***** denotes well-worth reading in full at source (even if excerpted extensively here)
Economic Fare:
The market is better at calling the end of a recession than the beginning. Here's the part of the economy that actually leads the cycle, and how to track it.
Warnings from the Bank of International Settlements, even though written in dry economese, are worth heeding. It was the BIS, specifically Willam White and Claudio Borio, who identified dangerously elevated housing prices in many markets. Alan Greenspan pooh poohed their concerns. Better credentialed economist similarly dismissed White and Borio because all they had was empirical findings, and no theory or model.
We have embedded the germane section of the BIS Annual Economic Report at the end of this post. The Financial Times made it their lead story: .........
........... Again, a very bad ending seems baked in, but the incentives to keep the party going are massive.
42Macro:
While the shift toward a multipolar world continues to reinforce durable demand for artificial intelligence, raw materials, and defense, investors are beginning to rotate capital within the AI ecosystem as compute costs, margin pressures, and stretched valuations encourage a shift from AI providers toward AI adopters.
At the same time, one of the strongest quarters of U.S. equity outperformance relative to bonds on record has increased the likelihood of meaningful portfolio rebalancing, raising the probability of a deeper correction in risk assets over the coming weeks.
Attention also must remain firmly fixed on the Federal Reserve. It is plausible the Fed will use its balance sheet and communications tools to tighten financial conditions over the medium term, creating the credibility needed to ultimately support a more accommodative policy path.
While near-term volatility may increase as markets digest these evolving dynamics, our data-driven view remains unchanged: Investors should continue using overextended Mag-7 exposure as a Source of Funds to capitalize on undervalued opportunities across global markets while maintaining discipline through what could resemble a 1998-style correction before the next leg higher.
China Fare:
Market Fare:
In the spectrum of bullish stock markets, there are two polar opposites. The first is driven by FOMO, the Fear of Missing Out, which inflates P/E multiples as investors chase hope and hype rather than fundamentals, creating the conditions for a bubble. The second is driven by FEMO, or Fabulous Earnings Momentum, which works the other way around: Corporate earnings grow faster than stock prices, compressing P/E multiples rather than expanding them, and analysts raise their estimates because the fundamentals justify doing so.
The current bull market has been in the middle of the spectrum, but has moved more toward the FEMO variety this year. It is being driven by real, measurable, and record corporate profits. And it is lifting not just stock prices but the entire economy. Consider the following: ........
........... FEMO is lifting the economy through two channels. The first is the wealth effect: Rising stock prices increase household net worth, boosting consumer spending. The second is the profit channel: Profitable companies expand operations, hire more workers, pay higher wages, and invest in new productive capacity. Workers spend their wages, companies respond to demand, and a virtuous cycle takes hold. Both channels currently show up in the economic data. ............
13,025% IN A JUNIOR MINER: The 50% Mid-Cycle Pullback in the 1970s Precious Metals run that Launched a 6X run & why that Playbook is about to Repeat!
The greatest gold bull market in modern financial history did not move in a straight line. In the middle of the legendary 1970s run, the physical metal suffered a brutal, eight month pullback that wiped out roughly 50% of its value.
For the weak hands, it felt like the end of the cycle. For the smart money, it was the greatest opportunity at accumulation and the ultimate shakeout before the real mania began.
That midcycle correction did not invalidate the bull run; it built the foundation for it. Over the next four years, gold went on a historic tear, delivering a 6x price increase that culminated in the 1980 peak. Those who panicked and sold during the 50% drawdown missed out on the most explosive wealth creation event of the decade.
But the real story of the late 1970s was not just the physical metal. It was the leverage. When gold resumed its march higher, the mining equities went absolutely parabolic. The producers delivered life changing returns, and the junior explorers minted millionaires overnight. .......
*** In Gold We Trust
Part 2 of 3 · The oldest asset on Earth just went from everyone's favourite trade to almost forgotten — and that is precisely when we are interested.
«Gold and silver are money. Everything else is credit.»
J. P. Morgan, before Congress, 1912
Gold.
A shiny yellow metal.
No cash flow. No dividend. No underlying business to value, no earnings to discount, no intrinsic worth we can calculate on a spreadsheet. By every rule of the quality-and-compounding investing we practise at arvy, gold should not interest us at all.
And yet here we are, writing about it for the second time — because in Part 1 of this trilogy we argued that the old economy is striking back, that the assets the last decade left for dead are quietly taking the baton. Energy was the cash engine. Gold is the memory — the asset that remembers every currency ever debased.
Let me be honest from the first line, the way I was when I last wrote about this: I am a gold bug. So take everything that follows with a grain of salt. You either believe in the ancient metal or you do not; there is very little in between.
But right now, we believe the stars are aligning. And the chart is screaming an opportunity that comes around once every several years. .......................
Gold’s long-run record as an investment is genuinely poor. Since 1800, after inflation, gold has returned roughly 0.6% per year — against about 3.3% for long Treasury bonds and 6.9% for US equities. Two hundred years of holding the shiny metal barely kept pace with the cost of storing it. It pays you nothing to wait, it generates nothing, and for long, brutal stretches — the entire 1980s and 1990s, the decade after 2011 — it does nothing but disappoint.
So let us be clear-eyed. Gold is not a compounder. It will never be the engine of a portfolio. Anyone who tells you it is the best long-term asset has not looked at two centuries of data.
So why, then, are we writing two thousand words about it?
Because gold is not bought for what it returns. It is bought for what it protects against. And the conditions it protects against have rarely looked more present than they do today. ...............
The long-term picture could hardly be more constructive: a powerful uptrend, a clean secular breakout, price riding above a rising trend. But — exactly as we described with energy in Part 1 — great breakouts do not run in a straight line. They pull back, they shake out the latecomers, and they hand the patient buyer an entry. And gold is doing precisely that right now. ............
Part 3 of 3 · The finale.
If gold is the memory of the financial system, the miners are the leveraged bet that the memory is about to be tested. The most hated equities in the market — and why we are watching them closely.
We have arrived at the end of the trilogy.
In Part 1, we made the case for energy — the old economy’s cash engine, breaking out of a fifteen-year base. In Part 2, we made the case for gold — the old economy’s memory, the 3,000-year insurance policy, deeply oversold and utterly forgotten just as its structural story has never been stronger.
Now the finale, and the most dangerous, most leveraged, most interesting corner of the whole theme: the gold miners. ..........
And the royalty companies that sit, quietly, above them.
If you own the metal, you own the insurance. If you own the miners, you own a leveraged call on that insurance — two, three, four times the move, in either direction. They are not for everyone. They have a genuinely terrible history. But at the right point in the cycle, they are the single most powerful way to express everything we have argued across these three pieces.
We believe this may be that point. ...........
...... For most of modern history, that skepticism was correct. If you are a quality investor — and we are — the miners are exactly the kind of capital-destroying, cyclical, management-dependent business you are trained to avoid.
So why are we writing the finale of our trilogy about them?
Because three things have changed at once: the businesses, the cycle, and the chart. And when all three turn together, the most hated equities in the market become the most asymmetric. ........
Bubble Fare:
This probably isn’t when it bursts, but there’s room for plenty of over-leveraged damage
Tech stocks are in the throes of a big selloff. It can’t be blamed on geopolitics, with oil markets calming down as a messy compromise takes shape in the Middle East. And there’s no big new news — barring, possibly, imminent results from Micron Technology Inc., these days a $1.2 trillion company. So is this the moment the bubble bursts?
Probably not, but it’s a mighty interesting juncture. And it’s also important to keep two different cycles separate. First, there are the fundamentals of what tech companies are making and selling — they’re undeniably growing fast, but that makes it much harder to gauge what they’re worth. Second, there are what market people call the technicals — the waves of mass psychology that show up in charts, and which plainly show that we reached the point of over-excitement a while ago.
The events of the last 24 hours are purely to do with the latter. ..............
Good news: So far, this isn’t even a correction. Worse news: That leaves much space for over-levered investors to suffer losses that they cannot afford. ...............
The S&P 500 is now nearly half artificial intelligence. As of early June 2026, A.I.-related stocks across direct A.I, A.I. utilities, and A.I. capital equipment account for approximately 49% of the entire index by market capitalization.
That number has been climbing since the SpaceX IPO last week added another wave of speculative capital into the technology complex. We have not seen concentration at this level since the railroad bubble of the 1800s.
Every single time in history that market concentration has reached an extreme like this, the outcome has been the same.
The bubble pops. It does not deflate gently. It does not find a soft landing. It collapses, taking the broader market down with it, inflicting severe economic damage, and ultimately forcing some form of government intervention to stabilize the system.
A.I. Fare:
As tech firms make huge profits and investors fear losing out, both are doing their best to hold off the day of reckoning
Marcus: China catches up
Has the US been focused on the wrong things?
The ultimate culmination of the “no moat => more competitors => price wars => profits are scarce” argument that I have been making here regularly since the summer of 2023, has arrived — and may wreck the U.S. AI industry: ..........
It is hard to see how Anthropic and OpenAI are going to pull off trillion-dollar IPOs in light of this news, especially given the newfound industry-wide price sensitivity in token budgets. In the light, it is hard to see how all the massive data center investments will pay off, with price wars dropping token prices to near zero; the meagre profits are unlikely ever to justify the massive outlays. ..........
The fundamental flaw in the current paradigm is threefold. First, it is wildly inefficient, a brute force paradigm that requires a model to train on the entire internet in order to approximate intelligence — hence expensive to develop; it is also difficult to operate, because the approximation, being derivative of the entire internet, requires vast resources in order to run.
Second, because the systems are not reliable, charging premium prices was never really viable in the long term.
Third, the basic approach is easily replicated, leading to the price war dynamics and small or negative margins.
The combination of high operating costs, unreliability, and small margins is not a winning formula—and certainly not one that we should be structuring our entire economy around. ........
Companies in dealmaking blitz as they seek to build the energy infrastructure for data centres
Part 1 of 3 · Semiconductors just became 22% of the S&P 500 on the largest inflows ever recorded. A study of what happens at the end of a great trend — and how to read it.
«The market is designed to fool most of the people, most of the time.»
Jesse Livermore, American stock trader (1877–1940)
Something extraordinary is happening in the semiconductor sector, and almost nobody is framing it correctly.
The bulls see confirmation: record inflows, record leadership, the AI build-out validated by price. The bears see a bubble and have been wrong, painfully, for two years. Both are missing the more useful question — not is it a top, which nobody can answer, but where are we in the structure of a great trend, which the chart can actually tell you.
This is the first of three pieces on exactly that question. Today, in Part 1, we read the technical picture — what is happening, and the framework that makes sense of it. In Part 2, we turn the story over and ask whether the fundamentals underneath are as strong as the price implies. And in Part 3, we resolve the two-sided puzzle the way we resolve every position: not with a forecast, but with a plan — the sell rules that work whether this tops tomorrow or runs for two more years. ........
For most of the 2000s and 2010s, semiconductors were a 3-to-5% corner of the S&P 500. A cyclical industry — important, but a corner. Today that corner is 22% of America’s largest companies. One narrow, deeply cyclical sector now carries more than a fifth of the broadest US benchmark.
The last time a single theme commanded this share of the index, it was technology in 1999 and energy in 2008 — and the parallel is worth sitting with, because of what came next. ...........
And the market has never paid up this aggressively for what is already working. The ratio of momentum stocks to low-volatility stocks now sits roughly five standard deviations above its long-term trend — more extreme than March 2000, more extreme than June 2008, more extreme than February 2021. Every prior reading near this level was followed by a painful unwind.
None of these three charts tells you to sell tomorrow. Parabolas run further and longer than anyone believes — what seems too high usually keeps going higher, and I have said exactly that for years. But together they describe something specific. They describe a late cycle. And late cycles do not require prediction. They require a framework. ..........
Crypto Fare / Investing Fare:
***** QTR: The Last Word On Kernen Vs. Grantham
A six-minute CNBC argument exposed the biggest unanswered question in investing.
......... Regardless of whether you think Bitcoin has intrinsic value, it has created extraordinary wealth for many.
It has gone from essentially nothing to becoming an institutional asset held through ETFs, corporate treasuries, family offices and investment funds. Millions of people who ignored critics like Grantham became substantially wealthier for doing so. That’s a perfectly fair point.
............ His firm’s flagship allocation strategy has delivered respectable long-term returns while deliberately sacrificing some upside during one of the strongest U.S. equity bull markets in history. Grantham would also argue that judging his record solely by annualized returns misses the point. Part of his philosophy appears to be centered on avoiding permanent capital impairment and the psychological toll of major drawdowns.
Investors who lived through the dot-com crash or the financial crisis know that recovering from a 50% loss isn’t just a math problem, it’s years of waiting simply to get back to even. Grantham’s case has never been that he’ll win every bull market, but that preserving capital during the inevitable busts leaves investors in a stronger position when the cycle eventually turns.
........ That’s the real debate. Grantham believes valuations still matter. They may not matter next quarter or next year, but eventually they matter. Kernen is essentially asking whether investors have spent fifteen years waiting for history to repeat while the rules of the game have fundamentally changed. Neither question has been answered and frankly, nobody knows.
The Four-Stage Map of Every Stock's Life — and Exactly When to Buy
............. Stan Weinstein developed Stage Analysis after living through a brutal market crash in 1962, while still in college. Like most investors then, he relied on fundamental analysis — and watched many of his investments lose serious value in the downturn.
Instead of giving up, he turned to technical analysis and studied thousands of charts. Over time, a consistent pattern emerged: stocks formed bases, broke out into uptrends, lost momentum, and eventually declined — then repeated the cycle. Inspired by Edwards and Magee’s Technical Analysis of Stock Trends, he refined these observations into a four-stage system.
He shared it through his newsletter, The Professional Tape Reader, and then in his 1988 classic, Secrets for Profiting in Bull and Bear Markets — still one of the best technical analysis books ever written. Decades later, the framework holds up remarkably well, because it’s built on something that doesn’t change: human behaviour in markets.
The CAN SLIM System That Built Investor's Business Daily — and Why I'm Helping Bring It to Europe
Most investing books tell you to buy low and sell high.
William O’Neil’s How to Make Money in Stocks tells you the opposite: buy high, and sell higher.
Vid Fare:
Quotes of the Week:
Charts:
1:
Historically, semis were priced as a cyclical industry. As margins peaked, P/S ratios would fall.
— Warren Pies (@WarrenPies) June 22, 2026
Over the past year, though, semi multiples have exploded as margins hit all-time highs.
Either the industry has become less cyclical OR it is a sign of exuberance. pic.twitter.com/OX59m4DA1W
(not just) for the ESG crowd:
Rory Green, TS Lombard's chief China economist, is the latest Wall Street strategist to warn of the mounting macro and food inflation risks that a super El Niño could release on certain regions of the world.
A tally of the great planetary damage expected to result from AI growing use, thanks to its insatiable hunger for power.
How the fossil fuel industry turned the plan to solve climate change into a plan to save itself
........... In this article, we look at the latest ocean data, atmospheric forecasts, and historical Super El Niño patterns to track how this event is rapidly spreading its influence in the atmosphere. You will also see what the July forecast suggests for North America, and why late summer into Fall could bring an amplified pattern across the United States, Canada, and now also Europe. ...............
Heatwave: Which European countries are running out of water?
.................... I don’t think we’re going to stop the widespread use of air conditioning in Europe anymore at this point. In 2023, 13% of Germans owned air conditioning, in 2024 it was already 19%. We’re going to end up like the Americans, with a population that uses air conditioning at a large scale. The effect that has, is that we’re going to recarbonize the electricity grid. We’ll find ourselves simply needing to start using more fossil fuels again, to deliver sufficient electricity during the summer evening and nights, as the normies have their air conditioning on.
The green transition always was going to have to involve moving electricity demand to periods when we are actually able to generate renewable electricity. If we decide to all buy air conditioning, what we’re effectively choosing is to do the exact opposite: We’re choosing to increase our electricity consumption during the exact period when we can’t generate sufficient renewable electricity.
I know what my family chose. We don’t want to become like Americans, which is a fate worse than death, as it means losing your dignity as a human being. We want to stay Europeans. We would unironically rather die in one of the heatwaves with our dignity intact than buy air conditioning.
U.S. B.S.:
War Fare:
Other Fare:
Systems thinking applied to the peculiarities of our modern cultural swamp.
QOTW:
Society is losing its competence. Meanwhile, our leaders are acting more certain of themselves than ever, despite track records that should give them pause.
Corruption, stupidity, and ideology can’t fully explain our bias toward incompetence. The real issue is systemic: you can swap out the people in charge all you want, but the dysfunction just keeps reproducing itself.
This isn’t a collection of bad actors; it’s a broken structure. It runs on a feedback loop where every failure reinforces the conditions that caused it. Time simply compounds the dysfunction, and the scary part is that no one even needs to be steering ...........
QOTW:
A comment on Emad Mostaque's book: The Last Economy
The reason the conversation about our intelligent future is full of people getting thermodynamics wrong is that almost no one in the field of AI knows much about thermodynamics. Which is expected. We, humans, are limited — no single human brain can know everything. And in this very moment, our limitations show. Our best minds can’t catch the complexity of the problems we are facing — it is a task too difficult for us.
Pics of the Week:
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