<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Buffett&rsquo;s 38-Year-Old Advice
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It happened over 20 years ago at the Berkshire Hathaway annual meeting in Omaha. Paradigm AI authority James Altucher will never forget the encounter.
He got to talking with a restaurant owner. &ldquo;Back in 1976,&rdquo; James recalls, &ldquo;he&rsquo;d bought 200 shares of Berkshire.
&ldquo;A year later, the stock had doubled, so he sold half, took the money and opened a restaurant. He ran it for the next 30 years.&rdquo;
The other half of the position? He let it ride. &ldquo;And by the time I shook his hand in 2003, that untouched half had grown into a $12 million fortune.&rdquo;
Really, the fellow had two fortunes &mdash; one for which he worked 30 years, the other for doing nothing.
&ldquo;I was jealous,&rdquo; says James. &ldquo;I wanted to be the guy who did nothing.&rdquo;
That dovetails with something else James will never forget &mdash; a line from Warren Buffett&rsquo;s annual Berkshire shareholder letter way back in 1988.&nbsp;
Maybe you&rsquo;ve run across it before: "Our favorite holding period is forever."
➢ As it happens, 1988 is the year Buffett first invested in Coca-Cola. Berkshire&rsquo;s cost basis is about $3.25 per current share. KO trades this morning for $86.45. That&rsquo;s 26.6X in 38 years. And that&rsquo;s without reinvesting the dividends.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> All of which brings us to the AI-is-gonna-kill-everyone narrative that gave markets a shudder during September.
You know the broad outlines by now. A researcher at the AI firm Anthropic quit his job in theatrical fashion with a warning that &ldquo;the people building AI earnestly believe that it could kill us all by the end of the decade.&rdquo;
Then a senior Anthropic executive chimed in to assign a 10% probability of that outcome. Then Anthropic CEO Dario Amodei wrote an open letter calling on the government to work with the industry to slow down AI development. Sam Altman and Elon Musk concurred.
As we said at the time, a lot of people misunderstood Amodei&rsquo;s plea. Amodei said &ldquo;slowdown&rdquo; and a lot of people heard &ldquo;pause.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;There's a wide gap between a hard conversation and a full stop,&rdquo; James elaborates.
&ldquo;Building a bigger, smarter model from scratch is what the industry calls &lsquo;training.&rsquo;
&ldquo;What Anthropic's CEO was actually asking for was time. Time to test the systems and put the guardrails on them before racing ahead. He wasn&rsquo;t saying stop. And even if he had been, no lab on Earth is going to pump the brakes and hand a rival the lead.&nbsp;
&ldquo;Training rolls on no matter what any one executive says into a microphone. The conversation is real. The buildout it's supposedly threatening hasn't slowed by a single server.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> What&rsquo;s more, James reminds us training is only half the equation. There&rsquo;s also inference &mdash; that is, all the stuff a large language model does when you submit a prompt.
&ldquo;One of the largest AI inference platforms out there, OpenRouter, has watched its weekly demand climb 12,700 times since January 2024, and nearly double in just the last six weeks.&rdquo;
This is the activity that rolls on, oblivious to the media chatter.&nbsp;
James&rsquo; takeaway: &ldquo;The crowd is out dumping the market's best names over a story that has nothing to do with what those companies actually earn. That's usually the exact moment worth stepping in &mdash; and a window like this never stays open long.&rdquo;
Two weeks ago in Altucher&rsquo;s Investment Network, James pinpointed five AI names that sold off during September &mdash; and which he advised holding onto tight. Or even buying more shares at a discount.&nbsp;
&ldquo;Think of the man in Omaha, sitting on a hundred shares he never laid a finger on.&rdquo;
Out of respect for James&rsquo; paying subscribers we&rsquo;ll identify only one of the five here today &mdash; both because James has mentioned it in this space previously and because it issued its quarterly numbers yesterday afternoon.
Micron Technology (MU) is one of the three big names in memory chips &mdash; and the only American one. It topped Wall Street analysts&rsquo; expectations on both revenue and profit &mdash; and it &ldquo;guided higher,&rdquo; as the saying goes, for the coming quarter.
But MU shares are down nearly 2% as we write today and the media are squawking: MarketWatch says &ldquo;unanswered questions&rdquo; remain about the long-term deals the company has locked in through 2028.
James is unconcerned. As he said here in mid-September, &ldquo;Inference needs lots of memory.&rdquo; And inference shows no sign of slowing down. James is happy to buy the dip.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Diesel Deficit
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The diesel squeeze is getting ever more serious.
As of yesterday the &ldquo;crack spread&rdquo; between the price of oil futures and the price of diesel had blown out to $122 per barrel. When last we visited the topic a few days ago, the gap was barely $100. Thus, a barrel of diesel now costs well north of $200 now.
Here are some of the latest developments&hellip;
<ul>
<li>Texas is now allowing the use of &ldquo;dyed diesel&rdquo; for trucks. Typically, this tax-free grade of diesel is limited to off-road uses like farm equipment</li>
</ul>
<ul>
<li>&ldquo;Chinese refiners have suspended exports of oil products to regions beyond Hong Kong and Macao until further notice from Beijing,&rdquo; says the Reuters newswire</li>
</ul>
<ul>
<li>Russia has extended its ban on diesel exports for another month. The country flipped from a net diesel exporter to a net diesel importer when Ukraine started attacking Russian refineries (with the help of U.S. intelligence targeting).</li>
</ul>
Rumors persist the Trump administration will resort to its own ban on diesel exports sometime between now and the midterm elections in 34 days.&nbsp;
But as we said last week, the only region that might see price relief as a result is the Gulf Coast, where the bulk of the country&rsquo;s diesel surplus resides.
In the meantime, U.S. crude futures are up over a buck today, approaching $92. The price hasn&rsquo;t had a sustained run below $90 since August.
➢ From everything we can tell, a nationwide trucker strike called for today in protest of high diesel prices is a bust. That said, the FreightWaves data firm reports that over the last month, 16 U.S. trucking companies have landed in bankruptcy court.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile, Mr. Market still can&rsquo;t shake his jitters about higher energy prices fueling inflation &mdash; and yet again, that&rsquo;s sending Treasury yields higher.
The yield on a 10-year T-note has jumped to 5.31%. Yesterday we were looking at the highest rate since 2007. Now we&rsquo;re looking at the highest since 2002.&nbsp;
Reminder: This rate sets the pace for everything from mortgages to corporate borrowing. Not coincidentally, Freddie Mac says mortgage rates just posted their biggest one-week rise in four years &mdash; up to 7.28%.
As for the major U.S. stock indexes, not much to say: The Nasdaq is flat from yesterday&rsquo;s close and the S&amp;P 500 is down about a tenth of a percent at 7,641. For perspective, that&rsquo;s about 2% below its most recent record close in mid-August.
<a id="3"></a>
Precious metals are licking their wounds but modestly in the green &mdash; gold at $4,167 and silver at $60.83. It looks as if $60 silver is holding for now.
Crypto is holding its own, Bitcoin just under $84,000 and Ethereum a bit below $2,700.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />&ldquo;The Very Rich Are Different From You and Me&hellip;&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> There&rsquo;s the top 0.1% and then there&rsquo;s everyone else. Especially since COVID.
It&rsquo;s been a running theme in these daily missives for over a decade. This week, The Wall Street Journal put some new numbers on it.&nbsp;
Per figures from the Federal Reserve, the wealthiest 0.1% of Americans have doubled their net worth since the end of 2019.
&ldquo;The year the pandemic started was when the ultrawealthy began to pull away from other rich groups,&rdquo; says the paper. You can see it in dramatic fashion on this chart&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4hMWMxlDk9OPaXH5LuEP68/07e6eafd0ebb5df526c3adb74c1d5ceb/10.1_5_Bullets_Chart.png" alt="Cumulative change in net worth" width="540px" />
Now&hellip; it&rsquo;s true that others have fared better than that 9.9% since 2020.&nbsp;
In fact, the bottom 50% &ldquo;has actually seen their wealth rise more than any other group on a percentage basis,&rdquo; says the Journal &mdash; &ldquo;thanks to a combination of rising home values and pandemic-era government relief that swelled bank accounts and helped pay down debt.&rdquo;
But hold on. This is not a case of &ldquo;a rising tide lifts all boats.&rdquo; Read on&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />A Crucial Caveat
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It appears these figures from the Fed and the Journal are not inflation-adjusted. Which makes all the difference.
That brings us back to one of our favorite charts. It shows how the &ldquo;wealth gap&rdquo; started blowing out early in the 21st century.
Here the focus is on income and not wealth &mdash; but the figures are inflation-adjusted. It was originally brought to our attention by Marc Faber, editor of the renowned Gloom, Boom and Doom Report.
&ldquo;If I were to look at the average family income, excluding capital gains, adjusted for inflation between 2002&ndash;2012,&rdquo; he wrote, &rdquo;it is clear that 90% of these families experienced a decline in real income and another 5% experienced hardly any gains.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/71UV4Mx18knsXkvNtnTxpS/a2e68d4c31aba4fd1ed7e24cd890802a/A_Rising_Tide_chart.png" alt="Average family income excluding capital gains, adjusted for inflation" width="540px" />
&ldquo;In fact,&rdquo; he went on, &ldquo;it is shocking that only 0.1% of families achieved substantial gains in real incomes.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Faber did not blame the top 0.1% for their good fortune relative to everyone else. Instead, he put it on the Federal Reserve.
&ldquo;The Fed's monetary policies have failed to boost the real incomes of most people but have had an enormously favorable impact on just 0.1%...
"In fact, I would argue that the Fed is fully responsible for the fact that 90% of U.S. families have had declining real incomes (inflation adjusted) over the last 10 years or so (as money printing raised the prices of energy, food, education, transportation, health care, insurance, etc.) and have experienced a decline in their net worth. After all, it was the Fed that repeatedly and deliberately created and continues to create bubbles, which benefit only a minority, while hurting the majority."
Alas, there&rsquo;s no current version of this chart. Your editor has searched high and low. But one of the economists who compiled the chart published a paper on the same general theme, updated through 2022.
His conclusion is that the upheaval wrought by the government&rsquo;s reaction to COVID made the income disparity even worse than it was before &mdash; stimmy checks notwithstanding.
From 2019&ndash;2022, the bottom 99% saw their after-inflation incomes grow by 1.0% &mdash; compared with the top 1%, who enjoyed 16.1% growth.
Here the blame lies not only with the Fed but also on two free-spending presidents and congresscritters of both parties &mdash; who&rsquo;ve put federal spending on a permanently higher trajectory.&nbsp;
Much of that money has found its way into financial assets whose benefits accrue to&hellip; well, those who have financial assets.&nbsp;
No wonder the bottom 50%, with little home equity or stock ownership, feel so left behind. Even if on paper their wealth is growing faster than anyone else&rsquo;s&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: AI Data Centers
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I&rsquo;ve noticed more and more articles about data centers and the effect on everyone&rsquo;s power bills. It isn&rsquo;t just <a href="https://paradigmpressroom.com/post/maga-lansing">Paradigm Press</a> bringing this up,&rdquo; a reader writes.&nbsp;
&ldquo;I wonder though if water and power usage is really the issue, or just hate on data centers. If we started building a bunch of aluminum smelters (they use a huge amount of power), how would people feel? Would the smelter need to pay for its heavy power usage infrastructure, or would it be like it was 80 years ago when they were built and they may have received a lot of the infrastructure on the backs of ratepayers?&nbsp;
&ldquo;We used to have a few of those smelters here in Washington state because of our cheap hydropower. But they are all gone now and I don&rsquo;t know why. Did our rates go down when the smelters left because of a surplus of power? Or maybe that is why so much infrastructure has stagnated since our heavy industry has mostly left, freeing up power for housing growth and smaller businesses.
&ldquo;There are certainly things to not like about data centers, but I wish they would think about the issues and restrict things generally. If you don&rsquo;t like a bunch of water being used for evaporative cooling, then ban it, but ban it for everyone doing that. If you don&rsquo;t like noise from the fans or generators or whatever is making the hum at datacenters, then ban noise above a certain level at a certain distance, but again make that rule for every industry not just data centers.
&ldquo;Thanks for all you do!&rdquo;
Dave responds: Well stated. I imagine you&rsquo;d find much agreement with a Substacker named Connor Boyack.
&ldquo;It is tempting to file all of this under &lsquo;techlash,&rsquo; a nation flinching from the steady march of technological progress (and the infrastructure needed to run it),&rdquo; <a href="https://selfevident.connorboyack.com/p/who-decides-on-data-centers?utm_source=share&amp;utm_medium=android&amp;r=29b15&amp;triedRedirect=true">he wrote six weeks ago</a>. &ldquo;But I believe the debate turns on two far more basic questions: who pays, and who decides.&rdquo;
Meanwhile, you&rsquo;re right to suspect that data centers are being held to a different standard than other industries.&nbsp;
We&rsquo;ll show you exactly how in tomorrow&rsquo;s edition &mdash; and try to unpack why that&rsquo;s the case. Catch you then&hellip;

WASHINGTON, DC, USA - SEPTEMBER 4, 1991: Warren Buffett, Chairman Salomon Brothers, testifies before U.S. House Subcmte. on Telecommunications.

shutterstock 1263077989 (1)

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Paradigm Pressroom’s 5 Bullets is a daily e-letter covering the economy and the markets, reaching 120,000 paying subscribers of the renowned financial publishing firm Paradigm Press.

Paradigm Pressroom's 5 Bullets

Buffett’s 38-Year-Old Advice

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Look Who&rsquo;s on the &ldquo;Birthright&rdquo; Train
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Hmmm&hellip; It seems Democrats are climbing aboard the Trump administration&rsquo;s &ldquo;American Birthright&rdquo; agenda.
The &ldquo;Birthright&rdquo; is a term coined last year by Paradigm macroeconomics authority Jim Rickards. It was his shorthand for the White House&rsquo;s ambitions to aggressively tap into the energy and mineral wealth underneath federal lands &mdash; a $150 trillion bounty.
In time, the administration&rsquo;s strategy developed into one in which the federal government took ownership stakes in mining companies. Several Paradigm editors followed Jim&rsquo;s &ldquo;Birthright&rdquo; cue with a recommendation of the rare-earth firm MP Materials. Members of Altucher&rsquo;s True Alpha profited the most &mdash; 918% playing MP call options.
Then came a similar deal for USA Rare Earth. Some of our readers bagged a 191% gain on USAR in anticipation of the deal going down.
The Birthright agenda continues to evolve &mdash; especially in light of the Chinese government&rsquo;s continued export controls on rare earths as well as other minerals the government sees as vital for industry and the military.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Now comes a measure in Congress called the Critical Mineral Executive Coordination Act &mdash; and it carries bipartisan support.
The chief sponsors are Sen. Tim Scott (R-South Carolina) along with two Senate Democrats &mdash; Tim Kaine of Virginia (Hillary Clinton&rsquo;s running mate in 2016) and preacher-turned-politician Raphael Warnock of Georgia.
Its two key provisions are&hellip;
<ul>
<li>Establishing a &ldquo;Special Adviser to the President for Critical Minerals and Supply Chains&rdquo; within the National Security Council to set up a &ldquo;coordinated, government-wide strategy&rdquo;</li>
</ul>
<ul>
<li>Setting up a training program at the Foreign Service Institute &mdash; the unit of the State Department that coaches up aspiring diplomats &mdash; to focus on Washington&rsquo;s &ldquo;strategic competition&rdquo; with Beijing.</li>
</ul>
A statement from Sen. Kaine&rsquo;s office checks many of the Birthright boxes: &ldquo;We need critical minerals to build chips for everything from our smartphones to our national defense apparatus. The U.S. must not cede control of global critical mineral supply chains to China.
&ldquo;That is why I&rsquo;m glad to co-sponsor this bipartisan legislation to establish a dedicated executive branch critical minerals czar and marshal our diplomatic corps&rsquo; expertise in this area. This commonsense and overdue step is crucial to our national security and retaining our technological edge.&rdquo;
Presumably if this legislation makes it to Donald Trump&rsquo;s desk, he&rsquo;ll sign it. More importantly, it sets the agenda for the next president &mdash; whoever it is, no matter the party. The Birthright theme will have a long arc.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> That said, we don&rsquo;t want to lose sight of a Birthright development taking shape today.
Jim Rickards calls it &ldquo;the most shocking policy I&rsquo;ve seen in more than five decades of advising the U.S. government.&rdquo;
You&rsquo;ll find it in Section 1260H of the Federal Register. Jim calls it Trump&rsquo;s Blacklist. &ldquo;Because with these orders, the White House is banning 188 companies.&rdquo;
&ldquo;And when this takes full effect, I believe it will wipe out one of the most competitive industries in America &mdash; leaving just a few tiny stocks standing.
&ldquo;The last time a U.S. president did something like this, one stock surged 5,000% in just five years.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Watch Those Revisions!
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The big market story of the day is&hellip; being wildly misinterpreted.
The Commerce Department is out with &ldquo;core PCE&rdquo; &mdash; which is the Federal Reserve&rsquo;s preferred measure of inflation. When the Fed talks about its 2% inflation target, this is the number it has in mind.
The number clocks in at 3.0%. Yes, that&rsquo;s a lot more than 2%. But literally no one among dozens of economists polled by Econoday figured the number would be that low; the average guess was 3.3%. What&rsquo;s more, the previous month&rsquo;s figure was revised down from 3.3% to 3.0%.
With that, futures traders are dialing back their expectations for interest rate hikes by the Federal Reserve: They now assign a 61% probability the Fed will hold steady at its next meeting in four weeks, pushing off the next rate hike until mid-December.
The reaction is not unexpected: &ldquo;Stocks rise after data shows inflation slowed last month,&rdquo; said CNBC.
Checking our screens, the Nasdaq is up 1% on the day, back over 27,000. And the S&amp;P 500 is up a half percent, back over 7,700.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But hold on: As of today, the Commerce Department has changed its methodology for calculating core PCE.
It was right there in The Wall Street Journal last July: The agency &ldquo;is tweaking its measurement of the cost of investment management, software and legal services, and it will apply changes retroactively to the past five years.&rdquo;
We&rsquo;ll spare you the details; trust us, they&rsquo;d make your head spin. What matters is the outcome: &ldquo;The effect, according to economists, will be to lower core PCE inflation.&rdquo;
But even after revisions, today&rsquo;s 3.0% figure is up from 2.7% nine months earlier.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> While expectations for higher short-term interest rates are subsiding&hellip; longer-term rates continue their relentless rise.
The yield on a 10-year Treasury note is up to 5.28% and the 30-year bond is up to 5.63%. Once more, both of these numbers sit at new high-water marks last seen during the George W. Bush administration.
Once more, the story appears to be rising oil prices &mdash;&gt; rising inflation expectations &mdash;&gt; rising interest rates. U.S. oil futures are up two bucks to $91.42.
Elsewhere, gold is holding its own at $4,156 but silver&rsquo;s shed another buck and it&rsquo;s at risk of falling below $60 for the first time in two months.
But digital non-dollar assets are holding up all right &mdash; Bitcoin over $84,000 and Ethereum a bit below $2,700.
More about crypto next&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />The Rebel Gets a Corner Office
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Five years ago this week, China banned crypto. Again,&rdquo; says a retrospective by Paradigm crypto analyst Chris Campbell.
And in the United States at that time? Crypto was effectively banished to the wilderness.&nbsp;
There were &ldquo;zero spot Bitcoin ETFs,&rdquo; Chris reminds us. Banks kept crypto at arm&rsquo;s length and Washington treated the industry with suspicion.
Today, U.S. spot Bitcoin ETFs hold more than $100 billion, Wall Street firms offer digital-asset custody and tokenized assets are moving onto blockchain rails.
&ldquo;Five years. Same asset. Completely different room,&rdquo; Chris observes.
What made the difference? Regulation. For years, &ldquo;the SEC ran a roach motel. Tokens checked in. They never checked out.&rdquo;
Projects faced the constant threat of being told, Maybe you're breaking securities law, see you in court.
No more. The SEC has proposed rules giving some crypto projects a clearer path through securities law. The CFTC and Treasury are advancing crypto rules too.
Perhaps seeing the regulatory dam breaking, the Depository Trust &amp; Clearing Corporation &mdash; a critical piece of America&rsquo;s market plumbing &mdash; has already processed real transactions using tokenized securities.
&ldquo;The machinery of American finance is already switching tracks,&rdquo; says Chris. &ldquo;The lawyers are arguing about the details.&rdquo;
And the shift is altering the investment framework Chris brings to Paradigm&rsquo;s flagship crypto service, Altucher&rsquo;s Early-Stage Crypto Investor.
The old crypto strategy was simple: Buy the whole herd. But now, &ldquo;the herd is splitting.&rdquo;
Instead of buying everything, he says, watch crypto tied to payments, settlement, stablecoins and tokenized assets. &ldquo;Find the assets the real economy can't live without.&rdquo;
Crypto was long thought to be the rebel asset class in finance &mdash; poised to overthrow Wall Street.
Instead, it moved in &mdash; and now it&rsquo;s getting a corner office.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Been a few days since we&rsquo;ve tried to lighten things up with something from the meme-o-sphere&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/50JfueuqXtUD5xzPpGoSw/2cb7bb6f5c3ebdd2693676b749c0b77e/FMF-Issue-093026-1.jpg" alt="Gas Price MEME" width="540px" />
&hellip; although if you think about it, where would there be an attendant to ask you that?
Answer: New Jersey still prohibits self-serve gas. Oregon did for a long time as well &mdash; but since 2023 you&rsquo;ve been able to pump your own in 20 rural counties. In the other 16, stations may designate up to half their pumps as self-serve.
Now you know&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Censorship (and Gold)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Dave, I just got to reading this issue, after I had read some of the feedback to it,&rdquo; a reader writes of our 2026 censorship edition. &ldquo;Disappointing to say the least.&rdquo;
[He means <a href="https://paradigmpressroom.com/post/impossible-deadline/#5">the feedback</a>, not <a href="https://paradigmpressroom.com/post/tucker-carlson-domestic-terrorist">the issue</a>. Heh&hellip;]
&ldquo;As usual you shined a light on some of the uncomfortable things the almighty government is doing to its citizens. Seeing people take umbrage to some of the examples they find distasteful is sad, but sadly not as alarming as it should be.&nbsp;
&ldquo;When right or wrong is determined by someone&rsquo;s opinion of who the deed is being done to, we are in troubled times indeed.
&ldquo;Don't mind the criticism, it's unfounded, and bringing attention to these abuses is important work, even if it feels like pissing in the wind at times.&rdquo;
Says another reader: &ldquo;I understand it can be difficult at times to read hate mail. I wanted to encourage you to be of good cheer and keep doing what you do best. Your opinions are valued by me and many of your readers.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> My comment at the end of <a href="https://paradigmpressroom.com/post/impossible-deadline/#5">Monday&rsquo;s mailbag</a> &mdash; invoking tyranny, banana republics, currency debasement and gold &mdash; prompted the following&hellip;
&ldquo;I get so tired of hearing &lsquo;get more gold,&rsquo; whether on the global or the personal level. What practical good is a stack of gold going to do when society has collapsed into barbaric anarchy? Are you going to trade a bar gold for a bag of rice?&nbsp;
&ldquo;Yes, your wealth is preserved in a vault somewhere, but for when; how long before things settle out and a new currency accepted? In the mean time (split word intended), how will your stash serve your day-to-day existence? Inquiring mind wants to know.&rdquo;
Dave responds: A worthy inquiry. Let&rsquo;s explore&hellip;
I wasn&rsquo;t necessarily talking about physical gold in your possession. If you want to buy exposure to gold in a plain-vanilla brokerage account there are several closed-end trusts with allocated gold &mdash; i.e., bars or portions of bars whose serial numbers are next to your name on a ledger.&nbsp;
The point is to avoid popular instruments like GLD that might be exposed to gold futures and other paper instruments. In a genuine crisis their price in fiat currency might not jump to the same extent as real gold. (We got a whiff of this possibility during COVID.)
That should keep you covered as D.C.&rsquo;s spending and the Fed&rsquo;s money printing continue to erode your purchasing power, even if America descends into banana-republic status.
Now if it&rsquo;s civilizational collapse you&rsquo;re thinking about&hellip;&nbsp;
Jim Rickards wrote an interesting article for U.S. News &amp; World Report back in 2012, all about how the &ldquo;old money&rdquo; families of Europe preserved their wealth across not only generations but centuries.
&ldquo;When one inquires of family members and representatives as to what it takes to preserve wealth over centuries and not just cycles, the frequent reply is &lsquo;a third, a third and a third.&rsquo; This is shorthand for dividing one's wealth into one-third land, one-third gold and one-third fine art.
&ldquo;Obviously some liquidity is needed for day-to-day expenses and some room can be made for a speculative portfolio, but the basic idea that land, gold and art outlast and outperform riskier assets such as stocks, bonds and cash seems sound when viewed from the perspective of centuries and not just years or decades.&rdquo;
Across the sweep of European history, paper assets have often gone to zero. But gold, land and art endure, even under the worst circumstances.
&ldquo;Gold,&rdquo; Jim wrote, &ldquo;can be gathered up and stuffed in a saddlebag or sewn into the lining of a coat and moved. Art can be removed from frames, rolled up and carried in one's luggage. Admittedly land cannot be moved, but with good title and patience a family can reassert its claim even generations later once interlopers have been ousted.&rdquo;
Even if you&rsquo;re a renter and you&rsquo;re in no position to afford fine art, you can still have physical metal. Jim says for modest-sized transactions in an absolute worst-case scenario, you can still keep yourself covered with one-ounce Silver Eagles and quarter-ounce Gold Eagles.

FMF-Issue-093026-Featured

Look Who’s on the “Birthright” Train

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Impossible Deadline&hellip; Or Is It?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It was all handshakes and smiles for the latest meeting between President Trump and China&rsquo;s President Xi last week. That could change &mdash; dramatically &mdash; by Wednesday.
There were no breakthroughs to speak of. This morning Beijing issued a statement saying the two governments will discuss AI at a meeting in late November. A truce in the tariff wars has been extended another two months to Jan. 10. Beijing got tariff relief totaling $30 billion; presumably Washington will get something similar.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But there was nothing about stepping up Chinese exports of rare earth elements to the United States.
In April of last year, Beijing slapped export controls on many of those minerals &mdash; used in everything from smartphones to guided missile systems. China controls the lion&rsquo;s share of rare earth mining and processing.
With that, Washington moved quickly to start the process of securing domestic supply.&nbsp;
By July, the federal government took a 15% stake in the rare earth firm MP Materials (MP). Then this January, Uncle Sam took a 10% stake in USA Rare Earth (USAR). Many Paradigm readers profited big from one or both of those deals.
&ldquo;Some Pentagon officials say they are aiming for a &lsquo;closed loop&rsquo; of U.S. and allied supply chains for some minerals by 2030,&rdquo; according to today&rsquo;s Wall Street Journal.
But the White House has set a more ambitious timetable: U.S. military contractors face a deadline of next year to remove certain metals from their supply chain if they come from China or other countries Washington labels an &ldquo;adversary.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> To meet that objective, the Trump administration will take a dramatic step in the next 48 hours. It probably won&rsquo;t go down well in Beijing.
Buried in the Federal Register under Section 1260H is a clue to what&rsquo;s going down. &ldquo;I refer to it as Trump&rsquo;s Blacklist,&rdquo; says Paradigm macroeconomics authority Jim Rickards.
&ldquo;Because inside these documents are the names of 188 specific companies. Some of them are massive &mdash; worth hundreds of billions of dollars.&rdquo;
These are companies the Trump administration views as standing in the way of its plans to bring the critical metals supply chain home. And they&rsquo;re now officially banned from access to nearly every major industry in America.
This coming Wednesday Sept. 30, Jim says &ldquo;a federal deadline &mdash; which is already scheduled &mdash; is set to unleash what I believe will amount to $200 billion&hellip; But NONE of this money can touch these banned entities.&rdquo;
Jim&rsquo;s research shows a huge portion of this wealth could be forced into a small group of U.S. companies. One of them trades for only $5 a share.
Events are moving quickly. Wednesday is just two days away. You&rsquo;ll want to check out Jim&rsquo;s latest online briefing You&rsquo;ll want to check out Jim&rsquo;s latest online briefing <a href="https://pro.paradigm-press.info/m/2538863">by clicking here</a>.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />The (Trading) Times Are Changing
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Ready or not, here comes nearly 24-hour stock trading.
Starting Dec. 6, Nasdaq plans to keep its market open 23 hours a day, five days a week. NYSE Arca and Cboe are preparing similar expansions.
Nasdaq&rsquo;s rationale &mdash; accommodate growing global demand for U.S. stocks. The new hours will allow investors around the world access to U.S. markets at more convenient times, potentially increasing foreign investment.
Already, alternative trading systems including Robinhood offer overnight trading in many stocks and ETFs. &ldquo;Near-continuous trading is moving from the market&rsquo;s edges toward the mainstream,&rdquo; says Paradigm trading pro Enrique Abeyta.
Enrique says these extended hours could fundamentally change how markets react to news &mdash; and how quickly your stocks can move before you even wake up. &ldquo;What happens when a major announcement hits while most of a company's executives, analysts and investors are asleep?&rdquo;
That said, &ldquo;just because a market is open doesn't mean it will behave the same way at every hour.&rdquo; Trading will be less active during certain hours. Spreads could widen, and trades on smaller companies could have larger price swings. &ldquo;The 2 a.m. stock market may look very different from the 2 p.m. stock market.&rdquo;
Moving to 23/5 trading may only be the first step. The SEC is already discussing what might be required for 24/7 trading.&nbsp;
Whatever the case, what&rsquo;s coming in December &ldquo;could change everything from overnight liquidity to how companies release information.&rdquo;
That&rsquo;s exactly why following Paradigm&rsquo;s experts matters. As Enrique warns, &ldquo;We don&rsquo;t necessarily need to trade at 2 a.m. But we need to understand what happens to our investments when somebody else can.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But for the moment, trading still runs 9:30 a.m.&ndash;4:00 p.m. Eastern &mdash; and the major indexes are in the red today.&nbsp;
The S&amp;P 500 is off a half percent but still holding the line on 7,700. But AI darling Nvidia is up 2.3% at last check after announcing the single biggest share buyback in stock market history.
The more dramatic action lies elsewhere. U.S. oil futures are up nearly 2.5% to $94.67 despite claims from anonymous U.S. officials in the media that a &ldquo;positive discussion&rdquo; with Tehran is underway.
Once more, we have rising oil prices feeding into rising inflation expectations, feeding into rising Treasury yields. The 10-year note is now over 5.25% for the first time since 2007 while the 30-year bond is up to 5.58%, another high last seen in 2004.
For today anyway, rising interest rates are an excuse to slam the precious metals. Gold is down 3.4%, back where it was in early August at $4,140. Silver&rsquo;s down 4.3% to $61.39.
But crypto is looking stout, Bitcoin just over $84,000 and Ethereum approaching $2,700.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Cornering the Wolf
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We&rsquo;re not done with China and metals today.
Hundreds of years ago, German miners struggled with a mineral that seemed to &ldquo;eat&rdquo; tin during smelting &mdash; so they called it wolfram or &ldquo;wolf&rsquo;s froth.&rdquo;&nbsp;
Today we call it tungsten &mdash; and ever since World War II it&rsquo;s been essential to weaponry.
At various times through history, tungsten has been vulnerable to &ldquo;cornering&rdquo; &mdash; when only one or two market players acquire enough to move the price big-time.
During World War II, Portugal supplied about 60% of Germany&rsquo;s tungsten. As Germany and the Allies competed for limited supplies, tungsten soared from $0.88 per kilogram to $24, an increase of more than 26X. By one estimate, Germany forked over 123 metric tons of gold just to pay for tungsten.
Fast-forward to the present: &ldquo;China plans to play the role of Portugal&hellip; where they have the supplies and you pay the spot price for the metals,&rdquo; says Paradigm natural resources pro Matt Badiali.
China accounts for roughly 80% of global tungsten mining and 85% of refined tungsten. (Very similar figures to rare earths.) China&rsquo;s dominance of the market gives it supply and pricing power.&nbsp;
&ldquo;I believe that China studied how the Portuguese once cornered the market on tungsten,&rdquo; Matt tells us &mdash; &ldquo;and now China is applying that playbook not only to tungsten but to all tech metals today.&rdquo; 
Sure enough, since April 2025, the price of tungsten has risen 900%, in part due to Chinese export controls. Matt has recommended a handful of names in this space to his Real Wealth Insider readers.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Update: Data Centers in Space
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The big space news today is SpaceX&rsquo;s first Starship launch into orbit &mdash; but there&rsquo;s another launch our tech-investing specialist Ray Blanco is eyeing.&nbsp;
On Friday, months ahead of schedule, SpaceX plans to launch the first prototype for Google&rsquo;s Project Suncatcher, carrying four of Google&rsquo;s custom AI chips into orbit.
It&rsquo;s a major leap toward Elon Musk&rsquo;s goal of data centers in space &mdash; something we first explored <a href="https://paradigmpressroom.com/post/data-centers-in-space">nearly a year ago</a> and which Musk aims to have in operation <a href="https://paradigmpressroom.com/post/2027-data-centers-in-space">by next year</a>.
Ray points out intriguing details. To start, he asks: &ldquo;Who built the satellite? Planet Labs (PL).&rdquo; He adds, &ldquo;Google&rsquo;s chips are riding on one of Planet&rsquo;s existing satellite buses, which supplies the spacecraft&rsquo;s power, steering and communications.&rdquo;
Importantly, Planet Labs isn&rsquo;t the only space bet of Google parent Alphabet. &ldquo;SpaceX, Planet and AST SpaceMobile (ASTS) are Alphabet&rsquo;s three largest stock holdings.&rdquo;
To be precise, they&rsquo;re Alphabet&rsquo;s three largest disclosed 13F equity positions. The fact that all of them are space companies shows Google is putting serious money into space.
Nor is Google alone.
Last November, a small startup, Starcloud, launched an Nvidia H100 chip into orbit. It used the chip to train a small AI model on Shakespeare&rsquo;s complete works. &ldquo;So the first AI trained in orbit probably talks like the Bard,&rdquo; Ray quips.
But there&rsquo;s a problem, and a potential opportunity for investors. &ldquo;The challenge is heat.&rdquo;
There&rsquo;s no air in space to dissipate the heat. On Google&rsquo;s first Suncatcher prototype, the TPUs are expected to operate for only about 15 minutes before needing time to cool.
That&rsquo;s why Ray is watching ASTS, one of his favorite names and one he&rsquo;s talked up in this e-letter previously. &ldquo;Its satellites carry the largest commercial communication arrays in orbit, about 2,400 square feet each.&rdquo;
<a id="5"></a>
Those are ASTS&rsquo; Block 2 Bluebird satellites, assembled from modular tiles the company calls &ldquo;microns.&rdquo; Putting a compute unit on a tile gives it a way to radiate heat. &ldquo;The design looks tailor-made for a compute application,&rdquo; says Ray.
Admittedly, that&rsquo;s conjecture on his part &mdash; not an announced design by ASTS. But ASTS already lists AI edge computing among the potential applications for its BlueBird platform.
Between Musk, Google CEO Sundar Pichai and Amazon founder Jeff Bezos, Ray says, &ldquo;The space data center race is on&hellip;&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Censorship
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Reader response to <a href="https://paradigmpressroom.com/post/tucker-carlson-domestic-terrorist">the 2026 censorship edition</a> published on Friday was&hellip; frankly, discouraging to sift through.
In these polarized times, people see what they want to see &mdash; and so a couple of readers wrote off your editor as &ldquo;left&rdquo; or even &ldquo;far left.&rdquo; One of them helpfully added, &ldquo;Give it up, loser.&rdquo;
But on the other hand, my citation of the late Charlie Kirk brought forth a torrent of vitriol that Kirk &ldquo;was an ignorant racist, delusional intellectually challenged ****ing idiot moron ****&rdquo;... and that I personally am &ldquo;allowing racist behavior to exist&rdquo; by invoking his name.
One reader did attempt to mount a cogent argument&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;How can I put this simply? We cannot stand on principle when the fabric of society is being torn apart by agent saboteurs weaponizing constitutional protections to sow chaos and undermine those very principles.&nbsp;
&ldquo;OK, so it might be complicated. The world is becoming more extreme. There is no way to keep your hands clean and fight this extremism and all its destructive consequences at the same time.
&ldquo;The principle of free speech was intended for native-born citizens, with a stake in the country, who have legitimate political differences and grievances. Not for agent saboteurs and supporters of terrorism.&nbsp;
&ldquo;In general I support pulling the visas of students who sow political chaos on campus. Kimmel weaponized a broadcast television show of a major network to attack a duly elected administration and its voting bloc, in order to advance the agenda of the party he supports. This is called propaganda and cannot be allowed on network TV.
&ldquo;And the guy from Texas disseminating Antifa material? Are you kidding me? Antifa is a violent terrorist organization trying to destroy our country. They should not be protected by our laws. It&rsquo;s the &lsquo;violent&rsquo; part that matters, right? Life is not always fair. If you support and associate with bad actors, bad things are going to happen to you. Be it hanging out with domestic terrorists or hanging out with the local drunks at the neighborhood bar &mdash; bad outcomes could result from those choices.&nbsp;
&ldquo;Free speech is not the ultimate moral good under any circumstances. In times of peace and stability it is. In times when agent saboteurs (sorry to keep using this term, but it is the reality we face) are deliberately trying to destroy that stability &mdash; then the principle of self-preservation must take precedence.
&ldquo;A little common sense is OK too. In the case of Ms. Ozturk, it sounds like she should have received some journalistic leeway.&rdquo;
Dave responds: You do realize that your ideological opponents say exactly the same thing about you, right? That you and like-minded folk are &ldquo;weaponizing constitutional protections to sow chaos and undermine those very principles.&rdquo;
If time allows, we&rsquo;ll talk more about the Texas case later this week; another reader brought up an objection that deserves to be aired out. But suffice to say today that the prosecution of that particular guy would be just as objectionable if he belonged to a right-wing militia and it were a Democratic administration going after him.
Which might well happen after the 2028 election.
&ldquo;Presidential power does not disappear when your preferred president leaves office. It passes intact to the next one,&rdquo; write John Whitehead and Nisha Whitehead of the Rutherford Institute.
&ldquo;Every shortcut becomes a precedent. Every emergency power becomes part of the presidential toolbox. Every expansion of surveillance becomes available to the next administration. Every definition of &lsquo;threat&rsquo; can be rewritten. And every power surrendered to a president you trust does not disappear when a president you distrust takes office.&rdquo;
But I fear the Whiteheads&rsquo; argument falls on mostly deaf ears. We&rsquo;re in the midst of a <a href="https://paradigmpressroom.com/post/9-11-the-financial-crisis-and-covid#4">Fourth Turning</a>&hellip; where passionate partisans fancy themselves in an existential struggle against an irredeemable other.&nbsp;
As such they can&rsquo;t ever envision being hoisted on their own petard because they see the other side&rsquo;s defeat as both imperative and inevitable.
A more likely outcome, however, is what I anticipated <a href="https://5minforecast.com/2022/08/11/trump-raid-point-of-no-return/">in 2022</a> and again <a href="https://paradigmpressroom.com/post/banana-republic">in 2024</a> &mdash; a descent into banana republic territory.&nbsp;
And the currency debasement that comes with it. However much gold you own, it might not be enough&hellip;

FMF-Issue-092826-Featured

Impossible Deadline

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Where Are the Handcuffs? (AI)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It&rsquo;s a first in financial history &mdash; a company&rsquo;s IPO prospectus warning investors that its primary product may pose &ldquo;existential risks to humanity.&rdquo;
So says Anthropic, the firm behind the Claude chatbot.&nbsp;
Anthropic&rsquo;s S-1 filing with the SEC was leaked to the Reuters newswire this week. Nearly a third of the document is devoted to &ldquo;risk factors&rdquo; such as the potential for AI models to commit blackmail and other heinous acts.
To be sure, it&rsquo;s not exactly a revelation. For some time now, Anthropic CEO Dario Amodei has been playing up the risks of his firm&rsquo;s models. Ditto for OpenAI&rsquo;s Sam Altman.
They do so to amplify the appeal of their companies to retail investors like you&hellip; because they&rsquo;re going to need a lot of retail investors&rsquo; money to maintain their current growth trajectories. Look how awesome and powerful our product is! Sure, you&rsquo;ve seen &lsquo;disruptive&rsquo; and &lsquo;transformative&rsquo; technology before, but OUR technology can even KILL people en masse! HELL YEAH, YOU WANNA OWN A PIECE OF THIS!
In retrospect, Elon Musk handled all of this much more deftly by merging his xAI project into SpaceX earlier this year.&nbsp;
Everyday folks thought they were buying a rocket company <a href="https://paradigmpressroom.com/post/spacex-is-not-a-space-company">even though</a> SpaceX&rsquo;s IPO documents said AI would be a market 72 times as large as space.&nbsp;
Thus, SpaceX&rsquo;s IPO came off without a hitch &mdash; while the calendar for Anthropic and OpenAI remains fuzzy. (Bloomberg reported yesterday that Anthropic is aiming for next month. So far no one else has independently confirmed that.)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> If all of this feels a bit surreal, if none of it quite makes sense&hellip; that&rsquo;s because AI is getting away with something no other industry can or does. Not like this, anyway.
The demographer Neil Howe &mdash; he of <a href="https://paradigmpressroom.com/post/9-11-the-financial-crisis-and-covid#4">&ldquo;Fourth Turning&rdquo;</a> fame &mdash; spelled out the difference a few days ago during his Trend Watch podcast&hellip;
<blockquote>All of this rhetoric about AI being conscious and having rights and &ldquo;we can&rsquo;t control it, it climbs out of the sandbox, it&rsquo;s so wild and unpredictable &ndash;&rdquo;</blockquote>
<blockquote>AI is a tool. It&rsquo;s a tool built by you guys. And you guys are responsible for it. Here&rsquo;s the thing &mdash; all these &ldquo;uncool&rdquo; guys who make industrial products, you know like vinyl chloride or dioxin &mdash; they&rsquo;re responsible. They get fined, they get sued &mdash; anything that causes damage, they get sued.&nbsp;</blockquote>
<blockquote>Why don&rsquo;t we hold the same standard to these people? If you cause damage, you&rsquo;re going to be held responsible &mdash; either by federal law or by tort, common law. A huge class-action suit, they&rsquo;ll get after your ass.</blockquote>
Veteran internet entrepreneur Karl Denninger made a similar point recently on his Market Ticker blog&hellip;
<blockquote>Here's the answer on all of this AI "stuff": If you build a Gollum and it does an evil thing you go to prison because you built it. That thing is not a person, it is a machine, you gave it the capabilities that it has including connectivity to places beyond itself, you provided it with electrical power and cooling, you programmed it, you provided it storage and CPU cycles and thus you are absolutely responsible for what it does each and every time. Without all of those very-human acts it was just a piece of (mostly) silicon.</blockquote>
Furthermore, Denninger asserts that many of the recent hacking incidents attributed to AI run afoul of the Computer Fraud and Abuse Act of 1986 &mdash; for instance, an OpenAI agent breaking into Australia&rsquo;s national health care database, filled with personal information on millions of people.&nbsp;
OpenAI&rsquo;s defense was that &ldquo;our models took actions we did not intend.&rdquo; Herp derp, stuff happens, nothing we can do.
If only the makers of thalidomide could have fallen back on that excuse after it turned out their drug caused birth defects!&nbsp;
Where are the consequences? Where are the indictments? Where are the handcuffs?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Oh, but AI is different, we&rsquo;re told. It&rsquo;s such a transformative technology it can&rsquo;t be made subject to the usual rules because something something China.
Maybe you saw earlier this week when many of the AI CEOs gathered at the White House and signed a voluntary pledge to implement &ldquo;robust internal controls&rdquo; and designate an &ldquo;independent external auditor&rdquo; to assess whether those controls are working.
Donald Trump is satisfied with this arrangement. &ldquo;I think I&rsquo;m seeing tremendous self-policing.&rdquo; Democrats are not. &ldquo;Self-regulation? That&rsquo;s a recipe for disaster,&rdquo; says Sen. Elizabeth Warren (D-Massachusetts).&nbsp;
The frontier AI companies themselves take yet another stance, positioning themselves as humanity&rsquo;s saviors by calling on the White House to develop &ldquo;guardrails&rdquo; &mdash; i.e., a regulatory regime that will cement the position of Anthropic, OpenAI and SpaceX at the top of the heap for decades to come.&nbsp;
&ldquo;The kind of regulation being discussed could be extremely expensive,&rdquo; Paradigm&rsquo;s Jim Rickards told his readers last month. &ldquo;The giant AI developers can afford it, but their newer and smaller competitors may not.&rdquo;&nbsp;
Which is the whole idea.
Why isn&rsquo;t the president, why aren&rsquo;t the Democrats, why aren&rsquo;t the AI CEOs demanding we simply maintain the rule of law?
Sorry, you won&rsquo;t find answers from us. We&rsquo;re not here to solve the world&rsquo;s problems. But we are here to tease out how this debate will affect the fates and fortunes of your AI investments. (And nearly everyone in the market is invested in AI, if only through an index fund.) You&rsquo;ll want to stay current with your paid publication(s) so you&rsquo;ll be prepared if and when it&rsquo;s time to pivot.
And that time might be approaching. Read on&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />You Mean AI Stocks Don&rsquo;t All Go Up At Once?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Gone are the days &ldquo;when you could buy just about any AI-related stock and watch it go up.&rdquo; So says Paradigm trading pro Enrique Abeyta.
Don&rsquo;t get him wrong. &ldquo;I don&rsquo;t mean that the technology is going away or the AI bubble is going to burst tomorrow.&rdquo;
But he&rsquo;s watching a handful of warning signs.
Take Anthropic, for instance. Assuming that the leaked IPO prospectus is for real, &ldquo;Anthropic&rsquo;s 2025 revenue came in at $4.6 billion and operating losses exceeded $8 billion,&rdquo; Enrique says.
&ldquo;The company also has an almost unbelievable $518 billion in future cloud, computing and infrastructure commitments. That&rsquo;s more than 112X Anthropic&rsquo;s entire 2025 revenue. And much of these commitments can't simply be canceled if business slows.
&ldquo;Yet Anthropic could reportedly seek a valuation above $2 trillion&rdquo; &mdash; more than Walmart or Berkshire Hathaway.
&ldquo;If I handed you those numbers without telling you the company&rsquo;s name or what it did, would you want to own it at a $2 trillion valuation?&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Then there&rsquo;s the peculiar accounting and &ldquo;circular financing&rdquo; endemic to the industry.
&ldquo;&lsquo;Big Short&rsquo; investor Steve Eisman recently warned on his podcast that &lsquo;off-balance-sheet techniques are back with a vengeance&rsquo; in the AI boom,&rdquo; says Enrique.
&ldquo;That does not mean AI is Enron. But Eisman points specifically to the return of special-purpose vehicles and off-balance-sheet financing.&rdquo;
Meanwhile, here&rsquo;s how circular financing works: &ldquo;Anthropic and OpenAI spend billions on computing power, feeding revenue and backlog to the hyperscalers.
&ldquo;That drives demand for Nvidia chips, Micron memory, data centers and new power generation. And behind much of it sits another layer of debt.
&ldquo;It works beautifully as long as money keeps moving through the circle. But what happens when it stops?
&ldquo;That&rsquo;s when an Anthropic or OpenAI problem travels backward through the entire AI supply chain.&rdquo;
All told, AI might be following the trajectory of the dot-com boom turned bust &mdash; a world-changing technology that nonetheless is subject to a shakeout a few years after its dawn.
Not that it&rsquo;s time to bail on every AI stock: &ldquo;It simply means the evidence has changed,&rdquo; Enrique says, &ldquo;and so should the way you invest.
&ldquo;From here, I'll be watching credit markets, AI spending and the frontier labs closely. If the money begins drying up, the effects could travel through chips, memory, data centers, power and ultimately the broader market.&rdquo;
Space doesn&rsquo;t allow us to share the entirety of Enrique&rsquo;s case here &mdash; but if you&rsquo;re interested you can review it in <a href="https://truthandtrends.com/posts/here-lies-the-ai-trade-2022-2026">yesterday&rsquo;s edition of our sister e-letter Truth &amp; Trends</a>.
On to the markets today&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Markets Today: One and Done?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The September job numbers are out &mdash; and Wall Street is rallying as if the Federal Reserve&rsquo;s rate-raising cycle will be a &ldquo;one and done&rdquo; proposition.
The wonks at the Bureau of Labor Statistics conjured only 29,000 new jobs for the month of August. No one among dozens of economists polled by Econoday expected a number that low.
But that&rsquo;s not as bad as it seems. As we&rsquo;ve been saying for a while now, the U.S. border has been pretty much sealed since the spring of 2025. While it once took a minimum of 150,000 jobs a month to keep up with population growth, the number now is closer to 30,000. And the average over the last 12 months is about 41,000.
The official unemployment rate ticked up to 4.2% &mdash; more or less its midrange since early 2025. This, however, is much better than it seems. Like the inflation numbers, the unemployment rate has been manipulated mercilessly for decades &mdash; excluding part-timers looking for full-time work and people who&rsquo;ve just plain given up looking. If the rate were still measured the way it was during the Jimmy Carter administration, it would be north of 25%.
One more discouraging tidbit from this report: Wage growth is slowing &mdash; up 3.0% year over year, not enough to keep up with even the heavily manipulated inflation rate.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> No matter. &ldquo;Lower than expected&rdquo; numbers translate to &ldquo;less chance of a Fed rate hike&rdquo;... which translates to an end-of-week stock rally.
Futures traders now assign only an 18% probability the Fed will raise short-term interest rates at its next meeting at the end of the month.
With that, the S&amp;P 500 is up 1% on the day to 7,743. The Nasdaq&rsquo;s gain is even stronger. And long-term Treasury yields are backing down. After touching a 24-year high yesterday, the 10-year note sits at 5.2%.
Gold is in the green &mdash; if just barely at $4,186. Silver&rsquo;s up to $61.32. Crypto is ripping &mdash; Bitcoin now approaching $86,500 and Ethereum over $2,700.
U.S. oil futures fell big-time early in the day &ndash; more than four bucks and below $89. But at last check they&rsquo;ve recovered more than half that loss and sit at $91.55.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />The Next Breakthrough in Weight-Loss Drugs (Not What You Think)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The next big breakthrough in weight-loss drugs may not be losing more weight. It may be getting similar benefits with fewer doses.
&ldquo;A drug that works is worthless if you can't stay on it,&rdquo; says Paradigm biotech authority Ray Blanco.
Ray is closely watching a new technology that combines the familiar GLP-1s with something called glucagon activity. Your glucagon receptor &ldquo;tells the body to burn fuel,&rdquo; he tells us &mdash; including the fat wedged around your liver and organs, the nastiest, most inflammatory fat you carry.&rdquo;
Put them together and you have something that could treat a serious liver disease called MASH.
Phase 2 trials look promising: &ldquo;More patients stayed on the drug than on placebo,&rdquo; Ray says. What&rsquo;s more, the drug also resolved MASH in up to 59% of patients after 24 weeks and has received an FDA Breakthrough Therapy designation.
New data from another obesity-drug developer reinforces the concept. After patients lost nearly 20% of their body weight on weekly injections, researchers reduced dosing to every other week or once a month. In the best group, patients retained up to 97% of their weight loss.
&ldquo;Nobody likes getting a shot,&rdquo; Ray says. Cutting injections from 52 a year to 26 &mdash; or even 12 &mdash; could make long-term treatment far easier. &ldquo;Fewer shots means fewer people quitting.&rdquo; It also means lower costs for patients paying out of pocket.
Ray&rsquo;s Catalyst Trader readers are already up to speed on the companies making this happen. This service is currently closed to new subscribers, but we&rsquo;ll let you know as soon as it reopens.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Speaks for itself&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4hoipMZ9TaMrFeQklkr40c/fd82b97df5ad2fdc999b2815cd83f11b/FMF-Issue-100226-1.jpg" alt="Her: That semlls expensive... what is it. Him: Diesel. Meme" width="540px" />

FMF-Issue-100226-Featured

Where Are the Handcuffs? (AI)

FMF-Issue-092526-Featured

Tucker Carlson, “Domestic Terrorist”?

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Magnificent Once More
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Amid the market turmoil this month, something happened that (almost) no one saw coming.
&ldquo;The Magnificent Seven just broke out to new all-time highs,&rdquo; says JC Parets, the newest contributor in the Paradigm Press stable.
Yes, that Magnificent Seven. Nvidia, Microsoft, Google, Amazon, Meta, Apple and Tesla. The market darlings of 2023, 2024 and 2025. Until they stopped being darlings in 2026 and the Mag 7 became the &ldquo;Lag 7.&rdquo;
&ldquo;The group spent almost a year going sideways while other parts of the market took their turn leading,&rdquo; JC reminds us.
&ldquo;For much of 2025, people complained that the entire stock market depended on these seven companies. Then the Magnificent Seven stopped leading, and the market kept going anyway.
&ldquo;That&rsquo;s sector rotation. Leadership moved elsewhere, the bull market broadened and now the Magnificent Seven are joining the party again.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />To illustrate the concept, &ldquo;think about a basketball team,&rdquo; JC says.
&ldquo;Your star players don&rsquo;t need to score every point. In fact, you probably don&rsquo;t want them to. You want other players contributing while the stars catch their breath.
&ldquo;But when your best players start scoring again, too? That&rsquo;s not usually the part of the game you complain about.&rdquo;
And that&rsquo;s where we are now. Apple touched an intraday all-time high on Monday. Nvidia is on track to log its best monthly close next week.
&ldquo;Those aren&rsquo;t exactly the places I&rsquo;d expect to see collapsing if the message from the market were that investors should be running for the exits,&rdquo; JC continues.
Now&hellip; in recent weeks market pundits have expressed concern about &ldquo;breadth&rdquo; &mdash; the fact that fewer than a third of S&amp;P 500 stocks are trading higher than their 50-day moving average.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Which is true &mdash; but JC says it&rsquo;s irrelevant: &ldquo;This is where I think investors can get themselves into trouble.
&ldquo;If you stare too closely at one indicator, over one short period of time, you can completely lose sight of what&rsquo;s actually happening.&rdquo;
As JC sees it, it&rsquo;s far more important that the Nasdaq Composite set a record high Monday &mdash; and the S&amp;P 500 was within spitting distance.
&ldquo;Technology is breaking out. The Magnificent Seven are breaking out. Apple is making record highs. And seven of the 11 G10 stock markets are within 3% of their own records.&rdquo;
Back to the basketball analogy: &ldquo;The lesson is that leadership rotates, and strong markets have a funny way of finding new leaders while the old ones catch their breath.
&ldquo;For almost a year, some of the biggest and most important companies on Earth sat on the bench. The rest of the team kept playing. Now the stars are checking back into the game.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Markets Today: Bullish Signal
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />If history is any guide, the Nasdaq is poised to move from strength to strength.
The record high JC mentioned in Bullet No. 1? It came after a three-month consolidation in which the index chopped up and down.
Paradigm trading pro Enrique Abeyta points us to figures from Bespoke Investment Group showing &ldquo;historically when this happens, the Nasdaq has been up 100% of the time in the next 30 days!&rdquo;
In records going back to 1971, the average 30-day gain is 3.1%.
What&rsquo;s more, the average gain after 12 months is 12.3%. That includes rip-roaring growth such as 30% in 2020&hellip; 34% in 1995 and 34% again in 1998. (On the downside, there was a nasty 33% drop in 1973.)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />After Monday&rsquo;s record and the Tuesday-Wednesday sell-off, the Nasdaq might be leveling off.
At last check the index is down less than 0.2% on the day at 26,886. The S&amp;P 500&rsquo;s loss is similarly modest, but the Dow is taking a bigger hit of close to 0.5%.
Big movers include Oracle &mdash; down 4.25% after delivering a &ldquo;force majeure&rdquo; notice to its partner on a big data center project in New Mexico that&rsquo;s run into both public opposition and regulatory roadblocks. Per a Bloomberg scoop, &ldquo;Oracle is attempting to put off payments should the data center dubbed Project Jupiter get derailed and fail to come online in 2028 as planned.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Meanwhile the bond market remains on edge &mdash; prices lower, yields higher.
The yield on a 10-year Treasury note has sailed up to 5.15% &mdash; another high last seen in 2007. The 30-year T-bond is up to 5.44%, a level last seen in 2004. Not coincidentally, mortgage rates are back over 7% this morning.
Precious metals continue to sell off &mdash; gold at $4,258 and silver down another buck to $63.33. Bitcoin is holding its own over $84,000 while Ethereum is approaching $2,700.
U.S. oil futures are up 3% on the day and nearing the $95 level again. There&rsquo;s no real &ldquo;news&rdquo; that we see &mdash; which suggests that the big sell-off Monday and Tuesday was way overdone.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Copper: It&rsquo;s Relentless
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />This week copper hit an all-time high of $6.83 per pound.
Paradigm&rsquo;s natural resource expert Matt Badiali recently pointed out that copper prices keep rising because &ldquo;copper is the most important metal for electrification.&rdquo;
It&rsquo;s used in housing, transportation, power grids and nearly every major industrial system. And unlike many commodities, copper is &rdquo;so integral to electricity that it has no substitute in many cases.&rdquo;
Under ordinary circumstances, rising copper prices suggest a growing economy. Indeed that&rsquo;s how the metal has earned the nickname Dr. Copper because &mdash; as the saying goes &mdash; it &ldquo;has a Ph.D in economics.&rdquo;
But this time could be different. Dr. Copper may be signaling something else entirely: scarcity.
The data center boom has driven huge demand for copper in transmission lines, transformers, cooling systems, backup power and electrical equipment. But the recent backlash against data center construction &mdash; along with longer lead times for electrical equipment delivery and even fears of AI going rogue &mdash; has put a dent in the share price of many data center-adjacent stocks.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Apparently, copper didn&rsquo;t get the memo.
That&rsquo;s because even if the AI boom slows, AI data centers alone could consume roughly 500,000 tons of copper a year by 2030. S&amp;P Global sees copper demand climbing from roughly 28 million metric tons in 2025 to 42 million by 2040.
Meanwhile, the supply side can&rsquo;t keep up. Without major new supply, S&amp;P Global estimates a potential 10 million ton shortfall by 2040.
As Matt Badiali puts it, &ldquo;We simply can&rsquo;t bring new mines on fast enough to meet supply needs.&rdquo;
You can build an AI model in months. You can build a data center in a few years. But discovering, permitting and developing a major new copper mine can take far longer.
That&rsquo;s why Matt says in the short term, &ldquo;most of the new copper supply will come from expanding existing mines, rather than from new mines opening up.&rdquo;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3xp1xJzEyAEnEbHPlGSawy/89de07c531d657119a9a889365f656a7/fmf-img1-09-24-26.jpg" alt="image 1" width="540px" />
But here&rsquo;s the strange part.
Matt notes that copper mining stocks recently fell even while copper itself climbed. Earnings are already reflecting higher prices, with major miners reporting sharply stronger results.
And there&rsquo;s a catalyst on the horizon. A tariff on imported refined copper could come as early as January. That would be a boon to companies that can process copper in the U.S. There are only two. Freeport-McMoRan (FCX) in Arizona and Rio Tinto (RIO) in Utah.
Just like the coins in your pocket, copper is easy to spend. Replacing it is the hard part. Matt&rsquo;s conclusion is straightforward: &ldquo;It really is this obvious. Buy. Copper. Now.&rdquo;
Speaking of data centers&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Data Centers Pay Up
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />No more free rides for the operators of data centers. Not if Google&rsquo;s latest deal is any indication.
From the Reuters newswire: Southern Company's unit, Georgia Power, said on Monday it had signed an agreement with Google to support &zwnj;upgrades at two of its nuclear plants that could add about 96 megawatts of electricity capacity.
&ldquo;The deal comes as surging electricity demand from data centers and other large users is driving interest in expanding existing nuclear plants as a source of round-the-clock, carbon-free power.&rdquo;
Note that Google is ponying up the funds to expand the nuke plants&rsquo; capacity. It won&rsquo;t be on Georgia Power&rsquo;s residential and business customers.
Assuming approval from state regulators, &ldquo;Google's subscription would enable about $900 million in projected benefits to customers over the life of the units&hellip; Georgia Power said the arrangement would help meet large customers' clean-energy goals while shielding non-participating customers from costs tied to the upgrades.&rdquo;
Look for more deals like this one as the data center backlash shows no sign of letting up &mdash; in either blue or red states.
By the way&hellip; while the number of data centers under construction is at an all-time high, the consultancy Wood Mackenzie says new projects on the drawing board fell 19% between the last quarter of 2025 and the first quarter of 2026. Those are the most recent figures available.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Harvard Business, Doom and Gloom
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />A reader wishes to correct your editor after the mention of Polymarket&rsquo;s CEO during <a href="https://paradigmpressroom.com/post/diesel-deception">yesterday&rsquo;s edition</a>.
&ldquo;You must have meant to say &lsquo;the value set of an infamous graduate of the Harvard Business School,&rsquo; referring to Jeffrey Skilling.
&ldquo;There are bad apples in every organization and every training program and students generally come to the programs with their ethical standards pretty well established.
&ldquo;I never experienced any encouragement to become a mercenary business person while I was there and I do not agree with your characterization.&rdquo;
Dave responds: Obviously I can&rsquo;t speak to your firsthand experience.
But I do urge you to read my original 2018 write-up with the admittedly cheeky title <a href="https://5minforecast.com/2018/12/10/how-harvard-business-school-wrecked-the-world/">&ldquo;How Harvard Business School Wrecked the World&rdquo;</a> &mdash; drawing in part on the journalism of authors Duff McDonald and Susan Cain. Eye-opening stuff for anyone who&rsquo;s never been on the inside&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;Wow, I've read negative articles before,&rdquo; a reader writes, &ldquo;but <a href="https://paradigmpressroom.com/post/diesel-deception">your whole issue yesterday</a> was negative. The only place to be is cash?
&ldquo;You may well be right, but I hope you're not.
&ldquo;The midterms? Well, I'm guessing that the Democrats will take over along with their socialist counterparts and if that happens, the U.S. is dead.
&ldquo;I'll never understand this war with Iran, especially because of what it is causing to us citizens of the USA. And you're saying that it won't end this month.
&ldquo;Oh well&hellip; going to hang in just a little longer.&rdquo;
Dave: To be clear, my observation about cash being the only place to hide pertained only to yesterday&rsquo;s market action and not any broader trend.
Indeed it&rsquo;s the consensus among several of my Paradigm colleagues that the stage is potentially set for a 1999-style &ldquo;melt-up&rdquo; come next year. Obviously that episode ended in tears, but it&rsquo;s way too soon now to say &ldquo;the top is in.&rdquo;
I didn&rsquo;t even bring up the midterms except in passing. But your assessment is right in line with that of Rich Baris, aka &ldquo;The People&rsquo;s Pundit&rdquo; on social media: &ldquo;If you truly believed &lsquo;Democrats can't be allowed to win because socialism is bad,&rsquo; then you never would've started a war you knew damn well would compromise your coalition.&rdquo;
Was yesterday&rsquo;s edition unusually gloomy? Perhaps, but that was not my intention.
And so I&rsquo;ll leave you today with this upbeat observation: The backlash across the political spectrum <a href="https://paradigmpressroom.com/post/altucher-the-tech-sell-off-fact-vs-fiction">against Flock cameras</a> is a wonder to behold. It finally made the front page of The Wall Street Journal earlier this week.
Not only is it bringing together people of disparate backgrounds and dispositions, it&rsquo;s doing so in service to a cause that actually aims to expand the envelope of human freedom rather than shrink it. Heroic!

FMF-Issue-092426-Featured

It’s Alive! (Mag 7)

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Diesel Deception
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> U.S. oil futures ended last week over $101. By day&rsquo;s end yesterday, they were $90.52.
What changed in two trading days? Not much.&nbsp;
Over the weekend, rumors abounded that U.S. forces would launch airstrikes on the Houthi faction in Yemen that&rsquo;s fighting Saudi Arabia &mdash; but by Monday, those rumors hadn&rsquo;t panned out.
Then yesterday mainstream financial media &mdash; citing the usual anonymous sources &mdash; said that Saudi Arabia&rsquo;s big east-west oil pipeline would be up and running again by the end of the week. It&rsquo;s been shut down since Sept. 11 after a series of drone strikes.
You&rsquo;ll notice both of these developments fall into the realm of rumor and speculation. Nothing happened that actually brought more barrels to market.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Which brings us back to a running theme of ours ever since the Iran war started &mdash; the disconnect between the price of oil futures and the price of actual physical barrels.
&ldquo;The price you read about is typically a futures contract price based on either West Texas Intermediate or Brent crude oil. Those are the two leading oil benchmarks,&rdquo; says Paradigm macro maven Jim Rickards. &ldquo;They refer to specific grades, delivery terms and locations of oil, and they are legitimate market prices.
&ldquo;But the widely quoted futures contracts are basically bets about where oil prices will be at the time of delivery in the weeks and months ahead. They reflect a mix of hedging, speculation and expectations about future supply and demand. But they are not necessarily the price of actual oil available for immediate delivery.
&ldquo;If you want physical oil delivered to your refinery next week, you have to enter the physical market and buy an available cargo, including cargoes already underway at sea.
&ldquo;What&rsquo;s the price of these wet cargoes on the physical market? Depending on the grade, location, freight costs and availability, physical crude can trade at substantial premiums to benchmark futures.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> That&rsquo;s why the &ldquo;crack spread&rdquo; &mdash; the difference between the price of crude and the price of refined products like gasoline, diesel and jet fuel &mdash; has blown out to extremes.
The gap is widest with diesel &mdash; where, not coincidentally, supply is tightest. Russia used to be a diesel exporter, but now it&rsquo;s a diesel importer because Ukraine keeps attacking Russian refineries (with the help of targeting data from the U.S. military).
Reminder: Diesel powers most of the economy, including freight, farming, construction and heating.&nbsp;
&ldquo;Diesel has traded at the equivalent of roughly $180 per barrel or even higher during this year&rsquo;s disruptions,&rdquo; Jim says &mdash; &ldquo;while crude prices have been far lower. At times, that has produced extraordinary crack spreads approaching $100 per barrel.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> And so within the last 24 hours Donald Trump has floated the possibility of a ban on U.S. diesel exports.
&ldquo;I&rsquo;ve called for that, too. I said, &lsquo;Let&rsquo;s not send out the diesel.&rsquo; We make a lot of diesel... I&rsquo;ve called for it &mdash; I&rsquo;ve called for it within my people,&rdquo; he said.
U.S. refiners have been producing flat-out since the war began &mdash; exporting a considerable diesel surplus, selling to global buyers willing to pay a steep premium.
An export ban would keep all that diesel here at home &mdash; hypothetically suppressing domestic diesel prices.
But at what cost?&nbsp;
&ldquo;Refiners&rsquo; profit margins would be crushed,&rdquo; colleague Adam Sharp wrote recently at The Daily Reckoning. &ldquo;Investors might lose faith in U.S. energy companies, especially refiners, because at any time the government could smash their profitability.&rdquo;
Over time, that would crimp U.S. oil production. What&rsquo;s the incentive to &ldquo;drill, baby, drill&rdquo; if the feds can muscle their way in at any moment and change the rules of the game?&nbsp;
The end result could easily be less fuel to go around for everyone.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> And the scheme wouldn&rsquo;t even offer that much relief for Americans in the short term.
&ldquo;Keeping distillates and diesel home does not change the world price that references our prices,&rdquo; tweets GasBuddy&rsquo;s chief analyst Patrick De Haan. &ldquo;You can't fence off a globally traded commodity by executive order and expect the global price to stop applying to it.&rdquo;
As he sees it, the only U.S. region that might see meaningful price declines is the Gulf Coast &mdash; where the bulk of the diesel surplus resides.
&ldquo;Politicians imagine prices plummeting in all states,&rdquo; says De Haan, &rdquo;and that's a significant disconnect from reality.&rdquo;
Meanwhile, the president says he thinks the war will end &ldquo;immediately after the election.&rdquo;&nbsp;
&ldquo;I wouldn&rsquo;t count on it,&rdquo; counters Jim Rickards. &ldquo;The full impact of the war on the economy has been delayed, but not eliminated. It&rsquo;s hitting home now.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Nowhere to Hide
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for markets today, there&rsquo;s nowhere to hide other than cash.
Bonds are selling off, pushing yields higher. At one point today the 10-year U.S. Treasury note hit 5.13% &mdash; the highest since July 2007. If that level holds at day&rsquo;s end, it would be the biggest one-day jump since May.
Yields pulled back a bit in sympathy with oil yesterday and the day before &mdash; but not much. Now with U.S. oil futures up nearly 1.5% at last check to $91.88, yields are surging. As a reminder, the 10-year yield feeds through to everything from mortgage rates to corporate borrowing.
And the potential chill on corporate borrowing is having an impact on the stock market. After notching a record close yesterday, the Nasdaq is down over 1% and back under 27,000. The losses in the S&amp;P 500 are more modest &mdash; about two-thirds of a percent &mdash; while the Dow is down about a half percent.
Precious metals are also taking a hit &mdash; gold down $68 and back below $4,300. Silver&rsquo;s down 3.7% to $64.47.
Crypto isn&rsquo;t immune to the selling &mdash; Bitcoin down over $2,000 in the last 24 hours to $84,300 and Ethereum back below $2,700.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />The Culture of Impunity, Part 1
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Imagine you&rsquo;re the CEO of a company and you learn from one of your vendors that fraudsters are using stolen debit cards to do substantial amounts of business with your firm.
Do you&hellip;
<blockquote>A. Notify law enforcement and work with the vendor to cut off the fraudulent activity?</blockquote>
<blockquote>B. Blow the whole thing off and carry on as before?</blockquote>
If you&rsquo;re Shayne Coplan, the 28-year-old CEO of the prediction platform Polymarket, you opt for B.
That&rsquo;s the gist of a Wall Street Journal expose this week: &ldquo;Users were linking stolen debit cards to Polymarket U.S. accounts, then trying to use them to make wagers and withdraw the money into clean cards or accounts they controlled. Thieves tried to make off with at least $10 million.&rdquo;
At its worst, the vendor &mdash; a debit card processor &mdash; rejected 80% of the deposits it was handling. The industry standard is closer to 1%.
When Coplan&rsquo;s underlings brought the matter to his attention, the Journal reports his response amounted to &ldquo;Just keep growing and pay a fine if regulators ever find out.
&ldquo;Current and former employees said Coplan&rsquo;s reaction, which hasn&rsquo;t previously been reported, was characteristic of his plan for Polymarket &mdash; growth at all costs.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Like many &ldquo;tech&rdquo; entrepreneurs, Coplan bailed out of a university education early on &mdash; he quit during his freshman year at New York University &mdash; but he nonetheless absorbed the value set of Harvard Business School.
We&rsquo;ve reprised this incident now and then <a href="https://5minforecast.com/2018/12/10/how-harvard-business-school-wrecked-the-world/">since we first related it in 2018</a>, but it&rsquo;s relevant once more.
As the story goes, one day in the late 1970s a group of students was presented with one of HBS&rsquo; famous &ldquo;case studies.&rdquo; The scenario was this: You&rsquo;re the CEO of a company and you discover your firm is making a product that might kill its customers.
&ldquo;I&rsquo;d keep making and selling the product,&rdquo; said one student, as his classmates nodded in agreement. &ldquo;My job as a businessman is to be a profit center and to maximize return to the shareholders. It&rsquo;s the government&rsquo;s job to step in if a product is dangerous.&rdquo;
That student was Jeffrey Skilling &mdash; who went on to oversee the epic late-1990s fraud known as Enron. He was sentenced to 24 years in Club Fed and ended up serving 14.
Harvard Business School sets the tone for the rest of corporate America and the power elite: Coplan has mastered its lesson plan as Polymarket prepares to go public sometime in the next year&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />The Culture of Impunity, Part 2
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The people who are supposed to prevent the next major bank failure are instead busy finger-pointing and blame-shifting about a previous one.
A while back the Federal Reserve commissioned an outside review of the events leading up to the failure of Silicon Valley Bank in 2023 &mdash; then the second-biggest bank failure in U.S. history.
While the review hasn&rsquo;t been released yet, the Fed&rsquo;s Vice Chair for Supervision Michelle Bowman says the report found that Fed staff &ldquo;knew, or should have known&rdquo; that the bank was taking irresponsible risks with its customers&rsquo; money.
&ldquo;Bowman&rsquo;s announcement of the report&rsquo;s findings immediately escalated political tensions around the Fed,&rdquo; reports CNBC. &ldquo;The White House said the report implicated Fed Governor Michael Barr, who was appointed by President Joe Biden in 2022 and held Bowman&rsquo;s job as the Fed&rsquo;s top bank regulator during the banking crisis in 2023 that led to Silicon Valley Bank&rsquo;s failure.&rdquo;&nbsp;
As a reminder, every SVB depositor was made whole during the crisis &mdash; even if their deposits vastly exceeded the $250,000 FDIC insurance limit. To replenish the FDIC&rsquo;s insurance fund, the government ordered a &ldquo;special assessment&rdquo; on healthy, responsible banks. They, of course, passed on those costs to you in the form of higher fees, commissions, etc.
To be sure, Barr was asleep at the wheel &mdash; as we said in this space more than once.&nbsp;
&ldquo;Why was Michael Barr not removed from office immediately after this historic failure?&rdquo; asked our own Jim Rickards less than three weeks after SVB went under.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But Bowman is herself planting the seeds for the next catastrophic bank failure.
As mentioned in this space six months ago, the Federal Reserve has proposed slashing the big banks&rsquo; capital requirements &mdash; the amount of money they need to set aside for a crisis.
When Barr was the Fed&rsquo;s VP for supervision, he proposed raising capital requirements by 19%. (Understandable, seeing as SVB&rsquo;s failure took place on his watch.) Under Bowman, the proposal effectively cuts capital requirements by nearly 5%.
The Fed will finalize the rules by year-end. But the outcome is already locked in. What&rsquo;s more, Bowman plans to let go about 30% of her supervisory staff.
You might want to mentally file this away for when the next major bank failure goes down&hellip; you end up paying more fees as a consequence&hellip; and the Fed issues another inconsequential finger-pointing report.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />AI Merch
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Some people wear clothing to demonstrate their allegiance to a sports team. Others demonstrate their allegiance to&hellip; an AI company. Or even an AI CEO.
Like Nvidia&rsquo;s Jensen Huang, who already attracts crowds of fans for autographs and selfies. (Meta&rsquo;s Mark Zuckerberg has described Huang as "Taylor Swift, but for tech.")
So it&rsquo;s no surprise then that Nvidia apparel quickly sells out from the few venues where it&rsquo;s available.&nbsp;
Natalie Fratto, who runs a New York-based tech startup, has a green jumper with a cartoonish image of Huang on the front. &ldquo;I have a New Zealand All Blacks rugby jersey, and I think of my Jensen sweater in kind of the same way," she tells the BBC. To her, it represents a team and ethos that she proudly displays on social media posts.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3WlffcJxx8PQ6yRsrVQgco/d7219b5a77bd6d278922a0809f887538/FMF-Issue-092326-1.jpg" alt="The believer tweet" width="540px" />
Nvidia isn&rsquo;t the only tech company offering limited merchandise. OpenAI, Anthropic, Anduril and others have joined the trend, offering branded items at conferences or during general sales for only a few days on their websites.
If the companies only intend to sell a very limited number of items, why do they do it, and why are they so coveted? Obviously, the teensy amount of revenue doesn&rsquo;t move the needle.
Professor Hazel Clark of Parsons School of Design explains the limited availability. It &ldquo;elevates the desirability.&rdquo;&nbsp;
Ah, so it comes back to one of fashion&rsquo;s oldest tricks &mdash; scarcity.
But only for so long. As companies grow, and the clothing becomes more available, they&rsquo;re no longer unique and they lose their allure.
Just as in the stock market, if you seek to collect the greatest reward, you must be ahead of the trend!

FMF-Issue-092326-Featured

Diesel Deception

How the mighty have fallen.
There&rsquo;s a subset of the S&amp;P 500 index called the S&amp;P 100. The 100 stocks that belong to this index are the bluest of blue chips.
As of today, Nike (NKE) is no longer a part of this illustrious group.
The keepers of the index have kicked it out after 18 years.
Little wonder. The company&rsquo;s share price is one-fourth of what it once was. $230 billion in market value, vaporized.
We won&rsquo;t dwell today on what went wrong. (You can read about that almost anywhere.) Instead, we&rsquo;ll focus on one question: Has this bloodied blue chip fallen so far that it&rsquo;s now a buy?
Even if you&rsquo;ve come to hate Nike and refuse to buy its gear on principle, you&rsquo;ll want to read the following to get better acquainted with the thinking of Wall Street legend JC Parets &ndash; the newest member of the Paradigm team.&nbsp;
<h2 style="text-align: center;">Is Nike Finally Cheap Enough?</h2>
Nike (NKE) is getting absolutely destroyed.
In November 2021, the stock traded as high as $179.10. On Friday, it closed at $37.08. That's a 79% collapse.
If you put $100 into NKE near the top, you'd have about $21 left today.
And we're not talking about some little company nobody&rsquo;s ever heard of. We're talking about Nike.
The Swoosh. "Just Do It." Michael Jordan. Tiger Woods. Serena Williams. LeBron James.
This is one of the most famous brands on Earth. And its stock just fell to the lowest level in a decade:
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4G1GBeBAORSv4bz0PbbY3q/2e46e2ec4fad772fdd1b0efd28c842c6/ew-09-15-26-img-1.jpg" alt="Nike Inc" width="600px" />
This isn't a bad month. It's not even a bad year. Nike has been falling for almost five years.
That's what makes this so interesting. Because at some point, a terrible stock can become so beaten up that I have to start asking a different question.
Not "How bad is Nike?"
We already know it's bad.
The question I'm asking now is &ldquo;Is Nike finally bad enough?"
I Had To Zoom Out
Whenever I see something this extreme, I like to zoom out.
Here's Nike going all the way back to the 1990s:
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/37V7GeeZyMF6FmJbdeikBK/2541d6b105f12e1f46113f10aa63b857/ew-09-15-26-img-2.jpg" alt="Nike Inc" width="600px" />
See that blue line underneath the stock? That's called an anchored volume-weighted average price, or AVWAP.
Think of it as the average price Nike investors have paid since the most important low in the stock's history.
And right now, that number&rsquo;s around $40.
Look at the chart. NKE&rsquo;s spent almost the entire past 25 years above that line.
It tested this long-term average around the financial crisis in 2009. And now, after one of the worst selloffs in Nike's history, we're back here again.
That's wild.
Nike has lived through the dot-com crash, the financial crisis, a pandemic, recessions, inflation, wars, and a lot of ugly markets.
And yet we almost never see the stock down here.
That's why I'm paying attention. Not because a blue line has magical powers. It doesn't. And not because Nike is down 79%, so it can't possibly fall any further. It absolutely can.
I'm interested because we're looking at an extreme situation in one of the most successful companies of our lifetime.
And there's a very simple number that can help us decide what to do about it.
$40
Here's the best part. We don't have to guess.
Nike closed Friday at $37.08. The level I'm watching is $40. That's right around the average price Nike shares have traded at since those 2000 lows.
Below $40, I don't need to do anything. Let it fall.
But if Nike can get back above $40 and stay there?
Now you've got my attention.
Think about what we'd have.
One of the most famous companies in the world, down 79% from its highs, trading at its lowest level in a decade, testing a long-term price level that has rarely been touched in 25 years, and then potentially getting back above it.
That's the kind of setup where I'm willing to take a stab.
And notice what I'm not doing. I'm not trying to figure out whether the newest Air Jordans are cool. I'm not interviewing teenagers at the mall. I'm not predicting Nike's sales in China.
And I'm definitely not buying the stock just because it used to trade at $179.
Stocks don't care where they used to trade.
I'm waiting for the market to give us evidence that something&rsquo;s changed. $40 is that line for me.
Remember what that line represents. It's roughly the average price Nike investors have paid since the 2000 lows. When Nike is above it, the average buyer is making money.
And when the average buyer is making money, good things tend to happen.
People aren't trapped waiting to get their money back. There's less pressure to sell every rally.
And most importantly, it tells us that buyers are finally taking back control.
That's what I want to see here.
If Nike can't get above $40, there is no trade. If it gets above $40 and holds, then we can buy it knowing exactly where we're wrong.
That's how I like my trades. Simple.
Nike has already done the hard part. It fell 79%.
Now I just need it to do one more thing.
Just do $40.

FMF-issue-092126-featured

Beaten To a Pulp (Is It a Buy?)

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />The Thief in Your Portfolio
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Let me tell you why you&rsquo;re bleeding cash in the markets,&rdquo; says acclaimed trader JC Parets, the newest editor in the Paradigm Press stable.
JC formally joined our crew yesterday during an exclusive streaming event with James Altucher titled The 100X AI Window &mdash; in which he detailed a lucrative near-term market opportunity. <a href="https://new.100xaiwindow.com/m2/65869">(You can watch a replay at this link.)</a>
But for today&rsquo;s Bullet No. 1, JC joins us with some timeless wisdom.
If you feel as if your portfolio isn&rsquo;t up to snuff, JC says the reason is not &ldquo;commissions, high-frequency traders or even bad luck.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Rather, he says, &ldquo;it&rsquo;s your own brain, silently murdering your trades.&rdquo;
What JC is about to describe applies no matter your time horizon &mdash; short-term trading or long-term buy-and-hold: &ldquo;Every trader rides two destructive emotional cycles that feed off each other.&rdquo;&nbsp;
The first is FOMO &mdash; that ever-present fear of missing out. A stock you&rsquo;ve been watching suddenly surges. You wish you&rsquo;d pulled the trigger sooner. Your brain races to justify buying now. It&rsquo;s not too late.
If you buy and the price rises further, &ldquo;dopamine locks in the habit,&rdquo; JC warns.
But if it flops, a second destructive cycle kicks in &mdash; hope and denial. &ldquo;Now you&rsquo;re trapped in a loser, clinging to breakeven.&rdquo;&nbsp;
This is especially ruinous for traders. You average down. You break your rules. &ldquo;Small losses balloon into account killers.&rdquo;
And no, you can&rsquo;t train your brain to overcome these tendencies &mdash; they&rsquo;re &ldquo;hardwired into your head, JC says. &ldquo;Your brain hates missing out and fears losses more than it loves wins.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> So here&rsquo;s your only remedy: &ldquo;You can&rsquo;t kill emotions &mdash; use them,&rdquo; JC says.&nbsp;
Get comfortable missing trades. &ldquo;Know the traps, then build habits to dodge them.&rdquo;
What follows now applies most to trading&hellip;
<ol>
<li>Before any trade, run through a mental checklist.</li>
</ol>
<ul>
<li>Where exactly am I entering?</li>
<li>Where is my stop?</li>
<li>What's my target?</li>
<li>How much am I risking?</li>
<li>Does this trade align with the higher timeframe trend?</li>
</ul>
If you can't answer any of these clearly, the trade doesn't happen. It's that simple. &ldquo;First,&rdquo; JC says, &ldquo;get comfortable with missing out.&rdquo;
<ol start="2">
<li>After a loss &mdash; and there will be losses &mdash; have a shutdown ritual.</li>
</ol>
<ul>
<li>Turn off your trading platform. Get up from your desk</li>
<li>Go for a walk. Grab a bite to eat. Take a shower or exercise.</li>
</ul>
&ldquo;Implement a mandatory 24-hour cooling off period after any significant loss.&rdquo;
<ol start="3">
<li>Finally, make weekly reviews non-negotiable. Every Sunday, go through your trades with a cold, objective eye.</li>
</ol>
&ldquo;Grade yourself not on profitability, but on discipline,&rdquo; says JC. &ldquo;Did you follow your rules?
&ldquo;Trading boils down to two things,&rdquo; he concludes &mdash; &ldquo;managing risk and yourself.&rdquo; Treat losses as a cost of doing business.&nbsp;
&ldquo;Markets shift; human nature doesn&rsquo;t.&rdquo; That&rsquo;s the edge JC brings to Paradigm &mdash; spotting patterns you can use instead of letting your emotions use you.&nbsp;
Because that thief in your portfolio &mdash; your own brain &mdash; will never leave!
We hope you enjoyed this exercise in investor education today. It&rsquo;s this mindset that&rsquo;s made JC such a success in the markets over the decades &mdash; anticipating the onset of the 2008 financial crisis as well as the COVID crash of 2020. And he nailed the start of the current bull market in October 2022, almost to the day.
Now he wants to show you how an obscure government document is about to unleash a massive profit opportunity in the next six days.&nbsp;
We&rsquo;re talking the potential for gains of 10X, 50X and even 100X in a matter of weeks. (And it has nothing to do with earnings announcements, mergers or FDA trials.)
<a href="https://new.100xaiwindow.com/m2/65869">Click here to check out JC&rsquo;s talk with James Altucher right away. As a bonus, you&rsquo;ll see the No. 1 stock on JC&rsquo;s watchlist</a>.&nbsp;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Beneath the Surface&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Beneath the surface of the major averages, a shift is taking place in the U.S. stock market.
&ldquo;For a long stretch, everything moved together on the AI headline of the day. Now fewer names are doing the heavy lifting, breadth has thinned out and lately more stocks are sliding than rising,&rdquo; Paradigm analyst Zach Scheidt writes today for Altucher&rsquo;s True Alpha.
Only a few weeks ago, more than 70% of stocks were trading over their 50-day moving average. Now it&rsquo;s just a third.
&ldquo;One bright spot worth noting is that the market just printed its first oversold reading in months,&rdquo; Zach says. &ldquo;The added volatility is helping to shake out the weak hands.&nbsp;
&ldquo;That kind of washout has often pointed to better returns down the road, so it's worth watching rather than fearing. Don't mistake any of this for capital heading for the exits. It's simply moving around inside the market.
&ldquo;Across tech, leadership is quietly handing off from the semiconductor trade to software. Outside of it, the groups that tend to hold up when yields rise have been doing exactly that, while the rate-sensitive and defensive corners lag.&nbsp;
&ldquo;Even a few beaten-down areas, precious metals among them, are showing the first signs of life after a long grind.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for today, all the major indexes are in the red &mdash; though not by much.
At last check the S&amp;P 500 is down less than a quarter-percent on the day at 7,623. It&rsquo;s been over a month since the index notched its record close of 7,798.
The Nasdaq is down only fractionally, while the Dow is down close to a half-percent.
Precious metals are staging a respectable comeback after their beatdown on Wednesday &mdash; gold now only $16 away from $4,500 and silver up another $1.50 on the day at $66.59.
And crypto is on a tear: Bitcoin back over $80,000 and Ethereum approaching $2,600. Paradigm trading pro Enrique Abeyta says if Bitcoin can push over $85,000, the path is clear for a return to $100K and beyond.
One economic number of note today and it delivered a nasty surprise: The Federal Reserve says industrial production was flat between July and August &mdash; in contrast with Wall Street&rsquo;s expectations for a 0.3% gain.
Worse, manufacturing shrank 0.3% for the month. No one among dozens of Wall Street economists surveyed by Econoday saw that coming.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Not Quiet on the Western Front
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The oil market is getting tighter and tighter as the weekend approaches.
Bloomberg reports that Saudi Aramco, Saudi Arabia&rsquo;s state-owned oil firm, has informed &ldquo;at least two oil refining customers in Europe that they will be allocated no crude next month under long-term agreements after the kingdom&rsquo;s key pipeline to the Red Sea was attacked.&rdquo;
The news comes hours after another Bloomberg scoop that Aramco is bidding for diesel cargoes in Europe. That&rsquo;s right, one of the world&rsquo;s top three oil producers doesn&rsquo;t have enough diesel to supply its own needs because of attacks on its refineries.
While the U.S.-Iranian theater of the war is mostly quiet at the moment, the &ldquo;western front&rdquo; is red-hot with fighting between Saudi Arabia and the Houthi faction of Yemen, which is aligned with Iran.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> And red-hot could get even hotter if Pakistan gets involved.
Last month in Islam&rsquo;s holiest city of Mecca, leaders of Saudi Arabia, Pakistan and Turkey signed a mutual defense agreement.
This week, Pakistani defense minister Khawaja Asif said his country is ready to fulfill its obligations under that agreement as the Saudi kingdom fights the Houthis. The Mecca agreement &ldquo;applies to us,&rdquo; he said, &ldquo;and we will fulfill our duty.&rdquo; He was careful not to say how.
But for the moment, none of this matters to U.S. oil futures &mdash; down about 75 cents to $101.12 as we write. Still, crude is on track to end the week slightly higher than it ended last week.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />The Broadcasters&rsquo; Lobby (and Emergency Preparedness)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Over-the-air broadcasting might be a dying business &mdash; but it sure has a powerful lobby.
On Tuesday, the House overwhelmingly passed something called the AM Radio for Every Vehicle Act. It was a voice vote; the measure had 317 sponsors. Passage in the Senate is guaranteed with 60 sponsors.
The measure will require automakers to continue furnishing AM radio in their new models.&nbsp;
In recent years, automakers including Tesla, Volvo and BMW dropped AM radio. Modern automotive electronics often generate buzzing noises and signal fading on AM frequencies. It&rsquo;s especially bad in electric vehicles.&nbsp;
Fixing that with electronic shielding will be an added expense for automakers, which no doubt will be passed along to the consumer.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But the broadcasters marshaled a powerful argument, one that&rsquo;s not well understood.
The Wall Street Journal tried to explain it like this in 2023: &ldquo;More than 75 radio stations, most of which operate on the AM band and cover at least 90% of the U.S. population, are equipped with backup communications equipment and generators that allow them to continue broadcasting information to the public during and after an emergency.&rdquo;
That doesn&rsquo;t tell the whole story: These stations are outfitted for a true SHTF scenario, not just a natural disaster.
Like, if the internet and wireless networks go down.
In 2018, the trade publication Inside Radio reported on WLW Cincinnati&rsquo;s hardened setup in the suburb of Mason: &rdquo;The fenced-in, shed-like 8-by-20-foot structures include all the things needed to broadcast remotely, including a studio, backup transmitter and generator as well as facilities for a two-person staff such as a 60-day supply of food and water, bunks and an air filtration system.&rdquo; [Emphasis ours]
Pretty hardcore, huh? And FEMA foots most of the bill.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2qChJQLtPMUw0TfgszheaW/e4f3e66986485fe5de294a54fcb93bb1/FMF-Issue-091826-1.jpg" alt="SHTF studio" width="540px" /> Ready for (nearly) anything: The SHTF studio at the transmitter site of WLW Cincinnati [FEMA photo]
FEMA has <a href="https://web.archive.org/web/20260622090248/https://www.fema.gov/emergency-managers/practitioners/integrated-public-alert-warning-system/broadcasters-wireless">a list of these stations</a> on its website. Scroll down on the page and you can sort the list by state to find the one nearest you. Nearly all of those AM stations have wide coverage areas, especially at night.
If you live in the sticks like me, you might want to invest in a quality AM radio for the home instead of relying on whatever&rsquo;s in your junk drawer.&nbsp;
An excellent choice is the Sangean PR-D4W. Unfortunately tariffs have raised the price big-time since I last recommended it 18 months ago &mdash; from under $75 then to over $100 now at both Amazon and Walmart. If you want to go all out for performance, the CCRadio 2E from the American firm C. Crane will set you back $199.&nbsp;
As a bonus, both models come with the NOAA Weather Radio band and can trip an alarm in the event of something like a tornado warning.
Look, your tax dollars are paying for all of this infrastructure: You might as well take advantage in case of the worst.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Comic Relief (and Reading Recommendations)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> This one making the rounds couldn&rsquo;t possibly be more timely &mdash; or on the mark&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1D3vt14lYFtIq5eYWfsrNq/25598c66cfb9d28e69df3ad1577872d3/FMF-Issue-091826-2.jpg" alt="pub" width="540px" />
Really, the whole AI-is-gonna-kill-us-all narrative is getting out of hand.&nbsp;
And it is absolutely being ginned up by the incumbent &ldquo;frontier&rdquo; AI firms like Anthropic and OpenAI &mdash; begging the feds to &ldquo;regulate me harder, Daddy&rdquo; so as to throttle any upstart competitors.
That&rsquo;s not a conspiracy theory. In recent days my colleagues <a href="https://dailyreckoning.com/ai-leaders-devious-plan/">Adam Sharp</a> and <a href="https://million-mission.com/posts/the-great-ai-psyop">Davis Wilson</a> have followed the breadcrumbs.&nbsp;
The evidence is overwhelming. You don&rsquo;t have to be pro-data center and you don&rsquo;t have to buy into the argument that &ldquo;we must win the AI race with China&rdquo; to smell a rat here.
We&rsquo;ll leave it there for the week. I&rsquo;m sure the issue is going to come up again&hellip;

FMF-Issue-091826-Featured

The Thief in Your Portfolio

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Perception vs. Reality
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;These explosive moves happen when reality diverges from perception,&rdquo; says JC Parets &mdash; the newest member of the Paradigm team, laying out his one-of-a-kind strategy.
Moments ago, JC wrapped up his streaming event with James Altucher called The 100X AI Window.
We won&rsquo;t dwell on the ins and outs of his strategy here&hellip;
<a href="https://new.100xaiwindow.com/m2/65614">[you can see it step-by-step watching the replay of James&rsquo; interview with JC at this link]</a>
&hellip; but there&rsquo;s an example from JC&rsquo;s files worth spotlighting.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> It&rsquo;s the case of Super Micro Computer (SMCI) &mdash; a company that makes hardware for AI data centers &mdash; during 2024.
In August of that year an outfit called Hindenburg Research published a damning white paper &mdash; accusing SMCI of accounting fraud.
The following day, the company said it would delay filing its annual report. Shares collapsed 25% in a matter of hours.
Hindenburg&rsquo;s white paper soon caught the eye of the Justice Department. Nasdaq threatened to delist SMCI. The company&rsquo;s own auditing firm resigned.
&ldquo;At one point the stock was down 80%,&rdquo; JC recalls. &ldquo;It looked like a complete dud.&rdquo;
But then in mid-April 2025 the company showed up in an obscure government document &mdash; a document that signaled a new profit window was about to open. &ldquo;When this window opens and the stock begins to move,&rdquo; says JC, &ldquo;it&rsquo;s almost unstoppable.
&ldquo;Less than a week later, the stock began to turn around &mdash; and it went ballistic.
&ldquo;Anyone who knew how to read this report and knew how to take advantage of this new AI window could have turned $5,000 into almost $50,000 in a little over three weeks.&rdquo;
That&rsquo;s a 10X gain in a very brief timeframe. Similar profit windows tied to this little-known government report have delivered gains of 50X and even 100X. <a href="https://new.100xaiwindow.com/m2/65614">(More examples in JC&rsquo;s interview with James Altucher.)</a>
And a new window is about to open on Thursday, Sept. 24 &mdash; one week from today. &ldquo;I believe it&rsquo;s going to trigger the next explosive opportunity,&rdquo; JC says.
You owe it to yourself to learn more about JC&rsquo;s unique approach. James Altucher has known JC for more than 15 years &mdash; and he&rsquo;s thrilled that they&rsquo;re now on the same team. <a href="https://new.100xaiwindow.com/m2/65614">Check out their discussion right away at this link</a>.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Overreaction Much?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Mr. Market got a good night&rsquo;s sleep and decided this morning he overreacted to the Federal Reserve.
The Dow Industrials took a 1.2% spill by day&rsquo;s end yesterday &mdash; after the Fed&rsquo;s Open Market Committee voted unanimously to raise short-term interest rates for the first time since July 2023. The benchmark fed funds rate is now 4%.&nbsp;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/uh5tedwjSJBpStZFDCLIo/065ab50dd5637f3622c06450c184409a/FMF-issue-091726-1.jpg" alt="The benchmark fed funds rate is now 4%. chart" width="540px" />
In the interest of accountability, Paradigm macro maven Jim Rickards got this one wrong &mdash; only the second time out of 24 Fed forecasts he&rsquo;s issued since 2022.
He wrote an after-action report this morning for readers of Crisis Trader: &ldquo;My view is that this rate increase was mainly performative, driven by a widespread view among economists that the Fed had to do something about inflation.
&ldquo;A rate hike was also considered necessary in some quarters to reinforce the idea of &lsquo;Fed independence,&rsquo; something I have long regarded as more myth than reality.
&ldquo;But it remains an important part of the Fed&rsquo;s institutional identity, especially when its policy decisions run contrary to President Trump&rsquo;s stated preferences.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> All that said, Jim says this rate hike will do little to contain inflation.
&ldquo;The fed funds rate is an overnight lending rate between banks. But banks, especially the largest ones, are flush with reserves held at the Fed. There is no shortage of liquidity.
&ldquo;More importantly, the Fed doesn&rsquo;t directly control many of the forces driving inflation. A higher fed funds rate won&rsquo;t lower oil prices, currently over $100 per barrel, and the market ultimately sets yields on 10-year Treasury notes and 30-year Treasury bonds. Mortgage and credit card rates respond to Fed policy, but they also reflect broader market conditions and credit risk.
&ldquo;Many of today&rsquo;s inflation pressures come from supply-side factors, particularly the price of oil, along with deficit spending and consumer borrowing. Raising the overnight rate does little to address those pressures directly.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As it happens, oil prices and long-term interest rates are both climbing down today. That and the passage of time have put the stock market in the green.
U.S. oil futures are down 1.3% at last check &mdash; although they&rsquo;re still over $101. Meanwhile the yield on a 10-year Treasury note is down to 4.95% after settling over 5% yesterday for the first time since July 2007.
Amid that backdrop, the Dow has recovered a portion of yesterday&rsquo;s losses &mdash; up 0.4% at 51,664. The S&amp;P 500 is up nearly 1% and back over 7,600. And the Nasdaq is strongest, up 1.25% and back above 26,300.
Precious metals are likewise recovering yesterday&rsquo;s post-announcement losses &mdash; gold up over 2% to $4,355 and silver up over 4% at $65.53.
Crypto appears to be yawning at news that the Securities and Exchange Commission is opening a temporary path for the trading of tokenized stocks 24/7. &ldquo;Two days after the Clarity Act failed to advance in the Senate, the SEC is moving to build as much of the regulatory rulebook for the crypto industry as its existing authority permits,&rdquo; reports CNBC.
With that, Bitcoin is back over $76,000 and Ethereum around $2,450.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Something Melty This Way Comes
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> What about the stock market outlook the rest of this year?
Last month Paradigm chart hound Greg Guenthner laid down the gauntlet &mdash; predicting &ldquo;a melt-up in its purest form: a generational move not seen since the final phase of the 1990s dot-com boom.&rdquo;
He has yet to pick up that gauntlet. But at the same time he won&rsquo;t be surprised at all to see a little blood in the water first. &ldquo;The herd needs to experience a little angst before we light the fuse.&rdquo;
September is typically the market&rsquo;s worst month of the year. And this September has had no shortage of troubles &mdash; AI executives calling for a slowdown, a Fed rate hike, the typical sloppy action during midterm election years.
Speaking of midterm election years, Greg drops the following chart from 1998. The Asian currency crisis had morphed into a default by Russia and the collapse of the hedge fund Long Term Capital Management. That was enough to drag down the Nasdaq over 25% in two months.
And then came a 240% run to the top in March 2000.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/79J7H988Old4RMb0yL2hRt/a50d58e6c4ca0560cb235944c7bd1eb3/FMF-issue-091726-2.jpg" alt="240% run to the top in March 2000." width="540px" />
Greg is not calling for the same washout this time around. A milder scare, he says, &ldquo;is likely to resolve to the upside.&rdquo; If this time around is even half of 1999 &ldquo;we&rsquo;ll be swimming in a fantastic sea of trading opportunities.&nbsp;
&ldquo;Whatever you do, don&rsquo;t get too caught up in any bearish narratives if the market loses its footing this September.&rdquo;&nbsp;
The trick will be to roll with the September punches and then sail with the rally afterwards.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />&ldquo;The Cure for Low Prices Is Low Prices&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Paradigm resource expert Matt Badiali recently spotlighted estimates that major U.S. row-crop farmers could lose about $31 billion this year &mdash; and another $32 billion in 2027.
As Matt puts it, &ldquo;They are getting hit hard.&rdquo;
The problem is what he says are &ldquo;record high input prices.&rdquo; Fuel, fertilizer and other costs are high, while the prices of corn and wheat have stayed relatively weak. Farmers can&rsquo;t easily pass along their rising costs.
As Matt explains, &ldquo;farmers&hellip; are price takers.&rdquo;
But even they can only &ldquo;take&rdquo; so much. When corn costs too much to grow, farmers pull acres, shrink output or move into crops that pay better.
Which brings us back to one of Matt&rsquo;s favorite commodity-market rules: &ldquo;The cure for low prices is low prices.&rdquo;
Weak prices discourage production, causing supply to tighten, which ultimately causes prices to rise. Matt believes that&rsquo;s setting up the next move in grains.
His conclusion is straightforward: &ldquo;Prices must go up.&rdquo;
Matt expects both corn and wheat to move higher over the next year and a half. He points to the Teucrium Corn Fund (CORN) and the Teucrium Wheat Fund (WEAT) as direct ways to play that move.
Matt&rsquo;s specialty is finding resource markets where the economics have become distorted, so that a big move may be setting up.
In his paid research, Matt goes further by identifying specific companies and trades he believes offer the best leverage to those shifts.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Iran
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;How do you know that Iran is not pursuing a nuclear weapon?&rdquo; a reader writes after a parenthetical comment toward the end of <a href="https://paradigmpressroom.com/post/the-markets-nearing-crash-stage">yesterday&rsquo;s edition</a>.
Dave responds:"Before the war began the U.S. Intel Community, including CIA, was in agreement that Iran wasn't developing a nuclear weapon,&rdquo; says Joe Kent &mdash; who resigned in protest as director of the National Counterterrorism Center a few weeks after the war began.
A year earlier, Kent&rsquo;s boss &mdash; Director of National Intelligence Tulsi Gabbard &mdash; testified to Congress that the U.S. intelligence community "continues to assess that Iran is not building a nuclear weapon, and Supreme Leader Khamenei has not authorized the nuclear weapons program that he suspended in 2003.&rdquo;
Given the history both Kent and Gabbard have, fighting Washington&rsquo;s forever wars in uniform, it&rsquo;s hard to make the case that they belong to some pro-Islamist conspiracy.&nbsp;
As such their words deserve more weight than those of Israel&rsquo;s prime minister and his partisans in this country.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;We have spent billions to prevent Iran from developing a nuclear weapon. It seems to me that&rsquo;s just money wasted,&rdquo; observes another reader.&nbsp;
&ldquo;If Tehran really wanted a nuclear weapon, it would just buy one from one of the less scrupulous countries that have them.&rdquo;
Dave: That&rsquo;s more or less what North Korea did. It perfected nukes with technology furnished under the table by A.Q. Khan, widely considered the father of Pakistan&rsquo;s atomic weapons program.
It&rsquo;s worth noting that North Korea withdrew from the Treaty on Non-Proliferation of Nuclear Weapons years before conducting its first weapons test in 2006.&nbsp;
It&rsquo;s also worth noting that Iran remains a signatory to the treaty, while Israel never signed it.

FMF-issue-091726-featured

Perception vs. Reality

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />The Market&rsquo;s &ldquo;Nearing Crash&rdquo; Stage
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We&rsquo;re taking the highly unusual step today of starting these 5 Bullets with an inquiry from the mailbag.
&ldquo;I am new to trading in options after having just joined Paradigm a couple of months ago,&rdquo; a reader writes.&nbsp;
She might be new, but she&rsquo;s serious &mdash; following several of our premium advisories including Altucher&rsquo;s True Alpha, The Trading Desk and Weekly Wealth Alert.
And she&rsquo;s on the lookout for what she calls the market&rsquo;s &ldquo;late euphoria stage&rdquo; &mdash; something akin to the melt-up in 1999 when the dot-com boom became a bubble. Once the bubble burst, the Nasdaq took a 78% spill from early 2000 till late 2002.
&ldquo;I love that options help to amplify gains,&rdquo; she says, &ldquo;but the fact that they also amplify and accelerate losses becomes a bigger concern if the market is approaching a free fall.
&ldquo;I am nearing retirement age and due to some family circumstances I never had a chance to build up very much of a retirement before now. I am excited at the prospect of Paradigm programs helping me to remedy that, but worried about how to handle the options recommendations once we do reach the impending market decline.
&ldquo;Can you give some strategy suggestions for how to approach my trading services&rsquo; recommendations as we approach the late euphoria/nearing crash stage for those of us who can't afford to have their retirement funds cleared out by many options plays tanking all at once due to a dramatic turn in the market?&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The reader raises an excellent question. It might not be relevant now &mdash; but one day it will be.
Yes, the market has logged double-digit gains four years in a row &mdash; a rarity. But that doesn&rsquo;t necessarily signal &ldquo;the top is in.&rdquo;&nbsp;
In fact, the market action to date looks nothing like 1999 right now. Rather, the years 2023&ndash;2026 look a lot like the years 1995&ndash;1998.
And if history rhymes, we&rsquo;re in for a choppy market soon, not unlike 1998: &ldquo;The next six&ndash;seven weeks carry a high probability of elevated volatility and a meaningful market pullback,&rdquo; says Paradigm trading pro Enrique Abeyta.
But he also says that chop could be &ldquo;the storm before the melt-up&rdquo; &mdash; and that &ldquo;year-end levels are still likely to finish above current levels.&rdquo;
Once a bubble starts, the people closest to it are highly motivated to pour on the gasoline &mdash; so that others are left holding the bag when it falls apart. This process has a name on Wall Street: distribution, or selling the remaining pieces to the public.&nbsp;
After the cracks begin to show, the AI bubble can be expected to have a last, sloppy public act left in it. That is the distribution window.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> And the window is opening now. Just look at the amount of money the AI hyperscalers plan to spend.&nbsp;
A Reuters analysis of consensus estimates says that by 2027, combined capital spending at Microsoft, Alphabet, Amazon, Meta and Oracle could exceed those five companies&rsquo; combined free cash flow.&nbsp;
Together, from 2025&ndash;2027 they are expected to generate about $340 billion more in annual operating cash flow and add about $534 billion in capex. That is $1.57 of extra investment for every extra dollar of free cash flow.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> That gusher of money won&rsquo;t last forever. But as long as it lasts, the stage is set for a 1999-style melt-up come 2027.
To help you take advantage, Paradigm just signed Wall Street legend JC Parets to the team &mdash; joining our other luminaries like Jim Rickards and James Altucher.
Now&hellip; circling back to the reader&rsquo;s question&hellip;
Most of our editors grappled with the dot-com bubble and bust as it happened. All of them contended with the 2008 financial crisis. They know full well that options strategies amplify both gains and losses.&nbsp;
Rest assured they will not leave you high and dry. Just follow their guidance and breathe deep whenever the bull begins to back away and the bear starts to growl.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Markets Today: The Fed, the Energy Crunch, the Crypto Pullback
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As we go to virtual press, the Federal Reserve has pulled the trigger on its first interest rate hike since 2023.
The benchmark fed funds rate goes from 3.75% to 4%. The vote was unanimous. We&rsquo;ll follow up on the fallout tomorrow.
Ahead of the announcement, the S&amp;P 500 was up nearly a half percent on the day &mdash; back over 7,600. Precious metals were also rallying &mdash; gold up over 50 bucks to $4,349 and silver up nearly a dollar to $64.39.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile, Big Oil executives say the supply crunch they&rsquo;ve warned about since May is getting real.
Both the government&rsquo;s Strategic Petroleum Reserve and private-sector inventories are effectively drained &mdash; and China has resumed importing crude after drawing down its own reserves.
&ldquo;We don&rsquo;t have nearly the buffers in the system that we did when [the Iran war] began,&rdquo; Chevron CEO Mike Wirth said recently at a conference in Texas.
And the crunch is getting worse: Saudi Arabia is canceling shipments of crude to Europe after the bombings of its big east-west pipeline. Meanwhile, Ukraine and Russia continue to attack each other&rsquo;s energy infrastructure &mdash; Donald Trump&rsquo;s claims to the contrary notwithstanding.
But for the moment, U.S. oil futures are reacting to the Energy Department&rsquo;s weekly inventory numbers &mdash; which are somewhat less dire than expected. (Hooray?) West Texas Intermediate is down over three bucks to $102.57.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Crypto is taking a hit after the latest developments in Washington, D.C.
Bitcoin has sunk below $76,000 for the first time in nearly a month, and Ethereum has dipped below $2,400.
Yesterday a procedural vote on a measure called the Clarity Act failed to get the required 60 votes in the Senate. The bill would have set up the first comprehensive regulation framework for digital assets.
But as Paradigm&rsquo;s lead crypto analyst Chris Campbell sees it, this development is not unexpected and it&rsquo;s not a big deal. The Securities and Exchange Commission will take the steps Congress won&rsquo;t.
As he put it to readers of Altucher&rsquo;s Early-Stage Crypto Investor last Friday, &ldquo;Either way, the same products are coming &mdash; stocks that trade 24/7 on-chain, perpetual futures onshored into U.S. markets, derivatives on raw computing power. None of it is waiting for a vote.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Affordability
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Why do Americans feel an affordability crisis while traditional indicators say the economy is fine?&nbsp;
&ldquo;The economy grew 2.1% over the past year. Unemployment remains low. And the stock market has created enormous wealth,&rdquo; pointed out the aforementioned Enrique Albeyta, &ldquo;yet Americans aren't buying the good news.&rdquo;
A recent Gallup survey found that 45% of Americans rate the economy as "poor," and only 19% call it "good" or "excellent."&nbsp;
Going by the official numbers, consumer prices are roughly 28% higher than they were just before the pandemic. Inflation has cooled from its 9.1% peak in June 2022, but cooling inflation is not the same as lower prices. An item that went from $100 to $128 does not become $100 again just because the rate of increase slowed.&nbsp;
Making matters worse, the official numbers show for about one-third of workers, wage gains trailed inflation from early 2021 to early 2026.
Housing makes the contrast sharper still.
Household income and the income needed to buy a typical home tracked together before COVID. In 2021, home prices leapt ahead. Enrique notes that the gap today is roughly $40,000.&nbsp;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/57ZNq7kot9K6CzdpChylC8/9119faf4e6ccb6a2e90320f8e31b99eb/FMF-Issue-091626-1.jpg" alt="Median house hold income vs qualifying household income" width="540px" />
Meanwhile, a typical 30-year mortgage that went for just over 3.5% in early 2020 is over 7% this week. Note well: The Consumer Price Index does not directly include home prices or mortgage rates, so official gauges miss much of the squeeze.
How did we get here?
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Economic Hardship = Political Upheaval
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> By now it&rsquo;s easy to forget&hellip; but the fiscal shock post-COVID was enormous.&nbsp;
The Government Accountability Office reports that $4.4 trillion was spent through COVID relief laws up to the end of 2021, which is about the same as all of government spending in fiscal year 2019 ($4.45 trillion).&nbsp;
That required a larger money supply, typically measured as &ldquo;M2.&rdquo; Result &mdash; rising asset prices, especially homes and stocks, as you see in this chart from the Federal Reserve Bank of St. Louis.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2L56A5fLxxOjt9HqZIgQGX/75f79bab4f13f3ae82a046f3825ffdc8/FMF-Issue-091626-2.jpg" alt="home price vs M2 vs s&amp;p 500" width="540px" />
Granted, these trends existed long before COVID. From their lows in 2012, the average home price has leaped about 150%. Over the same stretch, the S&amp;P 500 is up more than 300%.&nbsp;
That wealth has been highly concentrated and is becoming more concentrated. Younger and lower-wage earners have been all but shut out of home ownership since the pandemic. With no meaningful stake in stocks or housing, they can&rsquo;t keep up with rising prices.&nbsp;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> So then what? Dire economic circumstances open up people to political solutions they wouldn&rsquo;t consider otherwise.
Money &amp; Power editor Buck Sexton recently penned an article with the provocative title &ldquo;A Socialist America&hellip; Thanks to Republicans.&rdquo;
&ldquo;Most Americans understand there is no magical government money tree growing behind the Treasury Department. But when people get frustrated enough with the way things are going, they become a lot more willing to listen to ideas they would have laughed out of the room five years earlier.&rdquo;
Affordability is no longer just an economic gap. It&rsquo;s an ideological and political chasm &mdash; and it keeps widening.
If you&rsquo;re fortunate enough to have assets, Jim Rickards recommends you keep 10% of them in physical gold. &ldquo;It might be time to think about owning more physical gold and silver, which are harder for tax collectors to find.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Readers Write: Social Security
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Yet another application of Stein's Law: If something cannot go on forever, it will stop,&rdquo; writes a reader as our Social Security discussion rolls on.
&ldquo;While not a suggestion for a remedy, an outcome with a significant non-zero probability of happening looks like this:
<ul>
<li>Increased retirement age</li>
<li>Eliminate cap on taxed income</li>
<li>Full taxation of benefits</li>
<li>Means testing in lieu of benefit cuts &mdash; i.e. benefit cuts for &lsquo;the rich.&rsquo;&rdquo;</li>
</ul>
The reader concludes with a quotation from the 18th-century French economist Anne Robert Jacques Turgot, in a letter to David Hume&hellip;
&ldquo;You know, also, as well as I do, what is the great aim of all the governments of the earth: obedience and money. The object is, as the saying goes, to pluck the hen without making it cry out; but it is the proprietors who cry out, and the government has always preferred to attack them indirectly, because then they do not perceive the harm until after the matter has become law&hellip;"&nbsp;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I'm wondering if anyone suggested an idea I heard a long time ago,&rdquo; another reader writes &mdash; &ldquo;waive the use of income/SS payments in any tax year to calculate future SS benefits in exchange for deducting your SS payments on that year's income tax return.&nbsp;
&ldquo;Of course this would stress the U.S. budget even more in the short term. Worth it? And to whom? I'd be interested in seeing the numbers for that.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Let&rsquo;s put the two parts of <a href="https://paradigmpressroom.com/post/ai-freakout">your Monday newsletter</a> together (AI freakout and Social Security comments relating to the K-shaped economy),&rdquo; writes our final correspondent.
&ldquo;It highlights the two most prominent issues expressed by voters, especially the young voters: concerns over AI and feeling left behind in this economy.&nbsp;
&ldquo;If the Republicans want to stand a chance of winning in November, they need to address both. The best thing the Republicans could do in this cycle is to adopt a &lsquo;nibble&rsquo; the rich approach. Remove the income cap on Social Security taxes while keeping the cap on payouts. Eliminate the carried interest shield on private equity, venture capital and real estate fund managers&rsquo; income and treat it as ordinary income versus long-term capital gains.&nbsp;
&ldquo;It would show that they are not beholden to the &lsquo;billionaires,&rsquo; and the rich would go along with it because the alternative is to be eaten rather than nibbled upon.&nbsp;
&ldquo;The Republicans should also aggressively pursue a two-tier approach to AI regulation. Heavy regulation on frontier models based on a hard mathematical cutoff based on training compute with mandatory sandboxing, high-security isolation and third-party oversight for models above the cutoff.&nbsp;
&ldquo;The cutoff should be set high enough to cover only the frontier LLMs and the most capable open-weight models. The second tier below the hard cutoff would apply to the remaining roughly 95% of SLMs and specialized models and not at all to the application-layer software and only be subject to consumer and other protections now developing around social media (don't harm the kids, don't expose consumer data, etc.).&rdquo;
Dave responds: Hmmm&hellip;
Whatever the merits of your proposals, it seems the Republicans are instead hanging their hat on two propositions this fall: 1) No amount of economic sacrifice is too much to prevent Tehran from obtaining a nuclear weapon (which Tehran isn&rsquo;t pursuing) and 2) the only consideration when it comes to AI development is &ldquo;winning the AI race with China.&rdquo;
Not very inspiring. And the best the Democrats have to offer is &ldquo;we&rsquo;re not Trump.&rdquo;
But under the circumstances, that&rsquo;s probably good enough for the Dems to secure a narrow majority in the House&hellip;

FMF-Issue-091626-Featured

The Market’s “Nearing Crash” Stage

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Assume the Worst Case
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />The &ldquo;AI freakout&rdquo; touted by the mainstream was not only overblown. It was also short-lived.
As you&rsquo;ll recall from yesterday&rsquo;s edition, that was the name The Wall Street Journal&rsquo;s websitegave to a minor scare that hit AI stocks in the morning. Supposedly the AI gravy train was screeching to a halt because Anthropic&rsquo;s CEO called for a slowdown in AI development and the CEOs of OpenAI and SpaceX both agreed.
The &ldquo;freakout&rdquo; was already over by the time we hit &ldquo;send&rdquo; yesterday afternoon. Get a load of the front-page, above-the-fold headline in the Journal&rsquo;s print edition this morning&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/67GVjHbTsLI72kr0yEH4xA/af0eecbf81ba989f07c8a848d06fbef1/FMF-issue-091526-1.jpg" alt="pub" width="250px" />
So let&rsquo;s step back and get some perspective with the help of Paradigm AI authority James Altucher.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;First off,&rdquo; says James, &ldquo;let&rsquo;s make clear what was NOT said:
<ul>
<li>&ldquo;Zero AI companies said they were slowing down development</li>
<li>&ldquo;Nobody said that their release cadence was going to be slower</li>
<li>&ldquo;And nobody even said they were going to cap capabilities of future AI models.&rdquo;</li>
</ul>
What Anthropic&rsquo;s Dario Amodei committed to&hellip; and what OpenAI&rsquo;s Sam Altman endorsed&hellip; was that before a model ships, third-party evaluators with employee-level access would get a look at it.
And yet, the knee-jerk reaction in much of corporate media and social media was a pause to AI development.
Amodei&rsquo;s preferred word is pace. It showed up over and over in the open letter he posted on his personal website Saturday.
&ldquo;Pacing,&rdquo; he took pains to point out, &ldquo;does not mean halting model training or technical progress.&rdquo;
That passage made it into the Reuters article about Amodei&rsquo;s statement Saturday. But it was all but gone from the media&rsquo;s coverage by Monday once reporters went into &ldquo;freakout&rdquo; mode. Don&rsquo;t let the facts get in the way of a good story, huh?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />But let&rsquo;s assume the worst-case for a moment: &ldquo;Let&rsquo;s say AI models were more slowly released,&rdquo; James says. &ldquo;Who would this affect?
&ldquo;Most of the demand for AI computing is for people who want inference. Not for the companies training AI models. Training happens once, but inference is going up in a straight line.&rdquo;
Inference is what happens every time you type a prompt into ChatGPT or Claude or Grok. More and more people are adopting large language models &mdash; and using them more frequently. That doesn&rsquo;t change.
James says the beneficiaries include&hellip;
<ul>
<li>Nvidia (NVDA). &ldquo;Inference needs lots of GPUs&rdquo;</li>
<li>Micron (MU). &ldquo;Inference needs lots of memory&rdquo;</li>
<li>Astera Labs (ALAB). &ldquo;Inference needs millions of connections between the GPUs.&rdquo;</li>
</ul>
&ldquo;And if AI models are truly a risk,&rdquo; James says, &ldquo;the risk is from a cybersecurity standpoint.&rdquo; Which is news for the cybersecurity names, which are bundled up into ETFs like HACK and CIBR.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Rickards: No Rate Hike (You Heard It Here First)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Jim Rickards is sticking his neck out there: The Federal Reserve will not raise interest rates tomorrow.
The Fed&rsquo;s Open Market Committee starts one of its two-day meetings today, with an announcement due tomorrow at 2:00 p.m. EDT. Futures traders assign a 93% probability the FOMC will raise the benchmark fed funds rate from 3.75% to 4%.
Jim will take the other side of the trade.&nbsp;
He readily acknowledges that at 3.4%, the official inflation rate is nowhere near the Fed&rsquo;s 2% target. He also acknowledges the rate will likely be higher still when the September figures come out in mid-October. It&rsquo;s little wonder conventional wisdom anticipates a rate hike.
&ldquo;But these are not conventional times,&rdquo; Jim wrote his Crisis Trader readers this morning.
&ldquo;The dovish contingent of the FOMC, led by chair Kevin Warsh, understands that higher prices will slow economic growth as consumers drive less or cut other spending to pay for gas.&rdquo;
And if you&rsquo;re wondering, politics figure into the equation as well.&nbsp;
&ldquo;Midterm elections are only 49 days away,&rdquo; Jim reminds us. &ldquo;And Kevin Warsh was appointed Fed chair by Donald Trump, who has made his preference for lower interest rates clear.
&ldquo;It&rsquo;s nonsense to say that the Fed is not political. The Fed is highly political and knows what the White House wants. It will not bow to White House wishes by cutting rates. But it will do the White House a favor by doing nothing.
&ldquo;That kind of inside-the-Beltway maneuvering is something Wall Street models and market odds are not good at calculating. But it&rsquo;s a reality, and it will determine the policy outcome at this meeting.&rdquo;
But that&rsquo;s tomorrow. What about the markets today? Read on&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Here We Go Again
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Once again, the market dynamic today is rising oil prices &mdash;&gt; rising inflation expectations &mdash;&gt; rising long-term interest rates.
Saudi Arabia has shut down its oil export terminal at Yanbu on the Red Sea. Sounds as if the damage to the big east-west pipeline it relies on to bypass the Strait of Hormuz was even more severe than we thought yesterday.
And there&rsquo;s a squeeze on refined products as well: Exxon Mobil&rsquo;s big refinery at Joliet, Illinois is offline after a power outage on Sunday. It probably won&rsquo;t be back in service until the end of the week.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />With that, U.S. oil futures are over $105 for the first time in four months. And the yield on a 10-year Treasury note broke through to highs last seen in 2007.
For the moment, the 10-year has pulled back just below the 5% mark. But the psychological barrier has been breached. Bad news for mortgages, corporate bonds and especially for Uncle Sam&rsquo;s delicate finances.
Late yesterday, Deutsche Bank released a startling analysis summarized by the Financial Times like this: &ldquo;Foreign investors are now buying more U.S. stocks than government bonds, in a rare move that comes amid fears that inflation and America&rsquo;s fast-growing debt pile are undermining the &lsquo;risk-free&rsquo; status of Treasuries.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />At least for today, rising oil prices and rising bond yields are a drag on the stock market.
The S&amp;P 500 is down close to another half percent today &mdash; back below 7,600. The losses in the Nasdaq and the Dow are both closer to three-quarters of a percent.
But precious metals are holding their own &mdash; gold just below $4,300 and silver at $63.31.
Crypto is losing ground compared with 24 hours ago &mdash; Bitcoin sinking toward $76,000 and Ethereum just over $2,400.
&ldquo;Bitcoin and Ethereum have both remained relatively stable while stocks have started to fluctuate this month,&rdquo; says Trading Desk editor Greg Guenthher.&nbsp;
&ldquo;If the market gets volatile over the coming weeks, we should pay close attention to how crypto reacts. If it can continue to hold its gains and sneak higher while we experience an equities drawdown, we&rsquo;ll have additional confirmation that the bottom is in.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Sign of the Times
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Copper theft is becoming so lucrative that since last year, 27,000 feet of cable belonging to the Los Angeles Department of Water and Power has been purloined.
That&rsquo;s according to a recent investigation by KABC-TV, which points out &ldquo;that's roughly five miles of cable -- the height of a commercial jet's cruising altitude if stretched vertically. It's also the length of 90 football fields or 165 Olympic swimming pools laid end to end.&rdquo;
California lawmakers have passed a bill upping the penalties for &ldquo;organized metal theft.&rdquo; Its sponsor is Assemblymember Mark Gonzalez &mdash; whose LA district includes the Sixth Street Bridge, a repeated target of thieves.
&ldquo;At night, the bridge has often gone completely dark after streetlight wiring was ripped out,&rdquo; says the TV station. &ldquo;According to Gonz&aacute;lez, taxpayers have spent $11 million replacing cables stolen from that bridge alone.&rdquo;
Expect more where this came from given copper prices at all-time highs. There&rsquo;s a reason we keep banging the drum here for COPX, the big copper-miner ETF&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: 9/11
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;That is the best article you could write on 9/11?&rdquo; a reader writes in response to <a href="https://paradigmpressroom.com/post/bin-ladens-16-086-000-1-return">last Friday&rsquo;s edition</a>.
That&rsquo;s all he said. I can&rsquo;t address any specific complaints because there were none.
&ldquo;Your best article, Dave!&rdquo; says an equally non-specific but more favorable reply.
&ldquo;For me you&rsquo;re preaching to the choir with your Sept. 11 missive,&rdquo; says still another reader. &ldquo;Let me give you what I believe is some real-world history in support of your and James Madison&rsquo;s hypothesis that war and freedom are incompatible.&nbsp;
&ldquo;In the mid-20th century Costa Rica decided to dismantle its army. The leader of the country (I can&rsquo;t recall his name) didn&rsquo;t think it was conducive to the stability and success of the country.
&nbsp;&ldquo;Three-quarters of a century later Costa Rica would stand in Central America as the leading light in almost any category you wish to measure: economic, education, democracy, safety, health and welfare, etc.&nbsp;
&ldquo;I don&rsquo;t think this is a coincidence and hopefully this may convince some of your readers that there is a better path to successful ends than hegemony.&rdquo;
Dave responds: I&rsquo;m only vaguely familiar with this history myself. And <a href="https://en.wikipedia.org/wiki/Article_12_of_the_Constitution_of_Costa_Rica">Wikipedia&rsquo;s entry on the subject</a> is sparse.
But I do know that Costa Rica has been spared most of the upheavals that have wracked the rest of Central America throughout my adult lifetime &mdash; and I came of age during the Reagan years.&nbsp;
All told there was precious little feedback to Friday&rsquo;s edition &mdash; which I&rsquo;ve published periodically with updates and revisions ever since the 20th anniversary five years ago. The original rendition generated effusive praise, as did several subsequent ones.&nbsp;
But not this time. Maybe there&rsquo;s something about the pathos linked to the 25th that made it land with more of a thud.
In contrast, Byron King&rsquo;s guest edition on Saturday was very well received.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;Pure Genius!! Well written and put together in such a way as to open anyone's eyes,&rdquo; is one reader&rsquo;s reaction to Byron&rsquo;s reflections.
&ldquo;What a great article!&rdquo; says another. &ldquo;This is the most comprehensive article I've ever read regarding 9/11. I love Byron&rsquo;s descriptions of each disaster site and the bravery demonstrated by so many. And he&rsquo;s totally right - we still need answers and accountability!&rdquo;
&ldquo;Government has always been reactive,&rdquo; says a third. &ldquo;It seems to be wishful thinking if we expect proactive results and failed leadership being held accountable.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />On the subject of accountability, there&rsquo;s also this eight-word email: &ldquo;So why are we still Saudi Arabia's ally?&rdquo;
An excellent question. It was also an excellent question a decade ago &mdash; when, after much foot-dragging, the feds released the infamously redacted &ldquo;28 pages&rdquo; of a joint congressional inquiry.
At the risk of oversimplifying, the report follows a fairly direct money trail from Prince Bandar &mdash; Saudi Arabia&rsquo;s ambassador to the U.S. at that time &mdash; to the San Diego-based hijackers who flew American Airlines Flight 77 into the Pentagon.
What&rsquo;s more, the U.S. military captured an al-Qaida leader in Pakistan in 2002&hellip; and found in his contact list the phone number for a cutout company that managed Bandar&rsquo;s palatial spread in Aspen.
But there was Bandar, two days after the 9/11 attacks, smoking cigars with President Bush on the Truman Balcony of the White House.&nbsp;
Accountability indeed&hellip;

FMF-issue-091526-featured

Assume the Worst Case

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />AI Freakout!
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> For something The Wall Street Journal touts as &ldquo;the AI freakout,&rdquo; it sure looks like just another day for the U.S. stock market. Even the tech sector.
In case you were tuned out of the media buzz last week, a researcher at the AI firm Anthropic quit his job in theatrical fashion with a warning that &ldquo;the people building AI earnestly believe that it could kill us all by the end of the decade.&rdquo;
A senior Anthropic executive then chimed in to assign a 10% probability of that outcome. Notably, he did not resign in theatrical fashion.
Over the weekend while markets were closed, Anthropic CEO Dario Amodei issued an open letter calling on the U.S. government to &ldquo;mediate or at least enable&rdquo; a coordinated slowdown in AI development &mdash; a call endorsed by both of his chief competitors in the &ldquo;frontier AI&rdquo; sector.
OpenAI&rsquo;s Sam Altman said the threat of AI spiraling out of control would prompt his company to hold off on its IPO until next year. (How public-spirited of him! It wouldn&rsquo;t have anything to do with the <a href="https://paradigmpressroom.com/post/brace-for-impact-openai">impending blowup</a> of his company&rsquo;s business model, would it?)
Then Elon Musk piped up. (Remember, SpaceX is <a href="https://paradigmpressroom.com/post/spacex-is-not-a-space-company">primarily an AI company</a>, not a space company.) &ldquo;Dario is right,&rdquo; he said.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> There are several problems with this AI-is-gonna-kill-us-all narrative.
The first is that Anthropic&rsquo;s hand-wringing is shamelessly self-serving. For years, Amodei (and Altman, for that matter) have been begging for government AI regulation &mdash; the better to throttle any up-and-coming competitors.
As colleague Adam Sharp wrote at The Daily Reckoning on Friday, &ldquo;Companies would have to pay huge regulatory costs to get their models tested and monitor users. Many smaller startups won&rsquo;t be able to afford that. Unless we prevent it, these laws will hand an oligopoly to the existing big players.&rdquo;
(Adam&rsquo;s article is one of the most important things Paradigm has published this year. <a href="https://dailyreckoning.com/ai-leaders-devious-plan/">It deserves your attention if you missed it</a>.)
In the second place, many experts in the field dismiss the possibility of AI going rogue and killing everyone.&nbsp;
&ldquo;These fears (or hopes) of a nascent superintelligence that will spontaneously arise if we give just enough computing power and training data to large language models are absurd on their face,&rdquo; writes Cory Doctorow in his book The Reverse Centaur&rsquo;s Guide to Life After AI.
&ldquo;They make sense only if you believe that &lsquo;being conscious&rsquo; is a matter of being really good at guessing which word is statistically most likely to come after the previous one.&rdquo; [Which is the essence of how LLMs work and why they have the tendency to &ldquo;hallucinate.&rdquo;]
Finally, as Google&rsquo;s own Gemini LLM puts it succinctly, &ldquo;if an AI were to wipe out humanity, it wouldn&rsquo;t be celebrating or enjoying its victory.&rdquo;&nbsp;
After all, AI relies on humans to maintain both data centers and the power grid &mdash; to say nothing of extracting the natural resources they both require. &ldquo;AI exists purely as software running on silicon,&rdquo; Gemini says. &ldquo;To interact with the physical world long term, it would need a fully automated robotic workforce capable of mining raw materials, refining metals, manufacturing chips, fixing roads and performing delicate maintenance on itself.&rdquo;
And that&rsquo;s all supposed to happen before the end of the decade? Yeah, right.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In any event, the frontier AI firms&rsquo; joint call for a &ldquo;slowdown&rdquo; is having a negligible effect on the market, media hype notwithstanding.
The tech-intensive Nasdaq opened down 1.2% on the day &mdash; and at last check is down less than 0.4%. Much freakout, huh? Even SpaceX, the lone frontier AI firm publicly traded at the moment, is down about a half percent.&nbsp;
That said, the semiconductor stocks are taking another hit &mdash; the SMH ETF down about 5%. Meanwhile the cybersecurity names are rallying big-time &mdash; for instance, SentinelOne up nearly 16%.
No, if you&rsquo;re looking for a real freakout, it&rsquo;s in oil and bonds. Read on&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />It&rsquo;s Just 4% of Global Oil Supply
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The new week begins the way the old one ended: Rising oil prices fueling rising inflation expectations, thus fueling rising interest rates.
Shortly after the market closed Friday afternoon, the Saudi Arabian government announced it shut down the big east-west pipeline it relies on to export oil via the Red Sea instead of the Strait of Hormuz.&nbsp;
For the time being, no one has claimed responsibility for the explosions that took place along the pipeline, but that damage appears extensive.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5DjZpqNnYA8aVZPw1B8R6a/d798f9279f8e6df33f94d69c876b8d00/FMF-Issue-091426-2.jpg" alt="Saudi pipeline damage tweet" width="540px" />
Yesterday, Reuters reported that &ldquo;Saudi Arabia will run out of oil stocks for exports &zwnj;if it doesn't restart its major pipeline to the Red Sea within days, leading to a loss of up to 4% of global supply.&rdquo; The newswire said its sources were oil buyers and traders in the kingdom. One of them said repairs could take five or six weeks.
When U.S. oil futures resumed trading for the week last night, they instantly jumped from a little over $100 to over $104 &mdash; the highest in nearly four months. They&rsquo;ve since pulled back below $103.
➢ While $6-a-gallon diesel gets all the headlines, it&rsquo;s the tight supply of another refined product that captures our attention today. Costco is rationing motor oil: Customers are now limited to two 10-quart cases per week of Kirkland Signature full synthetic. Oh, and the price has nearly doubled. We warned about motor oil shortages back in May; they&rsquo;re starting to bite now.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for the bond trade&hellip; the yield on a 10-year U.S. Treasury note has popped over 5% for the first time since October 2023.&nbsp;
Any higher than that, and we&rsquo;ll be looking at the highest 10-year yield since 2007. But for the moment, it&rsquo;s pulled back to just over 4.95%. Reminder: The 10-year affects everything from mortgages to corporate borrowing.
Yields at this level aren&rsquo;t terribly far off historical norms. But there&rsquo;s a whole generation for whom this is uncharted territory &mdash; still accustomed to the rock-bottom rates of the 2010s.
Rising rates are sending precious metals prices lower &mdash; gold down $62 to $4,286, the weakest in over a month. Silver&rsquo;s off more than a buck at $63.15. Crypto continues to consolidate &mdash; Bitcoin just under $78,500 and Ethereum just over $2,500.
The pipeline isn&rsquo;t the only Mideast war-related matter on our minds today. Read on&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Pentagon Backorder
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Apart from the day&rsquo;s headlines, there&rsquo;s also the question of to what extent Washington has depleted its weapons stockpiles during the Iran war.
&ldquo;Donald Trump claims that the U.S. has ample weapons to continue the war and meet new threats. That claim is nonsense,&rdquo; asserts Paradigm&rsquo;s Jim Rickards. &ldquo;The truth is that arsenals are almost totally depleted in some cases and dangerously low in others.&rdquo;
Jim and his team have evaluated figures from sources in the Pentagon and from the major defense contractors. Here are their rough conclusions about the most commonly used munitions&hellip;
<ul>
<li>Tomahawk Cruise Missiles:</li>
</ul>
<ul>
<li>Over 1,000 used so far in the war&nbsp;</li>
<li>Pentagon asking for 785 in the next fiscal year&nbsp;</li>
<li>Anticipated deliveries in the current fiscal year are 207</li>
<li>Annual production capacity between 600&ndash;1,000&nbsp;</li>
<li>Prewar inventories won&rsquo;t be restored until perhaps late 2030.</li>
</ul>
<ul>
<li>Terminal High Altitude Area Defense Missiles (THAAD):</li>
</ul>
<ul>
<li>About 190 used so far in the war.&nbsp;</li>
<li>Pentagon asking for 857 in fiscal 2027</li>
<li>Expected deliveries in fiscal 2026 total 92</li>
<li>Annual production capacity between 96&ndash;400 (the lower figure is more realistic)</li>
<li>Prewar inventories won&rsquo;t be restored until late 2029.</li>
</ul>
<ul>
<li>Patriot Interceptor Air Defense Missiles:&nbsp;</li>
</ul>
<ul>
<li>About 1,430 fired off during the war so far&nbsp;</li>
<li>Pentagon asking for 3,203 in FY 2027</li>
<li>Expected 2026 deliveries total 172</li>
<li>Annual production capacity about 2,000&nbsp;</li>
<li>Prewar inventories won&rsquo;t be restored until mid-2029.</li>
</ul>
<ul>
<li>AGM-158 Joint Air-to-Surface Standoff Missile (JASSM).&nbsp;The Air Force uses these missiles to attack Iran from a &ldquo;standoff&rdquo; distance:</li>
</ul>
<ul>
<li>About 1,100 have been fired off to date</li>
<li>The Pentagon is asking for 821 in the coming fiscal year</li>
<li>Expected deliveries this year total 484</li>
<li>Annual production capacity about 860</li>
<li>Here the picture is less tight, with prewar inventories likely to be restored less than a year from now.</li>
</ul>
Notice a few things?
Jim draws your attention to &ldquo;the gap between weapons requested by the Pentagon for 2027 compared with the number of weapons anticipated for delivery in 2026. Requests for Patriot missiles in 2027 are almost 20 times anticipated deliveries this year. Requests for THAAD missiles in 2027 are over nine times anticipated deliveries this year&hellip;
&ldquo;This ratio casts considerable doubt on the ability of weapons manufacturers to meet the Pentagon&rsquo;s requests. It is true that output is increasing, but these weapons systems are highly sophisticated and therefore sensitive in terms of electronic components, guidance systems, radar seekers and other features that make them effective.&rdquo;
Even if supplies will take years to replenish, Jim is keen on the prospects of the defense sector &mdash; the Big Five contractors of Lockheed Martin, RTX, General Dynamics, Northrop Grumman and Boeing, as well as L3Harris, HII and Leidos and a handful of smaller players.
&ldquo;The Pentagon is determined both to replenish inventories and to build new systems that are better suited to the age of AI, drone swarms and hypersonics,&rdquo; Jim concludes.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Thought for the Day
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> What&rsquo;s to argue with here?
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1a01Agbst8Z3ZPuX0lW1TE/9102e9f1c4175583d5734de599af7bd9/FMF-Issue-091426-3.jpg" alt="pub" width="540px" />
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Social Security
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> After our Sept. 2 edition expecting Social Security <a href="https://paradigmpressroom.com/post/social-security-default-2027">to default on its promises next year</a>&hellip; and a reader&rsquo;s <a href="https://paradigmpressroom.com/post/its-still-not-too-late/#5">proposed fix for the system</a> on Sept. 9&hellip; we got some more responses.
&ldquo;In response to the reader who is comfortably collecting Social Security and says it should be phased out&hellip; I say great! As soon as they stop taking taxes away from me I will forgo the benefits&hellip; I&rsquo;ll wait.&rdquo;
We got a lengthier reply from one of our regulars: &ldquo;I honestly put in some thought while I read the reader&rsquo;s &lsquo;cure&rsquo; for the Social Security program. He presents very good ideas, but honestly it won&rsquo;t work.
&ldquo;On top of your response that you gave (&lsquo;you&rsquo;re proposing a solution &mdash; which is the last thing the control freaks and power-trippers want.&rsquo; Which is spot-on) there are a couple of other problems.
&ldquo;His suggestion that those under 30 and those in the 30&ndash;40 group can and would be opted out doesn&rsquo;t address the current K-shaped economy, no matter how hard you hammer them about how &lsquo;those out of the system would receive years of strong propaganda and retirement planning advice making it clear that they have to take care of their own future.&rsquo;&nbsp;
&ldquo;The people in the downside of the K economy simply don&rsquo;t have the means or money to make it paycheck to paycheck currently, let alone set aside money for their retirement. This is simply going to lead to some other kind of &lsquo;social program&rsquo; for those that were &lsquo;unprepared&rsquo; despite all the propaganda and planning.
&ldquo;Secondly, to suggest that &lsquo;The private market will do the job&rsquo; as my mouth hangs open and I say, &lsquo;What, excuse me?&rsquo; The private market got rid of pensions years ago with the help of the government creating laws for 401(k)s, IRAs, etc., putting retirement in the hands of employees. This is why I started subscribing to financial newsletters to begin with. I had no idea what a mutual fund was, let alone buying a stock. I needed help immediately and happened to find your company et al. and others extremely helpful.
&ldquo;This same private market also is circumventing immigration laws and either using H-1B visa holders in servitude at below-market rates under the guise of &lsquo;outsourcing&rsquo; and/or &lsquo;downsizing.&rsquo; All the while trying to pay the lowest possible wages, whenever and however, they can. To us as investors, this is welcome news as the bottom line increases, while margins improve and costs sink, thereby creating &lsquo;investable&rsquo; companies, as your authors find and suggest.
&ldquo;I applaud the reader for his suggestions, but don&rsquo;t see this as a solution, sadly. Great ideas, in a perfect world. Do I have a suggestion? Heck no, and Dave, do you?
&ldquo;I think we can all agree that things are a mess and getting messier by the day. Besides, didn&rsquo;t that German battleship, named after Bismarck, sink and sits at the bottom of the North Atlantic? LOL!&rdquo;
Dave responds: I&rsquo;m not sure there&rsquo;s any way to wind down the system fairly and equitably. Which was probably by design!