Good Monday morning. We start a new week in the REGJB, with trials set, and the State announcing "victim wants max."
However international events are intruding on everyone's thoughts. So let's dive in.
Oil. There is plenty of oil in the world that has been delivered or is being delivered and is out of the Mid East. Oil companies however use any excuse to raise prices. Today we will see prices rise to the mid 70's a barrel, and we could see 100 a barrel in the future. But most of that will be a non-supply/demand response, with news driving the price.
Iran. Iran has suffered under a religious theocracy for nearly fifty years. Women are beaten, degraded, and imprisoned for not following rules designed to make them second class citizens; intellectuals are scorned and prosecuted (and this doesn't just occur in Muslim religious theocracies, as the battle in Texas and Alabama to force the display of biblical quotes in public places continues unabated), and minorities like the LGBTQ community are persecuted and murdered. In recent months the Ayatollahs have ordered the wholesale murder of people protesting their regimes. The Iranian people, who have a long history of a brilliant and vibrant culture have suffered too long. The religious/criminal leaders need to go. While they led chants of death to America and death to Israel, they are facing their own elimination, and rightfully so.
Financial Markets. We went to 60% cash last week, buying short ETFs QID and SQQQ which are up nicely this morning. But the horse is out of the barn on those, so do not buy them today. As you consider your portfolio remember Warren Buffet's first rule of investing- when people panic, be greedy, and when people are greedy, panic.
If you have assets to deploy, here are our thoughts. Historically, markets have fallen about 1.1% on the first trading day of an international event similar to this one, and 4.4% over the two weeks following the event, and risen well over 10% in the two months following the end of the incident. We can expect those trends to continue. So today is not the day to buy, nor panic sell. There are issues unique to this event, as each event has unique possibilities. Here, the closing of the Straits of Hormuz for a longer period of time could inflict short term damage to world economies. China is the wildcard here as they purchase about 80% of Iranian energy products that Iran exports. China's response is at this time not discernable. It would be extremely unlikely for China to provide military support to Iran. Rather, we expect them to watch the situation closely and quickly re-establish ties with whomever ends up leading Iran in the coming months.
Any short-term Iranian military success will also cause a sharp drop in US equities. By that we mean the damage or sinking of a US naval vessel, or a more successful missile strike against US forces in the region than we have seen up to now. More likely is that Iran will continue to target soft civilian targets of their neighbors, like they have recently done in attacking Dubai's airport (our all-time favourite airport).
Many stocks will be attractive in the coming days, including the ETFs XLK, VOO and VOOG.
We, of course love NVDA below 180, META below 650, APPL below 270, AVGO (Broadcom, which reports this week) below 350 (it's around 320 now. Because it reports this week, this will be our first buy, either late today or tomorrow), and TESLA below 400.
TESLA is the most intriguing company. If you have been listening to Elon carefully, as we have, TESLA is transitioning from a car company to a robotics company where the market to sell or lease a personal robot is literally in the billions. If you're a 30ish ASA/PD/Young lawyer, we would advise to start picking up a few shares every month, as well as buying an ETF with a large exposure to TESLA. If you're older, there is still a near-term horizon which could pay off nicely, as many analysts view 2028-2030 as the time frame when robotic sales will begin to show up in the company's financial reports. TESLA at 400 could be akin to NVDA at 50, or AMZN at 20.
While it takes a significant amount of time, attention, and financial sophistication (like the ability to quicky read and comprehend a company's annual report or the 10K) to safely pick individual stocks (eliminating most of our robed readers) picking a good ETF with a great track record is a safer and easier way to make a smart investment. XLK, a tech ETF, has been our best performing ETF since 2020. Always keep an eye on the expense ratio. A price below .5 is a must. A good ratio is < .25% for a stock ETF and < .10% for a bond ETF.
Final thoughts. Regime change is hard. See, Iraq, 2000-2015. But sometimes it is needed. See Germany and Japan, 1930-1945. The leaders of Iran need to go. The Iranian people have waited too long for the world to step up to the plight.