ASYMMETRY
Living in the Wings
"Only those who will risk going too far can possibly find out how far one can go."
— T.S. Eliot
I want your best asymmetric plays. We have three legs of a great trade lining up. Then, factor in the legacy newsletters’ reliance on lazy AI and “seasonals.” End users remain uncovered because grain has been in a freefall since the summer of 2022, and nobody wants to pay the carry.
If. Let me repeat. If—these pieces come together, this is one of the best asymmetric setups of my career. WEAT being up 15% is great for the portfolio, but we don’t make “Don money” by allocating 2% to an ETF. We’ll get to what this means in a minute.
I take a lot of pride in the network this Substack is building: industry-leading farmers, business owners, and PMs. Sincerely, thank you. My readers are smart, and I want your feedback on this one—I implore you.
What I would like from this note are your best asymmetric plays. I will organize them and share them with our subscribers next week. I will share some of mine below to get the ideas flowing. Email me at nico@archaiq.ai or click here to send a message.
I have a friend; let’s call him Don. If you meet me in person, ask me about my “Don Stories.” I can ramble on for hours over a bottle of wine about how Don broke every trading rule to ever exist and somehow came out wealthier each time. I know this sounds like an exaggeration.
Ever try managing a massive short in a bull market with one phone call a day while watching delayed CNBC soybean quotes on a shared television—where the only reason your cellmates leave the financial channel on is that you’re paying for all of their cigarettes? Don’s done that.
Don was an OG floor trader who, at some level, is partially responsible for how rules around margin calls evolved. He wasn’t some large flow market maker, Don took risk—a lot of risk. Don likes to say,
“Every great trader has to go bankrupt twice. The third time was totally unnecessary.”
Today, Don trades mostly for fun and travels the world.
Pyramiding
Pyramiding is a trend-following strategy where you add to a winning position as the market continues to move in your favor.
Instead of putting all your capital at risk on the initial entry, you start with a core position. As the trade becomes profitable, you use the unrealized gains (paper profits) to finance the margin and risk for additional contracts.
“Extreme pyramiding” (a phrase I just made up) is borrowing more than your base capital to put all of it at risk, and then doubling down repeatedly.
When you ask, “How does one go bankrupt three times?” this is how.
When you ask, “How does one retire at 38?” this is also how.
We’ll come back to this in a bit.
Toxic Weather Words
One of the major problems with talking about big-picture weather trends is the association of specific words.
Climate change and global warming carry such loaded political meanings that people immediately check out. None of this is new; this article is from 1997. We’ve had two full-on food crises since then, as well as some of the cheapest food in history (inflation-adjusted).
It is common sense that the environment is affected by the billions of people living on it, but my cows farting isn’t some cataclysmic event the private-jet set elites should take to task. Even the “I want to share a flotilla with Greta Thunberg” dummies get this.
While the energy cartel routinely takes production offline to support crude prices, there is no such equivalent for wheat or soybeans. Farmers plant the seeds, apply fertilizers and chemicals, and Mother Nature does the rest. This is how agriculture works.
The world is setting up for one of the warmest periods in history. It has been decades since we’ve experienced a truly severe warming of the oceans to this extent, which is what drives the ENSO cycle—more commonly known as El Niño and La Niña. It is not “global warming” or “climate change”; it is the natural cycles of our planet.
Let’s make an effort to use the right words so we don’t alienate people.
We’ve all seen the black-and-white photos of people waiting in lines while America rationed gas in the 1970s. There are two reasons this will not happen in 2026. First, the American economy is far less petroleum-dependent on a per capita basis. Natural gas provides the BTUs for manufacturing, and America produces roughly 13.5 million of the 20.5 million barrels it consumes daily. Second, America can restrict exports to ensure domestic supplies, as it refines more oil than anyone else.
Fun fact: China has passed the US in total refining capacity, now nearly 19 million barrels per day (bpd); however, in terms of throughput, the US remains the world’s largest daily refiner.
While the president and the Energy Secretary have said they will not restrict exports, they are certainly exploring every possible way to bring fuel prices down. We covered this in our last note, Can’t Change.
There are not many options available because energy companies have built the infrastructure specifically to import crude oil and export refined products and natural gas. As global prices rise, these companies have more incentive to export.
I had a disagreement with Craig today because I view freight as the outlier. I think the American economy is strong, but not because of some “magical manufacturing renaissance” that is neither creating new jobs nor showing up in the FRED data.
I keep using the terms “$40 ribeyes” and “$6 gasoline” as the Memorial Day breaking point, because they are. My brother coined this phrase, and he is spot on; he gets the credit.
The reason I harp on the inflation point—the lack of job creation and constant government crowding out—is that it raises the floor on structural inflation. The 2% baseline is dead, and Americans are becoming increasingly angry. Home prices will not rise without massive rate cuts. I don’t see how Warsh can establish an iota of credibility if he cuts rates prior to crushing gasoline and crude oil prices. This is another tail trade I am putting on, covered below.
Let me say it again: Trump has to do something.
A few anecdotal figures provide context to the scope of what is coming:
Farm Input Costs: A typical 3,000-acre farm in Iowa uses 20,000 gallons of diesel each growing season. Every dollar increase in fuel is a $20,000 hit to the bottom line of this “average” farm.
Brazil Supply Constraints: Brazil imports the equivalent of 65,000–95,000 bpd of fuel, with the U.S. acting as the dominant supplier. While Brazil’s refineries are running at max capacity and the country produces over 3 million bpd of crude, it cannot increase domestic gasoline or diesel supplies in 2026.
India Fertilizer Risk: India has been cut off from 55% of its 195 million metric cubic meters of gas (primarily LNG). The downstream impact on fertilizers has not yet begun to be felt, even as Asia is warming. When I describe the scope of global wheat markdowns, I joke that I don’t even have a clue where to begin with India.
One note: We do not subscribe to these "doomer" posts. Yes, fertilizer exports through the Strait have come to a halt; however, we are not anticipating any doomsday scenario like the ones being described across X. These posts will gain traction, though, which will raise the floor on volatility due to this new “known unknown” risk.
Here is a great app for finding the best local gas prices—certainly a timely tool.
The Wheels are in Motion
Trump may say he can wait on the Strait of Hormuz—and Lord knows there’s a group of his believers who still think this is how things work—but it’s not.
The reason I explained that America is less dependent on the world for energy is that it provides a false sense of security. Yes, America can withstand an energy shock better than other countries. No, there won’t be fuel rationing à la the 1970s. However, U.S. gasoline and diesel prices will continue to converge with world prices (higher). The only way this organically corrects is a quick reopening of the Strait, with KSA, UAE, Venezuela, Libya, and Russia maximizing production while China and the United States keep all refined products moving to their destinations. Zero hiccups.
I specifically used the word “organically” because there are other ways this can correct, and that’s why I am buying tail risk all over. Something has to give. It’s that simple. The government will try to “solve this” and crush the crude inverse, or it will commit to a regional war and all production bets are off.
