Title: Oil To 'Break' Everything; Stocks, Bitcoin, Gold Crashing 'Back Down' | Mike McGlone Show: David Lin (YouTube) — interviewer David Lin Guest: Mike McGlone — Senior Commodity Strategist, Bloomberg Intelligence Date: 2026-09-10 URL: https://youtu.be/k0z4b9oYw3Y Length: 33:41 Note: Auto-captions pasted by Stephen; fillers (um/uh/you know/stutters/false starts) removed and caption garbles corrected ("Mike Mclo/McGloan/Mcloone" = McGlone; "snare" = scenario; "volley season" = volatility season; "dear in the headlights" = deer; "ComX" = COMEX; "CE copper" = CME copper; "$380 per mmmbu" = $3.80 per MMBtu; "bare market" = bear market; "unled/Unlimited gas" = unleaded gas; "200E moving average" = 200-week; "CB Fed watch" = CME FedWatch; "bofuels" = biofuels; "multi-deade" = multi-decade; "tickling down" = trickling down; "Venez Venezuela" = Venezuela; "straight opening" = Strait opening); wording otherwise verbatim. "Stock puppets / sock puppets" is his deliberate term and is kept. "Frederick Douglas, a famous evolution leader" (the abolitionist) and "every single spoon we've had in crude oil" are left as captioned. 07:36–08:40 is a sponsor read (Delete Me) and is excluded from the analysis.
00:00 We reached an endgame. This might all pan out by the end of the year and midterms can be a good trigger. I look at crude oil now as deer in the headlights. Is this going to go much higher? If it does, it breaks stuff. Gold fits in my stock puppet category. It's highly correlated. The 100 day correlation with the S&P 500 reached almost such a multi-decade high recently.
00:19 Its volatility versus the S&P 500 is two times. That's hard the highest in 20 years. Could easily get back down to 3,000 before at some point it stays above 5,000. And if you look at copper over the last 3 4 years, it trades at two to three times the volatility of the S&P 500 and it's underperformed. Now this year it's performed.
00:37 That's an accident waiting to happen. >> Mike McGlone joins us today. It's September 10th and WTI, both WTI and Brent crude are above $100. Now it's a bit of a down day for the stock markets. The S&P is down 50 basis points. The NASDAQ is down about 50 basis points. Gold's down 1.5%. Bitcoin's down 2%. 10-year yields, well the yields are up, 10 year and 30-year, the 10 year is now at the highest since 2023, 4.
01:06 92%, inching towards the critical 5% that a lot of people on my show have been warning about. Mike, welcome back to the show, good to see you again. >> David, it's always good to be back. I'm honored. I do enjoy your interviews and your questions and you help me look and sound like I know more than I do when I listen to a lot of your stuff, so thank you for that. >> That is very kind words, high praise coming from you.
01:29 Honor to have you back. Let's talk about what's going on right now in the markets. Before we get to the prices and the numbers themselves, take a look at this story here. Trump hoping to salvage midterms makes a claim to, he's pledged to give every American adult $5,000 if Republicans retain control of the House and the Senate in the midterm elections.
01:54 This promise would, dubious promise, according to the AP, would most likely cost $1 trillion, require congressional approval, and would further exacerbate the country's nearly $1.8 trillion annual deficit. Well, first of all, on prediction markets, which I can show you in just a bit, it's not likely that the Republicans will take both the House and the Senate.
02:22 So that aside, election odds aside, what's he trying to do here? That's a rhetorical question. I think you and I both know what he's trying to do. But >> I just want to get your response. >> Well, my first, I'm a very neutral conservative Republican and endowed. I always just vote Republican down the ticket.
02:42 The first time in my life I might vote Democratic down the ticket just to push back on, we need democracy in this country. You don't pay people to vote for your party. This is anathema, but it's a classic sign of severe desperation. And when he said, and he's been repeating repeatedly, he doesn't care about the midterms, that usually means he does.
03:01 It's also a sign of how things are going really bad with the war. And I think typically that happens sometimes when you get in that box, and with a human like him, he's completely ignoring the push back he's getting now from the average person in this country globally. But most next voters based on what's happening since he's become president.
03:22 And most people don't care about nuclear weapons and Iran. They care about, people like me who've raised a lot of children and paid a lot of bills in their life, about that next electricity bill and healthcare bill and heating oil and diesel and insurance and supporting your family, and things are much worse now for your average person than they were 2 years ago before he was elected.
03:49 So this is going to be a major potential sweep against Republicans. This gimmick is a sign of desperation. And my first thought was, oh, gold's going to like that, and gold hates it. So, I think most people think, yeah, the sooner we get rid of him, the better. And I think most Republicans are thinking of that. They can't say that, but the voters, I think, will.
04:08 And what does it mean for markets? Bottom line, that's always what it means for markets. For me, as neutral as possible. And my thought is this is going to be a very contentious midterm election year. Last two midterm election years, markets were down, 2018, 2022, in S&P 500 total return. It is volatility season.
04:29 Fed funds are priced for hikes one year out. They're priced for 60 basis points of hikes. That's the most on a one-year future since 2021 Q4. On the way down, I'll point out gold bottomed the year after that. And it was very cheap back then. Now it's the opposite. And so I look at this scenario as very bad for all major, this stock market and most notably the sock puppets, the stock puppets on that list.
04:57 I have copper as number one. Bitcoin is up there and gold and all the metals are stock puppets at the moment. Like the Bloomberg All Metals index, its correlation with the S&P 500 on a 100 day basis is the most in its history of 30 years. So, we're entering volatility season and the scenario I've been pointing out for a while might be kicking in, but I want to focus on a little bit of number before you killed over a little bit.
05:21 The main thing I've been getting wrong, and focus on what that means. Number one, I did not think at this point with this Iran war. First, we all kind of expected that the US would not be able to completely suppress the offensive capabilities of Iran. Wrong. So far, they have been showing pretty significant offensive capabilities.
05:39 Now, that's a big check mark. I did not expect that to happen. And so I look at crude oil now as a bit of deer in the headlights, is it going to go much higher. If it does it breaks stuff, certainly you're seeing in diesel. And another number one thing I got wrong, and I'll end with this one day but we might not talk about it, but something that's really happened this year is, I used to own a farm and I'm from the corn belt initially, the last three decades in New York and five years in Miami now, but I've never seen a July with too
06:04 much rain that pressured corn yields. So price of corn is going up and soybeans and wheat. They're all stuck in the middle of something that's really unusual events. And the question is how much higher everything can go in terms of commodities and then at some point what breaks it. >> And just on corn and soybeans.
06:19 It's going up because of fertilizer prices or something else? >> No, that's really the first of all, corn is going down because at the beginning of the year yields are expected in this country to be about 186 bushels. That was on a record and now they're dropping below 180. They're just collapsing. And it's not because of drought.
06:34 It's because of too much rain, which is, I've just never seen that. It's just because we've had drought, price runoff. Now wheat's pumping up because of, we had a drought early in the year. That's winter wheat usually harvested in the spring. That was, but mostly because geopolitical conditions and situation in Ukraine and with Russia and exports, and soybeans.
06:58 Most notably, the soybeans are going up on the back of soybean oil. And if you look at right now in the year, crude oil is up about 75%, soybean oil is up about 75%. And there's Brazilian and there's Chinese imports, but supplies coming out of Brazil and that's going to kick in.
07:15 But the key theme is, I like to point out, this whole space is a bit of a sock puppet to the crude oil. If crude oil drops, then the whole space and grains will drop too. So, we're all connected, and all this is on the back of, most of it is on the back of our president, who we pointed out earlier just had a pretty significant speech last night with some pretty obnoxious promises.
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08:40 Okay. Why don't we talk about commodities now? Gold. You said gold hates whatever happened yesterday. Well, gold also hates the likelihood of a Fed interest rate hike. >> There you go. >> Which significantly increased today. CNBC had an entire article about it. Okay, I won't read the entire article, but I will show you the CME FedWatch tool, which rose to 67%, 68% chance now of a hike by next week.
09:06 Now, much of this may have been due to the fact that oil is now above $100 for both WTI and Brent. Am I missing anything? >> I think that's the key thing. The thing about gold is unfortunately gold fits in my stock puppet category. It's highly correlated.
09:25 The 100 day correlation with the S&P 500 reached almost such a multi-decade high recently. It's around 0.52. Typically gold zero correlation, a negative correlation in the stock market. Its volatility versus the S&P 500 is two times. That's hard the highest in 20 years. It's the highest versus a Treasury bond index in 40 years.
09:44 And then the key fact is, as you point out, we're looking at Fed tightening. This is not a good environment for gold. So I stick with the, yeah, long-term gold is going to be in an enduring range and it could easily get back down to 3,000 before at some point it stays above 5,000. It should be in this range forever. Everybody bullish near the highs, bearish in their lows, but it's stuck in a range and it's in the middle of its beta in the basket of metals, and metals right now, all metals have the highest correlation with the stock market on a 100 day basis ever if
10:12 you go back 30 years. So this is all the key theme, is they're all, the whole space is facing ECB hike today, facing central bank hiking across the world except for China, where we have deflationary forces. So you think about metals, you think that's a bit of a bearish factor. The Fed, as you mentioned, basically 2/3 priced for hikes at the September 16th meeting, which I don't think is going to happen. If stock market goes down they won't hike. But also what just happened with the ECB by hiking because of the pump in crude oil, that's
10:43 going to be temporary, just a question of how long. And this whole pump in crude oil is because of the decision of one man, who is the leader of the world's largest energy producer and net exporter. So at some point this is going to revert lower, and crude oil collapse and energy prices will collapse, but it's the question when and how, and Mr.
11:03 Trump is already admitting it might not happen by midterms. That's something I, you know, we're not there yet, but I fully expected these prices would be much lower by midterms. So, to me, that's the key thing to think about gold, is you're supposed to be selling when they're yelling. I know that's difficult to come say this on your program when a lot of people have been in the space forever, including me.
11:21 But it's still, I think gold is tilted over to a bear market on the back of what Bitcoin did last year. Remember how bullish everybody was a year ago in Bitcoin? Same thing in gold. And like I mentioned, it's reached a pretty significant apex in my view. And it could knock around in a range for a while.
11:38 But I'm more worried about it, what does it do first? Does it press resistance around 5,000 or break down below 3,000 and make it easier to reset long? So right now to me, it's a bit of a no man's land for investors. Does gold perform when inflation worries are high or does it go down >> when interest rates go up? Now let's talk about the scenario that we're in right now.
12:03 So we have both scenarios happening at the same time. There is a pressing concern for higher inflation because of oil, and paradoxically because of that interest rates are going up, which gold doesn't like. So what is gold going to respond to more? And by the way, I have left the 10-year yield on my screen here, which is at the highest level since 2023, almost at 5%, pretty critical.
12:25 We'll talk about that. And look how well correlated it is with oil. I'll just leave that on the screen. And the question is, what is gold going to respond to? >> Inflation expectations or interest rates? >> Well, there you go. It's a big question. I look at it as the fair value of this rock, that some people say take out of the ground, put back in the ground, that has no income, like Bitcoin has no income, versus a Treasury guaranteed 10-year note yield around 5% is just plain horrible.
12:56 It's at a 40-year peak or high versus treasuries in terms of price. Gold is, I just say thank you but no thank you. That's just too expensive. And also these are the way things always work at peaks. You have to have severe disdain for treasuries and severe love for gold at certain levels, and that's when they tilt back.
13:14 So, I look at it as it's a lose-lose for gold. And the key thing to make the Fed shift to ease, which usually helps gold, is the stock market going down, and we just point out right now gold is a stock puppet. It's very highly correlated to the stock market. You just never want to buy a store of value, oxymoron, when it's two times the volatility of the S&P 500.
13:33 Wait till it gets back. I'll give you the example: the time to buy gold was when it bottomed at 1,600 or near 1,600, which was its 60-month moving average in the fourth quarter of 2022. That was right after, you know, was there in that tightening cycle. It was right there. It was cheap. It was the time to buy it.
13:50 Now it's 60% above that average. That's the highest on a year-end basis since basically almost 1980. It's very similar to the peak in 2011. And it's just too expensive versus that basics for all investing on the planet, the riskless return of a 10-year yield. Now, obviously, some people might push back on that, but this is where we are.
14:12 So, I'm still not in that gold bullish camp. I'm still worried it's going to go lower, but all metals, like even copper, starting to break down. The key thing to remember about gold is it's been part of that pumped and dumped scenario that started with Bitcoin in the beginning of the year and now includes gold. It's still hovering up on the year by 1%.
14:28 But silver, platinum and iron ore have all pumped then dumped this year. It's not just a one-off. >> Yeah. What's going on with copper? >> So I think >> Red bar this morning. >> Yeah, just today it's down 5%. I've been calling copper an accident waiting to happen. The question is, is the accident starting? And the bottom line is the key facts of copper is everybody gets the fundamentals.
14:48 People always repeat that, and I love when we get to near extremes and people repeat the same stuff that some of us pointed out 5 years ago, but AI, electrification, decarbonization, all that. The bottom line is if you look inside the market it's an accident waiting to happen. First of all, it's managed money net, it's CME copper. First off, CME copper is the center of the global universe because what's happened in tariffs, it pumped it up. 70% of global inventories of the major exchanges, including CME, the Shanghai Futures Exchange and the LME, are now in LME or
15:21 CME type warehouses. That's the highest ever. That's like 700,000 tons. Total inventories of copper globally are very high. But I'll just concentrate on CME managed money net positions. Hedge funds are way long the copper contract. They've been since it popped above five last year.
15:39 They've been running 20 to 30% of total open interest net long. They're way long. And if you look at copper over the last three, four years, it trades at two to three times the volatility of the S&P 500 and it's underperformed. Now, this year it's performed. That's an accident waiting to happen. It's stuck in the middle of tariffs.
15:54 It just needs a little trigger. And so far, we're hearing a little bit today, there's a little bit of push back from the potential US tariffs and what's happening, but I think it's a way distorted metal. And the bottom line is it's a complete stock puppet. If you look at the S&P 500, its correlation.
16:08 And I'll end with the key fact. The HG1, that's the COMEX copper, CME copper, now its 100 day correlation with the S&P 500 is about .62. That's the highest ever, with the market going up, in the history of that copper contract since 1988. Now this has happened in a very quiet environment, it's happened in the summer, but the lessons you always learn is correlations go to one in down markets. When they go to one in up markets I take it as a warning. >> The elephant in the room, oil. We haven't talked about the direction yet. How is this going to end? You said
16:38 it could come down sharply anytime soon, Mike? >> Well, I don't think it's, I think it will come down sharply. To me, it's not an if. Everybody gets that. It's a question because if it stays up and continues to go up, it breaks stuff. Diesel right now about $6 a gallon. The US is breaking stuff.
16:56 It's the grease of the global economy. Now, this US, and you look at the rest of the world, particularly in Europe, in Asia, it's a big problem. Most notably natural gas, but that's why I want to tilt over, is your signal where things are going. US natural gas, the January contract, that's the apex of the bell curve, right now as we speak it's $3.80 per MMBtu. That's the lowest since the end of 2021, right before Russia invaded Ukraine. So that number one measure of heat, electricity, fertilizer that led the way down after 2022 is leading the way down, telling you where
17:27 energy prices are going. Just a matter of time. Now it's supposed to bounce from here, hedge funds are short, but it hasn't. But then you see the disparity between that and heating oil. It's just a shocker. So once we get past some of the nuances, once human nature and innovation works through this, if we don't have a Strait opening up soon, or if we can, Mr.
17:47 Trump decave a little bit, because maybe it's going to take the Republicans get absolutely hammered in the election for him to see the disparity he's created, that'll happen. But the key factor we have to point out is, as I pointed out when Russia invaded Ukraine in 2022, the US, right at that time the western hemisphere was already becoming the price maker status in energy, that accelerated the process and now it's doing it more. Now we're seeing near record production in Canada, and also, but we're seeing record production in US,
18:15 Argentina, Brazil, Guyana. Venezuela is on the way. I fully expect they're going to double their production in a year. They're already up 30% from a year ago. But you see that's happening, there is, we're crushing the global economy and we're creating massive surpluses, where it was already accelerating before, between US and Canada were running surpluses of crude oil and liquid fuels running 8 million barrels a day.
18:38 Just a few years ago that was flat. There's only one thing that's going to stop this lower price. So right now we're in the disparity stage. I don't really know how high crude is going to go. I think 100 in the US is a decent peak. I thought 120 was a decent peak early in the year, but you see it's breaking stuff.
18:56 The key thing that hasn't broken is US stock market. And that's the one thing I always like to point out, is virtually every single spoon we've had in crude oil the last 20 years, has been around $40 a barrel, has coincided with the stock market going down. Even with unleaded gas, which is right now in this country around $4.
19:11 20, every single time it's gone down to two, has coincided with the stock market going down. And that to me is a key thing you have to worry about as we enter the second half of this year: if the stock market doesn't break, well the Fed might have to do something, which is be a bit of a shocker, but if it breaks the whole thing starts trickling down for a normal reversion of very elevated risk assets. And there's few, there's good ways to really break the stock market, and that's what crude oil and energy is doing right now. But also I'll repeat the key
19:37 signal is what's happening US natural gas. Its price right now on the January contract is 3.80. The peak on a monthly basis or so in 2022 was around nine, and now it's, you know, a fraction of that price, and that's the number one measure of heat, electricity and fertilizer in this country. >> Is copper a leading indicator for both stocks and oil? Perhaps in this particular case? >> It can be. Right now, it is more lag.
20:04 Well, it's lagging to some extent, because I've watched copper for literally decades, or at least a decade, versus S&P 500. And usually it trades along with it and sometimes it leads. It's led well before that, but it's been lagging since 2023. But the key thing I write about, I like point about copper, is not as an accident waiting to happen, but it's a severe accident we often worry about, because copper breaking down usually coincides with the stock market breaking down.
20:31 I mean if you take the price of copper per pound right now, we're $6.50. The high this week was around 6.85 or so. And if you overlay with the S&P 500, just take three zeros off the S&P 500, it's been the same trade, except copper's been lagging most notably. It breaks down, always means S&P 500's going down too. So to me that's the key theme I'm worried about copper, is if it kind of just makes beta revert a little bit, which is way overdue, for everything falls, and we're so overdue for just, gosh, the days we used to have a 20%
21:05 correction. S&P 500 stays down and it's right now both copper, so I'll be publishing on this tomorrow by the time we hit the tape with this, is if you take copper divide by its 200-week moving average and take the S&P 500 divide by its 200-week moving average, both are near the danger zone, around 40% premiums to that mean, 200-week moving average, as I said or tried to point out, and it's the same chart.
21:30 So to me copper and basically most all metals are complete stock puppets, and maybe today they're leading the way down. They were today because, you know, when we time stamp, but this morning copper started breaking down, then the stock market started falling. >> Well when you say they're stock puppets, I want to show people this chart that you've posted on your own X.
21:47 This is interesting. I think over the very long-term horizon, gold has not been a stock puppet. >> The trend is not friendly for gold versus the S&P 500. The yellow line here represents gold over the S&P, which has been down in the last 100 years. And people should understand this chart when they talk about the prospect of holding gold to outperform the stock market over the long term.
22:14 The key here is the time horizon. Anyway, why do you think this happened? >> Yeah, keep that chart up for a second. I love to talk to charts. I did that intentionally. I needed to agitate a little bit. As Frederick Douglas, a famous evolution leader, used to say, sometimes you have to agitate. And I'm agitating with facts.
22:31 And that is cuz I'm sensing so much bullishness in gold. We've had a wonderful run. We've had almost 30 years now where gold has outperformed, that rock has outperformed the S&P 500 total return. And I like to say, well, if the stock market's so great and all this AI is so great, how come it's not beating the rock? But that's the longest period in history. Yes, I only have 100 years.
22:51 But the key thing I want to point out is what's happened is also in that other part of that chart, you see the S&P 500 versus Warren Buffett's model versus GDP. It's the highest on a year-end basis since 1928. So my point is something's going to give here. This is the best performing period in history for gold versus that, you know, just total return of a stock index, and I want to point out what S&P 500 is.
23:15 I used to work at S&P. It is beta to the world, but what the index, number one, does, first of all, has a survivor bias, and you take out the bad stuff, put in new stuff, and it's also tracking human ingenuity and the ability to profit over the long term in a decent well-managed society. That will always win.
23:32 I do love the fact that gold, from most other people in the world, yes, you really need to hold that, because most societies don't really have the rule of law and the checks and balances we have in our countries. And that's in part you should always have some gold. But the point is now that it's this expensive, now we've had a 30-year run and everybody's excited.
23:49 I think it's time to tilt away and focus maybe not in equities, because equities are expensive. This is where I tilt over to T-bonds at right now 5.34%. I've been wrong in that for a while. I was wrong on gold for quite a while to break above 2,000 until 2024. And to me, that's the next big trade. As you see, but what I want to point out on this chart, in the long term, you're much better off holding a basket of S&P 500 or stocks than gold.
24:14 The problem is now you just don't want to buy the stock market. Okay, I'll end with one key fact. Okay, we all know the Warren Buffett model, but what I've really started using this year is, well before total debt, US got the 40 trillion, is a stock market cap around 82 trillion versus total debt.
24:30 When people talk about debt, they're pointing out a liability. That's always been a great reason to buy gold. But you can't point out a liability without pointing out the asset. X account, the number one real trying measure of assets in this country is the stock market. That's 2.1 times that liability. That's unstoppable.
24:44 Yeah, that's bad, but that's your key theme. That's what matters. And gold's very expensive. Stocks are very expensive. Housing's expensive. I was just on a call with my good friend this morning out in the heartland. He said land is really expensive. You look for alternatives. And at some point you just can take a little trigger for reversion.
25:02 That's why it's so important the stock market and copper stay up, because it's the same trade. >> This is a fair rebuttal though. Why did you start from a base of 1927? Mike, that's ridiculous. Gold was pegged pre 1973. Literally everything was outperforming gold. Now it can move freely as supply demand balance is out.
25:23 What's your response? >> So I might pull back and, not push back, and come out and say yes, I agree. I took out the Dow Jones. So on that chart you can see gold's down 98%. The farthest I can go back with the relative robust index on the terminal is the Dow Jones Industrial Average, I think to about 1890.
25:40 Maybe I can do that in the future. And gold's down about 40% over that period. So it's not picking a point in time. It's picking as far as I can go back now, right before the Great Recession or the Great Depression, made sense, but that's as far as I go back. That's it. I can't go back before 1927 in this S&P 500 versus gold.
25:57 So, maybe I'll do that with the Dow. But again, the Dow is also a much different index. It's only 40 stocks. It doesn't include a lot of that technology revolution we've had in the last few years. >> When you say that oil, if it goes even higher, is going to start breaking stuff.
26:12 What's the level we're looking at here? >> I think we're there. All-time high in diesel. US, and one thing I also remember about US gasoline, that was a key trigger for me in 2008. I remember going to a gas station, and when it first went to $4, I was bearish and short and long bonds and just all hedged up. And when I saw it hit four bucks in July, like that was the trigger.
26:34 Well, now we're not much above that now. But that's what triggers human sentiment in this country. So if you get unleaded gas back above near five, or even where we're now, keep going, that's a shocker. But it's also the time of year. Unleaded gas prices always go up in the first half of the year as we get to driving season, and always go down in the second half of the year as we get away from driving season, that we switch to different blends.
26:56 Going up right now is a real bad sign. Diesel's already done it. Unleaded gas is probably there. It's just sometimes what it takes is a trigger. And the key thing is stock market. That's all that matters. If that breaks, if that shows breaking, then everything triggers down. But typically, this is how it happened. It happened in 2007.
27:15 We spiked up to four in unleaded gas and by the end of the year we're two. We spiked the all-time high in crude oil to 147 and by the end of the year we're trading 40 or so. I see a scenario like that happening, and that's why I'm, I would say, very worried about touching the stock market, and I just look at that 5% bond, treasuries is a place to be.
27:34 >> Okay. Any of the commodities you're watching right now we haven't discussed yet? >> Well, we did mention a little bit of the grains. The grains are complete crude oil stock puppets at the moment. They're the ones that, yeah, they're up for good reasons. They all have their kind of new good reasons, but like I said, if you look at soybean oil, like it was one of the top traded, it's up almost exactly as much as crude oil.
27:55 I mean, they're both oil and biofuels. So, that's one key sector. And also, it's food. What's a lot of that cost of all that food, it needs to be transported, is diesel. So, I overlay a lot of these things with the price of diesel, and diesel's at a record high. So that's the main ones that we've touched on.
28:11 I can't think of, you know, at the moment, the main macros that matter. And the key thing also, I look at one of the best leading indicators for everything I've used for the last decade or so is Bitcoin, and it's just broke up to a decent resistance level and I think it's heading back downward. So I'm looking at that as a decent leading indicator.
28:31 If it stays below 80, which was key resistance, and just goes back down to the trend, it might be what led everything up is leading everything back down. >> Final question. The deflation thesis that you talked about to me earlier in the year and last year, is that still here? >> Absolutely.
28:49 Delayed, extended, and it'll be more extreme now. So, it's similar to 2008. We've had this unusual spike in crude oil and energy because of the decision of one man to invade Iran. It's his war now. That's a shocker. That's created pretty severe inflation, but it's short-term. Now, just think what's happening. ECB did that in 2008.
29:10 They hiked in 2011 and then what happened? They were all cutting really hard later when stock market went down. So, that's why the number one source for inflation or deflation short-term, it's energy. Certainly in this country, we have a super abundance of it. It's not going to last long because it'll break stuff.
29:29 But the number one thing I'm looking for, for normal post-inflation deflation, is that stock market going down. And that's why I look at a bond market right now. If you look at TLT or bonds, it's basically, it's essentially a put on the S&P 500 with positive carry, no time decay, and it's just, you know, waiting around for a trigger.
29:47 So that's the number one thing I'm looking for. It hasn't happened yet. Key thing I had in the beginning year was that, all that signals that I got from gold in 2006 and seven, when gold volatility surged versus the S&P 500 and S&P 500 just picked up. We have volatility in the stock market running at, basically on a year-end basis, it's only 3 years it ever really settled this low versus gold: was 1980, 2006, maybe seven, and here we are.
30:16 So that's the key thing I'm worried about, is just a little reversion in the stock market. So for that scenario to pick up, just a normal backup in the stock market, and you'll see pretty severe inflation, and it's like, you know what, when you're 2.5 times GDP, that means if you correct 10%, that's 25% of the US economy. That's pretty severe.
30:35 >> Not to mention the wealth effect that we have if the stock market corrects. Final question, Mike. If we have a correction in the stock market, yes, potentially we have a deflationary scenario, but that's a big if. Are you more bullish on the stock market given that the oil surge has not caused the stock market collapse? In other words, it's demonstrated ironically the resilience of the stock market and those strong fundamentals behind stock earnings.
31:02 >> So, that's a key point. I am not. The thing is if oil, something happens in the Gulf, Mr. Trump figures out and oil drops 20 to 30% heartbeat. Sure, stocks will go up. They'll feel a relief. And so were bonds a lot. Bond prices, which maybe been the better risk-reward, but no, I think we're in a pretty severe historic silly stage.
31:24 I point out in the stock market how expensive it is. And it's also a key theme I've seen, David, from a lot of people I talk to this morning, people who are older than me, who are very well invested. The key theme I hear is, "Yeah, I can't sell because of the taxes." I'm like, "Oh my gosh, that's probably might be a title in my book someday.
31:42 " But this is just, we've reached that, I think, the endgame. The Fed has to tighten because there's too much inflation. Now, yeah, it's short-term from oil, but it's mostly because of the significant wealth creation inflation. We reached an endgame. And also, one thing that Mr. Trump hasn't figured out yet is in the old days you would pressure the Fed to cut rates to goose the economy to help you get elected. Now it's the opposite.
32:02 It just makes more inflation, and the number one issue is affordability, and a lot of the affordability is just because asset prices gone up. Yes, short-term because of the war, but this might all pan out by the end of the year and midterms can be a good trigger. >> Is this endgame the way you envisioned it maybe a year ago? Oh no, I didn't.
32:19 I didn't. My main thing I got wrong is, I fully expected by the time we saw that US was amassing major military forces on Iran in January, fully expected the invasion to happen. But I fully expected that the US would repress the offensive capabilities of Iran quickly. They still haven't. And this is more than 6 months into war.
32:40 So that's the number one thing I got wrong. But what does that mean? It's doing what it did kind of in 2008, when crude oil went a lot higher than I thought. It created more of that inflation that reverted to deflation effect. That's the problem now. This is going to make it worse. The higher plateau drops harder.
33:00 >> Well, let's see what happens. We'll have to be on before the midterms for sure. Let's hope oil doesn't break everything. That would definitely be unfortunate. Mike, thanks for coming on. Where do we follow you? >> Thanking you, Dave, on your program. Really appreciate being on. On X, Mike McGlone 111, and LinkedIn. Senior commodity strategist at Bloomberg Intelligence. Mike McGlone is happy to respond to people and add them to my list if they want to be on.
33:26 >> We'll speak soon, and everybody should follow Mike on social media, links down below. Take care for now. >> Thanks David.