Inside today’s Daily Journal…

Remember, the first casualty of war is the truth.

President Donald Trump said “Death, Fire, and Fury” would prevent Iran from blocking the flow of oil. He said Iran would be “destroyed” if it tried. He said Iran “has nothing left in a military sense.”

And yet, ships are burning in the Persian Gulf every day, the Strait of Hormuz is closed, and Iran’s regime has not surrendered. Instead, it has moved quickly to consolidate power around a new supreme leader, Mojtaba Khamenei. The new boss is the same as the old boss.

When Trump was elected, I warned subscribers that his tariffs were no panacea. (I also explained they were unconstitutional too.) Tariffs are merely taxes. It’s consumers – not producers – who ultimately pay all taxes. The administration knew this too, of course. But they were happily willing to lie to gain power. Just like they lied about the Department Of Government Efficiency (“DOGE”) and about cutting $1 trillion from the U.S. government’s budget.

Now they have lied about not starting any more foreign wars. And they are lying again about this one ending quickly.

This isn’t about politics. I’m not saying we should have elected Ms. Boozy McMumbles.

My job is to explain the economic reality behind any government policy. Tariffs will increase production costs, disrupt supply chains, and harm the U.S. economy, which, as one of the most open economies in the world, has the most to lose from higher tariffs. That is a simple economic fact, not a political statement. And no amount of wishful thinking will change that fact.

Likewise, the United States cannot defeat Iran with air strikes. Iran is a nation of ~90 million people. It has vast resources, and, despite our government’s claims to the contrary, it isn’t on the verge of a revolution. The economic reality is this: war in the Persian Gulf will be a catastrophe for the U.S. and the world.

Everyone knows how important the region is to oil, but there are many other major oil producers, including the U.S. It’s the other things that the Gulf produces that will cause the real problems. As I explained on Monday, the Gulf produces a range of raw materials that are critical to the world’s economy: including urea, helium, sulfur, ethylene, polyethylene. These are the “boring” chemicals that quietly run the modern world.

Qatar’s Ras Laffan liquefied natural gas (“LNG”) complex is the biggest LNG export hub in the world. LNG is a primary energy source in many large economies, like Japan’s. Ras Laffan also makes roughly 40% of the world’s helium, which is indispensable for chip fabs. Ras Laffan has been knocked offline by Iran drone strikes.

Think for yourself: how many B-52 attacks will it take to eliminate Iran’s ability to launch drones from apartment complexes in residential neighborhoods?

And here’s the real looming disaster: food.

The Gulf accounts for almost 50% of global urea exports. Urea is the world’s dominant nitrogen fertilizer, used to grow roughly 50% of all of the world’s food.

In addition, the Gulf also supplies about half of globally traded sulfur. Nearly all of this sulfur is converted into sulfuric acid, which is then used to make phosphoric acid – the backbone of phosphate fertilizers, which make up about 40% of global fertilizer volume. Phosphate fertilizers are essential for corn, soybeans, and wheat.

So, in one way or another, chemicals made in the Gulf touch virtually all of the world’s food supply.

Even a partial disruption will remove millions of tons of fertilizer from the market. This directly reduces available fertilizer for spring planting in import-heavy regions (India, Brazil, Europe, Southeast Asia). Farmers face higher costs or outright shortages, leading to lower application rates, reduced crop yields, and eventual food-price inflation downstream.

Benchmark fertilizer prices (New Orleans urea) have already jumped 30% to 35% since February 28 when the U.S. and Israel attacked Iran.

On Monday, I wrote that if the Strait of Hormuz remained closed, “the single biggest beneficiary could be CF Industries (CF), which makes nitrogen-based fertilizer.” CF’s Donaldsonville complex in Louisiana sits right in the heart of the world’s largest petrochemical infrastructure network and has access to the Permian Basin’s virtually inexhaustible supply of low-cost natural gas. Again, you can think of nitrogen fertilizer as natural gas in solid form. CF Industries was up big today (almost 15%) and it’s up almost 50% in the last month.

The other hedges against the risk of a longer war include:

And, except for Frontline, they are all moving higher.

Why Bitcoin and not gold? I know the government will have to “monetize” to afford this war. I think within the next 90 days you’ll see the Fed begin to increase, substantially, its buying of U.S. Treasury bonds. The government cannot afford to pay higher rates – and much higher rates are coming as the inflation impulse of higher food and energy prices hits the market.

The 2‑year Treasury yield has climbed from about 3.38% just before the first strikes to roughly 3.6% to 3.7% now – a move of roughly 25 to 30 basis points in two weeks. That’s a big move at the front end of the yield curve, and it’s happening against a backdrop of softer economic data and rising recession risk.

This is a huge warning that inflation is coming.

Bitcoin is more sensitive, in the short run, to the growth of monetary aggregates and banking reserves. Thus, it’s a better hedge, in the short term, against monetization.

I believe the market is facing a very tough period. Let me reiterate: If you’re within five years of retirement or if you simply can’t stand the idea of a substantial drawdown, consider moving at least half of your equity portfolio into cash.

If you’re following Porter’s Permanent Portfolio you already have a “hedged” portfolio. We have not adjusted our recommended allocations. Or if you want to make sure that a decline in the stock market won’t impact your wealth, I suggest moving our recommended “bond” allocation (P&C insurance companies) into cash. Doing so will go a long way toward insulating your portfolio against the growing stagflation risk.

Our leaders believe they can bomb a theocratic, revolutionary regime into embracing Western liberal values. They still talk as if Iran will “unconditionally surrender” and as if we can “destroy” its military in a matter of days. They still promise that the Strait of Hormuz will remain open and that the “free flow of energy” will be protected at all costs.

The markets are saying otherwise. Who are you going to believe?

Tell me what you think of today’s Journal: [email protected]

Good investing,

Porter Stansberry
Stevenson, Maryland

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1. The U.S. and Iran are digging in. With both sides hardening their positions, crude oil prices – above $95 per barrel this morning – appear headed for new highs. Today, President Trump posted on Truth Social that preventing a nuclear Iran matters “far more” than lower oil prices. That followed comments from Defense Secretary Pete Hegseth yesterday promising continued escalation: “We’re fighting to win.” In response, Iran’s new Supreme Leader Mojtaba Khamenei declared that not “one liter of oil” would pass through the Strait of Hormuz for U.S. allies – and backed the threat with three more ship attacks on Wednesday. With prices higher for longer, we remain bullish on energy.

2. Nvidia’s “data center in a box.” Leading chip maker Nvidia (NVDA) and data integrator Palantir Technologies (PLTR) are partnering on what they call a “data center in a box” – a turnkey AI operating center designed for government and enterprise clients that demand total data sovereignty without the security risks of the public cloud. As Palantir leverages its deep connections with the government and Nvidia (a current Complete Investor recommendation) maintains its architectural supremacy, this partnership cements their role as the indispensable backbone of the global AI infrastructure.

3. Private-credit dominos keep falling. Some of the largest private-credit funds (Morgan Stanley, Cliffwater, Blue Owl, Blackstone, BlackRock, and JPMorgan Chase) are restricting redemptions – likely to prevent having to unload mostly illiquid assets at fire-sale prices. And now Deutsche Bank just disclosed $30 billion of private-credit exposure in its annual report, flagging the once-favored asset class as a “key risk.” Private credit was a beneficiary of the easy-money era when underwriting standards were relaxed, and investors plowed into these semi-liquid structures. Now the credit cycle is turning – repricing the illiquid loans that dominate these portfolios.

Many investors have written off software stocks such as Salesforce (CRM) as AI runoff, while others herald AI as a bulwark for the strong players in an intensely competitive environment… So far, Salesforce (a Complete Investor recommendation) is proving the latter side of the argument correct – up 8% over the last month as the death of software predictions continued.

In response to Monday’s Daily Journal, in which Porter said of the war in Iran, “In short, this is yet another American foreign war disaster in the making – despite its noble intentions,”

Hugh M. writes:

Porter Comment: If Iran’s secret services had jailed President Dwight Eisenhower in 1953, left him to die alone in prison, and installed a Muslim president of their choosing in the United States, while ending our free elections, how do you think we’d feel about the Iranians? Well, that’s what we did to them – mostly so that Britain could continue to buy their oil at far below market prices. Since WWII our country’s foreign policy has been to start as many wars as possible. Maybe the best way to avoid people wanting to kill us is just to leave them alone.

James V. writes:

Porter Comment: I don’t have the information necessary to judge Trump’s actions about the necessity of striking Iran. But what I can tell you is, the Cold War was all a complete lie. We spent $15 trillion making 77,000 nuclear warheads we couldn’t possibly ever use. LIkewise, we had no strategic interest in Vietnam. And there were no weapons of mass destruction in Iraq. So… why would any American believe anything the government tells us about the military?

Betty V. writes:

Porter Comment: Thank you, Betty. I certainly hope I am wrong about the future of this conflict.

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