Animal Spirits Podcast - Talk Your Book: Hedging the Different Types of Inflation

Episode Date: June 6, 2022

On today's Talk Your Book, we spoke with Don Casturo from Quantix Commodities and Kristof Gleich from Harbor Capital to discuss how to hedge inflation with commodities.   Find complete shownotes on our blogs...  Ben Carlson’s A Wealth of Common Sense  Michael Batnick’s The Irrelevant Investor  Like us on Facebook  And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you by Harbor Capital. Go to Harbor Capital.com to check out their all-weather inflation-focused ETF. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions in the

securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, you listen to that Odd Lots podcast with Greg Jensen a few weeks ago, right? I did. I feel like among smart-ish macro people, there's a growing drumbeat that the inflation stuff, even if the Fed can throw us into recession is going to be here for a while. Like, their structural, secular inflation. So I think here's the argument. There are going to be countries that want to shore up their own supply chains and their own resources and materials

and become energy independent. And that's going to take a lot of government spending. And that's going to keep energy prices elevated and that's going to keep the prices of materials elevated and all that government spending is going to keep inflation elevated. I think it's simpler than that. that's obviously the second part of it, but I think the simpler part is that the war in Ukraine and Russia being a huge energy exporter is so even...

But that's a cyclical thing, not a secular thing. Well, but this is causing the secular stuff, no? Like this is... So you're saying this pushed people more into the secular... Yeah, because my point is that demand can cool off, but oil prices can remain high. And that is the scenario that nobody is excited about. Right. So we've talked in the past about how there was 10, I don't know, 10 or 12 years where commodities just did nothing. And not only did they do nothing, they crashed and they never really came back. So I think most of the broad commodity indices were down, I don't know, from like 2008 to 2020, 30 to 50 percent in some cases, over that entire period when stocks went crazy. And it was kind of like this fool me once shame on you type of thing where people got into commodities in the 2000. and then completely got out. And so now I think people are starting to think about it again.

And it's coming back a little bit. And they're wondering if this is just like a quick spike up and it's coming back or if this is something that's going to be here to stay. Because stocks aren't working, bonds aren't working, cash isn't working. People looking for alternatives. There's one asset class that's working. Right. So we talked today to Christoph Gleish, who's been on the show before for Harbor Capital, and then Don Casturo. And I thought the most interesting thing Don said was that there's different types of inflation. I don't think we've quite dissected this yet. And one of them, what you asked is why isn't gold doing well? And he said, well, there's different types of inflation. And one of them, the dollar strengthens, which is going on

now. And one of them, the dollar weakens. And that was like the 70s, I guess. He kept calling it the debasement. Right. A debasement inflation, which is what we're not seeing that, obviously. Right. It's the opposite of that. And he's saying that, that probably has confused a lot of people. So anyway, I think we get into some interesting stuff on inflation here. It is probably kind of scary for some people, but I think it's worth hearing that. For some people, what? You're not scared? No, I'm saying for a lot of people that are latching onto this narrative, it is scary, yeah. But I just think it again, I'm pounding the drum in this forever.

I think it just opens up the need for more diversification. I think that's the main takeaway. But anyway, here's our talk with Christoph Gleish and Don Castero. We're joined today by Christoph Gleish. Kristoff is the president and CIA at Harbor Capital. We're also joined by Don Casturo, who is the founder and CIO at Quantix Commodities. Gentlemen, thank you for coming on today. Thank you. Thank you for having us. We're going to start with some mixed signals in the economic inflationary prints that we're seeing. We got lumber down 50% from its highs,

fertilizer down 30% from its highs. However, we still see crude surging, and we got some inflationary prints from the EU this morning that was at, I think, all-time highs, at least in recent data, up 8% year-over-year. So, Don, we'll start with you. Where are we? It seems like it's obviously no longer transitory. That ship has sailed. And we're now, I don't know how many months into this, but it seems to not be getting any

better. Are we in the middle? Where do you think we are in terms of pricing increases? I would argue, I think we're still in the early stages of an inflationary regime. Oh, God. Even the examples that you brought up there, lumber and fertilized. are coming from extreme highs, which is why they're able to fall 15, 30%. Those were short term, not short term, those were spikes that are receding from a spike

high, the broader basket of inputs into the economy that sort of measure inflation from like my perspective, it didn't see those spikes are still on their upward trend. And it's for the reverse reasons, I would argue that we're still in the early stages. And the fact that even though we're seeing year on year and month on month high inflationary increases, it was coming from such a low base that the absolute numbers and the levels that prices have gotten to across a broader basket are still really not that high. What are you basing this on? The capacity to build some of this stuff out, the demand supply characteristics? What is it? Because I guess thinking through what brought inflation down in the first place and what made

its disinflationary was obviously interest rates were falling, but also we had demographics and technology was making things more efficient. And all that stuff still seems to be kind of in place. It seems like it's more of a supply demand and balance. Now, like, what is the reason that we could keep seeing higher prices going forward? I think there's some structural things that you didn't mention. I would agree that technology is still a force that is deflationary. But there are some structural items that are beyond supply and demand that are structural in nature that have definitely changed. The two principal ones we would like to point to are de-globalization.

The world over the last couple of decades was exploiting the cheapest sources of labor and resources globally as it was globalizing. That is sort of reversing now when you're getting things like sanctions and splitting the east or west. That's sort of a reversal in trend that's coming out of the Russia-Ukane conflict. The second thing is decarbonization. That is not something that really existed 20 years ago. The world was just trying to find the cheapest sources of energy wherever it can find in fossil fuels were that placed over the last decade or so. There's been a reversal of that. And the world should expect if you're trying to solve for something that's non-economic and that social good,

you may be sacrificing some of the economies of that and having to look for things that are more expensive. Where we are today, look, the annual inflation is running at 40-plus year highs. It's comfortably over 8% year-on-year here in the U.S. And as we mentioned, this isn't a U.S. only phenomenon. This is a global phenomenon. And it's as bad, if not worse, elsewhere as well. So there's definitely an inflationary wave coming through the world at the moment.

I think is relevant for investors because it's doing untold damage through the channel of wealth destruction at the moment. Markets are very volatile and people are overly exposed to financial assets. We mentioned Top Gun. Let's talk about Top Gun, the original versus Top Gun Maverick. We've had in that period of 35, 40 years unprecedented disinflation where financial assets have benefited, whereas now inflation, it certainly seems beyond transitory. We think we're in a different regime. And in a year where a 60-40 portfolio is having strong negative double-digit returns, and indeed really sort of its poorest start ever to a year, commodities are up sort of 35% over the course of this year. Everybody is long financial assets and everybody is effectively

short consumption or commodities. And so you've got this real wealth squeeze that's happening where your financial assets are losing value and the cost of what you're having to buy every day is going up and up and up. As Don mentioned, I think there's different drivers. Sometimes we need to step back. There's the day-to-day, the cyclical, and then there's the longer term, the secular. And at the moment, the secular forces driving inflation and the cyclical forces driving inflation are pointing up and flashing red, giving us the numbers that we see today. We were talking earlier, Ben and I, about when Top Gun came out in 1986, a year later, It was the first VHS cassette that was under $27.

Imagine paying $27 in $1987 for a lousy cassette. I want to ask you this. In terms of where we are with oil, which is obviously a huge component of rising prices, they said the cure for high prices is high prices. And I understand Russia coming out or people not getting oil from them is a big deal. but wouldn't other producers, drillers, be highly motivated to get as much supply to the market as they currently can? How does that process work in real life?

Yeah, normally they would be highly motivated, but there's a force that's keeping them from being able to really act on that infalls, and that goes back to this decarbonization thing that I mentioned, where their access to capital is, you probably reduced relative to it was even five, seven years ago the last time we saw higher prices at the start of the last decade. Can you explain that, Don? Can you explain what that means exactly? What I mean by that is that the ESG, particularly the E element of that in terms of investor activism, taking capital away, well, disincentivizing capital from flowing to entities that were deemed to be contributing to hurting the environment. And you get even the large corporates reacting to that with Exxon

making statements in terms of their future R&D budgets going into not expanding fossil fuel production but looking for alternative energy sources, that has taken away the drilling response. And the other thing that's happened that made that even more so is in the 14-15 shale revolution where we did see a significant uptick in U.S. production, the amount of assets that were held by private entities that were freer not to respond to that investor activism because they didn't have shareholders that were maybe dictating what they were doing as much, those assets have moved in the hands of the larger corporates who are very much responsive to investors saying,

hey, we're trying to disincentivize fossil fuels and move to alternative energy, meaning that there's not as much capital that's flowing to the space that take advantage of the high prices. I've wondered about this. I don't know what the timeline is, but let's say in 20 years, the majority of the cars on the road are electric vehicles, and that takes down the need for fossil fuels. Obviously, it doesn't go away completely. But even if we got to that period that maybe some people want because it's better for the world, do oil prices in the meantime go ballistic because there isn't as much investment made in the space?

Is that kind of what could happen, even if we did get to the right place? You're going to have to thread the needle in terms of the timing of this whole energy transition. I think what the world is going to discover is that there was a great plan to get to net zero from a philosophical perspective. But there wasn't a real agenda laid out in terms of getting the alternatives in place before we cut off what we're using today. And events of the world of pandemic recovery, the Russian invasion of Ukraine is sort of highlighting that, yeah, while we want to get to a place that has lower emissions, we need to have credible alternatives in place before we can do that. And the supply side got cut off, I think, a little faster from fossil fuels than the supply of the alternatives.

And hence, that's leading to some of the spikes we're seeing today. Where are investors in terms of allocating money to commodities? Because if you look at like the asset quilt of returns over the last decade, commodities have had a really, really rough stretch. They've been towards the bottom half on an annual calendar basis for much of the last decade. Are investors now starting to come into commodities? they're still behind? What's going on? I'll jump in, Don, and then you can, I think largely investors are under-allocated to commodities today. I think in a lot of way, investors had a bad

experience with commodities as an asset class going into the financial crisis and coming out of the financial crisis, where there had been just a lot of capex and a lot of investment and bringing on new supply, and given the kind of the anemic recovery coming out of the financial crisis with just de-leveraging and very weak consumers and just weak balance sheets everywhere that you looked, commodities didn't do well. And I think a lot of people left the asset class, but we think the setup this time is very different in terms of the structural drivers over the next 10 years versus the previous 10 years. So I think most investors are under-allocated to this asset class. And I think it's the surest way to bring another asset class that's going to bring

some diversification and correlation benefits to a portfolio. It's certainly negatively correlated to bonds and equities at the moment, as we would expect it to be with where we are at this stage of the economic cycle, which is clearly later stage with demand running well above what supply is able to provide. I don't want to pin you guys down on like a macro, forecast here because obviously that's very difficult. But let's say the Fed raises interest rates high enough and they get what they want and the wealth effect makes people slow in demand slows down and they put us into recession. I guess are you saying that even if we get a slow in consumption for commodities and other things that makes inflation come down, that your stance is

that that's probably a temporary thing where inflation coming down could be transitory. That's the new transitory is inflation coming down is transitory and then maybe it goes right back up because of the supply demand problems? I would say that the first part of that is that commodities themselves are spot assets where what the Fed may be trying to deal with in terms of selling the economy and what that may have in terms of asset prices is going to be felt first with financial access that can be anticipatory like equities where you're pricing in future cash flows and that slowdown has to be wrapped up in today's spot price where commodities are spot assets. They're reflecting the current supply and demand picture and that takes some time to unwind.

you look back in historic economic cycles, commodities tend to outperform late in the economic cycles. You saw that back in 2008, where equity markets peaked in September 07, oil didn't peak till July of 08. If the Fed is able to organize a software, even a hard landing, you're likely to see, and we've already seen it. Equities turn over first and commodities keep going. We're going to talk today about the Quantix Inflation Index. Why do we think gold has had such a relatively lousy run relative to what you would expect it to do. If I just laid out for you the scenario in which we were in, and I gave you all the data points, you would say, buy gold.

And over the last year, I think it's flat-ish. This seems like literally tailor-made. Nobody knows. But if you had to guess why gold's not doing what you would think of do, especially when almost every other commodity is rocking and rolling, what the hell is going on? I'm glad you asked that question because it's core to sort of the framework and how we think about using commodities and inflation hedge here at Quantix. I did a piece about a year ago now talking about the different types of inflation and how commodities play a role in that inflation look, because we were getting questions of investors, much like yourself asking, should I buy gold or should I buy oil? It occurred to me that people are asking because they should be used for different purposes.

Gold is a debasement hedge, which can be inflationary. Most of the commodities we trade, all of those that are in the broad indices are denominated in U.S. dollars. So if the dollar is getting weaker, the price of everything denominated in dollars will go up, rising tide raises all ships. That's where you want to buy gold. And we were in a scenario where gold would have been a good inflationary hedge when central banks globally, not just the Fed, we're trying to stimulate demand by debasing their currencies. And gold is the only commodity that's a true store of value because it's easy to store.

You can fit a billion dollars of it in your refrigerator. But if inflation is driven by an overheating economy, which is a scenario we call a scarcity environment, that's when you want to actually own the consumable commodities. That's when current demand is outplacing supply. That's a different class of commodities. That's the everything else that you're talking about. That's the metals. That's the agriculture.

Those are the things that when the colony is finally overheating, that they're going to outperform. So it's a classic example when you say that you should have turned to. Yes, you should have turned to gold when you're looking at a debasement hedge. But when we're looking at overheating economy as we're in now, it's those consumable ones that are going to outperform. That's a very good point. There's different types of inflation and people think about an inflation hedge. Well, it's, well, what type of inflation are we talking about?

Yes, it could be consumer prices rising as the definition, but it's caused by all sorts of different things. So I'm just looking over the last year, gold's down 4%. And a basket of commodities is up 56%. One of the biggest drivers in that is obviously energy prices, but also you've got agricultural commodities that are going bananas. What is going on in the world? world of agricultural commodities. What were prices doing, I guess, before the invasion of Ukraine?

In Ags, it goes back to my answer about this de-globalization and decarbonization. And Ags is a sector that is experiencing the effects of both of those phenomena. De-globalization is playing more of effect in the Russia-Ukraine contract because Ukraine in particular is such a significant producer of agricultural products, especially exportable agricultural products, because they don't tend to consume a lot domestically. They do export quite a bit. But obviously, if there's a hiccup in Ukrainian exports, given how significant they are to the global agriculture export, that's one element of it.

But the other element of it is this, again, goes back to decarbonization. Bean oil went from basically a 30% biofuel consumption five years ago to up to 45% of bean oil production is now used for biofuels just in the last five years. So that decarmonization effect is having an effect on subsectors like agriculture because they're looking for ways to provide fuel that are not coming from fossil fuels, in this case, coming from agricultural products. Christoph, Michael and I've been talking for the last year or so, how it is gold as a prime example, kind of sometimes hard to hedge against inflation. So when you're looking for a partner for this, what were you looking for in terms of finding something that actually could help hedge inflation? Because there's not always going to be a one-to-one and work over every environment. What do you look for in your team when you were trying to find something that can help investors do this?

So what we look for in managers and specifically in this case with inflation and commodities is really deep domain experience and expertise and finding a partner that really gets and really understands the commodities space and can tailor make a new solution for clients to help navigate this inflationary. environment, it's really important in any asset class, but especially in commodities. This is not a DIY or do it yourself asset class. For example, there are different considerations that one has to take into mind when investing in commodities. Specifically, there's really two things that you need to get right. There's the fundamental piece, which is which commodity do you want to invest in and hold in what weight and in a portfolio. And then there's the technical pieces. How do you get exposure to that commodities as well?

And nuance in commodities are due to the way that you invest in them. You don't hold the physical commodity. You have to invest in futures contracts, one month out, three months out, six months out, 12 months out, whatever it may be. And getting that technical position on the curve and which future you, hold can be as, if not more important than which commodity you hold. And that comes down to something called backwardation versus contango, which is ultimately a kind of a former carry that you're either being paid to hold that commodity or that either

you're paying to hold that commodity. So it's a really important consideration and having someone like Don and his context team to help our clients navigate through those decisions is critical to getting this asset class right. I do think there's a lot of individual investors who've tried to invest in commodities and realize that a lot of the index funds approaches or the indices that are out there are suboptimal or they don't necessarily track what they're trying to track one for one. So if you try to track the price of oil, I think people realize like you can't really invest at the price that you're shown on your screen on Yahoo Finance every day. Maybe you could compare and contrast what you do

with more of an index fund approach. Investing in commodities really, for most investors, involves investing in derivatives because, as Christop was saying, investing in the physical commodity is a complicated thing to do, which requires physical infrastructure and logistics and storage things. Gold is the easiest thing to store, and even then you're not going to put in your refrigerator, you're going to need a vault. If you do something like oil to make a billion dollar investment in oil, you'd have to have a storage facility. I used to say it was as large as the Louisiana Superdome, but probably with a price appreciation over the last year, it might be down the Madison Square Garden, but either way, it's a big building that you would need to make a substantial

investment on a physical basis. So what people tend to invest in are derivatives, which are commodity futures is the most likely way to do that. But in doing so, that's the biggest difference with how people think about it relative to equities. If you own a futures contract, it will deliver into the physical, which you're trying to avoid, but you want to maintain the price exposure without going physical, you need to roll that future into a more deferred future to maintain that exposure. And that process by which you buy a nearby future and then have to roll it to a further defer future can be somewhat complicated and require some skill to do it in the most effective way. And what you're referring to, Ben, if people try to invest in U.S.O, for example, to invest in oil,

they'll notice that what they're getting in the return on that index-based USO investment doesn't match what the spot price of oil is. And in fact, on a broader scale, I think that's discurs a lot of commodity investors across the whole asset class. I was looking at this data this morning. If you go 20 years back, the BCOM index, which is a basket of 23 different commodities, is up 38% over those 20 years. Not good. Not good at all. Anybody who made that investment, that's a miserable return, especially when you consider, if you look at the spot price of the component commodities over that period, they're up four and a half time.

Holy shit. The sticker price of everything that's in the basket is four and a half times more than 20 years ago, your investment's only up 38%. So addressing the role yield, which refers to this process of going from one future to the next, as a very important process which most investors are somewhat fearful of and maybe don't understand, which that's something that our history of being involved with commodity index business for as long as we have, that's what we address. And with the way we approach the market in our Quantix Inflation Index, which is the back. behind the Harbor ETF is up six times over that same 20-year span.

So it's possible to get positive returns with commodities if you're thoughtful about how you're managing the process. Is managing the risk, is that easy? Is that skill or is that like every commodity manager can do that? Is it just not best in like a passive product? It's something that you have to be aware of in terms of even the product construction. When Christop was talking about the ETF being actively managed, it's actively managed versus, but it is benchmark two, a prescriptive index that's rule based. So it doesn't require

dynamic decision making that is on the fly if we see something happening needs to happen. We do that in our hedge fund. But within this product, there are thoughtful and strategic ways you can do that can be prescriptive. And it mostly relies on picking where on the curve to be and when to move and then ultimately also being aware of those commodities that tend to have the highest drag. Natural gas, while the price is exploding especially recently recently, is a very costly commodity to to try to buy and roll over the last 10 years, it's exhibited on average at 25% negative roll yield. Every four years, the price needs to double for you just to be flat just by having to go through that rolling process. What is it about not gas that seems to leads to somebody blow

up? I feel like whenever there's a commodity trader blows up, it's always a net gas. Mostly due to the fact that it's very difficult to store. When you buy a stock, you don't need to think about that. You're just transferring cash and you own the thing. There's no complication of something like that could be cash and carry because there's no complicated stores dynamics involved. Macass is the most difficult commodity to store and as a result, you get things that lead to wild movements in the time spreads, which can blow people up.

Speaking of blowing up, Don, this story sort of came and went with the nickel story at the London Metal Exchange. I see that not only do you have nickel inside of the index, but it's also the facility that uses the LME. Can you talk about what happens? there and is that what under the bridge? Is all forgiven? It may be all forgiven. It was a pretty chaotic and almost incomprehensible that it could actually have happened. When I say it,

the thing that I found most surprising is that they actually unwound trades and busted trades that actually happened that morning. I understand how there are scenarios where what may be best for the market is to have some temporary cooling off period that you close the market down, allow that to happen. But it seemed very surprising and probably unreasonable to me that you go back and unwind trades that actually happened before you had made that decision. And I think I'm not alone in terms of market participants who are surprised that that happened. In terms of scaling your strategy, it seems like a lot of the differences among the indices that are out there.

I never know if indices or indexes. I guess it depends if you're British. I don't know. But a lot of them, I think the big difference is energy. So like the Bloomberg Commodities Index versus the Goldman Sachs Commodity. index, whatever, like it seems like the biggest difference in a lot of these energy. So how do you decide when you're making your rules-based system? How do you decide which is which and how do you decide what gets allocated to what and what your different weights are on the different commodities

and how does that change over time? The first thing about those benchmark indices, whether it's the S&P GSEI or the BCOM, is to note that they weren't created to be inflation hedges. They were created to be broad diversified baskets in the case of the GSEI, mostly to offset Goldman's corporate flowbook from a hedging perspective to give them some offsetting full. lows. They are used in analysis as they're effective as for inflation hedges because they're representative of the commodity asset class and they hold up well under different scenarios. And I'll get into that in a second about which one is better for what. But they weren't specifically designed to be an inflation hedging tool. And that was the first approach we took in create our

index. It's like, if you're trying to solve to use commodities as inflation hedge, think about weighing the basket in an appropriate way to do that. And we do that by looking at cost through past sensitivity of the representative commodity, something like cotton, which is in a very unrefined state, just the bail that came right out of the field. It takes a lot of processing to turn into a t-shirt even in the most simplest form. If its price doubles the product, it's only 5% of the cost of a t-shirt. It's not going to have that high of effect. Or something like Arbob gasoline is basically what we trade on the screen is the same thing that you put in your car, just with some taxes added on. So that's going to have a much higher effect on inflation. So thinking

about things like that, you can construct a more appropriate basket. But when you talk about the differences between BCOM and GSEI, the more heavily weighted energy, one is the S&P GSCI, BCOM is tried to deal with that and create greater diversification by just putting sector cap weights on and they raise the weights of things like agriculture and gold. Really what it means for us in terms of how our index looks like relevant to those benchmarks, we look more like BCOM because we have the higher gold weight when we think we're in a debasement environment. And we look more like GSI when we rotate the consumer commodities that are higher in GSI when we're in a scarcity environment. And as such, I think you're getting the best of both worlds because of that dynamic reweighting.

We keep talking about debasement. What do you make of the fact that inflation is at a 40-year high and it's global and I get it, but that the dollar is relative to other baskets of currencies, the dollar is on a tear. It's sort of counter to it. Most people think like obviously inflation, you think there's getting more expensive, weakening dollar, not happening. I think it goes back to the difference between the baseman and scarcity environment. If the inflation was being caused by excessive money printing, yes, you'd think the dollar would be getting weaker.

But what's happening now is we're starting to see signs of an overheating economy where there's just not enough supply of stuff to keep up with the demand of it. And the U.S. seems to be in the best position in the most hawkish in terms of trying to slow that down with monetary policy, reversing the quantitative easing and go to quantitative tightening and raising rates, if they're the fastest and the most capable of raising rates, then that I guess I'm surprising that will strengthen the dollar. It sounds to me like, I don't know if you're using some sort of tactical shifts in terms of price signal or is it more like if then, but your strategy changes with the economic

environment. How do you go about building that framework? We look at a couple of different signals. We prescriptively baked that into terms of how we look at the index. So we can look at it at how it would have looked at historically. And it basically comes down to the shape of the yield curve is one thing that we look at to signify whether the world seems to be growing and accelerating in terms of activity. And that can be exemplified by the shape of the yield curve.

We look at trend signals between gold and copper. If copper price signals on a trend basis are outperforming gold, that's a sign that there's real demand in the economy that's causing the inflationary impulse, not the divasement environment. Those two are the most significant things that would tell us where we are. All right. Don, anything else that we missed today? I think we covered a lot of ground, but it's good to be able to get to tell the commodity story because, as Christoph was saying, so many investors had not paid attention to the asset cost because it was relatively lacklester for a period of time. But that does not mean that there's

not opportunities when we had a different stage of the cycle, such that we're in now. So recap, we think the environment that we're in now, this inflation, environment we're in now as a very different environment structurally than we've been in really for the last 20 or 30 years. And because of that new environment and acknowledging that new environment, we think this is going to take new investor tools to help navigate through this. We think the old inflationary regime of 2% targeting is largely a relic of the past. We think there are both structural or secular or long-term drivers of why we think inflation is going to be higher in the next market cycle than it has been in the previous one, as well as the cyclical factors that are leading to higher inflation today, that really is going to take a dynamic approach to changing your commodities allocation, depending on whether we are in a scarcity environment, that like we are in at the moment, or more of a general. debasement environment that we've seen in the past and depending on those environments

really determines which commodities you should hold and why that we think is best done by a leading commodities boutique such as Don and his team at Quantix. All right, Don, appreciate the time. Christoph, thank you. Thank you to Harbor Capital and Quantix Animal Spiritspod at gmail.com. We'll see you next time. Thank you to Don from Quantix and Christoph, Harbor Capital. Remember harbourcapital.com to check out that inflation fund of theirs,

and send us an email, animal spiritspot at gmail.com.