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

A Fed rate hike won’t enable more ships to go through the SOH or refineries to produce more diesel or farmers to grow more corn. In more general terms, when prices are rising due to supply restrictions, central-bank rate hikes are not a reasonable response. In fact, when the underlying problem is reduced supply due to temporary disruptions, a rate hike by the central bank is not only not part of the correct response but also gets in the way of the actions that are needed to fix the problem. What’s required is investment to increase production, not tighter monetary conditions to clamp down on demand. However, many commentators are arguing that the Fed should hike in September because “inflation is well above the Fed’s target!”.

Unfortunately, most members of the FOMC also fail to account for economic reality and instead react blindly to the high-profile “inflation” numbers and to employment reports that are inaccurate to the point of uselessness. Of course, Trump’s threats against the Fed do not help. That’s because to maintain the appearance of independence, if any members of the FOMC were leaning towards rate cuts (none of them are at the moment), the President’s threats likely would push them in the opposite direction.

So, the situation is that regardless of what caused the increased inflation numbers and what’s the best way to address the issue, the financial markets assume that any economic statistic will make a rate hike more likely if it hints at larger price increases or a stronger economy. Consequently, in response to the latest news, last week the probability assigned by the Fed Funds Futures market to a Fed rate hike at the FOMC meeting on 16th September went from 70% on Tuesday down to 50% on Thursday and back up to 59% on Friday. Gold was the market that was most sensitive to these probability swings.

In effect, at the end of last week the Fed Funds Futures market was assigning a probability of almost 60% to a Fed mistake in the form of a rate hike in mid-September. We will be surprised if this particular mistake is made, but if it is it could be the catalyst for deeper corrections in the gold, equity and currency markets, with the gold price and the SPX dropping and the Dollar Index rising.

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

In several respects, the past few years have been different from anything in the past. In some cases the reason for the unprecedented outcome is not hard to find. However, while it is always possible to concoct an explanation after the fact, in other cases the reason for the unprecedented outcome remains in doubt.

As an example of an easy-to-find explanation, the fact that the US stock market has become more expensive and more concentrated than ever before is a predictable consequence of the increasing influence of passive investing.

A case where the explanation for the divergence from the historical record is far less clear is the fact that in the US, economic conditions that in the past always were followed by a recession did not lead to a recession. Instead, the economy went from one boom to another with an intervening bust phase that lasted about two years and never became severe enough to qualify as a recession.

One of the many indicators we can use to make the point that this time has been different is charted below. The chart shows that with the exception of the extremely short COVID recession of 2020, which was caused by the government suddenly shutting down a large portion of the economy, every recession (the shaded areas on the chart) since the start of data collection in 1985 was preceded by a sharp downturn in Residential Construction Payrolls (RCP). Furthermore, prior to 2022 there were no multi-year periods in which RCP essentially went sideways. Consequently, the period from 2022 onwards stands out. For the first time, RCP peaked and instead of dropping spent years going sideways near its cycle high.

After the fact, we can come up with three main reasons why the US economy never became weak enough during 2022-2024 to officially enter recession territory. Here they are:

1) The government spent money (provided fiscal stimulus, that is) as if a recession were underway while the economy was still growing, boosting employment and economic activity in the process. However, this alone could have done no more than delay a recession. In addition, it would have increased the severity of the eventual recession.

2) During 2023-2024, the Fed released about 2.5 trillion dollars into the economy from its Reverse Repo Facility. This meant that during a 2-year period in which the Fed supposedly was tightening monetary conditions, it actually was a net injector of liquidity into the financial markets and the economy. However, like the ‘amped up’ government spending, this could have done no more than delay a recession.

3) The combination of items 1) and 2) potentially could have delayed the start of a recession by 1-2 years, but at around the time that their positive short-term effects on the economy would have ended, the AI-related investment boom became big enough to counteract all other negatives. This wasn’t planned or — as far as we know — foreseen by anybody. For policymakers in the government and the central bank, it constituted blind luck of a very rare kind, because it is unprecedented for a new technology to have such a substantial effect on economy-wide economic statistics within such a short period.

The effect of the AI-reflated investment boom has been positive as far as economy-wide measures of economic activity are concerned, but for many individuals the effects to date have not been positive. In particular, the demand for energy and materials from AI-related spending has increased significantly the cost of living for the average person. Consequently, datacentres have become an important political issue.

“It is different this time” is said to be the most dangerous expression in the world of investing. It usually is a dangerous idea to hold, but the fact is that sometimes it really is different.

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

In the 10th June Weekly Update we discussed the potential for the El Niño currently underway to become the “super” variety, with major adverse consequences for food production around the world and especially in Asia. Before we provide an update, here’s a brief description of the El Niño and La Niña weather phenomena from the article linked HERE:

“Normally, Pacific trade winds blow west across the equator, carrying warm South American water toward Asia. Cold water then “upwells” from the depths to replace the warmer surface water that’s been pushed away.

El Niño is a natural climate cycle that disrupts this pattern. It’s triggered by weaker-than-usual trade winds — winds that end up allowing much of that warm water to flow back toward the west coast of the Americas.

Ultimately, that warmer water forces the Pacific jet stream — a high-altitude air current that acts as a 7,000-mile “conveyor belt” pushing storms east across the Pacific toward North America — to move south of its usual path, altering weather patterns across the U.S. and the globe.

La Niña is the exact opposite: stronger trade winds, colder water and a Pacific jet stream that moves north rather than south.

El Niño and La Niña happen roughly every two to seven years and last nine to 12 months. El Niño generally arises more frequently than La Niña.”

This year’s El Niño stands a good chance of becoming strong enough to qualify as “super”, meaning that surface temperatures in the Pacific are on track to become much warmer than would be the case in an average El Niño. Super El Niños are relatively rare, typically occurring every 10-20 years. However, as discussed in our 10th June commentary, a Super El Niño combined with other natural climate cycles could result in weather conditions during 2026-2027 being similar to those of 1877-1878, when Asia experienced the worst drought in centuries.

Evidence regarding the likely consequences of the 2026 El Niño will start to become available by August, because by that time it will be possible to make an initial assessment of India’s monsoon season. In particular, much less rainfall than usual in India during June-July (the first two months of the monsoon season) would increase the risk that an event of similar severity to 1877-1878 is in store.

The broad correction in the commodity markets that began in April could continue for a few more months, but as we mentioned last month, a “super El Niño” probably would result in grains and other crops being among the first commodities to resume their longer-term bullish trends. Therefore, over the months ahead we will be looking for opportunities to add more agriculture-related exposure to the TSI Stocks List.

[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.

[This blog post is an excerpt from a commentary published about two weeks ago at www.speculative-investor.com]

During February-March of last year there was talk of the US government revaluing the gold bullion that currently is an asset on the balance sheet of the Fed. The asset was being valued at $11B, or only US$42.22/ounce, whereas the market value of the asset at that time was around US$770B. The situation today is that the asset is still being valued at only US$11B, whereas its market value is now around US$1.2 trillion. This means that bringing the asset’s official valuation in line with its market value would now result in the addition of more than $1 trillion to the Treasury’s account at the Fed (the Treasury General Account, or TGA). Is this likely to happen anytime soon?

When we addressed this topic in February of last year, our answer to the above question was “no”. The reason, in a nutshell, was that while the monetary injection would give the economy a short-term boost, it would have longer-term negative effects including higher price inflation. We concluded that due to the short-term nature of any positive effect on the economy, from a purely political perspective it would make more sense to implement the revaluation during the final year of the Presidential term than during the first year.

Due to the looming importance to Trump of the November-2026 mid-term elections, we now think that the revaluation could happen within the next few months.

If the mid-term elections result in the Democratic Party gaining control of the House, the path ahead for Trump would become far more difficult. Not only would it be harder for him to pursue his policy agenda, but also he probably would be impeached for a third time. Creating the impression that the economy was strong or at least improving during the months leading up to the election would reduce the risk of this happening. In this respect, we can’t think of anything realistic that would be as effective as a $1 trillion monetary injection that did not have to be financed via debt.

Adding a trillion new dollars to the TGA would be short-term bullish for almost everything except the US$. It would be bullish for the stock market, gold, commodities, bitcoin, and economic statistics such as GDP. It even would be bullish for the Treasury market, because it would enable the US government to spend a lot of money without issuing new debt. In fact, it’s possible that some of the money would be used to repurchase existing Treasury debt, thus lowering interest rates across the economy for a while.

Beyond the short-term it would be bullish for gold and commodities, but very bearish for Treasury bonds and the economy. However, that would be a 2027 story.

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

Whether it is war or accidents at major mines or weather or trade disputes or political upheaval or power shortages, every large rise in the price of any commodity will have its own unique drivers. However, there are periods when many commodities experience large price rises. Even though each of these price rises will have its own fundamental reasons and will seem special when viewed in isolation, a broader view will indicate that they are related.

One reason for the existence of periods during which many commodities experience large price rises, each for a seemingly unique reason, is that long periods of under-investment in commodity production due to low prices make the markets far more vulnerable to supply disruptions. Consequently, an issue (for example, a drought, a mine collapse, a civil war) in one part of the world that during some periods would be taken in stride and result in a relatively small rise in the international price, can lead to a globally important shortage and a huge price rise.

A second reason is the macroeconomic/monetary backdrop and a feedback loop involving commodities and conflict. Monetary inflation eventually leads to economic hardship by raising the cost of living and getting in the way of economic progress. As the inflation problem becomes more obvious, commodities are hoarded both for insurance and speculation purposes, putting additional upward pressure on prices throughout the economy and exacerbating the hardship. This leads to conflict within countries and between countries. If the conflict involves countries that are important in the global supply chain for any commodity, which it often does, then the price of that commodity will rise in dramatic fashion.

The current situation in the tin market is a relevant example. Over the past year there have been supply disruptions due to decisions to curtail production in Myanmar, where 10%-15% of the world’s tin supply originates, and conflict between government and rebel forces in the Democratic Republic of the Congo (DRC), where about 6% of the world’s tin supply originates. These supply issues have led to the price surge illustrated below. While a short-term price peak probably will be set soon, this market will remain acutely vulnerable to supply disruptions due to the combination of additional demand from the building of datacentres and long-term under-investment in mining.

There have been several dramatic price rises in commodity markets over the past six months and we expect to see many more over the next two years. Each will have its own unique drivers, but almost all of them will be related to the underlying influences outlined above.

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

The broad rally in the world of metals has continued during the first full week of 2026. During December the upward price momentum in the white metals (silver and the PGMs) became extreme, but now we are seeing dramatic upward price acceleration elsewhere. In particular, the rises in the prices of copper and lithium have become parabolic.

During the first half of this week the copper price in the US traded above US$6/pound for the first time ever, and the following chart shows that the price of copper on the London Metal Exchange (LME), which is less affected by tariff stupidity than the price in the US, is now above US$13,000/tonne. Prior to the past two months it had never been above US$11,000/tonne.

For its part, lithium carbonate priced in Chinese Yuan per tonne (CNY/t) has gained about 120% since June-2025 and about 45% over just the past month. Refer to the following chart for the details. Furthermore, since the Yuan has strengthened relative to the US$ the performance in US$ terms has been even better.

We wrote numerous times over the past two years that the gold bull market would broaden to encompass almost all commodities, starting with the white metals and then moving to other industrial metals and lastly to oil. We noted soon after it happened that the tariff-related panic in April-2025 had marked a turning point for the white metals relative to gold, while industrial metals in general have been strengthening relative to gold since October-2025. Therefore, it is fair to say that the broad strength that we are seeing across the metals markets was anticipated.

At this point in the cycle, it’s very unlikely that industrial metals such as copper and lithium are close to major price tops. On the contrary, the rallies from last year’s lows probably are just the initial rallies — the first of two or three bull-market legs. However, like the price action in silver and the PGMs, the price action in the copper and lithium markets is setting the stage for multi-month corrections. It also will be increasing costs in many industries, which is a related issue because there will be demand destruction if prices continue to rise rapidly. For example, in response to the huge recent price rise in silver, solar cell manufacturers, the largest industrial consumers of silver, are finding ways to substitute base metals for silver in their products.

So, don’t forget to take some profits!

[This blog post is an excerpt from a commentary published at www.speculative-investor.com within the past fortnight]

It has become clear to many analysts that the amount of money being poured into AI-related investment doesn’t make sense. The numbers just don’t add up, meaning that there appears to be little chance that many of the individual investments will achieve reasonable returns and no chance that the investment, in the aggregate, will achieve a reasonable return. This is true, but the rapid rate of spending probably will continue. Fortunately, there is a way to profit that doesn’t involve trying to pick winners in the technology race and doesn’t rely on the AI-related spending being profitable for the companies making the investments.

The rapid rate of spending on AI probably will continue, for two main reasons. The first is that although concerns regarding the magnitude of capital spending by formerly capital-light companies such as Oracle (ORCL) are beginning to appear in both the stock market and the bond market, it’s likely that the senior managers of the mega-cap tech companies view falling behind in the AI race as an existential threat. In other words, the current rate of spending creates a big risk, but failing to spend enough and thus falling behind one’s competitors could be an even bigger risk.

The second is that political leaders in both the US and China clearly believe that for both military and economic purposes, AI-related development in their country must at least keep up with the AI-related development in the country perceived to be their main adversary. Therefore, it’s reasonable to expect that there will be government pressure and incentives to ensure that the private sector continues to invest massive sums in AI and the associated infrastructure.

We think that the safest way to participate in this on-going investment boom is to own the shares of the companies that produce the raw materials that are needed to 1) build datacentres and the equipment that goes into them, and 2) build and fuel the systems that supply power to datacentres. Examples include the producers of natural gas, uranium, copper, tin, REEs and lithium.

The strategy of owning the stocks of companies that produce the raw materials required for the AI boom has worked well for us over the past 12 months and probably will work well for at least another 1-2 years, with — naturally — the occasional gut-wrenching correction along the way. Moreover, this strategy not only obviates any need to pick the AI winners, but also meshes with the fact that we have entered the phase of the economic cycle in which industrial commodities would likely perform well even without the additional impetus provided by the AI spending binge.

A final related point is that while the commodities mentioned above probably have all commenced cyclical bull markets, they tend to rally and correct at different times within these overarching cyclical upward trends. For example, the stocks of REE- and uranium-focussed companies were star performers during the second and third quarters of this year, but during September-November the focus shifted to lithium stocks and over the past few weeks the focus shifted again — to natural gas stocks. This means that it is not uncommon for a short-term selling opportunity in the stocks of companies focussed on one commodity to coincide with a short-term buying opportunity in the stocks of companies focussed on a different commodity.

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

Aggregates such as Gross Domestic Product (GDP) and Consumer Price Index (CPI) always have been fatally flawed. For example, the GDP calculation treats a dollar of wasteful spending as if it were the same as a dollar of productive spending, and the concept that a single number (the CPI) could represent the economy-wide price of money has never made sense. However, over the past several years some of the highest-profile economic aggregates have become more misleading than ever, prompting economists and politicians to wonder: “Why is the average person so concerned about his/her financial situation when the economy is doing so well?”

In the US, the Bureau of Economic Analysis probably will report that real GDP grew at the annualised rate of 3%-4% during the third quarter of this year, which is suggestive of a strong economy. At the same time, however, President Trump’s approval rating on the economy is very low and measures of consumer confidence are in the dumps. For example, the following chart shows that US Consumer Sentiment as measured by the University of Michigan is near a 10-year low.

The discrepancy between the economic aggregates and the perception of the average person was explained in a recent FT article. Here’s an excerpt:

“The American economy is deeply split, with those at the top enjoying unparalleled prosperity and the rest of the country struggling to make ends meet. The top 10 per cent of earners now account for almost half of all spending, up from about a third in the 1990s. Many are feeling particularly flush as they enjoy the fruits of a strong stock market — the S&P is up more than 15 per cent this year, despite a few wobbles. For everyone else, the picture is gloomy. Lay-offs are surging, consumer sentiment has fallen by 30 per cent year on year to near-record lows, and three out of four Americans tell pollsters that the economy is in fair or poor shape.”

And:

“The share of Americans who describe themselves as middle class has dropped from 85 per cent a decade ago to 54 per cent. Over 40 per cent of Americans consider themselves lower or working class, suggesting that many of the finer things feel completely out of reach.”

In short, the aggregates reflect a large increase in spending on the part of the wealthy, while most people are struggling financially. This has political consequences and probably is the main reason for Trump’s success in November-2024 despite the strong — according to high-profile statistics — economy of the time. Moreover, the economic trends of 2022-2024 and their effects on the political realm have continued this year, with the recent election of Zohran Mamdani, a so-called “democratic socialist”, as the New York City Mayor being one of the consequences.

All economic trends affect the financial markets in some way and economic trends that bring about political upheaval tend to have big effects on the financial markets. Although the “inflation” resulting from simultaneously creating a supply shock and showering the populace with money during 2020-2021 is the main cause of the current malaise, it’s a good bet that additional inflationary policies will be part of the official solution to the problem. For example, Trump is talking about sending a $2,000 “tariff dividend check” to almost everyone next year and cutting income tax*, while the Federal Reserve almost certainly will be taking actions to ease monetary conditions. We expect that these policies will extend the gold bull market and fuel even bigger price gains within the ranks of industrial commodities.

*Trump is saying that the income tax cut will be funded by tariff revenue, but you only need rudimentary understanding of the size of the federal budget relative to projected tariff revenue to know that this is nonsense. Any significant cut in US income taxes will be funded by an increase in government indebtedness.

We have never come across a satisfactory way of quantifying overall financial market liquidity, but major trend changes in liquidity can be observed in the price action. In this regard, the price action in several markets points to a major downward reversal in the liquidity trend having occurred during the first half of October.

To further explain, too many markets reversed course during the first half of October for it to be a random coincidence. Therefore, during this period there must have been an underlying shift in something with the ability to pressure prices in diverse markets upward or downward. A shift in the liquidity trend is the most logical explanation.

A shift in the liquidity trend could explain why all the following happened within a 2-week period:

1) There were spectacular downward reversals in the prices of stocks focussed on Rare Earth Elements (REEs), indicating that the REE bubble — a bubble that was extremely profitable for us — has burst.

2) The prices of gold and silver rocketed upward and then reversed downward.

3) The gold mining indices/ETFs peaked in mid-October, two days after breaking above their 2011 highs, and then plunged.

4) The prices of platinum and palladium rocketed upward and then plunged.

5) After peaking during the second week of October, US Antimony Corp. (UAMY), a proxy for the antimony speculation, quickly lost about two-thirds of its value.

6) Bitcoin made a new all-time high and then reversed downward.

7) The German stock market, as represented on the following chart by the DAX, made a marginal new all-time high and then reversed course. The chart indicates that the DAX may be about to complete an intermediate-term topping pattern.

The most important market that is yet to show evidence of declining liquidity is the one that is being supported to the greatest extent by passive money flows: the US stock market as represented by the SPX. However, if a major liquidity trend reversal is underway then its effects should start to become apparent in the senior US equity indices by early next year at the latest. More generally, if a major liquidity trend reversal is underway then no market will be spared and the next several months will be a period in which to ‘play defence’.

[This blog post is a brief excerpt from a commentary published at www.speculative-investor.com on 9th November]

In the 15th October Interim Update, under the heading “The REE Bubble”, we wrote that all the REE-related stocks that we track except for Neo Performance Materials (NEO.TO) were now in bubble territory. This was not only because equity prices had gone parabolic, but also because the price gains in the stock market were not supported by price gains in the underlying commodities. We went on to write that the bull market possibly had years to run, but the risk of an intervening crash had become high. Therefore, we recommended that anyone with significant exposure to REE-related stocks who had not yet harvested meaningful profits, should do so right away. Our warning was well timed, because a crash began almost immediately.

The first of the following daily charts shows that MP Materials (MP), the largest (in terms of market capitalisation) stock in the REE sector and a stock that we use as a sector proxy, fell by 50% from its October high to last week’s low. The second chart shows the performance of USA Rare Earth (USAR), a stock that looked very expensive in early-September — BEFORE it tripled in price on the way to a blow-off top in October. USAR lost two-thirds of its value from its October high to last week’s low.

On average, the prices of the REE stocks on our radar screen fell by around 50% from last month’s high to last week’s low. The stock price of Neo Performance Materials (NEO.TO) held up relatively well and suffered a peak-to-trough decline of ‘only’ 32%, because it didn’t rise by as much in the lead-up to the top and because its current valuation is underpinned by current revenue and earnings.

The way these things usually go, the initial phase of the crash will be followed by a rebound to a lower high, a decline that tests or breaches the initial low, and then several months of base-building. After that, the next leg of the bull market possibly will begin. Note that last Friday’s price action suggests that the initial phase of the crash is complete, so over the weeks ahead there probably will be a rebound.

With commodity-related stocks, we like to do most of our buying during base-building periods and to scale-out during the parabolic rallies.