Quercus

“There’s going to be a generational buy opportunity in oil….” 🔮 -Cem Karsan, May 10, 2025 ———————— “Stagflation, Storytelling, & the Search for a New Hero” player.captivate.fm/episode/4c8aa0… @TopTradersLive —————- In this episode Cem Karsan argues that structural forces—underinvestment in energy, geopolitics, and the broader macro regime shift toward commodities—could soon lead to “a generational buy opportunity in oil.” Across multiple interviews Cem Karsan repeatedly says the bottom will be identifiable through macro positioning and liquidity signals. These are the 5 main indicators he is watching 👀 for that would suggest the “generational oil🛢️ bottom” is forming. ⸻ 1. Supply Destruction in U.S. Shale Why it matters: Oil cycles historically bottom when producers stop drilling. Karsan notes that if oil drops enough: •Rig counts collapse •Capex budgets get cut •Production growth stalls ⸻ 2. Positioning Washout in Energy Markets Because Karsan runs an options-focused macro fund, positioning is one of his biggest signals. He watches for: •Hedge funds aggressively short oil •Long-only investors capitulating •Energy ETFs seeing large outflows This indicates maximum pessimism. The best commodity entries historically occur when: “everyone believes oil is going much lower.” ⸻ 3. Global Liquidity Turning Back Up Karsan constantly emphasizes liquidity cycles. Oil bottoms often occur when: •Central banks begin adding liquidity again •The market transitions from deflation fear → reflation This is when commodities historically launch into major rallies. Examples he references historically: •2009 oil bottom •2020 COVID oil crash Both coincided with massive liquidity injections. ⸻ 4. Energy Equity Capitulation Karsan often says energy equities usually bottom before oil does. Signs he would watch: •Energy stocks severely underperforming the S&P 500 •Dividend cuts or major pessimism in oil company earnings •Institutional investors abandoning the sector When that happens, value investors begin stepping in. Historically this marked the start of big energy bull markets: •1999 •2009 •2020 ⸻ 5. Geopolitical Supply Shock After supply is destroyed, a small geopolitical disruption can trigger a huge move. Potential triggers Karsan discusses: •Middle East conflict •OPEC production cuts •Sanctions on a major producer •Shipping disruptions When supply is already tight, even a minor shock can cause a violent oil rally. ⸻

Excellent episode with @CliffordAsness . One nugget that stood out - as an investor, you get to do a 'high five' only once - and that is when you retire. Humility and long-term discipline is the only way to win & if you forget it, the markets will find a way to make you humble.