The question I keep getting asked right now is some version of: “Chris, with everything blowing up in the Middle East...what are you doing with the portfolio?”
The answer is nothing.
Not because we’re frozen. Not because we’re paralysed by uncertainty. But because we positioned for this years ago. The bombs flying don’t change the thesis. They confirm it.
Let me explain.
Every time there’s a geopolitical shock, the financial press reaches for the same label. Black swan. Unprecedented. Nobody could have seen this coming.
It’s codswallop.
A black swan is a genuine surprise...an event outside the range of normal expectations with no historical precedent. What we’re watching unfold right now is none of those things. It is the logical, sequential, boringly predictable result of choices that have been made over many years.
When you have Western governments running deficits that would embarrass a banana republic...when you have a decade-long collapse in capital expenditure across every extractive industry that actually matters...when you have de-dollarisation accelerating quietly while the financial press argues about quarterly earnings...when you have geopolitical fracturing that anyone paying attention could trace back years, not weeks... this is where you end up.
Wars. Supply shocks. Instability.
These things weren’t black swans. They were on the schedule. The “black swan” framing is a scapegoat...a convenient way to avoid admitting you weren’t paying attention.
Let’s talk about the actual implications, because there are a few layers here.
The obvious one is energy. The Strait of Hormuz sits at the throat of roughly 20% of the world’s oil supply. That’s not a narrow accounting footnote...it’s an artery. And it’s not just crude oil. LNG, ammonia, fertilisers... the ripples go well beyond what shows up in the WTI price on any given day.
Now here’s what the supply bears consistently get wrong. They assume that if the conflict resolves, supply rushes back. It won’t. Iran is already near full capacity. The only countries in OPEC with any meaningful spare capacity at all are Saudi Arabia and the UAE...and it wasn’t much even before any of this. US shale, which for years was the world’s marginal producer and swing supply, is now seeing year-on-year production go negative for the first time in history. The basins are maturing. There is simply no cavalry coming.
In other words, supply was already structurally constrained before a single missile was fired. What’s happening now is an accelerant on top of a fire that was already lit.
But I think the more important shift...the one that doesn’t get discussed enough...is the move from just-in-time to just-in-case.
We’ve been living in a world optimised entirely around efficiency. Why store anything? Why maintain inventory? Someone else could store it. Supply chains were frictionless. You could outsource everything, reduce your cost base, and trust that whatever you needed would arrive on demand.
That world is ending.
Japan has roughly 250 days of oil in storage. Sounds like a lot until you consider how completely dependent their entire industrial base is on that supply. And Japan is not unique. Every country in the world is running some version of this calculation...and most of them are going to come to the same uncomfortable conclusion at roughly the same time.
The shift to “just in case” means strategic stockpiling. It means nations and corporations hoarding energy, food, and critical inputs in ways they haven’t since the Cold War. That is structurally inflationary. Not the demand-pull inflation the central banks keep confidently misdiagnosing. Supply-side inflation. The kind that rate hikes don’t fix and that fiat currency is uniquely terrible at handling.
Which brings me to the denominator.
While everyone was watching the missiles, we were watching the war bill. A few hours in and the costs were already north of $2 billion, burning through roughly $9 million an hour. These things need to be funded. And they will be funded the same way everything gets funded now...deficit spending, bond issuance, and ultimately printing.
Deficits up. Bond supply up. Rates up. And as rates go up under these conditions, you get stagflation...not a soft landing, not a gentle cooldown, but the ugly combination of rising prices and a slowing economy that crushes financialised assets.
Bonds don’t do well in war. Cash doesn’t protect you when the currency is being debased to fund the fighting. Going “risk off” into cash in this environment isn’t safety...it’s a slow-motion guarantee of getting hosed.
So when people ask me if we’re “reducing risk”... I’d ask them: relative to what?
Our portfolio is roughly two-thirds positioned in energy-adjacent themes...coal, natural gas, oil and gas services, producers, tankers. The rest spans precious metals and emerging markets, with short positions on the Nasdaq providing both protection and upside in the event of a meaningful unwind in the most overvalued corner of global equities.
That short is not incidental. The whole AI-driven Bag 7 thesis is largely a revenue-free business model dressed up in extraordinary valuations. As stagflation bites and cost of capital rises, gravity isn’t a risk...it’s a schedule.
On the geographic side, the emerging markets case hasn’t changed, it’s strengthened. Argentina, Chile, Brazil...these are assets trading at valuations that would make a value investor weep with joy, in jurisdictions where the relative setup looks extraordinary compared to the priced-to-perfection developed world. We’ve been up around 50% over the last twelve months in this positioning. And I think we’re only just getting started.
The hardest thing about being early...and we have been early on some of this, make no mistake...is that the market eventually forces even the sceptics to acknowledge what’s happening. We’re in that phase now. The themes that have been unloved for years are coming back into vogue. And if you waited until now to notice, well...the asymmetry is still there, but it’s smaller than it was.
That’s the lesson worth taking from all of this. Not “what do I do now that the bombs are flying?” But “what did I do for the last five years while the conditions that led to this were building daily, weekly, monthly?”
The short term is unknowable. The long term, when you look at historical cycles honestly, is more predictable than most people are comfortable admitting.
As always, do your own research. Nothing here is advice.
