Words Matters

The week ended on July 17, 2026, interesting news items to look at for the past fortnight are:

Words Matters: There is a saying by Confucius “一言兴邦,一言喪邦” which can be translated as, “A single remark can revitalize a state; a single remark can ruin a state.” (Fig. 1).

"A wise leader speaks with humility and welcomes honest counsel—then the nation prospers. An arrogant leader who shuts out dissent when wrong leads the nation toward ruin."

Trump and his team, of course, do not necessarily know the words of Confucius, but as a collective group that tried to appeal to US evangelical Christians, they are certainly far from the wisdom of the Bible. (Fig. 2).

For readers of this Blog, I have been quite upfront about my personal worldview and convictions. And the foregoing words of wisdom will be a well-oiled lamp that guides our path in the coming period of darkness and instability. To know what lies ahead, we need to examine what was said.

1. Strait of Hormuz Conflict - On April 20^th 2026 Trump stated: “We're going to hit them extremely hard over the next two to three weeks. We're going to bring them back to the Stone Age, where they belong." (Fig. 3). 

These words totally decimated whatever residual pro-American interests remained in Iran and hardened the resolve of Iranians to prevail over all and every Zionists’ threat.

On July 13, Trump posted on his Truth Social about a 20% American protection extortion levy on Hormuz traffic. (Fig. 4).

This was retracted the following day. How do you think the international community would react? (Fig. 5).

World opinion has already been formed by two memes, with the center of power shifted to BRICS. (Fig. 6).

I guess you all know the answer to yet another Trump threat to destroy all Iranian civilian infrastructure (Fig. 7).

The reality is that Iran’s tit for tat would be to enforce a blockade against the Red Sea by the Houthis at Bab el-Mandab, and the world will make Trump answerable for an all-critical 19% of ME oil lifeline that did not go through Hormuz. (Fig. 8).

I am therefore not concerned and will be relaxing this weekend with Mexican delights of TACO and NACHO.

2. Artificial Intelligence - I guess I am out by two weeks regarding the stock performance of Space X IPO. I gave SPCX two weeks, and it would fall below the IPO price. SPCX did that with 23 trading days. (Fig. 9).

As a one year old grandpa, I am fascinated by infant brain development andderive tremdous pleasure watching my granddaughter grow.  Inadvertently, I also became extremely skeptical of the Wall Street and Silicon Valley hype of LLMs. Input through GPU, LLMs are essentially high-speed probability pattern recognition guesswork rather than intelligence in the true human linguistic sense. The American narrative is that it got some exclusive claims on a portion of high-density chip technology, printable money to buy HBM (Ultra-High Bandwidth Memory), and therefore should dominate the AI ecosystem to the exclusion of everyone.  To my utter amazement, there is also this cult-like belief among the Mag 7 that an AI singularity will occur imminently. When that occurs, the first innovator will go through a cycles of runaway recursive self-improvement upgrades, achieve omnipotence, and then can dictate all humanity. With this obsession, immensely profitable tech titans are all spending money without caution on GPU, HBM and related R&D infrastructure to be the first achievers. I will give more details on their finances later, but first let us deal with a few known facts about human brain development, as after all, AI is fashioned after a human neural network.

(i) The Neural Network - Artificial Neural Networks (ANNs) were inspired by human brains. While human brains are complex, energy-efficient biological organs capable of continuous learning, ANNs are rigid mathematical models designed to process vast amounts of digital data to perform highly specific, singular tasks. (Fig. 10).

GPT-4 was trained simultaneously on approximately 25,000 NVIDIA A100 GPUs, while frontier models currently employ clusters of 100k+ NVIDIA Hopper or Blackwell GPUs. By comparison, the human brain has an estimated 86 billion biological neurons connected by trillions of synapses that communicate using both electrical and chemical signals. ANNs consist of a much smaller number of artificial neurons—mathematical nodes—arranged in strict layers (input, hidden, and output). The interconnections between GPU and HBM in AI language are called “parameters” and apparently the larger the number of parameters, the more powerful the “brain power” of AI. Now let’s take a look at the top of the-line LLms and compare them to a newborn baby. (Fig. 11).

A newborn baby has 5X the current top AI. Yet, despite the large number of synapses in the baby’s brain, the baby cannot tell the difference between a banana and a banana-shaped animal wastee unless the baby is trained. Bear in mind, the lessons a baby will learn is much more than visuals through a GPU but also through smell, touch, and other senses. It also depends on the human trainer, and so does AI.

(ii) Human Brain Development - From the 50 trillion synapses, a baby neural connections will grow to 1000 trillion by 3 years old before natural pruning sets in to stabilize the number of neural connections to 100 trillion. (Fig. 12).  

Synaptic pruning is the brain's way of refining itself to become more efficient. By eliminating excess or unused connections while strengthening frequently used ones, it optimizes cognitive function, reduces energy consumption, and improves the brain's ability to adapt and learn. AI although it mimics the human neural network, has no knowledge, provisions, or plans for pruning, and my expectation is that cyber weeds will grow and the drainage will clutter before humility sets in for the elites to appreciate they cannot build God in a box.

(iii) The Hard Numbers: Since 2024, the term Mag 7 has been sarcastically changed to Lag 7 because of their under performance relative to the general stock market. I have compiled a combined free cashflow chart of the hyperscalers (Microsoft, Google, Amazon, Meta and Oracle) plus Open AI, Anthropic and Space X. (AI Generated - Fig. 13).

If we just concentrate on the thick black line, the combined free cash flow (Operating cash flow minus Capex) has decidedly turned negative in 2026 and will further deteriorate in 2027. There are two separate danger signals in the horizon: -

(a) US AI service providers have found that their revenue growth is much slower than their Capex. Adoption numbers are impressive when AI is free or at a highly subsidized rate. This is a different story once the AI service providers begin to charge on a token usage basis. Enterprise users like Coinbase, DoorDash, Airbnb and Seimens immediately switched to China-based AI service providers when Chinese AI are open-sourced and charges were at a tiny fraction of what US providers charged. (Fig. 14 shows a global ranking by their most recent token usage).

(Fig. 15 shows this ranking by the cost per million token usage). A survey concluded in July 2026 showed that 80% of US AI Startups switched to Chinese Models. (Fig. 15).

(b) The second risks factor on US AI sector is their circular financing arrangement. OpenAI’s revenue grew from $2 billion in 2023 to $20 billion in 2025. Anthropic’s annualized revenue run rate surged from $87 million in January 2024 to $30 billion by April 2026, a trajectory that Salesforce took 20 years to achieve. NVIDIA’s revenue grew eightfold from $27 billion to over $216 billion between 2023 and 2026, achieving that growth in just one-third of the time it took Apple to do so during its heyday between 2007 and 2015. By nearly every reported metric, the AI market is delivering growth at a scale and speed that defies historical comparison. Yet a narrative has emerged about how much of that growth reflects genuine market demand and how much reflects the circular financing structures that have become a defining feature of AI infrastructure investment. Circular financing in AI describes investment structures where the same capital flows simultaneously as vendor payment and equity stake. A company funds its own customer’s revenue while also supplying that customer’s core infrastructure. The result is reported revenue growth that is real but not cleanly separable from investment activity. The answer matters enormously, not just for investors in AI infrastructure companies, but for every enterprise software vendor and technology buyer trying to make sense of what’s actually happening in the market. The telltale sign shows up when profit growth of these AI-related companies is derived not from operating income but other income, meaning valuation gains from their investment activities. (Fig. 16).

Their books are not clean, and Open AI has already delayed its IPO and Anthropic is planned to cash out in Oct 2026. The AI bubble when it burst will be worse than the subprime fiasco in 2008 because the excess valuation in this caper is a whopping $10 trillion. AI related stocks currently account for nearly 50% of S&P. The contagion will be ugly.(Fig. 17)

Genesis 11:1  Now the whole earth had one language and one speech.2  And it came to pass, as they journeyed from the east, that they found a plain in the land of Shinar, and they dwelt there. 3  Then they said to one another, "Come, let us make bricks and bake them thoroughly." They had brick for stone, and they had asphalt for mortar. 4  And they said, "Come, let us build ourselves a city, and a tower whose top is in the heavens; let us make a name for ourselves, lest we be scattered abroad over the face of the whole earth." 5  But the LORD came down to see the city and the tower which the sons of men had built. 6  And the LORD said, "Indeed the people are one and they all have one language, and this is what they begin to do; now nothing that they propose to do will be withheld from them. 7  Come, let Us go down and there confuse their language, that they may not understand one another's speech."8  So the LORD scattered them abroad from there over the face of all the earth, and they ceased building the city. 9  Therefore its name is called Babel, because there the LORD confused the language of all the earth; and from there the LORD scattered them abroad over the face of all the earth. 

Peace, peace!' When there is No Peace

The week ended on July 3, 2026, interesting news items to look at for the past fortnight are:

1. Peace, peace!' When there is No Peace: There is a Chinese proverb that says “聽其言,觀其行”which means caution dictates that one should “listen to his utterance but observe his actions.” To this I further remind myself of what Jesus says in Matthew 12:34 “For out of the abundance of the heart the mouth speaks.” It was less than two weeks before the US spilled her beans in public about her true intentions for signing an “MOU” with Iran. (Fig. 1).

A strategic pause, an opportunity to replenish her oil reserves, stabilize the markets, and time for military regrouping and preparation.  

(i) US Strategic Oil Reserves at Historic Low - The US Strategic Petroleum Reserve (SPR) has fallen to roughly 325 million barrels, its lowest level since May 1983. (Fig. 2).

So shortly after signing the MOU, US behaved as if Iran had given up control of traffic in the Strait of Hormuz and moved oil tankers without further reference. Iran, however, is not deceived after having been bitten twice before in negotiations with US and Israel under their cloak and daggers. .(Fig. 3).

Skirmishes flared just 10 days after the MOU.

(ii)  Post-MOU skirmishes - There were 4 separate military confrontations after the MOU, namely

(a) Strait of Hormuz Retaliatory Strikes: The US military launched a series of airstrikes on Iranian missile storage, coastal radar, and minelayer capabilities in the Strait of Hormuz. The US Central Command (CENTCOM) described these actions as direct responses to Iranian drone attacks on Panama-flagged and other commercial tankers traversing the strait.

(b) Persian Gulf Skirmishes: Iranian military units retaliated to US strikes by deploying drones and missiles that targeted US-aligned interests in Kuwait and Bahrain.

(c) Escalations in Lebanon: The US-Iran MoU specifically declared an immediate termination of hostilities on all fronts, including Lebanon. However, both sides traded reciprocal strikes after Iran accused the US of permitting Israel to continue occupying Lebanese territory in violation of the treaty. 

(d) Continued Southern Lebanon Engagements: The Israeli military continued its military presence in southern Lebanon and launched airstrikes against Hezbollah targets.

(iii) IRGC declared the Strait of Hormuz closed again - Iran declared the Strait of Hormuz closed again on June 20, 2026. The military stated the move was in retaliation for Israeli strikes in southern Lebanon, which Tehran claimed was a violation of a recently signed ceasefire memorandum of understanding with the United States.

(iv) Trump Declared National Emergency and Food Crisis - President Donald Trump on Monday declared a national emergency aimed at protecting the U.S. food supply and temporarily suspended import duties on certain Moroccan fertilizer products. Under the presidential emergency declaration, phosphate fertilizer imported from Morocco will no longer face tariffs for up to eight months or until the emergency declaration is terminated. (Fig. 4)

The potential fertilizer/fod crisis for US is a self-inflicted wound as we can see through war, embargoes, sanctions, and through transit choke points that US  had painted itself into a corner. (Fig. 5) 

For Phosphorus - Russia, Saudi Arabia, and China combined account for 52% global share in exports. Potassium - Belarus, Russia and Canada combined account for 77%. Nitrogenous fertilizers - Russia, China, Oman, Qatar, Saudi Arabia, and Egypt a combined 46.5% global share.

By extension, through insurmountable supply-chain squeezes in rare earth and critical minerals, oil and gas, and finally fertilizers, the only way for the entire Western economy to go is down. Let us not fool ourselves. The MOU with Iran, the IPO of SPCX, the recent strength of US Treasuries and DXY and the take-down of precious metals is a kabuki theater and a short-lived respite performance of a dying empire. (Fig. 6).  

2. What’s Your Business: “The business of America is war, the business of China is business” is a signature critique coined by geopolitical trend forecaster Gerald Celente regarding the opposing global strategies of the two superpowers. (Fig. 7)

Look at the different solutions used in China and Europe to counter the current heat wave. (Fig. 8).

Look at the Chinese products flying off the shelves to Europe and draw your own conclusion as to who will have the last laugh:Western political elites who are ignoramuses except for lying and electioneering, or down to earth Chinese who provide solutions to anticipated needs. (Fig. 9)  

The advancement of AI certainly impacted our society; readers may have spotted that my writing has shortened, as I too have begun to adopt AI to provide more data in graphical form. That means the images has a much richer information content than before and may require more of your attention. Please let me know if this has become a distraction rather than an enhancement. Thanks again for investing your time in this blog.

Jeremiah 6:8  Be instructed, O Jerusalem, Lest My soul depart from you; Lest I make you desolate, A land not inhabited." 9  Thus says the LORD of hosts: "They shall thoroughly glean as a vine the remnant of Israel; As a grape-gatherer, put your hand back into the branches." 10  To whom shall I speak and give warning, That they may hear? Indeed their ear is uncircumcised, And they cannot give heed. Behold, the word of the LORD is a reproach to them; They have no delight in it.  11  Therefore I am full of the fury of the LORD. I am weary of holding it in. "I will pour it out on the children outside, And on the assembly of young men together; For even the husband shall be taken with the wife, The aged with him who is full of days. 12  And their houses shall be turned over to others, Fields and wives together; For I will stretch out My hand Against the inhabitants of the land," says the LORD. 13  "Because from the least of them even to the greatest of them, Everyone is given to covetousness; And from the prophet even to the priest, Everyone deals falsely. 14  They have also healed the hurt of My people slightly, Saying, 'Peace, peace!' When there is no peace.15  Were they ashamed when they had committed abomination? No! They were not at all ashamed; Nor did they know how to blush. Therefore they shall fall among those who fall; At the time I punish them, They shall be cast down," says the LORD.16  Thus says the LORD: "Stand in the ways and see, And ask for the old paths, where the good way is, And walk in it; Then you will find rest for your souls. But they said, 'We will not walk in it.' 17  Also, I set watchmen over you, saying, 'Listen to the sound of the trumpet!' But they said, 'We will not listen.' 18  Therefore hear, you nations, And know, O congregation, what is among them.:19  Hear, O earth! Behold, I will certainly bring calamity on this people—The fruit of their thoughts, Because they have not heeded My words Nor My law, but rejected it. 

 

Sell in May and Go Away

The week ended on June 19, 2026, interesting news items to look at for the past fortnight are:

Sell in May and Go Away: There is an age-old Wall Street adage that says, “Sell in May and Go Away” meaning that summer will follow and investors should close their books, have a bit of R&R then come back in November when action starts again. This adage certainly does not apply in 2026. (Fig. 1)

The fragile US/Iran Ceasefire MOU was finally electronically signed on Friday but not without Israeli sabotage of the deal through bombing in Lebanon. (Fig. 2).

 Washington was reluctant to officially disclose the details of the MOU but a senior U.S. Official read out loud on a conference call with reporters of what was purported to be the full text of the MOU. The official spoke on condition of anonymity under ground rules set by the White House. Details can be found in the link below: https://arabcenterdc.org/resource/memorandum-of-understanding-between-the-united-states-of-america-and-the-islamic-republic-of-iran/  .

In summary, the MOU contains:

(a) Military & Security - Full permanent ceasefire – Iran, the US, and allies halt all military operations on all fronts (including Lebanon).Respect for sovereignty – Both sides pledge non-interference in each other's internal affairs. Lifting blockade & troop withdrawal – US to lift naval blockade within 30 days; troops to withdraw from the region within 30 days after the final agreement is signed.

(b) Economy & Sanctions -  $300 billion reconstruction fund – Led by the US and allies (but the US will not contribute funds). Sanctions removal – Commitment to eventually terminate all sanctions; oil export waivers to be issued immediately after signing. Unfreezing assets – US to release roughly $24 billion in frozen Iranian assets after Iran fulfills its commitments.

(c) Nuclear & Implementation - Iran commits to “never build nuclear weapons" – Agrees to dilute existing high-enriched uranium, but key details are deferred to the 60-day talks. Status quo maintained – During negotiations, both sides keep the nuclear status quo; the US will not add new sanctions or troops. UN endorsement – Final agreement to be approved by a UN Security Council resolution.

On the surface, Iran had prevailed with its 14 points demand, the U.S. TACO and Israel put on its backfoot. The risks is whether the MOU would be implemented in full. The sudden and abrupt retreat by Trump begs the question of why. We have in the April 12 blog titled “Stone Age and Cease Fire” opined that a logical conclusion to the hostility should come in June and subsequently offered 4 areas of depletion that will lead to a US TACO. Another important milestone is that China restriction on exports of rare earths and critical minerals has begun to bite hard on the MIA in both the US and Japan. In the case of tungsten, which China controls over 80% of global supplies, not only are exports for military use restricted, but Chinese buyers have also moved to buy up scraps in US recycle yards to complete a chokehold against US weapons and munition manufacturing. (Fig. 3).

Without the ability to replenish its depleted armory, US may find it hard even to defend her own shores, much less to be a global bully with impugnity. One telltale sign of a more permanent peace in the ME is when the US aircraft carriers are pulled out; it would be difficult to send them back into the fray.  

(ii) Japan Re-militarization - China has moved against Japan in her military use of rare earths and critical minerals of Chinese origin. (Fig. 4)

Shin-Etsu Chemical has stopped accepting new orders for dysprosium-containing magnets, affecting high-end applications such as radar systems and electric vehicles. Kanto Denka & Central Glass: Have notified clients like Samsung of an indefinite suspension of production of tungsten hexafluoride (a critical chip material) starting July. Toyota & Panasonic: Rely on China for nearly 100% of the dysprosium (Dy) and terbium (Tb) used in their motors. If the supply cutoff persists, production lines could halt within weeks. A top executive at a major Japanese manufacturer has publicly warned that "factories may be forced to shut down." At the G7 meeting in France on June 16, Prime Minister Sanae Takaichi warned that China’s measures against Japan risked disrupting partner nations’ supply chains and called on G7 members and multilateral development banks to build more resilient mineral supply chains. G7 leaders agreed to coordinate stockpiling of critical minerals and reduce dependence on any single dominant supplier outside the G7. They also agreed to launch a new coordination platform with an expanded role for the International Energy Agency (IEA) to monitor markets and flag supply risks. Yes, all well and good for photo ops, but Takaichi truly left reeling.

(iii) Space X - Space X IPO was initially oversubscribed by only 2 times, but late institutional demand, on news of an end to the Iranian war, pushed demand to 3.5 times. There were every sign of Wall Street skimming the top at a very late hour of the tech bull run. Retail investors were allocated 30% (instead of the usual 5%-10%). The stock was fast-tracked into CRSP Index, MSCI-Global Standard, Basdaq-100, FTSE-Russell and S&P 500 without a waiting period, thereby ensuring that retail retirement funds heavily invest in passive investment vehicles like Index Funds and ETF were duly stuffed.  With the usual trick of over-allotment and early trading stabilization purchases, I am sure SPCX share price won’t disappoint for the first two weeks; thereafter, who knows.

(iv) Fed Chair Warsh first FOMC Meeting - Key Takeaways from the June 17, 2026 Meeting: (a) Rate Decision: The Fed maintained the status quo by holding rates steady. (b) No Dot Plot Projection: In a break from tradition, Warsh refrained from offering his own personal dot plot projections for interest-rate trajectories. (c) Hawkish Shift: Despite the pause, updated projections from other committee members indicated an increased belief that rate hikes could be on the horizon for 2026 to combat inflation, and (d) Market Reaction: The hawkish tone and emphasis on price stability caused a spike in Treasury yields, with the 2-year note experiencing its biggest jump on a Fed meeting day since March 2008.

Despite the rhetoric, after Warsh appointment, the Fed continued to expand its balance sheet and money supply. (Fig. 5).

My prognosis is US has a more pressing need to stabilize the dollar first; the bond market becomes secondary. US probably hopes that when oil prices come down as the ME ceasefire sets in, a lowering of interest rates may be opportune.

We have persistently presented our thesis that US Treasuries issuance has already passed a market saturation point and that a precipitation is a certainty. (Fig. 6).

Immediately after the FOMC meeting, gold and silver were heavily hammered in the derivatives market (Fig. 7).

This is despite foreign Central Banks contiued their buying spree to diversify away from dollar risks. (Fig. 8).

The Bullion Banks are in a panic as a fresh call by Trump to once again audit US Gold Reserves at Fort Knox. (Fig. 9).

It is understood that for every physical ounce of gold held by banks, there were customer claims of 147 ounces, and for every ounce of silver, 392 ounces of customer claims. (Fig. 10).

No doubt, there would not be many more opportunities for Bullion Banks to square off their naked short positions when some Gulf Council State Members are forced to liquidate their bullion holdings to pay for state admin expenses when their revenue are halted.

Philippians 4:4  Rejoice in the Lord always. Again I will say, rejoice! 5  Let your gentleness be known to all men. The Lord is at hand. 6  Be anxious for nothing, but in everything by prayer and supplication, with thanksgiving, let your requests be made known to God; 7  and the peace of God, which surpasses all understanding, will guard your hearts and minds through Christ Jesus. 8  Finally, brethren, whatever things are true, whatever things are noble, whatever things are just, whatever things are pure, whatever things are lovely, whatever things are of good report, if there is any virtue and if there is anything praiseworthy—meditate on these things9  The things which you learned and received and heard and saw in me, these do, and the God of peace will be with you.