00:00Let's bring it back to the equity market because you have pointed out that energy is the most interesting sector
00:04in the equity market
00:05because it sits at the intersection of so many different dynamics. How are you feeling about it right now versus
00:10a month ago?
00:10I think that ultimately the one thing I can submit oil prices to start is oil prices are wrong.
00:16They're wrong. They're wrong. They if you look at the futures curve, they should be trending lower.
00:21I think the question is at what rate do they trend lower? At the same time, tankers aren't really transiting.
00:27We were reminded that the blockade this morning remains 100 percent effective.
00:31And that means we, I think, are not paying enough attention to the actual declines in physical inventory.
00:38And that even if you start actually getting crude flowing tomorrow, you're 45 days away from actual new supplies reaching
00:46to demand centers.
00:47And so in that environment of there's very few barrels to be bought, the possibility of very few barrels to
00:53be bought,
00:54you wind up with having these scenarios where oil might go not to 90, not to 100, but potentially to
00:59125, $150.
01:02And that has an inflation knock on.
01:04And that is not something the Fed can can easily control through thinking about either rates or money supply.
01:09Who seems to understand this better, short-term traders or long-term investors?
01:12I think that there's probably an interesting time arbitrage between the two where the short-term traders are looking at,
01:20you know, oil prices easing.
01:23They're looking at airline stocks making all-time new highs, forces you to scratch your head.
01:27If you think about the possibility of physical shortages of someone who's certainly very operationally leveraged to what fuel prices
01:34wind up being or what they pre-sold their tickets as being.
01:38And so I think that's where traders are responding to almost literally tweet by tweet, truth by truth, versus investors
01:45are saying, interesting, I don't really see the path forward.
01:49And yet, as much as you think about an energy dominance theme, large oil companies are at least being very
01:56slow with increasing their, you know, historically, the rule of thumb is high prices, cure high prices.
02:03And yet, normally, the cure for high prices is actually increasing supply.
02:07No one's really rushing to increase supply.
02:09And I would suggest over time oil needs to be higher because I think the world has realized that the
02:17choke point, which is the Strait of Hormuz, is probably unacceptable for the global economy.
02:22And so how do you incentivize more production out of South America, more production out of Africa, reroute around some
02:28of the other choke points, which is not just the Strait of Hormuz, but potentially even the Suez Canal.
02:32Depending on what total victory looks like in terms of where parties settle out.
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