Make 1973 Great Again

Analogs, Second Order Effects, Bonds, and More

Putting aside all human elements of the ongoing tragedy in the Middle East, my recent realization amidst the insanity underway is we are staring at the biggest opportunity set for macro in decades, and that is quite a statement considering we have already had Covid and Russia/Ukraine. It’s like sitting in cash watching a river of money flow by when all that is needed is to kneel down and put your hands in it. Like noodling for giant cashfish. All you need is your hands and pull. I’m not saying it’s easy — far from it. But I’m saying the opportunity set is immense and almost nobody is around anymore who has any experience trading this. In its quest for high Sharpe/low vol with leverage, the entire asset management industry is set up entirely the wrong way for what is happening. The asset reallocation, capital flow, and outright wealth destruction ahead is of historic proportions. As I told my friend over a year ago, Trump’s reelection meant Make Macro Great Again.

Today I am going to share some loose thoughts on second order effects of the ongoing energy crisis in terms of equities, and then revisit the 1970s. I will start with the latter first.