关于石油，你需要知道的一切

What’s up, Jonah?

Hey, Avi. Welcome back. How do you feel?

Welcome back. I’m glad that you’re feeling better. It’s crazy. I’m going to send out the most baity tweet I can think of right now: “Live with former Vitol partner Jonah Van Bourg.”

Does anybody even know what Vitol is?

We are live with former Vitol partner Jonah Van Bourg to talk about the oil market. Famously, Vitol is the firm featured in the book The World for Sale. That’s a clickbaity title right there. Is Vitol the oil-trading firm in The World for Sale—the firm that silently runs the world, the SPECTRE Bond-villain organization?

The World for Sale. The SPECTRE.

The reality is more like Vitol is the overwhelmingly British secret society of oil movers and shakers. Oh, wow. I really fucked it up at the end there.

It’s okay.

It’s good, Jonah. I have to say I’m glad that you’re feeling better because I wanted to start off this podcast with a little bit of a spiel, just because I personally almost died on Saturday, and that was a crazy experience.

Really? At least you got the Flood podcast in before you almost died.

I was thinking about this: Thank God I got that Flood podcast in before I almost completely nuked myself.

Took us long enough. I want to hear the story. What happened?

It’s not even an interesting story. It’s really simply that I got T-boned at an intersection by a car going so fast. I’m in Puerto Rico right now, and there are all these lights that are out, so some people just barrel through them. I didn’t check fast enough. I thought the car was going to stop, but it didn’t. God, it hit my Bronco.

Technically, it was going so fast that we collided at a perfect 90-degree angle. It only hit the front of my car, but if I had been going even a little bit faster, it would have hit the passenger side, and it would have been over for me.

This goes out to all the people—today, tomorrow, yesterday, whenever. If you’ve ever felt your trading losses pile up, or you feel like you’re in a bad financial state, or you generally feel like your life isn’t going that well, just remember that your health is number one. My life was going pretty well up until that moment, and it really makes you think about how easily something can be taken away from you.

You start to appreciate all the little things, like getting on the podcast and talking to you, Jonah.

It’s good to see you again. I’m glad you’re here and not dead. How’s your Bronco doing?

The Bronco’s completely totaled.

Oh, my God. So it was a really serious accident, then?

Yeah, no, it was bad. It was bad.

Now that you’re okay, can I ask—you seem like you just walked away from that thing. Were you in shock? Were you at all injured? Any scratches?

It’s kind of interesting. I don’t know if any of the listeners have been in a car accident, but this was actually the first car accident I’ve ever been in. It was really interesting to me because people always say time slows down when you get filled with adrenaline, and I never really understood what that meant, but it’s true.

When you get impacted from the side, you hear this massive crunch, and you start to taste this almost metallic feeling in your mouth. I don’t think it was blood. It was almost adrenaline. It was this feeling that takes you over, and you start looking around and realize you’re watching the car move in slow motion.

You look to the left and see the airbag deploying in slow motion. You look to the front and see the airbag coming at you. It’s the most insane thing I’ve ever experienced in my entire life. Everything literally slows down.

Then you have to make a quick decision. The first thing I did was pull down the mirrors and look to see if I was bleeding anywhere. How badly had this impacted me? Luckily, I wasn’t bleeding. The worst thing that happened is I think I broke my pinky, but other than that, I think we’re actually good to go. I feel fine.

Was it the airbags that saved you?

Yeah. It’s also—you know what? It’s funny. It made me really think about all of the small things that exist in your day-to-day life that you just take for granted, like the fact that we developed technology to save you in a car crash. It’s called the airbag, and you don’t think about it 99.99% of the time.

There are people whose entire jobs are literally to create this thing to save you. You continuously iterate it to make it safer and safer and safer and safer. Think of how many lives they’ve saved. The person who invented the airbag literally saved my life. How insane is that?

It really puts into perspective the work that we do. It is phenomenal work if you give back. If you make a lot of money trading, if you’re an extremely talented person, if you’re an investor, and you do not donate, you do not put your money to work, you do not give to charity, I don’t know what you’re doing with your time.

I genuinely don’t understand. I think it’s extremely important, because the reality is that our day-to-day jobs don’t necessarily do anything for this world. But what we can do is, if you’re intelligent enough to make money in the markets, you’re probably intelligent enough to figure out how that money is best put to use.

What charity should it go to? What things should be funded? What research should be funded? You, the trader and investor, are probably smarter than most of the people who gave you this money, that you took this money from in the markets. Maybe it’s up to you to figure out where to put that money in a smart and efficient manner. That’s just my take on it.

I was really thinking about this recently because there are so many things out there—the people who design the cars, the people who design the airbags, the people who design the crumple zones. They’re out here saving lives.

It’s crazy, isn’t it? I remember thinking, when I was at Vitol, what did we earn per hour? Everybody on the desk would do the calculation. We’d laugh about it at the pub. We’d be sitting at lunch saying, “How much do we earn during lunch?”

I remember one guy—the one who was earning the most out of all of us, a guy my age. Now he’s retired with hundreds of millions of dollars and has started his own foundation. He’s a very respectable character. He was like, “My brother-in-law’s a doctor, and he earns less than $100,000 a year. He’s literally a surgeon.” In the UK, they don’t get paid that well. It’s a socialist health system there.

I’ve obviously started giving to charity pretty substantially now. It’s also crazy: You’re not the only person I know who’s gotten T-boned this week. My dear family friend is in her sixties.

Seriously? Somebody else got T-boned this week?

Yeah, in the Valley. Our dear family friend is the dean of a school. She drives a 2003 Kia, a real beater, and doesn’t earn a lot of money doing God’s work, teaching kids.

She got T-boned at some insane speed and walked out of that thing without a scratch. Why? Airbags. Freaking crazy. Those things really work. The car was a crumpled-up mess. The jaws of life had to rip it open for her to get out, and she didn’t have a scratch. Unbelievable technology.

The metallic taste, though—no one else has ever talked to me about that. Are you sure you’re not a cybernetic organism sent back through time by John Connor to save humanity?

I’m fairly certain I’m actually—Is that part of all the near-death experiences? That’s the only thing I’ve ever heard that’s completely out there. Are you sure you’re not a Terminator?

You get filled—I mean, there’s a taste and there’s a color that I felt.

Oh, what?

It’s like this thing that just filled my entire brain, and I couldn’t stop tasting or thinking about it. I just remember these massive flashes of light, and then my entire mouth started tasting metallic. I looked it up, and sometimes people say it’s blood, but there was no blood.

I don't know how to describe it. There was no blood in my mouth. It was just kind of crazy.

Dang. [snorts]

But it was really weird. Yeah, I guess I don't know why. I looked it up. Sometimes it's just the adrenaline that makes you feel that, but I couldn't find anything on the color. So I was like, “What the fuck is going on here?”

I always knew you were unique and special, Avi. That's crazy. Holy moly.

I don't know what you're talking about.

1. Are Tax Havens Worth It?

Glad you survived. Also, I have a rant on this. Now that you're okay and that we can learn lessons from this instead of mourning your death or injury, thank God you're all right. Tax havens—they're not worth it, right? Dubai, missiles are raining down upon it. Also, even if they weren't, it sucks ass.

Miami, it's like living in a grundle or a nutsack. Why would you do that to yourself? Andorra, there's nothing there. Monaco, pretty cool, actually, but it's way too expensive.

No, Monaco's great.

Monaco might be the only one.

Monaco's great. But hold on, I'm also in Puerto Rico.

Go ahead.

Puerto Rico, it's a third-world country. You're living in Cuba but without communism. First of all, why are the traffic lights out? Second of all, why is this guy driving at, whatever, 40 miles an hour through an intersection with no lights?

Of course it wasn't. All right. Well, all right, you got T-boned on International Women's Day. We'll just leave it at that. This is crazy. This is crazy, Avi. Tax havens are not worth it. Move to California. Move to New York. Pay the taxes. Enjoy the beauty and civilization and all of the benefits that come with it, including electricity, running water, and weather. What is it with these places?

Dude, one thing I'll say about Puerto Rico is that I do love this island. I genuinely love this island from the perspective of vacation. And I did live here—I lived here for a solid 4 years. My advice to anyone who doesn't have a family and is under the age of 30 is to move to Puerto Rico. And the reason—the reason is because—

Just don't cross the street.

Just don't. Check both ways when you cross the street, buy a safe car, and be really careful when you're driving. I mean, to be fair, this is the first accident I've ever gotten in Puerto Rico. But this is important for traders and investors. Your biggest expense is not food. Your biggest expense is not your girlfriend, not your wife, not even your house—it is taxes. Your biggest expense every year is taxes.

If you can move to a place when you're young where you can get that compounding effect, I think that really sets you up for life, personally. And I do think that it actually is worth it if, let's say, you start a company when you're 23. Maybe you start a company when you're 24. Three years in Puerto Rico—that compounding is worth a lot. And it's not that bad. You only have to spend 6 months out of the year here. It's not that bad.

Where I think it becomes bad is when you have a family and you need to raise children, send those kids to school, and want them to be integrated into society. Maybe they can spend the years of 0 to 5 in a tax haven, but they're never going to get real-life experience in a tax haven in the same way. They're always going to be outside where it's really happening.

And so I do think that there is a huge benefit to living in tax havens, especially—by the way—especially if you think that you're going to make a lot of money. If you start a company or have a massive investment that's going to pay out and you're not sure if you're going to replicate that in the future, maybe you want to take a break. I think it makes sense to move to a tax haven.

I agree with that in general—the philosophy of trying to accumulate as much capital as you can at a young age because of the math of compounding, and then a tax haven could be a really optimal way to do that if you have one big windfall. If you have a 2021 in crypto, you're early in crypto, and then 2021 happens, or you start a company and you want to exit, I totally agree that it makes sense to go. I know some natural-gas traders who did this in the U.S. Virgin Islands. There's a similar tax haven there for Americans. You did it in Puerto Rico.

For me, I didn't really have that big one-off windfall. Instead, I did a thing where I just agreed to live basically on the North Pole in a giant pile of wet dirt called England, which isn't necessarily what I would have chosen otherwise. I probably would have stayed in New York City in order to amass a bunch of money in a tax-efficient way. So I sort of did the same thing. I basically get it in the door early because what they say about starting a company is you can't do it later in life because you risk your family.

It's hard to move your family into a smaller house or declare bankruptcy in your 40s and 50s when you have children. You got to do it young when you have nothing to lose. That's true, but there's a big asterisk on that. You can take all the risk you want in your 30s, 40s, and 50s and do incredible things with your life if you have a cushion, right?

So getting that cushion, whether it involves sucking it up and moving to Puerto Rico or sucking it up and moving to the land of fried blood and fucking disgusting aged-cheese eaters over there in England—it's something to do, right?

Thank you so much. Thank you, thank you, thank you, thank you, thank you, Jonah. I appreciate you talking about this.

You're welcome. Basically, do what you got to do to get the money in early. I think that's generally sound advice. I just think we have to qualify that it's not the only way to do it. It's not like tax havens are the magic formula. If you're going to earn it a little slower, like I did, go to where you have to go.

Singapore is a nice tax haven to earn money, too. Nice in the sense that you can earn a lot of dough there. It doesn't work for Americans; it works for everybody else.

[laughter] It's just too hot.

Yeah, that's kind of the issue with being in America: it's basically impossible to save money on taxes unless you move to Puerto Rico. That's really it, right? Unfortunately, that's kind of the whole thing. Because every American still has to pay federal taxes, which isn't obviously ideal.

2. Oil’s Spike Over $100

But I think we've now got almost 2,500 people on the live looking at us. I think we should probably talk about the elephant in the room, Jonah.

Yeah, let's talk about it.

Which is that you were very, very, very wrong and very, very, very right, in sort of the most classic trading way possible.

Yeah.

And I want to set the frame. I want to set the scene and say that when the war first broke out, the stance was, “Oil is going to be a fade.” And I think the issue with this is that a lot of people thought that. Then they got massively squeezed. Now we're back to where we were before, but that's my understanding of the situation.

But what's really going on with the oil market? I think what people want to know is, why did this massive spike happen? Why is it also still a fade? And what's going on in the physical oil market right now?

So I faded this war. But I didn't fade it with oil futures in my PA because I'm not loco, right? I bought stocks and Hyperliquid when they were down, right? That's how I faded it.

I sent out a couple of nonchalant tweets: “This is a massive fade. Fade this. Nothing ever happens.” There are a lot of people out there on the internet who are very angry at me. I had to block another 50 people online. I don't understand why.

Lesson 1: if you are trading oil futures on the basis of my tweets, you are not going to make it. This is not how you're supposed to trade. You're supposed to be an independent thinker. I'm not your dad. Do your own research.

If I tweet, “This is a fade,” and you go and sell CL1 or BZ1, or whatever instrument you trade, you are getting it wrong, okay? To be fair, I did think that oil futures were a fade, but I'm also aware that the negative convexity of that trade is so extreme that I could get financially wiped out trying to make 20% on my dollar. So I didn't do that because I've been in this game long enough.

I bought stocks when they were down. I ate dirt while they went down further, and now I'm back in the money. It's literally that, right? That's a safer way to do this PA. So now let's go into the dynamics of what actually happened.

I think the commentary online tends to suggest that because there's a war in the Middle East, you cannot be short oil futures. You cannot think this is a fade. This is the end of days, right? This is it. 30% of the world's oil goes through the Strait of Hormuz.

It's a little bottleneck that separates the Arabian Gulf, as the Saudis call it, or the Persian Gulf, as the Iranians call it, from the rest of the world. Within that bottleneck, Saudi Arabia has an East-West pipeline. They can send oil west across their landmass to the Red Sea, but that pipeline only does—I forget—3–4 million barrels a day. Most of that oil is still coming out of the Gulf, right?

The big oil fields go into the Gulf. Iraq, a lot of Iran, the UAE—Fujairah is there. This is a big transit point for all these major oil-producing countries. I forget the exact geography of Oman and Kuwait, but it's a lot of oil, right?

So basically, when there's a war that involves Iran, as there have been several recently, Iran's government will threaten to shut the straits. How do they do that? They can shoot missiles at boats because you can take a pea shooter and hit a boat from Kharg Island, which is where a lot of Iranian oil infrastructure is, or just from the coast of Iran. It's not hard; it's right there. I forget how many miles wide it is. It's like 10 or 15 miles wide.

So basically, there are a lot of boats trapped in the Arabian Gulf right now, and they can't get through. But my point here, and why I think this is a fade, is that this is not a problem that has spiraled out of control as a result of actions that the actors involved are unable to reverse out of. And what I mean by that is, the only entity in this war that's getting absolutely daddied and can do absolutely nothing about it is Iran, right? And Iran is the threat.

So who else is involved? You've got the United States and Israel. I'm sure the other Gulf states are quietly participating, helping, and offering their air bases and other forms of support because they want to get their oil out to the market, too. They don't want to have their oil sit there unsold. No effing way.

I mean, obviously, it benefits them a little bit to have oil prices skyrocket to $200 and then save the world, or pretend to. But in general, they want to sell their oil. They also don't want $200 oil and EV adoption to pick up. Because at the end of the day, this is a commodity, and high prices are the solution for high prices.

So I'm sitting here watching this, thinking to myself: Okay, Trump just started a war with Iran. Surely he's aware of the Strait of Hormuz and the threat to global commerce. Surely he's aware—and/or somebody in his government is aware—that if the Strait of Hormuz is closed for a week, whatever, and if the Strait of Hormuz is closed for a month, oil trades up to $300.

The entire global economy shuts down. It's a Great Depression. There are lines around the block at every gas station. It's like 1979 all over again. He's aware of that. Call him crazy, call him an [expletive]. He's not—he's not like Biden. He's not brain-dead.

So I'm sitting here watching this, thinking, obviously not. Well, first of all, not a single boat has been hit by a missile, so let's just set the table with that. And I didn't expect there to be, because you watch the way that the United States attacked Iran with Israel.

First it was the B-2 Spirits, right? The stealth. Then it was the slightly less stealthy ones that still go above the speed of sound. And eventually, the bombers they're sending over Iran are these World War II-era B-52 bombers, just lighting up Iran.

Their air defenses are gone, and surface-to-air is kind of the same technology as surface-to-surface. There's really not a lot of firepower that Iran has left to hit boats. And even if they did, they probably wouldn't, because most of the boats they'd be hitting would be from the Arab countries that they're hoping would beg for an end to this.

So there's no kinetic or military closure of the Strait of Hormuz. The only closure is a financial closure. It's an insurance-company-driven closure. Having worked at Vitol, Vitol is what's called a charterer, right? They don't own the boats; they charter them, they rent them.

So if you're a charterer, if you're Vitol, who's going to pay for it? There are two types of ways that you can buy oil.

No, no. This is now an oil podcast. And then we can talk about all the other trades, which there have been a lot of, but for now, we're talking about oil.

Okay, so there are two types of ways that you can buy oil. It's FOB or CIF. FOB stands for free on board, and CIF stands for cost, insurance, and freight. It's basically: do you buy it with all the shipping and handling included, or do you just buy it at the port for the price of the oil and then handle the shipping, insurance, and all of that stuff yourself?

CIF means that the buyer is responsible for the insurance. FOB means that the charterer is basically responsible for insurance. Either way, somebody's paying for the insurance, and no insurance company, because of its risk aversion, is willing to insure a voyage across the Strait of Hormuz right now.

So if you look at the price of oil on your screen and you see $88, that's all right and good, but a refinery in Asia looking to buy a cargo of Iraqi oil right now is going to pay $88 plus another $88 of insurance. Economically impossible. It doesn't work, right?

My thinking was: Trump started a war. He's aware of this. The United States Treasury has billions of dollars that it could use to insure these boats and be the insurer of last resort. That is a light switch they could just turn on if they want to, if they don't want the global economy to grind to a halt in a 1931-style apocalyptic unwind of 100 years of progress, right? And I'm like, why wouldn't they do that?

So I'm watching this, thinking, there was already a 12-day war with Iran, and nothing happened. Three aircraft carriers and millions of tons of military hardware and might kept the straits open. Shortly, it'll happen again.

So when oil traded up to $90, I tweeted out, “This is a fade.” The entire internet clowned on me when the thing briefly spiked up to $120, which shocked everybody, including me. Luckily for me, my trade expression wasn't idiotic; it was relatively elegant. Buy stocks instead of shorting oil with infinite downside. Seems kind of obvious.

And then the thing just came crashing right back down. Why? For exactly the reason I just said. There's no way that the wounded, completely pinned-to-the-floor, half-dead wrestler is going to be able to get up and start taking out boats in the strait. It's impossible.

The people who pinned down this wrestler—the United States and Israel—are fully aware and fully capable of guaranteeing maritime transit. And so, lo and behold, yesterday the G7, with 400 million barrels of cumulative SPR, the Strategic Petroleum Reserve, said, “We'll release it if we need to.”

Traffic resumed through the Strait of Hormuz, and here we go again. Oil's back down in one of the craziest whipsaws of all time. I did not expect oil to rally 25% in a day and sell off 30% in the same day. Nobody did.

Well, this is now just par for the course. You had silver doing it 2 months ago, and you've got oil doing it now. The world—this is what we've been talking about, Jonah—is just becoming a more volatile place.

That's one of the reasons why people like you listen to this podcast. I saw a crazy statistic that 80% of Gen Z believe that speculative investments will lead to their financial success far more than traditional investing. While that might be an exaggerated statistic, the core is true.

In today's world, there are so many opportunities to make money because of the volatility of the markets that people are smart. They're noticing. They're noticing all these opportunities. They think to themselves, “If oil can go down 25% in a day, and just 6 weeks ago silver did the same thing, and they both went up 40% in 3 days, obviously there's opportunity here. Obviously I need to be paying attention to the markets.”

That wasn't happening for basically since the Great Recession, right? There weren't these whipsaw moves for a really long time. COVID obviously had them, but even COVID wasn't a whipsaw move. It was straight down and then straight up.

Now things are moving out of lockstep with each other. Oil's running 40% in a day when gold is dropping 5% on the same day. And so now we're in this new realm of how do you position yourself to really succeed when all these opportunities are around you?

You can't let the— I guarantee the Citadels of the world aren't capturing this. You just do it. Just support this.

Citadel’s actually down over the last week.

3. Dynamics of The Oil Market

Yeah. So they just lost one of their oil PMs. I read somewhere that they lost one of their oil PMs. Who knows? Maybe he got stopped out. Maybe he left before.

The interesting thing here, Avi, is that these whipsaw moves—yesterday was the craziest single-day move in the history of crude oil, if you think about it across various metrics. It was the biggest move. Oil has never sold off 30% in a day before.

I remember, in the depths of COVID, I was short oil all the way down, partying and high-fiving everybody. Then Trump tweeted something about an OPEC cut, and oil was up $11 in a matter of 10 minutes.

My business partner and I were literally on the verge of tears, unable to breathe. It was just this massive financial loss, the likes of which neither of us had seen. Now it feels like par for the course. This stuff is all over the place.

Basically, I think neither I nor, obviously, anybody else expected yesterday’s move. I’m humble about that. But the outcome is kind of what I expected.

Here’s why I think it ended up collapsing: 2 reasons. The first is that high prices are the solution for high prices. That $120 print squeezed Trump. It squeezed the G7. It squeezed all the people who have all the power to bring it back down. I thought they would have acted earlier, but they didn’t.

The second is gamma. The market is very long gamma. Gamma is just a Greek; it’s a risk metric for an option. Basically, when you’re long gamma, you get longer the underlying commodity as the price goes up and shorter as the price goes down.

Physical oil-trading houses are, I guess, net-net, flat gamma because it’s a zero-sum game. But the people who actually trade their gamma are the trading houses, and they’re very long gamma.

When you have boats, pipelines, and tanks, you pay a premium to rent that infrastructure because it costs money to keep it up. But you have what’s called optionality as a result of that infrastructure, and when you’re long optionality, you’re long gamma.

The physical market is so long gamma. This happened during the Abqaiq attack in 2019 when Yemen—wink, wink, nudge, nudge—but really Iran took out Abqaiq, this mega-processing facility in the middle of Saudi Arabia that basically bottlenecks 3–4 million barrels a day worth of their exports.

Oil spiked like crazy. It spiked $10–15 overnight, which at the time was a wild move. I remember we all at Vitol showed up to work the next morning, and the physical traders had been in since midnight, just selling, selling, selling because they thought they were flat. They thought they had no exposure.

Then this move happens, and they’re like, “Wait, I’m long 20 million barrels of oil, up $15. I just made $30 by accident. Let me lock that in—or, sorry, $200 by accident. Let me just lock that in.”

And so, basically, it literally was a $200 event. They’re like, click, click, click, click, click—selling, selling, selling. I guarantee you the same thing just happened yesterday.

A bunch of guys came in on Monday after watching it over the weekend, salivating and thinking about all the villas in Ibiza and wherever the hell else—Monaco, Saint-Jean-Cap-Ferrat—that they want to buy. They can. All they have to do is wake up at midnight and click. That’s why I think the price just got hammered all the way back down.

That makes it—can you explain how it works, though? I’m curious about how it works. You have all these people who are stuck in positions that they can’t get out of, right? They own the physical, and they’re probably already hedging the market.

If you’re at a firm like Vitol or Glencore, do you ever have conversations where you think to yourself, “Oh, we could move the market and try to [bleep] these people and push the market in the direction that we need it to go in”?

Yeah, unfortunately—

Do people play those games?

Of course they play them, though in smaller markets. They’ll play them in the Singapore 380 versus New York Harbor fuel oil, some kind of differential or regional grade, or Ethiopian gasoline versus global waterborne gasoline like EBOB.

These little differentials can be manipulated. I’m not accusing Vitol of manipulation because I don’t want to end up unalived, but there are all sorts of games that you can play. You can be long gamma and influence the price of that thing in a market.

Do you think big markets like crude oil are different? You don’t think this oil run was a manipulation? You think this was just pure mechanism? You don’t think anyone—

Global crude oil is way too big for any company, even Vitol, to manipulate. It’s impossible.

They can play games in what are called differentials during the window, which is 4:00 to 4:30 p.m. London time. There’s a Singapore window, which is 8:00 to 8:30 or 9:00 to 9:30 London time, depending on whether it’s daylight saving time.

Basically, there are these little markets—I say little, but they’re physically huge markets, just financially small—where you can make a lot of money because of that asymmetry. There are like 5 financial participants, and if you want to corner the market on something, you can.

Suddenly, 30% of a certain type of hydrocarbon goes up, and if you own a lot of it physically, then you win because you’re in the financial situation to do so.

Another question I’ve seen tossed around—and people were using this as a scaremongering tactic—is whether Iranian oil is better than all other oils.

No, but it’s good oil. Basically, I think I’ve got some oil here. This is oil. This is oil.

Most people think of oil as this molasses-y substance that I’m showing you right now, right? But this is light sweet oil. If you open it, it smells horrendous. It’s not light or sweet. It smells worse than a gas station. It’s just horrendous, toxic fumes.

However, this is considered good oil. What does good oil mean? It means that when the refinery does what it does to it—which is basically boiling it, taking the steam, and cooling it back down, a process called distillation, along with other things like cracking and coking and the complex manufacturing that makes gasoline and other products—it yields a slate of products that are more valuable.

You put crude A into a refinery, and you get X dollars out. You put crude B into a refinery, and you get Y dollars out. It’s really physical chemistry. Different inputs yield different outputs.

This type of crude oil, light sweet oil, is considered good crude because it yields high-value outputs. It yields more jet fuel than, say, the crude oil from Venezuela, which is often a solid at room temperature.

Venezuelan crude yields more asphalt—the fuel oil that goes into cruise ships and oil tankers, and the stuff used to make asphalt. Those aren’t particularly valuable products. There isn’t a lot of jet fuel in that crude.

Is jet fuel the most valuable oil product you can produce?

Jet fuel. That’s the most valuable product that you can produce. I guess some people would say it’s certain types of naphtha, which is a precursor to plastics and is in shampoo and everything else, or lubricants.

Realistically, the big-volume, high-dollar product is jet fuel. I’m not a refinery expert or a downstream engineer. I don’t understand this stuff that well, but more jet fuel is better is sort of the rule of thumb.

In a previous life, I studied chemical engineering, and we spent so much time on this because they all expected us to go into the industry. They basically expected us to go into the industry.

There were only 3 outcomes for you as a chemical engineer studying in St. Louis. Either you went into the oil industry—you basically got snapped up by Exxon, Chevron, or one of these companies—you worked for Anheuser-Busch making beer, or you went into finance.

That’s good.

What did you think the most popular was?

Finance.

No. Going to Anheuser-Busch and making beer.

No way.

Because it actually pays a lot of money. And it was local, because Anheuser-Busch is based in St. Louis. But anyway, back to you.

You can have oil that looks like this. It can look like piss. It can be a solid at room temperature. Oil is a very nonhomogeneous thing. The more jet fuel, the better.

Basically, going back to your chemistry classes in college, Avi, oil is a battery, okay? It’s a hydrocarbon.

The more carbon molecules you have bunched together in a small space, the more energy they're storing, because when you break those bonds in an internal combustion engine, it releases energy, which makes planes fly and cars go, and so on. So basically, the greater the energy density, the more valuable it is. And so, crude from Iran is energy-dense. It's light, meaning that it's energy-dense.

It's low-sulfur, which means that the more sulfur there is, the more you gunk up the refinery by putting the oil through it, and the more it produces all sorts of problems and crap. So basically, it's light sweet oil. It's considered the best oil in the Middle East. Arab Light is also the best oil in the Middle East; it comes from Saudi Arabia.

Saudi Arabia has Arab Heavy, which is crappy. So, it is good oil. It's not the best oil, but it's up there. Let me put it this way: in terms of extraction cost per energy density, it is probably the lowest in the world. Usually, light sweet oil is a little harder to extract these days than it is in Iran. You just stick a toothpick in the earth there, and the light sweet comes out. It's pretty good geology.

That's solid. What a lot of people, I think, aren't necessarily appreciating is that we have massive sanctions on Iran. So, if we successfully take down the regime, shouldn't more Iranian oil flood the market?

No.

No?

No, because they're already exporting the maximum to China. This is about geostrategic leverage. Basically, by taking Venezuela and Iran out militarily, by basically ankling them, what you get is a situation where, instead of China getting a 50% discount on Venezuelan oil versus its fair value and a 50% discount on Iranian oil versus its fair value, and 100% security of supply of all Venezuelan and Iranian exports because nobody else will touch it, these are just going to become open-market crude.

They're just going to trade like every other crude, and China's going to have to pay up for them. And then, when China invades Taiwan, which will happen, they won't be able to say, “Oh, and by the way, now if you fuck with us, Iran and Venezuela are going to cause a bunch of chaos, too. And the world will lose their exports if you screw with our exports, and then the price of oil's going to go up.” It's basically about reengineering the pieces on the Risk board game.

Well, yeah.

China doesn't have a monopoly on those 2 streams, because as we learned from World War II, when General Rommel ran out of oil on his blitzkrieg through Africa, he lost, right? Oil is victory. Oil is sovereignty. If you don't have it, you can't do anything.

So that's what this is about. This is just about blocking off oil from China. It's not about bringing new oil to market, because all the oil is already going to market. It was just going to 1 market: China.

I 100% agree with that. I guess the only thing that I think—if we do get Venezuela—well, Venezuela's already back on our side. If we get regime change in Iran, I 100% agree that the entire reason that we've done this is specifically to kneecap China. That's why.

Trump, I think, is going to go down as the most consequential president basically in history, since maybe—maybe Roosevelt. I actually don't even think Reagan would be more consequential, because I think the Soviet Union was going to collapse whether Reagan was the president or not. I think that was sort of inevitable. But the collapse of the Chinese network was not inevitable. In fact, it could have kept growing.

It takes an extremely strong president like Donald Trump to stand up, take down Venezuela, and now attempt to take down Iran—basically to pull apart all the pieces. One thing that people don't talk enough about is that this is all because of Israel at the end of the day. The massive win against China is because Israel didn't back down over October 7, dismantled all of the Iranian proxies that exist in the Middle East, because this war could never have happened if Hamas and Hezbollah and all of the Iranian militias in Syria were still strong. It could never have happened.

The reason that it could never have happened is because they could have inflicted so much more damage. The Houthis would have inflicted so much more damage unless Israel had degraded all their capabilities in the Middle East. Dubai would have been getting hit 15 times as hard right now. The Saudis would have been getting hit 10 times as hard, right?

It's because Israel dismantled all these people that now we're getting this opportunity to actually go and attack Iran, and therefore really tumble the final piece. China still has North Korea left, but they really only have—and obviously, they have some African countries and resources—which are much less useful, let's say, than their Iranian and Venezuelan allies.

4. What Assets To Own?

And so, this brings me back to my thesis that I posted on X a few weeks ago, which is: could we be seeing the return of an American hegemony? This is important for our bags. Could we be seeing the return of an American hegemony? Does this elongate the timeline of the multipolar world? China looks completely feckless right now.

To me, what that means is that gold is actually not as interesting an investment today, and I've been a gold bull for a long time. I've been pounding the table on gold for more than a year now. I'm finally starting to think, well, the whole thesis behind gold—the entire thing—is that if we're going into a multipolar world, people are going to want to be less exposed to America.

After this, I'm saying, I don't know if people are going to agree with that anymore. I feel very comfortable being invested in American equities, in American Treasuries, in America. I think the Europeans are going to come around to that point of view, and I think India is going to come around to that point of view. You want to be on the winning side, and America's on the winning side.

A huge part of the thesis was that people were pulling out of America because America was getting weaker relative to China. You can make the argument that, post-Iran, America is the strongest it's been against China since, like, 2015, right? Since prior to the massive rise of China—the 2015 to 2018 massive bull run in Chinese equity markets. Everyone gets really excited about China.

If we do take down this network, the U.S. is now in the strongest position against China since probably 2014 or 2015. That makes me think that gold is a less good investment today than it was yesterday if we succeed with this war, which I think we will.

What I do think is still very valuable is uranium, because we're still going to be pushing forward on energy production. So, I think uranium's going to be valuable here. Our rare-earth minerals are going to be extremely valuable still. Bitcoin's going to be extremely valuable, actually, specifically because of the return of American strength.

Bitcoin is very closely tied to the Trump regime, and I think the better the Trump regime stands on the world stage, the better it is for Bitcoin. So, a swift resolution to this war is going to be very good for Bitcoin, in my personal opinion, and very good for the American equity markets as money comes rolling back in.

It will probably not be so good for emerging markets, as people pull out of emerging markets to flood back into America, as America is now viewed as a safe place again. Candidly, China can't stand up to the U.S. without these allies. So, I'm very bullish on U.S. equities now. I'm super fucking bullish on U.S. equities.

I think that money's going to come flooding back in because I think that this war is going to be over very soon. If you look at the missile launches out of Iran, they're down 90%.

Check this out, Avi.

My take is that this war is going to be over very soon, and that's going to be phenomenal for the market. You need to get in position. I tweeted this out: the one thing I love about wars, and one thing I love about the tariffs, the snafus, and all of the nonsense that Trump puts out there and riles the market with, is that it gives you generational entries on megatrends.

Megatrends are not impacted by month-to-month activities. This may have impacted the gold megatrend, but the other megatrends that we've been talking about remain intact. I'll give you a great example: this war gave you a phenomenal entry on Intel. Intel is going to 80 bucks. We're going to be pumping out American chips. Intel is going to 80 bucks.

What does this look like to you?

That looks like the Tel Aviv Stock Exchange is doing real well. This is the other thing: never bet against the Jews. Even if you hate the Jews, even if you're like, “The Jews have this thing called the Talmud, this evil book that teaches you all sorts of evil things. It teaches you how to rule the world.” If you truly believe that, then you should be buying as much [censored] as you possibly can. I mean, I don't know what to tell you.

Yeah.

I mean, look, I think we got a good entry on the Tel Aviv Stock Exchange, too. It's off—what is it, off 10% or 15% on this? It's going to go right back to the highs once this is over.

So, I think if you're looking for a quick 15% farm, [snorts] that's a good one. But I really appreciated what you just said because your response there was a 2-part response. I did my oil rant, then you were like, “For part 1, was this a just invasion? Was it the right thing to do, and what does it mean geopolitically?” The second thing was like, “Where’s the trade?” Let me give my 2 cents on that.

Mhm.

I’ll do it in a little bit shorter time, and then I’ll pass the ball back to you. I grew up in Berkeley, California. I went to Columbia University. I have no shortage of liberal friends. They know that I’m steeped in oil knowledge and geopolitics from my years of working for the Bond villain organization.

I get asked a lot of questions and have a lot of intelligent debates with them. They are smart, and they are willing to learn and think. So, basically, the steel man that the anti-Iran-invasion liberal crew has given me is, “Well, what if we just left them alone? Wouldn’t the Ayatollahs just live in peace and do their Ayatollah things in a way that wouldn’t interfere with us? Then there would be peace and love, and everybody would hold hands?”

You’re on mute, Avi. Hold on.

So, what would we classify as an Ayatollah thing? What is an Ayatollah thing to do?

Yeah, just friendly praying and—

Jailing them. Murdering protesters. Throwing women in jail for showing their hair, hoarding oil and sending it to China, and building nuclear weapons in violation of the JCPOA, as reported by the IAEA, which is a left-leaning International Atomic Energy Agency. Just friendly stuff like that, right?

Yeah, just the normals. Just the normal stuff.

Yeah, just the normals.

So, they’re like, “Well, hey, if we just left them alone, if we just did a little bit less, maybe they’d stop saying ‘Death to America,’ and everything would be fine.” What I basically have to explain to them is that these guys are members of—this is not North Koreans who observe Juche. I don’t know how to pronounce it. It basically means radical self-reliance. It’s basically Burning Man up there: Burning Man in the snow, with no food and a bunch of starving North Koreans, not a lot of tech people.

Instead of Juche, in Iran it’s Twelver Shia Islam. Basically, they think that the 12th Imam, their messiah, will come only when everybody’s a Muslim. You either have to convert or get pushed out of the way in order for this to happen. So, it’s an active world-domination kind of thing.

You generally don’t want world-domination maxis like Hitler or Ayatollah Khomeini—may he rest in pieces—to have nuclear weapons. So, I think it is a just invasion, and I do not think that just ignoring them and playing nice would have ended in a good outcome. I think that short-term pain, to quote the Trump administration, is worth the long-term gain here.

This is something that people on the internet don’t seem to understand about markets. Just because there’s a war in the Middle East does not mean oil is going to infinity. Sometimes there’s volatility on the way to victory, right? So, I do think this is a just invasion.

By the way, 4 weeks ago, if you’d asked me, I would have said the oil market was heading into a supply glut—an oversupply that was basically as bad as COVID, when all the demand got switched off. That’s the fundamental picture. The only thing you’re looking at on screen when you see $88 a barrel is geopolitical risk. This thing is worth $50, right?

So, if you can find a way to get short oil without getting your nuts blown off, you should do it. The other trade here—I definitely agree that it’s a better idea to buy amazing nuggets of value like Bitcoin when they’re somewhat distressed because of things like a transient war in the Middle East that’s going to go away, right? I totally agree with the Bitcoin trade.

I think the Tel Aviv Stock Exchange is a nice quick farm, and I think we got a nice dip on the one crypto asset that’s probably worth trading. The likely HYPE—did it go below 30? Yeah, it did. I got in around $31. I think Arthur Hayes just put out a note saying it’s going to $150. I kind of agree.

Yeah, I mean, look, later today we’re going to be interviewing this guy named Capital Flows. He’s super, super, super big on this asset called HYPE, which is the Hyperliquid DEX token. We’ll be talking with him a lot about Hyperliquid, what he’s seeing in the markets, and this potential asset called HYPE that you might want to look into.

We’ll see how it goes. I’ve always been very bullish on Hyperliquid. I’ve been bullish on Hyperliquid for a long time. I still hold a position in it. But I do think that over these next few weeks, do not get scared. If there’s 1 thing I want to leave you with, it’s: don’t get scared. Don’t panic. Buy the fucking dip.

Shovel all your chips into US equities, rare earth minerals, uranium, and Bitcoin, because I think the next 2 months of price action are going to be really fucking good, in my personal opinion.

I think so, too. Post the resolution of this Iran war, I am so bullish on everything. Are you so bullish you can’t see straight?

My largest positions are Bitcoin, Intel, uranium, REMX, and Ethereum. That’s my portfolio.

Basically, what Avi is saying here, dear listener, is: have your cycle bags and buy dips. That’s the way you fade geopolitical froth: buy, add to your cycle bags when geopolitical froth cheapens the stuff that you like. I completely agree.

Now, we have a slightly more bro-y, just-buy-the-dip kind of approach. My mom listened to last week’s podcast with Flood, and she was like, “Wow, he’s so much more articulate than you, and he never says ‘like,’ and he never swears. It’s just so professional, and I really appreciated it. It was a breath of fresh air, honestly.”

That was her criticism of me. I don’t have the same analytical, polished approach as our boy Flood does, but what I would say is: you’re right, Avi. Just BTFD. Buy the effing dip here, and you’ll probably be okay.

It’s because we exist on a trading floor. I can obviously—we can put on the act. We can come on a podcast and act very proper, and I can talk analytically to you if you would like. But I don’t think that’s what you want. I don’t think that’s what you need.

No. [laughter] This has been so fun, Avi.

Yeah, this is awesome, as always.

These markets are awesome.

Yeah, these are fun. These are real—these are good markets, I do have to say. These are—

Epic.

Epic price—

Great markets to trade. Anyway, REMX—what a trend. I’m just looking at that. This thing is up only. I’ve told you guys about REMX at $60. I just want to remind you that I’ve been talking about REMX since $65. It is now $98, and I’m still bullish.

I think it’s going to $200. It’s a no-brainer to me, but we’ll talk about more specific companies and do a little bit of a deep dive on the next podcast. On this podcast, I just want you guys all to know that we are feeling good about the markets.

Great to see you, Avi. Stay strong, and you hor moose, you lose.

Take care, Jonah. Bye.