The Strait of Hormuz is open fully. Probably. Mostly. In a limited fashion. For now.

Regardless, oil is crashing. U.S. indexes extended gains into a 12th consecutive day. Gold, silver, and miners are ripping higher.

We still don’t have much clarity on when the conflict with Iran will be resolved.

So today we’re going to switch track and cover implications of the looming U.S. debt crisis.

Yesterday Bloomberg released an article which went mostly unnoticed due to the Middle East drama.

Source: X

The article covers a disturbing interview with Hank Paulson, our notorious Treasury Secretary during the Global Financial Crisis. The $700 billion TARP bank bailouts were Hank’s baby.

Paulson’s bailouts rescued big banks with taxpayer dollars, including Goldman Sachs, where Hank was previously CEO. The bailouts were almost 2 decades ago, but it still makes my blood boil.

Anyway, in this new interview Paulson warns that the U.S. needs to prepare a “back-up plan in order to avert a potential collapse in demand for Treasuries.”

“When you hit the wall and you’re trying to issue Treasuries and the Fed is the only buyer and the prices of the Treasuries are going down and interest rates are up, that’s a dangerous thing.”

In other words, investors might soon start demanding higher yields from U.S. Treasury bonds, notes and bills.

This would be a disaster, because U.S. Treasury yields spike, our debt problems would soon snowball out of control.

For example, of America’s $39 trillion in federal debt, about $9.3 trillion will have to be refinanced this year. The majority of our debt these days is in short-term securities (nobody wants to buy 30 year U.S. bonds anymore).

The current yield on a 3 month Treasury is 3.68%. If that spikes to 5%, or even higher, our debt problem would quickly spiral out of control. We’re already paying more than $1 trillion per year in interest costs alone. If yields on Treasuries are much higher, we’ll quickly hit $2 trillion, then $3 trillion, and on… Utterly unsustainable.

It’s a big deal that a well-connected guy like Hank Paulson is sounding the alarm. It’s recognition that this problem is no longer decades away. It’s immediate.

1940s Solutions?

The last time American debt-to-GDP was this high was during WWII.

Source: Economic Policy Innovation Center

During the 1940s, the Federal Reserve and Treasury Department dealt with soaring debt using “yield curve control”.

In other words, the Fed committed to buying as many Treasuries as required to keep yields at rock-bottom levels. So it’s very interesting that Paulson says we could soon be in a situation where “the Fed is the only buyer,” of Treasuries.

The chart below tells the 1940s story. The blue line is inflation, and the red line is the yield on a 3-month Treasury bill.

This chart shows how anyone holding cash or bonds got hosed. This is what’s known as “financial repression”. Even though inflation is near 20%, investors were still getting less than 1% on Treasury bills. At those levels, that’s a 19% loss of purchasing power annually.

Gold wasn’t an option then, at least in the U.S. Owning bullion was illegal for American citizens. And the price was capped at $35/oz regardless.

Fortunately today Americans can own precious metals. And they will be key to preserving wealth going forward.

So what did work in the 1940s? Commodities. Hard assets. Industrials. Defense.

I believe a return to yield curve control is inevitable. It probably won’t happen for a few years. If and when it does, you’ll want to have plenty of exposure to select foreign stocks and natural resources.

Even Higher Taxes?!

In 1939, only around 5% of American workers paid income tax. It only affected the wealthiest citizens.

By 1945, 60% of people paid income taxes. So in the 1940s, the debt problem wasn’t solved through yield curve control alone. This period also dramatically increased taxes.

And as we know, once you give the government an inch, they take miles.

In his interview, Hank Paulson hinted at more tax hikes ahead, “It’s going to take increased revenues, taxes, and dealing with expenses.”

This strategy worked during the 1940s because taxes were low going in. But now? Many are already paying 30-40% income taxes, then even more on capital gains, sales tax, and inheritance. We’re already taxed in countless ways.

Still, if the Democrats win midterms and the presidency in 2028, we could absolutely see even higher taxes ahead.

This is why it’s an urgent priority to get as much of our savings as possible into tax shelters. IRAs, 401ks, college savings plans, etc. Max them out whenever you can.

Once you get some money into a tax shelter, make sure you own some hard assets, precious metals, and emerging markets. These assets will be key to wealth preservation and growth in the chaotic decade ahead.

Oh yeah, and I would also limit your long-term exposure to U.S. Treasuries. It’s fine to hold some over the next year or two. In fact, they would rise in value if rates fall. But over the long run, these are NOT going to be a staple of a healthy retirement plan.

U.S. Treasuries (bonds, bills, notes) will be hardest-hit in the coming financial repression. Inflation will eat away purchasing power, as yields remain at artificially low levels.

We’ll discuss alternatives to U.S. Treasuries for retirement soon.

The post Sounding the Alarm on American Debt appeared first on Daily Reckoning.

The S&P 500 just reached a fresh all-time high.

In the middle of an energy crisis, two wars, an emerging credit crisis, and while deficits are screaming higher.

Stocks are famous for “climbing the wall of worry”. But this seems more like scaling Mount Everest in sweatpants and a hoodie.

The current optimism is based around a widespread perception that the war is over. Even if this were true, the damage already done is significant.

Yes, the ceasefire with Iran is holding. And it will hopefully be extended before its April 20th expiration.

In other positive news, President Trump announced that Israel has agreed to a 10-day ceasefire with Lebanon (home to Hezbollah).

Source: Truth Social

This is a positive signal. But achieving lasting peace between Israel and Hezbollah will be a major challenge.

Still, the ceasefire with Lebanon was one of Iran’s key sticking points. So we’ll have to see if this leads to progress toward opening the Strait of Hormuz.

A Deal Could Be 6 Months Out

The ceasefires are real progress. But they are fragile, and may only be temporary.

Importantly, the Strait of Hormuz remains closed. Even more closed than it was, with the U.S. blockade now preventing Iranian cargoes from leaving the Gulf.

The key to a lasting resolution remains a deal.

But according to reporting by Bloomberg, the negotiations could take 6 months:

“Some Gulf Arab and European leaders believe that a US-Iran peace deal will take about six months to be agreed and that the warring sides should extend their ceasefire to cover that timeframe, according to officials from the regions familiar with the matter.”

I agree, finding a lasting deal is going to take at least that long.

Naturally, we hope that the Strait will re-open before then. But this is Iran’s primary leverage point. They won’t give it up easily.

Meanwhile, the White House just highlighted a statement by Secretary of War Pete Hegseth, stating that, “This military operation is dictated by our terms”.

President Trump seems to believe that Iran can be pressured into quickly re-opening the Strait and making a deal. Let’s hope it works.

A Return to Wartime Production Mode?

In other news, the Pentagon has approached Ford and GM about converting some of their factories to produce weapons for the military. WSJ:

“The Trump administration wants automakers and other American manufacturers to play a larger role in weapons production, reminiscent of a practice used during World War II.

…The Pentagon is interested in enlisting the companies to use their personnel and factory capacity to increase production of munitions and other equipment as the wars in Ukraine and Iran deplete stocks.”

Of course, we do need to replenish weapons used in Ukraine and the Middle East. Many key systems, such as HIMARS and cruise missiles, are backlogged and allies have been waiting for years.

But the urgency of converting existing factories may indicate that these weapons will be needed soon.

Last night the Washington Post reported that another 10,000 American soldiers are on their way to the Middle East, along with the George H. W. Bush aircraft carrier strike group.

Additional U.S. missiles, bombs, and military aircraft are also being flown and shipped in from around the world.

Iran is busy repairing its underground “missile cities”, which were hit hard by U.S. and Israeli bunker-busting bombs. The country is also taking advantage of the ceasefire to repair bridges, power plants, energy infrastructure, and shift military equipment around.

Make no mistake. This war could resume at any time. And the market continues to ignore this possibility.

Portfolio Prepping

I’m still holding a few long-dated puts, but these remain a very small portion of my portfolio. The best hedge to own in this situation is still select oil stocks. Companies not affected by Middle East chaos.

Gold and silver have rebounded nicely, and miners have followed. I’m still concerned about the short-term outlook for miners, until we see the Strait of Hormuz open back up.

As long as oil prices stay elevated, it will be a weight on miners’ backs. But the bull case remains strong. And whenever this energy crisis is resolved, I expect miners to resume their extreme outperformance. So for long-term holders, staying put is the best option. That’s what I’m doing.

It makes sense to continue holding a higher than normal cash position here. While the average investor is rushing back into tech, a more cautious approach is warranted.

Ridiculously Expensive

U.S. stocks are considerably more expensive today than during the 2000 dotcom bubble peak. That’s according to a number of measures, including dividend yield, price/sales, and my favorite – the Buffett Indicator.

The Buffett Indicator compares US stock values to GDP. It is Warren Buffett’s favorite measure of how expensive stocks are. Here’s a long-term chart:

As you can see, during the dotcom bubble the Buffett Indicator peaked 137%. We didn’t surpass that level until the COVID market craziness.

Today we’re sitting at a shocking 223%!

So American stocks are worth 223% of GDP. That is… historically bubbly. This is why Warren Buffett is sitting on $373 billion worth of cash, more than a third of Berkshire Hathaway’s assets.

So the fact that people are rushing to buy U.S. stocks, in the middle of all this chaos, is a little crazy.

Our strategy of owning hard assets and emerging markets is working, and should continue to outperform the S&P 500 and Nasdaq going forward. If we get a broad selloff, it’ll go down less. And the upside remains better than expensive U.S. indexes.

My advice: don’t get caught up in the excitement and buy overpriced stocks.

More soon.

The post Climbing the Mt. Everest of Worry appeared first on Daily Reckoning.

Let’s start with a tweet that’s been circulating and making Britons choke on their morning biscuits. It goes something like this: Mississippi’s GDP per capita — America’s poorest state, the one the rest of America makes fun of — is higher than the United Kingdom’s.

Mississippi. The state synonymous with poverty, crawfish, and “bless your heart.” That Mississippi now outproduces the cradle of the Industrial Revolution on a per-person basis.

Congratulations, Mississippi. You’ve officially lapped a G7 country.

Before we get into it, a few caveats. First, I’ve written articles arguing that comparing two different levels of polities using GDP per capita is erroneous… and I even use Mississippi versus Germany as an example why.

Second, the South isn’t rising. It’s already risen. By that, I mean the area from Louisiana up to Arkansas, over to Kentucky and West Virginia, and then down to Florida, is the largest economic region in the United States. That region doesn’t include Texas.

So it should be no surprise that Mississippi is doing well. The shock is that Britain is doing so poorly.

Let’s check the numbers.

The Numbers Don’t Lie (Even If They’re Complicated)

The headline comparison is real. Mississippi’s nominal GDP per capita sits in the low-$50,000s. The UK’s comes in around $45–49k. So on the most basic measure — total economic output divided by heads — the poorest American state edges out Great Britain.

Now, economists will immediately reach for PPP adjustments — purchasing power parity, which corrects for the fact that a pound in London and a dollar in Tupelo don’t buy the same thing. Fair enough. Once you run those numbers, both Mississippi and the UK fall into roughly the same $50–60k range. A statistical draw. Barely.

But here’s where things get genuinely embarrassing for the Mother Country.

The Median Tells the Real Story

GDP per capita is an average. It tells you what the economy produces per person. It says nothing about what typicalpeople actually pocket after taxes, healthcare costs, and the general business of modern life.

So let’s look at median disposable income, which is what the person in the middle of the distribution actually has to spend.

The UK’s Office for National Statistics reports that median household disposable income is about £36,700 for the year ending 2024. Convert that to purchasing power parity dollars and spread it across household members, and the typical Briton is living on roughly $21,000–25,000 a year in real, spendable income.

Mississippi’s median household income is around $56,000–57,000. Adjust upward for the state’s rock-bottom price level — Mississippi is the cheapest state in America to live in, with a regional price parity index of just 84 — and the typical Mississippian has the purchasing power of roughly $35,000–38,000 a year.

That’s a gap of 50–60%. Not in the UK’s favor.

Britain, a country with a nuclear arsenal, a permanent UN Security Council seat, and an insufferable combination of snobbery and imperial hangover, is delivering its median citizen a standard of living meaningfully below that of the people America uses as its go-to punchline for rural poverty.

“But the NHS!” I Hear You Cry

Yes, yes. The caveats are real and worth noting, if only so you can’t accuse this column of cherry-picking.

The UK’s welfare state is genuine. Universal healthcare, subsidized university places, and a denser safety net are things that have real value that doesn’t show up in disposable income figures. What they’re worth and what they deliver is certainly up for debate.

The median Mississippian’s higher cash income gets eaten by healthcare premiums, out-of-pocket medical costs, and the necessity of owning a car. Strip out those private expenditures, and the gap narrows.

British wealth, particularly housing equity and pension rights accumulated over decades, also appears stronger than the income data suggest. The UK is a country where a lot of middle-class security is locked up in bricks and pension funds rather than flowing as monthly take-home pay.

And yes, Mississippi has inequality problems that Mississippi’s averages politely obscure. Plenty of Mississippians are genuinely poor by any measure.

Fine. All of that is true.

But here is what is also true: the median Briton — not the poor, not the rich, the person bang in the middle of the distribution — is living on less disposable purchasing power than the median resident of the state where, as the joke goes, the schools are so bad they make you feel better about everywhere else.

At least, that’s what the Office for National Statistics (ONS) spreadsheet says.

Wrap Up

Britain’s model has quietly traded away cash income for a large state and inflated asset prices. That was a fine bargain when house prices were still accessible, and the NHS wasn’t drowning. It’s a considerably worse deal for anyone born after 1985, locked out of housing, and staring at a crumbling public health system.

Meanwhile, GDP per head has stagnated. Relative to the US, British living standards have been in quiet, polite, and utterly catastrophic decline for the better part of two decades.

The Mississippi comparison is a diagnostic. When a typical citizen of a major G7 economy has less spending power than residents of the state that the rest of America reflexively uses as a synonym for “rock bottom,” something has gone very wrong in Westminster.

Mississippi didn’t win by getting richer. Britain lost by getting poorer.

Someone should probably tell the King.

The post Congratulations, Mississippi. You’ve Earned It. appeared first on Daily Reckoning.

Precious metals are starting to get their shine back.

Silver is now up $10/oz from its recent low of around $70/oz. Gold is up more than $400 from its dip to $4,400/oz.

Bullion is looking good here.

Miners are clawing back gains as well. The GDX gold miner ETF is up from a low of $79 back on 3/20 to $98 today. The SILJ silver miner ETF has bounced back to $32 from $26.

However, let’s not pop the champagne on miners just yet. The situation in the Middle East remains uncertain.

The ceasefire is holding for the most part, which is encouraging. But the Strait of Hormuz is still closed. And as we’ve pointed out many times, we are still miles apart from Iran on negotiation terms.

Higher oil prices mean higher costs for miners. So for now, I think the outlook for physical metals looks more certain than miners.

The world seems to think this crisis is over, but I’m not sold on that idea yet.

However, if (when) oil prices return to the below-$70 per barrel level, it’ll be off to the races for miners again.

We just don’t know when that will be. So for now, my recommendation would be to invest new money into physical gold and silver rather than miners. That can either be in the form of coins and bars, or ETFs like Sprott’s Physical Silver Trust (PSLV) and Physical Gold Trust (PHYS).

Today we’re going to focus on silver, and explain why we should see $100+ prices again soon.

Solar Demand Surges Silver Higher

Even before the conflict with Iran, energy prices were rising around the globe thanks to a surge in data center construction.

Now the world faces additional energy inflation, with oil and gas prices up sharply.

And as we predicted a few weeks ago, this is leading to a surge in demand for solar panels.

Around 19% of total silver demand comes from solar panels. Silver is the best conductor of electricity, and resists corrosion much better than copper.

So the tiny electrical connections on solar panels use silver, as shown below:

Solar panels can function for decades thanks to silver’s unique properties. And even with the metal at around $80/oz, it’s the only good option.

We shouldn’t be surprised that in the wake of this energy crisis, solar demand is booming. Here are a few recent headlines from around the world:

• BBC: UK Sees Surge in Solar Panel Demand Amid Rising Energy Costs
• Bloomberg: Malaysia’s Biggest Solar Firm Sees Jump in Demand on Iran War
• Impakter: Suniva to Invest $350 Million in South Carolina Solar Plant

Even once this crisis is resolved, I expect the world to continue installing solar at a rapid pace. Especially in the Asia-Pacific region.

Asia has now seen how quickly oil and LNG imports can disappear, and will look to reduce their dependence on imported energy. And that means a lot more solar power.

Silver’s Shanghai Premium

As I write this, silver is trading at around $79.20 per ounce in the U.S.

In Shanghai, China, however, it’s trading at $89.50. That’s a hefty 13% premium.

Source: GoldSilver.ai

The price is significantly higher in China due to the fact that China’s silver markets are based around physical metal. Much of their silver gets used for industrial manufacturing.

Almost 90% of solar panel manufacturing takes place in the country. There’s also a robust silver investing community in China.

Meanwhile, here in the U.S. we primarily trade silver as a paper contract on the COMEX. There is a growing silver investment movement, but it still hasn’t reached its potential yet.

The Shanghai premium means that physical silver supplies remain tight. Buyers are bidding up the price locally.

Industrial demand looks strong going forward.

What About Silver as an Investment?

We had our first real outbreak of silver fever late last year into January, when prices briefly reached $120/oz.

It was a perfect storm of booming industrial demand, combined with rising investment buying.

That was the first wave. I believe we’ll see another one soon.

Silver is the precious metal for everyday people. Gold led the way during the early stages of this bull market, driven largely by central bank buying.

And I think gold will do fine going forward. But the setup for silver looks even better. When that combination of booming industrial + investment demand hits again, we’re going to see fireworks.

In the midst of this energy crisis, it’s easy to forget we’re also due for a debt/credit disaster. And whenever that one kicks off, demand for silver (poor man’s gold) is going to skyrocket.

So despite all the chaos and change in the world economy, silver remains my favorite way to play precious metals.

It’ll be volatile. But the stars are once again lining up. Over the next few years, I remain confident we’ll see $200/oz silver.

The post Silver’s Next Wave Starts Now appeared first on Daily Reckoning.

A good friend and schoolteacher posted this question on Facebook the other day:

An honest question- PLEASE don’t turn it into politics- Do we not have our own oil in this country? Why do we not drill more and supply more? If we have it and can drill, why are we not? Prices would drop, no?

I posted a short answer, but I keep hearing this question from all over. The snarky, economics answer is that markets work and oil is too useful to be cheap for long. Before we start, we need to learn a new word (for some of us):

To economists, oil is fungible. It means that a barrel of oil in Abilene is the same as a barrel of oil in Singapore. And so, if the price of a barrel in Singapore costs more than a barrel in Abilene (plus shipping costs), then we should buy the barrel in Texas.

But there’s a much more interesting and detailed answer…

Okay, buckle up. Because I want to take a deep dive. You see, I love oil. Back in the early 2000’s, I thought that was going to be my career path. I partnered with some wild-catters on oil wells in West Texas. It fascinates me, so hopefully I can share some of that with you!

Let’s start with the fact that oil is a global market. In other words, you can swap barrels from almost anywhere. There is a little more nuance that we’ll get to in a minute. But generally, you reach a price point where you can substitute crudes to save money.

That balances the price of oil, so you don’t have one region with super cheap oil and another super expensive. In other words, the market works…

But, since I love oil so much, I’m going into a little more detail on this. We’ll start with chemistry and go on from there.

You see, oil isn’t monolith…it’s not like a metal, which is made of identical atoms. Oil is like a soup. It’s made up of chains of “hydrocarbons”. They are literally hydrogen and carbon atoms linked together in different lengths with some other stuff too. If the crude has a lot of sulfur, it’s called sour. If it has a little, it’s called sweet.

We see both ends of the spectrum every day in our lives. Gasoline is another soup of chains that contain 4 to 12 carbon atoms. On average, gasoline is C₈H₁₈. That’s eight carbon atoms and 18 hydrogen atoms linked in chains.

Asphalt on our roads are hydrocarbon chains that have more than 42 carbon atoms. In general, the longer the chain, the thicker and heavier the oil. But both are hydrocarbons found in oil. Some chains, like those found in Canada’s oil sands, are so long that they need to be heated to flow.

We measure the average length of hydrocarbon chains in oil using “API Gravity”. This measures the density of the oil. The higher the gravity, the lighter the oil.

Water has an API Gravity of 10. Below that, the oil sinks in water.

As a rule of thumb, the lighter the crude oil, the higher percentage of shorter chains. That crude is easier to turn into vehicle fuels. And it gets a premium to heavier, sour crudes.

Since oil varies by region, the world has a series of “benchmark” prices. When you drill a new well, the oil gets classified against your benchmark. We use West Texas Intermediate, here in the states.

The oil coming out of the ground in the U.S. gets graded against the West Texas Intermediate benchmark. That’s how the price is set here in the U.S.

For reference, here are the main oil benchmarks around the world, with the current prices:

In general, the benchmark crude prices trade in lockstep. You can see an example of three key benchmarks’ prices here:

Quality of the crude will create a small discount or premium, but for the most part, the market moves together.

That’s why, when war closed the Strait of Hormuz, crude oil from Dubai to the U.K. to Cushing, Oklahoma all soared. It doesn’t matter who has the oil.

Markets are global, and oil is the beating heart of the economy today.

The world produces and processes around 103 million barrels of oil per day (pre-Iran). So if one country raises output, it won’t affect the local (or global) price much.

The post American Oil Won’t Save the Day appeared first on Daily Reckoning.

“We’re ahead of schedule and landing early,” said the pilot. My wife and I were on a flight from Tokyo, and the aircraft was descending towards SeaTac Airport, south of Seattle.

“There’s something else,” said the voice from the cockpit. “We have two airliners from China behind us. So, when we reach the jetway, please deplane quickly. Get yourselves to customs, or you’ll wind up in a big backlog of passengers.”

Forewarned, we made haste to International Arrivals and joined a fast-growing line. Then, from another hallway, a crowd of passengers emerged, fresh off those other two airliners from the Middle Kingdom, and this new mass of inbound humanity included a group of about 40 very pregnant Chinese women headed towards the non-citizen passport line.

To be perfectly clear: it was beyond obvious that these ladies were pregnant, although I should add that my keen powers of observation were enhanced by a sharp elbow to my ribs, as my spouse said, “What’s with those pregnant gals? They look like they’re at seven months.”

Hey everybody! Your US passport is an airline flight away. Image via ChatGPT.

Definitely, women notice these things. And then, it was our turn with U.S. Immigration and Customs, but hold that thought…

“The Same Constitution”

You may already suspect where this is going; namely, to discuss what’s euphemistically called “birthright citizenship,” although another term for the phenomenon is “passport tourism.”

That is, current U.S. law interprets the 14^th Amendment to the U.S. Constitution as conferring citizenship on any person born in the U.S. or territories, aside from limited exceptions such as children of foreign diplomats. Otherwise, it doesn’t matter who is born to whom, or under what circumstances. When a baby pops anywhere inside U.S. territory, the outcome is a brand-new U.S. citizen.

At least, that’s the conventional legal wisdom, now under review by the U.S. Supreme Court in a case called Trump vs. Barbara (S.Ct. Docket 25-365), which was argued two weeks ago on April 1, with no less than President Trump in personal attendance.

People write scholarly books and law-review articles on the 14^th Amendment and birthright citizenship. Plus, there’s a large cadre of legal pundits on the topic, who jealously mark this territory like dogs at fire hydrants. And of course, within a few months we’ll have a Supreme Court decision on the matter. Case closed? Well, we’ll see…

Meanwhile, at this point in life I’m just a humble, taxpaying Navy veteran and geologist, not a bigshot Constitutional lawyer. Still, though, I’m intrigued at this quirky feature of American law, the principle that almost anybody can walk in (or fly; see above), deliver a live birth, and presto we have a new citizen, eligible for every sort of private right and public entitlement. So, I listened to the Supreme Court oral arguments.

Frankly, one line of discussion perplexed me. In fact, it troubled me deeply; namely, an exchange between Chief Justice John Roberts – full disclosure; he’s an old Harvard classmate – and U.S. Solicitor General John Sauer.

Undergraduate John Roberts, circa 1973. Courtesy Harvard Crimson.

In opening remarks, Sauer referred to “birth tourism” and stated that “uncounted thousands of foreigners from potentially hostile nations have flocked to give birth in the United States in recent decades, creating a whole generation of American citizens abroad with no meaningful ties to the United States.”

Well, yeah… Sauer’s point rang true to me; see my anecdote above about the pregnant Chinese ladies at SeaTac. Obviously, these women were coming to the U.S. to deliver babies. And one need not be Sherlock Holmes to understand that this was not a one-off thing, because it happens across the country many times, every day. Look around. In essence, there’s an entire travel-birth-citizenship industry at work here.

Then in a follow-up question, Roberts asked Sauer: “Do you have any information about how common that is, or how significant a problem it is?”

Sauer responded that “media reports” estimate over one million people have come from China alone to give birth in the U.S. And he mentioned a Congressional report about “Russian elites” who travel to Miami to have babies, via “birth tourism companies.”

Sauer added that, “Based on Chinese media reports, there are 500 birth tourism companies in the People’s Republic of China whose business is to bring people here to give birth and return to that nation.”

Roberts replied with a rhetorical question: “Having said all that, you do agree that that has no impact on the legal analysis before us?” In other words, Roberts essentially called Sauer’s point irrelevant to the case.

Sauer replied that, “We’re in a new world now, as Justice [Samuel] Alito pointed out, to where eight billion people are one plane ride away from having a child who’s a U.S. citizen.”

And Roberts answered, “Well, it’s a new world. It’s the same Constitution.”

Huh? Hey, wait a minute. That’s a pretty glib, uncurious wave-off of an important fact-set. Indeed, it’s gratuitous, especially coming from the Chief Justice of the United States.

Suicide by Constitution

In other words, it’s not as if the Supreme Court has not interpreted and reinterpreted that so-called “same Constitution” mightily over the centuries to accommodate all manner of human advancements.

And that’s before we get to the relatively modern idea of a “living Constitution,” under which the Court has allowed the federal government to do pretty much anything that the political powers desire. Indeed, the past 90 years of Supreme Court jurisprudence speaks for itself.

The idea of the “same Constitution” should not mean that the nation’s foundational document is some sort of unchangeable fossil record of the world of 1787, from the time when the document was composed.

For example, does the First Amendment, which protects freedom of speech and press, only apply to communication technology of 1787? The question practically answers itself. American free speech is wide open, and per countless Supreme Court cases over many decades, federal, state and local governments restrict it at their legal peril.

Or does the Second Amendment only pertain to muskets of late-1780s vintage? Does it mean that you can own only a flintlock rifle, and even then, only if you are in a “well-regulated Militia?” No, of course not, and the Supreme Court has evolved its views on firearms laws to change with the times.

How about the part of the Constitution that empowers Congress to “raise an Army” and “maintain a Navy.” Does that mean the country cannot have an Air Force? Because obviously, there were no airplanes in 1787 flying over the Philadelphia Constitutional Convention. And again, it may come across as silly to argue the point, except that somehow the so-called “same Constitution” is now a barrier to progress if we follow the Roberts logic to where it seems to be headed.

Last, and not to overwhelm you, there’s Wickard vs Filburn, a 1942 case that empowered the federal government to regulate the smallest details of daily American life – in this case, farming – under the guise of “regulating interstate commerce.” Indeed, the small family farm in America traced its roots literally to Jamestown in 1620. And for over 300 years, farming was a taproot of American freedom. Yet after Wickard, the simple act of planting seeds in the ground fell under the jurisdiction of the U.S. Department of Agriculture.

Which brings up a line that popped into my head when Roberts rebuked Sauer, namely that “the Constitution is not a suicide pact.”

The exact historical record is unclear, but President Abraham Lincoln supposedly coined this phrase in response to charges that he was a tyrant for suspending the Writ of Habeas Corpus during the Civil War. Today, we have the luxury of second-guessing the man, but in his day, he had battles to fight, and keeping certain people off the streets served a purpose.

President Lincoln. Courtesy Library of Congress.

More recently, the “suicide pact” phrase was used by Justice Robert Jackson in his dissent in a 1949 case, Terminiello vs. Chicago, a free speech case then before the Supreme Court. And the phrase saw more daylight in 1963 in Kennedy vs. Mendoza-Martinez, in an opinion grounded in due process rights, authored by Justice Arthur Goldberg.

And now, here we are, dealing with new developments in a rapidly changing world, namely birth tourism. Fly in, have a baby, make a so-called “citizen,” and… then go home.

My anecdote above, about the pregnant ladies at SeaTac, is from 2015, or more than a decade ago. But it still resonates. Both the New York Times and New York Post have recently run stories about Chinese women traveling to the mainland U.S. or territories (eg., Mariana Islands) to have babies. They fly in, hang out, deliver a baby, and in due course obtain U.S. citizenship for the child, plus a social security number and passport.

Clearly, per those above-noted Supreme Court discussions, this is a new world. It’s not the olden days of the 1860s, when the 14^th Amendment was drafted in the wake of the Civil War. And obviously, coming to America no longer involves a long sea voyage on a sailing ship. Just buy an airline ticket, and voila!

Meanwhile, it’s one thing when foreign visitors come to America to see the sights, do tourist things, and then go home with, say, a T-shirt, coffee mug, or maybe some refrigerator magnets.

But now, there’s also a vast subset of the tourism industry that brings late-term pregnant women to America, to have babies and return home with a child and U.S. passport; or perhaps call it a “refrigerator magnet passport.”

To be fair, these almost-mom arrivals are not sneaking into America. They’re not “illegal,” not in the way the term is commonly used. Nor are they coming here to go to take a job away from an American worker. Although their little anchor baby now dilutes your own citizenship, in the big scheme of life.

Indeed, the pregnant ladies walk through the U.S. entry system, usually with a B-1 visitor’s visa, and get a stamp on their own passports for a six-month stay. And they go home with a nice, new, bundle-of-joy American citizen, to raise in, say, China under Communism.

A Crazy Way to Run a Country

To me, at least, this is all very odd: granting citizenship based on an airline ticket and six-month tourist visa. Is this really what the 14^th Amendment authors meant when they were working to clean up the societal mess after the Civil War?

Plus, we have the raw, blood-sport politics of the entire matter, the idea that President Trump wants to end this passport tourism business, which is enough for many people simply to dismiss the idea out of hand. Cuz… Trump, yes?

Then again, all systems have flaws, and the world is filled with people who want to take advantage. But the more curious thing – scandalous, actually – is that this matter has grown to such size that it’s actually a demographic and political issue, now sitting on the bench of the Supreme Court.

It’s in front of the Black Robes, with all of the subtle, but critical, in-group virtue signaling that they must perform to impress their Washington, D.C. career managers. And face it, there’s a certain, leftward-drifting agenda in America, with Washington as Ground Zero. And the Supreme Court is part of it.

At the end of the day, each justice has his/her own future personal and career goals, if not their income and ego. Are they there to serve the nation? Or have they gone native inside the Washington Swamp?

In general, the question is how “birthright citizenship” serves the national good? More specifically, how does “passport tourism” advance the national agenda?

Well, we’ll find out in a couple of months. And that’s all for now.

Thank you for subscribing and reading.

The post Trump Takes Aim at Passport Tourism appeared first on Daily Reckoning.

Today we’re going to take a break from the Middle East, and focus on an important shift taking place in markets.

Slowly, investors are beginning to appreciate fundamentals again.

After more than a decade of reckless speculation, meme stocks, gambling, and ultra-low interest rates, we are starting to see a return to old-school investing.

A fresh focus on dividends, earnings, and real assets.

It’s refreshing. And this new paradigm is going to last a while.

Is the Dark Age of Investing Over?

There is a classic scene in the HBO show Silicon Valley (2014-2019).

The show revolves around a tech startup named Pied Piper.

When the CEO tells their biggest investor that he wants to start generating revenue, the investor loses it.

“If you show revenue, people will ask ‘HOW MUCH?’ and it will never be enough. The company that was the 100xer, the 1,000xer is suddenly the 2x dog.

But if you have NO revenue, you can say you’re pre-revenue! You’re a potential pure play.

It’s not about how much you earn, it’s about how much you’re worth. And who is worth the most? Companies that lose money!”

For a long time, this was a real thing.

Pre-revenue startups were priced largely based on their ability to pitch investors. But once a startup began generating revenue, some investors priced them using more traditional metrics, like a revenue multiple.

So startup companies without any revenue were often valued more highly than those with it. And hot startups were expected to raise and spend vast sums of money to grow at warp speed.

This sentiment also bled over into the stock market. Investors demanded growth at all costs. And smaller tech stocks delivered plenty of growth, but plentiful losses too.

Low interest rates are partly to blame. With yields on bonds and bank accounts so low, money poured into the stock market, creating one of the wildest speculative environments in history.

It’s been a crazy time.

But I believe this era is ending. Investors are ditching software for oil and gas.

They’re ditching government bonds for gold and silver. Over the past year, U.S. bonds are basically flat, while gold is up 46% and silver is up 134%.

And they’re shifting out of overpriced U.S. stocks into emerging markets like Brazil. Over the past year, the iShares Brazil ETF (EWZ) is up 72% compared to the S&P 500’s 28%. And Brazil still looks cheap.

I believe this trend will be dominant for at least the next decade.

The Revenge of Buffett and Graham

Legendary value investor Benjamin Graham famously said, “In the short run, the market is a voting machine. In the long run, it is a weighing machine.”

In other words, manias and bubbles can push stocks to crazy levels temporarily, but over the long run, it is ultimately earnings and dividends that drive returns.

We’ve already started to see a shift away from money-losing stocks and startups. Primarily in the tech space.

For example, Snowflake (SNOW) was the hottest tech stock in the world for a brief period. Its 2020 IPO even attracted Warren Buffett’s Berkshire Hathaway.

Snowflake shares soared over $350 in 2021. But since then, like much of the software/tech space, investors have lost interest. The company is still growing fast (30% YoY), but in 2025 it generated a loss of $1.3 billion.

SNOW shares are now down 62% to $131. There are dozens of stories just like Snowflake’s. Tech firms that spent too much money, gave their employees too much stock, and lack a realistic path to profitability.

The rise of AI is also contributing to this shift. It has made the outlook for software stocks especially murky. In such an environment, companies that own hard assets like oil wells, mines, and factories are increasingly attractive.

U.S. Stocks – Still Overvalued

We’ve seen the first hints of a shift in investor psychology. A desire for profitability, dividends, and real assets.

But U.S. stocks are still quite overvalued. When Walmart is trading at a P/E of 46, you know things are out of whack. This is a stock that has historically traded in the 10-16 P/E range. And today it’s 3x that.

So just because a business owns real assets doesn’t make it a good bet for this environment. It needs to be cheap to offer real protection.

So while we’ve seen the beginning of a shift, the trend has a long way to go.

The world will soon face a financial reckoning. It will happen regardless of what occurs in the Middle East. Though if that situation escalates, it will worsen it.

So this is not a time to have a large allocation to pricey speculative stocks. During market crashes, speculative stocks are always hardest hit.

It’s a time to buckle down in hard assets and high-yield value stocks. Companies that can thrive in a chaotic environment.

Here in the U.S., stocks that are cheap, attractive, and high-yield are somewhat rare.

So I will continue to invest primarily in emerging markets for value. Emerging markets now make up about 40% of my stock portfolio, and that will likely rise over time.

Strangely, the return of fundamental investing means we need to own more non-traditional assets. More on that soon.

The post The Glorious Return of Fundamentals appeared first on Daily Reckoning.

Tomorrow, talks between the U.S. and Iran are scheduled to begin.

The discussions will take place in Islamabad, Pakistan.

President Trump appears confident going into the meetings:

Source: Truth Social

But Iranian leaders, such as Speaker of Parliament Mohammad Ghalibaf, say they are not even willing to negotiate until their money is unfrozen, and Israel’s bombing of Lebanon, and annexation of land, stops.

Source: X

As we covered earlier this week, it does not appear that Israel is about to stop bombing Lebanon. This is a major sticking point for both parties. Israel says it needs to protect itself against Hezbollah rocket attacks, and Iran says Israel is killing civilians along with militants.

Unless we get a ceasefire which includes Lebanon, it’s unlikely these negotiations will go forward.

In more disturbing news, rumors are flying that Iranian “moderates” like Ghalibaf are losing influence to Iran’s hardline Islamic Revolutionary Guard Corps (IRGC).

Source: ZeroHedge on X

Iranian “moderates” like Ghalibaf and Foreign Minister Aragachi appear to be pushing for diplomacy, while the IRGC is more interested in preparing for a resumed war. And we don’t know which side will win out, due to all the chaos with Iran’s leadership.

Meanwhile Trump is also preparing for the possibility of a resumption of fighting.

Source: Truth Social

The President continues to move American military assets into the region, and has now committed 80% of our cutting-edge long-range JASSM stealth cruise missiles to the fight, according to Bloomberg.

Lasting Agreement: Unlikely

After some initial hiccups, the fragile truce between the U.S. and Iran is holding. For now.

But the only point the sides agree on is that they’re not currently launching missiles at each other.

With negotiations scheduled to take place tomorrow, both sides are preparing for the possible (likely?) resumption of war.

Our colleague Jim Rickards did an excellent interview with Michelle Makori yesterday, in which he said, “It’s not much of a ceasefire…. the two sides don’t agree on anything.”

And he’s right. The U.S. demands include:

• Severe limits on Iran’s ballistic missile and drone programs
• An end to nuclear enrichment
• Full opening of the Strait of Hormuz
• An end to support for Iran’s proxy/allies in Yemen, Iraq, and Lebanon

These are basically all non-starters. Iran has signaled that it may be willing to give up its near-weapons-grade uranium, but that’s about it.

Meanwhile, Iran demands:

• A permanent commitment to non-aggression
• Withdrawal of all US forces from Gulf region
• Peace in Lebanon, which Israel is currently bombing back to the stone age
• Compensation for the war (possibly in the form of tolls to pass through Hormuz)
• End of all sanctions and UN resolutions

Again, I don’t see our government agreeing to any one of these, let alone all of them.

So even if the negotiations do take place, and I hope they do, it’s unlikely this first round will go anywhere.

If we’re lucky, the U.S. team will be able to convince Iran to open the Strait of Hormuz as talks proceed.

Financial Impact

Meanwhile, the Strait of Hormuz remains closed to nearly all traffic. About 20% of global oil flows. Only a few tankers bound for China and other Iranian “friendly” countries are getting through currently.

Unless the Strait opens very soon, this energy crisis will enter a new dimension. $150/barrel oil is possible near-term, and higher than that if it stays closed for a few more months. And that’s not even counting what happens if more oil and gas infrastructure gets blown up.

In his interview yesterday, Jim also warned, “the fact that you’ve got a dollar liquidity crisis, a private credit meltdown, and a war with Iran, is extremely concerning. And we could be looking – at best – a recession, and possibly something much worse.”

Regarding the Strait of Hormuz, Jim says that due to the fact that the last tankers through the Strait are just arriving at their destinations recently, “now is the time the danger truly kicks in.”

He’s right. It takes time for ships to travel, arrive, and deliver their cargo. We are just now reaching the point where the real supply disruptions kick in.

I strongly recommend watching Jim’s recent interview. He gives a great overview of the current ceasefire situation, economic challenges, and more. Here’s the Youtube link.

Best and Worst Cases

For now, the best outcome I see is a continued ceasefire and Iran agreeing to re-open the Strait of Hormuz, which would re-inject about 8 million barrels of oil per day back into global markets. That’d be an amazing outcome for this initial meeting.

The tough part will be hammering out a lasting agreement. And that’s what we need for markets to find certainty and confidence. Right now it looks like both sides are simply resting and re-arming.

The worst case, of course, is a full resumption of the war. More targeting of oil, petrochemical, and natural gas infrastructure.

Stock markets are not currently pricing in the possibility of a bad outcome. At all. They are pricing in a peachy resolution where everything turns around tomorrow.

So I will continue to hold an oversized cash position, with a few hedges, until the smoke clears. Don’t get me wrong, I haven’t sold everything. But I’m back up to around 18% cash, which is a lot for me.

If we do get another escalation, I want to have cash ready to buy select assets. Because the downside potential for stocks from here is significant.

Eventually this situation will be resolved, and oil will come back down to a more reasonable level. But my guess is it won’t be as soon as most people think. And oil could go a lot higher than most investors imagine before that happens.

A lot of economic damage can be done before this war is over. Even if the war ends tomorrow, oil won’t return to normal levels for some time. And volatility will remain high until that resolution happens.

More on Monday.

The post Intermission: The War Will Resume Shortly appeared first on Daily Reckoning.

Imagine a metal so rare that if it were an eye color, only 36 people would have them…in whole world. Now, imagine it is incredibly useful for aerospace technology.

The element is named rhenium.

Before 1905, it was merely a predicted element. They knew something should be on the periodic table there, but not what.

And then Japanese scientists discovered it in 1908 but misidentified it. Finally, it was identified in 1925. But it didn’t trade commercially until 1928.

A kilogram of the stuff cost $10,000 at the time ($190,000 today). It was so rare and so difficult to refine that it cost a whopping $5,390 per ounce in today’s dollars.

It took decades before we figured out what to do with this expensive metal. But by the 1950’s, tungsten-rhenium and molybdenum-rhenium alloys became critical for aerospace applications.

However, it really became commercially important in the 1970’s, with specialty gasoline catalysts and high-temperature nickel alloys.

The nickel alloys go into the hottest sections of jet engines, rocket engine nozzles, combustion chambers, and gas turbines. The addition of rhenium strengthens these materials used in extremely high temperatures.

Rhenium resists oxidation (rust) and high temperatures. That makes it perfect for electrical connections in high performance switches used in aerospace and defense systems.

However, it is rhenium’s membership in the 2D transition metal dichalcogenides (TMDs). TMDs appear to be the most promising functional materials for post-silicon, high-performance devices.

When combined with sulfur (rhenium disulfide) it creates a material with unique electrical properties. That opens some doors for potential use in next-generation electronic and optoelectronic devices.

According to Advanced Science News:

The unique structure of this anisotropic 2D material has endowed it with layer-independent electrical and optical properties, suitable for application in field effect transistors (FETs) and photodetectors.

That’s a complicated way to say that TMDs could replace silicon in advanced computer chips. As its utility grew, so did demand. You can see the impact on its price over the past decade:

Today, the world mines about 50 to 60 metric tons of rhenium per year. Compare that to copper, where the world produces 23 million metric tons per year.

Today, the aerospace/defense industries consume about 80% of the annual rhenium supply. As we mentioned earlier, it’s a key part of jet engines and rocket thrusters. However, it also goes into the frames of late generation fighter jets. The jets require up to 6% rhenium in their alloys. That allows them to operate at much higher temperatures than traditional metals.

The second largest demand for rhenium comes from catalysts in petroleum refining. Refineries use platinum-rhenium catalysts to make high-octane gasoline. These catalysts resist sulfur and nitrogen “poisoning”. That gives them a much longer life than catalysts made of just platinum.

But that’s looking into the past. The future is all about demand for rhenium disulfide TMDs:

• Next-Gen Semiconductors: Over 72% of semiconductor R&D groups are prioritizing 2D materials like rhenium disulfide because they maintain a stable direct bandgap regardless of layer thickness, a major advantage over other TMDs.
• Advanced Optoelectronics: there is a growth in rhenium disulfide in near-infrared (NIR) photodetectors and sensors.
• Flexible & Wearable Tech: Rhenium TMDs can be exfoliated into layers thinner than a nanometer but retain a high strain tolerance (above 10%). That makes them useful for flexible displays and wearable biosensors.
• Quantum Computing and AI: Engineers are trying rhenium thin films for superconducting quantum circuits and hardware for neural networks.

That’s why rhenium is so important for tech investors going forward. Unfortunately, there is no direct play on rhenium mining.

The bulk of this metal comes from copper mining. Chile currently produces the bulk of this material. Alloy recycling produces about 25% of total supply.

We will continue to explore the metals which will power the future. And share attractive investment ideas as we find them.

The post This “Unobtanium” Metal Powers the Future of Tech appeared first on Daily Reckoning.

My friend and editor of Paradigm Press’s Million Mission, Davis Wilson, wrote a piece on the Facebook IPO I read with a potent mix of nostalgia and alarm.

I’ll start with the nostalgia.

The Big G

In 2012, I had already moved to Singapore, but was still flying back and forth to London, my old home, to meet and greet with friends and clients. One of my friends, G, was a partner at Goldman Sachs and had lived in New York since we graduated from London Business School together. But he had returned to London to work at Goldman’s Fleet Street offices. With a mathematics professor and an engineer for parents, G was a natural at the rather mundane mathematics finance employs. He made Goldman and himself bags of cash.

I loved hanging out with G because he was smart, fun, and rich as Croesus. But more than that, if I had to teach something that was over my head, he’d meet me in the pub to show me the ropes. One time, I had to teach a Credit Derivatives class. One glass of single malt scotch and two hours in the pub was all it took for me to have a Goldman-level understanding of the big picture. Definitions, pricing, uses, and back office requirements. He gave me it all, plus a few war stories, which the class devoured. The class certainly got its money’s worth.

Oh, those were fun times.

But the reason I bring G up is because of another conversation we once had about the Facebook IPO. I’ll never forget it for as long as I live, simply because I remember feeling my brain take in the information. It was the “scales falling from the eyes” moment for me, the moment I finally understood how cutthroat the business world could be.

Before META, There Was FB

META is pretty old news now, and its Metaverse is such a failure that they’ve stopped using the term. Reality Labs, Meta’s virtual reality (VR) division, has lost $83.6 billion over the last six years.

But back in 2012, Facebook was all the rage. It’s hilarious to think its biggest problem back then was that they hadn’t yet figured out online advertising. Of course, with the Facebook Pixel, they had mastered that domain and made themselves and their investors so much money they could piss it up a wall on a botched bet on VR costing billions.

Nevertheless, their IPO was hotly anticipated for many reasons, not the least of which was finally determining the company’s worth. Older readers may remember Diane Sawyer famously trying to weasel it out of Zuckerberg in an incredibly awkward interview. Think Mrs. Robinson meets Sheldon Cooper. Ewwww…

Morgan Stanley emerged as the lead bank after doing a lot of work for Facebook at no cost in the years leading up to the IPO. JP Morgan was second, leaving Goldman Sachs embarrassed as the third bank. (Even Facebook executives, with their close government connections, had no love for the “vampire squid.”)

But, as usual, this was an enormous blessing in disguise for Goldman. Morgan Stanley would screw up the IPO so badly that it took the massive reputational hit Goldman was able to avoid. How did Morgan Stanley mess up?

The IPO Numbers

On the surface, Facebook’s IPO looked like a triumph of capitalism. The book was 5x oversubscribed, so Morgan Stanley did exactly what it was paid to do: it raised the price from $28–35 to $34–38, jacked the share count 25% to 421 million, and handed Zuckerberg a tidy $100 billion valuation.

Facebook CFO David Ebersman had been quietly gunning for that number all along. Round, iconic, and utterly meaningless as a forward-looking metric, but perfect for a Wall Street dog-and-pony show.

But here’s the rot underneath the paint job: 11 days before the IPO, Facebook quietly whispered to Morgan Stanley that it was slashing its revenue projections. Mobile was eating desktop faster than Zuck’s ad team could monetize it; fewer eyeballs on ads, fewer dollars in the door. That’s a material development.

While Morgan Stanley’s institutional clients got that little heads-up, retail investors lining up to buy the hottest IPO in a decade were left staring at a glossy prospectus built on a lie of omission. The oversubscription number that made the deal look bulletproof? Engineered on asymmetric information.

And this is where the job gets sticky for bankers. On the one hand, you’ve got your issuing client; in this case, that’s Facebook. You want to maximize their take from the IPO. But on the other hand, you’ve got your investing clients, the pension funds, insurance companies, endowment funds, hedge funds, and other long-only asset managers who depend on the 10% first day bounce from the IPO price.

Morgan Stanley had just booked themselves 18 months of ass-kissing and discounts for the IPO buyers.

Was FB’s IPO a Failure?

The honest answer is, “It depends.”

For the IPO buyers? Yes. They got hosed.

For Morgan Stanley? Yes. The equity origination team utterly embarrassed the bank.

For Mark Zuckerberg? Absolutely not. It was the greatest day of his young life.

This brings me back to my conversation with G. I vividly remember saying something to the effect of “Ha! Morgan Stanley! What a failure…”

To which he replied, “Failure? For whom?”

I looked at him quizzically. I was confused.

“Seanie, Facebook raised $16 billion. Zuck never has to go to the market again!”

If you’re a well-worn mining investor, think of how many times you’ve been diluted in the past year alone.

Now, understand that Mark Zuckerberg has never done that to his shareholders. In fact, Zuck has had only one other equity offering, in December 2013, because Zuck had a tax bill due. Here are the stats on that one:

• 27 million shares sold by Facebook itself (~$1.5B, for working capital and general corporate purposes)
• 35 million shares sold by Mark Zuckerberg personally (proceeds used to cover taxes on exercising 60 million Class B stock options)
• 6 million shares sold by Marc Andreessen

That’s it.

So from Facebook’s perspective, it was maybe the greatest IPO of all time.

But for those Day One buyers… Ouch!

Let’s look at the chart.

After debuting at $38 and briefly hitting near $45 on the first day of trading, FB was cut in half over the next 5 months, closing at $17.59. If you’re a fund sitting on those losses, you’re bitching out your idiot banker every single day.

Allegedly, it took those 3 banks 85 subsequent IPOs over 18 months to make their institutional clients whole on the expected “money on the table” they’d been denied. Some hedge funds reported that shorting FB stock was their biggest profit that year.

Of course, Facebook became a darling for investors and has made people multimillionaires since.

Elon’s SpaceX IPO

Ok, here’s the alarm, after the nostalgia.

Please understand something. I’m writing this to you via my Starlink satellite dish because Telecom Italia can’t get its act together. I think Elon is a genius and an unambiguous good for the world, and I would’ve let him finish the DOGE job by gutting government spending.

Here’s the comparison of FB’s IPO with SpaceX’s:

Elon is looking to raise $50 billion, and honestly, I hope he gets it.

But should you buy this stock?

Yes, but only after its IPO, when it falls at least 50% from these asinine, nosebleed levels the stock will get priced at.

I remind you of Scott McNealy’s reflection, years after Sun Microsystems’ stock imploded:

At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?

At a P/S of circa 100, Elon has to give you 100% of revenues for 100 straight years as dividends… with all those other assumptions McNealy was nice enough to elucidate.

Good luck with that.

To reiterate, I think Elon is doing yeoman’s work for humanity. But I’m going to let bloated fund managers who benefited from decades of receiving Federal Reserve-induced funny money pay for it.

You should, too.

Wrap Up

Rarely has history screamed so loudly to warn us. Facebook’s IPO is our guide. SpaceX is in front of us.

While we cheer for Elon to reach for the stars… or just Mars… we mere mortals on Earth should tend to our flocks, rather than let this IPO clean our clocks.

The post Will the SpaceX IPO Zuck Early Buyers? appeared first on Daily Reckoning.