Breaking the China Habit

Boomtown Dreams

"I have nothing against it, but it's pretty hush-hush around here," says a retiree named Garry Teske. "We don't hear much."

“Here” is Beulah, North Dakota — in the western half of the state, population just over 3,000.

And “it” is a project transforming a shuttered coal mine into a processing plant for nickel ore arriving from next-door Minnesota.

"Basically, when you put all your eggs in one basket and something changes, it makes it difficult for your community to thrive and continue to grow," says Beulah’s economic development director Beaver Brinkman. "Hopefully, this will take and diversify our economy."

The hope and expectation is the plant will bring new jobs, maybe even restoring Beulah’s boomtown days.

Not everyone around town is sold but at the same time, “there's no organized opposition,” says a recent NPR story.

Perhaps not surprisingly, NPR’s piece goes out of its way to tell listeners this project began under the Biden administration — and that nickel is essential for electric-vehicle batteries.

But the project fits in perfectly with the Trump administration’s mining-and-energy agenda — leveraging the $150 trillion mineral bounty that Paradigm’s Jim Rickards calls the “American Birthright.”

Apart from its role in EV batteries, nickel helps to strengthen steel. Thus it’s of immense interest to the U.S. military.

"What the Pentagon's trying to do is to lock in and preserve these raw materials for the highly sophisticated, technologically advanced warfare that the United States wields today,” retired Marine Gen. John Allen tells NPR.

Too, there’s the whole breaking-the-China-habit thing.

"The United States and Europe and other of the technologically advanced societies sort of backed themselves into an environment where we imported a lot of these materials,” says Allen — “mostly from China.”

(For the record, Allen is a Democrat — he was on the short list to be Hillary Clinton’s running mate in 2016 — but there’s nothing he says here that Defense Secretary Pete Hegseth would take issue with…)

To be sure, the Trump administration has done nothing to reverse Biden’s $114 million grant for the nickel-processing plant. Nor another $20 million matching grant to look for more minerals in the United States.

The beneficiary of these grants is Talon Metals Corp. — a penny stock trading in Canada under the ticker TLO and on the U.S. pink sheets as TLOFF.

➢ Strictly speaking, Talon owns 51% of the Minnesota mine, with the mining giant Rio Tinto holding the other 49%. In addition to nickel, the mine produces copper and cobalt — both of which are also viewed by the Trump administration as “strategic.”

For whatever it’s worth, despite the Biden administration’s support, Talon’s share price fell steadily during much of the Biden years.

But starting in late March, its fortunes have reversed dramatically thanks to a string of good drill results — the U.S.-traded shares leaping from 6 cents to over 27 cents this morning.

As impressive as a 350% gain is in only five months… Jim Rickards says much bigger Birthright gains are to be found right now in the Utah desert.

We told you yesterday how Jim was so impressed, he urged Paradigm VP of Research Aaron Gentzler to go see it for himself.

They’re in total agreement. They see profit potential over the next 12 months of 4,800%. If you haven’t followed along for Aaron’s on-site visit, you really need to follow this link and give it a look.

Mutual Suspicion

For everything you see these days about the Trump administration trying to “de-risk” or “decouple” from China… the sentiment runs both ways.

“Although U.S. Treasuries have not yet reached the default threshold, their expansion is unsustainable,” says an article published by researchers at Bank of China.

Bank of China is one of China’s Big Four banks. The article turns up in China Money — a publication supervised by China’s central bank, the People’s Bank of China.

So this assessment doesn’t come out of nowhere. It has a very official stamp of approval.

The report has been picked up by Hong Kong’s newspaper of record, the South China Morning Post: “Calls for China to gradually reduce its exposure to U.S. dollar assets are growing louder as Washington’s national debt continues to set records,” says the paper — “reigniting persistent worries over the long-term sustainability of an investment formerly considered rock-solid…

“China has been trimming its U.S. Treasury holdings for three consecutive months, while keeping them roughly unchanged at the US$756 billion level in June, according to data released on Friday by the U.S. Treasury Department. This remains the lowest level since March 2009.”

The Bank of China article casts doubt on the Trump administration’s major gambit — that it can goose economic growth to such an extent that the resulting tax revenue would start chipping away at Washington’s $37 trillion debt burden.

The authors’ conclusions: “[We need to] gradually adjust U.S. Treasury holdings and appropriately increase reserves of gold, key resources and strategic materials.”

You could do worse than adjust your portfolio in line with the Bank of China’s recommendations: Long-term U.S. Treasuries will be a long-term loser in the decades to come (even if they serve up short-term trade opportunities now and then)... while precious metals, base metals and energy are set to thrive.

As for the stock market this week, it’s been like watching paint dry.

After meandering yesterday, the S&P 500 is down about 0.4% as we write today — resting at 6,423. For perspective, that level was a record only last week.

Gold is similarly unexciting, the bid $3,321. But silver is on sale — down 54 cents to $37.40. Ditto for Bitcoin, now under $114,000 for the first time in two weeks.

It’s a big week for retail earnings — and Mr. Market likes the report from Home Depot. HD whiffed on both the top and bottom lines… but stuck to its guidance for the rest of the year. With that, HD shares are up 3.2% at last check.

The big economic number of the day is a good news-bad news proposition: Housing starts blew out Wall Street’s expectations, up 12.9% year-over year. But permits — a better indication of future activity — rang in well below expectations, down 5.7% from a year earlier.

Regime Change… or Cheaper Crude?

U.S. oil prices sit near their summer lows this morning at $62.80 — thanks in part to fresh inflows of Venezuelan crude.

Going back to the first Trump administration, the U.S. government has repeatedly flip-flopped on Venezuela — sometimes amping up sanctions in hopes of toppling President Nicolas Maduro, other times easing the sanctions to keep Venezuelan crude flowing northward.

Last month brought an easing — the second Trump administration restoring Chevron’s license to operate in Venezuela.

“The Mediterranean Voyager and Canopus Voyager left Venezuelan waters on Friday loaded with Hamaca and Boscan heavy crudes, bound for the U.S. West Coast and Port Arthur, Texas, respectively,” reports Julianne Geiger at the OilPrice website.

Chevron’s reinstated license, Geiger writes, “carries a crucial caveat: No revenues can flow to the Maduro government, an attempt to walk the line between sanctions enforcement and U.S. supply needs.”

For all the bountiful crude coming out of America’s shale patch, there’s a problem: It’s “light, sweet” oil, and U.S. refineries aren’t equipped to process much of it.

U.S. refineries have long been geared toward thick, sulfurous grades of crude — and Venezuela has the world’s biggest deposits of that stuff.

“Heavy Venezuelan grades remain prized by U.S. Gulf refiners for their compatibility with coking units designed to run on similar slates from Mexico and Canada,” Geiger continues.

“With Mexico cutting heavy crude exports and Canada’s pipeline flows constrained, Chevron’s return could ease sourcing headaches for refiners like Valero, which is reportedly negotiating a supply deal for part of Chevron’s share.”

Chevron (CVX) stock has appreciated over 14% in the last three months; it’s a favorite of our Jim Rickards. Valero (VLO) has been range-bound in the same time frame.

The Price on Zuck’s Life: $27 Million

How much is Mark Zuckerberg’s life worth?

Or to put it another way, is it worth more than the CEOs of the other megacap tech-adjacent companies combined?

The Financial Times recently looked into 10 major tech companies and the amount of money they spend on personal security for their high-profile, hot-button bosses.

Put together, they spent over $45 million in 2024. And well over half that total — $27 million — was spent by Meta on protecting Zuck.

No one else came close…

• Alphabet spent $6.8 million protecting Sundar Pinchai
• Nvidia dropped $3.5 million to safeguard Jensen Huang
• Apple spent $1.4 million protecting Tim Cook
• Amazon plunked down $1.1 million on Andrew Jassy (and another $1.6 million on the founder known in some quarters as “Beelzebezos.”

Elon Musk, you ask? Tesla says it spent $500,000 on Musk’s security last year — but presumably his many other companies, the ones not publicly traded, help cover his security costs. (Never mind that one of them is a private security firm! It’s called Foundation Security.)

So why is Zuckerberg such an outlier among CEOs of public companies?

“Meta’s costs are much higher than its peers’ because the group has agreed to provide security directly for members of Zuckerberg’s family, and not just the executive himself,” says the FT. “As both the chief executive and founder of Facebook, Zuckerberg has maintained majority voting power, giving him greater influence over board decisions than his counterparts.”

Whatever the case, CEO security overall is in a bull market.

Not only did Meta’s spending for Zuck’s security rise 17% from 2023… but Alphabet, Amazon, Nvidia and Palantir all beefed up their security budgets by more than 10% year-over-year.

Mailbag: Is AI Too Far Over Its Skis?

“I agree with Enrique Abeyta's assessment 100%,” a reader writes after last Thursday’s edition warning about a looming overbuild — dare we say “bubble” — in AI infrastructure.

“The reason? Quantum-based software stacks already outperform what the biggest, baddest, fastest AI chips have ALL been built on: the old relational legacy platform that today is really obsolete and very much input/output limited; always will be. Surprise! Quantum runs on current (legacy) hardware also.

“Yes, the new NVDA (and other) chips are blazing fast but are vastly slower in computational power, as they all are I/O limited to what quantum computing can do today, as in right now.

“Strange how Jensen Huang was asked about his opinion on quantum computing just eight months ago and he said it is still 20–30 years out, yet has just recently made positive comments about it. I believe he is fully aware of the numerous limitations of legacy programming-based ‘AI’, such as permitting, off-scale power consumption, far-beyond-reasonable cooling requirements and consuming hundreds if not thousands of acres of both public and private land for just one data center.

“When will adequate power become available? It is simply not available today and a recipe for disaster.

“AI is all the hype, to be sure. Every company (such as yours) is putting it ‘all in’ various rehearsed and boring webinars.

“Why not use a computer that runs on 1,000 watts of power, that you can hold in your hand, requires no special cooling, takes up far less space than a kitchen dining room table and runs a thousand times faster for the same output that AI is all the brag about?

“When this word gets out to the savvy public, and it will, that will be the death of AI as it is currently being presented.”

Dave responds: Your conviction is admirable. Presumably you’ve put your money where your mouth is.

But you’re looking at some long-term bets — things that could take years to pay off, and with heart-stopping levels of volatility along the way.

Off the top of my head, there’s one quantum computing name in the Atlucher’s Investment Network portfolio. It’s up 108% in just under two years — but it took a 63% plunge just in the first quarter of this year!

If you’re willing to construct a portfolio jam-packed with names like that… and hold onto them for dear life… and for years at a time… more power to you. (I suppose I’ve done the same with gold miners, come to think of it.)

But most folks don’t have that kind of patience or risk tolerance. And while we’re not a mass medium, our entry-level newsletters do reach tens of thousands of subscribers.

So by and large, the quantum names recommended by the Paradigm editors have been short-term affairs in our more costly trading services — taking advantage of chart patterns, fleeting narratives and sheer momentum to capture high double- or triple-digit gains in a matter of weeks or months.

Quantum’s time will come. But as the saying goes, events that are inevitable aren’t necessarily imminent!