Investing in the face of a War and High Oil Prices

Quiz!

What are ways to make money by staying out of the stock market for now?

  1. Move to cash until getting clarity about Iran in the near term.
  2. Move to US stocks that are perceived as a safe-haven for now.
  3. Move to cash for as long as it takes, until a resolution for the war is in sight.
  4. Move to bonds for safety.

Investing in the face of a War and High Oil Prices

Oil prices jumped over 50% in two months given the war in Iran, which borders the Strait of Hormuz – the biggest passage of oil for the world. Higher oil prices are inflationary, since they affect the price of gas for travel and shipping, heating oil, plastics including food packaging, fertilizers for food and more. The concern is that a rapid spike in inflation may lead to a global recession. One question is whether it is safer to invest for growth beyond inflation, or keep money not invested with the hope of buying lower. Here is what it would take for a successful bet on staying out of the market:

  1. The war continues with no signs of a potential improvement in passage of ships in the Strait, and you reinvest when uncertainty is higher, or
  1. The uncertainty continues for a very long time, with a spike in inflation hurting the economy. You invest when there is more clarity, but the economic damage is big, making the declines bigger than the gains thanks to the clarity.

Here are things that could lead to a missed opportunity:

  1. You keep money on the sidelines, and reinvest when there is clarity in the near term. When you see real clarity, big investment gains are likely to be behind us.
  1. There is some resolution before serious economic damage. So far, there are at least 30 countries committed to helping open the Strait. There are various paths to success, including one-sidedly stopping the attacks in Iran.
  1. Value stocks outside the US are priced around average, when considering inflationary forces that tend to increase the steady-state valuations (as measured by Price/Book or P/B). Avoiding holding them is very different from US Large Growth stocks that are priced extremely high – potentially higher than any other time since 1929.

At this point, it is impossible to be certain that one approach is better than the other. There may be more factors beyond those presented in the article. Please don’t use this information as personalized investment advice.

Quiz Answer:

What are ways to make money by staying out of the stock market for now?

  1. Move to cash until getting clarity about Iran in the near term.
  2. Move to US stocks that are perceived as a safe haven for now.
  3. Move to cash for as long as it takes, until a resolution for the war is in sight.
  4. Move to bonds for safety.

None of the answers is correct.

Explanation:

  1. Once we have real clarity about Iran, we would likely have big gains behind us. If this happens in the near-term it is likely to offset declines leading to it.
  2. While US stocks are often perceived as a safe haven at times of uncertainty, their extremely high valuations may more than offset the benefit. In addition, the reversal for non-US stocks is likely to be significantly steeper, given the combination of lower valuations and higher growth.
  3. This could work if there is a long path to a resolution of the war, and the economic damage is big enough to offset the spike in stocks due to more clarity. Given the risk of high oil prices, the world is more likely to find a resolution before letting the damage build up, so it may be a risky bet.
  4. Bonds do poorly when inflation goes up and interest rates may increase to fight the inflation. While economic damage typically leads to lower interest rates, when having to choose between fighting inflation vs. a recession, the choice is likely to be skewed towards fighting inflation, because high inflation can worsen a recession. In addition, in case of a resolution of the war before sustained economic damage, you could miss a surge in stocks.
Disclosures

Do you Know the Real Value of your Private Investment?

Quiz!

If you have $10M in public investments and another $20M in private investments, and spend $600k per year. What is your withdrawal rate for risk planning?

  1. 6%
  2. 2%

Do you Know the Real Value of your Private Investment?

Bluerock Total Income+ Real Estate Fund was a private fund, until going public (symbol BPRE) on 12/16/2025. On that day, shares were traded at a loss of about 38% to the private share price. What happened? Private shares may not have ongoing trading information, so their stated price is not always reliable. In contrast, public investments typically exchange hands multiple times each day, creating the most reliable pricing data – what actual buyers are willing to pay.

This exposes an issue of private investments. Not only could they be locked for years, but their stated price may be flawed. This is not a reason to avoid all private investments at all times. It is a reason to do very careful risk planning around private investments. Examples of risk planning include:

  1. Making sure you have enough public investments that you can sell on a dime to buy food and pay your bills whether in retirement, between jobs or during a slowdown of your business.
  2. When calculating your withdrawal rate for risk planning, use annual spending divided by liquid investments (excluding private investments). This matches daily spending with investments that can be sold at any point, and at a reliable price.

Once you are able to and choose to sell your private investment, it can be used for spending with a known value and can be added to your risk plan. While this may seem harsh, I witnessed too many surprises with waiting for a liquidity event that failed on timing, value or both.

Quiz Answer:

If you have $10M in public investments and another $20M in private investments, and spend $600k per year. What is your withdrawal rate for risk planning?

  1. 6% [The Correct Answer]
  2. 2%

Explanation: You can’t reliably sell a private investment at its stated price to cover current expenses. For risk planning, it is safest to ignore it until sold. This means that your withdrawal rate is not $600k/($10M+$20M) = 2%, but $600k/$10M = 6%.

Disclosures