A Punch in the Mouth
Real-world limits... Rights aren't the force of gravity... The magic of money... The laws of finance... Diesel fuel and AI led me here...
Thirty years ago, a buddy of mine lost his foot to a papermaking machine...
The particulars have faded from memory, but I'll never forget how much it shocked me when he called and told me about it.
I vaguely remember him describing the gruesome accident. I didn't know what to say except, "Wow, man, I'm so sorry that happened to you."
I distinctly remember the first time I saw him afterward. I stood in his room and looked at the prosthesis situated where flesh and bone had been. It jarred me. I'd never known anyone who had lost a major body part.
Looking back, it had an Old Testament feel to it. An eye for an eye... except my friend hadn't taken anybody's foot. He was just making a living operating dangerous machinery. I suppose he let his concentration slip and wham, the machine took his foot.
I'm not saying God had it in for him. My friend simply hit a hard limit of reality. His mistake was met by a machine with all the sympathy of a firing squad. It took a piece of him in an instant.
Had his foot been crushed by an avalanche or severed in a car accident, the end result would have been the same. The physical world has its limits, and sometimes it's best you don't find them.
The physical world isn't like the world of politics and ideology...
Americans especially like these realms.
For example, take the rights to life and liberty. They're critical underpinnings of the U.S. Constitution, which we call the "Law of the Land." We should call it the "Law of the People Who Live on the Land." The land doesn't care about us. It routinely swallows people and buildings that happen to be on the wrong spot at the wrong time.
Let's face it, rights are wonderful, but they're not exactly the force of gravity. You can violate someone's right to life and liberty. It's happening right now, all over the world.
But you can't violate the law of gravity. If you step off the roof of a tall building, the universe will extract payment from you.
Physical law is effectively the law of God. And as Cecil B. DeMille, director of the 1956 epic film The Ten Commandments, famously said:
We cannot break the Ten Commandments. We can only break ourselves against them.
The markets and economy are a hybrid of these worlds...
At times, they abide by the Law of the People Who Live on the Land. Other times, they follow the laws of physical reality. But more often, they follow aspects of both.
When these worlds work together, we hail the process as a great triumph. Folks get ideas. They want to turn them into real products and services. So they put money to work and poof, the world is suddenly filled with iPhones and Peloton bikes. Money is earned, saved, and becomes capital for the next attempt at earning. It's a straight line from ideas to real things, made possible by the accumulation and allocation of capital.
But when ideology and the physical world are at odds, things can get dicey – fast. When you drop bombs on a country that produces roughly 3% of the global oil supply, you shouldn't be surprised to see oil rise from below $70 per barrel to a little more than $112 per barrel in 27 trading days.
That makes life harder for people who must buy fuel to live.
Like the other laws of men, you can violate the laws of finance...
For example, sometimes the market lets people buy garbage companies and make a fortune when they soar for one ridiculous reason or another.
Or take the Federal Reserve and the U.S. Treasury. The Fed prints money out of thin air, buys Treasurys and mortgage-backed securities... and voila, loans are made, and housing is constructed.
You can get away with violating laws for longer than you'd imagine... until you can't.
I believe we have entered a time when the financial and economic policies of the past few decades are colliding with the limits of the physical universe. And physics will always win out.
Today's hyperabundance of money will have to bow to the economic scarcity of things. Printing more money doesn't make a semiconductor fab appear any sooner. Nor does it make copper appear faster. It still takes two decades or more from the discovery of a copper deposit until the mine begins to produce usable ore. And even then, the ore still needs to be turned into copper cathode before it becomes wire or pots and pans.
The situation is almost primitively simple.
Humans want things. Producing things requires manipulating physical reality in myriad complex ways. They cost effort and time and require struggle. That's just life.
However, we often ignore the more unpleasant realities of cost.
We see our neighbor's shiny new Tesla. We don't see the children mining cobalt from rocks and mud in the Democratic Republic of the Congo. We see the bacon on our plate in the morning. We don't see the river of blood in Chicago that produced it.
As Mike Tyson might say, we don't think about the costs until they punch us in the mouth.
COVID-19 landed a solid punch. So has the closing of the Strait of Hormuz.
Before COVID, only the geekiest financial and industry analysts even uttered the term "supply chain." Many of us had never heard of it.
Now, even my non-financially savvy friends and relatives know China controls global rare earth refining. They all know 20% of the world's oil transits the Strait of Hormuz. And some are quick to cite how much naphtha, refined products, urea, and other materials that power and feed our modern world move through the highly contested waterway.
That's what a good solid punch will do for you. It'll wake you up better than the most clangorous alarm clock ever could.
A good punch will threaten a critical body part.
It's what happened to the Western world in March 2020 and again in February 2026. Both times the pain, swelling, and disfigurement lasted well beyond the initial impact.
I started thinking about the 'next punch' last December...
That's when I noticed that 95% of the country's data centers use diesel backup generators.
You see, data-center customers now routinely require "five nines" reliability. They're even writing it into contracts. That means the data center must deliver 99.999% uptime. That's just five minutes and 26 seconds of allowable downtime per year. A microsecond more, and companies lose revenue on projects, most of which aren't making a profit yet.
In The Ferris Report, I showed how an extended power outage in a place like Loudoun County, Virginia – Data Center Alley – could cause an overnight 3% spike in national diesel demand. That could easily send prices at the pump north of $10 a gallon. The national average diesel price is about $5 now, so $10 is likely a conservative guess.
I recommended two oil refiner stocks in the crosshairs of this potential crisis. They're both up more than 80% since December. (Ferris Report subscribers can find that issue here. And if you don't already subscribe to The Ferris Report, click here to learn more.)
They benefited as the war in Iran pushed up fuel prices. (I won't pretend I predicted that in December.) Even with oil and gas prices retreating from their April war highs, the crack spread – the price of gasoline and diesel fuel minus the cost of the crude oil required to make them – has soared to all-time highs and now sits around $65 a barrel. That has kept these stocks soaring.
I realize that rearranging your portfolio to benefit from a potential crisis is not a popular move...
It leads to disappointment the majority of the time. But when it does deliver, it tends to make up a lot of ground – especially when the majority of folks are losing big.
Imagine that seven months ago you'd bought two stocks that would rise 80% as all the big AI stocks either rose a little, fell a little, or fell a lot. That's exactly what has happened since I recommended the refiners in December.
Among the biggest AI names, Alphabet (GOOGL) and Nvidia (NVDA) are the only two that are up by double digits since December 24. Through yesterday's close, they were up 13% and 10%, respectively. That's not bad, but it's not 80%. Microsoft (MSFT) was down 18% and Palantir Technologies (PLTR) and Oracle (ORCL) were both down more than 30%.
I promise you, paying 100 or more times sales for any business (like folks did with Palantir in 2025), carries substantial risk.
Understanding how important backup power is for data-center owners and their customers would have helped you see the energy trade in December. It's where the real gains in the AI boom have been for a while.
You can probably name other ways the physical world is winning out.
For example, my friend and legendary natural resources investor Rick Rule, of Rule Investment Media, has been saying for years that "either the price [of uranium] goes up or the lights go out."
The lights have stayed on, and the price has gone up... and will likely go up some more. I don't believe the uranium bull market is over yet.
That same dynamic applies to copper, rare earths processing, chemical production, and a host of physical products and processes that financial institutions, central banks, and governments can't print out of thin air.
I've already picked at least a dozen stocks with this idea in mind, and some of them are absolutely crushing the market. I expect that to continue for years to come.
New 52-week highs (as of 7/16/26): AXA (AXAHY), Alpha Architect 1-3 Month Box Fund (BOXX), Chemed (CHE), Canadian National Railway (CNI), Healthpeak Properties (DOC), W.W. Grainger (GWW), Coca-Cola (KO), Kayne Anderson Energy Infrastructure Fund (KYN), Lamar Advertising (LAMR), LXP Industrial Trust (LXP), Marathon Petroleum (MPC), Match Group (MTCH), Omega Healthcare Investors (OHI), Pembina Pipeline (PBA), Invesco High Yield Equity Dividend Achievers Fund (PEY), Starbucks (SBUX), Snap-on (SNA), State Street SPDR Portfolio S&P 500 Value Fund (SPYV), Union Pacific (UNP), and Visa (V).
In today's mailbag, feedback on Dr. David "Doc" Eifrig's new investing tool that tracks market "rotation," which we wrote about yesterday and debuted to the public earlier this week...
Existing Retirement Trader subscribers and Stansberry Alliance members can find this new tool here... and if you're interested in learning more and joining them, click here for the details and a free demo in Doc's presentation...
Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
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Good investing,
Dan Ferris
Medford, Oregon
July 17, 2026