The Breakdown - Oil 101: How Easy Money Enabled the Shale Revolution, Feat. Tracy Shuchart

Episode Date: June 24, 2020

Today on the Brief: PayPal and Venmo reportedly adding crypto buying and selling Trump executive order temporarily suspends H1-B visa program Continued growth in bitcoin derivatives Our main conversation: Tracy Shuchart is an oil- and commodities-focused trader in the private equity space known for her wide-ranging insights on financial Twitter (FinTwit).  In this conversation, she and NLW discuss: Why the shale revolution of the last 10 years shifted the power balance in global energy among the United States, Russia and Saudi Arabia How easy money in the wake of the Great Financial Crisis enabled the shale revolution as much as new technology Why after the 2014-2016 oil crash it was inexperienced private equity firms that picked up where banks left off with shale How a growing focus on dividends and cutting costs was creating structural problems for shale even before the COVID-19 crisis How COVID-19 coincided with a contentious negotiation between Saudi Arabia and Russia that ultimately sent prices to less than $0    Find our guest online: Twitter: @chigrl On the web: chigrl.com

Welcome back to the breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond. This episode is sponsored by BitStamp and CipherTrace. The breakdown is produced and distributed by CoinDesk. And now, here's your host, NLW. Welcome back to The Breakdown. It is Tuesday, June 23rd, and today I am joined for a really interesting conversation about Basically, everything you know to get started in understanding oil and the energy markets and what's happened over the last few months, including the crazy dip below zero.

And I'm joined by FinTwit Superstar and trader Tracy Shukart, better known as Shy Girl, her Twitter handle. But first, the brief. First up on the brief in news that broke just after I had finished recording yesterday's brief was PayPal and Venmo are apparently on their way to adding crypto. This is a report from CoinDesk. It is not confirmed by PayPal themselves, but seems to have good sourcing. And basically what we're hearing is that they will offer crypto buying and selling, supported by multiple exchanges for liquidity, including CoinDesk and Bit Stamp. The why it matters on this one is pretty self-evident. First, there is the massive user base of

325 million plus users. Second, it also represents a U-turn in PayPal's relationship to this asset class. As Blockworks groups put it, financial institutions are being forced into Bitcoin. PayPal is rolling out Bitcoin a direct competitor to itself to their 325 million users. You saw folks like Charlie Shrem post screenshots from 2011 when PayPal wouldn't let them or wouldn't interact with them in any way. Brad Michelson from E Toro wrote, Crypto is becoming a B2 feature in FinTech app, similar to how everyone is launching debit cards, hard to ignore Cash App's revenue reports from crypto trading. Scott Melker said, this is backed X10. If PayPal and Venmo are truly entering crypto, then this is arguably the most bullish news that we have seen in this space ever. Maybe most interesting of all came this thread from American Hoddle on Twitter who said, here's the scoop from one of our maximalist brothers inside PayPal as sent to me via DM.

The main driver for adding Bitcoin is monetizing Venmo, so much growth, no rev. Then Cash App comes along, growing faster, making money. PayPal even did a review paper considering Ethan XRP and BTC, though it would be uber-cringe, but they knew their stuff and decided BTC was the way to go. Can't be sure they won't fold given there is money and shitcoins, though. They're building buy, sell, and store functionality into their wallets, Bitcoin only, Target releases end of year. If this bears out the way that it looks like it's going to, this is going to be a pretty significant boost for the space.

My question ultimately, which I asked yesterday on Twitter, is how many more times can Bitcoin be normalized before it just becomes a normal part of the consumer conversation. Next on the brief is the H-1B visa program shutdown or suspension and the America First Recovery. So what happened? Well, last night, President Trump signed an executive order targeting certain areas of immigration, the most notable of which was the H-1B visa for high-skilled workers. We'll come to that in a minute, but in addition to the H-1B visa, this temporary ban also applies to H2B visas, which are short-term seasonal work and landscaping and other types of non-farm jobs, J-1 visas, which are short-term work, including camp counselors and all pairs, and L-1 visas,

which are internal company transfers. So the H-1B wasn't the only thing affected, but it was the most headline-grabbing. Why it matters? Well, there's two reasons that I think are worth noting. First is that there has been a huge outcry from the tech industry. I mean, basically across the board with a very few notable exceptions. The tech industry has a huge history with the H-1B visa. Highly skilled immigrants comprise an inordinate number of the entrepreneurs who build successful companies as well as employees in those entrepreneurs. And for a very long time, America has prided itself on attracting the world's top talent and actually assimilating it into our economy and reaping the benefits in terms of the companies that get built here.

So that's obviously a huge dimension of this is just what this does for America's tech competitiveness. The second reason I think this matters, though, is that we are four months from the U.S. presidential election, and I expect that this is a proxy for how political battles that are going to play out in terms of wanting to rally different bases, in terms of wanting to get the soundbite, get the clicks, this is going to be impactful to economics and economic policy in ways that aren't necessarily designed to be the best for the economy, but are instead to be the best for either one candidates or in others election chances. So this is a proxy for a process that is painful and will play out, I think, unfortunately, again and again in the months to come. Third on the brief today is

continued growth in Bitcoin derivatives. So what happened? Bitmec's parent HDR group led a 3.25 million Series A round in Sparrow, which is a new options trading platform, which is getting some good attraction. Additionally, FTX, which is itself an insurgent kind of startup exchange, has caught up to Bitmex for orderbook depth with emphasis on products like Bitcoin Perpetuals, which are described by CoinDesk as a form of futures contract but without an expiry date and thus without a settlement. Perpetuals have a funding rate that occurs every eight hours and traders holding a position at the funding timestamp receive or pay funding. Why is this relevant? Well, the rise of derivatives trading, I think has big implications for Bitcoin in terms of one who participates and how, and it has implications

for the rest of the industry as there are many reasons to think that it will suck energy and attention away from quote-unquote alt-coin trading. It makes it less likely that we see some sort of quote-unquote alt season, despite crypto-twitters perhaps call for it. And I think you can even make the argument that the type of interest that we're seeing in defy with its yield farming and all these other sort of exotic financial engineering instruments reflects this interest in sophisticated financial instruments over just sort of spot trading around basic assets. There's a clear shift in terms of the types of trading available and because of that likely who will trade as well, both in Bitcoin and in crypto assets in general. All right, last up a quick bonus. I just wanted

to say a quick word about Star Slate Codex. StarSlate Codex is a very popular oft-referenced blog by someone named Scott Alexander, who that's not his full name, and he has worked hard to remain anonymous, relatively anonymous, at least, in the face of often controversial positions. Well, The New York Times was going to do an article about him, mostly about being a little bit prescient when it came to the impact of coronavirus, and they found out what his real identity was, and they told him that they were going to run it. And he obviously asked them not to, because it was a threat to him an actual physical threat, and they said it was their policy to reveal the real names of people. Unfortunately, he decided to take his blog down in an effort to stop the story by making there be

no context for a story by removing the blog. This has sparked a huge amount of yelling and sort of outrage and frustration on the internet for whom this Star Slate Codex blog as a key source of opinion and analysis. For me, the reason that it's so resonant to people, even people who don't necessarily read Star Slate Codex regularly, is that this idea of pseudo-anonymity that is protected feels like something that may be an important part of the future of information sharing and sharing one's opinions. We live in a world where it is getting increasingly difficult to remain any sort of neutral and to share real opinions, especially if they diverge with whatever tribe has attracted themselves to you. And so I believe it's an important refuge to keep

and preserve the sanctity of this sort of pseudo-anonymity in internet spaces for that reason. And it's just a silly position for the New York Times to take. My strong guess is that they back off it. But I think that more broadly, they need to have a discussion internally about this particular policy. It simply does not work and it does not reflect the world that we live in anymore. With that, let's switch to our main conversation with my guest Tracy's shoe cart. As I mentioned, Tracy is best known as Shy Girl on Twitter. She is an excellent analyst and observer of the macroeconomic landscape with a particular focus on oil and commodities.

I wanted to invite her on to give almost a primer for folks who haven't spent necessarily a ton of time in the oil and commodity space, but who know it's hugely relevant for the global economy and who want to have that base level understanding about what's going on. This is the conversation for you. So we talk about basically what the large sort of secular shifts in this industry have been over the last 10 years in terms of the shale revolution. We talk about the Fed's role in creating that shale revolution, or at least enabling it. We talk about what happened with this crazy dip below zero during the COVID crisis. And we talk about what might happen next. We also get into a number of other macroeconomic issues, be it commercial real estate or supply chains.

But either way, I think that you'll really enjoy this conversation. Now, the one caveat and apology is that I recorded this with Zencaster. We were having some major technical difficulties. And in the process, it accidentally recorded via my AirPods rather than my normal microphone. So the quality is absolute dog-b-francly, and I hate it. But the conversation with Tracy was worth it to me to share, even though the sound quality is so abysmal. So with that noted, here is your conversation with Tracy Schu-Cart on basically everything you might want to know about oil. All right. I'm here with Tracy. Tracy, thanks so much for hanging out today.

Yeah, absolutely. Thanks for having me. We talked about this for a while now. Yeah, no, I'm really excited. I think I, you know, I've been a long-time follower on Twitter. And I think one of the things, you know, you do a lot on Twitter, obviously, but there's a combination that you have of clear, like, domain expertise and interest in oil and commodities and energy. but also, and I kind of guess this is a prerequisite of that professional background, a real strong pulling in of geopolitics as well. And I think, you know, one of the things that I'm always thinking about and talking about on the show is how much it blows me away sometimes that we have conversations about economics and macroeconomics in particular devoid of kind of global political context.

So I'm really excited to ask you about a whole bunch of different things. Fantastic. So the first thing I want to do is, you know, kind of our audience comes from a huge different walks of life and backgrounds. And, you know, oil has been in the headlines in a huge way, particularly with this crazy moment where prices went into the negative range, right? And that's the type of thing that gets attention, even if you've never spent a minute thinking about that, you know, from a kind of a professional perspective. But I want to maybe go back and start just a little bit further back and how help people understand maybe how the global power dynamic around oil

has changed over the last five years or 10 years, particularly in the context of Shale and what Shale has done. So I wonder if we could almost set the stage for before the COVID-19 crisis. You know, what was the state of energy and how had we gotten there? Well, if you look back, I mean, Shale has, you know, Shale basically, we had this shale revolution really, I mean, it came on up a little bit earlier than 2008, but that's kind of really when, you know, it kind of started, you know, it kind of blew up. And we've kind of had different moments in the shale industry. I mean, we've had different times that, you know, it's kind of crashed and come back again. And remember we had that 2014, 2016 oil crash. And

then, of course, just the recent one. So kind of the little bit of background about Shale is, you know, Shale who came on, there was a bunch of wildcatters, right? Banks threw a bunch of money at them. And then we had the 2014-16 oil crash. Banks kind of were burned, so the private equity guys got involved. They were like, yeah, this is great. and they threw a bunch of money at shale then, you know, oil prices went up and everything was good,

except for the fact that, you know, this whole time, the shale industry kind of has been mismanaged in a way. I mean, there hasn't been a lot of, you know, fiscal responsibility, the way that a lot of these guys run their business is, you know, they're over margin. They're not making money at any of these prices, but money kept, being thrown at them. So they just kept doing what they were doing. So even after the first crash, when banks got burned, wouldn't give them any more money,

they had the private equity guys come and give them a bunch of money. So that's kind of a little bit of a background on the shale industry. But they can move forward, moving up, because of the behaviors of these companies and how they were run and things like that. And certainly not all

them, but a good majority of them. What happened is that, you know, starting in around 2015, we started seeing a lot of bankruptcies, obviously, and every year since then, even though oil prices have gone up, they haven't gone up to, you know, that, you know, we were over a $100 a barrel. We haven't even gotten close to that in the last five years. And so there's not making money. So just coming into this off, fresh off of the oil crash of 2014-16, these guys kind of never really rebounded from that, right? So we saw from 2015 to 2019, say, I mean, there have been over 200 bankruptcies and things like that. So going into this year, and this is pre-COVID, I, I had. I did. I do. I have been over 200 bankruptcies and things like that. So going into this year, I

I did a Real Vision episode with Danielle DeBartino, Ruth, and we kind of went over, you know, our concerns about the shale industry and the fact that we saw a lot of bankruptcy is coming, a lot of insolvency, a lot of defaults, and things of that nature, just coming into, you know, 2020. Then what happened, obviously COVID demand drops off a cliff and, you know, oil starts falling drastically. The next step that came into this particular series of events is the OPEC meeting in February when they couldn't decide on exactly what they were going to do. they post on the meeting again. They met again in March to see the state of things.

Russia said, I think everything's fine. I'm going to walk away from the cut deal. They had a previous cut deal that they had been working together. OPEC plus no-PEC nations, which is basically Russia and allies. And Russia basically walked away from the table. And Saudi Arabia at that point said, well, if you walk away from this deal, then forget it. We're tearing up the entire deal and we're going to pump as much as we want. So starting April 1st, they raised their production to 12 million barrels per day in a complete

demand crisis. And that's when we saw oil. Basically, when that contract rolled off that at the end of April is when we saw prices go negative because they just flooded the market in a serious demand crutch. And it just went no bid, basically. There's so much to unpack. I want to, I feel like that's a really, really great framing setup for, for the first part of this conversation. But let's start, I want to go back, actually, because I thought the episode that you did with, with Danielle on Real Vision was excellent. And one of the kind of key feces of that show or that discussion was that the shale industry was as much a byproduct of the availability of capital in particular types of cheap capital in the wake of the great financial crisis as it was a technology

innovation. I mean, is that accurate? Yes, absolutely. That's what I meant. When I said, you know, people were throwing money at, I mean, literally, thanks for throwing money at them. And then, you know, private equity guys started throwing money at them. So, you know, really they had all this access to capital, but their business model, you know, was never what it should have been, right? And this is the private equity guys, too, you know, no, just based on what you were kind of discussing at the beginning of this show, this wasn't like experienced in oil private equity, right?

These were people who were learning on the fly. Exactly. Absolutely, because they saw all this money. They saw, you know, all these guys producing oil. You know, it was kind of Wild West kind of, you know, shale industry. It was still new. It was still exciting. You know, obviously the oil business can be highly lucrative.

And so that's what those guys, you know, that's what those guys saw. Do you think, too, that, I mean, obviously at the same time this is happening in oil, you have across the board private equity having to kind of look for farther and farther out and riskier and riskier things, right, just to get returns. Do you think it was part and parcel of that as well? Oh, absolutely. I mean, you know, you heard for, especially during that time we were hearing where, you know, private equity had nowhere to go.

You know, they were just looking, you know, they had so much cash built up. You know, the VC guys were the same way where, you know, they just had so much money. they were just willing to go anywhere with it. So, yeah, absolutely. Yeah, I mean, it's really interesting. Like, I feel like the story, when, you know, when we have a little bit more perspective and context, the story of some of the kind of excesses of like the soft bank V.C. era

will be, you know, kind of compared and wrapped up together with the private equity and, you know, exotic adventures like Shale. Right. So I want to also ask just kind of clarifying around this idea of the fundamental business model being offed. I mean, obviously it's not as simple as what I'm about to say, but is it roughly as simple as how much it costs to actually run these productions was too much based on where the global market for oil actually was? Yeah, I mean, absolutely. I mean, you have to understand, I mean, it's, you know, your cost of doing business is not only getting oil out of ground, but you have to understand these are like tight oil plates, right? So it's very difficult, you know, they use horizontal wells and they have to basically pressurize, they send in like a water chemical solution, basically into rock formations to draw out the shale. And that's why a lot of natural gas comes out with that. that you know people talk about flaring and things like that because natural gas is a huge byproduct of that because you're literally in rock formation. So it's not like you're out to see, you know, in conventional wells where, you know, the initial costs to start sort of that project is there's, you know, it's time consuming and it's very expensive up front. But once those costs, you know, it's time consuming. And it's very expensive up front.

but once those costs are, you know, completed, the actual drilling is a lot less expensive. Now, with Shale, the startup costs are not as much, and that's another, I think, appeal to sort of the private equity guys because, you know, the initial startup costs of nothing compared to, say, a deep well project. But to keep it going, you know, requires a lot of money because these wells, you know, these wells, you know, they run dry quickly. That's why they drill so many of them. They have a well-declined activity level, meaning over time they produce less and less. So you have to keep drilling more to fill that void, right? It's kind of like a funnel. Well, and this is, I think, you know, something that I've heard folks like Art Burbank talk about the structural problems with shale even before the crisis often had to do with this particular factor of it, which, you know,

if any given site is producing 30% less, you know, year over year, that it's a model that depends on constant movement and drilling, right? So the idea of being able to, you know, we're jumping ahead a little bit to COVID, but shut down production, then flip it right back on, becomes a little bit more complicated. Right. So, and that's why they have a lot of these things. They have what we call duck wells are drilled, but uncompleted wells. So they'll drill. So they'll drill. them out so that they can bring them online a lot quicker. Now, we do have a substantial duck well base, you know, that we can go through, right? So, you know, what will happen, say, now after, you know, demand has gone down and now

we're starting to see demand come back. Now, what these shale players will do, most likely is, you know, they'll start with their duck wells first before they actually. you know, move on to actually producing. So they'll go through the inventory that they have and their duck well inventory. So going back, there's another interesting kind of contrast that I want to ask you about, which is on the one hand, you're identifying these sort of structural problems with the business model of the industry on the basis of, in part, the cheap, you know, kind of flood of available capital. But at the same time, you know, when times are good, when that's working,

capital is there. And U.S. production did go up in a way that changed our relationship with other oil exporting countries. Is that, is that accurate? Oh, yeah, absolutely. I mean, we went from producing, you know, five million barrels a day to over 13 at the height, you know, of last year. So, which, you know, basically put us, Russia, or the U.S. Russia and Saudi Arabia as the top oil producers in the world. So we kind of gained that status with the Shell revolution. How did that change our, I guess, what was the impact of that on how places like Russia and Saudi Arabia looked at us in relation to the, to the, to the

rest of the, to the rest of the kind of the world, or how did it change basically that relationship? And, you know, specifically where I want to get to is an argument, which I've read, I think, that you don't particularly buy that part of the, part of the Russia and Saudi Arabia failure to reach agreement, let's call it, was an intentional drive or dig at the American shale industry. Right. I do not believe that. Not at least in this particular case. But obviously, you know, it's, you know, it's, there's enough, the thing is, is that the oil that we produce is very light, right? So we're producing a completely different kind of oil than Saudi Arabia and Russia. Russia, year rails, it's very heavy crude. So they have a completely different customer than, you know, the United States.

Most people think that oil is interchangeable. Oil is just oil, right? But if that's not the case, it's crude quality matters. So there are different grades of crude, and they all kind of make different things. For instance, the very light crude that the U.S. produces, mainly produces, a barrel mainly produces gasoline. That's really all you can get from it because it's so light. So in order to make other products with it, you have to get, and that's why we're still an importer. You have to import heavy crude to blend with it to get the other products that we need, such as, you know, jet fuel, kerosene, et cetera.

So basically the point here being that although it certainly was something important that was relevant for, you know, places like Russia and Saudi Arabia, it's not, it didn't make them irrelevant in any way that would change, that would so dramatically shift that that relationship. Right. And they have, I mean, you think about it too. I mean, they're mostly, both of them are, but mostly competing for, you know, the Asian market, because you have to think, you know, we do, you know, obviously ship some to Asia, but, you know, it only generally happens when WTI is at a major discount to Brent's because of just merely the shipping cost.

So that's not really our market. Asia's not really our market, whereas, you know, it's Saudi Arabia and Russia compete. for that market tenfold. Yeah, I want to come back to China and China's kind of demand for cheap fuel and how that affects things. But first, just for people who are, this is totally new for them. Could you define WTI and Brent just so they have a frame of reference? Right. So WTI is just West Texas intermediate. All that means is it's the oil stored at Cushing. U.S. produces a lot of other different oils that you never hear about it. You only hear about the benchmark. It really is only, you know, the oil that you trade on screen, you know, WTI that we talk about really only pertains

to one particular grave from the permeant that's stored in cushion. But there are other kinds. Brent actually refers to the 40s, the Norwegian oils. There's four fields that they have. Well, they added a fifth now in that particular basket, which is the Brent's basket. And that's just a heavier sour crude, meaning it has more sulfur in it. but Saudi Arabia and Russia, I mean, everybody has their own kind of crude grades that they sell. It's just the two that you hear about and that, you know, what most contract, most pricing is based off of is one of those two contracts. Got it. Okay, great. Thank you. And so, okay, so let's come back to when things got crazy earlier this year.

So we're going with the assumption that this is not some intentional attack to try to take down shale. So then let's talk about what actually happened and the calculus, I guess, of MBS and Saudi Arabia on the one hand versus Rush on the other. And maybe it's important to go back a little bit to the kind of agreement that they were operating on before this. Right. So they came together. They came together in 2016 after that crash. You know, because they needed to, I mean, OPEC's whole goal is they want to stabilize the oil market. Obviously, they want higher prices, too, but really their stated goal is to stabilize the oil market.

Because, you know, they needed help in that particular time. The United States being that we don't have national oil, right? So we couldn't really join that kind of collaboration. So Russia and partners decided to join together to help stabilize the oil market. Now, you know, I think the thing is, is that, you know, Russia and I always kind of joked about it. I was like, you know, Russia hates this deal, right? You know, because prices started to rise again. I mean, we got up to like $65 last year.

And, you know, Russia initially thought they were going to be in this deal for a year, not three years. Right. I think, you know, they just, they had been wanting out anyway. Oil prices were fine for them. Their budgets based on $42, their fiscal budget. We were, we spent most of last year, you know, within the $50 to $60 range. So they were kind of tired of that deal anyway. It's just unfortunate, you know, what happened at this meeting. I think nobody really understood the gravity of the demand the loss at that time. You know, Russia's stance was kind of, well, let's see, you know,

because at that point, you have to realize it was only in China. Nobody realized it hadn't gotten to Europe yet, really. I mean, that we know of. I mean, I'm not going to go into the theories on that, but, you know, it hadn't really started in Europe, hadn't got to the United States. So their stance was kind of, you know, well, let's just wait and see how bad it is. And unfortunately, it got really bad.

So in some ways that the like maybe not even just a political overcalculation in terms of, you know, either party being aggressive about leaving this deal, more just that happening to coincide with this massive demand shock that they didn't really realize how big it was going to be. Absolutely. Absolutely. And, you know, I mean, and the Saudi response to say, well, you know, we extend this deal or there's no deal at all, you know, I think they were trying to prove a point. You know, that's where it kind of got like the tit for cat kind of thing. And eventually Russia did come to the table. You know, you can argue whether or not that was the correct way to handle the situation. But it certainly did exacerbate everything. Like, I don't, you know, I don't believe that we would have seen that kind of draft. A negative $37 oil had that sequence of events not occur.

in that particular way. And what was the, just so we round out this story, at least on a basic level, what was the storage dimension of that negative 37 price? As far as how we got down, because it basically, so this is where, you know, kind of the layperson really started to notice this. And there was, there were these questions of, was there actually enough storage capacity to bring all this oil in or as these contracts expired, you know, where, what people we're going to do with it basically right obviously that was another concern as well you have to

understand when these contracts expire I mean this happens after options expiration everybody rolls and most brokers make you roll I mean usually generally anybody left after options expiration is supposed to be an actual physical oil trader meaning they are either supposed to be able to supply or or take delivery of right So that contract was very illiquid at that time. There weren't a lot of people left in that market. Everybody has rolled, hedge funds rolled, retail platforms, rolled, and things of that nature. It turns out there was one China bank that still had their clients in. And I heard something about I broker.

So anything that possibly could go wrong absolutely went wrong. You had speculators in that contract. You know, people were worried about the storage situation, which never panned out. I mean, pushing, you know, everybody thought pushing was in the full, which never happened. And, you know, it was just a whole series of events. And everything that could have gone wrong possibly went wrong at that particular time. It's so wild. So, you know, my perspective is.

is one of someone who's is kind of a passive outside observer. What was it like with folks who had been in this industry for a long time watching this, I mean, this Lemini Snicket-esque series of unfortunate events all happen at the same time? Was it just like disbelief? Yeah, absolutely. I mean, I watched oil price go. I mean, it literally happened like the last 20 minutes. And it was just all of a sudden, like, I thought we got close to like zero, right?

and I thought they're going to stop this, right? But and then there was just a void, literally a void, and it just went, it was crazy. So no, none of us have ever seen anything like that in our lives before. I mean, that was nuts. And we kind of had a clue because CME group actually had sent out a letter saying we're going to let prices go negative. And what happened is that they already knew that they were going to do negative pricing. They sent out, I think, a letter on the food. But then, you know, they went over the wires.

And as it got approach zero, they said, you know, I think I saw it all over the wires. CM is going to let this contract go negative. And that was another unfortunate thing that happened at that same time, right? It was just an incredible series of events that just led to the ultimate event. It's wild. It's wild. It's one more notch on 2020's bedpost. at this point.

Exactly. Yeah. So, okay, so let, now, okay, so we go negative. Everyone's in disbelief. Right. What has happened then over the last couple months? Because this is now, it's hard to believe it, but it was a couple months ago in April, right? I mean, a couple months ago and literally were like almost $80 higher.

Is that crazy? And OIL is only $40, which is not really even that expensive, technically speaking. But yeah, I mean, so what happened is, well, first, what happened is, you know, everybody went all the retail platforms, everything, you know, all the trading platforms, you know, went on hyperprotective mode. So a lot of retail were locked out in the first two months. And so they had to change things, you know, within the system because most people's platforms, you know, couldn't handle. negative numbers. They had U.S.O. had to change the way that they allocate their basket. Now they can't just be in the next month. They have to be, you know, I think they're spread out until December now. So a lot of things changed technically, you know, within just the trading world.

But on the fundamental side of that, you know, starting May 1st, we had a new production pact, you know, you know, Russian and Saudi Arabia got together. So starting May 1st, production, they started taking production offline. Cushing wasn't filling up. Like, you know, everybody was all worried about. I mean, there is a ton of storage. I mean, there's a ton of oil and storage out there. Make no mistake.

And there's a ton of floating storage more than we ever have. But even at the height of the last storage crisis, which was 98. You know, we never actually ran out of storage, and it was almost as bad as it is now, but, you know, technically we never ran out of storage that. I mean, we didn't run out of storage yet now either. So, you know, I think obviously the OPEC meeting,

the NOPEC meeting, then that, you know, sort of calm the markets, storage not running out, sort of calm the markets. Now we're kind of at that, you know, we've kind of been in this $4-5 range right now. So oil's kind of taken up, taking a pause here. BitStamp is the original global cryptocurrency exchange. Since 2011, BitStamp has been the preferred exchange for serious traders and investors, trusted by over 4 million customers, including top financial institutions. BitStamp is built on professional grade trading technology.

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about oil, not kind of in the short term, because we're now hyper-focused on this narrow band of time. But I'm really interested in what you watch for, what type of kind of large-scale shifts in power are going to be relevant for the story over the next six months, year, five years, whatever. But before that, one of the things I want to kind of shift into, and this is the perfect kind of reflection point, is I remember right when this was happening, we started to see the first headlines about Robin Hood, because all of a sudden you saw as these crazy headlines of, you know, negative prices and things were happening, all of a sudden, retail investors in Robin Hood specifically

were piling in. So I pulled up actually a Bloomberg piece from April 22nd, and we weren't really recognizing the Davey Day Trader effect yet, right? So the article is titled, Mom and Pop piled into biggest U.S. oil ETF during historic route. And it was about how, so this was Wednesday the 22nd. And the number of investors on Robin Hood had spiked to 152,000 from something like $60,000 in the week before.

And it's interesting now, in retrospect, because obviously, so much of the last month's narrative conversation around the markets has been about this retail effect and everything going on there. But have you been watching kind of the Robin Hood rally broadly speaking? And if so, what's your, how do you make sense of it? Yeah. I mean, I've said it before. I mean, a lot of people, you know, get mad at them or, you know, I don't know, feel some sort of hostility towards them. But really if you look at, you know, you know, most of the stuff that they're kind of buying is they're buying the cheapest things out there, right?

Like, USO was a dollar when they started buying it, right? So, you know, if you look at a lot of the stocks that they trade and things like that, they're the inexpensive stocks, right? So, and they do bid them up and, you know, because they're kind of some of the more illiquid stocks as well, right? you know, I don't take offense to it. I kind of, you know, I mean, good for them. But, you know, they're not, I guess they don't, you know,

hurts goes bankrupts that they pile in. I mean, I think it's just because they look for, you know, things. I think that they look for things that have declined so far in price. But, you know, if you think about it, you know, if you read any kind of, you know, books about hedge funds or whatever, you know, basically they're looking for stuff that's 80% off. So the mindset's not that much different. Yeah, it does.

I thought you had a great tweet about it. You said, everyone complained for years that there were no speculators in the market. And it was man versus high frequency trading. Dave Portnoy has brought human specs back to the market. That's what makes it a market. Yeah. I think it's a really relevant point. I mean, listen, you know, so a couple things that I've,

found fascinated about it is one, Portnoy, hold aside performance in market, you know, like obviously he's kind of created this whole him versus Warren Buffett thing, because it's great for the media. But my general belief is that he is the harbinger

of death for financial media, which is so boring and routine and same zies in its analysis, you know, and like that type of force. I mean, he's a total wrecking ball. I think when it comes to the media side specifically. And so, you know, of course, the kind of gatekeepers of financial information are going to be absolutely terrified of it. Or we kind of try to, like, include him in a segment in a way that, like, makes them feel safe, even though he's literally a harbager of their destruction in my expectation.

I mean, he's a marketing genius, right? He's a marketing genius. We created this whole thing because I guess, what, his sports betting thing? Like, there's no sports. Yeah, he's poor. Like, there's nothing. There's no sports. I mean, barstool sports is no sports to talk about, you know?

Right. No, I think there's definitely that. But I think that the other piece that's interesting is, you know, I've heard the argument, which I'm totally sympathetic to, that, you know, part of the, part of the logic for a lot of the people trading is that when you have a, you know, we spent 12 years since the great financial crisis, totally focused on propping up asset prices as kind of the main mechanism of monetary policy in this country. Right. And in that context, you have people, like, that's great if you can own assets.

But for the people who are, it gets harder and harder and harder to buy into that system, you know, whether it's in terms of housing prices or in terms of just what your money gets you in the stock market, this is an insurgency that's trying to take it back because they just don't believe that it's going to triple down because it hasn't. You know, and I think that that's an interesting, I don't think that for, there's a huge number of these folks for whom that they're not sitting there like that. It's just a fun thing to do and it's ridiculous and it's, you know, why not? then there's FOMO, but I do think that it's an interesting, an interesting point that I've made about this too. Yeah, I mean, absolutely. I mean, you know, they're not sitting around going, you know, equity, you know, equity prices are too inflated. You know, they're not looking at things like that, literally, you know. So, you know, and the market does keep going up. I mean, right? Yeah. Right. They're not wrong, right? Right. You know, I mean, you know, it took COVID to bring us,

you know, to deflate that bubble a little bit. And now we're right back up there as soon as every central bank freaked out and, you know, dumped everything at it that they possibly could in the span of a week. And up we went. I think I have a tweet. Somebody that said, oh, my God, you marked the bottom because it was like the 23rd. I don't know. It was right when Powell Central Bank basically said, we're throwing in the kitchen sink.

And it was literally like March 23rd, like the bottom of the market. And ever since then, the market spent straight up. And, you know, too fast for some and things like that. And asset prices are inflated. I mean, they're trading at multiples. They should not be trading at right now. We're not even have people back to work yet. But it is what it is.

So I think, you know, a lot of people may be upset. You know, they're upset about that. The market's dangerous. You know, asset prices shouldn't be trading this high. And I think that maybe people get irritated. Yeah, there's definitely, there's a little bit of a kind of like psychic fracture for between like, let's put it this way. There's pretty much unanimous agreement that things are overpriced, overvalued, and that, you know, so much of this is driven by central bank interventionism in markets. But at the same time, the psychic fracture comes because some people are willing to say that, acknowledge it, and then trade the hand that they have or the market that we have.

And other people have a hard time accepting that because it's so wacky compared to their priors, right? And I totally understand that. It's part of why I don't trade because it's really hard for me to, like, kind of get outside of my own sense of what should be and just understand what is. It's probably why I trade more oil that I do these indices. Yeah, totally. Well, this actually brings me to a different question, which is, what is your sense of, not so much the markets around oil right now and how they've recovered, but the fundamentals around oil in terms of demand. You know, there's kind of almost conflicting signals in some ways. But what do you make of where we actually are right now in terms of recovery or not?

I mean, I think we don't know. And that's one of the things that we can't really quantify right now. I think, you know, I think oil's gotten a little ahead of itself. I mean, we are seeing demand improvement on one hand. But on the other hand, we have so much excess to draw down before we can start really talking about, you know, $60 oil. Again, I mean, there's just too much, there's just too much in storage right now. we're producing and there's too much in storage until we actually start seeing some solid demand.

So I think in the near term, you know, I think, you know, these 40 areas is probably where it stalls out. We may see a pullback. I mean, again, it completely depends. Is there going to be another shutdown? I mean, there's too many things you can't really quantify right now. There's too many factors involved in everything. you know, if oil starts getting, you know, to $50 to do, does everybody in OPEC just say, forget it, it's a free-for-all, we're going to produce as much as we want because we've run into that issue before. So there's so many factors you have to look into for the near term, you know, I'm saying from, say, here out to, you know, the end of the year or so.

But if you're talking longer term, due to all of this, I mean, I'm looking out to like 21. 22, you know, I think we're going to have severe supply shock the other way. So I see oil prices going much, much higher because all of these companies cut back on CAPEX. In order to keep investors happy, companies been focusing on dividends and watching capital expenditure. So going into the future after the supply comes down, you know, like I said, looking out to 21, 22, I think we could have a supply shock, but the opposite way, whereas we're not going

to have enough supply, being that, you know, I don't think bankruptcies are done, so we're going to have, you know, a severe cutback in the amount of companies out there. Of course, they're going to be, you know, the big, the majors that are in shale right now, Exxon and Chevron, they'll pick up distressed assets. But, you know, but in general, we're just not going to see that, I think, going forward that kind of production, because companies haven't invested in their future enough either. And that's not only in the U.S., you know, all of the majors everywhere, you know, you hear about, you know, everybody, Norway, many of the OPEC nations, things like that. I mean, everybody wants, you know, cut back on

on CAPEX for oil and exploration. So I think we're going to have a problem. So right now I see oil prices remaining depressed until, you know, something materially improves. But moving forward, you know, beyond this, I can see, you know, a possible inflationary oil spike. Was that shift in how people treated CAPX based on the, How much was it based on the just the kind of the market for oil and the price for oil versus the returns that people were getting in other industry context?

Because the story of obviously people investing in the short term, be it buybacks or whatever you want, as opposed to investing in long-term resiliency is a huge part of the discussion right now. And certainly a big part of why we've kind of shown ourselves to be so fragile. But how much was that kind of industry-specific versus part and parcel of that larger shift over the last, I know, five or ten years? Well, I think it's, you know, it's kind of a shift. But, I mean, I think it definitely came to play, you know, again, you know, over the course of the last five years just because banks got burned, you know, private equity guys got burns. You know, banks are very, you know, reluctant to lend to these guys right now. you know, they do, but, you know, it's definitely not their first choice right now. So in order to, you know, stay afloat, you have to cut something, right?

So they cut capital expenditures because that's, you know, one line item off your books, right? And investors love that every time a company would announce CAFX cuts, the stock price went up the next day. So, you know, that's what investors wanted to hear. that was a light item, you know, being fiscally responsible, things like that. But in the long run, then you're hurting your, you know, your future, right? Future production runs. So I think we're going to have a, you know, until you can, you know, start up CAPEX again, we're going to have a both kind of a void, I think, and which could, you know, a supply void.

And just, and that, again, it's not just in the United States either. There's plenty of, you know, all of the majors are doing the same thing. So you mentioned earlier Russia and Saudi Arabia competing for the Asian oil markets. Where does China in particular, I guess, fit into the larger global oil equation? Well, I mean, basically they're what I call the buyer blast resort, right? They're insatiable. So they never had an SBR. So a few years ago, they decided that basically most countries have 90 days to cover of SPR, meaning you have 90 days in case, you know, worldwide catastrophe happens and there's no oil left or, you know, everybody pretty much has 90 days to cover generally, not everybody, but that's kind of the going rate.

So China just started this a few years ago. So they, and 90 days to cover for them is obviously a lot. Right. So, you know, they've always been the buyer of last resort, what do I call it? Because they'll just buy no matter what, because it doesn't matter if they actually are consuming it, right? Because they need it for storage. So they've been big buyers in their particular love it when oil prices. are low. They particularly don't like it when oil prices are high. So, you know, they've been a really good customer for Saudi Arabia, Russia, you know, other other Gulf nations. They've bought some from

us in the last, you know, a couple of years, not really a ton. But the worry, kind of the worry is, And it's always been kind of the worded that people have kind of talked about is what happens when, you know, they're done most stories. Like what happens when they have their 90 days to cover, right? But they're constantly building out storage, which in turn creates its own problem because it creates kind of a false demand, right? They're filling out their SPR. They're filling out other storage. They keep building out storage.

So they kind of pulled the cards as in, what if they stop? Right. Like, what if they don't, what if they're happy with the amount of storage they have, right? That could part of serious crib and the demand, in the global demand factor. Wow. Yeah. So what, I guess, it hasn't been conversation about that possibility in the wake of COVID as everyone is trying to figure out, you know, what, what manufacturing capacity is coming back online, what actual kind of domestic demand, you know, are around the. world is coming back online? Is that something that people are discussing actively now, I guess? You know, I mean, people are because, you know, I, and I extend out a few charts on it, it's because, you know, they have, you know, their floating storage is the highest

it's ever been. It's a manageable number. They could add more. But, and then also their onshore storage. So, I mean, people are watching it for certain. within the kind of the global system what are fault lines that are more that aren't just kind of production and market related right so you mentioned and I don't know how much this this tweet had to do with with oil specifically but you said I don't think that people understand the magnitude of

the China India clash right now this potentially could completely change the Belt and Road initiative landscape but so I'm interested in that particular kind of because I thought it was is really interesting. But in terms of oil as well, you know, you know, you spend your everyday thinking about this. What are you watching in places like the Middle East and with places like Russia? It used to be wake up every morning and scan. You just wanted to make sure nobody bombed somebody or, right? That sounds terrible. So that's not really, really that kind of concern anymore. I mean, it's, you know, obviously, you know, you have the Libya issue and things like that. But, you know, I think with COVID, it's kind of shifted the narrative that way rather

than, you know, sort of towards violence and things like that. I mean, and Russia's, Russia kind of does what Russia does, right? I mean, they, they were involved in this deal, but they always produced more. And they, you know, They said, okay, yeah, we're, you know, so they've kind of always been, I mean, this is the actual first time they've actually cut down on production. It's in all reality, right? Because what they used to do is they used to ramp up production before the meeting and then ramp it back to the same level that it was and say, oh, yeah, we cut production. So this is actually the first time that you could tell they were worried because this is actually the first time they actually have cut back on production, which is interesting. But, I mean, Russia kind of does what Russia wants to do, right? What are the other kind of big picture global issues that you spend time thinking about

that you think could shape, you know, either the oil industry specifically or just kind of world economies more broadly? I mean, by way of example, there's obviously been during this COVID crisis a huge uptick of the talk about reshoring and de-globalization, you know, is that a force? that you see having an impact on this? And what are the things, if any, are kind of top of mind for you like that? Yeah, I mean, obviously, I think that what's going to happen, you know, we're kind of starting to see that.

There is going to be sort of a global shift of reshoring supply lines and things like that. Or are moving, you know, I think we're going to see a global manufacturing shift in general. So, you know, what I'm looking at is, you know, what, you know, the U.S. best options are South Korea, Vietnam, India, Mexico, you know, South America will likely be beneficiaries of, you know, a lot of that production getting out of China. You've already kind of seeing Apple has moved over to India for some of its manufacturing. So I think you're going to see just a global shift in general. And the United States isn't the only country that's concerned about this.

You know, India's worried about this. You know, South Korea, you had Samsung move there, they're manufacturing back to South Korea for a lot of things. So I think it's just, you know, kind of you're going to see a global shift in manufacturing. A lot of people are going to bring, you know, manufacturing home, things like that. You know, if you watch pharmaceuticals in particular, those are the kind of industries that were sort of bee shifting, automobile manufacturing, things like that. How does currency competition, and in particular, at any given moment, the comparative strength or weakness of the dollar play into the shape of the oil industry?

I look at it and really I look at the Norwegian croner and CAD really because those are really the commodity currencies for oil, right? Because Brent's contract, Brent's is Norwegian contract. And Canada, although they don't produce a ton, their currency still very much moves in sync with oil and oil. a lot of other natural resources as well. So really, those are the kind of currencies. I know people say the stronger dollar, then you have a weaker oil price, but it really is not a one-to-one ratio like that.

The correlation goes in and out. So, you know, really when I'm looking at sort of the FX arena, you know, I'm looking at NOC and CAD more so than the dollar, even though obviously higher dollar prices put pressure on commodities in general, you know, oil is not as affected by it, in my opinion. Now, Euro used to be because Saudi Arabia used to hedge using Euro. Their FX hedge for their oil was using Euro. So that used to be a lot more, but they kind of gotten away from that. So interesting. It's super, super interesting.

Zooming out, I guess, what are you, what are the most important things? For someone who's interested in how oil is going to shake out over the next six months, what should people be paying attention to? What should they be watching for? I mean, I would watch, you know, for obviously, really we need to see an uptick in demand, right, all around. And we are, but, you know, we have to the factor in, you know, really the airline industry. I mean, that was a huge, huge pullback in demand. Now people are going back to work. So, you know, I'm also watching, you know, how is the structure of the work environment changed?

Are people commuting to work anymore or are they, you know, are they at home now? You know, are they driving in from the suburbs because they've moved out to the suburbs instead of, you know, being in cities taking public transportation? Are people even taking public transportation? you know, when will people feel really safe to get on public transportation again? So kind of all those kind of things when you're looking at the demand factor situation, kind of all tend to, you know, I mean, this is a very interesting time, I think, just in general, because a lot of things are going to change and not change like, you know, necessarily for the worst. I think it just, you know, like work at home, work from home, you know, what kind of all.

offices are you going to have? I mean, I look particularly at like commercial real estate. Are people going to cut down on commercial real estate because they don't need as much space because now they can have their people work from home? You know, are they going to consolidate because they haven't been, you know, up in fronting for months? And now they have all of these costs that, you know, in our spaces sitting empty. So, you know, kind of looking at that all in general should be really interesting. Commercial real estate is really kind of like what I've been paying to paying attention to. That's my new kick after after supply chain that I talked about for months, I think. My new kick is watching commercial real estate. Yeah, I mean, it's it's really

fascinating for sure. I mean, it's it feels to some. I mean, I'm interested to see if this is your take as well as one of the more obviously threatened areas in terms of like actual demand destruction and fundamental shifts and habits. And I've heard some people argue the opposite, right? The contrary intake is like, well, if you need more space per person based on new regulations, maybe it's a wash, you know, but it feels, I mean, given the number of everyone that I've seen whose other companies are like, you know what, fine, you work from home if you want to. Right.

And, you know, people are having layoffs and things like that. I mean, I've heard a lot of companies who just look, they're consolidating space. They're shutting down, you know, restaurants, things of that nature. You know, if they have multiple locations, you know, Starbucks just shut down a bunch of restaurants, things like that. So those are kind of the things that I'm looking at because they're going to, people are going to consolidate right now, in my opinion. I don't think. Yeah, I don't know. I understand the contrarian side.

I really do, but I'll be watching to see how that manifests. Well, and I think to your point as well, there's also the, you know, I'm speaking or that argument, I think a particular has to do with like office space. But then there's a whole retail dimension, like AT&T has announced that they're going to close like 250 plus locations, right? And it's, I mean, ultimately, how many people do you know for whom like the AT&T store or the Verizon store is the main way that they interact with that company versus just on line around the phone. Exactly. And thinking about malls.

I'm thinking about malls. Is that kind of business going to come back? That kind of mall business? I mean, how many malls were already kind of, you know, experiencing, you know, a downturn. I mean, there's so many empty malls in the United States now. Now, now, you know, is that, you know, I'm watching that area too because that's a lot of retail space as well. Do you have, whether it's an oil or one of these other spaces, any perspective,

right now that feel really contrarian to where people are in the market? You know, I don't really know because there's so many conversations out there all going in so many directions, right? I don't think there's really anything that's just, you know, that contrarian because I've heard so many crazy things. I mean, it's interesting. So I'm actually, so I'm planning a show on Wednesday that I'll just do myself. So I do like kind of half of these shows are with guests and then the other half are me just analyzing things.

And the show that I'm doing on Wednesday in my head, I'll probably change the name a little bit. But at my head it's are the Bulls or the Bears write about the economy, question mark. Yes. Yes. Like that's that's, you know, because it's so. And I'm basically going through, you know, I don't know, four or five different areas. There are six different areas of the economy. And it's like here's the Bulls.

The numbers that are like, I suggest for the Bull case versus the Bear case. And you really can find it. I mean, like I think that, um, uh, you. you know, kind of people's like regular housing, right? Not commercial real estate, but just a personal real estate is one of these like very, the stories that the data is telling are really all over the place, you know? Exactly. But there's a bull in there.

I mean, you know, what, the mortgage data that just came out was really great, you know, which I think is part of, you know, that pends up demands as well as, you know, I think there's that, you know, my theory is people are getting out of cities and moving to the suburbs after this. So you can find good data everywhere. You know, retail sales were just good. I mean, not, you know, spectacular, but a lot better than anticipated. So there is really good data out there.

It's just, I think that really you need to see, like, how long it takes for people to actually go back to work. And, you know, what happens when, you know, unemployment benefits run out. out or they can extend it and things of that nature. I mean, I guess you could just prolong this. Governments can just prolong this. But, you know, I don't think we have any. I think the data is improving, but we don't really wait until, you know, 90 days out,

you know, six months out. Or can people pay their mortgages at that point? Are they still not working? You know, I just don't think we have enough. We're not far enough along to. really see what the bigger picture really is. So right now, the market and everybody's getting excited about any good, you know, piece of information that's not, you know, tremendous.

I mean, the bar sets so low, right? It's kind of like if you set the bar low enough that everything's a beat, like if you're, you know, like watching earnings, right? So set the bar really low and then it's a beat even if it's terrible. So right now everybody's just, you know, it's good to hear. The market likes to hear. people like to hear that, you know, some of these things are starting to pick up, but I just don't see, I think we need more data. I think we need a longer term to really, you know,

decide what the effect is because right now we're just, this is pure stimulus mode, right? Yeah. Well, and even more than that, it's, I think we have, you know, I have to stop myself every time I want to say post-COVID world, because the reality is, even like the term second wave, I think at this point in the U.S. is a misnomer. It's just the same wave that moved to different places. You know what I mean? Like if New York had a second wave, that would be a real second wave. But this is the X factor, of course, with all of this information.

And to your point is, you know, we can talk about like pent up home demand all we want. But if all of a sudden there's, you know, six million white collar layoffs like Bloomberg. You know, Bloomberg economics did a study where they suggested that six million jobs were under threat. And they could be way off, you know, in either direction, I think. But if all of a sudden that starts to happen and, you know, you see more of what you saw with Hilton just laying off 2100 kind of more professionals, white pilot executive types, that very fundamentally changes a lot of these questions. And it's all still in the context of what the hell this virus is going to do, which we just don't know. Right. Exactly. I mean, it's just really hard to qualify right now.

So I think, you know, we'll find out really what the damage is when it's hindsight. But cold comfort for everyone out there trying to figure it out. But absolutely too. No, but you know, I just think we need some more, we need a few more months of data. We really need to see how this pans out. You know, to me it's just a little too early to get super excited, although obviously I love seeing good data. Well, maybe by way of closing, are there any of these shifts which you see,

see happening or either happening because of this strange crisis that we've been living through or just being accelerated by them, do you think are actually net positive for the world? I actually think that, you know, I think moving supply chains, some supply chains out of China, I think it's, you know, good for everybody because, you know, the manufacturing, the manufacturing landscape has changed there, right? They're no longer that cheap labor country anymore, you know, they sort of moved up. So, you know, I don't think it's a bad thing that, you know, to kind of reshore some of that or kind of to, you know, spread it around to other countries, not have everything so, you know, centralized and be so dependent on another country. I mean, I don't

see that as a bad thing. I don't know. I don't know. Because I was thinking, are people going to spend less? Do you think people are going to be more frugal? They're going to, you know, care about quality of life over quantity. More. I mean, right. Well, the fascinating thing I think that you're getting at, which is something that I wrestle with a lot, too, is like a lot of the things that seem like they might be like net beneficial or good for human beings aren't good for the economy. And that makes the question like, oh, how did we set up the economy, you know? It's like savings rates going up, people being more resilient, people quality, you know, treasuring time with their families instead of buying things at malls. It's like, yeah, but unfortunately, the economy was designed for the opposite of that. And kind of here and lies the problem, right? Right. Exactly. Exactly. Yeah, it's a weird, it's something that I haven't reconciled other than.

Like, I can't like, yeah, I can't like really, I don't know. I want to see, you know, I just want to see what happens. I'm not going to get that at this question. No, I think it's a, it's a tough question. I mean, listen, I think the supply chance, you could have just stopped the supply chain answer. That is a very legitimate and serious answer that I think a lot of people are thinking about, you know, or just a national security issue as well. For all countries, like you shouldn't, you know, be that dependent on one country because what if happens, It's what if happens. It's exactly what we saw, a breakdown of all these supply chains.

Nobody had backup. People had to shut down before, you know, before it even hit Europe, you know, European countries were shutting down because they couldn't get their parts from China, right? And then you just realize, you know, kind of what a mess the supply chain system was. It'll take time to ship those things, but I think the ship will be net positive. Yeah, no, I think that's... That's absolutely true. Well, listen, I have kept you now for quite some time.

I really appreciate you going so in depth and helping people understand what's been going on with oil and just your perspective on a lot of these issues as well. For people who want to follow you and get these insights on the regular, where can I find you? At Shy Girl, it's C-H-I-G-R-L, because somebody had Shy Girl. And they've never even used the account once. So I'm like, come on. So I'm on Twitter, and that's where you can reach me for now. I have a website that's got some old information on it.

I haven't updated it. It's got some oil stuff on there. If you're interested, it's just shy girl.com. Awesome. Well, Tracy, thanks so much for spending time today. I really appreciate it. One really notable thing from our conversation was the degree to which capital and the nature of capital and the expectations of capital shape economic outcomes.

And on the one hand, this is obvious, right? We know this. If you have investors who have a particular type of expectations, it shapes the type of company you're going to build. But it's hard to find an example where it's so dramatically clear in the context of oil. We talked at the beginning of the interview about how this glut of cheap money in the wake of the great financial crisis enabled this highly speculative, still very nascent industry to thrive. We talked to the Talk then about how private equity sort of picked up that banner and ran with it, even though they didn't know very much about this industry, because again, there was so much money sloshing around that needed to find increasingly riskier things to deploy against. And now we talked about how

over the last few years, there's been pressure to reduce capital expenditures, to reduce research and development, to reduce these things that might make companies more resilient because the availability of profits in the forms of buybacks and other dividends from other parts of the space, other sectors in the economy, the oil industry, the shale industry couldn't keep up. So really, it's sort of live by the easy money, die by the easy money in a lot of ways, and that is a structural issue that has to do with the way that things are designed right now. So it's a really interesting case study that I think has larger ramifications than just this oil industry itself.

Anyways, guys, again, I apologize for the quality of that interview, but hopefully you agree if you made it this far that it was worth the less than perfect listening experience to get the information underneath. Until tomorrow, guys, I appreciate you listening and be safe. Take care of each other. Peace.