Happy St George’s Day to you.
My apologies for the late arrival of this week’s missive but I found myself without electricity this morning due to, and I quote, “a fault with the electricity”
Never mind. Here we are.
Everything seems so headline driven and yet contradictory at the moment. With every change in circumstance, especially at the Strait of Hormuz, a different narrative seems to emerge only for it to peter away almost as quickly.
You’ve got to be long oil and gas. Buy. There’s no point. The strait is open. Sell.
With so much geopolitical tension you have to be long gold and silver. Debt, deficits, debasement, de-dollarisation, conflict, central bank buying. But gold and silver aren’t moving. They had their move last year.
Equities make even less sense. You don’t want to be long equities. You need to reduce risk. World War Three is coming. And the S&P 500 has just broken out to record highs.
So you end up with this strange situation where the stories are compelling, but the price action is inconsistent. Narrative is not confirming price. Price is not confirming narrative.
That’s usually where mistakes get made.
You feel like you should be doing something. You look for reasons to act. You react to headlines. You convince yourself you’ve spotted an opportunity. And then the move reverses, or fades or never quite follows through.
These are the environments that chop people up. False breakouts. False breakdowns. Strong opinions built on weak signals.
That’s why I am such a big advocate of the Dolce Far Niente portfolio.
Sometimes doing nothing is the best policy. In fact, often.
We had a position in oil and gas so we didn’t need to panic when the bombing of Iran began. We had a position in equities, so even though I was arguing this would be a typical second year of a presidential term, with no meaningful movement until the final quarter, we had exposure to this latest (probably stimulus driven)rally in the S&P 500 to new highs. You can also be wrong, as is often the case when you are a commentator - and it doesn’t matter.
If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
What am I doing with my own money?
Not that much to be honest.
I’m looking around and I can’t see any obvious mispricings. There are areas that look interesting. Software looks attractive. Bitcoin, which has increasingly behaved like a proxy for that part of the market, is quietly ticking higher again. Chemicals look cheap.
Copper too is looking attractive. The long-term story is obvious: electrification, underinvestment, constrained supply. What is notable is that the miners are starting to behave better than the underlying metal. That is often where these moves begin. Our new copper play is already up 20% in barely a fortnight.
There is a Namibian copper story I am looking at too. More on that soon.
Nor am I trimming anything.
There is no euphoria to sell into. No obvious excess. And equally no panic to buy. So positions are left alone.
There is one area where I do have a clear opinion, and that is oil and gas. But my decision is to hold existing positions rather than add new ones.
The market seems to be treating the Middle East situation as temporary. I’m not convinced that’s right - at least not the effects on oil and gas, and I’m staying long, despite the temptation to take profits. I think we are in a new bull market.
Positioning in the sector still doesn’t look extreme. Sentiment is not euphoric. Oil could drift lower if tensions ease and the market continues to treat events as passing rather than structural. But this feels more like the beginning of a bull market rather than the end.
The same goes for gold and silver - mid-cycle pause is my prognosis there. I think bitcoin probably outperforms them over the next 12 months, but If I’m wrong, it doesn’t matter because I own both.
Doing nothing feels like inaction. It isn’t. It is a decision not to play a game where the signals are unclear and the odds are not obviously in your favour.
Right now, that is where I am.
If you’re interested in my three largest oil positions, you can find them here.
Until next time,
Dominic
The latest edition of Atlas Pulse is out now. In my view it’s the best gold newsletter out there and it’s free. Read it here.
