4 Wars = 4 Market Rallies (No. 5 Starting Now?)

“The Street Loves Blood”

Whatever your opinion of the Israel-Iran war — or American involvement in it — one thing is evident: Chances are good it will be bullish for the U.S. stock market.

As we write this morning, about two dozen U.S. aerial refueling tankers are crossing the Atlantic toward the Middle East. The aircraft carrier USS Nimitz is also on its way to the region.

On the other hand, Iran supposedly is ready to sue for peace. “Messages passed by Tehran through intermediaries seek a return to talks if the U.S. stays out of the fight,” says the subhead to a Wall Street Journal article posted at midmorning.

On the other-other hand, the lead reporter on that story’s byline has a checkered history — accused of fabricating stories during her time at Reuters.

More about the problem with the war and the media later. First, some remarkable market history…

“The Street loves blood” is an old Wall Street saying.

And it’s what came to mind for Paradigm’s Mason Sexton on Friday. In a dispatch to readers of The Map, he noticed some uncanny market parallels when looking back at major Israeli wars over the last 50 years…

• Six-Day War, June 1967: From a level of around 860, the Dow Industrials rallied steadily to nearly 1,000 by late 1968

• Yom Kippur War, October 1973: A short rally of only a few days, but a rally nonetheless (preceding a grinding bear market that lasted into late 1974)

• Israeli invasion of Lebanon, June-September 1982: From a level in the low 800s, the Dow launched into an epic bull market that August — running well past 11,000 before the dot-com bust arrived in early 2000. (Way back when, Mason called the start of that rally almost to the day)

• Israel-Hezbollah war, July-August 2006: The Dow began a sustained rise that summer from about 11,200 to a peak near 14,000 in late 2007 (as the early stages of the global financial crisis were underway).

So… four rallies, one lasting only a few days, one lasting 18 years, two that lasted well over a year before the market made a major top.

How will the pattern play out this time?

Or is this the time the pattern breaks?

Well, we don’t want to give too much away. If you’re a subscriber to The Map, you’re already familiar with what Mr. Sexton sees just over the horizon.

If you’re not, you should know that this week he’s conducting a new edition of his wildly popular briefing from last March called The Prophecy.

This time, he’s delivering what Paradigm publisher Matt Insley calls a “terrifyingly specific prediction.”

You don’t want to dismiss that as hyperbole. Recall the bit I mentioned moments ago about how he nailed the start of an 18-year bull market in 1982? He forecast “a massive rally in stocks” on Aug. 9, 1982.

Three days later, the Dow hit a bottom that would never be seen again.

He called the top of that bull run in early 2000 as well — along with the tops and bottoms of the global financial crisis and COVID.

What’s coming now? This new edition of The Prophecy gets underway this Wednesday at 1:27 p.m. EDT. (There’s a significance to the odd start time — but to see why, you’ll have to sign up to watch.)

We do ask that you sign up in advance to watch this one. But sign-up is as simple as clicking this link. We’ll send you an email with everything you need to know to be ready Wednesday.

The Alfred E. Neuman Market

True to the pattern just described, the U.S. stock market is rallying today — as if to take a page from Mad magazine icon Alfred E. Neuman: “What, me worry?”

After closing last week below 6,000, the S&P 500 is up 1.1% on the day to 6,042. The Dow’s gain is about the same, the Nasdaq’s gain over 1.5%. Bonds, meanwhile, are looking flat.

The commodity complex is taking a rest after its initial spike when Israel began bombing Iran Thursday night. At last check, crude has pulled back $2.43 to $70.55.

Gold is barely holding on to the $3,400 level — but silver is up a few cents to $36.30.

Bitcoin seems unmoved by news of a new crypto ETF announced by the media arm of the president’s business empire.

Trump Media has filed the registration papers with the SEC: The “Truth Social Bitcoin and Ethereum ETF” will hold 75% of its assets in Bitcoin and 25% in Ethereum.

The ETF’s custodian will be crypto.com. No word on what ticker symbol the ETF might trade under.

Bitcoin is holding steady this morning at $107,567. Ditto for Ethereum at $2,641.

The Monster That Ate the Power Grid, Continued

For the record: AI now poses the biggest challenge to the stability of the power grid.

We’ve been warning about “the monster that ate the power grid” for nearly 18 months now. It’s one reason that large swaths of the country are at risk of rolling blackouts in case this summer turns extra hot.

Now comes the annual “State of Reliability Report” from the nonprofit North American Electric Reliability Corporation. It warns that the construction of data centers is proceeding at such a furious pace that power plants and transmission lines simply can’t keep up.

Result? “Lower system stability,” says the report.

That’s because data centers don’t always require the same amount of juice at the same time. Already there’s been trouble in northern Virginia’s “Data Center Alley” — where voltage issues resulted in about 1.5 gigawatts of datacenters tripping offline last July, and 1.8 gigawatts this past February.

“A loss of load of this size is comparable to a large nuclear power plant coming on-line immediately and unexpectedly,” says the report, “creating an imbalance due to too much generation on the system.”

As we’ve mentioned in recent weeks, the Trump administration is addressing some of the problem by ordering certain coal-fired power plants to remain open past their scheduled shutdown dates. More “baseload” power, more stability. (More about that in today’s mailbag.)

Too, the White House is looking to revoke Biden-era rules governing the carbon emissions by power plants.

But the latter of those two steps is likely to face court challenges. To be continued…

The News… and the “Fog of War”

“Be wary of ‘the news.’ Much of it is noise,” warns our own Byron King about news from the war zones.

Byron is our expert on energy and mining stocks — but he says this with the authority of a 30-year background as a Navy flight officer, graduate of the Naval War College and former staffer with the Chief of Naval Operations.

He’s seeing “plenty of ignorant commentary from people who have next-to-zero knowledge. Even if they know something, it's not much. Plenty of disinformation. 

“Iran-Israel both are incentivized to spread propaganda. Innumerable outsiders have an interest in confusing everyone & everything. And think of the potential for market manipulation.

“It gets back to the old military adage about how ‘first reports from the front are almost always wrong.’ Much of the war is happening at night, and/or very much cyber & electronic. You likely will not know what's happening even if you are standing right there (e.g., ‘on the spot’ reporters).

“And things are happening at algorithm-like speeds because many systems are primed for things to happen at the speed of circuitry. Human eyeballs-brains are too slow. Look at every news item and begin by thinking that it's wrong, and take it from there.”

I’ll add my own warning, drawing from 20 years practicing daily journalism before I moved into the financial publishing space.

For as valuable as X-formerly-Twitter can be as an alternative source of breaking news… Elon Musk did a grave disservice a while back when he made it nearly impossible for users to include external links in their original posts.

Musk’s decision gave rise to thousands of slop accounts that post “BREAKING NEWS” — often as not just making make s*** up for the sake of clicks.

Case in point: Friday night an account called “Merlin Capital” posted: “BREAKING: IRAN DECLARES STRAIGHT [sic] OF HORMUZ CLOSED.”

Huge if true; over 20% of the global oil trade transits that slender waterway. But there was nothing to it.

Or this…

All too often, ordinarily sensible people will reflexively repost this sort of thing because it fuels their confirmation bias.

More than once, individuals I trust have reposted utter nonsense — and I have to go chase it down to see if there’s any source behind it.

It’s one thing when the story is about Ukraine’s leader Zelenskyy buying a choice piece of property from the British royal family. It’s another thing when World War III is looming…

Mailbag: Costly Electricity, Gold and “Basel III”

After our previous mention of the feds stepping in to keep coal-fired power plants open, we heard from a longtime reader…

“Your bullet questioned the additional cost to consumers resulting from the Department of Energy order.

“As one of those consumers (I live within driving distance from the J.H. Campbell plant in Michigan), local news reports that complying with the order suddenly creates the need for major maintenance and upgrades that weren't getting done with the facility only days from final shutdown.

“To which I would also consider the increased cost of coal at spot prices rather than continuous contract.

“Ignoring solar and storage, it looks like the Campbell plant had pretty much been replaced by the purchase of a gas-fired plant for the local grid (1,200 MW plus two standby units vs the 1,560 MW peak for Campbell). 

“While the additional baseload power could be handy as electricity demand increases, the increasing strain on my pocketbook in this instance feels like a triumph of doctrine over common sense.”

Dave responds: All good points. It’s the folly of central planning and top-down solutions for the Obama and Biden administrations to effectively order the shutdown of these plants. Not sure if it can be fixed with still more central planning and top-down solutions… but that’s the route the Trump administration is going.

While the gold price consolidates and the silver price plays catch-up, a reader writes from western Canada…

“Will the Basel III directive on July 1 revalue central bank gold reserves?

“Which central banks need to comply with Basel III? The Bank of England indicates it is not part of the Basel III framework for example.

“Has the Basel III date of compliance been postponed?

“We haven't heard much about the Basel III issue from you guys.”

Dave: Well now, speaking of news you can’t necessarily believe…

There’ve been many rumors during 2025 surrounding the implementation of banking regulations known as “Basel III” — the third in a series of international rules drawn up over the years by the Bank for International Settlements in Basel, Switzerland. (The BIS is often called “the central banks’ central bank.”)

Supposedly, gold was to be elevated to a “Tier 1 High Quality Liquid Asset” as of July 1 this year.

That would mean U.S. banks, when toting up their core capital reserves, could count physical gold at 100% of its market value. At present, it’s marked down by 50% as a “Tier 3 asset.”

If true, this reclassification would mark a sea change in how the mandarins of the global financial system look upon gold — not as a “risky” hunk of metal, but as money.

But about a month ago, the London Bullion Market Association poured a 55-gallon drum of ice water on this chatter.

It seems gold is already a “Tier 1” asset — but it’s not recognized as a “High Quality Liquid Asset,” nor will it be in the immediate future. The LBMA along with the World Gold Council are lobbying hard for gold’s recognition as a “High Quality Liquid Asset” — as well it should be — but we’re not there yet.

Exactly where the July 1 rumor originated is hard to say — at least while we’re crashing deadline today. (Maybe a slop account on X?)

The point is that the rumor pulled in even some of the most knowledgeable people in the precious metals space, people who’ve been on my radar for 15 years or longer — before the LBMA did its mid-May debunking.

That’s how hard it is to separate rumor from reality these days. It’s impossible to be too careful…

Best regards,

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets