Inside today’s Daily Journal…

Air campaigns don’t win wars.

While I hope there’s a miracle in Iran, it seems extremely improbable to me that the U.S. / Israeli missile and bombing campaign to force regime change in Iran will quickly lead to peace. Likewise, it’s virtually certain that instability in Iran will lead to more violence as multiple factions begin to compete for power. How that will impact energy prices in the short term and the long term is far from certain… but higher prices for longer is the most likely scenario.

You may recall that I’ve been raising the “warning” flag that a 1970s-like stagflation scenario is emerging. Yesterday I explained how consumer credit is rolling over and the next sign of an emerging recession would be job losses. And today’s jobs report was far weaker than expected, with the economy losing 92,000 jobs since January. Looking at the jobs numbers it’s obvious that, in the private economy, a recession has begun.

With oil prices up 50% this year, the economic outlook is pretty grim. My 1970s scenario – weak earnings, high inflation – becomes more likely.

How can you manage these risks? Raise cash. The normal cash allocation in Porter’s Permanent Portfolio is 25%. If you’re looking at retirement in the next five years or if you simply don’t want to stomach the volatility that an ongoing war in the Persian Gulf is almost certainly going to cause, then I recommend selling out of bonds (aka, property and casualty insurance) and moving those assets into the “cash” bucket, which is made up of three short-duration fixed-income ETFs.

That would leave you with a portfolio that’s long stocks (25%) but hedged with gold and Bitcoin (25%) and a huge cash hoard (50%). If that seems far too conservative, keep in mind that Berkshire Hathaway is also holding a third of its balance sheet in cash.

Another way to hedge the risks of a wider war is to add exposure to the companies best positioned to profit from the ongoing disruptions to global oil supplies.

The escalation in the Persian Gulf has effectively shut down 20% of global liquefied natural gas (“LNG”) production (Qatar) and almost 20% of seaborne crude (Strait of Hormuz).

The most obvious trade is buying (or buying more of) one of our long-time recommendations, Venture Global (VG).

The company has rapidly become the second-largest U.S. LNG exporter behind Cheniere Energy (LNG) and is expanding its output faster than any other LNG exporter in the world. Venture Global’s Calcasieu Pass facility in Louisiana is already operating at scale, while the larger Plaquemines LNG project is ramping toward full capacity and its CP2 expansion is advancing. Combined, Venture Global can produce over 45 million tons per annum (“MTPA”) in the near term and should have 100+ MTPA capacity by 2030.

Qatar’s force majeure has removed millions of tons of LNG from global trade. Asian buyers, who take nearly 90% of Qatar’s output, and European utilities are already calling U.S. suppliers for spot cargoes. Venture Global’s portfolio is uniquely flexible: while it has long-term contracts with creditworthy buyers, about 30% of its total capacity is available to the spot market and can be redirected to the highest bidder.

Despite all of these factors, the stock is cheap because it carries a lot of debt ($33 billion) and there’s considerable execution risk in the build-out of its facilities. It’s trading at only 5x its 2026 estimated EBITDA (earnings before interest, taxes, depreciation, and amortization). With LNG cargo prices rising, Venture Global could spike to over $50 this year. It’s currently trading around $12.

The other major energy source flowing from the Persian Gulf is, of course, crude oil. And the main beneficiary of crude oil shipping disruptions will be Frontline Plc (FRO).

Frontline operates the world’s most modern oil tanker fleets, including 42 Very Large Crude Carriers (“VLCC”). These massive vessels are designed specifically to haul crude oil on long-haul routes, like the Persian Gulf to Asia, and carry 2 million barrels of oil per voyage.

A normal VLCC voyage from the Persian Gulf to China is about 25 days. Rerouting around Africa adds 10 to 15 days and thousands of extra miles, effectively doubling the tonnage required to move the same volume. With hundreds of tankers stranded waiting for insurance clarity, the spot market has tightened dramatically. Day rates for VLCCs have hit all-time records above $423,000 – levels last approached only briefly in 2020 and far exceeding the $50,000-$70,000 range seen in calm markets.

CEO Lars Barstad has long positioned Frontline for exactly these scenarios: The company has minimal long-term charters. Its VLCCs and high spot-market exposure mean its fleet-wide average time-charter equivalent (“TCE”) earnings can surge faster than any peer. In past crises – 2019 drone attacks, 2022 Russia sanctions – Frontline delivered outsized returns as rates spiked. But this time the scale is larger. A sustained disruption in the Strait of Hormuz could keep rates higher for months, not weeks.

The stock is trading higher, up about 100% from before the war started. But at $34 per share, it is still a long, long way from its all-time high price above $300. It also pays a very good dividend.

If the war continues for years, the world will seek supplies of oil far from the chaos of the Middle East. A certain beneficiary of that – and of higher oil prices in general – are U.S. based suppliers, especially those with growing, low-cost production reserves. APA Corporation (APA) – formerly Apache – has the most to gain from that scenario.

APA, which has long been a Porter & Co Asymmetric recommendation, currently produces 400,000-plus barrels of oil equivalent per day from its core U.S. shale fields. But the reason to buy the stock is what’s coming next: the development of the Gran Morgu project, Block 58, offshore of the South American country of Suriname.

Suriname sits in the same geological basin as neighboring Guyana, whose Stabroek block has become one of the world’s most prolific new fields. (For details on Stabroek, Complete Investor subscribers can see our recent recommendation of ExxonMobil.)

APA holds a 50% working interest in Block 58 alongside operator TotalEnergies. The field is expected to deliver its first oil in 2028, with 220,000 barrels per day capacity. Capturing the higher Brent oil price will supercharge this field’s economics: each $10 move in oil will add hundreds of millions to APA’s annual free cash flow. Today the stock is still incredibly cheap – trading for less than 10x earnings and pays a great dividend. Along with ExxonMobil, APA is a very low risk way to hedge the risk of much higher oil prices.

Finally… There’s one business that exists because of the inherent instability of the world’s markets.

Glencore (GLNCY) is the only major commodity-trading house that U.S. investors can easily buy. Founded by Marc Rich in 1974, Glencore is a metals and oil trading firm. More recently (2013) the company merged with Xstrata, a massive Swiss-based commodity producer (coal, copper, zinc, nickel) to become a diversified mining and marketing giant.

When the world gets turned upside down by a war, Glencore makes a fortune. It has an unparalleled ability to deliver whatever the world needs, no matter what is happening. The company is justly renowned for discretion and, like any good smuggler, has long operated as though the rules were for other people.

The other guys’ political risk is Glencore’s opportunity. When physical flows break – whether from sanctions, wars, or weather – regional price spreads widen, freight rates surge, and counterparties need financing. This is like Christmas morning to Glencore’s traders. They capture geographic arbitrage (buy cheap stranded Gulf barrels, sell into Asia at premium), time arbitrage (stored in floating or onshore tanks), and quality arbitrage (blend to customer specs).

In the 2022 Russia-Ukraine shock, Glencore’s marketing EBIT exploded to multi-billion-dollar levels as it rerouted Russian crude and captured massive spreads.

Glencore’s integrated model adds ballast. It produces some of the commodities it trades (copper, coal, oil), reducing counterparty risk and giving it first call on volumes. Its global network of storage, ports, and vessels is unmatched. While mining assets provide steady cash flow, the marketing arm delivers the high-beta upside in volatility.

In a prolonged Persian Gulf crisis, Glencore’s ability to charter tankers, finance stressed producers, and optimize global flows positions it to generate outsized returns.

Plus… it’s just one of the coolest businesses in all of finance. These traders are real-life James Bonds.

So, if you believe, as I do, that we’ve kicked a hornets’ nest by starting a war with Iran, these four positions are a great way to hedge the growing risk of stagflation in your portfolio.

And, one more thing: I told you yesterday that we should be watching the weekly bank reserve numbers to confirm continuing increases to banking system liquidity.

As I explained, gold has moved higher because of expanding credit. But if we’re entering a credit default cycle, credit expansion will reverse and the price of gold will, most likely, decline. In contrast, Bitcoin is correlated to changes in liquidity, not credit creation.

Banking system liquidity (as measured by reserves on deposit with the Fed) is down about 8% year over year and was falling for most of the last year. But those declines bottomed in late January and have begun to reverse. The most recent data (out yesterday) reveal reserves passed through the $3 trillion level, after hitting a low of $2.9 trillion in January.

As the Fed continues to buy Treasury bills ($40 billion a month), liquidity will continue higher. And if there’s a dislocation in the bond market, caused perhaps by spiking inflation, I have no doubt that the Fed’s purchases of Treasury securities will grow more rapidly. Thus, for now, I suspect Bitcoin offers investors a better hedge against monetary chaos than gold.

Tell me what you think: [email protected]

Good investing,

Porter Stansberry
Stevenson, Maryland

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1. The Strait of Hormuz is effectively closed. Traffic through the Strait – one of the world’s most important shipping lanes for energy, fertilizer, and other goods – has ground to a halt since the U.S. war against Iran began Sunday, putting a huge portion of the global economy at risk. Potentially compounding this problem, Qatar’s Energy Minister Saad al-Kaabi told the Financial Times this morning that his government expects all energy producers in the Persian Gulf to declare force majeure and shut down all energy exports within weeks if the war continues.

2. Energy prices soar as the Middle East conflict escalates. Oil just crossed $90 per barrel – surging 57% year to date. Gasoline at the pump in the U.S. is up 11% in just four days – to $3.32 per gallon – the largest increase since Hurricane Katrina in 2005. Meanwhile in Europe, spot natural gas prices have skyrocketed 89% year to date. And mentioned above, Qatar’s Energy Minister just told the Financial Times: “This war could bring down the economies of the world.” We are on the precipice of something big – and it’s about to ripple across the global economy.

3. The economy continues to shed jobs. This morning the Bureau of Labor Statistics (“BLS”) reported the U.S. economy lost 92,000 jobs in February, well below expectations of a 50,000 decline. This marks the third time in the last five months that payrolls declined. The unemployment rate also ticked higher again for the second consecutive month to 4.4% from 4.3% in January.

Shares of APA Corporation (APA) broke out to a new 52-week high as the global energy crunch pushes up oil and natural gas prices. Subscribers to Porter & Co’s Asymmetry are sitting on gains of 80% since we recommended APA shares in March 2025.

In yesterday’s Daily Journal, in the context of the debate about whether artificial intelligence will kill or actually support subscription software businesses, we asked Journal readers about their investment outlook toward leading customer management platform Salesforce (CRM)… Nearly half of survey takers (48%) said they would sell shares if they currently owned them, while 36% would hold onto shares, and 16% would buy more shares.

Helen B. writes:

Porter Comment: I hope today’s Journal will give you more guidance. I think it’s prudent to raise some cash (not sell everything) and make sure you’ve got enough exposure to energy, which I’ll note was our main investment theme this year – before the war started.

Jeff Q. writes:

Porter Comment: If you think it’s cheap or easy to run a business like mine, then I invite you to try it. It is very expensive to reach new potential subscribers. We typically lose money on each new subscriber and, on average, will only make a profit when (or if) a customer renews. But, as you surmise, the economics of my business are outstanding. Porter & Co.’s revenue growth, renewal rates, ARPU, and profit margins are all more than double the industry’s average. Likewise, at Stansberry Research, after starting with a borrowed laptop and $36,000 in capital, I grew the business (sales and profits) at 30% a year for 20 years. We never had a down year. And we put zero additional capital into the business, before selling it at a $3 billion valuation. I’ll give you two guesses as to why my companies thrive, why many of my competitors end up failing, and why most people are thrilled to pay our low subscription prices. Hint: if you’ve ever been to my annual conference, you’ve seen this firsthand.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current portfolio page of the relevant service, here. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.