Happy Independence Day America

June 25,2025

My goals for this month’s letter:

• To be succinct (I am not generally good at this!).

• To tell you about the changes in my probabilistic thinking.

• To express gratitude for our country.

  
  

These are the adjustments to the inputs for my investment process. They are only opinions (no sources are listed), but they are derived from my open mind, a hyper rational approach, and many global sources. Additionally, I am always trying to differentiate what is noise (narratives, people’s feelings), and what is the likely path of least resistance, and I am always trying to reduce my own biases. The difference between the signal and the noise is where the value lies.

So here we go:

1) The Theocratic government in Iran is highly likely to fall. As I mentioned in previous pieces over the past year, Israel was likely to go for full regime change. The probability of regime change is increasing. Why:

a. The tools and leverage of the Iranian regime working toward the destruction of Israel are basically gone: Terrorist organizations (Hamas and Hezbollah), Syria, and Iran’s nuclear program are no longer available to negotiate with.

b. A good deal of the Iranian population is unhappy with the regime and prefers more western style liberal democracy.

c. Intelligence agencies are likely working to empower the Iranian population and Iranian diaspora to establish a more democratic government.

2) Russia is weaker both politically and economically. Syria and Iran were both important allies to Russia militarily and that is over. The Russian military using increasing economic resources and the younger population; the eventual result is eroding development, growth and wealth levels.

3) China is weaker both politically and economically. China is a big importer of cheap Iranian crude oil, and Iran used to be a strong counterbalance to western democracy. This benefit for the Chinese government is eroding. China is being hurt by USA tariffs. Other large countries may become more likely to push back against Chinese exports being redirected to them: Electric Vehicles, Batteries, Solar panels, wind turbines.

4) European Countries are increasing their defense spending and support of NATO. Pressure from the United States and aggression from Russia in Ukraine have increased the defense of Europe, UK, the USA and western liberal democracy.

5) A significant slowdown in Chinese manufacturing could reduce global CO2 emissions from Coal. Coal consumption reached a record high last year, and it’s one of the biggest contributors to emissions. Although the United States has done a good job of reducing coal consumption over the past 20 years, this has been dwarfed by Chinese consumption, and this continues to increase. Tariffs on Chinese goods may reduce the incentive to overproduce manufactured goods which could benefit the environment.

6) Technological improvements in the United States are astounding me. The ability of artificial intelligence to reduce the number of hours on tasks is impressive, but the future productivity gains in all areas are likely to have major impacts on the global economy. U.S. Companies seem best placed to reap these future rewards. The large U.S. technology companies (Mag 7) may be able to increase their pricing power and profits in the future. I am spending a lot of time learning about and using these new tools.

I am going to stop there for now (I want to keep it short!). Based on the above points and many others, I am going to give a rapid-fire synopsis of my views:

1) Western liberal democracy led by the United States is gaining strength.

2) The world is a far more peaceful place; war is less likely in the west and middle east.

3) Ukraine and Russia war will end in the next 12-24 months with a good outcome for Europe.

4) The middle east develops economically and brings hope and potentially self-determination and security to Palestinians.

5) The peace dividend coupled with technological productivity will lead to increasing economic growth globally and led by the United States.

In summary, I am very positive. And remember, if you accuse me of being overly optimistic, remember that I created substantial personal wealth by betting against the equity market and economy in 2000 and 2008. I would classify myself as overly eyes wide open.

Last is my gratitude on this upcoming Independence Day in the United States. I am forever grateful for all those that have made sacrifices for my benefit. Leaders, workers, slaves, and soldiers. Thank you. I will not waste your efforts. I pledge to do my best with the cards I’ve been dealt. I won’t blame others when I feel sad, anxious, or jealous. When I face challenges, I will transform myself, I will not transmit my ills to the decisions that others have made. I will not allow myself to be a victim. I will press on.

If you feel sad or anxious, I am sorry you feel that way, and I really wish you didn’t. When I feel sad or anxious, I do the following:

• Acknowledge that these are just my feelings. They have no bearing on the reality around me.

• Let the feelings go and focus on nature and silence.

• Recognize all of the gifts I’ve been given, embrace my reality, and move forward.

Peace to all,

Joe

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i Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor. Stratos Wealth Advisors, LLC and August Wealth Advisors are separate entities.

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