I Just Work Here

If you were opening this newsletter in anticipation of getting some advice on trading and investing during the Iran war, I’ve got nothing for you. I don’t pay attention to the news; I just trade the charts. I guess we blew up some island near the Strait of Hormuz? See, I don’t know what I am talking about.

Speaking in broad terms, though, war tends to be good for commodity prices. This war is clearly positive for the price of oil (duh), but it’s leaking into agricultural commodities as well, since a lot of fertilizer goes through the Strait of Hormuz. Corn, wheat, and soybeans are making new highs; and metals prices already went up before the war. If you’ve seen a chart of the commodity index lately, you know what I am talking about. By the way, commodities prices are now up over 30% from the lows in September 2024.

I have written about commodities several times in this newsletter in the past—I think they are going up, and I thought they were going up before the war started. I thought that commodities were very underpriced relative to financial assets, reaching levels of historical cheapness never seen in history. As I mentioned in Chart of the Week on Tuesday, I’m long for the next 10 years.

The war has also had a deleterious effect on emerging markets, which have been in a nascent bull market. Emerging markets usually do well with a weaker dollar, and the US dollar just put in a new high last Friday because of the war. I am not too worried about emerging markets here, for much the same reason as commodities—they had reached levels of historical cheapness relative to US markets, and it was my belief that the valuations of the two would begin to converge. That was happening… up until two weeks ago. Again, I’m long for the next 10 years, and if you haven’t yet allocated to emerging markets, now would be a pretty good time.

That is the boring financial stuff, so… 

What About the Morality of this War? 

Should we be doing this?

Last year, I was visiting my high school in Connecticut, talking to one of the development people. I sussed out pretty quickly that she was not a Trump supporter (nobody is, in that part of the country). At the time, Trump was beating up on Jerome Powell, doing the thing that he usually does, destroying Fed independence. 

I told her, “Look, it doesn’t really matter what your opinion on these things is; you just have to trade the markets as they are.” In fact, having an opinion usually works against you because you are trading the markets as they should be, not as they are. In that particular case, I disagreed with what Trump was doing with the Fed, but it didn’t matter what my feelings about it were, so I was getting exposure to short-term interest rates going lower. 

If you are the type of person to get jammed up on politics, if you are watching cable news turned up to 11, if you are getting into political fights on Facebook or Twitter, you probably won’t make a good investor. You are not trying to figure out what is good or right, only what makes you money, and sometimes those are two entirely different things altogether. Take it from someone who has held gold for 20 years. Yes, it is working now, but for many years, it wasn’t. And upon reflection, I was holding it for my political beliefs more than anything else.

As a human being, I would like to end the war as quickly as possible, to prevent the loss of life and things like shortages of food and medicine. As a freedom lover, though, I do not want the war to end before the job is done because the Persian people have been through so much and deserve a better government. As a trader and investor, the war has created numerous opportunities in the markets, and I am actually relieved to not be trading a market that was simply made up of tech stocks that went up every day.

So, I have mixed feelings about it. But as investors, our primary purpose here is to make money—and nothing else. Full stop. Some people think you need to predict the outcome of the war to make money. Not true. Even if you had tomorrow’s newspaper today, I doubt you could make money from it. The goal here is to trade sentiment and the charts—that is where the answers lie.

Jared Dillian, MFA

P.S. Need some new music to listen to? Try my new mix, “Hypnotic,” on SoundCloud.

P.P.S. If you’re in the Nashville area, I’ve been invited back to Night We Met on Saturday, April 11, in support of Layla Benitez. I’ll be playing the closing slot, from 1:45 am–3 am. Yes, it is very late. We are all allowed a late night once in a while.