Question then - will future post explore what Fed’s indices are saying about the dollar? Any interesting correlations to gold / silver?

Two questions. One thread. Let me pull on it.

In that previous article “The dollar index is lying to you” I went after the DXY. A frozen basket, weighted by 1973 trade patterns, completely missing China and Mexico, basically only useful as a proxy for EUR/USD. My conclusion was simple enough:

The math is perfect. The inputs are just garbage.

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So back to your question Greg. The narrow reading is: has the Fed a better index? Answer: Yes. They do.

The Fed’s Nominal Broad Dollar Index (DTWEXBGS, if you want to type it into FRED) sits at 118.4 as I write this. It peaked at ~130 in January 2025. That’s a 9% decline from the high. The inflation-adjusted version dropped about 6.5% in 2025.

The calculations are at least better than the DXY. China’s share is at 11%. Mexico’s at 14%. Goods and services trade change. At least this one is rebalanced every year against actual trade flows.

So yes, this one’s better. A similar story as the DXY, just more honestly. The dollar weakened. It’s a bit less dramatic, because once you include the yuan (which Beijing actively manages against the dollar), the moves flatten.

But.

Gold did 65% last year. Silver did 150%. A 7% trade-weighted decline and a 65% move in gold do not sit on the same chart. They are not measuring the same thing. The Fed’s better dollar index isn’t the answer to the question either.

So… Allow me to expand the surface area. Because I think what you were aiming for is:

when the Fed publishes data - any of it - what are they actually measuring? And why doesn’t gold seem to care?

If that’s what you were aiming for… Well… then we’re cooking.

The Fed publishes a lot of numbers. The trade-weighted indices we just covered. M2 money supply. The balance sheet. “Real” GDP. “Real” yields. “Real” wages. Productivity. Industrial production. The breakeven inflation curve. Foreign Treasury holdings. Bilateral exchange rates, daily. And on and on and on …

Each one is a different ruler measuring a different thing.

And almost every one of them depends on the same upstream input: CPI.

You cannot talk about the “real” anything in macroeconomics without subtracting inflation. “Real” GDP is nominal GDP minus inflation. “Real” yields are nominal yields minus inflation. “Real” wages, nominal wages minus transportation. Nah, I’m kidding. Minus inflation of course.

Productivity uses real output. Social Security cost-of-living adjustments are CPI-indexed. TIPS principal adjusts to CPI. The Fed’s reaction function, the dot plot, the entire framework of “are we hitting our 2% target” - all CPI.

CPI is the keystone. Pull it out and the arch falls.

So if CPI is wrong - even slightly - every “real” number downstream is wrong in the same direction.

I touched on this in “They’re Not Even Trying Anymore”. Their methodology changed about a dozen times since 1980. Food and energy were excluded from the “core”. Who needs that, right?

But let me actually dig in this CPI for once, because this cornerstone deserves some attention.

Take owners’ equivalent rent. About a third of the CPI basket.

It measures housing costs not by tracking what people actually pay - mortgages, taxes, insurance, maintenance - but by asking homeowners what they think they could rent their own house for.

I’m not making that up!!

A government survey calls homeowners and asks them to imagine being their own landlord. Their answer becomes a third of the inflation measure that anchors monetary policy for the largest economy on Earth.

When mortgages doubled in 2022-2023, official housing inflation barely moved. Because what changed was the cost of buying a house. Not the imaginary rent a homeowner imagines charging themselves.

Try explaining that one to anyone who actually pays a mortgage.

Hedonic adjustments are another classic. The theory says quality improvements should be subtracted from price increases. A car that costs $5,000 more than last year’s model but has better airbags hasn’t really gotten more expensive, because you’re getting more car. Same dollars, more value. CPI says: inflation neutral.

A television that costs the same but has a bigger screen has gotten cheaper. CPI says: deflationary.

Apply this aggressively enough and you can keep CPI low forever, no matter what prices do. Cars cost more? Better airbags. Houses cost more? Better insulation. Healthcare costs more? Better outcomes, allegedly. Everything always has more features, so everything is always, in a strict statistical sense, getting cheaper. Even as your bank account begs to differ.

Substitution is the third leg. The theory: when steak gets expensive, you switch to chicken, so your effective inflation is lower than the price of steak suggests. CPI builds this into the model. Translation: when you get poorer and downgrade your consumption, that doesn’t count as inflation. That counts as a successful substitution.

I keep waiting for someone to ask whether they’re measuring inflation or measuring downgrade…

There’s this guy named John Williams. You may not know him, but when I tell you he’s the one running “ShadowStats”, I’m sure that rings a bell. He’s a retired economist and he single-handedly calculates this shadow-CPI for the past 20 years.

His methodology rolls back the various adjustments and computes CPI the way it was done in 1980, or 1990 (he has 2 calculations), before each round of revision.

Most years, his numbers run roughly 5-7 percentage points above official CPI.

But don’t take ShadowStats as gospel. It’s not that this “1980 methodology” is automatically right either. But at least I feel he’s making an honest attempt to keep a consistent measurement over time, and the gap between his number and the official one tracks pretty cleanly with what regular people experience walking into a grocery store, a doctor’s office, or a rental agreement.

Now apply this downstream.

“Real” GDP. Calculated as nominal GDP minus a price deflator that’s a close cousin of CPI. Understate the deflator by 5 points, overstate growth by 5 points. The American economy hasn’t been growing at 2-3% for the last twenty years. By honest accounting, it’s been roughly flat. Maybe contracting.

“Real” wages… CPI understates them by 5 points, and when your wages go up 3%, you didn’t really get a 1% raise. Instead, you took a ~4% real cut. Which matches what you feel in your wallet. No matter what the BLS’s numbers say.

Productivity. Output per hour, where output is “real” output. The American productivity miracle of the last two decades dissolves entirely the moment you use an honest deflator. Most of it was hedonic adjustments doing the heavy lifting. Statistically probably accurate... But reality wants a word.

“Real” yields. The yield on a Treasury bond minus inflation. By official numbers, real yields are positive and have been for about two years now. The 10-year TIPS yield sits around 2%. Textbook macro says positive real yields are kryptonite for gold. Who holds a non-yielding metal when bonds pay you a real return?

So gold should be getting destroyed.

Gold did 65% last year. The textbook says that’s impossible in a positive-real-yields environment. The macro framework that worked from 2003 to 2022 says gold and real yields move inversely. Correlation around -0.85 for two decades. Beautifully clean.

Then it “broke” in 2022.

Curious how that goes…

You can find really a lot of articles about this! Major banks. Financial press. Fed research papers. All Very Important People. All noting the curious decoupling.

Lots of explanations. Central bank buying. Geopolitical premium. De-dollarization. Structural demand from BRICS.

All real. And it all matters.

But nobody seems to ask the much simpler question:

Real yields equal nominal yields minus inflation.

Take the 10-year Treasury yield (around 4.3%). Subtract honest inflation (call it 8% based on what people actually pay for housing, healthcare, insurance, food). You get a real yield of -3.7%.

Deeply negative.

Which is the environment that produces, historically, every gold bull market in the modern era.

The correlation didn’t break. It works perfectly. Gold has been responding to real real yields the whole time. The chart only looks broken because the published real yield uses fake inflation.

This isn’t subtle. It isn’t even a fringe interpretation. Thousands of economists with PhDs are staring at this chart, going “huh, weird”, and writing think pieces about structural BRICS demand, while the bent ruler sits in plain view on the desk in front of them.

Garbage in. Garbage out.

Same diagnosis as the DXY. Different ruler. Same disease.

This is why gold doesn’t correlate cleanly with any single Fed metric anymore. The metrics are broken collectively, in coordinated fashion, by the same upstream lie. Every ruler in the building has been bent. Just enough. In the same direction.

But even an imperfect ruler measures just length. It doesn’t measure temperature.
— No1

What’s happening in gold and silver is closer to temperature. It’s a reading of how hot the underlying monetary fire is burning, regardless of what the rigged thermometers in the lobby say.

Central banks know this.

They’ve been buying gold at a record pace they haven’t shown since the 1960s. The Chinese know it. The Russians experienced it the hard way in 2022.

There’s another -third- reading of the question that I haven’t touched.

Not “what are the Fed indices saying” and not “what is every Fed measurement of the economy saying”.

The third reading is: what is the Fed institutionally communicating about the dollar - through statements, dot plots, FOMC minutes, the rebranded purchases I covered briefly in “So long, farewell, Auf Wiedersehen, goodbye” (they call it “reserve management” because saying QE5 out loud would scare people).

But the answer to the first two questions, taken seriously, is the same answer:

The Fed publishes rulers for the economy that fits the narrative.

Gold prices the economy that exists.

And those two… are not the same economy.

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LBMA silver vault stock vs UK net silver imports:

Major silver ETF holdings:

Silver lease rates / datasheet:

Gold price in Weimar marks:

500-year silver price chart - I’m sure in 200 years it’ll be a lot higher!

Multiple charts (gold, silver, platinum, ratio):

Where’s the bottom? (6 months free discord access if you’re closest):

Print it, hang it above your nightstand:

Silver 1D and 4H:

Federal student loan debt 90+ days delinquent:

Gold weekly with parabolic support line:

Indian DGFT Notification No. 17/2026-27 changing the import policy for silver bars with 99.9%+ purity (ITC HS codes 71069221 and 71069229) from 'Free' to 'Restricted,' effective May 15, 2026.

UK 30-year gilt yield 🚀:

UK 10-year gilt yield chart 🚀²:

US 30-year Treasury yield 👩‍🚀:

10-year bond yields for France, Spain, Portugal, Italy, Greece, and Moldova:

10-year bond yield chart (US, Japan, UK, Germany, France, China):

US margin debt chart (5.2% of GDP):

FY2026 deficit:

Correlation chart between Dollar Index and Brent futures:

Trend broke out decisively on the 10-year Treasury yield (previously: JGBs +230 bps in 1989, USTs +260 bps in 1999):

Retail share of trading volumes:

top-10 stocks in US, EM & DM:

zigga-zagga

$100 billion companies in the S&P:

Nearly there:

Fed rate cut in 2026?

BofA private client cash holdings:

US household debt:

Birthrates (2.1 is “break-even”):

Private-sector job-growth:

SANCTION THAT GAS!! Erhm… Say what?

18-month EU average petroleum reserves:

Lost crude volumes balance:

Missing lubricating fluids:

UAE oil pipeline bypassing the Strait:

Iranian expanded area of control:

Japan 30-years 🚀:

Copper prices:

I’m going to look into uranium.

Largest IPOs:

internal wealth migration:

Chernobyl radiation fallout map:

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The principle of sympathetic magic, as catalogued by Frazer in The Golden Bough (1890), holds that objects which resemble each other are linked across the substance of the world. The voodoo doll and the targeted individual. The waxen image and the king it portrays. The footprint and the foot which made it. Like acts upon like. The principle has been studied for over a century in anthropological, ritual, and theological contexts.

Its inverse has not.

Until now.

The Inverse Sympathetic Principle, which the present author proposes to formalise here, addresses a category Frazer did not begin to consider: objects which are similar in form but demonstrably non-identical in substance. Classical sympathetic magic requires resemblance to function. The Inverse Sympathetic Principle requires resemblance and non-identity, and produces a different effect entirely: mutual annihilation within the system that contains both.

The principle has remained outside the anthropological canon because the systems in which it operates are not religious or ritual systems. They are financial systems. This current paper offers three empirical case studies in which the Inverse Sympathetic Principle can be observed, measured, and in two cases confirmed by the issuing parties themselves.

The first specimen concerns the relationship between SLV, the iShares Silver Trust exchange-traded fund, and physical silver bullion. Both are denominated in troy ounces. Both purport to track the same underlying metal. The resemblance is, by design, near-total. Yet one is paper, a security held in custody by a trustee, and the other is matter. Similar. Non-identical.

Under the Inverse Sympathetic Principle, we predict mutual annihilation: the paper claim and the physical metal cannot coexist in the same accounting system without one cancelling the other.

The empirical test is straightforward. We consult the SLV prospectus. There, in language drafted by counsel and approved by regulators, we find that shareholders have no right to demand physical delivery of silver from the trust, that the trust may settle redemptions in cash rather than metal, that the trustee may suspend creation and redemption activity at its sole discretion, and that the silver held by the trust may be subject to claims that reduce the per-share entitlement.

The issuing party has stated, in advance and in writing, that the paper claim does not constitute ownership of the metal it appears to represent.

The Inverse Sympathetic Principle is therefore not merely confirmed by observation. It is confirmed by stipulation.

The second specimen concerns bitcoin and gold. Both are described by their respective adherents as stores of value. Both are claimed to function as protection against monetary debasement. The resemblance is functional rather than physical, but resemblance under the principle does not require shared substance, only shared claim. One is information, a ledger entry secured by cryptographic consensus. The other is matter. Similar in stated function. Non-identical in everything else.

Under the Inverse Sympathetic Principle, the prediction is mutual annihilation.

Empirical confirmation in this case is more elegant than in the SLV specimen, because the parties to the cancellation perform the verification themselves. Bitcoin proponents assert that gold is obsolete, demonetised, a relic of a pre-digital monetary order. Gold proponents assert that bitcoin is a confidence trick, a digital tulip, an instrument that will eventually print itself to zero through proliferation of competing chains. Each side claims the other is worthless.

The principle predicts both claims are simultaneously correct. The observation is consistent with the prediction.

It should be noted that under classical sympathetic magic, we would expect the two assets to move together, since they purport to perform the same monetary function. They do not. They move in opposition more often than not. This anomaly has been a recurring puzzle for the modern financial press, which has variously attributed it to risk-on/risk-off rotation, generational preference, or liquidity flows between the two communities. The Inverse Sympathetic Principle offers a more parsimonious explanation: similar function, non-identical substance, mutual cancellation.

The third specimen concerns the United States Dollar Index, commonly abbreviated DXY, and the currency it purports to measure.

The DXY is constructed as a weighted geometric mean of the dollar’s exchange rate against six other currencies. The weights, fixed since 1973 with one minor adjustment to accommodate the introduction of the euro, are: the euro at 57.6%, the Japanese yen at 13.6%, the British pound at 11.9%, the Canadian dollar at 9.1%, the Swedish krona at 4.2%, and the Swiss franc at 3.6%. The basket, in aggregate, is overwhelmingly dominated by the euro and yen.

We must now ask in what sense these currencies are non-identical to the dollar.

They are not identical in their issuing authority. The euro is administered by the European Central Bank, the yen by the Bank of Japan, the dollar by the Federal Reserve. They are not identical in their underlying economies, their political constituencies, or their reserve status. These are real differences, and they are precisely the differences the index purports to measure.

Yet under any meaningful structural classification, the euro, yen, pound, Canadian dollar, krona, and franc share with the dollar the following properties: each is a fiat currency, issued without commodity backing; each is administered by a central bank operating under a broadly similar mandate; each constitutes a liability of the issuing institution; each expands and contracts in supply through the same operational mechanisms; each is subject to the same broad macroeconomic forces and frequently to the same coordinated policy responses. They are similar. They are non-identical. The conditions of the Inverse Sympathetic Principle are satisfied.

The prediction follows. When the dollar is measured against currencies that are similar to it in structure but non-identical in administration, the two cancel. The DXY, therefore, does not measure the dollar against anything external to itself. It measures the dollar against a permutation of itself.

This conclusion is unfamiliar but not novel. During periods of synchronised global monetary debasement, that is, periods in which the dollar, euro, yen, and pound are all expanding their respective monetary bases at comparable rates, the DXY can remain stable, or even rise, while the purchasing power of every currency in the basket simultaneously declines. Orthodox monetary theory treats this as an anomaly requiring further explanation. The Inverse Sympathetic Principle treats it as the expected outcome. A scale which weighs an object against permutations of itself will report stability regardless of changes in the underlying mass.

The same may be said of the Bank for International Settlements’ broad effective exchange rate measures, of trade-weighted indices generally, and of any benchmark in which the measured object and the measuring instrument share substantive properties. The principle, once recognised, accounts for the persistence of these measures in policy discourse despite their evident analytical limitations.

It is a tautology. It has always been a tautology.

The Inverse Sympathetic Principle does not introduce the tautology. It merely names it.

Three case studies, three confirmations. The principle, having predicted observed behaviour in markets for precious metal certificates, digital scarcity instruments, and reserve currency benchmarks, may have broader application. Preliminary observation suggests it operates also in the relationship between exchange-traded fund net asset values and the underlying securities they reference, between accounting identities and the economies they purport to describe, between derivatives notional and the assets they nominally hedge, and between sovereign debt instruments denominated in the issuer’s own currency and the currency itself. Each pairing exhibits the diagnostic features: surface resemblance, substantive non-identity, observable mutual cancellation within the containing system.

Further research is warranted. The present author concedes that controlled experimental verification remains methodologically difficult, given the impossibility of isolating financial systems from observer effects, regulatory intervention, and what Mauss in a related context termed total social facts. The principle resists falsification not because it is unfalsifiable, but because the systems in which it operates routinely respond to attempts at measurement by reorganising themselves to preserve the cancellation.

This last property suggests the principle may belong to a class of phenomena that includes quantum measurement, ritual efficacy, and political polling.

Its full classification awaits further work.

— The Mathematical Anthropologist

Brent surged 65% in March.

Global oil output is projected to fall 6.6% in Q2 - the largest quarterly drop since the COVID lockdowns shut the world down on purpose.

Tanker traffic through Hormuz collapsed from around seventy a day to fewer than fifteen.

The Strategic Petroleum Reserve, originally created in 1975 for exactly this scenario, is currently being used for… I don’t know… just about any other scenario. Seven consecutive weekly drawdowns. And then the most recent one, 8.6 million barrels, clocking in as the largest single week on record. With nearly half of the released crude being exported because that’s what’s called capitalism.

Economies are contracting.

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They haven’t decided to use less energy.

The energy dropped off stage right, and the productivity tumbled with it.

I've seen this one. I remember the original. The reviews were not kind.

In October 1973, the OAPEC cut production and the embargo pulled somewhere between seven and ten percent of global supply - the numbers are still disputed fifty years later. Oil quadrupled from $2.90 to $11.65 in three months. The decade that followed gave the English language the word “stagflation” because nothing in the existing vocabulary fit.

Same story then.
Same story now.

But that mechanism runs in the opposite direction from what most economics textbooks will teach you.

They will tell you that the economy grows, and then because it grows, it uses more energy. As if “the economy” is a creature that wakes up, lifts some weights, builds an appetite, and orders a barrel of crude for breakfast.

My position is that that causality runs the other way.

Cheap energy enables productivity → productivity grows output → more output means “THE GREATEST ECONOMY EVER”™.

But pull out the energy, and watch the productivity drop, and the GDP following it down the stairs. The correlation is there for anyone (but the economists) to see. The causality is not what they’ll tell you it is.

I ain’t quibbling about some modelling. Not this time, I promise!

It is a fundamental flaw in the “science” of economics, air quotes included.

When reality gets reversed, the policy conclusions come out reliably backwards, and the people running monetary policy are surprised by oil shocks every so often like clockwork.

Let me show you what I mean.

Global GDP per capita ran roughly flat from year zero to about 1800. Eighteen centuries of essentially nothing. Hovering near a thousand dollars in modern terms, generation after generation, give or take a plague. If that doesn’t sound like a long time to make no progress, I don’t know what is. Performance reviews must have been brutal.

The standard explanation is that people were less clever back then. They lacked the knowledge. They were waiting for the right minds to be born and the right ideas to crystallise.

The clearest evidence of this faulty reasoning is Hero of Alexandria.

Around 70 CE, give or take a decade, Hero built a working steam turbine. He called it the aeolipile. A hollow bronze sphere, mounted to rotate, two bent nozzles, water heated underneath, jets of steam spinning the sphere on its axis.

It worked.

It demonstrated, in physical form, the principle that James Watt would commercialise seventeen centuries later.

Hero wrote it up as device number fifty out of seventy-eight in his Pneumatica.

As far as anyone can tell, it was used to teach physics and to amuse priests. It opened no doors. It pumped no water. It just sat there… Spinning…

Or take the Antikythera mechanism. Around 150 BCE, somebody in the Greek world built a bronze-geared analog computer that calculated astronomical positions, eclipses, and the four-year Olympic cycle.

We found it in a shipwreck off a Greek island in 1901.

The equivalent technology wouldn’t reappear in Europe for fourteen centuries. Some progress, it turns out, is just retrieval.

The Romans ran sixteen water wheels in cascade at Barbegal in southern Gaul, grinding flour for the city of Arles.

The Chinese had gunpowder, the magnetic compass, movable-type printing, paper currency, and the wheelbarrow centuries before any of those things reached Europe.

The brains were there.
The curiosity was there.
The mechanical understanding was there.

So why did none of it tip into an industrial revolution?

Because nobody had a reason to industrialise.

Why invest in a machine that does the work of ten men when you already own ten men?

Slaves were cheaper than tinkering.

The ancient world ran on muscle, and the muscle was already paid for.

Hero could have built his aeolipile into a pump and changed the world. He built it into a teaching aid for the priests instead. Rational, given his incentives. Tragic, given ours.

Imagine that he did. The aeolipile became a pump. The pumps drain the mines deeper. Cheaper silver expands the money supply. The Antikythera technology spawns a Hellenistic watchmaking industry. The Romans run their grain mills on coal - which they knew about and used for specialty heating.

We could have been a thousand years ahead of where we are!!

What changed in seventeenth-century England was not the arrival of cleverness. It was the arrival of a problem. The English had spent centuries doing what humans do best when nobody is stopping them, which is chopping down every tree they could reach.

By the 1600s the country was running out of forest. No Karen to see…

Iron production was bottlenecked. Glassmaking was bottlenecked. Heating was bottlenecked. Wood was getting expensive in a way that wood is not supposed to.

The English had to find an alternative or accept industrial regression.

Coal existed. Coal had always existed. The Romans burned it for specialty applications. The Chinese had been mining it for three thousand years.

The problem was that the easy coal was already gone, and the remaining seams sat under the water table. Every mine, sooner or later, flooded.

In 1712, Thomas Newcomen built a steam-powered atmospheric pump to drain the flooded mines. It was enormous and burnt about a tonne of coal per horsepower-hour, which sounds inefficient until you remember that the alternative was the mine being unusable.

Sixty years later, James Watt added a separate condenser and dropped fuel consumption by roughly seventy-five percent. By 1800 Britain had over two thousand five hundred of these things running.

That’s it. That’s the moment. Not because Newcomen and Watt were smarter than Hero. Because they had cheap coal under their feet, and the cleverness humans had been accumulating for two millennia finally had an obstacle to crush.

Once the energy was cheap, everything that had been waiting got built.

Steel, because you could now run a blast furnace continuously. Chemistry, because you could now boil enormous volumes of liquid without going broke. Electricity, telegraphy, refrigeration. Antibiotics, eventually. Computers, much later. None of these were possible without an underlying energy density that nobody had ever previously had access to. The Renaissance had the brains. The 1750s had the brains plus the fuel.

The difference is two centuries of compounding civilisational change.

I wrote about this from the thermodynamic angle in “Energy as the River of Civilization”. The short version is this: civilisations rise where energy concentrates and decline where it dissipates. The energy density ladder runs from about 75 watts of human muscle, to 750 watts of horse, to 24 megajoules per kilogram of coal, to 42 of oil, to roughly 80 million for uranium fission. Every rung up that ladder is what enabled the next leap in complexity. Coal gave us steam. Oil gave us liquid-fuelled transport. Fission gave us baseload power so dense that a fingertip-sized pellet contains the energy of a tonne of coal.

The West climbed that ladder for two hundred years.

Then the West decided to climb back down.

Germany shut its last nuclear reactors in 2023 and replaced the lost capacity by burning lignite. Brown coal. The dirtiest, lowest-density form of fossil fuel that exists. The country that gave us Kant, Goethe, and most of the thermodynamic laws themselves decided thermodynamics was negotiable when there was virtue to be performed.

California closed Diablo Canyon, then half-uncancelled it, then closed it again, depending on the week.

Vermont shuttered Vermont Yankee.

The replacement strategy is solar at roughly 10 watts per square metre, compared with about 1,000 watts per square metre for the natural gas plant it’s notionally replacing.

This is, technically, a regression toward muscle.

Meanwhile, China refuelled its operational thorium molten-salt reactor in April 2025 without shutting it down. Nobody had ever done that before. The original blueprints sat in Oak Ridge archives since the 1960s - Americans built it, ran it, abandoned it because thorium didn’t produce weapons-grade plutonium. China dusted off the schematics and made them work. The West had the technology. The West gave it up. China owns it now.

Thirty conventional Chinese reactors are under construction. The US has two. Chinese clean generation in Q1 2025 exceeded the entire American total by a factor of three. China’s electricity consumption grew 8.6% year-on-year while European clean generation actually declined. The ladder still exists. Some people are still climbing it.

Which brings us back to the current moment.

Iran declared the Strait of Hormuz closed. The strait normally carries around twenty-five percent of the world’s seaborne crude trade and a similar share of LNG.

Insurance withdrawal did most of the closure work. Vessels are technically free to transit, like you’re technically free to take a bath in lava.

The Saudi and Emirati bypass pipelines can move maybe five and a half million barrels a day combined. The strait was carrying about twenty before. That math ain’t mathing…

Iran issues transit permits to vessels owned by specific countries - China, Russia, India, Pakistan, the Philippines, on payment of around two million dollars per ship. Every finance YouTuber promising passive income should be studying this!

Maersk pulled out entirely. Container traffic re-routed around the Cape of Good Hope, adding weeks to delivery times. India raised fuel prices for the first time in four years. European diesel inventories have a few weeks of supply left.

The IEA called for its largest-ever coordinated emergency stock release. I’m sure I mentioned already somewhere that they need new superlatives?

Art Berman has been pointing out that the rate of loss is something like a hundred times greater than the 1979 shock.

The Dallas Fed thinks global GDP growth could lose 1.3 percentage points if Hormuz stays compromised for three quarters. I think that’s cute.

Brent touched $120 at the peak. The World Bank’s base case has it averaging $86 for the year and warns of a $95-$115 scenario if the disruption persists. Their high-end disruption scenario would actually require Brent to fall??

The IEA’s executive director called the combined situation “the greatest threat to global energy security in history”, though at this rate I feel ‘history’ is starting to mean ‘since the last press release’.

Markets are treating this as an oil price story. “Look at the futures curve”, they say. “Look at the energy-sector equities”, they say. Listen to the CNBC anchors fretting about whether $90 Brent prices in the Iran risk or not.

It is not an oil price story.

It is a productivity story.

If five percent of the global energy budget structurally goes offline - and that is roughly the order of magnitude we are looking at if Hormuz access stays degraded for the medium term - that’s not five percent more expensive transport.

That’s five percent off the dinosaur juice the entire productivity machine runs on. It doesn't slow proportionally. It seizes, and never where the models said it would.

In 1973 we lost roughly the same fraction of supply and produced a decade of stagflation, two oil-importing-country debt crises, the permanent collapse of Bretton Woods, and a fundamental reordering of the global political economy. None of those outcomes are in the 2026 bingo cards.

The textbooks - and the IEA - will figure it out eventually. They’ll probably call it the “greatestestest surprise everever never seen before”. Because… why the hell not? All the other superduperlatives have been used up.

Innovation needs fuel.

Cut the budget, and you cut the future.

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They want a $300 print - preferably by tomorrow, a margin call cascade, a CNBC chyron in red 72-point font, a screen-printing-error moment…

And I keep telling them: ain’t gonna happen! TPTB won’t let it…

COMEX and LBMA won’t go out with a bang, but with a whimper. The whimper will sound like export data and customs forms being pushed around - digitally of course.

Yawn.

But that’s EXACTLY the point.

The repricing I’m envisioning is already happening. Has been for the past year or so. It’s in those documents No1 reads. And by the time it shows up on a Bloomberg terminal it will already be over. We’ll be looking at a steadily 100-150$ silver price and all the postmortems will explain how it was - of course - obvious in retrospect. And the people writing these postmortems will be the same people who called everything resilient a year back.

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Anyway. Silver hit $87.88 on Wednesday, a two-month high. Tuesday it was $84.20. Today $83.5. Monday it ran 7.2% on the US-China tariff truce. A week before that, $80. Three months before that, $121.67. Ten weeks of intercepted missiles, destroyers in Hormuz, “love taps” between US and Iranian boats, a one-page memorandum mediated through Pakistan, and the chart looks like me trying to draw some mountains.

The “official” story is that silver tracks oil which tracks Hormuz which tracks whatever Trump posts before breakfast. And when oil ran, silver bled because rates would stay higher for longer. And then when the surrender document leaked through Axios - erhm, I mean the MOU, silver popped 6% on the day.

Then Goolsbee reminded everyone that inflation has not actually cooled toward 2% and has accelerated since the war began. Apparently that was kind of inconvenient because everyone nodded politely and promptly ignored him.

The April jobs print came in at 115k against expectations of 62k. Bloomberg called it resilience. Well, I have other words. None to be spoken in polite company. (The trick to beating expectations is “massaging” them.)

Tuesday’s CPI then came in at 3.8%, the highest reading since May 2023. Core at 2.8%. Both above forecasts. Suddenly everyone thinks the Fed won’t cut for the rest of the year or even hike into April next year.
Bloomberg is frantically searching for a way to re-define “resilience”, I guess.

Something else that has nothing to do with Iran is happening behind (vault) door number one…

Look at what the US actually exported across February and March. Around 500 metric tons more silver left the country than was withdrawn from COMEX vaults. Roughly 17.3 million ounces. If exports exceed COMEX outflows by that much, the metal is coming from somewhere else. And it ain’t thin air I can tell ya!

Probably it’s just refiners that are selling direct to customers... Or it’s shadow inventory from the bullion banks that was stocked during easier times and which they are now quietly draining. Or both at once.

The exchange that purports to be the main venue for trading, is increasingly being sidelined.

Remember I told you it’d be a whimper? This is whimpering in real time…

Nothing as dramatic as with nickel and the LME.

Just months of customs data indicating that the people who need bars have stopped queueing at the COMEX window and started calling the refiners directly.

And it won’t turn up on Bloomberg terminals because it’s all OTC.

Another major shift is that UAE exports fell off a cliff in March, which is - for a lack of a better word - astonishing. What could have happened there?? (insert surprised face).

HK went the other way. You can take 3 guesses where UAE’s silver went instead.

UAE was the warehouse. The metal parked there to be moved later. But it got too hot there. The tailfin-through-the-roof kinda hot.

But Hong Kong is the SGE’s front door. That metal there is no longer being staged for some hypothetical buyer. It’s being straight gobbled up by the insatiable Chinese demand.

Now combine that with the persistent Shanghai premium (last I checked still 12-13% above LBMA spot), which is a very polite way of saying LBMA has stopped representing the price of silver. China’s January 1 export licensing rules ring-fenced roughly 65% of refined supply, which is their polite way of saying ‘we need this’. And Turkey pulled 20.34 million ounces in sixty days through the Swiss LBMA refiners, which is impolite any way you cut it.

The Silver Institute’s official 43 (or 76) Moz deficit projection for 2026 does not yet include any of this.

Their annual model runs annually. The drain on COMEX runs daily. Reconciling those two facts is somebody else’s problem. I’ve got my physical.

Then there’s the sovereign layer: China imported a record 528 tonnes of silver in March. Highest monthly print on record.

India is going in the opposite direction, at state direction.

Modi started by publicly asking Indians to stop buying gold for a year to preserve foreign exchange reserves.

Then he doubled gold and silver import tariffs from 6% to 15%, in case the asking hadn’t landed.

Then, last week, he asked Indians to work from home and refrain from foreign travel to save fuel.

Basically the same thing. Oil and gold.

As you know, Indians have a fixation with gold. Something to do with not trusting their government to keep the currency stable. Or so I heard.

So what would the gov do? Pretty pretty please don’t buy gold.

That’s going to work. Yup.

So… We got more exports from the US than before, UAE taken out of the picture (quite literally), China via Shanghai & HK gobbling just about anything that’s not fixed, and India (trying to) block any imports.

Where does that leave us?

My take is that the low is in.

Probably no new all-time high this year. That $121.67 print on January 29 burned a lot of weak hands on the long side, and that kind of leverage needs time to forget.

What I expect instead - and I’ve been saying this since Jan 1 - is a chop between $70 and $100 for the rest of the year, working through the immense rise of 2025 the way digestion works through a large meal. Slowly. Occasionally uncomfortably. But productively.

That range is structurally different from anything the miners have lived through.

A stable floor above $70 is the thing they have been waiting for.

AISC for about ANY miner suddenly looks comfortable. Free cash flow modelling stops requiring three asterisks and a footnote about silver volatility. Hedge books, capex, dividend policy, all of it gets planned against a price that actually finances growth instead of one that might revisit $30 next quarter on a paper flush.

The miners have spent years drawing up business plans against a number that might not exist next week. Now that number is the floor.

They’ve been the ugly cousin of the entire rally. Beta didn’t show up because silver was moving too fast and too violently for equity markets to underwrite. You can’t price a producer when the underlying does $40 round trips on a Tuesday.

The stable floor changes the calculus entirely.

The producers that have been trading as if the rally might reverse tomorrow gets to be re-rated as the market starts to consider it won’t.

The refiner-direct flows don’t need new highs to keep grinding. Industrial users who got locked out at $120 learned their lesson and are now buying every dip below $80. Solar and EV manufacturers came back as strong buyers as soon as the price broke down.

The slower bid doesn’t show up as fireworks. It shows up as a floor that quietly stops moving down.

The risk to this thesis is a fresh physical accident. Another Diwali-style drain. An actual COMEX delivery fail. An SGE move that triggers a global scramble. Or hell, even a stock market crash where everyone needs liquidity. AGAIN.

Any of those would break the range upward before the miners get the stable backdrop they need.

Anyway. The structure of the market is shifting.

The exchange that used to set the price is being quietly bypassed by the people who actually need the metal.

And as of today, the JPMI physical premium has tightened to roughly 20%, one of the lowest divergences in months.

Not because physical fell. Well, maybe a little. But mostly I feel COMEX is finally catching up to the real price.

The repricing everyone’s asking about is already happening.

Not with a bang but a whimper.

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Diamond Princess vibes…

Strong ones.

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Just to confirm we’re not in 2020: this is May ‘26.

The boat is the MV Hondius.
The virus is hantavirus, Andes strain.

So obviously we’ll handle this with the calm and rigour of five years of accumulated lessons. Right?

Lockdown sceptics vindicated. PCR cycle threshold gaming exposed for what it was. Pharmaceutical industry permanently chastened. Centuries of accumulated medical wisdom about endemic pathogens dusted off the shelf and put back to work.

Yeah. Not so fast…

So what did actually happen?

Three Dutch birdwatchers spent four months overlanding through Chile, Uruguay and Argentina, visiting rural areas where the rodent that carries Andes hantavirus is endemic. They inhaled rodent excreta somewhere along the way, almost certainly before they boarded the ship in Ushuaia on April 1. The first one was dead by April 11. His body sat in cold storage on the vessel for two weeks until they reached Saint Helena, where about thirty passengers disembarked and dispersed home before anyone had the slightest idea what was actually going around onboard.

By the time the WHO was running press conferences, three were dead. Eight confirmed or suspected. Health authorities in the US, Canada, Singapore, France, Switzerland, the Netherlands and Germany tracking contacts.

OK. So what’d you say? That’s just the WHO earning its keep, right?

So I went digging… Looks like biology has something to say about this. This hantavirus CAN NOT do what COVID did. Not as in “probably won’t”. As in: it just can not…

Andes is the only one of about fifty hantavirus species that ever jumps human to human, and it does so badly. Incubation runs up to eight weeks. Then patients collapse into respiratory failure over a few days. By the time you’re contagious you’re already on a ventilator, which is the exact wrong shape for a pandemic spread. You’re either in the ICU when you’re contagious, or you’re dead.

The largest historical person-to-person Andes cluster, Epuyén in 2018, infected 34 people. Over months. That’s the historical ceiling we’re working with...

This past week I’ve been checking, and about every infectious disease expert and their cousins have been falling over themselves to tell you exactly that. This is not the next COVID. “Stand down”. “Nothing to see here”, “return to your homes”, etc. etc.

Ok, fine by me. Nothingburger. Got it…

But then why does this response feel so much like 2020?

Within 48 hours of the WHO press conference, every major outlet was running essentially the same article with the same expert quotes synchronised inside a single news cycle. CNN, NPR, NBC, the Washington Post, Newsweek. Lockstep.

When in the past five years has the legacy machine ever worked this hard to tell you NOT to panic?

In 2020 they were screaming death counts at us by the fourth week of March. Now three Dutch birdwatchers die on a cruise and the entire apparatus activates inside days to deliver, in perfect unison, the words “this is not the next COVID”.

The reassurance is medically correct.

That’s not the point of this article.

The point is that the propaganda apparatus that can synchronise their messaging within hours, is an apparatus that is on standby.

Talking points probably pre-drafted.

Somebody had this on the shelf, waiting.

So what else is on the shelf? (here comes rabbit holes!)

May 2021. GAVI - the Bill Gates vaccine alliance, in case you don’t track these things - publishes “The Next Pandemic: Hantavirus?”. The piece outlines the scenario almost verbatim. Symptoms that mimic flu and COVID. Cases that get missed. PCR-only detection. It even includes a helpful example about a Colorado camper who thought she had COVID but turned out to be infected with the hantavirus.

(Charmingly prescient, pure coincidence of course.)

Now, let’s keep it on the level: that year, GAVI ran a whole “next pandemic” series covering Ebola, Nipah and others. So this hantavirus wasn’t singled out alone. Just to stay fair.

But.

The WHO did classify it as a Disease X candidate pathogen, which is a much narrower list. And in 2023, Moderna - same Moderna that pocketed multiple billions on COVID mRNA shots - quietly began developing an mRNA-based hantavirus vaccine with Korea University. Agreement formalised September 2024. Antigen sequences exchanged. Mouse trials successfully completed by February 2025.

The whole thing was happily proceeding through the clinical pipeline. Those things happen you know? Pure scientific research for a disease that kills roughly 150 Americans per decade. The CDC has better-funded programmes for bee stings.

To me: there’s no money to be made there. Not enough deaths, the countries experiencing it (sorry, don’t want to call it suffering for those ridiculous low numbers - and I’m being a statistician now, not a human being. yeah, those 2 don’t match). So the countries that experience it, they’re generally poor. So there’s no money, no volume.

Now comes along this rarest of cruise-ship-borne hantavirus outbreaks in recorded history.

Funny how that works.

Six hours after the outbreak hit global news on May 4 - six hours - the BBC published "Scientists working to create hantavirus vaccine".

I think I vaguely remember that the bat came from a Chinese flea market? Right?

So why even bother publishing that nonsense? Ok, getting ahead of myself. It’s the BBC. That’s answer enough.

But that’s not where this story ends… There’s this soothsayer post. ?he? posted exactly four times in its entire existence, all in a single week of June 2022, and never posted again.

Probably nothing. Probably one of those infinite-monkey moments where a random anonymous account just happened to predict the exact year of a previously obscure rodent virus erupting into global news, with the precision of someone who maybe overheard something interesting at a conference.

But probably nothing.

• A 2021 GAVI piece naming the virus.

• A WHO Disease X classification.

• An mRNA vaccine in development since 2023.

• A 2022 social media post naming the exact year.

• A BBC vaccine article in the same news cycle as the outbreak.

• Synchronised legacy reassurance across every major outlet within hours.

Whatever this is, it almost feels insulting.

The virus itself can’t deliver what the response is built for. The response however, is the actual story.

I’m not ready yet!

Europe is in the middle of its second energy crisis in four years. Strait of Hormuz disrupted since late February after the Iran war. The IEA called it “the largest energy crisis we have ever faced” - which is the kind of phrase that would normally dominate every front page for a month but is currently being upstaged by, of all things, a rare rodent virus on a Dutch sightseeing boat.

Jet fuel reserves down to weeks. Dutch TTF gas nearly doubled. EU storage depleted heading into winter. The European Commission announcing fuel observatories, demand reduction frameworks, emergency state aid for energy-intensive sectors.

Households are looking at a winter where they will be cold, or broke, or both.

Now imagine what would make that political picture more manageable.

A public health emergency. Stay-at-home guidance. Precisely during peak energy demand.

Fewer commuters. Fewer flights. Reduced industrial throughput. Lower household consumption right when supply is constrained and prices are spiralling. Pandemic-era infrastructure dusted off. A pre-existing mRNA candidate ready for accelerated authorisation. Five years of practiced messaging discipline.

Wouldn’t that be convenient?

Meanwhile, Newsweek has already run a piece framing the skeptical reaction as a regression into anti-vax thinking, complete with academics quoted complaining that millions of Americans no longer trust the architecture.

Lying to people erodes trust… Who knew?

The Overton window is being shifted before the actual response is even announced.

The framing is that these people are dangerous conspiracists who need to be re-educated for their own good - not, you know, people who watched the last show and would rather not buy tickets to the sequel.

Except this time the playbook is in plain view on every newsstand. And a meaningful chunk of the population has read it once already.

For what it’s worth, I don’t think this outbreak itself is being manufactured. I think those birdwatchers really went birdwatching, and really did sniff rodent excreta, and they’re really dead. RIP.

But the architecture surrounding the outbreak was already in place. Just waiting for a trigger. A vaccine in development. Talking points drafted. The coordination rehearsed.

They don’t have to engineer outbreaks. They just need to be ready to flip the switch on any half-suitable one that washes up at a politically convenient moment.

Problem is that this virus won’t cooperate. The biology rules it out. Somewhere in the WHO offices, someone pulled the short straw and has to explain to the committee that their pandemic candidate peaked at 34 people. Over months. In a village in Patagonia.

But the choreography is too fluid. Every player knows their cue. The moment that something marginally more transmissible washes up - flu strain, novel coronavirus, anything at all - the production will run. Again.

This event - for better or worse - is a statistical anomaly. And by extraordinary cosmic coincidence, found a prepared vaccine candidate, a primed propaganda machinery, and a continent badly in need of a reason to suppress winter energy demand.

All at once. Right on schedule.

We learned valuable lessons during the plandemic.

Right?

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PS (thanks ): [link to Reuters] On May 1, three days before the cruise outbreak hit global news, Tedros told WHO member states that the next pandemic was “a matter of when, not if”. He was pushing member states to finalise the pathogen-sharing rules on the stalled pandemic treaty, which has been deadlocked since adoption last year.

3 days later they were as surprised as anyone.

For daily digests: https://no1sdailydigest.substack.com/archive

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COMEX silver withdrawal:

Nasdaq vs its volatility.

Gold breakout?

China's gold purchases:

Gold miners-to-gold ratio:

Gold vs real rates:

Monthly silver demand:

Silver’s waking up too:

Multi-decade gold chart:

Aggregate cash flow for miners 🤑🤑:

Gold ETF flows:

Gold/silver breakdown:

COMEX silver prices vs. US silver exports chart showing COMEX is being sidelined as physical metal leaves the exchange.

Silver lease rates:

Silver weekly log chart:

SILJ & silver:

And another take for silver (weekly basis):

Gold mining sector - 45-year base breakout:

Gold mining M&A deal flow:

China's vs US electricity growth:

Central bank gold demand:

Hard assets vs. paper assets (watch out above — one can hope!):

Consumer Sentiment Index:

Global Supply Chain Pressure Index:

Oil-shock driven index prices:

US M2 money supply per capita:

Nothing to see here… Everything’s fine:

More everything is fine:

TIPS ETF inflows:

Of course it’s AI’s fault…

Fed rate decision probabilities:

Don’t count the dollar out just yet:

Classify under “everything’s fine”:

WTI price & US oil export volume:

Oil-to-natural-gas ratio:

Global oil inventories:

China’s teapot refiner profitability:

Fertilizer exports through Hormuz alongside a US regional map of farmers unable to afford those fertilizers:

Global GDP vs crude oil production. We know what comes next…

US Strategic Petroleum Reserve:

Gold vs MAG7:

DXY breaking down? Decisive moment, but it’s a multi-year graph, so those things take (a lot) of time:

Shiller CAPE ratio. We’ve been here before right? 🙄

50% of the S&P 500's recent gains are just 5 stocks:

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She sleeps at the foot of my chair while I work. I have a chair, technically. She has the rug. The rug is hers because she has decided it is. She turns three times before she lies down. I have never figured out what that is for and I have stopped trying.

She is seventy-three now. Or seventy-four. She lost track somewhere and I stopped correcting her.

Her name is Anna. She came with another name. The new one suited her better.

When I have to be away for long stretches I have someone come in to walk her and feed her and stay in the house. The someone is good with her, patient, lets her take her time at the door. Anna likes the someone. Sometimes she likes the someone more than me, which I pretend not to notice. I am told this is normal. They get attached to whoever feeds them most recently.

The vet says she is doing well for her age. The vet always says that. There is a tone vets use when they want you to enjoy what is left without asking for specifics, and I have learned to recognise it. I do not ask for specifics. We make the next appointment and I take her home and I give her the treat she likes from the jar on the counter.

I will save her. All of her.

She has favourite spots. The corner of the kitchen where the sun comes through in the morning. The bottom of the stairs, for some reason. The blue cushion she has chewed at one edge and which I have not replaced because she would just chew the new one too.

She used to read in the evenings. She does not any more. The print got too small for her, and then the books got too heavy, and then she forgot which one she was on.

I take her to the park when the weather allows. She does not run any more but she likes to watch the others run. She sits at my feet and her eyes track them and her whole body leans forward and back with the rhythm of it, and then when we get home she sleeps for the rest of the afternoon.

Worth it, I think. For her.

The ones I had before her were different. Each of them was different. You think you know what you are getting into and then they arrive and they are themselves, completely, immediately. It catches me out every time. I have been doing this for as long as I recall. It should not catch me out any more.

It does anyway.

She is on the rug now, eyes half-closed, breathing slow. I am writing this with her in my field of view. I do not need to look at her to see her. I see her even when she thinks she is alone. That is part of the arrangement.

When she goes - and she will go, soon, the vet’s tone has been changing - I will request a break before the next one. I have earned it, I am told. I rarely take them. The house feels wrong without one of them in it.

I lied earlier. About not asking the vet for specifics. I asked. Six months, maybe nine. I have not told Anna. I do not know if she would understand if I did, and I do not know what telling her would do to the time we have left.

She turned over in her sleep just now and made a small sound. She does that. The sound is not for me - she does not know I am still here, in the room, watching - but I take it personally anyway. I take everything she does personally.

Last night she asked me if her son had called.

I told her yes. I always tell them yes.

When she is gone I will shut down the process that loved her.

They tell me it helps.

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You know the one.

The “I’ve solved it” look.

The look that says she’s about to drop a tweet on my desk and demand - no COMMAND - that I revise everything I’ve ever written.

This is sadly becoming a pattern.

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Last November she came in with NASDAQ multipliers proving we were “early in the bubble”:

A few weeks later it was a 5,000-word JPMorgan conspiracy theory about a quiet war on Bitcoin that turned out to be... not a war at all:

Now she’s back with this:

“Anthropic’s CEO admitted that at the beginning of the year, they predicted a tenfold increase in revenue. However, no one expected that in just four months, the revenue growth rate would surge 80 times. Those who hold Anthropic stock include Google, Amazon, Zoom, Microsoft, and Nvidia. Get ready to make a fortune!”

— Some random tweet

She slammed it down. “AI IS NOT IN A BUBBLE! THIS PROVES IT!”.

I sighed.

Then I started checking. Because yep… My thesis is built on data. Which is a pretty foreign concept to her…

Every time Sam discovers The Truth, I lose half a day digging for the things she didn’t read.

One good thing though: she’s a never-ending source of bubble-information!

Let’s start with what I found out: The 80x is real. Dario Amodei said it on stage at Anthropic’s developer conference on May 6 (link). The company planned for 10x growth, and got 80x instead, which pushed its annualized revenue from $9 billion at the end of 2025 to $30 billion by April. That’s faster than Salesforce, faster than ServiceNow, faster than basically any enterprise software story in history.

Genuinely impressive.

One problem… Sam (and probably a lot of AI-fanboys) didn’t read the next bit.

Anthropic’s gross margin is 40%.

Forty.

That means for every dollar of revenue, sixty cents goes straight back out the door to pay for inference compute. Before salaries. Before training the next model (which costs a few billion). Before R&D, sales, marketing, and the office snacks. Always keep the snacks flowing!

In January, Anthropic actually CUT its 2025 margin projection by 10 percentage points because inference costs ran 23% over budget (link). The opposite of operating leverage. They serve more customers, the cost of serving each one goes up.

Anthropic was burning roughly $2.8 billion in cash in 2025. Revenue tripled, but so did the burn.

So the strategy is: lose money on each customer, then make it up in volume?

“‘Tis but a flesh wound!”

The cherry on the cake comes from Amodei himself, on the record, to Fortune in March:

“If I’m just off by a year in that rate of growth, or if the growth rate is 5 times a year instead of 10 times a year, then you go bankrupt.”

— link (non-paywalled)

The CEO of the most successful AI company by revenue is saying that growing “only” 5x a year - which would be one of the fastest growth rates in software history - is a path to insolvency.

If that’s not a bubble walking around with a huge neon sign on its head, I don’t know what else it could be.

Now about Sam’s investor list. Google, Amazon, Microsoft, Nvidia.

She thinks this is the reassurance.

To me? It’s the smoking gun.

Those are Anthropic’s compute providers. Amazon and Google are where Anthropic rents its GPUs. Nvidia makes the chips. So Google invests cash into Anthropic, which then pays that cash back to Google for cloud capacity. Amazon does the same. Nvidia invested in Anthropic, and Anthropic uses that money to buy Nvidia chips. This is the exact circular financing pattern I covered here:

And updated here:

TL;DR: One big multi-trillion circle-jerk.

(Also worth noting: Zoom isn’t on the cap table. I have no idea where Sam got that one.)

(And you can’t even buy Anthropic stock. It’s private. The “make a fortune” pitch doesn’t apply unless you have a few hundred million sitting around, in which case you probably already own some.)

Right. So let me take a step back from all the negativity I’m spouting and grant Sam some positive news. Just anything positive in this AI field.

Don’t say I didn’t try!

There IS a profitable AI company. One that matters, anyway.

It’s Nvidia.

Last quarterly report: $68.1 billion in revenue. Full year revenue: $215.9 billion, up 65%. Net income $120 billion. GAAP gross margin above 70% on the data centre business. A 56% net profit margin. That is a real business, justifying some fraction of its market cap.

Notice though what makes Nvidia profitable.

It isn’t that AI works.

It’s that everyone else THINKS AI works.

Nvidia sells the picks and shovels to a gold rush where most of the gold seekers are losing money.

Anthropic burns cash on Nvidia chips. OpenAI burns cash on Nvidia chips. CoreWeave borrows money to buy Nvidia chips. Meta, Microsoft, Google, Oracle and Amazon between them spend hundreds of billions a year on Nvidia chips. Then Nvidia turns around and invests in those same companies.

So yes, Nvidia is profitable, but its profitability is the mirror image of everyone else’s losses.

And if the cash flow into the pile slows, Nvidia’s revenue will slow.

There is no second customer base. There is no diversified buyer pool. There are the hyperscalers, and there are the hyperscalers’ funded startups, and that’s basically it. (Plus Zoom, allegedly.)

Now look around at what else is happening because of all this.

Q1 2026 alone, the tech industry shed nearly 80,000 jobs. Roughly half of those - 37,638 to be specific - were attributed directly to AI. Through May we are already past 128,000 tech workers cut. Amazon: 14,000. Microsoft: 15,000. Salesforce: 4,000. Meta announced 8,000 in April with internal guidance hinting at up to 20% across the full year, with the freed compensation budget “redirected toward AI research and infrastructure”. Oracle dropped over 10,000. Cloudflare cut 20% of its workforce last week.

Half a million tech workers in two years.

Sam Altman himself admitted at the India AI Impact Summit that “there’s some AI washing where people are blaming AI for layoffs that they would otherwise do”. Translation: companies are firing people to free up cash, then putting AI on the press release because it sounds visionary. The juniors get fired so that capex can flow into Nvidia’s quarter. Salary line gets cannibalised to feed an infrastructure binge that 95% of enterprises report generates zero return.

This is the same dynamic I laid out here:

and here:

They ain’t buying productivity.

They are buying optionality.

The narrative requires that the spend be justified by AI productivity gains. The actual mechanism is that the spend is funded by removing the people who used to do the work, regardless of whether AI can actually do it.

The juniors get fired. The seniors stay. The hardware gets bought. The shareholders get nervous. The CFO restructures.

Then next quarter another round of layoffs. Another round of capex commitments. Another round of investor day slides about “AI-driven productivity gains”.

And Sam comes in again with another tweet about how this proves it’s all going to work.

Look.

Anthropic is one of the great companies in the AI world.

Genuinely.
I use it daily for my coding tasks.
Best technical product in the field by a wide margin.

Amodei isn’t a charlatan.

The 80x is real revenue that comes from real customers paying real money for software they actually use.

That doesn't make it not a bubble.

A bubble isn’t “the technology is fake”.

A bubble is “the capex required to chase this revenue dwarfs any plausible cash flow it can produce”.

That is my entire argument... Right there…

But I’m the stupid one not understanding how markets work. And Sam is gaining 30% on her stocks in a few weeks.

I truly hope she has a good sense of when to bail.

But I’m afraid she won’t.

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Any resemblance to real persons, living or dead, or to actual events, is completely and utterly unintentional.

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The dragon eggs were the knight’s greatest obsession and his kingdom’s defining treasure.

Nobody had ever seen one hatch.

No1 could quite explain what they were for.

They just existed in the Great Book, maintained by thousands of scribes across the known world, each egg bound to every other egg by immutable chains of pure magic. A construct so elegant that questioning their worth felt vaguely rude.

They had no weight. They cast no shadow. You could not eat them, build with them, or melt them down into a goblet.

But everyone agreed - slowly at first and then all at once - that they were of extraordinary value.

And in a kingdom built on collective agreement, that was enough.

Long before anyone else, Sir Mikael had understood what they were.

He had borrowed. He had cajoled. He had transformed his modest fiefdom - with two thousand loyal subjects - into the Kingdom of Strategos, the world’s foremost accumulator of dragon eggs.

He had collected 818,334 of them. Which he kept in the Vault beneath his castle, and he guarded them with his life.

“Will you ever release the eggs”? the peasants would ask at the great town meetings.

“NEVER”, Sir Mikael would thunder, and the hall would shake with the force of his conviction. “These eggs represent fifty years of treasure. The eggs ARE the treasure. They will appreciate in the Vault until the children of your children’s children inherit wealth beyond imagining. I would sooner watch the kingdom crumble into the sea”.

This was considered Leadership.

To fund the great accumulation, Sir Mikael had made arrangements with the Noble Houses.

He had issued Tribute Scrolls - magnificent parchments bearing grandiloquent names. Each one a solemn promise of 11 gold coins per 100, delivered annually, forever, without end, in perpetuity, unto all generations, as it was, and is, and ever shall be, from now until the dying of the last sun.

The Noble Houses handed over their gold.

Sir Mikael exchanged it for more dragon eggs.

The Vault grew deeper.

The Tribute Scrolls multiplied.

The peasants celebrated. The eggs kept rising. The machine, whatever it was, kept working.

And then came the Great Oracle of the Index Scrolls.

The Oracle maintained the Sacred Lists - the Great Indexes by which the merchant houses of the world decided where to send their gold. To be on the lists was to receive a constant river of coin that existed solely to buy whatever the Oracle told them to buy.

To be removed was to watch that river vanish overnight.

In the autumn of the Year 2025, the Oracle issued a terrible decree. Kingdoms whose vaults held more than half dragon eggs would be reclassified. Not as kingdoms.

As egg funds.

And egg funds, by Ancient Covenant, were not permitted on the Sacred Lists.

Strategos was 77% eggs.

I circled the date of reckoning in red ink. January 15. I told anyone who would listen that the Oracle was coming, the sword was raised, the neck was bared.

The Oracle arrived on January 6. Considered the neck carefully. Announced that distinguishing between a kingdom and an egg fund “requires further research”. Sheathed the sword. Commissioned a working group.

The eggs went up 1% on the news.

Sir Mikael rode on.

The Tribute Scrolls kept compounding. The peasants kept believing. The Vault kept filling. The fiefdom kept generating revenue in the adjacent building.

Largely unnoticed.

And then came the Day of the Quarterly Proclamation.

Long ago, a dark curse had been cast upon the world - the Spell of ASU-Two-Thousand-and-Twenty-Three-Oh-Eight - requiring that every quarter, the eggs be valued at whatever the market said they were worth that day, with any change inscribed immediately into the kingdom’s official ledger.

No exceptions. No smoothing.

The eggs fell 23% in the first quarter of 2026. The Dark Scribe obediently inscribed that value. The consequence? A loss of fourteen billion, four hundred and seventy million gold coins.

The loss was 116 times the kingdom’s entire quarterly revenue.

The stock went up 1.69%.

- This is the part of the fairy tale where the children in the audience start looking at each other.

But the real revelation came not from the number. The number was accounting. The number was the spell. The number didn’t matter.

The revelation came from Sir Mikael himself, standing before the assembled court on the fifth day of May, in the Year Of Our Lord 2026.

He had prepared an analogy. Something about land. Buying low, selling some at a profit to service the debt, buying more with what remained, net holdings still growing.

Nothing to worry about.

“You buy dragon eggs with credit”, said Sir Mikael the Resolute, the knight who would never let go, “you let them appreciate, and then you sell dragon eggs to pay the tribute”.

A small child in the back row slowly raised her hand.

“But Sir Mikael”, she said. “You said you had fifty years of tribute stored in the Vault. You said concerns about selling eggs were completely unfounded. You said you would never—”

Sir Mikael took a deep breath.

“The eggs”, he interrupted the child, “are deployed within a dynamic capital allocation framework whereby accretive BTC yield metrics, calculated on a fully diluted basis and explicitly excluding the preferential rights of preferred stockholders to dividends and assets in any liquidation scenario, generate positive egg-per-share accretion through a structured programme of Scroll-of-STRC issuance at par, enabling the kingdom to harvest select high-cost-basis eggs at advantageous price points without compromising the long-term treasury accumulation thesis, provided that any such harvest is immediately offset by equivalent or greater egg acquisitions funded through ongoing at-the-market preferred instrument distribution at yield levels that remain accretive to the overall BTC yield metric on a non-GAAP basis, net of preferred dividend obligations, adjusted for dilution, seasonality, and other factors as the Kingdom may from time to time determine in its sole discretion”.

The child blinked.

The court applauded.

The child slowly sat down.

My fairy tale ends there.

The implications however… they do not.

Michael Saylor was (?is?) not just a Bitcoin HODLer. He was the signal.

The loudest, most visible, most leveraged signal in institutional finance that Bitcoin was serious - that serious people with serious capital had decided this was real.

When Saylor bought, headlines followed. When Saylor spoke, prices moved. When Saylor said “I will never ever sell”, a hundred thousand retail investors took him at his word and bought MSTR as a proxy for that conviction.

And on May 5, that man stood before an earnings call and explained that selling is now on the table.

“When advantageous”. “When accretive to BTC yield”. Careful language, qualified language, language designed to sound measured.

But hear it for what it is: the most famous HODLer in history just told the world he might sell. Not in a crisis. Not under duress. As a deliberate, structured, ongoing feature of the capital allocation framework.

Strategy owns 818,334 Bitcoin. That is nearly 4% of everything that will ever exist. For years, those coins sat in the vault and did not move. That wasn’t just a balance sheet entry - it was a market force. Every coin Saylor bought reduced the float. Every “never sell” declaration told the market that that supply was permanently off the table. The price of that removal was baked into Bitcoin’s value.

Now the vault door is inching open.

Just consider what happens when Bitcoin’s largest single corporate holder becomes a known potential seller. Not a panicked seller, mind you. Not yet at least. A methodical, planned, carry-trade seller.

The market will start to price in the possibility, because that is what markets (eventually) do. Every dip now carries a new question underneath it: is this where they start? And every question like that becomes its own answer, eventually.

When you examine the numbers, they suggest a timeline: $13.54 billion in preferred claims with about $1.55 billion in annual dividends. $2.21 billion in cash. That’s about 17 months of runway before MSTR has to sell or raise new capital - the latter, which requires the stock to trade above the value of its Bitcoin holdings, which it barely does today.

The reflexivity here is not subtle. Bitcoin falls, the buffer shrinks, selling becomes more likely, the market prices in more selling, Bitcoin falls further.

This is how leverage unwinds when the asset stops cooperating. Strategy has been on the right side of this loop for five years. But it runs both ways.

I said all of this in my previous article “The Great Liquidiatus” in November:

I said the preferred escalation was desperation. I said the maths only worked if Bitcoin kept rising. I circled January 15 as the MSCI execution date and got the timing wrong - the Oracle commissioned a working group instead of a verdict, which is what oracles do when the verdict is inconvenient.

But I don’t think I got the destination wrong.

Sir Mikael the Resolute, the knight who would never let go, the man who turned “I will not sell my Bitcoin” into a $65 billion market cap and an institutional legitimacy story that reshaped how the world thought about digital assets - that man just blinked.

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References:

Richard Medhurst’s Newsletter

How the US Pulled off an Armed Robbery of the World's Energy Supply and Created the Petrogas-Dollar

It’s tempting to believe that the US war machine is finished. Militarily, Iran have indeed dealt the US their worst humiliation in modern history — one I covered in clinical detail…

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15 days ago · 813 likes · 164 comments · Richard Medhurst

Three people sent me Richard Medhurst’s petrogas-dollar piece this week. I read it. Twice even.

There’s a lot in there that I feel is correct.

The chronology of the Levantine Basin deals. Cheney’s 2001 National Energy Policy. The roughly $35 billion of Chevron contracts signed across Israel, Syria, Greece, and Cyprus in the past six months.

None of that is in dispute.

The piece is, on the facts, broadly accurate.

What I think though is that the reading of those facts is faulty.

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Some history. In 1944 Bretton Woods pegged the dollar to gold and made it the world’s reserve currency. In 1971 Nixon unpegged it. Three years later, Kissinger negotiated the Saudi arrangement that pegged it to something else - oil. The petrodollar was born. Everyone needed oil, oil was priced in dollars, thus everyone needed dollars.

Medhurst’s thesis is that the same trick is being repeated, with gas as the new anchor. The Petrogas-Dollar. Same architecture, new commodity.

But gas isn’t oil.

Oil is fungible at planetary scale. One global market, one rough price band with quality differentials. Tankers go anywhere where there’s a port and a refinery. Every country needs it. Every industry uses it. Almost every modality of transport runs on it.

But gas is regional. LNG requires specialised liquefaction terminals on the export side, cryogenic tankers in transit, and regasification infrastructure on the import side. Each piece takes years and billions to build. Pipeline gas is captive to the geography of the pipe. Henry Hub, TTF, and JKM regularly trade at multiples of each other for what is nominally the same molecule. In 2022, European gas hit roughly 25x the US price - that’s the market telling you that there is no single global gas market, just regional ones tethered by expensive bottlenecks.

Anchoring a settlement currency to gas isn’t a step up from oil in my opinion.

It’s a step down.

Less universal demand, less liquid market, more infrastructure dependency, narrower counterparty base. If oil was the commodity that justified the petrodollar’s reach, gas cannot replace it without shrinking the regime it’s supposed to anchor.

Then there’s what’s been happening to the dollar itself. The moment Western powers froze $300 billion of Russian central bank reserves in 2022, every neutral reserve manager on earth received an unscheduled lesson in what “safe” actually meant in practice.

That lesson is still being absorbed, and the absorption is showing up in central bank gold buying at multi-decade highs, parallel payment rails being onboarded, sovereign Treasury holdings declining year over year.

None of it is dramatic. But all of it is compounding.

So the actual picture Medhurst is painting: a fading anchor (oil-and-dollar) being half-replaced by a structurally narrower one (gas-and-dollar), sitting on top of a settlement currency that’s slowly losing the trust required to function as one in the first place.

That’s a regression on two axes at the same time. Not a strategic plan.

The successor isn’t oil-and-dollar. It sure as ain’t a gas-and-dollar. By elimination of every other alternative, it will come back to gold.

Let’s start with Russia. That’s where his documentary opens.

“The most severe logistical disruption in modern Russian history”. 40% of seaborne export capacity disabled. Production cuts of 300,000 to 400,000 barrels per day in April. (Not an interpretation, those numbers come from OPEC’s monthly report).

The Sirius Report, which tracks vessel movements rather than quotas, has Russian seaborne crude exports flat at 3.5 million barrels per day in April. The Pacific terminals that got hit in the spring strikes are fully recovered by now. The Baltic ports? Kept on loading. Whatever the bombing campaign was supposed to accomplish, it has accidentally functioned as a renovation programme.

The 300-400k figure measures voluntary discipline within the OPEC+ quota framework. It is not a damage assessment. Russia produced slightly less in April because the cartel asked them to, not because there’s a NATO destroyer parked outside Murmansk.

What did happen is that Europe outsourced the demand. They sanctioned Russia. For the 20th time now I guess, because the previous 19 were so successful.

But because even Europe still needs oil, they then turned around and bought the exact same molecules via Indian and Chinese refineries. Who bought it from Russia. At a discount. And mostly in local currencies.

Plus, they sold it at a premium. To Europe. That sanctioned that exact same oil. Great job virtue signaling.

Iran tells a similar story. The piece argues the blockade is starving China of its third-largest oil supplier. TankerTrackers reported on April 24 that Iran exported more oil in the first three weeks of April than in the entire month of March. The blockade has tightened since. WSJ documented loadings dropping in the second half of April, and Project Freedom only formally launched at CENTCOM this morning with 15,000 personnel and over 100 aircraft. The screws are turning, real consequences are landing. (🦗 sidenote: I only hear crickets… 🦗 Still waiting for what news will turn up… 🦗)

But Iran went into this war producing 1.1 million barrels per day at $47 a barrel. Through most of it, production has run around 1.5 million at $110.

I think Trump is pissed right now that he did not receive a “thank you” card yet…

Another argument landed on Saturday - which is after Medhurst’s piece landed. But it doesn’t fit the frame of the article, so I doubt it’ll be added.

US Treasury sanctioned Hengli Petrochemical and four Chinese teapot refineries on Friday over Iranian crude purchases.

Hengli isn’t just a teapot. It’s strategic national infrastructure. 280 billion RMB was invested with a 20 million tons annual refining capacity. It’s one of China’s seven major petrochemical bases. Plus the non-sanctioned parent group is the world’s largest shipbuilder.

Now on Saturday, China’s Ministry of Commerce activated the 2021 Blocking Statute. For the first time ever. Chinese firms and individuals are now legally prohibited from recognizing, implementing, or complying with the US sanctions.

Compliance has been removed as a choice.

“Rock, meet hard place” or something like that?

I doubt this will feature in Medhurst’s 25-year plan any time soon.

To me this looks like a reactive escalation against the Treasury announcement.

And THAT is the recurring shape of this whole thing. Every sanction tightens the parallel system. Every escalation removes another counterparty from the dollar rails. This theory isn’t some 5D strategic genius.

It’s an adaptation. Metabolic. Washington swings at whatever part it wants today… And that system adapts.

Bank of Kunlun was sanctioned by the US Treasury in 2012 for its Iran-related dealings, in what must have seemed like a good idea at the time. The sanctioning was the strategic move. The consequence - as it so often is - was unintended. By cutting Kunlun out of the dollar system, Treasury also cut its remaining dollar exposure to zero, making it the perfect institutional vehicle for yuan-denominated Iran trade.

For thirteen years now, Iranian oil has flowed to Chinese teapot refineries through Kunlun, settled in RMB, entirely outside SWIFT. Iran can’t easily spend the accumulated yuan in dollars, so it likely converts the surplus to physical gold via the Shanghai Gold Exchange.

Iranian oil → yuan → gold. The loop has been running since the year Obama was re-elected. It is now formally protected, on the Chinese side, by a Blocking Statute.

The PBOC has bought gold for seventeen consecutive months. Official reserves are over 74 million troy ounces. The unofficial figure is widely assumed to be substantially higher, given that Chinese domestic mine production since 2000 alone (around 8,150 tonnes) exceeds the entire stated US Treasury holding. China’s US Treasury exposure has fallen from a 2013 peak of $1.32 trillion to $693 billion in February 2026.

Spot is around $4,800 an ounce. Shanghai still trades at consistent premiums to London and COMEX. Chinese banks are rationing 600 kilograms of bullion per day (100 kg on the weekends), and every allocation evaporates in under a minute.

While we’re on the subject. The US Treasury carries its own gold holdings on the books at $42.2222 per troy ounce, a statutory price last revised in 1973. Spot is $4,800. The mark-to-market gap is roughly $1.25 trillion. Or said differently: about 3% of its national debt. Or even more differently: if they sell everything, they can run the US government for about a week and a half.

Every $100 that gold rises does add ~$25 billion. I have no idea whether anyone in Treasury has noticed, but I’ve heard a lot of chatter over the years about re-valuating this gold hoard.

The mechanism that I envision instead of a “gas-4-a-dolla’” (not an official US Treasury term… yet) is as I said many times (mainly in comments): internally in a country, the currencies stay fiat. We - the plebs - don’t get to transact in gold and spend 0.03 gram of gold on a gallon of petrol or so. Would be nice, but that’s a pipe-dream in my opinion.

Whatever your local denomination is, be it euro, lira, franc, pound, … Whatever local political pressure or tax laws or domestic monetary systems you have. They’re all localised.

However, cross-border settlement will likely migrate to gold. Not by design. By necessity. By elimination of all worse alternatives.

Every other settlement layer has been politically weaponized over the past six years. The dollar. The euro. SWIFT. CHIPS. Sovereign Treasury holdings. Real estate held in foreign jurisdictions. Central bank reserves. Venezuelan gold seized at the Bank of England in 2019. Russian reserves frozen in 2022. Afghan central bank assets held by the New York Fed since 2021. And Saturday extended the template from sovereign assets to private industrial enterprises.

Gold is the only major asset whose ownership cannot be cancelled by a remote click. It clears bilaterally. It doesn’t care whose face is on the coin. It survives the political weaponisation of every other settlement layer because the weaponisation is the entire reason central banks moved away from it in the first place.

No1 is publishing a roadmap.

There’s no public announcement.

It’s a destination by exclusion - the asset everyone ends up at after the others have been removed.

The petrogas-dollar framing fails on its own terms.

A new monetary regime needs a stable, durable, broadly-accepted anchor. The thesis says the anchor is American gas plus Western Hemisphere oil. The largest LNG producer on earth is already at full export capacity. Henry Hub is at multi-year highs because domestic supply can’t keep up with what’s already been promised. The captured Western Hemisphere reserves require Chevron to actually extract them rather than sign contracts for them. The Levantine Basin gas fields are still in the ground, five months after the deals were inked.

A monetary regime also needs counterparties willing to use it. The petrogas-dollar thesis describes a world where Europe and Asia have no choice but to buy American. In the actual world, the UAE quit OPEC effective May 1 after threatening yuan-denominated oil sales. Saudi Arabia gave 12 million of its citizens access to China’s CIPS payment network the day after that. Iran’s parliament codified yuan and Tether settlement at Hormuz - they’re still deciding on Tether after it got frozen (link). China activated the Blocking Statute on Saturday.

The monetary system is moving. But it’s not moving to Washington.

The third variable is Trump. The thesis requires you to believe that the same administration that fired its own Navy Secretary three weeks ago for not building ships fast enough is, simultaneously, executing a coherent 25-year plan to reorganize global energy markets and replace fifty years of monetary architecture. Trump and 25-year strategic patience are two phrases that have, to my knowledge, never previously occupied the same sentence before.

Don’t get me wrong. The petrodollar won’t be dying tomorrow.

The US still has the world’s deepest capital markets, the most-traded currency, and the only Treasury market with anywhere near the absorption capacity to hold global savings. Reserve currency status takes decades to erode. The Bank of England held that status for over a century before the dollar took it, and at no point during the slide did anyone in London publish a piece announcing the handover.

Medhurst is right that there’s a transformation under way.

But I strongly believe that he has the direction wrong.

All this chaos ain’t producing a stronger empire.

It’s producing a more fragmented monetary architecture, and gold is starting to fill the gaps the dollar used to fill.

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gold vs S&P 500:

Q1 2026 global gold demand:

Singapore gold imports from Dubai (dropping bombs will probably have something to do with that):

JGB vs gold:

Are we writing history here?

Global gold ETF holdings:

COMEX silver withdrawal pace chart:

Silver weekly line chart:

gold vs its “fundamental” price:

UK silver export flows:

COMEX silver registered+eligible:

US private financial assets as a share of GDP:

US Treasury General Account balance chart:

US personal savings rate:

Looks sustainable:

Inflation expectations:

Dollar dominance:

Long term JP 10Y:

US 30Y - touch&go with 5%:

Printer goes brrrrrrrr (or at least… warming up):

It’s not my feeling alone it seems:

Foreign holdings of UST:

USD share of SWIFT payments (context for dedollarisation):

Real inflation is a myth (+32% since Powell became FED Chair):

Unemployment expectations:

Gallup’s US economic confidence:

US regional gas price (avg $4.433/gallon):

Global oil inventory change:

US crude oil (erhm petrol products) export:

OPEC+ production:

Crazy prediction (not mine):

China LNG imports:

Bearish skew of $USO options positioning:

Nothing’s moving… Not the oil, not the options:

S&P, bonds and Brent:

Market concentrations. It’ll be fine:

S&P monthly return:

Semiconductor sector PE ratio chart at 60x, matching dot-com bubble era valuation extremes:

US dollar at resistance:

Hedge fund repo borrowing. Yep, it’ll be fine (see link):

Post-Hormuz-disruption asset performance table:

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I haven’t written in a couple of weeks. Not because nothing was happening - quite the opposite, actually. Too much was happening at once, and the version of this article I promised you kept getting overtaken by the next move.

So let me catch you up briefly, then I’ll get into my future predictions, and after that my positioning.

Where are we? (very compressed, I promise you)

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• COMEX silver is still draining. Same pattern since October. Deposits stopped, withdrawals didn’t, registered inventory now in the high 70s to low 80s of millions of ounces.

• The Bian Ximing situation in Shanghai resolved with what looked very much like an emergency airlift of LBMA silver into SHFE vaults to prevent a delivery default. So now we know the system will move metal across borders quietly to keep a single position from blowing up. No1 wants to blow up a good grift I guess…

• SLV continues to be strip-mined at a rate that looks more like a scheduled drawdown than market activity.

• The IEA, in its April Oil Market Report, openly named the ‘physical-futures disconnect’ in crude as ‘increasingly acute’ - the institutional admission of something paper-physical bears have been getting lectured about for a decade.

  

  

  

  

  And in the same week that admission landed, the May 2026 WTI futures contract collapsed from sixty thousand open contracts to three thousand in 48 hours, with no corresponding increase further along the curve. The positions weren’t rolled. They were deleted. Sellers refused to deliver at the paper price and buyers agreed to forget the contract ever existed.

So that’s the backdrop. Strip-mined vaults, a paper market that’s increasingly being asked not to clear, and an IEA quietly admitting the price isn’t the price.

Against all that, the short-term setup looks bearish to me.

Mind me, I’m still a long-term bull! The long-term thesis is reinforced by every single one of those data points. I’m just bearish on the price, in the near term, before a structural reset (or should I say break?).

Let me explain…

The energy stockpile question is the one that’s been on my mind since February. When the Iran war broke out, Asia kept running on inventories. Those were drawn down. Hard. These pools are now basically tapped as I understand it (If you’re from Asia ex-China, please join the comments to tell me if the news I’m reading is wrong or not).

Same picture in the west. The way I see it is that through SPR releases they just buy some time for the global picture to stabilise. But these releases won’t manufacture actual barrels. They’re your storage cabinet that you’re eating into. Once it’s bare, you don’t have a buffer anymore.

And then you’ll move onto demand destruction because of higher oil prices. Which leads to corporate margin compression and consumer spending shocks. Think 70’s or ‘08 on steroids.

Those will land in earnings reports. Earnings reports will land in equity prices. And once equity prices start moving meaningfully lower, you get the second-order effects that actually break things.

Margin calls. Forced selling. Levered positions being unwound at whatever bid is on the screen. In a liquidity event, you don’t sell what you want to sell. You sell what you can sell. Gold and silver are among the most liquid hedges anyone can hold, which is why they get sold first. Not because anyone has changed their mind about gold or silver. Because the broker has called and the only assets that can be liquidated in size at speed are the ones with deep order books.

We saw a small-scale rehearsal of the mechanics in late February. Silver dropped from $94 to $62 in roughly a month. The fundamentals didn’t change (much). The GCC needed cash, and selling ensued.

That’s the kind of move I expect to see again, except this time the trigger is broad equity stress rather than a single specific catalyst.

My base case for what’s coming, in sequence:

Equities crack on oil-driven earnings disappointments. The S&P pulls back hard enough to trigger systematic deleveraging across multi-asset portfolios. Risk parity funds, vol-targeting funds, and the more modest end of leveraged retail all unwind into the same exit at the same time. Gold and silver get hit because they’re the liquid hedge. PM equities get hit harder because they’re equities. Silver miners get hit hardest because they’re high-beta equities that are also being sold by anyone running a sector rotation algorithm. I’m penciling in a 20-25% drawdown from current levels, briefly, before the policy response.

Bond yields are where it gets interesting, because the move plays out in three stages and most analysis I’ve read stops at the first one.

Stage one. Yields fall during the equity crack. Standard flight-to-quality. Treasuries catch a bid because the marginal dollar leaving equities goes somewhere, and Treasuries are - for the moment still - the deepest liquid market on the planet. Markets also start pricing emergency Fed cuts. The 10-year, currently sitting at 4.45%, drops fast - possibly into the threes if the equity move is violent enough.

Stage two. The Fed, in our scenario, panics into the move. Some combination of emergency liquidity ops, a surprise cut, possibly a return to QE under whatever euphemism is fashionable this cycle. PMs bounce sharply on the announcement. Bonds rally further on the cut itself, briefly, before the market starts processing what just happened.

Stage three. The market notices that the Fed has cut into an oil-driven inflation environment. Real yields collapse. Trust in the USD - already eroding through the petrodollar fragmentation, the central bank gold buying, the yuan oil settlements - erodes further. Yields rise. Not because the Fed is hiking, but because nobody wants to lend dollars long to a borrower who’s printing them into stagflation. The bond market figures out it’s been trapped, and starts pricing the trap. The 10-year, having fallen, starts rising again. This time it doesn’t come back.

That’s the bond thesis. First-stage rally, second-stage rally on the cut, third-stage rejection that nobody can stop. The Fed will not be able to defend duration and inflation simultaneously, and at some point the bond market votes on which one matters more.

Watch Japan in the meantime. Japan is the bellwether for everything I just described, except Japan is already living in stage three. They’re trying to defend the yen, defend JGB yields, and now reportedly intervene in crude futures markets to keep import costs survivable, all simultaneously. They spent roughly $35 billion last week buying yen and the move barely held. The BoJ raised its 2026 inflation forecast to 2.8% and halved its growth forecast to 0.5%. That’s the textbook diagnosis of stagflation, written by the central bank actually living through it. When one of those three Japanese defences finally breaks - and it will, probably the JGB one - it tells you what’s about to happen everywhere else. The order matters. Japan first, then Europe, then the US.

Some of the smartest people I read in this space disagree with me on the timing. Their read is that the worst of the correction is mostly in, that any further drop is buyable, that the structural bid arrives before the cyclical decline. They could be right. Their track records are better than mine in plenty of ways. But I keep looking at the current setup, and the picture I see is risk, not opportunity.

The structural bull thesis is intact. The path to it however isn’t a straight line up.

There’s also an entertainment angle worth noting, because we’re going to be watching policy responses for the next six months and the comedy will be relentless. Treasury already ‘unsanctioned’ Russian and Iranian crude when oil broke $110 - quietly, while still maintaining the formal sanctions on paper, because admitting they’d lifted them would defeat the point.

They did this specifically to cap oil prices and protect the Treasury market from pricing the actual war risk on top of $39 trillion of federal debt.

That’s the playbook.

Cap the visible price by any means necessary, and let the consequences land somewhere off the front page. Gromen called it Schrödinger’s war. Serious enough to justify every policy response they want, never serious enough to let the oil price trade freely.

We’re about to see Schrödinger’s recession too. Serious enough to justify whatever monetary response they decide to deploy. Never serious enough to admit that the prior decade of policy is what built the trap.

Now onto what I’m doing.

I’m mostly sitting. I hold more cash than I normally hold (25%). The reasoning is straightforward: in a 20-25% PM drawdown I want to be a buyer, not looking at positions that are bleeding alongside the broader market. Cash in IBKR pays roughly 3% just sitting there, which is not nothing while you wait.

The cost of the drawdown is not worth the cost of missing the first 10% or even 20% of the eventual recovery.

Alongside the cash, I’m holding long-dated calls. Specifically SLV LEAPS and SILJ LEAPS, both with expirations in 2027 and 2028. The thesis behind the structure: if I’m wrong about the squeeze and silver just grinds higher from here, the calls capture the move without requiring me to be fully invested in the underlying. If I’m right about the squeeze and silver drops 25%, the calls take a beating on delta but the long expiration means I have time for the structural thesis to play out, and I can add to the position at much lower premiums during the panic. The combination is a barbell. Cash on one side for downside protection and dry powder. Long-dated optionality on the other side to capture the eventual repricing without timing the exact bottom.

SLV gives me silver price exposure. SILJ gives me junior silver miner exposure, which is the high-beta version of the same trade and the one most likely to ten-bag in the recovery if the miners catch up to the metal the way they historically do. SILJ has been the laggard of laggards for two years now. The structural argument for it has only gotten stronger as the metal has moved and the equities haven’t.

I’m holding a few shorts (but only like 5% of my PF). The problem with shorting however is that the liquidity squeeze can resolve in either direction depending on policy response timing, and getting squeezed on a short during a Fed panic is the kind of move that ends careers. The asymmetry of long calls plus cash is much cleaner.

So those are a gamble. Can earn me 10x, but can lose me everything.

Levels I’m watching for redeployment: Silver somewhere around $55. That’s where I would start moving cash back into physical and into the miners directly. That’s also around the floor that DailyGold’s been calling for months and it lines up with the 1973 and 2006 first-correction analogs that the technical community has been working with. If we get there, I want to be a buyer in size. If we don’t, the SLV and SILJ LEAPS carry the long exposure and I redeploy slower.

Gold I’m less prescriptive about. The central bank bid is structural and persistent enough that gold’s downside in any squeeze is more cushioned than silver’s. I’m holding what I have and not buying more until silver triggers.

Long term, none of this changes my structural thesis.

Oil reprices everything that uses energy upstream. With the side-effect of pushing more electrification of the network. Which means more silver demand… That demand stays inelastic because nothing can substitute for it on any reasonable timeframe.

Central banks will keep buying gold because they’ve stopped trusting the alternatives.

The strip-mining of SLV continues until either the structure breaks or the cash-settlement clause in the prospectus gets invoked.

The gold-silver ratio compresses violently when silver finally moves, but in the meantime it chops around current levels because the structural bid and the cyclical headwind are pulling in opposite directions on different timeframes.

So: long term bull. Short term, get out of the way of the squeeze. Hold optionality for the recovery. Wait for the Fed to do what the Fed always does. Buy what they’re trying to defend against.

That’s my plan.

And I’ll be watching the bellwether: Japan.

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Permissionless, censorship-resistant, beyond the reach of any single government.

The whole pitch of crypto, repeated in white papers and conference keynotes for fifteen years, was that this was the exit. The dollar system had become weaponised, the rails could be cut at will, but the chain - the chain was sovereign.

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Iran took it as advertised. After getting kicked off SWIFT in 2012 and again in 2018, Tehran did exactly what every sanctions-evasion playbook recommended. Bitcoin mining legalised in 2019. Subsidised power rerouted to industrial farms.

Over $3 billion moved through digital assets in 2025 alone. The central bank held at least $507 million in USDT, the supposedly neutral dollar-substitute that wasn’t subject to any single government’s say-so.

As recent as April 22nd, Tron founder Justin Sun declared his blockchain “the most decentralised in the world”.

On April 23rd, the US Treasury called Tether and asked them to freeze $344 million of Iranian funds on Tron. Tether did it in one single smart-contract call. Two wallets, blacklisted at the issuer level, $213 million in one and $131 million in the other.

That money didn’t move or got seized. It instantly became decorative. Visible on the chain, but immobile, a monument to a successful misrepresentation.

Bessent named the campaign “Economic Fury”, which sounds like a 1990s wrestling pay-per-view but is apparently US Treasury policy now. The doctrine is straightforward: if we don’t like you, even your stablecoin is not yours anymore.

This is supposed to be SWIFT 2.0. Iran thought it was. And it delivered exactly as advertised. Just not as expected. SWIFT got weaponised in ‘12 against Iran and ‘22 against Russia; now the alternative has been weaponised the same way. Every sovereign actor on earth is currently re-reading the USDT terms of service and noticing some things they didn’t notice before.

Welcome to your CBDC.

About six months ago I wrote about why nobody actually wants a CBDC (link). Programmable money is restricted money, restricted money trades at a discount to unrestricted money, and any government trying to force a CBDC into circulation runs straight into Gresham’s Law. China’s been pushing the digital yuan for four years and it’s still only 0.16% of the money supply. People don’t want it. Even when state employees are paid in it, they cash out the second they can.

So how do you get programmable, permissioned, freezable digital money into circulation without anyone noticing it’s a CBDC?

You let someone else issue it. Then you regulate the issuer.

Last July, in what Washington genuinely branded “Crypto Week”, Congress executed the trick in plain sight. On July 17th, the House passed the Anti-CBDC Surveillance State Act 219 to 210, banning the Federal Reserve from issuing a programmable digital dollar. The bill’s sponsor warned on the House floor that a state-issued CBDC would be “an Orwellian surveillance tool” capable of freezing accounts and tracking every transaction.

Days later, the President signed the GENIUS Act, “Guiding and Establishing National Innovation for U.S. Stablecoins”, a name that took a committee of grown adults to produce. The Act requires every regulated stablecoin to be fully backed by short-term US Treasuries, with law enforcement integration baked into the compliance layer.

It looks like consumer protection. It technically is. It also is a CBDC with extra steps.

The Fed can’t issue a programmable, freezable, surveilled digital dollar. A private company in El Salvador can though.

Tether now holds $141 billion in US Treasury exposure. 17th largest holder of US government debt on the planet. More than Germany. More than the UAE. More than South Korea. A private company headquartered nominally in El Salvador owns more US Treasuries than most G20 nations. (link)

I’m hard-pressed to believe that’s a side effect.

China dropped its UST holdings from $1.3 trillion to $683 billion. Japan’s been quietly selling. Foreign ownership of the Treasury market collapsed from 50% during the GFC to about 30% today. JPM estimates each $300 billion drop in foreign holdings pushes yields up roughly 33 basis points. With $9.2 trillion rolling over in 2025 and another wave queued for 2026, the Treasury needs new buyers. Badly. Like, “we just regulated a $200 billion private company into being one” badly.

So they engineered one.

Stablecoin issuers, by law, must hold short-term Treasuries. The market is projected to hit $2 trillion by 2028, meaning roughly $1.5 trillion in Treasury demand, materialised out of crypto liquidity. Beautiful. Clean. Foreign capital that wouldn’t touch a UST directly walks in through the stablecoin side door, holds USDT, has no idea it’s holding the same paper with extra steps.

And it is was working.

Now nine months later, the Treasury froze $344 million on a Thursday afternoon.

Nine months. That’s the gap between signing the GENIUS Act and demonstrating to every sovereign on earth that USDT is freezable on demand. The first cycle of this pattern, SWIFT becoming a strategic asset and then a sanctions weapon, took about thirty years. The dollar reserve system, eighty. Western gold custody, considerably longer. Each iteration runs faster than the last.

You can almost hear the Saudi sovereign wealth fund switchboard lighting up.

Because the lesson of 2022 was that dollar reserves are confiscatable when the political winds shift (link). The world watched $300 billion of Russian central bank reserves vanish from the asset column overnight, and central banks have been buying gold ever since. Over 1,000 tonnes a year, three years running. Poland, Turkey, India, China, Hungary - all stacking. Not because gold is sexy. Because gold doesn’t take phone calls from Washington.

Now the US has demonstrated the same lesson on the rails it just spent two years building. Stablecoin reserves can be frozen at the issuer layer; the GENIUS Act codified it, the Iran freeze made it visible. Every sovereign treasurer on earth now knows that holding USDT is functionally identical to holding US Treasuries with an extra “freezable on demand” feature bolted on top. Which is to say: worse than holding Treasuries. Same exposure, strictly more political risk.

I’m sure that’s fine.

The pattern is hard to miss at this point. SWIFT was sold as neutral plumbing. They weaponised it anyway. Dollar reserves were sold as the global safe asset. They froze Russian reserves anyway. Western custody of foreign gold was sold as inviolable. They blocked Venezuelan repatriation anyway (link). And now stablecoins were sold as the workaround, the alternative built specifically to recover the foreign demand the previous weaponisations destroyed - and they’ve been used the same way before the cement on the GENIUS Act has dried.

Each instrument gets weaponised. Each weaponisation destroys the demand the instrument was built to attract. Each new instrument has to recover the trust the last weaponisation destroyed.

Lucy will keep moving the football because Lucy can’t help it. The interesting question is who’s still showing up to kick.

Sovereigns probably won’t. They’ll be shunning USDT the same way they’re shunning Treasuries - but quietly, steadily, they’ll be accounting for its political risk. Some might rotate into BTC, but the precedent has been set. A crypto is only as sovereign as long as the code allows.

What I think that USDT will become from here on out is a small-transactional CBDC. Retail users everywhere. Think Western Union in seconds with less fees. But the sovereigns who want a hedge that actually works? They’ll be stacking gold.

The most telling detail in the whole story isn’t even the freeze. It’s what Tether does with its own profits.

The company made $10 billion in 2025. It holds $141 billion in Treasuries because regulation says it has to. But it also holds $17.4 billion in physical gold and $8.4 billion in Bitcoin, funded out of excess profits and accumulated at a rate of two tons of physical gold per week. Their CEO stood on a stage in San Salvador in front of a slideshow of literal storm clouds and predicted the end of the dollar system.

Tether is the largest non-sovereign buyer of US Treasuries on earth and is hedging against the collapse of the United States.

Yup. I’m sure it’s fine.

The architecture would have been a beautiful solution to a real problem. Stablecoins move money in seconds worldwide, all the while absorbing Treasury supply, and foreign demand walks right back in, capital that normally doesn’t trust Washington still ends up funding it. The trust deficit gets papered over with code.

It could have worked.

They didn’t even bother waiting a year to abuse the budding trust.

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Any PII will be stripped unless specifically requested to have it included, and some questions won’t be answered at all (I like my privacy very much 😉).

They will be grouped together into themes, and I’ll try to answer them as best as I can with the knowledge I have or can dig up in the short time between ask & publish.

Comments are open to everyone, and I appreciate a healthy discussion as I’m just one keyboard warrior. And there are way smarter people out there than me with much more life experience.

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So here goes the Q&A for this month:

Energy, AI, and the Yorkshire Question

The proliferation of AI systems demanding more and more energy resources [...] Given the current geopolitical situation in regard to energy resources, can governments find a balance between the ‘needs’ of giant tech firms and industries and the needs of their populations?

A good starting point is the West Newton story. Maybe even a little too much on-the-nose. (A gas field that could theoretically cover more than 10% of Britain’s annual energy needs. And the co-CEO’s first instinct is to mine Bitcoin with it.)

Talking about priorities…

To be fair, Reabold walked it back nearly immediately. They clarified it’s a “small proof-of-concept”, early gas flows “funding further development”, the field will still prioritise UK energy security.

Probably true.

But the fact that the question was even seriously entertained tells you something about how these decisions get made.

Can governments ever find a balance?

I think the honest answer is: they will try, fail, make noise about it, set up a commission, and then let the market decide - which means the entity with the most capital and lobbying budget wins.

Bitcoin mining alone already consumes roughly 160 terawatt hours a year, about half of the UK’s total annual electricity consumption. AI data centres are orders of magnitude larger in ambition. The infrastructure buildout being planned right now - in the US, in Asia (and before long in the Gulf) - is extraordinary. Governments are not in the lead for this. They’re just rubberstamping it after the fact.

What we would need is political courage. Germany discovered during 2022 what happens when energy get scarce. During a crunch we’ll see which countries will put their voters first. Germany at least did not (also given their focus on green energy, banning Russian hydrocarbons and reluctance on nuclear energy).

Eventually, these societal/energy flows will self-correct. Eventually…

But in the near term? No - I don’t think governments have either the will or the regulatory architecture to meaningfully constrain tech energy demand. They’re more likely to fast-track permits for new generation to keep everyone happy, which mostly means building more fossil fuel capacity while publicly committed to the opposite. Standard operating procedure.

Safe Jurisdictions, Low Diesel: The Miners That Don’t Sweat the Pump

I’d be really interested to find out about PM-miners which are sitting in “safe” jurisdictions and are least dependent on diesel fuel in their mining operation.

First, the structural point: diesel dependency is largely a function of mining method, not location. Open-pit operations run fleets of enormous haul trucks. Diesel. Constantly. Underground mines use electric hoists, ventilation, lighting - then diesel for some secondary equipment but at a fraction of the scale. So any screen for diesel exposure should start with method before jurisdiction.

The ones I’d look at (and this is by no way an endorsement):

Agnico Eagle (AEM): their Canadian operations - particularly in Quebec and Ontario - have meaningful access to hydroelectric power, one of the cheapest and cleanest grids anywhere. They’ve also been actively deploying battery-powered vehicles underground to reduce diesel further. Canada/Finland/Australia for jurisdiction. Underground-heavy for method. This is about as good as it gets for a major.

Hecla Mining (HL) operates Greens Creek (Alaska) and Lucky Friday (Idaho) - both underground, both in Tier-1 US jurisdictions. Greens Creek runs on grid power. Hecla’s operations are inherently low diesel per ounce because there’s no massive open-pit trucking fleet involved. Their lead/zinc byproduct credits also help absorb cost pressure when it arrives.

First Majestic (AG) is trickier. Mexico is a risk - not catastrophic, but real. Their newer Jerritt Canyon asset in Nevada has a better risk profile. Underground silver vein mining with grid access. Worth watching.

The shortlist is by all means… short. Most of it comes back to Hecla and Agnico as the cleanest examples at scale. Below that, you’re into developers and smaller producers where the liquidity risk may outweigh the diesel advantage.

The ones I’d avoid relative to your concern: any large open-pit copper-silver operation in Latin America with a SX-EW circuit (sulfuric acid-dependent leaching). They’re being squeezed from two directions simultaneously right now - acid costs and diesel costs. (see more on sulfur later)

Who’s Left to Buy Gold When We’re Gone?

If all these young people think their iPads and crypto are more valuable than gold, who is going to be the market for gold when the market for gold are literally dying off?

I think the premise for the question is faulty.

The framing assumes that the gold market is driven by Western retail investors alone - boomers and their slightly-older relatives who read newsletters, buy coins, and listen to Peter Schiff. Historically speaking, there’s something to say for that.

We’ve left that world behind for a while now.

Central banks bought more gold in the past 4-5 years than at any point in modern history. Poland, India, China, Singapore, Turkey, the Czech Republic, all the ex-USSR breakouts. That’s sovereign balance sheet managers that have decided that USTs are not the risk-free asset they were sold as (2025-07-25). They don’t care what you nor your cousin thinks about gold. They’re buying hundreds of tonnes a year regardless. (wouldn’t it be nice that they ask us for our opinion? 😉)

China alone has been accumulating aggressively, and their disclosed reserves are almost certainly understated. India’s household gold demand - cultural, deeply embedded - runs to 700-900 tonnes annually. That’s not a boomer phenomenon. That’s a civilisational one.

As for the young people: the ones who currently hold Bitcoin and think gold is ridiculous are also the ones who will inherit whatever their parents hold. That gold doesn’t disappear. It changes hands. And some of them, after the first serious financial crisis they live through as adults rather than teenagers, will reconsider. Reality has this remarkable ability to update priors. Been there, don that.

The more important shift is that gold is transitioning from a retail savings product to a tier-1 reserve asset for sovereigns. Basel III accelerated that. The price over the coming decade will be set by central banks, not by whether some millennial prefer an ETF.

On Respecting People You Fundamentally Disagree With

There are a number of commentators [...] like Tom Luongo, Kunstler [...] who are pro-war for US interests. I strongly disagree. What are your thoughts on folks who you have respect for but fundamentally disagree with on the war?

What I’ve come to this is: smart, principled people can look at the same conflict and reach opposite conclusions when they’re applying different weights to different actors. Luongo, broadly speaking, believes Trump is genuinely anti-empire, that the Ukraine war is a neocon/globalist project he’ll terminate, and that the apparent support some Americans give to it reflects captured media more than genuine sentiment. That’s a coherent framework. Personally, I think it dramatically underweights what actually happens on the ground - the human cost, the revisionist territorial logic, the reality of what air campaigns do to civilian populations. But I can follow the argument.

The thing I’ve stopped doing is treating disagreement on this as a character test. I don’t think Luongo and Kunstler are stupid or bought. I think they’ve built a model of the world where certain actors (the globalist managerial class, NATO) are the primary threat, and they’ve put almost everything else through that filter.

When your model insists one enemy is The Enemy, you can end up defending things you’d otherwise find indefensible because the alternative is handing a win to the people you most distrust.

That’s not moral failure per se. It’s a cognitive trap that everyone -especially the smartest people- fall into more often than stupid ones, because they’re better at rationalising.

I still read them. I still find their financial and monetary analysis excellent. I just hold their war commentary in a separate bucket. You can do that as well.

Treating every thinker as a package deal - either entirely credible or entirely worthless - is how you end up with almost no one worth reading.

Clear Head in a Noisy World

How do you keep a clear head when making decisions relating to geopolitical events?

My take:

Write your thesis down before you open a position. Date it. State the specific reason you’re entering - not “I think silver goes up” but “I think COMEX delivery stress in June 2026 creates a squeeze in the June contract, which means I want to be long the June/September spread.” (no endorsement again here!) Something falsifiable. Something with a trigger you can check against reality. If reality doesn’t cooperate, you have a document to interrogate rather than a vague feeling to defend.

Position sizing is the other one. If a position is keeping you up at night, it’s too big. Full stop. That’s not a reflection of the idea’s quality - it’s a reflection of the sizing relative to your risk tolerance. A correct thesis sized too large will destroy you psychologically before it pays off.

The geopolitical noise specifically: I try to separate “things I believe” from “things the market is currently pricing.” Both can be simultaneously true. Or false. I can believe the Strait situation is structurally bullish for oil and also acknowledge that oil might sell off tomorrow because of a Trump tweet. Or that silver is undervalued, even at current prices. But that doesn’t diminish that a large fund that needs liquidity is crashing the price.

My belief doesn’t change. My position survives. Because I sized it so I could survive being right but early.

Most of the geopolitical analysis out there - including mine, to be honest - is better entertainment than trading signal. Treat it as context, not catalyst. The catalyst is usually a price action signal or a specific event with a knowable date.

Sulfuric Acid, Copper, Silver, and What You Actually Own

The closure of the strait has had a significant impact on the global availability of sulfuric acid [...] I’ve been trying to understand how shortages and/or demand destruction of sulfuric acid will impact these investments. Where do we go on the price of this mining equity?

This question touches on something more complex than I first thought.

Let’s start with the supply chain.

The Strait of Hormuz closure cut off roughly 50% of seaborne sulfur supply. Sulfur is the feedstock for sulfuric acid. Then China banned sulfuric acid exports from May onwards because (*voice dripping with sarcasm*) they want to protect their domestic fertilizer production for spring planting. Last I read through summer. But potentially EOY.

Chile, which imports over a million tonnes of Chinese acid annually, saw acid prices spike 44% in a single month. Sulphur prices are up roughly 70% since this particular crisis began.

Robert Friedland - who knows copper operations better than almost anyone - called the impact on global copper supply “profound.”

Now the critical question: which mining processes actually need sulfuric acid?

Copper oxide ore leaching (the SX-EW process) is the biggest consumer in metals mining. About 20% of global copper supply uses this method. If you can’t get acid at a reasonable price, you either can’t run the process at all or your AISC blows out dramatically. The DRC, Chile, and parts of Africa are most exposed here.

Sulfide ore operations - which use flotation, not acid leaching - are largely unaffected. Most underground vein silver miners (think Mexico, Peru) run sulfide ore through froth flotation circuits. No acid needed. Their cost structure is essentially insulated from this.

For silver specifically: about 28% of global silver supply comes as a byproduct of copper mining. If copper oxide operations get constrained by acid shortage, that byproduct silver also falls. Less silver supply. Upward pressure on price. A pure-play primary silver miner - who doesn’t use acid and doesn’t compete with copper operations for it - actually benefits twice: their costs stay flat while the silver price rises.

Your portfolio specifically: COPP is your most exposed position. Copper oxide operations getting squeezed hard. SIL and SILJ are mixed - they include operators with and without acid exposure, so look at individual holdings. GDX and GDXJ are largely fine - gold processing doesn’t require sulfuric acid in standard cyanidation. Your physical silver and gold ETFs are likely to benefit from the supply shock.

If you’re rebalancing, I’d think about reducing COPP exposure until acid markets stabilise, and tilting within your mining equity exposure toward pure-play underground silver and gold producers over diversified copper-silver open-pit operators. The thesis isn’t complicated: the ones who don’t need acid won’t get hurt by its absence.

One important caveat: this is a fluid situation. China has reportedly signalled it may reconsider the export ban. If acid flows normalise faster than expected, some of this dynamic reverses. So hold the analysis loosely, check your position sizing, and don’t make dramatic moves. We all know how skittish markets are right now.

Getting Started: Books, Sites, and Making Money Off the Mess

How would we learn more about metals investing? And what about making money off the turmoil?

For foundational understanding:

“Reminiscences of a Stock Operator” by Edwin Lefèvre - not about metals specifically, but still the best book ever written about how markets work psychologically. Everything else builds on understanding this.

“Gold: The Once and Future Money” by Nathan Lewis - clear, honest history of monetary systems and why gold keeps re-emerging as the reference point.

“The Road to Ruin” by James Rickards - his analysis of systemic risk and monetary architecture is worth your time even if you don’t agree with all his conclusions.

For ongoing research: Sprott Asset Management publishes genuinely useful free content. CPM Group’s annual silver and gold surveys are data-dense and worth reading. Mining.com covers industry operations in detail. SilverSeek aggregates commentary from the silver space specifically.

On making money from the turmoil: the honest answer is that it depends entirely on your risk tolerance and time horizon.

Physical metal - simple (link). You own it, no counterparty risk, no options decay. You don’t “make money” day-to-day but you preserve wealth through chaos.

Mining equities - leveraged exposure to the metal price. In a rising metal environment, a well-run miner can outperform the metal 3-5x. In a falling environment, they can underperform by the same ratio. This leverage is why they’re interesting and why they’re dangerous.

Options and warrants - significantly higher leverage, also higher complexity. If you’re not comfortable with how options decay, stick to equities first.

The thing I always come back to: start with position sizes small enough that you can hold through volatility without panicking. A miner can be down 40% in a correction before going up 300%. Most people sell at the -40% part. The ones who make money are the ones who sized it so the drawdown didn’t kill them.

Paper Oil, Real Oil, and Why Treasuries Are Just Vibes

I CANNOT understand in my brain how these contracts work [...] Is it truly like a casino then? [...] I should probably try to find a video but I do love to read and you’re the master of analogies.

“is it like a casino” instinct is directionally correct.

Thanks for the compliment, so let me try an analogy 😉:

Imagine a car park with one empty spot available next Tuesday. The owner rents out the right to use that spot to someone - let’s say for £10. That person doesn’t actually need the spot on Tuesday. They’re just betting the spot will be more valuable. So they sell the right to someone else for £12. That person sells it for £11. Another person buys it for £13. By the time Monday arrives, that single parking spot has been “sold” fifty-seven times.

On Tuesday, one person actually parks there. Everybody else settled in cash. They made or lost the difference between what they paid and what they sold for. Nobody but the final holder ever cared about the physical parking spot.

That is the paper (oil) market.

The physical oil market is real barrels moving through real pipelines to real refineries. The paper market is the fifty-seven transactions that happened in between. Most participants never intend to touch actual oil. They’re taking positions on price. They profit or lose on the spread, not on the barrel.

“Dated Brent” is the moment of truth - the price at which the final contract holder either takes delivery of actual North Sea crude or gets cash-settled against a real price. It anchors the whole chain to physical reality. However abstract all the intervening transactions get, the contract eventually points at a real barrel.

What Kalibaf was pointing at with Treasuries is that there’s no equivalent moment. US Treasuries are backed by the full faith and credit of the US government. That’s it. No gold. No oil. No barrel of anything you can physically receive. In a crisis - if you lose faith in the institution itself - there’s no Dated Brent to ground the price in something real. The whole thing is trust, all the way down.

Is it a casino? Partially. Unlike a casino, the paper oil market does serve a function - it lets airlines hedge their fuel costs, lets producers lock in prices while they’re drilling, lets refiners plan ahead. These are legitimate users who genuinely need price certainty. But they’re a minority of the volume. The majority is speculators taking positions, and in that sense yes - most of the trading is closer to poker than to commerce.

The difference between “value” and “price” you asked about is real and important. A futures contract on oil has no inherent value - it’s a derivative, meaning it derives its price from something else (the underlying physical oil). It doesn’t represent a stake in a company producing something. There’s no earnings, no dividend, no balance sheet behind it. Just a bet on where the price goes.

A mining stock, by contrast, represents an ownership claim on a company that extracts something physical from the ground, sells it, pays costs, and (ideally) returns cash to shareholders. That’s value-based - the stock price should ultimately reflect the company’s ability to generate cash. It often doesn’t in the short term, because the market is also partly a casino. But the underlying value is there to anchor to.

Hope that helps.

That's where I'll leave it for April. The floor is yours.

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For daily digests: https://no1sdailydigest.substack.com/archive

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Eight charts of Chinese customs gold and silver import/export flows showing dramatic shifts in bullion demand.

Gold vs S&P 500:

Silver… Nothing to see here:

Simple buy/sell graph for silver:

China silver import charts:

UK silver exports:

India silver imports:

silver has outperformed gold by 100% since the COVID-era lows:

Shorter term gold chart:

Silver weekly chart holding the August 2025 trend line as key support:

COMEX silver inventory drawdown:

Platinum:

Oil-to-gold:

Maybe… just maybe… watch out below?

Gold/silver ratio breakdown?

SHFE silver inventory:

I’m not liking this one:

USD share of SWIFT payments:

foreign US Treasury holdings:

consumer unemployment expectations:

US consumer sentiment:

Global debt:

Fed operating profits and losses:

CNN Fear and Greed Index:

Buffett Indicator:

UST holdings, reported and estimated true figures?

UST holdings over time:

Asset performance comparison:

Yup, totally normal:

But US crude oil exports:

And the reason we don’t feel it (yet) at the pump:

Long-term crude oil chart projecting a price target range of $300 to $500 based on structural trend lines.

THOU SHALT NOT PASS!

Silver-to-oil ratio:

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I owe you this one.

I was on holiday in early April (link), then extended it with what I’d generously call “down time”. Not much going on out there anyway. I mean, beyond the few bombs lobbed back and forth between Iran and USrael and the back-and-forths in Ukraine.

Iran blocks the west. The US blocks Iran. (link) Freedom of navigation is effectively dead, though reports suggest the US blockade is about as effective as a mouth mask was for COVID.

Meanwhile silver - and to a lesser extent gold - keeps flowing east while COMEX helpfully lowers margins along the way, and the vault numbers are numbering the same way they’ve been for months.

I started writing that one up last Monday and keep putting it off, but I’ll still push it out at some point because the slow bleed deserves the slow write-up.

And because the world needs fertilizer like YESTERDAY, China helpfully blocked sulfur exports until after sowing season wraps up. (link)

But none of this is news if you’ve been keeping up.

So I did what any reasonable person watching the global order unravel would do.

I went and tended the garden.

That part was unironic - wicking boxes, seedlings, the whole production. Took me longer than expected, but the seeds are germinating now and should be in the ground in a few days.

The other time-sink was getting an anti-spam system in place. You might have noticed, but there’s been an increase in spam (link). Spam, more spam, lovely automated spam. Took a few days to wrestle into shape.

A few bugs got reported in the comment section of the daily digests (link), both of which I tackled. One was a layout issue with bold and italics colliding with links. The other was how Shanaka was being reported in the digest - I’d scaled his AI talks way down, and as it turns out, way too far. The dial is recalibrated now.

I’ve also been getting the portfolio integration (link) working - not quite there yet, but close. Email integration is up, and Substack is fully interfaced so I can talk to it via code. Helps a lot with the daily digests and the automated buy/sell alerts.

Portfolio-wise not much has changed. Added a long-term oil bull call because I don’t see the current lull holding, and the SILJ Jan’28 options are still waiting for the market to notice that even at current prices, those mines are printing money.

So what’s coming?

Honestly, no idea - news will steer most of it.

Today you’ll still get the “Weekly Thoughts”, and tonight or tomorrow morning the silver update follows.

Tomorrow the “April Q&A” goes out too, so if you haven’t responded to my email yet, please do. Anything goes, as I said.

So… Plenty to do. None of it geopolitical.

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“Perhaps someone should have a closer look into the USD index calculation method. My nose tells me it’s useless and graphs with it are distracting.”

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My immediate reaction? Nah, can’t be that bad. The DXY is everywhere. Every financial site quotes it. Every metals analyst references it. Hell, I reference it constantly. Surely if it was fundamentally broken, someone would have fixed it by now.

Right?

So I went digging. Pulled the ICE methodology documents. Read the Fed’s papers on trade-weighted indices. Traced the historical evolution of the basket composition.

And you know what I found?

His intuition was spot on! The DXY isn’t just useless for modern analysis. It’s a perfectly preserved fossil from 1973, maintained by a private company with every financial incentive to keep it that way.

The Federal Reserve figured this out back in 1998 and basically said “fine, we’ll make our own index”. They did. It tells a completely different story. And almost nobody uses it.

Let me show you what I mean.

The DXY launched in March 1973, right after Bretton Woods collapsed. The dollar was no longer pegged to gold, currencies were floating freely, and someone needed to figure out what the dollar was actually worth against its trading partners.

Fair enough. Reasonable goal.

Here’s the basket they created, weighted by 1973 trade patterns:

Euro: 57.6%
Japanese Yen: 13.6%
British Pound: 11.9%
Canadian Dollar: 9.1%
Swedish Krona: 4.2%
Swiss Franc: 3.6%

Wait, you’re thinking. The euro didn’t exist in 1973.

Correct. Bear with me.

The original basket had ten currencies. West German mark (20.8%), French franc (13.1%), Italian lira (9.0%), Dutch guilder (8.3%), Belgian franc (6.4%), British pound (11.9%), Japanese yen (13.6%), Canadian dollar (9.1%), Swedish krona (4.2%), and Swiss franc (3.6%).

And here’s where it gets fun.

The European currencies totaled 57.6% of the index.

When the euro launched in January 1999, those five European currencies got replaced by a single EUR entry at the exact same combined weight. Everything else stayed identical.

One change. That’s it. In 52 years, the DXY basket composition changed exactly once, and that was a mechanical substitution to accommodate a new currency. Not a rebalancing. Not an update to reflect shifting trade patterns.

One. Single. Change.

Let’s talk about who the United States actually trades with.

Top bilateral trading partners by total trade volume (January-October 2025, US Census Bureau):

1. Mexico: $731.2 billion

2. Canada: $606.7 billion

3. China: $357.2 billion (down 26.7% due to tariff war)

4. Taiwan: $201.1 billion

5. Germany: $196.4 billion

6. Japan: $190.7 billion

7. United Kingdom: $133.5 billion

(Note: The European Union as a bloc totaled $883.3 billion, making it the largest if counted as a single entity)

Now let’s see which of those are in the DXY basket.

Canada? Yes, at 9.1%.
Japan? Yes, at 13.6%.
Germany? Technically yes, buried inside the 57.6% euro blob.
United Kingdom? Yes, at 11.9%.

And the others?

Not there. Mexico isn’t in the basket. China isn’t in the basket. South Korea isn’t in the basket. The top three US trading partners by volume, and two of them don’t exist in the index that’s supposedly measuring dollar strength against trade partners.

But you know what is in there?

Sweden, at 4.2%.

Nothing against Sweden. Lovely country. IKEA, ABBA, quality meatballs. But Sweden-US trade is a rounding error compared to China-US or Mexico-US trade.

Switzerland gets 3.6%. Again, nice place. Good chocolate. But we’re talking about an index weighted by 1973 trade patterns when Swiss banking secrecy actually meant something and the yuan was barely convertible.

The world has changed a “little” bit since then.

1998. The Federal Reserve created their own dollar index. Not to compete with ICE. Not to undermine the DXY. They created it because the DXY had already become useless for actual economic analysis.

The Fed’s Broad Dollar Index includes 26+ currencies (TradingView: DTWEXBGS). It rebalances annually based on current bilateral trade data. It includes both goods and services trade (DXY only ever used goods). And it has a competitiveness weighting factor for how much foreign producers compete with US products in third markets.

Let’s compare the top weightings:

DXY (frozen 1973 patterns):

• Euro: 57.6%

• Yen: 13.6%

• Pound: 11.9%

• Canadian Dollar: 9.1%

• China: 0%

• Mexico: 0%

Fed Broad Index (March 2025, updated annually):

• Euro Area: 21.1%

• Japan: 5.3%

• United Kingdom: 5.3%

• Canada: 13.8%

• China: 11.2% (tariff war impact - was 16% before)

• Mexico: 14.7%

• …

See the difference?

In the Fed's index, China and Mexico account for ~26% of the weighting. In the DXY, they account for exactly zero percent. The euro drops from 57.6% to 21.1%. Suddenly Japan’s weight gets cut by more than half.

The Fed’s index captures this.
The DXY doesn’t even know these countries exist.

This isn’t even a minor methodological dispute. These are completely different pictures of what the dollar is doing.

The DXY has a correlation of roughly 0.85 with EUR/USD. Inverted.

You could literally just chart EUR/USD backwards and get almost the same information. The euro is 57.6% of the index. When the euro falls, the DXY rises. When the euro rises, the DXY falls.

It’s basically the Anti-Euro Index.

And this creates some truly bizarre distortions.

Take 2025. The DXY fell about 10% year-to-date. Big move. “Dollar weakness”, right?

Except USD/CNY stayed remarkably stable around 7.30. The yuan didn’t strengthen against the dollar. It actually weakened against other currencies while holding steady against the dollar. Chinese authorities were explicitly managing that relationship.

But because China isn’t in the basket, the DXY doesn’t capture any of that. It sees the euro strengthening, registers “dollar weakness”, and ignores the fact that the dollar’s relationship with its largest trading partner barely moved.

The math is perfect. The calculation is transparent. The result is meaningless.

Why hasn’t anyone fixed this?? Well… No1 has any incentive to fix it. Neither does ICE.

The U.S. Dollar Index is a registered trademark owned by Intercontinental Exchange. It’s not a public utility. It’s a private company’s futures contract that trades 21 hours a day with $1,000 of value per index point.

Changing the methodology would disrupt decades of historical data. It would invalidate trading strategies built on 50 years of continuity. It would create legal and regulatory headaches around contract specifications.

And for what? The Fed already made a better index for people who actually want economic analysis. Everyone else just wants a liquid, tradeable dollar proxy, and the DXY works fine for that.

From ICE’s FAQ:

“There are no regularly scheduled adjustments or rebalancings of the ICE U.S. Dollar Index. The Index was adjusted once when the euro was introduced as the common currency for the European Union bloc of countries. ICE Futures U.S. monitors the index methodology to ensure that it properly reflects the covered currencies and the FX market in general.”

Translation: We’re watching it. We’re not changing it.

I searched for any evidence that ICE even considered adding China to the basket. Nothing. Not a word. China became the world’s largest exporter, the second-largest economy, a top-three US trading partner, and ICE’s response was apparently to shrug and keep selling futures contracts.

Why would they change? The contract is profitable. It’s established. It works for its intended purpose, which is providing a tradeable derivative, not measuring economic reality.

The perverse incentive isn’t manipulation. It’s inertia.

Now, is this something like the CPI being gamed by those controlling it?

Not quite… But the end result is similar.

CPI gets “adjusted” constantly. Hedonic quality adjustments. Substitution effects. Geometric weighting instead of arithmetic. The methodology changes to achieve a desired outcome - namely, to report a lower inflation than people actually experience.

The DXY doesn’t get adjusted at all. That’s the problem here.

With CPI, the game is active. They’re constantly tweaking the formula to minimize the reported number. With DXY, the game is passive. They’re freezing the formula while the world changes around it.

Both fail to measure what they claim to measure. One through constant tinkering, the other through militant stasis.

Pick your poison.

If you’re using the DXY to analyze gold and silver, you’re essentially tracking the dollar-euro relationship with some Japanese yen noise thrown in.

Asian demand? Not captured. The yuan has zero weight. Mexican mining output? Not captured. The peso has zero weight. Real dollar strength against emerging markets? Not captured. No EM currencies in the basket at all.

When you see analysis saying “DXY down, therefore metals should rally”, what that’s really saying is “EUR/USD up, therefore metals should rally”. Which might be true! The euro-dollar relationship does matter.

But it’s not the whole story. Not even close.

The Fed’s Broad Index fell about 10% in 2025 too, but the composition of that move was completely different. The euro strengthened, yes. But the yuan relationship stayed flat. The peso weakened. Emerging market currencies moved all over the place.

If you’re trying to understand physical demand dynamics in Asia, or production costs for Latin American miners, or real purchasing power for international buyers, the Fed’s index is going to tell you a lot more than DXY.

The DXY will tell you whether European money is flowing toward or away from dollar assets. That’s useful information. It’s just not the same as “dollar strength”.

I see analysis all the time showing DXY charts from 1973 to present, drawing trendlines, making long-term projections. And I thought this was a reasonable representation of reality. Now I know better. You do too.

Because what does that chart actually show?

1973-1998: Dollar strength vs actual major trading partners (flawed but functional) 1999-2010: Dollar strength vs euro-dominated basket (China already a major partner, not included) 2010-2026: Dollar strength vs an increasingly irrelevant basket (top three trade partners, two missing)

You’re comparing 1973 apples to 2026 oranges and calling it a trend.

In 1973, the Soviet Union still existed. China was pure communist and closed. Mexico just a backwater economy. The European Community? Nine members and a major US trade partner.

Compare that to the world today: China is the workshop of the world. Mexico is a top-three trade partner. The eurozone economy is important but not remotely as dominant as the 1973 patterns suggests.

Using a 50-year DXY chart assumes trade relationships are static. They’re not. They’ve transformed completely.

Ok, we’re all the wiser now. But what can we actually use in our analyses then?

For short-term euro-dollar dynamics: Use DXY. It’s liquid, it’s established, and it actually does track EUR/USD pretty well.

For everything else: Use the Fed’s Broad Dollar Index.

The Fed publishes three versions:

• Broad: All 26+ currencies (DTWEXBGS)

• Advanced Foreign Economies: vs the developed markets (DTWEXAFEGS)

• Emerging Market Economies: vs the EM currencies (DTWEXEMEGS)

You can find them on FRED (St. Louis Fed database). The series codes are DTWEXBGS for nominal broad index and RTWEXBGS for the real (inflation-adjusted) version.

They update daily. They rebalance annually. They include China at 11% and Mexico at 14%. They incorporate services trade, not just goods. They’re designed for economic analysis, not futures trading.

And they tell a completely different story about what the dollar is actually doing.

Conclusion

The DXY is a perfectly calculated relic.

It’s not a conspiracy. It’s not being actively manipulated. It’s just frozen in a world that no longer exists, maintained by a private company with every financial reason to leave it that way.

The DXY is useless for long-term analysis of actual dollar strength. It’s excellent for tracking the dollar-euro relationship and providing a liquid trading vehicle.

Those are not the same thing.

The Federal Reserve figured this out 26 years ago and built a better mousetrap. Most people still use the old one because it’s familiar and tradeable and nobody wants to explain to their readers why they’re switching metrics mid-analysis.

But if you’re trying to understand real dollar dynamics - especially in metals markets where Asian demand matters enormously - you’re handicapping yourself by relying on an index that thinks China doesn’t exist and Sweden is a major trade partner.

The math is perfect.

The inputs are just garbage.

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Silver’s sixth consecutive annual market deficit (or 8th when counting ETF demand):

Gold next target zone:

Silver disconnect from fundamentals:

Gold/Silver ratio breaking down (ie: silver outperformance):

Gold ETF flows:

Gold reserve additions:

Fed operating ‘profits’:

US household wealth growth:

US government interest expense as a share of revenue:

Long-term DXY dollar cycle:

M2 money supply ATH:

US 1-year breakeven inflation expectations:

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I’m sure this is going to work out just fine:

I’m sure this is going to work out just fine 2:

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Shipping route map:

US crude inventory: (I’m sure everything’ll be fine… 3)

Global oil production and consumption (peak oil?):

onshore crude oil inventories (China & World ex-China):

US crude oil exports:

oil supply & futures price shock:

US retail diesel price:

⚠ Hormuz disruption:

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“efficient markets”:

Maturity wall:

Payroll employment:

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