MAGGIE LAKE: Hello, welcome to the Real Vision Daily Briefing. It's Tuesday, January 4th, 2022. I'm Maggie Lake and here with me today is Tony Greer, Editor of The Morning Navigator. Hey there, Tony.

TONY GREER: How are you, Maggie? Happy New Year.

MAGGIE LAKE: Yeah. Same to you. Happy New Year. 2022 is certainly going to be action packed. We've seen that already in the first couple of trading sessions. Another interesting mix of news today. Some of yesterday's winners were today's losers. Tech stocks down, the NASDAQ the biggest loser of the major indices, down about a percent, actually over a percent.

The S&P 500 did hit a new intraday high earlier but couldn't hang on as we saw that tech selling. The yield, meanwhile, on the US 10 Year Treasury edged up to 1.66% after the Labor Department reported a record number of people quit their jobs in November, 4.5 million. And oil rallied with Brent above 80 and WTI at about $77 a barrel. Tony, we're going to do something a little different today and start off with a question because we have a great one from Goncalo on the Exchange.

I apologize if I'm mispronouncing your name, but they're asking, do you think that energy is up because maybe big hedge funds are deleveraging? And as they were long tech, short cyclicals, maybe that short covering that's behind this, or do you think it's the beginning of a big rotation year? What do you think about that, given the action we saw today in the market?

TONY GREER: That's a great setup for today's market action actually, Maggie. We're seeing a massive rotation today into natural resources out of technology, as you said. In terms of the energy question, the oil question, yeah, it could be. There's certainly some measure of portfolios out there that are probably short some of the cyclical stuff like commodities.

WTI expecting a more deflationary scenario, and probably still left over from the last 10 years, a lot of technology on their pad. When you come out of the gates in 2022, and the breakeven 5 Year makes a statement like it did yesterday, breaking above all major moving averages, closing on the highs, really, really continuing to be that beacon of inflation for the markets that it's been, that set the tone for me yesterday.

That was a significant move. 2 Year paper, once again, goes bidless, while 5 Year breakevens are breaking out. We touched 80 basis points in the 2 Year. As you astutely point out, we're at 170 in the 10 Year now, yields looking like they can break even higher. Yeah, the market is telling us right now that it's expecting that inflationary environment to follow through from last year, which is really a story about it's a commodity story.

It really is, Maggie. We've seen a lot of strength underneath the commodity markets, and they keep bubbling up every time we have a derisking. Yeah, I think that traders are starting to get positioned, whether it's for the first quarter or for the whole year, they're piling into natural resources today. That's for sure.

MAGGIE LAKE: This feels like it has some staying power. Because I think that when they're asking that, they're wondering, is this a beginning of the year just temporary repositioning? Do you see this rotation trade as something that has staying power?

TONY GREER: Oh, man, I think it's going to be with us for a while and I think it can get violent at times. Yeah, I really do. If we look at the tape today, I've got enough evidence of there are as many two and three sigma breakouts in natural resources as there are two or three sigma breakdowns in technology. These are, when I see major magnitude moves like this, it tells me more that we're at the beginning of a new paradigm rather than at the end of one.

When I look up today, and I see at the top of my leaderboard, we've got John Deere that just came out with an autonomous tractor, up 6% today. Then we've got financials. JPMorgan and Bank of America up on the top of the leaderboard, we've got Halliburton and Schlumberger in the oil services space. We've got Exxon Mobil and oxy in the E&P space, Morgan Stanley, XLF. These are all two sigma breakouts and I think that this is going to set the tone here.

Because on the other side, most importantly, and in addition to there being large magnitude moves on the downside in technology, these moves are doing some serious technical damage. These are not two or three sigma moves to the downside that I want to stay in there and catch the falling safe. When I look across these names, Shopify, Cisco, Snapchat, Twitter, the social media sector, a lot of this is undoubtedly part of Joe Rogan's media revolution that's taking place outside of our door right now.

But a lot of it is that rotation at a technology. And like I said, these stocks are dangling into new lows, these aren't falling back into support. They're not consolidating, they are taking the message from the Natural Resources tape, and from bond market based inflation expectations and saying, for now, we're out of here. I think that portfolio managers after the last 10 years of being positioned really heavily for deflation, and then getting bailed out at the end of last year with the-- when we had that big Omicron sniffles dip right after Thanksgiving weekend that everybody panicked over.

There was a lot of de risking, we saw it right in front of our face, big TICK index prints on the downside, a lot of stress in the markets. We spent the last couple weeks of the year with the VIX around 2530. And that was really people just saying, okay, we've got to lighten up this rotation here. Now, we're seeing the exact opposite of that getting right back into those natural resources -led type of movement. And because big tech is such a heavy weighting in the S&P right now, that probably leads to a little bit of a negative move in the broader index. But if you're in the right sectors, who cares?

MAGGIE LAKE: Yeah, that's really important. Because so much of the action was driven by those big tech names that when you're looking at the indices and we saw it today, the S&P 500 hit that intraday high that got pulled down when we saw that selling in tech, but if you're not exposed to that big market, then it's a different story. It looks very different for you.

TONY GREER: Exactly. And for when I look back, Maggie, at last month, we just spent the month of December with a lot of volatility. And it was interesting to see that all the dollar index had to do was back off 40 basis points in December to set the Bloomberg Commodities Index free for a 3.5% rally largely led by metals and mining stocks. We had oil and gas up 12% in addition, aluminum up 7% last month, grains up 4%, grains leading today. These are the stories that keep reiterating themselves. And these are the ones that I'm expecting to keep showing their face this year.

MAGGIE LAKE: I'm glad you brought up metals. I had the chance to sit down with Peter Brandt of Factor who talked about his outlook for 2022 including his forecast. We hit pretty much every asset class including precious metals and he said some really interesting about silver . Let's have a listen to that.

PETER BRANDT: Of all the markets that I trade, I'm most constructive on silver as a matter of fact. My biggest position right now, not counting real estate that I own, live in, rent, not counting retirement equity positions, not counting a pretty good chunk I have an Bitcoin, is in silver. I really liked silver. Silver has come out, if you look at the chart of silver, you look at a weekly or monthly chart of silver, we emerged back in early 2020 from a big base.

Silver prices are cheap. We were at $50 silver back in the 1970s. We're at $50 silver back in the 1990s. We're at silver right now, we're in the 20s. We're in the mid-20s. I think silver goes to 30 this year, possibly to 50 next, and then I think silver has upside from there.

When I look at gold and silver, I prefer silver. I think silver is-- I call it the altcoin, the altcoin of metals, so one that's going to give you the big volatility in both directions. But I think silver prices are very reasonably priced. I think silver has substantial upside potential from where we are. I own silver. I like silver. I'm bullish silver.

MAGGIE LAKE: And that entire interview is available on Essential Plus and Pro tiers. So much good info in my conversation there with Peter, but I'm curious, Tony, to get your thoughts. I know you watch the metal space really closely. What are your thoughts on silver? Are you also bullish? And if not, is there something you like better?

TONY GREER: My thoughts are I'm rooting for him. Maggie, for me, I continue to point out that precious metals are struggling in a tape where natural resources are not. And that may mean that people have thrown in the towel, it may mean maybe a positive thing where there's so little interest and they've been left for dead that eventually they wake up and surprise everybody. But my perspective is after the last year, just look at it that we've seen so much headline inflation.

I look over and silver's $24. And after a year that we've seen so much headline inflation, I look over, and gold is $1,800. And I keep joking that that's an evergreen tweet, like, look, there goes gold through 1800. It just boggles around that price. I don't have as much passion for it as he does. With any luck, I'll jump in and catch the trade if it starts going, because I'm not going to take my eye off of it for sure.

I can just find other things that are performing better and doing better for my book than gold and silver right now. And that's what I'm all about.

MAGGIE LAKE: Yeah, makes a lot of sense. I'm curious, Peter and I started out the conversation talking about currencies and the dollar, because his feeling is if he doesn't get that call right, then everything else. He can't execute on any of his other trades if he doesn't understand that macro call. What are your thoughts? Are you watching the dollar? Does the same apply for you?

TONY GREER: Yeah, it does apply. But I got to tell you, Maggie, let me put Peter at ease a little bit, we just came out of a year, 2021, with the dollar index rallied 5% and the Bloomberg Commodities Index rallied 27%. In my 30 years of trading, I haven't seen too many episodes where we have a really, really robust dollar move like that, and commodities just leap out of the gate.

I'm saying while I'm not as favorable towards gold and silver as Peter is, I don't know, I'm not going to sweat too much, I'm not going to sweat dollar strength too much this year. It's going to be something where dollar strength means my commodity trade is probably going to work. Dollar weakness means my commodity trade is going to be blowing my hair back, we're going to be flying so high. That's just how it's been going.

As evidenced by December, we finally get one month where there's a pullback in the dollar index, obviously, at the expense of the euro, the yuan, and the Aussie dollar, but commodities are up and gone. They're not waiting around. That's my speedometer on the commodity trade, is the dollar and the breakevens.

MAGGIE LAKE: Yeah, it's interesting. And he's also, I think fair to say, also thinking of them separately, maybe in this case, but bullish on the dollar and not influencing his commodity, also able to be bullish certainly on his silver call and some ag commodities. It is a really interesting time. It's maybe some of those old tenants not really holding true in this environment for now. I want to get to a question from Jim on The Exchange.

Great, great questions today, by the way, coming in, from the viewers and listeners. Thank you so much for that. If you have any, pop them on The Exchange, or put them on the site, or in the comment section on YouTube. Jim asks, are institutions underweight energy because of their reluctance to invest in a sector that's not viewed favorably in the ESG arena? Do they now have to revisit that decision and increase their exposure to oil and gas, essentially play catch up?

TONY GREER: That is a great question. To me, that is my long play in the crude oil space, is that eventually, the big E&P companies or first of all, the large cap E&P companies are going to stay alive through this ESG period that we're in right now. Because they're going to pivot to carbon capture. They've got all the tools necessary and if we don't start with carbon neutrality from the source of pulling the oil out of the ground, we're never going to get there.

They're doing the right thing. They're long carbon credits. They have gone into the business line of carbon capture and storage. That's, I think, going to keep them afloat for this ESG period where, yeah, Larry Fink is telling people to get out of fossil fuel stocks, because we're not going to capitalize them. I think the longer trade for me is to figure out how to stay in these names for when the world realizes that they're still going to be the source to pull the gasoline out of the ground.

And last I checked, gasoline demand is pretty strong globally right now despite muddling through the virus, the pandemic, the lockdowns, all the nonsense. Gasoline demand is pretty strong given that situation, so in a fully reopened scenario, man, gasoline could pick up and go really fast because we've got growing demand and shrinking inventories. That story is as old as it gets, right, Maggie?

MAGGIE LAKE: Yeah. You're saying that you are-- I don't think taking conference the right phrase, but you are watching what they're doing in the carbon capture space as their transition play. You're not scared off by the ESG mandate because of what they're doing in carbon capture. Easier for them to do than me to say, but--

TONY GREER: They're cooperating, Maggie. They're doing the responsible corporate thing and staying alive in periods of stress and times when there aren't the whole markets aren't going for them. But talking about how out of favor they are, E&P stocks had been thus far the smallest percentage that they've been for 50 years in terms of their presence in the S&P. I still think we have a long, long, long way to go on the upside if they're going to come back into favor.

And I think that that can happen whether or not we're successful in our carbon neutral by 2030 plan, or whichever global plan you want to go by, I feel like no matter what, we're going to be kicking that can down the road, whatever the carbon neutral deadline is, because I think it's just going to be harder and harder in reality to get there as hard as they want to mash it on the tape. What I think is that E&P hangs around through this whole entire period.

And then, man, if we get through this and realize that it's just not going to happen as fast as the establishment would like it, where we're all on electric vehicles, etc., etc., I still see a really, really bullish scenario for the E&P companies.

MAGGIE LAKE: I want to ask you something about, we had the OPEC meeting today and some Ford news. I want to get to that, but we have a question, since we're on this topic, from Oliver from the site. Are you long the carbon credit trade? We just talked about the companies getting into that business. Are you playing there yet, or are you waiting outside your area?

TONY GREER: It's in my area. It's a really popular topic in my Slack channel. We talk about carbon capture and storage, KRBN all the time. We talk about it as it relates to the European energy crisis that's going on right now, which is obviously gotten a little bit of a reprieve from something warmer than expected weather. Natural gas has been flying up through 200 euro per kilowatt hour again this week, it's rather been cut in half, which is a big relief for them.

But yeah, I think that these are going to be the names that you have to stay in throughout this process. And then you can look at carbon capture, I don't want to get away from that. It's a tricky, tricky trade, Maggie. Looking at it from 30,000 feet up, seeing how there's still a humongous balance of industrial companies that have to go carbon neutral, it's hard to think that the KRBN, carbon credit ETF, can back off much. We've got a lot of companies out there putting a lot of carbon emissions into the atmosphere that are not carbon neutral yet.

They're the natural bid in KRBN. At some point, they've got to figure out how to neutralize their carbon emissions. I think that there's going to be a natural bid to the markets. You can see when the ESG picture fails and comes apart, and Europe comes under heavy stress and electricity prices are flying through the roof, the carbon credit trade backs off because everybody starts to think to themselves, hey, are they going to be able to force this on the tape, this carbon neutral, by 2030, or are they going to have to, like I said, kick the can down the road and say, okay, we've got to ease up because we don't have all the resources at our command to build the whole electronic infrastructure?

I'm waiting to see how that pans out. A big failure in ESG policy, or a perceived failure by the markets is what I'm looking for as a final entry level to KRBN. Yeah, I'm hunting KRBN from the long side, but I'm in the weeds with eye black on my face, and I'm waiting for an event to knock it into my wheelhouse so I can put some bids in and buy it on the bid because you can't buy it right now.

MAGGIE LAKE: I love that visual toy. That's a great one. I want to talk a little bit about both. It's interesting this juxtaposition between what's happening in the oil markets and then that ESG trade came up again today because we had OPEC meeting say it's going to increase production but it looks less clear that the members can actually deliver on that. I think we have a chart of WT, how are you feeling about the oil trade? Do you see upside? Is there something you're targeting? What do you see happening there first off?

TONY GREER: I'm a Byron Wien, man, I'm a $100 bid. I really don't see how we get out of that scenario given the situation right now with rising demand, shrinking inventories, squelching exploration and production, we're not putting new rigs in the ground. The scenario keeps getting more and more bullish for crude oil if you ask me. The latest development, what I cling to when I hear OPEC is the Bank of America call coming out of Thanksgiving weekend.