Molecule Contagion with Jeff Currie

0:00Welcome to the HC commodities podcast, a podcast dedicated to the commodities sector and the people within it. I'm your host Paul Chapman. This podcast is produced by HC Group, a global search firm dedicated to the commodities sector. Jeff Curry, Carlisle, welcome back to the show for an emergency pod as we're terming them. To do two things really, one is to get your current take on what's going on in the market. And then secondly, to start that process, which is very hard at these early stages, but to divine what do you think the medium and long term impacts of this are, particularly in the context of our last conversation about the great repricing a roll over from infinitely scalable tech into it back into assets, a recognition that perhaps we've under invested in molecules in general and as your recent piece on LinkedIn said, they can't be printed.

1:03So lots to discuss, but can we just start with the current events and I'd love to kind of know what what are the key questions you're looking to get answered to inform your view on what's going on. Well, I think there's there's two questions. One is how quickly and how much and for whom can you restore the flows in the Straits tomb. And I think that the misperception is that the Straits are closed. They're not closed. Chinese barrels are flowing through them right now. So it's open to Chinese and now Indian barrels. And so the China block continues to be supplied, the US block doesn't. And if we use what we learned in the Red Sea as an example, you never did see the flows fully restored after two years of military action by the US against the hoodies.

2:05They could not reopen the Red Sea to Western traffic. And if that were the case, you're talking about, you know, a five to 10 million barrel per day disruption for a very long period of time. And I think, you know, given the magnitude that you would find ways to get around it, you know, SPR is a drop in the bucket. It's not going to do anything. And so when we look at this, that's the first question you're going to have to ask. I don't want to get in the speculation game on this. All I know, you've already done so much damage. And that's what's not being priced. If we think about the ability of the US to open this, you know, again, they were unable to open it against the hoodies, but just I just want to make you know, so people have a visual in this. This is going up the other side of the straits got hills, caves. It's a really treacherous, arduous task to be able to open this from a military perspective.

3:09It's not something you can bomb your way out of because ultimately you would end up bombing the straits. Somebody sinks a ship. Somebody mines it. It's a really delicate situation. So let's just look beyond that. And let's just ask, how is the market's ability to deal with this? And the answer is you're getting already at by the time you're in at this month of March, you're beginning to run on fumes. If you just look at all the glut that was out there, it was you know, last year, I say you've built up relative to the lows of the 2019 through 2026 cycles. You've built out somewhere close to around 800 million barrels. I'm going to give that's what, you know, the biggest of the oil glut people put it at. You will have dusted that down to the 2022 lows in another week. And if you this goes on for another month, you're down to minimum operating levels. So by the end of April, mid April, you're in a really serious precarious situation unless

4:13something changes. And I think even if you had a ceasefire tomorrow, you've shut in wells all over the, all over the Gulf and the damages substantial. You have refineries, you know, gas fields, you know, this morning about the powers field being hit. And I think we're up to 108 right now because the Iranians are saying gloves are off. And the fact that we're not at 108 and not 200 is mind boggling. And I think the other important point to watch that I'm focused on is the fiscal markets have disconnected from the financial markets. You know, Oman's traded yesterday, 173. And even with the potential for gloves off, you're only at 108 on Brent right now. So there's a huge disconnect. And the, I think the other issue is this thing is now spreading the, I like to call it molecular contagion. And it's moving around the world. It's gone intercontinental. And so those are the key things I'm watching.

5:15So I want to, you know, summarize it. What is the status of the Straits? I'm not a military tactician. I just go, they failed in with the hoodies in the Red Sea. Why do you think they're going to be successful here? The Iranians are just playing the exact same playbook that the hoodies played over the past two years. Then the second issue is the question of your inventory coverage. The best you're likely to do is make it to the end of April with the most, you know, bearish of the oil supply glut scenarios out there more likely than not. You're running into problems already in key product markets, which brings me to the third issue, which is asking, when are you going to see a convergence between the physical and the financial markets? And I think we're within, you know, days, you know, weeks of that convergence beginning to happen. The bit I find quite hard to understand divine, as you say, is kind of that how much actual damage has been done to critical infrastructure that will take a long time to fix, right?

6:17Because every day it emerges that that's more significant than we think, which plays into this. Why is there this disconnect between the financial markets and the physical? Is that just how things work? And you've got a lot of different types of money on the financial side, maybe even the US Treasury. But is that a, is that just complacency or what's going on there in your mind? You know, I think it's denial by investors because they, it's so bad they can't believe that could happen. But I think the ability to avoid it happening, I think, is relatively low. And by the way, we see this at every crisis, think about COVID. It was, you know, it was January of 2020. And I think you and I actually think you and I did a podcast back then. January of 2020, in China's blowing up, very clear, the second largest economy in the world is blowing up. And it took three, two and a half months.

7:17So it was by almost 12, 10 weeks that before actually you had that market reaction in the S&D 500 actually was, yeah, by March, it was by March 23rd, they were injecting QE in the system. I remember that day very vividly, but I actually, let's, let's talk about COVID because it's a great starting point because the size of this shock is about the same size as the COVID shock, but it's a supply shock as opposed to a demand shock. Think about that. The demand shock, the initial big one was 20 million barrels per day. This one is a 20 million barrel per day supply shock, they're about the same size. There are a mirror image of one another. And I like to remind everybody, once you exhausted storage capacity, which is the ability to lend barrels into the future, you had to bring demand down in line with, or supply down in line with demand. So you had, it was the opposite problem. Demand was low, supply was high, and you had to crush supply down in line with demand.

8:19And how did you accomplish that? A minus $37 barrel price print. Then we go to the other side. Currently, it's a, now you have a 20 million barrel per day supply shock and demand is above supply. Now you need to bring demand down in line with supply once you run out of inventory. So you know, you think about how do you borrow barrels from the future? It's through inventory, just like in the COVID, you were lending barrels to the future. Here are your borrowing barrels. And once you exhaust your borrowing capacity, it's game over. You have to bring demand down in line with supply. It's just a physical reality. You cannot print molecules. And I like to, you know, the point I say it is, yes, you can print money, you can print bonds, but molecules you can't. No banks have unlimited liquidity in the oil market. Once your, your story just gone, that's it. You're done with your liquidity. It's game over. And I don't think people understand that there is no policy fix here that can deal with

9:20that problem other than getting that supply back online and that's going to take a long time. Yeah. What does that convergence look like in your mind? I mean, there is obviously that, I guess that molecule contagion, you know, it could be quite an accelerated force to price across the board, right? I think we're in the process of pricing it right now. And I think that, you know, the, the, and for, you know, I think there's a belief in the United States that they're immune to this because of energy dominance. That is true at the cash level. At the income level in the United States, they produce about the same they consume. The reality is that the wealth level, they're far from immune to this at the wealth level. They're very much exposed because the United States equity market is not a local US market. It is a global market for the rest of the world. All those mag seven companies have earnings that come out of Europe, Asia and the rest of the world. And once you see those other parts of the world get hit, it's going to have a significant

10:24impact on the earnings of those companies. And it'll have, so you can think about the fact of the matter is, yes, the US as a domestic economy is insulated by energy dominance, but at the wealth level, it's really exposed. It's not even at the energy dominance level. I mean, it isn't the natural gas, which in some ways is the biggest story than oil. But actually, you know, still the same again, it's connected to an oil, a global oil market unless it shuts itself off from that, which you can't do because it obviously needs to buy heavy crews to fill its refinder as well than the light crews that the energy dominance is underpinned on. That complacency, that sort of denial as you described it, which seems to be going on both in the S&P 500, which really hasn't skipped a beat whatsoever. Alongside actually oil prices as well, yes, they've gone up by a significant amount, but nowhere near as you point to the level that would just cause real demand destruction. And that's before you get to that molecule contagion, as you spoke about, in your mind,

11:29can you just give us some sense of the magnitude that this could be? And I know it is tied to duration, but even at this point, we're three weeks in, critical infrastructure has been hit, the northern shore of the straighters, as you say, pop up by caves and scrub and all you need is one short range to do the damage. It just seems that if the magnitude is COVID, then we are talking 23% drops in the S&P 500, and as you say, the equivalent to the other side of minus $37 a barrel, which looks more like that 200 level. Yeah, I don't want to get into the speculations now how high this thing can go, but the reality is this is going to be unlike anything you have ever seen before, just like COVID was unlike anything you had seen before. The impact on global supply chains is going to be significant, and it's going to be much more painful this way than it's more painful to have supply come down, than demand come

12:30down. Why? It's because you're shutting in production when demand comes down on supply, you just cap a well. This on the other hand was supply pulling demand out of the system. Think about all of the cascading effects through global supply chains, plastics, fertilizers, jet fuel, trucking, the list goes on and on, and they're thinking, oh, it's going to be in Thailand or Philippines, and then you impact everything that the Philippines produce that goes into the United States. This is going to be unlike anything we've ever witnessed. Yeah. And by the way, this seems to me, I always like to say if the story is not so simple that Eddie Murphy can tell it on trading places that it's probably not right. By the way, I'm pretty sure Eddie Murphy could give you the full chain reaction about what's going on here, which is why I'm utterly baffled that the global equity markets are choosing to ignore this, because it is something that is going to be, and the common thing is

13:34like we're more immune today is going to be nothing like the seventies. Actually you're more exposed today than you were in the seventies because the only thing you use you oil for is critical demand. You don't, it's like think about the seventies. Oh, I could switch out of my big GTO into a toyota or dots, and that's what created the Japanese auto market. I can start to walk, I can take the train, I can switch a generator out of diesel into gas. All those options available to me, I don't have those options this time around. This time around, it's petrochemicals, it's fertilizers, you know, the impact is going to be significant. Think agriculture probably provides that one of the best hedges to what's going on right now because it's the one that has not yet moved. You've seen the metal space move, you've seen the energy space now move. The one that has remain dormant is agriculture, and the impact here is probably very significant.

14:34One you have the channel through fertilizers, but don't forget through the LPGs, you end up impacting synthetic fibers, more demand for cotton right when you have the planting season for soybeans and corn, and you're likely to see a rotation towards something that's more competes with the oil space, and then you have the impact through ethanol, sugar, corn, and the rest of it, so I view that the space that is the least impacted right now with the most upside, it's a catch-up trade would be agriculture. I think we've established the magnitude, you certainly scared the heck out of me, and I didn't know how to short sell, so I'm stuck where I am and all the rest of it, but I want to move on to some of the medium to longer term impacts of this, and I know this is hard to divide, but let's start with Europe, and more broadly this de-globalization that you and I have spoken of over time, which is going on, and the blockatization into

15:37kind of a China block, a US block, and so forth, is it too far fetched to say, at some point Europe is staring at not buying diesel from India, making this very prosaic, but it's off the back of the podcast with the Kimite yesterday, because it's sanctioned and so forth, and at the same time Iran is saying, hey look, we'll let your ships through, if you disavow this operation and don't allow support, there is a scenario where actually this accelerates the isolation of the US as a rogue actor in the peace of minds of the rest of the world, and further pushes Europe into China's hands, I know that's quite a big thing, but what do you sit on that? Oh, I think we've already witnessed that with gold. Gold was pricing this de-dollarization as fears of having exposure to the US through sanctions, they've moved out a dollar-denominated

16:40products and moved into things like gold. So we've already witnessed this rotation away from the US, and towards the unidentified social bank, or it's more than the people own gold, because they actually determine that crypto actually does leave a footprint as it is controlled by the governments, that ultimately gold is that best hedge against Fiat currents, another way to say it, of losing control your own, actually what you think about the term, they don't want to lose control of their own destiny, so they buy gold, buy not having dollar exposure. You can think about what's going on in energy is that they may not turn to China, whether they're going to try to do it on themselves, and that's really brings in the whole idea of clean energy, and I don't think, we call it clean tech, pre-2015 it was called secure tech probably, because ultimately renewables in nuclear were

17:43born out of the 1973 oil and bargo. They, you look at energy transition, energy transition did not focus on the environment, it focused on secure energy, in the Maslow sense, build a secure base, and then pursue the higher needs, what if you know, Maslow's high arcadines were fear, greed, and compassion, and you have to control the fear first, and building a secure base is the critical one, and at the foundation has to be secure energy. In Europe in particular is very exposed right now, I think you saw Italy restarting nuclear power plants, and you have seen, you know, I'd likely you're going to see a focus on the North Sea as not being a sunset industry, but a energy security industry, and I think that that's, you know, so they'll try their hardest not to be sucked into the Petro one world,

18:46but I think that the immediate response is what you saw when in gold was take your own destiny into your own hands by owning gold and not being exposed to anybody's central bank, and what we're seeing right now, people are going to try to do it, or countries and states are going to try to do it with energy as well. Yeah, I mean, I definitely think we, in fact, I'll call things over at Hyperion Search for writing a piece on this is the, it's certainly going to accelerate the energy transition for non-hydrocarbon producing nations, or indeed non-hydrocarbon processing nations, but instead of it being about the green attributes, it is going to be about that security piece. Yeah, that all ties back to the, you know, at the same time you're strengthening your China, and it's fascinating, I want to get you to take on this as well, and let's do it now. Why is China not using its strategic petroleum reserve? Is that about the scariest thing we could hear on Earth? But they have built up a lot of inventory that allows them to ride this out, but

19:47let's not forget you take Iran in Russia and in Venezuela, we did this analysis, actually, I think the last time we did this is that China is pretty close to being energy independent when you take in its all of its satellites. It's dominant on metals and nearly energy independent when you bring in Russia, Iran, Venezuela, countries in Africa, in which they're very close to. So they're looking at this, they can ride it out. And I think there's a lack of recognition that China is in a position to ride this out. And in the, in the end, they produce all of the clean tech. It's like, I look at what happened with, with COVID, who was the biggest benefactor of it? It was China. I don't want to get a conspiracy theories or they didn't cause it because they benefited. When you look at a wedge between Chinese manufacturing in US Europe, did you know that wedge since COVID has grown by 50%, 50% the manufacturing capabilities of China. Now, what did they build? They

20:50built all that call it clean tech for lack of better word, renewables, batteries, EVs. And with this type of oil shock, wow, who has all the goods that are perfect to meet the lack of oil. So I look at China, they're in a very good position right here. Of course, you look at, okay, they're ability to ride this out when Trump asks them to bring their warships to deal with this. Everybody assumes they're the one that's most exposed. They are the most exposed, but let's not forget, they're getting their oil right now. They're not. They don't have a problem. Why would they use their battleships to open it? They don't have a problem. The West has a problem. And I think it would actually then begs the question, is the US must know that? Then why did they do that? I would guess the surmise, one of the reasons could potentially be they're likely to impose

21:51export bands. You will see what happens in the coming days, but there is a point that just not widely recognized out there is China is getting their oil not at the same level. They were used to be taken about 2.5 million barrels per day out of the straight. Now they're taken around 1.25 so about a half. The energy and resources sector is experiencing unprecedented change. To help navigate this change and capture its opportunities, HC Group launched Enco Insights, a global advisory network dedicated to the sector, providing senior advisors and subject matter experts to investment and infrastructure funds, law firms and corporates. Enco Insights leverages HC Groups 20 years of connections in energy and commodities to give clients the expertise they need when the stakes are high and insight matters. Learn more at Enco Insights.com. Yeah, and then we'll be competing for those Canadian barrels and all the rest. So again,

22:54this leads back to the globalisation a bit in that molecule contagion you're talking of, which is we could suddenly see a proliferation of export bands of products in Asia. But yeah, what happens when the US, because I mean the one thing we know is the only thing the US administration cares about is domestic politics at this point with the midterms and shutting in oil, shutting in natural gas is a solution to rampant inflation and suddenly in the words of Pat Bondi, the down not being at 50,000. Yeah, but I'd be very cautious about shutting the exports because the channel, US gasoline prices off Brent. I mean Brent will just explode under that scenario. And then you got to think about the ramifications to the US if they were to employ I see the export band because it would not be viewed favorably that they go in a attack

23:57Iran and the straits get shut, they go home and do export bands. It's not a good look. This is sort of the second order ramifications of this is how does the commodity markets maintain and survive what could be a huge period of government intervention and disruption and also lowering efficiency as people sort of build up stocks and all the rest of it, right? I mean, that's probably not what we're thinking of right now. But yeah, definitely think you know, banning exports by the US would be catastrophic. But staying on that rather pessimistic sort of US decline aspect. This presumably also accelerates that narrative twofold. One is you have dollar dominance because you have military dominance. If it's perceived that that military dominance is contingent on ally support is actually in a world of drones and low cost equipment, you know, is big capital assets no longer pertain

25:01to supporting it. You know, and also at the same time also you're trying to strengthen, trying to say, oh, you know, you can settle your barrels in new one and so forth. Does this accelerate that the de-dollarization is this accelerate, I mean, US perceived decline? I mean, again, it doesn't seem particularly positive. And you end up in an economy where the US is better on hydrocarbons, which are over time devalued. And as you, as I've heard you talk about in the past, you know, China and some extent Europe go to this new electron economy, where the the marginal cost of power is zero. I mean, it could, this could be seen in historical terms as quite a pivot moment or a sharpening of ongoing trends and an accelerant ongoing trends. But by the way, on that point in the piece we put out called a crude awakening, we have a chart in there and shows the asset rotations over time between asset heavy and asset light. They always occur around these big geopolitical events. Let's go back to the end of the

26:04dot-com boom in the beginning of the China boom. What was the pivot point? September 11th. And when we think about what occurred there is we saw the attack on the towers. That was September by September 13th and 17th. The Americans were already negotiating a deal with China to admit them into the WTO in exchange for a vote in the UN Security Council to let the US use force in the Middle East. Back then, the Americans used to ask for permission so they don't do now. But I think the key point is there was a chain reaction. Now, I'm not going to say that was the only reason China was dead on its way to become a member of WTO, but it accelerated it. It all occurred and you just swung and you just look at the rotation that occurred right there. It's just almost right on January 1st, 2002. You'll left the dot-com world in the telecom world which would be like the AI and data center world of today in boom you went into the commodity world

27:06and you never look back. And people say, oh, you know, AI is so much more important than energy and oil. Look, you know, they don't even care about the war. Let's go back to a very important point. AI dominance is essentially energy dominance. It's what you can't have one without the other. And when we look at this disruption, your ability to dominate in AI, dominate in energy, are going to be very much tied to one another. And ultimately, as you and I discussed in our in our last session, is that having that ability to have a zero marginal cost fully electric energy system with EVs, where your marginal cost is zero because it's all nuclear. It is renewables, it's batteries, and there's no marginal cost. Your ability to dominate in AI will be unlike

28:06any other entity on the planet earth. I mean, it really does. It's fascinating in a way, isn't it, because we've had sort of two years of relatively low volatility, relatively, right? And there's data out there that says the wallet within the commodity trading sector has gone from sort of 30 billion averaging last year into almost 100 in the early part of this decade and then kind of has settled back down a bit, run it until this point, but has settled back down at kind of triple the level of the last decade. And today, you just sit there and you think, you know, this roll over into real assets, the recognition that even in the energy transition, you can't print them and look at them and the zanthia, whatever it might be that you need, right? Certainly, you can't print the molecules and they are going to continue to be needed. The roll into real assets is going to be accelerated by this. And at the same time, the commodity volatility story is just going to presumably in that world of decoupling,

29:08declobalization of not trusting supply chains and not trusting governments to honor the rules of the ability to pull the rug on exports at any given time. I mean, that case for a commodity trading platform that has a broad footprint in the physical world is pretty strong, it was stronger today than it was two months ago and it was already pretty strong two months ago. Yeah. And I think the, you know, I get your point is this, this was already underway. By the way, in 2001 and 2002, you're well on your way at the revenge of the old economy before September 11, September 11, it was the accelerant that just swung you really hard the other direction. Like I think that this one's going to be. And, you know, there's still a belief that this thing finished itself in five days, six days, like all the banks are still there. We're going back to 60, 65. No, you saw the load prints. You're not going back to 60, 65. We're in a different world. And, you know, I think one thing that made this very clear last week was we saw

30:12a failed bond auction for the German Booms. And it wasn't because of lack of liquidities because they couldn't price it low enough because the inflation expectations were so high. What was that bond going to do? It was going to build out energy infrastructure, defense and everything like that. The cost of building all this stuff just went up tremendously. And everybody's going to be doing it at the exact same time. And I just, you know, there's enough of signals out there that this is real. But you look at the market, you know, even today, we're up on the equity market. I think we were down this morning and oil actually, I think when the last hour we're back up. But the point being, it still has not appreciated, priced in or looked at any of these signals that this is the important. It still thinks AI is dominant. AI is only dominant if you can turn on the data centers and the computers. If you can't turn them on or you don't have the copper to be able to create the grid and the

31:15transformers that turn it on, it's meaningless. I think that point is the one that's lost here. Again, it comes back to this, the fascinating sort of overhang of complacency, denial, optimism. And as you say, kind of the language out there, which of course, I know we all use eye views of duration matters. But duration really only mattered in day one to five. Right? It seems now we're at a point whether it stops tomorrow or stops in a month. There's no, there's no outcome barring a total Iranian immediate surrender that does anything to get prices stabilized. And even then they're going to be stabilized at a higher level with all that infrastructure damage. And that just doesn't seem a possibility out there. And again, even if so, I want to talk about we aren't going back to a world where people aren't pricing in a significant risk premiums come away. No, no, we're not. Yeah, just without I don't see how it's possible. And just think about the cost to rebuild the Gulf. I mean, if the power field really was just struck just now,

32:21I think these are large, extremely globally critical to the economic environment of the entire world. And we are hitting these assets. It's going to it's going to be really expensive to dig ourselves out of this. You know, I don't know if it's true or not. But I think that that goes to that point that the and I really think about about why is I think there's a belief deep down this cannot really be happening. You know, I look at my biggest mistake in 2000 was I didn't sell enough of my my my shares. But I think the mistake the thing that everybody believes in the equity market is that it always comes back. I'm not worried about it because it had I had, you know, I was down 27% and 22 and the equity market, but by 23, it was up. And even in, you

33:21know, COVID in 2020, I was down a lot. But the reality is I was up by by the end of 2020. And there's not one person out there other than you and I, Paul, that will tell you that that's not going to happen again. I just I think it'll be up. But this time, it's going to be the big producers of heavy assets, Halo. By the way, I love that term Halo, heavy asset low obsolescence by Halo. And so I think that we're in that and you want to own Halo. By the way, the 2000s were very much that way. The equity market never saw the highs of 2000 for another almost decade. And that's probably what we're talking about this time around. Bye. Yeah, I'm not an equity guy. I don't want to stare at everybody. I'm just telling you that happened. I don't know. I think it took a decade for for the equity market to get back to the levels it was in the 2000s, particularly the NASDAQ. I think it may have been 15 years.

34:23There's been a couple of lost decades in there. And then as you say, everyone's recent experiences the last 15 years where it's just gone up and almost exponentially, certainly in the US versus Europe. That could change. And I mean, I think there's a chance that when we look back at this, it will be Joe Kent's resignation yesterday. The top counter-terrorism official for the Trump administration might be that pivot point, the moment at which a deep insider said, we shouldn't have done this. And there is no plan. And I can't stand by while we do this. I mean, I think that might come around as one of the more profound moments in US history. Let's hope it's not the case, but it does seem like that was the key pivot moment. Yeah. Kind of. It was kind of like the WMDs in under the under the Bush administration. It took a look. By the way, you look at when that oil, the WMD thing all occurred around 2003 and by that point is that transition by 0405,

35:25the transition into old economy heavy assets. It was well underway at that point. And everybody wants to blame that on China. China was part of the story, accelerated it in 04. But again, just like we're saying today, that story was well underway going in back to 99 2000, just like it was well underway before this event just occurred. Yeah. And yeah, the other point too is I would argue, I still argue this stuff started in 2020 when you and I first did one of these podcasts talking about the new super cycle. You look at metals. It's just a straight line. You look at, you know, the softs. They were a straight line over there. Life cattle was a straight line from there. You know, copper had a little wobble. I am resisting the urge to say, have you felt like telling people I told you so? It's just you don't want to be short ball in these markets. I think it's that everybody got lulled into the short ball environment. And it's time to be long ball. And commodities are the best way to express a long ball macro environment.

36:29Yeah. Yeah. And it's fascinating to see even sort of the the early stocks that have been hit have been sort of those that have been kind of around the critical minerals narrative. You know, and the ultimate, well, why is that? Well, in part because yes, the critical minerals are needed. But these things have 10 year lead times. And people are realizing that it's to use one of your phrases. It's molecules today, right? You can't print these things. And you need to be need to be in the hard assets that can get produced today. They're the halo. I don't know. I mean, I know Jeff and people should watch you've been on YouTube on Bloomberg and people should go watch those. Is there anything as we like, what are you looking at over the next five days apart from potentially the S&P 500 collapsing and oil going to 200? But are there any sort of key things that you and sort of deep thinkers on this are are looking at? Is there other data coming out in the next couple of weeks that, you know, what what do you think will be a potential pivot point going forwards or what information out there is a key gate that you're

37:31like, actually, that's going to confirm this story. Yeah, I think that the key thing to watch here is the convergence between paper and physical just watch the physical markets. The mallet's cool contagion is occurring at the physical level, regardless of what's happening at the paper level. So the question you have to ask is when do you see the paper markets converge to the physical? And I get up every morning, I look at where where are plants prices trading around the world? And you know, if I see any weakness there, that would say, hey, it's some stuff's easy there, but all I've seen in the last three weeks, plants prices get worse and worse so the question you then have to ask is when do you see the the big paper benchmarks start to converge where the physical markets are? And I think that that's when you start to take you create an acceptance around what is happening. I want to go back to talking to somebody yesterday, a really smart individual. He says he's shorted in January all the equity markets on

38:37what he saw in China and in COVID. He says he got taken out, stopped out of his positions, and it wasn't until February, it really began to work. Here, I think it'll be a quicker timeline given the fact that there's enough evidence of this moving through global supply chains. And also, we haven't even started the the ramifications of like in the US, the BP refinery, I think it's the widening one, strikes because the workers are going, hey, we see this. So the contagion is well beyond the molecules. It's contagion. You've got military contagion, labor contagion, molecule contagion. It's starting to happen everywhere you look. And so I look at that, the physical market is the real benchmark here, watch that. And I think even if you open up the straight tomorrow, the amount of supply that is shut in, the damage to the infrastructure, the misalignment of ships all over the world. You've got, in fact, there are the big headlines

39:41today as cargo ships dumping cargo in safe places using a 19th century law. The unwind this is just going to be a painstakingly difficult. And it's like an air pocket in global supply chains, and it's coming your direction. And it's getting in the air pocket is getting bigger, in bigger, in bigger. And so they think the key thing is watch the physical markets near you. And as it starts to come into those markets, you've got to be hedge yourself and and understand the risks that are involved. So I think the the key conclusion in there is, it's an air pocket moving through the global supply chain. And it's having implications that are far away, away from US and Europe right now. It's in Thailand, it's in Philippines, New Zealand, Air Australia. It's in the Indian Ocean with the Oman benchmark, eventually, and it's showing up to you. It's coming to you. It's coming to you. It's one final bit for where we let you go.

40:45And I really appreciate the time. The other thing that's kind of bubbling on in the background, and we've heard a couple of shots, obviously, you know, a couple of well-known funds, limiting redemptions, and his private credit, which has been a huge explosion as an asset class, essentially banks offloading what they wanted to do into other firms, but still suffering the same risks. That to me as well, private credit presumably is going to seize up in a high vol world. Is that a sort of gasoline on the fire of this? Where does that sit in your mind? And what are you looking at from that perspective? I mean, it's one of the many short, volatile trades out there, as you point out. Actually, I think it's less dangerous than anything we see before because the money is sticky. You don't get a bank run like you did in 08. So it's its own problem and it's own in its own category. That's a financial issue. What we're dealing with is a physical issue.

41:45And this is supply chains. This is inflationary. In fact, it's all of the above. And so, you know, that's out there, but I've never was a buyer that this thing is systemic. Because, remember, it's long-term capital that has it's not the guy with his deposit chase in Wells Fargo that does a run like in or created the fear of a run in 2008 that caused the system to seize up. This one's a very different dynamic and I don't think has any of those same type of properties. I'm not going to get into a good or bad of it, but I think the key point here is focus on what's happening in the physical markets because that's the one I think that is more concerning. Yeah. One of the world is stuck in in Maslow, then a deep fear and some greed if I can go and buy some halo stocks. But I think you've set us up with a very clearly Jeff. And, you know, I was always really appreciate your time, but I think I would agree with you that the

42:47world is not quite priced all this in, if at all, and actually irrespective of what happens now in the state of whole moves, the diet has been cast and, you know, and the ramifications are on the move. Exactly. Exactly. Thank you for listening. To find out more about HC Group, our global offices, and our expertise in search within the commodity sector, please visit www.hcgroup.global.