Markets Weekly January 3, 2026

Hello my friends. Today is January 3rd, 2026. I want to wish everyone a happy

2026. I want to wish everyone a happy new year. Now before we begin, I want to

new year. Now before we begin, I want to bring to your attention that I've noticed that some of you are not receiving weekly updates from my blog posts. I've looked into this and

posts. I've looked into this and discovered that this is a technical problem and hopefully I will have this resolved by Monday. But remember, you can always access my posts on my website

and of course whenever I have a new post, I will tweet about it on Twitter.

Okay, so this week I actually had initially planned to make it a geopolitical episode since we had so many big things happening in the world of geopolitics the past week. Little did

I know what we would have this huge huge event that happened this morning where it seems like President Trump has successfully taken out President Maduro

of Venezuela. So this is definitely an

of Venezuela. So this is definitely an earthquake in the world of geopolitics.

So we got to talk about uh what happened and what it all means for the economy and for markets. And also we have to talk a little bit about silver as well.

So silver totally imploded uh in the beginning of the week. There are some concrete causes for that although it did recover a little bit more. So first

though let's talk about what happened in the world of geopolitics.

So I think there are four theaters in the world and in each geopolitical theater we had some pretty big developments from the far east to Latin

America to Europe to the Middle East.

Starting with the Far East. So earlier

in the week, last week, we had China make pretty big military exercises all around Taiwan. And what they seem to be,

around Taiwan. And what they seem to be, you know, kind of projecting is that they could easily blockade Taiwan. And

if they were to blockade Taiwan, again, Taiwan is an island, so it's not self-sufficient in many things like oil.

Uh the ch the Taiwanese economy would easily crumble and um it would be the end of that pretty quickly. Now the

broader context of course is that not too long ago you had Prime Minister Tekachi of Japan make supportive statements for Taiwan that really angered the Chinese and you know

President Trump actually seemed to reportedly intervene to maybe just politely suggest the Japanese prime minister to maybe moderate her stance a little bit. Although by all reports uh

little bit. Although by all reports uh Japan still stands in support of Taiwan in case of potential military conflict.

For context here, uh Taiwan was once a Japanese colony. Many people in Taiwan

Japanese colony. Many people in Taiwan remember that period positively and look upon Japan in a very positive light. But

of course, if you recall from the United States's most recent national security strategy, the US is basically viewing the world as multipolar where every country has your sphere of influence.

Very clearly the United States will have a Trump correlary to the Monroal doctrine. Latin America, North America

doctrine. Latin America, North America will be under the United States. And you

know, I think the the implication of course is that the Far East, at least when it comes to Taiwan, will be under China and maybe Russia will have Ukraine.

Now, moving on to Eastern Europe.

Earlier in the week, uh Russia loudly complained that uh Ukraine will actually launched a very mass-cale assassination attempt on President Putin. Apparently,

there was a large fleet of Ukrainian drones launched and Russia alleges that these drones were targeted towards where where President Putin was and it was an assassination account. Putin actually

assassination account. Putin actually complained to Trump which then complained to President Zalinski. Now,

the US it seems that reports suggest have determined that this actually was not an assassination attempt that maybe they were targeting other military installations in in Russia. But at the

end of the day, if Russia is claiming this and perceiving this, then again, that is an escalation in the Russia Ukraine war and suggests that peace talks are not going well and maybe it

could serve as a pretext for further military escalation by the Russians.

Moving on to the Middle East, also another very interesting development.

Now, you had Prime Minister Benjamin Netanyahu of Israel basically just, you know, fly down to Mara Lago, hang out with the president the fifth time. He's

done this this year. That's kind of a record. And what usually happens, of

record. And what usually happens, of course, is that after these discussions, you have some kind of geopolitical escalation.

Now, it's no secret what Prime Minister Netanyahu would like is to have more military action on Iran, but of course, they can't do that without the support of the United States. Last time they

attacked Iran, Iran retaliated with missiles and a lot of those missiles were intercepted by US um US support.

And so they really need the US to protect them to be able to attack Iran.

Now reporting suggests that right now what u Netanyahu is saying is that you know Iran they have these ballistic missiles. They can attack Israel. They

missiles. They can attack Israel. They

are a threat to us. We got to go and take out that capability. Now notice now that the goalposts are moving. initially

was that Iran could never have nuclear weapons and so we need to take that out and you know President Trump went and bombed the nuclear facilities in Iran.

Now the standard is being lowered. It's

not that Iran can have nuclear weapons is that they can't have ballistic missiles and if uh the president agrees with that lower standard then yes that

he's greenlighting more military attacks in the Middle East.

But of course, the most interesting geopolitical action we have is in Latin America. Remember, not too long ago, the

America. Remember, not too long ago, the Trump administration told the entire world that Latin America belongs to us.

So, we are going to call the shots here.

Now, earlier in the week, uh the president surprised the world by revealing that the CIA actually carried covert operations on Venezuelan soil.

Now, everyone knew that the US had a Navy presence right outside of Venezuela, that they had been blowing up Venezuelan boats, but until earlier in the week, they had not uh done anything

on Venezuelan soil. So, that was a very clear escalation. A CIA bombing

clear escalation. A CIA bombing facilities in Venezuelan ports.

This morning, it was revealed that around 2:00 a.m., US forces basically flew in uh to where President Maduro of Venezuela was staying. uh basically

kidnapped him and his wife, put him on a ship, the USS Euima, and that ship is now on route to New York where uh President Madura will face the US

courts. Now, throughout this operation,

courts. Now, throughout this operation, uh it was it was only a few hours. There

were reportedly zero US casualties. One

US helicopter was hit, but that US copter continued to fly when it's able to return uh to to its uh to the ships.

So this was an amazing amazingly precise attack and amazingly successful.

Now by orchestrating this it all by guarantees that the Maduro regime has collapsed and that there will be regime change in Venezuela.

So, uh, this is definitely not in line with the America first ethos that President Trump often campaigned on where the US would not, um, you know, intervene in foreign wars, nation

building and all that. But it does fall under the Trump coralary of having more power over the Latin America. Now, why

does Trump doing this? I think some some context is helpful here. So, Venezuela,

if you look on a map, is actually a pretty large country. uh it's in uh South America. It's the land mass is

South America. It's the land mass is about say 20 30% larger than Texas and has a population of about 30 million about the same population as the state

of Texas. Venezuela of course is most

of Texas. Venezuela of course is most known for having a lot of oil. According

to studies it has the most uh the largest oil reproven oil reserves in the entire world. So it has the potential to

entire world. So it has the potential to be an oil superpower. However, if you look at its output data over the past decade, you'll notice that Venezuela is

actually outputting much less oil today than it did a decade ago. So, that

decline in oil output largely has to do with just the tremendous tremendous mismanagement of the Venezuelan economy.

If you look at a chart of Venezuelan GDP, you know, a decade ago, things were actually going really well. Now, oil

prices were going up. uh Venezuela was pumping a lot of oil and the country the people were getting much wealthier. Now

that all ran into problems when the oil price of oil collapsed and then you had new change in regime a more left-wing regime came to power in Caracus and they

did not do a very good job and what you see is the complete implosion of the Venezuelan economy. According to the

Venezuelan economy. According to the United Nations, about 20% of Venezuelans actually fled the country. Now, that's

like 7 million people. Uh, viral videos at the time would show that many Venezuelans were basically starving. You

can see them throwing rocks at cows, trying to kill the cow to eat them. It

was very much a humanitarian disaster.

Now, you had Venezuelan refugees flood the entire world. You have Venezuelan refugees in Chile, um, in Colombia, Mexico, and of course in the United States. Uh this was a tremendous

States. Uh this was a tremendous tremendous catastrophe. You had a

tremendous catastrophe. You had a country that was doing on the upswing just just totally destroyed and of course the people Venezuelans did not

like that and ideally there would be a mechanism for the people to change course to have a new government. Of

course that was naturally through the ballot box. Now Venezuela did recently a

ballot box. Now Venezuela did recently a few years ago have an election by all accounts. President Maduro lost that

accounts. President Maduro lost that election in a big way for obvious reasons. Um but uh you know he just

reasons. Um but uh you know he just decided that he didn't want to leave and so basically became a de facto dictator of Venezuela. So this is a guy who did a

of Venezuela. So this is a guy who did a terrible job ruined the lives of millions of people ruined his country and it's just not very popular. However

though and of course he's uh not friends with the Trump administration is friends with Russia, Iran and China. basically

friends with people who are not uh with team Trump, team USA.

So it seems like the motivation for this uh move is twofold. One of course is to strengthen US influence in uh Latin

America and secondly of course is for oil. Now,

in his uh in his press conference after his president is is totally blunt. You

know, it's it's not like President Bush going into Iraq and then not so much telling you about the oil, although a lot of US companies having big oil contracts. It's that the US president is

contracts. It's that the US president is telling you today, President Trump is telling you today that Venezuela has lots of oil and the US is going to have

control over it and it's this uh operation in Venezuela is not going to cost taxpayer money because uh the US is going to get paid through oil. So, it's

very open about it. The US would like to have more control over Venezuelan resources. Now, a coup attempt has

resources. Now, a coup attempt has always been telegraphed. Again, you had that military flotillaa outside of Venezuela. You also had the US

Venezuela. You also had the US intelligence operations smuggle out Venezuelan opposition leader Machado smuggled her out into um to Sweden where she could get her, you know, Nobel Peace

Prize, have more international legitimacy. But I think the US has

legitimacy. But I think the US has basically changed its mind on that. She

was, you know, probably a plan B or plan A or plan C or something like that. But

maybe looking at how successful the operation was today, the president very openly told everyone that actually the US will run Venezuela.

>> We don't want to be involved with uh having somebody else get in and we have the same situation that we had for the last long period of years. So we are

going to run the country until such time as we can do a safe, proper and judicious transition. Eventually,

transition. Eventually, Trump is saying that he will give Venezuelan back, but uh you know, this could be years or decades, and no one knows when.

So, it looks like overnight it's not just it was regime change of Venezuela, but the US has a new territory. It will

be run by um you know, who knows, new governor, new prime minister, protector of Venezuela. I'm not sure. But for the

of Venezuela. I'm not sure. But for the foreseeable future, uh, Venezuela will be under US control and eventually it looks like there's going to be more investment into Venezuela and there's

going to be more oil flowing out. So,

this this is a big big big geopolitical move and it has some winners and losers.

The clear winners of course are the US oil companies. They're going to be able

oil companies. They're going to be able to go in and uh operate on those resources. Chevron was already there.

resources. Chevron was already there.

Uh, it looks like other people are going to come in as well. So that's very good for the US oil industry. It's going to be very good for inflation and the global consumer. If you have Venezuela

global consumer. If you have Venezuela there with all this oil, but just kind of not having the infrastructure to be able to extract it. Now the supply of oil is going to go up. That's going to

mean down pressure on oil prices. Not

immediately, of course. It's going to take time to be able to have the facility set up, but you know, in a few years, you can easily see the supply of oil go up, oil prices uh go down. So

this is u good for again the war on inflation. If you remember in January of

inflation. If you remember in January of 2025, Trump actually openly said that his plan to get inflation lower is to get more oil and you have OPEC pump more

oil. You have oil prices down a lot and

oil. You have oil prices down a lot and now it looks like this is um this is maybe another part of that.

You do have clear losers as well. Now,

of course, aside from President Moduro, who is now, it seems, on a ship, uh, you know, it seems like if you look at a chart where Venezuela was selling its

oil, a lot of was going to China. Now,

Venezuela was a staunch ally of China, of Russia, and of Iran. And so now that team is losing a big ally. Now, China is still going to be able to get oil from Venezuela. Now, the president was very

Venezuela. Now, the president was very clear that, you know, we're going to pump more oil and we're going to sell it to everyone. So, China is still going to

to everyone. So, China is still going to get more oil, but they probably won't get it at the same discounted price.

Venezuelan oil was sanctioned. It really

couldn't go to the global market. And

so, they had to sell it at a discount to other people, similar to what Russia does, right? Russia oil was sanctioned.

does, right? Russia oil was sanctioned.

They sell it at a discount to other countries. And so, uh, China was getting

countries. And so, uh, China was getting discounted oil. Now, they're not getting

discounted oil. Now, they're not getting discounted oil anymore. China was

friends with Venezuela. In fact, reports suggest that they had a Chinese delegation being sent to Venezuela just in a few hours before the operation.

Now, it looks like they've lost a key ally in Latin America.

Um, this of course could also point to trouble for uh allies of uh President Maduro, say Cuba, for example, longtime thorn in the side of the US. You know,

doesn't have any oil but uh not friends with the US. And of course, um, Secretary of State Marco Rubio is of Cuban descent. And of course, uh, the

Cuban descent. And of course, uh, the Cuban community in the US really doesn't like what's happening in Cuba. And so I think he should be a little bit worried.

If you are Iran, you could probably be upset as well. You're losing another ally. But it also tells you very clearly

ally. But it also tells you very clearly that the president is a man of action.

He says many things, but he also has done many things as well. um many things other presidents would not have done right directly strike Iran bombs huge

huge clampdown on illegal immigration everywhere in the country of course strikes on Venezuela but he's also said other things that he hasn't done yet so

let's say that you are the prime minister of Denmark who of course controls Greenland president has said that you know Greenland is very very important to us from a national security

standpoint so does that increase the probability that you know maybe one day Greenland will have to change hands as well. Of course, the president also made

well. Of course, the president also made comments about Canada and we we don't know what will happen there. One thing

to note though is that strategically speaking, the oil that Venezuela pumps is heavy crude. That's the same stuff that Canada pumps to as well. And right

now, Canada has one captain consumer, the United States. And the United States is relying upon Canadian heavy crude as well. That's what the refiners are

well. That's what the refiners are optimized for. If you have another

optimized for. If you have another source of heavy crude come online from Venezuela, that really really decreases the bargaining power that Canadian oil

companies have. And of course, that is a

companies have. And of course, that is a big problem from a geostrategic way for for Canada and maybe why Prime Minister Mark Carney is eager to

greenlight another pipeline so that they have other outlets for Canadian oil.

So, one other thing, of course, we have to think about is that what other thing has Trump um kind of obsessed about over

and over again, um that's lower interest rates. And as I wrote last week, my

rates. And as I wrote last week, my blog, the market is really not pricing in that Trump will get his way. I the

market really doesn't seem to think that, you know, prices interest rates the same way they did months ago. So

they don't really place probability on President Trump actually getting his way and able to lower interest rates even though the president has you know done a lot of really obvious moves to try to do

that. So I think that continues to be a

that. So I think that continues to be a significant mispricing of the market. So

uh president has a track record of uh acting on things that he cares a lot about. So markets will be exciting this

about. So markets will be exciting this next week. Guessing that you know I

next week. Guessing that you know I since it was so effortless. Maybe not

even that big of an impact, but you know, if you have lower oil prices in the future, maybe that's a little bit downward pressure on inflation.

Okay, the second thing that I want to talk about, of course, is silver. Now,

last week we talked about how silver was absolutely surging, was up 10% a week.

Last Friday, when you do something like that, it looks like an obvious obvious blowoff top. And earlier in the week, we

blowoff top. And earlier in the week, we did see silver totally, totally implode.

Now, there are two concrete drivers of this. One of course uh is that well

this. One of course uh is that well actually one concrete driver of this and another thing we'll talk about and that is of course higher margins from the

CME. So professional speculators in

CME. So professional speculators in silver usually trade through futures and when you trade through silver futures you're operating on an regulated

exchange. Your counterparty is the

exchange. Your counterparty is the exchange. So a standard future futures

exchange. So a standard future futures contract for silver gives you control over 5,000 ounces of silver. So that's,

you know, about 30 uh $350,000 worth of silver.

Now, in order to have control over a silver contract, you have to put up a little bit of margin with the w with the exchange. The reason for this is that

exchange. The reason for this is that the exchange wants to make sure that you have money uh to pay in case the contract goes against you. So let's say that you bought one silver contract and

then suddenly the price declines. How

does the exchange know that you are able to uh um you you are able to pay the exchange uh in the case in case that uh you know you continue to lose money or

you're underwater in your contract. So

the exchange collects a little bit of margin uh just to make sure that uh you don't default. Now the amount of margin

don't default. Now the amount of margin the exchange has to connect collect is in proportion uh to the size of the market value of the contract and also to

the volatility of the contract. as

silver prices went from say50 to $75 in a very volatile way. You know there you need to put down more margin uh because from an exchange standpoint there's a

higher probability that you could have big big volatile moves suddenly leaving the exchange exposed to counterparty risk. That is to say you could default

risk. That is to say you could default if silver were to suddenly implode.

So exchange very naturally raises margins and what that means that you have to put up more money to be able to have control over a silver contract. Now

if you look at the margin hikes it looks like it went from you know 20ome,000 to 30 some thousand. Uh when you raise the margin some people say you're a DGEN who

has been levered up uh with silver futures will have to put up more money to be able to maintain their position.

Sometimes they don't have that much money and so when that happens they get liquidated and when they get liquidated you know the price of the contract goes down maybe that also compels other

people to get liquidated as well. So

ultimately it's kind of a mechanical thing where you have u basically a liquidity squeeze where the really really big dens are squeezed out and this happens a lot if you look at any

type of um speculation in the 1980s when you have the Hunts brothers squeezing silver to dizzying heights the exchanges also continue to raise their margin

again this is not necessarily some sort of conspiracy or anything like that it's just totally mechanical the exchange you is dealing with a more volatile commodity. It's trying to protect itself

commodity. It's trying to protect itself from defaults and so it obviously has to raise margins. There's nothing uh

raise margins. There's nothing uh nefarious about it. Sometimes there is back in the 1980s uh they try to um they

changed the rules so that you can not buy silver, you could only sell. And so

of course that's putting that put a lot of downward pressure on silver prices and did ultimately precipitate a huge implosion. They're not doing that today.

implosion. They're not doing that today.

So far by all accounts it's just normal functioning of how an exchange works.

And obviously when you have an exchange hiking margins that's going to put downward pressure on the prices. How

much is going to depend on how levered it was. And obviously if you're going up

it was. And obviously if you're going up 10% a day that's a lot of leverage. And

so you also imploded 10% a day.

The second big news came out of China and that China is going to more exercise more control over how it exports silver.

Now, China has already been doing this with all sorts of commodities. Remember,

they have their, you know, control over rare earth and so forth. Now, it seems like they're extending this export control regime to silver. I don't think this should be a surprise because China

is the largest manufacturing power in the world. and silver, it's not just for

the world. and silver, it's not just for speculation, it's also a key industrial input. And so if you have all these

input. And so if you have all these speculators in the west kind of making silver prices really high, that has a real impact on the Chinese economy, Chinese businesses and so forth, it

makes uh it makes basically things like solar panels more expensive. And so if there is a potential shortage or some kind of weird speculation, of course, the Chinese are going to be a bit more

careful since this is um maybe even a national security issue. Now, China is the second largest uh minor of silver, the largest is Mexico. So when they put

on these expert controls on silver, so what that means is that in order to sell expert silver, you're going to have to have a license from the Chinese authorities. They're going to have more

authorities. They're going to have more control over this. What that means is very clearly that outside of China maybe the supply of silver is going to be a little bit less uh because the Chinese

export of silver is going to be more controlled. Now the immediate impact of

controlled. Now the immediate impact of this should be to have a wedge in silver prices where Chinese silver prices are going to be a little bit lower and global price of silver a little bit

higher since you have less Chinese supply. So this is a a bullish

supply. So this is a a bullish development for silver prices but was not able to overcome of course the uh implosion you had from higher margin rates. Now there is always a question

rates. Now there is always a question whether or not the US or maybe other countries will also declare silver to be uh you know commodity of national importance and then also put on their

own bears. So that's something to watch

own bears. So that's something to watch out as well. So if you look at silver prices, they classically follow this formation where they kind of surge to uh

comically high levels and then just implode. There is a possibility that

implode. There is a possibility that this is what's happening right now. We

could just totally implode. Uh but my gut says that, you know, and I hate saying this, that maybe there's something about different this time. And

so I I personally think that the highs for silver are not yet in for the year.

Although when you have all this technical damage, you do usually need to digest a while. Not necessarily a long time. Remember when gold had that big

time. Remember when gold had that big blowoff blowoff, it came down a little bit, steadied, steadied, and then just recently made new all-time highs. All

right, so that's all I prepared for today. Again, this is just year one in

today. Again, this is just year one in the Trump administration. We have three more years. Maybe the map, the global

more years. Maybe the map, the global map in a few years will be different than the one today. All right, talk to you guys next week.