Inside today’s Daily Journal…
Essay: The Inflation Shining – Heeeere’s Johnny
Caterpillar fights back tariffs
Trump picks a Fed chair
Gold and silver tumble
Chart Of The Day: Sagimet Biosciences
Reader Poll results: Has silver peaked?
Today’s Mailbag
He ended Monday’s Daily Journal with this message:
Producer Prices Surge, Putting The Bull Market At Risk
The big news today is that inflation is returning to the U.S. economy.
As you’ll remember from the “Mailbag” drama in Wednesday’s Journal, that risk lies at the core of my “out of the pool” warning in the event that 10-year Treasury yields rise above the 5% “Biden Bust” level.
My thesis is simple: inflation returns to the economy thanks to trade wars and huge government deficits, crushing the bond market. Higher interest rates then crush a stock market that’s worth more than 200% of GDP (all-time highs) and is trading at multiples that can only exist with very low interest rates.
This chart, from my good friend Meb Faber, reveals how extreme U.S. stock prices have become. This shows the huge number of companies that are trading at more than 10x annual sales.
A market, like the U.S.’s, that is priced for perfection will not handle the risk of much higher rates of inflation with equanimity. We are, more and more, at risk of a huge rout in the prices of financial assets.
Specifically, December producer price index (“PPI”) inflation was 3.0%, well above expectations of 2.7%. More importantly, core PPI inflation, which removes the volatile food and energy categories, was 3.3%.
It wasn’t hard to see this coming. And it’s virtually certain to get much worse.
A basket of silver, copper, zinc, and aluminum (key industrial metals) is up almost 100% over the past year.
These huge prices were last seen during the 1970s. We know from the past that these kinds of “producer” price increases will show up in consumer price hikes in the future. Typical throughput time is 18 to 24 months.
To see this happen in real time, I direct you to Caterpillar’s (CAT) recent earnings report. The Yellow Monster is one of America’s best businesses – it has a legendary reputation and many of its largest machines are irreplaceable in large-scale mining operations. Caterpillar must import many of its raw materials (primarily steel and aluminum) because they are not produced in the U.S.
Taxing raw materials that we do not produce does not bring jobs to the U.S. It only brings revenue to the government – at the direct expense of one of our best and most important businesses. In his bid to massively increase U.S. government revenue in ways that are invisible to most voters, President Trump has threatened Caterpillar’s ability to build the machines the economy needs.
These tariffs aren’t about “making America great again.” They are about staving off the bankruptcy of our government, which steadfastly refuses to reform.
In 2025, Caterpillar faced $1.7 billion in tariffs. Its tariff outlook for 2026 is worse: $2.6 billion.
The President’s supporters (and many of my dear paid-up subscribers) insist that these soaring taxes won’t cause any economic harm. They haven’t learned the first law of economics: TANSTAAFL… there ain’t no such thing as a free lunch.
These enormous new costs directly cut into Caterpillar’s margins and profitability. Its full year earnings per share fell from $21.90 in 2024 to $18.81 in 2025. Full-year 2025 profit margin was 17.2%, down from 20.7% in 2024.
The stock was hammered on these tariff risks immediately following President Trump’s “liberation day” last April, falling below $300 per share.
But today the stock is trading over $650, after being the Dow Jones Industrial Average’s top-performing stock in 2025.
Why do you think that happened? I’ll give you two guesses…
The company has already moved to begin raising prices significantly, with around $1.5 billion in price hikes expected for 2026.
Says Caterpillar CEO Joe Creed:
I remain confident that we’ll manage the impact of tariffs over time as we aim to operate around the midpoint of our adjusted operating profit margin target.
My friends… consumers pay 100% of all production costs. America’s industrial, agricultural, and manufacturing producers will inevitably pass these higher costs on to you.
I’ve met Kevin Warsh (Trump’s pick to be the new Federal Reserve chairman) and, like many other market participants, I expect he will bring the Fed renewed credibility. Warsh resigned from the Fed in 2011 over the same specific issues that I was warning about in The End Of America, the documentary I published that year. He knows everything that’s at stake if we do not get our financial house in order.
Whether it’s Warsh or U.S. Treasury Secretary Scott Bessent, someone has to explain to the President that making it harder and more expensive for companies like Caterpillar to build economically critical machinery isn’t making America great again. It’s making inflation great again.
America doesn’t need more taxes. It needs a government that will live within its means. And, unfortunately, that’s unlikely to happen without the crisis that I believe is coming.
Tell me what you think – good, bad, or anywhere in between: [email protected]
Good investing,
Porter Stansberry
Stevenson, Maryland
The NEXT Move To Make In 2026…
Matt Milner, the founder and Chief Investment Officer of Crowdability, recently dropped a video about the #1 move to make right now to kick off 2026. But a fair WARNING: You have an extremely short window to act.
By February 2, it could be too late to take advantage of this situation. Click here now to watch my short video, before it’s gone.
Editor’s Note: Keep in mind, we only accept advertising from publishers we know to offer well-researched ideas vetted by a legal team, excellent customer service, and reasonable refund policies. Crowdability is one such partner. We do not, however, under any circumstances make any representations about their investment ideas or strategies, nor will we warrant them as equal to our own. We do recognize that the markets are tempestuous and, at times, ideas that we may not endorse prove valuable.
3 Things To Know Before We Go…
1. Caterpillar powers ahead. As Porter referenced above, Caterpillar (CAT) reported record full-year sales of $67.6 billion, punctuated by a massive Q4 revenue beat ($19.1 billion versus $17.8 billion expected). Fueling future optimism is a massive $51 billion backlog, driven by a 44% surge in power-generation sales to support the artificial-intelligence data-center boom. While Caterpillar faced $1.7 billion in tariffs, it still managed to return $7.9 billion to shareholders through buybacks and dividends in 2025.
2. President Trump nominates Kevin Warsh as the next Fed chair. In a Truth Social post this morning, the President announced he was choosing the former Federal Reserve governor as the central bank’s next head. Warsh is known as a longtime “hawk” (in favor of tighter monetary policy) and has been an outspoken critic of the Fed’s “bloated balance sheet” and quantitative easing (“QE”) programs, as well as the government’s runaway spending. However, in a Wall Street Journal op-ed last November, Warsh also appeared to endorse Trump’s view that short-term interest rates should be lower, saying “money on Wall Street is too easy, and credit on Main Street is too tight.” In any case, this morning’s higher-than-expected producer price inflation reading suggests Warsh will have his work cut out for him when he takes the helm in May.
3. Precious metals tumble. Gold prices dropped 10% while silver fell 30% today, as the relentless rally in precious metals reversed course. The catalyst for the move was Trump’s selection of Kevin Warsh as Fed chair. As noted above, Warsh is widely viewed as a more hawkish choice among the options sending the dollar higher and precious metals lower.
Chart Of The Day… Tech Frontiers
Shares of Sagimet Biosciences (SGMT) dropped around 10% yesterday after clinical data was released about its lead drug “with not even a trace of a negative implication,” explains Tech Frontiers editor Erez Kalir whose first two recommendations of SGMT have resulted in gains of 200% and 80%. He’s now re-inforcing the “buy” status to readers after yesterday’s decline.
To access Erez Kalir’s recommendation of Sagimet and everything else in the Tech Frontiers’ portfolio, sign up here.
Wednesday’s Poll… Has Silver Reached The Top?
Following silver’s remarkable run in 2025 (up more than 200%) and into 2026 (up 50%), we asked readers on Wednesday if “the price of silver peaked?”… 68% of survey takers said no, selecting “the price of an ounce of silver will be at least 20% above today’s price of $115 on June 30, 2026,” while 32% believe it will be lower than $115 per ounce.
Mailbag
“I’m Now A Newly Minted Millionaire”
Tony E writes:
Porter –
After reading yesterday’s Daily Journal, I’m left feeling that you need to hear from those of us who truly appreciate what you do and really value hearing your unfiltered thoughts. Count me as one of those. Thank you.
I only started my investment journey about six years ago. I always wanted to get into investing because I was sure it was the only way to stop being poor, but I was never fortunate enough to have anyone show me how. Years ago, I decided to take a leap with Jeff Brown’s introductory service, which I think was only $100 for a year (which was a lot for me at the time -and caused a fight with my wife!). That service was the gateway drug for me– I soon found myself reading every newsletter I could get my hands on.
Over time, I’ve added a lot of newsletters (and dropped some too). I still like to read everything I can get my hands on, but as you advocate, I use my own intellect to process that information and do what I think is best for me. In the examples you listed in yesterday’s Journal, those subscribers seem to want you to tell them what to do. It seems they may be better served by an active asset manager. But for subscribers like me, your thoughts have been tremendously helpful.
When I first heard about your method of applying leverage to Porter’s Permanent Portfolio, I was blown away. I then did a deep dive to learn everything I could about applying leverage and put that process to work on my favorite investing ideas. I’m happy to report I’ve seen a lot of success – I’m now a newly minted millionaire! I also recently bought the new car I’ve been wanting. I could have paid cash for it, but why would I? Applying your leverage idea, I took out a seven-year note at 4% and invested my cash, which is seeing a much higher return. When I do decide to pay off the note, I’ll think of it as getting a massive discount on the car purchase. You set me on that path, so thank you.
My more recent focus is on when to trim and where to go with my cash when I do. On that front, your whole “Biden Bust” threshold of 5% Treasuries seems like a fantastic indicator to watch, and I appreciate you bringing it up.
I’m sure days when you get lots of hate mail from those who don’t apply themselves must be hard. But try to remember: you really do help people by telling them the things you would want to know. That is certainly true for me. Thank you.
Partner Pass member for life!
“I’m Not Rich But I Feel Quite Wealthy”
Chris D writes:
Hello Porter,
Concerning your Monday essay about what happens when the government / financial sector’s “scata” (Greek for you know what) hits the fan. You are once again very concise and “down to earth” in the way you educate your readers about the markets.
I have no doubt you know what you’re talking about no matter how many “experts” fail to recognize or admit the dollar is doomed.
You see, I’ve been reading your words since your days as The Pirate Investor, when it was basically just you and Steve Sjuggerud doing the writing. Back then, I had saved barley $30,000.00 and had just bought a home on a few acres for my family of five an hour southeast of Chicago in rural Hanover Township, Indiana.
You taught me so much about investing in general, and more specifically about the stock market, that over the years I’ve done quite well with your insightful research and shared knowledge.
I was able to support my family as the head of an independent home-improvement business with my son and three employees. Thanks in large part to your help (I knew little or nothing about investment markets), my family and I have been able to live comfortable and prosperous lives, sometimes making much more money from my investments than from my business.
I’m not rich, but I feel quite wealthy…having been able to travel the world and realize a few lifelong dreams: I own a family forest/hunting preserve, become a pilot, and I own a vintage aircraft and a vintage motorcycle collection.
Keep up the great work…I’ve learned so much reading it and have prospered wonderfully as a result. I am forever grateful.
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