Chuck Yates Needs A Job

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1:08 Hey everybody, welcome to Chuck Yates needs a job, the podcast in a first. I have decided that I've been failing so poorly that I need a lesson and a special co-host to help coach me through this.

1:20 So Colin McClellan, welcome in as the co-host. It feels like BDE. It does feel like BDE. But even more important than that, when you're failing, you go out and get the biggest, heaviest hitter

1:32 you can. And we've got John Saucer from Mobius. Welcome in, John Thanks, Chuck. Thanks, Colin. Great to be here. Pleasure. So John, tell us a little bit about you background and what does

1:45 Mobius do? I'll just give you a quick background on myself. I've been involved with energy markets and specifically oil markets for more than 30 years. I started doing research for Argus and a Wall

1:57 Street bank, then went into futures and options trading for the bank, worked for a hedge fund. And then as that wound down about seven years ago, was looking for a way to sort of apply all the

2:09 skills I'd learned in a one-stop type of situation, known the guys at Mobius for more than 20 years, reached out to them and started working there. So Mobius is a boutique risk advisory firm. We

2:22 work with folks that have large commodity exposure. That could be a producer who's selling NGLs, crude and natural gas. Could be an industrial customer who has a big power or natural gas

2:32 requirement to heat, steel, pulp, paper, silica, things like that. So we're commodities guys and we provide merchant energy services to people as agent. So we provide them sort of a high level

2:44 of trading, a high level risk management, a high level of marketing that they can bolt on to their shop. And it's a pretty good model in the PE space because a lot of people don't want redundancy.

2:52 They don't want to set up five different marketing teams. So this is a way to market for an entire portfolio or manage risk for a entire portfolio and aggregate that risk so they can see it from the

3:01 top down.

3:03 The thing I find wild is physical market and let's just pick oil. Call it 100 million barrels a day. The financial market is actually 10 times that. I would say at least because they can easily

3:16 measure all the exchange traded derivatives, but it's much more difficult to measure all the bilateral swaps and derivatives that people do directly with the bank. I would say that's a conservative

3:25 estimate, but absolutely. That's always been the case. I think it's also interesting It's interesting statistic about when you think about the futures contract, only about 5 or less ever goes to

3:35 delivery. These contracts are not about accessing the physical. It's the financial utility of them. Who plays in that? Obviously, producers look out 18 months ago. That's a pretty good price.

3:49 I'm locking my price for my barrel. I get that. Who's on the other side of that trade? Well, logically, you would expect to see end-users there, whether they're fleet, airlines, or What we see

4:03 is there's sort of a transactional mismatch. And what I mean is that oil and gas producers are selling forward strips, commodity strips. They're selling a constant amount across the forward curve.

4:14 The end-users aren't as consistent in their hedging. Many cases are not required to do it, like oil and gas producers. And they tend to be more concentrated in the front and kind of lack of a

4:23 better term, batchy. So it doesn't really align well. You get all the producers selling out the curve in strips and you got the end-users buying in the front So that's the roles played by the banks

4:34 and the other traders to sort of fill in the middle there. Take the other side of those trades - 'Cause I mean, the thing that shocks me today is what's oil, 95 bucks a barrel, whatever it is

4:44 today. You look out four years, it's still got a six handle in front. It's still in the '60s. And just that backwardation makes absolutely no sense to me 'cause I don't buy into demand is gonna

4:57 diminish over the next two to three years. And on the supply front, I mean, I hope that cat didn't even hit there. Production quote is what six out of the last eight months or five or seven

5:07 whatever it is and The only explanation I heard from that that made some sense to me is goes Well your natural buyer of barrels out to the future of the airlines and they're kind of a shit show right

5:20 now just coming off of COVID not sure where Demand is but the backwardation is you get out past a couple years. There is no natural buyer No any truth to that well, yeah, and it's not because it's

5:32 not an attractive because you think about it as an airline hedger Buying forward at a discount would be pretty attractive But it's just not their practice to hedge forward they hedge, you know and

5:43 more prompt short-term chunks. So

5:47 I Think the most important thing to realize about the backwardation and because I think there's a lot of misconceptions about the Ford price curve It in no way predicts the future. No one has a

5:56 crystal ball even the market All it does is two, well actually three things. tells you where you can trade the future today, which is pretty fricking powerful if you ask me. I mean, you're trying

6:06 to lock down some sort of deal and you can lock down the next five years of your forward sales. That's a powerful tool. It doesn't tell you where the market's gonna be in five years. It just tells

6:14 you how you can trade five years today. The other thing about the shape of the curve and the backwardation, and this is the part I think that's really important is that it's the shape that's

6:24 important. The shape of the curve is not telling you that crude's gonna be a certain flat price next year All the backwardation tells you is that at whatever price, crude price now is worth 12 bucks

6:34 more than it's worth 12 months from now. That's true at 100, that's true at 60. So the forward curve only tells you the premium or the discount for the prompt in a no way projects forward prices.

6:44 So those forward prices in a tight market, which is what we have demands going up quickly and supply is slow, the back end of the curve comes up to meet the front not the other way around. And I

6:55 think there's that misconception people think, well, that's predicting the future. No, it's just where you can trade the future today By the time we get to the future, it's likely to be very

7:01 different. I love that you brought up that it's not a crystal ball. I put on a tweet the other day that said forward strips or astrology for oil and gas guys - Oh, we have another, I'm trying to

7:09 read the stars - I had a colleague who sent me a photo that said technical analysis was astrology for mail. So I think we're gonna send camp here - But yeah, but that's the thing is if you use the

7:19 forward curve like that in a way, you're treating it that way, but it's not. And like I said, it's very powerful because it's what balances inventory. Like when the market gets gludded, like in

7:30 2015 and 2016, it's the signal that paid people to take those barrels and stick them in tanks or stick them on ships. Just like right now, that premium's telling you if you have a barrel of oil,

7:39 sell it. If you have product, sell it. The market is paying a premium to deliver the barrel now. And it's gonna penalize you to hold onto it or hoard - Yeah, the other thing that I find

7:52 interesting surrounding this whole area and trading is just the amount of credit. that's necessary, 'cause I think the oil contract, what, 25th of each month, it kind of settles - Well, yeah,

8:06 it's a physical sale. So think about this, you're an oil and gas producer. The H-patrolan in here, selling crude all month - By the way, I could not find any of my ancestors wandering through New

8:18 Mexico for me to actually be part of the Yates of New Mexico - Yeah, I'm such a good rich guy. I've always wondered that if there was a connection there Unfortunately not, I'd be so generous with

8:30 charity. If they're adopting, I'm still useful. I've got years left, because I'm lacking - Yeah, no, I not lost much. Were we on that question -

8:41 I was like, we're going through the Yates - I'm wandering over here about being rich - That's a fun

8:44 wonder though - But just the amount of credit that's necessary to do all this - So credit is on both sides - So

8:51 from a credit perspective, you're under as wise the case. So if you think about it, if you're producing crude oil. And let's say someone's hauling it away by truck. They're going to haul away all

9:02 this month and 20 days of next month before they pay you for the first barrel of this month. So you basically have 50 days exposure times volume, times price. That's a big credit ask. As a small

9:12 producer, you're effectively extending a lot of credit to companies. So it's really important to understand that. The other thing though, from the credit side is, you know, flipping around,

9:23 your counterparts are worried about your credit Hey, they're buying the crude from you, so they're paying you, but they're more thinking about, is he going to be there like 10 years down the road?

9:31 If you have a long-term contract, you know, transportation like that. So they spend a lot of time during the onboarding process, focused on credit because everybody's got that pain point on both

9:43 sides. And so it really drives a lot of the work in the onboarding process of trading. It drives some of the fills that people get. And when I mean, when you do a trade on behalf of a client or

9:54 counterparty, Each person has a different credit profile. So when you trade with a bank, their fill may be different based on what the bank's perceived credit charges with your counterparty. So

10:05 it's like the markets here, but each company's credit will dictate where their fill is with a bank based on how the bank views them based on the onboarding process. So it's a key part of the trade

10:16 in terms of the actual price too - So calling back when we'd have portfolio companies, there was actually a lot in the way of, you borrow money from commercial bank and then whoever you're trading

10:33 with picks somebody, BP, not to pick a name, but any of them, any of them shall, whoever is on the other side, you always had to figure out the collateral agreement so that the bank and your

10:45 potential trader is

10:48 sharing that collateral. I mean, it was just a massive undertaking when it came to credit. I also would point out that one of the reasons that the oil industry as a whole tends to gravitate towards

10:59 the bilateral swaps for risk management versus futures and option is the posting of collateral because the futures and options, you'd have to post collateral daily based on your margin requirements

11:09 where with the bilateral, obviously that's built into the transaction.

11:14 Can you explain what that means, a bilateral swap? So a bilateral swap means - That's no idea what that means. Yeah, I'm sorry. So when you're trading futures and options, you're effectively

11:21 trading on exchange Your counterpart is to exchange for everybody. The buyer faces the exchange, the seller faces the exchange. If you do a bilateral, it's just two people. Well, I can do a

11:30 bilateral trade with Chuck. I can do a bilateral trade with you. I can do a bilateral trade with the bank. So it's just a bilateral relationship. So the reason people do bilateral is that the

11:39 banks and the counterparties will bake in that collateral and that credit into the trade costs so people don't have to post because people don't want to have to post LCs or cash to back up their

11:51 hedges.

11:54 capital can be better used elsewhere. So the bilateral in a way is a means to access a credit back solution. So you don't have to post call, how are using features and options. So if, if bank X

12:06 was loaning us the money, generally half the time we rounded, we wound up just doing a bilateral with the bank because they already had the credit. So they know we're going to produce the barrel

12:18 they have slight lines to it. Yeah, exactly. And they get to walk in and say, by the way, that stuff's mine if we don't pay them back. So Yeah. And one thing to do is you can build out other

12:27 counterparts, you know, but you know, your bank's going to be in that group amongst the others, right? Right. Yeah. And the counterparts are going to be more enthusiastic if they to get some

12:36 sort of sightline to the underlying asset. Yeah, I mean, old school back in the day, what would happen is your bank would quote you, okay, you want to lock in at 75 barrel and you're like, man,

12:48 that's a good price. Okay, we'll take it. I'm sorry, it's 62.

12:52 And you're like, what? Hold on, that changed. I don't know what we have your collateral, you know? And so it was never that bad. Yeah. But banks made, I mean, 25 cents, 50 cents, 75 cents

13:03 of trade. And then the sharing of the collateral trading partners popped up and kind of kept the banks honest. But that was a big development during the private equity days. Yeah. So John, tell

13:17 me like in the life of a trader and guess to take all of these things into consideration, credit capacity, agency risk with all of these different counter parties. Like in a event like Yuri, you

13:31 know, you have a extremely volatile energy market. How do those things work? Because it sounds like it's still kind of like a manual process of spending a lot of time on phones with other parties

13:44 trying to figure out like, hey, what do you got? Here's what I got Is that a correct assumption of how trading still works? on phones trying to see what everyone has - Well, the only difference

13:56 would be maybe you're on IM, but yeah, in many ways it is still the same. In many ways the mechanics are trading, we may have some technological devices, but talking to people and closing the

14:07 deal and how everything is reconciled every month is done the same way it's been done for 35, 40 years - That's crazy to me - So you got better technology and you're using it on the edges, but it

14:17 hasn't been integrated into the guts - Yeah, fundamentally - Yeah, people are looking at it obviously - Yeah, it's been a long time coming - Yeah - It is an issue because again, people spend a lot

14:28 of time on stuff that doesn't create a lot of economic value, just supporting making sure all the paperwork's done so that the credit department's okay. With your trade or with your counterparty -

14:38 Yeah, and I know that you spend a lot of time, I know if you know, if you talk to the Mobius, about Bitcoin or what's happening in the space and blockchain,

14:52 a lot of time thinking about that in terms of how that affects. Because I know like Kurt Coburn is over here at Eliax, working on a platform for instant settlement on commodities trading. Have you

15:05 spent any time thinking about that and how that improves that process? Yes. And since you mentioned the ISDA, because the one thing you need is - so blockchain has brought some tools to the

15:16 industry. They're going to help in this regard. And what we've seen is that those tools would be used in the supply, saying with acquisition of stuff at the lease for drilling and development and

15:26 things like that.

15:28 I think we'll be seeing it in the ESEAN carbon counting space as well. We're going to need those tools. But I think one area that we could really use those tools is in this trading space. Because

15:37 as I said, reconciliation hasn't changed in 40 years. People are still being paid 25 days after the end of the month, or gas 20 days. And

15:47 blockchain specifically, smart contracts finance, DeFi, does create some opportunity here because I'll start with crude because I think crude is more simple. In a reconciled crude, you just need

15:60 price and volume. So the thought process is some of these tools would allow us to reconcile that omecent real time. That's down the road. But even right now, we could certainly reconcile stuff in

16:11 the last day of the month with all the data that we have if the data was just applied in ways that we know we can now apply it. If we keep going the same, we're always going to do it. It's never

16:19 going to change But the point being is there's no reason why a smart contract can't pay a deferred ledger for midstream or deferred ledger for pricing service and calculate that price at 1201 on the

16:30 last day of the month. My point is that people say, Well, yeah, it'll shorten the things. It won't create a lot of efficiencies from a human thing, but eliminating a lot of the credit pain will

16:40 eliminate a lot of those processes now. And when you go back to the trader, I mean, a trader has all these trading opportunities, but some of those opportunities and optionality goes away if his

16:48 credit department says, No So my point is it's gonna help the trader. It's gonna help the people reconciling. I mean, people say, well, won't eliminate jobs. No, I think what it does is

16:57 transform jobs because you got people doing what I consider dead-end work on reconciliation, you can do much more commercial stuff going forward with their revenue accounting skills. So yes, we're

17:08 focusing on the very narrow area. What I would say is one thing that's really important about

17:14 commodities trade, futures contracts, and this particular application is fungibility and consistency. So you brought up IsDIS That's a very standardized contract that everyone agrees to, which is

17:24 gonna help facilitate the transformation into the blockchain 'cause you need that consistency. Likewise in the natural gas space, you have NASB's. So everyone's already signed on to that

17:34 unified contract. So gas may be more complicated because you can trade it daily and monthly, and crude you can only trade monthly. But from a contractual and a fungibility and the fact that it's

17:45 all C1, it's all the same commodity Crude, every crude is different It's um every crude contract is different. People use different terms and conditions. So in crude, I can see a pretty good

17:56 pathway to solving this, maybe in the financial space first, but it's gonna take some time on the crude space because crude is also dictated to by what goes on downstream, division orders, paying

18:09 royalties and things like that, that has to be incorporated too for it to work. So as it turns out, as we move through time, we will have to see much like you do with futures, contract and swaps,

18:21 you have to standardize around a certain thing, you gotta get there. And I think we've kind of got there a little bit more quickly in gas because they've done this process before and standardized

18:30 everything. crude is still a common attraction. There's a lot of people motivated to do it for efficiency reasons, but you can also understand there's a lot of people, traders and other people who

18:38 recognize that that will eliminate some of the inefficiencies and create transparencies that take some of their trading opportunities away. So you gotta get everyone to buy in or at least the people

18:47 that matter to buy in enough people to, you know. I'll vote the ones that don't. 'Cause there's always gonna be, you know, pluses and minuses - Yeah, I mean, if you look at the evolution of

18:58 markets, I mean, in Iran, essentially creating natural gas markets and the 90s and it sounds like, you know, things really kind of still work the same way as they did back then.

19:12 With blockchain

19:14 and instant settlement, I mean, you brought it up. It's like it actually opens up opportunities that might not have existed because you didn't have credit capacity to execute on that trade. And I

19:24 understand what you're saying that there's some people that may be incentivized not to have technology like that because it'll actually, you know, take opportunities away. But - Or they perceive

19:32 that. Whether it's sure not, if they perceive that, they're gonna push back - Yeah. So I guess my thing is it seems like it'd be, seems like it'd be a benefit to everyone in the space to open up

19:43 more - Oh, unequivocally, as I would say is, you know, our role is we wanna accelerate the process. But we recognize, and we recognize this is not a if, but a when, but we also recognize that

19:54 the pathways for different commodities are going to be different. But this is something that's going to be universally accepted across the entire commodity space, not just the interspace. And the

20:02 other thing I want to point out to is I find it difficult to believe that we would implement these tools on the supply chain side in the carbon ESG part of the company and exclude the revenue

20:13 generation part. That's just my hunch I think those people that group will be forced into it eventually because it will be company wide at some point. Yeah, I don't know if you were there Chuck,

20:25 but Energy Tech Night to the ninth or is a company that presented a block apps and they have a product called Carbon Trace. And it's for supply chain application used to track emissions for ESG

20:39 reporting And I thought that was a super interesting application and so back to your point, like you see it in supply chain logistics. You see it in ESG reporting makes sense that you would see it.

20:49 over there too, but

20:52 we've had some blockchain applications within oil and gas. I mean, Total was doing commodity trades a couple of years ago if they'd started doing it using blockchain. So I thought it was really

21:05 interesting to see how quick oil and gas was adopting blockchain. I mean, there was actually a lot of excitement around it around 2017 and 2018, which no oil and gas industry is usually kind of

21:16 slow to adopt - Well, people were investing, and they recognized it was something that had a lot of potential - Yeah - And I think they started again, they were looking at like just examples of,

21:25 you know, speeding up the payment the services and of better deal in a lot a cycle to get

21:30 stuff that was being delivered on the treadmill every day - Nothing more annoying than oil and gas than that 90 to 120 day payments - Yeah, so I don't really have anything to complain about. Oh my

21:40 five, 20, 25 days. So - Well, but, you know, I think what's gonna happen too is you're gonna see investor demand, stakeholder demand, This isn't crude oil. This is natural gas and power type

21:53 stuff. But when Urcott had its blow up, I've got a really good friend that's a trader. He was at the office for about nine days straight, sleeping under his desk, literally on the phone with CEOs

22:05 of trading partners saying, hey, what's your book look like right now? Because there's no real-time information for that. And you don't know if somebody's short natural gas going into that, short

22:18 power going into that. And he said he made three decisions to stop trading with folks based almost on gut. Just didn't feel comfortable with however it shook out. And wound up potentially being the

22:33 right call and saving money. But I mean, all you need is an implosion. And your shareholders go, you're not on the blockchain settling every day. And I think it's almost gonna be required. I

22:45 mean, you're - They'll expect of you earlier than you may even be ready, but you're right, that expect or requirement will be there - Yeah, we actually, when I was at Cane Anderson, we were the

22:56 largest shareholder for a long time with Plains All-American. And part of the reason we did that was they had their trading debacle kind of in the late '90s where rogue trader was entering

23:09 into trades and putting the trades literally in a drawer. You know, and wake up at some point and you don't have cash in the bank, you're like, whoa, what happened? And so, I mean, from a

23:21 management tool perspective too, that's always the problem running a trading organization as the rogue trader - You need transparency, and this has gotta help that - Yeah - In terms of seeing your

23:34 list - And that's always been the promise of blockchain is transparency, right - You're just bringing the information to everybody uniformly. I mean, we have a big thing in movies about universal

23:43 data truth 'cause we see a lot of people. We're working off different versions, the same spread, a different version of the spreadsheet. And then you give them a week, it's like, hey, we all

23:49 need to be working on the same universal data truth. And the way blockchains that on a global basis, you know, you know, everyone's being the same deferred. I mean, the tribute ledgers, they're

23:58 seeing corrections, revisions, and true ups at the same time, it eliminates a lot of this shuffle we have every month - So

24:16 how do you think this rolls out, if you've got to look into your crystal ball and say, how do we wind up everyone trading on that? Is it a proprietary software model? Is it gonna be an exchange

24:21 that leads with it? How do you think it rolls out - Well, I

24:29 think that there'll be a number of people that sort of come to the fore who will sort of be, you know, leading, you know, in terms of managing and running the blockchain. And some people

24:39 described to me, I thought there was a good way of sort of the operating system and that people write the smart contracts or the apps. So I don't know, it's early days. And

24:53 we're talking a number of people too, because there's people in Europe working on it, there's people here working on it, and in the old trade, you gotta kind of be cognizant of both. So how I see

25:03 it sort of coming to pass is, I do think that you'll see the inregent, the natural gas, I think you'll see the inregent financials. And the reason I think you'll see that is A, because of the

25:12 simplicity, and it's something what we're seeing in other markets. And in capital markets, the one area that these contracts and the blockchain is really taking off is in the repo market, because

25:20 that's a repetitive trade you have to do every day that's really pretty straightforward. It's very mechanical. So instead of having human beings, processes now, that was one of the first things in

25:29 people like UBS and some of the other big banks are already doing it. So selectively, we find areas that we can use it. I just think that over time that spreads as we are able to deal with the

25:38 complexity and idiosyncrasies and what makes like crude esoteric We'll figure it out, but sure, things will be figured out first - So the other, I'm gonna make you continue to look into your

25:50 crystal ball and put you in the spot on that. Do it ultimately, is there a separate blockchain that is created that's a centralized network, but it's blockchain? Or do you ultimately think that

26:05 some sort of protocol for this sits on top of the Bitcoin network? Do we ultimately wind up running all the trades through the

26:18 Bitcoin network? Any idea there - Well, no, but there's a different question. I mean, I haven't really been thinking about the way I've been thinking more of the blockchain, but the thing about

26:24 not the Bitcoin, but the coins or tokens in general, there is a lot of utility and just broader reconciliation for a lot of those coins and tokens. So I'm not talking about that, but that is there

26:35 - Yeah, no - I mean, that'll speed things up because much like money markets and just, It'll speed things up, but.

26:44 I mean, to add on to that, you know, in applications like this, it's more about adoption from everyone in the space - Or buying adoption, what do you wanna call it, right - Yeah, it really

26:55 doesn't even matter about the, like to be honest, you know, sometimes you don't even need a blockchain, like you just need a centralized database and someone that's holding that and it's the

27:07 source of truth, right - And there's some companies that have that now, the feel that they're close without even having blockchain - Yeah, that's what I'm saying Like you technically could solve

27:15 this without blockchain, but with having multiple independent parties and transactions, you know, you probably need some form of a blockchain application and don't necessarily know if it matters

27:27 what blockchain it's on - I'm not so sure it does, it's like Chevy Ford Dodge - Yeah - It's the driver or the application - Yeah, it's who is the players in the system adopted and is using.

27:42 You know, on that question, you know, I know you guys at Mobius, not well, but I know that you know, you guys do hedging and risk mitigation brought it up that you guys did this for private

27:53 equity, backed oil and gas companies. How do you all think about, you know, Chuck and I sit here to talk about Bitcoin mining a lot. That's why we were asking the question because him and I are

28:03 going back and forth on, you know, the Bitcoin protocol compared to other blockchains But you know, from a trader's perspective,

28:13 what is the trading on in hedging on Bitcoin futures look like because as Chuck and I look at it, it's like, you know, you have six months of liquidity in the futures market. How do you think that

28:24 develops over time as a, as, I mean, well, I mean, you're kind of agnostic to commodities, right? I mean, commodities, commodities. I would say that I think it's amazing that you've already

28:36 got some forward liquidity to lean into because I remember with crude, I mean for years. We had 12 months. I mean, we got to 24, 36 is like how allude it. Now I'm trading 20, 30. So walk

28:48 before you run - Yeah, but let's talk about that because I have no knowledge about that. Like all I know is we've got six months of Bitcoin futures - So that's pretty good - I have no idea how other

28:57 commodities, future markets, progress and evolved over time. Like sounds like oil, you know, you started off, like you got 12 months and you guys are - Well, I wanna say even probably before my

29:06 time, you're probably at three to six, but yeah, it's been slowly so now and the curves get further further forward as more people have to use for that - Yeah - And more people will have more use

29:15 for that with Bitcoin too. And it's more people adopt that futures contract. You know, you'll see the up-taking open interest, the up-taking daily volumes and theoretically them extending trade

29:24 further out the curve. What they typically do on these exchanges is they will mark a curve

29:31 as long as there's some trade. So what I mean is that you can have some pretty obscure derivatives, whether it's a derivative on a Bitcoin or greater than on some oil spread. It's not widely traded,

29:41 but as long as it's traded at all, they are obligated to make a mark or settlement for that price across the curves, long as there's any open interest. So it's really quite useful because even a

29:52 low volume of trade, if it's spread out across six months or 12 months, creates the obligation exchange to mark that curve every day, which we want, because we want the transparency. We have to

30:03 be realistic, because if there's no trade, it's still nebulous, but you can lean into it because it is a third party independent mark. It's not your opinion, your opinion or my opinion.

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31:01 It's really interesting because part of, correct me where I'm wrong, but part of the reason oil developed longer term is you had a natural subset of sellers and a natural subset of buyers that

31:16 practically speaking needed certainty at points into the future. Think about transportation agreements. Those are frequently five, seven, 10, 12, 15 years long. That's a longer tenor. That

31:28 makes you think about longer-term. That's absolutely right. But that's both sides. That's producer seller or the transporter or the buyer. Yeah. What's cool about hearing

31:41 that, talking about historical development of futures markets, is it sounds like it's market-driven, you're saying, it's like you had two sides of a market that needed this medium of exchange.

31:49 And me coming in here, I'm like, Oh, well, that market's always just existed. It's always been there for oil and gas. But it's not the case. It's developed over time. And you've got more

31:58 liquidity over a longer tenure just because the market demanded it. I mean, another good example, NGLs, which is big You know, ethane, propane, butane, all those.

32:11 For most of my career, you had to hedge those, dirty hedge those. you had to use some sort of basket of commodities or per-cent of crude. Yeah, or some sort of crude optionalities. But I mean.

32:22 Well, a quick story. One of the best deals I ever did in my life was a company called Stallion. And basically, we were up in the panhandle of Texas producing the brown dolomite. And we had this

32:38 basically bunch of NGLs coming out of the ground. And back then, you didn't have an NGL market And so we did all this analysis that showed that the NGLs basically sold for 80 of crude. So we locked

32:51 in all of our hedges based on 80 of crude. And the market went topsy-turvy. And they didn't trade at 80 of

33:03 NGLs. They moved in such a way that we made a fortune. And we sold the company. We made three and a half times our money in 18 months And it wasn't until the closing dinner. that the CFO sat down

33:17 with a sheet of paper and explained to me, you do realize you just took a long bet on NGOs and you won, right? I was kind of like, no, I didn't. So, yeah, that was real. Yeah, that was real.

33:28 Little, you know, live with the sword, dive of the sword. I'm sorry. We've seen it the other way too. I can tell you during the difficult times in 2015, 2016, 2017, I don't know if you

33:38 remember this because everyone was focused on the bear part, but in the spring of 15 and in the spring of 16, we had some pretty material rebounds in price. Now they were temporary, you know, a

33:48 bounce in a bear market, but a lot of people got run over because, you know, their dirty hedge or their crude swap, you know, was pricing with crude as it went up. And the angels were just

33:57 hanging because they're not crude. Yeah. So that spread created the exact opposite. So the reason I bring that up is now we can trade the individual components as swaps with the banks like any

34:07 other So, you know, I can trade ethane, I can trade, you know, butane, propane, I see butane, C5 individually.

34:15 example and you've got a basket of NGLs and half of its ethane, you may choose not to hedge the ethane because it's not worth that much and focus on hedging this up that's more tied to crude. But

34:26 all these tools are now available. These were not available seven years ago, certainly not 20 years ago. And even there, the tenor on these NGLs, I can do a year, maybe two, I get out to three

34:37 years forward, it gets really squirrely. So that's how it evolves. Now, if we have this conversation two years from now, we'll be trading NGL three years forward. But that's how it comes about.

34:47 It just builds up every time. So what happens on Bitcoin developing? Because at this point, I don't know that there's a natural selling group and a natural buying group that needs a market. It

35:01 seems like it's purely speculating on both sides. And maybe that's big enough to actually create a forward market. I don't know. Yeah. I mean, I don't know. I guess people look at it as a store

35:11 value and I know people look at Bitcoin a little bit different than the other ones because of the of work, the fact that the originators or the founders are out of the picture now. It does perform

35:22 or behave much more like a virtual commodity. It has been behaving as a store of value. Some of the other ones, and I'm a big fan of Ethereum because of the smart contracts and the other Ethereum

35:32 derivatives, but in many ways they perform and act like a security, in a sense, like a high-tech security because they're trying to provide a service, a layer, a token, something to participate

35:44 and improve the system. There's thousands of them. At some point there will be winners and losers, but

35:50 it's not currency and it's not really a commodity. I saw an interesting comment about a week or so ago from a gentleman who's at a tech company. I thought he really nailed it succinctly. It's like

36:03 Bitcoin specifically is the first one you really look at where you can own an asset, a virtual asset, and feel the value and trade the value.

36:14 the Bitcoin from the other ones because of the proof of work and all that. So.

36:19 Yeah, the, you're hitting the nail on the head. I mean, let me get all my soapbox here for a minute, but. The value of Bitcoin is in the net is in the network. And I had someone ask a day.

36:30 Yeah. It's like, Hey, why proof of work over proof of state is because that's where the value lies within Bitcoin. And you can talk about as Bitcoin, a cryptocurrency. Is it a store of value?

36:41 It's like really to me, it doesn't matter because it's the infrastructure for the next evolution of the internet. It's the Bitcoin protocol and then we start having, you know, it's later one. And

36:48 you can later to applications on top of that, like Bitcoin, like new network, things of that nature, you go to Ethereum. Um, you know, Ethereum is more, it's kind of software as a service,

36:59 right? In terms of these smart contracts, it's also centralized. It has a team behind it. It's not a truly. The team. And so when you saw the team managing, that's what makes it feel a bit more

37:09 security for me. Yeah. The C and that's what I love that you brought up that a Bitcoin founders, I was just talking about that. Thank you very much. He's gone. Yeah. That's one of the most

37:17 fascinating things is that Satoshi's gone. No one knows anything about it and it's a truly decentralized application protocol. That's a good way of describing it. That's running truly decentralized.

37:27 Yeah. Yeah. And so that's always, I think that's kind of been misleading for the blockchain industry historically, is that we talk about decentralization, but it's very much centralized outside

37:41 of Bitcoin And that's kind of going back to Chuck's point. That's why he was asking that question. It's like, hey, are these applications that we build for trading or to check carbon or supply

37:54 logistics? Are these built on central platforms or are they layered on top of the Bitcoin protocol? But yeah, I mean, that's

38:04 when I look at Bitcoin, I talk about it as being like I brought up like, oh, it's a commodity. It kind of acts like that in the futures market But really, it's like you're buying a piece of And

38:15 that's where the values are. But it just feels more tangible than the other ones because you're buying something. You're not buying a strategy or a management team. Yeah. And trust me, if you're

38:24 around in the 2016-2017 ICO days, I bought tokens that I still haven't got distributed in 2017. I'm still waiting on them. I just straight up got scammed and I was telling Chuck, I was like, I

38:36 saw billions of dollars invested in the space and no products shipped. I mean, you're buying a story, buying a team.

38:44 People saying like, oh, we're going to build a shipping logistics platform that's going to work on the blockchain, raise 30 million and boom, it's just gone. Nothing there. So that's also

38:55 another thing too. But so I was interested with like total and some of these bigger oil companies, bigger internationals that started trading because it didn't really matter what the protocol was.

39:04 They built a platform and then said, hey, we're going to adopt this and we're going to use that. And ultimately, that's what matters is whatever protocol it's adopted as the one that's used. Well,

39:13 I know they've got the VAC group over there, and I suspect that, you know, to tell us part of that along with some of the big merchants, Largas, some of the other people. They've got a lot of

39:20 heavy hitters, but, I mean, the other thing I wonder with some of these larger groups is, yeah, they're all in the business, but they all have very divergent views and business models. It's

39:30 like, how do you get to where you need to be when everyone's running almost in different directions - In different directions - Yeah, and it's different allegiances. I mean, you could see where

39:39 distributed ledgers can really help the data providers in terms of market intel, but also properly monetizing their asset. At the same time, the Ocra is like, I don't like that, that just means

39:48 I'm paying more. So it's like, yeah, that's why it works. Transparency cuts both ways -

39:55 For sure. Yeah, absolutely. That transparency's better for some than others, no doubt - But I find it super exciting because, and I like to use the word accelerant, because it's like, we need

40:06 to get here more rapidly - Yeah - 'Cause it seems like, A in a way, ESG. carbon and in a way, the pandemic created this opportunity for people to focus on it. But I want people to, we need to

40:18 fall through because sometimes you get the easy low hanging fruit. But now the task becomes more difficult as we deal with the more specialized commodities, the ones a little more idiosyncratic like

40:26 crude versus natural gas, it can still be done. We got a lot of smart people working on it. I'd say we, I'm not talking about Moga saying in our industry here in Houston, Texas. Yeah. I mean,

40:35 this is a real, this town's leading the way in many regards Yeah, super bullish on Houston for many different reasons and aspects. But I agree with you on a present there. I think that one thing

40:47 that's really keeping, you know, for years, people have said institutional capitals come into Bitcoin. It's coming to Bitcoin. And you started to see some of those dominoes fall. What was it?

40:57 Texas firefighters pension. Is that? Yeah, I think it was the Houston firefighters. Yeah. You know, they put, yeah, they bought Bitcoin a few months back and you start seen this but. So the

41:10 fed today actually set out loud that maybe they should have. some crypto in their balance sheet - Oh really - No one laughed or said - Yeah - They were rolling - Yeah. That's all that hit line down.

41:20 It's like what - There's whole conspiracy theories that the CIA created Bitcoin - Oh really - People think the feds already hold Bitcoin on their balance sheet. Have to give that a different show.

41:31 Yeah, we'll be our conspiracy - I wish that were true. I don't have that as level of expectations -

41:37 But I think like one thing that's really been a barrier is how it's treated as a financial product, how it's hedged. And that's really been a main barrier. And to hear you talk, it's like, hey,

41:50 you got six months, like that's already a great start. And have this conversation seven years from now could have three months of liquidity at that point - Yeah, I mean, I'll just take it. So

42:02 visualize this a couple years from now, you have a four curve in Bitcoin, that's three or four years short, maybe longer You may have some other curves and other coins as a relationship to Bitcoin.

42:11 However, people trade this. You know, spreads can be as a ratio, a percentage or, you know, fix things. So the relationships will be traded as well. And that's the way it works in oil and

42:21 alcomones. Yeah. Trade between the grades, different rates of copper, different grades of crypto. Yeah. So we've had questions about correlation between other crypto currencies to Bitcoin. So

42:33 I've done, we've done a, we do a little bit of work on crypto pairs. And, um, and we run through our stuff. And it is very interesting. The thing is, I mean, there's not a long history. Also,

42:44 we've already learned that there's not really normal distribution commodities are pretty abnormal. So I would assume that the distributions and this, when we look at it, maybe abnormal, which is

42:52 fascinating, which means we need to get to it. But I think it's still early days, but there's something we're looking at. Cause it's got to happen because going back to kind of the question of a

43:01 market is, I mean, I think I can talk for you too, Colin. We actually think Texas is going to be Bitcoin mining capital world. we have this running thing we talk about where, if you think

43:16 through what makes a good Bitcoin miner, all these different check marks, like the price of your power contract, the ability to run off renewables, with need be off-grid, et cetera, go through

43:27 all that - Stranding ass, Jack - Yeah, no exactly - Go right regulatory - Right, right - Check, check, yeah. So, you know, the acreage map for Bitcoin mining looks a lot like the acreage map

43:39 for shale, it's West Texas So we're gonna have a lot out there. So you're gonna have producers of Bitcoin that are gonna wanna monetize future Bitcoins 'cause that comes back to cost of capital type

43:53 issues, allows me to borrow more money, whatever the case may be. And it's gonna be interesting to see how the buyers of the other side develop on that. Is it pure just monetary speculators or to

44:06 Collins Point people that are starting to use network is infrastructure and running things so that you want to be on the other side of that trade. Yeah, no, I think a little bit of both.

44:17 Absolutely. I will say that I agree with you. I mean, Texas, we had obviously years of a lot of flaring and a lot of shiny gas. And even years before that, I mean, gas and gels were treated

44:28 more of a nuisance rather than a lot of economic value. You moved them so you could get it accrued. But I do think, you know, people look at the gas a lot differently now. And, you know, we're

44:38 saying some of the mining being done, not just in the permeability, but like in the block and places like that, because the one thing that really sort of prompts people is isolation. So isolated

44:48 areas work really well because you're never going to build a pipe to move those molecules. So your only solution is something on the ground locally. They are to consume that. Bitcoin is a lot

44:58 obvious. I mean, you can do other stuff too, but Bitcoin is a third party bolt on that can show up today. And we're seeing people do it. And what we've seen some people do on trial runs too,

45:11 where they don't build out the infrastructure themselves. They just do a third party for a year to see how that location works - Yeah - And it works pretty well - Yeah - 'Cause it's easy to improve

45:21 on zero - Per per

45:24 per per per per per per per per per per per per - I mean, that's a little more - That's a little more - A little more. Yeah, without a doubt. Yeah, and I think that's - So by the way, in some of

45:31 those places, it's a negative. In some of those places, we have, I mean, we've paid to have in jails and gas. You know, when the market's a certain way, it goes the other side. So it's worse

45:40 than zero - Yeah, that's what, yeah. I mean, sometimes we have negative differentials, right? Which is - It's like you called waste managers to come haul the stuff away. You got a big bill - I

45:49 mean, you know, at Caine, a lot of what we were doing were early stage assets. We'd go drill the first horizontal well in a county, you know, be the first to apply a modern frack in certain

45:59 areas. And what would happen is you drill a big well and the existing infrastructure inevitably was old and couldn't handle the volumes and the pressure. new well. And so you'd sit there and we

46:13 always thought we could drill two wells and figure it out. You can never drill two wells and figure it out. You're lucky if you figure it out, but 10 wells. But at call it five to seven wells,

46:23 okay, maybe this works. We got to build pipe there. It's another 10 or 15 million bucks. And if if you're trying to keep your test budget to 25, 30, 35 million dollars, that's a big part of it

46:35 to go build a pipeline You're just seeing a big asset that you may or may not have long term use for. Yeah. It doesn't have a lot of salvage value if the play doesn't work. I'm just saying, if

46:45 you're not there, it's got no value. It's rusty metal in the ground. Yeah. I would love to have had the tool of Bitcoin mining to put at each one of our well sites when we would drill our initial

46:56 wells to kind of solve the regulatory environment of, hey, you can't flare for more than 90 days or whatever the case may be Yeah. I also am trying to get people producers in our house to think

47:07 more about. So obviously Bitcoin mining is a solution for standard gas, but anyway, you can use more of your commodity produced at the lease site so that you're not shipping it into the midstream

47:20 vortex where, I mean, think about it like permeating your shipping and just the Gulf Coast by the time you pay on the transportation, fractionation, all the fees, you get like two cents. So if

47:30 you could figure out a way to use it locally, something, my thought process, there needs to be a lot more stuff at the Crane, Midland orla, wink into the line so that we can use this stuff out

47:40 there because shipping in gills all the way to the Gulf Coast

47:45 or two cents in that bag - That's what I saw with like Bitcoin - Doesn't seem like a good economic value if you convert it locally to anything else - Right - So I've always thought about Bitcoin

47:53 mining was that you're actually shortening up the process, right? You're bringing the downstream activity straight to the wellhead and bypassing midstream, you're bypassing the crackers of the

48:03 refineries and able to generate. product. You're bypassing so many people on the financial side too. I mean, it's just bypassing everyone. And I hate to say this for free to use it against us.

48:16 But quite frankly, ESG emissions type stuff, you can keep stuff out of a pipeline and keep it local. Well, that's another reason we're thinking about it, because people have recognized that some

48:27 of the heaviest emissions are on that midstream transportation part too. So absolutely. And just even without ESG, does it make sense to ship an NGO molecule from the premium to the Gulf Coast to

48:40 make two cents? Yeah, that's a lot of power to energy fuel time effort people for nothing. Yeah. Maybe slightly better than burning it in a little pile. Not much. So my point is if you could

48:54 burn a little pile, make something there. Power, Bitcoin, lease, you'll I mean, think outside the box Yeah, no, it's really I mean, it goes back to skid day solution. Fly in something, drop

49:05 it. And they drop these good base fuels plants in Nigeria because it's like a little mini refineries like come up with a engineering solution. Yes for more localized use of fuel that'll supplement

49:21 the Bitcoin and it'll achieve what we're trying to do is shipping. I mean again, that's an unnecessary shipment if you're making two cents. Yeah it's your only choice now. I'm saying it in the

49:33 future if you had a local use for it, you would absolutely use it. Yeah and the interesting thing. And you can sell it cheaply to someone locally who wanted to buy it. Right. Because the net back

49:44 of winning all that transportation. And your ESG score will be like, well, you know, we were talking about this today and I'm kind of making up these numbers, but I think there's 35 gigawatts of

49:55 generating capacity out in West Texas And I think there's 12 gigs of of

50:05 takeaway capacity - Takeaway capacity from there. And to the extent you keep building more out in West Texas, whether it's solar or wind or whatever the case may be, if you have Bitcoin to be able

50:19 to justify it, the next step is, well, why don't we put a manufacturing plant there - That's there, yeah - You know? And it goes even beyond just Bitcoin mining. You're gonna have cities pop up

50:32 around - That's kind of a way I'm thinking too. And I was thinking about up in the panhandle when you drive by, you know, obviously Texas is the largest wind production state. And we do it right

50:38 because when you go into some of those wind areas and they're like, I know when I was driving up to Zamorilla, you can actually see the regular power plant sitting out there in the middle of the

50:46 field with all the wind mills so they can optimize. So it's that combination of things that really helps. So that's what I'm trying to think. It's like, hey, out in the field, there's a lot of

50:55 stuff you can do. You're talking about Bitcoin mining. You can have a conventional power plant that runs gas next to your wind mill 247, you have this bucket of options to optimize. Yeah. So when

51:06 like it gets windy at 2 am. And gas is, I mean, that power is like negative 30. The Bitcoin shed is like, boom. Right. That's what I just had Mesa solutions on the podcast before this. And we

51:19 were talking about code generation, like they're putting these big natural gas generators next to power plants and helping them supplement power. So like coaching or issue was huge in the night.

51:29 That's how I make near made all his money That's what paid for the Houston, Texas, but that's the concept. So we're taking a concept that we had 30 years ago and just tweaking it. Yeah. But like

51:39 to, you know, add a geothermal company on and they were talking about, yeah, you know, our, our strategy is we make this geothermal power plant, then it's, uh, it's already, uh, co-located

51:50 with a manufacturing plant. And so we're not even, I look at Bitcoin mining as a kind of a manufacturing process, right? You're making Bitcoin, but this can be even more analog. manufacturing

52:01 factories, things of that nature, start to see them kind of come closer to the energy source - Well, if you're adding a geothermal, you're adding in the heat element too, which is what industry

52:09 needs as well. I mean, a lot of the energy goes to making heat. So you've already got the heat, and you've got the power from the planet - I think it's a pretty exciting time - It's a great

52:20 situation to be in. I mean, it's a great opportunity - Well, I think it's exciting time to be in energy because there's so much - In this day in particular - Yeah, there's just so much opportunity

52:30 like this that are being enabled by things like Bitcoin mining and renewables and geothermal that just kind of feels like there's just a lot of people, a lot of smart people in different industries

52:40 just running 100 miles an hour in different directions that all kind of lead to the same point. But it's like, why would you not have a windmill or a wind turbine farm with power plant right there

52:53 that's optimized? That's almost like you're making this mini grid - You're making both things better - Yeah. I'll take it one step further. It's amazing time to be in energy. It's amazing time to

53:04 be in Texas because we're so big, we've got so much in the way of resources. And so long as we stay in the state, we don't have to mess with the FERC - Yeah - And I think that's gonna be kind of

53:18 one of the things if America misses this great opportunity or doesn't maximize - On a national level - On a national level, it's because of the FERC - You know, and I know that we're designed -

53:31 That's the point - The founder's designed us this way to be a republic and to have a lot of competing interests and be slow and plotting. But I mean, the fact that we have all that gas in Appalachia

53:42 and Massachusetts - Won't build a spur - Yeah, 15 to 20 of their power generation is burning fuel oil - Russian fuel - Russian fuel no less. and LNG. So, someone, some day, there's the only

53:55 state that still imports LNG. They have, yeah. They put LNG. And they don't want to hear from us. They've heard from us. Well, that's someone commented on Twitter yesterday. They're like,

54:03 yeah, they just approved a new Nat Gaspeaker plant in Massachusetts. It's insane. As I guess that insane, it's like what's insane is you import all your LNG from Russia and Africa. And yeah, in

54:13 our Jones Act, all the LNG that Texas exports goes to Europe I was like, this is just clown world in terms of our energy efficiency in the US. Yeah. So we actually on the BDE show, I had Jeff

54:28 Davies sit in as co-host and we were talking about it. And I actually, and the FERC just ruled last week, they changed the 23 year rules we had in place about building pipelines. And they added

54:41 things like, you got to consider land owners, you got to consider environmental concerns And a separate ruling that related was you got to consider climate change. in this. And so, you know, the

54:54 opponents of this have said, you're never going to build another pipeline in the United States. I actually think the tweak that makes all of that work is if you just say, you got to consider all

55:06 that, and it's got to be relative to the existing situation. So if you make it better, then you can go ahead and approve it. And right now, it's an absolute standard. So if you cause any sort of

55:17 climate change problem, then they're not going to approve it. But if you could say, we're taking 15 of the heating oil off the market and we're not going to burn that in Massachusetts either. I

55:27 think that should be the standard. Yeah, it should be. I mean, if they correct the behavior and get rid of the Russian fuel, it's substituted with domestic gas. I don't think why shouldn't they

55:35 be remunerated for it? Yeah. Finally. Exactly. We do so in the right thing. Exactly. It's not just one state. I think we're, you know, singly I'm Massachusetts, but it's, you know, pretty

55:47 much everything north of Pennsylvania is problematic in terms of gas. In terms of a lot. the things on the West Coast as well as California - There we go. All right, John, before we go, give us

55:58 one crazy trader story from your career. 'Cause I've always found that traders have the best stories in one way, shape, or form, and change the names to protect the innocent. We don't need to

56:12 dime anyone out, but you gotta have one good one in there - Well, it's not exactly a trader story, but it's a story that I think people may relate to because it was pretty well known at the time,

56:23 and it wasn't directly involving us, but it really had an impact on that particular day. So I don't know if you guys recall back in, I guess about 2006, the whole thing with Amaranth, Brian

56:34 Hunter,

56:36 the Widowmaker trade, the March April trade in natural gas. So some of his background, when I was at the hedge fund, I started working there in 2001, and we traded a lot of natural gas. I was a

56:45 crude guy, thank you. But we traded the Widowmaker big time, all right? really badly in 2000. I won't even tell you what it is. I mean, we're still in business. People say it was money, but

56:57 there's like, man, that hurt. So a couple years later in 2003, we were trading it again, the Widowmaker, the March, April, natural gas spread. We as a group, not me personally, but we'd

57:09 learned our lesson in 2000. So we had a lot more assets in our management. We had a much smaller position, all right? So February rolls around and, oh, it's another. I mean, we just got

57:19 schooled And again, the year ended okay. It was a bigger draw than we wanted, but it was a thing. So at this point, I worked for a gentleman named Anthony Nunziata, who's one of the greatest oil

57:29 traders in Houston history. He was like, you know what? These things are not spreads. You're trading two different commodities. He said, you cannot cheat them like spreads. So we will not trade

57:39 them as spreads. We either not trade them or we'll trade them as outrights. So from that point forward, we were on the sidelines. So in 2006,

57:48 that was the big. Widowmaker year, 'cause that was when it was the battle royale between Amaranth and Brian Hunter and John Arnold, it's in Taurus. And it went on, the spring, the summer, the

58:02 fall. And during the summer, there was another smaller fun run by a guy called the other, Motheroth, that got caught in the crossbar. It was five or 600 million, but it wasn't like some Taurus,

58:11 it wasn't like Amaranth.

58:13 This is where it became very personal. Flash forward in September, I was asked to fly to Singapore and do this big marketing thing for our fun. So I'm like over in Singapore and Hong Kong, okay?

58:23 My buddy and my colleague, Chad Jiminas, who was one of our gas guys, he was asked to go to Switzerland to do the same thing. So we had flown, we're there, we land, we're gonna ready to do our

58:31 big presentation. He's a year up, I'm over here. And it's the day that story broke. No one would talk to us about anything else that entire day. I mean, it was just the fascination level. And

58:44 it turned out to be a big story. Now there's been books have been written about it, But the funny thing was is that A lot of people in the industry watched us unfold for six months. It was like

58:53 they were just, they were with popcorn. Just wait. So that's kind of weird because none of these things sort of bubble up suddenly. This wasn't. This was like this slow moving multi month, just

59:04 like. And the thing is, since we'd already been. Black and better to run over ourselves, not fatally, but enough to respect it. We're just like, wow, watching this. So we didn't lose the

59:15 bunch of money in that thing, but the lessons that we'd learned previously in the tuitions we paid in 2003 saved our ass for lack of a better term, because otherwise we would have had a big position

59:25 on to just like everybody else. Right or wrong, I'm not saying we'd have been right or wrong, but we'd have the risk. So, but there's been so many, I mean, these markets are crazy. I started,

59:36 I'll just tell you, my first day in all markets was April Fool's Day of 1988. I was right out of college. I didn't know anything. I mean, seriously, I'm a UT bracket. they hired me, I'm like,

59:49 that's a miracle. My first day, I sit down, I'm doing oil, like water, more oil, Atlantic basin, pipeline. So I'm figuring this stuff out. My first day I'm watching the news and they're like

59:59 firing French exo-set missiles at tankers and the Persian Gulf and they're Kuwaiti tankers that President Reagan had reflagged as to vessels American preclude that. So I'm like, this is crazy. And

1:00:11 then I look at the screen and by then, and that day the screen was monoco It wasn't like that, it wasn't, you know, it was like, look at the screen. And the price wasn't moving. And I was like,

1:00:22 what is going on? This is huge. This is like World War III. And all the people that have been there, like me said, this is, this happens all the time, old news. And I learned right away, a

1:00:30 diagonal lesson, markets get jaded really quick. What's exciting and important to you? Ah, they learn much quicker than you. So I learned day one that, that's not doesn't matter anymore 'cause

1:00:40 everyone's used to it A more, you know, a boring, marginal news item may have had more impact which was something I'd never seen in my life. And that's like I started in energy markets - That's

1:00:53 great - The other story I tell is that everyone says, How do you become a trader? There's a lot of different ways to do it. There's no one way. Annelies, skates or what have you. But I told

1:01:02 people, I didn't, won't mark a research for 12 years before anybody would trust me with their money. So you gotta pay your dues, but, you know, it's a lot of fun too - As I've always said, I've

1:01:13 told every portfolio company when we would meet about hedging, I say, Whatever I say, just go do the opposite. And I promise I won't gripe, 'cause I've never been right - Yeah, the other thing

1:01:21 about research is you get to research like the stuff we were just talking about with Amazon and stuff and do a deep dive And. I mean, truth is stranger than fiction. And more entertaining - It

1:01:32 always is - Yes it is - Well, John, how do people reach you -

1:01:36 Well, Mobius Risk Group here in Houston, Texas, 5847 San Felipe, we can, you know, again, one thing I wanna say about us is we're in the advisory space. We work on a model non-conflicted,

1:01:50 we're basically your employees. So what we wanna do is basically help people lever up the teams they have with the additional skill sets that we have, so we can work together. We're not about

1:01:58 replacing people, we're about levering up what we've got. Optionality, commodities, people - Yeah, could you never take title to the commodity? You're purely - Yeah, and that's what really

1:02:09 helps us because, so we don't take title, we don't take the other side of the trade, we never touch money. And because we're charging people a known fee, there's no mystery, we don't have to

1:02:18 drive people towards transactions, we're not paid on the bro model. And our fixed retainer is based on complexity, which is actually more fair, because if you're someone who has a lot of crude in

1:02:28 one spot, that's a much easier job than someone who has a little bit of crude in five different basins. So as such. And for some people, we'll do one thing, we may mark their book, we may market

1:02:40 physical molecules, and for some people it's a turnkey solution where we do everything in the emergency space forum

1:02:47 cost effectively and guiltfully as possible. Exactly. Appreciate you coming on. It's been great guys, thank you very much for having me. Pleasure.