Finding the Market’s Most Overlooked Macro Themes and Profiting from Global Volatility | Harris Kupperman

Episode Summary

Executive Summary: The episode centers on a thematic/event-driven investing playbook, with strongest emphasis on refiners, Latin America, commodity volatility, elder care, and a fallen-angels monitor. Guests argue markets are tightening via real supply-demand shifts, not just geopolitics, and that investors should focus on inflection points, buybacks, and catalysts rather than headlines. They also highlight how Ketem/Kenum research helps track these changes in real time.

Main Topics: Refiners and crack spreads (Priority: 5/5): Harris Kupperman and Roderick Van Zeulen argue refining is in a structural tightening cycle. They emphasize utilization, crack spreads, and the lack of new refinery announcements as the key signals that the market is truly tight, not merely geopolitically constrained. Latin America and Brazil as a macro trade (Priority: 5/5): The guests see Latin America benefiting from a weaker dollar, friend-shoring away from China, shifting politics, and improving local equity participation. Brazil is the focal point, with falling rates and rising trading volumes supporting exchanges and brokers. Volatility, commodity brokers, and financial infrastructure (Priority: 4/5): They frame rising volatility as a durable tailwind for commodity brokers and futures merchants like StoneX and Marex. More hedging, more speculation, and more corporate risk management should support volumes over time. Elder care / senior living as a supply-demand inflection (Priority: 4/5): Senior living is presented as a long-cycle opportunity where years of underbuilding, COVID-related disruption, and staffing shortages have set up a supply deficit just as boomer demand accelerates. Event-driven monitors and the Ketem research workflow (Priority: 4/5): A major theme is how their research platform tracks CEO changes, buybacks, insider buying, spin-offs, privatizations, investor days, unlocks, and M&A to find catalysts that overlap with thematic tailwinds. Fallen Angels and selectively buying cheap quality (Priority: 3/5): They reintroduce the Fallen Angels monitor to find decent businesses that have become unusually cheap due to neglect, accounting issues, or temporary dislocations, while stressing risk management and timing. US consumer weakness and select discretionary opportunities (Priority: 3/5): They remain cautious on consumer names, noting many categories are still deteriorating. They focus on highly discretionary sectors like mattresses, boats, and RVs only as potential future rebounds, not current buys.

Key Arguments: Refinery equities rallied because crack spreads confirmed a real tightening in supply-demand, not just a geopolitical spike. The most important signal for a durable refinery bull case is new capacity announcements; none are being made, which supports the trade. Large refiners with advantaged assets, especially Pad 3 names, are preferable to smaller refiners because of balance-sheet and operational risk. Brazil and broader Latin America are benefiting from political shifts, lower rates, and higher equity turnover, which should favor exchanges and brokers. Commodity volatility increases hedging activity and trading volumes, benefiting infrastructure-like firms such as Marex and StoneX. Senior living has an unusually strong setup because supply has been constrained for years while demographic demand is about to rise. Event-driven catalysts such as activist campaigns, CEO changes, and investor days can materially accelerate the re-rating of thematic winners. The Fallen Angels approach targets quality businesses that are neglected rather than structurally broken, using catalysts to identify when sentiment is about to shift. The US consumer remains weak and K-shaped; many categories are still too early for a true cyclical bottom despite low valuations.

Data Points: Crack spread: 55 - Current prompt crack spread cited as dramatically higher than the teens a year earlier. Crack spread a year ago: teens - Reference point for how much refinery margins have widened. Potential EPS impact: ~$1 billion of pre-tax per $1 crack spread increase - Back-of-the-envelope estimate for Marathon/Valero-sized refiners. Refiner market cap reference: ~$60 billion - Used to illustrate operating leverage in large refiners. 2022 Marathon EPS: $28 - Referenced as the prior peak year during the Russia-Ukraine dislocation. Consensus 2026 Marathon EPS: ~$22.7-$22.8 - Analyst consensus was cited as being below what current crack spreads might justify. High Marathon EPS estimate: $34-$35 - Shows wide dispersion in Wall Street forecasts. Low Marathon EPS estimate: low-to-mid teens - Lower end of analyst estimates discussed on the call. Refinery build time: 5-7 years - Time required to bring new refinery capacity online, supporting the structural thesis. Capacity replenishment after stock drawdowns: 6 months to 1-2 years - Rough estimate for how long it could take to rebuild product inventories if the disruption persists. Brazil real rate: ~10% real yields - High real rates were cited as suppressing equity participation. Brazil inflation / rate context: 14-15% rates vs. 5-6% inflation - Used to explain why fixed income dominated at the expense of equities. Brazil equity trading growth: 40%-45% - Two consecutive months of accelerating equity trading volumes were cited. Volatility / exchange ROE: 20% ROE (StoneX), 30% ROE (Marex) - Illustrates quality and profitability of commodity futures infrastructure businesses. Senior living supply freeze: since 2017 - New senior living construction largely stopped after oversupply problems. Senior living demand milestone: first baby boomers turning 80 this year - Demographic trigger for rising demand in elder care. Senior living new supply: not until 2030-2031 - Expected lag before meaningful new facilities are delivered. Mattress sales: back to 2009 lows - Used as an example of weak discretionary consumer demand. IPO unlock strategy: 30 days before and 30 days after unlock - Historical backtest described for shorting post-IPO unlock weakness. Company data scale: 100+ pages of weekly data - Describes the breadth of Ketem/Kenum monitoring work. Data sets: 20+ - Number of datasets the platform scans. Users: 400-500 - Approximate mix of hedge fund allocators, retail, and high-net-worth subscribers. Research team: 4 data analysts - Operational support for scanning filings and flagging catalysts.

Pivotal Quotes: "Nothing matters until the commodity tells you it's ready." — Harris Kupperman: On waiting for market-confirming price action before committing to a commodity trade. "The most important thing to track in this whole thing isn't when Hormuz opens, it's when guys announce brand new refineries." — Harris Kupperman: On why new capacity announcements matter more than headline geopolitical events for the refinery thesis. "If something goes from totally fucked to somewhat shitty, you can make a lot of money." — Roderick Van Zeulen: Defining the core logic of the Fallen Angels monitor.

Implications: Listeners should focus on structural supply-demand inflections plus catalyst tracking. The biggest opportunities may come from combining thematic tailwinds with event-driven triggers before Wall Street fully reprices them.