[This blog post is an excerpt from a commentary published last week at https://speculative-investor.com/]

After the war against Iran broke out in late-February, we thought that the oil market was under-estimating the scale of the oil supply problem and that a price of US$150-$200/barrel would likely be seen in the US futures market if the war continued for more than a few weeks. However, by the first half of April — with the war still very much in progress — we thought that the crisis essentially was over and that oil’s price spike to the US$120s in early-March would turn out to be its peak for the year. This was based on the price pattern and the progress of the war. As the oil price subsequently made progressively lower highs and the futures curve flattened, we became more convinced that the early-March peak was, indeed, the intermediate-term variety, while any remaining doubt was removed as soon as the US-Iran MOU was put in place. Some oil market analysts, though, maintained their $200/barrel price forecasts throughout the downward price trend and are still talking-up the short-term risk of a price rise of that magnitude. Why have these forecasts been so wrong and why, in all likelihood, will they continue to be wrong?

After the start of the war, several actions were taken that helped ‘fill the void’ created by the closure of the Strait of Hormuz (SOH). On the supply side, most of these actions were obvious and accounted for in price forecasts. Examples include Saudi Arabia re-routing oil from its east coast to its west coast via pipeline and oil being released from strategic reserves. The mistakes were on the demand side and the biggest of these was to not account for China reducing its oil imports by more than 5M barrels/day.

We started writing about the large reduction in China’s oil imports in early May, which also is when related articles started to appear in the press. But if this information was starting to appear in the mainstream media during the first half of May, it’s reasonable to assume that large traders in the oil market had been aware of it and had acted on it much sooner. In more general terms, when you discover information in the mainstream financial press (Financial Times, Wall St Journal, Bloomberg, etc.), you should assume that the information already is reflected in market prices.

Another mistake worth highlighting is associated with global oil inventories. We keep reading about plummeting inventories and storage tanks rapidly emptying, which creates the impression that the world will soon run out of oil. The reality, though, is that commercial oil inventories are not materially different today than they were at the start of this year. To further explain, there have been large inventory drawdowns, but only in the inventories (strategic reserves) managed by governments. This means that there will be no need to replenish the inventories in a hurry.

An important related point is that the reduction in the US Strategic Petroleum Reserve (SPR) accounts for about 75% of this year’s reduction in global strategic petroleum reserves. This is important because the US does not need a strategic reserve, so the US government could take as long as it wanted to replenish the SPR or simply choose not to replenish it.

Therefore, what’s being touted as a dangerously low inventory situation is a non-issue.

All of which brings us to a critical point: At any given time, the most accurate assessment of the current supply of oil relative to the demand for oil is provided by the slope of the oil futures curve, that is, how contract prices change as delivery months become more distant. The slope of the futures curve tells you the extent to which the market is well supplied, while the change in the slope over time tells you whether the supply situation is becoming tighter or looser. For example, there were times between early-March and early-April when the price of the nearest oil futures contract traded more than $40/barrel above the price of oil for delivery nine months later, indicating a severe shortage of physical oil, but the difference between these contracts has since trended lower and is now only about $3. This suggests that although the oil supply situation is still tight, the extent of the tightness has reduced dramatically. Moreover, it continues to move in the direction of increasing abundance.

Summing up, when it comes to assessing current oil supply relative to demand, the futures curve is vastly superior to any analyst.

[This blog post is a slightly modified excerpt from a commentary published at https://speculative-investor.com/ last week]

Assuming that the US-Iran Memorandum of Understanding (MOU) remains in effect and the Strait of Hormuz (SOH) reopens as agreed, the prices of equities, industrial metals and gold could have an upward bias for a few more weeks. If so, it would be reasonable to view this period of relative buoyancy as an opportunity to reduce portfolio risk by building up cash. Doing so would result in an opportunity cost if prices were to continue trending upward, but it would both mitigate the financial consequences of sizable corrections and enhance the ability to take advantage of future price weakness. After all, it’s always easier to buy low if you previously sold higher.

The overarching issue right now is that financial market liquidity is ebbing while high-profile inflation indicators such as the CPI are poised to stand in the way of decisive actions by central banks to bolster liquidity, potentially paving the way for meaningful price weakness within the next few months. We note, in particular, that currently all the world’s most influential central banks are either actively tightening monetary conditions or on hold*, while the gold and crypto markets have been warning for some time about declining liquidity. Also worth noting is that massive IPOs will in effect be shifting demand from the stock market to real assets. For example, the SpaceX IPO transferred US$75B from stock market investors to the company — money the company will now spend on building datacentres, rockets, etc. The same thing happens when instead of spending money on stock buybacks, companies such as Microsoft, Alphabet, Meta Platforms, Oracle and Amazon spend the money on AI-related infrastructure.

Furthermore, it’s likely that the markets have gone a long way towards pricing-in the best-case outcome for the conflict in the Middle East, leaving far more scope for a negative surprise than a positive one.

With regard to industrial commodities, our concern is solely about the short-term, because much higher prices remain likely over the coming 1-2 years. In fact, an implication of the intentions outlined in the US-Iran MOU is that the future demand for many industrial commodities will receive a significant new boost. The boost will come from a privately financed US$300B development fund that will be established to rebuild Iran and that will, if implemented as envisaged, help to integrate Iran into the global economy. This aspect of the deal has been widely criticised, but it is extremely positive. The greater the amount of trade with Iran and the more that foreign companies/investors are involved in Iran’s reconstruction, the lower the probability of another war.

*The Fed is on hold with regard to interest rates, but the new Fed Chair is considering a balance sheet reduction. At the same time, a substantial monetary tightening is underway in China and both the ECB and the BOJ are hiking interest rates.

[This blog post is an excerpt from a recent commentary at https://speculative-investor.com/]

To promote last week’s IPO of SpaceX, some extraordinary forecasts were made. For example, SpaceX founder Elon Musk said that by 2030 the company could be deploying 100 gigawatts of solar-powered artificial-intelligence datacentres into orbit every 12 months. According to the IPO prospectus, this “will require thousands of launches per year and the transport of approximately one million metric tons to orbit annually”. While these prognostications are far from realistic, they do indicate that massive spending on datacentres will continue. Rather than being built at a huge cost in space to take advantage of free energy from the sun, they probably will be built at a small fraction of the cost in Alberta to take advantage of cheap natural-gas-generated power. However, the point is that they will be built. If so, the demand for some commodities will rise substantially over the years ahead, resulting in much higher prices in order to incentivise additional supply.

Of the commodities for which there should be large increases in demand associated with the building of datacentres, up to now we have focussed on REEs, lithium, tin, copper and natural gas. We also are interested in vanadium, which currently is used mainly for hardening steel but probably will be used increasingly for stationary energy storage. For lithium and natural gas there is the potential to ramp-up supply in response to higher prices, limiting the magnitudes and/or durations of bull markets, but that’s not the case for REEs (especially Heavy REEs (HREEs)), tin and copper. Tin, in particular, is at risk of a significant supply disruption due to the Ebola outbreak and political instability in the Democratic Republic of Congo (DRC), the country with the world’s 5th largest production of the metal.

At the moment we are intermediate-term bullish on many commodities, because a broad bull market in commodities is underway and probably will continue for another 1-2 years. However, we suggest being particularly alert to opportunities to purchase the shares of companies involved in the production, or the development of new production, of HREEs, tin and copper. That’s because these are metals that will be integral to the datacentre buildout and for which it will be very difficult or time-consuming to ramp-up supply. Currently, the TSI Stocks List has exposure to HREEs via Aclara Resources (ARA.TO), European Lithium (EUR.AX, EULIF) and Neo Performance Materials (NEO.TO), exposure to copper via Cyprium Metals (CYM.AX), US Gold Corp. (USAU) and Vizsla Copper (VCU.V), and exposure to tin via Metals X (MLX.AX).

[This blog post is a brief excerpt from a recent commentary at https://speculative-investor.com/]

A major market-moving event for the US cannabis sector will arrive soon. We are referring to the upcoming administrative hearing to determine whether recreational marijuana will follow in the footsteps of medical marijuana and be moved from Schedule 1 to Schedule 3 under the Controlled Substances Act. The hearing will start on 29th June and finish no later than 15th July, potentially paving the way for a decision by the end of August. We expect the result to be positive, that is, we expect that recreational marijuana will be moved to Schedule 3, thus completely eliminating the excess federal taxation on state-legal cannabis sellers and propelling the associated stock prices to much higher levels. However, a positive outcome is not guaranteed.

The following weekly chart shows that the US Cannabis ETF (MSOS) gained more than 11% last week. Part of this gain would have been related to anticipation of a positive rescheduling decision, but the bulk of it was due to a surge in the price of a single stock: Trulieve Cannabis (TCNNF). The price of TCNNF, one of MSOS’s two largest holdings, rocketed upward late last week in reaction to news that it would soon up-list onto the NYSE. This means that Trulieve will be the first US cannabis company to list on a major US exchange.

Note that the TSI Stocks List has indirect exposure to TCNNF via MSOS.

Trulieve has achieved its up-listing by restructuring its business to separate medical sales from recreational sales. Other US cannabis companies could follow suit, but we expect that most of them will wait for the outcome of the above-mentioned hearing. The reason is that there will be no need to restructure in order to up-list if recreational cannabis is moved to Schedule 3.

We continue to expect that if cannabis is fully rescheduled, MSOS will rise quickly to the US$9-$10 area. In the meantime, resistance at US$6.00-$6.50 probably will limit the upside.

[This blog post is a brief excerpt from a commentary published at speculative-investor.com on 31st May]

In the 27th April Weekly Update we noted that the oil price had peaked in March and probably was in a downward trend, but that the gasoline price was still rising. We went on to write that if the oil price continued to trend downward (as expected), then the gasoline price would follow. The gasoline price extended its upward trend until mid-May, but it has since begun to follow the oil price downward and last week generated evidence of an intermediate-term top by breaking below its 50-day MA. What’s likely to happen from here?

What happens in the near-term will be determined to a large degree by developments in the Middle East, which remain unpredictable. However, while there is a risk that re-escalation will push the gasoline price back up to near its May peak within the next few weeks, it’s likely that the May peak will turn out to be the peak for the year and that the price will be much lower by the final quarter.

Interestingly, oil and gasoline prices are adhering closely to the 2022 price pattern that was a consequence of the Russia-Ukraine war. As noted on the following daily chart, in 2022 the gasoline price initially peaked in March with the oil price but then made a new high in June before commencing a major decline. In 2026 we have essentially the same pattern.

By the way, there is a strong tendency for the gasoline market to make a seasonal low late in the year. The vertical lines on the chart indicate these seasonal lows.

In summary, our base-case scenario is that the gasoline price in the US is now in an intermediate-term downward trend that should lead to much lower prices within the next seven months.

[This blog post is an excerpt from a commentary posted at https://speculative-investor.com/ last week]

Despite all the AI hype, general mining stocks as represented by XME have massively outperformed the tech-heavy NASDAQ100 ETF (QQQ) since late-2024. In fact, the first of the following daily charts shows that XME approximately doubled relative to QQQ from its December-2024 low to its January-2026 high, while the second chart covers a longer period and puts XME’s recent relative strength into perspective. The message of the longer-term chart is that the rally in the XME/QQQ ratio from its December-2024 low potentially is the final part of a major base that began to form in 2020. This interpretation suggests that XME could double again relative to QQQ over the coming 1-2 years.

The above interpretation of the long-term chart pattern makes sense, for these four reasons:

First, the monetary inflation moonshot of 2020-2021, the trend towards on-shoring prompted by security-of-supply concerns and the long-term acceleration in government spending set in motion by the COVID lockdowns has created an economic backdrop that should continue to favour the producers of physical commodities.

Second, the companies that supply the materials needed to construct the physical AI infrastructure stand to benefit more than most software creators from the AI boom. This is because for these companies (the suppliers of the materials) the barriers to entry are relatively high and, due to physical limitations and regulations, it usually takes a long time to increase supply in response to growth in demand. During the time between growth in demand and supply catching up, there tend to be large gains in prices and profit margins.

Third, three of the past four cyclical upswings in the XME/QQQ ratio have lasted at least 2.5 years, suggesting that the current upswing won’t end any sooner than mid-2027.

Fourth, the upward trend in the breadth and intensity of military conflict that began in 2022 is bullish for inflation and commodities.

The upshot is that the decline in the XME/QQQ ratio from its January-2026 peak probably is just a correction within a major upward trend that will continue for at least another 12 months.

[This blog post is an excerpt from a recent commentary at https://speculative-investor.com/]

In January of last year, we presented a list of items that would support the coming bull market in commodities. We subsequently reiterated and added to this list. Due to the events of the past two months another addition is appropriate, but to refresh memories here are the points mentioned previously:

1) Investments in AI-related datacentres and the associated infrastructure (power plants, pipelines, transmission lines, transportation services) will add significantly to commodity demand for years to come, even if the stock prices of the biggest spenders (the so-called “hyperscalers”) have reached their peaks. This is based on the datacentres already under construction and planned to commence construction.

This AI-related investment continues to have a very significant effect on the US economy. It is, in fact, the main reason that the US economy continues to grow.

2) The commercial demand for commodities will be boosted by the rebuilding of Ukraine, the rebuilding of Gaza and the construction of the massive Yarlung Tsangpo Hydroelectric Project in China.

3) Government trade policy is likely to put upward pressure on commodity prices in some parts of the world, most notably in the US, by making the trading of commodities less efficient. For example, whereas previously it would have made sense to import a commodity rather than produce it locally, due to tariffs it could make more sense to produce locally. However, it generally takes several years to build a new mine and the mine-building process itself consumes large quantities of commodities.

4) The combination of a weaker US$ and increased government spending around the world will both support the commercial demand for commodities and boost the speculative demand for commodities as an inflation hedge. The buying of commodity futures and physical commodities to hedge against currency depreciation contributed to the commodity bull market of the 1970s.

5) Even though investment in ‘renewable’ energy such as solar and wind is now being de-emphasised or actively discouraged by the US government, there continues to be massive investment in these forms of energy around the world and especially in China. This will boost the commercial demand for industrial metals.

6) The gold bull market that began in late-2022 projected a subsequent commodity bull market (commodity bull markets are just gold bull markets that have broadened). We have conclusive evidence in the price action that a commodity bull market began last year, and cyclical bull markets in commodities usually last at least two years.

The above points remain valid, and we can add the US-Israel-Iran war to the List. This war will fuel the commodity bull market in these ways:

a) Due to the damage it has caused to oil and LNG production facilities, the prices of oil and LNG will be higher than otherwise would have been the case over the next 1-2 years.

b) There will be increased commodity demand associated with massive rebuilding works in Iran and the rectification of the energy infrastructure that has been damaged throughout the Gulf region.

c) By creating a temporary shortage of fertiliser and raising the price of fertiliser, it will result in less fertiliser being used this year, leading to lower crop yields and higher agricultural commodity prices next year.

d) By reducing the supply of sulphur and thus boosting its price, the costs of fertiliser production, mining and petroleum refining have increased. This will lead to higher prices for grains, industrial metals and petroleum products.

e) The need to replenish the missiles, bombs and other weapons/equipment used by the armed forces will significantly add to demand for some commodities, chief among them being Rare Earth Elements (REEs).

f) US government spending will be hundreds of billions of dollars more than otherwise would have been the case. In essence, the US government has broken a lot of windows and over the coming year will spend a lot of money to get back to where it was prior to the war. This non-productive public-sector spending will elevate prices and increase the private sector’s desire to own commodities or the stocks of commodity producers as a hedge.

Further to the above, the commodity bull market is very much intact and looks set to extend into 2027-2028. Consequently, significant corrections in the stocks of commodity-related equities should be viewed as buying opportunities.

[This blog post is an excerpt from a recent commentary at www.speculative-investor.com]

In inflation-adjusted terms and relative to the monetary commodity (gold), commodities tend to become cheaper over the long haul. Another way of saying this is that over the very long-term, gold tends to increase in value relative to commodities in general. This is due to technological progress that enables the production of more for less, as evidenced by the fact that the percentage of the US workforce involved in farming has decreased from over 50% in the 1860s to less than 2% today in parallel with a large increase in per-capita agricultural production. Historically, however, oil has held its ground relative to gold. Why is that and will it continue?

When we say that oil has held its ground, we don’t mean that the gold/oil ratio has been stable. On the contrary, over the 150+ year period covered by the following monthly chart there clearly have been huge swings in the price of oil relative to the price of gold. What we mean is that after a huge move in one direction or the other, in the past the ratio eventually retraced the move.

Of particular interest, the chart shows that since the 1890s there have been four rises in the gold/oil ratio to 80 or above, with the latest one occurring recently, and that each of these previous dramatic upward moves was followed by a decline to below 40 within the ensuing few years. Will it be the same story this time around, that is, should we expect the gold/oil ratio to be back below 40 within a few years?

Before attempting to answer the above question we’ll posit that the oil price has held its ground relative to the gold price over the very long term because artificial barriers have been created to limit oil production and thus cause the long-term average oil price to be higher, in real terms, than would be the case if market forces were allowed to operate unhindered. The most important of these artificial barriers is OPEC, which was created in 1960.

Furthermore, we have just witnessed the creation of another artificial barrier in the form of deliberate destruction of oil production facilities in the Middle East. Even if the US-Israel-Iran conflict has peaked and the current fragile truce evolves into a lasting peace arrangement, due to what already has happened the global production of oil will be lower, and the average price of oil will be higher, during 2026-2027 than it otherwise would have been.

So, as to whether the gold/oil ratio returns to below 40 within the next few years, a lot of will depend on what artificial barriers are placed in the way of oil production growth. This is not knowable, as the determining factor will be political decisions that often are not rational if the goal is to maximise living standards.

That being said, the next monthly chart indicates that a major change in the performance of oil relative to gold may have occurred in 2008.

For decades prior to 2008 the gold/oil ratio oscillated within a wide horizontal range, but in 2008 it commenced an upward trend that has resulted in a move to well above the top of this multi-decade range. This upward trend was ‘kicked off’ by the Global Financial Crisis, but it’s likely that it was sustained in part by the shale revolution that began to have a significant effect on oil production in the early-2010s. Due to the shale revolution, US oil production increased from a low of around 5M barrels/day in 2008 to its current level of around 13.6M barrels/day. This large rise in US production put downward pressure on the oil price and reduced the influence on the oil market of the artificial barrier known as OPEC.

Further to the above, it’s possible that oil is now about 18 years into an ultra-long-term (multi-decadal or even multi-generational) downward trend relative to gold, but a lot will depend on the actions taken by governments to limit the supply of oil.

[This blog post is an abbreviated excerpt from a recent commentary published at www.speculative.investor.com]

On Friday of last week the Supreme Court of the United States (SCOTUS) ruled against the tariffs imposed by Trump under the International Emergency Economic Powers Act (IEEPA). What will be the financial-market and economic effects?

Based on the financial world’s initial reaction, the effects will be relatively minor. For example, the following weekly chart shows that the iShares 20+ Year Treasury ETF (TLT) consolidated last week but held the preceding week’s upside breakout. Also, the currency market did very little in response to the news.

The small initial market reaction probably stems from the fact that the Trump Administration intends to replace the tariff revenues lost through the inability to use the IEEPA with tariff revenues gained through other avenues, such as “Section 122”. In fact, Trump already has stated that he will use Section 122 to impose a global 15% (initially 10% but raised to 15% one day later) tariff on US imports. This would keep total tariff revenue at around the same level, but it would change substantially the distribution of the tariffs. For example, the average tariff on imports from China would be reduced, but the average tariff applied to imports from Canada would increase.

The single biggest problem associated with Trump’s use of tariffs has been the uncertainty resulting from the sudden changes. The uncertainty remains, because there will be many changes to product tariff rates in response to last Friday’s SCOTUS ruling, necessitating changes to many business plans. Furthermore, the President’s authority under Section 122 only enables the imposition of tariffs for up to 150 days. What happens after that?

Trump has been fortunate in that the business investment that has been curtailed/delayed by his many tariff-related threats and policy flip-flops has coincided with a massive increase in investment associated with AI — investment that would have happened regardless of who was in the White House. As illustrated by the following quarterly chart, Real Gross Private Domestic Investment (RGPDI) in the US has dropped from its Q1-2025 all-time high, but not by much. Moreover, with at least US$1 trillion of AI-related investment slated to occur during 2026 in an economy with a current RGPDI run-rate of about US$4.4 trillion, there’s a good chance that RGPDI will make a new all-time high within the next three quarters despite the uncertainty caused by the tariffs.

Unfortunately, this AI-related investment binge won’t do anything for average Americans other than increase their electricity costs and make their jobs less secure.

Summing up, last Friday’s ruling on Trump’s tariffs has removed a ‘known unknown’, but it has created new unknowns and hasn’t prompted a change to our outlook for any market. Currently, the ‘known unknown’ with the largest potential short-term market impact is the US-Iran situation.

[This blog post is an excerpt from a recent commentary at www.speculative-investor.com]

The stock prices of companies focussed on Rare Earth Elements (REEs) rallied well in advance of the underlying commodities during May-October of last year, but recently the prices of the commodities have gone up a lot while the REE sector of the stock market has been in correction mode. This actually is normal for some commodity sectors, chief among them being REEs and lithium, during cyclical bull markets. First the equities make big up-moves while the commodities do very little, after which the equities correct/consolidate while commodity prices catch up. Then the cycle repeats, with the equities rallying anew.

The following daily charts illustrate what we just described. The first chart shows that there was a massive rally in the stock price of MP Materials (MP), a proxy for the REE equity sector, from a low in May to a peak in October of last year, at which point a substantial correction began. The second chart shows that during May-October there was only a moderate advance in the price of Neodymium (Nd), a proxy for REEs, but that over the past two months there has been a parabolic rise to well above the October high.

Based on the historical pattern, we expect that the Nd price will level off within the coming month or so and that at around the same time the REE equities will commence new intermediate-term upward trends.

Upward pressure on the prices of many industrial commodities, including REEs, lithium, copper, tin, nickel and natural gas, will be maintained for at least another 12 months due to the on-going datacentre buildout, which not only is continuing but accelerating. Just four companies (Alphabet, Amazon, Meta and Microsoft) are together anticipating capital spending of around US$650B this year, up from the already-substantial amount of US$360B in 2025. These spending plans could explain January’s large rise in the ISM Manufacturing New Orders Index.