David Hay — As Tech Trade Falters, Value Stocks Are Breaking Out

4:13 Bullish energy all year while the bears piled in

• "I've been bullish on energy for most of the year and people were really laughing at me" — Kevin Muir made the same stand, and noted how "so many of the bears came out of the woodwork when oil was down in the upper 60s at the end of June."

4:40 Physical vs paper — the futures market is 50–60× the physical

• "One thing that I think is just completely overlooked": the derivative market "is something like 50 to 60 times the physical market," which is why "it really lends itself to the tail wagging the dog."
• The physical evidence the paper price ignored: physical oil traded in Asia at $170/bbl back in the April–May period.

5:31 The "Memo of (Mis)Understanding" — three chokepoints, not one

• He was "one of the few saying, guys, this is not a done deal" — the memo of understanding "was really more like the memo of misunderstanding."
• 20% of the world's oil supply and LNG at risk through Hormuz; the Red Sea still running at only "50 60% of capacity" months after reopening, with the Houthis realising their leverage and Bab el-Mandeb (~12% of global oil shipments) now in peril; and Ukraine hitting "over a 100 Russian ships in less than 10 days," going after "Russia's energy lifeline."

7:07 The monster move — and gradually liquidating the futures

• "Oil's gone from what 69 at the end of June to about 93 today" on WTI, with Brent over 100 — "that's a monster monster move," and "the best setup for oil that I ever saw in my career."
• He was long 10,000 barrels into the low; "now that it's had this monster rally, I've been gradually liquidating some of my futures contracts… if they want to take some profits on oil, anybody that's following us, like with USO, I don't disagree."
• Where the upside remains: "with the energy equities."

9:02 A decade of maintenance capex — and the IEA's "super glut"

• Of the last ten years' oil-industry capex, "90% of it has gone to just maintaining production. Only 10% to growth."
• Part of the cause is the IEA, which has now called for "a super glut next year… quite remarkable given this enormous shortage" — an agency that "historically [is] incredibly inept" and once said there should be "absolutely no new oil investment… if you want to get to net zero." Rick Rule's under-investment thesis, he says, "is exactly right."

10:05 If you're in energy or precious metals, embrace the volatility

• "Oil markets extremely volatile. So you get these big rallies, you get these big sell-offs. And if you don't take advantage of the volatility, when the declines come you go, 'Oh gosh, what a fool I was, and I'll never touch energy again.'"
• "I think if you're going to be in energy, just like if you're going to be in precious metals, you've got to embrace volatility. Most people just have the hardest time with it… and it drives them away at the wrong times."

12:25 Rangebound $70–100, with China as "the new OPEC"

• The bull case isn't a moonshot: a range with "the low end… in the say 70 range" and "100 tough to penetrate other than maybe on a short-term basis." At an $80–90 equilibrium "the oil companies can make a lot of money."
• China is the swing buyer — "almost like the new OPEC in terms of its influence": it cuts when prices spike and accumulates when they fall, and Chinese imports falling 4–6 million b/d "was a big reason why oil fell as hard as it did."

14:11 SPR refills everywhere, "day zero," and the majors saying the same

• Not just refilling existing reserves but "all the countries that now are going to have SPRs that never had them to begin with — another one of my bullish arguments."
• Jeff Currie's "day zero" on the US SPR — forced refilling at any price — is corroborated by Chevron CEO Mike Wirth and a senior Exxon executive (16:14). His June quip: would oil bottom before the storage tanks did? "It's pretty obvious the oil hit the bottom first and the tanks are still going to shrink."
• What fed the complacency: 130 million barrels flushed out quickly when the straits reopened, creating "a near-term temporary glut" — and a round of victory dances that was "just simply wrong."

19:06 Energy ties tech for the best five-year returns — and is still 3% of the S&P

• "An amazing factoid that I don't think many people know": over the last five years energy is tied with technology for the highest returns of any sector — "basically neck and neck."
• This year XLE is +33% against a NASDAQ up "8 n something," and energy was already rising before the war — "but it's 3% of the S&P. It's peanuts… incredibly neglected."

21:12 The John Kemp positioning chart — buy the red line low, sell it high

• "If you wanted to make money on oil, just pay attention to this chart… the red line is the key." High = futures positioning very bullish, "you want to go the other way"; low — as on July 7 with oil "bouncing around 70 bucks a barrel" — and "you want to be a buyer."
• "Every one of those low points in particular, but even the high points, have been great contrarian trading opportunities." The line is climbing now; at some point "it would be time to exit."

22:08 EOG — the June-17 write-up: PE 10, a multi-year breakout pending

• "This is a specific recommendation… we wrote up in our haymaker on June 17th" — EOG, "one of the premier oil and gas producers in the United States," and "also a takeover candidate, though you never bet on that."
• "I love to look at multi-year breakouts. Admittedly this one hasn't happened yet, but I think it will — and when it does, it likely is going to run a bit more." Valuation "amazingly undemanding": PE of 10, mid-range price-to-sales that should improve as higher oil lifts revenue.

23:09 US gas at $3 vs >$20 abroad; Europe's storage at 15-year lows

• "The US gas… at $3 per MMBTU is just ridiculously cheap. Around the world you've got it now pushing over 20." Jeff Currie is "incredibly bullish on gas as I am."
• Europe's gas in storage "has just fallen off the cliff" — the lowest in at least 15 years (36:53) — and the Continent "is really guilty" of energy complacency: "I think they're going to pay a severe price this winter."
• "So I really like US natural gas, US natural gas producers which are also very cheap."

24:02 Is this the tech shakeout? Good earnings, falling stocks

• "Look what's happened to SPCX [SpaceX]. And even Google today reported good earnings and the stock is getting a whack."
• The precedent: at the March-2000 NASDAQ peak "it was companies like Cisco reporting great earnings and the stocks went down. So maybe this is the big shakeout we've been looking for with tech."
• Overvaluation is already unwinding — SpaceX's post-IPO bond has been "the space shuttle crashing back down to Earth," the equity ~$116 against a ~$170 average secondary purchase price (24:46).

26:03 Uranium "looks like oil in late June" — an even better supply setup

• Poised to spring, if less dramatically ("I don't think the negativity is as great") — "but it's certainly neglected, and I think the supply demand setup with uranium is even better than oil."
• The inventory has gone: Megatons to Megawatts (Soviet warheads converted to reactor fuel) is "gone"; the post-Fukushima excess "that's gone"; "it's almost impossible to build a new uranium mine in the west," and Russia supplies ~35% of conversion/enrichment. Meanwhile "demand is just going bonkers."

28:01 SRUUF — a discount upon a discount

• Spot uranium ~$85/lb; the Sprott trust "effectively pricing at about 77" — a ~10% discount.
• But spot is itself below the market that matters: almost all volume is utilities' long-term contracts around $95, typically with escalators, ceilings up near $150 and floors around current prices — "you've got no downside and lots of upside over time."
• "So with SRUUF right now you're getting a discount upon a discount — really a 20% discount from where most uranium is trading currently," and the trust is "pretty out of favor."

30:08 70 reactors under development, ~40 Chinese — and zero new US light-water builds

• "I'm pretty sure there are 70 new large scale reactors under development right now and China is about 40 of them." New US light-water reactors under construction: zero (some restarts aside).
• Mine lead times are five to ten years — "you don't snap your fingers and create a new uranium mine."

31:02 The grid, not the reactor, is the constraint — so go behind the meter

• "The US grid is already so taxed" that plugging in millions of EVs, or wheeling power from new gigawatt reactors, means "the grid is going to collapse. It's already very fragile."
• Hence small/micro reactors: "you can actually have them at the site where the power is used — the electricity doesn't have to go over the grid." He and the host are both invested in the theme; Aalo Atomics "did just get DOE approval along with three others" for criticality (33:13), though even a successful Aalo is "three to four years away from producing in size."
• The China contrast: "we have the data centers, but we don't have the electricity. They have the electricity. They don't have the data centers."

34:36 Gas is the bridge fuel — but you can't get turbines

• He agrees natural gas is "the bridge solution for these data centers… with combined cycle gas plants" — "the problem is turbines… you just can't get them. So that's another bottleneck."
• The host's frame he endorses: an economy and market unprecedentedly levered to one trend, with AI capex "something like 70% of GDP growth," and enough physical constraints (turbines, capacitors, transformers, permits, land, water) that the buildout "probably [isn't] going to get built at the rate that Wall Street is currently expecting."

37:10 The coal buy alert — Yancoal and New Hope

• "We put out a buy alert on Monday on two Australian coal companies" — YACAF and NHC — with the detailed write-up following the next day; both had already popped ~4–5%, and "New Hope has been holding up much better." Credit to Trader Ferg, who "made a great case for it."
• The substitution mechanism: Hormuz threatens LNG, not just oil, so "Asia is going to have no choice" — and on the supply side Indonesia, "the largest exporter of thermal coal… in the world," is "drastically reducing their coal exports" to keep it at home.
• "Look at that pounding that it's had this year, like so many commodities… the whole complex got sold off very very hard and I think created just a tremendous buying opportunity" — energy, coal, uranium and hard assets together.

38:59 Adjusted earnings — Google's "other income" and the depreciation still to come

• Of Alphabet's very good quarter, "almost two-thirds… have come from the gains on their basically their venture capital investments in these entities which are big customers. So it is a circular financing type of situation."
• Those gains sit in other income and are required to be booked — "they're not doing this improperly" — but "you need to really make an adjustment and not just look at these headline earnings numbers because they are very unsustainable… a lot of it is non-recurring stuff."
• Fred Hickey's version, cited approvingly: strip the one-time AI-stake gains and add the depreciation schedule that "has really yet to hit the P&L" and a teens/20s P/E becomes "like 65."

41:28 Semis — margins from scarcity, and the air pocket that follows

• MU and the semis look cheap on earnings ("single digits") and expensive on sales, "because their margins are just off the charts" — and those margins come from scarcity: "they haven't changed the product really at all."
• "I think there's a lot of overordering going on in the semiconductor world. That's always been the case in that industry. So when the downturn comes… those stocks just hit air pockets" — semis being "about as cyclical as an industry can get… especially RAMs."

42:43 Are the backlogs solid? OpenAI's IPO and the end of the capital-light era

• On the cloud providers' spending commitments: "are some of these customers like Open AI really that solid?" The >$1T IPO has "a good chance… gets pulled and if they try to ram it through, it could be quite a fiasco" (the host confirms a possible slip to 2027).
• Capex of ~$700B this year toward ~$1T next: "how are you going to get an ROI on that? I think it's going to be really really tough to do, and I think the market's starting to wake up to that" — Google's raised capex target the tangible example.
• The structural point: these were "very low capex, very high free cash flow… capital light" businesses with great network effects, "that's why they were such great stocks for so long… it wasn't that long ago they were trading at 10 11 times earnings but maybe someday they'll be back there given what they're doing." A META capex cut "might [send] that stock straight up" (45:16).

47:00 The financing leg cracks — Oracle's near-junk bonds and IBM's 25% day

• The buildout assumes the capital shows up: "it's getting very costly, and Oracle bonds are trading almost like junk" — a near-trillion-dollar market cap that "really leveraged up… trash balance sheet. The market's kind of unforgiving."
• Symmetry warning: Oracle gained "something like $200 billion of market cap in a day" on its AI-spend announcement a year ago — "when you see that kind of stuff on the upside, almost invariably you're going to get the payback on the downside."
• IBM lost 25% in a single day; Haymaker "bought that one on its breakout… and put out a sell on it a few months ago" (47:58).

49:39 The late-90s playbook — reallocate from growth to value

• With ~45% of US market cap in AI and AI-related stocks (~70% of the NASDAQ), the analogue is 1998–2000, when "hardly anybody" reallocated "out of the growth stocks into the value stocks, which included financials and energy and industrials."
• Most stocks, "especially smaller companies," were already in a bear market for two years before the top — and through the 2000–02 crash "for most of that bare market… you still would have been up if you'd been in value stocks," while the S&P fell ~50% and the NASDAQ ~80%.

50:09 Regional banks broke out — and he buys breakouts on the pullback

• "I think the breakout by the regional bank index is very bullish. It looks great." He keeps finding regional banks that "either have broken out or [are] very close to it and they're very reasonably priced 10 11 12 times earnings."
• Discipline: it's extended over both the breakout level and the 200-day, so "maybe it's going to pull back a little bit… I like to look at breakouts and then buy them when they pull back after they break out."
• He is deliberate about the balance: "I'm just as bullish on certain areas of the market as I am bearish on others."

51:32 "More likely the great rotation than the great meltdown"

• Asked whether to harvest AI gains and roll them into breaking-out laggards: "Absolutely. I believe it's more likely to be the great rotation than the great meltdown."
• The hard part is behavioural: "it's against human nature… we tend to want to keep our winners and buy more of them" — or keep adding to a broken trend "and by the time you realize the situation's actually changed, you've thrown in a lot of good money after bad."
• Passive investors aren't exempt: if tech corrects, "the tech sector goes down, it's taking the S&P with it."

53:47 International markets, and where value actually is

• "I've been pounding the table on international markets for about over a year, and I still think that's where the money is starting to flow. They outperformed last year, they're outperforming again this year."
• Per GMO's data, value is very cheap and "within the value universe the deep value is really cheap — like unbelievably cheap." "It's amazing to me how many companies out there that are pretty good companies are trading at 10 times earnings or less. And some of it's because they're viewed to be AI victims — a lot of software companies right now are being absolutely destroyed."
• The framing of the whole interview: "don't go to a bomb shelter, but be on alert for all these opportunities… look at stocks that are breaking out."

54:26 The Felder montage — leverage that doesn't show up in the leverage data

• Margin debt "very high and very far above its trend line" — and the usual rebuttal (look at it versus market cap) misses that "the market cap can come down very quickly and the margin debt's still there." Lance Roberts' line: rocket fuel going in, an anchor coming out.
• And margin debt understates it: "there's all the leverage ETFs. It doesn't even pick up on that" — plus people "buying call options on leverage ETFs with margin… that's the scenario we're in now which we've never been in before."
• Margin-debt-to-GDP "has gone vertical", cash-on-the-sidelines relative to margin debt is very low, and the (18-month-lagged) correlation points to poor forward returns. To pundits who say there's no raging speculation: "Oh, you're kidding. It sure looks like it to me."

57:16 Caterpillar — a cyclical at bubble multiples

• "A lot of people don't realize that some of these more smoke stack industrial companies have been caught up in the AI mania as well." CAT "just exploded" off a good 2023–24 breakout and is "now very extended" at ~32× earnings and 6× sales — "way above anything it's ever seen before" for a cyclical.
• "If the AI data center buildout starts to slow down, Caterpillar is going to get hit hard… they may want to take some partial profits at least."
• The valuation history: Scott McNealy's parable about paying 10× sales for Sun — pass through every dollar of revenue and still not earn a return — against roughly half the index now above 10× sales and SpaceX peaking near 100× (58:30). "That used to be considered an outrageous valuation level and now it's like, ah, big deal."

1:00:12 Credit — investment grade gives no warning, private credit does

• "So often what gives you advanced warning when a bubble is going to pop is the credit market." To be fair, investment-grade spreads to Treasuries are very tight — "no warning sign at all."
• The warning is elsewhere: private credit yields ~9% vs junk ~7.3%, an unusually wide gap, "and default rates in private credit are soaring." Gundlach's anecdote of a prestigious portfolio "marked down from 100 to 81 overnight" is the tell — "something is rotten in Denmark."
• He won't damn the whole asset class ("there's obviously really good credits… I don't want to panic"), but "it is one of those warning signals going off right now" — "at least some fire."

1:02:03 BB vs CCC — +300bp and on the verge of a multi-year breakout

• BB is "high-grade junk, which seems like calling a bald man curly" — but genuinely safe on defaults ("less than 1% per year"), whereas CCC is "right on the door of default."
• That spread, "fairly tight last year, has really widened out dramatically… about a 300 basis point increase in yield of double B's relative to triple C's" — and "these spreads look like they're on the verge of a multi-year breakout. I think they will break out."
• The transferable idea: "it's not just with stocks and commodities — these breakouts work with the bond market too, and with currencies."

1:03:07 The 30-year at 5.18% is a breakout — and 6% "would be really bad news"

• "The yield on the 30-year Treasury is 5.18%. That is a breakout. And it just keeps inching up" — despite a US economy that "looks a little creaky… fraying around the edges" and inflation data that "has not been that bad."
• The explanation is the buyer base: "foreign central banks have been backing away from the treasury market," so "the pool of buyers for longer treasuries has really shrunk and it doesn't take as much in the way of selling pressure to pop these longer term yields."
• "If this were to say all of a sudden run to 6% I think that would be really bad news for the stock market." Lacy Hunt — "about as close to a perma bull on bonds as you could find" — has now shifted to "a secular period of rising inflation and higher interest rates, a stagflationary environment," and the deficit math (6–7% of GDP now; 10% in the next recession) is "the sword of Damocles overhanging the bond market" (1:05:20).

1:06:34 The next-crisis playbook — Fed games, then the Treasury buying stocks

• First the workarounds: "they'll play all kinds of games to try to avoid" balance-sheet expansion — sell short-term Treasuries into strong demand and buy the long end (operation twist), "get the banks to step in and buy with zero reserve requirements."
• Then the big one: "if things really get bad… I believe that the Treasury is going to buy stocks" — "probably index funds," not individual securities. He has said this for years, and points to his own precedent: he called the Fed buying corporate bonds in the next crisis (which turned out to be COVID) "seven or eight years ago."
• The logic is Bagehot's: in a crisis "the government should lend at a very high rate to companies with a great credit rating — and that's what you do when you buy corporate bonds when the yields are way off the charts." Extended to equities: with the market down 30–40% the earnings yield is very high and "they can make a killing" — exactly what "the Hong Kong Monetary Authority did in the late 90s, and it worked beautifully" (1:07:43).
• He'd rather they stayed out, "but that's not going to happen, so it's take the lesser of the evils" — and all of it (Grant Williams' "project Zimbabwe" games to escape the debt hole) means "there's going to be this persistent bid under precious metals."

1:09:22 The yen — 50% undervalued, and a trillion dollars that could come home

• Japan "is now trying to repatriate capital back to Japan, which is what Korea did," and as "the world's largest creditor nation" (against the US as "the world's biggest debtor nation") "they could be bringing a trillion dollars easily back to their shores."
• The yen is "about 50% undervalued versus the US dollar" on purchasing power parity — visible in the Big Mac index — despite a big trade surplus. "I think that's going to be one of the big reversals over the next few years."
• The catalyst he'd want: not jawboning or intervention but a drastic short-term rate hike — "50 basis points like the Fed does when it really wants to send a message." Tokyo is wary because the 2024 yen spike crashed the Japanese market "14% in one day," but a hike "would actually be pro-growth because it's such a high savings country." Korea's capital-gains amnesty is the template Japan hasn't yet copied (1:11:05).

1:14:12 Japan's fiscal position is better than America's — and hedge funds are short the yen

• "Everybody blames the Japanese for having such big deficits, but their deficit as percent of GDP this year… is about 2% versus six to seven in the US" — and backing out interest, "they've got a balanced budget on a primary basis." Their enormous debt stock "they owe to themselves — almost no external debt."
• Positioning mirrors oil at the June low: "there's tremendous negativity, the hedge funds are so short… so if you get a turn, the short covering becomes very powerful."
• Jesse Felder's chart makes the yen and the AI trade "teeter totter, opposite" — so a repeat of the 2024-style yen rally "could [be] a real nasty hit to the AI trade" (1:15:33). Layer that on an AI bust and the giant mindless robot of passive flows could finally be overwhelmed.

1:16:56 Silver — from blow-off top to recovery setup

• Recap of the round trip: silver "got up to close to 120" after a second breakout, "and just boom, but it got really overheated" — Haymaker warned on it and advised "gradual dollar cost averaging into the blowoff."
• "At this point, I think it looks pretty interesting for a recovery," helped if trouble in the risky end of the stock market convinces people the Fed won't hike. His Fed call: on hold — "I don't think the Fed is going to hike. I don't think they're going to cut either."
• Silver's edge over gold is use: heavy industrial demand, "all these military applications" ("a lot of military armaments have been destroyed and need to be rebuilt"), and "a big part of improving the grid" as a very good conductor.

1:19:00 Why this isn't 1980 or 2011

• 1980's silver peak was "an artificial peak… the Hunt brothers" cornering the market, and its crash "coincided unfortunately for silver buyers with Volcker coming in there and driving real interest rates to astronomical levels" (prime above 20%).
• "So that's not happening this time. And we're in a period of monetary debasement, which we weren't at that point. So the circumstances are very different."
• Gold's structural bid: it "has become the central banker's reserve asset of choice more than any bond" — "gold's got that going for it… I think gold's going to rally too."

1:20:58 Record miner outflows in a banner year = apathy, not warning

• The chart: fund flows for GDX (senior miners) and GDXJ (juniors) show the largest outflow year on record was last year — after "tremendous returns" and "really good profits." Inflows at that point would have been "a big warning sign like it was back in 2016"; instead "this indicates a lot of investor apathy."
• Both he and the host are "shocked" it was the most negative year by far; his best guess is precious-metals investors bailed on miners early in the year when the metals were working and the equities weren't.
• "So the gold miners and silver miners look pretty interesting" — and if the flows ever turn, "how high could high be?"

1:22:57 Miners are importing energy's capital discipline; central banks keep buying tonnage

• Mining "has been very poorly run for a long time," but "it's starting to emulate the energy industry," where a decade ago "prices went up, they'd spend like drunken sailors" and now it's "years and years of capital discipline. I do believe that's coming to the mining industry as well."
• On the claim that central-bank gold buying is just a price effect: measured in tonnage it remains at high levels (last year's dip likely China stepping back at high prices, "just like they do with oil"), and "I think we're going to see another surge of central bank gold purchases at the lower prices."

1:24:33 Closing message — don't let the tech reality check sour you on everything

• "My main message is I don't want people to get too negative… there's such overexposure — it's not just institutions, it's retail as well — to tech, that if tech goes through the reality check that's greatly overdue, I'm just afraid it's going to cause people to sour on everything that's risk."
• The specific risk: capitulating out of "gold miners or energy producers or financial stocks or overseas" and going "into cash… at the wrong time." As the host puts it, "that's the job of the bear market — to depress as many people as possible."

1:26:34 After Hay — the New Harbor Financial recap (separate segment, not his views)

• Mike Preston and John Llodra echo three of Hay's positions from their own model: oil-service stocks (added end-September 2024 on relative strength, "nearly a double," trimmed on the way up but still core), regional banks via KRE (a full 4–5% position after the base-and-breakout), and gold/silver at 5% miners + 2.5% gold bullion + 2.5% silver bullion.
• Their chart read on the metals: SLV and GLD have gone "exactly nowhere in a whole month" against a purple downtrend line, a GLD "death cross" they expect to be "a fake out" — and the bullish percent of precious-metal miners washed out below 10–15%, matching the 2020 and 2022–23 extremes. Verdict: "this pullback is just about over… if you don't have any gold and silver, now is a great time to build a position," sized to what you can hold.
• They are more bearish than Hay on the index (a Shiller PE "in the high 30s," fair value ~15, "at least a two-thirds pullback… and still we won't be undervalued"), running only ~50% equities with hedges and mental stops; their indicators "start to shift negative" that week. Llodra adds GMO's "electricity tipping point" letter — under 10% of the next five years' global electricity-demand growth is data centers vs 36% industrial/buildings — and the caution that adoption growth doesn't make a good investment (renewables as "a capital destroyer"), with nuclear "a dog this year… down 10% year-to-date" and only suitable as a small thematic sleeve.