Jeff Currie on the Crazy Surge in Metals, And Why The Supercycle Has Years to Run

The big story this year is the surge in metals. And it's really all metals. The ultimate industrial metal, copper, has been on a massive tear, but so has gold, which has very few industrial uses. And then, of course, silver has seen a blistering rally, in part due to massive buying in China. On this episode, we bring back the man who saw this coming years ago, Carlyle partner Jeff Currie. Prior to joining Carlyle, Currie was a top commodities analyst at Goldman Sachs, and has been calling for the emergence of a brand new supercycle for years now. In this episode, he explains the drivers of this supercycle, and why he thinks we're in the very early days of what will be a multi-year run. Read more:Gold Retreats in Sudden Selloff After Breaking Through $5,500China’s Metals Mania Sends Copper Soaring Past $14,500 a Ton Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

• 0:26Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 1:08Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 1:52Speaker 01

  Bloomberg Audio Studios. Podcasts, radio, news.

• 2:08Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:13Tracy Alloway?

  And I'm Tracy Alloway.

• 2:14Joe Weisenthal?

  Tracy Metals.

• 2:16Tracy Alloway?

  That's it. That's the episode.

• 2:18Joe Weisenthal?

  It's the title.

• 2:19Tracy Alloway?

  No, you're right. There is a lot happening in the metals space. So we have gold above 5,500 an ounce, which is a record. We have silver above $120 an ounce, also a record. And now we have copper at over $14,400 a ton.

• 2:37Joe Weisenthal?

  Yeah. So this is something that's super interesting to me. And I think it's a very important dimension, which is that copper is the ultimate industrial metal, right? And for, you know, Dr. Copper tells us about the economy, probably a little overstated its reputation, but it's the ultimate industrial metal. Gold is the ultimate metal with no industrial uses, right? It's primarily a store of value, a sort of a form of money that's existed for thousands of years. And then silver is a little bit in the middle. It's more of a safe haven, but we know it has, it's used in solar, it's used in photography. Not that that really exists anymore, but you know what I'm saying? So it's like, it's interesting to see, like, why are they all flying at the exact same time?

• 3:16Tracy Alloway?

  Yeah, I was gonna say the exact same thing. So each of these metals historically would tell you something very specific about the state of the economy. And copper certainly would be screaming, people are bullish on economic growth. Silver, you know, something kind of in the middle. And gold, gold soaring is something that you traditionally associate with stress points, either in the financial system or the broader global economy. And yet, here we are.

• 3:45Joe Weisenthal?

  Yeah, it's all happening in once. And like, you know, you know, you could say like, oh, dollar debasement, right? And we know the dollar has been weak against other currencies. It's not like inflation is measured, you know, is like raging hot. So it's not just a simple of story of like, the dollar becoming worthless. So the, you know, the denominator, whatever, going up or whatever the other way around is, et cetera. There's something going on with metals. Maybe they're just the new meme stocks, et cetera. But We have to, we have to dig in.

• 4:14Tracy Alloway?

  Yeah, let's do it.

• 4:14Joe Weisenthal?

  All right. Well, I have to say, we really do have the perfect guest on the perfect day. Again, we're recording this the morning of January 29th. We're going to try and get it out ASAP. But this headline, copper surging 10%, unbelievable headlines. We've had him on multiple times in the past, a believer in super cycles, a vindicated man in many respects. With many of his calls, he's a Goldman a long time. We're going to be speaking with the one and only Jeff Currie, who is now a partner at Carlyle. Knows commodities as well as anyone else we talked to. So Jeff, thank you so much for coming back on the Odd Lots podcast.

• 4:52Speaker 03

  Great. Well, thank you having me. Commodities are up and back in favor. It was a rough last couple of years, to say the least.

• 4:59Joe Weisenthal?

  What do we?

• 5:00Tracy Alloway?

  You should just ask, is this going to be the peak?

• 5:02Joe Weisenthal?

  Is this the peak? Did we, is, uh, yeah, that's the question. Is this the peak?

• 5:06Tracy Alloway?

  You're back on. Everyone's going to ask, is this the peak?

• 5:08Joe Weisenthal?

  Oh, did Odd Lots get the peak? Cause they called, they rang Jeff Currie. So let's just get this out of the way.

• 5:12Speaker 03

  By the way, I love that we're in the foothills of the Himalayas right now. So we're not even close to the, the real mountain peaks yet.

• 5:20Joe Weisenthal?

  Really?

• 5:21Speaker 03

  Yes.

• 5:21Tracy Alloway?

  Okay. So I'm going to ask the obvious question, which we alluded to in the intro. But why are all three of these things moving in the same direction all at once?

• 5:31Speaker 03

  When you look at the commodity complex, you take anything that has an atomic number to it, that's in the periodic table, it's going up right now. Even nickel and zinc have joined the party. If it is a molecule and it has a carbon in it, a carbon hydrogen, a CH in it, it's been struggling. So that includes hydrocarbons as well as carbon hydrates like corn, wheat and so forth. So that space, the molecules have been struggling. Yet you have the things that are primarily critical minerals, things that are in the periodic table, the atomic number have all done well. And the fundamentals in copper are not that much tighter than what you have in oil.

• 6:15Speaker 03

  That what's going on in the metal space is hoarding, given the concerns over having availability of these critical minerals. And you threw out the idea of debasement. And I want to throw in three other Ds. De-dollarization and diversity to your debasement. So debasement, de-dollarization and diversity is what's driving all of these different metals. And when we think about the de-dollarization, and that goes back to 2022, when the US and Europeans froze the central bank assets of Russia. Every emerging market goes, uh-oh, I don't want to be owning any dollar-denominated assets because look what happened to the Russians.

• 6:57Speaker 03

  And as a result, they're moving as fast as they can out of dollar assets into assets that cannot be seized. And precious metals and metals are part of that. And then when you have the geopolitical risk as high as they are right now on a global basis, whether it was US cutting off Venezuelan oil supply to China, India and Europe, or it was the Chinese cutting off critical mineral supply to the US and its allies, or it's Russia cutting off supplies of natural gas, it's a dangerous time to be dependent upon foreign commodity supply. And as a result, we have stockpiling. And everybody talks about the squeeze in silver, running it up to $120 an ounce.

• 7:41Speaker 03

  The reality is this is a squeeze by the population of the people in China. You know, they're hoarding the silver over concerns around, you know, export controls and things of that nature.

• 7:52Tracy Alloway?

  So you mentioned China just then, and this is exactly what we wanted to ask you about, which is if you've stripped out what's going on in China, how much of the rally would disappear in something like gold?

• 8:05Speaker 03

  I mean, the vast majority of it is not just China, but emerging market central bank buying basically reduced their holdings of Western bonds that can be frozen, similar to what happened with the Russians. So, you know, do not underestimate the impact that China's had. In fact, if anything, China and the other emerging markets have squeezed other participants in the gold market out. And you still have a long ways to go. I like to point out that in 1970, when Nixon took the US off the gold standard, central bank reserves of gold stood at around 40%. Last time I calculated late in the last year, wasn't that 27 to 28%? But the run up in the last couple of days could be as high as 30 by now.

• 8:50Speaker 03

  But I think the key message is there's still a lot more buying by central banks who diversify themselves out of dollars.

• 8:56Joe Weisenthal?

  Wait, I'm still a little bit confused. What is it about silver particularly that's so desirable right now from the population in China? Because just, let's talk about hoarding and some of these issues. It's totally understandable why China wants to hold certain strategic assets, right? It wants to accumulate a lot of oil, in part because of defense purposes. Because in the event of a war, for whatever reason, they may get shot out of oil, so they need a lot. What is it about silver in the population context that makes it so desirable? And by the way, I'm looking at a chart, this is from two days ago. But the Shanghai Silver Premium, buyers in China paying more than $5 an ounce versus everyone else in the rest of the world.

• 9:39Joe Weisenthal?

  But explain what is it that's driving this purchase from the public in China?

• 9:44Speaker 03

  Okay, first, let's talk about its role as a critical mineral. It goes into the production solar PV. And that makes it, as you pointed out at the beginning, 50% an industrial metal and then 50% of a store value like gold. So the fact that it has these dual uses, it's a critical mineral and important to the electrification process on a global basis. Remember, it's a superconductor. Actually, let me go back to answer your question. Tracy, you said, what do gold, silver, and copper all have in common? They're superconductors. I know people say, well, Jeff, copper isn't exactly a definition of a superconductor. It's not as strong as silver and gold, but it sits up there in that electrification process.

• 10:27Speaker 03

  And so when we think about silver, it's critical for the industrial base of China, given the importance of solar panels as a part of the industrial manufacturing process in China. So if you're the PBOC or somebody like that, you're going to be very focused on making sure there's adequate silver supplies inside of China. So the fact that it also then has The store of value like gold and accessible by many parts of the population because even at, you know, a hundred, hundred dollars an hour, a hundred and twenty dollars an ounce as wherever this morning, it still makes it a much more affordable, uh, you know, a store of value.

• 11:07Speaker 03

  So I think that two key points for China and why silver is so important is its role as a critical mineral and as a superconductor. And given the importance of solar panels and the other types of renewable investments to the Chinese industrial base, having a secure supply of silver is absolutely critical to the Chinese economy. Second of all is when we look at the price of silver, even at a hundred and twenty dollars an ounce, it is still very affordable to many of the population as a store of value similar to gold. And also, given the recent price trends, people feel comfortable in holding it. So it has those two components that make it critical to the Chinese economy.

• 11:53Tracy Alloway?

  Some people would say that like, all right, you can look at all these things surging and tell a story about debasement and electrification and what the future world is going to look like. Some other people would say, well, you could tell an even simpler story, which is that one of these markets is wrong, right? So maybe copper sees economic growth going to the moon, although it seems kind of unlikely to me. Maybe silver is somewhere in between. Maybe gold is wrong about the debasement thesis, whatever. How do we know that we're just not seeing investors get this one wrong? People are just going in for momentum.

• 12:31Joe Weisenthal?

  Right, or the meme coinification of precious metals.

• 12:34Speaker 03

  Well, I, I do think when we talk about a commodity supercycle.

• 12:40Tracy Alloway?

  The S word.

• 12:40Speaker 03

  Which by the way, is nothing other than a commodity capex cycle or a big global capex cycle. And we're seeing that, you know, whether it's an investment in defense, investment into AI, data centers, the list goes on. This is a world scale capex boom we're now entering. And that typically is when you see the big commodity supercycles, one in the seventies, One of the two thousands and we're I mean, just take the defense spending in Europe alone. It's likely to be nine trillion euros over the next decade. To put that in perspective, the Chinese boom in the two thousands was ten trillion US. Today it's about fifteen. So even just Europe on alone, we haven't even factored in data centers and AI.

• 13:23Speaker 03

  So when that occurs, typically what we see is a repricing and rerating towards asset heavy industries and commodities. Or another way to think about it is short duration. As strangely as when interest rates are low, everybody thinks, oh, you would be doing capex cycles. No, you do them when their interest rates are high. Because the interest rates are high, they're telling you, you need to put money into the ground. And so we're moving into one of these repricing towards asset heavy industries, which is why it'll ultimately be sustainable across the entire commodity complex. And I just want to take a step back and talk about these reprices because in my career, I've lived through two.

• 14:04Speaker 03

  The first one was in that, call it oh, two through like oh, four time period. And that's when we coined the term revenge of the old economy. Old economy is asset heavy. New economy is asset light. And that asset light in the late nineties, two thousands was really about the scalability of software. You don't need to have put a lot of money into the ground to be able to create growth. And that was the whole asset light model. But eventually we ran out of all of these heavy industries that you need to make the investments in. And then China came on the scene and became clear, we need to make those investments. And that happened over that decade.

• 14:45Speaker 03

  But that repricing, rerating was a violent process as you moved out of new economy or into the old economy. The next time we saw that was in fourteen, fifteen, where we moved out of the old economy and into the new economy. Why? Because it was clear China was at the end of the track. And if you remember that time period, we go through there, the euro went from like one point four to parity in the course of like eighteen months. I remember the period. Was coming down seven dollars a barrel like every other day. Everybody's what's going on? What's going on? But I wanna make a point here to get to your point about why is this sustainable across all these commodities? And when we look at, I'm gonna take a like a private equity pitch

• 15:28Speaker 03

  book in two thousand and twelve of a Canadian oil asset. They valued the asset at a hundred and ten dollars a barrel. The IRR of that asset, that this oil field was twenty five percent at a hundred and ten. Now, fast forward to two thousand and sixteen, after the macro repricing, oil was sitting around forty dollars a barrel. Now, let's go reprice the IRR of that asset. What do you think it is? Immediate response was people go, oh, it was negative IRR. No, it was around eighteen, nineteen percent. It didn't come down much. Why? Is because the Canadian dollar repriced, so wages went down. You had a repricing of the cost of capital. You

• 16:09Speaker 03

  had a repricing of copper, iron ore, they all came down. And so your cost bases came down such that the IRR was far more stable over that repricing. And that's ultimately what we're starting to see happen across this space right now. And I believe we're in one of these repricings where we're gonna move back into the asset heavy space. I wanna make one last point before moving on this during this. Sure. It's gonna make this one really different from ones in the past, is I wanna go back to the nineteen sixties, because it's similar to today. And that was at the least in the modern data, the first big commodity supercycle. The asset light space back in the sixties was

• 16:51Speaker 03

  companies like Coca-Cola. In fact, all the nifty fifty were brands. What do brands have similar to, let's say, Microsoft? Infinitely scalable at zero marginal cost. And so Coca-Cola was the world's darling right now. And all of the big commodity producers, the miners, the oil companies were at the bottom. And then you had the Arab oil embargo create that catalyst to reprice. Now, what happened here is that that's different today. So you think about that asset light space was Coca-Cola then, and then in 2000 it was Microsoft and today it's Google and the hyperscalers. Now here's where it gets really different in the power of what's going to happen now

• 17:34Speaker 03

  is the asset light space is getting into the asset heavy space, i.e. these hyperscalers are putting steel into the ground. And by the way, you're no longer a asset light infinitely scalable software company. You're a miner, you're an oil company, you are a commodity producer, your multiple is going to get rerated. And so what we have is the asset light space this time is moving into the asset heavy space and putting steel in the ground. So this is going to be a real violent transition. So you ask about copper and silver and the rest of these things. What are the restrictions on their big CapEx budgets? It's the availability of transformers. What are transformers? Big chunks of copper. And so we have a difference in this cycle than once in the past is the asset light

• 18:19Speaker 03

  space is colliding in the physical space at the exact same time, which is what I tend to think that this repricing is going to be more violent, more sustainable. And what you're going to see, and it goes to a simple point that I observed in the 2000s was when oil first went up because, oh, it's a bunch of investors buying oil. It sits at $60 a barrel, it's supernatural returns. No, you actually had capital rotate out of the asset light space and into the oil space during 04, 05, such that the cost basis actually rose and there was no supernatural return. So go, Tracy, back to your point, how sustainable is this? Well, what we're seeing is all the capital flowing into this asset heavy space and it's

• 19:01Speaker 03

  going to fill the ground underneath these prices and support them from a relative cost basis. And so when we think about $14,000 a ton copper, doesn't mean these guys are earning supernatural returns because we see so much capital moving into space.

• 19:29Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee, so search Barclays Brief wherever you get your podcasts.

• 19:55Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices,

• 20:39Speaker 01

  but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 21:18Joe Weisenthal?

  I absolutely love that comparison of the software companies to the Coca Colas and this idea that like there are certain business models that can scale incredibly with very little physical needs. And I, the way you frame that, I thought was very helpful to understand. And we've certainly talked a lot on the podcast about the hyperscalers getting into the real business of things and, you know, going up the chain and in some cases, getting, you know, getting into the power production, investing in their own nuclear plants and hiring power traders. So all of this feels very real. Let's just like, you say we're in a super cycle. You say we're at the foothills of the Himalayas. What does history or your work say about how big and how far this can go?

• 22:00Speaker 03

  Well, I mean, historically, these cycles last summer around 12 years. The one in the 70s did, the one in the 2000s did. Yeah, one in the 70s from 68 to 1980, the one in the 2000s from essentially 2002 to 2014. A lot of people say, oh, the world's different today than in those other points in time. Putting steel in the ground still takes about the same amount of time, technology or no technology. I like to point out, where do you get the 12 years? You know, the first three years are getting people to believe it before they start to really invest earnestly. And I would say this one started in 2020. And so the fact that we lost two years in 23 and 25, whether it was copper oil, part

• 22:43Speaker 03

  of the reason for that was the rally in prices was so steep after that Russian Ukrainian invasion, that the policy response globally was incredibly swift. I want to point out that policy response in 22 and 23 was not so much the rise in interest rates, but the creation of supply. And I say that is because you had inflation come down everywhere in the world in a synchronous manner. And it did it against record commodity demand and really strong GDP growth in the United States. What does that tell you? It simply could not have been interest rates and the demand side. It had to come from a supply side. Where did they get new supply?

• 23:25Speaker 03

  Russia, Iran, Venezuela, you know, some of the issues that are facing us, they got it through increased immigration on the labor side. There was a lot of ways they created supply all over the world to be able to deal with that. Now, the point this time around, and everybody's bought into this oil supply glut, we don't have a problem, is that those easy fixes are not going to be available next time around. So this one's going to take longer than normal. But I also want to go, why I'm comfortable with this being a super cycle, is all of these things are all policy driven. The one in the 70s was due to the LBJ's war on poverty, the big defense spending, sounds familiar, and then you had the Arab

• 24:09Speaker 03

  Oil embargo. If you look at what happened in the 2000s, it was the decision to admit China to WTO, a policy decision. Here, the policy decisions is the war on free trade. And it's not just the US doing it, everybody's doing it, you know, curtailing commodity supply around the world. In fact, the three points we laid out in 2020, in fact, it was on this show, we laid them out, they're still very much valid today, and they were all policy decisions. One was deglobalization, the war on free trade. I mean, if anything, it's been turbocharged now from five years ago. And when we think about it, it's all policy decisions, it's not just inside the United States where we're seeing this. You know, the Chinese cutting critical mineral supply, you know, Europeans focused on, you

• 24:54Speaker 03

  know, protecting themselves, defense spending, the list goes on. Let's go to the second one. At the time, decarbonization or electrification. And I know a lot of people are going to look at, oh, well, didn't the US backtrack on that with, you know, the recent political shifts? The answer is absolutely not. The rest of the world is doubling down on electrification for both. When we think about the electrification of the world, where it wasn't, decarbonization was not the motivator today, it wasn't then, and then going back in time. Why do I say that? Why did China build cutting-edge technologies in nuclear power, solar, wind, batteries, and the rest of it? They did it for energy security. Kind of goes into the de-globalization point. They want their own secure energy supply.

• 25:39Speaker 03

  In fact, Carter coined the term "energy transition" and wanted transition out of oil into renewables in 1977, not because they wanted to save the world, but because of energy security. One last point on this is France, lowest carbon footprint in the world. It didn't get there because it wanted to save the planet. It got there because it wanted nuclear power, so it was Charles de Gaulle's decision to rid itself of the oil trade. So, this story, regardless of what's going on in the political pushback, and I don't think "green" was ever probably the right way to phrase this. It's renewable, it's a secure source, nuclear power is a secure resource, throw data centers, AI all on top of it. It's turbocharged from the last time we talked about.

• 26:23Speaker 03

  And then finally, the third point was redistribution of the war on income inequality. Yeah. With the K economy, this is alive and kicking.

• 26:31Tracy Alloway?

  Wait, say more about that last point.

• 26:34Speaker 03

  Well, when we think about commodities, and actually, Tracy, I've seen you even make this point that I made back five years ago, was that when you see inflation and you see commodity demand, it has to be coming from the low-income groups. This is a point I think people get backwards. Inflation is bad for the high-income groups, and the reason why is because the low-

• 26:58Tracy Alloway?

  This was a great call that you made, by the way.

• 27:00Speaker 03

  Yeah. And the low-income groups are the ones that actually... Think about this, in corn, a high-income person will consume the same amount of corn at any point in time. The marginal demand has to come from the low-income groups. And so, when you give them money, like fiscal transfers, and, you know, to keep the masses happy in certain situations, what are they going to do? They're going to spend it, and they're going to spend it on commodities and physical goods. And that ends up creating that inflation. And then the high-income people suffer because the response by policymakers to the higher rates is wealth comes down. The other way to think about all inflation is the wealth transfer between the high income groups and the low income groups, and then they go out and spend it.

• 27:42Speaker 03

  And so when we think about the demand here is that third one, which is this war on income inequality, it's just going to demand more and more types of transfers to the lower income groups to be able to deal with the civil unrest. And it's alive and kicking everywhere in the world right now. And so I would assume, you know, if you liked any of these three stories back in 2020, you got to love them today.

• 28:10Tracy Alloway?

  Just going back to the super cycle thesis and the role of policy, how do we know that the importance of a lot of these metals, the strategic importance, how do we know that that won't end up increasing supply faster than we expect? You know, part of the story, especially in copper, is that it's not that many people are pulling it out of the ground anymore. It takes forever to get a new mine started. How do we know that governments aren't just going to make it easier to get this stuff? And so you'll see a supply response faster than perhaps you saw previously.

• 28:45Speaker 03

  Let's go back to my point, you know, these are 12 year cycles. It's just putting steel in the ground takes a long time. Even if you got rid of all of the bureaucracy and red tape, it's going to take time. But let's go to the critical minerals. Why does China dominate these? They did it because the Soviets and the Americans didn't want to touch the downstream processes because of not in my backyard for NIMBY reasons. I mean, even the Soviets, I mean, remind, I say the Soviets because this decision was made in the 70s. Remember when the EPA, the Superfund sites and all of that? The Americans and the Soviets used to do this. They quit doing it and farmed it out to the Chinese because they didn't like doing it in their backyards. These are really highly toxic processes. And so if you're going to onshore them and bring them back,

• 29:29Speaker 03

  you've got to figure out technology needs to do this in a way that's going to deal with those NIMBY problems that people didn't want to deal with 50 years ago. So it's going to be very expensive, time consuming. There's ways to get around it, but you know, whether I heard, you know, you can build these. Facilities on Army land in United States, you don't get any of the bureaucracy around environmental problems. But even so, and the last thing you this stuff, you know, if you didn't like it in the seventies, you're still not going to like it today. So I it's not something that can be resolved overnight. It's going to take a long time. It's going to take an enormous amount of capital, new technologies, created rerouting, supply chains around the world. That's why I say that we're at just the the tip of the iceberg on what needs to be done here.

• 30:13Speaker 03

  Which is why I think it's going to go on, you know, for at least another decade. And I think one last point about the super cycle, the seventies and the one in the in the two thousands. They were sequences of price spikes. They weren't a steady upward trend. You had one in seventy three, another one in seventy seven, seventy eight, and another one in eighty. In the two thousands, you had one in oh, four, oh, five, another one in oh, eight, and then the final finale in eleven, or late ten and eleven. It was with Libya and then copper topped eleven thousand. So everybody thinks they're like this steady upward trend in prices and assets. The reality is they're sequence of price spikes, and this one will be more bubbly in nature.

• 30:53Joe Weisenthal?

  Right.

• 30:54Speaker 03

  I like to say it's a bubbling cauldron of supply and demand imbalances. And part of this is because of what happened with the surge in investment around, let's call it the green investment around net zero twenty fifty. I like to say that that investment occurred from around twenty fifteen through about twenty one, twenty two. It created an environment where you have lots of, let's say, renewable wind in places like Germany or Spain, but you don't have the batteries, the grid and the rest of it. So what that creates is these pockets where you can see big shifts where you have negative prices of power at some point, explosive prices on the other side. So the one thing about this time around is going to create much higher levels of volatility across the commodity space.

• 31:37Speaker 03

  Like silver, you can see you get into these pockets where it'll go up and down. And, you know, whether if it was California power in the two thousands and that that cycle, which sure reminds me what silver's doing today, is you end up with an environment in which the volatility gets higher. The volatility then scares investors away. The lack of investment then reinforces the higher volatility. And I think that that dynamic in this bubbling cauldron of supply and demand imbalances is just going to be that much more vicious this time around than in the past.

• 32:09Joe Weisenthal?

  Jeff, you're my favorite person to talk to about commodities. But my second favorite person to talk to about commodities is the Uber driver that I had in 2022, who, when he was dropping me off at Bloomberg, and I mentioned this on a previous episode, he's like, oh, I have a thesis. I'm really long silver because it has all these industrial uses. But silver is frequently mined as a byproduct of copper production, and there isn't a lot of new copper production happening at this current state. And therefore, we're not going to see a big supply response be elicited on the silver side. And so you're going to get this mega squeeze. So he's my second favorite one. That was 2022. Now, in January 2026, I mean, clearly, the price was right.

• 32:51Joe Weisenthal?

  But this phenomenon, as he described it, does that sound pretty accurate to you?

• 32:56Speaker 03

  Absolutely. I mean, with all of these, by the way, you can get the supply. It's not a scarcity of the commodities, whether if it's critical metal, even copper. It's like, it's the access. It is the political access to where the resource is. But more importantly, it's the willingness of capital to provide the money. I like to say it's not about the supply and demand of the molecules or of the metric tons or the bushels. It's about the supply and demand of the capital used to create the production. Therein lies the core problem. And the capital has not moved in. So trace back your point. How long has it gone? We haven't even moved the capital in yet.

• 33:38Speaker 03

  The capital's still sitting in the new economy or asset light world. And the returns, you know, by the way, I've asked people, I go like, this was in like 23, 24. I go, hey, why don't you want to put money into this space? The answer was, Jeff, I agree with your story. The problem is the tech space is providing such good returns that if I am underweight the space, I got a problem. And I'd rather be putting the money into what's out before me. That was the case in 23, 24, 25.

• 34:07Joe Weisenthal?

  Just to be clear, since the last time we talked to you, there has not been a ton of activity in terms of, let's actually start digging.

• 34:15Speaker 03

  No, because the pullback in late 22 and early 23 was so vicious across this entire space that the money, they looked at it, go, I got beaten up. You know, Currie, you told me to go in back in 20 and 21, work for about a year and a half. I got absolutely cremated on the backside. I'm not going to do that again. And so they got beaten up over that time period. Their willingness to go back in and believe the story is not that high. They're going to have to see it. And now that's moved so quick, so fast, like it did in 22, that they're going to look at it and go, oh, I've missed it. And I think, you know, it's like Tracy's point is how, how much further does this go? How sustainable is it? And I think the key point there is it's got, it's that volatility is discouraging them.

• 35:01Speaker 03

  And that's why I tend to think what is going to force the money into this space? Is you're going to have to have the returns in the asset light tech or whatever you want to call it. World get to a point that they're going, looking at the old economy going, I'm willing to take that risk and go in it. Cause that's the only place that has returns. And when they do that, that's when you're going to end up seeing the rotation. And I also want to go back to a point here is the market is so severely underweight all of this stuff. Cause it's been so hated for so long that when the money rotates.

• 35:35Tracy Alloway?

  Anti gold bug.

• 35:38Speaker 03

  But when the money rotates, it's going to be playing catch up. Whether it fits, you know, the two and a half percent weighting of energy in the S and P 500 versus what a seven or eight percent weighting on revenues. The market cap is too small. And what if it's in metals and mining, critical money? These things are just so tiny. It's like I was talking the other day, you take FCX and let's see Ivanhoe Mines and some of the other smaller copper producers. So what is our market cap is, is all together 200 billion versus Nvidia at four and a half trillion? Now all of a sudden you take that money out there that has to go chase this space. And so you're asking, how high can it go?

• 36:17Speaker 03

  It can go really high because you're talking about moving trillions of dollars out of asset light into asset heavy. When nothing's been here for over a decade.

• 36:26Tracy Alloway?

  Jeff, very, very quickly, are there any risks to the structural super cycle thesis? Is there any indicator that you're watching to suggest that, okay, maybe it's not going to happen? Or maybe it's not going to happen at the moment that you're currently predicting?

• 36:43Speaker 03

  I first want to talk about the difference between equities and commodities. Commodities are driven by the real physical supply and demand. And equities and financial markets are driven by expectations. Expectations can or cannot happen. I'm trying to figure out what the next person is going to do and what they're going to buy. Actually, it can be modeled and thought through, but it's less predictable. Long-term supply and demand balances of commodities, you know when you have a problem. By the way, people don't push back. I mean, when I think I said on the last time here, copper is the best trade I've seen in terms of fundamentals. Stan Druckenmiller recently, he made the same comment that, hey, it's tight. Yeah, it's really tight, but it may not work today, tomorrow, the next day.

• 37:26Speaker 03

  I know if I sit on position and hold it long enough, eventually you'll get to that point where it does pay out. Because you know the physical supply and demand, the rubber meets the road and you see the rise in prices. Now, the question is, can you stay liquid long enough before that event occurs? So first of all, the reason why I'm so confident in these stories is the forward on these markets are incredibly unbalanced. Whether if it is in copper, you know, the industrial metals, you know, the critical minerals, oil, all of them are really imbalanced. So that's the thesis why my confidence. Now, what is the near-term risk? It's not that, you know, that you're gonna, because we're going to electrify the world. You don't have enough copper to electrify the world.

• 38:08Speaker 03

  The risk is like the demand for, in housing demand in China collapses. But that happened in 23 and 24. So you've already paid the price on that one. So when I think about these risks that you're talking about, they might come from the demand side. Because you cannot create supply from thin air. So it has to be demand coming down. But that demand coming down just ultimately delays how long it'll take before you run into problems. The main reason why copper didn't perform in that 23, 24 timeframe is we underestimated the severity of the property contraction in China. Right. And part of that was the high interest rates in the West forced the Chinese to keep interest rates too high

• 38:51Speaker 03

  because they can't prevent capital outflow. And as a result, it really hurt that property sector. So that would be, you know, it's different than the financial markets because the expectations can change on a moment and they're hard to forecast. Bottom line, you need this investment.

• 39:08Joe Weisenthal?

  Jeff Currie, perfect guest, perfect day. Thank you so much for coming back on Odd Luck.

• 39:12Speaker 03

  Great, thank you for having me. It's quite enjoyable.

• 39:15Tracy Alloway?

  Truly the perfect guest. And congrats on all your structural theses that seem to be playing out.

• 39:20Speaker 03

  Great, thanks. Take care, y'all.

• 39:35Joe Weisenthal?

  I love that Jeff's just the best.

• 39:37Tracy Alloway?

  He's so good.

• 39:38Joe Weisenthal?

  He's so good.

• 39:39Tracy Alloway?

  I'm so glad we could get him on today in particular. I should just mention, we're recording on January 29th. The price of metals is going up so quickly. Who knows what it's going to be tomorrow?

• 39:49Joe Weisenthal?

  I think the most, I mean, there are so many powerful ideas and compelling notions. To my mind, one of the strongest ideas that I think is sort of under discussed in the debate is the intersection of the commodity rally and the war on free trade.

• 40:04Tracy Alloway?

  Mm hmm.

• 40:04Joe Weisenthal?

  Right? And, you know, we look at things, they're getting a little bit more expensive here. People sort of look like, oh, the tariffs being passed through, et cetera. But this deeper dynamic, that if you don't have a world of sort of relatively open trade, then that forces everyone to stockpile and that forces everyone to build their own version. And that all, I'm going to build a chip plant here and I'm going to build a chip plant there and I'm going to build a chip plant there because we're all so worried. You have that duplication that it's the war on free trade that whether it's public or private forces all of this commodity intensive spending.

• 40:37Tracy Alloway?

  Yeah, all I'm going to say is it's good to hold gold and silver coins right now.

• 40:42Joe Weisenthal?

  Stop rubbing it in. Stop rubbing, stop rubbing it in.

• 40:44Tracy Alloway?

  Well, the problem is it feels good.

• 40:46Joe Weisenthal?

  Are you going to sell?

• 40:47Tracy Alloway?

  It feels good, but well, that's the thing. I don't even know how to sell. Like, I would have to carry a bunch of gold coins through New York and find a dealer or something.

• 40:55Joe Weisenthal?

  You know what? We need to take another trip through the diamond district.

• 40:59Tracy Alloway?

  Yeah.

• 40:59Joe Weisenthal?

  Where there are plenty of signs on their windows, we buy gold and so forth.

• 41:02Tracy Alloway?

  Well, I would actually do an episode on buying physical gold.

• 41:06Joe Weisenthal?

  Let's do an episode on selling physical gold.

• 41:08Tracy Alloway?

  Yeah, both.

• 41:09Joe Weisenthal?

  Yeah, okay.

• 41:09Tracy Alloway?

  Like, how do you actually do that? Are there certain ways to do it that are better than others and all of that?

• 41:16Joe Weisenthal?

  Yeah.

• 41:16Tracy Alloway?

  I'd totally do that.

• 41:17Joe Weisenthal?

  Let's do it. It sounds like a great episode.

• 41:18Tracy Alloway?

  I have a silver bar somewhere, too. I need to find that.

• 41:21Joe Weisenthal?

  I like, I'll.

• 41:22Tracy Alloway?

  I'm going to bring it in and use it as a paperweight just to annoy you.

• 41:25Joe Weisenthal?

  Well, I have my, I have my, what's it called? The, not the, um, what's that metal?

• 41:30Tracy Alloway?

  tungsten.

• 41:30Joe Weisenthal?

  I have my tungsten cube.

• 41:31Tracy Alloway?

  That metal that you were obsessed with and now you've forgotten.

• 41:33Joe Weisenthal?

  I should have asked if, that's my one, that's my main exposure to hard assets is that tungsten cube that I use.

• 41:39Tracy Alloway?

  Has that gone up?

• 41:40Joe Weisenthal?

  I think so. I mean, he said every element in the, he said, the, the story is that if it's an element in the periodic table, it's gone up in price. And I actually think tungsten has gone up quite a bit in price, but I didn't exactly buy in size. I think my cube cost about $300, just something like that, but.

• 41:57Tracy Alloway?

  Okay. Um, shall we leave it there?

• 41:59Joe Weisenthal?

  Let's leave it there.

• 42:00Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 42:05Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at thestalwart. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashell Bennett at Dashbot, and Kale Brooks at KaleBrooks. For more Odd Lots content, go to Bloomberg.com/oddlots. We have a daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 42:26Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we talk about commodities, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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