The Dangerous Game of Modern Economic Warfare with Doomberg

In this episode, the team riffs with Doomberg, a renowned energy analyst, to discuss a range of issues from the global energy landscape to geopolitical tensions and the changing nature of warfare. The conversation also delves into the intricacies of the global natural gas market, the impact of sanctions on Russia, and the potential future of nuclear energy.

Topics Discussed

  • Discussion on the global energy landscape, with a focus on natural gas and its role in the U.S. economy
  • Insights into the geopolitical tensions, particularly the war in Ukraine, and the implications of the fall of the city of Avdiivka
  • Examination of the changing nature of warfare, with a focus on the use of drones and the complexity of modern military conflicts
  • Analysis of the impact of sanctions on Russia, the effectiveness of these measures, and the potential repercussions on the global stage
  • Exploration of the global natural gas market, its future prospects, and the implications for the U.S. economy
  • Discussion on the weaponization of the U.S. dollar and the potential for gold to emerge as a neutral reserve asset
  • Insights into the potential future of nuclear energy, spurred by Amazon’s entrance into the nuclear sector

This episode offers a deep dive into the complexities of the current global landscape, from energy markets to geopolitical conflicts. It provides valuable insights for anyone interested in understanding these dynamics and their implications for the future. The discussion with Doomberg offers a unique perspective, blending energy analysis with geopolitical understanding, making this episode a must-listen for those seeking to navigate the intricacies of the global stage.

This is “ReSolve Riffs” – published on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

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Natural gas, a crucial source of global energy, is currently experiencing a market surplus, contributing to low prices and supporting the strong manufacturing base in the U.S. and Canada. These nations, particularly the U.S., produce significant portions of the world’s natural gas, creating an economic advantage that staves off recession. However, it is important to remember that this abundance isn’t permanent and we may see a shift from glut to shortage. On the geopolitical front, the current state of affairs in Ukraine is alarming. The war strategy deployed by Putin is reminiscent of WWII tactics, and diplomatic failures have led to a tragic loss of lives. The West’s energy policies and sanctions against Russia have proven ineffective, evidencing our underestimation of Putin and Russia’s strength. Russia’s economy is thriving, showing that the assumption of their energy infrastructure’s dependence on Western companies is flawed. The West’s failure to understand the changing nature of warfare, such as the use of drones, and the lack of a unified response from NATO have exacerbated the situation in Ukraine. It’s clear that a more informed and effective approach is needed in dealing with Russia. Furthermore, the sanctions policy is based on flawed assumptions, such as the belief that India, China, and Russia cannot sustain Russian energy. In the realm of finance, the participants have a discussion on the potential of gold as a neutral reserve asset, surpassing U.S. Treasuries. The Shanghai gold exchange and the seizing of Russian reserves have influenced the gold market. The conversation suggests that if the Chinese Communist Party leverages the Shanghai gold exchange, gold could significantly increase in value. The conversation also raises concerns about threats to liberty and free speech, with a particular focus on recent legislation in Canada. Bill C-63 is viewed as a potential tool for political suppression through compelled speech and hate crime allegations. However, there is some optimism in the discussion surrounding nuclear energy, with Amazon’s entrance into the industry viewed as a promising development. In conclusion, the current energy market dynamics, geopolitical tensions, financial trends, and concerns over personal liberties are all interconnected. The abundance of natural gas fuels a strong manufacturing sector but could shift to a shortage. Misjudging Russia’s strength has resulted in ineffective sanctions and a lackluster military response, while flawed assumptions guide monetary policies. The potential of gold as a neutral reserve asset is being explored, and threats to personal liberties are on the rise. These complex topics require a nuanced understanding and strategic decision-making to navigate effectively.

Topic Summaries

1. Impact of natural gas on the global energy market

Natural gas is a significant source of global energy consumption, accounting for 24-25% of primary energy. The current low price of natural gas in the U.S. is contributing to the country’s strong manufacturing base. The U.S. and Canada are major players in energy production, with the U.S. alone producing 25% of the world’s natural gas. This abundance of cheap hydrocarbons is preventing a recession, as the availability of cheap energy is not conducive to an inflationary recession. The U.S. and Canada’s access to ultra cheap hydrocarbons is a major advantage, allowing them to swim in the world’s largest supply of hydrocarbons. This abundance of natural gas is not only beneficial for the economy but also for the manufacturing sector, as it provides a cost-effective energy source. The availability of cheap energy also allows the Federal Reserve to raise interest rates without causing a break in the economy. However, it is important to note that this abundance of natural gas may not be a permanent state, and there may be a future shift from glut to shortage. Despite this, the current state of the natural gas market is contributing to the strength of the U.S. economy and preventing a recession.

2. Analysis of the war in Ukraine

The war in Ukraine has been analyzed by the Doomberg team, who believe that underestimating Putin and Russia’s role on the global stage is a mistake. They argue that Putin’s war strategy is abhorrent and reminiscent of World War II carpet bombing. The failure of diplomatic negotiations and the resulting hostilities have led to a disastrous outcome. The team emphasizes the need to be cognizant of who we are dealing with when making strategic choices. They also criticize the architects of the West’s energy policy and sanctions against Putin, stating that these policies are ineffective and misguided. The team highlights the importance of understanding the changing nature of warfare, particularly the use of drones. They express concern about the response of NATO and the bureaucratic struggles between different countries. Overall, the analysis of the war in Ukraine reveals the devastating consequences of underestimating Putin and the need for a more effective and informed approach to international conflicts.

3. Ineffectiveness of sanctions and military strategies

The architects of the West’s energy and sanctions policies against Russia are also the architects of the military strategies being employed. These policies have not been successful in achieving their objectives. The assumption that Russian energy infrastructure will collapse without Western companies is flawed. The Russian economy is booming, and Putin’s war machine is superior to NATO’s. The use of sanctions as a tool to weaken Russia has failed, as the Russian economy continues to thrive. Additionally, the military strategies employed by NATO have proven to be ineffective against Putin’s war machine. The assumption that Russian energy infrastructure would collapse without Western companies is flawed, as Russia has found alternative partners in India and China. The architects of these policies have underestimated Putin and Russia’s role on the global stage, to their own peril. The current situation in Ukraine, with the fall of heavily fortified cities like Adiivka, suggests that the momentum in the war has turned in Russia’s favor. The flailing response of NATO and the panic that has set in further highlights the failure of these policies. It is important to recognize the strength of Russia and the leadership of Putin when making strategic choices in dealing with the country. The loss of innocent lives and the devastation caused by the war in Ukraine is a tragic outcome of failed diplomacy. The use of military force by Putin, reminiscent of World War II carpet bombing, is abhorrent and inconsistent with the way the world should work in the 21st century. The response of NATO and the decision on how to proceed is a matter of concern, with different countries having different views on how to handle the situation. The idea of using French troops as cannon fodder in Odessa is seen as a blunder, as it is unlikely to persuade Putin to pause. The ineffectiveness of the sanctions policy is attributed to the flawed assumptions guiding the policy, such as the belief that the combination of India, China, and Russia would be incapable of keeping Russian energy flowing. The strength of the Russian economy and the resilience of its energy infrastructure prove otherwise. The use of frozen assets and the weaponization of the U.S. dollar have also not been successful in achieving their intended goals. The marginal shift towards bilateral trades between BRICS countries and non-aligned powers is a sign of the changing global dynamics. The surprise in the gold market and the convergence of the Shanghai gold contract into a neutral reserve asset further highlight the shift away from the U.S. dollar. Overall, the discussion highlights the ineffectiveness of sanctions and military strategies in dealing with Russia and emphasizes the need for a more nuanced and effective approach.

4. Concerns about NATO’s response and strategic choices in the war in Ukraine

Concerns about NATO’s response and strategic choices in the war in Ukraine are being raised. There is a sense of panic setting in as NATO seems to be flailing around without a unified approach. The conversation highlights the questionable strategic choices made by Macron, particularly his belief that inserting French troops as cannon fodder in Odessa would persuade Putin to pause. Doomberg also criticizes the ineffective sanctions policy against Putin and the failure to understand the changing nature of warfare. The Russian economy is seen as booming, and Putin’s war machine is considered superior to NATO’s. The lack of a strong response from NATO and the bureaucratic struggle between Macron, the U.K., and Germany are causing concern. Doomberg suggests that the path from where the Russians are to Kiev seems relatively achievable, and the main concern is what response NATO will decide is appropriate. Overall, the discussion emphasizes the need for NATO to be cognizant of who they are dealing with, and to make strategic choices that are consistent with the changing world.

5. Analysis of the natural gas market and its implications

The global natural gas market is undergoing a significant shift from shortage to glut, which is expected to have far-reaching implications. Natural gas is a major source of global energy consumption, accounting for approximately 24-25% of primary energy. The recent energy crisis that began in Europe in 2021 and spread worldwide has prompted a surge in natural gas production. As a result, there is a massive surplus of natural gas on the horizon. This excess supply is expected to drive down the price of natural gas, creating opportunities in other markets. The conversation highlights the importance of understanding the dynamics of the natural gas market when analyzing the economy. The availability and affordability of primary energy sources play a crucial role in economic stability. The United States, as a major producer of natural gas, has benefited from the abundance of cheap hydrocarbons. This has contributed to the country’s economic resilience, despite expectations of a recession and interest rate hikes. However, the participants also acknowledge that the current glut of natural gas is not a permanent state. Historically, shortages have followed periods of excess supply. The conversation emphasizes the need for caution and humility in the face of success, as overconfidence can lead to major mistakes. The bottom of the natural gas market remains uncertain, and Doomberg suggests that gold may be a potential investment to consider amidst these market dynamics. Overall, the discussion provides insights into the natural gas market and its implications for the global economy. It highlights the importance of understanding the supply and demand dynamics of primary energy sources and the potential risks and opportunities associated with market shifts.

6. Potential impact of gold and the Shanghai gold exchange

The potential impact of gold and the Shanghai gold exchange is a topic of speculation. Factors such as the seizing of Russian reserves and the opening of the Shanghai gold exchange have influenced the price of gold. While the physical gold market has shown signs of convergence, the paper market has not. There was a piece written about gold and the surprising price action, with allusions to the Shanghai gold contract and its potential to converge into a neutral reserve asset. Doomberg also mentions the possibility of gold becoming a better neutral reserve asset than U.S. Treasuries, which has led to a relatively large allocation of gold in personal portfolios. The Shanghai gold exchange is reasonably liquid, and its premium can be tracked using the SHAUPM Index. The price of gold and the premium have shown a correlation, with the premium expanding and marking the bottom in gold, leading to a recent rally. If the mechanism of the Shanghai gold exchange is exploited by the Chinese Communist Party, gold could see a significant increase in value. Doomberg also highlights the need to step back and ponder the recent price action in gold, as well as the swings in Bitcoin and NVIDIA, suggesting that something is happening that requires further consideration.

7. Threats to liberty and freedom of speech

Threats to liberty and freedom of speech are a growing concern, particularly in Canada where legislation such as Bill C-63 is seen as a severe threat. This legislation, currently making its way through the Canadian Parliament, has sparked fears of compelled speech and the potential for hate crimes to be used as a means of suppressing political opponents. The conversation highlights the dangers of this orthodoxy and groupthink mentality that is permeating society. It raises the alarm that not following the prescribed narrative, such as the Davos script, could result in being liable for hate crimes. The discussion emphasizes the importance of protecting liberty and freedom of speech, as well as the need to resist oppressive measures that seek to silence dissenting voices. Doomberg also mentions a previous piece of legislation that didn’t go far, but still serves as a reminder of the constant struggle between the state and political opponents. Despite the challenges, the conversation ends on a slightly brighter note, mentioning an upcoming optimistic piece on nuclear energy and the potential for positive developments in that field.

8. Optimism about nuclear energy

Nuclear energy is being discussed optimistically in an upcoming publication. The entrance of Amazon into the nuclear industry is seen as a positive development. The publication, titled ‘Primetime’, explores the potential for nuclear energy and highlights the promising prospects it holds. The authors believe that the involvement of Amazon in the nuclear chat raises good prospects for the industry. This optimistic outlook on nuclear energy suggests that there may be positive advancements and opportunities in the field.

Doomberg is a pseudonymous writer and commentator known for their thought-provoking perspectives on various topics. With a focus on economics, finance, and societal trends, Doomberg offers insightful analysis and commentary through their Substack platform. The author’s work delves into the interconnectedness of global markets, the impact of technological advancements, and the potential consequences of various economic policies. Through their writings, Doomberg aims to shed light on complex issues, challenge conventional wisdom, and provoke critical thinking among their readers. While the true identity of Doomberg remains undisclosed, their unique insights and engaging style of writing continue to captivate and inspire a growing audience.


[00:00:00]Doomberg: And that’s what’s happening in natural gas. And natural gas is 24, 25 percent of global energy, primary energy consumption. It is a really clean burning hydrocarbon. And as you alluded to in your question, it is currently selling at an energy equivalent price of $10 a barrel oil in the U.S. The U.S. produces 25% of the world’s natural gas. We are a giga power in energy. Canada and the U.S. in particular, combined, are giga powers in energy. And when you’re swimming in cheap hydrocarbons and you have a relatively good manufacturing base to feed that into, these are not conditions for a recession. We got two things wrong heading into the year. One, we thought U.S. energy production would roll over. And two, we thought there’d be a recession, with the Fed hiking from zero to five. Neither of those happened. And one explains the other. The U.S. has been overproducing energy.

[00:01:07]Mike Philbrick: All right, welcome to another recording of ReSolve Riffs with the one and only Doomberg. If you’re not familiar with Doomberg on Substack, I would suggest you do so and get familiar with them because the unique and novel takes in thinking, and thinking through both the geopolitical and energy complex, are absolutely fascinating. Doomey, welcome back. Great to have you.

[00:01:35]Doomberg: Always a pleasure to be with you guys. It’s one of my favorite podcasts to record. I’m glad to be back I think this is my third time with you guys.

[00:01:42]Richard Laterman: Yeah. I’m pretty …

[00:01:43]Doomberg: At least, yeah. Yeah, cool. Looking forward to it. We always have great discussions.

[00:01:48]Richard Laterman: Yeah. So I was listening to one of Doomberg’s recent appearances on, on Grant Williams’ podcast and they do a, I don’t know if it’s weekly or monthly, but they do a series together, where they talk about some of Doomberg’s pieces as well as some of the things that they’re working on. And then occasionally some of the pieces that have not yet come to light, that might not come to light because of whether they’re controversial or not quite as salient for the moment, or for whatever reason. They’ve not yet been published or won’t be published.

But, we were talking about this offline, which is the ongoing conflict in Ukraine, and how the mainstream media has been portraying what’s going on on the ground, versus what some of the other sources that we have available in the age of information There’s so many different sources and actual boots on the ground to verify on both sides.

And so there are some interesting developments here, and the recent fall of the city of Avdiivka, which was, as I understand, correct me if I’m wrong, but one of the most strongly held cities and most heavily armed and fortified. So that seems to suggest that the wave and the momentum in the war has decidedly turned in Russia’s favor. I wonder if you might give us a little bit of insight on that.

[00:03:11]Doomberg: You bet, Richard. The podcast you referred to is, we called it This Week in Doom, um, half-jokingly because we record it probably every six or eight weeks. It’s a knock-off of a great television show in Canada called This Hour Has 22 Minutes, which is a great show, and so we thought This Week in Doom would be a good name.

And we have been studying the war in Ukraine as a team for the better part of a couple of months. It’s not something we’ve written about yet. We’re still deciding whether and how we would under the masthead, but it doesn’t mean we’re not interested in it, and that it’s not something that we might discuss on podcasts.

And Grant and I went a lot deeper into the topic than perhaps both of us anticipated as we just recorded that conversation. But the motivation to talk about it on Grant’s podcast is the fact that Grant wrote two really prescient pieces on the matter years before the war in Ukraine broke out. One was called Putin on the Ritz, and which, if I could summarize in a way that does the piece justice, it really does need to be read. The West radically underestimates Putin and diminishes Russia’s role on the global stage to its own peril.

And I think that was a pretty appropriate prediction of what eventually transpired as the diplomatic negotiations broke down and hostilities broke out in Ukraine. But the other one that was really pressing, it was not your grandfather’s warfare. I believe it was called, where Grant got ahead of this whole drones issue and the fact that the entire nature of warfare was changing. Having known Grant and been in and around his orbit for years and having read those pieces, they were top of mind for us as we started looking at this and the motivation to dig into the military side of the conflict hit us over the Christmas holidays, actually. You know, the same architects of our insane energy policy in the West and the same architects of our utterly insane and provably dumb sanctions policy against Putin are also the architects of the military strategy, and therefore, why would we give that vertical of foreign affairs policy any more credit than it deserves?

Just because we don’t know anything about it. I, in fact, the things we know about have been done terribly, and why would we assume that the military is somehow different? Now, we have great respect for people in uniform, and the commanding officers. But as history teaches, of course, a military is often constrained by the qualifications and attributes of the political leadership.

And in this case, we wondered whether the strategy of the war was being executed with the same level of incompetence that we have personally observed in areas we know well, which is the energy market, and a derivative of that, the sanctions policy against Russia’s energy commodities in particular. And frankly, the further we dove into this, the more alarming it got.

Again, we are not experts, which is not why, it’s the primary reason why we haven’t written about it, but it doesn’t mean we aren’t trying to be informed citizens. And, as I described on that podcast, there’s this whole array of distributed media out there, and you always have to be careful that maybe some of this is just, you know, propaganda or sophisticated fakes, or but you get pretty good at, yes CYOPs, and you get pretty good at picking that out like, and the approach we took while studying this from the ground up was, we would take the average of what the pro-Ukraine and pro-Russian sides were saying as a reasonable arbiter of truth, and if you just, you would learn a lot more about what’s going on long in advance, before it’s reported in the Western media. And the two men, the two examples we mentioned on the podcast, one was the firing of Syrskyi, the head of the Ukrainian armed forces by Zelensky, that the power struggle that was going on domestically, it was downplayed in the Western media, had come to a head, especially as you mentioned, the fall of Avdiivka, was really a true turning point.

And, the way the war is portrayed in the West versus the way Putin portrays the war, and we watched with great interest, of course, Putin’s interview with Tucker Carlson. I think it, Tucker’s treatment by those in the media for having done the interview was interesting. I think Putin didn’t do himself much in the way of favors in that interview if we’re being totally honest, and I think Tucker did a pretty good job of getting him to speak and allowing free thinking people in the West to assess the situation themselves. And we count ourselves among that crowd, and so, we’re capable of observing that war is terrible. It’s just terrible when you see these videos of the complete raising of Ukrainian villages and the incalculable loss of innocent lives in both militaries, by the way. We’re talking about people in their early twenties, basically dying by the scores of thousands for political reasons. And it’s a real shame.

And we would say, and we said on the podcast, that this is a disastrous outcome of diplomacy. And Putin, the war strategy that Putin uses is terrible. It is abhorrent. It is inconsistent with the way the world should work in the 2000s. This is, it’s reminiscent of World War II carpet bombing and it’s, but it’s reality. Russia is a strong country. Putin is the person who leads that country and we need to be cognizant of who we’re dealing with as we make these strategic choices, and to see the flailing around of NATO now, as panic sets in, and I think that’s the phrase that one would use to describe the situation. It’s pretty amazing.

[00:09:04]Richard Laterman: And the fact that we’ve actually heard, I don’t know if this was a Freudian slip of any sort, but the fact that Macron actually suggested publicly, that Europe might deploy actual boots on the ground in Ukraine, which would, I think the fact of, the trigger, I don’t know, World War III or something to the effect NATO wouldn’t, would in fact be at war with Russia, which was then loudly denied by so many different actors, suggesting how much of a blunder that statement actually was. But the fact that he would actually say something like that suggests exactly what you’re describing right there.

[00:09:46]Doomberg: I’m not sure it’s a blunder. I think he believes that somehow inserting French troops to be a cannon fodder guard to Odessa would somehow persuade Putin to take a pause. Like it, again, the original axiom of our foray into this space was Macron is the same clown who is, was behind the sanctions policy. Like, so why would he get military strategy right? Like why do we assume that when it comes to sleepwalking our way to thermo-nuclear war, that he would be any wiser?

[00:10:31]Richard Laterman: Maybe let’s press pause just for a second, because I’ve read and listened to your comments on why the sanctions policy has been so ineffective and it’s all to do with price versus quantity, but maybe you can bring that out into the light a little bit more and explain to the listeners exactly what you mean by that and the logic behind why this ultimately is doomed to fail.

[00:10:55]Doomberg: Yeah, sure. We wrote a piece very early on after hostilities broke out called Crazy Pills, in the weeks after sanctions were announced, predicting not only that they would fail, but that they would backfire, and then explaining why that was the case, and that was not an easy piece to write, at that time.

It looks good in hindsight, but you have to remember the thickness of the propaganda of the day and the sort of, the analogy would be sort of the unity after 9-11. You know, we’re in war, and we’re going to do this together, and we support the commander in chief and all of this stuff. But anybody who has spent five minutes in the commodity sector, on the industrial side at least, and wise investors who have tried to play commodities from the outside, knows that commodity players make all their money on price, not volume. And that the inelasticity demand for these essential-to -life commodities is such that it doesn’t take much in the way of shortages for prices to skyrocket, and it doesn’t take much in the way of gluts for prices to crater.

And we saw this most recently when oil traded for … $37 a barrel and within two years was trading for $125 a barrel. It’s the same suite of hydrocarbons, but trading for radically different prices, just because of very subtle supply/demand imbalances. Now, Russia is a major exporter of critical-to-life commodities. In a world where sanctioning their volume would cut their access to the global markets by 50%, prices would more than double and Putin would make it up to make up all of his revenue and then some on price, and still have the extra commodities to sell when the war ended.

And so the only way, if your objective and the stated objective of the sanctions policy was to reduce Putin’s revenue so that it would be more difficult for him to fund the war machine, that is a worthwhile objective that everyone would agree that the West should try to impart on what amounts to a proxy war opponent. Sanctioning volume will guarantee, attempting to sanction volume because you really can’t, would almost guarantee more revenue for Putin than it has, simply because anything that increases the friction cost increases the price of commodities, and Putin collects on price.

So if you’re in the commodity sector, let’s say you own a refinery, and refineries are running at 97 percent and you own eight of them, and one of your refineries blows up, you’re going to make more money. It’s very counterintuitive to people that have never been in commodities, but the price is going to go up by more than one eighth of your production. And in fact, one of the things that happens during commodity boom cycles is that producers get accused of being a little ambitious in their maintenance schedule, because they know that the price elasticity demand is such that if they take a little bit of volume off the market, they’re going, the integrated impact across the volume they still have is going to be substantial.

Well, the same thing works in reverse, and to make the point, we have said on many podcasts, the U.S. Navy should be escorting Russian oil tankers to get every milliliter of oil that they produce to market as friction free as possible, for as low a price as possible We should be pumping as much oil as we can, which is what we did in the first gulf war, when Jim Baker went around the Middle East and basically instructed everybody, back when they still listened to the Secretary of State of the U.S., to pump more oil. And we did. And the price of oil stayed low while we ejected Saddam Hussein from Kuwait.

This is a playbook that’s well known and why we’ve forgotten it is a great mystery. So that is what we mean. We’ve written this on several occasions. We’re still doing it by the way, by trying to sanction the LNG volume of Arctic Two, for example. It’s insane. It’s dumb. It’s guaranteed to backfire. It doesn’t work. Let’s try something different. And you would think two years on, and change, that we would have learned a lesson by now. But the fact that we have it is one of the reasons why we went down the military rabbit hole in the first place.

[00:14:46]Richard Laterman: Is there any evidence that the, uh, sanctioning of volumes itself has even worked? I mean, we know Iran has…

[00:14:55]Doomberg: So,…

[00:14:55]Richard Laterman: In avoiding sanctions for several years, I would imagine being aligned with Russia, Russia may have taken a page or two from their playbook and been able to avoid sanctions as well as export to China and other players.

[00:15:08]Doomberg: So it can work for very small players and Iran was a borderline case, but for somebody that is like a major exporter, and prices are set at the margin for a highly inelastic commodity, like Russia, first of all, the world could not persist without Russia’s commodities, and we should not want that to happen because it would result in starvation.

Russia is such a major player. There’s this denialism in the West. We deny a lot of things about Russia because the West doesn’t like Putin. We deny, for example, that Russia is a manufacturing powerhouse. We have politicians arrogantly describing Russia as country with a gas station on it. They’re out-producing us right now militarily, and at a tenth of the cost. We have this profit driven military industrial complex, whereas they have a purpose driven military industrial complex, which are two radically different things, and one of them works better when you have a war. It just does. And so, we have this techno arrogance, the Zeihan Analysis that says, you know, once the Western companies pull out, the entire commodity infrastructure of Russia is going to collapse.

Look, you don’t have to be a pro-Putin puppet to object to demonstrably wrong assumptions that are guiding policy. In fact, it’s the opposite. Like, if our objective is to win this war, this is what we need to be doing, and we’re not doing those things. We’re doing the opposite. So we assume, for example, that the combination of India, China, and Russia will be incapable of keeping Russian energy flowing. That’s insane. I’ve lectured in universities in China. I’ve been to the IT schools in India. I’ve hired people from Moscow State University. We call that the genius school. By the way, if you have that school on your resume, don’t need to ask any more questions. The disrespect for the capabilities of your adversary, I didn’t see that in the laws of war like that, you should assume they’re more capable than they, are and be happy when you find otherwise.

And we have this, Macron is sort of the personification of that Western elitist arrogance, is the only way to say it. And again, to be a critic at a time of war is dangerous, right? I mean, historically, there’s a fine line between critiquing policy and, treason is too strong a word, but people have accused Tucker Carlson of being treasonous, for example, for merely going to Moscow and interviewing people, Putin, which they would say is platforming him. But I do think that if you know something’s not going to work and you don’t say anything, how is that any useful?

[00:17:48]Richard Laterman: Yeah, I agree. And you touched on an interesting point, because that is actually one of the questions I had, the idea that without Western technology, Russian production would eventually just grind to a halt and they would be set back several years, if not decades, because once these oil wells are shut, it’s very hard to get them back on production. So you just consider that to be flat out wrong?

[00:18:12]Doomberg: It’s well, I mean, it’s bullshit. There’s no other way to say it. I mean, pardon my French, but I’ll give you an example. So there’s this professor at Yale, whose name escapes me, but he is a professor of economics, I believe, and his claim to fame, Jeff, Jeff is his first name, Jeff …, or I forget his name, but it doesn’t matter.

He’s a famous professor in the executive world, industrial world, because he is sort of a whisperer to CEOs. And I know this person as a person who coaches CEOs. And I’ve seen him present and I’ve, you know, CEO of a company I used to work for used him as a client and, and he was fine.

He was a good coach. And suddenly he puts out a white paper early on in the war that claims the Russian economy is going to totally collapse. And I just, you know, when I read it. Yeah, Jeff Sonnenfeld, I just found it. So he put out this white paper, it got all kinds of circulation. He’s a professor at Yale, and the paper is just nonsense.

Like, it was just the most puff piece of propaganda that you’ve ever seen. So then you ask yourself, why is a professor at Yale, who knows nothing about charts, I can tell, I never knew him to know anything about these things, writing this piece that is just demonstrably wrong, and then every single major news, the Washington Post, the New York Times, Yale professor says Russian economy is on the verge of collapse.

And I know this person, and I’ve had dinner with this person, and I, this is, if you were to ask me who would have authored that piece, and I had to guess a hundred names, his wouldn’t have been among the hundred, right? And so then you have to ask yourself, what is actually going on here? Why are we lying to ourselves? The Russian economy is booming. Putin has won the sanctions war. We have lost. The Putin war machine is superior to NATO’s war machine. And by the way, the supply chain is a lot closer to the line of contact. We’re making weapons over here, and shipping them over there, and what are we doing? For all of Obama’s flaws, I never voted for him, he did not get into a war over Ukraine in 2014 because he realized that you’re fighting a war in Putin’s backyard, and if the Russians know how to do anything, it is the carpet bomb from east to west, right? I mean they’ve done it historically, and they’re doing it now.

[00:20:33]Mike Philbrick: And they have a demonstrated behavioral bias towards taking steps that we would not take in the …

[00:20:42]Doomberg: Well, they lost a lot more people in World War II.

[00:20:45]Mike Philbrick: Exactly, and without even thinking twice about it, right?

[00:20:49]Doomberg: But also, that is a scar that one has to ponder when you’re playing the game theory of war, pre 2022. Now again, you have to be careful. People will say that you’re just a Putin apologist, or whatever. Like, we’ve been arguing how to better defeat Putin from the beginning. But any critique of his recent policy is going to be pushed back upon by the propagandists in this way. But I remember reading that Jeff Sonnenfeld paper thinking, (a) why is he writing this? (b) it’s demonstrably wrong. It’s actually, it’s just a piece of puffer and it’s getting wide play across all of the media.

Like what am I missing? It’s just, and there comes a point where we’re sleepwalking towards nuclear war here. Like I have military aged children. Last I checked the U.S. Congress needs to vote to go to war. I mean, I would at least like to have my representative in Congress have a voice on whether my kids are going to be potentially, in the extreme event… to hear Lindsey Graham go on national television and say we need to be carpet bombing Iranian refineries because of some outfit called the Houthis are firing missiles in the Red Sea, is the height, like it’s dangerous. And I, call me whatever you want. I’m going to call it as dangerous. This is insane. What are we doing?

[00:22:17]Richard Laterman: And to take your logic forward with regards to the means of production in a theater of war, it struck me when the U.S. allowed the shipment of cluster munitions, which is banned by the Geneva convention. and which no Western conventional army would dare use, but they shipped it to the Ukraine because they could not produce and supply them with enough conventional ammunition at one point.

That suggested to me that the battle readiness of the U.S. Army, or at least a portion of the Western forces was a lot more precarious than we would have anticipated. And so that made me wonder, with regards to, there’s a hot conflict in Europe. There’s a heating up conflict in the Middle East, with potentially much larger ramifications. There’s always that specter of conflict in the Taiwan Straits. What does that say about the ability of the U.S. to face off those challenges? I know I’m leaning on a small piece of anecdotal, but it seems to be a relevant point, given that these munitions have been banned for so long. I don’t know if you…

[00:23:30]Doomberg: Well, I mean we supplied Ukraine by buying munitions from Korea, which, of course, now has less munitions than they have. The Russians are out-producing us, right? They have a different kind of economy. It’s a command economy. They’re on a war footing. It’s on their border. Like, if the Chinese, and by the way, we would argue that the Chinese are committing war against us through fentanyl, which is another piece that we’ve been researching, that we’ve not yet figured out how to write about.

[00:24:01]Richard Laterman: Reverse opium wars, I guess.

[00:24:02]Doomberg: A hundred thousand people dying in the U.S. a year from chemicals that originate in China and nothing happens in China without the approval of the CCP, like let’s be honest.

So, but back to the topic of issue. We’re being outproduced. This assumption that sanctions would lead to regime change, I think, was the war, that was the war strategy. We are going to sanction Russia, we’re going to kick them out of SWIFT, their economy is going to collapse, people are going to revolt, and they’re going to kick out Putin. We hate Putin, so clearly the people in Russia hate Putin. And that was basically it. That’s it.

In my, if you ask me, I watched that 60 Minutes puff piece. We’ve written about it in a piece called The Peter Principle, where the architect of the sanctions, who, by the way, has just returned to the White House to take over his old role, just assumed he was taking a hero lap, right? You might not recall this, but there was a 60 Minutes segment that we watched, in horror, as they proclaimed that these sanctions were going to kneecap Putin and this would lead to regime change. We’d have a color revolution in Moscow. None of that was true, and none of that, and that would be the axiom of our policy.

This is truly amazing. And here we are, like two years later, Victoria Nuland leaving is interesting. You mentioned it earlier. That is a potential finger out of the damn moment, of we’ll see. I don’t think a second that Putin is unaware of the importance of the upcoming election in November and the need to run the score before that election. I do think Trump is playing politics with the issue.

We wrote a piece called Minority Report where we talked about how the ouster of Kevin McCarthy might come back to haunt the Democrats, who played a role in his ouster that was under-reported. So these are obviously tricky things. But when you’re at war, the right answer is the one you should be trying to find, not the politically sellable one. That’s always been our view. And look, we are patriotic Americans. We would like for the U.S. to be in less wars. And we would like for the wars that the U.S. gets into, be ones that we win. Pretty simple.

[00:26:22]Richard Laterman: I’m just trying to understand. So, to go back to the original thread here, what is your take on the direction of the conflict right now, and how do you expect that to play out in the coming months? Obviously with the caveat, I know you’re not a military expert, but I know that you’ve been following your, you’re a very thorough analyst and you’ve been following this very closely.

So I’m trying to get a sense of what that might mean for the conflict, but also, the downstream effects on commodities which I think are the main asset class that is currently affected by all this.

[00:26:57]Doomberg: So, if you push me, and we were just guessing, we are at a very precarious point. I think, if you remember the chaos of the fall of Afghanistan and the speed with which seemingly stable, metastable states collapse. I think we’re close to a very dangerous situation in Ukraine, a confluence of effects converging here soon.

One is that Zelensky’s term actually expires at the end of the month, and there are no plans for an election. And there are probably many people inside of Ukraine who are unhappy with the way the war is going, that may have pro-Russian tendencies, for example, or may wish to cut a deal while there’s still time. Such talk is being muffled in the Western media today, understandably, I suppose. But, there’s also clearly, in watching Putin on Tucker, and again, I would, I would grade him C+ for that performance. I think the half hour opening monologue lost almost everybody, and only those who are truly interested to find out would stick through it, and that was a mistake.

I think I just, this worship of Putin, that the left accuses people who wonder what’s actually going on in Russia of having, is just not true, but all that aside, there is a faction within Ukraine that thinks the war is being run poorly, that it is Ukrainian lives that are being sacrificed for American geopolitical objectives, and to the extent that Zelensky is held up as the, as sort of the metaphor for that, his position of sort of staying beyond his term and not holding an election, seems precarious.

I think the firing of the commander of the Ukrainian Armed Forces, Syrskyi, was a gambit on his part. We’ll see. These types of things happen when wars aren’t going your way, right? Soldiers don’t want to go into a meat grinder. And I think the collapse, the chaotic nature of the collapse of Avdiivka is actually what matters more than the collapse itself. It was clear weeks in advance that the Russians were operating a classic pincer movement, and the failure to retreat from that city, frankly, led to thousands of lives that need not, in hindsight, have been lost.

Those are the types of things that make soldiers angry, that make commanders angry. They have guns, and the speed with which metastable states collapse can surprise some. I think once the Russians inevitably carpet bomb their way through the remaining strongholds, it seems like the path from where they are to Kiev is relatively achievable. So my main concern is what response NATO decides is appropriate.

The Macron’s of the world, there seems to be a bureaucratic struggle between Macron and the U.K. versus Germany. You know, again, I’m not a geopolitical expert, but the Poland’s and the Estonia’s of the world who view Russia as a severe and imminent threat, would like to harden, but also don’t want to do it without at least having America on board. Whereas Germany, you know France, of course, it has a long history of losing wars, which makes one wonder why they keep trying to get into them.

But Macron, basically saying there are no limits. He had this meeting that has been reported on in the French media with the factions of the French leadership, where he said we should have no limits in France as a nuclear power, and presumably no limits includes the use of nuclear weapons. That’s quite a thing to say. The thing that amazes me is that we just assume that all that action happens over there. iI can never come here, right? That’s the thing that amazes me. Again, and maybe I’m just naive. I mean, but like, we hit, Russia can shoot back. One of the reasons why you don’t pick fights in bars is you might lose. I don’t know, call me crazy.

[00:31:28]Mike Philbrick: Yeah, I know what that would do. I think that’s the, it’s been many, many decades where in North America, we’ve been sheltered from any of that. And I think, you know, what you talked about on the addictive chemicals side. And then you, the other thing is the border crossings, with a number of people sort of leaking up through South America who are of Chinese descent.

[00:31:58]Doomberg: I know, this is something that, I don’t understand why controlling the border is a controversial issue. So again, I don’t want to come across as like, I’ve stood in line at customs and border control hundreds of times in my life as I flew around the world as an executive, always with my papers in hand, hoping that the person you’re about to walk up to is nice, because they have absolute power over you. They have absolute power over you. They can make your life miserable with no recourse, and it’s all theater. Like, why am I standing in line at JFK for an hour and a half to have somebody stamp my passport, when they know me, they know everything about me.

They know why I just went to China. They know who I work for. They know who I’m married to. They know every single thing about me. They have my DNA, I’m sure. They have my eye scans. They have my facial recognition. Like, what are we doing? So we have this on the one hand. I still got to take my shoes off. Like, I’m pretty sure the NSA knows I’m never going to walk onto a plane with a bomb in my shoe. They know that much about me. They know everything about me. They know I’m Doomberg, right? They know how much Doomberg makes. There’s no privacy anymore. So why are we giving up all of our privacy if we still have to indulge in this security theater, when at the exact same time, we have tens of thousands of people just pouring into the country, many of whom are military age, man, from countries that don’t like us. What are we doing? I don’t understand how this is controversial. Now, again, I haven’t studied the border issue and I’m sure, you know, that you’ve all stood in line at border.

[00:33:47]Mike Philbrick: No, the theater is bewildering. I agree with you. I’m, I think the same thing. I mean, at least now when I’m crossing the border into the U.S. and back and forth from Canada, there’s the thing where it just takes a look at your face. You don’t have to do anything, and you just say, way you go, Mr. Philbrook. And you’re …

[00:34:04]Doomberg: Like I was, you know, TSA-PRE, and international traveler, and I’ve gone and given them my fingerprints and they scan my eyeballs and I, maybe I even peed in a cup and I don’t remember it. Like, who knows? But they know who I am and they know I’m never going to blow up a plane, ever. And I don’t want to be in a plane where somebody else is either. So I get it. But like the disparity between crossing the bridge to go to Canada and just flowing over the border in Texas, it just blows my mind. Like why is this controversial? Who could be opposed to it? Like do we have a country or not? Countries begin at the border, right? Like when you go from Detroit to Windsor, you know you’re in Ontario because…

[00:34:51]Mike Philbrick: Yes.

[00:34:51]Doomberg: …are better. Right? They just are. I’ve been on the 401. It’s a great highway. Right? I mean…

[00:34:58]Mike Philbrick: Yeah. No, I’m bewildered by it as well. And I don’t know, I’m not like, I’m not sure who wins there. Is it this democratic thesis that they all vote Democrat, and so they want them in? I mean, it can’t be that simple. It seems to …

[00:35:11]Doomberg: I don’t know,

[00:35:12]Mike Philbrick: … seems so.

[00:35:13]Doomberg: The cartels are buying people off. I mean, who knows, but, I don’t understand where the controversy arises. I’d like to, I, honestly, if somebody could explain it to me, I’m very interested to know.

[00:35:26]Richard Laterman:

[00:35:27]Mike Philbrick: Yeah.

[00:35:28]Richard Laterman: We can all agree the common sense, and just like pragmatic, realistic approach, middle of the ground, middle road type of solutions have been losing ground more and more, just because of the polarization that we see. And so I think this reflects in the way that we’re approaching geopolitical issues, the way we’re, the U.S. is approaching the  border, and I think it’s symptomatic of the times that we find ourselves in.

[00:35:56]Doomberg: Well, look, when I land from Europe, there should be no border control there. Like, that’s fine. Let’s just do it on both sides. We have, you’ve all stood in those lines. It’s crazy. But what are we doing? You know, you fly into Pearson and next thing you know, you’re backed up for four hours and you miss your connection. Why? What are we doing? What, if it’s, if we’re just going to have people pouring over the border anyway, like if you can afford a first class business ticket from Europe, I don’t know, like come on in. Right? I mean, so call me crazy. I don’t know.

[00:36:28]Mike Philbrick: I agree.

[00:36:29]Rodrigo Gordillo: Sorry to interrupt, but I did want to take a quick second to remind listeners that while we do absolutely love providing our audience with world class guests and weekly investment insights, we wanted to remind you that we actually do our best work outside of this podcast. And we try to do this by providing cutting edge, globally diversified, and systematic investment strategies that are designed to be broadly non-correlated to traditional equity and bond portfolios.

So we actually manage private and public funds, as well as bespoke separately managed accounts for investors that seek the potential to smooth out portfolio returns in the long run. So if you do want to see that theory that we’ve been talking about put into practice, please do go ahead and check us out at Now back to the podcast.

[00:37:11]Mike Philbrick: I wonder, well, I don’t know what you have thoughts on Richard, but I also would love to cover some of the latest writings on natural gas and LNG, and some energy policy within North America, because you certainly peel back some layers for me, and understanding some of the implications for why a country might choose some of these policies and why they’re sort of pushing that commodity in certain ways to cross certain borders, but not others.

And it was fascinating for me to read that. So I don’t know where you want to start there that makes the most logical sense for the listeners. But I found that whole line of thinking over the last sort of half dozen articles very, very intriguing, and I think under underappreciated and under realized generally.

[00:38:06]Doomberg: Yeah. Good

[00:38:06]Richard Laterman: We could start with the idea of natural gas being so cheap at this point and how that may have helped the U.S. stay so economically powerful. I mean, the momentum of the U.S. economy to persist, given the rate hikes. And I think this was part of your mea culpa recent tour.

[00:38:27]Doomberg: Yeah. So like, as an analyst, as opposed to an advocate, your objective is to understand and explain, as opposed to twist data into meeting a preconceived condition, right? And we came to some prominence during an energy crisis. And so I think some people confuse us for perma energy bulls, when in reality we’re energy analysts.

And we like to say that the most important question an analyst can ask when analyzing an economy is, whether or not that economy is long or short primary energy. And the mere posing of that question implies there are two possible states. And just because we came to some prominence during a period where the global economy was in a period of energy shortage, doesn’t mean that that’s the permanent state. And we spent the month of November doing a deep dive on the global natural gas market for our pro-tier. We wrote a, we delivered a 45 slide presentation to that tier called Simple Molecule, Complicated Markets, a deep dive on the natural gas market, global natural gas market.

And we came to the conclusion that there’s going to be a huge cloud of natural gas coming as a response to the 2021, 2022 energy crisis that started in Europe and spread across the globe. And we opened one of the pieces, we wrote to follow up that Doom Zoom pro-tier talk with a quote from Nassim Taleb and something like, I’ve never seen, I’ve, I haven’t always seen gluts followed by shortages, but I’ve always seen a shortage followed by a glut. And that’s what’s happening in natural gas. And natural gas is 24, 25 percent of global energy, primary energy consumption. It is a really clean burning hydrocarbon.

And as you alluded to in your question, it is currently selling at an energy equivalent price of $10 a barrel oil in the U.S. The U.S. produces 25% of the world’s natural gas. We are a giga power in energy. Canada and the U.S. in particular, combined, are giga powers in energy. And when you’re swimming in cheap hydrocarbons and you have a relatively good manufacturing base to feed that into you, this is, these are not conditions for a recession.

We got two things wrong heading into the year. One, we thought U.S. energy production would roll over. And two, we thought there’d be a recession with the Fed hiking from zero to five. Neither of those happened. And one explains the other. The U.S. has been overproducing energy, and natural gas in particular is particularly advantageous for the U.S., for two reasons. One, it’s difficult to ship, which means it’s trapped by land. And two, it finds wide use across a lot of primary industry.

We heat our homes with it. We use it to make ammonia. We use it to power co-generation facilities that produce both steam and electricity in all manner of heavy industry, cement making and so on. And we have, unlike other petrostates, the U.S. has still, despite the stripping of our manufacturing core and the rusting out of the Midwest, we still have very sizable manufacturing capacity, and the geopolitical tensions, both with Russia and China are driving near-shoring and on-shoring. And so, when you have $10 a barrel of oil and natural gas in abundant supply, the U.S. produces like 25 to 30 percent of all the natural gas in the world. We produce 20 percent of the oil and petroleum products in the world. We produce more coal than we burn. We have 93 nuclear reactors operating across the country. We’re an energy gigapower, and Biden deserves very little credit for this.

But Texas and Louisiana are bailing out Biden. And we are producing an enormous amount of natural gas. One of the big reasons why we’re producing so much natural gas is because in the Permian, which is the source of most of the world’s oil growth, it’s associated gas. It’s a nuisance. It’s a by-product. And with the risk premium embedded in oil, because of the situation with Israel and Palestine and a potential kinetic conflict with Iran, we believe there’s probably a 20 or 30 … risk premium embedded in the price of oil that motivates producers in the Permian to keep producing, and you get all this excess gas as a by-product that they would burn if they could.

But now with, the methane agreement in COP 28, tighten all that down. Natural gas today is a buck, buck 75. It’s a, a bottle of Coke costs more than a million BTUs of natural gas. It’s pretty incredible, so like if you put that in the hands of a manufacturing sector that is tied into it, sitting on the end of the pipeline, we’re going to make fertilizer cheaper than everybody else. And yeah, we’re going to make corn cheaper than everybody else. And yeah, we’re going to make soybeans cheaper than everybody else, right? And we’re going to be sold out. And by the way, we’re going to be struggling to make money in those industries because we make money, like all commodities do, when things are short.

And right now we’re long energy and all derivatives of energy are struggling. Like, you didn’t want to be long corn and soybeans this year. And just look at the charts. One of the few conferences we speak at is a private Ag conference, and we made this point like, when production in the Marsalis shale turns over, and when production in the Permian turns over, that’s when you want to get long corn and soybeans, because they’re derivatives of energy and we’re long energy right now. We are swimming in the world’s largest supply of ultra cheap hydrocarbons in the U.S. and these are not ingredients that make an inflationary recession soup. The reason why the Fed can raise rates and nothing breaks and inflation seems to be coming down is because we’re swimming in hydrocarbons.

Have you been to Saudi Arabia? The sidewalks are paved in gold. We’ve added two and a half Saudi Arabia’s in the past 15 years to the U.S., plugged into a manufacturing sector that can use it. Same thing in Canada. Like, despite Justin Trudeau, Canada’s going to be fine. It’s amazing.

[00:44:23]Richard Laterman: Just as a sidebar here, as you’re describing this energy abundance, I’m reminded of the Argentinian discovery of Vaca Muerta, which is a huge deposit. I mean, similarly sized, I think, to the Permian Basin, at least in the order of magnitude, and it’s been a while since I’ve, I’ve caught up on what’s going on. I don’t know. Do you keep up on that? And why has that, I know that the dysfunctionality of Argentinian politics should not be underestimated, but I’m just curious as to why that has not yet manifested into an economic boom,

[00:44:59]Doomberg: The dysfunctionality of Argentinian politics should not be underestimated. I think you nailed it. And the point is, if we get too dysfunctional in our politics here, this will all turn. By the way, natural gas producers will curtail. We wrote a piece recently wondering whether the bottom might be an EQT, cut a BCF per day of production. Chesapeake, you know, cut production. Nobody wants to produce natural gas for a small fry at McDonald’s. And they know that they make it up in price. And so, it’s a game theory right now. Who’s going to cut, and then who’s going to rush back in when the prices come up a little bit so they can make their quarter. Like, this is the nature of the game.

Now, are we at the bottom of natural gas? Maybe, but you could see it was coming, right? And again, you have to be willing to (a) recognize that you were wrong, (b) be willing to admit it, and (c) do your earnest to try to understand it as a job, as an analyst, which is what we try to be. And you’ve read our stuff, like, that when we get something wrong, we’re the first to write about it and say this is why we were wrong, and here’s our new position based on the things we’ve learned. And to the extent that our readers learn with us, that’s wonderful.

We want to be in the business in a decade or two, and the only way to do that, I think, is to be consistently authentic as you can be with your audience, which is why, by the way, we hesitate to write about the military situation or the fentanyl situation, because if you get something materially wrong on something that you don’t really know enough about to be writing about, then that can really damage you. And, and we respect our audience enough to not bring things to them that we don’t, we believe 100 percent of what we publish when we hit Send, but I digress.

So, to the original question of natural gas, it is, look, we heat our homes with it, we make our food with it, we produce steam and electricity with it all across the country. If you add two and a half Saudi Arabia’s to a country like the U.S. that has a lot of inherent geopolitical advantages that Peter Zeihan does get correct, unlike the sort of techno arrogance that we talked about earlier. This is, and then you have a motivated Fed and fiscal stimulus coming out, whatever the long term consequence of that might be. You’re not going to get a recession before this election. That’s our view.

[00:47:18]Mike Philbrick: And to me, it was fascinating, just the multidimensionality of the number of things involved in something like a recession call, or some of the political dynamics and some of the underlying layers of third derivative thinking of why something happens, when you see something that just doesn’t make sense.

You just haven’t kind of fully conceptualized it yet. Some of the early things we’re talking about, why are we approaching the war like this? And we just don’t quite understand the motivations, I think, of people quite yet. I found in the natural gas space, when you were sort of laying this tapestry of knowledge and connectedness, the lights started to go on in my head, and I don’t think people appreciate the miracle that is the power, that’s constantly running everything that we do every day.

And the, and as you say, energy is life and the miracle that that’s there, it’s underappreciated. These two lamps that are on behind me. The fact that your fridge is cold every morning, it’s a miracle that it’s on 99.9 percent of the time.

[00:48:21]Doomberg: Not only do they not appreciate it, they disdain it. They disdain the people who do it. They disdain the wizards that wake up every day and wave a wand and make all of this happen. Like the technical power of the U.S. fossil fuel industry is first class.

Look, I spent two decades in the commodity sector. I know lots of people in the space and I’ve toured a lot of major facilities. And if you go to Saudi Arabia and you see what Saudi ARAMCO is capable of, and then you just assume what most people assume about Saudi Arabia, like, they just have no earthly idea what they’re talking about. And the speed of technical innovation, to take the U.S. shale, what a miracle the U.S. shale is.

We wrote a piece called Peak Cheap Oil is a Myth, and much to our surprise, that kicked the hornet’s nest of a few very loud, vulgar, let’s say peddlers of peak cheap oil, because that’s what they are. And we went back to 2009. And we’ve not written this because we won’t. And we’re going to stay above the fray, but,we could find the exact same people saying the Marcellus shale patch is set to underperform. Shale gas is going to be a big disappointment. U.S. natural gas production is going to flatline. It’s doubled since then.

Like, techno-pessimism is sellable. In fact, of course, Doomburg is sort of an, we’re very optimistic people. This is sort of the brand itself, because we came up during the energy crisis. People assume that we are doomers by nature, but in fact, we’re actually pretty optimistic, and it’s more of a play on words, and we’re just having some fun with it because we do enjoy the occasional doom scroll. Because we’re defensive pessimists, we focus on the worst case scenario and then try our best to hedge against that. But, like, the permadoom crowd just, it’s just wrong. Like they just get it wrong. They are shorting human ingenuity and that’s a widow maker trade, forever.

The whole AI revolution we think is going to normalize nuclear energy again, and get our energy policy back. Like, there’s all manner of things that – the arrow of time and the direction of innovation both flow in the same direction, and if you just look at the miracle that was pulled off in the shale, we added two and a half Saudi Arabia’s in 15 years. And when people thought peak cheap oil was here in ’08, ‘09, by the way, like when oil hit $147, it was intraday and that triggered the global financial crisis. The thing that people don’t realize, if $150 oil triggers a global financial crisis, what does dirt cheap natural gas mean? It’s got to be bullish. Like if Germany is de-industrialized because it screwed up its energy policy, what happens to the U.S. if we get it right?

[00:51:13]Mike Philbrick: Well, and where, where does all that production go? It goes where the cheap natural gas is.

[00:51:16]Doomberg: Correct. It goes where cheap energy is, because energy is life. Our currencies are just derivatives of energy. Like you, and so that was our big AHA! Look, we were wrong. Like it’s okay. Like you make mistakes. Like we thought there was going to be a recession. We thought there was no way Jerome Powell could hike to 5 percent without breaking something.

He did, and nothing broke. Why? Now, one approach is to say the data is fraudulent. And we see that with every jobs report, right? Like people pick apart the flows and all that stuff. The other approach is to say, hey, maybe I got this wrong and that’s okay, but why did I get it wrong? And what can I learn about it? And the connecting of the two things we got wrong, which was we assumed because of drilling activity, that the U.S. production would roll over. And it didn’t because technology overcame and efficiency overcame the numbers, which we’ll talk about the meta lesson of that in a second. And then the U.S. didn’t go into a recession. I mean, it’s still hard to find people. It’s hard to find good people to hire. I talk to a lot of small business owners because of other aspects of our business, and finding talented people willing to work and show up is hard. Like, it’s tight.

We’re not in a recession. We’re just not in a recession. Now, are the benefits of this currently growing economy equitably shared? No. I’m the first to admit that. In aggregate, like if you’re making a bet on a GDP print, and banking on that as a political issue for the upcoming election, I think all things being equal, you have to sort of put that aside, because it’s not going to happen.

Now we could be wrong, and if we’re wrong, we’ll try to figure out why. But the meta lesson is any backward looking metric that you use to analyze the energy industry is manifestation of what you would call survivorship bias, in the stock market. In other words, it can’t incorporate the latest technology, rate count, pick your favorite. It is backwards looking and existed at a time where technology was inferior to what it is today. And that is what we got wrong. And that is not something we’re going to get wrong again, hopefully in the future.

[00:53:24]Richard Laterman: Taking this line of reasoning and as you’re describing this, yet another competitive advantage that U.S. has found against the rest of the world to ocean moats, abundant natural resources, and now this natural gas glut. It seems like this is the sort of good fortunes that would allow some of the bad thinking to endure because of the overconfidence that that might instill.

And so I’m thinking to one of your other pieces about the idea of using the frozen assets that were seized from Russia, and I’m thinking about the weaponization of the U.S. dollar. I mean, the strength of the U.S. economy begets strength in the U.S. dollar. It begets the continuation of U.S. hegemony. But on the flip side, we do start to see, at the margin, still very, very small, but that’s how these things would begin, right at the margin, bilateral trades with, between some of the BRICS countries ,and the, let’s call them non-aligned powers, and you wrote a piece on gold and how surprised you were with some of the price action, and you’re alluding to the Shanghai gold contract and how you expected it to start to converge more into the neutral reserve asset, and to some degree, the physical gold market has, even though the paper market goal has not. So I wonder if you can comment a little bit on that and tie some of these threads together for us.

[00:54:53]Doomberg: So the first thing that pops into my mind as you were articulating that question is means will be regressed to, and there’s no question that we will overplay our hand. We’ll be arrogant, we’ll make major mistakes and the glut that we’re enjoying today will eventually become a shortage. And you know, success has a way of intoxicating such that you become humbled.

[00:55:16]Mike Philbrick: You learn more by losing.

[00:55:18]Doomberg: Yeah, exactly. And so this is why we’re wondering where the bottom is in natural gas, for example, because like as, the despair we’re seeing in the market is not the stuff of tops. Let’s put it that way, right?

And so, up to your question about gold. So I watched with some fascination –  this is going to sound like it’s a tangent, but actually I think it’s the right answer to your question. NVIDIA’s price action on Friday. Intraday move was what, $200 billion, right? And meanwhile, gold is setting an all-time high. We’ll get to gold in a second, but I’m actually deeply fascinated by Bitcoin at $72,600 as we’re talking, and NVIDIA swinging a hundred billion dollars in an hour. A hundred billion dollars used to mean, something like a billion would mean a lot to me. I wouldn’t be on this podcast if I was in possession of a billion dollars. I can assure you.

[00:56:11]Richard Laterman: I’d like to think maybe.

[00:56:13]Doomberg: I would buy an island and you’d never hear from me again, right? A billion dollars, a lot of money. A hundred billion dollars in an hour of market cap swing in the market, darling stock, is put your glass down and think about what that means. And I can’t help but keep coming back to When Money Dies, the iconic book about the Weimar Republic. Even though I think a glut of hydrocarbons is not bullish for inflation, we have this amazing lack of confidence, I think, in fiat currency that is starting to spread. You see it in Bitcoin, you see it in gold reaching all time highs, albeit much more measurably and controllably as gold always does. And then you see $100 billion swings, like the mania of the casino echoes of what was happening in Germany in the years ahead of hyperinflation. We are, despite relatively tame inflation numbers, which I would agree with most people, think the government probably cooks those numbers, we are at the cusp of fiscal dominance, as Luke Gromen likes to call it.

Like, we are adding a trillion dollars in debt every a hundred days. I’m old enough to remember, I’m not quite old enough to remember, but I was alive when the U.S. first crossed an annual budget of a trillion dollars, let alone a trillion dollar deficit, let alone a trillion dollars in interest payments, let alone a trillion dollars to the debt every 90 days. We are, it’s fascinating to me who’s going to be the marginal buyer of these Treasuries, especially as we weaponize the dollar and seize Russia’s reserves, which they’ve not done. So these questions now on the flip side, back to the recession call, interest payments to wealthy investors are bullish for the economy.

So if you a billion, a trillion dollars in interest payments to pension funds and wealthy investors and bankers and so on, will find its way to the economy. It doesn’t have the velocity of stimmies, but it’s still fiscal stimulus, and so in the short term, it gives a little pulse to the economy. People are getting 5 percent on their money now, right? I mean, this lines people’s pockets. But the sustainability of it all, in the 5 to 10 year time frame, is an entirely different question to whether we will enter a recession in 2024. But it does, I watched those, so I love to watch things like what happened on Friday.

So for those that are unaware, each dollar move in NVIDIA I think is $2.5 billion in market cap. And the intraday swing was 100. It’s a quarter trillion dollars in the market’s quote/unquote objective valuation of what the present value of the future cash flows of NVIDIA is worth. What does that tell you? It tells me something. I don’t know what it is, but it tells me something. Like, by the way, NVIDIA’s worth more than Canada,

[00:59:05]Mike Philbrick: I …

[00:59:06]Doomberg: Right? I mean…

[00:59:07]Mike Philbrick: Larger than the Canadian GDP or …

[00:59:09]Doomberg: Yeah, like, what are we doing? Like, what, what does this mean? What does this actually mean? What does Bitcoin at 72.6 mean? And I love the Bitcoin guys, and they like to harass me and I don’t mind it. But like Bitcoin is just, I mean, it’s predominantly a vehicle for speculation. And here we are, all time high. What does that mean? What does it mean that gold is at an all time high, and that the premium in Shanghai seems to be driving the upward movement, the upward march of gold?

Does that mean that the paper markets were used to suppress the physical price of gold for decades, as many people in the gold community assume? Perhaps. We would caution that, and we said this on our friend Tony Greer’s Zoom call on Friday, that the premium has closed, relative to the past six months, and the alligator jaws of gold, you know, reaching $2190 in the face of no more premium in Shanghai, was a cautious signal to us. And we’ve seemed to have consolidated around this price now. But, for those that don’t know, if gold sells for a higher price in Shanghai, which it has been for most of the year, you can buy paper gold in London, short paper gold in Shanghai, stand for delivery in London and cover your short with physical in Shanghai and park at the average, pocket the arbitrage. And if you look at the total hold, the total gold holdings of the Western ETFs, they’ve been shrinking, even as the price of gold has been rising. And that is basically a chart that we stole from a Zero Hedge tweet, but a proxy for the flow of gold from the, from West to East. And if gold is going to become a central player in the settlement of international trade as a neutral reserve asset, you’d probably want to be in possession of some of it.

And the Chinese are nothing, if not strategic. And so you have gold being bid up in Shanghai. If somebody’s trying to suppress the price in the West, that bluff’s going to be called. And so the piece we wrote that you referenced to is called Gold In Resolution, and our prediction was that in 2024, we’ll know one way or the other.

We’re not saying the price of gold is suppressed in the West, but if it is, we’re going to find out, because the rush, the Chinese have opened this physical exchange window that is allowing sophisticated financiers around the world to arbitrage that price and call the bluff of the paper price suppressors, if it’s real. That, plus the seizing of the Russian reserves, which would cause people to ponder whether gold might be a better neutral reserve asset than U.S. Treasuries, which is again, full credit to Luke Romen for putting that on our radar. Those two things combined is why we have a relatively large allocation of gold in our personal portfolios, in full disclosure.

[01:01:55]Richard Laterman: I’m assuming the Shanghai gold exchange has grown to significant depth and volume at this point. I haven’t quite thought…

[01:02:06]Doomberg: It doesn’t really need to be, because in inelastic commodities, prices are set at the margin.

[01:02:12]Mike Philbrick: Okay.

[01:02:12]Richard Laterman: Absolutely, but I am assuming at this point, given the attention, it’s grown.

[01:02:16]Doomberg: Yeah, it is reasonably liquid as all developed gold. Look, there’s markets beyond London and New York, right? I mean, you have Dubai and various other gold centers. For anybody that has a Bloomberg terminal, you can follow the premium under the SHAUPREM index.

And the plot we like to make is, the price of gold and the price of this premium, and you see these alligator jaws first opening up with the premium expanding, which then marked the bottom in gold and caused this recent rally, and now it’s going the other way, which is why we express some caution on the near term price. But if that mechanism exists and the CCP is willing to exploit it, then we could see gold run from here. When I see that happening and I see Bitcoin and I see NVIDIA swinging a quarter trillion dollars over lunch, something is, I don’t understand something, and it’s time to take a step back and ponder what that might be.

[01:03:21]Mike Philbrick: Good advice.

[01:03:24]Richard Laterman: Yeah, I think maybe lastly, we might touch on one of your other pieces, which was this idea of climate newspeak and compelled speech, which is something us north of the border here have been unfortunately, quite familiar with, on the Canadian side. And, I’m just curious because it’s yet another symptom of the times, and of this orthodoxy when it comes to groupthink, and we are now facing this idea that if we are not following the Davos script, we could be liable for hate crimes. Is that the general …

[01:04:13]Doomberg: Yeah, I think Bill C-63, as it’s called, and currently making its way through the Canadian Parliament, is a severe threat to liberty in Canada, and the piece we wrote was inspired by a piece of legislation that didn’t go very far a few weeks ago, by Charlie Angus, as we sort of called him a quintessential member of the Canadian political left and currently a backbencher in the in the New Democratic Party.

He proposed this bill, C-372, which of course, as a private member’s bill was not proposed by a Minister or backed by the full weight of the government machinery, but still nonetheless, achieved his purpose of creating significant global headlines, which would make it effectively illegal to say something nice about fossil fuels. These are not power moves, right? These are moves by people who are extremists in their views and can read the polls and want to leave as much damaging mines buried in the ground and laid in the sea as they can, before they are swept away from power.

And I think any objective reading of the Canadian political mood would say that if an election were held tomorrow, we would have a radically different government in place. But while power can be exercised and it is common for people that hold views, that feel as though their ends justify their means, and what end could justify more nefarious means than the literal end of the world, because the people who believe that to be imminent, many of them genuinely do. I think some are in it for the power, but others are full converts to the orthodoxy. And so it’s a very dangerous time. I would say like the next year in Canada is a very, very dangerous time to be a free thinking person.

And, so too, is it dangerous here in the U.S. with the upcoming election? It is our view that half of the country will reject the results of this election. And that is not a good situation to be in as a quote/unquote democracy. In fact, the word democracy itself is undergoing a purposeful semantic shift to mean the current slate of leaders retain their power. If you look at what Germany is doing with the AFD, trying to allow that party, if you look at the, whatever you think of Trump, and we think Trump has many deep flaws, the prosecution of Trump by Democrat-leaning attorney generals is not the stuff of stable democracies. And you see what’s going on in Canada. Like, if your positions are truly defendable and we would say spontaneously believed by people, the need to outlaw opposition to those ideas is not a sign of power. This is a sign of the incorrectness of your ideas and the desperation of the political actors who are behind such concoctions.

[01:07:11]Richard Laterman: The hollowness of the arguments at the end of the day is what that belies, right? At the end of the day, you don’t even believe you can defend your own arguments. That is why the opposing thought must be outlawed.

[01:07:23]Doomberg: Yes, and we’d use the violence, the sanctioned violence of the state to oppress our political opponents. This is forever thus. This is nothing unique about history and this cycle works, will turn to, but it doesn’t mean that the friction of the transition isn’t going to be very, very high. So, it is a very dangerous time, and, you know, we shall see.

[01:07:45]Mike Philbrick: We shall. Well, on that, we’ve been at this for an hour. Doomberg, you got anything else, Richard, that you want to…

[01:07:53]Richard Laterman: Maybe on a cheery note, is there anything that you’re working on, anything that we could at least try to end on a slightly brighter note? If we can, if not, let’s just go for more, some more …

[01:08:03]Doomberg: No, we’re like, we’re publishing an optimistic piece on nuclear energy here soon. It’ll probably come out before this publishes called Prime Time where we think the entrance of Amazon to the nuclear chat raises good prospects for nuclear, and actually makes us focus on enrichment.

And so we hosted our February Doom Zoom with a physicist, who gave a 90 minute presentation on the entire sort of front end of the nuclear fuel cycle, which was very fascinating. And we were writing a summary of that. Ultimately I do think that means we’ll be regressed to, and the thought police, and C-63, and all of these things, you know, ultimately, the culture and character of Canada and the U.S. will survive this period of adversity. We survived the ‘70s. We survived the ‘60s. We survived World War II. We survived the First World War. We survived the terrorist attacks of 9-11. This too shall pass. The vast majority of the center are free thinking people with good ethics and good empathy. And means will be regressed to, and the harder you pull on the elastic, the quicker it snaps back.

[01:09:10]Richard Laterman: Amen. Love it. That’s a great way to close.

[01:09:13]Mike Philbrick: All right. That’s awesome. And, if you’ve listened to us through and you don’t know who Doomberg is, look them up on Substack and make sure you subscribe. The content is always fascinating, and a couple of derivatives deeper than most people are thinking about issues and…

[01:09:30]Richard Laterman: And I’ll just add that I have not yet come across another information source that so regularly raises their hand to acknowledge when they’re wrong and accept the mea culpa’s. And so I completely endorse. I try to read everything you guys put out and listen to every piece of content that I can. I am more informed and smarter every time I engage with your content. So thank you for continuing to do the work you do, and for coming on today.

[01:09:58]Doomberg: That was great. And that’s the, I couldn’t think of a better articulation of our brand ambition. So it was real great. And I always enjoy coming back, looking forward to appearance number four, five, six, seven, and eight.

[01:10:09]Mike Philbrick:

[01:10:09]Richard Laterman: As we will, for sure. Thank you so much guys for listening. See you next time.

[01:10:13]Rodrigo Gordillo: Sorry to interrupt, but I did want to take a quick second to remind our listeners that the team works really hard on these podcasts. We spend a lot of hours trying to get the right guests and we do a lot of prep work to make sure that we’re asking the right questions. So if you do have a second, just do hit that subscribe button, hit that like button, and share with friends if you find what we’re doing useful.

Thanks again.

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*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.