Japan reportedly put in around $75 billion of its dollar reserves. The Treasury put in five to ten billion (selling euros rather than dollars), along with a handwritten note from Bessent that probably did more work than the money did.

Note: As you may remember from my previous writing, a weak yen has become a major problem for Japan, a country that imports nearly all of its energy and about 60% of its food, virtually all of it priced in dollars. Which is why it had already tried to fix the problem on its own. In April and May of this year, the Ministry of Finance went into the currency market and bought $73 billion worth of yen with its dollar reserves. The largest currency intervention in the country’s history.

I ended that piece by saying it didn’t look like a one-off to me. It looked like the opening move in a recurring operation.

What I didn’t tell you was where the money for the next round is probably going to come from. Spoiler: it isn’t euros out of Uncle Sam’s pocket. So let’s dig in.

A Pawn Shop for Governments

On Sunday 2 August, two days after the intervention, Treasury Secretary Scott Bessent took to social media and publicly asked the Federal Reserve to "upsize" something called the FIMA repo facility. Here's his post.

Now, it always strikes me as a little strange when the government brags in public about intervening in another country’s currency. (Aside from the act itself, the bragging tends to lay bare the real reason they’re doing it.)

But it was the last paragraph that nearly made me blow coffee out of my nose.

“Robust” and “durable” are not the words I’d reach for to describe an economy that has needed fifteen years of stimulus to stay upright, that still carries the heaviest debt load in the developed world, and whose currency two governments just had to go into the market and buy.

Anyway, on the same day, Japan’s Ministry of Finance put out a statement of its own. It confirmed the joint action, said Japan would not hesitate to conduct further joint intervention, and then, in the last line, said Japan “also plans to utilize” the Fed’s FIMA repo facility in the future.

Now, if you’ve never heard of the FIMA repo facility, don’t worry. Few have, and that’s rather the point.

FIMA stands for Foreign and International Monetary Authorities. In plain English, it’s a pawn shop. A foreign central bank hands the Federal Reserve some of the U.S. Treasury bonds it owns, and the Fed hands back dollars. Later the country buys the bonds back and returns the dollars, with interest.

The Fed set the thing up on 31 March 2020, in the middle of the COVID panic, as a temporary measure. But as so often happens with temporary government measures, it became a permanent one.

The facility is there, in the Fed’s own words, to support “the smooth functioning of financial markets, including the U.S. Treasury market,” by giving foreign central banks “an alternative temporary source of U.S. dollars other than sales of securities in the open market.”

Yes, you read that right. The Fed itself tells you the facility exists so that foreign governments who need dollars don’t have to sell their Treasuries to get them.

Now, for most of the facility’s life the balance has been zero, or near enough. There were a few token draws in 2020 and 2021, a billion here and there, never more. (Yes, the thing was built for the 2020 panic and then, in the way of these things, opened after it was over.) It has been drawn on hard exactly once, in March 2023, when the banking system was coming apart around Silicon Valley Bank and Credit Suisse. On that occasion it went straight to $60 billion. Which, as it happens, is the most the Fed will lend any one country at a time.

Take a look for yourself.

As I write this, the balance is back at zero.

So, the takeaway is that this is a facility built for emergencies. Which is what makes the Treasury Secretary’s request so unusual.

Why Japan Can’t Just Sell

The reason we’re talking about any of this at all is simple enough. Japan needs dollars. Because to defend the yen, Japan has to buy yen. And to buy yen, well... it needs dollars.

Now, being the largest foreign holder of American government debt, Japan has plenty of dollars. Roughly $1.14 trillion of them, in the form of U.S. Treasury bonds.

So the obvious move would be to sell some.

Which is exactly what the U.S. government cannot allow.

As I’ve written more times than I can count, the American bond market is already struggling to absorb what Washington is throwing at it. $739 billion of new borrowing this quarter alone. Japan dumping Treasuries on top of that would send yields straight up. Keep in mind, the 30-year is already at its highest level since 2007. A fire sale by the biggest foreign creditor would make it considerably worse, and the bond market the U.S. government is trying to protect is the one it would have broken.

Hence Uncle Sam’s involvement in this operation. Hence the pawn shop.

Now, I explained its basic mechanics earlier. But here’s a visual that may help you picture what it looks like with Japan actually in it, if the Fed goes along with Bessent’s request.

It’s a clever way around the problem. Japan would raise the dollars it needs against its Treasuries without selling a single one of them, and the American bond market would never see the supply.

What They're Really Asking For

OK, so what does upsizing actually mean?

Well, it means raising that $60 billion per-country cap.

If you’re wondering why $60 billion isn’t enough, the answer is exactly why I called this an opening move in a recurring operation.

Propping up a currency, let alone a major one, is an expensive business. Remember, Japan’s defense of the yen this April and May cost $73 billion. The one before that, in the spring of 2024, cost $62 billion. Had either been financed through the facility, it would have drained the entire line and still come up short.

Then there's the bizarre way this came about.

A Treasury Secretary publicly instructing the Fed to upsize a lending facility is not standard procedure, to put it mildly.

What interests me here isn’t the Fed’s so-called independence, which I have no illusions about. It’s that the procedure got skipped at all. Treasury and the Fed have a private line for exactly this kind of conversation. You don’t go around it in public unless you’re in a hurry, or unless you want the market to see you doing it. Frankly, it’s probably both. Which tells you how serious the U.S. government thinks the Japan problem is.

And one last thing. All of it is done with new money. When the Fed lends dollars against those bonds, it doesn’t take them out of a drawer. It creates them. “Prints” them, if you will.

We probably shouldn’t be surprised. Printing, after all, is what a central bank does. But it makes a mockery of all that talk about shrinking the balance sheet. As if it wasn’t already a joke.

Of course, at the end of the day this is just kicking the can down the road. None of it would fix anything for Japan. (I say would, because the Fed hasn’t said yes to Bessent’s request. Not yet, anyway.) It still cannot raise rates meaningfully, because it owes more than twice what its economy produces and the interest bill would eat the budget. And it’s not like it can stop importing energy and food either.

None of it would fix anything in the U.S. either. The U.S. government is still borrowing $739 billion a quarter. Interest on the debt is still the second-largest line in the budget.

What it does show is the lengths the U.S. government is now prepared to go to keep the yen from falling. Because the thing it’s really protecting is the American bond market. And that’s the thing to watch from here.

As I’ve said many times before, when a government is forced to choose between letting the bond market implode and printing the difference, it prints. Every single time.

Regards,

Lau Vegys

P.S. A country that imports nearly all its energy and pays for it in dollars has only so many ways out of a weak currency. One of them is to burn less imported fuel, which is why Japan and much of Asia have been quietly reversing their retreat from nuclear power. That’s part of the reason uranium is where I put SNAFU’s first recommendation, and it’s what my special report, Situation Normal: Uranium, is about. It went out to paid subscribers at the start of the month, so make sure you haven’t missed it.

Most of my week is work, and my family made peace with that a long time ago. But Sundays I try to get everyone out of the house and go and look at something. This Sunday it was Lake Bled.

It’s a small lake in the Julian Alps with an island in the middle of it and a church on the island, and it is every bit as pretty as the photographs suggest.

But that isn’t the only reason I wanted to go.

Bled was Tito’s. On the northern shore sits Vila Bled, which he had built for himself in 1947 on the site of the old royal summer house, and which stayed the most exclusive address in Yugoslavia until he died. It’s a hotel now. And above it, up a flight of steps from the lakeside path, there’s a pavilion on stone pillars called the Belvedere, built originally as a waiting room for people hoping for an audience with the king. Tito used it as his tea house. Today it’s a café, open to anyone who climbs the stairs.

So we climbed the stairs and ordered cake, and I can report that the view is worth it. You look straight down on the island and the church sitting on top of it, ninety-nine stone steps up from the water.

Not a bad spot from which to run a country.

If the name doesn’t mean much to you, Josip Broz Tito ran Yugoslavia from the end of the Second World War until his death in 1980.

Now, ruinous ideology aside, Tito was surely one of the more fascinating characters of the last century. A Croatian metalworker who fought for Austria-Hungary, took a Russian cavalryman’s lance in the back in 1915, and spent the next five years watching a revolution and a civil war from the inside. Having come home a communist, he spent two decades organizing, in and out of prison. Then the Germans invaded, he took to the mountains with the Partisans, and by 1945 Yugoslavia was one of the few countries in Europe liberated largely by its own people.

But Tito’s taste for doing things his own way was also what put him at odds with his namesake in Moscow, Joseph Stalin.

Stalin ran the Soviet Union with an iron fist and expected the new communist states of Eastern Europe to behave as satellites. The trouble, again, was that Tito hadn’t been installed by the Red Army the way the others had. He’d taken the country with his own partisan army, so he didn’t think Moscow had any standing to give him orders.

Without going too far into it, the two ended up on a collision course. It came to a head in 1948, when Stalin had Yugoslavia thrown out of the Cominform, the body coordinating Europe’s communist parties, on charges of nationalism and hostility to the Soviet Union. The expectation in Moscow was that the Yugoslav party would take the hint and remove him.

Instead, the opposite happened. Tito purged the pro-Soviet faction, and thousands of suspected Stalinists were sent to Goli Otok, a prison camp on a barren Adriatic island.

What followed was economic isolation, incidents along the border, and a long run of Soviet attempts on his life. Tito, the story has it, eventually sent Stalin a note, found in the old man’s desk after he died.

Stop sending people to kill me. We’ve already caught five of them... If you don’t stop sending killers, I’ll send one to Moscow, and I won’t have to send another.

Of course, Tito was no more immune to the pleasures of the good life than any socialist before him or since.

Walking around Bled on Sunday, I was struck by the beauty of the surroundings, the views, the scale of the villa, the grounds around it, the sense that a great deal of money and care had gone into making one man's summer agreeable.

And Bled was only one of his residences. There were also the Brijuni Islands off the Croatian coast, complete with private villas and a safari park, presidential yachts, and a fleet of luxury cars (which we’re going to see this Sunday) along with countless other comforts ensuring the great socialist leader was always exceedingly well taken care of.

Basically the same story as Che and his Rolex, or Hasan Piker, the infamous socialist streamer who wears designer clothes, carries a Gucci bag and lives in a $2.74 million house near West Hollywood. Socialism for thee, but not for me.

Anyway, Tito died in 1980, and within little more than a decade the whole Yugoslav project had come apart, violently, in a series of wars whose consequences much of the region is still living with.

Except here.

Slovenia looked at what was coming and went its own way. It declared independence in June 1991 and immediately turned westward, cozying up to the rest of Europe.

Yes, there was a war with the Yugoslav People’s Army, but it lasted just ten days and killed fewer than eighty people on all sides. That’s next to nothing compared with what tore through Croatia and Bosnia in the years that followed.

None of this is to say Slovenia is exempt from the problems facing the rest of Europe today. The demographics are cratering, work is taxed heavily, and four decades after Tito the state still owns a remarkable amount of the economy, banks and utilities included. But it’s still a relatively prosperous, high-trust and thoroughly pleasant country (which I can report firsthand after spending the past week here).

That brings me to last week’s pieces, all linked below, including the alert I sent out Friday morning after two of our companies reported results in the same week.

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 six that stood out, for different reasons. Each one links back to the piece 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 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

P.S. If you joined as a paid member last week, welcome aboard. A few links to help you find your way around:

• The first recommendation: a uranium play, with the full thesis, buy-up-to price, and tranche levels.

• The second recommendation: a silver pick, same treatment: the whole thesis, and exactly what to do about it.

• The live portfolio: the scorecard of every open position and where each one stands.

• The first Special Report: a deep dive into uranium and the opportunity behind it.

You may have already seen the headlines.

The number comes from a Treasury statement released earlier this month. Unless you trade bonds for a living, you’ve probably never read one of these, and there’s no reason you would have. It’s the financial equivalent of a utility bill.

But this one was worth reading. It tells us that between July and September alone, the government expects to borrow $739 billion.

That’s for a single quarter. Not the year, mind you.

Sure, some government debt is going to mature and some of that will be paid back. But once all the shuffling is done, Washington will be less than $300 billion short of a trillion dollars deeper in the hole, in three months.

But it gets worse.

The same release matter-of-factly adds another $628 billion for October, November and December. Put the two together and you get just under $1.4 trillion of new borrowing in the back half of 2026.

For context, the national debt stood at $39.9 trillion in the second week of August. If the government keeps borrowing at the current pace, we’ll be looking at roughly $41 trillion by New Year’s Eve.

But here’s the thing. I suspect even that’s very much on the optimistic side, and that the final number will be bigger. Let me tell you why.

A Month in the Life of Uncle Sam

Now let me go back to something I skipped over above. The $739 billion is actually $68 billion higher than what they projected in May. In other words, the government’s own forecast was off by nearly $70 billion in the space of just three months.

Aside from the fact that they seem to have a knack for getting these things consistently wrong, what changed?

Well, we’re told they’re now expecting “lower projected net cash flows.” Which is another way of saying: less money is coming in than we thought.

Hmm. Interesting. So I guess the economy isn’t doing quite as well as the narrative would have it.

Except we don’t have to guess about it. Nine days after the borrowing announcement, the Treasury published a second document that hardly anybody reads either. It’s called the Monthly Treasury Statement, and unlike the borrowing announcement, it doesn’t deal in projections. It shows you what actually happened. In this case, in the month of July.

I’ve pulled it together for you in the chart below. Money coming in on the left, money going out on the right. Have a look and two things jump out at you right away. In July, the government collected $334 billion. And it spent $766 billion. That’s a hole of $432 billion, in thirty-one days.

This isn’t just a big number. It’s the largest deficit ever recorded in the month of July.

Mind you, that $432 billion gap doesn’t get filled by magic. It gets borrowed. Which is exactly how a country ends up nearly $40 trillion in the hole, one month at a time.

Now, there are a couple of other figures on that chart I’d like to draw your attention to, because they’re rather important.

Look at the right-hand side, the spending. You’ll see net interest at $104 billion. That makes it the third-largest thing the U.S. government spent money on last month, behind only Medicare and Social Security. Bigger than what Uncle Sam spends on the military. Bigger than the health budget (which is mostly Medicaid). Bigger than income security or veterans’ benefits.

Keep in mind, this is purely the cost of servicing the debt. Not a cent of it goes toward paying down the principal. And the bill grows with the pile. Every trillion added means another payment stacked on top of the last one, and that money has to come out of somewhere.

Let me show you what that looks like from where you’re sitting.

In July, Americans paid $173 billion in individual income taxes. The government spent $104 billion of it on interest. So roughly 60 cents of every dollar you paid in income tax last month went straight back out the door to the people the U.S. government owes money to.

And it keeps getting worse. By the end of June last year, the government had spent $749 billion just on interest. This year? $827 billion. That’s $78 billion more, or better than 10%, in a single year.

Now take a look at where that puts it alongside everything else they spend money on.

As you can see, across the fiscal year so far, the interest bill isn’t third anymore. It’s second, ahead of Medicare and behind only Social Security.

Where This Leaves Us

There’s one more line I’d point you to, this time on the receipts side of the chart, right at the bottom where the small stuff lives. Customs duties: minus $9 billion.

Minus. But wasn’t tariff revenue supposed to be the thing that helped pay for all of this? And now it’s running backwards.

Now, if you were in favor of the tariffs, you probably blame the Supreme Court for that. After all, it was February’s 6-3 ruling that said the President had no authority to impose them, and the Treasury has been handing the money back ever since. Thirty-three billion dollars of it in July alone.

Fine. It doesn’t change the arithmetic. The tariff plan clearly isn’t working, and while everyone argued about it, America’s fiscal hole only got deeper.

So where does that leave you and me?

My buddy Rob Smallbone over at The Contrarian Capitalist posted this on his Substack the other day.

As people say, it’s funny because it’s true. The top half is really how most people see gold’s rise. They look at a good year for the metal and think, wow, gold is having a moment. Completely oblivious to the fact that gold isn't going up. It's fiat going down.

Everything I've seen in 2026 tells me that fall has a long way to run yet.

And when the market finally refuses to keep propping up this growing house of cards, or the next government-induced crisis threatens to bring it down, the Federal Reserve will step in as the buyer of last resort.

Which, of course, means printing trillions. Which means regular people will get wiped out, the middle class will shrink further still, and only those holding what I like to call unprintable assets, along with the companies that produce them, will have a chance of keeping up (or even coming out ahead).

That’s not a prediction of some exotic collapse, mind you. It’s the same playbook we all watched in 2008 and again in 2020. The only question is timing.

Have a great rest of the weekend,

Lau Vegys

P.S. All of the above is the reason SNAFU Investing's second recommendation was a precious metals play. It's up nearly 30% since I sent it to paid subscribers in July, which puts it slightly above our buy-up-to price, so it's a buy on dips only for now. But I'll have another precious metals recommendation going out later this month. Keep an eye out for it in the days ahead.

A quick but important portfolio update. I wanted this in front of you first thing this morning, before the opening bell, so you’d have the full picture before the trading day starts.

This week, two of the companies in our model portfolio reported results, and they could hardly have gone more differently. One turned in a strong quarter that’s pushed its shares higher, and our position is up about 25% since we recommended it. The other had a rough day, selling off close to 18% yesterday.

The good news is the easy part, and we’ll get to it, because good news deserves its moment. But the main reason I’m writing is the one that fell.

Partly to get ahead of it, so you’re not staring at a red screen wondering what on earth happened. (After all, showing up on the down days, not just the up ones, is a big part of what I do here, whether you’re a paid subscriber yet or not.)

And partly to tell you something more useful: a drop like this, on a company whose long-term story hasn’t changed, isn’t a problem for us. It’s an opportunity, all the more so because we came into this name near its lows to begin with, not chasing it at the highs.

And there’s a second reason we’re able to treat a day like this as a chance rather than a threat: how we buy in the first place. If you’ve been with me for a while, you know I never put on a full position all at once. We build them in stages, deliberately, into weakness, the approach I laid out in “Why I Never Go All-In on a Stock.” So when the market slams one of our names, a frightening headline number rarely lands on us the way it lands on someone who bought their whole position at the top. It’s exactly why a stock that just fell by double digits on the screen is barely down in our portfolio.

A selloff like this one, driven partly by a temporary, fixable problem and partly by the market simply misreading a piece of news, is precisely when a patient investor gets to add at a better price. Not everyone managed to fill their full position when we first recommended this name, and days like yesterday are how you get that second chance, at a lower price.

Below, for paid subscribers, I name both companies, walk through exactly what happened to each and why I think the selloff was overdone, and give you my current buy levels. If you've been on the fence, this might be a good moment to come inside.

Read more

Within days it was official. The United States and Japan were intervening together in the currency market to prop up the yen, the first coordinated operation of its kind in nearly thirty years. Japan reportedly put in around $75 billion. The American contribution was five to ten billion, exactly as the note said.

The last time the two countries did this together, Asia was in the middle of the 1998 financial crisis.

President Trump, asked about it, explained things this way: “We have a good relationship with Japan... they have a weakening yen and they wanted a little bit of help, and we’re always there for Japan. Japan’s been very good to us, with the exception, of course, of Pearl Harbor.”

Say what you want about the man, but he has a way with words, doesn’t he?

Anyway, so that’s the official version. America, helping out a friend.

But I’d like to offer you a different reading of it, one where the helping-out-a-friend story doesn’t hold up very well, as well as two genuinely strange things about this operation that I’ll get to below.

Why America Suddenly Cares About the Yen

If you’re a regular reader, you’ll probably know that Japan has more problems than it knows what to do with. It’s the world’s fifth-largest economy and, at the same time, the oldest country on earth. Or the oldest one that matters, anyway. It also carries the heaviest debt load in the developed world. And it imports nearly all of its energy and about 60% of its food, virtually all of it priced in dollars.

That last part, of course, becomes a serious problem when your currency is in free fall, which the yen has been for years now. In fact, this summer it hit its weakest level in roughly four decades. And when you import almost everything you burn and eat, a cheap currency isn’t the blessing it looks like on an exporter’s spreadsheet. Every time the yen drops, it costs a little more to keep the lights on and the supermarket shelves stocked.

So Japan has been trying to fix the yen directly, by buying it. In April and May, the Ministry of Finance went into the currency market with its dollar reserves, day after day, $73 billion worth of yen-buying in all. It was the largest currency intervention in the country’s history. It worked for about three weeks. Then the yen started falling again.

Which brings me back to the point I made in my last essay on Japan: buying your own currency is never enough. Somebody else has to want it too.

Well, as we now know, a couple of weeks ago somebody finally did.

But before you conclude that the U.S. government has developed a sudden affection for Japanese grocery shoppers, let’s remember one simple fact. Japan is America’s banker. It’s the largest foreign holder of U.S. government debt, sitting on about $1.14 trillion of Treasuries. For forty years Japan sold America cars, chips, and machines, and instead of spending the dollars, it lent them right back by buying Treasury bonds. That arrangement worked because Japan had nowhere better to put the money. Its own interest rates were zero. America’s weren’t.

Not anymore, though. In an attempt to put some kind of floor under the yen, the Bank of Japan has been raising rates. It went to 0.25% in July 2024, then 0.75% last December, then 1% in June, which is the highest the country’s policy rate has been since 1995. And as I write this, more hikes look to be on the way.

And that matters, because every notch up in Japanese rates makes it a little less worthwhile for Japanese savings to sit abroad chasing yield, and a little more tempting to bring them home. We’re talking about an enormous pile of money here, a good deal of which is currently parked in American assets.

And everyone in Washington understands where that road leads. If the yen keeps collapsing and Japan runs out of gentler options, it will have to dump those Treasuries to raise the dollars for the next, bigger intervention. Not to mention the $1.8 trillion pension fund I told you about in my last essay, the one whose own finance minister has been saying out loud that she’d like to see its money come home.

Which is why the U.S. is not really defending Japan’s currency here. It’s defending its own ability to borrow.

The Man With the Notepad

Now to the strange parts of the story, because there are two.

The first is the size. Five to ten billion dollars, in a currency market that turns over trillions every day, is a rounding error. Nobody moves the yen with $10 billion, and nobody knows that better than Scott Bessent. To understand why, you need to know who he is, because his resume happens to be the single most interesting fact in this whole affair.

So indulge me in a short trip down memory lane.

Thirty-four years ago, in 1992, Bessent was a young man working for George Soros in London. Yes, that George Soros, of all people. And he noticed something about Britain that most of the market had walked straight past. Nearly every homeowner in the country was on a floating-rate mortgage, meaning the monthly payment moved up or down with the Bank of England’s interest rate.

Nothing like America, where you lock in a rate for thirty years and forget about it. In Britain, if the central bank raised rates, every household with a mortgage got a bigger bill within weeks. Raise them far enough and millions of people simply couldn’t pay.

To make matters worse, Britain had also promised to keep the pound pegged to the German mark. And the only real tool a central bank has to defend a currency is to raise interest rates, since higher rates make holding that currency more rewarding.

Bessent’s insight was that the two promises couldn’t both be kept. If defending the pound meant bankrupting millions of British households, the government would fold, whatever it said in public.

So Soros bet $10 billion that it would. He did it by borrowing pounds and selling them for German marks, over and over, on a scale nobody had tried before. The logic was simple enough. Every pound he dumped on the market was a pound the Bank of England had to buy back to hold the peg, and sooner or later it would run out of money or nerve. It’s the trade that made Soros famous as the man who broke the Bank of England.

Britain fought. It raised rates from 10% to 12%, then announced 15%, a level that would have been ruinous. And nobody believed it, because anyone could do the mortgage arithmetic. The threat wasn’t credible, so it didn’t work. By the end of that same day Britain surrendered, pulled the pound out of the peg, and the currency crashed. Soros made a billion dollars in an afternoon and the papers named it Black Wednesday. It went down in history as the day a hedge fund beat a central bank.

Interestingly, twenty years later Bessent ran the same playbook in reverse, and, as it happens, in Japan. When the country elected a prime minister in 2012 who announced out loud that he intended to print money and drive the yen down, Bessent took the man at his word and bet against the currency. That one made another billion, with Bessent running the book this time as Soros’s chief investment officer. A few years later he set up his own fund with $2 billion of Soros’s money.

I’m telling you all this so you understand what Bessent took away from it, which is that a currency isn’t defended with money, it’s defended with credibility. And when those two things come apart, somebody gets very rich and somebody else gets a swift kick in the proverbial behind.

So when a guy like that walks past a room full of photographers holding a to-do list that says “buy Japanese yen,” helpfully specific, perfectly legible, angled just so toward the cameras, you’re free to believe it was an accident.

I don’t buy it.

Sure, if this were some career politician who’d wandered into the Treasury building by mistake, I’d probably believe it too. Plenty of them couldn’t tell you what JPY stands for. But this is a man who spent thirty years reading other people’s tells for a living.

By that evening, a photograph of his to-do list was sitting on every trading desk on the planet.

Every trader who was short the yen suddenly had to ask himself whether he really wanted to keep betting against a currency the U.S. Treasury had just promised to buy. Plenty of them, unsurprisingly, decided they didn’t. Within four days it took only 157 yen to buy a dollar, down from nearly 164. In a market where most days bring a fraction of that, this is a very big move.

It’s not as though Bessent had to reinvent the wheel here, mind you. This is one of the oldest tricks in the central banking book. The example freshest in my memory is the summer of 2012, when Europe’s bond markets were coming apart and the head of the European Central Bank, Mario Draghi, stood up at a conference in London and said the bank would do “whatever it takes” to preserve the euro. He didn’t buy a single bond that day. He didn’t have to. The panic stopped, yields across an entire continent came down, and the crisis that had been eating the eurozone for two years was over. For the time being, anyway.

Bessent did much the same thing here, minus the podium.

You Scratch My Back

Of course, keeping Japan from dumping Treasuries isn’t the only reason the U.S. government was so willing to help. There’s a second thing that puts the two governments on the same side of this trade. The Americans want a weaker dollar. The Japanese want a stronger yen. Those aren’t two trades. They’re the same one, seen from either end.

Remember, even before he made it part of his election platform, Trump had spent the better part of a decade arguing that other countries hold their currencies down to undercut American producers, and that a strong dollar is a tax on anyone who still makes things in America.

Then, last year, he put Stephen Miran on the board of the Federal Reserve.

If the name doesn’t ring a bell, Miran is the man some have called the architect of Trump’s monetary reset. Days after the 2024 election he published a forty-page paper titled A User’s Guide to Restructuring the Global Trading System, and the argument in it was straightforward enough. Because the rest of the world is obliged to hold dollars, America has to keep sending them out, running deficits year after year, and that is what slowly hollowed out its own industrial base.

Economists have a name for this bind. They call it Triffin’s Dilemma, after the Belgian economist who described it back in 1960.

Note: Miran didn’t give up his White House job to take the seat. He was the chairman of Trump’s own Council of Economic Advisers at the time, which made him the first person to sit on the Fed and serve in the administration at the same time since the 1930s. The seat was a temporary one to begin with, though, and he handed it over this spring so Kevin Warsh could take it on his way to the chairmanship. But you don’t make an appointment like that by accident.

And Trump’s dollar reset has been working, up to a point. The dollar index fell more than 9% over the course of last year and touched a four-year low early this one.

The problem is, a cheaper dollar doesn’t build a factory by itself. Reshoring, which is the whole point of the exercise as far as Trump is concerned, takes years. Supply chains take longer. And one good run in the currency market doesn’t come close to delivering what these people are actually after. They need the dollar lower, and they need it to stay there.

Which is what makes the yen operation so convenient.

And that brings me to the second strange thing about this operation, namely how the American side actually paid for it.

You may have heard that the U.S. Treasury wasn’t really selling dollars at all. It sold euros. And you might reasonably wonder how that squares with wanting a weaker dollar.

On the surface, it doesn’t. But what actually pushed the dollar down against the yen wasn’t the American side of this operation. It was the other side. The roughly $75 billion Japan spent, because its reserves are held in dollars and Treasuries. The Japanese did the dollar-selling.

So it was, basically, an I-scratch-your-back arrangement.

Why wouldn’t the Treasury simply sell dollars itself, though? It has plenty of them, and it would have done the job directly. Well, the detour is there for a reason, and it’s the same reason none of this can ever be said out loud.

“The United States is selling its own currency” is not an intervention, it’s an announcement. And the moment that announcement lands, every foreign government holding American debt starts working out what those Treasuries will be worth in five years. They sell, yields spike, and the bond market you were trying to protect is the one you just broke. A devaluation only works while it’s deniable.

Helping Japan buy its own currency gets you the same result with none of the fingerprints. On paper, the U.S. Treasury never sold a single dollar. In practice, the dollar dropped about 4% against the yen inside of four days.

Careful What You Wish For

There’s one potential problem with all of this, though, dear reader, and it’s worth keeping on your radar.

The two governments need to get this exactly right, because while both of them want a stronger yen, history is fairly clear that a rapidly strengthening yen is what breaks things. I’ve written about the yen carry trade, the world’s biggest free lunch, and about what happens when it unwinds, more times than I care to count, so I won’t kick that horse again here.

The short version is this. When the yen jumps, everything bought with borrowed yen has to be sold at once to pay the loans back. And since Japanese investors are sitting on more than $3 trillion in net foreign assets, very little of what gets sold is actually Japanese. It’s American stocks, American bonds, and whatever else all that borrowed money happened to buy.

I put together the chart below to show you what that has looked like over the years.

My longtime readers will remember August 2024, when a single modest rate hike in Japan handed Japanese stocks their worst day since 1987 and sent a shudder through markets everywhere. Well, as you can see, that wasn’t a one-off. Just about every violent yen rally of the past thirty years has arrived with a market seizure attached to it somewhere.

What this means is that Bessent is working in a very narrow corridor here. Let the yen keep sliding and Japan eventually sells Treasuries to defend it. Push it up too fast and the borrowed trillions unwind and take everything else down with them. He needs the yen to rise gently, on command, and to stop when told.

Put plainly, Uncle Sam has deliberately started the one thing that breaks markets when it happens quickly, and is betting it can control the speed.

So far it’s holding. But the yen has started sliding again in the last few days. It now takes 159 yen to buy a dollar, where at the start of the month it took 157. My bet is it keeps sliding, which means the next round will cost a good deal more than a photograph.

Bottom line: this doesn’t look like a one-off to me. It looks like the opening move in a recurring operation, where each round has to overcome the market’s memory of the last one wearing off. And every time they go back in bigger, the odds go up that somebody pushes a little too hard and sets off the very unwind all of this is meant to prevent.

I suspect a few of you will ask in the comments what we should all be watching from here, so let me get ahead of it. Three things, mainly.

The 30-year Treasury yield. This is the first thing I look at in the morning, and here’s why. A thirty-year bond is somebody handing over money today on a promise to get it back three decades from now. The yield is what they’re charging for taking that chance. So when it climbs while stocks are falling, I don’t read that as a story about growth. I read it as the market telling us, politely, that it expects to be paid back in weaker dollars.

The yen, and less its direction than its speed. A slow grind higher tells me the plan is working. A sudden lurch tells me it’s getting away from them. So if you see the yen jump several percent in a matter of days, that’s the borrowed trillions heading home, and chances are you’ll feel it in your own portfolio before anybody in the U.S. government gets around to explaining what happened.

And finally, the yellow metal. Gold is the one thing in this whole story that nobody can print more of, which is exactly why I keep half an eye on it. If it starts running while the dollar slides, that tells me the market has already worked out where this is heading. And where it’s heading, I suspect, is another one of those spikes on the chart above. Only this time with a great deal more borrowed money riding on it.

Regards,

Lau Vegys

P.S. A country that imports nearly all its energy and pays for it in dollars has only so many ways out of a weak currency. One of them is to burn less imported fuel, which is why Japan and much of Asia have been quietly reversing their retreat from nuclear power. That’s part of the reason uranium is where I put SNAFU’s first recommendation, and it’s what my special report, Situation Normal: Uranium, is about. It went out to paid subscribers at the start of the month, so don’t let it sit unread. And if you’ve already read it, the uranium play is waiting in the portfolio.

Not a typo. Yesterday we packed up the car, said our goodbyes, and crossed the border.

The Spanish adventure is over, and the family is on the road again. I’m typing this from a hotel room a couple of hours after waking up, so today’s letter will be a short one.

Spain kept me well supplied with material these past weeks. A World Cup victory, wildfires, migrant waves, and an out-of-control socialist government presiding over it all. Something tells me it will keep making news without me.

Before I get to the week that was, though, a question for you.

The response to the recent China oil essays surprised me. Part two went out on Wednesday (it’s linked below, along with Saturday’s essay), and judging by the comments, restacks, and emails, this kind of piece resonates. The long ones, I mean. Where I pick a rabbit hole and keep going until I hit the bottom, even if it takes two parts. Or three.

So here’s my question: what should I dig into next? I keep a list of candidates of my own, and if there’s one thing this world isn’t running out of, it’s SNAFUs. But I also know from experience that some of the best leads often come from readers. So I thought I’d ask you. If enough of you point in the same direction, that might become my next research subject. The comments are open. And if you’d rather keep it between us, write me at lau@snafuinvesting.com.

In the meantime, I’ll be working on more essays for you, plus this month’s first regular issue for paid subscribers, as well as the silver special report. That last one is taking longer than I expected. But I don’t put anything out until I’m 100% happy with it, so I’ll ask you to bear with me. I promise it’ll be worth the wait.

With that out of the way, let me share a Soviet joke I posted over the weekend as a Substack Note, which most of you probably haven’t seen. This one is almost personal. My father spent years in exactly this situation before finally getting his hands on his first shiny Moskvitch.

You’ll find the China oil piece Part 2, along with the other essay, below.

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 six that stood out, for different reasons. Each one links back to the piece 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 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

P.S. If you joined as a paid member last week, welcome aboard. A few links to help you find your way around:

• The first recommendation: a uranium play, with the full thesis, buy-up-to price, and tranche levels.

• The second recommendation: a silver pick, same treatment: the whole thesis, and exactly what to do about it.

• The live portfolio: the scorecard of every open position and where each one stands.

• The first Special Report: a deep dive into uranium and the opportunity behind it.

It’s not a document anyone reads for pleasure. It’s basically a spreadsheet with a cover page. It comes out once a year, gets a paragraph in the trade press, and disappears. But it is the only place you can find out where the fuel in America’s nuclear reactors actually came from.

And if for some reason you found yourself perusing it, one number would stick out like a sore thumb.

Of all the uranium delivered to American nuclear power plants last year, 7% of it came from the United States.

That’s remarkable, because no country on earth burns more of it than America does.

We’re talking ninety-four reactors, the largest operating fleet in the world, producing about a fifth of all the electricity in the country. And it isn’t shrinking. As I write this, twenty of those plants are working through license renewals, and roughly 95% of the fleet now plans to run for eighty years or more.

And that’s before you count the three shuttered reactors being brought back from the dead: Palisades in Michigan, Three Mile Island Unit 1 in Pennsylvania, and Duane Arnold in Iowa (about 2.3 gigawatts between them). On top of all that, President Trump signed four executive orders last year aimed at taking American nuclear capacity from around 100 gigawatts to 400 by 2050.

Everybody Else’s Uranium

The point is, America needs a lot of pounds to keep all of that running. And it doesn’t have them. Because if it did, 93% of the uranium bought by domestic nuclear power plant operators wouldn’t be coming from overseas.

So where is it coming from? I put together a chart to show you exactly that.

As you can see, Canada is the primary source, accounting for 32% of everything American utilities bought last year. Kazakhstan comes next at 28%, followed by Australia at 15%, Uzbekistan at 7% and Namibia at 4%.

Interestingly, that 7% America bought from itself is actually down on the year before, when the figure was 8%. So in a year when Trump was signing executive orders about domestic fuel production, American reactors ended up buying a smaller share of their uranium from America than they had the year before.

Just as interestingly, Kazakhstan went from 22% to 28%. That’s six percentage points in a single year.

If you’re surprised by that, you shouldn’t be. Kazakhstan is often referred to as the “Saudi Arabia of uranium.” In fact, it’s more than three times as dominant in uranium production as Saudi Arabia is in oil. This Central Asian republic produces about 40% of the world’s uranium.

You can see it in the chart below, which ranks world supply by the home country of the company doing the digging.

Add to that Uzbekistan, and over a third of American uranium comes from two ex-Soviet republics that aren’t especially stable and are increasingly looking eastwards.

What do I mean by eastwards?

Well, China basically.

China has spent the last few years quietly working its way into Central Asia’s uranium, and not necessarily by building mines of its own out there. By buying its way into the ones that already exist.

In December 2024, for instance, Uranium One, a subsidiary of Russia’s state nuclear giant Rosatom, sold its stakes in three Kazakh uranium entities: the Zarechnoye and Khorasan-U mining ventures, and the Kyzylkum processing operation.

Sold them to whom? Chinese state buyers.

And that’s just one deal. According to the World Nuclear Association, China now receives more than half of Kazakh production.

You get the point.

By the way, none of this should surprise anyone. China needs all the uranium it can get its hands on, because it is building more reactors than the rest of the world combined. If you look at the chart below, you’ll see just how far ahead of the competition it is. Each square represents a single reactor. The dark green ones are running today, the gold ones are under construction, and the paler shades show what’s planned and proposed. China’s block is more than twice the size of anyone else’s.

To save you all the counting of the squares, China has 64 reactors already running and another 37 going up right now. That second number is just under half of every reactor under construction on the planet. And that’s on top of a further 186 planned or proposed, and an official target of 110 gigawatts by 2030 against roughly 60 today.

All of which adds up to an appetite for uranium that isn’t getting satisfied any time soon.

Unsurprisingly, then, China pays well, it pays early, and it contracts years forward. That’s a hard combination for any producer to turn down. And out in that part of the world, most of them are state-owned, which means the decision isn’t purely commercial anyway.

In other words, America isn’t simply importing most of its uranium. It’s importing it from a region where China is the bigger customer, and where China is better placed to stay that way. It has the relationships, the checkbook, the patience, and often a shared border.

The U.S. government has a great many advantages in the world. Lasting influence in Central Asia has not tended to be one of them.

And the Pounds Are Only Half of It

But the thing to understand is that America’s dependence isn’t only about pounds in the ground.

As you may know, raw uranium is not suitable as fuel for nuclear plants. It needs to be refined into uranium concentrate, U3O8, commonly referred to as “yellowcake,” then converted into gas, and subsequently enriched.

It’s not uncommon for U.S. companies to buy yellowcake from some countries and then contract enrichment services in other countries.

And until recently, the country America leaned on for that last step was Russia.

I say until recently, because that arrangement is now illegal.

In August 2024, the U.S. banned imports of Russian low-enriched uranium. Waivers were permitted in the meantime, but they all expire on January 1, 2028, and the underlying prohibition runs to the end of 2040.

Okay. So a full year into that ban, who was actually enriching America’s uranium?

Well, turns out, it’s (still) mostly Russia. In fact, as you can see, Russia supplied 26% of it.

Which tells you that Washington isn’t in any great hurry to get rid of the Russian stuff. It has been handing out waivers and grace periods to keep it coming. Why? Because if you switched Russian enrichment off overnight, some American reactors would simply go dark.

So for now, even a year after Congress banned Russian enriched uranium, Russia remains the single largest supplier of enrichment to the American nuclear fleet.

Where This Leaves Us

As you may guess, all this leaves the U.S. in a bit of an awkward spot. It has to buy an enormous quantity of uranium, for years, out of a pool that keeps getting smaller.

And despite President Trump’s slew of executive orders, an order doesn’t produce a single pound. Permitting a deposit, drilling it and commissioning a plant takes years, and America has spent four decades barely doing any of it. Worse, the enrichment waivers American utilities have been riding on expire on January 1, 2028, and the Western enrichment capacity meant to replace all that isn’t ready yet.

I go into all of this and a good deal more in the uranium report I put out last week for paid subscribers. But suffice it to say, this is an opportunity for U.S.-based uranium producers, because America now has to replace a great many imported pounds and a great deal of Russian enrichment, on a deadline.

And remember, none of this is happening in a calm world. We’re in the middle of a major energy crisis right now, and despite China’s best efforts, it keeps rolling on.

Which makes it a very good time to own the uranium companies that have already made headway on American soil.

Situation normal. Position accordingly.

Have a great rest of the weekend,

Lau Vegys

P.S. The uranium story is the reason why, for our first ever SNAFU Investing recommendation, I chose a uranium play. A producing uranium company based in the U.S., which puts it in about as good a position as a company can be in when the country it sells to imports 93% of what it burns. And no, it isn’t one of the usual suspects like Uranium Energy Corp. As I write this it is still trading below my buy-up-to price. If you’re on the free list and you’ve been meaning to upgrade, this is a reasonable week to do it.

It turned out to be one of my most popular essays yet, so clearly many of you had been wondering who "Canceled the Oil Apocalypse," and just as importantly, how. But if you missed it, here’s the short version. When the Strait of Hormuz closed and the world came up 5.5 million barrels a day short, China all but stopped buying oil. As I explained then, it could afford to do that thanks to three things:

• Coal. China never bought into the crusade against “dirty” coal, so when the crisis hit, it could shift real demand away from oil and onto coal at a scale no Western country could dream of.

• A quiet fuel export ban. In March, Beijing ordered its refiners, some of Asia’s largest fuel exporters, to stop shipping gasoline, diesel, and jet fuel abroad. Less fuel exported meant less crude imported.

• A decade of EV subsidies. Tens of millions of electric cars were already on the road when gasoline prices surged.

But none of it would have been possible without the real backstop: China’s immense oil reserves. Here’s the chart I showed you:

More crude than every other country on Earth was holding, combined. Around 1.4 billion barrels.

In that essay, I also promised I’d explain why China did all this. Today is that day.

But to get to the why, we first have to answer a different question: how? How does a single country quietly stockpile that much oil without the rest of the world noticing? Because you can’t really understand why China chose to spend its hoard the way it did until you understand how it built that hoard in the first place.

And here’s the strange part. The how and the why turn out to have the same answer.

The petrodollar.

So that’s precisely where we’ll start. Because once you understand how the petrodollar actually works, the whole picture snaps into focus: where China got the oil, and why Beijing would go to all this trouble in the first place.

How Oil Saved the Dollar

So what actually forces an oil trade to happen in dollars?

There’s no treaty. No law. No global rulebook saying a barrel of Saudi crude sold to a refinery in India has to be paid for in greenbacks. And yet, overwhelmingly, it is.

To understand why, and why it matters this much, we have to go back about eighty years.

You’ve probably heard the saying: he who has the gold makes the rules. That was America in 1944. It had won the war and held the largest gold reserves on Earth, and it used that position to rebuild the global money system around the dollar. The new system, created at the Bretton Woods Conference that year, tied almost every nation’s currency to the U.S. dollar at a fixed rate. It also pegged the U.S. dollar to gold at a fixed rate of $35 an ounce.

This arrangement made the U.S. dollar the world’s premier reserve currency, effectively forcing other countries to hold dollars for trade or redeem them with the U.S. for gold.

But by the late 1960s, America had printed far more dollars (for welfare, for Vietnam) than it had gold to back them. Other countries noticed and started cashing their dollars in for the real thing, draining America’s gold from 574 million ounces down to about 261 million. In 1971, to stop the bleeding, Nixon slammed the gold window shut. The dollar’s last tie to gold was gone.

That should have been the end of the dollar’s reign. A currency backed by nothing is just paper. Instead, Washington found something better than gold to back it with.

Oil.

In 1974, Saudi Arabia’s Prince Fahd came to Washington, and he and Henry Kissinger signed something titled the “Joint Commission on Economic Cooperation.” A bland, boring name. The deal underneath it was anything but. In short: America would give the House of Saud protection and a guarantee of its survival. In return, the Saudis would sell their oil — all of it — in dollars, and only dollars. And as the dominant force in OPEC, they’d make sure everyone else did the same.

It was, frankly, genius. Oil isn’t just another commodity. It’s the biggest one there is, bigger than any other commodity market on Earth, and every country needs it, constantly, forever.

Just to give you a sense of the scale we’re talking about, here’s how oil stacks up against the world’s ten biggest metal markets:

Tie the dollar to oil, and you’ve made the entire planet need dollars.

But the real masterstroke came about a month later. It dealt with the question of what would happen to all those dollars the Saudis were about to earn, and with it, the deeper question of how the whole arrangement stays durable. Because remember, there’s no law forcing anyone to obey it.

In July 1974, Treasury Secretary William Simon flew to Jeddah, the kingdom’s great port city on the Red Sea, on a hush-hush mission. There he cut the part of the deal that truly mattered: Saudi Arabia’s oil billions would be recycled into U.S. Treasuries through special off-the-books auctions, in exchange for military aid. Curiously, the arrangement was considered so sensitive that the Treasury hid Saudi Arabia’s holdings inside its published data for the next 41 years, until Bloomberg pried the records loose in 2016 with a Freedom of Information Act request.

And just like that, a perpetual loop was born. The world pays Saudi Arabia (and, in time, the other big oil exporters who followed its lead) dollars for oil. Those dollars get parked right back in America’s debt. Oil, in other words, became a permanent source of demand for U.S. paper.

The Only Buyer

Now, there’s one important aspect of all that plumbing that we live with to this day, and it works like this.

Say an Indian refinery buys $100 million worth of Saudi crude. It pays in dollars, and those $100 million move through the banking system, ultimately clearing through banks supervised by the United States.

This means the U.S. government can see any dollar oil trade on the planet. More importantly, it gives Washington the unique ability to block any one it doesn’t like.

This is what you’d call a sanction. A switch built right into the petrodollar’s plumbing, one America can flip to cut any bank, any company, any country out of the dollar system entirely.

That’s the true source of American power. And it also brings us, conveniently, back to China, and to that question I said we’d have to answer before we get to the why: how does a single country quietly stockpile 1.4 billion barrels of oil (and probably more) without the rest of the world noticing?

I’ll spare you the suspense and tell you outright. The answer comes down to two words: Iran and Russia.

Not coincidentally, these also happen to be the two most heavily U.S.-sanctioned countries on Earth.

Iran's sanctions go back decades: in 1996, President Bill Clinton signed a law that started cutting the world off from buying Iranian oil (the sanctions would come in waves and tighten for years afterward). Russia’s are more recent: in 2022, after the invasion of Ukraine, the U.S., joined by Europe and most other West-aligned economies, banned Russian oil in retaliation.

That left two of the world’s biggest producers largely locked out of the global oil market. Millions of barrels a day of crude sloshing around, stuck, with nowhere to go and almost nobody willing to buy.

Except one country. China.

Not only was China willing, it worked out how to do it without getting caught. The trade ran on an intricate system of workarounds: aging “dark fleet” tankers that switch off their transponders so no one can track them; cargoes relabeled as Malaysian; small, independent Chinese refineries known as “teapots”; and payments routed through obscure little banks with no business in America to lose, outfits with names like Bank of Kunlun.

Note: This is a fascinating rabbit hole. I might write a whole essay on it one day. But this piece is already running long, so for now all you need to know is that the dark fleet and the fake labels were the easy part.

But China's real secret weapon was the one thing the whole operation rested on. Without it, none of this would have been possible: the yuan. Because China wasn't paying in dollars. It was paying in its own currency.

And based on what we just discussed, you can probably see why that mattered so much. A dodgy-looking dollar payment would have lit up on Washington’s radar and been shut down in an afternoon. A yuan payment never touches an American bank. The sale simply happens, and there’s nothing Uncle Sam can do about it.

And of course, being the only willing buyer of Iranian and Russian oil meant China got a big, big discount.

Which is how, year after year, cargo after cargo, China quietly funneled over a billion barrels of deeply discounted crude into those silos in the desert, until it sat on more oil than the rest of the planet combined.

Why Save Your Rival?

OK, so we’ve finally arrived at the why. Why save the world, your fiercest rival included, from certain economic devastation in a $200-oil scenario?

There are three reasons. The third, arguably the most important of them all, deserves its own section, so I’ll get to it last.

But before I get to any of them, let me first rule out a couple of theories that kept popping up in the comments section of Part 1 and in readers' emails to me.

Theory number one: China did this simply to protect itself from high oil prices.

It makes sense on the surface. China is the world’s biggest oil importer, so $200 crude would hurt it more than almost anyone. Burning reserves instead of buying would simply be self-insurance.

The problem is that the theory falls apart once prices come back down.

In late June, when hopes of a ceasefire briefly pushed crude back to pre-war levels, a country that was merely protecting itself from a price spike would have jumped right back into the market. It would have been the perfect time to refill the reserves it had just drawn down.

China didn’t.

Its imports stayed at their lowest levels in a decade (that’s China’s own customs data, not satellite guesswork), and it just kept burning reserves.

Which tells us there had to be another reason.

Theory number two: China did it out of the goodness of its heart. A soft-power play for global goodwill, if you will.

Anyone who knows anything about China’s leadership can probably dismiss that one right away. The Communist Party has been remarkably pragmatic ever since Deng Xiaoping decided, back in the late 1970s, that markets would serve the Party better than Mao’s textbooks.

But there’s an even simpler problem with this theory: soft-power plays don’t happen in silence. And as I mentioned last time, China did all of this without saying a single word. If you’re saving the world to win friends, wouldn’t you mention it at least once?

OK, with that out of the way, let’s get to the real reasons.

First: protecting China’s export-based economy.

Some of you pointed this one out in the Part 1 comments too, and it’s kind of obvious when you think about it. China’s economy still revolves around making things and selling them to the rest of the world. Yes, its domestic consumer market has come a long way, but exports still account for roughly a fifth of China’s GDP. One dollar in every five the country earns comes from selling things abroad. That’s huge.

The chart below shows what that looks like in practice. Every box is one of China’s export markets, roughly scaled by value. The boxes with a line through them are the economies most likely to be hammered by a prolonged oil shock.

How do we know? Simple. They’re the big net oil importers, the countries that buy most or all of their crude abroad. For them, $200 oil is effectively a giant tax with no offsetting benefit from higher oil revenues.

And yes, that includes the United States. America produces plenty of oil, but crude trades in a global market at a global price. So even if every extra barrel came from Texas, American drivers and consumers would pay the shock all the same.

Add up the struck-through boxes and you get more than half of China’s export book. In dollar terms, that’s close to $2 trillion a year in sales suddenly walking toward a cliff. The U.S., Europe, much of Asia. China would have lost half its export market, and a good chunk of its economy with it.

Now the second reason: neutralizing the Malacca threat.

For all its economic might, China has one enormous vulnerability. And, curiously enough, it also comes down to a strait. Just a different chokepoint thousands of miles away: the Strait of Malacca.

Roughly 80% of China’s imported oil flows through this narrow shipping lane between Malaysia and Indonesia.

The U.S. government is, of course, well aware of this. The so-called “Malacca Dilemma” has featured in Pentagon planning for years, and the war plan it points to is brutally simple. In any serious conflict over Taiwan, don’t invade China. Don’t fire a shot at the mainland at all. Just park the U.S. Navy at Malacca, thousands of miles from Chinese shores, and choke off most of China’s imported oil. Starve the country into submission without ever setting foot on Chinese soil.

Needless to say, that scenario has kept Chinese strategists up at night for decades.

Now, in truth, China has done quite a bit over the years to blunt the threat, including two things that in the Western mind are diametrically opposed: expanding coal production while rapidly electrifying its economy with renewable power.

But if you’re China, there’s no better way to show the U.S. government that the Malacca card is dead than to go without imported oil, in public, for months on end. Which is exactly what China spent this spring doing.

The Stress Test

OK, so we've covered the first two reasons. Now for the third, and by far the most interesting one.

Remember how I said at the beginning of this piece that both questions, the how and the why, ultimately lead back to the petrodollar? This is where the two finally come together.

If you've been reading me for a while, you probably know China has been at the forefront of the de-dollarization movement for years. My research suggests the wake-up call came in 2014, when the U.S. weaponized the dollar against Russia over Crimea. Beijing drew the obvious lesson: holding dollar reserves means accepting potential financial subjugation. If Washington ever decides your foreign policy isn't aligned with theirs, your reserves can be frozen or seized. (Incidentally, a lesson Russia learned the hard way in 2022, when the West froze some $300 billion of its central bank reserves.)

You can actually see China acting on that lesson in the chart below. Its stash of U.S. Treasuries peaked at about $1.3 trillion in 2013, when China was America's largest foreign creditor. Ever since then, it's been steadily selling. Today it's below $700 billion, the lowest level in roughly 17 years.

But China wasn’t just walking away from the dollar system. Quietly, piece by piece, it was building a replacement, one designed to swap out every part of the dollar’s grip on oil.

The first serious move came in 2015 with CIPS, China’s answer to SWIFT: its own cross-border payments network. Think of it as a parallel set of banking pipes, ones the U.S. government doesn’t supervise and can’t switch off. Remember, two countries can agree to trade in yuan all they like, but the money still has to move between banks somehow. Until CIPS, nearly every major international payment ultimately relied on infrastructure controlled by the West.

Then, in 2018, Shanghai launched yuan-denominated crude oil futures, the first serious attempt at an international oil price that wasn't a dollar price. And to make sure the market actually worked, two of China's largest state-owned oil companies, PetroChina and Sinopec, stood ready as buyers, providing liquidity. Sell your oil in yuan, and there would always be someone on the other side of the trade. It worked. Within about a year, Shanghai's crude contract had become the world's third most traded crude benchmark, behind only Brent and WTI.

At that point, the blueprint was starting to emerge. I put it all on one page below because it’s much easier to grasp visually than in prose.

Now, if you look back at the blueprint above, we’ve already covered the first two blocks. It’s the third one, “The Backstop,” that’s worth a closer look, because that was the hard part.

Remember the arrangement William Simon negotiated with Saudi Arabia back in the 1970s? Oil exporters earned dollars, then parked those dollars in U.S. Treasuries. That wasn’t just good for the Saudis. It was good for Washington, too, because those oil dollars helped finance America’s deficits.

China couldn’t simply copy that model.

Yes, it has the world’s second-largest bond market. But Chinese government bonds yield far less than Treasuries. More importantly, the yuan isn’t freely convertible. Money can flow into China easily enough. And getting it back out often depends on Beijing’s permission, exactly the sort of uncertainty central banks and sovereign wealth funds try to avoid. Nobody parks their emergency fund behind a door someone else can lock.

So China came up with another solution.

Instead of backing its oil market with Treasuries, it backed it with gold.

From day one of the Shanghai oil contract in 2018, exporters accepting yuan could use those proceeds to buy physical bullion through the exchanges in Shanghai and Hong Kong. In other words, China solved the convertibility problem not with financial liberalization, but with the oldest monetary asset in history. You didn't have to trust the Chinese Communist Party. You just had to trust gold.

With that, the blueprint was complete.

There was just one problem.

Building a bypass is one thing. Knowing it actually works is another. Knowing it still works under the most extreme conditions imaginable is something else entirely.

Yes, over the next few years, countries slowly started using pieces of the system. Pakistan bought Russian crude in yuan. Iraq approved yuan settlement for trade with China. Even Western oil major TotalEnergies completed the first LNG trade settled in yuan. And in 2024, following Xi Jinping’s famous trip to Riyadh, where he met King Salman and Crown Prince Mohammed bin Salman and openly urged the Gulf states to start selling their oil and gas in yuan, even Saudi Arabia, the original pillar of the petrodollar, joined China’s cross-border payments network.

But all of that happened on a relatively small scale.

Running millions of barrels of sanctioned oil through the system in normal times would have been tantamount to declaring monetary war on the United States. And Washington would almost certainly have responded.

But then the new Trump administration, fresh off its victory in Venezuela, handed China the opportunity itself. The U.S.- and Israel-led war with Iran pushed Tehran into shutting down the Strait of Hormuz, the single most important oil chokepoint on Earth.

And just like that, the very same actions that would have looked like monetary aggression a few months earlier suddenly looked like a public service. The world needed someone to absorb the oil shock. China did exactly that, while quietly putting every part of its alternative financial system through the biggest real-world stress test imaginable.

And that’s why I think this story matters.

Yes, China saved the world from $200 oil.

Yes, it protected its export economy.

Yes, it made the Strait of Malacca a much less effective weapon.

But it also accomplished something much bigger.

For the first time, China showed, to itself, to the U.S., and to anyone paying attention, that the petrodollar can be bypassed, not in theory, but in practice, and on a scale never before attempted.

If I’m right, and historians ever go looking for the day the multipolar world was born, this spring is going to be a very strong candidate.

Regards,

Lau Vegys

P.S. If today’s essay left you thinking about what happens to energy markets when the old rules quietly stop applying, that’s exactly what my new special report is about, just in a different corner of the market. Situation Normal: Uranium went out to paid subscribers a few days ago. Make sure you haven’t missed it. And if you’ve read it and want to act on it, remember there’s already a uranium play in the SNAFU portfolio. Read the report first, then go back to the recommendation.

This time it wasn’t the fires. It was 60,000 illegal migrants storming into the town of Ceuta (the overwhelming majority of them fighting-age men), crossing from Morocco by land and sea in a matter of hours. Here’s some footage, to give you a taste.

Now, in case you’re worried about the wellbeing of your editor, don’t be. Ceuta is not located on the Spanish mainland. It’s a small piece of Spanish territory, an enclave, that sits across the water on the North African coast.

But here’s the thing about the place: it’s a city of only about 85,000 people. So when 60,000 pour across the border in a matter of hours (reporters on the ground were clocking something like 200 people a minute), you’re looking at more than half the city’s entire population arriving in a single day. That’s when a town’s real trouble starts. And the internet is full of videos of the place descending into chaos: crowds of young men harassing locals, breaking into shops and even private homes. A total sh*tshow, and a nightmare for anyone who actually lives there.

Now, there’s nothing new about Spain’s coastline being a landing point for illegal migration out of Africa. It’s been happening for years, really ever since Angela Merkel threw open Germany’s doors back in 2015 and signaled to the whole continent that the welcome mat was out. But this is something else entirely. This is on a scale nobody has seen before.

So unprecedented, in fact, that it pulled a statement out of Italy’s prime minister, Giorgia Meloni, who called for Spain to be suspended from Schengen, the EU’s visa-free travel zone.

And as I write this, Italy has already started acting on it, reintroducing checks on arrivals from Spain by air and sea.

Now, in case you’re not familiar with it, most of the EU belongs to what’s called the Schengen Area. No passports, no border checks, drive from Lisbon to Tallinn without ever stopping. That was the deal, anyway, and it’s meant to be the crown jewel of the whole European project, the thing the EU is built on. But the way I see it (and Italy just proved the point), it’s already dead in the water. Country after country has been quietly reintroducing controls, mostly because of out-of-control immigration and everything that comes with it.

I saw the writing on the wall myself a little over a month ago. On our drive down to Spain I wrote about hitting border checkpoints crossing into Poland and then Germany that simply weren’t there the summer before.

So what brought this on?

The internet’s already cooking up theories that this is payback, punishment for Spain being the one EU country willing to stand up to both Washington on China and Israel on Gaza. And look, I keep an open mind. Far too many so-called conspiracy theories have turned out to be true lately, COVID leaking from a lab being the cleanest example.

But I don’t think that’s it.

For starters, a lot of the people pushing that line conveniently forget that Spain has, for the better part of a decade, been run by a rabidly socialist government that despises almost everything the West stands for, including its own history and, frankly, its own people. So any “principled stand” coming out of Madrid against the U.S. or Israel isn’t really about the Palestinians or the Iranians. It’s ideological. In plain terms: they’re communists, and they hate the West. And they hate their own population as an extension of that West. So much so that they’ve been openly trying to replace it with foreigners, as a way to lock their opponents out of power for good. It's why, just months ago, they pushed through an extraordinary regularization scheme handing legal residence and work permits to about a million migrants over the next three years, with a path to citizenship.

Note: That, coming back to Schengen for a moment, is the real problem for everyone else. Once a country turns itself into one giant sanctuary, and there are no borders between it and the rest of the continent, those migrants aren’t just legal there. They’re legal everywhere in the bloc. They can go anywhere and do as they please, and the rest of the continent is left standing downstream of it.

There’s a lot more to say here (I may even write a fuller piece, with some of the conversations I’ve had with people while I’m here), but suffice it to say I’ve never seen Spaniards despise a government the way they despise this one.

Anyway, back to the invasion itself. From my digging, both online and on the ground here, there are two things going on.

The first is legal. Back in July (just weeks ago), Spain’s Supreme Court ruled that migrants who reach Ceuta or Melilla by sea can no longer be given the “hot return” (devolución en caliente) that used to send them straight back. Now they have to go through the full legal process. The ruling applies to them because they don’t climb the border fences. They swim around them.

That doesn’t mean you automatically get asylum. But to the smugglers and the migrants, the message is dead simple: make it to the beach, and Spain has to process you. Maybe you get asylum, maybe you don’t, but in the meantime, while you wait, it’s free housing, free food, free everything. A pretty good deal for people who don’t have two cents to rub together.

Granted, that still doesn’t explain how you get from a court ruling to 60,000 people crossing at once. That doesn’t just happen. It’s organized.

And that’s where Morocco comes in. Morocco has a long track record of “relaxing” its border controls whenever it wants to lean on Spain or the EU, opening the tap, basically, as leverage. The best-known case was Ceuta in 2021, when thousands crossed right after Spain quietly let a figure Morocco considers an enemy into the country for medical treatment.

Fast forward to today, and Morocco looks annoyed about something else entirely: Spain cozying up to Algeria, its bitter rival in the region. In March, Spain’s foreign minister flew to Algiers (the Algerian capital) to deepen energy ties. Then, on July 20 (days before the border broke), Spain’s socialist prime minister, Pedro Sánchez, went himself, with the bosses of Spain’s biggest energy companies in tow, and the two countries announced a “new phase”: more Algerian gas, fuller use of the Medgaz pipeline that runs straight from Algeria to Spain, more LNG, broader cooperation across energy and industry.

To Morocco, that’s Spain climbing into bed with the enemy. And a few days later, the border sprang a leak.

It doesn’t strike me as a coincidence, not with Morocco’s track record of using its border as a weapon against Spain.

Anyway, it seems Spain is in trouble. Which, these days, feels more like the rule in Europe than the exception. As even Bill Maher (one of the more reasonable old-school liberals) put it:

Did you see what happened in Spain? 60,000 people in one day bum-rushed the border. And at the same time, Spain’s having horrible fires. Spain is the new California: the northern part is on fire, the southern part gets overrun by migrants, and everybody speaks Spanish.

And since that sharp joke just carried us across the water, let’s turn to the biggest story of the week in the U.S.: Anthony Fauci.

Yes, we finally got to see Mr. Science testify. Well, “testify” is generous. On the advice of his lawyers, Fauci took the Fifth instead. More than a hundred times. He wouldn’t say what day of the week it was. He wouldn’t say what color his tie was. He wouldn’t even say what color the carpet was.

Because nothing says “trust the science” quite like pleading the Fifth over the color of the carpet.

And the reason is pretty obvious. Fauci is clearly terrified of incriminating himself.

In case you’re wondering why, Biden’s pardon (or Biden’s autopen pardon, if we’re being precise) only covers crimes committed before he left office. So if Fauci answers a question today in a way that contradicts his earlier sworn testimony, that’s a brand-new perjury case the old pardon doesn’t touch. The same goes for possible state charges or contempt.

Which is exactly why his lawyers told him to shut up and plead the Fifth on everything, right down to the color of the carpet.

Some of my readers may disagree, but I think Congress should grant the bastard immunity. If that’s the only way to drag the actual truth out of him, then do it. Not for his sake, but for the people who lost family, businesses, years of their lives, and whatever trust they had left in “science” and “the institutions.” And so we’ve got a fighting chance of stopping the same circus from playing out the next time someone decides to play God. We already know he funded the research. We already know the diary contradicts the public story. We already know he orchestrated the early narrative. What we still don’t have is the full, unfiltered account, under oath, of exactly how deep it went and who else was in on it. Give him immunity. Make him talk. Then let the chips fall. He won’t get off scot-free before God anyway.

That aside, the other story that caught my eye last week was NYC’s socialist mayor, Zohran Mamdani, unveiling plans for New York’s first city-owned grocery store. That one hits close to home. I was born in the USSR and grew up under the exact system he’s now selling to Americans. So here’s the Substack note I posted about it:

That was the week, and a busy one for me behind the scenes, too. Most of it went into finally finishing the SNAFU Investing uranium report, which is up now for paid subscribers. It’s linked just below, along with last week’s other piece.

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 five that stood out last week, 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.

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

P.S. If you joined as a paid member last week, welcome aboard. Here’s where to dive in:

• The first recommendation: a uranium play, with the full thesis, buy-up-to price, and tranche levels.

• The second recommendation: a silver miner.

• The live portfolio: the scorecard of every open position and where each one stands.

It took longer than I expected. I kept going back into the text, and then probably spent longer than I should have on how the thing actually looks. Partly because something you’re going to keep on your hard drive ought to be worth keeping, and partly because I’ve found that when a thing is set properly you read it more carefully and more of it stays with you. Anyway. It’s done.

Situation Normal: Uranium is nineteen pages and six charts, sitting at the bottom of this post as a PDF. Download it, keep it. Paid subscribers, as promised.

It’s the thing I wish somebody had handed me when I first started poking around this market. A plain explanation of how uranium actually works, why it behaves like nothing else in resources, and what’s going on in it right now.

Read it front to back and you’ll know more about this market than 99.9% of people out there, including most of the ones who already own uranium stocks. I don’t say that to flatter myself. This sector just gets covered badly.

Some of what’s in there:

• Uranium is the one commodity where demand doesn’t flex. A copper smelter can be idled. A reactor can’t.

• 156 million pounds a year. It’s the number in every research report written about this market, and it’s close to useless, because it describes a market the sanctions of the last two years quietly killed.

• 440 reactors running, 80 more physically under construction, 445 planned or proposed. By 2040 the world needs around 390 million pounds a year, and identified supply covers less than half of that.

• Producers are still delivering into old contracts at around $61 a pound while new ones are being signed at $97. For a miner with all-in costs of $40, that’s the difference between earning $21 a pound and earning $57. Uranium itself doesn’t have to move a dollar for it.

• 92% of the uranium burned in American reactors comes from abroad. Over a third of it from Russia and two ex-Soviet republics that are increasingly looking east.

• Why the price hasn’t spiked yet, and you get the honest answer rather than the bullish one.

• Plus the four questions I keep getting from readers. Isn’t this just the AI trade? What about small modular reactors? What if the Russian ban gets lifted? Could another Chernobyl end all of it?

One more thing and then I’ll get out of the way.

There’s no company named in the report. Doesn’t need to be. There’s already one in the SNAFU portfolio.

I laid out the company in full at the time. But the case for uranium itself, the reason to own any of this, is in the report. So if you read that recommendation and wanted more before acting on it, this is the more. Read it first, then go back. → Read the recommendation

Now, the report.

Read more

To say that’s a big deal would be an understatement.

The fund is called GPIF. It manages $1.8 trillion, which makes it the largest pool of retirement money anywhere on earth. That's bigger than the entire annual economic output of the Netherlands, Saudi Arabia, or Switzerland.

If you’ve been reading me for a while, you probably know Japan has more problems than it knows what to do with. It’s the world’s fifth-largest economy and, at the same time, the oldest country on earth. Which is challenge enough in itself. But it also has to deal with the largest debt load in the developed world, a currency in free fall, and an economy heavily dependent on imports. That last one was a serious problem long before the Hormuz crisis came along and made it a lot worse.

Japan also happens to be the world’s third-largest creditor nation. Which means whatever it does ends up landing on markets somewhere else. Usually American ones.

So today I want to spend some time on this latest development, because this is exactly the kind of story that reaches your money long before it reaches the headlines.

How the Money Gets Home

OK, so a fund that size has to put its money somewhere. And for the better part of the last thirty years, a very large share of it has sat outside Japan.

Going by its latest disclosure, the GPIF holds about $931 billion in foreign assets. Of that, $232 billion is U.S. Treasuries, and most of the rest sits in foreign stocks, a good chunk of them American as well.

So what does it actually mean when a finance minister says something like that?

Because we’ve seen other Japanese officials make borderline threats about American assets before, only to walk them back a few days later. Last year, for example, Japan’s previous finance minister floated the idea that the country’s Treasury holdings could serve as “leverage” in trade talks with President Trump.

That one lasted about a week.

So is this just another one of those?

Well... no.

But before I explain why, let’s first get the story straight, because I’ve already seen a lot of people get this wrong.

Katayama is the finance minister, but the GPIF doesn’t actually report to her. It sits under the Ministry of Health, Labour and Welfare because it manages the reserve assets of Japan’s public pension system. And even that ministry doesn’t tell the fund what to buy. Instead, every five years it sets broad investment objectives, and the GPIF’s own board translates those into a target allocation the fund then has to stay reasonably close to.

That allocation is famously simple: 25% domestic bonds, 25% domestic stocks, 25% foreign bonds, and 25% foreign stocks.

So, strictly speaking, the finance minister can’t order any of this.

But here’s the thing you need to understand about how Japan works.

Government decisions there are made through something called nemawashi. In a very Japanese fashion, the groundwork gets laid privately first, circulated between ministries and negotiated toward consensus, long before anyone says a word in public. So by the time a minister stands at a press conference and says something like this, it has usually already been cleared behind the scenes.

Now, those target weights don't come up for review until 2030, which is when I'd expect Japan to properly reshuffle the deck.

But here’s the important part.

They don’t actually have to wait until 2030 to start bringing money home.

Why?

Because those 25% targets aren’t hard limits. They’re allowed to drift within a fairly generous range without anyone changing the policy. Each bucket can move roughly 5 to 6 percentage points on either side of its target.

Which means foreign bonds and foreign stocks could both fall to around 20% without anyone touching the official allocation. On a fund this size, that’s roughly $180 billion that could come home under rules that already exist. And with $232 billion of the GPIF’s money sitting in Treasuries, a good slice of it would come straight out of American paper.

And if you look closely, the money is already starting to move.

In June, just about a month ago, Japanese life and casualty insurers bought more of their own government’s long-term bonds than in any month in the past three years.

These are private companies. Nobody told them to do this. They looked at what they could earn at home, without taking currency risk, compared it with what they were getting abroad, and decided they were better off buying more Japanese government bonds.

One of the biggest, Meiji Yasuda, doubled its planned purchases for the year to ¥2 trillion (about $12 billion).

What Backed Them Into This

Now of course, if you’ve been reading my past essays on Japan’s troubles, you probably know why this is happening. A weak yen, and the heaviest debt load in the developed world. (And, as you'll see, they're really just two sides of the same problem.)

Just to give you a sense of how bad the yen's decline has been...

In early 2021 you needed about 105 yen to buy a dollar. Today you need about 163. In five years the yen has lost more than a third of its value against the dollar, and it’s now the weakest it has been in roughly forty years.

The reason isn't especially complicated. It goes right back to what I mentioned a minute ago.

For decades, the Japanese government dealt with the country's problems (an aging population, turtle-speed growth, and a shrinking workforce) the same way governments often do: by borrowing. A lot.

The pile is now north of 200% of GDP, or roughly $8 trillion. And the way Japan managed to carry it was with a familiar playbook: keep interest rates near zero and have the central bank print money to buy the government’s own debt.

That works... right up until the rest of the world starts paying interest and you don’t.

When America was paying around 5% on cash and Japan was paying next to nothing, money did what money always does. It went where it earned the better return. Investors sold yen, bought dollars, and moved their money into American assets. As more money left Japan, the yen kept falling.

Unfortunately, for a country that imports almost everything it burns and eats, a weak currency isn’t the blessing it looks like on an exporter’s spreadsheet.

Japan imports nearly all of its energy and about 60% of its food, virtually all of it priced in dollars. So every time the yen falls, the cost of keeping the lights on and the supermarket shelves stocked goes up.

So Japan has been trying to fix the yen directly, by buying it.

Just this year, in April and May, the Ministry of Finance went into the currency market and started buying yen with its dollar reserves. Day after day, $73 billion worth. It was the largest currency intervention in the country’s history.

It worked for about three weeks. Then the yen started falling again. Turns out that's not enough. Somebody else has to want your currency too.

Japan also tried raising interest rates.

You can almost watch the capitulation happen in the numbers: 0.25% in July 2024, 0.75% last December, then 1% in June — the highest policy rate since 1995.

The yen fell anyway.

Note: The Bank of Japan meets again this week to decide whether to raise interest rates further. The decision is due Friday, and another hike wouldn't surprise me.

Interestingly, inflation came in at 1.6% just last week. That’s below the Bank of Japan’s own 2% target for the fifth straight month. Under normal circumstances, that should have pushed long-term yields lower. Inflation is being tamed. Yay.

Instead, long-term yields rose. (Which means Japan’s borrowing costs on that $8 trillion just went up.)

That alone tells me the bond market has stopped worrying about inflation and started worrying about something much bigger. Who's going to keep buying all this debt?

And that's really what I think Katayama was getting at when she said she wanted the pension fund to sell its foreign assets and buy Japanese ones. If the rest of the world won't buy this debt, the Japanese will have to... which means cashing out of assets parked abroad, including the good ol' USA (and buying a great deal of yen on the way).

Situation normal. Plan accordingly.

Regards,

Lau Vegys

P.S. I realize you probably don’t spend much time thinking about Japan’s economy. Most people don’t. But I’ve been banging the table about this for the past year or so because I think it’s one of the most overlooked stories in global markets. Japan owns about $1.1 trillion of U.S. government debt (already noticeably less than when I last wrote about Japan). If a buyer that big starts heading for the exit, it doesn’t just become your government’s problem. It eventually spills over into mortgage rates, car loans, corporate borrowing costs, and, ultimately, your portfolio.

These are exactly the kind of situations I want to stay ahead of, and a big part of why I launched SNAFU Investing earlier this month. There are two picks in the portfolio already, two special reports on the way, and the first monthly issue landing next month. It’s all just below, if you’re curious.

Barely a week ago, the entire nation was glued to the World Cup final. This week, Spaniards are watching their country burn.

In case you haven’t seen the news, a savage heat wave has touched off wildfires up and down the country, and it’s hitting especially hard here in the Valencia region, where we happen to be staying.

The photos below could easily have been taken from the highway we were driving on just last week. (Good thing we weren't headed that direction.)

And right on cue, we’re handed the reason: climate change. It’s always climate change. But talk to anyone who actually studies how these fires start, and you get a different, less convenient answer.

The Mediterranean has always had hot, dry summers. That part isn’t new. What’s new is the fuel. The Spanish even have a name for the deeper cause: la España vacía, “empty Spain.” Over the past few generations the rural interior hollowed out — people left the villages for the cities and the coast, and the work left with them. Grazing stopped. Clearing stopped. The old habit of working the land, burning the brush back, keeping the undergrowth down, died with the rural economy that used to do it. Add decades of “put every fire out the second it starts,” and you’ve quietly stacked a tinderbox the size of a province.

The point is, heat alone doesn't create catastrophes. The neglect makes sure that once one catches, it doesn't stop.

If you're an American and you're getting a sense of déjà vu, you should — it's pretty much the same script behind California's infernos. Years of fuel piling up in forests nobody’s allowed to thin or burn, then a spark, then a catastrophe the politicians pin entirely on the weather.

But of course, it's easier to blame CO₂ emissions and climate change than admit the land was mismanaged for forty years.

Now, here in the EU, that kind of thinking is of course out of step with the official line. You’re perfectly free to say it out loud, sure. You’re just not free from what comes after: the label, the pile-on, the climate denier tag. And if you know anything about the current state of Europe, you know it can get worse than a label. In some countries here, voicing the wrong opinion on social media can land you with a fine, or a knock on the door from the police.

Which brings me to an old Soviet joke I shared on the feed last week:

Remarkable how it applies to so many Western countries today.

I’m not sure you caught this, but even on Musk’s own X, the European Commission recently strong-armed the platform into adding a reporting tool — a button for flagging content that supposedly runs afoul of European rules.

Here’s a screenshot from my own X feed, taken just a few minutes ago.

Speaking of Musk, his marquee venture has been having a rougher time of it — SpaceX, the private-market darling everyone was scrambling to own just weeks ago, has come sharply back to earth. I posted a note on it last week:

The war with Iran, meanwhile, grinds on... After another week of strikes, threats, and frantic diplomacy, the two sides are still haggling over shipping in the Strait of Hormuz while mediators scramble to keep the fighting from spiraling again.

I’ve said it before, and I’ll say it again: if you don’t see how outrageous and meaningless this war has been, you only need to understand two things.

First, the entire reason the U.S. is still fighting now comes down to the Strait of Hormuz. And the truly outrageous part is that keeping it open wasn't even a problem before the war started.

Second, everything we were originally told this war was about — zero enrichment, Iran's nuclear program, its ballistic missiles, and so on — has quietly been dropped from the talks. That alone should tell you what an utter, pointless failure this has been.

Since we’re on the subject of Hormuz, maybe it’s just my own bubble, but I’ve been seeing more and more people wonder why, with everything going on, we still haven’t seen $200 oil. My relatives have asked me. A good number of readers have too. So last week I sat down and wrote the whole thing up.

(Judging by the response, plenty of readers who hadn’t asked were wondering the exact same thing.)

The essay is linked just below, but the short version is this: China — the world's biggest buyer of crude — quietly pulled off the largest intervention in the history of the oil market, and almost nobody noticed while it was happening.

This week I'm sitting down to write a part two, because the more important question isn't how China canceled the oil shock — it's why. I'll give you the spoiler: the Chinese Communist Party didn't do it out of the goodness of their hearts.

Meanwhile, again, you’ll find the China oil piece below, along with last week’s other essay and the reader discussions they sparked.

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 seven that stood out, for different reasons. Each one links back to the piece 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 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

P.S. If you joined as a paid member this week — welcome aboard. Here’s where to dive in:

• The first recommendation — a uranium play, with the full thesis, buy-up-to price, and tranche levels.

• The second recommendation — a silver miner, out this weekend.

• The live portfolio — the scorecard of every open position and where each one stands.

When the fighting closed the Strait of Hormuz this spring, the predictions were apocalyptic. Thirteen thousand flights canceled. Britain, we were told, was days from its last shipment of jet fuel. Analysts penciling in $200 oil, and a few of the louder ones going even higher.

Over at Doug Casey’s Crisis Investing (my old shop), readers kept writing in, asking why we weren’t recommending an oil play, or telling me to “look into” this or that oil company.

And believe me, I understood the temptation. On my drive over here to Spain, I was posting photos of German pump prices doing things I hadn't seen since 2022… and half-wondering if the doomers had a point.

Now, on the face of it, the doomsday math was never wrong (more on that below). After all, the 1973 Arab embargo — the one that gave us gas lines, odd-even rationing, and a decade of inflation — took away about 7% of the world’s oil, and prices more than doubled. This time, Hormuz was choking off well over twice that share.

And yet I kept pushing back against any oil recommendation.

Why?

Because someone was absorbing the shock.

Now, if you're thinking it was the International Energy Agency (IEA) riding to the rescue with its emergency release — 400 million barrels from strategic stockpiles around the world — no.

Yes, it was the largest release in history — bigger than all the previous ones combined. (Or pledged, anyway — the barrels trickle out over months.) But it wasn't nearly enough. In fact, it fell short by miles, as I'll show you in a minute.

The someone was China.

While the whole world stared at the strait, Beijing quietly pulled off what may be the largest intervention in the history of the oil market. And it did it without announcing a thing. (That, in a nutshell, is why I steered clear.)

Today, I’ll show you exactly what China did, and how. (Why they did it — and what it means for the dollar, which is the far bigger story — that’s Part 2, next week.)

First, though, let’s take a proper look at that doomsday math.

The Doomsday Math

On any given day, the world produces about 83 million barrels of crude — and consumes about 83 million. That's no accident. Oil isn't like wheat you can pile in a silo and forget about (national reserves aside, which we'll get to). Pretty much every barrel that comes out of the ground gets refined and burned almost as fast. There's basically no slack in the system.

Note: If we counted refined products too, global production and consumption would both be about 100 million barrels a day. And yes, the Strait carries both crude oil and refined fuels. But because the replacement routes we're about to discuss are almost entirely crude, I'll stick to crude throughout this essay.

Which is why Iran’s closure of the Strait was such a big deal. Overnight, roughly 15 million barrels a day stopped reaching world markets. That’s nearly one in every five barrels of the world’s crude.

So what could actually replace those missing barrels?

Well, first you have the bypass pipelines. Saudi Arabia’s East-West Pipeline has a nameplate capacity of around 5 million barrels per day. The UAE’s Habshan-Fujairah line adds another 1.5 million. Combined, that’s 6.5 million barrels per day on paper. And we’re being generous here, because pipelines rarely run at their full nameplate capacity.

Then there was the IEA’s 400-million-barrel release I mentioned earlier. Again, that’s a lot. But the total wasn’t what mattered here. What mattered was how fast those barrels actually reached the market. And if past emergency releases were any guide, that worked out to roughly 2 million barrels a day.

Finally, there was the shadow fleet — tankers still willing to run the Strait with their transponders switched off, accepting the risk in exchange for higher freight rates. At best, they probably added another million barrels per day.

Add it all together. About 6.5 million barrels from the pipelines. Another 2 million from the IEA. Roughly 1 million from the shadow fleet. That makes around 9.5 million barrels per day in total.

But remember: before the closure, roughly 15 million barrels of crude had been flowing through the Strait every day. That still left a gap of about 5.5 million barrels per day. Take a look at what that looked like visually.

The world was still 5.5 million barrels short. Every single day.

Which of course meant the shortfall was compounding fast. Day one, you’re 5.5 million barrels in the hole. Day thirty, 165 million. By day one hundred? More than half a billion barrels gone.

In other words, the IEA’s record release would have covered less than three months of the gap. Meanwhile, strategic reserves around the world were visibly draining. In the U.S., for instance, the Strategic Petroleum Reserve fell to its lowest level since Reagan's first term.

So no, the doomsday crowd wasn't crazy. It was just math. If all you looked at was the supply gap, it really did point to $200 oil.

Enter the Beast

But then, somewhere around April, reality stopped matching the math.

Despite some ups and downs in the oil price (plenty of jittery action depending on what President Trump was saying at the time), we never saw $200 oil.

In fact, if anything, prices kept easing. Why?

The gap hadn’t gone anywhere, after all.

This could only mean one thing: somewhere out there, demand was disappearing. Millions of barrels a day of it.

I had my suspicions. Then in April, a friend with access to a Bloomberg terminal (the expensive kind) sent me a chart. It looked a lot like this:

As you can see, China’s imports had been humming along around 11 to 12 million barrels a day for years. Month in, month out.

And then the bars start shrinking. Fast. The slide began in March. By May, imports were down to 7.8 million barrels a day, the lowest in nearly a decade. By June, 7.2 million. That’s down 41% from a year earlier, per China’s own customs data. A cut of 4.9 million barrels a day, and the weakest month since October 2016.

In other words: in the space of four months, the world’s biggest buyer of crude cut its purchases by 40%. That’s nearly half. No announcement. No explanation. It just quietly stepped back from the market.

Now, to appreciate all that, you have to understand that China is no ordinary player in the oil market. Its rise as an oil importer is one of the biggest stories in modern economic history, decades of almost uninterrupted growth that took it past the United States as the world’s largest importer.

In normal times, China buys more crude from abroad than India, Japan, and South Korea combined. So when it pulled back its imports after the Strait of Hormuz closed, the effect was enormous. JPMorgan found that China alone accounted for 74% of the entire global decline in crude trade.

And of course, every barrel China didn’t buy was a barrel freed up for everyone else.

Remember our doomsday arithmetic? The world was short 5.5 million barrels a day. China cut 4.9. Just like that, the gap was all but gone.

Which is how, without announcing a thing, China saved the world from $200 oil.

How China Canceled $200 Oil

Now that you know what happened, you’re probably wondering how China actually pulled it off. Because if you know anything about economics, you know you can’t just slash your oil imports in half and carry on as if nothing happened. An economy doesn’t work that way.

Now, look — having been born and raised in the USSR under Communist Party rule, it should go without saying that I’m no fan of centrally planned economies. They don't work. Never have. I watched it fail in real time.

But China isn’t really a centrally planned economy anymore. It’s a strange hybrid: a one-party dictatorship bolted onto one of the most ruthlessly competitive market economies on Earth.

And what it pulled off during the Hormuz crisis was a masterclass in crisis management. Which is why it’s worth understanding exactly how it did it.

OK, so let’s start with what cutting roughly 40% of your oil imports actually requires. There are only two ways to do it: either you need less oil, or you get it from somewhere other than the global market.

China did both.

First, coal. This one's big. For all of China's solar-panel headlines, the sun is still only a small slice of its power mix. And unlike the West, China never bought into the crusade against "dirty" coal. The plants just kept humming. In fact, it commissioned more than 50 large coal plants in the previous year alone. Somewhere along the way, it also figured out how to make plastics from coal instead of oil, and fertilizer too. So when the crisis hit, China was in a unique position: it could shift real demand away from oil and onto coal at a scale no Western country could dream of.

Second, a quiet fuel export ban. In March, China ordered its refiners, some of Asia's largest fuel exporters, to stop exporting fuel. China has a huge refining industry that turns crude into gasoline, diesel, and jet fuel. Most stays at home, but a sizeable chunk is exported across Asia. Well, not anymore. There was no announcement; the story leaked through "sources familiar with the matter."

At the time, everyone assumed Beijing was simply building fuel stockpiles at home. Wrong. It turned out to be the first quiet step in the import cuts that were coming. The refineries were about to process less crude. Which meant importing less of it. And here’s the beauty of it: because much of that fuel was headed overseas anyway, China barely had to cut domestic consumption.

Third, years of EV subsidies quietly paying off. China spent the past decade subsidizing electric cars the way other countries subsidize bread. So when Hormuz closed and gasoline prices surged, nobody had to be told what to do. The old Wuling Mini came back out of the garage. Gas-car owners carpooled in a friend's EV. None of this would have been possible if China had started from scratch. You can't put tens of millions of EVs on the road overnight. But you don't have to if you've already spent a decade doing it. China had. And gasoline demand fell accordingly.

Put all three together and you get roughly 2 million barrels a day. Significant. But still nowhere near a 4.9-million-barrel reduction.

So where did the other 2.9 million barrels a day come from?

The silos.

Now, we can only estimate the size of China’s strategic oil reserve, because it’s — you guessed it — a state secret. But we can get surprisingly close thanks to the people whose full-time job is counting storage tanks in satellite photos. The tanks are enormous, and their floating roofs rise and fall with the oil inside. All of it visible from space.

Count the tanks, measure the roofs, do the arithmetic, and you arrive at roughly 1.4 billion barrels of crude. That’s more than every other country’s strategic reserves combined. Just look at the chart below.

In all honesty, 1.4 billion is probably the conservative estimate. Remember, that's only the visible storage tanks. China has also spent years digging vast underground caverns that no satellite can measure, so the real figure is almost certainly higher. Whatever the true number, the Hormuz crisis revealed just how enormous China’s reserves had quietly become. (Which, by the way, I don’t think was accidental. But more on that in Part 2.)

But like I said earlier, what matters isn’t the total. It’s the daily flow. Simple arithmetic: draw the missing 2.9 million barrels a day from a 1.4-billion-barrel reserve, and it lasts about 480 days. That’s sixteen months, well over a year, before you even count the underground caverns.

To appreciate just how extraordinary that is: if India had to fill a hole that size from its strategic reserve, it would run dry in about a week. America’s (the envy of the world, built up over decades) would last under five months. Most countries measure their emergency reserves in days or weeks. China measures them in years.

So if you were wondering why everyone (but China) spent the first month of the war convinced the sky was falling, that’s why.

The world genuinely did need saving.

Now you know who saved it, and how.

As for why they did it... well, that’s next week’s Part 2. As you probably suspect, it wasn’t out of the goodness of their hearts.

Have a good rest of the weekend,

Lau Vegys

P.S. In the two weeks since SNAFU Investing launched, I’ve recommended two companies to paid subscribers: a uranium play and a silver play. If you’re on the paid side, make sure you haven’t missed them: catch up here and here. Especially now: one of the two just pulled back to the level where, per our playbook, it triggered the second tranche — a chance to add at better prices than the original recommendation. And if you’ve been on the fence about upgrading, this may be the week it makes sense.

It’s a joke, of course. But like most good jokes, it works because it’s true: nobody wants to talk about silver right now. And I understand why. It’s been a rough year for the metal. After doing something it had never done before — crossing $100 an ounce, then topping $120 — silver got cut in half. As I write this, it’s trading around $57. So it’s understandable... Anyone who bought the top would rather talk about gold. Or bonds. Or Bitcoin. Anything, really.

But if you assumed $57 is what the poor man’s gold trades at around the world, you’d be wrong. That’s just the price in New York.

In China, the hungriest silver market in the world, the same ounce goes for about $64. That’s the price on the Shanghai Gold Exchange, and the venue matters: it’s where China’s physical metal actually changes hands. In other words, bars move in and out of vaults, not paper promises. Call it a 12% premium over the Western price.

Same metal, two very different prices… depending on which side of the planet you’re standing on.

Today I want to walk you through why that gap exists, why it’s not going away, and why the metal crossing into China these days is probably making a one-way trip. Because I think it tells you more about where silver is headed than any bank’s price target.

The Great Silver Exodus

If you’ve been reading me for a while, you’ve heard me talk about the gold exodus from West to East, and how it’s been picking up speed for years. Interestingly, the same thing has been happening with silver.

I call it an exodus because premiums this large create a prime arbitrage opportunity that speculators can’t ignore: buy metal in the West, ship it east, sell it at the higher price, pocket the difference. And so the silver continues to flow eastward.

And as the arbitrageurs cash in on the price difference, Western vaults get depleted. Sooner or later, the price has to notice.

That was exactly the situation when I first wrote about this, a little over two years ago. Here’s what I said back then:

Take the mentioned LBMA, for example. It now holds around 300 million ounces of silver, which is 66% less than it had at the beginning of the year (870 million ounces). Meanwhile, COMEX in New York has seen its stacks shrink by about 46%, down to 60 million ounces from 110 million ounces.

If the Red Dragon doesn’t slow down, these reserves will be nearly gone. Silver could easily break $50 when that happens.

What happened next? The Red Dragon didn’t slow down — and silver did exactly what I said it would. By last fall, it had blown through $50. But as you well know, it didn’t stop there. By early this year, it was trading above $120.

Now, are Western inventories getting drawn down at that same pace today? Not quite. But that’s just a matter of time. As long as the premium persists, silver will keep moving from West to East.

Interestingly, unlike gold, it’s not central banks driving this. It’s Chinese investors.

Now, to understand why the Chinese keep buying, you have to look at what a saver’s options actually are over there, because they’re nothing like ours in the West.

Even in the U.S., with the Fed cutting rates since late last year, you can still park cash in a CD at around 4% and more or less keep pace with inflation. Not exciting, but your money has somewhere to sit.

A Chinese saver has no such luxury. Bank deposits there pay about 1%, and the central bank has promised more cuts, not fewer. Property — where Chinese families kept the bulk of their wealth for a generation — has been deflating for years. The stock market has burned retail investors more than once. And capital controls mean you can’t simply move your money out of the country and into something better.

That leaves precious metals. And that’s exactly what they’ve been buying — first gold, now silver.

And that’s before you even count the factories. Because China isn’t just the biggest saver-buyer of silver — it’s also the world’s largest industrial consumer of the metal. It builds most of the planet’s solar panels (silver’s biggest single use), plus the EVs and electronics that need it too. And unlike a saver, a factory doesn’t get to change its mind when the price rises. It either buys silver or stops producing.

The Whale and the Throttle

Now, if you know a thing or two about markets, you should be asking the obvious question: why don’t those same arbitrageurs just close the gap for good?

Here’s the catch. China charges a 13% value-added tax on imported silver. It’s the same VAT China slaps on most goods.

Here’s what that means in practice: you buy your ounce in New York at $57 and ship it to Shanghai, where it sells for $64 — a $7 profit, in theory. Except at the Chinese border, the taxman takes his 13% — about $7.40. So now you’re all-in around $64.40, selling at $64. You’d lose money on every ounce — and that’s before you’ve paid to ship, insure, and finance metal halfway across the planet.

In short, the premium has to blow past the tax line before the trade works.

This is all to say — and it’s the part so much financial commentary glosses over — the metal doesn’t simply flow from West to East in a steady stream. It moves in waves: every time demand pushes the premium through the toll, a wave rolls.

And the last big one wasn’t back in mid-2024, when I first wrote about this. It came just this past winter, when the premium on the Shanghai exchange blew out past 30%. That’s more than double the toll. We know what happened next from Chinese customs data: China imported nearly 470 tons of silver in February alone, the most ever recorded for that month. Imports of refined silver ingots rose 5,910% from a year earlier.

That’s not a typo. About sixty-fold.

But if China wants the world’s silver as much as it clearly does — you might wonder — why not just drop the VAT completely and let it pour in?

Well, I can’t read minds in Beijing, but I can read incentives. So consider this...

China is the largest buyer in the silver market. Remove the toll, and Chinese demand hits the world price at full force — and every ounce China still wants to accumulate gets more expensive.

That’s the last thing a whale would want. A whale that wants to keep buying doesn’t announce its bid. It buys slowly, quietly, and at its own pace.

So I find it helpful to think of the tax as a throttle that keeps China’s own appetite from bidding up the metal against itself.

That said, I can see the throttle getting eased — not necessarily scrapped overnight, but loosened a notch at a time until one day it’s gone. There’s a precedent for that too: gold. Back in the early 2000s, China made investment gold traded through the Shanghai Gold Exchange VAT-free. Well, we know how that ended: Chinese gold demand skyrocketed — and the gold price with it.

Incidentally, proposals to exempt silver, at least partially, pushed mainly by the solar industry, have been floating around for a while now. Again, I’m no mind reader of Chinese apparatchiks, so I can’t tell you when that might happen. But I do know this: the day China gives silver the same treatment it gave gold, it will be every bit the game changer for the silver price that it was for gold’s.

And something happened earlier this year that makes me think that day may be closer than most people think.

When One Market Becomes Two

If you've been reading me at all this year, you might already know where I'm going with this. In January, China reclassified silver under "dual-use export controls" — the rules reserved for materials that serve both civilian and military purposes.

In plain terms: exporting silver from China now requires government authorization. Only 44 companies have been approved to export silver during the 2026–2027 period, giving Beijing tight control over who can sell refined silver abroad.

Think about what that means. You don’t put washing machines under dual-use controls — you do that to things you consider strategic. And so, with one stroke, China officially stopped treating silver as just another industrial commodity.

And the way China went about this — compared to its much more gradual approach with rare earths, for example — shows you just how much it cares about silver.

Now, silver is not yet where gold is. On the other hand, January brought its first reclassification in decades. The only rung left above it on the ladder is gold’s. That’s the one where the VAT comes off — and where the world’s biggest buyer of silver stops merely guarding its own metal and starts pulling in everyone else’s.

And the fact that silver is the only metal that’s genuinely both things — industrial like copper, monetary like gold — makes that last step that much more likely.

But forget all the ladder business for a second. Even if China never touches the VAT and never puts silver on a par with gold, the export controls alone change the game.

Remember, most of the world’s silver passes through Chinese infrastructure on its way to becoming usable metal — something I mentioned on Saturday, in the piece that also carried SNAFU Investing’s second recommendation. So when Beijing puts itself in charge of what leaves and what stays, even freshly mined silver from Mexico or Peru can end up joining China’s pool rather than the West’s.

Put it all together, and the old self-correcting silver market — where a shortage in one region simply pulled metal in from another — is breaking down. And it’s breaking in one direction. Silver gets scarcer in the West, and Western paper markets can no longer hold the price down the way they always have: by selling promises of metal that rarely turn into actual bars.

Which means the silver price may soon stop being set by traders in New York — and start being set by whoever actually has the metal. (And by now you know exactly who that is.)

So if you needed one more reason to be bullish on silver, there it is. And I think it’s a big one.

Regards,

Lau Vegys

P.S. If you want the actionable version of all this — the silver miner I recommended on Saturday, with the full case, my buy-up-to price, and how I’d size the position — it’s here for paid subscribers. If you’re one of them and haven’t read it yet, don’t let it slip by. (As I write this, the stock is still trading below my buy-up-to.) And if you're on the free list — the first part of that piece is free to read anyway.

So forgive me if this one’s a little groggy.

Last week brought a couple of milestones I'm still getting my head around. Thanks to you, SNAFU Investing hit #1 Rising in Finance on Substack. And then there was one that nearly made me spit out my morning coffee: on the New Bestsellers list, we landed at #2 — one spot ahead of Hunter Biden.

Needless to say, I did not have “beat Hunter Biden on a bestseller list” on my bingo card for this year. Come to think of it, I didn’t even have “Hunter ‘Laptop’ Biden starts a Substack.” What a (weird) timeline.

But I’ll take it as a win — Substack clearly worked their asses off pushing the guy into every corner of the platform.

Now, the unfortunate flip side of all this newfound “popularity.”

A wave of impersonators has shown up — fake accounts using my name and photo.

So a few things, plainly, so you’re never caught out:

I will never DM you or reach out to you off Substack out of the blue (the only exceptions being founding members, or anyone who’s written to me first). Otherwise, the only place you’ll hear from me is right here, in the public comments. I will never try to move you onto WhatsApp, Telegram, or some private “signals” group — that is always a scam, never me.

The tell is usually in the name: the fakes misspell a letter or look just slightly off.

If one contacts you, don’t engage — just report it. That’s the only thing that actually gets them taken down. And if you’re active on Substack, double-check you’re not following one of them by mistake. My only account is Lau Vegys (SNAFU Investing with Lau Vegys).

On my end — we’re into the third week of the launch now, and I’m happily buried. Between working through a mountain of email — sorting out sign-ins and payment snags one by one, helped enormously by my lovely wife, who, having done her time in tech startups, knows her way around this stuff far better than I do — and hunting down the next opportunity to put in front of you next month, there aren’t many spare hours. If I haven’t gotten back to you yet, I will — bear with me.

Speaking of opportunities — I also dropped a second SNAFU Investing recommendation on Saturday; the free silver thesis behind it is open to everyone above the paywall, and paid members can see the pick itself. (Last week also brought the Wednesday essay on uranium, the Strait of Hormuz, and the sulfuric-acid squeeze — linked just below if you missed it.)

From the Comments

One of the things I’ve come to appreciate most about writing here is the conversation that happens in the comments. Five stood out last week, for different reasons — and a couple of them were reacting to this:

That was a story I highlighted in a Substack Note last week. As I put it at the time: looks like politics isn’t just influencing markets anymore — it’s becoming a subscription service. Outrageous on so many levels. But then again… I suppose that’s just SNAFU. Judging by the comments, it clearly resonated.

Note that each comment below links back to where it was posted, so you can click through for 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.

Regards,

Lau Vegys

P.S. If you joined as a paid member this week — welcome aboard. Here’s where to dive in:

• The first recommendation — a uranium play, with the full thesis, buy-up-to price, and tranche levels.

• The second recommendation — a silver miner, out this weekend.

• The live portfolio — the scorecard of every open position and where each one stands.

The company — a silver miner I think the market has badly mispriced — and exactly how to buy it are waiting for you below. But first, the backstory, because with this one the why matters as much as the what.

Now, as you probably know, at the start of this year silver did something it had never done before: it crossed $100 an ounce and went on to top $120. Since then, it’s been cut by more than half, trading around $56 as I write this.

Some people see a chart like that and run. I see an opportunity. Here’s why.

Yes, the silver price fell. But silver’s supply story didn’t — it got, well, even more bullish. In fact, 2026 is on track to be the sixth straight year the world consumes more silver than it produces.

In other words, the silver market isn't just in deficit. It's in a multi-year structural deficit.

And the reason that deficit persists comes down to supply. Industrial demand alone still consumes around 650 million ounces of silver a year — roughly 80% of everything the world’s mines produce — and mine supply simply can’t grow fast enough to catch up. The pipeline of large new primary silver mines is essentially empty; no major one is expected to come online before 2027. Even a standout like Aya’s Zgounder mine in Morocco produces only about 5 million ounces a year.

The Silver Squeeze

And it’s about to get worse — or better, depending on which side of the trade you’re on.

Now, if you read my article earlier this week, this next part will ring a bell. In it, I laid out how the fighting around the Strait of Hormuz choked off the world’s sulfur supply: roughly half of it ships through that single waterway, and when the Strait seized up, sulfur prices jumped about 70%. Then China — the largest exporter — halted most of its sulfuric acid shipments on May 1, tightening the screws further. (Sulfur is the main ingredient in sulfuric acid; right now there simply isn’t enough to go around.)

I told that story about uranium. But it's every bit as much a silver story — and here's why. Silver, you see, is barely mined on its own: roughly 70% of it comes out of the ground as a by-product of other metals, with copper alone accounting for about a quarter of global supply. And a good chunk of the world's copper is pulled from the ore using sulfuric acid.

Less acid, less copper, less silver.

But here's the thing. That acid squeeze I just walked you through? As far as silver goes, it's only an indirect hit. And even China's role in it isn't its boldest move on the metal. For that, rewind to the first day of this year, to something most people have completely forgotten amid all the Hormuz headlines.

On January 1st, 2026, China reclassified silver under “dual-use export controls” — the rules reserved for materials that serve both civilian and military purposes.

In plain terms: exporting silver from China now requires government authorization. Only 44 companies have been approved to export silver during the 2026–2027 period, giving Beijing tight control over who can sell refined silver abroad.

If that sounds familiar, it should. It's the same playbook China used with rare earths. The difference is that, with rare earths, Beijing tightened the screws gradually — first permits, then more categories, then eventually even foreign-made products containing Chinese material.

With silver, it skipped all of that and went straight to comprehensive controls on day one.

And those controls remain firmly in place today.

Now, this matters a great deal because China controls 60–70% of the world's refined silver supply. So even when silver is mined in Mexico, Peru, or Australia, there's a good chance it still passes through Chinese infrastructure before it becomes usable metal. Beijing has effectively put itself in charge of whether that metal leaves—or stays.

A Different Animal Altogether

Now, you might be thinking: why does China care more about silver than rare earths? After all, rare earths are critical for all kinds of high-tech applications, right?

True. But rare earths, for all their strategic importance, are still relatively niche. They’re used in specific, high-value areas—mostly defense and advanced tech.

Silver is fundamentally different.

Solar panels. Electric vehicles. AI data centers. Military electronics. Satellites. Consumer devices. Medical equipment. 5G infrastructure.

I could go on. The point is, silver is everywhere.

And that isn’t a coincidence.

Silver is one of the best electrical conductors on Earth. What’s more, there’s no easy substitute for most applications. You can’t just swap in copper or aluminum and expect the same performance. Silver’s unique properties—its conductivity, its reflectivity, its resistance to corrosion—make it nearly irreplaceable in high-performance applications.

All of this makes silver’s demand what economists call inelastic. Think of it this way: if coffee doubled in price, some people would drink less—that’s elastic. But if insulin doubled in price, diabetics would still buy it—that’s inelastic. The demand continues regardless of price.

Now, the best way to play a silver bull market has always been through a leveraged silver miner. And below, I’ll give you the one that’s finally got me off the sidelines — a company that just cleared its biggest hurdle, yet is still trading as if nothing has changed. That gap won’t stay open for long — and I’ll show you why.

Remember: I put my own money behind every name I recommend here — but never ahead of you. I don’t buy for at least three trading days after a pick goes out, so you always get first crack at it.

Read more

And the reason is simple: I’m extremely bullish on uranium.

Nuclear power is enjoying a revival across much of the world. That part is no longer exactly a secret.

What’s less widely understood is that the real turn is happening in Asia. If you’ve been reading my recent essays, you’ve probably already seen a case in point: Japan and South Korea signed an agreement with the United States to jointly deploy small modular reactors, or SMRs, across Asia and beyond.

One of the things giving that push fresh urgency is the Strait of Hormuz. The recent fighting showed how quickly the oil and gas Asia depends on can be stranded at a single chokepoint.

And that deal is only one piece of a much larger Asian nuclear renaissance: Japan is restarting the reactors it shut down after Fukushima, South Korea is expanding its fleet, and China is building more nuclear capacity than any other country on earth.

More nuclear power, of course, means more uranium demand.

Pretty straightforward.

The Problem

But here comes the big caveat.

Being bullish on uranium doesn’t mean every uranium company deserves your money.

Strangely enough, the reason also goes back to Hormuz.

If you’ve been watching the markets lately, you’ve probably noticed uranium stocks selling off pretty much across the board, caught up in the broader market swings around every new development in the Strait.

At first glance, that doesn’t make much sense.

Uranium doesn’t sail through Hormuz. And a disruption there would, if anything, be good for the uranium price: less supply, the same growing demand, higher prices.

So why would uranium stocks fall because of it?

Because while uranium doesn’t pass through Hormuz, a critical input in producing it does.

And that’s where the opportunity comes in — because not every uranium company depends on it. I’ll get to that in a moment. But first, a little backstory.

You see, many of the world’s uranium mines use what’s called in-situ recovery, or ISR. Instead of digging an enormous open pit, miners inject a solution underground that dissolves the uranium from the surrounding rock. They then pump the uranium-bearing solution back to the surface and process it.

Some — and I emphasize some — use sulfuric acid.

As the name implies, sulfur is the main ingredient used to make sulfuric acid — and it’s the critical input I referred to earlier. Because sulfur is largely a byproduct of processing oil and natural gas, much of the world’s supply comes from the Persian Gulf and sails through the Strait of Hormuz.

In fact, roughly half of the world’s seaborne sulfur trade normally passes through the Strait.

So when the Strait turned into a shooting gallery this spring — and, by all reports, still is — those shipments largely stopped moving. As the Strait seized up, sulfur prices climbed roughly 70%.

Needless to say, that’s a big problem for a lot of industries, not just uranium. Fertilizer producers need sulfuric acid. Copper miners need it. Nickel and cobalt operations need it. And so they’ve all been competing for what’s left.

But then China made the situation even worse.

On April 10, Chinese authorities reportedly instructed producers to halt most sulfuric acid exports beginning May 1.

China, mind you, is the world’s largest sulfuric acid exporter, so the restrictions removed one of the market’s largest remaining sources of flexible supply almost overnight.

Incidentally, Russia has also restricted sulfur exports.

Countries don’t normally give up export revenue unless they’re worried about supplies at home.

Russia and China clearly are.

Bad for Some Companies. Great for Others.

Now, remember what I said about uranium producers not being equal — and the opportunity buried inside this crisis?

Well, that’s because not all uranium producers have a sulfur problem.

Some in-situ recovery operations use an entirely different chemistry: groundwater mixed with oxygen and sodium bicarbonate.

Baking soda, essentially.

The solution is injected into the uranium-bearing formation, where it dissolves the uranium underground. The uranium-bearing water is then pumped back to the surface, processed, and recirculated.

No sulfuric acid needed.

My point is that, as long as you’re looking at the right companies, a sulfuric acid shortage isn’t bearish for uranium.

It’s bullish.

And not only because some producers can use a different input to get uranium out of the ground.

It’s also because the biggest producer of all can’t.

That producer is Kazakhstan.

The former Soviet republic — which I’ve visited several times — isn’t some marginal player in the uranium market.

It’s the Saudi Arabia of uranium, producing about 40% of the world’s mined supply.

Most of that uranium comes from Kazatomprom, Kazakhstan’s state-controlled uranium company and the largest uranium producer in the world.

And its mines consume enormous quantities of sulfuric acid.

Interestingly, that was already becoming a serious problem before the latest fighting around Hormuz.

So what happens when you don’t have enough of the input needed to get uranium out of the ground?

You mine less of it.

In 2025, Kazatomprom produced roughly 5,000 metric tons less uranium than originally planned — a shortfall of about 17%. Sulfuric acid shortages were one of the main reasons.

To put that in perspective, that’s roughly 13 million pounds of U₃O₈ (yellowcake, the concentrated form of uranium produced by mines) — more than many publicly traded developers hope to produce over several years.

And lest you think that’s old news, Kazatomprom also cut its planned 2026 production by another 10%.

Less supply. More demand. Higher prices.

Economics 101.

And remember, all of this was already happening before Hormuz became a shooting gallery.

The Opportunity

All of this brings me back to SNAFU Investing’s first recommendation.

Last week, I recommended a producing uranium company on exactly the right side of the input divide I described above. Its operations run entirely on groundwater, oxygen, and sodium bicarbonate.

It doesn’t use a drop of sulfuric acid.

That wasn’t the only reason. The company is already producing and selling uranium today — and doing it in the West, just as Western utilities are scrambling for alternative supply. Remember, Russian enriched uranium is now effectively banned in the U.S.

But the sulfuric acid angle was an important part of the thesis.

Because the best uranium companies won’t merely benefit from higher uranium prices. They’ll benefit from the exact problems preventing their competitors from producing more.

Better still — and this is in the writeup too — the stock continues to trade at depressed levels, dragged down along with the rest of the sector.

The business has not suddenly become more dependent on Hormuz. If anything, the disruption has made one of its most overlooked advantages considerably more valuable.

The market can overlook that distinction in the short term. But in my experience, the economics eventually make it impossible to ignore.

The name, the numbers, and the buy-up-to price are all in the full writeup — the first recommendation in the SNAFU portfolio — for paid subscribers. (My broader uranium thesis is free, though, so you can see exactly why I’m this bullish.)

If you saw the launch a few days ago but you’re still on the fence, here’s your nudge. This is launch week, and launch week gets launch terms: $199 for the first year, instead of the standing $349. The offer closes Friday, July 17, at midnight New York time, and it only works through this link: www.snafuinvesting.com/launchweek. (Substack asks for your email first; the $199 shows up on the next screen. Outside the U.S., you’ll see the equivalent in your local currency.) When it closes, it’s gone.

Situation normal. Position accordingly.

Regards,

Lau Vegys

I launched SNAFU Investing two days ago. Yeah, I know — not the most conventional name for an investment publication. There’s a real story behind it, and it’s all in the launch essay. But before any of that, the most important thing that happened last week — the one I suspect a lot of you skimmed past in the launch essay itself.

And for most folks, it probably slipped under the radar, buried beneath the renewed shooting in Hormuz. But it may be the more significant story of the two.

Japan and South Korea just signed an agreement with the United States to jointly deploy small modular reactors, or SMRs, across Asia and beyond.

SMRs are exactly what they sound like: smaller, factory-built reactors, designed to be faster and cheaper to stand up than the giant conventional plants of the past. That size — just look at the image below for the difference — lets them put nuclear where a traditional plant never could: remote sites, smaller grids, even data centers. More reactors, in more places, means far more demand for the fuel that runs them: uranium. And three of the world’s most important economies just signed on to making it happen.

One paid subscriber, a former submariner, put it better than I could:

Been reading your free stuff for a while now, and I joined this morning. As a side note, I spent several years under water in subs. We had a small nuclear reactor that I spent years next door to. The Navy has had them for many years now with no problems. The technology is there and proven.
— Nelson

This deal gets at the heart of something I’ve been banging the table about for years. For all the noise about the West and nuclear, the real turn is happening in Asia.

Go back to Fukushima in 2011. Before the meltdown, Japan was a nuclear powerhouse, drawing roughly a third of its electricity from reactors. After it, the country panicked — shutting its entire fleet, one plant after another, and setting the industry back by years. Much of the world followed. That reflex is now clearly reversing, and the SMR deal is just one piece of it. And where Asia leads on this, other countries will follow — exactly as they did on the way down.

What drove it home was Hormuz. This spring, one strait — a fifth of the world’s oil and gas — turned into a shooting gallery, and every energy-importing country got a hard lesson in how much of its lifeline runs through a chokepoint someone else controls. Nowhere did that land harder than in Japan and South Korea: two of the most energy-starved economies on earth, importing nearly everything, much of it straight through that strait. (I laid the whole thing out in the launch essay, if you missed it.)

So these Asian powerhouses are now scrambling back toward the one clean, always-on power source they spent a decade dismantling. That’s the SNAFU in a sentence: nothing works the way it’s supposed to, and everyone pretends it’s fine — until they can’t.

All of it is great news for uranium. Because here’s the catch on supply: Russia’s uranium is effectively banned in the West. Kazakhstan, which mines nearly half the world’s, is Moscow’s closest friend and has been quietly promised to China. That leaves America, Europe, Japan, and Korea all bidding for the same thin sliver of Western supply.

Which is exactly where our first pick sits: a Western uranium producer that’s already producing, not promising to someday. If you’re a paid subscriber, it’s all in the launch essay — the full writeup, the numbers, and my buy-up-to price. And if you’re still on the fence, the thesis is free to read — and if it grabs you, everything you need to get in is just below.

By the way, the feedback on that first pick has been good. Here’s one from a paid reader:

Love the first pick. I’ll be adding this week for sure. Subscribing with you is a no-brainer. Will certainly recommend to others.
— Josh

As for the launch itself — I’m a little overwhelmed, in the best way. Two days in, the response has been more than I expected. Thousands of readers showed up, and as of the weekend, SNAFU Investing is sitting at #2 on Substack's Rising list in Finance.

In short: not a bad start. And thank you to everyone who’s been part of it.

Now, a lot of the early feedback hasn’t been about the pick or even the investment case itself. It’s been about the format. The portfolio lives on its own page, updated live — every position with its entry, its exit, and its current price, on the record from day one. No digging through a bulky PDF to find what you own and what to do about it. As one subscriber put it:

I’m looking forward to being able to look at the stock recommendations and updates, rather than having to wade through a whole 25-page document to get what I want. It seems the way you are doing it is a much better way.
— David

I'm glad that landed, because it's something I really wanted to get right. At my old shop, readers had asked for years for a live portfolio — or at least a separate, dedicated place where they could see all the picks at once — and I pushed for it more than once. For whatever reason, it never happened. Here, it's been in place since day one. Paid subscribers can see it on the website or through this link — one position for now, with the second coming this week.

One last housekeeping note: As I outlined in the launch essay, I’m running a launch offer: $199 for your first year, instead of the regular $349. You can claim it here: www.snafuinvesting.com/launchweek.

The offer closes Friday, July 17, at midnight New York time. After that, it’s back to the regular price.

A quick heads-up, though, because a few people have already tripped on it: the $199 rate only works through the launch link above, the one ending in /launchweek. Use that link, not the regular “Subscribe” button on the site or app — the Subscribe button charges the full $349. When you click the launch link, Substack asks for your email first, and the $199 shows up on the very next screen. (Outside the U.S., you’ll see the equivalent in your local currency.)

And a quick reminder of what’s ahead, this week and this month: recommendation #2, from a different corner of the resource market than the first. Two special reports before the month is out. And the first recommendation, as I mentioned, is already live.

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 four that stood out last week, 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.

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. Now that the launch is behind me, I’ll catch up on the questions and the longer threads over the coming days.

Regards,

Lau Vegys

The publication I promised when I left my old shop is live — you’re reading it. (The backstory’s here, if you missed it.) I called it SNAFU Investing. Odd name, I know — but it’s personal. Behind it is the biggest tank battle in history, two days in cold water, and a man I knew well. I want to tell that one properly before we get down to business — because it sets the stage for everything else we’ll be talking about today. But it’s far from everything you’re getting.

Here’s the plan. The story first. Then the word itself, and why it’s the single most useful word for understanding the world right now — by the time you see what it actually means, you’ll know why I built a whole publication around it. From there, the biggest SNAFU in the markets today, plus what you’ll actually get around here, free and paid. And at the bottom, my first recommendation: the full writeup on a company sitting right in the middle of that SNAFU.

Let’s get into it.

Two Days in the Water

Longtime readers know I grew up in the USSR, in the Soviet republic of Lithuania, and know roughly what I think of the system that ran it. I’ve written about that world plenty. Nobody in my family had any love for communism.

But there’s a story from that world I haven’t told here. It’s about my grandfather, on my father’s side, and it’s where this publication’s name — and the star on its masthead — come from.

When the Germans invaded, my grandfather — Juozas, the Lithuanian version of Joseph — was evacuated from Lithuania deep into Russia. He was no communist, but he was young, idealistic, and, might I add, fiercely anti-Nazi, having witnessed some of their atrocities. So when the Red Army formed the 16th “Lithuanian” Rifle Division at Balakhna, near Gorky, largely from evacuees like him, he ended up in its ranks.

Now, for all the genuine bravery of the men in that division, my grandfather’s stories about it always carried a second theme: the staggering amount of nonsense that came down from above.

The division was poorly supplied and short on combat experience. And from the day it was formed, the Soviet leadership looked at it with suspicion. Moscow simply never trusted it.

So its first battle — against fortified German positions near Oryol in February 1943, undertrained and half-starved — went about the way you’d expect. Historians call it the catastrophe at Alekseyevka: more than a thousand men dead and three thousand wounded in roughly a month. Even the Soviet command admitted the division had been sent in unprepared.

Its response? It stamped the survivors politically unreliable.

You can guess what a label like that meant in the Soviet Union. It was no badge of honor; a man wearing it stood about two steps from prison.

Whether my grandfather was in that February fight himself, he never said — and the men who were there mostly didn’t.

By the summer of 1943, the division — refilled with fresh replacements after that February — was fighting around Oryol, on the northern side of the Kursk salient.

History remembers Kursk as the largest tank battle ever fought. But most of the men who fought there weren’t in tanks. All told, some two million men took part — roughly the population of a decent-sized European capital — spread out across hundreds of miles of farmland, trying to kill each other. Most were infantry.

My grandfather was one of them.

Long story short — and I don’t recall all the fine details; my grandfather, rest his soul, has been gone for more than twenty years — somewhere in that fighting, his unit collided with the Germans and got mauled. Men he’d trained with died around him. What was left of them went to ground in the only cover they could find: a marshy stream bottom — a pond, basically — with reeds and standing water.

And then, at some point, the rest of his unit fell back. Nobody told him.

That used to puzzle me. How does an army forget a man?

Years later, I did some digging into how the Red Army actually worked. Turns out, it wasn’t hard to see how something like that could happen.

Orders in a rifle company that summer traveled by field-telephone wire and by runner. There were no radios at that level. After a mauling, half the wire could be cut and some of the runners dead. The lists of who was still alive out front no longer necessarily matched anything real.

Somewhere up the chain, someone ordered a pullback. The order reached the men it reached.

It never reached my grandfather.

Maybe the runner was killed. Maybe whoever knew where he was lying was dead himself. Maybe someone decided the men in the low ground were lost anyway. Nobody ever knew, and nobody came.

As far as headquarters was concerned, the situation was normal.

So he sat in that water for two days, with German patrols close enough that he could hear them talk.

Now, look, the man was no coward — he’d go on to be decorated later in the war — but he wasn’t stupid either. A soldier separated from his unit was supposed to rejoin it without delay. For my grandfather, that meant climbing out in broad daylight and crossing open steppe crawling with German patrols. He probably wouldn’t have made it very far. The other option was to remain in the area and wait for orders. But Germans were everywhere, and the orders weren’t coming.

The point is, the official version of events had no survivable role in it for him. So he read the situation for what it actually was, rather than what it was supposed to be, and stayed in the water until he saw his chance to get out.

Thankfully, it was summer, or this story would have ended very differently. But even in summer, two days in water does ugly things to a body. And he couldn’t so much as splash around to keep the blood moving; he had to stay still while the mosquitoes found him long before the Germans left. The skin goes white and soft, the legs go numb, and when you finally try to move again, every step is excruciating.

My grandfather learned all of that on the way out.

When he finally pulled himself out of the water, he was lost, starving, and alone in enemy-held territory. He told me he was never much good at reading terrain. But he knew two things: roughly where his own lines were, and where to find the North Star.

Now, walking north was obviously out of the question. That would take him deeper into German-held territory, toward Oryol itself. His own lines lay somewhere to the east or southeast.

So that became the plan. Hide and sleep through the day so the patrols wouldn’t find him. Walk at night, using the North Star as a fixed point to keep his bearings.

He didn’t walk toward it. He kept it to his left and walked east.

The skies stayed clear.

And eventually, he made it back to his own lines.

It’s a shame the old man isn’t around anymore. Had he lived long enough for me to tell him, he’d have gotten a kick out of knowing there’s a perfect word for everything he went through in those fateful days of 1943:

SNAFU.

The water never entirely left him, by the way. For the rest of his life, his legs ached whenever rain was coming. He’d announce it, complaining, a day in advance — and he was usually right.

The Word

Soviet soldiers didn’t do acronyms. They had mat, the great Russian cursing tradition, and they wielded it the way painters wield paint. My grandfather’s full description of that, shall we say, pond experience, faithfully translated, would probably peel the pixels off this page.

Now, from what I know, American soldiers love swearing too. But they also love acronyms. And so the American GIs fighting that same war came up with five letters that couldn’t have described my grandfather’s situation any better.

As you may or may not know, the term came from the ranks, not the officers’ mess. It was the enlisted man’s cynical answer to the nonsense that came down from headquarters — and the difference between what command thought was happening and what was actually happening on the ground.

SNAFU. Situation Normal: All Fucked Up.

(Pardon the language — that was strictly for research purposes, as you can no doubt tell. From here on, we’re a respectable publication. Mostly.)

That’s the word this publication is named after. And now you know the story behind the North Star in the logo, too. One last point on that note, by the way. You may have noticed that my grandfather didn’t actually follow the star — had he done that, he would have walked due north, deeper into German-held territory. No, what he did was use it as a fixed point to find his own way back. And that’s an important distinction. In a SNAFU, you first need to see things as they really are. Only then can you figure out where you’re going.

That’s more or less the philosophy behind what we’ll be doing here.

Enough war stories, though. Let’s look at the world we live in today. Nothing works the way it’s supposed to — and everyone pretends it does.

It’s the SNAFU world.

You don’t have to look very far to see what I mean:

• Take the debt. The U.S. owes $39.4 trillion, runs war-sized deficits in supposedly good times, and borrows new money just to pay interest on the old.

• Or take the money itself. You saw what happened with the COVID trillions. The Fed’s balance sheet more than doubled, inflation hit 9.1%, and the people responsible called it “transitory.”

• Then there are the markets. The economy weakens, so stocks rise because investors expect the central bank to make money cheaper. That’s a perfectly normal day in today’s SNAFU world.

• And then there’s the empire. America is expected to police the world, defend its trade routes, and run the world’s reserve currency — all on borrowed and printed money — while depending on its rivals for critical minerals and supply chains.

But tune into the legacy media, and none of this is particularly alarming. The debt is high, yes, but manageable. Markets may be a little frothy, but fundamentally sound. Fiat money is simply how the modern world works. And the American empire may have its problems, but it remains indispensable.

You get the picture.

Situation normal.

Now, I can already hear some of you thinking: fine, but why not just call it a crisis?

Crisis. I know that word intimately. It was in the name on the door at my last job, and it’s the load-bearing word of half the financial newsletter industry. It taught me a lot. It also taught me its limits.

Here’s the difference.

A crisis is an event. Something breaks, everyone can see that it broke, the sirens go off — and buried inside the word is an assumption that the system will respond, the damage will be repaired, and things will eventually return to normal.

A crisis, by definition, ends. Or it’s not a crisis.

A SNAFU is different. The dysfunction is the normal state of affairs. Nothing is coming to the rescue because, as far as the system is concerned, the situation is normal.

The best you can do is recognize things for what they actually are rather than what they’re supposed to be, and act accordingly.

Which, come to think of it, is exactly what my grandfather did some eighty years ago.

And speaking of the USSR, do you think it had nearly seventy years of crisis?

No. It had nearly seventy years of SNAFU.

Sure, it spilled over into proper crises now and then — shortages, Afghanistan, Chernobyl, the “monetary reforms” that ate people’s savings overnight. But those were events. The SNAFU was the system standing behind them all.

And guess what? Most people didn’t see it. They lived their lives. They married, worked, raised children, and told jokes in their communal kitchens. The Soviet Union had existed for their entire lives and, for all its dysfunction, looked permanent. So when the whole thing came crashing down, millions were left scratching their heads.

But some saw it coming from miles away. They understood that the USSR wasn’t collapsing because of Afghanistan, or the ruble, or any single disaster. Those were crises, and crises pass. The real problem was that the entire country had become one big ball of SNAFU.

The people who understood that early enough didn’t just survive what came next. Some of them came out of it very wealthy.

And before you assume it all must have been obvious, remember: you have the benefit of hindsight. They were living inside a totalitarian state that had looked permanent their entire lives.

Now, I’m not saying America or Europe is the Soviet Union, or that either will necessarily end up like it. I’m saying people are remarkably good at accepting dysfunction as normal once they’ve lived with it long enough — and then being completely gobsmacked when things finally change.

You, of course, are different. You read SNAFU Investing.

I kid, but only a little. The truth is, it’s no more obvious today to most people knee-deep in the SNAFU world of the West — Europeans and Americans alike. Most will only recognize the crisis when it finally arrives, far too late to prepare. And even then, they won’t understand what actually hit them.

And it won’t be the crisis per se. It’ll be what stood behind it all along.

So What’s the Biggest “Situation Normal” Right Now?

I could point you to a dozen more SNAFUs, and one of these days I’ll lay the whole thing out properly. Maybe I’ll even turn it into a SNAFU manifesto of sorts.

But the question that matters right now is the one in the title: what’s the biggest SNAFU going on today?

First, though, here’s the thing to understand about SNAFUs as an investor’s tool. A SNAFU creates the mispricing: assets get valued as if the official story were true. On the other side of the equation sits reality — and it’s reality that creates the catalyst, because sooner or later, it forces the issue.

Learn to see both clearly, and you win. Simple as that.

And one of the clearest examples of SNAFU in the world right now — one I deliberately left off the list above — is energy.

Just look at the genuinely destructive energy policies the West has talked itself into. The Paris Accords. Net Zero. Entire national grids staked on the idea that the wind will blow and the sun will shine when we need them to. Spain — the country I’m writing this from — got a taste of where that can lead last year, when a massive blackout brought much of the country to a standstill.

Meanwhile, nuclear — the one source of clean, always-on power — spent those same years wearing a scarlet letter.

And nothing did more to cement that reputation than the 2011 Fukushima disaster. Nuclear progress was set back by years, as governments and environmentalists spent the next decade bashing the cleanest, densest fuel humanity has ever had while their own grids became shakier by the year.

But electricity has to come from somewhere. And sooner or later, reality wins.

The turn came, of all places, at a climate conference. At COP28 in Dubai in December 2023, the U.S., UK, France, Japan, South Korea, the UAE, and more than a dozen other countries pledged to triple global nuclear capacity by 2050.

As big a deal as that was, remember: it happened before two things made the case for nuclear considerably more urgent.

The first was AI. The world piled into the data-center craze, and suddenly everyone needed vastly more reliable, around-the-clock electricity to power it.

The second was Hormuz.

I’ve written extensively about this in the past, so I won’t beat a dead horse here. But the point is simple: the war with Iran and the subsequent closure of the most important energy chokepoint on earth gave every energy-importing country a hard lesson in what it means to depend on someone else’s strait for your energy needs.

Nowhere did that lesson land harder than in Japan and South Korea, two of the biggest and most energy-starved economies on earth. They produce little of their own energy, import most of what they use, and much of it arrives through Hormuz.

Both countries were already turning to nuclear before the missiles flew. Japan had been quietly restarting reactors shuttered after Fukushima, while South Korea was pushing ahead with its own nuclear build-out. But Hormuz gave the energy-security argument a whole new urgency.

And then, just this week, came another big step. Japan and South Korea signed an agreement with the United States to cooperate on deploying small modular reactors — SMRs — across Asia and beyond.

Unlike conventional nuclear plants, SMRs are designed to be smaller, easier to deploy, and potentially cheaper to build at scale. If the technology lives up to its promise, it could bring nuclear power to far more places, far faster.

And all those reactors — big or small — need fuel.

That’s where uranium comes in.

The world’s nuclear plants already generate roughly 10% of its electricity. And every new reactor means more uranium demand — not for a year or two, but for decades. Remember, the commitment is to triple nuclear capacity by 2050. And that pledge came before AI, before Hormuz, and before Asia got its latest brutal lesson in energy security.

The problem — especially for the data-center-crazed United States — is that much of the world’s uranium supply is increasingly spoken for, tied up, or simply off-limits.

For investors positioned in uranium, of course, that’s the opportunity.

The U.S. banned Russian uranium imports in 2024. Kazakhstan — the Saudi Arabia of uranium — produces roughly 40% of the world’s supply but has deep ties to Moscow. And China, busy building reactors of its own, has been locking up Kazakh output years in advance.

That leaves America, Europe, Japan, and Korea competing for the same limited pool of Western supply.

Somewhere in the middle of all this mess sits a Western uranium company — and no, not one of the usual suspects. Already producing — not promising to produce someday, but producing now.

And here’s the kicker on timing. The stock sits about a fifth below where it traded a month ago — mostly because the whole sector gets dragged down every time Hormuz flares up, and lately it’s been flaring more often than not.

Now, plenty of smart people will tell you uranium shouldn’t sell off on Hormuz at all, since not a pound of it passes through the strait. They’re only partly right.

Something else does pass through: sulfur — close to half the world’s seaborne supply — and sulfuric acid is what Kazakhstan’s uranium mines run on. So the shooting is a real uranium problem after all. Just not for everyone.

It threatens the world’s biggest supplier. But some Western producers don’t touch the stuff at all — including the one I’m recommending today.

A Quick Word About Me

Before I show you the company, you’re entitled to ask who’s asking for your trust.

I’m Lau Vegys. I’ve spent nearly two decades in the investing world — though who am I kidding: if you’re reading this, you probably know me already. And if you don’t, Google works fine.

So I’ll just say this. For the past two and a half years, I wrote every stock recommendation published by Doug Casey’s Crisis Investing right here on Substack. Last year, those recommendations averaged +53% by the December review. The precious-metals positions averaged around +140%. Eleven times, a position doubled and subscribers got the alert: original capital off the table, ride the rest for free. One pick — a rare-earths company — ran to five times the entry price; I walked through that whole trade recently, start to finish, right here.

Now, normally I would never cite results from behind another publication’s paywall — that research belongs to the people who paid for it. But my former shop has been quoting these particular numbers in its own public marketing. And since I’m the one who built them, I figure I’m entitled to mention them here too. The rest of the wins stay where they are — out of respect for the subscribers who paid for them, not because there’s nothing to tell.

But none of that matters much from where you’re sitting. Because as of today, the record restarts — in public. Every recommendation I make here goes into the SNAFU portfolio — its own page, every entry and exit on the record, prices updating automatically. It starts small. That’s what a track record looks like on the day it’s born.

And I’ll be in it with you. Every stock I recommend here, I buy with my own money — never before you get it. My standing rule: no buying until at least three trading days after a recommendation goes out, so every subscriber has had their chance first.

For what it’s worth, I also live the SNAFU world the way I write about it: a wife, three kids, passports from more than one country among us — and no single government holding all our keys.

What You’re Signing Up For

Free subscribers get the essays — at least twice a week, on making sense of the SNAFU world we all live in: money, markets, and everything the official story leaves out. Free, and free to share.

Paid subscribers get what follows from the seeing:

• Live now: the SNAFU portfolio on its own page — every entry and exit on the record, prices always current (give or take — they update on a small delay), one click away. No digging through back issues.

• Today: my first recommendation — the full writeup below: thesis, numbers, risks, buy-up-to price, position sizing.

• Next week: recommendation #2, from a different corner of the resource market.

• Before the month is out: two special reports, going deeper — one on today’s theme, one on the second recommendation’s.

• From August: monthly issues.

• Twice a year: a full review of every position in the portfolio — on top of the real-time alerts.

• As they trigger: real-time alerts — new picks, material developments on our positions, and profit-taking. When a position roughly doubles, I’ll usually tell you to sell enough to recover your original capital and let the rest run free.

And for those who want a direct line: Founding Members get their questions answered first, plus a heads-up whenever one of our buy levels trades. (Sell alerts are identical for everyone, always.)

To everyone who pledged during the quiet weeks — and there were many of you — thank you. Your pledge converts automatically today, at the price you pledged, regardless of anything happening with pricing this week. You were in before anyone, and your deal reflects it.

Now, the price. SNAFU Investing costs $349 a year — that’s the standing rate, and it’s what subscriptions will cost from next Saturday onward. But this is launch week, and launch week gets launch terms: $199 for the first year. That’s 43% off — everything above, the picks, the portfolio, the alerts, the reports, for about 55 cents a day. Get your first year for $199: www.snafuinvesting.com/launchweek

(Substack asks for your email first — the $199 appears on the next screen. Outside the U.S., you may see the equivalent in your local currency.)

The offer closes Friday, July 17, at midnight New York time. When it closes, it’s gone. No extensions, no “back by popular demand.”

The comments on my essays are open to everyone — I read everything, and I answer. The essays keep coming regardless. But the picks, the portfolio, and the alerts live below this line.

And the first one is waiting: a producing Western uranium company, recently sold off with the rest of the sector — and on the right side of the energy SNAFU I just laid out.

Situation normal. Plan accordingly.

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Two quick notes on what you’re looking at. This is a model portfolio: each position’s entry price is the closing price from the last trading day before the recommendation went out — simple, transparent, and easy to check against any chart. And the last column carries a link to each position’s original writeup — those aren’t clickable inside the table, so copy one into your browser whenever you want the full case behind a stock.

The SNAFU Portfolio

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