The Fed's Playbook Just Broke

In the first 36 hours of the Iran war, the U.S.-Israeli coalition burned through 3,000 precision-guided munitions and interceptors.

Each one is packed with cobalt, tungsten, neodymium, samarium, dysprosium, gallium, germanium, and tantalum. Minerals America doesn't mine, doesn't process, and in many cases can't source without China's involvement.

By day two, the U.S. had spent an estimated $5.6 billion in munitions. By the end of week one, nearly $2 billion in equipment was destroyed. And the Strait of Hormuz, the 21-mile-wide chokepoint carrying 20% of the world's oil and a third of global fertilizer exports, went dark.

Oil spiked. Bond yields climbed. And the Federal Reserve, already pinned between a slowing economy and sticky inflation, lost its last good option.

The Hobson's Choice

Let me explain what's actually happening because the financial media is tap-dancing around it.

A "Hobson's choice" means you get one option. Take it or leave it. That's where the Fed sits right now. Except their one option isn't very good.

Before the conflict, the market was pricing in a 62% chance of a rate cut at the June meeting. That number has collapsed to under 30%. Oil prices just registered double-digit year-over-year gains, and when oil moves like that, it doesn't politely stay in the energy sector.

It bleeds into food, transportation, manufacturing, chemicals, plastics, and packaging. Everything you touch, eat, or ship.

Gasoline had been dragging CPI down by 5.6% in the most recent inflation report. That drag is about to flip. Pushing inflation higher at exactly the moment the economy needs relief.

Here's the Fed's impossible math: cut rates to support a weakening economy, and you pour fuel on an inflation fire already reigniting.

Hold rates steady, and you watch consumers, especially lower-income households, get crushed by rising fuel costs while the job market deteriorates.

There is no good move.

And the math is brutal. Raymond James strategist Tavis McCourt estimated that a $20 move in oil could translate into $150 billion in higher gasoline expenditures this year.

That more than wipes out the estimated $129 billion in individual tax cuts from the latest tax bill. The pain at the pump will exceed the relief from Washington.

And if you're waiting for the Fed to ride in and rescue your portfolio, you need to understand something: they can't.

The Stagflation Setup

I've been writing about inflation as a structural force for a while now. Since I began writing about it, I’ve always believed it’s not the kind that shows up for a quarter and fades. It’s the kind of inflation that rewires how economies function for a decade or more.

Mohamed El-Erian, one of the sharpest macro minds on the planet, wrote in the Financial Times last week that "stagflationary risks are building."

He pointed out something most people miss: the negative forces in the economy don't cancel each other out. They compound.

He's right. And here's what's compounding right now.

The labor market is cracking. February's jobs report showed a surprise loss of 92,000 payrolls. Strip out health care and social assistance, which have created roughly 784,000 jobs since 2024, and the economy has actually lost 634,000 jobs.

Manufacturing employment alone has dropped 100,000 since the end of 2024. This despite $280 billion in CHIPS Act commitments, IRA manufacturing incentives, and the most aggressive tariff regime in a century. So much for reshoring.

The K-shaped economy is widening. Income growth for the top third of households is running above 4% year-over-year. For the bottom third? Just 0.6%.

Energy costs are about to eat the consumer alive. The oil shock I mentioned above doesn't just erase the tax cut… it hits hardest at the bottom of the income ladder.

The people most exposed to gasoline prices, lower-wage service workers who can't work from home, absorb the blow first.

This is textbook stagflation: rising prices, falling growth, and a central bank with no tools left to fix either one.

I grew up watching my parents stretch every dollar. I know what it looks like when the system squeezes the people at the bottom first. We were the people at the bottom, and the pain was brutal.

This is deja vu all over again, except now it's climbing up the income ladder.

Commodities Just Broke Out Against Treasuries

Here's the headline that should be on the front page of every financial publication and isn't.

Commodities have broken out versus U.S. Treasuries.

For decades, Treasuries were the safe haven. When things got scary, money flowed into government bonds, yields dropped, and the system reset. That relationship is fracturing.

Bond yields have risen since the conflict. Both 10-year and 30-year Treasury yields are trading over 25 basis points above their pre-conflict closes.

The Bloomberg Global-Aggregate Bond Index has given up its entire gain for the year.

Meanwhile, commodities such as oil, gold, agricultural products, and base metals are surging.

When commodities outperform Treasuries, the market is saying something simple: we trust stuff more than we trust promises.

That's a massive problem for a government that needs to roll over nearly $10 trillion in debt this year. The U.S. had among the highest refinancing needs ratios relative to GDP in the OECD last year, over 30%.

If bond buyers start demanding higher yields to compensate for inflation risk, the cost of servicing that debt explodes.

Over the next decade, federal net interest expense is projected to rise 121% to $2.1 trillion by 2036. That's five times faster than defense spending growth.

Interest payments alone will consume 4.6% of GDP, higher than any point in the last 60 years.

A research paper from the Kiel Institute studied every major military buildup since 1870 and found that governments almost never cut social spending to fund wars. They choose "guns and butter," and they finance it by borrowing.

As former European Commission President Jean-Claude Juncker once said: "We all know what to do. We just don't know how to get re-elected after we've done it."

That's exactly what's happening now. And it's exactly why the bond market is starting to revolt.

Why Gold Miners Are the Trade

When oil spikes, mining shares always take an initial hit. Miners burn diesel, use oil-derived chemicals, and carry exposure to global slowdowns.

That's what happened this past week… gold miners pulled back alongside the broader commodity complex.

But here's what the selloff is missing.

Gold miners are generating massive operating profits right now. Gold itself has broken out from a 45-year downtrend relative to CPI.

The ratio of gold mining stocks to gold hasn't even retraced half of its decline from the bull market highs 20 years ago. There's enormous room to run.

And the real catalyst hasn't arrived yet. The Fed's balance sheet has quietly grown by nearly $100 billion in the last three months.

When that kind of monetary expansion accelerates, and it will, because the Treasury market increasingly needs the Fed to keep yields from spiraling, the dollar weakens further. Dollar debasement is rocket fuel for gold.

Silver is outperforming gold. Silver miners have broken out against almost every broad stock market index in the world. Agricultural commodities and fertilizer stocks are breaking out, too.

A third of global fertilizer exports are now trapped behind the Strait of Hormuz, right as the Northern Hemisphere's spring planting season is underway.

One of the most respected independent research firms in the world, publishing institutional-grade macro research since 1983, has been pounding the table on this thesis since 2020.

Their highest-conviction portfolio is up over 2,284% since inception. Year-to-date, it's returned 20.3% while the S&P 500 is down 0.8%.

Their allocation tells you everything: 30.9% in gold, silver, and mining stocks. 22.3% in commodities and related sectors. They're not guessing. They're positioned for exactly the world we're living in right now.

The One Thing You Can Do Right Now

I'm not going to sugarcoat this. The environment we're entering, stagflation, supply chain fractures, a paralyzed Fed, and rising geopolitical conflict, is one of the most challenging investing backdrops most of us have seen in our lifetimes.

But it's not hopeless.

When the system that's supposed to protect you, low rates, stable prices, functioning supply chains, breaks down, what you need is simplicity.

Here's your one actionable move: start building a position in hard assets if you haven't already.

Gold. Silver. Mining stocks. These are insurance policies against a monetary system running out of options. You don't need to go all-in tomorrow. But you need to start.

A 10–15% allocation to precious metals and commodity-related investments is no longer "alternative", it's essential.

But knowing what to own is only half the battle.

Knowing which miners, how to size positions, and when to add is where the real edge is. Inside Moonshot Premium, I share the specific names I'm watching, the positions I'm building, and the framework I use to manage risk when volatility spikes like it has this week. If you've been reading these essays and thinking, "I need to actually act on this,” that's exactly what Premium is for. In fact, right now, below, we have two new portfolio recommendations in the buy range.

The 40-year bull market in bonds is over. The Fed can't cut rates without reigniting inflation. The government can't stop borrowing without cutting programs that no politician will touch.

And the Strait of Hormuz just showed the world how fragile our entire supply chain architecture really is.

The old playbook, buy the dip, wait for the Fed, trust the 60/40 portfolio, is dead.

The new playbook is simple: own things that can't be printed, debased, or trapped behind a 21-mile strait.

The Fed can't save you. But you can save yourself.

Double D

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