Adam Rozencwajg: Why Inflation Isn’t Over, What Gold Is Saying, and How Shale Oil Fades Away

Summary

• Inflation Outlook: The guest argues the disinflation era is over and a multi-decade inflationary cycle is beginning, with the Fed boxed in by deficits and debt servicing costs.
• Gold: Strong case for gold driven by central bank accumulation (notably China/BRICS) and re-monetization dynamics, with Western investors still light on gold equities.
• Gold-Oil Dislocation: The gold-to-oil ratio near record extremes implies oil is deeply undervalued relative to gold, signaling substantial upside for hydrocarbons.
• US Shale Decline: Shale growth has stalled with the Permian maturing and other basins declining; EIA now projects a shale peak/plateau, tightening future supply.
• Oil & Gas Opportunity: Despite IEA surplus claims, inventories and backwardation suggest balanced-to-tight markets and significant upside risk in crude and natural gas.
• Offshore Drilling: Offshore drillships are priced near scrap/replacement values, creating a mispriced opportunity as bears assume offshore will backstop supply without reflecting asset economics.
• Natural Gas & LNG: Rapidly rising demand from data centers/AI and new gas-fired power (plus US LNG export growth by 2027) collides with flat production forecasts and aging basins like Haynesville.
• Investment Stance: Preference for real assets—especially gold and energy—given carry-trade unwinds, structural underinvestment, and inflationary pressures; no single-stock pitches were made.

Transcript

Nothing in this program should be considered investment advice. It is for educational purposes only. Please hit pause and read this disclaimer in full. We used to run the economy with less money in credit. For every dollar of GDP, required substantially less money in credit. Now it just takes a lot. That can't be good for anybody. And and and I think gold's waking up and telling you that finally. Welcome everybody to this episode of Finance Hugh. I'm your host Chris Martinson and we're going to have a very special update here. As you know, we've been doing quarterly updates with Adam Rosenwag of Garing and Rosenwag. We're going to be talking about this. We're going to be talking about the return of inflation. What? And uh Shale Oil's long goodbye with Adam. Hey Adam. So good to see you again. >> Great to see you Chris. Nice to nice to be talking to you again. >> Likewise. So, we're going to be discussing this, which uh every quarter, the quarterly reports out of uh your firm Garing and Rosenwag, everybody should be reading this. Absolutely. This one uh came out in the August 25th issue here, 2025. The next inflationary surge is about to begin, but I think you buried the lead a little bit because um uh you were talking about shale oil and all of that, too. But I want to start here. You start you open this piece with quote we are firmly in the camp that believes the great disinflationary arc which began in the stern days of Paul Vulkar's Fed has run its course. The era of falling yields and fading price pressures is over. In its place a new cycle has begun, an inflationary one with the potential to stretch across decades. And if history is any indication it will not pass quietly. It will bring with it the kind of problems that compound politically, economically, and socially until they can no longer be ignored. Let's start there with that great opening line. You have my attention. Adam, >> what what brings you to that point? >> So, look, you know, if you guys have read our stuff, and I know you have, and some of your listeners and viewers have as well, you know that we believe that markets move in these big long drawn out cycles. And we're in the midst of, you know, a doozy right now. And what I would sort of generalize it to is this bigger idea of a carry trade cycle where um there's certain times in the market where you have self uh correcting feedback loop. So for instance value investing that might be a good example that naturally takes care of itself. If value stocks do really well they stop being value stocks and money migrates into another part of the market. So it naturally kind of goes in these es and flows. There's other types of markets though that are feedback loops, positive feedback loops. Momentum would be one. If momentum stocks do well, then all of a sudden that begets more momentum because they become a larger and larger piece of the index by definition. And what works yesterday keeps working tomorrow. That's the definition of a momentum trade. And in markets like that, there's no regulator. There's nothing that kind of keeps things in check. So those just tend to accelerate and spiral and get worse and worse and worse until eventually uh they tend to end with more of a shock. And we're in one right now. It's been a disinflationary one. It's gone on for 45 years uh in counting. Let's call it 40 years in earnest. And it's created a huge amount of distortions, dislocations, mispricings. Uh everything from the everything bubble of a few years ago to the hyperscalers to AI today to high duration, high multiple assets, low volatility, relatively low interest rates except for the last sort of 18 months or so. And that's been allowed to persist because we've had very very benign inflation, very very benign volatility. But those things I think are now on the verge of of ending. And if history is any guide, you know, President Trump has been uh you know, certainly hasn't hid his feelings towards uh Chairman Powell. And there's no shortage of newspaper articles that will talk about how that's really really unprecedented. Uh and maybe there's some truth to that. I don't know. Fed independent seems like it's not in its best days right now and at under threat and things like that. But we can't forget that if we go back throughout history, there's been other unbelievably tumultuous times between the administration and the Federal Reserve uh including if if you believe AMD Schllay's book um the the uh Great Society, there was a period of time where Lynden Johnson actually took uh Chairman Martin uh who who mind you, you know, you talk about an august reputation, I think he'd been the Fed chair for like 20 years at that point or something crazy like that, and slammed him against a all physically assaulted him and said, "Look, you know, my boys are in Vietnam dying and you won't give me the money that I need to help bring them home." And you know, you can imagine that being a very sort of powerful conversation, you know, and um if you put it in that context, I mean, my god, a couple tweets on Truth Social and things like that doesn't seem quite so bad anymore. Called him a loser or whatever he did, but that, you know, to my knowledge, no one has accused the president of having assaulted Chairman Powell. So, we haven't hit a new low. Maybe we're probing it, but we haven't hit it yet in terms of the relationship between those two bodies. And you know, I don't think it should be a huge surprise that also took place, that huge consternation took place at the end of a big carry trade, the same as we have right now, where these distortions and these imbalances that fed on each other just got bigger and bigger until the system really couldn't handle it anymore. And the frustration, I think, you begin to see uh comes exactly from that. It's the idea that the the imbalances are now so big that the system is having a hard time functioning and it's difficult to run uh the country and run monetary policy. Why? Well, because we've printed so much debt in the last 20 years. We've printed, you know, we've printed had such big government deficits. Uh we've printed so much money that the entire thing is becoming really really imbalanced and now it's beginning uh to break down. So if if you talk to people that know Chairman Powell um and I don't think this is a big stretch. I think most central bankers fall into this category. They'll tell you that he's you know really wants to go down. You know on one side of his office he has a big framed picture. I'm being facitious but you know the proverbial big frame picture of Paul Vulkar who everyone thinks of as the best central banker that ever lived. Broke the back of inflation did the impossible. Uh and then you know sort of also a little picture on the table maybe of Arthur Burns who's considered the worst Fed chairman ever who you know was was far too dovish in the face of inflationary pressures building and ended up um ended up you know causing or enabling the inflation through the 1970s. Uh, and so you that's sort of the dichotomy, right? Don't be Arthur Burns, be Paul Vulkar. But what nobody stopped to think about was that there was a third choice, which is you might be Martin. You might be the guy that tries really, really, really hard uh to keep the thing going and tries really hard to do the right thing, but ultimately uh succumbs to pressures, pushed aside, and allows for the Arthur Burns type to come in, who, by the way, I think gets sort of a bum wrap. He wasn't he wasn't as bad as everyone says, although he was under huge pressures and ultimately didn't emerge victorious, that's for sure. But but he was he was a fairly smart guy. And you know, a very smart macroeconomist said to me about a year ago, which has been sort of haunting me ever since, the idea that the path to Paul Vulkar lies through Arthur Burns. You can't have Paul Vulkar without Arthur Burns because you can't take the medicine unless the pain of the inflation is so bad. And we just haven't had it yet. You know, we had a couple years where numbers were high and it was the shot across the bow and then we raised interest rates. Inflation sort of diminished a little bit led largely by energy. Uh but until you have that huge pain, you're never going to be able to stomach the contractionary monetary policies needed to truly reign in in the inflationary expectations and and that's what people just don't get. We have to have that in order to get the katharsis that's going to come likely later. So if you look at 1970s, it was the same. You had a runup of inflation, you had some tighten tightened monetary policy, you had a recession, everything came back. You waved the all clear. That's when Burns came in, waved the all clear, and then you know the second half is when the fireworks took place and the inflation really took got going. I think that's going to be very similar to what we're going to see this time as well. I I have a chart on that, but first you know uh they famously say they never ring a bell at tops, but sometimes they print a cover at the bottoms. Uh you pointed this out. I mean, what great near-perfect timing is inflation dead with a crumpled up dinosaur there. Bloomberg picking the bottom uh for for that inflationary moment almost perfectly. >> Well, what what's so interesting is, you know, when that Bloomberg cover story took was was released in May of 2019. Um, a couple things happened. First of all, you know, there's only a few of us that really even picked up on that cover and posted it. We did at the time. You go back and look at our Twitter, it was us and Jim Grant and maybe one or two others. Uh, and then we wrote about it a little bit more extensively in our in our next letter and we said 2022 is going to be the time that inflation really picks up its head, which that was 2019. That was precoid, you know. So, so you weren't anywhere near uh and and people said, "Well, why' you think that?" And they said, "Well, you know, if you go back to 1978 or early 79, Bloomberg, which was then just Business Week, ran a cover story called The Death of Equities, which is sort of heralded as the worst piece of financial prognostication in the history of the world because equities were about to go on a 40-year run unlike anything has ever been seen before." Um, you know, you you were able to in 1980 you were able to buy the Dow 800. It's 40,000 and today. Um, so we're in excess of 40,000 today. So Lee said very perniciously that 3 years after that cover story happened, that's when equities really took off in 81. And so it'll be 3 years after 2019 that inflation will really start to take off. So it's 2022. So we just got off a big call with somebody, a client, a prospective client a minute ago and we said, you know, part of this business is a little bit of art and a little bit of science. So there's the example of the art. You know, why three years? I don't know. It was 3 years last time. Magazine indicators usually don't quite get the bottom. Just quite, but they're awfully close. Three years fine. And that's exactly what what what happened. And as an aside, I I read a article with the guy who wrote the death of equities piece and um God bless him. He said, you know, for the next two years, equities went down a lot and if you had traded my signal, you would have made a good return. I said, yeah, I think you're missing the forest for the trees there a little bit. But markets are facing heightened uncertainty and thoughtful portfolio management has never been more important. If your current strategy relies solely on passive investing or diversification without active oversight, it may be time to consider a different approach. At Peak Financial Investing, we connect you with experienced wealth managers who actively manage portfolios using disciplined, research-driven strategies designed to adapt to evolving market conditions. Our focus is on helping clients navigate volatility with clarity and confidence. While no investment strategy can guarantee results or eliminate risk, we believe that preparation and active management can make a meaningful difference over time. Visit peakfinancialinvesting.com to schedule a complimentary consultation and explore whether our approach aligns with your goals. I'm Dr. Chris Martinson and I am proud to support Peak Financial Investing. This is not a guarantee of future performance, but a call to take your financial planning seriously. Again, that's peak financial.com. Investing, of course, involves risk, including the potential loss of principle. Past performance is not indicative of future results. Please consult with a qualified adviser before making investment decisions. Let's talk about I want to get into inflation because uh I this could mirror the 70s again, but let's just start to parse it a little bit because inflation everybody listening to this thinks of that instantly automatically as rising prices. Okay, so let's look at prices very quickly. This headline just popped up just literally an hour ago and it says sticker shock car prices topped $50,000 for the first time in US. So I think that's probably average car prices. Could be median. I didn't read the article yet. But then we're looking over here at the Fred data. This is the bad old 1970s that we're comparing ourselves to. But the slope of this line is actually steeper for this little chunk here postco injection, the STEMI checks, all of that. This is actually one of the more sustained and awful periods of inflation. And I would think that the Federal Reserve, whoever is at charge, Powell's got to be cognizant of this. He does not want to go down as a burns. I would think at this point because that's I don't look at that chart, Adam, and I say I see a case for easing here that's very strong. >> Yeah. Listen, you know, I I I think there's a lot of truth to that. You know, if you take a step back, the tension that you feel in the central banker's decisions today, I think largely stems from the fact that one way or another, the United States is approaching a level of debt and deficit that that is really unsustainable. And look, people have said that for a very, very, very long time. But there's a difference between unsustainable and a crisis. And I think we're approaching that level fairly quickly. And and so I think that puts a lot of tension in in these two mandates, these two aims because you on the one hand um you look at the inflation data which does seem to be a lot more persistent than anyone would care to admit. And on the other hand, you know, you really can't handle higher interest rates uh in terms of the government's ability to fund itself. And so let's like take a step back and and say what I'm talking about there, you know. So if you look and this goes all the way back to Yelen but it's it's happening today under Treasury Secretary Bessant as well. In fact, it's accelerated. Uh if you go back, you know, when we crossed 100% debt to GDP, people became fixated on the idea that your 10-year Treasury uh rate could not exceed long-term growth rate. Otherwise, you'd be in a debt spiral, right? You're you're literally if if you're only whatever 20% debt to GDP, your interest rates could be really high and you can withstand it. If your debt level is the same as the economy and the interest is a percent on that level is higher than your economy is growing uh then by definition even if everything's going great you're going to get yourself worse and worse into debt just on just on the additional interest expense. Yeah. So there's become this huge fixation on that price level and sure enough you know all the way back when Yellen was Treasury Secretary when you started to approach 5% on the 10-year um she stopped issuing bills because of or bonds because of it you know she just stopped issuing the 10-year and she started to move into a shorter and shorter and shorter duration uh in order to try to relieve some pressure on the tenure and that's when you got the inverted yield curves and everything like that. And so what that ended up happening at that point, you know, you went into 30, 60, 90day bills. Now, a couple things. First of all, we're very sensitive to changes in interest rates because of that. Very, very, very sensitive because we have to refinance our debt stack that much faster. Uh, and second of all, you've actually sucked out a huge amount of liquidity from the system inadvertently. And and this is because of what's known as the relative value hedge fund trade. And God, you know, always beware of commodity guys talking about macroeconomics and financial plumbing, but I think this is really important. So, what what basically what what happened is you have a different kind of buyer in the bills market than you did in the bonds market. Um, the bonds market is asset management companies, uh, long-term liability holders, foreign and and domestic central banks. And in the bill market, it's money market funds. And so the only problem with money market funds is that they don't buy treasury bills. They buy treasury bill futures. And it's just easier for them. It's easier for them to clear and settle in custody. And so what you end up with is a hedge fund who sits in the middle who takes like a, you know, two basis point spread or probably even less than that and buys the treasury bill and sells the futures or the forward to the uh to the money market fund. And of course that's not so excit I mean it's a pretty riskless trade. You know you buy a Treasury bill and you sell a Treasury bill future. It's it's pretty straightforward. U but it requires an awful lot of leverage because it's not very exciting on its own. And so you lever that up 50 100 times to one whatever it's going to be. And that's what's known as this relative value trade and total quintessential carry trade by the way. I mean almost the definition of a carry trade. Cheap bank financing. Take a tiny little risk-free spread and magnify it. Now, the issue with that is that it's sucked up so much liquidity that there's about a trillion dollars of leverage being lent into this trade right now, right? So, these are big dollars uh that that just doesn't that that liquidity is available into the market when you're issuing bonds because that trade collapses. But when all of a sudden you move your bonds to your bills, you have now sucked up a trillion dollars of liquidity. So you're in a real tough spot because you need more liquidity on the one hand. You have inflation on the other hand, you can't issue bonds again because then everyone's going to know that you're basically bankrupt. So, so you're really boxed in. And this I think just falls under the idea of um you know, I go bankrupt slowly at first and then all at once. Um you know, we're in a tough spot. This this is why we we're in a moment, I think, of realignment and a moment of needing to change the big kind of large superructure that exists over the monetary system and the financial plumbing. I think gold's telling you some version of that. And by the way, I don't know that it ends badly for the United States. We've been in tough spots before. And in 19 uh 1969 70, it looked like we were going to run out of gold. uh we ended up finally breaking the whole world's uh exchange standard Brentton Woods and and shut the gold window. And what did that do to the dollar? It made it super relevant, more relevant by 1985, 1990 than it was in 1965. So I mean kind of bizarre things like that. The US still has a huge amount of might and dynamism, but it has a big debt problem. So I think people are trying to find solutions to that. I think it's going to lead to inflation for sure. I think you're in this moment now where the carry trade unwinds and you start to see tomorrow doesn't look the same like as yesterday and that's really bad for a carry trade and really good for real assets and gold. >> Well, we'll get to gold in a minute because wow, what a story there. But, uh, this has huge implications obviously for everybody who's uh, trying to plan for retirement or think about how they have to diversify or how they're going to spread the risk. I want to get to this idea though. You said this is going to create problems that are going to compound politically, economically, and socially. Which brings me to this idea here, which I call this the what the heck, let's elect Mum Dami in your city, why not? What could possibly go wrong chart? Uh Sven Henrik pointed this out that net worth of the top.1% that's only 135,000 households versus in the red dotted line versus the net worth in the bottom 50% that's 67 million households. Obviously, um 1 2 3 4 five times as much wealth contained in the top household. So, this is really what we're talking about here is ever since that great financial crisis, which would be right here at my cursor in that gray spot right here, the Fed has done everything it can to liquify and print and financialize and it's really, can we be honest about this? Flowed highly preferentially to one segment of society, not to the bulk of it. Um, it has consequences, social consequences, does it not? >> Oh, I I think it certainly does. I mean, I think the administration today, populist left and populist right, uh are um a reaction to that for sure. I mean, look, you know, I'm certainly not the only person that said it, far from it, and and you've read it time and time again, but but very clearly what you have seen is wealth creation through asset price inflation. And that in and of itself is neither good nor bad, but it obviously does redistribute wealth a little bit in the sense that if you don't own assets, then you have don't have assets that appreciate. Now, the issue is that at the same time as that's been happening, other things like, you know, real wages and things have largely stagnated. So, you have had a big growing gap. And I'm I'm certainly no bleeding heart and I'm not even liberal. um quite conservative, but you know, I mean, yeah, you can't deny that the um actions of the Federal Reserve over the last 15 years has has led to a huge amount of wealth inequality because of asset prices have have skyrocketed uh to the point where major cities are sort of unlivable for most people. Uh unless you know, you fall into one or two or three very specific categories. If you're in the real estate business, you have to be something that's carry trade or carry trade adjacent. If you're in the real estate business, it's been really good. uh if you push paper ac across your desk in some form of financial trading or financial services, you've been able to take advantage of that even if you don't own the assets. you know, there's young finance guys that that do quite well and and and and ladies that do quite well um without necessarily owning assets because they have, you know, they're adjacent to that industry, but other than that, I mean, yeah, the real economy wage growth has largely stagnated and uh it makes for uh quite a bit of animosity and jealousy amongst the classes for sure. >> Yeah. I only wanted to raise that because I wanted to you mentioned how the Fed's boxed in, but I believe they are increasingly socially boxed in, politically boxed in, and now sort of monetarily or economically boxed in. It's it's getting dicey. Um, >> yeah, you know, I mean, >> I don't know what I would do in their position to be honest. I thought about it long and hard like what would I do? I'm a big critic, but I don't know what I would do. >> It's tricky, right? and and this everyone is sort of uh everyone has identified the same risks to this type of a system and the risks is the kind of the risk of incrementalism a little bit is that you can get away with it for a while and doesn't really hurt anybody or anything and you know you can have elasticity of your money supply you know we could go back to a gold standard and be extremely rigid and go through periods of deflations and busts and uh I probably think that we would be better off for it we'd allocate capital more prudently we probably would have longer term growth both for everybody, right? Rich and poor alike would do better because you'd have a cost of money. You'd have a cost on interest that reflects the scarcity of that asset and you'd put it into the right projects and you wouldn't squander it on stupid things like uh solar panels in Germany where there's no sun and things of that nature. And um you know because of that, it might not happen on day one, but because of that uh that would certainly trickle down to everybody in the form of higher growth and higher prosperity. uh instead we've we've taken a different route and the reason is you know it's it's politically intolerable to go through a big recession that could be alleviated with a Fed backs stop. So you do it once, you do it twice, you do it three times and you never bring it back to neutral. You know, so after the GFC, I've spoken to so many people who worked at the Fed during the GFC and they all say the same thing, which is uh I don't fault anyone for doing what they did. I don't fault Ben Bernaki for doing what he did in the depths of the GFC, but I fault him terribly for not pulling back some of that liquidity shortly after. You know, it became permanent. And so now we run our economy with a um balance sheet that's a as a percent of GDP. Massive. Massive. We we used to run the economy with less money in credit. For every dollar of GDP required substantially less money in credit. Now it just takes a lot. That can't be good for anybody. And and and I think gold's waking up and telling you that finally. Well, it is. I'll get to that in a minute, but so the case though. So, you know, are we at the Burns era, Mc Martin? Um, but here's Powell or whoever comes next. And obviously inflation has not come down. So, the Fed has this 2% target, which is laughable because we haven't been there for like 54 months, right? Or whatever it is now. I I haven't added it up lately, maybe 55. But I look at this and so ultimately inflation, you can pretty much understand it through M2, a broad measure of money that's in the system. And here we can see obviously there was this massive COVID gyration disruption perturbation. But I'm looking at this Adam and I see year-over-year growth in M2 of 5% and I'm not I'm not seeing tight conditions here. Um this is kind of a it's kind of headed up and and if I'm going to be honest that that's kind of an awkward spot for the Fed to say, "Yeah, let's make the case for for more easing here." Although honestly when the Fed sets interest rates today, it's not like it was at any point before Bernanki in 2008 because now they just turn a dial and they change the interest on excess reserves and it happens. They don't withdraw money and put cash back in the system as far as I understand anymore. So, but money growth itself in the system looks reasonable to me by historical standards. >> No, listen, I think I think it is. I I think part of the issue though with liquidity and and liquidity uh metrics in the system right now I is all that money that's tied up in these crazy cockami things like you know trillion dollars right I mean that's that's a big part of M2 you know that just is no longer available for use it's doing nothing it it it's not dissimilar from when you had all those excess reserves uh after the GFC and so you had to sort of adjust your monetary base because you have this big M2 number but a trillion of it is doing seriously nothing. It's providing a two basis point liquidity advantage to six hedge funds around the world who do nothing but buy a treasury bill and sell a treasury bill future. I mean, this is not there's not going to be much of a multiplier on that money, right? I mean, that that's a crazy uh amount of liquidity to be tied up in in something. And there's like two or three other examples of crazy distortions that that are like that. So, look, as far as the liquidity situation goes, uh, you know, it's it very very very tough to say, but the inflationary pressures that that feel like they're bubbling up certainly, um, I think are at the risk of of accelerating predominantly because, uh, in, you know, we're we're having a good year this year, uh, to say the least. People can go and and look at our website if they want to learn more. But that's really on the back of precious metals and uranium which is a fairly obscure commodity rallying in the you know at least based in the broad market. You know, I think the index has about 1% uranium and then it's gold, right? But energy has actually been fairly lackluster this year and the risk is massively to the upside, massively to the upside on energy both in terms of natural gas and crude oil. And and so that certainly does not help uh inflationary numbers as well. And you have to remember the thing about inflation that makes it so difficult to model, so difficult to model is that inflationary expectations are not an exogenous shock. Inflationary expectations become embedded in the economy and they distort behavior which actually then changes the rate of inflation going forward. That might sound like a convoluted thing to say, but I mean just think about it like this, right? When people begin to feel inflationary pressures coming, they pull forward their purchases, which puts a strain on the supply chain, which causes retailers to raise their price and actually creates the inflation that everybody was worried about in the first place. What do you think that does to inflationary expectations? You know, this then it becomes a bit of a cycle and and that's super hard to model. No one has it in their models. Um, I don't know if that's why people missed the last quote unquote transitory inflation period. Uh, but you know, it's tricky because it's half macroeconomics and it's half psychology. And to me, neither look particularly dovish. Both seem like they're going to lead to higher inflation in the next 3 to 5 to seven years. Well, I want to talk about um so the Yeah, I I know I haven't heard the phrase in a while, but Bernanki was uh all about anchoring inflation expectations. Um and they're very unanchored apparently right now in Japan. Last last thing I saw, people are expecting like 10% inflation. Whether that comes true or not, as you just said, that reflexivity of because they expect it, they'll probably get it and then they'll get more of it and then they'll expect more of it and that has to run its course, right? But I came across this and I really wanted to talk about this with you which is uh you know history rhymes often and and um at Apollo research torstston the economist said uh whoa this is kind of looking a lot like the 70s again. So we had our first inflation mountain here which had its set of uses. You were just talking about the decisions the the Fed was making right around here. >> Then we had the second inflation mountain which in uh a couple of reasons right we had an energy shock in there. We had uh the Vietnam war monetary shock. We had a variety of things but I want to talk about if this comes to pass will history will rhyme and I think there's a lot of reasons you mentioned one of them because we have to get to the upside potential of oil contributing almost verbatim to this particular chart again in in essence right a very rhyming sort of a period of time absolutely gosh there's so many parallels to the 1970s and we um I mean lots of people have shown this chart but we showed this chart as well we put this in one of our letters maybe a year or So ago, it obviously didn't go as far, but it is continuing to follow that exact same trend, you know, eerily well. Um, and like you said, it might have some similarities in terms of the root underlying causes, uh, as well in terms of, you know, an big energy shock that nobody expected. And I don't know, can you pull that chart up again? >> Yeah. The the other thing that's so fascinating is that if you look right as the core CPI and the 197482 experience, no, right when it bottomed. So, you know, that corresponded exactly to when US conventional crude oil production peaked and rolled over. And that was something that took everyone by surprise. everyone, you know, remember if you will when from the day we first drilled oil, oil was discovered at kind of at the same time in the US and in um Azerbaijan. Uh the US went on a run from 1890 to 1971. Uh almost, you know, huge swings in the price, but but you you had young growing fields and so you were able to withstand that and production just grew and grew and grew. And then in 55, this guy King Hubert predicts that by 71, uh, oil, US oil production is going to roll over. And sure enough, it does. It caught everybody off guard. It caught everyone off guard so much, I think we might have talked about this last time that Nixon got on TV and launched Project Independence where he said, "Look, you know, we've come to take our energy industry for granted. um we haven't, you know, dedicated enough time, resources, education, whatever into generating the next guy generation of oil field services and and drillers and whatever. And so we're going to help raise prices, give them a big tailwind. Uh we're going to make taxes less burdensome, make regulation less burdensome, and the industry is going to get back to work. And it's called project independence. And production fell another 30% over the next, you know, three decades after he announced that. And today, right around that time or right around the same time in that troughing period, we had the shells, the big source of growth now, begin to roll over and begin to falter. And the timing is not exactly right. Um because, you know, we're going to peak US shell production in 200 realistically on a monthly basis in late 24. Um just a couple years after, but gosh, it's awfully close. And frankly from 201920 which is the low in the inflation number there which corresponds to 72 uh you've had very very meager growth. You had the the huge COVID uh slowdown in oil and gas and then it came back and made a new high but not by too too much. Nothing like the growth we had before. And so I think it's going to be the same driver. The main source of nonopc oil supply growth is now slowing and rolling over. Doesn't mean it goes to zero. Didn't go to zero in the US. Still a very robust business through the 80s and 90s. um played lots of people. I think the same will be true here. But it's not going to be the incremental barrel of growth that the world needs. And I think that's very important. >> I'm going to dive into that. Um but just I want to I want to just clean up one one little piece that we said we were going to talk about just to make sure we're we're clear about this. Um so you had a really great point in in the quarterly report. You said, you know, things get a little out of favor. Do you remember this? I remember this cuz I was here. Um this is when gold in blue and nobody wanted it like coming in here through you know 1999 into 2000 and gold in terms of a global reserve. It has no role in monetary policy anymore. It's the barbarous relic and all that stuff. It has nothing to do with nothing. And here it's gone from well I guess that's 10% over 20%. So this is big cuz this is g global dollar reserves in essence and the dollar's coming down and you can see what's happening here. This is an extraordinary change but nobody saw this coming back here. Well except you did right. >> Well I didn't. I have to give Lee credit. Lee did >> give credit for that. By the way this is where I first started buying gold heavy right where my right there 2021. That was I mean 2001. That was my that was my moment. >> Good for you. Well >> well that's cuz the Fed was printing like five billion a month. You know I got to hold my pinky up. That was like such quaint numbers by today's standards. >> Totally. No, you know, look, no, nobody saw that coming. And what and >> you know, we'll probably never see that again, right? By by the late 1990s, gold had become so out of favor that you could really make the case that you didn't need a gold mining industry. Like we always see all the time, we knew it was unsustainably low when the price of an cost price of an ounce of gold was less than the cost to extract it in the best mines in the world. on that same ounce. Um, so the mining industry couldn't make a cash margin. So said, do you want a gold mining industry? Well, like devil's advocate, you could argue you didn't need a gold mining industry because all the central banks were in the process of liquidating. They were your gold mining industry, right? And they came together and devised a scheme to not frontr run each other and get rid of all their gold. And they would be net sellers. It was expected for 30 to 35 years. I mean, massive, you know, generations. They would be just pressing down the price. And so why on earth would you want to own it when you could own bonds? You know that that was obviously bonds the most favorite asset class. And so you know that created a a unbelievable bearishness in the market that probably would be difficult to replicate without a huge forced seller the same way like he did then. Um but it was a great time. The whole narrative was complete bunk. It was a great time to get involved in gold. Gold went on to be the best performing asset class not only of the decade, but then it took a bit of a breather, but still on a 25-year basis, it's the best performing asset class of the last quarter century. This was the barbarous relic that everyone told you 99 had no role, no role to play. And and and so yeah, you know, I think it's being remonetized. I actually don't really think it ever stopped being money, but I think we just stopped thinking of it as money. Um, you know, you obviously have a different massive difference in who's buying now. you know, the the central banks are are buying, but it's not those same central banks that sold their gold. It's not England and Switzerland. It's it's really China uh that's buying a lot of that and and the other BRICS countries, Brazil, India, uh and China. Russia is, you know, needs as much liquidity as they can get. So, they're probably not big gold buyers, but you on the margin. And Poland is a big gold buyer. Um and and so um and so but you're not seeing you know the western central banks coming back. So so you're broadening golds interestingly enough you're not you know the countries that used to use gold uh to back their currencies they're they're seeing more coverage now because the price is going up but they're not accumulating but you're seeing a broadening of the acceptance of that kind of a regime to other countries that that didn't have big gold reserves before. Um, and so, you know, it's been absolutely fascinating and and I think it partially explains obviously why gold's making all-time highs at $4,000. Uh, more than partially. What's been interesting is that the Western investors haven't really returned to the gold market. We've seen a little bit of an uptick in holdings through the GLD, but not through the gold equities. And people say, well, does that matter? I mean, yeah, a good a true gold robust speculative mania, if I told you you could get a six times levered bet on gold by owning a gold equity, you know, those things are going to do super well. You know, the Tesla 3x longs, uh, ETF, single stock ETFs do really well. And, you know, when you get to that part of the market, uh, gold equities will do well also, but you don't even need to put on the financial leverage. But, you know, you're not there yet. So the price action so far has been mostly the central banks buying and it's been just recently a little bit of western interest coming back into bullion only. So I think we have a long way to go. Um you know the only thing that gold seems awfully expensive relative to not not relative to all the debt that's out there all the GDP that's out there nominal dollars or anything like that. Certainly, you know, I had meeting with Pier Lasand last week and he was talking all about, you know, the gold to Dow ratio crossed one uh in the past. That would be, you know, 46,000 on gold or whatever. You know, 23,000 if gold fell, if the Dow fell by 50% in a huge market correction. I don't know. But, you know, it doesn't seem expensive in those terms, but it is awfully expensive relative to crude. In fact, it's at a record. Uh the only time it's been cheaper relative to crude has been um during COVID when oil went negative. Yeah. 65 barrels of oil with 1 ounce of gold. >> 65. Unbelievable. Seven and a half standard deviations above its long-term trend for the math wonks at home. That's a very rare event. Um >> yeah. Yeah. It's not so savior, >> you know, it's been it bounced along here. Um, and this would just be one standard deviation away, right? So, it just bounced bounced basically within one standard deviation up and down from 1970. Okay. Co, this is weird. We had negative oil for a couple of uh days there, but but outside of that, this is a fairly sustained and very robust move right now. >> Totally. And and and the thing that's really bizarre in the oil markets today is that, you know, I would argue that crude prices today reflect capitulation lows. And you know certainly relative to gold it's at a level that only happened during co in real dollars it's awfully cheap as well. And um you look at the headlines, the IEA is now talking about even in the second half of this year a surplus in the crude markets that rivals that that we saw during co remember we like shut down the world's transportation and >> tank batteries were overflowing and people were paying negative prices for someone to take oil off your hands so that they could shut in wells etc. ETA and the according to the IEA this year and certainly the second half of this year of which we are now halfway through the second half of this year the surplus today is nominally on paper worse than it was during co well what it doesn't seem worse we don't see inventories going up actually until yesterday uh oil was remained backwardated which meant that traders were willing to pay a physical premium for prompt delivery because inventories were quite low. So, you have pricing that suggests it's the worst days that we've ever seen. You have an energy agency that's out there telling you it's as bad as it's ever been before. And that I think is propagating the the fear and what have you. And yet, when you look at the actual fundamentals, which I mean, you don't have to be so sophisticated to read an inventory number, you'll see that it's not going up. It's not going up. Um when you look at the IEA, interestingly they they did put out a report which I think is probably their most insightful report in some time which said that next year you know they look at how much the base is declining and how much ongoing capital investment is needed in order to just hold production flat or grow and we're just at the level basically to hold it flat according to them to say nothing of growth. And so I don't see that being a situation where we're going to be able to have such a loose market at all. In fact, we might have quite a tight market and yet you're getting this capitulation low pricing. So maybe everyone sees something that I don't see. I'm not really sure what that would be. The shales have now pretty definitively rolled over. They rolled over last October. Uh oil. Everyone asks me when they'll roll over year on year. I suspect by this October. >> So let me just throw in a quick point um because we're gonna I I want to get into the shells big time, but you're not alone. Uh, it turns out that um at the recent Energy Intelligence Forum conference in London, just happened a couple days ago, the Exxon Mobile CEO, I think he knows something about the oil business, I'm guessing, um, and says that Darren Wood says that today's oil glut, such as it is, which may be a fiction, is short-term, and that without new investment, supply could fall 15% per year. Now, is he talking his book, or is he seeing something that maybe the IEA has missed here? That's interesting. I mean, I look, I suspect if you parse that number and you really dove into what he's talking about, I mean, that that that that's high. That that is not the base decline rate. Um, something would have to go fundamentally catastrophic, frankly. We we would have massive massive issues. You know, if you move from a 4%, which is a good guess for the base decline rate, to 5%, that's the difference between a really strong bull market and kind of a neutral market. Um, you know, 15%. And I mean that would be you almost catastrophic. So I suspect he's looking maybe at his shale assets or shale in general. Those things could be true. Uh if you look at a younger more high decline basin. Um but yeah look you know you're on a treadmill. The oil business is always a treadmill. I mean every all the extractive industries are. You know you produce something and then it begins to decline the minute it comes online. So you have to invest more and invest more and invest more. The problem is, and this is what actually kind of creates the commodity cycles, when the market's in surplus, prices collapse to find the level that'll shut off the next unit of supply, which is really low. So, you're not incentivizing anyone to invest in the next generation of projects. So, you the base starts to decline. In the first year, you still might be in a surplus, might take two years, and then everyone says, well, you know, prices will stay low forever. But they don't. They they they slowly they ratchet tighter until you slip back into a deficit. And it's that it's the fact that not everything happens overnight and that you don't have the instant gratification of new projects coming online and depletion taking hold and um that that creates the cycle because the timing signals aren't perfect. You know, it takes time on both sides. Uh so that's always been true and now you're at a level of capital investment where you're not able to sustain that anymore. I mean it's as simple as that and you can measure these things. Lots of people do fewer and fewer but you can measure where we are in the capital cycle and that's pointing for a very very very bullish 5 to 10 year run for energy. Now does it happen at the end of this quarter? I think it could. Is it next year? It's possible. But when you're buying a ounce of gold and you're able to buy 65 barrels of oil with it, uh I think you'll be very happy. Chris, to put it in perspective, when you bought your ounce of gold back in the late 1990s, the same ounce bought six barrels of crude. So, you would have been very wise to drain the swimming pool that I know is in your backyard that was full of crude at the time and sell it for gold. And today, you probably make sense to buy some oil. I'm not saying that gold won't do well. In fact, we remain quite bullish on gold. But clearly, oil is the mispriced asset between those two. standard devi seven standard deviations is telling you something is either really badly mispriced or there's a huge turn coming that I don't see. >> Well, I want to get into that because this is the crux of it and of course you and I have been talking about um the shale thesis for a while and the depletion paradox and all of that. Uh this is a a section in your most recent quarterly report, the arithmetic of depletion, shale's long goodbye. The age of shale is drawing to a close. Big statement. I just want to start with this though. This is the price of crude oil, WTI. Obviously, just sustained awfulness. It starts at 85 and goes down to 58 as of this morning. That's just a big long slow goodbye to the price of oil. I guess we don't need oil anymore. Um, but you wrote in here, this is this is fascin. So, so kudos. >> You got some stuff in here that I was like, oo, great point. We'll start here. You said, quote, "With hindsight, the record is plain enough. Shale oil production crested in November of 2024 at 9.19 million barrels a day. Has since slipped by a modest 180,000 barrels per day. In a year-on-year basis, growth has slowed from 800,000 barrels a day as recently as 23 to just 80,000 barrels per day. Um, and destined to turn negative by October." And you debated Doomberg about all this, and I have too. Um, but this seems pretty clear to me. just I see a trend and I you don't have to be an expert chart reader to see that trend, do you? >> No. No, I don't think so. Well, I mean I I find that the funniest thing here is that on a monthly basis, you peaked in October of last year and everyone and you and you've not regained that high. You peaked in October. That was the high. I guess that's what it means, right? By definition. >> And I still get a lot of people saying, "Well, that's all well and good, but when do you think it's going to decline year on year?" And I said, "Well, I suspect it'll be by this October." And they said, "That's soon. Why would you say that?" And I said, "Well, if last October was the peak, and you're comparing it to a year ago, and this October is not higher, then you're going to be down year on year." So, I don't know, maybe that's going to be the catalyst that's going to get people um to realize it. You know, I would have thought that the sequential change, there could be noise, right? Monthly changes can be difficult because you can get another rebound. So, I fine, I get it. But you're a couple months in, nothing. 6 months in, nothing. Now you're 11 months in. Doesn't look like we're going to get a new high. We could we could, you know, a new pad could come on or three pads instead of two and pulls a little production forward. But um but I think that it will be negative pretty soon. Um and is that this thing that gets people going? I'm not sure. Is it when inventories finally start to decline? Because I will admit, you know, oil markets have been basically balanced for the last 18 months, two years. You know, for those out there that say the market is in surplus, I think that's nonsense. But it's equally nonsense to say the market's in sharp deficit. The market's been balanced with a price signal that's telling you on a balanced market, I would be buying it, right? You know, the odds are in your favor. Um, so maybe it's when the market finally slips into deficit and inventories fall or maybe it requires like a real crisis. I'm not sure. Um, but but I think we're moving towards that uh day by day. Today's markets are more volatile than ever with ongoing economic and geopolitical uncertainty. Navigating such environments requires thoughtful, adaptive strategies, not a one-sizefits-all approach. At Peak Financial Investing, our registered investment advisory firm connects clients with experienced wealth managers who focus on active portfolio management. These professionals use evidence-based strategies designed to respond to changing conditions, not outdated formulas, but customized approaches grounded in research, discipline, and risk awareness. We believe in open, informed conversations, including discussing tools like precious metals and diversification as part of a broader financial strategy. Every investor's situation is unique, and our adviserss tailor their guidance accordingly. Visit peakfinaniinvesting.com today to schedule your free consultation and explore how proactive management can support your financial goals. I'm Dr. Chris Martinson, proud to work with Peak Financial Investing and my support reflects my professional views. I encourage you to take control of your financial future by making informed decisions. Well, I was just shocked that uh this came out in April. This is the EIA, not the IEA, EIA, very similar, but this is the energy information uh administration. So, for the US, but but they this this did shock me because 2024 this dotted blue line of of production output in shale went went out flat to 2050 and then they very quietly said, "Yeah, no, that's a peak." I would have thought, well, for me, this is a very obvious thing that happened to all of this is big news, right? That's big news. the EIA itself, ultra bullish, uh, with, I would suggest even potentially some political pressure at this point to be as bullish on production as possible, >> still came out and said, "Oh, yeah, this is adding up to look a little bit more like what you've been projecting for a while now." >> No, listen, I think the writing's on the wall, okay? The these are really, really big assets. They've been depleting and declining slowly at first and then more and more and more. Uh, these it's all about differential equations. you know, you have you're constantly drilling new wells and you have old ones depleting. And at some point, the production from the new ones isn't enough to overtake the depletion from the old ones. And when you look at it on balance, it's this nice kind of steady number, but it's a little bit like ducks under the water. It's frenetic activity happening all the time. And small changes have a big amplified impact on the output. And I think that's what we're seeing. We're now entering this period where the shells are all sort of mature assets and you don't get the same levels of growth from them that you did before or the ability to grow even if you wanted to pull on them and press a little bit harder. And so what does that look like? You know, in the last god 15 years you brought on 10 10 to 13 million barrels whether you're taking your NGL's or not of crude oil production and 90 billion cubic feet of natural gas. Divide that by six, you know, divide it by 10 and you'd be at nine. So you're at what like 15 million barrels there. You brought on nearly 30 million barrels of oil equivalent in this country and nobody thinks that the last 15 years had anything to do with energy. I mean that that's really a testament to the dynamism of the US economy. When they talk about the 2010s, they don't talk about the energy boom. When you talk about Saudi Arabia in the '50s, I promise you they talk about oil. But when they talk here, it's just sort of something that happened in the background. And so I kind of maybe forgive people for becoming somewhat complacent or, you know, just forgetting that you actually need to care and tend to this industry, but you do. And so now it's come the chickens, no pun intended, to doomber coming home to roost. And we're starting to see tightness overall. Um, and and that's going to be a problem. There's there's no way around it. It's a simple story. There's going to be a problem. >> I I agree. And and to get there, I I would like everybody to be aware that when we talk about the shales, the shales the shales of US shales, we're actually really talking about the Perian basin only at this point in time because this gray line in your report is all other shales combined actually down from its peak back here. And the story is 100% the Perian and as we covered last time, it's actually the story of four counties in Texas and New Mexico. Um, at this point we're literally down to named counties as being responsible for keeping the whole thing going in terms of narrative control. >> And if you were to look at the acreage maps in those four counties, I mean, maybe that's what it takes. It takes a real aha moment. If you look at everything that's been drilled, you know, are there little pockets? There's a couple, but I'm talking like a couple, you know, when when we look at the royalty side of the business, too. So, we get shown packages all the time. And if you want something that's unrilled, it's not going to be in Midland Martin uh loving Reeves County. It's going to be, you know, in second tier areas. These things have been drilled like pin cushions. U and that's what brought on that unbelievable period of prosperity in the United States and in the world, frankly. Um resulted in low oil prices, allowed the debt bubble to go on longer than it could otherwise because there was no inflationary pressures. >> Help the trade deficit. >> Help the trade deficit. Uh but it's all ending. And so there's a problem. And so people need to have a little bit of protection in something that's not in that everything else portfolio because everything else has this common factor in it. Everything else has become the carry trade and you need something. Gold has been the first thing that has sort of proved itself. The rest is still hypothetical, right? To own oil stocks is still you have to believe me a little bit. Gold showing you what that looks like where you can start to really create wealth. And then what's going to be really scary is likely based on valuations in the broad market and certain trends on the investment side and talk about AI if you want. We're going to go through a period where it's not that you can do better in gold than you can in the S&P. But it that's the only place where you will be able to protect and preserve your wealth and not see it go down rather sharply. And that becomes the moment of panic where people begin to really rush into real assets uh as a haven. And that's when prices become unsustainable on the upside. But we're years away from that yet. >> Yep. The pendulum doth swing. Here's the thing that shocked me. So that's why I put two exclamation points. I'm not a big exclamation point guy, so you know this is serious. Um I was shocked to read this that as much tightly as I follow this. I didn't know this that the wells themselves that we see here in 2024 are almost a third longer than they had been. which meant that in aggregate lateral footage drilled each month since October was 70% higher than in 2018. And we're barely holding on to that output and we're drilling things that are se we've we drilled 70% more lateral feet. >> No, I I think that that's absolutely true. It's surprising to a lot of people and and it's one, you know, it's surprising for a couple reasons. First of all, I hear from a lot of folks that we've become so much more efficient. And to me, that means that we're getting more out of the ground. And I guess it's getting it out of the ground per what? Per dollar spent, per day active, per whatever. You know, to me, I think of geological productivity is how much per uh unit of subsurface, per cubic meter of subsurface, how much oil are you getting out, you know, for 10,000 foot lateral well that accesses 10,000 feet of the wellbor. But a lot of people quote, you know, per rig. And yeah, that's true. The rigs have become a lot more efficient because we're drilling them quicker and we're drilling them longer, right? So each rig, if you if you look at the sort of if you think about kind of the the chain reaction, you have rigs. Rigs drill wells. Wells have lateral length. Lateral length has accesses reservoir, right? So you your rig count has come way down. your your productivity of the rig count has gone has gone way up in terms of lateral foot access per rig day I guess right what what a cumbersome metric that is but I think you get the intuition so that's true if you had lots and lots and lots of undrilled acorage and your bottleneck was rigs then increasing that metric would lead to a production bump because that would be the thing that was holding you back but it's not the thing that's holding you back is the fact that there's no good geological locations left. And so what that means, and that's kind of actually what you're seeing, if your rigs then become super productive, you can do so much more with a single rig. What does that mean? It means you just your rig count goes down because you don't have anything to do with those other rigs, right? It doesn't grow the way you would expect it to. And that's what we've seen. And that's why your utilizations on the rigs are low. Um because there's just nothing to get after. And you and you've made each rig quite productive. Well, and and then we see initial productivity production, sorry, initial production per lateral foot. It's clearly trending down. >> Oh, it's clearly clearly trending down. >> We we are drilling more faster and getting less out. And that's the depletion paradox which was covered in your prior quarterly report. Everybody should read that because paradoxically, we'll do more and more and get less and less, right? It'll mirror the 70s under under Nixon. >> I think that's that that's exactly right. The paradox comes from the fact that production rolls over when there's still lots of reserve left in the ground. Everyone, I think, in their mind, has this idea that production will keep growing until you run out of oil and then it kind of crashes to zero. It doesn't. It stops growing actually much earlier than that. And that's the paradox. And and even the industry doesn't really get it in the sense that like I was in a room full of oil and gas veterans and everyone said the same thing to me. They're like, I get what you're saying, but if you raise the price, I'm going to have more money that I can drill less good acres and I can still make a couple bucks doing that and I'll be able to grow production. And so, if I can do it, everyone can do it. That's all true. That happened, but it wasn't able to increase the aggregate level of flow rates from these basins. That was true in the 70s. That's been true in all the shell basins to date. Every single one except the Perian. Um, it's not, you know, it's not cuz you can't make money drilling. It's just that you get less productive and your initial the the super high declines from your high volume wells, you can't stack enough low volume wells on top of new ones on top of it to overcome that. Well, this is exactly what you pointed out in the report, which is that the more obviously I mean the more wells you have, the more decline you have off of those wells. So, the more you have to drill to offset that decline. And that as of now, it turns out the decline rate quote has not changed. The burden has grown heavier. more than a half a million barrels a month vanish before the first new well comes online. Twice the toll of 2018. So we have to run twice as fast as 2018 just to stay in place at these levels. Right. So yeah, that's right. That's absolutely right. And it's funny because as I'm looking at these numbers, you know, per perhaps the Exxon guy is right because we kind of always thought about a four or 5% base decline rate on a global basis, but if really, let's say, you know, you're at 5% decline on conventional oil uh and now you're at, you know, closer to, you know, what 20 30% declines on the base uh on shale and shale's now become 15% of the world. I mean, that number probably is high. Is it as high as 15? I have I could do the arithmetic, but but I guess in retrospect it probably is I would say at least 200 basis points higher than than it had been before because of that. >> Well, it depends if we're talking crude plus condensate or the all liquids thing. So, um I like to think of it as as crude. So, so bottom line summary is um this is what your model is is churning out right now for the perian, right? And by the way, as we mentioned, all the other shales are already kind of in decline. And this looks a lot like what the EIA has put forward too, just in terms of like it doesn't go away, but man, we're not getting more out of the ground. And um as goes the Peran, so goes the entirety of the US production in the sense that it's been holding up the declines from the other fields, they're all in decline at this point in time. Everyone I've looked at. Is that true? >> That is true. That is true. >> I feel like this is just so underappreciated. Uh it it's ridiculous. >> Nobody cares. Nobody cares about oil and gas and energy at all. at all at all. It hit a low of 1.8 in CO when you weren't moving anyone around the planet and oil was spilling risk spilling out over the tops of the tanks. Hit 1.8. You're like, you're at like 2.3 today waiting in the S&P. >> Okay. A single ounce can buy 60 barrels of oil. I have to find out what you can do with 60 barrels of oil in terms of like how far that's going to take you. I need some kind to put this in people's perspectives, right? To to to get it in the right mindset. This is as unloved an asset class as we have seen. You are seven standard deviations away from normal, at least on that one metric. Uh, you know, things start blowing up when you're like at three standard deviations. Banks fail and collapse and stuff like that. When you have a day that's like three and a half, you you're at seven. It's almost unheard of. Um, this is a out of favor asset class on steroids. It is so unloved because everybody thinks just like gold in 1999, it is a barbarous relic of the past. It used to have a use. It has no use going forward. It is simply untrue. It still is how this world gets around. It's not going anywhere. And we have not put a nickel into it in quite some time. I'll show you how mispriced this market is. Okay. Oil bears, people are only interested in playing it on the short side and from a negative perspective. Oil bears will tell me all the time that the it doesn't matter if the shells roll over because we have this huge offshore drilling boom now that's just going to accelerate from here and we're going to get as much as we need in offshore Brazil, Guyana, Namibia, Angola. Um I say, "Okay, that's interesting." Like, "So, how are you playing it or whatever?" And they don't really tell me. and you say, you know, if you really think that and you're a little bit worried or just want to hedge or double down, I don't even know what it would be, whether it's a Texas hedge or a proper hedge, you can go out and buy those drill ships that are apparently going to backs stop this boom for effectively the scrap value of the steel on the board them. You know, they're 10 cents on the dollar replacement cost. If you think about what you could do with human ingenuity to add as much value as possible to a piece of steel, it's probably building a seventh generation semi-submersible drill ship. And you are near on a replacement cost basis. You're getting down to like scrap values. Okay, 10 cents on the dollar replacement cost. These things are being given away. This is allegedly what will be powering the entire boom going forward in the oil and gas industry that will be so prolific that it will overwhelm demand and cause prices to fall. Like this market doesn't make any sense. The the these things are not logically cohesive anymore. That happens when people just walk away from it. They don't even think about the industry. They're not making sense. Um and that's that's where you are today. So there's huge opportunities. Unbelievable. both in terms of taking a directional view on crude as well as some mispriced assets like those offshore drill ships that I referenced a minute ago and uh it's not dissimilar from gold in the late '9s. It's not dissimilar from uranium in 2018 and I think people will be very very happy if they have at least some exposure in their portfolios to something that is really outside uh of the mainstream and outside of the carry trade. >> Understood. And I've I'm I really want to um get your perspective on this because this just came out yesterday in the Wall Street Journal. Trump wants to wants more natural gas exports and lower energy prices. It's going to be tricky. They appine right in the headline. Um because look, look, look what they put right in here. Major gas basins are growing old. >> They put it right in there. And I thought this was astonishing that they said, "Well, you know, these things are kind of growing old. Um you know what we're going to do? You know what we're going to do?" They said they said, "Ah, that's easy. We're going to need output from the Hannesville to increase basically by another third." So they need that to 1.3x its current output and 40% of new LG demand is the rest of Perine and the other basins are going to fill the rest. >> Like that's what they're going with here. >> That's what >> the Hannesville is going to 1.3x its output and the others are going to fill in the gap somehow. >> Yep. No, listen and and and you know I actually like Benois Moran who wrote that story. He's one of the only guys that stuck with the oil beat throughout the dog days here and um he he he has a pretty good handle on some of the technical sides of things. I've spoken to him a few times. >> I'm not faulting him at all, but but the the the analyst who said oh yeah, he's quoting here who said >> Oh, no, no, no, no. Yeah, no. I I >> The article is good. >> I agree with that. But if you if you read between the lines, what he's saying is that the problem with being able to increase exports is that the fields are getting really really old. and and you know those analysts that think that that's going to happen. I mean that is what has to happen to get the numbers to balance. I just don't think it's possible. Um I guess I'm feeling I'm feeling kind today. I'm looking only on the bright side of people's articles. But no, listen, that's exactly it. If you talk to anybody in the midstream business, in the AI power business and the LG business, they'll all tell you the same thing. Uh the one thing they don't worry about is where they're going to source the gas. That's that's what they all tell you. The one thing they don't worry about is where they're going to source the gas. They worry about where they're going to source the power, >> you know, to have the turbines. >> Yeah. >> But not the gas. And that's incorrect. And that people are going to pay a big price for that. >> So, let's close up then with with natural gas cuz um by the way, full disclosure, I invest in natural gas and oil and all that. But, but today, even though it looks like it's the same price as back there in 2017, inflation adjusted, it's way it's way down. It would be as if gas was 467. Maybe we'd get more out of the ground. We know electricity costs are like woo, you know, heading through the roof. We know that the whole world is saying, "Wow, we're going to use natural gas for electricity production, which the US here is going to put in 90 gawatt of gas fired power plants." That's fine. Um, mostly because of the data center thing. That's fine. We're going to export more and more. These are all coming online, right? So by 2027 we need another I don't know another 10 11 12 billion cubic feet per day just to export just to feed those things. That's fine. >> 27 by the way is like 13 14 months away. >> It's coming in. And meanwhile the EIA is over here going um here's what here's our forecast for marketed dry natural gas production. Like how do you put these two chart this is in the EIA. This is in the EIA. They're the same outfit and nobody's ringing any alarm bells here and I'm just confused by that. >> See, Chris, this is like it's all a big game. They're giving you little clues here and there that it's not all going to work. And yet, you can buy this stuff as though it's going out of business. So, every once in a while, like the joke that the economists say or two economists look at each other and say, "Is that a $20 bill?" No, it couldn't be. It would have been picked up by now. Sometimes it's just a $20 bill and all you got to do is bend over and pick it up. And I think that the entire resource complex is going to be that kind of an investment for the next decade or so. Uh I think that the energy side for right now, you know, typically in resource bull markets, different areas show leadership and then you know cycle out and and they all tend to go up, right? So, so you don't have to be too uh subtle into where you are. Anywhere kind of works uh as long as it hasn't had a capital boom behind it or capex boom behind it. But uh parts of the market will do better than others. Gold has done much better than oil in the last couple years. I think it's oil's turn probably coming up here pretty soon. Doesn't mean gold does badly, but oil probably is going to catch up. Uh gas as well. I mean, natural gas in the United States is the cheapest molecule of energy on the planet. And we have a lot of demand coming to try to soak up that gas. Now, we've had a lot of demand. It hasn't soaked it up in the past, but that's because supply's grown and grown and grown. But you look at the supply numbers. Haven't done anything. They haven't done anything in like 3 years, you know. So, it it's it's just a very very good story. It's very tight markets and uh I'm growing tired of of my voice is growing horse from from from screaming it from the rooftops. But nobody cares other than you, Chris. So, kudos. >> I care. I care a lot. Shell cares. They're they're they just noticed that um global demand for LG is going to outstrip supply about early 2030s just because you know you have to build these big giant plants are capital intensive and nobody cares. So so it it's easy to see sort of these shortfalls are are about to come and um I think it's it's about as easy a setup and layup. Listen, as I mentioned, I in I didn't invest in I put my savings into gold in started in 2001 and I went pretty heavy. I I'm kind of an irresponsible guy that way. Silver, too. Um because I could see the setup for that. It was just really hated and I couldn't understand why it was hated given all sorts of things. Um history, the fact that it was obvious we were going to print more, etc. This seems about as easy a layup as I can imagine, too. We're building huge demand for oil and gas and we're not building the supply needed for that. >> Yep. >> It's kind of like >> I listen that that's that's how I see it too. Okay. And and assets over time they're young. They come online. Usually what happens is prices are high. It creates an exploration boom and a drilling boom and new young assets come to the four. And because it takes so long from that first moment of panic and investment and high prices to when the supply comes online, it tends to bring on too much capital in the middle and too much supply and then prices collapse. And people say, "Well, you know, that was foolish. You can't make much money when oil's at 40." Said, "No, well, we thought it was going to be 90." You know, even if you look at all the Shell guys, were they too overly exuberant? Yeah, probably. But I mean they had from 2010 to 2014 oil averaged 100 bucks with unbelievably low volatility and then it went to 27. So yeah, the projects didn't really earn a particularly good rate of return if you invested for 100 and you got 27 but it hadn't been 27 for a long time. You know it stayed at 100 100. So these things are cyclical. They're massively cyclical. money pours back out and the market slowly ratchets tighter and tighter and tighter until eventually it tips back in to deficit and you off you go. So that's the cycle. That's the model. We're certainly underinvested. There's no toys about that. Even the IEA admits that you're not investing enough now to replace replace depletion. The narrative that's emerged is that EVs are going to take over the world and eat everyone's lunch in the oil markets, but it's not happening uh because they're not particularly energy efficient. Hybrids work. those will go forward. They still consume gasoline though, so you know, the numbers are still growing very robustly. Uh, and you're in a you're in a tight spot. So, everyone hates it. Nobody likes it. Uh, can't get anyone to agree. Everyone um is convinced that AI is just going to continue to dominate the world. Even though if that is true, that precipitates its own bull market in energy because it is the most energyintensive uh undertaking we've ever really tried to do, you know. So, I think all roads lead to higher oil prices, higher gas prices. We need to normalize these ratios, bring them back into line, attract the capital back in. Does it happen now or in 6 months from now? I don't know. By 2030, I think you'll be awfully happy that you have some allocation and exposure into this industry. >> Well, excellent. And so we've been talking with Adam Rosenra. Garing and Rosenra. Everybody should read this. Uh the next inflationary shirt surge is about to begin August 25th report. You can find that at gorosen.com. That's go ozen.com. And Adam um can you please tell people about uh the mutual fund you run? >> Yeah, sure. We run Yeah, we run a 40act mutual fund here in the States and a usage fund for offshore investors. Um and all the information is on our website. We have two share classes, very low minimums for retail investment. uh and were, you know, widely available and low cost. So, please go have a look. >> Well, and they've been doing very well lately. So, I've been tracking that. Obviously, past performance, no indication of future success, all that. But, um, yeah, it's, uh, clearly you've been doing some things right in there. So, with that, Adam, thank you so much for your time again. Really appreciate it. Thank you, Chris.