In this episode, the team riffs with Doomberg, a renowned energy analyst, to discuss a range of issues from the global energy landscape to geopolitical tensions and the changing nature of warfare. The conversation also delves into the intricacies of the global natural gas market, the impact of sanctions on Russia, and the potential future of nuclear energy.

Topics Discussed

• Discussion on the global energy landscape, with a focus on natural gas and its role in the U.S. economy

• Insights into the geopolitical tensions, particularly the war in Ukraine, and the implications of the fall of the city of Avdiivka

• Examination of the changing nature of warfare, with a focus on the use of drones and the complexity of modern military conflicts

• Analysis of the impact of sanctions on Russia, the effectiveness of these measures, and the potential repercussions on the global stage

• Exploration of the global natural gas market, its future prospects, and the implications for the U.S. economy

• Discussion on the weaponization of the U.S. dollar and the potential for gold to emerge as a neutral reserve asset

• Insights into the potential future of nuclear energy, spurred by Amazon's entrance into the nuclear sector

This episode offers a deep dive into the complexities of the current global landscape, from energy markets to geopolitical conflicts. It provides valuable insights for anyone interested in understanding these dynamics and their implications for the future. The discussion with Doomberg offers a unique perspective, blending energy analysis with geopolitical understanding, making this episode a must-listen for those seeking to navigate the intricacies of the global stage.

This is “ReSolve Riffs” – published on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

[00:01:35] Doomberg: Always a pleasure to be with you guys. It's one of my favorite podcasts to record. I'm glad to be back I think this is my third time with you guys.

[00:01:43] Doomberg: At least, yeah. Yeah, cool. Looking forward to it. We always have great discussions.

But, we were talking about this offline, which is the ongoing conflict in Ukraine, and how the mainstream media has been portraying what's going on on the ground, versus what some of the other sources that we have available in the age of information There's so many different sources and actual boots on the ground to verify on both sides.

And so there are some interesting developments here, and the recent fall of the city of Avdiivka, which was, as I understand, correct me if I'm wrong, but one of the most strongly held cities and most heavily armed and fortified. So that seems to suggest that the wave and the momentum in the war has decidedly turned in Russia's favor. I wonder if you might give us a little bit of insight on that.

And we have been studying the war in Ukraine as a team for the better part of a couple of months. It's not something we've written about yet. We're still deciding whether and how we would under the masthead, but it doesn't mean we're not interested in it, and that it's not something that we might discuss on podcasts.

And Grant and I went a lot deeper into the topic than perhaps both of us anticipated as we just recorded that conversation. But the motivation to talk about it on Grant's podcast is the fact that Grant wrote two really prescient pieces on the matter years before the war in Ukraine broke out. One was called Putin on the Ritz, and which, if I could summarize in a way that does the piece justice, it really does need to be read. The West radically underestimates Putin and diminishes Russia's role on the global stage to its own peril.

And I think that was a pretty appropriate prediction of what eventually transpired as the diplomatic negotiations broke down and hostilities broke out in Ukraine. But the other one that was really pressing, it was not your grandfather's warfare. I believe it was called, where Grant got ahead of this whole drones issue and the fact that the entire nature of warfare was changing. Having known Grant and been in and around his orbit for years and having read those pieces, they were top of mind for us as we started looking at this and the motivation to dig into the military side of the conflict hit us over the Christmas holidays, actually. You know, the same architects of our insane energy policy in the West and the same architects of our utterly insane and provably dumb sanctions policy against Putin are also the architects of the military strategy, and therefore, why would we give that vertical of foreign affairs policy any more credit than it deserves?

Just because we don't know anything about it. I, in fact, the things we know about have been done terribly, and why would we assume that the military is somehow different? Now, we have great respect for people in uniform, and the commanding officers. But as history teaches, of course, a military is often constrained by the qualifications and attributes of the political leadership.

And in this case, we wondered whether the strategy of the war was being executed with the same level of incompetence that we have personally observed in areas we know well, which is the energy market, and a derivative of that, the sanctions policy against Russia's energy commodities in particular. And frankly, the further we dove into this, the more alarming it got.

Again, we are not experts, which is not why, it's the primary reason why we haven't written about it, but it doesn't mean we aren't trying to be informed citizens. And, as I described on that podcast, there's this whole array of distributed media out there, and you always have to be careful that maybe some of this is just, you know, propaganda or sophisticated fakes, or but you get pretty good at, yes CYOPs, and you get pretty good at picking that out like, and the approach we took while studying this from the ground up was, we would take the average of what the pro-Ukraine and pro-Russian sides were saying as a reasonable arbiter of truth, and if you just, you would learn a lot more about what's going on long in advance, before it's reported in the Western media. And the two men, the two examples we mentioned on the podcast, one was the firing of Syrskyi, the head of the Ukrainian armed forces by Zelensky, that the power struggle that was going on domestically, it was downplayed in the Western media, had come to a head, especially as you mentioned, the fall of Avdiivka, was really a true turning point.

And, the way the war is portrayed in the West versus the way Putin portrays the war, and we watched with great interest, of course, Putin's interview with Tucker Carlson. I think it, Tucker's treatment by those in the media for having done the interview was interesting. I think Putin didn't do himself much in the way of favors in that interview if we're being totally honest, and I think Tucker did a pretty good job of getting him to speak and allowing free thinking people in the West to assess the situation themselves. And we count ourselves among that crowd, and so, we're capable of observing that war is terrible. It's just terrible when you see these videos of the complete raising of Ukrainian villages and the incalculable loss of innocent lives in both militaries, by the way. We're talking about people in their early twenties, basically dying by the scores of thousands for political reasons. And it's a real shame.

[00:09:04] Richard Laterman: And the fact that we've actually heard, I don't know if this was a Freudian slip of any sort, but the fact that Macron actually suggested publicly, that Europe might deploy actual boots on the ground in Ukraine, which would, I think the fact of, the trigger, I don't know, World War III or something to the effect NATO wouldn't, would in fact be at war with Russia, which was then loudly denied by so many different actors, suggesting how much of a blunder that statement actually was. But the fact that he would actually say something like that suggests exactly what you're describing right there.

[00:10:31] Richard Laterman: Maybe let's press pause just for a second, because I've read and listened to your comments on why the sanctions policy has been so ineffective and it's all to do with price versus quantity, but maybe you can bring that out into the light a little bit more and explain to the listeners exactly what you mean by that and the logic behind why this ultimately is doomed to fail.

It looks good in hindsight, but you have to remember the thickness of the propaganda of the day and the sort of, the analogy would be sort of the unity after 9-11. You know, we're in war, and we're going to do this together, and we support the commander in chief and all of this stuff. But anybody who has spent five minutes in the commodity sector, on the industrial side at least, and wise investors who have tried to play commodities from the outside, knows that commodity players make all their money on price, not volume. And that the inelasticity demand for these essential-to -life commodities is such that it doesn't take much in the way of shortages for prices to skyrocket, and it doesn't take much in the way of gluts for prices to crater.

And we saw this most recently when oil traded for … $37 a barrel and within two years was trading for $125 a barrel. It's the same suite of hydrocarbons, but trading for radically different prices, just because of very subtle supply/demand imbalances. Now, Russia is a major exporter of critical-to-life commodities. In a world where sanctioning their volume would cut their access to the global markets by 50%, prices would more than double and Putin would make it up to make up all of his revenue and then some on price, and still have the extra commodities to sell when the war ended.

And so the only way, if your objective and the stated objective of the sanctions policy was to reduce Putin's revenue so that it would be more difficult for him to fund the war machine, that is a worthwhile objective that everyone would agree that the West should try to impart on what amounts to a proxy war opponent. Sanctioning volume will guarantee, attempting to sanction volume because you really can't, would almost guarantee more revenue for Putin than it has, simply because anything that increases the friction cost increases the price of commodities, and Putin collects on price.

So if you're in the commodity sector, let's say you own a refinery, and refineries are running at 97 percent and you own eight of them, and one of your refineries blows up, you're going to make more money. It's very counterintuitive to people that have never been in commodities, but the price is going to go up by more than one eighth of your production. And in fact, one of the things that happens during commodity boom cycles is that producers get accused of being a little ambitious in their maintenance schedule, because they know that the price elasticity demand is such that if they take a little bit of volume off the market, they're going, the integrated impact across the volume they still have is going to be substantial.

Well, the same thing works in reverse, and to make the point, we have said on many podcasts, the U.S. Navy should be escorting Russian oil tankers to get every milliliter of oil that they produce to market as friction free as possible, for as low a price as possible We should be pumping as much oil as we can, which is what we did in the first gulf war, when Jim Baker went around the Middle East and basically instructed everybody, back when they still listened to the Secretary of State of the U.S., to pump more oil. And we did. And the price of oil stayed low while we ejected Saddam Hussein from Kuwait.

This is a playbook that's well known and why we've forgotten it is a great mystery. So that is what we mean. We've written this on several occasions. We're still doing it by the way, by trying to sanction the LNG volume of Arctic Two, for example. It's insane. It's dumb. It's guaranteed to backfire. It doesn't work. Let's try something different. And you would think two years on, and change, that we would have learned a lesson by now. But the fact that we have it is one of the reasons why we went down the military rabbit hole in the first place.

[00:14:55] Doomberg: So,…

[00:15:08] Doomberg: So it can work for very small players and Iran was a borderline case, but for somebody that is like a major exporter, and prices are set at the margin for a highly inelastic commodity, like Russia, first of all, the world could not persist without Russia's commodities, and we should not want that to happen because it would result in starvation.

Russia is such a major player. There's this denialism in the West. We deny a lot of things about Russia because the West doesn't like Putin. We deny, for example, that Russia is a manufacturing powerhouse. We have politicians arrogantly describing Russia as country with a gas station on it. They're out-producing us right now militarily, and at a tenth of the cost. We have this profit driven military industrial complex, whereas they have a purpose driven military industrial complex, which are two radically different things, and one of them works better when you have a war. It just does. And so, we have this techno arrogance, the Zeihan Analysis that says, you know, once the Western companies pull out, the entire commodity infrastructure of Russia is going to collapse.

Look, you don't have to be a pro-Putin puppet to object to demonstrably wrong assumptions that are guiding policy. In fact, it's the opposite. Like, if our objective is to win this war, this is what we need to be doing, and we're not doing those things. We're doing the opposite. So we assume, for example, that the combination of India, China, and Russia will be incapable of keeping Russian energy flowing. That's insane. I've lectured in universities in China. I've been to the IT schools in India. I've hired people from Moscow State University. We call that the genius school. By the way, if you have that school on your resume, don't need to ask any more questions. The disrespect for the capabilities of your adversary, I didn't see that in the laws of war like that, you should assume they're more capable than they, are and be happy when you find otherwise.

And we have this, Macron is sort of the personification of that Western elitist arrogance, is the only way to say it. And again, to be a critic at a time of war is dangerous, right? I mean, historically, there's a fine line between critiquing policy and, treason is too strong a word, but people have accused Tucker Carlson of being treasonous, for example, for merely going to Moscow and interviewing people, Putin, which they would say is platforming him. But I do think that if you know something's not going to work and you don't say anything, how is that any useful?

[00:18:12] Doomberg: It's well, I mean, it's bullshit. There's no other way to say it. I mean, pardon my French, but I'll give you an example. So there's this professor at Yale, whose name escapes me, but he is a professor of economics, I believe, and his claim to fame, Jeff, Jeff is his first name, Jeff …, or I forget his name, but it doesn't matter.

He's a famous professor in the executive world, industrial world, because he is sort of a whisperer to CEOs. And I know this person as a person who coaches CEOs. And I've seen him present and I've, you know, CEO of a company I used to work for used him as a client and, and he was fine.

He was a good coach. And suddenly he puts out a white paper early on in the war that claims the Russian economy is going to totally collapse. And I just, you know, when I read it. Yeah, Jeff Sonnenfeld, I just found it. So he put out this white paper, it got all kinds of circulation. He's a professor at Yale, and the paper is just nonsense.

Like, it was just the most puff piece of propaganda that you've ever seen. So then you ask yourself, why is a professor at Yale, who knows nothing about charts, I can tell, I never knew him to know anything about these things, writing this piece that is just demonstrably wrong, and then every single major news, the Washington Post, the New York Times, Yale professor says Russian economy is on the verge of collapse.

[00:20:33] Mike Philbrick: And they have a demonstrated behavioral bias towards taking steps that we would not take in the …

[00:20:45] Mike Philbrick: Exactly, and without even thinking twice about it, right?

Like what am I missing? It's just, and there comes a point where we're sleepwalking towards nuclear war here. Like I have military aged children. Last I checked the U.S. Congress needs to vote to go to war. I mean, I would at least like to have my representative in Congress have a voice on whether my kids are going to be potentially, in the extreme event… to hear Lindsey Graham go on national television and say we need to be carpet bombing Iranian refineries because of some outfit called the Houthis are firing missiles in the Red Sea, is the height, like it's dangerous. And I, call me whatever you want. I'm going to call it as dangerous. This is insane. What are we doing?

That suggested to me that the battle readiness of the U.S. Army, or at least a portion of the Western forces was a lot more precarious than we would have anticipated. And so that made me wonder, with regards to, there's a hot conflict in Europe. There's a heating up conflict in the Middle East, with potentially much larger ramifications. There's always that specter of conflict in the Taiwan Straits. What does that say about the ability of the U.S. to face off those challenges? I know I'm leaning on a small piece of anecdotal, but it seems to be a relevant point, given that these munitions have been banned for so long. I don't know if you…

[00:24:01] Richard Laterman: Reverse opium wars, I guess.

So, but back to the topic of issue. We're being outproduced. This assumption that sanctions would lead to regime change, I think, was the war, that was the war strategy. We are going to sanction Russia, we're going to kick them out of SWIFT, their economy is going to collapse, people are going to revolt, and they're going to kick out Putin. We hate Putin, so clearly the people in Russia hate Putin. And that was basically it. That's it.

In my, if you ask me, I watched that 60 Minutes puff piece. We've written about it in a piece called The Peter Principle, where the architect of the sanctions, who, by the way, has just returned to the White House to take over his old role, just assumed he was taking a hero lap, right? You might not recall this, but there was a 60 Minutes segment that we watched, in horror, as they proclaimed that these sanctions were going to kneecap Putin and this would lead to regime change. We'd have a color revolution in Moscow. None of that was true, and none of that, and that would be the axiom of our policy.

This is truly amazing. And here we are, like two years later, Victoria Nuland leaving is interesting. You mentioned it earlier. That is a potential finger out of the damn moment, of we'll see. I don't think a second that Putin is unaware of the importance of the upcoming election in November and the need to run the score before that election. I do think Trump is playing politics with the issue.

We wrote a piece called Minority Report where we talked about how the ouster of Kevin McCarthy might come back to haunt the Democrats, who played a role in his ouster that was under-reported. So these are obviously tricky things. But when you're at war, the right answer is the one you should be trying to find, not the politically sellable one. That's always been our view. And look, we are patriotic Americans. We would like for the U.S. to be in less wars. And we would like for the wars that the U.S. gets into, be ones that we win. Pretty simple.

So I'm trying to get a sense of what that might mean for the conflict, but also, the downstream effects on commodities which I think are the main asset class that is currently affected by all this.

One is that Zelensky's term actually expires at the end of the month, and there are no plans for an election. And there are probably many people inside of Ukraine who are unhappy with the way the war is going, that may have pro-Russian tendencies, for example, or may wish to cut a deal while there's still time. Such talk is being muffled in the Western media today, understandably, I suppose. But, there's also clearly, in watching Putin on Tucker, and again, I would, I would grade him C+ for that performance. I think the half hour opening monologue lost almost everybody, and only those who are truly interested to find out would stick through it, and that was a mistake.

I think I just, this worship of Putin, that the left accuses people who wonder what's actually going on in Russia of having, is just not true, but all that aside, there is a faction within Ukraine that thinks the war is being run poorly, that it is Ukrainian lives that are being sacrificed for American geopolitical objectives, and to the extent that Zelensky is held up as the, as sort of the metaphor for that, his position of sort of staying beyond his term and not holding an election, seems precarious.

I think the firing of the commander of the Ukrainian Armed Forces, Syrskyi, was a gambit on his part. We'll see. These types of things happen when wars aren't going your way, right? Soldiers don't want to go into a meat grinder. And I think the collapse, the chaotic nature of the collapse of Avdiivka is actually what matters more than the collapse itself. It was clear weeks in advance that the Russians were operating a classic pincer movement, and the failure to retreat from that city, frankly, led to thousands of lives that need not, in hindsight, have been lost.

Those are the types of things that make soldiers angry, that make commanders angry. They have guns, and the speed with which metastable states collapse can surprise some. I think once the Russians inevitably carpet bomb their way through the remaining strongholds, it seems like the path from where they are to Kiev is relatively achievable. So my main concern is what response NATO decides is appropriate.

The Macron's of the world, there seems to be a bureaucratic struggle between Macron and the U.K. versus Germany. You know, again, I'm not a geopolitical expert, but the Poland’s and the Estonia’s of the world who view Russia as a severe and imminent threat, would like to harden, but also don't want to do it without at least having America on board. Whereas Germany, you know France, of course, it has a long history of losing wars, which makes one wonder why they keep trying to get into them.

But Macron, basically saying there are no limits. He had this meeting that has been reported on in the French media with the factions of the French leadership, where he said we should have no limits in France as a nuclear power, and presumably no limits includes the use of nuclear weapons. That's quite a thing to say. The thing that amazes me is that we just assume that all that action happens over there. iI can never come here, right? That's the thing that amazes me. Again, and maybe I'm just naive. I mean, but like, we hit, Russia can shoot back. One of the reasons why you don't pick fights in bars is you might lose. I don't know, call me crazy.

[00:31:58] Doomberg: I know, this is something that, I don't understand why controlling the border is a controversial issue. So again, I don't want to come across as like, I've stood in line at customs and border control hundreds of times in my life as I flew around the world as an executive, always with my papers in hand, hoping that the person you're about to walk up to is nice, because they have absolute power over you. They have absolute power over you. They can make your life miserable with no recourse, and it's all theater. Like, why am I standing in line at JFK for an hour and a half to have somebody stamp my passport, when they know me, they know everything about me.

They know why I just went to China. They know who I work for. They know who I'm married to. They know every single thing about me. They have my DNA, I'm sure. They have my eye scans. They have my facial recognition. Like, what are we doing? So we have this on the one hand. I still got to take my shoes off. Like, I'm pretty sure the NSA knows I'm never going to walk onto a plane with a bomb in my shoe. They know that much about me. They know everything about me. They know I'm Doomberg, right? They know how much Doomberg makes. There's no privacy anymore. So why are we giving up all of our privacy if we still have to indulge in this security theater, when at the exact same time, we have tens of thousands of people just pouring into the country, many of whom are military age, man, from countries that don't like us. What are we doing? I don't understand how this is controversial. Now, again, I haven't studied the border issue and I'm sure, you know, that you've all stood in line at border.

[00:34:04] Doomberg: Like I was, you know, TSA-PRE, and international traveler, and I've gone and given them my fingerprints and they scan my eyeballs and I, maybe I even peed in a cup and I don't remember it. Like, who knows? But they know who I am and they know I'm never going to blow up a plane, ever. And I don't want to be in a plane where somebody else is either. So I get it. But like the disparity between crossing the bridge to go to Canada and just flowing over the border in Texas, it just blows my mind. Like why is this controversial? Who could be opposed to it? Like do we have a country or not? Countries begin at the border, right? Like when you go from Detroit to Windsor, you know you're in Ontario because…

[00:34:51] Doomberg: …are better. Right? They just are. I've been on the 401. It's a great highway. Right? I mean…

[00:35:11] Doomberg: I don't know,

[00:35:13] Doomberg: The cartels are buying people off. I mean, who knows, but, I don't understand where the controversy arises. I'd like to, I, honestly, if somebody could explain it to me, I'm very interested to know.

[00:35:27] Mike Philbrick: Yeah.

[00:35:56] Doomberg: Well, look, when I land from Europe, there should be no border control there. Like, that's fine. Let's just do it on both sides. We have, you've all stood in those lines. It's crazy. But what are we doing? You know, you fly into Pearson and next thing you know, you're backed up for four hours and you miss your connection. Why? What are we doing? What, if it's, if we're just going to have people pouring over the border anyway, like if you can afford a first class business ticket from Europe, I don't know, like come on in. Right? I mean, so call me crazy. I don't know.

So we actually manage private and public funds, as well as bespoke separately managed accounts for investors that seek the potential to smooth out portfolio returns in the long run. So if you do want to see that theory that we've been talking about put into practice, please do go ahead and check us out at www.investresolve.com. Now back to the podcast.

And it was fascinating for me to read that. So I don't know where you want to start there that makes the most logical sense for the listeners. But I found that whole line of thinking over the last sort of half dozen articles very, very intriguing, and I think under underappreciated and under realized generally.

[00:38:06] Richard Laterman: We could start with the idea of natural gas being so cheap at this point and how that may have helped the U.S. stay so economically powerful. I mean, the momentum of the U.S. economy to persist, given the rate hikes. And I think this was part of your mea culpa recent tour.

And we like to say that the most important question an analyst can ask when analyzing an economy is, whether or not that economy is long or short primary energy. And the mere posing of that question implies there are two possible states. And just because we came to some prominence during a period where the global economy was in a period of energy shortage, doesn't mean that that's the permanent state. And we spent the month of November doing a deep dive on the global natural gas market for our pro-tier. We wrote a, we delivered a 45 slide presentation to that tier called Simple Molecule, Complicated Markets, a deep dive on the natural gas market, global natural gas market.

And as you alluded to in your question, it is currently selling at an energy equivalent price of $10 a barrel oil in the U.S. The U.S. produces 25% of the world's natural gas. We are a giga power in energy. Canada and the U.S. in particular, combined, are giga powers in energy. And when you're swimming in cheap hydrocarbons and you have a relatively good manufacturing base to feed that into you, this is, these are not conditions for a recession.

We got two things wrong heading into the year. One, we thought U.S. energy production would roll over. And two, we thought there'd be a recession with the Fed hiking from zero to five. Neither of those happened. And one explains the other. The U.S. has been overproducing energy, and natural gas in particular is particularly advantageous for the U.S., for two reasons. One, it's difficult to ship, which means it's trapped by land. And two, it finds wide use across a lot of primary industry.

We heat our homes with it. We use it to make ammonia. We use it to power co-generation facilities that produce both steam and electricity in all manner of heavy industry, cement making and so on. And we have, unlike other petrostates, the U.S. has still, despite the stripping of our manufacturing core and the rusting out of the Midwest, we still have very sizable manufacturing capacity, and the geopolitical tensions, both with Russia and China are driving near-shoring and on-shoring. And so, when you have $10 a barrel of oil and natural gas in abundant supply, the U.S. produces like 25 to 30 percent of all the natural gas in the world. We produce 20 percent of the oil and petroleum products in the world. We produce more coal than we burn. We have 93 nuclear reactors operating across the country. We're an energy gigapower, and Biden deserves very little credit for this.

But Texas and Louisiana are bailing out Biden. And we are producing an enormous amount of natural gas. One of the big reasons why we're producing so much natural gas is because in the Permian, which is the source of most of the world's oil growth, it's associated gas. It's a nuisance. It's a by-product. And with the risk premium embedded in oil, because of the situation with Israel and Palestine and a potential kinetic conflict with Iran, we believe there's probably a 20 or 30 … risk premium embedded in the price of oil that motivates producers in the Permian to keep producing, and you get all this excess gas as a by-product that they would burn if they could.

But now with, the methane agreement in COP 28, tighten all that down. Natural gas today is a buck, buck 75. It's a, a bottle of Coke costs more than a million BTUs of natural gas. It's pretty incredible, so like if you put that in the hands of a manufacturing sector that is tied into it, sitting on the end of the pipeline, we're going to make fertilizer cheaper than everybody else. And yeah, we're going to make corn cheaper than everybody else. And yeah, we're going to make soybeans cheaper than everybody else, right? And we're going to be sold out. And by the way, we're going to be struggling to make money in those industries because we make money, like all commodities do, when things are short.

And right now we're long energy and all derivatives of energy are struggling. Like, you didn't want to be long corn and soybeans this year. And just look at the charts. One of the few conferences we speak at is a private Ag conference, and we made this point like, when production in the Marsalis shale turns over, and when production in the Permian turns over, that's when you want to get long corn and soybeans, because they're derivatives of energy and we're long energy right now. We are swimming in the world's largest supply of ultra cheap hydrocarbons in the U.S. and these are not ingredients that make an inflationary recession soup. The reason why the Fed can raise rates and nothing breaks and inflation seems to be coming down is because we're swimming in hydrocarbons.

Have you been to Saudi Arabia? The sidewalks are paved in gold. We've added two and a half Saudi Arabia’s in the past 15 years to the U.S., plugged into a manufacturing sector that can use it. Same thing in Canada. Like, despite Justin Trudeau, Canada's going to be fine. It's amazing.

[00:44:59] Doomberg: The dysfunctionality of Argentinian politics should not be underestimated. I think you nailed it. And the point is, if we get too dysfunctional in our politics here, this will all turn. By the way, natural gas producers will curtail. We wrote a piece recently wondering whether the bottom might be an EQT, cut a BCF per day of production. Chesapeake, you know, cut production. Nobody wants to produce natural gas for a small fry at McDonald's. And they know that they make it up in price. And so, it's a game theory right now. Who's going to cut, and then who's going to rush back in when the prices come up a little bit so they can make their quarter. Like, this is the nature of the game.

Now, are we at the bottom of natural gas? Maybe, but you could see it was coming, right? And again, you have to be willing to (a) recognize that you were wrong, (b) be willing to admit it, and (c) do your earnest to try to understand it as a job, as an analyst, which is what we try to be. And you've read our stuff, like, that when we get something wrong, we're the first to write about it and say this is why we were wrong, and here's our new position based on the things we've learned. And to the extent that our readers learn with us, that's wonderful.

We want to be in the business in a decade or two, and the only way to do that, I think, is to be consistently authentic as you can be with your audience, which is why, by the way, we hesitate to write about the military situation or the fentanyl situation, because if you get something materially wrong on something that you don't really know enough about to be writing about, then that can really damage you. And, and we respect our audience enough to not bring things to them that we don't, we believe 100 percent of what we publish when we hit Send, but I digress.

So, to the original question of natural gas, it is, look, we heat our homes with it, we make our food with it, we produce steam and electricity with it all across the country. If you add two and a half Saudi Arabia’s to a country like the U.S. that has a lot of inherent geopolitical advantages that Peter Zeihan does get correct, unlike the sort of techno arrogance that we talked about earlier. This is, and then you have a motivated Fed and fiscal stimulus coming out, whatever the long term consequence of that might be. You're not going to get a recession before this election. That's our view.

You just haven't kind of fully conceptualized it yet. Some of the early things we're talking about, why are we approaching the war like this? And we just don't quite understand the motivations, I think, of people quite yet. I found in the natural gas space, when you were sort of laying this tapestry of knowledge and connectedness, the lights started to go on in my head, and I don't think people appreciate the miracle that is the power, that's constantly running everything that we do every day.

And the, and as you say, energy is life and the miracle that that's there, it's underappreciated. These two lamps that are on behind me. The fact that your fridge is cold every morning, it's a miracle that it's on 99.9 percent of the time.

Look, I spent two decades in the commodity sector. I know lots of people in the space and I've toured a lot of major facilities. And if you go to Saudi Arabia and you see what Saudi ARAMCO is capable of, and then you just assume what most people assume about Saudi Arabia, like, they just have no earthly idea what they're talking about. And the speed of technical innovation, to take the U.S. shale, what a miracle the U.S. shale is.

Like, techno-pessimism is sellable. In fact, of course, Doomburg is sort of an, we're very optimistic people. This is sort of the brand itself, because we came up during the energy crisis. People assume that we are doomers by nature, but in fact, we're actually pretty optimistic, and it's more of a play on words, and we're just having some fun with it because we do enjoy the occasional doom scroll. Because we're defensive pessimists, we focus on the worst case scenario and then try our best to hedge against that. But, like, the permadoom crowd just, it's just wrong. Like they just get it wrong. They are shorting human ingenuity and that's a widow maker trade, forever.

The whole AI revolution we think is going to normalize nuclear energy again, and get our energy policy back. Like, there's all manner of things that - the arrow of time and the direction of innovation both flow in the same direction, and if you just look at the miracle that was pulled off in the shale, we added two and a half Saudi Arabia’s in 15 years. And when people thought peak cheap oil was here in ’08, ‘09, by the way, like when oil hit $147, it was intraday and that triggered the global financial crisis. The thing that people don't realize, if $150 oil triggers a global financial crisis, what does dirt cheap natural gas mean? It's got to be bullish. Like if Germany is de-industrialized because it screwed up its energy policy, what happens to the U.S. if we get it right?

[00:51:16] Doomberg: Correct. It goes where cheap energy is, because energy is life. Our currencies are just derivatives of energy. Like you, and so that was our big AHA! Look, we were wrong. Like it's okay. Like you make mistakes. Like we thought there was going to be a recession. We thought there was no way Jerome Powell could hike to 5 percent without breaking something.

He did, and nothing broke. Why? Now, one approach is to say the data is fraudulent. And we see that with every jobs report, right? Like people pick apart the flows and all that stuff. The other approach is to say, hey, maybe I got this wrong and that's okay, but why did I get it wrong? And what can I learn about it? And the connecting of the two things we got wrong, which was we assumed because of drilling activity, that the U.S. production would roll over. And it didn't because technology overcame and efficiency overcame the numbers, which we'll talk about the meta lesson of that in a second. And then the U.S. didn't go into a recession. I mean, it's still hard to find people. It's hard to find good people to hire. I talk to a lot of small business owners because of other aspects of our business, and finding talented people willing to work and show up is hard. Like, it's tight.

We're not in a recession. We're just not in a recession. Now, are the benefits of this currently growing economy equitably shared? No. I'm the first to admit that. In aggregate, like if you're making a bet on a GDP print, and banking on that as a political issue for the upcoming election, I think all things being equal, you have to sort of put that aside, because it's not going to happen.

Now we could be wrong, and if we're wrong, we'll try to figure out why. But the meta lesson is any backward looking metric that you use to analyze the energy industry is manifestation of what you would call survivorship bias, in the stock market. In other words, it can't incorporate the latest technology, rate count, pick your favorite. It is backwards looking and existed at a time where technology was inferior to what it is today. And that is what we got wrong. And that is not something we're going to get wrong again, hopefully in the future.

And so I'm thinking to one of your other pieces about the idea of using the frozen assets that were seized from Russia, and I'm thinking about the weaponization of the U.S. dollar. I mean, the strength of the U.S. economy begets strength in the U.S. dollar. It begets the continuation of U.S. hegemony. But on the flip side, we do start to see, at the margin, still very, very small, but that's how these things would begin, right at the margin, bilateral trades with, between some of the BRICS countries ,and the, let's call them non-aligned powers, and you wrote a piece on gold and how surprised you were with some of the price action, and you're alluding to the Shanghai gold contract and how you expected it to start to converge more into the neutral reserve asset, and to some degree, the physical gold market has, even though the paper market goal has not. So I wonder if you can comment a little bit on that and tie some of these threads together for us.

[00:55:16] Mike Philbrick: You learn more by losing.

And so, up to your question about gold. So I watched with some fascination - this is going to sound like it's a tangent, but actually I think it's the right answer to your question. NVIDIA's price action on Friday. Intraday move was what, $200 billion, right? And meanwhile, gold is setting an all-time high. We'll get to gold in a second, but I'm actually deeply fascinated by Bitcoin at $72,600 as we're talking, and NVIDIA swinging a hundred billion dollars in an hour. A hundred billion dollars used to mean, something like a billion would mean a lot to me. I wouldn't be on this podcast if I was in possession of a billion dollars. I can assure you.

[00:56:13] Doomberg: I would buy an island and you'd never hear from me again, right? A billion dollars, a lot of money. A hundred billion dollars in an hour of market cap swing in the market, darling stock, is put your glass down and think about what that means. And I can't help but keep coming back to When Money Dies, the iconic book about the Weimar Republic. Even though I think a glut of hydrocarbons is not bullish for inflation, we have this amazing lack of confidence, I think, in fiat currency that is starting to spread. You see it in Bitcoin, you see it in gold reaching all time highs, albeit much more measurably and controllably as gold always does. And then you see $100 billion swings, like the mania of the casino echoes of what was happening in Germany in the years ahead of hyperinflation. We are, despite relatively tame inflation numbers, which I would agree with most people, think the government probably cooks those numbers, we are at the cusp of fiscal dominance, as Luke Gromen likes to call it.

Like, we are adding a trillion dollars in debt every a hundred days. I'm old enough to remember, I'm not quite old enough to remember, but I was alive when the U.S. first crossed an annual budget of a trillion dollars, let alone a trillion dollar deficit, let alone a trillion dollars in interest payments, let alone a trillion dollars to the debt every 90 days. We are, it's fascinating to me who's going to be the marginal buyer of these Treasuries, especially as we weaponize the dollar and seize Russia's reserves, which they've not done. So these questions now on the flip side, back to the recession call, interest payments to wealthy investors are bullish for the economy.

So for those that are unaware, each dollar move in NVIDIA I think is $2.5 billion in market cap. And the intraday swing was 100. It's a quarter trillion dollars in the market's quote/unquote objective valuation of what the present value of the future cash flows of NVIDIA is worth. What does that tell you? It tells me something. I don't know what it is, but it tells me something. Like, by the way, NVIDIA's worth more than Canada,

[00:59:06] Doomberg: Right? I mean…

[00:59:09] Doomberg: Yeah, like, what are we doing? Like, what, what does this mean? What does this actually mean? What does Bitcoin at 72.6 mean? And I love the Bitcoin guys, and they like to harass me and I don't mind it. But like Bitcoin is just, I mean, it's predominantly a vehicle for speculation. And here we are, all time high. What does that mean? What does it mean that gold is at an all time high, and that the premium in Shanghai seems to be driving the upward movement, the upward march of gold?

And the Chinese are nothing, if not strategic. And so you have gold being bid up in Shanghai. If somebody's trying to suppress the price in the West, that bluff's going to be called. And so the piece we wrote that you referenced to is called Gold In Resolution, and our prediction was that in 2024, we'll know one way or the other.

We're not saying the price of gold is suppressed in the West, but if it is, we're going to find out, because the rush, the Chinese have opened this physical exchange window that is allowing sophisticated financiers around the world to arbitrage that price and call the bluff of the paper price suppressors, if it's real. That, plus the seizing of the Russian reserves, which would cause people to ponder whether gold might be a better neutral reserve asset than U.S. Treasuries, which is again, full credit to Luke Romen for putting that on our radar. Those two things combined is why we have a relatively large allocation of gold in our personal portfolios, in full disclosure.

[01:02:06] Doomberg: It doesn't really need to be, because in inelastic commodities, prices are set at the margin.

[01:02:12] Richard Laterman: Absolutely, but I am assuming at this point, given the attention, it's grown.

And the plot we like to make is, the price of gold and the price of this premium, and you see these alligator jaws first opening up with the premium expanding, which then marked the bottom in gold and caused this recent rally, and now it's going the other way, which is why we express some caution on the near term price. But if that mechanism exists and the CCP is willing to exploit it, then we could see gold run from here. When I see that happening and I see Bitcoin and I see NVIDIA swinging a quarter trillion dollars over lunch, something is, I don't understand something, and it's time to take a step back and ponder what that might be.

[01:03:24] Richard Laterman: Yeah, I think maybe lastly, we might touch on one of your other pieces, which was this idea of climate newspeak and compelled speech, which is something us north of the border here have been unfortunately, quite familiar with, on the Canadian side. And, I'm just curious because it's yet another symptom of the times, and of this orthodoxy when it comes to groupthink, and we are now facing this idea that if we are not following the Davos script, we could be liable for hate crimes. Is that the general …

He proposed this bill, C-372, which of course, as a private member's bill was not proposed by a Minister or backed by the full weight of the government machinery, but still nonetheless, achieved his purpose of creating significant global headlines, which would make it effectively illegal to say something nice about fossil fuels. These are not power moves, right? These are moves by people who are extremists in their views and can read the polls and want to leave as much damaging mines buried in the ground and laid in the sea as they can, before they are swept away from power.

And I think any objective reading of the Canadian political mood would say that if an election were held tomorrow, we would have a radically different government in place. But while power can be exercised and it is common for people that hold views, that feel as though their ends justify their means, and what end could justify more nefarious means than the literal end of the world, because the people who believe that to be imminent, many of them genuinely do. I think some are in it for the power, but others are full converts to the orthodoxy. And so it's a very dangerous time. I would say like the next year in Canada is a very, very dangerous time to be a free thinking person.

And, so too, is it dangerous here in the U.S. with the upcoming election? It is our view that half of the country will reject the results of this election. And that is not a good situation to be in as a quote/unquote democracy. In fact, the word democracy itself is undergoing a purposeful semantic shift to mean the current slate of leaders retain their power. If you look at what Germany is doing with the AFD, trying to allow that party, if you look at the, whatever you think of Trump, and we think Trump has many deep flaws, the prosecution of Trump by Democrat-leaning attorney generals is not the stuff of stable democracies. And you see what's going on in Canada. Like, if your positions are truly defendable and we would say spontaneously believed by people, the need to outlaw opposition to those ideas is not a sign of power. This is a sign of the incorrectness of your ideas and the desperation of the political actors who are behind such concoctions.

[01:07:23] Doomberg: Yes, and we'd use the violence, the sanctioned violence of the state to oppress our political opponents. This is forever thus. This is nothing unique about history and this cycle works, will turn to, but it doesn't mean that the friction of the transition isn't going to be very, very high. So, it is a very dangerous time, and, you know, we shall see.

[01:07:53] Richard Laterman: Maybe on a cheery note, is there anything that you're working on, anything that we could at least try to end on a slightly brighter note? If we can, if not, let's just go for more, some more …

And so we hosted our February Doom Zoom with a physicist, who gave a 90 minute presentation on the entire sort of front end of the nuclear fuel cycle, which was very fascinating. And we were writing a summary of that. Ultimately I do think that means we'll be regressed to, and the thought police, and C-63, and all of these things, you know, ultimately, the culture and character of Canada and the U.S. will survive this period of adversity. We survived the ‘70s. We survived the ‘60s. We survived World War II. We survived the First World War. We survived the terrorist attacks of 9-11. This too shall pass. The vast majority of the center are free thinking people with good ethics and good empathy. And means will be regressed to, and the harder you pull on the elastic, the quicker it snaps back.

[01:09:13] Mike Philbrick: All right. That's awesome. And, if you've listened to us through and you don't know who Doomberg is, look them up on Substack and make sure you subscribe. The content is always fascinating, and a couple of derivatives deeper than most people are thinking about issues and…

[01:09:58] Doomberg: That was great. And that's the, I couldn't think of a better articulation of our brand ambition. So it was real great. And I always enjoy coming back, looking forward to appearance number four, five, six, seven, and eight.

[01:10:09] Richard Laterman: As we will, for sure. Thank you so much guys for listening. See you next time.

Thanks again.