Last updated on August 1, 2022
Salem Abraham of Abraham Trading Co. joins the podcast to discuss his bullish outlook for oil, predicated on supply issues and under-investment.
Content Highlights
- The shift to renewable energy is real, even in the Texas panhandle. But the transition is still in the very early stages. Oil and gas are still needed — so are investments in infrastructure (4:13);
- Worldwide drilling has yet to recover to pre-Covid levels. This will lead to $200/barrel oil and $10 gasoline prices (7:07);
- “I think we end up with stagflation,” but even that will not solve the supply issues (8:50);
- Natural gas “is still a great investment” (14:14);
- The benefits of green hydrogen (16:31);
- There are more pipelines than popularly believed in the U.S. and they are actually more precarious than transmission lines (19:52);
- Background on the guest (29:36);
- Liquid alternatives and the need for better diversification (31:37);
- The Federal Reserve has to regain credibility after the ‘transitory’ talk. The Fed will blink, eventually… (36:02);
- Unrelated: Notre Dame will not join the Big 10 for football, says the alumnus (39:49).
More Information on the Guest
- Twitter: @SalemAbraham;
- Website: AbrahamTrading.com.
Quick Highlights From Our YouTube Channel
Transcript
Nathaniel E. Baker 0:30
I’m here with Salem Abraham, of Abraham Trading Company, calling in from Canadian Texas, Texas, which I just learned is a tiny little town in the northern panhandle of Texas. We will talk about that, and how that all factors into this investment thesis in a bit. But a lot of coverage here, a lot of ground that you Salem have covered in your career as an energy trader of various types. But your view that I want to focus on at least to start — this contrarian view here, to cut to the chase here, you’re bullish on oil for a number of reasons that you’ll talk about. So I’ll just shut up with that and let you take it away.
Salem Abraham 1:16
Sure, Nathaniel, it’s great to be with you. And I started trading futures in the futures markets when I was still in college during my last semester at Notre Dame. And I graduated early. So I was I would have been 20. I’m now 56. So I’ve traded futures almost continually the last 36 years I’ve had memberships on them, both the Chicago Mercantile Exchange Chicago Board of Trade, we’ve been market makers and we’ve had a hedge fund a Managed futures hedge fund so so but I’ve also grown up it’s an interesting to you overlay that with a grown up out in this area, that’s a ranching community. It’s, you know, the, I think, you know, the, the nearest Starbucks was 101 miles away, and now it’s now there, you know, now we’ve got 145 miles away, but everybody’s still makes their own coffee that’s got two stoplights. So long way, from anywhere, though, it’s 200 miles from the nearest commercial airport. And so anyhow, so we are. And you hear that? I don’t know if you heard the train
Nathaniel E. Baker 2:16
I was wondering if that was you or me
Salem Abraham 2:17
No that’s the train. Our little town was put here by the train, you know, the Atchison, Topeka, Santa Fe Railroad in 1887. So this is a train they have, you see the trains going out to Los Angeles from here. And so anyhow, so it Burlington Northern line now, so. So we, but we also have oil and gas here. And we also have wind here. So I’ve been somewhat involved in those as well. But what I’m seeing that’s really interesting is, you know, we there’s this shift to renewables. And what we’ve seen out here is, you know, we’ve gone from no wind turbines 20 years ago to now, literally 1000s of wind turbines around the Texas panhandle, so the Texas panhandle and up through Kansas, you go, there’s a lot of very windy spots in the country. And I even have, I haven’t have a I bought a ranch and sold it but kept the wind rights, it’s 1919 square miles 12,000 120 acres of wind rights. So I’ve been green energy, as we see that transition, this area can benefit from that this area also has oil and gas, as well. And when I say gas, I mean natural gas. And so. So what’s fascinating, that I think your listeners ought to consider is this, what I’m seeing is this big ESG push. And, you know, and even this shaming of people who invest in carbon fuels, and everyone’s like, well, you know, you’re a bad person, if you invest in carbon fuels, you must hate the planet, you must hate your grandkids. You know, and so there’s this embarrassment, if you invest in carbon fuels, you’re like, well, you’re, you’re a bad person. So so that peer pressure you get and you know, the money’s the big money’s not in that many hands, and it’s in the cities. And there’s this disconnect, I think of look, we’re making a transition from carbon fuels to green fuels. But that transition has not happened yet. And so and with the carbon fuels, we have this oil and gas wells that deplete over time, so they dropped our if we’d never drill new wells, our oil and gas supply every day, or every every year drops about 5%. So you got this, you know, imagine you drill a well and it starts out at a level and it slowly declines. You know, it’s like draining. Think of a balloon, you know, over time, there’s less pressure so there’s less less coming out of it the ground so Do you have that declining supply, so supply is declining, you’ve got to keep investing. If you don’t keep investing, then you can’t even stay in place, let alone grow. So we’ve had COVID, where we have all this reduction in demand. And we go, let’s say, we’re almost three years now, where, you know, two and a half years that the demand has not been as much, but there’s been very little investment new to make more supply, you got to have drilling rigs. So if you look at the rig numbers, look at drilling rig numbers, if you Google that, you’ll see I mean, just this complete drop off, after really, you had a drop off in 2014, when prices really tanking. So the last eight years, it’s been low, and then it really dropped at COVID. We haven’t gotten back to pre COVID levels on if you look at worldwide drilling, we have not gotten back to pre COVID levels. So what we’re doing is we’re not I don’t even think we’re replacing the 5% decline. So now we’ve got these high prices, and everyone wants to blame it on the Ukraine Russian situation. But the Russian, if you really study Russia, and what they’re doing with it, they’re selling their oil, they’re always getting out there. It’s just they’re doing they’re having to do some trickery to get it out there. And, and but, but so what I see coming with oil is because of the lack of investment, I think we’ll have $200 plus oil, I think we have over $10 gasoline, it’s coming. And I think we have people picketing in front of, you know, and protests in front of wool company offices saying you’re taking advantage of us you’re doing all this, but it’s like, no, we’re all doing it to ourselves with this whole idea of this kind of this. It’s really in a way delusional that you say, Look, we aren’t there yet. It’s like, it’s like ordering a Tesla that you say, well, the Tesla’s coming a year from now I’m gonna go blow up my, you know, my gas guzzler? You know, in you know, and in Yeah. And you’re like, Okay, we you got a year there that you got a problem.
Nathaniel E. Baker 6:58
Interesting. Now, that’s the supply issue. What about the demand side, and we’re talking now about going into a recession, slowdowns here slowdowns there, which is, I assume is what led to the the drop in oil prices? Maybe a little, there’s a lot that goes into it. What do I know, but that fundamental argument, what and in these times, historically, oil prices have declined? What do you make of that whole argument? Do you not see the drop in demand?
Salem Abraham 7:25
I agree with that. And I think I think we have with the Fed, I think, I think we ended up with stagflation, I think the Fed is going to have to raise rates, which is going to is, you know, hurts hurts the economy. But so do you know, high oil prices are similar to high interest rates? I think I think the supply disruption from Ukraine, Russia, I think that hurts things and higher interest rates, you know, they want to stop inflation. And if inflation, you know, we have 40% increase in money supply by the Fed during COVID. That’s, that’s huge. I mean, that’s, that’s like Argentinian light kind of numbers. I mean, you know, it isn’t quite as bad as Argentina, which has 40 to 50% inflation, but it’s about half of what Argentina was, has done so so they’ve got to the Fed has to appear serious. And and they’ve got it, they’ve really got to get their credibility back. Well, so they got to raise these rates. And but we already, we already have oil up, and we have Ukraine and Russia. And those are both creating inflation, because of supply problems. And so I think that creates this and higher interest rates are not going to fix Ukraine and Russia, and they’re not gonna fix a low supply in oil. So, so it’s, it’s interesting, where the Fed is trying to fight inflation, everybody points to energy, they point to the supply disruptions, but it’s like, well, that’s the higher interest rates aren’t gonna fix it really, they are, you know, and they’re gonna do quantitative tightening to, which would help. But I think we have stagflation, I think, but I think eventually, the supply issues gonna be there still, even if we got out of out of the hole. You know, let’s say we go through a recession, let’s say at last, let’s say it’s nine months of a recession, at the end of that nine months, we are not going to have the supply still of oil. And so that’s where I’m looking at, you know, I would say in the six to 18 month range. I think oil prices go up. And, you know, there’s a lot of ways to express that trade, you could do it in the in the futures markets or an options markets, you know, in the in the oil or gasoline market, you know, because even refineries, you know, at some point, you might want to be on the gasoline side, because refineries, they’re not doing new refineries, either. So, so, but you could also do it with stocks, as well. And so it’s just a, it’s a fascinating thing where you have peer pressure playing in instead of economics, you know, saying, hey, there’s $1 to be made here. There’s this peer pressure, and I think it’s gonna bite us.
Nathaniel E. Baker 9:59
What do you make of the argument — We had somebody on the show a couple months ago where the whole show was about this. And it was about how the the whole idea of renewable energies, it’s not cost effective because the amount of of carbon that you need to use to create one of these renewable outputs, like, be it wind or solar, or what have you, ultimately is worse for the environment than if you’re just to drill for oil. Have you seen that discussed at all?
Salem Abraham 10:27
I have. And I think it’s I don’t know enough about all the specifics. I know that, but it’s it is it’s a fascinating argument. But I do think we, you know, if you look at, you know, it’s a carbon problem we’ve got, and I think I think there’s issues there, but at the end of the day, I think I think there’s still things we can do to go more green. And, and I think that’s the direction we’re gonna, we’re gonna go I think it’s harder than people think. Absolutely. That you know, and that’s what we see in the Texas panhandle. You know, I’ve got this, here, I have 19 square miles of wind, I have not got a phone call zero. No one’s willing to put a wind turbine. And the reason is because we don’t have the infrastructure to get the electricity out. And then you get people that they say, we just got to build, we got to we got to make a smart grid. Well, the smart grid means a lot of wires in the air. And that means long transmission lines. Well, you know, if you if you read a book called superpower, Michael Skelly he tried to get long transmission lines from near me in the Oklahoma Panhandle all the way to Memphis, Tennessee. Well, when he’s getting into Arkansas, you’ve got people that own their 10 acres, little slice of heaven. Well, no one wants to put this giant transmission line above and so all the folks in Arkansas really fought it, and it didn’t happen. And so you’ve got people in the country that just say, Hey, I don’t want to, I don’t want that huge transmission line in my backyard. And so there’s, there’s, it’s, it’s harder than people think. And I call them armchair environmentalists, you know, I’ve got I’ve had on three orchards I’ve planted over 20,000 trees, I’ve sued oil companies before, but I also had been involved in the oil and gas business and I have you know, so I’ve done I’ve been on all sides of it. It’s it’s hard these are these are hard problems. I would just say to people that think it’s easy, it’s like go do it, do it and help get involved do your part don’t just say it’s easy that’s the frustration I have is with with people telling me hey, this is easy this you got to do this or that and you say well, you need to try it like you need to come be part of it. And really work like come in let’s go build a wind farm. Let’s do let’s do green hydrogen, let’s do or or you know and and at some point you know, if you don’t like $10 oil, you gotta invest in drilling more oil wells because we need oil and gas and particularly natural gas is going to be I think the the bridge fuel, it’s only got one carbon atom. And I think long term natural gas is still a great investment. You know, I think oil is going to be less is going to go out of favor before natural gas, natural gas and any any long term prediction show this net natural gas is going to be needed because natural gas turbine can be turned on in five minutes. A coal turbine is like hours, six hours nuclear is maybe a day or two. And so you can’t when the wind or sun quits you know you can’t go and just flip on a switch but you can with natural gas and of course coal is the dirtiest I mean coal has it’s it’s got lots of carbons have three or so carbon atoms dependent on coal. It’s all different but but you know, you’ve got methane gas, natural gas, one carbon atom. And it’s cleaner. It’s the cleanest of the carbon fuels and you know, at this point that’s that’s needed for electricity but it’s it’s tricky. Nothing no it is and I just see I see this kind of this kind of ignoring reality have we got to replace the oil and gas at this point? We are not we’re not there yet. So are Tesla hadn’t come in yet. It’s it’s out there. And so and everybody’s, you know, they’re blown up their, their, their Chevy gas guzzler car, and I think there’s gonna be a problem.
Nathaniel E. Baker 14:27
But even if you do have a Tesla, you know, the energy needs to come from somewhere. Electricity isn’t created out of thin air.
Salem Abraham 14:33
Right.
Nathaniel E. Baker 14:34
And a lot of that is powered by, you know, carbon, but yeah, these infrastructure issues that you speak of, is there any it sounds like the the world or at least the US is desperately in need of new infrastructure investments in energy fields? And is there any kind of low hanging fruit can you talk a bit of these challenges, you know, with with building a distribution, but is there any like lower hanging fruit that where something is like it’s an easier political fight. It’s like, okay, this is a renewable energy, it’ll be net carbon neutral for the foreseeable future. We just need to build it, and then we need to build the transports. And is there a way to do that?
Salem Abraham 15:16
I don’t know, I have an idea that, that I’ve heard that I like is you have green hydrogen, where if you can, you know, instead of transporting electricity through wires, you basically converted to hydrogen, and then you send it through pipelines. And that’s pipelines are more palatable to people in the country. So you know, because if you bury a pipeline, three, four feet underground, you know, you can be at your favorite fishing hole out and say, Arkansas or Texas, and you say, oh, yeah, and, you know, my sunset is not, you know, blocked by a big transmission line. It’s, it’s all in here. So it’s underground. That’s, but that’s hard to there’s a lot of things, you know, I think people are trying to solve them. It’s, there’s no low hanging fruit. I think, I think this is, this is all going to take time, you know, and the some of the infrastructure, money that’s that was set aside during COVID. I think that’s going to, you know, that there’s money being thrown at it. But the big thing is just time, you know, it’s like, it’s like, you know, it takes 20 minutes to bake a cake. I think it’s gonna take 20 years to get all this done. And I think it’s just, I understand people are impatient. But this is not something that’s going to be you know, if you’ve ever built a house, yeah. Welcome to building a house times 20. It’s frustrating. It’s hard.
Nathaniel E. Baker 16:45
couldn’t you just just bury the electricity lines to they do that in Europe, right?
Salem Abraham 16:50
You can. it’s like two to — at least double the cost, maybe more. And, you know, you want to go to with DC, if you go very far with transmission, you want to go with a DC line, not an AC line, but you can vary them. And it’s just more expensive.
Nathaniel E. Baker 17:07
Yeah.
Salem Abraham 17:08
But I like that idea too, Nathaniel. I think that’s something to think, think about as well, is burying those lines. And because you, you can’t just assume everybody’s fine. You know, it’s like, well, I don’t want the electric lines in my backyard. But all those country, folks, I don’t mind. And it’s people came to the country to get away from electric lines. And so there’s, you know, you have enough country folks fighting it, it didn’t get to happen. Sure. So as a country, we’ve all got to agree, okay, we don’t want to go and just say, well, let’s go make this big mess out in the country. And and so the city folks can have their electricity and feel good about it. And, you know, you put turbines and solar solar everywhere. And that’s where I’m thinking, I bet your guests would talk about that. Because at some point, all you see is, you see windmills and you see, you know, and you see solar arrays, and you’re like, Wow, this used to be really pretty.
Nathaniel E. Baker 18:00
Yeah, there’s something to be said for that, too. Yeah. I mean, it’s fine. If they’re like on the roofs of houses, which by the way you have out here in Connecticut, even which is not the most sunny place in the world. Well, three months a year. Sure. But, yeah, but then also with pipelines. I mean, that’s a precarious issue. Also, environmentally, and there hasn’t been any new investment in pipelines. I don’t think recently.
Salem Abraham 18:23
right. Well, there’s more pipelines. And people think, you know, they talk about some of the pipelines that they’ve shut down, and they have you know, marches and you know, me as a country, kid growing up here, and it’s like, there’s pipelines everywhere. You know, there’s all over and I think people don’t realize how many pipelines they are, and they focus in on one or two, and it’s more pie. If you look at look up oil and gas pipelines in the United States, they’re all over. Okay. And, you know, as as, you know, my brothers and I have owned ranch land. Over the years, and, you know, we, we deal with pipelines all the time. So, pipelines are not as bad. I mean, you want to you got to be careful with them and all that, but I’ve had way less issues with pipelines than I think that transmission lines, just like those worse as just as a guy, that’s, you know, I’ve made easements with both transmission lines. I’ve negotiated those on my land and and pipelines, I’d rather have pipelines
Nathaniel E. Baker 19:18
You’re talking as far as like an eyesore of weather.
Salem Abraham 19:21
Yeah. Well, and even just Yeah, mostly eyesore, but you really, I haven’t had much trouble with pipelines. I mean, occasionally, you have a problem but, but you can have problems with transmission to
Nathaniel E. Baker 19:33
Yeah. Now how does this natural hydrogen or stuff what they mentioned,
Salem Abraham 19:37
if you get so green hydrogen would be you have solar or you have wind? turbines. And so if it’s green, if you use electricity, you say, Okay, this is stranded electricity in a way, you can’t get it out the transmission lines are here. So let’s take that electricity and let’s take water and now we’re gonna get the water and and bust out the oxygen atom and keep the hydrogen, and you release oxygen and you’ve got hydrogen that goes, and that you send down a pipeline. So so it becomes green hydrogen, because you’re, you’re getting the hydrogen with green power, I say, and it’s safe to transport across these and these Well, hydrogens. I mean, it’s an explosive, you know? Okay. Well, everybody know, but we do natural gas, you know, natural gas, you know, is really for hydrogen atoms plus a carbon atom. Yeah, it’s got one carbon and for hydrogen, so you could even make you know, you can make it from natural gas, you bust out the the carbon atom, and you just are left with hydrogen. So really, methane gas is really, what’s the flammable part is the hydrogen. So it’s really no different. Now, you could convert it to ammonium to, yeah, nitrogen, you add nitrogen to the hydrogen, and then you’ve got ammonia. And so you could, but but it’s not. Yeah, and hydrous. Ammonia is like, I mean, you don’t want to breathe it. Yeah, you know, farmers use it, though, to do fertilizer, anhydrous ammonia, and they have tanks, and they pull it behind, and they’ll they’ll inject the gas into the ground to get nitrogen in the ground. Okay. So anyhow, so there’s anhydrous, ammonia has been dealt with for years. And it’s, and they know how to do it safely. But none of this is safe. None of right. Perfectly safe.
Nathaniel E. Baker 21:21
Are there any green hydrogen companies that are public that you know of?
Salem Abraham 21:31
You know, I know what NextEra does a lot of stuff, but they seem to be but there’s a lot of others that are probably more green. Even I just know, NextEra is is a big utility is also has a lot of green things that they do so. Yeah. But I just Yeah, I think that’s what the idea was sure. The contrarian idea that, that is, I think your listeners ought to really consider would be, are we making a mistake? By you know, kind of, we’re thinking ahead too much. And we’re not taking care of today by not investing in carbon fuels that we do not like, that people do not like, and wish they didn’t have, but that is what we have, you know, you could wish you had a Cadillac. And you but you got a Ford but you’re like this, like, well, you don’t have we’re not there, there’s this kind of this idea of reality is not is not being considered that will look we could wish that unless we’re all going to live in the dark and ride a bike and it’s like, and no one seems to want to volunteer to do that. There are some real hardcore environmentalists that go out and live in a tent. And and God bless him but but um, you know, I’m, I’m with everybody else. I kind of, I like my AC down here in Texas. And on July day, like we’re talking right now. And I like I like driving in the car and not walking places,
Nathaniel E. Baker 22:57
and phones and internet and TVs, also all that stuff.
Salem Abraham 23:00
You know what’s funny, too, you see bit you see these miners? Oh, now they come out and they want to have it’s not the phones quit ringing with them that the word my wind was requested was was from miners, Bitcoin miners. And now they as the price dropped below 40,000. The phone quit ringing but Oh, interesting. But it’s it is, you know, you look at the miners. Now, there’s something that talks about an environmental Oh, yeah, yeah. Yeah. It’s like, we’re just sucking electricity for miners. And you’re like, Well, is this really even make sense? Yeah. I mean, why are we doing that? And, you know, so you start looking at an end today? You know, you got to know the grid is mostly carbon fuels. So we’re gonna burn more carbon fuels for for Bitcoin mining or other mining?
Nathaniel E. Baker 23:51
Yeah, but maybe not at these prices? And maybe not if it goes lower? What about what about nuclear? Because that’s something that is environmentally safe, if it’s done right. And
Salem Abraham 24:00
no, to me, you know, I know, I, you know, my, the compelling argument I saw was the Bill Gates documentary talking about it. I don’t know if you’ve seen that, but it was interesting. And, and the idea that basically, you would want to have computers run it, and, and computers could make it a lot safer. You know, we used to do high frequency trading here at our shop. And, and it’s amazing how you can you can write code, which we did to trade, and you have all these contingencies. And you write them all and it’s all and it’s so much better than humans can do. Yeah, it’s faster, it’s less error prone. All that. So I’ve seen that with high frequency trading, which when we would make markets and ETFs and stuff, but But no, I think nuclear. Yes, I think it can be done. It looks like you know, I think there’s the issue of where to put the waste. But I think there’s ways to deal with that. I mean, you know, you drill a well you have I mean, I mean radio Active material is everywhere. You know that if you go up to Telluride, Colorado, and I know I was on a tour once with my wife and I, we have eight kids. So we go up there Telluride, it’s, it’s, yeah, we would do it there was a tour we were had kids on and they were talking about the miners would find these hot rocks, and they would they would sleep with them at night because they would keep them warm. Oh, so then they ended up having, you know, issues with radiation poisoning. So, I mean, radioactive material is it’s, it’s out there. It’s not. So I think we could deal with that with nuclear. Cool.
Nathaniel E. Baker 25:41
All right, Salem, Abraham, I want to take a quick break, and come back and ask you some more questions about this. But let’s first take a break. If you aren’t a premium subscriber, you will not get the break. Don’t touch the dial. We’ll be right back. In fact, we already are.
Nathaniel E. Baker 25:57
Welcome back everybody here with Salem Abraham, Abraham Trading company out of Canadian Texas, Texas. I originally thought Canadian, Texas was in Canada. It is not it isn’t Texas. But Salem, this is the segment of the show where we ask our guests about their background, how they came to this station in their career, how they came to investing in the first place. So with you obviously you touched on an interesting background from down there in Texas. But yeah, take it away. Tell us tell us about that.
Salem Abraham 26:25
Sure. Well, I so I I grew up as a as a kid, we really a one trick kind of pony, where I know math, and I do math. Well. I’m a slow reader, a poor speller. And, but but I love math, and I love math puzzles. And so and my grandfather, he was in business and so the idea of being in business was interesting. So I went to Notre Dame got a finance degree, was hustled through there to get in and out in three and a half years graduated with honors started trading futures in my last semester. Because and, and really have used that the the love of math to become a quantitative trading in the futures market ran a hedge fund a Managed futures hedge fund that was a there’s a trend following components. Some people call us trend followers. But really, we did a lot of quantitative trading, that was not trend following too. So we did that for 31 and a half years from 1988 to 2019. And then we ended up we’ve transitioned though now starting in 2018, we started a hedge fund that was basically where we had stocks, bonds, and then third party hedge funds. And that’s been now that’s now a mutual fund that that converted to a mutual fund recently. So today we have the Abraham fortress Fund, which is a it has stocks, it has bonds, and it has this third pillar of diversification, which is hedge funds, which we call diversifying alternatives. And today we have seven different hedge funds in there. And so, you know, what we saw, Nathaniel was the need for better diversification, we felt like most people were becoming more and more focused just on stocks, you know, in the world of stocks and bonds, there’s been a slow migration more and more stocks. And really, we’ve, we’ve set aside this idea of the need for diversification, which to me is the bedrock principle of investing. And we think by having alternatives, and they’re in the right alternatives. And that’s where that’s really helpful diversification
Nathaniel E. Baker 28:24
As a mutual fund, you can invest in limited partnerships, or these liquid hedge funds?
Salem Abraham 28:29
liquid hedge funds. You know, it’s there’s a lot of restrictions on mutual funds, where you know, you’re limited to 25% of your money. Well, depending on and generally they’re, they’re hedge funds that have commodity exposure. So that’s you. And so there’s some limits there, and then you do need it to be liquid. And all of our hedge funds can be liquidated. Certainly, within 48 hours, probably 24.
Nathaniel E. Baker 28:54
They have daily NAV?
Salem Abraham 28:57
They all have daily nav, exactly. So yeah, and so that you end up in more, the funds will end up in our more in like global macro managed futures, currency traders, spread traders, a lot of people that trade in the futures markets, where again, you can get daily NAVs.
Nathaniel E. Baker 29:13
and you find that this is enough of they do the job of diversifying away from stocks and bonds.
Salem Abraham 29:18
Right. Yeah, you know, that we were in the Managed futures space and for 31 and a half years and so, we, you know, our pitch to people was always, hey, if you’ll do this, if you’ll invest with us, you’ll see that we can make money. Regardless of where stocks are going, we really are non correlated to stocks. So when we so at some point, though, you’re you know, it’s like you say, if you sell cocoa to people that make chocolate cakes, and you try to tell them, hey, if you use our cocoa, this is how you do it. Well then at some point, you’re like, none of them. Listen, let me just make a cake. Let me just do the whole thing. And then you see this product you go, wow, this is totally awesome. And so that’s, so that’s what we did. And really, we think gets more convenient for people. People don’t want to build things themselves. They want to, I think in this world, we want convenience. It would be like if you’re flying from New York to LA, and the pilots came back and took a poll about how do we want to get there and at what altitude, you know, you’re like, let’s get us there safely. We don’t want we don’t need. We don’t you know, don’t tell us how the clock is built. Just tell us what time it is kind of thing. So we just say, look, we’ve been in this business, the alternative space, we think there’s opportunities here for diversification, let us show you. And here it is a one stop shop where and the fortress fund the idea is more safety. And, and so it’s Yeah, so we’ve been able to weather some storms that have hurt other folks.
Nathaniel E. Baker 30:42
Yeah, actually, I studied this the performance of hedge funds and the various types of hedge funds and the CTAs, the commodity trading advisors did perform better during crisis, like during the Oh, eight or nine, I think that they did perform much better than certainly in other hedge funds, and certainly in the market. So there is that?
Salem Abraham 31:00
Absolutely. No, I think managed futures is a great space currency traders are great. Global macros. Great. You know, and always, I think that the average managed futures, the main futures, hedge fund index was up 14% in 2008. So that’s a very good place. Yeah. For I think, for your listeners to, to investigate is that space, but you know, you get in that space, and it’s hard to discern who’s good, who’s not good. And having us having done it before. That’s where I think our expertise is unique to the world of investing in that we did it, we’ve done it for three decades, three plus decades. And so then it’s easy to look at people and say, Okay, we, we see that they’re doing some smart things, their risk management is good. And so. So yeah, it’s been helpful. And we and yeah, if you look at the fortress fund, and you, you compare it to like a 7030. You know, and you can see that performance on our website, just you’ll say, Well, wait, what’s going different here, and for the most part, it’s, it’s those all those diversifying alternatives. Interesting,
Nathaniel E. Baker 32:07
interesting. So this kind of, I guess, gives you the luxury of not having to worry too much about the markets and the economy. But as you look at things, you know, we talked about oil, do you have what are your thoughts here on on the big picture on the fed on the recession, and things like that? Well, I
Salem Abraham 32:22
do think, you know, the Fed has to regain some credibility, you know, there’s all this silliness about all this is transitory as their as their, you know, it’s just all supply chain. But meanwhile, when you make 40%, more money, you know, if you had 40%, more, you know, oil, or corn or cattle, the prices would go down. And so the value of our money has gone down, because they made 40% more of it during COVID. And, and so that’s a problem. Now they’ve got this credibility problems. Alright, we got to fight inflation. Well, now I see this. So I do think we’re gonna have stagflation. I think we have a recession, I think, you know, and we’re gonna get through it. I do think I’ve heard some people this debate about will the Fed, you know, will they chickened out? Will they blink? I do think they will. I do think at some point between here and you know, probably December, I think the economy gets bad enough. And we could have really, you know, a capitulation moment in stocks where, you know, let’s say we show up in a day, and there’s, you know, the stocks are down 10 or 15%, you know, over let’s just say even it’s a week, you have and then I think the Fed is gonna say, well, we can’t keep cutting, we can’t keep raising rates. And, and so I don’t, and that’s where, you know, you think about an interest inversion on on the yield curve, and you just say, No, I could see that where, at some point, the Fed blinks, because at the end of the day, really, if it’s just you and me, and we don’t, we’re in a closed room, and we’re in the Fed, you’re like, the only way we’re out of this debt. Problem, we’ve got it, we got to inflate our way out. So inflation, we don’t want it too much. But we want some of it, if we’re the if we’re the US government, and every government of the world. So there’s an advantage from you know, you’d say, well, we want to fight inflation, but not too hard.
Nathaniel E. Baker 34:12
No, that’s true. But it has gotten too hard. I mean, what is it 8% CPI or more? Whatever it is, it’s really good.
Salem Abraham 34:20
So no, yeah, no, it’s a real problem and that you know, people you know, when you go fill your tank up you really notice it, you notice it when you go to the grocery store if you you know just look at something like ground beef that you say what what’s it you know, what’s this usually cost and it’s amazing the prices that you know that but But you say well, the prices aren’t going up your value, your money’s going down, which is a different thought for most people. I think that people listen to your show. Not so much. But I mean, we’re just debasing our currency. So
Nathaniel E. Baker 34:49
yes, although luckily for us, the other major currencies are kind of even worse
Salem Abraham 34:54
yeah, we’re the the what the least dirty shirt. kind of deal?
Nathaniel E. Baker 35:01
Right? Yeah. So yeah, I mean, that all begs the question what what investor does? I mean, obviously one alternative is to go to alternatives get some short exposure, and there’s ways of doing that to protect. Do you have any thoughts of that? Or me? Are there any assets that you think are?
Salem Abraham 35:16
No, I think, well, you know, we’re and when we ran our hedge fund, you know, it’s always easier to make money when you got volatile markets. And so I do think alternatives are an interesting place. I always want to be in alternatives. But I would say certainly, right now, when you’ve got, you know, I think the markets are, you almost always want to be in stocks. Today, you might say, well, I’d really like alternatives even better, because what’s a bad environment for stocks is a really good environment for alternatives. Oftentimes, the right alternatives now long short hedge funds, things like that, no, but like, you know, you know, the global macro currency traders, you go to, you’ll go to the Managed futures, hedge fund. So that kind of sector, you know, is I think it’s a good place to be in these in this type of environment. All right.
Nathaniel E. Baker 36:10
All right. Last question. Not related to any of this. Is Notre Dame going to join the big 10? Or what?
Salem Abraham 36:15
No, no, not for football.
Nathaniel E. Baker 36:20
the other ones. They’re in a different conference. All right. Yeah.
Salem Abraham 36:23
No, I think. I mean, it’s, and again, it gets back to money they can get, I think they get a good, you know, such a good contract from NBC that they Yeah, but but I do know, they’ll win a lot more. Nothing. I’ll there if they were in the big 10 or with no, anymore. Oh, well. Now you’re getting the delusional fan? Well, yeah. It’s like, it’s a great season coming up. All right. You know, it’s like a farmer. You see that with farmers? It’s like, well, always next year, right.
Nathaniel E. Baker 36:55
That’s right. Well, that’s the old Brooklyn thing.
Salem Abraham 36:59
yeah, all that. So we’re, yeah, no, we won’t we. And that’s hope. That’s what you know, there’s nothing wrong with hope. We want to hope for a better day and let’s, let’s all work toward that. That’s always a good thing.
Nathaniel E. Baker 37:10
Nice. All right. In closing, maybe let our listeners know where they can find out more about you more about the fund. And I’ll include that in the show notes.
Salem Abraham 37:19
To learn more about about Abraham trading and what we’re doing, go to our website and AbrahamTrading.com. So
Nathaniel E. Baker 37:26
simple enough. I see you are on the Twitter, they’re not that active. But yes, wonderful. Okay. AbrahamTtrading.com. And with that, thank you to Salem for joining me contrarian investor podcast today. Thank you all for listening. And we look forward to speaking to you again next time.