The One Strategic Asset You Need to Own Now

In October 1973, Egypt and Syria launched a surprise attack on Israel. The United States quickly backed Israel with military aid.

That decision triggered retaliation from Arab oil-producing nations. They didn’t send missiles. Instead, they reached for a far more powerful weapon: Oil.

Arab members of OPEC implemented an oil embargo against the United States and other nations that supported Israel. Practically overnight, 12% of the oil supply vanished from the global market.

Friends, when the supply of the world’s most important commodity suddenly drops… prices explode. Oil prices quadrupled from roughly $3 per barrel to nearly $12 by 1974. That’s like going from $19.50 to $78 in today’s inflation-adjusted money.

That shock rippled through the entire economy. Gas prices spiked… Transportation costs soared… Food prices surged… And manufacturing slowed down.

Economists coined a term for the toxic combination of economic stagnation and high inflation: Stagflation.

Even though I wasn’t working on Wall Street at the time, I still remember stagflation and what happened afterwards.

I was born in London in 1971. So I was sheltered from what it was like to be a working adult during that decade.

What I remember of the 1970s is my parents complaining about the price of food and gas. My grandmother would tell me stories of how she used to be able to buy five chicken legs for 20 pence. Now, they were 20 pence each.

In the United States, things were no better.

Inflation averaged 7.1% per year throughout the 1970s… Peaking at nearly 14.5% by 1980. Like the UK, the United States experienced high gas prices, high inflation, high unemployment (7.5%), and lousy economic growth.

Here’s why I’m reliving one of the darkest chapters in U.S. economic history…

Since the start of the Operation Epic Fury on February 28, oil futures have surged – at times nearly doubling. When oil skyrocketed during the 1973-74 Yom Kippur War, the Dow Jones Industrial Average ultimately fell more than 45% from peak to trough.

Now, I’m not saying we’ll see a market collapse like that again. But the setup today is starting to look eerily similar to the 1970s… and I don’t believe the market has fully priced that in yet.

Oil Crises Can Send Shockwaves Through Markets