Is Oil Forming a Bottom? w/ Tony Greer

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1:24And now to the top analysis of today's markets.

1:34Is oil forming a bottom? Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Tony Greer, editor of the Morning Navigator newsletter. Tony, it's great to see you. And you, Maggie. How are you doing today? I'm doing okay. A little allergies, but other than that, doing pretty good. We heard. Yeah. I was sneezing right before I came on air, everyone. Tony and I were commiserating. That's what you have to do at this time of year on the East Coast of the US. But we, you know, we're watching the markets and it was pretty quiet today. But we did notice that oil prices finally started moving a little bit higher.

2:09But it seems that the market is kind of bouncing between growth and supply concerns. I don't know. What are you what are you thinking about oil these days? Oil, I've been flat for a long time. I've been flat for a couple of months now. And I'm in the spectators seats just like everyone else at the moment. You know, it hasn't been able to do anything technically exciting on the upside, you know, in months now. You know, we had that a little bit of, you know, we had a little shake up on the OPEC price cuts that turned out to be, you know, we closed that gap that they gapped open from and kept heading south.

2:44But that turned out to be very much a non-event in this sort of tidal wave deflationary tape that we're pricing in right now. And so that's kind of how I'm looking at the world since we came out with, you know, kind of let the record reflect that last week when we had headline CPI and PPI come out bang in line. What happened was we got a continuation of the deflation trade. Right. And with the deflation trade has been led by has been five year break evens, which have been a great market market based inflation expectation. they've been negative for six weeks in a row now. They've faded toward the bottom of the recent range that they've been trading at at 2.1%.

3:31And that's kind of the only thing that I've got a leg to stand on now, Maggie, where I can expect the market to change at some level. So if we break through that level on the downside at 2.1 % in five-year break-evens, then I expect this deflationary slide that we're seeing to get more extreme. But the reason that it's getting so tricky, and Jared Dillian went over this beautifully in the recent daily briefing, is that everyone is sitting here looking for this hairpin turn back into an inflationary impulse. And we don't know if we're going to get that tomorrow, next week, or in 2025 at some point.

4:11right so it's really difficult now you know this trade right now as we see it is we had inflation go from two percent to nine percent and now back off to four and a half five percent now where's the bottom going to be right is it going to pull back all the way to two percent where it broke out from or is it going to get sticky around here at five percent and next thing you know there's a big burst right now those are two very different trades for the markets and extend that market making decision over a long period of time. And you've got what we're looking at on the tape today, where we've got this sort of noncommittal rotation.

4:49We've got a small number of stocks really holding the indices up. And we've got very concentrated sector leadership where we've got semiconductors and a couple of other tech sectors paired up with home builders and gold stocks that are really the only game in town if you want to chase performance this year. So it's a pretty tricky trade out there right now, Maggie. Yeah, it certainly is. Let's break that up a little bit because we noticed that you did tweet out part of that conversation that Jared had with Ash last week. And I think – I don't know if you guys agree totally, but he was – I know when we've talked, you've talked about having to trade the market now, including oil, being flat oil, commodities haven't been doing anything, watching this deflationary trade.

5:36But having the thought that we're in a longer term upward cycle for commodities, and I think you fall into the camp that inflation, there's a good chance inflation comes back. Certainly, that's what Jared seemed to be indicating. Let's run that clip, and then we'll talk on the other side. Sure. I do believe that we're going to have a second inflationary impulse. I think it's going to happen. And I think the Fed will have to respond. And I think, you know, and look, this is not, you know, imminently maybe 2025, maybe 2026. But at some point in the future, we're going to have 10 % on tenure notes.

6:14Like that's going to happen. 10 % on tenure notes. Yeah. In the next couple of years. Yeah. So, I mean, right now we're having this disinflationary impulse. But, well, you know, I get sick of saying it because I say it all the time. But inflation is really about psychology. And we haven't killed the inflation psychology. We haven't squashed it yet. Look, I went to Chipotle today for lunch. Actually, it's funny because I haven't been to Chipotle in like six months. I got, not that anybody cares about what I eat for lunch, but I got a bowl with double chicken and queso and a large drink for$19.40.

7:00And this is at Myrtle Beach. This is the lowest cost of living area in the country, like$20 for Chipotle. People expect price increases. Even though inflation has slowed down, people still have that inflationary mindset. They still expect price increases. And that's why we're going to have another wave of inflation in the future. First of all, I loved the expression on Ash's face when Jared said 10%. You can see he was smiling and only the way Ash can do. But it's a really interesting, it's a really provocative thing to say, but it's interesting, this idea that, listen, we're not necessarily out of the inflationary woods, and this thing may not only come back, but come roaring back.

7:46And it's a concern out there, right? Yeah, it was, you know, it's definitely it's on the back burner right now, because as we said, you know, we're pricing in this deflationary tsunami at the moment. But, you know, that was a great comment by Jared. And Jared's one of the few people that can make that comment with a straight face and then back it up with a straight face and say, you know, this is what he's seeing. We kind of we have the similar view here with maybe slightly different shape. You know, I'm definitely a believer that there's going to be a resurgence of inflation at some point and we're going to see a hairpin turn in the data.

8:22But I think for the most part, I'm seeing it come back because I feel like we've got politically structural inflation right now. You know, I feel like it's very much caused by, you know, the administration's energy policies and some foreign policy, et cetera, et cetera. And, you know, I don't want to get political, but we can draw that line really to, you know, when the shakeup was in the, you know, U.S. energy policy with all the executive orders, et cetera. So we're still kind of on that path. We're still on this, you know, come hell or high water, you know, carbon neutral 2030, which is, you know, a fantasy in and of itself.

8:57But at least that I think that that hoax is becoming a little bit more popular, you know. And I think that sort of people invading the Black Rock building in France, et cetera, things like that are kind of startling signals where you say, wow, people are kind of waking up to what's going on here. So that's just an interesting phenomenon. As we turn from 23 into 24, I mean, it's going to be election year in the U.S. It doesn't have a great track record if you take even the energy situation out of it. Cutting spending, being super fiscally tight is not something that usually happens in presidential elections.

9:32people usually spend so they get reelected. So even if you look at it through that lens, maybe you are going to have politically structured inflation. Well, I mean, we just had how many people pour through the border in the last several days that we're all going to be footing the bill for here. I mean, their entire existence is going to be paid for by the American taxpayer. Does that sound inflationary or does that sound deflationary to you? I don't know. That sounds inflationary to me. So, Tony, the market's pricing and easing still, though, isn't it? The bond market? Yeah, well, we're kind of right on the turn.

10:04You know, that was supposed to be the last rate hike. Yes. So now we're looking at a path of easing coming down the pike. And, you know, that's going to be a question of data dependency. Again, you know, I would imagine because if a little bit of the data starts, you know, stepping out of line on the inflationary side, it's going to take, you know, a lot of the impetus behind the Fed to be able to ease, like you say, it's going to have to be balanced out, I would imagine, by continually negative data on the employment and economic side. But that's not the part of this trade that I'm good at, right, Maggie?

10:39I'm not a biologist, and I'm trying to just find the right trades here. Yeah. So it's so interesting to have this conversation because we've got these market expectations, and I understand you're all looking for that signal that maybe the market's going to rethink this. We spoke to former Atlanta Fed president, former Dennis Lockhart, Friday. For those who couldn't stick around for the extended second half, we talked a lot about the Fed's framework. Is it working? Is it current? To Jared's point about inflation being psychological, are they looking at the right stuff? Are they able to measure in real time what's happening in the economy?

11:22And we got a question from a viewer. Does the Fed care about the stock market? Do they look at the stock market? Do they look at markets in general, especially given all the concerns we have about banking and banking crisis? And this is how he put it. Let's have a listen. The FOMC does not want to be seen as simply the handmaiden of financial markets, you know, doing in every reaction responding to recent market behavior. the framework that we tended to use when i was there was that we would pay most attention to the real economy we'll call that the main street economy but obviously attentive to financial conditions because it's through financial conditions that fed policy monetary policy actually has an influence on the real economy.

12:25And at the same time, very focused on the statutory objectives of the Fed, the so-called dual mandate, low inflation and maximum employment. And it's through that prism that almost everything is interpreted. So what happens in the financial markets is important because it is the way that financial conditions are actually formed. But it is not a goal to necessarily be responsive to the latest sell-off or the latest bull market or the latest move in term interest rates. The Fed doesn't believe it can do that, and it doesn't believe that is its mission. Its mission is the broad, real economy and making sure that the two mandated objectives are met.

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14:40Now, again, that was in the second half of the extended daily briefings. If you want to be able to ask your questions during that time and listen along, make sure you sign up ahead of time for the next one. You can hit the QR code. So, Tony, we've heard, you know, that's like typical Fed speak. We do hear that from time to time. And, you know, I want to again underscore that he's former, But he spent a lot of time at a lot of those meetings and really, I think, has a really good understanding of how the Fed operates. And it was interesting. I was thinking about it in terms of everyone was surprised at the last FOMC meeting that Bernanke didn't kind of talk.

15:16Not Bernanke. Powell didn't talk more about being concerned about banking and, you know, kind of didn't really address it as much as people thought and really stayed focused on inflation. and employment. And so I wonder if that should make us concerned that the market's kind of aggressively pricing in more rate cuts than maybe the Fed is considering. I don't know. Do you think the market has the calculation around the Fed wrong? It's another tough one for me to gauge, Maggie. I think that the more the data gives them room to manage expectations via their dual mandate, you know, to say, well, it looks like we have to fight a little inflation or we have to, you know, fight a little inflation here, try to keep employment together here.

16:08You know, that kind of just gives them all the more leeway in the world to manage expectations. And that's what they happen to be good at, whether or not they're good at managing the actual economy or not. They're usually good at managing that to keep the stock market from coming undone. And so that's, you know, that's the game that I'm trying to focus on. Yeah, yeah. Pay attention to the real economy. So we're going to be sort of bouncing off all of these data releases as we head through the summer until we can get some kind of clarity, I suppose. So we started talking a little bit earlier about oil.

16:43We had a very observant comment from Roger saying, I thought oil found a bottom a few weeks ago. So we should have probably said, is it bottoming in a way that'll finally be able to sort of bounce higher? And you've been flat. I know you're looking for that turn. I wondered if you had any thought about – there was a comment from the energy secretary saying that they might start refilling the strategic reserve after their last mandated tapping of it in June. I think – I guess that's the last congressional mandate sale in June. You think that could lend some support to crude prices? Yeah, it could.

17:23And I definitely wouldn't take the administration at their word in any capacity in terms of being a buyer of fossil fuels, even through political pressure of the nation and political strategists wanting to see that strategic reserve get filled. They've come up with excuses like it needs maintenance and we're waiting and originally the price wasn't right. So I've got a list of three excuses that they've used so far to not refill the SPR. I'm going to guess that by the time this saga is over, that by the time this administration is over, that I've got a list as long as my arm and they still haven't bought a barrel of oil.

18:02OK, so it sounds like you're not looking for that to lend any significant support. Not really. Not really. I think the best thing that could happen to the administration is that oil falls through the floor and they don't do anything to affect it on its way down. So we have questions coming in and they're kind of split up, which tells you where people's minds are. We have questions on commodities and questions on technology. Let's stick with commodities for a moment. And before we get to the questions, just want to hit one more news item with you. And that is that we saw some merger activity in the mining space.

18:36Newmont acquired New Crest Mining in a$19 billion deal. And I saw a headline in The Economist, a recent article in The Economist, saying that dealmaking is the new digging. You think we're going to continue to see merger activity here? Is that something that you're watching? It could be. You know, I like that it's in the sector that I deeply care about right now. You know, gold miners are one of the leading sectors on the year. They're up about 15%, 20%, and they've been vying with technology for leadership within the S &P. So I find that interesting. While gold is attacking this hugely critical 20-80 resistance level, which is the two prior tops that it's stalled out at.

19:17So if we get through the top of the zone now, it can get really interesting. I thought it was great the way, you know, Newmont played into the sort of GDX price action where the Newmont deal came out or sort of negotiations about it and weakness. And Newmont came out and caused like a second top in GDX, the gold miners ETF. So that saw, you know, finally saw a 5 % pullback last week. That was about the most volatile sector within the S &P. And that's the sector that I'm looking to buy. So that makes me sit up in my chair and see where this is going to shake out. But I think that that consolidation is good for the sector, good for the industry, makes me even more bullish, the sector for the rest of the year, potentially looking for more M &A headlines like that.

20:04So yeah, I think it's a good development for me from a trading perspective. It shook the market up a little bit and gives us a chance to try to buy it cheaper. So I have to ask this question because it's from GoldMiner James right on topic. But he's actually asking about NatGas. thoughts on that gas it's been really tough trade right she's bottom feeding right now around two dollars there's been false breakouts to the upside false breakouts to the downside you know i i'm kind of going to stick with my guns and say that until mother nature does something extremely out of the ordinary you know and causes extremely hot weather um you know or extreme in the summer or extremely cold weather in the winter that causes huge draws on power on baseload power i'm going to say we might be stuck at the bottom of this range for a long time.

20:51It's certainly not something that you want to just carry around on your books and sit and wait for to happen, in my opinion. You know, you can trade things like, you know, Southwestern Energy and Chesapeake when the trade gets going again. And if the trade is real, there should be plenty of time, you know, to get in and out of it and make money. So that's kind of like, you know, one of the trading rings that I kind of stand outside of until there's a big crowd and a lot of noise going on. And then I'll jump in and see what's going on. But until then, it's just too dangerous for me to try to think that every move to the moving averages is the next breakout or every move to a new low is a breakdown that I can trade.

21:32So right now, natural gas is in a very cautious danger zone for me. But I have my eye on it and several of the stocks in case the move gets real that I will be engaged by the time it does. We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

21:54Yeah, we had a follow-up question on M &A, and I'm not sure. I want to make sure this is an area that you're looking at. It was specifically M &A activity in the midstream pipeline sector.

22:07Talking about O &E OK, 1OK taking over MMP. I don't know. Are you looking in depth or are you just kind of looking at the sector as a whole and just seeing what's interesting? Yeah, for me, Maggie, for compliance purposes, it's a lot easier to sort of navigate sectors of the S &P. And I'm really not a good specialist of single stock, you know, M &A trading. Yeah, yeah. We got a question about uranium, too. I feel like uranium and pot stocks are like always going to come up. Tony, I don't know. We didn't get one on pot yet. I'm sure someone has one and we kind of know how you feel there. I think we won't ask about pot until you change your mind, then you'll tell us.

22:46But same with uranium. Yeah. What about, are you watching? You have a view on uranium? Yeah, you know, I still have a core position on. You know, the URA ETF has been 18 bid at 22 for, sadly, a year. Wow. Yeah, there's literally, there's no discussion to be had in terms of uranium trading in any way, shape, or form. It's not trending. It's not moving. If you like dead money, it's a great investment. It might be a great place to hide. No, seriously, if you want money to be sitting there waiting for you when you get back from whatever disaster, maybe that's the sector that just won't go down. you know it sure seems like it's for me it's kind of worth it to have a small bet in that ring just for you know for for headline purposes because it seems like you know that's a great way to fade the ESG fantasy and the and the fantasy toward the pivot to electronic vehicles and and you know electronic armored vehicles and things like that I mean that had to be the funniest thing that I ever heard when they talked about electrifying Abrams tanks and things like that.

23:54And Doonberg did a brilliant job of blowing that fantasy to shreds with actual science. So that's the way to manage that trade. But at least when you hear the administration saying that there's still gung-ho for all this push toward electric battery power, it lets you stay bullish fossil fuels because the attack on supply is still there. And it also allows you to keep a sort of, you know, an expectation for that inflation impulse to come back again, because we know that$1.80 gallon of gas is not coming back anytime soon. Yeah, that's great. And for those who've made their way through the academy, a lot of what Tony's talking about and giving you some insight in is like the framework he develops, right?

24:36He's got to wait for the timing and his trader senses, you know, he's got some parameters on for what that would make sense, but he's got a larger framework when it comes to commodities. So he's just looking for those opportunities, which is why it's really important to sort of have something like that in place so that you can seize the opportunity when it comes. Robert wants to know, I'd love to know your view, Tony's view on the lack of vol. Well, we've got a VIX bleed out into the street right now, right? We had, you know, during the banking crises. We saw VIX bursts into the mid-20s and towards 30, et cetera, et cetera.

25:13Everybody loads up on protection through these events along various timeframes. And some of the stuff rolls off in the short term and the rest of the stuff traders have on their books and wind up having to trade around. And that's the sort of stuff that causes the VIX to bleed out into the teens again. Now, it's really difficult to negotiate, but with the curve still buried at minus 50 basis points, I still think there's a better chance than not that at some point there's going to be another snowball that goes through the window. And I mean, in the form of an economic data miss or an earnings miss that throws some sector into a tailspin in the S &P and you get a pop in the VIX back up into the 20s or something like that.

26:01So being long the VIX down here is not an outrageous trade, in my opinion. And it's sort of a necessary equal but opposite reaction to when traders get hysterical and buy it up into the 30s for a couple of weeks at a time while the Fed is circling banks and putting them on JP Morgan's balance sheet. Yeah. I love your expressions to snowball through the windshield because that is exactly what it feels like. John asking about copper? Thoughts on copper? You know, it falls right into the category of go figure out when the inflationary turn is going to happen. You know, copper to me just came apart in a way technically where the bulls are now out of reasons to be bullish copper.