Never Fall For the Geopolitical Trap
“I’d be a bum on the street with a tin cup if the markets were always efficient.”
- Warren Buffett
Yesterday, I laid out my thoughts on crude…………..
TACO Trump ----> Became FAFO Trump
“The stock market is a device to transfer money from the impatient to the patient.”
Where are we now?
Brent Crude sold off 15% from last night’s peak of $81.40.
The reason why?
1.) Iran produces just 2% of the world’s crude, which is mainly sold to China. Saudi Arabia can rapidly increase production and replace the Iranian supply gap…… This month alone, Saudi Arabia and the UAE increased production by 870k b/d.
2.) 80% of Iran’s crude oil exports flow through the Strait of Hormuz, of which 80-90% goes to China. Closing the Strait would criple their economy and aggravate their #1 client.
3.) Iran’s retaliation towards U.S forces in Doha Today was a complete disaster and a stunt to show some military will.
Institutional Traders know this! I believe Brent will trade under $70 for the upcoming weeks.
How did the Team and our Paid Subscribers take advantage of this?
This morning, we went long XOM $110/100 Sept 19th Put Spreads for $2.35, providing 2.9x leverage. That structure is up 28% on the day. I believe XOM will trade under $106 by the end of the week.
Please keep your notifications turned on as we’ll be adding exposure across the risk curve.