Miami Hedge Fund week panel 2024 – Commodities: Outlook on Prices, Volatility, and Portfolio Diversification

This packed panel discussion featuring Tim Pickering (Auspice), Brent Belote (Cayler Capital), Gerardo Tarricone (Arion) and Derek Stroke (Equanimity Advisors) focused on commodities as diversifiers and opportunities in commodity trading and investing. Our panelists discussed topics like the reliability of commodities in portfolios, ESG factors, the potential for a commodity supercycle, and educating the next generation of commodity investors. They debated drivers of long-term commodity prices and the impact of trends like energy transition. Panelists also highlighted volatility in energy markets, shifts toward separate managed accounts, inflation expectations, and strategies for including commodities in diversified portfolios. This session illuminated both risks and rewards for navigating evolving commodity markets, leaving attendees energized to pursue these opportunities through dedicated managers and stay tuned for what’s in store in the world of trading and beyond. – you need to check this one out! SEND IT!



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Check out the complete Transcript from this week’s podcast below:

Miami Hedge Fund week panel 2024 – Commodities: Outlook on Prices, Volatility, and Portfolio Diversification

Jeff Malec  00:06

Welcome to the derivative by RCM Alternatives, where we dive into what makes alternative investments go analyze the strategies of unique hedge fund managers and chat with interesting guests from across the investment world. Hello there, and depending where there is you might be a little chilly right now you’re in the middle of winter. So this week we want to take you to the warmth of Miami where we co hosted a four person panel during hedge fund week talking the good the bad and the ugly in commodities. The panel had to newcomers to the show here, Derek Stroke of equanimity advisors, and Gerardo Tarricone. Sorry, I don’t know how to pronounce that exactly of area and investment management, as well as to show veterans Tim Pickering of Auspice Capital and Brent Belote of Cayler Capital and was hosted by our friend at Cohen & Co Camille Clemens, which is I have to admit a great podcast name Camille Clemens, maybe just coming after my spot here. Anyway, listen in as the panel dives into commodities as portfolio diversifiers the impact of ESG the potential for commodity supercycle and educating the next generation of commodity investors send it! This episode is brought to you by RCM’s managed futures group who help investors identify invest in programs like the pros on the panel here. Head over to to see the write up on this episode, or the RCM YouTube channel for this episode to find the link in the pod subscription to see the full performance record of these managers and explore the rest of the RCM database. And now back to the show.


Camille Clemens  01:49

And to all of the sponsors and specifically, RCM alternatives are getting us all together today. Our agenda I’m just going to run through really quickly will be introductions by our esteemed panel a little bit on their experience and where they are in the industry as far as what their what level commodity trading is what I was focusing on. We’re going to talk a little bit about the reliability of commodities as a diversifier for portfolio. How the last couple of years, this asset class has had some strong returns. So how that’s affecting us on a go forward basis. And then I’d like to also dig into a little bit about the education of the next generation of CTA investor or commodity investors. We’re hoping for a really dynamic dialogue. These guys have a ton of experience are super interesting, have great backgrounds. And then, of course, questions from the audience. So let me just start. My name is Camille Clemens. I work for Coleman and company. We are a public accounting firm, that’s 47 years old. We do a lot in the alternative space, supporting investment strategies throughout structures. We have a large practice on the registered fund side of things too. So we’re definitely seeing an intersection of public versus private ways of accessing this investment strategy in the marketplace. So I will pass it up to you. Turn your microphone.


Brent Belote  03:14

Brent Belote, Cayler Capital. We’re a systematic oil, CTA and we’ve been around for a little over five years now.


Tim Pickering  03:22

Tim Pickering, Auspice cap was a firm I founded 18 years ago, former head trader for Shell Oil and I guess the title of the commodity side TD Bank. So we ran a commodity tilted CTAs we were the first seed to launch a ETF ever, I really wanted to go hear that pedal. We did that in 2008 with natural gas based on a candidate eco gas for those that know the energy market. We run ETFs in both Canada and the US in our brand and other brands, as well as publicly available CTA strategies on both sides of the border as well.


Gerardo Tarricone  04:01

Hi, everyone. I’m Gerardo from Arion investment management in London. We are a commodity focused investment manager. We run multiple strategies by multiple PMS. We call it anything from all your products to base metals for issues, grains and Soft Commodities.


Derek Stroke  04:23

How’s it going everyone? I’m Derek Stroke one of the founding partners of equanimity advisors for CTA CPO with the hybrid focus and liquidity providing and fundamental trading on the ball surface of specifically natural gas, US based natural gas futures and options, heavily focused in the in the ball surface and options space.


Camille Clemens  04:47

Alright, Brent, we’re gonna start with you. I’ve heard you say on a couple of occasions, if you’re not long commodities, you’re short them. And I’d like you to talk a little bit about that. Specifically, your experience through all facets of oil investing. I know you started your career Early on in one area, and now you’re running your own shop. Where do you see the supply and demand balance over the next year? And I’m also interested if you can kind of weave in your thoughts on Evie. Yeah,


Brent Belote  05:15

absolutely. So my background, I really glossed over it. I worked at JP Morgan before this for four, I started Kaler capital for 10 years, in terms of will kind of go backwards in terms of Evie, it’s been a very fascinating time for. That’s always been one of the things that I believe is if you’re if you’re not long, admired or short, then because every commodity, especially oil, which is our primary focus flows into every aspect of your life, whether it’s your car, whether it’s to your house, whether it’s the food you eat, and you have exposure to it, whether you like it or not, so you’re going to lose money, if oil goes to two under $250, you’re gonna end up having a reverberating effect on your life for a long, long time, which is something I’ve always believed in, you know, I always like to think that we’re in kind of the Golden Triangle of oil trading, where supply is slowly declining, every government in the world is kind of trying to kill it outside of the Middle East. And everyone wants to switch to the Green Revolution, but demand is still increasing. And there’s gonna be a point where the supply does not keep up with the growing demand. And we lose about five or 6% of oil just from decline rates. And as that kind of goes, if you’re not constantly investing in that demand is going to outpace it. And I think we’re kind of hitting the point where everyone’s planning that the Green Revolution is going to switch on like that. And it’s going to end up in a situation where the supply demand balances are going to switch very quickly. And I think everyone’s going to be under invested and underprepared for those four or five year periods where it can’t catch up. In terms of Eevee. Obviously, I’m an oil trader. So I’m biased. But has anyone ever seen the amount of mine that is required in materials that are required to come on the ground to create an electric vehicle on top of the power grid, probably should about a car trader for here as well, just for that, but the power grid is not equipped to handle anything that we need to get to a full, you know, 100% Evie Green Revolution. And I don’t think that over the next 10 years even I just don’t see that being a reality, especially when you look at the pockets of where demand is still growing, especially in the EM space. So I mean, in terms of EVs, you know, I’m going to be combustible engine till I die. But I think, I think I think I also live in zero degree weather. So batteries, batteries go pretty quickly there. But I think it’s gonna, it’s gonna be a long time.


Camille Clemens  07:40

It’s even interesting to see some of the requirements from an infrastructure standpoint, we’re putting in new developments, right? There’s just not enough power to draw from. So I think, you know, there will come a time where we’re going to have to just admit to ourselves, it’s not an endless availability at the moment, we do have to spend some time and


Tim Pickering  07:58

look at some of the nuances here. So think of it Texas production. And I think of in Alberta and Canada, where I’m from, so you get some of the biggest oil production in the world. And where are the two of the power grids, who had the biggest failures in the last few years, Canada just in the last 60 days here, where I’m from, and in Texas. So if we can’t solve it in those places, but just think what that implies, and the whole idea of going green, and even if you tie in ESG as a physic concept. It’s all a good idea, right? But we’re just not prepared for it. We’re nowhere even close to be prepared for. And so even as we coast down that sort of path, what does that imply for us as commodity traders volatility. As long as we go fall, we can make money in some capacity. And this push towards decarbonisation is Green Revolution. We’re just, we’re nowhere near ready for it. And so it’s going to be good for what we do.


Gerardo Tarricone  09:03

Yeah, so it’s definitely probably the only demand driver for commodities you know, for with this energy transition requires a lot of a lot of a lot of methods to be taken out of the ground. And that has been obviously under investment in in metals over the last 510 15 years. If you aren’t aware, you know, new copper mining might take you like 1520 years from discovery to production. So, I think I think what we’re going to see in the next few years are rather than my seeming only commodity supercycle is going to be a longer cycle. We don’t know how long it’s going to take for for this energy transition to to actually do materialize. But one thing that I think we’re going to have is certainly volatility in oil as well as base metals and metals like copper and nickel aluminium. If that’s not The much for you know, for certain spreads for certain or for for flood price to display. So figuring out for strategies that are relative value like you know what we do for our Tyrion, I think is going to be, regardless of whether we’re going to go live fully green in the next 510 15 years, one thing is going good, like why these quality these locations, and this is going to benefit all of us.


Derek Stroke  10:30

Not to sound repetitive, but you guys had a lot of great points there about the Green Revolution and the increased volatility and the trading opportunities that bring CTAs we’re not just here to be talking about a commodity supercycle, but the trade opportunities from a ball perspective that what we’re in this transitionary period of, you said oil, the same thing in natural gas and power prices, and you hit on the earth cop power prices. And what happened we seen two years ago with this the URI in Texas, and we had these large spikes in the ERCOT plate failure in the grade. And we just saw in the past month, record low weather record. Low weather temperatures in Texas, just two weeks ago, which drove oil prices $2,000 for the weekend. And we saw Henry Hub natural gas prices from a spot perspective trading at 10 year highs. So this brought this really volatile natural gas environment over the last month, where we went from $2.50 to $3.50, back down to two and a quarter. Now, March is $2.07 today, which is at a contract low, there’s still there’s transitionary period in this ESG and trading opportunity that it’s bringing for these CTAs. And this this increase ball that the last two years for natural gas for the highest ball, sustained ball ever. So this is all this transitionary period that’s going to probably sustain for the next five to 10 years before we are ready to move towards more of a renewable standpoint.


Brent Belote  12:04

So your question, yeah, since I’m nervous of strategy, like how, you know, obviously people talk about the end of oil and where it’s going to go, and what do you do when oil is $14? Forever? Because we have too much of it. And I think that gas is a good kind of, you know, when I started my career, I think that gas was like 14 or $15. And now it’s consistently in the twos like how has that evolved for you guys in a lower price environment is still high vol. Yep,


Derek Stroke  12:27

from percentage moves. I mean, even though we’re trading at last year, we you know, two years ago, we went from $10 to $2. And we sustain this north of 77 ball for the average of the year. Last year, we were more in a $2.50 cent range. But we still had these large percentage moves in these ball opportunities. There’s these spikes. And as we move towards maybe a greener energy, there’s going to be these short term trading environments and the short term potentials where the green energies go back to Texas and roughly 30% of their power maybe in the summer now is coming from, from wind and a little bit more from solar. So like 40% of the grade, but there’s going to be times where the batteries aren’t there yet right now. So it’s going to create these short term opportunities in natural gas even though of course, the standing $2.50 is still a weather driven product where we’re going to have short term dis outlook dislocations, as you mentioned before in your in your products. So the opportunities are going to continue to be there even though in a lower price environment. There’s always going to be short term opportunities.


Camille Clemens  13:44

Tim, I’m ready to come to you for the next kind of portion of this because I think it is a nice transition. You were the head trader for show for a bit. And then you started hospice and now you trade everything. Can you talk to me a little bit about why did you go beyond energy? And how does that play into this?


Tim Pickering  14:01

I mean, that’s a good question. So I mean, I was really trained to manage wall. And so ended up focusing focusing at TD Bank and then to shell on energy because it moves. So you want to trade ball energy was the place to be and I’m a little older than Brent. So you know, at the time natural gas, it really was the Bitcoin. It was this chaotic thing that our market is still developing. So if you really want it to trade and the big merchant energy shops at the time, whether it’s shell BP and Ron was a whole host of them that are now gone, but it was a great opportunity. But But Why bring that up is what we learned and what we honed trading first at TD Bank and then at Shell was how to trade this really chaotic commodity and natural gas. So the way I like to describe it as natural gas at 30 Volume is not the same acid as 120. It’s a completely different animal. And I’m a quantitative trader, I understand the fundamentals, I don’t act on fundamentals. But we need to come up with a systematic and in this case trend following methodology that made the transition from trading low vol to high volume and kind of going through these regime shifts, natural gas will be more volatile, the high volume and go back there if you blink. And so what we did was we develop trend following strategies that made that transition, it was really focused on energy markets, they did this because you know, our view that was the need, if you were going to be effective trend follower, you needed to adapt to the volatility. And that’s how we describe it. So while all markets it was an epiphany with myself, and my trading partner can corner, he’s the co founder of hospice, we’ve been trading together since 2000 to 23 years, was sort of why are we just trading energies? If we developed a strategy that adapts to the different volatility and volatility regime, sort of altered regime shifts? Why are we just doing that and energy when other markets do this, and we’re not a fundamental trader. So, you know, we tried to push that boundary at Shell really wasn’t the place for it. And we just said, you know, we’re gonna go off and do this on a road. When we left in 2005. Left shell, I left in January of oh, five. I didn’t really even know what CTA was. I mean, it was a quantitative trader, use futures contracts, I suppose cash efficient way to do it. You don’t want to trade everything. And in fact, I remember getting ready to launch the first fund. And somebody in Chicago, I remember FCM or something, asking, you know, you’re going to trade grain, why are you going to trade drains, they don’t move anymore? Like, why bother? It’s like, we’re going to trade everything. And we’re completely agnostic in terms of market. And with one tilt, and that is commodity, we run 75% commodity risk, we don’t care if it’s long or short. We don’t care if it’s this or that we do throw in Financials from a diversification standpoint. But it truly is because there is more Alpha opportunities in commodities, commodities are the most diverse asset class there are. It’s not even a debate. And then you get to the diversification benefits for a portfolio. If I’m targeting an institutional investor, that’s truly what they’re after is diversification and true non correlated returns. So to us, it was just a natural thing. And then our strategies could make a transition. Our strategies are built for energy, per se. They’re built just for volatility.


Camille Clemens  17:42

It’s great answer. I want to ask you about your feeling around Alpha. That’s a whole different conversation.


Gerardo Tarricone  17:50

That’s for me. Yeah, well, I feel like well, you know, the whole team just said, you know, commodities are the most diversified asset class. Same thing that will tell you initially, we started with a focus on base metals and mainly copper, specializing in geographical art between copper trading on the army versus coppertree, and COMEX and then in 2019, we decided to, to expand into other into other products like fuel oil, distillates, gasoline, and then a few months ago, we decided to expand into other commodities like grains and Soft Commodities, just because if you focus on if you have you know, if you hire a specialist looking at the focus on one or two commodities, if you if you manage to go over like 1520 commodities, there is always something going on in in in one commodity than the other. So, you can read it, that you can have exposure to diversification that is


Derek Stroke  19:02

sort of hit on some of the points here, but the the volatility opportunities, and why invest in commodities and the diversification of a portfolio and that there are a lot of alpha driven strategies in the commodity space, because we can’t rely on the beta of the equities world, when you have a lot of talented traders that have made their way into commodities, we’re able to, you know, our returns are completely agnostic to the equity world and even to the commodities that were trading myself. So we trade natural gas, but we don’t have any exposure to long term, are completely uncorrelated to the underlying price of natural gas in our strategy, so it’s really diverse, a diverse instrument to really enhance your portfolio from that perspective. I


Tim Pickering  19:50

mean, I just second was, you know, friend came from the oil trading background and you know, we started natural gas we kind of turned in all of these HL s The things you learn in the energy trading environment, I do believe it was a gift in my career in terms of perspective, in terms of managing risk in terms of you know, extracting alpha, if you can do those things in a volatile market like gas or crude and a myriad of other things you know, the rest of it, think volatile times going through COVID or 911, or for financial crisis is just another volatile period COVID was nothing any different than any other time period. And when crude went negative, we traded negative, right natural gas we trade negative as a balancing factor way back in 2000 2000. So we already knew what to do in that case.


Brent Belote  20:52

Even though it blew up half of all marks


Tim Pickering  20:56

for sure, but like I mean, you know these things happen and energies and you’re prepared for you’re mentally prepared for them your risk is prepared.


Camille Clemens  21:10

Gerardo let’s talk to talk a little bit about the long term drivers of commodity prices. I know that you’re you’re kind of knee deep in that across a bunch of different markets. Can you come in on a longer term view here?


Gerardo Tarricone  21:24

Sure. Yeah, the title of the show the discipline to me is like commodities supercycle I was feeling really obvious some of you earlier I don’t think it’s really I don’t think it’s going to be a supercycle I think it’s going to be a long cycle commodities are certainly in play. I don’t see. I don’t see a big like big demand coming from, you know, a country like, like China that will you know, like 10 years ago, China is obviously still there. There’s there’s compared to five, six years ago, demand coming from the energy transition is not something that is going to materialize in the next like two a month 24 months or something that might materialize over the next 20 years. Some fees are going to be more video driver or commodity prices will be more supply whether you know supply shocks or supply deficit in certain in certain commodities. So, I think rather than calling it a commodity supercycle thing, we can always go with someone mentioned earlier commodity like super squeeze, where prices can prices will, will, will be driven by short term squeezes that you can have in one commodity or, or the other is result that we offer opportunities to, to retraced whether it’s an over long gone labor trades, or the volatility either by options or our bodies are divided strategies. So


Tim Pickering  23:01

here’s what I’d say, No, you’re wrong. So I’ll have some fun. And there’s two basic ingredients for a commodity supercycle. There’s a period of lack of CapEx or lack of expenditure and commodity supply. Right. So we’ve had capex peaked out about 2012. And it went down for a decade, we’ve only seen it come back a little bit, and that’s pretty much commodity wide. It’s everything from energy to mining to everything. That’s your CIP. And in every one of these cycles, that’s the setup. There’s a lack of CapEx for an extended period of time. I’m not talking 135 years, I’m talking a decade. We saw the same thing in the mid 90s, when it was And everybody forgot about commodities. And then came China led me to the second part. There’s some sort of generational catalysts that occurs to get a commodity supercycle going and back at the start of my career is mid 90s. I got on the desk at TD, you know, focus on commodities. People thought I was throwing away my career, it NASDAQ, the internet. You know, this is old school stuff, it doesn’t matter anymore. Well, along came China. This demand factor changed everything. And it really was the catalyst at the top. When I think about the catalysts we have in the marketplace right now. It exceeds that China factor in multitudes, and it’s everything from we’ve got more geopolitical tension right now than any time since World War Two, that’s one thing. We’ve got various supply demand issues that keep happening, whether it’s, you know, the hoodies or whatever straighter or problems in the Panama Canal due to drought. We’ve got D globalization, we got decarbonisation, we’ve got demographics. We’ve got India now is the largest population In a world with the third largest middle class, remember, commodities go up in price and get inflationary when you’ve got not only population growth, but you’ve got affluence, and you’ve got income. And when China hit about 4000 GDP per person in 1999, in 2000, that got the party started. India just hit that level, they’re already the third largest in the world in terms of middle class, there’ll be the largest middle class in three years. So we’ve got a lack of supply already. And what’s happening with companies or countries like India is they’re weaponizing certain commodities. I think, in the last year wheat, rice, sugar, some of those foodstuffs start moving, what do I care, I’m just an agnostic trend follower at the end of the day. And I’m not a fundamental trader. But when I look at those factors that bring in the volatility, because it is that supply and demand imbalance, there’s already a lack of supply, the the volatility that follows and the trends that fall out of that. I haven’t seen this setup, since you know, since the mid 90s, late 90s. So I think we’re in for not only a period of volatility, and then we can get to inflation a second, please, let’s get into that slide. But this is a structural shift, this idea that we’re going back to 2%, inflation, I’m sure somebody’s going to take this bet upon me, this idea that we’re going back to 2%, inflation is laughable, the central banks don’t control cost push inflation, that’s wages and commodities, they don’t have that lever, right. So what’s gonna probably happen is we’re gonna have a structural shift where the narrative starts to change, where the average of 4% inflation that we’ve seen since 1970, you start to going to be their narrative again, because they can’t fix that problem. And we’re gonna have to accept higher oil prices. And natural gas is way down to cheap. And all these commodities are going to continue to rise because the world is getting smaller. And the Eastern world wants the same thing we have in the Western world. And all that’s going to mean is we’ve got to accept higher prices and more volatility. We are absolutely in for a supercycle. But when I say supercycle, I mean it’s going like this. I mean, it’s going like this, it’s going to be volatile. And from what we do for a living. It’s like the most exciting proposition every we make our money on war, famine and strife and hurricanes and all this shit. And that’s just the way it is. And so we


Brent Belote  27:28

never root for them, right? Well, Derek, maybe you can scratch your Canadian.


Camille Clemens  27:37

The volatility of natural gas prices and some of the things that you’ve seen from development of our ability to handle the production and where we put it and how we manage that is not something you focus on? Yeah,


Derek Stroke  27:50

yeah, I’m trading volatility and the opportunities that are brought by whether it be a cold snap across January or flashed, sort of this shift in the world that we’ve seen is the US becoming the largest exporter of LNG the past year. And now they said, a newfound volatility of new risk in the US net in the US for natural gas prices are these LNG export facilities that we put in all basically in the Gulf where there are hurricanes and we used to have this production risk in the Gulf 15 years ago, that now shifted to the LNG export facilities in the Gulf War. We saw Freeport go down two years ago, and we went from $9 gas to $6 gas and one month, eventually, we came up and realized for roughly 100 ball for that time period, but this shifts in everything that’s changing in the market, these these different ball opportunities as we bring in new ESG projects, new LNG projects. It’s a fundamental shift in the pricing, and it’s going to bring fall with it.


Tim Pickering  29:01

We’ve even got regulations. You just saw that in America here in the last 96 hours, right? What stop LNG exports, we’ve had that same problem in Canada for a decade, on top of the LNG exports a decade ago and got beat to the punch. And that regulatory aspect is adding more and more volatility in the Western world. If you go to Asia anywhere, go check it out from a commodity perspective, they don’t care. Flow the commodity.


Derek Stroke  29:30

Well, yeah, the world needs the natural gas anyway. So it’s going to come from somewhere. If it doesn’t come from the US and we shut it down. Somebody’s going to supply us we need power. Everybody likes having their lights on at night and heat on in during the winter. So I


Tim Pickering  29:44

was talking to Bobby about this earlier who would have thought like in the last, you know, in this era of ESG and green, one of the fastest growing come up physical commodity firms out there right now is focused on coal. That’s a little bit of a surprise you think about Those guys are growing fast.


Derek Stroke  30:00

We just saw New York. Nice. So they’ve been walking back some of the transitionary coal periods, they were supposed to decommission to New York City coal power plants peaker plants. And they had to go back and block that back and extend it for two more years, because there’s nothing to make up that power right now. So we’ve decommissioned all this coal. And this is something that’s led to some of the natural gas volatility in Texas and such recently, we’re just not prepared to transition away from these products yet, and events brought on this, this new level of volatility. So makes for a great trade environment. And it’s going to last for the next decade to come, because it’s going to take time.


Camille Clemens  30:52

Speaking of taking time, let’s talk about interest rates and inflation and how we think, like, what what are we thinking because they feel like if you’ve been trained to trade volatility, who knows 60% of the world will be going through some sort of an election this year. How does that come into play? Like? Can we talk a little bit about that? I know it’s kind of broad, but it’s,


Tim Pickering  31:14

what do you run for a margin, the


Brent Belote  31:16

equity, the 5%,


Tim Pickering  31:19

were six, six over 18 years, that’s a nice little tail. And


Brent Belote  31:22

that’s good. I think that’s actually interesting thing where we’ve got a lot more interest because people are looking at what you get on the risk free rate versus us. And so rather than have a commingled vehicle where you’re paying, you know, the cut time costs money of five or 6%. You know, we’re five 6%, total market equity. So a lot of people kind of what we’re finding is kind of been a tailwind for us on the back end with with where interest rates are is, is people like us from a perspective of diversification, they like us that we’re low cost to get into, we offer daily liquidity for our investors. And it’s been kind of something that we’ve seen as people who have had maybe two 300 million tied up with a commingled vehicle is kind of coming over to more of the SMA space. It’s also kind of speaks of the structural changes that we’ve seen where I don’t think there’s been a lot of commodity fund launches in the past. And in the last like, five, six years, I look historically, just from a standpoint of, there’s been so much money flow into the multi strap model that a lot of people who would have gone out on their own and started new funds, or now it’s just so easy to go to the millenniums go to the larger guys and have and have a dedicated seat with far right on day one, as opposed to kind of watch and rolling. So I think, you know, if you’ve kind of made it through this transition, I think there’s not as many of us as it used to be, especially in the oil space, that’s for sure.


Tim Pickering  32:39

Already did my bit on interest rates inflation, so Oh,


Brent Belote  32:42

yeah, I think inflation is way higher than 4%. I think anyone who goes to fill up their car with gas, or it goes to the grocery stores, and doesn’t believe anything, the Fed is thrown at them. So I don’t see that going back.


Tim Pickering  32:53

I mean, they’ve done this many times, and all the central banks, they want to push out a narrative, and they don’t want panic to ensue, right? Because they never talk about commodities, because that does instill panic. And, and they don’t have that lever. It’s as simple as that. They can’t make it go away. Now, theoretically, in the 70s. They did, because they raised rates for 10 years until it was high teens, and then they killed it killed the economy. Right. But they’re probably not going to do that this time. So they’re gonna have to get more comfortable at a higher rate. And I think people are slowly going to get used to, because right now it’s not at 4% anyway. Right. So if it averages out at 4%, where it’s been since 1970, there’s probably a comfort zone. I think we just gotta get used to it.


Gerardo Tarricone  33:46

Yeah, another thing we kind of were used to in the last like, two, three years. Yeah. I mean, I don’t think inflation is going to come down anytime soon. You know why? I’m probably less, I believe less. So the old commodity supercycle but certainly convinced that the volatility in commodities is is is is here to stay. And inflation is going to come down anytime soon.


Derek Stroke  34:14

I think everybody likes their country life. And if you want, get rid of inflation, it’s going to take some pain in the markets. And I don’t think politically or work, nobody’s nobody’s ready to take that payments. And


Tim Pickering  34:29

what’s the incentive? You’re right, so rates go up even to where they are. So it’s a bit of rapid increase. It’s not that high on a historical basis. But what’s the incentive and bring up rates? Does that incentivize more short term commodity supply or incentivize investment in long term commodity projects? It does, it makes it harder. And so all this exacerbates the problem. We’re not making the problem easier. We’re making the problem harder. And and that’s just our reality. Then you get to green which I love the green side of the equation and you Know who’s making a difference. And you got to give Elon Musk some credit to like him or not. But who’s investing money in the green space? It’s the energy companies, right? We all understand that. It’s the shells in the Chevron’s. And the BPS that have the engineering know how and the capital to do it, they’re the ones making a difference. And if we screw them, we don’t have a way forward. Right? So that’s the reality of the world is becomes sort of a self fulfilling cycle, and commodities are going to be the benefactor. California


Brent Belote  35:33

is a great microcosm of that if you’ve been seeing a news about the chevron facility that they’ve been threatening to close down in California, gasoline is super unique. Number one, they’re idiots because they create a new gasoline that’s way more expensive than normal gasoline, it’s impossible to resupply there. So they either have to import it, or they have to lower their standards. And they’re not going to do that. But what did they do they threatened Chevron, with all these refining sanctions and making it more difficult to be a refiner there, whatsoever I’m gonna do they’re probably just gonna close down the refinery, and pay gasoline $10 gallon in California. And it might it might mean that everyone in California tries Tesla’s but it might be a situation where people who were can’t afford a Tesla are the ones who are going to pay for it. So it’s interesting to see kind of that microcosm of


Tim Pickering  36:17

I don’t know if you heard that news that hurts. I rented it hurts, hurts just announced they’re getting really a large part of the Evie side of their rental fleet. It’s too expensive, people crashing too much. And they’re blowing it up. It’s just, you know, it’s a great idea, but we’re not ready. I live I live in Calgary, it got cold in the last month, and they were just not ready for certain certain things. It’s also


Brent Belote  36:42

reason I, California, born and raised I live in Wyoming. Everybody’s?


Camille Clemens  36:49

Well, there’s no shortage of new gas stations being built, which is another thing that I find very interesting. I have a question, since we’re talking about the generational event that’s going to provide additional to be the catalyst if you will for the commodity space. Hi, I know that we’ve got everything from SMEs to ETFs represented on this panel from an access perspective, how are we going about educating kind of this new generation of investors to ensure that they understand the benefits and how commodities really are a diversifier in a portfolio as opposed to just kind of a a more retail, if you will, investment we talked about that was like a


Derek Stroke  37:38

simple thing to just educate people would write a blended portfolio into it and put it into this mix, where you’re going to have this diversifying factor that’s going to blend out your returns over time, and you’re taking money away from something that’s going to really just look at it as a blended portfolio and what your long term risk warnings, and commodities, some sort of estimate, that’s going to diversify a large portion of your portfolio,


Brent Belote  38:07

I think it’s interesting. So you don’t need to have, I think that’s, you know, like India, commodities, we’re never going to be the 60% of the pie, like, we’re just we just don’t, we’re always going to be a smaller piece. And so even adding a small chunk of that to it, and that’s just kind of something we needed to understand is, you know, it’s gonna be hard for any of us to be, you know, the size of a credit fund or a rates fund, just from a standpoint of flows. But I think even adding a little bit, whether it’s five or 10%, you know, across the Diversified is kind of what we’re seeing. And I think that’s kind of been the MO is, you’re now seeing a lot more fun to funds and multi strats. And different, different people get into the space of allocating, you know, for lack of better words, a little guys in the commodity space. And I think they’re getting a lot of alpha, out of that when you take four or five, you know, 40 annual vol 20, annual vol 35 annual volume, put them in a portfolio and all of a sudden, like, wow, it’s actually 17 with a two and a half shark, like that’s a pretty good portfolio. So it’s fascinating to kind of see, like, as they piece it together and run the numbers, how uncorrelated we are versus everything, like you guys are negatively correlated to the nat gas, we’re negatively correlated, the price of oil, even though that’s all we trade, and that’s all you trade. And so it’s fascinating to see kind of how everyone’s kind of coming around to something


Derek Stroke  39:16

you could do with the commodity space, and whether it’d be SMHS, or a Keylor, and equanimity, you could put those two portfolios together and see how that looks in your in your portfolio over time. And that’s going to bring down diversifying across the space and you’re gonna have these very good returns with probably pretty low risk with risk five across four or five and then that are annualized in 20%. And with a one plus shopper, so it’s going to look good in your portfolio, and I promise


Tim Pickering  39:52

you there’s a quick answer. Yeah. Education is kind of everything that what we do and it has to be big focus for our industry, it is a big focus for industry. And I think I think it’s started to come a long way. I mean, all these terms are opaque and weird, you know, CTA managed futures are all scared of Commodities Futures, back to futures, you know, it’s scary stuff. So it does take a lot of work in terms of the education. And it’s not just retail versus institutional, we spend as much time educating our pension clients, as we do is our retail ETF clients. And so we’ve covered the whole spectrum at hospice. And it’s, it’s really pointing out some simple things. And these guys have already done it. But the one that’s kind of struck me lately is if you look back at inflation, and periods of inflation, and the 6040, portfolio and bonds and equities, you can go back in time. And as soon as you go back to a period, pre 2000, that is normal inflation, and normal interest rates, I’m not talking 20% of the early 80s, late 70s, just normal inflation, bonds, Stonehedge equities, all you have to do is point that out that we’re in a period where bonds don’t have equities. And so what’s happened, you’ve got to look for something else? Well, let’s look at private equity. Yeah, that’s not going to solve your problem. And so institutions have started to get this, retail investors have started to get this. And you only have to look as far as the ETF launches in the retail space that retail investors are looking for, and they’re craving this diversification too. All you have to do is point out that your biggest investors, your smartest investors in the space pick on one Ontario teachers pension plan, they look at that factor, you can see the breakdown on their fixed income. As soon as inflation starts to come above where they putting it, they’ve got 10% of the entire portfolio of Ontario teachers pension plan portfolio in direct commodities, 10%. And they’re already a diverse investor. So as long as we kind of keep on that narrative, and it’s going to take work, you should have a good distributor, you’ve got a few, you just got to keep working. But it’s all about the


Camille Clemens  42:06

education. I think as soon as institutional capital starts flowing to something again, and it feels like it was right for a while, and then the global financial crisis happened. And that was the pocket of liquidity that these investors could draw on. Right, because you things were tied up in hedge fund, things were tied up in the private equity, the public markets were in shambles. And so the place they went, of course, was to use commodities.


Tim Pickering  42:29

Just reposition. Remember that, like, the institutions are really smart people, of course, he got his calls. But But retail investors can move faster, right, the RAS can put money to work far faster than the pension, the rolls is up through their IC, and takes it to the board and everything. Although we’re going to invest in commodities again, Oh, I thought we said we’re never going to do that. But the RA can make that response much quicker. If you would have told me as COVID hit as COVID Hit 2020, our focus at hospice was entirely institutional entirely outside of Canada, we raised we’ve multiplied by four or five times our capital. And it’s come a lot of it from retail investors, were looking for that just because they can react faster, institutions are going down, which takes a lot longer, but it’s the same education. It’s the same narrative. Just take some pictures, it’s a process, it’s probably not the same.


Gerardo Tarricone  43:29

thing I’m just gonna summarize I think this is who you got to buy commodities in the portfolio, especially in the last three to four years commodities are in play. They offer diversification and how you’re going to build your commodity portfolio. You want to have you know, diversification of style in terms of strategies and discretionary, systematic, you want to add diversification in terms of sub commodities, whether it’s exposure to energy, which metals green, Soft Commodities, and your RV and directionality but yeah, definitely you want to have more than this now that you know, Polly’s are this back.


Camille Clemens  44:13

And 12 minutes from the audience.



I’m so good question. Bloomberg wrote an article not too long ago, which I think was purely fiction, but it blames CTAs for price volatility and high prices. I think you might have been referenced but do


Brent Belote  44:30

you think on the front page



you think that that comes from a place of pure ignorance, or is there something more nefarious?


Brent Belote  44:39

I think pure ignorance out of the writer from blue brick is that during the interview I gave for that was very pro CTA and trying to to kind of teach everyone about how futures in oil space work. I do think there is you know, some nuance about it that yeah, we do look at shorter term signals sometimes and we can’t be faster Reverse. But I think calling us the reason behind that. I mean, you could say an ETF liquidation is just as just as just as volatile for it. Yeah, that was it was a left turn. I think the article came out. So


Tim Pickering  45:17

think about it. CTAs are agnostic long and short. Like we’re talking about the bullish stuff up here. I’m mostly short commodities right now. I think they talked about this. But we’re mostly short. I’m long term bullish for fundamental reasons. But I’m going to follow the trend CTAs are bringing liquidity against this narrative now. So Bloomberg got it wrong. I mean, I’m not sure who I wasn’t familiar with that. Reiners is silly. There were some great CTAs that responded to that article, as you probably saw more at sea routes. Yeah. I mean, it’s just silliness. That’s like, say taking take away the shorts from all markets, you know, shouldn’t be allowed to short office.



You guys mentioned somebody mentioned politics over the next year to 70%. Somebody said a stat in


Camille Clemens  46:06

relation you’ll experience in elections this year



election this year, I know, I just focus on our little hemisphere. And I know Canada and the US kind of have some issues coming up here. If, if, if the right if the people get in there, let me just say politically correct that the people get in here that I’ve been saying, drill baby drill, do we? Do we get down to 40 bucks and oil or something like our commodities? Do we lose that supercycle short term piece that you guys have been talking about? I’ll take


Brent Belote  46:37

  1. Well, I think right now you’re looking at a lot of headwinds in oil. I mean, I think without Saudis, most importantly, having a ton of spare capacity. Currently, we’d already be over 100, given what’s going on right now. So I think the fact that they’re sitting on their spare capacity and their voluntary cuts has really led to it, I think Biden does on the phone with him a lot, because the last thing they want is to see the spike. I wouldn’t be surprised if they came out and kind of did that. Now, if they go back to the drill, baby drill, I don’t think it’s going to materially change stuff, you’re still running into the headwinds of every oil production costs a lot more to make just because 4%, that means you need to make almost close to 11 on your money to do it. And you’re bound getting that out is coming in. So all these new oil projects have such a large lead time, even if you know January of 25, they set foot in the White House, and it’s like yeah, whatever you want federal lands, let’s go, you’re still going to have a hard time getting that out in a meaningful way. Now, once five to seven years, from from you


Tim Pickering  47:36

can say let’s go right now. Yeah, and even if that happened, they opened up west coast of Canada, which will probably never happen. Five, 710 years away. I mean, this is a layer of the volatility didn’t talk much about and that’s that regulatory.


Brent Belote  47:49

So yeah, I mean, shale is really fast to drill like you can drill shale fast, but they’re kind of doing that already. We saw a big resurgence in shale this past year, and the growth. But the problem with shale is you’re declining, it’s like I heard a great, it’s someone call shell Ponzi scheme. And that’s kind of true, you know, like in the first 1516 months of just shale oil, well, you get about 75 or 80% of the total value of that well out. So if the decline rate is almost parabolic to the downside, and so you’re having to constantly put money, put money, you’re getting more efficient, and they’ve gotten better and more efficient, but you’re still decline rates, you have to keep investing, which is why if you look at the capex budget, so some of the larger is just keeps going. And they keep going because they want to see that, hey, we increase production 20% year on year, okay, well, capex had to go up by XYZ, you know, there’s a reason why they’re these shale companies aren’t issuing massive dividends, because they have to keep putting it back in the company to keep it going. So I mean, I do think that, you know, we’re talking about the oil shale cycle oil supercycle, we have to get demand has to catch up to the Saudis. Right now. There’s one or 2 million spirit capacity. And I think that’s about 12 to 18 months away. So I think next summer is kind of when I think oil will be in trouble. I think this summer, unless unless you have a material outage somewhere else in the world, whether, you know, we sanctioned Iran for the last 18 months, we’re still producing almost six, because basically Russia, in you know, Russia, India, China, just says we don’t care. Well, we’ll take whatever we


Tim Pickering  49:09

sanction them, but nothing happened. Yeah, exactly. Let’s not get political.


Derek Stroke  49:15

Wyoming with the geopolitical risk, and I think a lot of that gets overstated somewhat, just this week, and you mentioned there before Biden said that we’re going to pause all future LNG approvals and the timeline as you were saying, for that to have any impact on natural gas prices, now, we’re talking about a decade plus EJ states to two plus years just to get through the EPA, nevermind to start building in such there. So we’re pausing LNG export facilities, how’s that going to impact natural gas prices right now? Well, maybe in eight years that’ll have some sort of impact on the supply demand. If we don’t have a major technological change or a new party comes in you To me now, and that was eight years, maybe it’ll impact prices then. So I think a lot of the geopolitical risk, and what we’re talking about gets somewhat overstated and sort of just posturing if you would, to some degree


Tim Pickering  50:13

forever. We’re COVID hit and we were all wondering, you know, because oil went negative, you know, how long is it gonna stay down here? And where’s all this oil gonna go? Because we’re not flying around. And we’re not doing all this stuff. Look where we are, right? Where did all the oil get gobbled? went places, it’s not going away. And so I think we can see, and I’m short. But the reality is, I think the upside risks are far more plentiful than they are on the downside. Overall, we look at commodities as a whole. And when you’ve got countries like India, weaponizing commodities, taking them off the market, playing those games, you’re introducing a whole nother diet dynamic. Like we need another cartel concept.



You brought us back to India. And that’s where I wanted to go. So the I thought your comparison of late 90s, China middle class, tidal wave versus what we anticipate coming out of India? I think it’s perfect. It’s beautiful. The How do you see those two events being similar and different? You talked about? Could you explore the weaponization of commodities,


Tim Pickering  51:28

they are very different. So you, we’re getting into the weeds here, but like China, we’re never sure we’re never sure what we get out of China. From a numbers perspective, it’s opaque. It’s communist, right. So you get what you get, you don’t get upset trying to figure it out with your money. There’s a CTA, hopefully, you get to know India is different. It’s educated, democratic, very capitalist motivated, you got a government was trying to expand so fast, it’s been 20% of their GDP 20% Right now, on infrastructure, just think about it. It’s such a game changer, plus a very educated population that’s mobile. And so India is different, and it is going to play out different, it isn’t going to be the exact same as China. But I really believe and what I’ve seen in spending time trying to figure it all out. It’s that catalyst point, when the middle class gets to a certain point, they can be taxed, and they demand stuff, right? India’s point of inflection has just started to occur, but it’s gonna occur so much faster. And so you’ve got this massive middle class there, that’s just, it’s gonna be the largest middle class, some say in three years. Some say in five. It could even be faster the law, right, that’s ahead of the US and ahead of time ahead of the US think of that for one sec. So it’s such a game changer. And that is where a lot of the commodities are going right now. That’s what you know, I was trying to figure out in late 2002, I went over to Asia. And a friend of mine is head of one of the biggest consultancies over there. And my question to her was, when is China get open up? And she said, You’re asking the wrong question. Right, China is gonna be China, it’s a monster. The question is, is really about India?



I’m sorry, the follow up piece was, could you jump quickly in a little bit into the weaponization that you referred to a little while they


Tim Pickering  53:27

pulled, they basically done that with rice was sugar. Last thing, but sugar was the best performing thing in my portfolio last year, they basically have ordered it and wouldn’t let it hit the market, they banned all



exports of a number of markets



because they need them internally. Right? Whereas going as juicy that continuing or would that be part of who’s gonna slap in


Tim Pickering  53:48

it says, whatever they want. Like, I mean, this is this is the thing with commodities is who’s gonna stand on AI? And control this situation when we’re clearly at some sort of, you know, margin, if you will, right. If one thing I liken it to, like, you know, you’re leaving downtown after work, and it goes swimmingly, but have one card, it’s a flat, tire lesion downtown, everything back. So that’s what the commodity market feels like right now. Works great until it doesn’t work. And India is playing those games. And they’re not the only nation, which is the big boy. So why do I care? Volatility that’s great.


Camille Clemens  54:35

Final thought for what we’ve talked about today and what you’re thinking about for the balance of the year. And please do


Derek Stroke  54:46

so well. recapping what we spoke about today, you have this opportunity to really diversify your portfolio and some great performing CTAs that are going to give you a better blended return over time. There’s a lot of talented commodity traders out there and you don’t have to just invest one, you can diversify across a handful of them. And you’re going to have this great return profile with some some pretty good upside versus the rest of your portfolio.


Gerardo Tarricone  55:17

You’re just going to say, You know what, though, you said a few minutes ago, you you got two commodities in the portfolio, commodities are certainly played or everything started in the same amount for 2020. You can you can tell that, you know, things are moving in a different way, if you’ve been trading commodities in the last, you know, 5678 years, you can certainly tell that you’ve got to, you want to be in his game, and I think it’s sold, you know, it’s all about that is having exposure to different different different strategies, winning commodities, you don’t know where he’s going to be operated from Chicago is going to be something else, you just want to have exposure to all of those, you want to have that extra ID in the book as well as me. Because I think we saw enough, you know, enough dislocations in the last like two or three years, we didn’t know negative ti go VFB. Blowing golf. Corporate our ability is one of the strategies and the focus on at regional levels in the arc between London and New arteries will reach levels never seen before. So I think these things will happen more and more, and getting nothing of volatility, which is something that we mentioned a few times, but also


Derek Stroke  56:34

something that I kind of missed there with the exposure to the CTAs. And the managers, and we kind of touched on this before but a quick recap, like our strategy is completely agnostic to the price of natural gas brand strategy is completely agnostic to the price of crude and we’re still able to extract return. So even if we have this the short term volatile events. We’re not just and this commodity supercycle doesn’t have to be commodities don’t go up the next 10 years. We’re still extracting alpha, it’s still returning. That’s good.


Tim Pickering  57:10

I forgot the question I need to do. So my knees go up to my knees go down. I think we’re better smart traders than a lot of trainers. So I’m indifferent here to be honest with you. But I just think let’s be realistic about what’s going on. So if you look statistically, you had a negatively correlated return to a portfolio, anything that value and trend following has been proven to be one of the most accretive to a portfolio. So commodities trend following negative correlations. I mean, there’s nothing more to say it’s just trying to find a delivery mechanism to raise money, whether it’s an ETF or a managed account, and it’s really doesn’t matter.


Brent Belote  57:51

I think I think the moral is short Canada, right.


Tim Pickering  57:56

You just had your guy Tucker Carlson up there saying short.


Brent Belote  58:02

Gonna just reiterate, I think everything is kind of shaping up for a really fascinating year in oil. Obviously, the first six weeks or first couple weeks of the year, I’ve been, I’ve been kind of out of the off the charts in terms of, you know, the news cycle every single day, it’s been something new. But I think the relative value trades are going to be just as interesting as we start to approach in the summer, whether it’s gasoline or distillate, those are still growing tremendously. And I think there’s going to be a shortage of at least one, possibly both in the summer. So I think relative value and in the oil space is kind of be the theme for 24. And then I think going on, like I said, I think there’s I realistically think at 25.6 We definitely see 150 oil at some point, just from a standpoint of we’re not investing currently, and it’s going to catch up. So


Camille Clemens  58:46

Alright, all great points. I would encourage you to remain curious about the asset class and this exposure you can get through the likes of these gentlemen, follow them and learn from them. I know that even in my preparation for this panel, I learned a ton. So thank you to the panel.


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