Hi All,

Well, if you’ve been following this newsletter weekly, you wouldn’t be surprised that the US and Israel have bombed Iran. More on that in a little, let’s dive into things.

Word of the Week

Regime (n)

A system of government or leadership, especially one that exercises strong central control. Can also refer to any organized system of rules or management.

• The military regime banned all political opposition and controlled the press.

• After decades under the same regime, citizens took to the streets demanding change.

• The US and Israel are now in a regime change war with Iran.

• The new health regime recommended by his doctor included daily exercise and cutting out sugar.

New Class Article

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What’s Happening in the News

War with Iran

The United States and Israel launched a joint military operation against Iran late Friday night, and make no mistake about what this is: a full-scale regime change war. Trump said it himself, naming it Operation Epic Fury. Over a thousand airstrikes hit Iran in the first 24 hours, eventually climbing to strikes on 1,700 separate targets across the country, hitting the navy, missile production facilities, nuclear sites including Bushehr, Fordo, Esfahan and Natanz, regime leadership, command and control centers, the defense and intelligence ministries, and fortified bunkers. The US had 50 percent of its deployable airpower in the region at the time of the attack, backed by two aircraft carriers, the USS Gerald Ford and the USS Abraham Lincoln, plus over a dozen destroyers. Patriot missile batteries and THAAD systems were pre-positioned, diplomatic personnel were evacuated, troops were moved out of range of Iranian missiles, and Israel opened its bomb shelters. Nobody was pretending this wasn't coming.

Trump announced the operation in a video posted to Truth Social, wearing a USA baseball cap with no tie in front of a black curtain, which was exactly as surreal as it sounds. He ran through the entire history of US-Iranian tensions going back to the 1979 hostage crisis, the 1983 Beirut barracks bombing, and Iran's backing of Shiite militias in Iraq, making the case that the Islamic Republic has been an international pariah (a country treated as an outcast by the rest of the world) and historic adversary of the United States since its founding. He announced the targets, called on Iranian Revolutionary Guard and Armed Forces personnel to lay down their weapons or die, and then invited the Iranian people to emerge from shelter and take their country back. His exact words: "When we are finished, take over your government, it will be yours to take. America is backing you with overwhelming strength and devastating force. Now is the time to seize control of your destiny." Operation Iraqi Freedom feat. Iran, basically. And as history has shown us repeatedly, bombing a country into regime change and then wishing the population good luck has always worked out perfectly.

Supreme Leader Ayatollah Khamenei was killed in the first round of strikes after CIA intelligence placed him at his residential compound on Friday night. Trump claimed that over 40 top leadership figures had been killed within the first day alone, boasting the operation was "way ahead of schedule." Following Khamenei's death, a council was convened to maintain governmental continuity and a new Supreme Leader was elected. By day three, Iran's navy had been completely destroyed, its air force had not mounted a meaningful response, and roughly 50 percent of Iran's missile launch platforms had been degraded. The US and Israel maintained air superiority across the country.

Iran retaliated with missile strikes targeting US military bases and regional allies across the entire region including Bahrain, Qatar, the UAE, Saudi Arabia, Jordan, Iraq, Kuwait, and even neutral Oman, while also striking civilian infrastructure including hotels and airports in Gulf cities. In the first 24 hours alone Iran fired approximately 300 missiles, with the intercept rate running at roughly 86 percent, meaning around 14 out of every 100 get through. The US death toll from the conflict had risen to six by day five. The axis of resistance (Iran's network of allied militias, including Hezbollah, the Houthis, and the Popular Mobilization Force in Iraq) has not mounted any meaningful pushback.

Trump told the American public on Friday that the US went to war because Iran was sponsoring terrorism, refusing to negotiate, and posed a threat to global security. By day three, his own Secretary of State Marco Rubio had already contradicted that story publicly. Rubio told reporters that the US entered the war because Israel had informed Washington it was going to strike Iran regardless, and that Iran would retaliate against US military bases in the Gulf whether America participated or not. His logic: since American soldiers were going to get hit anyway, better to join the attack upfront and destroy Iran's missile launch platforms before they could fire. The third option Rubio conspicuously left out of this equation is simply restraining Israel from launching the attack in the first place. Israel receives $3.8 billion in annual US military aid, relies on American diplomatic cover at the UN, and could not have built or maintained its military without decades of US support. The idea that a client state was able to inform its patron that a war was happening and Washington's only choices were to participate or accept casualties is, to put it diplomatically, a striking way to run an alliance.

The prelude to the attack came on Thursday, when the final round of US-Iran negotiations collapsed in Switzerland. Jared Kushner and Steve Witkoff presented Iran with an ultimatum demanding the permanent dismantlement of all nuclear enrichment facilities, surrender of all highly enriched uranium to the United States, and a permanent non-nuclear pledge with no expiration date. Iran rejected everything. With diplomacy dead and Israeli pressure at a maximum, Netanyahu had informed the administration during his February 2026 White House visit, his sixth trip to Washington since Trump's inauguration, that Israel was going to war before Purim whether the US joined or not. The strikes came Friday night.

For those unfamiliar, Purim is a major Jewish holiday celebrating the story from the Book of Esther, in which the Jewish people of ancient Persia were saved from annihilation and instead destroyed their enemies, including 75,000 Persians. Ancient Persia is modern-day Iran. The holiday is observed with costumes, feasting, and the public reading of Esther's story in synagogues worldwide, and it is explicitly a celebration of Jewish victory over the Persian people. That the US and Israel chose to launch their most dramatic military escalation against modern-day Persia on this specific holiday is either the most extraordinary coincidence in modern military history, or it was the point all along.

The big unanswered question moving forward is what happens when the bombs stop dropping, because there is, by all accounts, no plan. Trump's stated hope is the Venezuela model: hit Iran hard enough, kill enough leadership, and a pragmatic faction from within the surviving government will emerge and negotiate. After Khamenei's assassination, a new Supreme Leader has already been installed and the government is attempting to maintain continuity. Trump himself acknowledged in the Oval Office that the more likely outcome may be a hardline faction consolidating power, calling that the worst case scenario. Critics point out that Iran is a Shiite theocracy built around a culture of martyrdom, and that the survivors of a bombing campaign that killed their spiritual and military leadership are statistically more likely to dig in than to negotiate.

Both strategic objectives, regime change and the destruction of Iran's missile capability, face serious complications on the ground. Iran's missile production facilities, like its nuclear sites, are built deep underground in fortified mountain bunkers, making complete destruction from the air nearly impossible to verify. Iran's missiles are also largely mobile, making them extremely difficult to locate and destroy before launch, a lesson the US learned the hard way during its month-long campaign against the Houthis in Yemen in 2025, which ended with Trump publicly acknowledging it had failed and the Houthis retaining their full launch capability to this day. The cost equation is deeply unfavorable: Iran's ballistic missiles are cheap to produce and it takes multiple expensive interceptor missiles to stop each one, with no guarantee of success. The US is burning through years of interceptor stockpiles in days, and those systems are spread thin across the entire region as well as Europe and Asia. If the war drags on for weeks or months, the math strongly favors Iran outlasting the American interceptor supply.

This creates the core dilemma. The war needs to be short, but Iran is not surrendering, and air power alone has never achieved regime change in history. If the gamble on a compliant successor government fails, the only remaining options are ugly. One is that the regime survives, reconstitutes, and the US finds itself back at the starting line within a year. Two is a US ground invasion of a mountainous country three times the size of Iraq with a population of 90 million and a million-man security force. Trump has said publicly he is not ruling out boots on the ground and that he does not have the "yips" (a fear of taking action under pressure) about it the way other presidents did. Hegseth echoed that, saying a force of 200,000 is not necessary but nothing is off the table. Three is a proxy ground force, most likely the Kurds.

The Kurdish option has moved from speculation to confirmed planning. According to Axios, Trump spoke directly with leaders of the two main Kurdish factions in Iraqi Kurdistan on Sunday, the day after the bombing began. The calls were the culmination of months of behind-the-scenes lobbying by Netanyahu, who has maintained close security and intelligence ties with Kurdish groups in Iraq, Syria, and Iran for decades. Six days before the war began, five dissident Kurdish groups sheltering in Iraq announced the formation of a united coalition to fight Iran, a detail that is difficult to attribute to coincidence given the timing. The plan appears to be that Iraqi Kurdish forces, backed by US and Israeli air power, would cross the border into northwestern Iran, where Kurdish Iranians make up roughly 10 to 15 percent of the population and could potentially greet them as liberators. US officials privately acknowledge, however, that the Kurds do not have anywhere near the numbers needed to control the whole country. Whether the plan involves a smaller Baloch separatist force opening a second front from southeastern Iran, US special forces providing ground support, or some hybrid of all three, nobody has publicly explained how any of it adds up to subduing 90 million people.

The January protests in Iran are now being viewed in a different light. At the time, Western media framed them as a nationwide democratic uprising being massacred by the regime. Eyewitness accounts that emerged later described groups of armed men in black uniforms using professional military tactics to seize government buildings, almost entirely concentrated in Kurdish-majority western provinces, which fits the pattern of a proxy infiltration rather than a spontaneous civilian uprising. If that reading is correct, it means an initial Kurdish incursion was already attempted and repelled, with the crackdown then laundered through Western media as a humanitarian atrocity to build the case for intervention. The six Kurdish groups forming their coalition six days before diplomacy collapsed would then be the sequel.

What is clear is that there is no exit ramp in sight. If Iran does not capitulate, the US cannot simply go home and let the regime rebuild. Israel will not allow it. Trump has already said as much. The war that was supposed to last four weeks, and which Trump claims is already ahead of schedule on leadership kills, is quietly revealing itself to be something with no defined ending. Nobody inside the administration opposed entering the conflict. According to the New York Times, Vice President JD Vance actively pushed in the Situation Room for the US to go bigger and faster. The war currently has a 27 percent approval rating among the American public, roughly half the popularity of the Iraq war at launch. Whether that matters to anyone making the decisions is, at this point, a reasonable question.

What’s Happening in the Markets (Not Financial Advice)

🛢️ Oil, the Strait of Hormuz, and Recession Risk

Oil has rallied 28% in six weeks, from $59 to $76, driven by escalating risk around the Strait of Hormuz, where roughly 20% of global oil supply passes daily. At least five commercial tankers have been struck or damaged, and major insurers have pulled war risk coverage, effectively shutting down private shipping through the corridor. The Trump administration has offered political risk insurance through the DFC and floated Navy escorts, but neither is guaranteed. Crude is technically strong, having broken out above $66 resistance and holding, with $72 as the level where a breakdown would signal reversal.

The recession trigger isn't a high oil price but a sharp spike: historically, a 50%+ surge sustained over months precedes contraction (1973, 1979, 1990, 2008). That threshold sits around $90. Gasoline has already moved from $2.89 a month ago to $3.20 nationally ($4.74 in California), and the CME FedWatch tool shows a 97.4% probability of no rate cut at the March 18th FOMC. Consumer spending drives 70% of GDP, so rising energy costs compress margins, squeeze households, and box the Fed into tighter policy for longer.

🌍 Iran, Markets, and Geopolitical Pricing

The S&P 500's reaction to the Iran escalation has been muted, suggesting markets are pricing in a quick deescalation. That assumption carries risk. The bond market is already diverging from equities: 10-year and 30-year Treasury yields rose rather than fell, signaling no flight to safety in US debt and likely pricing in stagflationary risk. The dollar strengthened on a short-term safety bid, pressuring metals, but geopolitical events of this nature tend to accelerate de-dollarization, with central banks in China, BRICS nations, and Poland continuing to accumulate gold. Volatility through March is a given, and the stock market's calm may not last if the conflict drags on.

📊 Equities: Range-Bound With Downside Risk

The S&P 500 remains trapped in the range established since October. Predictive models based on midterm-year cycles and five-year fractals both pointed to a low forming in late February/early March, and the recent bounce aligns with that timing. Volume on the selloff showed smart money buying near support, and gains held into the following session. However, the model does not call for a rocket to new highs; it projects grinding, choppy action through March with a potential peak around mid-March before another correction into late March.

The midterm-year roadmap projects significant lows in June and September, with no clear directional trend until later in the year. The 50% support at 6,784 has not been broken on a daily close and remains the line in the sand. A break below with follow-through opens the door to prior lows; a breakout above the range highs with a successful retest would signal genuine strength. Until one of those events occurs, sector rotation matters more than index direction.

💰 Gold: Structural Strength Intact

Gold remains the strongest major asset class. After the late-January flash crash, price rebounded quickly above its halfway point, confirming institutional money is holding rather than liquidating. Q1 2026 prices are running well above Q4 2025, setting up gold miners for strong quarter-over-quarter earnings. Gold has tripled over the past 40 months, something only seen twice since WWII (1972 and 1979), both preceding severe currency devaluation.

The macro case is unchanged: US government debt-to-GDP sits at 124%, central bank purchases exceed 1,000 tons annually (double historical averages), and over 40% of central banks plan further increases. Geopolitical escalation only reinforces the trend. The key invalidation level is $4,400; above that, the macro bull structure holds.

🥈 Silver: Lagging Gold, Watching for Confirmation

Silver took a harder hit during the flash crash than gold and has been slower to recover, sitting roughly 25% below its highs versus gold's tighter retracement. This divergence suggests institutional money is favoring gold, or at minimum, silver is seeing more position rotation. The macro bull structure holds above $64, but for momentum to genuinely flip, silver needs to reclaim $97.30 with higher lows above that level. Anything in between is consolidation. A weakening dollar would help, and the broader precious metals backdrop of rate cuts, eventual QE, and de-dollarization still supports the case, but silver needs to prove itself technically before conviction returns.

₿ Bitcoin: Relief Rally, Not a Trend Change

Bitcoin surged 6.5% overnight to $74,000, breaking the 50% level at $71,000 and testing resistance at $74,000-$75,000 (Liberation Day lows and the March 2024 breakout zone). Short-term trend indicators have flipped bullish on increasing volume with higher lows forming off extreme fear readings as low as 5 on the index. Next resistance sits at $79,000-$81,000. For the monthly candle, any close above $67,000 would break the five-month red streak.

The weight of evidence still favors a counter-trend rally. Exchange volume hasn't picked up, ETF inflows are insufficient, stablecoin dominance keeps rising, and crypto interest on Google Trends is near five-year lows. Sentiment has spent 35 consecutive days in extreme fear; historical parallels suggest it needs weeks in regular "fear" territory before a durable base forms, likely Q2 or Q3. A drop back below $71,000 with lower highs on shorter timeframes would signal a false breakout. The bigger concern remains Bitcoin's failure to act as a hedge during geopolitical stress: gold rallied into the Iran escalation while Bitcoin did not, raising real questions about the store-of-value thesis.

💵 US Dollar: Short-Term Strength, Long-Term Erosion

The dollar strengthened on a flight-to-safety bid, with the DXY pushing toward 99.65 before sellers stepped in. Rising lows since the 95.50 bounce suggest institutional accumulation, and as long as 98 holds, reaccumulation remains the base case.

The longer-term picture is erosion. Federal debt approaches $39 trillion, interest payments run $970 billion annually (roughly 20% of revenue), and the only politically viable path is continued printing. The Fed has already cut rates below the pace of money supply growth, meaning cash is being devalued faster than it earns. Roughly $8 trillion in money market funds will begin flowing into real assets as rates fall further. The 1970s parallel is instructive: gold tripled and the dollar lost approximately 60% of purchasing power over a decade.

🏗️ Debt, Deficits, and the Policy Trap

Total US financial system debt now represents roughly 400% of GDP, a level that has only risen since 2008. The supposed deleveraging was really a transfer: household debt-to-GDP fell from 100%, but government debt-to-GDP rose proportionally from 50% to 124%. Officials cannot cut Social Security (72 million recipients), health programs, or interest payments ($970 billion, now exceeding defense) without political or financial catastrophe.

Revenue at $5.23 trillion cannot cover $7 trillion in spending. Rate cuts ease new borrowing costs but do nothing for the existing stock, and any interest savings barely dent the $1.8 trillion annual deficit. The endgame is printing, which is why the next Fed chair will almost certainly continue easing regardless of inflation. The risk of another US credit downgrade in 2026-2027 remains elevated, which would paradoxically trigger even more printing as borrowing costs rise.

📉 Inflation: Cooled but Not Cured

Official inflation sits near 3%, but the price level remains structurally elevated, with essentials still roughly 50% above pre-pandemic levels. The rate of change has slowed but the damage is embedded. The immediate concern is what rising oil does to the trajectory: if crude pushes toward $90+ on Strait of Hormuz disruptions, headline CPI re-accelerates through energy and transportation costs that flow into virtually every consumer product.

The 1970s analog keeps surfacing: inflation spiked, cooled to around 3%, then re-accelerated into a devastating second wave. The Fed is already cutting rates and expanding the balance sheet while inflation remains above target. A new oil shock would make that contradiction impossible to manage quietly.

That’s all for this week, have a nice weekend and see you next time!