Robert Friedland: The Physical World Is Going To Compete With The Bullshit Financial World
Billionaire mining entrepreneur delivering more shock therapy for the West's critical raw materials supply chain.
A truly excellent episode of the Smarter Markets Podcast featuring billionaire mining entrepreneur Robert Friedland and Chief Strategy Officer of Energy Pathways at Carlyle, Jeff Currie.
As usual, Friedland was in top form, preaching the revenge of the miners and the incredible moves still to come in strategic metals that are critical to national security.
“In recent days, China has cut off virtually all raw materials to Japan….they were quite unhappy with a few unfortunate remarks made by the new Japanese Prime Minister. And I think it’s very clear now we’ve gone from an integrated just in time economy to a just in case economy, and everybody’s scrambling to secure their supply chain. Everybody’s realizing that this really has a direct connection to national security and military matters.”
Jeff Currie on the commodity hoarding phase:
“This thing's entering a new phase, we're going into the hoarding phase, which I think could put a lot of upward pressure across the entire commodity complex, because your supply chains are now vulnerable.”
And Friedland talks about the prospect of “psychedelic” price action in copper:
“….the supply demand balance for copper at the moment is not too bad. Not too bad compared to what I think we’re going to see at the end of the decade. We have real structural problems in mining copper all over the world. When we get into a real deficit market, that could really get psychedelic because there’s so much loose money slushing around, and things like Bitcoin.
You know, in Bitcoin, I always show you a picture of a coin. You know what it looks like? There’s no coin. It’s just a little bit of magnetic energy. If an EMP weapon comes over your city, it’ll just wipe out the internet. You won’t be able to eat your bitcoins in an emergency. But we’ve seen Bitcoin go from $1,000 to $120,000. So we’ve seen copper go from $4/lb to $6/lb.
That’s nothing.
We’ve seen gold go from $2,000/oz to $6,000/oz.
These are little baby steps for baby feet. If the dollar really gets challenged, if the dollar falls off its perch, if China starts getting everybody to start accepting CNY for payment, I I don’t think there’s any theoretical target price for any of these metals. There’s no fundamental difference between $5,000 gold and $20,000 gold or between $13,000/tonne copper and $30,000/tonne copper. I’ve seen molybdenum go from $1/lb to $30/lb, that’s 30x!”
On the ongoing unconventional conflict:
“What we have is a unconventional conflict. People are cutting fiber optic cables in the Baltic Sea. Strange drones are appearing in European airspace. Increases in military budgets.
But guys, if you look at this in a historical perspective. Once this starts, this can run much much much further. If we go back to this podcast three, four, five years from now, and we look at what we knew today, I don’t think this is it yet. I think what Jeff is saying is true. I agree with a lot of it, but my gut is that this is a situation that we haven’t lived in since World War II, in our natural lifespan.
It’s a feeling of it’s never happened before.”
Jeff Currie points out how underappreciated, underinvested and underdeveloped the natural resources sector is…
“You put it all together, this is an underinvested space, most of the investors around the world don’t even have the people on staff to actually rotate into this sector even if they wanted to. So if you take the three and a half times of financial capital, which is we’re talking trillions of dollars, redirect it and aim it at real assets, God help you about the upside here, and it’ll be across the financials as well as the the physical assets.”
I don’t think this last point can be overemphasized. Not only has the mining sector been neglected by the West for the last fifty years. Even if we decided that we have the political will and financial capital to build a bunch of new mines tomorrow, we don’t have the skilled labor to build new mines rapidly, and the investment banks don’t even have enough experienced analysts to effectively cover the metals & mining sector.
Robert Friedland drives it home as only he knows how to:
“I think what’s happened is that we live in this bullshit financial world where I sell you silver for $40 an ounce on the LME and once you find out it’s not really deliverable, we find out that the physical price of silver is very different than the financially shorted silver on paper……
…..Let’s say you’re running a major Middle Eastern country and you want to buy $100 billion worth of gold or $100 billion worth of silver, which is nothing to these guys. You think you can deliver $100 billion worth of physical silver or gold today? It’s hopeless.
And so what we have is a absolutely financialized economy.
And we’ve lost the ability to build anything.
When these top seven stocks hit an air pocket, the whole market goes down with it. And by the way, they’re starting to move in different directions. Nvidia has gone from zero to $5 trillion, but they need gallium to make a chip and Bloom Energy has gone to a massive market cap.
They need scandium metal to build fuel cell. And so we’re starting to see that the Chinese and by the way, you you can only accuse the Chinese of being intelligent and prescient and educated. They’re just beginning to call the bluff. They’re just beginning to say, “Wait a minute. Here’s these 27 elements in the periodic table, and you need our permission to buy them.”
If you want to buy one of these elements for China, now you have to show your blueprints to the Chinese government, and you have to explain why it’s not dual use technology, and then they get to see your blueprints. Who in American industry wants to expose their blueprints to the Chinese army? And so all of a sudden we’re waking up in a panic saying we need to solve these raw material supply chain problems at any cost.
We’re willing to print dollars to solve the problem.
So this is like trying to get the contents of the Hoover Dam through a garden hose. And once the financial markets actually understand the existential dilemma we’re in, then I would posit we’re in the foothills of the Himalayas. I don’t think it’s started yet.
The silver price is too high to make solar panels. So where is this electricity going to come from when everybody wants to build data centers? We’re screwed because China has more than twice as much electricity in their grid as they require.
So they have huge excess electrical energy to power their AI economy. We don’t.
If we get a little bit of cold weather, the Texas grid goes down and the whole U.S. grid is vulnerable. Our grid is like a hundred-year-old lady waiting to die. It’s just all patched up with chewing gum and bailing wire. And if we start falling out of love with Canada, well, Quebec could just unplug New York City. New York City runs on hydroelectric power from Quebec.
I think that there’s a complete lack of understanding of what is electrical energy? How is it generated? How is it transmitted? How is it used? Where do you think this power is going to come from in an AI world? What’s going to happen if we build 10 billion humanoid robots and they walk to their charging stations and they want to be charged?
So what’s going to happen here is the physical world is going to compete with the bullshit financial world, some of these crazy hyper dreams. And then we’re going to end up with much higher prices for these metals in real terms against a depreciating currency.”
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