Remy: On this Monday morning we're looking at WTI as well as Brent advancing. Now Saudi Arabia is facing new drone and missile attacks and posing fresh security risks after deadly weekend strikes on the airport in Riyadh, and the continued Houthi escalation is keeping global energy markets on high alert. Meanwhile, President Trump unveiling a diesel supply deal with Russia while declaring an energy ceasefire between Moscow and Kiev. While the move does aim to cool higher pump prices. Ahead of midterm elections, even as Capitol Hill lawmakers push back. Joining us this morning to weigh in is Patrick Young, chairman and founder of Exchange Invest. Patrick, great to have you back on the show. Well, plenty of geopolitical tensions both in the Middle East as well as between the Ukraine and Russia. So with Middle East escalations threatening oil supplies, how severely do the conflicts threaten market stability as well as concerns about inflation?
Patrick Young: Well, it's incredible, isn't it, Remy, because we thought it was the end of the world 3 months ago, and actually we're still seeing something like 70, 75% maybe even of oil managing to escape from the Gulf region, whether it's through the various repurposed pipelines, alternative routes, or indeed through the Straits of Hormuz themselves. Now everything is not hunky-dory, as can be seen from the excessive pay rates being paid and the freight cost of actually getting oil moving. The problem is, of course, we have a number of concomitant problems which. Prompted the Trump deal at the weekend with Russia because there is a fundamental shortage of diesel out there, and the difficulty is that American refineries are running at something like 95 96% of capacity. They cannot run full capacity all the time. They have to come down for maintenance every so often. So therefore we have got a struggle, which is why we're seeing oil notching up. And therefore in the benchmark Brent Brent crude, which is really the most important benchmark today, you can see that prices are going higher. But let's face it, we were talking. Just a few months ago, about $200 oil was quite possible because of this terrible meltdown. In fact, we're not even breaking $100 at the moment. That's not to say pump prices aren't large, because also, of course, we've got a huge freight cost built in there at the moment, as I've already mentioned. But nonetheless, given the amount of violence that is taking place in the Middle East at the moment, things seem to be remarkably calm. Even if that's very unpleasant for American voters paying $6 a gallon and more at the pumps.
Remy: Yes, and speaking of Patrick, of course we're all counting down to the midterms here in the US, so can importing Russian diesel actually lower pump prices for American drivers as well as truck drivers here in the US?
Patrick Young: You mentioned truck drivers, that's a very, very important point, because that's obviously vital in the overall diesel flow chain, because they're the people using the most most of all. And, and of course, as it is, I mean, diesel cars in the US got somewhat of a bad rap thanks to Volkswagen and various scandals a number of years ago. Nonetheless, yes, it can make. Impact on pump prices. I would say actually at the moment it's probably taking the edge off pump prices because the markets are not panicking so much because they do see attempts at alternative supply. Can it stop Trump from having a meltdown in the midterms? At the moment, no. He needs another miracle if he's going to turn that political kahuna around.
Remy: Yes, and Patrick, while I have you here, it goes without saying that all of us are continuing to watch what's happening with the bond markets and with geopolitics as well as multi-billion, if not trillion dollar budget deficits. There are concerns about the term premium as well for Treasuries, but in simple terms, give us your perspective on the bond market and what it means for regular people, especially. They contend with higher borrowing costs for longer.
Patrick Young: Well, obviously one of the problems that once we get borrowing costs going up is particularly going to be something like mortgage rates. You're going to see that feeding through more and more, and therefore people who are locked in at low rates are going to be staying there, which means they're not going to be moving houses, etc. etc. as goes out through the chain in America. If you're looking at Europe, it's obviously a much, much worse situation. I mean true. In the USA at the moment, there are a few bonds, around about 2 years, Johnson and Johnson, magnificent large mega corporates who are actually borrowing money cheaper than the US government. But when you look at Europe, that's really where the big kahuna lies, where there's a huge crisis at the moment. The French government at the moment is finding it more expensive to borrow across the curve than the likes of LVMH. So in other words, there's more value in handbags than there is in. Luxury handbags, one has to say also than there is in the possibility for the French government. That certainly suggests that there's a crisis coming down the pipeline. The interesting issue now is what can governments do about it? The answer is they don't seem to be able to get austerity together, so can they do something that's going to try and grow the economy? That could be a very, very interesting facet as we manipulate our way towards a greater AI economy.
Remy: Yes, and you brought up a lot of important points, especially when it comes to the individual economies in the eurozone, and that is an area we'll continue to monitor both in the FX market as well as the bond market. But shifting our focus back here to the US when it comes to investors who are looking at the S&P 500 as well as Nasdaq near or post record highs, which be doing when it comes to long term investing and how can they protect their accounts from a lot of the noise?
Patrick Young: Look, one thing you could probably do is go out and buy economic value. Go and find the companies that are doing lots of deliveries of probably very boring things. People who are making ships or delivering packages for Amazon, etc. etc. There's a lot of great value to be had in there. What we've got to look at is don't be driven by the AI bubble. Maybe you might want to lend a bit of money to the AI companies on the bond market because they seem to be almost insatiable, and they're willing to pay a higher yield for that, but of course it could. Risky in the long term if we have a data center overflow. But at the same time, there is value in this economy. There's great value to be found across the real economy. That's not technology. That's not sexy stocks. That's not the things that are going to get you endless talk and headlines on indeed live shows even such as this. But actually, boring looks really, really interesting right now. There are some great potentials in the sort of stocks you mentioned that are reporting their results this week.
Remy: And finally, Patrick, before I let you go, we've covered North America as well as Europe and the Middle East, so I do want to end in Asia. So this week, the IMF as well as the World Bank will be gathering in Bangkok. So what is the single most important metric or policy signal that you'll be watching out of these meetings this week?
Patrick Young: Obviously I think a lot of people are going to get very concerned about the dollar and they're also going to be very concerned about the euro. The euro is at 17 month lows against the dollar, or at least was last week. That's something that's obviously going to be disquieting a lot of what goes on in Southeast Asia. Equally, I think the biggest metric we can look at brings us all the way back to the top of this discussion. Oil. The natural way to get oil to Southeast Asia is bringing it down through the Straits of Hormuz when it's originating in the Middle East. That pathway is not so easy to get through at the moment, and there are obviously going to be a lot of concerns that the. Cost of freight alone is going to be an impediment upon the Middle East, uh, the, the East Asian, Southeast Asian economies. And that's obviously going to be a concern. Particularly so at a point in time when really a lot of people are seeking greater clarity on just what are China's intentions in so many parts of the world. And obviously, therefore we come back to the geopolitics, whether it's China, Taiwan, or indeed how Russia is relating to China in this very, very volatile age.
Remy: Well, Patrick, appreciate your time. Thank you so much for joining us this morning with all of your insights as well as your perspective as we head into a busy week for global markets.
