You have to turn the lights on or nothing happens. You need both the lights and the energy to power them. No lights, only energy? Nothing. Lights with no energy? Nothing.

Essentially you have to innovate or you never progress. Markets tend to rotate between those two broad sectors accordingly.

Go back to the height of the energy boom in 2013 and 2014. You couldn't give Microsoft away. Energy, on the other hand, could do no wrong. That was the time to own tech.

Then tech took a bottle of Viagra and proceeded to shoot the lights out from 2014 through roughly 2022 while energy was decimated and left for dead. The way it works is that the last clutch of investors in any given sector go about losing their shirts and as a result are extremely reluctant to re-enter it anytime soon.

Recall that in 2001, the NASDAQ pulled back by a whopping 75%. That unleashed a commodity supercycle that ran all the way to 2014. When the NASDAQ recovered to its prior high, oil rolled over almost to the day… and the cycle reset. History suggests oil goes up seven times on average during such a cycle. Historically, the NASDAQ gets taken down 50 to 75%.

We are at the point where we think both have pretty decent probabilities. Hence our long positions on energy and short positions on NASDAQ.