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The Thesis
Bacon read the geopolitical signals of Saddam Hussein massing troops on the Kuwait border and went long oil futures before the invasion, capturing the ensuing price spike.
The Story
In the summer of 1990, Louis Bacon was closely monitoring the escalating tensions between Iraq and Kuwait. While most market participants dismissed the troop buildup as saber-rattling, Bacon concluded that an invasion was likely and positioned his Moore Capital fund long crude oil futures and short equity indices. On August 2, 1990, Iraq invaded Kuwait, and oil prices spiked while global stock markets tumbled.
Bacon's fund reportedly earned 86% for 1990, establishing him as one of the premier macro traders of his generation. The trade exemplified his approach: combining geopolitical analysis with market positioning, then sizing the bet to maximize returns when his thesis proved correct. Moore Capital went on to become one of the most successful macro funds in history, and Bacon earned a reputation as a reclusive genius who let his returns speak for themselves.
Key Insight
Pay attention to geopolitical signals that the market is dismissing — when troops mobilize, markets often lag reality.
“The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money.”
Louis Bacon
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