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Rafa Martinez: I Traded Natural Gas to Fund My Racing Dream. Here’s How I Built It | DSH #1607
00:55:34
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- [00:00]
A
I don't have a background in racing. I started in finance and energy. That's kind of what my background is from a professional standpoint. Four years ago, I went to the track for the first time I've watched racing on tv. I've been into cars for, since I was a kid, really. It's always been a thing. It was one of the things that as an adult, I always knew I'm always going to get a new car. Some of the big hurdles were just not knowing one, how to drive, how to get registered, not knowing the safety components of the car, what tires to be on the brakes. Good. Even just from hauling the cars around, there isn't a really easy turnkey solution that existed. It doesn't quite exist yet. Like we're the ones, I think, pioneering and building it where we're trying to do it not just at a very local level, but, you know, be able to do it more internationally.
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B
Okay, guys, got Rafa on today from Houston. He's been traveling a lot lately. Thanks for coming on today, man.
- [00:48]
A
Yeah, of course. Thanks for having me.
- [00:49]
B
Yeah, I know you're super busy with Rafa racing, right? Every month you have to travel somewhere new.
- [00:52]
A
Yeah, it's been pretty hectic. You know, middle of the summer is where the season is the busiest. So sometimes every two or three weeks that we have a racing event. Had a couple of, a couple events in the last month. Really? Last five weeks, we had two races. We had one this weekend. So it gets busy here in the summertime. Nice.
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B
What made you want to get into the business of racing? That's such a specific industry, right?
- [01:12]
A
Yeah, you know, I don't have a background in racing. I started in finance and energy. That's kind of what my background is from a professional standpoint. But about four years ago, I went to the track for the first time. I've watched racing on tv. I've been into cars for, since I was a kid. Really. It's always been a thing. It was one of the things that as an adult I always knew I'm always going to get a new car. I'm always going to have a car. Note, I go to work in the morning and work late so I can drive whatever car I want. Like that's kind of the mentality I had all through my adulthood until I was able to kind of figure out, you know, I'm gonna build a car collection and get some supercars and sports cars in, in, in. In the day to day driving, you know, cars that I had instead of just like A nice sedan, started collecting them. And through that I got invited to go to the track. And about just over four years ago, I went to circle the Americas down in Austin for the first time, met some other fellow McLaren owners and learned that this was a sport that I could actually participate and take a part in. And it wasn't too late for me to get into it. You know, when you watch football or baseball, you know, and you're 35, 36 years old, you're past. Like, there's no way you could ever.
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B
Yeah.
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A
Competing a football game where you're mixing it up with the pros. Well, in motorsports and racing, it's something that you can. And I became aware of that just four years ago and decided that, you know, it was a sport that I personally wanted to enjoy in practice. And as I learned more about the sport and realized the opportunities that it provided and the obstacles that he has and all the different elements of the sport that I didn't know existed, sort of like, you know, if you're not in it, you don't know. I found a business opportunity that. That existed and went ahead and committed and sort of built into it. So I sort of fell into it as an enthusiast and found myself in a. In a business operation that's growing and it's, you know, it's. It's in full operation now. Nice.
- [03:05]
B
Was it smooth sailing as soon as you got into it, or was it. Were there some major hurdles?
- [03:08]
A
You know, some of the big hurdles were just not knowing one, how to drive, how to get registered, not, you know, not knowing the safety components of the car, what tires to be on, you know, the brakes good. Even just from hauling the cars around, you know, there isn't a really easy turnkey solution that existed. It doesn't quite exist yet. We're the ones, I think, pioneering and building it, where we're trying to do it not just at a very local level, but, you know, be able to do it more internationally, nationally. But there isn't a lot of information on how to get to a track day, how to register, how to get your racing license. So a lot of the opportunities that I saw was actually educating people like myself that had the means, the desire, the interest potentially to practice and enjoy the sport. Some turnkey solutions on how to get into it. Because I faced the difficulty of, okay, I was in Houston trying to get to Austin with my car. I had to buy a truck, buy a trailer, figure out how to hitch a trailer. I'd never done that. You know, figure out how to Tie down a car, figure out the mechanics of the car. I've never changed a tire on a McLaren, figured out like how to do that. It's just very different in particular. And these are type of cars that not anyone can touch. So there's some mechanical, you know, mechanical components, or I would say some of the electrical things that only if you have a particular scanner, you can actually diagnose when you're on track. And if the car is overheating and it just dies on track, there's no way for you to diagnose it. So then there was all these different challenges that I found that a lot of other people were actually having and sharing in terms of difficulty to enjoy the sport, but still doing it because of the love of it. So you pack your bags, carry your car all the way to Austin, you get on track, the car has a blip, you have no way to resolve it. So your whole weekend is ruined. But next time you still do it again because you love the sport. And when everything goes smooth, it's an awesome, enjoyable sport. The adrenaline is, you know, it's incredible. The learning how to drive the car, pushing it to the limit, like all that, it's a crazy feeling that makes it worthwhile. But a lot of the people doing it are business owners, are people that have, you know, C suite roles in companies that could really use the benefit of a turnkey solution. And so for me was individually, personally, I wanted that and no one was really providing that at the level that I wanted. So I found myself, you know, in the opportunity again to develop that concept and build it for people to actually have the ability to enjoy the sport in a much less friction based, you know, way.
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B
Nice. So you basically had a problem and you found the solution yourself.
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A
Exactly. Solution. Myself, you know, I studied finance, economics, I trade natural gas for a living. So markets is what I do. I look at the world from a supply and demand standpoint and try to gauge value for my own endeavors, my own time commitments and things like that. And just like, you know, what, what value does it have in me doing this or me investing my time in this and me putting money towards that. And so as I looked at the sport, I looked at the big, you know, spike in interest and enthusiasm that the fan base has. How much more people are talking about motorsports today ever since Drive to survive. And if one really made the US sort of its key, I would say cornerstone, sort of like market, right? Like the US for any sport, any manufacturer, anything really is the largest market in the world for Almost anything. And so once I saw F1 committing to doubling up on the content, doubling up with Miami, and then obviously tripling down with Vegas, I knew that it was time for motorsports in the US to really take that next level up. And so immediately I started looking at, okay, like, we see all this demand, you see the attendance growing, you see the people buying the cars and watching them more, and everybody pretty much can tell you at least one F1 driver today that you run into where five years ago, people didn't even know what F1 was. And so, like, it's grown so much that I was like, okay, like, there's got to be some supply to meet this growth of demand and content, entertainment accessibility, logistical solutions, all of those things were things that I came across as opportunities and, yeah, just jumped in. And when went into deep end pretty quickly.
- [07:21]
B
Did you see that new F1 movie?
- [07:23]
A
Yeah, we actually just watched it this last weekend. Is it pretty well done? Yeah, it was awesome. It was.
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B
I didn't see yet, but I want to.
- [07:27]
A
Yeah, it was entertaining, I think, from a racing footage standpoint and sort of the being in the car, making it feel like you're in it. It's. It's probably one of the best ones that's been done. And then the storyline is interesting. It's cool. And I think that the movie was about two and a half hours long. You know, I think that they probably spent so much money in trying to make the racing feel so real that they had to use as much footage of that as they could where they made a lot of the scenes probably a little longer than you might have seen in other movies. So he made it two and a half movies, you know, two and a half hours. Could it be two hours? Hour 45. Probably could have been. But it was still a great, engaging and entertaining movie. So it didn't feel like you were there for that long, but when I looked at that time was, oh, wow, that was two hours long. It's a long movie for these days.
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B
Checking my phone.
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A
Yeah, exactly. For the attention span that people have these days. Two and a half felt long sitting there, but it was entertaining throughout the movie. And I just kept looking like, man, it doesn't feel like the movie's going to end anytime soon. And sure enough, it was. It was. It was a solid two and a half.
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B
That's funny. You said you trade natural gas. That's how Bill Perkins made his money, right?
- [08:29]
A
Yeah, yeah, Bill. Yeah, I know Bill. I've met him a couple of times down in Austin. I Never met him through a professional setting in terms of, like the natural gas, then I just know who he is. Yeah. So I've been trading natural gas for about 16 years now. That's sort of what my career has been.
- [08:43]
B
So did you have an edge or how did you make a living with that?
- [08:46]
A
Yeah, so for me, it's been. I think some of it has been like not having any hesitation when I. When I see and believe in something, and so being able to execute quickly and be able to manage risk at the same time. Right. So one of the big things about trading is one, you have to guess which way the market's going more often than not. You know, I think I've looked at my history of trading, and on my trading days, I've been up 55% of the time. I've been down 45% of the time. And it's about managing the risk, you know, having the biggest upside that you can on those 55 days and having the smallest downside that you can on those 45% of the days. And so it's really, you know, managing the risk and engaging sort of where you stand in the spectrum of pricing and price movement and volatility and things like that, and sizing your positions appropriately based on where you stand. And so for me, I think one of the things that's made me a great trader has been having a deep understanding of just economics and supply and demand balances, having a deep understanding in my particular region, which I trade western part of the country, largely West Texas, down to California, and really understanding what's driving that market. Why is the price what it is, why is the logistical challenges, what they are, you know, what's coming, what's the weather going to do based on what it's done in the past, what. Based on what I foresee happening in the future, and then being able to put some, I would say, educated, pretty, you know, big bets on it and being right more often than not. And I think for me, understanding the models, understanding the market, knowing where we are and having a good gut feel for, you know, this doesn't feel good or like, I think it's time to get out, has made me a pretty, I would say, successful trader outside of obviously, all of the other things that go into the technicality of the trading and understanding the markets and just, you know, being able to manage a portfolio of assets and manage people and things like that. So I don't only, you know, transact in the physical market, I mean, financial market. I also do it in a Physical market. And that requires an entire team that helps me and helps a company manage the operations of the physical components of the, of the commodity where it's buying and selling and actually physically taking delivery of the natural gas, transporting across pipelines and send it over to an end user. So understanding the physical logistical components of that, understanding the financial, understanding where you know where the market is heading towards, constraints based on production, based on demand, pipeline capacity, infrastructural challenges, political changes, environmental changes, all these different things are impacting the market. I've had the capacity to be able to absorb it all into a view that then I can put our trades on and be able to monetize it pretty successfully. So I've been very successful in my career in doing that. And I think that having the ability to like process all that and having no hesitation around the execution is really what's. It's easier said than done, but I think that's kind of my competitive advantage. I think there's a lot of people that can get all the information, but it takes him a little too long to process it. By the time they kind of decide which direction they want to go, someone like myself has already been on the trade. So then they don't get the full upside of the trade.
- [11:52]
B
Wow.
- [11:52]
A
And there's other people that maybe pull the trigger too quickly without having all of the details or just hesitate so long that the trade is gone by the time they see it and it's starting to revert and sometimes they jump on it too late and the market's now going against them and they didn't realize that it was already starting to turn. And so I think the timing of it, the execution, the ability to manage risk are some of the components that have made me a successful trader. And honestly, you know, in the world of racing and cars and being in that high stress environment, it kind of translates pretty well because you're in a car that has millions of variables. You know, I tell people that there's. I've never experienced this, you know, I haven't never really played professional sports, but there's no other feeling that I've ever felt like the race start. At the start of a race where you're 40, 50 cars deep, you're bumper to bumper waiting for the flag to go green, and the minute it goes green, you just go flat gas and you have a car in your bumper, you have another car in front of you in a bumper and you. Any point in time, anything can happen. There could be a pile up, someone breaks too early breaks, too late. And it happens. Right. Like all these things happen. But the roar of the cars all around you and your mirrors, the role that you feel in the car while you're in it, that adrenaline rush, it's like nothing you could ever probably replicate in most anything else. Just the proximity and the fact that you're loving driving the car. You know, sometimes you may be driving things or doing other things that you don't absolutely love. I absolutely love cars. And the fact that I'm on it, driving it, it's. It's a crazy feeling just to do that. But then in the environment itself, being able to then process information, stay calm, you know, make quick decisions, I think that my trading experience and the way that I've sort of developed that skill set translated pretty well into sports cars, racing, and that's why I was able to jump into it pretty quickly. And I would say get up to speed, you know, quicker than probably most people.
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B
Literally get up to speed.
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A
Yeah.
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B
Wow. So with the 55.1percent, you were able to make nine figures.
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A
That's.
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B
That's incredible.
- [13:53]
A
Yeah. Yeah. It's been. It's been a successful career, and, you know, we've been able to replicate it time and time again. And it's been. It's been one of those things that, you know, you got to have the backing from the infrastructure, the company that backs it, you know, yourself, your team, and then you have to continuously adapt to the market. You know, in the last 15 years, we've gone from a view in the market that the US Was running out of gas and that we were going to have to import to being the largest exporter of natural gas in the world, and we're exporting a large percentage of our production. With the shale boom that's happened, we've gone to pricing where, you know, natural gas was priced at $50, $2 across the country to $20 across the country and everything in between. And if you were on the right side or wrong side of that, you either made a lot of money or lost a lot of money. And the volatility continues to happen. With all the political changes that we've had from administrations that were very proactive green, and people started saying, okay, you're going to need less gas, you're going to need more solar. And so gas demand in the forwards started shifting people's models and pricing started adapting to what the new balance might look like. You never know what. What the world looks like in five years. You can only guess based on today, based on some form of extrapolation of information that you can model and say, okay, if we're going to grow wind, solar, X amount, this is going to take away gas demand. This is what gas is going to look like in five years and you start trading against that. Well, a new administration comes in and changes things and it changes again. And like all this fleet flopping that we've had from a political environment has flip flopped. A lot of the industry balances in the forwards and it's created an immense amount of uncertainty and volatility which obviously creates a good opportunity to be on the right side of things, but also be on the wrong side of things. And fortunately, my team and I, you know, my views have been such that I've been able to successfully continue to be able to, I would say, properly guess the future, if you will.
- [15:55]
B
So you got to be really on top of it.
- [15:56]
A
You got to be on top of it. And every data, you know, every, every piece of information is key weather events. We've had some major hurricanes, we've had some major heat waves, droughts, we've had some major winter storms. The flooding that just happened in Texas, like all those things impact demand, all those things impact infrastructure. You know, you have a big hurricane come through the Gulf of Mexico. When I started, when that happened, it was a big impact to production because we were producing so much gas in the oil in the Gulf of Mexico that a lot of the, a lot of the infrastructure was damaged, people were having to evacuate. You shut down production pretty significantly. Well, in those 15 years that I've been in the industry, we've developed so much export capacity out of the Gulf of Mexico, we've developed so much more production onshore at shale plays and you know, completely shifted where gas is being produced, where cruise is being produced that now when a hurricane comes into the Gulf, the impact of production is actually minimal. But the impact of demand is massive because you have so much more infrastructure along the Gulf with these gasification, export, you know, pipe plants with infrastructure that's gotten developed around the Gulf because of the export capabilities that we now have as a country. That entire demand supply chain or the demand supply balance has completely shifted and things like that continue to happen. Right? And so we've had some crazy winter storms where it's completely snowed in Texas where it never used to snow and now we get snow pretty regularly. That changes the supply and demand and even the projections that you have for the next five years, when you see snow in two or three years in a row now you have to Adapt. Okay. My models of the last 30 years, a lot of times people use 30 year historical modeling, they use 10 year historical modeling. But when you see snow and big snow events in Texas for three years in a row, where you start putting more weight onto that, onto your forward model, and now you start trading that as a, as a new model, a new balance. But if it doesn't snow then now you're reverting more towards the 30 year model versus the last 5 year model kind of thing. Right? And so even playing where in that, how much weight do you want to put onto abnormality or the new norm? And that's one of the things that you just, in the world of trading, you always, you always got to be on it because it's ever changing, man, and it can change drastically. And that's what makes the market. You know, my model tells me that there's going to be more gas demand. Your model tells you that there's going to be less gas demand. The price is indicative of one or the other. And we could be trading against each other based on the simple assumptions that we've put into our model. Basically betting against each other, the price going up or down from where it is today. And that's, that's ultimately what creates the, you know, what creates the market is every person models things differently. Every person interprets information differently. Every model, it's built in some ways similar, but with very much different outputs. And that's what you start getting a pretty range in opinion of value. And the price is somewhere in the middle and there's forces that start pushing the price in other direction. And as life plays out, you start finding out whether you were right or wrong. And then every single new point of data that comes into your matrix of information starts adjusting your opinion of what price equilibrium is. And then you start trading towards that equilibrium in whichever direction your position is. So it's, it's, you know, it's pretty crazy. I've just been fortunate. I think that just comes naturally to me. It's, I wouldn't call it effortlessly, but it comes in a very natural, easy way that my brain is able to comprehend and process all the complexity of this market. And then I'm able to see clear and be able to make decisions without any sort of emotional attachment or without any really cloudiness. And you know, like I said, sometimes I'm right, sometimes I'm wrong. And then that's where the. Now you know, that's one of the things about the art of trading is how do you manage the Risk, how do you manage the downside? How do you manage the upside? And that translates into business, that translates into relationships, that translates into life, translates into many things. And I think that that market feel is one of the things that I get a feel from a business standpoint, from friendships, from relationships. Like, I, I just happen to get this gut feel, if you will, this senses, you know, my spider senses, if you will, like this, that tell me where something is not good or something's bad. And I'm able to then validate it with information, with market movements, with testing the market, you know, put a trade on and see whether your gut feel is right or not. And then as you start seeing it move, then maybe it is a trend that's changing as a trend that's continuing. And so you start loading your trades or unloading your trades in that direction of, of that validation. So, yeah, it's. It's something I've been doing for, I guess now, 16 years and have been fortunate to be successful and extremely successful at it.
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B
Super fascinating. Yeah. They say the gut is the second brain, right?
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A
Yeah, that's what it is. You know, sometimes you're looking at everything, everything tells you, like the price has got to go up, but sometimes your gut tells you it's not going up. And you gotta trust your gut sometimes. And a lot of times, you know, you always got to think that the people largely making a lot of these decisions are humans. And not everybody is unemotional. Not everybody's able to just make a very subjective decision based on pure data.
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B
Most people aren't.
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A
People aren't. And sometimes you're not able to separate that. And so, you know, you got to also know that on the other side of the screen, there is likely. I mean, there's going. There's some algorithmic, there's some AI going on and programming going on, but to a large degree, there is another human on the other side of the screen that is feeling some kind of way about the price movement today or about the price movement in the last 30 days. And so then you got to start getting a feel from the market of like, what the sentiment of the market is. And I think that a lot of people lack the ability to sense the market. And I, again, I think I've just been with experience and, and, and some natural gift, I guess I've been able to get a good feel for the energy of the market, the way that I feel the energy of the room, the way I feel the energy of a person. When you're talking to someone you can kind of feel the energy that they give off. Yeah, I kind of feel that in the market when I'm trading it. And I think that that's been one of the elements of my career that's made me more successful than, than perhaps, you know, your typical trader or your average trader is the fact that that energy, I really feel it and then I trade using all the things that I've processed. But keeping in mind that that energy is very real and that it's carried me so far in my career that I can't, I can no longer ignore it. You know, in the beginning it was more like, am I feeling scared? Am I excited? Am I too smart? Like, is the market not really seeing this? And then you start getting some of that validation. You're like, you know what? Like it actually is you sensing the market. And then the market sometimes catches you off guard. Something happens, you know, a war breaks out, political things happen, you know, like infrastructure breaks down. Sometimes your trade is perfect. But a pipeline blows up.
- [23:03]
B
Right.
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A
Someone's drilling for construction or whatever, and then they have a massive blow up on a pipeline. And now your supply and demand balance is completely changed because of a variable that was never priced in, that you couldn't have priced in. And so now you have to adapt. And now you have to figure out very quickly what does that mean to the position that I have and how can I mitigate my losses or make the most money I can from that event. And you got to very quickly dissect what's happened, be able to rebalance your, your brain and your book and your, your models into, you know, the new norm, if you will, with that new data point.
- [23:41]
B
Is it true we're, we're going to run out one day? Because I remember when I was a kid, they said 20, 30 years.
- [23:46]
A
But I think right now, I mean, with technology, with where we are, with the way that we're fracking and going wider, deeper, finding new technology to extract it and produce it, I think that we're set for the next 80, 100 years. Wow. But that was what they said in the 80s, and now we're 40 years later and we're still continuing to find new technology, new ways to extract it. But I do think that obviously we know that it is a finite number. One of the things that make it finite is price. And so may we run out when crude is 85 bucks? Yeah. If we're starting to run out and there's crude to be found much deeper in the earth, that requires much more cost. To take it out. And crude needs to be at $500 a barrel. Well then if we feel the need that we have to have that source of energy, then price is going to have to cover the cost of production. And so I don't know how much deeper we can dig to find crude and natural gas or some of these resources, but there is a lot of on tap resources. It just hasn't made financial sense to develop the technology or to actually explore them because, you know, it takes a lot of money to do the exploration and production.
- [25:03]
B
That makes sense. With all the car brands releasing electric vehicles, is that impacting this at all?
- [25:07]
A
It's impacting a lot of the models. In terms of what you forecast for gas consumption to be electric consumption, generation. You know, obviously the cars are being ran on gas. That's gasoline. That impacts the demand for crude oil because gasoline is a byproduct of crude oil. And natural gas largely these days is a byproduct of crude oil production. So a lot of places in the shale plays that we're producing these days, you're finding natural gas pockets and massive production of gas coming from the fact that you're extracting the crude. And so the gas is really, I would call it like a free commodity because it comes as a byproduct of crude. And so there is impact with all the electrical things that are happening. All this in electrifying the grid and getting more batteries and things out there. But with that has also come new technology where you used to not be able to store electricity. Power generation, well, with the new technology of batteries, now you're building much bigger batteries and capacity to store much more volume in electrons, if you will, and be able to then produce the electricity and use it later in the day or use it tomorrow. While in the past it was you generated because of today you need to consume it right now. It was an instantaneous thing. We're finding new technology. So even some of the development or the subsidies that some of these industries have had are leading to new technology. And so it is impacting the world. I don't think that personally, I don't think the electrical cars are the future. I think it's been a good transition and it's allowed us to develop new technology. But I think that there's, there's going to be, there's got to be a different, a different solution. Just because the batteries, the recyclability of them, like it's just not, you know, I think that there's, I don't know this as A data point or as a fact. But I've heard and read headlines and certain articles that make an argument. Obviously I've never researched it deeply myself that say that the actual carbon footprint of an electric car in its life is longer than an actual carbon footprint. That car, like a natural, natural gas, diesel car. And so it may look like it today, but the electricity it's going to get generated from something. And those things that are generating electricity are their hydrocarbons like natural gas, diesel, heating oil, you know, crude byproducts or their battery based industries, their solar, their wind. A lot of this infrastructure that has now faced challenges of what do you do with it when it's life cycles out? What do you do with these solar panels when, when, when they're no longer capable of converting solar into electricity? Like you just can't really recycle those, you can't really repurpose them. And so you end up with all this waste that is now generating toxins. And you know, like there's just, I think there's just, there's no easy solution to it.
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B
Yeah.
- [28:20]
A
And I think that one of the mistakes that people have made in the past administrations, the world is politicizing what source of energy we use because the market generally tells you what that is. And so if you make hydrocarbons expensive enough, then the technology to develop electrical cars will have existed on its own time. But once you start giving massive subsidies there and are really fully informed on what that's going to look like in 15, 20 years, then now you're, I would say arbitrarily choosing winners and losers in the market that's supposed to be capitalist and free. And so that's happened in the electrical car world. And now you're starting to see people reverting back into is hydrogen a better technology or is just sticking to natural gas or liquid natural gas or, or gasoline and diesel a better technology. And you're seeing all the political turmoil with Elon and Trump and subsidies and all these talks that are happening because a lot of the things that have supported the electrical or electrification of the cars have been subsidies from the government. But at the same time the government talks about drill and crude oil and energy independence and all these other things. So you know, the lobbyist game is interesting and it's, and it's its own thing and I think that that's just some of the things that we've seen play out. But ultimately, yeah, the electrifying of the cars and you know, Formula E exists now, all these different technologies and Battery advancements that we've had have come as a result of a lot of these subsidies that wouldn't have made it possible to spend the R and D or have a commercial reason to do it. Where now you're being subsidized by the government and you can look at some form of ROI and spending time in developing the technology. So just like chips and nano chips and all these other things that develop over time, I think the market, you know, there's a thing that we say in trading that the solution to low prices is low prices and the solution to high prices is high prices. When the prices are too low, people pull back production, people retrieve back on investment and spending. You start running out of that resource. All of a sudden you realize that the resources now no longer abundant, it price was too low. The price spikes up, people start developing new technology, they go back to drilling, they back, they go back to producing it. They, you know, the price ends up getting too high. Where we develop way too much technology, we can now extract way more gas and crude and all these things that we couldn't in the past. And the price kind of comes back down. So the price is going to fluctuate. The market's going to supply and demand is going to dictate the direction of things and what technology is proper at what time. But, you know, I know that people want to preserve the world and look for a better future and cut down, you know, the production of, of greenhouse gases. And so there's going to be a political component that is always going to have its hand on sort of this type of markets.
- [31:23]
B
What do you think it'll be? Because I've had a few guests say hydrogen on this show.
- [31:26]
A
I think hydrogen is probably the next thing that it's going to, you know, it sounds like from everything that I've read that it's the cleanest burning, probably one of the most efficient in terms of Btu and the ability to, I would say, convert even the existing infrastructure into another just energy source that's not electric, using the same, similar tanks and using, you know, being able to liquefy the hydrogen and things like that. So that's probably going to be the next, the next big thing.
- [31:51]
B
Yeah, I think they can't figure it out for commercial vehicles yet, right? Yeah, but they have it for the big transportation.
- [31:57]
A
They do it for big, big, big fleets now. And I think it's, it's a matter of time before they start rolling out hydrogen cars or some country somewhere like France or something says, you know, that Germany Some of the very pro green countries where they either subsidize it or they make it mandatory, where the industry just got to go there.
- [32:16]
B
You think you'll have success trading other commodities if that happens?
- [32:19]
A
Possibly. You know, for me, obviously, natural gas, I still see this as a thing that we're going to continue to produce for the rest of my career in energy. So I've never contemplated shifting commodities. I've been so successful in what I do and I know it so well that it'd be difficult for me to go be as successful. It almost would be more of a challenge than an opportunity, right. To say, like, hey, can I go trade hydrogen, Can I go trade propane? Can I go trade the NAFTAs and, you know, diesels and all these other things in the world, or do I just stick to natural gas where I know well and I know it comes easy. I can do it. I can generate revenue and, you know, build a nice wealth doing with, you know, what I know how to do. So at the moment, I still feel that I have a pretty good stronghold in natural gas. I feel that I have that competitive advantage and I still feel that the market has quite a bit of volatility and opportunity to still continue to, to create value from it. So not really interested in particularly shifting commodities. But, you know, I think I could be successful because all it's going to take is me learning the supply and demand components of those markets, getting granular, understanding the micro, the macro, what's driving it, and then started getting a pulse for it by actually trading it. It's hard to get a pulse of something just watching it.
- [33:38]
B
Yeah.
- [33:39]
A
If you just watch the charts and the price movement is there, but you have no stake in the game. It's very different than putting a trade on and feeling okay, like I feel like I'm going to lose more. Let me get out of the trade. I feel like I've kept the upside of this trade. Let me get out of the trade or let me double down because I think it's now actually going to get to that next level. And so participating in those markets will actually be, I think, what it will take me to be successful, like actually taking it slow and building back up what I've built on the gas.
- [34:08]
C
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B
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- [34:59]
A
But I think natural gas is here to stay, at least for our generation, for maybe the next couple of generations.
- [35:04]
B
I'd imagine you're trading against some of the biggest hedge funds with the most advanced models too, right?
- [35:08]
A
Yeah, yeah, yeah. You know, we're, we're trading against some pretty big boys and you know, they're, they're building some pretty robust algorithm, you know, mathematical models on, on, on supply and demand models and, and price movements. And they're looking at much more, I would say complicated models, more, much more technical signals from the market. You know, all the different technical, you know, you have hundreds, you know, dozens and hundreds of different technical movements in price that people measure over a certain period of time that they can then project forward and guess, you know, whether it's candlesticks, whether it's, you know, moving averages. Like there's all these, you know, very basic that everybody kind of uses. But then there's all this really complex other metrics, statistical metrics that people use to try to guess which way the market's going. And there's some people that are far more certainly, I would say, I wouldn't necessarily call it smarter, but far more technical, far more advanced in the tools that they use but are probably less advanced in the emotional, the sensing, the energy, the, you know, the capability of put gut feel trades on and actually do that profitably.
- [36:27]
B
Right.
- [36:28]
A
They're more like this is what the robot says. This is what our complicated equation says. And this is the trade. And they live and die by that. And so sometimes we get, from a fundamental and a market, I would call it trending trade standpoint, sometimes you get sort of like shoved out of the way by a, you know, an algorithm that believes that the price is where it needed to get to in Order to take another 30 cent down. And so then the market just sells off 30 cents for no particular reason. I'm looking at it. There's no reason why the market's so bearish and the sentiment so bad. We're looking at supply and demand production, you know, weather forecast. There's no reason why we just took a 10% other than the fact that this model had this sort of point that if we broke past it, it was going to trade against it. And so you have, you know, a lot of these big funds and trading houses that do quite a bit of volume trading and significant positions on, on algorithmic traded that are way more sophisticated than anything I'm doing.
- [37:39]
B
So they're using literally AI to make the trades. No, human.
- [37:42]
A
Yeah, it's program. It's programs, it's AI. It's. They literally have a software that they have on their machines that's looking at price movements and it's just executing trades for them. Wow.
- [37:55]
B
Yeah, that's crazy.
- [37:56]
A
And it's high volume, it's high frequency. And these are quants, and these are teams of quants of like math geniuses that are developing these programs and you know, developing all the parameters. And it's something that you have to continuously develop because again, as price movements happen over time, as data comes into, you know, into the model, they have to make adjustments and trade, you know, change it. But it's a really sophisticated trading tools that they're using that I'm nowhere near that sophisticated.
- [38:24]
B
Yeah, yeah, you got to play around with it because I was using one for like a few months and then I lost my whole account in one day. Yeah, it was working for like six months.
- [38:32]
A
Yeah. And that's one of those things that, you know, some of those are really good. And all of a sudden something happens. There's like a white, you know, like there's a black swan event.
- [38:41]
B
Right.
- [38:41]
A
Where it's a tail end, you know, five standard deviation sort of event that you will have never predicted and you just get wiped out in one.
- [38:48]
B
Yeah, I think it was some news hit that day. Yeah.
- [38:51]
A
Literally with a news hitting, there's a 3, 4 standard deviation event. 5 standard deviation event that gets you way out in the curve and then you just lose everything.
- [38:59]
B
Dude, it was crazy.
- [39:00]
A
One minute. Yeah.
- [39:01]
B
Because I was making like 5% a month for like six months straight, which is pretty crazy. And then just got wiped out. Yeah, Yeah. A lot of people lost money on that. It was like a forex trader or something.
- [39:10]
A
Yeah.
- [39:11]
B
I don't know what exactly they Were trading. But I hear stories like that all the time.
- [39:14]
A
And then you hear the news and, you know, there's one shop at whatever in Barclays, Some foreign exchange trader lost a billion dollars when some trade and whatever. Like you see this in the headlines all the time of like, when things like that happen, generally, that's somebody that blew up.
- [39:29]
B
Yeah, yeah. Because the volume is nuts, right? The trading volume.
- [39:32]
A
Exactly.
- [39:33]
B
It's like in the trillions.
- [39:34]
A
Yeah. I mean, it's. It's aggressive when it happens and it's. It happens quick. So super high volume, like the velocity of it, like, you can't even react to it. Yeah, you're just along for the ride at that point.
- [39:44]
B
Does that happen to you where you just got wipes one time?
- [39:46]
A
Yeah, yeah, it's happened. You know, Covid was one of them. That's one of those things that crude oil fell 30, 40 bucks.
- [39:53]
B
Damn.
- [39:53]
A
You know, all in metal, two or three days. That impacted the natural gas business. The fundamentals, the balances significantly where again, like I was saying earlier, gas is a component of crude production. So if crude goes far below where it makes sense to produce, then people start forecasting gas production to be less than it used to be. And, you know, I was put in a position and, you know, it's. It's one of those trades that, you know, you live with it and you then have to reassess your risk and trade back out of it. And so, you know, managed to retrade the positions and manage it. But Covid was one of the big events that I think caught a lot of people. Yeah, one of, you know, some of the big events that caught people by surprise was winter storm yuri back in 2021. It froze pretty much half the country. Places that had never gotten snow got several inches of feet of snow. Texas, you know, we had snow all the way down to the coastline. Infrastructure broke, pipelines froze, storage facilities froze, wind farms froze. And so the state was put in a position where it didn't have heating, you know, for natural gas, for heating. It didn't have electricity for running, you know, generation. So, like it, the entire country within, I mean, the state of Texas was in pretty bad shape, but the entire country was put in a really strained energy position where prices just, you know, exploded. So natural gas went from some parts of the country today, trading at $3 to tomorrow, trading like $11,000.
- [41:18]
B
Holy crap.
- [41:20]
A
You know, it's insane type of volatility. And if you were cut on the wrong side of that, there's nothing you could do. Like you just lost millions of dollars.
- [41:27]
B
Whoa. So you were on the right side of that one.
- [41:28]
A
Yeah.
- [41:29]
B
Damn. That's nuts.
- [41:30]
A
We're net. Net, right? Like I was right on some. Like really right on some. I was really wrong on some. Net net. We came up ahead. I did it right. We did good.
- [41:37]
B
Oh yeah. Because it depends on the market too.
- [41:39]
A
Depends on the market. You know, some of them, you know, where I was short, the price still went up. So I lost money there. But where I was long, the price went up and hopefully when you do the math and you know, do the sum of all of it, you came up ahead. I think a lot of people came up ahead, but a lot of people lost a lot of money.
- [41:55]
B
Yeah, I said 300x overnight.
- [41:56]
A
It's just like overnight and it's not something that any sort of model was predicting. It was just like the market just freaked out and it exploded. So.
- [42:03]
B
Yeah, because you could have the best models and that happens and you just get wiped out.
- [42:07]
A
Yeah.
- [42:07]
B
So it's a. Would you say it's a risky space?
- [42:10]
A
I guess it's super high risk. Yeah. I mean trading in general, anything, whether it's crypto, whether it's commodities, whether it's stock, whether it's anything in general, like it's super volatile. Um. And yeah. And you know, fortunately for me I was able to do extremely well then. I was able to fund my passion for motorsports.
- [42:29]
B
High risk, high reward, baby.
- [42:30]
A
Yeah.
- [42:31]
B
Let's go. And you came here at 12 from El Salvador.
- [42:33]
A
Yeah.
- [42:33]
B
It's the American dream you're living.
- [42:35]
A
Yeah, I lived the American dream. You know, we, we grew up in El Salvador in the middle of the civil war, moved to Houston back in 97. Been there for 28 years now. And yeah, it's been a wild variety from learning the language to working even through the immigration system to now becoming a citizen four years ago and obviously now being able to be a pretty successful individual and providing opportunities for people that wouldn't otherwise have them both on the motorsport side. But I also own a construction company, I own a media company, invest in different startups and things like that. And obviously paying immense amount of taxes. So it's been a success story. Yeah.
- [43:16]
B
Nice man. Houston 97, that's the year I was born. So you've been there for 28 years?
- [43:20]
A
28, yeah. Wow.
- [43:21]
B
You really like it there?
- [43:22]
A
I love it there. You know, it's a great place to be. Home weather wise is great, the economy is great, cost of living is awesome. That's where my family is and friends. And you know, I went to University of Houston, studied finance economics there. I did my Master's of science in finance at U of H as well. And then I found my first job in downtown Houston. And I'm parking in the same spot that I've been parking since I started working in, in the professional career of trading.
- [43:47]
B
Wow.
- [43:47]
A
And I've been in the same building the entire time. So I, I worked for a company for 11 and a half years before I started with my current company. I'm going on about eight and a half years on this one, but they both happen to be in the same building and.
- [44:00]
B
Crazy.
- [44:00]
A
I've been parking the same parking garage for pretty much 20 years at this point.
- [44:04]
B
That's nuts.
- [44:04]
A
It's wild. Yeah. Wow.
- [44:05]
B
So you really got a lot of valuable experience working for someone else first?
- [44:08]
A
Yeah, that's, you know, that's kind of where I got my, my training, if you will. It was a company that was a young company that was growing, but that was really in the physical market more than even the financial market. So I really learned the ins and outs of the financial kind of like on my own, but the physical component of it and how to move gas around and what's driving it? Supply and demand, understanding the pipelines, their terrorists, the cost of doing business, what's driving the industry, infrastructure, all these different things that, that I think give me a good feel for where the market is and where it's heading. I, I, I developed them at, at that initial job that I had for eleven and a half years. I, I helped them build a, a gas portfolio in the southwest part of the country. And then I came to my current job to build a west as well. And that's what we've been doing for the last eight plus years.
- [44:59]
B
You mentioned tariffs, did that, Was that another event that kind of rocked the market for you?
- [45:03]
A
Yeah, yeah. The terrorist was definitely here in April, you know, during the liberation or whatever. The, the, the, the big tariff announcements were. Crude oil took a big, a big fall. It went from $78 to $55, something like that, in the course of a week or so. And there was another big impact in the market. A lot of volatility, a lot of uncertainty. Then some of the terrorists got extended, some of them got canceled, some of them got lowered, some of them got increased. So like just the uncertainty of what the direction is provides quite a bit of volatility, good and bad. Right. And yeah, I got caught on the wrong side of some things and traded against them, reverted them, got Caught up on the good side of things, cashed out on those. So it's just been one of those things that just. Volatility continues to be pretty insane in commodities and all these wars and tariffs and all this, you know, uncertainty on the political end and what the administration is doing is going to do. It's continued to provide quite a bit of uncertainty. So that provides a lot of, I would say, volatility that, that otherwise would probably not be there, but, you know, gives the opportunity to put some bets on and be wrong and hopefully still be there to be able to put another bed to be right or, you know, to, to, to really trade around your, the volatility and capture some of the upside on it. So.
- [46:23]
B
So you had your bed a lot, it sounds like.
- [46:25]
A
Yeah, yeah, yeah. You know, we, we, we hedge, we trade, we spec, we get out of trades, manage them, offset them, rebalance that portfolio, have a big portfolio of assets that I trade around and then have certain views that I trade against. So, yeah, it's a, it's a complicated business.
- [46:43]
B
Sounds like it. Well, dude, I've learned a lot. Where could people find you, support you and support the racing company too?
- [46:50]
A
Yeah, yeah. So Rafa Racing, you know, it's, it's my short name, but it's rac. That concept started four years ago. I, I saw the infrastructure challenges that people had. I learned about the budget and the cost of doing racing and, and the difficulties that people had to find an opportunity to actually make a living out of being a professional race car driver. And so then I committed in, in the mission to build a platform where we were able to elevate people's profiles, be able to participate in the sport and enthusiasm via creating content and media. So Rafa Racing Club on the social media channels, that's the website as well. But the Rafa family of companies, over the last three years I've been acquiring some strategic pieces of assets and companies that we've been able to plug into this ecosystem where now we have a media and entertainment platform, we have the logistical, we have the country club, we have the number one creator of video content and podcasts covering F1. Nice as an independent company, acquired that company, the Race Media based out of the UK last year and we've been able to expand on what they're doing. So we're covering more sports, more, more racing principles, we're covering more languages, we're adding more podcasts, covering racing and talking about what's happening in the world of Indy NASCAR F1. And so outside of outside Of Liberty Media itself. We're the largest independent company creating content for that. And then we have some TV shows that we have coming out. So in our operations from the racing side, I've been, I've been. I've signed a few drivers that I found very unique stories about them. And I found that they had the drive, the talent, the desire, the marketability. Like, they basically were this perfect package of an individual that I wanted to take under our wing and develop them into a proper race car driver, a professional competitive race car driver, which they already had, sort of like the raw talent, too. But we wanted to provide an infrastructure around to be able to develop into that and then use our platform to elevate their media value so that we can bring sponsors and partners in. You know, we were talking earlier about NASCAR and some of the, you know, sponsorship deals that some of the drivers have. They do that at nascar. They do that at, at, at Formula one. But in sports cars where, or grassroots racing, where most of the people live, if you don't have a sponsor, a parent or someone writing you a check, you just can't race. There isn't like a minor league where there's at least a base salary that someone makes. It's literally, it's going to cost you to go racing this weekend. 50k. If you don't have the 50k, you don't race.
- [49:21]
B
Damn.
- [49:22]
A
And it's that cutthroat. And so a lot of people just don't have the path forward to, to be able to succeed in the sport because they just don't have the funding. You know, in, in some of the race series that we're in today, your annual budget is somewhere between 4 and 500k, up to a million, $2 million a year. And there's no prize money. You know, that's just the cost of running the car, paying for the tires, the fuel. And you have to be able to sell that story to a sponsor. But the series isn't on ESPN every weekend like NASCAR is. The big brands aren't spending a lot of money in it. The way that, you know, Target, Eminem, Tide, Coca Cola, like all these brands aren't spending the kind of money that they are in Indie and even Indy struggles some. Right? But in NASCAR and what they're doing in F1, Rolex does some sponsorship, but not to the extent of what they pay F1 and some of these, you know, Ferrari and those guys to like, be able to sustain the level of racing that they do and be able to pay the drivers what they pay. So a lot of the drivers that we come across are talented, driven individuals, don't have the money for it. And so we're trying to create an ecosystem and a platform where we are able to then support them by creating content, telling their stories through films and TV series and sort of developing the grassroots up of what Liberty Media has done for F1 down and be able to tell the real life stories of racers trying to make it in the world of racing and making a career out of it. And so we're committing to a lot of content production and media distribution and the platform that we have. And so that's one of the things that we will have coming up is the TV shows in the series of My Life Story, the drivers that we've signed, Life Story, how they came about in, you know, living in our space, how we're developing into racing professional, where we're going racing and the excitement behind it. And so we're bringing more fans into the world of motorsports, but we're also creating alongside opportunities for more drivers to actually have a career in it. And we're doing it by sort of creating our own platform inside the sport. So not depending on say F1 or not depending on the NBA or the NFL to be the platform that, you know, say that Lakers are who they are. They just sold for $10 billion. They were able to do that. Not just because they're the Lakers alone, is because the NBA provides them the ability to exist. Well, this motorsports series that we participate in, these platforms, they try to do what they can, but they have limited budgets and they don't have the TV rights, they don't have the audience, they don't have the views, they don't have the attendance that it will require to be able to sustain the cost of racing. Every single race, every single weekend, this many cars, right? So say for example, I go on grid and we have 40 cars on grid, we have 10 races. It cost us about 100 grand a race per car chase, right? Like that's just what it costs to just race. And that doesn't account for the driver itself getting some form of salary. And so if this driver then got paid and obviously you start adding all those costs on top of what it costs every weekend to go racing. And so we wanted to, when I saw an opportunity, was that there's this demand for the sport, there's this demand for people that want to access it, there's a demand, there's people that want to get into it, but all they really see is NASCAR and F1, there isn't someone on the grassroots level doing this and I thought that there was a possibility that we could do and so we're well on our way to do that. We've signed some people, we're getting some pretty big signed sponsors and partners onto the platform and now we're going to start distributing the content of telling these pretty cool stories. And I'm a little bit biased on pretty cool shows coming. You know, we're basically doing our own version of Drive to Survive as a follow doc series of the drivers that we've signed. Our platform, the racing that we're doing, the operations of, the clubhouses and the media platform that we've created. And you know, we do experiences, we do F1 Hospitality. We went to Spa 24 hour a couple of weeks ago where we hosted people and gave them full on behind the scene access. So, you know, we're doing a lot of these things that people want to do from an experience standpoint, but also creating these opportunities, creating this platform for these brands to exist, creating this content to distribute, to give the brands the opportunity to get seen and give them some form of ROI in their investment. And then we're focusing really on the driver development aspect of it. So there hasn't been a, a centralized way for someone to go through college to become a race car driver. And we're developing that in house. You know, people kind of find their way, they get thrown into a cart, someone gives them an opportunity to drive, they kind of learn to drive. And some of them are gifted, some of them are not. But there isn't really a path from, you know, a six year old getting in kindergarten or first grade all the way through high school in college. In the world of racing, like that path isn't there, that development isn't there. And so we're developing that. I think that will be probably the most advanced racing driving school in the world in the way that we're developing it.
- [54:27]
B
Nice. We'll include a link to all that in the video. Yes. Thanks for your time and that was awesome.
- [54:30]
A
Yeah, appreciate you having me.
- [54:31]
B
Anything else you want to link or promote?
- [54:33]
A
No. Yeah, I mean I think that's, that's the, you know, the RAFA ecosystem is, is the thing that we're working on the most. And then I have a family office, maximum capital that I used to fund a lot of my investments and opportunities. You know, one of the things that I see as an opportunity that I've been doing is investing in sports socials and you know, using the three pillars of community, commerce and content. And so looking at golf, have an investment in that. Having investment in soccer, have a big investment in motorsports and racing now. And looking at pickleball and other opportunities to where people are doing something unique to create community that's worthwhile, creating content that then you can commercialize. And that's kind of been sort of like my family office or my personal sort of interest in investing in sports because I just love sports, but then, you know, do some real estate and other things like that. So that's kind of what I do outside of the trading world. Cool.
- [55:23]
B
Thanks for coming on, man. We'll link it below.
- [55:24]
A
I appreciate it.
- [55:25]
B
Awesome. Check them out, guys. See you next time.
- [55:28]
C
I hope you guys are enjoying the show. Please don't forget to like and subscribe.
- [55:31]
B
It helps the show a lot with the algorithm. Thank you.