No Fertilizer, No Food

No Fertilizer, No Food

The original concept behind today’s edition was to take a break from the war and turn our attention to other matters — at least for Bullet No. 1 and hopefully 2.

Then came the message from our natural resources pro Matt Badiali: “The list of unintended consequences of this war gets longer every day. At a minimum, we are facing massive inflation by summer. High fuel prices add a cost to everything transported. And either customers pay it or the companies eat it…”

Whelp, let’s dive in.

First example — fertilizer. As mentioned in Monday’s edition, 35–40% of the world’s fertilizer supply transits the Strait of Hormuz, which the Iranian military has now closed to Western vessels.

Great timing too — planting season in the Northern Hemisphere.

“The effects are likely to materialize with a six–nine month lag through weaker crop yields, resulting in higher food inflation, tighter grain stocks and elevated food security risks for import-dependent countries,” says a note from Nikos Tagoulis — senior analyst at Intermodal Shipbroking, a leading Greek shipping firm.

“Higher fertilizer prices, shipment delays and rising freight costs, further compounded by surging bunker [fuel] prices, are likely to force farmers either to reduce nutrient application or absorb higher input costs. Unlike oil, fertilizers lack meaningful strategic reserves…”

Next example — helium. “No helium, no semiconductors,” says a pithy tweet from an analyst at Citrini Research that Matt spotted.

As we’ve chronicled in years gone by, helium is useful for much more than just party balloons — everything from MRIs to, yes, semiconductors.

As it happens, much of the world’s helium supply is a byproduct of natural gas production. About one-third of global helium production comes from Qatar — and that supply is now shut in because, again, the Strait of Hormuz is closed.

The Citrini post says South Korean chipmakers Samsung and SK Hynix are especially concerned. That’s because two-thirds of Korea’s helium supply comes from Qatar.

➢ Meanwhile, more than a quarter of Korea’s helium supply comes from the United States. Presumably producers of liquefied natural gas like Cheniere Energy (LNG) would be a beneficiary should the war drag on.

Back to Matt Badiali: “Add fertilizer and helium to the list of critical commodities now. Less fertilizer means lower crop yields and higher prices. Less helium means fewer chips made, so the cost of AI is going up. This is a massive macroeconomics lesson being learned at the world’s expense.”

There’s other war-related business to attend to today, but now let’s turn our attention to something else…

Sorry, You Can’t Have Your Money Now (Continued)

The dirty snowball known as private credit is gathering speed as it rolls downhill.

We first tipped you off to the problem last fall — when the auto parts maker First Brands filed for bankruptcy. First Brands financed its operations through the “private credit” market — loans that were once the province of banks but are now dominated by players like Blackstone, Apollo and KKR. (Non-bank financial institutions or NBIFs, they’re called.)

Then as we related last month, the private credit group Blue Owl told investors in one of its funds that they could no longer pull their money out on demand. Instead Blue Owl would pay out investors on a schedule of Blue Owl’s choosing.

Last week, it was the turn of the giant asset manager BlackRock: “That firm put up gates on their flagship $26 billion HPS Corporate Lending Fund,” says Paradigm macroeconomics maven Jim Rickards.

“As of now, investors can only withdraw 5% of their investment. The remaining 95% is locked into a sinking ship.

“Much of the private credit fund industry has remained afloat by not selling assets, which means you can pretend valuations are higher than the market would support,” Jim goes on.

“Once the investor redemptions begin, the manager must sell assets to pay the redemptions, which quickly reveals that the bottom has fallen out of valuations. That’s when the gates go up on redemptions.

“The entire private credit and NBIF sector is now in a state of panic. What’s more dangerous is that NBIFs get their funding from major commercial banks. This means bank loan losses and lower bank stock valuations are next.”

As we said last month, the situation definitely echoes the 2008 financial crisis — but the fallout isn’t likely to be anywhere near as severe.

But when the situation is coupled with war-related economic disruptions… the consequences could be more problematic.

“Real Breakthroughs” Coming Next Week

Helium shortages notwithstanding, an event known as “the Super Bowl of AI” is still on for next week.

It’s Nvidia’s annual GTC gathering in San Jose, California. GTC is short for “GPU Technology Conference” — focusing on the graphics processing units that are Nvidia’s bread-and-butter.

“Every year, there’s a moment when the future of technology suddenly becomes clearer,” says Paradigm AI authority James Altucher — “not from headlines, not from analysts on TV, but from the engineers, founders and builders who are actually creating the next wave.”

James will be on hand. And as soon as he gets a look at everything unfolding there, he’ll host a livestream special where he’ll break down what it all means — “not just the flashy announcements but the real breakthroughs that could shape the next decade of innovation and the opportunities that could come from them.”

Several key members of James’ team will also be on hand for this event, which we’re calling Tech Turning Point 2026. It’s set for next Tuesday March 17 at 2:00 p.m. EDT.

Note well: We won’t try to sell you any of our newsletters or trading services during this event. We just want to clue you in to the tech trends that will shape your world in the years ahead. Watch this space for details in the days to come on how you can join in.

In the meantime, the big market story today is a coordinated global release of oil reserves.

The International Energy Agency says its 32 member nations will release 400 million barrels from its emergency stockpiles — a record total, more than double a 2022 release after the Russian invasion of Ukraine.

If the aim was to calm the oil trade, it’s not working: At last check a barrel of West Texas Intermediate is up over $3.50 — back over $87.

Perhaps that’s because traders understand the complex logistics of releasing such oil.

It’s not as simple as opening a spigot. The math is ugly: “IEA-coordinated releases have never exceeded 2 million barrels a day,” says an article by economist Tracy Shuchart. Contrast that with the current amount of oil production that’s offline — about 6.5 million barrels a day. That’s not production that’s bottled in — that’s production that’s shut down.

As for stocks, it’s a red day, but nothing dramatic — the S&P 500 down less than half a percent to 6,751. The Nasdaq’s losses are more modest, the Dow’s steeper.

Gold is relatively calm at $5,166 but silver’s on another wild ride — down over $3.50 to $84.66. Bitcoin is holding onto the $70,000 handle and Ethereum is comfortably over $2,000.

Also in the mix is the Labor Department’s release of the consumer price index: The official inflation rate clocks in at 2.4% — unchanged from a month earlier. The number has been stuck in a channel between 2.3–3% since the summer of 2024.

Of course, that 2.4% figure is for February — prewar. As such it will likely have little or no impact on what the Federal Reserve does with interest rates at its policy-setting meeting a week from today. The betting in the futures market is that the Fed will hold the benchmark fed funds rate steady at 3.75% — and the next cut won’t come until July at the earliest.

The war potentially throws another economic indicator into a cocked hat — small-business sentiment. But for the record, the monthly Optimism Index from the National Federation of Independent Business registers 98.8 for February — slightly above the index’s long-term average.

Market-Moving Tweet

There’s an old saying about how “There are no markets anymore, only manipulations.” (As with many sayings, its origins are murky.)

It comes to mind given the action in the oil price yesterday.

At midafternoon, Energy Secretary Chris Wright posted the following on X: “The U.S. Navy successfully escorted an oil tanker through the Strait of Hormuz to ensure oil remains flowing to global markets.”

A few minutes later, he deleted the post. The White House and the Navy said no escorts were underway, nor were any planned.

The whipsaw action in the oil price was extreme — a barrel of West Texas Intermediate sinking to $77, then rallying to $84.

For its part, the Energy Department is pinning the blame on a flunky who put an “incorrect caption” beneath a video clip of Wright. Alrighty then…

The renowned oil industry analyst Anas Alhajji says political maneuvers like these always backfire. “Traders may be fooled once or twice, but that’s it,” he tweets.

Worse, “Drillers will not drill under such manipulation. They want a clear market signal. This will guarantee higher prices for [a] longer period!”

Mailbag: “Lost” Reader, the Draft, Civil War

“You just lost me as a reader,” begins today’s mailbag. “You really don’t understand what is happening and how. If this is all you have, you are done.”

That’s all the email said. Presumably it was in response to something in yesterday’s edition? Alas we’ll never know…

“Smoking marijuana isn't the only way to flunk a military physical,” writes a retired Air Force officer on the subject of a return to the draft.

“Back in 1972 before the draft ended, I was in the Chicago Military Entrance and Examination Center waiting room waiting for a physical. There were also a soda and snack machines there. One potential draftee holding a Coke can told me that if you drink a Coke shortly before your physical, you will show up as diabetic and they will have you return again in a month to test again before disqualifying you.

“Sesame seeds also have a reputation for making you test positive for drugs.

“Depending on my mood, I can argue for and against a draft.”

“Seeing civil war in The 5 for two days in a row while the war in Iran is going on has got me itching to throw my 2 cents in,” writes one of our regulars.

“To discuss the possibility of civil war, to acknowledge its likelihood, requires the ever-so-subtle unsaid concession that ballots don't seem to have the power they are supposed to. It seems to be noticed amidst all the broken promises that lobbyists and others with big wallets get what they want when the voters don't.

“From there it is easy enough to conclude that we live in a kleptocracy or an oligarchy and that the American Experiment is a failure and the eternal vigilance the founders named as the price for freedom is simply too high a price for the average citizen to pay.

“After that? Who knows?

“I think Robert Kiyosaki is probably right when he says three days after there is no food is when all hell breaks loose, but we aren't there yet.”

Dave responds: And let’s pray we don’t get there.

Brings to mind another old saying, often misattributed. We made a meme out of it on Election Day 2020…