Videos Of The Week

Commodities, Inflation, And The Big Picture & A Look At The LIBOR Scandal From 2007-2008

I saw a bunch of interesting videos this week, but a couple stood out. The first video was a good look at the big picture for financial markets, and they discussed commodities, inflation, and deglobalization as things to watch in coming years. The second one was a different topic from the typical video focused on markets, commodities, and current events. It takes a look at the LIBOR scandal during the 2007-2008 Financial Crisis, and the people who were scapegoated for it, while the people behind the scenes got away scot free.

Palisades Gold Radio w/ Jesse Felder

Tom Bodrovics released two great videos this week, and it was hard to narrow it down to one. The other one that is worth checking out is his interview of Luke Gromen. Tom and guest Jesse Felder discuss a bunch of topics, but I thought Jesse’s points on inflation and commodities stood out. They talk about how inflation looks like it might be returning, and the idea that we are going back to a low inflationary environment is premature.

Another thing he talked about that I found very interesting was his take on commodities. He thinks the supply and demand picture for commodities is very bullish. He talks about the capital cycle, and how the broader commodities complex has been starved of capital. This is generally the foundation for a commodities bull market. He points out that since the 2012-2013 crash in precious metals and 2014 crash in oil that the broad commodities complex has seen significant underinvestment, while the technology sector has been on the other end of that investment spectrum. Even the fake “green” energy is going to require a significant amount of commodities, whether it’s oil, coal, silver, or steel.

With oil specifically, he talks about constricted supply, with the Permian looking like it is set to peak in the near future, the drawdown of the Strategic Petroleum Reserve, and other signs that could spell trouble for total oil supply. On the demand side, projections show that we are continuing to hit record highs for oil demand each year. They also discuss manufacturing, conflicts around the world and economic protectionism, the grid, and precious metals, among other topics. He thinks that the decades long process of globalization, which was one of the most important drivers behind disinflationary trends, is coming to an end, and he talks about how things might shift in coming years.

Forward Guidance w/ Andy Verity

Some people look at geopolitics through the lens that “All roads lead to London” and this will be an interesting video for people in that camp. This video was that it was an interesting look at LIBOR (London Interbank Offered Rate) and what was going on in 2007-2008 during the financial blowup. They share taped phone calls from traders talking about the manipulation of LIBOR, which talk about the pressure from higher up in the banks as well as political influences, and how the wrong people were scapegoated and took the fall for it. They also discuss why the more recent switch to SOFR (Secured Overnight Funding Rate) was an important in the last couple years to reduce outside influence on our currency markets. Verity discusses the difference between LIBOR and SOFR, but overall, I think the shift to SOFR is a positive one for Americans.

It shouldn’t be surprising that a British guy is arguing that LIBOR was a better system for monitoring credit quality (or whatever other reasons he mentions), but I think SOFR is an important shift in the last couple years for the American financial system. I’m not going to start pontificating on interest rates on a regular basis, because I don’t think it’s that productive for my investment process. I would rather be looking for cheap assets with a catalyst or tailwind. However, I think being aware of some the things that are happening (or have happened in the past) behind the scenes can give investors some insight into important events in financial markets. I will probably add Verity’s book, Rigged, to my ever-growing reading list because I think it would be an interesting look at what happened in 2007-2008 as far as LIBOR and the people responsible are concerned. The video might be dry for some viewers, but I thought it was an interesting look at a piece of the financial circus in 2007-2008.