The Breakdown - Why Energy Is the Most (Geo)Political Market, With Tony Greer

Episode Date: October 29, 2022

This episode is sponsored by Nexo.io, Circle and FTX US.   In this interview, NLW chats with Tony Greer, a veteran trader and author of the Morning Navigator newsletter. They discuss energy markets, inflation and geopolitics.    Find our guest on Twitter: @TgMacro - Nexo Pro allows you to trade on the spot and futures markets with a 50% discount on fees. You always get the best possible prices from all the available liquidity sources and can earn interest or borrow funds as you wait for your next trade. Get started today on pro.nexo.io. - Circle, the sole issuer of the trusted and reliable stablecoin USDC, is our sponsor for today’s show. USDC is a fast, cost-effective solution for global payments at internet speeds. Learn how businesses are taking advantage of these opportunities at Circle’s USDC Hub for Businesses. - FTX US is the safe, regulated way to buy Bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today. - Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell and research by Scott Hill. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. Music behind our sponsors today is “War” by Enoch Yang. Image credit: Malte Mueller/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io, Circle, and FtX, and produced and distributed by CoinDesk. What's going on, guys? It is Friday, October 28. I am so excited for this one. Tony Greer has been a macro trader for 30 years, and for the last 15, has been bringing his insights to market with his morning Navigator newsletter. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation,

come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Also a disclosure, as always, in addition to them being a sponsor of the show, I also work with FTX. All right, folks, Tony Greer has spent a ton of time on commodities and energy and thinks a huge amount about the geostrategic and geopolitical dimensions of the markets. Obviously, if you're listening to this show, you know that's right up my alley. In this conversation, Tony's triumphant return to the breakdown, he lays out how the last two years of U.S. domestic and global politics have shaped the fossil fuel markets in both transparent and opaque ways. All right, Tony, welcome back to the breakdown. How you doing, sir?

Nathaniel, thanks for having me, man. How are you? I'm great. I'm excited to chat. I'm excited to get your thoughts on things. I think people are doing a lot of catching up on and learning. about parts of the market that they might not have understood or felt like they need to understand over the course of this past year. And I think there's got some particular insights there

to dive into. So I'm excited to have you here. Awesome, man. I hope I can help in some way. It's a complicated world out there, but we're trying to figure it out every day. Yeah, right? So let's, so what I wanted to do is, you know, I guess for people who aren't familiar with you, you know, you've been on the show, I think a couple times now. But for those who don't know you, just give a little bit of your background and where you kind of find yourself most drawn and spending most of your time. Yeah, I showed. I kind of go through the arc of my career path saying, you know, the first 20 years out of college were cut in half or the first half. I was a commodity trader and currency troder. I spent the bulk of that time at

Goldman Sachs, really learning everything that I know about troading. That when Goldman Sachs went public right around the dot-com bubble. I wound up leaving the firm to chase the dot-com bubble and trade tech stocks, basically with my own firm. And that was my kind of segue into equity trading and literally sat down to do that with the NASDAQ at 5,000 on its way to get cut in half in March of 2000. And Segway, I wound up having that trading operation arrived for two years and wound up shutting it down, segues into equity sales trading, and wound up having a great franchise built

out at a place called Dalman Rose for the majority of that time where we specialized in transportation, energy, and commodities. And when Cowan brought, after Callan, Bert, Dalman Rose, I wound up going to three different shops in three years. And I decided that I was tired of playing pickup basketball with my relationships and my careers and my friends and clients in the business. And decided to finally kind of lean back on going out on my own. And like I said, leaning on the note that I have been writing the clients for probably 15 or 20 years prior to that, that started with keeping one client informed in the equity market. And it pretty much organically grew to about 1,500,

subscribers. And from that point in 2016 is when I leaped off of the corporate Wall Street train and made a bet on myself and launched the morning Navigator on election day in 2016 with the bet on that Donald Trump was going to win the election and the world was going to change dramatically. And so far all of that happened. And now I'm about to start my seventh year of writing this November. I published a Navigator four times a week and I have a really robust Slack channel with 150 trading ninjas in there that talk about managing risk and trading all day. And I spend most of my time now trying to, you know, really just continue to create a really good product to help people follow markets and kind of give them an inclination of what they should be looking

every day. And so that's what I'm doing now, Nathaniel. That's where we are and, you know, surfing the volatility of this, you know, batch-crazy world that we're trading through right now. Yeah, awesome, man. Well, hopefully some people kind of listen to this and get excited about you producing more content. You produce a lot of content, both for yourself and you're on Real Vision all the time. You're on Bloomberg. You get out there, right?

Yeah, yeah. We stay busy around here at TG Macro. That's for sure. So what I thought would be super helpful for folks is, you know, I was kind of describing this audience as sort of an intersection of both macro, Bitcoin, crypto, crypto, folks. But I think a lot of the folks here are, let's put it this way, they maybe come in the door of kind of crypto or Bitcoin, but then are kind of expanding their view into other parts of the market and trying to really understand what's going on, right? The way that I frame the show is about big picture power shifts.

And I think the last couple years have seen a lot of those big picture power shifts. And a big part of that story is around oil, gas, and other commodities. And so I guess, you know, you spent some time. My recollection is late last year. It could have been earlier this year, being out ahead of some of the changes that you were seeing in those markets. And what I'd love to do is maybe just kind of do a little bit of almost linear TLDR type history of kind of those big shifts that you've seen in that market over the last call it 12 months or so to kind of bring us up to speed with, you know, what we've been looking at for the last couple of months, which I think is particularly acutely interesting in a bunch of different ways. Yeah, man. There's a lot to, there's a lot

one pack there, Nathaniel, but we can start with, you know, I would say quite honestly, since the Biden administration started their aggressive attack on supply, you know, on election day with, you know, on their, the first day of office when they wrote all of those executive orders, a lot of them had to do with, you know, canceling pipeline drilling and banning drilling on federal lands. I mean, the president came into his office saying that he was going to end fossil fuels. And so basically he came in and has been doing every, thing in that direction, which caused the tremendous spike in the price of gasoline, diesel fuel, WTI crude oil, and sort of all the, you know, supplies that come out down the commodity chain from

there, you know, when you when you kind of understand that it, that this investment in drilling is what's necessary to keep an equilibrium in the markets, which is basically means to continue to supply the market with the gasoline and the fuel that it needs to survive. build through an economy. And you see that there's that attack on supply. You say there's only one out for this commodity right now, and that's for the price to go up. Right. So that started literally, you can draw a line directly on the charts to election day

when the Biden administration started that attack on supply. So that's when the trade really kind of got rolling for me. I guess it probably started, I guess, in the March of 2020, you know, market collapse when everything went to zero essentially in the commodity markets, and we have been trading out of that. But like I said, the attack on supply means the price is going to go up and means that supply is going to be diminished. If you look right now across gasoline, WTI, and diesel fuel especially, you will see that current inventories are now tumbling below five-year averages. In addition to that, you've got the president's SPR sales as being his attempt to control the gas prices that he's sent flying out of control now. So now he's approaching it from the other end.

And instead of loosening up some of the restrictions on drilling or something like that, he is pivoted toward our enemies and asking them for all. And they haven't been very receptive to that. So we're in this predicament now where there's sort of a shortage of oil. I'm looking at the diesel fuel spread right now, the front month spread, which has just literally gone haywire to a new hide in a 15 Sigma move, which just shows how irregular mathematically that scale of a move is. And the reason that this spread that used to live at, so let's call it $5 or $6, the front month spread, that's now a $50. spread. So that means that the front month, November, diesel futures are trading $48 higher than the next month's diesel futures. And the reason that the curve is so steep is because everybody is scrambling to get last minute supply of diesel fuel when there is really no diesel fuel.

So that's why you've seen the markets rallying today. That's why you've seen a general bid under the price in the 80s, you've seen OPEC react to the SPR sale by saying if you were going to sell oil into a slowing economy, then we're going to cut output further to support the price. And so that's what happened with OPEC kind of slammed the brakes on the oil slide in the low 80s when they said we're going to cut two million barrels a day. I think that was at the earlier in this month meeting. And so now oil has been holding in there. and with the shortage of supply, you're seeing spikes in all the front month spreads,

which means that the market's getting tighter and tighter almost to an emergency situation. Now, you can also imagine how the people in the oil markets have kind of, you know, revealed the strategic petroleum reserve as, you know, a point of pride that we've got this reserve of oil in case we run into a disastrous geopolitical situation where we might need it. We don't have to go scrambling to the open market and buy it at 100. $100 a barrel. Well, what's going on is now that we're emptying the strategic petroleum reserve, I would argue that there will never be a replacement of the strategic petroleum reserve because if the price goes higher, they'll have an excuse not to go and buy it on the

open market. And if the price goes lower, you know, the administration and the whole green team will use it as evidence that oil is less and less necessary and probably keep pushing their electric vehicle agenda, which directly puts China at the center of that output mechanism, where we're going to, where we would now pivot from the globe, getting all of its energy from oil and, you know, driven mostly by the United States and OPEC to now getting our energy from electronic batteries, where we have to go and buy all of that metal and rare earth metal from China. So essentially it swaps the U.S. for China as the center of the sort of global energy hegemon.

And so that's the predicament that markets have found themselves in. It's created a lot of volatility. It has created a massive bid for the energy stocks as the sort of world is realizing that no matter what goes on with the attack on supply, we're still burning oil at an unbelievable pace and not transferring to electric vehicles quite as fast as the administration would probably like us to. And therefore, these companies are set up to make a lot of money. A great example of that is what's called the crack spread, which is essentially a measure of a refinery's margin, right? That's the price that a refinery can buy three barrels of oil and crack it, like they call the crack spread, into two barrels of diesel fuel and one barrel of gasoline that can then go out into the open market. And that's another spread that used to trade in a $5 to $10 range that is now a $35, $40 spread. and probably the reason why Marathon Petroleum and some of the other refineries are up 60 and 70% on the year this year,

because they are set up to make wild amount of money as, you know, the market sets the price of diesel fuel and gasoline. So all they're doing is essentially being the clearing price for that market and getting that gasoline out to the market, and it happens to be profitable for them. So that's why, you know, we're paying $4.00. that the pump today rather than $1.50. That's why natural gas has caused the price of ammonia and the fertilizer prices to go up and food prices to go up. And that's why your grocery bill is probably 25, 30 or 40 or 50 percent higher than it was

two years ago. And that's what the energy inflation does, is that it forces itself into all the different corners of the ag economy and winds up with you paying for it when you draw it from the store. So that's the predicament that we're in. That's the source of the headline inflation that we're seeing. A lot of it has to do with the Federal Reserve doubling its balance sheet to $9 trillion in the wake of the lockdown response.

You know, that obviously when we increased money supplied by 40% over the course of one year, that's obviously going to cause a lot of deflation in your currency. And where it is filing out is in the commodity markets, where the commodity markets are rallying sharply in every other currency on the world. is getting slaughtered right now. So it's a pretty confusing world out there. But like I said, I want to give you the whole data dump. And now I want to be able to dig into whatever corner of that argument you want to dig into.

Great overview. To what extent do you think that the story of the last, call it year plus, has in a lot of ways just been idealism smashing against sort of reality, particularly as relates to a, an expectation of economics always being a certain way predicated upon political assumptions that have turned out to be untrue? A lot of it. A lot of it is, you know, as we call it in our circle, in the commodity trader circle, we're witnessing the battle of physics versus platitudes, right? And you know which side the platitudes are coming out of. They're coming out of the government that's saying, hey, we've got a climate emergency. If we don't address this emergency, We're all going to die in 12 years, I think, AOC said or something like that, that, you know, the planet's

only got nine or 12 more years before climate. The emergency kills everyone. So they've got the buy-in, you know, from some people that believe that, that say, oh, okay, there's an emergency and, oh, okay, we'll believe that we're causing it. And, okay, we're going to have to go ahead and make the necessary changes and start recycling glass and plastic and things like that and cutting oil production because that will be better for the environment. You know, the physicist's side of the argument that would say that when you decrease the

supply of molecules, you're eventually going to have a massive problem, right, at the end of the food chain. So cutting down carbon emissions is essentially fueling through these higher gasoline and oil prices. What's happening then is that the higher prices are causing manufacturers to reassess their cost structure because now their base load power is costing them 5x what it did two years ago because natural gas is five times more expensive than it was and that's, you know, one of the main uses of base load power, coal being the other use of base load power and that's probably five to ten more times expensive than it was two years ago or for the same reasons this attack on

fossil fuel supply and essentially banning the coal industry from emitting carbon. And that's where we find ourselves. And as you know, the physics side of the market battles back and says, you know, this spikes European natural gas prices to the equivalent of 10 times what our natural gas prices are here. Right. So for a period, Dutch TTF gas, natural gas prices went from being 10 euro per megawatt hour. They traded 200 per megawatt hour before Europe was able to fill their storage tanks with gas, which they did by paying, you know, up to astronomical prices and then walking away from the markets. So now we've got European markets that say that they're okay on storage for the winter

and European gas prices backing off, but they're still beholden to Russia for their gas. So they've still got a problem going forward as to how they're going to supply all the gas that they need to cool themselves in the summer and heat themselves in the winter. And no matter what, it lines up with inventories declining, attack on production. So production is declining. and the pivot towards Russia as the source, it lines up that there's going to be another shortage on paper at some point. And so maybe we get through this winter and maybe there's a issue with the electric grid over

the summer or something like that. But the crisis in Europe is not over. The trade is over for now. And now we've kind of shifted our focus from natural gas over to the battle in WTI where, you know, we've got Biden spilling the SPR and OPEC cutting production, you know, pulling the price. back up. So it's a pretty aggressive back and forth, Nathaniel, but my sense is is that after the election, Biden isn't going to have as much political role determination or power to try to just, you know, level the gas price with the SPR. They'll move on to the next set of optics because there

won't be much SPR for sale and the price of oil will go back up into the low hundreds for the next period of time and we'll see what happens from there. But that's, I think, the predicament that we're set up for. keep more profits when trading? Get the best possible prices and trade with 50% lower fees on NXO Pro. The new spot and futures trading platform uses aggregated liquidity of over 3,000 order books collected from multiple sources. Utilizing the complete Nexo suite allows you to earn interest and borrow funds as you wait for the next trade setup. Visit pro.nexo.io. That's p.r.o. N-E-X-O and sign up today. This episode is brought to you by Circle, the sole issuer of USC and a leader in crypto that's held to a higher standard.

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There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. One of the largest exchanges in the U.S. FDXUS is also the only leading exchange that supports both Ethereum and Solana and When you trade NFTs on FTX, you pay no gas fees. Download the FTX app today and use referral code breakdown to support the show. Just to kind of almost like take a step out or zoom up a level, in the context of just kind of trying to explain a market setup, you've touched on at least four different broad-based sort of political regions and political issues. So one is domestic U.S. politics and how the price of energy impacts politics here. A second is obviously Russia's war in Ukraine and the implications there. You could actually call it probably multiple political issues because you've got both Russia's war as well as the response to it as well as the energy policy.

It's sort of a whole cluster of things. But for the sake of this, let's just call it one. You've got OPEC in the Middle East, which is sort of the geo-political issue that to the extent that even during the kind of, highfalutant aughts and teens, we probably could have still recognized that politics hadn't completely left the world of markets just based on OPEC. But so you have that one is a third. And then fourth is China and where China ends up sitting based on shifts and whether, you know, there's sort of an implicit and under discussed shift to getting in bed with China as relates, you know, if we move away from fossil fuels. How much of, I mean, this is sort of more personal and we'll bring it back to this. How much for you is this sort of appeal or interest in these markets because they are so inherently geostrategic and kind of relate to these broader, you know, power dynamics in the world?

Yeah, that's really your point. That's what makes the market, right? You know, it's really, really interesting. I mean, it was baffling for oil traders to see Biden announce SPR sales, right? Like, you knew right off the bat that that was a reaction to the headache he was getting from headline and fly. All of a sudden, headline inflation was a problem at the polls. He had to figure out how to address it. And the thing that makes the least sense would be to just spill the SPR into the open market.

And so that's what the wind did. What was wild for their oil market to see was, you know, you're thinking to yourself after Prince Abdulaziz of Saudi Arabia, which is the chief energy minister of OPEC, says there's a great disconnect between the physical and paper markets, right? Saudi Arabia for the last several consecutive months has been able to raise oil prices of physical oil that they're selling to Asian clients. And they're looking over here to the U.S. paper market and they're seeing somebody spilling futures out into the market every day and the price going down. And they're saying, we're raising prices every month here because our markets are getting physically tighter.

the aging customers see that. They understand that we have to raise prices. And then they say to us, how come the price over there and the United States is spilling, right? So they have noticed that there is a disconnect here and they've essentially called out the United States for doing this to be completely politically motivated. You had that.

And then you see, as the energy traders, you see the OPEC response, which is fine. We're cutting production. You know, and you're looking at it back and forth now and you're like, wow, this is war. No uncertain terms about it. This is commodity war, right? This is the U.S. spilling a strategic reserve.

This is one of our, you know, who knows what they are, if they're friends or enemies or counterparts, trade party, whatever it is. Saudi Arabia is saying, okay, we're cutting production. You see the price go back up. And, you know, you just kind of wonder what's going to happen next. You know, the market's been super headline driven. You know, the China side of the story has been how they have managed their zero COVID policy with lockdowns and how that is a direct effect on the market's perception of oil consumption. So if you notice when headline inflation got out of control and Biden started his SPR sales in a somewhat conspicuous coordination, China said, oops, we got COVID over here.

were shutting down 60 million people. And so the world says, oh, geez, that's like, you know, a couple percent less oil consumption than the world would normally have if this part of the world is shut down. That means commodity prices can back off. And the world sells commodities. So you see what's going on here is you've got, Fritz Biden spiking the price with their set of executive orders, then showing up two years later before midterms and saying, okay, this is a problem.

this happened because Russia invaded Ukraine, which is a lie. So I need to spill the SPR. They're spilling the SPR to keep the price down. China's saying, great, we're going to lock down part of the country. That'll help lower the price even further. And to continue to try to get Biden elected because it helps China to get Biden elected because he's trying to shift the global power center to electronic vehicles, which makes them more money.

So this is like watching a game of strategic play out in real life, where you can't really see anybody's cards, you can only see the moves they're making and what's going on in the commodity world. So, yeah, this has been a fascinating, fascinating narrative to trade through Nathaniel. Like nothing I've ever seen before, quite honestly. Very different from trading through a kinetic Gulf War, right?

It's very different. You're trading through an information and headline-driven, you know, non-kinetic war. And so it's really fascinating to follow. Yeah, I mean, it's way more Game of Thrones than it is. You know, saving private Ryan, right? Yeah. No, exactly.

That's exactly what's going on. It's moves under the table that are all taking place that are sitting the world on fire. It's really crazy. Well, it's interesting, too, because the moves are taking place, you know, under the table, but not exactly in the sense that they're clear, they're big, they're telegraphed. It's sort of they're explained in ways that aren't clear. So you have to do that amount of parsing, right? But it's sort of, you know, tapping into the SPR as a market recourse.

Listen, even Democrats, you've got to kind of understand the, there's a motivation here. The incentive to have some relief in inflation in an election year is too strong. It's been clear, right? And that can be wrapped up as much as is wanted to in, you know, the more beneficent, this is better for people at the pump. They need that relief that we want. But, you know, come on, it's clear that there's an aspect here. And frankly, just to, you know, to be clear, I think that.

probably if the situations were reversed and it was a it was an R in office and ours controlling the places and they were being hammered for the same reason there'd be a temptation there. Now, individuals are going to make individual decisions. So I, you know, we don't have to get into kind of exact equivalence. But the reality is that it's impossible to not recognize the intense political pressures on that and understand that there's sort of that political dimension. So it is interesting that it's sort of, it's happening under the table in terms of long-term objectives, but very above the table in terms of these things, which is even more fascinating because

you're kind of dealing with both text and subtext as a trader. In this context, how much does what's going on in these markets and what they're telling us about what's going on in the world make the sort of the Fed's inflation fighting relevant off kilter? I mean, you know, are basically we in a situation where the only way that the Fed efforts work is just by crushing to the man so entirely that the real cause can't keep up with inflation. I mean, it sort of versus it actually being any sort of scalpel. Yeah. No, it's really, you know, we made fun of it quite a bit saying like, you know, imagine if the newspapers were covering the Federal Reserve's actions as they were really intended right now. The newspaper would be telling you, right now the Federal Reserve

is hiking interest rates to slow the economy down to make you. so poor that you won't be able to afford to pay the prices on the screen for things and that these prices will have to back off. That's essentially, you know, the Federal Reserve's game there, right? They're slowing the economy. They're kneecapping the economy so that prices will back off. And that's probably, you know, a part market driven thing because two-year yields have been flying off the handle for months now, you know, keeping the Fed's hand to the fire that they have to raise rates to fight this inflation and probably a little bit due to some political pushback from the White House saying, look, you got to help me out here. I'm getting killed on the

inflation polls. You know, where can you pitch in? And they say, okay, we can raise rates. That's in line with what we're going to slow down the economy. And the White House is probably saying, we'll get at it, you know. And so you have a little bit of that game being played. But more importantly, I remember what I wanted to credit Duneberg for was that Biden is playing this energy game with his cards open, right? He is playing an open hand, right? He is openly selling the SPR where we can all look over and say, okay, he's draining this thing down to a point where he will no longer have any to sell

at some point. And then he is going right to Saudi Arabia in August on a plane and having an awkward fist bump with NBS as they go inside and have the conversation about what's going to happen with the oil price and comes back with no such. agreement for anything about the oil price. You know, so he's playing all these cards wide open here. There was, you know, there was stories that he went to Venezuela, not physically, but reached out to Venezuela to potentially get oil from them on the open market.

So now we're going to like, you know, global maniacs and asking them for oil supply. And, you know, that generally just lowers our credibility stature globally when we're doing things like that, and which may be part of the Biden plan, who knows. But watching all of this play out between from the Fed to Biden playing his cards with his hand right open is absolutely phenomenal to watch. And like I said, luckily a wildly tradable scenario. Do you think and how do you think the election changes dynamics in the short term? Midterms?

Yeah, midterms. So, you know, they've got the fracking political football out. there, you know, if you saw last night between Federman and Oz, you know, they're questioning whether people support fracking and they want to get that out on the table, whether they do or don't, I have a feeling that even through midterms, that it's not going to be much of an effect. Put it this way. Through midterms, even if Republicans take the Senate, you know, and there's a little bit of a red woe of, I won't think that it is going to diminish the desire to move towards electronic vehicles and

fossil fuels, as long as the Biden administration is in the White House, right? Because he's going to pull those levers with executive orders and the states aren't going to have a lot of power here, I don't think, and I got a feeling that this is going to last through his administration. And then we'll see, you know, what the

2024 presidential election has lined up, who looks like they're going to win, and if they're going to, you know, if they've run on the policy of saying, you know, maybe drill, baby, is the opposing side to Biden's, I'm going to end fossil fuel, right? And maybe somebody runs on that and wins and ends all the executive orders. We build a transcontinental pipeline to Canada. We start drilling on federal lands again, and we have dollar and a half a gallon gas before you know it. Right. But that's not going to start until 2024. If that even happens, and if that happens,

that probably takes two bid at four years to filter into the oil market to actually lower the price. So we're still a ways away. I feel like politically, fundamentally, a lot of different ways were a long way away from ending the attack on supply, if that's a fair way to look at it. Sure. Beyond the sort of midterms, what do you think are key catalysts over the next few months that you're paying attention to? Yeah, you know, I am pretty myopic with midterms. I'm really set up for a trade now because, you know, we're in an unbelievable situation. where oil has been pressed lower due to the SPR sales.

Oil stocks don't want to hear it. Like I just had some data from yesterday in a conversation that I had, and I don't have it in front of me, but the rough data was since July 22nd, oil and gas are down like 12, 15%. XLE, the energy ETF, is up almost 20%. So there's a disconnect going on, which you can start to see, where if oil starts rallying, the stocks might actually explode from here. So there's a really interesting setup there. Aside from the election, really the thing to do, you know,

you still have to keep an eye on the administration. You know, they're not done ending fossil fuels. They don't seem like they're done, you know, with all of their mechanisms in the energy industry. So, you know, I fear that their next move might be to sort of, you know, cap prices or cap margins or something like that. and cause a real economic stir in the industry. So that's one thing to look out for.

You know, there's definitely a crisis brewing in Europe that you have to keep your eye out on. You know, there was a huge headline that came out today related to that crisis. And that was that BOSF, one of, I think it's Europe's biggest chemical maker, stated that they are going to be shutting down part of their operations and that those will be shut down permanently now. And that has to do with the complication. of some of these big CO2 crackers and big refineries that have all of these efficiencies within them of heating and cooling that once you stop the operation, you cannot get it started up and over again. So anything that gets shut down gets mothballed from here on in. And so you're

looking at the potential further deindustrialization of Europe. So those are the kind of headlines that I pay attention to because it won't be until that pendulum swings to the point where European citizens won't be able to get their hands on everyday goods that, you know, they're used to being so plentiful and regularly available before that political pendulum swings back and the people say, hey, wait a minute, you know, this attack on supply has caused these, the prices to spike and the chemical makers to shut down and now they don't make plastic this and we can't get plastic that and there's no more parts for cars and, you know, it's just going to cause general mayhem in industrial Europe.

Europe. So that's another stir line to follow there. And from there, outside of that, it's really just a general blocking and tackling of following crude oil inventories and gas inventories and spreads and futures and things like that. Amazing. Well, Tony, this has been awesome. Awesome to get your thoughts on this. I'm sure it will be super, super illustrative for a lot of folks. So, you know, always love having you on the show and appreciate you taking the time. Yeah, Nathaniel, anytime, man. I'm glad that was helpful. Thanks for having me. I really appreciate you giving me a platform. Cheers. All right, guys, back to NLW.

Well, I think it's clear I could talk the geopolitics of the fuel and energy markets all day long. It to me is archetypical of why when we're dealing with economics and markets, we can't just leave that stuff as some other thing for some other set of people with some other set of expertise to understand. In fact, when we're trying to understand any particular issue, being able to squint at it from the lens of on the one side and economic perspective, but that's a lot of, you're and on another side, a political perspective is hugely, hugely valuable. That's something that I really strive for at this show, and I hope you guys enjoy.

Anyway, for now, I want to say a big thanks again to Tony for being on the show. For my sponsors, nexus.com, and FtX for supporting the show, and to you guys for listening. Until tomorrow, be safe and take care of each other. Peace.