Reality Check (Ukraine)

• Biden gets bored with his Ukrainian plaything
• AAPL and NVDA struggle, but look who’s thriving
• Build Back Better with stone and bamboo: An update
• Whither the English pub?
• More Feedback on Our “Massive Change"

Biden Gets Bored With His Ukrainian Plaything

Is Joe Biden getting bored with Ukraine?

Ukraine’s President Zelenskyy comes back to the United States this week. He’ll speak at the United Nations General Assembly and meet up with Biden in New York.

After 19 months of conflict and $113 billion in American aid, “U.S. focus has now shifted entirely to China to the point that Ukraine is little more than a nuisance to the White House, State Department and Department of Defense,” says Paradigm’s Jim Rickards.

“The Ukrainians and Zelenskyy are finding out the hard way that Biden is untrustworthy — a lesson the Afghans learned in August 2021.

“Americans know little about the war in Ukraine because of a constant stream of lies from U.S. and European media,” Jim goes on.

“The media narrative is that the ongoing Ukrainian counteroffensive launched from Orikhiv in early June is having success after a slow start and has breached the first Russian defensive perimeter in the vicinity of Robotyne. The Ukrainians have since pivoted to attack the nearby village of Verbove to widen the front.

“This is all in preparation for an armored assault on remaining Russian lines with a goal of taking the stronghold city of Tokmak. From there, Ukraine will push on to the major city of Melitopol and finally the Sea of Azov.

“At this point, Ukraine will have severed the Russian land bridge from Russia to Crimea. This will be the prelude to the Ukrainian liberation of Crimea. This military success is backed up by U.S. and NATO weapons including Bradley Fighting Vehicles, Leopard tanks, Challenger tanks, Patriot anti-missile systems, HIMARS mobile precision artillery and drones.

“Everything in that Ukrainian narrative is a lie,” Jim hastens to point out.

“The Ukrainian counteroffensive has failed across the board. Challengers, Leopards and Bradley Fighting Vehicles have been left burning on the battlefield. Robotyne has not been taken by Ukrainians, although they are in the northern part of the village. The pre-war population of Robotyne was 400, it has been totally depopulated for months and is of no strategic importance.

“Ukrainian casualties are horrific — perhaps 300,000 dead (many left to rot on the battlefield) and 200,000 wounded. Meanwhile the Russians are making major advances in the north against Kup’yans’k, which will open the door to Russian victories in Izyum, Lyman and Slovyansk. In the end, Russia will launch major offensives to take Kharkiv and Odessa. At that point, Ukraine will surrender on highly disadvantageous terms.”

LOGO — Some of the reality is creeping into the media — i.e. the front page of today’s Wall Street Journal: “Approach of Rains, Snow Puts Pressure on Ukraine.”

Yesterday on CNN, Gen. Mark Milley — chair of the Joint Chiefs of Staff — said, “I can tell you that it’ll take a considerable length of time to militarily eject all 200,000 or plus Russian troops out of Russian-occupied Ukraine. That’s a very high bar. It’s going to take a long time to do it.”

Milley is a month away from retirement and perhaps can speak more freely than he would otherwise.

Investment implications? “As long as the war continues, U.S. sanctions will continue, which means continued disruption of global supply chains and higher costs,” says Jim.

“The weaponization of the U.S. dollar in the form of sanctions means continued efforts to de-dollarize, led by the Global South as revealed in the recent BRICS 11 and G20 conferences. President Putin of Russia and President Xi Jinping of China did not even bother to attend the G20 conference in Delhi in person. Putin did not want to be shunned by the West and Xi did not want to meet with Biden. The days of the G20 as an important multilateral organization are over.

“Asset allocation recommendations would include reduced exposure to equities, increased allocations to cash and allocations to U.S. Treasury notes and gold as protection against de-dollarization and illiquidity.”

➢ Did Jim say “gold”? As it happens, Jim is offering a limited-time opportunity to become his “gold partner.” It’s a one-of-a-kind backdoor into the gold market — and he says there’s a small fortune to be made if it comes off. Click here and watch as Jim takes a video crew into the desert for the full story.

AAPL and NVDA Struggle, but Look Who’s Thriving

Midway through September, Paradigm retirement specialist Zach Scheidt is seeing a “rotation” in the stock market.

“This year, many of the mega-cap stocks surged higher while small and medium-sized stocks lingered behind. That meant many diversified investors didn't keep up with the broad-market averages.

“Remember, the S&P 500 and other indexes are heavily weighted toward large stocks. So if you aren’t overweight in these names, your portfolio may not have performed as well.”

Now the story is changing: “Many of the largest stocks like Apple and Nvidia are weakening,” says Zach. “But other key areas like energy, health care and certain industrial stocks are moving higher.

“In other words, smaller stocks are playing catch-up to the rest of the market, giving you plenty of opportunity to profit. And this is true even if the broad S&P 500 index trades lower due to a pullback for stocks like Apple and Nvidia.”

Did Zach say energy? Crude is up $1.31 as the week begins, now over $92 — still another high-water mark last seen in November 2022.

With that, energy stocks as a group are up another 1% today — even as the broad market meanders. The S&P 500 is microscopically in the green at 4,451 — no better, really, than it was at this time two years ago.

Precious metals are also little moved — gold at $1,926 and silver at $23.05. Bitcoin, however, is showing signs of life — popping over $27,000 for the first time all month.

Wednesday is the day the Federal Reserve delivers its latest proclamation on interest rates. Jim Rickards is sticking to his outlier projection that the Fed will lift the fed funds rate another quarter-percentage point — an outlook the markets and the media do not anticipate. Truly, the market will fall out of bed if the Fed raises this week.

That said, the Financial Times just conducted a survey of academic economists — more than 40% of whom expect two more rate hikes by year-end — just not necessarily this week.

Only one economic number today: Homebuilder sentiment as measured by the National Association of Home Builders is back in the dumps, with a sub-50 reading of 45. "High mortgage rates are clearly taking a toll on builder confidence and consumer demand,” says NAHB chief economist Robert Dietz — “as a growing number of buyers are electing to defer a home purchase until long-term rates move lower."

Build Back Better With Stone and Bamboo: An Update

Every now and then, our timing of the topics we take on in these daily bullets can be spooky.

Last Thursday we spotlighted a United Nations report calling for a shift away from production of steel and cement because they’re too — you guessed it — carbon-intensive.

One of the report’s authors waxed nostalgically about how “until recently, most buildings were constructed using locally sourced earth, stone, timber and bamboo.” The press release accompanying the report calls for “government regulation and enforcement… across all phases of the building life cycle.”

Which brings us to the big story in today’s New York Times — front page, above the fold, next to a photo of a “climate change” protest outside UN headquarters…

The lead sentence: “If President Biden wins a second term, his climate policies would take aim at steel and cement plants, factories and oil refineries — heavily polluting industries that have never before had to rein in their heat-trapping greenhouse gases.” [Emphasis ours]

To be sure, some Democrats fret that this agenda won’t fly during an election year: “If you are seen as imposing debilitating regulations on heavy industry that employs large numbers of people, you’re not only going to get a backlash from manufacturing, but labor as well,” says Obama campaign strategist David Axelrod.

Then again, reality hasn’t stopped the administration before. Take its proposed regulations governing electricity generation: Nearly all large power plants fed by coal or natural gas would have to reduce or capture 90% of their carbon dioxide emissions by 2038.

How realistic is it for them to hook up to vast new supplies of solar and wind — or to hook up to carbon capture pipelines (an extremely problematic technology)? As a practical matter, many of these plants would simply have to shut down. Hello, load shedding and electricity rationing.

Or take its proposed electric vehicle regulations — effectively requiring two-thirds of new cars sold in this country by 2032 to be EVs. And if the infrastructure isn’t there to support the charging of those EVs? Too bad, so sad.

So when it comes to steel and cement, no doubt there are policy wonks in the administration who got a sneak peek at the UN report and its recommendations for “renewable bio-based building materials, including timber, bamboo and biomass”... and said, “Yeah, let’s do this!”

Oh, by the way…

No one is coming to save you. Prepare accordingly.

Whither the English Pub?

Between labor shortages and high taxes, the pub culture of England and Wales is dying out pint-by-pint.

According to government statistics, 230 pubs closed forever during the second quarter of this year — on top of the 153 during the first quarter. That’s an average of two pubs per day — double the pace of last year.

True, there’s still no shortage of places to go to wet your whistle — 39,404, according to figures compiled by Altus Group.

“It’s a three-way squeeze,” says Chris Miles — who shuttered the Fleece in the North Yorkshire community of Richmond. Specifically, labor shortages, operating costs (such as energy) and taxes — especially the dreaded value-added tax that European politicians love so much.

"VAT is the single biggest problem,” he tells the BBC. “A fifth of the money we generate we have to pay to HMRC [His Majesty’s Revenue and Customs]. My last bill was £26,000 [$31,000 — and that's for a business that's never made a profit.

"We don't want hand-outs or grants, we just want to keep more of the money we generate."

Seems reasonable to us, but we don’t set British (or American) tax policy…

More Feedback on Our “Massive Change"

Who knew the “massive change” we made to the way we do business would generate so much reader response after our mailbag in Friday’s edition?

“I think the biggest complaint the reader really has is that we're kind of tired of hearing about it,” says our first correspondent. “It is a constant drumbeat and while I agree that it’s a good change, I too am tired of hearing about it for what seems like months on end.

“I agree with the change for the simple reason that with the old policy, one had to think that maybe the best investments were not put forth in order to invest in them yourselves. That is just conjecture though.”

Another reader asserts the change was a “non-event” and challenges my claim that the original policy sought to erase the perception that an editor was padding his account simply because his readers were buying into positions he already owned: “This comment doesn't seem to apply to Paradigm Press' conflict of interest in hyping Hard Assets Alliance where there is some vested interest.”

One more: “Now that your editors can invest in their own recommendations, can we get Chris Mayer back? 

“Many years ago when Chris was writing the Capital & Crisis letter, I made a suggestion that his service might be even better if he were allowed to invest in the positions he touted, as it would align incentives in the right direction by allowing more direct skin in the game. He said that not being allowed to invest in what he promoted was the ‘most negative’ part of the job. He left Agora soon afterward, and I always felt guilty that I may have contributed to that.”

Dave responds: Let’s address these remarks in reverse order.

First, it was not Chris who I had in mind when I mentioned that a popular editor or two left because of the old policy. Chris was simply ready for a change — and he’s very content running a hedge fund these days. (That said, I still miss his input!)

There’s no conflict of interest with Paradigm’s ownership stake in Hard Assets Alliance — which of course, we disclose fully every time we encourage readers to sign up. What is it you’re expecting? Rare indeed is the owner of a business that does not expect to collect a profit from the revenue stream. (And Hard Assets Alliance still charges some of the lowest premiums in the industry.)

Finally… yes, we tend to hammer away at marketing messages when they become popular. If people are willing to open their wallet, that’s a signal to us that the marketplace wants more of whatever we’re offering.

But rest assured we were never “holding back” under the old policy. We were simply doing what we felt was best for our readers — and when we made the change, it was with the same reader benefit in mind. We’re glad it’s a change you welcome!

Best regards,

 

 

 

 

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets