“An Empty Room Kinda Guy” (Guest: Robert Mullin)

Robert Mullen, founder of Marathon Resource Advisors, shares insights on his investment journey and career during a conversation with hosts Patrick Serezno and Kevin Muir. Growing up as the son of a stockbroker, Mullen developed a strong interest in finance, influenced by his father's career. He recounts a significant early investment in Amgen that helped finance his college education and reflects on his academic journey, including a degree in economics from the University of Colorado and internships at EF Hutton.

Mullen discusses his experiences during the dot-com bubble and expresses skepticism about current market sentiments, drawing parallels to the late 1990s hype surrounding transformative technologies. He critiques the concept of "financial alchemy" and the unrealistic risk-return profiles in today's market, particularly with companies like MicroStrategy using stock issuance to buy Bitcoin. He humorously refers to the proliferation of cryptocurrencies and questions their sustainability.

The conversation shifts to the interaction between bonds and stocks, noting that from 2000 to 2020, bonds served as an anti-correlated asset to equities. Mullen critiques the 60-40 portfolio strategy, arguing it is based on a 20-year anomaly rather than historical trends. He highlights the challenges faced by foreign investors, who have experienced significant losses due to simultaneous declines in US stocks, bonds, and the dollar.

Mullen discusses the need for portfolio adjustments in light of potential inflation and volatility changes, suggesting a shift back to commodities, which historically outperform equities during certain periods. He emphasizes the reduced market cap in sectors like S&P energy and the potential impact of capital moving into these areas, particularly gold, as a hedge against volatility.

The podcast notes a significant decline in resource prices and the pressing need for spending to fill the production pipeline. Mullen reflects on his investment focus on exploration and early development stage companies, emphasizing that successful companies during downturns are characterized as low-cost producers generating substantial free cash flow.

The discussion also touches on the increasing investments by pension funds in gold, which has led to significant price increases. Mullen highlights the divergence between commodity prices and stock performance, noting a recent focus on precious metals and gold mining companies due to favorable economics. Despite a decline in stock performance until early 2023, the fundamentals driving gold remain strong.

Transitioning to copper, Mullen observes that many investors are drawn to it due to the AI theme, albeit without strong conviction. He expresses a tactical short position on both copper and natural gas stocks while seeing long-term potential in these commodities. He identifies as an inflation bull but an economic bear, particularly concerning broader market expectations.

Mullen presents a nuanced perspective on the economy, acknowledging some strengths while expressing concerns over housing starts and credit card defaults. He discusses the fragility of energy supply and the regulatory environment affecting European energy, suggesting that Europe may need to reconsider its energy production strategies.

The conversation shifts to private credit, noting its growth and concerns about how it is characterized in institutional portfolios. Mullen emphasizes the need to sell public equities to mitigate systemic risks in the market, suggesting that most portfolios are not adequately positioned. He identifies gold as a valuable asset during market drawdowns due to its historical performance.

In a lighter segment, the hosts discuss music, recognizing trader Stanley Druckenmiller for his market insights. They analyze market trends, noting the S&P's struggle to maintain gains and the implications of a possible Fed policy error. The conversation touches on inflation concerns and the Fed's historical tendency to be reactive.

The hosts discuss the current state of the market, contemplating whether a significant drop is imminent. They analyze job revisions and their impact on the likelihood of a September rate cut, while also discussing the economy's strength and contrasting views on its performance. The conversation concludes with a recognition of market dynamics and the anticipation of future developments.