Mike Novogratz on Oil Futures, Oil ETF USO, Gold, and Bitcoin

Siamak Masnavi

In a CNBC interview on Tuesday (April 21), Michael Novogratz, a former Goldman Sachs partner, as well as Founder, Chairman, and CEO of crypto-focused merchant bank Galaxy Digital, gave his thoughts on crude oil futures, oil ETF USO, gold, and Bitcoin.

His comments were delivered on during an interview with Melissa Lee on CNBC's post-market show "Fast Money" at a time when the June 2020 contract for WTI Crude was trading at $13.12 (down 35.78% on the day). and U.S. oil ETF USO as trading at $2.81 (down 25.07% on the day).

So, Lee started the interview by asking Novogratz:

"I want you to put your old hat on as a hedge fund trader. In this sort of market environment, where do you see oil going and what would be your next move if you were still trading commodities."

Novogratz replied:

"I think the oil move is important for a bunch of reasons one it shows just how much demand destruction we've had...

"But, just as importantly, when major markets break -- and the oil market broke yesterday right trading to negative $40 and it broke again today with the June contract collapsing -- it sends a message that's something's not right.

"I remember in 2008 everyone thought swap spreads can never go negative and thirty year swap spreads just a few weeks ago were -80 basis points.

"And so you have these paradigm shifts, and markets aren't prepared for that yet...

"We had a huge rally off the lows [in] stocks, everyone got kind of 'okay, we're gonna get out of this thing at one point'... two bad days in a row, my sense is the stock market's gonna trade heavy for a while, and the crude market will trade heavy.

"Will it go through zero again? I'm not sure a lot. A of this was USO -- the ETF was all in the front month contract, which is trading at a huge discount. They basically halfway through the day today or are close to the end of the day said 'the old USO doesn't exist anymore, we're going to kind of recreate this product and remake it and roll out at least two-thirds of the exposure to the next couple of contracts'.

"And so I think part of the volatility today was just that ETF getting crushed. It's a little bit sad as if you look at the big buyers of that ETF over the last three days... retail piled into this ETF at the exact wrong time, and so I think a lot of the pain was actually retail not professional."

Novogratz also talked about how he is trading these days:

"I have two hats. I have a macro portfolio, and I traded this as aggressively as I ever have, and then I have the crypto business, and you know, they're very much linked...

"I have a big position in gold [and] a very big position in Bitcoin.

"I think Bitcoin has this moment right now where just today we did another half a trillion dollars of stimulus... just money growing on trees, and my mother taught me when I was young money doesn't grow on trees.

"And so, as we have more and more just fiscal stimulus being monetized by the central bank, more and more people I talk to want to find something with scarcity.

"There are only 21 million bitcoins ever going to be mined. 87% of them have already been mined. Next month, the inflation rate gets cut in half, and so there's a really good story, and the problem we've had up until now has been one of adoption...

"I am seeing more and more people starting to buy, calling me up, wanting to learn about it, and so my sense is you're going to have the macro tailwind plus the adoption tailwind happening in bitcoin.

"Gold already has its story. It's going to put new highs in this year, and so I think that's a really powerful story that policymakers are going to continue to play into."

Next, Novogratz gave Lee more details on his current trading, and gave his outlook for the markets:

"I'm still long gold. I've been shorting stocks the last week. I don't think we're going to have a collapse of the market again... I now think we're gonna trade soggy. I think we could trade back to 2600 [for the S&P]. It's more of a trading market...

"But the economy stinks, and it's gonna stink for a while, and so you know fundamentals will weigh on the market. So, I kind of think we're 2200-3000 on the wide and in the tighter range we're probably 2900-2600, and so I sold a bunch up top, and I'll buy them back at 2,600, and look for other opportunities in commodities and currencies."

Back on April 7, during an interview with Rebecca Quick on CNBC's "pre-market" morning news and talk program "Squawk Box", Novogratz said that all of these massive economic stimulus packages that we are currently seeing should benefit hard assets such as gold and Bitcoin:

"I have a big Bitcoin position. I continue to add to it partly because I think this is an amazing environment for both being long gold and long Bitcoin.

"Nancy Pelosi came out today to talk about another trillion dollars of stimulus.

"Money is growing on trees right now. I learned as a little kid that money really doesn't grow on trees, and so we have a global money printing orgy going on.

"And maybe it's necessary, but at one point that comes home to roost, and so I think hard assets are going be a big buy. Gold [and] Bitcoin are my two favorites..."