The Next Energy Chokepoint
The Iran war is back in full swing... Tariffs for generic drugs... One more 'circular' AI investment... U.S. margin debt is surging... Lessons out of South Korea... Margin debt isn't signaling the end of the bull run...
The Iran war ratcheted up again today...
Overnight, the Iranian-backed Houthi militants in Yemen announced that they're prepared to attack ships in the Bab el-Mandeb Strait, according to CNBC. That would close another key shipping lane for global energy markets.
The Bab el-Mandeb Strait connects the Red Sea to the Arabian Sea. Last year, it was one of the largest energy routes in the world. According to the Energy Information Agency, 4.2 million barrels of oil flow through it each day.
And it has become even more important since the start of the Iran war. With the Strait of Hormuz blocked, Saudi Arabia has diverted its energy exports through the Bab el-Mandeb Strait. So it could become another major chokehold.
Meanwhile, the chances of a ceasefire are getting slimmer...
Secretary of State Marco Rubio told reporters in the Philippines that Iranian negotiators "don't seem to be serious" about making a deal to end the conflict.
And in a post on Truth Social this morning, President Donald Trump lobbed more threats at Iran...
Oil rose today on the news, with West Texas Intermediate crude hitting a near six-week high of about $87 per barrel. Stocks were mixed, too, with all three major U.S. indexes falling – though the S&P 500 Index and Dow Jones Industrial Average were in the green for much of the day.
As we've noted last week, investors are believing the Iran threats less and less. That would explain the muted reaction in stocks today. But the oil markets are showing that we should prepare for more energy disruptions.
There's a new tariff target...
In a separate post on Truth Social, Trump announced a 100% tariff on imported generic drugs for one year, starting on August 1, 2028. After that one-year period, the tariff would rise to 200%.
Last year, Trump did the same thing when he announced tariffs for brand-name drugs. But for both brand-name and generic drugs, pharmaceutical companies can avoid the brunt of tariffs by building manufacturing plants in the U.S.
That's likely why there's a two-year grace period before the tariff kicks in – to give companies time to line up investments for U.S. manufacturing plants.
As Dr. David "Doc" Eifrig wrote in the April issue of Prosperity Investor...
Now, the industry's biggest players are committing billions to a full-scale build-out of U.S. drug manufacturing. In 2025, major drugmakers collectively announced more than $370 billion in investments over the next five years.
That money isn't just building factories and plants. Pharmaceutical companies need to fill those facilities with machinery, chemicals, and other supplies. So it's also flowing down to pharmaceutical suppliers. More from Doc...
In most situations like this, there's not just one way to invest. The obvious way is to buy the contract drug manufacturers – or CDMOs. These are the companies actually running the plants. But there's an entire universe of lesser-known tools and equipment... each with their own place within the industry.
Doc and his team identified a company with a niche position in pharmaceutical manufacturing that's in a great position to take advantage of the "reshoring" theme. In a little more than three months, their pick is up more than 20%, versus a 14% gain for the S&P 500 and an 8% gain for the broader healthcare sector.
Paid subscribers and Alliance members can read the full report here.
Another 'circular' investment in the AI space...
This morning, Advanced Micro Devices (AMD) announced a partnership with AI startup Anthropic. The chipmaker will invest $5 billion in Anthropic in exchange for Anthropic buying up to 2 gigawatts of AMD chips.
This is AMD's second AI-startup deal. Last year, AMD issued Anthropic's competitor, OpenAI, a warrant for up to 160 million AMD shares. So OpenAI owns roughly 10% of the company. In short, the web of AI investments is getting even more tangled.
We most recently shared this image in May, showing just how tied together AI companies are...
When you factor in that AMD is now an investor in Anthropic, while OpenAI is an investor in AMD, you have one of the most well-known AI startups now indirectly invested in its chief competitor.
Again, we'll warn that these deals will crumble when the AI bubble bursts. All it takes is one company not meeting its obligations to bring down the entire ecosystem.
This is another area we're keeping an eye on for cracks in the AI boom. But for now, companies are still spending and investing heavily in one another. So the boom carries on.
Meanwhile, folks are levering up to buy stocks...
According to the Financial Industry Regulatory Authority ("FINRA"), U.S. margin debt hit a new all-time high of $1.5 trillion in June. That was up about 6% from May, and up nearly 50% from the same month a year ago.
As a refresher, "investing on margin" is simply borrowing debt to increase your exposure to a stock. As our colleague Dan Ferris wrote back in our January 3, 2025 Digest, this increased exposure can lead to higher returns. But it also comes with the risk of big losses, too.
From Dan...
[Investors bought stocks on margin so] they could buy $100 worth of stock for $10 in cash. If the stock went up 10%, they'd double their initial investment. But if it fell 10%, they were wiped out.
We've already seen how dangerous margin investing can be in countries like South Korea, where investors levered up to buy shares of memory-chip stocks during their run-up earlier this year.
Now that things have turned (the South Korean Kospi Index is down 25% in a month), folks are paying the price...
According to financial-data firm Barchart, more than 1.2 million South Korean investors received margin calls last week – meaning that their brokers asked for more money to cover the positions.
And 10% of South Korean investors are facing forced liquidation, where the broker automatically sells an investor's holdings to try and recoup some of the margin payments or declines in stocks. That's about 5 times the country's average liquidation rate of 2.1%.
Here in the U.S., folks are using this margin to "buy the dip" in huge waves.
As our friend Jason Goepfert of SentimenTrader shared on social media platform X, margin increased in June while stocks fell. Jason called that an "unusual occurrence" that typically hasn't led to strong market returns in the short term.
In the 13 previous occurrences dating back to 1928, the S&P 500 was only higher 12 months later five times.
We're in the 'middle innings'...
When the stock market starts to turn, folks who have invested heavily on margin will be wiped out. But we may not be at that point yet.
As our colleague and DailyWealth Trader editor Chris Igou explained in his July 8 issue, folks shouldn't just focus on the total level of margin debt (though it's important), but the ratio of margin debt to the total stock market.
From Chris...
By this metric, we have a long way to go before we hit the ceiling. Take a look...
Margin debt is on the rise relative to the broader market. This means that margin-debt growth is starting to outpace rising stocks. But it's not even close to the top of its range – which means the current rally in stocks can continue.
Still, margin debt is something to watch. If it surpasses the post-COVID high – when folks were levering up to buy meme stocks and the market as a whole – we could be approaching the end of the bull run.
But right now, there's no reason to exit before the bull market completes its course. More from Chris...
In short, margin debt needs to be on your radar today. It's approaching a level that typifies market peaks. That won't kill the bull market in and of itself. But it does show us that the cycle is in the middle innings...
[We] aren't panicking because of the mounting margin debt. But this moment serves as a great reminder that stocks will eventually go down.
When they do, you need to be ready. Know your exit strategy. Mind your allocations. And always, always follow your stops.
That's great advice to keep in mind during any market environment, not just the middle innings of a bull market.
New 52-week highs (as of 7/21/26): Healthpeak Properties (DOC), LXP Industrial Trust (LXP), Marathon Petroleum (MPC), Omega Healthcare Investors (OHI), Travelers (TRV), UnitedHealth (UNH), and Valero Energy (VLO).
In today's mail, feedback on Doc's new investing tool that helps you see market "rotation" on thousands of stocks and exchange-traded funds ("ETFs") to identify whether they're bottoming, topping, or doing something in between... Stansberry Alliance members and Doc's Retirement Trader subscribers can find this new tool here. If you want to get access, you can learn more from Doc in his free presentation that he debuted last week. Click here to watch a replay.
"Doc, I just got your StockTracker. Been reading and doing charting for 55 years. I believe you have knocked the cover off the ball! All makes sense. Cyclical nature of stocks has been captured with your work. Extensive backtesting proves the probabilities of individual stock moves. Lots of folks back test but not for 25 years. Congratulations for the hard work, and I'll be using it every day." – Subscriber Ward A.
As always, send your notes to feedback@stansberryresearch.com.
All the best,
Nick Koziol
Baltimore, Maryland
July 22, 2026