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Greetings Fellow Legends.

This beauty from Bariloche, Argentina comes courtesy of Paola.

And from fellow member and pilot, Andrew, flying over Greenland.

Before we dive in, we recorded a video going through the topics covered in this issue. It’s right below the paywall.

For those of you reading this one for free, a quick word before you reach the gate.

The full Insider Newsletter sits below the paywall. Here is a taste of what is behind it this week.

The United States spent August propping up the Japanese yen. Buying it. And paying in euros, so as not to part with a single dollar of its own. Why would the mightiest currency on earth move heaven and earth to hold up somebody else’s? Because Japan is the largest foreign holder of US government debt, and that debt is now being held up by the elbows. We walk through the whole trap, and what it means for the one thing sitting under everyone’s feet, the sovereign bond market.

That is one piece of nine. There is the letter almost nobody read, in which a regulator quietly decided the bonds bankrolling the entire AI build-out need not obey the rules written after 2008. There is Terry Smith, the so-called English Warren Buffett, abandoning the one rule that made him, at what smells an awful lot like a top. And there is the credit market, staffed by the most boring people alive, beginning to price something the equity crowd is still far too busy dreaming to notice.

We also name the Big Five. Five deeply unloved ideas to go and research yourself, sitting in tankers, offshore oil, and one very large short.

It runs $420 for the year. Less than a decent lunch in the city, once a month, for the lot. And if it is not for you, no hard feelings at all, the free pieces keep landing regardless.

But this is the issue where we join the dots. And the picture they make is not a calm one.

In This Week’s Issue

• The Erosion of Trust

• Vetting

• Blowing the Bubble

• Terry Smith: Contrary Signs in Bending His Investment Strategy

• Situational Awareness: Not So Aware of the Situation

• We Have a Situation

• Buy an Index Fund and Join the Crowd

• The Cost of Insuring Against Default is Telling Us Something

• The US Started a War… and Shot Its Own Banker

• Offshore Oil Growth to Accelerate

• The Big Five:

Read more

On the fourteenth of August the US Treasury sold thirty-year bonds at 5.216%. The highest yield at auction since 2001.

Five days later, the same Treasury announced it was doubling how much long-dated debt it buys back.

Sit with that a moment, because the whole story is in it.

A government does not step up purchases of its own debt because it has spotted a bargain. It does so because the price has started saying out loud what it would much rather keep quiet. Here’s the bit that actually hurts.

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The Bit That Actually Hurts

Why is the thirty-year the problem child rather than the ten?

Because if I lend you money and you repay me tomorrow, I am barely taking a risk. Lend it for thirty years and an awful lot can happen to you, to me, and to what the money is worth by the time it comes home. More time, more risk, more cost. That is the whole of duration, and every finance professional who dresses it up in a longer word is doing it to sound clever at dinner.

So when confidence goes, it goes at the far end of the curve first. Which is precisely what has been happening. That $25 billion sale did not clear well. For every dollar of bonds on offer, buyers put in just $2.39 of bids, below the twelve-month average, and the primary dealers were left holding 11.5% of the issue, well above their usual share. Dealers are the buyers of last resort, the ones who mop up whatever nobody else wanted. When they are eating a bigger slice than usual, somebody else did not turn up.

The thirty-year yield, monthly, since 1998. Twenty-odd years of falling, then 2020, then the part where it stopped falling. The dotted line is where we are now, and you have to go back a very long way to find it.

In other words, the queue is thinning. Which raises the obvious question of what you do when you are the one who still has to sell.

So What Is Being Done About It

If you are the US Treasury, you have a problem you cannot fix and a bill you have to pay. So you do what any borrower does when the expensive part of the loan gets more expensive. You stop borrowing at the expensive end.

Scott Bessent has been less coy about this than his predecessors, and he even gave it a name. The Treasury twist: buy back the long-dated bonds to take pressure off the long end, and lean harder on shorter-dated paper to fund it. Deutsche Bank, Morgan Stanley and Citigroup are all war-gaming how far it goes, up to and including cutting long-bond sales outright. The decision lands at the quarterly refunding announcement on the fourth of November. Put it in the diary.

The buyback half is already running. On the nineteenth of August the Treasury raised its long-end operations from a $2 billion maximum to at least $4 billion apiece, covering everything from ten years out to thirty. Its stated reason for doubling up, and I am quoting the press release, is that it wants to support liquidity in a part of the market with “consistent strong sponsorship from market participants.”

Sponsorship so strong it needs twice the help. Righto.

On the face of it, the twist is free money. The thirty-year costs you a bit over 5%. Short-dated paper costs you somewhere in the mid-threes. Retire the expensive stuff, issue the cheap stuff, and your interest bill falls this year. Do that all day long!

Ah. But.

The Mortgage You Already Understand

Here is what is actually happening, without the terminal.

Joe Sixpack has a $500,000 mortgage on a thirty-year fixed rate. He never thinks about it. That is rather the point of one.

Money is tight this year, so Joe decides to tap his equity and refinances into an adjustable. Today’s adjustable rate is lower, his payment drops, and he feels clever.

Joe is not unusual in this, by the way. Adjustables were close to 21% of American mortgage originations last year, the highest share in three years, and by December nearly half of everything written above a million dollars. Most of the people doing it intend to refinance again, or sell, before the rate resets.

Which is the whole trick, so let us say it plainly. Joe has not made his debt smaller. He has not really made it cheaper either. He has taken a cost that was fixed and knowable for thirty years and handed it to whoever happens to be setting rates in five. He will find out how that went on a date somebody else chose.

That is what is being done to the balance sheet of the United States government, and Joe has one advantage over it. His interest bill is not the third-biggest line in the household budget. Washington’s is. Interest on the national debt came to $931 billion in the first ten months of this fiscal year, up 11%. The only things the federal government spends more on are Social Security and Medicare.

Not defence. Interest.

Where It Has Got To

This is not some emergency measure dreamed up last week. It has been running a decade, and it shows up in the plumbing.

Treasury bills, the paper that matures inside a year, were 13% of marketable debt in October 2015. By last October they were 22%. Notes went the other way, 66% down to 52%. The weighted average maturity of the whole pile peaked at 75 months in May 2023 and has been sliding since, down to 71.

Undramatic numbers, and that is the point. Nobody runs a headline on the weighted average maturity of US marketable debt, and the pointy shoes will tell you four months is neither here nor there. But the direction has been one way for ten years, and every month it continues, a little more of that mountain has to be refinanced sooner at whatever the world feels like charging by then.

You are not removing the risk. You are moving it closer.

None of which is new, by the way. They have run this exact play before, and we know how that one finished.

They Have Done This Before

The name is not even original. Operation Twist ran in 1961, when the Fed and the Treasury bought long-dated bonds and sold short ones to bend the curve into a more agreeable shape. Bernanke dusted it off in 2011.

The 1961 version is worth knowing because of why they did it. Under Bretton Woods the dollar was still convertible into gold, and America was bleeding the stuff: investors swapped dollars for gold and put the proceeds into higher-yielding European assets, at a rate the San Francisco Fed later put at several billion dollars a year walking out of the country. Washington needed lower long rates to help the economy at home, and short rates high enough to stop capital fleeing to Europe. Twisting the curve promised both at once.

Ten years later Nixon closed the gold window.

I am not claiming one caused the other. I am saying that when a government engineers the shape of its own borrowing costs to dodge an uncomfortable piece of arithmetic, the arithmetic does not go anywhere. It waits. And it collects.

And Then What?

So where does this one end? Not a mystery, sadly. Every country that has walked this road comes out at the same place.

When the debt cannot be rolled at a price the government can afford, the government prints the money and buys its own paper. That is monetisation, and it is where the exercise stops being a swap and starts being inflation.

Note the distinction, because it gets muddled by people who should know better. Shifting maturities is not itself inflationary. It swaps like for like, flatters this year’s expense line, and creates no new money. It turns inflationary at the step after, when there is nobody left to swap with.

They will not call it that, of course. It will arrive with a friendly name, the way quantitative easing did. Something committee-approved and faintly heroic, and the peasants will hear it on the news and not have the faintest idea what has just been done to their savings. That is rather the function of the name.

Who Has Already Worked It Out

You could dismiss all of that as the usual doom merchandise, so let us not rely on my opinion. What are the people who actually have to hold this paper doing with their afternoons?

At the start of August the yen slid towards 160 to the dollar and Japan stepped in to prop it up, roughly $75 billion of it, with the US chipping in another five to ten billion. Go back over that. The United States spent to hold up somebody else's currency.

But the mechanism is the tell, not the money. Notice what neither side would touch. Our sake-drinking friends hold more US Treasuries than any country on earth, and they arranged to fund any further intervention through a Federal Reserve facility rather than sell a single one of them. The US, when it bought yen, paid in euros rather than dollars, so that it too parted with nothing tied to the dollar. Two governments moving heaven and earth to prop up a currency, and the one thing both refused to touch was American paper.

Sheesh.

That is not a market. That is a market being held up by the elbows.

And the reserve managers are perfectly candid about where this goes, if you bother asking them, which the World Gold Council did. Seventy-six central banks, surveyed February to May. Seventy-four percent expect the dollar’s share of global reserves to be lower in five years. Eighty-three percent expect gold’s share to be higher. A record 45% intend to buy more of the shiny stuff inside twelve months.

Not YouTube dollar-collapse merchants. The institutions that own the thing, telling a surveyor, in writing, that they intend to own less of it.

So what do you do with that?

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What It Means for You

Let me head off the obvious misreading, because everybody makes it.

None of this says the dollar is about to collapse. It is still the king currency, it sits on one side of the overwhelming majority of world trade, and it is going nowhere. It is the cleanest shirt in a dirty pile. If you are bearish the dollar then you are, by arithmetic, bullish the euro, and good luck writing that down with a straight face. The soggy island has its own troubles. Japan rather more.

So stop thinking about currencies. That is the trap, and it has cost a great many otherwise sensible people years of their lives and a decent chunk of their capital.

The comparison that matters is not one fiat against another. It is the whole financialised paper world against the world of things that have to be dug up, grown, refined or shipped. Gold, oil, copper, farmland, fertiliser. The boring stuff that hurts when you drop it on your foot. In an increasingly inflationary environment real things beat claims on other people’s promises, and they beat all the currencies at once rather than some of them.

That is not a trade you put on in November because of a refunding announcement. It is a decade-long positioning call, we have been making it for years, and we intend to go on being boring about it for a good while yet. None of this is a recommendation and none of it is advice. Do your own research.

The rest of this argument runs in Issue #334, and it is the half that would not fit here. What China has been quietly doing to its Treasury holdings for fifteen years, and how much faster it is doing it now. Why Japan’s debt problem and America’s are the same problem wearing different hats. What Goldman’s own modelling says happens to the gold price when the average American portfolio shifts its allocation even fractionally. And the Big Five, five deep-value contrarian ideas offered as ideas to explore rather than recommendations.

That is the Insider Newsletter. It lands monthly, it runs $39 a month or $420 for the year, and the link below is the entire ask. If it is not for you, no hard feelings, and the free pieces keep coming regardless.

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Governments do not announce the day they stop being able to afford themselves. They change the terms quietly, give it a name nobody understands, and count on you measuring your net worth in a unit they control.

Nothing in this article constitutes investment advice. Do your own research. All investments carry risk. This is what we think...it may not be suitable for you.

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Somebody built the biggest short position in gold miners in roughly a decade.

They were betting against a sector generating record free cash flow, carrying half the debt it had five years ago, and priced at its cheapest relative to the S&P 500 in twenty years.

Then, across five trading days in the first half of August, GDX rose 21.09%. GDXJ 22.42%. Newmont 20.55%. Barrick 19.22%. Agnico Eagle 22.92%.

You can probably guess how that went for them.

The financial press filed the week under the obvious heading. Gold ran, miners dig up gold, therefore miners went up. True as far as it goes, which is not far, because gold has gone up plenty of times over the last decade without the miners doing anything of the sort. That was rather the whole complaint about them.

And look at the sizes. Gold reached a two-month high that week. It did not go up twenty-one percent. Whatever accounts for that gap, it is not the price of the metal.

The more useful explanation runs through a chart we ran in Issue #334.

Short interest in the two big gold-miner ETFs, sitting at its highest level in nearly a decade. In a thin, structurally short market, as we put it in the issue, that is not a trade you would want on if, or rather when, the sentiment turns even slightly.

The sentiment turned.

What the Shorts Were Actually Short

Start with the thing that makes the position strange.

Free cash flow across the senior gold miners is roughly 10x what it was in 2020, and over the same stretch their net debt has halved.

This is not a forecast about what happens once the new mine comes online. Newmont posted a record $2.2 billion of free cash flow in the second quarter. Agnico did $1.3 billion. Cash that has already arrived, sitting in filings anybody could have read.

And yet the market has priced these companies as though the whole sector were closing down. Against the S&P 500 they have not been this cheap in twenty years.

So the short position was never a bet that the miners would fail to make money. They were already making it, visibly. It was a bet that nobody would care.

For about twelve years, that was an outstanding bet. Which is worth understanding before you write off the people on the other side of it.

Why Being Short Was Not Insane

I am not going to pretend that side of the trade was staffed entirely by muppets, because it wasn’t.

Gold miners spent two decades earning a reputation as some of the worst capital allocators in public markets. They bought assets at the top, diluted shareholders at the bottom, blew out cost guidance with a straight face, and turned every gold bull market into a fresh lesson about why owning the metal was easier than owning the people who dig it up. Anyone who lived through that learned an expensive rule. When gold goes up, do not reach for the miners.

Add the price action. The sector that just moved 20% in a week spent the run-up to it going backwards, with several of the large caps down more than 40% from their highs.

So the short case was never stupid. It was stale. A rule learned from a version of the industry that no longer exists, applied to balance sheets that look nothing like the ones that taught the lesson. Which is usually what the far side of a decent asymmetry looks like...not idiocy, but a perfectly correct observation about a world that has quietly stopped being there.

Which leaves the question of what actually broke it.

The Trigger Was Not the Cause

What lit it was ordinary enough. The US economy unexpectedly shed 23,000 jobs in July against expectations for a gain of around 80,000, and the shiny stuff did what it tends to do whenever confidence in the people running the machine takes another small knock.

Fine. But a soft payroll print does not move a sector 21% in five days. Payroll prints happen constantly and mostly nothing occurs. So why this time?

Because of who was standing on the other side.

If you have never shorted anything, the mechanic is worth thirty seconds. A short seller borrows stock he does not own, sells it, and plans to buy it back cheaper later. The buying back is not optional, and that is the part people forget. Every tick higher enlarges his loss, and eventually his broker stops asking politely. He has to buy. If the people who wanted out got out long ago, the only way to find stock is to bid until somebody parts with it...which enlarges the loss of every other short still in the trade. Who then also has to buy.

That is why the catalyst gets the headlines and the positioning does the work.

Notice, too, how uniform it was. Every large name went up roughly the same amount inside the same week. That tells you little about the shorts, but a great deal about how to own this stuff: the week belonged to the sector, not to any one management team having a clever quarter. Roughly 80% of what moves any individual position here is the macro and the sector cycle. Get the sector right and you are spared having to also pick the hero.

All of which brings us to the only question you actually care about.

So Is It Over?

Here is where I would rather disappoint you than flatter you.

We put this exact question to you back in December, in a piece titled Gold Miners: Time to Scale Out? The answer then was no. The miners were nowhere near overbought, the pointy shoes were ignoring them in favour of the same handful of mega-caps as everybody else, and the sensible move was to sit still and be boring about it.

Eight months and one violent fortnight later I would give you broadly the same answer. But one part of it has weakened, and you should know which part.

The easy money in the squeeze itself is gone. Retail has noticed. GDX pulled in $419 million in August, on track for its strongest monthly intake since February, including its largest single day of retail buying in at least a year. When the punters turn up after a 20% week, that is a fact to respect rather than celebrate.

But look at what the fortnight actually repaired, and what it left alone.

Go back to the first chart and read it again. On the twentieth of July, GDX was down 17% on the year. It is now up 20%. That is the entire contribution of the fortnight, and it is worth being precise about what it was. Not a launch. A repair. The sector spent five months handing back everything it made in the first two, and August took most of that back again. Even now, after all the excitement, GDX sits below where it was trading in early March.

The gaps that made this interesting in the first place are multi-year gaps, and a fortnight does not close them. Measured against gold itself, the miners have been sitting at historic lows. To crawl back to the previous cycle’s peak, the ratio of miners to metal would have to roughly quadruple. Not because gold has to fall. Because they have that much ground to make up.

Twelve years of accumulated indifference does not get resolved by three good weeks.

Nor does anybody own any of it yet. According to Goldman Sachs the average American portfolio carries a 0.18% allocation to gold. Eighteen basis points. Gold miners are about 0.16% of the S&P 500, and gold’s share of global financial assets was roughly four times higher in 1980 than it is today. None of that has shifted at all. A short squeeze reprices a float over a few sessions. Moving a country’s savings takes years.

What We Actually Do About It

We have owned GDX for years, through the stretch where it did nothing and through the stretch where it went backwards, which is the only way anybody was ever going to be holding it in a week like this one. Nobody times the turn. You size a position so that being early is survivable, and then you get on with your life.

None of this is a recommendation and none of it is advice. Do your own research. For what it is worth, we size so that a bad outcome is an inconvenience rather than an event, and we are not chasing a 21% week into a weighting we already carry.

The rest of the gold work sits in Issue #334, and it is the half that would not fit here. A record outflow from the biggest US gold ETF, $14.4 billion out since March, running against physical metal moving east into hands that never much wanted a paper claim in the first place. China’s central bank buying gold every single month for twenty straight months, at a pace the World Gold Council flagged as accelerating through the spring, while its Treasury holdings have collapsed from 29% of reserves to 7.3%. What Goldman’s own modelling says happens to the gold price when that 0.18% allocation shifts even fractionally. And the Big Five, five deep-value contrarian ideas offered as ideas to explore rather than recommendations.

That is the Insider Newsletter. It lands roughly every two to three weeks, it is where the rest of this argument lives, and it runs $39 a month or $420 for the year. If that sounds useful, the link below is the whole of the ask. If it doesn’t, no hard feelings, and the free pieces keep coming either way.

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Twelve years of nobody caring is what built that short position. It took five days to find out how few people were standing on the other side of it.

Nothing in this article constitutes investment advice. Do your own research. All investments carry risk. This is what we think...it may not be suitable for you.

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Greetings, fellow outlaws!

I think this is the very first month that I looked about and lo and behold… no sunset or sunrise photos from any members. And so, one of my own...taken last week as the sun set on Mt. Ruapehu in New Zealand.

We recorded a video walk-through of the main topics covered in today’s issue, plus some thoughts on Bitcoin/crypto and our commentary on the Coldcard fiasco. Be warned, however...the video is a bit of a technical dog’s breakfast as Chris’ mic cut out here and there and Brad’s video did the same. Video sits right below the paywall.

In This Week’s Issue

• The Builders and the Parasites

• Pure Gold

• The Debt Spiral

• Obtaining an Edge

• KOSPI: What’s Going On?

• Why Inflation Matters as a Silent Tax

• Even Rich People Get Sucked Into Stories

• The Big Five:

Read more

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Last Thursday Diageo, the biggest spirits company on earth, stood up and told the market that its sales had gone backwards, that it was going to spend $1.2 billion tearing up its own operating model to save a billion a year, that thousands of people would lose their jobs, and that it was rewriting the dividend policy while it was at it.

The stock went up.

That is always worth a few minutes of your attention. When a company delivers news that bad and the shares rally, the market is telling you it had already priced something considerably worse.

What Actually Happened to the Booze

Let me first be completely fair to the bears, because the case against this sector is not stupid. It is the opposite of stupid. Four separate things have hit these companies in four years, and every one of them is real.

Americans are drinking less, and not by a rounding error. Gallup has the share of US adults who drink at 54%, down from 67% in 2022. That is a collapse of thirteen percentage points in three years and the lowest reading in the near-ninety years Gallup has asked the question. Gen Z is not picking up the slack. It is the generation least interested in the product.

Then the drugs arrived. A randomised trial published in JAMA Psychiatry found that people on semaglutide drank significantly less on the days they drank at all, had fewer heavy drinking days, and reported lower craving week after week. Small trial, and I am not going to pretend otherwise. But hundreds of millions of prescriptions are now circulating globally, and a drug that quietly turns down the volume on wanting things is not a tail risk to a business built on wanting things. It is the business model in reverse.

Then China. In retaliation for European tariffs on Chinese electric cars, Beijing went after European brandy with anti-dumping duties, and cognac took the full weight of it. Then, fourth, COVID’s hangover, in the literal sense. The pandemic pulled years of premiumisation demand forward, distributors ordered against a party that was already ending, and the destocking has been grinding through the numbers ever since.

Add it up and you get one of the ugliest four-year stretches any consumer sector has produced. A Bloomberg index of around fifty listed drinks companies has shed something like $830 billion of market value and sits 46% below its June 2021 peak. Diageo, Pernod Ricard and Rémy Cointreau have all traded at their lowest levels in at least a decade. The index changes hands at roughly fifteen times forward earnings, less than half where it was valued in 2021.

So yes. Putrid. Which is precisely why I am looking at it.

The Only Question That Matters

Here is where I part company with the consensus, and it is not on the facts. It is on one word.

Structural.

Every bear case on this sector leans on that word, and every one of them stretches it across all four problems at once, as though a generation that never started drinking and a warehouse full of unsold cognac were the same kind of thing. They are not. They are four separate problems wearing one coat, and their half-lives are wildly different.

Gen Z drinking less is structural. GLP-1 suppressing consumption is probably structural, or at least durable enough that you should underwrite it as though it is. Fine. Price those in.

But post-COVID destocking is inventory. Inventory always ends, because warehouses are finite and eventually somebody has to order again. And the China tariff, the one that gutted cognac and took Rémy down with it? Look at what actually happened when Beijing finalised the ruling in July last year. It set the duties at 27.7% to 34.9%, and then exempted Pernod Ricard, Rémy Cointreau and LVMH’s Hennessy outright, in return for nothing more than an agreement on minimum prices. The catastrophe that had been priced as permanent was negotiated down to a cost line inside twelve months.

Nobody re-rated anything.

We Have Read This Page Before

There is a sector that spent forty years in documented, undeniable, terminal volume decline. Every year fewer customers than the year before. Regulators against it, advertising bans, litigation, taxes designed explicitly to kill demand, and a product that a majority of the public agreed was harmful.

That sector was tobacco, and over the long run it produced the best returns of any industry in the American market. We wrote about the arithmetic of it in 265,528,900%, and the number in the title is not a typo. It is Altria’s total return over ninety-eight years.

The lesson was never that volumes did not fall. They fell, exactly as everyone said they would. The lesson is that a business with an unbreakable distribution moat, pricing power over a loyal remnant, and a share count shrinking every year does not need volume growth to compound. It needs to be bought at a price that assumes the funeral.

Now look at what this sector owns. Walk into any decent bar anywhere in the world and roughly half the bottles on the top shelf belong to just six listed houses. Six. That is not a brand portfolio, it is a distribution network that took a century to build and that no new entrant can replicate with a marketing budget. Marketing and distribution moats of exactly that kind are what the tobacco majors had.

And on the numbers, Diageo’s forward earnings multiple is now creeping toward ten, on a stock down some 80% from its 2022 high. The company has just handed the job to Sir Dave Lewis, who spent his last turnaround dragging Tesco out of an accounting scandal and a hole considerably deeper than this one.

What We Are Doing About It

We went through all six of those houses in the current issue of the Insider Newsletter, eleven days before Diageo stood up and reported. Not because we knew what the numbers would say. We had no idea. We flagged them because the price already assumed the worst version of every one of those numbers, which is the only thing we are ever really trying to establish. They sit there as ideas to explore rather than as anything resembling a recommendation. Do your own research, keep any position small, and understand that a bottoming process in a sector this hated will very probably take longer than you would like. They always do.

What makes this one interesting to us is not just the valuation. It is that it correlates with nothing else we look at. Whisky brands have precisely no relationship to coal miners, oil service stocks, tankers, Argentina, Brazil or the Chilean equity market. If you have spent two years being told to diversify and have quietly built a portfolio holding a dozen different ways to be long the same commodity cycle, then a cheap asset that moves to its own clock is worth considerably more to you than its upside alone would suggest.

Nothing here is investment advice and none of it is a recommendation. Do your own research. Everything carries risk, and what suits us may be entirely unsuitable for you.

The market has decided this sector is dying. It decided that about tobacco too, and it has been wrong for ninety-eight years.

If you want the six names and the maths behind them.

The current issue of the Insider Newsletter carries the full teardown of this sector, the analyst numbers on all six houses, and the reasoning on where we think the structural damage stops and the cyclical damage begins.

It also carries the rest of the issue, which has nothing to do with liquor at all:

The arithmetic on AGI that IBM’s own chief executive put on the record. One gigawatt of data centre costs $80 billion to fill. The industry is chasing a hundred gigawatts. That is eight trillion dollars of capital expenditure requiring roughly $800 billion of annual profit just to service the interest, against a technology he gives a 0 to 1% chance of getting there.

Why the cavalry is not coming for oil, and what the Permian actually looks like now that tier-one acreage is drilled out.

The most extreme short positioning in Brent in fifteen years, sitting on top of the lowest onshore crude inventories ever recorded. A corner of the chart that nothing else in the data occupies.

And the story of Jean-Marie Eveillard, who was right about the dot-com bubble, lost two thirds of his shareholders for it, was called half senile by his own colleagues, and then watched the Nasdaq fall 80%.

Free readers get the argument. Paid subscribers get the evidence, the charts, the numbers and the names.

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Greetings, friends!

A few years ago I received a letter from my bank. Not a phone call, not a conversation, not a meeting with a man in a suit who could look me in the eye. A letter. It informed me that I was no longer a client and that I had thirty days to tell them where to send the cheque.

Nobody took anything. No court, no charge, no explanation, no appeal. The money was all there, every last unit of it. It had simply stopped being welcome anywhere I could spend it. And the educational part comes afterwards, because obtaining banking once you have been debanked is not the administrative formality you would assume. Doors open your entire adult life are suddenly...not.

I don’t mention it for sympathy. I mention it because there is a difference between owning a thing and having permission to use it, and almost everything most people count as their wealth sits firmly in the second category.

Nobody Needs to Take It

Start at the loud end. In February 2022 the Canadian government reached for the Emergencies Act and roughly 210 bank accounts were frozen, holding around C$7.8 million belonging to people who had done something the establishment found irritating. Note the verb. Not seized. Frozen. Your money, still yours, still on the statement, entirely out of reach on a timetable nobody would tell you.

You could argue those were blue-collar workers with no political weight. Fine. Look up the ladder. Nigel Farage was debanked by Coutts, and whether you like the man is completely beside the point. The point is that within days the chief executive of NatWest had resigned over it. Everybody involved knew exactly what had been done.

Then go all the way up. Something in the order of $280 billion to $300 billion of Russian sovereign reserves sits immobilised, roughly $200 billion of it at a single Belgian clearing house. And here is the part worth sitting with...they never actually seized it. They didn’t have to. They froze it and quietly spent the interest it threw off. A nuclear-armed state with a permanent seat at the Security Council, locked out of the plumbing by policy decision.

Blue collar, white collar, nuclear power. Same mechanism, three orders of magnitude apart. So the notion that you, little old Joe Bloggs, enjoy some meaningful layer of protection inside that same architecture is not a theory. It is a hope.

Everything Sold as Convenience

Banking is only the loud version. The quiet version has been running for decades.

You own the computer you are reading this on. But the machine is a paperweight without the software, and the software is increasingly a subscription renewed at somebody else’s discretion. The same is now true of the thing in your driveway. When Fisker went under in 2024, people who had fully paid for their cars had to reverse-engineer the vehicle’s own software just to keep them running. Not leases. Cars they owned outright. The eighties habit of fixing your own car in your own garage didn’t die of natural causes. It was engineered out.

Then the one almost nobody thinks about. Look at fruit, and at how much of it is now seedless. Marvellous, no pips in my mouth. Except that if you must go back to a particular party each season to obtain seed in order to grow anything at all, you are not a farmer. You are a subscriber. And that isn’t conjecture, it is settled law...the US Supreme Court held unanimously in 2013 that a farmer replanting patented seed saved from his own harvest was manufacturing somebody else’s invention without a licence. Control the farmer and you control everybody sitting underneath the farmer, which is all of us.

The whole thing arguably began with the thirty-year mortgage, sold as the great democratiser of property ownership. Shelter, right there near the base of Maslow’s pyramid, converted into a multi-decade relationship with an institution that can legally pull credit on you, and which can itself be leaned on by a regulator who ran the algorithms and decided this fellow says things on X we don’t much care for.

Every one of these arrived wearing the same costume. Convenience. Nobody ever marched in the streets over seedless grapes.

The Tell

Last month the European Parliament handed us the clearest statement of intent yet, in a manner so perfectly European it deserves framing. Rejecting chat control required an absolute majority of 360 votes. Three hundred and fourteen members voted to reject it. More members voted against the thing than for it...and because 314 is not 360, it stands until April 2028.

That is not a law. That is an architecture, and the distinction matters. A law tells you what is forbidden. An architecture tells you what you are permitted to do, then confirms continuously that it is you doing it.

What Diversification Actually Has to Solve

Which brings me to money. Every second industry figure has now discovered geographic diversification. Ray Dalio is out there arguing investors need far more of it, and he is right as far as it goes. I am not at all convinced he means what we mean.

Picture an Australian with a self-managed super fund. Inside it, a brokerage account. Inside that, a Greek bank, an Indonesian palm oil producer, a Brazilian miner. Textbook diversification, and I have no quarrel with it whatsoever...we do exactly this, globally. That is intelligent portfolio management.

But look at where that person is concentrated. Every one of those holdings sits inside one pension structure, in one jurisdiction, behind one custodian, reachable through one banking relationship. He has diversified the assets beautifully and left the failure point completely untouched. Add a trust, and if the trust is domiciled in the same country holding the same account with the same custodian, he has solved for precisely nothing.

So we went and did something about it with our own money, and I will tell you plainly it was a pain in the arse of a magnitude we had not anticipated. The answer we arrived at is the original meaning of private equity. Not buying another listed security through the same system, but founding and owning real operating businesses in jurisdictions suited to where the world is actually heading. Hard assets rather than financial claims sitting in a custody account in New York. Income-producing, not a story that might make money in a decade. Productive farmland. Producing wells. Rent.

Which is close to the opposite of what the word now means. Google private equity today and you get the large houses, whose model is to buy an already-profitable business, load it with debt so the return on invested capital flatters nicely, then offload it to a pension fund carrying risk it never had before. Those same firms are now gating their investors.

Here is the lesson that actually shook me, though. Building the structures, the banking, the legal architecture, taught us we are considerably further down this road than we had assumed. We used to write that capital controls were coming. They are not coming. For European investors in particular it is now close to impossible to participate in our deals at all. Not difficult. Close to impossible. That is not a forecast, it is a Tuesday.

The Only Thing Worth Building

Underneath all of it there is one idea, and everything else is scaffolding around it. It is the ability to say no.

And you cannot say no from inside. When the letter arrives, when the account is frozen and nobody can tell you when or whether the money comes back, you have no position to negotiate from. You have a phone call and a hold tone. Everyone who ends up on the wrong side of this discovers the same thing at the same moment, which is that the moment is far too late.

I am not sitting here telling you we have the right answers. What I know is that this is what we are doing, with a quantity of our own capital large enough that if we have it wrong I burn worse than anybody reading this. That is the arrangement. We are doers, so we are doing.

Nothing here is investment advice and none of it is a recommendation. Do your own research. Everything carries risk, and what suits us may be entirely unsuitable for you.

No is not something you say when the moment arrives. It is something you build, quietly, for years before it does.

If you want the machinery rather than the shape of it.

What you have just read is the outline. The current issue of the Insider Newsletter takes it apart piece by piece, and it does not make for comfortable reading.

Inside it:

1. The EU’s internet passport, and the carve-out written into the design specifying that it cannot be bypassed by VPN. Which is the entire point. They published that themselves.

2. The World Economic Forum’s own roadmap for personal carbon allowances. Three levers, named in their own words, on their own website.

3. A court ruling out of Europe attaching criminal liability to the relaying of information, where the accuracy of that information is explicitly not a defence.

4. Australia’s four and a half trillion dollars of superannuation, described by its own Prime Minister, on the record, as a “national asset.”

5. The Big Five, which this month is six. An entire consumer sector down 60% in three years, several names at ten-year lows, one of them 80% off its high.

Free readers get the argument. Paid subscribers get the evidence, the charts, the numbers and the names.

Upgrade to the Insider Newsletter

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Greetings, friends!

All quiet on the Persian front, courtesy of Lee Ann:

Lee Ann is a fellow Maverick, a beautiful human being and friend. She recently joined Charles Motsinger (yet another Maverick) on the CIMavericks podcast to provide an update on the UAE. You can listen to it here.

If you seek truth, in the end you will find comfort. If you seek comfort, you will find neither comfort nor truth...only pleasant wishes at first, and, in the end, despair.

C. S. Lewis

Sunset on Mt. Buller, Australia from a few days ago:

Yes, it does snow in Australia (in a few places at least). Brad’s farm is underneath that “dumb little mountain” (otherwise known as Timbertop), on the top left hand corner of the picture.

Grab a coffee (or...given the state of the world...something stronger) and watch Chris, Brad, and Lucas unpack this issue’s themes below the paywall.

In This Week’s Issue

• Math Not Mathing

• Taking the Long View

• Restocking and Stockpiling

• Open Taps, Closed Door

• The EU Just Criminalised Truth

• A Permanent Slave Class

• The Perils of a Value Investor

• Taking Profits… or Paying Taxes

• Achtung, Ozzies!

• Something That Shook Me

• The Big Five Six:

Read more

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Let me tell you about the most frustrating conversation in my professional life. I have it constantly. It goes like this.

Someone comes to us. They’ve read the research. They’ve attended the conferences. They understand the thesis cold... they can describe the coming crisis with a precision that would embarrass most economists. Deficits, debasement, capital controls, pension raids... they’ve got it. Chapter and verse.

Then they want to do something about it.

They want to move capital offshore. So they consult their domestic bank. They want to restructure their pension exposure. So they call their pension administrator. They want to diversify into real assets outside their home jurisdiction. So they check with their local financial regulator.

The tsunami is visible on the horizon. The water is already pulling back from the shore. And they are standing there, looking for a lifeguard who works for the ocean.

The gap between knowing and doing

Here’s what I’ve learned running money for people who, by definition, have enough of it that these risks aren’t hypothetical. They’re existential.

The gap between what sophisticated investors intellectually understand and what they’re actually willing to do about it is astonishing.

People nod. They find it alarming. They share the piece with friends. Some write to say it changed how they think. And then... in ninety percent of cases...they do precisely nothing. The article gets filed under “important” in some mental folder that never once triggers an action, and the thumb goes firmly back where it was.

This isn’t stupidity. I want to be precise about that, because it would be lazy and wrong to call it that. These are intelligent people. Many of them are accomplished, formidable in their own fields.

What they’re suffering from is paralysis. The particular paralysis that comes from decades of being conditioned to outsource every consequential decision to an institutional intermediary. They know, intellectually, that the intermediaries are compromised. They simply cannot bring themselves to act as though it’s true. The dissonance is too large. The implications too unsettling. The steps required sit too far outside the established routines of a life built around quiet compliance.

Seeing clearly and acting on what you see are different skills. The second one is much, much rarer.

History doesn’t grade on effort

And history, unfortunately, does not hand out participation medals for understanding the crisis correctly.

Consider the Portuguese who left their retirement savings in state-managed pension funds after 2011. They didn’t lack information. They lacked the activation energy to move.

Consider the Cypriots who left deposits above €100,000 sitting in Bank of Cyprus in 2013, right up until the morning those deposits were “bailed in” and nearly half of the balance above the guarantee was simply converted to equity in a broken bank. They had read the same reports everyone else had read.

Consider the Argentines who kept dollar savings in domestic banks in 2001, when the corralito froze the accounts and converted dollar deposits into devalued pesos by decree. Many of them had lived through previous cycles. They knew the pattern. They stayed anyway.

In each case, the price of compliance was paid in full. In cash. Without recourse.

Notice the through-line. In none of these episodes was the fatal error a failure of analysis. The information was public. It was on the record, with dates and mechanisms and precedent. The fatal error was behavioural. It was the decision to wait for someone in authority to grant permission to act... permission that, by the very nature of the situation, was never going to come.

You do not get advance notice from the institution that is about to gate you. The institution is the ocean. It does not employ lifeguards for your benefit.

What diversification actually is

So let me reframe something that gets dismissed as a rich man’s indulgence.

Diversification across jurisdictions is not a luxury for the ultra-wealthy. It’s the absolute minimum rational response to the demonstrated willingness of Western states to freeze assets, suspend civil liberties, and enforce compliance with policies ranging from the merely misguided to the actively destructive.

And I do mean demonstrated. These aren’t hypothetical risks I’m conjuring to frighten you. In the last handful of years we watched Canadian banks freeze the accounts of protestors and the people who donated to them. We watched an Australian government build quarantine camps and put citizens in them. We watched financial transactions surveilled without warrant. None of that was a tail risk on a slide. It happened. It’s on the record.

Once you accept that, the second principle follows naturally. The optimal jurisdiction isn’t the one with the lowest advertised tax rate. It’s the one with the most predictable actual treatment.

A 20% rate under genuine rule of law and low political risk beats a 10% rate somewhere the rules can be rewritten retroactively, where confiscation is a live possibility, and where the regulatory apparatus can be turned into a weapon against you the moment it becomes politically convenient. A low number on a brochure means nothing if the brochure can be reprinted overnight. We wrote about this the day the contrast became impossible to ignore, in When Capital Smells Freedom... one set of countries moving to presume your innocence, another set moving in exactly the opposite direction.

Which brings us to what we actually own, and why.

Real assets, held in politically stable but regulation-sceptic jurisdictions, are the most robust store of value available in a world of monetary debasement and expanding state claims. Farmland priced in distressed-country terms but producing globally priced commodities isn’t merely a commodity play. It’s a position in a jurisdiction where the apparatus has historically lacked the capacity... or the inclination... to enforce the full menu of claims that Western states now make on their productive class as a matter of routine. Argentina is the one we keep coming back to, and we laid out the size of that opportunity in The $40 Billion Bid for a sub $100 Billion Market.

I won’t name individual positions here. That’s what the Insider Service is for, and you can do your own research on the category. But the shape of the thing is not complicated. Own what a government cannot conjure at will, in a place where the government is either friendly to you or too disorganised to be effectively predatory.

Agency is the rarest asset

Here’s the part almost nobody wants to hear.

The people who navigate these episodes intact are not distinguished by superior prediction. The future is genuinely unknowable in its specifics, and anyone who tells you otherwise is selling something. What distinguishes them is superior optionality.

They hold assets in multiple forms and multiple jurisdictions. They keep relationships across more than one network. They’ve retained the cognitive independence to update their models when the evidence demands it. And they have not surrendered the one asset that underwrites all the others... the capacity to act on their own judgement.

That capacity is precisely what the whole apparatus is designed to extinguish. The captured universities, the curated feeds, the credit-financed comfort... all of it engineers a population that doesn’t exercise independent judgement because it has been trained not to trust its own.

The most valuable people I know, from a purely practical standpoint, are united by a single unglamorous attribute. It isn’t wealth and it isn’t cleverness. It’s that they never forgot how to say no.

So I’ll leave you where I always seem to land. The comfortable will manage their risk by surrendering to the system and calling it prudence. The independent will manage their risk by retaining the ability to walk out of it.

The tsunami is on the horizon either way.

The only question is whether you’re still waiting for the lifeguard.

Everything above is the free version. The part where we tell you what we actually own, and what we’re doing about it, sits on the other side.

This week’s Insider, Issue #332, is where the argument turns into positions. Inside it:

• Why the richest woman in Australia just quietly took a billion-dollar stake in something the peasants are now stampeding into... and what that stampede always signals.

• The poison pill hiding inside a new class of ETF that could force buying by law, and the developed-market bond chart that explains why the whole thing is primed to detonate.

• The pre-IPO junk-debt reveal that tells you exactly how the smart money is funding the mania while pretence holds.

• The Big Five. The names, the sizing, the reasoning. Not the category... but good positions to consider.

• Plus much more…

You’ve read the map. The subscription is where you get to move on it.

Upgrade here. Take it or leave it. But the water is already pulling back, and the lifeguard still works for the ocean.

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Everyone Just Bought the Same Rocket

The richest woman in Australia, twenty-eight thousand retail punters, and an index fund you probably own... all crowded into the same trade in the same fortnight. That is not a signal you ignore.

Gina Rinehart is the 104th richest person on the planet. She built a fortune digging iron ore out of the Pilbara and selling it to India and China...a real business, real dirt, real cash flow. Last month she wrote a cheque for over a billion dollars for a slice of SpaceX. It is the single largest investment her company has ever made outside of iron ore.

Read that again. A woman who got rich owning the ground looked at a rocket company losing four billion dollars a quarter, trading near a hundred times revenue, and decided that was where the next billion should go.

She was not alone. She was early to a stampede.

CommSec, Australia’s biggest retail broker, had four times as many customers bid for SpaceX shares as for any float in its thirty-year history. Four times. For a company with no local listing, in a foreign currency, with zero management presentations, no dividends, and, in the broker’s own words, no certainty about its future revenue or even its products. Twenty-eight thousand retail accounts piled into an offshore IPO. Thirty-seven thousand more opened accounts just to get in.

When the cleaning lady and the mining billionaire are reaching for the same red-hot stock at the same moment, you are not looking at a market. You are looking at a mood.

We have seen this mood before. We wrote about it when the giants of one era became the fossils of the next...back when Schlumberger, an oil service company, was the fourth most valuable business on earth and nobody could imagine it any other way. We wrote about it again when we pointed out that the hyperscalers had quietly stopped being software companies and become capital-hungry utilities wearing a software multiple. The market did not notice then either.

Here is the number that should stop you cold.

Fifty-one percent of the S&P 500’s entire market cap now sits in stocks trading above ten times sales. Half the index. Not half the companies...half the money.

Ten times sales is not a valuation. It is a confession. In 2002, after his own stock had already crashed ninety percent, the CEO of Sun Microsystems explained exactly what you are agreeing to when you pay it. At ten times revenue, to get your money back in a decade, the company has to pay you every single dollar of revenue as a dividend for ten straight years. Zero costs. Zero R&D. Zero taxes. Zero employees. He asked his own investors, flatly, what on earth they had been thinking.

Today half the index trades there. And the crowd thinks it is being sensible.

This is the part where somebody usually tells you to short it. Don’t. We are not going to hand you a rope to hang yourself with, and inside the issue we walk through exactly why...a story about the greatest investor you have probably never heard of, a man who saw the last mania with perfect clarity, called it precisely, and was very nearly destroyed for the crime of being right too early. His investors screamed at him. His money fled. He quit the exact month the top came in. The lesson buried in that story is the single most useful thing we can teach you about the months ahead, and it is not the lesson you are expecting.

So if you don’t short it, what breaks it?

Because something always does. Manias do not die of old age or of common sense. They die when the plumbing seizes... when the one input the whole tower is quietly resting on gets pulled out from underneath it.

We think we know what that input is. It is not earnings. It is not a scandal. It is not even the Fed.

It is a single number on a single screen, one we have circled for readers before, back when we told you why five percent was the level that mattered more than any headline coming out of Washington. That number is compressing into the tightest coil we have seen in years. A range this long, wound this tight, does not resolve gently. And when it breaks...and we are talking about when, not if...it moves further and faster than almost anyone positioned in that half-of-the-index is prepared for.

The MANGOS have a poison pill baked into them, and almost nobody buying the rocket has read the label.

Then there is the other thing about that SpaceX float. The part the twenty-eight thousand retail accounts did not see, because it was never meant to be seen from the cheap seats. Musk folded a pile of old debt from his other companies onto the rocket’s balance sheet in the months before the listing. Billions of it. Due for repayment within six months of the float.

Which means a good chunk of the money the crowd just handed over for Mars...isn’t going to Mars.

We laid it all out this week...where that money actually goes, the number that breaks the whole trade, and the one lesson from the last bubble that determines whether you come out the other side richer or wiped out.

The full Insider issue is below. It is not comfortable reading. It was never meant to be.

If you haven’t done so already, join us behind the paywall.

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A man at Uber recently said the quiet part out loud, and almost nobody noticed.

Andrew Macdonald, Uber’s president and COO, told a podcast that he could no longer draw a straight line between what the company was spending on AI and what it was getting back. The phrase he used was the kind of thing finance people say when they’ve stopped pretending. “That link is not there yet.” Ninety-five percent of Uber’s engineers using the tools every month. Seventy percent of committed code now machine-written. And the man whose job is to justify the bill cannot tell you whether any of it produced a single feature a customer would notice.

This is not a man saying AI doesn’t work. Read it again. It’s a man saying he’s been handed an invoice and can’t find the thing he bought.

His own engineers had already blown through the entire 2026 budget for their AI coding tools four months into the year. Uber capped them. A company that spent $3.4 billion on research and development last year...a company that does not flinch at big numbers...looked at the meter and flinched.

And here’s the thing about a meter. It only feels free when someone else is paying.

The Token Trap

There’s a logic to how the smart money fell into this, and it’s worth understanding because it’s the same logic every time.

AI feels cheap when you’re one person experimenting on someone else’s subscription. It feels free, even. It only becomes expensive when the company sees the bill, and the bill, it turns out, can run higher than the salary of the person you fired to pay for it. Token costs for running these agents are now outpacing the headcount savings they were sold to deliver. And when the tokens run out, the thing simply stops. No workaround. No continuity. The employee you let go knew what to do when the system broke at two in the morning. The AI just sends you an invoice for the outage.

Uber isn’t an outlier. It’s the one that admitted it.

OpenAI is carrying a $60 billion annual cloud bill against something like $25 billion in actual revenue. Starbucks reportedly built an AI that can’t reliably count coffee cups... so perhaps Jose gets his job back after all. Microsoft, the company that has staked its entire valuation on this stuff, quietly pulled the plug on using one of these coding tools for its own internal engineering teams.

The pattern is consistent enough now that it deserves a name. Call it the gap between what AI costs and what AI does.

But the spending gap, as ugly as it is, isn’t the part that should keep you up at night. The spending gap is just bad business. What sits underneath it is something closer to alchemy, and it’s being run at industrial scale by the largest companies on earth.

The Mark-Up Mechanism

Here’s a number that should stop you cold.

In the first quarter of 2026, Alphabet reported a record $62.6 billion in profit. Up 81% on the year. A blowout, the headlines said. A vindication of the AI bet.

Except nearly half of it, about $28.7 billion, didn’t come from search, or YouTube, or cloud, or Waymo, or anything Google actually sells. It came from Alphabet revaluing a stake it owns in a private company. On paper. Without selling a single share.

Amazon did the same thing the same quarter. Of its $30.3 billion in net income, $16.8 billion was a paper mark-up on the same private AI company. More than half its profit. Meanwhile, and hold this number next to the last one, Amazon’s actual free cash flow collapsed 95% to $1.2 billion, because $44.2 billion in real money walked out the door to build data centres it doesn’t yet have the power to run.

Real cash out. Paper profit in. Genius, isn’t it.

So how does a company book tens of billions in profit on an asset it hasn’t sold? You need to understand the mechanism, because the mechanism is the whole story.

When a private company raises a new round, even a tiny one, the share price set by that round becomes the benchmark used to re-value every existing share held by every existing investor. Own 10% of a company last valued at $100 billion, and some new investor drops a million dollars in at a valuation implying $300 billion? Your stake just went from $10 billion to $30 billion. Overnight. Whether or not the business changed in the slightest. And under the accounting rules, you don’t just get to record that...you’re required to. It flows straight onto your income statement as profit.

That’s normal private-equity accounting. What’s new is the scale, and who’s holding the pen.

Incestuous Circular Financing

Follow the money around the loop once, slowly. It’s worth it.

Google put early money into Anthropic, a few hundred million in 2023 for roughly a tenth of the company, building to around 14% by this year. In February, a new funding round re-rated that AI company from $183 billion to $380 billion. Google’s stake jumped from about $25.6 billion to $53.2 billion. A $27.6 billion paper gain, straight into the P&L, nearly doubling reported pre-tax income for the quarter.

Now here’s the part that should make your jaw tighten.

Google itself committed $10 billion to the round that drove that new valuation. But the cash didn’t actually move until April...the next quarter. So Google engineered the valuation uplift in Q1, deferred its own cheque to Q2, and booked the full mark-up gain in Q1.

In other words: the investment that created the profit hadn’t even been made yet when the profit was recognised.

And the gain is only half of it. The AI company then takes the capital it raised, including Google’s money, and spends it buying compute from Google Cloud. Google’s cloud revenue jumped 63% in the quarter, much of it AI infrastructure spend. A good chunk of that is the startup spending Google’s own money back with Google, at a fat margin. So Google books the paper gain, then collects the cash back as revenue, then earns another few billion in margin on top of the money it just got returned.

I think I’m going to call this ICF...incestuous circular financing. Though incestuous circular fraud might be the more honest label, if only it were illegal.

Because it isn’t. That’s the whole trick.

We’ve Seen This Movie. It Was Called Global Crossing.

None of this is against the rules. The accounting is permitted. The auditors sign off. And if that reassures you, you weren’t paying attention in 2001.

Back then, telecom carriers traded identical lumps of fibre-optic capacity with each other and booked each swap as a sale, manufacturing revenue out of thin air. Qwest sold capacity to Global Crossing; Global Crossing sold roughly the same capacity right back. Both pointed at the transaction and called it growth. A Qwest spokesman at the time called it “common practice” in the industry, which it was, right up until it wasn’t.

Qwest ended up restating roughly $950 million in phantom revenue. Global Crossing went bankrupt owing $12.4 billion, leaving thousands of miles of fibre dark and unused. Investors... ordinary American families... lost $54 billion. Nearly 10,000 people lost their jobs.

The difference between then and now? Those swaps were eventually ruled illegal. Today’s loop is fully compliant with every accounting standard on the books.

That is not reassuring. That is the warning. Legal doesn’t mean stable. It just means no regulator can stop it before it unwinds.

Strip out the equity mark-ups and the recycled cloud revenue, and Google’s underlying business is growing at a perfectly respectable 16%. Not 81%. A fine number for a company that size. The other 65 points are machinery. And the valuation of the private company at the centre of it all is set not by any open market, but by the same handful of giants who get richer every single time it ticks up. A closed loop, painting its own marks, printing its own profits.

And you already know who’s standing underneath when it comes down. Same as always. Joe Sixpack, whose 401(k) is run by some mindless desk drone in a suit who calls it “managing.”

The headlines say record profits, AI vindicated, the bet is paying off. The footnotes...the paper mark-ups, the deferred cheques, the circular cloud revenue, the 95% cash collapse...say the profits aren’t profits at all.

So what happens when the loop stops spinning, and more to the point, where do you want to be standing when it does?

Here is what waits on the other side of the paywall below. The four-stage hype curve that tells you exactly where in this cycle we are right now...not where the pitch decks claim, but where the engineers who’ve lived it say it actually breaks. Why the AI tools are real and worthless at the same time...the Camry-versus-Ferrari distinction that separates the work that gets cheaper from the work that can’t. And the specific corner of the market we are positioned in for exactly this...the cheap, unloved, physical thing the entire AI fever depends on and refuses to pay for...the trade that wins not when the chatbots get smarter, but when the crowd realises the profits were marks in a ledger all along.

If you have read this far you already feel the shape of it. The rest of this one is for paid subscribers...the part where the argument stops being interesting and starts being actionable.

Upgrade to the Insider Newsletter Level to keep reading →

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As of the writing, Brent just had its worst week in a month. The tankers are hesitantly moving through Hormuz again, the peace memos are teetering, and the screens are bleeding red across the energy complex. And you can almost hear the exhale from every macro desk on Wall Street at once...thank god, the oil shock is over, the inflation scare with it, back to your regularly scheduled rate cuts.

I want you to hold onto that exhale, because it is one of the most expensive mistakes you will see priced into a market this year.

Here is the thing the relief rally is quietly assuming. It assumes that the inflation was the oil price. That the two are the same animal, that when crude rolls over the inflation rolls over with it, and that a falling pump price is the all-clear. It is a tidy story. It is also a category error, and a costly one, because it confuses the spark with the fire.

So let me ask the question I have put to every economist who has ever sat across from me and forecast deflation out of a war. And not one of them has ever answered it.

Show me a war that was deflationary.

The question nobody can answer

Go and look. Genuinely, go and look...I’ll wait.

You will not find one. Not the Napoleonic wars, not the American Civil War, not either of the two big ones in the twentieth century, not Korea, not Vietnam, not the Gulf. Every major conflict in recorded financial history runs the same way on the price level, which is to say up, and frequently up in a manner that does not politely reverse when the shooting stops.

The reason is not complicated, and it has nothing to do with the price of a barrel. It is this. Wars have to be paid for. Nobody finances a war out of the petty cash drawer. You run the deficit, you blow out the debt, and then...because the bond market will only swallow so much before it gags...you monetise it. You print, or you let the central bank do the printing on your behalf and call it something more respectable. That is the inflation. Not the missiles. The financing of the missiles.

And here is the part the relief rally is missing entirely. That financing has already happened. The deficits are already wider. The monetisation is already in train. None of that unwinds because a ceasefire holds and a tanker clears the strait. You cannot un-print money. The spark may have gone out. The fire is in the walls.

We have actually been here before, you and I, on this very page. A few weeks ago in Countdown to Shortages I showed you that oil had quietly split into two markets...a jumpy spot price whipsawing on every peace headline, and a forward curve that kept right on pricing the structural shortfall underneath, indifferent to the diplomacy. That piece was about the oil. This one is about something larger and slower-moving that sits behind the oil, and it is the thing that actually empties your wallet.

Because watch what the official numbers are doing while the crowd celebrates cheaper petrol.

The data is not cooperating with the relief rally

US consumer prices rose at 4.2% in the year to May. That is the highest reading in three years, and it is the third month in a row that the number has accelerated. Above four percent for the first time since 2023, climbing, not falling, in the very window everyone now wants to declare the inflation finished.

“Ah,” says the pointy-shoe brigade, “but that’s the energy spike, and energy is rolling over now, so May was the peak.” And they are half right, which is the most dangerous thing to be. Headline inflation may well have topped for the moment, because the gasoline line will drop as crude drops. Fine. I’ll grant them the headline.

But look one layer down, at the number the energy noise can’t explain away. Core inflation...stripping out food and energy entirely... rose to 2.9% in May, its highest since last September. The bit that is not the oil price is still climbing. Which is precisely what you would expect if the inflation were being driven by something other than a barrel of crude. Something like, oh, I don’t know, the financing of a war.

And the bond market, which is a great deal less sentimental than the equity desks, has noticed. The talk now is not of the rate cuts everyone penned in back in January. Traders have started pricing the Federal Reserve’s next move as a hike. A hike. Into a “peace rally.” Sit with that contradiction for a moment, because it is the whole article.

The screens say peace, cheap oil, all clear. The actual machinery...the deficits, the monetisation, the core number, the rate path...says something it would very much rather you didn’t hear yet.

So what happens next, and more to the point, what do you do about it?

Here is what waits on the other side of the paywall below. The three things a falling oil price will not fix, and why they keep the inflation alive long after the war is a memory. The historical case in full...what actually happened to prices in the decade after the big conflicts, not during them, because the “after” is the part that should frighten you. And the specific corner of the market we are positioned in for exactly this...the trade that wins not when oil spikes, but when the crowd realises the inflation was never about oil in the first place.

If you have read this far you already feel the shape of it. The rest of this one is for paid subscribers...the part where the argument stops being interesting and starts being actionable.

Upgrade to the Insider Newsletter Level to keep reading →

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There is a particular kind of comfort that comes from a number nobody has tested. You see it on a brokerage statement, on a fund report, on the glossy annual letter from an endowment that has spent two decades being held up as the smartest money in the room. The number sits there, serene and unbothered. One times cost. One-point-two. Marked, audited, signed off.

And it is, in many cases, a complete fiction.

I want to talk about that fiction today, because it has just walked into the open at the one institution the entire pointy-shoe establishment spent twenty years trying to copy. Harvard. The endowment held up as the cathedral of sophisticated investing is now neck deep in the same private equity and private credit garbage we have been warning about for the better part of a year. And the dolts running the money are discovering, in slow motion, what happens when a fiction is asked to become a fact.

The trick only works while nobody asks for the money

Here is the mechanism, stripped of the jargon designed to keep you from understanding it.

Private equity funds report the value of their holdings themselves. They mark their portfolios to comparable public multiples, then apply a liquidity discount at the manager’s discretion. That phrase, “at the manager’s discretion,” is doing an enormous amount of work. It means the person whose bonus depends on the number is the person who gets to pick the number. Whowouldathunkit.

This works beautifully, right up until something trades.

For the last few years the exit door has been welded shut. No IPOs worth the name. No strategic buyers stepping up to pay 2021 prices. No secondary sales clearing at par. And as long as nothing trades, nothing prices. The valuations float along, untroubled by reality, because reality requires a transaction to assert itself and there have been no transactions. A portfolio marked at one times cost is worth one times cost in exactly the way a house is worth whatever Zillow says...until you actually try to sell it.

The denominator does the dirty work

So why is the spell breaking now?

Because Harvard needs cash. The endowment funds more than a third of the university’s operating budget, the federal money is under attack, and a tax increase on endowment income is bearing down. Roughly seventy percent of the portfolio sits in private equity and hedge funds. Four percent sits in bonds. That is not a balanced portfolio. That is a bet, dressed up as prudence, that the music would never stop.

When you need cash and your money is locked inside illiquid funds, you have two doors. You can sell your fund stakes on the secondary market, where buyers happily take them off your hands at a discount to the reported value. Or you can sell the liquid things you still own, which shrinks the whole portfolio and mechanically pushes the private equity percentage even higher, which trips your own allocation limits, which forces still more selling. Either door leads to the same room.

And the moment a single secondary stake changes hands at, say, sixty-five cents on the marked dollar, something irreversible happens. A price exists. A real one. Stakes have been changing hands at a discount to net asset value, and the auditors who waved through the self-reported marks now have a transaction to point at. They start asking why this fund says one dollar when a willing buyer just paid sixty-five cents for the same thing. The discretion evaporates. One trade contaminates every mark around it.

This is the part nobody at the cocktail parties wants to discuss. The marks were never wrong in a way you could prove. They were just untested. The selling is the test.

The credit piece is the real kicker

The equity fiction is bad. The debt underneath it is worse.

A vast slug of the deals stitched together between 2020 and 2022 were levered to the eyeballs on floating-rate debt, against businesses valued at peak multiples. Then rates normalised. The cost of capital went up and the multiples came down, squeezing the equity cushion from both ends at once. In plain economic terms a lot of that equity is underwater, and in some cases it is simply gone. But the self-reported mark doesn’t show that, because the self-reported mark doesn’t have to.

Until the debt matures.

A company bought at six or seven times leverage in 2021 eventually has to refinance. When it shuffles up to the window in 2025, 2026, 2027, it does so at rates two to three hundred basis points higher, against earnings that may have gone nowhere, into a lending market that has rediscovered the concept of risk. And the lender, unlike the fund manager, has no incentive to be polite. The refinancing process mechanically surfaces what the equity is actually worth. Often that number is somewhere between “very little” and “nothing.”

That is not a mark anyone chose. It is a covenant breach. It becomes public. And it is precisely why you have been watching fund after fund quietly gate its investors, slamming the redemption window shut and telling people who were promised liquidity that, terribly sorry, the money will come back to you eventually, through periodic distributions, at a pace of our choosing.

We have seen this movie. The PE world’s valuations were slow to move in 2008 too. They sat there looking calm while the world burned, and then the refinancing cycles arrived and the bank lenders stopped extending and the numbers moved all at once, violently. The difference this time is the sheer scale of the thing. When the most sophisticated institutional capital on earth is running forty percent and more of its book in private markets, you are not looking at a niche problem in a corner of finance. You are looking at a systemic concentration that has been marked to a story.

What this actually tells you

Step back from Harvard for a second, because Harvard is not the point. Harvard is the tell.

When the cleverest, best-resourced, most envied allocators on the planet start quietly building an armour of liquidity, issuing bonds and dumping fund stakes at a haircut rather than touching their marked-to-perfection private book, they are voting with their feet on what those marks are worth. They will not say it out loud. They will talk about portfolio optimisation and duration management and rebalancing into a generational opportunity. But the action underneath the words is unmistakable. They want out, and they want out before everyone else works out the same thing.

Between the private equity overhang, the private credit gating, and the small matter of the AI bubble inflating in the same sky, the odds of the next couple of years chugging along without a violent speed bump look slim. Sooner or later a concrete barrier gets hit. It always does.

Which brings us, as it always does, back to the only question that matters. What do you actually own, and what is it actually worth when somebody is forced to find out?

A barrel of oil is worth what a barrel of oil is worth, every single day, in a market that prints a real price every second the sun is up. An ounce of gold the same. A tonne of coal, a bushel of grain, an acre of dirt that grows food. These things have the inconvenient and deeply unfashionable property of being priced continuously, in daylight, by people actually transacting. There is no manager’s discretion. There is no liquidity discount applied at someone’s convenience. There is no number waiting to be exposed by the first honest trade, because every trade is honest and every trade is now.

For twenty years the clever money paid a premium to own things that never had to prove what they were worth. It is about to find out what that premium costs.

Before you go

What you have just read is the why. It is the part I am happy to put in front of the whole world, because the world ought to hear it and most of the people who should be saying it are too busy collecting fees on the marks I just described.

But the why doesn’t make you any money on its own. The money is on the other side of the trade...in the specific, named, continuously-priced assets that win when the fiction collapses and capital comes stampeding out of the dark and into things it can actually value. That part we keep for the people who want to do the work alongside us.

If that is you, here is where it lives.

Upgrade to the Insider Newsletter. It lands in your inbox roughly twice a month, and every issue carries The Big Five...five deep-value trade ideas, fully worked, the kind of macro intelligence most analysts won’t touch because it sits in energy, commodities, and geopolitics, the three corners of the market where the real asymmetry has been hiding while everyone crowded into the Bag 7. Full access to the Asymmetric Investing Course comes bolted on. Thirty-five dollars a month on the annual plan, which works out ten percent cheaper than paying month to month.

The free tier gets you roughly two market posts a week, and they are good ones…The Newsletter is simply where the why turns into the what.

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As always, none of the above is financial advice. We are not telling you what to buy. We are telling you what we think. Do your own research, and size yourself so the speed bumps don’t end your race.

I had a conversation recently where I said something out loud that I have been chewing on for a while, and it landed harder than I expected. I said that within five years we are going to be calculating net worth in kilojoules and calories.

People laugh when I say that. Then they stop laughing, because they start to think about it.

Here is the uncomfortable little exercise. Pull up your brokerage account. Look at the number. Now ask yourself a question that almost nobody asks, because the system is designed so that you never have to. What is that number actually denominated in? It is denominated in a liability. A unit of account that a central bank can create at the press of a key, in any quantity, at any time, answerable to no one. You are measuring your life’s work with a rubber ruler...and the people who own the ruler can stretch it whenever it suits them.

So let me walk you through how I have come to think about this. Because once you see it, you cannot unsee it, and it changes what you choose to own.

The Rubber Ruler

Most investors think entirely in fiat terms. What is the IRR in dollars. What is the EBITDA multiple. What did the portfolio return this year, in dollars. And those are not stupid questions. But they all share a hidden assumption, which is that the dollar is a fixed thing you can measure against. It is not. It is the thing being measured, and it is shrinking.

Go back to August of 1971. On a Sunday evening, Richard Nixon went on television and closed the gold window. Foreign governments could no longer hand the United States dollars and receive gold in return. Up to that moment, every dollar was a claim on something real. After that moment, every dollar was a claim on...another dollar. A promise backed by a promise.

The history books file this under monetary policy. I file it under the largest unilateral default in human history. Overnight, the world’s savings were quietly redenominated from hard-asset claims into sovereign promises, and almost nobody noticed, because the number on the statement did not change. The digit stayed the same. Only the meaning of the digit changed.

And then the ruler started stretching. Since that night, the broad money supply has expanded something like fifty times over. Gold has gone from thirty-five dollars an ounce to north of four thousand. That is not gold becoming more valuable. That is the ruler getting longer. Same bar of metal. Same weight, same shine, same atoms. Just measured against a unit that means less every single year.

In other words...the thing you are using to keep score has been losing the game the whole time.

What You Own Versus What You Control

Here is where it gets personal, and here is the distinction that matters more than any chart I could show you.

There is what you own. And there is what you control. We have been trained to treat these as the same thing. They are not.

Think about the pension. Most people look at the statement, see a number with a comfortable amount of zeros, and feel wealthy. They will tell you, with total confidence, that they have a million dollars. Do they? Go and read the fine print on what you are actually permitted to do with “your” money. There is a great deal you cannot do. You cannot, in many cases, take it out without penalty. You cannot move it where you like. And increasingly, governments around the world are deciding what it must be invested in...mandating allocations into government securities, into “national priorities,” into whatever the parasite class has decided is patriotic this quarter.

The moment a politician tells you what you should be doing with your assets is the moment you should be wide awake. Because what they are describing is not your asset. It is their asset, with your name on the spreadsheet.

Contrast that with something you genuinely control. A farm. Cattle in a paddock. A store of grain. Energy you physically hold. Nobody can press a key and dilute the herd. Nobody can mandate that your wheat be reallocated into government bonds. You can walk outside, put your hand on it, and if it comes to it, you can eat it. That is ownership in the oldest and only unbreakable sense of the word.

I am not telling you to go and buy a farm tomorrow. I am telling you that the gap between “the screen says I have it” and “I actually control it” is the single most underpriced risk in modern finance...and it is about to get repriced for a lot of people who never knew the gap existed.

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The Hierarchy That Actually Matters

So if the dollar is the wrong unit, what is the right one?

This is where the calories line stops being a provocation and becomes a framework. When you strip away the fiat layer and ask what actually sustains a society, you arrive at a hierarchy of real things, and they rank in a very particular order.

At the base sits energy. It is the master resource, the one that prices all the others, because nothing moves, grows, smelts, or ships without it. A barrel of oil contains roughly four and a half years’ worth of human manual labour, compressed into a form you can pour. You cannot print that. You cannot legislate it into existence. You can only find it, lift it, and burn it...and right now the world is doing far too little of the first two while complacently assuming the third will always be cheap.

Above energy in monetary terms, but woven through the whole structure, sit the monetary metals. Gold and silver. Not as inflation hedges, which is the lazy framing, but as the thing capital flees to when faith in the paper version finally cracks. Then agriculture, the most underappreciated tier of all, because it is the literal base of social stability...hungry people do not stay calm, and you cannot restate a failed harvest with a press release. And finally the industrial metals, copper above all, which functions as a real-time vote on whether the world is actually building anything.

Energy. Metals. Food. The materials. That is the hierarchy. And here is the part that should make you sit up...every single tier of it is, in both absolute and relative terms, about as cheap as it has been in a generation, precisely because the entire investing world has spent fifteen years measuring value with the rubber ruler and concluding that the unprintable things were boring.

The unprintable things are never boring for long.

Systems, Not Stories

Let me take this one level higher, because the same logic that reframes your portfolio also reframes the map.

I try very hard not to think in ideologies, because ideologies make you tribal, and tribal makes you stupid with your money. I try to think in systems. A system is just a set of rules that produces outcomes, and you can assess it coldly...what does it produce, at what price, and what is it priced at right now.

Run that lens across the world and you get an answer that offends a great many people’s instincts, which is usually a sign it is worth listening to. You can compare two systems, and one of them might genuinely be more productive than the other. But productivity is only half the trade. The other half is what you are paying for it. If the more celebrated system trades at a hundred times earnings and the less celebrated one trades at six, the cheaper system can grow more slowly and still hand you the better return, because you did not overpay for the privilege of owning it.

I cannot afford to be ideological about that. My job is to make money for clients and for myself, which means I have to be realistic rather than righteous. And realism keeps pointing at the same uncomfortable conclusion. The unloved, the cheap, the structurally starved, the things sitting at six times earnings while the crowd piles into the hundred-times story...that is where the asymmetry lives. It always has.

We have written before about why the most hated sectors on the board are the ones set up to pay. This is the same argument, told from the top down. When the next monetary architecture emerges...and it is when, not if...it will be anchored to something real, and the entities holding the physical nodes of that system will be standing on the right side of the reset. Everyone else will be holding digits, insisting the screen still says they are rich.

So What Do You Actually Do

You do not need to move to a farm and start churning your own butter. This is not a survivalist sermon. It is a portfolio instruction, and it is a fairly simple one.

You tilt the denominator. You move weight, at the margin, out of the things that are priced in fiat and into the things that price the fiat. And you can do it with the most boring instruments imaginable. If you want a single one-stop way to own the upstream producers of the real economy, a fund like GUNR holds the lot in one line. If you want energy specifically, the producers sit in XOP and the beaten-down services end sits in XES. The gold miners live in GDX. And for the sector the whole world keeps trying to bury and cannot, the coal names...we have said it before and we will say it again, own coal...with something like Yancoal as the example everyone loves to hate. None of that is exotic. None of it requires a passport or a numbered account. It just requires you to decide that you would rather own a claim on something real than a claim on a central bank’s good intentions.

Now, I am naming those as illustrations of the categories, not as a shopping list...do your own research, because what suits our positioning may not suit yours, and every one of them carries its own risk and its own timing. But the principle underneath them does not change with the ticker. Own the unprintable. Underweight the conjurable. Measure your wealth, increasingly, in the units that cannot be summoned from nothing.

Because the casino does not stay open forever. And the question that matters when the doors finally close is not what your chips were worth on the screen. It is what you walked out holding.

Where This Goes Next

What you have just read is the philosophy. The positioning is a separate thing, and it is where the real work lives.

The full breakdown...which tiers of the hierarchy we are weighting most heavily right now, the specific energy and metals and agricultural names we hold and why, the sizing and the rotation discipline that turns a good idea into an actual return...runs in the latest Insider Newsletter, where we lay out the Big Five for the month. The individual holdings, with entry logic and position sizing, sit one tier further up, in the full Insider Service at capitalistexploits.at. Three products, three jobs. The article gives you the frame. The Newsletter gives you the analysis. The Service gives you the names.

If you have spent this whole piece quietly recalculating what you actually own versus what you merely have a number for, that is the right instinct. The next step is deciding to do something about it.

The screen tells you what you are worth today. The dirt tells you what you will be worth when the screen stops working.

Sincerely,

Chris MacIntosh Founder & Editor In Chief, Capitalist Exploits Independent Investment Research

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Nothing in this article constitutes investment advice. Do your own research. All investments carry risk. This is what we think...it may not be suitable for you.

Nobody believes the giants of one era become the fossils of the next. Then it happens anyway.

There is a chart we keep coming back to. It ranks the ten biggest companies on the planet by market capitalisation, and you can drag a little slider along the years and watch the kingdoms rise and fall in real time. It is the single most humbling thing you can look at as an investor, and I would recommend everyone spend ten minutes with it before they buy another share of anything.

Let me walk you through what it shows. Because it tells you almost everything you need to know about where the next decade of returns is hiding.

The Companies Everyone Knew Would Last Forever

Run the slider back to 1972. The biggest company in the world was IBM. The second biggest was Eastman Kodak. Then AT&T, then Exxon, then General Motors, Sears Roebuck, General Electric, Procter and Gamble, Coca-Cola, Texaco.

Now. At the time, the idea that Kodak might one day be a punchline...that it could file for bankruptcy and have its name turned into a business-school cautionary tale...was simply unthinkable. Kodak was film. Film was photography. Photography was forever. You may as well have told someone in 1972 that water was about to go out of fashion.

IBM was the bluest of blue chips. The phrase “nobody ever got fired for buying IBM” was not a joke, it was corporate religion. These were not companies. They were institutions. They were the furniture of the modern world, and the modern world does not throw out its furniture.

And yet here we are. One of them went bankrupt. The other spent two decades as a slow-motion cautionary tale about missing every technology wave that mattered. Few ever thought they would fall from their greatness. They fell anyway.

In other words...the things everyone agrees are permanent are usually the things about to be repriced.

Now Drag It Forward to 1980

This is the part that stops people in their tracks.

By 1980 the top of the table looked like this. AT&T at the top, around 49 billion dollars. IBM second, around 43. Exxon third, around 37. And in fourth place, at roughly 25 billion dollars...Schlumberger.

Read that again. The fourth biggest company in the entire world was an oil service stock. Not an oil major. Not a household name. An oilfield services company...the outfit that shows up to log your well and measure what is down there in the dark. The plumbing of the plumbing of the oil business.

And it gets better. Look down the rest of that 1980 list. Standard Oil of Indiana. Chevron. Royal Dutch Shell. Mobil. Texaco. Of the ten most valuable companies on earth, seven were energy. The shiny stuff and the black stuff between them owned the entire podium.

What makes the Schlumberger story so delicious is the asset base it pulled this off with. The company sat fourth in the world on something like 5 billion dollars of invested capital. Its market-cap rivals were carrying six to thirty times more capital on their books to justify roughly the same valuation. Schlumberger was, in the scheme of these titans, almost tiny. It was a generational valuation stretched over a sliver of hard assets, because the market had decided that finding and producing hydrocarbons was the most important thing a company could possibly do.

This was 1980. The second oil crisis had just torn through the decade. Oil and gas exploration and development was not a backwater, it was the main event. Capital flooded in. The best engineers in the world wanted in. And the market did what the market always does at the end of a long, powerful trend...it extrapolated. It looked at a decade of rising prices and exploding demand for energy services and said, this is the future, pay any price.

Can you imagine? An oil service stock, the fourth most valuable enterprise on the planet. Today that sentence reads like a typo.

And Today

Drag the slider all the way to the right.

When the chart was captured, the table read: Nvidia, around 4.2 trillion. Microsoft, 3.8. Apple, 3.2. Amazon, 2.4. Alphabet, 2.2. Meta, 1.8. The exact figures have only stretched further since...Nvidia has since punched through 5 trillion and the order at the top reshuffles by the week. But the figures are not the point. The composition is. Six names, every one of them technology, every one of them riding the same single story. There is not one energy company anywhere near the top. The sector that owned seven of the top ten slots in 1980 has been so thoroughly forgotten that the average investor genuinely struggles to name a single oil service company. Do they not know they exist?

And the valuations being paid for the new royalty are not modest. They are 1972 IBM. They are 1980 Schlumberger. They are the furniture of the modern world, priced as though the world will never rearrange its living room again.

We have written before about why we think energy is the most hated, most ignored, most uninvestable-looking sector on the board, and why that is precisely the setup that pays. This chart is the long-memory version of that same argument. You do not need a forecast. You just need to know that the table has been turned over before, and that it was turned over hardest precisely when one story had become so dominant that paying any price for it felt like common sense.

The Quiet Part

Here is the thing nobody wants to say out loud. There is nothing...nothing...stopping this from happening again.

Well, almost nothing. All it would take is higher-than-expected oil and gas prices for the next decade, and an exploration and development boom to go with them. That is the entire list of preconditions. And if you have been reading us for any length of time, you will know exactly how probable we think both of those are.

We are not going to give you a price target. We never do. The denominator is fiat, and fiat can be conjured at will, so the number is meaningless and the direction is everything. What we will tell you is that the cheapest, most loathed, most structurally starved sector on the board is the one that has form for marching straight to the top of this very table. It did it in 1980. It did it on a tiny asset base, against a backdrop of a tight oil market and a capital-starved industry that could not bring on supply fast enough.

Squint at the present and tell me what is different.

We romance the idea of dragging this slider forward ten years and finding an energy name back in the top five. Stranger things have happened. In fact, the entire history of this chart is nothing but stranger things happening to people who were certain they would not.

Where We Go From Here

What you are reading is the surface argument. The full analysis...the energy supply math that has us this confident, the sector mechanics walked end to end...runs in the latest Insider Newsletter, Issue 331, where we also lay out the Big Five for the month. The actual names being held to play this, with the sizing and the rotation discipline... the offshore service companies trading at a fraction of where the last cycle took them, the producers sitting on reserves the market is pricing at close to zero...sit one tier further up, in the full Insider Service at capitalistexploits.at.

If you have been circling the energy trade and want to see how we are actually positioned for the decade this chart keeps hinting at, the Insider Service is where to go.

The giants of every era looked permanent right up until the slider moved.

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The Most Honest Fraud in History

A rocket company that loses money on rockets wants $1.75 trillion. The accounting underneath it is legal, which is the scary part.

There is a particular kind of document that should make you sit up straight, and SpaceX just filed one.

When a company goes public, it files an S-1. Normally it reads like a sedative... pages of risk factors, revenue recognition policies, and the kind of prose that exists to be skimmed. SpaceX opened theirs with fourteen pages of rocket photography and a warning that investors should not want humans to share “the same fate as dinosaurs.” The word “AI” appears over two hundred times. The word “profit” appears rather less often. There is a reason for that.

We have spent the better part of two years on this Substack arguing that the market is long the story and short the math. We laid out the mechanics in The AI Bubble’s Smoking Gun. We watched the private-credit plumbing start to seize in No Cash, No Yield, No Exit. And we keep coming back to the same uncomfortable conclusion... the most spectacular numbers in this market are not coming from businesses. They are coming from accounting.

Issue #331 is where it all comes together. And I’ll be honest with you, this one was almost fun to write.

The trick is legal. That’s the warning.

Let’s start with the part that should be a national scandal and is instead a footnote.

Google reported an 81% profit surge last quarter. Amazon posted 77%. The financial press waved at “booming cloud businesses” and moved on. The reality is far more interesting, and once you see the mechanism you cannot unsee it.

Here is the shape of it without giving away the full anatomy, which sits below the paywall. A hyperscaler invests billions into an AI lab. The contract requires that money be spent on the hyperscaler’s own cloud. The hyperscaler books that spend as fresh revenue. The lab’s valuation then gets marked up... and the hyperscaler revalues its own stake to the new number and books the paper gain straight into profit. The same dollar does three laps and generates a headline each time around.

We gave it a name in the issue. I won’t spoil it here, but it rhymes with “incestuous.”

The part that matters for your portfolio is this. Strip out the equity mark-ups and the circular cloud revenue, and the underlying business is growing at something like 16%. A perfectly respectable number for a company that size. Not 81%. The gap between those two figures is the entire story of this market.

And you already know who ends up holding the bag when the music stops. Same as always. The pension fund. The 401(k). Joe Sixpack, whose retirement is being “managed” by some desk drone in a suit who has never once asked where the profit actually came from.

Meanwhile, the inventory runs out in July

While everyone stares at the AI carnival, the thing we have been pounding the table on for months is quietly reaching its moment.

Oil has stayed oddly calm in the $90 to $110 range despite the largest supply disruption in history. We explained the buffers absorbing the shock in Countdown to Shortages and the chokepoint mechanics in The Toll Booth. Those buffers are not permanent. They are borrowed.

In #331 we map the buffer-depletion timeline week by week, and it points at one cliff. The floating storage is nearly gone. The emergency reserve releases run dry around the start of July. After that, every temporary cushion is exhausted and the full shortfall... roughly 16% of global crude trade... hits a market with nothing left to absorb it.

This is not us spinning a yarn. An Exxon executive went off script at a Bernstein conference and said the quiet part out loud about where dated Brent goes once inventories hit the floor. We reproduce his exact words in the issue. The number he gave is the kind of number that reorganises a portfolio.

Markets have been buying time with borrowed inventory. That borrowing has a maturity date.

What else is in here

A lot, as it turns out. This is one of the meatier issues we have put out.

We get into the private-equity reckoning now landing on the dolts running Harvard’s endowment, and why a forced mark-to-market event in slow motion is the most predictable disaster in finance. We look at why we are not buying puts on semiconductors even though every instinct screams to... the option writers, it turns out, are not the idiots in this trade. We walk through resource nationalism arriving exactly on schedule, with the world’s largest coal exporter making our point for us. And we revisit the great parade of market caps over time, where once upon a time an oil services stock was the fourth biggest company on earth. Could it happen again? We romance with the idea.

Then there is The Big Five. Five deep-value, contrarian ideas with the potential to do 300% or more. Not recommendations... ideas to explore, sized small, held with patience. This month’s names sit right across the seam of everything above... energy, value, and a couple of things the market has left for dead.

We do not put the individual names out here above the paywall, and you would not want us to. That is the part you are paying for. The Insider Newsletter gives you the full analysis and the reasoning. The full Insider Service over at capitalistexploits.at gives you the actual portfolios... the Asymmetric, the Dividend, and the holdings we are buying with our own money, not just talking about.

The carnival will end. All manias do. The only question that has ever mattered is whether you are positioned before the lights come up or after.

The inventory runs out in July. The accounting runs out whenever someone finally asks where the cash is.

Scroll down. It’s all in here.

Sincerely,
Chris

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Let me offer you the best trade in the world. A crystal ball.

I’ll tell you, right now, exactly where the price of oil will be on any future date you choose. Not roughly. Exactly. You’ll know the wars, the supply shocks, the Strait closures, the OPEC cuts, the demand collapses...every wiggle, years in advance, to the dollar. Most people would tell you that’s all they’d ever need to get rich in energy.

It isn’t. In fact, I can show you stretches where that crystal ball would have bankrupted you.

The Stock That Wouldn’t Cooperate

Take TechnipFMC, ticker FTI, one of the larger subsea oil-services names. We’ve owned it, and it’s been a cracker. But forget the outcome for a second and walk it forward with me, the way you’d have lived it.

Start in early 2021. I hand you the crystal ball. It tells you that over the next year or so, oil is going higher...a lot higher. Brent was sitting around $50 to $60 then, and you now know with certainty it’s heading north of $100 as Russia invades Ukraine and the energy world loses its mind. Easy money, right? You buy the best subsea name you can find and wait for the gusher.

Here’s what you’d have collected for being exactly right about oil: a drawdown. Into the back half of 2021, with oil climbing, FTI fell. Not a little. You’d have been sitting on a meaningful loss while the one thing you “knew” would happen... oil going up... was happening in front of you, right on schedule.

Now spin the ball forward again. It’s the middle of 2022. Oil has done exactly what you knew it would, well over $100. And the ball now tells you the next leg is down... oil is going to roll over hard, shedding something like half its value into late 2023. So you do the sensible thing. You sell the oil-services stock, because why on earth would you hold an oil stock into a 50% oil decline?

That’s the moment FTI decided to triple and then some. Through the very window where oil fell by half, the stock didn’t just hold...it went vertical, eventually running to fresh all-time highs above $77 by the spring of 2026. The thing reached its highest price ever after a multi-year span in which oil went nowhere in particular.

In other words...perfect knowledge of the commodity would have had you buying before a fall and selling before a moonshot. The crystal ball didn’t help you. It actively hurt you. (And do your own research here, obviously...FTI has split its stock twice over this stretch, so any back-of-the-envelope “it did X percent” needs adjusting. None of this is advice. It’s an illustration.)

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Brazil’s stock market ran to multi-year highs this spring before pulling back over the past few weeks. The iShares MSCI Brazil ETF (EWZ) is still up on the year even after that slide, the real has been one of the better-behaved currencies on the board, and Brazil is sitting on some of the highest real interest rates of any major economy on earth. So naturally, with the tape softening, the pointy shoes have decided this is the moment to start worrying about Lula.

Let me offer a different frame.

The Two Lists

Sit down and write out everything that is wrong with Brazil. It’s not a short list. Lula’s administration leans left and has rattled the cage on agricultural land use in the Cerrado. He’s cosy with Beijing, which is awkward if your whole pitch is “Brazil is the West’s way around China.” Every election cycle stress-tests institutions that never fully healed from the Lava Jato years. Corruption isn’t a bug you can patch...it’s woven into the bureaucracy, top to bottom, under every administration anyone can remember. The currency can shed 20 to 30% in a single risk-off cycle no matter how well the underlying business is run. And then there’s the famous “custo Brasil”...the aggregate drag of red tape, logistics, and tax complexity so severe that it can cost more to move soybeans from Mato Grosso to the coast than to ship them from the coast to Shanghai.

Now write out the second list. The things that are right about Brazil.

It holds more unused arable land than any country on the planet, and it can roughly double the area it farms without touching the Amazon, using technology that already exists, on pasture that’s already degraded. It controls something like 12% of the world’s renewable freshwater. Unlike California, unlike Punjab, unlike the North China Plain, its agriculture is mostly rainfed...it isn’t quietly draining an aquifer that will never recharge inside any timeframe you’d care to invest across. Its electricity is the cleanest of any large industrial economy, the bulk of it hydro, fed by rivers that aren’t running dry. It’s a serious oil producer whose pre-salt crude sails out across the open Atlantic, touching no strait controlled by anyone hostile or unstable. And on the minerals the entire Western world is currently scrambling to source from anywhere that isn’t China...Brazil controls roughly 90% of global niobium, sits in the global top five for nickel, graphite, lithium, manganese, and rare earths, and has surveyed less than half its own ground.

Two lists. Look at them side by side, because the relationship between them is the entire trade.

Institutions Change. Geology Doesn’t.

Here’s the thing nobody on the worried side of the table seems to notice.

Every item on the first list is institutional. Political cycles, governance quality, fiscal management, currency policy, bureaucratic friction. Every item on the second list is physical. Soil, water, sunlight, geology, geography.

Institutions change. They can rot further, or they can heal. Physical endowments do not change. The Amazon basin will carry the same volume of freshwater in 2075 regardless of which podium donut is sitting in Brasília. The pre-salt fields will hold the same barrels. The niobium will still be sitting in Araxá. You are being asked to accept institutional volatility...which is real, which will hand you drawdowns, which deserves genuine respect... in exchange for physical advantages that compound in exactly the world now arriving.

In other words, the risks are the reason the assets are cheap. If Brazil had Singapore’s governance, its farmland would trade at Iowa multiples. It doesn’t, so it doesn’t. The discount exists precisely because tolerating the dysfunction takes conviction, local knowledge, and patient capital. Those are the barriers to entry. Those barriers are what create the return.

This is our shtick, really. Buy what’s cheap and unloved, and the reason it’s cheap is usually something uncomfortable that everyone else has decided not to stomach.

A Country That Could Close the Door and Survive

Put the pieces together...food surplus, water abundance, clean and secure energy, chokepoint-free oil, mineral dominance, and a domestic market big enough to sustain its own demand...and you get something rare. Brazil is one of the only economies of meaningful size that could function in near-autarky if it were ever forced to.

That’s not an argument for autarky. It’s an argument about pricing. In a world that is increasingly paying a premium for supply security... food security, energy security, mineral security... Brazil’s bargaining position appreciates continuously, and it doesn’t have to lift a finger to make it happen. Every Red Sea disruption, every Hormuz anxiety, every Bab el-Mandeb incident reprices Brazilian energy and Brazilian food upward without Brazil doing a damn thing. We’ve been hammering on the supply-security repricing theme for a while now, and Brazil is the cleanest expression of it we’ve found.

Compare that to the alternative. Look at the absolute clustafuk that is Europe right now... or the United States, for that matter, if you fancy a serious conversation about institutional corruption. Suddenly the discount you’re getting on Brazil looks rather generous.

How You’d Actually Play It

We are long EWZ and have been for a while. It’s been better than a poke in the eye with a sharp stick. But pull up a longer-term chart and the more important point lands...even after the run to the spring highs, we are still nowhere near the old peaks. This is a market getting off the mat, not one that’s run away from you. And the recent pullback hands you a better entry than chasing the high would have.

Now, the standard caveats apply, and they matter. The currency risk is the most immediate threat to dollar returns...Brazil’s fiscal trajectory means the basis for periodic real weakness simply persists. But you’re buying an export economy. Your costs sit in real, your revenue arrives in dollars. Not a bad shape for profitability. And currency risk is global now anyway...the whole point of owning hard assets is that they hold value while the paper doesn’t.

So if you were going to structure this properly, you wouldn’t treat it as a binary in-or-out call. You’d size for the currency. You’d favour export-oriented assets...agribusiness, oil-linked names, mineral royalties priced in dollars. Think soybeans sold to China, crude sold to Europe, niobium sold to the carmakers. And you’d treat the whole thing as a long-duration position, because the thesis plays out over decades, not quarters. Political cycles will turn against you at times. The currency will punish you at times. The investor who sizes correctly and holds through those episodes is the one who captures the compounding.

Do your own research, obviously. None of this is advice. It’s how we’d think about it.

The Discomfort Is the Point

Brazil is not a comfortable trade. It isn’t meant to be. Honestly, think about most of the things we buy when we buy them...the average Joe Sixpack would look at the lot and call it reckless. That’s how it’s supposed to feel. The political noise, the currency swings, the institutional friction... none of that is incidental to the opportunity. It is the opportunity. Strip the discomfort out and the discount goes with it.

The full Brazil case study runs in the most recent Insider Newsletter, Issue #330...the complete endowment breakdown, the risk framework walked end to end, and where it sits alongside the rest of the commodity-supercycle positioning. Go read it. What you’re reading here is the surface argument. The named companies behind the themes, with the sizing and the rotation discipline, sit one tier further up in the full Insider Service at capitalistexploits.at. Three different things...this article, the Newsletter, the Service. Don’t confuse them.

Everyone’s busy counting the votes. The dirt doesn’t vote.

Nothing here is investment advice. This is what we think and what we own. Do your own research.

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Here is a number that should stop you cold. Amazon’s free cash flow over the trailing twelve months collapsed to $1.2 billion. A year ago it was running around $38 billion. A $59 billion surge in infrastructure spending swallowed nearly all of the $148 billion in operating cash the business generated. Same company, same dominance, a fraction of the cash left over at the end.

And to bridge the gap, the hyperscalers have been queuing at the bond window. In March, Amazon raised something like $54 billion. Weeks earlier, Alphabet sold a 100-year “century bond”... the first by a tech company since Motorola in 1997... as part of a roughly $32 billion multi-currency offering.

Let that sit for a second. The most cash-generative businesses in the history of capitalism are now borrowing money on hundred-year terms to keep the lights on in their data centres. Something has changed. Most of the market hasn’t noticed yet.

The Greatest Business Model Ever Invented

For two decades, the Bag 7 ran on the best business model anyone has ever dreamed up... asset-light software.

You write the code once. Whether you then sell it to a million people or a billion, the marginal cost of the next customer is basically nothing. No factories. No raw materials. No union labour. No physical plant. Just pure operating leverage... scale the revenue, barely scale the cost. That is precisely how you end up with companies trading at 30x, 50x, 60x earnings. The market wasn’t paying for the earnings. It was paying for the compounding... the belief that returns on capital would stay sky-high indefinitely because there was no heavy physical anchor dragging them back down to earth.

It was a wonderful machine while it lasted.

Then AI blew it up.

When Software Companies Start Looking Like Utilities

The hyperscalers...Amazon, Microsoft, Google, Meta...are now projected to spend somewhere between $600 and $700 billion on capex in 2026 alone. Two years ago that figure was around $250 billion. It isn’t plateauing. It isn’t even climbing in a straight line. It’s going vertical.

And it isn’t just the chips and the buildings. It’s the energy underneath all of it. When Microsoft re-signed Three Mile Island, it locked in a 20-year forward purchase agreement at more than $100 per megawatt hour...nearly double the going rate for wind and solar in the same region. That is a long-dated liability now baked into operating cash flows for two full decades. That is not what an asset-light software company’s balance sheet is supposed to look like. That is what a utility’s balance sheet looks like.

This is the part the multiple hasn’t caught up to. When a company is asset-light, investors pay a premium for the lightness... the 30x reflects a faith that capital-efficiency stays high forever. But when Google is locked into 20-year power contracts, carrying a debt load it never used to carry, and spending close to half its revenue on physical infrastructure, the rational multiple has to compress. You don’t price a utility at 30x earnings. You price it at 10x, maybe 12x. Bank of America reckons hyperscaler capex now eats roughly 94% of operating cash flow after dividends and buybacks. These businesses can no longer self-fund their own growth. That’s why the five biggest raised $108 billion in bonds in 2025, and why BofA now sees $175 billion of issuance in 2026 alone...more than six times the annual average of the prior five years.

Companies that spent twenty years as net cash hoarders are now queuing at the debt window like everyone else. Term loans, revolvers, structured facilities, century bonds. That’s fine. Businesses borrow. But a business that borrows to fund physical buildout does not deserve to trade like a business that prints cash from thin air.

We’ve Read This Page Before

History doesn’t repeat, but it does rhyme, and this particular rhyme is getting loud.

Go back to the height of the energy boom in 2013 and 2014. You couldn’t give Microsoft away. Energy could do no wrong. That was the exact moment to own tech. Then tech took a bottle of Viagra and shot the lights out for the better part of a decade while energy got decimated and left for dead. The way these things always work is that the last clutch of investors in a sector lose their shirts, swear off it for years, and miss the entire turn. Recency bias, dressed up as prudence.

Now flip it around. AI-related equities are something like 45% of the S&P 500. The energy needed to power the entire world...including all of that AI...is less than 4% of the index. The US is pouring more capital into AI data centres over six years than the inflation-adjusted cost of the Marshall Plan, the Apollo programme, the Manhattan Project, and the Interstate Highway System... combined. We’ve laid out why the energy side of that trade pays from here at length. The mirror image is the side most portfolios are still crowded into.

The market is overweight the thing that needs the power... and underweight the power.

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Greetings, friends!

Your fellow Insider member Jon took this shot on a long equator crossing in the Indian Ocean between remote Maldivian atolls. Nothing but water for 3,000 km straight west to Sumatra.

Brad’s farm in Victoria, Australia. Yes, it is Autumn...a beautiful time of year. Flies, snakes, heat, bushfires, and dust are largely gone and the colours are out.

There were virtually no trees here ten years ago. What a bit of imagination and time can achieve! I romance with the idea of what this frame will look like in five years from now.

And lastly, subscriber Gordon and Deborah’s sunset over the Gariep Dam in Eastern Cape, South Africa.

Lots going on in the world right now. We recorded a short video covering the big stuff in this issue. Watch it above.

In This Week’s Issue

• The Commodity Supercycle

• Brazil: Case Study

• Asset Light to Asset Heavy: The New Face of Tech

• Government Bonds

• Energy Stocks Defying Logic

• Surprise, Surprise: An Oil Exploration Boom

• The Bullish Case for Energy

• A Lesson in Markets

• Ticks

• South Korean Stocks Now Available on IBKR

• Benjamin Graham Would Roll Over in His Grave

• The Big Five Four:

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Everyone’s celebrating the numbers.

Record US energy exports. A surge of 2.5 million barrels a day above recent averages, unprecedented volumes flowing out to Europe and Asia, and the administration taking a very public victory lap. Making America great again, energy edition. The headlines are ecstatic. The commentary is effusive. You’d be forgiven for thinking the cavalry had arrived.

There’s just one question nobody seems to be asking.

Where, exactly, is the oil coming from?

Drilling Down

Here’s the part the victory speeches leave out.

The surge isn’t coming from production. It’s coming from the Strategic Petroleum Reserve. The US is drawing down its emergency stockpile...the buffer built precisely for moments of global supply disruption...and presenting the numbers as if they represent new domestic output.

That distinction is not a minor accounting quibble. It is the entire story.

The reserve entered 2026 at roughly 411 million barrels. That sounds substantial until you remember it peaked at 727 million in 2009 and has been drawn down repeatedly since. The Biden administration drained nearly 180 million barrels in 2022 alone. It was still being slowly rebuilt when the current conflict started. And now it’s being tapped again, at scale, to support the export surge.

A finite buffer being treated as a production stream. That’s what the victory lap is actually about.

And the underlying production picture? Considerably less impressive than the export figures suggest.

The Treadmill Has a Speed Limit

The shale revolution genuinely changed the game. That’s not in dispute. From roughly 2010 onwards, US tight oil production surged in a way that surprised nearly everyone, including us. But shale is not one undifferentiated resource. It’s a collection of distinct basins, each with its own depletion curve and its own ceiling.

The Eagle Ford and Bakken...two of the largest shale plays outside the Permian...have already contracted from roughly a quarter of total US crude production in 2017 to about 19 percent today, per EIA data. The trend is not ambiguous. Every major shale basin outside the Permian crossed into structural decline between 2018 and 2019.

That left one basin carrying the whole story: the Permian, in west Texas and New Mexico. The EIA’s own January 2026 forecast projected US crude production falling from a record 13.6 million barrels per day in 2025 to 13.3 million by 2027 as Lower 48 declines outpace modest offshore growth. That projection predates the conflict and the well shut-in dynamic now underway. When you cap wells because the tankers that normally take the output can’t move, you damage future production capacity. Sometimes permanently. The longer the shut-in, the harder the reopening. And you rarely get the same volumes back.

Conventional oil, for its part, has been in structural decline for decades. The IEA has documented this in depth. Shale made the numbers look better than the underlying geology warranted. Now the shale basins are peaking too, one by one.

The Permian was always the last holdout. It may have just joined the others.

The Bond Market Wearing an Energy Costume

If the underlying production base is declining, why accelerate SPR drawdowns now? What’s the actual logic?

Dollar demand. Bond market support.

US Treasury yields have been climbing. The deficit is running in the trillions annually. Foreign appetite for long-duration US debt has been eroding for years and the conflict has accelerated that trend sharply. The US needs buyers for its bonds. One mechanism for generating global dollar demand is to flood the world with energy sold exclusively in dollars. Even if that energy comes from a strategic reserve rather than the ground.

In other words, the SPR release isn’t primarily an energy policy. It is a bond market operation wearing an energy policy costume.

The dollars flow back. Treasury demand gets a short-term boost. The export figures look extraordinary on the quarterly report. And the reserve gets a little thinner each week.

Clever in the short term. Not a durable production strategy.

What Comes Next

The math that follows from all of this is not complicated.

Conventional oil in a structural long-term decline. Shale basins outside the Permian already past peak. The Permian itself tipping into year-over-year decline as capital expenditure collapsed after 2014 and the green-policy regime made replacing it politically difficult. Global supply destruction from shut-in wells that won’t come back at full capacity even if the conflict ended tomorrow. And a strategic reserve being drawn down to fund the optics of a victory lap.

The EIA’s January 2026 production forecast was built before any of the conflict disruption entered the calculation. The actual forward numbers, looking out 18 months, are likely worse than any pre-conflict model suggests. There is no large new supply coming to replace what’s being burned through. Building a refinery takes years. Drilling a replacement well takes months. The SPR drawdown takes weeks.

The timelines don’t line up. That’s the problem.

Three Cents on the Dollar

Energy as a share of the S&P 500 sits at roughly 3.3 percent. In 2008, when oil was making headlines for the opposite reason, the sector was nearly 15 percent of the index. The sector most directly positioned to benefit from the largest supply shock in modern energy history represents three and a third cents in every dollar of America’s benchmark index.

Sheesh.

We’ve covered the forward supply picture in Countdown to Shortages. We’ve covered the incentive structure keeping the conflict from resolving in Follow the Incentives. The physical picture keeps getting harder each week the reserve draws down and the treadmill slows.

We are heavily positioned in energy. We have been for years, well before the current conflict confirmed what the underlying supply math was already telegraphing. The specific names, the recent portfolio moves, and where the asymmetry still sits within the sector...that’s in the full Insider program. Find it at capitalistexploits.at.

Do your own research. Understand your own risk tolerance. But don’t let a victory lap become a reason to miss the question underneath it.

A reserve is not a well. One of those runs out.

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