Leigh Goehring and Adam Rozencwajg have come out with their 1Q22 letter, where they update their views on a commodity bull market that they expect to last about a decade. Among the interesting sections is a long discussion about the peaking of production in US shale gas fields, possibly this year, due to resource limitations, not just low capex. Free, but registration required.
Read: The Global Natural Gas Crisis Is Coming to North America
Bigfoot institutional shop GMO has also written a quarterly letter, which also looks at commodity producers as value/cashflow/dividend plays with inherent inflation protection. Regular value guys can’t ignore the valuations here — I mentioned supermajor Total Energy trading at sub-5x 22e earnings. Also, being the best performing sector in 2021 and 2022 ytd tends to get people’s attention. But, it is still early, as the valuations themselves show. Would you believe that, while ARKK is still getting inflows, the US E&P ETF XOP has actually been experiencing outflows? Does anyone know how to play this game?
Now-retired founder of GMO, Jeremy Grantham, aka “the Ghost of Bubbles Past,” recalls the similarities between today and 2000. Profit margins are due for a big compression, he said, which would make today’s seemingly-modest forward PE ratios not so hot anymore.
Watch Jeremy Grantham interview on CNBC
Lastly, Ray Dalio, retired founder of giant macro hedge fund Bridgewater Associates, suggested 15% gold in a “well-diversified portfolio” — actually, in line with the World Gold Council’s statistical results since the Floating Fiat Era began in 1971.