The Iran war is in the headline for entirely understandable reason. But AI remains the other key story for the US stock market.

The latest Nvidia results confirm that AI capex remains strong.

This is no surprise based on recent hyperscaler guidance. Nvidia quarterly revenue rose by 20% QoQ and 73% YoY to a record US$68.1bn in the three months ended 25 January, with data center revenues up 22% QoQ and 75% YoY to US$62.3bn.

Still the key point remains if markets start to focus more on how the investors in AI capex are going to make the returns to justify this enormous spending.

Remember that the four major US hyperscalers’ capex is projected to grow by a further 65% to an enormous US$620bn this year based on latest company guidance.

This questioning began with the 4Q25 results announced this quarter, with the shares of the four major hyperscalers underperforming the S&P500 by 7.1% so far this year.

This is why the base case of this writer is that the AI picks and shovels trade in the Western World has seen its best days in terms of the gains to be made in these stocks, most particularly in terms of relative outperformance.

Indeed Nvidia has stopped outperforming the S&P500 since early November, though the DRAM memory producers are still outperforming for now.

Nvidia has underperformed the S&P500 by 12% since 3 November, while Micron, Hynix and Samsung Electronics have outperformed by 90%, 60 and 80% over the same period.

The other issue is who, if anyone, will most successfully monetise AI in the world outside China.

The best guess is that victory will go to Alphabet, which appears to have successfully integrated its Gemini AI into traditional search.

In this respect, the latest data continues to show people are spending less time on ChatGPT.

Gemini’s web traffic share in the Generative AI market has increased from 5.7% to 24.4% over the past 12 months, while ChatGPT’s market share has declined from 75.7% to 61.7% over the same period, according to SimilarWeb.

Unlike Last Cycle, Credit Spreads Won’t Foreshadow a Future Crisis

Moving on from AI, there continue to be problems emerging in the private credit space.

There have been two examples of late of BlackRock marking down a loan from 100 cents to zero.

The first involved private debt it had extended to Dallas-based Renovo Home Partners.

This was written down from a value of 100 cents on the dollar in October to zero in November.

BlackRock held the majority of Renovo’s roughly US$150m of private debt (see Bloomberg article: “BlackRock Faces 100% Loss on Private Loan, Adding to Credit Market Pain”, 10 November 2025).

The second BlackRock loan written down from 100 cents to zero occurred more recently.

An SEC filing released in late February shows that BlackRock slashed the value of a US$25m loan to Infinite Commerce to zero at the end of 2025, just three months after valuing it at par (see Bloomberg article: “BlackRock Slashed Private Loan Value From 100 to Zero”, 5 March 2026).

Fraud appears to have played a role in some of the recently publicized problems in private credit.

But it is becoming ever more obvious that the dodgy loans in this cycle have been extended in the unregulated private credit market rather than in what used to be known as the junk bond market — as has long been this writer’s base case (see “Private debt – A ticking time bomb”, 30 August 2023).

As such, credit spreads in the high-yield market will not play their usual role as a warning indicator.

Rather, the risk is that there will be no warning whatsoever, which was the case with the above cited examples.

Meanwhile, the US high-yield corporate bond index is still trading at “only” 312bp yield spread over the Treasuries, compared with 1,100bp in March 2020.

Fundamentally, it is worth re-iterating that the explosion in private credit in the US over the past 15 years has been one massive regulatory arbitrage after the over regulation of the commercial banks which followed the subprime mortgage crisis of 2007-2008.

This regulatory arbitrage has limited what well-meaning commercial bank regulators can do about shadow banking because they do not regulate private credit. Nor for that matter does anyone else.

But increasingly concerned US bank regulators have started to address the issue by telling commercial banks to report their exposure to non-bank financial institutions (NBFIs), starting from December 2024.

Could the Shadow Banking System be a Systemic Risk?

The latest information shows, unsurprisingly to this writer, a dramatic surge in commercial bank lending to NBFIs, as previously discussed here (see “The Financial Assets Most at Risk From Trump’s ‘Bull in a China Shop’ Strategy”, 3 June 2025).

US commercial banks’ loans to NBFIs have risen to US$1.92tn in the week ended 11 March, up 65.9% since the last week of 2024.

While commercial and industrial (C&I) loans rose by only 1.1% to US$2.82tn over the same period. This latest data is the result of a loan reclassification since the start of 2025.

A Moody’s report published last October has provided more data on this area of lending (see Moody’s report: “US private credit market reshapes bank lending and risk”, 21 October 2025).

The report confirms that lending to NBFIs has been the fastest-growing loan category in US commercial bank lending, with such loans representing 10.4% of total US bank loans as of 2Q25, up nearly threefold from 3.6% a decade ago.

A further data point worth noting is that NBFI lending accounts for a higher 15% of the loans of the 25 largest US domestic banks as of 2Q25.

Meanwhile latest weekly data released by the Federal Reserve shows that NBFIs’ share of US bank loans has increased further to 11.6% for all US domestic banks and 16.2% for the 25 largest banks as of the week ended 11 March 2026.

Note: Data up to the week ended 11 March 2026. Source: Federal Reserve

Another Moody’s report published last November focuses on a related issue.

That, the growing exposure of US life insurers to private credit or what are termed “less-liquid and privately rated investments” (see Moody’s report: “Private assets boost US life insurers’ returns but reduce liquidity, transparency”, 12 November 2025).

Such illiquid investments accounted for 18% or US$685bn of the industry’s US$3.8tn in fixed income holdings at the end of 2024, according to Moody’s.

Furthermore, the exposure is concentrated with 10 life insurers accounting for 43% of the illiquid assets. The same Moody’s report also notes that life insurers’ exposure to illiquid assets has continued to grow in the first half of last year.

On a related point, it is also worth highlighting that UBS Chairman Colm Kelleher warned last November that insurers shopping for better ratings on their private credit assets are creating a “looming systemic risk” to global finance (see Financial Times article: “UBS chair warns of ‘looming systemic risk’ from private credit ratings”, 4 November 2025).

Kelleher said the insurance industry, especially in the US, was engaging in “ratings arbitrage” akin to what banks and other institutions did with subprime loans before the 2008 financial crisis.

Similarly, the Bank for International Settlements (BIS) also said last October that ratings on private credit assets held by US insurers might have been inflated and warned of the risk of fire sales during periods of financial stress.

Smaller rating agencies have captured market share in private credit by providing so-called private letter ratings, which are typically only visible to an issuer and select investors, according to the BIS (see BIS Paper – “The transformation of the life insurance industry: systemic risks and policy challenges”, 27 October 2025).

The above is why it is no surprise to read that the National Association of Insurance Commissioners (NAIC) recently restructured its task force focused on the “scrutiny of private and complex asset holdings”.

The regulatory focus is long overdue, given the longstanding practice of growing “payments in kind” (PIK) in private credit also previously discussed here (see “Private Credit’s Incredible Vanishing Cashflow”, 16 December 2024).

This is a practice where companies financed by private credit are opting to increase their principal balance outstanding rather than paying cash to make interest payments.

While such PIK is counted as “income” each quarter, the private credit funds do not receive cash payments until the loan is refinanced or matures.

Retail Investors Beware

Then there is the related issue that private credit has begun to be sold to retail investors following deregulation last May.

This is despite the fundamentally illiquid nature of the underlying assets as has become clear of late as investors have tried to pull out of these so called “semi-liquid” funds.

Still, some transparency on the pricing in this sector can be obtained by monitoring quoted business development companies (BDCs).

On this point, the Cliffwater BDC Index of 41 lending-oriented exchange-traded BDCs has shown a diverging trend with the S&P500 since mid-July 2025.

The index has declined by 20.1% since mid-July on a total-return basis and is down 14.9% since the start of 2025.

By contrast, the S&P500 has risen by 4.2% since mid-July on a total-return basis and is up 12.4% since the start of 2025.

Meanwhile there is a certain symmetry, or should this writer say inevitability, in that the two obvious areas of excess in this cycle have begun to converge: private credit and AI capex.

Still, this writer would advise all lenders, be they commercial banks, insurers, or private credit players, to become extremely wary of extending more credit to data centers, as this cycle is now so well advanced.

Investing in data centers, or what used to be characterized as “digital infrastructure”, seemed entirely sensible a few years ago. But as the AI capex arms race has reached ever more maniacal proportions, and as debt has increasingly been employed rather than cash to finance such spending, the endgame in terms of a massive oversupply of data centers seems increasingly inevitable.

The Iranian conflict continues to spiral, and we are no longer looking at a marginal disruption. We are witnessing a structural break in the global energy system.

As Wood Mackenzie’s Alexander Araman noted today, the halt of LNG production in Qatar - representing ~19% of global supply - has moved from a “temporary outage” to a fundamental reset of the market. While the consensus previously expected a return to balance by mid-2026, those assumptions have evaporated.

The math is stark: every month this disruption continues removes roughly 1.5% of global annual LNG supply. After six months, the market becomes structurally short. We are shifting from a period of volatility into a period of physical scarcity and sustained repricing.

To help you navigate this transition, we’ve put together a primer on the metrics and companies best positioned to weather this reset across the hydrocarbon value chain. Below the fold, we highlight 5 companies we believe have the best leverage to this supply/demand crunch—specifically those capable of filling the 19% hole left by Qatar’s Ras Laffan LNG.

Read more

We caught up with a great group of CEOs to cut through the noise, uncover the valuation disconnects, and map out exactly what the future holds for commodities in 2026.

Full Conference: X | iTunes | Spotify | YouTube

Cambria Gold Mines (TSXV:CAMB): The Turnaround Playbook | Rob McLeod, CEO

• The M&A Trigger: While the metals have moved significantly, mining equities are still catching up, and the real bull market liftoff historically occurs when major M&A activity accelerates. Mid-tier and major producers are under severe pressure to grow, but there is a distinct lack of advanced assets available to acquire. Cambria Gold Mines aims to position itself as a prime acquisition target later in 2026 as these larger companies look to replenish their portfolios.

• The Fiore Group Playbook: Cambria was recapitalized by the Fiore Group, which specializes in rescuing “hated assets” that have significant sunk costs. The group successfully executed a $190 million rescue package for the company—formerly known as Ascot Resources—which was on the brink of bankruptcy. This turnaround strategy mirrors the group’s past successes with the Madsen mine (West Red Lake Gold) and the Minto copper-gold mine (Selkirk Copper), where they brought in Tier 1 management to fix undercapitalized operations.

• The Core Problem & Solution: The previous management team failed because they did not drill enough tight-spaced holes to properly define the stopes, leaving their brand-new 2,500 ton-per-day mill starved for ore. The new strategy is straightforward: conduct the necessary development drilling and build an access road to the high-grade Red Mountain deposit to finally fill the mill.

• Pivoting to Bulk Mining: Because the existing mill is designed to self-grind, it must be completely filled with ore to function properly; it cannot be run at half capacity. To ensure a consistent feed, the new management team is looking at ways to pivot away from difficult, skinny veins and instead focus on bulk mining strategies, including potential open pits. The Red Mountain deposit is perfectly suited for this, boasting measured and indicated grades of nearly 9 grams per ton over massive widths ranging from 15 to 100 meters.

• Major 2026 Catalyst: The most significant upcoming catalyst for Cambria Gold Mines will be an updated feasibility study expected near the end of the year. Management’s goal is to use this study to demonstrate the project’s stellar economics to the market, ultimately aiming to emulate the massive value creation seen in successful peers like Skeena Resources.

Silver Viper (TSXV:VIPR): The “Go Big” Blueprint in Mexico | Adam Cegielski, Chairman

• Silver’s Fundamental Breakout: Silver has broken out of its traditional $15 to $25 trading range, smashing through the $100 mark before consolidating in the $80s. This fundamental break in the system has brought a massive influx of new capital into the sector, driven by silver’s industrial utility and its role as a hedge against the printing of money.

• The Mexico Advantage: Mexico offers some of the richest geological potential for silver globally, backed by a 400-to-500-year history of extraction. The current high-price environment transforms previously marginal shallow projects—often sitting in the top 30 to 50 meters of ground—into highly profitable operations that can quickly generate cash flow. This lucrative dynamic has already helped elevate several local operators into multi-billion dollar companies.

• A Tier 1 Turnaround Team: The Silver Viper leadership team has a rich, proven history of developing Mexican assets into major acquisition targets. Their track record includes the development of El Burkino, which was sold to Agnico Eagle for $210 million, and Orco Silver, which was sold to Coeur Mining for approximately $250 million. They have also strengthened their technical roster by bringing in Technical Director Gernot Wober, who previously discovered the Cordero deposit that helped build Discovery Silver into a nearly billion-dollar company.

• Aggressive Expansion & Upgraded Economics: The company recently completed a 5,000-meter drill program at its 100% owned La Virginia project, which currently holds about 500,000 gold equivalent ounces. They plan to drill an additional 15,000 meters to aggressively chase a potential multi-million ounce resource. Crucially, upcoming 43-101 resource updates will utilize much higher base metal prices—such as $3,500 to $3,800 per ounce for gold and $50 to $60 per ounce for silver—which will drastically improve the project’s baseline economics compared to older studies.

• Immediate 2026 Catalysts: Over the next six months, investors should watch for pending drill results from La Virginia and the initiation of drill programs at new parallel targets. Additionally, the company is expecting the imminent closing of the Caneto project acquisition—a massive 50 million ounce silver asset purchased from Fresnillo—and will be updating the market on potential future M&A activities as they look at all options to create value.

Newcore Gold (TSXV:NCAU): The CIL Pivot and High-Grade Upside | Luke Alexander, CEO

• CIL Pivot & $5k Gold: In 2024, Newcore released a Preliminary Economic Assessment (PEA) that outlined a simple open-pit, heap-leach operation based on $1,850/oz gold. However, in today’s robust environment with gold trading over $5,000/oz, the project’s economics have completely changed. After extensive metallurgical test work in 2025, the company shifted to a Carbon-in-Leach (CIL) processing flow sheet for their upcoming Pre-Feasibility Study (PFS). This pivot unlocks significantly higher recoveries ranging from 89% to 98%, compared to the 75% to 85% recoveries modeled in the previous heap-leach scenario.

• Institutional Backing: The company recently received a $10.3 million cash injection from the exercise of deep-in-the-money warrants. These warrants were held primarily by five major, deep-pocketed institutional investors who are focused on the long-term potential of the district-scale exploration. Currently, Newcore boasts a massive 55% institutional ownership base, signaling strong, long-term market confidence in the project’s trajectory.

• Hunting High-Grade at Depth: The company is currently executing a 45,000-meter drill program, with about 33,000 meters already completed. While the initial focus was on resource expansion and stepping out the mineralized footprint, Newcore has brought diamond rigs back to the site to aggressively chase high-grade shoots at depth. This strategy is already yielding massive intercepts, including 1 meter at 175 grams per ton, 1 meter at 147 grams, and wider intercepts like 25 meters at 3.2 grams, proving out the underlying geological models.

• Mid-2026 PFS Catalyst: Despite the strong gold market, Newcore is currently trading at a heavily discounted multiple of roughly 0.15x the Net Present Value (NPV) of the project. Management views the upcoming PFS, targeted for release in June 2026, as a critical de-risking milestone. As the project is de-risked from a PEA to a PFS, the market typically assigns a higher valuation multiple, which is expected to trigger a significant re-rating of the stock.

• Consistent News & Alignment: The management team and board of directors are highly aligned with shareholders, holding a combined 13% ownership stake in the business. With the recent warrant capital injected into the company, Newcore is fully funded to expand its drill program well beyond the initial 45,000 meters. Investors can expect a steady and consistent news flow, with drill results anticipated every four to six weeks throughout 2026 and well into 2027.

Anfield Energy (TSXV:AEC | NASDSQ:AEC): The Road to 2027 Uranium Production | Corey Dias, CEO

• The US Uranium Squeeze: The United States operates the largest installed base of nuclear reactors globally, consuming roughly 50 million pounds of uranium annually while producing less than one million pounds domestically. Corey Diaz expects this massive supply-demand imbalance to drive uranium prices into the triple digits in the near future. Furthermore, this dynamic is expected to create a bifurcated market where highly coveted, domestically produced uranium will command a premium price over non-U.S. material as domestic utilities and competing parties vie for a secure supply.

• The “Manufacturing” Moat: Anfield Energy has strategically separated itself from typical junior exploration companies by securing one of only three conventional uranium mills in the United States. By focusing on controlling their own processing capabilities rather than just exploring for ounces in the ground, Anfield operates much like a manufacturing business. This unique infrastructure asset allows them to dictate their own production timeline and fundamentally shifts them off the traditional mining exploration curve.

• Regulatory Fast Lane: The U.S. government is actively pivoting toward domestic energy independence, shifting from distant encouragement to tangible financial and regulatory support. This includes the rollout of Department of Energy (DOE) low-interest loans and Department of Defense (DOD) grants tailored for the mining sector. For Anfield, this highly favorable environment has already resulted in unprecedented, expedited permitting timelines for their assets, clearing major regulatory hurdles at a record pace.

• The Production Roadmap: The company has laid out a clear timeline culminating in ultimate uranium production in 2027. In the second half of 2026, Anfield expects to complete construction at the Velvetwood mine and receive its Radioactive Materials License upgrade from the State of Utah. This license approval will trigger a 9- to 12-month refurbishment of their mill facility. By early 2027, the company plans to begin stockpiling mined material so it is ready for processing once the mill is fully operational.

• Massive Valuation Disconnect: Anfield is currently one of only about five companies with the realistic capability to produce uranium in the U.S. within the next couple of years. However, there is a severe dislocation in how the market is pricing the stock; the other four capable companies are currently valued anywhere from four to forty times Anfield’s market capitalization. As the company hits its upcoming milestones and closes in on its 2027 production target, management expects this massive valuation gap to shrink considerably

Ecora Royalties (TSX:ECOR | LSE:ECOR): The Base Metal Inflection Point | Marc Bishop Lafleche, CEO

• The 2025 Inflection Point: 2025 marked a landmark year for Ecora Resources, serving as a major inflection point for their cash flow profile. For the first time in two decades, over 65% of the company’s revenue base—which totaled $57 million last year—was generated from critical minerals. Furthermore, base metals alone accounted for exactly half of that total revenue.

• Copper at the Core: The company has deliberately built its portfolio around copper, which currently represents 50% of its Net Asset Value (NAV). Within their base metals exposure, copper makes up approximately 80% of the mix. The remaining 20% of the portfolio offers diversification through high-quality uranium and rare earths, including exposure to the NextGen Patterson corridor and the Cigar Lake mine.

• Tier 1 Quality Focus: When evaluating new royalties, Ecora’s absolute first criterion is the quality of the underlying ore body, as this dictates the cost profile, scale, and mine life. This stringent approach is reflected in their deployed capital, with approximately 80% of their portfolio consisting of Tier 1 projects that sit comfortably in the first or second cost quartiles of their respective commodity complexes.

• Aggressive Deleveraging: Despite utilizing their revolving credit facility to acquire a producing $50 million copper stream last year, Ecora successfully executed a rapid deleveraging plan. Assisted by the sale of a non-core development-stage gold royalty, the company ended the year with its net debt reduced to roughly zero.

• Massive 2026 Catalysts: Investors can expect continued volume growth at the Voisey’s Bay and Mimbula copper mines throughout the year. Beyond existing production, Ecora is anticipating major development milestones, including a Phase II study for the Mantos Blancos mine expansion (potentially taking it to 100,000 tons), a targeted Final Investment Decision (FID) for Santo Domingo in the second half of the year, and a Definitive Feasibility Study (DFS) for the Phalaborwa rare earth project.

Power Metallic (TSV:PNPN): The Polymetallic Powerplay | Terry Lynch, CEO

• The Bull Market “Start Line”: Despite recent commodity price surges across the board, Terry Lynch stresses that the sector has been underinvested for so long that we are only at the “start line” of this cycle, not the finish line. He notes that investors who feel they missed the rally should look at the cash flows of producing companies, which indicate that the sector is actually cheaper now than it has ever been. Furthermore, mining equities and “ounces in the ground” remain incredibly undervalued and have not even come close to catching up to physical metal prices.

• The “Duck Bill Platypus”: The company was blessed with an ultra-rare polymetallic discovery, noting there have only been about 20 similar deposits of this nature in the history of the world. Legendary mining investor Robert Friedland compared the asset to a “duck bill platypus” because its massive grades—such as a zone of 10 million tons at 7% copper equivalent—should not logically happen in nature, but they do.

• Heavy-Hitter Backing: Power Metallic has attracted an elite roster of mining billionaires and industry veterans. This includes Robert Friedland, who led their last two funding rounds, Rob McEwen, who has participated in their last three rounds, and Gina Rinehart. This “smart money” provides the company with vital capital at rates fair to shareholders and offers invaluable strategic guidance to sharpen management’s daily execution.

• Accelerated PEA Catalyst: Lynch highlighted a massive valuation disconnect, comparing his asset to peers like Foran Mining, which successfully sold a roughly 25 million ton deposit at 2.5% for $3.8 billion. To prove to the market that Power Metallic holds a highly viable mine and to force a valuation re-rate, the company plans to bring forward a Preliminary Economic Assessment (PEA) sooner than its original target. Lynch believes this PEA will establish a solid floor and demonstrate that the company is worth three to four times its current value relative to its peers.

• Incoming Results & New Messaging: With six drill rigs actively turning, the remaining results from the fall drill program are expected to drop in the next couple of weeks. Taking direct advice from Rob McEwen, the company plans to revamp its market messaging by utilizing PGE and gold equivalents to better highlight the extreme concentration of their high-grade intercepts. This new messaging will help investors easily compare Power Metallic’s 10% to 20% grades against the 1% copper average typically seen around the rest of the world.

Metallic Minerals (TSXV:MMG): A Diversified Critical Minerals Play | Greg Johnson, CEO

• The Multi-Metals Profile: Metallic Minerals operates as a multi-metal company with a diverse portfolio that includes copper, silver, gold, platinum, and rare earths. The company’s two primary assets are the La Plata project in Colorado and a high-grade silver project in the Yukon. The La Plata resource already boasts over one billion pounds of copper, 17 million ounces of silver, and nearly 300,000 ounces of combined platinum and gold.

• Exploration akin to the “Pharma” Business Model: CEO Greg Johnson compares the modern junior mining sector to the pharmaceutical industry, where smaller companies handle the initial research and discovery phases before larger corporations step in to buy them out or partner for production. This dynamic is already playing out for Metallic Minerals, as Newmont has made a strategic investment in the company related to the La Plata project. Newmont acts as a hands-on partner, holding quarterly technical committee meetings to provide Metallic with deep technical, geological, and engineering expertise.

• The “Next Door” Silver Advantage: The company’s second major asset is located in the Yukon’s Keno Hill silver district. This project sits directly next door to Hecla, Canada’s largest silver producer, effectively giving Metallic Minerals ownership of the other half of the district. This strategic positioning is exactly what attracted legendary silver bull Eric Sprott to invest in the company.

• The Cash-Flowing Ace in the Hole: Unlike most exploration-stage juniors, Metallic Minerals generates its own cash flow. The company is one of the largest holders of placer, or alluvial, claims in the Yukon’s historic Klondike region, an area that has historically produced 20 million ounces of gold. By securing permits and inviting high-quality, independent operators to mine the ground, Metallic collects a 10% to 15% royalty on the raw gold produced. This steady cash flow provides confidence in soft markets, helps cover corporate costs, and contributes to the exploration of their primary copper and silver assets without the immediate need for outside financing.

• 2026 Catalysts & Drill Programs: With gold, silver, and copper all breaking to new market highs, the company is launching drill campaigns at both the Keno Hill silver project and the La Plata copper-silver project. Investors can expect a steady stream of news and drill results throughout the year. These campaigns are designed not only to expand the existing resources at both projects but also to drill entirely new, untested targets, potentially adding new resources to the company’s books.

Stillwater Critical Minerals (TSXV:PGE) America’s Next Major Critical Metals Hub | Michael Rowley, CEO

• The Polymetallic Play: Stillwater offers a massive, diversified metal profile that gives investors flexibility based on their commodity outlook. The company’s current resource inventory boasts 1.6 billion pounds of nickel, copper, and cobalt, alongside 3.8 million ounces of PGMs (platinum, palladium, and rhodium) and gold, plus an additional 2.3 billion pounds of chromium. Crucially, ten of the metals found in their system are currently listed as critical by the U.S. government.

• U.S. Government Tailwinds: The current U.S. administration’s push to build a domestic critical minerals supply chain has been hugely beneficial for the company. Stillwater has garnered high-level political support, with their local Montana Congressman becoming a great champion for the project locally and in Washington D.C.. This shifting dynamic means the government is getting out of the way and acting as a facilitator, which has already made the drill permitting process noticeably easier.

• The Glencore Stamp of Approval: While juniors often receive premature project-level buyout offers, Stillwater strategically brought in Glencore strictly as an equity partner to validate the asset before completing feasibility studies. Glencore has written three checks over three years, investing $8.4 million for a 13% equity position. Beyond the financial backing, Glencore acts as a highly engaged partner on the technical committee, actively participating in decisions regarding geophysics and drilling.

• The “Next Door” Advantage: The project is located merely half a kilometer from Sibanye-Stillwater, a major global miner. Because Sibanye recently struggled locally and laid off 700 people, Stillwater’s potential expansion has become “political gold” for local politicians looking to bring work back to the community. Additionally, Sibanye operates a smelter, refinery, and recycling complex just 40 miles away in Columbus, which presents massive potential for future infrastructure synergies.

• Major Near-Term Catalysts: In the very short term, investors can expect a steady flow of drill results from their expansion campaign, with two holes recently released and six more close behind, followed by specific rhodium results. The biggest upcoming catalyst is an updated Mineral Resource Estimate (MRE) targeted for the April timeframe, which is being handled by the same technical team that worked on Ivanhoe’s massive Platreef deposit. This MRE will lead directly into their largest, fully-funded summer drill program, setting the stage to begin metallurgy and PEA work

Hot Chili (TSX:HCH | ASX:HCH): Expanding the Costa Fuego Copper Hub | Andrea Aravena

• 15-Year Loyalty & Team Stability: Andrea Aravena, VP of Geology, has been with Hot Chili since September 2011, working her way up from initial field logging and reverse circulation (RC) drilling at the Productora project. The company boasts a highly stable technical team with very low turnover; before a recent hiring wave to support the new drill campaign, the newest geologists on staff already had six years of tenure with the company.

• A History of Tripling Down: The company has a proven track record of expanding its resource base, having successfully delineated three major deposits. After completing studies on the Productora deposit in 2016, management realized the project needed more tonnage, leading to the acquisition and 2019 drilling of Cortadera, which effectively doubled the project’s size. Most recently in 2024, they acquired the La Verde asset, located just 30 kilometers south of the main Costa Fuego hub.

• The La Verde High-Grade Discovery: Initial RC drilling at La Verde outlined a massive mineralized footprint measuring 1 kilometer long by 700 meters wide, with shallow mineralization extending to depths of 300 to 400 meters. Because the majority of those initial holes ended in mineralization, the company initiated a second phase of diamond drilling last year. Five core holes have already returned exceptional shallow, high-grade intercepts—such as 0.8% copper equivalent starting from just 70 meters depth—confirming a high-grade center measuring 400 meters by 400 meters.

• Aggressive Multi-Rig Drilling: Hot Chili is aggressively ramping up its exploration efforts, having just commenced a new campaign this week with an additional RC rig arriving on site. This rig will focus on both regional exploration and crucial infill drilling designed to convert existing resources into reserves. Concurrently, the company is deploying a smaller rig to conduct sampling and test three highly anticipated regional “look-alike” targets.

• Major 2026 Catalysts: The company has outlined three primary milestones for the year. First, they are pushing to establish a maiden resource estimate for the new La Verde discovery. Second, they are advancing feasibility studies and value engineering for the flagship Costa Fuego project. Finally, management aims to officially submit the Environmental Impact Assessment (EIA) for Costa Fuego by the end of 2026, while concurrently advancing their critical water assets

Galleon Gold: The Fast Track to Production and 3 Million Ounces (TSXV:GGO) | David Russell, CEO

• Path to 3 Million Ounces: Galleon Gold is officially transitioning from an exploration company to a developer. Following four years of extensive diamond core drilling and a Preliminary Economic Assessment (PEA), the company defined 1.56 million ounces of gold on their books in 2022. Aided by gold prices surging well past the $1,700 mark used in their initial studies, Galleon is now aggressively targeting 3 million ounces within the next 24 months. The project benefits from prime infrastructure, located just 13 kilometers outside of Timmins directly on Highway 101.

• The Pan American Silver Partnership: Pan American Silver currently holds a 19.9% equity stake in Galleon and provides a $46 million line of credit that can be drawn on at any time. Crucially, Pan American has agreed to custom mill Galleon’s ore at their nearby Bell Creek mill, which currently needs additional feed. This toll-milling arrangement saves Galleon approximately $150 million in upfront capital costs and bypasses years of complex environmental permitting required to build a new mill and tailings facility.

• Self-Funding Development: The company is fully financed for its upcoming development phase, boasting over $40 million in the bank alongside the Pan American credit line. Galleon is preparing to mine an underground bulk sample of 86,500 tons of ore at an impressive grade of 8 grams per ton. This program is projected to yield approximately 22,000 ounces of gold, generating around $130 million in sales over the next 18 months to help self-fund future feasibility work and mine development.

• Immediate Underground Catalysts: Site development is beginning immediately with a “box cutting” phase to strip away roughly eight meters of glacial sand, gravel, and muskeg left behind by Mother Nature. Once this surface clearing is completed by mid-April, underground contractors will hit the rock face to begin drilling and blasting. Within nine to ten months, the company expects to complete a 1,250-meter ramp system descending at a 10% grade to directly access the main ore body.

• Roadmap to Production: Over the next 24 to 30 months, Galleon will focus on gathering data from the bulk sample to complete a Bankable Feasibility Study (BFS), which will accurately define the final capital needed for the full mine build-out. Concurrently, they are working to finalize an Impact and Benefit Agreement (IBA) with their First Nations partners and secure their final operational footprint permit from the Ministry of Mines. Ultimately, CEO David Russell anticipates announcing the opening of a brand-new mine within 36 months.

Viva Gold (TSXV:VAU): Advancing Towards Bankable Reserves in Nevada | Jim Hesketh, CEO

• The $5,000 Gold Tailwind: With gold prices approaching the $5,000 per ounce mark, the resulting market excitement makes project funding much more readily available. This influx of capital allows management to significantly accelerate work on their development projects. From a technical standpoint, higher gold prices fundamentally improve project economics by reducing cutoff grades, which enables the company to bring more resources into the overall pit design.

• The Nevada Advantage: Operating in Nevada provides an unmatched supply chain for mine development. The project is situated just three and a half hours from the world’s largest heavy equipment dealers in Las Vegas and three hours from the only sodium cyanide producer in the Western United States. Furthermore, the state boasts highly experienced regulators at the Bureau of Land Management who deal with mining projects daily, ensuring a clear and efficient permitting process. The rural communities surrounding the project are also composed of miners who are highly supportive, eliminating the risk of “not in my backyard” pushback.

• Transitioning from Resource to Reserve: Viva Gold is actively transitioning from being an exploration-focused resource company to a reserve-based development company. The company’s current drill program is strictly focused on increasing drill density across the deposit. By establishing tighter drill spacing, the team will improve the confidence level of their gold resource, officially upgrading it from the inferred category into the measured and indicated categories.

• Bankable Economics: The company has officially announced the commencement of a Pre-Feasibility Study (PFS), with certain components being engineered to a full feasibility and design level. This critical study goes beyond just designing a pit; it provides higher-order cost estimates and significantly reduces project uncertainty. Most importantly, completing this work establishes a proven and probable mine reserve, which is the key metric required to make the project bankable for future financing.

• The Two-Year Permitting Roadmap: Viva Gold is currently conducting environmental baseline studies alongside their feasibility work to finalize a comprehensive “plan of operations”. This detailed plan will outline exactly how the mine will interact with the environment—including plant designs, leach pads, and waste dumps—and will be submitted to regulators to initiate the Environmental Impact Statement (EIS). The company aims to move straight into the EIS study early next year, which serves as the formal pathway to obtaining mine permits. Management’s ultimate game plan over the next two years is to navigate this permitting process while simultaneously initiating discussions for project financing.

First Phosphate (TSXV:PHOS): North America’s LFP Battery Supply Chain | John Passalacqua, CEO

• The 60% Cathode: A frequently overlooked reality of the battery metals space: the cathode of a Lithium Iron Phosphate (LFP) battery consists of a significant 60% phosphate, compared to just 4% lithium and 30% to 35% iron. Establishing a localized North American supply chain for this material is critical, as LFP batteries are essential for broad end-uses, including energy storage systems, drones, military applications, and electric mobility.

• High-Tech, Not Fertilizer: The company mines a rare, ultra-pure igneous anorthosite phosphate rock in the Saguenay-Lac-Saint-Jean region of Quebec. Unlike the common sedimentary rock traditionally used for fertilizer - which contains heavy metal “nasties” like cadmium, uranium, and thorium - this igneous rock converts almost completely into battery-grade phosphoric acid. This pristine purity allows First Phosphate to operate exclusively as a high-technology battery materials supplier rather than a legacy fertilizer producer.

• 30% Capex Cut: In a highly favorable regulatory shift, the Canadian government recently passed a budget amendment adding phosphate to its “A-list” of clean-tech critical minerals. This crucial designation makes the company eligible for the Canadian Mineral Exploration Tax Credit (CMETC), providing an extra 30% tax credit for flow-through investors. More importantly, it triggers a 30% refundable tax credit that applies to building downstream facilities, including the mine, concentrator, phosphoric acid plant, and LFP-CAM production plant, effectively slashing future capital expenditures for the build-out by nearly a third.

• Prepaid Offtake: The company is fully funded for its upcoming phases with over $20 million in the bank and is executing a clear plan to achieve initial mine production by 2029.

• Immediate 2026 Catalysts: The company is wrapping up its second and final drilling program, which is slated for completion by the end of April, with assay results expected shortly after. Once those results are finalized, the board will make a formal decision to advance into a fully funded feasibility study, targeted for completion by the end of 2026. Concurrently, they are advancing their final metallurgical studies to upgrade their flow sheet from bench and pilot scales up to a full concentrator-grade process.

This writer is no energy expert.

But it is becoming increasingly apparent that energy could become the key factor in terms of determining not only the long-term winner in AI but also geopolitics in general. And this is not a reference to the current focus on Iran.

In this respect, there have been some interesting comments made on the AI thematic in recent months as it relates to energy. The first came from Nvidia chief executive officer Jensen Huang when he commented on the sidelines of a Financial Times conference last November that “China is going to win the AI race”.

The Nvidia boss, in particular, highlighted lower energy costs citing Chinese energy subsidies that made power more affordable for local tech companies allowing them to run Chinese alternatives to Nvidia’s AI chips. Huang actually said: “Power is free” (see Financial Times article: “Nvidia’s Jensen Huang says China ‘will win’ AI race with US”, 6 November 2025).

The second comment that caught attention came from Microsoft CEO Satya Nadella when he said in a podcast the same month that chip stockpiles were building up because Microsoft did not have enough power for some of their data centres.

In an interview on the YouTube channel Bg2 Pod on 1 November alongside OpenAI CEO Sam Altman, Nadella said: “The biggest issue we are now having is not a compute glut, but it’s power”.

These comments have caused concerns amongst tech investors about an inventory build for Nvidia and the rest of the AI “picks and shovels” plays as a result of this energy constraint.

These tactical concerns are understandable given the ever rising forecasts of AI capex. The four major hyperscalers’ aggregate capex is projected to be US$620bn this year.

What if China Will No Longer Need New Nuclear or LNG

But the real strategic issue is why America has a power constraint relative to China.

And the answer seems to be that the amazing progress made in battery storage technology means that solar has become cheaper than coal in China even before the recent Iran-triggered rise in the oil price.

Or to be more precise, battery storage technology and the associated rapid fall in storage, as well as solar photovoltaic prices, have made “intermittent” solar and wind power, paired with battery storage, a competitive alternative to coal-based power.

Or in other words, the problem of having a reliable source of baseload, or readily available power, is close to being solved. Baseload refers to the minimum amount of electricity required or delivered by an electric grid at any given period of time.

If this is indeed the case then it must be asked why LNG or indeed nuclear will be required at all as energy sources going forward.

American related energy stocks have rallied in recent months on the perceived urgent need to build up energy sources to power all these data centres with some utilities turning into growth stocks.

See, for example, the chart below of Constellation Energy

But the quickest and cheapest way to address this problem for the US is surely to import the Chinese technology.

But that requires a realisation that technological disruption has arrived in the energy space.

In this respect, the narrative as regards solar and renewables has definitely been damaged in the West in recent years by the self-serving virtue signaling symbolised by the ESG movement and the related association of renewables with climate change obsessions and green politics in general.

The Trump administration has had no time for these woke obsessions and clearly the arrival of Donald Trump at the White House has triggered a full-scale retreat from such virtue signaling, with the only remaining proponents of these positions the true believers.

But the point to understand for the Trump administration, or indeed investors, is that the Chinese have been focused on improving battery storage technology not because of a green agenda but because it has the potential to remove China’s dependence on imported fossil fuels in a cost effective manner.

It is also, importantly, a huge advantage when it comes to AI.

Two key inputs are required for the development of AI.

That is power and compute. And the evidence increasingly suggests that China is far further ahead in energy than the US is ahead in compute.

On the latter point, Huang’s comments about China winning the AI race came after the Nvidia boss failed in his efforts to persuade Donald Trump to discuss in his meeting with President Xi Jinping last October a deal whereby America would allow the export of Nvidia’s Blackwell chips to China.

The idea appears to have been that this would be offered in exchange for Beijing relaxing restrictions on exports of rare earth materials.

Such hopes also drove a 15% rise in Nvidia’s share price in the five days prior to the meeting on 30 October in Korea.

A recommended article in the Wall Street Journal at that time reported that Trump backed off the proposed deal, as he “prepared to meet Xi”, because of comments from the likes of Secretary of State Marco Rubio that allowing the export of the Nvidia Blackwell chips would threaten US national security.

As a result, faced with “with nearly unified opposition from his top advisers”, according to the article, Trump decided not to discuss the advanced Nvidia chips during the meeting (see WSJ article: “Trump Aides Sank Nvidia Push To Export AI Chips to China”, 4 November 2025).

The above account reads very true to this writer.

Rare Earth’s Give China Far More Leverage Than America’s AI Chips

It is another example of how the conceptual vacuum symbolised by the 47^th American president means he is vulnerable to making sudden changes in policy.

Instinctively, his views are contrary to the national security lobby, be it on Ukraine or the export of advanced semiconductors to China, but he still succumbs to their concerns.

The reality, of course, is what Nvidia’s Huang has doubtless been telling him.

That is that the semiconductor controls introduced by the Biden administration in October 2022 have backfired badly and are contrary to the US national interest as long argued here.

This is not only because they have deprived America’s tech companies, such as Nvidia, of their largest customer.

But also because they have massively incentivised China to develop its own semiconductor supply chain.

And it is clearly now the all-consuming focus of President Xi to end China’s dependence on Nvidia chips as soon as possible.

On this point, Reuters reported late last year that Beijing has issued guidance requiring all new data centre projects that have received any state funds to use only domestically developed AI chips (see Reuters article: “China bans foreign AI chips from state-funded data centres, source say”, 5 November 2025).

In this respect, it would have been interesting to see how the Chinese leader would have reacted if Trump had suggested the Blackwell deal advocated by Huang.

But for now it seems increasingly to be the case that China’s leverage on rare earths is much greater than America’s on semiconductors.

Meanwhile, if there is growing recognition in America of the energy deficit, there is much less focus on why America is behind which is obviously because it is committed to yesterday’s technology.

On that point OpenAI wrote an open letter to the White House Office of Science and Technology Policy (OSTP) last October highlighting how the PRC is way ahead of the US and stated that the OSTP should prioritise closing the “electron gap” by setting up an ambitious national target of building 100GW a year of new energy capacity to “fuel American AI dominance”.

If this is a seemingly ambitious target, it is still minimal compared with China’s progress in this area.

The OpenAI letter noted that China added 429GW of new power capacity in 2024, which was more than one-third of the entire US grid and more than half of all global electricity growth.

While China added a further 542GW of power generation capacity last year, compared with a net addition of 50GW in the US where total capacity was only 1,281GW at the end of 2025.

Perhaps even more importantly, China also added 378GW of solar generation capacity in 2025 - greater than the entire installed solar capacity in the US of about 274GW.

While China’s total power demand increased by 505TWh (Terawatt hours) in 2025, power generation from solar (336TWh) and wind (138TWh) sources increased by 474TWh in the same period.

Meanwhile the dramatic growth in Chinese electricity generation capacity, in terms of both flow and stock, are shown in the two charts above.

The development of a solar based generation system augmented by battery storage, and the key word is system, raises the real possibility that the US is at risk of losing energy dominance to China.

This is a very big deal in the context of which recent tactical victories for America, such as getting the Europeans to buy more expensive LNG by stopping them buying cheap Russian energy, are not very important at all.

The Strait of Hormuz is effectively closed, and roughly 16 million barrels per day of oil supply has been removed from the global market. The WTI futures curve tells the story better than any headline. A month ago it was flat and mundane. Tonight it’s a 5-alarm blaze, a steep backwardation across the term structure. The market has zero faith there’s an endgame in sight.

This is a dual-commodity shock. It’s not just crude; 20% of global LNG (mostly from Qatar) is also trapped behind the same blockade, threatening power grids across Europe and Asia in a way no prior oil disruption has.

We took a methodical, quantitative approach to scour for alpha: we analyzed every major oil supply disruption since 1973 - the cap-weighted market returns, the CPI impact, Strategic Petroleum Reserve levels, and sector-by-sector performance across all sub-industry groups. We then scored each historical event for its similarity to today and let the data show which subsectors consistently survive the fire.

The Historical Playbook

Six oil supply disruptions. Six very different outcomes. The table below is the starting point - US market cap weighted returns.

The range of outcomes at the market level is wide: from -41% to +19% in the year following each disruption. But at the sub-industry level, a clear pattern emerges: a handful of sectors provided consistent, significant outperformance vs. the market regardless of the macro outcome.

Read more

Donald Trump’s agenda may be all about attacking globalization.

But China has continued to take the opposite line.

Xi Jinping’s public comments continue to emphasise the case for multilateralism and for the need to enhance the authority and effectiveness of the multilateral trading system with the World Trade Organization at its core.

The contrast with the American president’s continuing penchant for bilateral trade deals could not be more stark.

In this respect, the meeting between Xi and Trump in South Korea last October on the sidelines of the Asia-Pacific Economic Cooperation (APEC) Forum also saw the first-ever leaders’ meeting of the Regional Comprehensive Economic Partnership (RCEP), a grouping which has ASEAN at its core but also includes China, Japan, South Korea, Australia and New Zealand.

This is the world’s largest free trade agreement but the US is not part of it.

Indeed, reflecting Trump’s lack of interest in multilateral affairs, the American president left Korea following his meeting with Xi before other leaders of the 21-member APEC forum began discussions on the core issue of the meeting, namely trade and investment across the Asia Pacific.

If Xi continues to emphasise the case for multilateralism and globalisation, Trump’s “America First” agenda is all about unilateralism.

Indeed the American president ordered in February last year a comprehensive review of US engagement in all multilateral organisations, the findings of which were meant to be delivered in August but nothing has been announced until of late.

Thus, Trump signed a presidential memorandum on 7 January ordering the withdrawal of the US from 66 international organisations that “no longer serve American interests” based on findings from the review, including 31 United Nations (UN) entities and 35 non-UN organisations. While a review of additional international organizations remains ongoing.

How the US is Dealing with Transshipments From China

Meanwhile, tariff discussions also remain ongoing with many Asian countries, including the issue of how the US is going to address “transshipments”, namely Chinese goods shipped via third-party countries.

Washington has previously threatened a 40% tariff on “transshipped” goods.

But so far nothing has happened on this point with most of Asia hoping the American president has forgotten about it.

If this is the negative backdrop in terms of the Washington retreat from globalisation in the context of the highest tariffs imposed since 1934, the reality is also that intra-emerging markets trade continues to rise while China’s exports to the Global South also continue to grow relative to its exports to the G7.

Meanwhile, in an Asian context, China has been Asean’s largest trading partner since 2009.

In this sense, globalisation is far from over. The numbers are worth spelling out.

Emerging markets’ exports to other emerging markets rose to an annualised US$4.96tn in the 12 months to October 2025, accounting for 46.2% of emerging markets’ total exports, up from US$292bn or 23.2% of total exports in 1999.

While China’s annualised exports to the Global South have increased from US$772bn in June 2020 to US$1.514tn in December 2025.

By contrast, China’s annualised exports to the G7 have declined from US$1.161tn in August 2022 to US$928bn in December 2025.

As a result, China’s exports to the Global South now amount to 40.1% of its annualised total exports, up from 21% at the beginning of 2008, while the share of exports to the G7 has declined from 39% to 24.6% over the same period.

Similarly, Asean’s trade with China has risen from US$179bn or 11.6% of Asean’s total trade in 2009 to US$845bn or 20.5% of its total trade in the 12 months to October 2025.

In this respect, China could be said to be filling the vacuum left by Trump’s bilateral focus.

Meanwhile, from an Asean perspective, there continues to be remarkably little pushback in terms of the negative impact on domestic businesses of the continuing flood of Chinese imports into these countries.

Asean’s imports from China have risen from US$97bn or 13.3% of total imports in 2009 to US$545bn or 27.1% of total imports in the 12 months to October.

In the Stablecoin Game the Dollar Now Has some Competition

Changing subject but on a related theme, Stablecoins have clearly been identified by the Trump administration as one way of creating short-term demand for Treasury bills to fund America’s fiscal deficit, as previously discussed here (see An Exploration of Trump’s View on Crypto, Short Term Treasuries and Yield Curve Control, 11 September 2025).

But there is nothing that says stablecoins have to be US dollar based.

On that point, Hong Kong passed stablecoin legislation in May 2025 with the Stablecoins Ordinance taking effect on 1 August. The idea from a mainland perspective is that Hong Kong should be used as a pilot scheme, or “sandbox”, to experiment with stablecoins, with the plan to allow a small number of issuers to issue digital tokens pegged most likely to the Hong Kong dollar.

Hong Kong is a perfect environment for such an experiment since it is outside the mainland’s capital controls.

Indeed this is one of Hong Kong’s core “raison d’etre” as has also been demonstrated by the success of the Hong Kong Stock and Bond Connects which have now been in operation for 11 and eight years, respectively.

Still if the idea to experiment with a new financial technology makes sense, it is also a reality that stablecoins are a potential threat to the mainland’s ability to control its closed capital account.

This is why stablecoins remain banned in mainland China.

For similar reasons there is also a ban on trading cryptocurrencies in China which has been in place since 2021.

In June last year PBOC Governor Pan Gongsheng noted in a speech that digital tokens “posed great challenges to financial regulation” (see “Keynote Speech by PBOC Governor Pan Gongsheng at the 2025 Lujiazui Forum: A Few Observations on Global Financial Governance”, 18 June 2025); though he also acknowledged that “central bank digital currencies and stablecoins are thriving, making possible the simultaneous processing of payment and settlement”.

If the risks are clear, given that loss of control of the capital account is the ultimate nightmare for the PRC, it is also the case that the mainland authorities understand that it is unwise to shun outright a developing technology which has the potential at least to transform finance, not least in terms of the way international payments are handled.

There is also the point that currently about 99% of stablecoins are US dollar backed which further supports the US dollar’s global dominance.

For such reasons, it is both risky and unwise for Beijing to ignore the technology altogether, just as Beijing has experimented with internationalization of the renminbi in recent years even as it has maintained control of the capital account.

Still the practical problems represented by stablecoins, and the mainland authorities’ extreme cautions as regards this area, are reflected in a recent decision to delay the implementation of Chinese tech giants’ stablecoin issuance plans in Hong Kong.

Thus, the PBOC reportedly summoned in October a number of mainland firms under its jurisdiction, including banks and non-bank payment service providers, asking them to wait for its instructions before moving forward with their stablecoin initiatives in Hong Kong (see South China Morning Post article: “China’s pause on stablecoin projects will not dampen Hong Kong’s crypto push, experts say”, 25 October 2025).

The Chinese government also announced on 6 February rules barring individuals and businesses from issuing stablecoins linked to the renminbi overseas without regulatory approval (see Nikkei Asia article: “China bans unapproved issuance of yuan-linked stablecoins overseas”, 7 February 2026).

Meanwhile, it is interesting to note that the biggest issuer of stablecoins globally, Tether, has been a major buyer of gold in recent months.

Indeed Tether is the largest non-sovereign buyer of physical gold globally.

Its physical gold holdings rose to 142 tonnes worth US$19.7bn at the end of last year and an estimated 148 tonnes valued at US$23.3bn at the end of January, after purchasing 26 tonnes in 4Q25 and a further 6 tonnes in January.

Interestingly, these purchases exceeded the quarterly additions of most central banks ranking only third behind Poland and Brazil last quarter.

It is also the case that tether’s gold purchases of 26 tonnes in 4Q25 were equivalent to 11.4% of total central bank gold demand of 230 tonnes last quarter.

So, Tether has seemingly been one of the main drivers of gold’s rally in recent months.

The base case remains that the US reached an all-time peak of world stock market capitalisation on 24 December 2024. America’s share of MSCI AC World Index l peaked at 67.2% and is now 62.9%.

Meanwhile the MSCI AC World ex-US Index broke out of a 18-year trading range last year supporting such a view.

The index has risen by 46% from the recent low reached in early April 2025 to 445.7, after reaching a record high of 452.6 on 28 January.

Still, while it is the case that the US underperformed MSCI AC World ex-US last year, rising by 16.3% compared with a 29.2% gain in the MSCI AC World ex-US, it is only fair to point out that the US has continued to report better earnings growth than other markets.

Thus, the 2025 and 2026 consensus earnings growth forecasts for MSCI USA are now 14.1% and 15.4% respectively, compared with 6.7% and 15.0% for MSCI AC World ex-US.

On a longer term basis, MSCI USA 12-month forward EPS has outperformed MSCI AC World ex-US 12-month forward EPS by 146% since the start of 2011.

This is another way of saying that the outperformance of Europe, Japan and emerging markets last year was driven by multiple expansion.

The MSCI Europe, Japan and Emerging Markets 12-month forward PE ratios have increased by 16%, 18% and 13% respectively since the beginning of 2025 to 15.6x, 17.3x and 13.5x, up from 13.4x, 14.7x and 12x at the end of 2024.

By contrast, MSCI USA 12-month forward PE is up “only” 2% from 21.9x to 22.3x over the same period.

Also, as a result of this multiple expansion in the stock markets outside the US as well as the 10% decline in the US dollar index since the start of last year, it remains the case that America’s share of MSCI AC World Index peaked on 24 December 2024.

Still, for this view to be correct on a long-term basis, the earnings growth in other markets will have to pick up relative to the US.

Consensus 2026 earnings growth forecasts for MSCI Japan, Europe and Emerging Markets are now 9.4%, 11.7% and 23.2%, respectively, up from 0.9%, 8.1% and 14.1% for 2025.

Meanwhile, US earnings are very dependent on the continuation of the AI capex arms race.

The base case of this writer has been that this year will see investors starting to question the returns, or rather the lack of them, from the now three-year old AI capex arms race.

That process has now started to happen even if there is as yet no sign of the capex slowing.

Thus, the share prices of Microsoft, Amazon and Meta have already declined by 28%, 19% and 17% from last year’s peak, while Alphabet is down 7% from its peak on 3 February.

Yet, the hyperscalers in the most recent earnings seasons have continued to increase their capex.

Thus, Alphabet has doubled its capex guidance for 2026 to US$175-185bn, up from US$91bn in 2025, while Meta expects capex to total US$115-135bn in 2026, up from US$72bn in 2025.

Amazon also plans to invest US$200bn in capex this year, up from US$131bn in 2025.

AI Compute is Ramping, But is Demand There to Meet it?

This writer’s base case remains that the AI capex arms race will culminate in massive over-investment in data centers and the like as the Big Tech players feel compelled to participate for fear of being disrupted.

Still, if the focus up till now has primarily been on supply, in terms of the surging amounts being spent on AI capex, there is also the issue of demand.

And it is belief in the S-curve nature of demand for AI, particularly consumer demand, which has driven a lot of the investment in AI and indeed the growing tie-ups in recent months with OpenAI, be it Nvidia, Broadcom or Oracle.

This is, of course, to assume that OpenAI keeps growing, in terms of users, and, perhaps more importantly, starts monetising them.

On this point, the hope had been that OpenAI would become as dominant in consumer-orientated chatbots as Google has been in search.

But this is now increasingly questioned with the success Google has had incorporating its Gemini AI function into search.

The widely trumpeted S-curve dynamic, which was driving the frenzy to do deals with OpenAI, is easily illustrated.

OpenAI’s ChatGPT had 350m weekly active users two years after its public launch at the end of November 2022.

In OpenAI’s annual DevDay conference on 6 October, CEO Sam Altman said the number had risen to over 800m users.

In this respect, it remains the largest large language model in terms of users, though only about 5% of these users are paying the monthly fee of at least US$20. The monetization case is, therefore, far from proven.

Still, the latest data shows Gemini taking market share from Open AI’s ChatGPT. Gemini’s web traffic share in the Generative AI market has increased from 5.3% to 22% over the past 12 months as of 16 January, while ChatGPT’s market share has declined from 86.6% to 64.6% over the same period, according to SimilarWeb.

Meanwhile, in the corporate market, Open AI has been losing out to Anthropic.

Thus, Anthropic’s Claude is primarily used for professional purposes with coding accounting for 34% of prompts, according to a recent study published by Anthropic (see Anthropic report: “Anthropic Economic Index report: Economic primitives”, 15 January 2026).

This compared with only 4.2% for ChatGPT, according to an OpenAI study published in September as a National Bureau of Economic Research (NBER) working paper (see NBER Working Paper No. 34255: “How People Use ChatGPT”, 15 September 2025).

Meanwhile, Anthropic’s AI coding tool Claude Code was only publicly launched in May last year and reached US$1bn in annualised recurring revenue in November.

The different usage is reflected in a starkly different revenue split.

At OpenAI, about 75% of revenues come from consumers paying the US$20 a month ChatGPT Plus plan, which is designed for casual users with more access and a faster response time than the free version, while companies make up the rest paying a higher monthly fee for full access to ChatGPT.

By contrast, 80% of Anthropic’s revenues come from enterprises.

To return to Goggle’s Gemini, as already noted, it is steadily gaining market share.

In this respect, Google has one big advantage.

It is already integrated into the lives of 90% of global internet users and AI functions, via Gemini, are now being integrated into the tools people use daily, be it as basic a function as drafting emails in Gmail.

It also means, if privacy is any concern at all, that people do not need to give up the data to another provider.

On this point, Google said in October that it processed more than 1.3 quadrillion tokens every month with its AI models, up from 9.7 trillion in April 2024.

There has been no update since so far as this writer is aware.

By contrast, OpenAI is processing around 260 trillion tokens per month from ChatGPT and Application Programming Interface (API) usage.

So, Google is roughly five times OpenAI’s monthly token volume as a result of embedding AI across many high-traffic surfaces. Meanwhile, the Alphabet valuation is far from insane if search is not disrupted.

Alphabet is now trading at 27x 2026 consensus forecast earnings and 9.7x sales. Compare this with Nvidia which is currently trading at 24x sales, or OpenAI which is now talking about an IPO valuing the company at up to US$1tn even though it is only generating annualised revenues of US$20bn.

All of the above is to highlight that it is far from clear who is going to be the winner in terms of the race to build large language models.

While, so far as this writer can tell, no killer app has yet been developed for the masses in terms of the practical application of AI.

But the upside of the seemingly inevitable over-investment bust when it happens, in terms of the amount being spent on chips and AI data centers, is that the costs of so-called “inference” should collapse and demand should surge.

This is, of course, what happened in the Dotcom bust when fiber optic capacity caused a big decline in the cost of broadband and the resulting explosion in e-commerce demand.

The difference this time, of course, is that the AI chips have a much shorter shelf life (apparently 3-4 years) than fiber optic cables (around 25 years).

*For standardized performance click HERE

Our year-end letter breaks down the AI infrastructure thesis, commodity supercycle positioning, and 2026 outlook.

Read our full 2025 Year-End Review ➡️ LINK

5-Star Morningstar Rating*, 1st Percentile Performance

Since inception on December 16, 2021, DARP has delivered a cumulative return of 92.85% vs 55.54% for the S&P 500—outperformance of 37+ percentage points in just four years.

This performance earned us a 5-star Morningstar rating and places the fund in the top 1% of US Large Cap Growth funds for 2025.

*Morningstar Star Rating based on risk adjusted return in the US Fund Lg Growth category out of 1,002 funds. Returns are on a 3-year basis as of 1/31/2026. Morningstar Rankings represent a fund’s total-return percentile rank relative to all funds that have the same Morningstar Category. The highest percentile rank is 1 and the lowest is 100. It is based on Morningstar total return, which includes both income and capital gains or losses and is not adjusted for sales charges or redemption fees. For 2022, the fund ranked in the 10th Percentile out of 1,235 funds; in 2023 the fund ranked in the 64th percentile out of 1,200 funds; and in 2024 the fund ranked in the 74th percentile out of 1,088 funds in the US Fund Large Growth Category. Past performance does not guarantee future results.

All-Weather Performance: Bear Markets & Bull Markets

DARP's strategic allocation to commodity equities—often viewed as contrarian in a "disruptive growth" fund—has proven its value across divergent market environments:

2022 Bear Market: While the Nasdaq 100 fell -31% DARP’s drawdown was limited to -20% (matching the S&P 500). Our commodity allocation delivered a +10% contribution when technology stocks cratered.

2025 Bull Market: In a year favoring disruptive growth, DARP captured the full upside with a 40% return, outperforming the Nasdaq 100 (20%) and peers. Commodities remained a meaningful contributor (+5%), demonstrating that energy and materials aren’t just defensive ballast—they’re critical to the AI infrastructure build-out.

Growth at a Discount: The PEG Ratio Advantage

After rigorous bottom-up analysis of our portfolio, we’re pleased to confirm that DARP continues to offer exponential growth at a structural discount to the market.

Our forward PEG ratio is 0.25x vs 0.72x for the S&P 500. This means we’re buying 106% projected earnings growth (vs 35% for the benchmark) at valuations that don’t fully price in that growth potential. The gap has actually widened in 2025 despite our strong performance.

In our view, our PEG ratio demonstrates the fund’s avoidance of growth at any price in favor of disruption at a reasonable price.

What’s Ahead for 2026

Our year-end letter outlines three high-conviction themes for 2026:

1. The Industrialization of AI – Value capture shifts from GPU (graphics processing units) to data center infrastructure (power, networking, thermal management)

2. The Commodity Supercycle – Natural gas, uranium, and copper underpin the AI build-out

3. The Hard Money Pivot – Rotating from Bitcoin to Gold/Silver miners as risk premiums shift*

*The Fund does not invest directly in Bitcoin, gold/gold bullion, or silver/silver bullion.

We also address our primary risk monitor: the shift toward debt financing in AI infrastructure and what it means for 2026.

Read our full 2025 Year-End Review here ➡️ LINK

Thank you for your continued confidence in DARP.

Thomas George, CFA and Scott Willis, CFA
Portfolio Managers, Grizzle Growth ETF

DISCLOSURES

Shares of the Grizzle Growth ETF may be bought or sold throughout the day at their market price on the exchange on which they are listed. The market price of the Grizzle Growth ETF shares may be at, above or below the fund’s net asset value (“NAV”) and will fluctuate with changes in the NAV as well as supply and demand in the market for the shares. The market price of the fund’s shares may differ significantly from their NAV during periods of market volatility. Investors cannot invest directly in indices or averages, and their performance does not reflect fees and expenses or represent the performance of the Grizzle Growth ETF.

Price/Earnings: The trailing price/earnings ratio measures value by dividing a stock’s most recent price by the previous year’s earnings per share.

EPS Growth: The forecast growth rate of earnings per shares

The price/book (P/B) ratio measures a company’s stock price compared with its book value. The ratio is calculated by taking the market price per share of an investment and dividing it by the book value per share.

Price/Cashflow: The price/cash flow ratio calculates value by dividing a stock’s current price by the company’s free cash flow over the trailing 12 months.

Long Term Earnings Growth (%): The long-term projected earnings growth rate for a stock is the average of the available third-party analysts estimates for three- to five-year EPS growth.

PEG Ratio: is a stock valuation metric that relates a company’s stock price to its expected earnings per share growth rate. P/E divided by expected growth rate. Cashflow: Cashflow from operations. Comes from the statement of cashflow.

NAV: Net Asset Value (NAV) represents the per-share market value of a fund—such as a mutual fund or ETF—calculated by subtracting total liabilities from total assets and dividing by outstanding shares. Updated daily, it helps investors determine the fair value of their holdings.

Market Price: Market price is the price of an asset that a willing buyer pays to acquire the asset from a willing seller, when a buyer and seller are independent.

Investing involves risk. Principal loss is possible.

Growth Investing Risk. Growth stocks can be volatile for several reasons. Since those companies usually invest a high portion of earnings in their businesses, they may lack the dividends of value stocks that can cushion stock prices in a falling market.

Foreign Securities Risk. Investments in securities or other instruments of non-U.S. issuers involve certain risks not involved in domestic investments and may experience more rapid and extreme changes in value than investments in securities of U.S. companies.

Derivatives Risk. Derivatives are financial instruments that derive value from the underlying reference asset or assets, such as stocks, bonds, commodities, currencies, funds (including ETFs), interest rates or indexes.

Options Risk. The prices of options may change rapidly over time and do not necessarily move in tandem with the price of the underlying securities. Selling call options reduces the Fund’s ability to profit from increases in the value of the Fund’s equity portfolio, and purchasing put options may result in the Fund’s loss of premiums paid in the event that the put options expire unexercised.

Emerging Markets Risk. The Fund may invest indirectly, via ADRs, in securities issued by companies domiciled or headquartered in emerging market nations.

High Portfolio Turnover Risk. The Fund may actively and frequently trade all or a significant portion of the securities in its portfolio. A high portfolio turnover rate increases transaction costs, which may increase the Fund’s expenses.

Models and Data Risk. When Models and Data prove to be incorrect or incomplete, any decisions made in reliance thereon expose the Fund to potential risks.

NASDAQ-100 Index: A globally recognized index of 100 of the most innovative large cap companies listed on the Nasdaq Stock Market

The Morningstar RatingTM (“star rating”) is calculated for funds with at least a three-year history. Exchange-traded and open-end mutual funds are combined into a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each fund category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar RatingTM is a weighted average of the performance figures associated with a fund’s 3-, 5-, and 10-year (if applicable) Morningstar RatingTM metrics. Morningstar rankings are based on a fund’s average annual total return relative to all funds in the same Morningstar category. Fund performance used within the rankings, reflects certain fee waivers, without which, returns and Morningstar rankings would have been lower. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100.

Overall Morningstar Rating based on risk adjusted return in the US Fund Lg Growth category out of 1,002 funds as of 1/31/2026

Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (267) 419-7469 or visit our website at www.etf.grizzle.com. Read the prospectus or summary prospectus carefully before investing.

Distributed by Foreside Fund Services LLC.

The Trumpian driven news cycle continues to dominate, as reflected in the recent headlines concerning Greenland.

Still the all-important issue is US-China relations.

The ultimate deal between Washington and Beijing would be complete abolition of American export controls on semiconductors in return for China’s complete relaxation of restrictions on exports of rare earths.

This makes sense logically since Beijing has explicitly linked these two issues since last year, after showing remarkable restraint previously, as it has become ever clearer that the US does not have the leverage over China it once thought it had on the trade and tariff issue.

Indeed on the rare earth issue the leverage is seemingly all on the China side.

China, for example, has a 92% market share of the global production of rare earth magnets which remain key components in many US weapons systems.

This lack of leverage is something the Washington national security establishment is having a hard time adjusting to.

And in the case of rare earths it increasingly looks like the US needs the rare earths far more than China needs the semiconductors.

In that respect, while the Chinese government has said it no longer wants its tech companies buying Nvidia’s AI chips, this writer has been skeptical about whether this was really the case in practice.

Yet it has been reported of late that Chinese customs officers are now on the lookout for smuggled banned Nvidia chips whereas previously there were estimates that 10% of the banned Nvidia chips ended up in the mainland presumably with the central government’s tacit blessing (see, for example, Financial Times article: “China launches customs crackdown on Nvidia AI chips”, 10 October 2025).

In the same article it was also reported that at least US$1bn worth of Nvidia’s top AI chips were smuggled and sold in China in the three months from May.

Will China Every Agree to Set up US Based Production Capacity?

Beyond the above issue of the two countries’ regimes of export controls, both of which are designed to prevent the leakage of technology, another issue is whether China could offer Donald Trump a “win” by agreeing to set up production in America.

The two leaders are due to meet again in April in Beijing.

Two obvious candidates for such production are CATL and BYD.

In this respect it should be recalled that Trump’s stated reason for advocating tariffs, aside from boosting fiscal revenues, is to create an incentive for foreign companies to move production to America for those wanting to access the American consumer market.

Naturally, such policies will be anathema to Washington’s national security establishment which is for now belatedly and manically focused on securing rare earths from the likes of Pakistan, ironically a long-term China ally.

See, for example, the Financial Times article: “Pakistan courts US with pitch for new Arabian Sea port”, 4 October 2025. Still as the saga over TikTok has demonstrated yet again, Trump is not a national security zealot nor indeed a hawk on China.

It is also the case that he is increasingly sympathetic to this writer’s longstanding view, doubtless also argued by Nivida boss Jensen Huang in private conversations with the American president, namely that the export controls on semiconductors introduced by the Biden administration in October 2022 have proved to be a massive “own goal” for the US to employ a soccer analogy.

This is because they have triggered an overwhelming incentive for China to set up its own semiconductor value chain while depriving US tech companies of a major customer.

Nvidia’s sales to China (including Hong Kong) declined by 24% YoY to US$2.77bn in 2QFY26 ended 27 July and were down 63% YoY to US$2.97bn in 3QFY26 ended 26 October 2025.

As a result, China/HK’s share of Nvidia sales has fallen from 26.4% in FY22 ended 30 January 2022 to 13.1% in FY25 ended 26 January 2025 and only 5.2% in 3QFY26.

All this suggests that the potential for such a deal is not impossible even though it will involve Trump acting specifically against the agenda of the national security lobby, something he has conspicuously failed to do in the case of Ukraine where he has ended up following the exact opposite of the policy he campaigned on.

As a result, what he used to call “Biden’s war” has now become his war in political terms.

Indeed the Wall Street Journal reported at the time that Trump was on the point of telling President Xi Jinping he would allow China to buy the most advanced Nvidia chips when he met with Xi in Korea in late October only to be talked out of it at the last minute by Secretary of State Marco Rubio (see WSJ article: “Trump Aides Sank Nvidia Push To Export AI Chips to China”, 4 November 2025).

Americans are Increasingly Tired of Tariffs

Meanwhile, it is surely the case that the more tariffs impact prices in America, the more they risk becoming unpopular.

There is growing evidence of this.

An Economist/YouGov poll conducted on 20-22 December shows that 56% of respondents disapprove of the way Trump is handling the tariff issue, with only 36% approving.

An earlier Economist/YouGov poll conducted on 15-17 November also shows that 73% of Americans say that Trump’s tariffs have increased the prices they have paid by either a lot (40%) or slightly (33%).

If there is a deal it will likely mean, in investment terms, that Chinese stocks will no longer be viewed as uninvestable by managers of America-based global equity funds.

It would also mark a reprieve, if likely only a temporary one from a longer term historical standpoint, in the growing rivalry between the world’s two major economic powers.

On this point, Beijing must surely be aware that other American presidents could be much more ideologically hostile, and also perhaps less easy to manipulate than the Donald.

Still it is also the case that President Xi Jinping is surely not going to sign any deal endorsing the current tariff rate on US goods imported from China which is 47.5%, according to the Peterson Institute for International Economics.

The 15% level agreed by Europe would surely be much more acceptable, though Trump has threatened last weekend to impose an additional 10% tariffs on imports from several European countries over the Greenland issue.

“The US is now one big bet on AI”. This was the headline in an article in the Financial Times last quarter (see Financial Times article: “The US is now one big bet on AI” by Ruchir Sharma, 6 October 2025). This writer could not agree more.

The stampede to invest in AI is one of the most remarkable frenzies ever seen.

Indeed, AI capex was the main driver of US economic growth last year after personal consumption, based on national accounts data.

US real GDP rose by US$438bn or an annualised 2.5% in the first three quarters of 2025. While real personal consumption and real AI-related fixed investment, including private investment in information processing equipment, software and data center construction, increased by US$268bn and US$193bn respectively over the same period, or an annualised 2.2% and 19.8%.

As a result, real AI-related investment contributed to 44% of the increase in real GDP in the first three quarters of 2025, compared with 61% from real personal consumption.

The AI capex arms race is now three years old.

All that spending, running at an estimated US$360bn last year for the four major hyperscalers and a forecast US$480bn this year (see following chart), is based on the premise that OpenAI and others will be able to monetise so-called large language models (LLMs).

Yet in recent months, a MIT study, a FT survey of large companies and a recent Bain analysis have all come to the conclusion that corporates have yet to find any commercially powerful use cases for GenAI.

The MIT study, published in August, found that 95% of “enterprise generative AI (GenAI) pilots” have failed to deliver any financial returns despite US$30-40bn in investment into GenAI (see MIT NANDA report: “The GenAI Divide: State of AI in Business 2025”, July 2025).

While a Financial Times analysis in September of hundreds of corporate filings and executive transcripts suggests most S&P500 companies are not clear about how AI is changing their businesses for the better (see Financial Times article: “America’s biggest corporations keep talking about AI but struggle to explain the upsides”, 24 September 2025).

Then Bain’s sixth annual Global Technology Report published in September estimated that the US$500bn of annual capex spending, which it estimates is the amount needed to fund the necessary data center related infrastructure by 2030, will require US$2tn in annual revenue to earn an adequate return on that investment.

Yet the current estimates of the revenues being generated by AI range from only US$40bn to US$250bn (see Bain & Company report: “Technology Report 2025: AI leaders are extending their edge”, 23 September 2025).

As for consumer applications, there remains, so far as this writer can tell, a lack of any killer app in terms of the uses of chatbots.

It is certainly far from clear who, if anyone, is going to be the winner in the US in terms of the race to build large language models and monetise them.

Indeed, there is a growing view that AI could turn out to be much more like the capex intensive airline industry than the winner-takes-all network effect of the Internet economy from which US Big Tech has so benefited.

Certainly, no killer app has yet been developed for the masses in terms of the practical application of AI.

Rather, this is an area which looks increasingly commoditised with a lack of product differentiation between different providers.

LLM Advancement Certainly Seems to be Slowing

Meanwhile, as the AI capex numbers are getting bigger, the improvements in the LLMs are only seemingly getting marginally better.

OpenAI’s release of ChatGPT-5 in August was widely viewed as an incremental improvement, not the game-changing moment many expected.

But new AI models ChatGPT-4 and ChatGPT-5 cost significantly more than their predecessors to train, often 3 to 5 times the cost of the predecessor.

The other point often ignored is that most of the AI equipment, especially the chips, do not last forever. While the fiber cables laid during the dotcom bubble still have their usefulness, Nvidia chips rapidly depreciate in value.

It is highly questionable whether Big Tech’s depreciation schedules reflect this, most particularly following the changes introduced by the One Big Beautiful Bill Act (OBBBA), in terms of spreading out the cost of purchasing chips and related equipment over several years.

Or in other words, US Big Tech is in no hurry to pay for the AI capex in terms of accounting for it.

This writer remains fundamentally sceptical that ever-greater scaling up the large language models will ever lead to Artificial General Intelligence (AGI), as previously discussed here (What If Chinese AI Stocks Are The Better Value, 20 October 2025).

The base case is also that the main players, be they the hyperscalers or OpenAI for that matter, are, in their rush to spend, driven primarily by the fear of missing out (FOMO) on the next big thing rather than on any conviction that large language models can be monetised.

This is on top of the fact that the Big Tech companies have exited their moats and are now competing directly with each other.

Indeed they are draining their moats.

This can be seen in the extent to which capex is rising both as a percentage of revenues and as a percentage of operating cash flow.

The four major hyperscalers’ capex to revenue ratio is projected at 23% in 2025 and 27% this year, or 64% of their combined operating cash flow in 2025 and 69% in 2026, based on consensus forecasts.

This is the same sort of FOMO which has been driving the ever-more retail-driven US stock market, as reflected in both a record high price to sales ratio and record high stock market margin debt.

The S&P500 price to sales ratio has risen from a recent low of 2.65x in early April 2025 to a record high of 3.58x last Friday.

While US stock market margin debt rose by 36% YoY to a record high of US$1.21tn at the end of November.

All this strongly suggests that markets are much nearer to the end of the AI mania than to the beginning of it or, in other words, based on the Nasdaq Internet-driven boom bust, much nearer to March 2000 than 1995.

It is also the case that, at the end of the day, the high capex budgets of the likes of Meta and Alphabet are being funded by advertising revenues and advertising is cyclical.

Yet with an estimated nearly 50% of consumption accounted for by the top 10% of households, the US economy is now increasingly geared to the US stock market given the wealth effect generated and the US stock market is, more or less, all about AI in terms of the market leadership with about 45% of the gains in the S&P500 since the beginning of 2023 still accounted for by Nvidia and the four hyperscalers.

Meanwhile, it is further the case that AMD suddenly playing catch up, in terms of share price performance, with its chief rival Nvidia, is almost what had to happen before AI mania peaks in stock market terms.

AMD has outperformed Nvidia by 27% since the beginning of last quarter but has still underperformed by 75% since the beginning of 2023.

We recently hosted our annual Commodity 1x1 Outlook Conference, featuring the industry’s sharpest minds and delivering unfiltered insights across the commodity spectrum.

We gathered top-tier portfolio managers, strategists, and CEOs to map out the evolution of the commodity supercycle through 2026 and beyond.

This is critical viewing for both commodity and generalist investors. See below for summary notes on each interview.

Full Conference: X | iTunes | Spotify

Warren Pies – Cofounder & Strategist, 3Fourteen Research

Website

2025 Review & 2026 Macro Outlook

• 2025 Performance: 3Fourteen Research correctly predicted disinflation trends and the lack of a recession in 2025, pushing back against the “higher for longer” consensus

• 2026 Forecast:

  • Economic Acceleration: Pies does not see a recession on the horizon; instead, he believes the economy is troughing and will accelerate in the early part of 2026

  • Bullish on Equities: The firm expects a bullish outcome for stocks with cyclical disinflation continuing through the start of the year

  • Margins & Multiples: Contrary to the consensus that multiples will contract, Pies forecasts multiple expansion in 2026. He expects margins to expand, driven by a Fed cut, 12% earnings growth, and a less cyclical market

• The “Debasement Trade”:

  • Psychological Shift: Investors are transitioning from a “deflation mindset” (protecting principal) to a “debasement mindset” (protecting purchasing power) due to fiscal stimulus and deficits

  • Asset Rotation: This environment increases the “right tail” for assets, benefiting stocks, gold, commodities, and crypto in a rotational manner

Commodities & Inflation

• Inflation Timeline:

  • First Half 2026 (Goldilocks): Inflation is not a major concern for early 2026 due to shelter disinflation and a stabilizing labor market

  • Second Half 2026: Disinflationary tailwinds may abate later in the year, leading to a more commodity-led and demand-driven cycle

• Sector Specifics:

  • Copper & Natural Gas: These commodities are breaking out, driven by the infrastructure and energy needs of data centers and AI buildouts

  • Oil: Currently lagging due to a supply glut from OPEC returning oil to the market, expects oil to find a bottom in mid-2026

  • Energy Stocks vs. Commodity: Stocks (e.g., Exxon) are outperforming the underlying commodity because they can look past the short-term supply glut, whereas physical oil markets must digest the current inventory

Bitcoin vs. Gold

• Gold Preference: Pies has a bias toward gold and precious metals over Bitcoin because gold currently enjoys a central bank and monetary tailwind that Bitcoin does not yet have

• Bitcoin Positioning: While Bitcoin benefits from the debasement trade, Pies believes it pulled a lot of returns forward post-election and is in consolidation. His fund holds a max allocation of ~3% for Bitcoin compared to ~9% for gold

ETF Strategies & Methodology

• Real Asset Allocation (RAA) Model:

  • This model expands beyond the traditional 60/40 split to include 20 different asset classes, including alternatives¹⁷.

  • It utilizes a trend overlay to identify strong trends and a hierarchical risk parity approach to budget risk across asset buckets (equities, fixed income, alternatives)

• Quality ETF (FCTE) & The “Boring” AI Trade:

  • Recent Performance: The quality strategy underperformed in 2025 as quality stocks faced a bear market

  • Outlook: Pies expects quality to rebound in 2026 as the benefits of AI spending trickle down to efficiency gainers

  • Adoption Theory: AI adoption will move from large firms downward, benefiting “boring” but efficient operators (e.g., McKesson, Walmart, Costco) who can squeeze better margins out of the technology

Steve Cope - CEO, Silver Viper Minerals (TSXV:VIPR)

Website

Silver Market Dynamics & Outlook

• Supply Crunch: Cope notes that above-ground silver supply has dropped significantly, moving from 100+ years of inventory to just 1-2 years

• Investment Gap: There has been a lack of capital spent on silver exploration over the last 20 years, as many primary silver deposits were not economic

• Industrial Demand: A new structural driver is the “green movement” and AI infrastructure. Silver is the most conductive metal, making it essential for electrification and solar, creating a disconnect from historical demand patterns

• Price Catch-Up: While gold has doubled its all-time highs from the last cycle, silver is still lagging its historical high of $50. Cope expects silver to play “catch up” to gold, potentially exceeding historical ratios due to the new industrial component

• Rotation of Capital: Cope believes the “poor man’s gold” speculative capital that historically went to silver was diverted to Bitcoin in recent years

Silver Viper Strategy (The “Go Big” Blueprint)

• Corporate Goal: The company aims to position itself as the largest explorer in Mexico by mimicking the strategies of successful peers (like Vizsla Silver) who used large scale to command a market premium

• Drilling & Expansion:

  • La Virginia: Adding rigs immediately to focus on resource expansion, testing depth potential, and regional targets

  • Caneto: Drilling is set to begin in late January/early February with a focus on both resource expansion and new discoveries

• Valuation Opportunity: The company is currently trading at market caps similar to when metal prices were much lower, suggesting the market has not yet valued their ounces in the ground at current metal prices

Jurisdiction: Mexico vs. Canada

• Cost Advantages: Mexico offers significantly lower mining costs. The state of Sonora is a hub for open-pit heap leach mining, which is the cheapest mining method available

• Grade Economics: Due to lower CapEx and infrastructure costs (no need for heating pads, etc.), a Mexican mine can be economic at much lower grades (e.g., 0.5g gold) compared to a project in the Canadian arctic which might need 3-5g gold

• Permitting Speed: Cope asserts that Mexico is “back open” for mining, with open-pit permits being granted in roughly one year, compared to potential 3-4 year timelines in Canada

Catalysts & 2026 Outlook

• Resource Updates:

  • La Virginia: Resource update expected at the end of Q2

  • Caneto: Resource update expected in the second half of the year

• PEA Work: The company hopes to begin Preliminary Economic Assessment (PEA) level work at La Virginia by year-end

M&A Potential: The ultimate strategy is to de-risk the assets to become a takeover target for a major miner (e.g., Fresnillo, Agnico Eagle). Fresnillo is already the largest shareholder

Terry Lynch - CEO Power Metallic (TSXV:PNPN)

Website

Macro Outlook: 2026 & Beyond

• Copper: Lynch predicts a strong year for copper, driven by the need to satisfy normal demand plus new AI infrastructure requirements. He believes significantly higher prices are required to incentivize the necessary production

• Platinum & Palladium (PGEs): He is very bullish on PGEs, noting they have been undersupplied for years with demand met by inventory drawdown. He suggests prices need to reach $2,000 to justify new mines, which benefits Power Metallic as it is arguably ~40-45% PGE.

• Precious Metals:

  • Silver: Lynch is most bullish on silver, expecting it to “rip the face off” the market.

  • Gold: He forecasts gold breaking the $5,000 mark next year.

• Mining Market Cycle: While 2025 benefited producers and exceptional discoveries, Lynch believes 2026 will see the rally extend down to juniors with valid assets (ounces/pounds in the ground).

The NISC Project (Quebec)

• Geological Significance: The project is described as an “orthomagmatic discovery,” a rare deposit type (only ~20 in history) that typically results in major mines. It is compared to Anglo American’s Sakatti deposit in Finland⁹.

• Scale: Analysts currently estimate ~700,000–800,000 tons of contained metal, but Lynch expects it to grow significantly larger.

• Drill Program: The company is fully funded for a 100,000-meter drill program.

  • Lion Zone: Drilling has crossed the fault to “Lion West” and is picking up mineralization again.

  • Tiger Deep: Located east of Lion, this target is showing “un-mobilized high quality core,” suggesting a source is very close.

  • Research Hole: A deep 1,000m hole revealed the company’s biggest borehole anomaly ever¹⁴. Drilling was paused to secure adjacent land (Hydro lands) but will resume in January.

• Polymetallic Nature: The deposit contains multiple “pipes” (like fingers on a hand) rich in copper, nickel, and PGEs. Lynch expects to find significantly more nickel sulfide as they explore further.

Corporate Strategy & Backing

• High-Profile Investors: The company has attracted industry legends Robert Friedland, Rob McEwen, and Gina Rinehart, who have participated in multiple private placements.

• “Free Agency” Strategy: Lynch has rejected funding offers from majors to preserve the company’s “free agency”. He intends to let the asset grow and hit the open market without restrictions, likely looking toward a transaction in 2026.

• Valuation: Lynch estimates the company is trading at 20–30 cents on the dollar relative to peers based on what they have already found.

Upcoming Catalysts (Q1 2026)

• January Exploration Update: A detailed podcast update with the geological team is planned for the first week of January.

• Assay Results: New exploration results are expected to start flowing by mid-January.

• Metallurgical Study: A “Met study” is projected for release by the end of January to de-risk mineral recovery (currently carrying 80% recovery estimates).

• NYSE Listing: The company expects to list on the New York Stock Exchange towards the end of January, which Lynch views as a significant catalyst for reaching a better market.

Leigh Goehring, Goehring & Rozencwajg Associates

Website

Macro Outlook: The “Uninvestable” Opportunity

• The “First Stage” of the Bull Market: Goehring believes the commodity bull market is only in its first stage—where “no one believes.” He argues investors haven’t missed anything because participation is nonexistent, and recent gains are primarily driven by short covering rather than new capital inflows.

• The “Uninvestable” Narrative:

  • 1999 Parallel: Goehring draws a parallel to gold in 1999, which was considered “uninvestable” due to central bank selling, yet became the best-performing asset class for the next 25 years.

  • Today’s Uninvestable Asset: He identifies oil as today’s “uninvestable” asset class. The prevailing narrative is that EVs will destroy oil demand, making oil stocks (currently only ~2.6% of the S&P 500) remarkably cheap.

Energy & The EV Thesis

• EV Skepticism: Goehring aggressively challenges the consensus view on Electric Vehicles (EVs). He predicts that by 2035, there may be “no EVs on the road” because they simply “don’t work” in terms of utility and cost efficiency compared to internal combustion engines.

• The Hybrid Future: He believes the future belongs to hybrids, which offer far greater energy efficiency (pushing a car 70 miles per energy unit vs. 25 for an EV) and utility. This outlook makes him extremely bullish on Platinum Group Metals (PGMs), which are essential for hybrid vehicles.

• Oil Valuation: In terms of gold, oil is radically undervalued. An ounce of gold currently buys ~73 barrels of oil, whereas historically, it has bought as few as 6–7 barrels.

Precious Metals: Gold & Silver

• Silver Catch-Up Framework:

  • Goehring outlines a recurring historical pattern (seen in 1974, 1980, 2011, and 2020) where silver lags gold for years and then stages a massive “catch-up rally”.

  • Current Status: A silver catch-up rally is currently underway. If history repeats, silver could overshoot to $75–$80.

  • The Sell Signal: Historically, once this silver catch-up rally peaks, it triggers a major correction (sell signal) for the entire precious metals complex.

• Advice for Investors:

  • Institutional/Active Traders: If the silver rally plays out as expected, it may be time to “step aside” or take profits in 2026.

  • Retail Investors: Goehring advises retail investors to hold their positions regardless of the signal. He believes we are facing a monetary regime change and dollar devaluation, making gold the only ultimate safety.

2026 Portfolio Strategy & Top Picks

• Recommended Allocation:

  • Oil & Gas (50%+ Allocation): Goehring recommends a minimum of 50% of the portfolio in oil and North American natural gas stocks. He believes these will take off in 2026 with little initial participation.

  • Offshore Drilling: He highlights offshore drilling stocks as a key area that will attract huge capital in the next 5-6 years as US shale disappoints.

• Contrarian Picks:

  • Coal: Described as unmentionable in “polite company,” coal equities are a “great contrarian call” and often lead commodity bull markets.

  • Uranium: He remains bullish and advises keeping positions in the sector.

Corey Dias - CEO, Anfield Energy - Uranium (NASDAQ:AEC | TSXV:AEC)

Website

Uranium Market Outlook

• Price Forecast: Dias expects uranium prices to reach triple digits due to a stark supply-demand imbalance

• Market Bifurcation & US Premium:

  • Tariffs and protectionist policies from the US administration could create a bifurcated market where US-produced pounds command a premium over non-US material

  • The US has the largest installed base of reactors but produces less than 2% of its required uranium, creating a critical need for domestic supply

• Tech & AI Demand: The AI boom is bringing new investors and attention to the niche uranium sector. It is also driving demand by preventing the deactivation of nuclear plants and spurring new reactor agreements (e.g., Cameco/Westinghouse)

Anfield Energy Strategy: Hub & Spoke

• Asset Overview: Anfield is a purely US-based company with 25 mines across Utah, Colorado, New Mexico, and Arizona

• Shootaring Canyon Mill (The Hub):

  • This mill is one of only three licensed, permitted, and constructed conventional uranium mills in the US

  • It will serve as the central processing hub for ore from Anfield’s various mines (the spokes)

• Production Timeline:

  • Goal: Start production through the Velvet-Wood mine by mid-2026 and have the mill ready to accept ore by mid-2027

  • Long-Term Plan: Create a pipeline of projects ensuring 15–20 years of continuous production by bringing multiple mines (e.g., Slick Rock, West Slope complex) online sequentially

Regulatory & Permitting Environment

• Expedited Processes: The regulatory environment under the current administration is favorable. Anfield’s Velvet-Wood mine received an expedited permit in just 11 days (after a year of prior review), setting a precedent for faster approvals

• Brownfield Advantage: Anfield focuses on restarting past-producing mines (brownfields) rather than greenfield projects. This minimizes NIMBY (”Not In My Backyard”) risks because the ground is already disturbed, and local communities are historically supportive of mining

Upcoming Catalysts (2026–2027)

• Mill Licensing: Anfield expects to receive the radioactive material license amendment to move the mill from standby to operational status by mid-2026

• Mill Refurbishment: Once licensed, a ~12-month full refurbishment will begin, targeting completion by mid-2027 Immediate work includes replacing old redwood tanks with steel tanks and updating electrical systems

• Mine Construction:

  • Velvet-Wood: Construction is underway and expected to be complete by mid-2026

  • JD-8 (West Slope): A plan of operations has been submitted. Restarting these “turnkey” mines is fast and low-cost (~$1M each)

• Inventory Build: A 3–6 month inventory build is planned before mill restart. The company already has ~350,000–400,000 pounds of uranium in stockpiled material ready to be processed

Marc Bishop Lafleche - CEO, Ecora Resources - Critical Minerals (TSX:ECOR | LSE:ECOR)

Website

Macro Outlook: Electrification & Copper

• The “Electrification” Theme: Lafleche describes Ecora as an “electrification” company rather than just a battery metals or royalty firm.

• 2025 vs. 2026 Market Dynamics:

  • 2025: Defined by precious metals (gold and silver), which dominated capital raises.

  • 2026 Prediction: Expects equity capital markets to broaden beyond precious metals, particularly in the second half of the year, with a “flurry of issuances” in the base metals space led by copper.

• Bullish Copper Thesis:

  • Price Consensus: Long-term consensus for copper is now just under $4.50/lb (real terms), up significantly from ~$3.00/lb five years ago.

  • Drivers: The structural case is underpinned by strong demand (electrification), inflation raising incentive prices for new supply, and recent supply-side disruptions (removing ~5% of global supply).

  • Ecora’s Exposure: Approximately 50% of Ecora’s NAV is currently exposed to copper, with 80% of the total portfolio in base metals.

Uranium Outlook

• Structural Support: While uranium spot prices went sideways after a strong start to the year, Lafleche remains bullish due to the US centering its energy security policy around nuclear (e.g., the Westinghouse transaction).

• Permitting Moat: Bringing new uranium projects online is extremely difficult from a permitting perspective, adding value to existing and developing assets.

Ecora Resources Portfolio & Strategy

• Strategic Transition: 2025 marks a pivotal year where the company has largely completed its transition from a coal-heavy royalty business to one focused on copper and electrification commodities.

• Cash Flow Ramp-Up: Nine months into 2025, Ecora’s base metals exposure is up 150% year-over-year. 2025 marks the beginning of a significant ramp-up in cash flow from capital deployed over the last decade.

• Low-Cost Focus: The portfolio is deliberately built around assets in the lower 50th percentile of the cost curve. This ensures resilience through price cycles and makes development projects more likely to attract financing.

• Jurisdiction: ~85% of the portfolio is located in OECD countries, focusing on well-established mining jurisdictions.

Key Asset: Patterson Corridor East (PCE)

• “Generational Discovery”: Ecora holds a royalty on NextGen Energy’s PCE property in the Athabasca Basin (the “Saudi Arabia of uranium”).

• Valuation Disconnect:

  • Analysts currently ascribe zero value to PCE in Ecora’s NAV because it is still at the drilling stage without a defined resource.

  • Lafleche views this as a massive opportunity, noting that NextGen has indicated PCE could potentially be similar in size to their flagship Arrow project (which underpins NextGen’s $5B valuation).

  • He considers it potentially one of the “best uranium royalties” in the sector.

Valuation & Catalysts for 2026

• Current Valuation: Ecora shares are up ~60-70% year-to-date, yet the market price still roughly equals only the value of the producing portfolio. This implies the market is assigning little to no value to the development assets (like PCE, Santo Domingo, etc.).

• 2026 Catalysts:

  • Voisey’s Bay (Cobalt): Expected to approach nameplate capacity in 2026. Guidance has already been upgraded twice in 2025 amidst strong cobalt price tailwinds.

  • Mimbula (Copper): Capacity expansion continues, targeting an increase from 14kt to 56kt over the next two years.

  • Mantos Blancos (Copper): A feasibility study for Phase II is expected next year. This could add ~25kt of production by retreating waste material that is economic under the royalty structure.

  • Phalaborwa (Rare Earths): A feasibility study is expected in 2026, which is a key step before financing and construction.

  • Santo Domingo (Copper): De-risking events expected as Capstone Copper advances the project.

Luke Alexander - CEO, Newcore Gold - Gold (TSXV:NCAU)

Website

Macro Outlook: Gold & Jurisdiction

• Bullish Environment: Alexander notes that gold is hitting all-time highs heading into the end of 2025, with strong momentum expected for 2026 due to central bank buying and broadening investor interest

• Ghana’s Strategic Advantage:

  • Global Major: Ghana is the sixth-largest gold producer globally, producing ~5 million ounces per year

  • Established Hub: It hosts four of the top 10 global gold producers (Newmont, Gold Fields, AngloGold Ashanti, Zijin)

  • Infrastructure: The country has a deep pool of skilled labor (supported by two mining universities) and a robust service sector, which is critical as global activity ramps up and services become constrained elsewhere

Investor Interest & Alignment

• Generalist Capital: Over the last 12 months, Newcore has seen a shift from purely specialist investors to generalist investors seeking “torque” and outsized performance from development-stage assets

• Inside Ownership: Management and the board own 15.5% of the company, purchased alongside investors, ensuring strong alignment

Enchi Gold Project & Exploration Strategy

• Geological Potential:

  • The project is located on the Sefwi Bibiani Belt, which hosts major deposits like Chirano (~5.5Moz), Bibiani (~6.5Moz), and Newmont’s Ahafo mine (~20Moz)

  • Current resources are defined mostly within the top 80 meters (near-surface oxide), but significant upside exists in targeting high-grade shoots at depth, similar to other large mines on the belt

• Drill Program (45,000m):

  • Phase 1 (~29,000m): Focused on resource conversion (Inferred to Indicated) to support the upcoming Pre-Feasibility Study (PFS)

  • Phase 2 (~16,000m): Focused on pure exploration, testing deeper targets and strike extensions. This drilling will continue through Q1 2026

• Funding: The company is fully funded for the current program and PFS. Additionally, ~$10 million from in-the-money warrants is expected by February 2026, which will fund expanded drilling well into 2027

Key Catalysts for 2026

• Pre-Feasibility Study (PFS):

  • Newcore plans to commission the PFS in early 2026 and complete it by mid-2026

  • This is viewed as a major de-risking event that could trigger a fundamental re-rating of the stock

• Steady News Flow: With three drill rigs turning, investors can expect assay results roughly every 4–6 weeks throughout the year

Rob Weir - VP Corporate Development, Lithium Royalty Corp - Lithium (TSX:LIRC)

Website

Lithium Market Outlook (2026 & Beyond)

• From Surplus to Deficit: The narrative has shifted from “forever surpluses” to a potential “demand shock”. Weir notes that analysts (e.g., Canaccord) are now predicting a 170,000-ton deficit for 2026/2027.

• Price Trend: Lithium prices are trending higher (lithium carbonate back over 100k RMB) after three years of pain, signaling a return to a bull market.

• Supply Challenges:

  • While some mines can turn back on, restarting is not instantaneous due to permitting, labor, and capital constraints.

  • Meeting 2030 demand estimates (e.g., CATL’s forecast) would require 65 to 80 commercial-scale lithium mines.

  • Inventories have been whittled down to near zero.

Demand Drivers: The “CATL View” vs. Consensus

• CATL’s Influence: Weir places heavy weight on the outlook of CATL (the world’s largest battery manufacturer), noting they have the most accurate real-time data.

  • CATL forecasts 4 million tons of demand by 2030, significantly higher than the consensus of 2.8 million tons.

  • Weir explicitly dismisses IEA forecasts as “out to lunch” and far off the market reality.

• Energy Storage Systems (ESS):

  • ESS is growing faster than the EV sector and is a global phenomenon rather than a regional one

  • It is expected to account for ~30% of the market (1.4 million tons) by 2030

Lithium Royalty Corp (LRC) Overview

• Financial Position: LRC has a clean balance sheet with no debt and holds approximately $27 million in cash (primarily from the partial sale of Tres Quebradas)

• Portfolio Strategy:

  • Focuses on high-grade hard rock assets in safe jurisdictions¹³.

  • 37% of the portfolio is currently in production (assets include Grota do Cirilo, Tres Quebradas, Mariana)

  • This is expected to grow to nearly 60% with near-term restarts, driving a potential re-rate in the stock

• Share Buybacks: Management aggressively bought back almost 800,000 shares in Q2 when lithium prices bottomed at ~$700/ton, viewing it as buying “a dollar for 15-20 cents”

Key Catalysts for 2026

• Finniss Mine Restart (Core Lithium):

  • Identified as the most material catalyst. The restart could generate $6.5M–$7.5M USD in annual revenue for LRC, instantly making the company free cash flow positive

• Winsome Resources (Adina/Renard):

  • Weir highlights Winsome’s potential acquisition of the Renard mine infrastructure, which could save $500 million in CapEx and accelerate production by two years

  • LRC holds royalties on claims producing half the reserves, with technical reports estimating $300M USD in cash flow to LRC over 17 years

• Case Lake (Power Metals):

  • Just signed an offtake agreement with Albemarle covering lithium and cesium²⁰. Albemarle’s interest in cesium (used in defense/atomic clocks) highlights the strategic value of these assets

• Sigma Lithium: Expected to sign three offtakes in 2025 and two in 2026, driven by strong appetite observed in China

James Seyffart, Bloomberg - Bitcoin, ETFs

Bitcoin & Crypto Market Dynamics

• Risk Asset Correlation: Contrary to the “digital gold” narrative, Bitcoin continues to trade primarily as a risk asset, correlating more with tech stocks (like the QQQ) than safe havens. It tends to act as a safe haven only in specific scenarios like banking crises.

• “Diamond Hand” ETF Holders:

  • Despite price volatility (down ~30% at times), ETF investors have largely held their positions.

  • Cumulative flows into Bitcoin ETFs remain strong (~$57 billion), with minimal outflows relative to total assets. Selling pressure has come primarily from long-term crypto insiders (”OGs”) taking profits, which Seyffart compares to an “IPO moment.”

• Volatility Dampening: The institutionalization of Bitcoin via ETFs is expected to dampen extreme volatility over time. While 30% drawdowns will persist, Seyffart believes the days of 70–80% crashes may be over as portfolio rebalancing acts as a stabilizer (investors selling rips and buying dips to maintain target allocations).

Crypto Treasuries & The “MicroStrategy Play”

• Saturated Market: The trend of companies adopting “crypto treasuries” (copying the MicroStrategy playbook) has slowed. Seyffart views the market as oversaturated, similar to the SPAC boom, with too many issuers chasing a weakened narrative.

• MicroStrategy Anomaly: Seyffart expected MicroStrategy’s premium to compress once ETFs launched. Instead, it created a “flywheel” effect where higher stock prices fueled more Bitcoin buying. He warns this flywheel could eventually spin in the opposite direction.

ETF Outlook for 2026

• “Tidal Wave” of Launches:

  • There are ~126 filings for crypto-related ETFs across 35 different assets. Seyffart predicts a “deluge” of launches in the next 6–12 months, followed by a wave of liquidations for products that fail to gain traction (capitalism at work).

  • Index Products: He expects strong demand for basket/index ETFs (e.g., “Top 10 Crypto” or “Bitcoin + Ethereum”) as investors seek diversified exposure without picking individual winners.

• Industry Records: The US ETF industry is “on fire,” on track for $1.4 trillion in flows for the year (beating the prior record by ~25%) and over 1,000 new launches.

• Mutual Fund Exodus: Mutual funds are seeing massive outflows ($1.1 trillion), driving issuers to launch ETF share classes or convert strategies to ETFs to retain assets.

• Leverage Limits: The SEC has effectively capped leveraged ETFs at 2x, preventing the launch of 3x and 5x products. Seyffart views this as a positive move to prevent industry “black eyes” from massive blow-ups.

Key Trends to Watch

• Active vs. Passive: While passive flows (like into Vanguard’s VOO) still dominate, active ETFs are booming by number of launches.

• Fee Wars & “Beta Adjusted Fees”: Investors are getting smarter about fees. They will pay up for “hot sauce” (unique, concentrated, or high-alpha strategies) but refuse to pay high fees for “closet indexing” (beta).

• Innovation: New areas include “defined outcome” products (capped upside/downside), option-based income strategies, and niche exposures like private credit or SpaceX (XOVR), though interest varies significantly.

Ian Harris - CEO, Copper Giant - Copper (TSXV:CGNT)

Website

Copper Market Outlook: The Supply Cliff

• The AI Factor: Harris identifies AI as the critical new driver, describing the demand as “insatiable” and a “life and death battle” for companies and nations, leading to a willingness to pay any price for the necessary infrastructure (data centers, electrification).

• Supply Crisis:

  • “The Cupboard is Dry”: Despite record exploration budgets, new discoveries have plummeted since the 1980s.

  • Physical Crunch: Unlike gold or silver, which have large above-ground inventories, copper consumption is absolute. Harris notes fears over physical delivery are heating up the market.

  • 2026 Outlook: With major disruptions (e.g., Cobre Panama still out, issues in Congo), anticipated supply deficits are hitting faster than expected, making 2026 a potentially explosive year for prices.

Industry Dynamics: The Return to Greenfields

• Risk Aversion: Harris explains that after the 2008–2013 cycle, where many CEOs were fired for massive CAPEX blowouts on new builds, the industry shifted to “brownfield” expansions and M&A to minimize risk.

• The Pivot: Brownfield expansions are facing diminishing returns as grades drop (average feed grade is now ~0.3%). Investors are now asking “where is future growth?” forcing majors to look back at greenfield exploration to find the necessary scale.

Copper Giant (Mocoa Project) Overview

• Tier 1 Milestone: The project recently updated its resource to surpass 1 billion tons.

  • “Size Matters”: Harris notes that 1 billion tons is the threshold to attract a major mining company. Projects between 200–500 million tons sit in a “no man’s land” (too big for a junior to build, too small for a major).

• Valuation Disconnect:

  • Harris identifies only ~5 other junior projects globally that are near-surface and >1 billion tons.

  • Peers trade at ~10–12 cents per pound in the ground, while Copper Giant trades at ~0.2 cents, suggesting a massive re-rating opportunity as the market digests the new resource size.

• Geological Potential (”Tail of an Elephant”):

  • The deposit shows a 10-million-year fertile period between copper pulses. Only two other known districts (Chuquicamata and Rio Blanco, which produced ~60% of Codelco’s copper) have longer fertile periods, indicating immense district-scale potential.

  • Current drilling is likely just “one of the fingers” of a much larger system.

Catalysts for 2026

• Drill Results: Continuous news flow from ongoing drilling to drive market recognition of the asset’s quality.

• Colombia Elections: Presidential elections will be held in May 2026, with a new president taking office in August. This political transition is a key event for the country’s mining sector.

• Preliminary Economic Assessment (PEA):

  • Targeting completion around mid-2026 (aligning with the new administration).

  • The PEA will showcase the project’s infrastructure advantages (power, roads, and port access at only 1,500m elevation, compared to high-altitude Andean projects) and highlight the high-grade starter pit potential (190 million tons at ~0.94% CuEq).

Heather Exner-Pirot, Macdonald Laurier Institute - Canadian Resources

Website

Canada’s Resource Standing

• Underperformance: Despite being the second-largest country by landmass, Canada often “punches below its weight” in resource development. It ranks roughly 8th in mining but should arguably be number two given its geological endowment.

• World-Class Assets: Canada holds exquisite resources:

  • Oil: 4th largest reserves (Oil Sands).

  • Uranium: 2nd largest reserves (Athabasca Basin).

  • Potash: #1 globally.

  • Natural Gas: World-class deposits in the Montney (BC/Alberta).

• Geography: Unlike the US or Australia, Canada’s resources are often inland, in the Canadian Shield, or in the North, making infrastructure more difficult and expensive to build.

Regulatory Environment & Infrastructure

• “Bottom 20%”: Canada typically ranks in the bottom 20% for permitting timelines.

• Federal vs. Provincial:

  • Resources are constitutionally provincial jurisdiction, but federal regulations (like the “Impact Assessment Act” or Bill C-69) created redundancy and slowed approvals.

  • Since 2019, only two projects have been approved under this act.

  • Shift in Momentum: Exner-Pirot notes that recently, almost every province and the federal government have moved to speed up approvals, spurred partly by a loss of complacency relative to the US (Trump administration policies).

• Pipelines:

  • Oil: The focus has shifted from sending oil south (US) to reaching Asian markets via the Pacific coast (e.g., Trans Mountain expansion).

  • Gas: Natural gas pipelines (e.g., Prince Rupert Gas Transmission) are easier to approve politically than oil pipelines because LNG is viewed as the “good fossil fuel” by both federal Liberals and BC NDP.

Sector Outlooks

• Gold (The Bright Spot):

  • Top Performer: Gold is now Canada’s #2 export and the “only bright spot” in recent trade balances.

  • Exploration: Nearly half of all exploration projects in Canada are for gold. The last six mines brought into production were gold mines.

  • Advantages: Gold projects face less resistance and require less heavy infrastructure (product can be flown out) compared to bulk commodities like iron ore.

  • Agnico Eagle: Highlighted as Canada’s biggest mining company, now larger by market cap than the biggest oil sands company.

• Industrial Metals (Copper, etc.):

  • Copper: Prices are rising, and new projects like the Foran mine in Saskatchewan and expansions in BC are on the horizon.

  • Ring of Fire: Exner-Pirot is skeptical, noting that despite the hype, it “isn’t producing a single ounce” and likely never will compare to major gold mines in Ontario.

• Defense/Critical Minerals: While essential (antimony, rare earths), these markets are small in dollar terms compared to major commodities like potash, coal, and gold.

2026 Outlook

• Bullish Cycle: Exner-Pirot believes we are at the beginning of a resource boom after a 10-year “bust.”

• Growth Drivers:

  • Uranium & Gold: Already steaming ahead.

  • Copper & Natural Gas: Prices have started to rise in late 2025.

  • Oil: When oil joins the rally, she expects Western Canada’s GDP growth to move in “one direction” (up).

• Policy Shift: A final investment decision on major gas infrastructure (connected to Ksi Lisims LNG) is expected in 2026.

It is the strangest of worlds. AI capex mania in the US gets ever more extreme in an American stock market driven primarily by retail investors and passive investment strategies while at the same time the gold price, and in particularly long ignored gold mining stocks, have of late gone vertical.

Yet the long end of the Treasury bond market remains remarkably calm, all things considered, even as the US dollar remains essentially weak.

The US dollar index is now down 9.3% year to date, its worst performance in any year since 2017.

Meanwhile the recommencement of Federal Reserve easing has, for entirely understandable reasons, given the bulls more confidence.

The increase in the S&P500 market cap since bottoming in early April is US$16.6tn, which is equivalent to 54% of America’s GDP.

US Economic Health is Now Highly Geared to the Stock Market

That has provided massive support to the American economy in terms of the wealth effect and raises an entirely legitimate question mark over the Fed’s decision to resume easing.

Yet the American economy is extremely lopsided with an estimated 49.2% of consumption accounted for by consumers in the top 10% of the income distribution, according to an interesting recent analysis by Moody’s Analytics’ chief economist Mark Zandi (see Bloomberg article: “Top 10% of Earners Drive a Growing Share of US Consumer Spending”, 17 September 2025).

What is abundantly self-evident is that the American economy is now extremely geared to the US stock market, with the outcome of the AI capex cycle the key determinant of the latter’s long-term health.

This writer’s base case remains that the US stock market peaked as a percentage of MSCI All Country World late last year at 67.2% on 24 December 2024.

But this view will likely be wrong structurally if the AI capex is successfully monetised which is not the base case here.

Still this writer could also be wrong tactically if this momentum continues for longer, helped by the likes of continuing Fed easing and the beneficial impact of OBBBA in terms of delaying the accounting impact of the capex spend for Big Tech, via extended depreciation schedules and the like, as the hyperscalers’ business models turn from asset light to asset heavy.

For now the US market is at 64.2% of MSCI All Country World, which is still below the peak recorded late last year as other major stock markets have been rallying, most interestingly China where the AI theme has also increasingly been the thematic driving share prices but from a much lower valuation level than in the US.

This writer vastly prefers from an investment standpoint the Chinese approach to AI which appears to be much more practical, as discussed here previously (see Key Takeaways From Our Recent Trip to Beijing, 6 August 2025).

But for now the lessons from the DeepSeek moment in late January have been completely forgotten by investors in the US market.

Still they remain highly relevant.

Signs are Emerging of a Speculative Mania in Stocks

Meanwhile, markets are ever more reflexive in the AI era as retail investors appear to have been buying the stocks their AI chatbots have been telling them to in the ultimate feedback loop. Indeed, there have been mounting symptoms of speculative mania in the US.

One of the most dramatic was the euphoric market reaction to Oracle’s earnings report in early September.

The company shares rose nearly 40% in a day, or by US$255bn, after Oracle said it had increased its outstanding contracted revenues not yet realised by 359% YoY to US$455bn in 1QFY26 ended 31 August.

One day later Oracle confirmed where a large part of this increase came from when it announced it had signed a US$300bn deal to provide OpenAI with computing power over a five-year period.

The interesting point is that OpenAI is reportedly currently losing about US$1bn a month and generating around US$13bn in annual revenues.

The company has also told investors it will burn US$115bn in cash by 2029.

In the context of these numbers, the scale of the OpenAI-Oracle contract looks ambitious in the extreme. In fact, OpenAI’s focus on investing huge sums scaling up proprietary large language models remains the exact opposite of the cheap open source approach adopted by DeepSeek, which in this writer’s view is much more likely to generate commercially viable use cases applying AI technology.

Meanwhile, Oracle’s share price has now declined by 42% since the September announcement.

If the Oracle news was already remarkable, a few weeks before Nvidia had announced it will invest as much as US$100bn in OpenAI to support the building out of new data centres and related AI infrastructure.

That should in theory increase Oracle’s chances of getting paid.

The news followed a number of other investments made by Nvidia in AI-related companies, most of whom like OpenAI are also its customers in what looks suspiciously like a return to the vendor financing model which blew up in the Nasdaq bust at the start of this century.

One example of a company Nvidia partners with is CoreWeave whose business, so far as this writer understands it, is primarily about buying Nvida GPUs to rent them out.

Yet the returns from renting out GPUs are said to be falling.

This renting out business and the related financing, which can be viewed as a sort of digital equivalent to the WeWork, is an area for investors to keep an eye on. For if there is going to be an unravelling it is likely to show up there first.

Markets have begun to react to all of the above as can be seen in the rise in credit default swaps (CDS) of both Oracle and CoreWeave, both of whom are leveraged unlike the hyperscalers.

Meanwhile, the Federal Reserve cut the Fed funds rate by another 25bp last week and also resumed balance sheet expansion.

The Fed cut rates by 25bp on 10 December to 3.5-3.75% as widely expected. But, more interestingly, the Fed decided to resume balance sheet expansion again by initiating purchases of shorter-term Treasury securities (mainly Treasury bills) “for the sole purpose of maintaining an ample supply of reserves over time”.

It plans to purchase US$40bn of Treasury bills in the first month starting last Friday.

Still perhaps the most interesting development as regards the Fed of late was the public reference by new Fed governor, Stephen Miran, in his testimony to the Senate in September to a “third mandate”, namely “moderate long-term interest rates” (see Bloomberg article: “Fed ‘Third Mandate’ Forces Bond Traders to Rethink Age-Old Rules”, 16 September 2025).

Apparently, this is referenced in the original statement in the Federal Reserve Reform Act in 1977.

Still what Mr. Miran, who is also chairman of the Council of Economic Advisers, may have meant by this, so far as this writer is concerned, is targeting the long end of the yield curve.

This is of course the same Mr Miran who wrote the by now notorious paper recommending foreign creditors of the US should agree to invest in century Treasury bonds at a below market yield in return for America’s “security umbrella”, as discussed here in the past (see Mar-A-Lago Accord Deep Dive: Implications and Risks, 29 April 2025 and Hudson Bay Capital report: “A User’s Guide to Restructuring the Global Trading System” by Stephen Miran, November 2024).

The arrival of Miran at the Fed and the talk of “third mandates” is a reminder, if it were needed, of the likely end game of some form of yield curve control which would clearly be US dollar bearish and gold bullish.

Equity Investors Should Start Preparing Their Portfolios for Rising Bond Yields

Meanwhile the ten-year Treasury bond yield has so far remained remarkably calm in the face of renewed Fed easing.

Last year it rose by 116bp in four months after the Fed resumed easing in mid-September 2024 from 3.65% to a recent high of 4.81% on 14 January.

This year the 10-year Treasury bond yield has so far risen by only 15bp from 4.03% to 4.18% since the Fed resumed easing in mid-September.

For this reason, in this writer’s view it is now a good idea for equity investors to hedge their portfolios by betting on a pickup in bond volatility.

Remind Me Why you Still Own G7 Government Bonds?

Meanwhile this writer maintains the view, held here since March 2020, that investors should look to dispose of all G7 “risk free” government bonds.

In this respect, the current record low spreads on investment-grade corporate bonds should be seen in the context that the likely end game in the G7 world is that the best corporate bonds trade through government bonds, in terms of yields, because of their vastly superior balance sheets.

The US investment-grade corporate bond yield spread has declined from 119bp in April to 72bp in mid-September, the lowest level since mid-1998, and is now 78bp.

Indeed such a trade through government bond yields has already happened in France of late, with borrowing costs for some French companies falling below French government bond yields of a similar maturity (see Financial Times article: “French companies’ borrowing costs fall below government’s as debt fears intensify”, 14 September 2025).

For example, the LVMH bond maturing 2033 with a 3.5% coupon now yields 3.21% or 10bp below the yield of the French government bond maturing 2033.

Japan has been one of the stock markets favoured by this writer. There has recently been some political noise with the departure of yet another Japanese prime minister.

Shigeru Ishiba resigned on 7 September when it became clear that he was going to be forced out by a party vote.

Such an outcome always seemed inevitable following the loss of a LDP majority in the Upper House election held in July. The LDP also does not have a majority in the Lower House of the Diet.

The LDP party members selected Sanae Takaichi as the new LDP president on 4 October, who was subsequently confirmed by the Diet as the first ever lady Prime Minister on 21 October.

The election of Takaichi as Japan’s Prime Minister is a positive for the stock market as it suggests a more dynamic leadership in the Shino Abe mode.

Takaichi is a protégé of the late prime minister and an advocate of more doveish monetary policy.

It is also interesting that Takaichi has formed a coalition with the conservative Osaka-based Japan Innovation Party (Ishin) ending 26 years of LDP coalition governments with the Komeito.

This will lead to more robust policies as regards both defence and immigration as the political process responds to the growth in right-wing populism in Japan.

There is growing evidence of a demographic divide in Japanese politics.

Data shows that more than 55% of the LDP votes in the Upper House election came from people aged over 70.

This suggests that the long ruling LDP’s core support will be literally dying out in coming years.

Implications of Japan’s Demographic Cliff

Meanwhile one core issue which is upsetting Japan’s younger generation is that scant effort was made to reform Japan’s social security and medical system ahead of the country’s long anticipated demographic cliff.

Thus, Japan is currently spending Y140tn or 22.4% of GDP a year on social security and healthcare, while working Japanese are paying 15% of their gross wages on contributions to social security, and their employers another 15%.

Meanwhile the retired elderly aged over 75 only have to pay 10% towards their healthcare costs and 20% for those aged 70-74. Given that 36% of the population is now aged over 60 this is, understandably, causing rising tensions between the generations.

The other issue starting to cause tensions is a growing pushback against immigration. Thus, Justice Minister Keisuke Suzuki made headlines when he stated in late July at the Japan National Press Club in Tokyo that the proportion of foreigners in Japan could exceed 10% by 2040 (see Japan Times article: “Japan’s foreign population could top 10% in 2040, says justice minister”, 31 July 2025).

This raised eyebrows as did a NHK report in August that four Japanese municipalities were designated as “Africa’s hometowns” (see NHK report: “JICA’s plan to pair four Japanese ‘hometowns’ with African nations takes on a life of its own”, 28 August 2025).

If the actual level of immigration is only 2.8% of the population, it is easier to immigrate to Japan than many might assume given the country’s famed xenophobia.

For example, it has been possible to acquire a five-year entrepreneur visa for just Y5m (US$32,000).

The recipient of such a visa can then bring in relatives, including spouse and children but seemingly not parents, all of whom can then take advantage of the Japanese healthcare system.

In the case of those aged over 70 they only pay 10-20% of the medical cost, the same as Japanese nationals.

Such an offer has proved attractive, for example to middle-class Chinese.

Immigration data shows that 41,615 foreigners held such visas at the end of 2024, up 11% YoY, with Chinese nationals making up 2,741 or 52% of the total.

Meanwhile, in terms of the required capital investment for such a visa, the authorities hiked it to Y30m (US$192,000) in October.

Such companies are also now required to employ at least one full-time employee who is a Japanese citizen or permanent resident.

While it could be argued that immigration is a practical necessity for Japan, it is no surprise that populist pressures on the right of a kind long observed in America and Japan are now building.

The clearest manifestation of this so far is the populist and social media savvy Sanseito Party, which won a surprisingly large 14 seats in the Upper House election.

Its support base is mainly in the 30-40 year old age group and its main 2 policies are anti-immigration and increased handouts to address rising living costs.

Falling Wages and Rising Housing Prices Pressuring Japanese Youth

In Japan it remains the case that inflation is primarily driven by the cheap yen and this has continued to depress real wages. Real monthly contractual cash earnings per employee declined by an average 1.3% YoY in the three months to September.

A further pressure point, at least in central Tokyo, has been rising property prices which has made property ever more unaffordable for those not on the housing ladder.

That is the consequence of years of ultra easy monetary policy and a central bank which remains deliberately behind the curve in terms of monetary tightening.

Thus, high-end condos in central Tokyo have been transacting at increasingly higher prices.

The average asking price of apartments in Minato-ku, the district known for its high-end condos, has risen by 40% over the past 12 months to Y3.4m/sqm, according to Akasaka Real Estate.

The divergence in price between new property and second-hand property in the same location has also become enormous.

Thus, the average price of apartments aged three years or less in Minato-ku is now Y5.5m/sqm, or 2.6x the average price of Y2.1m/sqm for apartments aged 30 years and over.

The State of US-Japan Tariffs

Still if all of the above is a breeding ground for populism, there is so far a remarkable lack of any evidence of any populist backlash against the bullying tactics of the Trump administration as regards the tariff negotiations with Japan.

One problem has been that the negotiations have encountered an ongoing gulf between what the Japanese side believed they had agreed and what President Trump stated had been agreed.

Still the US president finally signed an executive order on 4 September making a baseline 15% tariff rate official, effective 16 September, which means automakers will not have to pay the previously threatened 27.5%.

But the price paid for the US agreeing to the lower tariff is a commitment by Japan to invest US$550bn into the US.

On this point, there remains a lot of room for continuing disagreement.

The Japanese view seems to be that the US$550bn includes loan guarantees from Japanese public financial institutions whereas this is most unlikely to be the interpretation in Washington.

Indeed Trade Secretary Howard Lutnick said on US TV in early September that, in return for lower tariffs, the Japanese “have given President Trump US$550bn for President Trump to direct where and how he wants it invested in America”.

Then there is also the issue, still seemingly to be agreed, of how the profits on any such investments, assuming there are any, are to be divided.

The Donald’s original request was for a 90/10 split! Apparently, the memorandum of understanding signed on 4 September by Lutnick and the main Japanese negotiator, Minister in Charge of Economic Revitalization Ryosei Akazawa, stated that Japan and America will evenly split the cash flow generated until Japan’s investment is paid off, at which point the US will take 90% of the proceeds and Japan 10% (see Financial Times article: “Trump to direct Japan’s trade deal cash”, 9 September 2025).

All of the above would seem natural fodder for populist politicians to exploit.

But there is no sign as yet of any such pushback politically, despite private comments about extortion tactics, doubtless in large part because of Japan’s reliance on the US for the country’s defence.

Indeed the obvious risk is that if Japan does not agree to Trump’s tariff agenda, the US president will demand that Japan pays more for its defence.

About 53,000 US troops are still stationed in the country.

On this point, it is the case that this writer has always viewed the relationship between the US and Japan post-1945 as that of older brother and younger brother.

And older brothers tend to like to bully younger brothers.

Japanese Stocks are on the Move

As for the Japanese stock market, it has continued to make solid gains, up 21.3% year to date, despite the tariff concerns helped by continuing evidence of improving corporate governance.

Topix-listed firms have announced Y11.5tn of share buybacks since the start of the fiscal year while foreign investors have been net buyers for six of the past eight months, purchasing a net Y7.82tn worth of Japanese stocks since April, after selling a net Y2.01tn in 1Q25.

Indeed the Topix is up about the same as the Eurozone’s Euro Stoxx Index year-to-date in local currency terms with the difference in US dollar terms explained by the euro’s much greater appreciation against the US dollar.

Thus, the Topix has risen by 21.3% year-to-date in yen terms and is up 22% in US dollar terms. By contrast, the Euro Stoxx Index is up 18.4% in euro terms and 32.7% in US dollar terms over the same period.

Japan is Showing Good Growth, but what about Interest Rates?

BoJ Governor Kazuo Ueda remains as cautious as ever, as regards monetary tightening.

The risk about being too cautious is a further steepening of the yield curve with the 30-year JGB yield now 3.35%.

For such reasons there is the potential for another 25bp rate hike at the 19 December BoJ policy meeting to 0.75%.

Such an outlook clearly creates the potential for yen appreciation; though the risk is Ueda’s innate caution in the sense that he may well want to wait for evidence of whether the tariffs impact growth negatively both in Japan and, perhaps more importantly, in the US.

For such reasons, money markets are only forecasting 15bp of BoJ tightening by the end of this year.

Meanwhile, that the Japan stock market is trading at a new record high reflects in part the Tokyo Stock Exchange-driven corporate governance reform agenda.

It also reflects the accumulating evidence that Japan has returned to solid nominal GDP growth which is good for equities and bad for government bonds.

Japan nominal GDP rose by 3.9% YoY in 3Q25 and is up an annualised 3.3% over the past five years, up from an annualised 0.0% in the five years to 3Q22.

While the 10-year JGB yield has risen from a negative 0.29% in August 2019 to 1.81%.

This is also why both nominal GDP growth and ten-year government bond yield look on the point of crossing their Chinese counterparts.

China nominal GDP slowed to 3.7% YoY in 3Q25, compared with 3.9% YoY in Japan.

While the China 10-year government bond yield has declined from a peak of 4.7% in November 2013 to 1.83% or “only” 2bp above the 10-year JGB yield, down from 407bp in November 2013.

Meanwhile, bank loan growth remains healthy running at 4.5% YoY in October.

This is the strongest loan growth in Japan, excluding the post-pandemic period, since the data series began in 1992 following the peak of the Bubble Economy in 1990.

27 August was the Ganesh Chaturthi holiday in India.

But it was not a happy day in the country in the specific sense that the Trump administration went ahead with the threatened 50% tariff levied on Indian goods exports, with the main exemption pharmaceuticals.

This amounts to an estimated US$55-60bn direct hit to the economy with the most negatively impacted sectors the likes of textiles, shoes, jewellery and gems, all of which are employment intensive.

This writer would never have predicted such an outcome.

But conversations in New Delhi two months ago make it clear that the tariffs are primarily the consequence of the American president’s “personal pique” that he was not allowed to play a role in seeking to end the long running acrimony between India and Pakistan following the four-day military conflict between the two countries in May.

India has never accepted third party intervention in its relations with Pakistan and this remains a “red line” despite the economic costs of depriving the 47^th American president of one of his opportunities to win the Nobel Peace Prize.

The other point is that no Indian government, including the current government, is going to open up agriculture to imports given the devastating impact it would have on many poor people.

Nearly 250m farmers and related labour derive their incomes from agriculture with the sector accounting for nearly 40% of India’s workforce.

That said, the word is that the two countries were very close to securing a trade deal before the conflict with Pakistan broke out triggered by the killing of 26 Indian tourists in Kashmir in April.

So the draconian tariffs India now faces is the result of an unfortunate series of events, compounded by the fact that Donald Trump has not ended the Ukraine conflict as he stated he would do.

As a result, India’s continuing purchases of Russian oil again become an issue.

But the reality is that everyone in the Indian capital understands that the real issue is the refusal to allow Donald Trump’s personal intervention in the Pakistan issue.

This is a classic example of where the “conceptual vacuum” in Washington is not in the national interest since it is surely not in America’s interests to push India closer to China, a trend which was already happening with direct flights between the two countries having resumed in late October after more than five years.

Meanwhile, India needs China’s cheap goods, for example, solar panels, with China imports into India now running at an annualised US$120bn or 16.3% of India’s total imports and growing by 11% YoY in the 12 months to September.

Meanwhile, there remain growing hopes of a deal being negotiated in the near term.

The other positive point is that the Trump administration has not yet at least focused on India’s booming exports of services.

This is not just IT services currently running at US$150bn annually, but also so-called global capability centres (GCCs) set up mainly by US multinationals which base their IT infrastructure out of India and where revenues total around US$60bn annually.

This reflects the reality so far that when Trump talks about trade, he seems to be almost solely focused on trade in goods.

Will India Stop Russia Oil Imports?

As regards the Russian oil issue, Delhi has also maintained a relatively hard line.

Foreign minister Subrahmanyam Jaishankar has stated publicly that the largest importer of Russian oil is Europe, albeit oil which has often been refined in India, thereby highlighting European hypocrisy on this issue.

He also noted, as previously discussed here (see The Real Sticking Point in China-US Negotiations, 27 October 2025), that China remains the bigger buyer of Russian oil.

The tariff issue is all the more important in India because growth has slowed this year, particularly nominal GDP growth which is so important for equity markets.

The estimated nominal GDP growth of 8.5-9.0% YoY in FY26 ending 31 March 2026 would mark the lowest growth rate in the past two decades except Covid-related FY20 and FY21.

The main reason for this nominal slowdown is that headline CPI inflation was at an eight-year low of 1.5% YoY in September. While WPI inflation was only 0.1% YoY in September.

How is India Coping with US Tariffs?

Still, if this is the backdrop, the reason the stock market has not yet reacted more negatively to the 50% tariffs, particularly consumption-related stocks, is the escalating policy response of the government.

Income tax cuts were already implemented in the February budget.

But the more positive news of late has been a rationalisation and simplification of GST where the previous four bands (5%, 12%, 18% and 28%) have been reduced to two bands (5% and 18%).

This GST overhaul has been long in the planning, but execution was speeded up as a direct result of the Trump triggered tariff issue.

The new GST rates took effect 22 September.

The view is that the fiscal loss will only be small to the central government.

Indeed, the hopes are that the GST cuts will be self-financing by generating more sales.

Meanwhile, if the income tax cuts primarily favour the urban middleclass since only an estimated 30m Indians pay income tax, the benefits from GST cuts are much more widely spread as a tax on spending is felt by everybody.

If these are the two major pro-consumption initiatives taken by the government so far, though more fiscal easing is likely coming, the Reserve Bank of India (RBI) has also turned unambiguously doveish since new governor Sanjay Malhotra took over last December.

He has cut the policy repo rate by 100bp since February to 5.5%, though keeping it unchanged in the last two meetings in August and October, with the possibility of another 25bp cut to 5.25% by the end of this fiscal year ending 31 March 2026, given that inflation has been running well below the central bank’s formal target of 4%+/-2% (i.e. 2-6%). Headline CPI inflation was 1.54% YoY in September.

There is no doubt that the Trump administration remains focused on getting the cost of debt servicing down.

The strategy seems to be to try to grow out of America’s fiscal debt problem, with a little help of course from surging tariff revenues currently running at US$29.7bn in September or an annualised US$356bn.

This explains in large part the continuing pressure on the Fed to cut rates, which Fed chairman Jerome Powell has partly reciprocated with 50bp of rate cuts since mid-September even though inflation remains above the Fed’s 2% target. CPI was 3.0% YoY in September.

Scott Bessent has called for the Fed to do more, having stated in August that the neutral rate is about 1.5 percentage points lower than the then federal funds rate level of 4.25-4.5% (see Bloomberg articles: “Bessent Urges Fed to Lower Rates by 150 Basis Points or More”, 13 August 2025 and “Bessent Says He’s Not Pushing Fed Cuts, Just Touting Models”, 14 August 2025). It is now 3.75-4.0%.

Similarly, Bessent is also seemingly focused on keeping the US Treasury bond market as calm as it has undoubtedly been of late.

US Bond Yields Remain Subdued, Unlike in Japan and Elsewhere

This probably explains his public criticism of the Bank of Japan for not hiking rates following its meeting at the end of July.

Bessent told Bloomberg at the time that the BoJ is “behind the curve” and that “they are going to be hiking and they need to get their inflation problem under control” (see Bloomberg article: “Bessent Says BOJ Is Falling Behind the Curve, Expects Hike”, 14 August 2025).

The Japanese central bank opted to stay on hold with Governor Kazuo Ueda sending the doveish message at the post-meeting press conference that the desired approach was to wait and see the impact of tariffs on both the Japanese and American economies in the second half of this year.

Moreover, the Japanese central bank stayed on hold at its meeting last week.

It is highly unusual for a US Treasury Secretary to comment on a Japanese central bank meeting in this fashion.

In fact, this writer cannot remember such a precedent.

Still the motive seems to be to avoid negative bond market volatility.

The Japanese 10-year and 30-year bond yields remain at near multi-year highs.

The 10-year JGB yield rose to 1.71% on 10 October, the highest level since July 2008, and is now 1.67%. While the 30-year JGB yield rose to a record 3.35% on 7 October and is now 3.06%.

Still their correlation with the long end of the US treasury bond market has continued to decline, a feature of the past nine months.

Indeed the rolling 90-day correlation between US and Japan 30-year government bond yields has collapsed from 0.87 in mid-January to a negative 0.16 at the end of October.

While the correlation between US and Japan 10-year yields is down from 0.92 to a negative 0.58 over the same period.

This is a positive from a US standpoint in the sense that the long end of the Treasury market has not sold off in conjunction with JGBs.

The US 10-year and 30-year Treasury bond yields have declined by 73bp and 35bp from 4.81% and 5.0% in mid-January,

while the Japan 10-year and 30-year JGB yields are up 42bp and 73bp over the same period.

Nor for that matter has the US Treasury market been selling off with long-term British gilts where yields have also been near multi-year highs of late.

The 10-year and 30-year gilt yields rose to a recent high of 4.92% and 5.75% in January and September respectively, the highest levels since July 2008 and May 1998 respectively, though they have since declined to 4.41% and 5.18%.

In this respect, the US Treasury secretary will undoubtedly have been pleased by the dramatic decline in bond volatility since the Treasury market sold off on the original Liberation Day tariff announcement on 2 April.

The so-called MOVE index, which measures implied Treasury bond market volatility by tracking a yield-curve weighted basket of options, has declined by 53% from a recent high of 139.88 on 8 April to 65.75 on 29 October, the lowest level since November 2021, and is now 66.61.

The Treasury is Targeting Low Volatility on Both the Short and Long End of the Curve

Meanwhile, it is clear that Bessent is highly focused on not only getting short-term rates down but also avoiding disruption at the long end of the market.

This can be seen not only in the ever-growing resort to short-term issuance previously discussed here (see An Exploration of Trump’s View on Crypto, Short Term Treasuries and Yield Curve Control, 11 September 2025), but also in the decision to buy back more long-term Treasuries.

The US Treasury announced in the quarterly refunding review in late July that it would double the frequency of liquidity support buybacks in both the 10-20 year and 20-30 year nominal coupon buckets from two times per quarter to four times per quarter.

This would increase the maximum aggregate size of liquidity support buybacks from US$30bn to US$38bn per quarter.

But whatever the tactics they seem to have been working in the sense that the recent calm in the long end of the Treasury bond market, reflected in the plunge in the MOVE index, has been a major contributing factor to the US equity rally of recent months helped of course by the positive tax consequences for corporates of OBBBA as well as investors’ renewed enthusiasm for celebrating surging AI capex.

None of this makes this writer want to alter the view that Treasury bonds are in a structural bear market.

Still it needs to be acknowledged that the Trump administration as a matter of policy seems clearly focused on keeping yields down, which is also another reason to assume that downward pressure will remain on the US dollar.

Fed Independence Clearly Weakened with Stephen Miran’s Appointment as a Fed Governor

On this point, it is further worth noting that Stephen Miran, author of the by now notorious paper advocating foreign creditors own discounted long-term treasury bonds in return for so-called “security guarantees” (see Hudson Bay Capital report: “A User’s Guide to Restructuring the Global Trading System” by Stephen Miran, November 2024), was appointed Fed governor in mid-September in addition to his existing position as chairman of the Council of Economic Advisers.

Miran is on record as not being a fan of Fed independence, as will be self-evident to anyone who has read another of his papers (see Manhattan Institute article: “Reform the Federal Reserve’s Governance to Deliver Better Monetary Outcomes” by Dan Katz and Stephen Miran, 14 March 2024). Not that this writer has ever believed in Fed independence save for when Paul Volcker was running the place.

Are Stablecoin Flows a Zero Sum Game?

Then there is also the issue of the Trump administration’s promotion of stablecoins as a means to trigger demand for short-term Treasury securities, as also previously discussed here (see An Exploration of Trump’s View on Crypto, Short Term Treasuries and Yield Curve Control, 11 September 2025).

On this point, it is worth noting the pushback that has come from some economists.

This is that any increase in demand due to shifts into stablecoins could be “offset almost 1:1 by a shift out of bank deposits, money market funds and currency”, to quote one monetarist economist.

Or in other words the global demand for short-term Treasuries would not be changed, only the instruments by which people or firms hold the Treasuries.

On this point it is interesting to note that the minutes of the meeting of the Treasury Borrowing Advisory Committee (TBAC) held in late April revealed that there was a debate on precisely this issue.

And the discussion continued in the latest meeting in late July as reflected in a TBAC letter to Bessent on 30 July.

To quote from the relevant section of the letter: “Increased stablecoin issuance could create a new source of demand for short-maturity Treasury securities.

While this might be offset by a reduction in demand from traditional Treasury investors if stablecoins act as a substitute for deposits, money market funds, or other cash-like instruments, much of the Committee seemed more optimistic about this as a source of new demand for T-bills. Potential impact to bank deposits bears close monitoring.”

That point about monitoring bank deposits clearly makes sense given this issue could well become of macro importance if the forecast growth in stablecoins takes place.

Thus, one of the TBAC members in the April meeting projected that stablecoins could increase 8.3-fold by the end of 2028, rising from US$234bn to nearly US$2tn. There is currently more than US$120bn of Treasury securities backing stablecoins.

Meanwhile, by way of comparison, US bank deposits currently total US$18.5tn, while US money market funds total US$7.4tn.

It is also worth recording that the BIS estimated in July that stablecoins bought nearly US$40bn of Treasury bills in 2024, the third largest net buyer after JPMorgan Government Money Market Fund (US$53bn) and China (US$43.7bn) (see following chart and BIS Bulletin: “Stablecoin growth – policy challenges and approaches“, 11 July 2025).

The BIS report also estimates that stablecoins’ current market capitalization has doubled from US$125bn less than two years ago to US$255bn with the two biggest issuers, Tether and Circle, accounting for 90% of the market capitalisation.

The path is set for another Fed rate cut at this week’s meeting on Wednesday following the latest inflation data even though reported inflation is still well above the 2% YoY target.

Headline CPI rose by 3.0% YoY in September compared with consensus expectations of 3.1% YoY, while core CPI inflation slowed from 3.1% YoY in August to 3.0% YoY in September.

Meanwhile, money markets are now discounting 50bp of rate cuts by the end of this year, up from 39bp in late September.

Meanwhile the prime driver of the Trump administration’s criticism of Jerome Powell is not concerns about the state of the economy but rather to get the cost of debt servicing down.

Net interest payments and entitlements were still running at 93.7% of total federal government receipts in the 12 months to September.

Total receipts are, for now at least, still not showing a big impact from increased tariffs.

Total federal government receipts rose by 3.2% YoY to US$543.7bn in September and are up 9% YoY to US$2.97tn in the period between April-September.

Still tariff-related revenues are up from US$7.25bn in February to a record US$29.7bn in September 2025 and were US$151.3bn in April-September 2025.

A Disjointed US Foreign Policy Approach Looks to be by Design

Moving on to more topical matters, running foreign policy on an ad hoc deal-making basis can generate newsflow, and divert attention from awkward domestic issues such as the Epstein case which continues to simmer as discussed here previously (see An Exploration of Trump’s View on Crypto, Short Term Treasuries and Yield Curve Control, 11 September 2025).

The past week has seen a classic example of the extreme volatility of the Trumpian approach to foreign policy.

Thus, Donald Trump’s telephone call with Vladimir Putin on 16 October was followed by his statement later on the same day that he would meet with the Russian president in Budapest which then followed by his statement on 22 October that he has now cancelled that meeting.

But the problem is that the effective conduct of foreign policy for the world’s major power requires a conceptual framework and this is what is conspicuously lacking in the current US administration.

The 47^th US president certainly has no such framework and is also bereft of an adviser who has one. There is certainly no equivalent to Henry Kissinger who was the ultimate conceptual thinker.

This has become only too starkly evident in recent months as Donald Trump has succeeded in bringing China, Russia, India and Brazil together like never before.

Indeed BRICS as a grouping has been regalvanised. Thus, as a result primarily of tariff provocations, most particularly in the case of India which currently faces 50% tariffs.

Meanwhile Brazilian president Lula is indignant against 50% tariffs imposed arbitrarily by Trump even though Brazil runs a trade deficit with the US.

Tariffs Singling out India Surprised Us

The singling out of India in this fashion is not what most people would have predicted, including this writer.

First, China has been buying more Russian oil than India but has not been similarly punished. (India imported an estimated 1.6m barrels/day of Russian crude oil in September compared with 2.0m barrels/day for China).

Indeed Trump in mid-August extended the tariff deadline as regards China for another 90 days to 10 November in the latest signal of his desire for a one-on-one meeting with Chinese President Xi Jinping who has continued to play hard to get.

Meanwhile New Delhi will not be happy that it now faces 50% tariffs whereas arch-enemy Pakistan is only facing 19%.

As regards the purchase of Russian oil issue, India has taken the position since the start of the Ukraine conflict in February 2022 that its duty is to pursue its own national interest which is clearly to purchase oil as cheaply as possible.

New Delhi has also had little patience with the pretence that Europe is not buying Russian oil when it is common knowledge that Europe has been buying Russian oil refined in India.

As one senior Indian bureaucrat commented to this writer two years ago it seems politically correct for the Europeans to buy Russian oil “so long as it is washed in the Ganges”.

This is the kind of humbug nonsense Trump as presidential candidate railed against.

Still presidential candidate Trump also said he would end the Ukraine conflict in 24 hours.

Unfortunately for him, Biden’s war has now become his war as he has chosen to listen to the neo-con lobby whose agenda is all about expanding NATO where the people of Ukraine are in reality pawns in a greater power game.

Still Trump is no neo-con and it is certainly possible that more U-turns can happen at any time.

The problem for Trump is that it is hard to project any deal on Ukraine as a “win” for the West since the Russians will only agree a deal where there is a formal renunciation of any Ukraine intentions to join NATO while Moscow will assert sovereignty over the four eastern and southeastern Ukraine regions they already effectively control, namely Donetsk, Luhansk, Zaporizhzhia and Kherson, as well as of course Crimea.

The Best Hope for a Real Deal Between the US and China

Meanwhile, the best hope for a real deal between US and China, if the long-sought meeting between the two leaders actually goes ahead on 30 October in Busan, South Korea on the sidelines of the Asia Pacific Economic Cooperation (APEC) summit as confirmed by White House press secretary Karoline Leavitt on 23 October, is the US dismantling its export controls on semiconductors in return for China allowing unfettered exports of rare earths.

This may seem far-fetched at the moment but anything is possible with the Donald.

The original export controls introduced by the Biden administration in October 2022 amounted to nothing less than the declaration of economic war against China, as discussed here at the time (see The Shadow Semiconductor Wars Explained, 23 November 2025).

A real lasting improvement between the two countries would require a complete end to such a policy. But this year China has, for the first time, exercised its leveraged on rare earths to stunning effect which directly impacts America’s ability to wage war.

Thus, China continues to curb the export of the two most sought after of its rare earths from a military perspective.

Exports of antimony and germanium have declined by 63% and 73% respectively as of September compared with their January levels.

Meanwhile if such a deal remains theoretically possible, there has to be a growing risk that Beijing has decided that Trump is too unstable, in terms of the constant flip-flops in policy as reflected in the stance on Ukraine, to make it imprudent to invest too much political capital in seeking to secure a deal.

If that is indeed the case the rare earth issue remains a huge source of leverage for China since the Ukraine conflict has exposed that the US simply does not have the means to wage conflicts on all fronts in terms of access to weaponry and the components that go into the weaponry.

The view here has been that the US made an all time peak as a percentage of world stock market capitalisation, as measured by MSCI All Country World, on 24 December last year.

This was still the case as at the end of last quarter. MSCI USA’s share of MSCI AC World peaked at 67.2% on 24 December 2024 and was 64.7% at the end of 3Q25.

The view has also been that this forecast is most likely to be wrong if the hyperscalers prove to be successful at monetising their colossal investment spending in the ongoing AI capex arms race.

Given the way the relevant stocks have been rallying on surging capex announcements of late, it now has to be wondered whether this writer could be wrong in the near term even if the base case proves to be right in the sense that the ongoing AI capex arms race leads to a massive investment bust which, as discussed here previously (Two Years is Too Long…The AI Conundrum, 25 February 2025), will make the 2000-2002 Nasdaq bust look like a sideshow.

There have been plenty of examples of the euphoria of late, including growing evidence of what could be described as circular deal making, most of which involve OpenAI.

One recent example of the mania was the 23.7% rise in the share price of AMD on 6 October as a result of OpenAI’s commitment to buy six gigawatts worth of AMD chips.

A notable feature of the deal, different from the Nvidia commitment to invest US$100bn in OpenAI announced two weeks ago, is that AMD is giving OpenAI warrants entitling it to 10% of the company if OpenAI meets certain targets.

Another example was the euphoric market reaction to Oracle’s earnings report in early September.

The company shares rose nearly 40% in a day, or by US$255bn, after Oracle said it had increased its outstanding contracted revenues not yet realised by 359% YoY to US$455bn in 1QFY26 ended 31 August.

One day later Oracle confirmed where a large part of this increase came from when it announced it had signed a US$300bn deal to provide OpenAI with computing power over a five-year period.

The interesting point is that OpenAI is currently losing about US$1bn a month and generating around US$10bn in annual revenues.

The company has also told investors it will burn US$115bn in cash by 2029. In the context of these numbers, the scale of the OpenAI-Oracle contract looks ambitious in the extreme.

Such deals seem to be as much about financial engineering as exploring new frontiers in tech.

Then there is the most recent guidance by Meta.

It has said that it plans to invest about US$100bn next year, or more than half of its expected revenue for this year.

Meta revenues were up 19% YoY in the first six months of this year to US$89.8bn.

Another way of looking at this is that Meta’s forecast capital spending for this year, namely US$66-72bn, is about the same as its consensus forecast profits of US$73bn though clearly generous depreciation schedules mean that the accounting for this capex can be stretched out over a period of five years.

And these have become more generous as a result of the recently passed OBBBA as previously discussed here (see Stablecoins, Bonds & Hyperscalers Oh My!, 24 July 2025).

Valuations are Clearly Stretched

Meanwhile, it is worth highlighting that the S&P500 price to sales ratio reached a new record high of 3.49x in early October as did stock market margin debt. The S&P500 price to sales ratio has risen from a recent low of 2.65x in early April to a record high of 3.49x on 8 October and is now 3.43x.

While US stock market margin debt rose by 39% YoY to a record high of US$1.13tn at the end of September.

The capex spending plans of Meta are seemingly triggered by chairman Mark Zuckerberg’s stated goal of pursuing “superintelligence”.

This writer’s base case remains, as discussed here previously, that so-called AGI is still several years away (see The Stock Market is Eating The Economy, 27 August 2025).

Meanwhile Meta’s improving results, with revenues up 22% YoY and profits up 36% YoY in 2Q25, reflect improvements in advertising efficiency and related improved personalization of content.

But this is the result of earlier investment in a different form of AI, not the generative kind.

What do Students and Professors Have to Say About Artificial General Intelligence (AGI)?

The pursuit of AGI by the four hyperscalers, with an estimated US$350bn to be spent this year and perhaps more than US$400bn next year based on the latest guidance and consensus estimates, reflects the continuing reality that the new technology represents not only the next big growth story but also the next big source of disruptive threat.

In that sense there is a genuine fear of being left behind (i.e. FOMO) if a decision is taken not to participate in the AI arms race; and these companies certainly have the cash flow to burn even if it means that they will no longer be “asset light” businesses which is one of the features which has made them so attractive to equity investors in the past many years.

In this respect, the one conspicuous opt out amongst Big Tech of the current AI capex binge is Apple.

Its forecast capital spending was only US$12bn in FY25 which ended 30 September. Still more spending is seemingly coming.

Apple CEO Tim Cook and Donald Trump jointly announced last quarter, following a meeting at the White House in August, that Apple will invest an additional US$100bn in the US.

Including the US$500bn investment pledged in February, Apple’s total commitment to invest in America is now US$600bn over the next four years!

This writer makes no pretense to be a technology expert let alone an expert on AI.

It must also be admitted that the widely hailed vision of AI, namely the emergence of all-purpose personalized agents running all aspects of an individual’s life, is viewed here as somewhat creepy.

But that does not mean that it will not be commercially successful, just as the practice of surveillance capitalism best exploited by Google and Facebook, as they were then known, has been similarly creepy albeit also extraordinarily lucrative.

Still the point for now seems to be that the large language models, the development of which on which so much is being spent including on the data centers to power them, are nowhere near achieving the AGI goal.

In this respect, this writer has made some inquiries of Generation Z students actually studying AI.

Their view, and apparently the view of their professors, is that large language models are actually not the path towards AGI, however much they are scaled up.

Indeed the perception of LLMs as reasoning machines is largely an illusion.

Instead they should be viewed as “advanced pattern matchers” that struggle with novel logic and true understanding.

Meanwhile, there is another practical problem with investing in large language models.

That is that, even if it is assumed that these models are everything that they are cracked up to be, the spending boom in the pursuit of so-called “scaling” is hitting a natural physical and economic wall as the models require more data and compute than is sustainably available.

That suggests that the prospects are for sharply diminishing returns where massive increases in cost yield only marginal improvements in performance, or what is otherwise known as the law of diminishing returns.

There is also the issue, at least in America, whether there is the power available to drive the data centers.

AI Profits Continue to be Concentrated in Nvidia

If all of the above is more or less the case, it becomes clearer than ever that the only entity currently making real money on so-called AGI is Nvidia.

In this respect, it is worth focusing again on some numbers and the extent to which the US stock market is geared to this phenomenon.

Thus, Nvidia’s quarterly revenues have surged almost eight-fold from US$6bn to US$47bn since the Microsoft investment in OpenAI announced in January 2023 triggered the AI capex arms race, even as Nvidia’s revenue growth on a quarter on quarter basis has, naturally, slowed from 88% QoQ in the quarter ended 30 July 2023 to 6% QoQ in 2QFY26 ended 27 July 2025 based on the law of large numbers.

We Favor Owning Chinese AI Stocks Due to Customer Concentration in the US and Expensive Energy

But this surging revenue growth is concentrated on a few customers.

This writer has seen estimates that 42% of Nvidia’s revenue in FY25 ended 26 January 2025 came from the four hyperscalers plus Tesla continuing to buy more GPUs.

And it is this concentrated nexus which is driving the US stock market since the four hyperscalers combined with Nvidia now account for 26.1% of the S&P500 market capitalisation and an estimated 45% of the gains since the beginning of 2023 as at the end of last quarter.

Still if the projected capex spend give some idea of the scale of the bet these companies are making, it is also the case that they can seemingly afford to make this bet given the projected profits they will make this year.

The combined net income of the four major US hyperscalers is forecast to rise by 29% to US$406bn in 2025 based on consensus estimates.

Still it also gives an idea of the vulnerability of the US stock market if the value of this capex spend is ever questioned by investors, with the DeepSeek moment in late January providing a dress rehearsal, or conversely if the hyperscalers suddenly decide to stop spending out of their volition.

This writer, from an investment standpoint, remains much more comfortable with the intrinsically practical Chinese approach to AI which, as previously discussed here (see Key Takeaways From Our Recent Trip to Beijing, 6 August 2025), is focused on using the cheap open-source DeepSeek to come up with commercially viable practical applications rather than building the perfect large language model.

The Chinese also have seemingly limitless access to cheap energy in stark contrast to America.

China remains the best example of a country which has not succumbed to the pressure tactics so effectively deployed against many other countries by the current administration in Washington.

There is also the continuing reality that China still has leverage on the rare earth issue, which it has clearly chosen to apply again if the circumstances warrant.

But Donald Trump has seemed happy of late to de-escalate in the hope of securing a long-sought face-to-face meeting with Chinese leader Xi Jinping in the autumn.

Still, it would be unwise in the extreme to write off completely the influence of Washington’s national security lobby, most particularly as Trump’s U-turn on Ukraine relative to what he campaigned on in the presidential election campaign, makes it clear that it still has real influence.

That said, a face-to-face meeting between the two leaders raises the potential for a real breakthrough given the transactional nature of the current US president.

Indeed, the Chinese president has found himself in the strong negotiating position of being lobbied for a meeting.

It now seems that the American president has got his way. After a call with Xi on 19 September, Trump said that he would meet the Chinese president at the Asia-Pacific Economic Cooperation (APEC) Summit in Gyeongju, South Korea in late October.

Anti-Involution is China’s Attempt at Stimulus

Then there is the issue of the state of China’s domestic economy.

If investors have waited in vain in the past few years for more aggressive stimulus out of China, there has been renewed evidence in recent months on the Chinese authorities’ concern about deflation.

PPI has now been negative on a YoY basis for 35 consecutive months since October 2022, running at -2.9% YoY in August.

While YoY nominal GDP growth has been lower than YoY real GDP growth for the past nine quarters.

That concern has been reflected in what has become known as the “anti-involution” campaign.

The campaign appears to have had its formal origin in President Xi Jinping’s call at a meeting of the Central Commission for Financial and Economic Affairs (CCFEA) on 1 July for the need to “promote the orderly exit of obsolete production capacity” (see South China Morning Post article: “China’s top leadership takes aim at ‘disorderly low-price competition’”, 2 July 2025).

While the National Development and Reform Commission (NDRC) and the State Administration for Market Regulation (SAMR) jointly issued on 24 July a draft amendment to China’s Pricing Law for the first time since 1998 to curb what the authorities describe as “disorderly low-price competition”.

The amendment prohibits businesses from selling below cost to eliminate competitors or to monopolize the market, except in the case of legitimate discounts such as seasonal promotions or clearing excess inventory.

It should also be noted that this amendment was not in the original 2025 legislative plan.

So releasing such a draft is another sign of the increased urgency to deal with deflation and so-called involution (内卷).

These latest measures follow growing official focus on the negative aspects of excessive competition or what has been described in the Global Times, an English-language newspaper under the People’s Daily, as “rat race-style” competition (see Global Times article: “China releases draft law amendment to stop ‘rat race-style’ market competition”, 24 July 2025).

As discussed here recently, the authorities in May and early June called in both EV makers such as BYD and food delivery internet platforms such as JD.com and Meituan to warn against excessive price cutting (see Key Takeaways From Our Recent Trip to Beijing, 6 August 2025).

So, the latest campaign is not just about excess capacity, though excess capacity is a part of it.

Similar to China’s Supply Side Reforms of 2015?

The obvious historical comparison is with China’s supply-side reforms of 2015-2018.

Ten years ago, the focus was primarily on steel, coal and cement, with the stated policy goal “phasing out inefficient, polluting capacity”.

But this time, the policy targets not only traditional sectors such as iron and steel, building materials, chemicals and coal, but also high growth areas such as solar, lithium batteries, electric vehicles and internet e-commerce.

The growing investor focus on the latest policy has triggered rallies in the likes of cement and solar stocks in China.

Weak Labor and Housing Markets Make Enforcement Difficult

Still, domestic demand is much more subdued than was the case ten years ago when in certain respects the deflationary shock caused by supply-side reform, in terms of cuts in capacity, was offset at that time to a significant extent by the boost to demand triggered by the monetisation of the shantytown redevelopment scheme which created demand for residential properties, particularly in the smaller cities of China.

The result then was a dramatic rebound in PPI and a return to double-digit nominal GDP growth.

Thus, PPI inflation rose from a negative 5.9% YoY in December 2015 to a positive 7.8% YoY in February 2017.

While nominal GDP growth surged from 6.6% YoY in 4Q15 to 11.8% YoY in 1Q17. It was only 3.9% YoY in 2Q25.

This was very positive for a Chinese stock market where domestic investors have always been focused on the close correlation between PPI and industrial profits at a time when the residential property market, not exports, was the key driver of the economy.

The correlation between PPI inflation and industrial profit growth was 0.75 between 2011 and 2019 prior to the pandemic.

The situation is very different now given the continuing residential property downturn, where the latest data suggests renewed weakness, and given the reality of both deflation and depressed consumer sentiment.

The official National Bureau of Statistics data shows that nationwide residential property floor space sold declined by 9.7% YoY in August and were down 13.6% YoY in value terms.

While weekly secondary market residential floor space sold in 13 major cities declined by 2.1% YoY in the first 10 weeks of 2H25 ended 7 September, after rising by 19.4% YoY in the first half of this year.

Enforcement of Anti-Involution Reforms has Been Weak so Far

Meanwhile, the current round of so-called “anti-involution efforts” are based primarily on industries exercising self-discipline, with relatively weak enforcement.

By contrast, in the previous supply-side reform, the National Development and Reform Commission (NDRC) took the lead with specific targets for capacity reduction assigned to local governments and with specific timetables to meet those targets.

Clearly, the risk of a similarly aggressive approach in the current macro context of weak domestic demand would be a destabilising rise in unemployment in an economy where employment trends are clearly not that healthy.

This is also why the current policy focuses more on production cuts than reducing excess capacity. As regards the state of the labour market, the surveyed urban unemployment rate is now 5.3%.

While the employment sub-index of the consumer confidence index declined from 74.0 in February to a record low of 70.6 in June and was 72.8 in July.

Manufacturing Capacity Continues to Increase According to the Data

If “anti-involution” is not quite supply-side reform, it would be wrong to dismiss outright the significance of this latest policy initiative.

It is a positive that the authorities are focused on excessive price competition in both the legacy and growth sectors, as well as on the need to curb capacity expansion.

On that point, the statement released following the Politburo meeting in late July emphasized the need to address “disorderly competition among enterprises” and to monitor local governments competing to attract investments in the same sector.

The end goal is to end deflation and increase corporate profits to a healthier level, which is where the longstanding correlation between industrial profits and PPI is relevant.

But for now there is no clear evidence of improvement.

On a related point, it is interesting to note that PPI for manufactured goods has now been declining on a YoY basis for 37 months, falling by 2.2% YoY in August.

While the official data shows that fixed asset investment (FAI) for the manufacturing sector still increased by 5.1% YoY in the first eight months of 2025.

This suggests manufacturers are still increasing capacity.

Bank Lending to the Manufacturing Sector is Slowing, Potentially Signaling Capacity Growth Will Slow as Well

Still, a sign that manufacturing capex may be slowing more than the official FAI data suggest is reflected in bank lending data for the manufacturing sector.

Thus, outstanding medium and long-term loans to the manufacturing sector rose by 8.7% YoY at the end of 1H25, down from 11.9% YoY in 2024 and over 30% YoY in each of the previous four years since 2020 when banks were responding to the Xi campaign to build “new productive forces”.

Similarly, net new bank lending to manufacturing was Rmb921bn in 1H25 and Rmb1.5tn in 2024, down sharply from an estimated Rmb3tn in 2023.

The base case remains for a 25bp rate cut by the Federal Reserve in September (i.e. this Wednesday) even though inflation is still running well above the 2% target based on the latest data.

US headline CPI and core CPI were up 2.9% YoY and 3.1% YoY, respectively, in August.

The official reason is, of course, growing evidence of labour market weakness.

The latest monthly US employment data showed that US nonfarm payrolls increased by only 22,000 in August on a seasonally-adjusted basis, well below consensus expectations of 75,000, while the increase in the previous two months was revised down by 21,000 jobs following the 258,000 downward revision in early August.

As a result, US nonfarm payrolls increased by “only” 107,000 jobs in the past four months or an average 26,750 per month, the lowest level since July 2020.

Ex-Tariff GDP Shows US Economy is Slowing

As regards the latest revised GDP data, stripping out the distortion triggered by the tariff agenda in terms of the front loading of imports in the first quarter, the key point is that the growth rate of the US economy has slowed from an annualised 2.8% in the second half of 2024 to an annualised 1.2% in the first half of this year.

Meanwhile, more important for financial markets than the Fed is the continuing calm in the Treasury bond market after the most recent Treasury quarterly refunding announcement in late July has again confirmed the ever growing resort to short-term financing.

The US Treasury announced no change in coupon auction sizes for the coming quarter, while Treasury bill supply is going to continue to increase in the coming weeks.

Clearly, as discussed here previously (see Stablecoins, Bonds & Hyperscalers Oh My!, 24 July 2025), the Trump administration’s strategy is to create growing demand for Treasury bills via the launch of stablecoins.

Tether is already the 18^th largest holder of Treasuries if it were a country, holding more than US$127bn in US Treasuries in 2Q25.

Trade Deal with Europe is Far From Set in Stone

Returning to trade and tariff issues, if craven capitulation was the base case it is still a bit shocking to see the extent to which that assumption was confirmed in terms of the details of the agreement announced in late July between the US and the EU with the language, as expected, also seemingly committing the EU to buy US weaponry.

President Donald Trump and a far from comfortable looking European Commission President Ursula von der Leyen announced on 27 July following a meeting at Trump’s Turnberry golf course in Scotland that the US and EU had agreed to the framework of a trade deal that included a 15% tariff on EU exports to America.

True, that is substantially lower than the threatened 30%. Still the sectoral tariffs on steel, aluminum and copper will for now remain unchanged at 50%.

The White House also stated that, as part of the deal, the EU will purchase US$750bn in US energy and make new investments of US$600bn in the US by 2028. The EU will also purchase “significant amounts” of US military equipment.

As for the EU tariffs on US goods, the EU will remove significant tariffs, including the elimination of all EU tariffs on US industrial goods exported to the EU.

If these are the reported details it should be remembered that, just as in the world of corporate finance a memorandum of understanding does not necessarily constitute a final deal, so the same applies with trade deals, most particularly when the deal consists of quid pro quos which are not directly linked to trade.

Thus, as regards the US$600bn of new investments in the US seemingly committed to by the EU, so far as this writer understands it such a commitment is outside the prerogative of the European Commission which is charged with negotiating trade issues.

Investment targets are more the responsibility of individual countries and ultimately come down to private sector decisions.

It is also the case that both France and Germany were quick to raise concerns over the deal on 28 July. German Chancellor Friedrich Merz said that the agreement would cause “considerable damage” to the German economy.

While French Prime Minister François Bayrou, who has since subsequently resigned, said the deal marked a “dark day” and that the EU had “resigned itself into submission” (see Financial Times article: “Germany and France hit out at EU-US deal”, 29 July 2025).

Still the growing penchant of the 47^th US president for such deals, including often getting countries to agree to buy specific amounts of Boeing aircraft, are a sad reflection of the accelerating breakdown of the GATT area which has been beneficial for so many.

The General Agreement on Tariffs and Trade dates back to October 1947 when it was signed by 23 countries in Geneva.

Cracks Forming in The Japan Trade Deal

Returning to the issue that a deal is not a deal until fully confirmed, it is also the case that cracks also surfaced in the supposed trade deal with Japan also announced with fanfare in late July.

The normally polite Japanese pushed back against the notion peddled by US Commerce Secretary Howard Lutnick that Japan would finance US$550bn worth of investments in US strategic sectors and that the profits from these investments would be split 90% to US taxpayers and only 10% to the Japanese.

Still if the deal now renegotiated in September looks slightly less one sided, it remains unattractive from a Japanese standpoint.

The problem is that the negotiations have encountered an ongoing gulf between what the Japanese side believe they have agreed and what President Trump has stated has been agreed.

In the pursuit of this negotiation the main Japanese negotiator, Minister in charge of Economic Revitalization Ryosei Akazawa, has visited Washington no less than ten times since April. Still the US president finally signed an executive order on 4 September making a 15% tariff rate official, effective 16 September, which means Japanese automakers will not have to pay the previously threatened 27.5%.

But the price paid for the US agreeing to the lower tariff remains a commitment by Japan to invest US$550bn into the US.

On this point, there remains a lot of room for continuing disagreement.

The Japanese view seems to be that the US$550bn includes loan guarantees from Japanese public financial institutions whereas this is most unlikely to be the interpretation in Washington.

Indeed Trade Secretary Howard Lutnick said on US TV on 5 September that, in return for lower tariffs, the Japanese “have given President Trump US$550bn for President Trump to direct where and how he wants it invested in America”.

Then there is also the issue, still seemingly to be agreed, of how the profits on any such investments, assuming there are any, are to be divided.

Remember that the Donald’s original request was for a 90/10 split.

Apparently, the memorandum of understanding signed on 4 September by Lutnick and Akazawa stated that Japan and America will evenly split the cash flow generated until Japan’s investment is paid off, at which point the US will take 90% of the proceeds and Japan 10% (see Financial Times article: “Trump to direct Japan’s trade deal cash”, 9 September 2025).

Fundamentally, the base case of this writer remains that tariffs are bad for everybody as taught in classical economics.

Is Another Bull Market Beginning in the US?

Still there is a narrative whereby America emerges as the least bad off from the tariff agenda.

The Yale Budget Lab now estimates the average tariff as a result of the recent announcements at 17.4%, the highest level since 1935.

First, while it is too early to tell how much prices will rise for US consumers the positive consequence of OBBBA, in terms of corporate tax cuts and the like, may mean that companies can take some of the pain of the tariff increase, at least initially.

Second, increased capital investment in America and increased purchases of US weaponry remain cyclical positives.

In this respect, it is worth highlighting again the increased investment in US factories in recent years, which had its origins in the Biden administration’s Inflation Reduction Act and CHIPS and Science Act in 2022, should now be further stimulated by Trump’s agenda with the differences being that Joe Biden offered carrots in the form of subsidies whereas Trump has threatened sticks in the shape of punitive tariffs.

Thus, private construction spending for manufacturing facilities has more than doubled from a seasonally adjusted annual rate of US$98bn in January 2022 to US$239bn in June 2024 and US$222bn in July 2025, with construction spending for computer, electronic and electrical manufacturing up almost fivefold from a seasonally adjusted annual rate of US$26bn in January 2022 to US$126bn in July 2024 and US$108bn in July 2025.

Still there has yet to be a corresponding pickup in imports of industrial machinery.

US imports of machinery, excluding transport equipment, have risen by “only” 31% from an annualised US$819bn in 2021 to US$1.086tn in the 12 months to July 2025.

For such reasons it is entirely possible to make the argument that the US economy could be in the early days of a new cyclical rebound, a point also suggested by the trend in commercial bank loan growth.

US commercial banks’ total loan growth has risen from 1.5% YoY in mid-March 2024 to 4.6% YoY in early September 2025, while commercial and industrial (C&I) loan growth is up from a negative 2.6% YoY to 4.1% YoY over the same period.

“Trump and hubris” is a phrase that has come to mind of late.

It in part refers to the American president’s undoubted growing confidence that his tariff agenda will not derail markets.

It could also refer to Donald Trump’s misplaced confidence in his ability to negotiate a peace deal with Russia.

Still there is also another political thought in mind.

Will the Epstein Case Splinter the MAGA Movement?

That is whether the MAGA (Make America Great Again) movement, which is the foundation of the Trump political phenomenon, has the potential to splinter if not fracture.

In recent weeks it has become clear that the issue of the Trump administration’s stated refusal to release the FBI files on the death of financier Jeffrey Epstein has the potential for the first time to alienate the 47^th president from his support base, or at least part of it.

That this has become a live issue was already clear from the fact that Republican House of Representatives speaker Mike Johnson on 22 July shut down the chamber one day early for the summer recess in order to avoid a vote on releasing files on Epstein.

It was also interesting to watch a network TV interview in mid-July with former Vice President Mike Pence on CBS News where he stated that he saw “no reason” all the files relating to Epstein should not be released (see CBS News article: “Mike Pence says ‘the time has come’ to release the Epstein files”, 16 July 2025).

Two months on and the issue has not gone away with Congress returning to business this past week.

Why is the Epstein case potentially so politically important?

In this writer’s view it goes back to the origins of Trump’s appeal to his supporters.

That is that he is perceived by the MAGA faithful as an outsider who has taken on the “Deep State” and the related “Washington swamp”.

Yet to the MAGA movement, or at least some of it, the Epstein case, with all the speculation regarding the prominent names thought to be in the Epstein files, represents a classic example of elites covering up for or defending other elites.

Indeed, this is why Trump himself brought up the Epstein case, and the alleged cover-up by his political opponents, during last year’s presidential election campaign.

If Trump’s image as an outsider has been a huge part of his political appeal to his base, on top of his undoubtedly superb marketing skills, this writer continues to believe that the origin of his political movement lies in the popular revulsion with and reaction against the bailouts of Wall Street back in the 2008 financial crisis.

The lesson drawn by most ordinary Americans, particularly those living in the so-called “flyover states”, from these events was that there is one rule for Wall Street and another rule for main street.

Trump has superbly exploited this phenomenon since he emerged as a political force more than ten years ago, and also staged one of history’s most remarkable comebacks in his presidential victory last November while at the same time effectively taking over complete control of the Republican Party.

Still there are potential market implications from the MAGA support team splintering, one of which being that it has finally given a recently toothless Democrat opposition a point of weakness to seek to exploit.

At the very least it makes continuing Republican control of Congress next November less likely.

Rising Crypto Prices Support the Government's Continued Reliance on Short Term Funding

But this in a way gives all the more reason for the 47^th president to pursue his agenda aggressively now while he still controls Congress.

And this is what is happening as reflected in the recent passage through Congress of the OBBBA and the GENIUS Act.

As regards the latter, this legislation has created a regulatory framework for US dollar-pegged cryptocurrency tokens known as stablecoins.

This legislation should have the hugely practical benefit from a federal government perspective, given the Treasury’s reliance on short-term funding, of increasing the demand for short-term Treasury bills since the bill requires stablecoins to be backed by liquid assets such as Treasury bills.

Indeed Treasury Secretary Scott Bessent has openly referenced the demand for Treasuries that should be derived from this source.

This legislation has also brought the regulatory clarity the crypto industry has been looking for.

Meanwhile, the other positive for crypto assets is the already mentioned championing of stablecoins by the Trump administration as a way of funding America’s fiscal excesses.

Indeed the higher Bitcoin rises in price, and the prices of other crypto assets, the more it should create demand for stablecoins.

All of this presumably creates an incentive for the US Treasury to maintain the current reliance on short-term funding rather than risk upsetting the long end of the bond market by increasing supply.

If all of the above is crypto bullish and dollar bearish, a weak US dollar is not such a problem for the US stock market.

Indeed it is a positive for many US companies’ earnings, including Big Tech.

Evaluating The Impact of Accounting Changes for CAPEX

The other recent positive for Big Tech, and in particular the hyperscalers, is changes in the accounting of capex resulting from OBBBA.

Thus, OBBBA makes permanent the 100% immediate expense of domestic R&D, while also allowing eligible short-life capex (such as servers and networks) to be 100% immediately expensed.

These deductions will have almost no direct impact on EPS but can boost near-term free cash flow by reducing the immediate tax burden.

When Do Rising Yields Matter?

Meanwhile the weak dollar only really becomes a problem for the stock market if the long end of the bond market revolts.

Still the 10-year and 30-year Treasury bond yields are now 53bp and 37bp below their recent high seen in May post Liberation Day which is a positive for the Trump administration, though they still in this writer’s view reflect a certain supply premium, especially the 30-year.

The divergence between the 10-year and the 30-year Treasury bond yields is now a wide 68bp after reaching 70bp on 2 September, the highest level since May 2021.

Is the Fed Leaning Towards Yield Curve Control?

It is also the case that it is not clear whether the 47^th president understands that jawboning the Fed to cut rates risks triggering the opposite reaction at the long end of the bond market.

But that will certainly not have been lost on Treasury Secretary Scott Bessent.

On this point, it is interesting that former Fed governor and Fed chairman candidate, Kevin Warsh, publicly called in July for a greater partnership with the Treasury.

He said in an interview on CNBC: “We need a new Treasury-Fed accord, like we did in 1951 after another period where we built up our nation’s debt and we were stuck with a central bank that was working at cross purposes with the Treasury” (see CNBC article: “Kevin Warsh touts ‘regime change’ at Fed and calls for partnership with Treasury”, 17 July 2025).

Warsh was referring to the last period when the Treasury and the Fed combined to control the cost of funding the federal government.

Indeed the US had yield curve control between 1942 and 1951.