Middle East in Disarray, California in Pandemonium
142: The Weekly Selection
Introduction
Investors,
Welcome back to another iteration of ‘The Weekly Selection’, where I cover my thoughts on the market, what’s upcoming and some other little nuggets for your enjoyment.
Check out the latest Podcast at the link below, as well as some other socials:
Indices
Last week ended with a bang, literally. Israel fires precision missiles, taking out Iranian leaders and strategic military positions. This theme escalated into the weekend, with Iran returning fire with a barrage of missiles of their own, some hypersonic.
it’s become apparent that this long brewing conflict is coming to boil, however it’s important to sift through the headlines to find the real impacts on markets.
First, I analyze how markets have reacted to similar events over the last few years. In my opinion the biggest conflict on the map is still Russia/Ukraine as far as true market impact goes. Both countries are top producers of key resources, making them strategically significant in the global commerce landscape. Israel and Iran, despite being allies of world powers, do not possess market shifting capabilities in the event their natural resource economies are taken off the board.
A brief example of this line of thinking is my 2022 fertilizer trade. When Russia invaded, Ukraine’s focus shifts from economic growth and stability to national defense, effectively taking their exported resources off the board. As a major player in the agriculture and phosphates production space, this immediately sent prices soaring as the rest of the world adjusted to the supply shock. Similarly, as the EU and US cut off Russian trade, countries like Germany who were 90% exposed to Russian natural gas needed an alternative fuel source, which they found in coal. The impact on price here was significant enough to create a durational trade opportunity.
To bring this back to the current conflict, many are under the assumption Iran is a major oil player, which is misguided, in my opinion. While yes geographically their positioning is significant, actual export numbers suggest less impact in the event of all out war between the two countries. If anything, the probable “spike” in prices will represent a better short opportunity than anything.
Furthermore, there is an assumption that Iran has the capability to shut off the Hormuz Strait, effectively culling transport through the area. Once again, I believe this confidence in Iran is misguided, as we already have reports of ranking officials fleeing the countries for western sanctuary.
My social media feeds are filled to the brim with input and opinions, and in times where it feels overwhelming it helps me to go to the raw data and weigh impact. From my limited experience trading commodities through conflict, I do not believe this conflict to be a major cause for concern unless the much larger allies of these warring countries step in to a degree that’s cause for the erasure of the term “proxy war” as we know it to be in the moment.
If we take a look at price through all of this, SPY doesn’t look terrible, just 2% off the all time high from earlier this year.
Individual stocks and themes continue to rip all time highs, which is a good sign of a healthy market.
GLD 0.00%↑ Gold is also performing well, indicating heightened uncertainty in markets. I expect this to continue.
Opportunity
At this point it is almost laughable to continue to talk about the same few stocks on this publication, but I really do believe them to be the best names to own over the last couple years since Ive started posting.
Nuclear/electricity rips higher despite the global madness. If AI is what everyone thinks it is, we need more power! I believe it to be that simple and cause for the creation of a ton of value. SMR 0.00%↑ VST 0.00%↑ OKLO 0.00%↑ and related names surge higher despite broad market pullback last week. Here’s the SMR 0.00%↑ breakout below:
That’s about as clean of a high tight flag as were going to get in this environment, and it worked beautifully.
Moving on down into the deportation trade, I introduce a new arm this week: riot trade. It goes without saying, there is unrest in America. Recently, protests have sprouted up under the slogan “No Kings”, which despite being pretty funny, is quite serious and police forces nationwide are attempting to de-escalate the situation. The same names I liked for deportation are in play for this situation as well: AXON 0.00%↑ BYRN 0.00%↑ OSIS 0.00%↑ GEO 0.00%↑.
BYRN 0.00%↑ on display here, nice tight look under all time highs. Breach of $32 and I will likely get involved, especially if conflict escalates domestically.
On the cybersecurity front, there are 0 cracks in the pavement. CRWD 0.00%↑ nudging ATH, CYBR 0.00%↑ close second, FTNT 0.00%↑ still in its range ready to go.
Note the very clean action below previous ATH. This is exactly what you want to see out of a name. CRWD 0.00%↑ is positively impacted by global headlines and news, so as far as a defensive hold goes, this is it.
In additional to traditional markets, Crypto looks OK here. Its not my favorite look, but the relative strength and potential is appealing. Will watch it if it breaks new highs, as we know when BTC moves, it really moves.
That’s all I have for you today. Happy Fathers Day to all the Dads out there, and be sure to let them know!
