A few months back, we remodeled our bathroom. My wife and I held off for the first 12 years in this house, so the master bath was in its original 1987 state for 38 years.

All our friends and neighbors had long since upgraded their bathrooms.

But it was hard to justify a remodel because everything worked fine, even if it looked dated. But over the past year, the tile started to chip and the tub looked dingy. It was finally time.

On the flip side, I’ve seen a friend with zero retirement savings spend $60,000 on a kitchen remodel. The appliances were maybe 8 years old and worked fine. The counters and cabinets were simple, but also completely fine.

I blame HGTV (Home and Garden TV). His wife watches religiously. That noxious cable network has done more for Home Depot stock than every hurricane combined.

My wife used to watch those home renovation shows. The hosts would come into a perfectly serviceable kitchen, wrinkle their noses, and with a nasally tone say, “Yuck. Everything needs to go”.

Keeping Up With the Joneses

HGTV is a sort of mind virus. It infects viewers with the idea that their house is shabby and in need of glorious upgrades.

The way these shows present perfectly good houses as hideous and dated is annoying. There’s nothing wrong with having older appliances, cabinets, flooring, and fixtures.

To be clear, if you have the funds to do renovations, and it brings you happiness, have at it. What worries me is how people will take out a home equity loan, or even borrow from their retirement accounts to fund needless renovations.

Savings and investment should come first. Optional home improvements later.

This speaks to a broader problem in America. We spend well beyond our means.

An Unhealthy Fixation

It’s not just remodels and renovations. It’s our entire consumption-based society.

When my kids were younger, going to all the birthday parties was fun, but also bothersome in a way.

Watching a kid open 20 brand new presents, almost all imported from China, of which they might end up playing with 1 or 2, always felt off. The vast majority would wind up at Goodwill or in the trash.

As a result, we usually told parents to skip the gifts at our kids’ parties.

It’s not healthy for a society to be so focused on consumerism.

When Will Consumerism Peak?

The American economy is famously driven by consumer spending. They say it accounts for about 70% of GDP. A crazy number.

So… What will happen when Americans are inevitably forced to slash spending?

Stocks will fall, leading to even lower consumer spending, leading to lower stock prices, and on and on… It will be a difficult but necessary part of the coming transition to a more sustainable economy.

Of course, we must also factor in the Federal Reserve and government’s inevitable response. The government will send out stimulus checks, much of which will rapidly be deposited into brokerage accounts and sports books. But some will go to pay off debt and buy groceries.

The Fed will cut rates and restart QE, attempting to keep the status quo intact for a while longer.

These measures may slow the shift, but they won’t stop it. Eventually we simply need to quit spending so much money on frivolous things.

Perhaps this energy crisis will be the catalyst that begins the shift.

Then again, the change in consumer habits may still be a few years off. But it is inevitable.

Until we reach the tipping point, American overspending and under-saving will continue.

All we can do is watch the slow-motion train wreck play out. And prepare our portfolios for what lies ahead…

More on that soon.

The post The HGTV Mind Virus appeared first on Daily Reckoning.

The most common crop grown in the U.S. is also the single biggest consumer of nitrogen fertilizer. And, thanks to the Farm Lobby, it gets added to everything from gasoline to animal feed to candy.

Here’s the thing, 94% of ethanol comes from this crop. And as it gets more expensive, so will gasoline.

If you guessed corn, you are right.

And higher corn prices mean inflation for us. Besides ethanol, corn goes into the cost of raising animals, particularly beef. It becomes high-fructose corn syrup, which is the ubiquitous sweetener in everything.

The problem is that the price of nitrogen exploded, as you can see from the chart below:

Corn is the most nitrogen-intensive crop in the United States, and it isn’t close. Corn consumes about 78% of the nitrogen applied to grain crops like wheat, soy, etc. And the cost of that fertilizer is up over 30% from last year.

Corn needs about 150 pounds of nitrogen fertilizer per acre. In 2025, that was around $59 per acre. Today, according to the U.S. Department of Agriculture, that jumped to $78 per acre. by a wide margin, accounting for about 78% of all nitrogen fertilizer applied to major field crops (corn, soy, wheat, etc.).

The reason that nitrogen fertilizer costs so much today is the war in Iran. Natural gas is critical to making ammonia, which is the feedstock for nitrogen fertilizer. You can see the process in the diagram below:

But if you can’t get natural gas, you can’t make fertilizer. And that’s where we are today. The war in Iran and the closure of the Strait of Hormuz crippled nitrogen fertilizer supplies to the world, including the U.S.

Nitrogen fertilizer made up to 25% of the cost of corn prices. However, as we can see from the chart below, corn prices are at multi-year lows. If past is prologue, we can expect to see corn prices rip higher like they did in 2022:

Back in 2022, Russia invaded Ukraine. That cut off Russian natural gas to the world. It spiked the price of nitrogen fertilizer and sent the price of corn to multi-year high prices. The Teucrium Corn Fund (NYSE: CORN) is a great way to play rising corn prices. As you can see, the price is up about 4% YTD.

If the past can tell us the future, then it’s going much higher. If we’re going to pay extra on everything due to higher prices, we might as well hedge that cost by making some money on this trade.

The post This Grain’s Price Is About To Pop appeared first on Daily Reckoning.

One of my favorite things about driving through the Italian Alps is seeing all the medieval castles on the cliffs. Their ornate, haunting beauty lurks menacingly above the smooth new EU-sponsored highways that run along the valleys.

Why were they built there? For centuries, the main source of revenue for the Lombards, the Savoy family, or the Italian state (at different times for different passes) was tolls for crossing the Alps. Take Reifenstein Castle. It guarded the Brenner Pass route. Knights slept eight to a bed. They watched for traders. No pay, no pass.

Think Trump’s tariffs, Old Europe style.

Now picture this. You’re sailing a merchant ship down the Rhine. Suddenly, a castle looms on the cliff above you. Armed knights block the river. Pay up, or your cargo goes to the bottom of the river.

That’s how the European river network ran for centuries.

Fast forward to today. You’re an oil tanker captain. You need to get through the Strait of Hormuz. Iranian Revolutionary Guard boats pull alongside. Pay $2 million in Chinese yuan. Or turn back.

Same racket. Different century.

Welcome to 2026, the Year of the Returning Toll Booth.

Hugo Grotius Had a Dream

In 1609, a Dutch lawyer named Hugo Grotius published a slim but explosive book. He called it Mare Liberum (“The Free Sea”).

His argument was simple. The ocean belongs to no one. It’s like air. Every nation has the right to sail it. Trade freely. Go anywhere.

Why did he write it? Because Portugal was sinking Dutch ships. Portugal claimed a monopoly on the route to India. Their attitude: our ocean, our rules.

Grotius said that was nonsense. His idea spread. It changed the world.

But Grotius had a client. He wrote Mare Liberum for the Dutch East India Company. Profit drove principle. Free seas meant Dutch profits. Keep that in mind.

Castles on the Rhine

Grotius dreamed of open seas. But rivers told a different story.

As I alluded to before, the Rhine was medieval Europe’s main highway. It linked Switzerland to Germany and the Netherlands. It moved grain, wine, silver, and spice. Commerce flowed along it every day.

So did extortion.

By 1254, some 79 castles lined the Rhine. Each one was a toll booth with a garrison. Lords built them on high cliffs for a reason. Catch the merchant traffic below. Demand payment. Enforce with arrows if needed.

Pay gold, or your ship sinks.

Merchants grumbled. But they paid. Because the goods still needed to move. The lords understood leverage perfectly.

The Holy Roman Empire ran largely on Rhine toll revenue. It was robbery, institutionalized. Just like income taxes these days.

The Barbary Pirates Ran the Same Scheme

It wasn’t just rivers. The Mediterranean had its own toll collectors.

From the North African coast, the Barbary pirates ran a protection racket for centuries. They raided ships. They took cargo. They enslaved sailors. And they accepted tribute in the form of annual payments from European nations, in exchange for being left alone.

England paid. France paid. Even the young United States paid, until Thomas Jefferson said enough.

Jefferson sent the Navy. The First Barbary War, 1803 to 1805, broke the back of the tribute system. The message was clear: America doesn’t pay tolls.

Free seas required muscle.

Pax Britannica: 100 Years of Open Water

In the 19th century, Britain provided the muscle.

Though it’s barely more than a few rubber ducks now, back then, the Royal Navy was the most powerful force on Earth. It crushed piracy worldwide. It destroyed the slave trade. It signed treaties with Arab coastal rulers. The deal was to stop attacking ships or face British guns. Most chose to stop.

The result was Pax Britannica. British Peace. A century of open seas.

Trade exploded. Goods moved freely from Liverpool to Cape Town, then to Mumbai, Singapore, and Hong Kong, and back again. Any nation could ship anything, anywhere, with reasonable safety.

Britain got rich, of course. Free seas tend to benefit whoever controls the most ships and ports. But the freedom was real. The tolls were gone.

After World War II, America took over. The U.S. Navy enforced freedom of navigation across every ocean. The UN codified it in 1982 with UNCLOS (more memorably and sarcastically known as LOST, for reasons we’re witnessing right now) — the Law of the Sea Treaty. No tolls. No castles. Open water for all.

That arrangement lasted 80 years.

Iran Builds Its Castle

The Strait of Hormuz is 21 miles wide at its narrowest point. 14 million barrels, or 21% of the world’s oil, pass through it every day. There is no practical alternative route for most of that cargo.

Iran sits on one side. Iran knows exactly what it has.

Last month, Tehran turned the strait into a toll waterway. Not a full blockade. Smarter than that. A selective one.

China pays in yuan. Ships pass. India and South Korea negotiate terms. They pay something. “Friendly” nations get escorted through by IRGC Navy boats. Others get turned back, or worse.

The toll runs about $2 million per ship.

Oil markets responded immediately. Brent crude hit $113 a barrel, up 74% at one point, from February’s open. American gas prices jumped $1.25 a gallon. The IEA warned it would get worse this month.

For your reference, during the 1973 Arab oil embargo, gas prices rose from $0.33-$0.38 to $0.55-$0.84, depending on where you were in America. Right now, the national average is $3.84. If the war lasts until June, that average may rise to $7.

The castle is working exactly as intended.

Trump Calls the Bluff

President Trump didn’t mince words. On March 16, he told allies: “Countries must help secure the strait. It’s their oil.”

He’s not wrong. China depends on the Strait of Hormuz for 90% of its oil imports. Europe isn’t far behind. America, now an oil exporter, needs the Strait far less than it once did.

Trump warned NATO: send ships, or face “very bad” consequences. The UK and France balked.

History is not encouraging. Medieval traders paid the Rhine lords. European nations paid tribute to the Barbary rulers for centuries before Jefferson stopped it. Right now, China is paying Iran in yuan. The precedent is resetting itself.

Wrap Up

Hugo Grotius was right about the theory. The seas belong to no one. Trade should be free.

But like the law and our borders, the theory needs enforcement.

The Dutch Navy backed Grotius. The Royal Navy backed Pax Britannica. The U.S. Navy backed 80 years of free postwar trade. Remove the navy, and the castle wins every time.

Iran understands this. They didn’t close the Strait. They monetized it. That’s actually more sophisticated than a blockade. A blockade invites a military response. A toll booth invites negotiation, payment, and, eventually, acceptance.

The Rhine lords ran their castles for 200 years before anyone stopped them.

America spent 80 years providing global maritime security. Now the bill has come due… and it’s denominated in yuan. But the thing is, the rest of the world doesn’t mind paying… or negotiating.

The question isn’t whether Iran can run a toll booth. They’re already running it.

The question is, who builds the castle on the other cliff?

The post The Toll Booth Returns appeared first on Daily Reckoning.

“We negotiate with bombs.” – Pete Hegseth

Words are a lot less expensive than bombs. And you don’t have the costs of cleaning up. Which is why thinking, and expressing your thoughts in words — even single syllable words — rather than bombs, is almost always the cheaper and more effective way forward.

But far be it from us to offer advice to Pete Hegseth. He has a role to play — the ‘comic book tough guy’ contributing to the empire’s decline. And he plays it well. He says his forces will “destroy the enemy as viciously as possible from moment one.”

Maybe so. But the gods of war do not favor oafish amateurs. Which is the whole point; his historical role is to turn the gods against us. Kristi Noem is already out of Donald Trump’s inner circle. If the war goes badly, as it seems to be, Hegseth may soon be sent packing too.

In the meantime, Hegseth should be an inspiration to young men everywhere. He’s the kind of jockish guy who normally peaks out in the 11th grade, as captain of the football team. And here he is at the head of the biggest, most wealth-destroying enterprise in the world.

An empire is essentially a protection business…sometimes providing good service…but often, just a racket. People like Hegseth provide the muscle. But in order for the empire to survive, someone should probably do some thinking too. Somehow, the empire must enforce its monopoly on the use of violence so that people within the empire are able to go about their business with tolerable security. And it must have a reliable economic system, too, whereby people can trade, earn money, and save their wealth. Typically, both goals are served by protecting trading routes.

The Mongol Empire created a huge trading area that stretched from the Pacific coast of China all the way to the Bosporus. The Mongols set up way stations to make travel and transport easier. They made the Silk Road much safer, too. If goods were stolen by bandits along the way, the local community was held responsible for making up the losses.

In the 14th century, as the Mongol Empire broke apart, the trading routes became less safe and the empire itself ebbed into a backwater.

The British Empire, too, went out of business when it lost control of vital trade routes. After the decline of the Mongol Empire, the Ottomans took over Anatolia and much of the Levant. This left them in position to strangle traffic coming through the Bosporus Strait. When the Turks closed it to English shipping in WWI, prices in England rose…and the value of the pound fell. The UK tried to unblock the strait with an invasion of Gallipoli, but as we’ve seen, the invasion was a military disaster and the strait remained in Ottoman hands.

The next important pinch point to slip away was the Suez Canal. Built by a French company in the 1860s, the canal became a vital trade passage, connecting Europe to India and the East. It was by this canal that the British Empire was to fully exploit its crown jewel — India. So important was it that the English developed a word for how best to make the trip. POSH, port out, starboard home…and avoid the hot Egyptian sun.

But as we saw yesterday, the pound sank into the mud of the Somme and never recovered. By the end of WWI, Britain was deeply in debt. It had to give up India in 1947. And then, in 1956, it was unable to control the Suez Canal. That was when the sun set on the British Empire.

Could it be that the Strait of Hormuz marks a similar twilight for the US empire?

Today, the world’s economies run on oil. The US controlled the oil flow, first by pricing it in dollars….and second, by providing ‘security’ to the oil producers.

As to the first condition, Iran has been off the reservation for the last 20 years. It sold oil for euros. Now, it is asking for yuan.

As to the second, all was fine until the US and Israel began ‘negotiating’ with Iran by bombing it. The Iranians then did the obvious thing. They blocked the strait of Hormuz to ‘enemy’ transit. The US may or may not be able to re-open it. Der Speigel:

Trump’s options against Iran have run out. The US president entered the field with the promise of a quick and powerful agreement, but now finds himself in the midst of a war that he can neither win nor find a dignified way out of. Iran has put Trump in a trap by targeting the world’s energy arteries, with no escape route, and he has no clear idea how to end this strategic suicide.

Meanwhile, the dollar seems to be taking too many sleeping pills too. AsiaTimes:

Iran is not simply disrupting oil supply — it is quietly challenging the currency structure underpinning global energy trade. Under sanctions, Tehran has developed alternative channels, exporting oil through barter arrangements, informal networks and increasingly through settlements in Chinese yuan. This shift is not merely tactical; it reflects a broader strategic alignment with efforts toward de-dollarization.

If Iran succeeds in institutionalizing yuan-based oil trade, the implications could extend well beyond sanctions evasion. Energy markets have long anchored dollar dominance. Even partial diversification in pricing and settlement mechanisms could begin to weaken that foundation.

Iran is still resisting.

Send more bombers to negotiate!

Editor’s note: Sign up and read Bill’s free newsletter at Bonner Private Research.

The post Shock and Aww Shucks appeared first on Daily Reckoning.

Imagine a single country at the center of the world’s monetary system.

An empire overflowing with unprecedented wealth.

Sounds pretty nice. But underneath the shiny surface, all isn’t well.

These vast riches have discouraged industry at home. The country imports most of its goods.

Its elites are living a life of luxury. Building palaces and importing the finest foreign wares.

But inflation becomes a persistent problem due to all the money sloshing around. Working people struggle to get by.

Wars and nation-building are a continual drain on its finances. So despite all the wealth, debt piles up.

We’re talking, of course, about the Spanish Empire in the 16th century.

Drowning in Money

In one of the best investments in history, Spain’s King Ferdinand and Queen Isabella financed Columbus’ voyage to the New World in 1492. The Crown spent only $5-10 million in today’s money on the venture, generating an ROI for the record books.

Columbus and Spain were in search of a better route to Asia, but what they found was a New World with incredible amounts of gold and silver.

And back then gold and silver were money. Silver was the true backbone of the economy. The gold:silver ratio stayed around 12, so each ounce of gold was worth just 12 of silver. And they found a LOT of silver in the Americas.

From 1500 to 1650 Spain shipped hundreds of tons of gold and tens of thousands of tons of silver back home.

For a while, it had incredible effects. Wealth was overflowing. New cathedrals and palaces sprang up. Art and culture flourished.

But eventually, all this new money started causing problems. From 1500 to 1600, prices quadrupled. And this was after centuries of price stability.

The introduction of so much money disrupted the entire economy. Savers saw their wealth evaporate.

Wages didn’t keep up with the price of food and goods.

The monarchy spent too much on wars defending their empire, and debt became a major problem.

Local industries died off as the nation increasingly relied on imported goods.

In 1569, Tomás de Mercado, a friar and proto-economist, wrote: “The Indies bring us silver, but we turn it into smoke and the wind carries it away.”

When silver imports from the Americas slowed in the late 1500s, the monarchy was forced to mint copper coins. Classic monetary debasement.

Despite the unprecedented riches, within a century it had mostly been squandered.

This was the beginning of a period of decline for Spain, and it would be a while before their star rose again.

Similarities and Lessons

Writer Aldous Huxley famously wrote, “That men do not learn very much from the lessons of history is the most important of all the lessons of history.”

The story of 16th century Spain isn’t a perfect parallel to modern America. But we can attempt to learn important lessons from it.

Like Spain in the 1500s, America has been the center of the monetary universe for many decades.

The U.S. dollar being the world’s reserve currency is both a blessing and a curse. Our fiat currency has been far stronger than anybody else’s.

This makes our imports cheap, but has weakened our export market. As a result, our manufacturing sector is in terminal decline. The dollar is simply too strong, which makes our goods uncompetitive in the global market.

Our primary export today is dollars, just as Spain’s was silver.

The American economy has become over-financialized. A huge chunk of our economy is essentially shuffling money around in increasingly creative ways.

We also spend unsustainably on our military. A classic mistake of empires in decline. Once the military becomes such a large part of the economy and foreign policy, it is difficult to change. The current war in Iran is only the latest example. It will accelerate our debt crisis significantly.

Now, some will argue that it is worth the cost, and that’s fine. But we must acknowledge the simple truth of the matter.

No Easy Solutions

The U.S. today stands at a crossroads. We’ve reached the point where it is apparent to everyone that something needs to change.

What’s concerning is that we might change in all the wrong ways.

Young people are struggling to make ends meet. They can’t afford houses, and aren’t having enough kids. Many are turning to socialism and/or communism as a last resort.

Mayor Mamdani’s in NYC is a disturbing sign of what could lie ahead. Hopefully this experiment fails as miserably as we expect, and the country learns a lesson from it (be sure to read Sean Ring’s recent letter on this if you haven’t yet!)

It seems our political system is irreparably broken. It’s going to take a real crisis to provide the necessary wakeup call. Today we appear to be accelerating towards one.

No matter what, the U.S. has a date with a reckoning. This pile of debt isn’t going to deal with itself. We will see incredible amounts of money printed in the decade ahead. The global financial crisis and COVID were just warm-ups.

So unlike in 16th century Spain, where a flood of gold and silver were the problem, today they are part of the solution.

I believe strongly that everyone should have at least a 5-10% allocation to gold and silver. I’m comfortable with as high as 20%.

The current pullback is an excellent opportunity for those looking to begin or add to a position. However, I do recommend “dollar-cost-averaging”, or buying over time. That way if we go lower, your price will average out.

Our economic future is more uncertain than ever. We’ll continue to help readers navigate these crazy times.

The post Empires Past and Present appeared first on Daily Reckoning.

Warren Buffett once quipped: “When the tide goes out, you can see who is swimming naked.”

It’s all fun & games, until… Courtesy HitManJohnny

Buffet was referring to banks, companies and even investors that appear solid on the surface, but behind the scenes are unprepared for when things go south: entities with poorly thought-out business models, too much debt, not enough cash, weak internal controls and the like. In many cases, they don’t even realize it themselves until the moment that stress arrives.

With that in mind, consider where we stand today. We’re four weeks into the Iran war, and Buffett’s observation applies to an unsettling number of players — including, in important ways, the United States.

The Decision That Set It All in Motion

First, a very basic question: Why did President Trump authorize the use of American military power against Iran?

No doubt, there’s a substantial classified record behind that decision, and much of it will remain out of view for years. But at least one public thread offers insight: statements by Steve Witkoff, Trump’s Iran nuclear negotiator, who described his discussions with Iranian representatives and what he conveyed back to the President.

According to Witkoff, by late February, Iran was just weeks away from possessing enough highly enriched uranium to assemble roughly eleven nuclear weapons. This is what the Iranians themselves conveyed. They also presented data indicating that, within a relatively short period, they could construct dozens more — potentially as many as 75 additional devices.

From Trump’s perspective, the choice was straightforward: act promptly to degrade Iran’s nuclear capability, or risk being “that guy,” meaning the president on whose watch Iran went nuclear. Perhaps unsurprisingly – at least, in keeping with what we know about Trump – it was bombs away.

Since then, the media, pundit class and numerous retired military voices have been quick to criticize the decision. “No plan.” “No strategy.” “Historic blunder.” Indeed, all of a sudden, everybody is Carl von Clausewitz — the 19th-century Prussian theorist of war — or at least playing one on television.

Typically, these instant experts have little to offer beyond self-serving hindsight and academic jargon. Particularly, they fault Trump for somehow “not anticipating” that Iran would restrict transit of ships through the Strait of Hormuz.

Strait of Hormuz. Courtesy LogisticsInsider.in.

What tends to be overlooked in all of this is something quite basic. Namely, that security of maritime transit through the Strait of Hormuz has been a core element of U.S. war planning since the 1940s, when the Navy first began operations in the region. In fact, during World War II, Hormuz was a key maritime corridor for U.S. ships that carried Lend-Lease materials to Iran, destined for shipment north to the Soviet Union.

In other words, for the past 80-plus years, and in any Gulf conflict scenario, the security of Hormuz is not a secondary consideration; no, it has been ItemNumberOne.

In every planning scenario, the security of Hormuz is always assessed, always briefed and always accounted for. There are no exceptions.

To me, at least, it’s inconceivable that Trump somehow “failed to plan” for Hormuz. Far more likely, he was fully briefed, understood the risks and chose to proceed anyway and, in effect, manage developments as they unfolded.

Which brings us to Iran.

Thirty Seconds That Changed the War

Since the 1990s, Iran has invested enormous resources — hundreds of billions of dollars — into building a layered military system.

Iran built extensive underground missile complexes, hardened bunkers, tunnel networks, proxy forces across the region and a nuclear program that achieved near-weapons-grade enrichment. None of this occurred by accident. It was the result of sustained effort, planning and coordination across decades, with support from counterparts including Russia, China and even North Korea.

And then the tide went out.

Iran’s air defense system appears to have failed in roughly the first 30 seconds of the conflict, degraded by U.S. cyber and space-based operations before it could respond in a meaningful way. Within hours, the airspace above Iran was effectively open.

Since that point, U.S. and Israeli forces have conducted sustained aerial operations across the country, delivering more than 18,000 air strikes, according to the Wall Street Journal. Every day of the conflict, aircraft ranging from legacy platforms to advanced fighters, along with drones and long-range missile systems, have struck a vast array of Iranian targets.

Iranian naval and air capabilities have been severely degraded. The country has lost its navy and air force, while land-based systems have absorbed extensive damage. Key industrial facilities have been hit. Personnel losses at senior levels have been significant.

Everything the regime constructed over multiple generations has been stress-tested in real time. And much of it has failed, although the Iranian regime remains “in power,” in a manner of speaking. For now, the rulers of Iran possess enough residual capacity to fire their remaining stockpiles of missiles and drones at U.S., Israeli and Gulf state targets. But they’re up against a relentless clock that delivers over 600 air strikes per day.

How long can they endure? We’ll have to wait and see…

Precision and Power, but Also Structural Limits

We could go on about Iran, but it’s also worth turning the Buffett test inward.

The United States has spent decades building military capability based on a power projection model that emphasizes technological superiority, precision targeting over distance, and high-performance systems. This is, in many respects, an “American way of war” — one that favors quality over quantity and seeks to deliver decisive effects through advanced capabilities.

This approach has advantages, particularly in the opening stages of a conflict; but it also carries structural limitations.

Top-shelf systems like, say, the B-2 bomber or F-22 fighter, are expensive, complex and maintenance-intensive. They’re not designed for prolonged, high-intensity campaigns that require sustained output over extended periods. And increasingly, that constraint is becoming visible.

Meanwhile, ammunition stockpiles are not as deep as they should be, not for this war and not considering other regions where conflict could break out. America’s warehouses are not full because past procurement decisions prioritized performance over volume, leaving gaps across multiple categories: cruise missiles, interceptors, air-to-air systems, guidance kits and more.

And replenishment is not a simple matter…

The Materials Bottleneck Nobody Can Ignore

Modern weapons systems depend on long lead-time inputs: rocket motors, warheads, internal electronics and a range of specialized materials. These inputs are not easily or quickly sourced. And the materials issue, in particular, runs deep.

Primary raw materials used in a notional guided missile. Courtesy AWST.com.

The image above highlights numerous elements and materials inside a “notional” guided missile. Meaning not any particular make or variant. But in general, this is what’s there. We see 27 distinct items, and these are not all! Meanwhile, lack of any single one of these materials could become a choke point in the production cycle.

For example, antimony is essential for explosives and solid rocket motors, but is largely sourced from China which, since the end of 2024, has restricted exports. Tungsten presents similar story of scarcity and Chinese control.

Add gallium and germanium to the list, both critical for radar systems, electronics and guidance technologies. China controls those supply chains, all the way down to the ore in the ground.

Then there’s the issue of rare earth elements, used throughout modern defense manufacturing in magnets, electronics and other components, again with major dependency on China, a strong geopolitical competitor.

At larger scale, constraints on U.S. military power become more visible. Right now, the U.S. lacks sufficient shipyard capacity to expand naval production rapidly, and the same goes for aircraft. Workforce limitations affect the ability to build ships and aircraft, engines, electronics and other critical systems. Production bottlenecks are not theoretical; they are practical constraints.

Energy adds another dimension, certainly on the West Coast where refinery capacity has declined significantly over the past several decades; California had 42 refineries in the early 1980s, and today has but six, entirely due to the state’s regulatory and economic pressures.

Follow that chain of primary materials, production facilities and energy, and the pattern extends far beyond the United States.

A World of Exposed Supply Chains

Let’s take the Buffett bathing suit test overseas, where NATO allies love to virtue signal, but when Trump asked for help with Iran the answer was a collective “Umm… no.”

With characteristic snark, numerous nations characterized their unwillingness to assist in terms of general objections to the Iran conflict. But the truth is more foundational; namely, many NATO nations simply lack the ability to contribute meaningfully to sustained operations. Overall, NATO offers limited naval capabilities, airlift, and/or deep logistical support.

Let’s single out the United Kingdom, Canada, Australia and New Zealand for collective military weakness. Together, they have zero ships ready to sail to the Middle East, and even Britain could only release one destroyer, after several weeks of preparation, to go to Cyprus in the relatively friendly and protected Mediterranean area.

On the other side of the world, vulnerabilities are similarly structural. Right now, Australia faces extreme shortages of motor and aviation fuel as global shipping routes shift, while domestic capacity is constrained. In fact, Oz has but two oil refineries in the entire, continent-sized nation, and imports significant refined products from China (well, not for long because China is shutting them off).

Meanwhile, New Zealand maintains no refining capability and must import essentially all of its fuels and lubricants. And truly, New Zealand is at the far end of everyone’s logistical tail. (Good luck, guys!)

Further north, both Taiwan and South Korea depend heavily on imported oil and natural gas, particularly from Qatar and Saudi, as well as helium inputs necessary for their respective semiconductor fabrication businesses. Hmm… What were they thinking?

Again, we could go on with examples, but these illustrations don’t demonstrate isolated weaknesses. No, they highlight embedded dependencies, now starkly revealed under stress.

The Tide Is Revealing

Looking ahead, where do things go? Trump claims that his reps are negotiating with the Iranians. Officially, the Iranians deny that, and declare that they will never deal with the Great Satan. Okay, we’ll see.

But sooner or later the Iran war will end, whether through negotiation, escalation or exhaustion, and the underlying vulnerabilities will remain. Supply chains, industrial capacity, energy infrastructure and material dependencies are not short-term issues. They are structural realities built over decades.

And of course, there will be opportunities in the rebuilding process. But first, it requires clear thinking — and a realistic assessment of what this moment has exposed.

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The post Late Edition: The Tide Goes Out on Wartime Planning appeared first on Daily Reckoning.

President Trump’s latest post on the Iran war is out.

In it, he says a deal with Iran “probably will be reached”.

But he goes on to say that if an agreement isn’t reached, our military will completely obliterate Iran’s power plants, oil wells, and Kharg Island (where the country exports 90% of its oil).

Here’s the full post via Truth Social:

Source: Truth Social

The fact that he says the “new regime” is more reasonable could point to a desire to make a deal.

But the threats, if carried out, would bring us up near the top of the escalatory ladder.

We don’t know how many ballistic missiles, drones, and launchers Iran has left. But my guess is they’re saving enough high-end options for such a scenario.

Even before Trump’s post this morning, strikes on energy infrastructure were accelerating. The picture below is from Israel’s Haifa oil refinery, which was apparently hit by an Iranian drone this morning.

President Trump was asked about a response to the refinery strike by a reporter. His reply was simple, “You’ll see.”

Iran’s capital, Tehran, has been hit extremely hard over recent days. Power outages have been reported across the city.

A chemical plant in Israel was hit, and shortly after, one in Iran was destroyed.

A few days ago, Israel struck Iran’s largest steel plants and a nuclear site. Iran hit a major aluminum plant in the UAE.

U.S. and Israeli military bases in the area have also been hit hard, with valuable planes and radars hit over recent days.

An American E-3 Sentry AWACS was destroyed by an Iranian drone in Saudi Arabia

It is worth noting that the Wall Street Journal initially reported the plane as being “damaged”, when it was clearly destroyed.

We do not have good visibility into the level of damage due to satellite coverage being restricted in the West.

Israel and all of our Gulf allies have also put strict censorship in place. Anyone filming and uploading footage of missile or drone strikes is being arrested.

And not much footage is coming out of Iran, due to the fact that they’ve shut down the internet, and the regime is also cracking down on anyone sharing negative footage.

Most of what we’re getting are leaks and official releases that governments judge to be beneficial.

The fog of war is extra foggy currently.

Failing Brakes

This war continues to accelerate. And unfortunately, I don’t see a good path to peace.

Each side is miles apart on their expectations for a deal. Iran is demanding the U.S. abandon its regional bases and compensate the country for its losses. Not going to happen.

The U.S. is demanding that Iran cripple its missile and drone capabilities, hand over its enriched uranium, and stop supporting proxy forces in Lebanon and Yemen. The uranium was already offered before the war, but the other two would seem to be non-starters.

While there is at least some communication between Trump’s team and Iranian leadership, it’s all through 3rd parties (Pakistan and Oman, reportedly).

So instead of talking directly, we’re playing pass the message.

The only possible factor that could lead to a ceasefire or deal is that all sides are likely running low on missiles and drones.

That could pause the conflict for a year or so, long enough for all sides to re-arm and repair. But it would almost certainly be temporary.

Hopefully I’m missing something here.

Market Impact

Despite the ongoing chaos, markets continue to yawn. Today U.S. stocks are down only slightly as of 1:30pm ET.

Meanwhile in Japan, stocks dropped 5%. Japan and much of Asia are almost entirely reliant on the Strait of Hormuz for their oil and gas supply. The U.S. is much better off, at least energy-wise.

But oil is priced globally, so we will still feel the effects. Additionally, fertilizer prices are soaring, which will impact food in a major way. Plastic production has plummeted, which will lead to shortages and price hikes.

A recession is almost certain. And Jim Rickards seems to agree. In a recent interview at CPAC, he said that markets are not pricing in current risks.

Today Jim posted the following in the Paradigm Press app’s Daily Feed:

Download the Paradigm Press App Here

I agree with Jim’s analysis. Trump is unlikely to quit now, with Iran still controlling the Strait of Hormuz and threatening U.S. and Israeli assets. And markets aren’t pricing the risks properly.

Further escalation remains the most likely option, by far.

The S&P 500 and Nasdaq are both down about 8% since the war began.

But we started out at an extremely expensive level. The downside in stocks far outweighs the upside from here.

Below is a chart showing the Warren Buffett Indicator, a measure of how expensive stocks are. It simply compares the value of all U.S. stocks to GDP (US economic output).

The blue line is the Buffett Indicator:

Source: MacroMicro

We are still at levels more expensive than the dotcom bubble in 1999-2000.

As I’ve been mentioning from the beginning, it would be wise to take some profits here and raise cash. And maybe buy some puts/hedges, but only if you know what you’re doing or are following one of our experts here like Jim Rickards and Dan Amoss.

I continue to hold large positions in oil and gas stocks such as Petrobras (PBR, PBR.A) and Exxon Mobil (XOM). If you want easy diversified exposure to U.S. energy companies, the XLE ETF is an easy choice.

The pullback in gold and silver has provided a nice buying opportunity. They may fall a bit further, but long-term, precious metals are going higher. I am avoiding buying any more miners for now, due to their heavy exposure to oil prices. However, if they fall to levels that are irresistible, we will let you know.

Money Printing Ahead

President Trump is likely to send out stimulus checks to struggling Americans at some point this year. Around 65% of Americans live paycheck-to-paycheck, and this energy spike is going to hit hard.

The President is requesting an additional $200 billion to support the war effort. More debt, more money printing.

The Federal Reserve will almost certainly cut interest rates at some point. While some are arguing for rate increases, this seems highly unlikely. Besides, higher rates wouldn’t help lower oil-driven inflation anyway.

Even before this war began, markets were in a fragile fundamental state. Now I don’t like the outlook for most stocks at all.

We are still near record-high valuations for U.S. markets, and much of the rest of the world is far more vulnerable to oil and natural gas disruption.

The post No Brakes appeared first on Daily Reckoning.

Back in December, I wrote a newsletter about lessons from the war in Ukraine.

The conclusion was:

“This is the age of asymmetric warfare. Pinpoint long-range weapons systems have eliminated the advantage of large troop concentrations and capital ships like aircraft carriers.

For a long time, only superpowers like America and Russia had access to these types of systems. Now they have proliferated throughout the world. The implications have yet to be fully realized.”

This lesson is coming into sharper focus due to the war with Iran. So far, the U.S. has kept its Navy ships far from the country. Yes, they are still launching strikes from the 1 carrier in the area, but from a safe distance. This limits aircraft time over target.

The threat of anti-ship missiles and sea and air drones has kept U.S. Navy ships mostly out of the Persian Gulf. We also saw this during America’s brief skirmish with Yemen’s Houthis. With the threat of anti-ship missiles, they were mostly able to scare off even mighty U.S. aircraft carriers.

Now Iran is using the threat of sea drones and anti-ship missiles to keep the Strait of Hormuz closed.

Iran is allowing some ships through, but none owned by the U.S., Israel, or certain other countries.

Tankers that are allowed to pass are apparently paying a toll of around $2 million. But they’re not paying in dollars. The toll is being paid in Chinese yuan. Fortune:

The secretary-general of a bloc of Gulf Arab countries said that Iran is charging fees for ships to safely transit the Strait of Hormuz. Industry experts say some ships are paying in Chinese yuan to pass through the Strait of Hormuz, where 20% of all traded oil and natural gas is transported in peacetime.

For Iran, using Chinese currency is preferable because it cannot be seized by America or NATO countries. And it’s a small blow against U.S. dollar hegemony.

This is not a small thing. For the first time in a long time, a foreign enemy is denying us and our allies resources. And forcing other parties to switch from U.S. dollars to Chinese yuan.

We are accustomed to being the one who sanctions.

The Petrodollar Remains (For Now)

For those who need a quick reminder, the petrodollar system has been in place since the 1970s. The agreement was simple.

Oil producers in the Middle East would only sell their oil for dollars. This drove up demand for dollars, and helped cushion the shock after leaving the gold standard. It was also understood that these countries would invest their oil profits in U.S. stocks and bonds.

In exchange, we would protect these oil producing countries from attack. Our distinguished colleague Jim Rickards actually helped forge the petrodollar system. It was a brilliant solution to reverse a falling dollar.

The petrodollar system allowed the U.S. dollar to remain a strong world reserve currency, even after we ended the gold standard.

The problem right now is that Iran is attacking all our military bases in the area. The New York Times just reported that, “Many of the 13 military bases in the region used by American troops are all but uninhabitable”.

NYT reporters say that U.S. troops have abandoned many of these bases for local hotels and office buildings, and are “working remote”. Many of us have known this for weeks, but it’s nice to see it finally acknowledged by “the paper of record” (ha!).

Iran has also targeted Gulf countries’ oil infrastructure, which has become a key point of leverage.

This could present a problem for the petrodollar system. If we can’t properly protect our Gulf allies from attack, they may be tempted to strike a deal with Iran. And Iran, of course, is allied with China and Russia.

Eventually, these Gulf countries could switch from selling oil in dollars to yuan and other currencies. This would be a major blow to the petrodollar.

For now, the dollar is fine, and even getting stronger. Most countries still use dollars to purchase oil, and oil is far more expensive than it was. So currently we’re actually seeing a dollar shortage.

But unless this war ends soon, the threat to the petrodollar system could become very real. And that could mean a significant fall in the value of the dollar over time. Which would mean inflation and disruption to U.S. markets.

Iran: A Difficult Challenge

Today the U.S. maintains large military bases in Saudi Arabia, Bahrain, Iraq, Kuwait, the UAE, Oman, Turkey, and Pakistan.

The old joke is “why’d they put their country so close to all our military bases?!”

Iran has always been a dream target for regime change. The ultimate hope of neocons and neolibs for decades.

It sits north of the most important sea route in the world, the Persian Gulf and the Strait of Hormuz. It has the largest natural gas reserves in the world, and among the largest oil reserves.

The problem, of course, is that Iran is built like a fortress. It is surrounded by high mountains and has a population of 90 million highly-educated people. This is why Persian culture has survived for thousands of years, while countries around them are frequently toppled.

And today Iran is extra tricky to target due to advances in missile and drone technology. Sure, we can launch missiles and bomb them almost at will, but their military assets are spread out across thousands of locations across the country. Under 300 feet of granite and reinforced concrete, in some cases.

Anti-ship missiles in a “missile city” located under a mountain on Iran’s coast.

Underground missile launch system in Iran

Satellite view of one of Iran’s launch facilities on top of a mountain. Source: Maxar via Fox News

These underground “missile cities” have been hit by bunker buster bombs repeatedly so far in the war, but are still firing. Sure, we can block the entrances temporarily, but then Iran digs out and starts firing again.

I get the feeling that people, including politicians, are still underestimating Iran’s capabilities. And that is a bad thing to do during a war.

Honestly, at this point I don’t see either side backing down anytime soon. I suspect Iran can keep the Strait of Hormuz closed for months or a year if they want to.

And sure, we could hit all of Iran’s energy sites, but they would strike facilities that provide 20%+ of all global oil and gas. We covered this in-depth in Escalation Ladders, so check that out if you haven’t yet.

It’s an ugly situation. And I don’t see any easy way out of it. Trump and Iran are so far apart on negotiations, it’s hard to imagine either compromising. It may have to get significantly worse before one side caves.

Militarily, there are only bad and worse options going forward. A ground invasion might happen, but will not go well. Honestly I don’t even know how they’d insert the troops. V-22 Osprey from Kuwait, perhaps? It wouldn’t be easy to get many in. Amphibious landing? Call me skeptical.

Destroying Kharg island, Iran’s primary oil export facility, is entirely possible but would trigger massive retaliation.

There is an ever-increasing risk that 20%+ of the world’s oil and LNG production goes offline for years.

And that would be a catastrophic outcome. Hopefully some kind of deal can be struck soon.

Otherwise, we continue to climb the escalation ladder, and eventually could end up at the last rung – the nuclear one. And I don’t think anybody wants that outcome.

Update: As I was finishing this article, we learned that Israel has struck 3 Iranian steel plants, a nuclear facility, and other infrastructure. It appears the ceasefire on non-military infrastructure is over. Iran has vowed to retaliate.

We’re climbing that ladder. I’m sure we’ll have developments over the weekend, and will have more Monday.

The post Iranian Missiles Target the Petrodollar appeared first on Daily Reckoning.

It’s been a frustrating few months for precious metal investors.

Silver is currently trading around $68/oz. Gold is at $4,415.

If you had told me these prices a year ago, I’d have been thrilled. But today it’s disappointing.

I don’t think there’s any grand conspiracy at play here. We simply went up too far, too fast. Now that volatility has arrived, we’re correcting.

A friend sent a meme which describes the situation well.

On the left: gold when it hit a new high of $4,400 in December, 2025.

On the right: gold at $4,400 today.

Same price, different perception.

However, I remain utterly confident in the long-term bull case. A global debt crisis still lies ahead. In fact, it is accelerating.

Inflation is picking up, and the longer the Strait of Hormuz stays closed, the worse it will get.

War is spreading. The world is becoming multipolar, meaning America is no longer the only superpower. The geopolitical chessboard is in motion like we haven’t seen in decades.

Currency and trade wars are raging, as our colleague Jim Rickards has long predicted.

This is still a gold and silver world. We just got a bit ahead of ourselves.

Now is a time to either sit tight, or make a shopping list. I’m sitting on a larger than normal amount of cash, so am working on my buy list.

With high oil prices, I’m not currently looking to add to miners (already have plenty of exposure there).

There is a way to get similar leverage to the price of gold and silver. But with less exposure to oil and fuel prices.

How? Precious metal streaming companies.

The Streaming Model

Mining can be lucrative, but getting started is expensive. You have to buy the rights to property, get permits, drill extensively, and build out the infrastructure.

A mining company can raise money in a few different ways. One of them is to sell “streams”. In essence, the company gives up some of its future precious metals in exchange for cash up front.

Let’s look at a real example.

Vale (VALE) is the Brazilian mining giant we’ve discussed a few times. They primarily mine iron, copper, and nickel.

But when you mine these base metals, there’s always some gold and silver too.

For Vale, precious metals are byproducts. So sometimes they will sell the rights to gold and silver to a streaming company. This lowers the upfront cost to build the mine.

In this case, Wheaton Precious Metals (WPM) bought the right to 75% of the gold produced at Vale’s massive Salobo copper mine for $3.4 billion in 2013.

Part of Vale’s giant Salobo copper and gold mine

In exchange for that $3.4 billion, Wheaton gets to buy 75% of the gold produced for $429 per ounce.

In the 4th quarter of 2025, the Salobo mine produced 88,900 ounces of gold which Wheaton bought at $429 per ounce, and sold for around $4,000.

By my rough calculation, this single streaming asset produced $266 million of profit for WPM in Q4 of 2025 alone!

It’s a beautiful business model when done right. And the Salobo copper mine could operate for another 30 years. As long as it’s operating, Wheaton will be collecting a big payday from its gold stream.

Wheaton owns precious metal streams on dozens of projects. Ones where gold and silver are primary assets, and ones where they are byproducts. Here’s a map:

Source: WPM

Oil and Overhead Costs

During periods of high oil prices, gold and silver miners’ profit margins decrease.

So before the Iran war, it was a GREAT time to own miners. Oil was cheap and bullion prices were high.

But with oil costs rising, I will be looking to shift some exposure into streaming and royalty companies.

Wheaton Precious Metals (WPM) is the gold standard streaming company. It has almost zero direct exposure to oil prices (though if oil gets high enough to slow mining at sites they have a streaming asset on, it could affect them).

In Q4 2025, Wheaton produced $865 million in revenue and $765 million in operating cash flow. Margins are high.

Wheaton shares are currently down about 27% from its recent high.

I haven’t bought any WPM yet, but plan to soon. I will likely shift some of my mining exposure into WPM, buying over time in case we go lower.

And if we get a broad market crash, Wheaton will be near the top of my shopping list. I need more exposure to quality streaming assets, in case oil stays higher for longer than we expect.

With a good streaming company like WPM, you get nice leverage to the price of gold and silver, but with less exposure to rising oil costs.

I don’t know how long oil prices will stay elevated. But it could be longer than most people expect.

I’m not giving up on miners. I still love the model and the potential upside. I’m simply looking to diversify into some streaming companies as well.

The post Streams of Gold appeared first on Daily Reckoning.

How much has the Iran war impacted U.S. oil prices?

Here is the Energy Information Administration (EIA) oil price forecast from February 2026:

We estimate that oil-directed rig activity in the Permian will be relatively low as West Texas Intermediate prices fall from $65/b in 2025 to average $53/b in 2026 and then average $49/b in 2027.

According to the EIA, WTI should be around $53 per barrel on average this year. Here is the current oil price chart for West Texas Intermediate:

As we can see, the Iran war pushed the oil price from less than $60 per barrel to over $90. That’s a 50% jump in a few weeks. This is the highest price we’ve seen since 2022.

There’s an opportunity for investors inside this oil spike.

The higher oil price drove gasoline prices higher. However, oil price isn’t the only driver of gasoline. The explosion at Valero’s (VLO) giant Port Arthur oil refinery could send gas prices even higher. Port Arthur is the largest refinery in the U.S. and the eighth largest in the world.

The fire at Valero’s Port Arthur oil refinery

The fire damage shut in over 380,000 barrels per day. That’s about 2% of the U.S. refining capacity. However, we don’t think its loss, even for a few weeks, will create a country-wide supply crisis. However, it will further increase the price of gasoline.

The premium of a gallon of gasoline over a gallon of oil is going to go up. Here’s what I mean…

The price of gasoline is a function of the cost of oil, taxes, and marketing. Over the past couple of years, gasoline costs about 24% more than a gallon of oil. But as you can see in the chart below, it can go much higher:

In 2022, gasoline prices spiked to 122% over the price of oil. That means, if oil was $2 per gallon, gasoline price was $4.44 per gallon. Since 2024, we saw it has high as 48% over the price of oil.

We can use this to roughly forecast earnings for refiners. When the premium is up, it’s good for them. When it’s low, it isn’t…and right now it looks promising.

The fallout from the Port Arthur fire could be a higher premium for gasoline prices. That means gas prices could go up, even if the oil price doesn’t. That premium means refiners are going to make more money.

Refiners’ share prices soared quite a bit, as you can see here:

This trend remains in place. And the larger than average premium of gasoline should continue to pad their earnings.

This is one way to offset higher gasoline prices. Own the companies that are going to make more money in this situation.

The VanEck Oil Refiners ETF (CRAK) is an easy and diversified way to do so.

The post CRAK Kills (During an Oil War) appeared first on Daily Reckoning.