For those of you that don't know, the

crack spread actually comes from

cracking that barrel of oil open and

making different products out of it. So

that's where that comes from. Good to

know.

>> Yeah, people make jokes about that name,

but I digress. When you look at it from

a perspective of what is actually

happening, what most of us that focus on

oil, it's probably 30 40% of what I do

uh in a given day is barrels are getting

out. Oil, barrels of oil are getting

out. The struggle now is in part related

to the Houthis attacking Saudi and

others refineries. Uh just last night

they attacked the Jazan refinery in

Saudi Arabia which was mostly a diesel

fuel refinery. There was also chemical

coming out of it petrochemicals but it

you could characterize that as a diesel

refinery very loosely. And that's part

of the problem. The shortage is now

diesel fuel not necessarily oil. That's

why you don't see oil responding as much

as diesel is. And that's why that spread

keeps widening. Russia has periodically

completely eliminated the exporting of

diesel fuel from their refineries. China

has built about 16 new refineries since

the US started the Brownsville, Texas

refinery project, which still hasn't

even broken ground and is expected to do

any actual refinering till probably late

2027, possibly early 2028. New

refineries are hard to come by in the

West. So we're generally getting

refineries out of the places that are in

conflict. That's where we're getting a

lot of diesel fuel from globally. So

that's why that crack spread keeps

widening. And there's nothing the Fed

[snorts] or even the opening of the

straight can necessarily do about that.

The opening of the straight, we're not

just talking about the straight of

Hormuz anymore. We're talking about the

Bob Elandab Strait, which is what the

Houthis are attacking where Saudi Arabia

is diverting some of their shipments.

It's over in the Red Sea. That's also

been blocked now by the Houthis. So

that's the problem. It's the refined

products coming out. That's why you're

not seeing actual crude oil react as

much as you would think it would.

>> I mean, at the same time though, crude

is the ship's getting through. There's

some barrels coming out, but it's still

a heck of a lot less than it was before

this conflict started. And the conflict

doesn't seem to really show any signs of

ending. Right. Just this morning, we had

reports of Iran striking a ship in what

is supposed to be the US controlled part

of the straight. So, I mean, that

doesn't necessarily imply any any

relief. I mean, even if if oil doesn't

spike again, it implies that it it's not

going to go a heck of a lot lower from

here either.

>> Well, it's certainly not going to help

with the diesel fuel problem. You could

open both straits right now and it

wouldn't necessarily put a dent in the

diesel fuel problem because the crude

that's coming out has to be refined.

Now, would add some refined product to

market that I'll give you. But if you

look at it from the crude oil

perspective, again, what you're hearing

in the headlines, and I'm not talking

about the news headlines, I'm talking

the headlines coming out of Iran as well

as the headlines coming out of this

administration, isn't necessarily

reflective of what's happening in the

actual oil market. I'll give you an

example. When the lastou was signed, I

don't know if that was number 12, number

20, I don't know what it was. You look

at it from that perspective, there were

already Iranian ships getting I'm sorry,

Iraqi ships coming out because when that

was signed, they made note of Iraqi

Iraqi ships coming back to refill at

some of the refining plants. That

couldn't have happened if they didn't

get out in the first place. There were

clearly some empty ships sitting on the

other side of the straight, but these

ships were tracked as coming back from

purchasers, consumers of both oil and

refined products going back into the

straits to fill up. So there's a little

bit of rhetoric between the two

governments, that of Iran and that of

the US, talking back and forth.

Obviously from the US, every ship is

getting through. From Iran, no ships are

getting through. The reality is in the

price of crude oil, not in what you

read, what the two administrations are

saying to the to the media.

>> And just to get back to diesel for a

minute then, if what you're saying, you

know, ends up playing out, it sounds

like diesel could well go higher from

here.

>> It could. And that's the problem with

the inflation front and that's the

problem that the Fed is in right now as

we wait for the minutes to come out

tomorrow. You can't affect inflation

that's driven by the price of diesel

into the goods that are shipped to

consumers. You can't affect that.

There's nothing the Fed can do with

hiking rates to fix that. I believe they

know that. I'm not sure, but I believe

they are. And I think that's starting to

be reflected in the probabilities of of

a Fed rate hike dropping even from

yesterday to today. Yesterday was about

36%. This morning it's about 34.3%.

So you're not looking at a situation the

Fed can fix. Now they may need to hike

anyway just to sort of take care of

their credibility. Um but if they're

going to do that, they need to do it in

September because you can't do it

approaching the midterms. It's always

been strange to me, Julie, where

everyone says they can't be political,

but then they can't hike or cut rates

into an election because that would be

political. I've never understood that.

They're either independent or they're

not.

>> Right. doesn't well yes it doesn't make

necessarily a lot of sense but who knows

I mean what they actually do and what

people say they do and why they do it

are two different things so um let's

talk about something else that is very

inflationaffected and that is gold um I

just want to take a look at our

alphasace platform for a moment here at

a couple of different charts that uh we

have built to to kind of reflect what's

going on in the price of gold so what

we're looking at here is the price of

gold versus the S&P 500 we've started to

see gold recover from the lows

Obviously, we know last year we it had a

big up year for gold, but stocks are

still beating it. Um, then I'm also

taking a look at gold miners versus the

S&P 500 here. Miners have held up a

little bit better, right? They tend to

kind of magnify the movement in gold.

So, they've come up a little bit from

the uh lows here. And then finally, also

looking at gold miners versus the price

of gold. So, gold miners have

outperformed the price of gold itself.

So, all of this is to say, and you got a

heat map of the gold miners, many of

which are falling today. Um, all of this

is to say, like, what do you think about

gold right now? You know, do you think

we'll have further recovery from the

lows, especially given what's going on

with yields and what's going on with the

dollar?

>> I do. And the reason I say that is

because you can have two sides of the

long bond yield. Okay? The long bond

yield could be implying inflation. It

could be implying a strong economy as

well. Um, I think it's the inflationary

story this this time and gold is an

inflation hedge. If the Fed is not

fighting inflation, if the Fed is

fighting inflation, then gold suffers.

It's not as good of a hedge because the

competition for gold is short-term

interest rates. So, if those are going

up, gold goes down and vice versa.

That's not binary, but that's typically

what happens. Now, if you look at the

miners, for example, in our newsletter,

the unfiltered investor newsletter, we

put out a buy of a gold miner ETF, a

Vanax gold miners ETF, I believe it

symbols GDX. We put that out because

there are certain spots in time gold

miners tend to have very fixed cost

structures. So, when gold gets to a

price and stays there, their profit

margins widen because their costs don't

necessarily increase incrementally with

the price of gold. Now, normally I'm the

guy who's saying if you think a move is

coming in a commodity, buy the commodity

rather than the people who mine for it.

Because if you're buying miners, for

example, you have CEO scandal risk. You

have non-GAAP earnings risks. You have

all kinds of things you don't have in

the actual commodity. But in this

situation, gold has been elevated for so

long and the cost of mining has been

stable for about the last 2 years, which

is why I believe the miners are now

outperforming the actual commodity.

>> Interesting. All right. Well, keep

watching that. I mean that's what's been

happening in the oil space too uh to

some extent. Interesting stuff. Good to

see you Bob. Thank you.