Ted Oakley: Expensive Markets, Fed Mistakes, And The Case For Commodities
Summary
Market Outlook: Ted Oakley emphasizes that the current market is expensive, with the S&P 500 trading at high multiples, suggesting caution for investors.
Economic Conditions: Oakley notes that the economy is flatlining, with rising delinquencies and stagnant home prices, indicating a disconnect between economic fundamentals and market performance.
Federal Reserve Policy: He criticizes potential rate cuts by the Fed, comparing it to past mistakes, and suggests that such actions could exacerbate inflation rather than control it.
Investment Strategy: Oakley advises against long-term bond investments due to expected persistent inflation and recommends holding gold as a hedge.
Commodities: He sees commodities, particularly energy and gold, as undervalued and poised for growth, suggesting they will outperform in an inflationary environment.
Investor Behavior: Oakley warns about the risks of retail investors' overexposure to stocks and the dangers of speculative trading, drawing parallels to past market bubbles.
Risk Management: Emphasizing liquidity, Oakley advises investors to maintain cash reserves to manage risk and avoid significant losses during market downturns.
Optimism and Resilience: Despite challenges, Oakley remains optimistic about the resilience of the American economy and the potential for young people to seize opportunities in adversity.
Transcript
our level of inflation is going to be higher. That 2% is a is a pipe dream. I mean, if you're going to own some bonds, you better own some gold right beside it, I think, if that's what you have to do. But, um, I I just think owning if if a person says, "I'm going to own a lot of bonds more than 5 years out, 10, 15, 20, 30." I really think they need to rethink that about where the country is today. Ted Oakley, managing partner and founder of Oxbow Advisors. It is so wonderful to welcome you back to the show. Great to see you as always, Ted. We always appreciate you coming on. Thanks, Julia. Good to see you again. I'm thrilled to see you. And I got to say, Ted, the last time we spoke, I feel like it was probably late April, early May. It's been a while. Um, and we have you here today on the um Friday, September 5th. We just had the jobs report this morning. And since it's been a while, um, had a lot happening this summer. Let's start where we always start, Ted, with more of that big picture where we are today, how you're thinking about the economy and the markets, your outlook, if you will. And as you know, Ted, on this program, you can take all the time you need to set the table when it comes to that big picture view. Well, you know, Julia, we've uh you know this, but we we do mostly bottom up on the investment side as far as finding things. But I will say this to you. You know, four months ago, we were coming off that low and we were rallying up and typical, everybody's been trained to buy the dip and so it worked again for them. Uh but we were expensive by the time we got to June, but now we're real expensive. Now, what does that mean? That means you're selling at 23 times future S&P earnings, not past, and 26 or 27 times trailing 12 months. And under any circumstance you want to look at that S&P 500 dividend for example is only one other time been two times when the S&P dividend was 1.2% which is virtually nothing. Um and so when you get all those you put all those things together there's a lot of things going on by the way you know you look at delinquencies rising you look at home home prices are stuck uh and and you can see those little signs out there. You could see them before, but now I think they're having a little bit more impact. But I I just think from an economic standpoint, u you'd have to say we're we're flatlining at the very very best. But that's sort of how we see it right now. Yeah. So you're, as you point out, you're starting to see some of these signs out there, the little signs, and the economy is flatlining. It makes me wonder, Ted, is there a bit of a disconnect between maybe what's happening in the economy and then what we're seeing in the markets. Oh, totally. Yeah. You know, what happens is this is not anything new, but when people are making a lot of, you know, they make good money in the markets, uh, and you know, they don't want to they don't want to get out. So, uh, they don't really the economy. you could be giving them bad numbers and if they look up the next day and the S&P is is up a little, um, they're fine. They never they never think about it until it they wake up one day or that after a series of weeks and all of a sudden, you know, hey, I've got 15 or 20% less than I had and then they think about it. Yeah. Um, when you look at the markets as someone who's been how many years, I think 45 years now in the business, what do you make of it? Does it make sense to you? Well, it's a few more than 45, but I'm not going to go too much detail, but it's it's 48 or so. But the the point being is that nothing really changes in people's emotions. All this period of time I've been in the marketplace, it's always the same. at lows and at highs. At lows, they're so distraught you can't they they don't they don't want to buy anything, which is kind of, you know, obviously odd if you're really in them to make money. And at highs in the market, you know, they don't want to sell anything because if they sell it, they're afraid, you know, it's going to go higher. And usually it would if you sell a little bit, but no, it's not a lot that that the emotional part of it is not a lot different. Uh I would say AI to me is sort of like uh the buildout of uh the internet was in 98 99 early 2000. They overbuilt it and then two years later everybody had to eat the capex and realize that hey we're not making any money here. And I think the same thing's happening in AI. It doesn't mean AI won't do well. It just means that too many people uh ate the fruit and and so then they some of them get sick. And I I I think that's where we are. But it's not a lot different than than a lot of markets. They they're very similar in terms of uh greed and fear. I'll put it that way. I want to also bring up the Fed with you. Um because I think now everyone's kind of expecting it's pretty much a lock in that we're going to see a rate cut in September in just a couple of weeks when they have the FOMC. So, how are you thinking about um the environment for um a rate cut, what that might mean? Uh how are you thinking about that? Well, in the big picture, and I'm talking about the next 5 to 10 years, we think we're our level of inflation is going to be higher. That 2% is a is a pipe dream. I mean, you know, we're probably It may not mean you go back to the late '7s, but what it does mean is that when you get these periods when they lower rates, and this could be an Arthur Burns kind of period like the 70s where they shouldn't should not be lowering rates with full employment, a lot of things going on, and they're probably late on rolling if if we're really going into recession. But now they become political, which is what they were in the 70s, by the way, until Vulkar came along. And he he basically told President Reagan, "Hey, I'm I'm not doing what you want." And so we're back into this mode again. And I think by lowering rates and I mentioned this I do I know I remember four months ago when I interviewed with you I you I mentioned that you're probably going to get a chance uh rates going to go down somewhere in the next two or three quarters and if they do you're going to get a chance to sell those lawn bonds. You need to sell them. Okay? Don't get caught up in this idea that we're going back to a half percent or 1% interest rate. And oh by the way if we do this market's down 50%. I don't think either one of those are going to happen. But the main point is that if you get a chance to sell this bond, you should sell them because um there's really nothing there for. If you think about uh a bond, you know, like a like a 10-year bond, it's it's maybe a point 1.1 1.2 over inflation right now. And that'll be that'll be a small period of time. We think we think the way this government's run, the way we're printing, the way things are going, the only way out of this has to be you print it out and eventually you can't loan long bonds in that situation. But I will tell you, Wall Street keeps selling them and people keep buying them. But from a Fed standpoint, you have I mean, you'd have to think, hey, this thing's a real mess. Yeah. You just think about it. Okay. I want to hear Let's I do want to hear a bit more. Okay, that's going to give you a window or an opportunity to sell those long bonds. Elaborate a bit more. Is is that because we will likely see um you know more mounting government debt, the rising interest expenses like persistent inflation? Is it like the stagflation threats? Give me a bit more color. I I don't know if it's stagflation as much as they only if you look look at the new bill they passed a $5 trillion debt moved it up. So nobody's worried about you know the debt limit right now. They and and then they go in a situation to where neither party anywhere even state and local nobody's worried about balancing budgets. Spend it, raise it, borrow it, spend it, spend it. And there's really there's not much of a way out of that. I mean, uh, you can say, okay, there's nothing you could cut. Um, I I tell you, my friend, and you know your friend too, Luke Grumman, uh, has a lot to say about what are you going to do? Well, nothing because you can't. Some of the things you cut, you're immediately out of office. And so, you know, to me, what happens is they just keep on doing the same things. What that means though in the long run, if you own bonds, if you're going to own some bonds, you better owe some gold right beside it. I think if that's what you have to do. But um no, I I I just think owning if if a person says I'm going to own a lot of bonds more than 5 years out, 10, 15, 20, 30, I really think they need to rethink that about where the country is today. Do I wonder too like how many people even realize like what what they're even how many people actually realize like what their portfolios look like and their like allocations in this environment? Yeah, you're right. If you go ask and I've done this numerous times I've had people that lot of money and ask them what's in that what's in that what do you have in that exchange rate phone or bond phone what do you think's in it well it says that's off it starts out with a sentence like well it says X I said yeah but do you really know what's in it you really know uh you know how far out they go you know and so no they don't know Um, and they, by the way, anybody sitting in the last three years has on long-term there's they're so far underwater uh that they're not probably going to get even on this move in bonds, but if you even get half of that move back or more, I think you should take it. Yeah. Um, okay. So, let me ask you this. With the rate cut, do you think that would I heard you say it would be like a mistake like an Arthur Burns mistake. Is it going to in your mind will that just fuel more inflation then? Well, you'll I think what it would do is you'd have maybe have people buying the market a little bit on it, but see it's it's not going to it won't affect the 30-year rate. I mean, and if that's the case, if you're looking at 20 and 30-year paper yields staying higher or going higher, then that's the marketplace telling the Fed, hey, you're not you're not this is not going to work for you because inflation long-term inflation is still there. And uh and they can lower them on the short run. But I mean, let's just say I'll give this example. Say they lower them 50 basis points. All right. That's going to take the prime rate at a bank from seven and a half to seven. Is that going to cause a tremendous amount of borrowing? I doubt it, you know. Um I mean, you have to get into some rate structures that make things really palatable or be able to make money out of it. I maybe you go into a recession and you know they lower the you have the rates come down uh you know you bring the Fed funds rate on down you know two points I don't think you I really don't think you bring them down more than one and a half at the best um just because they got too much inflation coming at them eventually they will I have a pretty basic question but like inflation it I have many guests who say this is still going to be a problem. Can the Fed actually really do anything to solve inflation? Like that can they really get back to 2%. Well, I don't Can they get back to 2%, you say? I don't know. Like I I don't even know if that's realistic. Well, no. I I don't think I don't they what they can do with inflation is what Vulgar did, which is you move the rates up so high that you you're in a recession and you slow everybody down because the game's up. That's what he did, you know. He he he pushed him up to, you know, you could get just under 15% on a 30-year US Treasury bond. Well, and that was three or four points over inflation at the time. And that was a that was a perfect that was the perfect investment at the time. And yet and yet nobody would buy it. You think about a US Treasury, they can't call it away from you. It's not like a normal bond after 10 years. So, you could have made a 30-year investment that would have beat every stock market investment out there. But individuals, no, I'm not going to buy that because I can buy a 90-day CD that'll give me another point higher than that. That's how people think. But yeah, they can impact it. They can impact it if they want to get aggressive. I don't think they'd ever do it, but they could impact it. I don't I didn't ask you, but what were your thoughts on the jobs report and I guess more of that softer labor market data that we've seen come out? Let love to get your take there. Well, I I do think the immigration situation's having some impact because it it it makes look it makes the rate look kind of okay or maybe different. But if you look if you look at jobs in general though, you know, they're they're they're coming off. I mean, you know, we keep revising and that sort of thing, but but we're not we're certainly not in a move today that would make you think we're in some sort of robust move in this economy, for sure. Gold keeps setting new all-time highs, but price appreciation isn't the only way to profit from owning gold. Monetary Metals is redefining the future of precious metals investing. Instead of paying to store gold, imagine getting paid to own it. With monetary medals, you can earn up to 4% on your gold paid in physical gold. That's right. Your ounces grow each month, not just your paper balance. A yield on gold paid in gold means you're stacking more ounces every single month. And you still benefit if gold's prices rise. You're earning more gold every month and enjoying potential price appreciation at the same time. Go to monetary-medals.com/jullia to learn more and see how you can start earning 4% on your gold paid in gold. Do you think um when you look at the economic picture, you see I don't know if you want to call them like warning signs, but you were talking about like the little signs that you're starting to see. Do you think we're like due for a recession? Has it been surprising that we haven't seen one in a while? What I don't know like will we will we see anytime soon? When I think about a recession, I think about when the average person gets hit, you know, pretty hard. Um, now uh yeah, you you could I I don't know what the Fed would do about that in that case and maybe they do another one of these overkills where they push so much money in that ruins everything again. But I hopefully they'll realize this time around that if they do that in the long run, it's going to be tough. Um but yeah, it wouldn't hurt to have a recession really. You know, we've got so much fluff in the system, leverage, super leverage in the system right now that uh it wouldn't wouldn't hurt to clean it up a little bit. Yeah, maybe a bit of a reset or something. Um yeah, it kind of feels like folks like are always looking for like some sort of move from the Fed to do something and I don't know, maybe maybe we should just like let things actually play out. Well, okay. One of the other topics I want to bring up with you because we talked about this um with so much overexposure to stocks. I know we've talked about that, but we've also seen of late a lot of retail investors piling into the markets. There's also been a conversation on this channel about the passive bid uh and impact on markets too. What do you make about like just more of the activity that we've seen? And I'm talking more about like the stock equity markets. Um what do you make of the activity that we've seen there? Well, when you know what years ago, a number of years ago, when you went to zero commissions, there's two things happened. You went to zero commissions and then you changed from eights quarters and a half point spreads to like one penny. So, if you think about that, if I'm a little trader, well, I now I've got a little machine here where, you know, I can make a couple hundred bucks on a trade uh or lose a couple hundred in that manner, too. But so what's happened is especially with people under 40, okay? They've they really they really think they've found some some sort of holy grail and it never ends well for them. You the thing that works for true investment is to own a producing asset for a long time. That's how you make money. And for these investors that are buying all these daily daily options and all sorts of trades and all the cryptos and all that sort of thing, when those things break down, they typically take a lot of people with them. And I I suspect that will happen again somewhere. Uh, and the individual um, put it this way, Julia, if you open up at the Fords 400 every year, you're never going to see anybody that says, "Hey, I made a lot of money trading trading the index every day or uh, on crypto." Now, you know, you you can that's that's my point is that most of those people on there are own real estate companies. You know, some of them are in finance, too. But the main point is that that individuals are usually the last group to get on the train and the last group unfortunately to get off because I've seen this too many times. Um but we'll we'll see. I mean individuals today if you talk to them about selling part of their Apple or part of their Nvidia or something like that, I mean they're not going to do it. you know, you might as well I'll I'll take your firstborn child because they made a lot of money and they don't want to listen to you. That's fine. It's their money. Do what they want to do. Yeah. Um, I wonder would you say would that be a bit of a warning sign though because I think that that's probably happened in in the in prior cycles too where it's always that that individual investor just kind of like you said their last one their last one I guess in and yeah I had um it's interesting you say see but late late 90s like particularly 99 and early 2000 there's about two years there where everybody became a day trader and they were quitting their jobs. I I I knew lots of them. They were quitting their jobs and they were saying this is this money is too easy to make. You know, I'm pretty much set for life. I work two hours in the morning and then uh I'm I'm gone. Everything's fine. Well, fast forward three years later and they're all gone, you know. And what hap what happens to that is if you have some really poor times and it goes the other way on you, you know, they don't really have enough money to to really stand hard hard times and so a lot of them just lose it all and um you know you you can see what happens but I've seen seen that before. Yeah. Yeah. That's a good point, too, like especially if you're like, "Oh, I made more money in the market today than I made at my job." Um, and I guess most folks wouldn't even know like when to get out or get out at the right time and look for that moment to, you know, get some liquidity. Ted, you and I have talked about the importance of liquidity, having that cash. Um, how are you thinking about liquidity today and how much you want to have? Well, you have to look at um you have to decide, okay, what your situation is. You know, if you're over 60 uh or over 70 or so, you you're in a different situation than somebody that's 30 years old. And so, uh because the 30, you know, 30, I mean, you're going to continually put more money in a 401k. You're going to put more money in the market in your personal account. But most people in their 65, 75, 80, they have all the money they're going to have. That doesn't mean there's not a lot of it. But they they're in a different situation that they need to keep enough liquidity so that they can have some peace of mind under any circumstance. This is where I come from. Uh and you have to think about what's right for you. I'll give you an example. Let's say the S&P is up I don't know 10 and a half for the year 10 11 almost and you have an account which we have some like this that are up 8% or 8 and a half but they have 50% in treasuries. Which one of those would you which one would those make you feel more comfortable? the one that's fully in every minute every day and has no buffer or the one that's making that's doing okay, you know, it's not not it's not it's not in some sort of race here, but you know, you've always got some safety valve. And the main thing we do is we look at companies and I'll tell you, it's just not there. I mean, we if we had a lot of cheap companies, we would buy them, but uh but we find some good we find some good things. I mean some of the new companies we've found in the last three months or so you know if you take u their you know if you take everything they have to spend capital expenditures debt everything and the cash is left over their free cash flows are 9 10 11% which is really good but see there's not many of those that's the problem um and so right now I think when you asking the question what's right for you here's what's right for If I come in tomorrow and let's just say forget about what happens and but I I'll compress it. Say it's a three but I'm going to compress it to one day and your portfolio is down 35 or 40%. Dollar amount. Think about it. If that really unwinds you and you can't deal with that, if you think you think if that really happened, I I don't know what I would do or I'd be going crazy or whatever. Ask yourself that question. So, if you don't have that staying power, then you need to raise some cash and have some liquidity because you you're playing a a fool's game and that every so often you have a major selloff and you'll have another one. And so if you're not ready for it, then you know it doesn't work. And I'm not I'm not doom and gloom here. I'm just trying to tell you have to manage your risk. That's the key to investing. You have to manage risk. I mean, one of the things we espouse at Oxbow is we're never going to lose a lot of money. And we don't necessarily at the top. And somebody leaves us, they usually leave us because we weren't as aggressive as they wanted us to be. But we own the right stuff, you know. Um, so I I think people have to that's how you think about liquidity. Uh, and I see it today. A lot of people 70, 75, 80 years old, I'm like, you you're not even counting the fact you you might get sick. I mean, there's all kinds of things. See, we're fiduciaries. So if somebody comes to us and says, "Hey, I got a lot of money, but I'm I'm 80 years old, but it's 90% in the market." we won't take that account because, you know, next thing could happen. I mean, I I can't make I can't make a case for that person if they're 25. I can't, right? Um, y'all manage the money of like a lot of high net worth individuals, people who a lot of people who've probably had exit exited businesses, they've been really successful, too. And it's imagine Ted, it's like preserving that wealth, growing at a steady rate versus like these big crazy like, you know, swing for the fences kinds of moves. Y'all are looking for like how can you steadily grow that, preserve that? Is that right? Oh, for sure. I mean, we have so much of our business over the years because we write books about it. We've done many, many speeches over the years about people that have sold a company. And the one thing about it is they know what they sold it for. If you sell a company for $50 million today net after tax, you know, you have 50 million and you and and it's it's not it's not best for their mental health to show up two or three years later and have that 50 be worth 35 or 40 because they're like, "Wait a minute. That's not what that's not what I thought was going on here." But I think a lot of them have kind sort of forgotten that a little bit. Uh and they they they've gotten further out over their skis than they should be. But in general, I see, you know, you get into these, you know, we we manage in some f family offices and foundation different things. And um I think these consultants have convinced them that, oh, you got to keep swinging for the fences. And we're like, no, you don't really. What you have to do is make a certain a few percentage points over the inflation rate, maintain buying power, and you'll be great for the rest of your life. Yeah. It makes me wonder too like, you know, when you've seen when you see like double digit stock returns in like more recent years, do people just get like a recency bias and they think, "Oh, I need to be doing that every single year or something versus like maybe just the steady, like you said, a few percentage points above the inflation rate, you're you're good to go." You know, I have a graph that we put together a few years ago, but if you had a five if you had five years in a row where you made 15% and then you have one 40% or 50% sell off, you go almost back to break even. Oh wow. People don't realize what losing money does for you. It's it's not the gaining, it's the the making sure you don't lose a lot. It's not to say you never lose any, but you need to keep that manageable and that's what will get you through to make sure that you'll be all right over every every single year. It's a good point. Um, yeah, I really liked that framework you shared though and like asking yourself like how much liquidity you need. I do want to ask you this because it's not like you're not finding opportunities in the market. Um, but how are you finding like these hidden gems, if you will? um what can you share there? Like what what are the opportunities today? You don't have to go into too much detail. I don't want you to give away all your secrets or anything, but yeah, anything that you can share that would be great. Oh, sure. You you know, we screen about 300 stocks or less that are good companies. We we we wouldn't mind owning them. In other words, they have low debt to equity, um, good managements, they have a high free cash flow, meaning they have money left over to pay more dividends, buy back the stock, whatever they want to do. And, um, sometimes you just have one, for example, Crown Company, which makes a lot of cans. Okay. You see them. Wait, what is the company again? Crown. Okay. Crown. Okay. Yeah. and you know all of a sudden it gets in a position where it's got a high free cash flow. It's in a great pricing spot and we look at those companies and what we think they can do the next five years and we try to discount that back and and say okay well you know we'll try to buy it a little better than that price even. So, we have some pricing points where we come in to buy and and and and that works for us. Um because we're really going to try to own those companies if we can, you know, five to 15 years, maybe longer if they're a really great company. But when we see a company that's coming into play like that, we, you know, we know like for example now we're buy, we've been buying some energy. Now you you could say with things slowing down worldwide that energy is going to be in the doldrum. Probably is too by the way for the next six or nine months. However, if you look at production, the way things are set up, energy is probably one of the best buys out there for the next three to five years and you let oil go up to say 75 80 bucks or higher, then you're going to bring it out of the woodwork and everybody want to buy it. But um yeah, you look at things that uh that really make sense in terms of paying you interest, dividends, free cash flow uh as you would own a business. You know, we look at it like we would like we would own a business. I mean, if you look at the gold miners we own, this is another strategy. Um we were in those way earlier than well, people are still not in them if you want to get right down to it. PE people don't still don't believe in gold miners, but they were really cheap and we could see the numbers stacking up. And here's a group um that's making a lot of money and probably will continue to do so, but until the investing public gets excited about it, you know, they'll just they'll just do it right in front of them. But we look for we screen things out to find a good buys. And if we find a uh in a high income strategy, for example, we have to own things that are 5%. Try to own things that are 5% cash flow or higher. Um but we find them. It's just we don't find enough. You know, if you look at the average treasury level for us, short-term treasuries, I mean, less less than 15 months, all three strategies, it's it's 50%. Is it not because we wouldn't do it, by the way? We would if we were cheap tomorrow, you'd see us bam bam bam, you know, buying companies. Um, and I guess it's, you know, kind of like Bergkshire Hathaway in a way. Not that we're anything like that, but but you have to you have to start looking at things that are like, you know, like we bought, you know, Sigma. Now, some of these companies get hit because they throw them in the in the pot with all the other companies, but that company's totally different. They don't have they don't depend on what these other companies depend on. It's that sort of thing. Sometimes you'll get a a situation, but um yeah, you find things to buy, but sometimes you have to sell things too if they don't they don't work out. Yeah. Um it's almost it's like truly like getting into like stock picking um if you will and looking for those opportunities. You did I hear you correctly? You said 50% across the three strategies in the short-term treasuries, right? Is that normal or like what's the usually the allocation? Well, in the in we have this one strategy, conservative fixed income. Now, that's normal for them because uh that's a conservative fixed income strategy and everything we own in there is less than it's it it's it's very high quality treasuries and short m short munis. Um but that everything's less than 48 months or 50 months, 60 months maturity. So, it's always that way. Um, but we do we do carry 6% gold in that strategy because if you're going to own any kind of bonds, you're gonna need to own some gold. Um, and what why is that? Can you explain that relationship like wanting to own gold if you're going to own bonds, too? Well, it wasn't always that way, but it could have been, I guess, but now it's a situation to where um a lot of trade that's going on with the people we don't like necess I'll use China as an example. You know, they're having, you know, at 1.2 two trillion excess. It's all in dollars. And so they'll go to another trading partner that with us and say, "Hey, you know, I know you got some debt over there. We'll, you know, we'll flip that. You do the yuon. We'll we'll give you some dollars. You can pay that off." And so what's happening is they're getting away from the treasury, getting away from the dollar, and they're buying gold. And if that's the case, and I think it's I think all countries are in bad shape right now. If that's the case, you have to go back to hard assets. Now, you can go anywhere you want to go. You can go land, building, farms, metals, mining, you know, oil and gas, minerals, anything you want to put in that package. But I think that's why we put it over there because it becomes like a currency to us, a hedge. Interesting. Yeah. And look, gold today. I'm just looking. It's at a new 52- week high. Um, yeah, it's north of 36 or 3,653. Yeah. Yeah. To answer your question on the stock account, we're about at least we're about 40 42 43% treasuries. Um again, not not not because we were trying to time it or anything. It's just that we didn't have the companies that fit. Uh then we have a high income a high very high income strategy. And believe it or not, it's about 60. But but the things that we have in the 40 have done so well that it offset it. So you know that's the way it goes. Yeah. Um so it sounds to me like commodities though are going to be important because I heard you say energy obviously gold. Um commodities being an important area for investors to be thinking about. Well, if you go back, Julia, and look at the look at a 25 or 30-year chart on the Bloomberg commodity index, you'll see we're lower than we were 20 years ago. And I think people have gotten so used to financial assets that they've forgotten that there's other things out there. So, uh, I won't be surprised that if in the next 10 years, if you get to the end of 10 years, that you'll look up and say, gosh, commodities did really well during that period. And they come and go. You can't buy a commodity and hold it 30 years really like you can a stock, a company, a really good company, because they come and go. Supply, demand, a lot of things hit it. But but we're in a situation now where they've been tried beaten down so badly uh for so long that uh and that that's why all of that whole group if you look at you know um metals mining any oil there there's so many things fit that uh and I think in times of higher inflation commodities are always going to outperform. Yep. Okay. So that's part of that trading that inflation trade having the exposure to the commodities. Well, I think you do. I mean for us it's a lot of things but we own fertilizer, timber, you know, we own a lot of energy, metals, mining, you know, iron, you know, all all sorts of things that fit that category. So, um, you know, we'll we'll see. It's it's always a horse race. So, uh, we've been right the last year or two, but, uh, you know, it's it's always what have you done for me lately? Exactly. Let me ask you a couple more questions before I let you go, Ted. Um, I think this is your third appearance on the show this year. We had you at the beginning of the year. Um, late spring now, as we're getting toward the end of summer, I can't believe it. Um, but when you think about like the first eight, nine months here of 2025, um, has there been anything that, well, gosh, I'm sure there's many things, but what has surprised you the most this year that maybe has made you kind of readjust your thinking, if you will? Anything that stands out as like a big surprise for you this year? Not a lot really, Julia. Um we've everything that we sort of thought the way things looked a year ago is sort of the way it is or way it's happened and so that hasn't surprised if that I think the terrorists were different for us because we and everybody else have no way of knowing you know what that outcome is and so we didn't know it when they started it we didn't know at the beginning and now with the new judge with the new ruling we don't know where we are now uh Um, I'm sure there's a lot going on right there. But, uh, that's the one thing that's probably surpris one of the things surprised me on it is if you look at wholesalers and manufacturers, they've sort of split those higher costs between the two. And I've talked to a lot of people that that that rep these companies and they'll say, and I'm surprised they didn't push it down to the consumer as much as they did. And I always ask the question, do you think they'll continue to do that? And their answer is no. They will eventually hit the consumer. And so that's the place that's probably surprised me that it didn't show up more than it has. But it doesn't affect us too much. But um it's just that that would have been the only thing I think. Um this is a question I've been asking a lot of my guests lately. Um, what is that risk for you right now that's been keeping you up at night? It doesn't actually have to be keeping you up at night, but maybe the risk that's been on your mind quite a bit that you keep thinking about. Well, I always I think I I think people and I don't get me wrong, I'm I'm a I'm I'm super uh I'm a super America and super capitalist. everything that you want to talk about, but I think we have as a country have been duped into thinking we're this we've got we're better than we are militarily. We're not really the strongest. And if you look at uh just last week that summit between China and Russia, South Korea, I mean North Korea, those things start to tell you that you know what um we're in a situation now to where not everybody is our friend. In fact, a lot of people are not our friend. And what what makes me think about things is if you show up sometime and we misjudged a lot of that, you know, and it'll show up in our economy, then it'll show up in our, you know, our our markets as well. But nobody thinks about it. I think they think, well, we're still the greatest, so they can't hurt us. But, you know, it's it's different out there than it used to be. And what is that one thing that's making you optimistic? Well, I'm always optimistic for this reason and that is if when things get harder or people people I think in the US are very resilient and they find a way they find a way to to take to get opportunity out of adversity. I've seen it over and over and over again. So, I'm not I don't rule out the fact that Americans uh and especially a lot of young people I'm impressed with a lot of young people now. I see I know a lot of people uh come down on the millennials and Z's but you know in talking to them a lot I see you know they I think I think they're thinking right a lot of them are and I think you'll see more and more people where they'll use it as opportunity and it gives people that maybe come from nothing or whatever they get a chance resiliency is like the code word I think for Americans and um and it's still there so I'm I'm I'm optimistic about that. I love that. Ted Oakley, founder and managing partner of Oxbow Advisors. I always, always, always enjoy having you on the show. This audience certainly does, too. It's always a treat. Um, really appreciate you stopping by. Thank you so much for being so generous with your time, all of your knowledge, your wisdom, helping us all learn and get better. Thanks again and we look forward to having you on again soon. Okay, Julia. Thanks.
Ted Oakley: Expensive Markets, Fed Mistakes, And The Case For Commodities
Summary
Transcript
our level of inflation is going to be higher. That 2% is a is a pipe dream. I mean, if you're going to own some bonds, you better own some gold right beside it, I think, if that's what you have to do. But, um, I I just think owning if if a person says, "I'm going to own a lot of bonds more than 5 years out, 10, 15, 20, 30." I really think they need to rethink that about where the country is today. Ted Oakley, managing partner and founder of Oxbow Advisors. It is so wonderful to welcome you back to the show. Great to see you as always, Ted. We always appreciate you coming on. Thanks, Julia. Good to see you again. I'm thrilled to see you. And I got to say, Ted, the last time we spoke, I feel like it was probably late April, early May. It's been a while. Um, and we have you here today on the um Friday, September 5th. We just had the jobs report this morning. And since it's been a while, um, had a lot happening this summer. Let's start where we always start, Ted, with more of that big picture where we are today, how you're thinking about the economy and the markets, your outlook, if you will. And as you know, Ted, on this program, you can take all the time you need to set the table when it comes to that big picture view. Well, you know, Julia, we've uh you know this, but we we do mostly bottom up on the investment side as far as finding things. But I will say this to you. You know, four months ago, we were coming off that low and we were rallying up and typical, everybody's been trained to buy the dip and so it worked again for them. Uh but we were expensive by the time we got to June, but now we're real expensive. Now, what does that mean? That means you're selling at 23 times future S&P earnings, not past, and 26 or 27 times trailing 12 months. And under any circumstance you want to look at that S&P 500 dividend for example is only one other time been two times when the S&P dividend was 1.2% which is virtually nothing. Um and so when you get all those you put all those things together there's a lot of things going on by the way you know you look at delinquencies rising you look at home home prices are stuck uh and and you can see those little signs out there. You could see them before, but now I think they're having a little bit more impact. But I I just think from an economic standpoint, u you'd have to say we're we're flatlining at the very very best. But that's sort of how we see it right now. Yeah. So you're, as you point out, you're starting to see some of these signs out there, the little signs, and the economy is flatlining. It makes me wonder, Ted, is there a bit of a disconnect between maybe what's happening in the economy and then what we're seeing in the markets. Oh, totally. Yeah. You know, what happens is this is not anything new, but when people are making a lot of, you know, they make good money in the markets, uh, and you know, they don't want to they don't want to get out. So, uh, they don't really the economy. you could be giving them bad numbers and if they look up the next day and the S&P is is up a little, um, they're fine. They never they never think about it until it they wake up one day or that after a series of weeks and all of a sudden, you know, hey, I've got 15 or 20% less than I had and then they think about it. Yeah. Um, when you look at the markets as someone who's been how many years, I think 45 years now in the business, what do you make of it? Does it make sense to you? Well, it's a few more than 45, but I'm not going to go too much detail, but it's it's 48 or so. But the the point being is that nothing really changes in people's emotions. All this period of time I've been in the marketplace, it's always the same. at lows and at highs. At lows, they're so distraught you can't they they don't they don't want to buy anything, which is kind of, you know, obviously odd if you're really in them to make money. And at highs in the market, you know, they don't want to sell anything because if they sell it, they're afraid, you know, it's going to go higher. And usually it would if you sell a little bit, but no, it's not a lot that that the emotional part of it is not a lot different. Uh I would say AI to me is sort of like uh the buildout of uh the internet was in 98 99 early 2000. They overbuilt it and then two years later everybody had to eat the capex and realize that hey we're not making any money here. And I think the same thing's happening in AI. It doesn't mean AI won't do well. It just means that too many people uh ate the fruit and and so then they some of them get sick. And I I I think that's where we are. But it's not a lot different than than a lot of markets. They they're very similar in terms of uh greed and fear. I'll put it that way. I want to also bring up the Fed with you. Um because I think now everyone's kind of expecting it's pretty much a lock in that we're going to see a rate cut in September in just a couple of weeks when they have the FOMC. So, how are you thinking about um the environment for um a rate cut, what that might mean? Uh how are you thinking about that? Well, in the big picture, and I'm talking about the next 5 to 10 years, we think we're our level of inflation is going to be higher. That 2% is a is a pipe dream. I mean, you know, we're probably It may not mean you go back to the late '7s, but what it does mean is that when you get these periods when they lower rates, and this could be an Arthur Burns kind of period like the 70s where they shouldn't should not be lowering rates with full employment, a lot of things going on, and they're probably late on rolling if if we're really going into recession. But now they become political, which is what they were in the 70s, by the way, until Vulkar came along. And he he basically told President Reagan, "Hey, I'm I'm not doing what you want." And so we're back into this mode again. And I think by lowering rates and I mentioned this I do I know I remember four months ago when I interviewed with you I you I mentioned that you're probably going to get a chance uh rates going to go down somewhere in the next two or three quarters and if they do you're going to get a chance to sell those lawn bonds. You need to sell them. Okay? Don't get caught up in this idea that we're going back to a half percent or 1% interest rate. And oh by the way if we do this market's down 50%. I don't think either one of those are going to happen. But the main point is that if you get a chance to sell this bond, you should sell them because um there's really nothing there for. If you think about uh a bond, you know, like a like a 10-year bond, it's it's maybe a point 1.1 1.2 over inflation right now. And that'll be that'll be a small period of time. We think we think the way this government's run, the way we're printing, the way things are going, the only way out of this has to be you print it out and eventually you can't loan long bonds in that situation. But I will tell you, Wall Street keeps selling them and people keep buying them. But from a Fed standpoint, you have I mean, you'd have to think, hey, this thing's a real mess. Yeah. You just think about it. Okay. I want to hear Let's I do want to hear a bit more. Okay, that's going to give you a window or an opportunity to sell those long bonds. Elaborate a bit more. Is is that because we will likely see um you know more mounting government debt, the rising interest expenses like persistent inflation? Is it like the stagflation threats? Give me a bit more color. I I don't know if it's stagflation as much as they only if you look look at the new bill they passed a $5 trillion debt moved it up. So nobody's worried about you know the debt limit right now. They and and then they go in a situation to where neither party anywhere even state and local nobody's worried about balancing budgets. Spend it, raise it, borrow it, spend it, spend it. And there's really there's not much of a way out of that. I mean, uh, you can say, okay, there's nothing you could cut. Um, I I tell you, my friend, and you know your friend too, Luke Grumman, uh, has a lot to say about what are you going to do? Well, nothing because you can't. Some of the things you cut, you're immediately out of office. And so, you know, to me, what happens is they just keep on doing the same things. What that means though in the long run, if you own bonds, if you're going to own some bonds, you better owe some gold right beside it. I think if that's what you have to do. But um no, I I I just think owning if if a person says I'm going to own a lot of bonds more than 5 years out, 10, 15, 20, 30, I really think they need to rethink that about where the country is today. Do I wonder too like how many people even realize like what what they're even how many people actually realize like what their portfolios look like and their like allocations in this environment? Yeah, you're right. If you go ask and I've done this numerous times I've had people that lot of money and ask them what's in that what's in that what do you have in that exchange rate phone or bond phone what do you think's in it well it says that's off it starts out with a sentence like well it says X I said yeah but do you really know what's in it you really know uh you know how far out they go you know and so no they don't know Um, and they, by the way, anybody sitting in the last three years has on long-term there's they're so far underwater uh that they're not probably going to get even on this move in bonds, but if you even get half of that move back or more, I think you should take it. Yeah. Um, okay. So, let me ask you this. With the rate cut, do you think that would I heard you say it would be like a mistake like an Arthur Burns mistake. Is it going to in your mind will that just fuel more inflation then? Well, you'll I think what it would do is you'd have maybe have people buying the market a little bit on it, but see it's it's not going to it won't affect the 30-year rate. I mean, and if that's the case, if you're looking at 20 and 30-year paper yields staying higher or going higher, then that's the marketplace telling the Fed, hey, you're not you're not this is not going to work for you because inflation long-term inflation is still there. And uh and they can lower them on the short run. But I mean, let's just say I'll give this example. Say they lower them 50 basis points. All right. That's going to take the prime rate at a bank from seven and a half to seven. Is that going to cause a tremendous amount of borrowing? I doubt it, you know. Um I mean, you have to get into some rate structures that make things really palatable or be able to make money out of it. I maybe you go into a recession and you know they lower the you have the rates come down uh you know you bring the Fed funds rate on down you know two points I don't think you I really don't think you bring them down more than one and a half at the best um just because they got too much inflation coming at them eventually they will I have a pretty basic question but like inflation it I have many guests who say this is still going to be a problem. Can the Fed actually really do anything to solve inflation? Like that can they really get back to 2%. Well, I don't Can they get back to 2%, you say? I don't know. Like I I don't even know if that's realistic. Well, no. I I don't think I don't they what they can do with inflation is what Vulgar did, which is you move the rates up so high that you you're in a recession and you slow everybody down because the game's up. That's what he did, you know. He he he pushed him up to, you know, you could get just under 15% on a 30-year US Treasury bond. Well, and that was three or four points over inflation at the time. And that was a that was a perfect that was the perfect investment at the time. And yet and yet nobody would buy it. You think about a US Treasury, they can't call it away from you. It's not like a normal bond after 10 years. So, you could have made a 30-year investment that would have beat every stock market investment out there. But individuals, no, I'm not going to buy that because I can buy a 90-day CD that'll give me another point higher than that. That's how people think. But yeah, they can impact it. They can impact it if they want to get aggressive. I don't think they'd ever do it, but they could impact it. I don't I didn't ask you, but what were your thoughts on the jobs report and I guess more of that softer labor market data that we've seen come out? Let love to get your take there. Well, I I do think the immigration situation's having some impact because it it it makes look it makes the rate look kind of okay or maybe different. But if you look if you look at jobs in general though, you know, they're they're they're coming off. I mean, you know, we keep revising and that sort of thing, but but we're not we're certainly not in a move today that would make you think we're in some sort of robust move in this economy, for sure. Gold keeps setting new all-time highs, but price appreciation isn't the only way to profit from owning gold. Monetary Metals is redefining the future of precious metals investing. Instead of paying to store gold, imagine getting paid to own it. With monetary medals, you can earn up to 4% on your gold paid in physical gold. That's right. Your ounces grow each month, not just your paper balance. A yield on gold paid in gold means you're stacking more ounces every single month. And you still benefit if gold's prices rise. You're earning more gold every month and enjoying potential price appreciation at the same time. Go to monetary-medals.com/jullia to learn more and see how you can start earning 4% on your gold paid in gold. Do you think um when you look at the economic picture, you see I don't know if you want to call them like warning signs, but you were talking about like the little signs that you're starting to see. Do you think we're like due for a recession? Has it been surprising that we haven't seen one in a while? What I don't know like will we will we see anytime soon? When I think about a recession, I think about when the average person gets hit, you know, pretty hard. Um, now uh yeah, you you could I I don't know what the Fed would do about that in that case and maybe they do another one of these overkills where they push so much money in that ruins everything again. But I hopefully they'll realize this time around that if they do that in the long run, it's going to be tough. Um but yeah, it wouldn't hurt to have a recession really. You know, we've got so much fluff in the system, leverage, super leverage in the system right now that uh it wouldn't wouldn't hurt to clean it up a little bit. Yeah, maybe a bit of a reset or something. Um yeah, it kind of feels like folks like are always looking for like some sort of move from the Fed to do something and I don't know, maybe maybe we should just like let things actually play out. Well, okay. One of the other topics I want to bring up with you because we talked about this um with so much overexposure to stocks. I know we've talked about that, but we've also seen of late a lot of retail investors piling into the markets. There's also been a conversation on this channel about the passive bid uh and impact on markets too. What do you make about like just more of the activity that we've seen? And I'm talking more about like the stock equity markets. Um what do you make of the activity that we've seen there? Well, when you know what years ago, a number of years ago, when you went to zero commissions, there's two things happened. You went to zero commissions and then you changed from eights quarters and a half point spreads to like one penny. So, if you think about that, if I'm a little trader, well, I now I've got a little machine here where, you know, I can make a couple hundred bucks on a trade uh or lose a couple hundred in that manner, too. But so what's happened is especially with people under 40, okay? They've they really they really think they've found some some sort of holy grail and it never ends well for them. You the thing that works for true investment is to own a producing asset for a long time. That's how you make money. And for these investors that are buying all these daily daily options and all sorts of trades and all the cryptos and all that sort of thing, when those things break down, they typically take a lot of people with them. And I I suspect that will happen again somewhere. Uh, and the individual um, put it this way, Julia, if you open up at the Fords 400 every year, you're never going to see anybody that says, "Hey, I made a lot of money trading trading the index every day or uh, on crypto." Now, you know, you you can that's that's my point is that most of those people on there are own real estate companies. You know, some of them are in finance, too. But the main point is that that individuals are usually the last group to get on the train and the last group unfortunately to get off because I've seen this too many times. Um but we'll we'll see. I mean individuals today if you talk to them about selling part of their Apple or part of their Nvidia or something like that, I mean they're not going to do it. you know, you might as well I'll I'll take your firstborn child because they made a lot of money and they don't want to listen to you. That's fine. It's their money. Do what they want to do. Yeah. Um, I wonder would you say would that be a bit of a warning sign though because I think that that's probably happened in in the in prior cycles too where it's always that that individual investor just kind of like you said their last one their last one I guess in and yeah I had um it's interesting you say see but late late 90s like particularly 99 and early 2000 there's about two years there where everybody became a day trader and they were quitting their jobs. I I I knew lots of them. They were quitting their jobs and they were saying this is this money is too easy to make. You know, I'm pretty much set for life. I work two hours in the morning and then uh I'm I'm gone. Everything's fine. Well, fast forward three years later and they're all gone, you know. And what hap what happens to that is if you have some really poor times and it goes the other way on you, you know, they don't really have enough money to to really stand hard hard times and so a lot of them just lose it all and um you know you you can see what happens but I've seen seen that before. Yeah. Yeah. That's a good point, too, like especially if you're like, "Oh, I made more money in the market today than I made at my job." Um, and I guess most folks wouldn't even know like when to get out or get out at the right time and look for that moment to, you know, get some liquidity. Ted, you and I have talked about the importance of liquidity, having that cash. Um, how are you thinking about liquidity today and how much you want to have? Well, you have to look at um you have to decide, okay, what your situation is. You know, if you're over 60 uh or over 70 or so, you you're in a different situation than somebody that's 30 years old. And so, uh because the 30, you know, 30, I mean, you're going to continually put more money in a 401k. You're going to put more money in the market in your personal account. But most people in their 65, 75, 80, they have all the money they're going to have. That doesn't mean there's not a lot of it. But they they're in a different situation that they need to keep enough liquidity so that they can have some peace of mind under any circumstance. This is where I come from. Uh and you have to think about what's right for you. I'll give you an example. Let's say the S&P is up I don't know 10 and a half for the year 10 11 almost and you have an account which we have some like this that are up 8% or 8 and a half but they have 50% in treasuries. Which one of those would you which one would those make you feel more comfortable? the one that's fully in every minute every day and has no buffer or the one that's making that's doing okay, you know, it's not not it's not it's not in some sort of race here, but you know, you've always got some safety valve. And the main thing we do is we look at companies and I'll tell you, it's just not there. I mean, we if we had a lot of cheap companies, we would buy them, but uh but we find some good we find some good things. I mean some of the new companies we've found in the last three months or so you know if you take u their you know if you take everything they have to spend capital expenditures debt everything and the cash is left over their free cash flows are 9 10 11% which is really good but see there's not many of those that's the problem um and so right now I think when you asking the question what's right for you here's what's right for If I come in tomorrow and let's just say forget about what happens and but I I'll compress it. Say it's a three but I'm going to compress it to one day and your portfolio is down 35 or 40%. Dollar amount. Think about it. If that really unwinds you and you can't deal with that, if you think you think if that really happened, I I don't know what I would do or I'd be going crazy or whatever. Ask yourself that question. So, if you don't have that staying power, then you need to raise some cash and have some liquidity because you you're playing a a fool's game and that every so often you have a major selloff and you'll have another one. And so if you're not ready for it, then you know it doesn't work. And I'm not I'm not doom and gloom here. I'm just trying to tell you have to manage your risk. That's the key to investing. You have to manage risk. I mean, one of the things we espouse at Oxbow is we're never going to lose a lot of money. And we don't necessarily at the top. And somebody leaves us, they usually leave us because we weren't as aggressive as they wanted us to be. But we own the right stuff, you know. Um, so I I think people have to that's how you think about liquidity. Uh, and I see it today. A lot of people 70, 75, 80 years old, I'm like, you you're not even counting the fact you you might get sick. I mean, there's all kinds of things. See, we're fiduciaries. So if somebody comes to us and says, "Hey, I got a lot of money, but I'm I'm 80 years old, but it's 90% in the market." we won't take that account because, you know, next thing could happen. I mean, I I can't make I can't make a case for that person if they're 25. I can't, right? Um, y'all manage the money of like a lot of high net worth individuals, people who a lot of people who've probably had exit exited businesses, they've been really successful, too. And it's imagine Ted, it's like preserving that wealth, growing at a steady rate versus like these big crazy like, you know, swing for the fences kinds of moves. Y'all are looking for like how can you steadily grow that, preserve that? Is that right? Oh, for sure. I mean, we have so much of our business over the years because we write books about it. We've done many, many speeches over the years about people that have sold a company. And the one thing about it is they know what they sold it for. If you sell a company for $50 million today net after tax, you know, you have 50 million and you and and it's it's not it's not best for their mental health to show up two or three years later and have that 50 be worth 35 or 40 because they're like, "Wait a minute. That's not what that's not what I thought was going on here." But I think a lot of them have kind sort of forgotten that a little bit. Uh and they they they've gotten further out over their skis than they should be. But in general, I see, you know, you get into these, you know, we we manage in some f family offices and foundation different things. And um I think these consultants have convinced them that, oh, you got to keep swinging for the fences. And we're like, no, you don't really. What you have to do is make a certain a few percentage points over the inflation rate, maintain buying power, and you'll be great for the rest of your life. Yeah. It makes me wonder too like, you know, when you've seen when you see like double digit stock returns in like more recent years, do people just get like a recency bias and they think, "Oh, I need to be doing that every single year or something versus like maybe just the steady, like you said, a few percentage points above the inflation rate, you're you're good to go." You know, I have a graph that we put together a few years ago, but if you had a five if you had five years in a row where you made 15% and then you have one 40% or 50% sell off, you go almost back to break even. Oh wow. People don't realize what losing money does for you. It's it's not the gaining, it's the the making sure you don't lose a lot. It's not to say you never lose any, but you need to keep that manageable and that's what will get you through to make sure that you'll be all right over every every single year. It's a good point. Um, yeah, I really liked that framework you shared though and like asking yourself like how much liquidity you need. I do want to ask you this because it's not like you're not finding opportunities in the market. Um, but how are you finding like these hidden gems, if you will? um what can you share there? Like what what are the opportunities today? You don't have to go into too much detail. I don't want you to give away all your secrets or anything, but yeah, anything that you can share that would be great. Oh, sure. You you know, we screen about 300 stocks or less that are good companies. We we we wouldn't mind owning them. In other words, they have low debt to equity, um, good managements, they have a high free cash flow, meaning they have money left over to pay more dividends, buy back the stock, whatever they want to do. And, um, sometimes you just have one, for example, Crown Company, which makes a lot of cans. Okay. You see them. Wait, what is the company again? Crown. Okay. Crown. Okay. Yeah. and you know all of a sudden it gets in a position where it's got a high free cash flow. It's in a great pricing spot and we look at those companies and what we think they can do the next five years and we try to discount that back and and say okay well you know we'll try to buy it a little better than that price even. So, we have some pricing points where we come in to buy and and and and that works for us. Um because we're really going to try to own those companies if we can, you know, five to 15 years, maybe longer if they're a really great company. But when we see a company that's coming into play like that, we, you know, we know like for example now we're buy, we've been buying some energy. Now you you could say with things slowing down worldwide that energy is going to be in the doldrum. Probably is too by the way for the next six or nine months. However, if you look at production, the way things are set up, energy is probably one of the best buys out there for the next three to five years and you let oil go up to say 75 80 bucks or higher, then you're going to bring it out of the woodwork and everybody want to buy it. But um yeah, you look at things that uh that really make sense in terms of paying you interest, dividends, free cash flow uh as you would own a business. You know, we look at it like we would like we would own a business. I mean, if you look at the gold miners we own, this is another strategy. Um we were in those way earlier than well, people are still not in them if you want to get right down to it. PE people don't still don't believe in gold miners, but they were really cheap and we could see the numbers stacking up. And here's a group um that's making a lot of money and probably will continue to do so, but until the investing public gets excited about it, you know, they'll just they'll just do it right in front of them. But we look for we screen things out to find a good buys. And if we find a uh in a high income strategy, for example, we have to own things that are 5%. Try to own things that are 5% cash flow or higher. Um but we find them. It's just we don't find enough. You know, if you look at the average treasury level for us, short-term treasuries, I mean, less less than 15 months, all three strategies, it's it's 50%. Is it not because we wouldn't do it, by the way? We would if we were cheap tomorrow, you'd see us bam bam bam, you know, buying companies. Um, and I guess it's, you know, kind of like Bergkshire Hathaway in a way. Not that we're anything like that, but but you have to you have to start looking at things that are like, you know, like we bought, you know, Sigma. Now, some of these companies get hit because they throw them in the in the pot with all the other companies, but that company's totally different. They don't have they don't depend on what these other companies depend on. It's that sort of thing. Sometimes you'll get a a situation, but um yeah, you find things to buy, but sometimes you have to sell things too if they don't they don't work out. Yeah. Um it's almost it's like truly like getting into like stock picking um if you will and looking for those opportunities. You did I hear you correctly? You said 50% across the three strategies in the short-term treasuries, right? Is that normal or like what's the usually the allocation? Well, in the in we have this one strategy, conservative fixed income. Now, that's normal for them because uh that's a conservative fixed income strategy and everything we own in there is less than it's it it's it's very high quality treasuries and short m short munis. Um but that everything's less than 48 months or 50 months, 60 months maturity. So, it's always that way. Um, but we do we do carry 6% gold in that strategy because if you're going to own any kind of bonds, you're gonna need to own some gold. Um, and what why is that? Can you explain that relationship like wanting to own gold if you're going to own bonds, too? Well, it wasn't always that way, but it could have been, I guess, but now it's a situation to where um a lot of trade that's going on with the people we don't like necess I'll use China as an example. You know, they're having, you know, at 1.2 two trillion excess. It's all in dollars. And so they'll go to another trading partner that with us and say, "Hey, you know, I know you got some debt over there. We'll, you know, we'll flip that. You do the yuon. We'll we'll give you some dollars. You can pay that off." And so what's happening is they're getting away from the treasury, getting away from the dollar, and they're buying gold. And if that's the case, and I think it's I think all countries are in bad shape right now. If that's the case, you have to go back to hard assets. Now, you can go anywhere you want to go. You can go land, building, farms, metals, mining, you know, oil and gas, minerals, anything you want to put in that package. But I think that's why we put it over there because it becomes like a currency to us, a hedge. Interesting. Yeah. And look, gold today. I'm just looking. It's at a new 52- week high. Um, yeah, it's north of 36 or 3,653. Yeah. Yeah. To answer your question on the stock account, we're about at least we're about 40 42 43% treasuries. Um again, not not not because we were trying to time it or anything. It's just that we didn't have the companies that fit. Uh then we have a high income a high very high income strategy. And believe it or not, it's about 60. But but the things that we have in the 40 have done so well that it offset it. So you know that's the way it goes. Yeah. Um so it sounds to me like commodities though are going to be important because I heard you say energy obviously gold. Um commodities being an important area for investors to be thinking about. Well, if you go back, Julia, and look at the look at a 25 or 30-year chart on the Bloomberg commodity index, you'll see we're lower than we were 20 years ago. And I think people have gotten so used to financial assets that they've forgotten that there's other things out there. So, uh, I won't be surprised that if in the next 10 years, if you get to the end of 10 years, that you'll look up and say, gosh, commodities did really well during that period. And they come and go. You can't buy a commodity and hold it 30 years really like you can a stock, a company, a really good company, because they come and go. Supply, demand, a lot of things hit it. But but we're in a situation now where they've been tried beaten down so badly uh for so long that uh and that that's why all of that whole group if you look at you know um metals mining any oil there there's so many things fit that uh and I think in times of higher inflation commodities are always going to outperform. Yep. Okay. So that's part of that trading that inflation trade having the exposure to the commodities. Well, I think you do. I mean for us it's a lot of things but we own fertilizer, timber, you know, we own a lot of energy, metals, mining, you know, iron, you know, all all sorts of things that fit that category. So, um, you know, we'll we'll see. It's it's always a horse race. So, uh, we've been right the last year or two, but, uh, you know, it's it's always what have you done for me lately? Exactly. Let me ask you a couple more questions before I let you go, Ted. Um, I think this is your third appearance on the show this year. We had you at the beginning of the year. Um, late spring now, as we're getting toward the end of summer, I can't believe it. Um, but when you think about like the first eight, nine months here of 2025, um, has there been anything that, well, gosh, I'm sure there's many things, but what has surprised you the most this year that maybe has made you kind of readjust your thinking, if you will? Anything that stands out as like a big surprise for you this year? Not a lot really, Julia. Um we've everything that we sort of thought the way things looked a year ago is sort of the way it is or way it's happened and so that hasn't surprised if that I think the terrorists were different for us because we and everybody else have no way of knowing you know what that outcome is and so we didn't know it when they started it we didn't know at the beginning and now with the new judge with the new ruling we don't know where we are now uh Um, I'm sure there's a lot going on right there. But, uh, that's the one thing that's probably surpris one of the things surprised me on it is if you look at wholesalers and manufacturers, they've sort of split those higher costs between the two. And I've talked to a lot of people that that that rep these companies and they'll say, and I'm surprised they didn't push it down to the consumer as much as they did. And I always ask the question, do you think they'll continue to do that? And their answer is no. They will eventually hit the consumer. And so that's the place that's probably surprised me that it didn't show up more than it has. But it doesn't affect us too much. But um it's just that that would have been the only thing I think. Um this is a question I've been asking a lot of my guests lately. Um, what is that risk for you right now that's been keeping you up at night? It doesn't actually have to be keeping you up at night, but maybe the risk that's been on your mind quite a bit that you keep thinking about. Well, I always I think I I think people and I don't get me wrong, I'm I'm a I'm I'm super uh I'm a super America and super capitalist. everything that you want to talk about, but I think we have as a country have been duped into thinking we're this we've got we're better than we are militarily. We're not really the strongest. And if you look at uh just last week that summit between China and Russia, South Korea, I mean North Korea, those things start to tell you that you know what um we're in a situation now to where not everybody is our friend. In fact, a lot of people are not our friend. And what what makes me think about things is if you show up sometime and we misjudged a lot of that, you know, and it'll show up in our economy, then it'll show up in our, you know, our our markets as well. But nobody thinks about it. I think they think, well, we're still the greatest, so they can't hurt us. But, you know, it's it's different out there than it used to be. And what is that one thing that's making you optimistic? Well, I'm always optimistic for this reason and that is if when things get harder or people people I think in the US are very resilient and they find a way they find a way to to take to get opportunity out of adversity. I've seen it over and over and over again. So, I'm not I don't rule out the fact that Americans uh and especially a lot of young people I'm impressed with a lot of young people now. I see I know a lot of people uh come down on the millennials and Z's but you know in talking to them a lot I see you know they I think I think they're thinking right a lot of them are and I think you'll see more and more people where they'll use it as opportunity and it gives people that maybe come from nothing or whatever they get a chance resiliency is like the code word I think for Americans and um and it's still there so I'm I'm I'm optimistic about that. I love that. Ted Oakley, founder and managing partner of Oxbow Advisors. I always, always, always enjoy having you on the show. This audience certainly does, too. It's always a treat. Um, really appreciate you stopping by. Thank you so much for being so generous with your time, all of your knowledge, your wisdom, helping us all learn and get better. Thanks again and we look forward to having you on again soon. Okay, Julia. Thanks.