Darrell Delphen Macro

Investment Conference – Client Update

Bekki and I are wrapping up the investment conference in San Diego. I found a few promising ideas that deserve more research, but the biggest takeaway is that I remain confident we’re partnering with outstanding managers and operators.

San Diego has been a wonderful break from the Texas heat. Last night we enjoyed sitting around a fire pit on the beach, and it reminded us how important it is to slow down.

That said, no matter where I travel, it always feels good when it’s time to head back home to Texas.

Germany wants citizens to work on Sundays 

Germany’s industrial decline isn’t being caused by Sundays off. It’s being driven by expensive, unreliable energy.

German industry warns that 2026 could mark a fifth straight year of manufacturing contraction. Capacity utilization is just above 78%, yet policymakers seem more concerned with extending the workweek than fixing the real problem.

Factories don’t relocate because bakeries close on Sunday. They relocate when energy becomes too expensive to compete. Germany shut down nuclear power, abandoned affordable Russian energy before securing a competitive replacement, and layered on costly green policies. The predictable result has been declining competitiveness in chemicals, steel, glass, machinery, and automobiles.

This is a perfect example of how a country‘s leadership making bad decisions can affect everyone. 

Affordable, reliable energy isn’t optional. It’s the foundation of a strong industrial economy.

The U.S. appears to have two choices in Iran: bad and worse.

The worst option: Stay in the war, watch the conflict escalate, and risk severe economic damage. If that happens, history could judge Trump’s presidency through the lens of a major economic downturn.

The bad option: Negotiate an agreement, withdraw, allow Iran to charge a toll on shipping, and declare the mission a success.

My concern is that global oil inventories appear relatively tight, missile stockpiles are being depleted, while Iran still has a large supply of low-cost drones and, perhaps most importantly, time. Wars of attrition are not won by military strength alone—they also depend on logistics, industrial capacity, and political endurance.

We’ll see how it unfolds, but the strategic and economic consequences may ultimately matter more than the battlefield victories.

Why is the savings rate so low?

For years, inflation was low, interest rates were near zero, and the Federal Reserve flooded the financial system with liquidity through quantitative easing (QE). Investors came to believe the Fed would step in whenever financial markets got into trouble.

But the Fed can’t make the same guarantee for real assets or the real economy.

The result? Capital flowed into financial assets like stocks and bonds because investors expected Fed support. That helped inflate asset prices, benefiting those who owned them. Meanwhile, investment in the productive economy—the factories, energy, infrastructure, and industries that raise the average person’s standard of living—lagged behind.

The stock market climbed, but many Americans saw their purchasing power erode as the cost of living outpaced their wages.

This is why I am always saying that the stock market is not the economy.

It’s often easy to see the unintended consequences in hindsight. The hard part is recognizing them while they’re happening.

This is another reason that I believe we are entering a period of natural resource scarcity. We have under invested Capital and exploration and development of real things for a long time. 

Whether OpenAI or any other AI company ever becomes consistently profitable is almost beside the point. Every AI model still requires enormous amounts of electricity, cooling systems, transformers, copper, networking equipment, and reliable baseload power to operate.

If AGI arrives, infrastructure demand accelerates. If AGI takes longer than expected, data centers still need to be built, expanded, and powered.

AI requires massive amounts of power, and power depends on fuel. Yet fuel supply is under pressure from depletion, years of underinvestment, and geopolitical attacks on critical energy infrastructure—all at the end of a decade-long commodity bear market that constrained capital investment.

I’m not trying to pick the winning AI model. I’m looking to own the businesses that supply the picks and shovels: the energy, electrical infrastructure, and industrial backbone that make AI possible.

The stock market is not the economy.

The National Association of Realtors says the average first-time homebuyer is now around 40 years old. That should concern everyone.

For many Americans, the economy doesn’t feel strong. Housing affordability is near historic lows, financing costs remain high, and the average new car costs roughly 35% more than it did before the pandemic. For many young adults, buying a home or even replacing a vehicle feels increasingly out of reach.

The Bureau of Labor Statistics’ benchmark revision showed that nonfarm payroll employment increased by only about 181,000 jobs during 2025—roughly what used to be considered a solid month of job growth before the pandemic.

When young people feel they can’t get ahead despite working hard even if they can get a job , they naturally begin questioning whether the system is working. That’s one reason many are becoming more receptive to socialist ideas. They aren’t necessarily embracing the ideology—they’re responding to an economy that often seems to offer fewer opportunities than it did for previous generations. They’re just too young and ignorant to know that socialism will make it worse.

I also believe the global economy is much weaker than many realize, with China’s real estate problems still weighing on growth. We’re not in a severe recession, but we’re not in a healthy economy either. A record-high stock market doesn’t change the reality that many Americans are struggling to build wealth, buy a home, or achieve the financial milestones that once defined the middle class.

Why are oil inventories so low, yet crude prices remain relatively tame?

In my view, it’s because the primary price discovery mechanism for oil is no longer the physical cash market—it’s the paper futures market.

When futures trading dominates pricing, the market can become disconnected from physical supply and demand for extended periods. That disconnect can persist until physical inventories become so tight that buyers are forced to compete for actual barrels rather than paper contracts. If that happens, real price discovery could occur very quickly—and likely to the upside.

Either this is one of the biggest disconnects I’ve ever seen between physical fundamentals and market pricing, or the relatively low forward crude futures curve is signaling something more concerning: a much weaker global economy (including China) than most investors currently expect.

Time will tell which explanation is correct, but one of them is.

How I speculate-I love buying cheap real assets that everyone else seems to hate—but the world still can’t live without. Then I hold them for 5–10 years and let time do the work.

Right now, I like copper, coal, oil, and natural gas.

To me, buying undervaluation and selling overvaluation just makes sense. To do this you must be an independent thinker, be able to hold through volatility/cycles, and not care what they herd does. Disclosure, this is not a recommendation. It’s just the way I speculate. 

Central Banks are the biggest force supporting gold prices today.

Many central banks have indicated that gold still represents a smaller percentage of their reserves than their long-term target, so they continue to be steady buyers. That creates a strong underlying source of demand.

The second major driver is government debt.

As deficits continue to grow, governments face rising interest costs. In the U.S., a significant portion of federal individual income tax receipts now goes toward servicing the national debt. If those costs continue to climb, the pressure on the Federal Reserve to monetize the debt by expanding the money supply also increases.

History has shown that inflating away debt reduces its real burden, but it also tends to reduce the purchasing power of the currency.

That is one reason I believe central banks continue accumulating gold. Gold has no counterparty risk, cannot be printed, and has served as a store of value through countless monetary cycles.

Pay attention to what central banks are doing—not just what they're saying.

Energy Update

In the short term, refineries have been flooded with crude oil from trapped tankers released after the Strait of Hormuz reopened. It’s closed again now. While many refineries are running near full capacity, they cannot process all of that crude quickly enough. The result is a temporary glut of crude oil alongside tightening supplies of refined products.

The situation is being compounded by Ukraine’s attacks on Russian refining infrastructure, reducing the availability of refined products from Russia.

Longer term, Strategic Petroleum Reserve SPR inventories remain near historically low levels. There may still be oil in storage, but inventory on paper is not the same as having enough production and refining capacity to meet demand when it matters. At some point, the challenge becomes one of flow, not just supply.

I believe diesel is likely to experience the tightest conditions first due to ongoing shortages of heavier, sour crude from the Middle East, which many refineries are configured to process. If refined product shortages persist, I believe those pressures will eventually be reflected in higher crude oil prices as well.

Time will tell, but I believe the energy market could become much more interesting over the coming months.