'It's Over': Strategist Reveals Which Assets Are About To Crash | Mike McGlone

Key Concepts

• Elasticity of Commodities: The tendency for commodity prices to revert to lower levels after significant spikes due to increased supply and demand destruction.
• Post-Inflation Deflation: The theory that current inflationary pressures will eventually lead to a deflationary environment, similar to the 2008 market cycle.
• Wealth Reversion: The process where inflated asset prices (stocks, real estate) correct downward, acting as a primary trigger for deflation.
• Backwardation: A market condition where the spot price of a commodity is higher than the futures price, indicating current supply tightness but expectations of future price declines.
• Beta: A measure of an asset's volatility in relation to the overall market (S&P 500).
• Value at Risk (VaR): A statistical technique used to measure the amount of potential loss that could occur in an investment portfolio.

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1. Main Topics and Key Points

• The Stock Market as the Primary Driver: Mike McGlone argues that the stock market is the "anchor" for all other assets. If the stock market remains at 2.4 times GDP, it creates extreme complacency. He asserts that if you are bullish on metals or crypto, you must be bullish on the stock market, as these assets are currently highly correlated with equity performance.
• Commodity Outlook: McGlone emphasizes that the "bull market" in commodities is not in prices, but in elasticity. He expects crude oil to drop toward $50–$60 by midterms, citing the US and Canada's ballooning surplus of supply (approx. 8 million barrels/day) and the government's motivation to lower energy prices.
• The Deflationary Thesis: Despite current inflation prints, McGlone maintains a deflationary outlook. He draws parallels to 2008, where high oil prices eventually led to demand destruction and a subsequent market collapse.

2. Real-World Applications and Examples

• Natural Gas: Cited as a leading indicator. It spiked to $7/MMBtu and subsequently collapsed to $2.5, mirroring the 2022–2023 cycle.
• Crude Oil: McGlone notes that the December crude oil future is trading at $77, significantly lower than current spot prices, suggesting the market expects lower prices ahead.
• Cryptocurrency: McGlone declares the "glory days" for Bitcoin and crypto over. He views them as poorly performing assets that only rise when the stock market rises, but fall harder when the market corrects.

3. Methodologies and Frameworks

• The "Puck" Strategy: McGlone focuses on where the market is going (the futures curve) rather than where it is currently. He uses the December crude oil future as a benchmark for his year-end outlook.
• Relative Value Analysis: He evaluates assets by dividing their price by the S&P 500. He notes that copper and gold have become "stretched" and "overdone" relative to the broader market, making them potential shorts if the stock market corrects.

4. Key Arguments and Evidence

• Argument: The US is a net exporter of energy, and the current administration is highly motivated to lower energy prices before the midterms.
• Evidence: The "backwardated" futures curve in oil, corn, and soybeans indicates that producers are selling forward, which will increase supply and pressure prices downward.
• Argument: Gold is currently a "highly volatile speculative risk asset" rather than a safe haven.
• Evidence: Gold volatility has reached its highest levels since 2009 relative to the S&P 500, indicating it is no longer acting as a stable hedge.

5. Notable Quotes

• "If you're bullish metals, you got to be bullish the stock market. Sorry, that's just the way things are." — Mike McGlone
• "The bull market in commodities, not in prices, it's in elasticity." — Mike McGlone
• "The higher it goes, the harder it falls." — Referring to the nature of commodity price spikes.

6. Synthesis and Conclusion

Mike McGlone’s outlook is fundamentally cautious. He views the current market environment as the end of a bull cycle characterized by extreme complacency and high valuations (2.4x GDP). His actionable advice is to remain underweight in risk assets (stocks, crypto, industrial metals) and overweight in Treasuries. He believes the "low price cure" is inevitable for commodities and that the stock market will eventually trigger a broader deflationary event, at which point assets like Bitcoin and copper will likely see significant downward corrections. He expects inflation to drop to 2% by year-end, driven by a cooling economy and increased energy supply.