…not the stock market so much, where the same focus that governed last year–companies with costs in $US dollars and revenues elsewhere–remained in fine form on day one of 2026 trading.

Venezuela is the weird thing I see.

I can understand assertions that the Maduro arrest has been timed to distract voters from the ongoing Epstein files revelations and/or from Jack Smith’s testimony before Congress. Smith stated there that he had developed enough evidence to establish beyond a reasonable doubt that Trump did attempt to overthrow the government after he lost the 2000 election; and that his top secret documents crime was not possessing them after he left office in early 2021, but by failing to return them when asked and hiding them instead (the obvious question is why would one do so). As a human being and as a citizen, I find all this disturbing.

As an investor, though, I scratch my head trying to figure out why anyone would want to develop Venezuela’s relatively tar-like, high-sulfur, expensive-to-refine, heavy oil deposits, especially at a time when world demand for crude in general appears to me to be at best plateauing, and more likely in the early stages of secular decline.

Several issues:

–history shows even relatively small additions to global output–on the order of 1% or 2%– can trigger substantial declines in price.

–the parties most hurt by price declines will likely be, as they always have been, the highest-cost producers, that is, US-based frackers, who are also by and large strong Trump supporters. Price declines typically only stop when the highest-cost producers begin to lose money and/or go out of business

–Venezuelan oil might displace Canadian heavy crude, and US oil firms do have heavy oil-friendly refineries. Still, it may take years (a decade?) and billions in infrastructure investment to restore Venezuelan output to former levels. So investing there seems to me to be a risky bet on what oil prices will be a decade from now.

what to do?

I see this situation as a little like buying up Atlantic City casinos during the 1980s (btw, you can see my recent AC photos at danduandphoto.com). Nevertheless, US-based oil majors and oilfield service companies are up by 6-7%+ in pre-market trading this morning.

The Energy sector only has about a 3% weight in the S&P 500, even though the US is currently the world’s largest producer of oil. That’s less than the weight of any of the top five in the S&P (NVDA, AAPL, MSFT, AMZN, Google). For anyone not an oil and gas junkie, either neutralizing the sector by holding the index weight (arguably, the safer way) or simply having no oils (my approach), on the idea that the sector has to be up by 50% or so before it does any performance damage, are the easiest ways of avoiding having to spend time figuring the sector out.

My sense, too, is that professional equity investors worldwide are finding it increasingly hard to see any sound economic concept behind many of the administration’s other moves. As a result, for the first time in a quarter-century, professionals appear to be deemphasizing not only Energy but also US stocks overall vs. the rest of the world. The idea that seizing Venezuela’s oil is top of mind in Washington will likely only speed the asset reallocation.