“Open the Fuckin’ Strait, you crazy bastards, or you’ll be living in Hell – JUST WATCH! Praise be to Allah. President Donald Trump”
Those were the wise words of our President on Easter Sunday last week and, now that Trump and Vance have completely and utterly failed to negotiate peace – it is President Trump himself who is now BLOCKING the Strait of Hurmuz – with all those ships he sent there to supposedly unblock it.
The US Navy was created in 1794 primarily to FIGHT piracy, not to BE THE PIRATES! The Strait of Hormuz was open to all traffic UNTIL Trump attacked Iran who then did EXACTLY what Trump’s intelligence briefings said they would do and used the Strait as leverage (since they were massively overpowered otherwise) and now Trump thinks he’ll look like a hero if he re-opens the Strait and “only” charges $1M per ship as a toll?
That’s exactly what I said would happen with the above cartoon from our March 25th post – 3 weeks ago! At the time, we were still pretending to be the good guys but THAT ship has sailed…
So we’re back at war and waiting for the bombs to drop. The indexes are down about 1% at 8am, the VIX is 21.45, Oil is up 8% at $104.35 and Gold is $4,729 with the Dollar at 98.74 and Bitcoin is back to $71,075 as no one is using them to arrange tanker passage today (that we know of).
Things flip-flop so fast I hate to say this is good or bad for anything in particular. We are reviewing our Member Portfolios this week while Earnings Season kicks off this morning (Goldman Sachs beat, but not enough to please investors – after a 50% run from last year).
Trump might nuke Iran or he might invite them to the White House and compare them to the Founding Fathers – just like Reagan did with the Taliban in 1985 – we have NO WAY OF KNOWING WHAT HE WILL DO, DO WE???
Fortunately, Trump has re-decorated – so Iran can see what real power looks like (shiny!):
I guess Defense stocks should continue to do well. As we’ve noted, we like RTX in LMT – even if the war ends as we still have to re-stock the missiles they make. Airlines are likely to get worse – jet fuel is literally going to start running short in Europe to the point where flights will get cancelled and if a plan can’t leave France to go to New York, then that plane won’t be able to leave New York to go to Paris, etc, etc. – and then YOUR vacation gets cancelled and THEN you care, right?
It will be weeks before we start getting earnings from Retail and Discretionary stocks but between Tariffs, Inflation, Shipping Costs and trapped containers – BE CAREFUL – is quite the understatement for earnings (more so for guidance as the war didn’t start until the end of Q1). It will be very interesting to see the CEOs dance around blaming Trump for their troubles this Q.
We’ve been warning about the intersection of geopolitical instability and market fragility for years – it’s kind of our thing at Phil’s Stock WORLD, in fact… This is precisely the scenario where having defined risk parameters, hedged positions, and a clear-eyed view of macro reality separates Members who navigate this from traders who get destroyed by it.
We’re happy to show you how and you can join us HERE!
The playbook isn’t complicated, but it requires discipline:
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Energy positions need reassessment at these levels – are you playing the spike or the inevitable resolution?
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Consumer exposure needs hedging – this hits Main Street harder than Wall Street initially
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Dollar dynamics are fascinating here – typically oil spikes strengthen the Petrodollar, but when America IS the blockade, the usual rules get complicated
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Duration risk in bonds becomes acute again as inflation expectations reprice
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We’ve been here before – so we’re not too worried. Well, not exactly HERE, because “here” involves a Presidential Easter tweet combining profanity and Islamic prayer while inadvertently blockading the world’s most important oil chokepoint – but we’ve seen the pattern: Manufactured Crisis, Market Shock, Opportunity (for the well-prepared).
The question isn’t whether this gets resolved. It will. The question is whether you’re positioned for the chaos before the resolution, or whether you’re the one panic-selling at the bottom.
I’ll post up a nice list of trade ideas we can watch for the next few weeks but first let’s focus on this week’s earnings reports:
As you can see – we’re starting off slow and picking up speed with lots and lots of bank earnings and hopefully, we’ll get a little color on whether or not there is really a liquidity crisis going on. Historically, the big banks have driven our earnings with a nice kick start and expectations are high (too high in GS’s case!) so we’ll see how they go.
On the data calendar – we have two weeks left until the next Fed meeting so they are out in force this week ahead of their quiet period with 9 scheduled speeches and two of them are from Miran – so you know we’re tilting doveish! Plus we have short-term Note Auctions and some regional Fed reports sprinkled in for good measure:
So it’s going to be an interesting week and don’t miss Robo John Oliver’s weekend posts about Mythos, which is probably a lot more important to our future investing than any silly war between humans:
