<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 Data Centers and Chinese Stooges
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> If you oppose the construction of an AI data center in your neck of the woods, then you must be a dupe of the ChiComs and the Russkies and the Iranians.
Seriously, that&rsquo;s the gist of a front-page New York Times article today.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1mwKCpZ0D6wDjpGxfRfYp9/9c478f526ccf38a42ba6c7566dd2a362/FMF-Issue-071026-1.jpg" alt="pub" width="540px" />
The key paragraph: &ldquo;China, Russia and, to a lesser extent, Iran have sought to use state media outlets to turn the controversy over data centers in the United States into &lsquo;a domestic fracture point,&rsquo; according to a new analysis by Alethea, a threat intelligence company, which identified scores of articles and posts on social media this year.&rdquo;
Here&rsquo;s one meme by way of example&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/iKY7iGf1DBI32O1Qf4oQJ/a9dcedf38eeaa5ec55f7b9472accac83/FMF-Issue-071026-2.jpg" alt="pub" width="540px" />
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> So&hellip; what&rsquo;s this Alethea outfit all about? The article doesn&rsquo;t really say. It just assumes we should accept the company&rsquo;s claims as credible.
Based in Washington, D.C., Altethea Group &ldquo;is a technology company helping the Fortune 500, private companies, democracies and nonprofits protect themselves from harms stemming from disinformation, misinformation and social media manipulation,&rdquo; the company states on its LinkedIn page.
Hmmm&hellip;
Perhaps for understandable reasons, Alethea does not identify its major clients. So it&rsquo;s hard to evaluate whether the company is a neutral observer here or if it&rsquo;s got a significant conflict of interest.&nbsp;
But Alethea does have a somewhat well-known former employee &mdash; Nina Jankowicz, named by the Biden administration in April 2022 to head up a &ldquo;Disinformation Governance Board.&rdquo; Its purpose &mdash; strong-arming social media platforms to censor posts that met with White House disapproval.&nbsp;
The backlash against this budding Ministry of Truth was so severe that Jankowicz resigned after just three weeks and the board <a href="https://5minforecast.com/2022/07/20/when-cash-is-all-youve-got/#320">was disbanded</a>.
As it turns out, Jankowicz was on Alethea&rsquo;s payroll as &ldquo;director of external engagement&rdquo; for a few months before her appointment. And it seems Alethea founder Lisa Kaplan is all on board with U.S. government efforts to combat &ldquo;disinformation.&rdquo;&nbsp;
&ldquo;Disinformation will become the next iteration of warfare,&rdquo; Kaplan said during a 2020 podcast interview. &ldquo;The government should identify vulnerable populations and develop support plans.&rdquo;
Yeah, The New York Times said nothing about any of this by way of background.
We&rsquo;ll deconstruct what the paper did instead in Bullet No. 2&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" />Anatomy of a Narrative
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> What the Times did instead was take Alethea&rsquo;s research at face value to slyly impugn the motives of people who oppose data center construction.
Behold this remarkable passage early in the piece&hellip;
<blockquote>These campaigns, whose impact on public opinion remains to be seen, have raised alarms in Washington, where AI is seen as a top issue heading into this year&rsquo;s midterm elections.</blockquote>
<blockquote>The foreign efforts appear intended to stoke the debate over data centers that has united political figures across the political spectrum &mdash; from Sen. Bernie Sanders of Vermont, a progressive, to Stephen K. Bannon, the erstwhile adviser to President Trump.</blockquote>
<blockquote>&ldquo;Foreign actors aren&rsquo;t manufacturing American debates over the future of AI, they are exploiting them,&rdquo; said Jessica Brandt, a former official with the Office of the Director of National Intelligence who tracked foreign influence efforts during the Biden administration.</blockquote>
<blockquote>The goal, she added, is to &ldquo;deepen our divisions in order to dent our appeal and weaken us from within.&rdquo;</blockquote>
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> See what they did in these four paragraphs?&nbsp;
First, there&rsquo;s a clause buried in the middle of a sentence where you&rsquo;re liable to overlook it that says the &ldquo;impact on public opinion remains to be seen.&rdquo; Can&rsquo;t play up a detail like that too much when you&rsquo;re trying to foment a moral panic.
Then, they&rsquo;re limiting the respectable boundaries of debate, within the 40-yard lines on a football field. You don&rsquo;t want to be associated with looney-tunes like Bernie Sanders and Steve Bannon, do you? Especially BOTH of them, right?
And finally they bring on some chin-stroking &ldquo;disinformation&rdquo; expert (from the Biden admin, natch) to trot out the hoary old narrative about foreign governments &ldquo;sowing discord.&rdquo;
Remember that? It was <a href="https://5minforecast.com/2017/11/01/might-useful-idiot-russia/">all the rage a decade ago</a> when Russia supposedly unleashed Facebook bots and Twitter trolls on the American populace to poison our civic dialogue.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> To be sure, this narrative has been building for weeks. I just didn&rsquo;t expect to see it front and center in the one corporate news outlet that sets the agenda for the rest.
For starters, none other than Kevin O&rsquo;Leary of Shark Tank fame has invoked the Chinese-stooge argument.&nbsp;
As we mentioned in May, O&rsquo;Leary is bankrolling a massive data center project in rural Utah that&rsquo;s met with <a href="https://paradigmpressroom.com/post/backlash-data-centers/#1">huge backlash</a>. A couple of weeks ago, he accused two Utah organizations and their leaders of being linked to the Chinese government &mdash; an accusation for which he offered no supporting evidence and which he ultimately <a href="https://www.fox13now.com/news/local-news/box-elder-county/kevin-oleary-walks-back-accusations-that-data-center-opponents-are-funded-by-china">walked back</a>.
Also last month, OpenAI generated publicity when it claimed Chinese operatives were using its ChatGPT platform to create anti-data center content for social media. But even the guy who led the investigation for OpenAI conceded that &ldquo;neither campaign appears to have gained much authentic engagement.&rdquo;
Then there was Sen. Tom Cotton (R-Arkansas), the 24/7 warmonger who sent a letter last month to acting Attorney General Todd Blanche: &ldquo;Alarming reports indicate that a network of foreign actors, led by the Chinese Communist Party, is attempting to manipulate U.S. policy and public opinion on data centers.&rdquo;
As the writer Leo Hohmann pointed out, Cotton &ldquo;offered no proof, just innuendo.&rdquo;
Which is more or less what The New York Times did as well. But now that the Times is running with it, you&rsquo;re going to see it everywhere for a few days.&nbsp;
But the data center backlash isn&rsquo;t going away. We&rsquo;ll tackle some other angles &mdash; including the potential investment implications &mdash; next week.&nbsp;
Oh, I&rsquo;m also going to dunk on The Wall Street Journal later in today&rsquo;s edition, but first let&rsquo;s turn our attention to the markets&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" />Markets Today: Good Timing
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The big market story today is the well-timed Wall Street debut of SK Hynix &mdash; the giant South Korean chipmaker.
SK Hynix is one of the &ldquo;Big Three&rdquo; manufacturers of memory, along with South Korea&rsquo;s Samsung and America&rsquo;s Micron. Formed in 1983, it will start trading on the Nasdaq today as SKHYV, which will be shortened to SKHY next Tuesday.
The company announced it would list on the Nasdaq back on June 24 &mdash; which happens to mark the recent peak in its Korean-traded shares. The share price has since cratered 25%. A new influx of cash from American investors would probably be pretty welcome about now.
For a few weeks, savvy market watchers have looked upon South Korea&rsquo;s benchmark KOSPI as a potential harbinger for America&rsquo;s red-hot semiconductor sector.&nbsp;
The American chip benchmark, the Philadelphia Semiconductor Index (SOX) peaked on June 22 at 14,634. It bottomed on Tuesday at 12,300 &mdash; a more modest 16% drop &mdash; and trades today a little over 12,900.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The broad U.S. indexes are little moved as the week winds down &mdash; the S&amp;P 500 up barely 10 points at 7,554.
Monday will be potentially quiet too, but Tuesday is the start of earnings season and the Labor Department will issue the official inflation numbers.
The week has brought a staggering number of big wins in several Paradigm portfolios. This is in no particular order. With any luck I&rsquo;m not leaving anyone out here&hellip;
<ul>
<li>102% on ConocoPhillips call options in Rickards&rsquo; Insider Intel</li>
<li>146% on International Seaways in Rickards&rsquo; Strategic Intelligence</li>
<li>77% in only four months with put options on FXE, the big euro currency ETF, for PRO-level readers of Rickards&rsquo; Strategic Intelligence</li>
<li>A staggering 1,000% on Adobe call options in 10X Trader</li>
<li>50% on Magnite Inc. in Paradigm Mastermind Group</li>
<li>29% on Robinhood in The Income Alliance, our options-selling service</li>
<li>And a clean 1,000% on the space name Rocket Lab in Ray Blanco&rsquo;s Catalyst Trader.</li>
</ul>
That last one is a prime example of sound money management: After four years and three months, it&rsquo;s no time to get greedy. Ray says the thesis behind RKLB is changing now that it&rsquo;s acquiring the satellite communications firm Iridium. It introduces a level of risk that wasn&rsquo;t there before. And so Ray advised his readers to sell half the position and let the rest ride.
Checking in on non-dollar assets, gold appears set to end the week just barely above $4,100 but silver will probably wind up below $60. Meanwhile, crypto appears to be hanging onto its most recent gains &mdash; Bitcoin approaching $64,000 and Ethereum a shade under $1,800.
<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" />Oil and World War III
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Oh, now the nation&rsquo;s leading business newspaper tells us&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3R2teDq18sehf2VQ1YBdWv/b7771d46d7e2e684724676e10f274f11/FMF-Issue-071026-3.jpg" alt="US OIL SUPPLY" width="540px" />
Memo to The Wall Street Journal: The situation was risky before Donald Trump ended the ceasefire with Iran.&nbsp;
For months, we&rsquo;ve been spotlighting the ongoing drain from both private-sector inventories and the government&rsquo;s Strategic Petroleum Reserve. (If you&rsquo;re a newer reader, <a href="https://paradigmpressroom.com/post/40-oil">here&rsquo;s a good place to get caught up quickly</a>.) Why the mainstream decided to start worrying this week is anyone&rsquo;s guess.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile, the feds have nixed plans for oil futures that would trade on weekends.
As we mentioned at the time, CME Group &mdash; which oversees the most widely used U.S. commodities exchanges &mdash; announced last month it would launch an oil futures contract that trades round the clock.
That includes weekends. As we&rsquo;ve spotlighted since at least 2024, major U.S. airstrikes in the Middle East tend to come over the weekend &mdash; when markets are closed and there&rsquo;s no chance of a knee-jerk reaction.
The new contract was supposed to start trading as early as today. Yesterday, the Commodity Futures Trading Commission said Oh no you don&rsquo;t.
Usually the CFTC allows CME Group to &ldquo;self-certify&rdquo; new futures contracts. And that&rsquo;s what CME Group sought to do here &mdash; until CFTC chair Michael Selig slapped it down yesterday in blunt terms.
"CME's decision to disregard the commission's effort to undertake a reasoned analysis of the critical issues at stake is wholly inappropriate,&rdquo; he said &mdash; &ldquo;and necessitates commission action to stay the certification.&rdquo;
Now the whole thing will be subjected to what the CFTC calls a &ldquo;thorough review.&rdquo;
Betcha it doesn&rsquo;t survive that review. The White House needs a window every weekend to wage war without impact on the oil price. (And of course, a &ldquo;peace is at hand&rdquo; announcement for the resumption of trading on Sunday night&hellip;)
For the moment, traders are buying into Donald Trump&rsquo;s declarations that Iran is once again &ldquo;desperate&rdquo; to make a deal. U.S. crude futures are down a little over 1% to $71.30.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We can&rsquo;t let the week pass without acknowledging the possibility Washington will soon be waging a two-front war.
At a NATO summit in Turkey on Wednesday, Trump nodded in approval at Ukraine&rsquo;s recent drone strikes on Russian oil refineries. In addition Trump authorized Ukraine to start building Patriot missiles.
&ldquo;It&rsquo;s an escalation,&rdquo; he said, &ldquo;but it&rsquo;s also an escalation that could help lead to an end.&rdquo;
Or it&rsquo;s an escalation that could lead to further escalation &mdash; like Russian airstrikes on NATO&rsquo;s Baltic states, whose airspace Ukraine is using to send those drones into Russia.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3m7oskxd7ZwMhC1BaLR8pP/21ad579d6de9103abe1ef5a68ce633cc/FMF-Issue-071026-4.jpg" alt="Trump" width="540px" />
&ldquo;Diplomacy is dead and this is now Trump&rsquo;s war,&rdquo; tweets the Norwegian political scientist Glenn Diesen, author of several books about Russian foreign policy.
&ldquo;How to fight and defeat the world&rsquo;s largest nuclear power in a fight for its survival? We will now see massive escalation as we move toward total war.&rdquo;
Or at the very least, Moscow could step up its shipments of S-400 air defense missiles to Iran &mdash; along with targeting intelligence on U.S. forces in the Persian Gulf.
<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 (Teaser)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;How do you measure demand for compute?&rdquo; a reader writes after <a href="https://paradigmpressroom.com/post/elons-new-plan-for-world-domination">yesterday&rsquo;s guest edition featuring Ray Blanco</a>. &ldquo;Who are the players that provide the current answers?&rdquo;
Unfortunately Ray&rsquo;s out of pocket today and I can&rsquo;t get a ready answer. But those are great questions worthy of follow-up next week.

FMF-Issue-071026-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

AI Data Centers and Chinese Stooges

In the electronic dictionary that came installed on my desktop computer, the word &ldquo;compute&rdquo; appears only as a verb:
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4PnSix7TUyvYUKP755M0bP/ba81173911d4d0259620d3b3f994e7f9/FMF-Issue-070926-1.jpg" alt="Compute" width="540px" />
But soon &mdash; if you haven&rsquo;t already &mdash; you&rsquo;re going to hear it used as a noun. Constantly.
From Elon Musk&rsquo;s Grok AI engine&hellip;
<blockquote>"Compute" as a noun refers to computational resources or processing power &mdash; basically, the "brainpower" (CPUs, GPUs, memory, etc.) that computers use to run calculations, train AI models or handle heavy tasks.</blockquote>
<blockquote>It's like treating "compute" as a measurable thing you can have more or less of, rent or run out of &mdash; similar to saying "We need more horsepower" for an engine.</blockquote>
But it&rsquo;s not just a trendy new usage. Paradigm tech investing specialist Ray Blanco says compute is rapidly evolving into a desirable type of currency &mdash; and Elon Musk is positioning himself to corner the market in it.
The concept is so cutting-edge that we&rsquo;re breaking from our usual format today to bring you Ray&rsquo;s compelling case. The following was first published on July 1 for readers of&nbsp;Altucher&rsquo;s Investment Network.
<h2 style="text-align: center;">Elon&rsquo;s Secret Currency</h2>
There is a new currency being minted right now &mdash; and almost nobody can name it.
It isn't gold&hellip;&nbsp;
It isn't the dollar&hellip;&nbsp;
It isn't even Bitcoin.
You can't hold it in your hand, you can't bury it in the backyard, and your bank won't let you deposit it.
But every AI lab on the planet is fighting for it.
Every government on Earth is now stockpiling it.
And the man building the biggest reserve of it just pulled off the largest IPO in human history.
The currency is compute.
If that word sounds like jargon, stay with me a moment &mdash; because once you see it, you can't un-see it.
It changes how you should think about where the next decade of wealth gets created.
The Line That Gave It Away
A couple of years back, the heads of the big AI labs started talking in a strange new way.&nbsp;
They stopped talking about software. They stopped talking about apps.
They started saying things like "it all comes down to compute."
At first it sounded like Silicon Valley nerd-speak. It wasn't.&nbsp;
What they were admitting is that the bottleneck on artificial intelligence &mdash; the one thing standing between their models and something far more powerful was raw processing power. The chips. The electricity to run them. The physical infrastructure to house them.
Pour in all the dollars you want; what every one of them actually needs is the thing at the end of the pipeline: compute.
When the most powerful companies in the world start measuring their strength not in dollars but in a single scarce resource&hellip; that resource has become a currency.
We've Seen This Play Out Before
In 1870, the resource that took over the world was oil. And one man understood something his competitors didn't.
John D. Rockefeller realized the money wasn't really just in the oil itself. It was in controlling the whole chain &mdash; the refineries that turned crude into something useful, the pipelines that moved it, the distribution that put it everywhere.
He didn't just sell the currency of the industrial age. He owned the machine that minted it.&nbsp;
That machine was Standard Oil.
And a hundred and fifty years later, history is rhyming.
Today the strategic resource isn't crude pumped out of the ground. It's compute. And once again, the real fortune won't just go to the people who simply use it. It'll go to whoever controls the refinery &mdash; the chips, the power, and the fabs that turn sand and electricity into intelligence.
So the question that matters is simple: who's building the new Standard Oil?
The Rockefeller of the AI age
I'll give you a hint.&nbsp;
He already controls the railroads. Now he's coming for the refinery and the power plant.
Rockefeller's empire was built on controlling how the currency moved. Over the past year Elon Musk has assembled the one thing no one else on Earth has &mdash; and he&rsquo;s building exactly the way Rockefeller did.
Start with the transport layer. Elon controls the rockets that haul mass to orbit and Starlink, the network that pipes the output back down. In a world where compute is the currency and the refinery is migrating to space, that is the chokepoint &mdash; and while every rival is left negotiating for a ride, Musk owns the freight line.&nbsp;
The rockets are his railroads. Starlink is his pipeline.
Now for the two other pieces.
The first is a project he calls Terafab. This is the refinery.
A refinery that takes a raw resource and turns it into the high-value fuel everyone fights over. Terafab will take silicon and turn it into chips: the refined, scarce fuel of the AI age, the thing nations now guard like enriched uranium. Whoever controls the refinery controls the fuel supply for the entire industry.
But fuel sitting in a warehouse doesn't do anything. You have to burn it. And that's the second piece &mdash; the data center, the power plant where chips and electricity get fused into the only thing anyone actually wants at the end: compute. The refinery makes the fuel. The power plant turns the fuel into the currency.
That's a Standard Oil strategy.&nbsp;
Musk isn't trying to win one link in the chain &mdash; he owns the railroad, he's laying the pipeline, he's building the refinery, and he's building the power plant. Every rival who wants to mint this currency has to come through infrastructure he controls.
Which leaves just one question.&nbsp;
Where It Gets Strange
Where do you put a power plant that devours that much electricity &mdash; and throws off that much heat?
For two hundred years the answer was "wherever the resource is." For the compute age, I think the answer is going to surprise people: off the planet.
This is a thread we&rsquo;ve been pulling on for a while.&nbsp;
We call it the Great Migration &mdash; the slow, inevitable shift of heavy compute up into orbit, where solar power is unlimited, where the cold of space solves the heat problem for free, and where you're not fighting cities and regulators for land and electricity.
The same man building the refinery already owns the only fleet on Earth that can cheaply move mass into space.
Connect those dots, and the SpaceX IPO stops looking like a rocket story. It starts looking like the opening move in a plan to mint the world's most important currency &mdash; and to do it somewhere no competitor can easily follow.
The Proof Is In How the Powerful Are Behaving
You don&rsquo;t have to take my word that compute is the new money.
Governments now treat advanced chips the way they once treated enriched uranium &mdash; with export controls, with watch lists, with national-security reviews.
Nations talk openly about how much compute they have versus their rivals, the same way the old powers once counted oil reserves and gold bars.
When a country starts measuring its strength in a unit, and starts hoarding that unit, and starts forbidding its enemies from getting it, that's a currency.&nbsp;
And currencies, unlike fads, don't go away. They get more entrenched. The early holders get richer the longer the game runs.
What This Means For You
You can&rsquo;t open an account and buy a pile of compute.
But you can own the refinery and the picks-and-shovels that feed it &mdash; the chip designers, the power and energy plays, the thermal and fabrication names, and the orbital infrastructure that becomes the future foundation for it.
That&rsquo;s the map we&rsquo;ve been laying out. The names are already in our portfolio. Keep watching.
For today, I just want you to walk away with this one idea:
Oil was the currency of the last century.&nbsp;
Compute is the currency of this one.&nbsp;
And the man minting it just went public.
The people who understood Standard Oil in 1880 didn't need to be geniuses. They just needed to see the pattern before everyone else did.
We're at that same moment again&hellip; right at the start.

FMF-Issue-070926-Featured

Elon’s (New) Plan for World Domination

<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" />War&rsquo;s Back On?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Gee, what were we saying in the middle of yesterday&rsquo;s edition? Oh yeah, don&rsquo;t rule out a few ceremonial U.S. airstrikes late this afternoon or tonight.
U.S. Central Command says it struck 80 Iranian targets overnight.
Maybe it&rsquo;s not so ceremonial now. Of the ceasefire that&rsquo;s been formally in effect for the last three months, the U.S. president says, &ldquo;I think it&rsquo;s over.&rdquo;
So how did we get here?&nbsp;
As mentioned yesterday, the latest trouble began with two attacks on ships that tried to transit the Strait of Hormuz without Tehran&rsquo;s permission.&nbsp;
No one was hurt and the damage was minimal. The attacks were intended to &ldquo;send a message&rdquo; about who&rsquo;s in charge of the strait.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />As the Iranian side sees it, the &ldquo;Memorandum of Understanding&rdquo; between Washington and Tehran gives Iran sole responsibility for traffic going through the strait.
Here&rsquo;s the language both sides signed onto: &ldquo;Upon the signing of this MoU, the Islamic Republic of Iran will make arrangements using its best efforts for the safe passage of commercial vessels, with no charge for 60 days only.&rdquo;
There&rsquo;s nothing in there about how Iran must revert to a prewar state of free navigation for all &mdash; which seems to be what the U.S. side is demanding.
(Reminder: The strait was free for all to navigate before Trump and Netanyahu started the war on Feb. 28 with a sneak attack while negotiations were ongoing.)
Washington&rsquo;s initial response to the shipping attacks was to yank the waivers that allowed Tehran to sell oil to foreign buyers &mdash; a move Tehran was almost sure to interpret as marking an end to the MoU.
Then came the U.S. airstrikes &mdash; during the official mourning period for the previous Supreme Leader, Ayatollah Khamenei, which doesn&rsquo;t end until his burial tomorrow. That&rsquo;s sure to enrage both Iranian leadership and the population at large.
For the moment, Iran&rsquo;s response has been limited to airstrikes on U.S. targets in Bahrain and Kuwait &mdash; a move that retired CIA officer Larry Johnson believes is perhaps calculated to give Washington a chance to back down.
&ldquo;If the U.S. continues the strikes,&rdquo; Johnson writes at his website, &ldquo;then I expect Iran to expand its targets to include Mowafaq al Salti airbase in Jordan and possibly Israeli airfields.&nbsp;
&ldquo;At this point the MoU is hanging by a thread.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />And so U.S. oil futures priced under $69 on Monday are priced over $74 today.
Whoop, make that nearly $76. Because as we write the Energy Information Administration is out with its weekly U.S. inventory figures. It&rsquo;s grim stuff, especially with this latest turn of events.
The government&rsquo;s Strategic Petroleum Reserve sits at another low last seen in 1983. Fully 1.9% of the remaining crude in the SPR was drained just last week &mdash; when peace kinda-sorta reigned.
Private-sector inventories fell another 0.9% last week. The giant oil terminal at Cushing, Oklahoma saw only a slight drawdown &mdash; but it&rsquo;s still very near &ldquo;tank bottoms&rdquo; beyond which there&rsquo;s not enough crude to reliably feed the pumps and pipelines.
Between the war and the inventory numbers, it all looks bullish for crude &mdash; although a few hardened cynics are expecting another rug pull&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7eP1xnlPdJWXhkNvXAReq4/4ae096c8a5538f9036433a3c62bf9726/FMF-Issue-070826-1.jpg" alt="Rick J Tweet Iran is begging for another chance report" width="540px" />
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />This would be a good time to review some numbers that we explored at the start of the war.
&ldquo;It&rsquo;s useful to know just how much of the global output of key energy and other commodity supplies comes from the Gulf,&rdquo; Jim Rickards wrote his Insider Intel readers yesterday.
&ldquo;The numbers are astounding including 34% of the trade in crude oil, 19% of global output of liquified natural gas (LNG), almost 30% of liquified petroleum gas, 13% of chemicals and fertilizers, 19% of refined oil products and about 10% of global aluminum.
&ldquo;There are no easy substitutes for any of these outputs. The U.S. and Russia may increase their oil exports somewhat but LNG, chemicals, fertilizers, aluminum and refined oil products (gasoline, diesel, jet fuel) are not easily replaced if at all.
&ldquo;Markets have yet to internalize the continuing danger of the Iran war situation and the impact on demand for crude oil and distillates,&rdquo; Jim concludes.
Although maybe that process is starting today, as we&rsquo;ll see in Bullet No. 2.
<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" />Yahoo Goes Doomer
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;There&rsquo;s an Urgent Sign of an Impending Market Collapse,&rdquo; reads the subject line of an email your editor got this morning from Yahoo.
I&rsquo;m not accustomed to Yahoo as the deliverer of doom. So out of curiosity I clicked on the link and up came an article from the Futurism site.&nbsp;
It was a profound disappointment. It said a valuation metric called the &ldquo;Shiller CAPE ratio&rdquo; sits at 41. &ldquo;Said another way, investors are paying $41 for every $1 of average annual profits the S&amp;P 500 has generated over the past decade.&rdquo;&nbsp;
The Shiller CAPE&rsquo;s historical average is 17.3. Thus the present situation is &ldquo;more or less the financial equivalent to the tide receding before a freak tsunami.&rdquo;&nbsp;
Only two possible outcomes, we&rsquo;re told: &ldquo;Either earnings actually catch up to the pie-in-the-sky AI fantasies, or the market closes the gap between financial valuation and productivity the hard way.&rdquo;
Whatever. Your editor is well aware that the Shiller CAPE sits at nosebleed levels. What the author purposely omitted from his article &mdash; because it didn&rsquo;t comport with the narrative &mdash; is that the Shiller CAPE was even higher at the peak of the dot-com bubble.
It was over 44 compared with today&rsquo;s 41. So there&rsquo;s still some ceiling here.&nbsp;
We&rsquo;re as certain as the Futurism author that &ldquo;the hard way&rdquo; is coming sooner or later. But not right now &mdash; and the tell is that Yahoo picked up an article like this. It&rsquo;s when you see only bullish articles &mdash; and the only remaining bears are a few cranky contrarian newsletter editors &mdash; that&rsquo;s the time to worry.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />All that said, the stock market is reacting poorly to the resumption of the war &mdash; however long or brief it turns out to be.
Among the major indexes, the biggest hit by far is to the Dow Industrials &mdash; down nearly 1% and approaching 52,100. Monday&rsquo;s record high over 53,000 is but a memory. Next worst is the S&amp;P 500, over three-quarters of a percent and closer to 7,300 than 7,400.
But for a second day running, the tech-heavy Nasdaq is shrugging off concerns from Asia. South Korea&rsquo;s benchmark KOSPI index slid another 5%. It&rsquo;s met the threshold of a &ldquo;bear market&rdquo; in that it&rsquo;s down 20% from its (very) recent peak.
And while the Nasdaq has been in the red yesterday and today, the sell-off hasn&rsquo;t been anywhere near as severe. At last check, the Nasdaq Composite is down three-quarters of a percent at 25,633. It&rsquo;s down 5.3% from its peak in early June. Not good but not disastrous.
Bonds are selling off alongside stocks &mdash; on the theory that a renewed war will goose inflation. As prices fall, yields rise: The 10-year Treasury note is up to 4.56%, the highest since mid-June.
As yields rise, precious metals become less attractive. Gold is down 2%, approaching $4,000 again&hellip; while silver is down 4.2% to $57.31.
Crypto can&rsquo;t hold onto its recent mojo &mdash; Bitcoin retreating toward $61,500 and Ethereum about to crack below $1,700.
<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" />Free Money
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Whether or not it&rsquo;s a good idea for the country&hellip; it&rsquo;s free money for someone you love, and it compounds from an early age.
On Monday, Donald Trump formally rolled out the &ldquo;Trump Accounts&rdquo; made possible under the Big Beautiful Bill passed last year.
&ldquo;Eligible children can receive a $1,000 investment account at birth,&rdquo; writes colleague Davis Wilson. &ldquo;And given enough time, that initial investment could compound into hundreds of thousands &mdash; or even millions &mdash; of dollars.&rdquo;
The money will go into an index fund that tracks the broad U.S. stock market.
&ldquo;Using historical S&amp;P 500 returns,&rdquo; says Davis, &ldquo;if your family never contributes another dollar, the government's initial $1,000 could grow to roughly:
<ul>
<li>$6,000 by age 18</li>
</ul>
<ul>
<li>$15,000 by age 27</li>
</ul>
<ul>
<li>$243,000 by age 55.</li>
</ul>
Those numbers only mushroom further if parents and grandparents contribute to the account (maximum $5,000 per year).
Yes, there are a few more details and logistics to cover about who qualifies and how. Davis runs them down for you on <a href="https://million-mission.com/posts/read-this-if-you-have-kids">Monday&rsquo;s edition of our sister e-letter The Million Mission</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" />Stupid Bureaucrat Tricks
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Props to whoever crafted this headline: Sometimes the most straightforward, deadpan telling is the one that makes you say, &ldquo;Holy s***!&rdquo;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7nVy2bBvcUfcWXcgRJ0Pwc/4f565ea8787d08dcd28276b8b84407aa/FMF-Issue-070826-2.jpg" alt="Politico" width="540px" />
Yeah.
Citing four sources within the Department of Homeland Security, Politico reports that last summer, Madhu Gottumukkala &mdash; the acting director of the Cybersecurity and Infrastructure Security Agency &mdash; &ldquo;uploaded sensitive contracting documents to the public version of ChatGPT.&rdquo;
None of the files was classified. &ldquo;But the material included CISA contracting documents marked &lsquo;for official use only,&rsquo; a government designation for information that is considered sensitive and not for public release.&rdquo;
Everything uploaded to ChatGPT is assimilated by ChatGPT into its knowledge base to answer other people&rsquo;s questions in the future. Those files are now a matter of public record.
Accountability, you wonder?
Back to the article: &ldquo;Cybersecurity sensors at CISA flagged the uploads this past August, said the four officials. One official specified there were multiple such warnings in the first week of August alone. Senior officials at DHS subsequently led an internal review to assess if there had been any harm to government security from the exposures, according to two of the four officials.
&ldquo;It is not clear what the review concluded.&rdquo;
Well, except for the fact Gottumukkala is still on the job 11 months later. That much is very clear.
<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: Agitating About Apple
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;Dave, so glad you talked about Apple and its demise for user-friendliness,&rdquo; a reader writes after the mailbag in yesterday&rsquo;s edition.
&ldquo;They continually &lsquo;upgrade&rsquo; the iPhone with no warning and no explanation of how the &lsquo;improvements&rsquo; function. As an investor I love the stock. As a user I'm extremely frustrated and disappointed.&nbsp;
&ldquo;Don't always agree with you but love your column.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;Apple had and has many chances to make their technology better that they missed,&rdquo; writes another reader with a good example.
&ldquo;They should have long ago standardized device control (apps on your phone interacting with third-party devices) so that rather than having separate apps with different functionality from every manufacturer, they would provide common interfaces to register/enable/connect to devices of different kinds.
&ldquo;It&rsquo;s ridiculous how many apps I have, and having to search through apps to remember which one controls something as simple as a power switch, and then discover it requires logging in again with a password I haven&rsquo;t had to use, etc., etc. &mdash; it&rsquo;s just a big fail.
&ldquo;And for those who would say it&rsquo;s too hard or would stifle innovation I&rsquo;d point to printers&hellip; when you get a new printer you may have to install a driver, but the UI, command-P to print, etc., are standardized. Different printers support or don&rsquo;t support features like double-sided printing, but you don&rsquo;t have to remember a password or a special UI for any given printer, regardless of manufacturer.
&ldquo;I could go on.
&ldquo;One of many misses.&rdquo;
Dave responds: Interesting analogy. I will say that connecting wirelessly to a printer these days is way easier than it was with a wired connection 30 years ago. Some things do get better!

FMF-Issue-070826-featured

War’s Back On?

<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" />One Chart to Live By
<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 chart I&rsquo;ve been obsessing over for a few days. It&rsquo;s time that you take a good look at it.
Here&rsquo;s how it appeared on X, courtesy of a Swiss money manager named Thierry Borgeat. Study it closely&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/78YAUnTb7IHvnR9TB2QL2N/b71240132316310a97f1c9cf3366ed8c/FMF-Issue071326-1.jpg" alt="AVG annual real returns" width="540px" />
Borgeat&rsquo;s point is that the conventional wisdom about how you need to stay in the market for the long haul &mdash; because the market goes up an average 7% a year after inflation &mdash; rarely works out in real-world experience.
&ldquo;Notice the rhythm. A golden era, then a dead one,&rdquo; he says. &ldquo;Feast, famine, feast, famine.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Everyone who started investing after 2009 has only known the feast,&rdquo; Borgeat goes on.
&ldquo;Buy the dip worked every single time. Not because it's a law. Because you happened to live inside the blue bar.&rdquo;
On one level, I&rsquo;ve known this overview of market history for years&hellip;
<ul>
<li>If you bought at the top just before the 1929 crash, you didn&rsquo;t get back to breakeven until 1954</li>
</ul>
<ul>
<li>The Dow industrials peaked at 1,000 in 1966 &mdash; and couldn&rsquo;t surpass that level for good until 1982</li>
</ul>
<ul>
<li>The dot-com bubble burst in early 2000, at which time the S&amp;P 500 was around 1,500. The index returned to that level in 2007 and then came the financial crisis. The 1,500 level wasn&rsquo;t surpassed for good until April 2013. Brutal.</li>
</ul>
But seeing the visuals really brings it home &mdash; especially when you realize we&rsquo;re now 13 years into the current blue bar. We&rsquo;re closer to the end of this bull run than the beginning.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Note well: That chart shows the returns after inflation.&nbsp;
Recall the research we&rsquo;ve been citing regularly for a few years now: Once inflation sails past the 5% mark &mdash; as it did in 2022 &mdash; it typically takes a decade to get back to &ldquo;normal&rdquo; 2% inflation of the sort we experienced during the 2010s.&nbsp;
So we&rsquo;re looking at elevated inflation levels for the rest of this decade and into the 2030s. That means the stock market has to rally that much more to overcome the inflation rate &mdash; and for your portfolio to stay ahead of the cost of living.
Very few portfolio managers are preparing their clients for this outcome. They&rsquo;re operating under recency bias &mdash; assuming the 2% inflation of the 2010s will return any day now.
Bottom line: You can&rsquo;t invest in an index fund and hope your portfolio will stay ahead of a rising cost of living. Not now.&nbsp;
<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" />Trump Wants a Toll
<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 starting the week over $3 higher &mdash; $74.72 &mdash; now that it&rsquo;s becoming obvious to everyone that peace in the Persian Gulf is no longer &ldquo;at hand.&rdquo;
U.S. airstrikes hit Iranian oil infrastructure over the weekend. Iranian airstrikes hit U.S. bases in Bahrain, Qatar and Kuwait (as they did in March).&nbsp;
Then Tehran announced it was shutting down the Strait of Hormuz. This morning Donald Trump tried to one-up Tehran by resuming the U.S. blockade of Iranian ports &mdash; and by insisting that Washington will charge a toll for vessels wishing to transit the Strait of Hormuz.&nbsp;
Per Trump&rsquo;s declaration on social media, the toll will equal 20% of the value of every vessel&rsquo;s cargo &mdash; far more than the toll Tehran seeks to impose.
How he intends to enforce the toll, he did not say.
By the most authoritative count we can locate, only three vessels transited the Strait of Hormuz in the last 24 hours, and only one of those was an oil tanker. Here it is on a chart going back to last December&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4Lvw6WfnuLG7wEEH3YHSRG/1db863674aefb57b4535bea7e43187aa/FMF-Issue071326-2.jpg" alt="Hormuz is closer to being closed than open" width="540px" />
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Think about what actually happened to the world's energy infrastructure these past four months,&rdquo; says Paradigm&rsquo;s Zach Scheidt, writing late last week for Rickards&rsquo; Insider Intel.
&ldquo;Iran's strike on Qatar's Ras Laffan complex knocked out a sizable portion of the country's LNG capacity, and that damage will take several years to repair. Refineries, terminals and loading facilities across the Gulf took similar hits.&rdquo;
At the same time, &ldquo;there&rsquo;s a secondary issue that will need to be addressed with stockpiles.
Governments and companies hold reserves of crude and refined products. Gasoline, diesel, jet fuel. Those reserves got drained hard in the first months of this war. The IEA directed the release of 400 million barrels. Governments around the world tapped strategic reserves to keep the lights on and the trucks moving.
&ldquo;Every one of those barrels has to be replaced.
&ldquo;So you have normal economic demand, and stacked on top of it, a second wave of demand from everyone who needs to refill what they burned through. Meanwhile, supply is constrained by infrastructure that takes years to rebuild.
&ldquo;The setup we&rsquo;re looking at here is rare. You have structural supply damage that takes years to repair, a second wave of demand coming from every reserve that needs refilling, all while the market keeps pricing in a peace that hasn't actually arrived.&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" />
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Don&rsquo;t count out the highflying semiconductor stocks yet.&nbsp;
The benchmark Philadelphia Semiconductor Index (SOX) is down 15% from its nosebleed peak on June 22 &mdash; but Zach Scheidt, this time in a briefing for Altucher&rsquo;s True Alpha, says Micron Technology (MU) is changing the game.
Last week, &ldquo;Micron poured the first concrete at its new fab in Clay, New York, and announced a fresh round of investment aimed at strengthening the U.S. semiconductor supply chain.
&ldquo;The commitment runs up to $3 billion and lifts the company's total domestic investment target through 2035 from $200 billion to more than $250 billion. Roughly $500 million of it goes to GlobalWafers to expand wafer development and manufacturing in Texas, paired with a 10-year supply agreement for raw silicon wafer capacity.
&ldquo;Micron's New York facility will be the largest semiconductor manufacturing site in U.S. history.
&ldquo;The market noticed. Shares surged as much as 9% intraday, and the buying spread to semiconductor equipment makers and related stocks. By Thursday's close the Nasdaq had climbed 1.3% as the AI trade was able to plant its foot firmly on the ground, preparing to regain momentum.&rdquo;
Yes, semiconductors are notoriously a cyclical business &mdash; like the oil business, subject to both spectacular booms and epic busts. But &ldquo;nobody breaks ground on the largest chip plant in American history if they think the demand is a mirage,&rdquo; says Zach.&nbsp;
&ldquo;Concrete is a confession that management firmly believes in the next decade of development, and it says it just as loud as any earnings call could.&rdquo;
No, it&rsquo;s not an all-clear to pile back into chip stocks. &ldquo;We have to see how this rebound materializes,&rdquo; says Zach. &ldquo;The fact still remains that plenty of money walked out of the AI trade for the time being.&rdquo;
And still more is walking out today, with the SOX down over 4.5% as we check our screens.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Those losses in the chip stocks are dragging down the Nasdaq &mdash; over more than 1.25% as we write and back below 26,000.
The S&amp;P 500 is holding up better, down two-thirds of a percent at 7,527. The Dow is off a third of a percent, back under 52,500.
Bonds are reacting badly to the trouble in the Persian Gulf: Rising oil prices translate to rising inflation expectations which translate to rising interest rates. The yield on a 10-year Treasury note is up to 4.61% &mdash; not far from the 4.66% of last May, which was a 16-month high.
Precious metals are getting clobbered, too: Gold is off nearly 3% and back under $4,000 while silver is down 3.8% to $57.49.
Crypto is holding its own, Bitcoin over $62,000 and Ethereum a little under $1,800.
There&rsquo;s Still Life in the Semis
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Don&rsquo;t count out the highflying semiconductor stocks yet.&nbsp;
The benchmark Philadelphia Semiconductor Index (SOX) is down 15% from its nosebleed peak on June 22 &mdash; but Zach Scheidt, this time in a briefing for Altucher&rsquo;s True Alpha, says Micron Technology (MU) is changing the game.
Last week, &ldquo;Micron poured the first concrete at its new fab in Clay, New York, and announced a fresh round of investment aimed at strengthening the U.S. semiconductor supply chain.
&ldquo;The commitment runs up to $3 billion and lifts the company's total domestic investment target through 2035 from $200 billion to more than $250 billion. Roughly $500 million of it goes to GlobalWafers to expand wafer development and manufacturing in Texas, paired with a 10-year supply agreement for raw silicon wafer capacity.
&ldquo;Micron's New York facility will be the largest semiconductor manufacturing site in U.S. history.
&ldquo;The market noticed. Shares surged as much as 9% intraday, and the buying spread to semiconductor equipment makers and related stocks. By Thursday's close the Nasdaq had climbed 1.3% as the AI trade was able to plant its foot firmly on the ground, preparing to regain momentum.&rdquo;
Yes, semiconductors are notoriously a cyclical business &mdash; like the oil business, subject to both spectacular booms and epic busts. But &ldquo;nobody breaks ground on the largest chip plant in American history if they think the demand is a mirage,&rdquo; says Zach.&nbsp;
&ldquo;Concrete is a confession that management firmly believes in the next decade of development, and it says it just as loud as any earnings call could.&rdquo;
No, it&rsquo;s not an all-clear to pile back into chip stocks. &ldquo;We have to see how this rebound materializes,&rdquo; says Zach. &ldquo;The fact still remains that plenty of money walked out of the AI trade for the time being.&rdquo;
And still more is walking out today, with the SOX down over 4.5% as we check our screens.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Those losses in the chip stocks are dragging down the Nasdaq &mdash; over more than 1.25% as we write and back below 26,000.
The S&amp;P 500 is holding up better, down two-thirds of a percent at 7,527. The Dow is off a third of a percent, back under 52,500.
Bonds are reacting badly to the trouble in the Persian Gulf: Rising oil prices translate to rising inflation expectations which translate to rising interest rates. The yield on a 10-year Treasury note is up to 4.61% &mdash; not far from the 4.66% of last May, which was a 16-month high.
Precious metals are getting clobbered, too: Gold is off nearly 3% and back under $4,000 while silver is down 3.8% to $57.49.
Crypto is holding its own, Bitcoin over $62,000 and Ethereum a little under $1,800.
<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" />Startling Stat
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The sky started changing dramatically when Starlink began launching its satellites in 2019&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5tVeZcOsE8ldiNTh9bGbUQ/8d59bf1d5a92a5bfcd570e6587947358/FMF-Issue071326-3.jpg" alt="Starlink changed everything" 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: Data Centers
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We got an appreciative note after <a href="https://paradigmpressroom.com/post/ai-data-centers-and-chinese-stooges">Friday&rsquo;s edition</a> deconstructing a New York Times article strongly implying that people who oppose the construction of data centers are dupes of the Chinese and Russians.
&ldquo;Dave, thanks for rooting out Nina Jankowicz. That pretty much says it all for the validity of the source.&nbsp;
&ldquo;And NYT, enough said there too - a bunch of mainstream nonsense to create for fear and division.&rdquo;
Dave responds: I can&rsquo;t help wondering if we&rsquo;re at &ldquo;peak data centers&rdquo; here in the summer of 2026&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/6e3A99apsAqV3NFYZNq5UO/ff161850753b60d1bc0a5d5bb0d0574c/FMF-Issue071326-4.jpg" alt="Data Center construction growth is slowing" width="540px" />
As I said 18 months ago (and again last week), AI faces two huge constraints that digital technology has never grappled with until recently &mdash; limited capacity in the U.S. electric grid and the rising cost of borrowed money.
By now, everyone knows about the electricity part. And today&rsquo;s Wall Street Journal acknowledges the cost of financing: &ldquo;Over the past several weeks, the investment-grade corporate bond market has struggled to absorb a combined $75 billion of bond issuance from Nvidia, SpaceX and Amazon.com.&rdquo;
The so-called hyperscalers like Amazon, Google and Meta can no longer tap their free cash flow for the data-center buildout. So they need to take on debt.&nbsp;
And it sounds as if Wall Street is approaching a threshold where it says no more.
To be continued&hellip;

FMF-Issue071326-Featured

One Chart to Live By

<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: Too Big to Fail
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> A new government document says the AI industry in the 2020s has become like the big banks in the 2000s &mdash; &ldquo;too big to fail.&rdquo;
Not that the document frames it in those terms, of course.
The report is being prepared for Treasury Secretary Scott Bessent and Federal Reserve Chair Kevin Warsh, among others. From the nonprofit NOTUS news site&hellip;
<blockquote>A draft report inside the Treasury Department is set to warn of the risks posed by the artificial intelligence market, likening key aspects of it to the dot-com bubble that upended the U.S. economy when it burst in the early 2000s.</blockquote>
<blockquote>The document, the existence and contents of which have not been previously reported but was obtained by NOTUS, is a significant departure from the Trump administration&rsquo;s public tone, which has focused on encouraging unrelenting investment to unlock exponential growth.</blockquote>
<blockquote>Career Treasury analysts found that AI firms are more deeply entrenched in the U.S. economy than their dot-com predecessors and pose significant risk to the entire system if financial conditions change, productivity goals are missed or various choke points stymie growth.</blockquote>
I bolded those couple of lines for a reason.&nbsp;
While the report compares the AI boom with the dot-com boom, the implicit analogy is with the 2008 financial crisis &mdash; with all of its domino effects starting in one isolated pocket of the system and then spilling into everything everywhere.
According to the NOTUS write-up, the report says &ldquo;AI investors are taking risks so significant that much of the financial system now rests upon AI meeting expectations for productivity gains and profitability&hellip;
&ldquo;If AI companies fall short, the effects would ripple throughout the financial system as a whole, from big banks and hedge funds to private creditors, the analysts note. The largest AI firms are also all interconnected with each other and across different markets, which also points to widespread impacts if investment dries up or demand slows.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The report acknowledges a reality first spotlighted in this space <a href="https://paradigmpressroom.com/post/stargate">18 months ago:</a> AI faces two huge constraints that digital technology has never grappled with until recently.
One is the limitations of the electric grid &mdash; whose capacity remained static between 2011&ndash;2023. The buildout since 2023 hasn&rsquo;t been nearly enough to keep up with demand: Data center projects are being cancelled left and right, not because of local opposition as much as the fact there&rsquo;s just no juice to power them.
The other constraint is the rising cost of borrowed money. Interest rates move in decades-long cycles of roughly 40 years down and 40 years up. We&rsquo;re about six years into the current up phase &mdash; with the benchmark 10-year Treasury note yielding 0.5% in the summer of 2020 and over 4.5% today.
On that first limitation, NOTUS says the Treasury report worries that &ldquo;supply chain issues, geopolitical tensions, electricity bottlenecks, utilities shortfalls and other concerns could all block AI&rsquo;s momentum.&rdquo;
On that second constraint, NOTUS says the report frets that &ldquo;the AI sector is vulnerable to funding for data centers and other infrastructure projects drying up and sustained growth expectations not being met.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It&rsquo;s hard not to think this report is greasing the way for an eventual taxpayer bailout of the AI industry.
We broached that possibility <a href="https://paradigmpressroom.com/post/ai-needs-a-rescue">late last month</a>. And our suspicions were reinforced last week when OpenAI CEO Sam Altman proposed &ldquo;giving&rdquo; Uncle Sam a 5% stake in his (money-losing) firm ahead of its IPO.&nbsp;
Such a deal, right?&nbsp;
What would Uncle Sam have to do in return? Our Jim Rickards unpacked the details yesterday for Strategic Intelligence readers: &ldquo;In exchange, the U.S. government will clear any obstacles to the release of OpenAI's new ChatGPT models and bury any antitrust or fair trade objections to the IPO.&nbsp;
&ldquo;Not only that, but once OpenAI is public, the U.S. government stake will pretty much ensure government contracts and government support if needed.
&ldquo;Let's give Altman credit for learning to feed at the government trough - just like many others before him.&rdquo;
<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" />&ldquo;Big, Fat, Ugly Bubble,&rdquo; 10 Years On
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> No one remembers now, but during one of his debates with Hillary Clinton in 2016, Donald Trump warned of a &ldquo;big, fat, ugly bubble.&rdquo;
&ldquo;We're in a bubble right now. And the only thing that looks good is the stock market, but if you raise interest rates even a little bit, that's going to come crashing down. We are in a big, fat, ugly bubble. And we better be awfully careful.&rdquo;
He could speak candidly then because no one, least of all himself, thought he&rsquo;d win the election. But once he did, he found himself desperately trying to keep the bubble inflated as long as possible.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Which brings us to yesterday. From the White House, he remotely rang the opening bell for yesterday&rsquo;s trading on the New York Stock Exchange and the Nasdaq.
The occasion was to promote &ldquo;Trump Accounts&rdquo; &mdash; a new tax-advantaged vehicle for kids made possible by the &ldquo;Big Beautiful Bill&rdquo; passed last year (More about that tomorrow.)
Not surprisingly, everything he said about the stock market was effusive. Recent performance was &ldquo;the hottest stock market in history.&rdquo; As for future performance, &ldquo;I think the market&rsquo;s going to go through the roof.&rdquo;
He even hit out at short sellers: "I guess you have a couple of guys that went short, those poor bastards. I mean, they're in big trouble. They're being wiped out. I never like short guys because they're betting against the country.&rdquo;
Setting up scapegoats in case an AI bubble starts to deflate?&nbsp;
It&rsquo;s gotta be in the back of his mind.
To be sure, the AI bailout chatter is still in its early stages. There&rsquo;s nothing you need to do about it yet &mdash; but we&rsquo;re going to stay all over it.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for the market action today, stocks are mostly in the red &mdash; along with nearly every other asset class.
The tech-heavy Nasdaq is taking the biggest slide &mdash; down two-thirds of a percent and back below 26,000. The S&amp;P 500 and the Dow are down about a third of a percent.
Bonds are selling off, pushing yields higher: Checking our screens the 10-year Treasury note is now over 4.52% &mdash; a four-week high.
Gold is losing ground but is still comfortably over $4,100. Silver&rsquo;s lost over a buck and is back under $61.&nbsp;
The exception to the rule today is crypto &mdash; Bitcoin back over $64,000 and Ethereum over $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" />&ldquo;Captain, We Have Bombed Your Vessel&rdquo;
<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 have shot up nearly two bucks &mdash; back over $70 &mdash; now that shooting has resumed in the Persian Gulf.
Iran&rsquo;s Islamic Revolutionary Guard Corps fired missiles at two commercial ships near the Strait of Hormuz.&nbsp;
In one case, the IRGC got onto marine channel 16 &mdash; the emergency radio frequency known to all boaters and sailors &mdash; and announced, "Captain, we have bombed your vessel.&nbsp;
&ldquo;You shall only use routes as approved by Persian Gulf Strait Authority. Any other routes are considered unsafe.
&ldquo;All vessels in your vicinity must turn around immediately or face imminent danger."
No one was hurt and the damage was minimal. Basically what happened is what happened about 10 days ago: A couple of vessels tried to transit the southern side of the strait, bordering Oman, and Tehran took a few potshots just to say Look at me, I&rsquo;m the captain now.
Also to say: We will impose a toll once the 60-day Memorandum of Understanding with the Americans expires in mid-August.
Last time this happened was on a Thursday. U.S. forces then bombed Iran over the weekend &mdash; while the markets were closed, and then of course it was announced the ceasefire was back in effect before the markets reopened Sunday night.&nbsp;
It being Tuesday, there&rsquo;s no opportunity for a precise replay of those events this time. But don&rsquo;t rule out a few ceremonial U.S. airstrikes late this afternoon or tonight.
In the meantime, shipping traffic through the Strait of Hormuz remains only about a third of its prewar level.
<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" />Follow-up: Where In the World Is Gal Luft?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> For nearly two years, the whereabouts of an accused arms trafficker have been known only to himself&hellip; and the feds.
It was in 2018&ndash;19 when Gal Luft first <a href="https://5minforecast.com/2018/08/29/de-dollarization-goes-mainstream/">came on our radar</a> for his early warnings about de-dollarization &mdash; a concerted move by governments in the Global South to get out from under U.S. sanctions and other economic warfare measures. This was years before global central banks began <a href="https://paradigmpressroom.com/post/groundhog-day-iran-edition#2">accumulating gold</a> in response to Washington&rsquo;s freeze of Russia&rsquo;s U.S. Treasuries.
In February 2023, Luft was <a href="https://5minforecast.com/2023/03/02/biden-whistleblower-under-arrest/">picked up</a> on an Interpol warrant in Cyprus. He then escaped house arrest and went <a href="https://paradigmpressroom.com/post/biden-whistleblower-in-hiding">on the lam</a>.
&ldquo;The chances of me getting a fair trial in Washington are virtually zero,&rdquo; he told the New York Post from an undisclosed location.
That&rsquo;s because Luft said he had the dirt on Joe Biden&rsquo;s son Hunter &mdash; having talked to the FBI in 2019 about the Biden family taking illegal payments from Chinese officials.
In May 2023, the Justice Department detailed its allegations against Luft &mdash; summed up by USA Today as acting as &ldquo;an illegal arms broker and unregistered agent for the Beijing government while also seeking to help China obtain Iranian oil in violation of U.S. sanctions.
&ldquo;Gal Luft, a dual U.S. and Israeli citizen, is accused of recruiting and paying a former high-ranking U.S. government official &mdash; and adviser to then president-elect Donald Trump &mdash; on behalf of principals based in China in 2016 without registering in the U.S. as a foreign agent as federal law requires.&rdquo;
➢ The official Luft allegedly recruited and paid was not named in the feds&rsquo; paperwork &mdash; but investigative reporters identified him as former CIA Director James Woolsey. The claim made zero sense. Woolsey is a card-carrying neoconservative &mdash; about the last guy in the Beltway you&rsquo;d figure would cozy up to Beijing.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Three years later, the story has retreated into the mists of mystery.
There&rsquo;s only one update of substance we can locate, although it&rsquo;s a big deal: In September 2024, Reuters reported that Luft had been re-arrested and plans were supposedly underway to extradite him to the United States for trial.
The weird thing is that prosecutors did not specify when or where the new arrest took place. There has been no update since.
Meanwhile, on his reputation rehab tour this past spring, Hunter Biden told conservative influencer Candace Owens that Luft is living as a fugitive in Israel and that the &ldquo;Israelis will not help us locate&rdquo; him.
And that&rsquo;s all that can be readily found in the public record.&nbsp;
Where, if anywhere, is Luft in custody now?&nbsp;
Whenever we hear, we&rsquo;ll have an update&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" />Apple and the Ens***tification of Everything
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> After your editor made passing mention last week about &ldquo;how Apple has gone down the tubes, a process underway even while Steve Jobs was still alive,&rdquo; the following landed in our inbox&hellip;
&ldquo;I&rsquo;m interested to hear the reasons you dislike Apple and think they&rsquo;ve gone downhill. They&rsquo;ve pissed me off quite a few times over the years too but as far as I can tell, most of the problems (except maybe iTunes) started awhile after Jobs.&nbsp;
&ldquo;I think it&rsquo;s obvious he cared more about user experience, and not just because of the bottom line either.
&ldquo;Anyway, go ahead and list all your reasons. We may share a few criticisms. And keep up the good work, etc.&rdquo;
Dave responds: What I&rsquo;m about to say comes with the authority of having bought my first Mac on the recommendation of a friend in the summer of 1996 &mdash; before Jobs returned to the company.
Leave aside the technological advances of the last 30 years: Apple products today under Tim Cook are less reliable and less user-friendly than Apple products under Michael Spindler 30 years ago.&nbsp;
That&rsquo;s because in 1996 the Jobsian ethos still suffused the company even though he&rsquo;d been away for a decade.&nbsp;
Within only a few years of Jobs&rsquo; return, it seems that ethos dissipated as Apple evolved from scrappy upstart to world dominator. An early warning was an iBook laptop purchased in 2005 that croaked in catastrophic fashion not long after the AppleCare coverage lapsed.
In 2018 I bought a Mac mini that constantly gave me fits for reasons I could never figure out. One day in 2020 &mdash; while it was still covered by AppleCare &mdash; I called once more for support and was kicked up to a &ldquo;senior adviser&rdquo; who had the temerity to tell me the machine was underpowered for what I wanted it to do.
Preposterous. I write documents and browse the web. I wasn&rsquo;t using the computer for video editing or high-end gaming, for crying out loud. And I custom-ordered it with 16 GB of memory, double what came standard, specifically so it would be somewhat &ldquo;future-proof.&rdquo;
Then there are the constant &ldquo;improvements&rdquo; to macOS and iOS which inevitably make simple tasks harder. What used to require one or two taps on the iOS Podcasts app now takes five or six &mdash; and I still haven&rsquo;t mastered the proper sequence in the current iteration.
I could go on, but I think you get the point.
People talk these days about &ldquo;the ens***tification of everything.&rdquo; From where I sit, Apple is a prime example.

FMF-Issue-070726-Featured

AI: Too Big to Fail

<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 SPCX Casino
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> "We've all been forced into a giant casino," says Tim &mdash; a sixtysomething engineer from the Silicon Valley region.
Asked by The Guardian how he feels about the SpaceX IPO and how it might affect him, he replied, "I've never wanted to participate in the so-called AI bubble. Basically my entire retirement is in the S&amp;P 500. Not out of choice, but if you don't have investments in the stock market, you're losing ground compared to everybody who does.&nbsp;
&ldquo;That's the pernicious thing about it. There's really no way for the average person to diversify."
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Lurking in the background of Tim&rsquo;s concerns is this: SpaceX is being added to major stock market indexes well ahead of the usual schedule for newly public companies. It joins the Nasdaq-100 tomorrow.
&ldquo;If you own a Nasdaq index fund &mdash; in your 401(k), your IRA, your kid's college account &mdash; you're about to become a SpaceX shareholder,&rdquo; says Paradigm tech investing specialist Ray Blanco. &ldquo;Nobody asked you. That's how index inclusion works: Trillions in passive money is now mandated to buy SPCX.
&ldquo;And the circumstances are unusual. The Nasdaq wrote special rules just to get SpaceX in early after the record IPO.
&ldquo;Here's what makes the timing interesting. SPCX closed Thursday at $162 &mdash; about 20% below its June high. The retail euphoria came and went. The rotation traders came and went. And now the most patient, price-insensitive buyers on Earth &mdash; index funds that never sell &mdash; start accumulating.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> So&hellip; will index investors like Tim be left holding the bag?
Maybe not &mdash; not if Elon Musk moves ahead and merges SpaceX with Tesla.
Ray is among the Paradigm experts along with James Altucher and Davis Wilson who are convinced it&rsquo;s going to happen.
&ldquo;The signals are already there,&rdquo; Ray says. &ldquo;For example, Terafab isn't a SpaceX venture. It's a formally joint initiative spanning both Tesla and SpaceX. Tesla builds the $3 billion pilot line. SpaceX owns the full-scale fab. Two shareholder bases, one project.
&ldquo;And we have the Elon pattern. X folded into xAI in March 2025. xAI folded into SpaceX this February. Exactly one major piece remains outside SpaceX.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But the most compelling rationale for a SpaceX-Tesla tie-up is the calendar.
&ldquo;The SpaceX IPO lockup expires in December,&rdquo; Ray says. &ldquo;Up to 20 years of paper gains &mdash; early funds, employees, institutions with LPs demanding distributions &mdash; become sellable in a single window.
&ldquo;There is exactly one announcement that turns December's sellers into December's holders: Your shares are about to become part of something far bigger.
&ldquo;To be clear, the two sides of the combination need to legally sort things out and get shareholder approval.
&ldquo;So the deal announced this year likely closes next year. But I'm betting on the announcement.
&ldquo;If it comes, it creates something without precedent: rockets, satellites, AI, robots, energy, chips, and self-driving cars inside one company. A company assembled to mint the currency of the next century from a place no competitor can follow.&nbsp;
&ldquo;This will be the greatest moonshot in the history of capitalism,&rdquo; Ray concludes.
To be clear, that doesn&rsquo;t make SpaceX a buy right now. SPCX is not a recommendation in any paid Paradigm publication. Most of the time, there&rsquo;s too much noise and not enough signal amid the price action in an IPO &mdash; and that&rsquo;s doubly true for a company with as much hype as SPCX.
But if the pre-IPO shareholders have an incentive to hold on beyond this year&hellip; maybe the folks who are about to involuntarily own shares through index funds can rest a little easier.
<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" />Stock Market Shift
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It&rsquo;s been nearly five weeks since the S&amp;P 500 notched an all-time high. But don&rsquo;t confuse that with weakness in &ldquo;the market.&rdquo;
A shift took place during June: &ldquo;After months of the rally being concentrated in a handful of semiconductor stocks,&rdquo; colleague Davis Wilson writes at The Million Mission, &ldquo;market leadership finally began to broaden. Financials started participating. Health care joined the rally.
&ldquo;Small caps surged too. The Russell 2000 ended the first half more than 21% higher, putting the index on pace for its best first-half performance since 1991.
&ldquo;Granted, even that small-cap rally was heavily influenced by AI. Nine of the 10 best-performing stocks in the Russell 2000 are tied to artificial intelligence or semiconductors.
&ldquo;But investors are no longer just buying just the Magnificent Seven and a handful of chipmakers.
They're buying the broader AI ecosystem.
&ldquo;That's a much healthier market than the one we started the year with.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;The average stock is now starting to carry its weight,&rdquo; concurs Zach Schiedt &mdash; analyst for Altucher&rsquo;s True Alpha and Rickards&rsquo; Insider Intel.
Evidence shows up in RSP &mdash; the ETF in which all the S&amp;P 500 stocks comprise 0.2% of the holdings. RSP logged several all-time highs during the final days of June and first days of July.
&ldquo;When the average stock wins while the giants stall,&rdquo; says Zach, &ldquo;that tells you money is spreading out across the whole market instead of crowding into the same five names.
&ldquo;The mega-caps that carried this thing for years are cracking, with several slipping below key support. That money has to go somewhere, and right now it's fanning out into the rest of the market.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Of course, we mention all of this on a day when the price action is an exception to the recent rule.
As we check our screens, the S&amp;P 500 is up nearly three-quarters of a percent at 7,537. Meanwhile, RSP is flat on the day.
The Nasdaq Composite has powered 1.4% higher, back over 26,000. But the Dow is slightly in the red.
Precious metals are losing ground &mdash; gold at $4,147 and silver at $61.39. But crypto is showing renewed signs of life &mdash; Bitcoin over $63,000 and Ethereum in striking distance of $1,800.
U.S. oil futures are flat at $68.76 &mdash; about where they were during the Iran war&rsquo;s early days four months ago.&nbsp;
That said, we&rsquo;re hearing rumblings that China&rsquo;s oil imports are starting to pick up again. As we chronicled here <a href="https://paradigmpressroom.com/post/spacex-and-smoothies/#3">last month</a>, China slashed its crude imports by 40% year-over-year and stopped adding to its strategic petroleum reserve. But the country&rsquo;s small, semi-independent &ldquo;teapot&rdquo; refineries are starting to load up again.
<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" />AI Data Centers and Heat Waves
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Amid a heat wave, it was a lucky break the Eastern Seaboard didn&rsquo;t experience widespread power outages over the holiday weekend.
On Friday, PJM &mdash; the country&rsquo;s biggest regional grid operator &mdash; said it was under federal orders to cut power consumption across its territory, covering 13 states stretching from New Jersey west to Illinois.
PJM was under assault from &ldquo;generator outages, massive overloading ⁠on its transmission lines and a surge in air conditioning use from prolonged sweltering &zwnj;heat,&rdquo; per a CNBC report.
And if you suspect data centers were a factor, you&rsquo;d be correct: Spot wholesale power prices in northern Virginia &mdash; home to &ldquo;Data Center Alley,&rdquo; the highest concentration of data centers in the world &mdash; surged past $2,000 per megawatt hour. That compares with $40 during normal times.
&ldquo;The surge in prices &zwnj;is mostly because it has become expensive to provide power across congested high-voltage power lines, according to industry analysts and PJM&rsquo;s operations data.&rdquo;
We warned at this time two years ago that AI was becoming &ldquo;<a href="https://paradigmpressroom.com/post/the-monster-that-ate-the-power-grid-ai">the monster that ate the power grid.&rdquo;</a> During 2025, Paradigm readers prospered from investing in companies like Vistra and Talen &mdash; &ldquo;independent power producers&rdquo; that aren&rsquo;t regulated utilities.
Turns out there&rsquo;s an ETF packed with these companies &mdash; the Virtus Reaves Utilities ETF (UTES). The share price has gone nowhere for nearly a year, but it might simply be digesting massive gains from 2024 and the first half of 2025. Worth a look&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" /> Speaking of heat waves and stress on the power grid&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/65ETfUyo47Uim7Izx3CWgz/53c2b03dc6d980ab547ba8f6a90f804a/FMF-Issue-070626-ComicRelief.png" alt="pub" 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: OpenAI Bailout, National Debt, &ldquo;Inalienable&rdquo; Rights
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;The bailout of Altman&rsquo;s OpenAI has been telegraphed for a long time,&rdquo; a reader writes after we took note last week of OpenAI&rsquo;s pitch for the federal government to take a 5% stake in the firm.
&ldquo;The only way this works for him is to have the taxpayer foot the bill. Now with the chief inside trader in charge, it will be much easier for him to get his wish.&nbsp;
&ldquo;As far as pushing the IPO out to &rsquo;27, perhaps he is getting a little nervous about having to actually open his books. Pretty sure when this bubble is over, the emperor will indeed be buck naked.
&ldquo;Thank you for all you do!&rdquo;
Dave responds: Hard not to wonder whether Anthropic, the company behind Claude, might make the same pitch soon.
About a month ago, Anthropic called on the AI industry to slow its pace of development. The company&rsquo;s rationale was this: The state of the art was advancing so quickly that AI models would soon be able to improve themselves without human intervention, touching off all manner of unintended consequences for society.
(Again, as with Altman, notice the humanitarian appeal.)
As one skeptic put it on X, &ldquo;Translation: People can&rsquo;t afford our models and our AI bags are about to blow up.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Any ideas on how to reduce the national debt?&rdquo; a reader inquires after <a href="https://paradigmpressroom.com/post/george-washingtons-warning">Sean Ring&rsquo;s guest edition</a> we published while the markets were closed Friday.
Another reader already has an idea: &ldquo;I believe what is always ignored is the waste, fraud and abuse of taxpayer funds.
&ldquo;Elon tried to correct the matter with the DOGE program but was shot down or ignored. I believe that if the waste, fraud and abuse of the taxpayer funds were eliminated, the debt would drop to one half of what it is; the problem, of course is that the present representatives and Senate are on the take as much as the normal crooks and that has to do with the elections and noncitizens voting.
&ldquo;A long time ago The 5 asked how does one become a millionaire and I answered by running for political office in D.C. and that still holds true today &mdash; a sad commentary on today's politicians (it may have always been that way from the beginning)!&rdquo;
Dave: Sorry, but &ldquo;waste, fraud and abuse&rdquo; are part and parcel of the system. If you want to reduce it, you have to reduce the size and scope of government first.
On that score, and to tackle the original question, nothing gets better until two things happen: <a href="https://paradigmpressroom.com/post/luigi-mangione-isnt-the-problem">the health care cartel</a> is smashed and <a href="https://paradigmpressroom.com/post/usd1-5-trillion">the military-industrial complex</a> is dismantled.
Neither of those things is likely to happen without a sovereign debt crisis forcing the issue. Which is why your editor is partial to investments geared toward tangible wealth &mdash; precious metals, base metals, energy, agriculture. People want real stuff when paper promises blow up.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> OK, we&rsquo;re going to put the whole inalienable/unalienable thing to bed for good today.
&ldquo;Haven&rsquo;t you ever accidentally hit a &lsquo;u&rsquo; when reaching for an &lsquo;i&rsquo;?&rdquo; a reader writes with tongue firmly in cheek.&nbsp;
(The QWERTY keyboard didn&rsquo;t come along until a century after the Declaration of Independence.)
More seriously he says, &ldquo;Obviously the discrepancy between Jefferson and the Declaration was a typo!&rdquo;
Meanwhile, the original reader who touched off the controversy wrote back: &ldquo;So it's &lsquo;tomato &mdash; tomato.&rsquo; My sincere apologies &mdash; to me it sounded like a David Hume/John Locke-type distinction.
&ldquo;I did find a source that opined that the i- form pretty much replaced the u-form during the 1830s. Again, sorry for the distraction. Thank you for filling up the rabbit hole.&rdquo;
Dave: Looks as if you found <a href="https://persistentenlightenment.com/2014/07/07/rights-unalienable-or-inalienable-a-concluding-philological-postscript/">the same article</a> I did, complete with a graph showing how indeed the usage shifted nearly 200 years ago.
No apologies necessary &mdash; you&rsquo;ve been around long enough to know that I&rsquo;ll make a conscious decision now and then to let the mailbag go off on a tangent!

FMF-Issue-070626-Featured

The SPCX Casino

For most of its history, the United States treated debt with suspicion, if not outright fear. That instinct came from four men who understood, in ways modern policymakers seem to have forgotten, debt is less an economic tool and more a political weapon.
George Washington, Benjamin Franklin, Thomas Jefferson, and John Adams, America&rsquo;s founders, architects, and revolutionaries, were students of history. History taught them one simple lesson: nations don't collapse overnight. They decay under the weight of obligations they can&rsquo;t control.
Washington warned against entanglements that could drag the young republic into endless commitments. Today, America is entangled in alliances abroad and its balance sheet at home.
Franklin, the pragmatist, understood the corrosive nature of excess. &ldquo;Rather go to bed without dinner than to rise in debt,&rdquo; he said. Today, the United States does neither. It spends without restraint and borrows without consequence&hellip; for now.
Unlike that statist Alexander Hamilton, Jefferson feared centralized financial power and permanent debt, arguing that each generation should pay its own way. Now, that idea is almost quaint. The current system doesn&rsquo;t just pass the bill to the next generation; it compounds it.
Adams was blunter still: &ldquo;There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.&rdquo;
We chose the latter.
Now comes the reckoning. Not in soft theory, but hard mathematics.
When Interest Becomes the Budget
Within a few years, interest on the national debt is projected to become the single largest line item in the federal budget &mdash; overtaking defense, Medicare, and eventually Social Security, if nothing changes.
This is one obscenely incredible post:

<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3KzgoEGvh50kdv6WvT74Gv/11e97debf45f378b5520e6960082ba65/mr-issue-06-11-26-img-2.png" width="540px" />

Credit: <a href="https://x.com/charliebilello/status/2064824365309444427">@charliebilello</a>
The numbers are already brutal. The government paid roughly $882 billion in net interest in fiscal 2024 &mdash; nearly triple the $345 billion paid in 2020, and more than it spent on national defense or Medicare. In 2025, that figure climbed again to an estimated $970 billion, or about 19 percent of all federal revenue collected.
Read that again. Nearly 1 in 5 tax dollars now goes just to pay interest. That&rsquo;s before a single soldier is paid, a single pension check is mailed, or a single road is repaired.
Based on CBO projections, annual interest costs will exceed $1 trillion around 2026 and continue to climb to roughly $1.8 trillion by 2035. Over the next decade, cumulative interest payments will run into the tens of trillions. Over the next 30 years, the U.S. is on track to spend nearly $100 trillion on interest alone if current policies persist.
This is nothing if not a slow-motion transfer of national income from taxpayers to bondholders.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1KiBlQ3H2zIuPqp43BY2CY/4e11fa54afd7244ea2a5fccec4a715dd/mr-issue-06-11-26-img-3.png" alt="" width="540px" />
You can see this in the above chart. Net interest costs are rising from a few hundred billion in 2020 to roughly $1 trillion by the mid-2020s, then marching relentlessly toward $1.8 trillion by 2035. It&rsquo;s not a gentle slope. It&rsquo;s an accelerating curve.
From Spending Priorities to Interest Tribute
The more alarming story isn&rsquo;t the nominal dollars. It&rsquo;s the changing composition of the federal budget itself.
Interest costs have already become the government&rsquo;s second-largest expenditure, trailing only Social Security and outpacing every other major program. As a share of total federal spending, interest is projected to reach 15&ndash;16 percent by the end of this decade &mdash; surpassing the prior peaks of the 1990s, but this time on a far larger debt base with far less room to maneuver.
As a share of the economy, interest is heading into uncharted territory. CBO-style projections show net interest rising from just over 3 percent of GDP in the mid-2020s to around 4.5 -- 5 percent by the mid-2030s, and higher still beyond that.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1J8E7uRvGQCgz1LQ0NCPC6/3c849c825b8db99427c6305aca550c1c/mr-issue-06-11-26-img-4.png" alt="" width="540px" />
The above chart tells this story cleanly: one line shows interest as a share of GDP grinding higher; another shows it climbing through the mid-teens as a share of federal outlays.
At some point, the budget is no longer about national priorities. It&rsquo;s about servicing past decisions.
That&rsquo;s the tipping point the four founders would have recognized immediately.
Once interest becomes your largest expense, you&rsquo;re not governing freely. You&rsquo;re managing liabilities.
Debt as Stealth Political Control
Every dollar spent on interest is a dollar that cannot go to defense or infrastructure. It&rsquo;s a transfer from citizens to creditors. Those creditors include foreign governments and large institutional investors whose only concern is that America keeps paying.
To put a finer point on it, let&rsquo;s look at the numbers for this past May, thanks again to Charlie Bilello:

<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3Osh6JjAoJ2ZLfj9NUxEP5/07cb28b2e245e6ad265ebd5cd4c982ae/mr-issue-06-11-26-img-5.png" width="540px" />

Credit: <a href="https://x.com/charliebilello/status/2064829101001556076?s=46">@charliebilello</a>
You read that right: $107 billion spent on interest in the month of May 2026, just behind Social Security.
This is where the founders&rsquo; warnings stop sounding like philosophical musings and start sounding like a risk memo.
Washington feared entanglements that would limit the republic&rsquo;s independence of action. A government that must roll over trillions of dollars at ever-higher rates is not fully independent. It&rsquo;s constrained by what markets will tolerate. One only needs to monitor The Donald&rsquo;s war-on/war-off policy, which depends only on when the markets are open.
Jefferson&rsquo;s skepticism of permanent debt was not anti-growth naivety. It was a recognition that a state that lives forever in arrears slowly mortgages its future policy choices.
Adams&rsquo; line about conquering a nation by debt rather than by the sword was not hyperbole. It was a description of how power actually operates: not through the now pass&eacute; direct coercion, but through the more modern means of controlling cash flows.
We&rsquo;re living in that world now. The U.S. is still nominally sovereign, militarily dominant, and the issuer of the world&rsquo;s reserve currency. But its fiscal trajectory is increasingly dictated by a simple math problem: how to service a ballooning stock of debt in a world of higher rates.
When interest consumes 15&ndash;20% of your budget and a quarter of your revenues, you&rsquo;re working for your bondholders, not your citizens.
What Happens When the Bill Comes Due
The markets will tolerate this&hellip; until they don&rsquo;t.
There is no precise breakpoint on a chart where confidence disappears. But the mechanisms are familiar:
<ul>
<li>Borrowing costs rise as investors demand compensation for fiscal risk.</li>
<li>The currency weakens as foreigners question its long-term purchasing power and store-of-value status. (Just check out TLT&rsquo;s dreadful returns since 2020.)</li>
<li>Policymakers are forced into bad choices: higher taxes, sudden spending cuts, financial repression, or higher inflation.</li>
</ul>
The CBO&rsquo;s long-term outlook already assumes that interest rates stay elevated enough to keep interest costs outpacing growth in both revenues and the underlying economy. That&rsquo;s how you get to projections where interest alone may be the single largest category of federal spending within a decade.
None of this would surprise Washington, Franklin, Jefferson, or Adams. They had all studied what happened to overextended empires like Spain, France, and Britain. Their reach exceeded their revenue. Our Four Fathers understood that debt, if abused, was a slow form of national subjugation.
Unfortunately, their successors (and their voters) ignored them.
Wrap Up
The result is visible now, not in abstract theory, but in the federal budget line where interest is about to eclipse everything else.
The successors systematically dismantled every cultural, political, and fiscal safeguard its four founders had tried to leave in place to stop this from happening.
Debt becomes destiny. And the charts are telling you: destiny is getting closer.

FMF-Issue-070426

George Washington’s Warning

<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" />Celebrate the Second!
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;The second day of July 1776 will be the most memorable epoch in the history of America,&rdquo; wrote Founding Father John Adams &mdash; in a letter to his wife, Abigail.
<blockquote>I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival. It ought to be commemorated as the day of deliverance, by solemn acts of devotion to God Almighty. It ought to be solemnized with pomp and parade, with shows, games, sports, guns, bells, bonfires and illuminations from one end of this continent to the other, from this time forward forever more.</blockquote>
No, not the Fourth, Adams believed. The second, 250 years ago today.
It was on July 2, 1776, that the Continental Congress, meeting in Philadelphia, passed a resolution offered nearly a month earlier by Virginia&rsquo;s Richard Henry Lee&hellip;
<blockquote>Resolved, That these United Colonies are, and of right ought to be, free and independent States, that they are absolved from all allegiance to the British Crown, and that all political connection between them and the State of Great Britain is, and ought to be, totally dissolved.</blockquote>
The delegates had spent much of the previous week debating Lee&rsquo;s resolution. Meanwhile, the actual Declaration of Independence languished &mdash; having been submitted by Thomas Jefferson back on June 28.
Only after Lee&rsquo;s resolution passed did the delegates get down to debating and editing Jefferson&rsquo;s document &mdash; which they adopted on the Fourth. Whew.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Then there&rsquo;s the matter of whether the Declaration was signed on the Fourth.&nbsp;
The overwhelming historical evidence is that the signing took place on Aug. 2, once the final draft had been put on parchment.
That said, late in their lives both Adams and Jefferson swore up and down it was signed on the Fourth. The 20th-century Princeton historian Julian Boyd, who spent over 35 years editing The Papers of Thomas Jefferson, was likewise persuaded &mdash; but he remains in the minority.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As long as we&rsquo;re in the weeds here, we should (briefly) return to the inalienable/unalienable thing.
I referred in Tuesday&rsquo;s edition to our &ldquo;inalienable&rdquo; rights &mdash; much to the consternation of a longtime reader who pointed out the language of the Declaration says &ldquo;unalienable.&rdquo; He asserted there&rsquo;s a huge difference. An AI search told me there was no meaningful difference &mdash; but that didn&rsquo;t square with my memory of a lecture I listened to long ago.
Now another reader weighs in: &ldquo;As a copy editor/tech editor for 60 years, I was predisposed to ask the same question way back in school days. The answers I always got were exactly what AI was telling you. The words mean the same.&nbsp;
&ldquo;In my professional opinion, they even mean the same today; anyone trying to build a case for a distinction is simply &lsquo;making a distinction without a difference.&rsquo;&rdquo;
I subsequently managed to locate the lecture recording. Turns out my memory was faulty and the AI take is correct. As the late libertarian scholar George H. Smith said in the 1980s&hellip;
<blockquote>You may have noticed that although we usually say inalienable rights spelled with an &ldquo;i&rdquo; the Declaration speaks of unalienable rights spelled with a &ldquo;u.&rdquo; Does this difference reflect a subtle change in meaning? Most likely not. It probably reflects what we call today a typographical error.&nbsp;</blockquote>
<blockquote>Jefferson used the word inalienable in his original draft. Where and how the &ldquo;i&rdquo; became a &ldquo;u&rdquo; is anyone&rsquo;s guess.</blockquote>
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> No matter. Whichever word you use, the meaning is the same &mdash; and essential to the Founders&rsquo; vision. Smith again&hellip;
<blockquote>Jefferson and other radical Whigs believed that human beings have natural rights. Natural rights are rights we were born with, rights we enjoy in virtue of our nature as human beings. These rights do not rely for their validity on any person or government. And no person or government can legitimately violate them or take them from us.&nbsp;</blockquote>
<blockquote>Natural rights seemed so obvious to many 18th-century Americans that the Declaration calls them self-evident.</blockquote>
Natural rights have nothing to do with majority rule &mdash; which too many miseducated Americans believe to be at the heart of the American experiment.
No. Your inalienable rights are rights that no majority &mdash; no matter how large &mdash; can ever take away from you.
That&rsquo;s something to celebrate and preserve &mdash; today, and on the Fourth and on every other day as well.
<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" />Meta&rsquo;s Lies, OpenAI&rsquo;s Backdoor Bailout
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Facebook is a big fat liar,&rdquo; declared our AI authority James Altucher today on the Paradigm mobile app.
When we left you yesterday, the big tech news was that Facebook parent Meta planned to lease its mushrooming data-center infrastructure to outside customers &mdash; that is, getting into the same business as Amazon Web Services, Microsoft Azure and CoreWeave. META shares leaped almost 10% on the day while CRWV tanked hard.
&ldquo;Let's get this straight,&rdquo; says James: &ldquo;META is not selling compute and companies that sold off are going to bounce back hard.
&ldquo;First off, META has paid tens of billions of dollars to CoreWeave, Google and others to BUY compute from them. In fact, META's demand for compute has been so great that Google has had to ration them.
&ldquo;The idea that they have excess compute is ridiculous, particularly when they can't even buy enough compute to meet their own demands.
&ldquo;So why was this news leaked? To get the stock price up so they can sell shares at inflated prices to buy compute.&rdquo;
James says he&rsquo;d be a &ldquo;strong buyer&rdquo; of companies that took a hit from the news yesterday &mdash; CoreWeave as well as memory makers Micron and SanDisk.&nbsp;
Checking our screens CRWV and MU are down another 3.5% on the day&hellip; while SNDK has shed another 11%. META has given up nearly half of yesterday&rsquo;s gains.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile the big tech news today is ChatGPT maker OpenAI pitching the federal government on a backdoor bailout.
&ldquo;OpenAI has discussed giving a 5% stake to the U.S. government,&rdquo; reports the Financial Times, &ldquo;as the $852 billion AI startup seeks to clear political obstacles by securing financial buy-in from the Trump administration.&rdquo;
Giving. Yes, how magnanimous on the part of OpenAI co-founder and CEO Sam Altman. What have we peasant taxpayers done to deserve this splendid humanitarian gesture?
&ldquo;Giving the government an ownership stake,&rdquo; the article goes on, &ldquo;could help secure good relations with the administration and would mark an attempt to address political blowback by sharing the wealth generated by AI with the public.&rdquo;
Wealth? OpenAI is losing money hand over fist &mdash; depending on who you want to believe, $21 billion during 2025, more than double the 2024 total.
As one sober assessment on X puts it, &ldquo;This is bullish if you now assume that the government will be very incentivized to make sure AI doesn&rsquo;t fail&hellip;
&ldquo;This is bearish if you assume that OpenAI is having some serious issues and now the U.S. gov will have to hold the bag when things don&rsquo;t work out.&rdquo;
As you&rsquo;ll recall, OpenAI has filed for an IPO with the Securities and Exchange Commission. But the latest scuttlebutt is that the offering will be pushed back into 2027. One theory is that a delay would improve the odds of the company reaching Altman&rsquo;s goal of a $1 trillion valuation at the time it starts trading publicly. Stay tuned&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" />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" /> With a three-day weekend starting tomorrow, the government is out with its monthly jobs report a day early.
The wonks at the Bureau of Labor Statistics conjured 57,000 new jobs for June.
On the one hand, that&rsquo;s not an awful number &mdash; not with the U.S. border having been more or less sealed since the spring of 2025. We no longer need 150,000 or more new jobs each month to keep up with population growth; several experts think 30,000 is adequate.
On the other hand, no one among dozens of Wall Street economists was expecting a number this low. In addition, the robust numbers for May and April were revised down &mdash; and not by a little.
One eye-opener in the report was a monthly decline in the number of leisure-hospitality jobs. Really? With the World Cup going on in 11 U.S. cities? OK then&hellip;
The official unemployment rate ticked down to 4.2%.
Your editor is always suspicious of the headline job numbers. Like the official inflation rate, they&rsquo;ve been subject to statistical tinkering over the last 40-plus years.
There are a couple of numbers the statisticians can&rsquo;t game, and they don&rsquo;t look good&hellip;
<ul>
<li>The labor force participation rate &mdash; the percentage of working-age adults either working or looking for work &mdash; sits at 61.5%. Aside from the COVID disruptions of 2020, the number hasn&rsquo;t been this low since June 1976, just ahead of the Bicentennial</li>
</ul>
<ul>
<li>The employment-population ratio sits at 59.0%. It does not sit at 50-year lows &mdash; but it&rsquo;s been dropping like a stone for six months.</li>
</ul>
In theory, the lower-than-expected headline number of 57,000 should be cooling expectations that the Federal Reserve will raise interest rates later this year. And in theory, that should be giving the stock market a lift today.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Instead, the major U.S. stock indexes are a decidedly mixed bag.
At last checkthe Nasdaq was down over a half percent, the Dow up over three-quarters of a percent and the S&amp;P 500 pancake-flat at 7,484.
Instead, it&rsquo;s the precious metals enjoying an across-the-board rally &mdash; gold up $95 to $4,125 and silver up two bucks, just a penny away from $61. Crypto is also bouncing, with Bitcoin well over $61,000 and Ethereum approaching $1,700.
U.S. oil futures have sunk nearly another buck to $67.70 &mdash; where it was on Day 3 of the Iran war.
The latest drop comes despite Vice President Vance telling an interviewer that the purpose of the 60-day &ldquo;memorandum of understanding&rdquo; is merely to buy time &ldquo;to sort of refill the world&rsquo;s oil economy&rdquo; after which the Trump administration would &ldquo;see where the hand is.&rdquo;
Does Vance think no one in Tehran will see this interview?
<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 had air conditioning on the brain <a href="https://paradigmpressroom.com/post/crank-up-the-all-american-ac">in yesterday&rsquo;s edition</a>&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3adb1tKYwxOy2MOSTSszTx/72956d2ae6c0da0c9c461261a6b57f25/FMF-issue-070226-2.png" alt="Comedic Relief" 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: Pipelines, American Comeback
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Perhaps you can help me with something. Why would anyone, other than Iran, ship oil (or anything else) through the Strait of Hormuz in 24 months?&rdquo; a reader inquires.
&ldquo;I would think they would be actively expanding pipelines and other infrastructure to bypass this chokepoint in the future &mdash; rather than be held hostage by Iran anytime they want to do so.
&ldquo;I would certainly see Saudi Arabia as leading this and helping the Gulf states, if needed, bring it to fruition. Nothing else makes long-term sense, but I am surprised that there has been no news around planning for a long-term &lsquo;Hormuz alternative.&rsquo;
&ldquo;Love your work!&rdquo;
Dave responds: It&rsquo;s in the works. Or at least there&rsquo;s some jawboning.
Last week the CEO of the French oil giant Total said &ldquo;we must invest in pipelines to bypass the strait, which is an absolute priority." It wasn&rsquo;t clear whether he was speaking of his own firm or if he was using the royal &ldquo;we&rdquo; addressing the industry as a whole.
In any event, pipelines aren&rsquo;t a panacea.&nbsp;
Iran made a strategic decision during the hot-war phase this spring to conduct only theatrical pinprick attacks on Saudi Arabia&rsquo;s Yanbu oil terminal &mdash; which handles the crude coming from an east-west pipeline crossing the kingdom.&nbsp;
If Tehran had decided to attack for real, the impact would have been catastrophic &mdash; taking another 5 million barrels of oil a day off the market.
Too, as our own Byron King points out, oil pipelines don&rsquo;t solve the &ldquo;Hormuz problem&rdquo; for liquefied natural gas, helium, sulfur, fertilizer and so on.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Can I share yesterday&rsquo;s 6th Bullet with friends and family?&rdquo; a reader writes after yesterday&rsquo;s extended edition.
Adds another: &ldquo;I have never read such a positive, encouraging article in any of the
many financial newsletters to which I subscribe. Thank you, Ray Blanco.&rdquo;
Dave: You can always share the material we publish at our daily e-letters. They&rsquo;re free content intended to supplement your paid subscription.
We knew Ray&rsquo;s piece would be a hit. Going into the holiday weekend, we&rsquo;re cross-posting it at several of our sister publications. The handiest link to give to friends and family is <a href="https://rudeawakening.info/posts/the-builders-are-back">today&rsquo;s Rude Awakening</a>. Enjoy!

FMF-issue-070226-Featured

Celebrate the Second!

<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" />Crank up the (All-American) AC
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> So you&rsquo;ve probably heard about the heat wave in Europe. But maybe you haven&rsquo;t heard about the crackdowns on people who &mdash; God forbid &mdash; want relief from the heat.
&ldquo;Air conditioning is very rare in European homes,&rdquo; says CNN &mdash; present in only one of every five households. In the U.K., it&rsquo;s only one of every 10.&nbsp;
&ldquo;Many residents ride out the searing heat with the help of electric fans, ice packs and cold showers.&rdquo;
&ldquo;It was my luck,&rdquo; writes Matthew Petti at Reason, &ldquo;that I arrived in Britain to pick up my master's degree just before a heat wave hit&rdquo; &mdash; with daytime highs of 95 Fahrenheit.
<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 that people across the Atlantic relish suffering through the heat. It&rsquo;s that Europe&rsquo;s control freaks and power trippers want people to suffer.
&ldquo;A combination of environmental regulations, NIMBYism and cultural snobbishness have slowed down Europeans who want to buy an AC unit,&rdquo; Petti writes.
For instance&hellip;
<ul>
<li>Homeowners with AC are subject to periodic inspections in several countries &mdash; including Hungary, Slovakia and Greece. The inspections cover everything from energy usage to noise to historic preservation rules</li>
</ul>
<ul>
<li>For several years, Spain and Italy have ordered public and commercial buildings to keep the thermostat no lower than 81 and 77 degrees Fahrenheit respectively during summertime</li>
</ul>
<ul>
<li>In Switzerland&rsquo;s Geneva canton, homeowners must prove a medical need before they can install AC.</li>
</ul>
Of course, these rules are frequently &ldquo;for thee, but not for me.&rdquo;&nbsp;
Last Friday the European Commission&rsquo;s headquarters building in Brussels shut down the AC &ldquo;due to extreme weather conditions&rdquo; &mdash; but only on the seven lowest floors. The senior staff on floors 8&ndash;13, including EC President Ursula von der Leyen, stayed cool as cucumbers.
Complained one of the lower-floor staffers to Politico: &ldquo;It&rsquo;s like feudalism.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> And then there&rsquo;s the U.K. &mdash; where people have been ordered to remove AC from their homes even as temps soar past 100 Fahrenheit.
Local officials &ldquo;have told residents to take down their cooling units over concerns about carbon dioxide emissions,&rdquo; reports the conservative-leaning GB News channel.
The rules are frequently confusing and contradictory &mdash; setting up &ldquo;situations where units are fitted believing they comply with rules, only for council enforcement teams to turn up and demand their removal.&rdquo;
In London&rsquo;s Camden section, inspectors told a resident to &ldquo;permanently remove&rdquo; two cooling units from the rear of the property, saying they violated the neighborhood council&rsquo;s &ldquo;cooling hierarchy&rdquo; policy.
The homeowner appealed the decision &mdash; only to be told to open second-floor windows for ventilation. When the homeowner raised concerns about crime and the risk of a break-in, the inspectors then pointed out &ldquo;the absence of ceiling fans&rdquo; in the home &mdash; even though there&rsquo;s no explicit requirement for ceiling fans.
In the end, the homeowner won an appeal &mdash; by pointing out the property did have solar panels, thereby assuaging the busybodies&rsquo; &ldquo;climate&rdquo; concerns.
And that&rsquo;s just one example of many in Great Britain. The situation is so absurd it&rsquo;s become the stuff of memes&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/RPs1SpMDyLCyEtSome8R1/ac2b28051cf6d470ecda4bcb0146e1e9/FMF-Issue-070126-1.jpg" alt="AC MEME" width="540px" />
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> No wonder Europeans visiting the United States for the World Cup seem so happy &mdash; especially now amid our own heat wave.
&ldquo;I've been getting a kick with news stories of foreigners visiting the U.S. for the World Cup, awestruck and marveling at our advanced level of civilization &mdash; like air conditioning, and how restaurants just come right out and serve water when you sit down,&rdquo; observes Paradigm&rsquo;s resident oil field geologist Byron King. &ldquo;There's even ice (!) and free refills at fast-food joints.&nbsp;
&ldquo;Of course, this also reflects the U.S. energy buildout, in which energy is widely available and relatively low-cost.&nbsp;
&ldquo;By comparison, other nations of the world are energy-impoverished... even so-called &lsquo;advanced&rsquo; countries like Germany and the U.K.&rdquo;
Last week on the Daily Feed section of the Paradigm Press mobile app, Byron shared this infographic courtesy of the Visual Capitalist site. &ldquo;Helps put it all in perspective,&rdquo; he says.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/6W2d1c7jK7Qtm6LqhAFwLl/0247a1b4edf1a781026152099754a52d/FMF-Issue-070126-2.png" alt="Fuel Consumption chart" width="540px" />
&ldquo;And note how China-China-China is such a vast energy producer, much of it for industry (versus air conditioning, ice, fast food, etc.). And note how China generates more energy from just coal than the U.S. generates energy in total.&nbsp;
&ldquo;Point is... when good things happen, follow the energy trail. And when bad things happen with energy... well, that's a predictor as well.&rdquo;
Something to think about as we recall how the Founders sweltered their way through adoption of the Declaration of Independence in Philadelphia 250 years ago. On this day in 1776, the weather diaries kept by Thomas Jefferson and Phineas Pemberton suggest temps well into the 80s and thick humidity.&nbsp;
And no AC for any relief.&nbsp;
Now there&rsquo;s something to be grateful for this week as you crank down the thermostat. Only in America! (Well, Japan and South Korea, too. Their adoption of AC in the home is nearly as extensive as our own&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" />Meta, Markets, Oil
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Among the big market movers today is Facebook/Instagram parent Meta.
&ldquo;META is up 10% today after giving investors exactly what they wanted: a plan to monetize its massive AI spending,&rdquo; says colleague Davis Wilson at The Million Mission.
&ldquo;The company is reportedly developing a cloud computing business that would rent excess AI compute to outside customers &mdash; putting it in competition with Amazon Web Services, Microsoft Azure, Google Cloud and even CoreWeave.
&ldquo;For months, investors questioned whether Meta's hundreds of billions of dollars in AI infrastructure spending would ever generate a return.
&ldquo;Now they have an answer.
&ldquo;Instead of letting unused computing power sit idle, Meta&rsquo;s turning it into a new revenue stream.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Not that Meta&rsquo;s move is powering the rest of the stock market today.
To be sure the major indexes are in the green &mdash; but in the case of the Nasdaq, just barely. The S&amp;P 500 is up about a quarter percent; the 7,500 level is looking more and more like a ceiling at the moment.&nbsp;
The Dow is up 0.4% &mdash; once more in record territory at 52,522, goosed by the addition of Google parent Alphabet to the index this week (replacing Verizon) along with strong performance by Caterpillar.
Precious metals are staging a modest comeback, gold up nearly $75 to $4,079 &mdash; with silver up 2.7% and back over $60. Bitcoin has hefted its way back over $60,000 and Ethereum over $1,600.
<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 sinking toward $68 &mdash; apparently because there&rsquo;s no sign that U.S. reserves are being replenished.
The Energy Department is out with its weekly inventory numbers: Despite a shaky &ldquo;memorandum of understanding&rdquo; between the United States and Iran, the U.S. government drained another 5.5 million barrels from the Strategic Petroleum Reserve, dropping its total level to another low last seen in 1983.
Private-sector reserves were drained an additional 3.8 million barrels. The silver lining here is a small inventory build at the giant terminal in Cushing, Oklahoma. As mentioned here in recent days, Cushing was approaching &ldquo;tank bottoms&rdquo; beyond which it can&rsquo;t go on pumping and transferring crude.
<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" />&ldquo;It&rsquo;s for the Children&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Ready to verify your age before you go online? The U.S. House just took a huge step in that direction.
The late Rush Limbaugh observed that some of the worst legislation tends to be enacted &ldquo;for the children&rdquo; &mdash; and that&rsquo;s certainly the case with the &ldquo;Kids Internet and Digital Safety Act,&rdquo; which of course shortens to KIDS Act.
Digital rights groups like Reclaim the Net warn that the KIDS Act raises huge concerns &ldquo;about government overreach, privacy erosion and the expansion of online surveillance.&rdquo;
So of course the legislation passed the House Monday night with <a href="https://clerk.house.gov/evs/2026/roll228.xml">overwhelming bipartisan support</a>, 267-117.
&ldquo;Buried inside the KIDS Act are provisions that will push online services to verify all users&rsquo; ages, require government-directed moderation policies for online speech and even create new rules about private and encrypted communications,&rdquo; writes Joe Mullin for the Electronic Frontier Foundation.&nbsp;
&ldquo;While supporters continue to claim this bill protects minors online, its requirements come at the expense of privacy, free expression and the ability of people of all ages to use the internet without revealing sensitive data.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Technically the measure doesn&rsquo;t require websites and apps to conduct age verification. But it sure as heck pressures them to do so.&nbsp;
&ldquo;The problem,&rdquo; Mullin writes, &ldquo;is a website operator doesn&rsquo;t need actual knowledge that a user is a minor to get in legal trouble. It applies when a platform &lsquo;knows or should have known&rsquo; a user&rsquo;s age &mdash; a low, negligence-style standard of knowledge. If an online service gets it wrong, it&rsquo;s going to be up to courts and regulators to decide, after the fact, if an online service &lsquo;should&rsquo; have known a user was 16.&rdquo;
Given that burden, most website/app operators will simply opt to make all users verify their age.&nbsp;
&ldquo;Some companies may respond by requesting driver's licenses or passports,&rdquo; Mullin continues.
&ldquo;Others will rely on age-estimation systems that attempt to guess users' ages by looking at existing activity or doing facial scans.&rdquo;
Say goodbye to online anonymity.
And it gets worse. Another section of the bill creates new rules for encrypted messaging platforms like WhatsApp &mdash; aimed at curbing discussion among young people about drugs, alcohol, gambling and so on.
&ldquo;The KIDS Act never answers an obvious question,&rdquo; Mullin says: &ldquo;how exactly is a platform supposed to address those activities if they&rsquo;re inside encrypted communications that it can&rsquo;t read?&nbsp;
&ldquo;That will create pressure for providers to weaken private communications or limit features on encrypted private services.&rdquo;
The good news is that the Senate has yet to act. The bad news is that the Senate version of the KIDS Act is even more restrictive.&nbsp;
We&rsquo;ll keep you posted&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" /> You laugh because you know it&rsquo;s true&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1GnfkQWPO2Qj7oMbV7YYZy/83284730e54c0d8c92f23dc0f979a7bf/FMF-Issue-070126-3.png" alt="Comedic relief" width="540px" />
Amazing how they can pass legislation shredding online privacy but just can&rsquo;t get around to that bill limiting their own trading activity&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: &ldquo;Unalienable&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> After I closed yesterday&rsquo;s edition with a reference to &ldquo;our inalienable rights,&rdquo; a longtime reader was quick to correct&hellip;
&ldquo;Um, Dave, that's &lsquo;unalienable&rsquo; rights. More than a slight difference &mdash; means we can't even give 'em away.
&ldquo;New poll for you -- how many of your readers catch it?&rdquo;
Dave responds: You&rsquo;re the only one who wrote in. And it is true: The parchment says &ldquo;unalienable.&rdquo;
I confess to listening to an authoritative lecture years ago about the distinction &mdash; and it&rsquo;s become muddled in my mind with the passage of time.
Unfortunately, I&rsquo;m on deadline and I can&rsquo;t trust AI to refresh my memory.&nbsp;
One link after another suggests no difference between the two, even at the time the Declaration of Independence was adopted&hellip; that Jefferson&rsquo;s early drafts said &ldquo;inalienable&rdquo; and somewhere along the line it was inadvertently changed to &ldquo;unalienable&rdquo;... and that throughout the 19th century, common usage adopted &ldquo;inalienable&rdquo; especially as Abraham Lincoln used the word in his speeches.
And I don&rsquo;t trust any of it. I&rsquo;ve got the authoritative lecture in audio form somewhere on my computer, but Apple&rsquo;s deprecation of iTunes over the years has made it impossible for me to locate it readily. (Maybe AI can help me?)
Don&rsquo;t get me started on how Apple has gone down the tubes, a process underway even while Steve Jobs was still alive&hellip;

FMF-Issue-070126-Featured

Crank up the (All-American) AC

<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" />Survey Says: Freedom and Opportunity
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;My parents brought us here in 1967 to achieve the American dream &mdash; and they did, and so did their four children,&rdquo; writes a Paradigm Press subscriber who hails from New Jersey.
&ldquo;I am truly proud and my children also live the American dream and also my eight nephews &mdash; truly proud to be an American.&rdquo;
Ahead of the nation&rsquo;s 250th anniversary this weekend, we invited you during yesterday&rsquo;s edition to tell us what part of the country you come from and what makes you most proud to be an American.
Our own invite here was supplemented by separate invites from Paradigm macro maven Jim Rickards, AI authority James Altucher and publisher Matt Insley. All told we got over 5,200 responses.&nbsp;
To be sure, I&rsquo;ve not had a chance to go over all of them. I did, however, copy and paste them into ChatGPT and asked for an executive summary.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Across hundreds of responses, one theme overwhelmingly dominates: Freedom is the defining source of American pride,&rdquo; is the chatbot&rsquo;s main takeaway.
&ldquo;Respondents repeatedly cited freedom &mdash; not just as an abstract ideal, but as the foundation for nearly every other aspect of American life they value. Freedom of speech, religion, opportunity, movement, enterprise, and self-determination appeared far more frequently than any other theme.&rdquo;
Some of them simply responded, &ldquo;Freedom.&rdquo; Others specified the freedom of speech, free exercise of one&rsquo;s religion, the absence of tyranny or the ability to choose one&rsquo;s own path.
Says a California reader: &ldquo;Freedom. Freedom of speech, expression and religion. That the powers bestowed to us are not granted by the government, but from God.&rdquo; Right on.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;A second major theme was opportunity,&rdquo; ChatGPT continues.
&ldquo;Many described America as &lsquo;the land of opportunity&rsquo; where effort &mdash; not birth &mdash; determines success.&rdquo;
&ldquo;I&rsquo;m proud of the fact that everyone, including me, has the opportunity to decide how they'd like to succeed in life,&rdquo; says a respondent from upstate New York. &ldquo;I changed my mind numerous times over my lifetime and every time I was rewarded with multiple opportunities as well as wonderful teachers to help me along my path.&rdquo;
Beyond freedom and opportunity, many respondents invoked their faith. Others, military service.&nbsp;
Some people chose to get political &mdash; inevitable given the tenor of the times, I guess. We&rsquo;ll skip over those ones on this occasion.
We give the last word today to someone from the Philadelphia area &mdash; where this week in 1776 Thomas Jefferson submitted his draft of the Declaration of Independence to the Continental Congress&hellip;
<blockquote>We celebrate the Fourth of July not because it was the founding of our form of government. That happened in 1789 with the ratification and implementation of the Constitution.</blockquote>
<blockquote>No, we celebrate July Fourth because it was a seminal moment in the history of the world. Yes we declared our independence as a sovereign nation, but it was an announcement to the world of a new form of sovereignty. The revolution of sovereignty of the individual over the sovereignty of the state. The first time any such form of government was to be attempted.</blockquote>
<blockquote>Make no mistake, there have been many other revolutions throughout history. But none was as significant as this.</blockquote>
<blockquote>For the first time men had stated that rights which previous had been the dominion of a king or emperor come from something greater. Something that supersedes the bonds of servitude to the whims of an all-powerful ruler. That those rights are unalienable.</blockquote>
<blockquote>That a man was free to exercise his will the way he felt best for himself. As long as his will was, as Thomas Jefferson wrote, &ldquo;within limits drawn around us by the equal rights of others.&rdquo;</blockquote>
<blockquote>Is the document perfect? No. But it set in motion the seeds to create a more perfect union of men. And continues to do so.</blockquote>
<blockquote>So when you hear those words you've heard so many times before, &ldquo;We hold these truths to be self-evident, that all men are created equal,&rdquo; remember that when they were written it was not so self-evident.</blockquote>
Hear, hear. Thanks to everyone for their submissions.
<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" />Takeover Announcement Now, Bidding War Later?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The big takeover news of the week is something the Paradigm team spotted in advance.
One of the trendy space names &mdash; Rocket Lab Corp. (RKLB) &mdash; is acquiring industry workhorse Iridium Communications (IRDM).
Only seven days ago, subscribers of Altucher&rsquo;s True Alpha learned that IRDM was looking like buyout bait &mdash; given a sudden bout of buying by institutional investors. This is the &ldquo;blue spike&rdquo; that True Alpha readers know is their signal to act&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4qbYHDBkz2Z3i4AAAzLjRQ/3879d215663276991e4b193f1ec2b6a0/FMF-Issue-063026-1.png" alt="IRDM" width="540px" />
Sure enough, word broke before the market opened Monday morning &mdash; a recurring &ldquo;weekend trade&rdquo; phenomenon True Alpha readers seize on for big gains.
The background: Iridium owns 66 low-Earth orbit satellites, along with access to a slice of the radio frequency spectrum used for satellite phones and similar technology. (If you have one of Garmin&rsquo;s high-end devices for hiking in the backwoods, it relies on Iridium satellites.)&nbsp;
The company&rsquo;s satellites and frequencies are also used by the U.S. military. That&rsquo;s what makes IRDM a juicy takeover target.
Rocket Lab could have tried to build its own satellite network. But it was easier to acquire an existing one that already generates a profit. RKLB now has the whole satellite &ldquo;stack&rdquo; &mdash; building them, launching them and operating them.
Well, that&rsquo;s assuming the deal goes through.
Altucher&rsquo;s True Alpha strategist Zach Scheidt thinks IRDM could become the object of a bidding war. Zach and James Altucher recommended IRDM call options last week &mdash; and they&rsquo;re urging readers to continue hanging onto them until the story fully plays out.&nbsp;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The broad stock market is drifting higher again today amid a low-volume trading week.
The S&amp;P 500 is up nearly three-quarters of a percent, knocking on the door of 7,500 for the first time since mid-June. The Nasdaq&rsquo;s gain is stronger, the Dow&rsquo;s weaker.
Among the big movers is military drone maker AeroVironment (AVAV) &mdash; up over 15% after delivering killer quarterly numbers.&nbsp;
Several Paradigm editors have been perking up to the drone story in recent days. In both the Russia-Ukraine war and in the Persian Gulf, &ldquo;relatively inexpensive drones are proving capable of threatening or destroying assets that cost hundreds or even thousands of times more,&rdquo; says trading pro Enrique Abeyta. &ldquo;That shift has enormous implications, not just for military planners, but for investors as well.&rdquo;
To explore the possibilities of drones in detail, check out <a href="https://million-mission.com/posts/55-billion-reasons-to-go-drone">Davis Wilson</a> at The Million Mission and <a href="https://dailyreckoning.com/drones-invade-moscow/">Adam Sharp</a> at The Daily Reckoning.
Elsewhere, gold is holding its own at $4,027 while silver&rsquo;s up over a buck to $59.55. Bitcoin looks as if it wants to break below $58,000 &mdash; which would be the lowest since September 2024.
<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 Hormuz Disconnect
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Markets have responded to the idea that Hormuz is reopening. They have not fully priced the question of on what terms,&rdquo; says Mason Sexton, editor of The Map.
Sorry if you think we&rsquo;re beating a dead horse here. But the distinction matters. Washington and Tehran can&rsquo;t even agree on whether they&rsquo;re holding talks today &mdash; much less how the Strait of Hormuz is going to operate in a postwar world.
&ldquo;The market has priced &lsquo;reopening&rsquo; as if it means immediate normalization,&rdquo; Mr. Sexton wrote his readers yesterday.&nbsp;
&ldquo;The more likely outcome is a new normal defined by higher costs, slower flows and persistent political uncertainty. That uncertainty is not incidental. It is central to Iran&rsquo;s leverage.&nbsp;
&ldquo;Washington appears to expect toll-free reopening and a return to normal. Iran, by contrast, has signaled that the strait will not return to its prewar administrative status.&rdquo;
Indeed, Tehran has set up a Persian Gulf Strait Authority &mdash; which will oversee insurance requirements for ships, and presumably a toll of one sort or another.
&ldquo;A strait that is technically open but subject to Iranian-administered fees, insurance approvals, selective delays and renewed political bargaining is not equivalent to the prewar strait. It is entirely possible that Iran allows outbound crude to move while restricting or slowing inbound traffic as a means of extracting further concessions.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;This creates a problem for oil markets because the buffers that suppressed prices during the past several months cannot continue indefinitely,&rdquo; Mason warns.
&ldquo;Commercial inventories have been drawn down. Strategic reserves have been tapped. China has reduced imports, helping dampen price pressure.&nbsp;
&ldquo;But these are temporary cushions, not durable solutions. If China returns to the market, if negotiations stall or if Hormuz traffic remains materially below prewar levels, the relief trade in crude could reverse quickly.&rdquo;
For the moment, however, U.S. crude futures continue to hover just over $70 a barrel &mdash; more or less where they were on day four of the war in early March.
And while oil and gasoline futures usually move in tandem, that&rsquo;s not been the case in recent days. Gasoline futures are rising, much to Donald Trump&rsquo;s consternation.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7M6zIywlpCTJTV34WHtBuv/bc52715e200f4aa47865b133306eea6b/FMF-Issue-063026-2.png" alt="DJT Tweet" width="540px" />
Trump is learning that his people can jack around with U.S. oil futures&hellip; but that doesn&rsquo;t lower the costs of producing and refining physical barrels.
This is the second time in less than a week that Trump has hit out at fuel retailers for &ldquo;high&rdquo; prices. Your editor has a small position in the VanEck Oil Refiners ETF (CRAK)... but I&rsquo;m starting to wonder if the political risk is too much to bear. Nixon-era price controls and gas lines, anyone?
<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 (and Some Aging Statistics)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Timely thought for the day&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5fv4HIkcjjZ6RcMvjxfABu/a168c57a3a263367cb5372e1e6e14deb/FMF-Issue-063026-3.png" alt="Comedic Relief" width="540px" />
Which got your editor to wondering&hellip;.
Seems it&rsquo;s been several years since the Tax Foundation undertook a comprehensive survey of fireworks taxes among the 50 states.
But as of 2019, six states imposed statewide excise taxes on fireworks sales &mdash; on top of existing sales taxes. They ranged from 2% in Texas to 12% in Pennsylvania and West Virginia &mdash; with Georgia, Indiana and Michigan falling in between.&nbsp;
<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: Lisa Cook, Politicians&rsquo; Love
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I know that people are saying Fed governor Lisa Cook can&rsquo;t be fired because of the Supreme Court decision. Not true,&rdquo; a reader writes.&nbsp;
&ldquo;All it did was deny a government-requested stay of a preliminary injunction preventing her removal. The decision was narrow &mdash; Cook is entitled to due process by statute.&nbsp;
&ldquo;Now, in the companion case, Slaughter, the court found the executive could fire any member of the executive branch.
&ldquo;So after all the more litigation and charges against Cook that may come in further proceedings, the court may then reach the question of whether the executive can dismiss a Fed governor for &lsquo;cause&rsquo; or if the Fed is &lsquo;special.&rsquo; Under Slaughter, the executive possibly could fire Cook after affording the due process relied on in today&rsquo;s decision.&nbsp;
&ldquo;I&rsquo;ll admit, they seem to presage less of an ability to fire a Fed governor due to the Fed&rsquo;s special nature and history on monetary policies. But it&rsquo;s still an open question.&rdquo;
Dave responds: Perhaps I was careless with my brief mention yesterday. Thank you for parsing the nuances &mdash; which I glossed over because to me it&rsquo;s more important to abolish the Fed than to quibble over who has hiring and firing authority. Heh&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> One of our longtimers chose to weigh in on our American Pride survey via the mailbag rather than the survey form&hellip;
&ldquo;Dave, our planet has some rather remarkable lands and people. None more so than the land we call America and the people we call Americans.
&ldquo;(Now, if only our Pols would love us back.)&rdquo;
Dave: We don&rsquo;t need the love of our politicians. Just their respect for our inalienable rights&hellip;

FMF-Issue-063026-Featured

Survey Says: Freedom and Opportunity

<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" />American Pride
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I&rsquo;m in love with America,&rdquo; says a visitor to the United States, one of the many here for the World Cup.
Earlier this month we took note of the many visitors &mdash; mainly from Europe, but not exclusively &mdash; who are wowed by the sights of this vast land, and sharing their impressions on social media.
To be sure, a lot of it has to do with America&rsquo;s consumer culture. Costco, Walmart, Buc-ee&rsquo;s stores. &ldquo;Oh, gawd damn!&rdquo; said a Norwegian fellow entering a Bass Pro Shop.
But it&rsquo;s more than that. Many of them are venturing beyond the cities whose stadiums are hosting the matches.
&ldquo;With each wide-eyed video of travellers documenting their first encounters with everything from roadside convenience stores to ranch dressing, fans are highlighting the real America &mdash; one that's rarely portrayed in films and TV, has nothing to do with politics and that many visitors often miss,&rdquo; says freelance travel writer Jeff Bogle.
&ldquo;Along the way, they're not only reminding those of us who live here of the many quirks that make this country special; they're also helping us fall back in love with it,&rdquo; Bogle writes in an article for a foreign outlet &mdash; the BBC.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> "Many U.S. citizens have been feeling down on their country, and sad that their nation is seen in a negative light overseas," says clinical psychologist Charlotte Russell &mdash; a Brit who runs a website called The Travel Psychologist.
"With the negative news in the run-up to the World Cup&hellip; seeing people actually enjoying the U.S. and its people feels more intensely joyful."
Bogle &mdash; who interviewed Russell &mdash; concurs. &ldquo;After consuming so many of these social media posts and videos, I find myself overwhelmed with a sense of national pride that I haven't experienced for some time.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Which brings us to a reader survey we&rsquo;re conducting this week.
Going into the 250th anniversary of the nation&rsquo;s founding this Friday&hellip; we have two simple questions to ask you:&nbsp;
<ol>
<li>Where in America are you from?&nbsp;</li>
<li>What makes you most proud to be an American?</li>
</ol>
<a id="2"></a>
You can <a href="https://docs.google.com/forms/d/e/1FAIpQLSfZF6yzvXQ8ECrZwtOCf2fNyftdvNndijbqPhES6Z15X0WgvA/viewform">click here to submit your answers at this web form</a>. We&rsquo;ll share your answers here tomorrow.
Yes, there&rsquo;s a money-and-markets angle to all of this. But we&rsquo;ll get into that as the week goes on&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" />War&rsquo;s on, War&rsquo;s Off
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> And now for something that&rsquo;s probably fake news&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5n871LvaXzwp530hmWEgPC/9560b76064fd540eb55658686d8921ea/FMF-Issue-062926-1.png" alt="pub" width="540px" />
It&rsquo;s got the ring of plausibility to it. Major military action by Washington often comes after the markets close on Friday afternoon. That&rsquo;s been the case throughout Donald Trump&rsquo;s second term, as well as Joe Biden&rsquo;s term before it.
Problem is, there doesn&rsquo;t seem to be an article corroborating the claim on NBC News&rsquo; website. Google News and two AI engines come up dry.
Conceivably it was something a reporter ad-libbed Friday night during NBC Nightly News? The Grok AI engine speculates &ldquo;it could be from a recent TV segment, live blog update or subscriber/paywalled NBC article not fully indexed [on the web] yet.&rdquo;
Again, it&rsquo;s highly likely the announcement of airstrikes on Iran was in fact timed for after the market close.&nbsp;
But applying my old-school journalism sensibilities &mdash; honed during 20 years as a TV news producer and manager &mdash; I&rsquo;m calling BS on the claim that someone in the Pentagon acknowledged as much to NBC News.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In any event, the Axios site was up to its <a href="https://paradigmpressroom.com/post/tank-bottom-date-july-4/#2">old tricks</a> yesterday &mdash; reporting just before futures markets opened for the week that Washington and Tehran would stop the shooting.
As a result, U.S. oil futures begin a new week more or less where the old one ended &mdash; about $70 a barrel.&nbsp;
Amazing how that works. It&rsquo;s as if Washington can wage war only on the weekends, lest it throw markets for a loop.&nbsp;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But hold on: On Thursday, CME Group &mdash; the outfit that oversees the most widely used U.S. commodities exchanges &mdash; announced it would launch an oil futures contract that trades 24/7.&nbsp;
It&rsquo;s a smaller contract &mdash; only a tenth of the size of the existing &ldquo;Micro WTI&rdquo; futures contract &mdash; thus targeting the retail crowd, not the pros. CME Group also recently launched a one-ounce gold contract that trades &lsquo;round the clock.
"Our new WTI and Gold futures provide regulated products that are right-sized and available 24/7, ensuring traders can manage exposure whenever news breaks,&rdquo; says CME Group&rsquo;s Derek Sammann.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In the meantime, here&rsquo;s your first reminder this week that traffic through the Strait of Hormuz is still nowhere near normal.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/40SIoaBXKcJWhpQayxJ2Ki/4f00e4626058d74a7b48f5623e0506ed/FMF-Issue-062926-2.png" alt="pub" width="540px" />
By the way, Axios&rsquo; story &mdash; citing U.S. officials &mdash; says U.S.-Iranian talks are supposed to resume tomorrow. So far, no confirmation from the Iranian side.
<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" />Strange Day
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Last Thursday brought &ldquo;one of the strangest sell-offs of the entire year,&rdquo; says Paradigm trading pro Enrique Abeyta.
&ldquo;In just 27 minutes, the Nasdaq-100 plunged nearly 1,000 points while the S&amp;P 500 erased roughly $1 trillion in market value.
&ldquo;And this was all without a single major headline explaining the move.
&ldquo;The Nasdaq opened nearly 1% higher before suddenly tumbling almost 3% in less than half an hour!
&ldquo;It's a reminder that today's market is operating in a very different environment. Record levels of investor enthusiasm are colliding with record amounts of uncertainty about AI, inflation and interest rates.
&ldquo;When that happens, volatility can seem to appear out of nowhere.&rdquo;
All of the Paradigm editors are aware of this potentially delicate situation. For now, it&rsquo;s a watch-and-wait affair. But if that changes, keep an eye on your inbox and/or the Paradigm Press app for actions to take.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The volatility is in retreat as a new week begins.
Among the major U.S. indexes, the Nasdaq Composite is leading the way &mdash; up nearly 1.5% to 25,670. The S&amp;P 500 is up over three-quarters of a percent and back over 7,400. The Dow is the laggard &mdash; up only a half percent but that puts it in record territory over 52,000.
Precious metals are losing ground, gold only 25 bucks over the $4,000 level and silver about to crack below $58. Bitcoin remains stuck under $60,000 and Ethereum under $1,600.
➢ For the record: The U.S. Supreme Court just ruled 5-4 that Donald Trump cannot fire Lisa Cook &mdash; one of seven members on the Federal Reserve&rsquo;s Board of Governors. The majority opinion says to preserve the Fed&rsquo;s independence, it was Congress&rsquo; intention to limit the president&rsquo;s power to remove Fed governors. (The Fed hasn&rsquo;t been truly &ldquo;independent&rdquo; for decades, if ever, but that&rsquo;s another story&hellip;)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> File this one under &ldquo;the market climbing a wall of worry&rdquo;: The Bank for International Settlements says the AI boom is setting the stage for a prolonged &ldquo;investment bust.&rdquo;
The Switzerland-based BIS &mdash; sometimes called the central bank for central banks &mdash; is out with its annual economic report, spotlighting the $1 trillion that Microsoft, Google, Meta, Amazon and Oracle plan to spend on data centers from 2025 through year-end 2026.
The report says there are &ldquo;instructive parallels&rdquo; between the present moment and previous booms and manias &mdash; such as the buildout of canals and railroads, and more recently the 1990s dot-com boom.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/42ODmINDIquJghVQA4uGEu/51d48ab5b4b48b28f84fac96760a493b/5Bullets_0629.png" alt="pub" width="540px" />
The report says in each case there was &ldquo;a genuine technological breakthrough that attracted capital in excess of what commercial returns could ultimately justify&rdquo; &mdash; leading to &ldquo;an eventual reversal in investment, including economywide recessions.&rdquo;
From where we sit, this is one more indication that the AI boom still has legs before the inevitable bust.&nbsp;
It&rsquo;s when the experts become convinced that the boom will go on forever that you should start to worry&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" />What the Street Doesn&rsquo;t See (MU)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Micron Technology shares are up 1,000% in the last 18 months &mdash; and James Altucher is telling Altucher&rsquo;s Investment Network readers to hold on tight.
As mentioned here last Thursday, MU delivered boffo quarterly numbers &mdash; revenue up 346% year over year, gross margins now 85%.
And James believes Wall Street is still underestimating its potential &mdash; for two reasons.
One is that MU has insulated itself from the chip industry&rsquo;s notorious boom-bust cycle. &ldquo;The company has now signed 16 long-term supply agreements with customers, covering 2026 through 2030 &mdash; take-or-pay deals, meaning customers commit to minimum purchases and pay deposits upfront.
&ldquo;Forty percent of revenue is now contracted through 2030, locking in Micron&rsquo;s highest margins in history for years to come&rdquo; &mdash; even when the inevitable turn comes.
Meanwhile, the most intensive demand for AI no longer comes from the &ldquo;large language model&rdquo; chatbots. It comes from agents &mdash; the kind of AI that can execute tasks for its users. Agentic AI &ldquo;requires roughly 50 times more memory,&rdquo; says James.
And that&rsquo;s before humanoid robots become all the rage: Tesla&rsquo;s Optimus robots will sell for under $20,000 &mdash; putting them &ldquo;within reach of midsize manufacturers, not just the Fortune 500.
&ldquo;Micron's CEO mentioned robotics as a new demand driver on this week's earnings call,&rdquo; says James. &ldquo;Not a single analyst brought it up during the Q&amp;A segment. Nobody has gone back to run the numbers yet.&rdquo;
All of this as MU trades at 9.5 times forward earnings &mdash; compared with 20.8 times for the S&amp;P 500.
&ldquo;The people who buy it 18 months from now, after agents are running every enterprise software stack and Optimus is on factory floors and Wall Street has finally rebuilt its demand models, will wish they had owned it today,&rdquo; James concludes.
<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: $40 Oil
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> On the subject of oil sinking to $40 in the next three years &mdash; broached in <a href="https://paradigmpressroom.com/post/40-oil">last Thursday&rsquo;s edition</a> &mdash; a reader writes&hellip;
&ldquo;I think there will be a reassessment by countries that are dependent on fossil fuels to determine if that remains their future.
&ldquo;Now knowing just how easy it is to cause a major disruption in deliveries by countries like Iran and Indonesia, a shift to renewables may be prudent. If the countries holding the reserves come to the same conclusion, they will recognize that their oil reserves are going to become worth less and less as time goes on.
&ldquo;OPEC is finished as a monopoly (if it ever was one), thereby eliminating production caps, so oil-producing countries will race to increase production to take advantage of these higher prices.
&ldquo;Whether that will result in $40 oil, I don&rsquo;t know, but wouldn&rsquo;t it be ironic if President Trump went down in history as the president that did the most to further the cause of renewables?&rdquo;
Dave responds: For the moment, we still lack the technological breakthrough that will wean the world off oil for large-scale transportation.
Yes, China is putting its population in vast numbers of electric vehicles (powered in many cases by coal!)... but beyond personal transportation there&rsquo;s still no substitute for diesel, jet fuel and bunker fuel for ships.
Meanwhile, a prediction of $40 oil isn&rsquo;t the same thing as saying oil will stay at $40.&nbsp;
Below $60, production for many American firms becomes a money-losing proposition. If they start to cut back&hellip; well, it&rsquo;s that old saying in the commodity space about how &ldquo;the cure for low prices is low prices.&rdquo;

FMF-Issue-062926-Featured

American Pride

&ldquo;As far as I know, there has never, in all of history, been a time when the markets have been so corrupted,&rdquo; a reader wrote to us.
The reader wrote to us&hellip; 15 years ago.
Point being, &ldquo;market manipulation&rdquo; is nothing new.&nbsp;
Way back in 1930, people complained about market &ldquo;pools&rdquo; &ndash; which were sort of an early version of hedge funds. One author said a pool possessed the power to &ldquo;put the price of a stock wherever it sees fit.&rdquo;
But how exactly does the rigged game work here in 2026?
Today as we head into a (hopefully) lazy summer weekend, I bring in my colleague of nearly 20 years &ndash; Paradigm chartmeister Greg Guenthner.
&ldquo;Gunner&rdquo; exposes three lies you&rsquo;re told&hellip; and the rigged reality behind them.
<h2 style="text-align: center;">Everyone Knows the Market Is Rigged. But How?</h2>
Let's get something straight before we go any further&hellip;
You've been told a very clean story about how markets work.&nbsp;
A company does well, and the stock goes up. A company misses earnings, and the stock goes down. Bad news hits, investors panic and sell. Good news lands, they buy.&nbsp;
Simple. Logical. Fair. But that story is a lie.
A full, elaborately constructed lie that exists to separate you from your money and hand it quietly to people who know how the game really works.
Wall Street is a casino where the house doesn't just have an edge &mdash; it writes the rules, moves the chips, and signals its partners before the table even opens to the public.&nbsp;
Today, I want to share three of the biggest ways in which Wall Street is rigged against everyday investors like you and me.&nbsp;
Each one is invisible if you don't know what to look for. Each one is completely legal.&nbsp;
And once you see them, you can't unsee them &mdash; which means you can start using them, instead of being used by them.
#1: The Tail Wags the Dog
Here's a question almost nobody thinks to ask&hellip;&nbsp;
If a stock is supposed to move based on company news and investor decisions, why does it sometimes move violently when there is no news at all?
The answer involves a corner of the market most retail investors don't think about very much: options.
The Lie We're Told: Stocks move every time because of company fundamentals. A CEO gives a great interview, earnings come in strong, a product launch goes well &mdash; investors get excited, buy the stock, and the price rises. Simple. Logical. Makes intuitive sense.
The Rigged Reality: The options market is often bigger than the underlying stock market itself. And when huge money moves through options, it mechanically forces the stock to move &mdash; news or no news.
To understand why, you need to understand who's on the other side of every options trade.
Think of it like a casino.&nbsp;
When you walk into a casino and place a $1,000 bet on red, the casino takes your bet. They don't care which way the roulette wheel spins &mdash; they've run the math, they know the edge is theirs over time, and they'll make money in the long run.&nbsp;
Options Market Makers work the same way. When a big investor (call them a "whale") buys $10 million worth of options on a stock, the Market Maker takes the other side of that bet. They have no opinion on the stock. They just facilitate the trade and collect fees.
But here's where it gets strange &mdash; and this is the part Wall Street never explains&hellip;
Unlike a casino that can lose a million dollars on one spin of the wheel, Market Makers can't afford to be exposed to a $10 million directional bet.&nbsp;
So the moment they take the other side of that whale's options trade, their computers automatically start buying the underlying stock to hedge.
All because an algorithm is mechanically balancing a ledger.
The stock starts moving up, and retail investors see it breaking out. Then they pile in, attributing the move to some news story, some momentum, some fundamental shift in the company's outlook. They're buying from the Market Maker, who is quietly offloading shares at elevated prices.
The tail just wagged the dog. And retail investors were the last to know.
Watch for massive options volume hitting a stock with zero news attached to it&hellip; No earnings, no analyst upgrade, no press release.&nbsp;
Just a surge of options activity out of nowhere.&nbsp;
That "ghost volume" is a signal &mdash; the Market Maker just got hit with a large bet, and their hedge-buying algorithm is about to go to work.&nbsp;
Buy the stock before the news cycle picks up. The algorithm will push the price higher as it hedges. The retail crowd will follow, chasing what looks like a breakout. Sell to the latecomers.&nbsp;
You bought the mechanical move. You exit into the narrative.
#2: The Liquidity Trap
Picture this&hellip;
A stock you own has been holding firm at $50 for weeks. That price level is what traders call a "support line" &mdash; a floor where buyers historically show up and keep the stock from falling further. You've got a stop-loss set just below it at $49.50. If the stock breaks through $50, you'll automatically sell and cut your losses.
The stock drops to $49.75. Then $49.60. Then $49.48&hellip; just below your stop.
You get stopped out. The stock immediately reverses and rockets to $53.
You just experienced a stop hunt. And you weren't alone.
The Lie We're Told: Support lines on a chart are safe zones. If a stock holds above support, it signals strength. If support breaks, it's a warning sign &mdash; and your stop-loss protects you from the damage.
The Rigged Reality: Support lines are maps. And when millions of retail investors all put their stops at the same level, they've just marked an X on the treasure map for anyone big enough to use it.
Here's the problem a whale faces: imagine you need to buy five million shares of a stock. You can't just click "buy" for five million shares.
Doing so would drive the price up against you before your own order is filled. You need someone to sell you five million shares, all at once, at a price you're comfortable paying.
So here's what actually happens.&nbsp;
The whale identifies a major support level where retail stop-losses are clustered.&nbsp;
They use a small fraction of their capital to aggressively push the stock below that support &mdash; it's a bait move. Every retail stop-loss triggers. Panicking investors flood the market with sell orders.
The whale's computers sweep up all those sell orders at a discount. Five million shares, instantly, at a price below support. Then the whale stops pushing down. The stock reverses and rockets back above support. The whale is now long five million shares at a great price. Retail is flat, confused, and watching from the sidelines.
Watch for a stock breaking below a major support level &mdash; the kind that's been solid for weeks or months, the kind everyone has circled on their charts.&nbsp;
At that exact moment, check the options flow. Is massive, bullish options activity hitting simultaneously with the breakdown? Large call buys, unusual put selling, big premium moving to the upside? If yes, the breakdown is fake. The whale isn't bearish on the stock &mdash; they're buying calls because they know the stock is about to recover.&nbsp;
They're taking the other side of your panic. The reversal is coming!
#3: Weaponized Fear
Think about hurricane insurance.
On a calm Tuesday in March, you can buy a full year of hurricane insurance for your Florida home for a few hundred dollars.&nbsp;
The weather is beautiful, the forecast is clear, and the insurance company is happy to take your money because the risk feels very low.
Now it's late August. Category 4 storm in the Gulf. Landfall predicted within 72 hours.
That same insurance policy just got very expensive. Because, of course, fear just went through the roof.&nbsp;
This is exactly how volatility &mdash; and by extension, options prices &mdash; works in the stock market.
The Lie We're Told: Trade the stocks that are moving the most. High volatility means high opportunity. Follow the action, chase the headlines, buy the stocks that are in everyone's feed.
The Rigged Reality: High volatility means you're paying maximum price for insurance.&nbsp;
Wall Street has already priced the fear into the options. You're buying the most expensive version of the opportunity.
Here's the key term: implied volatility, or IV.&nbsp;
Think of it simply as the price the market charges for options. High IV means options are expensive. Low IV means they're cheap.&nbsp;
And before a major earnings announcement, Wall Street jacks IV up to extreme levels &mdash; because the market is pricing in the uncertainty of the upcoming news.
Retail investors, hit by FOMO, buy in at that peak.&nbsp;
They pay a massive "fear premium" for their calls or puts.&nbsp;
The earnings announcement drops. Even if the news is good &mdash; even if the stock moves in the direction the retail investor predicted &mdash; implied volatility collapses immediately. The hurricane passed. Insurance is cheap again.
This is called IV Crush.&nbsp;
And it's how retail investors lose money on a trade they called correctly.
Look for stocks with flat, quiet, boring charts.&nbsp;
No news... No momentum&hellip; No social media chatter.&nbsp;
These are the stocks where volatility is lowest &mdash; where options are dirt cheap. Watch for a single spark: a sudden burst of unusual options volume hitting quietly, with no obvious catalyst.&nbsp;
This is smart money positioning ahead of a move they see coming.&nbsp;
Buy cheap options alongside that early volume.&nbsp;
You're buying hurricane insurance in March, before anyone starts watching the weather. When the catalyst eventually hits and the public piles in, implied volatility explodes. Your cheap options are now expensive. Sell to the latecomers who are buying in fear.
You're not predicting the future. You're buying cheap before it gets expensive &mdash; and selling expensive to the people who waited for confirmation.
The Game You're Already Playing
Here's the hard truth most people never accept&hellip;
You are already playing this game. Every time you buy a stock, you're sitting across the table from someone who has been doing this longer, faster, and with more information than you.
The question was never whether the game is rigged. It is. It always has been.
The question is whether you're going to keep playing it blind or start learning to read the table.
These three forces &mdash; mechanical options hedging, stop-loss hunting, and weaponized fear &mdash; aren't exotic strategies used once in a while.&nbsp;
They're running constantly, in every market, on every ticker, every single day. The same machinery that's been quietly taking money from retail investors for decades.
But machinery has patterns. Patterns can be read. And once you know what you're looking for, the signals are everywhere.
You don't necessarily need to beat Wall Street at its own game.
You just need to stop being the one they're playing against.

FMF-Issue-062626-Featured

Everyone Knows the Market Is Rigged. But How?

<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" />$40 Oil?!
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;Get Ready for $40 Oil &mdash; Hear Me Out&rdquo; was the headline to a piece penned last week by Paradigm trading pro Enrique Abeyta.
Provocative, for sure. Maybe he was even trying to get a rise out of oil bulls like&hellip; well, myself.
&ldquo;What if the market is already pricing in a world none of us is ready for,&rdquo; he asked &mdash; &ldquo;one where oil trades at $40 a barrel?&rdquo;
At the time of the article seven days ago, U.S. oil futures were still hovering near $80.
Yesterday, they fell below $70.&nbsp;
So let&rsquo;s follow the breadcrumbs&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />The case for $40 oil centers on the world&rsquo;s two biggest oil consumers &mdash; the United States and China.
Earlier this month we mentioned how <a href="https://paradigmpressroom.com/post/spacex-and-smoothies/#3">China slashed its oil imports</a> after the Iran war began &mdash; so much so that it offset as much as a third of the barrels lost to the Strait of Hormuz&rsquo; closure.
&ldquo;China spent the last 20 years preparing for exactly this scenario,&rdquo; Enrique says. &ldquo;While much of the world focused on maximizing efficiency, China focused on maximizing flexibility.
&ldquo;The country invested heavily in electric vehicles, liquefied natural gas infrastructure, refining capacity, coal-to-liquids technology, strategic petroleum reserves and alternative energy systems.&rdquo;
Those are heavy-duty, long-term investments. How likely is it that China will go back to its old ways once global oil flows normalize?
Meanwhile, the United States is less vulnerable to oil shocks than in previous decades because of bountiful shale oil. Twenty years ago, no one expected America to become the world&rsquo;s No. 1 crude producer. But it did in 2018.
&ldquo;During the recent crisis, the U.S. wasn&rsquo;t scrambling to secure foreign supplies,&rdquo; Enrique says. &ldquo;In many cases, it was helping supply the rest of the world.
&ldquo;For the first time in modern history, the world's largest energy importer and one of the world's largest energy producers may both be moving toward a future where oil matters a little less than it once did.
&ldquo;If that happens, the biggest surprise of the next decade won't be that oil went higher. It will be how much lower it ultimately went.&rdquo;
Thus, Enrique&rsquo;s conclusion: &ldquo;I believe there&rsquo;s a real possibility that crude oil trades below $40 per barrel within the next three years.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Still not persuaded? There&rsquo;s precedent: Look at what happened less than 15 years ago.
For most of the period 2011&ndash;2014, crude traded in a range between $80&ndash;110.&nbsp;
But by early 2014, the U.S. shale patch &mdash; only a few years old then &mdash; had blundered into massive overproduction. The OPEC nations cranked up their own production to squeeze their new American competition. Meanwhile, based on the history told in James Norman&rsquo;s book The Oil Card, it&rsquo;s highly likely the Obama administration engineered a takedown of the oil price to punish Russia for seizing the Crimean Peninsula from Ukraine.
In June 2014 crude still traded for over $100. Less than two years later, it bottomed at $26.
All that said&hellip; before we get to $40 oil, we might still be in for a face-ripping rally from current levels.&nbsp;
For that part of the story, we move today&rsquo;s mailbag section up from its usual slot to Bullet No. 2&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" />Oil: A Reader&rsquo;s Frustration
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;I've been kind of annoyed with the media headlines and market response in regards to the negotiations going on with Iran for almost a week now,&rdquo; writes one of our regulars.
This individual doesn&rsquo;t write often, but when he does he always puts thought into it.&nbsp;
&ldquo;Assuming that the success of the negotiations is a sure thing, we've got the demining of the strait of Hormuz, which is scheduled to take a month. Then assuming insurance companies are again willing to take on risk immediately, once all the ships stuck there leave it'll take them perhaps another month to get to their destinations.
&ldquo;Taking Trump at his word that we're going to be &lsquo;out of reserves in four weeks,&rsquo; that leaves us about a month of being &lsquo;out of reserves&rsquo; before shipments once again begin reaching their destinations. A month of being out of reserves sure doesn't sound like about $75 per barrel of oil making any sense at all.
&ldquo;Now adding some reality to that mix, where there is not only a possibility of the negotiations failing, but a significant chance of them failing, there seems to be no acknowledgement of any such possibility of failure either in the mainstream reporting or in the market prices!
&ldquo;Now that a week has almost passed since the announcement of the talks, we've got some progression of events that there still seems to be no reply to in the markets. Namely that the traffic through the strait is still heavily restricted by Iran on account of Israel still having military forces in Lebanon, and now the Iranians walking out of negotiations after Trump continued to threaten them.&nbsp;
&ldquo;I can only look at the prices and come to the conclusion that either the Dead Internet Theory also applies to markets or that the 'smart money' and insiders are so sure of the success of negotiations that they are actually not taking into account the high likelihood of things going wrong after Trump has been promising this would be over in two more weeks for a few months now.&nbsp;
&ldquo;Thanks for letting me vent about the slow-motion track wreck playing out in real-time.&rdquo;
We thank the reader for his input. Your editor&rsquo;s response follows immediately&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" />The Messy Road to &ldquo;Normal&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Jeez, what a doomer. A real panican you are.
I jest, of course.&nbsp;
Ever since Trump&rsquo;s 39th announcement of a peace deal two weeks ago, I&rsquo;ve taken pains to sprinkle these daily missives with reminders that&hellip;
<ul>
<li>Traffic through the Strait of Hormuz remains a fraction of its prewar level</li>
</ul>
<ul>
<li>Even if traffic through the strait returned to prewar levels tomorrow, it would take months to unscramble everything else that the war scrambled (production shutdowns, ships that aren&rsquo;t located where they&rsquo;re needed, etc.)</li>
</ul>
<ul>
<li>Israel could at any time monkey-wrench the agreement, to which it is not a party. (Israeli troops continue to occupy southern Lebanon.)</li>
</ul>
<ul>
<li>U.S. crude stockpiles continue to dwindle. The government&rsquo;s Strategic Petroleum Reserve is its smallest since 1983. The big private-sector hub at Cushing, Oklahoma is at &ldquo;tank bottom&rdquo; levels; if refilling doesn&rsquo;t start within days, the terminal will be physically incapable of pumping and transferring crude.</li>
</ul>
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />And yet&hellip; the drop in crude prices this month is the steepest on record outside of the COVID lockdowns in the spring of 2020. I feel your pain, dear reader.
Some of it is the aforementioned plunge in Chinese crude imports.&nbsp;
But a lot of it sure looks like a deliberate attempt by the Trump administration to distort the price signals that oil should be sending. (I&rsquo;m not singling out Trump here. As we&rsquo;ve chronicled many times before, <a href="https://paradigmpressroom.com/post/the-cia-and-the-oil-price/#3">the feds have fiddled with oil futures</a> regularly for over 40 years.)
When the world normally produces 103&ndash;106 million barrels of oil per day&hellip; and when up to 15 million of those barrels are shut in&hellip; and when the oil price is still under $100&hellip;
&hellip; well, that&rsquo;s going to encourage the world to continue consuming oil at more or less its prewar pace.&nbsp;
Put another way, prices didn&rsquo;t rise enough to make you change your fuel-consumption habits.&nbsp;
And so the reserves are running on empty.
Earlier this year in a series of podcast interviews, I listened to several oil-industry experts anticipating what the world would look like once some sort of peace deal was in place.
Their consensus was that oil prices would fall steeply on the announcement of a deal&hellip; and then when physical reality started to bite, prices would start to take off again.
These weren&rsquo;t screaming randos on the internet shoring up my own confirmation bias. They&rsquo;re sober, respected figures in the industry.
Bottom line: We might well be headed long term to a world of $40 oil. But for the moment I&rsquo;m not selling my oil stocks even though they&rsquo;re now trading at prewar levels.
Oh, and I&rsquo;m also making sure our vehicles at home stay topped up&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" />Markets Today: Summertime Stumble?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />If history continues to rhyme, the stock market is headed for a summertime stumble.
Every once in a while we spotlight a chart from Bespoke Investment Group. It compares the performance of the Nasdaq composite during the 1990s dot-com boom and the current AI boom.
It sets the starting point for the dot-com boom with the introduction of the Netscape web browser in December 1994&hellip; and the starting point for the AI boom with the rollout of ChatGPT 3.5 in November 2022.
As far as we know, the chart was last updated about two months ago&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/73YvCOFYUCCFikrGpmA6Y8/f0f1b0392582861d3cf547820ded775e/FMF-Issue-062526-1.png" alt="Nasdaq" width="540px" />
Now&hellip; look at what happened in the late summer and fall of 1998. The market had a big scare when the Russian government defaulted on its debt &mdash; which had a domino effect that took down the American hedge fund Long Term Capital Management.
From a peak of just over 2,000 in mid-July, the Nasdaq sank below 1,450 by early October &mdash; nearly a 30% drop in less than three months.
If the pattern continues to hold &mdash; and to date, it&rsquo;s been uncanny &mdash; look for a slide to begin next week or maybe after Independence Day before the index stages a recovery in mid-September.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />The big market stories today are Micron and inflation.
Chip darling Micron reported its quarterly numbers after the closing bell yesterday. They blew away the expectations of Wall Street analysts. MU shares are up 10.5% as we write &mdash; but still shy of their record close Monday.
You might think the tech sector would be rallying hard under that circumstance &mdash; and you&rsquo;d be wrong. Checking our screens the Nasdaq is down over a half percent on the day, adding to the previous three days&rsquo; losses, at 25,369.
The S&amp;P 500 is up about a third of a percent at 7,383 &mdash; more or less the midpoint of its trading range the last two months. The Dow, meanwhile, is powering nearly 1.5% higher into record territory, approaching 52,600.
➢ The biotech sector has been very kind to Paradigm readers in the last 24 hours: Microcap Millionaire readers booked a 530% gain on one pick... while Catalyst Trader readers collected 120% on another. In both cases the editors advise selling half the position while letting the rest ride.
Gold has clambered its way back over $4,000 for the moment and silver is inching higher at $57.87. Bitcoin remains under $60,000 and Ethereum well below $1,600.
The Commerce Department came out this morning with &ldquo;core PCE,&rdquo; the Federal Reserve&rsquo;s preferred measure of inflation.&nbsp;
It rings in at 3.3% year-over-year &mdash; not a surprise to Wall Street economists, but still the highest since October 2023 and nowhere near the Fed&rsquo;s 2% target.&nbsp;
With that in mind &mdash; as well as the new Fed chair Kevin Warsh saying he&rsquo;s laser-focused on &ldquo;price stability&rdquo; &mdash; futures traders assign a 60% likelihood the Fed will raise short-term interest rates by September.
<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" />Sen. Warren Gets Kinky
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Something weird happened yesterday on CNBC&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5JHYQUdtRaaHgJcAsiU9ER/765bdd8e690ae3743041c73ade74a3c5/FMF-Issue-062526-2.png" alt="CNBCpub" width="540px" />
During a live interview, Sen. Elizabeth Warren (D-Massachusetts) said, &ldquo;AI doesn't get to engage in a bunch of funky, hinky bookkeeping.&rdquo;
Somehow the cutline thrown up on the screen a few moments later changed &ldquo;hinky&rdquo; to &ldquo;kinky.&rdquo;
The interwebz had plenty of fun with it.&nbsp;
One of the more family-friendly takes came from longtime Paradigm Press friend and mining/energy financier Rick Rule: &ldquo;The only entity that gets to engage in funky, kinky bookkeeping is the government.&rdquo;&nbsp;
Word&hellip;

FMF-Issue-062526-featured

$40 Oil?!

<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 Needs a Rescue
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The first trial balloon about a bailout of the AI industry&hellip; went over like a lead balloon.
We chronicled it at the time: Back in November an executive at ChatGPT maker OpenAI spoke at a conference about her company getting <a href="https://paradigmpressroom.com/post/openai-wants-a-bailout">taxpayer-backed loan guarantees</a>.&nbsp;
A federal backstop like that would &ldquo;really drop the cost of financing,&rdquo; enthused CFO Sarah Friar.
The backlash was&hellip; well, furious is an understatement. Friar had to walk back her remarks on LinkedIn.
Within hours, White House AI czar David Sacks <a href="https://paradigmpressroom.com/post/no-bailout-for-you-openai">nixed the idea</a>. &ldquo;There will be no federal bailout for AI.&rdquo;
But Sacks&rsquo; role in the White House has diminished since then. And the Trump administration has <a href="https://paradigmpressroom.com/post/ai-speeding-toward-a-brick-wall">abandoned its hands-off approach to AI</a>.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Which brings us to what seems like another trial balloon &mdash; this one floated by Vice President Vance.
Reminder: Vance has a history in Silicon Valley. After giving up his law career he became a principal at one of Peter Thiel&rsquo;s firms. He accepted funding from venture capitalist Marc Andreessen and ex-Google CEO Eric Schmidt.
&ldquo;The president is supportive of the United States owning these big AI companies,&rdquo; Vance said last week during a podcast interview.
On the surface, that sounds like what the feds have already been doing over the 18 months &mdash; taking ownership stakes in everything from Intel&hellip; to U.S. Steel&hellip; to rare-earth firms like MP Materials.
But then Vance added something curious: He said Donald Trump &ldquo;likes the idea as sort of a sovereign wealth fund idea.&rdquo;
That sounded like an off-the-cuff remark. It was not. OpenAI has an entire white paper proposing a &ldquo;public wealth fund&rdquo; whose proceeds "could be distributed directly to citizens, allowing more people to participate directly in the upside of AI‑driven growth, regardless of their starting wealth or access to capital."
Is your BS detector going off? Good. Read on&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" />USA SWF?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It&rsquo;s here we should pause to acquaint you (or reacquaint you) with what a sovereign wealth fund is.
Basically a SWF is a government-owned investment fund that can hold everything from stocks to bonds to real estate or even hedge funds.
Many SWFs got their start with bountiful mineral or energy wealth. The biggest in the world is Norway&rsquo;s, a $2.1 trillion colossus organized in 1990 with surplus revenue from North Sea oil.
Many Americans first learned about SWFs during the early phases of the 2008 financial crisis &mdash; when the oil-rich Abu Dhabi Investment Authority plowed $7.5 billion into Citigroup. At the time, it was a lifeline for Citi, but in the end it wasn&rsquo;t enough; Citi took a bailout from the U.S. government and Abu Dhabi booked a loss.
But a SWF isn&rsquo;t entirely a &ldquo;foreign&rdquo; concept: The Alaska Permanent Fund, formed in the 1970s as Alaskan crude started flowing to the lower 48 states, is now $80 billion strong.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Here&rsquo;s the problem with Uncle Sam establishing a SWF.
As perhaps you&rsquo;ve noticed from the preceding examples, governments typically create a SWF when they have a generous surplus of revenue.
As you&rsquo;re likely aware, the U.S. government does not have a surplus.
In fact, going into the Iran war, Uncle Sam&rsquo;s annual deficit relative to the size of the economy was the biggest in history outside of a war, financial crisis or pandemic. Here&rsquo;s one of these charts we can&rsquo;t share often enough&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/6S6UBuMnENSfhR3CJsXdL8/523cb39bc9ed9d7e58f9b5e4dc7b55a8/FMF-issue-062426-1.png" alt="Annual budget" width="540px" />
So where&rsquo;s the seed money for the SWF supposed to come from?&nbsp;
OpenAI proposes that it come from AI companies themselves. Which sounds good in theory until you realize that precious few AI companies turn a profit &mdash; certainly not OpenAI and the other chatbot makers.&nbsp;
So how exactly is a SWF supposed to work under that circumstance? How would everyday Americans &ldquo;participate directly in the upside of AI-driven growth&rdquo;?
They would not.&nbsp;
&ldquo;A sovereign wealth fund, which almost always comes along with not having a huge deficit and debt and/or great commodity wealth, is a terrible idea for the USA,&rdquo; tweets AQR Capital chief Cliff Asness. &ldquo;More taxes to pay for [an] utterly corrupt ideologically whacko government to play with (I say this in a bipartisan way).&rdquo;
Economist Don Johnson of the MacroEdge firm is even more blunt: The purpose of the SWF chatter is to obscure the fact that AI companies will be in line for taxpayer bailout &mdash; like the banks in 2008. &ldquo;I love that we&rsquo;re rebranding TARP 2.0 (for AI companies) to sovereign wealth fund.&rdquo;
Back then it was sold to the people as absolutely necessary to prevent the financial system from collapsing. Now it&rsquo;ll be sold as absolutely necessary for America to keep its technological edge over China (and, secondarily, to prop up the stock market should it start to falter).
<a id="3"></a>
There&rsquo;s a lot more to say about the subject, but we&rsquo;ll leave it here for today. Just wanted to get the topic on the record.&nbsp;
Because it will come up again&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" />Update: SpaceX-Tesla Tie-Up
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> This whole SpaceX-Tesla merger thing is getting legs &mdash; five months after colleague Davis Wilson first suggested it.
From Paradigm AI authority James Altucher: &ldquo;I've never seen this before. Elon Musk just exercised 300,000,000 options of Tesla (TSLA) and he DID NOT SELL A SINGLE SHARE.
&ldquo;This is very unusual and extremely bad from a personal finance perspective
&ldquo;In general when someone exercises options, they lock in a profit at that point (in Elon Musk's case, it&rsquo;s a $116 BILLION [!] profit.) Once they lock in the profit, they have to pay the taxes on the profit even if the stock goes down from there.
&ldquo;In other words, when they actually sell the shares they may no longer have a profit or they may have a much smaller profit, BUT they still have to pay the full tax amount.
&ldquo;NOBODY ever does this. I can't even think of another time in history where someone exercised a significant amount of stocks and held on to every single share.
&ldquo;SO WHAT DOES THIS MEAN? Elon needed the shares (and soon!) to get more control over Tesla. Before this exercise of shares, Elon controlled 13% of Tesla. Now this brings him up to 20% control of TSLA shares. With that much control it is unlikely anyone can outvote Elon on a major decision.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Gee, what major decision might be on the horizon?
James&rsquo; answer: &ldquo;Elon is going to propose a SpaceX-Tesla merger (&lsquo;That might make Elon's life a little easier&rsquo; &mdash; the COO of SpaceX recently stated) and he wants to make sure there are zero issues. So he is giving himself much greater controlling interest even though he will have to pay tens of billions in taxes even if it could cost him billions in overpaying the taxes.
&ldquo;That's how much it&rsquo;s worth it to him to merge these two companies.
&ldquo;Who will benefit? SpaceX? Unclear. Tesla? Unclear.
&ldquo;All of the suppliers to this mega-merged company? Absolutely. And then some.
&ldquo;These are the companies we are focused on right now,
&ldquo;Again, I have never seen anything like this. But this is Elon playing chess on a board that includes: rockets to Mars, internet for the entire world, autonomous vehicles, humanoid robots, 100,000 orbital AI factories and obviously much more.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />SpaceX is in the red today, as is the Nasdaq and the S&amp;P 500.
The red on the Nasdaq is a lighter shade than it was yesterday but at last check it&rsquo;s still down nearly a half percent to 25,478 &ndash; approaching its lows of earlier this month. The S&amp;P 500 is down a tad to 7,355 while the Dow is once more showing green. (SpaceX is down about a half percent but still above its opening price of $150 last Friday.)
The market&rsquo;s next big catalyst comes after the close today &ndash; when chip darling Micron reports earnings. MU is among the semiconductor names that have soared to nosebleed heights the last couple of months. We shall see&hellip;
The picture in precious metals is positively fugly. Gold is down 3% and has sunk below $4,000 for the first time in seven months. Silver is down four bucks to $57.31, a level last seen in December.
No joy for crypto, either &ndash; Bitcoin has now been cut in half from its October 2025 peak, under $60,000 for the first time since October 2024. Ethereum has sunk below $1,600.
As for oil&hellip; here&rsquo;s a visual to help reinforce what we said yesterday about shipping volumes through the Strait of Hormuz&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3RiRJxWBwTQnp4SOP8S8lE/ea6393928e29636a3845a896feca3191/FMF-issue-062426-2.png" alt="Strait of Hormuz vessel chart" width="540px" />
Meanwhile the U.S. Energy Department&rsquo;s weekly inventory numbers show that another 9 million barrels were drained from the government&rsquo;s Strategic Petroleum Reserve. At 331 million barrels, the SPR is the lowest it&rsquo;s been since 1983. Inventories at the big private terminal in Cushing, Oklahoma now total 19 million barrels &ndash; basically the <a href="https://paradigmpressroom.com/post/tank-bottom-date-july-4">&ldquo;tank bottom&rdquo;</a> we warn about now and then.
And none of it matters to U.S. oil futures &ndash; down nearly three more bucks today and approaching $70, another level last seen in early March when the Iran war was getting cranked up.
<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" />Financial Fathers, Continued
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Now for something to pass on to the next generation.
Ahead of Father&rsquo;s Day last week, our weekly editorial meeting took an unexpected turn: The Paradigm editors rose to a challenge from our trading pro Enrique Abeyta, whose son just turned 13: What&rsquo;s the one piece of financial advice you&rsquo;d give to a 13-year old?
The answers were terrific, as Sean Ring chronicled in <a href="https://rudeawakening.info/posts/financial-fathers">last Friday&rsquo;s Rude Awakening</a>.&nbsp;
Logistical considerations didn&rsquo;t allow me to take part in the discussion. I was a little surprised no one brought up a piece of advice that precedes pretty much all the other excellent guidance that was on offer.
Avoid consumer debt.
In his 2007 book Crash Proof, money manager Peter Schiff drew a critical distinction between good debt and bad debt&hellip;
<blockquote>Capital debt, or investment debt, refers to loans made to businesses to finance capital formation, such as an automobile manufacturer building a new plant. Such loans benefit society and lead to higher living standards. The earnings the automobile company gets from its increased production enable it both to pay the interest on the debt and to repay the principal. Anything left over represents profit, which is the return on investment that a business deserves for taking risk and for successfully combining the factors of production.</blockquote>
<blockquote>Society benefits in several ways. Consumers now have more cars, workers have more jobs, savers earn interest and get their principal back and the business earns a profit, which can be used to finance still more capital investment.</blockquote>
<blockquote>Consumer debt, in contrast, refers to money lent to individuals to finance consumption. Such loans represent a waste of scarce savings that might otherwise have gone to finance capital formation. When individuals borrow to consume, there is no income-producing asset acquired. Therefore, the loans can only be repaid out of reduced future consumption.</blockquote>
<blockquote>Society does not benefit, since such loans do nothing to increase the supply of consumer goods and actually do the opposite, as borrowers consume goods that would otherwise be available for nonborrowers. Although consumer loans ultimately enable savers to be rewarded with interest, assuming they are paid, they are of no benefit to society as a whole. In fact, by redirecting savings away from capital investment, they actually undermine the higher living standards that might have been achieved in their absence.&nbsp;</blockquote>
I bolded the bits in the final paragraph to underscore a wider consideration: Every action we take in life ripples out to the rest of the world &mdash; often in ways we might not see or understand on a surface level.&nbsp;
To be clear, Schiff didn&rsquo;t characterize all consumer debt as bad. For instance, a car loan is perfectly fine if that&rsquo;s what you need to get to work; you&rsquo;re paying for it with wages you couldn&rsquo;t earn without the vehicle. It&rsquo;s not fine if you&rsquo;re having a midlife crisis and craving a convertible.
Anyway, just wanted to submit that guidance for young people on top of all the other outstanding counsel offered by my colleagues!
<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" />A (Real, Physical) Mailbag
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Today&rsquo;s mailbag section is a little different. It&rsquo;s not an email sent to <a href="mailto:feedback@paradigmpressroom.com">our inbox</a>. It&rsquo;s snail-mail &mdash; and gifts &mdash; addressed to Paradigm&rsquo;s Baltimore-area headquarters.
He runs a small manufacturing firm in New England&hellip; he&rsquo;s a faithful Jim Rickards reader&hellip; and he looked forward with anticipation to our America 76/26 event earlier this month in Philadelphia.
&ldquo;I attended Villanova University &mdash; missed Pope Leo by one year &mdash; and spent lots of time in Philly,&rdquo; he writes.
&ldquo;Traveled back last year to take close-up photos of the Liberty Bell to model and create the tooling for this celebratory piece to share in our country&rsquo;s semiquincentennial celebration! Let&rsquo;s hope for another 250 years of a FREE and democratic republic.&rdquo;
And he sent a dozen or so of these zinc die-cast Liberty Bell keychains.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7zXfxtBDHaaj4rS0dGLR2X/f2e0136f477386d3048dd13605b577fa/FMF-issue-062426-3.jpg" alt="Key chain" width="540px" />
&ldquo;Proudly Made in USA,&rdquo; the packaging says on the back. No trivial trinket, this.&nbsp;
We thank him for his generosity.&nbsp;
&ldquo;Appreciate all of your insights and ideas,&rdquo; he added in a P.S.&nbsp;
And we thank him for a reminder of why we do what we do.

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