Markets are up big on… no substance at all

Markets are up in a big way today, and that makes no sense. We have received nothing but negative news today from the White House regarding the Iran war. The idea of "leaving the Strait shut" indefinitely is chilling should the US decide to pull out of this war suddenly. That would prolong an energy crisis… essentially indefinitely until the US was forced to "finish cleaning up" or until another powerful coalition from the West did so. In any case, this is not positive news for any US industry you may work or invest in.

First off, as a level set, the highly developed world in which most of us that write or read posts on this platform live is completely dependent upon cheap, free-flowing energy. There is no "alternative" or "workaround" to that condition. This is not catastrophizing, or alarmist, or meant to scare people or hype up short sellers. None of that. It is simply the truth. Business models we have come to know, love, and invest (cumulatively) trillions of dollars in will not be profitable in a world with 150+ per barrel of landed oil. That is not workable, and unless/until the current, enormous energy shock is fully put behind us, there is no reason to think that markets should have a "bright green bounce" right now.

Additionally, there is no concrete reason to believe that what the Trump admin. says about the war (that they will withdraw from the conflict even as tensions rise with our regional allies every day) is true. There are many reasons to think that this announcement was meant to do nothing but give markets a relief bounce and a "saving face" news cycle, before more of the same plays out over the next months.

Many of the costs and harms done to our economic systems and energy/logistical networks that span the globe are not calculable today. It is a vast, unknown box of nasty things which we will be having revealed to us on about a daily basis for the coming months. The bond market reflects the magnitude of the problem much better, and that will prove to be a massive "gotcha" to relief rally traders rushing into markets at this stage hoping to make a quick "turnaround" profit.

Long term, this almost definitely is a buying opportunity. Valuations almost have ceased to matter, and so I'm not going to lecture anyone on waiting for valuations to adjust to a new energy cost reality, etc. HOWEVER, pricing does reflect directly the availability of capital. The Fed is already signaling to us that they may raise rates, at least once this year, to account for the inflated energy and supply-chain costs that will work their way into every single corner of our lives. Rates moving higher ALONG WITH the rest of our current economic headwinds will mean a recession, potentially a deep and lasting one. This is reason enough for me to "disbelieve" that today's seeming turnaround rally means anything. I think that we are only a few bad headlines away from seeing major indexes below their trading levels when Trump took office.