By midnight, just twenty minutes later, the ship’s engineers already knew it was going to sink.

Up on the first-class deck, the band played on as passengers sipped brandy, some even tossing fresh chunks of ice from the deck into their glasses.

And the orchestra didn’t stop until 2:15 AM.

The gap between what the engineers know and what the passengers know is the most dangerous twenty minutes in any crisis.

Right now, the private credit market is somewhere between 11:40 and midnight.

The engineers, Morgan Stanley, UBS, and the IMF are already staring at the hull.

The passengers, $1.8 trillion worth of pension funds, insurers, and everyday investors are still on deck, sipping their brandy, wondering why everyone looks a little tense.

Let me be the person who taps you on the shoulder.

What is private credit, and why should you care?

Private credit is shadow banking.

It’s what happens when your local bank decides a company is too risky to lend to and a giant investment fund steps in instead.

Funds run by names like Apollo, Ares, Blackstone, KKR, and Blue Owl stepped into that gap after 2008, when tighter bank regulations forced lenders to retreat from riskier deals.

And they never looked back.

Today, private credit manages roughly $1.7–1.8 trillion in loans, mostly to mid-sized companies that can’t tap the public markets.

For years, the trade was almost too good to be true.

Investors poured in because the yields were juicy, several percentage points above what boring bonds were paying.

The funds were lent at floating rates, so when interest rates rose, the funds earned even more, and the returns were staggering. Over the 18 months ending January 2025:

• KKR returned 103%

• Blue Owl returned 81%

• Apollo returned 78%

• Ares returned 68%

Sounds incredible, but here’s the catch.

These loans are completely illiquid, no exchange, no market price, whatever the fund manager decides they’re worth.

But the funds sold themselves to retail investors, pension funds, insurers, high-net worth individuals with the promise of semi-regular withdrawal windows.

You could theoretically get your money back monthly or quarterly.

Then everyone decided they wanted their money back at once and that’s when the architecture cracked.

The gates are closing

The crisis of confidence arrived in early 2026, fast and ugly.

Blue Owl Capital was first back in February, it didn’t just pause withdrawals from its retail private credit fund, it shut them down for good.

Mohamed El-Erian, the former PIMCO CEO, a man who has seen a credit crisis or two, immediately drew comparisons to August 2007, when BNP Paribas froze three funds over illiquid asset valuations.

That was the opening shot of the global financial crisis, and then came the dominoes.

Morgan Stanley and BlackRock tightened restrictions.

In March 2026, Ares Management capped quarterly withdrawals at 5% after investors tried to redeem 11.6% of a $10.7 billion fund.

Apollo followed the same day with an identical 5% cap on a $25 billion vehicle, after redemption requests hit 11.2%.

In Q1 2026 alone, $13 billion in total redemption requests and over $4.6 billion still unresolved.

The stock market had thoughts about this.

• Apollo: down more than 23% in 2026

• Ares: dropped over 12% in a single session

• Blue Owl, KKR, Blackstone: all double-digit declines

The message from markets was blunt nobody trusts the price tags on these assets anymore.

Why? Because of two letters: AI

The AI wildcard: why software loans are ground zero

Over the past decade, private credit funds fell in love with software companies.

Specifically SaaS, software businesses with predictable recurring revenue, sticky customers, and no factories to burn down making them seem like the perfect borrowers.

Outstanding loans to SaaS firms grew from roughly $8 billion in 2015 to over $500 billion by end-2025.

That’s roughly 19% of all direct private credit loans about one in every five dollars flowing into software companies.

Then AI ate the software sector’s lunch.

Agentic AI tools started doing the complex, billable professional tasks that many software firms charge for.

The revenue models underpinning hundreds of billions in private credit loans began to look shaky.

Software company stocks fell nearly 30% between October 2025 and February 2026.

And here’s the cruel twist nobody planned for.

Software loans are nearing a maturity wall about 11% come due by 2027, with another 20% hitting in 2028.

Companies that can’t refinance because AI disrupted their business model will default and unlike a manufacturer that has equipment to seize in bankruptcy, a software company’s main asset is its code.

Which is now being written for free by the AI that killed its customers.

Morgan Stanley estimates direct lending defaults could reach 8% approaching COVID-era highs driven largely by AI disrupting software borrowers.

The canary in the coal mine is choking

Read more

He changed it from 25% to 30%, marking the third time he’d adjusted that number in 90 days.

The number is Goldman’s probability of a US recession in the next twelve months.

It was 20% at the start of the year, 25% eleven days ago, and now it’s 30% today.

Hatzius isn’t dramatic, he doesn’t go on CNBC to scream about crashes.

He’s the kind of guy who lets the data do the talking and then updates his model accordingly.

Which is exactly what makes this worth paying attention to.

Most recession calls focus on one big, scary thing, a housing crash, a banking crisis, or a pandemic.

The US’s current situation is different, it’s not one catastrophic event, but three completely separate problems that all showed up at the same time.

And the terrifying part isn’t any single one of them, it’s the math when you stack them on top of each other.

The stack

Let’s start with the fastest-moving piece. The Atlanta Fed runs a live GDP tracker called GDPNow.

It’s a real-time read that updates every time new economic data hits, think of it as the economy’s live box score.

On February 24, Q1 2026 growth was tracking at a healthy 3.1% annualized with no red flags.

Here’s what happened over the next four weeks:

• Feb 27: 3.0%. Barely moved.

• Mar 6: 2.1%. Oh.

• Mar 13: 2.7%. Small bounce from inventory data. Don’t get excited.

• Mar 19: 2.3%. Construction spending cratering.

• Mar 23: 2.0%. Private fixed investment just fell off a cliff from 3.1% growth to 1.2% in a single release. Residential investment, non-residential structures, and private inventories all dropped simultaneously.

1.1 percentage points were wiped out in under a month.

Goldman’s own estimate of US potential GDP growth, the speed at which the economy needs to grow just to keep the unemployment rate from rising, is 2.3%.

We are now below it and still falling.

Goldman’s H2 2026 forecast is 1.25%–1.75%, and for the second half of this year, the economy is expected to grow more slowly than it needs to just to tread water.

That gap between what the economy is producing and what it could be producing has a name when it gets wide enough.

It’s called a RECESSION.

Problem 1: The oil shock that broke all the records

The Strait of Hormuz is closed.

That’s the 21-mile-wide chokepoint between Iran and Oman that handles roughly 20% of the world’s entire oil supply, about 20 million barrels a day.

Every barrel flowing from Saudi Arabia, Iraq, UAE, Kuwait, and Iran to the rest of the world passes through it.

Here’s the precedent table:

• 1973 OPEC Embargo (+300% oil): 16-month recession and the stagflation era begins. Gerald Ford hands out “WIN” buttons (Whip Inflation Now). It does not work.

• 1979 Iran Revolution (+100%): Double-dip recession through 1980–82. The Fed raised rates to 20%.

• 1990 Iraq-Kuwait invasion (+135%): 8-month recession. The S&L (savings and loan) crisis piled on.

• 2008 Oil Peak at $147 (+96%): The Great Recession, eighteen months and you know how this one ended.

• 2026 Hormuz Crisis (+60% and counting): TBD.

The correlation between the magnitude of an oil price spike and the severity of the recession that follows is 0.9.

Among the highest of any leading indicators in the entire field of economics.

Every single major oil supply shock in modern history ended in recession.

Brent crude is at $110, and Goldman expects it to stay there through April.

Fitch says if the closure runs six months, we’re looking at a $120 annual average, with spikes to $130–$170 and the record is $147.50, set in July 2008.

You know what happened in Q4 2008.

Problem 2: The fiscal tailwind wore off

Remember the One Big Beautiful Bill from last summer?

The mammoth tax package that reinstated 100% bonus depreciation, doubled the Section 179 expensing cap to $2.5 million, gave full expensing for new factory construction, and cut middle-class taxes?

This was the key driver of the economy’s strong Q4 2025 and Q1 2026 performance.

The problem with front-loaded fiscal stimulus is the word front-loaded.

Businesses that rushed to claim first-year expensing in 2025 already did it, and they don’t need to do it again.

The consumer tax cuts delivered their maximum marginal impact in year one, after that, spending adjusts, and the boost fades.

The CBO itself projects real GDP growth decelerates from 2.2% in 2026 to 1.8% in 2027, partly because this boost doesn’t repeat.

The tailwind is turning into a headwind right now.

Problem 3: Money just got more expensive

When oil spikes, financial conditions tighten. Goldman’s proprietary Financial Conditions Index, a composite measure of how easy or hard it is to borrow, invest, and take risk, has tightened by roughly 60 basis points since the Hormuz crisis started.

What that looks like in the real world:

• Airlines down 14–20% (jet fuel is their biggest cost)

• Cruise lines down 20%+

• S&P 500 dropped 3% in the first few trading days

• Financial sector down 4% in March alone

This tightening alone shaves half a percentage point off H2 GDP growth.

Through tighter credit spreads, higher equity volatility, a stronger dollar squeezing exporters, and rising mortgage rates cooling housing.

And these effects compound with the typical 2–3 quarter lag, meaning the full damage from today’s tightening doesn’t show up in the data until late 2026 or early 2027.

Half a point sounds manageable but when your baseline is already 1.5% growth, half a point is not manageable.

Three problems, all arriving at once in an economy that just printed –92,000 jobs in February.

The breakeven rate, or the number of jobs needed to be added monthly to keep unemployment flat, is about 70,000. The underlying trend is running at around 11,000.

The unemployment rate is already at 4.44% and is expected to rise to 4.6% by year-end, with a worst-case scenario of 4.8–4.9%.

The Sahm Rule, one of the most reliable recession indicators ever developed, triggers when unemployment rises 0.5 percentage points from its cycle low.

We are close enough to see it from here.

THE SECOND SHOE

Right now, markets are running the inflation script: oil goes up, yields go up, central banks stay hawkish, equities hold because growth is resilient.

The oil shock is being read purely as a cost-push inflation event.

The regime flip happens when the market starts pricing the other side, the demand destruction embedded in sustained $110 oil, because here’s what $110 oil actually does to an economy.

It’s a tax, a regressive, non-discretionary, unavoidable tax on every consumer and every business that uses energy, transportation, or petrochemical inputs, which is all of them.

Money spent at the pump doesn’t make it to restaurants, trucking costs push up prices and squeeze margins, airlines burn cash, and manufacturers cut shifts.

The demand destruction doesn’t show up immediately, and it shows up in the data 60, 90, 120 days later.

When it does, when the GDP prints come in, when the layoffs register in the jobs report, when the earnings revisions start rolling in, Goldman says the market’s regime assumption flips.

And when it flips:

• Oil up = yields DOWN (growth fear drowns out inflation fear)

• Oil up = stocks DOWN HARD (earnings expectations get slashed)

• The Fed pivots from holding rates to cutting rates aggressively

The 2008 playbook is clear: oil peaked at $147, the recession deepened, the Fed cut to zero, and equities fell over 50% before recovering.

Why the inflation number is lying to you

Read more

A trader at Lehman Brothers, watching his screen turn red, looked at his colleague and whispered:

“We’re not in a correction. We’re in a liquidation.”

The first week of February 2026 just became the largest notional short selling event in US equity history.

Microsoft dropped 26%. Oracle got gutted by 56%.

The entire S&P 500 software index lost $1 trillion in market cap in seven trading sessions.

To put that in perspective: That’s more wealth destroyed than the entire GDP of Indonesia. Gone in a week, poof.

The craziest part? Friday saw an explosive reversal.

The most-shorted stocks ripped 8.8% higher. Everyone exhaled, crisis averted and the bottom was finally in.

But here’s the part that should either terrify you or get you unreasonably excited (depending on which side of this trade you’re on):

Friday’s rally only unwound 20% of the short positions.

That means 80% of the powder keg is still loaded and ready to blow.

We are either about to witness the most violent short squeeze since Volkswagen in 2008, or we’re headed for another leg down that makes last week look like a dress rehearsal.

Let me explain how we got here and which way I think this thing breaks.

The Catalyst: When AI Declared War on Software

The proximate trigger for the massacre has a funny name: The Claude Crash.

On January 27th, Anthropic dropped what they called a relatively minor product update.

Claude Cowork got industry specific plug ins. Then they released Claude Opus 4.6, a model that can coordinate teams of autonomous AI agents.

Translation: Your $50,000/year enterprise software subscription just got replaced by a $20/month AI assistant that doesn’t need coffee breaks or complain about open floor plans.

The market responded with the financial equivalent of a full-blown panic attack.

Microsoft fell 26% from its peak. Palantir lost 25% of its value. Oracle got absolutely murdered by 56%.

And the iShares Expanded Tech-Software ETF (IGV) plunged 28%, with its RSI hitting 19, the lowest reading since the 2011 debt crisis.

For context, an RSI below 30 means oversold.

An RSI at 19 means someone call an ambulance. Actually, call the coroner.

Then OpenAI, never one to miss a chance to steal headlines, piled on.

They released their own coding assistant that goes beyond programming into documentation and presentations.

Basically, they looked at the software carnage and thought, You know what this fire needs? More gasoline and maybe some fireworks.

Some analysts like Gartner tried to calm everyone down, saying predictions of a “SaaSapocalypse” were overblown.

Their argument: These AI tools automate manual work, but they don’t replace critical SaaS operations.

The market heard them and just didn’t care. The market wanted blood.

When Wall Street Smells Blood, It Doesn’t Just Watch, it Feasts.

According to prime brokerage data, hedge funds didn’t just sell, they short-sold at a pace not seen in modern markets.

The numbers are absolutely bonkers.

Notional short selling in US single stocks was the largest on record since data began in 2016.

It was a +3.2 sigma event (translation for normal humans: this basically never happens).

Short sales outpaced long buys at a ratio of 2.5 to 1. In tech specifically? Short sales beat long buys at an astonishing 5.4:1 ratio.

For every $1 hedge funds were buying tech, they were shorting $5.40.

Let that sink in while I pour another drink.

And unlike past selloffs where shorts cover on the way down (taking profits like sensible people), hedge funds actively increased their short positions into the weakness.

Microsoft, historically a stock where shorts cover during declines was now trading like a “momentum-driven, distressed name.”

(That’s Wall Street speak for: “We think this thing is going to zero and we’re betting the farm, the tractor, and our kid’s college fund on it.”)

TeraWulf had over 35% of its float sold short. Asana sat at 25% short interest. Dropbox hit 19%.

The carnage was biblical.

The aggregate net exposure in software as a percentage of hedge fund books fell to a record low of 2.6%.

Hedge funds are now more short software relative to their entire portfolios than at any point in recorded history.

This is the setup for either:

(A) The mother of all short squeezes, or

(B) Hedge fund managers finally getting their I told you so”= moment after being wrong for two years straight.

But the software massacre was just the opening act.

The Bull Case: This Setup Is Almost Too Perfect

The setup is textbook. Record short positions (largest ever recorded).

Read more

And if the opening week is any indication, we are settling in for a quarter that is going to be incredibly specific about what it rewards and ruthless about what it punishes.

To understand why the tension is so high, you have to look at the context of where we are standing right now.

It is early 2026, stock prices have rallied near all time highs, and investors have essentially pushed all their chips into the center of the table betting on a perfect economic landing.

This is not just a routine check up on corporate profits, it’s high pressure test to see if these companies actually deserve the massive price tags the market has slapped on them.

We saw this dynamic play out immediately with the banks last week which gave us a perfect tale of two markets.

On one side, you had massive institutions like JPMorgan (down nearly 3%) for the week.

Bank of America (down 4%) delivering results that were numerically fine, essentially solid report cards that met all the technical requirements.

However, investors hammered their stocks because those earnings came wrapped in layers of regulatory headaches, potential capital requirement increases, and general political noise.

The market simply does not want to deal with complexity right now.

On the other hand, pure investment banks like Morgan Stanley were the life of the party because their story was incredibly simple to understand.

They showed that deal making is back, fees are flowing, and there isn’t a massive government cloud hanging over their future profits.

This set the tone for the entire quarter, signaling that investors are willing to pay a premium for simplicity and clean execution.

But if your results come with administrative drama or legal baggage, you are going to the penalty box regardless of how much money you actually made.

This extreme pickiness makes perfect sense when you step back and look at the valuation of the stock market today.

The S&P 500 is trading at price levels that we haven’t seen since the post-COVID euphoria or even the dot-com bubble, which means the index is being priced like a high-growth startup rather than a stable basket of companies.

When you pay a price that implies perfection, you naturally expect a perfect outcome.

This creates a dangerous setup for companies this quarter.

Wall Street has set the bar relatively low for the last three months of earnings, expecting only about 7% growth, which most companies will likely step over easily.

But here is the catch.

The market has already looked past this quarter and is pricing in a massive year for 2026, betting on double-digit earnings growth and significantly fatter profit margins.

That means simply beating the estimate for the recent quarter is just the bare minimum requirement to keep a stock from crashing.

It is no longer enough to just pass the test, companies have to promise they are going to ace the entire year ahead.

If a management team hints that the future looks even slightly murky, the trap door opens, and there is zero financial cushion for disappointment because all the optimism is already fully baked into the price.

The central character in this high-stakes drama still remains AI but the plot has shifted dramatically from where we were six months ago.

We have officially moved past the phase where a CEO could simply mention their exciting AI pilot programs and watch their stock price pop.

That grace period is over.

Wall Street is done hearing about experiments and want to know exactly how AI is hitting the bank account today.

For software companies, this means showing that AI features are allowing them to charge customers more money or stop them from cancelling subscriptions.

For boring industrial companies, it means proving that AI robots or automated scheduling are allowing them to do significantly more work without hiring any new people.

The investment focus is rotating away from the infrastructure trade of buying the expensive chipmakers and data centers that everyone already owns and moving toward the productivity layer.

The new gold rush isn’t about buying the companies selling the shovels anymore, it is about finding the regular companies that are actually finding gold with those shovels by becoming more efficient.

We also need to clarify the spending side of the AI equation because the headlines are going to get confusing.

You will likely hear a lot of chatter about how the growth rate of AI spending is slowing down, dropping from explosive jumps to more moderate levels.

The bears will try to tell you this means the AI boom is busting, but that is just bad math.

It is simply the law of large numbers at work because you cannot keep doubling your spending every single year when you are already spending tens of billions of dollars.

The absolute mountain of cash being poured into chips, cooling systems, and data centers is still growing, but investors are looking for maturity.

They want to hear management teams explain that this spending is stabilizing into a steady, productive rhythm rather than just a reckless arms race.

The winners this season will be the companies that can explain they are spending billions but getting twice as much efficiency out of their new equipment.

And the losers will be the ones who look like they are burning cash just to keep up appearances.

Why Owning The Winners Is Now Dangerous

Looming over all of these company specific stories is a massive macroeconomic headache involving the tug of war between the US dollar and trade policy.

Recently, the dollar has been getting weaker, which in normal times is great news for American companies because it makes their products cheaper for foreign buyers and boosts international sales figures.

However, the threat of new tariffs is acting as a massive buzzkill that complicates this math.

Tariffs essentially function like a silent tax on corporate profits.

The smart money estimates that a significant hike in tariffs could wipe out a meaningful chunk of the entire market’s earnings power.

This creates a confusing situation where a company might report great revenue numbers thanks to the weak dollar but disappointing profit margins because of tariff fears.

The critical skill for companies right now is pricing power, which is the ability to pass those extra tariff costs on to the customer without driving them away.

If a company cannot raise prices, they are going to get squeezed, and you do not want to be holding their stock when they announce that their profit margins are shrinking.

Finally, navigating this market requires understanding the positioning trap.

Because everyone has piled into the same popular winner stocks, the market has become incredibly lopsided.

This creates a volatility gap where the overall market looks calm, but individual stocks are violently swinging around.

If you own the crowded AI darlings, the risk-reward is terrible because if they report amazing news, the stock might barely move since everyone already expects it.

But if they miss, the exit door is tiny, and everyone tries to leave at once, causing a crash.

On the flip side, the hated stocks that everyone is betting against are like coiled springs.

If a heavily shorted company like Moderna or PayPal reports news that is merely not a disaster, the short sellers panic, buy back the stock to cover their bets, and the price rips higher.

This sets up a very specific playbook for finding opportunities.

Here is exactly how I am positioning for this earnings and how you can profit from all of this.

Read more

We have just lived through the year of the safe haven.

It was the year where fear drove the bus and panic was the navigator.

We watched Gold surge 64% to hit all-time highs, briefly tapping levels that made the old-school gold bugs faint.

But the real showstopper, the one that had everyone on Reddit and X losing their minds, was Silver.

This went absolutely vertical, skyrocketing 188% to smash past $90 an ounce.

It was the perfect storm, global economic anxiety, sticky inflation that just wouldn’t quit and a massive supply squeeze when China slapped those export restrictions on silver.

If you were holding precious metals in 2025, you crushed it. You secured the bag.

But here is the honest, uncomfortable, and often expensive truth about investing that few newsletters will tell you because it ruins the hype.

You cannot buy yesterday’s returns.

The market is a forward looking machine.

It doesn’t care what Silver did last year. It cares about what is undervalued right now.

With Silver and Gold now sitting at nosebleed valuations and the initial panic buying fading, the easy money in those trades has been made.

Buying Silver at $90 is a crowded trade.

It’s like trying to get into a nightclub at 2 AM when the lights are coming on, the party is effectively over, and you’re just paying the cover charge to stand in the mess.

The real alpha that institutional investors are whispering about in closed door meetings is that the smart money is always actively rotating.

They are taking their profits from the stagnant vaults of bullion and moving them into the one metal that drives actual, tangible economic growth.

They are moving into the physical backbone of the future.

Drum roll please…

Read more

Bank of Greenland is up 40% in a single week.

Did they discover a gold mine in their basement?

Did they invent a new way to finance igloos? No.

They rocketed higher because Wall Street is starting to bet on something that sounds like it belongs in a Tom Clancy novel:

The United States government might be looking to essentially “acquire” a new territory.

Buckle up, because we are going to walk through why the world is getting chaotic, why the dollar is in the crosshairs, and how you can actually make money from it.

The Dollar Dilemma: Printing Money While Fighting the World

Let’s start with the big picture, because this is the engine driving the whole car right now.

The current setup is a bit of a paradox.

Imagine you decide to quit your job to start a fight with your neighbors (Trade War/Tariffs), but at the same time, you decide to go on a massive shopping spree using your credit card (Government Spending/Printing Money).

That is effectively what the US policy looks like right now.

We have simultaneous “Quantitative Easing” (which is fancy banker speak for the Fed buying bonds to inject cash into the system) plus tariffs that make imported goods more expensive.

Here is the kicker: US gross national debt was $37 trillion in August and reached $38.4 trillion by December.

That is $2.23 trillion more than a year ago.

It is the fastest increase outside the COVID pandemic.

That is an unfathomable amount of money.

The only way the math works, the only way the government can afford to pay the interest on that debt is if they let the dollar get weaker.

When the dollar is weaker, the debt is easier to pay off (in real terms), and our exports look cheaper to the rest of the world.

So, what’s the trade? one of the trade is Bonds.

I know, I know. Buying bonds sounds about as exciting as watching paint dry.

And with interest rates where they are, it feels like a losing bet.

But here’s the secret: The government cannot afford for interest rates to go high.

If rates spike, the interest payments on that massive debt would bankrupt the budget.

So, they will do everything in their power, cut rates, buy bonds, manipulate yields to keep them down.

You aren’t betting on the economy; you’re betting that the government will do whatever it takes to survive.

That makes bonds a surprisingly smart contrarian play right now.

But wait what if I want more than just bonds, don’t worry:

I have the perfect playbook for you coming up.

Read more

I know I’ve been MIA (missed you guys) for the last few weeks, but trust me, I needed the reset.

I took some time to unplug, clear my head, and stare at the charts without the daily noise.

Now, I’m back, recharged, and arguably more locked in than ever.

I’m also making it official: my New Year’s resolution is to deliver two high-quality newsletters per week to your inbox.

I’ve written it down in permanent marker, so now you all have permission to hold me to it.

But enough about me.

I used that time away wisely to really look at where we’re heading, and my conclusion is that the landscape for 2026 looks nothing like the fever dream we just woke up from.

This edition is dedicated to my core thesis for the year ahead.

If you are still reading this, congratulations, you survived the “AI Mania” of the last three years.

You lived through the era where a CEO could simply whisper “AI” into a microphone and watch their stock price rocket.

You watched as the market threw money at anything with a microchip, ignoring fundamentals, logic, and occasionally, gravity.

It was a frat party in a penthouse, fueled by cheap money and expensive dreams.

But as we settle into 2026, the vibe has shifted.

The party is officially over.

The bartender is no longer handing out free drinks, he’s handing out the bill.

Wall Street strategists, who love inventing fancy terms for simple problems are calling this the “Great Bifurcation.”

It’s a polite way of saying the economy is snapping in half.

For the better part of the 2020s, a rising tide lifted all boats.

But now that era is dead.

In 2026, the tide is going out, and we are about to find out exactly who has been swimming naked.

This year isn’t just about growth at any cost. It is about discernment.

(the ability to tell the difference between a real business and a cool PowerPoint presentation).

It is about the ruthless separation of the winners, who are actually using technology to print cash from the losers who are just burning it to stay warm.

The Two Economies

To understand where to put your money this year, you first have to ignore the single biggest lie on television: The Economy.

Pundits love to talk about the US economy as if it’s a monolith, a single creature that is either happy or sad.

It isn’t.

We are currently living through a textbook K-Shaped reality where two completely different economic movies are playing at the same time.

On the top arm of the “K,” we have the Asset Class.

If you own a home, have a 401(k), and hold a good job, 2026 is shaping up to be a banner year.

This is largely to what is jokingly called the One Big Beautiful Bill Act (OBBBA).

While the name sounds like it was written by a marketing intern on a sugar high, the effects are real and they are actively reshaping the consumption habits of the upper middle class.

The standard deduction for married couples has jumped to $32,200, effectively shielding a massive chunk of income from the IRS.

The SALT cap (State and Local Tax deduction) has risen to $40,000, which is a massive bailout for the upper middle class in high-tax suburbs who have spent the last few years complaining about property taxes at dinner parties.

Seniors over 65 are getting an extra $6,000 deduction.

The data backs this up: the top third of American households grew their spending 2.6% year over year in November 2025.

They are flush with cash, tax incentives, and the warm glow of a rising stock portfolio.

But if you look at the bottom leg of the “K,” you see a solvency crisis that looks terrifyingly like 2008.

The low income consumer, the person who rents, lives paycheck to paycheck, and relies on credit is drowning.

The data reveals that the bottom third of households managed just 0.6% spending growth, a four-fold gap compared to the wealthy.

But the most alarming signal in the entire market is now the delinquency rate on subprime auto loans.

Right now, over 6.65% of subprime borrowers are more than 60 days late on their car payments.

That is higher than it was during the Great Financial Crisis.

Think about the desperation required to stop paying for your car.

In most of America, if you lose your car, you lose your job.

People don’t default on their car loans unless they have absolutely zero options left.

For a subprime borrower paying $600 a month in a world where average cars cost $50,000, a minor tax cut doesn’t move the needle.

They have exhausted their savings, maxed their cards, and are now capitulating.

This fracture creates a very specific roadmap for your portfolio.

You want to own the companies serving the top of the K and avoid the ones preying on the bottom.

This is why we are looking at Credit Acceptance Corp (CACC) and World Acceptance Corp (WRLD) not just as stocks to avoid, but as active shorts.

These companies’ entire business model is lending money to people who are currently broke.

Their asset backed securitizations depend on borrowers maintaining payments, but with delinquency rates at three-decade highs, the math has inverted.

Recovery rates are compressing, and loss severity is widening.

When the repo man is busier than the loan officer, your stock is headed for a violent repricing.

Conversely, this is why Dollar General (DG) and Walmart (WMT) are poised to win.

We are witnessing the great trade down, a mass migration where families earning six figures swallow their pride and swap Whole Foods and the “Erewhons” of the world for the discount aisle to make ends meet.

As the middle class feels the pinch of inflation, they trade down to value.

For example, Walmart’s online sales surged 28% in the second half of 2025, driven largely by households earning over $100,000 trading down to save money.

Dollar General is seeing a similar trend, expanding its gross margins to nearly 30% as it becomes the primary retailer for 80% of communities with fewer than 20,000 residents.

They are some of the beneficiaries of the great trade-down.

Revenge of the Boring

While the economy fractures, a similar split is happening in the corporate world.

For the last three years, the only game in town was the “Pick and Shovel” trade.

You bought Nvidia because they made the chips.

You bought stocks like Arista because they made the cables but the infrastructure phase is maturing.

The easy money there has been made.

The smart money in 2026 is rotating into what we call the productivity super-cycle.

We are moving from the companies building the AI to the companies using it.

And ironically, the biggest winners are the boring, unsexy, old economy giants that you haven’t thought about since 2010.

These companies are using AI not to write poems or generate weird images of cats in spacesuits, but to decouple revenue growth from headcount growth, the holy grail of business.

Consider Bank of America (BAC). It’s a dinosaur, right? Wrong.

Under the hood, BofA has become a technology fortress.

The bank’s “Erica” virtual assistant has handled over 3 billion customer interactions.

Now, I know what you’re thinking.

Most AI assistants are just frustrating gatekeepers that make you scream “REPRESENTATIVE” at your phone screen.

I get it, they can be annoying.

But put your personal feelings aside and look at the math.

That volume is the equivalent of 11,000 full-time employees working around the clock, never sleeping, never getting sick, and never demanding a raise.

This technology generated a 19% revenue lift through strategic cross-selling, surfacing refinancing and investment opportunities to customers automatically.

But looking only at the chatbot misses the bigger picture.

Deep inside the bank’s plumbing, BofA is deploying a private army of AI agents that normal customers never see.

For their corporate clients, they launched CashPro, a crystal ball that uses AI to predict future cash flows so CFOs don’t have to build spreadsheets.

For their wealth managers, they built “Ask Merrill,” a tool that turns every junior advisor into a walking encyclopedia by instantly pulling data from massive reports.

They are even getting weird with it, using AI-powered VR headsets to train employees, complete with a Metaverse room where staff can ride virtual unicorns to de-stress (I promise I am not making that up).

Add in a developer workforce of 18,000 engineers using AI to boost coding speed by 20%, the bank is guiding for 6-7% earnings growth in a tough environment.

While other banks squeeze margins, BofA is using technology to widen them.

Or let’s look at XPO Logistics.

Trucking is a brutal, low margin business where success usually means saving pennies on diesel.

But XPO has deployed AI to solve the industry’s biggest problem: empty miles.

When a truck drops off a load and drives 100 miles empty to the next pickup, that is just burning cash, a $30 billion annual waste for the industry.

XPO’s new algorithms have reduced those empty miles by 12% and cut unnecessary rerouting by a staggering 80%.

They are effectively creating “free” capacity out of thin air.

In Q2 2025, their purchased transportation costs fell 53% year-over-year because their AI allowed them to insource 93% of their linehaul operations.

This is a company turning efficiency into margin expansion while competitors burn cash fighting for market share.

We are also watching the mortgage sector, specifically UWM Holdings (United Wholesale Mortgage).

In an industry that usually relies on an army of loan officers making awkward phone calls, UWM deployed “Mia,” an AI-powered agent that works 24/7.

In just a few months, Mia made 400,000 outbound calls to past clients, reminding them about refinancing opportunities.

The result? 14,000 closed loans that would have otherwise been missed opportunities.

UWM saw its best quarter for loan originations since 2021, proving that AI can drive volume even when interest rates aren’t at rock bottom.

The Reckoning

Finally, we have to address the elephants in the room, the pure-play AI stocks.

Read more

Bitcoin did one revolutionary thing, it let you send money to anyone, anywhere, without needing a bank.

This was huge and for the first time in human history, you could transfer value across the internet as easily as sending an email.

Governments couldn’t stop it and banks couldn’t control it.

This was the start of digital gold.

But Bitcoin had limits. It was designed to do one thing only, be money.

You couldn’t build apps on it. You couldn’t create automatic agreements. You couldn’t program it to do complex tasks.

It was like having a calculator that only adds and subtracts, useful, but very limited.

Enter Vitalik: The Kid Who Wanted More

In 2013, a 19-year old Russian Canadian programmer named Vitalik Buterin was deep in the Bitcoin world.

He loved what Bitcoin did, but he kept thinking: what if we could do MORE than just send money? What if we could build an entire computer that nobody owns?

Picture Vitalik: skinny, wearing t-shirts featuring cats and aliens, looking exactly like someone who would say actually a lot at parties. But this kid had a vision.

Think about that for a second. Every computer you’ve ever used has an owner.

Apple owns your iPhone. Microsoft owns Windows. Google owns the servers running YouTube.

Someone is always in control, usually collecting your data and selling it to advertisers.

Vitalik wanted to build a computer that runs on thousands of computers simultaneously, spread across the entire world, where no single person, company, or government could ever shut it down or control it.

People told him it was impossible. He built it anyway.

In 2015, Ethereum launched, and the financial world would never be the same.

Also, Vitalik became a billionaire before he could legally rent a car in the United States.

To understand why Ethereum is different, think of the traditional internet as a global filing cabinet. You can put files in, and take files out.

Ethereum is something else entirely:

A World Computer, a shared calculator where you can run actual unbreakable agreements and no single boss, government, or disgruntled intern can ever turn it off.

Here’s how it works:

• Traditional Computer: Runs on one machine. If your cat walks across the keyboard at the wrong moment, everything stops.

• Ethereum: Runs on thousands of computers at once. If 100 computers crash, the other thousands keep running. If a government tries to shut it down, good luck finding all the computers. They’re literally everywhere.

It’s the cockroach of computing: impossible to kill.

Part II: How It Actually Works (Robot Lawyers and Parking Meters)

The core invention of Ethereum is the Smart Contract.

You can forget the paper, the human lawyers, and the endless meetings.

A Smart Contract is a Robot Lawyer.

It is a computer program stored permanently on the Ethereum network that automatically executes the terms of an agreement when certain conditions are met.

Imagine a vending machine. If you put in $2.00 (the condition), the machine automatically releases a Snickers bar (the execution).

It doesn’t need to call a manager to ask for permission. It just follows the code.

A Smart Contract does the same thing for complex business deals.

You can write a code that says:

“IF the cargo ship arrives at the port in New York (verified by GPS), THEN automatically unlock $1 million from the bank account and pay the shipping company.”

Once this code is turned on, it cannot be tampered with, changed, or reversed. It executes perfectly, forever.

It is trust, outsourced entirely to a machine.

But what stops a bad person from writing a program that says “Hello” five trillion times a second and crashing the whole system?

The answer is Gas. Every single time you want to use the World Computer, you have to pay a tiny fee called Gas.

The cost of Gas is like a parking meter for your transaction.

If you want to park your car (run your program), you have to put money in the meter.

If your money runs out, the meter flashes red, and your car gets towed (the program stops).

This makes it too expensive for hackers to spam the network, keeping the computer running smoothly.

Part III: The Money That Destroys Itself (The Scarcity Trick)

For a long time, people said Ethereum was bad for the environment because it used too much electricity.

So in 2022, it did something that sounded impossible: The Merge.

Ethereum swapped the engine of the airplane while it was still flying.

Overnight, it ditched energy hungry mining and cut power usage by 99.95%, going from a gas guzzling Hummer to an electric scooter.

But the real financial sleight of hand is what I call the Digital Incinerator.

Every time you pay a gas fee to use Ethereum, the network doesn’t just pocket the money.

A portion of it is permanently destroyed, deleted forever, never to be used again.

Why would a system burn its own money?

Imagine if every time you bought a coffee, the government took a dollar bill and set it on fire.

Over time, there would be fewer dollar bills in circulation and when supply shrinks, what happens to the value of what’s left?

That’s exactly what Ethereum does. The more the network is used, the more ETH disappears.

As a result, the total supply of Ethereum is actually shrinking, down 2.22% over the past year. It’s money that gets rarer because people use it.

Which raises the obvious question: how do you profit from money that disappears?

Don’t you worry, I have the perfect solution for this.

Read more

You just need to understand a simple problem of physics that is currently costing the world’s biggest companies trillions of dollars.

For the last twenty years, the internet, the thing that powers your Netflix, your banking app, and your emails was built on a specific type of microchip called a CPU.

Think of a CPU like a really good Office Manager.

It’s organized and it’s reliable.

It can do a thousand different things one after another: “Open this spreadsheet, send this email, load this webpage.”

It is designed to be a multitasking generalist.

Because of this, companies like Amazon, Microsoft, and Google spent two decades building massive data centers that were essentially giant office buildings for these managers.

They were quiet, air-conditioned rooms where rows of servers hummed along, sipping a polite amount of electricity.

Everything was efficient and fine.

Then, the aliens landed.

In late 2022, ChatGPT arrived, and the world realized that AI doesn’t work like an Office Manager.

AI doesn’t need to multitask, it needs to do math.

That’s because every thought an AI has is really just numbers being multiplied and added together.

AI models turn words, images, and sounds into huge grids of numbers called matrices.

To figure out the next word in a sentence or identify a cat in a photo, the model runs the same math operation on those numbers over and over, multiply, add, repeat millions or billions of times.

So instead of doing lots of different tasks one after another, AI is doing one kind of task millions of times at once.

That’s why the old CPU based world broke and why GPUs, built for massive parallel math, took over.

GPU’s are made by a tiny company you might have heard of called NVIDIA.

If the CPU is an Office Manager, the GPU is a team of 10,000 mathematicians screaming answers at each other in a room.

But here is the trillion dollar problem: You cannot put these new alien brains into the old office buildings.

It is a physical engineering nightmare.

A rack of old CPU servers generates about as much heat as a few hair dryers.

A rack of modern AI chips generates as much heat as a blast furnace.

If you plug a modern AI supercomputer into an old Amazon or Google data center, you will quite literally melt the power cables and set the room on fire in minutes.

The old air conditioning systems, which just blow cold air through vents, simply cannot move the heat away fast enough.

This means the world’s biggest tech companies are sitting on empires of legacy infrastructure that is suddenly obsolete for the new hot thing.

They are scrambling to retrofit, but it is slow, expensive, and painful.

This disaster created a massive opening for a new breed of company: the “Neocloud.”

These are companies that started from scratch with zero baggage.

They buy empty land and build AI Factories designed specifically for these hot, hungry GPUs.

They use liquid cooling (piping fluid directly to the chips) and specialized networking cables that cost more than a Ferrari.

They don’t sell web hosting or email or photo storage.

They sell raw, unadulterated intelligence.

And that brings us to the most fascinating, and perhaps most misunderstood, player in this arena.

Drum roll please and say hello to my little friend newest position.

Nebius Group (NBIS). Side Note: You can track every thesis and previous position in this live spreadsheet so you can see the exact price we entered at in real time.

The “Born Rich” Advantage

Usually, when you hear about a hot new AI stock, it’s some startup run by three guys in a garage who were mining Bitcoin six months ago.

They have a cool PowerPoint, but they have to beg venture capitalists for money to buy even a handful of chips.

Nebius is weird.

It is technically a new company, but it’s actually a 22 year old tech giant that faked its own death and was reborn in Amsterdam.

Until 2022, there was a company called Yandex.

People called it “The Google of Russia.”

It was a NASDAQ-listed behemoth with world class search engines, self driving cars, and thousands of the best engineers in Europe.

But when the geopolitical situation exploded, the leadership did something radical.

They decided to amputate the company to save it.

They executed a clean break. They sold all the Russian assets, the search engine, the taxi apps, the consumer brands for over $5 billion.

They left the country completely.

What remained was a Dutch holding company, renamed Nebius, which kept the only things that mattered for the future:

• The patents.

• The software code.

• The 1,300 top engineers who fled to the West.

• A massive war chest of billions of dollars in cash.

So when you look at Nebius, you aren’t looking at a scrappy startup.

You are looking at a veteran technology army that was “born rich.”

The Deep Dive: How Do They “Own the Stack”?

This is the most important part of the thesis.

Most AI Clouds are actually just assemblers.

They buy Dell servers, rent space in an Equinix data center, and install standard software.

They are middlemen.

Nebius is vertically integrated.

That’s fancy MBA speak for: “We cook our own food, grow our own vegetables, and built the kitchen ourselves.”

Here is exactly how they own the stack, from the dirt to the code:

Layer 1: The Metal (The Hardware)

Nebius doesn’t just buy off the shelf server racks.

Because they have those 1,300 ex-Yandex engineers, they design their own proprietary server racks and power distribution units.

Why does this matter? Heat.

Their flagship data center in Finland is a masterpiece.

It captures the massive heat generated by the AI chips and pipes it into the local town’s district heating system, warming homes in the winter.

• The Result: A “Power Usage Effectiveness” (PUE) score of 1.13.

• The Benefit: The industry average is much higher. A lower score means a lower electricity bill. A lower electricity bill means higher profit margins.

While competitors are paying to vent heat into the atmosphere, Nebius is recycling it.

Layer 2: The Orchestration (The “Soperator”)

This is the secret weapon for the nerds.

In the world of supercomputers researchers speak a language called Slurm.

It’s old-school, rigid, but incredibly fast.

In the world of modern apps (startups), developers speak Kubernetes.

It’s flexible and runs on the cloud.

Usually, you have to pick one.

It’s like choosing between a manual transmission racecar (fast but hard to drive) and a Tesla (easy but automated).

Nebius built a proprietary tool called “Soperator” (Slurm Operator).

It translates between the two languages.

It allows top-tier AI researchers to run their old-school, high-performance science experiments inside the modern, flexible cloud environment.

This makes their platform incredibly sticky. Once an AI lab builds their workflow on Soperator, it is very painful to leave.

Layer 3: The Platform (MaaS)

Finally, they offer Managed Services.

Instead of just giving you a raw GPU and saying good luck, they provide the software environment pre-configured.

If you want to train a model using PyTorch, Nebius has a click-to-deploy environment ready.

This attracts the mid-market companies who need AI but don’t have 50 PhDs on staff to configure servers.

Because Nebius owns the hardware design, the software, and the data center operations, they capture the margin at every step.

• CoreWeave Model: Rent equipment -> Pay Interest -> Pay Landlord -> Small Profit.

• Nebius Model: Buy equipment cash -> Own Building -> Keep All Profit. Analysts believe this will eventually lead to 60-70% gross margins, compared to the razor-thin margins of renters.

The $17.4 Billion Hammer Drop

For most of 2024, this was all just a nice story. Investors were skeptical. “Sure, you have cool tech,” they said, “but who is actually going to buy from you?”

Then, in late 2025, Nebius dropped the hammer.

Microsoft signed a definitive agreement to rent Nebius’s GPUs.

And this wasn’t a small trial, it was a deal worth $17.4 billion committed over 5 years.

Microsoft, the third most valuable company on earth, effectively admitted it couldn’t build infrastructure fast enough and needed Nebius’s help.

This deal involves Nebius building a massive new data center in New Jersey specifically to serve Microsoft’s needs.

Shortly after that, Meta (formerly known as Facebook) followed up with a $3 billion deal.

These contracts changed everything.

They effectively guaranteed Nebius’s revenue for the next half-decade.

They also solved the financing problem.

Because Nebius has a signed contract from a Triple-A credit-rated company like Microsoft, banks are now lining up to lend them money to build the data centers.

This created a virtuous cycle:

1. The contracts proved the tech works.

2. The contracts secured the cheap debt financing.

3. The funding builds the capacity to sign more contracts.

The Scorecard: Numbers Go Up 📈

Let’s look at the scorecard, because the numbers are getting wild.

In the third quarter of 2025, Nebius revenue grew 355% year-over-year to $146 million.

Side Note: These charts were made with Fiscal.AI, which I use daily for structured financial data and analysis. Use this link to get 15% off all plans.

They are forecasting to hit an annualized revenue run rate of $1 billion by the end of 2025.

Nebius’s main rival is a company called CoreWeave.

• CoreWeave Valuation: ~$44 Billion.

• Nebius Valuation: ~$23 Billion.

  

But the gap becomes even more extreme when you compare forward fundamentals versus trailing ones.

Right now, on trailing revenue, Nebius screens as expensive.

The company only posted $363M in revenue over the last twelve months, which makes multiples like EV/Sales of 66x and EV/EBITDA of -96x look eye watering on paper.

(Quick translation: EV/Sales shows how much investors are paying per dollar of revenue. EV/EBITDA shows how much they’re paying relative to profits. A high EV/Sales or a negative EV/EBITDA just means the company is still in heavy build-out mode and hasn’t scaled profitability yet.)

Nebius is guiding to $750M to $1B in annualized revenue by year end 2025.

And the analyst estimates reinforce that trajectory, consensus revenue jumps to ~$556M in 2025, ~$3.45B in 2026, and ~$7.78B in 2027, with even the low end estimates landing well above today’s trailing revenue base.

When you reprice Nebius on that forward revenue base, the entire valuation profile collapses downward:

• At a $1B run-rate, Nebius trades at roughly 24x EV/Sales,

• While CoreWeave trades closer to 40–55x forward sales.

Suddenly Nebius isn’t expensive at all.

And the deeper you go, the wider the gap becomes.

Nebius owns its infrastructure outright, a massive advantage as scale increases and depreciation begins to flatten operating costs.

CoreWeave, in contrast, leans heavily on debt financing and leased equipment, which ties its long-term margins to interest rates, refinancing cycles, and hardware renewal schedules.

Nebius is also aggressively expanding its global footprint, bringing new data center capacity online across the U.S., Europe, and the Middle East, with 100MW+ of deployments planned for 2025.

This is the same pattern of infrastructure ramp that fueled CoreWeave’s valuation explosion.

Then there’s the Nvidia angle.

Nebius secured a strategic partnership with Nvidia and is among the first cloud providers to offer Blackwell Ultra instances, a signal that Nvidia doesn’t see Nebius as a second-tier operator but as a front-line infrastructure partner.

Combine that with long-term contracts, ARR acceleration, global expansion, and a differentiated software stack (Slurm-based orchestration, automatic recovery, proactive system health checks), and you get a business the market is still valuing based on yesterday’s version even though the 2026–2027 version is what should be priced in.

In other words: The market is using a rear-view mirror to price a rocket that’s already pointing straight up.

The Hidden Bonus Level: Sum of the Parts

Finally, there is one last piece of the puzzle that makes this stock a value play in disguise. It’s called the Sum of the Parts.

When you buy Nebius stock, you aren’t just buying the cloud business.

You are getting three other businesses for free that are hidden inside the company structure.

1. Avride: The former self-driving car division of Yandex. In October 2025, Uber invested $375 million into Avride, valuing it at several billion dollars. Nebius owns over 80% of this company. It acts as a massive safety net; even if the cloud business struggles, Nebius could sell Avride to a company like Uber or Tesla and return a huge amount of cash to shareholders.

2. Toloka: A platform for labeling data to train AI. Jeff Bezos’s VC fund invested in it recently.

3. TripleTen: An education tech company that is actually profitable and growing fast.

Analysts estimate these side businesses provide a safety net of $5-$8 per share in value, regardless of what happens with the cloud.

Verdict

Nebius Group is a bet on the physical infrastructure of the future.

It is not a safe, steady dividend payer.

It is a company building the railroad tracks for the next industrial revolution.

The Risks:

• Building these AI factories is expensive. Nebius plans to spend $5 billion in 2025 just on buying chips. They are currently losing money (~$100M net loss last quarter).

• If Microsoft cancels the contract (unlikely, but possible), the stock would implode.

If you believe that we are in the early innings of a massive shift toward automated intelligence, Nebius offers one of the purest, most aggressive ways to invest in that future.

They are backed by top-tier engineering, massive contracts from the biggest companies on earth, and a “born rich” balance sheet that gives them a distinct advantage over the competition.

The next twelve months will determine whether Nebius becomes one of the two or three dominant providers alongside CoreWeave or becomes a solid but not spectacular single-customer infrastructure company.

Investors who buy today are essentially taking a bet that the pipeline of additional hyperscaler deals materializes.

If they announce a deal with Google or Amazon next? The stock won’t just walk, it will sprint.

If you made it to the end, hit like, restack it, and share it with someone who’d get value from it. Seriously, it helps more than you realize.

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Disclaimer: Nothing in this newsletter is financial advice. All opinions, analyses, and commentary shared here are my own personal views, based on publicly available information and independent research. You should not rely on any of this content as a recommendation to buy, sell, or hold any security or investment. Always do your own due diligence and consult a licensed financial advisor before making investment decisions.

You think it’s a story about Jerome Powell standing at a podium deciding whether to tap the brakes or hit the gas.

But the truth is: the world isn’t run by policy, It’s run by plumbing.

I’m not talking about copper pipes and wrenches.

I’m talking about the invisible, subterranean machinery that moves trillions of dollars between banks overnight.

It is the boring, technical, acronym-filled layer of finance that 99% of people ignore because it sounds like homework.

But here is the dirty little secret of Wall Street: The plumbing is the only thing that actually matters.

Most of the time, the pipes hum along silently.

But every few years, the plumbing gets clogged and in the global financial system, a clog doesn’t just mean a messy bathroom.

It means the credit markets freeze, the stock market crashes, and the Federal Reserve has to panic.

Right now, if you put your ear to the ground, you can hear the pipes rattling.

The warning lights are flashing red.

The “smart money” in the bond market, the institutional giants who move markets while the rest of us argue about meme stocks is positioning for a massive shift.

They believe the Federal Reserve is about to pivot.

No, I don’t mean cutting interest rates by 0.25%. That’s child’s play.

I’m talking about the Fed turning the printing press back on.

We are talking about a program that will soon be announced that could pump anywhere from $20 billion to $60 billion of fresh cash into the system every single month.

But here is the catch: They are going to look you dead in the eye and tell you it isn’t “Quantitative Easing” (QE).

They are going to use a wall of jargon to convince you it’s just a “technical adjustment” to “reserve management.”

Today, we are going to rip up the floorboards.

We are going to ignore the headlines and look at the mechanics.

This is the deep dive guide to why the system is leaking, why the big banks are on strike, and why the money printer is likely warming up right now.

Part 1: The Pawn Shop of Wall Street

To understand why the system is fragile, you have to understand the Repo Market.

The Repo (Repurchase Agreement) market is essentially a massive, overnight pawn shop for banks and hedge funds.

Here is how it works: Let’s say a bank has a Treasury Bond (a safe asset) but they need Cash (to pay bills, settle trades, or lend to you).

They go to the Repo market.

They say, “Here, hold this Treasury Bond overnight, and lend me Cash. I promise to buy the bond back tomorrow morning for a slightly higher price.”

That transaction happens trillions of times a day.

It is the grease that keeps the gears turning. Without the Repo market, money stops moving. If money stops moving, the economy stops.

Normally, this market is boring. Banks charge each other tiny amounts of interest (the Repo Rate) to swap cash for bonds.

But what happens if everyone has Bonds, but nobody has Cash?

Part 2: The PTSD of September 2019

To understand the panic, we have to travel back to September 2019.

Back then, the Fed was doing exactly what they are doing today: Quantitative Tightening (QT).

Basically, the Fed was trying to slim down.

They were letting bonds expire off their balance sheet to suck cash out of the system.

They thought the banking system had plenty of cash left. They thought the plumbing was fine.

They were wrong.

On September 17, 2019, two routine events collided:

1. Corporate Tax Day: Companies withdrew cash from banks to pay Uncle Sam.

2. Treasury Auction: The government sold new debt, sucking more cash out of the system.

Suddenly, the banking system ran out of grease. Banks rushed to the Repo market to borrow cash, but the cupboards were bare.

The Repo Rate, the cost to borrow money overnight exploded. It went from a sleepy 2% to a panic-inducing over 7% in a matter of hours.

It was a cardiac arrest for the financial system. Trading desks froze. The Fed had lost control of the price of money.

To fix it, the Fed had to panic.

They rushed in with emergency hoses, printing billions of dollars overnight to flood the market with liquidity. It was embarrassing.

It proved that the “geniuses” at the Fed didn’t actually know how much cash the system needed to survive.

Why this matters today: The Fed is terrified of a sequel.

They see the same signals flashing now that they saw back then.

They know that if they keep draining cash, they are going to hit the wall again.

Part 3: The Bathtub Theory

The Fed operates on a framework called “Ample Reserves.”

Think of the US banking system as a giant bathtub.

• The Water: Bank Reserves (Cash held at the Fed).

• The Drain: Quantitative Tightening (QT).

For the last two years, the Fed has been pulling the plug on the drain to fight inflation.

They are intentionally lowering the water level.

The Fed’s goal is to keep the water level “Ample”, low enough so there isn’t excess splashing (inflation), but high enough that the drain isn’t sucking air (a crisis).

The Problem: The Fed is driving blind. They don’t actually know where the bottom of the tub is.

In 2019, they thought the bottom was at $1.2 trillion. They hit it at $1.4 trillion and crashed the car.

Today, estimates suggest the “danger zone” is somewhere around $3 trillion.

The “Repo Gurus” on Wall Street are screaming that the water is getting too shallow.

If the Fed doesn’t turn the faucet back on, the plumbing is going to seize up again.

Part 4: The “Backpack” Rule (Why Banks Are on Strike)

You might be asking a logical question: “The US Government is issuing trillions in debt. Banks are profitable. Why don’t the banks just buy the debt and lend the cash? Why does the Fed have to get involved?”

This is the most critical part of the story. The banks are effectively on strike.

They aren’t on strike because they want to be. They are on strike because the government broke their legs with regulations.

There is a rule called the Supplementary Leverage Ratio (SLR).

Let’s call it the “Backpack Rule.”

After the 2008 financial crisis, regulators told banks: “To make sure you don’t go bust, you have to limit how much stuff you own relative to your capital.”

Think of it like this: Every bank has to wear a backpack.

The regulators say the backpack can only weigh 50 pounds.

Here is the insanity of the rule: Everything counts as weight.

• A risky loan to a bankrupt startup? That goes in the backpack.

• A safe, risk-free US Treasury Bond? That also goes in the backpack.

• Pure Cash? That goes in the backpack too.

Right now, the big banks (JPMorgan, Citi, BofA) have full backpacks.

Their balance sheets are saturated.

They literally cannot buy more Treasury bonds or hold more cash without raising expensive capital or firing clients.

So, we have a standoff:

• The Treasury: “We need to sell trillions in debt to fund the deficit.”

• The Banks: “Sorry, backpack is full. We are regulatory constrained.”

• The Market: “If nobody buys this debt, rates are going to spike and break things.”

This leaves only one buyer left in the room: The Federal Reserve.

Read the rest to understand the impacts of this in your portfolio.

Part 5: The Stealth Pivot (The “Not QE” Solution)

Read more

It costs you nothing.

It works on Sunday at 2:00 AM just as well as it works on a Tuesday morning.

The internet of information moves at the speed of light.

Now, imagine you want to send that same colleague $10,000.

Suddenly, you are transported back to the 1970s.

You are dealing with SWIFT codes, correspondent banking fees, exchange rate markups and a settlement time of 2+ business days.

In a world of instant information, money still moves at the speed of a fax machine.

This is the problem Circle Internet Group (NYSE: CRCL) was built to solve.

Circle is not your typical crypto company.

It isn’t trying to replace the U.S dollar with Bitcoin, it is trying to upgrade the U.S. dollar into a piece of software.

By issuing USDC (USD Coin), a digital token pegged 1:1 to the dollar, Circle is building the plumbing for a new financial internet.

For investors, Circle represents a fascinating, binary bet.

It is currently a cash printing machine that looks like a bank but it is trading like a volatile technology stock.

To understand if Circle belongs in your portfolio for the next five years, we have to look past the crypto buzzwords and analyze the actual business model, which is currently caught in a tug of war between falling interest rates and rising global adoption.

The Business Model: The Most Profitable “Bank” You’ve Never Used

To understand Circle’s stock price, you have to understand how boring their business actually is.

Strip away the blockchain terminology and Circle operates remarkably like a 19th-century bank just rebuilt for the digital world.

When a customer say, a hedge fund in Singapore or a fintech startup in Brazil wants to use USDC, they wire U.S. dollars to Circle.

Hedge funds in particular rely on USDC because it gives them something the traditional banking system still doesn’t, instant, global liquidity.

They can move money in seconds, rebalance across exchanges 24/7, settle cross border trades without waiting on a correspondent bank and jump on arbitrage opportunities without being handcuffed by wire cut-off times.

That speed becomes even more valuable during currency shocks moments, when the yen drops overnight like we saw last week, a Latin American currency suddenly devalues, or an emerging-market central bank imposes capital controls with zero warning.

In those situations, funds rotate into USDC because it’s a neutral, dollar-denominated asset they can access immediately, without needing a U.S. bank to open in the morning.

For a fund that measures profit in basis points and risk in minutes, that flexibility is worth far more than the interest they give up by holding USDC instead of a traditional deposit.

Circle then gives them digital tokens in exchange. Those tokens circulate freely on blockchains, moving billions of dollars in value across markets every single day.

But here’s the subtle magic behind the whole system,Circle keeps the real dollars.

And they don’t stash that cash in some dark vault like old world bankers. They put it to work.

Circle currently holds roughly 75,558.9 million in reserves.

Almost all of it sits in super-safe, short-term U.S. Treasury bills, the kind of assets that pay reliable interest and are considered some of the safest instruments on earth.

And that brings us to the single most important number for any Circle investor: Reserve Income.

In the third quarter of 2025 alone, Circle generated roughly $740 million in revenue and 96% of that money came from interest earned on those reserves.

Circle functions like a massive money market fund that simply doesn’t pass yield back to its users.

When interest rates are high, as they’ve been recently, the model prints cash.

Circle generates hundreds of millions in free cash flow just by existing.

However, the ceiling is already visible. We have seen revenue slip from a peak of $800.5 million in late 2024 down to roughly $740 million this quarter.

This decline highlights their greatest vulnerability.

That’s the core tension inside Circle’s business, an incredibly powerful model sitting on top of an incredibly rate sensitive foundation.

If you look at the price charts for Circle you will see volatility that mirrors the Federal Reserve’s announcements.

This is because Circle’s primary revenue stream is at the mercy of Jerome Powell.

This is the “Rate Cliff” thesis.

With the Federal Funds Rate currently sitting near 3.9%, the ceiling is already lowering.

If the Fed continues to cut rates down to 2% over the next few years, Circle’s revenue will mathematically evaporate unless they can drastically change their business.

A single 1% drop in interest rates wipes out roughly $600 million from their top line annually.

To offset this, Circle has to grow the amount of USDC in circulation faster than interest rates fall.

With current circulation at approximately $75.6 billion, they effectively need to double their user base to $150 billion just to maintain their current revenue levels in a 2% interest rate world.

This is difficult because they are paying a heavy toll to get there because of a metric called Distribution Costs.

This is essentially a revenue-sharing agreement, primarily with Coinbase, the crypto exchange.

Circle pays Coinbase a massive chunk of its interest income in exchange for Coinbase distributing USDC to millions of customers.

This significantly eats into their Gross Profit margins, which sit around 39.5%.

Side Note: These charts were made with Fiscal.AI, which I use daily for structured financial data and analysis. They’re running a big Black Friday sale, 30% off all plans.

While that’s healthy for a bank, it is quite low for a software company, proving that Circle creates money, but they have to pay rent to the platforms that distribute it.

The Strategic Pivot: From “Interest” to “Utility”

Circle knows it cannot survive forever as just a savings account that doesn’t pay interest.

Management is keenly aware of the Rate Cliff.

This is why the investment narrative is shifting from “how much interest do they earn?” to “what can you build with this?”

Circle is attempting to pivot from a Net Interest Margin business like a bank to a Transaction Services business like Visa or Stripe.

They want to charge fees for using their software, not just earn yield on cash.

They are building what they call the Economic OS (Operating System). This includes:

1. The Arc Blockchain: A new network designed specifically for financial institutions where Circle could potentially capture transaction fees.

2. Programmable Wallets: Tools that allow developers to build USDC accounts into their own apps.

3. Cross-Chain Transfer Protocol (CCTP): A teleportation device for money that lets USDC move between different blockchains (like Ethereum and Solana) instantly, burning tokens on one end and minting them on the other.

If this pivot works, Circle becomes a technology stock with recurring software revenue.

The situation feels reminiscent of Robinhood during its own massive transition. Just as Robinhood had to evolve from a misunderstood, single-revenue trading app into a diversified financial services giant to survive.

Circle is currently undergoing that same painful but necessary metamorphosis from a crypto native yield farmer to a mature software platform.

If it fails, however, they remain a proxy for Treasury yields and their stock price will bleed out as rates fall.

The Regulatory Moat: Why Being the “Good Guy” Finally Pays Off

For years, Circle was the nerdy kid in the crypto class.

While their biggest competitor, Tether (USDT), operated out of offshore havens with murky financials and refused to do full audits, Circle insisted on being regulated in the United States.

That strategy was expensive and slow.

Tether grew to be three times the size of Circle because they didn’t ask difficult questions about who was using their money but the tide has turned.

The GENIUS Act in the United States and MiCA regulations in Europe are changing the game.

Governments are drawing a line in the sand, if you want to integrate with the Western banking system, you must play by the rules.

This creates a massive regulatory moat for Circle. U.S. banks, pension funds, and payment giants like Visa cannot legally touch an unregulated stablecoin like Tether.

They can, however, use USDC.

This moat was solidified after the Silicon Valley Bank (SVB) collapse in 2023.

Circle temporarily lost access to $3.3 billion of its reserves, causing the USDC peg to slip to $0.87.

It was a near-death experience but they survived, and they upgraded their armor.

Today, their reserves are managed by BlackRock in a bankruptcy remote government fund (the Circle Reserve Fund).

They have essentially become “too big to fail” by integrating themselves into the very fabric of Wall Street.

The Future: AI Agents and the $4 Trillion Opportunity

So, where is the stock price going in a few years?

The Bear Case is simple, interest rates drop to 2%, revenue gets cut in half, and banks like JPMorgan launch their own JPM Coin, rendering Circle obsolete.

In this world, Circle is squeezed between the government and the big banks, and the stock languishes.

But the Bull Case is captivating. It relies on a concept called the Velocity of Money.

Circle is betting that in the future, humans won’t be the only ones spending money.

We are entering the age of AI Agents, autonomous software bots that perform tasks.

An AI agent cannot walk into a Wells Fargo and open a checking account but it can generate a USDC wallet address in milliseconds.

Imagine a future where your AI personal assistant books your travel, negotiates with a hotel’s AI agent for a better room rate, and settles the payment instantly in USDC.

Or imagine a self-driving truck paying a toll road automatically, machine-to-machine.

it is already being tested by the biggest players in tech. Amazon’s cloud division (AWS) is already hosting the infrastructure for these serverless payment systems, and startups like Crossmint have actively demoed AI agents purchasing products on Amazon using USDC.

Even Google is experimenting with Agent-to-Agent (A2A) protocols where AI models pay each other for data in real-time.

Circle is building the native currency for this machine economy.

In this scenario, USDC becomes the native currency of the internet.

Even if interest rates are low, the sheer volume of transactions would be in the trillions.

Citi estimates the stablecoin market could reach $4 trillion by 2030.

If Circle captures just 30% of that market, their reserves would grow to $1.2 trillion.

Conclusion: A Binary Bet on Infrastructure

Circle Internet Group is not a stock for the faint of heart.

It is an infrastructure play. And right now, the market is offering a entry point due to a technicality, The IPO Lock-Up Expiration.

The stock is currently trading around $72.72, down roughly 12% over the last year, with a market cap of $17 billion.

This depressed price partly reflects the fear that early insiders will flood the market with shares when their lock-up period expires Dec 2nd.

This creates a unique psychological game for investors.

The market anticipates that employees and early backers, who have been waiting years for liquidity, will sell regardless of price.

This supply shock is what bears are banking on.

We might see Circle dip to lows in the mid-60s as this supply hits, nothing is ever guaranteed.

It would be quite foolish for insiders to aggressively dump shares at these levels given how much the stock has already dropped, but panic selling is rarely rational.

I am watching next week as a critical entry point.

A prudent strategy is to open a starter position here and I have started one at $72.72.

Also, I plan to add more shares if the post lock up selling pressure pushes the price down to the $62–$65 range and if circle continues to go higher, I will start to dollar cost average.

Beyond the technical setup, catalysts for a rebound are lining up fundamentally.

We have a clear Bull Case in AI adoption where autonomous agents will start to use USDC for payments but we also have a massive political tailwind that cannot be ignored.

The current administration has taken an undeniably pro crypto stance.

With the GENIUS Act signed into law, the regulatory cloud that once hung over Circle has dissipated, replaced by a framework that explicitly favors compliant, US domiciled issuers like Circle over offshore rivals like Tether.

Furthermore, with the Trump family’s direct involvement in projects like World Liberty Financial, the political environment for a regulated, dollar backed stablecoin like USDC has never been more favorable.

The administration views the digital dollar not as a threat, but as a tool for maintaining American financial dominance in the internet age.

You are essentially betting that the U.S. dollar is about to get a software update.

Just be prepared for a bumpy ride every time the Federal Reserve Chairman speaks.

If you made it to the end, hit like, restack it, and share it with someone who’d get value from it. Seriously, it helps more than you realize.

Important note: As you know, I track macro trends closely because you can’t consistently pick good stocks without understanding the bigger forces shaping the market. That’s why I’m rolling out a full equity research series, something I’ve mentioned to paid members in earlier editions. Most of these deep dives will be paywalled and the plan is to publish four each month and track every thesis in a live spreadsheet so you can follow the performance in real time.

Disclaimer: Nothing in this newsletter is financial advice. All opinions, analyses, and commentary shared here are my own personal views, based on publicly available information and independent research. You should not rely on any of this content as a recommendation to buy, sell, or hold any security or investment. Always do your own due diligence and consult a licensed financial advisor before making investment decisions.

President Roosevelt authorized the Manhattan Engineer District, a secret military project to build an atomic bomb before Nazi Germany did.

The government didn’t know if it would work.

The government just knew that if Germany got the bomb first, America lost the war so Roosevelt said, spend whatever it takes.​

The government spent approximately $2 billion on the Manhattan Project between 1942 and 1945.

That’s about $30 billion in today’s money.

But here’s the critical part, the government didn’t stop spending in 1945 when the bombs were built.

The infrastructure, the uranium enrichment plants at Oak Ridge, the plutonium production complex at Hanford, the research facilities at Los Alamos and Argonne, didn’t disappear.

Instead, those facilities became the permanent national laboratory system and kept funding them indefinitely.

That’s the historical lesson.

The Economic Trap: Why Reversing AI Spending Now Means Recession

Fast forward to now, David Sacks, Trump’s White House AI and Crypto Czar, dropped a statement that laid bare the entire trap the U.S economy has just walked into.

Half the country’s GDP growth this year wasn’t consumers, housing, or manufacturing. It was AI.

Barclays says AI spending drove over 50% of the U.S.’s 1.6% GDP growth.

Let that sink in.

Half Of All Economic Growth.

The only thing keeping the U.S. economy from sliding into recession is AI capex and the wealth effect from AI stock appreciation.​

Sacks’ statement was blunt: “A reversal would risk recession. We can’t afford to go backwards.”​

That’s the government saying, we cannot allow AI spending to slow down because the entire economic structure now depends on it.

If AI capex drops 10%, GDP growth goes negative. If AI drops 20%, you’re in a real recession.

The New York Times reported it even more starkly, investments in AI hardware and software accounted for over 90% of all GDP growth in the first half of 2025.

Everything else, every other sector, every other industry is basically treading water.​

Unemployment has ticked up, hiring has decelerated, manufacturing is shrinking.

Construction is soft, consumer confidence is declining as lower income families cut spending.

The economy is now a two track system, as economist Mark Muro from the Brookings Institution put it:

“This AI gold rush is generating all the excitement and papering over a drift in the rest of the economy.”

This is structurally similar to what happened with the Manhattan Project.

Once the government committed to uranium enrichment at Oak Ridge and plutonium production at Hanford, those facilities became so critical to national security that the government couldn’t close them.

Eighty years later, they’re still being funded. Oak Ridge and Hanford still gets government money.

The spending never stops because the alternative, national security vulnerability is unacceptable.​

The same dynamic is now true for AI.

The U.S. economy is now structurally dependent on AI investment. You can’t reverse it without causing a major blowback.

The Nvidia China Trap: Why Selling Older Chips Accelerates the Entire Boom

Here’s where this gets absolutely critical and this is a perfect example of how the government is trapped in its own AI spending cage.

The Trump administration is currently debating whether to let Nvidia sell its H200 chips to China.​​

On the surface, this seems like a straightforward trade policy question.

Should America allow Nvidia to sell advanced chips to a geopolitical rival?

The national security hawks say no. The commerce people say maybe.

Nvidia ‘s CEO Jensen Huang has been lobbying intensely for yes.​​

But here’s what most people are missing, the chips Nvidia wants to sell to China are not even the current-generation Blackwell architecture.

They’re Hopper-based chips, the previous generation. The H200 is Hopper, it’s been superseded by Blackwell.

When Nvidia sells H200s to China, it’s moving old inventory to free up manufacturing capacity for the newest Blackwell chips that go to American hyperscalers and the government.​​

Here’s the trap the government is in, if Nvidia gets H200 export approval, Nvidia ‘s revenue surges, Nvidia ‘s stock soars, the wealth effect accelerates, and GDP growth stays elevated.

The administration gets to claim it negotiated a win with China while keeping the economy booming.​​

But the government is literally trapped.

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It’s starting to showing up in the way officials talk, the way they vote and the way their decisions no longer line up perfectly.

For almost 30 years, the Fed operated like a single voice.

But for the first time in a long time, the Fed doesn’t sound like one unified voice, it sounds like individual people with their own views, their own priorities and their own thresholds for risk.

And honestly, that’s long overdue.

If you’re new to the Fed or haven’t thought much about how it’s structured, Here is a a must watch introductory video that helps everything click.

It walks through the Board of Governors, the 12 regional banks, and the FOMC in a way that’s simple, visual, and surprisingly good for beginners.

How the Fed Lost Its Voice and Why Consensus Became Religion.

Now that you watched that video and have a better understanding of the federal reserve, you need to back up a bit more to learn history.

Before 1987, the Fed was messy, dissent was normal. Different regional presidents argued based on what was happening in their districts.

That all changed after the 1970s, a decade of inflation, political pressure, and credibility crises.

Arthur Burns, the Fed Chair at the time, folded to the White House and held rates too low before the 1972 election.

Inflation spiraled, credibility collapsed and the committee was blamed for not acting as a unified force.

Then came Paul Volcker, who had the opposite problem, he had to act alone and force the economy through double digit interest rates to kill inflation once and for all.

He needed independence and that independence is what saved the U.S. economy.

After him came Greenspan, who took a completely different approach.

Instead of embracing disagreement, he engineered consensus.

He met with members privately, shaped expectations before the meeting even started and made sure dissent was almost nonexistent.

And because the 1990s looked like an economic miracle, the institution convinced itself that consensus = credibility.

From the late ’80s through the early 2000s, the Fed became what it still looks like today, a single voice.

Dissents were rare. Public disagreement became taboo and the Chair gained enormous power but that unity came at a cost.

When transcripts from the Greenspan era were released years later, they showed that people did disagree.

They worried about bubbles, leverage, and overheated markets but none of that reached the public because nobody wanted to break the illusion of unity.

It took the 2008 financial crisis to break that spell.

The Post-Crisis Shift: Cracks in the Machine

When Bernanke took over, the world fell apart.

The Fed slashed rates to zero, launched QE, and revived lending markets.

For the first time in years, multiple FOMC members publicly dissented.

Regional presidents pushed back on QE. Others accused the Fed of being too cautious.

Under Yellen, the Fed opened up even further.

She encouraged open discussion. She valued different viewpoints and she allowed dissent without treating it as rebellion.

Then Powell arrived and the culture shifted again, this time even more dramatically.

Powell basically removed the unwritten rule that the Chair decides.

He told members to vote based on what they believe, not on what the Chair signals.

At the same time, Dodd-Frank made individual votes more visible.

Slowly, but consistently, the Fed began drifting away from its consensus era.

2025: The First Real Break From the Old Fed

This year is the first time in a long time we’re seeing the shift happen in public.

The October vote was 10–2 for a 25 bps cut but it was anything but unified:

• Stephen Miran argued for a 50 bps cut

• Jeff Schmid argued for no cut at all

• Others split between 25 and 50

• And the minutes noted strongly differing views, rare language for the Fed

  

  And heading into December, Fed members aren’t hiding where they stand.

Here’s what some of them are saying:

Christopher Waller

“The labor market is still weak and near stall speed. I am not worried about inflation accelerating or inflation expectations rising significantly. My focus is on the labor market, and after months of weakening, it is unlikely that any data in the next few weeks would change my view that another cut is in order.”​

“I worry that restrictive monetary policy is weighing on the economy, especially about how it is affecting lower- and middle-income consumers. A December cut will provide additional insurance against an acceleration in the weakening of the labor market.”​

Jeff Schmid

“By my assessment, the labor market is largely in balance, the economy shows continued momentum, and inflation remains too high. I view the stance of policy as only modestly restrictive...My preference was to hold the policy rate steady.”​

“Inflation has been running above the Fed’s 2 percent objective for more than four years...Talking to contacts in the Kansas City Fed’s district, I hear widespread concern over continued cost increases and inflation.”​

Susan Collins

“I believe that a mildly restrictive policy is very appropriate at this moment, which makes me cautious as I consider what the next policy actions should be.”​

“I think inflation is likely to remain elevated through the remainder of this year into early next...Once the level has adjusted, you won’t experience additional impacts, but that can occur over time.”

They’re all having different views and going on record about cuts, inflation, labor markets, and policy trajectories something you almost never saw in the old Fed.

Why December Could Be the Defining Moment

The December vote is unusually high stakes, not just because it will set the tone for 2026 but because the Fed is going in without fresh data.

• October CPI was canceled

• November CPI comes after the vote

• Labor data is incomplete

The Fed will be making one of its most consequential decisions using stale numbers.

Members have to lean on their judgment and not the latest readings. And when that happens, their actual views come out. That alone makes this meeting different.

You can already see how much that missing data has shaken the committee.

Powell hasn’t spoken publicly since Oct. 29, and his silence has basically opened up the floor for everyone else.

Officials are now openly stating their preferences, something you almost never saw during the consensus era.

Traders who used to listen for Powell’s every adjective are now counting individual votes like it’s a Supreme Court decision.

And the votes look split. Right now, the camps look like this:

Hawks (likely no-cuts): Barr, Musalem, Schmid, Goolsbee, Collins
Doves (likely cuts): Waller, Bowman, Miran, Williams, Cook
Uncertain: Powell, Jefferson

A 7–5 or 6–6 vote is on the table. That would be the most divided Fed we’ve seen in years.

It would also be the clearest confirmation that the institution has truly shifted away from its consensus era.

The Old Fed Is Gone

The Fed is operating differently now. Members aren’t treating the Chair’s stance as the default answer.

They’re not softening their views just to make the vote look clean.

They’re laying out their reasoning publicly and sticking to it. That’s a real and a good change.

December is unpredictable for the simple reason that the normal anchors aren’t there.

Without new inflation data, every member is leaning on their own interpretation of the economy.

For some, inflation is still too high. For others, the cooling labor market and slower growth are flashing warning signs.

For the first time in years since Powell took over, you can actually tell who is hawkish, who is dovish, and who is trying to land somewhere in between.

What you’re seeing now is more transparent and more aligned with how the Fed was originally supposed to function.

If you made it to the end, hit like, restack it, and share it with someone who’d get value from it. Seriously, it helps more than you realize.

Disclaimer: Nothing in this newsletter is financial advice. All opinions, analyses, and commentary shared here are my own personal views, based on publicly available information and independent research. You should not rely on any of this content as a recommendation to buy, sell, or hold any security or investment. Always do your own due diligence and consult a licensed financial advisor before making investment decisions.

But I’m not going to drag you through every detail of the earnings, that’s not what this edition is for.

All you need to know is simple: NVIDIA crushed expectations and right on cue the bears came out swinging with the usual accounting tricks accusations.

Anyone who’s taken a basic accounting class could see it as fearmongering with no math behind it.

Even our favorite bear, Burry, jumped in and took a shot at OpenAI for good measure.

Listen, I’ll be perfectly honest, there is absolutely some truth in what Burry is saying.

Circular financing is real, and the ecosystem is messy.

But that doesn’t change the reality that these companies are still crushing earnings and will keep spending whatever it takes to keep the AI boom alive.

However, as I warned in previous editions, markets are priced for perfection and when expectations are that high even a flawless Nvidia beat can still trigger a sell off exactly as what we saw this morning.

Great results don’t matter when the bar is already sitting at the ceiling.

There are bigger macro forces shifting beneath the surface and this is one of the first times in the last couple of months where I’m genuinely becoming extremely cautious moving forward.

A Jobs Report, Two Fed Warnings, and One Market Meltdown

Now let’s talk about what actually happened this morning.

The jobs report came in this morning.

The U.S. added 119,000 jobs in September better than expectations but the unemployment rate ticked up to 4.4%, the highest since October 2021.

And the part nobody is talking about is continuing jobless claims jumped to almost 2 million, the highest since late 2021.

That number tracks people who are unemployed and staying unemployed longer which is the real stress signal.

Whether you believe these numbers coming from the government or not, they weren’t catastrophic.

However, I expect these figures to rise significantly once October layoffs start showing up in the data.

The damage always shows up with a lag but the part I am super worried about? This.

Labor Department announced that the November jobs report won’t come out until December 16th which six days after the Fed’s December meeting.

The market absolutely hates uncertainty, and that’s exactly what this creates.

The Fed will be flying into one of the most important meetings of the year with no fresh labor data which means the default path is no cut because of current conditions.

The only way that changes is if something dramatic happens between now and December 10th that forces their hand.

Market finally woke up to the reality that there will be no cuts.

The Fed Picked the Worst Possible Morning to Panic

As if the market didn’t already have enough chaos on its plate this morning, the Fed decided to toss gasoline on the fire with not one but two perfectly timed warnings.

First from Fed Governor Lisa Cook, and then from Chicago Fed President Austan Goolsbee.

Cook kicked things off by basically reminding everyone that valuations across stocks, corporate bonds, housing, and leveraged loans are looking stretched which is exactly the kind of message the market loves hearing when it’s already sliding.

She also flagged that liquidity isn’t as smooth as people think and noted that AI can stabilize markets or blow them up if models start moving in sync.

Now normally, that alone would’ve been enough to rattle markets but then Goolsbee stepped in and delivered part two.

His message? “The economy is strong, inflation has stalled, and I do NOT feel good about front-loading rate cuts.”

He practically hammered home that the Fed isn’t cutting unless inflation meaningfully moves lower and right now, he thinks it’s not.

But it got even better he literally said the data situation is a “mess” and that the lack of updated numbers makes him more paranoid about inflation.

So the Fed is uneasy, half-blind, and extremely cautious exactly the combo you want to hear on a down day, right?

Now these are all valid concerns and when they’re coming from people sitting inside the Fed, markets take them very seriously.

It’s no surprise this helped turn a normal post data dip into a full blown broader sell off.

So where do we go from here??

The Market Earthquake Arrives Tomorrow And Almost No One Is Ready

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They say the bills are piling up, the job market’s terrible, and their credit card’s maxed out.

Then you check your Venmo and they’ve been sending you money every day.

That’s China right now.

The world’s second biggest economy is in rough shape.

Growth has stalled, prices are falling, and the once booming property market is a slow-motion disaster.

Yet somehow, China keeps pumping money into the global financial system like it’s got cash to burn.

Trillions of dollars are flowing out of the country and into markets everywhere, the U.S, Europe, Japan, Brazil lifting stock prices, fueling rallies, and confusing every economist who’s trying to make sense of it.

This is the ultimate paradox: a struggling country making the world rich but here’s the twist, the moment China starts to recover, that global money pump stops.

The Money Mystery No One Can Explain

Let’s start with the weird part.

China’s central bank, the People’s Bank of China, has been printing money like crazy.

The country’s M1 money supply (basically cash in circulation and checking accounts) has jumped more than 7% in a year.

That’s a massive amount of new yuan flooding the financial system.

Normally, when a government prints that much money, prices rise.

That’s how inflation works = more money chasing the same goods means higher prices but in China, prices are doing the opposite.

Producer prices (what factories charge) are down about 2.3%. Consumer prices are flat.

Deflation, not inflation is spreading.

It’s as if someone poured gasoline on the economy, and instead of catching fire, it froze.

Here’s why all that new money has nowhere to go. Factories aren’t expanding.

Consumers aren’t spending. Real estate developers have stopped building.

The result is a mountain of idle cash sloshing around the financial system looking for a purpose. Economists call this “excess liquidity.”

In most healthy economies, it’s about 1–2% of GDP.

In China, it’s closer to 4%. That may not sound like much, but it means there’s roughly $16 trillion worth of cash sitting around, money that can’t find a productive home inside China.

For perspective, that’s 40% of all the narrow money in the world.

When that much cash gets trapped in a sluggish economy, it doesn’t stay trapped for long, it leaks.

The Great Domestic Dead End

If you’re a Chinese household or company sitting on savings, your choices are grim.

You can buy Chinese government bonds that pay around 1.8% interest less than inflation. In real terms, you’re losing money.

You can buy real estate, but prices have collapsed in nearly every major city. In some places, home values have fallen so far that entire developments are now ghost towns.

Real estate used to be the cornerstone of Chinese wealth.

Now, every additional price drop erases trillions of dollars in household value. It’s like watching a national retirement fund dissolve in slow motion.

But what about stocks? The Chinese stock market is tiny compared to the amount of money floating around.

In the U.S. the stock market is about eight times larger than the narrow money supply.

In China, it’s roughly equal. There just aren’t enough assets for all the money to flow into. If everyone tried to invest at once, prices would explode overnight.

So investors do the next best thing: they send their money abroad.

The Great Escape

Here’s where the story turns from strange to fascinating.

In 2025, China reported a record $1.2 trillion trade surplus meaning it sold far more goods than it imported.

That kind of surplus usually makes a country richer and boosts its foreign currency reserves but China’s reserves barely moved.

So where did the money go? The answer is both clever and illegal.

Roughly $1 trillion a year is leaving China through unofficial channels hidden, disguised, and often mislabeled.

One common trick is called trade misinvoicing.

Suppose a Chinese company sells $200,000 worth of goods to a foreign customer.

It tells the Chinese government the deal was only $100,000. The other $100,000 lands in a foreign bank account, outside Beijing’s control. It’s capital flight dressed up as commerce.

Another popular trick is buying overseas real estate through shell companies.

You overpay for a house in Canada or Australia, move the excess money offshore, and nobody in China is the wiser.

Others use underground banking networks, fake insurance policies, or inflated service payments.

The result is the same: money keeps escaping.

The Accidental Global Stimulus

Here’s the plot twist nobody saw coming, that money isn’t disappearing. It’s showing up in your stock portfolio.

As you know roughly about a month ago, global stock markets have been hitting record highs, not just the S&P 500 or Nasdaq, but Japan’s Nikkei, the UK’s FTSE, Brazil’s Bovespa, South Korea’s Kospi all at once.

That kind of synchronized boom hasn’t happened in decades.

It’s not because every country suddenly got rich at the same time.

One of the reason being is China’s excess money has to go somewhere, and the rest of the world is where it ended up.

When Chinese capital flees the mainland, it flows into global equities, bonds, and funds. It buys American tech stocks, European ETFs, and emerging-market assets.

It’s the invisible fuel behind one of the biggest bull markets in history.

And the timing checks out. Every time Chinese money growth spikes, global stocks rally. Every time it slows, markets wobble.

While the U.S. talks about tightening, China is flooding the system with liquidity that slips through the cracks and washes up everywhere else.

Beijing’s weakness has become the world’s stimulus package.

The Twist Nobody Wants to Think About

Now for the scary part.

If China’s economy actually recovers, this upside down dynamic collapses.

When confidence returns, property prices stabilize, and local assets start performing again, Chinese households stop sending money abroad.

They’ll want to keep it home, where the returns are better. The great capital leak will slow to a drip.

At the same time, the central bank will stop printing as much money.

No more excess liquidity. The global cash tide that’s been lifting every market suddenly recedes.

And that’s when investors realize one of the world’s biggest bull markets was partly built on borrowed liquidity.

And we’re already seeing early hints of this.

China’s M1 money supply growth just slowed from 7.2% to 6.2% in October.

Still high, still supportive of risk assets globally, but it’s a reminder that liquidity waves don’t last forever.

This liquidity leak has been one of the hidden catalysts behind the global repricing of stocks in Japan, South Korea, the U.S., and Europe.

These markets didn’t all magically get stronger at the same time.

They got flooded by a torrent of Chinese money with nowhere else to go.

The world needs China just weak enough that the money keeps escaping but not so weak that the whole system cracks.

As long as Beijing stays stuck in that uncomfortable middle zone, global markets keep partying.

But the second China genuinely recovers, the music cuts off and everyone finds out who was dancing on someone else’s liquidity.

If you’re still here, do me a solid, like and restack this on Substack so other people can learn too. It helps way me more than you think.

Disclaimer: Nothing in this newsletter is financial advice. All opinions, analyses, and commentary shared here are my own personal views, based on publicly available information and independent research. You should not rely on any of this content as a recommendation to buy, sell, or hold any security or investment. Always do your own due diligence and consult a licensed financial advisor before making investment decisions.

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November is supposed to be one of the calm, friendly months for stocks.

Historically, Since 1927, the S&P has finished higher in 59% of Novembers.

In the first year of a presidential cycle, it’s even stronger at 67%.

When the market heads into November already up 15%+ year to date, it still manages to squeeze out another +2.7% on average.

So in theory, this month should’ve felt steady but instead, it’s been a constant up and down like the market can’t decide what mood it wants to be in.

Every day comes with a new explanation for why things feel off.

• AI bubble chatter.
• Government Shutdown.
• Burry resurfacing again.
• Peter Thiel selling.

It’s been a constant stream of theories and if you’ve been watching all of that, it’s fair to wonder:

“Is this actually why stocks feel so unstable right now?”

If anyone tells you yes, they’re not right.

Great headline material but none of them were the real driver.

The actual reason is something so dull that most people mentally check out the moment you bring it up.

But it’s also the one thing that moves everything when it tightens: the financial plumbing.

The First Hint Something Was Off

To understand what went wrong, you have to know what SOFR actually is.

SOFR is the interest rate big financial institutions pay to borrow cash overnight.

Think of it as the market’s quick loan rate, the cost of getting cash for just one night, backed by Treasuries.

When the system has plenty of money floating around, SOFR stays low and predictable.

It usually sits below the Fed’s floor rate because borrowing cash should always be cheaper than parking it at the Fed.

That’s how the plumbing works in a healthy system.

But this time, it didn’t behave.

By End of October, SOFR spiked more than 30 basis points above the Fed’s own rate.

That’s a red flag that big players were suddenly competing for overnight cash because there wasn’t enough of it.

When SOFR moves like that, it’s the equivalent of the market saying,

“Someone turn the faucet back on, we’re running low.”

And the confirmation came fast.

The Fed’s emergency repo window, the Standing Repo Facility was tapped for more than $50 billion.

No one touches that unless borrowing in the private market becomes either too expensive or too difficult.

That was the moment the picture became clear: This wasn’t normal tightening.

This was real liquidity scarcity and markets were about to feel it.

How We Ended Up Here

A few different forces all hit the system at the exact wrong time, and together they drained money faster than the market could handle.

First was the government shutdown.

When the government shuts down, Treasury has to hoard cash because it doesn’t know exactly when it will reopen or how funding deadlines will shake out.

So it piles money into its account at the Fed, basically the government’s checking account. That balance shot up to around $1 trillion.

Here’s the part nobody realizes: Every dollar that lands in the Treasury General Account (TGA) comes out of the banking system.

So if the TGA jumps by hundreds of billions, that’s hundreds of billions less available for banks, funds, or the repo market.

Then there’s QT, the Fed shrinking its balance sheet. Over the last two years, more than $2 trillion has already been removed.

Early on, it wasn’t a big deal because the system had extra cash sitting around in places like the reverse repo facility but that extra cash is gone now.

Every dollar the Fed pulls now hits the part of the system that actually matters.

That combination is brutal for liquidity.

When all of these hit at once, the system tightened hard and fast.

And that’s exactly what happened. So what’s next and what does this all mean for the markets?

Why the Selling Hit the Biggest Names First

Once liquidity tightened, hedge funds and other leveraged players didn’t really get to choose what they wanted to do, the market chose for them.

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The one played by Ryan Gosling who sold credit default swaps while smirking like he knew the punchline?

That was Greg Lippmann.

He worked at Deutsche Bank and Deutsche Bank is back, baby, only this time they’re looking for ways to short AI stocks while financing the entire data center boom.

According to the Financial Times, Deutsche Bank has become the biggest player in AI infrastructure lending.

They’ve pumped billions into data centers for Alphabet, Microsoft, and Amazon, just in the past two months, they helped Swedish EcoDataCenter and Canadian 5C raise over $1 billion.

Executives inside these bank are panicking. They’ve started exploring ways to short baskets of AI stocks and buy default protection as a way to protect themselves.

So, why are they doing this? Because the last thing they want is a repeat of 2008 on their balance sheet.

They remember exactly what it felt like to be holding the bag when the whole system blew up, and they’re not about to run that playbook again.

So they’re hedging the only way a bank knows how: bet on the boom, insure against the bust.

And is everyone doing that? Absolutely not.

Now here’s where this actually gets interesting.

The First Major Red Flag

In my Nov 4th edition, I said earnings were being foreshadowed and AI capex announcements weren’t moving stocks anymore.

They stopped being bullish.

And now we have the clear answer

Let me present you with a chart that should honestly worry you.

You might be wondering what am I even looking at here.

You are looking at CDS, the same thing Lippmann used to bet against housing is ripping higher across literally every company tied to AI capex. Oracle, Snowflake, Amazon, Google all of them.

Credit markets don’t just casually move like this.

And it makes total sense.

These companies went from being asset light cash machines to suddenly taking on massive debt, buying hardware, loading up on GPUs, and burning cash to keep up with this AI race.

Five years ago they were swimming in free cash flow. Now they’re basically building factories and amortizing everything to death.

This is the first real sign that the market is starting to price in the downside of the AI boom.

And you should pay very close ATTENTION.

How We Got Here?

Let’s back up and see exactly how we ended up in this position.

This whole thing really snapped into focus on September 10, when Oracle dropped this massive, five-year, $300B cloud deal with OpenAI like it was nothing.

The stock ripped, everyone cheered and then people noticed the fine print.

Oracle had stacked up over $300B in “future revenue” from just a handful of customers and acted like this was all locked in.

That hype only lasted about a few weeks until everyone realized Oracle didn’t actually have the cash to build any of this out.

They could have avoided some embarrassment if it hadn’t also highlighted that it doesn’t actually have the funds for this long-term spending spree projected to stretch into the 2030s.

JPM’s Michael Cembalest highlighted the issue in a note:

Oracle’s stock surged by 25% after being promised $60 billion a year from OpenAI, a sum OpenAI hasn’t earned yet, to provide cloud computing facilities that Oracle hasn’t built yet, and which will require 4.5 GW of power (equivalent to 2.25 Hoover Dams or four nuclear plants), along with increased borrowing by Oracle, whose debt to equity ratio is already 500%, compared to 50% for Amazon, 30% for Microsoft, and even less for Meta and Google. In other words, the tech capital cycle may be on the brink of change.

What made this even worse is what it revealed about the entire AI infrastructure race.

Up until Oracle jumped in, the hyperscalers were funding this build-out with their own cash.

Amazon, Microsoft, Google, they were burning free cash flow to build data centers, expand power, buy GPUs, add racks, beef up networking, and cover the cooling and land and energy needs that come with it.

It wasn’t cheap, but they could handle it.

Oracle shattered that balance.

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Social media was full of people who’d been bullish for months suddenly talking like they’d just discovered risk.

And then like clockwork, it all stopped.

Stocks rebounded. Flows stayed positive. Companies kept buying back shares.

Within a few days, the crisis had evaporated, and everyone went back to debating whether AI chips are in a bubble.

Even our favorite bear, Michael Burry, was back today, posting a chart and a warning about depreciation fraud.

Last week wasn’t the start of a crash. It was the market doing what strong markets do, shaking out weak hands and rewarding the patient.

And I’ve been screaming this from the rooftops since the day I launched this newsletter back in September: stay bullish at least till the year end.

But I know the question still lingers in your mind: Are we really back yet?

That’s what this edition is about to walk you through the data, the psychology, and the underlying structure so you can form your own conclusion.

Because if you strip away the noise on social media, the story the market is telling right now is a lot clearer than it looks on your feed.

First up: The Government Shutdown

Remember back in 2019, when the last major government shutdown dragged on so long that the White House literally had to order Big Macs to feed championship athletes?

Yes, that actually happened.

With much of the staff furloughed, the White House ended up serving the Clemson University football team a buffet of McDonald’s, Wendy’s, and Burger King.

Now let’s reel it back to reality. While that moment went viral for laughs, today, there are thousands of federal workers and families lining up outside food pantries just to get by.

Paychecks have been missed, savings are running thin, and Snap benefits are only partially funded across the US.

However, the Senate finally voted to reopen the government, marking what could be the beginning of the end for the longest shutdown in U.S. history.

But make no mistake, even if the lights are coming back on, the damage has already been done economically and socially.

For more than a month, the Treasury kept collecting taxes and selling bonds.

That decision trapped over a trillion dollars in government accounts, money that normally circulates through banks, payrolls, and the broader economy.

Liquidity dried up. Markets tightened and the economic fallout wasn’t small.

Goldman Sachs estimates the shutdown shaved 1.15 percentage points off Q4 GDP growth, the largest hit from a government stoppage on record.

Analysts expects some rebound in early 2026 as delayed spending and back pay filter through the system, but the lost momentum will sting.

But reopening the government doesn’t erase the strain.

Key data releases including the jobs report and CPI were delayed, clouding visibility for investors and policymakers alike.

And while liquidity is now set to flow back into the system, relieving some of the pressure that’s built in funding markets.

Congress only extended funding through January, which means we could be right back here in two months if nothing changes.

Keep in mind the house and the president still needs to approve this.

So yes, reopening is good news for the markets in the near term.

Cash starts moving again, people finally get their paychecks and benefits, banks breathe a little easier, and risk assets catch a much-needed tailwind.

The Flows Actually Flipped Positive on the Dip

This is the part that immediately made me perk up: $29 billion in net global equity fund inflows for the week ending November 5.

Up from $17 billion the week before.

Think about that for a second. We just had a pullback. A real one and instead of capital going “okay, time to get cautious,” it went “time to buy more.”

US equity funds got all of it and tech funds specifically.

Here’s the historical thing that actually matters: when you’re up 10% into November which the market was and then you get a negative first week in November, what happens through year-end?

The median return is 3.59%. Average is 2.82%.

I know that doesn’t sound insane, but that’s the point. After being up 10% for the year, getting another 3-4% move in six weeks is the continuation.

That pattern has repeated enough times that pros recognize it instantly.

And here’s the thing about flows that most people miss: flows tell you what capital thinks is going to happen next. Price tells you what already happened.

Flows tell you what the smart money thinks is coming and right now it’s titled upwards.

Is Value Is Starting to Actually Wake Up?

Here’s the thing that actually matters for the next leg of upside, because mega cap tech can’t carry the entire market forever.

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Nearly 70% of the S&P 500 has reported earnings.

Of those, 64% beat expectations by more than a full standard deviation meaning the earnings were so strong they shocked analysts, landing well outside the normal range of surprises.

That’s the kind of stat that used to make traders throw their coffee mugs in excitement.

Earnings Per Share growth came in at 8%, well above the 6% analysts expected when this season kicked off. Margins are expanding, revenues are rising, and balance sheets look healthy.

This is the kind of quarter that would normally send markets soaring. This time, though, the market responded with a polite yawn.

The average company that beat earnings outperformed the S&P 500 by just 0.32% the next day. Historically, it’s triple that.

If this were a movie, we’d be watching the best performance of the decade with an audience that forgot to clap.

The Market’s Tired of Being Impressed

Wall Street is literally bored.

The S&P 500 trades at roughly 22.8x forward earnings meaning investors are paying about $22.80 for every $1 of profit that companies are expected to make over the next year. This is one of the richest valuations on record.

Historically, that 30 year average sits closer to $17 for every $1 of earnings.

When prices are stretched this far, good news stops moving stocks. It’s not that investors don’t appreciate the results, they just expect them.

The market doesn’t want improvement; it wants astonishment.

Companies that post solid numbers don’t get rewarded anymore because their success is already built into the price. Investors are grading on a curve so steep that even the best report cards look average.

The market’s appetite for surprise has disappeared. This earnings season now feels like watching a magician do the same trick for the hundredth time. The hand is still quicker than the eye, but the audience has figured out the secret.

When analysts and traders walk into a quarter already assuming growth, strong results stop being exciting. They become routine.

The Elephant in the Room: Michael Burry’s Contrarian Theatre

Before we get deeper into this earnings season déjà vu, let’s talk about the man who can “move” markets with a single cryptic post, Michael Burry. The Big Short legend, the myth, the meme, the guy who occasionally deletes his entire X account like he’s discovered monk mode, is back. And, of course, he brought chaos with him.

One day before Halloween because timing is everything Burry crawled out of his digital bunker and dropped a line that could double as a doomsday prophecy:

“Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.”

He paired it with a still from The Big Short and changed his name to “Cassandra Unchained,” a nod to the prophet cursed to see disaster coming but never be believed.

Then, as if to twist the knife, he followed it up a few days later with a not so subtle jab comparing the AI boom to the early-2000s dot-com fiber frenzy, all hype, all spending, minimal returns.

The digital equivalent of whispering, “Enjoy it while it lasts,” and walking offstage as the curtains burn behind him.

But here’s where things really start to cook.

Scion Asset Management, Burry’s hedge fund dropped its 13F filing two weeks early.

Translation: he wanted attention and he got it. Turns out Burry’s not just tweeting about bubbles once again, he’s putting his money on the line that one’s about to pop.

The first half of the filing was boring: a few residual holdings like Molina Healthcare, SLM, and a bruised Lululemon stake that’s been limping through 2025. But the second half? That’s where the fireworks are.

His Palantir wager covers a notional $912 million (about 5 million shares), and Nvidia’s sits at $187 million (roughly 1 million shares). On paper, that sounds insane like Burry just went all-in shorting AI.

But here’s what the traditional media won’t tell you: those headline numbers are basically optical illusions.

When you see “notional value,” it’s not the cash he actually spent, it’s the total value of the shares those options represent. Burry didn’t drop a billion dollars shorting Palantir; he bought put options, which are basically insurance contracts that pay out if the stock falls.

Think of it like this, he’s not buying the whole house; he’s just buying fire insurance on it.

That means he’s paying a small premium, maybe a few million bucks to control hundreds of millions in exposure.

If he’s right and Palantir or Nvidia tumble, he cashes in big. If they keep climbing, those puts expire worthless, and he’s basically spent a few million for the right to be wrong in style.

It’s a bold move and one he’s pulled before.

The last time Burry tried to top tick the market was early 2023 when he blasted the one-word “Sell.”

In August 2023, Burry bet $1.6 billion against the S&P 500 and Nasdaq with SPY and QQQ puts. and what do you know market is up over 69% since then.

His short bets got smoked, down an estimated 40% before he tapped out.

Before that, he called Tesla “ridiculous” right before it went up 700%. He said GameStop wouldn’t break $20. It hit $483. He went bearish on Chinese tech in early 2025, right before it spiked 68%.

The man who once nailed the biggest crash of our lifetime has spent the last few years getting dunked on by the bull market.

But the plot thickens.

Right after his 13F went viral and headlines like “Michael Burry Bets Against AI Boom” flooded every financial site.

Burry jumped back on X to post another Big Short meme this morning: “Journalists reporting on 13Fs, none more fake.”

Here’s what he meant and what most people miss.

A 13F is basically a time capsule. It’s a list of what hedge funds owned six weeks ago, not what they own today.

It doesn’t show when they bought it, if they already sold it, or whether it’s part of some hedge-on-a-hedge strategy. It’s old data dressed up like breaking news.

But that didn’t stop financial media from doing what they do best, turning a routine filing into a full-blown headline circus. I’ve already seen reports claiming that today’s baby sell-off (we’re talking less than 1%) was because of Burry’s 13F.

Yeah, no. That’s like blaming your mirror for a bad haircut.

The truth is, these filings don’t move markets, they just move clicks. They’re financial gossip columns with a balance sheet. And Burry, for all his complaining, knows it.

And let’s be real: this is also a man who’s been spectacularly wrong for years.

He’s called crashes that never came, shorted rallies that went vertical, and spent more time deleting tweets than being right.

Is he making a valid point that markets are inflated? Sure, you could argue that. But let’s not pretend his word is gospel especially when the choir stopped listening after 2023.

Two Different Stock Markets

Alright, enough about Burry’s theatre, let’s lift the hood on the actual market.

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Not in a quarter. Not in a business cycle but in Decades and he’s the guy running a company that sells ketchup and Lunchables to middle America. If people are cutting back on ketchup, we’re past the point of pretending everything is fine.

But that’s not even the wildest part of what just happened in earnings season.

The real story is about two completely different economies running in parallel, and they’re diverging so fast that pretty soon they’ll stop looking like the same country.

The Capex Fever Dream

Let’s talk about what Wall Street is actually doing right now. In Q3 2025, the big four tech hyper-scalers, Microsoft, Google, Amazon, and Meta dropped a combined $112 billion on capital expenditures.

In one quarter. Most of it going toward AI infrastructure: data centers, GPUs, the whole digital religion.​

But here’s where it gets insane. This spending has literally doubled since Q1 2024 and tripled since Q2 2023. We’re not talking about a gradual ramp. We’re talking about exponential acceleration.​

And they’re not slowing down. Amazon just raised its 2025 CapEx forecast to $125 billion and is already signaling that spending will rise even further in 2026. Alphabet expects full-year CapEx to hit between $91 billion and $93 billion. Meta is guiding between $70 billion and $72 billion but expects spending to “grow notably larger in 2026”. Microsoft posted a 45% increase last year and sees acceleration continuing in fiscal 2026, suggesting spending could hit at least $94 billion.​

Add those up. That’s over $380 billion in CapEx from just these four companies in 2025 alone. And we’re talking about a trajectory that could easily push the collective spending to nearly $500 billion annually by the end of 2026, which is what analysts are projecting.​

That’s not a budget. That’s a war chest.

To put this in perspective: $500 billion annually is more than the entire federal transportation budget. It’s more than what most countries spend on everything combined. It’s roughly equivalent to the GDP of Argentina. And it’s all flowing into semiconductor fabs, AI clusters, and server farms that make our current infrastructure look like a flip phone from 2005.

The implicit bet here is staggering: all that capital is supposed to generate returns by unlocking some massive productivity multiplier. AI is going to be so transformative, so revolutionary, that burning half a trillion dollars a year on the infrastructure to run it actually makes financial “sense”.

But zoom out for a second. That $500 billion? That’s capital that’s supposed to generate returns by making human labor more efficient. Which is a polite way of saying: automating jobs away.

The K-Shaped Knife Fight

Meanwhile, something genuinely weird is happening in the actual economy where actual people buy things.

Chipotle just issued its third downward guidance revision in less than a year. The company’s core customer, people making under $100,000, ages 25 to 34 has basically stopped showing up. Comparable sales guidance went from expected positive growth to negative low-single digits.

SFM (Simply Good Foods) cratered 26% in a single day. CAVA got crushed 11%. Sprouts down 9.6%. O’Reilly Automotive is reporting that DIY customers are deferring maintenance because they can’t afford to fix their cars. Hershey is discounting before Halloween.

The Winners Just Keep Winning

While all that destruction is happening, something else is occurring simultaneously in a different universe.

Visa is posting broad based strength across all consumer spend bands, with the highest spend band growing fastest. Starbucks says every demographic is crushing it, transactions flipped positive, college campuses are thriving, every generational cohort is responding well. Chili’s claims it’s growing across all income levels, and get this: their fastest-growing customer base is households making under $60,000.​

This is where your brain should break a little bit.

How can Chili’s be growing in low-income households while Chipotle is getting destroyed in low-income households? How can Starbucks be crushing it across all demographics while SFM crashes 26%? How can Visa see strength across all spend bands while half the retail sector is getting obliterated?

The answer is simple and terrifying:

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