Title: Saudi east-west pipeline hit by Iraqi militias. Oil and refined products soar. AIA Weekly 9.12.26
Show: AIA Weekly Market Update (Actionable Intelligence Alert — YouTube)
Guest: John Polomny (solo host)
Date: 2026-09-12 ("Today is Saturday, September 12th"; YouTube publishDate 2026-09-12)
URL: https://youtu.be/riVv_I7gzvg
Length: 57:40
Note: Captured from YouTube's "Show transcript" panel (auto-generated English) via Stephen's logged-in Chrome, segments merged into ~25-second (mm:ss) paragraphs. Verbal fillers (um/uh, interjection "you know") removed and stutters/false starts collapsed; wording otherwise verbatim and every (mm:ss) cue kept in place. Auto-transcript garbles corrected to the intended entity: "John Pauly"=John Polomny; "Houthies"/"Huthia"=Houthis/Houthi; "NBS"=MBS; "straight of Hormuz"/"Hormu"=Strait of Hormuz; "Bab al-Mandde"/"Bob El Mandab"/"Bob Elman"=Bab el-Mandeb; "Gulf of Adon"=Gulf of Aden; "Pum Island"=Perim Island; "Zukar Island"=Zuqar Island; "Yamu"=Yanbu; "Marib Governot"=Marib Governorate; "Sudin"=Sudanese; "Jeff Curry"=Jeff Currie; "James Tarico"=James Talarico; "Schwarzoff"=Schwarzkopf; "Donbos"=Donbas; "Bessant"/"Besson"=Bessent; "Dr. Fouchy"=Dr. Fauci; "boobous Americanis"/"Bubis Americana"=boobus Americanus; "pable"=palatable; "Noris Bank"=Norges Bank; "100red-year"=100-year; "porative"=pejorative; "aotment"=allotment; "HB"=H-E-B; "the ger"=the grocer; "fungeable"=fungible; "Nordstream"=Nord Stream; "off day"/"AFDA"=AfD; "SEO conference"=SCO conference; "Mckinder doctrine"=Mackinder doctrine; "BSW party Sarah whatever her name is Waggard party"=BSW (Sahra Wagenknecht); "Georgia Maloney"=Giorgia Meloni; "Alice Veto"=Alice Weidel; "Marie Le Pen"=Marine Le Pen; "Tom McClennon"=Tom McClellan; "Ed Milliban"/"Ed Millibond"=Ed Miliband; "chi Chile's"=Chile's. Left as spoken because the intended form is uncertain: "warthakers", "RAR fest", "Aana" (Astana?), "a company that does this reals mineral resources out for companies" (an unnamed AIA portfolio drilling-services holding — no name given). Slide/chart references are to the deck he shares on screen.
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(00:01) Guys, John Polomny here, Actionable Intelligence. Today is Saturday, September 12th, and this is the weekly market update. The disclaimer, anything that you hear or see on this podcast or video is not to be taken as investment advice. I am not a registered financial advisor and I cannot give you individual financial advice. Please do your own due diligence. It's your money. It's your
(00:27) responsibility. Okay, let's get started. Well, we have a big move in oil prices back over $100 a barrel on WTI and Brent. Obviously, this is the result of another front opening up in the Middle East as the Houthis have went on a blitzkrieg ground operation and seized a lot
(00:56) of territories. Some have said upwards of 1500 square miles. And so obviously this is a problem. This was coupled with various Iraqi militias have attacked the east west pipeline, Saudi pipeline and knocked it out of commission. You'll recall that with the closure of the, or restrictions or closure, however you
(01:22) want to characterize it, of the Strait of Hormuz, the Saudis were using this East West pipeline to get oil to their export facility in the Red Sea. That pipeline's now been damaged. We don't know how significantly, how long it's going to be offline. This goes back to what I've said before, folks. Asymmetrical warfare, fifth, sixth generation warfare. These people
(01:47) are so far ahead of the Pentagon and the warthakers in the West, it's a joke at this point. Okay? And knocking out this pipeline, Saudis are out of business basically right now. Will it get fixed? Yes. What stops it from being attacked again? Not only was the pipeline itself attacked, but pumping stations, there were satellite photos showing these huge black plumes of smoke. So yeah, what do you do after
(02:19) that? And now you have this militia Ansar Allah, a militia, Houthis, if you want to call them that, on the advance and the Saudi forces aren't going to stop them. It's funny because the Saudis don't actually fight themselves. Yes, they fly the jets and everything for the ground attacks and stuff like that and the bombing, but
(02:44) the Saudis use a lot of mercenaries particularly from Sudan. And so when you're being paid $500 a month to fight, how motivated are you? I mean they just melted away from what I understand. And so now we have the Houthis on the march and so we'll get into a little bit more about that. But again, how's this war with Iran going? It's funny, after this attack,
(03:10) MBS and Saudi Arabia asked Trump to start bombing the Houthis again. And Trump has declined. Why? Because Trump doesn't want this war in the headlines right before the midterms. And like I've said before, since this thing started, this was ill-conceived. This was stupid. There was no reason to do this. No one wanted to do this except for the Israelis and they convinced Trump to do it. Now he's got himself in
(03:36) a jackpot, the biggest own goal in history. He's got 33% popularity. They had their RAR fest down here in Dallas for the midterms. There's always going to be a true faithful of people on either side, no matter how stupid or bad things are. And they're just going to suffer a lot of losses in this midterm. And they deserve it. They did
(04:01) nothing with the two years that they had where they had both houses of Congress and the presidency. They did the exact opposite of what they said they were going to do. The immigration thing isn't even going like it should. Yes, they closed the border. That's about the only thing that he's done. Have they started ramping up deportations? Yes. Everything else was totally opposite. Affordability and cost of living is the
(04:28) biggest issue on people's minds and this is an own goal. This doesn't do anything and this is now unresolved. We have total chaos now. We don't know in what direction this is going to go. What's stopping the Houthis, they're emboldened now. I saw some of the videos. They're on the march. If there's no resistance, why not keep moving? And who's going to stop them? Okay. It's not like in Syria where you had Russians there and you had the
(04:58) Syrian Arab army and things like this. People were fighting for their lives literally. You have a bunch of Sudanese mercenaries, are like I'm out of here. I'm not going to get killed for $500 a month. So this is a mess. Now you have two major choke points controlled by either Iran or proxies of Iran. So we'll
(05:23) get into it a little bit further. So this is the East West pipeline I was talking about in case you didn't know. Just for a visual, you see that this is the Red Sea port. With the Persian Gulf over here closed, they were pumping oil across this. This has now been hit and is now out of action. As of the making of this video, I don't have any information of how long that's going to be. The thing that I find
(05:48) amusing is that this is just further reinforcing what I've been saying for a couple years now. You're spending $1.5 trillion on this outdated fancy military that we have and you can knock out major economic installations with drones, with cheap drones. It was amusing to me also that, I don't know if it's true but I think
(06:16) Anthropic or one of the AI companies was complaining because evidently either it was the Yemenis, the Houthis, I don't know who, somebody was using the AI for targeting of these various facilities and so they were all up in arms about that. I don't know if that's true or not but this is what I'm talking about, asymmetry okay, garage band warfare if you want to call
(06:41) it that. Okay? And the ability to use what you have at a small cost and leverage it asymmetrically against a higher tier opponent and negating their material advantage and their industrial capacity advantages. This is quite bothersome.
(07:06) So here's an article here. Says Yemen's Houthis captured the Red Sea port of Mocha on Thursday, taking the approach to the Bab el-Mandeb Strait, which connects the Red Sea and the Suez Canal to the Gulf of Aden and the Indian Ocean. Bab el-Mandeb is 12 mi wide and carries 6.2 million barrels of oil and refined products a day, plus 80% of the LNG shipped north to Europe. Houthi
(07:32) attacks made these waters unsafe for shipping in 2024 and Suez Canal revenue fell more than 60% that year costing Egypt $7 billion. Again, let me remind you that that was during the Biden administration. And if you recall, they sent all these destroyers over there and they were bombing the Houthis and they still couldn't open the Bab el-Mandeb sufficiently. Okay, that was even when Trump took over. Okay. And that was out of the
(08:02) news. And now the Houthis have completely taken over and control the Bab el-Mandeb strait. They actually control the islands in the Red Sea. As you go through the strait, they actually had one of the Houthi commanders on a video I saw explaining that we don't even need missiles or anything. We are on these islands now. We can use anti-tank guided missiles and drones to easily stop the traffic. Okay.
(08:28) So that leads you to believe now. Okay. So, who's going to recapture this territory and open this up? As of now, the Houthis have said the only traffic they're going to stop is Saudi traffic. The Houthis have been engaged in a war with the Saudis for 10 years, I believe, at least 10 years. And the Saudis have killed hundreds of thousands of people. They've embargoed the Houthis.
(08:53) You have to understand something about Yemen, okay? The country of Yemen has more people than Saudi Arabia does. Okay? Saudi Arabia is a small country population-wise because of all the wealth. They don't do their own work. They don't serve in their military as ground pounders. Okay? And so they've always had a problem with the Houthis. Now, if you look, we go back to these distinctions about Shia and Sunni and
(09:18) all this stuff. The Houthis are a certain sect of Shia Islam. That's why they're aligned with Iran. This was never a problem until we got involved. And of course, the US backs the Saudis against these Houthi rebels. Okay. So, it's now all these things that were festering undercover, nobody in the West paid attention to because of this war with Iran. I mean, you saw that Iran's
(09:46) going to activate all of its proxies that it can. And now you have two major transit points for the world's energy now controlled by Iran or proxies of Iran. Now again, as I've said, the Houthis have said, we'll just stop Saudi traffic right now because they're in a war with Saudi Arabia, but what stops them at some point from just stopping all traffic? Iran's not probably
(10:12) going to play all of its cards. And so, right off the bat, this is getting out of control. And what's the US going to do? MBS called Trump as I stated earlier and said, "Hey, you got to help me out." And Trump declined. It goes on here in this statement here or this news, Houthi forces also captured Perim Island and Zuqar Island. Holding Perim lets the group monitor and potentially mine the waterway.
(10:41) Saudi Arabia has rerouted more than 70% of its crude exports through the Red Sea port of Yanbu since Iran closed Hormuz. Houthis are now threatening that alternate Saudi route. And so again, and now we get news that, here's the territory that the Houthis have taken. This pink is Houthi controlled territory. This is what was taken just over the
(11:08) last couple days, 1500 square miles. Here's these islands that have been taken. Okay, I believe all these islands are now under the control. And so this is only 12 mi wide and so you can control who goes through here. Okay, who's going to open this up? Saudi Arabia doesn't have the military capability. Okay, you see the overall picture of Persian Gulf is closed or the Strait of Hormuz is closed and the Bab el-Mandeb is
(11:40) closed and the east west pipeline is out of action and this is where the Saudis were loading crude and shipping it through the Suez Canal up here to the north. Okay, so 12% of world trade passes through here. This is just getting worse and worse. So now the Houthis are advancing on Marib. This is the Marib Governorate and this is one of the largest
(12:10) areas of oil production in Yemen. And we're getting reports already that as they advance, the people that were defending this are already pulling out. Okay. And so what's stopping the Houthis from moving even further north into Saudi Arabia? What's stopping? Evidently, there was some type of, from what I understand from some of the reading I
(12:37) did, there was some kind of meeting of all these different tribes in Saudi Arabia and Yemen with Iran and possible situation was agreed to about basically Saudi Arabia is under threat right now. Okay, I'm not saying it's going to fall but the percentage chance is not zero that they're in major trouble. And what's the US going to do? Are we going to send the 82nd Airborne in and take these islands back? And then
(13:08) how do, again, how do you supply them? What does that entail? Okay. I mean, are you going to bring ships close to there and get them blown out of the water? Yemenis have capabilities whether people want to acknowledge it or not. And this is all coordinated. I don't think that the Iraqi militias destroyed this pipeline on their own. I think this was all coordinated by Iran. And so the idea that Iran doesn't
(13:38) have cards to play, the goal for Iran is to cause enough economic pain to destroy the Trump administration. And that's what's going to happen in less than 60 days. Even if you get the pipeline restored, they'll just attack it again. They've demonstrated they have the capability. Why not? And so I think there was some kind of news that came out late Friday about the United States is going to enact a defense authorization bill because of
(14:09) lack of refining capability. Another situation caused by stupid US foreign policy. Okay, which we'll get into of why we have a shortage of refining capacity. Okay. And that's why diesel is, I know at least here in South Texas, it's $6. Well, they're trying to keep it at $5.99, but I saw a six print somewhere. And I know from many people reporting in the comments, especially in places like California, it's seven or $8 a gallon.
(14:41) Okay. Jeff Currie, who's the big ex Goldman Sachs commodity guy that's off on his own now, has said that he thinks gasoline will be $5 by the midterms. I mean, this is going to be bad. And again, it's not like people like me, I'm not for Democrats. I'm not going to go out and vote for these nut jobs. I'm just going to stay home. I'm not going to vote for Ken Paxton, okay, in Texas.
(15:09) I'm not going to vote for that. There's no reform there. Okay. And I'm certainly not going to go out and vote for a strange weird person that gives me sweaty palm pedophile vibes like James Talarico. People are just going to stay home and the Democrats are going to have a big day and then the impeachments are going to start day one. Okay? And all of the hearings and all of the news media is going to jump on board and nothing's going to get done
(15:40) for two years, okay? And there's going to be a lot of turnover in the administration, a lot of chaos. In the meantime, this is festering over here. What's the solution? Mr. President keeps repeating the same thing. Well, the Iranians are destroyed. Their air force is destroyed. Their navy's destroyed. They don't need jets and destroyers and aircraft carriers. Okay? It's called fifth, sixth generation asymmetrical warfare. You and all of the
(16:10) generals think it's 1991 and Schwarzkopf is getting ready to roll in. That's not how this is. And so the idea is, well, we'll just spend $1.5 trillion on defense so that all the defense contractors can make even more money for weapons that are obsolete basically or don't work. So I'm talking about here the self-inflicted gunshot wounds. This refining capacity online is the lowest
(16:40) in modern history. Why is it the lowest in modern history? Okay, you see if you go back here on the left to the top, the normal range of refining capacity online, it's in percent. Refineries go through maintenance, they have turnarounds, some of them have accidents, they have to shut units down, but typically you see it runs in this band of 94 to 96%
(17:06) online. Okay, this is for the entire global nameplate refining capacity. And so why do we have high diesel and gas prices right now? Well, look at what happened. Okay, in March, we had the Hormuz Iran war, okay, started and we had the Strait of Hormuz closed and you see
(17:33) how refining capacity decreased. There are a tremendous amount of refineries in the Middle East. It's a value add, why would you just export your crude when you can refine it into refined products? Especially when the West is shutting down refineries. They built billions and billions of dollars worth of refining capacity. That refining capacity has been attacked by Iran. That refining capacity is locked in because of the fact that Strait of
(17:59) Hormuz has restricted traffic. Okay. So that took a lot of refining capacity offline. Then we had our allies in Ukraine are attacking Russian refineries. Okay, you can make the case if you're pro-Ukrainian or you want justice in the world that they should do that. Okay, fine. But it has consequences.
(18:24) Okay, you can't ignore the consequences. And I would suggest to you that the majority of people that put Ukrainian flags in their Twitter handle or go around virtue signaling probably are the same people that are going to complain when gasoline's 5, 6, 7 a gallon. And you could say as this
(18:50) virtuous person, well that doesn't matter because freedom and democracy is what matters. Okay, well there's a cost for that. This is the cost. Are you willing to pay? Most people aren't. Ask working poor people, lower middle class people, people that are struggling, people that are crying on the internet that they can't afford to live. Do they feel better consoled
(19:16) because we've removed the nuclear threat from Iran that nobody even thought about or cared about at the beginning of this year? Or the fact that Ukraine, the Donbas, which there isn't one person in a thousand, if I showed him a map, could point out where Donetsk and Luhansk are on a map, much less Ukraine. So we continue. So now we have the
(19:41) Houthis hit the Jazan refinery in Saudi and it just keeps dropping and so again refined product demand is not decreasing. It's actually increasing. We know that from air traffic. We know that just from goods having to be shipped. And so again, as I've stated many times in the past, the whole world runs on diesel as far as the economy
(20:08) goes. And you've taken all this refining capacity offline, you don't need to take that much off. You can see you only need to take off four or 5% because everything's, as you should know by now, all these commodities and all these things are priced at the margin. Okay? And so it doesn't take much to get prices to rise. And so
(20:34) again, these things need to be resolved, these conflicts, so that we can get back to the normal range. Otherwise, we're going to have prices that continue to climb. I like what Jeff Currie said, why he's bullish on commodities. Scarcity plus debasement equals higher prices. And so we've talked about the debasement, we've talked about the scarcity. He
(20:59) put a nice label on it, a nice moniker, a nice marketing title on it. But this is what our whole basis of Actionable Intelligence has been for the last couple few years. And this war, these wars which are of choice, not necessity. US homeland was never under threat. These were wars of choice. And now it's spiraling out of control. And
(21:25) these doofuses have no idea how to get out of it because Trump, he's psychologically damaged. He's a narcissist. You remember, Jeb Bush was a loser. And I'm not disagreeing with him. All these people he criticized as losers are losers. I agree with him on that. But he can't just back out of all this now so that he can get prices down, which is what he should do, by the way. Okay. And
(21:52) after a month of the news cycle, nobody would even think about it anymore because that's just how boobus Americanus is. But he's not going to do that because he doesn't want to be labeled that which he labels all these other people, a loser. You're the guy that lost the war to Iran. You're the guy that lost the war to the Yemenis. You're the guy that lost the war to Russia. When all he had to do when he came
(22:17) into power was cut the Ukrainians off day one. Biden's war. We're done. We're out. Sorry. Not sorry. Didn't have to start this war with Iran. Chose to do it anyways. We can argue about why he did it. Doesn't matter at this point. They did it. Now they're in a jackpot and they can't get out with midterms 60 days away. So the thing is, let's just pretend none of this is happening. We're not going to fire missiles. We're not going to respond to
(22:44) our so-called ally. I think the message has finally gotten through. Or maybe it hasn't cuz over the last 50 or 60 years these countries keep falling for the same thing. The United States is your buddy until it's not your buddy anymore and then it just leaves you hanging. Saudis, like I said before earlier in the presentation, it's not a 0% chance that the kingdom falls.
(23:09) It's very complex politics there. Okay? And they have approached the World Bank for a loan. They have no revenue coming in. And it's interesting that they're complaining now and that they're all up in arms, the Saudi leadership, MBS. Remember the city in the desert? Remember all the sports franchises they were going to bring. There was going to be entertainment and sports venues and a half a trillion dollar city in the desert. That's all shelved. Now we're talking about survival. And the US has
(23:39) said, "Nope, we're not going to do anything." They're not going to initiate major military operations before the midterms in my view. Because that will just exacerbate the price rises. More bombings that aren't going to do anything. They've been bombing the Houthis for years. So have the Saudis. That doesn't work. You need ground troops. And there's no appetite. Can you imagine him getting on TV and say, "We're going to take these islands.
(24:10) We're going to open up the Bab el-Mandeb. We're going to put troops." I mean, that's the only way you can do it. It's the same problem they had with the Strait of Hormuz. You can do it, but what's the cost? And they're not willing to absorb the cost. So therefore, they shouldn't have started this war because in war, things have a tendency not to go the way you want them, and they spiral out of your control.
(24:38) So, this is the problem and like I said, this is self-inflicted. So, of course, with the higher energy prices, because energy goes into everything, as we've been saying for 10 years that we've been doing these videos, as energy prices go up, inflation goes up. And so, that is reflected in people wanting a higher rate of return on their bonds to compensate them for the loss of
(25:03) purchasing power because of inflation. And you see across the world, 10-year government bond yields have basically been going up since 2020, whether it's the UK, US, Japan, or Germany. This is just a small sampling. You see the trend. This is not good. At some point in each of these countries, you get to a high enough bond yield,
(25:29) high enough interest rate, it starts breaking the economy because most of the commerce and loans and credit in various countries is driven or is based off the 10-year Treasury yield. Okay? And so if interest rates go up on the 10-year, well then housing loans, the interest rate goes up. It changes
(25:56) the calculus of whether you can afford to buy a home. And that's why we're in a big housing slump in the US. It has an effect on credit availability for buying autos and large capital items. Okay? It leads to economic slowdown. It's deflationary. Okay? And so what's most disturbing is all of these countries are massively in debt. And so the cost to service the existing debt
(26:25) plus the debt we're piling on top of it goes up. This is why interest expense in the United States on the debt is higher than the defense budget currently and going parabolic. This is why Bessent aka the house. I love it whenever I hear this, this should be a tell. Let me just do a side note here. Kind of a comedic interlude if you will. I love it when
(26:53) one of these stupid sociopathic government bed bugs is given some kind of moniker, some kind of nickname by the media, by the zeitgeist, right? Remember Greenspan, Federal Reserve Chairman Greenspan? He was the maestro. Remember Dr. Fauci? He was the science. And now we have Scott Bessent. He's the house, like in a casino. He never loses.
(27:20) Well, if you look at the guy's history, he isn't really that great of a trader. Okay? And so when we start making these little nicknames and kind of deifying these people as like they're so smart and so capable, it's usually the top is in for that person as far as I'm concerned because every time they do this, the person is exposed as the buffoon that they are.
(27:45) And it's no different than, all Bessent's going to do is walk away from this when it blows up. Throw his hands up and say, "I'm done." And then they'll put some other bed bug in there that crawled out from under a rock. There's never a shortage of people that will get in there and want to get their hands on the wheels and the levers and try to fix things. Of course, nobody advocates for doing the moral and correct thing, which is cut spending, be honest with people. But
(28:13) see, that's not politically palatable because boobus Americanus doesn't want honesty. Doesn't want the truth. Can't handle the truth. So again, people are getting wise to the scam, right? Norway sovereign wealth fund moves away from bonds. Here is the Norges Bank, this is Norway's central
(28:39) bank recommendation to Norway's wealth fund to reduce share of government bonds. Quote, a lower share of government bonds. Norges Bank recommends that the government sub index of the bond index be reduced from 70 to 50%. The analysis above shows that a reduction in the share of government bonds does not necessarily materially weaken the ability to reduce fluctuations. A share of government bonds that is
(29:05) higher than the liquidity does however represent an implicit cost in the form of somewhat lower expected return. Yeah, you've had negative returns in US treasuries for like the last 5 years. As rates go up, the price of bonds go down. Now, you can hold the bonds to maturity and you'll be paid back the face value, but you've lost purchasing power. They're not going to come out and say it like that, but that's what they're saying. And of course, this isn't going
(29:30) to independently by itself crash the bond market, but it's the direction, it's the change of tone towards government bonds that we're seeing build across the world and why inevitably you end up in yield curve control and because of the fiscal dominance that we're in now, you're going to end up in government policy, rules, and regulations making people buy these bonds inevitably. There's nothing
(29:57) stopping it. Well, Norway is kind of an interesting country because it's super wealthy because of its offshore oil and gas assets that's managed quite well to create this huge trillion dollar sovereign wealth fund and it has a small population. Okay. So, it can do these things. The United States, Japan, the UK, Germany, France, all these places are not in that same situation. Okay? They don't have, and so they're issuing
(30:26) debt and these other countries are saying, "Wait a minute. We don't need to hold as much of this debt because it's obvious these people are being out of control. They're not being responsible and they're going to issue more debt and rates are going up." The idea that people had the 60/40 portfolio, you would have 40% of your funds in bonds to stabilize, as if stocks went down, they would
(30:52) give you a return. Well, that's kind of out the window now because these countries are reaching the end of their capabilities vis-a-vis being able to service their debt. We're going to be quite possibly entering the end of this 100-year credit cycle and having to have a reset. And so, people are figuring that out. People aren't stupid. A lot of people are stupid, the average person. And I don't mean stupid as a pejorative. Again, let me correct that. I'm not calling boobus Americanus stupid and
(31:23) sneering at them. What I mean by stupid is how I define the word, the inability to connect cause and effect. The average person, if you ask them, I mean you've seen these videos. It's pathetic. They can't even name who the people are that are in the government much less if you went to someone and asked them what is the percent of GDP of our deficits every year. Nobody knows that, seven going on 7%. Okay. What was
(31:53) it during World War II? About 7%. When we were fighting World War II, we were running these types of deficits as a percentage of GDP. And then we saw, as I posted in this month's Actionable Intelligence Alert, a paper from the St. Louis Fed, which is available for free. You go to the commentary part of that newsletter, a September issue, and there's a link to
(32:18) the Federal Reserve Bank of St. Louis writing a paper about how they did that after World War II, how they got the debt as a percentage of GDP to go down over time through yield curve control. So, that's where this is heading. And people aren't stupid, they can see it coming. That's why they're reducing their allotment to bonds. Of course, US pension funds haven't got
(32:43) the memo. A lot of this now goes back to what Russell Napier has said, and I highlighted it again in that article last month. 25% of the US pension funds are in bonds. Okay? And that's going to be a problem. But as I said, and as Russell Napier has highlighted, eventually they're just going to force these pension funds. They're not going to be able to sell their bonds off. They're going to force
(33:12) them to hold a certain percentage. Same thing with insurance companies. I suspect if it gets bad enough, they'll even say, "You people that are administrating like Fidelity and Schwab and all these companies that are administrating 401k plans, you must tell your people," they'll pass it via legislation because Congress makes the rules, "that they must hold a certain amount of their assets in government bonds." They're not just going to come out on TV and say, "You're going to finance our deficits for us. We're going to confiscate your wealth via inflation."
(33:41) They're not going to say it that explicitly. It's going to be done under, I'm sure they'll wrap a flag around it and tell everybody that you're a bad person if you don't support these policies, especially where I see the demography of the country going and where I see the politics of this country going. You think that deficits are bad now? Wait for Medicare for all and all
(34:07) the social spending and reparations and I don't even want to go into that right now. I'm sure we'll be talking more about that once we get a Democratic president and a Democratic House and Senate. We'll have more to say about that, but that's in our future. That's going to be a neverending source of commentary. But as of right now, this is where we're at. And so they're mandated by law. They can't just run this thing like a private equity firm or some kind of hot shot hedge fund. I'm selling all my bonds.
(34:38) That's not considered prudent. Now, I consider it prudent. They should replace at least half those bonds with gold, but you can't do that. I've known people that have run pension funds or been involved in running them and they have brought that up in the past during previous inflationary periods or periods where gold outperformed and you won't get a hearing. People just aren't going to do it. Again, these are run by bureaucrats and
(35:09) they're not going to do the safe thing, they do what the advisers tell you to do. This is how you keep your job and keep your pension. Okay? You don't go off the reservation and run around with your hair on fire saying the end of the world. This is people's retirement money. But if you do what the consensus tells you to do, you can always fall back on that and say, "Well, wasn't my fault. This is what the advisers told us to do." So of course higher diesel prices,
(35:41) because again Currie said this, I want to highlight what he said, is diesel plus dirt equals mining and agriculture. Okay. Kroger reminds high diesel prices are going to flow through to grocers' inflation in balance of 2026. On their Q2 call Q&A they were asked, obviously with diesel prices going up a lot and things, what's the inflation outlook for you guys and your assumption for the industry for the back half of the year, so the CEO said
(36:12) yeah thanks for your question and it's something that weighs on my mind and as I see what's happening particularly with gas prices and diesel prices, historically when you get an environment like this you see it start to flow through, okay, so that was the end of the quote. Says, "Always remind diesel flows through to impact the price of almost every product, not just fruits and vegetables." And the reason why is because everything runs on trucks.
(36:39) Everything runs on trucks. Your grocery store is out of food in 3 days if the trucks don't come. Now, I'm not suggesting that's going to happen, but the price to get those products to this Kroger or to the H-E-B or to the Cub or whatever, that cost goes up. Somebody has to pay that cost. Those costs are going to be recovered by the grocer via higher prices to the consumer. Get it? This is why you don't go off half-cocked
(37:08) and cause unnecessary wars around the world when you don't really control where energy prices are going. And so this is what's happening. PepsiCo goes on here to say, this quote I guess was part of this discussion, PepsiCo didn't specifically say diesel but highlighted higher input cost inflation in the second half of 2026. So
(37:38) that's going to be across the board. We already know that the full impact of the agricultural prices going up is just now happening. We're seeing prices go up all across the board. Again, I don't anticipate famine in the US or in the wealthy countries. They just outbid the developing countries as the Europeans did during the gas crisis when
(38:04) the Ukrainian Russian war started and Russia cut the gas off or the pipeline was blown up, Nord Stream. The Europeans spent a half a trillion euros just outbidding everybody else. Again, LNG, wheat, diesel, these things are fungible and there is a certain demand for these things. And if the supply shrinks, the demand doesn't go
(38:30) down, the price goes up to ration. And who ends up getting and who ends up not getting, the people that can pay the most, which is the wealthy countries. And so again, the developing countries suffer. So, here's European natural gas prices on the march. Again, there's been some articles written and some concern recently that they're not filling their
(39:01) storage sufficiently for the upcoming winter and that we could have shortages again. I mean, again, these are all self-inflicted gunshot wounds. You still have one line of the Nord Stream pipeline that is still available to restart. They're not going to do it. Now, I would say that this kind of segues into the AfD in Germany winning, well, at least getting, they didn't get a majority. They got like 44% of the vote in the Saxony election. Now, Saxony is not a big state in Germany.
(39:31) It's in East Germany where the AfD usually does better. But that is one of the things that AfD has as a platform, getting back to a rational energy situation and making peace with Russia and getting things back to normal. Okay. And of course the European globalists are against this for whatever reason, I don't know. Okay. I mean it was interesting, Putin was in,
(39:58) where was he, Mumbai or wherever they had their SCO conference, recent conference, and he was asked this question, he's like why do the Europeans think we want to attack them? We don't need anything. We have more natural resources in Russia than the entire rest of the world, okay. We have tremendous amounts of land that we can't even use. Why do we want Western Europe? For what reason? Okay, this is all a
(40:24) manifestation of people in the EU hierarchy who try to get free money, okay, to keep the project moving forward. What actually unifies these people? Nothing. And so they need money, they need a cause, they need a boogeyman to point at and this is why you have this situation with Russia. Okay, it's been going on well before this incident in Ukraine. Okay, this is the whole Mackinder doctrine. This is the
(40:54) whole going back to Kissinger and all of these people, okay? Got to have a boogeyman. I've explained this before. And so again, if you restrict energy, which we don't have all this LNG coming out of the Persian Gulf anymore because of this stupid war, again, you're paying 10 times, 8 to 10 times, 12 times more than
(41:20) you were paying before when you were getting pipeline gas from Russia. And you call the United States allies, they blew that pipeline up, probably them and MI6. And Putin even mentioned it at this, I think it was in Aana or wherever they were, Mumbai, you were getting resources from us very cheaply and now you're paying more from your so-called allies. Okay. Well,
(41:48) guess that's your choice. So I don't see things reversing until you have a massive political change in Europe, which, yes, I'm not as confident as some people that were rejoicing. Yes, it's interesting that AfD had this win, the CDU's in disarray. It was eventually because a lot of it's around immigration and this cost of living but the problem is
(42:15) they're still going to try to maintain the firewall which is where the other parties will not go into coalition with AfD, so we'll see if the smaller party, which is the BSW party, Sahra Wagenknecht's party, I think they might go into coalition with them because they do share some ideas but that's a very left-wing party by the way, if that can get a coalition. But we saw this before. People get over excited. Remember when Giorgia Meloni got elected in Italy. She was going to stop
(42:46) the immigration from North Africa into Italy and all this stuff. She got absorbed back into the globalist thing, she's a non-event. And so do you really want to put your, and I'm just asking the question, is this woman Alice Weidel, a lesbian, married, her partner's a Sri Lankan? She lives in Switzerland and she's a former Goldman Sachs employee. Is this the
(43:13) person that's really going to lead the change in Germany? I don't know. I probably wouldn't bet a lot. I'd take a punt on it if you give me the right odds, but probably not. Is this a relief valve for people, you always have to ask yourself, is this just controlled opposition? Again, this is not the kind of person I want to put my hopes into that's going to change things. Again, radical change takes really radical
(43:38) things to happen. Okay? And we're moving in that direction, but we're not there yet. Okay? It's the same thing with Marine Le Pen. She's leading in the polls in France, but remember in 2017, she had to discard her idea of leaving the EU. And we're going to change it from the inside. You see how things get co-opted. I mean, the inertia of these globalists and the control that they have is very, very large. Don't underestimate it. But if people are
(44:08) sitting there shivering, okay, because they're out of gas and their standard of living continues to go down, yes, the cracks are getting thicker and undermining the globalist agenda. But again, they have a lot of inertia. So Tom McClellan came out with this. He found a relationship between the gold price and the oil price 20 months in
(44:34) advance. And I had heard him say this before. I'll put a link to the article in the show notes. Basically what he was saying is that when the gold price goes up quite a bit, typically, or what has happened in the past, 20 months later the oil price usually goes up. Doesn't explain why but he's found this pattern several times. Now, it didn't predict this crisis with Iran. So, this is kind of going to
(45:01) exacerbate what was already probably going to be a decent move, but I think that basically what he's saying is oil prices are going to be moving extremely higher regardless of the Iran situation into like September 2027. So, I'll put a link to the article. You can check it out. It's kind of an interesting correlation that he found. Says, "I covered here in June 2026 how
(45:28) the upturn in oil prices was on time, but the magnitude was overly amplified by the war with Iran. Now oil prices are starting upward again after a pullback, and this is going to be a much longer uptrend. That is the message of gold's 20-month leading indication shown in this week's chart. From this equivalent point in gold prices 19.8 months ago, gold went on to nearly double by the time it hit its January 29 all-time
(45:54) high. This does not mean that oil prices have to double from here. It does not work that way. Gold tells us about the direction, but the magnitudes of the movements do not have to match one for one. And as discussed above, the magnitudes can get warped by events gold did not know about months before," talking about the Iran war. That's just going to exacerbate the move. So this indicator can show
(46:23) you the direction but not the magnitude. So I just found it interesting. It seems to be working out. It was working out even before. I'll put this up on the Facebook. And again you can go to the article. It will be a link in the show notes. You can read the entire article, explains what he's seen in the past. So yeah, we're going to be looking forward to higher oil prices. That's kind of where I'm putting a lot of my money now and have been.
(46:51) I just think the underinvestment and the continued climb in demand, now with this war exacerbating things, we just may accelerate our timeline as far as how we're going to make a bundle in oil again. We'll have to sell at some point because all of these big moves that are caused by these political situations and wars, when they peak they go back down. You need to
(47:16) understand that we're not going to go up forever and stay at some sustained higher plateau. That simply isn't going to happen. Economics does work. Drilling will increase. We all know this. So, don't get caught out. If you make a bundle here, don't be afraid to take profits because at some point if the diesel and gasoline prices and oil prices continue to rise, at some point it will cause a recession. This
(47:44) is what happened in 2008. This is one of the main catalysts, not necessarily just the fallout from the housing situation and the debt situation around that and the housing bubble. But the thing that popped it was the higher energy prices. Remember oil got to $148 a barrel and that kind of was the catalyst to get things moving downward. So again, just as the CEO from
(48:12) Kroger said, people have a certain amount of income and if prices for food and energy are going up, then they can't buy other consumer goods. This is not hard to figure out. And if higher inflation, cost of living increases are causing rates to go up, well then that's going to keep people from buying houses. Again, if you have a three or three and a half% mortgage on your house now, and you thought about upgrading to a new house, why would you sell your house with a 3.5% mortgage and buy a new house that's
(48:42) overvalued and with a seven or seven and a half or 8% mortgage? That's not a good economic decision and it won't happen. So again, I think I should probably have had this up closer to the top, but this is China's share of US Treasury outstanding, official People's Bank of China holdings. You can see it's been in decline. It continues to go into decline. Again, what do you expect your
(49:09) declared rival or enemy to do? Buy your bonds? They're not going to do it. They're buying gold and they're buying other hard assets, building up their strategic petroleum reserve, things like that. Chile copper sector faces power crisis. I'll put a link to this article. I found it interesting. As the ore grades deteriorate over time, it takes more and more energy to process the ore to get even less and less copper out. So I found it very interesting. It says Chile's copper mines are using
(49:39) substantially more electricity for each ton of metal they produce as declining ore grades increase the physical demands of mining, a trend that could intensify pressure on the country's power system as the industry electrifies. There is a strong long-term relationship between falling grades and rising electricity intensity. But the link doesn't establish causation. Across the 20 annual observations, copper grade and electricity intensity have a Pearson
(50:06) correlation of minus .91. While a simple linear regression in levels produces .82. So it's heavily correlated. Let's say that it makes sense, right? You have to process more ore, more dirt basically to get the ore out of it because your amount of copper in that ore, in that dirt, goes down. And so you got to run the equipment longer and process more material. Obviously that
(50:34) takes more energy. Again, dirt plus diesel equals agriculture and mining. And of course, they're trying to electrify everything. So electricity intensity goes up. And of course, these things don't get resolved. People don't think about it. Big brain, well ore grades are decreasing. That's going to take more energy. Again, when the problem smacks you in the face is when
(51:03) people deal with it. Then you're dealing with, well, how long does it take to build additional electricity? You see how this works? And this is why you have these big lags in these things. So, this is from Tavi Costa. This is global mineral drilling is still depressed even with high prices. This is kind of what he suggests and I kind of agree. We're still very early in this mining cycle.
(51:29) I think we're still in the I don't believe these prices stage. As time goes by and prices continue to go up, like copper has been making recent new highs for example. Along with zinc, I mean nobody's talking about zinc. It's making new highs and you're going to see people are going to be having to, these are extractive industries. So at some point they have to continue to reinvest or at some point you go out of
(51:54) business. You have to find new mines, new reserves, new resources. And so you do that through drilling. And so global drilling activity has been in decline. And I think this is an opportunity. One of the portfolio companies is a company that does this reals mineral resources out for companies. They have seen an upturn in their business. And we
(52:20) haven't had a big move in the stock but it is positive for us and I think that's going to continue and the management there is actually even forecasting that too. They're seeing increased activity which you would expect to see as cash flows from the higher prices start trickling through. So I wanted to put this up here. I just talked about the fact that the situation in Europe with the energy prices and energy shortages,
(52:51) how high energy prices and poor decisions that the people in the EU are making, policy makers there, are affecting their industry, industry is becoming more and more uncompetitive, shutting down, job losses, lower standard of living, yada yada yada. You get it? And so what do the Europeans celebrate? Well, put the title here of this slide, EU short of energy, waste resources on carbon capture plan. And
(53:19) what I liked about it in the article, the people that got this thing going said, "This is the most European project of all time." And I agree 100%. Indeed, it is. Waste of time, waste of money. This thing produces no revenue. Okay? It cost a billion dollars to build this thing. It costs a hundred million a year to operate it. It produces no revenue, no profits.
(53:45) And so you're pulling carbon dioxide out of the atmosphere, wasting energy. This needs energy. You're capturing it and then you're pumping it to Norway so that it can be buried in the seabed. And these people think they're doing something. In the meantime, this shows you the mentality. Shows you the rot. It shows you the just
(54:10) corrupt nature of these people's souls. And I'm not talking about the average European person. I'm talking about the leadership there. The so-called leadership. This is what they think is the biggest most important project of Europe of all time. In the meantime, India and China are burning record amounts of coal. You can't make it up. And you tell me Alice Weidel is going to be the solution and Marine Le Pen. No, no, no, no. What happened in
(54:36) Sri Lanka a couple years ago is a solution. The people get so mad they storm the parliaments, burn them down and murder politicians. That is real change. Not forecasting it. Let me qualify this. Not forecasting it. I'm not hoping it happens. But that is where this is heading eventually because what else, this is stupid. You have huge
(55:04) amounts of offshore oil and gas around the UK for example. Okay. And you have this Ed Miliband character. They've done everything they can to not develop these resources because climate change. I mean they didn't get the memo, 2023 called, climate change zeitgeist is over. Yet they're still again fighting the last war. It's again the situation with these
(55:33) politicians, like Trump for example. Yeah. I know that high gas and diesel prices are not good. And many of you don't like that and you're upset about it, but Iran didn't get a nuclear weapon. They were never developing a nuclear weapon. Okay? It's the same thing with Ed Miliband and these other people in the EU. Okay. Fighting climate change. Okay. Wasting
(55:58) money on this project when they have insufficient oil and gas and energy for their population and all the industry shutting down and the people are going to get poorer and poorer and poorer and at some point you don't think that they're going to get angry? I mean it is about to explode just over the immigration issue. People have had enough and politicians are not there,
(56:23) still people are still voting and hoping that they can vote their way out of, but John F. Kennedy said, "If you don't allow people to vote and change things through voting, they're going to change it via violence." We've seen that around the world. Now, I think that we're probably a long way from that happening, if it ever happens. But you can see it simmering. You can see where this is going. And this, of course, is the most European project of all time. It's really sad. It is.
(56:54) All right, guys. That's it for this week. A lot was discussed. We have a lot of things going on, a lot of things in the world, a lot of things that we didn't see coming. We just knew that when you make bad political choices and decisions that you open a Pandora's box and you can't control the outcome sometimes and we may be in one of those situations. So, of course, our goal is not to, no one's going to listen to us. We don't make policy. We just try to look at it for the way it is
(57:24) and allocate capital sufficiently so that we can take care of our situation and come out the other side. That's it for this week. We'll talk to you next week. Thank you.