00:00 Speaker A
Are we at the start of a commodity super cycle? Now, Jeff Curry, remember he’s the former head of commodity research at Goldman Sachs, he’s a a senior advisor to Carlyle. He laid out his case on X today. And one of the things he talked about is that with all this enthusiasm for the AI-related equity trade, the people are kind of forgetting about the role that commodities will play in demand for that ecosystem. That’s one of the reasons he gives. Jake, as somebody who watches commodities so closely, um, what what did you take away from this argument that that he was making?
00:54 Jake
Yeah, I think you take two basic legs of his argument. and his his primary thesis is that we are at the start of the next massive commodity super cycle. The last real significant driver you saw on the last huge commodity super cycle was the entrance of China into the global market through the early 2000s, going up through the highs there of around 2012 to 2014 before the pullback. The driver this time is the AI build out. And Jeff is really, really concentrated on the physical side of this. And to that point, he makes two really key arguments. The first is just the raw physical bottlenecks. You look at energy, energy prices are soaring, electricity prices are soaring, especially in this country, in Europe and other uh really developed economies where you see this price pressure. At the same time, we’re seeing the biggest supply crisis in history for energy in the Straight of Hormuz. And as I was saying earlier, every trader I talk to says, even if this war, you know, quote unquote wraps up tomorrow, we are still not going to see a renormalization. The game has changed. and that is right as demand for energy is exploding as the US has spent the last 10 years kind of underinvesting. Jeff points out the top 20 miners in the world are spending 40% less than they were at the top of the last super cycle. So that’s got to come back. His second argument here is the deglobalization wave we’ve seen. You saw Ray Dalio’s Bridgewater call this modern mercantilism as their driving theory. We’re going back to this great powers world where the US and its sphere of influence, China and its sphere of influence are really driving this. And as deglobalization continues, supply chains have to get stronger, uh, competition for resources gets stronger. This is energy, this is metals. His argument, we’re at the beginning of the next huge boom just because of the raw demand for all of these materials.
02:30 Speaker A
All right. Amanda Keith, just quickly want to get your takes on this. Amanda, do you agree? And if so, as an investor, how do you take advantage of it?
02:41 Amanda
Well, certainly all good points. Uh, I’m not ready to back up the truck and say this is a super cycle. A bull market of sorts, yes. Some of it is policy driven for sure. So I’d like to see us get past the purple haze of policy uncertainty and the conflict and really kind of reset on what the backdrop looks like because broadly, the world is a wash in commodity supply of sorts, not specific to the AI trade. Um, so so I do think there is a narrow subset certainly of uh commodities that are going to be a long-term play here, but I’m not yet ready to say it’s a broad-based super cycle.
03:19 Speaker A
Fair enough. Keith, what about you?
03:22 Keith
Yeah, Jeff does some great work. I I just I think there are opportunities. I don’t know that it’s as broad-based as the 2000s, but I would say for us more directly is, you know, we like the energy sector. We think energy prices will be higher for longer. That’s a good hedge for the overall market. We’ve also, you know, was very positive on gold last year. We downgraded it to a neutral earlier this year, but there’s also some secular tailwins based on that um, you know, global uncertainty, geopolitical risk and so forth. So I do think relative to the last decade, we’re in a better place. Is it this broad-based super cycle? I think that’s still an open question, but there are pockets of opportunity as I as I just mentioned.
03:59 Speaker A
We shall see. Guys, thank you so much. Happy Friday to all of you. Amanda, Keith, Jake, really appreciate it.
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