<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />&ldquo;Inflicting Maximum Damage and Pain&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> One day in the spring of 2014, we published an issue titled <a href="https://5minforecast.com/2014/03/13/the-18-month-nationwide-blackout/">&ldquo;The 18-Month Nationwide Blackout.&rdquo;</a>
It was actually the second of two parts. <a href="https://5minforecast.com/2014/03/12/a-niche-sectors-mainstream-moment/">In the first</a>, we spotlighted the revelation that the previous year, snipers shot up the Metcalf electrical substation in Coyote, California &mdash; not far from San Jose.&nbsp;
The impact on the power grid was minimal &mdash; but by many accounts, that was just a lucky break. (To this day, the case remains unsolved.)
Over those two days we also took note of a government report that said, "Destroy nine interconnection substations and a transformer manufacturer and the entire United States grid would be down for at least 18 months, probably longer."
That&rsquo;s just nine substations out of 55,000 total nationwide.
You can imagine the scale of civilizational breakdown if the lights went out for a year and a half. (Or maybe not. Normalcy bias is a powerful thing.)
A few days ago, The New York Times Magazine <a href="https://www.nytimes.com/2026/08/18/magazine/national-blackout-power-electricity-outage.html">reprised</a> this history&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7cM5IWSecen5KTXrIrKbV2/dafd916bdc27f1479d13238a2c1ee2d5/FMF-Issue-082126-1.jpg" alt="What if America went dark?" width="540px" />
&hellip; albeit with startling detail about the Metcalf saboteurs&rsquo; meticulous planning.&nbsp;
And it advanced the story by spotlighting the critical shortage of electrical transformers &mdash; a problem even if the grid stays up because so many aging transformers need replacing. It turns out many of the largest ones have to be built painstakingly by hand.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But we have to ask: What took the NYT so long?
Again, we&rsquo;re not Johnnies-come-lately to this issue. Three years after the Metcalf revelation in 2014, our firm shelled out $80,000 to acquire copies of a book called Lights Out to distribute to readers.&nbsp;
Authored by Ted Koppel, the longtime anchor of ABC News Nightline, it was sobering stuff.
&ldquo;If an adversary has as its goal inflicting maximum damage and pain on the largest number of Americans, there may not be a more productive target&rdquo; than the power grid, he wrote.
&ldquo;If a highly populated area were without electricity for a period of months or even weeks,&rdquo; he added, &ldquo;there is no master plan for the civilian population.&rdquo;
Now and then we&rsquo;ve also spotlighted the everything-connected-to-everything-else nature of the grid &mdash; laid bare by the Northeast blackout of 2003. A software glitch at an Ohio control room ended up knocking out power to 55 million people in eight states and the Canadian province of Ontario.&nbsp;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We also have to ask: Why is the NYT bringing all this up now?
After all, the paper sets the agenda for the rest of the legacy media &mdash; and much of the alt-media for that matter. It&rsquo;s going to be all over the place for a while.
Yeah, I know. It&rsquo;s becoming &ldquo;a thing.&rdquo; People are more aware of the power grid&rsquo;s fragility as brownouts and blackouts become more common. I started pounding the table about it here four years ago, when an industry white paper spurred me to buy a generator.&nbsp;
Too, people&rsquo;s minds have been concentrated by the advent of AI data centers, with their prodigious power demands. (This e-letter was also <a href="https://paradigmpressroom.com/post/the-monster-that-ate-the-power-grid-ai">early to the party</a> on that issue.)
The conspiracy minded will surely say the article is &ldquo;predictive programming&rdquo; &mdash; softening up the populace for a grid-down event that a nebulous they will either let happen on purpose, or make happen on purpose.
But the article does allow for cautious optimism toward the end &mdash; describing a new kind of transformer technology, and suggesting that rather than one big solution imposed from the top down in Washington, &ldquo;the best solution to a fragile grid may look like a lot of little interventions, distributed widely.&rdquo;&nbsp;
<a id="2"></a>
Hear, hear. Best to conclude this bullet on that hopeful note.&nbsp;
And we&rsquo;ll reinforce the guidance we&rsquo;ve been sharing now and then since 2022: Even in a short-term outage, no electricity means no credit/debit cards and no power to the gas pumps. Keep a wad of cash, keep your tank topped up and keep your battery-powered devices charged.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />A Game of Economic Chicken
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> U.S. crude futures are set to end the week over $86 &mdash; the highest all month &mdash; even though the shooting portion of the Iran war is supposed to be over for a while.
Two days ago on social media, Donald Trump declared an &ldquo;Economic D-Day&rdquo; against Iran.&nbsp;
In addition, Treasury Secretary Scott Bessent said it&rsquo;s unlikely Washington will restart large-scale combat with Tehran &mdash; pivoting instead to a new round of economic sanctions, &ldquo;measures like have never been seen in the history of the economic isolation of a country.&rdquo;
Whatever. How many more sanctions can they impose at this point?&nbsp;
The announcement sounds a lot like the announcements that came out of the Biden administration and the European Union targeting Russia. The EU in particular has declared 21 packages of sanctions on Russia since the invasion of Ukraine 4&frac12; years ago. But go figure, Moscow is no closer to capitulation now than it was at the start.
And so begins a game of economic chicken: &ldquo;The U.S. is betting it can strangle Iran's economy to the point where Iran will concede defeat before the U.S. is forced to do so,&rdquo; writes John Mearsheimer, the renowned foreign policy scholar from the University of Chicago.
&ldquo;At the same time, the U.S. is working overtime to deal with inflation and rising bond yields, which are caused in good part by the Iran war, and which have the potential to badly damage the U.S. economy. Iran is effectively betting that continuing to limit the flow of oil and gas out of the Strait of Hormuz will threaten the US economy to the point where Washington, not Tehran, will cave first.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;This economic escalation is not even remotely likely to succeed on the timeline or at the cost Bessent &amp; co. assume,&rdquo; writes our former colleague David Stockman, who served as President Reagan&rsquo;s budget director for five years.&nbsp;
&ldquo;That&rsquo;s because Iran remains substantially self-sufficient in food and many essentials, retains residual oil revenues through black-market channels and pre-blockade floating cargoes and can endure prolonged isolation far longer than the already-strained global refined-product markets &mdash; especially diesel and jet fuel &mdash; can tolerate continued severe supply curtailment.&rdquo;
Maybe Bessent realizes as much.
Otherwise, why would he be badgering Chinese leaders to join in the sanctions? &ldquo;Keep in mind, the Chinese get 50% of their energy from the Gulf. So, it would do them a big service to get with the program,&rdquo; he said on CNBC.&nbsp;
(&ldquo;Get with the program&rdquo;? Diplomacy doesn&rsquo;t appear to be Bessent&rsquo;s strong suit &mdash; in contrast with Reagan&rsquo;s Treasury Secretary James Baker.)
And don&rsquo;t rule out a return to shooting, says Trita Parsi of the Quincy Institute: &ldquo;Iran fears surrender more than war.&rdquo;&nbsp;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile, <a href="https://paradigmpressroom.com/post/chatgpf-the-f-is-for-fiasco/#2">Bessent&rsquo;s failed maneuvers in the bond market this week</a> continue to give a lift to non-dollar assets.
<ul>
<li>Gold is set to end the week at a three-month high approaching $4,600</li>
<li>Silver is set to end the week at a two-month high over $69</li>
<li>Bitcoin is approaching three-month highs over $77,000</li>
<li>Ethereum is pushing $2,400 for the first time since April.</li>
</ul>
At the same time yields on Uncle Sam&rsquo;s debt continue inching higher &mdash; approaching where they were on Monday before Bessent said he&rsquo;d amp up buybacks of Treasury paper. The 10-year note is nearing 4.74% while the 30-year bond is up to 5.28%.
The major U.S. stock indexes are trying to claw back some of their losses earlier in the week &mdash; but they&rsquo;re likely to end the week in the red. The S&amp;P 500 sits at 7,669. (Perspective: That would have been a record close less than three weeks ago.)
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Death of Local TV (Avoid These Stocks)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Broadcast television is done. Like, as an industry. Forever. Its horse-and-buggy moment arrived this week.
As you might know, your editor worked in the TV news trenches for 20 years. I made my exit in 2007 &mdash; just as the internet was starting to change the advertising landscape in a big way.
Local TV has been in steady decline ever since. But there&rsquo;s one thing that kept it viable, even if TV stations could no longer generate the fat 35&ndash;40% profit margins of days gone by &mdash; campaign commercials.
As younger people turned away from TV, the remaining audience was concentrated among older demographics &mdash; people who happen to vote in the highest numbers. Thus, TV stations could count on a steady influx of campaign cash every two years.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> That all changed on Tuesday night with a shock election result in Florida.
The winner of the Democratic primary for U.S. Senate was a state lawmaker named Angie Nixon &mdash; proud member of the Democratic Socialists of America, collecting 56% of the vote.
Her opponent was retired Army Lt. Col. Alexander Vindman &mdash; a former National Security Council aide who was the star witness against Donald Trump during Trump&rsquo;s first impeachment in 2019.
As you might expect, Vindman was the favorite of the party establishment &mdash; and he had the campaign coffers to dominate, raising $16.3 million compared with Nixon&rsquo;s $975,000.
And get a load of the ad budgets, as recounted by Theodore Schleifer of The New York Times.
&ldquo;Vindman spent 36 times as much on ads as Angie Nixon, per AdImpact data. The loser here spent $2.2 million and the winner spent just $60,000, with zero spent on broadcast or cable.&rdquo;&nbsp;
Read that last line again.&nbsp;
It&rsquo;s a whole new world when a U.S. Senate primary candidate spends nothing on TV ads and wins by a 56-44 margin.
Yes, Nixon has an uphill battle against a Republican opponent in a red state. That&rsquo;s not the point. The point is that Nixon&rsquo;s win is the death knell for local TV stations&rsquo; cash cow. If not tomorrow, then likely before the 2028 presidential campaign cycle begins.
The days are numbered for the pure-play broadcast stocks &mdash; especially the top three station owners Nexstar (NXST), Gray (GTN) and Sinclair (SBGI). Make sure they&rsquo;re not lurking somewhere in your portfolio.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Because no one believes the official inflation figures anymore&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7gMqBmriAkSJB3W9a8Nnvr/bd2d315d5cc60fe41184ac4d85d8be96/FMF-Issue-082126-2.jpg" alt="Comic Relief Seinfeld comic strip" width="540px" />
By the way, a new and rare podcast interview just dropped featuring economist John Williams of Shadow Government Statistics. He&rsquo;s the guy who runs the inflation and job numbers the way the feds did decades ago, when they were still honest. I&rsquo;ll be sure to listen and share highlights next week.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Unfinished COVID Business
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Your Biased COVID Viewpoint&rdquo; says the subject line of a reader email responding to <a href="https://paradigmpressroom.com/post/now-she-tells-us-aoc">last Friday&rsquo;s edition.</a>
&ldquo;Dave, you must live somewhere far from international travel to have such a viewpoint on COVID and the lockdowns. 20/20 hindsight is convenient to such a position.&nbsp;
&ldquo;I personally knew and cared about five people who died of COVID within a month of the lockdowns starting (both before and after). The cities with international airports near the coast were most affected, and especially in NYC, which is a short distance from where I live.
&ldquo;Blaming anyone other than Trump for the majority of the carnage is really not even close to correct. I know you mentioned blaming Trump, but you are blaming him for the wrong reason. Here are his transgressions:
<ol>
<li>Ignoring advice as early as January to shut down incoming international travel. COVID was already starting to be reported as an issue, and erring on the side of caution could have saved lives AND avoided much of the lockdown hysteria.</li>
</ol>
<ol start="2">
<li>Once he closed the international travel down, he only stopped it from China. But people, especially citizens, would find a way to come via Middle Eastern country airports or other routes into NYC instead of LAX or SFO. Additionally, he didn&rsquo;t stop incoming travel from Macau, where all his rich friends go to gamble.</li>
</ol>
<ol start="3">
<li>Time and time again Trump espoused his stupid ideas instead of listening to his experts: bleach injections? Hydroxychloroquine? Etc.</li>
</ol>
&ldquo;The one thing he did right was developing the vaccine.
&ldquo;Most actions are driven by fear, and yes, the lockdowns were an overreaction when looking in hindsight. But nobody knew whom would be affected badly&hellip;what was known was that NYC was running out of ICU beds and places to store the dead. It seemed apocalyptic at the time.&nbsp;
&ldquo;Could they have reopened sooner? I believe so, but Trump used this event politically as he always does: Sow division and confusion. He and his cult followers bought into this so well that my son was assaulted by people he considered friends simply for being worried that going out with them could cause him to bring COVID back to our home and it might cause my death. And the death of my wife, as we are older, and my wife has some of the conditions that were noted as bad for getting COVID.&nbsp;
&ldquo;Worst president EVER! And I am a recovering Republican (can&rsquo;t say I like the Democrats much &mdash; woke definitely went too far)&rdquo;
Dave responds: So&hellip; you&rsquo;re not even asking for a pandemic amnesty. That&rsquo;s hardcore.
<a href="https://5minforecast.com/2022/11/03/the-election-is-already-decided/#255">In the autumn of 2022</a>, Brown University health economist Emily Oster penned an article for The Atlantic &mdash; kinda-sorta apologizing on behalf of her fellow control freaks and power trippers, saying it was time for all sides to forgive and forget.&nbsp;
"Treating pandemic choices as a scorecard on which some people racked up more points than others is preventing us from moving forward,&rdquo; she wrote. &ldquo;We have to put these fights aside and declare a pandemic amnesty."
Of the most draconian measures, she simply said, &ldquo;We didn&rsquo;t know.&rdquo;
As the Substack blogger known as El Gato Malo wrote at the time, &ldquo;The precautionary principle does not state, &lsquo;Every time you get scared, do the most radical thing you can think of if it feels like safety&rsquo; &mdash; that is precisely what it warns against.&rdquo;
These issues are not in the past, and we can&rsquo;t afford to put them there. They still matter.
We give the last word today to Chase Oliver, the Libertarian Party&rsquo;s 2024 presidential candidate&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7GY1AKXHMkX9yuoMM84DQ4/e7d0084d9eedc113dbbd004b6fa2f432/FMF-Issue-082126-3.jpg" alt="Chase Oliver quote" width="540px" />

FMF-Issue-082126-Featured

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Paradigm Pressroom’s 5 Bullets is a daily e-letter covering the economy and the markets, reaching 120,000 paying subscribers of the renowned financial publishing firm Paradigm Press.

Paradigm Pressroom's 5 Bullets

“Inflicting Maximum Damage and Pain”

FMF-Issue-082026-Featured

ChatGPF (The “F” Is for “Fiasco”)

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />The Position of **** You
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It might be the most brilliant financial-planning advice that ever came out of Hollywood.
In The Gambler, Mark Wahlberg plays Jim Bennett &mdash; a college professor who racks up huge gambling debts he can&rsquo;t repay.&nbsp;
As a result, Jim finds the lives of his loved ones under threat from a handful of loan sharks.
During a scene that&rsquo;s made the rounds on social media in recent years, a loan shark named Frank &mdash; played by John Goodman &mdash; tells Jim in blunt terms how dumb he&rsquo;s been with his winnings.
<blockquote>Jim: I've been up two and a half million dollars.</blockquote>
<blockquote>Frank: What you got on you?</blockquote>
<blockquote>Jim: Nothing.</blockquote>
<blockquote>Frank: What you put away?</blockquote>
<blockquote>Jim: Nothing.</blockquote>
<blockquote>Frank: You get up two and a half million dollars, any a**hole in the world knows what to do: You get a house with a 25-year roof, an indestructible Jap-economy s***box, you put the rest into the system at 3&ndash;5% to pay your taxes and that's your base, get me? That's your fortress of f***ing solitude. That puts you, for the rest of your life, at a level of f*** you. Somebody wants you to do something, f*** you. Boss pisses you off, f*** you! Own your house. Have a couple bucks in the bank. Don't drink. That's all I have to say to anybody on any social level. Did your grandfather take risks?</blockquote>
<blockquote>Jim: Yes.</blockquote>
Frank: I guarantee he did it from a position of f*** you. A wise man's life is based around f*** you. The United States of America is based on f*** you. You're a king? You have an army? Greatest navy in the history of the world? F*** you! B*** me. We'll f*** it up ourselves.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/45fd751lnooooXZM4Ceo9g/a981564e804551218da5110b24a36f7b/FMF-Issue-081926-1.jpg" alt="Click here to learn more" width="540px" />
What Goodman&rsquo;s character calls &ldquo;your fortress of f***ing solitude&rdquo; is what the rest of us call &ldquo;financial independence.&rdquo; Or maybe &ldquo;the millionaire next door.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Unfortunately, $2.5 million is no longer enough for &ldquo;your fortress of f***ing solitude&rdquo; &mdash; as your editor said last night in a reply to a post of the movie clip on X.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5FSs9xPCfNJuqxzjgiywwS/b1dbebaeba42f63a27b4a8befd014660/FMF-Issue-081926-2.jpg" alt="Dave Tweet" width="540px" />
The Gambler came out in 2014. Just going by the official inflation numbers, $2.5 million then is $3.5 million now.
And as we can&rsquo;t say often enough, the official inflation numbers are doctored through statistical games that economists give fancy names to cover up the sleight of hand. Such as&hellip;
<ul>
<li>Hedonic adjustments. If the price of a new car goes up, but the manufacturers add new features to the new models, well then the price of a new car hasn&rsquo;t really gone up, has it?</li>
</ul>
<ul>
<li>Substitution. If you start buying hamburger because steak is too expensive, well, your price of beef hasn&rsquo;t really gone up, has it?</li>
</ul>
Seriously, this is how government statisticians think.&nbsp;
Worse, we&rsquo;re not going back to &ldquo;normal&rdquo; 2% inflation anytime soon. We&rsquo;ve cited <a href="https://paradigmpressroom.com/post/declare-your-independence-from-inflation">the historical evidence</a> regularly since 2023: Whenever the inflation rate sails past 5%, it typically takes a decade to get back to 2% or less. That means we&rsquo;re looking at elevated inflation into the 2030s.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The impact on your finances &mdash; whatever size of pile you&rsquo;ve got &mdash; can be devastating.&nbsp;
Paradigm&rsquo;s macroeconomics authority Jim Rickards breaks down the numbers: &ldquo;Just 3% inflation cuts the value of the dollar in half in 24 years and half again in another 24 years. That means in a typical career from age 17 to age 65, the dollar will lose 75% of its purchasing power.
&ldquo;It takes an amazing combination of hard work, saving and investment skill to beat those odds. With inflation above 3%, the destruction of dollar purchasing power is even greater.&rdquo;
The good news, such as it is, is that U.S. stock market returns so far in the 2020s have outpaced the cost of living. But for how much longer?
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2E0boogMkeKUjzVbiWBkju/f22bb60eea99ae1723dbef7b617df760/FMF-Issue-081926-3.jpg" alt="Stock market has outpaced inflation... for now" width="540px" />
It is unusual for the S&amp;P 500 to generate double-digit returns in three consecutive years. It&rsquo;s rare indeed for four years in a row &mdash; happening only three times in the last century.
Which means that after another year or two, you can&rsquo;t put your money in an index fund and expect to stay ahead of the inflation monster.
It&rsquo;s always been our mission at Paradigm to deliver investment ideas that can outperform &ldquo;the market.&rdquo;&nbsp;
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But the present environment gives us an even more important mission &mdash; to deliver investment ideas that will offset a relentlessly rising cost of living.
We thank you for your patronage and your trust. We know that trust has to be earned anew every day.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Move Along, Nothing to See Here
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The Trump administration is using paper clips and rubber bands to prevent the bond market from blowing up.
As noted here yesterday, the yield on 30-year Treasury bonds hit 5.32% this week &mdash; the highest since 2007. Rising Treasury rates mean that people aren&rsquo;t interested in buying the debt of a debt-addicted Uncle Sam who&rsquo;s racked up nearly $40 trillion in future obligations.&nbsp;
Which is bad enough, but there&rsquo;s also a snowball effect: The higher interest rates rise, the faster the debt grows.
So this morning the Treasury Department announced Uncle Sam will more than double its buybacks of U.S. Treasury debt.
In recent weeks, these repurchases have taken place every 10 days or so, at a pace of about $2 billion per operation. Per a Treasury Department press release, the plan is to amp up each buyback to &ldquo;at least&rdquo; $4 billion starting next month.
&ldquo;Buying bonds pushes bond prices up and yields down,&rdquo; Paradigm income-investing pro Zach Scheidt reminds us. &ldquo;Lower yields ripple into mortgage rates, CD rates and borrowing costs across the board. That's stimulus.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But here&rsquo;s the problem: &ldquo;Stimulus usually shows up when an economy is struggling,&rdquo; says Zach. &ldquo;That's not where we are.&nbsp;
&ldquo;The S&amp;P 500 just hit an all-time high, and hyperscalers are pouring hundreds of billions into the economy.
&ldquo;Call it what it is: the government using its own buying power to push yields lower in a market that wasn't asking for help.
&ldquo;This is market manipulation. And manipulation doesn't end well. Free markets correct themselves. Manipulated ones do too, just more violently, once the money or the resolve runs out.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> For the moment, however, the announcement has had the desired effect.&nbsp;
The yield on a 30-year T-bond has fallen from Monday&rsquo;s peak of 5.32% to 5.2% this morning. For the bond market, that&rsquo;s a massive move in less than 48 hours.
But how long will it stick?&nbsp;
Recall that Treasury Secretary Scott Bessent <a href="https://paradigmpressroom.com/post/turning-japanese-fmf">intervened</a> at the end of July to prop up the Japanese yen &mdash; to ensure that Japanese owners of U.S. Treasuries would be less inclined to dump their holdings so they could raise needed cash.
That too knocked down U.S. Treasury yields &mdash; for a while. And then they started rising again.
Each new intervention reeks of desperation. But that&rsquo;s how it goes when your national debt explodes 68% higher since the onset of COVID and all the mad spending that followed&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Cancer Breakthroughs and Humanoid Robots
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The big stock stories today are in the realms of biotech and robotics.
Shares of Moderna Inc. (MRNA) are up 136% after the company announced a successful trial of an mRNA-based shot for skin cancer.
We won&rsquo;t dwell on the implications here. Our biotech expert Ray Blanco will have an update later today for Altucher&rsquo;s Investment Network readers &mdash; and we&rsquo;ll share excerpts here tomorrow.
The other big story comes from China &mdash; where shares of Unitree Robotics began trading today in Shanghai, and they promptly soared over 450%.
Unitree is the world&rsquo;s leading maker of humanoid robots &mdash; a realm followed closely by Paradigm AI authority James Altucher.
As he explained it in this space on New Year&rsquo;s Day, James once wrote off humanoid robots&hellip; and then it hit him. &ldquo;The entire world has been constructed to fit 8 billion 5&rsquo;8&rdquo;, two-armed, two-legged humans.
&ldquo;If you want a robot that can vacuum, make a bed, cook, pack goods, stack shelves, move objects down hallways, climb stairs, open doors and work inside spaces already optimized for people&hellip; you don&rsquo;t redesign the world.
&ldquo;You redesign the worker. That worker is humanoid.&rdquo;
The U.S. leader in this space is Tesla. Unfortunately plans for its Optimus robot are behind schedule, with release for consumers and businesses pushed off until next year.
Reason? The huge number of custom components and a wicked-complex supply chain.
Of course, it&rsquo;s the suppliers to big companies that often deliver outsized gains &mdash; something James and his team are monitoring closely as Optimus moves closer to launch.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for the broad U.S. stock indexes, they&rsquo;re all in the green today &mdash; but not by much. The S&amp;P 500 is up about a third of a percent as we write and back over 7,700.
The real action is in precious metals &mdash; gold up $164 and *this* close to $4,500 for the first time since June. Silver&rsquo;s up 4% to $65.74.
That&rsquo;s a function of two things we spotlighted in Bullet No. 2. All else being equal, falling interest rates give a lift to precious metals, which have no yield. But at the same time, the Treasury buyback announcement has touched off a flight from the dollar &mdash; the U.S. dollar index down more than three-quarters of a percent to 98.85 &mdash; the lowest since May. Hot money fleeing dollars is moving toward gold and silver, at least for today.
Digital nondollar assets also appear to be benefiting from dollar weakness. At last check Bitcoin is up nearly $3,800 to $68,360 &mdash; and Ethereum is slingshotting its way toward $2,100.
U.S. oil futures are up over 2% to $86.60. The weekly inventory numbers from the Energy Information Administration show that supply of distillates &mdash; diesel and jet fuel &mdash; are at critically low levels. A gallon of diesel that cost $4.58 in early July costs $5.46 now.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Well, as long as we have inflation on the brain&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1C2OAkZZb3JOCZ1UVORvHn/e6512d57b0e891fcb8689958b7c795a1/FMF-Issue-081926-4.jpg" alt="Meme" width="540px" />
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Private Credit
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Excellent explanation by Enrique Abeyta as to the difference between the housing bubble and the private equity bubble,&rdquo; a reader writes in response to yesterday&rsquo;s <a href="https://truthandtrends.com/posts/33-575-cracks-beneath-the-bull-market">guest edition</a>.
&ldquo;Your clear and concise description of the &lsquo;tells&rsquo; in both situations is most helpful. Too many times an author describes the problem but doesn't provide the clues we should be looking for. Thank you Enrique from a longtime subscriber.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I want to acknowledge how much I appreciate the market insights as well as your insights into private equity health,&rdquo; chimes in another. &ldquo;What you are describing relates to my local agricultural economy with local lenders tightening their evaluations for renewing operating lines of credit.
&ldquo;Annual operating lines are no longer routinely approved, leaving farmers and ranchers &lsquo;shell-shocked&rsquo; and treading water financially.
&ldquo;In a part of the country hammered by long-term losses created by wildfires as well as our state water resources department threatening water rights curtailments we are faced with a double-edged sword of asset devaluation.
&ldquo;I hope you continue to analyze the private equity market but go deeper on who is being impacted.&rdquo;
Dave responds: Rest assured we&rsquo;ll stay on top of it.
As long as you brought up your region&rsquo;s farm economy, I went and checked the Rural Mainstreet Index this morning. I don&rsquo;t do it regularly and maybe I should.
Every month, Creighton University economist Ernie Goss surveys bankers in rural areas of ten states dependent on either agriculture or energy. As with many sentiment indicators, numbers over 50 suggest growth. Under 50, contraction.&nbsp;
The index has spent five of the last six months below 50 &mdash; plunging from 52.6 in June to 42.1 in July.
&ldquo;More than half&hellip; of bank CEOs reported that very weak commodity prices will be the greatest challenge to the agriculture economy,&rdquo; Goss says.
Yes, grain prices are up &mdash; but farmers&rsquo; input costs (i.e., fertilizer in short supply after the U.S.-Israeli attack on Iran) are up more.
Thanks to all for the notes of appreciation and the on-the-ground insight.

FMF-Issue-081926-Featured

The Position of **** You

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />AI&rsquo;s &ldquo;Really Weird Math&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We pick up today where we left off with <a href="https://paradigmpressroom.com/post/chatgpf-the-f-is-for-fiasco">last Thursday&rsquo;s Bullet No. 1</a> &mdash; the probability that ChatGPT maker OpenAI will blow up before it ever goes public.
Or &ldquo;the OpenAI-pocalypse,&rdquo; as coined by Paradigm trading pro Enrique Abeyta.
Every few weeks, there&rsquo;s a new &ldquo;tell&rdquo; about what&rsquo;s coming. Last week it was a Wall Street Journal report revealing the company&rsquo;s revenue grew 18% from the first quarter to the second &mdash; a respectable figure were it not for the fact it&rsquo;s a fraction of the growth booked by OpenAI&rsquo;s main competitor Anthropic.
If OpenAI had disclosed that information as a publicly traded company, &ldquo;shares would have gapped down 30%,&rdquo; says Enrique &mdash; who&rsquo;s been on alert since late last year for a moment when everyone realizes the company is mostly hype and hot air.
That moment has not arrived yet &mdash; but something will trigger it sooner or later.&nbsp;
It comes back to the complexity theory championed by our macro maven Jim Rickards &mdash; or as he popularized it, &ldquo;avalanche theory.&rdquo;
&ldquo;A single snowflake can turn a seemingly stable snowpack into a roaring avalanche that destroys everything in its path. Once the snowpack is arranged in an unstable way, a single snowflake can unleash carnage. Of course, a single snowflake is so small you never see it coming.&rdquo;
Those revenue numbers last week were just the latest snowflake among many.&nbsp;
Today we&rsquo;ll examine a few other snowflakes that continue piling up&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In January, OpenAI confessed to its own vulnerabilities in a paper with the obscure title &ldquo;Ending the Capability Overhang.&rdquo;
&ldquo;The company boasted that ChatGPT had 800 million users, an impressive figure, yet only
50 million (6.3%) were willing to pay for the service,&rdquo; writes fund manager Daniel Oliver at Myrmikan Capital.&nbsp;
&ldquo;Of those paid users, the top fifth percentile used the service seven times more intensely than the median paid user.&nbsp;
&ldquo;In other words, of the 800 million users, only 5% of the 6.3%, or 2.5 million users, demonstrate that they are getting any real value out of the $20 per month service.&rdquo;
Per an article in Fortune two months ago, OpenAI booked $13 billion in revenue last year&hellip; and $21 billion in losses.
Further, CNBC reported six months ago that the company expects revenue through 2030 to total $280 billion&hellip; while it plans to spend $600 billion during that same period. (And that&rsquo;s scaled back from a previous plan to spend $1.4 trillion.)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Unfortunately, bad things that might happen to OpenAI won&rsquo;t necessarily stay contained to OpenAI.
More from Oilver: &ldquo;Microsoft (market cap $3 trillion) reports $627 billion in back orders, half of which is just from OpenAI.&nbsp;
&ldquo;The company has not yet hit the bond market for financing its foray into AI, but it has engaged in questionable accounting. For example, Microsoft invested $13 billion into OpenAI in 2023, but reportedly $10 billion of that figure was in the form of credits for OpenAI to use Microsoft&rsquo;s cloud services. Microsoft then counts the use of those credits as revenue.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Sounds crazy, right? But that&rsquo;s routine when it comes to the industry&rsquo;s &ldquo;really weird math&rdquo; described in a new book by author Cory Doctorow.
Under the partnership between these two companies, &ldquo;Microsoft gives OpenAI &lsquo;tokens&rsquo; that OpenAI can spend to access the computers in Microsoft&rsquo;s data centers,&rdquo; he writes.
&ldquo;OpenAI books these tokens as investment revenue, at face value. This is some very funny accounting. The tokens Microsoft invests in OpenAI can only be redeemed for Microsoft data center access&hellip;
&ldquo;The really weird math comes after OpenAI redeems its tokens with Microsoft to power ChatGPT and its other products: Microsoft books [those transactions as] AI-related revenue to its cloud-computing division.&rdquo;
Doctorow uses the analogy of an ice cream parlor with video-game machines in the back. &ldquo;To play these, you need tokens that you can get from the cashier in exchange for dollars. But the cashier likes you, so they give you $10 worth of video-game tokens to play, which you promptly pump into the Galaga machine.
&ldquo;Using Microsoft and OpenAI&rsquo;s funny accounting, the ice cream parlor has &lsquo;invested $10&rsquo; in you (by giving you $10 worth of funny-money tokens), and then the ice cream parlor &lsquo;earned $10 in revenue&rsquo; (when you pumped the tokens into the machine).&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We&rsquo;ll reiterate a point we made on Thursday, a truism related by the investment newsletter legend Doug Casey: &ldquo;Events that are inevitable aren&rsquo;t necessarily imminent.&rdquo;
So for now we&rsquo;ll give Daniel Oliver the last word &mdash; suggesting that even the key players know on some level that something has the potential to end badly.
&ldquo;The most telling comment from Microsoft&rsquo;s [most recent] earnings call was from CEO Satya Nadella: &lsquo;All of us are reading this 1873 as the book to be read.&rsquo;&nbsp;
&ldquo;Liaquat Ahamed&rsquo;s latest book, 1873, tells the story of the burst of the railroad investment bubble and the ensuing &lsquo;first great depression.&rsquo;&rdquo;
➢ As for Doctorow&rsquo;s book, it&rsquo;s titled The Reverse Centaur&rsquo;s Guide to Life After AI. I won&rsquo;t go to the trouble of explaining a &ldquo;reverse centaur&rdquo; today. I&rsquo;ll almost certainly circle back to this book in a few days, seeing as I&rsquo;ve barely started it.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Markets Today: The Pros vs. the Mom and Pops
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> An intriguing divide is emerging in the U.S. stock market, says Paradigm analyst Zach Scheidt.
&ldquo;Right now, professional investors are nervous, and retail traders are excited,&rdquo; Zach writes for Altucher&rsquo;s True Alpha. &ldquo;The gap between those two camps is a solid litmus test for what we can expect in the coming months.
&ldquo;Professionals tend to fixate on valuations, future earnings and growth rates. They answer to benchmarks and committees. They move slowly and they hedge their bets.
&ldquo;Retail traders look at stories. They get fired up about a trend, they can move fast and they can concentrate their positions in a way the big institutions never could.
&ldquo;Now, we'd rather be the nimble individual trader any day of the week. That's the whole edge of trading your own book. But it still pays to understand why the professionals are uneasy.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Zach points to Snowflake Inc. (SNOW).
&ldquo;The stock trades north of $300,&rdquo; he says. &ldquo;At that price, you're paying more than 100 times what the company is expected to earn next year, and still around 90 times what it's projected to earn two years out. That's the kind of valuation that only works if the growth story keeps getting more exciting from here, not less.
&ldquo;This is what froth looks like because it doesn't even mean the stock can't keep running. Names like this can stay expensive far longer than anyone expects. But the risk baked into a valuation like that is real, and it's exactly the sort of thing that has the professional crowd sleeping with one eye open.
&ldquo;None of that is a call to short Snowflake. We're pointing at it because it's a clean example of the exuberance running through parts of this market right now. Know what you own, and know what you're paying for it.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for the major U.S. stock indexes, they&rsquo;re a mixed bag.
At last check, the S&amp;P 500 is down more than a third of a percent to 6,745. The Nasdaq is down two-thirds of a percent, while the Dow is up slightly.&nbsp;
Recent winners in the Paradigm portfolios include a huge 547% gain in less than six weeks on ConocoPhillips call options in Rickards&rsquo; Insider Intel (more than enough to offset a loss on Venture Global).
On the short side, readers of Rickards&rsquo; Crisis Trader booked 85% gains on Thor Industries put options.
Mason Sexton has racked up a string of short-term stock wins in The Map &mdash; including 22% in a month on the big silver ETF SLV, and 18% on the &ldquo;neocloud&rdquo; name Nebius Group in only a week.
Elsewhere, bond yields are inching down for the moment &mdash; the 10-year note back under 4.7% and the 30-year bond at 5.23%.
Gold is soaring again &mdash; up 1.5% to $4,673, another high last seen in mid-May. Silver&rsquo;s gain is more modest, but it&rsquo;s still knocking on the door of $69 for the first time since June.
Crypto is moving from strength to strength &mdash; Bitcoin now only $150 away from the $80,000 level, the highest in over three months. And Ethereum has crested $2,500.
Two big events loom this week: Nvidia&rsquo;s earnings report after the closing bell Wednesday, and Federal Reserve chair Kevin Warsh&rsquo;s maiden outing addressing the annual confab of central bankers in Jackson Hole, Wyoming Friday. Watch this space&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Hormuz Hallucinations
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> U.S. crude futures are down nearly 2% to $85.36 &mdash; perhaps still under the sway of Axios reporter Barak Ravid.
Over the weekend, Ravid posted a story citing &ldquo;three U.S. officials&rdquo; claiming that 40 oil tankers hauling 16 million barrels of crude transited the Strait of Hormuz on Friday &mdash; escorted by the U.S. military on the southern side of the strait near the coast with Oman.
The claim doesn&rsquo;t remotely square with independent monitors like the analytics firm Kpler, which recorded zero tankers departing the strait Friday.
Later today Treasury Secretary Scott Bessent will formally roll out the Trump administration&rsquo;s &ldquo;Economic D-Day&rdquo; plan of sanctions targeting Iran, supposedly so severe they&rsquo;ve &ldquo;never been seen in the history of the economic isolation of a country.&rdquo;
Your editor expressed <a href="https://paradigmpressroom.com/post/inflicting-maximum-damage-and-pain/#2">skepticism</a> about that on Friday &mdash; which was reaffirmed over the weekend when someone started recirculating this tweet from Obamatime&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/6VgL9AW7AxPqbA5uH2m0wY/6612bc1a0c59dbd1722a5c1a49481ec9/FMF-Issue-082426-1.png" alt="Barack Obama tweet" width="540px" />
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile, the U.S. government&rsquo;s Strategic Petroleum Reserve sits at 289.7 million barrels &mdash; the lowest since 1982.
For perspective, the SPR was over 400 million just before Donald Trump and Benjamin Netanyahu launched the Iran war six months ago. In fairness, it was over 600 million before Joe Biden started draining it to save the Democrats&rsquo; midterm election prospects four years ago.
A scary chart from Bank of America&rsquo;s been making the rounds this morning. It shows the combined total of both private-sector inventories and the SPR, measured in days of available supply.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7IhjMI1fWVMeHTgJwaSzko/65b3bff3cd39e1a3e0030c2369b8fd5e/FMF-Issue-082426-2.png" alt="Us Crude inventories (Include SPR) at 40-50 years low" width="540px" />
Yikes. The biggest squeeze right now is in diesel prices &mdash; which feed through everything that&rsquo;s transported by truck. And right now diesel prices are about 20 cents a gallon away from their all-time high under Biden.
Meanwhile, we might be looking at the highest Labor Day gasoline prices ever.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Thought for the Day
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Here&rsquo;s another chart making the rounds today. What do Chinese leaders know that American leaders don&rsquo;t?
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5x9t974zt573DzT5iJY3vy/e619b96e5e5feb0e10e0287fede339a4/FMF-Issue-082426-3.jpg" alt="China Gold Vs Treasury Holdings" width="540px" />
Reminder: Those are the publicly disclosed gold holdings of the People&rsquo;s Bank of China. The real number is likely twice as high, maybe more.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Power Outages, Scrambled Political Lines
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;While the outcome of long-term power outages would be devastating, I believe this to be somewhat misleading,&rdquo; writes a reader after <a href="https://paradigmpressroom.com/post/inflicting-maximum-damage-and-pain">Friday&rsquo;s edition</a>.&nbsp;
&ldquo;History shows that our cities are capable of complete chaos within hours. Just look at the riots in LA, Minneapolis, Portland and Seattle to name a few.&nbsp;
&ldquo;The Northeast outage in the 1960s started about 5 p.m. with a transmission line failure. If a series of simultaneous outages started in the major cities at 6 or 7 p.m. (EST) on a hot weekday night, you would have full-scale riots by midnight.
&ldquo;Too many people would consider this the &lsquo;perfect shopping opportunity,&rsquo; much like a hurricane evacuation in New Orleans. Commuters would be struck during rush hour. First responders would be overwhelmed with rescues and not available to respond to the rioting, looting, etc.
&ldquo;God knows what would happen if this was extended for just.one or two days. Typically, power companies can get their systems energized within hours. However, this usually depends on power from neighboring power companies. That method would not be available if they could not transmit power due to line outages. .
&ldquo;By major cities I am thinking about New York, D.C., Atlanta, Houston, LA, San Francisco, Denver and Seattle.
&ldquo;You would not even need to hit the substations, but instead hit the major transmission lines feeding those cities, to start the outages.
&ldquo;Scary thoughts. I worked in the power business for 40 years in the Northeast and South.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Your three hot-button issues &mdash; data centers, flock cameras and U.S. aid to Israel &mdash; all seem designed to divide the conservative base,&rdquo; a reader writes after the conclusion to <a href="https://paradigmpressroom.com/post/chatgpf-the-f-is-for-fiasco">last Thursday&rsquo;s edition</a>.
&ldquo;Maybe so, but surely there are others that tie the left in knots. Here are three &mdash; communists taking over the Democratic Party, men in women&rsquo;s locker rooms and amnesty for illegal aliens.
&ldquo;Thanks for allowing me to balance out your list.&rdquo;
Dave responds: Maybe I wasn&rsquo;t clear. I was talking about issues that divide both partisan camps and that have the potential to scramble the usual loyalties.
For instance, here in Michigan, the Democratic nominee for governor is weighed down with a lot of data-center baggage &mdash; seeing as her husband is VP of the firm developing <a href="https://paradigmpressroom.com/post/maga-lansing">an enormously controversial project</a>.
Meanwhile it&rsquo;s fair to say the Democratic contest for U.S. Senate in the Great Lakes State turned on the issue of U.S. aid to Israel &mdash; or to be more precise, the unwarranted influence of pro-Israel donors.
There used to be a saying about how politics makes strange bedefellows. You don&rsquo;t hear it much anymore; too many elites are too invested in exploiting the red-blue divide.&nbsp;
But at the grassroots, some interesting coalitions are coming together. Could even be market-moving before all&rsquo;s said and done. We&rsquo;ll be watching&hellip;

FMF-Issue-082426-Featured

AI’s “Really Weird Math”

FMF-Issue-081826-Featured

Gold and Great Nations

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Now She Tells Us (AOC)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Rep. Alexandria Ocasio-Cortez (D-New York) just came clean &ndash; fessing up to something your editor&rsquo;s been saying for years.
Remember all the madness in the summer of 2020?&nbsp;
When strict lockdown orders could be violated as long as you were protesting &ldquo;systemic racism&rdquo;? When we were told mere speech <a href="https://5minforecast.com/2020/06/09/the-woke-takeover/">constituted &ldquo;violence&rdquo;</a> but deliberate property destruction was A-OK? When corporate America <a href="https://5minforecast.com/2020/06/25/the-purge-is-coming/">embraced the &ldquo;woke&rdquo; agenda</a> and employees who didn&rsquo;t toe the line got fired?&nbsp;
Perhaps the height of the insanity came when JPMorgan Chase CEO Jamie Dimon &ldquo;took a knee&rdquo; in the name of social justice&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3Y13JGB89nAFXzF9uXCOXj/955289ec4f11867ad3959e6c84a1c5b5/FMF-Issue-081426-1.jpg" alt="EKL Tweet on Jamie Dimon Kneeling in front of a giant bank vault" width="540px" />
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Yeah, none of that would have happened were it not for the COVID lockdowns that upended the economy by government decree.
<a href="https://5minforecast.com/2020/06/02/were-all-hajis-now/">I said as much</a> even as the riots were still going full-tilt. &ldquo;Absent the lockdowns driven by the pandemic&hellip; the chaos driven by the death of George Floyd wouldn&rsquo;t be happening.&rdquo;
History is clear: Economic hardship leads to societal chaos.&nbsp;
Case in point: The 2014 riots in Ferguson, Missouri took place after poverty rates shot up in neighbhorhood after neighborhood during the preceding decade.&nbsp;
Now, think about the prelude to the Summer of Floyd: &ldquo;Two weeks to flatten the curve&rdquo; had stretched into over two months with no end in sight. At the end of May 2020, emergency economic measures including expanded unemployment benefits and an eviction moratorium were about to expire.&nbsp;
Legions of overeducated, underemployed baristas and Uber drivers had spent two months cooped up in their crappy apartments &ndash; and now they were about to be rendered penniless and homeless.
Something was bound to send them out into the streets.&nbsp;
The architects of the lockdowns had already lit the match. All they needed was a splash of gasoline. The splash of gasoline just happened to be George Floyd.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Which brings us back to AOC.
When she burst onto the scene during the 2018 midterms, <a href="https://5minforecast.com/2019/01/17/ready-to-fork-over-your-fair-share/">she was all about economic issues and &ldquo;climate change&rdquo;</a> &ndash; tax the rich, Medicare for all, the Green New Deal.&nbsp;
&ldquo;Identity politics&rdquo; wasn&rsquo;t her thing.
But by early 2021, she <a href="https://5minforecast.com/2021/03/30/aoc-abandons-socialism/">fully embraced the woke agenda</a> as she sought to climb her way higher within the Democratic Party&rsquo;s power structure.
She even threw her fellow Democratic Socialists under the bus &ndash; saying they were coming from a &ldquo;privileged&rdquo; place if they dared to criticize Biden&rsquo;s economic policies from the left. &ldquo;For anyone who brings that up, we really have to ask ourselves, what is the message that you are sending to your Black and brown and undocumented members of your community, to your friends, when you say nothing has changed?&hellip; We cannot allow for that in our movement.&rdquo;
Later that year, she turned up at the Met Gala in New York &ndash; where tickets cost $35,000 a pop.&nbsp;
Most of the headlines were about her gown with the words &ldquo;Tax the Rich&rdquo; scrawled across her rear end. Less noticed was the fact she and the other attendees were maskless &ndash; while the hired help had to mask up.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2kDpOoyRCxOv45GLEEfL6z/298eaa642b79658f88953b94a218bec2/FMF-Issue-081426-2.jpg" alt="X post by Glenn Greenwald displaying img of AOC and her unmasked boyfriend being primped for the met gala in tax the rich dress" width="540px" />
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But now AOC chalks up wokery to a collective burst of temporary &ldquo;craziness&rdquo; from which we&rsquo;re supposed to just move on.
Last weekend she went on the Sunday talk show circuit. She nervously laughed her way through an interview with ABC&rsquo;s Jonathan Karl &ndash; who confronted her with the most extreme positions espoused by the social justice warriors.
<blockquote>Karl: Did the movement go too far with some of those positions? I mean, you, you briefly supported the idea of defunding the police.</blockquote>
<blockquote>Ocasio-Cortez: You know, I think that, I think that during this time, and during, especially during COVID, there was a huge opening of the Overton window. We were shut down. There was some of the highest unemployment rates that we have seen because of those shutdowns. Yeah. And I think that the, the doors were really open in trying to entertain any and every policy that was going to get us to a better place. And I actually think that the discussions that were had in that time were quite fruitful. [Emphasis mine]</blockquote>
There you are, direct from AOC. None of this would have happened if the control freaks and power trippers hadn&rsquo;t imposed their lockdowns, restrictions and mandates first.
So it&rsquo;s not just the upended lives, the disrupted schooling, the shuttered small businesses, the excruciating pain of saying final goodbyes to a loved one over Zoom, the federal spending spree that touched off the worst and most prolonged episode of inflation since the 1970s.
It was also the &ldquo;mostly peaceful&rdquo; protests, the workplace struggle sessions imposed by HR departments, the ensuing four years in which the culture wars were played out <a href="https://paradigmpressroom.com/post/peak-woke">on retailers&rsquo; shelves</a>.
All of it can and should be laid at the feet of those ultimately responsible. Anthony Fauci. Deborah Birx. The various state governors (<a href="https://5minforecast.com/2020/04/15/off-with-their-heads/">Gretchen &ldquo;Queen of Hearts&rdquo; Whitmer</a> in Michigan was the worst).
And Donald Trump &ndash; whose culpability I documented in March 2025 during <a href="https://paradigmpressroom.com/post/covid-9-11">my five-year COVID retrospective</a>. (No Trump supporter wrote in to tell me I was wrong.)
AOC wants you and me to move on. Trump too, when you get right down to it.
Never. Not until there&rsquo;s justice and accountability.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Consumers Buckling Under Inflation
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Speaking of the worst and most prolonged episode of inflation since the 1970s&hellip; it&rsquo;s now having a measurable impact on consumer spending.
The Commerce Department is out with its monthly read on retail sales. The typical Wall Street economist was expecting a small bump up of 0.1%. Instead, there was a 0.6% decline.
This number is often skewed by auto sales (volatile month-to-month) and gasoline sales (which rise and fall along with gasoline prices).&nbsp;
But even if you factor those out, you get a nasty downside surprise. The &ldquo;expert consensus&rdquo; was expecting a 0.4% jump and instead there was a 0.3% drop.
To be sure, one month does not constitute a trend. But for the moment, the mighty American consumer is buckling under the pressure of rising prices. &ldquo;The elevated inflation rate is having a dampening effect on consumption,&rdquo; says a summary from Econoday. &ldquo;Energy costs and tariffs continue to underpin higher prices.&rdquo;
Important reminder: These retail sales figures are not adjusted for inflation. If they were, you would see that retail sales have been flat since early 2021 (when the inflation rate started taking off in earnest).
Here&rsquo;s a chart that&rsquo;s now three months old &ndash; but we can assure you the trajectory hasn&rsquo;t changed.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3d8b9KN7iogd32kUToQLop/c4e2d421cb9cd70283839122c452bd12/FMF-Issue-081426-3.jpg" alt="Real Retail Sales Haven't grown in 5 years chart" width="540px" />
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> After notching a record close yesterday, the S&amp;P 500 is treading water going into the weekend.
At last check the index is down less than 0.2% to 7,786. (It couldn&rsquo;t quite break through 7,800 yesterday.) The Dow and the Nasdaq are also in the red, though not by much.
Precious metals are staging a modest rally &ndash; gold up to $4,383 and silver a few pennies shy of $65.&nbsp;
Oil, you ask? &ldquo;Iran blew up two tankers. Naturally oil is down,&rdquo; says a pithy tweet from commodities analyst Lukas Ekwueme. As we write, U.S. crude futures sit at $81.44.
Crypto is losing ground, Bitcoin well below $63,000 now.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Follow-Up: California&rsquo;s Wealth Tax
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> California&rsquo;s proposed wealth tax might never reach the ballot in November.
As we&rsquo;ve chronicled now and then this summer, the referendum proposes a one-time wealth tax of up to 5% on net worth over $1 billion. Doesn&rsquo;t matter whether those assets have been sold.&nbsp;
Silicon Valley billionaires are fighting back &ndash; Google co-founder Sergey Brin committing tens of millions in hopes of defeating the measure.
In a lengthy analysis issued this week by the Tax Foundation, senior fellow Jared Walczak finds the proposal vulnerable to a court challenge.
Among the potential objections: The measure is touted by its supporters as an excise tax rather than a tax on property. &ldquo;But courts, in California and at the federal level, have long held that the character of a tax is determined by its substance, not its form or label,&rdquo; Walczak writes. &ldquo;Merely calling a tax an excise tax does not make it one, and even if it is possible to define a tax as an excise in some fashion, it does not lose its ordinary characteristics.&rdquo;
Then there&rsquo;s the part of the referendum that applies the tax to billionaires who resided in California as of January 1, 2026. Walczak says the retroactive residency requirement is fatally flawed in light of Supreme Court precedent.
So far, no lawsuits have been filed challenging the referendum. But if it passes in November, litigation is a sure thing.
Bottom line: &ldquo;If courts invalidate the tax,&rdquo; Walczak writes, &ldquo;California will have the worst of all worlds: a threat that drives away some of the state&rsquo;s wealthiest taxpayers and spooks the next wave of startup founders, costly litigation that could drag on for years, and not a single dollar in new revenue.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Speaks for itself&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/01KV3yaGhdE5wl0g4bG3dI/fa83740d0d5e543c1629ce7c878057ef/FMF-Issue-081426-4.jpg" alt="Benjamin 100 dollar bill Meme" width="540px" />
Well, we&rsquo;ll add this.
If you go by the official inflation numbers, the dollar&rsquo;s purchasing power has depreciated 30.3% since 2013.&nbsp;
But <a href="https://paradigmpressroom.com/post/musks-biggest-ambition/#5years">given the way the inflation figures are gamed</a>, it probably is closer to 50%.
Speaking of gamed economic numbers&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Funky Stats, Entry-Level Jobs
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Hey Gonigam, watch how government numbers start to get better and better as we get closer to the mid-terms,&rdquo; a reader writes.&nbsp;
&ldquo;Trump doesnt care about how he looks in May or June. He knows the American public has no memory, and only cares about the next couple of weeks going forward. With all his political appointees (4,000 +/-) in place and ready for his final orders, those numbers are gonna get rosier and rosier ... no conflict of interest ... rrrrrrriiiiggghhhht.&rdquo;
Dave responds: Both Jim Rickards and Buck Sexton of our team &ndash; neither one Democrat-friendly &ndash; have spotlighted the perception thing.
&ldquo;Trump doesn't need perfection here,&rdquo; Buck said in this space on June 11. &ldquo;He needs people to feel like things are getting better. That's it.&rdquo;
We&rsquo;ll see. This much is for certain: Since Trump fired Bureau of Labor Statistics commissioner Erika McEntarfer a year ago, only one monthly reading of the consumer price index has come in hotter than the consensus expectation of Wall Street economists. What are the odds?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> After our item in <a href="https://paradigmpressroom.com/post/the-ai-bailout-of-2027">Wednesday&rsquo;s edition</a> about the plunge in the number of entry-level jobs, a reader writes&hellip;
&ldquo;My personal opinion is employers are using the &lsquo;wanting experience&rsquo; as an excuse to hire workers with maturity more than work experience. They want someone who is going to show up for work, every day, on time, no excuses, no entitlement.&rdquo;
Dave: Could be.
On Tuesday we mentioned the monthly survey from the National Federation of Independent Business &ndash; in which members are asked to identify their single-most important problem. &ldquo;Quality/availability of labor&rdquo; was cited by 27% of respondents.&nbsp;
In the 52-year history of the NFIB&rsquo;s surveys, the only time this figure was higher was during the worst of the post-COVID labor shortage in 2021-22.&nbsp;
The survey excerpts in the NFIB&rsquo;s report underscore the reader&rsquo;s point.
<ul>
<li>&ldquo;Labor is a challenge. We currently rely on older or retired help,&rdquo; said a retailer in Pennsylvania.</li>
</ul>
<ul>
<li>&ldquo;Our biggest obstacle is finding technicians with experience. It is also difficult to find office employees. Most [people] we hire off the street do not last. [They] miss a lot of work,&rdquo; says the owner of a construction firm in Arizona.</li>
</ul>
<ul>
<li>&ldquo;Employees want more compensation for less work/production. To keep this trend going we must find easier ways to do tough jobs and charge higher prices with stiff compensation,&rdquo; says the owner of a services-oriented business in North Carolina.</li>
</ul>
If you lack faith in the younger generations, tomorrow&rsquo;s 5 Bullets will &ndash; well, let&rsquo;s just say it won&rsquo;t do much to change your mind. Catch you then for our Saturday wrap-up&hellip;

FMF-Issue-081426-Featured

Now She Tells Us (AOC)

&ldquo;I don&rsquo;t gamble, I play poker,&rdquo; says Florida-based money manager Greg Weldon &ndash; a regular at the World Series of Poker for over 20 years.
What&rsquo;s the distinction? Poker, he says, is like the markets. Markets are all about assessing &ldquo;a risk that already exists&rdquo; &ndash; versus gambling, &ldquo;which is risk for risk&rsquo;s sake, created out of nowhere that didn&rsquo;t exist until you created it.
&ldquo;I play poker,&rdquo; Weldon said on his podcast this week, &ldquo;because it&rsquo;s very mathematically similar to trading and money management and the way you go about the entire thing from the top down.&rdquo;
We have our own poker aficionado in the Paradigm stable: Zach Scheidt is a former hedge fund manager who serves as senior analyst for Altucher&rsquo;s True Alpha and Rickards&rsquo; Insider Intel&hellip; as well as editor of his own premium advisory, The Income Alliance.
<h2 style="text-align: center;">The Poker Lesson That Changed How I Invest</h2>
Recently, my wife Angela and I headed up to Harrah&rsquo;s Cherokee. She was there for a Rotary conference. I was there as her &ldquo;plus one&rdquo; &hellip; which, for me, meant two straight days at the poker table.
Some of you may not know this, but in a former life, I was a semi-professional poker player. It wasn&rsquo;t my full-time job, but I earned reliable income at the tables &mdash; enough that I had a business partner living in Las Vegas and logged literally thousands of hours on the felt.
Looking back, that experience shaped the way I think about investing far more than any finance textbook or Bloomberg terminal ever could.
And the single most important lesson poker taught me was this: The best investors don&rsquo;t look for certainty.
They look for asymmetric opportunities.
The Edge Most Investors Ignore
An asymmetric bet is simply a situation where the potential reward is far greater than the potential risk.
In other words, instead of risking $100 to make $100, you might risk $50 to potentially make $200. The odds are tilted in your favor before the outcome is even decided.
That concept changes everything.
Here&rsquo;s a simple poker example:
Imagine you&rsquo;re holding a promising hand and facing a $50 call into a $200 pot. You don&rsquo;t need to win every time to make that bet profitable. In fact, you only need to win more than 20% of the time to come out ahead over the long run.
If you&rsquo;re winning that hand half the time, the math works overwhelmingly in your favor.
Now flip the situation around. Suppose you have to risk $200 to win a $250 pot. Suddenly, you need to be right nearly half the time just to break even.
Even skilled players struggle to overcome those odds consistently.
That&rsquo;s why successful poker players stop obsessing over individual wins and losses. Instead, they focus on expected value and long-term edge.
The same principle applies directly to investing.
How to Build Asymmetry Into Your Portfolio
There are several ways investors can stack the odds in their favor. Here are three of the most important&hellip;&nbsp;
1. Find Stocks With Outsized Upside Potential
The first place to look for asymmetry is in a company&rsquo;s underlying story.&nbsp;
Think about a small defense contractor bidding on a major Pentagon contract. If the company wins, the stock could soar 50%, 100% or even more.
But if it loses, the stock might simply drift back to where it started or decline modestly.
That&rsquo;s not a balanced risk/reward setup. It&rsquo;s an asymmetric opportunity where the upside meaningfully outweighs the downside.
Biotech companies awaiting FDA approval can create similar setups.&nbsp;
So can small technology firms launching breakthrough products, energy companies making major discoveries or businesses preparing for transformational earnings announcements.
The key is identifying situations where a positive outcome could dramatically reprice the stock higher while the downside remains relatively limited.
2. Structure Trades With Defined Risk
The second layer of asymmetry comes from how you manage the position itself.
Before entering any trade, I always ask myself two questions:
Where am I wrong?
And what does success realistically look like?
If I believe I could lose $5 per share if I&rsquo;m wrong but potentially make $30 per share if I&rsquo;m right, that creates a 6-to-1 reward-to-risk setup.
Think about what that means mathematically. I could be wrong five times in a row and still come out ahead with just one successful trade.
That&rsquo;s incredibly powerful.
Unfortunately, most investors approach the market backward. They spend all their time thinking about how much money they could make, but very little time defining how much they&rsquo;re willing to lose.
That&rsquo;s dangerous.
One of the most important habits I developed during my poker years was deciding my risk before the cards were even dealt. Good poker players know exactly how much they&rsquo;re willing to lose in a hand before they put chips into the pot.
Investors should approach markets the same way.
Defining your downside in advance won&rsquo;t eliminate losses entirely. But it can keep small mistakes from turning into catastrophic ones.
3. Use the Right Investment Vehicle
Even when you find a great opportunity and structure the trade thoughtfully, the investment vehicle you choose still matters enormously.
Personally, one of my favorite tools for asymmetric investing is in-the-money call options.
Now, I know some investors hear the word &ldquo;options&rdquo; and immediately think of reckless speculation. But when used properly, options can actually help control risk while increasing upside efficiency.
When you buy shares of stock outright, you must commit the full amount of capital upfront. But an in-the-money call option often allows you to participate in most of the stock&rsquo;s upside movement while putting far less money at risk.
At the same time, your maximum loss is generally limited to the premium you paid for the option.
That creates a naturally asymmetric structure.
Of course, options do involve a learning curve. Investors need to understand expiration dates, strike prices and position sizing before using them.
But once you understand the mechanics, options can become one of the most effective tools available for creating favorable reward-to-risk setups.
Patience Matters More Than Perfection
Even the best asymmetric strategy will still produce losing streaks.
That&rsquo;s normal.
A fair coin, for example, will land on tails three times in a row about 12% of the time.&nbsp;
The same thing happens in investing.
You can make smart, disciplined and mathematically sound decisions and still experience periods where multiple trades go against you in a row.
That&rsquo;s part of the process.
The goal is not to win every trade.
The goal is to make far more when you&rsquo;re right than you lose when you&rsquo;re wrong &mdash; and let probability work in your favor over time.
That lesson was drilled into me across thousands of poker hands over the years. And it continues to guide every investment decision I make today.
The real edge in investing doesn&rsquo;t come from being right all the time.
It comes from being positioned correctly when you are.
Dave&rsquo;s last word: Maybe today&rsquo;s the day the S&amp;P 500 will post its first close over 7,800.
At last check it&rsquo;s up more than a half percent on the day &ndash; and within six points of that lofty level. It was 10 days ago, when the index sat at 7,609, when our own Alan Knuckman said a melt-up rally to 8,000 is more likely than not. We&rsquo;re basically halfway there now.
The Nasdaq&rsquo;s rally is even stronger but it still has work to do to equal its early-June peak. The Dow is slightly in the red.
The big economic number of the day is wholesale inflation, cooler than expected &ndash; flat month-over-month and up 4.7% year-over-year. But like the consumer inflation numbers yesterday, that&rsquo;s deceiving: The number is skewed by average prices of energy throughout July, and not prices at the end of the month &ndash; which shot way higher.
Speaking of energy, U.S. crude futures are down nearly 2% to $81.62. (And there wasn&rsquo;t even an Axios story saying a peace deal is near!)
Precious metals are losing ground &ndash; gold at $4,364 and silver at $64.54. Crypto continues treading water.&nbsp;
Back to our usual order of business tomorrow &ndash; including some unfinished business from the COVID disruptions of 2020. Catch you then&hellip;

FMF-Issue-081326-Featured (1)

Investing Lessons from the Poker Table

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />The AI Bailout of 2027
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Slowly, inexorably, the path is becoming clear: The AI industry will be asking for a taxpayer bailout next year. Or, at the latest, 2028.
The signs have been there all along, and we&rsquo;ve been following them for nine months now&hellip;
<ul>
<li>Last November, OpenAI&rsquo;s chief financial officer floated the idea of her company getting <a href="https://paradigmpressroom.com/post/openai-wants-a-bailout">taxpayer-backed loan guarantees</a>. Your editor speculated her trial balloon was the prelude to the feds taking an equity stake in the company &ndash; an idea which CEO Sam Altman pitched to the White House six weeks ago</li>
</ul>
<ul>
<li>In June of this year, Vice President Vance <a href="https://paradigmpressroom.com/post/ai-needs-a-rescue">suggested</a> the formation of a sovereign wealth fund that would invest government money in the AI industry &ndash; totally impractical for a government that&rsquo;s $40 trillion in debt, but he put it out there anyway</li>
</ul>
<ul>
<li>Then last month, word slipped out of Washington about a draft report prepared for the Treasury and the Federal Reserve: It suggested the AI industry <a href="https://paradigmpressroom.com/post/ai-too-big-to-fail">poses a systemic risk</a> comparable to that of the 2008 financial crisis.</li>
</ul>
On that last one, the Treasury Department <a href="https://nypost.com/2026/07/07/business/your-401k-could-be-at-risk-if-the-ai-bubble-bursts-treasury-report/">issued a fierce denial</a>: The draft was the work of a flunky and AI &ldquo;will be a key driver of America&rsquo;s new Golden Age.&rdquo; (As the saying goes, never believe a rumor in Washington until it&rsquo;s been officially denied.)
All of which tees up two developments this week&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> On Monday, Nvidia CEO Jensen Huang unveiled a $500 billion deal with six major Wall Street firms to help finance the ongoing data center buildout.
Executives from all seven firms did a live interview on CNBC, which says the agreement will &ldquo;treat compute infrastructure much like commercial real estate, toll roads or other assets to borrow against&hellip; The effort aims to mobilize more than $500 billion in third-party capital for hyperscalers, frontier AI labs and enterprises to build out data centers and acquire Nvidia hardware, marking a potentially important shift in how AI infrastructure is funded.&rdquo;
Nvidia&rsquo;s partners are Apollo, Blackstone, BlackRock, Brookfield Asset Management, Goldman Sachs and KKR.
&ldquo;By using institutional credit, insurance funds and private capital to underwrite GPUs and data centers, Nvidia is helping its end users secure financing without tapping their own balance sheets,&rdquo; CNBC continues.
If you&rsquo;re getting some 2008 heebie-jeebies here, you should be. What began then as trouble in the housing market spilled into the credit markets and ultimately into the banks.
Same drill this time: What might go wrong in AI wouldn&rsquo;t stay confined to AI.
This is exactly what that draft Treasury-Fed report was warning about &ndash; which the Treasury was so eager to deep-six.&nbsp;
&ldquo;Jensen&rsquo;s goal is to make the AI bubble so large and so systemic that a taxpayer bailout is forced on everyone,&rdquo; tweets Don Johnson, chief economist at the MacroEdge research firm.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The same day as Huang and the finance bigwigs made their announcement, federal regulators gave the AI industry a free pass to take new financial risks.
From Bloomberg: &ldquo;The Securities and Exchange Commission has made it easier for data center owners to sell asset-backed securities, potentially opening the door for more debt sales as tech firms scour Wall Street for ways to pay for artificial intelligence.&rdquo;
Basically, the SEC took a series of rules that have been in effect since the 2008 financial crisis &ndash; and gave data centers a carve-out.
&ldquo;The SEC said a major subset of data-center securitizations don&rsquo;t need to have disclosures and investor protections that similar deals require. That includes risk retention, a requirement that companies issuing asset-backed securities retain some of the debt to better align their interests with investors.&rdquo;
Here the 2008 parallels might not be as obvious &ndash; but they&rsquo;re even more ominous.
In April 2004, the SEC buckled under pressure from the Big Five investment banks &ndash; allowing them to amp up the leverage on their trades from 12:1 to as much as 40:1.&nbsp;
It was a staggering level of risk &ndash; but one the industry was more than willing to take as long as it had an implicit taxpayer backstop.
The rest was history. Less than five years after that decision, the Big Five investment banks shrank to just two: Bear Stearns collapsed and was absorbed by JPMorgan Chase&hellip; Merrill Lynch collapsed and was swallowed up by Bank of America&hellip; and Lehman Bros. collapsed with no one to come to its rescue.
Only Goldman Sachs and Morgan Stanley survived &ndash; and only because they converted from investment banks to commercial banks, allowing them access to emergency loans from the Federal Reserve&rsquo;s discount window.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> No financial crisis and no bear market play out exactly the same way. And we&rsquo;re not saying it&rsquo;s time to batten down the hatches as if it were the summer of 2008.
But we&rsquo;re on watch.&nbsp;
AI isn&rsquo;t the only potential catalyst for the next storm. Only yesterday we <a href="https://paradigmpressroom.com/post/turning-japanese-fmf">teased out</a> how trouble in Japan could blow back on Washington and Wall Street.
That said, AI is at least as strong a candidate.&nbsp;
&ldquo;AI infrastructure has produced one of the largest capital-expenditure draws in modern history, comparable in scale to the nineteenth-century railroad build-out,&rdquo; Paradigm&rsquo;s Mason Sexton, editor of The Map, wrote his readers yesterday. &ldquo;Hyperscaler spending now accounts for a material fraction of GDP growth, yet revenue realization lags the debt and equity capital committed.&rdquo;
The railroad buildout transformed the nation. But along the way it generated staggering busts that followed stupendous booms &ndash; more than once.
Leaving aside the anomaly of the COVID episode in 2020&hellip; we&rsquo;ve been in a nearly nonstop bull market and economic expansion since 2009.&nbsp;
By historical standards, both are getting long in the tooth. We&rsquo;re much closer to the end than the beginning. Stay tuned&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Inflation: Still Sticky
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The cost of living is still rising at a disturbing rate &ndash; just not as fast as it was during the spring.
The Bureau of Labor Statistics is out this morning with the July consumer price index. The official inflation rate is now running 3.4% year-over-year.
On the one hand, that&rsquo;s the slowest clip in four months. On the other hand, it&rsquo;s still higher than the entire decade from 2011-2021, and higher than all of 2025.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5qG3svd65WDam8U8dBy2FB/0b99bd235ca8752b9ab9a81f8cb40239/FMF-issue-081226-1.jpg" alt="Down, but still elevated" width="540px" />
Gasoline prices climbed down 2.9% during July &ndash; but they&rsquo;re still up 24.6% year-over-year.
As always, any resemblance between these numbers and your own cost of living is purely coincidental. But even if you take the numbers at face value, they&rsquo;ve prompted some pithy social media commentary&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/58vj8TWih2IDdvEbBwT8QJ/035c5b63c05a8011b5ba9d9ec45f0022/FMF-issue-081226-2.jpg" alt="Charlie Bilello Tweet" width="540px" /><img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7vrSwJVOkzPI4OREZOWCGA/ca01e80773cccf0b5c1a0faad9c48cdd/FMF-issue-081226-2.5.jpg" alt="Geiger Tweet" width="540px" />
What have we said regularly for over three years? Any time the inflation rate sails past 5% &ndash; as it did in 2022 &ndash; <a href="https://paradigmpressroom.com/post/declare-your-independence-from-inflation">it typically takes a decade to get back to &ldquo;normal&rdquo; 2% inflation</a>.
There&rsquo;s still one more release of this number before the next Federal Reserve meeting in September. For now, futures traders assign a 62% probability the Fed will leave short-term interest rates alone.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The receding likelihood that the Fed will raise rates in September appears to be giving a lift to both stocks and precious metals today.
It&rsquo;s the Nasdaq taking the lead among the major U.S. indexes &ndash; up nearly a half percent at last check to 26,560. The S&amp;P 500 is up less than a quarter percent to 7,744. The Dow is barely in the green at 53,814.
The bigger gains are to be found in gold, up over 1% and over $4,400 for the first time in more than two months&hellip; and silver, up another buck to $65.60.&nbsp;
Crypto just can&rsquo;t get any traction, Bitcoin at $63,411 and Ethereum at $1,890.
Winners in Paradigm publications so far this week include over 15% in the space of a month on IBM shares in The Map&hellip; and on the options side, 132% in less than three weeks on the cybersecurity name SentinelOne in Altucher&rsquo;s True Alpha.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Drones and Oil, Russia-Ukraine Edition
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> For the moment, the big risk to global oil flows has shifted from the Persian Gulf to the Black Sea.
Overnight, the Financial Times reported that Vice President Vance asked the Ukrainian government to lay off its drone attacks on oil tankers loading at a Russian terminal.
&ldquo;Washington was alarmed that Ukraine was further destabilising oil markets and harming US companies by targeting tankers carrying crude piped from Kazakhstan to a Caspian Pipeline Consortium terminal in the Russian port of Novorossiysk.&rdquo;
The request supposedly came on July 31. The FT said no strikes on that terminal had taken place since.
And then within hours of the FT posting its story online&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/6l4T4yuyIg3rszpZmgGedR/cc275441ed3fcddb908b06f539310812/FMF-issue-081226-3.jpg" alt="OSINTtechnical Tweet" width="540px" />
Apparently Kyiv believes it&rsquo;s still going along with Washington&rsquo;s request because the targets this time do not belong to the Caspian Pipeline Consortium &ndash; in which both Chevron and ExxonMobil own a stake.
Regardless, Ukraine&rsquo;s steady drone attacks on Russian oil infrastructure are having an impact on global supply. Output from Russian refineries has fallen to two-decade lows. Moscow has banned the export of diesel and jet fuel. And as mentioned here on Monday, Russia is even importing these refined products from South Korea.
In the meantime, U.S. crude futures are holding steady at $83.16.&nbsp;
It being Wednesday the Energy Information Administration has released its U.S. weekly inventory figures. Supposedly private-sector crude stockpiles grew 17.4 million barrels in the week gone by. That&rsquo;s one of the four biggest weekly builds ever, in records going back to 1982.&nbsp;
Skeptical observers of the oil market say EIA&rsquo;s figures have become about as reliable as the inflation and jobs data coming out of the BLS&hellip;
➢ And just as a reminder: The Strait of Hormuz is still all but closed.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Grim Statistics (and Comic Relief)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The bottom rung of the career ladder is missing for scads of college graduates.
According to the hiring platform Cadient, only one out of every 50 job openings at the moment is entry-level &ndash; compared with one in 15 four years ago.&nbsp;
Furthermore, the number of entry-level job postings collapsed between 2022-2026 by an eye-watering 73%.
Cadient&rsquo;s researchers analyzed 7,984 salaried openings over that period. "The real issue isn't that entry-level jobs are disappearing,&rdquo; says Cadient CEO Bill Mastin. &ldquo;It's that employers increasingly expect candidates to arrive with experience before they're given the opportunity to gain it.&rdquo;
Which tees up today&rsquo;s meme nicely&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4AZzU4y0sQXrGJE3WkFNPi/cd896a0c617f071f04a147071096f0ac/FMF-issue-081226-4.jpg" alt="When employers want 10 years of experience before you turn 20 meme" width="540px" />
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: The &ldquo;Xennial&rdquo; View
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We&rsquo;re not quite done with the recent outbreak of generational warfare in these virtual pages.
We got a long note from a reader that we&rsquo;ve had to truncate for space.&nbsp;
&ldquo;Fellow Xer myself. Since you're right on the X-Boomer cusp, you might want to know something. I sit in a unique zone of generational history called 'Xennials' by psychology.
&ldquo;We began childhood in a non-digital world, and became adults in the first era of a digitized civilization, when Millenials started growing up. The YouTube channel Psychology Simplified has a series on this unique profile, and your assertion that GenX is politically and societally dismissible is both a manifestation of your trademark pragmatic cynicism and a grave miscalculation.
&ldquo;Xennials might be the last generation to care about and fight for privacy, individual rights, and restraint of state power. I might be overstating the case, because I am told there is cause to bet on Gen Z (I think Jim Rickards made that case in <a href="https://dailyreckoning.com/tech-bros-run-the-marxist-playbook/">"Tech Bros Run the Marxist Playbook"</a>), but I and my ken are not 'wait-and-see' types.
&ldquo;You call Boomers a generation of prophets - I rather see them as a generation of doers, who knew their business but didn't necessarily see the future clearly. I remember my father, who was very avant-garde about tech (he brought the first computer into our home in 1986), sitting me down in front of his stepfather, who was a foreman for PG&amp;E for 3 decades, and give me a 'talking to' about getting a stable secure job.
&ldquo;His concluding line was &lsquo;you find a good company, take care of them, and they'll take care of you.&rsquo; I didn't believe him then, and that advice has been shredded by 3 decades of economic upheaval that he didn't live to see. It will suffice to say that I have learned to not take anything, or anyone, at face value, which is why I still read your column regardless of whether I like or agree with you or not.
&ldquo;I look forward to more of your sarcasm, sardony, and sound analysis in a world-turned-bedlam. Keep the powder dry and the glasses cold. Into the future we go.&rdquo;
Dave responds: Thank you. To be clear, it&rsquo;s the demographer Neil Howe who says boomers fit the archetype of a &ldquo;Prophet&rdquo; generation &ndash; while Xers are &ldquo;Nomads&rdquo; and millennials embody the &ldquo;Hero&rdquo; archetype. In this construct, the previous Hero cohort was the GI generation that came of age during the Fourth Turning crisis of the Great Depression and World War II.
It&rsquo;s easier to understand in a table, which I created with the help of the AI engine Perplexity&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/59GFNXXRJ7ZmmnFJOkurYU/a7281e131613a01cce2a6a36fe56c859/FMF-issue-081226-5.jpg" alt="Table by Dave created by Perplexity AI ENGINE" width="540px" />
For whatever it&rsquo;s worth, Howe believes Gen Z is an artificial creation of the marketing industry that has zero reflection of the roles that generational archetypes play through history.&nbsp;
As Howe sees it, the last millennials were born not in 1996 but nearly a decade later. He&rsquo;s given the follow-on generation the working name of Homelanders &ndash; a nod to the post-9/11 zeitgeist.
Well, since he and his late writing partner William Strauss coined the term &ldquo;millennial,&rdquo; we have to give Howe his due&hellip;

FMF-issue-081226-Featured

The AI Bailout of 2027

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Turning Japanese
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> There&rsquo;s a situation shaping up in markets that Paradigm&rsquo;s macroeconomics authority Jim Rickards says could turn out worse than the 2008 financial crisis.
On the surface, it looks like an arcane event in the currency markets. But if it blows up, the effects could be widespread. Under the best case scenario, mortgage rates would sail even higher than they are now, and the AI buildout would hit stall speed.
What&rsquo;s happening is the &ldquo;unwind&rdquo; of the &ldquo;yen carry trade.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Here&rsquo;s how Jim explained it yesterday for Strategic Inteligence subscribers&hellip;
&ldquo;Interest rates in the U.S. for medium-term private borrowers with good credit are currently around 6.0%. Until recently, Japanese interest rates were close to zero or even negative.
&ldquo;A U.S. investor who wanted to finance U.S. manufacturing, engage in a takeover or pursue some other activity requiring capital could borrow cheaply in yen from Japanese banks, convert the yen to dollars and then invest the dollars at a much higher expected return.
&ldquo;If this arrangement were leveraged 3:1, typical for some hedge fund strategies, or even higher in certain buyouts, a wide spread between the cost of borrowing and the return on investment could produce outsized returns on the financing alone, regardless of any profit on the deal being financed.
&ldquo;This cheap, leveraged financing method has been driving investment worldwide in the age of globalization. It&rsquo;s used in China, the EU, emerging markets and U.S. M&amp;A deals, as well as commercial real estate development. The yen carry trade has been one of the engines powering global investment and sky-high asset valuations for decades.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It all works great &ndash; as long as Japanese interest rates stay low and the value of the yen remains stable. Neither of which is happening now.
Suddenly the cost of repaying yen-denominated debt is soaring. Thus the need to &ldquo;unwind&rdquo; the carry trade.
&ldquo;The unwind can be done by borrowing dollars, converting them to yen, paying off the yen loan and continuing the deal in dollars. But if banks won&rsquo;t lend or interest rates are too high, investors may have to sell assets to pay off the yen loans.
&ldquo;This leads to pressure to sell stocks and bonds, which can lead to sky-high interest rates and crashing stock markets.&rdquo;
Key point: Japan is by far the biggest foreign holder of U.S. Treasury securities &ndash; $1.14 trillion worth.&nbsp;
If Japan has to sell Treasuries to raise cash, that pushes U.S. interest rates higher. It&rsquo;s harder for homebuyers to get a mortgage and harder for the tech industry to finance all those new data centers.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> And so Treasury Secretary Scott Bessent staged an intervention a few days ago &ndash; promising to do &ldquo;whatever it takes&rdquo; to stabilize Japan&rsquo;s currency.
Just to make sure everyone got the message, Bessent attended a cabinet meeting armed with a to-do list that had only one item on it &ndash; strategically placed in camera range.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1RNK5ninaGjzBcujBZKW5e/69efc86d6dd9ad38fdfbe12efe85a26b/FMF-Issue-081126-1.jpg" alt="ACYN Tweet Scott Bessent" width="540px" />
&ldquo;The U.S. Treasury has now intervened alongside Japan to support the yen,&rdquo; says Jim &ndash; &ldquo;while Japan is looking to the Federal Reserve&rsquo;s FIMA repo facility, which would allow the Bank of Japan to obtain up to $60 billion in dollar liquidity against its Treasury holdings.
&ldquo;That gives Japan another source of dollars without forcing it to dump U.S. Treasuries on the market.&rdquo;
Jim points out that one of Bessent&rsquo;s predecessors, Hank Paulson, said the quiet part out loud: &ldquo;We don&rsquo;t need them selling Treasuries right now.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Will it work? &ldquo;These efforts to prop up currency values when fundamentals point in the opposite direction usually fail,&rdquo; Jim says.
&ldquo;In 1992, George Soros famously made about $1 billion betting against sterling when the Bank of England tried unsuccessfully to defend the pound and ultimately withdrew from the European Exchange Rate Mechanism.&rdquo;
One of Soros&rsquo; top traders at the time was none other than&hellip; Scott Bessent.
Jim&rsquo;s conclusion: &ldquo;Bessent knows the game. He also knows from experience that it doesn&rsquo;t always work for the side propping up the currency.
&ldquo;Get ready for the mother of all currency market panics.&rdquo;
We&rsquo;ll stay on top of it &ndash; including any actionable guidance, should it become necessary &ndash; in the days and weeks ahead.
➢ Recovered history: It was around this time two years ago that Japanese officials merely talking about raising interest rates sent shudders through markets worldwide, including the U.S. stock market. You can revisit that history <a href="https://paradigmpressroom.com/post/apology-from-tokyo">in this back issue</a>.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />How &lsquo;Bout Them Houthis?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> U.S. oil futures are up nearly a buck and over $83 as Yemen&rsquo;s Houthi faction all but controls another strategic &ldquo;chokepoint&rdquo; in global shipping.
The Houthis struck a Saudi Arabian vessel in the narrow Bab al-Mandab waterway at the south end of the Red Sea &ndash; killing three.
A few days ago, the Houthis &ndash; loosely aligned with Iran &ndash; declared the Bab off-limits to Saudi Arabian oil tankers. As a result, several tankers have had to transit the Suez Canal and go all the way around Africa to reach their destinations in Asia.
None of this is a surprise to anyone who saw what the Houthis did to the U.S. Navy in 2024-25. We chronicled it in these digital pages&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It&rsquo;s not an exaggeration to say tribesmen in flip-flops chased two U.S. aircraft carriers out of the Red Sea.
In late 2023, the Houthis began harassing U.S.- and Israeli-linked shipping through the Bab &ndash; an act of solidarity with the Palestinians of Gaza. Many vessels had to take that long route around Africa.
U.S. forces tried to inflict pain on the Houthis but to no avail. The Houthis shot down more than 20 MQ-9 Reaper drones at a cost of over $30 million each.
In the spring of 2025, incoming Houthi missiles forced evasive maneuvers on the part of the aircraft carrier USS Harry Truman &mdash; sending an F/A-18 fighter jet sliding off the deck and into the drink. And a similar incident took place a few days later.
With that, the Trump administration reached a truce of sorts with the Houthis after 19 months of low-grade fighting. The Houthis remained the effective rulers of the Bab.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The Houthis&rsquo; &ldquo;secret weapon&rdquo; was a barrage of cheap drones &ndash; much cheaper than the U.S. versions.
Here&rsquo;s a Politico headline from late 2023&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/287Guaokaecs0Sxy8xLbpJ/a2607c184f8cdb6c3c472f0ad3c5a006/FMF-Issue-081126-2.jpg" alt="Pentagon worried over cost of Houthi attacks" width="540px" />
What was happening back then was a preview of coming attractions for the Iran war this year &ndash; cheap drones giving fits to a U.S. military that still operates with a mentality that &ldquo;Big Iron&rdquo; like aircraft carriers and F-35s can bring any foe to heel.
That&rsquo;s changing. As we&rsquo;ve been emphasizing in recent days, the Pentagon is seeking a staggering increase in its annual drone budget &ndash; from $255 million to $55 billion.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />The View From Main Street
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We take the pulse of Wall Street every day in these 5 Bullets. What about the mood on Main Street?
The National Federation of Independent Business is out this morning with its monthly Small Business Optimism Index. The headline number jumped from 97.4 in June to 99.8 in July &ndash; the highest in nearly a year and higher than the index&rsquo;s 52-year average.
On the portion of the survey where business owners are asked to identify their single most important problem, &ldquo;quality/availabilty of labor&rdquo; has shot back to the top of the list &ndash; cited by 27% of respondents.
&ldquo;We struggle to find skilled labor/trades,&rdquo; says the owner of a construction business in New York State. &ldquo;Labor is a challenge. We currently rely on older or retired help,&rdquo; says a retailer in Pennsylvania.
Nothing else comes close on the single most important problem list. Taxes were cited by 16%, inflation by 14%. Everything else was 8% or less.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for Wall Street, it&rsquo;s another &ldquo;meh&rdquo; day for the major U.S. averages.
The S&amp;P 500 is down fractionally to 7,746. The Dow is essentially flat, just under 54,000. And the Nasdaq is down about a third of a percent, still holding the line on 26,500.&nbsp;
Congratulations are in order for Zach Schiedt&rsquo;s Income Alliance members &ndash; who booked 138% gains in only four weeks yesterday with an options play on the specialty-materials firm ATI Inc.
Gold is treading water at $4,381. Silver is consolidating its gains, back under $65. Crypto is stuck in the mud, Bitcoin at $63,554 and Ethereum at $1,863.
The meat of earnings season is over. The next major economic indicator is the official inflation reading due tomorrow.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> This is probably a few years old, but for whatever reason it&rsquo;s resurfacing on social media again. Really, it&rsquo;s timeless&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/17mbFhukWBXmucO6rnBf43/a093ad4359dd5eef8384391482a398a2/FMF-Issue-081126-3.jpg" alt="Federal Reserve Meme" width="540px" />
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: AI Maps, Fiber Recycling
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> After the &ldquo;Great Moments in AI&rdquo; item in <a href="https://paradigmpressroom.com/post/680-miles">yesterday&rsquo;s edition</a>, a reader writes&hellip;
&ldquo;It astounds me that the junior assigned the task of producing the map showing African countries did not have the presence of mind to make a simple check of the AI generated output using Google Maps.
&ldquo;It seems no one at State learned anything after <a href="https://en.wikipedia.org/wiki/Russian_reset">getting the Russian word &lsquo;reset&rsquo; wrong</a> during Hildebeast&rsquo;s tenure.
&ldquo;It just reinforces my belief that these so-called elites are &lsquo;intellectual but idiots&rsquo;.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Is there a company that does fiber optic cable recycling in Ukraine?&rdquo; a reader inquires after <a href="https://paradigmpressroom.com/post/what-wall-streets-getting-wrong/#5">last Friday&rsquo;s mailbag</a>, which touched on drone warfare.&nbsp;
&ldquo;Are they seeking investors?&rdquo;
Dave responds: Good question. For a long time,fiber optic cable recycling has been an iffy proposition even if you&rsquo;re not in a warzone.
Is it doable? Yes. Is there a payoff for the effort? Not often.
The problem lies in separating the various components of which the fiber is made &ndash; plastics, metals, the glass &ldquo;fractions.&rdquo; Not easy. Nor are any of those materials particularly high-value.
The technology for fiber recycling is improving on the margins &ndash; and companies like AT&amp;T have figured out how to convert old fiber lines into roofing material. But it&rsquo;s still not economical in many situations.&nbsp;
And when you add the labor costs of gathering all that fiber strung across Ukrainian cities? Forget it&hellip;

FMF-Issue-081126-Featured

Turning Japanese

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />9,800
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Ukrainian drone strikes inside Russian territory aren&rsquo;t altogether new. But 680 miles from the Ukrainian border? That&rsquo;s new.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3t3GJD22H6I9FcF7QhwVBS/2cc02bc6234a6ce1549b682afde84e83/visegrad24x.jpg" alt="Visegrad 24 - X" />
Local officials in the city of Nizhnekamsk, population 241,000, say the attack overnight killed 13 people &ndash; including a child. &ldquo;It is one of the deadliest single attacks on Russia since the start of Moscow's full-scale war in Ukraine in 2022,&rdquo; says the BBC.
For its part, the Ukrainian government says it hit an oil refinery &ndash; part of its strategy to strike targets that generate revenue for Russia&rsquo;s government and logistics for Russia&rsquo;s military.
Nor was that the only drone Ukraine sent into Russian territory: Moscow says it shot down more than 450 Ukrainian drones last night alone.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />The Russian defense ministry says Ukraine unleashed a record number of drones on Russia last month &ndash; 9,800. That&rsquo;s over 300 a day.
Not coincidentally, the supply of drones from European Union countries has mushroomed this year.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5rUriTgDgJboVEU0O4T9DF/30306be252ce3df9a80d8af3aa0427ac/statista_chart_fmf.jpg" alt="Statista Chart" />
These drones aren&rsquo;t especially speedy. And few hit their targets &ndash; perhaps 3% at most. They&rsquo;re unlikely to change the trajectory of the war, which is moving steadily in Moscow&rsquo;s favor.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />The Russian military has its own drone fleet that it unleashes on Ukraine &ndash; and those drones appear to be reaching a far higher percentage of their targets. 
That&rsquo;s because Kyiv has exhausted its supply of interceptor missiles &ndash; and Washington has no more to give, having already given so many to Ukraine and having used up so many defending U.S. bases in the Middle East from Iranian drone strikes.
These developments have not gone unnoticed in Washington. Which is why a tiny line-item in the Pentagon&rsquo;s budget blueprint perked up our attention at Paradigm Press.
We alluded to it last Thursday &ndash; a staggering 240x increase in the amount of money sought for drone warfare. From $255 million&hellip; to $55 billion.
We&rsquo;ve also been aiming to identify the companies that could be the biggest beneficiaries of this money flood from D.C. And the team at Rickards&rsquo; Insider Intel has pinpointed it &ndash; with the aid of a proprietary AI tool they call the I-3.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Energy: Reality Check
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;U.S. Oil Price Hits $80 as Doubt Grows Washington and Tehran Will Reach Strait of Hormuz Deal,&rdquo; says a CNBC headline.
Gee, ya think?
A week ago today, Treasury Secretary Scott Bessent said a deal was in the works &ldquo;today or tomorrow.&rdquo; But on Saturday, traffic was at a near-standstill.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/6cJ8EbpPz0JCC2KcTKrnQq/93df2eff5315b994bceb9c0d66e2d0d4/macroEdgeX.jpg" alt="MacroEdge - X" />
Yesterday, Donald Trump did an interview with one of the White House&rsquo;s fave reporters, Axios&rsquo; Barak Ravid. He issued no new military threats against Iran, saying he&rsquo;ll rely on economic warfare for the time being. Or as he put it, &ldquo;We are low-keying it.&rdquo;
Hmmm&hellip; That squares with a column last week by The Wall Street Journal&rsquo;s Holman Jenkins in which he anticipated &ldquo;the deusltory shooting and talking to continue to Jan. 20, 2029, when the next administration will be able to take a big-bath write-off and blame Mr. Trump.&rdquo;
Of course, it&rsquo;s still a long time between now and then &ndash; and the status quo can&rsquo;t hold indefinitely. Some other headlines today&hellip;
<ul>
<li>The Department of Energy says the U.S. government&rsquo;s Strategic Petroleum Reserve is now under 300 million barrels &ndash; the lowest level since 1983. By law, it can&rsquo;t fall below 252 million so that the military has a bare minimum to draw on in an emergency. At the current pace of depletion, we&rsquo;ll be there by late October.</li>
</ul>
<ul>
<li>Ukraine&rsquo;s attacks on Russia&rsquo;s oil industry are such that according to Reuters, Russia is importing refined products like diesel and jet fuel from South Korea &ndash; which isn&rsquo;t exactly an energy powerhouse</li>
</ul>
<ul>
<li>Yemen&rsquo;s Houthi faction continues to inflict pain on Saudi Arabia&rsquo;s oil industry &ndash; launching another drone attack on Saudi Aramco&rsquo;s Jazan refinery, which the company says is now disabled until at least the end of this month. (More about the Houthis and drones in tomorrow&rsquo;s edition&hellip;)</li>
</ul>
And with that, U.S. oil futures are now over $81 for only the second time this month &ndash; up more than three bucks from Friday&rsquo;s close.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />As for stocks, the major U.S. indexes are little moved from their Friday closes.
At last check the S&amp;P 500 is up fractionally in record territory at 7,764. The Dow and the Nasdaq are slightly in the red.
The Paradigm editors racked up another slug of winners for readers at the end of last week. Enrique Abeyta&rsquo;s The Maverick logged a 15% gain in less than four weeks on shares of Construction Partners Inc. &ndash; and 239% playing options on Atlassian Corp.
Atlassian was also a big winner for Zach Scheidt&rsquo;s Income Alliance &ndash; a staggering 157% in a single day. And in Altucher&rsquo;s True Alpha, readers bagged 196% in less than four months playing options on Unity Software.
Elsewhere, gold is consolidating last week&rsquo;s gains &ndash; up $21 as we write to $45,362. But silver&rsquo;s still on a tear, up 2.5% and now over $65 for the first time since June.
No joy in crypto, though &ndash; Bitcoin just over $64,000 and Ethereum under $1,900 again. &ldquo;Bitcoin&rsquo;s trading range has tightened to a point where we should expect a major move soon,&rdquo; says Greg Guenthner at The Trading Desk. &ldquo;Whether that move is up or down remains to be seen.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Et Tu, Texas? (Data Centers)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />For the record: The most data center-friendly state government in the country has paused new approvals.
Last week, Republican Gov. Greg Abbott of Texas ordered a pause on new approvals for every data center that wants to connect to the power grid. That&rsquo;s because &rdquo;less than 10% of data centers responded to the state&rsquo;s requests for them to report their power and water usage,&rdquo; according to the Texas Tribune.
And so all approvals are on pause until the state can perform an audit &ndash; some 1,800 projects representing 474 gigawatts, five times the Texas grid&rsquo;s record peak demand.
Donald Trump criticized Abbott&rsquo;s decision &ndash; gently, and without calling him out by name. &ldquo;I just think it&rsquo;s a mistake, because there are other communities that want it. When a community wants it, it means a lot of money is going to come into that community.&rdquo;
Abbott spokesman Andrew Mahaleris counters that &ldquo;many are unaware that [the Electric Reliability Council of Texas] is tracking a more than 500% increase in peak electricity demand. This unprecedented growth could endanger the reliability and stability of the Texas electric grid.&rdquo;
The situation is almost certain to encourage more data centers to spin up their own power on-site, &ldquo;behind the meter.&rdquo; The simplest and fastest way to do so is with natural gas.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />But that&rsquo;s not problem-free. In July we mentioned the objections neighbors have to SpaceX&rsquo;s colossus project in the Memphis area.
Last week, The New York Times had a front-page story that began with the tale of a woman near El Paso who will soon have a new Meta data center for a neghbor &ndash; powered by natgas turbines.
&ldquo;I thought I&rsquo;d bought my dream home, that I&rsquo;d be looking out on the dark sky, hearing the coyotes call,&rdquo; says Cynthia Crouse. &ldquo;Then I woke up to the biggest nightmare I&rsquo;ve ever had.&rdquo;
The Times story zeroes in on &ldquo;planet-warming carbon dioxide&rdquo; &ndash; because of course it would.
But you don&rsquo;t have to buy into the climate change hoopla to recognize that the turbines &ldquo;also produce harmful pollutants including particulate matter, formaldehyde and smog-forming nitrogen oxides that can contribute to heart disease, asthma, lung cancer, strokes and other ailments in people living nearby.&rdquo;
This much is certain: The backlash over data centers <a href="https://paradigmpressroom.com/post/backlash-data-centers" target="_blank" rel="noopener">isn&rsquo;t going away</a>. And it <a href="https://paradigmpressroom.com/post/maga-lansing" target="_blank" rel="noopener">transcends partisan lines</a>.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Great Moments In AI
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />You know the saying &ldquo;close enough for government work&rdquo;? Yeah, this ain&rsquo;t it&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1Zw6qyLlySi0jvkG34CpSj/43cf35c90cd136b7b78c7d3d9fb6ebbf/ReutersAfricaX.jpg" alt="Reuters Africa - X" />
Recently the State Department held its annual AIDS conference in Brazil. During one presentation, an official map spotlighted six African countries with which Washington has agreements for AIDS funding.
And the map botched both the shape and placement of every one.
From an NBC News account: &ldquo;The map showed Nigeria, where the U.S. has several hundred troops deployed, as landlocked in the Sahara. Mozambique, which is in southeastern Africa, was relocated to the Horn of Africa, while Ivory Coast in West Africa was placed on the other side of the continent.&rdquo;
It&rsquo;s&hellip; the&hellip; State Department. They&rsquo;re supposed to&hellip; know&hellip; this stuff.
A watermark on the map said the map was made with the help of OpenAI tools. OpenAI says it&rsquo;s investigating.
Yeah, I tried using OpenAI&rsquo;s ChatGPT to draw a map for a 5 Bullets issue one day recently. The approximate position of everything was accurate but the shapes were so distorted I refused to use it.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4nwMXioLcA4owlHzDuAeJF/6dd024160f4295430e5a25aa3d98f9c0/CaspianSea.jpg" alt="Caspian Sea - ChatGPT version" />
This is what ChatGPT thinks the Caspian Sea basin looks like&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7ej5GCbQEBeUZvLb4vIkc7/da322b88d9c8b9ee6703cb7f8baa83fb/caspianSeaActual.jpg" alt="Caspian Sea - Actual" />
&hellip;and this is what it actually looks like.
The State Department says it takes &ldquo;full responsibility for the confusion and misrepresentation it caused for attendees, including our African partners.&rdquo;
Betcha no one got fired or even reprimanded, though&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Show-Me State Taxes
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;As a Missouri resident, I wanted to follow up with you about the vote in the state that rejected abolishing the income tax,&rdquo; a reader writes after Saturday&rsquo;s edition.
&ldquo;As it stands now, under the Hancock Amendment and Constitutional Amendment 4 (2016), the Missouri General Assembly cannot raise state taxes or expand state revenue beyond a constitutional growth cap without sending the proposed increase to a statewide vote for public approval.
&ldquo;Plus, cities, counties, school districts, and special taxing districts cannot create new local taxes, increase existing tax rates, or expand sales tax levies without direct voter approval. And, if overall property assessments in a taxing district grow faster than inflation, local taxing authorities are constitutionally required to roll back their tax rates to prevent automatic revenue spikes&mdash;unless voters specifically approve keeping the higher rate. (There are some exceptions and caveats, but I hope this gives you the big picture of the tax scene in Missouri.)
&ldquo;Amendment 5 would have ended income tax; BUT it would have authorized the Missouri General Assembly to expand sales and use taxes to a wider array of goods and services without requiring a separate, subsequent public vote. (Effectively ending the safeguards outlined above.)
&ldquo;From my conversations with people from all over the political spectrum, I got the feeling that the vast majority of people did not want to allow politicians to expand sales and use tax at their discretion. Plus, they wanted to keep voter protections in place. (You kind of got the feeling it would have turned into an everything tax that could easily feel like a VAT for the state.)
&ldquo;In any case, I hope that paints a picture of the tax scene in Missouri and what Amendment 5 would have done.
&ldquo;Keep up the great work! Love the 5!&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I never met a tax I didn&rsquo;t hate, and for 27 years as an expat, I structured it so I paid little or none. I find income taxes almost as distasteful as slavery,&rdquo; chimes in another reader.
&ldquo;When I saw the amendment proposal to eliminate income and property tax, I was elated. Then I read the fine print. As you mentioned, they had to get funds from somewhere. In this case, it eliminated the constitutional restraints on sales and services taxes.
&ldquo;So our choice was to trade on a known form of robbery for another with no theoretical limits. As the winds and political fortunes shift over time, politicians would have a field day favoring this and taxing the hell out of that, with no say from the taxpayer. It would have been a great instrument for social engineering. Fortunately, enough people figured that out.
&ldquo;Unfortunately, but perhaps not surprisingly, the amendment to end simple majority rule (mob rule) and replace it with the requirement for proposed changes to pass with a majority in all voting blocks did not.
&ldquo;On the surface, this would appear fair, but Missouri is a bit different. The populations of St. Louis and Kansas City on the east and west borders are urban and primarily blue, while the rest of the state in between is mostly rural and red. The proposed amendment would have finally given some clout and better representation to the rural folk and perhaps provided a pathway to alleviate some of the disadvantages we now face. The campaigns in the media misportrayed it sufficiently that it did not pass.
&ldquo;So no changes. C'est la vie.&rdquo;
Dave responds: Thanks to our readers contributing on-the-ground insight.
As long as we have local and state taxes on the brain, here&rsquo;s a quick update on the proposal in Florida <a href="https://paradigmpressroom.com/post/elon-failure-is-always-an-option" target="_blank" rel="noopener">that would radically curb property taxes</a>.
Opponents of the measure challenged it in court &ndash; and a week ago today, a judge in Tallahassee ruled the language needs to be tweaked.
In particular, the judge said the title of the measure &ndash; &ldquo;Save Our Homes From Excessive Property Taxes&rdquo; &ndash; was too political, running afoul of state law requiring &ldquo;fairness and accuracy&rdquo; in ballot questions.
Gov. Ron DeSantis says while he doesn&rsquo;t &ldquo;necessarily agree&rdquo; with the ruling, a rewrite is underway. The referendum still goes before voters on Nov. 3.

fmf hero 081026

680 Miles

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />SPCX: The Last Word (For Now)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> So after three days is there anything to say about SpaceX&rsquo;s earnings report that hasn&rsquo;t been said already?
Yes, actually.&nbsp;
As we mentioned on Wednesday, Mr. Market punished SpaceX for its prodigious spending on AI infrastructure like data centers.
Because SPCX sees AI as a far bigger market than space, the company is spending accordingly. And Wall Street is evaluating SPCX as a competitor with the &ldquo;hyperscalers&rdquo; like Microsoft, Google, Meta and Amazon.
For the most recent quarter anyway, Wall Street has put SPCX in the same bucket as GOOG and META &ndash; skeptical that those billions and billions will ever pay off.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;The read is that SpaceX is burning tens of billions to fight the AI labs. That&rsquo;s not entirely correct,&rdquo; says Paradigm tech investing pro Ray Blanco.
&ldquo;Google is a customer. Anthropic is a customer. SpaceX chief operating officer Gwynne Shotwell named both on the call. The $14.1 billion in cloud services agreements they signed this quarter is money coming from those frontier AI labs.
&ldquo;Only about 10% of that compute goes to training Grok. Elon gave that number when an analyst asked. The rest is inference and rental.&rdquo;
Chief financial officer Bret Johnsen explained that SpaceX isn&rsquo;t playing the same game as the others. "We're able to deploy capital in such a way that we're getting less than a one-year payback.&nbsp;
&ldquo;It's almost like your capital is becoming almost an item that you would put otherwise in COGS [cost of goods sold], because it's moving so quickly as far as monetization and moving into revenue."
Ray finds that a plausible argument &ndash; but the burden of proof is on SpaceX in the next couple of quarters. &ldquo;The payback claim still has to hold going forward. If it doesn&rsquo;t, the bears are right.&rdquo;
But if it does hold&hellip; it will justify Elon Musk&rsquo;s expectations for $100 billion in annualized revenue by December.
For now, everyone on the Paradigm team agrees it&rsquo;s too soon to pull the trigger on SPCX. Only yesterday, 911 million shares held by insiders and employees were unlocked and available to trade openly on the market. Still more unlock events are on tap between now and December.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />About the Job Numbers&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Gee, who&rsquo;s Donald Trump gonna fire for the rotten job number this summer?
It was a year ago this week that Trump fired Erika McEntarfer, commissioner of the Bureau of Labor Statistics &ndash; the same day the BLS reported that employers added only 73,000 new jobs during the month gone by. It was the lowest increase all year.
The Bureau has gone without a permanent head since; Trump named someone more than six months ago but the nomination has languished in the Senate.
In the meantime, the numbers have generally worsened since then. Which brings us to today&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The wonks at the BLS conjured a loss of 23,000 jobs during July. No one among legions of Wall Street economists saw that coming.
The official unemployment rate ticked down to 4.1%. How could that happen when the economy shed jobs?&nbsp;
Because 80,000 people dropped out of the labor force during July. And it&rsquo;s a safe bet most of them weren&rsquo;t retiring with a gold watch after 40 years on the job with the same company; they were people of all ages who simply gave up looking for work.
In the scheme of things, a one-month drop of 23,000 jobs isn&rsquo;t a huge deal. The U.S. border has been all but sealed since the spring of 2025.&nbsp;
It used to take at least 150,000 new jobs every month to keep pace with population growth. But with migration dramatically curbed, the number is more like 30,000 &ndash; and the average over the last year has been just shy of that level, about 26,000.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The downside surprise in the job number is giving a lift to nearly every asset class as the week winds down.
That&rsquo;s because every punk job number lowers the likelihood that the Federal Reserve will raise short-term interest rates. As of this morning, futures traders now assign a 56% probability the Fed will leave rates alone at its next meeting in mid-September.
With that, the S&amp;P 500 is on track to end the week in record territory &ndash; up more than a half percent on the day at 7,753. The Nasdaq is up over 1% on the day, but it still has work to do to return to its early-June highs. And the Dow is up a quarter-percent, back over 54,000.
But if it&rsquo;s big movement you want, it&rsquo;s in the precious metals. Gold is up over $100 to $4,349 &ndash; the highest since mid-June. And silver is up over two bucks to $63.59.
In contrast, crypto is treading water &ndash; Bitcoin just under $65,000, Ethereum just over $1,900.
Crude is up less than a percent &ndash; a hair below $78. For the record, we&rsquo;re still waiting on whatever &ldquo;deal&rdquo; with Iran the Trump administration was promising earlier this week and was supposed to be done by now.
➢ Winners this week: With the bump in gold prices today, congratulations are in order for Weekly Wealth Alert readers. Alan Knuckman urged them to take 100% profits this morning on Barrick Mining call options. Nice work for just over a week. Meanwhile at The Income Alliance, Zach Scheidt&rsquo;s premium subscribers booked 59% in less than a month playing options on the software name Atlassian Corp.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Gold Miners: Still Cheap
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Even with the big bump in the gold price today, gold miners are still a steal.
&ldquo;This is an incredible chart of the free cash flows coming from mining companies,&rdquo; enthuses Paradigm natural resources pro Matt Badiali.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/MwYh9X8kFMn7clf2NjroA/37d4e920319223b5822a34014b53d49a/FMF-Issue-080726-1.jpg" alt="Gold miners: Free cash flow per share" width="540px" />
&ldquo;Mining, as you can see from those red lines, doesn't usually generate a lot of free cash,&rdquo; Matt says. &ldquo;That's because mining is capital intensive.&nbsp;
&ldquo;You plow most of your earnings back into the business. You have to find new mines, replace equipment, and maintain your operations. I once saw a metric that measured tons of rock produced per tire&hellip; because the haul truck tires (those giant, taller-than-a-man-things) cost so much money to replace.&nbsp;
&ldquo;But the soaring gold price of the last year-plus eclipsed those costs by so much that miners are now gushing with cash.&nbsp;
&ldquo;It's a great time to be a producer!&rdquo;
The HUI index of gold mining shares is up nearly 7% today, approaching the 750 level &ndash; the highest in over two months. Sooner or later it&rsquo;s going to take out the late-February highs of 978.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />It&rsquo;s Come To This&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> You know the world&rsquo;s turned upside down when this e-letter scoops Alex Jones by over a week.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3SjGD5LiYzEqaUzVKZ89XG/82f6e620b7165df335133810a6d4c44d/FMF-Issue-080726-2.jpg" alt="pub" width="540px" />
<a id="5"></a>
OK, the 5 Bullets take wasn&rsquo;t as hyperbolic, but it&rsquo;s right there <a href="https://paradigmpressroom.com/post/war-merger">at the top of our July 27 edition</a>. The Ukraine and Iran wars effectively merged with a Ukrainian attack on an Iranian merchant ship in the Caspian Sea.
It&rsquo;s true, as we chronicled a couple of days later, that Ukrainian and Iranian diplomats have since lowered the temperature. But the risk remains &ndash; and we&rsquo;re keeping a watchful eye&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Drones
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We heard from a skeptical reader after colleague Davis Wilson&rsquo;s <a href="https://paradigmpressroom.com/post/the-pentagons-244x-play">guest essay yesterday</a> about drone warfare&hellip;
&ldquo;Before the world decides that hand to hand fighting and tanks no longer serve any purpose, we need to have a discussion about how easy or hard it is to blast every one of those GPS satellites out of the sky/space without which no sophisticated drone can operate.&rdquo;
Dave responds: It is true that GPS satellites are vulnerable to ballistic missiles &ndash; to say nothing of hackers and solar flares.
But many armed drones don&rsquo;t rely on GPS at all &ndash; in part because GPS is also vulnerable to plain ol&rsquo; jamming and spoofing, of which there&rsquo;s been a lot during the Russia-Ukraine war.
AeroVironment (AVAV) &ndash; mentioned in Davis&rsquo; writeup yesterday &ndash; has developed a drone called Red Dragon specifically for scenarios when GPS is not available or not desirable.&nbsp;
Other systems are radio-controlled &ndash; a souped-up version of decades-old model airplane technology.&nbsp;
And for distances of 12 miles or less, there are drones controlled by fiber-optic cable &ndash; which leads to perverse results like this.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7DehtMxiV6mhOGoXXtahRN/133a7dc9f6d2846a1bc075c7e31a45aa/FMF-Issue-080726-3.jpg" alt="clash report" width="540px" />
Anyway, we thank the reader for the thought exercise here. More about drones and their investment potential coming up next week&hellip;

FMF-Issue-080726-Featured

What Wall Street’s getting wrong…

Buried in the Pentagon&rsquo;s latest budget blueprint is an eye-popping number &ndash; one that Congress is almost sure to agree to between now and year-end.
That&rsquo;s because you&rsquo;re going to be hearing a lot about drone warfare in the days, weeks and months to come &ndash; more than you have already.
Investable? Yes &ndash; as colleague Davis Wilson has discovered this summer.
Really, it&rsquo;s shaping up to be one of the major themes we&rsquo;ll be following for the rest of 2026.&nbsp;
<h2 style="text-align: center;">55 Billion Reasons to "Go Drone"</h2>
The Pentagon has a math problem.
And it's a big one.
Imagine spending $2 million to shoot down a drone that costs $20,000.
Do it once and nobody notices.
Do it hundreds of times and your military strategy starts to break down.
That's the lesson the United States has learned from the wars in Iran and Ukraine.
Cheap drones are increasingly able to overwhelm expensive defenses.
Now the Pentagon is responding in a dramatic way.
The Department of War just announced it&rsquo;s seeking $55 billion for drone and autonomous warfare programs in its fiscal 2027 budget.
For perspective, that's up from $225 million just one year earlier.
That&rsquo;s a 244x increase in one year.
The message couldn't be clearer: The future of warfare is autonomous.
And as investors&hellip; it&rsquo;s time we take notice.
Here&rsquo;s Where The Money Is Going
The Pentagon isn't simply buying more drones.
It's rebuilding an entire ecosystem.
Think about what it takes to field thousands of autonomous systems.
First, you need the drones themselves.
Then you need the software that allows them to communicate, coordinate, and operate autonomously.
And finally, you need a secure domestic supply chain capable of producing all of those systems at scale.
In other words, this $55 billion spending surge won't create just one winner.
It will create winners across the entire autonomous warfare stack.
Here are the three layers I'm watching closely.
Layer #1: The Drone Builders
The most obvious winners are the companies actually manufacturing the drones.
As warfare shifts from a handful of expensive platforms to thousands of expendable autonomous systems, demand for drone production could explode.
The Pentagon isn't looking to buy a few dozen systems.
It's looking to field them at scale.
Here are the companies I'm watching:
<ul>
<li>AeroVironment (AVAV) &ndash; This was once a $400 stock that now trades below $170. The company is one of the most established names in military drones. If the Pentagon is serious about fielding autonomous systems at scale, AeroVironment is likely to be one of the first companies on speed dial.</li>
</ul>
<ul>
<li>Red Cat Holdings (RCAT) &ndash; This is a $1.7 billion company most investors have never heard of. Red Cat focuses on tactical drones used by frontline military personnel for reconnaissance and battlefield awareness.</li>
</ul>
<ul>
<li>Kratos Defense (KTOS) &ndash; This is another stock well off its highs. Shares traded around $134 in January and sit near $53 as I type. What attracts me to Kratos is that its entire business is aligned with where military spending is headed: lower-cost, autonomous, and scalable.</li>
</ul>
One thing investors should remember: drones are increasingly becoming consumables.
Unlike fighter jets that can remain in service for decades, drones get used, destroyed, and replaced.
That creates a recurring demand cycle that looks more like ammunition than traditional defense procurement.
Layer #2: The Brains Behind The Drones
Building thousands of drones is one thing.
Getting them to operate together is another.
The Pentagon's vision isn't simply thousands of independent drones flying around the battlefield.
It's aiming to create swarms of these drones.
That requires software capable of coordinating hundreds of systems simultaneously, sharing information, assigning targets, and adapting in real time.
Here are the companies I'm watching:
<ul>
<li>Ondas (ONDS) &ndash; This is a $4.7 billion company operating at the intersection of drones and artificial intelligence. The company develops autonomous drone systems and the software needed to coordinate them.</li>
</ul>
<ul>
<li>Palantir (PLTR) &ndash; I&rsquo;ve been critical of Palantir in the past for valuation reasons. But undoubtedly the company is already deeply embedded within the defense ecosystem. And because autonomous warfare generates massive amounts of battlefield data, they&rsquo;ll likely be the company to organize it.</li>
</ul>
In many ways, this may become the most valuable layer of the entire autonomous warfare stack.
Anyone can build a drone.
Far fewer companies can build the software required to coordinate thousands of them.
Layer #3: The Picks-And-Shovels Suppliers
The Pentagon has made it clear that it wants to reduce its dependence on foreign drone components &ndash; particularly those sourced from China.
That's easier said than done.
Building thousands of drones requires motors, flight controllers, cameras, radios, and countless other components.
If those parts can't be sourced domestically, the Pentagon's ambitious plans quickly run into supply chain bottlenecks.
That's where a little-known $1.2 billion company called Unusual Machines (UMAC) comes in.
<ul>
<li>Unusual Machines (UMAC) &ndash; One of the few public companies focused on supplying NDAA-compliant drone components sourced outside of China. As the Pentagon pushes to build a secure domestic drone ecosystem, companies like UMAC could become increasingly important.</li>
</ul>
Most investors focus on the finished drone.
Instead, let&rsquo;s focus on what makes the drone possible.
After all, if the Pentagon is serious about deploying autonomous systems at scale, it won't just need more drones.
It will need an entire American supply chain to support them.
The Bottom Line
For decades, military power was built around a relatively small number of expensive platforms.
The future appears to be thousands of lower-cost autonomous systems operating together in coordinated networks.
And whenever an organization as large as the Pentagon changes direction, investors should pay attention.
The exact winners remain to be seen.
But if this $55 billion proposal is any indication, the drone economy is about to get a lot bigger.
I'd rather be early than late.
Dave&rsquo;s last word: We&rsquo;ll have more to say on this theme in the days to come. Stay tuned.
In the meantime, it&rsquo;s shaping up to be a sleepy summer day in the markets. The major U.S. stock indexes are flat in early trading. Precious metals are likewise consolidating their gains from earlier in the week. U.S. crude futures are up about 1% but still under $76. Bitcoin has pushed past $64,000 and Ethereum past $1,900.
Back to our regular fare tomorrow, including our always-skeptical take on the monthly job numbers. Catch you then&hellip;

FMF-Issue-080626-Featured

 The Pentagon’s 244X Play

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />2027: Data Centers in Space
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Elon Musk made it clear yesterday during SpaceX&rsquo;s inaugural earnings release: He intends to launch data centers in space next year.
And not a moment too soon.
We&rsquo;ll get to our team&rsquo;s take on SpaceX in Bullet No. 2. But as we said two weeks ago during our last foray into <a href="https://paradigmpressroom.com/post/maga-lansing">the data center backlash</a>&hellip; Musk&rsquo;s vision of data centers in space may be the only way to feed industry&rsquo;s insatiable demand for &ldquo;compute&rdquo; without compromising the power grid and the water table.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Pushback from the public is starting to have a measurable impact on the data center buildout.&nbsp;
&ldquo;The public is concerned about rising electricity rates caused by data centers,&rdquo; says University of Michigan political scientist Ben Green. &ldquo;They are concerned about the enormous water use that data centers require.&nbsp;
&ldquo;They&rsquo;re concerned about public handouts in the form of tax breaks that are going to data center developers,&rdquo; Green tells The Harvard Gazette &mdash; &ldquo;and they&rsquo;re also aware that data centers don&rsquo;t bring meaningful economic development, especially in the form of jobs.&rdquo;
Yesterday, colleague Matt Badiali spotlighted this chart from Goldman Sachs for his Real Wealth Insider readers. &ldquo;Goldman expects companies to complete only about 50&ndash;60% of data center capacity. That&rsquo;s due to delays and cancellations.&rdquo;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4ytyfGmg8zQHEJTDcaxHbS/58ddbbb71194606db505d93843a091ce/FMF-Issue-080526-1.jpg" alt="Data center forecast" width="540px" />
But it&rsquo;s not just growing public opposition acting as a constraint.
&ldquo;Our power grid is old,&rdquo; Matt reminds us. &ldquo;It needs a lot of investment as is. Data centers add massive new load to that grid. They currently use 4.4% of all electricity generated in the U.S. That will jump to 12% by 2028, according to research from the Harvard Kennedy School.&rdquo;
And then Matt laid out the following stats &mdash; which were new to me even though I&rsquo;ve been writing about the fragility of the power grid for over four years&hellip;
<ul>
<li>&ldquo;At the end of 2023, 11,600 projects waited to connect to the grid. Those projects represented 2,600 gigawatts of generation and energy storage. At the time, the U.S. grid&rsquo;s entire energy generation capacity was only 1,280 gigawatts.</li>
</ul>
<ul>
<li>&ldquo;Only 13% of the new power requests submitted from 2000&ndash;2019 were in operation by 2024. That&rsquo;s not good. Less than one in five got through. Looking ahead, that could mean even fewer data centers.&rdquo;</li>
</ul>
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> You might think these facts and figures undercut the case for investing in copper miners &mdash; something we talk up periodically in this space. But Matt says hold on.
Copper is &ldquo;the key that unlocks the electricity we need for the future,&rdquo; he tells us. &ldquo;It&rsquo;s the railroad that makes all this AI data work.
&ldquo;And it&rsquo;s not just AI. EVs, renewable power, batteries, etc. are all incredibly copper intensive. Updating and expanding power grids all over the world, not just here in the U.S., requires billions of pounds of copper.
&ldquo;On the other side of the equation, we&rsquo;re dealing with an aging fleet of mines that require more ore moved to produce the same amount of copper. And there is currently a lack of new copper mines coming online.&rdquo;
S&amp;P Global forecasts that yearly copper mining worldwide will peak in 2030 at 27 million metric tons.&nbsp;
Right now, demand is already at 28 million &mdash; and it&rsquo;s forecast to leap 50% to 42 million metric tons by 2040.
&ldquo;Short of another massive global recession, sustained higher copper prices are inevitable,&rdquo; Matt concludes. &ldquo;We do not have the supply we need to meet forecast demand.&rdquo;
Matt added another copper miner to the Real Wealth Insider portfolio yesterday. If you&rsquo;re new to the sector, you might want to first try an ETF. Sprott offers COPP for larger firms and COPJ for the juniors. [Dave&rsquo;s disclosure: I own both.]
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />SPCX: Still Not a Space Company
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Remember when we said before the SpaceX IPO that <a href="https://paradigmpressroom.com/post/spacex-is-not-a-space-company">SpaceX isn&rsquo;t a space company</a> as much as an AI company? Yeah, the rest of the world discovered the same thing within the last 24 hours.
Yesterday afternoon, SPCX delivered its first quarterly numbers as a publicly traded company. This morning, traders have driven down shares nearly 8% &mdash; mostly because of the company&rsquo;s plans to spend prodigious amounts of money on AI infrastructure.
This shouldn&rsquo;t have surprised anyone who reviewed SpaceX&rsquo;s pre-IPO prospectus. <a href="https://paradigmpressroom.com/post/spacexs-halo">As our Ray Blanco noted at the time</a>, the company saw space as a $370 billion market&hellip; while AI is a $26.5 trillion market.
Given that backdrop&hellip; and given the scale of Elon Musk&rsquo;s ambitions, whatever he puts his mind to&hellip; is it really so shocking that SPCX&rsquo;s capital spending last quarter totaled $18.4 billion &mdash; compared with only $2.8 billion a year earlier?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We won&rsquo;t dwell on the other headline numbers, which you can find anywhere. That&rsquo;s because under the surface are some other items at least as interesting, if not more.
&ldquo;SpaceX expects to be running at $100 billion in annualized revenue by December,&rdquo; says our Ray Blanco. &ldquo;That's FIVE months from now.
&ldquo;CFO Bret Johnsen laid it all out. In the first weeks of the third quarter, they've already contracted an additional $6.7 billion in cloud services revenue, ramping from October. Google and Anthropic agreements start hitting later this quarter. Plus the Cursor deal closes and consolidates.
&ldquo;Elon removed the hedge entirely: &lsquo;The $100 billion ARR in December is not a question mark. That's what we'd achieve if we basically did nothing. So I think it may be higher than that.&rsquo;&rdquo;
And while The Wall Street Journal&rsquo;s headline spotlighted Musk&rsquo;s forecast that SPCX will in time generate 10X that amount in revenue&hellip; Ray tells us that Musk has moved up the timeline to reach that $1 trillion target &mdash; from 2031 to 2030. Musk added, &ldquo;There's a non-zero chance of that being in 2029."
&ldquo;The rest of the call,&rdquo; Ray says, &ldquo;explained where it came from&hellip;
Compute. &ldquo;1.4 gigawatts today. Over 2 by year-end. &lsquo;Closer to 10 gigawatts than 5,&rsquo; by the end of 2027 said Musk&mdash; and they're building power and cooling toward 20 gigawatts, deliberately ahead of GPU supply. Payback on new compute capital is running under one year.
Starlink V3. &ldquo;Ten times the capacity per satellite, and 10 times as many satellites. Musk: &lsquo;Even if our monetization per bit dropped by a factor of 10, that would still mean a 10X increase in the revenue of Starlink.&rsquo;
Starship. &ldquo;Falcon delivers about 2,500 tons to orbit a year. The rest of the world combined does roughly 300. The Starship target is over a million tons a year, ultimately 10 million. And the heat shield &mdash; the hardest remaining problem &mdash; is, in Elon's words, solved (although he mentioned he doesn&rsquo;t want to jinx it).&rdquo;
Starmind. The orbital data center now has a name and a date. An optimized Vera Rubin NVL72 computer, launching next year.
Companywide, second-quarter revenue totaled $7.8 billion.&nbsp;
Ray does the math: &ldquo;A $100 billion December run-rate means roughly $8.3 billion in that single month. More than all of Q2, just in December alone.
&ldquo;If they hit that in five months,&rdquo; Ray concludes, &ldquo;the valuation argument is over.&rdquo;
A big &ldquo;if&rdquo; to be sure &mdash; especially with all those insider shares about to unlock between tomorrow and December. For the moment, no one on our team is ready to commit to SPCX as a buy.&nbsp;
[Editor&rsquo;s note: Ray posted his insights first thing this morning on the Daily Feed section of the Paradigm Press mobile app. Our editors deliver a host of instant insights every trading day &mdash; material we don&rsquo;t publish anywhere else.
What&rsquo;s more, the app is hands-down the simplest way to stay on top of our editors&rsquo; buy and sell recommendations &mdash; no sifting through your email to find exactly what you need to know.&nbsp;
The app is available for both iOS and Android. <a href="https://d2z65klgtz99km.cloudfront.net/PPG-App/">Download at this link</a>.]
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile, the major U.S. stock indexes keep powering higher.
To be sure, the momentum of the last two days is waning. But the S&amp;P 500 is up another third of a percent at last check to a record 7,762. The Dow is up another 1%, also in record territory approaching 54,700. The Nasdaq is just barely in the green at 26,600.
The big action, however, is in precious metals &mdash; gold up nearly 4% to $4,236, the highest since mid-June. And silver&rsquo;s up nearly 5% to $62.35, the highest in a month.
Crypto is like watching paint dry this week &mdash; Bitcoin a little over $64,000 and Ethereum a little under $1,900.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Such a Deal
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Oil Markets Price In an Iran Deal That Does Not Exist Yet,&rdquo; says a pithy headline at the Oil Price website.
Indeed, U.S. oil futures remain under $76 even though the probability of a deal to reopen the Strait of Hormuz is slipping further and further away.
When we left you yesterday, Treasury Secretary Scott Bessent said &ldquo;there is a chance we may have a deal today or tomorrow.&rdquo;
But late last night, Donald Trump told reporters, "We're moving along very nicely. We'll find out. We'll know in 48 hours, I would say."
Which takes us to Friday &mdash; just in time for the &ldquo;deal&rdquo; to fall apart and the war to resume while markets are closed for the weekend.
In a not-unrelated development&hellip; Do you remember how the &ldquo;memorandum of understanding&rdquo; between the United States and Iran back in June never got off the ground in part because Israel was attacking Lebanon?
Well, Israel just resumed airstrikes on Lebanon today. In fact, the Israel Defense Forces ordered everyone in the village of Mansouri to leave their homes. By one account, it&rsquo;s the first time the Israeli military has done that since the 2006 Lebanon war.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/JkEK4kxoiOqVOBzEjpRGv/6d0dbd4f5c861c4e6df52dbb7ad213d1/FMF-Issue-080526-2.jpg" alt="South Park Meme" width="540px" />
Honestly I didn&rsquo;t plan on the South Park banker to appear in these digital pages twice in the same week, but here we are.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Well, if the buzzword this year is &ldquo;affordability&rdquo;...
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2yUgJ9H0XkC0oIjgYK2qtW/058a013bf6eef2eb7b1d5d1db7b2ffe5/FMF-Issue-080526-3.jpg" alt="Ranch Meme" width="540px" />
And we&rsquo;ll carry on the theme in the mailbag&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Affordability
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I can't believe how easy you can throw out that line that if your GI parents didn't help you, too bad,&rdquo; a reader grouses after something I said at the conclusion of an issue last week.
OK, it&rsquo;s at this point I invite you to check out that issue: <a href="https://paradigmpressroom.com/post/its-all-over/#dave">This link</a> will take you directly to my comments at the end.
Back to the reader: &ldquo;The problem is people like you who think that since your parents have money, they should pay for whatever their kids need, they should live at home half their lives, go out to the clubs and, of course, buy the newest fab car out there.&rdquo;
The rest of the email continued in that vein. You get the idea.
Now here&rsquo;s the thing: Did I ever say in my reflections that boomer parents are obligated to finance the lifestyles of their adult progeny?
No, all I said was that on several levels &mdash; housing, higher education, health care &mdash; life for folks in their 20s and 30s is a lot less affordable now than it was in the 1970s and &rsquo;80s. And that boomers might wish to see where the millennials and GenZ-ers are coming from.&nbsp;
To drive the point home, I reminded boomers that the GI generation was notoriously tin-eared and unwilling to listen to boomers&rsquo; concerns (whatever those concerns might have been) when boomers were younger.
I honestly didn&rsquo;t think anyone would be triggered by those remarks &mdash; but such is the life of a GenX writer trying to mediate disputes between the generations on either side of me.&nbsp;
(I&rsquo;ve been doing it <a href="https://5minforecast.com/2015/10/22/putins-plan-b/#345">for over a decade</a>. It does seem as if the vitriol is getting worse now&hellip;)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;If Gen X is destined to be &lsquo;abandoned&rsquo; then there&rsquo;s a real possibility to fix Social Security or end it,&rdquo; a reader responds to the mailbag section of <a href="https://paradigmpressroom.com/post/musk-wants-to-hire-your-plumber">yesterday&rsquo;s edition</a>.
&ldquo;Once the boomers are too small a group the millennials will be able to do what they want with it.&rdquo;
Dave responds: That&rsquo;s still many years in the future. Crunch time comes well before then. The Social Security trustees estimate the old-age-and-survivors trust fund will be exhausted by year-end 2032 &mdash; at which point, benefits would have to be cut by 22%.&nbsp;
Go figure, the oldest Xers will have just reached full retirement age of 67&hellip;

FMF-Issue-080526-Featured

2027: Data Centers in Space

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Musk Wants to Hire Your Plumber
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> You think it&rsquo;s hard finding a good plumber or electrician now? Just wait&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/36GB9LiWMlqvxtKVfB6FO/235ed28f0533b1db121f6445ef35d5f1/FMF-Issue-080426-1.jpg" alt="Elon Musk Tweet Space X is hiring" width="540px" />
Huh&hellip; &ldquo;Skilled trades&rdquo;?
&ldquo;CEOs behind the world&rsquo;s hottest companies agree on one thing,&rdquo; writes Eleanor Pringle at Fortune: &ldquo;Among the most valuable workers in today&rsquo;s labor market are engineers and skilled tradespeople who can build the infrastructure needed for the artificial intelligence boom.
&ldquo;According to Pew Research, the U.S. is already home to more than 3,000 operational data centers, and more than 1,500 are currently in development.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Never mind the &ldquo;off Earth&rdquo; part for the moment: The data center buildout needs people on terra firma right now.&nbsp;
Nvidia&rsquo;s Jensen Huang said as much earlier this year.
&ldquo;It&rsquo;s wonderful that the jobs are related to tradecraft, and we&rsquo;re going to have plumbers and electricians and construction and steelworkers,&rdquo; he told BlackRock&rsquo;s Larry Fink last winter at the World Economic Forum in Davos, Switzerland.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> SpaceX&rsquo;s application process is more rigorous than Musk makes it out to be.
&ldquo;Musk often uses this simple hiring rule for potential employees, but SpaceX doesn&rsquo;t just hire anyone &mdash; it's truly looking for the best of the best,&rdquo; writes Niamh Ancell at CyberNews.
The three bullet points? &ldquo;These points must outline the potential employee&rsquo;s &lsquo;exceptional ability,&rsquo; clearly evidenced by presenting the most difficult technical challenges they&rsquo;ve solved.
&ldquo;Musk&rsquo;s method shows a shift toward more obvious skill-based hiring rather than getting sidetracked by what a person may put on their resume.&rdquo;
And when the time does come for Musk to pursue his vision of data centers in space&hellip; well, it&rsquo;ll go without saying that relocation will be required.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Imminent Deal (Again)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Because no one believes Donald Trump&rsquo;s imminent-deal-with-Iran announcements anymore&hellip; the task has now fallen to Treasury Secretary Scott Bessent.
&ldquo;There is a chance we may have a deal today or tomorrow to open the [Strait of Hormuz] and move toward a more normalized position in this conflict,&rdquo; Bessent told CNBC this morning.&nbsp;
Asked whether Iran would charge a toll, he said only &ldquo;it would be freedom of movement.&rdquo;
And with that, U.S. oil futures are down another 5%-plus &mdash; now under $76 for the first time in over three weeks.
Assuming a deal comes through, will this be a rerun of the &ldquo;memorandum of understanding&rdquo; in June &mdash; where a deal was supposedly done but it took days for the text to be made public?&nbsp;
Ah, memories&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In the meantime, Big Oil is making bank &mdash; and Donald Trump is big mad.
The lead to Bloomberg&rsquo;s story was devastating &mdash; but only because it was accurate: &ldquo;President Donald Trump scolded Exxon Mobil Holdings Corp. and Chevron Corp. for their soaring profits, as oil prices surged amid the war in Iran he launched in February alongside Israel.&rdquo;
The two companies more than doubled their second-quarter net income &mdash; choosing to use that money to shrink their debt burden.
As Trump sees it, the two are &ldquo;making too much money&rdquo; and they should &ldquo;give some of that back to the public,&rdquo; presumably in the form of lower gasoline prices.
"I don't like it. I should be the last one to say because I'm a big free enterprise guy, nobody bigger," he told reporters at the White House. "You surprised I'm saying it? I'll say it loud and clear. I'm not happy about it."
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4DcvBI8CHlmnN3DrWPTu4z/b9a26e4897a9549c2b01901d2af39617/FMF-Issue-080426-2.jpg" alt="Don Johnson Tweet" width="540px" />
Exactly what he plans to do about this, he did not elaborate. It would be &mdash; well &mdash; interesting to see him try to go the Jimmy Carter route and urge Congress to pass a &ldquo;windfall profits tax.&rdquo;
For the record, XLE &mdash; the big energy ETF in which XOM and CVX comprise over a third of the holdings &mdash; is up 36% over the year, compared with 23% for the S&amp;P 500.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for the broad stock market, it&rsquo;s adding to yesterday&rsquo;s big gains.
At last check the S&amp;P 500 is up another 1%, blasting past its previous record close on June 2. Indeed the index is barely 20 points away from the 7,700 mark.
The Dow, after setting a record yesterday, is up another 1.3% today, barely 100 points away from 54,000.
<a id="3"></a>
The Nasdaq is up 1.6% &mdash; not record territory, but good enough to surpass 26,000 again.&nbsp;
Gold is staging a modest rally &mdash; up a half percent to $4,078. Silver&rsquo;s up 2% to $59.27. Crypto remains range-bound &mdash; Bitcoin a little over $64,000 and Ethereum a little below $1,800.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />About Those Tariff Refunds&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> For as much as your editor keeps a pulse on the news and the markets, I end up learning about some things through memes&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/46RiEpGA9sJJCVcP4SqN5u/01068756d91dfbaa007c905808bb12a0/FMF-Issue-080426-3.jpg" alt="Kalshi Meme" width="540px" />
Upon further investigation, it is true that Amazon is due a $600 million refund from tariffs imposed by the Trump administration last year, struck down by the Supreme Court this year.
But&hellip; are customers truly out of luck?
On AMZN&rsquo;s quarterly earnings call last week, CFO Brian Olsavsky said the firm "identified a limited set of circumstances where we can trace that we passed specific import charges on to customers."
But no, there&rsquo;s no process by which Amazon customers can apply for refunds of their own. Not yet anyway.&nbsp;
"When we receive those refunds [from the federal government], we will proactively contact affected customers and automatically issue refunds to them," Olsavsky said.
Turns out Amazon&rsquo;s refund is lower than some of its competitors because the firm had the foresight to stockpile items before the tariffs were imposed.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Which reminds us we should update our item about the tariff-refund lawsuit against Costco.
Costco customer Matthew Stockov sued in March, asserting it would be &ldquo;unjust enrichment&rdquo; if the firm recouped its tariff costs twice &mdash; &ldquo;from customers through elevated pricing and from the government.&rdquo;
At the time, Costco wasn&rsquo;t even sure what, if any, tariff refunds it might collect.
In May, the company responded to the suit, urging a federal judge to deny Stockov&rsquo;s request to make the case a class action &mdash; adding that Stockov received all the goods he paid for at posted prices.
As near as we can tell, that&rsquo;s the most recent development. To be continued&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We always enjoy a searing rejoinder to corporate babble&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/58zTsd4WPGgZt0ntR7x1vQ/afbc1564de7595e40398d460e867cce3/FMF-Issue-080426-4.jpg" alt="Dani Donovan" width="540px" />
That said, <a href="https://paradigmpressroom.com/post/critical-minerals-ministerial/#4">the dog&rsquo;s post on LinkedIn</a> is still the ne plus ultra of the genre.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: What About the Xers?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> On a lark, I went to the &ldquo;suspected spam&rdquo; folder of the 5 Bullets email account this morning and found&hellip;&nbsp;
&hellip; a handful of recent emails from real readers, some of them weighing in on the generational warfare that&rsquo;s been waged in our mailbag of late. We&rsquo;ll share one today&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I appreciate Dave's continued throwing up about generations and specifically millennials and Gen Z. What the hell about Generation X???
&ldquo;We are a large voting block and a bunch of us are unaffiliated because of crap like this. I'm so sick of being passed on and overlooked and so are my cohorts in Gen X. I think you're really doing your readers a disservice when you willfully do not include a large voting block &mdash; in the last several decades in a lot of elections votes have come down to literally a few.&nbsp;
&ldquo;I'm not saying they don't matter. I'm saying we're tired of being looked at like what we were labeled slackers and not to be cared about.&nbsp;
&ldquo;Would love to get your feedback and I don't mean just feedback I mean honest feedback like I'm giving you. Quit writing half-truths and tell us like Paul Harvey used to: &lsquo;And now you know the rest of the story&rsquo;!&rdquo;
Dave responds: LOL, <a href="https://paradigmpressroom.com/post/9-11-the-financial-crisis-and-covid">I&rsquo;m an early-wave Xer</a>.&nbsp;
Furthermore, I&rsquo;m not only old enough to know who Paul Harvey was, I was in the audience as he accepted a prestigious award in 1992 from the Radio-Television News Directors Association.
(<a href="https://www.c-span.org/clip/public-affairs-event/user-clip-paul-harvey-global-warming/5053796">Here&rsquo;s a clip</a> from his speech where he poured cold water on global warming.)
Anyway&hellip; I&rsquo;m sorry to tell you, but we&rsquo;re not really that large of a voting block. The millennials leapfrogged us and took over the title of largest voting block from the boomers around 2019.
The demographer Neil Howe says it&rsquo;s the fate of &ldquo;Nomad&rdquo; generations like Xers &mdash; or before us, the Lost Generation born in the late 1800s &mdash; to be afterthoughts in the broad sweep of history. We&rsquo;re forever living in the shadow of the &ldquo;Prophet&rdquo; generations like the boomers who immediately preceded us.
As Howe wrote in his 2023 book, The Fourth Turning Is Here&hellip; &ldquo;We remember Nomads best for their rising-adult years of hell-raising (Paxton Boys, Missouri Raiders, rumrunners) and for their midlife years of hands-on, get-it-done leadership (think of Daniel Morgan, Stonewall Jackson, George Patton). Underprotected as children, they become overprotective parents. Their principal endowments are in the domain of liberty, survival and honor.&rdquo;
We get the short end of the generational stick all our lives. In our childhood, Howe characterizes our reputation as &ldquo;bad.&rdquo; Seriously, can you imagine movies like The Exorcist or Taxi Driver being made any time other than when Xers were kids?
And I hate to break it to you&hellip; but it&rsquo;s not going to get any better. Howe says while Prophet generations like the boomers are &ldquo;respected&rdquo; in their elderhood, Nomads are by contrast &ldquo;abandoned.&rdquo;

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