The market heard 2 weeks of peace and a likely peace deal, and Brent closed yesterday at $92, its lowest close since the end of August. What must be realized is that very little of this is due to a significant change in oil flows, and all of it has to do with the interpretation of the war premium.

Flows have been in dynamic equilibrium for a while, as Iran continues to harass the Strait of Hormuz and the Houthis continue to harass Saudi Arabian infrastructure. The Ukrainians continue to bomb Russian refineries.

Here is a very easy way to understand the price of Brent crude oil: five zones representing different levels of market expectations.

In late March, late April, and late October, when strikes were either at their highest or expected to be, Brent went above $110. Below $90, there’s an expectation that we are going to get peace or that we’re waiting on peace to happen. Of course, below $80, there’s a strong expectation of peace. It’s the reverse of the war scenario.

Right now, the price is near the bottom of the stagnation zone of $90 to $100. We’ve seen a spectacular speculative unwind as those who were speculating on war moved out of their longs.

Today, I want to give you a bit of my framework on the game theory of Donald Trump versus the IRGC and who blinks first. I also want to highlight a few elements which I believe will continue to shape expectations in the interim.

I will also explain how I have shifted my energy positions in the portfolio.

1. The president wants out.

I think it’s quite clear that Donald Trump would much rather this war be over. Recently, his advisers told CNN that he feels he was misled about the war, that he was promised it would be finished long before the midterms, and that he is now asking who should carry the blame.

He and his vice president, Vance, have said publicly that the war cost their party the election.

But he cannot leave on the terms currently offered by Iran. After the Democrats swept the midterms, Tehran republished the same seven-point plan they’ve been insisting on since June, which Marco Rubio called outrageous and ridiculous. The seven-point plan effectively asks the U.S. to lift the blockade, release Iran’s money, and pay reparations before talks about the nuclear issue even restart. Iran is willing to negotiate on the reopening of the Strait of Hormuz, but not on the nuclear issue yet.

Signing such a deal would be admitting defeat in his name, and this is a president who doesn’t book losses.

2. The Dems can’t squeeze him out.

Where Iran and the market are wrong, however, is that he can’t be forced out of this war either. Congress has never voted a single dollar for this war. The Pentagon has paid for it out of its ordinary budget, and the running cost so far is quite small: about $12 billion spent in 8 months, with another $35 billion of munitions and equipment that need to be replaced someday: an IOU to future defense budgets.

The Senate passed a resolution to end the war on June 5, 50 to 48, and the House passed one in July, 214 to 208. Neither of these bound Donald Trump and his administration. From January 3, the Democrats will hold 54 Senate seats, and they’ve promised to try again. I’m quite confident they’ll pass it. He will veto it, and it takes 67 senators to override a veto. The Republicans need 34 votes to prevent it, and they’ll likely have more than 40.

The only other path is a government shutdown, as funding for the government expires on December 11, and there are some Democrats who want to refuse any bill that pays for the war. They could do this, but a government shutdown doesn’t stop military operations. If there’s a stopgap at last year’s level, that keeps the ordinary budget flowing, which is what has paid for this war all along.

So Congress can’t end the blockade. It can refuse to pay for the rearmament of the $29 billion of missiles and bombs already fired, although this would be very questionable if the U.S. were not going to replenish its munitions.

None of what they can do actually matters for the line he’s holding with the blockade and the convoys, and it doesn’t impact his ability to go for a short-strike air campaign. The president isn’t being squeezed, and he can sit exactly where he is for the rest of his term.

3. The IRGC won’t let him off easy.

Tehran has looked at all the same reports that you and I can read and has come to a conclusion that seems obvious to them. A man who needs and wants an exit will pay for one, and every sign that he wants out reinforces their view that they have leverage in these negotiations.

After the midterm elections, their foreign minister posted that “American voters have made their choice.” Mojtaba Khamenei’s account on X said that America’s collapse was speeding up.

Then they reiterated their seven-point plan that Marco Rubio called outrageous and ridiculous.

Iran has transformed this into what they’re calling their two-day plan. On day one, the U.S. ends the war on every front, lifts the blockade, releases frozen money, eases sanctions, and pays reparations. The next day, the Strait of Hormuz reopens. They have also promised war if the U.S. refuses.

For now, Iran has failed to take the initiative and re-escalate the war. The reason is simple: as long as you have the threat of a catastrophic hit on Gulf infrastructure or worse, you can use this as leverage in your negotiations. Once it is spent, you no longer can, and you have to take a beating of your own before resuming.

I think this is a miscalculation because, despite all the hits on tankers in the Strait of Hormuz, oil is still getting out one way or another. It gives Trump comfort that he is winning the war and shouldn’t give Iran what they are asking for.

4. Iran’s economy can last longer than forecasts say.

The other hope on the Western front is that Scott Bessent’s promise, made months ago, that Iran’s economy would crumble under economic pressure within two weeks, will come to fruition any day now, or week, or month?

Of course, the economy is in its worst shape in decades. Inflation is anywhere between 70% and 140%, and the economy will likely shrink by at least 5% this year. Yet somehow, it’s still standing.

Despite sanctions, trade continues to move by road, and billions of dollars of military supplies have come into Iran from friendly parties. More importantly, it is highly likely that the ships it has granted waivers through the Strait of Hormuz have paid the regime for the privilege.

If the economic isolation project was working so well, you have to ask yourself why, on November 7, Washington created a new task force to ensure Iran’s land borders are shut.

At best, sanctions redirect flows. They obfuscate them, and they make them costly by adding new middlemen and new creative solutions to bypass them. Seldom do they work in actually stopping economic activity.

What you need to understand is that the Iranian economy doesn’t need to endure. Only the IRGC does. As long as their operations keep funding them, they can continue their campaign for way, way longer than anyone believes.

5. But the Iranians keep getting this wrong.

Iran keeps thinking, as they have since the beginning of the war, that they can force Washington into a quick settlement. It’s what they believed when they shut the Strait of Hormuz earlier this year.

Then they thought the midterms would break the president’s hand. Now they believe that Congress will finish the job in December or January. For all the reasons I’ve mentioned above, this is not going to happen.

How long will it take for them to realize that, if they want to get their way, they will have to force his hand and escalate?

6. The US Admin has another agenda

How long will it also take them to realize that the US is jawboning and managing markets to enable the big IPOs on this year’s calendar?

Let’s not forget that on the day SpaceX IPOed, the price of oil crashed 5% as hopes of a memorandum emerged. SpaceX started trading on the 12th of June, the largest offering in history. Five days later, the memorandum was signed, and by July 14, the blockade was back on.

Now we have Anthropic’s IPO coming next week, planned for the 19th of November. Is it possible that this administration is playing a false game of diplomacy to ensure optimal conditions to push this large IPO through? The same administration which said the U.S. must absolutely win the AI race and which heavily supports both Anthropic and OpenAI…

7. Who blinks first?

Both the US and Iran misread each other’s calendar. At some point, it will become evident to them that the information they are acting on is wrong and that they must course-correct. Course correction will most likely only happen through escalation, as neither party can currently accept the other’s conditions without looking like a loser, and neither party believes that it actually is a loser.

Until that happens, we will most likely remain in a messy status quo, oscillating between expectations of peace and expectations of war. A big mistake we made in October was not booking gains when expectations of war were high. That happened because I was myself fooled into believing there would be war. At the same time, the game theory analysis suggests a prisoner’s dilemma where, at some point, a return of hostilities seems the most likely outcome. How do you position and invest without blowing up, with this in mind?

That’s what the rest of this report will look at.

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• Long the energy complex

• Short overvalued tech

• Long a rotation into blue chips

• Long idiosyncratic healthcare plays

But paths matter as much as predictions, and in this environment how we play each theme will drive a lot of our performance.

Our long energy position has shifted towards the futures ETFs. Our short on overvalued tech, which until now was just Nvidia (and has paid handsomely), is expanding into more positions. And our blue-chip rotation needs more names after we took early gains in 3M and Waste Management.

This week I’ll publish four reports covering the changes going into the portfolio today, and the more rigorous methodology I want to apply to our investing over the coming quarters.

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End of marketing interlude. Back to the research.

On Thursday, the iShares Semiconductor ETF lost 12.1% in a single session, its worst day in five years. Nvidia fell 9.3% on no particular news.

The headline, of course, is that the AI buildout met the Democrats, who have taken both chambers of Congress. But I doubt their candidates’ promises to pause data center construction are the real reason behind the sell-off. These are themes I’ve been writing about for a while.

Back in June, I wrote a piece on Meta arguing it was starting to show the cracks in the AI buildout. More recently, I went short Nvidia, because I believed it would be the bellwether for tech and the wider market.

Last Thursday, in “When It All Falls Down,” I made the case that the money behind the AI buildout is circular, and that a virtuous circle on the way up quickly becomes a vicious circle on the way down.

In the third quarter, Microsoft, Alphabet, Amazon and Meta spent over $200 billion between them on property and equipment, more than double last year. In the same quarter, Nvidia reported revenue of $96 billion.

The problem is that the cash coming in no longer covers the capex. These companies are filling the gap in the financial markets with debt, convertibles, preferred securities and equity issuance.

When that isn’t enough, Nvidia steps in as financier of last resort, providing supplier finance to its customers. (Not so much the hyperscalers, but the CoreWeaves of this world.)

I argued that price action would lead the fundamentals, and that Nvidia was showing signs of breaking down. That pushed me into the short.

The Chinese spygate announcements that came afterwards only confirmed what buyers and sellers were already telling us.

But with Nvidia down 14% from where we shorted it last week (I had shorted it higher earlier, but covered straight after), I believe the next legs lower will come from somewhere else.

At the bottom of this report you’ll find a summary of:

• The trades discussed today

• The trades executed today but covered in the next three reports this week

• The changes to stop levels across the portfolio

Ideally, the next three reports come out on Wednesday, Thursday and Friday, though it may take me until Sunday to get them all out.

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I think this is one of those cases, and I’m initiating the position as soon as the article hits. I’ll be putting it on at the same time as it goes out, which I believe is fair.

Our oil gains on the Babylon Burns portfolio (which was initiated on August 15th) have evaporated amid the post midterm crash in the price of oil.

Some of our positions got stopped out, most at breakeven as stops had increased to follow the stocks, and I initiated a couple positions to play on a bounce.

The market is pricing a specialty business as a commodity one, and pricing a company that’s paying its debt down at a run rate of $800M a year as if the debt were still the story.

I’m putting this trade through as soon as this article hits, and so can you if you upgrade to a paid membership now.

The stock reports earnings tomorrow morning, so this is a now or never trade.

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This was the third such appearance he made in a week. On October 15, he said that Nvidia cards weren’t in need of a backstop. Then, on October 21, he said that a GPU easily lasts 8 years, if not more. Of course, on the 22nd, he said that the companies that borrow to buy his GPUs and rent them out were a good investment.

If this sounds like the barber telling you that you need a haircut, it’s not far off.

A neocloud is a company that borrows money to buy Nvidia chips and puts them in a data center and rents them by the hour to the AI labs.

On October 15th, CoreWeave (a neocloud)’s bonds yielded 15.6%, up significantly from the 9% they yielded when they were sold in April this year.

Since then, CoreWeave is down 22%, and Nvidia itself is down 4%. CoreWeave is also down 68% from its 2025 high.

On one hand, you have the CEO of the most valuable company in the world saying that his customers are a good investment.

On the other hand, you have the people who lent those customers money saying that they want 15% a year to continue doing it.

One of these two is wrong. If history teaches us anything, it is that usually the bond market is right and tech CEOs are wrong, because the bond market needs to be paid back.

And that spells trouble for Nvidia, not because it owns $2 billion worth of CoreWeave relative to Nvidia’s $5 trillion valuation (that is quite irrelevant), but because Nvidia has moved towards a position where it finances its customers.

You’ve heard this part of the argument a million times.

What you haven’t had a good answer to is:

• When does it become a problem for NVDA?

• What should we expect the stock price to do?

• And what does this mean for the broader stock market?

This report lays out the exact mechanisms which matter for NVDA and which inform the short position which we have initiated in the stock.

NOTE: This report is the most important report you will read in November. Countless hours have gone into preparing it, on the back of months of observation and analysis.

It is yours, absolutely free of charge, as long as you hand over your email.

I consider this report to be so important for the public benefit that I will not charge for it.

I will ask, however, for your email. This helps me more than you imagine, and I believe it’s a fair ask.

You give an email, I give you hours and hours of professional research for free.

Why Nvidia is the most important stock in the world, and why you’ve seen this movie before.

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This is the third Live with Sam Kovacs, recorded after Friday’s close, and it’s the one where I shorted NVIDIA. Live is where I talk less about fundamentals and more about price action and what it’s doing to the market. I’m not a technical investor. I try to apply Bruce Lee’s Jeet Kune Do to investing: take what’s useful from every style, discard the rest, and don’t get boxed in. I have a clear value bias, but that doesn’t stop me taking a growth view, a technical view, a special situation, or a big macro view like the Big Long in oil I have on right now.

This post is in two parts. Part 1 covers the themes: why the leaders are the last to fall, why the NVIDIA chart is the one that matters, why industrials are leading the market down, and why oil above $100 with a hiking Fed is a bad backdrop for risk assets. Part 2 goes through every name I discussed, with my view and the levels I’m watching. The positions themselves sit in the Babylon Burns portfolio, and members get a notification every time I trade.

Part 1: The themes

The leaders are the last to fall

People use the index to call the end of a bull market. The index comes down, so the bull is over. That’s not what matters. The great speculators worked out that you look at the stocks that added the most market cap and the stocks that went up the most, and you ask how they’re doing. Indices are built from sub-sector indices, which are built from stocks. If you see something on a sector chart, go and look at the biggest stocks in that sector.

In this bull market, which I called within a month or two of ChatGPT coming out, seven stocks added most of the market cap from the October 2022 low: NVIDIA and the rest of the Mag 7. They added only a few trillion dollars less than the other 493 S&P 500 stocks put together. That’s exactly how the market has felt for three years. But the stocks that went up the most in percentage terms aren’t Apple, Microsoft and Google. They’re the AppLovins and Microns of this world, the more speculative AI build-out names. NVIDIA is on both lists.

Those build-out names have already rolled over. Broadcom topped at $495 and trades at $320. Micron is at $877 against a high of $1,255. AMD is at $516 against $658, Cisco at $106 against $130, and Intel at $86 against $142. Lam Research and Applied Materials are both down about 50% from their highs. Meanwhile Amazon, Apple, Microsoft and NVIDIA haven’t done much.

That’s the classic sequence. The go-go names break first. The leaders get a last hurrah. Then the leaders turn, and the whole thing turns. The value names that money rotated into, Berkshire, JPMorgan and the like, are doing fine. It’s the leaders holding the index together, and that’s why NVIDIA is the most important chart in markets right now.

For disclosure, I made Broadcom the largest position in my portfolio after ChatGPT came out, and it went up 9x. I sold a lot on the way up, which was a mistake, and I exited the final stub around $350 because the price action had rolled over. I don’t own any Broadcom anymore.

NVIDIA: a wedge inside a wedge

Go back through the history. NVIDIA had its cycle, a small adjustment in the pandemic, then the rate hikes during elevated inflation brought it down. From the October 2022 low it went ballistic. In May and June 2023 it gapped up on good news, and after that gap it started forming a rising wedge.

A rising wedge gives you higher highs and higher lows, but each thrust from low to high has less amplitude than the one before. Buyers keep coming back to take control from the sellers, but each time with less enthusiasm and less ammunition. Eventually that becomes buyer exhaustion. The expected resolution is that the buyers give way, the sellers take over, and the price falls.

The big wedge has been violated a little on the upside and undershot a little on the downside, which creates a second, intermediate wedge inside the first. I’ve had this chart on my desk all week. My view was that a weekly close below $212 would signal the intermediate wedge had exhausted itself. It had a first touch, a second touch, and a third point that looked like support and broke down instead. Meanwhile the 200-day moving average has climbed to the lower boundary of the big wedge, and NVIDIA now looks like it’s coming down to test it.

I expect a move to $205 or $204 over the next week. The key test is a close below $200. It’s an important psychological number, but more than that, every previous close below $200 happened inside the pattern. A close below $200 now is outside the long-term rising wedge, which would tell you buyers are no longer stepping in where they usually do. If that happens, I think it’s bearish for the entire market a few months out. The chart says this resolves by the end of Q1, and the bias is down.

Back in June, in my piece on Meta showing the cracks in the AI trade, I said my max view for NVIDIA was around $250. I didn’t short it then. There are three boxes for trades: good, bad, and too complicated. Sometimes you don’t have an edge, and you stay aside. You don’t need to take part in everything to do very well.

Industrials are leading the market down

Industrials have a long-term channel that started at the 2009 low. Inside it sits a mostly clean rising wedge, with four touches on top and three on the bottom (five if you ignore the April 2025 washout), and that wedge has broken down. So has the shorter-term line. The technicals say there’s more to give back.

I’m not a pure technical guy. What I see on the chart has to make fundamental sense, otherwise it’s castles in the sky and Sam drawing lines. Here it does. Industrials trade on one of the highest price-to-earnings ratios of any S&P 500 sector, possibly the highest, above tech. The AI debt story, the neoclouds and the rest of it, has started to crumble in the headlines. These industrials were the picks-and-shovels play on power and electrification across the AI complex, and their valuations went sky high on it. Now they’re at risk of coming back down.

Then there’s the feedstock. The physical economy runs on oil and refined products, and the feedstock for the industrial sector is diesel or some derivative of it. Brent is $117, and the back end of the strip, the December 2027 contract, is well above $80. Prices paid by these companies are going through the roof. That squeezes margins, which squeezes already high valuations, and it’s happening while the Fed is hiking.

The top ten holdings of XLI confirm the sector chart. Caterpillar, GE Aerospace, Eaton, Boeing and Parker-Hannifin all look bearish. Union Pacific looks bullish. Deere, RTX, Lockheed and Trane are neutral or no view.

GE’s earnings this week told the same story: beat, beat, beat, decent guidance, and the stock sold off because the projected rate of growth is below what it’s been for years. Good news is being sold. That’s distribution. With liquidity tighter, it doesn’t make sense to pay 30 times next year’s earnings for these stocks. A stock that’s already down can always go down more. If it’s not zero, it can go lower.

I set this up in the portfolio as rotational long/short rather than Coke-and-Pepsi long/short. I’m short the names that look bad and long other industrial names that look better. It doubles up on the rotation view while keeping equity exposure to the upside. Under Reg T, a long and a short together give you gross exposure both ways without locking up more capital than a long-only cash account would.

Oil over $100 and a Fed that’s hiking

Going into the year, the consensus was that oil would be benign and rates would come down. That was my view too, until 21 February, when I saw it wasn’t going to work and that I needed to go long oil. Now oil is back over $100, inflation is picking up and moving through the value chain, and rates are up.

The story on the Fed is that they won’t cut into the midterms and won’t hike into them either. They’ll hold, use hawkish language, and hike again in December. I’ve stopped offering variant views on what the Fed does. I’d rather react, because rates have more of a long-term impact than the market’s knee-jerk reaction suggests. Tightening is like dieting. Eat a salad today and you don’t lose weight. Stay in a calorie deficit for a few months to a few quarters and the number on the scale moves. Rates take time to work through the economy and stifle everyone, and they’re working through now.

Then add the questions on AI capex returns. Capex over the next two to three years won’t come in at the projected rate, and it’s becoming clear to everyone that trees don’t grow to the sky. The squeeze is coming from every direction: rates, input costs and capex expectations.

How the book is positioned

The environment is dangerous and explosive at the same time, so the book is defensive but not passive. Energy is still the best setup in the market. Healthcare is the second best. Industrials are the worst, consumer discretionary the second worst, and tech is still in play, but all the big names are losing steam.

Energy is the biggest bet, and I’ve added to it throughout and rotated inside it. Then there are the rotational pairs in industrials and the country long/shorts: one in Latin America, one in Europe and two in Asia Pacific, all going well. The healthcare names and some small tech positions are doing well too, and I’ve cut a few quick losers.

Cutting the quick losers is the point. Klipp’s paradox says you have to love to lose and hate to win. Most people do the opposite. They love to win, so they grab any gain quickly, and they hate to lose, so they hold the losers hoping they come back. That’s human nature, and I’ve burnt the correction into my skull. A quick loss is good. A quick win is bad, because as Peter Lynch said, selling your winners to add to your losers is pulling out the flowers to water the weeds. You need many ideas, you need to be ready to give them up, and when one starts working you trust it and add capital. That’s exactly what I did with energy.

The bigger picture

Once you’ve been making easy money for long enough, something must be wrong. When Buffett first recommended index investing, only a small slice of assets was passive. Now the majority are. History says that when everyone agrees something is the right thing to do, it usually isn’t. Pure equity returns over the next ten years don’t look great, and they look worse in real terms once you adjust for the dollar. Real assets look interesting, but any real asset that’s levered or long duration looks bad right now: gold down, silver down, Bitcoin down, tech rolling over, the Fed hiking. To play that you have to be nimble and willing to go both ways, long and short. The question for everyone is how their portfolio is set up for this, and whether the tide is about to go out while they’re skinny dipping.

Part 2: The positions

Here’s every name I discussed in the live and what I said about it. The chart is the summary and the detail follows. Prices are the 23 October closes.

NVIDIA (NVDA): short

I shorted NVIDIA going into Friday’s close. I’d tweeted during the day that I didn’t like NVIDIA below $212, and a few minutes before the close it was at $211. I thought the odds of it closing back above my trigger were poor, so I sent it. It’s a small, very low conviction short in the member portfolio. It doesn’t put the book in jeopardy, and there’s a good chance it doesn’t work.

The thesis is the wedge inside the wedge from Part 1. A weekly close below $212 signals the intermediate wedge has exhausted itself, and the 200-day moving average has climbed to meet the lower boundary of the pattern. I expect $205 or $204 over the next week. The key test is a close below $200, which would put the price outside the long-term rising wedge for the first time and tell you buyers aren’t stepping in where they always have. If NVIDIA loses $200, I think the whole market turns bearish a few months out, with a last hurrah for Apple, Microsoft and Amazon first. My max upside view is still around $250, as I said in June. The chart resolves by the end of Q1, and the bias is down. This is the first tech short I’ve put on.

GE Aerospace (GE): short

Members got the GE short alert this week. The company beat on every line with decent guidance, and the stock went down anyway. It’s selling off because the projected rate of growth is below what it’s been for years, and at 30 times next year’s earnings, with liquidity tighter, that’s a problem. Last year you could pay whatever you wanted for GE and double your money. Now good news is being sold, which is the usual distribution pattern. The stock is already down, at $285.64, and it can go lower. I’m not saying GE goes bankrupt, or to $10 or $20. I’m saying the chart looks bad. In the member portfolio it’s paired against a long in another industrial.

Parker-Hannifin (PH): short

This is a horrendous chart, the kind you can see from a distance. Left shoulder, head, right shoulder, and a neckline the stock has poked below. It’s breaking through long support lines. Maybe it goes sideways, maybe it goes back to $770, but this isn’t the price action you want to see. It’s only 20% below its $1,098 all-time high, and it can correct a lot more on valuation and slower growth. It’s a short in the member portfolio, paired against a long.

Caterpillar (CAT): bearish, no position

Caterpillar is the biggest industrial and a cyclical, so it goes up and down even when the long-term direction is up and to the right. It broke out of a strong resistance level around September 2025 and went vertical, from about $400 to over $1,000. That’s a 2.5x in about a year, where previous 2.5x moves took years. Then a new resistance line emerged, a distribution pattern formed, not perfect but good enough, and the support line at about $775 gave way. Since the break it’s fallen to $687, more than 10% lower, and it now sits 36% below its $1,071 all-time high. Maybe that’s the end of the correction. Maybe it gives back more and tests the old resistance line at about $550, which should now act as support. I don’t know. I don’t have insight into Caterpillar’s business or a good read on its financials. But it’s a bearish chart any way you slice it: head and shoulders, support broken, and a long-term trend far below the price.

Eaton (ETN): bearish, no position

Eaton was one of my short candidates and I didn’t follow through. I think I got bored. It’s the same wedge formation as the industrials sector, a mirror image of it, and it’s breaking below the wedge now. That’s dangerous. The downside could be the $315 level just below, or $300, or $250. I don’t have the answer, but it looks bearish.

Boeing (BA): bearish, no position

I don’t have a strong view on this one, and I don’t love how the lines are drawn, though with five touches it’s not bad if you exclude early 2025. It broke down from a triangle rather than a wedge and it’s heading lower. Bearish bias.

Union Pacific (UNP): bullish, no position

Interestingly, Union Pacific looks bullish. It built a big base, broke above resistance, retested it, and is holding above. Nice support below, resistance broken. It’s the one constructive chart in the group.

Deere (DE): neutral, no position

Unlike GE, Deere has held up well. It’s in a channel from $650 and could go back to $730, about 10% upside. If it went down, there’s a bit further to fall before you’d expect support. The risk reward isn’t out of this world and it isn’t horrendous. You could argue it’s forming a handle and goes on to new all-time highs. If one of the ten makes sense as a long, it’s Deere. Sometimes you don’t get a read, and that’s fine.

RTX, Lockheed, Trane and Uber: no view or no interest

RTX doesn’t look bearish. It came down to its long-term line and bounced, and new all-time highs 20% above are possible. Maybe that’s a bullish swing, but I’m not interested. Lockheed broke out of a resistance line and has some support below, but I don’t know what I’m looking at and I don’t have a view. Trane has a wedge inside a longer-term channel, not yet broken, with a possible head and shoulders that isn’t clean. It could turn bearish, but you can’t call it on the price action yet.

Uber needs to digest. It’s already gone from $100 to $66, and it doesn’t look like it has crazy downside from here, though it can always go lower, maybe into the high $50s before it finds support, and that could take a year or two. I don’t want to be in a stock going nowhere. Wait for confirmation. Never force a view onto a chart. The second you force your ideas over the truth, you’re done. Never let a good story get in the way of the truth.

Amazon, Alphabet and Microsoft: the leaders losing steam, no positions

Amazon still looks fine in the big scheme of things, but if you connect the tops you get a clear intermediate wedge inside the bigger one, and the price is sitting right on the line, which is not where you want it. That could mean a 5% correction, or like NVIDIA it could be more. Alphabet has broken its support and buyers are now defending the $300 to $315 area. The chart says it resolves one way or the other by the end of Q1, and the bias is down. Microsoft is more of a channel than a wedge, so it stays bullish for longer, but the bottom of the channel is a 20% correction and the top is about a 15% gain. That risk reward isn’t wonderful. I don’t think Microsoft returns the 3x or 4x of the last six years over the next six. Come back in six years and tell me I was wrong.

The energy sleeve: long

Oil is still above $100, Brent is $117, and the December 2027 contract at the back of the strip is well above $80. The long energy positions are doing very well. I’ve added capital to the trade throughout and rotated inside it. I’ve written beautiful reports on energy names, with all the charts and all the analysis, then looked at the price, decided it wasn’t moving the way I wanted, and swapped into names with more Brent torque, like Murphy Oil. Energy still has the best setup in the market.

Long Brazil (EWZ) / short Argentina (ARGT)

I wrote this one up for free. It’s long the Brazil ETF and short the Argentina ETF. The short strips out some of the Latin America beta, the idea of the whole continent getting re-rated, and leaves a variant view that’s uncorrelated with the US economy: capital should rotate into Brazil from other emerging markets if Bolsonaro wins. Argentina gets a sympathy bid from the same idea, and its largest holding, Mercado Libre, makes half its revenue in Brazil, so there’s an offset inside the pair. Brazil stands to gain more. If Bolsonaro comes through, the real rate is higher, the Selic comes down, domestic institutional money moves from bonds into equities, foreign institutional flows come back, and they all pile into an index trading at 10 to 12 times earnings that’s heavily tilted to resources. I don’t think it’s a hard trade.

The other pairs, healthcare and small tech

The industrial pairs are rotational: short the names above and long other industrial names, so they double up on the rotation while keeping upside equity exposure. Beyond Brazil, there’s one country pair in Europe and two in Asia Pacific, all going well. The healthcare names are going well, some small tech positions are doing well, and I’ve cut a few quick losers.

Members got this NVDA short, the fills, the stops and every pair before the close. Upgrade to get every alert as it happens.

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None of this is financial advice.

As Babylon burns, we’ll light the cigars.

As Jesse Livermore said, “As the leaders go, so goes the entire market”. Nvidia is the bellwether. It’s the stock holding this whole thing together.

And while it is not a definitive sign, of the 3 signs I’m waiting for, the first one flashed red.

This comes just two months into live trading of the Babylon Burns portfolio, with members getting every trade alert in real time, and the portfolio is up 6.9%. It’s having, by far, its best week and maybe even its best day today.

The book is starting to fall into place, with the regular rotation of early losers and names I subsequently change my mind on.

We’ve been relentless, and we will find alpha or die tryin’.

Right now the energy trade is getting a lot of traction, but the portfolio is a lot more than just energy. We have idiosyncratic Healthcare picks, Long Short Industrials, a few isolated shorts, and a handful of oddball tech and payment positions.

Honestly I like the shape this thing currently has.

Currently, the portfolio is about 95% long as a share of net asset value, which is offset by short exposure of around 16%.

In this write-up I’ll go through the portfolio, mentioning what is working well, what is not working so well, and what I expect to happen next.

RingCentral (RNG) up 6% today

Interestingly, on the day Brent soars and the whole energy book gets a nice little bump to it, the best performer is a stock which has absolutely nothing to do with energy.

RNG is a pick which we initiated on September 23rd, where we had identified this quarter’s earnings as a signal for an inflection.

The stock opened at $94 today, which was looking very nice, and is now looking to settle around $85, which is still 6% above when we initiated the position a month ago. This is making it a good time to add to the position as the thesis is now getting some confirmation.

The targets I gave when I was looking at RingCentral were for revenue to come in above $650 million, and it came in at $676 million, at the top of guidance. I wanted subscription growth to stay above 4%, and it came in at 6%. This has happened on the back of their native AI product now having penetrated about 15% of their revenue base.

The company has reached its debt target a quarter early, and operating margins were above the guide, with free cash flow growing 21% year over year.

The price action was particularly weird today, with a massive wick on the candle. Frankly, I can’t tell you what to make of it going forward, but the technical pattern that I identified (a nice recovery out of a long-term crawl) is still alive.

My only regret is that I didn’t come across the stock earlier, because I would have loved to have bought it around $50 rather than at $79. However, as Peter Lynch would always say (and my good friend George Noble never forgets to remind me), the market does not care about the price at which you entered a position.

It cares about what is yet to happen. So far, what I see is that all of the things I wanted to see happen for RingCentral are happening. I had a target for the stock of $95 to $100. This was actually reached today, but we didn’t get to act upon it, which is fine because here, at $85, I’m happy to add some shares to the position.

You always need to give yourself a possibility to be able to add to a position when it starts working well for you. I know there’s an innate tendency of investors to lock in gains and let losers run, but superior returns really flow to the investors who are willing to add to winning positions (even when it’s a small position like this one). Cut the losers.

Nvidia’s warning sign just flashed red! Short?

The rest of this report is kept for Babylon Burns members. If you have not joined yet, now is an amazing time to join because I strongly believe that Babylon Burns is only getting started.

By Joining Babylon Burns you get:

• The full archive of analysis I’ve written over the past few months

• The live Babylon Burns portfolio with targets and live trade alerts

• The companion web app, to see everything about the portfolio, my chart library and charting software you can use.

• All the future picks which have not yet been made.

Whether you want a hands on “here’s how I build and run a portfolio” or want exposure to my research which has produced multiple winners already, At $100 a month or $399 a year, it’s as good as it gets.

I started Babylon Burns with a low ticket entry: $299 early bird, now it’s $399. Let’s be clear, I think I’m getting the short end of the deal here. Pricing so low is a way of investing into my audience as well. If you trust me early, you get a good deal. If you wait, well later the price could be higher.

As Babylon burns, we’ll light the cigars.

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The first bet is on the company. The second is on everything around it: the market, interest rates, the mood of other investors that month.

You can be completely right about the first and still lose money because of the second.

Picture the best house on a street in 2007. It had the best roof, the best kitchen and the biggest garden. Then the whole street fell 30%, and the best house fell with it. Being right about the house didn’t protect you from the street.

A long/short trade is a way to bet on the house without betting on the street. Or at the very least, of having some elements of a thesis offset to isolate those which are of interest.

A lot of investors are afraid of going short, but with a long / short, I know it can be done in a responsible manner. Especially with country ETFs where you’re using a full basket of stocks to express a view rather than two volatile single stocks.

To extend the metaphor from above, think of the world stock market as a city and each country as a street. When the whole city falls, nearly every street falls with it. You can own the best street in town and still lose money in a city-wide crash.'

A country long/short trade is a way to bet on one street against another. You buy one country’s fund, which is your long. At the same time, you short another country’s fund.

Whether global stocks rise over the next six months is a question which is hard to answer reliably. As I pointed out in my live session the other day, this market could very easily go both ways.

So you need to do your homework so that you can express a view.

Take an oil refiner and an airline, for example. The refiner sells fuel. The airline buys it. If fuel stays expensive, the refiner keeps more of every barrel and the airline gives more of every ticket away. In a recession, both shares can fall. The pair can still pay, because the airline falls further.

Country funds make this especially interesting. People talk about buying Canada or selling Mexico as if a country were one thing. A country fund is a bag of businesses with a flag on it. One might be a third banks. Another might be mostly factories and chipmakers.

Here’s the test I use before putting the trade on. I have to be able to say, in one sentence, what must be true for the long to beat the short.

For the refiner and the airline, the sentence is that: fuel stays expensive and the company selling it keeps more of the money than the company buying it.

And then you judge the pair as one position. If the long is up 10% and the short is up 14%, you don’t have a winner and a loser. You have a losing trade.

Today I reveal to you the 3 other Long / Short trades I put on yesterday, as well as more positions I’m initiating at market open. It’s a great time to be a stock picker.

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And, of course, right now I still view the energy trade, which has been paying us extremely well in the past month and, I think, will continue to do so through October. As Don Johnson’s line goes: “patience through October”.

However George does have a point. I’ve been thinking: exposure of the Babylon Burns portfolio needs to go beyond simply the energy trade. Ultimately, we will be either right or wrong, and while preliminary indications are showing that this trade is going our way, I also want to have more distinct trades being placed within the portfolio.

To that end, we already have an allocation to healthcare positions, which have an idiosyncratic nature, and a handpicked selection of misfit software and payment stocks, which I believe balance out the portfolio nicely.

Today, I am adding 4 longs and 4 shorts, all of them framed as long-short pairs to the portfolio.

The idea here will be to expose my macro views through a handful of small trades, which I believe will add up to alpha.

As I put it in a post the other day, the best diversifier to my energy position should be skill. In investing, there is no better way to measure skill than through a long-short trade because you not only have to be right about what goes up, you have to be right about what goes down.

I’m keeping it extremely simple: Longs at 2%, Shorts at 2%.

So I’ll be adding 0% net exposure, but 16% of gross directional exposure to the portfolio.

These will all take the views of country ETF long-shorts, which should provide absolute diversification against US systemic moves.

In many cases, though, they still do express the bias that the energy trade expresses, which only reinforces my view on these (because I did a full analysis of the setups for basically any country that has an ETF and concluded that these were the four I wanted to go long the most and the four I wanted to go short the most).

I am giving away for free the first of the four pairs. However, if you want to get all eight of my recommendations, the four longs and the four shorts, there is no better time than today to subscribe to Babylon Burns.

The energy thesis is playing out nicely, and it is still time, I believe, to get in on this trade. Not only will you get all of my diversifying book, which has been initiated today, but you will also get all of my energy book so that you can be best positioned for this market, which is rapidly changing.

When you sign up to Babylon Burns, you will get:

• Access to all of my archive of research here on Substack

• Access to today’s report as well, obviously

• Access to my web application, which gives you the live Babylon Burns portfolio where members receive live notifications when things are published

• My charting software for free, as well as all of my charts, so they can view them as the situation evolves.

Just one successful trade can more than pay for your Babylon Burns subscription. We just closed today a trade in Illumina (ILMN) for a 38% gain since inception.

I was not interested in holding this stock going into earnings and after the S&P 500 re-inclusion. A lot of the momentum has waned. One trade like this could pay for way more than one year’s dues to Babylon Burns.

That being said, all of this is for information purposes, and you should do your research. We are all adults here. We need to be responsible and take accountability for our actions. I do not know your risk profile or what trades are right for you. Click below to get started.

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You’ll get the first one for free today, and if you sign up you get all the trades today, and the reports on the other trades coming out tomorrow.

To get the first trade, all I’m asking of you is your email. I put a lot of work into my reports, and give a fair amount away for free, all I ask in exchange is for you to give me your email. I feel like that’s a pretty sweet deal for alpha, coverage of macro, and in general an honest voice with a solid track record.

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The habitual market commentators, with their perpetual bearish oil bias, jumped at the opportunity to suggest that it was a repeat of what happened in April, with physical scarcity disappearing.

I would highly recommend you take with a grain of salt anything that comes from an economist or any pundit who doesn’t actually have to be right about investment decisions and can just comment on markets and the economy at will.

Because on the very same day, the December Brent contract settled at $109.86, which was $3.94 higher than the previous day, when it closed at $105.92.

This was highly unusual, and X spaces popped up discussing whether this was insider trading, whether we were going to have war this weekend, and/or whatever spin people wanted to put on it. I instead decided to go back through every single trading day since July 2007, which is 4,737 sessions, to see if this convergence of front month up, Dated down, had happened before at any meaningful size. In the past 19 years, it has not.

The spread between Dated Brent and the front month went from a $20 gap to a $7 gap in one session.

In this article I’ll be:

• Explaining the linkage between Dated and front-month Brent. Never be confused about them again.

• Analyzing what happened in March and April, and why this looks different.

• What I believe truly happened on Friday.

And all I am asking of you to read this article is your email address. I spend a lot of time researching these topics and writing these reports. I put out a lot of information for free.

Handing over your email address in exchange for honest analysis which will help you navigate the markets seems like a pretty good deal to me.

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There are some Substacks you read for entertainment, and some you read for education.

And then there are the ones you read because they’ll make you money.

Babylon Burns is meant to be the third kind. Since 19 June I’ve published 34 pieces here, more than 86,000 words, and about two thirds of them are free. That’s the equivalent of a short book, and until today nobody had told you where to start.

This page fixes that. I promised it in the Saudi piece on 12 October, so grab a coffee.

I’ll tell you who I am in one paragraph, give you the whole thesis in two minutes, explain how I run money, hand you a reading path for whatever brought you here, and then show you every call I’ve made in front of free readers, with the losers left in.

Before you go any further, put your email in. It helps me in more ways than you know, and I help you out too: every free report lands in your inbox the day it’s published. It’s a pretty good deal.

Who’s writing this

I’m Sam Kovacs. I’m Franco-British, Dubai is home base, although I live a rather nomadic life, and I’ve published equity and macro research publicly since 2015.

I did my undergrad at HEC Montréal and my Masters in Economics at Sciences Po Paris, and I launched my first investment newsletter on Seeking Alpha while I was still a student. With my father Robert, I run the Dividend Freedom Tribe on Seeking Alpha, where the three portfolios I’ve managed have beaten the S&P 500 while invested in conservative dividend stocks. I was CIO of Havelet Bay Capital, a macro hedge fund, and I’ve advised sovereigns on economic policy, most recently in São Tomé and Príncipe and Madagascar.

On 21 February 2026, with oil at $66 to $72, I sent a note to a short list of associates and clients saying the market wasn’t pricing the risk of US military action against Iran, and that the asymmetry favored long energy, defense and shipping. A week later the war started. The note is reproduced, dated, in the first piece I published here.

My good friend George Noble convinced me to start writing in public. And one commitment up front: everything recommended in these letters is mirrored with my own capital. I eat my own cooking.

The thesis in two minutes

Everything I publish is downstream of two ideas: debasement and multipolar fracture.

Growth runs on three fuels: demographics, productivity and debt. The first two have been sputtering for decades, so the West kept pressing the debt button until it went numb. US federal debt has gone from 37% of the economy in 1970 to over 120% today.

When debt gets this big there are only a few ways out. Austerity loses elections. Default is unthinkable for the issuer of the world’s reserve currency. So debasement gets chosen again and again, government after government, in every heavily indebted democracy on earth.

At the same time, the post-1990 order is splitting into blocs that no longer trust each other. A fractured world builds two or three of everything it used to build once: chip supply chains, payment systems, munitions factories. That duplication is staggeringly expensive, and expensive means inflationary.

Based on my research, money has a half-life of about fourteen years. Save a dollar at twenty and by your seventieth birthday it buys an eighth of what it did. If the currency loses 8% of its real value in a year and your portfolio gains 8%, you didn’t make money. Only the return above the rate of debasement is real.

If you’re running as fast as the other guy, you’re on a treadmill and going nowhere.

That logic narrows the field to five themes: hard money, resource scarcity, global rearmament, the demographic dilemma and restructured rails. The themes tell me where to look first. They don’t fence me in, and some of the best ideas in the book fit none of them. We also need flexibility as the market conditions evolve. There are times when I don’t want to touch some of the themes above.

In investing as in comedy, timing is of the essence.

If you read one thing after this page, make it They sold you a dream and you bought it wholesale.... Every other piece hangs off it.

How I run the book

Knowing what to own is half the job.

The gold bugs have been telling you to buy gold for decades. The oil bulls want you in oil, the tech bros want you in semis, and the warmongers want you in defense. They’re all right at times and wrong at others, because themes don’t pay out in straight lines. A theme can be completely correct and still spend eighteen months going nowhere.

So the portfolio runs on a system, and I gave the whole system away for free in How I’ll Run the Babylon Burns Portfolio (and the 9-Bagger I Fumbled). Here’s the short version.

I lay a seedbed. New ideas go in as starters of about 1% of the book. Their purpose isn’t profit. Their purpose is attention: real money, even a little, forces you to watch a thing in a way a watchlist never does.

I know my exit before my entry. Every position comes with a stop, a chart level or a dated event that ends it.

I love to lose and hate to win. Most starters die within a few months, and dying costs pocket change. For instance, a position in Leonardo DRS was stopped out at $42 on a 1% position, a 0.05% hit to the portfolio, and the stock later traded down to $36.

I add on evidence: new information, a sharper thesis, or price confirming the story. Doubling down on a loser is your ego. Doubling up on a winner is the system. And there’s no cap on winners, because trimming your best idea to feel prudent is how 9-baggers become 2-baggers.

The reason for all those starters is arithmetic. Say one idea in ten becomes the kind of winner that carries a year. Five ideas gives you a 41% chance you caught one. Thirty ideas gives you 96%. Cut twenty-seven failures at a 10% loss on 1% starters and they cost 2.7% of the book. One survivor that triples pays for all of them twice over. I laid out the full math in the free opening of 4 new hot stock picks added to the Babylon Burns portfolio.

Everyone wants the tenth idea. Nobody wants the nine that bought it.

The charts come in at the last mile. I look at daily and weekly candles in the Richard Schabacker tradition to time entries and set stops, once the fundamentals and the catalysts have done their work. If you’ve wondered why there are so many triangles in my reports, read “Sam, Why are you so reliant on technical analysis?” (SPOILER: I’m not). Almost all of it is free.

Where to start, depending on why you’re here

Pick one path and read it in order. You’ll know within an afternoon whether this letter is for you.

If you’re here for oil and Hormuz. This is the biggest opportunity I see, and it dominates my positioning right now. Start with How the US manipulates oil prices (30 July), which explains why crude was being held down into the midterms and why suppression always ends discontinuously. Then read Why I’m buying a Norwegian microcap to play the Permian (14 July) for why the Permian is the only supply on earth that can respond within a year. Why haven’t my oil stocks MOONED yet? (15 September) explains why producers trade on the strip and not the front month, and it’s the piece to reread whenever the stocks lag the barrel. Exposing CENTCOM’s 1 Billion Barrel Lie (21 September) does the arithmetic on the official flow numbers, and Why I Expect the Hormuz War to Escalate Again (26 September) lays out where this goes next. The macro half of Why you never raise rates into an oil shock (17 September) is free. Then watch my hour with Trader Ferg in What’s the most asymmetric energy setup right now? (7 October), and finish with Short Idea: Saudi Arabia, the country priced for peace (12 October), which I opened up in full.

If you’re here for hard money. Start with Why I’m not touching gold miners with a 10ft pole (yet) (10 July). I like gold. I don’t like miners as a structural holding, and Newmont’s production per share falling 48% since 2011 tells you why. Then read EVERYTHING you need to know about silver (7 September), which is free from top to bottom: why the indiscriminate sellers are gone, why mine supply can’t respond, and where my model puts fair value. The free half of the launch post (15 August) tells the story of gold since Nixon closed the window. I then subsequently closed Silver and Gold positions. Thesis is right, timing not yet.

If you’re here for ageing America and healthcare. Start with From $12 to $0.67 and back: You can’t unplug your nephew (26 July). An ageing electorate guarantees the spending, and the money flows to the one segment of Medicaid nobody can cut. Then I’m up 20% in 2 weeks on this unknown pharma stock (11 August), built on a hand-collected dataset of 21 FDA human-factors rejections since 2010. After that, the free industry openings of four paid pieces give you the whole map: The Boomers Strike Back (18 August) on senior housing, where the industry would need about 13 times the current build rate; Left for dead (20 August) on healthcare sitting at 7.3% of the US market, near a thirty-year low; “There’s Violence in the Streets Over These Issues” (28 August) on claim denials; and Anxiety is a growth industry with 15% margins (19 September) on outpatient mental health.

If you’re here for rearmament and aerospace. Read There’s a 50%-margin monopoly hiding inside the airline industry (26 June), on the oldest global fleet on record and the engine shops that service it, then the free opening of The Only Bull Market Politicians Will Guarantee (19 August). Fair warning: this has been my worst theme so far, and the record below shows it.

If you’re here for tech and the AI cycle. Read Meta Just Exposed the Biggest Problem in the AI Trade (3 July), the most-liked piece I’ve written here. It follows the unwind from GPU rental rates through the neoclouds, the memory makers and the hyperscalers, with the levels I was watching on each.

If you want to get better at this. Read Find Alpha or Die Tryin’ (21 August) on the misfits and on PayPal, then Wall Street left this ex-market darling for dead (26 August), whose free section tells my Nexstar trade in full: bought around $80 in 2020, sold around $180 in 2026, about 2.6 times my money including dividends. Finish with Explosive setup (30 September), which uses Spotify’s 2022 to 2024 recovery as a template for spotting the moment the market changes its mind about a loss-making business.

If you’ve read this far, you’re the kind of reader I write for. Put your email in so the next one finds you.

The public record

Plenty of newsletters will show you the winners. This one shows you EVERYTHING.

Below is every position call I’ve made where a free reader could see it, measured from the level I published, with prices as of 13 October. Where a pick’s name sits behind the paywall, I’ve kept it there, but I’ll still tell you how it ended. The losers stay in.

The other picks I teased in free view (28 August, 13 September, 19 September and 30 September) are all still open, and members have the names and the numbers.

As a whole (as of October 13th), the Babylon Burns portfolio is up 2.1% since it started trading on 17 August, against 0.2% for the S&P 500, with about a fifth of the book in cash.

On 6 October I told you it was flat, and I’ll keep telling you where it stands whether it’s flattering or not.

Count the exits in that table. Most of them are losses, and none of them cost the book more than about 0.75%. That’s the seedbed working as designed: lose a little often, and let a handful of winners pay for everything else. Petrobras alone has made back most of what the stops cost.

It’s early. Two months tells you how a system behaves, and very little about what it’ll return. But you can check every line above against what I published at the time, and that’s the point.

What free gets you, and what paying adds

Free gets you the macro essays, the industry thesis that opens most paid posts, full reports whenever I decide to open one up (like the silver report and the Saudi short), the videos, and this record. That’s a lot, and I’m happy to give it away.

What free can’t give you is timing. A free write-up always reaches you after I’ve already put the position on. That’s the reality of a weekly newsletter, and it’s why the stock picks, the sizing, the stops and the exits sit behind the paywall.

Babylon Burns is $399 a year or $100 a month, and every member gets everything: every pick with its size, stop and exit, plus the web app with the live portfolio, trade alerts by email, monthly tear sheets and the Studio charting tool. Annual works out to about $1.10 a day, a third of what twelve monthly payments cost. Substack gives you seven days to read everything and take your money back.

It’s not the ideas, it never was the ideas. It’s what you do with them.

How to get the most out of the free tier

Put your email in, so the reports come to you instead of you hunting for them. If you read on your phone, the Substack app is the cleanest way to do it.

Read the founding essay first, then one reading path from above. Don’t try to read all 34 pieces in a weekend.

Comment. I read the comments and I answer them. The technical analysis piece started as a reply to a member’s question that got too long for the comment box.

And follow me on Notes and on X at @SamKovX, where I think out loud between reports. The dated calls with levels stay here.

That’s it. Welcome to Babylon Burns.

Babylon is burning. My promise is that as it burns, we’ll be the ones lighting the cigars.

As Babylon burns, we light the cigars.

Sam Kovacs

Babylon Burns is written for informational purposes and not to be construed as investment advice. I write about what I own and how I think. Your decisions are your own; do your own work before acting on anything here.

There are certain things which just take time. Buffett would say that you don’t make a baby in one month by getting 9 women pregnant.

Bearish compression of the Saudi stock market has been running for years now, since peaking in April of 2022.

It is extremely rare for me to initiate short positions, as I usually favor the asymmetry, which a long position offers me. However, the technical setup, along with the market’s perpetual mispricing of the risk of the current conflict, and a natural transmission risk into the Saudi economy, suggests to me that initiating a short in the iShares Saudi Arabia ETF ($KSA) presents a brilliant risk-reward here.

In 2026, the market has acquired an ugly reflex when it comes to Saudi Arabia; missiles hit, oil price rises, and investors choose to look past the damage inflicted. This cycle has been going on for 7 months now, but in the past month, the paradigm has changed, and the price of the index is starting to validate that.

An increase in the price of oil can compensate the kingdom for barrels it has lost, but it cannot reopen Saudi airports. The Saudi stock market doesn’t reflect this at all. It’s as if the country is priced for peace.

The Houthis struck the the domestic terminals at King Khalid Airport, on Saturday afternoon, killing 13 people and wounding more than 300, according to Saudi authorities. This made it the deadliest attack on Saudi soil in over a decade.

On Sunday, the same airport was struck once more, killing yet another person and injuring even more.

Today, the aviation authority has extended the airport’s closure to at least October 17. I believe this closure is likely to be renewed.

In today’s report, I will be explaining why I believe the iShares Saudi Arabia ETF is an interesting short, where my targets are, so grab a coffee, because it should be an interesting read.

To be clear, I do not seek to profit from war, I seek to profit from a mismatch between reality and the numbers. I believe the market has been too complacent in rerating the Saudi Arabian stock market, and that this gives us a good opportunity for a trade, with the fiscal direction changing.

I pray for peace, and for the war crimes which have occurred all over the Middle East to cease, but in the meantime, finding the opportunities for investors is my job.

Paid member housekeeping

It seems like you’re not a paid reader, so this small section is not for you.

Don’t worry. I’ve opened up the entire article on Saudi Arabia for free.

However, if you want to know my latest targets for Brent and two stocks which we exited today, the two we initiated positions in, and if you want access to my full body of work, then I highly suggest you join us on the Babylon Burns adventure.

I believe that it comes as no surprise to you that Babylon is burning. My promise is that as it burns, we will be the ones lighting the cigars.

If you want access to my macro research, to me hunting for the best idea before it becomes consensus, at the very least, put your email in so I can send you the free reports. If you want all of the extras, access to my web application, and so on, join for a paid subscription.

You won’t regret it. I won’t regret it. It’ll be a great time.

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So far, investors have looked through the conflict...

Insofar as our investment analysis is concerned, Saudi Arabia is a country which is attached to an oil company, Aramco. The country drills and refines huge amounts of oil, which it then puts onto the sea, either through the Strait of Hormuz or through the Red Sea. It ships it to Europe or Asia and gets paid for it. It then pays out to the state through dividends, royalties, and tax. So long as enough barrels get out at a price that’s high enough, then the war premium on price can compensate for a big part of the disruption.

Early on in the war, when Hormuz was entirely closed by the Iranians, Saudi Arabia pushed oil through its east-west pipeline line to Yanbu on the Red Sea. When, on July 20, the Houthis closed Bab al-Mandab, the kingdom turned around and started shipping oil back through Hormuz using the ship-to-ship (STS) method, which allowed them to shuttle oil out and keep flows going.

You must realize that Brent averaged $67 in January and February, then $88 in August, and $102 in September. Even with the East-West pipeline down for 11 days after drones launched from Iraq shut it down, the exports from Saudi were largely enough for it to continue taking in significant revenues.

And if you take the 5.4 million barrels per day that exited Saudi Arabia in September at $102 a barrel, they brought in more revenue than they would have with their full level of exports before the war started.

In the first half of the year, state oil revenue rose by 9%, and Aramco reported $33.4 billion in adjusted profit for the second quarter.

So it is natural that many are thinking that April to August was a blip, and that we are now back on track.

If you only look at the barrels and the price in the rearview mirror, then Saudi Arabia is looking like it’s coming out alright. So far, this is the calculation that the market has been making, as the share price is only a few percentage points below where it was when the conflict started.

In many ways, the problem hasn’t been oil revenue for Saudi Arabia, but more the knock-on effects that happen from this war.

There are two fronts to this war for Saudi Arabia now

The first remains the kinetic escalation threat. The Houthis have hit refineries time and time again in the past few weeks, and increasingly so since October, targeting the pipeline, oil fields, and refineries. So far, it is too early to say whether this has seriously hindered flows, but preliminary numbers suggest the answer is yes.

If it has, there is no question that it will therefore hinder Aramco revenues and therefore hinder state revenues. But the more important and maybe less priced development, I believe, is the recent expansion of the war to atrocities on civilian infrastructure.

Last week King Khalid Airport was hit by missiles on four separate days.

The Houthis have declared Saudi airspace a theatre for their operations and told Aramco’s workers they’re targets. On Sunday the Saudi aviation authority confirmed a strike on Dammam’s airport, and the Houthis claimed hits on two Aramco energy sites that Riyadh hasn’t confirmed. By Monday afternoon Cirium counted 46.4% of all scheduled flights in the kingdom cancelled, and Riyadh’s schools had moved online.

A pipeline and a refinery strike cost Saudi Arabia barrels of exports, and they’ve been compensated for these with a higher price of oil. Also, it should be noted that no one is as skilled as the Saudis in rapidly repairing their pipelines and their refineries.

However, a closed airspace costs Saudi Arabia its visitors, conferences, and investment from the foreign companies that Vision 2030 was written for. Triple-digit Brent doesn’t help a single bit here.

Saudi Arabia’s Vision 2030 requires 150 million yearly visits and $100 billion of foreign direct investment each year before the end of this decade. Even before the Houthis struck the airport, foreign arrivals were down 13% in the first quarter. Riyadh’s hotels were earning 26% less per room through August, and foreign direct investment had declined by 18% in the second quarter, about a quarter of the pace that the government’s programs require.

Riyadh’s King Khalid Airport transports about 29% of the kingdom’s air passengers. Lufthansa has already suspended Riyadh until October 16, and Air France-KLM until the end of the month. Britain, France, and Germany all advise against anything but essential travel to the capital city.

Thankfully, Medina and Mecca have been excluded from the Houthi areas of attacks, which means that pilgrims can still travel. Rather, it is commercial travel for investors, which is slowing down. The World Petroleum Congress opened this Monday without the chief executives of Exxon, Shell, Total Energies, and BP, who, according to the Financial Times, cancelled their visits. The Crown Prince’s investment conference is due to open in the city on 26th of October, and it is difficult to imagine how attendance and turnout will not be impaired at this point.

The consequence of course, will be the strain on the budget deficit, on economic growth, and therefore on the banking sector.

Government revenue rose 6% in the first half and spending rose 15%, with SAR 125 billion going to the military. The deficit for the first six months of the year amounted to SAR 160 billion against a plan of SAR 165 billion for the year. On September 30th the ministry raised its estimate for the year to SAR 245 billion.

That estimate leaves SAR 85 billion for the whole second half. Last year the deficit stood at SAR 181 billion in September and the fourth quarter alone added SAR 95 billion.

To hit it, second-half spending has to come in about 10% below the first half, during a ground offensive in Yemen. Last year it ran 11% above. The ministry’s estimate for 2025, made last December with weeks of the year left, was also SAR 245 billion. The outcome was SAR 277 billion.

I am therefore estimating a SAR 300bn deficit for the year. Could be higher.

All of this has come from higher borrowing, 73% of which has been issued domestically to the banks.

The Saudi Stock market is mostly banks

Saudi banks hold SAR 676 billion of government and quasi-government paper, almost two-thirds of the state's domestic debt, and their lending to state-owned companies grew 18.4% in the year to August.

Their deposits haven't kept up. Bank credit grew 7% over that year and the money supply 5.6%, and in August the money supply shrank. Fitch had the sector's loans at a record 108% of deposits at the end of 2025. The banks cover the difference abroad. They owe foreigners SAR 217 billion more than they hold overseas, and that figure grew 3.1% in August alone.

Riyadh ran this experiment in 2015 and 2016. Oil collapsed, the deficit blew out, the government drew down its deposits and sold bonds to its banks, and the interbank rate rose for 15 straight months. The peg held and the banks survived. KSA launched in September 2015 and lost 28.8% in its first four months.

Now, of course, my base case here isn’t that oil will collapse. However, it is that the expected foreign direct investment doesn’t come in anywhere near expected. Expenses blow out way above anything that is expected, and there remains the kinetic risk that outflows don’t come in anywhere near expected. All of these would point towards further losses, which the banking system must absorb.

The early sign this time is in the provisions. Al Rajhi, one of the country's two largest banks, grew its profit 14% in the second quarter and its impairment charges 46.8%.

When people think about the DIshare Saudi Arabia ETF (KSA), they think of an oil fund because they think of Aramco, but that categorization is incorrect. Financials are actually 41.7% of the fund, and energy is only 12.4%. What’s more, Al Rajhi is the largest holding at 13.9%, ahead of Aramco at 11.4%. The nine Saudi banks together make up 36% of the fund.

In my scenario, it is now seeming extremely likely that these banks own less than their current price assumes. The fundamental transmission towards a lower stock market index seems complete. As a whole, this fund, which is, like I said, 42% financials, still trades at 2 times book value, which would suggest that it is growing at around 6.1% per year. However, the ministry expects the economy to shrink 3.6% this year and has built its 2027 budget assuming growth of 12.8%.

For comparison, Al Rajhi trades at 3x book and earns 19% return on equity, which, of course, is excellent on an extremely low cost base. While profits grew 14% in the second quarter, as I said above, impairments grew 47%. If you compare this to Emirates NBD, which earns 17% and trades at 1.3x book with a loan-to-deposit ratio under 19%, you see that it is trading on a sound balance sheet in a safer environment right now and has around half deposits (which, of course, leaves a lot of room for Al Rajhi to re-rate lower).

Saudi banks will be reporting within the next two weeks. Saudi National Bank reported last year on the 20th of October, and Al Rajhi on the 27th. What we’re likely to see is that profits are still rising, but impairments are arising faster, and more debt is borrowed abroad. This means that, for now, the headlines will still look fine. This is an important but: the technical setup is suggesting that the market is now looking forward and prepared for a serious re-rating towards the downside.

The technical setup

For some reason, I feel like I have to keep justifying my use of technicals, but nonetheless, I believe doing so always provides an opportunity for education. Technical analysis is effectively a ledger of everything that was bought and sold by the market. It tells you at what price, in what volumes, and when people transacted. It would seem natural to me that behavioural patterns might be observed through such setups.

For the past 5 years now, the KSA ETF has been in what is known as a declining triangle, where the highs are sequentially lower and the lows form a flat line. Once that line is breached to the downside, if it stays there, it is extremely likely that we can see more share price declines.

Richard Schabacker, the father of technical analysis (and a fundamental piece of work to start with, it is 97% of my technical analysis education) had this to say about these setups:

The form of Right-angle Triangle, with its hypotenuse slanting down from the beginning of the pattern to its conclusion, is called a Descending Triangle, and almost invariably forecasts a downward movement to come. The Right-angle Triangle with its hypotenuse slanting upwards is called an Ascending Triangle, and it almost invariably forecasts a subsequent advance.

The Right-angle Triangles are, therefore, much more valuable for the purposes of practical forecasting than the Symmetrical Triangles. We have seen that the Symmetrical Triangle offers the decided drawback of not forecasting, in itself, the direction of the [eventual move].

The immediate targets in this case are $32 and then $27, which are prior levels of resistance and support.

I am setting the stop loss at $36.5. The methodology would suggest $36.2, as it would be just above the last engulfed candle (which you can see in the magnified section of the chart. This comes from Peter Brandt, who was well documented in Market Wizards, and is a trick which is part of the 3% of non-Schabacker sourced technical education.

So we’re putting $1 at risk for every $4.3 of potential return in my baseline $32 case. If we reach $27, we’re looking at a phenomenal 10:1 risk return ratio.

The setup is skewed in our favor.

I don’t like war, but we need to trade the numbers and where the puck is going.

The puck is going in a direction which suggests we have a lot to gain by going short here.

As Babylon Burns, we’ll light the cigars.

Liked this article?

If you liked this, you’ll love Babylon Burns, and I strongly suggest you join us. I work pretty much around the clock to find the next big idea.

12 days ago I picked an investment which was a Chinese company listed in the US which had nothing to do with oil & gas. We’re up 20% as this has rerated hard.

I seek out value, and try to put myself at the inflection of that value rerating.

Right now my focus on the Hormuz conflict does dominate our positioning and therefore our coverage, but only because it is the biggest opportunity.

I am not an energy only analyst, I’m an all equity analyst, and will continue to bring you the next big trade before it becomes consensus.

If you join Babylon Burns, you’ll get access to:

• My whole library of research.

• The Babylon Burns live portfolio.

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• I’ll be publishing this week a “Getting Started with Babylon Burns” article, which means that even if you’re coming in now, you’ll be able to use it for guidance in deciding how to position yourself in light of all my research.

So what are you waiting for? Come smoke a cigar with us, and if you don’t smoke a cigar, at least pick up a good stock idea. It only takes one for the subscription to pay for itself. I’ll see you on the other side.

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On August 17th, I wrote an article titled “The Big Long.”

Since then, most of the events that I thought would occur have occurred. And our book has done reasonably well, increasing at a faster rate than the S&P Oil and Gas Exploration and Production ETF.

But with all the indications now that we’re heading towards much more escalation in the current month and that the whole situation of stocks and flows is getting more and more complicated, I believe it is time to recenter the book on plays that make a bit more sense given the current environment.

It was always expected that this would be how I would proceed. I’ve signaled many times that I would add to winning positions and curtail losing ones, and this is exactly what I am doing today. Beyond a separation between winner and loser, it’s more okay, given the scenarios in which I expect WTI to go up, but Brent also to have a violent move up. In between now and mid-November, we need to find places where we have high talk on those movements.

And this is where we must move some of the book away from more of a resilience trade (or places where hedges reduce the amount of upside that’s available to us) and find purer expressions in the equity world of what we want to express.

1. What price is the barrel that the company sells?

2. How much of that price does the company realize?

3. How much of what it realizes goes down to the shareholder?

So if you’re building a portfolio with hedged, Canadian, diversified, and long-dated energy stocks, that’s exactly what you want.

If you don’t quite know which which way this conflict will go. Now that we want to express our view with much higher conviction (it was, of course, already quite high conviction with the 45% exposure), I’m looking for less resilience in some places and more talk. This will inform, in a lot of sense, the names that are going and coming out of the portfolio and those which are coming in.

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The big move is still brewing

On the twenty eighth of September, I said that this conflict had no choice but to re-escalate. Since then, ever more tankers have been hit inside of Hormuz and outside of ports in the region, with the IRGC saying that they will extend targets to any ship in the region which they believe does not comply with their rules.

The Houthis have escalated their war in Saudi Arabia, targeting both civilian infrastructure and the East-West pipeline, as well as different refineries and oil fields throughout the country. This is putting a strain on what can possibly come out of the country in the upcoming month. Regardless of the exact details of when the pro-Houthi propaganda is being oversold on X or the Saudi Arabia government messaging is being too conservative on X, there is a clear case to be made that my general thesis of this conflict reescalating is playing out.

Dated Brent, which is the price of physical cargo that actually clears, has been trading well above futures for the whole quarter, which is exactly what an actual squeeze looks like. Europe is going into winter with its gas storage 71% full, which is the lowest since the records began in 2011, and all the while Qatar gas is still stuck behind the Strait of Hormuz.

Our position in PetroBas has paid off extremely well, and I believe it will continue to do so. I’ve been looking for names which would fit the same bill and which would benefit members equally going forward.

If you join Babylon Burns today, you’ll get this summary, which gives you exactly where my mind is at with the energy trade: what it’s leaving and why, and what we’re doubling down on. This will help you inform your views on the entire Hormuz selection and not the Hormuz selection on the whole Hormuz trade.

Beyond that, tomorrow I’ll be releasing an article on my favorite other Hormuz trade, which is totally ignored by most of the markets, misunderstood, and which I believe has maximum convexity going into the fourth quarter.

On top of this, you’ll get access to the Babylon Burns web application, which comes with custom charting software, member videos, analysis, and live notifications on the portfolio.

Given how Babylon Burns has grown since the mid-August launch, I can’t promise today’s price will hold for long. If you join now, you lock it in, and one good idea pays for the whole subscription.

Join Babylon Burns today.

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Today, I’m just going to put up a short video introducing you to the new free perk that all Babylon Burns members get as part of their subscription. This is at no extra cost to you. I built it for myself, but I figured that everyone would benefit greatly from having it, so it is being included for everyone.

I did a short video presenting it. I hope to be doing a lot more video content in the future as well, which will not at all reduce the amount of text content that you can expect. It would only enhance it because there are days where I don’t quite feel like writing, and I would much rather just talk, show a few charts, and discuss where we’re at. That will be coming in an upcoming series that I will hint at and present a little bit in today’s video.

If you enjoyed this, let me know what you think. You can check it out by going to https://app.babylonburns.com and hitting Studio. You can use as many layouts as you want, and you have the charting tools. I’ll still be adding more. You can always just drop me a DM if something didn’t quite work as you expected it to.

I explain how to have multi-pane layouts, but you can also have multiple single ones. There is a DBAA clause attached, which is a “don’t be an asshole” clause. If you use and abuse this system, I will have to limit your usage. Otherwise, there’s no reason why most of you can’t enjoy this greatly.

I will be monitoring your usage, however. Be sure of that. Without further ado, check out the video. Let me know what you think. This is totally free (for paid members). Added value for you, whether you use it or not. It will, at the very least, help me produce videos using this tech, so we can talk through stocks and sectors in the future.

As Babylon Burns, we like the cigars.

Skill that extends to the trading room, where he has been doing extremely well on contrarian bets.

There is naturally one contrarian bet which is lining up quite nicely: The energy trade.

We talked for an hour discussing:

• Where we currently are with the energy trade.

• Why this conflict just won’t go away.

• What each of our favorite positions are.

• How one could possibly hedge their exposure to energy stocks.

• And much, much more.

You can watch the episode below. Make sure to check Ferg’s Substack out by clicking here.

(Yes, I’m way overdue a visit to the local barbershop)

It closed Monday at $24.14 having returned 34% in 7 weeks on the initial investment, and 30% overall on the full investment.

It has climbed to a 6.5% allocation in the portfolio.

When I first bought the stock in the Babylon Burns portfolio, I added the note to members:

“Deeply discounted cash flows and a payout that hands most of them back. A rerating to peers gets us paid with oil going nowhere. Higher oil is the bonus.”

On Monday crude oil fell. While I believe there is a very good chance the worst is past us when it comes to spot oil, and that the back-end of the strip will continue to rerate higher, Petrobas didn’t need any of it to increase by 11.5% on the day.

On Sunday, Brazil voted in the first round of its presidential re-election, during which Jair Bolsonaro upset the incumbent president, Lula, with 47% of the vote versus 45%.

That was in big part, why I liked Petrobras so much: we could buy its cheap stock that handed us back cash in droves, where there was a good domestic story for a re-rating without any help from the commodity.

Now, the unflattering part is that, despite this, the portfolio is currently flat since inception.

You should note that with this kind of strategy, where many small positions are taken and then turned over as stops are hit or I decide that they are not worth taking, this kind of behavior is to be expected in the inception months (during which the winning trades haven’t fully had time to play out). The losing trades, which are validated much faster, drag the portfolio down.

But there is one of our stocks which has been doing extremely well, and it is up 45% since we added it to the portfolio in mid-August. It has made up for most of the losses that we have realized on small stop losses and any other unrealized losses. At this point, I still expect to ultimately resolve and go my way down the line. Of course, that won’t be the case for all of the positions, but what I mean to say is that I like where the book is positioned right now and will continue to generate more ideas.

Paid members get a full portfolio report below. Every position I closed and what it cost. The September decision that turned a 3% gain into a 3% loss in four weeks, and why that was still the right decision.

They also get the whole book. All 30 positions, with the winners and losers named and sized. That includes one stock that’s up 54% since August and has nothing to do with oil.

And they get what I’m doing with Petrobras before Brazil votes again on 25 October.

Plenty of newsletters will show you the winners. This one shows you EVERYTHING. Winners, losers, PNL.

Of course, until it’s been a year or two, there is little value in measuring the behaviour and performance, but if anything, the preliminary data is showing that the strategy is at the very least a great diversifier to the S&P 500. My expectation is that the alpha is still all there to be unlocked, making this a wonderful time to join Babylon Burns.

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At the end of 2022, Spotify had 205 million paying subscribers.

(This is not an article about Spotify)

It also had a €659 million annual operating loss.

Its shares closed the year at $78.95, down 66% from the end of 2021. Its vast customer base had proven that people wanted the service.

It had not settled the question which shareholders cared about: could the company keep enough of its growing revenue to turn a substantial profit?

Revenue climbed from €11.7 billion in 2022 to €15.7 billion in 2024. Gross profit rose faster, from €2.9 billion to €4.7 billion, while annual sales and marketing expense fell.

By 2024 Spotify was reporting €1.37 billion of operating profit. Its stock ended that year at $447.38.

Anyone who bought at the end of 2022 had seen the share price rise 5.7-fold in two years.

Revenue was already growing when the stock was distressed. You could see where the puck was going.

The market changed its mind as more of that growth reached operating profits. Investors who waited until it turned a profit were faced with a much less attractive entry point.

That is the attraction of a recovery investment. It is also the danger: improving sales can disguise a business that will never earn an adequate return.

I have identified a company which is still in the less comfortable point in its recovery sequence.

A shock destroyed much of its original business. It has since rebuilt, sales are growing again, and losses are narrowing.

Full-year profitability remains unproven, but my modelling suggests a good chance of getting there.

As is usually the case in these scenarios, the stock is priced as though the recovery deserves very little credit, while a large balance sheet appears to offer protection.

I have bought shares because the market appears to assign almost no value to the rebuilt operating business.

That is either a mistake we can profit from or a warning I should heed. The price action is starting to suggest it could be the former.

If we’re right, this could offer very compelling returns.

This article is so good it’s for paid members only…

If you want to read it, join Babylon Burns today (7 days moneyback). You’ll get this stock idea, and much, much, more.

You also get the full research archive and my live portfolio in the Babylon Burns web app. I publish every entry, trim and exit with its price and reason; the web app emails you when I trade.

The complete record stays visible, losses included. Join Babylon Burns to follow this investment beyond today’s article.

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The media reported that Iran said it could reopen Hormuz within seven days if the US lifts its blockade, releases frozen funds and ends hostilities across the region.

Trump, very soon after the market closed, said Iran is running out of money, and that they are in a strong position, and bombing could resume after the midterms.

I have treated these talks as smoke and mirrors.

Neither government has publicly accepted the concessions needed to restart the June bargain.

US-protected oil traffic has given the US a belief that they do not need to concede any of Iran’s requests.

That makes further maritime escalation before year-end extremely likely in my view, even if the largest American strikes wait until after the November midterms.

The chance of Iran esacalating on its own timeline, should not be ignored now.

Washington’s wager

Trump set out the American strategy in a July 13 Truth Social post:

This article is free to read when you sign up with your email. In it, I answer:

• Why do I think the Iran peace talks are smoke and mirrors?

• How is protected tanker traffic changing the balance between Washington and Tehran?

• Why does that make renewed escalation extremely likely?

Click here to sign up for free and read the article.

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If you choose a paid subscription, you’ll also get access to all my research on how we’re actually trading these developments.

That isn’t a confession. It’s the business model, and I’d rather explain it than have you find out by reading the scoreboard in December.

Thomas Edison tested thousands of filament materials before carbonised bamboo held a charge for more than a few hours. His line on his process was five words long: to have a great idea, have a lot of them.

Every investor worth their salt, I’ve ever met would nod at that.

But almost none of them run money that way. They run five or ten positions they can defend at a dinner party, each one a thesis, each one loved, and they wait. Then they wonder why the year produced nothing, and they blame the market.

The market didn’t do it. The flawed approach did.

Say one idea in ten becomes the kind of winner that carries a year. I think that’s about right for anyone doing real work, and it’s flattering for most. Now count the shots.

Five ideas in a year: a 41% chance you caught one. Twelve ideas: 72%. Thirty ideas: 96%.

The dinner-party investor with five loved names has a coin flip’s chance of owning the year’s winner at all, and he’s paid for that coin flip with all of his conviction. The person running thirty scruffy ideas through a decent process has nearly a certainty, and paid for it with a lot of small, boring, forgettable losses.

Peter Lynch owned 1,400 stocks at Magellan at the peak. People laughed at it then and still do. Lynch’s answer was that the person who turns over the most rocks wins the game, and he put up the best public record of his generation doing exactly that. He wasn’t smarter than the fund next door. He looked at more things.

Here’s what the losses cost. Take thirty ideas, each a 1% starter, and cut the ones that fail at a 10% loss, which is roughly where my exits sit. Twenty-seven failures cost 2.7% of the book across the year. One survivor that is 3xed to 3% of the book and triples pays for all of them twice over.

So my job isn’t picking. It’s throughput and discipline, in that order. Generate more than feels comfortable. Buy a small piece of ideas that earns a second look, so I actually want to watch it. Write down the date and the number that ends it before the first share is bought. Then let the calendar do the killing, and let whatever survives the calendar get bigger.

Four went in this morning. Each one would get laughed out of a committee, and I can give you the sentence that does it.

The first: “AI is going to eat this thing.” The market said it in February and the stock lost a third of its value in one session. The AI builders are now its largest customers, and last quarter it made an operating profit for the first time in its life.

The second: “The regulator rejected them three times.” The regulator rejected the building. The three letters said so, in writing, and found nothing wrong with the drugs. The building passed reinspection in July, and the three decisions are due in the first week of December. My base case says the shares are worth a fraction of today’s price and my bull case runs to double it, which is why it’s 1% and not 5.

The third: “It trades in a jurisdiction half your readers have sworn off.” Fine. It also trades below the cash in its own bank account, so you pay about $67 million for a business doing close to a billion dollars of revenue, and the founder who controls the votes has been buying it cheaper than I did. He’s also the reason it stays at 1% until a few specific things change.

The fourth: “It’s already up 150% this year.” It is. It’s also 93% below its 2021 high, and there’s an accounting charge of about $105 million a year that rolls off between this year and next and adds four points of margin without the business growing a dollar. Nobody’s priced that yet. They’re too busy looking at the 150%.

Everyone wants the tenth idea. Nobody wants the nine that bought it.

But the ideas are so good that they’re for our paid members only.

Babylon Burns is $399 a year or $100 a month. One idea that works pays for that a dozen times over, and the point of this letter is that you don’t get the one that works without paying for the nine that don’t. If you want a single ticker with a story you can repeat at dinner, this isn’t for you. If you want to watch thirty ideas a year go through a machine that kills most of them in public, and own the survivors before anyone’s calling them survivors, that’s the whole reason it exists. Substack gives you seven days to read everything and take your money back, so read the four dossiers first and decide after.

Find alpha or die tryin’.

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There was a time when we had statesmen who wanted the public to know the truth and who defended what was right morally. Those times are gone.

As Abraham Lincoln once said:

No man has a good enough memory to make a successful liar.

On September 19, Admiral Brad Cooper said U.S. forces had helped move more than one billion barrels of crude oil through the Strait of Hormuz “in the last couple of months”.

This isn’t up for interpretation, it is spoken word for word in a video.

A billion barrels in approximately two months implies an average above 16 million barrels a day.

But put that claim alongside CENTCOM’s earlier announcements and the arithmetic becomes considerably more demanding.

The final three weeks would have to average approximately 32 million barrels a day.

I checked the work on the GOVERNMENT supplied numbers, and the math doesn’t math.

If you value the truth, and you want an analyst who is honest about the situation, not managing a narrative, and who is only seeking to find out the truth and help individuals profit from what is a really messed up situation, then enter your email below.

It helps me more than you know, and I’ll share a mix of free and paid content to help you navigate the economy, geopolitics and make money in this market.

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Breaking down CENTCOM’s numbers.

On July 20, CENTCOM reported that its forces had helped facilitate approximately 450 million barrels of crude oil since early May. I will link to everything so you can check for yourself. (CENTCOM release.)

On August 28,Cooper’s update: the vessels assisted by American forces had carried nearly 750 million barrels.

Think of those cumulative totals as odometer readings: subtract the earlier reading to find what moved in between.

750 million − 450 million = approximately 300 million barrels.

July 20 to August 28 is 39 days. The implied average over that interval is therefore:

300 million ÷ 39 = approximately 7.7 million barrels a day.

Keep those 300 million barrels in mind.

Now return to September 19.

Cooper described more than one billion barrels moving in approximately two months. Use July 20 to September 19: 61 days, with a dated CENTCOM reading at the beginning.

Under that reading, the 61-day window must contain at least one billion barrels.

Yet CENTCOM’s earlier figures account for only about 300 million during its first 39 days.

That leaves:

1,000 million − 300 million = approximately 700 million barrels.

And there are only 22 days left, from August 28 to September 19.

700 million ÷ 22 = approximately 31.8 million barrels a day.

The two-month average hides the extraordinary acceleration needed to make it work.

The final 22 days must average roughly four times the rate implied for the preceding 39.

Those are the barrels Cooper’s wording requires. Where are the daily figures showing that acceleration?

Before the Strait of Hormuz was impaired, 20 million barrels made their way through per day.

For their numbers to work, you need 22 uninterrupted days at 150% of prewar traffic.

That is a period when VLCCs were blown up by mines, missiles, and traffic was only moving through a thin Omani corridor.

A billion barrels since when?

There is a straightforward possible explanation: the billion-barrel figure was the latest milestone in the cumulative count that began in early May.

The problem is that the choice of words was deliberate to imply that it was in the past couple of months, which people extrapolated to the last 60 days, which as I believe I demonstrated above, is untrue..

That would follow naturally from the earlier readings:

450 million. Nearly 750 million. More than one billion.

Using one billion as an approximate total, early May to September 19 gives an average near 7 million barrels a day.

Compress the period to approximately two months and that becomes more than 16 million barrels a day.

Of course this is night and day, it’s the difference between 70% back to pre war conditions and half of pre-war flow

Anyone who understands anything about oil markets understands the difference between a 3-4mbpd gap and a 10 mbpd gap.

The cumulative would suggest 11mbpd coming out in the past 22 days, possible, although on the higher end.

A higher sustained flow means more supply reaching the market, less pressure on inventories and a weaker case for scarcity pricing.

If the billion-barrel count begins in early May, CENTCOM should correct the time description.

If it begins around July 20, the earlier readings leave approximately 700 million barrels requiring an explanation in the final three weeks.

CENTCOM should publish the starting date and the daily totals behind the announcement.

If one billion barrels genuinely moved in approximately two months, show where the remaining 700 million barrels fit.

Until then, the claim should not be treated as evidence that Hormuz flows have returned anywhere close to normal.

You don’t get to conveniently “slip up” and have all the stenographers on X and in the media repeat it without checking the work.

The public deserves better.

Patience is required, this conflict isn’t resolved, flows haven’t recovered nearly anywhere near to where they want you to believe.

And even if the flow is recovering somewhat, the inventories have been fundamentally impaired.

Patience is required through October.

As Nietzsche would say:

I am not upset that you lied to me, I am upset that from now on I can’t believe you.

And like Yogi Berra would say:

It ain’t over ‘til it’s over.

As Babylon Burns, we’ll light the cigars.

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