Skeptical Insight #17

At this point in time, China is in Productive Debt Growth (shown on the left side of the image) and the USA has entered into a phase of money printing (think stimulus checks) and debt restructuring.  

The US’s debt is beginning to strangle its economy as the debt repayments are now out of control. To combat this, Trump has begun negotiating with nations on tariffs to offset the increased debt costs. This is debt restructuring, Trump knows there’s a problem... and a big one.  

Unfortunately, when countries don’t agree, the conflict turns kinetic, and in the case of Iran, it has become that way. It doesn’t matter what story the media wants to make us believe – this is all par for the course. We are witnessing the changing world order in front of our eyes.  

History always repeats itself—just spaced out enough for us to forget, or worse, convince ourselves, “that won’t happen to us.”

At the moment, the US Dollar is the global reserve currency, and the US owns the financial plumbing of the world. The majority of trade deals are completed in dollars because of its stability and liquidity. This benefits the USA considerably – everyone needs dollars. 

As this revolution continues, China has two problems it needs to overcome in order to solidify its global dominance and inevitably gain control of the global reserve asset.  

Liquidity and energy.  

Energy to spur growth (and increase stability) and liquidity of its currency so it can be used as a medium of exchange around the world.  

China imports 13% of Iranian oil, which is the key to solving their two issues. China is trying to strike a deal with Iran to have that oil purchased in Yuan.

First, this would allow China’s manufacturing to grow as they have the energy to develop new facilities and plants, which increases their GDP. Secondly, this would increase the liquidity and usage of the Yuan. 

This is a big deal.  

So Trump lit up Iran. A slap on the wrist, as some may say.  

Here’s what ChatGPT has to say about the situation.  

They’re sneaky little buggers. And they are living rent free in Trump's head. 

Unfortunately, this doesn’t just impact the US, it impacts the Western world as we know it. The US has been propping the lifestyle of the Western world for as long as they've had control of the dollar. The liesures we enjoy today, would most likely not be as enjoyable under communist chinese rule.

Hate him or love him, let’s just hope Trump can slow down the Changing World Order.  

After the attacks, Iran had discussions of closing the Strait of Hormuz, which has and will continue to have impacts on oil transit out of the Middle East. As shown below, 30% of the world's oil supply and 20% of LNG goes through the strait.  

It’s safe to say that closing the strait would turn into a right sh*t show.  

Energy prices would skyrocket, and you’d hate to fill up your car.  

I won’t give it all away, but it follows the life of a hedgie who became a shipping man, owning and operating oil tankers that moved cargo across the globe. 

It paints a picture of today from a previous market cycle—when oil tanker stocks had been struggling for years with day rates around $5,000, only to spike instantly to $150k/day after the Suez Canal closed. This surge boosted shipping company profits dramatically, not to mention the second- and third-order effects across the industry (shipping yards, repair facilities, etc..). 

Some of these oil tanker stocks are dirt cheap right now and are paying dividends.  

These stocks are volatile and have dropped an average of 50% since 2022. There is nothing wrong with volatility as long as you are buying cheap (low P/E’s) and you position size accordingly to sleep at night. 

As an end note – as deep value investors, we find sectors that are extremely cheap and use the narrative as a free option for upside. We don't trade the narrative and hope for price to appreciate based on positive news. 

From my last newsletter:  

If we look closer, we see 5 perfect waves for the A leg. 

We had a little help – the bottom of the C leg came with perfectly timed strikes on Iran, driving fear into the market before quickly reversing.  

Sometimes it feels like we’re all just puppets living in a simulation. 

Now that we have reached the 0.702 retracement, I would expect some consolidation or a pullback on Bitcoin as the buyers get more comfortable with the fast moves in price. I’m not as convicted about how we get out of this range in the short term, but my long-term view is that we break to the upside.  

I am aware that getting out of ranges can be volatile, especially in the headline driven time we are in. One tweet or bombing can throw markets around something silly.  

COIN

Coinbase (COIN) shown below in the candlesticks, has predominantly been following the altcoin market cap (TOTAL2) chart for the last 4 years since its IPO. In the last 2 weeks, COIN is up 54% and is showing a clear divergence from TOTAL2.  

Is the market showing its hand?  

What do the insiders at Coinbase know that we don’t?  

My intuition is that they are expecting trading volume to increase dramatically, and so, as they clip the ticket on trades, they will become more profitable.  

Seems like another positive sign to me... 

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