Oil, goddammit! Oil.

I remember chatting about it (oil) early in 2020 with a guy who’d made more money by 30 than I’ll probably make by 50, and more legal money by 30 than I’ll probably make in my life, and do you know what he told me, that guy? Well, I’ll tell you what he told me. That guy — a former professional trader — told me to “be careful,” when I mentioned I might buy some oil and gas ETFs.

For context, I was just then starting to get back into my version of “active” trading. For me, “active trading” just means buying anything other than VOO, or shares in sundry manifestations of low-cost balanced index funds. (You know, that “dumb” strategy that made millionaires of so many boomers and older Gen Xers.)

I need to hedge here, because it’s entirely possible that guy (the former pro) still has our actual conversation stored in his Twitter DMs or e-mail somewhere, whereas I don’t, so I can’t recount the exchange verbatim.

If I recall correctly, our conversation unfolded prior to, or at the onset of, the epic oil collapse which ensued when Saudi Arabia’s comically ill-timed price war with Russia collided with the pandemic demand shock. If you pull up a chart of VDE, you can see it plunged by ~60% from mid-January of 2020 to the March 2020 lows. So, if the conversation I mentioned above took place in January or February of 2020, then lord knows this former pro’s “be careful” warning was prescient.

But I’m relatively sure his (accidentally condescending) exhortation that I not buy oil and gas stocks had not much to do with geopolitics nor pestilence, but rather with the simple fact that the damn things (the energy ETFs) couldn’t get out of their own way.

Even before the February/March 2020 crash, they were trading near their lowest levels since 2010. And indeed, that’s why I wanted to buy some. Unless they were going back to the post-GFC lows — or way back to the pre-2007 trading range — the question for XLE (and things like XLE) seemed to be, “How much lower can they go?”

The answer, as it turns out, was “A whole helluva lot lower, and in a helluva hurry.” But guess what happened once the bounced? This:

You don’t need a log scale yet, but… well, you get my drift. To the extent the former pro was laughing at me at the lows in March of 2020, when I’d just had my fingers chopped off on the first of my energy ETF buys (he wasn’t laughing, he didn’t care and probably doesn’t even remember our conversation), let me say this: Hardy har har, motherfucker. “Be careful!” Because you might get “tired of winning.”

Of course, I didn’t capture that entire ~430% rally. Not even close. Not even close to close. As noted, I bought some shares ahead of the egregious pandemic crash, which means my cost basis on those positions isn’t nearly as low as it would be if I’d just waited a couple of months to start buying.

As most of you’ve doubtlessly noticed, I don’t give a single damn anymore about any sort of decorum or discretion, so it doesn’t bother me in the slightest to “admit” that my overall percentage gain on XLE and VDE is a mere 146.01% and 129.78%, respectively as of… well, as of right now, this morning.

That’s 500 words to set up the chart below, which shows you just how beneficial big wars are to big oil.

Between them, Exxon, Chevron, BP, Shell and Total reported more than $56 billion in net income for Q3, the highest since the early days of the war in Ukraine.

In remarks to Bloomberg, Exxon CFO Neil Hansen said “windfall” isn’t the right word. “The most meaningful response to higher global commodity prices that we can offer as a company is to pull every lever that’s available to us to increase supply,” he said.

Fair enough. And listen, Neil, don’t be so implicitly defensive. It makes you sound guilty. Blood money spends just like any other money. I promise it does.

If you’re curious, my (paper) profit on those ETFs is about $15,000 so far. I’m sure the pro who warned me against them in 2020 would say that’s small change, particularly given how long I had to hold them to get there. But… well, we never buy less than 20, my friend, we make $2,000 off each one, and they’re gone by day four. So please tell me: What’s your $50,000 trade mean to me?

[For entertainment purposes only. The author’s joking, except to the extent that he’s entirely serious. Nothing in this disclaimer should be construed as clarification on that, or any other, point.]