How to Profit in a Crash or a Boom ft. Louis-Vincent Gave & Harris Kupperman

26:29Um, and I particularly like energy for another reason is that I tend to believe that energy today is the ultimate anti-fragile asset. For the past 35 years, maybe you liked Microsoft or Alibaba or LVMH. You bought the stocks you wanted that you liked. And to reduce the volatility of your portfolio, you bought US Treasuries. And you knew that if there was an exogenous shock, if some planes flew into the World Trade Center, or if a virus broke out, something that you just couldn't foresee that maybe your stocks would get hit, but your bonds would save the day. And that worked great for 35 years.

27:09And the reality is it stopped working with COVID. It hasn't now worked for two and a half years. OECD government bonds have been dogs with fleas. When equity prices go down, actually bonds go down more. You saw this again in August. In August, S &P was down, bonds were down more. What was up? Again, energy. Just like most of 2022 where bonds were down, equities were down, energy was up. So I think we're moving into a world where energy is the new anti-fragile asset class. It's the new thing that actually diversifies your portfolio. Meanwhile, nobody owns it. Nobody owns it because it's a very small part of benchmarks, because of ESG constraints, because of a terrible decade, basically between 2013 and 2021 or eight years.

27:55Lots of reasons to not own it. but what's going to happen, I think, is the more energy remains an anti-fragile asset class, and again, it was again in August, the more so much of the world's money now is managed by computers that it's going to start popping up in all sorts of quant models where it's like, oh, energy actually is a good diversifier, and you're going to start seeing the flows. And right now, all the guys that are long energy are guys like Kapi, myself, guys who are almost religious about it. We're not in there for the next 20%. We're in there for the next 300%. We're not selling because it's up like, it's going to be up 10 or 20.

28:37So I could see a lot of marginal buyers coming in. Meanwhile, the companies, it's not like the companies themselves are going to issue paper because they're not doing any capital spending. If anything, they're buying back their own shares. So yeah, I'm a big fan of energy for the foreseeable future. Cubby, over to you. What's your thesis on energy more broadly? And then we'll talk a little bit about the case for uranium. Well, I mean, in terms of energy, like the thing we do and the thing I do is I invest in sectors that have been starved of capital for long periods of time that have, you know, destroyed careers that people don't want to talk about anymore because they've just gone straight down for a decade.

29:15You know, I don't buy it when it's down 30 percent. You know, I want something that's been down 30 percent every year for like 10 years. And then it just kind of makes this bottom, you know, it makes a saucer looking thing. and, you know, it just starts going up again. And I've been doing the same thing for 25 years and it mostly works. And energy has just been starved of capital. I mean, look at how much capital was spent, you know, going into 2014. And then it just falls off a cliff. And like, think of the inflation, you know, we're not back anywhere near where we were the first half of last decade in terms of spending, but oilfield services, everything costs twice as much.

29:52So in terms of, you know, actual barrels that's going to produce the amount of spending we're doing, it's not even enough to run in place, really. I mean, production isn't really growing. And, you know, they're spending the money on much harder assets while, you know, the low cost, easy stuff is slowly dying out. And so, no, I think the price of energy is going to go up. You know, I think demand is going to keep growing. You have six billion people that want the same standard of living that I have. And, you know, a lot of these people don't have refrigerators and microwaves and cars and air conditioning.

30:26They're going to get all this stuff. I believe in human progress. And I think energy consumption is going to keep going up. And I don't know where it all comes from because there's no spending on it, like none. I mean, they're building some windmills offshore and some solar plants, but that doesn't do anything. It's a rounding error. That stuff all consumes energy up front anyway. It's just going to make the problem worse. And there's no EROI to it anyway. No, I just think energy is going to go up. I mean, my view of how to play it is owning the energy services companies. You know, I own offshore energy.

30:58I'm in Oslo right now to go meet with some energy companies. There's an energy conference this week. But I'm there. I mean, I think these energy services companies, a lot of this equipment in offshore energy, it trades at 10 cents on the dollar of replacement cost. I mean, historically, this stuff trades to 1.5 at two times replacement cost. We have a long way to go. And these things are already up many times. And, you know, I think they trade at low single-digit cash flow multiples. And, you know, in a world starved of, you know, cash, like I think that's going to be a great place to be. And they don't have, you know, net debt.

31:32They have net cash balance sheets. Most of these things, they're anti-fragile in the same way Louis talks about. And, you know, it's going to be volatile. But, you know, Louis is right. I'm not playing for the next 20%. And if the next 20 % is up or down, I don't really care. You know, and these things get overbought and oversold and everyone gets tossed off the descent. You'd be amazed at how many people have bought these things and sold and bought them and sold and made no money while they keep going up. You have to just have a view and ride. And, you know, the price of oil, you know, it's a crazy thing because it's so political and it's meant to destroy traders.

32:07You know, every time oil goes up, we do the Iran sanctions rumor again and oil drops three dollars. Like, how do you trade that? It just gaps down$3. They get some third-tier newspaper to say we're doing a rent sanction release. Or we make friends with Venezuela. How do you trade this product? You can't trade this product. You need to just buy it and stay with it. I mean, look, you get this roll yield now. If you own Brent Oil, it pays you 1.5 % a month to own it. Why wouldn't you own that? Why would you own T-bills at foreign change when you're going to own Brent Oil and in three months you're ahead?

32:41You know, like there's things you could do, which is why I think oil keeps going up and capital keeps getting allocated and reallocated. Cuppie, that was a brilliant 50 ,000 foot description of this market. I mean, is there anything on Earth right now as a sector where the underlying supply and demand seem more detached from reality and the unusual, almost quasi-religious sermons we get about this space? I mean, it just seems like it's just totally out of whack. It's totally out of whack. I mean, look, day rates on an offshore drill rig, you know, a Gen 7 offshore drill rig, it's 500 ,000 a day.

33:16Last cycle, it peaked at 700, and it bottomed at 100 ,000. And everyone went bankrupt. Every single company went bankrupt, except Transocean, which probably wish they did. And, you know, we're back at 500 ,000. These guys are finally making money for the first time in a decade. But what are they doing with the money? They're all doing buybacks and dividends. They're not building any more equipment. I don't think they ever build more equipment in their lifetime. These things last go around where 700 million, 800 million each. I think it's a billion and a quarter if you wanted to build one of these.

33:46If you call a Korean shipyard, they're going to laugh at you because they all lost so much money last time. They're going to want 75 percent down. And then it's four years to build it. But no one in Korea has built one of these things in a decade. They don't even know how. And even if they wanted to, all their births are full of LNG. You know, this is one of those things where you could look at it. There's no free vessels. It's pretty obvious unless you think the price of oil goes back into the 50s. And no one can produce oil in the 50s. That's what we already learned. The Shell guys can't. I mean, the Saudis barely can.

34:15So I don't think it's going to go that other direction. And I think the sector is just totally out of whack. Meanwhile, look at imports from India. I mean, look, China is supposed to be blowing up. And I'd love to talk about that next. But look at the import numbers in China during a blow up. All-time highs. Huh? All-time highs. China's oil imports are at all-time highs. Right, right. So, I mean, everyone's growing. Look, Europe oil numbers are flat-ish, and they're having a depression. The U.S. is up year over year, and we're supposed to be having a recession right now, or, you know, their promise gets a recession.

34:56Where is the demand destruction going to be? And then where does the supply come from? Yeah, I was just going to ask that as well. Where do you see this in terms of supply and demand? For all the reasons Cuppie highlighted, the supply isn't coming on. And so prices, in spite of all the bad news that's out there, prices keep on grinding higher. And that's why I remain extremely bullish energy. I remain extremely bullish emerging markets. places like Latin America that have started a genuine boom. This is the first cycle in my career where places like Uruguay, Brazil, Chile all get to cut interest rates while the Fed is still tightening.

35:42It's because they're getting rewarded for their non-crazy COVID policies. They didn't go down the well of MMT. They didn't go down the well of sending free money to people. and they're getting rewarded for it now. We have a bull market in Latin America. We have a bull market in the Middle East. We have a bull market in Southeast Asia. We have a bull market in India. And to Kappi's point, as all these people get richer in these environments, they buy motorcycles, they buy cars. One of the biggest development nobody talks about, everybody talks about how China's imploding. Nobody talks about how from nowhere five years ago, China's now the biggest car exporter in the world.

36:27It overtook Germany last year. It's overtaken Japan and Korea this year. And how has it done that? It's done that by selling cars that are less than$10 ,000. Some of them are electric. You can buy the BYD Seagull as$11 ,000. But most of the cars China sells abroad, it sells to emerging markets. It sells to Indonesia, to India, to Chile, to Mexico, to wherever else. And these cars are not electric cars. They're just gasoline cars. And so now what's happening is people in India and in Indonesia all of a sudden can afford cars because they're much cheaper than they used to be. But that makes extra fuel demand.

37:10And it's not like we've spent a ton of money in the past 10 years building the refineries we need, building new oil wells, building the pipelines. Now, all that is coming. And you're going to see an infrastructure spending boom across emerging market of epic proportions. Most people always tell me nobody can replicate what China did. And it's true. Between 2003 and 2013, China poured more concrete than the U.S. did in the 20th century. And that's when the US was building the interstate highway system in New York and Chicago, all sorts of things. China did more than that in 10 years. It was nuts.

37:47But if you draw an axis that goes from Istanbul to Jakarta, that's 3.6 billion people, so three times the Chinese population. If that axis does a third of the Chinese capital spending, then we have a commodity spending boom of epic proportions again. And right now, India alone is doing roughly the same amount that China did from 2003 to 2007. Over the next five years, India will do about that much. And that's just India. You can add all these other countries. So we're looking at an infrastructure spending boom of epic proportions across many emerging markets. And the reason this emerging market spending boom is starting is that all these countries now have access to commodities in their own currency.

38:34It's a game changer. If you're India, you always had big current account deficits, big budget deficits. So you were always constrained in your ability to project yourself. And then here comes Russia and says, hey, I'll sell you coal. I'll sell you copper. I'll sell you oil. I'll do a five-year contract in rupees. Now, all of a sudden, you have no constraint on building roads, building airports, building power plants. So you let rip. And that's what you're seeing in Indonesia. That's what you're seeing in Thailand. That's what you're seeing everywhere. It's the fact that you can now get commodities in your own currency is a game changer for any emerging markets.

39:13It removes all constraints to growth. Guys, we've got so many questions and I want to get to them in just a second. But you guys have laid out this thesis, supply, demand mismatch in energy sector, growth in emerging markets. How are you guys positioned? How are you playing it? What's the thesis? What are the instruments you're using? And what's the time horizon? I'll let Louie hit this one first. I mean, he's the emerging markets guy. I think he's right. I'll just say one last thing on emerging markets. If you were a Brazilian guy, a wealthy Brazilian guy, you always paid your money in Miami real estate.

39:46And suddenly you kind of look around, you say, why don't we buy some property in Rio? Or maybe if I want the money out of my own country, why don't I go to Uruguay or Paraguay? Why don't I go somewhere close to home and put the money, because it looks a little safer now than just buying USA. It's leaving the money at home. And I think that recycling thing is all directly related to what we did to the Russians. So I agree 100 % with what Kupi said. So the first thing you can play is basically the financial centers in emerging markets that are going to be booming because they're going to be doing a lot of the recycling of those savings.

40:25So it might be Dubai, it might be Singapore, it might be Hong Kong, it might be Uruguay. All these places have financial centers, growing financial centers. All the money that used to go, whether to Miami, whether to Switzerland, whether to London, is not going to stay in emerging markets. So these places are going to know a boom of epic proportions. And you're seeing real estate in Dubai go through the roof. You're seeing real estate in Singapore go through the roof. And I think others will follow. So that's one way you You can play it. Look, it all depends where you want to be on the risk spectrum.

41:03I think one of the best trades out there is on the lower end of the risk spectrum is Latin American, both government debt and corporate debt. You know, I was just in Chile, and they now refer to the Central Bank of Mexico as the Bundecito for the Bundesbank. And, you know, you look at how Mexico has handled its affairs through COVID. And it was them in Sweden that didn't basically lose the plot. And they now get the rewards. You get a strong currency, lower bond yields, et cetera. Now, you look at things like Pemex bonds. You can buy Euro Pemex bonds, swap them back into Mexican peso, and make 16%, 17 % a year.

41:47And I would say that, given my view on all prices, that seems to me like a fairly attractive proposition. You know, two-year paper. Or you can buy Colombian bank paper, you know, yielding for one year 15%, 16 % in a currency that's one of the most undervalued currencies out there. And that always tends to rise when oil prices go up. So there's lots of different possibilities out there. I think if you're non-American, one of the best trades on the fixed income world, it only works if you're non-American. but just to buy Venezuelan government debt or PDVA bonds because these things are trading at 10 cents on the dollar.

42:30At some point, the Americans will have to lift the sanctions on Venezuela because the Americans can't be pissed off at Russia, Saudi Arabia, Iran, and Venezuela all at the same time. You've got to sort of pick your fights. And Venezuela isn't an existential fight for the US. So that's an easy one to bury, especially as all prices rise. So I think that the Latin American debt space is fascinating. And it's not the highest returns, but it's very low risk. So I think the risk profile is a very attractive one. And then beyond that, look, I think equities in Southeast Asia, equities in India. We also have a number of, I think, very interesting companies in China that are not trading at single-digit P, single-digit cash flows, that are actually growing very, very fast in emerging markets.

43:22Whether you look at your BYDs, whether you look at your Alibabas, they're increasingly placed on the broader emerging markets more than just China. Yeah, very well detailed there, Louis. Kupi, what's your play? How are you thinking about it? What's your time horizon? What's the thesis? Well, so Louie will give you the no-risk ones. I'm Mr. Tork. Let's talk about the quirky ones. I own some Argentina. I own a basket of it. There's this guy – well, look, Argentina's hit rock bottom, like complete rock bottom. They don't have a currency anymore. They effectively don't have a functioning banking system.

44:00Nothing works. And the Argentines have finally given up on it. The elections used to be Peronism and then Peronism light. And now this guy Malay, who's a nacro-libertarian, is in the lead by a lot. It's likely he's going to win. He's one of the first politicians ever that seems to actually understand what the problem is and how you fix an economy. If he doesn't win, this lady named Bullrich is going to win. And she's very much like him, whereas he just wants to take a chainsaw and basically fire every government worker, blow up the central bank, basically just do a whole reboot. She kind of wants to do it over like three months so that you don't have people out on the streets rioting.

44:44I don't know which one's going to win, but I think Argentina assets will do well. I mean, it's actually a well-educated country. The infrastructure is surprisingly good for a place that doesn't have like a functioning currency. There's a lot of natural resources. All they need to do is fix the mess they have for themselves. They have two different exchange rates. They have all sorts of import-export controls. You can't run a business. And once they get rid of all this nonsense, I think the ag sector is going to boom. I think mining is going to do amazingly well. Vaca Muerta is probably the number two shale asset in the world.

45:21But no one really knows because they're not using modern technology to produce it. And they can't export it anyway. They haven't built a pipeline. No one wants to put money in the country. I think a lot of things can go right in a hurry there once the same people in charge. And the assets are obscenely cheap. USD ARS basically looks like Y equals X squared, right? I mean, just goes like that. It's shit coins. But to go – So how do you play it? Well, to add up on Argentina, because I think it's very important actually, is if you think of the next, I don't know, 12 months, you could have great news on Argentina.

45:55You could have good news on Venezuela if the U.S. moves away from its sanctions, which I think is likely. And then the rest of Latin America is booming. All of a sudden, you get a narrative where the whole of Latin America looks pretty good. And you get a lot of flows coming into Latin America. and it's not obvious who the marginal seller is going to be at that time. So when you look at the news flow over the next six to nine months, you have to be overweight Latin America in general. Cubby, what's the play? How do you get exposure to Argentina? Is it the sovereigns? Is it elsewhere? I don't know about the sovereigns.

46:32Argentina has a long history of screwing foreign bondholders. I think it's just in their blood. But no, I think there's a bunch of these GDRs. I mean, Argentina was a very rich country, and they got themselves a bunch of U.S.-listed GDRs over time. And if you looked at these things, they're incredibly volatile. You know, when Macri won, they were all five-baggers, and then they all collapsed 70 percent when he lost. I think they could all go up again. And they're obscenely cheap, but don't look at the financials. They make no sense. They use inflationary accounting. I mean, there's no currency right now.

47:06You look at it and you say, you know, you buy this company. It has this many megawatts of power plant. Well, what was the US market cap? That seems cheap for megawatts. Compare that to Columbia. OK, it seems even cheap for Columbia standards. You know, you look at a company, this is how much cement they produce. Well, they're not producing any cement right now, but the plant is there. You know, this is cheap. You look at company with farmland. This is cheap compared to this. You know, it's not rocket science. You buy things at 10 % of replacement costs. When they have tailwinds and things even get better.

47:34And by the time you can build a spreadsheet model, it all makes sense. that's when Citibank's having the Argentina recovery roadshow conference. That's when you sell, you know, it's this thing I've been doing for a long time. It sort of works. You know, when Argentina, when Citibank calls me up, they say we've rented a private jet and we're all going to Argentina because these companies all need to raise capital. That's probably when I hit the sell button. I mean, it's delightfully fundamental and cynical. I love it. history as a way of repeating. All right, guys. I wanted to jump in and ask some of these questions here because we've got some great ones coming in.

48:14The first one is from Valtteri. Actually, this is a topic we touched on a little bit earlier. Valtteri says, great to have these two on. Please ask the gentleman about Florida real estate. We touched on this a little bit earlier on a relative basis, but what do you think about it on an absolute basis, Florida? That's for copy. I mean, Florida has the most net migration of any state. That's usually good for real estate. I mean, Florida, people are fleeing all these other states because they're hardly mismanaged with high taxes and a lot of crime. I mean, it's still incredible to me that you can walk into any store you want and steal anything you want, and everyone's just kind of OK with it these days.

48:54I mean, Florida, they'll shoot you. And that's why people want to go to Florida. And I think you're going to see the population keep growing because Florida mostly functions. And, you know, I'm very bullish Florida land because it's a shortage. And land is the most torqued thing to what happens to population. I own a company called St. Joe, one of the largest owners of land. It's in the Florida panhandle, which means, you know, the starting point for valuation is very low. But, you know, there's a lot of people moving there. It's very, very pretty. and it doesn't have a lot of the same problems with, you know, 100-year-old infrastructure, logistics, everything else that South Florida has, where, you know, in South Florida, they're thinking in little tiny, you know, half-acre segments.

49:42And St. Joe, they just own a couple of different counties. They can make big, long-range plans and decide, you know, where all the infrastructure goes. And I think it's going to end up being a better place to live. You know, talking about durable transcopy, and this is an important one, you sort of do wonder the forces of virtualization that have been unleashed by the COVID pandemic and the reopening. Folks just do not want to spend nine to five in an office the way they did in the Mad Men era. It just seems sort of vestigial at this point. So you see people fleeing New York City, whether they're going to New Jersey and Connecticut for the short hop if they have to come in, say, two or three days a week, or if they're totally virtualized, if they're going to Florida.

50:21You see the same thing on the West Coast with Californians moving to Texas. What does this look like from a long-term perspective? How is it sustainable for these states, blue states in the Northeast and in the West, California, New York, and New Jersey, and others, to maintain these huge differentials in terms of state and local income tax, when essentially you can move someplace else and not pay it? I mean, is this something that folks are thinking about, and what do you see the risks there as? Well, I don't think the folks running these states think about it or particularly care. They have four-year cycles, and these are generational problems.

51:00I think the ultimate solution is an exit tax. So you ought to leave California and New York while you still can. No, I think they're going to keep bleeding people and be Detroit. New York, you used to have a reason you had to be there. You had to be there if you wanted to do finance because every roadshow went through New York. All the clients were in New York. I mean, settlement clearing was in New York. You don't have to do any of that. You don't even have to be in the United States anymore to do this. And, you know, the assets, I mean, if you look at these status, they had this, you know, it goes back to feudalism that you have the hard asset, which is land and the surfs on your land.

51:34And then, you know, it became a factory and then it became a, you know, something else. And now, you know, the assets up here, it's, you know, the ability to do work and to think and, you know, to have intellectual capital, that's very mobile. I mean, I get on a jet and go to the next place in a second if I get a better deal. And better deal isn't just lowest tax rate because a ton of places now with the tax rate zero. Better deal is also quality of life and all sorts of other things that governments offer in terms of getting rid of bureaucracy and stupidity in your life. And so I think countries and states are going to have to actually go attract the best and brightest again.

52:15And the U.S. always had an edge in that, that people wanted to go to the U.S. there's a lot of countries fighting for people like us now. And, you know, exit tax is what keeps the people in. It's the Iron Curtain in a way. Louis, maybe you're not as cynical as I am. No, no, I am. I would add that I grew up in France, and you can take the boy out of France, but you can't take the Marx out of the boy. It's, you know, if you think of it in Marxist terms, Marx explained that your political superstructure was reflected of your economic infrastructure below. Basically, whoever dominated your economic class chose the political structure above.

53:01Now, and Marx's point was that you had an agrarian society that had moved to an industrial society, but the political structure hadn't changed. Therefore, you needed revolutions to change all this. To Cuppie's point, we've gone through another change. We've moved from industrial economies where you have, I don't know, IBM that hires 100 ,000 people and Citibank that hires 100 ,000 people and Procter & Gamble that hires 100 ,000 people. And where most of the value added was created by these massive groups to an economy that's now far more fragmented and where the value add is spread all over the place in an economy of knowledge and that is no longer an industrial economy.

53:42And yes, in such an economy, the guy who actually controls his own value added can decide where he wants to be taxed at what rate and what makes sense for him. And what makes sense for Cuppie may be different than what makes sense for me and different for you. But for states, it does require a complete rethink of how they run. Now, so far, there's been none of that rethink. Instead, what we've done is just pile on the debt. It's like we're going to keep pretending that we're in the same system and that everything will work out in the end by piling on debt and kicking the can down the road, kicking the can down the road.

54:20But then you move to the time where all of a sudden that servicing of the debt goes from 5 % of your tax receipts to 10 % of your tax receipts to 25 % of your tax receipts to 35 % of your tax receipts. And before you know it, you choke on your debt. And I fear that's where we're heading into a number of Western countries. Copy, would you like to pick up on that? 30 minutes ago, nature heals. And if the governments can't adjust to the way the world has changed, it's not like you have a factory there and they just keep taxing the factory more and more. And yeah, they're going to have to adjust. And the adjustment is going to have to come somewhere else.

55:08and it's going to come through a lot of inflation if they just keep papering it over. Here's a question. Go ahead, Louis, please. Well, one of the best history books was a guy called Toynbee who wrote a book called History, and it's like this phone book of a book, where he studies the rise and fall of every civilization. And his point is that civilizations get a challenge, and either the elites rise to the challenge and you move on and you progress and move on to the next challenge, or you don't, or they don't. And if they don't, you need the elites to be replaced and changed. And usually this happens through revolutions.

55:51You get revolutions, change of the elites, new elites, and hopefully they address the challenge. And if they don't, then in time, your civilization collapses. Now, the beauty of the democratic system is you can change the elites without bloodshed, without destruction of properties, without all the things that entailed in the revolution. That was always the comparative advantage of democracies. It's not that democracies, we pick the best guys, it's that we can get rid of guys. That's what democracies are good for. You can throw the buns out. Increasingly, though, across the Western world, you're seeing this in Europe, but I would argue you're seeing this in the US.

56:33You vote for guys, but you still get the same policies regardless. Take the US, and I'm not American, so I don't want to look like I'm throwing the stone, but President Trump gets elected on the promise to bring all the troops back home. He says, we're going to pull out of Syria, and the general staff says no we're not and in the end they don't pull out of syria which i found mind mind boggling um as a former military officer myself that the army could say yeah we're not we're just going to disregard that order uh to me is mind-blowing um but there you go um that's the world that we live in and the same is true in europe where you vote guys in but the real decisions are made in brussels anyway so it's like politics just become entertainment so we've got politicians are totally, in Europe and also North America, they seem totally divorced from what the average guy on the street wants or needs.

57:25I mean, the politicians work for the big corporations, and that's fine. You can have your elite that runs things. It's how it's been going for a couple thousand years. I'm kind of okay with it, but it's not democracy anymore. I mean, and I think you just need a bigger crisis. We haven't had the big crisis yet. You'll have a really, you'll have a proper crisis. Remember, nature always heals, and it's going to heal through the 10-year collapsing and an inflationary crisis. And then, you know, I think you're going to get new guys. Or I don't know, maybe these guys just, they're all in their 80s. They can't make it another decade.

58:00Like, it'll heal that way. Maybe rising energy prices will be the catalyst for the big change. Because let's face it, we've had a malinvestment on an epic scale. For the past decade, we, the Western world, have spent$4 trillion in wind and solar. And we've moved our use of carbon-based energy from 83 % total to 81 % total. So it's$4 trillion that has really not even moved the needle. And I think the bill for that is coming due. And as it comes due, it will be hopefully a realization by voters that we've been led down the primrose path by policymakers. Well, it's never a bright morning when you're talking about both Toynbee and Marx as the strength for the political cultural economy.

58:47uh that you're discussing hey listen here's a question that comes to us from timothy longo and this sort of gets to the point that you were making louis in terms of uh where is marginal production going to come from from an energy perspective timothy wants to know copy what's your preferred way to maximize return on the uranium play what publicly traded in the u.s one could look at to take advantage cheers he says i think the the thing that's most twerked honestly is fraught physical uranium trust or a yellow cake which also is physical uranium Everyone has this idea that you're going to get torque by buying the miners.

59:19But, you know, look at where GDX was when it first came out and gold was about 600. Gold's been a triple and GDX is down. I mean, where's your torque? It's 15 years of retained earnings and reinvestment, and you have negative returns to show for it. I think it's going to be even worse than a lot of the mining companies because the two largest ones, Cameco and KazAtomprom, have sold forward a lot of their production for the next few years. So if the price of uranium goes up, they don't really get much advantage of it. And then the other guys are all going to raise billions and billions of capital, the mines that is the reason that they exist.

59:55They're one-mine assets, most of them. And so they're going to spray the street with shares. And then they're not going to get the advantage of when the price goes up because their mine will have maybe one year of peak production before there's a glut of uranium again. It just seems like a terrible way to invest. And I don't want to name any names, but they all seem just terrible to me. And I own a few of them, but I just own them because I can't have my whole fund to only own Sprott physical uranium. But, you know, I think, you know, the history of commodities is that they tend to overshoot dramatically.

1:00:29And they don't usually stay at extremes for long periods of time. And I want to own the physical commodity during the period of overshooting. The history of producers is that they tend to price in, you know, a baseline level of the price and earnings. And, you know, they don't really get much multiple expansion. And so you have a uranium stock that's worth three or four times earnings based on, I don't know,$80 is the marginal cost where there's enough uranium for everyone. Well, these things are already overvalued mostly. And so, no, I just think you own physical uranium because it can go to an insane number.

1:01:01I was just at a uranium conference and all the utilities are short. All the traders are short. A lot of the producers are short. A lot of the intermediaries, the fabricators, everyone's short. And everyone's lent material and they can't get it back. and everyone's about to declare force majeure on each other. And they can't get material from one location to another. And the whole ecosystem of trading this stuff broke down. It reminds me of Subprime, where in like the fall of 2007, it looked like the wheels were coming off the thing. And then everyone's just like, don't worry about it. And you remember Michael Burry banging his head against the wall because why are my CDS cubes at 101 when everyone's defaulting?

1:01:42I have the data. They're all defaulting. And it's still trading at 101. It's costing me a billion dollars a week to hold this position. And he's just banging his head against the wall. And that's how uranium feels right now. Because in a normal, and this is, I think, what's messing with people. In a normal physical market, if I like oil, I buy oil futures. If other people agree with me, they buy oil futures. Well, then the price of oil goes up. And it's very immediate. And if I looked at a world like uranium, where the demand is 210, let's say, next year, and the supply is 160, and there's a 50 million deficit, call it 25 % for round numbers.

1:02:20I mean, if the oil market was a 25 million barrels a day deficit, oil would be like 1 ,000 right now. Everyone would be freaking out. But instead, there's no way for me to go out there and buy physical uranium. I mean, you have to get licensed. You have to store it. It takes two years to get all the certifications. So there's no capital markets. There's no traders. There's no hedge funds. There's no one there to do the price discovery thing. It takes the price up so you incentivize mines to turn back on. So when that all happens and it's going to happen, it's going to overshoot in a very dramatic way.

1:02:54And then it takes five years for the mines to come on. And I think this could really overshoot because unlike oil where there's like, you know, you have switching, you can use less oil if the price goes up. There's all these things you could do. You can use other products. You could, you know, take the train. You know, when it comes to uranium, you build a mine, you operate the thing and you just need the uranium. And so, you know, we already know what the demand number is going to be every year into the future for like five years, maybe even 10 years with pretty good certainty. We know that the supply number isn't there.

1:03:24And, you know, we know the best outcome for supply, but mines break, mines have trouble, stuff goes wrong. It can only get worse from here. I mean, the deficits only can get worse from here. You know, it's not like they're going to say, wow, our mine did, you know, 130 % of nameplate. That just doesn't happen. So I just think it's going to overshoot and it's going to do something insane. Louis, did you want to comment on that? No. I think, Kupi, you said it all, to be honest. I think the one thing I would add, the one thing I would add perhaps to this is I think there's a real shift in the zeitgeist regarding nuclear in that two, three years ago, nuclear was a dirty word.

1:04:02It was nobody wanted to even consider building new nuclear unless you were China and India. That was basically it. And I think Russia's invasion of Ukraine shifted a lot of people's mindset where they realized, hold on, nuclear actually gives me energy independence. You know, with just a few pounds of uranium, I can produce electricity for a year. I'm exaggerating, of course, but it's all of a sudden dramatically, dramatically shifted the zeitgeist where we've moved from, ooh, let's worry about a potential nuclear accident that may or may not kill one or two people, to all of a sudden geostrategic independence.

1:04:42And when you think in geostrategic independence term, there really is nothing better than nuclear. Because you can buy and store a lot of uranium and not so much space. So you can be fully energy independent. That's where we were in France. You know, in France, the mantra following the 70s oil shocks where we don't have oil, but we have ideas. You know, we're smart. We can build nuclear plants. And we did. And then we got dumb. Then we decided, oh, screw the nuclear. We're going to build windmills and solar. And that's been a disaster. So we are, I think, all over Europe, people are realizing nuclear is not so bad.

1:05:20And so that's an important structural shift in the zeitgeist. Well, and plus you have from the global north, these punitive policies for carbon, right? That is pushing the marginal demand into a new direction. But on this, remember that in Europe, nuclear, because of German lobbying, nuclear, they want to protect their wind industry. Nuclear is still not seen as a renewable energy. It's nuts. But if you want to get your proper ESG points, you've got to be in solar or wind. And that's all linked to German lobbying efforts. And it is, frankly, to France laying down way too easy. I agree completely with Louis.

1:06:02Like, it's a geopolitical energy independence aspect to this. I mean, if we had invented nuclear last week, that's all we'd be talking about. We wouldn't be talking about AI. We'd be talking about how you have this carbon-free, clean energy that's the lowest cost energy, that is safe, that is super reliable, and you can store literally all the energy that a country the size of France needs in like a shipping container. And you can just set up a couple of these things and you have 10 years supply of energy and you're good to go. You don't have to worry about all this nonsense. You can't let, you know, Putin can't just bully you because you have it all.

1:06:39You have a 10 year stockpile of stuff. You know, it's just this thing that because of 60 years of baggage, in a couple of accidents, the world got stupid. China's not stupid. They're building these things nonstop. And at a fraction of the cost, on this, you know, you look, China just opened this year six nuclear plants at a cost of$18 billion. I think the U.S. built one in 30 years, the one in Georgia that just opened at a cost of, I think, about$30 billion, if my numbers are right. So when you think of it, basically China's opening nuclear plants at roughly a tenth of the cost of the U.S. So if you start off with the premise, and it takes them a tenth of the time as well.

1:07:26It takes three years in China, 30 in the U.S. So if you start off with the premise that economic activity is energy transformed, today, you know, China has a huge comparative advantage in that it can wheel out nuclear plants quickly and cheaply to the point where actually they're in the running to build one for Saudi Arabia. To me, that's one of the biggest game changers out there. Remember five years ago, we were all talking about how China is stealing our jobs. China's running unfair trade surpluses. Well, back then, five years ago, China's trade surpluses was$30 billion a month. Now they're$80 billion a month.

1:08:07And really, China is actually now stealing our jobs. Five years ago, they were building plastic toys and cotton underwear. And we were talking about stealing our jobs when nobody was producing cotton underwear in the U.S. anymore. Now they're producing cars. They're producing earth-moving equipment. They're producing telecom switches. They're producing nuclear plants. And all you hear in the media – and they are stealing our jobs. They've got an$80 billion trade surplus. And all you hear in the media is how they're about to implode and China's youth unemployment problem. To me, it's just mind-boggling.

1:08:42This is one of those conversations that I never want to end, but we've been going long here. It's such a fantastic conversation with both of you. Let's go around the horn real quick. 60 seconds, final thoughts, key takeaways. We've covered a tremendous amount of ground here. Louis, first to you. I'll finish with a Baudelaire quote, that the devil's greatest trick is to make you believe he didn't exist. And I think today China's pulling off a great trick, telling us that they're imploding when they're eating our lunch in industry after industry. Countries that run 80 billion trade surpluses don't implode.

1:09:1980 billion a month. You know, it's, you know, they just don't implode. So I think they're pulling off a really good one on us. Copy, final thoughts, key takeaways. The VIX is 13, and I don't think it's going to stay at 13. I think you want to de-gross. I think you want to stay liquid. I think you want to stay in liquid assets. I think, I don't know when, but I think sometime soon, the whole underpinning of everything we've known to be true in this world from a financial standpoint will be undone. It'll be undone because the 10-year moves just enough that it all cascades and falls apart. Everything's built on the 10 year, which used to be bedrock and now it's quicksand.

1:10:05Yeah, by the way, I was actually just looking at that. I read earlier this morning that I think that the VIX is down about 35, 36 % year to date, S &P up over 17%, make of that what you will, or almost 17%, 16 and a half, I think right now. Sorry. Guys, just go ahead. No, no, nevermind. I never would. Those are questions. I was going to say, at this point, you've got rising gasoline prices and rising mortgage rates. You've had mortgage rates, gasoline prices up 20 % year-on-year, and mortgage rates up more than 200 basis points. It's seldom year-on-year. It's seldom a super happy combo. Just a terrific conversation, guys.

1:10:48Some really deep analysis here and specifics on how you play this from a market perspective. Just a fantastic, fantastic conversation. Thank you both so much for joining us. Thanks a bunch. Thanks for having me on. Thanks. Good to catch up, Cuppie. Always. Great to see you. Listen, guys, tomorrow we're going to continue this Crash or Boom series here on Real Vision. Tuesday, September 19th, live at 11 a.m. I will be hosting Tracy Schuchart, also known as Shy Girl, and Rick Rule, talking about all the connections between macro energy and industrial material. Very much a conversation, some of the themes we've talked about here.

1:11:24I'm sure you guys are going to enjoy that one as well. See you tomorrow, everybody.

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