Why Energy Could Surge Like Gold Did Last Year, and Most Investors Don't Own Enough | Ted Oakley
Summary
Energy Overweight: Guest is strongly bullish on the energy sector, noting it is under-owned and outperforming, and advocates owning across the value chain from producers to midstream, drillers, services, and even refiners.
Energy Implementation: Examples span producers (Chevron, Exxon, Matador), midstream (Enterprise Products, MPLX, Energy Transfer), offshore drillers (Transocean, Noble), and services (SLB), emphasizing cash flows and dividends.
Commodity Supercycle: He believes we are in the early innings of a decade-long commodity cycle and owns diversified miners like Rio Tinto and Vale plus exposure to critical minerals.
Precious Metals: Long-term constructive on gold and silver but tactically trimmed miners and silver after strong gains, expecting a shakeout before the next leg higher while holding core bullion.
Treasury Positioning: Portfolio maintains substantial liquidity in short-term U.S. Treasuries (sub-18 months), avoiding long-duration bonds amid expectations of higher inflation and pressure on the 60/40 model.
Macro Backdrop: Consumer is weakening with rising delinquencies, while markets are driven by momentum and speculation; a recession would be the likely catalyst to break the trend but is not imminent.
Risks and Valuations: He warns that semiconductors and parts of mega-cap tech appear stretched, and speculative behavior (options, crypto, IPO chasing) signals late-cycle dynamics.
Policy Outlook: Expects potential financial repression as a longer-term path to manage debt, which, alongside firm energy prices, could keep inflation elevated and shape portfolio construction.
Transcript
Ted Oakley, founder and managing partner of Oxbow Advisors. It is so wonderful to welcome you back to the show. Great to see you as always, Ted. Really appreciate you taking the time today. >> Good to see you, Julia. >> Well, it's always great to see you, Ted, and I always say this, but wow, our audience loves hearing from you and I I always enjoy our conversations and so I'm thrilled to welcome you back on. It's been a few months. Um, and gosh, I feel like so much has happened since early February in our last conversation. So Ted, I know you're not a macro guy. Now you're more bottoms up, but you know, we always start with that big picture macro view, your assessment of the markets, the economy, where things are right now, where you see things headed. And you know, in that time frame, has anything changed for you or been re been reinforced? As you know, Ted, you can take all the time you need to set the table when it comes to that big picture view. >> Well, Julia, I you know, uh I think it's two different things. You know, if you look at the economy, it's different than what's going on Wall Street. Wall Street has the momentum going in these markets. But if you look at the consumer, they they keep falling apart. I mean, uh, it just gets worse all the time. If you look at credit card delinquencies, they're right where they were in the great financial crisis. And if you look at auto loans, you know, um, uh, the same way. They're up about 20% the delinquencies 90day over where they were in the great financial crisis, but the consumer is really getting hit hard and it's and it's starting to work into companies uh a lot and I don't think Wall Street sees that now. They're buying the momentum stocks and so that keeps it pushing on. But um you know, for example, we last time I saw you, we we we own Gilden, which is a t-shirt maker. But I have to tell you, within a two or three month period, the the consumer is back completely off buying. And so we turn that stock. Uh but you have to watch things in here because if the consumer pulls in on you, it hurts. But they're still buying these big uh you know, big momentum stocks. And I think I I think it's become a very speculative fever to it now. You know, I probably had 12 people, 14 people say, "Can you get me in on the SpaceX IPO?" I mean, it's getting hot out there right now. So, we'll see how it ends up. >> Yeah, that's a good point that you bring up because there's this dichotomy out there. It's like we've seen these headlines around consumer sentiment at all-time lows. We've also seen markets touching record highs. It does feel like we've talked about the K-shaped economy and it really feels like that bottom K is getting bigger, more exacerbated. How long do you think this can go on? It doesn't feel sustainable. >> Well, I I'll tell you what, uh, J, it's becoming more like an eye. >> Yes. >> You talked to Adam Tagger, didn't you? The >> the God is up there. >> Yeah. >> Uh, like like my friend Peter Booker talked about. Uh, and I'd have to agree with that. It looks more like an eye with everybody down at the bottom and this really small piece at the top. You know, it'll go on till you have a recession. You know, I mean, that's really what breaks everything. And uh with these higher rates, you know, it it it may press that in in time. It's not right now, but I think people are right now they're just they're just living on the trade and the momentum and and that's that's not what we do, but that's what's happening in the marketplace. >> You know, one of the things I really like about what you do at Oxbow is you are so transparent. You always put out your letters, your commentary. You're very open on YouTube as well. And obviously you give us your time to come on um quite often. You had a letter that you put out that you entitled the gambler. Can you explain the significance of that title and the environment that we are in? I know it goes back to a song. I think a Kenny Rogers song an old Kenny Rogers song back in probably around 1978 1980. A lot of people know it. Uh, in fact, at the Academy of Country Music Awards here a few nights ago, I I saw Blake Shelton singing it. But, uh, but what happened was, uh, what I was saying is is that we've become, uh, particularly younger investors under 40, they become, you know, they they do they do betting, they do sports betting, they do all sorts of betting, they buy one day options, they buy Bitcoin. Everything they do is on a bet really. It's it's just just a gamble. Uh it's not a true way of investing where you buy a really fine company and you own it for a long long time and you get dividends from it. The price goes up, you know, they buy grow organically. They don't they don't do that. And the other thing I was referring to was there was a line in there called know when to hold them, well, when to fold them. And I think so many of the advisors today or call themselves advisors don't really know that. they they just they just buy a big group of exchange traded funds and they hope it works. Uh, you know, and and I don't think that's going to work the next 10 years. I think we'll be up and down, up and down. You're going to have to know sometimes when to deploy cash and then when to take it off the table. >> Know when to hold them and when to fold them. I believe our last conversation, Ted, you talked about that cash position, that liquidity. I want to say it was around 50% short-term treasuries. Where are you today on, you know, the liquidity side of things? >> Well, we have three strategies and, you know, if you put them all together, it's about 50%. All of our treasuries, most of them, I'd say, you know, 90% of them are less than 18 months. And none of them are, you know, are more than 24 to 36 months really. But, but it's it's generally really short term. We've said for a number of years now, you cannot own that long-term treasury. it's going to bite you, which is, >> you know, nobody's really made any money in that in that trade in the last six or seven years, >> and we we really espoused that all along. But it's not because we're just holding liquidity. It's just if we had things to buy, we would. And we're concentrated in different areas probably than most people. But no, we're about the same really. It's just there's not a lot of and not again, we're not trying to time the market. We just don't we don't have the things that meet you know if we if you look at the 400 companies we screen we probably only have four or five that are even in the zone right now. So most companies are fairly expensive. >> What do you what do you make of the move that we've seen in the bond market especially like on the long bonds? I'm thinking like the 30-year topped went well 5.19% I think was the latest but >> yeah you know uh I was around in the late 70s and uh early 80s and if you want and if you bought a bond then it was over five years within a month or two you were destined to lose money on it because inflation would kept on cranking up and everybody thought oh it's going to be over now and then they they didn't realize, but inflation went from basically 5% to, you know, 18%. I'm not saying that's happening this time, but I think people have been sold on this 6040 idea and a 40 hasn't worked for them in a long, long time. And so, you know, they're not structured correctly. And I think the next few few months inflation will go higher, at least the way we see it. So, there's the bonds will probably be under more pressure in our opinion. Anyway, >> are the bond vigilantes coming back? I guess. >> Well, I think people I think the the bond market eventually sort of rules everything in the long run, not the short run. But it, you know, it would cause people to get out of the market and cause people to do some odd things. But again, that's sort of where we are in the market. People right now are denying everything. They're denying high oil, high inflation. They're denying, you know, what's going on on the inner belly of the market. I mean, this is super denial level right now. >> So, the expectation is more inflation ahead. Is that right? >> Well, it looks that way to us really. I I can't imagine that May is not going to come in a good bit higher. I'm talking about maybe four and a quarter or higher and then and then you probably go to four and a half or maybe four and three/4ers by the time you get to the fall. And uh you got to remember now energy is 36% of the CPI and I think people forget about that. They keep talking well it's this that and the other but it's a big number and uh you know I don't see that dwindling anytime soon. >> Yeah I know you've you've talked about inflation. I think you even wrote about it in the letter as well and um gosh we also have this debt situation here in the US. We're north of 39 trillion at this point. I don't even know what the latest is. I stopped looking at it because it's just so depressing. Um, but yeah, I guess higher from here. What do you think? Where do you think we're headed? Are we headed toward financial repression? Like what what do you think ultimately plays out here? >> Well, my guess is you would be because that's the only way you get out of the trap. We're not going to go the austerity route. We don't have anybody with the guts either party with the guts to do that because they can't get elected again and it's all about them when you get right down to it. So the only way out is like after World War II where you kept the rates lower than the inflation and you look up 15 years later and on a real basis your debts lower because your GDP is so much higher. See? And I I think I think I think that's what'll happen is over the next 15 you'll grow your GDP maybe, but your debt will become a lesser percentage because see you you've got it flipped. You're you're holding the line on interest rates and you're letting inflation run hot. Um and that would probably fit pretty good with this group in here right now because I don't think they want to raise rates. And they may, but uh I'd be surprised if they did just because he's just got there. >> But I wonder they probably won't have much of an ability to even cut rates either. >> Oh, I can't see how they cut rates at all. I mean, they would really they would look they would be looked on poorly if they did that. >> Yeah. you know, the inflation thing. We were just talking at the top of this conversation, the eye-shaped economy, and that consumer that's really gotten hit hard and if inflation rears its ugly head again, that won't be good. But also, it's been an interesting observation because asset holders have really benefited from an inflationary environment. >> Yeah, they they have. I mean, to to they will to a degree. Okay. uh everybody talks about in the stocks as an inflation hedge but once you go into a definite linear inflation movement stocks don't always benefit from that I mean if you look at the 70s when it was really going between 1972 and 1982 for example there were probably six of those years where the markets moved 25% both ways up hit a high come back down and that's sort of what happens in that sort of time frame and that's why I say uh you don't have a lot of people in the industry today that will know how to trade that because that's about the only way you can make money. You got to know sort of what you want to do here. >> And that's what you were kind of probably saying at the beginning too is you really have to watch your positions in this environment. Um we talked a lot about volatility um new highs, new lows, that sort of thing. is that you really need to be more active in the market then I take it >> well and you have to depend you have to decide where you want to be now you know our largest position is in energy >> now nobody will tell you this Julia but if you look at the S&P tech sector the S&P year to date is up 20%. the the energy sector of the S&P is up 35% this year. But the problem is is that nobody owns it. That's why we like it so much because it's just getting started and we really feel like that when people finally pick up on it, it will be like gold and silver were last year. You know, how they, you know, see how they picked up the last four or five months of the year. >> We think they'll do be similar in energy because they don't own it. But yet it's really it's moving. say it's moving higher and uh and I think I think they're still sort of locked into some of the old the old situations and they're buying you know even the big if you even look at the big 10 stocks a big mag seven plus two or three and you put it all together they're up maybe a few percentage points of where they were at the end of November early December and I'm not certain the regular investor understands that >> they they don't really just go back put the numbers together and the Google's up a little bit more. We own Google, but in general, that group, you know, Microsoft's way down, Meta down, you know, there's a number of them. Tesla, they're not making it here. See, and so investors are jumping around and finding the sort of the hottest thing going, you know, like the semiconductors, >> you know, they're like, you know, that's that's probably the high you'll see for five years in that group. >> They're way overpriced. But that's what happens at the end of a market cycle. >> What's so interesting, Ted, I do remember in our last conversation you mentioned energy specifically and gosh, we have seen quite a move. But what I'm also hearing you right now like um energy is dramatically underweight in investors portfolios broadly speaking. And so I guess the question is what happens when you see that kind of scramble that real scramble into these names because you just mentioned gold and silver and I mean wow we saw gold and silver really moon last year. So >> but see it really on the on the gold miners silver and gold though they were going up some during the year but when you caught about late July August from then to the end of the year they just exploded. That's when you put on the big part of the year. I wouldn't be surprised if energy doesn't do that this year because they gradually moved higher during the year. But see, they're only 3% of the S&P. I mean, >> 3%. >> Yeah. So, that tells you that nobody owns these things because if they were buying more of them and they were higher price, they'd be a higher percentage of the S&P 500. >> And I I mean, I remember 1980 they were 33%. >> Wow. Okay. Wow. I mean, it changes over time. Um, but people don't when people what people don't own is what you want to look at. And they don't own energy right now and they're passing up a good look because a lot of them pay good cash flows, good dividends, solid companies, and good, you know, look at everything they have to do the next three or four years just to go back and fix the hole we're in right now with all everything that's been broken. >> Yeah, that's a good point, Ted. um on the energy trade if you can maybe share a little bit more of like how you might express that trade or investment. I don't know if you can name any names but if you're willing to >> I think you have to own it from what we call the well to the end. In other words, you know, uh, for example, on the producing side for us, uh, producers, you know, we own, uh, we own Chevron, we own Exxon, we own a little company called Matador, which we really like. It's a, it's more of a mid midle. They mean like the midstream companies, the pipelines, enterprise products, you know, MLX, um, energy transfer. God, they pay seven and a half, eight% on the cash flow. you don't pay your K1s, you don't pay in current income on them. And then, you know, just recently in the last two months, we brought in the rigs, you know, because what happens is there's a lot of work has to be done uh on these things. So, you know, we own Trans Ocean and we own Noble Drilling and then um and then on the on the on the on the side like we own Slumber, >> you know, there's a lot of work to be done to fix all that stuff up. So you got Slimmer, a little company we own called National Energy Services Reunited, NESR. It's over uh it's it's a does they do all their work in the Mid East out of Houston, Texas. Uh great company, cheap as it can be. Um but you know, you got to own the whole package. You can put a refiner in there. We don't own Valero or something, but you could or MPC. Um but you have to sort of own the whole stream and uh because it all works together over time. And I and I don't mean to sound like we'd never sell them. There's a time you sell energy because you don't want to take energy through a serious recession. On the other side, it'll be cheaper. So, you just have to know sort of where you are in the cycle. >> Oh, okay. So, where you are in the cycle? Well, where where do you think we are? Are we in a commodity super cycle and early innings? Like, where do you think we are? >> Yeah. Well, I think you are. I we said this about three years ago. We started saying that the next 10 years we thought would be a commodity cycle. Um and again people are not ready for that because they don't own a lot of things. You know if you look at for us we own all we're spread on the commodities now they're not not just energy but you look at Riointo we own great dividend. we own, you know, uh they've they've got three or four different kinds of of uh metals that they mine. You know, if you look at Valet, which is an iron iron mining company, great dividend, again, seven or eight%. You know, you you we look, we have tungsten, we have fertilize, we have um uh all sorts of things like that have, you know, have uranium and antimony and just critical minerals, all that fits in together. But I I I just feel like people are missing that trade. Uh and it's done really well, by the way, but they don't own them, >> you know, with um what's happening in the Middle East um with Iran straight of Hormuz. Um oil prices. We've seen I don't know where oil is today. I think it's it's 158 right now. Um no, $100, excuse me. Whoa. Sorry everybody. $100.58 right now. Sorry y'all. Um, that would be a different story. How does the oil price factor into the energy thesis for you? >> Well, uh, it it it will eventually it factors back into the earnings. Now, people think that because the price is up, all these all these producers go out and just start drilling overnight, which they learned that a long time ago that it can come and go real quickly. So, it takes them a while before they decide if they're going to do any extra drilling typically, you know. Um, and I I I think that's where we are. I think you run the risk if you don't have anything change here this month and going into June, you run the risk by the time you get to July um of having having a situation to where, you know, already we're seeing uh motor oil, for example. I saw Auto Parts Auto AutoZone came out and said, "Hey, you better get your motor oil because we're not going to be able to get a lot of it after about another month or two." >> Well, that's just one thing. You know, it's going to come up and nap and cares all sorts of things. Uh but it's it it it's not it's not there yet, but you can see it coming because there's nothing changing over there. Every day you open up and you look at a Bloomberg of Wall Street and they've said the same thing they did yesterday, which is we're going to bomb you or you're going to bomb us. Uh we got talks look good now. No, they don't. I mean, we're right where we were 80 days ago if you want to know the truth. >> Yeah. Um All right. I want to bring up precious metals because you did. Where are you today? um as relates to the precious metals universe have have you been trimming pairing back what what's going on with precious metals >> I think at the last time I talked to you I mentioned at the very end of 25 in the first week really of 26 we cut way back on uh most things sold all the silver really um when it got up to 100 it went higher I know that but but then um not we didn't cut much on the bullion on the gold we That's just over long-term holding. But on the miners, we cut them back quite a bit. And uh and I thought, you know, it's it came in and and made a low at 4,200 or so. Then it rallied back up to, I don't know, 48 or something like that. It looks as though to me, Julia, that seeing the last three months of that move last year in gold and silver, that's when you had all the small momentum players that came in and that's what pushed gold to 5,500. I think they're still in it and I think it looks like it's just acting this way that it's probably going to have to go lower to shake all those out. Uh, and we think it will do that. That doesn't mean we don't like it long term. I think if you if you really want to own it for the next two or three years, you'll make plenty of money. But I could see us going lower than it is. In other words, if you told me the goal would be at 4,000 or lower, 3,800, wouldn't surprise me. Okay? Because you have this momentum group still in it just begging for it to make another run. It probably won't do that right here. See, gold doesn't like higher interest rates either. So, um, we're we still have our gold bullion. We still have the miners we bought years ago. And, um, but I I will tell you, we watch this stuff and if it looks like it's going to get a lot worse, we'll even cut back on those miners a little bit more. But, I we we had already taken quite a bit out and so we're we're lower than quite a bit lower than we were last year. I'll have to say that. >> Going back to the broader markets and I know you and I have talked about the valuations, whether or not they make sense. You also just talked about, you know, we have this momentum uh force at play in the markets still. Do you think that's going to continue or is it just something you're watching? Um how are you thinking about just the markets more broadly? >> Well, I'll just give an example. in 99 everybody was short the market in 90 you know early 99 and it just it just killed them the rest of the year because um it wasn't time and between March of 99 and March of 2000 >> there was a big market move. Now granted it was just in a few few names >> but it affected the NASDAQ and so people kept shorting it shorting shorting it. I mean, if you look at the NASDAQ today, it's highly shorted. So, you know, typically these moves go to a point where people give up and say, well, you know, it's not coming down, so I'm not going to be short anymore. I'm going to I'm just going to let it go. And about that time, it's over. But that could be that could be nine months from now. Who who knows really what happens? But that that's that's how I see the market right now. Mhm. And um when you were talking about the energy trade, you those are names you don't want to own in a recession. So I take it no recession on the horizon in your view. >> Doesn't look like it. Uh usually with a bad bare market, you do have a recession. If you look at the in the last 50 60 years, the bad bar markets we had going back to 1974, you had a recession. It was a it was a hardcore recession. 81, you know, 81, 82. Um, and we, it doesn't look like we're right on the verge of may maybe something changes. I don't know, but I think you'd have to have a recession to really bust all of this. In other words, the you'd have to break the momentum in the market. That's when you really would have a bare market. Uh, maybe that's 27 or late 26. Uh, I don't know. I think we'll sort of know when we get there. But uh until that time, I think the speculative nature just pushes pushes pushes and and people uh as long as they can speculate and make money, they'll do it. >> Yeah. The speculative nature, as you point out again in your letter, this kind of gamblers mentality, you have a lot of crypto, a lot of sports betting. You wrote a book called Second Generation Wealth and I would love to extrapolate on this idea because there eventually will be this massive wealth transfer, generational wealth transfer. Um, how do you see that one playing out? Um, maybe longer term concerns. If that's the mentality, this better gamblers mentality with this younger generation, what do you think are some of the broader cont uh consequences? Well, Julia, I think it's mixed in that uh first of all, that baby boomer group that has all the money, they'll probably live longer than we any of us expect. So, they won't be they just won't be turning it over tomorrow. All right? And the second thing is, and and this is something that I've written about, but if you look at people age 65 and older, they have the most stock in their assets that they've had ever in the history of keeping records. Okay. So, if you go through a period that is really nasty, all right, you're not going to have near as much money to transfer across as you thought you did. And a lot of these people are they're just they're kind of brain dead. They're just they're like, I you know, I'm 75 years old, 80. I've made a lot on the market and I'm not going to change it. Well, that's okay. But, you know, you're not really thinking right because you may get sick. you know, uh you may your spouse might get sick. There's all kinds of things go on and you've got to start being more conservative and that group is not like that right now. They're exactly they're they're the worst setup I've ever seen and that's going to change how much money really eventually gets moved over. Um and you know, some of them hold it over the younger generation's head. That's how they control them is with the money, unfortunately. Um but a lot of them don't. But I I I think there'll be changes in that area that we probably don't recognize right this minute. >> Ted Oakley, founder and managing partner of Oxbow Advisors, I want to thank you for being so generous with your time, all of your knowledge, your wisdom, for being a friend of this show. Really appreciate you. And until next time, be well, Ted. Thanks so much. Thank you, Julia.
Why Energy Could Surge Like Gold Did Last Year, and Most Investors Don't Own Enough | Ted Oakley
Summary
Transcript
Ted Oakley, founder and managing partner of Oxbow Advisors. It is so wonderful to welcome you back to the show. Great to see you as always, Ted. Really appreciate you taking the time today. >> Good to see you, Julia. >> Well, it's always great to see you, Ted, and I always say this, but wow, our audience loves hearing from you and I I always enjoy our conversations and so I'm thrilled to welcome you back on. It's been a few months. Um, and gosh, I feel like so much has happened since early February in our last conversation. So Ted, I know you're not a macro guy. Now you're more bottoms up, but you know, we always start with that big picture macro view, your assessment of the markets, the economy, where things are right now, where you see things headed. And you know, in that time frame, has anything changed for you or been re been reinforced? As you know, Ted, you can take all the time you need to set the table when it comes to that big picture view. >> Well, Julia, I you know, uh I think it's two different things. You know, if you look at the economy, it's different than what's going on Wall Street. Wall Street has the momentum going in these markets. But if you look at the consumer, they they keep falling apart. I mean, uh, it just gets worse all the time. If you look at credit card delinquencies, they're right where they were in the great financial crisis. And if you look at auto loans, you know, um, uh, the same way. They're up about 20% the delinquencies 90day over where they were in the great financial crisis, but the consumer is really getting hit hard and it's and it's starting to work into companies uh a lot and I don't think Wall Street sees that now. They're buying the momentum stocks and so that keeps it pushing on. But um you know, for example, we last time I saw you, we we we own Gilden, which is a t-shirt maker. But I have to tell you, within a two or three month period, the the consumer is back completely off buying. And so we turn that stock. Uh but you have to watch things in here because if the consumer pulls in on you, it hurts. But they're still buying these big uh you know, big momentum stocks. And I think I I think it's become a very speculative fever to it now. You know, I probably had 12 people, 14 people say, "Can you get me in on the SpaceX IPO?" I mean, it's getting hot out there right now. So, we'll see how it ends up. >> Yeah, that's a good point that you bring up because there's this dichotomy out there. It's like we've seen these headlines around consumer sentiment at all-time lows. We've also seen markets touching record highs. It does feel like we've talked about the K-shaped economy and it really feels like that bottom K is getting bigger, more exacerbated. How long do you think this can go on? It doesn't feel sustainable. >> Well, I I'll tell you what, uh, J, it's becoming more like an eye. >> Yes. >> You talked to Adam Tagger, didn't you? The >> the God is up there. >> Yeah. >> Uh, like like my friend Peter Booker talked about. Uh, and I'd have to agree with that. It looks more like an eye with everybody down at the bottom and this really small piece at the top. You know, it'll go on till you have a recession. You know, I mean, that's really what breaks everything. And uh with these higher rates, you know, it it it may press that in in time. It's not right now, but I think people are right now they're just they're just living on the trade and the momentum and and that's that's not what we do, but that's what's happening in the marketplace. >> You know, one of the things I really like about what you do at Oxbow is you are so transparent. You always put out your letters, your commentary. You're very open on YouTube as well. And obviously you give us your time to come on um quite often. You had a letter that you put out that you entitled the gambler. Can you explain the significance of that title and the environment that we are in? I know it goes back to a song. I think a Kenny Rogers song an old Kenny Rogers song back in probably around 1978 1980. A lot of people know it. Uh, in fact, at the Academy of Country Music Awards here a few nights ago, I I saw Blake Shelton singing it. But, uh, but what happened was, uh, what I was saying is is that we've become, uh, particularly younger investors under 40, they become, you know, they they do they do betting, they do sports betting, they do all sorts of betting, they buy one day options, they buy Bitcoin. Everything they do is on a bet really. It's it's just just a gamble. Uh it's not a true way of investing where you buy a really fine company and you own it for a long long time and you get dividends from it. The price goes up, you know, they buy grow organically. They don't they don't do that. And the other thing I was referring to was there was a line in there called know when to hold them, well, when to fold them. And I think so many of the advisors today or call themselves advisors don't really know that. they they just they just buy a big group of exchange traded funds and they hope it works. Uh, you know, and and I don't think that's going to work the next 10 years. I think we'll be up and down, up and down. You're going to have to know sometimes when to deploy cash and then when to take it off the table. >> Know when to hold them and when to fold them. I believe our last conversation, Ted, you talked about that cash position, that liquidity. I want to say it was around 50% short-term treasuries. Where are you today on, you know, the liquidity side of things? >> Well, we have three strategies and, you know, if you put them all together, it's about 50%. All of our treasuries, most of them, I'd say, you know, 90% of them are less than 18 months. And none of them are, you know, are more than 24 to 36 months really. But, but it's it's generally really short term. We've said for a number of years now, you cannot own that long-term treasury. it's going to bite you, which is, >> you know, nobody's really made any money in that in that trade in the last six or seven years, >> and we we really espoused that all along. But it's not because we're just holding liquidity. It's just if we had things to buy, we would. And we're concentrated in different areas probably than most people. But no, we're about the same really. It's just there's not a lot of and not again, we're not trying to time the market. We just don't we don't have the things that meet you know if we if you look at the 400 companies we screen we probably only have four or five that are even in the zone right now. So most companies are fairly expensive. >> What do you what do you make of the move that we've seen in the bond market especially like on the long bonds? I'm thinking like the 30-year topped went well 5.19% I think was the latest but >> yeah you know uh I was around in the late 70s and uh early 80s and if you want and if you bought a bond then it was over five years within a month or two you were destined to lose money on it because inflation would kept on cranking up and everybody thought oh it's going to be over now and then they they didn't realize, but inflation went from basically 5% to, you know, 18%. I'm not saying that's happening this time, but I think people have been sold on this 6040 idea and a 40 hasn't worked for them in a long, long time. And so, you know, they're not structured correctly. And I think the next few few months inflation will go higher, at least the way we see it. So, there's the bonds will probably be under more pressure in our opinion. Anyway, >> are the bond vigilantes coming back? I guess. >> Well, I think people I think the the bond market eventually sort of rules everything in the long run, not the short run. But it, you know, it would cause people to get out of the market and cause people to do some odd things. But again, that's sort of where we are in the market. People right now are denying everything. They're denying high oil, high inflation. They're denying, you know, what's going on on the inner belly of the market. I mean, this is super denial level right now. >> So, the expectation is more inflation ahead. Is that right? >> Well, it looks that way to us really. I I can't imagine that May is not going to come in a good bit higher. I'm talking about maybe four and a quarter or higher and then and then you probably go to four and a half or maybe four and three/4ers by the time you get to the fall. And uh you got to remember now energy is 36% of the CPI and I think people forget about that. They keep talking well it's this that and the other but it's a big number and uh you know I don't see that dwindling anytime soon. >> Yeah I know you've you've talked about inflation. I think you even wrote about it in the letter as well and um gosh we also have this debt situation here in the US. We're north of 39 trillion at this point. I don't even know what the latest is. I stopped looking at it because it's just so depressing. Um, but yeah, I guess higher from here. What do you think? Where do you think we're headed? Are we headed toward financial repression? Like what what do you think ultimately plays out here? >> Well, my guess is you would be because that's the only way you get out of the trap. We're not going to go the austerity route. We don't have anybody with the guts either party with the guts to do that because they can't get elected again and it's all about them when you get right down to it. So the only way out is like after World War II where you kept the rates lower than the inflation and you look up 15 years later and on a real basis your debts lower because your GDP is so much higher. See? And I I think I think I think that's what'll happen is over the next 15 you'll grow your GDP maybe, but your debt will become a lesser percentage because see you you've got it flipped. You're you're holding the line on interest rates and you're letting inflation run hot. Um and that would probably fit pretty good with this group in here right now because I don't think they want to raise rates. And they may, but uh I'd be surprised if they did just because he's just got there. >> But I wonder they probably won't have much of an ability to even cut rates either. >> Oh, I can't see how they cut rates at all. I mean, they would really they would look they would be looked on poorly if they did that. >> Yeah. you know, the inflation thing. We were just talking at the top of this conversation, the eye-shaped economy, and that consumer that's really gotten hit hard and if inflation rears its ugly head again, that won't be good. But also, it's been an interesting observation because asset holders have really benefited from an inflationary environment. >> Yeah, they they have. I mean, to to they will to a degree. Okay. uh everybody talks about in the stocks as an inflation hedge but once you go into a definite linear inflation movement stocks don't always benefit from that I mean if you look at the 70s when it was really going between 1972 and 1982 for example there were probably six of those years where the markets moved 25% both ways up hit a high come back down and that's sort of what happens in that sort of time frame and that's why I say uh you don't have a lot of people in the industry today that will know how to trade that because that's about the only way you can make money. You got to know sort of what you want to do here. >> And that's what you were kind of probably saying at the beginning too is you really have to watch your positions in this environment. Um we talked a lot about volatility um new highs, new lows, that sort of thing. is that you really need to be more active in the market then I take it >> well and you have to depend you have to decide where you want to be now you know our largest position is in energy >> now nobody will tell you this Julia but if you look at the S&P tech sector the S&P year to date is up 20%. the the energy sector of the S&P is up 35% this year. But the problem is is that nobody owns it. That's why we like it so much because it's just getting started and we really feel like that when people finally pick up on it, it will be like gold and silver were last year. You know, how they, you know, see how they picked up the last four or five months of the year. >> We think they'll do be similar in energy because they don't own it. But yet it's really it's moving. say it's moving higher and uh and I think I think they're still sort of locked into some of the old the old situations and they're buying you know even the big if you even look at the big 10 stocks a big mag seven plus two or three and you put it all together they're up maybe a few percentage points of where they were at the end of November early December and I'm not certain the regular investor understands that >> they they don't really just go back put the numbers together and the Google's up a little bit more. We own Google, but in general, that group, you know, Microsoft's way down, Meta down, you know, there's a number of them. Tesla, they're not making it here. See, and so investors are jumping around and finding the sort of the hottest thing going, you know, like the semiconductors, >> you know, they're like, you know, that's that's probably the high you'll see for five years in that group. >> They're way overpriced. But that's what happens at the end of a market cycle. >> What's so interesting, Ted, I do remember in our last conversation you mentioned energy specifically and gosh, we have seen quite a move. But what I'm also hearing you right now like um energy is dramatically underweight in investors portfolios broadly speaking. And so I guess the question is what happens when you see that kind of scramble that real scramble into these names because you just mentioned gold and silver and I mean wow we saw gold and silver really moon last year. So >> but see it really on the on the gold miners silver and gold though they were going up some during the year but when you caught about late July August from then to the end of the year they just exploded. That's when you put on the big part of the year. I wouldn't be surprised if energy doesn't do that this year because they gradually moved higher during the year. But see, they're only 3% of the S&P. I mean, >> 3%. >> Yeah. So, that tells you that nobody owns these things because if they were buying more of them and they were higher price, they'd be a higher percentage of the S&P 500. >> And I I mean, I remember 1980 they were 33%. >> Wow. Okay. Wow. I mean, it changes over time. Um, but people don't when people what people don't own is what you want to look at. And they don't own energy right now and they're passing up a good look because a lot of them pay good cash flows, good dividends, solid companies, and good, you know, look at everything they have to do the next three or four years just to go back and fix the hole we're in right now with all everything that's been broken. >> Yeah, that's a good point, Ted. um on the energy trade if you can maybe share a little bit more of like how you might express that trade or investment. I don't know if you can name any names but if you're willing to >> I think you have to own it from what we call the well to the end. In other words, you know, uh, for example, on the producing side for us, uh, producers, you know, we own, uh, we own Chevron, we own Exxon, we own a little company called Matador, which we really like. It's a, it's more of a mid midle. They mean like the midstream companies, the pipelines, enterprise products, you know, MLX, um, energy transfer. God, they pay seven and a half, eight% on the cash flow. you don't pay your K1s, you don't pay in current income on them. And then, you know, just recently in the last two months, we brought in the rigs, you know, because what happens is there's a lot of work has to be done uh on these things. So, you know, we own Trans Ocean and we own Noble Drilling and then um and then on the on the on the on the side like we own Slumber, >> you know, there's a lot of work to be done to fix all that stuff up. So you got Slimmer, a little company we own called National Energy Services Reunited, NESR. It's over uh it's it's a does they do all their work in the Mid East out of Houston, Texas. Uh great company, cheap as it can be. Um but you know, you got to own the whole package. You can put a refiner in there. We don't own Valero or something, but you could or MPC. Um but you have to sort of own the whole stream and uh because it all works together over time. And I and I don't mean to sound like we'd never sell them. There's a time you sell energy because you don't want to take energy through a serious recession. On the other side, it'll be cheaper. So, you just have to know sort of where you are in the cycle. >> Oh, okay. So, where you are in the cycle? Well, where where do you think we are? Are we in a commodity super cycle and early innings? Like, where do you think we are? >> Yeah. Well, I think you are. I we said this about three years ago. We started saying that the next 10 years we thought would be a commodity cycle. Um and again people are not ready for that because they don't own a lot of things. You know if you look at for us we own all we're spread on the commodities now they're not not just energy but you look at Riointo we own great dividend. we own, you know, uh they've they've got three or four different kinds of of uh metals that they mine. You know, if you look at Valet, which is an iron iron mining company, great dividend, again, seven or eight%. You know, you you we look, we have tungsten, we have fertilize, we have um uh all sorts of things like that have, you know, have uranium and antimony and just critical minerals, all that fits in together. But I I I just feel like people are missing that trade. Uh and it's done really well, by the way, but they don't own them, >> you know, with um what's happening in the Middle East um with Iran straight of Hormuz. Um oil prices. We've seen I don't know where oil is today. I think it's it's 158 right now. Um no, $100, excuse me. Whoa. Sorry everybody. $100.58 right now. Sorry y'all. Um, that would be a different story. How does the oil price factor into the energy thesis for you? >> Well, uh, it it it will eventually it factors back into the earnings. Now, people think that because the price is up, all these all these producers go out and just start drilling overnight, which they learned that a long time ago that it can come and go real quickly. So, it takes them a while before they decide if they're going to do any extra drilling typically, you know. Um, and I I I think that's where we are. I think you run the risk if you don't have anything change here this month and going into June, you run the risk by the time you get to July um of having having a situation to where, you know, already we're seeing uh motor oil, for example. I saw Auto Parts Auto AutoZone came out and said, "Hey, you better get your motor oil because we're not going to be able to get a lot of it after about another month or two." >> Well, that's just one thing. You know, it's going to come up and nap and cares all sorts of things. Uh but it's it it it's not it's not there yet, but you can see it coming because there's nothing changing over there. Every day you open up and you look at a Bloomberg of Wall Street and they've said the same thing they did yesterday, which is we're going to bomb you or you're going to bomb us. Uh we got talks look good now. No, they don't. I mean, we're right where we were 80 days ago if you want to know the truth. >> Yeah. Um All right. I want to bring up precious metals because you did. Where are you today? um as relates to the precious metals universe have have you been trimming pairing back what what's going on with precious metals >> I think at the last time I talked to you I mentioned at the very end of 25 in the first week really of 26 we cut way back on uh most things sold all the silver really um when it got up to 100 it went higher I know that but but then um not we didn't cut much on the bullion on the gold we That's just over long-term holding. But on the miners, we cut them back quite a bit. And uh and I thought, you know, it's it came in and and made a low at 4,200 or so. Then it rallied back up to, I don't know, 48 or something like that. It looks as though to me, Julia, that seeing the last three months of that move last year in gold and silver, that's when you had all the small momentum players that came in and that's what pushed gold to 5,500. I think they're still in it and I think it looks like it's just acting this way that it's probably going to have to go lower to shake all those out. Uh, and we think it will do that. That doesn't mean we don't like it long term. I think if you if you really want to own it for the next two or three years, you'll make plenty of money. But I could see us going lower than it is. In other words, if you told me the goal would be at 4,000 or lower, 3,800, wouldn't surprise me. Okay? Because you have this momentum group still in it just begging for it to make another run. It probably won't do that right here. See, gold doesn't like higher interest rates either. So, um, we're we still have our gold bullion. We still have the miners we bought years ago. And, um, but I I will tell you, we watch this stuff and if it looks like it's going to get a lot worse, we'll even cut back on those miners a little bit more. But, I we we had already taken quite a bit out and so we're we're lower than quite a bit lower than we were last year. I'll have to say that. >> Going back to the broader markets and I know you and I have talked about the valuations, whether or not they make sense. You also just talked about, you know, we have this momentum uh force at play in the markets still. Do you think that's going to continue or is it just something you're watching? Um how are you thinking about just the markets more broadly? >> Well, I'll just give an example. in 99 everybody was short the market in 90 you know early 99 and it just it just killed them the rest of the year because um it wasn't time and between March of 99 and March of 2000 >> there was a big market move. Now granted it was just in a few few names >> but it affected the NASDAQ and so people kept shorting it shorting shorting it. I mean, if you look at the NASDAQ today, it's highly shorted. So, you know, typically these moves go to a point where people give up and say, well, you know, it's not coming down, so I'm not going to be short anymore. I'm going to I'm just going to let it go. And about that time, it's over. But that could be that could be nine months from now. Who who knows really what happens? But that that's that's how I see the market right now. Mhm. And um when you were talking about the energy trade, you those are names you don't want to own in a recession. So I take it no recession on the horizon in your view. >> Doesn't look like it. Uh usually with a bad bare market, you do have a recession. If you look at the in the last 50 60 years, the bad bar markets we had going back to 1974, you had a recession. It was a it was a hardcore recession. 81, you know, 81, 82. Um, and we, it doesn't look like we're right on the verge of may maybe something changes. I don't know, but I think you'd have to have a recession to really bust all of this. In other words, the you'd have to break the momentum in the market. That's when you really would have a bare market. Uh, maybe that's 27 or late 26. Uh, I don't know. I think we'll sort of know when we get there. But uh until that time, I think the speculative nature just pushes pushes pushes and and people uh as long as they can speculate and make money, they'll do it. >> Yeah. The speculative nature, as you point out again in your letter, this kind of gamblers mentality, you have a lot of crypto, a lot of sports betting. You wrote a book called Second Generation Wealth and I would love to extrapolate on this idea because there eventually will be this massive wealth transfer, generational wealth transfer. Um, how do you see that one playing out? Um, maybe longer term concerns. If that's the mentality, this better gamblers mentality with this younger generation, what do you think are some of the broader cont uh consequences? Well, Julia, I think it's mixed in that uh first of all, that baby boomer group that has all the money, they'll probably live longer than we any of us expect. So, they won't be they just won't be turning it over tomorrow. All right? And the second thing is, and and this is something that I've written about, but if you look at people age 65 and older, they have the most stock in their assets that they've had ever in the history of keeping records. Okay. So, if you go through a period that is really nasty, all right, you're not going to have near as much money to transfer across as you thought you did. And a lot of these people are they're just they're kind of brain dead. They're just they're like, I you know, I'm 75 years old, 80. I've made a lot on the market and I'm not going to change it. Well, that's okay. But, you know, you're not really thinking right because you may get sick. you know, uh you may your spouse might get sick. There's all kinds of things go on and you've got to start being more conservative and that group is not like that right now. They're exactly they're they're the worst setup I've ever seen and that's going to change how much money really eventually gets moved over. Um and you know, some of them hold it over the younger generation's head. That's how they control them is with the money, unfortunately. Um but a lot of them don't. But I I I think there'll be changes in that area that we probably don't recognize right this minute. >> Ted Oakley, founder and managing partner of Oxbow Advisors, I want to thank you for being so generous with your time, all of your knowledge, your wisdom, for being a friend of this show. Really appreciate you. And until next time, be well, Ted. Thanks so much. Thank you, Julia.