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Alyosha (JJ): "We're Oversupplied in Oil, Period"

The Market Vibes author on his outlook for oil, how he surfs, not invests in, the stock market, and why people who invest in gold miners "have the patience of a biblical character."

On Talking Markets yesterday, we had the great pleasure of welcoming JJ (

of the phenomenal Market Vibes).

Thank you to the great

, , , , , and many others for tuning in live…!

We’re Oversupplied in Oil, Period

Iran is actually exporting more oil now, JJ said: “About 130% of their normal exports are going through the Strait of Hormuz now… [This] is not an oil war, [and] no one is interfering with the flow of crude.”

“We’re oversupplied in oil, period,” he said. “So, if you’re trading oil, you’ve got to keep that in the back of your mind.” Add to that, he said that while open interest is in the upper regions, “it’s coming off a bit. It wasn’t really a short position.” If it had been a big short position, “we’re be trading 90… and we’re in the 70s now.”

Other key things to think about in the oil landscape:

  • Trump’s 2-week pause “just blew the air out,” JJ said. “If you’re holding options, for the next 2 weeks you’re going to get crushed.”

  • Saudi Arabia want more market share: “They’ve been cutting a million barrels a day for almost 2 years, [which] is subsidizing everyone,” JJ said. “They want to take that back. And the only way they can take that back is to prove they still have control of the market, and the only way they can do that is to take the price down.”

  • Oil could continue to get cheaper,” he said. “It’s so easy now with technology to find it, fund, it and bring it to market.”

  • We’re playing a game of musical chairs where we actually have to kill off major producers in order for the price of oil to stay up,” JJ said. “Venezuela’s gone - they’re producing less than a million barrels a day now. Angola dropped out of OPEC… If Saudi Arabia decided to do it, to produce an extra $4 billion a day, that would put a lot of other producers [out]… I could see foresee something like that, a price war where you wind up with a handful of major producers still standing… A new OPEC in which the US is one of the dominant members because they’re a consumer nation.”

💡Back to the reality right now: Dropping a classic JJ gem, he said: “You either need a fundamental case where there’s not enough of a commodity, or a technical case where people are over their skis with a bad position or they’re going to get squeezed out. I don’t see anything like that right now - All I see is a little tension about whether something really, really bad is going to happen.”

Thoughts on Equities

Despite all the talk over the last few months of the great rotation and so on, right now “we have 40-45% of market cap in 10 stocks,” JJ said. “So I’m very leery about being long because the overweights are so dangerous - [for example] we’ve got a $50 trillion market cap that’s moving around 20% in a clip. So if you get that wrong, it’s just a big hole to get out of.”

On the other hand, “it’s very transparent how it operates,” he added. “It’s a rules-based system now, box to box. I’m usually flat coming into the morning, and I ask myself ‘are these guys going to buy stocks today?’ and [the answer is ] yes. They buy stocks every day no matter what. You can read all the bad news you ever want to know, which used to have an influence on stocks, but it [doesn’t] because there are really only 10 of them. If no one sells those 10 stocks, the market will not move.”

💡How JJ trades (not invests in!) equities: He looks “for the meat of the money to come in on the opening,” which gives a heads up on how the day is going to go, and then again “a little bit after lunch, around 1.30 or 2pm, if it pops up again 2-3 times in 5 minutes, [it’s] highly likely you’re going to have a strong afternoon.”

📝“It’s like surfing,” he said. “How are the waves? Pretty good, I’ll paddle out, catch a wave, make some money. That’s the stock market for me. Investing, I would not do that. I would not invest in the stock market, period. Too dangerous.”

Metals Update

JJ says that everything that made gold go up is still happening, including the fact that China is still buying.

“Total supply of gold was about 5,000 tons last year, and total demand for gold was about 5,000 tons,” JJ said. “So most of the movement up we’ve had in the last couple of years has been a very marginal imbalance of demand. It’s a really, really tight market.” (As evidenced by the BOE run earlier this year.)

The Oil/Gold Ratio

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The oil/gold ratio is broken “big time,” JJ said. “You could drive your car for a year on an ounce of gold… The ratio is down to like 40-45 barrels.”

Rather than being a statement explicitly about gold though, JJ says “The thing about gold right now is it’s a clear statement on how worthless everything else is.”

Gold Miners

People investing in gold miners “have got the patience of a biblical character,” JJ said. “Nothing harder. I own miners, it’s a really hard trade.”

Why is it so hard? “The reason why miners don’t go up is because they have ben terribly dishonest,” he said. “It’s going to take a long time to live that down. They dilute their stock at all the worst times, they don’t pay you anything…”

Silver and Other Metals

Silver is a great fundamental story,” JJ said, pointing out that there’s silver used in most guided missiles. Add to that, it isn’t a productive industry: “75% of all silver is a byproduct of zinc and copper,” he said. “So the inventories of some of these metals like platinum and silver probably continue to go down.”

💡“I think the whole metals spectrum is probably going to go up one way or another,” JJ said.

And Finally…

One of the hardest things in trading is knowing when to double down. “If you have an opportunity to make a lot of money, you’ve got to try,” JJ said. “So there are times, in the middle of a big move - like we had in crude - where instead of nibbling on it or fiddling with it, you should be ramping. You should be pushing, because if you can get that right, it can be life-changing.”

So helpful to hear this perspective from (he’ll hate us for saying this…!) a markets legend. Even more helpful as he was talking about a trade that didn’t go his way. The willingness of the crew we have on Talking Markets to be open and honest is something we deeply, deeply appreciate.

Have a great rest of your weekend.

Maggie

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Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

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