After The Surrender
The Big Winner Is The United States
Many commentators now categorize the US-Iran Memorandum Of Understanding as being very close to an unconditional surrender on part of the United States. Based on the easing of sanctions, the postponement of nuclear negotiations, the partial opening of the Strait of Hormuz, the end of military operations and a 300 Billion Dollar “Investment Fund” (aka bribe) it appears that Iran has achieved most of its long term strategic objectives, and the United States has achieved nothing.
The Nuclear Option Substack fully agrees with the Unconditional Surrender analysis, and in addition we feel that this outcome has many benefits for the United States, including:
The 300B Bribe, even if paid 100% by US Taxpayers is a lot cheaper than an 8 Trillion Dollar Forever War like Afghanistan or Iraq
The US does not have to pay to rebuild the destroyed Military Bases in the Gulf States or pay for ongoing maintenance costs of the bases, because we probably won’t be invited back
The removal of Iranian Sanctions provides a new source of oil supply on the global market which will help lower energy prices and partially offset inflationary pressures from the failed war
Most important, the Surrender avoids an unprecedented banking and currency crisis that would result if Gulf States liquidate their sizable holding of US Treasury Securities to cover their expenses during a prolonged energy blockade.
The historical record shows that Unconditional Surrender is not always a bad thing. Japan and Germany both had positive economic outcomes after their Unconditional Surrenders in 1945. President Trump’s Bankruptcies in the 1990s offer another example of how financial wipeouts in the short term can lead to success in the long term, after an interim Blue Period.
Nuclear Option Readers visiting Berlin might consider taking an interesting side trip out to the suburb of Karlshorst to visit the site of the World War II Surrender from May 1945.
Back when I visited the site in 1985 it had two different names, in German (under the Communists) it was called The Historic Museum of the Red Army whereas in Russian it was called The Museum Of The Surrender. The name changed again after the fall of the Soviet Union in 1990 and once more in 2022 when the German Government removed “Russia” from the Museum name in the aftermath of the Russian Ukraine War/Special Military Operation.
Here is the description from the Museum Website:
The heart of the museum is the surrender room, which is in its original state and where a film continuously shows the signing the Act of Surrender in 1945. In addition to the redesigned modern exhibition rooms, parts of the original Soviet exhibition designed for Soviet soldiers stationed in Berlin can also be seen, as well as monuments from Soviet times. On the grounds there is a memorial in which a Soviet T-34 tank is integrated on a pedestal, as well as an exhibit of large items of Soviet military equipment from World War II and the postwar period.
Based on the photos in the Museum Website, the facility is a lot cleaner than it was when I saw it in 1985. There probably aren’t Russian Language Bread Stands outside anymore, or uniformed USSR Military Personnel asking (in Russian) for a cigarette either.
Paradoxically, the positive benefits of the Surrender create unstable and dangerous market conditions in the US Markets. The outcome was front run by the financial markets which rallied sharply after the beginning of Operation Epic Fury on February 28. This leaves little room for error now that the markets are close to record highs and risks ranging from a delayed inflation shock and the long overdue bursting of the AI Bubble are lurking in the background.
For positioning, an In The Trade But Waiting For An Entry Point approach is a good way to manage risk. Another strategy is to buy in the money VIX call options and take profits if there is a 3-4 point blip in price. Your author missed a chance to take profits the other day on my 16.50 strike Calls Expiring July 17 when VIX briefly spiked to 20. If they spike again I’ll take profits sooner rather than holding out for bigger profits.
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