Market Madness
Trades in Whisky;
SpaceX got off to a good start. On Friday, the shares floated at $135 and are trading in Europe this morning at $212, valuing the company around $3 trillion. Sales for 2026 are expected to be $34 billion, and in 2027, $60 billion. Thank goodness for the growth. By any measure, what we are seeing in financial markets today is madness. For those riding in the fast lane, it is hard to see how it can end well.
The advantages of staying in the fast lane include profits and glory. The disadvantage is the heightened risk, which could bite at any time. Fortunately, we do own some SpaceX through RIR Capital Partners (RCP). The net asset value (blue) has been rising nicely and deserves to narrow the discount.
RIT Capital
When will they take profits? No doubt they are restricted and locked in for a while. The trouble begins when the early investors and staff are able to sell. Believe me, they will.
The disadvantage of the slow lane in 2026 is a dull journey, with modest profits, but the advantage is greater certainty, as the worst outcomes are defrayed. That is why I have chosen the slow lane. During these times, this comes with different challenges, some good, some bad.
Peace in the Middle East
A peace deal is expected to be signed on Friday between the US and Iran, which has reduced the risk of an oil shock. It is a Memorandum of Understanding, rather than a peace treaty, which aims to end active hostilities involving US and Israeli forces in Iran and Lebanon. The Strait of Hormuz should reopen to commercial shipping, as Iranian restrictions and mines are cleared, along with the US naval blockade.
So far, no ships have moved, but President Trump claims oil has been moved along the Southern Highway, along the coast of Oman. Yet so far, only minimal official traffic has been recorded.
Hormuz Tanker Vessel Crossings
My fear of oil shocks is based on historical precedent. The diminishing inventories in the US and China have averted the worst scenario, which would be expected when removing 20% of the world’s supply. To remind you of the last three oil shocks in…
1974
2008
2022
2022 saw a modest 20% correction, but the others were much greater, with stockmarket lows more that 50% below the original shock. In 1974, the low for UK equities was more than 70% down.
Since hostilities in Iran began on 28 February, oil is up just 12% and oil stocks have been flat. The Brent Crude Oil ETP is still up 32% (although we bought later meaning a 10% loss) due to the positive roll yield, which has been highly supportive, and reduces the risk of holding oil for a little longer, while we wait for proof that the market is physically rebalancing.
Oil, Oil futures and Oil Stocks
As oil has fallen, gold has bounced along with bitcoin and other stocks. The portfolio impact is therefore modest because the current high level of diversification balances the outcome. That is the point during times of uncertainty.
The travel industry is also relieved that fuel supplies are likely to return to normal before too long.
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