Yesterday, I wrote about opportunity cost, one of the most important tools - bar none - in anyone’s decision-making toolbox. 

Almost immediately after we published the piece, I received this in the mailbag:

Sean,

I tire of your rants about how you believe the Iran conflict is ill-conceived. In your latest post, The Unseen Cost, how exactly did it help me to be a better investor for you to go on and on about things I cannot directly control? I submit it is devoid of such value. I can’t stop the Iran conflict even if I agreed with you, which I don’t. Get serious about adding value to the subscriber’s day. I have much else to read that actually enhances my life and financial investing strategies.

Shalom,

Michael M.

Astonishing.

Anyway, I thought I’d use today’s Rude to spell out exactly what you can do about unseen costs.

First, if you’re new to the Rude, you might not know I recommended buying Palantir (PLTR) in October 2023 when it was about $18/share. I reasoned that if you can’t avoid being spied on, you may as well make some money out of it. One of my friends and subscribers bought a nice Toyota Forerunner with his profits.

Second, I have neither the time nor the inclination to hang on to the President’s every word. And I certainly don’t have someone inside the White House who tells me to buy the SPX and sell WTI 15 minutes before the President announces a ceasefire, a ceasefire Iran officially denies ever agreeing to.

Those two premises show how we can attack this contest, and more broadly, invest in this climate.

Holding Cash Versus Investing Rashly

First things first. You don’t need to be 100% invested this very minute. Yes, the unseen cost is inflation eating away at your dollars. Of course, here at the Rude, we think the CPI is a nonsensical number that nowhere near reflects the true inflation in the economy.

To make the math simple (and closer to reality than the official CPI), let’s assume inflation is 12% annually. If you take a month to think things through, it’ll cost you 1%. I’d rather pay that than make a poor decision that will cost you far more.

In fact, my friend and colleague Jim Rickards recently said, “Having a larger-than-normal cash position during times like this makes sense. Upside in stocks is limited while downside risks are elevated.”

I couldn’t agree more.

Oil Services

As for tickers, let’s begin here.

If you start a war in the Middle East, oil prices will increase. It’s as true as the night following the day.

Of course, you can’t stop a war from happening when Congress won’t stop the Executive from committing to one. But you can invest in oil and oil services firms.

Since the offensive began, Valero (VLO) is up 16%. ExxonMobil (XOM), up 5.66%, and Chevron (CVX), up 9.88%, have also performed well. I expect that to continue.

I don’t think this war is ending anytime soon. Short oil and oil services at your peril.

Brazil

My friend and colleague Adam Sharp hit this one out of the park. Petrobras (PBR), Brazil’s oil company, has nearly doubled since the beginning of the year. But it’s been particularly strong since the war began.

I’m glad I own it. In fact, it’s the only stock I own right now. (My portfolio is 12% PBR and 88% cash for now.) I’m taking my time with this choppiness.

You may be wondering why I’m not including Vale (VALE), Brazil’s standout mining company.

Since the beginning of the conflict, Vale is down about 14%, closely following the performance of the rest of the world’s miners.

Palantir

Let’s get back to my old friend, PLTR.

After falling out of bed since the end of December, PLTR staged a massive comeback since the late unpleasantness began.

While military-industrial complex stalwarts, such as Northrop Grumman, Raytheon, L3Harris, and Lockheed Martin, have faltered, Palantir is the USG’s preferred AI system.

Again, you (and the bad guys) are going to get spied on. You may as well profit from it.

Wrap Up

My favorite old curmudgeon of a philosopher, Arthur Schopenhauer, once said, “Talent hits a target no one else can hit. Genius hits a target no one else can see.”

Unseen costs are the targets no one else can see. But now, hopefully, you’ll start asking yourself that all-important question, “What is the unseen in this situation?”

As you get accustomed to doing so, you’ll develop your critical thinking muscles and find more places to put your hard-won savings.