Ben Fraser, Managing Director of Aspen Funds, argues “there’s a huge opportunity to get into fossil fuel production.” He discusses macro-driven alternative investments, investable megatrends, including the disruption to energy markets as advanced economies decarbonise, and the outlook for the US economy, particularly inflation. Disclaimer: this episode presents general information only and is not financial or investment advice.
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About this episode’s guest: Ben Fraser
Ben Fraser is the Chief Investment Officer at Aspen Funds, where he combines his analytical nature with a passion for delivering outstanding client service and strong returns through out-of-the-box investments. With a professional background that spans over a decade, Ben has become an expert in the field of investment management and has worked for several reputable financial institutions.
Ben is the co-host of the Invest Like a Billionaire podcast, where he joins his father, Robert, co-founder and CFO of Aspen Funds, along with co-founder Jim Maffuccio, to discuss economic trends and best practices for alternative investing.
Prior to joining Aspen, Ben served as a Commercial Lender at First Business Bank, one of the top SBA lenders in the nation. There, he specialized in government-backed loan originations, specifically SBA and USDA loans. Before that, he worked as a Commercial Credit Underwriter for Crossfirst Bank, where he personally underwrote over $125MM in C&I and CRE loans across various industries.
Ben also has experience working in the asset management industry, having served as a key member of the team at Tortoise Capital Advisors. At Tortoise, he helped grow institutional managed accounts from ~$3BN AUM to ~$7BN AUM.
Ben holds an MBA from Azusa Pacific University and a Bachelor of Science in Finance from the University of Kansas, where he graduated magna cum laude. Ben’s commitment to excellence and his ability to deliver strong returns for clients make him an invaluable asset to the Aspen Funds team.
What’s covered in EP231
- 00:00:04 – Global Energy from Fossil Fuels (excerpt from interview)
- 00:00:33 – Introduction to Economics Explored Podcast
- 00:01:06 – Guest Introduction: Ben Fraser of Aspen Funds
- 00:02:08 – Aspen Funds’ Investment Focus
- 00:05:17 – Accredited Investors and Investment Opportunities
- 00:06:04 – Expanding Accredited Investor Definitions
- 00:08:47 – Alternative Investments and Client Strategy
- 00:11:29 – Investable Megatrends for the Next Decade
- 00:13:03 – Inflation and Energy Market Outlook
- 00:15:37 – Private Credit in Real Estate
- 00:20:37 – Commercial Real Estate Market Dynamics
- 00:23:42 – Energy Investments and Fossil Fuel Outlook
- 00:29:10 – OPEC’s Influence on Oil Prices
- 00:31:28 – Gold, Bitcoin, and Investment Hedges
- 00:35:09 – US Fiscal Policy and Debt Concerns
- 00:38:40 – Closing Remarks
Takeaways
- Macro-Driven Alternative Investments: Aspen Funds focuses on macro-driven alternative investments, which involve understanding long-term economic trends to identify investment opportunities.
- Investable Megatrends: Aspen Funds has identified investable megatrends for the next decade, including higher inflation for longer and an energy crisis due to a transition to green energy.
- Opportunities in Real Estate: Aspen Funds sees opportunities in private credit within the real estate market, particularly in the midsection of the capital stack, where risk can be reduced while achieving good returns.
- Energy Market Insights: Ben Fraser discusses the impact of transitioning to green energy on fossil fuel production, highlighting potential supply shortages and investment opportunities in fossil fuel production.
- Views on Gold and Bitcoin: Ben Fraser comments on gold and Bitcoin as alternative investments, acknowledging their role as hedges against fiat currency but cautioning against heavy allocations due to the risks involved.
Links relevant to the conversation
Invest Like a Billionaire Podcast
Transcript: Alternative Investments & Investable Mega-Trends w/ Ben Fraser, Aspen Funds – EP231
N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.
Ben Fraser 00:04
Right now about I think it’s 83% of all of our global energy needs come from fossil fuels. And that’s usually pretty shocking number for people to hear. They think we’re way farther along. Right. You mentioned nucular, which I’m a huge proponent of, but that only makes up I think it’s less than 5% of total global energy needs.
Gene Tunny 00:33
Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning in to the show. This episode, we’re joined by Ben Fraser, Managing Director and Chief Investment Officer of aspen funds, which offers alternative investment opportunities for accredited investors that concentrates on real estate credit and energy markets. In this episode, Ben explains what he means by macro driven alternative investments. Ben and I discuss what he sees as investable mega trends. And we also talk about the outlook for interest rates in the US economy. Among other things, venture is some great insights into what’s coming up in energy markets as advanced economies decarbonize right, oh, we’d better get into it. I hope you enjoy my conversation with Ben Fraser of aspen funds. Then Fraser from Aspen fans, welcome to the programme.
Ben Fraser 01:50
Hey, thanks for having me, Jean.
Gene Tunny 01:52
Oh, it’s good to have you on Ben. And I’ve been listening to episodes of your invest like a billionaire podcast that you do with your father. So good work on that. And I’ve got a couple of questions coming from that, to start with grass. Q, what’s the what’s the pitch of aspen fans? Like, based on what I’ve seen, you’re focused on macro driven alternative investments. What do you mean by that, then?
Ben Fraser 02:21
Yeah, well, great question. And, you know, it really kind of ties in both to our podcast platform as well as what we do on the investment side. But the podcast invests like a billionaire is really intended to educate, you know, what I call the everyday millionaire strategies and tactics that the ultra wealthy are using, and have been using for many, many decades in growing and preserving their wealth. And usually, the biggest difference for what we find from the ultra wealthy calm institutional investors, family offices, the endowments, and pensions, relative to say the retail or the everyday millionaire, is the allocation to alternative investments, and specifically private alternatives. And that usually is comprised of the private equity, hedge funds and real estate really being one of the bigger ones. And so what we’ve found is there’s a huge gap of knowledge for the retail investors in understanding how to invest these asset classes. That’s really kind of what we we focus on. But then comes the question of, well, where do I invest, because there’s a myriad of opportunities to invest in kind of the alternative space. So then we use our framework that we tagged, you know, macro driven alternative investments, and really comes from the experience a lot from my father’s background, which we could talk a little bit about this, this driven kind of focus here of our economic themes. But really, the whole idea behind the tides are different than the waves, right? We can understand that there’s economic tides that are you know, seismic level shifts that happen usually over a slow period of time like these, these tectonic plates that are shifting, right. And we don’t really necessarily does nothing big are kind of boring, you kind of see it happening. But those create the the tailwinds the rising tide that lifts all boats that position you if you’re as an investor in pay attention to these, and a way to outperform because of where you’re positioned. And so what we usually kind of use that phrase for macro driven is we’re looking at it top down approach, we’re looking at what are the long term economic trends that are creating opportunities that then we can take advantage of as investors and outperform over a period of time from a allocation perspective, not just a individual investment perspective? Rod
Gene Tunny 04:58
Okay. So, your, your clients, the people who invest with you, you’re focused on accredited investors, is that right? So that’s a segment of the market where people have a particular level of income or level of net worth, is that correct? Right?
Ben Fraser 05:16
Yeah. So you’re in the US, we have a definition called accredited investors. And that’s basically driven by the SEC that says, you have to meet some minimum requirements to be able to invest in a lot of these types of deals. And so it’s really kind of driven from the regulation side of it, though, we do try to educate people that aren’t quite there, you know, the not quite yet accredited, because there are opportunities, and we actually believe the expansion of that definition will continue to go downstream. Because some of the changes they’ve made to the rules for accreditation have actually been expansionary to include more people over the past decade. And so we’re hopeful that they continue to make it more accessible for people. Yeah,
Gene Tunny 06:04
yeah, I’m interested in that, because I’ve been listening to Tony Robbins, his latest book, The Holy Grail of investing. And I mean, he has a case talking about the value of alternative investments. And he’s saying that a lot of people are locked out of them. Because of they don’t meet this accredited investor threshold. And I think he mentioned that there is or there was an act of Congress last year that is requiring the SEC to now bring in a test whereby you can establish your credentials as an accredited investor, if you pass the test to do you know where that’s up to you? Is that something you’re following, then? Absolutely, yeah,
Ben Fraser 06:46
that’s, that’s a pretty big deal. That’s kind of what I was referring to is, you know, from, from our standpoint, having a certain number financially, whether the income you make or the net worth you have is is an okay proxy to establish? Are you sophisticated enough to invest in something as gentle if you have to make a good amount of money and you have a lot of money? You know, theoretically, you’re, you’re, you’re smart enough to make these decisions. But what about the people that have studied this as a career and they’re maybe earlier in their career, and they want to make inroads into the alternative space, they’re trying to expand it based on knowledge, not just purely based on financial status. And so I don’t know the exact status of over that sat, it seems to me from what I’ve read recently, that that is either in play currently or about to be in play as an option. So it still requires a test, right. And there’s, you know, something you have to pass, I don’t think it’s terribly difficult, but it is an extra layer. But by doing that, you can, theoretically become accredited just through passing a test. Now, they’ve also included, they did this couple of years back where they, if you worked for a provider of alternative investments and operator or sponsor, after one year anniversary, you become what’s called a knowledgeable employee, to where you now have access to invest as an accredited investor into these types of investments that are being offered by your firm. And so, you know, I’ve told young people and love people that work for me, you know, I’m encouraging them to hit that one year mark, as to, hey, you’re now credited. So, you know, we’re going to try and wait minimums, or we can and make it easier for you to participate in a way that it’s comfortable for you at this point. But yeah, there’s definitely a cool trend for that. And we’re hoping that it continues, because there’s definitely some pretty big advantages when investing in alternatives. Right
Gene Tunny 08:47
now, I mean, the alternative investments so they can bring higher returns, obviously, there’s higher risk associated with that. Well, how does it work? I mean, if I come to you, so say, I’m a high net worth individual and I come to you and invest the funds, I come to Aspen funds, do we sit down? Or do you work out a portfolio? Do you say, you work out there’s this allocation, alternative investments is this much in domestic equities, this much international this much fixed income? How does that work? Ben?
Ben Fraser 09:18
Yeah, you know, it’s probably a little bit different than what you’re describing sounds more like meeting with a financial advisor. And, you know, to be clear, we’re not financial advisors. We don’t ever anticipate being that and I think there’s a role for a financial adviser, though, I do think a lot of the big shops they just kind of create echo chambers that don’t really know what they’re talking about and they just spout here’s the three things you should do. And honestly, isn’t that helpful, but we actually work with a lot of investment advisors that understand the importance of alternatives in a portfolio and actually are pretty big feeder system for us to help their clients allocate to what we’re working on. But you know, Working with us, it’s it’s a little bit different in the sense of, we have a few different opportunities, right, and we try to present here’s the characteristics of both the risk and the reward of each set of opportunities. Here’s the reason why we like you, I believe it. But ultimately, it’s up to you to decide what fits your investment profile, what fits the status of where you’re at, in your career, and your areas, spectrum and all those kinds of things, then, you know, we can help provide information, but we actually legally cannot give advice because we’re not advisors. So it’s really more of a here’s, here’s all the options, you get to pick and choose what what works best for you. And I always recommend, right finding an advisor that likes alternatives can be actually a great resource because they can help you not only on the portfolio allocation standpoint, a lot of times they can help you on the tax implications, and the basic financial planning of say, a budget and those kind of things. Estate planning, asset protection, a lot of broader topics that are important, but way outside the scope of what I’m an expert in, right.
Gene Tunny 11:06
Okay, gotcha. On your website on the Aspen funds website, which I’ll link to, in the show notes, or might have been on your podcast website, you’ve got the there’s a webinar about investable mega trends for the next decade. Could you tell us so what are some of those mega trends that you’re looking out for?
Ben Fraser 11:29
Yeah, so it kind of stems back from our approach of finding the best opportunities. And, you know, what’s, what’s different about us and maybe other operators, or sponsors of investment offerings is we’re not a hammer and everything is a nail, right? Well we try to do is identify where are the opportunities first, right, without any dog in the fight without us forcing a square peg into a round hole. And then we’ll actually create the strategies, build the teams, and put together these kind of investor friendly structures. And in terms to put together an offer that fits is supported by by these trends. So for us, it really comes down to where do we really believe the opportunity is because that sets the, the, you know, the next levels of dominoes to determine what how we present offerings for investors. And so, our research, we kind of consolidated into what we call an investable megatrends for the next decade. And so we these are trends that we believe are in play right now, and will be in play for a long period of time, that are really shaping the economy, and both right now and in the future. And those that are standing up, see this, and position themselves will be rewarded by the market. And so that’s really how we’re looking at it, you know, some of the things and we have a whole presentation, it’s a very long presentation. So I won’t get to all the details in this interview. But you know, some of the snippets, and we’ve been saying this for a little while, is we believe inflation is going to be higher for longer. And that has now become more popular sentiment. But you know, was it for for a period of time where inflation is more transitory. This is a short term phenomena. And there’s really two reasons that we believe are driving inflation likely been higher for longer. And this is, again, mostly in the US. But one of those being the huge labour shortage. And so we’ve really, since COVID, ended pressures in the BNF cover, we had a huge spike in unemployment. And then that kind of came down. There’s an interesting chart that we have in our presentations that, you know, shows there’s this huge gap that has continued to grow over the course of the past year to have job openings relative to those looking for full time employment. And it’s a pretty big gap by a factor of a million to several million job openings that can’t be filled. And a lot of it’s because the labour left the market after COVID, a lot of late stage career, folks took early retirement, a lot of dual income families went to single income and one of the spouses decide to stay home. And so the reason that’s important is the labour shortage puts a lot of pressure on wages increasing, which is very inflationary, because the primary driver of GDP is consumer spending. And so if the consumer continues to have more earnings, and they continue to spend that that will continue to contribute to a higher inflation number. And the other one is really we think it’s playing out right now, but we haven’t seen we go into the early stages of it and we think we’re at the early stages of a an energy crisis that we hadn’t seen in a long time. And it’s really going to be driven by a supply shortage of fossil fuels. As we’re making a transition into more green energy, renewable energy sources that is really being driven by a political narrative that, hey, as best as well, attention at its worst is creating a huge gap of understanding what it’s going to take to make this transition. And really putting ourselves in a really bad position from a production and supply standpoint of fossil fuels over the next several decades that we believe is going to be pretty, pretty severe.
Gene Tunny 15:38
Right? Yeah. Yeah. I mean, we’ve got some of the world that energy issue here, arguably in Australia to their concerns about reliability of the network as our coal fired, power stations are decommissioned or shut down over the next couple of decades. And so that’s, that’s a big issue were grappling with here at the moment. And there’s a big debate about nuclear energy, and whether that’s an alternative and that that’s becoming incredibly political. Over here, so yeah, good points, then can ask how do they affect your, your investment strategies is mean, inflation higher for longer, okay. Yep. Yep. Yeah, that that’s, that’s plausible. And then the energy, shock or crisis, or whatever you want to call it? How does that affect your investment choices?
Ben Fraser 16:35
Yeah, absolutely. So if, if we believe inflation is going to be higher, for longer, it really kind of sets the stage for where opportunities will kind of be over the next several years. If that’s the case, right here in the US, the Federal Reserve is really become the point of a lot of conversation, a lot of emphasis in trying to decipher what their approach is going to be. And they’ve been pretty clear from the get go, Jerome Powell stated, they need to get to a sustained level of comfortable GDP growth, which he stayed is 2% and Intel, and when that happens, they’re going to maintain a more aggressive monetary policy to bring inflation back into check. And so obviously, we’ve come way down from the highs of a year or two ago, you know, six and 8%, inflation numbers, you know, we’re down into the threes, which feels like a huge, you know, improvement, which it is, but it’s still very far off the mark. And there may be periods where we kind of dip down to the twos potentially. But given the things I just shared, that we think are systemic issues that are going to be very inflationary, they’re gonna have a hard time keeping interest rates or inflation to where they want to be. And that really drives monetary policy and interest rates. And so we’ve seen, obviously here in the US the fastest increase in interest rates that we’ve ever seen, that has caused a pretty big shock through the commercial real estate market, that we think is still being digested and will really start to play out over the next price several years, depending on what happens, but what our approach is that because inflation is gonna be higher, for longer interest rates will likely be higher for longer, the markets already priced in several rate cuts. This year, I think that’s pretty optimistic, or even heard some economists say that they think we could see six rate cuts this year. I think that’s very, very optimistic, given some of the numbers we just saw reported for q4 for both GDP and unemployment numbers. And, you know, we’re actually even seeing a probability now have an interest rate increase in very small probability. But you know, that’s back on the table if these numbers continue to come in, and you know, beyond expectations, and so we’re this driving opportunity is where we kind of see the biggest opportunity in the real estate market right now is in private credit. And so what that means is playing in this kind of mid section of the capital stack, if you understand what that means, but basically, generally in every deal, you have a senior lender, and you have equity investors, right. And right now, both of these parts of the capital stack are standstills. The lenders are pulling back, they’re tightening credit, they don’t want to put more money out, thanks for getting nervous equity investors, they’re getting capital calls, they want to preserve cash, they don’t want to put more money into deals. And so it’s providing opportunity for the market to come in across the middle part of the capital stack. So you can actually reduce your risk because you can get priority of payment. And you can help inject Apple into a project that, you know has a great path to stabilisation, a great path to reach its ultimate value, but needs a little bit of capital to get there, you come in with with pretty incredible rates of return for pretty minimal risk at this point of credit cycle. So we think it’s a great opportunity, kind of in this transition of the credit cycle, to take advantage of well positioned real estate and good markets with good operators that just need a little bit of extra cash to kind of take it to that next level to make it through and ride out was probably gonna be a pretty bumpy ride in commercial real estate the next few years. Yeah,
Gene Tunny 20:37
yeah, for sure. So I saw your you know, I listened to your episode on what’s been happening with the banks, and he was stunned by just how bad commercial property suffered in the States during the pandemic, and I mean, we had a bit of that, but the, the the plunge in values looks a lot larger in the States. Where’s the market at now? I mean, what’s it like? I mean, are there just parts of CBDs? That are the empty office buildings? Is that is that essentially what’s going on? What what’s the what’s the story there, Ben? Yeah,
Ben Fraser 21:14
so it’s, it’s interesting, because you see the headlines saying commercial real estate is down 30% or 40%. And, you know, as we all know, headlines are usually exaggerated, exaggerating what’s really going on. And while there are certain parts of the market, they’ve definitely been impacted to that degree, what most people think of when they hear commercial real estate, when they think of the big distress. In course, real estate is office. And, you know, when I say commercial real estate, I mean, the whole broad spectrum of all types of real estate, including office, multifamily apartments, you know, single family residences, industrial properties, retail, et cetera, et cetera, et cetera. So there’s lots of components within that big category. And everyone’s performing differently. So there’s some measures of Office that say, Yeah, values are probably dropped 30 to 40%. And, you know, I still think it’s a knife that’s, that’s falling, that we don’t really know where it’s going to where it’s gonna land, because we don’t really know what the value of an office property is that, say 50% occupancy and not probably going to improve from here on, you know, what’s the use case of that property going forward? How much is it worth? Well, I think the market is trying to digest that. But in other asset classes, we’re seeing a pretty different story industrial real estate, it’s actually it’s probably the least impacted by some estimates, it’s maybe only been impacted five, maybe 10%. Values. Retail similar way, apartments are probably the next biggest impact. And a lot of it’s because some of these really hot markets here, the Sunbelt markets are, we’re we’re very, very, the guy very aggressive in the prices. And so we’re seeing kind of a tail off some of these these high prices, but long term trends still support strong values, and housing and multifamily. And so it’s really trying to decipher, you know, here’s the big the big picture narrative, but then where’s the real opportunity to where maybe there’s a dislocation between the headline understanding the narrative and the actual underlying data. And that’s we’re always trying to look for that gap. Because if the market believes there’s a big issue, but the data supports something different, that’s where you can kind of come in and capture the opportunity.
Gene Tunny 23:36
Okay, we’ll take a short break here for a word from our sponsor.
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Gene Tunny 24:11
Now back to the show. And what about energy? Ben? What what is your analysis? What does that tell you about where your investments should be focused?
Ben Fraser 24:25
Yeah, so try continuing what I was saying a minute ago on fossil fuels. We’ve really seen a pretty big shift or the past decade from investment into new production. And if you think about fossil fuels, it’s very different than real estate where real estate naturally appreciates. Over time with inflation. The fossil fuels naturally deplete over time as we pull more resources out of the ground, there’s less and reserves and by some estimates, it’s somewhere between you know, five to 8%. have total global production is depleted every year. So just by normal usage and demand, numbers, we’re depleting about 5% of all the production that we’re using every year. And just to maintain the same levels of production, there has to be new levels of investment to find, you know, new wells and new reservoirs and build out the infrastructure to increase production, or just to maintain production. So, what’s been interesting is about 10 years ago, we saw a pretty big shift from the the political narrative of the environmental societal governance standards that have been imposed on not only the operators of these assets, but also the capital allocators. And so a lot of the allocators that are investing into different energy verticals are being either penalised for investing in fossil fuels, or they’ve been rewarded for investing in renewables. So it’s created this incentive structure that is moving capital away from fossil fuel production and development into other technologies. And I’m not saying we should suspend all investment into green energy, you know, that, you know, to put on the fossil fuels, but we can’t do the the inverse of bomb or capitalist to new technologies and, and not realise the impact that would have in current energy needs. Because right now about, I think it’s 83% of all of our global energy needs come from fossil fuels. And that’s usually pretty shocking number for most people to hear they think we’re way farther along, right. You mentioned nuclear, which I’m a huge proponent of. But that only makes up I think it’s less than 5% of total global energy needs. And we’re not seeing these these big shifts, we’ve been trying to invest herbal energies for many, many decades. And so to think we’re going to be 100%, the transition to green energy in the next 10 years is just completely irrational. So what’s really happening is this lack of investment is going to cause a future supply issue, right, because as we’re not reinvesting that supply curves continuing to decline, and By most estimates, including the most far left leaning the most renewable, energy focused agencies are predicting that demand for fossil fuels will at least be the same 10 years from now, but most estimates actually anticipate that’d be higher, because we have population growth. And here, at least in America, and so they’re, you know, JP Morgan, just put out a report a month or so ago, predicting a 7.1 million barrel per day shortfall of oil and gas, actually just oil, just oil needs per day. By 2030. If if we don’t have a massive course correction. And so the opportunity is we really believe there’s a huge opportunity to get into fossil fuel production. So we’re investing a lot into these operating wells at really good prices. And we’re, we have pre distort prices right now. But we also think of the probabilities and, and, you know, there’s probabilities to the upside and price as we kind of go later into this energy. kind of issue. Yeah. Good
Gene Tunny 28:30
points there. It’s just I was just thinking that, you know, Saudi Arabia and, and Russia, they’ll be, they’ll be happy because you’re talking about oil, and, you know, potential, you know, shortages and, you know, implications for prices, higher prices in the future. They’ve been trying to engineer that, haven’t they recently, so there was a report in the Financial Times. Yesterday, so OPEC plus members extend production cuts in bid to boost oil price. So they, they’ve been trying to get that up. And it’s been, it’s been quite stubborn that even with all of the geopolitical tensions, I don’t know if you’ve been following that at all.
Ben Fraser 29:10
Yeah, yeah. Yeah. I mean, it’s there’s a lot of game that ship that goes on with with OPEC. And, I mean, what’s interesting, now people don’t realise is that the US is actually the largest exporter of oil in the world. Right. So Saudi Arabia is huge. And they’re, they’re a big player in this, but most people don’t realise that the US is actually the largest. So we have a pretty big place to play in this global geopolitical thing. But in the short term, there’s a lot of, you know, supply cuts or, you know, we’re going to flood the market and there’s a lot of kind of gamesmanship to a certain degree on the short term, you know, prices but at a certain point, you know, supply is inelastic because you can’t just flip a switch and all of a sudden, you know, we just have so much more oil there’s there’s a stir certain range, right, they can they can reduce supply the short term and just keep certain wells not producing. But if your capacity is x, you can’t do more than that, right. So at a certain point, there’s going to be this divergence between supply and demand. And I think that’s where, in a longer term timeframe, we’re gonna run into some bigger issues. But in the short term, I mean, I don’t mind higher oil prices, because I’m a seller of oil, because of my made the investments that we’ve made. So, you know, it’s been interesting to there’s been a lot of shift of the market from kind of years past, here in the US, at least, where, you know, they’re, they got a very aggressive and drill and very aggressive and trying to produce as much oil as possible, kind of flooding the market and got a little bit in front of their skis to where prices dropped massively. But the the market is kind of pulled back today was kind of like these higher oil prices, and we’re okay to, you know, not massively increased supply, because one we’re getting, you know, bad mouth from the politicians and two, will make a lot more when prices are high. And so it’s kind of created this really unique environment where we’re, we’re sitting it kind of elevated prices from a historical standpoint, and, you know, some of this interaction interplay between OPEC in the US, and, you know, other players of oil, like Russia, are, you know, intentionally keeping prices higher in the short term, and I think it’s only going to continue wrong.
Gene Tunny 31:29
Okay. That’s a good insights there, Ben. Now, before we go, I’ve got to ask, I’ve got some of my listeners would describe themselves as libertarian, and they’re very much in or they’re, they’re concerned, or they’re Austrian economists, you could say and they’re very much concerned about the actions of central banks and their money creation and all that and the risks of fiat money. And so they’re very, they’re very interested in gold and I see gold as you know, that’s what is it? It’s was it 2600 Or something an hour or maybe 2100 USD announcer saw the other day, so it’s getting it’s getting up there near the, the historic high. And, you know, so gold’s something that is up again and Bitcoin is dead, it’s had a bit of a surge, particularly since the these Bitcoin ETFs have been allowed. Do you have any thoughts on gold Bitcoin? Where does that fit into your evey alternative investments that you’re looking at?
Ben Fraser 32:33
Yeah, I think they definitely are categorised as alternative investments. This is outside the scope of what we invest in as Aspen. But we definitely comment on gold a lot in our podcast, because we have a lot of listeners probably like you that, you know, want to get have a hedge against, you know, fiat currency. And I mean, I haven’t been around the game, as long as some, but you know, to me, it’s whenever there is maybe undisciplined from central banks, all the gold bugs come out and say, See, we told you so and I think there’s an element of truth. But it also never plays out the way that they expect. It For Me, gold has always had an identity identity crisis, right? Is it a currency? Is it a hedge store value? I think there’s an element of it’s all the above. But I think Bitcoin is also confused the use case for gold as well. Right. And so I do think it’s good to have hedges, I think it’s good to have as a portion of the portfolio, just like a lot of these different things that we’re saying. But people that have really heavy allocations into gold and, and other Kryptos for that matter, I think, take a lot of extra risks, they probably don’t need to, because of, you know, some of these things that are hard to know where they go, I think, you know, the I used to be a much more staunch Austrian economist and, you know, hard money, kind of side of things. But from what we’ve seen since COVID, the modern monetary theory, principles have played out and just certain degree have kind of worked and I think I’ve had to kind of readjust some of my initial thoughts because we would have expected a massive amount of, of deflation throughout the game, we are seeing some higher inflation, but definitely not to the degree that of the stimulus and monetization of what we saw over the past few years. And so I think it definitely can drive higher inflation, but I think it’s only to a certain point. And meanwhile, we’re having a really strong assumer in the US a really strong economy from a GDP standpoint, that continues to support a stronger dollar and so, you know, I’m not, I’m not a, you know, gonna take a big bet against the dollar. anytime soon. And, you know, I think it’s good to have edges, just like anything. But I also think it’s important to have have that imbalance and and measure.
Gene Tunny 35:08
Gotcha. Yeah, yeah. Yeah, I wouldn’t be necessarily betting against it anytime soon that that’s for sure. One thing I guess I should ask because just before we go, because this is something that does, as an external observer, looking at the US and looking at the budget situation, and that big structural deficit that the federal government has, and the debt to GDP ratio just keeps climbing. And, you know, you’re always there’s always talk of a potential shutdown from time to time. And it just, I just wonder, Where are we going to get to a point where there will be a US fiscal crisis at some stage, I’ve had one guest on from Cato Institute’s she was warning against that in the future. Do do you have concerns about the state of US public finances?
Ben Fraser 36:01
Yeah. I mean, it’s no one likes a budget deficit, right. I mean, there’s a lot of reasons that doesn’t work. The thing that’s interesting now is the US of all developed economies, you know, is doing the same thing everyone else is doing, and probably to a lesser degree from a debt to GDP GDP standpoint, you know, we we have one of the better ratios. And you also think about inflation, what does that do to borrowers? Right, it benefits borrowers, if you have higher inflation, the value of the dollars, you take on now, and you pay back later are worth less. And so the US government being the largest borrower, I don’t think I think they want to get inflation down for other reasons, you know, whether it’s political or keep the economy in check, but they also don’t mind a little bit of extra inflation in the short term to erode the value that they gotta pay back. I think the bigger question becomes, at a certain point, do you know government bonds become less attractive than, than other countries and people aren’t willing to take the risk on the government be able to pay back the all the money they’re printing? So I think, at a certain point, yeah, maybe the, you know, that things have big fiscal breakdown. But as of now, I don’t see that happening. Is it happening anytime soon? And, you know, when we’re able to continue to pray, and we saw buyers for, you know, all the bonds, then we can continue to keep it going.
Gene Tunny 37:37
Yeah, that seems to it seems to be the case for the moment. It’s interesting. You mentioned the Yeah, it doesn’t look as bad as some other countries. I mean, you’re talking about I suppose Japan and Greece, I mean, Japan show that you could actually, oh, it’s just extraordinary what Japan has been able to get away with for decades now. Yeah. And the US seems to be, you know, just just keeps going along there. The other point you may, which is a good one is on inflation and inflation, eroding the real value of the debt that’s got to be paid back. There was a famous study by I think it was Robert Eisner in the late 80s, which showed that a lot of the the budget deficit was in the 80s was being offset by that reduction in the real value of the debt, which was quite a clever paper at the time. I put a link in the show notes. It’s very good. Good piece of work. Yeah. Yeah. But I’ve been it’s been terrific. Any, any final points before we wrap up? Now?
Ben Fraser 38:34
This is a fun conversation. And I love love the good question. So appreciate you having me on.
Gene Tunny 38:40
Very good Ben. We’ll all put a link in the show notes to Aspen funds and also invest like a billionaire podcast, which I’ll definitely recommend. I’ve been getting some great insights out of it. I think you’ve got a great interaction with your with your dad on the show. So yeah, really, really good stuff. So again, thanks so much for your time.
Ben Fraser 38:57
I appreciate it dude with fun
Gene Tunny 39:00
rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economics explore.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.
39:47
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Credits
Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.