<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" />Gold: What&rsquo;s China&rsquo;s Endgame?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;China&rsquo;s central bank has bought gold for 23 straight months, and the country is importing more of the precious metal than ever,&rdquo; says a CNBC article posted yesterday.
The mainstream takes forever to catch up to alternative financial media. Here at Paradigm Press we&rsquo;ve been hip to China&rsquo;s gold accumulation &mdash; and its implications &mdash; for well over a decade.
It seems CNBC perked up at the story now because the People&rsquo;s Bank of China added 23 metric tons to its stash last month &mdash; &ldquo;its biggest monthly purchase in almost three years.&rdquo;
Officially, the PBOC&rsquo;s gold reserve sits at 2,387 metric tons &mdash; up 124% since 2009.&nbsp;
Unofficially, however&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;China may also hold gold through other state entities, including the State Administration of Foreign Exchange (SAFE),&rdquo; says Paradigm macroeconomics maven Jim Rickards.&nbsp;
&ldquo;China is non-transparent about the full extent of its gold holdings. The exact amount of any unreported gold is unknown. Estimates can be formed based on imports from Switzerland via Hong Kong, but those are inexact.
&ldquo;One estimate is that the amount of &lsquo;hidden gold&rsquo; held by Chinese state entities is approximately the same as the amount reported publicly by the PBOC. If that estimate is correct, total Chinese gold reserves would be about 4,700 metric tons, or roughly 58% of U.S. gold reserves of 8,133 metric tons.
&ldquo;That would make China the second-largest sovereign gold holder in the world after the U.S. and put China ahead of gold powers such as Germany, Italy and France.&rdquo;
Yeah, CNBC left out that part&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> So what&rsquo;s Beijing&rsquo;s agenda here? And what&rsquo;s it to you and me?
A decade ago, Jim wrote that Beijing&rsquo;s endgame was to have a &ldquo;seat at the table&rdquo; along with the United States, the European Union and Japan whenever the next financial crisis rolled around and the global financial system had to be reset.
But that was when Beijing and Washington were on friendlier terms.
If you look at some of the seamier corners of alternative media, you&rsquo;re told that Beijing&rsquo;s goal now is to create a gold-backed version of its currency, the yuan.&nbsp;
For any number of reasons, Jim says that&rsquo;s totally impractical. &ldquo;Traditionally, gold holdings must be 20&ndash;40% of the money supply to engender trust in a gold-backed currency system. China&rsquo;s reported gold holdings are in the low single digits as a percentage of money supply.&rdquo;
Nor is Beijing capable of transforming the yuan into a viable alternative to the dollar as a global reserve currency. That would require a large bond market trusted by most of the rest of the world. &ldquo;China is simply not in the same league when it comes to reserve-currency status, with or without gold.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Beijing&rsquo;s real goal is to facilitate easier trade and transactions &mdash; bypassing the dollar &mdash; with major trading partners like Russia and India.
&ldquo;China is looking ahead to the day when a confrontation with the United States could force it to separate from the dollar payments system entirely in order to avoid asset freezes and financial sanctions,&rdquo; Jim says.
&ldquo;Chinese policymakers are watching the financial sanctions that the U.S. is imposing on Russia and Iran and drawing the appropriate lessons.&rdquo;
Seen in that context, Beijing welcomes the decline in the dollar price of gold since last winter &mdash; from a peak of $5,500 then to under $4,200 now.&nbsp;
&ldquo;Any buyer accumulating gold favors a lower price for the time being because it means getting more gold for every dollar spent,&rdquo; Jim says. &ldquo;The payoff comes later if the dollar price of gold spikes higher. Whoever has the most gold then is the biggest winner.&rdquo;
That&rsquo;s what Chinese leaders are counting on. Jim says you should count on it too.&nbsp;
He&rsquo;s still anticipating an eventual climb to $10,000. &ldquo;It will get there faster than all but a few investors expect.&rdquo;
Yeah, you don&rsquo;t hear that from CNBC, either&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" />What Starts in Asia&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Interesting market action today: A stock panic that began in Asia stayed in Asia.
South Korea&rsquo;s stock market took a nasty 5.5% spill today after remarks by Hock Tan, the CEO of the U.S. chipmaker Broadcom (AVGO) during a conference in Singapore.
&ldquo;A lot of investors have no clue what they are investing in,&rdquo; he said. They &ldquo;set very extreme expectations only to find out that it&rsquo;s almost like they are in a casino.&rdquo;
Understand, over half of South Korea&rsquo;s benchmark stock index is composed of Samsung and SK Hynix &mdash; two of the big three names in advanced memory chips. Thus, the big drop.
Ordinarily, a reaction like that would spread to U.S. markets &mdash; but not today.
To be sure, Micron Technology (MU) &mdash; the other big memory name along with the two South Korean firms &mdash; is down about 5% at last check.&nbsp;
But the Philadelphia Semiconductor Index is down a more modest 2.2% &mdash; and the tech-intensive Nasdaq Composite is down a mere 0.4%. The losses in the S&amp;P 500 and the Dow are even narrower.
Perhaps that&rsquo;s because earnings season is underway today with several of the big banks reporting their numbers. JPMorgan missed the expectations of Wall Street analysts &mdash; but it&rsquo;s still up over a half percent on the day. (It&rsquo;s not the news, it&rsquo;s the reaction to the news.) Goldman Sachs&rsquo; numbers were a mixed bag but it too is up over a half percent.
Gold is generally steady at $4,159 but silver has shed 1.7% and is back below $60. Crypto continues to stabilize, Bitcoin over $83,000 and Ethereum over $2,500.
U.S. oil futures have sailed past $94, the highest in over two weeks. Iran&rsquo;s Islamic Revolutionary Guard Corps says it&rsquo;s struck three ships in the Strait of Hormuz over the last two days.&nbsp;
As you can see from the TankerMap website, precious little oil or refined products are making their way through the strait this month&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3qNyu27cY4WsqfvIdfdaeM/7b18edc0b2042d2729cf42f40627be8b/FMF-Issue-10-13-26-2__1_.jpg" alt="TankerMap" />
These figures appear to be more reliable than anything coming from Kpler or TankerTrackers. (We unpacked why Kpler is <a href="https://paradigmpressroom.com/post/stranded-no-more">not to be trusted</a> last week.)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The reality for small business in the 2020s is a double-whammy of a labor shortage and rising costs.
Or so you&rsquo;d conclude from the Small Business Optimism Index issued this morning by the National Federation of Independent Business.
The headline optimism number fell from 98.7 in August to 97.9 in September &mdash; just below this survey&rsquo;s long-term average going back more than 50 years. It&rsquo;s the second consecutive monthly decline.
More revealing is the part of the survey where respondents are asked to identify their single-most important problem.
Here &ldquo;quality/availability of labor&rdquo; tops the chart, cited by 26% of owners. This number has been elevated ever since COVID. The long-term average, again going back more than 50 years, is only 12%.
&ldquo;We need more experienced and skilled trade workers,&rdquo; says the owner of a services-oriented business in Michigan.
In second place is inflation, cited by 20% of respondents. This too is well above the historical average of only 7%.
&ldquo;Fuel prices are killing us on our delivery trucks, as well as fuel surcharges on all freight
coming into the store,&rdquo; says a retailer in Georgia. &ldquo;They also reduce the amount of disposable income our customers have to spend at our store.&rdquo;
After labor quality and inflation, everything else on the single-most important problem part of the survey is well back in the pack &mdash; taxes and poor sales each cited by 11%. Everything else was cited by 7% or less.
<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" />ASTS: Buy or Wait?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> SpaceX just handed investors a cheaper entry into AST SpaceMobile (ASTS).&nbsp;
Last week, SpaceX's reported $8 billion spectrum deal sent shares of America's major wireless carriers tumbling. AST SpaceMobile (ASTS) fell 10.5% with them. 
Paradigm&rsquo;s Davis Wilson sees an opportunity for readers of his Million Mission e-letter &mdash; analysis very much in line with what we&rsquo;ve shared in 5 Bullets from James Altucher and Ray Blanco.
Davis&rsquo; argument is straightforward: AT&amp;T, Verizon and T-Mobile aren't going to hand their customers to Elon Musk. They'll fight back by expanding satellite connectivity.
&ldquo;AST SpaceMobile is actually one of the biggest beneficiaries of SpaceX's expansion into wireless,&rdquo; he says.
&ldquo;ASTS is building a network of satellites that connect directly to ordinary smartphones, allowing people to make calls, send texts and access the internet in places without traditional cell coverage.&rdquo;
Meanwhile on Oct. 1, the three wireless giants formally established a joint venture to expand satellite coverage. Its purpose isn't simply to purchase satellite services. It's also to encourage competition among satellite providers.
Now that SpaceX is &ldquo;directly infringing on these existing carriers&rsquo; territory,&rdquo; says Davis, the logical response is to &ldquo;build out their satellite coverage with ASTS &mdash; a company they&rsquo;re already partners with.&rdquo;
Davis said yesterday that ASTS is a buy at $53. If so it&rsquo;s a better buy today at just over $47.
<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" /> Not sure why this is making the rounds of the meme-o-sphere right now but it is&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5Yf8x9pK4UVSBfpqzZxM9V/82f2c5d001a79a7d6ae87b57f883e9ab/FMF-Issue-10-13-26-3__1_.jpg" alt="10% cut meme" />
<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" />Politics, Prediction Markets and the Stock Market
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;If &mdash; IF &mdash; the prediction markets are right,&rdquo; a reader writes after <a href="https://paradigmpressroom.com/post/the-problem-with-prediction-markets">yesterday&rsquo;s edition</a>, &ldquo;what it's telling me is that when the Democrats win back the House and Senate, the USA is officially dead, as the DSA will soon take control.
&ldquo;There's not an article that I read that is not calling for this market to correct and to correct at least 20%.&nbsp;
&ldquo;I've normally found when all are in the same frame of mind that it doesn't happen. But I think the prediction of a market decline in the coming weeks is foretelling that the Democrats will win the House and Senate.
&ldquo;Guess we'll see in a couple of weeks.&rdquo;
Dave responds: Hmmm&hellip;
If that bar chart yesterday is suggestive of anything, a Dem sweep with a Republican president is the worst possible outcome for the stock market &mdash; with an average annual return of 4.9% on the S&amp;P 500. Here it is again&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5MDfOuL0W3Qcvkxwxs24rf/ef3ff30ffb9438a92935689dc3b9d02a/FMF-Issue-10-13-26-4.jpg" alt="Yesterdays chart" width="540px" />
Granted we&rsquo;re not working with a huge data set here. The most recent instance was 2007&ndash;2008, coinciding with the global financial crisis.&nbsp;
Before that there was a six-year stretch encompassing Reagan&rsquo;s last two years as well as the Bush 41 presidency &mdash; a span including the crash of &lsquo;87 and the 1990&ndash;91 recession.
Before that there was the entirety of the Nixon-Ford years &mdash; smack in the middle of a 16-year bear market.&nbsp;
The only reason the average returns are positive is the market&rsquo;s performance during the last six years of the Eisenhower administration. (1955 and 1958 were outstanding, not that many of us would remember.)
That&rsquo;s 22 years out of the last 76. And only two of those years fell during this century. Draw your own conclusions.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> You can see how the outcome is much more sanguine if control of Congress is split under a GOP president. But here the data set is even smaller &mdash; a mere 10 years.&nbsp;
Here we&rsquo;re looking at Reagan&rsquo;s first six years &mdash; a stretch including the start of an epic bull market in 1982. Animal spirits were also alive and well during the last two years of Trump&rsquo;s first term (apart from the brief COVID crash). That average 13.7% gain on the chart would be even higher were it not for Bush 43&rsquo;s first two years, encompassing much of the dot-com bust. Again, draw your own conclusions.&nbsp;
A lot of these market-moving events were, at best, tangentially related to whoever occupied the White House or Congress at the time.&nbsp;
For instance, much of the blame for the 2008 meltdown can be laid at the feet of a Democratic president (Clinton) and a Republican Congress &mdash; who together gave the big banks a blank check when they repealed the Glass-Steagall Act in 1999.
Something to bear in mind if the Dems sweep and the market tanks next year.&nbsp;
Whatever happens, our team will stay on their collective toes for you&hellip;

FMF-Issue-10-13-26-1 (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

What’s China’s Endgame?

<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 Problem With Prediction Markets
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> If the prediction markets are any indication, Democrats stand a better-than-60% probability of winning both houses of Congress in 2026 midterm elections.
More and more, the pundit class is looking to prediction markets like Polymarket and Kalshi as a barometer of the political weather.&nbsp;
And why not, given the extent to which traditional pollsters have beclowned themselves in recent years?
As the thinking goes, the prediction markets have a &ldquo;wisdom of crowds&rdquo; ability to foretell the outcomes of everything from elections to the Oscars the World Series.
As of this morning, Kalshi gives the Democrats a 90% probability of winning the House; Polymarket 91%. The Senate is less of a sure thing &mdash; but Kalshi gives the Democrats 60% odds and Polymarket 64%.
To be clear, these are probabilities &mdash; not polling averages or predicted vote shares. The DeFi Rate website explains it like this&hellip;
<blockquote>Each market asks a yes-or-no question, such as &ldquo;Will Democrats control the Senate?&rdquo; A contract pays $1 if the answer is yes and $0 if it&rsquo;s no, so its price works as a probability: 64&cent; means traders collectively put the chance at about 64%.</blockquote>
<blockquote>Take the Texas Senate race. If James Talarico trades at 58&cent;, 100 contracts cost $58. If he wins, they pay $100, a $42 profit before fees. If he loses, they&rsquo;re worth nothing. You don&rsquo;t have to hold until Election Day: If the price rises to 75&cent; and someone is buying, you can sell early and keep the difference.</blockquote>
<blockquote>A price isn&rsquo;t a poll. A candidate at 60&cent; doesn&rsquo;t have 60% of the vote; traders think they have about a 60% chance of winning.</blockquote>
It&rsquo;s all very entertaining &mdash; and if you play it right, quite lucrative.&nbsp;
But what exactly is its predictive value?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;As prediction tools, I believe these markets are highly overrated,&rdquo; Paradigm macroeconomics maven Jim Rickards writes in the current monthly issue of Strategic Intelligence.
&ldquo;The problem is not necessarily the markets themselves. It&rsquo;s how those odds are interpreted and reported.
&ldquo;Despite the hype, these are betting markets. The probabilities are not educated forecasts. Participants are betting against one another, so success says something about how well one does relative to other bettors, but not necessarily about one&rsquo;s forecasting ability.
&ldquo;Polymarket and Kalshi odds may offer some information, but they can be extremely volatile in close elections and should not be confused with rigorous data. Still, you will hear mainstream media trumpeting the odds as if they were accurate forecasts.&rdquo;
Another problem Jim sees is what&rsquo;s called self-selection. &ldquo;Participants are not a representative cross-section of the voting-age population.&nbsp;
&ldquo;They may differ from average voters in age, income, political interest and willingness to gamble. If you&rsquo;re poor, for instance, you&rsquo;re not going to risk money on Polymarket. But you do get a vote.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> A decade ago, Jim saw this skew in real-time while he was in London ahead of the &ldquo;Brexit&rdquo; referendum &mdash; in which a majority of U.K. voters opted to withdraw from the European Union.
There were no prediction markets to speak of back then &mdash; but there were plenty of traditional bookmakers in London taking bets on the outcome.
&ldquo;The betting odds gave &lsquo;Remain&rsquo; a 74% probability of winning,&rdquo; Jim recalls. &ldquo;I knew that Brexit, or &lsquo;Leave,&rsquo; would win and made that forecast for our readers in advance.
&ldquo;I disregarded the London betting odds because I believed those bettors were mostly well-off London bankers and professionals, not the blue-collar workers from Manchester, Birmingham and Leeds who actually carried the day.&rdquo;
One more problem with prediction markets: &ldquo;A large wager can change the odds,&rdquo; Jim says.
That&rsquo;s probably not a factor in a large and liquid market for a question like &ldquo;Will Democrats take the House?&rdquo; (At least right now it would be a shock if they did not.) But it can matter immensely in individual House and Senate races.
&ldquo;In a relatively thin market, a single bet can move a candidate&rsquo;s odds significantly in either direction,&rdquo; Jim explains. &ldquo;The odds may have changed, but that doesn&rsquo;t mean anything has changed among actual voters.&rdquo;
Just a few things to keep in the back of your mind over the next three weeks as you hear more and more about the betting odds&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" />Party Control and Market Performance
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> By the way, which party controls Congress has little impact on broad stock market performance.
Individual companies and sectors? Yes, sometimes. But not the market as a whole. That&rsquo;s according to figures from Carson Investment Research passed along by Paradigm trading pro Enrique Abeyta.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/AyR7CwRg8WVcLzR5f4EaU/54cdaf9dd4de90fcb22f5ade01a2408d/FMF-Issue-10-12-26-2.jpg" alt="Party Control and Market Performance" width="540px" />
That said, the figures do suggest somewhat better performance when control of Congress is split between the two major parties.&nbsp;
According to the Carson research, going back to the 1950s there&rsquo;ve been 13 instances of a split Congress &mdash; and the S&amp;P 500 rose every time!&nbsp;
Just for reference, the most recent instances were 2023&ndash;24&hellip; 2019&ndash;2020&hellip; and 2011&ndash;2014.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> One more chart of note this morning, and it&rsquo;s one we&rsquo;ve visited from time to time the last couple of years.
This is the one from Bespoke Investment Group comparing the Nasdaq&rsquo;s performance during the dot-com boom and the current AI boom. Bespoke&rsquo;s starting point for the dot-com boom was the release of the Netscape web browser in late 1994. And the starting point for the AI boom is when ChatGPT burst on the scene in late 2022.
After nearly four years, the two rallies don&rsquo;t line up perfectly &mdash; but they line up close enough.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1gPlWz2w9TGbXXD0KGESXV/a592bfd4172d430737854fd006befac3/FMF-Issue-10-12-26-3.jpg" alt="Nasdaq composite % change in the 10 years after netscape vs Chatgpt release" width="540px" />
&ldquo;Melt-up coming next?!?&rdquo; Enrique muses. Stay tuned&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In the meantime, the major U.S. averages are starting the new week in mixed fashion.
At last check the S&amp;P 500 is nearly pancake-flat &mdash; just over 7,800. The Nasdaq is down about a third of a percent, while the Dow is up about a half percent.
Treasury yields are backing down, the 10-year note at 5.24%. After September&rsquo;s rapid rise, some consolidation is inevitable.
Precious metals are in the red &mdash; gold at $4,167 and silver at $60.21. Crypto is little changed from Friday&rsquo;s levels with Bitcoin at $82,648 and Ethereum at $2,528.
The big scheduled market events this week are the start of earnings season tomorrow morning when four of the biggest banks report their numbers. Wednesday brings the Labor Department&rsquo;s release of the official inflation figures for September.
➢ For the record: The Financial Times kinda-sorta &ldquo;walked back&rdquo; its market-moving story from Thursday afternoon, in which it said OpenAI&rsquo;s annualized revenue was over 28% less than previously thought. A follow-up article noted that annualized revenue is &ldquo;a vague metric&rdquo; often used by AI firms that haven&rsquo;t gone public yet. Maybe the original article should have mentioned that?
<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 End of Saudi Arabia (Not Yet, But&hellip;)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> There&rsquo;s nothing in the news this morning to suggest any relief to tight energy supplies.
Before trading opened for a new week last night, Donald Trump said Russia and Ukraine agreed to halt attacks on each other&rsquo;s energy infrastructure.&nbsp;
He said the same thing a month ago, and it turned out not to be true. So far, it&rsquo;s shaping up to be a repeat this time.
Meanwhile, there&rsquo;s no letup in the pace of Iranian attacks on ships trying to transit the Strait of Hormuz without Tehran&rsquo;s permission &mdash; we&rsquo;re at two&ndash;three a day by now.
At the same time we&rsquo;re seeing scattered reports of new attacks on Saudi Arabia&rsquo;s east-west oil pipeline &mdash; the one it counts on to bypass the Strait of Hormuz. So far, those are unconfirmed but there&rsquo;s definite confirmation that Yemen&rsquo;s Houthi faction is attacking the airport in Saudi Arabia&rsquo;s capital Riyadh. Per Saudi Arabia&rsquo;s aviation authority, one airstrike killed 13 people and injured another 309.
The spin in The Wall Street Journal is that these attacks thwart the &ldquo;ambitions&rdquo; of the Saudi strongman &mdash; Crown Prince Mohammed bin Salman &mdash; &ldquo;to turn Saudi Arabia into a global tourism and investment hub.&rdquo;
Apparently it&rsquo;s a bridge too far to contemplate whether the House of Saud&rsquo;s ability to rule is in jeopardy.
&ldquo;Nothing can be done to save Saudi Arabia as it is,&ldquo; Johns Hopkins historian Michael Vlahos said last night during his weekly spot on John Batchelor&rsquo;s syndicated radio show.
&ldquo;What [the Houthis] are doing now is essentially just dismantling the Saudi regime. And the Saudis had grown so spoiled and so full of themselves with all [their] money that they didn&rsquo;t do anything to harden their infrastructure, whether it&rsquo;s oil infrastructure or the city of Riyadh itself. I simply can&rsquo;t imagine what the outcome will look like.&rdquo;
Your editor has seen lots of wild, speculative articles over the last 20 years about &ldquo;the end of Saudi Arabia.&rdquo; For the most part, I blew them off.
Now? It might be time to start seriously entertaining the possibility and teasing out the consequences. Stay tuned.
In the meantime, there&rsquo;s just enough underlying tension to push U.S. oil futures nearly two bucks higher to $93.74.
<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 End of Diesel?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Diesel prices have gotten so high that, at least on the margins, they&rsquo;re starting to make electric trucks look economically feasible.
In August, Bloomberg reported that Swedish freight company Einride (ENRD) plans to deploy 500 Tesla Semis across North America over two years. That would triple Einride&rsquo;s electric fleet, serving customers including Amazon across five states. At the time, it was the largest announced Tesla Semi deployment.
Barely a month later, Tesla landed a role in an even bigger deal.
The ZET SCALE freight alliance, whose founding shippers include Microsoft and PepsiCo, named Tesla the lead supplier in a 2,500-electric-truck procurement program. Other manufacturers were also selected. IMC Logistics separately ordered another 50 Tesla Semis.
For perspective, only 875 zero-emission heavy trucks were sold in the entire United States in 2025 &mdash; about 0.3% of the market.
What's driving the sudden interest? The cost of moving freight.
An Electrek analysis estimates that a Tesla Semi consumes about 20 cents of electricity per mile, compared with 67 cents in fuel for a conventional diesel truck. That's roughly 70% less in energy costs.
The comparison assumes electricity at 12 cents per kilowatt-hour and diesel at $5.35 per gallon.&nbsp;
(For perspective, the average commercial rate for electricity in this country is 14.5 cents per kWh and AAA says the national average diesel price this morning is $6.27 a gallon)
Factor in lower maintenance expenses and the analysis projects savings of $147,000 over five years or $404,000 over 10, depending on operating assumptions.
Tesla also advertises up to 500 miles of range, with charging that can restore 60% of that range in 30 minutes. Its new Nevada factory is designed to eventually produce 50,000 Semis annually.
Yes, there are still obstacles &mdash; higher purchase prices, limited charging infrastructure. And projected savings aren't the same as proven results.
But something appears to be changing. For decades, the push to electrify heavy trucking was driven largely by environmental policy. Now the economics are giving freight operators another reason to switch.
Diesel has survived political fights and regulatory deadlines. But can it compete when the companies buying the trucks conclude electricity is simply cheaper?
<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: Property Tax Relief
<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 Florida&rsquo;s referendum proposing property tax relief, a reader writes&hellip;
&ldquo;OK, first, this would reduce local government income by about 10%.
&ldquo;Restructures to the level of property exemption have to happen periodically to reflect property values. I believe they started at $5,000, went to $10,000, then $25,000 and are now at $50,000. The percentage of property value that that covers has constantly decreased over the years.
&ldquo;Florida property values have skyrocketed since 2020 and the exemption needs to increase. Local government income has increased far more than necessary for needed services. Salary jumps have been enormous. Amendment 3 will require about a 10% budget reduction. That affects donations to nonprofits and NGOs and maybe some of the wasted taxpayer dollars, not a reduction in necessary services, which are mandated by state laws. The fraud in Florida local governments has become ridiculous and this is just to slow it down.
&ldquo;Florida state has run surpluses, paid down debt and fully funded the rainy day funds. Local politicians have funded their own and their friends&rsquo; pockets and police and fire pay scales are approximately at the center of the national average.
&ldquo;Coincidentally, Amendment 3 does not touch school taxes yet the teachers in Florida are some of the lowest paid in the country.
&ldquo;I think local governments have a lot of explaining to do.&rdquo;
Dave responds: As for your concluding thought&hellip; that&rsquo;s probably the case everywhere, not just Florida. Don&rsquo;t get me going about the bad-faith efforts of &ldquo;civic leaders&rdquo; in my neck of the woods to sell the populace on a new levy to build a jail/courthouse complex. (For all I know the project is necessary but the lies they&rsquo;re telling to get their way are breathtaking!)

FMF-Issue-10-12-26-1

The Problem With Prediction Markets

<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" />Big Banks 2008 = AI 2027?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The OpenAI freakout didn&rsquo;t last long. At least not this time.
After we hit &ldquo;send&rdquo; on yesterday&rsquo;s edition, the Financial Times reported that OpenAI&rsquo;s annualized revenue is about $50 billion &mdash; $20 billion less than previously thought. The paper characterized it as &ldquo;a massive gap likely to damp optimism about the growth of AI demand.&rdquo;
By day&rsquo;s end, the Nasdaq-100 closed down 1.4%. After an hour of trading this morning, it had already clawed back about a quarter of that loss.
A flash in the pan? Maybe not.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;AI is starting to resemble something we&rsquo;ve seen before &mdash; something &lsquo;too big to fail,&rsquo;&rdquo; says Paradigm trading pro Enrique Abeyta. Like the big banks in 2008.
To be sure, we&rsquo;ve been following the breadcrumbs of a potential &ldquo;AI bailout&rdquo; in these daily missives <a href="https://paradigmpressroom.com/post/openai-wants-a-bailout">for nearly a year now</a>.&nbsp;
Back then, research from JPMorgan found that 41 AI-adjacent companies accounted for 47% of the S&amp;P 500&rsquo;s market cap. Since then, the number has crept closer to 49%.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/nGcDAY2tRgEvbaz8uRcSw/a77b4a1fc3f5b1cd50f340f190853054/FMF-Issue-10-09-26-2.jpg" alt="All about AI chart" width="540px" />
&ldquo;One theme now touches almost half the value of America's benchmark stock index,&rdquo; Enrique says. &ldquo;AI is also driving spending on chips, data centers, power plants and construction. And Washington increasingly views AI leadership as critical to America's economic and military competition with China.&rdquo;
Too big to fail, indeed.
AI-related investment will total about $650 billion this year. JPMorgan estimates that this per year number will double by 2030.
&ldquo;And the money is increasingly intertwined,&rdquo;Enrique continues.
&ldquo;AI companies need chips. Chip companies invest in AI companies. Cloud companies pour money into AI labs. Those labs commit enormous sums back to cloud providers and data centers. Everybody depends on everybody else.&rdquo;
Don&rsquo;t be surprised if the media start tossing around the term &ldquo;systemic risk&rdquo; soon &mdash; just like 2008.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The risks are now piling up in a way they weren&rsquo;t, say, in early 2025 &mdash; when the Chinese AI model DeepSeek sent a momentary shudder through the American AI sector.
For one thing, Enrique says &ldquo;the AI boom is increasingly being financed with something the dot-com boom had far less of &mdash; debt.&rdquo;
Case in point: Oracle. &ldquo;Its 2046 bonds recently traded around 85 cents on the dollar, yielding more than 8%.&nbsp;
&ldquo;S&amp;P has cut Oracle's credit rating to BBB&minus; (just one notch above junk).&rdquo;
Meanwhile, Oracle raised $43 billion of debt in its latest fiscal year as it races to build AI infrastructure.
Then there&rsquo;s the matter of OpenAI models burrowing their way into the systems of the AI company Hugging Face as well as Australia&rsquo;s government health system. Anthropic&rsquo;s models have pulled off similar automated hacks.
And don&rsquo;t forget how the U.S. government is now taking direct ownership stakes in everything from Intel to U.S. Steel to USA Rare Earth &mdash; all of them operating in what the feds consider &ldquo;essential&rdquo; industries.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> At the risk of sounding alarmist, the stage is set for what could be &ldquo;the dot-com bust and the Global Financial Crisis rolled into one,&rdquo; Enrique says.
&ldquo;AI has the spending and speculation of the dot-com bubble. But it also has the debt, interconnected financing and dependence on confidence that made the Global Financial Crisis so dangerous.
&ldquo;Then add something neither crisis had: credible national security concerns.&rdquo;
Exactly how might it all play out? Enrique hazards two educated guesses in yesterday&rsquo;s edition of our sister e-letter Truth &amp; Trends. (In one of those guesses, Elon Musk makes out like a bandit &mdash; just as JPMorgan CEO Jamie Dimon did after the financial crisis.)&nbsp;
<a href="https://truthandtrends.com/posts/ai-is-now-too-big-to-fail">Check out his full &ldquo;AI Is Now &lsquo;Too Big to Fail&rsquo;&rdquo; thesis at this link</a>.
And don&rsquo;t get the wrong idea. &ldquo;This isn't a call to sell AI stocks,&rdquo; Enrique says. But even more than before you&rsquo;ll want to stay abreast of your paid subscription(s) for guidance going forward.
<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" />Three Headwinds for the Stock Market
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> From the standpoint of the stock market, &ldquo;oil, interest rates and the dollar are all pushing in the wrong direction at the same time,&rdquo; says Paradigm&rsquo;s jack-of-all-trades analyst Zach Scheidt.
&ldquo;Crude jumped again this week as attacks on tankers in the Strait of Hormuz picked back up. The G7 just agreed to release another 100 million barrels of crude and fuel from strategic reserves. That can take the edge off prices for a few weeks. But every barrel that comes out of storage has to be bought back later, which stacks a second wave of demand on top of normal consumption.&rdquo;
Meanwhile, &ldquo;the 10-year Treasury yield just touched its highest level in more than two decades. Higher yields give investors a real alternative to stocks, they squeeze housing and they make Washington&rsquo;s debt more expensive to carry. The government now spends more on interest than it does on the military.
&ldquo;And the dollar has been rallying right alongside, sitting near its highest level since the tariff scare in the spring of 2025.
&ldquo;While any of these individual issues is manageable,&rdquo; Zach writes for Rickards&rsquo; Insider Intel, &ldquo;all three at once can create a strong headwind.&rdquo;
As with Enrique&rsquo;s warning about the AI sector, none of this means it&rsquo;s time to sell everything and hide out in cash.&nbsp;
The next earnings season &mdash; starting next week &mdash; might provide a valuable tell.
&ldquo;The last few have been impressive,&rdquo; says Zach, &ldquo;which is good news and a challenge at the same time. When companies keep clearing the bar, the bar keeps moving higher.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In the meantime, the major indexes continue to recover a fair chunk of yesterday&rsquo;s losses.
Actually as we check our screens, the S&amp;P 500 has made up for all of yesterday&rsquo;s losses. If current levels hold at day&rsquo;s end, it&rsquo;ll be the first weekly close over 7,800.
Otherwise, not a lot of drama &mdash; certainly not by recent standards. The 10-year Treasury note is steady at 5.26%. U.S. oil futures hover around $92. Crypto continues licking its wounds with Bitcoin just under $83,000 and Ethereum below $2,500.
But there are signs of life in the precious metals &mdash; gold ten bucks shy of $4,200 and silver roaring 3% higher, pushing $61 again.
One economic report of note &mdash; the University of Michigan consumer sentiment survey. By and large, this report is worthless. But for years, the Federal Reserve has paid keen attention to the part of the survey where people are asked how bad (or good) they expect inflation to be over the next 12 months.
With the average respondent saying 4.7% &mdash; way up from the pre-Iran war reading of 3.4% &mdash; there&rsquo;s still reason to believe the Fed will bump up short-term interest rates again before year-end.
<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" />Moderna's Miracle, Biotech's Misery
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> One of the biggest breakthroughs in cancer treatment has turned into a headache for biotech investors.
Back in August we told you how Moderna Inc. (MRNA) announced a personalized cancer vaccine built around mutations in each patient's tumor. Its stock skyrocketed 177% that day and has continued higher since.
Other biotech stocks rallied on the news, too. But that enthusiasm didn't last.
Since then, the S&amp;P Biotech ETF (XBI) has fallen about 12%. The clinical-stage biotech ETF (BBC) has plunged 24%.
Paradigm biotech authority Ray Blanco found something even more startling: &ldquo;By my count, 64% of the 697 U.S.-listed biotech and drug stocks now sit 40% or more below their 52-week highs.&rdquo; Among companies worth less than $300 million, that figure jumps to 86%.
So what went wrong?
Moderna's rally inflicted an estimated $5.5 billion in paper losses on short sellers. Hedge funds scrambled to cover their positions, selling other holdings to raise cash.
Ironically, the biotech companies favored by specialist investors suffered the most. Ray found that stocks held by three or more leading biotech funds fell a median 29%, versus just 7% for those without specialist ownership.
In other words, the experts' favorites got sold four times as hard.
Nor do the problems end there. &ldquo;First, money got more expensive,&rdquo; says Ray &mdash; reminding us about rising interest rates.&nbsp;
&ldquo;Second, the door to new money is narrowing.&rdquo; Public biotechs raised just $5.9 billion selling shares in the third quarter, down from $14.2 billion in the second.
AI hyperscalers are borrowing billions for data centers, and Washington's enormous borrowing needs are competing for investment capital. There&rsquo;s not much left for small biotech companies that need outside financing to get their drugs through clinical trials.
For the time being, Ray&rsquo;s strategy is to keep the focus on companies with enough cash to reach their next important clinical trial or FDA decision without raising more money.
For broad exposure, there's the iShares Biotechnology ETF (IBB). But the best bargains may be found in small companies that have been beaten down by forced selling. Ray has identified several in his Catalyst Trader service.
Bottom line: &ldquo;This sell-off is about the sellers, not the science.&rdquo;&nbsp;
His advice for separating the potential winners from the losers? &ldquo;Companies that need cash are in trouble. Companies that have it are on sale.&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" />Oh, Well&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> A search on social media for &ldquo;comic relief&rdquo; to repurpose in our Bullet No. 4 comes up short today. Best I can do is &ldquo;grim chuckle&rdquo;...
<img class="aligncenter" src="http://images.ctfassets.net/vha3zb1lo47k/6AQxsvlKGvcDSet7N9QIpq/42e59f01d87413298841c01278485dec/FMF-Issue-10-09-26-3.jpg" alt="Will that be cash or surveillance meme" 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: Florida Property Tax
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Stop my Florida property taxes,&rdquo; a reader writes.
That&rsquo;s it, that&rsquo;s the email.
Honestly I&rsquo;m not sure what brought it on &mdash; maybe last Saturday&rsquo;s edition about mobile phone taxes??
In any event, it&rsquo;s a good excuse to update the saga of the referendum in Florida <a href="https://paradigmpressroom.com/post/elon-failure-is-always-an-option#3">that would radically curb property taxes</a>.
When we last visited the story two months ago, a rewrite of the proposal was underway &mdash; ordered by a judge in Tallahassee who found the original language was too political, running afoul of state law requiring &ldquo;fairness and accuracy&rdquo; in ballot questions.
But the gist of the proposal remains intact &mdash; phasing in a homestead exemption starting at $150,000 next year &mdash; jumping to $250,000 in 2028. It would also authorize the legislature to abolish property taxes altogether if it so chose.
Skimming Google News we see a poll that finds the proposal commanding 55% support &mdash; not that state-level polling is very reliable these days. We also see the longtime sheriff of Polk County (Lakeland-Winter Haven) warning the proposal would threaten public safety &mdash; not a surprising stance coming from law enforcement.
The researchers at the Tax Foundation spotlight the potential downsides: &ldquo;Eliminating such a sizeable share of Florida&rsquo;s property tax base would not reduce the cost of providing local government services; it would simply require that the lost revenue be generated elsewhere, including from higher millage rates on all property that remains taxable.&rdquo;
Or maybe a higher sales tax? As we mentioned last summer, the rate in Texas &mdash; like Florida, a no-income-tax state &mdash; already runs 8.25% in most of the major population centers.&nbsp;
Really, outside the bluest of the blue states where nearly everything is sky-high, it&rsquo;s all a trade-off. They&rsquo;re gonna get you one way or another&hellip;

FMF-Issue-10-09-26-1

Big Banks 2008 = AI 2027?

At a recent conference, Jeffrey Huge &ndash; founder of a private family office and investment strategy firm &ndash; asked a crowd of financial professionals how many of them were around for the dot-com bust in the early 2000s.
Not even a third of the crowd raised their hands.
&ldquo;So overall,&rdquo; Huge said in a recent podcast interview, &ldquo;I'd say about 30% or so of the people in that audience actually have lived through a tech bubble professionally.&rdquo;
Which means over two-thirds of financial professionals are blind to the potential for the current AI boom to go bust.
We&rsquo;re pleased to say many of Paradigm&rsquo;s top minds did live through that earlier era &ndash; including trading pro Enrique Abeyta.
<h2 style="text-align: center;">The AI House of Cards: Wall Street&rsquo;s Trillion-Dollar Bet</h2>
I remember late 1999 like it was yesterday.
I was working at a New York City hedge fund, Red Coat Capital, and the internet was changing the world.
Telecom giants like AT&amp;T, MCI WorldCom and Sprint were spending billions building the networks that would connect everyone to this revolutionary new technology.
And Wall Street couldn't get enough.
Companies like Cisco, Corning and Lucent Technologies supplied the equipment.
Business boomed, earnings soared, and investors were convinced spending would continue for years.
Why wouldn't it? The internet was clearly the future.
Lucent, one of the world's leading telecommunications equipment makers, seemed unstoppable.
Since its 1996 spinoff from AT&amp;T, the company had beaten Wall Street's earnings expectations 14 quarters in a row.
Then, on Jan. 6, 2000, Lucent put the &ldquo;surprise&rdquo; in earnings surprise.
The company warned that quarterly earnings would fall roughly 29% short of Wall Street's expectations.
Its stock plunged up to 28% after the announcement, wiping out about $64 billion in market value.
Among the reasons Lucent gave for the shortfall? Changes in customer purchase timing.
The technological revolution hadn't ended. The internet hadn't stopped growing.
But one of its biggest suppliers had reminded investors of something they'd forgotten.
Even revolutionary technologies are vulnerable to ordinary business cycles.
Within months, the dot-com bubble began to burst.
Today, I see an unsettling resemblance in artificial intelligence.
The Trillion-Dollar Spending Boom
Microsoft, Amazon, Alphabet, Meta, and Oracle are spending hundreds of billions to build the data centers and infrastructure that power AI.
Meanwhile, Nvidia, Broadcom, AMD, and Micron supply much of the technology.
Once again, Wall Street expects the spending and earnings growth to continue for years.
And here's why this matters to virtually every investor.
The AI boom has become so enormous that a slowdown could shake the entire stock market.
In 2023, the five major hyperscalers collectively spent approximately $154 billion on capital expenditures.
By 2025, that figure had climbed to $416 billion.
And according to Vanguard, annual spending could approach $1.2 trillion by 2028.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2ycNw94JzLbYfq3DBp27Xs/43c166a5d6ec660a41b7ef5843544f44/TTR-issue-101226-2.jpg" alt="Hyperscaler Capital Spending" width="540px" />Hyperscaler Capital Spending: Actual &amp; Projected Through 2030. Source: Vanguard
That's nearly eight times their 2023 spending in just five years.
But what's happening outside the AI boom?
Research highlighted by Porter &amp; Co. shows that inflation-adjusted private construction spending outside data centers has declined by roughly $120 billion annually since 2024.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1MuysKWBDZ5GIecg0QJrcI/1ce13251e0451997c3373786bfdcd080/TTR-issue-101226-3.jpg" alt="Data Centers Mask Declining Pivate Construction" width="540px" />Source: Porter &amp; Co., &ldquo;The Coming OpenAI Meltdown.&rdquo; Underlying data from U.S. Commerce Department.
While data center construction is surging, other types of private construction are moving in the opposite direction.
Every new data center also drives orders for chips, networking equipment, cooling systems, and electrical infrastructure.
Those orders become revenue for suppliers and underpin Wall Street's earnings forecasts.
The more businesses depend on AI spending, the more consequential even a modest slowdown becomes.
But someone has to pay for it all.
For years, Microsoft, Amazon, Alphabet, and Meta generated enough cash to finance almost anything they wanted.
AI is changing that equation.
According to Goldman Sachs, major hyperscalers could spend roughly 90% of their operating cash flow on capital expenditures over the next three years.
And the pressure is already showing up.
In the second quarter of 2026, Alphabet generated approximately -$5.9 billion in free cash flow.
Amazon recorded approximately -$7.7 billion.
Both companies remained profitable, but their capital spending exceeded operating cash flow.
And Wall Street expects the pressure to intensify.
According to Bank of America Global Investment Strategy, combined hyperscaler free cash flow could plunge from approximately $191 billion in 2025 to negative $26 billion in 2027.
And some forecasts suggest it could turn negative as early as 2026.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/6scvMepZEGwrUwQsrNMrkS/a66ec7e9f9fde4c40026b72e112c185f/TTR-issue-101226-4.jpg" alt="Free Cash Flow Turns Negative" width="540px" />Source: Bank of America Global Investment Strategy, Bloomberg. Reproduced by Porter &amp; Co.
These are forecasts, not guarantees. But they illustrate the challenge.
The AI buildout is consuming enormous amounts of cash today, while many expected returns remain years away.
So, companies are increasingly turning to another source of financing.
Debt.
The Debt Is Becoming Everyone's Problem
According to Vanguard, Alphabet, Amazon, Meta, Microsoft, and Oracle issued about $130 billion in U.S. bonds in the first seven months of 2026 alone.
That's more than they issued during all of 2025.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5jP1zVCBCZag0AwURSb4up/872705584f6988daa3c105a60d02ddf6/TTR-issue-101226-5.jpg" alt="Hyperscaler borrowing" width="540px" />Hyperscaler U.S. Bond Issuance, 2024&ndash;July 2026. Source: Vanguard
Borrowing isn't necessarily bad, and not every dollar finances AI.
But Oracle shows how stretched spending can get.
Its capital expenditures reached approximately 174% of operating cash flow in fiscal 2026. In July, S&amp;P Global Ratings downgraded Oracle's credit rating to BBB-, just one notch above junk.
And the financing extends beyond the hyperscalers.
Ares Management examined more than 100 infrastructure financing transactions and identified roughly $573 billion in financing arrangements connected to a relatively small group of major technology companies.
That doesn't mean those companies own all this debt.
It means the same businesses keep appearing throughout the financing network.
If AI spending slows, the consequences could spread to lenders, infrastructure investors and equipment suppliers.
And money isn't the only obstacle.
Data centers also face electricity shortages, permitting delays and local opposition.
When a project slips, equipment orders can slip with it.
Which brings us back to Lucent.
Lucent's customers didn't abandon the internet. They changed when they were buying equipment.
Today, AI suppliers face a similar vulnerability.
Their earnings forecasts depend on customers continuing to spend extraordinary amounts of money.
But what if financing costs rise? What if a data center can't secure enough electricity? Or a major customer postpones its next round of orders?
Stock prices can fall long before capital spending actually declines.
The chart below compares stock prices and capital expenditures across five major investment booms.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5WvXXensM2JevF2earJsX/73d5046bb4d0eae014eb80b493a90d0f/TTR-issue-101226-6.jpg" alt="Stocks peak first" width="540px" />Source: A Wealth of Common Sense. Underlying data: Campbell &amp; Turner, Odlyzko, SEC, Bank of Japan, BEA and EIA.
During the dot-com boom, stock prices peaked roughly six months before capital spending peaked.
Investors didn't wait for companies to stop buying equipment. They began selling when confidence in future growth weakened.
That doesn't mean AI stocks must follow the same path.
But AI spending could keep growing even as the stocks benefiting from it start to fall.
And the consequences wouldn't necessarily stop with AI stocks.
As J.P. Morgan's chart shows, the 10 largest companies now account for approximately 41% of the S&amp;P 500's total market value.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/624svFF0qErRsh1teHG4aM/506309f3950ad0c01a9205bd62b8f254/TTR-issue-101226-7.jpg" alt="Top 10 Companies in the S&amp;P 500" width="540px" />Source: J.P. Morgan Asset Management
Several of those companies are at the center of the AI boom.
So even investors who have never purchased NVIDIA or Microsoft could feel the effects through their index funds and retirement accounts.
The Lesson Wall Street Forgot
Here's what makes this situation so dangerous.
AI doesn't have to fail.
The technology can transform the world. Data centers can keep getting built. Chipmakers can keep selling billions of dollars' worth of equipment.
And investors could still lose a fortune.
Because Wall Street isn't simply betting that AI will succeed.
It's betting that hundreds of billions of dollars in infrastructure spending will arrive on schedule, year after year.
That's a very different bet.
I'll be watching for changes in hyperscaler spending plans, financing conditions, and supplier earnings guidance.
In January 2000, Lucent taught investors a painful lesson: When customers buy equipment can matter just as much as how much they buy.
Twenty-six years later, Wall Street may be about to learn that lesson all over again.
And that&rsquo;s what makes today&rsquo;s AI boom so vulnerable.
The AI house of cards doesn't need a technological disaster to collapse. It may only take a few of its biggest customers to stop spending.
Dave&rsquo;s last word: The big market-moving story today is the Labor Department&rsquo;s release of the consumer price index.
Short story: The official inflation rate is galloping higher &ndash; from 3.4% in August to 3.7% in September.
That figure is more or less in line with what Wall Street economists were expecting &ndash; but even so, Mr. Market isn&rsquo;t taking it well.
On the theory that the Federal Reserve will jack up short-term interest rates at least once more before year-end, the S&amp;P 500 is down about two-thirds of a percent as we write at 7,555.
Longer-term interest rates are back on the rise, a 10-year Treasury note up to 5.28%. And that&rsquo;s putting a hurt on precious metals &ndash; gold now under $4,100 and silver down nearly three bucks to $56.11. Crypto is feeling the pain as well, with Bitcoin under $82,000 and Ethereum sinking toward $2,400. Crude is up slightly to $94.51.
With the release of today&rsquo;s inflation figures, the Social Security Administration announced that next year&rsquo;s cost-of-living adjustment will be 3.6%.&nbsp;
As we say every year at this time, don&rsquo;t spend it all in one place.

FMF-Issue-101426-1

Boom-Blind-Bust

<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" />Today&rsquo;s Issue Is Not About the Midterms
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> There&rsquo;s a wise old saying about &ldquo;don&rsquo;t let politics drive your investment decisions.&rdquo; But the political calendar? That&rsquo;s a different story.
As you&rsquo;re probably aware, it&rsquo;s 27 days until the midterm election.
No, we&rsquo;re not going to analyze who has the upper hand or what it means for policy or how policy might shape companies and sectors.
Rather, we&rsquo;re going to unpack a spooky-reliable barometer for stock market performance.
See, for decades, market sages have dug into the reliable patterns that coincide with election cycles &mdash; notably, the fact that presidential elections take place every four years.
In recent weeks, Paradigm&rsquo;s newest contributor JC Parets and his team have been analyzing nearly eight decades&rsquo; worth of market data &mdash; and they&rsquo;ve arrived at a stunning conclusion.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;We&rsquo;re entering the strongest seven-month stretch of the four-year presidential cycle,&rdquo; says JC.
Call it the Super Seven rally. It starts with the month before the midterm election &mdash; that would be right now &mdash; and extends through April of the following year.
You can see it on this chart of the S&amp;P 500, showing the average of every presidential cycle in the post-World War II era &mdash; going back to Harry Truman&rsquo;s first full term starting in 1949.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5l40b8mqIdcSjdmiGdAhUN/1a1e81679b2e0577f482b18f62dfb7cd/FMF-Issue-100826-2.jpg" alt="Four-year presidential cycle" width="540px" />
&ldquo;During this period,&rdquo; JC says, &ldquo;the S&amp;P 500 has produced an average gain of 18.3%.&rdquo;
That performance is substantially better than other October&ndash;April periods &mdash; in which the average is a much more modest 8%.
Just to be thorough about it, JC&rsquo;s team studied every seven-month period across this span of nearly eight decades &mdash; starting in January, starting in February and so on.
The Super Seven rally of 18.3% contrasts with a mere 5.4% on average.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Something uniquely powerful appears to be at play at this point in the presidential cycle,&rdquo; says JC.
Check out the Super Seven rally in every presidential cycle of the postwar era. Out of 19 completed cycles, 18 of them registered positive results. The only loser was a modest 0.8% drop in late 1978&ndash;early 1979.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/TBF3agMRfB7YXK8ozHIaK/7ad67ca4f395b32bbefce15850589d98/FMF-Issue-100826-3.jpg" alt="18 out of 19 finished higher" width="540px" />
&ldquo;Meanwhile, some of the winners were enormous,&rdquo; JC says &mdash; &ldquo;including gains of 37.4% beginning in 1974, 36.5% in 1982 and 31.3% in 1998. That&rsquo;s an extraordinarily consistent historical tendency.&rdquo;
The most recent midterms are a textbook example; its 16.3% rise is just below the 18.3% average.&nbsp;
As you might remember, 2022 was a rotten year for stocks overall. But the market bounced off its lows in October &mdash; just before the midterms &mdash; and didn&rsquo;t look back.
And JC says all the pieces are in place for another Super Seven rally in late 2026 going into 2027. &ldquo;The Nasdaq-100 is making new all-time highs,&rdquo; he reminds us. At the same time, &ldquo;large-cap technology, growth stocks and high-beta stocks continue acting well, while risk appetite remains firmly intact.
&ldquo;That&rsquo;s exactly what we want to see as this powerful seasonal window begins.&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" />Now They Tell Us (Bogus Oil Futures)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> We&rsquo;ve been pounding the table on this theme for six months. Finally the Financial Times feels as if it can broach the subject without offending the powers that be.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5f1TGv12q6omPQt65LcOTg/97511a71e771fd4ddf7434693662334c/FMF-Issue-100826-4.jpg" alt="Financial Times headline" width="540px" />
&ldquo;This year has shown more clearly than ever that there is no single price of oil. The futures contracts quoted everywhere as &lsquo;the price&rsquo; certainly can&rsquo;t be considered that,&rdquo; says an Op-Ed by Amrita Sen, co-founder of a consultancy called Energy Aspects.
Sen cites figures from Argus Media Group showing that the price of Brent futures &mdash; the global benchmark &mdash; is only 60&ndash;70% the cost of real physical barrels in Asia. Before the start of the Iran war, it was typically more like 90%.
&ldquo;Not only are futures increasingly unreliable as a proxy for genuine supply and demand,&rdquo; Sen writes, &ldquo;they are also no longer useful as a hedge either and further disconnected from the fuel prices that drive inflation.&rdquo;
And she&rsquo;s not shy about calling out the White House&rsquo;s manipulations: &ldquo;The constant jawboning by the U.S. administration to get prices down has left fewer participants in the crude market, according to our data. The view that the U.S. will do whatever it takes to lower prices before elections has dominated sentiment.&nbsp;
&ldquo;So despite global crude stocks falling about 650 million barrels since the conflict began, according to Kayrros inventory data, traders are scared to hold long positions &mdash; largely because of the volume of bearish headlines coming from the administration, leaving prices at the mercy of algorithm-driven trading.&rdquo;
We won&rsquo;t beat a dead horse. It&rsquo;s just nice to see someone fessing up in a mainstream outlet. If you&rsquo;re a newer reader and not yet up to speed, <a href="https://paradigmpressroom.com/post/the-cia-and-the-oil-price">our first two Bullets on April 20</a> are a good place to start.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But even crude futures can&rsquo;t help screaming higher today in response to the latest headlines from the Gulf region.
The shipping monitor UKMTO reports nine attacks on ships near the Strait of Hormuz during the first week of October. That compares with 13 for all of September.
Separately the shipping-info website gCaptain cites three &ldquo;maritime security sources&rdquo; who&rsquo;ve concluded that last week, attacks on tankers transiting the strait reached their highest level since the war began more than seven months ago.
One of those new attacks came off the coast of Qatar last night. In addition, Iran launched its first attack outside the strait for a month &mdash; at a tanker off the coast of Oman.
With that, U.S. crude futures are up nearly 5% to $92.48.
It&rsquo;s not helping matters that closer to home, Hurricane Isaias is making a beeline for offshore Gulf oil platforms; already 25% of the region&rsquo;s production is shut in.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile, the major U.S. stock averages are modestly in the red &mdash; the S&amp;P 500 down less than a quarter percent at 7,787. Treasury yields are little moved, the 10-year note at 5.29%.
Gold is holding the line on $4,100 but silver has slipped beneath $59. Crypto has gotten clobbered in the last 24 hours, Bitcoin well below $83,000 and Ethereum sinking toward $2,500.
It&rsquo;s been a quiet week for economic numbers but that will change next week with the release of the official September inflation figures. Earnings season also gets underway&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" />Big Tech&rsquo;s Big Nuclear Gambit
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Big Tech is throwing billions of new dollars at nuclear power to feed its insatiable appetite for AI data centers. But money can&rsquo;t solve everything.
This week brought a flurry of multibillion-dollar deals between the AI hyperscalers and nuclear power providers.&nbsp;
<ul>
<li>Amazon (AMZN) signed a 20-year power-purchase agreement supporting more than $3 billion in infrastructure investment at the Calvert Cliffs nuclear plant in Maryland, operated by Constellation Energy (CEG). The upgrades will add 190 megawatts of generating capacity</li>
</ul>
<ul>
<li>Google (GOOGL) followed with another 20-year agreement supporting more than $4.3 billion in upgrades spread across 11 Constellation reactors in Illinois, Pennsylvania and New Jersey. Those improvements will add another 890 MW.</li>
</ul>
<ul>
<li>On Monday, the Department of Energy announced a conditional $4.2 billion loan to Vistra Corp. (VST) to upgrade nuclear plants in Ohio and Pennsylvania, adding another 433 MW. Meta (META) has already agreed to support those projects.</li>
</ul>
In total, those upgrades would bring 1,513 MW additional generating capacity to the grid. That's about the same as one and a half average U.S. nuclear reactors. (For perspective, the nation has 94 operating reactors right now.)
Long before it became mainstream news, we pinpointed AI as <a href="https://paradigmpressroom.com/post/the-monster-that-ate-the-power-grid-ai">&ldquo;the monster that ate the power grid.&rdquo;</a>
By now, you&rsquo;re surely aware Big Tech is confronting a backlash against rising power prices brought on by the rapid build-out of large data centers. We&rsquo;ve chronicled in recent weeks how New York and Texas have imposed limits on data center development. Pennsylvania is considering a statewide moratorium.
To be sure, expanding the capacity of existing nuclear power plants goes a long way toward easing the AI data center energy squeeze.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But Big Tech's nuclear gambit has one enormous obstacle &mdash; time.
These projects involve extended power &ldquo;uprates.&rdquo; That doesn&rsquo;t happen by simply turning up the dial on an existing reactor.
Major uprates exceeding 100 MW typically take five&ndash;six years. They require replacing or upgrading massive turbines, generators, transformers and other equipment.
And the supply chain is already strained. Some essential components have very few qualified manufacturers, while specialized equipment can take years to design, build and deliver.
Constellation expects its first Google-backed uprate in 2028, with others continuing through 2032 or 2033. Amazon's Calvert Cliffs upgrades are scheduled to come online between 2030 and 2032. Vistra's regulatory applications extend through 2034. Delays could push project completions beyond then.
Bottom line: Big Tech is committing billions to increase nuclear generating capacity, but the additional power will arrive gradually over the next decade, possibly longer.
Investment takeaway? Last year, many Paradigm readers made handsome gains playing the data center power trend &mdash; mostly via the &ldquo;independent power producers&rdquo; like Constellation and Vistra that are not regulated utilities.&nbsp;
Our editors are still eyeing a good entry point to start playing these names again. Stay tuned&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" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Here&rsquo;s a timely one with mortgage rates pushing 7.5% and the median home price taking up nearly five times median household income&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2OL20opLZSaSle4sRtvqoP/b6e29d9e514074c44c1fa63264a6b8d1/FMF-Issue-100826-5.jpg" alt="1970's creepy van guy - 2026 starter home meme" 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: Fourth Turning
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Dave, I am writing to express my sincere appreciation for your recent response to a reader's inquiry,&rdquo; says an appreciative note.
From the context, I&rsquo;m pretty sure the reader is referring to the mailbag of <a href="https://paradigmpressroom.com/post/impossible-deadline">our Sept. 28 edition</a> &mdash; in which I harked back to the &ldquo;Fourth Turning&rdquo; discussion last year in a 5 Bullets edition I&rsquo;ve come to call <a href="https://paradigmpressroom.com/post/9-11-the-financial-crisis-and-covid">&ldquo;the cynicism issue.&rdquo;</a>
(It&rsquo;s about as personal as I&rsquo;ll ever get in these daily missives.)
&ldquo;Your thoughtful commentary resonated with me and provided meaningful encouragement for my personal journey. As someone from a transitional generation, your reflection on the 1980s was particularly insightful. I especially connected to your references of my two fave Founding Fathers.&nbsp;
&ldquo;I love everything this company generates. All of you resonate with me. I like challenges and caring for my family is now my challenge. Otherwise, I would be living on Walden Pond.
&ldquo;Thank you for sharing your unique perspective and for your continued support of us &mdash; your readers.&rdquo;
Dave responds: Thank you for trusting our team for guidance with your investing choices.
And thank you for the kind words about &ldquo;the cynicism issue.&rdquo;&nbsp;
I noticed you put your business signature at the bottom of your email. It&rsquo;s always interesting when someone does that and on occasion I&rsquo;ll even do a quick web search &mdash; just to get a glimpse into our readers&rsquo; varying walks of life.
Counseling traumatized veterans? You&rsquo;re truly doing God&rsquo;s work in this lifetime.&nbsp;
It touches me that you found value in something I wrote &mdash; and it&rsquo;s a vivid reminder for all of us at our firm that, in our own way, we can and do make a difference for the better in people&rsquo;s lives. Godspeed with the life/family challenges you&rsquo;re taking on with a full heart.

FMF-Issue-100826-1

Today’s Issue Is Not About the Midterms

5MIN-ISSUE-100726-Featured

Echoes of the Dot-Com Bust

I was talking to a friend of mine this week who runs a business and manages a bunch of people.
We were talking about AI and how much we&rsquo;re both using it.
At this point, I use these tools every single day. So do a lot of the people around me.
Then he said something that stuck with me.
&ldquo;You can tell.&rdquo;
He was talking about the people on his team. He can tell who&rsquo;s using AI and who isn&rsquo;t.
The difference is starting to show.
And it&rsquo;s not an age thing, either. Sometimes it&rsquo;s the younger guys using it the most. Sometimes it&rsquo;s the older guys.
From what I&rsquo;m seeing, age doesn&rsquo;t seem to matter much at all.
What matters is whether you&rsquo;re playing with the toys.
That&rsquo;s what I call them, &ldquo;the toys.&rdquo;
Apparently, most people still aren&rsquo;t playing with them.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/6tzTue7H0ypBxi766aZXIA/f196c7124406be0f1b53fd1c4078b26a/FMF-issue-100626-1.jpg" alt="More and more households are paying for AI" width="540px" />
Andreessen Horowitz, or a16z, has been putting out some really good charts lately.
They have access to a ton of data, and they&rsquo;ve been doing a great job visualizing it and sharing it with everybody.
This one stopped me: Only about 2.2% of U.S. households are paying for AI.
That&rsquo;s crazy to me.
I understand that plenty of people are using free versions. I did that myself for a long time.
But we&rsquo;re talking about a technology that could be one of the biggest changes we see in our lifetimes, and only a tiny percentage of households are willing to pay for the best versions of these tools.
Why?
I don&rsquo;t think people are dumb.
I don&rsquo;t think the technology is too difficult either.
In fact, that might be my favorite part about AI. If you don&rsquo;t know how to use it, you can literally ask AI how to use it.
Tell it what you&rsquo;re trying to accomplish.
&ldquo;I want to do this. I have no idea how. Help me.&rdquo;
And then start.
That&rsquo;s basically what I did.
I&rsquo;m Apparently a Software Developer Now
Last week I vibe-coded an MCP.
A year ago, I wouldn&rsquo;t have even known what that sentence meant.
I don&rsquo;t know the first thing about software development. I&rsquo;m not an engineer. I never learned how to code.
I&rsquo;m a market technician.
I like baseball. I like wine. I like hanging out with my family. And I like looking at markets and trying to find good ideas that can make us money.
That&rsquo;s my world.
But now I&rsquo;m sitting at home building a &ldquo;model context protocol.&rdquo;
MCP is an open standard created by Anthropic that lets AI applications and large language models connect to external data sources and tools.
I sent something I built to a friend of mine who actually is a software developer. He&rsquo;s been doing this professionally for decades.
He wrote back:
&ldquo;Congratulations. You&rsquo;re a software developer now about as much as I&rsquo;m a market technician.&rdquo;
Hahaha.
Fair enough.
But that&rsquo;s also the whole point.
He can build things now that used to require teams of people and huge amounts of time. And I can build things that I never would have attempted before because I wouldn&rsquo;t even know where to start.
Another friend of mine has spent close to a decade working on a data visualization project.
Years of work.
Lots of frustration. Lots of development. Lots of time and money.
Earlier this year, he told me something I&rsquo;ll never forget.
With AI, they accomplished in about six months what had taken them years before.
Think about that.
That&rsquo;s not some theoretical prediction about what AI might do someday.
It already happened.
And this is where it gets really interesting for us as investors.
I&rsquo;m using these tools to do research faster. I&rsquo;m using them for idea generation.
We&rsquo;re building scans. We&rsquo;re organizing huge amounts of information. We&rsquo;re testing things.
We&rsquo;re finding connections that would have taken much longer to find before.
That doesn&rsquo;t mean AI makes the investment decisions for me. That&rsquo;s still my job.
But if I can look at more information, test more ideas and get to the important stuff faster, why wouldn&rsquo;t I?
Imagine two investors.
They have the same experience. They work equally hard. They&rsquo;re equally curious.
But one of them has tools that allow him to research ten ideas in the time it takes the other guy to research one.
Who do you think is going to see more opportunities?
That&rsquo;s what matters to me.
The goal isn&rsquo;t to use AI because AI is cool.
The goal is to use better tools to help us make better decisions.
The Gap Is Starting To Show
There&rsquo;s a bigger lesson here that goes way beyond markets.
Think about something you&rsquo;ve always wanted to build.
Maybe you didn&rsquo;t know how. Or you didn&rsquo;t have the money to hire someone. Maybe you thought you weren&rsquo;t technical enough.
What about that idea that&rsquo;s been sitting in your head for five years and you never did anything with?
Try building it now.
Seriously.
Play with the toys.
You can do an unbelievable amount of this stuff sitting on your couch with a laptop. You can do a surprising amount of it from your phone.
And you don&rsquo;t need to become an AI expert.
I&rsquo;m certainly not one.
I just know that there are a lot of people counting on me. My family is counting on me. My team is counting on me. And if you&rsquo;re reading this, in some small way, you&rsquo;re counting on me too.
My job is to go out there, find good ideas and bring a different perspective to the table.
I take that responsibility seriously.
So if there are tools that can help me do that job better, I need to learn how to use them.
And I don&rsquo;t just want my team doing it for me.
I want to play with this stuff myself.
Because the more I understand the tools, the better I can communicate with the people on my team who are building with them every day.
You might say this doesn&rsquo;t apply to your business.
Maybe.
But I&rsquo;d challenge that assumption.
Ask the machine.
Tell it what you do all day. Tell it which parts of your job take too long. Tell it what annoys you.&nbsp;
Tell it what you wish existed.
Then ask:
&ldquo;Can you help me build something that fixes this?&rdquo;
See what happens.
Because for the first time, I&rsquo;m seeing the other side of this in real life.
It&rsquo;s not just that the people using AI are getting faster.
The people who aren&rsquo;t using it are starting to stand out.
My friend can already see it on his team.
So can I.
For traders and investors, this is an incredible new set of tools for finding ideas, doing research, and understanding markets.
For everybody else, it might be something even bigger.
It&rsquo;s an opportunity to build things you never thought you could build.
You don&rsquo;t have to understand how all of it works.
I certainly don&rsquo;t.
Just play with the toys.

FMF-issue-100626-Featured

Play With the Toys

<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" />Stranded No More?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> What in the world is going on with Middle East oil shipments &mdash; really?
In recent days, you&rsquo;ve no doubt heard claims from corporate media and the White House that crude shipments through the Strait of Hormuz are their highest since the start of the Iran war &mdash; or even approaching prewar levels.&nbsp;
In this telling, Middle East crude is no longer stranded.
By and large, these claims are based on figures from a Brussels-based data firm called Kpler, sometimes described as &ldquo;the Bloomberg of the physical world.&rdquo;
There&rsquo;s ample reason not to take these figures at face value &mdash; as colleague Adam Sharp <a href="https://dailyreckoning.com/lies-about-oil/">spelled out</a> last Thursday at The Daily Reckoning.
And now it turns out Kpler&rsquo;s chief of crude oil analysis is a hardcore Iranian monarchist.&nbsp;
Until a few days ago, the picture on his X profile was of Iran&rsquo;s &ldquo;Lion and Sun&rdquo; flag used before the 1979 revolution &mdash; now an icon for opponents of the current regime.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4DtBXgE4n1ntLpuOFLPIL0/2d697ac21a776d2cfc085b6f9d28268a/FMF-Issue-100526-1.jpg" alt="Homayoun X post" width="349px" />
And to leave no doubt about where he stands, this is what he posted after Israeli airstrikes killed Iran&rsquo;s supreme leader Ayatollah Khamenei at the start of the war&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/vIkQ04TLcKqSK7ChqsFvj/14d611defd30e351e4a62647ad6390fd/FMF-Issue-100526-2.jpg" alt="Homayoun X post Where does he stand " width="540px" />
In principle, one can advocate for a restoration of the Peacock throne in Tehran and still objectively analyze oil flows through the Strait of Hormuz.
But it&rsquo;s a bad look. It&rsquo;s easy to draw the conclusion, as the military analyst Will Schryver does, that &ldquo;Kpler is a western intel info op.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> There was another sketchy claim making the rounds late last week.
You might well have heard about this one too &mdash; &ldquo;a third aircraft carrier headed to the Arabian Sea.&rdquo; Supposedly the USS Theodore Roosevelt was on its way to join the USS George Washington and the USS George H.W. Bush.
But no. Turns out that the USS Theodore Roosevelt will be relieving the USS George H.W. Bush &mdash; which made a stop in Thailand over the weekend for R-and-R.
Too, the Roosevelt is still on its way. For the moment, only one carrier is in the region.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I think there's a pressure on everybody in the financial industry and in the media to not criticize or not contradict what the administration is saying, which is not necessarily true about the actual energy situation.&rdquo;
So says hedge fund consultant Michael Belkin, a Wall Street veteran who cut his teeth during the crash of 1987. His Belkin Report is one of those publications for ultra-high-net-worth types; its pricing is &ldquo;available upon request.&rdquo;
&ldquo;There's something called the rapid response team in the administration,&rdquo; he said on the Financial Sense podcast this past weekend. &ldquo;And whenever some story comes out that's not politically acceptable to them, they come out and they counter it with all these other stories.&nbsp;
&ldquo;And I think they lean on the mainstream media to report things that are favorable, and nobody wants to upset the administration.&rdquo;
Now&hellip; there&rsquo;s no doubt that the corporate media have it in for Donald Trump. But that doesn&rsquo;t invalidate what Belkin says here.&nbsp;
In fact, it makes what Belkin says even more concerning.
It suggests that at this time, the power elite places a lower priority on undermining Trump than it does on propping up the markets and the economy at all costs. What is it that they fear?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> And yet reality can&rsquo;t be suppressed forever. Both of the major financial newspapers acknowledge as much this morning.
From the Financial Times&hellip;
<blockquote>The world&rsquo;s oil stockpiles are now &ldquo;scarily thin,&rdquo; the chief executive of Saudi Aramco said, adding that it would take up to two years to rebuild inventories depleted during the Middle East conflict.&nbsp;</blockquote>
<blockquote>Amin Nasser said the seven-month war between the U.S., Israel and Iran had reduced oil supply from the region by &ldquo;nearly 3 billion barrels,&rdquo; equivalent to roughly half the crude oil and refined fuels that would have passed through the Strait of Hormuz over that period.&nbsp;</blockquote>
Even The Wall Street Journal &mdash; which was peddling the oil-flowing-through-Hormuz narrative last week &mdash; has issued what you might call a backdoor correction&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3rzvWAY6R5cDqV5NmgyuLl/159b6620846083a38c37212e8d8e8d5a/FMF-Issue-100526-3.jpg" alt="Wallstreet journal headline" width="540px" />
&ldquo;Lies don&rsquo;t work so good when one or two ships are getting hit a day in the Strait and burning wrecks and oil slicks litter the waters,&rdquo; quips the energy-market observer on X who goes by the name &ldquo;Carolina Lion.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> And yet&hellip; U.S. crude futures traded for a while this morning under $90 a barrel.&nbsp;
In mid-September they briefly touched $105. That&rsquo;s a 14% drop in three weeks.&nbsp;
Is the supply situation 14% better now than it was then? Judging from the foregoing, no.
But as we chronicled once again last spring, oil futures have been <a href="https://paradigmpressroom.com/post/the-cia-and-the-oil-price">massively manipulated</a> for decades.&nbsp;
And as Paradigm macroeconomics authority Jim Rickards has been saying for months, there&rsquo;s a disconnect between the &ldquo;paper price&rdquo; of oil and the price of real physical barrels for delivery &mdash; which is now manifesting as a record-high gap between the price of oil futures and the price of diesel fuel.
Investment takeaways? Year to date, energy is the strongest performing sector in the S&amp;P 500 &mdash; up 40%. Yes, that beats the information-tech sector, up 29%.&nbsp;
Under the circumstances, that outperformance is likely to continue &mdash; even if we&rsquo;re not looking at a worst-case scenario of the sort Belkin seems to be hinting at.
We&rsquo;ll continue to look at the glass half-full for Bullet No. 2&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" />October Optimism?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> After a choppy September, the calendar might be turning in the stock market&rsquo;s favor.
True there&rsquo;s no shortage of worries. Treasury yields have climbed to levels not seen since 2002. Oil is elevated relative to summer&rsquo;s levels. The Fed hasn&rsquo;t ruled out another rate hike. And market leadership remains unusually narrow.
But for all the ups and downs of last month, the S&amp;P 500 finished September roughly flat &mdash; and the Nasdaq actually gained ground.
So what about October? &ldquo;Since 1950, October has been the best-performing month for the S&amp;P 500 in midterm years, finishing higher roughly three-quarters of the time,&rdquo; observes Paradigm analyst Zach Scheidt, writing on Friday for Altucher&rsquo;s True Alpha. &ldquo;November has typically followed with solid gains, too.&rdquo;
Of course, &ldquo;seasonality isn't a guarantee.&rdquo;
But the official inflation numbers are climbing down for the moment, the AI industry is still investing in the future and well-to-do consumers are still spending briskly.
After surviving September, the bulls may finally have history on their side.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Sure enough, the S&amp;P is up another half percent on the day to 7,758 &mdash; less than 50 points from its record close in mid-August. The Nasdaq&rsquo;s gain is a bit stronger; the Dow is flat.
Gold is down but still holding the line on $4,100. Silver continues to bounce off the $60 level. Crypto is holding its own with Bitcoin a little over $85,000 and Ethereum just under $2,700.
It&rsquo;s shaping up to be an exceptionally quiet week for both economic numbers and earnings. But a new earnings season will be underway starting next week&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" />Medicare: After $90 Checks, Is a Premium Cut Next?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Is a cut in Medicare premiums coming next year? And will the announcement come soon?
Over the weekend, President Trump said the government will soon issue payments of $90 for everyone on Medicare Part B. The money should be direct-deposited sometime this week.
The president framed it as a rebate from the Medicare Improvement Fund, which he called a &ldquo;slush fund&rdquo; for waste, fraud and abuse under Democrats.
For perspective, $90 is a little less than half of one month&rsquo;s standard Part B premium. Looked at another way it covers about five months of the premium increase that kicked in at the start of 2026.
Here&rsquo;s a table &mdash; created with the help of the Perplexity AI engine &mdash; showing all the premium increases in recent years, as well as when those increases were announced by the Centers for Medicare and Medicaid Services.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1toRI76QtiuihYXuY8BBu5/667da6b02058c253d0113b7d77269bda/FMF-Issue-100526-4.jpg" alt="table designed.by perplexity ai engine" width="540px" />
Not a big sample size, but there&rsquo;s an interesting pattern emerging in the post-COVID era. Note the big increase announced toward the end of Joe Biden&rsquo;s first year as president in 2021.&nbsp;
Note also that a cut in premiums was announced the following year &mdash; and the announcement came earlier than usual, ahead of the 2022 midterm elections.
Sure enough, the first year of Trump&rsquo;s term brought a hefty increase. Will this year bring a cut? And will it be announced any day now?
Stay tuned&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" />Ten Days to a Flying Car?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The long-awaited rollout of Tesla&rsquo;s Roadster will have to wait a while longer.
Scheduled originally for last Thursday night, the event has been pushed back to Oct. 15, a week from Thursday. Tesla blames the delay on severe weather in the Waco, Texas area, saying the event &ldquo;can only be held outdoors.&rdquo;
Why outdoors? Paradigm contributor Davis Wilson <a href="https://million-mission.com/posts/elons-flying-car-delayed">has a theory</a>: the Roadster may actually leave the ground.
Elon Musk has teased an optional &ldquo;SpaceX package&rdquo; using cold-gas thrusters to boost acceleration, braking and cornering &mdash; and perhaps allow the car to briefly hover.
Tesla claims the Roadster could go 0&ndash;60 mph in under one second. Yet Musk has called that &ldquo;the least interesting part.&rdquo;
Davis&rsquo; theory goes further. Tesla and SpaceX already share technology, facilities and employees. Now SpaceX technology could literally be built into a Tesla.&nbsp;
Which means the eventual merger of SpaceX and Tesla &mdash; something Davis has been speculating about since January. A successful Roadster launch in 10 days could bring that possibility closer to reality&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 Liability, AI for Writing, AI Czar
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Excellent article, thank you,&rdquo; says a reader&rsquo;s short note after <a href="https://paradigmpressroom.com/post/where-are-the-handcuffs-ai">Friday&rsquo;s edition.</a>
A second reader elaborates: &ldquo;I would like for you to continue this theme because it is very relevant to this concept that the AI developers &lsquo;can't do anything about&rsquo; the rogue AI gremlins in the code. And my thinking is along your lines &mdash; &lsquo;Where ARE the handcuffs?&rsquo; Indeed. And legally, who is responsible for the damage that could be done here?&nbsp;
&ldquo;I am of the opinion that the developers/executives of the company are, as you mentioned, with reference to other things like products that cause harm, and the companies that produce them are responsible.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile, Friday&rsquo;s edition also brought up more, uh, stylistic concerns pertaining to AI&hellip;
&ldquo;Dave, I just read the Oct. 2 edition of The 5. I noted that it contained what seemed like a large number of &lsquo;&mdash;,&rsquo; i.e., long dashes between words.&nbsp;
&ldquo;I didn&rsquo;t go back and compare to past editions of The 5 to see if this was normal or a change in your style, but I recently became aware that the long dashes are a &lsquo;tell&rsquo; that the text may have been created with the assistance of AI.&nbsp;
&ldquo;I use AI to help me with my own work and it has been a huge productivity enhancer so I&rsquo;m not being critical or judgmental. You seem to be both idealistic and pragmatic so I&rsquo;m simply curious as to where you fall on the AI spectrum.&rdquo;
Dave responds: I addressed the question in-depth <a href="https://paradigmpressroom.com/post/infinitely-human">a month ago</a>. Since then, my understanding has continued to evolve. Really, once you start noticing the hallmarks of AI-generated copy, you see it everywhere.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/TphpVym6luiGsfVALid5V/342ea662a78ad52da5890c5b97cee934/FMF-Issue-100526-5.jpg" alt="once you understand the hall marks of ai-generated copy you see it everywhere" width="540px" />
That&rsquo;s taken from <a href="https://www.pewresearch.org/data-labs/2026/08/20/how-much-of-the-internet-is-written-with-ai/?utm_source=substack&amp;utm_medium=email">a recent write-up</a> at the Pew Research Center, by the way.
Anyhow you can run my stuff through <a href="https://www.pangram.com/">Pangram</a> and judge for yourself. From my limited experience with the platform, it seems pretty reliable.&nbsp;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Meanwhile, the news this morning is that the president is about to name Jay Clayton as the new &ldquo;AI czar.&rdquo;
Clayton has no particular expertise in the realm of AI or digital technology. He is, however, well practiced in the art of covering up for the excesses of well-connected financial firms.
He spent over 20 years at the white-shoe law office of Sullivan &amp; Cromwell &mdash; where he represented eight of the 10 biggest Wall Street banks, including Goldman Sachs and JPMorgan Chase while they were under criminal investigation.
Then he became SEC chair during Donald Trump&rsquo;s first term. It was on Clayton&rsquo;s watch that the &ldquo;repo&rdquo; crisis emerged in late 2019. The big banks got themselves into trouble with exotic financial instruments called repurchase agreements. The Federal Reserve rode to the rescue, printing money to buy Treasuries and mortgage-backed securities from the banks.&nbsp;
We&rsquo;ll never know how big a bailout was necessitated by this crisis because COVID <a href="https://5minforecast.com/2022/03/11/countdown-to-cover-up/">conveniently came along in early 2020</a>, necessitating an even bigger bailout.
Clayton spent the Biden years back at Sullivan &amp; Cromwell, along with gigs on the boards of Apollo Global Management and American Express.
So far in Trump&rsquo;s second term he&rsquo;s spent a year as U.S. attorney for the Southern District of New York &mdash; the office of the Justice Department that&rsquo;s supposed to be a watchdog on Wall Street, heh. Most recently he&rsquo;s spent the last two months as Director of National Intelligence, Tulsi Gabbard&rsquo;s old gig.
A cynic might well suspect Clayton&rsquo;s role as AI czar is to clear the way for an AI bailout at taxpayer expense. <a href="https://paradigmpressroom.com/post/the-ai-bailout-of-2027">After all, It&rsquo;s coming</a>.

FMF-Issue-100526-Featured

Stranded No More?

<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?
<a id="2"></a>
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)

<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)

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

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!