ICYMI | Josh Crumb & Keith McCullough: “Anyone In Commodities Saw This Coming"

10/14/21 01:26PM EDT

Dear Hedgeye Nation,

We just hosted nine of the sharpest investing minds on HedgeyeTV for a 3-day bonanza of world-class interviews. During our semiannual Hedgeye Investing Summit, Hedgeye CEO Keith McCullough was joined by Josh Crumb (Founder of Abaxx Tech).

Below is a brief excerpt and transcript from the interview. You can access the entire hour-long interview, as well as the 8 other financial market webcasts, by registering here.


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In this clip from the final day of Hedgeye’s Investing Summit, Hedgeye CEO Keith McCullough and Josh Crumb (Founder of Abaxx Tech), break down the mainstream narrative regarding the latest European energy shock and how that ties into Commodities and current Chinese policies.

“Anyone in the commodity space probably saw it coming,” Crumb exclaims. “But the mainstream narrative has been this nudging toward the energy transition, renewables, and all the rest which really caught the public off guard. . . For the most part this is policy driven, combined with the fact that, frankly, commodity producers have been very good a delivering supply and not great at delivering returns for their investors.”


McCullough: Well, transitory is my least favorite word, I like trending, you know, because I ride trends. I don't have a mining degree from Colorado. You do. You're going to tell me about that. You're going to tell me about the longer term structure that may or may not end the trend. You know, that's what we call a Hedgeye trend or trades trends and longer term tails.

And I think you really live in that longer term tail duration is as I like to define it.

But when we go from where we're at, if you say it's about inventories? So if inventories are at least partly or largely driving the price, where does CapEx and the lack thereof or future CapEx fit in terms of driving or building new inventories that that can that that can be sold?

Crumb: Yeah, and that's exactly the problem. I mean, this shock, particularly that this energy shock in Europe that, you know, I guess anyone in the commodity space probably saw it coming.

Which is why so many, you know, commodity specialists and just, you know, phenomenal returns this year. But, the mainstream narrative has been nudging towards the energy transition, renewables, hydrocarbons are dead, and all the rest.

Which which really caught, you know, generally the public off off guard. And and so I think that the problem is if you look, the fact that we're drawing and just about every commodities inventories are drawing down globally.

And yet, you've never you haven't seen a major new copper mine announcement yet this year, even as is as late as the middle of last year. And I'm old enough to remember a long term offtake agreement that was supposed to, you know, LNG cargo as opposed to going into France that got vetoed on environmental reasons because of fracking and upstream methane emissions.

So for the most part, this is policy policy driven, combined with the fact that frankly commodity producers have been very good at delivering supply and not great at returning and delivering returns for their investors.

So so what we've seen is much more discipline.

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