The Liquidity Crisis Pt. 2
When Even Safe Havens Aren't Safe
This week’s Newsletter is a continuation of last week’s newsletter:
The Numbers Don’t Lie
Total family portfolio: $347,260.63. Down $46,805 from pre-war. Down 11.9% in three weeks. All Weather Macro: $266,909.70. Options: $15,605.76. YTD: -3.26%.
Brent crude above $113. WTI touching $100. Gold erased its 2026 gains — crashing during an active shooting war. The 30-year yield breached 5%. The 20-year above 5%. DXY held above 100. Defense stocks sold off for weeks while bombs were literally falling. The S&P dropped below its 200-day moving average for the first time since May. Fear & Greed Index hit 14.6 — the lowest since November.
This is not a newsletter that hides from bad weeks. This is what holding conviction looks like when geopolitical shock meets portfolio reality.
But as I was writing this article Monday morning, a notification hit my phone that changed everything. We’ll get there.
Portfolio Snapshot
The biggest driver of the drawdown isn’t equities. My equity positions are holding relatively well. It’s the metals complex. Gold, silver, and the mining positions that were my best hedge all year — the positions that outperformed everything in the portfolio — are now the biggest drag. Gold down nearly 5% during the war. Silver massacred. Platinum dropped 5.7% in a single session.
That’s the irony of a liquidity crisis. Your winners become your biggest losers — not because the thesis broke, but because leveraged positions across the market are being unwound to raise cash. When COR1M hits 37.21, macro drives everything. Even the right thesis gets liquidated.
But context matters. The S&P is down over 5% since the war started. The portfolio’s drawdown is painful but it’s happening in an environment where the only trade that works is USD cash. And YTD, the total portfolio is down 3.26% — roughly in line with the S&P. We’re taking market-level pain during the biggest oil shock in futures history. That’s the framing.
The Yield Curve Told the Whole Story in One Session
On Friday March 13, the yield curve executed two regime changes in a single trading day. That’s never happened in this series.
Morning: GDP revised down to 0.7% from 1.4%. The economy was already weak before the war. The 2-year yield dropped 4.3 basis points. Bull steepener — the market briefly believed the growth collapse would force the Fed’s hand.
Afternoon: Oil surged back above $100. The long end resumed its selloff. The 30-year yield hit 4.908% — approaching 5% for the first time since 2007. By this week, the 20-year breached 5.00%. The morning’s rate cut optimism was slapped away by the inflation reality of $100+ crude.
Yield curve regime: Bear steepener. The front end is trapped between growth weakness and inflation. The long end keeps selling. Core PCE at 3.1%. Consumer sentiment at the 2nd percentile historically. The Fed met Wednesday and held at 3.75% — exactly as expected. But the statement language confirmed what the curve already told you: the Fed is trapped. Can’t cut into $100+ oil. Can’t hike into 0.7% GDP.
If you remember Liberation Day last April — tariffs crashed the market, then Trump reversed with a tweet and the market ripped — the pattern is the same. Maximum pain precedes the pivot. The question is always timing, never direction.
The Historical Precedent
This week I built a model tracking S&P 500 performance following every major US military conflict since 1950. Eleven conflicts. The data tells a clear story.
Across 10 completed conflicts, the average S&P 500 return is +0.29% at 1 day, +1.30% at 5 days, +4.22% at 1 month, and +6.03% at 2 months. The Gulf War — Desert Storm, the closest parallel to this conflict — returned +17.02% at 1 month and +20.13% at 2 months.
The current Iran conflict (Operation Epic Fury) shows +0.04% at day 1 and -2.00% at 5 days. Worse than average in the short term, but the 1-month and 2-month windows tell a different story — one that history says favors the holder, not the panic seller.
6 of 10 completed conflicts saw positive returns on day 1. The short-term signal is always noisy. The medium-term signal overwhelmingly says: markets recover from wars. The question is whether you’re positioned for the recovery or whether you panic-sold into the bottom.
DXY Above 100: The Thesis Under Pressure
The dollar broke above 100 for the first time since November 2022. That runs directly against the Article 1 thesis — a 60-year DXY chart targeting the 94–95 Fair Value Gap from Trump’s first term.
Let’s be honest. The chart says 94. The dollar hit 100.16. That’s a material divergence.
But the DYRH explains why. This is a safe-haven dollar bid during a liquidity crisis where nothing else works. Gold is crashing during a war. Bonds are selling at the long end. Equity bounces get sold within hours — one Friday saw a 78-point ES reversal, the largest intraday swing of the series. When gold can’t rally during a war and bonds can’t rally on a GDP miss, the only trade left is cash. And cash means dollars.
The Scientific Method says: observation changed, hypothesis under pressure, but the structural drivers haven’t reversed. Trump still explicitly favors a weaker dollar. The 60-year political cycle hasn’t changed. What changed is a temporary crisis bid overwhelming the structural signal.
This is exactly what happened with the tariff shock last year. Dollar spiked on panic. Trump reversed the tariffs. Dollar resumed its decline. Same playbook. Bigger stage.
The Strategy Beneath the Chaos
Here’s what most people are missing. They look at $100+ oil, a crashing stock market, gold selling off during a war, and they see chaos. They see an administration stumbling into an uncontrollable crisis.
That’s not what I see.
Trump has Kevin Hassett and advisers who understand exactly what the price of oil does to the global economy. Hassett publicly quantified the war’s cost at $12 billion. Treasury Secretary Bessent told the nation on Sunday: “50 days of higher prices for 50 years of no Iran nukes.” Trump tweeted that the US is the biggest oil exporter and higher prices make us money.
They’re not ignoring the oil spike. They’re using it.
Think about what’s happening from China’s perspective. 80% of Iran’s oil exports go to China. 50% of China’s crude transits the Strait of Hormuz. Trump sanctioned 84% of Iranian tankers. He’s threatening to strike Kharg Island — which handles 90% of Iran’s crude exports. He’s asking China to send warships to help reopen Hormuz. He’s dangling the Xi summit as leverage.
He’s systematically destroying China’s energy supply chain while simultaneously telling them to come help fix it. That’s not stumbling. That’s leverage.
And it’s working. The Wall Street Journal reported this week that China’s economy is falling behind due to deflation and a weak currency. The energy shock is transmitting directly into their economy — exactly as the thesis predicted.
Who Gets Hit Hardest
I built two dashboards this week to quantify what the brainstorm sessions kept pointing toward.
Oil Import Dependency: The data shows 18 of 25 tracked economies are net oil importers. China leads at 11.3 million barrels per day, 73% import dependent — the world’s largest importer. Japan at 2.8 Mb/d. The Eurozone at 11.1 Mb/d. And the US — flipped from importer to exporter in 2019. The biggest shift on the entire board. 7 countries are net exporters. The US is one of them. That’s why Trump can use energy as a weapon. Everyone else is dependent.
GDP Growth Projections: Average global growth drag from the war is -0.52 percentage points. China drops from 4.6% to 3.8%. Japan takes a -0.6pp hit. Europe across the board: -0.6 to -0.8pp. Turkey most impacted at -0.9pp. The only country that benefits: Saudi Arabia at +0.5pp.
The US takes a hit too — -0.6pp. But the US starts from a position of energy independence. China and Europe don’t.
Japan — the ally caught in the middle. This is the thread most people miss. Japan is one of America’s closest Pacific allies and a massive net energy importer. Hormuz closure doesn’t just hurt China — it hurts Japan. That’s why Trump met with Japan’s Prime Minister this week. He has to manage the ally relationship while weaponizing energy against China. He’s asking Japan to send warships to Hormuz — offering them a role in the solution to the problem his strategy created for them.
Europe’s nuclear escalation adds another layer. On March 2nd, Macron announced France would expand its nuclear arsenal and deploy nuclear-armed Rafale jets to 8 European allies. France and Germany created a high-level nuclear steering committee. Europe is realizing it can’t depend on Middle Eastern energy or indefinite US security guarantees. That creates a second structural demand driver for defense positions — RTX, BWXT, KTOS positioned for NATO rearmament that extends years beyond Hormuz.
What Institutions Are Telling You
The Quiggle rankings from Friday March 20th close:
Sectors (March 20):
Top Assets (March 20):
The deterioration from last week is stark. Gold collapsed from #10 to #20 with RLTV at 0.91 — the lowest relative performance on the precious metals board. Copper fell from #13 to #23. The S&P dropped from #19 to #28. VIX jumped to #3 — fear is now one of the strongest-performing “assets” on the board.
Industry rankings tell the deeper story. Oil & Gas E&P still #1 (STRNG 76). Refiners #2. But Aerospace-Defense cratered from #28 to #39 — the selloff in defense during an active war is now three weeks running. Gold Miners collapsed to #46. Copper Miners at #41. Shipping dropped to #33.
Materials dead last at #11 for the third consecutive week. The double squeeze — crude costs plus dollar conversion — continues to crush non-US miners. But Energy at #1 with STRNG 73 and positive momentum (+7) tells you the one sector capital refuses to leave.
What Earnings Tell You Underneath the Noise
Last week Broadcom beat — EPS $2.05, revenue $19.31B, AI revenue $8.4B up 106% year-over-year. Guided $22B for Q2, crushing estimates. Marvell surged 23% on data center strength — custom AI silicon revenue went from near-zero to $1.5B in a single fiscal year.
This week: Micron reported Thursday confirming AI memory demand resilience. FedEx as the economic bellwether — shipping with Hormuz closed. Nike telling you about the consumer with gas approaching $4/gallon. All reporting into $100+ oil, the day after the FOMC held steady.
The message: AI demand is inelastic even in a stagflationary crisis. Data centers don’t stop building because oil is at $100. That demand is deadline-driven, not price-discretionary — the same dynamic that supports the copper triple convergence thesis.
Why This Newsletter Exists
I need to say something that goes beyond the data this week.
As I scroll through social media, I see people that I follow posting only gains and no losses. Never showing a portfolio, never explaining a thesis — just screenshots of gains for the day. No framework. No accountability. Just a number designed to make people think they are winning.
That’s not trading. That’s gambling. And it’s the most dangerous thing you can encounter when you’re learning this market, because it creates the illusion that fast money is real money. It isn’t. The market will always find a way to take it back from people who don’t understand why they made it.
When I first started trading, that kind of content was one of the most harmful things I experienced. Seeing people make money without explaining why, then aligning my performance expectations with theirs. No risk management. No process. Just results with no context.
That’s where the framework kicked in. And I realized the people doing that aren’t profitable long-term. If you’re truly profitable, you don’t mind sharing your PnL. You don’t mind showing losses. But if you only show gains and pretend the losses never happened — what are you really proving? Are you trying to help people, or just feeding your ego?
I watched someone navigate this differently. Harrison and I started in the same trading group years ago. We both realized it was toxic — a pool of egos with no accountability. We left. Harrison went on to build his own approach, and one thing separated him from everyone else: discipline and transparency. He consistently took 20-30% gains. He showed his PnL — wins and losses. He had a track record anyone could verify.
I didn’t understand it at the time. Why take small gains when you could swing for the fences?
Three years later, Harrison was managing $150 million of institutional money. No formal background. Started exactly where I started. The institutions didn’t find him because of a screenshot. They found him because his risk management was verifiable and his losses were public.
Stanley Druckenmiller — one of the greatest macro traders of his generation — sold NVIDIA at $150, watched it go to $800, then $1,400, and was sick about it. Even the best let emotion override conviction sometimes. The difference between professionals and gamblers isn’t that professionals don’t feel the pain. It’s that they have a process that survives the pain.
This newsletter will never be a signal group. I don’t want to be responsible for your wins or your losses. I want you to be responsible for your own portfolio. The free tier gives you the education — yield curve analysis, Quiggle rankings, cross-asset frameworks. That’s the fishing lesson. If you’re willing to put in the work, you don’t need me. The paid tier gives you structured access to my time, my portfolio, my real-time process. That’s mentorship, not dependence.
If you’re looking for someone to give you signals and tell you what to buy, this isn’t for you. This is for the person willing to put in the work to understand why — the same way I did at 2 AM studying charts while everyone else slept.
The goal is not for you to depend on me. The goal is for you to not need me.
The Reversal
Warren Buffett said: “I would still hold stocks even if I knew that World War III would happen.”
Saturday night, Trump issued a 48-hour ultimatum — obliterate Iran’s power plants if Hormuz doesn’t reopen. Asia crashed. KOSPI down 6.5%. Nikkei down 3.5%. Hang Seng down 4%. US futures opened red. Maximum fear. Fear & Greed at 14.6.
Then Monday morning at 7:10 AM Eastern, three notifications hit in sequence:
Trump has had talks with Iran regarding end to hostilities. Trump instructed Pentagon to postpone ALL strikes against Iran. 5-day hold. Productive discussions.
Futures flipped green in real time. The same pattern. The same playbook. Maximum pain, then pivot.
I sat here Saturday telling you: “The question isn’t whether he reverses. It’s when.” Forty hours later, he reversed.
This is Liberation Day 2.0. April 2025, Trump crashed the market with tariffs. Everyone panicked. The framework said lean in, not run. He tweeted “buy” and the market did a complete 180. The people who held through the pain got paid. The people who panicked got left behind.
Thirteen months later — same playbook, bigger stage. Instead of tariffs, a war. Instead of trade policy, energy policy. But the mechanism is identical: create maximum pain, force the counterparty to the table, extract concessions, then reverse.
Bessent already told you on Sunday: “50 days of higher prices for 50 years of no Iran nukes.” They knew.
Cumulative Market Moves (Feb 27 close through March 20)
Process Over Prediction
The structural drivers haven’t changed. The copper triple convergence — military demand, AI infrastructure, construction seasonality — is still intact. Europe’s nuclear rearmament is structural. The 60-year DXY cycle hasn’t reversed. The energy leverage thesis is playing out at maximum amplitude.
The portfolio is down. The metals got crushed. The dollar spiked against the thesis. Materials ranked dead last for three consecutive weeks.
But I’ve seen this playbook before. And Monday morning at 7:10 AM, the playbook executed again.
You can’t help the currents you’re swimming in. But as long as you’re swimming, that’s all that matters.
Process over prediction. Data over headlines. Framework over fear.
Glossary
Bear Steepener: When long-term bond yields rise faster than short-term yields — pricing persistent inflation at the long end while the front end is held down by recession expectations.
Stagflationary Twist: A yield curve pulled apart by recession at the short end and inflation at the long end. The signature of a 1970s-style supply shock.
COR1M: One-month implied correlation. Above 30, macro drives everything. At 37.21, zero stock-specific alpha is available.
Forced Liquidation: When margin calls force investors to sell assets regardless of fundamental value. Why gold crashes during a war.
MOVE Index: Bond market volatility. Above 80 indicates crisis-level dislocations. Above 90 is severe.
Fair Value Gap (FVG): A price imbalance on the chart where an unfilled zone remains. The DXY FVG sits around 94–95.
Kharg Island: Iran’s primary oil export terminal, handling ~90% of crude exports. A leverage point in negotiations.
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