Passing [Liquified] Gas
A vacation to the energy markets.
Irrational Analysis is heavily invested in the semiconductor industry.
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Hello again. Hope everyone is doing ok given the increasing levels of kaboom in the middle east.
The huge OFC recap post is making progress and is expected to be completed by April 4th or 5th.
Additionally, the large project on AI hardware startups is making progress but having some trouble with MatX. Their public statements are vague and don’t make engineering sense. Have privately tried get them to disclose real engineering/design information with no luck so far.
Because MatX is the only AI hardware startup on my list who has refused to give any useful information to justify their questionable claims, I am planning to torch them. If there are any MatX investors or employees reading this (I know you are here), it is in your best interest to convince MatX to talk to me and at least have a say in the coverage.
Weights in SRAM and KV cache in HBM? Really guys?
Splitable systolic array? Why has nobody else done this? Google spent years researching optimal systolic array size. Is MatX using some exotic threading architecture with systolic arrays? No clue. Surely there is a downside to this?
I am very bad at trading under volatile macro conditions. Understand semis, understand nothing else lol.
Case in point, epic P&L failure in the last month.
The bad news is that the “risk level: safe” trading account is down ~$540K in the last… 25 days.
The good news is I no-longer owe any tax prepayment for Q1 2026. Was previously at ~$240K YTD realized gains and now at a strategic $34K YTD realized loss.
In fact, I am getting a nice tax refund soon because I over-paid my Q4 prepayment last year via typo. Accidentally sent the IRS $281K instead of $218K.
Hope the feds made good use of my $63K interest-free short-term loan. War is expensive.
My degen account is in a holding pattern with significantly less leverage than usual. Typically run 2-2.5X leverage long, no shorts no hedges lol.
Now at least I have positive cash balance, some shorts to hedge, and some buying power left over.
Waiting for macro shit to clear up is boring.
So let’s go on a vacation to the energy markets!
Almost every time I leave semiconductors, I lose money. Case in point, I have lost at least $30K trying to trade oil in the last two weeks. I don’t know the actual number. I don’t want to know this number.
The problem with oil is there are so many variants.
This is a vacation so let’s focus on something more simple. Something that has unique infrastructure, is even more degenerate/risky, and even involves frozen Europeans.
Natural Gas.
One of my favorite videos is of this degen who sold naked calls against natural gas futures and not only blew up but also delivered debt to his clients. Thats right, his clients lost all of their money and even got a bill from the broker due to negative account balance.
Unlike oil, natural gas is… as gas. So to effectively transport it over water, it must be highly pressurized into a liquid using specialized terminals and transported on specialized ships.
LNG coverage in the video starts at minute 10.
Like many of you, I have been following the… chaotic developments. One particular sequence of events caught my eye.
Israel bombed Iranian natural gas infrastructure, with the permission/blessing of USA. (attempt to force negotiations?)
Iran retaliated and blew up Qatar LNG facilities, taking out 17% of their capacity for the next 3-5 years.
Trump obviously panicked and told Israel to back off.
This tweet/post/truth/whatever_the_fuck reeks of panic.
Let’s take a look at why.
As you can see, Qatar is very important for the LNG market.
So to recap, liquified natural gas…
Requires unusually expensive and specialized ships.
Requires expensive, specialized, difficult to build/repair preparation terminals.
Has far fewer producers than oil.
Has several countries (Japan, South Korea, China, <large portion of EU>) dependent on it due to heating, an inelastic demand.
But wait, it gets more interesting.
European gas stockpiles are at historic lows.
If Iran situation escalates and the Strait of Hormuz remains closed, or even worse if more of Qatar LNG infrastructure goes kaboom and is offline for multiple years…
The United States is the largest exporter of LNG. There is a company with ticker LNG 0.00%↑ (great marketing guys) that is pure play on this potential war profiteering idea.
Cheniere Energy.
If Asia started to bid up American LNG because Qatar LNG is offline, that would spike prices crazy.
But everyone knows about lng shortage. Like every grandma in Germany even. It is in the press all over the place. It went up already, yes sure it can still. But this is not a "I know more than others" move but more of a gamble. Except you can back it by numbers why it should go up so much more.
Have a look at Equinor.. $EQNR. They took market share from Russia since the onset of the Ukraine conflict, and now supply up to 30% of Europe's total gas needs.. Their production capacity is 100% utilized and are fully sold out. Most importantly, they don't need ships to transport gas. Norway as a whole (mostly Equinor anyway) delivers around 95% of its natural gas to Europe through a subsea pipeline system and these pipelines serve as a critical, long-term supply source for North-West Europe, Germany, the UK, Poland (via the Baltic Pipe), and the Czech Republic
I like Cheniere too but you don't know when/whether the US may cap exports for their own domestic use.. or charge a windfall tax