Ultimately if the unemployment number does go up, do we think that they aren't going to simply try and fight it with more liquidity? Deflation begets inflation. You have to go through the scare first though. The path to the next wave of liquidity looks like it is opening, but the pain in the near term (year or so) could be disgusting. Bonds look good here, puts look good here and perversely commodities look good here (major bull markets are usually killed by oil). Crypto is done for at least a year, Nasdaq looks likely to roll. The only place they are hiding right now is memory/ "quality" and real assets. This is what happens at the end of a bubble. The riskiest stuff is sold first and rotated into "defensive" plays. Memory goes last but it will go. All eyes on the Kospi now.
I share your concerns regarding a potential regime shift. A few weeks ago, I rotated my SPY exposure into a 50/50 split of Berkshire Hathaway and the RSP. My thesis is that the primary risk is concentrated in 'Magnificent 7' valuations rather than the 'MAG493,' which still appear reasonably priced.
I suspect non hyperscalers will initially see margin expansion as AI agents replace white collar functions, with the MAG7 effectively subsidizing the rest of the market's growth. However, as rising unemployment inevitably suppresses aggregate demand, I don't see a world where a decline in consumption and deflation is tolerated for long. Mass government intervention will occur, including the "AI implementation taxes" you mentioned, which would effectively negate earlier margin gains. Nevertheless, I expect a final leg up driven by this efficiency boom before that intervention takes hold.
In this new era, I have been thinking about what it actually means to have a moat. It might come down to having the strongest balance sheets with a low cost of capital, critical physical infrastructure, or proprietary licenses.
While I have been bullish on the hypergambling trend, the threat of mass unemployment creates a fork in the road. It remains to be seen if this environment stifles speculation or triggers 2021 style stimulus measures that propel speculation to new highs.
Definitely much uncertainty, which made me raise cash and position quite defensively and avoid hyperscalers in index funds.
Maybe goes under geopol risk, but also with Trump doing Trump things (Greenland, etc), there's been a slow shift for row to pull money home, be it by policy or just common sense, and I think it's just gaining momentum like a boulder down the hill. Glad to hear from you btw, keep it up!
Great read, I share your view (albeit more tactically), to my mind the cycle can’t peak before Musk dumps SpaceX on retail and OpenAI early investors get to exit
Which companies do you own that will perform in a market nuke
$ROPE best way to express a market nuke
mythical reel pull
Really well-written. I probably disagree with mostly everything!
Ultimately if the unemployment number does go up, do we think that they aren't going to simply try and fight it with more liquidity? Deflation begets inflation. You have to go through the scare first though. The path to the next wave of liquidity looks like it is opening, but the pain in the near term (year or so) could be disgusting. Bonds look good here, puts look good here and perversely commodities look good here (major bull markets are usually killed by oil). Crypto is done for at least a year, Nasdaq looks likely to roll. The only place they are hiding right now is memory/ "quality" and real assets. This is what happens at the end of a bubble. The riskiest stuff is sold first and rotated into "defensive" plays. Memory goes last but it will go. All eyes on the Kospi now.
Thoughtful post
TLDR uncertainty is real , time to take a directional bet.
Fantastic read. I would pay for this. Please keep going!
I share your concerns regarding a potential regime shift. A few weeks ago, I rotated my SPY exposure into a 50/50 split of Berkshire Hathaway and the RSP. My thesis is that the primary risk is concentrated in 'Magnificent 7' valuations rather than the 'MAG493,' which still appear reasonably priced.
I suspect non hyperscalers will initially see margin expansion as AI agents replace white collar functions, with the MAG7 effectively subsidizing the rest of the market's growth. However, as rising unemployment inevitably suppresses aggregate demand, I don't see a world where a decline in consumption and deflation is tolerated for long. Mass government intervention will occur, including the "AI implementation taxes" you mentioned, which would effectively negate earlier margin gains. Nevertheless, I expect a final leg up driven by this efficiency boom before that intervention takes hold.
In this new era, I have been thinking about what it actually means to have a moat. It might come down to having the strongest balance sheets with a low cost of capital, critical physical infrastructure, or proprietary licenses.
While I have been bullish on the hypergambling trend, the threat of mass unemployment creates a fork in the road. It remains to be seen if this environment stifles speculation or triggers 2021 style stimulus measures that propel speculation to new highs.
Definitely much uncertainty, which made me raise cash and position quite defensively and avoid hyperscalers in index funds.
Curious about what specific companies have such beautiful houses and beautiful management teams that you're invested in besides carvana?
really well written. I probably disagree with mostly everything
/chumba_world
Equities are for women. Full port SPX6900
Thanks for the article, some pretty uncommon common-sense takes. Loved it.
First time I’ve read you (since I can’t afford the $1M standard to follow you on X).
Thanks.
Maybe goes under geopol risk, but also with Trump doing Trump things (Greenland, etc), there's been a slow shift for row to pull money home, be it by policy or just common sense, and I think it's just gaining momentum like a boulder down the hill. Glad to hear from you btw, keep it up!
Great read, I share your view (albeit more tactically), to my mind the cycle can’t peak before Musk dumps SpaceX on retail and OpenAI early investors get to exit
It can repeat endlessly