In this episode of Energy Newsbeat – Conversations in Energy, Stuart Turley and Wasif Latif discuss the impact of geopolitical tensions, particularly the escalation in the Middle East, on the commodities market. They explore the potential effects of supply disruptions, such as a shutdown of the Strait of Hormuz, on oil and natural gas prices, while emphasizing the growing importance of energy in global economics.
Latif highlights the ongoing commodity supercycle, driven by underinvestment and rising geopolitical risks, and forecasts a gradual increase in energy demand, despite short-term volatility. They also touch on the economic dynamics in Japan, Europe, and the U.S., focusing on capital flows and global investment trends.
We recorded this right after the U.S. Strikes on Iran, and were waiting for the retaliation from Iran, which turned out to be more like a staged event or a show of force.
This was a significant update from Wasif, considering the current geopolitical crisis the world economy is facing. When I asked him how his ETF is performing compared to the stock market, he responded that they are way ahead of the market. That is huge, as I rely on experts who are in the business for investment advice. The entire team at Sarmaya is outstanding and has provided excellent datapoints on their website, articles, and fantastic data slide sets.
Investors need data from trusted sources.
We recommend following Wasif on his LinkedIn here: https://www.linkedin.com/in/wasiflatif/
Check out Sarmaya Partners here: https://sarmayapartners.com/
Thank you, Wasif, for stopping by the podcast again, Stu
Highlights of the Podcast
00:00 - Intro
00:55 - Special Guest: Wasif Latif
01:20 - Geopolitical Risk and Commodity Markets
03:20 - The Commodity Supercycle
04:50 - Impact on Oil Prices
06:15 - Geopolitical Escalation: Immediate and Long-Term Effects
07:30 - The Role of Gold in a Volatile Market
08:35 - Strait of Hormuz and Global Energy Supply
10:00 - Geopolitical Risks and Economic Pressures on Global Players
11:30 - Impact of Iran’s Actions on Global Energy Markets
13:00 - Future Energy Demand and Long-Term Commodities Trends
15:30 - The Role of AI in Energy Consumption
16:30 - The Declining U.S. Dollar and Commodities
18:00 - Japanese Bond Market and U.S. Energy Investments
19:40 - European Deficit Spending and Economic Impact
21:20 - Potential Shift in Global Capital Flows
23:50 - How Countries Are Responding to Energy Security
25:10 - Global Financial Markets and Commodity Cycles
27:00 - Long-Term Investment in Energy
30:00 - Japanese Inflation and Global Impact
32:00 - Conclusion
Full Transcript
Stuart Turley [00:00:07] Hello, everybody. Welcome to the Energy Newsbeat podcast. My name's Stu Turley, president and CEO of the Sandstone Group. We are absolutely right now. We are recording this on a Monday. And this is absolutely, we're in a wait and see mode after the United States took out the three sites in Iran. And we are trying to figure out if Iran is going to retaliate. I wanted to find out what's going on in the commodities markets. And I rely on key people around the world. To that understand finance and financial markets. And my special guest has been on the podcast several times, and I truly respect him and his opinion and everything he's doing at Samaria partners, was a flat to hire you today. Was it.
Wasif Latif [00:00:55] You're great, Stu. How are you? Thanks for having me.
Stuart Turley [00:00:57] I'll tell you what, I have gotten such great feedback on all of your podcast and your visits and your insights. I rely heavily on folks that are actually, you know, doing this for a living and, and understand things. And I want to hear what your thoughts are on what's going to happen in the commodities market in this really wild time.
Wasif Latif [00:01:20] We got going on right now? Thanks for having me and it's a great question. It's always a pleasure to join you and talk about this stuff. It is a passion of mine and I've been following this stuff for years. Being a macro type of an allocation person and thinking about the world from the top down and looking at things. And, you know, the things as they're playing out are largely falling in line with the framework that we developed several years ago to think about the world, you know, of the big picture cycle of. Commodities generally being out of favor, and at some point becoming unloved, under-invested, under-owned, and under-appreciated. We've had all of that. And then the plague, I should say the plague. The pandemic came around, and the pandemic focused the world's attention on the underlying commodities that are needed for economic growth, economic prosperity. And then a few years after that, we saw an escalation of the geopolitical risks. And whenever you have a spike in geopolitics and increasing stresses around the world when it comes to any kind of military activity or resource activity, that generally means there's gonna be a bid for commodities. There seems to be a correlation of that with history. And so what we're seeing now to us largely He's falling in line. With our worldview that we established a few years ago that we entered since the pandemic a world where we're going to see heightened stresses in terms of geopolitics, heightened stresses in in terms budgets and fiscal deficits around the world, and as a realization of the world that energy is at the core of everything that we do. That's what we call energy is life. It's a phrase that a lot of folks including our mutual friend Doomburg uses a lot. It is something that is essential to economic and human prosperity. And so all of those things are playing out to us and it falls in line with our sub-themes of our commodity super cycle that we think began in the dying periods of the pandemic. So by the end of 2021, early 2022, you had a resurgence of energy prices as the Got out of the lockdowns and began to consume again, travel again, working in, move again, and then the realization that the under-investment had been there. Now, on top of that, when you throw in the geopolitical escalation that has continued on very gradually, every year there's been something new that occurs that gets added on to the pre-existing geopolitical stresses and tensions and the conflicts around the world. And so that just continues to. Move on top of that and add to it. So to us, this is an additional new escalation, if you will. Now, having said that, over a medium term or a short term basis, generally speaking, when you have a geopolitical flare-up, the markets on the financial side generally tend to fade this because it's an immediate reaction and an immediate move. And history tells us that that flare up and that immediate spike in, for example, energy prices or volatility in the market generally fades over time because cooler heads prevail or some kind of a stalemate emerges or a status quo re-emerges and it's back to normal to some degree. We think that that is also going to happen this time around, at least in the short term, What over the longer term because of this continual. Underlying pressure that's there on the geopolitical front, it will require a greater degree of energy and commodity spend, and that's going to keep a very slow burn, continued demand for those kind of things over time. And we think that's where the opportunity lies, focused on the longer-term need for all of these things to be built out. So I can share my slide, if that would help. Absolutely. It's our key slide where we showcase our sub-themes. And let me just share that. So let me know if you can see it. You bet. It's rolling. OK, fantastic. So we've shown this before, Stu, and it basically is talking about our big picture super cycle theme that we think is a commodity-oriented story, which started in 2021 and we think it still is in its early stages and will be a multi-year cycle, just like the prior ones that we've seen in the past. Such as the one that we saw in the 2000s or the one we saw the 1970s. And this one we think is gonna be similar in length, although it'll have a mixture of different things from the 70s and the 2000, contributing to the growth and rise of it. And as you can see, we have these four sub-themes and what's recently been playing out is these two on the left, which is the escalation in geopolitical risk and gold continues to have a bid on it. It's still this area that is being seen as a safe haven and as the bombs have been falling and there's been the conflict escalating over the past couple of weeks, gold has held steady while some of the other markets might have been wobbly here and there but gold has been holding steady. It hasn't had a full breakout yet in terms of its price but it is touching or nearing all-time highs already and we think that there's more room for that and we can talk about that as well. And then on the left is energy and the big news over the past week or so has been the spike in oil prices and energy prices as a result of concerns around strained supplies. If you get into a situation where a refinery gets blown up or a oil patch gets blown up or just shipping gets constrained, all of that is feeding into that fear. And that's why if you've seen oil from pretty low levels where the market earlier in the spring or in the summer was concerned about and pricing in and economic slowdown where demand might not be as robust. And at the same time over supply in the market coming from the US producers continuing to produce but also OPEC beginning to increase their production or at least committing to increasing the production to where they'd had earlier said it would do so. So all that increase in supply and the lackluster demand was weighing on the market and then the surprise came with this geopolitical spike and you've seen oil prices rise surprisingly to the upside and catching many many investors who probably were short oil because of those more consensus type of views and so you've see this this spate our view in our view this spade of oil covering, oil buying, and just rising oil prices as a result of that. And our strategy, we invest in all those things, including gold and oil and gas and uranium. And so all of those pieces of the puzzle have benefited that type of a strategy, if you will.
Stuart Turley [00:08:36] As we recording this, this Monday morning, Brent is at 7461 as we are recording. And the Strait of Hormuz, if it got shut down, uh, it's roughly 90% of us of the Iranians budget, uh 90 to 95%. And, and so it would absolutely cripple that if there is going to be a regime change, you would want them to have a resource of money coming in to fuel a new, a new government. So i'm hoping it is not disrupted i'm helping for the iranian people themselves that it is taking out. The LNG is not often talking about as it have coming from cutter and coming from the UAE and everything else. I believe it's 20% of the global, uh, LNG market for which is shipping to Europe and everywhere else. That's a huge chunk that would be taken off the market. I don't know that they would do that because If Iran did that, it would be like a wolf in the corner. It bites everything it can on the way out and being, you know, mall. It will do. You don't know what a wolf was going to do, but you know he's probably going to bite, so don't stick your hand in there, but in this case, uh, I'm hoping they don't shut it down. They haven't in the last 15 times that they have threatened to shut down, uh the straight. But China is, uh, China and Russia are two that I'm not sure how are going to handle this situation. Russia seems to be staying its course and focused on its own geopolitical problems with Ukraine and China. They're the wild card here. I'm sure how they're going to three huge, uh military transports landed a few days ago in Tehran. Were they picking up or dropping off? I don't know.
Wasif Latif [00:10:41] Well, I mean, there's a few things to consider, as you mentioned, in the Strait of Hormuz. It's when we hear about it in the news and the headlines, we think automatically, oh, Iran and Iranian supplies. But guess what's on the other side of the water? It's Saudi Arabia, it's Bahrain and it's Qatar. And all of those countries also push oil out through that water body. And as you mentioned, the LNG from Qatar, which is just a huge part of their economy and their growth. So all in all, when you factor that in, you're talking about 21 million barrels of oil or oil equivalent per day coming out of that tiny little piece of water, right? And that amounts to about twenty percent of the world's need. Because the world consumes about 100, 105, 102, somewhere in that neighborhood of oil barrels a day. If you take out 20 percent of the supply, that's going to be a big impact to the price of oil. Because what's interesting is the price of oil is actually determined by the incremental change. So it's really the. The supply increase and decrease at the margin. So even if you reduce the supply in the world of half a million barrels a day, that can have an impact on the price because a lot of the usage is determined by the incremental supply that's coming in. So all of that is to say, a 20 percent reduction in the supply would be enormous to the price of and by substitution to the price of natural gas. And so the entire energy complex would have this massive, massive move up. And to your point, that is mutually self-destructive for all parties involved. Right. The Western world, the US, Europe, we cannot afford a significant jump in the price of our energy. And neither can Iran afford that kind of a drop in their income that would surely shoot themselves in the foot. And then lastly, you mentioned China. China also is one of the biggest buyers from Iran, Iranian oil. And so that impacts them. And being a net importer of oil and natural gas, they like low prices, they want low prices. So it just serves the world better if we keep that open. And that's why up until now, for many, many years, no matter how many times this escalates, and we have to take a step back and remind ourselves that this generally Cursory five to 10 years, this recurs. And whenever this recurs, you have this escalation, you have the build out, and as a result, you have these fears, and then eventually they subside and things not necessarily go back to normal, but at least it becomes at least somewhat subdued and spread out in terms of the risks. And so we think that that is likely in the immediate or short term. Overall, in the long term, it still requires the world to continue to build out their capabilities because of the need to have competing areas of influence between the US and Europe now building out their own military and defense capabilities. So all that's going to need commodities over time and energy over time. We just think that immediate spikes like this usually fade. But that'll be undergirded by a gradual rise in the need for these types of commodities, especially energy over the course of history. There's one chart that I've always shown you, Stu, which is the world continues to consume more and more energy over time, no matter what happens. Right. I can share that. Please. It's a really eye-opening chart whenever people see it, because when we think about these type of things and we hear about them in the news, We don't see the data. We assume that energy and energy usage is declining because we're becoming more efficient, because we are becoming more abundant. But the reality is, since 1965, as this chart is showing, the usage of energy, the consumption of energy around the world has done nothing but go up. There have been shorter term periods where it's either flattened out or declined. So these two blips that you see towards the. The right side, the first one is the great financial crisis and then the second one is the pandemic. Other than those two periods, it's been pretty gradually continuing to rise. And so we think that that's going to continue to happen. And why is that? Even though we have the ability to produce more energy, what ends up happening is because of human innovation, human ingenuity, cheaper and more abundant energy actually equals usage of either the same amount or even more. Because we find new technologies and new ways to harness it. Case in point, the latest, greatest high-energy usage around the world is AI. So with AI, we're gonna be building a lot of data centers. Those are already in existence. They already are consuming a lot of energy and future ones are being planned and gonna be built out. The U.S. Has the most number of data center around the World. We can be assured that other countries around the word are gonna be building similar capabilities. And so all that energy is going to be needed. And whether that's translating to natural gas or nuclear, those are going to continue to rise and be needed, so in our view, the gradual need for energy will be there and it will be persistent and it won't be abated or go away with any type of innovation barring an economic crisis and even economic crises in the past I've shown that that. Reduction in the demand is always temporary.
Stuart Turley [00:16:33] Well, I'll tell you, um, I just got from Michael Yon is a war correspondent who has been on the podcast before, and he just sent me a note, uh, the owl, uh you did the air base in cutter was attacked by Iran. We're again, recording this on Monday afternoon. And it's like, holy smokes, Batman, um, even as we are sitting here recording this now, I knew yesterday that the United States had removed all of its airplanes out of that air base. So nothing was there. It might've been a symbolic attack, but we're in a really telling time here.
Wasif Latif [00:17:11] Yeah, it is the headlines crossed and I saw it and then immediately looked at the market and you saw a dip. You saw a deep in the S&P 500 and believe it or not, it rebounded and it's back up to positive. In fact, it's hitting its highs of the day right now.
Stuart Turley [00:17:28] So your comment earlier is, is like, so people have already baked in a certain margin for, uh, give or take of geopolitical things going on. Do you remember before, like, uh two weeks ago or a week ago, we had three tankers on fire in the straight of hormones and And they were on because two of them had hit because of the spoofing and the GPS detection systems and everything else. So they weren't attacked. I can remember a time not that long ago that I tanker on fire and you would see a $20 hit increase in oil. Not anymore. They're like, Oh, well, I got to get a cup of coffee or a cup of tea and there's three tankers burning. This is nuts.
Wasif Latif [00:18:15] Well, I think when you look at the financial markets, as I said earlier, the underlying consensus and viewpoint is that we have abundant supply. And so there's all that. So as I set earlier, barring the straight of hormones, which would be a big disruption in the percentage of supply, these other things are generally seen as passing and fading and short lived. And so that's why a lot of financial markets tend to fade those. The other thing is as you mentioned. You know, the Iranians wanted to show something that they're doing something as a retaliation. Right. They talked about it. So they need to show that to their people. And you know, in this day and age, as we were talking about earlier, Stu, is, you know, this conflict, at least for now, seems to be where it's somewhat orchestrated, a little bit of a dance. We're going to do this. It'll be proportionate. We're going to do this because I think everybody is aware of the risks of. Continued real escalation of the situation and that it seems to be pulling heads are still prevailing and they're trying to avoid that And what what I it seems like to me right now what Iran is doing with this strike is Internally, they're probably going to be Showcasing it as a big big success so that they can say they did something whereas it's probably an attack in a base where the the number of troops are already out or the damage might be minimal and it might be a little bit more show so but it all depends on how this tit for tat continues and where it goes um and so that will be interesting to see how that
Stuart Turley [00:19:53] You know, 80 or 89% somewhere around in there of the oil that Iran produces goes through their cargo Island, uh, uh export facility. They have their other newer facility closer to the straight of hormones, uh entry point there. But I noticed that there's a report that just came out that, uh, Israel shut down their Leviathan field natural gas plants, which is an affecting, uh Egypt's and at the site, second order of magnitude of impact is the, um, fertilizer stock in Egypt. So these wars for commodities and natural gas and fertilizer and everything else is a domino effect that it is impacting Egypt's ability to produce fertilizer. It's like, yeah.
Wasif Latif [00:20:46] And that's sort of the nature of a heightened geopolitical era. And even though this one incident, this particular conflict might be another line item in a long list of conflicts that have faded over time, what we are witnessing is an era that we think we crossed the Rubicon in the pandemic. And as a result of a lot of forces that have been building up over many, many, many years, it's been a confluence different forces coming together, where we do believe that we are in this higher level of geopolitical and sort of conflict era, which will have these knock-on effects. So if you recall, in 2022, when Russia invaded the Ukraine, Ukraine is a breadbasket of the world, not of the the world per se, but they're a big, big wheat producer and a bread basket for a lot of European needs and Middle Eastern and Asian needs. And you saw the price of wheat go up, you saw price of grains go up and you the price the fertilizers go up. So that does have these knock-on effects and it's probably, again, a case of a temporary move that'll fade as supplies resume and things come back and re-normalize. So you're gonna see that, but in the meantime, this is something that's gonna continue to have disruptive impacts and the longer these things persist, there are intricately connected systems that we are relying on. And if anything in the system gets disrupted, you could see these knock-on effects carry on or into areas that we wouldn't even have imagined.
Stuart Turley [00:22:23] Now we have not talked about this before the recording of this podcast. I may put you on the spot a little bit here, but how is Maria partners doing with your fund and how are things going? Uh, are you proving that your theory is profitable?
Wasif Latif [00:22:42] So we launched our strategy in the shape of an ETF earlier this year. So it's the Sermaya thematic ETF and the ticker is Lens, L-E-N-S. You can pull it up and look at it. And it's been doing really well since the launch. So since we launched it, which was in January of this year, it is up double digits in percentage terms. Whereas the... Broader market, whether you look at the S&P 500 or the NASDAQ, despite the rally we've seen over the past month or month and a half since the April lows, we are still doing a lot better than them because of what we're investing in. And I would say the larger contributor to the strategy this year, at least, and for the past few years, has been our gold and gold mining stock positions that have been helping us. Nice. It's been a great. Period for this type of strategy and we've done really well and it's heartening to see sort of the results.
Stuart Turley [00:23:45] Yeah. And I didn't mean to put you on the spot, but I respect your opinion enough on these types of global financial issues that I was hoping that it was a good answer instead of saying, uh, well, I know it's due. We're lower than the S and B.
Wasif Latif [00:24:04] No, we're doing really well. Thank you, yeah. Thanks for asking.
Stuart Turley [00:24:07] Okay, good. I feel better about being able to ask that. But when, as we sit here, what kind of things are you looking for during the second half of this year? Because if we sit back and take a look at oil, I think we're going to level out $75 oil is probably going to stick around for a little bit. I could even go back to the sixties again, based on that. Uh, I, but I think that in the overall view, there's still trillions of dollars needed in order to meet normal decline curves. So I'm still bull even without geopolitical issues. I'm Stella permable. I think there is going to be. A point in Josh young over at bison interest has said the longer that it, uh, kind of floats along here in the sixties, the higher it's going to go and rubber band back up. I like Josh. Josh is a cool cat very much like you. Um, I apologize if I called you a cool, but he is very much, like you that I trust his opinion on those things.
Wasif Latif [00:25:18] Yeah, we would definitely agree. I agree with your viewpoint, and that's why we have the energy sub theme in our portfolio. Nice. What's happened is, and what is happening is, as I mentioned earlier, the markets, the financial markets generally are focused on the here and now, and the consensus is focused on what's going to happen in the near term. And the near-term concerns are an economic slowdown. Coupled with an oversupply environment from Saudi Arabia and OPEC plus. And so that had been weighing on the price of oil where you saw the decline in April and there was talk of $40 a barrel oil, $50 a barrel of oil and we never got there. We barely broke 60 and then the geopolitical stuff biked again. And, you know, as I said earlier, the geopolitical stuff for price of oil in the short term is generally something that you should fade because it sort of moves back to the fundamentals. Well, when you look at the fundamentals, I couldn't agree more with the idea that just like in any commodity, you need to continue to reinvest in the production capability, the ability to produce more because the demand is just gradually continuing to And all of the big institutions that have projected demand for oil over the past several years have pretty much been undershooting their estimates and demand has generally been higher than what they've been estimating. And we think that that likely continues. And with this under investment that's taking place, it's laying the ground for higher and higher oil prices in the future. So we would agree with that viewpoint and that's why we have that allocation. And this stuff right now, this volatility. This near-term stuff is just, to us, is short-term noise on the way to higher oil prices because of a longer-term fundamental demand story. Now, to answer your question on the second half of the year, what might pan out is sometime in the second-half of the summer, call it July or August, maybe into September, we might start seeing a bit of a softening or a slowdown in the economy, and that might spook the market. And at that point, if the Fed feels that there's enough market volatility and if there's enough pain, they might then come in and step in and reduce rates. And whenever the Fed has cut rates in the past, and we're not saying that that's going to happen anytime soon, the Fed might need to be pushed into it or pressured into by market forces or a real, real recessionary scare. Barring that they might hold the course for now, especially with oil prices spiking again, because that feeds into inflation, right? But if, if they do get that pressure, they could cut rates or they could indicate that they're going to cut the rates and that would mean that would put downward pressure on the dollar and the dollar going down is generally correlated with commodities going up because commodities are priced in dollars and so there's generally an inverse relationship. The price of commodities and the price the dollar. So we think that we are in an era where you're going to see a softening and a declining U.S. Dollar. Just like we saw in the 2000s, we are in no way calling for a de-dollarization. We are no way in saying that there's going to be that kind of a substitution. But going back, you go back 50 years and there have been periods or the dollar has been down for multiple years. By 30%, 40%, 50%. And that's simply capital flows. That's simply interest rate differentials, market cycles, economic cycles. And we think after a long period of a rising and a strong dollar, we are probably now in an era where you're gonna see a weak to declining dollar, not a crash, not a collapse, but just a gradual weak to decline in dollar, which would bode well for. Commodities and commodity related equities like emerging markets, for example.
Stuart Turley [00:29:27] Let me ask, ask this, there's about 16 questions that just came up as we're going through this. The Japanese bond market is in a serious turmoil and going on with Japan owning so much of the U.S. Debt. And then you take a look at the horrific problems that is going on in the bond market. It's cool that we're seeing such great investment from Japan trying to recover into the U.S. Maybe that is a way for them to try to solidify that. And we're seeing other great investment from other countries into the United States energy market. Do you feel that that's a way that countries are trying to stabilize their own energy security and their own bond markets?
Wasif Latif [00:30:16] Yeah, I think that could be the case for sure on the on the energy side to show the investment, uh, the natural gas here is so abundant and so cheap. That's a great place to get some of the, the investment and the capabilities for sure. I think one of the challenges is that when you look at Japan, for example, they are now seeing inflation at levels they haven't seen in decades. Right. And so it's great because they've been wanting to spur inflation for the longest time, because they'd been trying to fight deflation for 30 years. And so in absolute terms, the inflation isn't alarming, but in relative terms to where they were simply five years ago, which was zero to negative inflation, where they are now, it's been a big jump. And it's now feeding into food prices, rice prices, which is a big staple. And the BOJ has been very, very slow to raise rates because number one, they don't wanna repeat of what they've done in the past. In 1997, they raised rates and, you know, sent the economy back into recession and causing more deflation. So they want to see this continue on for some time before they get comfortable. So that's number one. Number two, I'm sure we've all heard of the yen carry trade that, you, know, had a little bit of a hiccup last summer, and everybody became an overnight expert in the yen-carry trade at that time. But that is alive and well. And one of the things that could happen is. As bond yields rise in Japan in response to inflation, the government is now committed to the BOJ said, and the government has saying that they're going to issue more short-term bills instead of longer term bonds, because effectively the BOG owns the majority of that bond, that bond market, and there's not much activity there. So all of that to say Japanese inflation may force the BOJ to raise rates. Which would then require or reawaken Japanese money that's invested overseas to want to come back to Japan because now you can actually earn a yield because now, you can earn a return. And if that is in the face of a declining dollar and a rising yen, then in yen terms, those returns are even less as the dollar's declining. So there's a risk that the Japanese actually, at some point, may begin to pull their capital outside of the US. So one of the things that we think about is in the US broad equity market, it is very heavily owned. You think of the mag seven, you think of a big technology sector, big exposures, the US equity market and those big mega cap names are not only owned by US investors. There's a large portion of those stocks that is actually owned by non US investors in Europe, in Asia, both individually, but more so. With sovereign funds, with insurance companies, with all sorts of asset management companies that have the exposure. Why? Because it's been the best performing market for well over a decade and its returns have been spectacular and they've been invested here. Well, if those returns come under pressure, if the dollar comes under pressure and in local terms the returns aren't there as much, then you could see a flow of capital. From the U.S. Back to those countries and their markets as they see better returns in those markets. For example, European markets are actually up so far this year. Believe it or not, Germany is up over 20% so far, this year, their stock market. Why? I cannot see that on my bingo card. And the reason is because there's this resurgence, if you will, this renaissance of the build out that they're promising or trying to do. On their industrial and defense capabilities and they're going to be doing fiscal deficit spending in order to do that. They have the bandwidth to do it because they've been running pretty tight deficits But they've had two years...
Stuart Turley [00:34:13] But they've had two years of negative GDP growth over the last two years, and you're saying they're on track to increase their GDP this year?
Wasif Latif [00:34:21] No, no, no. I'm not talking about GDP. I'm talking about deficit spending deficit. So, OK, great. Deficit when when government, when governments borrow and spend more than they take in, right. Yes, it's spending. We've been doing that for a few years now, several years now. And when you take a step back and you look at the big macroeconomic picture, basically, what that means is that the public sector or let's say the government sector is borrowing government sector, borrowing. Actually translates into the private sector benefiting and so the one of the theories out there is that our economy and our market has benefited from the deficits that we've generated and if the Germans are going to do that now then their economy could actually get a boost out of it because spending is spending and that can increase economic activity and and grow that side so all of that is to say Stu that we might have entered an era where capital that is sitting in the U.S., in the US markets, begin to migrate back to their home countries. Wow. And that is a very, very slow moving phenomenon, because this is trillions of dollars across hundreds, if not millions of accounts. And it just takes very, very long for people to gradually get into it, make the decision and the mechanics of doing the actual trade and moving it. So this could be a multi-year cycle of that capital gradually. Leaving the U.S. And going back to their home country and investing in those markets.
Stuart Turley [00:35:51] But that's, that's a trend for me to kind of, uh, start watching and stuff. Cause when you sit back and take a look at the negative GDP growth out of the EU, um, they've had some serious problems and that is different as you were mentioning. Uh, the deficit spending, which is a totally different topic. And I was kind of misconstruing there, uh, on that, but as something that we would do, I absolutely treasure our conversation and thank you Wassa for your leadership. And I believe me, I will have you back again very quickly. Um, how do people find you?
Wasif Latif [00:36:27] Well, first of all, thank you for having me. I love having these conversations with you. They're really good and I enjoy them. We are Sir Maya partners and the best way to get in touch with me is through our website. It's SirMayaPartners.com. Our ETF that I mentioned is at SirMyaETF.com and I'm also on a Substack where they can find me under my name, Wasif Latif and the handle is Sir Maya Car.
Stuart Turley [00:36:55] All right. Well, thank you so much for stopping by the podcast. We are in a different time. And I guarantee I need people like you that I can call up and say, what the hay is this up? And so with that, again, thank you all for listening today and just reach out to Wasif. If you have any questions about what's going on in the market, he is a trusted resource. So thank you and have it a fantastic day. Thank you, Stu.
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