Is this time really that different? Is the semiconductor supercycle here to stay for years to come? Let's try to answer this question in light of current macro issues that continue to brew. I feel that we are close to reaching an inflection point, something has to give.
There are several danger signs all investors must be aware of.
1. The market is currently treating energy stability as a given, but look at the US strategic oil reserves, we have broken the recent low and approaching 1983 levels of oil inventories in the US.
2. We’ve nuked four decades of energy security in a couple of years.The "Energy Tax" Compression: The DJI is at all-time highs while our physical safety net (the SPR) is at a floor we haven't seen since the Reagan era. The markets are priced for perfection.
3. If oil prices spike— and they will now that the Strait is shut and reserves are at historical lows, there’s no cushion left to absorb shocks—that becomes an immediate, unavoidable industrial tax. Corporate margins don't just "shrug off" a 20% spike in transport and heating costs; they contract.
4. Inflation is baked in, not transitory. We’re past the point where inflation is just a supply chain glitch. Because the SPR is empty, the government can't flood the market to cool down prices. Energy costs are now a permanent, structural component of the inflation basket.
5. The DJI is essentially a house built on an energy swamp; as long as that energy line stays volatile, the index’s multiple has nowhere to go but down.
The alternative thesis? Oil’s "Synthetic Floor"If you’re wondering why oil is the only asset that makes sense right now, it’s because the government effectively turned itself into a long-term buyer. The SPR is at the 1983 Level. The U.S. government has effectively emptied the till. They are no longer the market maker that can suppress prices, they are now the buyer of last resort who must replenish those stocks. This creates a hard price floor. Any significant dip in CL1! will trigger a buy the dip campaign by the administration.
In the 2010s, we had the luxury of low volatility because the purple SPR line was high. That era is dead. Because there’s no buffer, any news out of the Strait of Hormuz or elsewhere sends oil futures into a frenzy. For energy producers, this volatility is the new premium. When the government can’t suppress the price, the market finds its own reality—and that reality is getting tighter by the week.
Not financial advice. Manage your risk according to your strategies. I know what I am doing, what are you doing about all these issues?
There are several danger signs all investors must be aware of.
1. The market is currently treating energy stability as a given, but look at the US strategic oil reserves, we have broken the recent low and approaching 1983 levels of oil inventories in the US.
2. We’ve nuked four decades of energy security in a couple of years.The "Energy Tax" Compression: The DJI is at all-time highs while our physical safety net (the SPR) is at a floor we haven't seen since the Reagan era. The markets are priced for perfection.
3. If oil prices spike— and they will now that the Strait is shut and reserves are at historical lows, there’s no cushion left to absorb shocks—that becomes an immediate, unavoidable industrial tax. Corporate margins don't just "shrug off" a 20% spike in transport and heating costs; they contract.
4. Inflation is baked in, not transitory. We’re past the point where inflation is just a supply chain glitch. Because the SPR is empty, the government can't flood the market to cool down prices. Energy costs are now a permanent, structural component of the inflation basket.
5. The DJI is essentially a house built on an energy swamp; as long as that energy line stays volatile, the index’s multiple has nowhere to go but down.
The alternative thesis? Oil’s "Synthetic Floor"If you’re wondering why oil is the only asset that makes sense right now, it’s because the government effectively turned itself into a long-term buyer. The SPR is at the 1983 Level. The U.S. government has effectively emptied the till. They are no longer the market maker that can suppress prices, they are now the buyer of last resort who must replenish those stocks. This creates a hard price floor. Any significant dip in CL1! will trigger a buy the dip campaign by the administration.
In the 2010s, we had the luxury of low volatility because the purple SPR line was high. That era is dead. Because there’s no buffer, any news out of the Strait of Hormuz or elsewhere sends oil futures into a frenzy. For energy producers, this volatility is the new premium. When the government can’t suppress the price, the market finds its own reality—and that reality is getting tighter by the week.
Not financial advice. Manage your risk according to your strategies. I know what I am doing, what are you doing about all these issues?
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