Valuing Apple’s Moat: Why Even the World’s Best Business Fails the 20x EV/EBIT TestIn the last three months of 2025, the tech sector experienced what some called a “correction”. But what is a true correction? Technicians will be quick to say a drop of 10%. But for me that doesn”t work… I would…
The 2026 “Known Unknowns”: Why Demographic Shifts Signal a Growth ProblemAfter three years of spectacular gains, 2026 demands a strategic pivot. I outline five critical themes determining market direction: rising unemployment risks, sticky inflation, a hawkish Fed, AI capex scrutiny, and a steepening yield curve. With valuations stretched, the easy money is gone. Investors should prioritize high-quality assets and cash optionality, preparing for a potential 15–20% correction. The focus now shifts from chasing momentum to preserving capital and awaiting reasonable valuations.
Contrarian Investing: Using Sentiment Analysis as a Market SignalWhen the crowd leans one way, the boat is at risk of capsizing. With BofA’s Bull & Bear indicator triggering a contrarian "sell" signal and equity inflows hitting record highs, market participants are priced for a "Goldilocks" perfection that leaves zero margin of safety. While consensus bets on double-digit earnings growth and Fed cuts, a "Bear Steepener" in the yield curve suggests the bond vigilantes are revolting against a $1.6T deficit. If the US 10-year creeps higher, today’s 22x forward multiple faces a sharp reality check. I remain 65% long in quality, but patient for the correction.
Baby QE & Fed Group Think: Why 23x Forward Earnings Signal a Decade of Zero ReturnsThe Fed just delivered a "Christmas gift" with a 25bps cut to 3.75% and a surprise $40B monthly balance sheet expansion—essentially "Baby QE." While markets hit record highs, FOMC "group think" may be masking a deteriorating labor market and looming 2026 tariff inflation. With fwd PEs at ~23x, history warns that subsequent 10-yr returns are often near zero.
The Fourth Shift: The AI ‘Honey Pot’ and Late-Cycle Dynamics Demand Strong Cash PositionThe seismic shift triggered by ChatGPT 3 years ago reminds me of 1995 when Netscape hit our screen. But as we approach the year 2000 - several "greey swans" emerged. Could 2026 be similar. This post discusses some of the possible risks looming for next year. This AI revolution has many of the hallmarks we saw some 30 years ago; i.e., creating extreme capital concentration in giants like Nvidia. As we enter what I think is a late-cycle phase, our focus shifts to systemic risks—from AI disillusionment to credit volatility.
The Asset-Heavy Trap: Why Nvidia’s 65% Growth Can’t Outrun a 48x EV/EBIT MultipleNvidia's earnings beat—reporting 62% YoY revenue growth and projecting $65B in Q4—solidified its position as the AI chip leader. Yet, the question for investors is not if the AI boom is real, it's how much you pay? The massive AI capital expenditure by giants like Google and Meta is transforming them from "asset light" platforms to "asset heavy" infrastructure owners. This shift, coupled with the unanswered question of whether the returns on this spending will justify the massive increase in assets, is fueling investor unease and market momentum loss
The AI Earnings Mirage: Why 6-Year Depreciation Cycles Are Inflating Big Tech ProfitsMost of the Mag 7 tech giants are using an extended 5-to-6-year depreciation schedule for their massive GPU investments. Since GPUs typically have a 3-year useful life, this practice artificially inflates current earnings by reducing the reported expense. If these chips rapidly become obsolete, investors paying high multiples must question the impact on future Free Cash Flow and margins when the true depreciation expense inevitably hits. Investors are optimistic that will show very strong returns (and soon) on their half-trillion-dollar bet.
The Inverted Pyramid: Why Michael Burry is Shorting the AI NarrativeGoldman Sachs are warning of a 10-20% correction within the next 12-24 months. And whilst saying this would be a healthy outcome - it aligns with stretched valuations seen only during the dot-com bubble, according to the Shiller CAPE Ratio. The market's risk is concentrated: returns are currently driven by a handful of mega-cap tech stocks. As Michael Burry's short of Palantir highlights, the issue isn't business quality, but the extended prices being paid. From mine, better opportunities exist outside the Mag 7.
The FOMO Trap: Why a 40x CAPE Ratio Guarantees a Decade of Lost ReturnsIt’s very tempting to chase AI and "Mag 7" gains, but your long-term returns are ultimately determined by the price you pay. With the S&P 500 trading near 25x forward earnings and the Shiller CAPE ratio flashing warnings similar to the 2000 dot-com bubble, the market is lofty territory. History is clear: investing at such elevated valuations drastically lowers subsequent 5 and 25-year returns. While FOMO is powerful, be cautious. As a long-term investor, focus on the risk of what you could lose, not just what you might miss
The Debasement Paradox: Why $4,000 Gold and 4% Treasuries Can’t Both Be RightWhile the S&P 500 trades at a rich 24x forward earnings, its gains are heavily concentrated in the 'Mag 7,' whose towering Price-to-Free Cash Flow multiples (eg AMZN’s 174.4x) suggest a market dangerously "priced to perfection." But a deeper unease is driving gold. Up over 50% this year, its rally resembles the 2011 credit downgrade panic, fueled by fears of currency debasement and US fiscal recklessness, despite moderate 3% inflation. With gold’s recent 8.5% plunge hinting at volatility, investors may be wise to trim those spectacular gains, while the Mag 7 face an extremely high earnings bar
