It's 43 degrees outside my window (about 110°F). Between settling in, getting the kids sorted, and finishing what I've been building this past month (more on that below), it's been a full couple of weeks.

Interestingly, there are no “air conditioning wars” in Spain. If you’re American, or really anyone outside Europe, and that sentence made no sense to you, you clearly haven’t been following the EU’s latest insanity.

Much of Europe is in the middle of a heated debate (pun intended) about whether air conditioning is an environmental luxury or a basic necessity. Germany has what WELT magazine called an “AC-phobia.” Good Morning Britain ran a segment asking whether using AC is “selfish.” European X is full of people earnestly trying to prove to the world that Europeans don’t need AC because they’re simply more in harmony with nature. And French politicians, who can barely keep their own power grid running, have taken to blaming American energy habits for Europe’s climate problems.

But leave it to EU officials to lay bare the absurdity of the whole “look at us, we’re so environmentally virtuous” act. Last week, the European Commission shut down the cooling system in its Brussels headquarters, the Berlaymont building. Staff on floors 1 through 7 (about 3,000 people) got a midday text: “BERL — URGENT — Due to extreme weather conditions, forced shut down of air cooling system from floor 1 to 7 for the rest of the day.” Meanwhile, floors 8 through 13, where Commission President Ursula von der Leyen and her 26 commissioners sit, kept their AC running. You can't make this stuff up.

In Spain, despite being an EU country knee-deep in its own brand of environmental posturing, none of this is a conversation. It’s 43 degrees. You turn it on. Yes, most of the buildings here are old and weren’t designed for central air, which seems to be the excuse for not having AC in other parts of the EU. Sure, it has some inconveniences. The condensate has to go somewhere.

But the Spanish solved this the way they solve most things: innovating with what they have. Run a drain pipe into a plastic jar on the balcony, empty it when it fills up. Not elegant. Works. Would I rather not do it? Sure, but it beats waking up at 3 AM in a puddle of your own sweat.

All that aside, I wanted to thank everyone who read and especially those who reached out about my “what happened” essay. I’ll be honest, I’m a little overwhelmed by the response. Thank you.

Since many of you asked: yes, I’m launching my own investment service. I’ve been busy putting the final touches on it so it can see the light of day this week. A philosophy, first picks, and everything I wanted to do at my old shop but couldn’t. Keep an eye on your inbox.

For now, here are the top essays from recent days, and a few reader comments that caught my eye.

From the Comments

One of the things I've come to appreciate most about writing here is the conversation that happens in the comments. Here are eight that stood out, for different reasons. Each one links back to the piece or note it appeared on, so you can click through if you're interested in the context, including my replies and the conversations that followed.

Thanks again to everyone who left a comment recently. I read all of them, even the ones I don't get a chance to reply to individually. Once this week’s launch is out the door, I'll catch up on the questions and the longer threads.

Regards,

Lau Vegys

But arguably the call I'm most proud of is the rare earths.

So today I want to walk you through that trade from start to finish. How I identified the opportunity, why I picked the company I did, and how it played out. Not because of the return (though it’s done very well, as you’ll see), but because I think it’s the clearest way to show you how I approach these investments. Every winning trade looks obvious after the fact. Hindsight makes the result look inevitable, when what actually matters is whether the process that produced it was repeatable (which in my case it is, because it follows a specific framework). So I think it’s a useful exercise, and I hope you’ll find it interesting.

Before I get into it, I wanted to thank everyone who read and especially those who reached out about my “what happened” essay. I’ll be honest, I’m a little overwhelmed by the response. Thank you. And for those of you asking what will happen — I’m kicking things off next week. Stay tuned.

With that out of the way, let’s dig in.

The Setup (Finding Asymmetry, Stacking the Odds)

Back in May of last year, I emailed Doug Casey. We need rare earths, I told him. Our portfolio didn’t have a single name in the space, and I thought that was a blind spot.

Now, rare earths had been coming together for a long time. As long as you’d been watching. And I’d been watching for the better part of a decade.

But over the past year it had kicked into another gear. A snowball was building. Take a look:

• December 2024: China bans exports of gallium, germanium, and antimony to the U.S., retaliating against Biden’s semiconductor restrictions.

• March: Trump responds by invoking the Defense Production Act to boost domestic mineral production.

• April: China escalates, imposing export controls on seven rare earth elements, including high-performance permanent magnets.

• Same month: Trump hits back with a Section 232 probe into critical mineral imports.

Each move triggered the next. By the time I sat down to write that email, the snowball was already rolling downhill.

But the macro case was only half of what made this a trade. The other half comes down to two things I always look for before I put money behind an idea.

The first is asymmetry. I want situations where the downside is limited but the upside, if you’re right, is several multiples of the entry price. Nassim Taleb, the risk analyst and author of “Antifragile,” calls this convexity. Think of it this way: you buy a stock at US$5. If the thesis doesn’t work out, maybe it drifts to US$3. You lose US$2. But if you’re right, it’s the kind of stock that can run to US$15 or US$20. You’re risking US$2 for a shot at US$10 or US$15.

Note: Here’s the beauty of asymmetric investing. Say you make ten speculative bets in a year. Six or seven go nowhere, maybe you lose a little on each. But the two or three that work return three, five, ten times your money. The winners more than cover the losers. You don’t need to be right every time. You just need the math on your side when you are.

In rare earths, the asymmetry was staring you in the face. I knew that the last time China had seriously squeezed rare earth supply, back in 2010, when it cut off exports to Japan during a territorial dispute over the Senkaku Islands, prices went parabolic. Neodymium went from around US$40 per kilo to over US$300. Some elements spiked 10 to 20 times in under a year. Take a look at the chart below.

The setup was right there. I understood that even if a fraction of those 2010 gains repeated, the upside would be enormous. And most rare earth companies were still trading at low valuations. The market was treating the whole space as a niche trade, background noise to the AI frenzy.

But asymmetry alone isn’t enough. A lottery ticket is asymmetric — you risk US$2 for a shot at millions. That doesn’t make it a good bet. You need setups where the structural forces are working in your favor. I call it putting the odds on your side. And in rare earths, the odds were as good as any I’d ever seen.

Just consider the structural picture behind those policy moves:

• One country controls roughly 70% of global rare earth production and over 90% of refining — and was now restricting exports. That’s China.

• The world’s largest economy and its largest military are utterly dependent on those materials. That’s the United States.

In fact, a report last year by Govini, a military analytics firm, put hard numbers on it: roughly 80,000 components across nearly 1,900 U.S. military systems contained Chinese-sourced minerals. 78% of all Department of Defense platforms. Navy: 92%. Air Force: 85%. Army: 70%. Javelin missiles, F-35 fighters, submarine sonar, drone guidance systems — all running on rare earths that came through China.

That’s what I mean by putting the odds on your side. It was clear to me that this setup meant the money was going to move. It was just a matter of time.

The Company

And I had the exact company to capture it: Energy Fuels (UUUU). What set it apart was a single asset: the White Mesa Mill in Utah.

To see why, you need to understand what happened to American rare earth production. Bear with me — this is the key to the whole trade.

Most people don't know this, but the U.S. used to be a major rare earth producer. It isn't anymore. Back in the 1980s and early '90s, U.S. miners routinely extracted rare earths as a by-product of iron and phosphate mining.

Note: Despite the name, rare earths aren’t that rare. They’re often found alongside other minerals in common ores.

Then came regulation. Citing nuclear proliferation risks, U.S. regulators threw rare earth processing under the same framework as uranium. The ores that contain rare earths, like monazite, come with small amounts of radioactive uranium and thorium mixed in. That meant the same licensing nightmare and the same sky-high compliance costs. So rather than deal with the regulatory burden, companies started burying the ore.

Within a few years, U.S. rare earth production shut down. China, which didn’t play by the same rules, kept processing. That’s a big reason it dominates the industry today.

Now here’s where Energy Fuels comes in. Because rare earth ores contain traces of uranium and thorium, you need a Nuclear Regulatory Commission (NRC) license to process them. That license is extremely difficult and expensive to get. Energy Fuels already had one. They’d been processing uranium at White Mesa for years, and they held the only active NRC license for a conventional uranium mill in the United States.

This meant that when they turned to rare earths, they weren’t starting from zero. They were plugging a new product into existing infrastructure, infrastructure that would take any competitor years and hundreds of millions of dollars to replicate. The uranium business was already there. The rare earths were the opportunity.

In 2024, they became the first American company in decades to commercially produce neodymium-praseodymium oxide, the stuff that goes into the permanent magnets used in EVs, wind turbines, and military tech.

Their breakeven cost was around US$30/kg. Market prices sat near US$60/kg. The margins were there. The feedstock was secured through joint ventures in Australia and acquisitions in Madagascar and Brazil.

So how did the same framework of asymmetry and odds apply at the company level? It was obvious to me that the market was still pricing Energy Fuels for its uranium business. The rare earth upside was essentially free, while the downside was pretty much capped by its functioning uranium operations. Remember, the margins were already there. And as for putting the odds on your side — well, that's what the only active NRC license in the country and existing infrastructure no competitor could replicate without years and hundreds of millions of dollars gave you.

I recommended the stock in June 2025 at US$5.55. By August, the stock had doubled.

Two months. That’s all it took. Subscribers who followed the plan took their entire original investment off the table — the free ride approach I wrote about recently — and were playing with the house’s money from that point on. The position kept running. By year-end, it was up 160%. At its peak, over 400% — a five-bagger. (It's pulled back since, which is exactly why you take profits when you have them.)

The Bottom Line

The thesis is still very much playing out today. I mentioned that Energy Fuels was the first U.S. company in decades to produce NdPr oxide. Since then, they’ve added heavy rare earths — terbium and dysprosium — to the lineup at 99.9% purity. Meanwhile, in February, the Trump administration launched a US$12 billion strategic minerals reserve. And about two weeks ago, the Pentagon’s Office of Strategic Capital offered the company US$725 million in conditional financing to expand White Mesa.

Now, I wouldn’t normally walk through a trade from a paid publication. It wouldn’t be fair to the subscribers who paid for those picks. But the publication recently ran a discount marketing campaign — after I'd handed in my notice — that named Energy Fuels and cited the returns.

That said, the usual disclaimer applies. Past performance isn’t a guarantee. Your results will always depend on your own timing and execution. And again, I recommended this stock through a different publication. So here I’m showing you the process, not telling you to buy it.

And the process is the point. Finding asymmetry. Putting the odds on your side. Identifying the company with the edge. And taking risk off the table as the thesis plays out. That’s how I tend to think about these things. Let me know in the comments if this kind of walkthrough was useful. More next week.

Regards,

Lau Vegys

It’s over (or so we’re told). And whatever else I say in this essay, I’m glad about that.

But nothing tells you just how pointless this war was quite like the deal Trump was willing to sign to end it.

On June 17, at the G7 in Versailles, Trump signed a 14-point Memorandum of Understanding with Iranian President Masoud Pezeshkian.

On paper, it looks like a remarkable deal… for Iran.

Tehran gets US$300 billion in reconstruction aid (underwritten in part by American taxpayers). All U.S. sanctions lifted. The naval blockade gone. And the right to sell oil freely again.

A Strange Deal

Now, at the risk of stating the obvious, the U.S. government didn't go to war to rebuild Iran. The stated objectives shifted depending on whom you listened to, but they all landed in roughly the same place: destroy Iran's nuclear program, eliminate its ballistic missile arsenal, end its support for proxy groups, and, according to some high-ranking figures in Trump's orbit, topple the regime altogether.

So how many of those objectives made it into the final agreement?

Essentially none.

Under the deal, Iran gets to keep its uranium enrichment program, with only a vague commitment to negotiate the “disposition” of enriched material at some later date. It also keeps its ballistic missiles. So much for eliminating Iran's missile program.

And the regime is still very much in power, just more radicalized after the bombing killed scores of its leaders’ families, including the supreme leader himself, whose own son now rules in his place.

Note: You may recall that when Obama signed the Joint Comprehensive Plan of Action (the “JCPOA”) in 2015, the same deal that Trump pulled out of in 2018 and called “the worst deal ever negotiated,” it didn’t come anywhere close to this kind of price tag. And Iran had to cut its nuclear centrifuges from 19,000 to 6,000, cap enrichment below weapons grade, and accept international inspectors. No missile concessions either.

So what is the U.S. getting?

Beyond the reopening of the Strait of Hormuz — 60 days of free passage, followed by negotiations with Oman over who administers it going forward — not much.

For a man who built his brand on making great deals, this is an awfully strange one.

So — and again, I’m all for peace, something I certainly hope endures this time — but I have to ask: why would Trump, of all people, sign something like this?

Follow the AI

To answer that, you have to understand a new reality, which is that the entire U.S. economy is being carried by one thing right now: artificial intelligence. The chip companies, the cloud platforms, the data center builders. Strip AI out of the picture and there’s almost no growth.

Don’t just take my word for it. Harvard economist Jason Furman recently calculated that without investment in data centers and information processing technology, U.S. GDP growth in the first half of 2025 would have been about 0.1% on an annualized basis. Effectively zero.

We also know that in the first quarter of 2026, AI-related investment accounted for more than half of all U.S. GDP growth. For context, even at the peak of the dot-com boom in 2000, tech contributed about 28% of GDP growth. AI’s share today is nearly double that.

That’s the reason you don’t even see a whole lot of office buildings going up anymore. It’s all data centers. The data confirms it too. Last quarter was the first time in U.S. history when the country spent more on data centers than on building office buildings.

There are now nearly 4,200 data centers in the United States. That’s roughly eight times more than either Germany or the United Kingdom, the next-closest countries by data center count. And there are going to be many more, since the big four alone (Alphabet, Amazon, Meta, Microsoft) are spending over US$650 billion on AI infrastructure this year.

In short, the American economy is physically rebuilding itself around data centers.

The problem, of course, is that data centers run on two things: cheap electricity and cheap debt. Remove either one and the AI momentum disappears.

And U.S. and Israel’s useless war with Iran put a big monkey wrench into both.

For starters, it sent oil prices soaring. Brent crude, which had been sitting around US$80, surged past US$120 a barrel. It wobbled after that, rising and falling depending on whether Trump sounded conciliatory or was rattling the saber on a given day. But we do know from the Fed’s own projections that a two-quarter closure would push oil to US$115 a barrel. Three quarters, US$132. And so on and so forth.

Now, you have to understand that oil at those levels doesn’t just mean expensive gasoline. It feeds into shipping costs, manufacturing costs, food prices, heating bills. And that matters for the AI story, because rising consumer prices make it politically difficult for the Fed to cut interest rates. If rates stay high, the borrowed money financing the entire AI build-out gets more expensive with every passing month.

Take Trump’s own Stargate project, the plan to build a massive network of AI data centers across the country. The headline number was US$500 billion.

What most people don’t know is that only US$52 billion of that is actual equity. The rest, US$448 billion, was supposed to come from debt financing that hasn’t been secured. Every additional percentage point on that debt costs roughly US$4.5 billion a year in interest. The difference between financing at 5% and financing at 8% is about US$13.5 billion a year, on one project alone. For reference, that’s nearly what OpenAI is on track to lose in all of 2026.

The 41% Problem

Now layer on soaring electricity prices, and it's not hard to see why the administration is so desperate to keep the Strait of Hormuz open.

The connection is pretty straightforward. Natural gas prices tend to follow oil, and natural gas generates roughly 40% of all U.S. electricity. More expensive gas means more expensive electricity. More expensive electricity means more expensive AI.

That's becoming a real headache for the industry.

As I write this, roughly half of all planned U.S. data center projects have already been delayed or scrapped. Another 75 projects, worth a combined US$130 billion, are stuck in limbo because the electricity to run them isn't there. And of the 12 gigawatts of new capacity expected to come online this year, only about a third is actually under construction.

In other words, the AI build-out is beginning to stall.

And that’s a much bigger problem than it sounds.

You see, the AI boom isn’t just another hot investment theme. It’s the only thing holding the stock market together. Take a look at the chart below. The top 10 stocks in the S&P 500, most of them AI plays, now make up 41% of the entire index. That's more than double what it was 10 years ago, and considerably more than it was during the dot-com bubble.

Now think about what the stock market actually means to the average American. For most people, their retirement account is the closest thing they have to wealth. And those accounts are now heavily exposed to AI stocks. When those stocks rise, people feel richer and spend more. When they fall, they don’t.

Consumer confidence, in other words, is increasingly tied to whether the AI story keeps working. And consumer confidence is one of the few things standing between the U.S. economy and a recession arriving just in time for the midterms.

Needless to say, the last few presidents who went into the midterms with a sputtering economy didn't enjoy the experience. Obama, for instance, lost 63 House seats in 2010 when the recovery felt too slow. Biden lost the House in 2022 with grocery prices doing his talking for him.

That’s why no price is too high to reopen Hormuz.

Now, none of this is to say the U.S. will necessarily honor every term of this agreement (or that the Hormuz disruption has fully worked its way through the global economy). It may simply be buying time… rebuilding weapons stockpiles, refilling strategic petroleum reserves, and waiting for a more favorable moment. That’s certainly possible.

But with the midterms approaching, the AI sector still needing cheap energy and cheap money to prove it can turn a profit, and Iran now knowing full well that Hormuz is a card no one can answer, the incentives overwhelmingly point the other way.

Position accordingly.

Regards,

Lau Vegys

P.S. I've been on the road and couldn't get to all the comments on last week's essay, but I've read every one. I'll be honest, I'm a little overwhelmed by the response. Thank you. I'll do my best to get to them as soon as I can. And for those of you who've been asking what I'm building here, you'll hear from me on that next week.

We’re driving from Lithuania to Spain. Five countries, roughly 3,300 kilometers (about 2,050 miles), four days on the road. It’s the kind of trip that sounds romantic until you’re eight hours in and the back seat has descended into open warfare. But we do it every summer — whenever we’re not in Paraguay, we spend part of it in Spain so the kids can practice their Spanish with people other than their father. This time, though, the trip feels different. It feels like a new beginning… and in more ways than one.

I’ll get to that.

The Road Here

First, a few things I noticed on the way here, because they’re hard to ignore.

Crossing into Poland, we ran into something that wasn’t there last summer: a checkpoint. An actual border control point, with officers and a queue of cars. We hit another one entering Germany. If you look at the photo below, you’ll notice they look almost makeshift. Because they are. These didn’t exist just months ago.

For anyone unfamiliar, most EU countries are part of what’s called the Schengen Area — no passports, no border checks, drive from Lisbon to Tallinn without stopping. That was the deal, anyway. Country after country has been quietly reintroducing controls, mostly because of out-of-control immigration and the problems that come with it. Nobody’s calling it what it is. But when you’re sitting in a queue at a border that didn’t exist last year, you notice.

But it wasn’t just the borders that made this trip feel different. It was how much more expensive everything was. Accommodation, eating out, noticeably pricier than last year. Inflation still working its way through, apparently. And then there's the fuel.

If you're American and wondering why Europeans seem perpetually grumpy, here's a big part of your answer on a blue sign. Regular gasoline at €2.37 per liter. That’s nearly US$10 per gallon. Diesel isn’t much relief, and in some countries, it’s now more expensive than gasoline, after years of the EU promoting it and then deciding it was the enemy. You pull into a gas station in Germany and watch €140 — roughly US$155 — disappear into a Volkswagen. Then you do it again in France. And again in Spain. Multiply that by an entire continent, layer on everything else those fuel costs feed into — food, shipping, heating — and you start to understand why the European middle class feels like it’s being slowly squeezed out of existence. Because it is.

The Question Everyone's Asking

I said this trip feels like a new beginning. Here’s what I mean.

Over the past month, I’ve been getting messages from readers asking me, in various ways, the same question. Here’s one that arrived a few days ago:

Lau, are you still with Doug Casey’s newsletter? I noticed your Substack seems to be its own thing now. What happened?

As I know well from experience, for every one person who writes in to ask, there are probably ten thinking the same thing. So I figured, rather than writing the same answer forty different ways, I’d sit down and write it once.

The short answer is yes. I’ve left the newsletter I spent over two years building, and I’m striking out on my own.

Here’s why.

For two and a half years, I wrote every recommendation, every alert, every company update, and most of the free essays for a well-known investment newsletter. I built the portfolio. I vetted every company. I made the calls on what to buy, when to take profits, and when to cut a position that wasn’t working. I did the research, I got on the calls with management teams, I ran the numbers. The track record, for better or worse, is mine.

I’m proud of that work. I still am.

But over time, tensions started to build around what was being recommended, and how. I’d raise concerns. Sometimes they were heard. Other times they weren’t. And increasingly, I felt I was expected to go along with decisions I wasn’t comfortable with. It was starting to keep me up at night. Not the work — the feeling that I couldn’t always do right by the people who trusted me.

The moment that made up my mind came when I was asked to recommend a company to our subscribers. This wasn't a company I had found or vetted. When I sat down and did my own research instead, I discovered a serious legal problem: the company was the subject of a lawsuit that went directly to the heart of its investment pitch. The kind of thing that, if we'd recommended it, could have hurt subscribers and cost us all credibility.

It didn’t go out, because I caught it. But the fact that it got that far made the decision for me. My May issue was my last.

I could have stayed. Financially, it would have made sense to. There’s a comfort in having a paycheck arrive every month, in not having to build something from zero, in letting someone else worry about the business side while you focus on the research. I understand why people stay in arrangements like that for years, even decades.

But I’ve learned that the cost of staying somewhere you don’t fully believe in is always higher than the cost of leaving. It just takes longer to show up on the balance sheet.

Now, I have nothing but respect for Doug Casey. I’ve worked with him and for him, in various capacities, for the better part of fifteen years. He’s one of the sharpest, most original thinkers I’ve had the privilege of learning from, and I owe him an enormous amount. The decision to leave had nothing to do with Doug, and everything to do with my need for full editorial independence. I need to be the person who decides what gets recommended to the people who trust me with their capital.

The Road Ahead

So here I am. Parking lot in Germany. A lot of road still ahead of me, in more ways than one. My wife has found the bag (it was, in fact, on top). The kids are stirring.

I’m not ready to share the full picture yet. That’s coming soon. But I’ll tell you this much: what I’m building is different from what I was doing. It starts from a premise I’ve been circling for a while now, one that years of writing about crises made impossible to ignore.

There’s a word from the military that keeps coming back to me. It describes a state of affairs where nothing works the way it’s supposed to, but everyone pretends it does, and life goes on anyway. I think it’s the most honest description of the world we’re living in. And I think it changes how you should invest, how you should protect your wealth, and how you should think about what’s coming.

More on that soon.

For now, Spain is two days and 2,300 kilometers (~1,400 miles) away, the trunk is full of bags in the wrong order, and three kids are about to realize they’re hungry. Some things, at least, are predictable.

Have a great rest of the weekend,

Lau Vegys

Well. Last week, Cuba’s Communist Party passed 176 economic reforms in a single legislative session. I’ll get to the specifics later, but the short version: it’s the biggest rollback of state control since 1959. Private firms become legal. Cubans can run more than one business and sell at prices they choose. The regime even asked the Miami diaspora, the same people it spent sixty years calling traitors, to come back and invest.

Looks like I may have to come back sooner than I originally thought.

Two Kinds of Everything

It helps to think about Cuba the way you’d think about its cars, because on the streets of Havana there are really only two kinds.

The American ones came first. Chevrolets, Buicks, Cadillacs, the odd Ford Fairlane. They arrived before the revolution, and the Cubans have kept them running for seventy years on ingenuity and scavenged parts. They’re gorgeous. Repainted in candy pinks and seafoam greens, chrome polished, engines rebuilt with whatever was available. They look like they belong in a museum, but people use them as taxis. They represent the country Cuba was before 1959, a country that was not without its own problems, but one that produced something beautiful enough to be worth preserving.

Then there are the Soviet ones. Ladas, Moskvitches, the occasional UAZ. They showed up after the revolution, courtesy of Moscow, and they look exactly like what they are: machines designed by committee for a country where aesthetics were considered a bourgeois indulgence. Boxy. Functional. Ugly. Rusting at the edges. Nobody polishes a Lada. You drive it until something falls off, and then you weld it back on.

Cuba is an amalgamation of those two things. The beautiful old architecture of Havana Vieja alongside Soviet-era concrete. Both crumbling, incidentally. The colonial plazas next to the housing blocks.

And it’s not just the buildings and the cars. It’s the people, too.

In our case, the contrast was made even sharper by the fact that we were coming off about half a year living in Medellín, Colombia. Which, contrary to what you might think after watching series like Narcos, is full of some of the warmest and most polite people you’ll ever meet. Before hopping on a plane to Cuba, we were visiting Cartagena, a Caribbean resort town on the coast. For all the touristy hassle you get there, Cartagena is full of the same easygoing, generous Colombians.

That’s not to say Cubans don’t have that same Latin warmth in them. They do. You certainly feel it in private, at dinner, in someone’s home. But in the transactional parts of daily life, the parts where you deal with strangers, something else comes through.

While in Havana (and I’ll admit we almost never made it out to the countryside, where I’m sure people are quite different), I lost count of the situations where shared-ride drivers would get angry at you for not letting them overcharge you. I mean, I wasn’t born yesterday. Getting overcharged is normal in Latin America. You kind of expect it. But everywhere else, you negotiate, you laugh about it, you meet somewhere in the middle. It’s not a big deal. My experience in Cuba was different. Whether dealing with drivers, beach equipment renters, or anyone else, I lost count of how many times we were almost made to feel guilty for not wanting to be ripped off. As if the fact that you have more than they do entitles them to whatever they decide to charge. And just as often, the door was shut with three magic words: es del gobierno. It’s the government’s.

I recognized it immediately, of course.

Growing up in the good old USSR (well, maybe not so good), you got used to a general rudeness from people in supposed positions of power. And I don’t just mean state officials or bureaucrats, though those too. Even a cashier at a local state-run store could ruin your day by refusing to hand over goods your family desperately needed. In the Soviet Union, there was a whole category of products called deficit goods — товары дефицита — things that were perpetually in short supply: sausage, soap, children’s shoes, you name it. You didn’t buy them. You hunted for them. And when you finally tracked down what you needed, you still had to get past the woman behind the counter.

There were running jokes about the downtrodden Soviet citizen being pushed around by the angry lady in the fake fur vest, because in that relationship it wasn’t the customer who held the power. It was the person supposedly doing the serving. Perverse incentives create perverse outcomes. I understood that since I was seven years old.

Which brings us, conveniently, to the other thing Cuban life and Soviet life have always had in common: scarcity.

Come Back After Five

Scarcity is one of the things you will inevitably run into after touching down at José Martí International Airport. And I mean even as a tourist, which is admittedly a much gentler version of the scarcity the locals have to endure. Just take a look at this photo of a store interior I shot through the window on one of the streets of Havana. And yes, that’s a cat on the countertop next to the scales.

It would take me pages to cover everything we found scarce on our trip to Cuba — from the state-run dollar stores, where imported goods were sold in convertible pesos at prices no ordinary Cuban could dream of affording, to the pharmacies where basic medication was perpetually out of stock. So I’ll just share a few anecdotes.

There was a restaurant near the place we rented, a nice-looking one with colonial arches and a pleasant feel to it. I used to frequent that place quite a lot during the day, for the simple reason that I needed internet. Oh — yes, that’s another thing. In Cuba, you can’t just have internet at home. When I was there, a handful of hotels offered it, but if you were a local, or anyone renting a room in a casa particular — a private homestay — you were stuck using the state telecom monopoly’s public wifi hotspots. To get online, you had to buy a prepaid scratch-off card from ETECSA, the only telecom company on the island. I have no idea how locals could afford them back then — each card ran about one or two CUC per hour.

Note: CUC was the convertible peso, Cuba’s tourist currency, pegged one-to-one with the U.S. dollar. Locals earned in regular pesos, the CUP, at a fraction of the rate. The government scrapped the dual system in 2021, but back then it created two parallel economies on the same island. And in the peso economy, one or two CUC per hour of internet was a luxury most people couldn’t touch.

What you’d do is locate one of the wifi towers mounted on poles across the city’s streets and parks, and join the crowd of people sitting on sidewalks, faces glowing from their phone screens, burning through their minutes. Or, if you were a tourist spoiled by the conveniences of modern life, you’d find a restaurant near one of those towers and use the internet from there. That’s what I used to do.

But whenever I’d come to that place — and like I said, it was a nice-looking restaurant, colonial architecture, pleasant atmosphere — I would try to order something off the menu. I’d come there for breakfast and stay through dinner. And there was always something missing. Simple things, really. Some days it was the orange juice. Other days it was the eggs. The scene was always the same: I’d place my order, the waiter would disappear into the kitchen to check, and come back with the verdict. No hay huevos. No hay jugo de naranja. No eggs. No orange juice. Come back after five.

Funnily enough, the one time I did come back after five, the eggs were still missing. Apparently, the state supply chain hadn’t received the memo.

For our living arrangements, our family rented two rooms in a casa particular from a Cuban family in their own home. It was a large apartment, maybe two stories, and the family lived in the other half. By Cuban standards, they were doing well. Very well, in fact. They had a place of their own that they could rent out to foreigners — one of the few forms of private enterprise the government had grudgingly legalized back in the late nineties. They could charge in dollars, which put them in a different universe from their neighbors earning in pesos. Keep in mind, a single night in a casa particular could earn more than a doctor made in a month.

The man of the family, José, had actually worked in the Soviet Union during the Cold War. Cuba and the USSR ran exchange programs for officials and workers, and he had spent years there. He drove us around in his old but lovingly maintained Lada, taking us to beaches and corners of Havana we never would have found on our own, in exchange for some dollars, fuel, and the chance to speak Russian, which he said he hadn’t had anyone to practice with in years.

One afternoon, we offered José a package of diapers we had brought from Colombia. We knew diapers were a deficit item on the island — available only in the dollar stores, where a single pack cost a small fortune in convertible pesos. Our baby had already outgrown them, and José’s kid was a toddler, even bigger than ours, so they were clearly going to be too small. We offered them anyway, not wanting them to go to waste, but we were half expecting a polite no.

What happened instead is something I still think about. José, who had been saying we were running late, unceremoniously pulled the kid over, put the too-small diapers on him right there, and said: there you go, see? Fits great. We can use these.

Again, I remind you: relative to their country, this family was well off. I don’t know whether they ended up using the diapers themselves or trading them for something else, but they were clearly happy to have them. To this day I feel a strange mix of amusement and sadness when I think about that moment.

It was a similar story with José’s wife, though from a different angle. Each morning, she prepared eggs and coffee for us. We paid for breakfast separately, in dollars.

One day, though, my wife realized our two eggs kept arriving with only one yolk between them. At first we figured she was skimping to save money. And in a sense, she was. No biggie… it's her kitchen. But only later did we realize it was because even something as simple as an egg was rationed. The way the system worked back then — and probably still does today — every Cuban household gets a fixed monthly allotment of eggs, along with every other staple: rice, beans, sugar, coffee, cooking oil. You can see them listed on the board at the local bodega, in the photo I took back then.

Used up your monthly ration? Tough luck. Sure, you could cut corners — get some from a neighbor, or from someone who worked the system. But officially, it didn’t matter that you had tourists staying over who needed feeding. For all intents and purposes, the eggs simply didn’t exist. At least not for the rest of the month. The ration board didn’t care about any of that. It cared about quotas.

Not the Embargo, Stupid

Now, you’ll hear a certain kind of person, usually a leftist American, explain that Cuba’s problems are really the fault of the U.S. embargo. I ran into a few of them in Havana, and I get them every now and then in my comments section.

For the record, I think the embargo makes little sense. It’s been in place for over sixty years and hasn’t achieved a thing, except maybe giving the regime a convenient scapegoat for its own failures.

But the embargo isn’t the reason Cuba is poor. Socialism is.

To start, and I’m always amazed by how many people don’t know this: the embargo is American. It is not global. The entire rest of the world has been open for business with Havana for decades. Cuba trades with Canada, with Europe, with China, with Russia, with most of Latin America. If the island’s problems were really about trade access, sixty years of commerce with every other nation on earth should have been more than enough to build a functioning economy. It wasn’t.

And what, in the name of the workers’ paradise, does the embargo have to do with the fact that Cubans couldn’t start a business until recently? That they couldn’t own a company, set their own prices, hire employees, install internet in their homes, or speak freely without risking a visit from state security? The embargo didn’t do any of that. The regime did. Every one of those restrictions was an internal policy choice, made in Havana, by the Communist Party. And of course, it was utter failure. All of it.

Funny enough, Cuba’s president Díaz-Canel admitted as much in his own words. The island’s troubles, he said, come not from the U.S. embargo but from the slowness, the bureaucracy, the rules that hold back any Cuban who tries to produce something. Here’s the full quote:

Hay trabas que no vienen de afuera, ni del bloqueo. Hay lentitud, burocracia, normas que frenan al que quiere producir y decisiones que hemos postergado.

Translation: “There are obstacles that do not come from outside, nor from the blockade. There is slowness, bureaucracy, rules that hold back those who want to produce, and decisions we have postponed.”

Díaz-Canel said this on June 17, 2026, in his closing speech at the Extraordinary Plenary Session of the Communist Party Central Committee, the same session that preceded the 176 reforms I mentioned at the beginning.

So what’s changing?

From what I can gather, the full document hasn’t been made public. Cuban state media and parliamentary reports reference a package grouped into 23 themes, but the actual text remains under wraps. What we know from the coverage is this: foreign investors no longer need a state partner. Private firms become legal. Cubans can run more than one business and sell at prices they choose. Private banks are permitted. Real estate development opens up. And the diaspora, the millions of Cubans who left for Miami and built lives from scratch, are invited back as investors.

In sum, it’s a big one.

Now, the official line is they’re modeling it after China and Vietnam. Managed capitalism under party control. Díaz-Canel even promised a model ‘better than China’s.’

In reality, they’re preventing catastrophe. The economy is in freefall. The power grid barely functions, especially after the loss of Venezuelan oil, which Trump’s pressure campaign helped cut off. Hundreds of thousands of Cubans have left in the past three years alone. Between the internal collapse and Washington’s secondary sanctions driving out what foreign investors remained, the regime has run out of room to pretend. Which is why they don’t have the luxury of half-measures this time. Which is why the 176 reforms.

Can they pull it off?

It’s an open question, but I’m cautiously optimistic. The regime has announced reforms before that were watered down, delayed, or quietly reversed, though nothing on this scale. The real test isn’t the announcement. It’s what happens in six months, in a year. That’s when the old guard will realize that real reform means real loss of control. There will be those in the regime who do their best not to let power slip out of their hands, and it remains to be seen whether the reformers can win out. But I’m cautiously optimistic.

It wouldn’t be the first time. I watched it happen in my own country.

Maybe it’s time to go back to Havana.

Regards,

Lau Vegys

So today I figured I’d do something different and talk about how I think about risk with real money. Not Monopoly money. Specifically, how it applies to the kind of stocks I usually analyze and write about: resource stocks.

The approach to risk management I want to share with you today goes back to August 2024. I was editing Crisis Investing at the time, Doug Casey’s paid investment newsletter.

That month was anything but tranquil in the markets. Japan’s yen carry trade had blown up. The Dow dropped over 1,000 points in a single session. The S&P 500 fell 3.1%, wiping out US$2.1 trillion in market value. Oil plunged. Bitcoin cratered from US$60,000 to US$50,000 in hours. Even gold took a hit.

I was getting panicked messages from subscribers, and I realized something. Most of them didn’t have a system for any of this. They were either frozen, watching their portfolios bleed, or panicking and selling at the worst possible time. A few wanted to buy the dip but had no cash left because they’d gone all-in months earlier.

That experience made one thing clear: before we chase the next ten-bagger, we need to know how to protect ourselves when things go sideways and how to turn the panic into opportunity. So I put together a risk management playbook that month to help subscribers navigate the volatility of that year and beyond. That thinking is what I want to share with you today.

Fair warning: there's more arithmetic in this one than you're used to from me. Nothing sophisticated, I promise. But I hope you'll bear with me, because this might be one of the more useful things you read this year.

Position Sizing

Let’s start with the basics. Before you decide what to buy or when to buy it, you need to answer a more basic question: how much?

The rule I use is simple. No single speculative position should represent more than about 2–5% of your total portfolio. For the most speculative names, early-stage explorers and pre-production juniors, I cap it closer to 2%. For established producers with real revenue, maybe 5%.

The gut check is even simpler: if this stock goes to zero tomorrow, can you shrug it off and move on? If losing the entire position would change your behavior, delay your retirement, force you to sell other holdings, keep you up at night, the position is too large. Size it so that a total loss is annoying, not catastrophic.

This matters because the system I’m about to show you only works if you have the emotional headroom to be patient. If a single position is large enough to ruin your sleep, you’ll panic-sell at the worst possible time. And that’s exactly the opposite of what the next technique asks you to do.

Building Positions in Tranches

So you've sized your position. Now the question is how you get into it.

The biggest mistake I see people make (and I've seen it hundreds of times) is going all-in on a stock the day they decide they like it.

The problem isn’t the conviction. The problem is the timing. You might be right about the company, but the market doesn’t care about your timing. It’s going to do what it’s going to do. And if it drops 40% the week after you bought your full position, you’re sitting there with a massive unrealized loss and no cash to buy the dip you’d love to buy.

What solves this is not going all-in in the first place. Instead, you buy in tranches. Here’s what I mean:

First tranche (20%): When I decide to buy, I often start with just 20% of the position I ultimately want. This is my initial stake at the recommendation price. If the stock takes off immediately (rare, but it happens), at least I’ve got skin in the game. A win is still a win, even if it’s not as large as I’d hoped.

Second tranche (20%): Stocks dip. That’s what they do. When the stock pulls back, say 10–20% from my entry, I buy my second tranche at the lower price. Now I’m at 40% of my ideal position with a lower average cost than if I’d bought it all on day one.

The stink bid (60%): This is where the patience pays off. If the market suffers a major correction (and in the resource sector, it almost always does eventually), I place what’s called a stink bid. That’s an order set 40–50% or more below my entry price for the remaining 60% of my position. This is how you fill your position at a huge discount to the price you initially liked.

Yes, this strategy can be frustrating when the market is rising. You might find yourself with only 20% of your desired position while the stock takes off. But in my experience, sooner or later the resource market gives you an opportunity to buy lower. It’s just a matter of time. And until that opportunity comes, you’re rarely exposed to more than 40% of your ideal position unless you’re given a dirt-cheap chance to buy the rest.

Now, the 20/20/60 split you see above is what I use for the most speculative positions, pre-production juniors and early-stage explorers. But the split flexes based on the company's risk profile. For an established producer with cash flow and near-term catalysts, I might weight the earlier tranches more heavily, say 40/30/30. For a senior royalty company with decades of operating history, maybe 50/30/20. The principle is the same: don't go all in at once. But the more established the company, the less you need to hold back for a crash that may never come.

The math in a crash scenario

Say your ideal position is 10,000 shares of a gold stock trading at US$1.00. You buy your first 20%: 2,000 shares for US$2,000. The stock dips to US$0.90, and you buy your second tranche: another 2,000 shares for US$1,800. Now you're at 4,000 shares averaging US$0.95 (US$3,800 total).

Then the market crashes. A real crash, not a bad week. Your stock drops to US$0.50. If nothing is fundamentally wrong with the company, this is when you place your stink bid for the remaining 60%.

Your average cost basis is now US$0.68 per share (US$2,000 + US$1,800 + US$3,000 = US$6,800 for 10,000 shares).

If the stock eventually reaches US$10 (which happens in this sector more than people think), your 10,000 shares are worth US$100,000 on a total investment of US$6,800. That’s a 1,371% gain. And you built most of that position at fire-sale prices while everyone else was panicking.

The discipline required here is real. You have to be willing to sit on a fraction of your position while the stock climbs and feel like you missed out. You have to resist the urge to buy more when things are going well. And you have to have the courage to buy aggressively when everything looks like it’s falling apart.

That’s contrarian investing. It’s not comfortable. But it works.

Riding for Free

This is the other half of the system, and it’s just as important.

You’ve built a position using the tranche method, and the stock has doubled from your average cost. You’re sitting on a 100% gain. What do you do?

Most people do one of two things. They either sell everything and take the profit, which feels great until the stock triples from there. Or they hold everything and watch the gain evaporate when the stock pulls back, which feels terrible.

The better move: sell exactly enough shares to get your original investment back. Then let the rest ride.

The formula is simple:

If a stock has exactly doubled, the math is easy: you sell half. But it doesn’t have to be a clean double. If you’re up 90%, 105%, 120%, close enough. The formula works at any price. You sell just the number of shares needed to recoup your capital, and everything left over rides for free.

A worked example

You buy 10,000 shares at US$0.50 each. Total investment: US$5,000.

The stock runs to US$1.18. Not a clean double, but a strong gain of 136%. Do you wait for an exact double? No. You apply the formula:

5,000 ÷ 1.18 = 4,237 shares to sell

You sell 4,237 shares at US$1.18, getting US$4,999.66 back, essentially your entire US$5,000 investment. You still own 5,763 shares. They cost you nothing.

Now suppose the stock pulls back to US$0.70. Without the free ride, your original 10,000 shares would be worth US$7,000. That’s a 40% gain on paper, but you’d have given back most of your peak gain. Psychologically brutal.

With the free ride, you have your US$5,000 cash back plus 5,763 free shares worth US$4,034. Total value: US$9,034, an 81% return, with zero risk to your original capital.

And here’s the real power: if the stock eventually runs to US$5.00, those 5,763 free shares are worth US$28,815. You’ve made nearly US$34,000 on a US$5,000 investment, and your original capital was safely back in your pocket the whole time.

When Stop Losses Do Work

By now you might be wondering: what about stop losses? Aren’t those the standard risk management tool?

They can be. But it depends on the stock. Doug Casey famously warned that close stop losses on junior miners are just as likely to knock you out of a winning position as they are to save you from a losing one. And he’s right. But that doesn’t mean they’re useless. You just have to match the tool to the stock.

The distinction comes down to volatility. Every stock has a measure called beta, which tells you how much it moves relative to the broader market. A beta of 1 means it moves roughly in line with the S&P 500. A junior gold miner might have a beta of 2 or 3, meaning it swings two to three times as much as the index on any given day. A large-cap utility or a blue-chip dividend payer might sit at 0.5 or 0.6. It barely moves.

For low-beta stocks (large caps, index ETFs, stable dividend payers), a stop loss makes perfect sense. A 20–25% trailing stop on a stock that doesn’t normally swing more than 10% in a quarter is a reasonable safeguard. If it drops that much, something has probably changed fundamentally, and the stop gets you out before it gets worse.

Trailing stops are even better than fixed stops because they move with the stock. A trailing stop isn’t set against your purchase price. It’s set against the highest price the stock has reached since you bought it. Say you buy a stock at US$50 and set a 20% trailing stop. The stock climbs to US$75. Your stop is now at US$60 — 20% below the peak, not 20% below your entry. If it drops to US$60, you’re out with a 20% gain instead of a loss. The stop traveled up with the stock and locked in profit along the way.

But here’s where people go wrong. They treat stop losses as a one-size-fits-all solution. They slap a 25% trailing stop on a junior miner with a beta of 2.5 and wonder why they keep getting stopped out during perfectly normal trading weeks. A stock that routinely swings 30–40% in a quarter will trigger a 25% stop as a matter of course, not because something is wrong, but because that’s what volatile stocks do.

The point isn’t that one approach is always right and the other is always wrong. It’s that risk management is context-dependent. The picks matter, yes. But the risk management is what keeps you in the game long enough for the picks to pay off.

The worst thing you can do is use the wrong tool on the wrong stock, and that’s what most people do. Hopefully after reading this, you won’t be one of them.

Regards,

Lau Vegys

Seems like a bit of an over-the-top reaction, if you ask me — given that the main route through Hormuz still has 80 unswept mines, with the southern route through Omani waters quietly doing all the actual moving. And honestly, I’m still struggling to figure out what the U.S. actually got out of this. What we do know is what Iran got: the U.S. naval blockade lifted, broad sanctions relief, and roughly $24 billion in previously frozen assets released. And more important than any of that, the lesson Iran has just etched into the playbook is brutally simple: they can shut Hormuz any time they want, and no one — not even the most powerful military on earth — can do much about it. So again, what exactly did the U.S. get out of all this?

Last week was also a busy one for the central bankers.

On Wednesday, Kevin Warsh wrapped up his first Federal Reserve meeting. The rate decision — a hold at 3.75% — was a non-event. But about halfway through the press conference, the new chair basically told you the Fed is giving up on its 2% inflation target. I broke down what’s actually going on in Saturday’s piece.

Across the Pacific, the Bank of Japan (BoJ) went the other way — on Tuesday they hiked their key rate by 25 basis points to 1%, the highest level since 1995.

Why does this matter so far beyond Tokyo? Because Japan is the world’s largest single foreign holder of U.S. Treasuries, and they’re being forced to hike because their own inflation refuses to quit. When Japanese rates climb, the math on parking trillions in American debt — instead of redeploying it at home — starts to fall apart fast. I wrote up the implications for U.S. investors in Tuesday’s piece.

Meanwhile in Europe, the European Central Bank (ECB) went the BoJ’s way — hiking rates 25 basis points and citing “inflation pressures” from the Iran war. This in the same week the eurozone’s first-quarter contraction was confirmed, the ECB revised its own inflation forecasts higher, and German industry kept bleeding jobs. In short, things aren’t looking good for the old continent. And as I wrote in Thursday’s piece, history says when Europe stumbles, America catches the chill too.

Last week also saw the annual G7 summit (the gathering of the world’s seven largest advanced economies), hosted by President Emmanuel Macron in Évian-les-Bains, the French spa town on the shores of Lake Geneva. The moment that caught my eye most was Macron inviting the CEOs of OpenAI, Anthropic, and Google DeepMind to a working lunch with heads of state. Sam Altman, Dario Amodei, and Demis Hassabis each got bilateral photo-ops with the French flag behind them, sitting in chairs usually reserved for presidents and prime ministers.

Curiously, this came just days after Trump banned foreign access to Anthropic's most powerful AI models. Even more curiously, those same three CEOs spent the summit asking for more regulation. The regulation, of course, helps the incumbents most. But that’s just one of many implications — I’ll probably sit down to write about it properly in the coming weeks. By the way, both OpenAI and Anthropic filed for IPOs last week, targeting fall debuts at roughly $1 trillion each. The next two index forced-buyer events are now on the calendar (following the SpaceX IPO on June 12, 2026).

And now for the latest pieces…

From the Comments

One of the things I’ve come to appreciate most about writing here is the conversation that happens in the comments. The thinking there often sharpens my own and adds dimensions I’d never have thought to include. Last week was an especially rich one on that front. Note that each of the (seven) reader comments below links back to the piece or note it appeared on, so you can click through if you’re interested in the context.

Thanks again to everyone who left a comment last week. I read all of them, even the ones I don’t get a chance to reply to individually. Over the coming days, I’ll try to catch up on the questions and the longer threads.

See you in the comments this week.

Regards,

Lau Vegys

But for anyone who stuck around, the press conference was the part worth watching. About halfway through, Warsh said something that should have been the headline.

When asked whether he planned to revisit the Fed’s 2% inflation target, Warsh said he tends to “focus on the left of the decimal point.” In plain English: as long as inflation starts with a 2, he isn’t going to fuss over what comes after it. 2.0%, 2.9% — same ballpark, as far as he’s concerned.

Now, personally, hearing that, I couldn’t help but chuckle. Because for weeks the financial press had been busy casting Warsh as a hawk, the tough new sheriff who’d finally get serious about inflation.

A hawk is supposed to sweat every last tenth of a percent. And here he was, in his first week, waving off the gap between 2.0% and 2.9% as a rounding error.

Note: It helps to know what that “2%” even points to. The Fed doesn’t target the CPI most of us see in the headlines. It targets a different gauge, the PCE price index, its own preferred yardstick, and, as luck would have it, the one that almost always reads cooler than CPI. Why cooler? Because PCE assumes that when something gets pricey, you’ll trade down to a cheaper substitute, and it folds in costs paid on your behalf, like employer health care. In other words, of all the official inflation numbers, the Fed is looking at the gentlest reading on the menu.

Then came the part I enjoyed most (and the part I’d seen coming the moment that left-of-the-decimal line left his mouth). Warsh announced a task force whose job is to “improve” the way inflation is measured. The current methods, he said, lean on “old-fashioned survey methods” that look “very little like the U.S. economy in 2026.” And when a reporter asked how, exactly, he’d improve them, Warsh allowed that he had “a phone call or two to make” before he could say.

You’d have to be brain-dead not to see what’s going on here — though, given some of the coverage of “hawkish” Warsh, apparently plenty are. The Fed can’t get inflation down to its target, so the new chairman’s headline idea is to go change the thermometer.

We’ve Been Here Before

And as I sat there watching, I couldn’t shake the feeling I’d seen this movie before. I had.

Back in October, Jerome Powell stood at a conference in Philadelphia and said this:

Normalizing the size of our balance sheet does not mean going back to the balance sheet we had before the pandemic.

Ah, the balance sheet. The pile of bonds the Fed holds, every one of them bought with money it printed. It’s the cleanest measure there is of how much the Fed has conjured out of nothing.

Before the pandemic, that pile stood at about $4 trillion. To “fight” COVID, the Fed printed until it reached $8.9 trillion. The story sold to the public was that the printing would be followed by the great unwind — the long march back to normal, aka quantitative tightening. So how did that go?

Well, by the time Powell stepped up to that podium in Philadelphia, three-plus years of “tightening” had brought the balance sheet down to roughly $6.6 trillion. Nowhere near the $4 trillion it started from.

This was no accident. The honest way to unwind all that money-printing would have been to make the banks hand the cash back in exchange for their bonds. That was never going to happen. The Fed and the big banks are perfectly content to let the money slosh around Wall Street, lifting asset prices to record highs while the rest of us deal with the inflation. The other route, selling the bonds outright, risked crashing the bond market. So they chose the slowest, softest path there is: letting bonds quietly mature without replacing them.

And even that proved too much. So Powell just went ahead and said it. We’re done pretending. The new “normal” is $6.6 trillion. Deal with it. (And that was before he started buying again: $40 billion a month in fresh Treasuries, every month since December.)

Which is exactly what the new Fed chair is doing right now, only with the inflation target instead of the balance sheet. And once you’ve seen it, you can’t unsee it. Powell quietly buried the idea that the balance sheet would ever come back down. Warsh is quietly burying the idea that inflation will ever return to anything resembling "normalcy."

The One Thing They Can’t Do

The 2% target was never going to survive contact with reality. Just look at Powell’s record.

Across his whole tenure, inflation ran well above the 2% he swore to protect — averaging around 3% on the Fed’s own preferred PCE gauge, and closer to 3.5% on CPI — with a 9.1% spike in 2022 that was the worst in four decades.

What did the Fed do about it? They cut rates. Three times in 2025 alone, while inflation was still running above target. This is the exact opposite of what you’d do if you were serious about fighting inflation.

Which is, of course, the one thing the Fed cannot do. Actually fighting inflation would mean the reverse of everything they’ve been doing: no more printing, pulling money back out of the system (real tightening), and holding interest rates high — on a national debt pushing $40 trillion that already carries an interest bill bigger than the entire military budget. Try it, and you blow up the federal budget and the bond market in the same motion.

So it was only a matter of time before they started moving the goalposts, which is exactly what we’re watching now. And whatever Warsh comes back with once that “task force” is up and running, don't kid yourself it ends there.

Remember, these are the same people who spent 2021 assuring us inflation was “transitory.”

At this point, it should be clear to everyone (even the most naive among us) that inflation isn’t a problem the Fed is solving. It’s a permanent condition the Fed creates and then pretends to manage, and the only part still under its control is the optics.

Regards,

Lau Vegys

P.S. There are things you can do to prepare for the coming dollar devaluation. First and foremost, hold hard assets — or what I call unprintable assets — like physical gold and silver. I know it sounds almost like a broken record by now, but it’s true: they’ve survived every monetary reset, currency debasement, and financial experiment governments have thrown at the public. And they can’t be frozen with the click of a mouse. These days, that’s a seriously underrated advantage.

But walking the same streets in the center most weeks, I’ve started to notice something. In the parts of town where the rents are highest and the foot traffic heaviest, more and more shopfronts are sitting empty. A café that was there last year, gone. A clothing store, papered over. And in one window after another, the same small sign: for rent.

It’s a little thing. Easy to miss if you aren’t looking. But once you start counting them, you can’t stop. Meanwhile, the economy seems to be catching up with the storefronts: the big Scandinavian banks that dominate Lithuanian lending, along with the country's own central bank, have all recently cut their growth forecasts for the year.

Now, you might be reading this from across the Atlantic, wondering why a few empty shops in Lithuania should matter to you. But here’s the thing: it isn’t just Lithuania. It’s the whole of Europe. And if history is any guide, Europe’s problems have a way of becoming America’s too. (More on that below.)

And if you look at the numbers, you can sense a storm gathering over economies that have, until recently, been limping along, propped up by little more than statistical mirages and out of control immigration.

The latest figures tell the story. In the first quarter of this year, the European Union’s economy shrank by 0.1%. The eurozone, the 20 EU countries that share the euro, did worse still, contracting by 0.2%.

That doesn’t sound like much. But it’s the first time the bloc has gone backwards since late 2022, and it came in below even the modest growth the statisticians had first pencilled in.

Is that a recession? Technically, not yet. The textbook definition needs two consecutive quarters of contraction, and so far there’s only one. But consider the timing. That first quarter ended in March, before Iran, before the Strait of Hormuz was choked off, before oil started climbing and Europe’s energy bills climbed with it. All of that lands in the second quarter, the one we’re living through now. If Europe was already going backwards before the energy shock arrived, it’s hard to see the quarter that includes it coming out any better. A recession here isn’t the worst case. It’s the base case.

It's Ireland, Stupid

Pull the bloc’s aggregate number apart into the individual economies, and one culprit jumps out immediately: Ireland, a nation of five million people that accounts for ~3% of the EU’s output.

Irish GDP in the first quarter didn’t dip. It fell off a cliff, down about 12% in three months.

So what the hell happened there?

Short answer: President Trump’s tariffs.

The longer answer is more interesting, and to follow it you have to understand what Ireland’s economy actually is.

In simple terms, Ireland is where the world’s biggest drug companies park their profits. Pfizer, Eli Lilly, Novo Nordisk and the rest run enormous operations there, drawn by a low corporate tax rate and an accounting setup that lets them book a remarkable share of their global profit on Irish soil. That’s right: a huge slice of what Ireland counts as “its” economy is really just multinationals routing money through Dublin.

In normal times, that’s a wonderful trick. It pads the country’s GDP with profits earned all over the world and makes a small island look like an economic miracle. But these are anything but normal times.

To see what happened, rewind a year. When Trump began threatening steep tariffs on pharmaceuticals, those companies did the only rational thing: they raced to get their product into the United States before the tariffs could land. Over a few months they front-loaded tens of billions of euros of exports across the Atlantic. Irish exports to the U.S. jumped by more than half on the year. And because all of that gets counted as Irish output, Ireland’s GDP shot up more than 12% in 2025. On paper, it briefly looked like the fastest-growing economy in the developed world.

Fast forward to 2026, and the exports that had been pulled forward into last year simply weren’t there to repeat. The number that ballooned on the way up deflated just as hard on the way down.

Not Really Just Ireland

Now, the Irish story has real merit; no wonder so many EU officials have chosen to run with it. But it raises a question they would very much rather you didn’t ask: if a country of five million people, running 3% of the bloc’s output, can tip all of Europe into the red, what does that say about the other 97%?

Nothing good, that’s for sure.

Here’s the truth. The only reason Ireland’s reversal could move the whole headline is that there was almost no growth anywhere else to absorb it. The rest of the continent was already sitting at a dead stop. And that isn’t a one-off. Europe’s economic model has been quietly unraveling for years — a process that has only accelerated since the war in Ukraine.

To see how, you have to step back.

For decades, European prosperity rested on three quiet pillars:

• Cheap Russian energy, which powered German industry, the one industry in Europe that truly matters.

• The American security umbrella, which paid for Europe’s defense and freed it to build generous welfare states it could never otherwise afford.

• Open foreign markets to sell into, a free-trading world happy to buy Europe’s exports, even as Europe kept its own market walled off behind tariffs and rules.

That was the deal. The problem is that all three are now all but gone.

Russia has been frozen out over Ukraine, and the cheap gas that ran German factories went with it. President Trump is pivoting to Asia and telling Europe, in no uncertain terms, to start paying for its own defense. And the open-trading world that once welcomed Europe’s exports is itself breaking apart, as Washington and others throw up tariff walls and retreat into rival blocs.

All of which leaves Europe exactly where it sits today: a continent that built its wealth on a world that no longer exists.

You can see it most clearly in Germany, the engine that was supposed to pull everyone else along. Earlier this year, German unemployment topped three million, the highest in over a decade. Since 2019, German industry has shed more than 340,000 jobs. Bosch, the auto-parts and appliance giant, is cutting 22,000. Thyssenkrupp, the old steel-and-engineering champion, another 11,000. Volkswagen’s quarterly profit fell by nearly a third. Foreign investment into Germany has now fallen for eight straight years, to a 17-year low. The country that was the backbone of the European economy has become its single biggest problem.

And, unsurprisingly, energy is a big part of why. European industry pays more than twice what American industry pays for electricity, and the war has only made it worse. So the factories are leaving. Between early 2024 and this year, more than a hundred chemical plants shut their doors in Europe. BASF, the German chemical giant that helped build the modern European economy, just opened the largest plant in its entire history. Not in Germany. In China. Ouch.

Worse, there’s nothing waiting to take their place. Europe hasn’t produced a technology company of global consequence in a generation. So far this year, the United States has minted dozens of new billion-dollar startups; Europe, barely a handful.

And here's another fact you may not know. As recently as 2008, the European economy was actually bigger than America’s. Today the U.S. economy is something like 40% larger, and it pulls further ahead every year. Measured per person, the average American now produces close to twice what the average European does.

Even Europeans aren’t buying the gleaming future their leaders keep trying to sell them. You don’t have to look much further than their bank deposits to see that. Something like €11 trillion (about $12.5 trillion) sits idle in European bank accounts earning next to nothing, money the EU’s elites have been dying to get their hands on, so far without success.

That’s more than the combined economies of Germany and France, because not even Europeans are confident enough to put that money to work at home.

When Europe Buckles

Now, again, you might read all this from across the Atlantic and shrug. Europe’s problem, not yours. And most days, fair enough. Americans don’t wake up worrying about Brussels, nor should they have to. America has plenty of problems of its own.

But here’s the thing, and like I said at the top: Europe’s problems have a way of becoming America’s problems. (And you don’t have to reach all the way back to World War Two to see it.)

Consider this.

The European Union is 449 million people and around $20 trillion in output, the second-largest economy on the planet after the United States. The two are also each other’s biggest trading partners, with nearly $2 trillion in goods and services crossing the Atlantic every year. Together, they account for almost half of global GDP.

So what happens when an economy that size stalls?

We don’t have to guess, because we watched it happen not long ago. During the eurozone debt crisis of 2011 and 2012, a wobble in Europe nearly dragged a fragile American recovery — still finding its feet after the 2008 financial crisis — back into recession. The chain ran like this:

• European demand dried up → American exporters lost one of their biggest customers.

• Money fled the euro into the dollar → the stronger dollar made every American export pricier and harder to sell.

• European banks, loaded up on their own governments’ shaky debt, started to buckle → and because banks on both sides of the ocean lend to one another constantly, those losses landed on American balance sheets too.

As a result, American hiring stalled through the summer of 2011, the stock market lurched through stomach-churning swings, and the Fed fired up yet another round of stimulus to “steady things.” U.S. growth slumped from 2.7% in 2010 to 1.6% in 2011, and the IMF kept cutting its U.S. forecasts as the crisis across the Atlantic dragged on.

Not because anything had broken in America, mind you, but because something had broken in Europe.

Now, to be fair, the U.S. is in a far stronger position than Europe. It has plenty of advantages, but the one that matters most right now is energy. America is the world’s largest producer of both oil and natural gas, a net energy exporter, and now the top LNG supplier on earth. Whatever it needs, it can pull out of its own ground, with plenty left over to sell.

Europe is the mirror image. It imports close to 60% of its energy, and for years it has gone out of its way to make that worse, Germany shutting its last nuclear plants in the middle of an energy crisis, the bloc sitting on its own gas and betting on the weather instead. So when oil and gas get more expensive, there’s no cushion at home to soften the blow. There’s just the bill.

So on this alone, the two are not in the same boat. Not even close.

But energy independence is not trade independence. The eurozone debt crisis showed as much.

They say that when America sneezes, the rest of the world catches a cold. True enough. But it runs the other way too: when Europe buckles, America feels the tremors. And this time, they could be stronger. Back in 2011, America was climbing out of a crisis with room to maneuver. Today it’s carrying a record national debt pushing toward $40 trillion, an interest bill that now runs higher than its entire military budget, and rampant inflation. A stalling Europe leaning on all of that is the last thing America needs.

And believe me when I tell you: Europe’s hard times are only getting started. I’ll be reporting more on it from Spain in the weeks ahead.

Regards,

Lau Vegys

That economy is Japan.

I’ll get to all of it in due order, but let’s start with what’s most timely. Earlier today — literally just hours ago — the Bank of Japan raised interest rates to 1%. That’s the highest level since 1995. And it has made clear more is coming.

I realize you probably don’t spend much time thinking about Japan’s economy. Most people don’t. It’s on the other side of the world and doesn’t dominate headlines like the U.S. or China. By the end of this essay, I think you’ll see why it’s a very big deal.

So before we get into the meat of things, let’s establish one thing that will run through everything that follows: Japan isn’t just any country. It’s one of the biggest creditors on Earth — and, most important for our purposes, America’s single largest foreign creditor.

Japan holds more than $3 trillion in net foreign assets and is the largest foreign holder of U.S. Treasuries—nearly $1.2 trillion as of late 2025. Take a look at the graph below.

And it’s not just bonds. Japanese institutions have billions tied up in U.S. stocks, corporate debt, and real estate.

Which brings us to the question that matters: what happens if an economy as large and as deeply integrated into the global financial system as Japan suddenly needs to bring all that money home?

Japan’s Many Problems

To answer that question, you first need to understand the precarious position Japan finds itself in today. And it goes far beyond rising interest rates.

To start, Japan is facing a deepening population crisis. The nation’s population has declined for 16 consecutive years as fewer people marry and have children.

That’s not unusual — many developed countries are grappling with falling birth rates.

But not every developed country has one of the lowest fertility rates in the world. Japan recently hit a record low of 1.15, down from 1.2 the year before — the lowest since record-keeping began in 1947.

Keep in mind, you need a fertility rate of about 2.1 to maintain a stable population.

To make matters worse, Japan also happens to be the oldest country in the world. About 30% of its population is over the age of 65.

Combined, these factors mean that by 2050, Japan is projected to lose around 20 million people — about 16% of its current population. And by the end of the century, the country is expected to lose more than half its population. That’s like the entire state of Florida vanishing now, and most of the United States East Coast disappearing later.

This crisis affects far more than retirement homes and hospitals — it’s crushing the entire economy.

Fewer workers means less growth. More retirees means rising government spending. Every below-replacement-level country faces these problems, but when your fertility rate is plummeting toward 1 and you have the oldest population on Earth, you’re dealing with a whole new level of crisis.

Second — and this one is ripped straight from today’s headlines — energy. Japan, you see, is an island nation with no meaningful domestic energy production. It imports nearly 90% of its total energy supply — not just oil, everything. And of its crude, 95% comes from the Middle East. And guess what: roughly 70% of that travels through the Strait of Hormuz.

You’d have to have been living under a rock to have missed what happened to that global chokepoint when the U.S. and Israel went to war with Iran, so I won’t belabor it. Suffice it to say that when Hormuz effectively closed, two-thirds of Japan’s oil supply was suddenly blocked, diverted, or severely disrupted.

Keep in mind, Japan has none of the cushions a country like the U.S. — or even China — can fall back on. No domestic production worth mentioning. No alternative pipeline routes. No preferential access through the strait. All it had was its reserves. And those started running low, fast.

The last time something like this hit Japan was 1973, the Arab oil embargo, and the country got absolutely pummeled — inflation surged past 20%. We don’t yet know whether this time will be as severe; the effects are still working through the system. But here’s what we do know: back then, Japan was young, growing, and relatively fiscally healthy. Today it’s none of those things.

Which brings us to Japan’s third problem: debt. And not just any debt — the heaviest load in the developed world.

That’s because the government’s long-running answer to everything I just described — the aging, the shrinking, the slow growth — has been to borrow. Heavily. As I write this, the country’s debt sits at over 260% of GDP.

Since the 1990s, Japan managed that burden with a familiar playbook: keep interest rates at zero and have the central bank print money to buy the government’s own debt.

The World's Biggest Free Lunch

Of course, one of the unintended consequences of keeping rates near zero for decades is that entire financial strategies get built around them. And in Japan’s case — being one of the largest economies on Earth, with the yen among the most-traded currencies anywhere — those strategies didn’t stay home. They were exported to the rest of the world. The biggest of them all, by far, was the yen carry trade — a machine for turning Japan’s cheap money into fuel for markets half a world away, including, in a big way, American ones.

Here’s how it works...

In a yen carry trade, large institutions borrow Japanese yen at rock-bottom interest rates. Then they convert that cheap money into dollars and plow it into higher-yielding assets abroad, especially in the U.S.

Imagine you’re a trader who borrows 10 million yen when the exchange rate is 100 yen to the dollar. That gives you $100,000 to play with. You dump this money into U.S. Treasury bonds yielding 4%. After a year, you’ve pocketed $4,000 in interest. And it gets even better — if the yen has weakened to 105 yen per dollar, you only need $95,238 to repay your loan. You’ve profited not just from the interest rate difference, but also from the currency move.

It’s essentially free money. At its peak, Bloomberg estimated yen carry trades reached hundreds of billions globally. Traders had been milking this cash cow for decades. Some people called it “the global money glitch.”

But there’s a (predictable) catch.

This strategy only works as long as Japanese interest rates stay low and the yen remains weak.

If either goes the wrong way, the trade breaks.

We got a preview of that back in August 2024, when the BoJ finally blinked — raising rates to 0.25%. Suddenly, the math flipped. Traders now needed more dollars to repay their yen-denominated loans than they had borrowed. That triggered a violent unwinding of positions — and a cascading sell-off across global assets that wiped out over $5 trillion in market value.

When the Bill Comes Due

Now, the Bank of Japan isn’t raising rates because it wants to. When you’re carrying this much debt, even tiny rate increases are brutally expensive.

It’s being forced to.

Bond investors are demanding higher yields. Japan’s auctions are failing. The BoJ, already holding 50% of the government bond market, is increasingly buying alone. Foreign and domestic investors are either fleeing or demanding much higher rates to offset inflation and currency risk.

So the BoJ is capitulating, and you can watch it happen in the numbers: 0.25% back in August 2024, 0.75% last December, and now 1%.

And here’s the thing.

Even if the immediate crisis in the Middle East eases, Japan's problems won't. The damage is already done. Japan’s oil supply is gutted, its trade deficit is blowing out, and the very inflation that started the BOJ down this road is running hotter still. That’s what carried them from 0.75% in December to today’s 1% — and it’s why they won’t be stopping there as the inflationary effects keep filtering through.

Thanks to Japan’s uniquely bad position — the problems I outlined earlier — there just aren’t any other options. The alternative would be even more trouble selling their debt, along with a yen free fall that would make imports ruinously expensive. And I do mean ruinously — Japan imports 60% of its food and, as already mentioned, nearly all of its fossil-fuel energy.

But rising rates in Japan don't just spell trouble for Japan. They spell trouble for you.

Remember, Japan holds nearly $1.2 trillion in U.S. Treasuries — more than any other country. As Japanese rates rise and the yen strengthens, parking money in America stops making sense. And so, instead of financing Uncle Sam's debt binge, that capital starts heading home.

Last year, Japan’s finance minister even floated the idea that their U.S. Treasury holdings could be “leverage” in trade talks. He later backtracked — but the message was clear: nothing is off the table in hard times.

That's the thing about a creditor this size: it doesn't need to do anything dramatic. Even the appearance of it stepping back would send a chill through global markets, undermine confidence in U.S. debt, weaken the dollar, and push borrowing costs higher across the board.

And it doesn't even have to sell a single U.S. Treasury for the damage to reach American markets.

Given how deeply Japanese capital is woven into the global financial system, even repatriation from other markets can send shockwaves across asset classes. It’s a domino effect. Capital flowing back to Japan from emerging markets tightens global liquidity — and that tightening eventually hits Wall Street just as surely as if Treasuries had been sold outright.

Now, I don’t expect this to look like August 2024 — one violent, single-day crash.

No. The pain from Japan's rising interest rates is more likely to unfold in slow motion. Funding costs rise. Leverage becomes unbearable. Positions get unwound, one by one, as the math stops working. And one day you look up and wonder why a portfolio full of perfectly good (mainstream) stocks has been quietly bleeding red for months.

Regards,

Lau Vegys

P.S. A quick note. I want to say thank you, sincerely, to everyone who has pledged their support over the past few weeks. I’m doing my best to reach out to each of you individually in private, but in case I missed anyone, thank you, again. Whether you’ve reached out publicly, privately, or just quietly clicked through to subscribe, I value it enormously.

Interestingly, at the press conference, Musk himself was pretty candid about his doubts. “We’re probably gonna fail,” he said, “but we should give it a try because if we don’t, we will never be a truly space faring civilization.” Look, I appreciate the vision. Few people have done more to lift our eyes back up at the stars. But not at this valuation, and not on my dime. In fact, I’ll go further: I think SpaceX will trade meaningfully lower a year from now, and quite possibly before year-end. The forced index buying I wrote about last week can paper over the math for a while — but only for a while. This is a company losing roughly $6 billion a year, with an entire money-losing division — the newly combined xAI/X business — having nothing to do with rockets at all.

On that note, here's a clip of how I think this one's likely to go. (Trajectory only — you'll see what I mean.)

On a somewhat related note, I also have to remind you that earlier this month, Comrade Bernie Sanders formally rolled out his AI Sovereign Wealth Fund Act. It's a simple idea, really: the U.S. government takes a 50% stake in every major AI company by force, holds it in a sovereign wealth fund, and pays out the proceeds to every American as a dividend.

Now, Bernie’s diagnosis isn't entirely wrong — power is concentrating in a small AI cartel, on a scale we haven't seen in a century. But his solution is completely bonkers. On one hand, it's basically a bailout — every one of these companies is bleeding money (OpenAI on track to lose $14 billion this year, xAI burning a billion a month, as I wrote about recently). And that dividend check the whole scheme is supposed to fund? Years away at best. That's assuming these companies ever turn a profit at all. On the other, it's full state-corporate fusion — which, at its actual structural definition (the merger of state and corporate power), is starting to look an awful lot like fascism. I'll probably have more to say on this in the coming days.

Meanwhile, the May jobs report dropped this week and caught everyone flat-footed. 172,000 jobs added against a consensus of 85,000, unemployment steady at 4.3%. Sounds like good news. In practice, it's the opposite — at least from the market's perspective. That’s because a print this hot tells the Fed it's unlikely to cut rates anytime soon.

By Friday, futures had flipped from pricing in a cut later this year to pricing in a 70% chance of an actual rate hike before year-end. The market did not love it: Nasdaq -4% on Friday alone (worst session since April 2025), S&P -2.55% on the week. It’ll be interesting to see how this digests over the next few sessions, especially on top of last week’s action.

Over in the metals corner, gold is still sitting at roughly $4,340 as I write this, well off its January peak near $5,600. And that’s despite central banks continuing to buy in size — they added another 244 tonnes in Q1 alone, and China has been buying for eighteen straight months. The financial press still treats gold as last year’s story. The central bankers apparently don’t.

And now for the latest pieces…

From the Comments

One of the things I’ve come to appreciate most about writing here is the conversation that happens in the comments. The thinking that shows up there often sharpens my own, and adds dimensions I’d never have thought to include. With that in mind, here are five reader observations from last week that stuck with me:

Thanks again to everyone who left a comment last week. I read all of them, even the ones I don’t get a chance to reply to individually. Over the coming days, I’ll try to catch up on the questions and the longer threads.

See you in the comments this week.

Regards,

Lau Vegys

And that, really, is why I love it. Between Monopoly and chess, our kids are learning something no school will ever teach them — how to take a calculated risk. When to buy, when to hold, when to go all in. When to sacrifice a piece to win the game. That’s the job, I think, as a parent. Because nobody else is going to do it for them.

The set you see above we picked up on a recent trip to Spain (where, as it happens, we’re headed again soon). Before that, we played on a different board, the one my father built by hand in the Lithuanian SSR, as it was then, around 1990. In the final days of the Soviet Union, you couldn’t just walk into a store and buy a board game. You couldn’t walk into a store and buy much of anything, really. The photo below gives you a pretty good idea.

At the time, my father was working at the national TV station, one of the few places where Western media was starting to trickle in. It was Perestroika, after all. He pieced together what the game looked like from foreign films and videotapes and reconstructed the rest from memory. He spent days drawing it. Every square, every property card, every Chance card, right down to the little hand-drawn Monopoly Man. He cut and colored the money himself. He wrote out every rent, every mortgage, every hotel price — all by hand, and with very little English to go on. And to this day, the thing looks great. Take a look. I pulled it out of the basement a couple of months ago.

And it wasn’t just the board. My father was an electrical engineer by trade, and the kind of man who, when we didn’t have something — and we didn’t have much — would simply build it. When we didn't have a radio, he built one himself — a transistor radio. When we didn't have a television set, he built one of those too, out of spare parts. Working at the TV station helped; there was always something lying around that he could put to use.

Remember, this was the Soviet Union. Everything was supposedly owned by everyone, which, as people liked to joke, meant nothing really belonged to anyone.

These days the board has earned a more respectable place in the house. We only bring it out on special occasions.

At the time, I never thought about why he’d made it. To me, it was just something fun to do with the family. It was only years later, reminiscing about those days, that I asked him. His answer turned out to be the very thing I find myself thinking about now, decades later, playing store-bought Monopoly with my own kids.

He didn’t build it just to keep us entertained. He built it to teach us about money. About capitalism. He knew the old socialist system was finished, and he wanted us to understand how the world actually worked before the new one took its place.

The Beggar’s Mentality

Now, Monopoly isn’t an overly complicated game. But there’s a real streak of brilliance buried in it. Played enough, it teaches you to think in assets and cash flow, in bets and odds, almost without you noticing.

It also teaches you about scarcity… albeit in a subtle way.

For instance, I noticed that after going bankrupt a few times, my kids, especially the younger ones, slipped right into that mindset. They got nervous about running out of money, so they’d stop buying properties and refuse to build houses, just in case they came up short again. I kept telling them these were assets, that they throw off cash you can use later to pay the other players and to buy even more property. It didn’t really sink in. They had to learn it by playing.

Watching them, I often find myself thinking about the marshmallow test. You probably know it. Researchers at Stanford sat little kids down in front of a single marshmallow and told them they could eat it now, or wait fifteen minutes and get two. Then they left the room and watched who could hold out.

The experiments ran back in the late 1960s, led by a psychologist named Walter Mischel, and when the researchers followed up years later, the kids who’d waited had done better in life: better grades, more self-reliance, and — decades on — even lower BMIs.

Over the years, though, people have poked holes in the test. Larger studies and better controls pointed to other factors too: family income, parental education, home environment, plain old cognitive ability. Once you account for those, self-control still matters. It just isn't the whole story. Growing up in scarcity, with parents who often couldn't afford to wait themselves, clearly matters too.

I don’t know whether my father ever heard of the test. But he understood, in his bones, what scarcity can do to a person. We even had a word for it back home — one that translates, roughly, to a beggar’s mentality. And he did his best to inoculate us against it, even if the only tool he had was a homemade Monopoly board.

The $175 Million Marshmallow

I was reminded of all this yesterday, by an entertainment story of all things. Now, I’m not one for entertainment news. But if you ever wanted a real-world marshmallow test, this is it.

It’s about “Obsession,” the indie horror breakout of the year. The film cost $750,000 to make. It’s now grossed more than $175 million. That’s a 233x return, roughly what you’d have made putting money into Bitcoin back in 2014.

There was an art director on the film. Instead of pushing for any piece of the upside, deferred pay, back-end points, a sliver of equity, all of it possible on a small indie, she took the cash: $300 a day, which came to about $6,700 after taxes for the whole job. For someone at her stage, no big credits, no name yet, it was a perfectly reasonable gig. Holding out for a share of some uncertain future would have meant risk, and she preferred the marshmallow now. Fair enough.

But now that the film has become a runaway hit, she’s gone public, furious, complaining about being robbed and calling for “industry reform.”

I sympathize with her. But it’s also about as clean an example as you’ll find of how badly people misunderstand capitalism — and delayed gratification along with it. I don’t know whether it was a scarcity mindset, a simple aversion to risk, or just a lesson nobody ever taught her. Either way, she chose the marshmallow. The guaranteed wage. The money in hand.

The people who got rich off the film took the other side of the bet. They put up the money and accepted that it would probably flop, the way most small films do. This time it paid off. Plenty of times it wouldn't have. She took no risk, so she got none of the upside. That's simply how the math works, or at least how it works when markets are allowed to function.

And the irony is that it’s often the young who get hurt most by misunderstanding these simple truths.

That seems to be the case here too.

By going public and attacking the very production that gave her the break, she’s basically setting fire to her own career. Instead, she could have taken the L, as the kids say these days, and used it to her advantage. A breakout hit on your résumé is exactly the sort of thing studios chase. She could have ridden that credit straight into something bigger.

In Closing…

Before I let you go, I want to leave you with one chart. It captures the gap between someone who chooses to consume today and someone who chooses to own and wait. Take a look. It tracks three things since the year 2000: gold, the S&P 500, and the wage the average person actually lives on.

As you can see, since 2000 gold is up about 1,000%, the S&P 500 just under 300%, and the median wage, the thing most people actually live on, up only about 12% after inflation. Yes, gold returned more than three times as much as stocks. But that’s not even the point. The point is that both gold and stocks ran circles around the paycheck.

Now, personally, given everything going on, I'll take gold (and gold stocks) over mainstream equities any day of the week… especially at today's valuations. But either way, the lesson is the same: if you can hold off on the easy reward, live below your means, and yes, take a risk now and then, you'll likely come out far ahead of the person who won't.

Does it take discipline? Dedication? A bit of courage? Sure it does, nothing is ever guaranteed. But if you can teach yourself, or your kids, to reach for the two in the bush instead of grabbing the one in your hand, that’s the whole game right there.

Have a great weekend,

Lau Vegys

Today it’s $39.2 trillion. It nearly doubled.

Now, a big chunk of that happened under Sleepy Joe. Roughly $8.5 trillion worth. COVID stimulus, a $1.2 trillion infrastructure bill, the Inflation Reduction Act, the CHIPS Act, repeated student loan forgiveness attempts, and the usual Washington math.

Still, Trump returned to office last year and, instead of even attempting to make a dent in it, let alone eliminate it, he has piled on another $3 trillion.

The reason is simple: spending. Trump has never been shy about spending big.

So where is all that money going? A lot of places. His “One Big Beautiful Bill” alone adds $3.4 trillion to deficits over the next decade. (Remember: deficits become debt.) But a good chunk of it comes down to Trump’s newfound fascination with war and playing the world’s policeman, which is quite something if you remember all the campaign rhetoric about ending wars and bringing the troops home.

I won’t dwell on the hypocrisy. Point is, war is expensive.

The Iran war alone has already cost $25 billion. And that’s just the start. As I write this, the Pentagon is floating a $200 billion supplemental war funding request that can’t find enough votes in his own party. That’s to say nothing of his FY2027 budget ($1.5 trillion for the military, the largest request since the Cold War) to build what he calls a “Dream Military.”

We’re talking a new class of battleships, autonomous weapons systems, expanded nuclear modernization, and a homeland missile shield called the “Golden Dome” — essentially an Iron Dome for the entire continental United States, which the Congressional Budget Office estimates could cost up to $1.2 trillion over twenty years. The military-industrial complex must be rubbing their hands.

Nobody Was Ever Going to Fix This

Now, I realize that when you hear “national debt of nearly $40 trillion,” your eyes glaze over. It’s such a mind-boggling amount that it’s hard to even comprehend how big it actually is. So let me try to bring it a little closer to home.

Enter interest expense. This is the number the government has to pay on all that debt — because debt is never free. It’s never just principal. It’s also what you owe to those kind enough to lend you the money. And in the case of the U.S. government, it’s staggering. Interest on the national debt has crossed $1 trillion a year. That’s $3 billion every day. Interest now costs more than the entire military budget. More than Medicare. In fact, the only program that costs more is Social Security.

Here's why this matters. Interest is the one bill Washington can't cut or skip, and it feeds on itself: with no spare trillion lying around, the government borrows to pay the interest, which only swells next year's bill. A snake eating its own tail. Worse, most of this debt is short-term, rolled over at whatever rate the market demands. So if rates climb — and with inflation hot and the 30-year already through 5%, they may have to — the bill doesn't drift. It jumps.

Now, before I get to how this ends, let me make something clear. This isn’t a Trump problem. It’s a systemic one. Every politician, red or blue, has the same spending habit. Because if there’s one thing the federal government has been perfectly consistent about, it’s spending more than it takes in. Over the past 76 years, it has run a deficit in 67 of them.

And it's gotten worse, not better. For the last 24 years straight, Washington has overspent every single year, piling on more debt each time. It genuinely doesn't matter who's sitting in the White House — Bush, Obama, Trump, Biden, Trump again — every one of them breaks the last guy's record.

Note: The last “balanced budget” under Bill Clinton was largely the result of accounting smoke and mirrors, and the debt still increased during that time.

The point is, it doesn’t matter which party is in power. The budget isn’t getting balanced, and the debt keeps rising.

It bears repeating because I was always amazed by how many otherwise sensible, fiscally conservative people swallowed Trump's promise to wipe out the debt in eight years. Hook, line, and sinker.

It Can't Be Balanced

Just how bad is it?

Consider this...

To balance the budget today, you’d have to cut spending by around $2 trillion a year. For context, the entire Social Security program costs roughly $1.7 trillion a year, and the military budget runs close to $1 trillion. Even eliminating either completely wouldn’t be enough.

Put yourself in a politician’s shoes. Imagine stepping up to the microphone: “My fellow Americans, we need to slash government spending by $2 trillion a year. We’ll start by cutting Social Security payments...” You wouldn’t finish that sentence before being booed off stage, assuming you made it past your campaign donors.

More realistically, balancing the budget would require across-the-board cuts of 30-40% to all non-debt-service spending. That means ~40% less for Social Security’s beneficiaries, Medicare, veterans’ benefits, military spending, education, and infrastructure. No politician who wants to remain in office would propose this. Even if they did, Congress would never pass it.

But, for the sake of argument, let’s imagine the government does the unthinkable: cuts spending massively while the Federal Reserve stops printing money.

This would trigger deflation and economic depression, causing the price of everything to plummet: stocks, real estate, private equity investments, all assets.

And who owns the majority of these assets? The ultra-wealthy.

I’m not talking about your average millionaires or even multi-millionaires here. I’m talking about the Jeff Bezoses and Jamie Dimons of the world, the Wall Street financial elites, the politically connected class that has benefited from decades of easy money policies.

Their fortunes are tied up in assets that have skyrocketed in value due to the Fed’s money printing and the resulting inflation. That’s why the top 1% now hold more than ten times the wealth of the entire bottom half.

The last thing these people want is to see the value of their assets deflate like a birthday balloon the morning after. And that’s exactly what would happen during an economic depression.

Sure, some wealthy individuals might relish the chance to scoop up assets on the cheap, but the politically connected elites would never back policies that would shrink their net worth to a fraction of what it is now. That’s their worst nightmare.

The “Easy” Way Out

History shows that when governments face tough choices, they almost always take the path of least resistance. Cutting spending is politically toxic. Default is off the table. But gradual devaluation? That’s always the preferred stealth option.

It allows politicians to:

• Avoid explicit spending cuts.

• Continue funding popular programs.

• Maintain the appearance of “doing something” while avoiding blame for direct cuts.

• Preserve their power and wealth.

Devaluation is also essentially a get-out-of-debt card for the government because it reduces the real value of what it owes.

Let me give you a simple illustration that hits close to home...

Say your family has a fixed $400,000 mortgage, roughly the average house value in the U.S. right now. If high inflation hits and prices across the economy rise dramatically (say your and your partner’s salaries double or triple along with most prices) that $400,000 debt suddenly feels much lighter. While your mortgage payments stay the same, they become a smaller portion of your growing income.

The government’s massive debt works the same way: inflation shrinks the real value of their $39.2 trillion debt burden while tax revenues rise with inflation.

The elites benefit too. During inflation, asset prices soar… stocks, real estate, private equity investments all rise in nominal terms.

The pandemic years proved this dramatically: The number of U.S. billionaires grew from 614 to 737 between March 2020 and March 2024, while their combined wealth surged by around 90% to about $5.53 trillion. Not coincidentally, this happened when the Fed ramped up money printing to unprecedented levels.

The bottom line: the path of least resistance is a win-win for those in power and the elites. For the majority of Americans? Not so much.

One Way or Another

Now, it’s no secret that Trump has made a weaker dollar an open goal. He thinks a cheaper dollar gives American factories a leg up, and he’s never hidden it. The dollar has already slid more than 10% since he took office, its worst run in over half a century, and his reaction was, “I think it’s great.”

But even if it weren’t Trump, the point would still stand. When countries become financially unstable, they reach for currency devaluation over outright default or austerity. From Weimar Germany to modern Venezuela, the playbook never changes.

Why should the U.S. be any different? Because it’s a developed nation? Tell that to 1970s Britain.

Note: In 1976, the U.K., then one of the world’s leading economies, was forced to go hat in hand to the International Monetary Fund (IMF) for the largest loan the IMF had ever granted. The British pound had collapsed, inflation was running at 27%, and the government couldn’t sell its debt. Being a developed nation didn’t protect them from the consequences of fiscal mismanagement.

Now, I’m not here to scaremonger. I want to be realistic… I don’t think the dollar goes overnight.

It didn’t happen overnight under Nixon, either.

But in just ten years, it lost over half its purchasing power. Today, that same dollar buys about 90% less than it did in the early 1970s. I think history repeats itself here, only faster. And the accelerant is AI. As I wrote last week, it’s going to put tens of millions of people out of work, and when it does, the government will respond the only way it knows how: with checks. Transfer payments, then some flavor of universal basic income (UBI), all of it funded by the printing press. Point is, we won’t have the luxury of decades this time around.

Trump or not, make no mistake: devaluation is coming.

Regards,

Lau Vegys

Now, over the past week or two I’ve been writing a fair bit about AI. About its power to make you, in economic terms, go the way of the horse. And about how there’s really no avoiding owning these companies anymore, whether you want to or not. And honestly, I can’t think of anything that will shape your financial life more than this over the coming decades.

But I'd half-decided to give the subject a rest this week. Well, it turns out I can't. Because one of these sales (one of these IPOs, I should say) is happening this week. Three days from now, in fact. (And the other two are only months behind it.)

I’m talking about Elon Musk’s SpaceX, which goes public on June 12 in what may turn out to be the biggest IPO in human history (more on that below). Now, before you tell me SpaceX is a rocket company, let me stop you right there. It’s an AI company too, at least in part. You may not know this, but a few months ago Musk folded his AI company, xAI, into SpaceX at a $250 billion valuation.

Note: xAI makes Grok, which holds something like 3% of the AI market and burns through roughly a billion dollars a month. The merger also dragged in X, the social network formerly known as Twitter.

I’ll come back to all of that. But I want to be clear up front about what this essay actually is. Because the SpaceX IPO is going to eat the financial press for the next two weeks, and my bet is that most of the coverage will miss the point entirely. This isn’t really a story about SpaceX. It’s a story about a playbook: a way of moving money out of your pocket (your retirement account, to be specific) and into the hands of a small group of insiders. SpaceX is simply the one with a date on the calendar, and it happens to lay the whole thing out cleanly. So that’s where we’ll start.

Priced for Mars

OK, so the first thing to understand about the SpaceX IPO is the sheer size of it. Like I said, it may turn out to be the biggest in human history. (IPO just means initial public offering: the first time a private company sells its shares to the public.)

SpaceX priced its shares at $135 each. That values the whole company at about $1.75 trillion.

To see what kind of number that is, look at the company that held the “biggest IPO ever” title before it: Saudi Aramco. Aramco is the state oil company of Saudi Arabia, the outfit that pumps and sells a good slice of the crude the whole world runs on. When it went public in 2019, it listed at a valuation of around $1.7 trillion. So SpaceX is coming to market priced like the most valuable company ever floated.

There’s a catch, though. Aramco has always been wildly profitable. It sells oil, the one thing the entire planet still can’t run without. SpaceX lost roughly $6 billion last year.

Either way, this is a giant. At $1.75 trillion, SpaceX would be one of the seven most valuable companies in America the moment it lists. On its own, it would be worth about as much as the dozen biggest aerospace and defense companies on the planet combined: Boeing, Airbus, RTX, Lockheed Martin, GE Aerospace, and the rest of the sector's giants stacked together.

The company is really three businesses. There’s Starlink, the satellite-internet arm, which is genuinely good: about $11 billion in revenue last year and $4.4 billion in operating profit. There’s the rocket business (the launches everyone pictures when they hear the name), which brought in around $4 billion, growing slowly, most of it flights SpaceX runs for its own satellites. And there’s the AI piece, xAI, the one I mentioned up top: roughly $3 billion in revenue and losing money by the billions.

Note: xAI was Musk’s own private company, and a few months ago he simply folded it into SpaceX at a $250 billion price tag. Because both companies were private, and Musk controls both, there was no outside market to argue with that number. He essentially set xAI’s $250 billion valuation himself.

Now do the back-of-the-envelope math the market is supposed to do. Put a rich multiple on Starlink, say fifteen times revenue, which is generous for almost any business, and you get around $170 billion. Be kind to the rockets and call that another $20 or $30 billion. As for the AI arm, it’s burning cash hand over fist and hard to value at all. But let’s be generous, give Musk the benefit of the doubt, and use his own $250 billion figure for it.

Add all of that up with a very generous hand, and the parts of SpaceX that actually exist and sell something come to maybe $450 billion. That isn’t even in the same postcode as the asking price.

So what fills the gap, the trillion-plus in between? Nothing that resembles revenue. It’s the story. Mars. Orbital data centers. The light of human consciousness reaching the stars.

Great stuff. But strip all of that out, and what you’re left with is a company being sold at about ninety times its annual sales. For context, Facebook went public at roughly eleven times sales, and people thought that was rich. Google listed at five or six.

You don’t have to take my back-of-the-napkin math for it, either. Morningstar (the investment-research firm that puts price tags on companies for a living) values SpaceX at about $780 billion. That’s quite a bit more generous than my number. And it’s still less than half the asking price.

So with those figures in front of you, the question almost asks itself: who actually pays $1.75 trillion for a company that, by every visible measure, looks worth a fraction of that?

The Only Buyer Big Enough

Well, to pull something like this off, you don’t just need buyers. You need a lot of them. And, more importantly, you need the kind of buyers who’ll show up and buy no matter what the company is actually worth.

There’s exactly one pool of money on earth that fits that description. It’s the passive money: the 401(k)s and index funds sitting in nearly every retirement account in America.

Here’s how that works.

As you’re probably aware, most people don’t pick their own stocks. Their retirement savings sit in index funds, funds that don’t research anything and don’t judge whether a stock is cheap or dear. They make exactly one promise: to mirror a list. The S&P 500. The Nasdaq-100. Whatever is on the list, in whatever proportion, the fund holds it, so your money simply tracks “the market.” That’s the whole product, and it’s gigantic. Trillions of dollars, the default setting in most 401(k) plans in the country. Probably yours included.

Now, a fund like that doesn’t look at SpaceX’s $6 billion loss and decide to take a pass. It can’t. The moment SpaceX is added to the index, every fund tracking that index has to go out and buy it, at the same time, in the same proportion, at whatever price the market happens to be asking that week. There’s nobody weighing whether it’s a good deal.

And that is very good news if you happen to be an insider. By insiders I mean the people who already own most of SpaceX (the early investors, the venture funds, the executives, Musk himself), the ones who bought in years ago at a tiny fraction of today’s price. On paper, they’re sitting on enormous fortunes. But paper isn’t money. To turn it into money, they have to sell. And to sell billions of dollars of stock without crashing the price, they need a wall of buyers waiting on the other side.

That’s exactly what the index hands them. The insiders cash out at the top. You’re left holding the stock. Congratulations. You’ve just been used as exit liquidity.

Now, maybe you’re thinking it’s not that bad. Musk is a visionary (nobody can really argue with that), and maybe SpaceX does go on to colonize Mars, blanket the planet in Starlink, and run the data centers of the future from orbit. Sure, that might all happen. I don’t know that it won’t.

What I do know is this. A man named Jay Ritter, a University of Florida professor who has tracked thousands of IPOs for decades, has shown the same thing over and over: newly public companies tend to lag the market in the years after they list, and the richer the price at the offering, the worse they tend to do. And remember, SpaceX is coming at ninety times sales.

There’s another piece of context worth holding onto here, and it comes from Musk’s own back catalogue: Tesla, the electric-car company he’s still best known for. In December 2020, Tesla was added to the S&P 500, at the time the largest company ever brought into the index, and only after a run-up of more than 70% on the announcement. Every index fund in America was forced to buy it at that peak. Three years later, Tesla was up about 6%. The S&P 500 over the same stretch was up around 27%. The passive investors marched in at the top spent three years underperforming the very index they were part of, while the early holders took their gains and walked.

Then again, Tesla did work out in the end, so maybe this one will too.

SpaceX Is Just the First

But remember, as I mentioned in the intro, SpaceX is only one of three giant IPOs lined up this year. It’s the biggest, and the first to arrive, but really it’s just the door swinging open. Right behind it come the other two. OpenAI, the maker of ChatGPT, filed on June 8 and is expected to follow this fall at more than $1 trillion. And Anthropic, the maker of Claude, filed on June 1 at around $960 billion.

That’s quite a lineup. Three of the most hyped companies on earth, all elbowing toward the same exit at once, all trying to sell their shares to you inside the same few months. Which begs the obvious question: why? Why the stampede?

The short answer is that the window is closing, and the people on the inside can see it more clearly than anyone.

The longer answer is a combination of a few things. Let me walk through them.

The first reason is the simplest: they need the money, and they’re running out of places to get it. AI devours cash on a scale that’s hard to fathom. The four biggest tech companies alone are pouring some $725 billion into it this year. That’s up nearly 80% from last. The companies now lining up to go public have their own enormous bills, and for years private investors footed them, round after round. That private money is drying up. The public market is the biggest pool left, so when you need to raise tens of billions, that’s where you go.

The second is timing. The boom holds only as long as everyone believes the valuations, and an IPO is where that belief first meets daylight. In a market this stretched, one flop can turn the mood and slam the window shut, leaving whoever’s last in line to list into a colder market for a fraction of the price, if at all. So nobody wants to be last. It doesn’t even have to be SpaceX that breaks the spell; any over-hyped debut will do. Better to go early and be clear before someone else’s bad listing ends the party.

Fair enough. But are these companies even making money?

Well, OpenAI is on track to lose around $14 billion this year, with no profit expected until 2030. It has signed up for roughly $1.4 trillion in future computing bills against maybe $25 billion of revenue. Remember, it wants to go public at ~$1 trillion. That’s the SpaceX problem all over again, only without a Starlink underneath to cushion it.

Anthropic, to be fair, is the exception: it’s actually closing in on its first profitable quarter (its first, mind you, not a track record of them), and at around twenty times sales it’s the only one of the three you could call sensibly priced. But that’s almost beside the point. Because whether these companies are any good or not, the index doesn’t care. Profitable or bleeding, your retirement funds will be forced to buy them.

In Closing…

This essay is already long, so I’ve skipped over a few things, like the fact that SpaceX didn’t even qualify for fast index inclusion under the old rules, and that Nasdaq quietly rewrote them so it could be force-fed into the index anyway, reportedly at Musk’s own insistence.

But the mechanics aren’t really the point. The point is that this is a playbook, and it won’t expire when the SpaceX window closes. Everything I’ve seen looking into this tells me that the nature of the AI business (staggeringly expensive, deeply unprofitable, and utterly dependent on a constant supply of fresh money) means its founders will keep needing to turn you into an unwilling, and largely unwitting, shareholder in their companies. That’s just the truth of it.

Now, once again, you don’t get a vote on what the index buys. So this week, and then again in the fall, and again later this year, your index funds are going to own SpaceX, then OpenAI, then Anthropic, at whatever price the market sets that week. Nobody is going to call and ask your permission.

The least you can do is not be surprised by it.

And if you’re really clear-eyed about it, you can go one step further: own a few things that don’t depend on an index committee, a Fed chair, or an IPO clearing at a price somebody’s praying it clears at. It may sound cliché, but if you ever needed one more reason to own unprintable assets like gold and silver, this is it.

Regards,

Lau Vegys

P.S. A quick note. I want to say thank you, sincerely, to everyone who has pledged your support over the past few weeks. I’m doing my best to reach out to each of you individually in private, but in case I missed anyone, thank you, again. I see the names. I read the messages. I do not take any of it for granted. Whether you’ve reached out publicly, privately, or just quietly clicked through to subscribe, I value it enormously.

Quick thank-you before we get into it. The response to last week’s AI piece — the comments, the pledges, the people who reached out privately — has been more than I can fully process. I’m doing my best to reply individually. In case I missed you: thank you, genuinely.

Now to the week. Gold dethroned U.S. Treasuries as the world's #1 reserve asset — central banks now hold gold at 27% of reserves vs. 22% for Treasuries, the highest gold share since Bretton Woods. Speaking of the U.S., data center construction just surpassed office construction for the first time: $50 billion vs. $43 billion and shrinking. It's also eclipsed spending on public transportation infrastructure.

In short, the AI buildout is eating everything else. Meanwhile, the people building all of it are visibly making their own arrangements: Peter Thiel is putting up a $10 million reinforced private residence in Uruguay, and Mark Zuckerberg fired 8,000 Meta employees by email while reportedly aboard his $300 million super yacht in the Mediterranean.

Over in the Persian Gulf, Iran is now charging yuan-denominated transit tolls on tankers passing through the Strait of Hormuz, taking a serious bite out of the petrodollar.

And in Europe, a story making the rounds last week was Brussels’ upcoming ban on single-use ketchup packets (set to come into effect in August). It would be funny if it weren't so tragic. The old continent has collapsing demographics, the world’s highest energy prices, economies on life support, and zero meaningful innovation. But at least come August, no one will have to suffer the indignity of opening a disposable condiment sachet ever again. Thank god the eurocrats are diligently watching over us.

Speaking of Europe, we’re in the early stages of prepping for our annual summer in Spain. Running checks on the car (it’s a road trip), mapping the route, the usual logistics. The idea is to send the kids to summer school there for the month — improve their Spanish, get them off the screens, give them something real to do. Some parents I know think that’s borderline cruel — sending kids to “school” during summer break — but it’s one month, four hours a day, and the rest of the time we’re a family on the road together. Road trips bring families closer than anything else I’ve found.

And now for the latest pieces…

From the Comments

One of the things I’ve come to appreciate most about writing here is the conversation that happens in the comments. The thinking that shows up there often sharpens my own, and adds dimensions I’d never have thought to include. With that in mind, here are four reader observations from last week that stuck with me:

Thanks again to everyone who left a comment last week. I read all of them, even the ones I don't get a chance to reply to individually. Over the coming days, I'll try to catch up on the questions and the longer threads.

See you in the comments this week.

Regards,

Lau Vegys

A quick note before we dive in. Today’s piece is longer than usual. It’s also more ambitious than usual — I’m trying to thread three different stories that I think are actually one story, and you’re going to need all three to see the whole shape. So bear with me. If you only have a minute, the headline is the thesis. If you have ten, the rest of it will, I hope, be worth your time.

So a few weeks ago, Meta (the parent company of Facebook) told roughly 8,000 people to work from home for the day. Then it fired them by email. That was about 10% of the company.

Here’s the thing. Meta wasn’t in trouble. The stock was near records. This wasn’t a company cutting muscle to survive a bad year. It was a company quietly shifting its money away from people and toward machines. Eight thousand gone, seven thousand survivors reshuffled into new AI divisions, and that’s to say nothing of the 6,000 open jobs they just quietly left unfilled.

While all this was going on, Mark Zuckerberg was reportedly aboard his $300 million super yacht somewhere in the Mediterranean.

Now, Meta isn’t an outlier. American employers announced about 1.17 million job cuts in 2025, the worst year since the pandemic, and tens of thousands of those were attributed to AI directly. And that’s just the layoffs, which tell only half the story.

The other half is the hiring that never happened. Announced hiring plans fell by a third last year, to the lowest level since 2010. In other words, companies are quietly deciding that the next worker simply won’t be needed.

Now, point any of this out to anyone in the tech world (or in the government, for that matter), and you’ll get a version of the same response. It goes something like this: “Don’t worry. Every wave of innovation gets predicted to destroy work. And every wave ends up creating more jobs than it destroys.”

And look, I get it. This response isn’t wrong on the historical record.

• The first industrial revolution (Britain, late 1700s) gutted skilled hand-weavers. They smashed the looms in protest. Called themselves Luddites. We pretty much use their name today as a synonym for fool. Because within a generation, the mechanized cotton mills had hired millions more people than the hand-weavers ever employed.

• The tractor (early 1900s in the U.S.) put almost half the country’s farm labor out of work. In 1900, roughly 40% of Americans worked on farms. By 1970, that figure was under 5%. Those farmhands didn’t starve. They moved to cities and built the postwar manufacturing economy that defined the American Dream.

• The assembly line (Ford, 1913) replaced the master craftsman who built a car bumper to bumper. But it also created the factory job that became the spine of the American middle class for the next fifty years.

• The spreadsheet (VisiCalc in 1979, Excel in 1985) ate most of the country’s bookkeepers and clerks. In their place came the entire knowledge-work sector — tens of millions of jobs (at least until AI showed up to eat it).

• The internet (mid-1990s onward) vaporized newspapers, travel agents, video rental stores, encyclopedia salesmen, half the music industry, most of the postal service’s volume, and a long tail of jobs nobody remembers anymore. But it also built every tech company that now dominates the S&P 500.

So yes, every previous innovation eventually created more jobs than it destroyed. The Luddites, in the long run, were always wrong. So why would this time be any different?

Yes, It Is Different This Time

Now, I want to be careful here. I’m not buying into the whole AI-doom thing. I think the future is going to be amazing in many ways. Cheaper goods, longer lives, scientific breakthroughs, the works. But to actually reap the benefits of that future, you have to be one of the people on the right side of the transition. And unfortunately, I think most people won’t be. Most will either fall by the wayside entirely or end up dependent on a government check (more on that in a moment). Which means if you don’t want to be one of them, you need to think realistically about how this thing actually unfolds.

And to do that, you have to be clear-eyed about one thing first. The AI revolution is a fundamentally different kind of animal from every previous wave on that list above.

You see, every previous machine moved human labor somewhere new. The mechanized loom needed a mill worker. The tractor needed a driver. The assembly line needed an operator. The spreadsheet needed an analyst. Each tool needed a human attached to it to be worth anything. Productivity went up for the worker, and the worker got paid for the gains (well, more or less — more on that in a minute too).

AI is the first technology designed for the opposite purpose. It isn’t built to make your labor more productive. It’s designed to make your labor unnecessary.

There’s a useful analogy for this. Not a human one, but a useful one. Think about horses. Before the internal combustion engine arrived, horses were arguably the most important factor of production in the entire American economy. The U.S. horse population grew roughly fivefold between 1840 and 1900, to over 21 million animals. Then we built tractors and automobiles. Within thirty years, horses were obsolete. They didn’t get retrained. They didn’t move to better jobs. They just stopped being needed.

If current AI deployment trends hold up, there’s a very good case to be made that humans, in economic terms, will go the same way as horses. To be clear, I’m not predicting anyone gets sent off to the glue factory. But economically? Same arc.

Note: Yes, AI will create some new categories of work: prompt engineers, AI trainers, model evaluators, that sort of thing. But the trouble is, those new categories are themselves AI targets. They collapse into themselves rather than expanding into real headcount. The new jobs AI creates tend to be the next jobs AI eats.

Now, I’m not a Luddite, and I don’t have a problem with AI as a technology. For better or worse, it’s just the logical progression of human achievement, the kind of thing that would have emerged sooner or later. We’re a species that improves things incrementally until we don’t need to do them anymore.

OK, so how many people are we actually talking about? That depends on who you ask, of course, but one thing is clear: the numbers aren't small. Goldman Sachs reckons roughly 300 million jobs globally are exposed to automation by AI. The U.S. and other developed economies take the brunt of that. Call it conservatively 70 to 80 million American jobs in the “exposure zone.” McKinsey, separately, estimates that about 12 million Americans will need to switch career categories entirely by 2030. That’s in less than four years. To put that in perspective, that’s roughly a hundredfold acceleration on the AI-attributed pace today. And that’s the consultant version. Not the doomer one.

Speaking of the doomer reading, Anthropic’s CEO Dario Amodei has said publicly he thinks AI could wipe out half of all entry-level white-collar jobs within five years. Geoffrey Hinton (basically the godfather of modern AI) has been warning about the same thing for two years now.

Assume the truth lands somewhere in the middle between the doomers and the consultants. That still raises the obvious question: if you fire all the workers, who buys the product?

It’s a fair question. Labor income isn’t just a corporate cost. It’s also demand. The economy is a two-way street. Hollow out labor and you risk demand collapse. What’s the point of fatter margins if there’s nobody left to buy what the AI-driven industries are producing?

Enter the almighty state.

The state will not allow demand to implode. It would be devastating for the economy, and most of all devastating for the wealth of the people who actually run the show. So the state will backfill the gap. Larger deficits. More transfer payments. Eventually, some flavor of universal basic income (UBI), financed in the end by the central bank and its money printer.

Mind you, we already got a preview of how this works during COVID. In the U.S., the government literally mailed checks directly to households — the $1,200 stimulus payments, then $600, then $1,400 — on top of expanded unemployment that paid more than many people’s old jobs did. Spain rolled out a permanent minimum-income guarantee during the same period. (And Finland had run a literal UBI pilot only a few years before.) In short, COVID was basically the dress rehearsal. The state learned that direct cash transfer to households at scale actually works. All that’s needed now is the next excuse to do it again.

The End of the Middle Class

So who wins in this arrangement?

Well, the biggest beneficiaries are clearly the AI-era equivalent of the old industrial barons. Call them the AI aristocracy — the tiny class that owns the systems doing the work everyone else used to do. In addition to fatter margins going straight to their bottom line, they’ll also have a captive customer base (because the state will be funding everyone’s grocery bill) and political cover, because they’ll be the only people building anything anymore.

Well, what about the rest of the population? They’ll no doubt end up increasingly dependent on a state check to function, making them docile and subservient as a result. Which is, conveniently, exactly the kind of population politicians have always preferred to govern.

You don’t need to be a conspiracy theorist to notice what this system actually is. The textbook name for the fusion of corporate and political power is corporatism; or, if you prefer the more candid synonym, fascism. Italy’s Benito Mussolini reportedly used the two terms interchangeably.

Now, if you think this sounds like a dystopia that’s still many decades away, here’s the part you might be missing. The process has been running for fifty years already. Let me show you.

Wind the clock back to August 15, 1971. On that day, President Nixon killed the last remnants of the gold standard.

Note: I say “remnants” because the U.S. had already left gold for domestic dealings back in 1933. Non-U.S. people and governments could still exchange dollars for gold at the U.S. Treasury, but by the late 1950s, even that was reduced to only foreign central banks. That was the last discipline against unlimited money printing.

Now, I’m not saying Nixon somehow devised this to bring about the AI future fifty years later. Of course not. But the move turned out to be the logical first step in the long march toward the kind of system I just described. Because you cannot run an economy where a tiny aristocracy owns the machines and the state writes checks to everyone else, without unlimited money printing. Gold-backed money is a hard constraint on state spending. Fiat money isn’t.

Now, guess what happened to the American middle class once that constraint came off? It started to slowly come apart. Take a look at the chart below — it shows what happened to American productivity and wages after Nixon took the brakes off.

As you can see, for about 25 years after World War II, productivity and worker pay moved in lockstep. The harder Americans worked, the more they earned. That was the golden age of the American middle class. A single income could buy a house, a car, send the kids to college, and fund a retirement. Wages, adjusted for inflation, rose alongside productivity.

Then 1971 happened. The two lines diverged. Productivity kept climbing. Real wages flattened. The graph above clearly shows how the real wages of the average American have essentially remained stagnant since the early 1970s.

Now, you might ask — how is any of this relevant to today?

Well, let’s look a little deeper. In 1970, wages made up about 52% of total U.S. national income. By the early 2020s, that share had fallen to roughly 43%. A 17% drop in fifty years. And the trend hasn’t stopped — by my rough guess, the figure today is somewhere around 40%. Do you see where this progression is going?

Right, but you might be thinking, the dollar has been fiat for over five decades. There’s no more gold standard to remove. The damage is done.

Not quite. The damage is just entering its second phase.

Enter the CBDC.

Now, I don’t know if it ultimately ends up being a pure central bank digital currency by 2030 (the date the current legal prohibition sunsets, if you read my recent piece on it), or a privately controlled equivalent run through dollar stablecoins like USDC and USDT, or some combination of the two. What I do know is that it will be fiat on steroids. Programmable. Surveilled. Fully wired into the state’s spending machinery.

It will also make money printing operationally much easier. Today, when the Fed wants to inject liquidity, it has to work through the multi-layered banking plumbing. It’s sometimes slow, frictional, politically visible. A digital dollar cuts straight through that. With the rails running direct between the central bank and the end user, the printer goes from slow tool to near-instant one.

Bottom line: the digital dollar is what makes UBI possible at scale. Managing the AI transition will require trillions of new dollars flowing every year, on demand, with no “political accountability” slowing it down. The current banking system would break under the load. A programmable digital dollar can do it before lunch.

What to Do About It

OK, so where does that leave you?

Look, when I said earlier that the future is going to be a small AI aristocracy and the rest of us as state-dependent consumers, that was a bit of a simplification. Some people will survive as something resembling middle class. That’s how it worked the last time, too. The American middle class didn’t disappear after 1971. It survived. But it survived by leaning on four workarounds that hadn’t been necessary before. And it’s worth going through them, because they give us a pretty clear hint about what’s going to be needed to survive what’s coming.

• Two-earner households. Pretty quickly, one income stopped being enough to maintain a middle-class lifestyle. So the wife went to work. Couples doubled their labor hours, called it progress, and convinced themselves nothing structural was wrong.

• Rising household debt. When wages don’t rise, you borrow. Credit cards. Student loans. Ever-larger mortgages on ever-more-leveraged homes. Total household debt in America has roughly tripled in inflation-adjusted terms since the 1970s.

• Home equity appreciation. The one asset that most middle-class families actually owned, far and wide. The one place where post-1971 monetary debasement worked in their favor instead of against them.

• Owning assets. For the smaller share of middle-class Americans who did this — primarily through retirement accounts like 401(k)s — it was overwhelmingly the best decision they made over the last fifty years. Most people didn’t do this in any serious way. But the people who did either kept up, or pulled ahead.

Now, imagine — and yes, this might already be happening to someone reading this — that your paycheck disappears. Suddenly, you’re leaning on the remaining three.

Two-earner households don’t help, because the second earner’s job is probably gone too. Debt requires income to service. And you can’t borrow your way through a period with no wages at the end of it. Home equity is real, but it’s not the kind of thing you can just take out without selling the house — and home prices need buyers with paychecks to support them.

That leaves the fourth one. Owning the assets.

And look, if you want to see how badly the people who didn’t own assets got squeezed over the last fifty years, this chart tells the story. It shows how many hours of work it took to buy one unit of the S&P 500 since 1860.

Note: The S&P 500 itself only dates to 1957 (the S&P 90 started in 1926). The pre-1926 data is a standard back-extrapolation, built from Shiller's reconstructed series using individual stock data and earnings going back to the 19th century.

In other words, the productivity gains that didn’t go to wages went to the people who owned the assets. Here’s the breakdown of what happened to the major asset classes since 1971 (incl. the S&P 500):

• Gold: $35 to about $4,400. Roughly 125x.

• Silver: about $1.55 to roughly $73 today. Roughly 47x (with much bigger swings along the way).

• S&P 500: 100 to about 7,400. Roughly 75x on price alone (much more with dividends reinvested).

Even if all you owned was your house, you did OK. The median American home went from about $25,000 in 1971 to roughly $419,000 today. That’s a 16x return.

Mind you, those are nominal numbers. The dollar lost most of its purchasing power over the same period, so the real returns are less impressive. But the point holds. Own the assets and you had a chance at staying ahead. Sell only your labor and you ran in place.

My guess is that what’s coming over the next twenty years is the same process, but compressed and worsened. The post-1971 generation lost real wages slowly. The post-2030 generation will lose wages entirely, and have them replaced with a state check whose buying power degrades on a fixed schedule.

The moral of the story? You’d better start learning about investing (and speculating). And practicing what you learn, too. Not necessarily to become rich, mind you — though many folks will. Just to keep your head above water in the world being assembled around you. Just to hold onto the kind of financial freedom your parents or grandparents probably took for granted.

Regards,
Lau Vegys

P.S. A quick note. I want to say thank you, sincerely, to everyone who has pledged your support over the past few weeks. I’m doing my best to reach out to each of you individually in private, but in case I missed anyone, thank you, again. I see the names. I read the messages. I do not take any of it for granted. Whether you’ve reached out publicly, privately, or just quietly clicked through to subscribe, I value it enormously. This essay — and the rest of what I’m trying to build — is possible because of you.

Now the cracks are getting harder to ignore.

The recent U.S.-Israeli war with Iran was supposed to weaken Tehran. Instead, it reminded the world of a simple reality: Iran controls one side of the Strait of Hormuz. After disrupting traffic through the chokepoint, Tehran is now charging yuan-denominated transit tolls on tankers that pass through. China is building alternative payment rails. BRICS keeps expanding. And the dollar’s share of global foreign-exchange reserves has fallen to its lowest level in decades.

Now, this doesn’t mean the dollar is about to disappear. But it does mean the system that financed Washington's deficits and projected U.S. government power around the world is coming apart at the seams.

America's ruling elites see the same thing.

And contrary to what many people assume, they aren’t sitting back and hoping for the best. They have a plan to replace the demand that’s slowly disappearing from the old system.

It’s a clever plan. It might even work.

The question is whether preserving the dollar’s dominance is worth the price Americans may end up paying for it.

Before we get to the solution, we need to understand the problem.

The Sponge That’s Drying Up

For fifty years, virtually every barrel of oil traded anywhere in the world had to be paid for in dollars. Every nation that bought oil needed dollar reserves. Every nation with dollar reserves parked them in U.S. Treasuries.

That meant foreign central banks were essentially forced, by the mechanics of the global oil trade, to absorb whatever the U.S. government wanted to borrow. New deficit? Somebody overseas had to buy the debt… because they had accumulated dollars and needed somewhere to park them.

That was the sponge.

It’s also why the U.S. could keep printing dollars for fifty years without getting the inflation that should have followed. This is the thing most people get wrong about so-called “Modern Monetary Theory” — the idea that a sovereign government printing its own currency doesn’t really need to worry about deficits. But MMT only “works” if someone else is absorbing the new money. For the U.S., that someone else was every Saudi or Chinese or German central bank that needed dollars to stay in the global oil game. Without the sponge, MMT is just printing. With it, MMT looked like a free lunch.

Take the sponge away and the math changes immediately. The same dollars that used to disappear into a Saudi central bank’s reserve account now have to find a buyer at home. The same Treasuries that the Gulf used to soak up now have to clear at whatever yield American pension funds and money market funds are willing to accept.

Which is why the 30-year just cracked 5%. It’s not random. It’s not “the bond vigilantes are back.” It’s the visible price of the sponge drying up. And that price gets paid by every American with a mortgage, a credit card, a car loan, or a small business credit line.

So how do you keep funding a government that runs a $2 trillion-plus annual deficit when the foreign sponge is drying up?

Well, you build a new one.

Building a New Sponge

The new sponge isn’t a foreign central bank. It’s a handful of private American fintech companies — Tether, Circle, and whoever else gets licensed under the recently passed GENIUS Act.

That’s the new sponge. Same mechanism. Different infrastructure.

Treasury Secretary Scott Bessent has been telling everyone, in plain sight, exactly what they’re doing. Here’s how he put it in the official statement marking the GENIUS Act’s enactment:

Stablecoins represent a revolution in digital finance. The dollar now has an internet-native payment rail that is fast, frictionless, and free of middlemen. This groundbreaking technology will buttress the dollar’s status as the global reserve currency, expand access to the dollar economy for billions across the globe, and lead to a surge in demand for US Treasuries, which back stablecoins.

Notice what he says there: “… expand access to the dollar economy for billions across the globe.” That’s the master plan. The dollar is going global — again.

Take a look at some of the numbers. USDT alone has more than 550 million active users worldwide, with user growth running near 30 million per quarter through late 2025 and into early 2026. Total USDT in circulation is about $190 billion as of April this year, up from $118 billion at the start of 2025. In 2025, USDT processed $13.3 trillion in transaction volume. Total stablecoin transaction volume across the whole sector hit roughly $33 trillion. That’s more than Visa and Mastercard combined.

And interestingly, the adoption is taking off exactly where you’d suspect. Argentina, where annual inflation has exceeded 200% in recent years. Turkey. Lebanon. Nigeria. Venezuela. Across Africa and Latin America, USDT now accounts for roughly 85% of stablecoin payment volume. Tens of millions of ordinary people, holding what they think of as “digital dollars.” Not because they love America, but because their own currency is on fire.

Doug Casey has long called the U.S. dollar "the prettiest mare at the slaughterhouse." If ever there was a real-world illustration of that idea, this is it.

What It Means for You

But there’s a catch.

The petrodollar sponge absorbed trillions of dollars over decades. The stablecoin sponge currently holds roughly $200 billion in Treasuries. To replace what’s drying up, stablecoins need to scale ten or twenty times from here. That’s why Washington is pushing global adoption so hard. They need the new sponge to grow fast, while the old one is still functional enough to bridge the gap.

Now, you might think this is fine. The dollar survives. Reserve status holds. Deficits keep getting funded. What’s the problem for regular Americans?

Well, aside from continuing to fund Washington's war machine and ever-growing deficits, the real problem is the mechanism.

Unlike cash, stablecoins leave a record. Unlike cash, they can be frozen, transactions reversed, and access restricted.

Every dollar ultimately depends on intermediaries complying with government rules. They aren’t anonymous. And they aren’t fully yours to use without permission.

That’s not a bug. It’s the feature.

As I wrote in a recent essay, there probably won’t be a formal federal CBDC before 2030. But Washington isn’t waiting around. The replacement is being assembled right now—by the private sector, on government-approved rails, under government rules.

The cost of preserving dollar dominance may ultimately be paid by every American who once had the option of cash, privacy, and opting out. Those options are slowly being engineered away in the same legislation designed to preserve the dollar’s reserve-currency status.

Bottom line: If the dollar is going to survive de-dollarization, American financial freedom may not survive with it.

Regards,

Lau Vegys

Encouraging stuff.

Especially since it comes on the heels of President Trump’s executive order, signed last year, directing federal agencies to halt any initiative to establish or promote a CBDC. Plus, Congress is currently working on a sprawling housing finance bill called the 21st Century ROAD to Housing Act, tucked inside which is a clause that would explicitly prohibit the Federal Reserve from launching a digital dollar.

You’d think, given all that, the question of a digital dollar was settled. Done. Closed file. Right?

See, there’s a small detail in that ROAD to Housing Act that’s escaped most of the coverage. The CBDC prohibition it contains comes with a sunset clause. It expires automatically on December 31, 2030. After that, unless Congress renews it, the ban just disappears.

Now, you’d be forgiven for asking the obvious question here. If the people writing this law actually wanted to kill the idea of a federal digital dollar, they’d have made the ban permanent. Why only until 2030?

Because they’re not killing it. They’re pausing it.

Granted, a handful of Republicans actually tried to make the ban permanent. Ted Cruz was probably the loudest of them. But they got rolled. Both parties' leadership wanted the sunset. That tells you everything you need to know.

And in the meantime, two things are happening.

First, as I wrote in a recent essay, there’s the GENIUS Act. Think of it as CBDC-level control without the baggage of the CBDC label — outsourcing the digital dollar to the likes of Tether and Circle (issuers of USDT and USDC, the two biggest dollar-pegged stablecoins). The government sets the rules. And the whole thing looks like just another tech product.

Second, in parallel, they’re quietly building the rails that’ll make a federal digital dollar work whenever they decide to switch it on. Regardless of what they end up calling it.

Let me show you what they’ve built so far.

The FedPal

You see, the Fed and big banks have been gearing up for the eventual rollout of a digital dollar for quite some time now.

As far back as 2017, a consortium including finance giants like Citigroup and JPMorgan initiated a real-time payments network operated by The Clearing House, known as the RTP Network.

This network processed a total of 173 million transactions worth about $76 billion during 2022.

The idea behind the RTP Network has always been to lay the technical groundwork and foster a culture of acceptance for a digital currency. The big banks made no secret of it.

But on July 20, 2023, the financial elites, led by the Fed, took it to a whole new level. Industry giants like JPMorgan, Citigroup and Wells Fargo lined up in support behind the project.

Thus, FedNow was born, the Fed’s own real-time payments service.

Officially, FedNow was meant to be like those instant payment apps you use, but for banks. It enables businesses and individuals to send and receive instant payments 24/7, 365 days a year. Sort of a FedPal, if you will.

Unofficially, though, FedNow is setting the stage for an all-digital dollar — or, as I like to call it, a Fedcoin.

By Design

FedNow is basically a test drive for CBDCs in banks.

That’s why the Fed is keen on rolling it out across the financial sector; they’ve made that much clear. Here are the words of Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive:

Availability of the service is just the beginning, and growing the network of participating financial institutions will be key to increasing the availability of instant payments for consumers and businesses across the country.

Expanding the Fed’s payments system to include more institutions, and ultimately reaching the public, is also a strategic move to drum up support for an eventual Fedcoin.

And the numbers since 2023 show exactly how aggressively they’re doing this.

As of today, more than 1,600 financial institutions are connected to FedNow — nearly 50% more than a year ago, and more than 45 times as many as when the service first went live. In 2025 alone, the system processed $853 billion in transactions, with an average payment value of just over $100,000 and total volume growing by 460% year over year.

If you open the official FedNow participants list (there's a downloadable Excel file on it, updated as of June 1, 2026), you’ll see some big names on it — BNY Mellon, Capital One, and the ones I’ve already mentioned, like Wells Fargo, JPMorgan, and Citibank.

This is already impressive, but there are plenty of reasons for others to follow. Think faster, more efficient fund transfers and improved liquidity management, just to name a few.

Banks have also been itching for a shot at the payments game, where fintechs like Venmo and Block’s Cash App have held sway. And FedNow could give them a competitive edge.

On top of that, the Fed recently proposed letting chains of correspondent banks use FedNow (today, a transfer can only involve two U.S. banks), and extending the service to handle the U.S. side of cross-border transactions.

Banks will inevitably see those “reasons” lining up with their business goals — and they’ll jump on the bandwagon.

Remember Them?

FedNow gives the Fed the ability to monitor every financial transaction made along with any data associated with that transaction.

That’s a scary proposition. Just think about it…

With this technology, the financial elites finally have the power, for the first time ever, to track every dollar you spend in real time. Not retrospectively, the way they could before. Not in aggregate. Live. Every wire, every transfer, as it happens.

Combine that with the GENIUS Act’s grip on stablecoin issuers (Tether, Circle, and whoever else gets a license), and the federal government now has visibility into a chunk of the dollar economy that was technically out of reach just five years ago. The Fed watches the bank rails. The Treasury watches the stablecoin rails. Between them, very little moves that isn’t observed.

And of course, if you can watch something, you can probably stop it too.

Before anyone tells you the kill-switch concern is paranoid, remember February 2022. Justin Trudeau invoked Canada’s Emergencies Act and ordered banks to freeze the accounts of trucker convoy donors. People who had committed no crime, who hadn’t been charged with anything, lost access to their money overnight.

The Fed will deny it. So will the government. They’ll talk about checks, balances, and regulation, but that’s the reality. And it’s getting us closer to the eventual rollout of Fedcoin, which, with FedNow spreading like wildfire, seems all but inevitable at this point.

None of the Trump administration’s recent CBDC announcements really change any of this. The 2030 sunset clause is the tell.

Regards,

Lau Vegys

P.S. There are things you can do to prepare for Fedcoin’s eventual arrival, regardless of what they end up calling it. First and foremost, hold hard assets — or what I call unprintable assets — like physical gold and silver. They've survived every monetary reset, currency debasement, and financial experiment governments have thrown at the public. And they can't be frozen with the click of a mouse. These days, that's a seriously underrated advantage.

Meanwhile, the surveillance architecture kept expanding. Biometrics for bank accounts in the U.S. Digital ID in the UK. And in New York, a new government category — "anti-tech violent extremists" — designed to pre-label anyone who pushes back on the AI buildout. I wrote about that last one in the final essay below.

Here's everything I published in May — plus one from late April on Palantir's 22-point political manifesto, where a defense contractor that profits from every conflict is publicly calling for a military draft so you can fight the wars it sells into. If you haven't read it, start there:

It wasn’t a particularly interesting conversation, to be honest. But then he said something that caught my attention. Fink casually said that the trillions of dollars needed to build AI data centers in America “will come from savings accounts, from pension accounts, from insurance companies.”

The Governor nodded along. Take a listen.

Now, I originally posted this video as a Note on my Substack, and a fellow - let’s call him Jerry - sent me a comment. Here’s what he wrote, unedited:

You’re an idiot. He’s simply saying that our capital, invested in the market, will be used to fund AI, mostly because it’s seen as a good investment. I’m certain you can chose to invest your money in companies not involved in AI.

He’s since deleted the comment, taking my rather long reply along with it. But it got me thinking. Jerry probably isn’t alone in believing this. That you can simply “chose to invest your money in companies not involved in AI.” (That’s basically why I sat down to write this today.)

Of course, what Jerry probably missed is that Fink isn’t just another guy with an opinion. He runs BlackRock, the largest asset manager in the world. About $11 trillion of other people’s money. And a very large share of that money sits in American retirement accounts. BlackRock’s iShares is the biggest ETF family on the planet, and its LifePath target-date funds are the default investment option in thousands of 401(k) plans across the country. If you have a 401(k), you’re probably already their client, whether you like it or not.

Now, as you may or may not know, the funds in your 401(k) are required to hold whatever’s in the index, in the same weights. So if you own an S&P 500 fund, you own whatever the S&P owns. And about 35% of the S&P right now is the Magnificent 7: Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla. Every one of them is up to its neck in AI. Microsoft backs OpenAI (more on that in a minute). Alphabet runs Gemini. Meta has Llama and is building data center campuses. Amazon backs Anthropic and runs the cloud most of this sits on. Nvidia sells the chips. Apple and Tesla bake AI into the products. So 35 cents of every dollar in an S&P 500 fund goes to AI by default.

But sure, I guess you could technically opt out. Liquidate your index funds, build a custom non-AI portfolio (good luck excluding everything that touches AWS or Azure, the cloud platforms most of the internet runs on), and give up your 401(k) employer match.

None of this is really an option for most working people.

So no, you can’t really “chose to invest your money in companies not involved in AI.” And it’s worse when you’ve got a guy like Fink calling the shots, who - let’s just say - probably doesn’t have your best interests at heart. After all, this is the same man who for years pushed for woke capitalism and ESG investing. Under his leadership, BlackRock shifted decision-making power in American capitalism away from shareholders and towards so-called stakeholder capitalism. He prioritized Net Zero emissions, board diversity, and “purpose-driven” commerce over actual value creation. A buddy of Klaus Schwab, he’s now interim co-chair of the World Economic Forum, part of the “Great Reset” crowd advocating for people to “own nothing and be happy” by 2030.

Quite a resume.

The Great Pivot

Wait a sec. Isn’t it curious that the same people who spent the last decade selling you Net Zero and ESG are suddenly all in on data centers? Which, for what it’s worth, are the most energy and water intensive infrastructure humans have ever built at scale.

And Larry isn’t the only one here. Just take everyone’s favorite philanthropist, Bill Gates. The man behind some of the most questionable global initiatives of the past twenty years. And, while we’re at it, a former pal of Jeffrey Epstein.

For a solid decade, Bill has been the loudest voice on climate. He’s done it all. Apocalyptic warnings, cow flatulence detours, the “we need to dim the sun” geoengineering pitches, the whole package. Then, on his 70th birthday last October, he publishes a 17-page memo titled “Three Tough Truths About Climate.” And here’s the quote that would have caught your eye, had you had some time to waste reading it.

Imagine that. If that isn’t a 180 on a decade of his own climate evangelism, I don’t know what is. And what’s the new metric Bill wants everyone to refocus on instead of emissions and temperature?

Ah, improving lives. Of course. Surely this sudden change of heart doesn’t have anything to do with something more earthly. Like, I don’t know, money. And power.

Bill’s money and Bill’s power, to be specific. Both come from Microsoft, the company he founded and still owns billions of dollars worth of stock in. Microsoft is in the middle of the largest AI infrastructure buildout in human history. Roughly $80 billion per year going into AI data centers. Microsoft is also the largest backer of OpenAI.

Larry and Bill are just two examples of how the climate scare is being quietly ditched in favor of something the same people find a lot more profitable.

Now, before we go further, let me say something up front. I don’t necessarily have a problem with AI as a technology. For better or worse, it’s just the logical progression of human achievement. Something that would have happened sooner or later given our penchant for improving things incrementally. Tools are tools. Like the internet, or for that matter like guns, they can be used for good or for bad depending on who’s holding them.

What I have a problem with is how it’s being built. How it’s being paid for. How it’s going to be used, and for what purpose. And what may soon be happening to anyone who objects.

Four things.

Well, we just talked about the paying part. And the using part I covered in a recent essay on this very subject. So let’s walk through the other two.

What They’re Building

There are now nearly 4,200 data centers in the United States. That’s roughly eight times more than either Germany or the United Kingdom, the next countries on the list.

The reason is simple: capital. American tech companies have been throwing every dollar they can find at AI infrastructure for the past three years. Spending on data center construction has grown 336% since 2022, and now sits at about $50 billion a year. For the first time in U.S. history, that’s more than what the country spends building office buildings ($43 billion, and shrinking). Take a look at the chart below.

The American economy is now physically rebuilding itself around data centers. In fact, Harvard economist Jason Furman recently calculated that without investment in data centers and information processing technology, U.S. GDP growth in the first half of 2025 would have been about 0.1% on an annualized basis. Effectively zero. A growing number of economists now think the country would already be in recession if not for AI capex.

That’s how big this thing has gotten.

Now, these things, what the industry calls “hyperscale” data centers (the really big ones owned by Google, Amazon, Microsoft, Meta, and a few others), are absolute power hogs. A single hyperscale facility consumes more electricity than 500,000 homes. Which creates two problems for the people who happen to live near where one is being built. First, your electricity bill is about to go up, because the local grid suddenly has a customer drawing more juice than a midsize city. Second, your land may be next.

On electricity, you might have already heard about Lake Tahoe. Earlier this year, the residents (about 50,000 people) were told by their local power supplier that the supplier was redirecting grid capacity to data centers. Their options were to wait years for new transmission infrastructure, or pay two to three times the wholesale electricity rate.

Now about the land. Across Georgia, Kentucky, and Virginia, journalists have been documenting the same pattern. Homeowners receive letters from utility companies informing them that high-voltage transmission lines will be running through their property. The lines are being built to serve data centers that haven’t been publicly identified. The legal mechanism is something called eminent domain. In plain English, that’s when the government (or, increasingly, a private utility acting under government authority) takes your land for “public use.” The Constitution allows it. They have to pay you something for it. But you don’t get to say no.

In Georgia, a woman whose childhood home is being seized for a transmission line told reporters that her family had lived on the land for generations. Nobody asked her if the line could go elsewhere. The notice arrived. That was it.

In Kentucky, more than a dozen farmers have received similar letters. In Virginia, one farmer was offered $1,500 per acre for land that’s worth, by his own assessment, ten to fifteen times that amount on the open market. He doesn’t have to accept the offer. But if he refuses, the case goes to court. And in court, he loses.

Interestingly, the companies actually building these data centers are increasingly invisible. Google has used shell companies to keep its data center activity quiet in at least five U.S. cities. In Texas, the company operated through “Sharka LLC” and “Jet Stream LLC.” In Ohio, “Magellan Enterprises LLC.” In Minnesota, “Harmony Group LLC.” None of these are identifiable as Google from public records.

It’s basically the same playbook Disney used in the 1960s, when they quietly bought up thousands of acres in central Florida under fake corporate names for what would become Disney World.

That’s not to mention what living next to one of these things actually feels like. Apartments doubling or tripling in rent within months of a construction announcement (Louisiana, Meta). Local water utilities projecting deficits that will essentially end all new residential permits within five years (Newton County, Georgia). A nonstop low-frequency drone that residents compare to a helicopter hovering over their neighborhood day and night (Virginia). It’s a long list of real inconveniences.

Now, the point I’m making here isn’t that every community is uniformly opposed to these buildings. Nor that they should be. I’m sure that many local governments, for example, welcome the property tax revenue. The point is that locals don’t really get a choice. The decisions are being made above their level, by entities they can’t see, for purposes they aren’t really allowed to question.

What Happens If You Object

So suppose you live in one of these communities, and you don’t like it. You show up at the local zoning meeting. You write to your senator. You start a group of neighbors planning to file suit against the next data center proposal in your county. Maybe you even hop on Facebook and vent. Drop a few choice words about your corporate and political overlords.

What happens to you?

Well, probably nothing for now. But you just watch.

In April, the New York Intelligence Bureau, a department of the Department of Homeland Security, quietly introduced a new threat category: “Anti-Tech Violent Extremism.”

Now look, anti-tech violence has happened. It’s a real thing. Ted Kaczynski, the Unabomber, killed three people and injured over twenty more between 1978 and 1995, mailing homemade bombs to scientists, computer-store owners, and airline executives, all from a remote cabin in Montana where he was writing a 35,000-word manifesto called “Industrial Society and Its Future.”

So in theory, having a federal threat category for that kind of thing isn’t exactly crazy.

At the same time, putting any stock in what the government decides counts as terrorism is a dangerous business under the best of circumstances. And this particular category, as written, is broad enough to encompass writing critical of AI, organized opposition to data center construction, and any “anti-corporate” rhetoric coupled with what the federal government chooses to call “intent to disrupt.”

Which means, for instance, it’s certainly broad enough to include the woman in Georgia fighting to keep her family’s land from being seized. Or the farmer in Virginia organizing against the next transmission line. And it’s certainly broad enough to include you, if you happen to decide you don’t want one of these things in your county and you organize against it loud enough.

In any case, I suspect this is just the beginning of an effort to get you to do exactly what former Google CEO Eric Schmidt told a graduating class recently when they booed his AI cheerleading: “Find a way to say yes.”

Regards,

Lau Vegys