Doomberg on MidasLetter

James West: Hey everybody, welcome back. My next guest is Doomberg, the largest financial creator on Substack. Doomberg, welcome.

Doomberg: James, great to be here.

James West: It is a pleasure to have you here as well. Your publication is essentially focused on the analysis of the global energy complex, if I'm not mistaken.

Doomberg: That's correct.

James West: Okay, so I'm most interested to engage you in a discussion about the effect of the new American administration's impact on the geopolitical balance of the petroleum industry. In particular, I'm interested in your opinion about how the tariffs and the implementation thereof might be having unintended consequences for the United States of America and its dominance in the global petroleum industry.

Doomberg: The first thing I would say, especially to a predominantly Canadian audience, is that the portrayal of Trump in contemporary media is so distorted from the realities on the ground that it's important to try to get a sense of what's really happening by consulting primary sources, listening to actual, full, complete interviews and not their summaries in the Globe and Mail or The New York Times. Trump is basically doing precisely and exactly everything he promised he would do before he was elected. There's a whole series of videos out called Agenda 47 that Trump published throughout 2023 and into 2024, where he lays out precisely virtually everything he's doing, including tariffs, immigration, ending the war in Ukraine, negotiating directly with Putin, all of the things that the media is kind of hyperventilating about. We're very transparent and rare is the politician who does precisely what he promises to do. But that is what Trump is up to. So to your question on tariffs, of course, we could talk for hours on tariffs. I think Trump is an agent of chaos leading a revolution in the United States today. One that has broad popular support amongst the working class. Say what you will about Trump. He has the ability to inspire the working class in a way that few politicians have done. And he frankly doesn't care what the elite class says or thinks about him. And he is trying to substantially shrink the federal government, give power back to the states and achieve energy dominance, which he correctly believes that countries that are dominant in the energy sector have at least the potential to be dominant downstream as manufacturer and then ultimately as a great military power. The nexus between Canada and the U.S. has been a very interesting one, and we've had some pretty bold and early calls on developments that I think have proven to be quite prescient. One of our best calls was in early December when we not only predicted that Mark Carney would soon replace Justin Trudeau, but that he would actually win the election or become much closer to winning the election than the pundits were giving him sort of credit for at that time. And we think there are going to be profound impacts on Canadian energy of the sort of nexus between Daniel Smith, Mark Carney, and Donald Trump in ways that few are expecting. We're publishing a piece on that later this week. Not sure which direction you want to take it, but I'm happy to go down any path that you think is interesting.

James West: Sure. Well, that is intriguing. So the basis of Trump's Agenda 47, then, is not necessarily derived from media focus, again, recognized as being concentrated on Project 2025 for the last five years, and more recently on Steven Moran's paper published in 2024, User's Guide to Restriction Global Trading System. So this is the execution of a thought out and long strategized plan.

Doomberg: Look, I think it's conventional wisdom that Trump unexpectedly won in 2016 and was ill prepared for the onslaught that enveloped his first presidency. I think he had no idea how Washington really worked and the knives came out for him and they succeeded in basically derailing his presidency. And then in his view, again, what you think or what I think or what the listener thinks doesn't matter near as much as what Trump thinks. In Trump's mind, the election in 2020 was stolen from him. And he has had really eight years since 2016, but most importantly, the last four years to ponder what he would do if he got a second chance. And nobody worked harder than him to win. He was all over the country doing rallies, got shot at, nearly got shot at a second time. He has been planning this steamroll for four years. And it has, in his mind, gone mostly to plan. A few hiccups, for sure. I do think that the chaotic nature of the tariffs implementation leaves much to be desired. And we have been flagging that this is almost guaranteed to trigger a recession, by the way. We have many contacts in industry. The industrial lens to the energy sector is the market opportunity that Doomberg exists for. And our friends have been flagging that the supply chains are seized in a way that reminds them of COVID. And we're going to have a pretty deep recession. Trump, I believe, is gambling that he has the political capital to see through a V-shaped recession in time for the upcoming midterm elections in 2026. But this is a man who's had four years to dwell on everything that went wrong in his first term, and this is a completely different beast. And by the way, again, one that we warned was coming before people realized, but the fact that he has been such a whirlwind is not surprising to us at all.

James West: Sure. Mark Carney, our current prime minister and soon to be elected for a full four-year term, if the polls are any indication, is a global statesman of possibly the highest possible order that one could hope for in a national leader. And his sort of moves and his connectivity to the entities geopolitically that Trump's implementation and the tariffs themselves are causing a degree of isolation towards America. Is there not a concern that the geopolitical order around the petroleum industry could be permanently reorganized away from America if an entity like Mark Carney has the ability to raise the capital and develop the infrastructure that Canada has relied upon in the United States and elected to, rather than build refineries in Alberta, they elect to build a pipeline to ship stuff to Cushing, Oklahoma, or down to the south coast there. And so the tariffs are causing a broad sort of retaliatory mindset in the minds of national leaders that are formally the trade partners and allies of the United States. So to reiterate and hopefully consolidate my wide-ranging question, isn't the danger that Trump's approach is going to isolate the United States and in four years the infrastructure could be implemented to impact the United States negatively dramatically in its U.S. petroleum dominance?

Doomberg: Yeah, so I'm going to reframe this entirely, perhaps much to your surprise. But we have a wildly different view of what's actually going on. We're publishing this in a piece called The Fix Is In. And this is our view. Trump wants Carney to win. Trump knows Carney from the private equity days. And there's a deal that's already been struck, in our view. So you'll notice that as soon as Carney became prime minister and Trudeau was out, all of the 51st state and governor talk has stopped. In a latest Truth Social post, Trump referred to Mark Carney as prime minister of Canada, the country. This has all been a smokescreen. So here's the grand deal. And look, this is going to sound weird to your audience if they're only consuming Canadian media and the subset of American media that makes its way across the border. Here's what I think is going to happen. The grand deal is Daniel Smith is going to provoke a constitutional crisis. That's going to be the cover for Mark Carney to go back on his sort of green energy past. You know, we describe Carney as a globalist delight. I mean, Bank of England, Bank of Canada, you know, Harvard, the whole nine yards. The guy's got, as you say, the perfect resume, right? And so the grand bargain is going to be constitutional crisis, which finally cements Canadian unity. Quebec signs on and they're going to unstick Alberta's energy. And in fact, the U.S. wants Alberta to unstick its energy. American energy dominance is going to become North American energy dominance and this is, I think, all baked into the cake. So what you're going to see after Carney wins is Trump is going to cut a very favorable tariff deal with him which is going to give Carney the political capital he needs to turn his back on the carbon agenda. You're going to see less and less focus in the Canadian media about the carbon agenda and eventually carbon emissions are just going to fade into the, you know, down the memory hole to use Orwellian language. And then you'll have this sort of fake constitutional crisis where concessions will, quote, have to be made to Alberta. And as a consequence, Quebec will come into the fold. And what will emerge from Trump is a Canada that has never been more united, whose confederacy has never been more cemented, and who joins America as a partner in North American energy dominance. Because what Trump is trying to do is pivot away from the sort of the world order that was failing anyway, you know, the U.S. as the global superpower, unipolar world, to a world where the Western Hemisphere becomes its own power block, which is why he's focused so much on Greenland. I think all of this 51st state governor Trudeau talk was meant to unify Canada behind Carney. It's crushed the conservatives, right? I mean, it took all the air out of the balloon. Trump then actually proactively criticized the conservatives in Canada and said he preferred Carney in an interview. I'm not sure if you saw that. It's pretty overt. The thing about Trump is like he tells you what he's doing. You just have to know how to listen to him, right? And so we called in December that not only would Carney replace Trudeau and he would actually win. The media in Canada gets what it wants. And then Trump preferred that. I can sort of follow a piece that we just wrote called Unspontaneous Combustion. We made the case that Trump and Carney are actually going to partner. And then we said in that piece, watch for the 51st state and governor talk to fade into the distance. And it has. I think Danielle Smith, Mark Carney and Donald Trump are going to cut an amazing deal. Unsticking Alberta's energy and allowing it to reach international markets only helps the U.S. The U.S. doesn't really need the heavy crude. It's got refineries that are optimized for it. But those refineries are getting their own investment and need to be switched to lighter grades anyway. It's just forcing a better situation, as you say. And Canada will refine its own as well and export refined products. And there's a chance that Alberta basically becomes the Texas of Canada.

James West: Interesting. Well, that's one of the great difficulties in interpreting global G7 policy. It's like, how much of this is political theater to induce us all into certain expectations and behaviors, and how much of it is actually geopolitical tension? For example, there's nothing theatrical about Ukraine and Russia except for America's policy towards it. So if that is the case, I mean, it's almost like, and this is now just me thinking out loud, it's almost insulting to be treated as such an idiot by the global power elite, though that is certainly their prerogative by virtue of where they are and how they got there. And it's just a result of humans being humans. Then, so from an investment perspective, you know, how can one position for that? I mean, you could have placed yourself short ahead of all of the oil and gas talk, drill baby drill, and reap short-term, soon-to-be long-term rewards. By your own oft-repeated statements, the direction of energy prices over time is always downward as efficiency and technology makes it cheaper to access the hydrocarbon power. But then so, from an investment standpoint, how should we respond to that? Should we prepare for this inevitable charade coming to light and be happy that we're able to anticipate it coming, or should we be more of an expectation that I am, is that the theater is intended in part, but the outcomes are never entirely what was planned by any participating party, and there's wild cards galore. For example, with China, is that political theater? Because I know that one of Trump's modus operandi is to create a tremendous crisis, a political emergency, so to speak, and then be the guy to come up with the solution that makes everything seem better than it was before. And, you know, that kind of a leadership style is, you know, you can admire it and you can respect it, but ultimately it's infantile and it's not very inclusive. So for whom is the benefit of the political theater if we can all see through it?

Doomberg: Well, again, first thing I would say is like, you don't have to believe the model is right. The model just has to work. And so far, our model has worked pretty well. We got a hunch through our knowledge of Canada and our contacts in and around the Trump administration that he had a strong preference for Carney. And so it happened, right? Like when we said Carney is going to be the next prime minister of Canada, you couldn't even bet on that on Polymarket. So I don't know what's going on in the inner, inner, inner circle, but the way we think, we call ourselves sort of lateral thinkers, right? So the media always lies to you. So just go back to any major event in history, read the contemporary media at the time, and then look what actually happened as historians have had the chance to pick through source documents. The media never tells you what's actually going on. And it is almost impossible to separate yourself from propaganda. It just is. I have many contacts in Canada. And when Trump was elected, they're sending me all kinds of texts like that. I just can't believe that people are actually thinking this. But at the same time, I'm not surprised because we all swim in our own propaganda. One of the things we try really hard to do is read everybody's propaganda. So you mentioned Ukraine, Russia. I personally read Ukrainian propaganda and Russian propaganda. I read the British propaganda on it. And then you get a sense over time, like what truth is. If you're only reading one outlet of propaganda, you have no hope of finding the truth, right? So one of the things we do is we exist in that market inefficiency where people come to know at least that whatever we press send, we 100% believe in the moment is true, right? So just want to get that out of the way. But you had a couple of questions in there. One of them was how to play it as an investor. And I want to address that. Over time, energy prices come down in real terms, always and forever. Occasionally, usually because of a geopolitical crisis, but also because the length of the capital cycle of energy companies and the length of the business cycle can be out of phase. Sometimes you have shortages that cause huge price spikes because the demand for energy is highly inelastic. Our view is you don't want to own producers. You want to own service providers, midstreams that scale with volume because the demand for energy is infinite and the gating function of demand is production over the long term. And then you don't want to bet the commodities because they go down in real terms. Just look at the 50-year chart of the number of barrels of oil an ounce of gold buys you and you'll see that technology overcomes both depletion and inflation. Oil is just cheap. And when you do come upon such a price spike, it's much easier to fade them than to try to predict their timing. And so we would never directly invest in commodities except after a price sprint. If you see a super spike in prices and they're down 20% from the top, it's almost a slam dunk that you buy a six-month put against that commodity because the prices are going to tank over the next six months. Sitting there burning premium waiting for a war in Iran to break out doesn't strike us as a very sensible thing to do. So we would avoid producers. We would be long enablers. And then if you could pick up a bunch of resources on the cheap, that's probably another way to play it, but that's more of a private market approach where, you know, if you could get pretty good resource for a fair price and then wait for one of those super spikes to sell that resource into it. But broadly speaking, yeah, one of the things that sort of we came of age during a crisis, so people will assume that we're just bullish or doomy, as the name implies, which has always been tongue in cheek. But no, we're analysts who try to understand reality. In the long term, energy prices go down. They just do. We're not running out of this stuff. Peak cheap oil is a myth. There's other trends we could talk about. I think one of the major trends is the world is trending lighter and eventually we'll all just run on natural gas. The very definition of oil is undergoing a semantic shift. But broadly speaking, that's how we play it.

James West: Sure. So a transition to a lighter hydrocarbon economy globally, do not the cost of processing, compressing, and shipping LNG ultimately raise it to near oil prices?

Doomberg: Sure. So in the long run, all hydrocarbons will trade for the same price, correcting for energy and logistics. And so right now in North America, for example, in dollars per million BTU, right? I mean, natural gas is as cheap as it gets. So if you just put everything in barrels of oil, that's probably the easiest way for people to understand. Natural gas in the U.S. today is selling for $22 a barrel energy equivalent, and NGLs are selling for $40 a barrel energy equivalent. Now, what do we do with hydrocarbons, James? We burn them to create heat to do work. Heat is heat. We will switch the engines. There comes a point where arbitrage gets closed. So NGLs... At least, you know, C3s and above are much easier to handle than natural gas. And the direction of travel is coal, heavy crude, light crude, NGLs and natural gas. And as the technology grows to enable the switching, we will switch the engines. We just will. And the cleanest burning hydrocarbons on the board won't sell for the deepest discount indefinitely. They just won't. And this is where people who fall for this cheap oil nonsense don't really understand. Like crude oil is one energy source that trades against all the others. The fungibility of hydrocarbons over the medium term is quite high. Sure, in the short term, it's inelastic and you see these spikes. But when you turn on the lights, you don't really care where the electricity comes from. It's hydro in Quebec or nuclear in Ontario or coal in Wyoming, the light needs to come on. That's what you care about. These things are fungible. Here's a perfect story. The rain levels in Sichuan province in China affect the price of coal in Appalachia. Why? Hydropower and coal are used to make electricity and China swings between the two of them at such a scale. That when it rains a lot, the demand for coal goes down and the prices collapse. And when it's dry, the demand for coal goes up and coal is a globally traded commodity. So what happens in just one province in China greatly affects coal producers in the U.S. It's the same for oil. OPEC is going to die, by the way, like OPEC is over. Why? Because OPEC has kept crude oil artificially high for so long. And crude oil is now co-produced in the Permian with natural gas and NGLs. Those are byproducts economics now. You could give away those byproducts, which they have been doing. Natural gas is literally negative in the Permian. And you can't pay people to take great hydrocarbons forever without some engine switching going on. So the very prospect of trying to keep crude oil prices high is what will be its undoing, which is why we're seeing the engine switching around the world. And it doesn't take much.

James West: So the role and the function of OPEC and OPEC Plus has been to maximize the return on investment from countries that produce a lot of oil. You said in a recent interview that the human endeavor is a constant unrelenting struggle against the forces of entropy, and you need to waste heat in order to have a good standard of living. So then how does that reconcile? So Trump's targeted cheap oil. The OPEC producing countries and OPEC plus want a higher dollar for oil. Russia wants a higher oil price. And I sort of juxtapose that statement with your other statement, make the Western hemisphere an impenetrable force and let the rest of the world figure out its own problems. So that strikes me as a support for the idea that we maintain an East versus West mentality, and OPEC has been supplanted by a current cooperation between Russia, U.S., China on the large hydrocarbon scale. Again, how much of that is political theater? How much of that is actual tension? And then I've listened to other parts of your podcast where you are clearly stating that it would be analogous to suicide to go to war with any of those entities, and war is not in anybody's interest. Yet the political theater would have us believe that that's where it's going and it's all based on this pursuit of hydrocarbon security. Yet you're also saying that there's tons of hydrocarbon. It's only going to get cheaper. There is no shortage and there's nothing to fight over. So this is all political theater then?

Doomberg: No. Sure, there's some theater. I think there's a grand bargain out there. Again, we like to think sort of laterally, right? So if you look at what the grand bargain is, what are the sort of preferences of everybody involved? Well, Trump wants cheap energy. So unsticking Alberta makes global energy cheaper, just us, right? And Russia actually doesn't really care about energy prices that much anymore. They have a ton of it. They use a bunch of it domestically. They've survived the sanctions. The sanctions have made them self-sufficient. And the Chinese want low energy prices, don't they, right? And the only sort of game in town that seems to be on the losing end of this is Saudi Arabia. Why would Saudi Arabia do what OPEC did? Like that was a shocking moment for us when OPEC poured oil on a burning tape on the Thursday after Liberation Day, right? So we knew something was, that was like a sit up in the chair. And didn't they announce eight new discoveries at the same time? Right. They are driving. Look, Trump wants $50 oil. He's going to get it. I don't know who's buying oil at 62, but they don't like money. I think one of the potential grand deals is peace in Ukraine in exchange for a nuclear disarmament deal with Iran that everybody believes. And the Russians are involved in both of that. And you threaten war in order to make the peace that you've already pre-baked in seem like an accomplishment so that you can run political cover for basically losing the war over Ukraine. And that war is lost. And then I think China gets lower oil. Trump strikes a grand tariffs deal with China. And as part of the deal, I think Taiwan is ceded. This is going to be like a nightmare to the neocons, right? I mean, you give Putin what he wants in Ukraine and he gives you what he wants in Taiwan. But the U.S. is not capable of winning either of those wars. I mean, we would lose the war against China if we had one. So I think the grand bargain is a new trade arrangement with China, lower oil for everybody. And then as part of that long shot is maybe we let the gold price run very, very high because the Saudis own a lot of gold and are getting into the mining business. I don't know if you picked up on that. So there's a world where there's a bit for everybody. And by the way, U.S. energy companies are squawking loudly, complaining, grumbling. We've long said Trump is bearish for oil prices. He's bullish for supply and it's bearish for equity. So here's the other thing you're going to see. All the big players don't mind this because they buy up all the great resources on the cheap. And then they just wait for a Democratic administration. So what happens in the U.S. is stuff gets built when Republicans are in charge and then nothing gets built while Democrats are in charge. And the oil companies make all their money during Democratic regimes. So there's going to be a lot of stuff getting built right now. And then it'll all get turned off when we have a regime change. And prices will spike temporarily. And the oil companies, the big ones who bought up all the weak players during the valley of death, will come out great. And this is forever thus. This is the cycle. This is how it works. So don't go long energy when Republicans are in office. I mean, it's a losing trade. It just makes so much sense. Like, you know, in this business, you make all the money on price, not on volume. But they can't help themselves. The oil and gas industry has no demonstrated track record of discipline whatsoever. And they're not about to start to have it now. They just, you know, they can't help themselves. They're drillers. That's what they do. And so that's where I think this is headed. Hopefully, you know, a grand bargain. It's to the horror of Europeans, who I think are in massive denial. But that's sort of the grand bargain that I hope happens. What is the national interest in Taiwan? What is the national interest of the Donbass to the U.S.? I mean, I ask my Canadian friends, like, when did you come to care who rules the Donbass and why? Yeah. Like you have an issue at home to worry about, which is Quebec and, you know, and the way Canada's provinces interacts with the federal government in Ottawa. Like there's lots of problems to solve in the world. Like there's a war in the Congo right now. Nobody talks about it. A lot of people being killed in the Congo. Why do you not care about who rules the Congo? Because the media has told you not to care about that. And so I don't know. Long ago, maybe I'm just too cynical, but it served me well. It's a good model. Go to the source documents, read everybody's propaganda, try to understand what the truth is, and play the pieces on the board as they lie. That was the name of our latest piece, Early Thoughts on How to Play Energy in a Post-OPEC World. The title was As the Pieces Lie. I don't care what the deal was. A deal was struck. And we openly admit in the piece, you know, that whatever was given in return is not known. Something was. And that's the end of OPEC. I mean, OPEC is done as a, you know, as we said in the piece, like it exists to achieve a mission made impossible by its own existence. And functionally, it no longer does. Some kind of a deal was cut. And we knew something was coming because who did you... just the whole Ukraine thing, right? Like the smokescreen of the distraction was they're negotiating without Europe and Ukraine at the table. And oh my God, the horror, the British press is filled with all kinds of, you know, Trump is a Putin, you know, enabler and whatever. You had the US, Russia and Saudi Arabia sitting in a room for days on end, embarking on clearly really important world-changing negotiation, right? And if you wanted to change the direction of the energy markets, what three countries would you want in the room, right? And so there's a plan. It's going to be implemented. Saudi Arabia signed out of the plan. What they got in return, I don't know. Maybe they got a higher gold price. I noticed gold has been on a vertical run basically since that announcement. I own a fair bit of gold as a hedge, and it's not an investment recommendation. I'm just speculating. But something was decided, and the follow-on announcement of eight new fields and you know like it's Saudi Arabia is participating with what the U.S. president wants. Historically, it's been foolish to bet against what the sitting U.S. president overtly and repeatedly says he wants.

James West: So then the carnage, the casualties, are U.S. frackers and tight oil extractors and heavy oil producers who need a higher oil price to make money then. And that's an acceptable body count as far as Trump's concerned.

Doomberg: Well, first of all, there will be candy given in exchange, long-term leases, access to land. The primary beneficiaries of that will be the large companies. Yeah, there will be carnage. Equity will be destroyed. But, you know, the U.S. has a bankruptcy system. And, you know, that just means the debt owners take it over. And this is forever thus. I mean, this is not like, sure. Major sensory sort of setting policy shifts have winners and losers. Absolutely, they do. Right. I mean, this is a decades and minutes kind of moment. Right. I mean, we're seeing a lot of things happening in a very short period of time. Globalization is over, right? It's back to multipolarity. The U.S. has exhausted its weapons supply in Ukraine and has lost the war. Nobody likes to say that. Europe's not going to be able to keep Ukraine afloat. Canada's not going to be able to keep Ukraine afloat. It's the U.S. And if the U.S. wants the war to end, the war's going to end. And one of the reasons you don't get into wars is you might lose them. Yeah. The U.S. has a track record of... When was the last one we won?

James West: Well, when was the last one you won? You might say World War II, but you could argue about, you know, what's a win in war? Fewer people died on your side than the other side?

Doomberg: Yeah, well, we'll definitely win the war against Panama, though. I would put money on that. And Greenland. You're going to defeat Greenland.

James West: We could defeat Greenland, yeah. Yeah. I could talk to you for a long time, and I would like to think that if I don't take too much of your time now, that possibility in the future exists. So I'm going to say thank you very much for your time, Mr. Doomberg. I really appreciate it, and I look forward to our next conversation.

Doomberg: You bet. I really enjoyed it. Thanks.