Brace For 8% Inflation Again, Cycle ‘More Painful Than 2008’ | Josef Schachter
Summary
Market Outlook: Severe supply-chain disruptions from Middle East conflict are widening the Brent-WTI spread and lifting LNG and refined product prices, fueling a 5–8% inflation risk if the war persists.
Energy Security: Security-of-supply concerns are pushing capital toward North American producers, reinforcing a structural bid under energy assets even if a ceasefire occurs.
Canadian Energy: The guest highlights Canadian oil and gas equities as attractively valued versus U.S. peers, with potential upside from pipeline optimization/expansion and capacity growth.
Natural Gas: With Asian and European spot LNG surging, he favors rotating toward natural gas equities—especially Canadian names tied to Montney/Duvernay basins—citing relative undervaluation.
Energy Supercycle: He argues an extended energy upcycle into the next decade as global demand and grid/metal needs rise, with energy stocks still trading at the low end of historical valuation ranges.
Portfolio Strategy: Maintain an energy overweight but trim outsized winners, diversify across oil, gas, and services, and target names offering 5–6% dividends plus capital appreciation.
Risks & Policy: Prolonged infrastructure damage, rising rates, and credit stress could pressure risk assets; recession risk rises if WTI advances into the $125–$138 range.
Transcript
It's Thursday, March 19th, and crude oil surged again overnight, and the stock markets globally are having a huge sell-off today. Brent crude surged nearly 7% to above $113 a barrel, while WTI hovers around $96, blowing the spread between the two benchmarks to roughly $17, its widest gap in 11 years. The Dow Jones hit a fresh 2026 low, down 300 points today. The S&P 500 is falling again, extending a week-long slide, and European stocks dropped more than 2% across the board. Gold is down nearly 18% from its late January all-time highs, marking one of its worst months in history. One trigger was an Iranian missile strike on Qar's Russ Lefan Industrial City, the world's single largest LNG export complex. Russ Lefon took roughly 14 years to build from 1996, reaching full capacity of 77 million tons per year by late 2010. It produces roughly 20% of the world's LG supply. Qatar Energy confirmed sizable fires and extensive further damage to several of those facilities. European gas prices jumped 35% at the open. President Donald Trump responded on True Social with an extraordinary threat and blamed Israel for Iran's retaliation. Take a listen. Israel, out of anger for what has taken place in the Middle East, has violently lashed out at a major facility known as South Par's gas field in Iran. A relatively small section of the hole has been hit. The United States knew nothing about this particular attack, and the country of Qar was in no way, shape, or form involved with it, nor did it have any idea that it was going to happen. Unfortunately, Iran did not know this or any other pertinent facts pertaining to the South P's attack. an unjustifiably and unfairly attacked a portion of Qar's LNG gas facility. No more attacks will be made by Israel pertaining to this extremely important and valuable South Pars field unless Iran unwisely decides to attack a very innocent in this case Qatar in which instance the United States of America with or without the help or consent of Israel will massively blow up the entirety of the South Pars gas field and an amount of strength and power that Iran has never seen or witnessed before. Meanwhile, the Straight of Cormuse remains effectively closed. Only about 90 ships have crossed the waterway since the war began on February 28th. And before that, more than 100 ships passed through each day. Most of the vessels that made the crossing appear to have been Iranian linked tankers running with their transponders off. Iran's new Supreme Leader has vowed to keep the straight shut. CNN reported that a senior Iranian official said Tran would consider allowing tankers through Hormuz on one condition that the oil be traded in Chinese yang rather than the US dollars. If that president holds, the implications go far beyond oil as the petro dollar system may then face its most direct challenge since the 1970s. Oil priced in Yuang at the world's most important choke point would weaken the dollar, erode American sanctions leverage, and rewire global finance. And there's one more choke point to watch. NBC News reports that Iran has declared the Red Sea fair game for retaliatory attacks. And the Houthis in Yemen allied with Iran say their fingers are on the trigger. If both Hormuz and the Bob Almandab Straight close simultaneously and there is no alternative route left, especially for much of Asia as 80% of oil through the street of Cormuse flows to Asia. Follow and subscribe for more daily updates. Now, our next guest says that what follows may be the worst period of inflation since 2020. Joining us today is Joseph Shakar, president of Shaker Energy Research Services and author of the Shakar Report on Substack. Joseph is a 40 plus year veteran of the Canadian Investment Management Industry and is a former chairman of the Canadian Council of Financial Analysts. Joseph, welcome to the show. Good to see you. >> Good to be with you, David. Glad to be with you. Let's start by talking about this divergence between Brent and WTI which is not normal. Uh there's a giant gap of nearly $18 per barrel. What does that tell you about how glo how the global oil supply chains are broken right now? >> Well, WTI is, you know, of course the US price and US production is still uh going and they're still exporting uh you know, 4 million barrels, 5 million barrels a day of lighter cruds to the world. Brent because a lot of the Middle Eastern crude uh and European crude is priced off Brent. There's lack of there's not enough supply of Brent priced crude. So there's a gap in the price. Normally it would be $5. Uh we even saw it, you know, when when they were when there was concern uh that there was a shortage of oil and and international buyers were buying up the US exports. We had the price of WTI trade over Brent. Today, as you mentioned, we're looking at a $15 to $18 premium on Brent. And again, that's the shortage argument um because of these straits of our moves being closed. Now, the close is not accurate cuz Iran is still able to ship 1 and a half 1.6 million barrels a day. And anyone uh that is uh that is selling to uh Iran or China or Turkey, um the Iranians are not firing on them. So those those tankers are able to get through. Um and um the but the anybody from uh any other um market the um the the um um the the IRGC is firing at both the cargo ships and at tankers. And they also have been not only attacking as you mentioned earlier the um the the Qatar pars gas field which is shared by Iran and Qatar but they're also firing um at the Saudi refineries Saudi facilities and that's really the the the one that's alarming the market because the concern now is if you you know you know if you close supply that's one thing but if you destroy the facilities the pipelines the the gathering systems um all of the you know the the processing plants of it let's say LNG or oil that's where you have a massive uh expenditure and a lot of time to repair those facilities and that's why there's a massive price increase um and concern um in there one thing to to note is prices of product because of the shortages um in Europe and in Asia have gone over $200 a barrel so the 147 which was the peak in '08 has already been exceeded and so we'll be watching the spread between uh crude and product um because of the shortages domestically and the big problem is going to be starting in Europe. Europe doesn't have a large amount of inventory and of course their natural gas they ran down during the winter so they're not going to be getting much natural gas from the Middle East so they're going to be desperate to get American cargos. >> Before we continue I want to bring to your attention today's sponsor Monetary Metals. Now, most people think of gold as something you buy in store. Monetary Metals takes a different approach. Instead of just holding gold and waiting for price appreciation, you can earn a yield on it paid in physical ounces. Through their leasing platform, investors can earn up to 4% annually with yield paid monthly in ounces. That means your return is measured in gold, not just in currency terms. Rather than sitting idle while you pay storage costs, your gold generates income. The metal remains your asset and can be redeemed at any time. Thousands of investors are already earning monthly interest in gold through monetary medals. Visit monetary-metals.com/lin link in the description down below or scan the QR code here to learn more. How much of this disruption is basically baked in for the next couple months? In other words, let's suppose the war ends right now in the next 5 minutes. Do we get an immediate reversion to the mean for oil prices and everything else? >> Well, the problem is the supply chain. So, you know, logistics matters. So, depending upon where this the the the crude carriers are or LNG carriers are and where the demand is needed, i.e. shortage in Europe, shortage in Asia, uh that's where you're going to see a a lag effect for price decline. But once we get to the point where we know that major facilities have not been destroyed and can be easily repaired, then we're going to come down um from these lofty levels, but maybe down into the 80s uh you know the 60s that we saw before and even you know low you know low to mid-50s that we saw you know in April of 25 and and you know early this year. I don't believe we're going to see those again. the the war changed a lot of the dynam dynamics. When the price of oil was below 60, we were bullish for 26 and our fieldless forecast was an average price of 70. And that was based on Q2 where we thought that it would be very clear that OPEC cannot increase production. And then by Q4, global inventories would be coming down and it would be very notable noticeable. So we were willing to say that we'd see 80 in Q4 even though you might see 60s in Q1. That all changed March 1st. And um we're now saying that you don't know what to forecast for Q2, Q3, and Q4 until you know when the war ends. And then what what the key thing is what damage has happened to the energy facilities and infrastructure because the longer it takes to repair those, that's going to be the key for uh pricing going forward. >> This is I want to show you a brief clip. This is uh Jeff Curry from the Carlo Group talking about this exact issue. Uh just take a listen, we'll react together. believe that even if there's a ceasefire tomorrow, right now, the next 5 minutes, the world's changed the policies of the crude. What's changed? >> Um, for one, you've disrupted global supply chains. This is not just a disruption. It's gas, it's fertilizers, it's metals, it's petrochemicals. The list goes on and on. And then you've disrupted supply chains in countries all over the world. The ships are in the wrong places. Um, the insuranceances have been cancelled. You've taken the pressure out of the fields that you've shut in in places like Saudi Arabia or Iraq or um even in the UAE. I can just the list goes on and on. The damage is going to take months to unwind. >> Do you agree? >> I totally agree with that. And and as he mentioned there, fertilizer um you know over 20% of the sulfur comes out of the Qar field. So that's a big issue um for the markets. ura. Uh so you know the fact that it's planting season now in a lot of places and if you can't get uh reasonably priced nitrogen ura sulfur all the ingredients for the u the fertilizer world that means they're not going to be able to plant uh as much that means the yields from the fields are going to be less when it when it comes to harvesting time and that means much higher food prices. So the the the inflation data that we're seeing, you know, PPI, CPI, PCE, deflate or whatever you are, by months from now, if the war has not ended, those uh numbers will go up and we're looking probably at a 5 to 8% inflation problem for a period of time as that goes through the supply chain. >> 5 to 8%. You're talking about all consumer goods like the headline CPI. I think that I think that's what we're going to see because remember one you're taking oil then you're taking consumer goods you know they may say that you know food or CPI PPI uh x food and energy is going to be a moderate number 2 to 3%. But when you plug in the real numbers, that's where the problem is. And that's the affordability. That's what consumers are paying. You know, you're paying probably what, two bucks a gall a liter there. We're paying a buck 65 a liter here in Calgary. So that's up uh you know, 30 40 cents just in the last uh you know, 3 weeks. >> How transitory would this 8% inflation be? Joseph? Um, again, if the if the if there's not a lot of physical destruction to the facilities in the Middle East, it could be uh a couple of months and then it, you know, just like the tariffs, you know, went through the the the economy and then they settled down. Um, so I think that, you know, it could be short. The big problem right now is, uh, there, you know, every day we hear about more attacks by the IRGC in Iran against targets on the, you know, the western side of the Persian Gulf. You see more and more attacks against Israel. Where are the weapons coming from? The Americans said they destroyed them all and they destroyed the weapons factories. And yet we're looking at a record amount of attacks on on some of these places. UAE, Israel are getting record attacks both from ballistic bombs with ballistic missiles with cluster bombs as well as by drones. And so until you see that that Iran does not have that firepower and can attack its western neighbors, I think the war continues. And if this drags on, every week that it drags on, add a couple bucks to WTI. Um if it drags on for a month or two, we could be 1201 130. Um and then again, Brent will be much higher and product prices will be much higher. So um the key thing is how quickly is the war? And right now the evidence is it's going to be longer than than the 3 to 6 weeks that President Trump uh you know originally gave us as the timeline. >> In your experience, Joseph, has the oil price had a correlation with recessions? In other words, uh if you look at a chart of oil versus the ember designated recessions in the US, oil typically has spiked right before a recession. But it has there been a level at which the oil price would most likely precede a recession? This is from the Wall Street Journal, for example. The economist survey here uh don't see a recession unless oil hits $138. That's based on a survey. What's your view? Well, I think the key thing is is the number gets higher because of just the you know the nominal rate nominal number goes higher simply because of inflation and uh you know what what was in in 1981 $36 was the one that sent us into a severe recession and the central banks had to beat up the massive inflation at that time. Uh today I would think you know 125 to 130. Um you could be 138. Uh but the key thing is are we looking at a domestic uh European uh recession or are we talking global recession? Uh global recession would definitely probably happen if we saw 138 a barrel on WTI and then above that plug in a higher number for Brent. So to me uh those that AC that report is quite accurate. close or different are we to a COVID style situation where we had a global supply shock in CO but that was caused by a surge in demand for goods um as everybody's had to stay at home and we had to order from online services uh but uh a lot of containers and shipping cargo ships were were just we're were stuck as you know um is this a similar situation here >> it's the reverse at that time we had demand destruction We had, you know, demand fall 15 to to 18 million barrels a day uh from the '9s because into the '7s um simply because demand we stopped driving. We you know we weren't flying, we weren't doing anything else. So that really was a different one and there the price went down because there was too much supply. Days of inventory right now are about 90 days. Historically 88 to 92 is norm. Um if you want you went to 2008 when we had that price spike up to the 147 we had only 79 days of inventory during co we had 120 days of inventory that was the problem inventory skyrocketed and that was why you saw that price go down severely and in fact if you remember there was even negative pricing because of the British hedge fund shorting it. >> Yes that's true. I was I was referring to consumer demand of consumer goods as well outside of oil. So that there was a there was a surge there during co but the global supply chain was disrupted here it's just a straight up hormuse and so how much of the west so Canada and the US and western Europe for example um how much of our goods and services well not services but how much of our goods imported from abroad depend on the straight of Hormuse or can we bypass that completely >> for Canada and the United States is a non-event for Europe and Asia it's very immaterial and Europe more so than Asia >> okay So the the 5 to 8% inflation rate that you're talking about, is that a global number? >> That would be a global number. If we had this continue into May and June of 2026, uh, and higher oil prices than today, then that would feed into the whole supply chain. uh be it you know from the you know from the uh cost of the basic goods, the shipping cost, the insurance costs uh you know the amount you know the cost of uh leasing a tanker now has gone up sixfold. Um and so all of those things will then go into the price that we see as consumers. Uh and that you know as I mentioned you know you your probably price of a a liter gas might have been a buck 50 before the war now you're two bucks. So there's quickly seeing the impact at the consumer level of gasoline. >> According to a report by CNN, Iran is also considering allowing certain ships and oil tankers to pass through the street provided the oil cargo is traded in Chinese yuang. A senior Iranian official told CNN oil is almost entirely traded in dollars as you know apart from sanctioned Russian oil which is traded in rubles or Yuang. China has attempted to make inroads for the past several years to buy oil in Yuang particularly in Saudi Arabia but with limited success. Do you think countries will will fold and start trading a yang to gain access? >> Well, Russia is now selling oil to Japan. This came out this morning in Juan. So, they do not want US dollars. They would like to have um um the Chinese currency and China is finding buyers and you know for a product that they have using the one. So, in Asia, the Juan is becoming more um more of a trading currency. still not in North America, still not in the major major financial markets of, you know, London, New York, or Toronto. It's definitely not something that that you see um as a as a daily event. >> So, Joseph, does this event create investment opportunities that maybe weren't there a few months ago? Well, I think you know the big change is that security supplies has become an important issue and so you've seen um people buying um you know US stocks you know US energy related names, Canadian energy names, the Canadian uh the the Canadian energy index is at a record high for the year um and has has been up is up uh you know 25 30% from the from the lows of April of 2025. We've seen some stocks double and triple if they've had good finan results. Um and you know some names like Tamarack have been stars. Um, and I think you're going to see um a lot more performance because when you take companies price to net asset value, 2PNAV, price to cash flow relative to the United States, Canadian companies are much cheaper and you can buy billion-dollar companies all the way down to hundred million dollar companies that compared to their peers around the world and especially the US, the Canadian ones are cheaper. And that's why we're seeing such a massive runup in the Canadian oil stocks and natural gas stocks and service stocks because people see that the Carney government is not the Trudeau government and that Canada door is now more open. Um the big issue is how do we get pipelines west um for you know for more natural gas to go there. Um, we saw TMX announce that they're going to do some tweaking to get some more oil through their volumes using some chem chemicals and then they're going to do some expansions, add more um compression power. Uh, and then the question is does do the feds and the province come to an agreement with both the Alberta and BC governments to put in a new pipeline which would be a million barrels a day. Uh so when you take into account that you know we we are the fourth largest producer in the world Canada the first one is United States 23.7 when you include oil and natural gas liquids you go to then go to Saudi Arabia 10.2 Russia is 9.3 and then Canada 6.1 and the next one below that is China at 4.2 too. So, Canada is the fourth number in the world. Um, and we have a fabulous basin with lots of upside potential. A couple million barrels is possible. Um, and so now the question is um do we have the uh everybody at the table be it the federal government, the provincial governments, the first nations and if everybody does get to the table um and there's agreement, I think we could see a massive increase in capacity. And remember, Canada is a resourced country. So, it's the forest products. It's the mining, it's the oil and gas. You know, if you look at our export surplus, biggest one is energy and the next one is the uh B precious and base metals. So, we are a powerhouse on that. And then forest products is also meaningful. So, um we need to get back to how we build a big bigger pie so we can afford the social services and we can afford um you know to get our deficits down. And so, I think u you know we have a great opportunity. The question is, are we going to use it or are we going to say politically, you know, we're not prepared to do that? And I think the the the trajectory has moved from leftwing to centrist now. Um, and let's see if if that turns into policy and then uh then approval of projects. >> Are you surprised at uh the contagion effect, if you want to call it that, on other assets outside of uh stocks? So as oil surged uh and uncertainty around the Middle East grows uh stocks sold off and likewise gold sold off as well. Gold is having its worst week since um the COVID crash. It's down 6.5% today in one day. It was down another 2% yesterday. It's now $4,500 an ounce. Uh other assets, Bitcoin's also down. Why are precious metals selling off? Well, I think it's a riskoff trade and we've seen you Bitcoin also, you know, risk off to some extent. The big problem is we have a credit crisis in private uh private debt and private equity. Uh we're also seeing um you know um people's car loans being, you know, delayed, mortgage payments being delayed. So, in some ways, you could say we have a bigger credit crisis than we had in '08. And so, the question is, what's the Fed going to do? Uh interest rates have moved up. you know, we're at 4.3% on the 10-year US Treasury. We were at 15 20 beeps below that just a week, couple weeks ago. So, if if we have higher inflation and we see rising long-term interest rates and we see problems, if you remember, um a lot of the companies in the private debt area, we're not allowing redemptions and a lot of the investors were saying, "I want my money back." And so, a lot of the paper that they needed to sell was sold at big discounts. and the spread between junk bonds and highquality bonds has widened. That's the one of the big signs for a credit crisis. And so the question is does that unfold or is this just a little blip because of what's going on in the Middle East? I'm uh more concerned about the um that issue with the credit crisis than maybe uh a lot of people are. And again, remember the derivatives are a big part of the problem. And so if we do see more of a credit crisis spread um you know from the subprime loans to private debt to private equity u to um junk bonds um that could cause uh that could cause another uh financial problem. Um and that added where you get margin calls if you own equities and you get a margin call. You got to sell what you can sell. You can't you know you're not going to sell what you want to sell. You got to go where the liquidity is. And right now, a lot of people have made a lot of money in precious metals. That's why the margin call, if you had something a margin call on some totally different asset, that's where you sell because you've got a massive profit. >> But if someone were to say to you, gold is a safe haven um for wartime scenarios. How would you respond to that statement? Generally speaking, >> I would agree that that's, you know, when there's times of uncertainty between war and financial crises and that, but gold's had such a great run, it doesn't, who says you can't have a bit of a correction? Uh but if you think about the monetary and federal government deficits all around the world and the amount of debt overhang we have around the world um you know people who call for $10,000 an ounce gold. I don't disagree with them that that is possible if we do have a debt crisis and if we have any defaults by any governments where they just say we can't pay them. You know we've seen even Britain in its history say we're going to give you here's a new guilt for your old guilt and the the interest rate is lower and we're giving you 20 cents on the dollar. So we we have had history where governments have done that in the past and I think we need to watch out on the periphery when you have weak countries um how they resolve their debt crisis. >> Speaking of the uh private credit um market bubble that you were alluding to earlier, does the oil price surging exacerbate that issue? uh you know the the problem was the a lot of that debt went for the um data centers and and the whole AI world um and u you know building out of the of the uh grid and so a lot of those loans the question is are they going to be able to make enough cash flow to service those debts and the cost of building out th those data centers is getting way higher than you know just taking example TMX you know it's you know it it it went three four times over budget. Coastal Gas went over budget. So, the key thing is uh if they go over budget and the amount of money they borrowed and all of a sudden they don't get the revenue showing up to pay the pay the interest. I think that's a problem that is still in the early stages and um I think private debt is a big problem. >> Speaking of um the credit markets, we're also concerned about what the Federal Reserve may do because if the money supply tightens up, that will put further strain on the credit market. uh in theory. Now, uh Joseph, we talked about higher inflation earlier in this interview. What would higher inflation prompt the Federal Reserve to do? In theory, it should tighten the money supply, which would make the credit issue worse. What do you think? >> There were some people forecasting that maybe the Fed would raise rates by a quarter. There was only one member that said should be down a quarter. Um the key thing is we need to wait for the new chairman to be approved by Congress. Um Jerome Powell said he would stay on until that's resolved and the uh court case against the cost of building the the new facility is resolved and that he's cleared. Uh so I think that uh um you know the the the Fed's in a quandry here because if the inflation numbers um you know go up materially um and then they they'll be watching the labor side and if labor holds in then they can't cut rates. Um, and so that's going to be a problem. And with this inflation going through the system, um, they may be pushed to raise rates, but I don't think that the new chairman is going to want to do that. You know, as as a Trump appointee, he knows Trump's going to want lower rates. He's going to have to be able to sell Trump on keeping rates stable. But if inflation really persists, Paul Vulk didn't care what the president of the United States felt and other central bankers didn't. And they raised interest rates to kill off inflation. So the question is how high is the inflation and how much pressure is on the uh the Federal Reserve Board as a whole. >> The last payroll uh report in the US lost 92,000 jobs. The unemployment rate has climbed up by 0.1% from the last reading to the prior one. And so the labor market on paper looks like it's weakening if they were to raise rates even in light of higher oil prices. Would that be considered a policy mistake? Do you think? >> I don't think it's a policy mistake. If you have miss, you know, you know, if you have too much inflation, I think it just means that the, you know, the slowdown or recession is going to happen, you need those to cool off excesses in the economy. Um, you know, we have problems with tariffs still. We have problems with the inflation. We have shortage of workers because of the immigration export by by ICE. You know, so there's a shortage of labor. There was already talk about farm prices in the United States going up because the migrant workers that were working, the farm workers that were imported uh to work on the farms in California and other places, they don't have enough workers. So, the price of vegetables has gone up sharply uh because of that. So, um I think that uh um yes, you know, the Fed's in a quandry. >> The ECB had to be in a similar position in 2007 as well. uh 2008 as you recall they raised rates in July 2008 uh when inflation was still running hot, oil spiked. Uh but at the time the banking sector was facing a similar dilemma. Um but I wonder how the Trump administration, Congress is going to react to higher oil prices. What fiscal policies or measures from Congress can be taken to bring down or at least stabilize the price of oil from now until the midterms, which is ultimately what the Republicans care about. Well, I think the Republicans and Congress as a whole would like to see prices stable or downward. The problem is as long as the war is still on, they're not coming down. Um they freed up, you know, the from the U, you know, the from the uh SPR um significant volumes are going to be allowed out. Um the US is, you know, dayto-day is self-sufficient in oil. It's, you know, it's even, as I said at the beginning, an exporter. It has enough oil. There's no shortage of oil. there won't be lineups where you got to go and you know depending upon the license plate you know you go on an even day or an odd day odd day which we did in the 70s that 1970s so I don't think any of that's going to happen I think it's just going to be a higher price point affordability will be the battleground of the election and if people feel that that uh um that the uh they should go and vote for um you know the Democrats over the Republicans because of the affordability issue um then they'll you know the president's going will lose control of one of the House or the Senate, probably the Senate. And if he does, it effectively kills his his legislative agenda because he can't get things passed through Congress. >> What's your view on price controls on gas at the pump? >> Uh, you know, in in the 70s, Nixon did that. Um, you know, in the States, I don't think that's going to be acceptable. I don't think anyone's going to go that way. Um you may see in some countries in Europe or Asia uh where they limit the price they put a price cap on and the government eats it uh and they import the oil and you know and they do that. Uh but in major industrialized countries no >> can you just explain to the layman watching the audience why that may not work? I mean if we're listening to this and we're thinking well that's a great idea. The government just tells the gas stations to stop raising prices. Wouldn't that just fix the problem? Well, if you know, take uh you know, your your world where there's $2, you know, gasoline at the pump. Um you know, if all of a sudden you ran out of the $2 gas, which is the cap, and the price of oil goes to 140 150 for WTI, the refineries are going to say, "Well, I'm going to have to pay 140 for that oil. I can't sell it to you at $2. We're running out of $2, you know, a liter gasoline." So um you know you know to they'll just state to the government we can't process and and provide the resource at that price. So you just run out of it. You got you know you got a price of $2 a liter but you got no volume. >> Okay that'll close >> supply shortage. Yeah. All right. Uh going back to the petro dollar issue. Do you see a scenario in which this actually decreases the demand for dollars as countries look for alternatives and they trade amongst themselves using another currency like the yang for example? So far the DXY is still trading above 99.4 and so we're not seeing a huge sell off in the dollar yet. Is that to come? Well, the US dollar was down I think what was it 93 94 before the war and then of course the risk premium when people get fearful they you know they want to get out of Europe or they want to get out of Asia and the US dollar consistently has that uh that you know reserve currency view um you know as you can see it's had quite the run there over you know since late January um and you know you know there's a yield spread between that in Canada yield spread with you know the US versus some of the European countries. So there's a a reason for the dollar to be in the high 90s. Um and the rest of it is a risk premium. Uh but um you know if the war ends um US deficits are disgustingly high um you know government policies you know is inept um and you know government uh you know dysfunction is there um you know you got an election as as we we talked earlier about in November and the battleground and the and the fighting between the two. There's no centrists anymore. there's no compromise. There's no, you know, working together. And that's going to make for a dysfunctional and very difficult market. And if we have the war behind us, then the US dollar weakening is probably a logical thing. One thing to keep in mind on the offset that is if we have higher prices after the war, you know, 7585, $990, the Canadian dollar could strengthen from the 73 cents. And u if you go back through history, when we've had high oil prices and high export surpluses, the Canadian dollar has traded up. And if we have $80 at the end of this year, we could have a 75 to 78 cent dollar. And if we go to 90 in the next two to three years for a WTI, we could see an 80 to 90 uh Canadian dollar. So, uh, the Canadian dollar, uh, is a procurrency and it would benefit from, um, the higher prices that we're going to see in the years ahead. >> Uh, assuming the interest rate differential stays constant, right? We're not >> I don't think that matters at all. I think it's we're a procurrency and if we have massive surpluses because of our oil and because of our natural resources being sold around the world that, you know, remember LG is now going to Asia. Oil through TMX is going to Asia. So, we're bringing a lot of money in the door right now. And if that continues and we find new markets to sell um mostly in Asia, but maybe at some point in Europe, that's only going to be positive for the Canadian dollar. >> Okay, speaking of LG, uh let's take a look at what happened here. So, like we mentioned earlier, the um facility in Qatar was struck accountable for roughly 20% of the global LG supply. Most of that, similar to oil coming out of the straight of Hormuz, most of that goes to Asia. According to this article, uh analysts are predicting um Asian spot LG prices in 2026 to rise from $10, uh to $14. Um what does that mean for the average person? >> Well, your home heating is going to be up and industrial use of natural gas will cost more. That that 14 is wrong. That number is closer to 20 right now uh because of the Qatar cut off. Uh so that's a price from, you know, I don't know how many days ago. Um and so the the big issue is I think prices are you know we're looking at in the 50s and 60s in Europe for LG pricing and we're looking in the 20s um in Asia and that number will just go higher um as we go um you know the longer this lasts um and the you know the the u the prices will just go higher and higher. >> Okay. And at what point would you start to take the reverse of the trade? In other words, at what point would you say to your At what point would you say to yourself, >> oil companies have run up enough? It's time to take profits on my oil and gas equities investments. What would the prompt you to make that kind of conclusion here? Well, we've been saying that to our clients for the last week because we've said that if you bought a position, you know, you know, in April of 2025 when they were very cheap and they tripled or quadrupled, then a four or 5% position is now a high teens position or 20% of your portfolio. You know, it's like Nvidia or Nortell, you know, if you have that big waiting, you it's only prudent from a portfolio management point of view to to take profits and cut that down and then either have cash for greater buying opportunities or, you know, spread your ownership from oily names to natural gas names. Um, we see natural gas stocks is very cheap relative to oil stocks. But we sent out uh to our client base that if you have disproportionate waiting um it's only prudent to take profits in the oil even though the stock will continue probably to perform as long as the war is on and prices go up. But from a prudence point of view um you don't want to have all your eggs in one basket and something happens and all of a sudden the war is over and we're $70 oil and all of a sudden your stock which tripled or quadrupled goes has a two for one sale. So, let's just finish off on how you think the world's going to change. Now, you've lived through 2008, the two Gulf Wars prior, you've been through the 1970s oil crisis. How does this stack up to prior oil crisis? The um 2008 we had inventories coming down, but you did not have a supply disruption. This time, you have a supply disruption. It's like the last gasp in the 1970s when the sha of Iran was deposed, the ayatollas came in and the price of crude went from 26 to $36 a US. Remember that's 1981. So, you know, you put that in today's dollars, that would be, you know, where we are now. Uh, but the key concern to me is the infrastructure destruction. If we see um you know Qar's natural gas uh facilities require one or two years to repair and the oil fields need you know you know 6 months to a year uh and we get the same thing with you know tankers that that have been uh destroyed and there's a shortage of tankers. I think we're looking at um you know a longer cycle and a more painful cycle than we did in '08. And that's why I think the price targets that people had at the beginning of the year are no longer valid. Um, and the longer the bore, the higher the prices, the bigger the problem and the higher energy securities will go. So have energy waiting in your portfolio. Uh, but make sure you don't have overinvested in any single position and take advantage of the cheap natural gas prices that are out there today. And natural gas stocks Canadian. Uh we have some fabulous basins here with the Montany the Duivere uh both in Alberta and you know northeast BC. There's a lot of great names to be invested in. Um and uh that's what our company does. We we provide research on 32 companies uh Canadian companies both domestic um and those that work internationally Canadian companies and we cover the service sector and royalty um incomes uh companies. So there's lots of opportunity and you can still get five and 6% dividend yields plus capital gain potential. That's pretty attractive even after the run we've seen. >> I'd like to close off with one final question. This is a reporter asking Jerome Pow how the world has changed and uh I'd like to take a listen to his answer and uh get your reaction as well. The economyy's experienced a series of supply shocks in the last few years. Uh COVID tariffs, two oil price shocks. Do you think that is bad luck or is something changed in the world that makes supply shocks more common and does the central bank need to take uh start taking account of the risk of supply shocks as more as a more common problem? >> You know, we we did go through a long period where where the shocks are all demand shocks and uh you know, so we've had a lot of practice thinking about supply shocks in the last four or five years for sure. uh and it's just a very different thing and a very much more difficult thing because it does immediately raise the question of uh tension between the two parts of our mandate but you know has the world changed I mean co co is a one-time thing right um uh this energy supply shock is a one-time thing it's not it's not because of some broad tendency or anything I don't think and and you know that the oil shock under with Ukraine was also a consequence of uh of military action so I don't know that I don't know that the uh the world has changed in a way that there'll be more supply shocks. But you know there's people have written that that paper and that speech a number of times a number of people have tried to make the case that that is the case and in fact we have seen more supply shocks in the last 5 years than we've seen in many years before that it's a fact. >> What's your view? Well, I thought that was very thoughtful of him and and you know, he he talked about demand shocks, which was was co supply shocks. Really the only one we really had was in the 1970s when the Shaaran was deposed and 4 million barrels a day came off the market. But that was 5% of the number. Today, if you take the 20 million that's having a problem coming out of the uh Persian Gulf, that's 20% almost of the total um consumption right now of 106 million barrels a day. So it's a bigger problem than it was um during the um you know what the when the sha was deposed in Iran and the uh and the IRGC and the Ayatollas came in. So this is a big much bigger supply shock and it's not just oil, it's fertilizer. It's it's going to be everything. Uh and I think that it's going to go through manufacturing and um you know the you know there's going to be you know problems in um you know in in this in the um in in the technology sector. there's going to be problems in the consumer sector uh and prices are going to go up and the squeeze is going to be on consumers. So um the next few months are going to be challenging but what I would recommend for people is have yourself ownership in resources be it in the agricultural sector be it in the mining sector be it in the energy sector mining stocks are getting corrected now as you mentioned because of what's going on in gold when that settles down you may want to be a buyer there forest products you want to be a buyer uranium you want to be a buyer but uh if I'm right and we have an energy super cycle that goes into the next decade because we go we going to need more energy in the third world. If we're going to bring on the copper, the lithium, the aluminum, the all the things you need for the grid and the EI world, um that means a multi-year cycle. And right now, we're trading at the lower end of historic norms for energy stocks. And at the top of market cycles, um they usually trade at multiples of where they are today. So, yes, they've had a great run, but it's if I was using a golf analogy, we're on the third hole and there's a lot of golf to play. Joseph, uh, thank you so much. Let's all go play some golf this weekend. I appreciate your insights. Where can we go and follow your work? >> Well, we our website is www. shaker sacchreport.ca. Uh, we have uh both quarterly and annual subscriptions there. As I mentioned, we cover 32 companies and we have two products. We have the ion energy which is our macro product to cover all the craziness that's going on every week. We write that up on Wednesdays. And then we have the uh STR report which we do twice a month. And right now we're going through the um year end and 2025 Q4 results. A lot of companies still have to report and we're doing our review of those quarterly reviews so that people can see um how did they do versus our estimate, how did they do versus the year before. Um, we do something called the balance of evidence. You know, what did we like in the court, what do we like, you know, if debt goes up or insiders are selling, you know, all those kinds of things that you want to know. Uh, we put that out in those reports. So, um, it's, uh, it's we built this up, uh, starting in 2017. Um, and it's, uh, built up and it's mostly focused for individual investors. Um, and, uh, it's, uh, it's been a product that's gotten a lot of support because it's an independent product. I even used the cell word as we talked about overweighted positions earlier. Um and I think people like that independence and um calling it as we see it and showing it from the data. >> I'm data driven. >> All right. Well, we'll follow Joseph's data down below, links down below. So, make sure to follow his work. Thank you so much, Joseph, for coming on the show. Appreciate it. We'll speak today. >> Thank you very much. >> Thank you for watching. Don't forget to like and subscribe.
Brace For 8% Inflation Again, Cycle ‘More Painful Than 2008’ | Josef Schachter
Summary
Transcript
It's Thursday, March 19th, and crude oil surged again overnight, and the stock markets globally are having a huge sell-off today. Brent crude surged nearly 7% to above $113 a barrel, while WTI hovers around $96, blowing the spread between the two benchmarks to roughly $17, its widest gap in 11 years. The Dow Jones hit a fresh 2026 low, down 300 points today. The S&P 500 is falling again, extending a week-long slide, and European stocks dropped more than 2% across the board. Gold is down nearly 18% from its late January all-time highs, marking one of its worst months in history. One trigger was an Iranian missile strike on Qar's Russ Lefan Industrial City, the world's single largest LNG export complex. Russ Lefon took roughly 14 years to build from 1996, reaching full capacity of 77 million tons per year by late 2010. It produces roughly 20% of the world's LG supply. Qatar Energy confirmed sizable fires and extensive further damage to several of those facilities. European gas prices jumped 35% at the open. President Donald Trump responded on True Social with an extraordinary threat and blamed Israel for Iran's retaliation. Take a listen. Israel, out of anger for what has taken place in the Middle East, has violently lashed out at a major facility known as South Par's gas field in Iran. A relatively small section of the hole has been hit. The United States knew nothing about this particular attack, and the country of Qar was in no way, shape, or form involved with it, nor did it have any idea that it was going to happen. Unfortunately, Iran did not know this or any other pertinent facts pertaining to the South P's attack. an unjustifiably and unfairly attacked a portion of Qar's LNG gas facility. No more attacks will be made by Israel pertaining to this extremely important and valuable South Pars field unless Iran unwisely decides to attack a very innocent in this case Qatar in which instance the United States of America with or without the help or consent of Israel will massively blow up the entirety of the South Pars gas field and an amount of strength and power that Iran has never seen or witnessed before. Meanwhile, the Straight of Cormuse remains effectively closed. Only about 90 ships have crossed the waterway since the war began on February 28th. And before that, more than 100 ships passed through each day. Most of the vessels that made the crossing appear to have been Iranian linked tankers running with their transponders off. Iran's new Supreme Leader has vowed to keep the straight shut. CNN reported that a senior Iranian official said Tran would consider allowing tankers through Hormuz on one condition that the oil be traded in Chinese yang rather than the US dollars. If that president holds, the implications go far beyond oil as the petro dollar system may then face its most direct challenge since the 1970s. Oil priced in Yuang at the world's most important choke point would weaken the dollar, erode American sanctions leverage, and rewire global finance. And there's one more choke point to watch. NBC News reports that Iran has declared the Red Sea fair game for retaliatory attacks. And the Houthis in Yemen allied with Iran say their fingers are on the trigger. If both Hormuz and the Bob Almandab Straight close simultaneously and there is no alternative route left, especially for much of Asia as 80% of oil through the street of Cormuse flows to Asia. Follow and subscribe for more daily updates. Now, our next guest says that what follows may be the worst period of inflation since 2020. Joining us today is Joseph Shakar, president of Shaker Energy Research Services and author of the Shakar Report on Substack. Joseph is a 40 plus year veteran of the Canadian Investment Management Industry and is a former chairman of the Canadian Council of Financial Analysts. Joseph, welcome to the show. Good to see you. >> Good to be with you, David. Glad to be with you. Let's start by talking about this divergence between Brent and WTI which is not normal. Uh there's a giant gap of nearly $18 per barrel. What does that tell you about how glo how the global oil supply chains are broken right now? >> Well, WTI is, you know, of course the US price and US production is still uh going and they're still exporting uh you know, 4 million barrels, 5 million barrels a day of lighter cruds to the world. Brent because a lot of the Middle Eastern crude uh and European crude is priced off Brent. There's lack of there's not enough supply of Brent priced crude. So there's a gap in the price. Normally it would be $5. Uh we even saw it, you know, when when they were when there was concern uh that there was a shortage of oil and and international buyers were buying up the US exports. We had the price of WTI trade over Brent. Today, as you mentioned, we're looking at a $15 to $18 premium on Brent. And again, that's the shortage argument um because of these straits of our moves being closed. Now, the close is not accurate cuz Iran is still able to ship 1 and a half 1.6 million barrels a day. And anyone uh that is uh that is selling to uh Iran or China or Turkey, um the Iranians are not firing on them. So those those tankers are able to get through. Um and um the but the anybody from uh any other um market the um the the um um the the IRGC is firing at both the cargo ships and at tankers. And they also have been not only attacking as you mentioned earlier the um the the Qatar pars gas field which is shared by Iran and Qatar but they're also firing um at the Saudi refineries Saudi facilities and that's really the the the one that's alarming the market because the concern now is if you you know you know if you close supply that's one thing but if you destroy the facilities the pipelines the the gathering systems um all of the you know the the processing plants of it let's say LNG or oil that's where you have a massive uh expenditure and a lot of time to repair those facilities and that's why there's a massive price increase um and concern um in there one thing to to note is prices of product because of the shortages um in Europe and in Asia have gone over $200 a barrel so the 147 which was the peak in '08 has already been exceeded and so we'll be watching the spread between uh crude and product um because of the shortages domestically and the big problem is going to be starting in Europe. Europe doesn't have a large amount of inventory and of course their natural gas they ran down during the winter so they're not going to be getting much natural gas from the Middle East so they're going to be desperate to get American cargos. >> Before we continue I want to bring to your attention today's sponsor Monetary Metals. Now, most people think of gold as something you buy in store. Monetary Metals takes a different approach. Instead of just holding gold and waiting for price appreciation, you can earn a yield on it paid in physical ounces. Through their leasing platform, investors can earn up to 4% annually with yield paid monthly in ounces. That means your return is measured in gold, not just in currency terms. Rather than sitting idle while you pay storage costs, your gold generates income. The metal remains your asset and can be redeemed at any time. Thousands of investors are already earning monthly interest in gold through monetary medals. Visit monetary-metals.com/lin link in the description down below or scan the QR code here to learn more. How much of this disruption is basically baked in for the next couple months? In other words, let's suppose the war ends right now in the next 5 minutes. Do we get an immediate reversion to the mean for oil prices and everything else? >> Well, the problem is the supply chain. So, you know, logistics matters. So, depending upon where this the the the crude carriers are or LNG carriers are and where the demand is needed, i.e. shortage in Europe, shortage in Asia, uh that's where you're going to see a a lag effect for price decline. But once we get to the point where we know that major facilities have not been destroyed and can be easily repaired, then we're going to come down um from these lofty levels, but maybe down into the 80s uh you know the 60s that we saw before and even you know low you know low to mid-50s that we saw you know in April of 25 and and you know early this year. I don't believe we're going to see those again. the the war changed a lot of the dynam dynamics. When the price of oil was below 60, we were bullish for 26 and our fieldless forecast was an average price of 70. And that was based on Q2 where we thought that it would be very clear that OPEC cannot increase production. And then by Q4, global inventories would be coming down and it would be very notable noticeable. So we were willing to say that we'd see 80 in Q4 even though you might see 60s in Q1. That all changed March 1st. And um we're now saying that you don't know what to forecast for Q2, Q3, and Q4 until you know when the war ends. And then what what the key thing is what damage has happened to the energy facilities and infrastructure because the longer it takes to repair those, that's going to be the key for uh pricing going forward. >> This is I want to show you a brief clip. This is uh Jeff Curry from the Carlo Group talking about this exact issue. Uh just take a listen, we'll react together. believe that even if there's a ceasefire tomorrow, right now, the next 5 minutes, the world's changed the policies of the crude. What's changed? >> Um, for one, you've disrupted global supply chains. This is not just a disruption. It's gas, it's fertilizers, it's metals, it's petrochemicals. The list goes on and on. And then you've disrupted supply chains in countries all over the world. The ships are in the wrong places. Um, the insuranceances have been cancelled. You've taken the pressure out of the fields that you've shut in in places like Saudi Arabia or Iraq or um even in the UAE. I can just the list goes on and on. The damage is going to take months to unwind. >> Do you agree? >> I totally agree with that. And and as he mentioned there, fertilizer um you know over 20% of the sulfur comes out of the Qar field. So that's a big issue um for the markets. ura. Uh so you know the fact that it's planting season now in a lot of places and if you can't get uh reasonably priced nitrogen ura sulfur all the ingredients for the u the fertilizer world that means they're not going to be able to plant uh as much that means the yields from the fields are going to be less when it when it comes to harvesting time and that means much higher food prices. So the the the inflation data that we're seeing, you know, PPI, CPI, PCE, deflate or whatever you are, by months from now, if the war has not ended, those uh numbers will go up and we're looking probably at a 5 to 8% inflation problem for a period of time as that goes through the supply chain. >> 5 to 8%. You're talking about all consumer goods like the headline CPI. I think that I think that's what we're going to see because remember one you're taking oil then you're taking consumer goods you know they may say that you know food or CPI PPI uh x food and energy is going to be a moderate number 2 to 3%. But when you plug in the real numbers, that's where the problem is. And that's the affordability. That's what consumers are paying. You know, you're paying probably what, two bucks a gall a liter there. We're paying a buck 65 a liter here in Calgary. So that's up uh you know, 30 40 cents just in the last uh you know, 3 weeks. >> How transitory would this 8% inflation be? Joseph? Um, again, if the if the if there's not a lot of physical destruction to the facilities in the Middle East, it could be uh a couple of months and then it, you know, just like the tariffs, you know, went through the the the economy and then they settled down. Um, so I think that, you know, it could be short. The big problem right now is, uh, there, you know, every day we hear about more attacks by the IRGC in Iran against targets on the, you know, the western side of the Persian Gulf. You see more and more attacks against Israel. Where are the weapons coming from? The Americans said they destroyed them all and they destroyed the weapons factories. And yet we're looking at a record amount of attacks on on some of these places. UAE, Israel are getting record attacks both from ballistic bombs with ballistic missiles with cluster bombs as well as by drones. And so until you see that that Iran does not have that firepower and can attack its western neighbors, I think the war continues. And if this drags on, every week that it drags on, add a couple bucks to WTI. Um if it drags on for a month or two, we could be 1201 130. Um and then again, Brent will be much higher and product prices will be much higher. So um the key thing is how quickly is the war? And right now the evidence is it's going to be longer than than the 3 to 6 weeks that President Trump uh you know originally gave us as the timeline. >> In your experience, Joseph, has the oil price had a correlation with recessions? In other words, uh if you look at a chart of oil versus the ember designated recessions in the US, oil typically has spiked right before a recession. But it has there been a level at which the oil price would most likely precede a recession? This is from the Wall Street Journal, for example. The economist survey here uh don't see a recession unless oil hits $138. That's based on a survey. What's your view? Well, I think the key thing is is the number gets higher because of just the you know the nominal rate nominal number goes higher simply because of inflation and uh you know what what was in in 1981 $36 was the one that sent us into a severe recession and the central banks had to beat up the massive inflation at that time. Uh today I would think you know 125 to 130. Um you could be 138. Uh but the key thing is are we looking at a domestic uh European uh recession or are we talking global recession? Uh global recession would definitely probably happen if we saw 138 a barrel on WTI and then above that plug in a higher number for Brent. So to me uh those that AC that report is quite accurate. close or different are we to a COVID style situation where we had a global supply shock in CO but that was caused by a surge in demand for goods um as everybody's had to stay at home and we had to order from online services uh but uh a lot of containers and shipping cargo ships were were just we're were stuck as you know um is this a similar situation here >> it's the reverse at that time we had demand destruction We had, you know, demand fall 15 to to 18 million barrels a day uh from the '9s because into the '7s um simply because demand we stopped driving. We you know we weren't flying, we weren't doing anything else. So that really was a different one and there the price went down because there was too much supply. Days of inventory right now are about 90 days. Historically 88 to 92 is norm. Um if you want you went to 2008 when we had that price spike up to the 147 we had only 79 days of inventory during co we had 120 days of inventory that was the problem inventory skyrocketed and that was why you saw that price go down severely and in fact if you remember there was even negative pricing because of the British hedge fund shorting it. >> Yes that's true. I was I was referring to consumer demand of consumer goods as well outside of oil. So that there was a there was a surge there during co but the global supply chain was disrupted here it's just a straight up hormuse and so how much of the west so Canada and the US and western Europe for example um how much of our goods and services well not services but how much of our goods imported from abroad depend on the straight of Hormuse or can we bypass that completely >> for Canada and the United States is a non-event for Europe and Asia it's very immaterial and Europe more so than Asia >> okay So the the 5 to 8% inflation rate that you're talking about, is that a global number? >> That would be a global number. If we had this continue into May and June of 2026, uh, and higher oil prices than today, then that would feed into the whole supply chain. uh be it you know from the you know from the uh cost of the basic goods, the shipping cost, the insurance costs uh you know the amount you know the cost of uh leasing a tanker now has gone up sixfold. Um and so all of those things will then go into the price that we see as consumers. Uh and that you know as I mentioned you know you your probably price of a a liter gas might have been a buck 50 before the war now you're two bucks. So there's quickly seeing the impact at the consumer level of gasoline. >> According to a report by CNN, Iran is also considering allowing certain ships and oil tankers to pass through the street provided the oil cargo is traded in Chinese yuang. A senior Iranian official told CNN oil is almost entirely traded in dollars as you know apart from sanctioned Russian oil which is traded in rubles or Yuang. China has attempted to make inroads for the past several years to buy oil in Yuang particularly in Saudi Arabia but with limited success. Do you think countries will will fold and start trading a yang to gain access? >> Well, Russia is now selling oil to Japan. This came out this morning in Juan. So, they do not want US dollars. They would like to have um um the Chinese currency and China is finding buyers and you know for a product that they have using the one. So, in Asia, the Juan is becoming more um more of a trading currency. still not in North America, still not in the major major financial markets of, you know, London, New York, or Toronto. It's definitely not something that that you see um as a as a daily event. >> So, Joseph, does this event create investment opportunities that maybe weren't there a few months ago? Well, I think you know the big change is that security supplies has become an important issue and so you've seen um people buying um you know US stocks you know US energy related names, Canadian energy names, the Canadian uh the the Canadian energy index is at a record high for the year um and has has been up is up uh you know 25 30% from the from the lows of April of 2025. We've seen some stocks double and triple if they've had good finan results. Um and you know some names like Tamarack have been stars. Um, and I think you're going to see um a lot more performance because when you take companies price to net asset value, 2PNAV, price to cash flow relative to the United States, Canadian companies are much cheaper and you can buy billion-dollar companies all the way down to hundred million dollar companies that compared to their peers around the world and especially the US, the Canadian ones are cheaper. And that's why we're seeing such a massive runup in the Canadian oil stocks and natural gas stocks and service stocks because people see that the Carney government is not the Trudeau government and that Canada door is now more open. Um the big issue is how do we get pipelines west um for you know for more natural gas to go there. Um, we saw TMX announce that they're going to do some tweaking to get some more oil through their volumes using some chem chemicals and then they're going to do some expansions, add more um compression power. Uh, and then the question is does do the feds and the province come to an agreement with both the Alberta and BC governments to put in a new pipeline which would be a million barrels a day. Uh so when you take into account that you know we we are the fourth largest producer in the world Canada the first one is United States 23.7 when you include oil and natural gas liquids you go to then go to Saudi Arabia 10.2 Russia is 9.3 and then Canada 6.1 and the next one below that is China at 4.2 too. So, Canada is the fourth number in the world. Um, and we have a fabulous basin with lots of upside potential. A couple million barrels is possible. Um, and so now the question is um do we have the uh everybody at the table be it the federal government, the provincial governments, the first nations and if everybody does get to the table um and there's agreement, I think we could see a massive increase in capacity. And remember, Canada is a resourced country. So, it's the forest products. It's the mining, it's the oil and gas. You know, if you look at our export surplus, biggest one is energy and the next one is the uh B precious and base metals. So, we are a powerhouse on that. And then forest products is also meaningful. So, um we need to get back to how we build a big bigger pie so we can afford the social services and we can afford um you know to get our deficits down. And so, I think u you know we have a great opportunity. The question is, are we going to use it or are we going to say politically, you know, we're not prepared to do that? And I think the the the trajectory has moved from leftwing to centrist now. Um, and let's see if if that turns into policy and then uh then approval of projects. >> Are you surprised at uh the contagion effect, if you want to call it that, on other assets outside of uh stocks? So as oil surged uh and uncertainty around the Middle East grows uh stocks sold off and likewise gold sold off as well. Gold is having its worst week since um the COVID crash. It's down 6.5% today in one day. It was down another 2% yesterday. It's now $4,500 an ounce. Uh other assets, Bitcoin's also down. Why are precious metals selling off? Well, I think it's a riskoff trade and we've seen you Bitcoin also, you know, risk off to some extent. The big problem is we have a credit crisis in private uh private debt and private equity. Uh we're also seeing um you know um people's car loans being, you know, delayed, mortgage payments being delayed. So, in some ways, you could say we have a bigger credit crisis than we had in '08. And so, the question is, what's the Fed going to do? Uh interest rates have moved up. you know, we're at 4.3% on the 10-year US Treasury. We were at 15 20 beeps below that just a week, couple weeks ago. So, if if we have higher inflation and we see rising long-term interest rates and we see problems, if you remember, um a lot of the companies in the private debt area, we're not allowing redemptions and a lot of the investors were saying, "I want my money back." And so, a lot of the paper that they needed to sell was sold at big discounts. and the spread between junk bonds and highquality bonds has widened. That's the one of the big signs for a credit crisis. And so the question is does that unfold or is this just a little blip because of what's going on in the Middle East? I'm uh more concerned about the um that issue with the credit crisis than maybe uh a lot of people are. And again, remember the derivatives are a big part of the problem. And so if we do see more of a credit crisis spread um you know from the subprime loans to private debt to private equity u to um junk bonds um that could cause uh that could cause another uh financial problem. Um and that added where you get margin calls if you own equities and you get a margin call. You got to sell what you can sell. You can't you know you're not going to sell what you want to sell. You got to go where the liquidity is. And right now, a lot of people have made a lot of money in precious metals. That's why the margin call, if you had something a margin call on some totally different asset, that's where you sell because you've got a massive profit. >> But if someone were to say to you, gold is a safe haven um for wartime scenarios. How would you respond to that statement? Generally speaking, >> I would agree that that's, you know, when there's times of uncertainty between war and financial crises and that, but gold's had such a great run, it doesn't, who says you can't have a bit of a correction? Uh but if you think about the monetary and federal government deficits all around the world and the amount of debt overhang we have around the world um you know people who call for $10,000 an ounce gold. I don't disagree with them that that is possible if we do have a debt crisis and if we have any defaults by any governments where they just say we can't pay them. You know we've seen even Britain in its history say we're going to give you here's a new guilt for your old guilt and the the interest rate is lower and we're giving you 20 cents on the dollar. So we we have had history where governments have done that in the past and I think we need to watch out on the periphery when you have weak countries um how they resolve their debt crisis. >> Speaking of the uh private credit um market bubble that you were alluding to earlier, does the oil price surging exacerbate that issue? uh you know the the problem was the a lot of that debt went for the um data centers and and the whole AI world um and u you know building out of the of the uh grid and so a lot of those loans the question is are they going to be able to make enough cash flow to service those debts and the cost of building out th those data centers is getting way higher than you know just taking example TMX you know it's you know it it it went three four times over budget. Coastal Gas went over budget. So, the key thing is uh if they go over budget and the amount of money they borrowed and all of a sudden they don't get the revenue showing up to pay the pay the interest. I think that's a problem that is still in the early stages and um I think private debt is a big problem. >> Speaking of um the credit markets, we're also concerned about what the Federal Reserve may do because if the money supply tightens up, that will put further strain on the credit market. uh in theory. Now, uh Joseph, we talked about higher inflation earlier in this interview. What would higher inflation prompt the Federal Reserve to do? In theory, it should tighten the money supply, which would make the credit issue worse. What do you think? >> There were some people forecasting that maybe the Fed would raise rates by a quarter. There was only one member that said should be down a quarter. Um the key thing is we need to wait for the new chairman to be approved by Congress. Um Jerome Powell said he would stay on until that's resolved and the uh court case against the cost of building the the new facility is resolved and that he's cleared. Uh so I think that uh um you know the the the Fed's in a quandry here because if the inflation numbers um you know go up materially um and then they they'll be watching the labor side and if labor holds in then they can't cut rates. Um, and so that's going to be a problem. And with this inflation going through the system, um, they may be pushed to raise rates, but I don't think that the new chairman is going to want to do that. You know, as as a Trump appointee, he knows Trump's going to want lower rates. He's going to have to be able to sell Trump on keeping rates stable. But if inflation really persists, Paul Vulk didn't care what the president of the United States felt and other central bankers didn't. And they raised interest rates to kill off inflation. So the question is how high is the inflation and how much pressure is on the uh the Federal Reserve Board as a whole. >> The last payroll uh report in the US lost 92,000 jobs. The unemployment rate has climbed up by 0.1% from the last reading to the prior one. And so the labor market on paper looks like it's weakening if they were to raise rates even in light of higher oil prices. Would that be considered a policy mistake? Do you think? >> I don't think it's a policy mistake. If you have miss, you know, you know, if you have too much inflation, I think it just means that the, you know, the slowdown or recession is going to happen, you need those to cool off excesses in the economy. Um, you know, we have problems with tariffs still. We have problems with the inflation. We have shortage of workers because of the immigration export by by ICE. You know, so there's a shortage of labor. There was already talk about farm prices in the United States going up because the migrant workers that were working, the farm workers that were imported uh to work on the farms in California and other places, they don't have enough workers. So, the price of vegetables has gone up sharply uh because of that. So, um I think that uh um yes, you know, the Fed's in a quandry. >> The ECB had to be in a similar position in 2007 as well. uh 2008 as you recall they raised rates in July 2008 uh when inflation was still running hot, oil spiked. Uh but at the time the banking sector was facing a similar dilemma. Um but I wonder how the Trump administration, Congress is going to react to higher oil prices. What fiscal policies or measures from Congress can be taken to bring down or at least stabilize the price of oil from now until the midterms, which is ultimately what the Republicans care about. Well, I think the Republicans and Congress as a whole would like to see prices stable or downward. The problem is as long as the war is still on, they're not coming down. Um they freed up, you know, the from the U, you know, the from the uh SPR um significant volumes are going to be allowed out. Um the US is, you know, dayto-day is self-sufficient in oil. It's, you know, it's even, as I said at the beginning, an exporter. It has enough oil. There's no shortage of oil. there won't be lineups where you got to go and you know depending upon the license plate you know you go on an even day or an odd day odd day which we did in the 70s that 1970s so I don't think any of that's going to happen I think it's just going to be a higher price point affordability will be the battleground of the election and if people feel that that uh um that the uh they should go and vote for um you know the Democrats over the Republicans because of the affordability issue um then they'll you know the president's going will lose control of one of the House or the Senate, probably the Senate. And if he does, it effectively kills his his legislative agenda because he can't get things passed through Congress. >> What's your view on price controls on gas at the pump? >> Uh, you know, in in the 70s, Nixon did that. Um, you know, in the States, I don't think that's going to be acceptable. I don't think anyone's going to go that way. Um you may see in some countries in Europe or Asia uh where they limit the price they put a price cap on and the government eats it uh and they import the oil and you know and they do that. Uh but in major industrialized countries no >> can you just explain to the layman watching the audience why that may not work? I mean if we're listening to this and we're thinking well that's a great idea. The government just tells the gas stations to stop raising prices. Wouldn't that just fix the problem? Well, if you know, take uh you know, your your world where there's $2, you know, gasoline at the pump. Um you know, if all of a sudden you ran out of the $2 gas, which is the cap, and the price of oil goes to 140 150 for WTI, the refineries are going to say, "Well, I'm going to have to pay 140 for that oil. I can't sell it to you at $2. We're running out of $2, you know, a liter gasoline." So um you know you know to they'll just state to the government we can't process and and provide the resource at that price. So you just run out of it. You got you know you got a price of $2 a liter but you got no volume. >> Okay that'll close >> supply shortage. Yeah. All right. Uh going back to the petro dollar issue. Do you see a scenario in which this actually decreases the demand for dollars as countries look for alternatives and they trade amongst themselves using another currency like the yang for example? So far the DXY is still trading above 99.4 and so we're not seeing a huge sell off in the dollar yet. Is that to come? Well, the US dollar was down I think what was it 93 94 before the war and then of course the risk premium when people get fearful they you know they want to get out of Europe or they want to get out of Asia and the US dollar consistently has that uh that you know reserve currency view um you know as you can see it's had quite the run there over you know since late January um and you know you know there's a yield spread between that in Canada yield spread with you know the US versus some of the European countries. So there's a a reason for the dollar to be in the high 90s. Um and the rest of it is a risk premium. Uh but um you know if the war ends um US deficits are disgustingly high um you know government policies you know is inept um and you know government uh you know dysfunction is there um you know you got an election as as we we talked earlier about in November and the battleground and the and the fighting between the two. There's no centrists anymore. there's no compromise. There's no, you know, working together. And that's going to make for a dysfunctional and very difficult market. And if we have the war behind us, then the US dollar weakening is probably a logical thing. One thing to keep in mind on the offset that is if we have higher prices after the war, you know, 7585, $990, the Canadian dollar could strengthen from the 73 cents. And u if you go back through history, when we've had high oil prices and high export surpluses, the Canadian dollar has traded up. And if we have $80 at the end of this year, we could have a 75 to 78 cent dollar. And if we go to 90 in the next two to three years for a WTI, we could see an 80 to 90 uh Canadian dollar. So, uh, the Canadian dollar, uh, is a procurrency and it would benefit from, um, the higher prices that we're going to see in the years ahead. >> Uh, assuming the interest rate differential stays constant, right? We're not >> I don't think that matters at all. I think it's we're a procurrency and if we have massive surpluses because of our oil and because of our natural resources being sold around the world that, you know, remember LG is now going to Asia. Oil through TMX is going to Asia. So, we're bringing a lot of money in the door right now. And if that continues and we find new markets to sell um mostly in Asia, but maybe at some point in Europe, that's only going to be positive for the Canadian dollar. >> Okay, speaking of LG, uh let's take a look at what happened here. So, like we mentioned earlier, the um facility in Qatar was struck accountable for roughly 20% of the global LG supply. Most of that, similar to oil coming out of the straight of Hormuz, most of that goes to Asia. According to this article, uh analysts are predicting um Asian spot LG prices in 2026 to rise from $10, uh to $14. Um what does that mean for the average person? >> Well, your home heating is going to be up and industrial use of natural gas will cost more. That that 14 is wrong. That number is closer to 20 right now uh because of the Qatar cut off. Uh so that's a price from, you know, I don't know how many days ago. Um and so the the big issue is I think prices are you know we're looking at in the 50s and 60s in Europe for LG pricing and we're looking in the 20s um in Asia and that number will just go higher um as we go um you know the longer this lasts um and the you know the the u the prices will just go higher and higher. >> Okay. And at what point would you start to take the reverse of the trade? In other words, at what point would you say to your At what point would you say to yourself, >> oil companies have run up enough? It's time to take profits on my oil and gas equities investments. What would the prompt you to make that kind of conclusion here? Well, we've been saying that to our clients for the last week because we've said that if you bought a position, you know, you know, in April of 2025 when they were very cheap and they tripled or quadrupled, then a four or 5% position is now a high teens position or 20% of your portfolio. You know, it's like Nvidia or Nortell, you know, if you have that big waiting, you it's only prudent from a portfolio management point of view to to take profits and cut that down and then either have cash for greater buying opportunities or, you know, spread your ownership from oily names to natural gas names. Um, we see natural gas stocks is very cheap relative to oil stocks. But we sent out uh to our client base that if you have disproportionate waiting um it's only prudent to take profits in the oil even though the stock will continue probably to perform as long as the war is on and prices go up. But from a prudence point of view um you don't want to have all your eggs in one basket and something happens and all of a sudden the war is over and we're $70 oil and all of a sudden your stock which tripled or quadrupled goes has a two for one sale. So, let's just finish off on how you think the world's going to change. Now, you've lived through 2008, the two Gulf Wars prior, you've been through the 1970s oil crisis. How does this stack up to prior oil crisis? The um 2008 we had inventories coming down, but you did not have a supply disruption. This time, you have a supply disruption. It's like the last gasp in the 1970s when the sha of Iran was deposed, the ayatollas came in and the price of crude went from 26 to $36 a US. Remember that's 1981. So, you know, you put that in today's dollars, that would be, you know, where we are now. Uh, but the key concern to me is the infrastructure destruction. If we see um you know Qar's natural gas uh facilities require one or two years to repair and the oil fields need you know you know 6 months to a year uh and we get the same thing with you know tankers that that have been uh destroyed and there's a shortage of tankers. I think we're looking at um you know a longer cycle and a more painful cycle than we did in '08. And that's why I think the price targets that people had at the beginning of the year are no longer valid. Um, and the longer the bore, the higher the prices, the bigger the problem and the higher energy securities will go. So have energy waiting in your portfolio. Uh, but make sure you don't have overinvested in any single position and take advantage of the cheap natural gas prices that are out there today. And natural gas stocks Canadian. Uh we have some fabulous basins here with the Montany the Duivere uh both in Alberta and you know northeast BC. There's a lot of great names to be invested in. Um and uh that's what our company does. We we provide research on 32 companies uh Canadian companies both domestic um and those that work internationally Canadian companies and we cover the service sector and royalty um incomes uh companies. So there's lots of opportunity and you can still get five and 6% dividend yields plus capital gain potential. That's pretty attractive even after the run we've seen. >> I'd like to close off with one final question. This is a reporter asking Jerome Pow how the world has changed and uh I'd like to take a listen to his answer and uh get your reaction as well. The economyy's experienced a series of supply shocks in the last few years. Uh COVID tariffs, two oil price shocks. Do you think that is bad luck or is something changed in the world that makes supply shocks more common and does the central bank need to take uh start taking account of the risk of supply shocks as more as a more common problem? >> You know, we we did go through a long period where where the shocks are all demand shocks and uh you know, so we've had a lot of practice thinking about supply shocks in the last four or five years for sure. uh and it's just a very different thing and a very much more difficult thing because it does immediately raise the question of uh tension between the two parts of our mandate but you know has the world changed I mean co co is a one-time thing right um uh this energy supply shock is a one-time thing it's not it's not because of some broad tendency or anything I don't think and and you know that the oil shock under with Ukraine was also a consequence of uh of military action so I don't know that I don't know that the uh the world has changed in a way that there'll be more supply shocks. But you know there's people have written that that paper and that speech a number of times a number of people have tried to make the case that that is the case and in fact we have seen more supply shocks in the last 5 years than we've seen in many years before that it's a fact. >> What's your view? Well, I thought that was very thoughtful of him and and you know, he he talked about demand shocks, which was was co supply shocks. Really the only one we really had was in the 1970s when the Shaaran was deposed and 4 million barrels a day came off the market. But that was 5% of the number. Today, if you take the 20 million that's having a problem coming out of the uh Persian Gulf, that's 20% almost of the total um consumption right now of 106 million barrels a day. So it's a bigger problem than it was um during the um you know what the when the sha was deposed in Iran and the uh and the IRGC and the Ayatollas came in. So this is a big much bigger supply shock and it's not just oil, it's fertilizer. It's it's going to be everything. Uh and I think that it's going to go through manufacturing and um you know the you know there's going to be you know problems in um you know in in this in the um in in the technology sector. there's going to be problems in the consumer sector uh and prices are going to go up and the squeeze is going to be on consumers. So um the next few months are going to be challenging but what I would recommend for people is have yourself ownership in resources be it in the agricultural sector be it in the mining sector be it in the energy sector mining stocks are getting corrected now as you mentioned because of what's going on in gold when that settles down you may want to be a buyer there forest products you want to be a buyer uranium you want to be a buyer but uh if I'm right and we have an energy super cycle that goes into the next decade because we go we going to need more energy in the third world. If we're going to bring on the copper, the lithium, the aluminum, the all the things you need for the grid and the EI world, um that means a multi-year cycle. And right now, we're trading at the lower end of historic norms for energy stocks. And at the top of market cycles, um they usually trade at multiples of where they are today. So, yes, they've had a great run, but it's if I was using a golf analogy, we're on the third hole and there's a lot of golf to play. Joseph, uh, thank you so much. Let's all go play some golf this weekend. I appreciate your insights. Where can we go and follow your work? >> Well, we our website is www. shaker sacchreport.ca. Uh, we have uh both quarterly and annual subscriptions there. As I mentioned, we cover 32 companies and we have two products. We have the ion energy which is our macro product to cover all the craziness that's going on every week. We write that up on Wednesdays. And then we have the uh STR report which we do twice a month. And right now we're going through the um year end and 2025 Q4 results. A lot of companies still have to report and we're doing our review of those quarterly reviews so that people can see um how did they do versus our estimate, how did they do versus the year before. Um, we do something called the balance of evidence. You know, what did we like in the court, what do we like, you know, if debt goes up or insiders are selling, you know, all those kinds of things that you want to know. Uh, we put that out in those reports. So, um, it's, uh, it's we built this up, uh, starting in 2017. Um, and it's, uh, built up and it's mostly focused for individual investors. Um, and, uh, it's, uh, it's been a product that's gotten a lot of support because it's an independent product. I even used the cell word as we talked about overweighted positions earlier. Um and I think people like that independence and um calling it as we see it and showing it from the data. >> I'm data driven. >> All right. Well, we'll follow Joseph's data down below, links down below. So, make sure to follow his work. Thank you so much, Joseph, for coming on the show. Appreciate it. We'll speak today. >> Thank you very much. >> Thank you for watching. Don't forget to like and subscribe.