This week on The Derivative, Jeff Malec is joined by seasoned resource investor Robert Mullin for a reality check on Venezuelan oil and the market narratives surrounding it. They dig into why headlines calling for cheap oil miss the point, what it actually takes to restart a broken energy system, and why “world’s largest reserves” isn’t the bullish mic drop many assume. Along the way, they unpack sanctions, shadow tanker fleets, Gulf Coast refinery hype, and where the real economic constraints lie. It’s a sharp, grounded conversation focused on market structure, logistics, and context, cutting through the noise without relying on forecasts or recommendations. SEND IT!
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Check out the complete Transcript from this week’s podcast below:
From Venezuelan Oil to Nuclear Frontiers: Navigating Resource Markets with Robert Mullin
Jeff Malec 00:09
Welcome to the derivative by RCM alternatives send it all right. We’re here with Robert Mullen, thanks for having a nice, easy name I can pronounce easily. Hey, no problem, Jeff. Are you a Robert or Bob? Or always been a Robert? What’s, what’s the story there?
Robert Mullin 00:26
So I’m a Robert, but I am the son of a Bob, and the father to a Bobby. So it just, you know, from, from keeping things straight, you know, Robert is the most functional one that I can use right now.
Jeff Malec 00:38
I’ve got a good friend, Italian family and his the father is named Dominic, my friend, the son’s Dominic, and then his son’s Dominic. And the mother has some way of, like screaming Dominic. And they know she says the same thing, but they know by the intonation, which,
Robert Mullin 00:54
yeah, exactly a certain, a certain twang to it gets the the attention of the proper Dominic.
Jeff Malec 00:59
Love it. So wanted to have you on talk the big news here to start the year of us grabbing Venezuelan oil, or is that a smoke screen? So we’ll just dive in of, kind of let us know your off the cuff thoughts. Did that knock you off your couch, or you were sort of expecting it, or what were your first thoughts? And then we’ll kind of dive into what’s going on there.
Robert Mullin 01:19
Sure. Sure. Look, well, I appreciate you having me on. The idea of us leaning into what’s going on in Venezuela has been pretty well telegraphed for a while. The swiftness with which it was achieved was, I think, surprising to a lot, myself included that said it was unbelievable the number of incredibly bad takes that were on the sort of ex Twitter sphere, etc, and even in some of the mainstream financial press about the likely impacts on the energy markets. So there are a few things that I think the world got right, right, you know. And I think the people calling on Saturday and Sunday for oil to go straight to 40 bucks a barrel, you know, clearly the market looked right through that and said, you know, it kind of opened flat, which you would think with a, you know, big, you know, big Change of Hands of what is being touted as the world’s largest energy reserves, which has kind of story off to it all by itself. It’s actually come back to that, yeah, exactly. But so it got that right. So, you know, the oil price kind of being flat, I think was right. Some of the way the energy equities reacted, I thought were pretty reasonable, if not maybe a little bit overdone. Because I think the big beneficiaries, at least in the early phases of this, will be the companies that help, in theory, rebuild the infrastructure. Once you stabilize the country, once you actually go and pay back all the people that Venezuela and petabesa, their national oil company, owe money to, but the first beneficiaries are going to be the people who helped to rebuild it. The take that, I kind of the two takes that I kind of disagree with. One is that gulf coast, us, Gulf Coast refineries, are going to be immediate beneficiaries from that. I think that is a, at this point, kind of a ridiculous take, the idea that we have this new flood of heavier crudes that benefit the Gulf Coast refineries of the US that are geared to run these heavier crudes,
Jeff Malec 03:15
and real quick, are they even set up to accept oil from the sea right there? Yeah. Oh yeah. They’re set up to accept it from pipeline.
Robert Mullin 03:23
No, but, but the Gulf Coast refiners can take it by ocean too, and then it’s Venezuela has historically been a big provider of Gold Coast crude. Those the refiners were built there to accept Mexican Maya crudes, other things from the and the refining network in the Caribbean was to take these sort of South American crudes and kind of pump them into the US refining system before we had enough of our own crude production to be able to fill them so so they’re right technically in that they’re they’re geared to run it. But the fact of the matter is, I think the likelihood of incremental barrels coming out of Venezuela in the next 12 to 24 months is virtually zero. There’s a huge series of things that have to go really right for Venezuelan production to rebound from where it currently is, which is about eight or 900,000 barrels a day. You know, to even think about 1.3 1.41 point 5 million barrels a day. You’ve got to stabilize the country. You’ve got to pay back all the people who are owed money. You have to convince energy companies that in a in an area where you have to invest for a life cycle that’s going to take decade plus to get your capital back to you, you have to believe that there’s enough stability there that it will outlive the, you know, three and a half years left of the Trump presidency. You know, this is not something that can be made on a political timeframe. And you also, quite frankly, the break evens, you know, the way I look at it, you have to both rebuild the entire infrastructure, electrical, roads, transportation, processing, diluents, all that sort of thing. It’s going to be about three to five times more expensive to do that in Venezuela. It’s. Then most companies have for prospects that are already on their books that they aren’t doing. So it kind of just, if you think that much money is flowing down there, you got to believe that oil prices are 80 to $100 a barrel. So to take this as a crude prices should go down and massive flood of of cheap, heavy barrels goes to the Gulf Coast refiners, and it’s going to be happy days for them, I think, is, you know, isn’t it’s kind of nonsense, you know, that said, that’s what the market has grasped onto.
Jeff Malec 05:27
Lots to unpack there. I’ll start with what. So the is, Venezuelan oil is kind of in their bay there. I don’t know what it’s called, right? It’s underwater, or is it in the ground?
Robert Mullin 05:37
So there’s actually, they have both offshore and onshore production, and like the Orinoco basin, which is where the majority of the reserves are located, that’s that’s reasonably inland, and you have to kind of produce that, get that to port. And so absolutely, Port infrastructure and export capacity is going to be something they have to rebuild first. You have to build the electrical grid, right? I mean this, this is a country that has been in massive underfunding disrepair for the better part of 20 years. So stuff is has been picked over and cannibalized, and it’s, it’s the idea that you can go in and snap your fingers and there’s a lot of oil behind the tap, that’s easy, low hanging fruit, I think, is it’s just a fallacy. It’s wishful thinking for people who really want oil prices to go down for whatever reason.
Jeff Malec 06:23
And why was that just the corrupt government and corruption there, and no one was willing to invest? Yeah, US companies and China was putting money into this. So how come that money never fixed the infrastructure
Robert Mullin 06:35
so it went in a long time ago? So Exxon has now had two rounds of confiscation of the elements that they’ve built down there, Chevron has been able to navigate relatively well. So they’ve still got, you know, I think roughly 300,000 barrels a day of production. But it’s not it’s a smidge on what they do, and it’s been really expensive and politically challenging to maintain, because Trump just sanctioned that stuff back in February, so they had to ramp production down before ramping it back up over the last three or four months, the Russians are there. The Chinese are there. That’s another 200 to 300,000 barrels a day of the production. The rest of it is the pet of a So, which is the national oil company? It’s, you know, it’s like going back to something in the fees. But even worse, because no one’s been paying attention to it. What they said when Chavez came in, and basically PETA Vasa nationalized, and, you know, took all these assets from everybody, they effectively fired everybody with a college education who worked at PETA VESA. And the way I’ve had it described to me, and this is going back 15 years, is that you all of a sudden threw all the computers out the window, and you started working with carbon paper. So it’s literally Stone Age and and
Jeff Malec 07:46
so on purpose to be like, This is ours. Here’s how we run it,
Robert Mullin 07:50
exactly well. And to the extent that there was, they could not afford to reinvest it, because they were taking all the money that pedives had produced to hand out in social programs to be able to, you know, to buy votes and to placate the masses, and to make oils cheap and gasoline cheap for the masses. And you can only do that for so long before the engine that fuels all that starts to seize up and doesn’t work anymore. And that’s prototypical socialism,
Jeff Malec 08:16
right, right. Interesting to me, like this is more of an 1800 like, early nights where governments were taking Well, or vice versa. It seems like all the other plays in the last 100 years have been countries taking their stuff back, right? Egypt, Venezuela. So, yeah, that was kind of a perverse inversion of that, of like, No, we’re giving it back to corporations instead of the state.
Robert Mullin 08:41
Yeah, yeah. So it’s gonna, it’s gonna be a, an absolute quagmire for an extended period of time.
Jeff Malec 08:47
I jotted down too, you mentioned sometimes who? These are people that are owed money, or companies that are, what does that look like, big national oil companies, banks,
Robert Mullin 08:56
yeah, Conoco. ConocoPhillips is on about, yeah. ConocoPhillips is on to owed about 8 billion that’s been in court for a decade. Exxon Mobil’s north of a billion. Schlumberger Halliburton are both, you know, half a billion to a billion dollars. So that’s those are big checks for a company a country with no cash and a huge amount of debt to be able to figure out, you know, who’s going to pay that back. So first you have to pay back the people who owed money, because you got to get them back in to actually develop it. Then you have to get, by my estimate, to get half a million to a million barrels a day in the next five years. You’ve got to spend somewhere between 60 and $100 billion in data center land. That may not seem like a lot of money, yeah, but everywhere else in everywhere else in the world, that’s a huge amount of capital. And so where does that come from? So start giving, and then we can talk
Jeff Malec 09:48
sign it off, right? Like hey, you will. Government will back all these debts. Get back in there. Yeah.
Robert Mullin 09:53
So if there is a point where the government does like they’ve done in some of the rare earth areas, where they. Guarantee returns and off take and back, you know, maybe sub, sub market interest debt, you know, then maybe you can start talking about doing it, but doing that in the midst. I mean, think about if they tried to do that in Afghanistan or in Iraq. I mean, think about what people would think about that just because Venezuela is closer to us, doesn’t mean that it’s easier to exert our will over an unstable sovereign nation, right?
Jeff Malec 10:28
With 25 million people or so, right? Yeah.
Robert Mullin 10:31
I mean, unless we’re unless we’re willing to put 50,000 troops on the ground, which now look we could do, but I think the public might not like that a whole lot.
Jeff Malec 10:40
And what kind of companies that will build it. We’re talking the big of the big like, you’re not going to get some small regional operators from Texas down there or something. This would just be,
Robert Mullin 10:50
yeah, so it’s interesting. So I think the big money will be made by, you know, international oil companies, and they’ll have to be the US ones, because with Trump, kind of, you know, exerting his influence there. It’s not going to be the European majors. It’s not going to be shell, it’s not going to be BP, so it’ll be the US focused major Chevron will be probably at the front of that because they’re currently there and operating, and it’s just going to depend on, you know, whether Exxon thinks it’s even worthwhile to go back in there again. They’ve had stuff confiscated twice, so their their long term return on capital in Venezuela has probably been the single worst investment in the history, long, storied history of Excel. So whether they even care to go back for half a million barrels a day over four or five years, I don’t, I don’t know if they would. The service companies, I think, are going to be the big winners, the guys who build the offshore projects infrastructure. There’s going to be some EMC companies that are involved with rebuilding the electrical grid, processing and transportation and that kind of infrastructure. So those folks will be the kind of on the first line of winners. I do think there may be some smaller companies that go back. There’s some really interesting I wouldn’t think it’s like the shale producers who then all of a sudden, Port themselves down there to do it. There are some really good Latin American companies, many of whom are staffed by former Venezuela pedives related engineers who know the basin really well. And so there are some independent oil companies, you know, in kind of down Latin America, South America, who I think we’ll probably play a role in this, and I think are well suited to do so. But you know, first things first, you got to stabilize things down there.
Jeff Malec 12:37
You mentioned the world’s largest reserves. What’s the, what’s the ish part of that?
Robert Mullin 12:43
So, so Venezuela, so 300 billion barrels is what everybody CITES, and that’s what is the bigger number than Saudi Arabia. And so, you know it’s they have the biggest oil reserves. If you look at their evaluation of their own oil reserves, it went from about, I think, 30 billion barrels to 300 billion barrels over the course of three or four years, according to their own reserve engineers. And that was in response to OPEC. Started setting OPEC quotas as a byproduct of, guess what your reserve, how big your reserves are. So, so it’s it, it’s it. There’s, I think, an enormous amount of fudge factor in those numbers. Yes, at $400 oil, they probably have 300 million barrels of reserves. At $50 you know, WTI, you know, my guess is their reserves, you know, their economic reserves are, you know, a small fraction of that, and all of not, I won’t say all that. The vast majority of it is very technically complex. It is both heavy, so it doesn’t run very well. Some of this stuff, the moment you bring it to surface, it coagulates and hardens. You need to mix it with lighter crudes or natural gas to even let it flow through a pipeline. So there’s a lot of infrastructure that has to go in. And it’s super sour, which means it’s got a very high sulfur content, which means you have to reduce that sulfur and so it doesn’t corrode everything that it comes into contact with. And that’s kind of the nasty stuff that you don’t want to end up in your get with your your gasoline, or your jet fuel or anything like that. So that’s got to get stripped out. And so it’s, it’s, it’s mostly very low quality stuff.
Jeff Malec 14:23
So like almost the exact opposite of of Middle East Saudi oil that’s just coming out,
Robert Mullin 14:28
you’re perfect. So, so, so a lot of Saudi stuff is good, but like the the Iraqis are, and Iran and Iraq both have significant kind of heavy sulfur barrels as well coming out of there.
Jeff Malec 14:39
And so what is it? Do you know, off top your head, I didn’t prep you for that of what that price to, you know, price, cost of production is to get it out of the ground
Robert Mullin 14:47
down there. Yeah, it’s, I mean, you know, it’s hard, it’s hard to say, because assuming all the infrastructure was in place, yeah, yeah. I think, I think up costs down there have got to be, you know, north of $30 a barrel. And. It depends on how much you fully loaded that the with the infrastructure. So that is sort of wellhead, you know, tie back pipeline, but then what people will really have to spend is all the money to build out the rest of the infrastructure, as I said, the electrical grid, because you can’t run all of this stuff without an electrical grid to pump the pipelines. You know, you can’t run it with, you know, without the ability to be able to turn on the lights in processing and desulphurization facilities. So all of that is if you load that on. So the metric that I use is a good heavy oil project around the world costs about $30,000 a flowing barrel to be able to get online. So that’s capital costs, not operating costs. I think Venezuela is going to be 230 1000 times barrel. 30,000 a daily flowing barrel, so and so. What you want to see from that, that gives you an idea of, you know, look, if you if I think the number for Venezuela, let’s use round numbers, is more like if you’re fully loading it for all of the infrastructure that you have to do. And it’s $100,000 a daily flowing barrel. You know, to get a million barrels a day, you got to spend billion dollars. So it’s, it’s just, it’s, it’s, or, sorry, $100 billion so it’s, it’s just a lot. It’s going to be, it’s going to be really hard.
Jeff Malec 16:14
You mentioned the tankers. We did a podcast to finish last year with a professor of maritime. Professor, we’re talking shipping and tankers and, like, massive under investment there as well, right? So you’re that’s another piece of this, of like, how are we going to, even if we can get it out, how are we going to get it to where it needs to go? Do they have their own fleet of tankers Venezuela? No, are those super Yeah, Venezuela
Robert Mullin 16:37
has some of their own flank tankers. They use what’s generally referred to as the shadow fleet, which is typically a lot older tankers that are flagged in Cyprus or some kind of offshore place that I think that was something out of Star Wars, the shadow non the shadow exactly non compliant tankers that can’t port in respectable jurisdictions. And so that’s a big, actually a big part of the global tanker fleet is what we call this shadow fleet. It’s old boats that I would I would say are generally characterized by being held together with duct tape and bailing wire. But their reason for being is that, you know, we’ve had sanctions. You know, sanctions on Iran, but you still see Iranian barrels going to India and sanctions on Russia and Venezuela, but you still see those barrels going to China, and it’s because we’ve had sanctions, but we haven’t been enforcing the sanctions, so it has facilitated the rise of this shadow fleet, which is about 10, there’s about 1000 vlccs, very large crew carriers on the water right now, and about 100 of them, little bit more are what is called this shadow fleet. So it’s boats that, if you did not have a sanctioned market where they’re operating in the shadows, moving crude that the rest of the world is saying you shouldn’t be doing that, these boats would have been retired and scrapped, you know, sometime over the last last three to five years. So, so that’s the interesting dynamic to me. It’s, I think there’s both the fact that there’s going to be more barrels going around, but I think you’ve got a big portion of the tanker fleet, which has been a byproduct of a sanction environment that can go one of two ways, one of which is you decide to actually enforce the sanctions, which is what the US is doing now, and actually boarding tankers and confiscating them, or you have peace in Ukraine, peace in Russia, you stop having the sanctions. So there’s no reason to have this shadow fleet anymore. And people won’t use them because they’re really dangerous, quite frankly, and they charge more than normal tanker fleet because they’re doing things on the on the dark market. So it’s, it’s got a lot of dynamics, but I like the fact of being long tankers, because it hedges one of if I’m long energy stocks too, one of the risks that I have is that OPEC increases production, and that was played out very well last year. So if you were long energy stocks in 2025 it was kind of a tough year, but if one of your vulnerabilities was more barrels coming from OPEC, which is what we got, that was really good for the tanker companies. So it’s kind of like a long that hedges along.
Jeff Malec 19:03
I’m thinking of the shadow fleet of like Dennis Hopper’s tanker in water world. Remember, he turned it into the evil base. And then, did you see this? Do you see the story where they were? They were trying to get that Venezuelan tanker, and they painted the Russian flag on the side of it real quick. Yeah? Like, no, this is a Russian vessel, Yeah, crazy. How does that even work? Are they just making them man the tanker by gunpoint, or their US Navy guys that then are operating the tanker knowledge?
Robert Mullin 19:34
But yeah, exactly they attempt is, you go in, you board it, and they’re not going to put up a flight. You know? That US military take them out and, you know, in a heartbeat. So they all stand on deck with their hands up. We board them, you know, either by boat or by, you know, fast helicopter and and they go on. You bring on a pilot, and boom. You say, we drive this to the Gulf of Mexico, or Gulf of America, as we now call. I guess, yeah, and, and these are our barrels now. And guess what, we’re probably going to keep the boat, and it’s, you know, it’s probably a piece of junk, so we’ll just drive it to the shipyard ourselves, and we’ll get 20 million bucks to scrap it.
Jeff Malec 20:12
We’re proper pirates now, yeah, Sir Francis Drake, we’re like, authorized by the government, authorized prior. Yeah.
Jeff Malec 20:28
So you’re not even, this is the part where I’ll tell everyone, you’re not even really an oil guy, right?
Robert Mullin 20:33
So, so actually, energy is a decent part of what I do. I’m a broader resource guy, and I’m not a trained geologist or anything like that. I’ve just been kicking around on the investment side of the natural resource sector for 35 years now. So I was originally at the Franklin Templeton group, left there in the late 90s or mid 90s, and have been kind of running resource focused investment deals, mostly hedge funds, long short equity funds for, you know, the better part of the now, 35 years
Jeff Malec 21:02
at Franklin Templeton. You were equity guy, but that was your focus. Yeah, I ran the
Robert Mullin 21:09
natural resource fund there. I covered energy as well as a couple of other non resource sectors, consumer products and cable and things like that. But energy and the resource sector were what kind of captured my imagination, and my my family history is my mom grew up on a cattle ranch in West Texas, and so I’ve always kind of been close to the idea of real assets and tangible commodities.
Jeff Malec 21:32
We are. Sam has a whole ag unit that does a lot of hedging and working with the farmers dry land cotton in West Texas, yeah, which is a seems like a brutal business, yeah.
Robert Mullin 21:45
Look, the entire history of options goes back. I was actually just driving my my son down the peninsula, who’s a very bright senior in high school right now, and just I was telling him about the podcast that I was doing, and he, out of the blue, said, yeah, do you know that the first options were on an olive press. You know, back in ancient Egypt, I was like, nice, really, I didn’t have a chance to do diligence it. But it was effectively someone who was like, wanted to secure the right to use an olive press going into the season that, apparently, at least in one YouTube video, is the original option that was was written.
Jeff Malec 22:21
I love it. I always tell people, they’re like, What are futures? What do you do? I’m like, Well, I like to call them nows right? Everyone thinks you’re guessing the price in the future. It’s like, no, some producer wants to get paid now for what he’s going to give you in the future. But I digress. So is resources even a market sector anymore? It seems like it just morphed all into energy, right? There’s Natural Resources still a legit market sector.
Robert Mullin 22:45
It’s still, it’s still a thing. Look, it’s a lot smaller than it used to be, you know, back in, you know, the early 2000s you know, the energy, plus basic materials, plus, you know, AG, and all that sort of stuff. Was 16, 17% of the s, p, now it’s less than five so it’s still legit sector, because, quite frankly, none of the world works without it. It’s, yeah, but it’s, it’s, it’s gotten a lot less mindshare from the investment world for quite a while. And I think augmenting that was the kind of ESG decarbonization movement that not only made it in many ways. It was, it was sort of out of mind, but you were punished for even thinking about being a contrarian and owning commodity stocks because you got bad ESG marks. So that, see, that pendulum seems to be coming back a little bit. And if you get a real commodity cycle, which I think we’re in, you know, we can, we can talk about that if you want, if we’re in the midst of seeing that develop, then I think you’re going to see a lot of people sort of forget that sort of strict interpretation of ESG and take a more pragmatic look at how their portfolio should be allocated. Well, do you ever
Jeff Malec 23:58
bristle at a commodity cycle? I sometimes bristle at that, because I’m like, Well, what are we talking about? Like, energy could be going gangbusters. Grains could be at zero. Precious or base metals could be doing totally different things. Like to think that the whole commodity market is going to cycle at the same time. I kind of bristle with and don’t always agree with, but
Robert Mullin 24:17
I totally agree with that’s what makes it such a fun sector to be long and short? Yeah, yeah. Is that there’s some. They’re wonderful opportunities to be long, even sometimes within the, you know, within the single sectors. But there’s lots of different opportunities to develop over, I’d say the short term, if you look intermediate to long term, commodity cycles do tend to line up a little bit. If you look at industrials versus precious versus energy versus and you look at, you know, 150 years of history on those things, I think, you know, my buddy Rob at the crude Chronicles and a couple of other places have have done some really good work on this. They do tend to move in relatively synchronized cycles. Sometimes it just takes 234, years for everything to kind of. Think up. And I think that’s where we are right now, and that precious kind of led the way. Copper is following. That’s pulling up some of the other metals along with it. And I think energy and eggs are kind of in the caboose. And that sort of path of least resistance over the next 2345, years for those two sectors in particular is higher.
Jeff Malec 25:23
Yeah, I my counter, my zag would be like the grains are just too they’re always going to be in the caboose. They’re easily replaceable, substituted. It seems like whenever we need more production, we just someone comes up with a new technology or method to farm more, which I could also argue is the same and right? Like we used to just drill down in the Gulf of Mexico, now we can drill down 1000 feet and then sideways 1000 feet. So like the technology is almost outpaced the the demand, right?
Robert Mullin 25:52
Well, the no question, the the in the innovation and technology in the energy patch has gotten way better, absolutely, the peak productivity of that innovation was really kind of hit its zenith. You know, 2020, 2021, and since then, incremental barrels are getting slightly more expensive. And so the question is, you the technology doesn’t get any worse, but the ability to apply it to a resource base that not is not universal, like the entire US is not that 10 counties in, you know, shit in us, shale land that are massively geologically fantastic and endowed to do exactly what we’re doing. And you know, the nature of any exploitation cycle is you go after the most profitable stuff. First, you spend a bunch of years drilling it at and you figure out where is my highest ROI to drill today, and that’s the stuff you drill first. And as you get further into that cycle, the technology benefits are offset by deterioration in the underlying asset quality. You’re going into what in the Permian they would call kind of second tier and third tier rock technology can make the rock look a little bit better over time, but it can’t totally offset it. And if you look, read like the Dallas Fed notes that have a lot of individual quotes from oil and gas producers in the Texas brand, and they’re all like, if you think we can drill at $50 oil and make money, you’re smoking the rock, right? It’s just, yeah, it happens.
Jeff Malec 27:26
Thus the $30 Venezuelan one, exactly, yeah. My, my end game for that is always people like, Oh, we’re gonna mine asteroids for, for these resources. I’m like, That’s the ultimate in. Like, well, what is the price that stuff need to be in order to make it feasible to send a rocket into space, do mining and then get it back on the ground
Robert Mullin 27:48
to me anytime you move anywhere from sea level. So what? What is true in space is also true in going down into the ocean and those sorts of things. And they’ve been three or four generations of like, yeah, we just, we’re gonna go out and, you know, pick out these great, you know, high, high, high grade pipes that are coming up from sea floor, seismic or volcanic activity. It’s like, it’s, it’s just, it’s the cost curve on that is ridiculously high. So yes, I think both of those, the exploitation of resources, gets logarithmically more expensive the more you move from sea level.
Jeff Malec 28:32
So have you always been equity based?
Robert Mullin 28:36
That’s the majority of what I do. I do a little bit directly in the commodities. I do a lot in sort of the volatility space, and that’s something where we’ve got kind of a constant, long volatility book to offset either some of the broader market risk that we look at or some of the sector specific risk that we see within our various energy AG, industrial metals, kind of verticals. So I’m kind of a hunter for cheap haul, and just kind of accumulate it and warehouse it. And it’s not a big dollar amount of what we do, but it’s it’s a useful punch to have in your back pocket when markets get squirrely, which I think they have periodically done over the last couple of decades, and I think they’re likely to do more of that over the next three to five years.
Jeff Malec 29:20
So that explains how Jason Buck introduced us. If you’re you’re searching for cheap fall exactly. So what does that look like? You’re buying options on individual companies. You’re looking at sector ETFs, you’re looking at commodity options. It all the above,
Robert Mullin 29:38
individual equities, sector equities, commodities, currencies. Some of the, sometimes the cheapest way to express, you know, some sort of disruption to or negative event potential in the market is via the currency markets, because that’s where, you know, vol gets compressed the most. First. So that’s that’s an area that we’ve been pretty active in. But yes, it’s an all of the above.
Jeff Malec 30:06
And what you were never tempted to be, hey, I’m just going to go start like a commodity fund and trade futures and and do all that you always thought you needed the equity piece.
Robert Mullin 30:16
My real skill set, I like to think, at least, is analyzing companies and trying to find ones where the market has misunderstood their ability to generate cash and their sustainability, the way I term it, and this is something I originally talked to Jason about a number of years ago. I’m looking for positive carry convexity in that we focus on high dividend paying resource equities where you got a huge amount of free cash flow, 1015, 20% free cash flow yields. 510, 15% dividend yields. And if you buy companies like that in periods of time where the valuations have been compressed, which is effectively what most of the last four or five years have been, then you get this constant. You know, our strategy delivers double digit dividend yields from the portfolio as a whole. So we get paid to wait, and we’re just waiting for the point where either idiosyncratic things relative the company give it a better valuation, or the sector as a whole gets positively re rated, and with resource stocks trading at 125 year lows versus the broader market in terms of valuation. Yeah, I think we’re, we’re in a pretty good spot that to potentially get a, at least a modest mean reversion in that.
Jeff Malec 31:31
I was just talking about this on our last pod, and I’ll bring it up again. I wrote a blog post once called Yeah, but the yield right. It was talking about MLPs in 2014 when they just crashed, and a lot of investors were saying, but the yield, I’m getting 9% like, but it’s down 80 like, so how do you square that? Of like, Yeah, cool. You’re getting this, but your price could, could decrease tremendously, right?
Robert Mullin 31:56
Absolutely, you know, and that’s why we’re long short, but that’s also why you got to be pretty selective. You know, if you go in and try and buy the highest dividend in the sector, you’re looking for trouble. What I prefer to look for is where we see companies that are generating so much cash at current commodity prices that they can pay a dividend, pay down debt, grow organically, all at the same time. And so that’s, you know, this is a unique market where, as I said, the combination of resources becoming a lesser focus and less of interest to people, as well as ESG and decarbonization weighing on the entire sector, that has given me an amazing opportunity set to be able to express that in super cheap equities, they can do all of the above, and they’re, you know, if you believe the dividend is sustainable, and we’ve got a pretty good track record, if what we focus on 100% is dividends, and I actually have been doing that for 17 years now, that is just the income side of resource equities, you get a pretty good handle over what are sustainable dividends and what aren’t?
Jeff Malec 33:06
So, like, some of those are high for a reason, price. Yeah, they’re showing you how risky they are, essentially, exactly.
Robert Mullin 33:13
But sometimes they’re not. Sometimes they’re just flying under the radar screen. I’ve got, you know, I’ve got some European e and P companies that have given me 40% dividend yields over the last couple of years that you know that stock prices flat with yield exploration. What’s EMP Yeah, producing companies. Yeah, exploration, production companies, yeah. And why does it need to be resource companies? Like, do you take your skills and be in tech, and, I mean, they’re not throwing off free cash flow so that, I unfortunately, but whatever, there are other areas where you could apply the same skills. You know, it’s it. I think it’s hard to develop the skill set that you know, that that gears me towards the resource sector, and a lot of it is just, is understanding, like being able to look at the Venezuela situation and in 10 or 15 minutes go, Okay, this is what I think it means. I don’t know if I could, I don’t really don’t think I could transfer that to any other place. I’ve got 35 years of scar tissue that I’ve developed in this sector, trying to understand both the macro level of it and the micro level of it. I mean, if people are coming to me and pitching me various Junior exploration companies in gold or copper, and it takes me five minutes to look at a map and say, Oh, this was the project that they tried to do in 19 No, 97 but here are the reasons why it didn’t work, because it was too far away from infrastructure. And there was, you know, too much of this in the deposit, so you couldn’t refine it properly. Or it’s, you know, you’ve got a town right next door who you know is going to come and protest it. Or that that’s the sort of accumulated skill set and and when you’ve accumulated that in a sector where most of the skill sets have dissipated and the people who do what I do has fallen by like. 80 or 90% you know, you might as well I’m the tallest pygmy in the space, so I don’t feel like I could compete in that way in any other sector.
Jeff Malec 35:09
Is that the PC way to say that? Quote? Now, the tallest pygmy? Yeah.
Robert Mullin 35:12
Well, I think we’re, I think we’re in a less PC world than we were a few years ago, for sure.
Jeff Malec 35:17
So give me an example of some of these, of these companies, of like, what they’re doing, how they can throw off that much cash flow?
Robert Mullin 35:23
Yeah, so I’ll mention, I’ll mention one that, yeah, you don’t have to mention names, but just kind of what I’ve mentioned this publicly in that our biggest position coming into this year is Schlumberger, you know, oil field services company, great, big global infrastructure company. It’s name that I mentioned when I was a speaker at the Soane conference down in Australia in November. So this is a company that is this kind of perfect analogy of positive carry convexities. Over the last 25 years, the company’s typically sold at kind of a par multiple with the s, p5 100. Oftentimes it’s been a 25% to 50% premium. It’s now trading at a 60% discount. It’s, you know, at least at the Ed coming into this year, it was a 10% ish free cash flow yield. So they were doing about three to 4% in dividend, and another five to 6% you share repurchase. And that’s for a, you know, a $50 billion there’s very little left in the s, p, like, but like a big, easy to look at company, and this is a company that’s going to be the biggest beneficiary of the movement of incremental oil production away from the US and towards areas like Brazil, Guyana and even the rebuilding of Venezuela, or in Iran or something like that. That wasn’t part of my direct thesis going through, but it’s, it’s something that works for them So, and
Jeff Malec 36:48
that’s just modernization, like, basically all these countries are moving up the scale of modernizing, and they’re going to be producing more and refining more. Yeah, yeah.
Robert Mullin 36:58
That’s where the incremental barrels are coming from, because that’s where people are finding the economic reserves. Growth in shale is not going to happen at $50 oil or $60 oil. Maybe it’s $70 oil. But the nature of shale oil is that it declines very rapidly. And so when you don’t apply capital to an to a production base, that’s declining very rapidly, the treadmill gets very, very steep or very, very fast. And so, you know, what you’re hearing right now from US companies is that, you know, shoot, we’ve got a president who we thought was going to be our guy in the White House, and all he seems to be trying to do is put a lid on oil prices down to $50 a barrel. And that doesn’t make sense for any of them. So as the US barrels flatten out and start to decline, somewhere else in the world has to win. And the people who’ve been doing the work to develop those projects over the last five to seven years, Brazil, Guyana, the Middle East. And so that’s Schlumberger is bread and Guyana. Guyana is an amazing story. It’s actually the best GDP growth story in the entire planet because of the oil production that they’ve been ramping up and over the next last three or four years, and that’ll continue. So that’s one of the few places where global oil production is accelerating. They happen to be right next door to Venezuela. So that’s caused a little bit of geopolitical tension over
Jeff Malec 38:19
basically the same reserves, the same base? No, it’s actually it’s
Robert Mullin 38:23
that is mostly offshore. Some of it’s onshore, but it’s actually mostly much lighter, better quality crude, as opposed to what Venezuela is involved.
Jeff Malec 38:34
And then the shale has another problem, in my opinion, right? That the playbooks out like as soon as they can start producing and making money, Russia and OPEC will just flood the market and drive the price back down to take them out. So, yeah, I don’t know how many times they can do that, but that was the playbook back in whatever that was 18.
Robert Mullin 38:53
And in theory, that’s what OPEC has been doing. Now, you know, they brought an additional, what, almost 2 million barrels a day, maybe a little bit more, back onto the market over the last six to eight months, ahead of schedule. Some would say that that’s been a little bit of kow towing to the US administration who wants lower oil prices going into the midterm elections, and happy consumers who don’t pay a lot at the pump are much more likely to vote for the incumbent than they are to vote them out that said OPEC capacity, if they really are producing where they say they are producing, there’s not a lot of that left. And so the surplus in the market has been wound down significantly. What people have been saying is, well, if they’re coming back with two plus million barrels a day, there’s going to be what they term super glut. And you know, these barrels should be piling up everywhere. They’re not. The matter is, they’re not. And so I’m not going to argue that we’re in an incredibly tight market right now. We’re not. We’re oversupplied, but not over supplied by two or 3 million barrels a day. We may be over supplied numbers and inventories that I look at maybe half. Million barrels a day or more that can tighten up pretty quickly in a geopolitical world where if all of a sudden you get, for example, a fall in Iran, or a fall in or Venezuelan, you get one of the 275 generals decide that he wants to be in charge, as opposed to the one that the US decided was going to be. In the case, you know, you could see a million or more barrels go offline very quickly. So, exactly. So, so I think, I like, I like, kind of like, where the cream market is at. I don’t think it runs away to the upside, barring geopolitical volatility, but I think the focus on we’re super oversupplied, and we’re likely to see 40 before we see 65 I would disagree there.
Jeff Malec 40:49
Back to your Schlumberger example for long short. Are you specifically picking out a short to offset that long? Or it’s more of like I’m picking out equally weak positions that I think aren’t a good story and going short then.
Robert Mullin 41:04
So truthfully, what I’m doing with that now is I’m long Schlumberger, which is, as I said, historically depressed, multiple with very positive catalysts going forward that I don’t think the market is incorporating. There’s a lot of other stuff that we didn’t talk about. I think Schlumberger is about the most legitimate AI play out there, they have an entire section Schlumberger digital, which, if it were a standalone tech company, would probably trade for something close to the entire market cap of Schlumberger, and it’s only 6% of their revenues. So there are a lot of other things that I like about Schlumberger.
Jeff Malec 41:35
Cheney died. It got like a it went on a discount,
Robert Mullin 41:38
yeah, but that was Halliburton, so he was hitting his Halliburton guy, all right. But the flip side of that is, I think the Gulf Coast refiners are ridiculously expensive relative to the fundamentals, and they’ve been a favorite of the zeitgeist, because clearly, all this more, all more Venezuelan crude is going to come to market and be said benefit of these guys. I think that’s two to three years out at best. And what you see from some of these Gulf Coast refiners is they’re trading at the most expensive multiples that we’ve ever seen them at, versus the oil service guys trading at the cheapest multiples we’ve ever seen at. And if you look at crack spreads, which is the best real time indicator of their profitability, they’ve been going straight down for four or five months, so gas
Jeff Malec 42:21
versus oil, so crack spray, yeah, yeah.
Robert Mullin 42:25
It looks at the profitability, the theoretical profitability, of running oil through a through a refinery in a certain ratio, and selling that at current gasoline prices. And so their leading indicators of profitability have been going straight down over the last two months, and yet the stocks, because of this theoretical benefit that I think is years away at best, the stocks are jamming. And actually it looks like they’re they want to break out to all time highs. To me, that’s that’s the sector that I feel like is a pretty good short.
Jeff Malec 42:59
So you’re not necessarily trying to match up positions, like a classic, like, I’m going long, Coca Cola, short, Pepsi, whatever the classic example is, it’s more
Robert Mullin 43:07
I do. I do that some, but mostly it’s in broader buckets. So I’ve got a lot of different ways that I can short within the energy bucket. So I view both of those as kind of energy things. So I’m long service, effectively, kind of short refining. I can be long short within different sub sectors. This doesn’t just doesn’t happen to be an example of
Jeff Malec 43:28
that, okay, I can’t put you in a box.
Jeff Malec 43:39
We’ve spent all this time on energy, but that’s only two thirds of what you do, roughly a third, actually, just only a third of what you do. So let’s get into all the other stuff. So what else is, resources in your
Robert Mullin 43:54
precious metals has been a focus for us for the last couple of years. You know, that’s been a pretty fun place to hang out, it would look it was, it was awful. And we were early, you know, going into particularly kind of the tail end of 2024, where the gold price was going higher and the gold stocks were not so. But that rectified itself last year, which was, which was great to the benefit of us and our LPs. I do think, you know, I people try and make the gold thesis really complicated. They’re like, it’s inflation, it’s deflation, it’s real interest rates, it’s, it can be any one of his I think, I think the gold thesis is actually, when you back away from it, it’s pretty simple. Is it a useful diversifying asset? And what I think got the central banks buying gold four or five years ago was the fact that gold was providing a significantly better offset to US Treasuries and other currencies and US dollar assets than US bonds were and so and at that time, the rest of the world was super overweight. Rate US bonds, they still are overweight US bonds, because from 2000 to 2020, bonds were US bonds with perfect hedge, right? Because the reaction function of Central Banks was every time there was a quake in the equity market, they would come in cut rates and bonds would go higher. But if you look over 150 years of history, bonds and stocks are only anti correlated in inflation environments of less than 2% if you look at an inflation environment of, say, 3% or higher, which is, I think, more likely the environment that we’re going to be in equities and bonds are either uncorrelated or positively correlated. And that’s what 2022 showed us, right, and that bonds and stocks can go down at the same time. So so the entire gold thesis being about some sort of death of the dollar, or, you know, whatever else, it’s not, it’s just, it’s just, it’s a really good portfolio allocation. The central banks figured that out first and started putting money to it for the better part of 2023 2024 and even the early part of 2025 western investors, both institutional and retail were very happy to sell the central banks their gold we were liquidating as they were buying. So that kind of kept a lid on gold prices. They were going up, but they weren’t going up very quickly. The thing that changed in second, third quarter of 2025 was that the sellers stopped selling and started buying a little bit. And when you have a market that was sort of positively biased, but with people on both sides to now really positively biased, and kind of everybody’s just a buyer, that’s what turned in the gold and then silver, and then PGMS, kind of move that we saw last year. And so I don’t that’s a long way of saying the catalyst for gold doing well, I don’t think changes unless you see an environment where we think we can sustainably get inflation back under 2% and where people trust the US dollar more than they did yesterday, which I think, starting with the Russian confiscation of You of, or the US confiscation of, or in European confiscation of Russian foreign exchange reserves back in 2222 and I think even more accentuated by our willingness to, sort of, you know, do these rifle shot decapitations of various governments around the world? Yeah, I think that’s a long shot. I’d say that’s a that’s, that’s not a high probability event. So I think those dynamics stay in place, I would not expect the pace of precious metals appreciation to continue. I think we will get a volatile ride. But I think over the next three to five years, it’s still up and to the right, it’s just going to be maybe a little bit more boring and a little bit more choppy.
Jeff Malec 47:34
Do you think Mexico’s rushing to buy US bonds or Denmark over like everyone is being threatened right now, like, let’s maybe look at something else.
Robert Mullin 47:44
If anything, it’s the opposite, right? You know, and there’s, I wrote a long piece right after the tariff tantrum back in April, where, if you look at the VAR shock to foreign holders of US assets, they lost on a percentage basis in the six weeks around the tariff tantrum, they lost twice as much in percentage terms. So I’m talking about foreign holders of us, assets, us, equities, us, bonds, us, government security, us, like mortgage securities and things like that. They lost twice as much on a percentage basis and 10 times as much on an absolute basis in six weeks around the tariff tantrum than they did during a year and a half during the global financial crisis, really. So if you’re a European holder of US assets, that was a, you know, quite frankly, an OH MY GOD, sort of moment you had never built into your var models. What that did. Now, what surprised me is I thought they would start selling US equities to reduce exposure, as well as bonds. They sold some bonds. They actually kept buying equities. What they did is they hedged their currency exposure. They had been holding us assets unhedged because the currency actually helped them in previous times of market dislocations. But that was definitely not the case in April of last year, and it hasn’t been the case for a while. So they started this, so they started to hedge the currency exposure, and that’s why the dollar has been relatively weak ever since then. Really hasn’t done much in the way of reality, even though US growth has been much better than the rest of the world. So I’ve been surprised that the the rest of the world is willing to come back to the trough on this, but eventually, maybe they don’t well.
Jeff Malec 49:24
And it seems they also were buying, especially in Europe, right? Like they were buying their own stocks, exact stocks might gangbus,
Robert Mullin 49:32
yeah, and that’s, I mean, we’ve got a record portion of our fund is outside of North America. So we’ve got about 65% of our holdings are non North American, which is unusual for us, because there’s a lot of resource options, or, sorry, resource companies in US and Canada. But there are a lot of things about Europe and Australia, and, you know, even parts of Africa and Middle East that, quite frankly, are just much more attractive right now. I just
Jeff Malec 50:08
want to circle back something you said 24 gold prices were rallying. Gold companies weren’t right for me. As a futures commodities guy, I’m always telling people like, avoid the companies. They’ve got warts, they’ve got the commodity exposure plus debt plus Management Risk plus yada yada yada. So how do you square that? What’s your calculus there? Why you’d rather be in the company than the commodity?
Robert Mullin 50:31
Yeah, the companies provide a couple of different things they can provide. Unlike direct investing directly in the commodities, they can provide an income stream, right? So if I’m choosing a dividend related company, you know, I get a positive carry on that. And again, the second part they Offer. Offer is convexity, you know, a from a lot of these companies, the move from $2,500 gold to $3,500 gold. So gold went up 40% a lot of these, that meant their earnings doubled or tripled. And so if you get into a market where people cared about that, which historically they have, in a good gold bull market with people paying attention, gold stocks will outperform gold three to 5x on the upside. And so look, it takes a lot of work to understand the idiosyncratic risks of individual resource securities, and it’s not something that I recommend to your average individual investor, and it’s even something to do, hard to do institutionally, because, quite frankly, the number of people who following these companies, who really know these markets has shrunk pretty dramatically. But that makes it the opportunities that that it is to be able to find ways where, you know, look, I can, you know, I, I was up. I had a couple of my gold stocks up two or 300% last year, gold was up 50 so that’s the reason why. And that
Jeff Malec 51:49
math, well, that can work both ways, but that math is simply, they have mostly a fixed cost, right? Like, Sure, it’ll fluctuate a little bit, but if the thing I’m getting out of the ground now is twice as expensive, I can sell it for twice as more, and I still paying basically the same cost to get
Robert Mullin 52:03
it out. Yeah. So I can illustrate that in a vivid example. In that I met with one of our key portfolio companies in September of 2020 at the Denver gold show, or, sorry, September of 2024 at the Denver gold show. Hey, gold was roughly $2,500 an ounce, and their project that they were bringing online was going to generate about $200 million in free cash flow in the first year of production, which was 2027 and the market cap was 600 million bucks. So it’s trading about three times free cash flow. So look, that’s good, pretty cheap. Fast forward to a year a year forward at that same conference. So September of 2025 gold price is up by over 1000 bucks. The stock is up a couple 100% but, you know, it’s a instead of so it’s a one point, you know, call it a 1.6 1.6 $1.8 billion market cap, but the free cash flow in the first year of production, it’s like 850 million bucks. So it’s actually, it’s a cheaper stock, even though it’s more than doubled, so more actually more than tripled. So that’s the kind of inherent operating leverage that you get. And look, there are a lot of crappy companies in this sector, and so that is not the case universally. And I see if I’m looking structurally like I’ve got geologists that I keep on retainer and great contacts that I know through 35 plus years in the business to be able to figure out what are real deposits and what aren’t. And if you gun to my head three quarters of this sector, I’d rather be short than long, because the business models don’t make sense. But when you find the good ones, man, and you get the tailwinds that we’re starting to see, and I think we’ll continue to see for the next couple of years or longer. I’d much rather be in the equities than commodities themselves,
Jeff Malec 53:50
and that’s why you look at it as a convexity play, basically like, hey, I can get this I’m paying this premium, or even I’m receiving a premium in a lot of cases, yeah,
Robert Mullin 53:59
and I have upside, massive, massive positive carry, double digits a year, we’ve generated at a fund level, 14% annualized yield from our underlying securities, coupled with serious convexity, if you’re right, either for idiosyncratic reasons to the company or broader sector reasons that you get The commodity right.
Jeff Malec 54:20
Were people back at Franklin Templeton, or even in your early days of like, what it why is this guy talking option terms with with resource stocks? Like, who is this guy up against that? Like, I most resource guys are like, Oh, the deposits and right. They’re talking a whole different language than you.
Robert Mullin 54:36
Yeah, Geology versus finance? Yeah, yes, I would say I wasn’t talking in these terms, you know, 30 years ago at Franklin, but it’s when you start, I find it, I think, very useful to think about all investing in terms of option terms, you know, what’s your, what’s what’s your upside, convexity, what is your theta, what is your I mean, there. Is just, yeah, all of, all of the Greeks make sense in terms of part of a toolkit to be able to understand what you what your expected, you know path function for returns are.
Jeff Malec 55:12
But do you have trouble explaining that to investors in your in your fund, right? Are they like what? I just want, exposure to gold prices?
Robert Mullin 55:21
Yeah, I write about it a lot, you know, just the ones who care to comment actually get it. But there may be a lot who don’t, you know, most of the folks I never hear from. So, you know, that’s fine, too.
Jeff Malec 55:30
Um, so energy, precious metals, what else we got? What else is under your resources umbrella?
Robert Mullin 55:38
So we talked about tankers, a little bit that’s a little bit kind of tangential to, you know, to the energy trade also, you know, look, we’re involved in kind of base metals and infrastructure. I’m probably there. I think it’s kind of more interesting. And I’m a little bit of a, I like the empty rooms. I’m more of a contrarian. So the laggard to me in the base metal complex has been nickel. So I think there’s some kind of interesting opportunities there. We’ve got some niche rare earths exposure, but I think that the fundamental analysis in the rare earth sector has gotten a little bit polluted from watching an administration who, while I think they’re doing the right thing, this is an area that we should have been investing in and backing strategically for, you know, we should have been doing this 10 years ago. My if I was to pick a fight with what they’re doing, they seem to be doing it not with the best quality assets or the best quality people, but the ones that are closest to the administration. You know, yeah, fine, you know, it’s, it’s, that’s, that’s the way the world works. So I think they’re interesting opportunities. I think they’re going to be fantastic short opportunities in the rare earth and strategic metals over the next couple of years, as government subsidies bring on more production than we probably need in the short term, and the Bloom will come off the rose in terms of the US, because the valuations on the vast majority of make no sense whatsoever.
Jeff Malec 57:01
Do you put uranium inside of it, inside or a separate deal
Robert Mullin 57:05
that’s just, that’s a separate deal. And I’ve, I like, and always have liked the uranium story, because for those who actually understand what the you know, if you’re looking for decarbonization or steady based load of power, or only answer, yeah, nuclear. Nuclear has been the right answer for 50 years, right? Yeah. You know, you compare France’s CO two output with Germany, and you see how incredibly self immolating the, you know, the energy vendor, you know, shut down your nukes to build a bunch of wind and solar in a place where it’s not cold, it’s mostly dark and it’s not windy, so it’s just, it’s it’s lunacy. But yes, nuclear is a great answer. It’s going to take time. I think traditional nuclear is much, a much better and more likely winner than things like small modular nuclear. I think there’s a lot of I think there are a lot of in technical challenges to that, and that’s going to be a long time in coming. I like the the uranium story in general. It’s hard for me as an equity investor to express it, because one of two things, either the companies don’t pay dividends because they’re all kind of on the Comm, or the ones that do is like, you can buy kazatomprom, but you’re taking on a very different geopolitical risk with that. And so from that standpoint, and look as a value guy, the way I like to qualify it is gold investors on a scale of one to 10 in terms of their zealotry. Gold investors are probably a seven. Silver investors are definitely a 10. Uranium investors are turned it up to 11 or 12 in terms of their zealotry and willing to pay high multiples for potential returns. And so I think what we all know is, if you overpay for an option, you can be right and still be wrong.
Jeff Malec 58:47
So I’m like a nine on that scale. On the SMRs, the the maritime guy we were talking about putting small modular actors on tankers, yeah, and, and he was saying, like, back in Seattle, in the east or something, they were actually plugged an aircraft carrier into the grid in Seattle, yeah, in the 80s at some time, and we’re driving power to the grid. So he’s, like, you could actually pull these tankers and plug them into the grid. So that’s interesting. But then again, that’s a hugely expensive, yeah. Like, what’s the tanker cost? Now, what’s it cost with a nuclear reactor, yeah.
Robert Mullin 59:21
And look, the government can underwrite that. And that’s been true with, you know, the US submarine fleet has been run off next for a long time. So the technology is there. It’s simply, that’s
Jeff Malec 59:31
when people get too dangerous. I’m like, we’ve been doing it for 60 years.
Robert Mullin 59:35
Yeah, yeah, it’s the the likelihood of accident or Fallout is not a serious reason not to consider nuclear.
Jeff Malec 59:54
Where does this all go next? The threats to Mexico, the threats to Greenland is that all a. Resources play, right? Greenland seems totally a resources play. Or is that more air defense? Who knows?
Robert Mullin 1:00:05
I actually, I would. I would push back a little bit. The geologic potential of Greenland is reasonably high. But when you see these, you know, us, geological survey studies of, you know, in situ values of minerals, it has nothing to do with economic recovery. So I don’t think it’s a potential rarest powerhouse. I think it’s much more about a combination of shipping lanes, which, when you control Alaska and Greenland, you got both sides of the Arctic, you know, channel that go through there. And also, you know, if you look at the places that the you know, the Soviets would launch air, sorry, Russians would launch any sort of attack our way. All of it goes over Greenland. So I think there are a lot of different parts of the mosaic that are valid. I would play down a little bit the resource angle, but I think it’s all part of what I think has been consistent in what is developing in the current administration’s geopolitical doctrine is they effectively want to control the Western Hemisphere. The done top to bottom, top to bottom. And, you know, I It would then surprise me if we go in and do the same thing that we’re doing in Venezuela to Iran. Iran may go that way. It’s by on its own, but, but so I think what it all highlights to me is that most commodities and US equity markets are priced like geopolitical risk is, you know, a very low probability outlier event. Think, I think we’re in an environment that could be much less stable than that, because when you go in with a surgical administrative decapitation of a sovereign nation. I think there’s a lot of the rest of the world that’s feeling a little bit like a cornered animal, and cornered animals do things that may in other environments, not really make sense. And so I think we’re I think we’re in a period where you want to be long volatility. You want to be long what most of these countries are fighting over, which is raw materials. And I think paying record multiples for s, p5, 100 and de facto, paying more than record multiples for tech at this point is this is terribly self serving. But I think that doesn’t appear to me to be the best bet if we are in a heightened geopolitical risk environment.
Jeff Malec 1:02:20
If you I’ll flip it on you. If they bring you in, they’re like, hey, where should we take over next to get access to these resources, Guyana. Besides Guyana, we already mentioned
Robert Mullin 1:02:31
that, yeah, and we’re doing that from a nice, friendly handshake, you know, capitalist standpoint, in that it’s mostly US oil companies that are partnered with the Guyana government. So we’ve, we’ve, we’ve got that, and we don’t have to fire a shot. You know, look, there’s a lot of things that we could be doing here in the US that, you know, in terms of actually exploiting, you know, rare earth and cobalt and things like that. There’s a lot of that here. We don’t have to go and take over the Congo to get it. The problem that we have is that we’re boxing ourselves in the corner, in that if we want to be the world AI champion and we want to onshore the development and processing of many of these very critical materials, the US grid can barely do one of those two things. Definitely can’t do both. And the problem if the US grid can’t do it is that prices to consumers are going to go up, and whoever’s in office is going to get thrown out of office. It’s not like, I don’t there’s
Jeff Malec 1:03:26
a lot I’ve already seen that near the data centers and whatnot, right? Absolutely.
Robert Mullin 1:03:29
And you’re starting to see cancelations of, kind of, 2027, 2028 2029 contracts for what people have thought would be data centers, where people are like, I can’t get the power for it. Never mind. Here’s the keys back to you. So I think that’s going to be, that’s the point of tension, is that we are resource and energy constrained, you know, and if we are resource and energy constrained, should all of materials and energy be 3.3% of the s, p5, 100? Probably not. Probably not. Right.
Jeff Malec 1:03:59
So what you would you say? Historically, it was 15% Yeah, history’s energy.
Robert Mullin 1:04:04
Just energy alone was 15 so right now it’s about 2.8% for the energy. And call it, you know, 3050, basis points for the rest. You know that that was as high as, like, 18. I mean, if you go back into the late 70s, you know? So here’s, you know, 70s, it was 35 maybe as much as 40% you go back in history when resources are really a thing, Schlumberger was the third largest market cap company in the world, behind General Electric and IBM, actually fourth General Electric, IBM and at and tch. Schlumberger was number four in 1979 because it was a technology way to play resources. So I think we’re going back in there like we had to explore, we had to do all that Exactly, yeah, and I think, I think, I think we’re going in an environment where we it might look a lot more like that over the next three to five years.
Jeff Malec 1:04:57
You mentioned your son. I’ve got a junior in high school. We’ve been starting to look at colleges. Where’s your son? Looking at schools?
Robert Mullin 1:05:03
Oh, he’s, he’s, he’s all over the place. Good news is, he’s done everything from a building, his own resume standpoint, to give him a lot of options. But, you know, we all know it’s a crap shoot. He’s mostly looking east coast. My wife grew up on the East Coast, and so we’ve actually spent a lot of time back there. And you know, as a Californian, I think they’re, I think they’re both. I have an older daughter who’s at school up in Maine right now. And all of all of my kids are interested in exploring other parts of the country. We love the California, but, you know, I think I ended up doing time in Colorado and backpacked around the world, and, you know, did all kinds of stuff. And I think they’ve got that same inclination. You’re not if you want to, if you want to, if you want to share notes on any college on the, you know, South East and even some of the Midwest. We’ve got them so we can talk
Jeff Malec 1:05:46
off one nice yeah, my wife thinks whoever sees the most colleges win, so we’ve been going all over. We were out in your neighborhood, saw Stanford and Santa Clara, which was super nice. I didn’t know that was so nice right there in
Robert Mullin 1:05:57
Silicon Valley. Yeah, I think we’re supporting GDP just on our application fees this year.
Jeff Malec 1:06:03
Little tick up on the applications. Well, good luck to him. You didn’t, you weren’t telling him Colorado School of Mines like learn, learn how to find all these resources.
Robert Mullin 1:06:12
You know, he’s, he’s really interested in kind of biomedicine, and so he’s, he’s, he’s a very stemmy kind of guy and and I’m going to encourage him to do that, because he’s really good at it.
Jeff Malec 1:06:25
So Amen, cure cancer for us. Yep, that’s the plan. All right, Robert, we’ll let everyone know how to get all of you in the show notes. So thanks for coming on, and we’ll talk to you soon.
Robert Mullin 1:06:37
Real pleasure, Jeff. Look forward to following up whenever, you want to have me back
Jeff Malec 1:06:42
on, for sure you’re going to be my go to energy guy now, even though you’re only a third in energy guy, pretty good for a third only.
Robert Mullin 1:06:50
Yeah, I’ve been doing this a long time. So you know, old dog, not sure. I have many new tricks in me, but the old ones are working pretty well.
RCM Alternatives 1:07:02
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