Peace Deal

Was caught offside.  The market was overbought, and should have fallen on any news that fell short of a peace deal.  We got a peace deal.

I think there's an 80% chance it will stick:

• Trump doesn't want economic disruption to derail the mid-terms.
• The IRCG doesn't want to be overthrown after Iran's economy is bombed into oblivion.

The Israelis might de-rail it.  Or parts of the IRGC (compartmentalised from each other) may keep shooting.  The Gulf states might want to finish the IRGC, but have no militaries.

Changed my positions:

• Covered all my shorts.  Lost ~1.5% in a night from them.  Its probably the worst time to do it, but once I'm wrong I prefer to cut my positions and start with a clean slate.
• Covered my short term war trades (BNO, Corn).  Kept Var Energi as its a low cost producer.
• Loaded up on some more EMs.   LATAM stocks, the high-beta ones that I sold before.  An India stock, as India was badly affected by the war.
• Looked at Dubai, but not attractive.  I think Dubai recovers - from blown up high-rises to normalcy - but there will be a new geopolitical risk premium unless the IRGC is overthrown.  The Iran drone risk.   The stocks just weren't valued attractively enough.  eg: Dubai stock exchange at 20X recurring earnings.
• Delfi (Indonesian chocolate company) shot up 15% on no news, maybe because of the peace deal.

Looking for more things to buy that were affected by the war.  Maybe EMs, maybe copper.

Quick update

Added a few more shorts (2%), and sold a little gold (1%). 

I expect Trump escalates after market close tonight (8am tmr Asia time).

Got Shorter

Reached 45% short.

Around 4% of that is really low beta stuff, so its more like 41% short.

I'm comfortable with that as the market is now overbought.  Rallied for 3 days.

Reloaded shorts

I reloaded my shorts yesterday night, before midnight (noon in NYSE time):

I was looking to go a little shorter again tonight, dunno if I'll get the chance.  The market was overbought last night and did not react well to Trump's speech.  

Uncertain

Kept most shorts, trimmed a few.  Rebounds in bear markets can be vicious for shorts.  Market has the potential to rebound from its oversold position, with VIX at borderline 29.  But has not done so yet.  Still waiting to see when I should trim more or reload for another leg down.

Market seems to be ignoring whatever Trump says.  Before the close, he says "Iran really wants to stop the war", after the market close he'll "obliterate them".  My base case is that the threats (not the war) escalate next week as both sides negotiate.  But it can end tomorrow.  Or Iran (and the Gulf States) can be "obliterated" anytime.

Short term uncertain, medium term moderately bearish.

Still Short

Kept most my shorts as market is crashing.  VIX > 30.  I don't know what happens next or when the rebound is.

My portfolio was up tonight more than 1%, or more than I make in 2 months of my day job.

Time for the weekend.

Gone shorter

Night 3 of the rebound, gotten shorter at the start of the session.  Also bought 1% oil (BNO) as a trade - which is the same as shorting the stock market.

Choppy market with a bearish bias.  This is about as short as I'll get.  Look to cover some on the next drop, probably in 1-4 trading days.  The war can end any day, however unlikely.  Or it can get worse.  Follow the market and don't listen to your beliefs.

Cutting exposure and Shorting again

Market was oversold, Trump made an announcement just before market open to make it pop:

Its a kangaroo market with a bearish bias, use the chance to sell:

• Sold some LATAM stocks.  High beta.  Fundamentally, I want to buy them back again when the war is over.
• Sold SOBO, too small a position to track (spin off)
• Sold the gold which I foolishly bought Friday.  I like my gold position, but it was too big.
• Wanted to sell Malaysia Smelting Corp (tin - industrial metal), but market closed today.
• Added shorts, as they has bounced back to the middle or top 1/3rd of Hedge risk range.

I may be a bit early shorting, by a few hours or a few days.  Would prefer to monitor first, but I need to sleep at night. I can still go shorter.

I think theres a 90% chance the war continues this week.  The chance to strangle the Iranian Regime is too good to pass up.  And Israel & the Gulf States will be in a bad situation if the job isn't completed.  Could be weeks, could be months.  The only real constraint is that it has to end before the mid-terms, probably August.  In this market, thats several lifetimes away.

Small chance the war is over tomorrow.  So keep nimble.  Currently a Kangaroo market, with a good chance of going into a correction.

Love Hurts

My portfolio is down 4% in a month.  It hurts:

Its a 7% drawdown from its all time high at the end of Jan.  Gold fell 16% in the same period.  Even in a gold bull market, it can historically be expected to correct 20-35%, so I expect more pain to come. 

I'm up 10% YTD while gold is up 4%.  So I'm "outperforming": rode the upside, missed most of the downside.

The market is choppy: 3-5 days up, then 3-5 days down.   I hate it, but we trade the market we have not the market we want:

• Started covering some shorts early tonight,
• Sold platinum and silver in the last two days, trailing stop-loss.
• Bought a little more gold (RGLD), bad timing.
• Sold my oil trading positions (XOP and BNO).  Still have Var Energi as a longer term holding. 

I don't know if we get a real correction: VIX > 30 with markets crashing from oversold levels and correlations going to one.  I think we should, as the market prices in inflation and a real (not nominal) recession.  But no sign of it yet.  So I'll probably cover more shorts in the next few days.  The war can last for months or could be over tomorrow.

This is the first time I've been able to short the market successfully over a few months.  And the first time being able to trade the chop.  At least reducing the effect of falling gold on my portfolio.  I should be happy about that.

When would I sell Var Energi?  Even through its a long term fundamental play, oil is cyclical.  Prices can't stay triple digits forever else they'll reduce demand with a recession.  Back-of-the-envelope, from 2025 numbers:

• 5.2bn revenue from crude @ 68.3 USD/bbl.  At 120 Brent it would be 9.1bn, or an extra 3.9bn  At 150 Brent it would be 11.4bn, or an extra 6.2bn.
• 2.4bn revenue from gas @ USD 74.4/boe.  Around 15% of their gas price was fixed in Q4, but I'll ignore this cuz its usually only one or 2 years out.  TTF now is EUR 59/Mwh, or roughly USD 106 per boe.  Selling gas at USD 106 would give 3.4bn revenue, which is an extra 1bn.
• Apply Norway's 78% O&G tax to this: At 120 Brent & 59 TTF, its an extra 1.07bn profit.  Or profit goes up 2.26 times.  At 150 Brent & 59 TTF, its an extra 1.58bn profit.  Or profit up 2.8 times.
• At 10 times earnings, that would be a stock price of USD 7 (NOK 67) for Brent 120 and TTF 59.   Or USD 8.7 (NOK 83) for Brent 150 and TTF 59.

The stock doesn't have to get there or could go further, but these would be unsustainably high stock prices.

Fundamentally, its not yet time to begin value investing.  Some stocks in the UAE ETF might be value buys later, but need to get cheaper.  Stocks in general are still too expensive, there's nothing yet where I'd stick my hand out to catch a falling knife.  Need to see real fear of a recession.  And if this war continues long enough we'll get it.

Gone short again

 Added to my shorts last night and tonight, and cut a few longs.  Almost doubled the shorts:

I expect this bear market bounce to end by next week or Friday.  Possibly tonight if Powell talks tough on rates.  I can still go a bit shorter.

Still moderately bearish due to rising inflation from oil.  No quick off-ramps for Hormuz yet.

Quick Update

Covered some shorts early this morning:

Its a short term move.  Expect to put them back again, with more, in the next few trading days.

Its been a tough week.  Choppy market with the change in daylight savings time mean I have to wake up at 3+ to place trades.  Its been stressful, with the market changing so frequently.  Twice I got caught where I made some moves, the market moved against them the next night, then moved back (and more), validating those moves.

Combined with my day job, barely pulling through.  Need to take this weekend to rest and exercise.

Performance last week is has been drip-drip-dripping down, but still OK YTD at 14%.  It still mostly follows gold (miners?):

I try to remind myself that in this business, a 60% hit rate is good.

I give an 80% chance the war continues next week, with the market beginning to price in sustained inflation and supply disruptions for basic materials.  Anything can happen.  Trump can TACO anytime.  The war can grind on for months.  Or the Iranian regime can be overthrown, bringing a new Golden Age of peace to the Middle East.

There will be opportunities at the end of this, I don't know when.  The war has to be over by the mid-terms.

Meanwhile: reduce high beta exposure, trade short positions, and try not to die.

Grown shorter

I am now 80% invested and 17% short:

Small changes:

• Covered some crypto shorts, bitcoin may be showing strength.
• Sold Copper miners
• Bought more puts and entered more short positions last night.
  
• Bought oil a few days ago, just sold some.

Short term - if the market drops and becomes oversold then I'll cover some shorts.  The war might be over next week...unlikely but anything can happen.

I hate choppy markets, but we trade the market we have, not the one we want.

If this war drags on for another month ands markets start to price it in (we ain't seen nuthin yet), is there anything I'd want to buy?

Cut more exposure

Cut more exposure this afternoon and tonight.  I think the war leads to a slowdown, as oil & food stay high for a few months:

• Reduced my Tin miner (industrial metal)
• Reduced some of my LATAM stocks (they are high beta, and move with the nasdaq).
• Reduced Equinox Mining.  Open pit miner with high diesel costs.  Kept ~ 1/3rd of my original position.  Keep the gold royalty companies.
• Kept silver.
• Sold my trades (XLI and EWW).  Keep EIS for now.
• Added a few puts (0.5% in total).

I am now around 22% in cash (excluding shorts).

A crashing market doesn't give you a nice bounce to sell your holdings and load up on shorts.

Its a pit of a panic, but the question is, is it at the start of the correction or the end of it?

Reducing Exposure

Reduced exposure last week, both on the long and short side.  Not as part of a strategy, just a bunch of individual trades:

• Reduced my crypto shorts.  Less bearish on this due to price action.
• Reduced one of my LATAM banks.  Its holding up OK from rising oil, but this decreases the chance of a political change in the next election, needed to really boost the price.
• Cut a lot of country specific trades, as they broke trend.  They were mostly profitable, but it doesn't matter.
• Cut my oil trades as they shot upwards.  Oil now to volatile to trade.  Still holding my fundamental oil pick (Var Energi).

Now I am almost 15% cash:

I think the market may be beginning to price in a slowdown/recession from the war.  The Straits of Hormuz is (fully or partially) blocked, oil cannot flow out, fertiliser and chemicals can't flow in.  This is existential for both Trump and the Iranian regime, and I see no off-ramp.  The war will escalate from here, and it could be a few months.  Enough to spike energy prices now and food prices later.  After the market does price all this in, it might be time to turn bullish.  A revolution in Iran would lead to a golden age of peace for the Middle East.  I don't know what will happen.

Short term, I want to:

• Sell my Trades if they break down (failure) or if they spike up (success).  XLI and EWW are looking weak, I've already reduced the former.
• Maybe reduce my LATAM companies, as they are high beta and will not do well in a correction.
• Sell Var Energi if oil goes unsustainably high ($100 to %150).
• And I would sell a bit more Silver if it goes above $100.

Long term, everything depends on wether the Iranian govt collapses (probably) and if there is a stable, interim replacement (maybe).  Iran is a black box now with no internet, so we have no idea.

Less Bullish. Sector Rotation.

I've been balls-to-the-wall bullish since April 2025.  Averaging 120 to 130% invested.  Now I've cut my exposure and added some shorts.  Now I'm 98% (gross) invested, plus 14% short.

Sold or reduced:

• Copper, palladium following Hedgeye Trade and Trend
• A Latam bank
• Shorted tech and crypto, again following Hedgeye Trade and Trend
• Sold 1/4 of my Malaysia Smelting Corp shares.  Tin made all time highs in Jan, with MSC up around 40% from where I bought it.  I think tin continues up this year, but probably falls next year with slowing economic growth.  So I still have a while to sell, but sell a little now in case I am wrong.
• Sold Hartalega (Malaysian rubber glove company) at a 66% loss.  I'm not sure if I timed the cycle wrongly, or there is something wrong with the company, or China is destroying the glove market.  There was no clear signal to say that I was wrong and to cut loss, just a slow drip, drip, drip of bad news.

Still golding a large chunk of gold and precious metals.  Gut feeling that we are not at the end of the gold cycle, but no numbers to back it up.

The US market is rotating away from tech and into Industrials and some cyclicals.

I am still bullish for 2026, but think 2027 has slower growth.  The bear may start end of this year.

My positions.  Short term trades are purple.  Cyclical commodities to sell as they go higher are Green:

The portfolio is doing OK, beating SPY but tracking gold.  With all the volatility that entails:

Another loss; Sector rotation; becoming less bullish

Another big loss last night, around 50K.

Caused by gold dumping for a 3rd time.

I still think gold is in a correction in a bull market.  Gold is making higher lows, while gold vol is dropping:

Still a bull market till proven otherwise.

The loss isn't really that big actually, at 2.6%.  I'm up 12% YTD.  The only way to handle volatility is to get used to it.  There is no course, training or job that can teach you this. When you ride the bubble up, you get smacked with vicious corrections along the way.  

This time tech and crypto sold off along with gold.  The market is rotating.  Tech (mag7, new AI and old SAAS companies) are out of favour.   Industrials, some cyclicals, and energy are in favour.  I have some short crypto positions, and added some short tech positions on the open last night.  Quite pleased with myself.

Since June last year I've been wildly bullish.  Was often 130% invested.  Now I'm down to 108% (gross) long and 10% short.  Want to continue in this direction.  With so many sectors selling off on the same day - and these are usually unrelated sectors like tech & gold - we may get a correction.  Where VIX goes over the 30s and correlations go to one.

2nd Biggest Daily Loss; Buying Japan

 Last Night:

Losses from gold (39K), Silver (12K), Cooper (9K), Platinum & Palladium (7K),.

What happened?

• Silver got hammered by some guy in China building a massive short position.  If his short position is not hedged, he'll have to cover in a few weeks.
• Gold fell in sympathy
• Crypto and Tech fell.  For tech, both Mag 7 (cause they are spending too much on AI), and traditional SAAS companies (cause they're going to get disrupted by AI).

I don't know if all these falls are the start of a new selldown, as volatility begets volatility, and correlations go to one.  I'm posting this to remind myself what 30-40 one-month forward IV feels like.  Really hope my next blog post has a different title.

My best guess is that gold will recover in a few months.  GVZ has peaked and is now falling, but needs to hit the low 20s:

Retail interest is still strong.  For now, I'll hold it and wait for the bull to continue.

Silver I think will also bounce, but is still too volatile.  For now, I'll hold it and look to sell above $100.

I don't know if tech and crypto will recover.  I'd like to put some tech shorts on during a bounce.  And reload my crypto shorts (MSTR and BMNR).

In the meltdown this morning, I bought 2 Japanese companies (paid link).  They are a growing SAAS duopoly, with a 20% market share together and 20-30% growth rates, and EV/Sales in the low single digits.

This is a fundamental bet, not macro.  Betting they won;t be disrupted by AI, and they can keep growing as the majority of additional revenue adds to their profits.

The meltdown can always continue next week.

Biggest loss in a day

Down over 100K last night.  Its the largest dollar (not percentage) loss I've ever had.

Mostly from metals: 34K from gold, 22K from silver, 15K from Platinum/Palladium, 8K from copper.

Silver down 28% looks like forced liquidation due to margin changes.

Part of this game is learning to deal with the volatility.

I'm still up over 200K this month.

Short term, I think theres a 40% chance that the metals and stock markets go down on Monday (more margin calls), and a 60% chance they bounce.  VIX is still below 20.

Long term, I am still bullish for 2027:

• Will hold my gold, as I'm expecting the bull market to continue.  Maybe after a few months of consolidation.  GVZ dropped a little yesterday but is still in the 40s, it needs to go into the 20s.
• Still buying copper.
• Look to sell my silver in the $100-$200 range.

Started to sell some gold

Gold is up 10% in the past week and 33% in the past month.

Crazy, but not a record.  I'm selling 1/3rd of Equinox.  Its the highest beta gold stock I own, and some of its upside has been removed by recent divestments.

Honestly, I have no idea when to sell.  Today could be gold's top, or it can go to 6000, 7000, or 10000.

There is no quantitive way to measure that gold is "too expensive" or "over owned".

Gold has no fundamentals. There is no "high price" where demand gets substituted or destroyed.

It is going up despite low inflation.

It has gone parabolic, and can go more parabolic. In the last month of the 70-80's bull market, it rose 66% in a month.

COT data tells you that its over owned, and has been over owned forever. GVZ has surpassing its previous peak before the correction in Oct - a mere 10% two-month correction. Even if you sold beforehand, you probably didn't get back in.

‌What can make it keep going up?

• Increased liquidity - especially China and Japan. People buy gold when their currencies are shit.
• CBs holding currencies down to offset their trade surplus wit the US by buying a neutral reserve currency instead of USTs.
• War or threat of war.

What can make it go down?

• Japan stops spraying liquidity (think its from BOJ issuing shorter term bonds)
• USD drops enough so no more trade defecit. Asian CBs no longer need to intervene in their currency markets.
• US successfully delevers, so USTs look more attractive.
• World peace. Old-Man-Xi dies (will happen) and his successor says he won't invade Taiwan (dunno). Iran regime overthrown (likely). Putin leave Ukraine (no sign yet).

Best I can do is look for signs of technical weakness or over-exuberance.  Like:

• Gold bugs telling people to "Have Fun Staying Poor".
• Gold doesn't rise on good news (good news for gold, ie: bad news).
• The price rise gets stupidly parabolic (like in the 70s). Or GVZ makes all time highs.

‌My gut feeling is that we still have some way to go. This is not yet like Crypto in 2021. But in a bull market, your gut feelings are probably wrong.

‌At some point, I have to say that "this is getting ridiculous", slowly sell my gold holdings, and maybe keep a small position just to trade. The trouble is, there are no numbers to tell you where that point is.

Start Selling My Silver

I bought Silver (SLV) eight months ago as a trade from Hedgeye.  Its up 3 times since then.  It was 2% of my portfolio, now its 5%.

When something goes parabolic theres no way to know when it ends.  You'll always miss the top.  Even a local top.  Hedgeye risk manages by frequent trading, but I don't like trading so I need another way.  Don't want to overstay my welcome and become like the sad crypto bros of 2025.

Fundamentally, for commodities, high prices cure high prices.  Demand destruction for silver in solar panels begins around  $100 to $135.  But supply incentives are harder to guess, as silver is a by-product of other metal mining:

Gold (10-15% of silver supply) has hit its incentive price.  Zinc (30-40%) is hitting it now.  Copper is nowhere near.  And of course silver mines (25-28% of silver supply) are incentivised.  So we have 65-83% of silver supply being incentivised.  The supply is not immediate - probably takes 9-15 years for a new mine to open.  But existing mines can increase output.

At $109 silver (tonight), we are at-or-near prices where demand replacement occurs, and at current silver/gold/zinc prices the majority of the worlds silver production is incentivised to produce more.   Neither will happen overnight, but it will happen.  I'm comfortable slowly trimming my silver position.  Sold a quarter of my holdings (pre-market), and will sell more if if rises.  It can still keep going higher.

Trader Ferg wrote a excellent piece about handling parabolic price rises.  Don't get too greedy.  Inner peace.

When would I sell my gold companies?  I don't know.  Gold is a currency, not a commodity, so has no fundamental price targets.

Sold Canadian Natural Resources (CNQ)

I've held Canadian Natural Resources (CNQ) since late 2022 based on excellent fundamentals.  Its an efficient low-cost producer in a safe jurisdiction, with effectively infinite reserves, that pays dividends and buys back shares.

But there's now political risk.  The upcoming July USMCA negotiations were already looking shaky:

• USMCA expires on July 1st.  In preparation, the USTR January report has listed areas of contention: lumber subsidies, diary protection, the digital services tax, imports rerouted from China, and fentanyl.
• 70-75% of Canada's exports go to the US.  Canada has no choice but to bend.  The issues can probably be worked through.  For example, the Digital Services tax has not been collected, and there are efforts underway to remove it from the books.  It depends on the support Carney can get.
• If the USMCA is not renewed by 1st July, it enters a 10-year "zombie state", whereby the three countries have to meet once a year for a "rolling renewal".  CNQ will be effectively licensed to sell 3/4th of their output to the US on a year-by-year basis.

Quick numbers on Canada's oil exports.  Most of their exports go straight to the US through the Mainline and Keystone pipelines.  Canada's total production is 4+m bbl/day.   The only way for them to bypass the US is through the TMX pipeline (890k bbl/day), and that is constrained as the port can only take up to Aframax sized tankers. So for long distances, they usually shuttle the oil to California to load onto VLCCs to China.   They may be able to dredge the port by 2027 to allow slightly larger Aframaxes in.  New pipelines are at least 8-10 years out.

Now Carney has gone to China and lowered tariffs on China EVs.  This is a slap in the face for Trump.  The US cannot tolerate Chinese influence on their neighbour.

I still think the USMCA is going to work out, but there'll be fireworks beforehand.  In between today and July, Trump will unleash tweets about destroying Canada's economy.  Canada is going to get bitch-slapped, then ass-fucked.  I may look to buy CNQ again when Canada rolls over or Alberta becomes the 51st state.