00:00 Julie
You mentioned the commodities super cycle, and I know that includes some bullishness on oil, which is a little bit out of consensus, right? Um Jay, you know, I’ve seen some some estimates out there that oil’s going to kind of remain in this range because of the ample supply out here. Sort of the Venezuela situation notwithstanding. What do you see that those folks maybe don’t?
00:24 Jay
Yeah, no, that’s a great point Julie and, you know, you have to have something that’s out of consensus, right? I mean, I think at this point, you know, non US is becoming more of a consensus. You can just tell by the performance in in EM that you that you highlighted. And so look, for us, uh commodity cycle history is pretty clear. Uh it starts with precious metals. We’ve had that this year. Gold miners are up 150%. It moves to industrial metals. We have that. Copper miners are up about 70% year to date. and then it moves on to energy. and as you point out, that has yet to happen.
01:14 Jay
And so as we look at it, it’s a really attractive risk reward environment. mostly because everyone and their brother knows that there’s a huge inventory glut. Wall Street has a Brent forecast for next year of $52 to $55. It’s currently at $61. And so all the bad news is in the price. And we love uh when those situations take uh take take place. and we’ve witnessed uh over the last month or two, you know, continued talk about OPEC plus adding capacity, adding production back to the market, and what does XLE do?
01:48 Jay
It does nothing. It sits there. And so the bad news is in the price, lots of upside if we get the global growth that we’re expecting, uh if we get a situation where demand is better than expected. And look, we think that uh there’s just a limited amount of low cost capacity in the oil and gas sector that has yet to be exploited.
02:08 Jay
And so, uh these prices, all you’re doing is basically shelving uh production, you’re shelving exploration. And so we think we’re setting up for the opposite of an inventory glut, an inventory shortage in the next 12 to 18 months.
