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    Value Hive Podcast

    Chris Martenson: Uranium, Tin, Copper, and Oil

    Fri Jan 05 2024
    InvestmentCommoditiesOilCopperMarket ManipulationEnergyThorium ReactorsInflationGold

    Description

    Teagas offers expert interviews on public and private companies. MIT Investment Management Company (Matico) invests with emerging managers and has created a website for emerging manager stock pickers. Ticker.com provides institutional-level investment research to individual investors. Chris Martenson has decades of experience in commodities and global macro markets. He got into his current field after experiencing the dot-com crash and educating himself about finance and banking. He became interested in the relationship between resources, such as oil, and the economy. Chris Martenson predicted the housing bubble before it happened through his blog. The speaker struggled to understand trading and experienced a decline in their strategies around 2007-2008. They realized they were up against computers and had an asymmetrical view into the books, leading to a change in perspective. The speaker synthesized their understanding of the economy, energy, environment, and exponential growth into a new perspective. They believe that we have picked the low hanging fruit and see a world of scarcity going forward. Understanding the narrative is important for contrarian investing. Timing is tricky, but one approach is to start investing gradually based on a thesis.

    Insights

    Market Manipulation

    There is evidence of market manipulation in the silver and oil markets, suggesting intentional efforts to move prices for personal gain.

    Thorium Reactors

    Thorium reactors have the potential to revolutionize energy production with their fuel efficiency, waste management capabilities, and decentralized power generation.

    Inflation and Gold

    The speaker predicts that inflation will come back stronger than expected, making gold an interesting investment opportunity.

    Chapters

    1. Teagas, MIT Investment Management Company, and Ticker.com
    2. Chris Martenson's Background and Predictions
    3. Understanding the Narrative and Contrarian Investing
    4. Gradual Entry into Investments and Bullish Views on Oil and Copper
    5. Market Manipulation in Silver and Oil Markets
    6. Challenges in Commodity Markets and Energy Definitions
    7. Confusion in COVID Terminology and Energy Supply-Demand Discrepancies
    8. Importance of Copper and Uranium for Energy Needs
    9. China's Strategic Positioning and the Importance of Thorium Reactors
    10. Thorium Reactors and the Future of Energy
    11. The Federal Reserve, Inflation, and Gold as an Investment
    12. Government Intervention and Excess Reserves
    Summary
    Transcript

    Teagas, MIT Investment Management Company, and Ticker.com

    00:01 - 06:56

    • Teagas offers expert interviews on public and private companies.
    • MIT Investment Management Company (Matico) invests with emerging managers and has created a website for emerging manager stock pickers.
    • Ticker.com provides institutional-level investment research to individual investors.

    Chris Martenson's Background and Predictions

    00:01 - 06:56

    • Chris Martenson has decades of experience in commodities and global macro markets.
    • He got into his current field after experiencing the dot-com crash and educating himself about finance and banking.
    • He became interested in the relationship between resources, such as oil, and the economy.
    • Chris Martenson predicted the housing bubble before it happened through his blog.

    Understanding the Narrative and Contrarian Investing

    06:35 - 12:55

    • The speaker struggled to understand trading and experienced a decline in their strategies around 2007-2008.
    • They realized they were up against computers and had an asymmetrical view into the books, leading to a change in perspective.
    • The speaker synthesized their understanding of the economy, energy, environment, and exponential growth into a new perspective.
    • They believe that we have picked the low hanging fruit and see a world of scarcity going forward.
    • Understanding the narrative is important for contrarian investing.
    • Timing is tricky, but one approach is to start investing gradually based on a thesis.

    Gradual Entry into Investments and Bullish Views on Oil and Copper

    12:38 - 18:59

    • The speaker combats the tricky timing of investments by gradually entering into them when they have a thesis.
    • They have been bullish on oil and copper due to factors such as supply and demand, depletion rates, and the need for alternative energy.
    • Despite the compelling case for copper shortfalls, its price has remained the same since 2007.

    Market Manipulation in Silver and Oil Markets

    18:44 - 24:57

    • The speaker noticed unusual behavior in the silver and oil markets, where large amounts of contracts were being traded at once to manipulate prices.
    • This behavior suggests that someone is intentionally trying to move the price of oil and silver for their own benefit.
    • The speaker believes that there has been market manipulation in the oil market for a while, making it difficult to untangle.
    • Despite this manipulation, individual oil wells and plays are not seeing an increase in activity, which would provide more oil supply in the future.
    • Market manipulation is not limited to smaller markets like silver; even large markets like oil can be influenced by a single player or entity.
    • The speaker mentions the possibility of central banks being involved in these manipulations, as they have preferred incentive programs on exchanges like the Chicago Mercantile Exchange.
    • Central banks and other non-economic participants do not care about the actual supply and demand dynamics but focus on creating a narrative that keeps prices stable.

    Challenges in Commodity Markets and Energy Definitions

    24:38 - 31:08

    • There is pressure to create a narrative that portrays leaders as good and suggests that prices are not increasing rapidly.
    • The London Metal Exchange experienced a fiasco with nickel, where trading was frozen and contracts were undone due to a large player going bankrupt.
    • The failure of the LME to regulate and monitor positions led to the breaking of contracts.
    • The oil industry has been facing challenges, with shale plays becoming harder and offshore production being more expensive.
    • JP Morgan predicts a supply deficit for oil starting in 2026, leading to higher prices.
    • There is speculation that someone has been manipulating oil prices, which could cause trouble in the future but also presents opportunities.
    • Lower input prices are desired globally, creating a headwind for commodities like oil, copper, lithium, and iron.
    • Opening new copper mines may require prices to reach around $15,000 per ton or $7-$8 per pound.
    • Common language is important for effective conversations, as seen in the confusion surrounding COVID terminology.

    Confusion in COVID Terminology and Energy Supply-Demand Discrepancies

    30:38 - 37:09

    • The ability to have a good conversation has become difficult due to the confusion surrounding terms like "case" and "infection" during the analysis of COVID.
    • The definition of petroleum has evolved over time, now including natural gas liquids and refinery gains, making it harder for people to understand the overall system.
    • There is a discrepancy between oil imports and exports, with a net import of 2 million barrels per day in crude oil but exporting propane with only 60% of the energy content of oil.
    • The change in the definition of petroleum is believed to be driven by politics and a desire to present a better picture than reality.
    • Government reporting can be unreliable, but accurate information about energy is crucial.
    • The EIA's recent report acknowledges that shale oil production in the Permian Basin will flatten out starting in 2024 or 2025 before declining.
    • Shale oil has transformed the global oil landscape, shifting from traditional sources to US shale production.
    • When investing in the oil market, there are various sectors to consider such as offshore oil, onshore shale, ENPs (explorers), well-serviced companies, and drilling companies. Each sector carries different risks and rewards.
    • Tax advantages make investing at the well level attractive for some individuals.
    • Higher prices are expected due to a projected 7 million barrel per day shortfall in supply versus demand by 2030. Companies that benefit from higher oil prices should be considered for investment opportunities.

    Importance of Copper and Uranium for Energy Needs

    36:56 - 44:00

    • Miners are shifting away from precious metals like gold and silver towards green electrification metals due to higher risk-reward opportunities and government support.
    • Gold mining companies with low all-in sustaining costs can trade at one to two times cash flow if gold prices remain stable.
    • Silver has been in structural shortfall for the past 10 years, with Mexico's production decreasing and associated silver from copper mining falling off.
    • Silver is considered an industrial metal with unique conductivity properties that are difficult to substitute.
    • Despite being in a structural shortfall, the price of silver remains the same as it was 10 years ago.
    • Trading silver in the futures market is challenging, and it is considered a risky investment.
    • The recent upgrade in solar panel technology actually uses more silver, contrary to expectations of decreased usage over time.
    • Energy, particularly oil, is the master resource, and everything else is a derivative of it. Mining accounts for close to 10% of world oil daily output consumption.
    • If there is a structural shortfall in oil supply, it could lead to higher prices and impact various industries, including mining.
    • Rising input costs and challenges such as diminishing ore grades and labor shortages may prevent new mines from opening up.
    • Opening mines requires individuals willing to take risks and invest their capital into mining projects.

    China's Strategic Positioning and the Importance of Thorium Reactors

    43:30 - 50:19

    • China has been positioning itself strategically by building infrastructure and making deals in countries like Afghanistan.
    • China's strategy is focused on business and making deals, while the United States is more focused on war.
    • Access to resources will be crucial in the next 10 to 20 years, and China currently controls a significant portion of them.
    • The United States may face challenges in sourcing materials like titanium for military purposes if they enter into a hot war.
    • There could be disturbances caused by the upcoming United States election and an inevitable recession.
    • Inflation is expected to come back stronger than anticipated, possibly around the middle of next year.

    Thorium Reactors and the Future of Energy

    49:55 - 56:27

    • The NRC has approved a non-Westinghouse Mark V boiling reactors design, which is encouraging for nuclear energy.
    • There is a need for a lot of uranium reactors in the West, and there is a strong case to be made for thorium as well.
    • Thorium reactors have a design that allows them to consume the entire fuel cycle and can even process nuclear waste.
    • Thorium reactors are considered safe and can operate without water for cooling, making them suitable for various locations.
    • Compared to solid pellet uranium cycles, thorium reactors burn a higher percentage of nuclear material into energy and produce less waste that needs long-term storage.
    • China has already built a two-megawatt thorium reactor plant in the Gobi desert to demonstrate its feasibility.
    • Thorium reactors use molten salt as their coolant and operate at high temperatures, requiring advanced material science but with solutions already developed.
    • Thorium reactors could be produced in smaller units that fit into 40-foot storage containers and placed in different locations for decentralized power generation.
    • These reactors could provide power for several decades before needing refueling.
    • Governments should consider incentivizing thorium reactor development due to its potential benefits in terms of fuel efficiency and waste management.
    • Cheap energy is crucial for economic prosperity, as shown by the correlation between electricity consumption and GDP in countries worldwide.
    • While the cost of thorium itself is negligible, investments would be required in building and servicing these reactors. Security concerns may limit widespread deployment but clustering modular units could be an option.
    • Upgrading the electricity grid is essential from both an infrastructure perspective and national security standpoint.

    The Federal Reserve, Inflation, and Gold as an Investment

    1:02:05 - 1:08:40

    • The speaker believes that inflation will come back stronger than expected, possibly in the middle of next year.
    • They anticipate that interest rates will need to be higher for longer than most people expect.
    • The speaker predicts a financial accident within the financial sector, although not specifically in banking.
    • There are concerns about unrealized losses sitting in banks and the large number of derivatives.
    • In the past, there have been instances where banks faced significant issues, but government intervention prevented systematic problems.
    • The Federal Reserve's actions, such as setting interest rates at 0% and then raising them, have created problems in the bond market.
    • COVID was used as an excuse to inject trillions into the markets which were already troubled before the pandemic.
    • The speaker expects more intervention from the Federal Reserve and increased money printing in the future.
    • If this happens, gold could become very interesting as an investment opportunity.
    • The Fed has implemented a new rule called interest on excess reserves which allows them to control rates without withdrawing cash from the market.
    • The US government has been tapping into excess reserves to fund their spending.

    Government Intervention and Excess Reserves

    1:14:21 - 1:20:48

    • The US government has been injecting $2 trillion a year into the economy, primarily through excess reserves created by the Federal Reserve.
    • This injection of funds has not led to tightening in the markets yet, but it has benefited big banks and supported their operations.
    • The speaker believes that the Federal Reserve is now stuck with this approach and cannot stop it.
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