13 Comments

yes you could skip the beginning and listen from from minute 60 till the end.

Let me see if I can try to explain here as much as I can:

A strong dollar and high prices for everything have created a demand shift down.

What OPEC has done it it cuts Supply so it shifts the supply curve back down but every time that it cuts, the supply tilt a little bit it becomes a bit more elastic

Also China has been building into spr and also adds to that elasticity

So essentially you now have a situation where OPEC has cut three times and each time the forward curve has become a little bit more elastic and so demand has come down

Because we have this forward Supply elasticity it gives Emerging Markets like China and India time to substitute away from oil also the longer this forward Supply elasticity happens the more longer term demand becomes more elastic

They also see hard Landing down the road and and if that is true it'll it this will be the first hard Landing with oil prices not going substantially lower than here

They also discuss US oil rigs and US SPR and don't see that affecting that much the price of oil (as much as the oil bulls are projecting)

Expand full comment

Hi Russell, what are your thoughts about Michael Kao & Alexander Stahel advocating for oil to go to 50$ in the following video: https://www.youtube.com/watch?v=rwbMRdHs_tg

Very interesting interview. Would love your thoughts on it as it contradict your opinion on oil

Expand full comment
Jul 7, 2023·edited Jul 7, 2023

While you may well be correct in your views, I would be concerned relying on GLD numbers alone. Since the GFC we had meaningful proliferation of ETFs competing with GLD as well as other means of holding gold.

The other issue is - you’re looking at shares outstanding rather than value and while gold nearly doubled from its 2015 low, TLT nearly halved recently.

Rather than shares outstanding, it may be more instructive to look at the total value?

Expand full comment

Maybe I should have left my short TLT on. Oh well.

Expand full comment

Russell, great charts - Thanks for sharing. Long bond yields have been rangebound for months in the face of high demand (per your chart showing TLT shares outstanding), but now, post debt ceiling suspension, a load of supply is coming to market. It looks like the dam might have broken...

I've been shocked that anyone would be accumulating 10Y UST at 3.5%, particularly when we *knew* of the looming supply that was coming to market as well as the currency weakness in CNY and JPY alongside >5% short duration USTs available. The inflows to TLT look irrational -- like lots of people are playing the rules of the past disinflationary regime.

Expand full comment

The world has changed for sure.

Central Banks pausing and resuming rate hikes in a short span differs from previous regimes.

Here in Aus, Albo & Co has lowered the tax rate for next FY. Inflationary pressures are here to stay.

What are your views on Rental caps being implemented around the world?

Expand full comment

Thanks for the nice post. We do share the similar strategic view on the commodities and fixed income. From your perception, does the 10y tenor is the optimal part of the curve to short, or the shorter end is better for the price action impulse?

Expand full comment