There are so many things happening right now, it is difficult to know where to start. Most of these things are a cause for major concern.

While most of the focus is on the events in the Strait of Hormuz there are plenty of other events taking place that could have a significant impact on our financial futures.

The most immediate concern happens to come from the Iran confrontation. While oil is the most discussed topic- and rightly so- there are other commodities that transit this route that are being disrupted at the same time.

A huge piece of latest news is that our strategic petroleum reserve fell below three hundred million barrels – the lowest reading since 1983. This is important because even though we are paying FAR more at the pump the price has been somewhat capped by releasing our energy insurance to the tune of nearly 600,000 barrels per DAY. Remember back in May the IEA (International Energy Agency) warned that July-August could be a “red zone” without improvement in deliveries.

It is becoming increasingly obvious that Iran believes it is winning this war and that they are setting the terms for an end to it. The problem is that hardliners are taking control and demanding that the US leaves the region before the Strait reopens. While headlines fool the trading robots into selling oil and pushing the price temporarily lower the reality on the ground is that there appears to be no real movement at this time. In fact, according to the Wall Street Journal, Persian Gulf energy producers are concluding that Iran’s control over the Strait of Hormuz will become permanent and disrupt oil and gas exports indefinitely. They believe this is better than going back to war and having infrastructure destroyed. Our problem is that our ability to continue propping up supply is rapidly deteriorating and if no changes occur $4.00 gas could look like a bargain by 2027.

Of course, diesel is also in deficit and that leads to higher costs for shipping, farming, and manufacturing. In other words- INFLATIONARY.

Natural gas supplies are being negatively impacted by the lack of shipping taking place. In Brazil, aluminum producer Norsk Hydro has reduced aluminum production by 50% because of disruptions in natural gas supply. This is causing aluminum prices to spike.

Manufacturing in Germany is collapsing for many reasons. Lack of cheap energy, a faltering economy and to add insult to injury- a drought that is making shipping on their rivers nearly impossible. Water levels at Kaub (Rhine’s key shipping bottleneck) are at a record low and cargo ships can only pass at 20% capacity. Thyssenkrupp’s steelmaking plant in Duisburg is experiencing disruptions due to a lack of supply of raw materials.

While these disruptions are concerning, I am watching events unfold that could have a far greater impact on our future financial security than the supply disruptions mentioned above.

To start, the “markets” have been propped up to give the illusion that the economy is doing well because stocks are rising. The only real growth has been in a few companies that have been building out AI infrastructure. There is mounting evidence that a lot of the profits are being manufactured by debt piled upon more debt and keeping that debt off of the balance sheets that they rightly belong on.

There are major problems that I have outlined in the past, but the most important points are:

· If this AI buildout disappoints it could lead to a “market” meltdown that has no precedent in history. There are MANY warning signs to me that say it is just a matter of time.

· The spending is off the charts and is based upon future assumptions that could easily be derailed mainly by Chinese competition but also by a scenario where the implementation of AI is not what it is cracked up to be and does not come close to the current projections of future profits.

· If interest rates rise- which they are already doing- this MASSIVE debt becomes an albatross that greatly impacts future earnings. Most companies that are spending money are spending other people’s money and keeping the debt off THEIR books. Nvidia is a perfect example where I wrote a couple of weeks ago about them funding startups with Nvidia cash and having the startups buy Nvidia products. They are not alone. This is standard practice these days. In addition, we have players like Apollo, Blackstone, Blackrock, etc. trying to sell to the public on the idea that the chips are like commercial real estate. Anyone with any financial sense would see the scam right away. The life cycle of commercial real estate could be measured in centuries while cutting edge chips have a shelf life of a few years at best. A LOT of the debt is being backed with these chips.

· The same players who are promoting this scheme are the same who are helping Nvidia raise over $500 BILLION in new loans to build out AI. While all of this is pretty well known the real problem comes from where those entities are going to be accessing the new debt. These same players have bought insurance companies and have sold a lot of private equity and private credit to many pension funds. If this collapses it could be a LOT worse than many can imagine at this time. This $500 Billion and the trillions already raised and spent are increasingly being funded by OPM (Other People’s Money) Insurance company assets and pension fund assets are being pledged as collateral for many of these loans. If this succeeds those “in charge” will reap the benefits. If this fails- insurers, pension plans (in other words you and I) will be holding the bag and those retirement dreams may become a nightmare.

· I have written in the past about concentration risk- where a few companies drive almost all profits. This is generally a problem because if they fail the whole ecosystem could implode. Today, according to Steve Eisman (Big Short Fame) 70% of AI-related revenue for Microsoft, Amazon, Google, and Oracle, along with up to 35% of all cloud sales come from privately held Open AI and Anthropic. Since they are privately held there is no oversight as to what is happening under the hood as there may be with a public company.

It appears to me that a perfect storm may be forming. Supply disruptions, higher prices, more “printing” needed to keep rates low and “markets” from imploding along with an illusion of wealth being created with unfathomable amounts of debt that payment may be coming due on VERY shortly.

How secure do you feel about those “promises to repay”?

Be Prepared!

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