I hope you had a good Memorial Day holiday. Now, it’s just six weeks to Independence Day, aka the 4^th of July. This year, it’s the “America 250” celebration, a quarter millennium since the Declaration of Independence, or also called a Semiquincentennial (yes, that’s a real word).

At Paradigm Press, we have an upcoming America 250 event that I’ll discuss further along. But first: Have you noticed that, while there’s a 250^th anniversary buildup, it doesn’t seem all that strong or widespread?

From what I’ve discerned, the overall level of America 250 sentiment comes across as subdued; and this 250-ennui is definitely a theme on social media. As I’ll detail below, things are not at all like what we had in 1976, during the 200^thanniversary of independence.

What’s going on? Where’s that Spirit of ’76, as in… 1976? It’s missing. Let’s dig in…

Recall the Bicentennial

First, and not to be presumptuous, but were you around in 1976? By definition, you’d now be at least 50 years old. And if you’re younger than 50, maybe you heard about it as you grew up.

The point is… 1976 was a thing! The Bicentennial was Big! There was a multiyear lead-up and a nationwide sense of excitement and anticipation.

For example, corporate America poured hundreds of millions of dollars into a multiyear makeover of the then-decrepit, unsafe Statue of Liberty. And during the actual 4^th of July week many foreign nations (even the Soviet Union) sent “tall ships” to New York Harbor, something that requires plenty of planning:

New York Times front page, July 5, 1976. Credit NYT.

Further north in the Big Apple, Broadway had a smash hit musical entitled… yes… 1776. It ran at the Gershwin, the largest stage-theater in New York. America’s Revolution was set to patriotic song, with sellout crowds all summer.

Playbill for 1776. eBay screen shot.

Bicentennial-focused marketing was ubiquitous. It touched everything from patriotic, totally red-white-&-blue Coca Cola ads to Revolution-themed highway maps – remember paper maps? – from oil companies like Conoco, now ConocoPhillips (COP):

Bicentennial-themed highway map. eBay screen shot.

I could go on, but you get the idea. And the takeaway here is that, for all the problems the U.S. had back then – and yes, they were many; see below – the country seemed upbeat in ’76. But that same level of… let’s call it celebratory enthusiasm… isn’t as apparent today.

Okay, I’ll grant that President Trump is fixing fountains and the Reflecting Pool in Washington, D.C., but even that has been met with partisan and media pushback.

Trump Admin fixed historic Meridian Cascading Fountain. Credit WJLA.com.

The background story is that most Washington fountains were shut off many years ago due to neglect and poor maintenance, while the celebrated Reflecting Pool transformed into a brown swamp of algae and built-up bird poop.

In many ways the broken, dysfunctional fountains characterized the culture of recent decades, in which people in power said, in essence, “You plebes and proles out there cannot have nice things.”

A Different Take on ‘76

When you think about it, that 50-years-ago national sense of Bicentennial good feeling could definitely have gone the other way. Consider that 1976 was one year after the disastrous Saigon-evacuation that ended America’s tragic, costly effort in Vietnam.

Saigon disaster, April 1975, one year pre-Bicentennial. Credit Library of Congress.

If Saigon wasn’t bad enough to wreck the nation’s party mood, the Bicentennial was a mere two years post-Watergate, when President Nixon was forced to resign.

Meanwhile in 1976, America was in the midst of roaring inflation, traceable to the 1960s and President Johnson’s blowout spending on the above-noted Vietnam War, coupled with his pipedream of a so-called “War on Poverty,” another failed conflict for the long-term “loss” column.

U.S. inflation, 1948 to present; note mid-1970s spike. Credit FRED, Fed of St. Louis.

That mid-decade, Bicentennial bout of inflation was also rooted in the energy shocks of 1973-74, when oil prices skyrocketed during a Middle East war, and the U.S. economy endured regional fuel and chemical shortages, and long lines at filling stations. (Sound familiar?)

Meanwhile, in 1976 the country – the entire world – was in the depths of the Cold War, in which the U.S. and Soviet Union had tens of thousands of nuclear weapons pointed at each other. Talk about things going south in a hurry? On any given day, we were 45 minutes from Armageddon.

Still, and as I recall 1976 both personally and from what history has recorded, the country felt pretty good about itself. In general, the U.S. looked like it offered a future.

Now, compare 1976 with today. And yes, hindsight is 20/20, but… little did we innocents back then anticipate what nasty stuff would hit the national fan over the next half-century, 1976 – 2026.

That is: five decades of inflation, financialization, deindustrialization, growth of government and expensive boondoggles, deficits, debt, corruption, globalism, open borders, mass migration, a widespread drug culture, H1B visas, outsourcing, crummy schools K-12, radical universities and grad programs, C0v!d lockdowns, homeowner associations, people everywhere staring like zombies into their smart phones… and you name it because I’m sure I’ve missed a few things.

America in 1976: a Foreign Country

“The past is a foreign country,” wrote L.P. Hartley in his 1953 novel The Go-Between. “They do things differently there.”

They do things differently? They sure as hell did things differently in America of 1976, a very different place to the present and now a “foreign,” long-lost land in many ways.

Among other things, in 1976 most people who worked at and ran America’s businesses, banks, educational and religious institutions, and government entities were U.S.-born citizens. They came of age during the Great Depression, World War II, the Korean and to some extent Vietnam Wars, and their shared life experiences informed their worldviews. They weren’t self-styled “citizens of the world” – i.e., they were not detached, rootless multi-nationalists – such as we see today in many C-suites.

At a deeper, cultural level in America of 1976, the intellectual poison of failed Marxism – think in terms of “Frankfurt School” – was germinating, but had not yet taken deep root. It’s a long tale, but by the mid-1980s the Hard Left was busy colonizing universities, media, religious institutions, NGOs, corporate HR departments, and definitely influencing politics.

In the five decades post-1976, what Marxists called “Critical Theory” transformed into today’s identity politics, DEI mandates, Woke-ism, and cancel culture; that is, an in-your-face means of attacking and controlling the individual in the name of group grievance.

In this sense, we now – 2026 – have a large segment of U.S. population who are not just indifferent to America 250 but are outright hostile to the very existence of the country. The usual critiques are along the lines of so-called “settlers” displacing Natives, and/or enslavement, racism, environmental destruction, exploitation of labor, “micro-aggressions,” etc.

In other words, the broad fabric American culture is now unraveling; it’s heavily influenced by dollarized globalism, plus the mind-bending, legacy toxic-sophistry of Erick Fromm, Herbert Marcuse, Howard Zinn and the like on steroids (look ‘em up; too depressing to discuss here).

Who Lives Here Anymore?

There are all of the foregoing matters (and more), and then there are just plain raw numbers. That is, according to the Census Bureau in 1976 the U.S. population was just shy 216 million. While today, the nation’s population is in the range of 350 million; perhaps 400 million by some counts. And the country’s overall demographics are quite different now-versus-then, to the point where the term “Balkanized” does not overstate the case.

In short, America is now more crowded than in 1976, evident in overburdened infrastructure: jammed roads, crowded airports, loaded rail lines, max’ed out cargo ports, busy hospitals, brimming schools, overloaded city housing, clogged courts and government offices, sprawling suburbs, rapidly-developing rural areas, busy beaches, packed parks and… yes, just about everything. (Really, have you visited a National Park lately?)

One way to view it is that the country’s vast increase in population was not met by sufficient investment in infrastructure. Looking back, we should have built more 10-lane highways in Houston, Dallas, and northern New Jersey, right? More Denver Airports. More big, ugly federal and state office buildings. More San Diego, Phoenix, Austin, Jacksonville or Charlotte sprawl. More beachfront high-rises on coastlines. More Walmart and Costco sites on former farmland.

Another way to look at it is that more-more-more has not necessarily been better-better-better, no matter what anybody built. That is, how much does quality of life improve in an overcrowded country held together by max’ed-out supply chains?

And please… don’t tell me that “America still has lots of empty land” unless you want to move to the middle of Nowhere in the Desert, High Plains, or Appalachia. Indeed, and again per the Census Bureau, over 82% of Americans live in urban areas, and quality of life in almost all areas has measurably deteriorated.

Plus, that 50-year population increase has brought a plethora of social pathologies like increased crime (petty and violent), drug usage, homelessness, and more. (On the positive side, maybe we’ve reached a point where Spencer Pratt will become Mayor of Los Angeles.)

Is There a “Spirit of ’26” Out There?

Okay, enough with the bellyaching, right? The year 1976 was then; and year 2026 is now. We have contrasts, and obviously the country had (then) and still has (now) many problems. So, we must deal with challenges as they are.

Of course, one element of dealing with things the way they are is to identify opportunities. And while we’re at it (and as Confucius noted long ago), it’s important to call things by their correct names.

One angle on current reality is that the 50-year American population explosion has led to massive increases in the use of what we at Paradigm call “hard assets,” things like energy, minerals and materials, water, waste disposal systems, and related elements of modern life. And that part of the economy is investable, so if you play it right you can stay ahead of the game.

Along these lines, as America approaches her 250^th birthday, my colleague Jim Rickards and our editorial team will present a broadcast on Thursday, June 4 at 2:00 p.m. ET — LIVE from Philadelphia… the birthplace of the American experiment.

With Jim leading this livestream event — and with insights from yours truly and the rest of the gang — we’ll break down what’s driving markets in 2026, including…

The Iran war and energy shock, growing stress in private credit, deep-rooted inflation, the affordability crisis, critical minerals, gold, AI-driven power shortages and the future of Trump’s agenda.

I promise that this won’t be a dry economics lecture. Expect lively give-and-take, show-and-tell, fast-moving debate, behind-the-scenes stories and practical insights you can use immediately. Indeed, we’ll share actionable, investable ideas tied to these major trends.

Again, there is no cost to attend. Watch for more details soon. But for now, save the date: Thursday, June 4.

And at this point? Well, let’s wrap-up, get moving, and build our own, better America.

Thank you for subscribing and reading.

The post The Missing Spirit of ‘76 appeared first on Daily Reckoning.

David Epstein was sitting across from me again.

The last time we met was in 2019, above a comedy club.

He had just written Range and showed why the late starters, the switchers, the people who can’t sit still in one field, are the ones who eventually win big.

Now he just came back on my podcast to talk about his new book, Inside the Box: How Constraints Make Us Better.

In this one, he proved something I’d suspected for years…

That freedom is overrated and limitations are underrated.

The Green Eggs and Ham Model

Dr. Seuss couldn’t write Cat in the Hat until his publisher bet him he couldn’t write a book using only 50 words.

That became Green Eggs and Ham.

Psychologists call this the Green Eggs and Ham model of creativity. The best way to make someone creative is to restrict their normal means of doing something.

But everything is creative. Solving problems. Building a business. Picking a school for your kid. Writing an email you’ve been avoiding for three weeks.

Every one of them is a blank page in disguise.

And every one of them gets easier the second you stop giving yourself room.

My best writing has always come from constraints. The 600-word essay. The five-minute set. The deadline.

Unlimited time gives me garbage. Unlimited canvas gives me nothing.

Pixar’s Secret to Success

David told me about General Magic.

In 1989 their CEO drew a thin glass rectangle in a notebook. No buttons. Touchscreen. Apps.

He called it the Pocket Crystal.

He saw the iPhone—18 years early.

General Magic had unlimited money. Unlimited talent. Total freedom. They went public in the first concept IPO in Silicon Valley history—no product, no revenue.

They built nothing useful. Every idea got chased. Total freedom led to total incoherence.

Had they picked one thing and built it, maybe the headlines would be talking about them instead of Apple.

Pixar was the opposite. I thought it was unfettered imagination. It was the opposite.

David told me it had rules:

• The three-pitches rule—directors had to pitch three ideas because they always got attached to the first
• Tiny teams stayed tiny for years before scaling
• Every story followed the hero’s journey

I asked him what constraints actually do to the brain. His answer: the brain is designed to do the easy thing.

Cognitive scientists call it the path of least resistance. Thinking is expensive. Give yourself a blank page and your brain reaches for the most repetitive option available.

Block the convenient solution. That’s the whole trick.

What I’m Doing Now

When I asked David how to actually use this, he said: don’t start with a blank page.

Start with one very specific question. “Why does tungsten use the symbol W?” beats “I want to write about chemistry” every time.

He calls it idea linking. The narrow puzzle pulls you somewhere the blank page never could.

Three things I’m taking away to solve any problem:

Cut your own time in half. Tell yourself the deadline is Friday, not next month. Watch what comes out.

Pick one specific question. “Why is revenue down in Tuesday’s numbers?” beats “How do we grow?” every time.

Before you open ChatGPT, write down your guess. You’ll be closer than you think.

David’s new book is Inside the Box: How Constraints Make Us Better. Read it.

The inspiration was never going to come from the blank page. The constraint was the inspiration the whole time.

Read the book. But before you do, listen to the podcast.

It’s one of my favorites of the year.

The post Solve Anything in 50 Words (Or Less) appeared first on Daily Reckoning.

What lured us to Paraguay? Is it not a backwater? A disreputable refuge for war criminals and disgraced smugglers? A sweltering tropical island without a beach?

Not anymore. It is still hot — in the summer months. It is still landlocked, snuggled in between Brazil, Uruguay, Argentina, and Bolivia. But the old Nazis, if there ever were any, have died…and Paraguay has come alive.

A proximate purpose of our trip was revealed in the headline of the La Nacion (Paraguay) on Friday:

Shipments of beef to Europe will begin in June

Then, in Saturday’s paper came more motivation in the UltimaHora:

The Fall of the Dollar Means Recalculating Investments

It is always a mistake to base investments on macro guesses. Even if you’re right about the trends, they often don’t have the results you expect.

But we don’t expect people to stop eating beef. And if we can produce the meat efficiently, we might be able to eek out a modest living. No outsize profits. No serious capital gains. Just a decent business with decent returns. So, we’re teaming up with an Argentine family to raise cattle in Paraguay.

Why Paraguay? Because it has lush, low-cost pastures…low taxes…and low labor costs. And a cattle investment in Paraguay is about as far from Wall Street as possible. More important, our partners know what they are doing. They’ve been raising cattle in Argentina and Bolivia for many years. Now, they want to do it in the Chaco of Paraguay.

The logic of our business is simple. We buy the weaned calves at about 200 kilos. We let them eat grass, give them vaccines, watch over them…and then hope to sell them at 400 kilos. Generally, the young animals gain about a pound per day.

You just have to make sure they’re taken care of properly.

Here are the gauchos who do it:

Source: Author

The trip from Buenos Aires to Asuncion was uneventful. From the airport, we drove directly out to the project. It’s in the Chaco, a vast region to the west of the capital city, with few people, little infrastructure, and a rough past.

Along the way were the typical signs of Latin American poverty — trash next to the road, and smoke rising from where people were burning it…ramshackle houses of tin, plastic and rude lumber…..big gas stations…and dangerous potholes. It was not rare to see entire families on motorbikes. We watched nervously as a 7-year-old sat in front and steered, while his mother looked at her phone and his sister held onto her waist.

After we left the sprawl of Asuncion, however, we were on a new highway where the ubiquitous Toyota trucks flew by at 100 mph. On both sides of the road, for four hours, stretched vast fields of swampy wilderness.

Then, as we finally approached Filadelfia, in the Chaco, things changed. Houses were respectable. Tractors were in the fields. And our hotel, was unexpectedly nice. So far from civilization, in such a dusty little burg, we anticipated a very basic place to stay. But the hotel in Filadelfia was surprisingly large and well-run. Not at all fancy in its design or furnishings, it nevertheless had a very attentive and professional staff, full restaurant with a wide-ranging menu…and a bar with plenty of selections.

“The Mennonites developed this area,” explained our partner. “They came here because there was nothing here. Land was very cheap. Nobody wanted to come way out here.”

After the five-hour drive to ‘way out here’ we wondered if — even today — anyone wanted to come. But there we were. And around us was evidence of a boom. There were many shiny new tractors and harvesters on display. Huge trucks pulled huge trailers — laden either with animal feed or the animals themselves. And around us were big, blond people speaking Spanish…or German.

There were no suspenders, long dresses or white caps. But these people were definitely not like the mestizos of most of Paraguay.

“First, they cleared the thick trees and bushes away and raised a few cattle.” Our partner continued. “They imported the Zebu and Nelore breeds from India and mixed them with the local cows. They’re more ‘rustic’ animals. They don’t seem to mind the heat or the bugs.

“They only started raising crops a few years ago. But now that they’re producing corn, wheat, soybeans and other field crops, they have something to feed the calves; they can keep them longer and can fatten them up. And now they’re exporting them all over the world.

“They are also very well organized and capitalized. They set up a cooperative years ago. It’s very important down here. The Mennonite cooperative partners with banks, insurance companies, developers and farm suppliers. Even this hotel is a joint venture with the Mennonite cooperative. Really, it was the Mennonites who made this area what it is.”

After a hearty breakfast, we drove out to see our cattle. It had rained during the night. The moisture left a slick layer of mud on the unpaved farm lanes; even with four-wheel-drive, we almost slipped off the road several times.

Source: Author

When we finally got to the fields, we were greeted by the gauchos above and the veterinarian:

“They’re good animals. A mixture of Zebu, Brahmin, Nelore and Brangus. The whole business depends on putting on weight. So, we weigh them every couple of months. Then, we sell those that don’t gain weight…and those that gain it fastest. Together, they give us an average price per animal and it leaves us with a herd that is more or less what we want — animals that steadily gain weight at a predictable rate.”

One of the drawbacks of this operation is that it is a long way from anywhere. It is a long way from Asuncion. It is even farther for our partners — two young men from a large farming family. They are based in Argentina, a 10-hour drive away. They come up once a month to check on it. After a cup of coffee and a brief discussion of how it is going, they got back in their truck for the long drive home.

The Chaco area is flat. It is hot. It is not a place we’d like to live. But it may be a good place to raise cattle.

We’ll find out.

The post Far from the Wall Street Crowd appeared first on Daily Reckoning.

To say that the world is in turmoil to an extent not seen since the 1960s is an understatement.

The war in Ukraine is now in its fifth year. The war in Iran continues with no end in sight, despite Trump’s optimistic talk. NATO may be nearing the break-up stage as Trump pulls U.S. troops out of Germany.

Energy prices are soaring, inflation has accelerated sharply again, consumer confidence has fallen sharply, debt is at an all-time high and supply chains are breaking down.

Yet the major U.S. stock indices are at or near all-time highs.

What accounts for record stock prices amid almost unprecedented turmoil?

There are a number of key factors supporting stocks. The most obvious is the AI frenzy. This has two aspects. The first is that AI applications can improve productivity. The second is that the build-out of data centers with the most advanced semiconductors has led to a $1 trillion capital investment tsunami as Microsoft, Amazon, Google, Meta, OpenAI, Anthropic and other AI providers build their server farms.

The next factor is related to the first and is often called the picks-and-shovels trade. The idea is that those who benefit in a gold rush are not the gold miners but the merchants who sell tools, clothes, supplies and other goods the miners need.

In the AI gold rush, the winners are electricity suppliers, builders, hardware manufacturers (semiconductors and servers) and small towns where the server farms are located. These suppliers will do well today whether AI lives up to its promise or not.

Passive Aggression

Another major factor is passive investing. An enormous amount of U.S. wealth is held in 401(k)s, IRAs and assets under management by wealth managers.

Relatively few of the account holders (or, for that matter, wealth managers) really understand active stock investing or risk management. Instead, they buy index funds, ETFs or other equity basket products that track the stock market itself or a specified segment.

When money is put into these index funds, the manager buys the stocks in the index. That buying pushes stock prices higher. That attracts more money, more buying and more gains in a positive feedback loop that drives stocks even higher. No Ph.D. is required. You just buy the index, sit back and enjoy the ride.

FOMO and TINA

Two other factors related to the passive investing feedback loop are fear of missing out (FOMO) and the idea that there is no alternative (TINA). It’s difficult to show up at a cocktail party or the country club when all of your friends are touting their stock gains and you’re not in the market.

It’s also difficult to put money in 4% cash equivalents or assets like gold when stocks seem set to deliver 10% returns as far as the eye can see.

FOMO and TINA have nothing to do with fundamental stock analysis. But they are real and powerful drivers of human behavior.

It’s not all fairy dust, however. There are actual fundamental drivers behind stock gains. Corporate profits are coming in strong (despite some high-profile missed estimates). U.S. energy self-sufficiency will keep the lights on in the U.S. and help prevent 1970s-style gas lines — even if we are not immune to the impact of higher prices.

That’s the argument for higher stock prices despite global problems. What could possibly go wrong?

Unrecognized Risks

The greatest threat to higher stock prices is that the market has not fully discounted the impact of the war in Iran and the unprecedented disruption in the supply of oil, liquid natural gas, nitrates for fertilizer, helium, sulphur, aluminum and other critical inputs.

The reality of these shortages has not hit home (with the exception of higher prices for gasoline and oil), but that does not mean the coast is clear.

An enormous amount of oil supply was already on vessels that left the Strait of Hormuz before the war began. That “floating supply chain” took weeks to be delivered to end users. That process has now been completed; the last deliveries have been made. There is nothing else on the way.

Major manufacturing nations like South Korea, Japan, Taiwan and China are now using up reserves. These may last another month or so. The critical point at which reserves are gone, no resupply is on the way and the Strait of Hormuz remains closed grows nearer by the day.

Even if the strait reopens tomorrow, the current shortages will raise prices, disrupt supply chains and possibly lead to a global recession. Markets seem to be ignoring this possibility in favor of a narrative that says the strait will reopen soon and all will be well.

Great Expectations (for AI)

Eventually, it may also occur to markets that AI is not producing any revenue. It’s consuming $1 trillion in capital and promising untold riches, but those riches have yet to materialize. AI is a powerful technology and it’s here to stay. But that does not mean it will be particularly profitable. It may even hurt growth if hundreds of thousands of skilled workers are laid off.

There are serious reasons to believe that AI will not be that productive at all. Output errors (called “slop”) not only cast doubt on the reliability of AI, but are also populating the internet, which AI itself uses as a training set for new applications.

More slop in the training set means even less reliable output than earlier versions. The dream of superintelligence (artificial general intelligence, AGI) is out of reach because of the inability of engineers to code abductive logic.

If the AI bubble bursts (which I expect), it will not only hurt the Mag 7 stocks but also the picks-and-shovels plays around it.

The Private Credit Canary

A separate trigger for a market meltdown is the crisis in private credit. Funds sponsored by top managers like Apollo, BlackRock, Blackstone, KKR, Morgan Stanley and others are severely limiting investor withdrawals.

Complicating matters further, if fund managers try to sell assets quickly, there may be very few buyers unless the seller agrees to slash the price dramatically — sometimes by half or more compared with the stated “book value.”

Supporters of private credit say that this private market is only worth about $4 trillion and that even 20% write-offs will not jeopardize the system. But this calculation ignores the impact of leverage and the effects of contagion. Losses in private credit can trigger runs on mid-tier banks, which then spread to funds that hold those mid-tier bank stocks and so on.

The Dark Side of Passive

But the greatest threat to the stock market may be the dominance of passive investing.

The same buying dynamic that drives stock prices higher can work in reverse. A market drawdown can cause investors to sell their index funds. This causes fund managers to sell the underlying stocks, which takes down the indices, causing more selling by investors and so on.

While passive investing can push markets higher gradually, it can also drive them lower with startling speed and violence.

What’s an investor to do? The positive story for stocks is real, but the downside potential is equally real. The solution is to hedge by diversifying your portfolio. Keep some stocks, but also maintain a slice of cash, a slice of gold and medium-term U.S. Treasury notes.

Gold is the everything hedge. Treasury notes are secure and will rally when the recession goes into high gear. Cash will give you the option to go shopping for bargains when everyone else is dumping stocks.

TINA and FOMO are not your friends. Diversification is.

The post Investing in a World in Turmoil appeared first on Daily Reckoning.

Fuel prices are going to clobber the American consumer. If you think it hurts now, I have bad news… higher prices are coming.

I expect that gasoline prices will break $6 per gallon this summer. The only good news is that high prices cure themselves…it just takes pain and time.

The closest thing I have to compare is the 2008 demand spike right before the global financial crisis. Back then, soaring gasoline prices created massive demand destruction. We all felt the pinch.

So, we stopped driving and conserved when we could.

We carpooled. When we went out to run errands, we ran ALL of them at once. And we changed our plans to accommodate the extra expenses. As you can see in this chart of data from the Energy Information Administration (EIA), the blue line is consumption. The red line is the price of gasoline:

The fuel price rose 90% in a year and a half. Bottom to top, fuel rose 150% in 3.5 years. In response, fuel consumption fell 3.8 million barrels per day (21.5%) from December 2007 to May 2009.

That’s a huge decline in demand. And as the economy cratered during the financial crisis, gasoline price collapsed. You can see what I mean in the chart below:

This is spot price, so it’s a little different from the EIA data, which is a reformulated price. Regardless, the prices went from low to high. Really high. To put that in perspective, $4.10 per gallon in 2008 is equal to $6.34 per gallon in today’s dollars.

The price fell off so much, so quickly because at the time, 60% of the demand for oil came from personal automobiles. And if we all stop driving, there’s plenty of oil again.

Today, light duty vehicles (cars, SUVs, and motorcycles) use between 52% and 60% of U.S. oil demand. That means personal vehicles still have a major impact on demand. And when driving becomes a luxury, a huge swath of the country will conserve.

However, there will be pain in the short term.

The Strait of Hormuz remains closed. All over the world, governments are burning through strategic oil reserves. The reality is about to come crashing home this summer.

I expect gasoline prices will blow through that 2008 high price. It’s going to be a bad summer for road trips, just like back then. With the benefit of hindsight, there is an answer to that though – invest!

Everyone should do what the big companies do and hedge their fuel expense. That’s a fancy word for buying something that goes up with the oil price. And there’s a simple way to do it.

The United States Gasoline Fund (NYSE: UGA) is a simple, liquid exchange traded fund (ETF) that tracks the gasoline price using options. That’s the only downside to the fund. It doesn’t actually own gasoline… because that’s not feasible.

Another simple way to play this trend is one of the refining ETFs like the VanEck Oil Refiners (NYSE: CRAK). This tracks companies that make money from refining margins. That’s not ideal, because oil prices are going up too.

However you do it, you absolutely must invest now. Rising fuel costs are going to hit every part of our lives. Even if you drive an electric car and have a stack of solar panels on your roof…you’ll still be impacted.

Now is the time to let your investment portfolio offset some of those expenses.

The post How to Hedge $6 Gasoline Prices appeared first on Daily Reckoning.

Chinese have a word – Jingju.

• 京 (Jing) means “capital” or “Beijing.”
• 剧 (Ju) means “drama” or “play.”

Translated, the term Jingju refers to a performance called “Peking Opera,” a traditional form of Chinese theater characterized by elaborate costumes and makeup, with loud singing, spectacular acrobatics, and grand gestures.

But it’s all just an act. And frankly, this is exactly how to process President Trump’s visit to China last week.

Presidents Xi and Trump walk past ceremonial honor guard. Credit White House Press Office.

From beginning to end (well, almost to the end; see below) the visit was one spectacle after another, replete with bands, ruffles, flourishes, honor guards and parades; a state visit to match all state visits. Or was it?

Because looking back, it’s apparent that the trip was cordial but cold; flashy but inconclusive; visually impressive, but mostly ineffective.

All in all, Trump’s recent trip to China was three days of Peking Opera; but in fairness, it did have something of a surprise ending… and for that please keep reading!

So, with this in mind let’s look behind the curtain at five things you probably didn’t see or know.

“My Friend Xi.”

“This has been an incredible visit,” said President Trump to China’s Xi Jinping during a visit to the elegant Zhongnanhai Garden, on his final day in Beijing. “I think a lot of good has come of it.”

Then there was this: “He’s a man I respect greatly. Become really a friend,” Trump said of Xi.

And more: “We’ve known each other now eleven years, almost 12 years. That’s a long time, and we’ve settled a lot of different problems that other people wouldn’t have been able to settle, and the relationship is a very strong one.”

Wow. So much bonhomie on display, right?

Presidents Xi and Trump, putting on the “Bro”-act. Credit Xinhua News Agency.

Not so fast, though, because much is missing from that brotherly narrative. Begin with the fact that even President Trump, like all official U.S. government travelers to China, was told not to bring any personal electronic devices with him, in order to protect his data from intercepts and hacks.

Okay, sure… At one point President Xi showed off a grove of old trees in Beijing’s Garden of Heaven. How touching! But of course, America has old trees too.

Presidents Xi and Trump admire old trees. Credit China XYZ Press.

What matters more than old trees, however, is a nation’s people and government. And Americans have lived as free citizens since 1776 (and okay, we can argue over details but not the Really Big Picture). While China is run by a hardline Communist government that blasted its way to power in 1949, and the country’s resurgent Maosim speaks for itself.

Trees or not, the fact is that before heading off to China, the President and every member of his official delegation was briefed and given strict protocols on what not to take along, which was everything and anything electronic.

No cell phones, iPads, laptops, thumb-drives; not even medical monitoring devices that people use for health reasons, if not routine metabolism checks like blood pressure or heartrate.

Nothing. Zero. Zilch. Leave it all at home. Because Chinese intelligence is just THAT good! And U.S. visitors have been badly burned in the past.

But yes, we’re “friends.” And we both have great old trees.

What’s for Lunch?

Meanwhile, at another point Trump and Xi had a nice sit-down for a chat, accompanied by lunch.

Chinese President Xi Jinping gestures during a meeting with President Trump. Credit New York Post.

And wow… it was quite a menu according to press reports:

• minced codfish in seafood soup
• crispy and stir-fried lobster balls
• pan-seared beef fillet stuffed with morel mushrooms
• kung pao chicken and scallops
• braised seasonal greens
• bamboo shoots, mushrooms and beans
• stewed beef in a bun
• steamed pork and shrimp dumplings
• chocolate brownies
• fruits
• ice cream
• coffee and tea

Yum-yum-yum… And Trump ate none of it. Not one bite.

Every morsel of the president’s food, plus water, his famous Diet Coca Colas – and even the ice cubes for the water and colas – was flown into Beijing either in advance on C-17s, or onboard Air Force One. Plus, every meal consumed by Trump in China was prepared in a U.S. mobile kitchen by an American chef, served on U.S.-supplied plates along with U.S. cutlery.

And just outside the dining area, a mobile U.S. hospital awaited any emergency, fully staffed by U.S. Navy and Air Force medical personnel. Just… in… case… something… happened.

All this was because of U.S. security concerns over Trump either being poisoned or otherwise ingesting some bizarre form of Chinese sci-fi nanotechnology embedded in the food. (Hey, that C0v!d bug of a few years back left an impression.)

Meanwhile, as Trump dined at the fancy luncheon with Xi (or did not dine, so to speak), other top U.S. officials and press received impromptu takeout bags from randomly selected McDonald franchises around Beijing.

No pan-seared beef & morels for the staff and press. Just McDs because that’s how worried U.S. intelligence and security services were about the Chinese government’s food.

Spies, Spies Everywhere

On the second day of the visit, President Xi threw an elaborate state dinner to honor Trump, and the spies were everywhere. Of course, it (almost) goes without saying that invited Chinese guests were all there to gather whatever intelligence they could pick up from the American side. That’s their job.

Meanwhile, Chinese serving staff were also in on the caper, such as this woman army officer who trailed White House adviser Stephen Miller:

How much should you tip the server when she’s a spy? Just curious.

According to Chinese commentator Bin Xie, this woman speaks perfect English. “That’s a must.” And undoubtedly, according to Mr. Bin, this woman and her associates at the fancy dinner are all intelligence agents. “Every one of them graduated either from the Beijing University of International Relations (UIR — 北京国际关系学院) or PLA Foreign Language Institute (解放军外国语学院) — both are China’s top spy schools.”

That’s just how it rolls at these big, elaborate state-sponsored feasts. And it’s just another act in the Peking Opera.

Speaking of Rolling…

Speaking of “rolling,” here’s the Presidential Limo, an armored car that tips the scale at over eight tons. It comes with bulletproof glass, an air filtration system, roll-flat tires, defensive armaments (can’t say much on that), and even a supply of fresh blood to match that of the Commander in Chief.

Fancy Presidential steel on wheels. Credit South China Morning Post.

This gleaming mini-tank, along with dozens of other vehicles for Trump’s Beijing motorcades, all arrived in China via a squadron of C-17 transport planes a few days ahead of Air Force One.

The president’s mechanized entourage included specially outfitted personnel carriers for armed security agents, plus redundant medical vans, communication vans, the above-mentioned mobile kitchen, and several trucks filled with supplies of presidential food, water, Diet Coke, ice cubes and much more.

Oh, and the U.S. even brought its own gasoline and diesel fuel for the vehicles. Because security dictates that the president cannot risk driving down the road and the engine conks out, a development which would definitely spoil his night at the opera.

Exit, Stage Right

Finally, we come to the last moments of Trump’s state visit, in which the Peking Opera displayed a dramatic, if not thrilling denouement. Some might even say that it was a shocking way for Trump and the U.S. entourage to exit the stage.

Per White House directive all American officials, delegates, staff and reporters on Air Force One were required – openly and notoriously – to trash ALL Chinese goods or items before boarding the airplane. Indeed, the Secret Service and U.S. Air Force obtained and displayed a dumpster for just that purpose, conspicuously labeled “Airport Waste.”

American officials and Air Force One passengers dump out all Chinese items. Credit New York Post.

Everyone on the U.S. side tossed every Chinese item straight into trash cans next to American airplanes. No exceptions. Nothing permitted. U.S. security protocols were airtight.

Not a single thing from China was permitted onboard the presidential jet. This included credential badges, lapel pins, souvenirs, gifts, and all burner phones that any of the U.S. group used during their stay in the country. It all went to trash, and in an astonishing photo, even President Trump himself was seen tossing Chinese items into a bin.

Nice visit, eh? Trump tosses his Chinese stuff. Credit Times of India.

In its own way this was an ultimate geopolitical power move by the Trump administration; truly a public slap in the face to the Chinese Communist hosts.

Based on (mostly) foreign press accounts – cuz almost all U.S. press carefully curated this very dramatic aspect – the astonished looks on the faces of Chinese officials said everything. That is, China invests enormous cultural and diplomatic thought and credibility on the kinds of gifts it presents to foreign leaders and emissaries. As a rule, every item is deliberately selected and thoroughly screened. And returning, let alone trashing, an item is a countermove that lands like a punch in the nose.

In essence, the Trump administration publicly signaled to China that American officials, and all others associated with the visit, would not take a single thing back from Beijing to U.S. soil. And in this respect, it reflects much about the overall outcome of the state visit.

Thank you, but no thank you. Chinese gifts in trash. Credit Times of India.

Indeed, this gift-dump was far more than a security measure. The optics were like a laser beam burning holes in Chinese drones above the oceans. Chinese officials, who no doubt had spent weeks preparing presentations, watched it all get left behind on the runway. All this, while Trump proceeded to his airplane, boarded, flew away and left it all behind without looking back.

President Trump walks towards Air Force One at Beijing Capital International Airport. Credit White House Press Office.

And as the spectacle and Peking Opera of his state visit faded in the rearview mirror, so to speak, Trump headed home, played golf the next day, and – from what we hear – worked on plans to bomb Iran into powder.

I hope you enjoyed the show… And that’s all for now.

Thank you for subscribing and reading.

The post Trump’s China Trip: Five Things You Didn’t Know appeared first on Daily Reckoning.

I saw a fascinating clip on Twitter/X recently.

At the graduation ceremony for the University of Central Florida, the commencement speaker brought up AI.

“The rise of artificial intelligence is the next industrial revolution.”

BOOOOOO! HISS! The new college grads are not fans.

Source: X

Gloria Caulfield, the speaker, was shocked by the negative response. “What happened?”, she asked in a Long Island-tinted accent.

Eventually the speaker continued:

“Only a few years ago, AI was not a factor in our lives.”

And the crowd goes wild cheering at that nostalgic thought. But then…

“And now, AI capabilities are in the palm of our hands…”

The crowd absolutely hated this line. More, louder booing and hissing. The speaker said it hesitantly. She knew it wasn’t going to go over well, based on prior reactions. If this young crowd would have had rotten vegetables handy, a volley of tomatoes and eggplant would have been launched in Gloria’s direction.

Young People (Understandably) Hate AI

Put yourselves in the shoes of a young American for a moment.

Houses are unaffordable. Rent and food are almost as bad. To have children comfortably, you’ll need to be in the upper 10% of earners (depending on the area).

You’re watching the stock market zoom ahead, but have little or none invested.

Your country is importing hundreds of thousands of foreign workers, mostly from India, to fill tech jobs. They’re willing to work 60-80 hours a week for far less pay.

And now, along come AI agents. Autonomous artificial workers who plan, complete, test, and complete complex tasks. Coding is currently the primary target, but agents will rapidly expand to every corner of the white collar world.

Ken Griffin’s Revelation

Billionaire Ken Griffin, founder of giant hedge fund Citadel, has been an AI skeptic. Up until now.

With the latest agents, his team is making a disturbing amount of progress. Ken says he went home on a recent Friday afternoon “depressed” about the societal changes these agents would bring.

An excerpt from Fortune’s reporting:

For Griffin, the most striking proof isn’t in coding or content—it’s in high-end financial research. Work that Citadel would previously have assigned to teams with master’s degrees and PhDs in finance, work that took weeks or months, is now being completed by AI agents in hours or days.

“To be blunt, work that we would usually do with people with master’s and PhDs in finance over the course of weeks or months is being done by AI agents over the course of hours or days,” Griffin said at Stanford.

We’ve entered the disruption stage now. And young people are on the front-lines. The first jobs cut were entry-level, but now AI is eating its way up the food chain.

Fortunately AI is still horrible at picking stocks and writing, which is our speciality. And honestly, I don’t see them getting significantly better anytime soon. AI models are trained on the entire internet, good, bad, and horrible. But anything is possible, and nobody is 100% safe from the coming wave.

Three Paths – Blue Collar, AI Master, or Entrepreneur

As I see it, young people today have three primary paths to choose from.

First, they can take the blue collar route. As I’ve mentioned before, my 16-year old son will be starting an apprenticeship to become an electrician this summer. I’m proud he chose this path, and think it’s a great decision.

Opportunities for plumbers, electricians, welders, mechanics, and other blue collar workers are wide open. It will be many decades before robots replace these jobs.

And of all people, Nvidia CEO Jensen Huang recently acknowledged this trend.

“AI gives America the opportunity to build again. Electricians, plumbers, iron workers, technicians, builders—this is your time. AI is not just creating a new computing industry, it is creating a new industrial era.”

Isn’t it fascinating that the primary beneficiary of the AI boom is touting blue collar work? There’s a good reason for it…

Path #2: AI Masters

The second path young people can choose is a bit riskier, but has a higher upside. They can attempt to become an “AI master”. After all, there will still need to be people in the loop.

We will still need people checking the code AI writes, assigning projects, and overseeing progress.

Over the past few years a saying has taken hold, and it’s worth repeating. There are a few different versions, but here’s mine: “Your job won’t necessarily be taken by AI, but it will be taken by someone using AI better than you.”

Path #3: An Entrepreneurial Boom

The third path, of course, is becoming an entrepreneur. And AI makes this easier than ever. Even non-technical people can write solid code now, so the tech part of building a business has certainly become easier.

I expect many young people will take the entrepreneurial path. They may not have much of a choice in the matter, assuming they’re determined to enter the white collar world.

I fully expect a small-mid sized business boom over coming years. And though these businesses won’t hire as many people as they used to, there will still be significant opportunities to hire smart people.

A Breaking System

For many decades, the goal of most parents was to send their kids to college so they can find a good white collar job.

This era is ending. The transition may take another few decades to complete, but we are now headed in a different direction.

The future of white collar work will look like a smaller number of “AI masters” managing fleets of AI agents.

Blue collar work is on the rise. It will become an increasingly popular option. But many people are still stuck playing the status games, where the “rules” say we must send our kids off to university. They don’t want to tell the neighbors that little Billy’s going to be a plumber. This will change rapidly if AI plays out like I expect it to.

Young people today have many things to be upset about. And they’ve thought about these issues far more deeply than we have. So consider reaching out to the young people in your life, and asking them about their plans.

If they seem confused about what to do, ask if they’ve considered a blue collar career. I’m convinced that it’s the best path for millions of young Americans.

The post Why College Grads HATE AI appeared first on Daily Reckoning.

“Nvidia killer.”

That’s the phrase suddenly getting attached to Cerebras Systems after one of the wildest IPO debuts we’ve seen in years.

Yesterday, the company priced its IPO at $185 per share.

Then the stock opened around $350.

Demand reportedly exceeded available shares 20-to-1.

In other words, investors desperately wanted in.

Now naturally, investors are asking the obvious question:

What exactly is Cerebras?

And more importantly… should you buy the stock?

What Does Cerebras Actually Do?

Whereas Nvidia builds chips roughly the size of a Post-it note…

Cerebras builds chips roughly the size of a dinner plate.

This size difference is the key to Cerebras’ entire strategy.

Normally, AI systems rely on thousands of smaller chips working together at the same time.

These chips constantly need to communicate with one another through networking systems called “interconnects.”

(Companies like Broadcom, Credo, Astera Labs, and Marvell supply these interconnects, as well as the chipmakers themselves.)

But as AI models get larger and more complex, all that communication starts creating traffic jams.

Cerebras is trying to eliminate that problem.

Instead of connecting thousands of smaller chips together, the company builds giant chips called Wafer-Scale Engines (WSE).

This allows far more of the work to happen in one place, dramatically reducing the amount of data bouncing around between separate processors.

Cerebras also packs huge amounts of ultra-fast SRAM memory directly onto the chip itself.

Without getting too deep into the weeds, SRAM is much faster than the traditional memory used in most AI systems.

(Companies like Micron, SanDisk, SK Hynix, and Samsung supply traditional memory chips used in most AI systems.)

Cerebras claims its systems can generate AI responses many times faster than traditional GPU-based setups in certain workloads.

Of course, there’s a catch.

Building one giant chip is incredibly difficult and expensive.

If something goes wrong while manufacturing a normal chip, you throw away one small processor.

If something goes wrong on a wafer-scale chip, you could lose the entire dinner-plate-sized processor.

This is what makes Cerebras so fascinating.

The company is attempting something very few semiconductor companies would even try.

The Competition With Nvidia

Let’s slow down a bit on the “Nvidia killer” narrative.

Cerebras has fascinating technology.

But replacing Nvidia is an entirely different challenge.

Here are the biggest reasons Nvidia’s position still looks extremely secure:

CUDA Is Still A Huge Advantage – Almost every major AI developer already builds on Nvidia’s CUDA software platform. That makes switching away from Nvidia extremely difficult and expensive for large companies.

Nvidia Is More Flexible – Nvidia’s chips are used across gaming, AI, robotics, autonomous vehicles, and scientific computing. Cerebras is much more specialized toward massive AI models and ultra-fast inference.

Nvidia Keeps Adapting – Cerebras gained attention partly because of its inference speed. But Nvidia responded by acquiring Groq in late 2025, bringing similar ultra-fast inference technology into its own ecosystem.

This doesn’t mean Cerebras can’t succeed.

But investors should be careful assuming one impressive IPO suddenly means Nvidia’s dominance is coming to an end.

Cerebras Also Has Some Major Risks…

Of course, investors need to understand this stock comes with some very real risks.

And after trading up to $350 following the IPO, these risks matter even more.

Here are the biggest ones I see right now:

The Valuation Is Extremely Expensive – Cerebras generated roughly $500 million in revenue in 2025. And as I type, the company’s market capitalization is around $70 billion. That means the stock is trading at roughly 140x sales. That’s dot-com bubblicious.

Revenue Is Highly Concentrated – Roughly 86% of the company’s revenue came from just two UAE-government-linked entities. That’s a massive customer concentration risk for a newly public company.

Profitability May Not Be Sustainable – Cerebras recently reported its “first profitable year,” but much of that profit reportedly came from a one-time accounting gain rather than normal business operations.

A Large Wave Of Shares Could Hit The Market – Over the next six months, insider lockups will gradually expire, allowing a large amount of additional shares to potentially enter the market. That can create meaningful selling pressure after a huge IPO rally.

In other words, Cerebras may absolutely become an important AI infrastructure company.

But investors should probably expect extreme volatility from here.

So… Should You Buy Cerebras?

Cerebras is a legitimately fascinating company.

This isn’t some random AI startup throwing buzzwords around to attract investors.

The technology is real.

And the company clearly has a unique approach to solving one of the biggest problems in AI right now – moving enormous amounts of data quickly enough to handle larger and larger models.

I also think the broader AI infrastructure boom is still in the early innings.

There’s room for multiple winners here.

Nvidia can continue dominating while companies like Cerebras carve out important niches in the market.

That said, investors need to separate “great technology” from “great stock.”

After the IPO frenzy, Cerebras already trades at an extremely aggressive valuation.

And with insider lockups expiring over the next several months, I’m betting we’ll be able to pick up shares at more attractive prices in the future.

Personally, I’m not chasing the stock after a near-doubling right out of the gate.

But I am putting Cerebras firmly on my watchlist.

Because while the valuation looks overheated, the underlying technology is interesting enough that this could eventually become a very important company in the AI ecosystem.

The post The “Nvidia Killer” IPO appeared first on Daily Reckoning.

Both President Trump and Iranian leaders are standing firm on their red lines.

Before peace negotiations restart, Iran has made 5 demands:

1. Ending the war on all fronts, including Lebanon
2. Lifting all sanctions
3. Releasing frozen Iranian assets
4. Compensation for war damages and losses
5. Recognition of Iran’s sovereign rights over the Strait of Hormuz

Trump called the proposal “TOTALLY UNACCEPTABLE!”.

The President has criticized Obama fiercely for releasing frozen Iranian funds, and hasn’t backed down on that subject.

As far as paying compensation, that’s not going to happen either. Sanctions relief could come in time, but asking for a total end before negotiations restart is a pipe dream.

And ending the war in Lebanon would mean Israel would have to stop bombing Hezbollah and likely give up the 10% of the country it currently occupies.

Nearly every one of these 5 points is a non-starter. And Iran knows it.

To understand the thinking here, we have to apply game theory.

A Mexican Standoff

In the classic Spaghetti Western The Good, The Bad, and The Ugly, there is a classic Mexican standoff near the end.

All three men in the standoff want the gold buried nearby. All are armed and deadly with their weapons. The scene’s tension is legendary. You don’t see filmmaking like this anymore.

I won’t spoil the ending for those of you who (somehow) haven’t seen this excellent movie. But these standoff scenes have become a cinematic staple for a reason.

Here is how Wikipedia defines a Mexican standoff:

“A Mexican standoff is a confrontation where no strategy exists that allows any party to achieve victory. Anyone initiating aggression might trigger their own demise. At the same time, the parties are unable to extract themselves from the situation without either negotiating a truce or suffering a loss, maintaining strategic tension until one of those three potential organic outcomes occurs or some outside force intervenes.”

This is essentially where we are with Iran. Everybody is armed to the teeth, staring each other down, wondering if there’s a resolution that doesn’t involve missiles, bombs, and drones.

With our current situation, however, the world economy hangs in the balance.

Last Man Standing

Early on during the conflict, the U.S. Navy allowed Iranian oil tankers to continue passing through the Strait of Hormuz and deliver their cargoes, mostly to China.

However, on April 13th, Trump ramped up the pressure with a blockade. A few Iranian ships have snuck through, but most are stuck.

Iranian oil is piling up in storage. They are likely close to reaching capacity. And when that storage is full, things get tricky for Iran.

The country’s oil wells are particularly vulnerable to shut-ins (shutting down production). Stopping the flow can seriously damage the wells. We saw this during COVID, which combined with U.S. sanctions, crippled Iran’s oil exports for years:

This was an absolutely devastating blow for Iran. Oil is their biggest industry, by far. Their currency was annihilated, and it’s getting destroyed even worse today. But somehow they buckled down and weathered the storm from late 2019 to 2022.

The blockade is currently costing Iran about $500 million per day. That’s a massive hit. President Trump has also sanctioned Chinese oil refineries for processing Iranian crude, which was a big trade war escalation.

However, it sounds like he may back down on this matter after his recent visit to Beijing. China has essentially told the refineries to ignore the sanctions, which is the first time that’s happened. Another Mexican standoff.

President Trump is betting that Iran will break first. I’m not sure that’s a great bet. This is a country that’s been under harsh sanctions for 47 years, cut off from the world.

And like it or not, the current leadership remains firmly in charge.

Iran vs. The World Economy

I ran some numbers this morning, and it looks like so far, the world has spent about an extra $600 billion on oil, fertilizers, and liquefied natural gas (LNG).

The energy crisis is beginning to work its way through the global economy. Inflation is picking up, as we covered yesterday.

When the price of fuels, plastics, and fertilizers spike, it affects almost everything. And it’s really only just beginning.

Yields on government bonds around the world are spiking. Investors are demanding higher yields to account for higher inflation. This is a bad sign for a debt-bloated world.

So while Iran is under serious pressure, so are the rest of us. Americans are struggling with high energy and food prices, and don’t want another prolonged war in the Middle East.

Last Man Standing

Despite Iran’s economy being put in a vise, I don’t expect them to give in.

For them, this conflict is existential. So they’re willing to accept prolonged economic pain. Or even a return to war.

Are they bluffing? Perhaps. But it doesn’t seem like it. They are united with a certain religious and nationalist zealotry.

Can we say the same? Are we willing to restart the war, or let the Strait of Hormuz remain closed for another few months, or even the rest of 2026?

If Hormuz remains shut, the pain will quickly become extreme. And despite his threats to end Iran as a civilization, I don’t think Trump wants to restart the war. We were the party which asked for a ceasefire via Pakistan. And we know that Iran will strike back at Gulf oil infrastructure and further damage U.S. and Israeli targets in the region.

I hate to say it, but President Trump has painted himself into a corner. It’s a classic Mexican standoff. There are no good exit options.

At the beginning of this conflict, back on March 7th, Jim Rickards made a bold statement.

In a war of attrition, really a war for survival, victory goes to the last man standing. That may be Iran.

At the time, almost nobody else was saying this. The U.S. appeared triumphant and unstoppable. He also predicted that U.S. munitions would become a problem, and they have. The March 7th piece, Jim Rickards’ Most Surprising Iran Takes, is worth a re-read today. He nailed it.

Exit Possibilities

President Trump wants to find an exit that can be spun as a win. Frankly, this is a longshot. So for now, the Mexican standoff will continue.

Eventually we may simply have to withdraw. It’s happened before. Vietnam, Afghanistan.

What that would look like isn’t exactly clear. Would all the U.S. bases in the Gulf be repaired and rebuilt? Even though they’re under threat from Iranian missiles and drones? If not, that’s a sea change in U.S. power projection in the region. If they are rebuilt, that’s going to be a rather expensive proposition, especially considering the new defensive measures which would be required.

Would the Strait of Hormuz remain under Iranian control? That’s another key consideration.

Ultimately, a deal remains the most likely outcome. But it could take years to reach a lasting agreement.

In the meantime the world economy will suffer. Somehow, stocks are just below fresh all-time highs. But I don’t see that lasting as this situation drags out.

This is why every past administration avoided a hot war with Iran. Now President Trump must find a way to salvage the situation. Even if that means making compromises.

If he can put aside his pride and make a deal, my respect for Trump will only rise. But it remains unlikely until the pain becomes unbearable. So buckle up.

The post A Mexican Standoff With Iran appeared first on Daily Reckoning.

Inflation came in hot in April.

The producer price index (PPI) rose 6% year-over-year. That’s the price companies pay for wholesale goods.

The bad news is that consumer inflation (CPI) tends to follow PPI with a lag of around 2 months.

The chart below shows how closely CPI and PPI track (with PPI running 2 months ahead):

Source: Robert infra on X

Note the large spike from back in 2021 and 2022. That was related to post-COVID inflation caused by massive monetary stimulus. And of course in 2022 Russia invaded Ukraine, which compounded the problem by spiking oil and fertilizer costs.

Here’s another chart showing how recent inflation trends (green) match up to the 1970s (blue):

It’s worth noting that official inflation was higher in the 1970s, peaking out at around 12% in the middle wave, and 14.5% in the final move.

Our “middle wave”, which peaked in 2022, rose to a high of around 8.5% inflation.

This is mostly due to differences in how CPI (inflation) is measured today. Now we have fancy tools like “hedonic adjustment” which make inflation appear lower than it truly is.

So in reality, we’re on a similar trajectory to the 1970s inflationary period. The primary difference is the level of debt we have today.

America’s current debt to GDP ratio is around 125%. In the 1970s it topped out around 35%. So we have 3.5x more debt today in comparison to the size of the economy.

Today’s huge debt load severely limits the Federal Reserve’s options.

To kill the 1970s inflation wave, Paul Volcker hiked to a crazy 20% fed funds rate. That is no longer an option due to the huge amount of debt we have.

Even if we see another major wave of inflation, I don’t see the Fed hiking interest rates. The math simply doesn’t work.

The Fed’s Dilemma

President Trump’s nominee, Kevin Warsh, was just confirmed by the Senate.

Tomorrow he will take over from Jerome Powell, who is considered somewhat of an inflation “hawk”, meaning he hiked interest rates to attempt to control inflation.

However, as the chart below shows inflation has remained above the Fed’s 2% target for 62 consecutive months.

Source: Charlie Bilello on X

President Trump has criticized Powell sharply over his refusal to cut rates further. And he’s not wrong.

Even though on paper the Fed “should” be raising interest rates, it would be extremely destructive to do so.

We have reached a point in this debt cycle where just paying the interest on the federal government’s debt costs $1.2 trillion per year. Here’s a 10-year chart:

Source: St. Louis Federal Reserve

In 2020, when interest rates were lowered to near-zero, interest costs got as low as $500 billion. Now that cost is $1,218 billion annualized ($1.2 trillion).

In 2025, total U.S. tax revenue was about $5.2 trillion. So 23% of taxes are being spent to pay interest on our debt. It’s outrageous.

At this point, higher interest rates would be devastating. We’d rapidly be paying $2 trillion in interest. Then things would rapidly snowball out of control.

In a perfect world the Federal Reserve is supposed to be “independent”. They are only supposed to adjust interest rates to cap inflation at 2% and keep employment high.

In the real world, they need to think about our country’s debt situation. And that means that in the mid-long term, rates need to be lower.

Financial Repression

This brings us back to the concept of “financial repression”. My belief is that the Fed will be forced to cut rates even as inflation is well-above target. They will have to buy large quantities of U.S. debt, essentially financing government excess.

Eventually they will institute “yield curve control” and keep rates artificially low, even if inflation is out of control.

I’ve been focusing on this topic so much lately for a reason. We’re approaching the point where drastic measures are going to become necessary to control the debt spiral.

Kevin Warsh will soon begin his term as Fed Chair. I believe he will go along with Trump’s wishes and cut rates, even if inflation is high.

Rate cuts may not happen immediately, but we need to start lowering this year. The debt situation is becoming urgent. And that will take precedence over inflation, as uncomfortable as it may be.

Starting as early as next year, more drastic measures will likely become necessary. Massive QE (quantitative easing), eventually leading to yield curve control.

During times of financial repression, hard assets and natural resources are key to preserving and growing wealth.

I want to own miners with huge projects that will last another 20 or 30 years. I want to own the best oil producers with billions of barrels of oil in the ground. Companies with real assets that will grow in value no matter how crazy things get.

We will continue to explore ideas to help readers navigate the coming storm.

The post The Next Inflation Wave is Here appeared first on Daily Reckoning.