Oil and the Fog of War
Death in the Dizmar Forest
The president of one of the world’s top 10 oil-producing countries dies under arguably suspicious circumstances and the oil price… barely budges.
For real. As we write, a barrel of West Texas Intermediate is down 4 cents from last week’s trade at $80.02.
As you’re surely heard by now, Iranian president Ebrahim Raisi was killed over the weekend in a helicopter crash — as was the country’s foreign minister and six other officials.
To be sure, it’s much too soon to call it a case of foul play. By all accounts, there was thick fog in the mountainous Dizmar forest region at the time.
But the timing is certainly eyebrow-raising. The crash comes weeks after Israel bombed an Iranian consulate in Syria, killing several Iranian military commanders. Generally, any attack on a country’s consulate or embassy is considered an attack on that country’s territory.
Iran’s riposte was a measured one — a barrage of slow moving drones/missiles reaching Israeli territory with little impact other than testing Israel’s defenses — but ever since, the question of a further Israeli response has lingered.
Too, the location of the crash is at least intriguing — near the border with Azerbaijan, a country that’s forged an increasingly close relationship with Israel in recent years. Indeed, Raisi was returning from a visit with Azerbaijan’s president-for-life Ilham Aliyev, trying to keep relations cordial.
But again, all of this lies within the realm of speculation. In the meantime, be extremely wary of factual claims made with total certainty by “open source intelligence” aggregators eager for social-media clicks…
“Completely false,” says journalist Sharmine Narwani from the online magazine The Cradle. “I'm in Tehran right now and there is no unusual activity or military deployment taking place in the city.”
Gold Gets “Shanghaied”
Another start to the week, another pop in precious metals — fueled by China.
On several occasions this year, heavy buying has emerged in Shanghai on Monday mornings — or Sunday night in North America. At one point within the last 18 hours, silver traded in Shanghai over $35 an ounce.
These Chinese prices are not reflected in London or New York, where the peak last night was $32.50. But they do have the effect of lifting prices higher everywhere.
Chinese gold buying is off the charts in 2024– whether it’s the Gen-Z crowd accumulating “gold beans” to preserve financial stability or the Chinese government pursuing its de-dollarization agenda alongside Russia.
In contrast, Americans couldn’t seem to care less about gold, even with the dollar price at all-time highs. For much of this year, money has been flowing out of GLD and IAU — the big American gold ETFs.
That’s the big picture. Zooming in closer, gold raced from $2,414 to nearly $2,450 during electronic trading overnight in New York — only to give it all up. A slow climb is underway again, the bid $2,424 at last check.
Silver is looking stronger — up 41 cents or 1.3% on top of Friday’s monster rally. The poor man’s gold is only 11 cents away from $32.
“The new floor for silver is either $28 or $26,” says Don Durrett — a sage observer of precious metals on Xwitter. “I expect strong price action [this] week in Shanghai, which will make it difficult for the banksters in New York to beat it down back below $30.”
As for stocks, all the major U.S. indexes are at or near record territory to begin the new week — the S&P 500 up a quarter percent to 5,317.
All eyes are on Nvidia this week — the last of the “Magnificent 7” companies to report their numbers during the current quarter. NVDA reports after the closing bell Wednesday.
As for economic numbers, those are few and far between this week — but Wednesday is the day we get the heavily massaged “minutes” from the Federal Reserve’s meeting earlier this month.
Bitcoin continues its slow grind higher, now $67,762.
Musk Looks to Leapfrog OpenAI and Google
The AI wars are amping up here in the month of May.
A week ago today, OpenAI announced the launch of GPT-4o/
“4o expands on OpenAI’s existing ChatGPT model with new abilities to process audio, vision and text within a single AI model,” says Paradigm’s AI authority James Altucher.
“The biggest change for users comes in the form of 4o’s ability to engage in conversation and analyze content from the user's computer screen or mobile phone camera. 4o’s conversational abilities greatly expand the usefulness of Chat-GPT, by allowing users to interact with the bot more like an assistant. The new model also includes improved performance in roughly 50 languages.
“The company demonstrated the app’s ability to perfectly translate a spoken conversation between English and Italian without delays or missing a beat.”
The following day, Google rolled out its own array of new AI products at its annual developer conference.
Google’s version of GPT-4o is called Gemini Live. “Like 4o,” says James, “Live will allow you to converse with an AI model and even share a live stream from your mobile phone camera. Google execs demonstrated how this feature can be used to detect and identify objects in real-time, allowing users to ask Gemini about their environment.”
In addition, Google announced new AI capabilities within search results — crucial because James says AI has the potential to blow up Google’s core search business.
“If users can get all the information they need in a single response,” he points out, “there is no reason for them to click on ads or leave the site.
“At the developers conference, Google laid out its vision for how the company intends to use AI to better analyze and organize information.
“Users can ask complex questions in search, such as looking for a quiet restaurant in a specific neighborhood and getting a list of results that match. It will also be able to pull together data from different websites allowing the creation of customized guides for everything you need to do.
“For example, a user could ask Google for a ‘vegan Thanksgiving menu for people short on time’ and Google would pull together a list of foods that match and provide links to each item's recipe.”
Watching all of this is Elon Musk — a co-founder of OpenAI along with Sam Altman, before they had a falling-out.
When Musk bought Twitter in 2022, James tweeted that perhaps Musk wanted to turn it into a “super app” incorporating all the services a person could need. (Musk liked that tweet, by the way.)
Fast-forward to the present through X-formerly-Twitter, Musk is pushing a ChatGPT-like chatbot called Grok. James surmises that as part of Musk’s agenda, Grok will soon add voice assistant capabilities — and then proceed to leapfrog the competition.
“With Musk and his team now two years into the process,” says James, “I expect that the new super app could be only weeks away.
“With this, my team and I have been hard at work on identifying new investment opportunities to take advantage of Elon’s next trillion-dollar business.”
State of the Power Grid: Good News, Bad News
The summertime outlook for the nation’s power grid — while still not great — is less dire than it was a year ago.
The North American Electric Reliability Corporation — basically the power grid’s reliability monitor — is out with its annual “Summer Reliability Assessment.”
Last year, NERC said the western two-thirds of the United States was at “elevated risk” of rolling blackouts in the event of extra-hot summer weather.
This year, a large swath of the Great Plains and Pacific Northwest are in better shape — with more capacity that’s come online, thus more reserves available during times of peak demand.
But the Upper Midwest, Mississippi River valley, Texas, the Southwest and New England are still at risk. Here’s the map nicked from NERC’s report…
In those orange-shaded regions, the trouble remains the same as before — too many coal and nuclear plants have been retired in recent years, and not enough wind and solar capacity has come online to replace them.
Of course, NERC’s report has to be viewed in the context we’ve been raising in this space all year — the exploding demand for electricity from EVs and AI.
“Demand is growing in many areas at a rapid pace with the adoption of electric vehicles and construction of new data centers, straining some parts of the system,” says Marc Olson, who oversees the preparation of these reports for NERC.
The biggest demand growth is coming from Texas, the Southwest and British Columbia.
That said, NERC is too politically correct to point out the impact of the EPA’s new “Clean Power 2.0” rules. Among other things, the rules would accelerate the shutdown of existing coal-fired power plants.
➢ Follow-up: We told you last week how Republican attorneys general from 25 states are suing the EPA in hopes of stopping “Clean Power 2.0.” On Friday, a federal appeals court in Washington turned down their request for a temporary stay of the rules while the case makes its way through the court system.
Meanwhile, from the standpoint of personal resilience… we continue to urge you to consider generator capacity for your home and/or small business if you’re in the orange areas.
You can go the Generac whole-house generator route or you can opt for a portable generator hooked up to a breaker interlock installed by an electrician to power essential loads.
The latter option is certainly cheaper and it’s what I did in 2022 after seeing both NERC’s report and a warning from the regional grid operator MISO. If you go this route, make certain to run a test of the system three or four times a year so you’ll know what to do if you actually need it.
The Amish Storefront in New York City
And you think you have a rough commute?
Yes, you can buy Amish goods from an honest-to-God Amish storefront in… Manhattan.
John Stoltzfoos hails from Amish country in Lancaster County, Pennsylvania. For 18 years, he was a fixture at New York farmers’ markets — drawing a loyal crowd for meats, dairy products, baked goods and especially the organic eggs.
But over time, he chafed at the rules about what items he could sell — rules drawn up by the nonprofit that oversees New York’s farmer’s markets.
And the routine became a drag: “Sometimes you’d be setting up your canopy in the pouring rain, and then, there’s unloading your truck and later, loading everything back into it again,” Stoltzfoos tells the New York Post.
“Now, I just open and close the door,” he says of his new permanent setup on the Upper West Side, called Millport Dairy.
That said, Stoltzfoos has a new grind to contend with — a 320-mile, six-hour round-trip commute four days a week, so he can operate the store 7:00 a.m.-4:00 p.m. Wednesday through Saturday. (Yes, he hires a driver since the Amish themselves swear off cars and much other modern technology.)
But he’s all good with the new routine: He hopes to keep the shop going “for the next 10 years — maybe 20, God willing.”
Longtime customers are thrilled. “They have the best eggs ever,” says one customer who lives nearby. “I’m so glad you’re here,” says another — who departed with a haul the Post describes as “pickled okra, pork roll and asparagus to shoofly pies, pumpkin bread and GMO-free duck and pullet eggs.”
Gee, getting hungry here!
Best regards,
Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets
P.S. Good news from London, where a court has given WikiLeaks founder Julian Assange another shot at challenging his extradition to the United States.
This e-letter has advocated on Assange’s behalf even before the feds indicted him in 2019 for violating the Espionage Act.
His case matters to our money-and-markets beat — for reasons we spelled out most recently in December.
