Go Time for Commodities

Podcast Transcript

Ed Coyne: Hello, and welcome to Sprott Radio. I'm your host, Ed Coyne, Senior Managing Partner at Sprott Asset Management. I'm pleased today to welcome Adam Rozencwajg, Co-Founder and Managing Partner of Goehring & Rozencwajg. Adam, thank you for joining Sprott Radio.

Adam Rozencwajg: Yes, great to be here.

Ed Coyne: Adam, before we discuss what's happening in the markets—there are many moving parts right now—please tell us a bit about yourself, the work you do at your firm, and how you got involved with natural resources in general.

Adam Rozencwajg: Sure. We are dedicated natural resource equity investors. We manage a portfolio of about $800 million right now, and we invest exclusively in natural resource listed equities, different companies, whether they be producers, exploration, development, what have you, and really across the spectrum. We look at all the different commodity markets. We look at mining, gold, base, bulks and uranium. We were big in the uranium space right at the absolute bottom back in 2018. We also spend a lot of time in the energy markets and oil, natural gas, coal and things of that nature.

Our process is to start from the top down and look market by market. We don't really manage ourselves to any particular benchmark. If we find that a sector is out of favor, particularly starved for capital, and represents good, deep value, those tend to be what we like to look for. That's where we go and try to find opportunities in the space to express those views. We like areas where depletion is taking hold and investor sentiment is about as negative and bearish as it can be. When we think that there's a fundamental turn happening in that market, and we'll allocate the portfolio to that and then get to work finding companies to express those views.

Ed Coyne: Do you consider the different corners of the market, like the energy, precious metals, and oil and gas markets? Do you try to manage specific allocations, or are you just going where the market tells you to?

Adam Rozencwajg: We go exclusively where the market's telling us. Sometimes we'll have 20 to 25% of the portfolio in gold stocks. We have that on right now and have for the last 18 months or so. Other times, we can take our gold exposure down to 4% or 5%. We could take it all the way down to zero, but realistically, we take it to a couple of points—the same thing with all the different commodity markets. For many years, we had no uranium exposure.

Then we saw the writing on the wall in terms of the huge lack of investment in the space, and the huge supply and demand imbalances that we're developing. We became very bullish and allocated a full quarter of the portfolio to uranium. For us, a full weight is about 20% to 25%. We're comfortable there, but I don't care what the benchmarks look like. We go where the fundamentals tell us and the value.

Ed Coyne: Speaking of value and reading your most recent report, I see that you guys tend to look and feel like a value manager. I would imagine because of that, your turnover tends to be fairly low. When you go into a position, you probably let that marinate for a while. Am I right, or how do you think about that?

Adam Rozencwajg: Absolutely. We tend to hold things for three to five years. Sometimes it happens faster than that. Sometimes it happens longer than that. We're value investors. Our turnover is quite low. We've had it as low as 10% in a year. I think realistically, 20% is something that we usually stick to. It gives our views lots of time to play out because we call these big market turns. You can read our quarterly letters, which we put out in the public domain. I think in the public domain, they go back to 2016.

You can probably find them going back to the late 1990s. We lay everything out. If you follow us for any time, you'll realize that we usually get the big turns right. Our timing—sometimes, we can be early on some things. I think that is just a little bit of a curse for the value investor.

Ed Coyne: Yes, it is. I spent close to two decades with a classic value manager in New York City, the great Chuck Royce. You may have heard that name.

Adam Rozencwajg: Sure.

Ed Coyne: Being a little early was probably our biggest sin. That's okay. A little early is not the worst thing in the world. Well, you already said three things I want to unpack a little more. Gold is one of them. At Sprott, we focus a lot on precious metals in general. We clearly like gold. Two: uranium. Three: big market turns. You hear a lot about whether we are at the beginning of a commodity super cycle. Is that happening? Maybe we start with that one first. Let's talk about the overall market. Are you seeing a different kind of cycle emerge right now than you've seen in the past?

Adam Rozencwajg: The first thing, I'll put in my two cents here. We're at the bottom of a very large commodity cycle. I think the catalyst is now here for the next wave of this bull market. I'll tell you about what I think has set up the bull market and what's now triggering a switch from a bear market, which has been in effect from 2011 to the bottom in 2020. Since then, we've come up off the bottom but haven't started the bull market in earnest. I think that's about to change.

That is true, but I have one bone to pick: the idea of a super cycle. Because I think the idea of a super cycle on some level implies that it's different than a cycle. If it were just a cycle, we'd say, "Oh, do we have a new commodity cycle?" A super cycle is headline-grabbing, and what have you? It implies that it's different from a traditional cycle. Now, I think that the cycle we're about to undertake will be dramatic in its amplitude because it's been pushed down so far.

I think it will last quite some time because we've underinvested in the space for so long now. The bear market has lasted so long that I suspect the bull market will last longer than a traditional cycle. This will be a cycle like anything else. It will eventually attract more capital than we need in the space. It will eventually bring on more supply than we need. It'll set the stage for the next bear market. That's quite a ways away, both in terms of percent move and in terms of years.

The reason is that this bear market, by every measure, has been about as severe as any we have seen. We've studied commodity markets going back 150 years, so basically from the time of oil on. I'd be dying to look at commodity cycles in the 17th, 18th, and early 19th century. I don't have quite the bandwidth to do that.

Ed Coyne: I think it might be coal at the very end there and horse manure. Those would be your two primary energy sources.

Adam Rozencwajg: Exactly. Certainly, since the mid-19th century, commodity prices, relative to stock prices and the broader market, have gone through these massive cycles. There are periods of time when they become radically overvalued. They represent terrible investments and periods of time where they become radically undervalued. If you just took the average, there'd be a good, stable asset class, but, of course, it's these huge moves around the average that make commodities so exciting and natural resource investing so exhilarating.

I think from an investor's perspective today, you're being given probably the best opportunity that I've seen, certainly in my investment career, and probably in the 150-odd years that we've been studying these markets.

Ed Coyne: What do you think is driving this cycle? Besides just coming out of a bear market, what do you think is driving the cycle today?

Adam Rozencwajg: Great question. We're jumping ahead a little bit. First, let's see how we got to where we are today. Every commodity cycle basically follows the same steps. Commodities are quite unique in that they're priced on the marginal unit of supply and demand. All the volatility that I've seen in the 20 years that I've been doing this and the 35 years that Leigh's been doing this, it's rare to see a commodity market out of balance more than plus or minus 1%. Compare and contrast that to consumer retail or something like that.

You can get big inventory overhangs of 10% or 15% that need to be worked through, but if oil becomes a million barrels a day in deficit, the price is going to rise tenfold. If it becomes a million barrels a day in surplus, the price will collapse by 90%. We've seen that time and time again. That's the first unique thing. The second unique thing is that it takes anywhere between 5 and 10 years to bring on new supply once you get the right price signals. I think today we're probably at that 10-year-plus given permitting in different countries and other bureaucratic red tape.

You take the two together, and what ends up happening is you get this massive price move. Supply is inelastic. It doesn't come online quickly. Companies that operate have a great period. They earn unbelievable profits if they have existing capacity. If they're development projects, they go up more on a more speculative basis because they don't have cash flows necessarily, but on the expectation of their cash flows once those assets are in operation. Eventually, that will start to attract capital. As that money starts to come in and gets put to work, because of the long lag and how long it takes to bring supply on, the bull market lasts longer than it ought to.

It goes farther, higher and longer, and too much money comes in. Eventually, that money gets put to work. New supply comes online, and the market slips from deficit into surplus. Prices collapse, and the whole cycle starts to work in the other direction. Investors flee the space. They redeem hand over fist and all the funds and stuff like that. They take money out of the space. Mark Twain said that a gold mine is a liar standing on top of a hole in the ground, and oil companies are called risk-taking wildcatters and things of that nature.

Depletion starts to take hold and ratchet the market tighter and tighter slowly. Then the cycle finishes slipping back into deficit, and a new bull market starts again. That's the quintessential commodity cycle. If you take it back for the last 25 years, to the beginning of the 2000s, we definitely had a commodity bull market. Gold bottomed at $275; oil bottomed at $11. Uranium was nine or so in the late '90s and early 2000s, and prices went up 10 to 15 fold. The equities went up 30-fold in some cases in the next 10 or 11 years.

That attracted a ton of money. Energy became 15% of the S&P again. Today, for instance, it's 3%. Gold is a percent of the S&P, not even within the bounds of recording errors. Basically, I don't know, 0.1 or 0.2 or something crazy like that. You had this strong bull market, and it attracted money. What did that money do? Well, big surprise, it found a new supply. In the case of energy, it found shale. We had some large copper projects come on 15 years ago. Iron ore is certainly all through Western Australia. Uranium's an interesting one. It missed the party a little bit.

The timing never quite worked. We didn't get a lot of those new mines online. Even in the case of uranium, Kazakhstan brought on new capacity, and that set up the new bear market, which took place from 2011 to the bottom in 2020. In this bear market, though, which has taken commodities as measured by weighting in the indices, looking at commodity prices divided by stock prices, it's taken those levels down to the lowest in 150 years. This is a worse cycle than we've seen in the past. I think ESG has played a little bit of a role there, or even more than a little bit of a role, but I don't think it was the primary culprit.

I think overspending last cycle was likely the primary culprit, but it has slowed the money from coming back in. We have this bizarre situation where energy has led the market higher in the last five years, but no one's bought it. Gold has been the only safe haven in the last year, but no one really seems to be buying that either. That's what needs to change for the next sharp bull market to start. I think that's happening right now as we speak.

Ed Coyne: Are you seeing whether it's individual investors or institutions that start to show up and really look at the different opportunities today in a way that they weren't a year or two ago, or are those still very early days?

Adam Rozencwajg: I think it's still very early days. We're starting to see it a little bit. If you look at some of our big wins over time, we've had lots of foresight investors on the institutional side and on the wealth advisory side, what have you, that have seen the opportunity in this space. They've done quite well with that and remain very happy, but it was all idiosyncratic. You had to get the right guy at the right firm who had a value approach and understood the benefits of the thesis.

We're seeing broader interest now, although the dollars aren't necessarily there. We look at the sheets every morning and see more consistent inflows. Maybe it's 500,000, a million. It's no one big ticket, but it is telling me that there's a bit more breadth in terms of who's buying now, and it seems to be a little more sustained. Is that a function of, I don't know, being out and doing the podcasts and writing the letter, or is that a change in the market? I don't know.

I would say that the people we're meeting with are, let's say, the larger RIAs and institutions. I would say that interest is at the highest level we've ever seen, and no one seems quite ready just yet to pull the trigger and commit dollars.

Ed Coyne: It's interesting you say that. We've seen a similar thing. We've seen it in the physical market, but not so much in the miners. However, if you go back just a couple of years at our firm, we would do a couple of RFPs a year. We're doing over 100 a year these days in the major brokerage firms and stuff. We're seeing it the same way. That's why I was curious to see what your response to that would be. It feels like we're in the early days. This is not a super cycle; it's just another cycle, which I like.

Super cycle's fun to say, but the reality is these are just cycles, right? They have a beginning, middle, and end like all cycles. We're going to keep that on the sidelines for a second, and I want to go to precious metals. The reason why I want to go to that, and in preparing for this interview today, I was watching some of your other interviews, and you had a great one back in February talking about gold being in your early days. Back then, gold was still at $2,900 an ounce.

It had moved a lot, but you felt there was still much more room to go. We're sitting here in mid-April, and it's bouncing around $3,400. It's always fun to be right, which is great. Having said that, being a contrarian investor and value investor, do you still like gold today?

Adam Rozencwajg: I do. To be clear, we're not gold bugs at risk of upsetting some of your listeners.

Ed Coyne: No. We want the facts, baby. Come on.

Adam Rozencwajg: We're not gold bugs. I don't think that gold's the answer to all of society's ills and things of that nature, but I do believe that it's an asset that can be valued. Buffett always says you can't value gold, because it doesn't generate any cash flows and stuff. I appreciate what he means by that, but U.S. dollars don't generate cash flows either. Treasury bills do, but U.S. dollars don't. That doesn't mean that the U.S. dollar doesn't have a value. There are different ways you can look at it.

We like to look at the value of all the above-ground gold relative to the value of all the above-ground money. Whether you take narrow money, broad money, financial assets, or what have you. That tells an extremely bullish story. That suggests that gold should be $15,000 an ounce. You could make a case higher. It depends on where you want it to stop out based on its historical relationship with financial assets. If it goes back to the average, it's 12 to 15. If it goes to the speculative high, for instance, people don't realize that it happened in 1939, and again in 1980.

1980 is bizarre because the U.S. wasn't even on a gold standard anymore. In both those cases, the Treasury's or the Federal Reserve's gold holdings held on balance at the Treasury were worth 1.7 times the amount of dollars in circulation. Britain ran a gold standard with 25% coverage. We ran a non-gold standard with 170% coverage as recently as 1980. That's how out of whack gold prices can get. In 1939, it was a little bit different.

The gold price was fixed, but a huge amount of gold volume flowed into the U.S., seeking a safe haven against the coming calamity of World War II in Europe. In that case, too, we had all this gold. The U.S. didn't want to print money against all that gold, because that would lead to huge inflation in the U.S. We ended up with a dollar that effectively was backed 170% by gold. That's crazy when you think about it. Today we're backed 6% by gold, 7%. Unbelievably low.

You have historically run a gold standard on that, which would take you to 12,000. If you went up 170 times, you're at 25 plus thousand. It's a wide range, and it's all very bullish. I think that's where we're going. I think we're in a period of time today of a monetary regime change. That sounds big, dramatic, and scary, but there are indications that we're in the right time of history for that.

There are some good indications that it's happening right before our very eyes. In every major monetary regime change, one of the commonalities is a devaluation of fiat currencies relative to gold. People say, "Well, how will the dollar do versus the euro?" and stuff like that. I don't know, but what I do know is that the dollar relative to gold will likely weaken, meaning gold prices are likely going considerably higher.

There's one thing that gives us a little bit of pause in the gold market today, and that is that one particular ratio that we look at is suggesting gold is very expensive, which is the ratio between gold and oil. That's been a pretty good predictive indicator. I think it's been a bit better at predicting when you want to get involved with oil than when you want to get out of gold. Frankly, it's been called both fairly accurately the last couple of times. Obviously, the ratio hit another high most recently, other than that short-term anomaly when oil went negative, but the ratio hit 50 back in 2020.

Ed Coyne: What's the average on that?

Adam Rozencwajg: Like 15, I believe.

Ed Coyne: 15. Gold's gotten ahead of itself. On a gold-to-oil ratio, it's gotten a bit ahead of itself.

Adam Rozencwajg: Yes. You're back at 50. You're 53 right now, and so that's a little bit of a concern for us. Given the major drivers of the gold market right now, let's be clear. The major driver of the gold market has been central bank buying. I don't think that's going to stop. I suspect that oil will rise to meet it. I think oil right now is quite cheap at $65. It's very difficult for any of the oil producers to generate strong returns from drilling new wells.

There's a very strong case for crude oil because the only source of non-OPEC oil supply growth in the last 15 years, namely the U.S. shales, has stopped growing. Everyone thinks that it can be undone with the stroke of a pen by allowing drilling permitting on federal lands and other such things. Our models have been telling us for five years now that 2024 would be the year that oil and gas shale production peaked and started to roll over slowly.

That's exactly what happened last year, at least on a monthly basis. Some people will say the jury's still out. In my mind, the geological models have told us 2024 is going to be the moment of exhaustion. That doesn't mean production goes to zero, but remember, for the last 15 years, 90% of all new oil demand has been met with a new shale barrel. Having that growth engine turn off will likely lead to much higher oil prices. I suspect the ratio will close mostly by oil prices rising as opposed to gold prices falling precipitously.

I do admit that we have a bullish disposition on gold. When I look at all these things, that's likely biasing my view a little bit. I think it'll be mostly crude oil coming up to meet—not meet gold dollar for dollar—but bring that ratio back in line. Even 20 or 30, the long-term average is 15. I was right there. You could get it to 22 and be within one standard deviation. Does it go back down to five-to-one like it did back in 2005? Maybe not, but 50 to one seems a little aggressive.

Ed Coyne: Does silver play into this, or is it predominantly gold for you all when you're looking at precious metals?

Adam Rozencwajg: For us right now, most of our exposure comes from gold. When I say gold, I'm talking about the gold equities because those have been a distinct asset class in the last couple of years. We can talk about some of the reasons why. The central banks have been the driving force behind the gold rally, and central banks buy gold bars, but they don't buy gold shares. Particularly when real rates were rising between '22 and '24, we saw Western investors selling everything gold-related, bars, and shares.

The central bank scooped up the bars, leaving the shares orphaned. They developed this huge undervaluation. That's where we focused because I think that's where the best value is. I think it's where our skill set is. The stocks have done well this year, but amazingly, the GDX has been down 20% since October in terms of the outstanding shares. That means people have taken out and sold a fifth of their GDX holdings in the last six months despite this strong run-up. Gold shares have not seen any love whatsoever.

Silver's interesting, and my partner Leigh did some great work in the silver markets and helped dispel a fairly widely held belief that for a gold bull market to have legs, silver needs to outperform. It turns out that nothing could be farther from the truth. What tends to happen is that silver lags and lags and lags eventually stage this massive catch-up rally at the very end of the move. Two interesting things to note there. First of all, after several years of lagging, silver makes this huge catch-up move, that's all anyone remembers.

In that last year, it's true silver outperforms gold, but over the full cycle, they tend to perform in line with or even better than gold. Everyone remembers that last bit. That's what sears in their mind. Now, instead of signaling a massive continuation or strength in the bull market, what it signals more than anything is the end of that bull market. Usually, when you get that big silver catch-up rally, that swan song or last gasp of speculative energy coming into the market, you should probably sell both your gold and your silver. If you're a silver equity investor, can you continue to hold it? Yes, I think you can. I think you'll be rewarded by the end of this cycle or even this move within the cycle. Is it right now? I suspect not. If it happens, you should probably say thanks, take your capital gains, and look elsewhere.

Ed Coyne: You were early adopters of uranium at $30 a pound or below that.

Adam Rozencwajg: Below that. We're down to about $18, $20 a pound.

Ed Coyne: You were way early on that, and then it ran up to over $110, and now it's sitting around $65. Do you see a cycle still developing there, or do you think that came and went in the short term, and wait and see going forward? What's your view on uranium today? There's no wrong answer there. I want to get your take because you are plugged into this daily.

Adam Rozencwajg: In retrospect, there's going to be a right and a wrong answer for sure. No, we remain steadfastly uranium bulls. I think that uranium has an unbelievably bright future and will probably be, I suspect, the most important single investment and societal theme in our lifetime. If you look throughout all of human history, there have been three major energy transitions in my mind. The first is when we went from hunter-gatherers to domesticating animals and crops.

The second is when we lived in that agrarian lifestyle for thousands of years. Then we harnessed coal's power because the energy in wood per pound was not great enough to offset the transportation from the hinterlands back into the city. What happened was that London grew and grew and grew, cut down all its trees. If you looked at the caloric energy in a tree being brought in from whatever many miles out in the hinterlands back into the city center, there's more energy to bring it back than there was in the tree itself.

You hit a plateau, and you couldn't grow the city anymore. People turned to coal, which they had newly burned, and they tried to harness the heat energy from coal, which ended up far more energy efficient than the agrarian lifestyle. There's a way to try to measure it. We like to use what's known as energy return on investment. You look at how much energy you put into the system and how much energy you take out of the system. We don't have reliable data for hunting and gathering, but when we went to the agrarian lifestyles, about five to one, you put in one unit of energy, you get five out the other side.

One goes back to the energy source to create the next five units. The other four are used for subsistence living for yourself and your family, just to survive and scrape by. That's why, for at least 2000 years and likely longer, we experienced 0.02% per year real GDP growth from AD-1 to 1650. That's as close to zero as you get. It took 1,000 years for the population to double. This is what we're talking about: effectively zero growth. Then you went to coal, and in 1 unit, instead of getting five units of energy, you got 10.

Your EROI went from 5 to 1 to 10 to 1. Your 5 was your subsistence, your 10 was your surplus, and your surplus capital and energy are very similar. You can invest them in things. You started to get growth, and the growth started to compound on itself. It's no surprise that if you look at any chart over history, whether it's population, real GDP growth, energy consumption, or metals usage, it's like a hockey stick, and it's all within 20 years of harnessing coal. That's 10 to 1.

Then we finally flash forward to the 20th century and move from coal to oil and gas. That has an EROI of 30 to 1, so much better than coal, 3 times, particularly as early coal. It creates abundance, the likes of which nobody could ever have imagined. If you asked somebody in 1870, their life would've resembled someone's in 1670, and by 1970, you might as well be living on Mars. It's just unbelievably different. The amount of energy we consume per person has gone up 20-fold, and life expectancy continues to grow.

Those three moments, the modern age, the industrial revolution, and the birth of society in the first place were done through these big transitions going from, let's call it, 3 to 1 hunting gatherer, 5 to 1 agrarian, 10 to 1 to 15 to 1 eventually with coal and then 30 to 1 with hydrocarbons. Nuclear power is 100 to 1. You put 1 unit and you get 100 units out on the other side. It's off the efficient frontier for anyone who's a CFA. Everything else is like singles and doubles. Uranium is a home run. People realized that this was particularly in moments of energy shortages.

Nuclear's big moment was through the 1970s when we were running out of conventional crude in the non-OPEC world, and OPEC was wielding its new pricing power and market shares and being a difficult actor. That's when people started to appreciate the huge benefits of nuclear power. Then we had this period of energy abundance in the 30 years after that, and uranium became less and less of a necessity until finally Fukushima happened. People said, "Do we need this at all anymore?" Now we're going back the other way.

People are beginning to realize that we are in an energy-short world, that nuclear is far and away the most efficient source of power and energy man has ever harnessed. As an added benefit, and I'm not saying this facetiously, it's a big benefit; it doesn't emit any CO₂. It both handles our energy needs and our environmental needs. The renewable push was interesting because it was framed as: how much efficiency do you want to give up to get rid of carbon? That's an interesting question to debate.

My view is that when the rubber hits the road, people are willing to give up nothing. Just look at Germany in 2022 when Russia turned off the gas taps, and they couldn't subsist on wind and solar alone. What did they do? They went back to coal within about six weeks. They didn't even wait for winter. They did it in advance. It's also a bit of a false choice, a false dichotomy, because we have that magic quadrant, which is efficient and low CO₂, and that's uranium. To just mention, where do renewables fit into all this?

I think they fit in nowhere because, realistically, when you account for all of the steel cement, rare earth magnets, copper fittings, and the gathering systems, their utilization rate, because they don't operate most of the time. You're talking about an EROI, realistically unbuffered, meaning not suitable for the grid with no battery backup in your best-sighted wind locations of 10 to 1, and on a fleet basis, if you were to back it up, you're back down to sub-five to one. You're asking a modern industrialized economy to effectively subsist on a 15th-century agrarian energy source when you really come down to it and can't do it.

That's why Germany, which has gone down the renewable path, is rapidly de-industrializing. Nuclear is the answer there. There's no two ways about it. There now seems to be greater appreciation of that fact. I think that's a trend that will continue. Again, I don't mean to oversell this, but if you go back, it's like the birth of society and the written word, the Industrial Revolution, and the modern hydrocarbon world. These are three really big events in the last 5,000-plus years. I think we could be on a threshold at least quantitatively, moving from 30 to 1 to 100 to 1, and with these new SMRs that they're bringing out, we could talk all about that.

Ed Coyne: Yes. That's another podcast, probably.

Adam Rozencwajg: As much as 180 to 1 with them. This is a bigger move than anything we've experienced. Anything.

Ed Coyne: I guess it's coming at a time where we're electrifying everything both here and abroad, and parts of the world are getting electricity for the first time. I think I read that less than 10% of India have air conditioning in their homes, and that's changing by the day. The demand for more electricity for core electricity, forget data centers and AI, and all the things that we consume, as a world, the general demand for more electricity is increasing. I believe nuclear will be at the forefront of that as well. Any other thoughts that you'd like to leave us with before we sign off?

Adam Rozencwajg: Yes. I'll touch on copper briefly, but then I want to end on something else. Copper, we have a half position, and the reason we have a half position is that we were early to the copper story. We invested in copper in 2015 when it was $2 and no one cared. We did some interesting early analysis that said if you want this energy transition, you will need a ton of copper. We called it a green metal. We got a lot of pushback at the time. I think we were the first to call it that. Now, I think that's a widely held view.

Copper's not a contrarian trade anymore. McKinsey, Bain, and S&P Global all have copper reports out. They don't have uranium reports out. Maybe they do, but they certainly didn't make the rounds like the copper report did. Dan Yergin and his group at S&P Global, which is good analysis, but to this huge copper permissive saying this was like once in a lifetime investment opportunity, by the time that's being written about it, it's certainly not a neglected trade by any means.

I think that what appealed about copper to us early on was that we said, "Look, we don't like this renewable stuff, but I'm not one to turn my nose up at a free call option." Copper was a free call option on renewables. If it worked, then it'll do quite well. It's a call option, but I don't think it's free anymore. I think it's fully priced. In fact, I think the tail's wagging the dog a little bit. I think that a lot of copper investors have copper positions as part of an energy transition renewables tech basket, and moving into the picks and shovels of data centers and stuff like that, and what'll benefit.

You just have to look back to 2022, which is the year that everything sold off. Big tech sold off, the S&P sold off, bonds sold off; it was a classic unwind. Resources in general were the only place to hide. We did quite well in '22, one of the few funds up for the year. Copper traded like a tech stock. It didn't trade like a commodity stock. I think that's because it's wrapped up in many of those, so it's no longer a free call option. We're a bit at crosswinds, we don't know what to do entirely. We have a half position on, and we'll be half wrong one way or the other. I'd like to leave with the idea that, as far as a catalyst goes, every time commodities become super cheap relative to financial assets, they get picked up as part of what we call a broader carry trade. We don't have time to go into what that all means, but it's a whole host of things that occur, I don't know, once a generation or so, and attracts a huge amount of money into long-duration growth assets. It makes them very, very appealing to investors.

That, in turn, makes big stocks get bigger, it makes growth and momentum lead the day, and it just sucks the air out of the room for things like natural resources and commodities that are delineated projects that have a 10, 15-year life that depend on the commodity price. None of that becomes important in these periods. It attracts more money out and more money into these other areas of the market until it eventually unwinds.

The catalyst for every one of those unwinds has been a change in the monetary system and trade regulations every single time. The two go hand in hand. In 1929, we got rid of the classical gold standard. In 1931, we had the Smoot-Hawley Trade Tariffs. In 1969, the U.S. started its process of getting out of Bretton Woods, which was finished in 1971, and all those trade tariffs from the '30s were repealed at exactly that same time. In 1999, we had the Asian currency peg system that had been in place for most of the '90s shift, which eventually took $9 trillion worth of treasuries eastward, and we added all these countries to the WTO.

That's always been the catalyst to end the bear market and start a new bull market. If you think that's the case, and we've been saying that for five or six years, not that it's happening imminently, but watch this space, watch the monetary and trade systems. What's happening now with the U.S. and the current administration certainly qualifies as a major shift in the global monetary regime and a major shift in global trade patterns. I'm not saying the tariffs work. I'm not saying the tariffs don't work, I'm not weighing in on that debate.

What I am telling you is that I think the catalyst is here. The event matters, at least to me as a resource investor. How it plays out, I'll leave that to smarter people than I am, but this has been the catalyst that we've been looking for. I think it's no surprise that even though this raises a huge amount of economic uncertainty, and you would think that commodity stocks would be weak in the face of that, they've done quite well so far this year, in the face of all this stuff. A lot of that's been gold, but some of it's also been other commodities.

Ed Coyne: I think you're spot on with the catalyst. The catalyst is the key when you're looking at this; it's what gets involved, it's hard to know, but the catalyst definitely drives it. Adam, we've covered a lot of stuff in a relatively short period of time. If anyone on this podcast wants to follow your work, the work your firm's doing, any public access that an investor can get exposure to, is there a website or anything you guys have that people can follow you on?

Adam Rozencwajg: We do so much. We put it all in the public domain. Go to our website, Goehring & Rozencwajg. G-O-R-O-Z-E-N.com. That's the website. Type it into Google. You only have to be 5% right, which'll point you to who we are. Certainly, read and listen to all of our stuff. We put it all in the public domain.

Ed Coyne: Awesome. Hopefully, you'll make yourself available down the road for a checkup every once in a while. We really appreciate you taking the time out of your schedule to talk to us today on Sprott Radio.

Adam Rozencwajg: Great. Thank you.

Ed Coyne: Thank you, Adam. Once again, my name's Ed Coyne. Thank you for listening to Sprott Radio.