Author: Chris Wood

The hyperscalers have now reported after the SOX index suffered a 21% decline in July, with Micron down 41% from peak to trough.

But the AI capex remains ongoing with the market now expecting capex of about US$860bn this year by the major AI-related US tech players and another US$1.15tn next year depending on the number of tech companies included in the aggregate.

Those figures are based on the five major hyperscalers and neoclouds CoreWeave and Nebius.

This capex number for 2027 represents about 3.5% of US nominal GDP and about 25% of US non-residential fixed investment to give some kind of macro perspective.

It is also, remarkably, equivalent to 39% of annualised total non-financial pre-tax profits of all US companies, not just listed ones, of US$2.97tn in 1Q26 based on national accounts data.

We cover a lot of ground in the paid portion of this week’s letter.

1. The data that is starting to convince us the AI Capex arms race is close to peaking.

2. Hyperscaler valuations - are they dirt cheap or is there still valuation risk?

3. The treasury bond yield level that would make us very nervous for our stock portfolio.

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The setup for gold and gold equities has significantly improved over the last two weeks.

Rate expectations have fallen, with a September hike priced in at 72% on July 31st - the July payroll miss and in-line CPI print have since flipped the market to expecting a hold.

Inflation expectations remain stable, with the 5y5y forward inflation expectation at 2.29%, inline with the 5-year average.

However long yields have continued to march higher, with the 10-year at 4.64% (it was 3.94% in late Feb, pre-Iran), and the 30-year sits at 5.21%. The market is demanding a higher risk premium - pricing in the reality of a stretched US balance sheet (war + uncontrolled spending).

This is the functional reason to be long gold in your portfolio, a guard against runaway government spending.

Gold Equities have Torque vs Gold Bullion (with a Caveat)

Gold producers clearly have a tailwind in this backdrop, but this is far from a blanket statement for the industry as a whole.

The miners have a long and well documented propensity to disappoint. That has been the central theme of the industry for the last 30 years; weak capital discipline, cost inflation, declining reserve grades and value destroying M&A. The list is long and it’s the reason why the default for investors is to own gold bullion (GLD ETF) over the miners.

However, an important dynamic has emerged that tilts the odds meaningfully towards gold equities - specifically the free cash flow yield (trailing 12m) for gold miners is now higher than the US market. This reflects two forces moving in opposite directions: 1. miners have embraced capital discipline and thus a focus on cash flow generation, and 2. the US market has far less free cash flow on the back of historic capital spending for AI infrastructure.

The spread is widening from both sides at once, a first in recent history. US large cap capex rose 20% in 2025 and is forecast to rise a further 43% this year.

Passive Investing in Gold Miners is a Problematic Strategy

The ETF-ication of the market has transformed commodity equity investing into an indexing exercise. Prior to this market change, capital allocation was set by active mining specialists and fund managers who understood the assets and the industry. Today the VanEck Gold Miners ETF (GDX) controls the flow. When a portfolio manager or a wealth advisor decides to own gold equities, they buy the GDX or GDXJ (gold juniors) ETFs.

These passive (market cap weighted) commodity equity ETFs are problematic for investors seeking alpha, the main reason is that the largest gold companies are among the worst offenders on the exact issues that have challenged the industry historically. Market cap weighting does not screen for capital discipline. An investor ends up being overweight the exact names they would least want to own.

Size compounds the problem, the majors face a genuinely difficult task replacing reserves and growing production - which leaves two levers to grow cash flow: a higher gold price (out of their hands) or cost reduction. Mid-caps and smaller producers are not constrained in the same way, they can grow production and cost profiles are much more manageable.

The cost of the poor portfolio construction shows up in the historic returns, since April 2009 the GDX has returned 267% vs 364% for bullion. This is why the GLD has become the default asset allocation choice for investors wanting gold exposure, why take the risk on a chronically underperforming sector? When you screen that same gold mining universe for capital discipline and cash generation the outcome inverts: the Grizzle Capital Discipline Gold Miners Index returned 621% over the same period - significantly outperforming passive (GDX) and bullion (GLD). This is the core reason investors should want to own the right gold miners over bullion: the inherent leverage to gold prices within the business.

Below we work through four screens, each testing a different factor that highlights value and capital discipline. We show which names stand out on each, where the screens agree and then highlight 3 of the names in greater detail.

This quantitative framework is an excellent starting point for gold mining investors, 17 years of data confirm that this is the pond to fish in. The alternative is favoring an index that is inherently handicapped from owning the attributes that predicate outperformance.

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Author: Chris Wood

China, accounting for 20% of the export of world manufactured goods and around 30% of world manufacturing output (value-added), has no interest in a protracted conflict in the Middle East in pure economic terms.

It is the case that China, prior to the conflict, was obtaining about 40% of its crude oil and 30% of its LNG imports from the Middle East.

Still, China is clearly far better positioned than the US as regards strategic oil reserves.

America’s strategic oil reserves have now declined to 307.65m barrels, the lowest since March 1983, while Japan’s are estimated at 263m barrels, the world’s third-largest strategic oil reserves.

By contrast, China remains much more comfortably positioned with an estimated 1.5bn barrels, according to the US Energy Information Administration (EIA).

Still, although China is estimated to have very large oil reserves compared with other oil importers, the Iran War seems to have accelerated China’s already formidable progress on renewable energy, previously discussed here (China Needs America Less Than You Think, 14 May 2025), courtesy of both the scale of the build-up and advances in battery storage technology.

Thus, President Xi Jinping called on 6 April about a month after the initial US-Israel attack on Iran for efforts to accelerate the planning and construction of a new energy system, alongside nuclear and coal, to boost energy security (see Reuters article: “China’s Xi urges faster development of new energy system as Middle East war continues”, 6 April 2026).

Among oil importers, China is unlikely to be alone in this reaction.

Indeed, the likelihood is that the already extended closure of the Strait of Hormuz, now lasting more than five months, will markedly accelerate a pivot towards renewable energy that is already underway, thereby taking advantage of the improvements in battery storage technology, where China’s CATL is the market leader.

The company has around a 40% share in global EV batteries and a 30% share in ESS energy storage.

In this respect, one way of looking at CATL is the “TSMC of electrification.”. The stock, quoted in Hong Kong, currently trades at a 36% premium to its Shanghai listing.

Iran is Likely Accelerating the World’s Move Away from Oil

Returning to the impact of the Iran War on oil importers, an article in the UK’s Daily Telegraph described a mood of “panic and dread” among oil and gas executives at the CERAWeek summit, an annual conference for the energy industry organised by S&P Global, held in Houston in late March again shortly after the war commenced (see The Telegraph article: “Trump is an utter disaster for the world’s oil and gas industry” by Ambrose Evans-Pritchard, 17 April 2026).

Instead of celebrating the windfall profits from the conflict, the focus was reportedly on the existential risk posed by, in this writer’s view, extremely realistic concerns that oil importing countries will react to the shock of the closure of the Strait of Hormuz by opting for accelerating the expansion into renewables, or what the article described in what could become a new buzzword as “electrotech.”

The incentive to reduce dependence on Middle East petrostates or, for that matter, on Texan frackers, is massive, particularly in Asia, as Japan and South Korea still have a huge dependence on net fossil fuel imports as a share of primary energy demand.

That figure is 84% for Japan and 80% for South Korea compared with “only” 37% for India and 24% for China.

Below we look at how China’s energy ambitions are running circles around the US and why it likely means China can brute force a win in the AI race.

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Author: Chris Wood

It remains surprising the degree to which markets have remained calm since the original US-Israel attack on Iran on 28 February.

The VIX has peaked at only 35.3 so far in this Iran-war-triggered cycle, compared with a peak of 60.1 following the tariff announcement in April last year, and is now 18.6.

Still, the risk of renewed Iran-triggered market turmoil is clearly rising though experience has shown that yet another Trump U-turn can happen at any time.

In that respect, wags have called it the Memorandum of Misunderstanding.

But that assumes the 47^th president actually read the 14-point MoU signed by the US and Iran on 17 June.

This writer severely doubts that.

Donald Trump actually signed it during a dinner with French President Emmanuel Macron at the Palace of Versailles.

What is clear is that outright conflict has resumed between the US and Iran of late and that Donald Trump, the man who got elected on the “no more wars” agenda, is in a trap of his own making in the sense that this writer’s base case is that Iran will be able to keep the Strait essentially closed and that time is on its side in terms of the growing impact of energy-related shortages.

Meanwhile, those on the Iranian side who favoured negotiations will have been discredited since the terms of the MoU were never honoured from almost the start of the supposed 60-day negotiation period.

On the issue of the Strait itself, the MoU states that Iran will “make arrangements using its best efforts for the safe passage of commercial vessels, with no charge for 60 days only”.

For this reason, this writer hears that real control in Iran is now firmly in the grip of Ahmad Vahidi, the Commander-in-Chief of the Islamic Revolutionary Guard Corps (IRGC), in terms of the management of the Strait of Hormuz and the related military strategy.

By contrast, the position of Iranian President Masoud Pezeshkian will have been further weakened.

Iran’s Reprisals are a Signal to Gulf States

Meanwhile the Iran response in terms of its renewed attacks on US bases in the Gulf, in response to the 13 consecutive nights of US attacks on Iran before they stopped on 24 July, is sending the message to the Gulf states that the “you are either with us or against us” in terms of allowing US military bases to operate in their countries.

In this respect, the Tehran agenda is increasingly clear.

That is that it wants the US presence out of the region.

Whereas for the Gulf states themselves, they must increasingly be asking themselves what exactly the US security guarantee is getting them in the sense that they are being attacked almost because of that presence.

In this respect, there has been an interesting divergence of late between the stance of Saudi Arabia and the UAE.

Most importantly, Riyadh has not allowed its territory to be used for the latest US strikes. Saudi’s strategic position had also been improved by the fact that it has been using its East-West pipeline to Yanbu on the Red Sea.

But that is no longer the case as the Houthis are now blocking Saudi ships’ access to the Red Sea.

This writer will not get further into the details of Middle East politics, save to note that they are fiendishly complicated.

This is why negotiations should be delegated to professionals in America’s diplomatic corps which is certainly not the approach of the Trump administration which has essentially been flying blind.

Recent US Bombings Directly Attacked China’s Interests

Meanwhile, it should be noted that the renewed American attacks have involved one major escalation which has directly attacked China’s interest.

This is because the US badly damaged Aq Tekeh Khan Railway Bridge in Aqqala in northern Iran which is part of the railroad linking Tehran to Xi’an in Western China via Central Asia which became operational in May 2025.

The important point to note is that, aside from its logistical importance, this railway was built and financed by China. The other major American escalation was the bombing of the port of Chabahar.

This is about 300 miles from the Strait of Hormuz and is on the Gulf of Oman only 62 miles from the Pakistani border.

All of the above must be distressing to the Pakistani negotiators who spent so much time in negotiating the original MoU.

This is why the official line is that the MoU is “suspended rather than irretrievably extinguished”.

But this writer has a very hard time believing in that outcome.

Clearly, the Donald can do a U-turn at any time, and indeed is very likely to do so.

But that is not a reason for the other side to commit to renewed negotiations given the by-now chronic loss of trust.

How Has the Market Shrugged off Iran?

Below we dig into the two key reasons the market has been able to shrug off the Iran conflict and the energy supply uncertainty (Hint: AI to the rescue).

We also look at valuations of the Nvidia plus the four largest hyperscalers to see if price underperformance in 2026 is a buying opportunity, or a sign of rising risks to the AI trade as a whole.

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The Grizzle Growth ETF (DARP) returned 32.88% in the first half of 2026, more than triple the S&P 500’s 10.21%. That performance places the fund in the 3rd percentile of the Morningstar US Large Cap Growth Category* YTD, and in the 3rd percentile on a trailing three-year basis, with a three-year annualized return of 35.07%. Consistency across the one-year and three-year windows reflects the durability of the process, not a single strong quarter.

That process was tested early in the year. Q1 opened strongly before markets sold off sharply, with DARP holding a positive return through that drawdown while the broader market posted a loss: DARP returned +4.55% in the first quarter, against a decline of -4.35% for the S&P 500 and -5.82% for the Nasdaq 100. This reflects the fund’s core thesis in practice: disruption at a reasonable price is not just a strategy for capturing upside, it carries inherent downside mitigation. Valuation discipline shows up not only in entry points but in the depth of the drawdown.

Read our full 2026 Semiannual Letter

Vigilance in a Maturing Cycle

Our view remains that artificial intelligence represents a structural productivity shift, a disruption on a scale we believe exceeds anything the market has seen in the last thirty years. We are watching the capex figures behind this cycle closely, and they are, by any measure, large. But the figure that matters more to our conviction isn’t the capex itself, it’s the penetration of that spend into actual corporate deployment.

By our read, corporate America is still in the early stages of putting AI to work. Adoption is no longer in question - the vast majority of large companies (92%) now use an AI product in some form, and that figure feels intuitively right to anyone inside a modern organization.

But usage and deployment are two very different things. Andreessen Horowitz, found that only 29% of the Fortune 500 have converted to live, paying production customers of a leading AI provider — a real conversion from pilot to deployment, not simply a license or a trial. That gap, between near-universal experimentation and still-modest production use, is where we expect the next several years of this cycle to play out, and it remains wide.

That view is precisely why we believe now is the time to be more disciplined on valuation, not less. Our core holdings remain, in our judgment, firmly within the DARP (disruption at a reasonable price) framework. But certain corners of the AI market are showing signs of real froth — areas where near-term bottlenecks have attracted fast-moving capital chasing momentum. The neocloud sector is the clearest example. Names like CoreWeave and Nebius have traded at extreme multiples this year despite operating what is, in substance, a commodity business, reselling GPU capacity with little defensible intellectual property behind it. We have not owned either name.

The risk in that corner of the market was on full display at the start of the third quarter. Meta announced plans to sell its own excess AI compute capacity to third parties — a direct move into the neocloud business. Both CoreWeave and Nebius fell sharply on the news, reflecting a straightforward structural vulnerability: Meta is one of the largest customers for each company, and a customer that becomes a competitor is a different risk altogether. Setting aside what this signals about Meta’s own strategy for now, the lesson for allocators of capital is clear — this is what happens when a business model is priced for perfection at exactly the moment its customer base has both the means and the incentive to compete with it.

We’ll return to this theme in the next section, on the pitches we choose not to take. But the core message here bears repeating: valuation discipline doesn’t limit participation in disruption — it’s what allows us to stay invested in disruptive themes even when volatility spikes. The first half of this year illustrated both halves of that equation. As this cycle continues to play out, we believe protecting against overpaying for growth remains the single most effective thing an investor can do to stay exposed to the theme.

The Discipline of What We Don’t Own

Where we see froth is one side of valuation discipline. The other is knowing when to walk away entirely. Conviction in the names a fund holds is straightforward to articulate. Conviction expressed through the names it walks away from matters just as much, and SpaceX is the clearest example this year — a useful illustration of how we think about disruptive investing more broadly.

Our approach starts with the same question we ask of every name in this fund: can the business as a whole reach cash flow inflection within our four-to-six-year window SpaceX warranted a different lens (Grizzle SpaceX Deep Dive - May 29th, 2026). Given how much was already priced in, we thought it was worth isolating the pieces of the business we believe genuinely have a shot at that inflection — in this case, Starlink’s connectivity business — while holding the rest, Space and AI, at cash flow neutrality (a generous assumption on our part). Only then did we apply our base case and most optimistic assumptions to the piece of the business we think can actually get there, and check the result against the price being paid.

The numbers didn’t support the price. Valuing Starlink’s connectivity business alone under our base case assumptions produced a valuation of $0.41 trillion, roughly a quarter of where the company ultimately priced. Applying that same framework at its most optimistic plausible extreme still only reached $1.29 trillion, against an IPO price of $1.75 trillion. Even granting SpaceX the benefit of the doubt on two entire divisions of its business, the price still didn’t clear the bar. That combination — a base case for the business as a whole, narrowed down to the piece that can realistically inflect within our window, then checked against the price — is a hallmark of how we underwrite everything in this fund, owned or not.

An Artificial Intelligence Research Update: Token Supply and Demand

That same discipline extends beyond individual names to the AI theme as a whole. One question we’ve fielded often this year: is AI demand itself starting to soften? A widely watched index of GPU rental prices — the Ornn Compute H100 Price Index — declined roughly 30% over the first half of the year from its 2026 peak, and some have read that as an early sign of exactly that. Given how central this debate is to the AI investment case, we wanted to lay out what the underlying data actually shows.

Token Pricing

Compute pricing for generating tokens fell roughly 40% from its peak over the period, according to Ornn, a token rental data provider. We read this primarily as a demand side rotation rather than a demand-side weakening: users are shifting from expensive frontier models toward cheaper, still-capable open source alternatives from China and North America. Frontier model providers accounted for only 33% of tokens transacted on OpenRouter by the end of the first half, down from 55% at the start of the year, according to Exponential View.

This is rational economic behavior, and in our view signals that AI spend among major users is maturing and becoming more efficient — a healthy sign for the market’s durability, not a warning sign of a demand reversal.

Zooming out, pricing continues to point to a market that remains compute constrained rather than oversupplied. The older Nvidia H100 GPU, released in 2022, rented for $2.25/hr by the end of the first half, up from $1.80/hr in November of last year, with pricing along the rental curve essentially unchanged since March. Rising rental prices for an increasingly obsolete GPU is not the signature of an oversupplied market. Even with rates off their recent highs, they remain up substantially versus year-ago levels.

This reading was reinforced by Amazon’s decision, late in the second quarter, to raise token pricing across its family of GPU and ASIC instances — a move that is hard to square with any narrative of token oversupply.

Token Demand

On the demand side, the data continues to show effectively insatiable appetite for tokens. JP Morgan’s global token output tracker, updated through period-end, showed output growing 70% month-over-month and reaching a new all-time high. We see no evidence of demand weakness in the data.

Taken together, the picture is consistent with a phenomenon economists call Jevons’ Paradox: as token prices fall, the market simply consumes more of them, such that total spend continues to rise even as unit prices decline. Google’s own token pricing versus usage over the past three years bears this out clearly — falling prices have consistently driven rising usage, not falling revenue.

This dynamic has, so far, kept revenue growth across the AI industry running well ahead of the decline in unit economics. According to the emerging technology research consultancy Exponential View, quarterly AI industry revenue has now exceeded depreciation for six consecutive months — a threshold that matters because depreciation is the real economic cost of the industry’s record capital spending.

The market’s central concern about the AI buildout — whether the return on capex will ultimately justify the investment — will continue to ease as long as revenue growth outpaces depreciation. Exponential View currently estimates AI revenue exceeds depreciation by 32%, a positive but still-early signal; we believe that figure needs to reach roughly 50% for the industry to generate durable, attractive long-term margins. Getting there will require some combination of continued pricing power and rising utilization, both of which the data currently supports.

Taken as a whole, the evidence points to an industry that remains effectively sold out of AI tokens: falling rental prices are being met almost immediately with rising usage, which continues to push aggregate revenue higher. We experience this directly. As heavy users of AI tools ourselves, Grizzle now regularly exhausts token capacity on both Claude and OpenAI under our fixed-price plans — something that was not happening even one quarter ago. We expect the continued explosion in tokens consumed per task, driven in large part by the rise of agentic coding, to remain a key catalyst for well-positioned AI infrastructure names going forward.

Store of Wealth: A Diverging Path for Gold and Bitcoin

Shifting from the AI complex to the other side of our thematic exposure — hard money. In our year-end letter, we flagged a shift underway in this space: a rotation of conviction towards gold and silver and away from Bitcoin. That dynamic has continued to play out. Year-to-date through June 30, gold is down 7%, while Bitcoin is down 33%, a meaningful divergence between two assets viewed as “store of value”.

We think the difference lies less in what each asset is than in who owns it. Bitcoin’s original holder base was built on long-duration conviction — investors who held through volatility because they viewed the asset as structurally different from a trade, a discipline captured in the term “HODL” (hold on for dear life) The largest tranche of capital to enter Bitcoin over the past two years, however, has arrived through ETFs, and that capital doesn’t carry the same conviction.

The behavior of iShares Bitcoin Unit Trust ETF (IBIT) unit count illustrates this well. Through most of 2025, unit counts held steady even as Bitcoin came under initial pressure — the ETF holder base didn’t budge. That changed in May 2026, when units began falling sharply. Rather than following Bitcoin’s price lower, that outflow appears to have triggered it.

This tells us something about the character of the capital: durable enough to absorb a quarter of drawdown, not durable enough to hold through sustained pressure. It is not fully sticky money. The flip side is that this capital, having exited, is now sidelined and defensive — effectively scared money, unlikely to rotate back in quickly.

Our expectation is that this capital continues to migrate toward gold, and specifically toward gold equities, which offer leveraged exposure to the store-of-wealth trade rather than the metal itself. These rotations tend to move first through the largest, most liquid names before cascading into mid- and small-cap producers. Consistent with that view, we re-established a position in Kinross Gold late in the quarter.

Read our full 2026 Semiannual Letter

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.

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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.

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Author: Chris Wood

Financial markets continue to ignore continuing historical geopolitical developments and maintain a near all-consuming focus on AI.

As estimates for AI capex soar, the key issue remains when investors start to worry about the returns or the lack of them from all this spending with the next test the forthcoming earnings seasons.

For so far virtually all the money in the AI trade has been made by the picks and shovels plays which has amounted, in significant part, to a massive redistribution of wealth from America to North Asia.

This is reflected in the increased capitalisations of the Korean and Taiwanese stock markets.

The combined stock market capitalisations of Korea and Taiwan have almost tripled from US$3.2tn at the start of 2023 when the AI story kicked off in stock markets to US$9.3tn, though down from a peak of US$10.5tn on 22 June, according to Bloomberg.

This is why the absolute and relative performance of the hyperscaler stocks need to be monitored closely.

While they have underperformed of late against the S&P500, they have not yet sold off aggressively on investor concerns about a lack of monetisation.

But that risk is growing with Alphabet, Amazon, Meta and Microsoft now down 13%, 12%, 16% and 31%, respectively, from their all-time highs reached in May or, in the cases of Microsoft and Meta, in July and August last year.

This has translated into growing relative underperformance of the hyperscalers against the S&P500 even as the S&P500 is still trading near an all-time high.

Thus, the hyperscalers have underperformed the S&P500 by 10% since early May and are down 7.6% from the peak reached in late May on a market cap-weighted basis.

As for the S&P500, it is now only 0.6% below the peak reached on 2 June.

Investors Continue to Ignore Iran’s Potential Impact on Bond Yields

Meanwhile with the latest revival of tensions with Iran, where geopolitics could matter for markets is the bond market where the ten-year Treasury bond yield remains the most important price in world markets.

The ten-year yield has now broken back above the 4.5% level, at 4.56%.

Indeed, how it behaves is probably more important than what the new Fed Chairman says or the FOMC does.

A clear break above the 4.5% level should be viewed by equity investors as a warning, more akin to a yellow signal at a traffic light, but nothing more detrimental given the for now continuing powerful earnings momentum in the US driven by AI capex.

But a more decisive move above 5% would be more like a red traffic light. It would also make it hard for the Fed to avoid renewed monetary tightening even though the base case for now is that the Fed remains on hold.

Higher Treasury bond yields and anticipated renewed Fed tightening, with money markets now expecting 39bp of rate hikes this year compared with 61bp of easing as recently as late February, may well have triggered a short-term bid for the dollar.

In fact the US dollar index is up 5.8% since late January.

But sooner rather than later we think higher yields will become dollar bearish because markets will refocus on America’s still deteriorating fiscal position which in turn will lead to renewed focus on the US dollar debasement trade.

US net interest payments and entitlements were still running at 93.1% of total federal government receipts in the 12 months to May despite the increase in tariff revenues over the past year and more, and those revenues are now falling, having peaked at US$31.35bn in October 2025.

Indeed, tariff revenues declined to a negative US$42m in May as the US Treasury refunded US$21.97bn in tariff revenues previously collected which were declared illegal by the Supreme Court in February.

This more than offset gross tariff collections of US$21.93bn in May.

For Now We Recommend Focusing on the Nikkei, Not the S&P.

Meanwhile, if the arrival of a new Fed chairman is an important event, and Kevin Warsh sensibly maintained a more hawkish line than expected in his first FOMC meeting in June since the obvious risk is that the markets will test him, this writer’s view remains that the monetary policy debate is most important in Japan at present given that the yen has just broken through the key 160 level. The yen is now Y162/US$.

The Nikkei 225 Index has Outperformed the S&P 500 by 20% over 5 year, even including the weakening of the Yen. In the paid section of today’s research note we lay out all the economic factors that are likely to drive continued outperformance of the Japanese stock market over the medium term.

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Yesterday, Meta released Muse Spark 1.1, undercutting the field on both price and speed rather than trying to out-frontier the frontier. Weeks earlier, Z.ai released GLM-5.2, an open-weight Chinese model that's since climbed above Anthropic on OpenRouter and near the top of the Artificial Analysis intelligence index - at roughly a sixth of the cost of the leading US models it's being compared against.

Together, they tell us something critical about where this market is going and how we think about positioning around it from here.

Below, we work through what that means for enterprise adoption, for token demand, and for who ultimately captures the value.

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We analyzed the sheer scale of the copper crisis, exploring how the world must mine more copper over the next 25 years than in all of recorded human history just to keep pace with AI infrastructure and global electrification. The insights extended across the strategic spectrum: we unpacked the significant industrial deficits keeping silver in a structural shortfall, and the urgent bottlenecks facing US uranium independence.

Navigating the tension between terminal brownfield depletion and the severe lag in bringing new greenfield projects online, we believe the current entry points for high-quality critical mineral assets offer a great combination of structural growth and deep value. We look forward to sharing these session notes with you, as these dynamics are going to be critical for navigating the markets in the months ahead.

Speakers:

◼️Anfield Energy (TSXV:AEC) (NASDAQ:AEC) - Corey Dias, CEO
◼️Ecora Royalties (TSX:ECOR) (LSE:ECOR) - Kevin Flynn, CFO
◼️Hilltower Resource Advisors - Tracy Schuchart, Founder
◼️Hot Chili (TSXV:HCH) (ASX:HCH) - Christian Easterday, CEO
◼️Aftermath Silver (TSXV:AAG) (OTCQX:AAGFF) - Michael Williams, Chairman

Anfield Energy: Positioning for the Nuclear Renaissance

• The Nuclear Imperative: Nuclear power is increasingly recognized as a critical source of low-cost, baseload power capable of sustaining global populations. With roughly 440 reactors currently operating worldwide, a massive pipeline of 70–80 proposed reactors and another 200+ under consideration suggests a potential doubling of global nuclear capacity.

• The Uranium Supply Deficit: The mining sector is currently undersupplied and lacks the growth prospects to meet even current demand. The US, which possesses the world’s largest reactor fleet, produces only about 5% of its required uranium, leaving it heavily dependent on geopolitically risky jurisdictions like Russia, Kazakhstan, and Uzbekistan. Even at full capacity, existing US processing facilities could only meet roughly 50% of domestic demand.

• Uranium Prices and the “Tipping Point”: Despite current term prices around $85–$86, these levels are insufficient to incentivize the launch of new mining projects. Anfield believes “triple-digit” prices are necessary to bring marginal projects online. The market is currently driven by slow and steady utility reentry, but Anfield expects a potential “panic” as aggressive RFPs reveal the true depth of the supply-demand imbalance.

• Managing Costs at the Shootaring Canyon Mill: To mitigate inflationary pressures, Anfield has moved away from third-party contractors—who carry heavy margin requirements—and toward an in-house team. This transition has allowed the company to be more granular with project requirements and effectively control costs during the rebuild process.

• Financing and Government Support: Anfield is exploring a 30% equity / 70% debt financing mix for its projects. Management is actively pursuing non-traditional sources, including potential low-interest loans from the US Department of Energy (DOE) earmarked for processing facilities, and Department of Defense (DOD) grants for mining assets.

• Permitting and Mill Optionality: The company is aggressively advancing its permits, with the radioactive materials license for the mill expected by the end of 2026. Anfield’s mill is designed with significant flexibility; while it can process material from the company’s internal portfolio (including JD8, SM18, and SlickRock), the mill capacity also allows for toll-milling third-party material.

• Operational Milestones: Near-term catalysts include the decommissioning of unused mill equipment to facilitate refurbishment, obtaining the radioactive materials license, and securing mining permits (Plans of Operations) for the JD8, SM18, and SlickRock mines.

Ecora Resources: Building a Future-Facing Royalty Portfolio

• Copper Supply-Demand Fundamentals: Ecora maintains a bullish outlook on copper, driven by the structural mismatch between growing electrification demand and the increasing difficulty of permitting and bringing new mines online. Supply disruptions from major producers have bolstered prices in the short term, but more importantly, the “incentive price” required to bring new supply online has risen due to inflation. The royalty model is particularly effective in this environment because it operates on a nominal basis, allowing investors to participate in higher price environments without being penalized by capex or inflationary cost drags.

• Critical Minerals Opportunity Set: While critical minerals are core to Ecora’s strategy, the company avoids branding itself as an “EV-only” shop. Instead, their portfolio is built around the broader theme of “electrification,” which encompasses how energy is produced, stored, and used. While the company retains base metals as a core component, it has deliberately diversified into niche areas like vanadium, rare earths, and nickel to ensure low earnings volatility.

• Macro Drivers: Beyond electrification, Ecora views defense spending as a major, under-invested macro driver. Western governments are increasingly focused on securing supply chains for critical minerals to support defense needs, and Ecora expects this trend to remain a key pillar of long-term demand.

• Ecora’s Royalty Portfolio: The company distinguishes itself by focusing outside of the well-served precious metals market. Today, 50% of its Net Asset Value (NAV) is in copper, and over 80% is in base metals. A key pillar of the portfolio is quality: 80% of assets sit in the first or second quartile of the cost curve, which is critical for resilience through commodity cycles. Furthermore, 50% of the portfolio is currently in production, providing immediate torque to spot prices rather than relying on long-term price assumptions.

• Evolution of the Royalty Industry: Over the last 14 years, the industry has shifted from royalties being perceived as a “financing of last resort” to a mainstream, sophisticated component of capital structures. Even mining majors like BHP are now utilizing streaming transactions, validating the model’s utility.

• Lifecycle & Valuation Catalysts: Ecora is currently in a growth phase, using its cash-generative royalty base to de-lever and invest in new deal flow. Key catalysts for the next 12 months include the continued production ramp-up at Voisey’s Bay and Mimbula, and the roll-off of private area assets like Kestrel, which will lead to a more visible, long-term production profile that can be measured in decades rather than years.

Hot Chili: Solving the Copper Scarcity Crisis

• The Copper Supply/Demand Reality: The world is approaching a state of copper scarcity that will likely drive prices to historic highs. To meet demand projections—which expect a 50% increase by 2050—the world must mine more copper in the next 25 years than humans have mined since the Bronze Age. Demand is no longer cyclical; it is policy-driven (AI, defense, electrification), meaning end-users are price-takers who will absorb higher costs to secure supply.

• The “Inertia” of Major Producers: The industry’s supply response has been muted for years due to declining ore grades and aging deposits. While majors have focused on “brownfield” expansions to mitigate risk, these are becoming prohibitively expensive, with some reaching capital intensities of mid-$20,000 per annualized ton. This has created a “tipping point” where majors must pivot back to cost-effective greenfield developments.

• Gamechanger: The La Verde Discovery: La Verde is a recent, high-grade discovery that acts as a major economic lever for Hot Chili’s flagship Costa Fuego project. With recent drill results including wide, high-grade intercepts (e.g., 61m at 1% CuEq), La Verde is expected to significantly reduce payback periods and boost NPV and IRR by providing high-grade feed for the front end of the mine plan.

• Drilling Catalysts Ahead: Hot Chili is currently running an intensive drilling program with 22 holes awaiting assay results due to lab backlogs. These results will culminate in a maiden resource for La Verde by the end of 2026, which is expected to be material to the company’s 1-billion-ton resource base and potentially extend the mine life of Costa Fuego from 20 to 30 years.

• Understanding Valuation Dynamics: While M&A activity among majors is cooling, the focus has shifted toward securing “meaningful bolt-ons”. Trading significantly below the 0.5x–0.7x PNAV valuation range supported by current M&A environments, Hot Chili sees a clear path to a re-rate as they integrate La Verde and demonstrate the economic upside of the Costa Fuego hub.

• The Huasco Water Project: Beyond copper, Hot Chili holds a highly strategic maritime license for desalination. In the water-scarce Atacama region, where mining projects can no longer draw from underground aquifers, Hot Chili’s ability to supply desalinated water to its own projects—and potentially to neighboring regional clusters—is a significant, untapped value proposition for the company.

Tracy Shuchart: The Copper Supply-Demand Mismatch

Renegade Resources

Macro commodity landcape and geopolitics

By Tracy (Chi)

• The Copper Supply-Demand Math: We are currently consuming 28 million tons of copper annually. Projections from S&P Global and BHP suggest demand will climb to 42–50 million tons by 2040–2050. To meet this curve, the world must mine more copper in the next 25 years than humans have mined in total recorded history since the Bronze Age.

• Key Demand Drivers: Demand is no longer solely tied to traditional construction; it is being driven by five converging, policy-backed vectors that are price-inelastic:

  • Traditional Industrial Growth: Urbanization in India, Southeast Asia, and Africa, including the addition of two billion air conditioners by 2040.

  • Energy Transition: Transmission and distribution infrastructure is expected to see $7.5 trillion in cumulative investment through 2040.

  • EV Penetration: Modern EVs require 2.9 times more copper than internal combustion engine vehicles, with the sector seeing massive incremental growth.

  • AI & Data Centers: Beyond power grid expansion, data centers require vast amounts of internal copper wiring and specialized cooling systems.

  • Defense: NATO’s pledge for 5% GDP defense spending is fueling demand for naval shipbuilding, hypersonics, and hard communications.

  • Humanoid Robotics: Modest adoption by the late 2030s could add another half-million tons of annual demand.

• The Supply and Discovery Drought: While demand explodes, supply has collapsed over the past 12 months. World-class producers are struggling: Codelco is producing less copper than it did in 1997, and major players like Freeport, Ivanhoe, Anglo-American, and Glencore have all faced production cuts due to seismic events, mud rushes, and declining ore grades. Consequently, over 1.6 million tons of supply that consensus modeled for 2026 will not materialize. Furthermore, major copper discoveries (deposits >500k tons) are at record lows, with three of the past four years delivering zero new major finds.

• Resolving the Mismatch: Traditionally, high prices led to demand destruction (”Dr. Copper”). Today, demand is policy-driven and price-inelastic; AI, defense, and electrification mandates will proceed regardless of cost. Because scalable substitutes like aluminum do not effectively replace copper’s conductivity and utility, the only resolution to this structural deficit is significantly higher prices.

Aftermath Silver: Silver’s Industrial Transformation

• Silver’s Industrial Transformation: Silver is currently in a structural deficit, with demand consistently outstripping supply by 40–60 million ounces annually. While historically viewed as a financial asset, its industrial usage has climbed to 65% of total demand. As the most conductive metal on the planet, silver is now a critical component in aerospace, high-efficiency EV electronics, defense systems, and the explosive growth of AI data centers.

• The Silver Scarcity Dilemma: Silver is exceptionally difficult to bring into production because 70% of global supply is a byproduct of copper, lead, or zinc mining; there are very few “pure-play” open-pit silver opportunities. Furthermore, exploration success is at a record low: since 1990, the industry has discovered 220 copper deposits, but only 10 in the last decade. This supply inertia is creating a long-term setup for elevated metal prices.

• The Manganese Value Add: Aftermath Silver’s flagship Berenguila project in Peru contains a unique, high-quality “oxide” manganese. This specific type of manganese is increasingly vital for EV battery chemistries (like LFP and nickel-cobalt-manganese batteries), where it acts as a “doping” agent to increase cycle life and efficiency. Furthermore, it serves as a cheaper, more ethically sourced alternative to cobalt, which is largely controlled by jurisdictions prone to human rights concerns.

• Project Roadmap & Tier-1 Status: Aftermath has bypassed a Preliminary Economic Assessment (PEA) to head straight for a Pre-Feasibility Study (PFS), which is slated for release in Q1 of 2027. Williams categorizes Berenguila as a “Tier-1 asset,” defined by its ability to remain robustly economic even in a “bad” market environment.

• Near-Term Catalysts: The company is executing an aggressive drill program at Berenguila. Key follow-ups include drilling the high-grade Eastern targets—where they previously hit 157 meters of 1.12% copper and 290g/t silver—and testing a separate “skarn” mineralization target four kilometers away. These results, alongside the upcoming PFS, are expected to be the primary drivers for a company re-rating.

Author: Chris Wood

There has been a general surprise that markets have not corrected more in recent months given the historic newsflow in the Middle East.

But that also means that the rally on the news of the MoU first signed digitally on 14 June between Vice President JD Vance and Iran’s Parliament Speaker Mohammad Bagher Ghalibaf has been more muted, save for the understandable decline in the oil price.

Still, if the ceasefire holds, which is a big if, it should lead to renewed outperformance of Europe and Japan over the US with a renewed emphasis on cyclical stocks.

What about the motivation for the deal itself?

Donald Trump was clearly desperate.

The master of the art of the deal has succumbed to what looks like almost a total capitulation after no less than 38 U-turns in recent months in terms of threatening death and destruction on Iran only to reverse course hours later with the latest twist and turn taking place on 12 June.

The key reason for Trump’s desperation to do this deal, in this writer’s view, has been continuing disastrous polling five months ahead of the November mid-term elections.

The Donald’s disapproval rating has been running almost as high as Richard Nixon’s during the worst period of Watergate, while his approval rating for managing the economy remains similarly low in spite of a booming stock market.

The latest Reuters/Ipsos poll conducted between 12-15 June put Trump’s disapproval rating at 62%, though down from 63% the previous week.

This compares with the 66% disapproval rating for Nixon back in early August 1974, a few days before his resignation, according to historical Gallup polls.

The latest Reuters/Ipsos poll also shows that 63% of Americans disapprove of Trump’s handling of the economy, compared with only a 30% approval rating.

The damage done to the Trump presidency by the decision to agree to the pressure from Israeli Prime Minister Benjamin Netanyahu to launch a joint US-Israel attack on Iran is, therefore, clear.

Indeed the blow to US credibility is also real with comparisons to Britain’s Suez Crisis in 1956 not so far-fetched.

China’s Commoditization of AI Models

Meanwhile if the geopolitical risks raised by the Iran issue are real, the US stock market is currently all about celebrating in the short term the continuing AI capex arms race, while in the medium term the critical issue remains whether the hyperscalers, and related parties, will be able to make a reasonable return on their massive investments.

This writer remains highly sceptical.

Indeed the base case is massive capital destruction, which is why the best AI trade has always been owning the picks and shovels plays such as the DRAM stocks.

Meanwhile, China remains a formidable competitor to the US on AI.

This writer was in the China capital a few months ago and had an opportunity to read a physical copy of the China Daily.

There was one article which particularly caught the attention, in part because it reconfirmed another base case, namely that China is on course to win the AI arms race both because of its open source approach to large language models as well as its overwhelming advantage in terms of having access to cheap power.

The article, with the provocative title “Chinese tokens ‘crush’ foreign competitors”, focused on how China is packaging its massive reserves of cheap electricity and computing power to process tokens – remember that “tokens” have become the unit measuring demand in the brave new AI world (see China Daily article: “Chinese tokens ‘crush’ foreign competitors” by Cheng Yu, 14 March 2026).

The result is a surge in what the article refers to as “token exports”.

It highlighted how in a “watershed moment”, Chinese AI models processed 4.12tn tokens on the global aggregator platform OpenRouter in the week ended 15 February, surpassing US models’ 2.94tn for the first time, based on the weekly usage of the top nine models on OpenRouter.

The figure has since risen to 21.37tn tokens for the top Chinese AI models in the week ended 21 June, compared with 5.76tn tokens for the top US models.

Yet US users reportedly make up nearly half of the platform’s base.

As a result, exporting tokens has “quietly” become China’s most efficient value-added energy trade as the country exploits the advantage of its access to almost unlimited cheap electricity, in terms of the dramatic improvement in battery storage technology which has meant that solar has become cheaper than coal in China even before the increased coal price triggered by the Iran conflict, as discussed here previously (see China’s Energy Endgame: Is Battery Storage Making LNG and Nuclear Obsolete?, 13 March 2026).

On this point, Beijing included “computing-electricity synergy” (算电协同) as a national priority in its 2026 Government Work Report at the National People’s Congress in March, which means in reality leveraging its energy infrastructure to build a strategic moat for the digital economy.

Meanwhile, in terms of the cost advantage, the above referenced China Daily article noted that raw power in China sells for roughly Rmb 0.5 per kilowatt-hour if exported.

Converting that same electricity into AI computing power and selling it as tokens yields an estimated 22-fold increase in value.

China’s Energy Advantage is Forecast to Grow

Meanwhile, the remarkable scaling up of electricity generation is not over even though China has massively increased its power generation capacity relative to the US in recent years as also discussed here previously (see China’s Energy Endgame: Is Battery Storage Making LNG and Nuclear Obsolete?, 13 March 2026) and shown again in the charts below.

This writer heard an estimate in Beijing that the cost of electricity will decline to one-third of the current level in ten years as the access to solar is further ramped up.

All of the above is why it is correct to say that China has secured energy dominance in a global context.

For paid subscribers we dive deeper into the financials of China’s largest upcoming memory producer IPO and what memory capacity expansion out of China could mean for the outsized profits currently generated by the memory cabal (Samsung, SK Hynix and Micron)

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Author: Chris Wood

It is now more than 14 weeks since the US-Israel attack on Iran, and there remains a remarkable lack of collateral damage in the markets, particularly the US stock market, given the continuing closure of the Strait of Hormuz during this period.

The explanation of course remains the ongoing celebration of the AI capex trade, and the related positive earnings revisions discussed here recently (see Why The AI Picks-and-Shovels Boom May Be Peaking, 13 May 2026), with the issue now whether the pending mega IPOs signal the peak in AI euphoria. There has to be a good chance that that will prove to be the case.

It is now clear that the rules governing IPOs are going to be changed to accommodate the interests of the promoters.

Most importantly, in the case of SpaceX, the company is going to be “fast-tracked” into the indices at a higher weighting than the percentage of the company due to be floated.

For example, Nasdaq’s new rules, effective 1 May, include eliminating minimum float requirements for new listings and allowing so-called “fast index inclusion”.

The rules will allow large-cap new listings like SpaceX to join the Nasdaq-100 index after only 15 trading days compared with the previous minimum seasoning period of three months.

The minimum 10% free-float requirement is also removed while, for the purpose of calculating the index weight, a mega-cap with a small free-float will be valued at three times its initial free-float (see Financial Times article: “New Nasdaq rules offer SpaceX free liquidity”, 2 May 2026).

Such “fast tracking” of new listings into indices has never happened before in America, so far as this writer is aware.

The significance of the move is clearly that it will force passive funds to buy the shares uptil the relevant weighting in the index.

Meanwhile, according to the updated S-1 filing last Wednesday, SpaceX plans to sell 555.6m shares at a fixed price of US$135 per share, raising US$75bn in the IPO which would value the company at US$1.77tn, meaning only a 4.2% free float.

But it will be treated as having a 12.7% float for the Nasdaq-100 index weighting calculation.

These valuations are in the context of a company which had an annual revenue of US$18.7bn last year and an estimated US$27bn this year, according to Bloomberg. SpaceX is expected to start trading on the Nasdaq on 12 June.

It is also worth noting that MSCI’s existing methodology already includes a rule for the fast-tracking of large IPOs.

This states that large IPOs are eligible for early inclusion after 10 trading days if they meet certain size thresholds and may qualify even with a low free float.

This is relevant as the inclusion of such mega IPOs in America will increase the US weighting in the MSCI AC World Index.

For now the US weighting at 63.4% is still below the all-time high of 67.2% reached on 24 December 2024.

This writer had thought that the biggest risk to the base case that the US reached an all-time peak share of world stock market capitalisation at the end of 2024 was that the hyperscalers successfully monetise their AI capex.

This is clearly not this writer’s base case. But these new listings create another such risk, at least theoretically.

The other key change in the listing rules appears to be that insiders will be able to sell their shares quicker than normal.

The standard rule is that insiders have to wait 180 days after an IPO.

But in the case of SpaceX, according to the S-1 filing, insiders can sell up to 20% of their eligible locked-up shares after reporting earnings for the second quarter ending 30 June and, if the stock is trading at least 30% above the IPO price, an additional 10% can be sold.

Revisiting China’s Stock Market

Meanwhile, amidst the near all-consuming focus on AI and the pending IPOs, it is worth looking again at the China stock market which remains out of most global investors’ focus.

In the mainland recently it remains clear to this writer that the “slow bull market” (慢牛市) remains the mantra of the central government as regards the stock market.

The goal remains clear: for the stock market to replace the deflating property market as the main source of wealth generation.

If this is the plan, there remains a lack of evidence that the Chinese middle class has yet bought into the long-term equity story, even though the growth of institutional investors has been dramatic in the last many years in a mainland A share market that used to be almost completely dominated by retail investors.

The main driver of the growth in institutional equity investment has been the life insurance companies, which now have in some cases more than 20% of their assets in equities at government prompting.

This remains one of the main reasons for the continuing outperformance of the major bank stocks.

They have continued to pay out attractive dividends even in the context of continuing deflation and a deflating residential property market, both of which would normally be very negative for bank stocks.

The Big four banks’ H share prices have risen by 66% since the beginning of 2021, compared with a 30% decline in the MSCI China over the same period.

The same banks have an average dividend yield of 4.9%. Similarly, the CSI 300 Banks Index has outperformed the CSI 300 by 35% on a total-return basis since the beginning of 2021.

The stock market as a whole has continued to perform satisfactorily since bottoming in September 2024 in a macro environment where nominal GDP growth has been lower than real GDP growth for the past 12 quarters and a micro environment where price competition between leading players has remained brutal in high-profile sectors such as electric vehicles and e-commerce, though in both cases there are some reasons to believe that the competitive feeding frenzy may be on the point of peaking.

Source: National Bureau of Statistics

The CSI 300 Index has risen by 51% since bottoming in September 2024, while MSCI China is up 55% from its low in January 2024 .

Still, this remains a stock market where pricing power is at a premium as regards individual companies, which is why investors are most on the lookout for quasi monopolies in areas prioritised by the government, which of late has meant primarily companies in the tech hardware and industrial spaces.

Meanwhile, from an overall stock market standpoint, the government, and in particular the responsible regulator, the China Securities Regulatory Commission (CSRC), remain supremely focused on preventing another boom-bust cycle, which has been the fate of all China bull markets in the reform era.

This is also the reason why MSCI China has underperformed the MSCI AC World Index by 72% since November 2007.

China and the “Slow Bull Market”

The base case is that this time will be different precisely because the government is focused on preventing another boom-bust outcome as a result of the need for another driver of wealth aside from property, given that there is, based on the latest data, Rmb172tn (US$25tn) in household deposits while property is down on average around 40% from the peak in China’s four major cities based on secondary market prices.

There have been even worse declines in the smaller cities where there has also been a collapse in transactions.

Still, there are now growing hopes that the residential property market is bottoming out in the major cities, given the relative lack of negative equity.

That said, there is no expectation of an imminent rebound.

So there is a clear need to promote the stock market.

As a result, the regulators have continued to promote higher dividend payout ratios and increased share buybacks, while they have also continued to control the supply of equity.

The result is that the stock market has been generating net cash for investors in the sense that dividends and share buybacks have been running ahead of IPOs and secondary issuance.

Thus, the onshore market distributed an estimated Rmb2.6tn of dividends last year and bought back Rmb143bn of shares, while equity issuance totaled Rmb1.2tn, including Rmb132bn of IPOs.

To help incentivise this process, the return on equity has been elevated as a key reference point to target for managers of state-owned enterprises, as opposed to net profits.

There has also been since October 2024 a Rmb300bn PBOC relending facility to help finance share buybacks.

This policy context has not been seen in any other bull cycles in China and is perhaps the best reason to give the benefit of the doubt to the “slow bull market” story.

Meanwhile, the other way the authorities have been seeking to reduce the risk of another boom-bust cycle is for the so-called national team to sell stocks when share prices rise too rapidly.

The Incentive for Chinese Households to Invest in Stocks is Growing

Meanwhile, the incentive to invest in equites must be growing, given declining interest rates and the lack of a visible recovery in the property market.

There are about Rmb50tn of 3-year household deposits due to mature this year, or 30% of total household deposits.

When that money was fixed three years ago, the three-year deposit rate was 3.5%. It is now 1.2%.

Valuations remain undemanding.

MSCI China now trades at 11.6x 2026 consensus forecast earnings assuming 13.4% earnings growth, while the CSI 300 is on 15.4x 2026 forecast earnings assuming 19.7% earnings growth, according to IBES.

Still, the deflationary backdrop clearly limits the potential for multiple expansion, with nominal GDP growth of only 4.9% YoY in 1Q26, which is why investors will pay a big premium for evidence of pricing power.

Chinese Memory Makers Are Hungry for Global Market Share

Meanwhile if the political signaling in China of late has been on the need to do more to boost consumption, the evidence remains that the central government remains primarily focused on technological upgrading and independence, in terms of a lack of reliance on others, as reflected in the official signals that China no longer needs Nvidia chips.

Such is the negative consequence for the US of the decision in October 2022 to control the exports of advanced semiconductors to China.

Coming months will see IPOs of China’s leading DRAM and NAND flash makers which will also cause global investors to focus more on the growing competitiveness of China in the semiconductor area.

The subscriber only section of this week’s note looks at China’s DRAM and NAND memory champions and their ability to take market share and profits from the dominant global memory giants, SK Hynix, Samsung and Micron.

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We also took a deep dive into the macro backdrop with Jeroen Blokland, whose work on The Great Rebalancing defines the current macro struggle: in aging economies, policymakers resort to debt-fueled growth, creating a cycle of fiscal dominance that guarantees the long-term destruction of fiat purchasing power. While gold has seen some expected volatility after its recent highs, the structural thesis remains incredibly robust. Whether it is China’s ongoing accumulation or the way gold historically thrives during inflationary spikes and periods of extreme debt, these are long-term dynamics that aren’t going anywhere.

Insights from the conference extended beyond hard money assets. Our conversation with Leigh Goehring provided a critical “other side of the coin” regarding oil and the broader commodities complex.

We also navigated the tension between the current market focus on AI and the search for value across asset classes; we believe the current entry points for hard money assets offer a compelling combination of value and growth.

Finally, we tackled the Bitcoin piece of the puzzle, acknowledging the ongoing volatility that continues to shape the digital asset narrative. Between the shifting macro winds and the tactical opportunities in mining and energy, this conference was held at an opportune juncture. We look forward to sharing these session notes with you, as the themes we unpacked over the last few days are going to be critical for navigating the markets in the months ahead.

Speakers:

• David Shaver, Executive Vice-President - Kinross Gold (NYSE:KGC)

• Derek Macpherson, CEO - West Point Gold (TSXV:WPG)

• Rob McLeod, CEO - Cambria Gold Mines (TSXV: CAMB)

• Andrew Clark, CEO - Summit Royalties (TSXV:SUM)

• Mark Brennan, CEO - Cerrado Gold (TSXV:CERT)

• Jeroen Blokland, Blokland Smart Multi-Asset Fund

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

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

• Stephen Soock, VP Investor Relations, Heliostar Metals

• Leigh Goehring, Goehring & Rozencwajg Associates

David Shaver, Executive Vice-President - Kinross Gold (NYSE:KGC): Firing on All Cylinders with a 10% Free Cash Flow Yield

• A Shift in Industry Discipline: David Shaver reflects on the evolution of the gold mining industry, noting a shift away from the “growth at all costs” mentality of past cycles. Previously, companies heavily leveraged their balance sheets for M&A and production growth, which did not translate to outsized shareholder returns. Today, the industry—and Kinross specifically—is intensely focused on capital discipline, prioritizing return on invested capital (ROIC), internal rates of return (IRR), and shareholder-friendly initiatives like dividends and buybacks.

• Conservative Planning in a $5,000 Gold Environment: While spot gold is flirting with $5,000, Kinross is not operating its business as if those prices are permanent. The company uses conservative baseline metrics—calculating reserves at $2,000 and resources at $2,500—to ensure profitability across all market cycles. However, for short-term guidance and 2026 planning, they are running numbers closer to the $4,500 spot price, which is generating exceptional margins.

• The 10% Free Cash Flow Juggernaut: This capital discipline and higher spot price environment have resulted in record free cash flow for the company. Kinross currently boasts an impressive ~10% free cash flow yield, a metric that is actively attracting generalist investors, pension funds, and sovereign wealth funds who historically may have avoided the sector.

• A De-Risked, Americas-Focused Portfolio: Kinross has strategically shifted its operational footprint to become more heavily biased toward lower-risk jurisdictions in the Americas, successfully exiting Russia and Ghana. This pivot is anchored by massive, high-margin assets like Paracatu in Brazil and upcoming tier-one projects like Great Bear in Ontario, Canada.

• Aggressive Shareholder Returns: The company has a clear, three-pillar capital allocation strategy: reinvesting in the business, maintaining a strong balance sheet, and returning capital to shareholders. Having successfully deleveraged to a net cash position of $1.4 billion, Kinross is now targeting a return of 40% of its free cash flow to shareholders. While they recently raised their base dividend by 30%, management is currently biased toward aggressive share buybacks—having repurchased roughly $900 million in stock since Q1 2025—to directly improve per-share metrics.

Derek Macpherson, CEO - West Point Gold (TSXV:WPG): De-risking with a Maiden Resource and aggressive exploration in the Walker Lane Gold Trend

• Focusing on the Gold Chain Project: West Point Gold is an exploration-stage company operating in the southwestern US, specifically within the Walker Lane Trend across Arizona and Nevada. Their flagship asset is the Gold Chain project, located just across the Arizona-Nevada border. The company’s immediate goal is to steadily de-risk this asset, advancing the project to the point where larger players see its acquisition value.

• The Imminent Maiden Resource: The primary objective of their recently wrapped 20,000-meter drill program is to deliver a maiden resource at the Tyro Main Zone by late Q3 or early Q4 of 2026. This zone features a one-kilometer-long outcrop with historical mining activity. Recent drilling has been highly encouraging, with holes intercepting 30 meters at 9 grams per ton, establishing a 20-to-30-meter-wide zone of high-grade material extending down to 300 meters. The company believes that simply defining this resource—which targets 1 to 3 million ounces at 2 to 3 grams per ton at surface—will significantly de-risk the company and highlight its undervaluation.

• A Pipeline of Regional Discoveries: While the Tyro Main Zone is the immediate focus, Gold Chain spans over 10,000 acres and holds a half-dozen high-quality step-out targets. The company has already announced discoveries at Black Dyke and Sheep Trail, which have the potential to become small resources themselves. They are also awaiting assays on Bull 8, a target situated on the intersection of two major structures (the Frisco Mine fault and Union Pass fault).

• The “Big Prize” Frisco Graben Target: Beyond the current drill zones lies the Frisco Graben, a massive, blind target measuring 4 kilometers long by 750 meters wide. Because there is no gold at surface, it is a high-risk, high-reward target. The company plans to systematically de-risk the area by drilling around it—including at Tyro and Bull 8—before likely taking a direct shot at the Frisco Graben in 2027.

• The Kinross “Jefferson Canyon” Option: In 2022, West Point struck a highly favorable option agreement with Kinross regarding the Jefferson Canyon project, which sits just seven kilometers from Kinross’s depleting Round Mountain mine. Kinross is handling the complex US Forest Service permitting process and will conduct exploratory drilling. Crucially, if Kinross wants to acquire an interest in the project, they must write direct checks to West Point—$5 million US for a 70% stake, and another $5 million US for an additional 10%—rather than just sinking money into project expenditures. This provides West Point with potential non-dilutive capital to reinvest in its flagship Gold Chain asset.

Rob McLeod, CEO - Cambria Gold Mines (TSXV: CAMB): A Clear Path to Restarting the Premier Mill

• The Red Mountain Solution: CEO Rob McLeod outlines the fundamental challenge that caused the Premier mine to fail under previous management in 2024: an inability to locate enough accessible ore to consistently feed its 2,500-ton-per-day mill. Cambria’s solution is the Red Mountain deposit, which McLeod describes as the best undeveloped underground gold deposit in Canada. Located 50 kilometers away, it boasts an incredibly wide, high-grade ore body with nearly 800,000 ounces in the measured and indicated categories (including 544,000 measured ounces at 8.8 grams per ton). The plan is to truck this ore to the Premier mill, creating a combined operation targeting roughly 150,000 ounces of annual production.

• The “Unicorn” Copper Spin-Out: In a massive value-unlock for shareholders, Cambria is spinning out its legacy Mount Margaret copper asset located in Washington State. Discovered in the 1970s but halted by the eruption of Mount St. Helens, the deposit features a historic resource of 577 million tons at 0.72% copper equivalent outcropping right at surface. As McLeod notes, a copper mine of this scale hasn’t been built in the US in 50 years. The new U.S.-domiciled company will target a listing on an American exchange, with Cambria shareholders expected to retain a 49.9% stake.

• Warrants as a Financing Mechanism: In a refreshing approach to capital management, McLeod shared advice received from Franklin Templeton: warrants should not be viewed merely as “sweeteners” but as a primary financing mechanism. If the half-warrants attached to their January 2026 private placement are fully exercised by their expiration in early 2027, they will bring in an additional $125 million CAD. This non-dilutive capital is earmarked to fund the operation to production, potentially including a $30 million aerial tram line to mitigate extreme winter snowfall at Red Mountain.

• No Need for Definition Drilling at Red Mountain: While exploration is always a consideration, it is not the current focus. McLeod emphasizes that Red Mountain is so well-defined—having been scissor-drilled, bulk-sampled, and heavily endowed with measured resources—that it likely won’t need any additional drilling for five years. The immediate focus is solely on executing the restart plan and putting the mill into production.

• A Potential Fast-Tracked Restart: Construction on the critical Red Mountain access road is beginning imminently, with the goal of starting underground development and ore trucking in 2027. However, management is actively evaluating an early restart scenario as soon as mid-2027. By utilizing a bulk mining approach at the nearby Big Missouri and Silvercoin deposits—blending those tons with high-grade ore from the Premier mine—Cambria could generate early cash flow and eliminate costly care-and-maintenance expenses while the final infrastructure for Red Mountain is completed.

Andrew Clark, CEO - Summit Royalties (TSXV:SUM): A High-Growth, Aggressive Market Entry

• The Star Royalties Acquisition: CEO Drew Clarke provides context on their recent acquisition of Star Royalties. The transaction is highly accretive on a Net Asset Value (NAV) per-share basis and dramatically increases Summit’s cash flow per share by an estimated 28% to 30%. A crucial component of this deal is Star’s Copperstone asset in the US, which recently entered construction. It features a new Preliminary Feasibility Study (PFS) indicating an IRR of over 100% and a resource base that has doubled, setting it up for production next year. Summit aims to close this acquisition by late June or Q3.

• Aggressive Revenue Targets: Summit came to market with an initial target of $10 million in revenue. With the Star acquisition propelling them past that milestone, management has immediately set their sights on $20 million, which they expect the current portfolio to generate by the end of 2028. At 15 times revenue—which is a discount to peer multiples—a $20 million revenue line implies a $300 million business, suggesting a potential share price of $3.00 US ($4.00 CAD), compared to their current trading level of $1.50. Once they hit $20 million, the target moves to $30 million, underscoring a relentless focus on scaling the business.

• A Non-Dilutive Debt Strategy: Uniquely, Summit has raised significant capital thus far without issuing warrants. As they move forward, debt is firmly in the toolkit. With the portfolio shifting from four producing assets to six next year, the business becomes highly bankable. Management is actively in discussions with banks—some of which have been inbound inquiries—to secure debt that will allow them to acquire future royalties on a non-dilutive basis, enabling them to make accretive deals even if they pay slightly above NAV.

• Closing the Valuation Gap: Despite the stock rising 66% since its November listing, Summit continues to trade at a significant discount to its peers, hovering between 0.75x and 0.8x NAV. Clarke argues that because almost all of Summit’s growth comes from assets that are either already producing or in active construction—managed by well-capitalized, $800M+ operators—the portfolio deserves to trade at or above 1x NAV. The company is actively pursuing aggressive marketing and expanded research coverage to bridge this gap.

• Major Upcoming Catalysts: Investors can expect a steady stream of updates across the portfolio. Highlights include the ongoing commissioning of West Red Lake’s Madsen mine, which is expected to have a strong second half. Additionally, a Preliminary Economic Assessment (PEA) is due for the Banyan project, targeting over 300,000 ounces a year, where Summit holds 1% and 2% royalties on key deposits. Finally, the Zancudo project in Colombia is installing a 1,000-ton-per-day mill later this year, expected to ramp up to 45,000–50,000 ounces annually, potentially adding another $1 million to $1.5 million to Summit’s revenue line.

Mark Brennan, CEO - Cerrado Gold (TSXV:CERT): Extending Mine Life and Advancing a Multi-Asset Portfolio

• MDN Mine Life Extension and Consolidation: Mark Brennan emphasizes that the Minera Don Nicolás (MDN) project in Argentina is currently the company’s most critical asset, as it generates 100% of their near-term cash flow. Historically challenged by a short, two-to-three-year mine life, management is now highly confident they can extend this to five to six years. This optimism is driven by their recent acquisition of the Falcon project from Pan American Silver, which fits into a regional consolidation strategy focused on processing lower-grade material at the Calandrias heap leach operation.

• Three Pillars for Production Growth: Beyond simply extending the mine life, Cerrado is actively working to push MDN’s production guidance from the current 50,000–60,000 ounces per year to higher levels. This growth will be driven by three key initiatives: optimizing current underground operations, expanding and upgrading material for the heap leach, and executing an aggressive 50,000-meter drill program designed to drive higher-grade material through the plant.

• The Portugal Turnaround: The company has faced regulatory hurdles with its Portuguese asset, specifically an unexpected environmental rejection despite addressing requested adjustments (such as eliminating cyanide use). In response, Cerrado has filed an injunction and a lawsuit to protect its interests. Management plans to resubmit a revised Environmental Impact Assessment by December 1st, 2026, alongside detailed engineering. They anticipate approval within 150 days, which would position the project to begin construction by the summer of 2027.

• The Quebec Iron Ore Upside: While further out on the development timeline, the Mont Sorcier iron ore project in Quebec represents massive potential scale. The deposit holds 1.1 billion tons of high-grade, high-purity iron ore, with 550 million tons in the measured, indicated, and proven/probable categories. A feasibility study is expected by the end of June 2026. Following this, the company plans to submit its environmental assessment in early 2027, targeting construction in early 2029 and first production by 2031.

• Clear Valuation Catalysts: Brennan lays out a compelling case for a significant market re-rating. Delivering the Quebec feasibility study could unlock $100M–$200M in value (assuming a 0.1x to 0.2x multiple on a potential $1B NPV). In Portugal, simply recovering credit for the historical $150M NPV of the project adds immediate upside. Finally, proving the five-to-six-year mine life at MDN could add another $100M–$200M to the market cap. Combined, management believes these three catalysts have the potential to add $300M to $500M to the company’s valuation in the near term.

Jeroen Blokland, Blokland Smart Multi-Asset Fund - The Great Rebalancing and the Shift to Scarce Assets

Link to Jeroen Blokland's New Book "The Great Rebalancing": https://shorturl.at/1uQad

• The Evolution of Bitcoin and Collateralization: Blokland maintains his bullish stance on Bitcoin despite recent underperformance, noting that it has simply lacked a specific recent catalyst compared to overwhelming market narratives like AI or gold. He is not concerned about the threat of quantum computing, arguing that the Bitcoin community is ahead of the curve and can implement a software update to address what will ultimately be a society-wide data privacy issue. More importantly, he highlights the rapid growth of Bitcoin-backed lending, where investors can now secure 30% to 50% loans against their Bitcoin collateral. This completely refutes the outdated argument that Bitcoin lacks intrinsic value or cash flow, as investors can now post it as collateral for US dollars to earn yield in a money market fund.

• Gold’s Historical Reaction to Inflation: While gold has recently pulled back 20% from its highs amid the Iran conflict and fears of higher interest rates, Blokland believes the long-term thesis is stronger than ever. He notes that China must accumulate true gold to build trust if it wants to successfully move away from the US dollar. Looking back at the two major inflationary spikes of the 1970s, gold surged 283% and 285% in real terms. During those same periods, bonds—often viewed as a safe asset—lost 11% and 17% in real terms, while equities also suffered massive drawdowns.

• The Problem: Debt-Driven Economies and Fiscal Dominance: In his newly published book, The Great Rebalancing, Blokland outlines the core problem facing global markets: aging societies naturally produce lower GDP growth. To artificially prop up growth and avoid shrinking, politicians rely heavily on debt. This creates a system where debt sustainability becomes the ultimate goal for policymakers and central banks, leading to higher taxes, forced lower interest rates, and higher inflation. Ultimately, this dynamic guarantees the ongoing destruction of purchasing power.

• The Solution: A New Portfolio of Scarce Assets: To combat abundant fiat money and inflation, Blokland argues investors must store their wealth in scarce assets. The Blokland Fund implements this philosophy by resembling a traditional 60/40 portfolio, but completely eliminating traditional cash and bonds. Instead, the fund maintains a 25% strategic weight in physical gold, a 10% weight in Bitcoin, and allocates just over half the portfolio to special, high-quality scarce equities.

• The “Emergency Brake” Mechanism: The fund utilizes a sentiment-driven “emergency brake” designed to neutralize equity exposure during severe market crashes, such as the dot-com bust or the Great Financial Crisis. The primary goal is to protect investors from 30% to 60% drawdowns that cause emotional, irrational selling. While the brake was triggered in April during the Iran conflict, the market’s rapid V-shaped recovery meant the fund re-entered at a slightly higher level; however, Blokland emphasizes the mechanism is built to protect against deep, structural bubbles popping rather than shallow, short-term volatility.

Steve Cope, CEO - Silver Viper Minerals (TSXV:VIPR): Aggressive Exploration and Strategic Growth in Mexico

• The M&A Strategy and Target Thresholds: CEO Steve Cope outlines the company’s clear strategy: aggressively building resource packages that attract mid-tier and major miners. For major miners (like Fresnillo), the target threshold is typically 2 million ounces of gold or 200 million ounces of silver equivalent. Mid-tier miners may engage at lower levels, roughly 500,000 ounces of gold or 50 million ounces of silver equivalent. Silver Viper’s exploration programs are laser-focused on advancing assets that have the scale potential to hit those “big boy” thresholds.

• Aggressive Drilling at La Virginia: Silver Viper has positioned itself as one of the most aggressive explorers in Mexico. They are currently executing a 30,000-meter drill program at La Virginia, having completed roughly 10,000 meters so far. The program is moving quickly, and management believes that if they add a second rig, they can comfortably complete the entire program this year, paving the way for a highly anticipated resource update in Q3.

• The “Deep Target” Below El Rubi: One of the most significant near-term catalysts is the upcoming drill test of a deep target below the El Rubi area at La Virginia. Geophysical testing (magnetotellurics) championed by Quinton Hennigh of Crescat Capital has revealed a large target at the contact point where the upper, brittle andesite rock meets the denser, tighter rhyolite package below. Geological theory—supported by occasional high-grade, base-metal-rich sulfide fragments blasted to the surface—suggests a massive blowout of mineralization occurred at this contact. Drilling this target could potentially reveal a multi-million-ounce, polymetallic deposit at depth. That is management’s hope.

• Leveraging the Fresnillo Partnership: Major miner Fresnillo is currently Silver Viper’s largest shareholder. Having successfully closed the Caneto acquisition, Fresnillo is now looking to open up its portfolio of 15 to 16 other Mexican assets that currently sit below their 200-million-ounce silver equivalent threshold. Silver Viper’s geology team is actively evaluating this portfolio to identify projects where they can acquire cheap ounces, create synergies, and rapidly advance the assets, focusing specifically on their preferred jurisdictions of Sonora and Durango.

• The Caneto Opportunity: The Caneto project currently holds a resource of roughly 50 million silver equivalent ounces, derived from just 6 of the 40 known veins on the property. Crucially, the old workings on these un-drilled veins only scratched the surface (20 to 50 meters down) because historical miners could not process below the water table. Because typical Mexican epithermal veins extend 300 to 600 meters deep, Silver Viper sees massive “easy” discovery potential by simply drilling directly beneath these historic workings. The company is planning a 25,000 to 30,000-meter drill program at Caneto to rapidly build out the resource.

• A Re-Rating on Ounces in the Ground: Cope argues that the junior mining sector is poised for a massive macro re-rating. Historically, in a weak market, an ounce of silver in the ground was valued between $0.50 and $2.00. However, in past bull markets, companies were often valued at a “third, a third, a third” rule (a third of the metal price for the asset, a third for costs, and a third for the acquiring company’s upside). Even taking a conservative approach, Cope believes valuations of $5 to $10 per silver ounce in the ground should become the new standard as majors increasingly pay premiums for quality assets, presenting a massive arbitrage opportunity for investors today.

Luke Alexander, CEO, Newcore Gold (TSXV:NCAU): Advancing the District-Scale Enchi Gold Project in Ghana

• Ghana as a Tier-One Mining Jurisdiction: CEO Luke Alexander highlights that despite common perceptions of emerging markets, Ghana is a premier, tier-one mining jurisdiction. The country has a thousand-year history of gold production, a well-established mining code, and a strong regulatory environment supported by the Minerals Commission and a robust Chamber of Mines. The country’s tier-one status is underscored by the presence of major global producers, including Newmont—which operates its second-largest global gold producing asset in Ghana—Gold Fields, and AngloGold Ashanti.

• The Enchi Gold Project: Newcore’s flagship Enchi project is located on the Sefwi-Bibiani belt, a prolific trend that hosts several major mines, including Chirano (5.5M oz) and Bibiani (6.5M oz), and runs along strike from Newmont’s 20M+ ounce Ahafo complex. The project currently hosts a global resource of 2.1 million ounces (1.5M oz indicated and 0.6M oz inferred). Crucially, the resource remains shallow, with current pit constraints only reaching 85 meters in depth, leaving massive potential for growth both along strike and at depth.

• De-Risking Catalysts: Newcore is currently moving from a Preliminary Economic Assessment (PEA) to a Pre-Feasibility Study (PFS), which is targeted for release in June 2026. This study marks a major de-risking phase for the project. While the current 60,000-meter drill program has been ongoing, Newcore has already cut off data for the upcoming PFS to focus on current resource certainty; therefore, the remaining 21,000 meters of planned drilling will be reserved to strengthen future feasibility studies and resource updates.

• Aggressive Exploration Strategy: Newcore is utilizing a sophisticated, result-based exploration strategy. With four drill rigs (three diamond, one RC) currently turning, the team is aggressively chasing high-grade feeder zones at depth, which have yielded some of the highest-grade intercepts in the project’s history during 2026. Beyond the main resource, the company has identified roughly 25 additional targets across its 100 kilometers of shear zone, utilizing soil sampling and trenching to prioritize which greenfield targets warrant initial drill testing.

• Strong Institutional Backing: Newcore recently closed a $15.15 million financing led by long-term, deep-pocketed institutional investors, pushing their institutional ownership above 55%. This capital ensures the company is well-funded not only to complete its 60,000-meter program but to expand it significantly. These funds will also begin the necessary technical work for a full feasibility study, including metallurgical, geotechnical, and hydrological assessments.

Stephen Soock, VP Investor Relations, Heliostar Metals (TSXV:HSTR): A Value Added Bootstrapping Approach to Building a Mid-Tier Gold Producer

• The “Bootstrap” Growth Methodology: Heliostar Metals is executing a unique strategy to reach its goal of becoming a 300,000-ounce-per-year producer. Instead of relying on heavy equity dilution to fund major development projects, the company uses its two cash-flowing mines to act as an internal “cash engine”. This allows the company to fund development activities and infrastructure growth through operational cash flow, a methodology management describes as a “bootstrapping” approach to building a producer.

• Flagship Asset: Ana Paula: The company’s flagship development project, Ana Paula, is described by management as a “unicorn” in the industry due to its rare combination of high-grade mineralization over wide widths, allowing for bulk-tonnage mining with high margins. A recent Preliminary Economic Assessment (PEA) outlines a 100,000-ounce-per-year production profile with an all-in sustaining cost (AISC) of $1,000 per ounce over a nine-year mine life. The company plans to reach a construction decision by late Q2 2027 and estimates the asset will generate roughly $200 million in annual after-tax free cash flow.

• Operational Cash-Flow ATMs: Heliostar currently operates two mines in Mexico. San Augustine serves as a short-term “cash flow ATM,” with 14 months of mine life on the books projected to generate $60 million in net free cash flow. Drilling has already suggested an additional 9 to 12 months of mine life, potentially adding another $50 million to that cash flow profile. Simultaneously, their La Colorada mine is currently mining a six-year reserve, but management believes that through expansion pits (like Veta Madre Plus) and high-grade underground potential, they will comfortably extend production at the site well past a decade.

• Geographic Diversification into Utah: Reflecting its growth, Heliostar recently acquired the Gold Strike project in Utah for $75 per ounce—a move management describes as “hiding in plain sight” under previous ownership. The asset holds a million-ounce resource and serves as a key step in geographically diversifying the company’s portfolio beyond Mexico while remaining in a premier mining jurisdiction (the Great Basin).

• Path to 300,000 Ounces: The company’s long-term production roadmap is clear: it is scaling from the current 50,000+ ounce annual run rate toward a 300,000-ounce target by the end of 2030. This is achieved in stages: first, by optimizing existing cash flows, then bringing AnaPaula online by 2028, and finally, integrating the Cerro del Gallo project.

• Upcoming Catalysts: Management highlighted a busy news flow over the next 12–18 months, focusing on:

  • Drill Results: Ongoing mine-life extension drilling at San Augustine and deep-tier drilling at AnaPaula to test the potential for a multi-million-ounce system at depth.

  • Permitting & Financing: Submission of the permit modification for AnaPaula in August 2026, and ongoing financing discussions exploring a blend of bank debt, Nordic bonds, and private equity.

  • Feasibility Milestones: Completion of the full feasibility study for AnaPaula, slated for late Q2 2027.

Leigh Goehring, Goehring & Rozencwajg Associates: The Coming Energy Crisis and the “Reverse April 2020” Setup

• Oil’s Unbelievable “First Leg”: Goehring argues that we are currently in the first leg of a massive oil bull market that remains largely unrecognized by the broader market. Despite a ~60% gain since mid-December, investor sentiment remains skeptical, with many dismissing the move as a temporary reaction to geopolitical tensions in the Strait of Hormuz. Goehring draws a direct parallel to the gold bull market of 1999–2001, where a radically undervalued asset class was ignored by the majority of the market before embarking on a multi-year secular move.

• The “Reverse April 2020” Scenario: Goehring forecasts an “unadulterated crisis” in global oil markets that will mirror the historic crash of April 2020 in reverse. While April 2020 was defined by a glut and fears of overflowing storage (leading to negative prices), the current trajectory is rapidly draining global inventories toward “tank bottoms.” When refiners finally realize supply is unavailable, it will trigger a frantic bidding war among major trading houses, potentially leading to a rapid, violent price spike to $200 per barrel.

• Algorithmic Short-Selling as a Funding Mechanism: A significant reason for the muted response in oil prices is the “carry trade” used by hedge funds and algorithmic traders. To fund positions in high-growth, long-duration assets like the “Magnificent Seven” and semiconductor leaders (e.g., Micron), funds have been shorting short-duration assets, specifically oil and oil-related equities. Goehring expects this trade to unwind violently, adding massive buying pressure when the oil price breakout forces these short positions to be covered.

• Gold: A Frustrating Period Ahead: Following a massive bull move from 2023 to 2025, Goehring believes the gold market is entering a “frustrating” period. Triggered by a “silver catch-up rally” that signaled the end of the primary gold bull run, history suggests precious metals may face a multi-year period of sideways trading or a significant correction, especially if real interest rates rise. While he recommends retail investors hold their long-term positions, he advises performance-focused investors to reduce exposure for the next couple of years until the next major default-driven leg of the gold bull market begins.

• High-Conviction Commodities for 2026:

  • Coal: Despite being a “four-letter word” in polite society, Goehring highlights an intense resurgence in global coal consumption, driven by Asian nations pivoting back to coal to ensure energy security. With Indonesian exports being curtailed and U.S. domestic consumption growing, this ignored asset class offers significant upside.

  • U.S. Natural Gas: U.S. natural gas currently trades at an 80% discount to international markets. While Permian supply has remained resilient longer than expected, Goehring remains confident that supply will eventually roll over. He views the current price of ~$3.20/MCF as a generational entry point for a commodity that could eventually converge toward international pricing levels.

These listings will completely reset how investors think about index concentration, benchmark risk, and sector allocation. Once free floats unlock, we are talking about instant top-10 names. For the NASDAQ 100, it means a massive rotation toward structural disruption - permanently. SpaceX is reportedly targeting an IPO valuation of $1.8 trillion, up from $1.25 trillion just four months ago.

In this report, we focus on SpaceX’s standalone valuation. This is where the DARP (Disruption at a Reasonable Price) framework becomes essential, the foundation of our DARP ETF. We look for companies capable of a tangible free cash flow inflection within a visible 4-to-6-year window. That discipline puts you in a vastly superior risk-adjusted position versus chasing 10-year narratives.

This analysis goes beyond whether to participate in the IPO. Due to its sheer scale, SpaceX will sit at the core of pension funds, endowments, and 401(k)s whether investors actively buy it or not. Understanding its foundational value matters, because this company is already destined to impact money you have parked in the market.

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The newsflow remains focused on the Middle East, and the Strait of Hormuz, with the continuing lack of a more dramatic market sell-off explained by the fact that investors have learned in recent years to treat such events as buying opportunities.

There has also been a continuing assumption that the conflict will not last long (first days, then weeks and now months).

This dangerously underestimates the resolve of an Iranian regime which faces an existential crisis. Meanwhile, Tehran has done what it said it would do if attacked, namely attack US missile bases in the region regardless of the surrounding collateral damage.

And the damage to these bases has much been greater than first admitted to, as has started to be reported in the Western media (see, for example, Washington Post article: “Iran has hit far more US military assets than reported, satellite images show”, 8 May 2026).

The US-Israel attack on Iran was always highly risky for the American president politically unless there was some pre-agreed deal in place with an anti-regime element in Iran’s security forces.

For now there is no sign of this, though a New York Times article last week revealed there may have been such a plan which backfired (see New York Times article: “Early War Goal Was to Install Hard-Line Former President as Iran’s Leader”, 19 May 2026).

This article gives some insight as to why the Israelis, and the Trump administration, were so confident that they could secure regime change.

This is because they reportedly thought they had secured an “asset” close to the regime similar to the Venezuela precedent. Such hopes have now been dashed.

The surge in energy prices, triggered by the seeming closure of the Strait of Hormuz, will not have been to the liking of the 47^th US president.

The Brent crude oil price and European natural gas prices have risen by 36% and 45% respectively since the onset of the Iran war at the end of February even after recent declines on renewed deal hopes.

This creates the continuing potential for another Trump U-turn, where the 47^th president opts to exit from the conflict on the argument that he has already decapitated the regime.

This, however, will not be to Israel’s liking.

Meanwhile, Trump’s initial claim that the American navy will be able to secure safe passage though the 21 miles narrow Strait has not been credible as reflected in soaring shipping insurance rates.

US Outperforming the World in Q1 and Valuations Remain Reasonable

Moving on from Iran, the renewed momentum in the AI trade since the start of this quarter, combined with the reality that America is much less dependent on imported energy, has led to renewed US outperformance of late.

The MSCI USA has outperformed the MSCI AC World ex-US Index by 7.5% since the end of February.

It has also led to renewed concentration in the US stock market in terms of the dominance of Big Tech as defined as Nvidia and the four major hyperscalers.

Still if they are back near the peak percentage of S&P500 market capitalisation, valuations are below recent peaks.

Nvidia and four major hyperscalers’ share of S&P500 market capitalisation rose from 23.8% in late March to 27% in mid-May and is now 26.1%, compared with the peak share of 27.4% at the start of November 2025.

But they are now trading at 22.9x 12-month forward earnings, compared with a recent high of 29.2x in late October 2025 and 33.1x in July 2024.

This de-rating reflects growing concerns that hyperscalers’ projected capex this year, at US$680bn, accounts for a projected 92% of their operating cashflow, as recently discussed here (see Why The AI Picks-and-Shovels Boom May Be Peaking, 13 May 2026).

Without the Mag-7, US Stock Markets Would have Looked More like Europe’s.

In the paid portion of this week’s strategy note we look at growing concentration not only in developed markets, but emerging markets as well.

You may be surprised to see what is really driving emerging market outperformance in 2026.

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The key medium-term issue for the US stock market at the start of 2026 remains whether the hyperscalers will be able to monetise their AI capex, which this year is now forecast to reach a staggering US$680bn for the major four US hyperscalers following the latest earnings guidance.

The market has viewed the increased capex for Alphabet, Microsoft and Amazon as positive because it has seen growing revenues in their cloud businesses.

Google Cloud’s revenues rose by 63% YoY last quarter, while Amazon Web Services (AWS) and Microsoft Cloud increased revenues by 28% and 29% YoY respectively.

Still there is an element of circularity here since cloud is benefitting from the pickup in demand from the likes of OpenAI and Anthropic.

The real winner from the AI capex thematic in stock market terms remains the picks-and-shovels trade with the huge gains in the three global suppliers of DRAMs, two of which are quoted in the Korean market.

This has been the main driver of very positive earnings revisions in both the US and Asian equity universes.

The LSEG I/B/E/S consensus data as of 8 May shows that S&P500 1Q26 earnings are expected to rise by 28.6% YoY, up from 10.9% growth expected last July.

The IT sector now has the second-highest forecast 1Q26 earnings growth of 52.5%, up from 20.7% last July.

Thus, the IT sector is expected to earn US$190.1bn in 1Q26, up from US$124.6bn in 1Q25, with all 12 sub-industries in the sector having higher earnings than a year ago.

Earnings for the IT sector account for 27.9% of the I/B/E/S forecast 1Q26 earnings for the S&P500, up from 23.5% in 1Q25. Unsurprisingly, the semiconductors and electronic components sub-industries have the highest earning growth (110.2% and 54.7%, respectively).

If these two sub-industries are excluded, the forecast growth rate for the IT sector declines to 27.1%.

Meanwhile, the Communication Services sector, which includes Alphabet and Meta, has the highest forecast 1Q26 earnings growth rate of 54.8%.

As for Asian equities, consensus 2026 earnings growth for the MSCI Asia Pacific ex-Japan universe is now 37%, but “only” 13% if Korea and Taiwan are excluded.

Consensus 2026 forecast EPS for the MSCI Asia ex-Japan universe has been revised up by 17% over the past three months, with the IT sector earnings being revised up by a massive 54%.

The result has been a dramatic rise in the stock market capitalisation of the likes of Samsung and Hynix.

Their profits this year are now forecast, for example, to be more than three times the total forecast profits of the benchmark Nifty 50 Index in India.

Samsung and Hynix are forecast by consensus to earn profits totalling W452tn (US$307bn) this year, compared with the total forecast profits of US$102bn for India’s Nifty 50 universe.

Still, it should be noted that the DRAM makers book their revenues up front, highlighting the front-end loading of profits.

By contrast, the hyperscalers are delaying the payment of the AI capex via extended depreciation schedules.

Still, the deprecation bill is rising…

Below we look at the extent to which the US and global economies are being propped up by AI CAPEX. Also do Hyperscalers have the financial capacity and do investors have the appetite to fund continued record levels of AI CAPEX spending?

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This writer remains of the view that Treasury bonds are in a structural bear market and that equity investors should hedge their portfolios by betting on a pickup in bond “vol” as discussed here previously (see AI Stock Buyers Beware, 17 December 2025).

This is because a renewed uptick in Treasury bond yields in coming months is one obvious risk to US equities which continue to be driven by the AI capex trade after the sell-off triggered by the Iran War.

Nvidia and the four hyperscalers have risen by 27.2% from the recent low reached in late March, while the S&P500 is up 13.1% over the same period.

It is also the case that Nvidia and the four hyperscalers still account for an estimated 45% of the gains in the S&P500 since the start of 2023 when the AI capex arms race commenced.

Meanwhile, the market will start to focus on the likely arrival of Fed Chairman appointee Kevin Warsh at the US central bank.

Our Thoughts on Incoming Treasury Secretary Kevin Warsh

Warsh has continued to talk about balance sheet contraction, which is interesting since the Fed decided in December 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 has since scheduled to purchase US$40bn of Treasury bills per month starting 12 December under the so-called “reserve management purchase” operation, though the pace has reduced to US$25bn in the month beginning 14 April.

This followed signs of emerging liquidity stresses in the repo market last October. In addition to such purchases, the Fed also reinvests all principal payments received from the Fed’s holding of agency securities into Treasury bills.

This amounts to around US$13.4-15.5bn per month. As a result, the Fed’s holdings of Treasury bills have risen by US$229.7bn from US$195.5bn on 10 December to US$425.2bn on 22 April.

The base case remains that Warsh will be quick to back off a balance sheet contraction strategy on any sign of renewed stresses in the repo market.

What Do the Cayman Island Have to do With Treasury Bonds?

In the subscriber-only analysis below we dig through the implications from a recent Federal Reserve Board report unmasking the hidden marginal buyer of US treasury bonds the last three years.

The buyer is not who we would have expected and has critical implications for what will happen to the US dollar, gold and bitcoin prices should treasury yields continue rising towards the all important 5% level.

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At one point this writer used to think that the mid-term elections were not so important to Donald Trump personally because he cannot run again for the presidency.

But it subsequently became self-evident that such an assumption was wrong when it was pointed out that the House of Representatives has the power to launch impeachments. For such a reason alone continuing Republican control of the House this November is a priority for the 47^th president.

This is one reason, among many, why the decision to launch the attack on Iran on 28 February was so risky domestically as all the polling continues to show that such a policy was unpopular both that decisions and has continued to be after it.

The latest CNN poll conducted between 26-30 March found that 66% disapprove of the US decision to take military action in Iran, up from 59% in the previous poll conducted between 28 February and 1 March, while 68% oppose the US sending ground troops into Iran.

There is also the not unimportant point that Trump’s election campaign was all about ending foreign wars.

Then there is also the issue of Trump’s unfavourable polling as regards the economy in spite of economic data and a stock market which shows an American economy in comparatively good health even if a significant part of that growth remains driven by AI capex.

The Economist/YouGov poll conducted between 3-6 April shows that 57% of Americans disapprove of Trump’s handling of the economy compared with only a 39% approval rating.

While the CNN poll conducted between 26-30 March saw 69% of Americans disapprove and 31% approve of the president’s management of the economy .

AI is the One Bright Spot in the US Growth Story

As for AI capex, the latest 4Q25 US GDP data shows no sign of any pickup in capex outside of AI.

Real AI-related capex, measured as non-residential private fixed investment in information processing equipment, software and data center construction, contributed 1.11ppts or 56% to US real GDP growth of 2.0% YoY in the four quarters to 4Q25.

US real AI-related capex rose by an annualised 18.5% QoQ in 4Q25 and was up 19.6% YoY, while non-AI capex declined by an annualised 8.0% QoQ in 4Q25 and was down 3.0% YoY.

Similarly, real AI-related capex rose by 26.8% over the past two years to 4Q25, while real non-residential private fixed investment excluding such AI-related capex declined by 4.9% over the past two years.

Tariffs Unsurprisingly are Unpopular with the Average American

Meanwhile, it has become clear in recent months that Trump’s tariff policies were increasingly unpopular long before the Supreme Court decision on 20 February to declare most of them illegal.

Those are the “reciprocal tariffs” imposed under the so-called International Emergency Economic Powers Act (IEEPA).

Thus, an Economist/YouGov poll conducted between 15-17 November showed that 47% of respondents want tariffs on foreign goods to be reduced and only 13% want them to be increased.

While 73% of Americans said that Trump’s tariffs have increased the prices they have paid either a lot (40%) or slightly (33%).

It is also the case that the more recent Economist/YouGov poll conducted between 20-23 February, following the Supreme Court decision, showed that 60% of US adult citizens disapproved of the way Trump is handling tariffs, while 57% approved of the Supreme Court’s decision on tariffs with only 23% disapproving.

A total of 71% of Americans also said Trump’s tariffs increased the prices they paid for things.

This reaction is not so surprising since the longer the tariffs are in place, and they were then running at an annualised US$376bn based on October data, the more likely most of the bill will be paid for by the American consumer.

These political pressures explain why the Trump administration in November suddenly cut tariffs on items like beef, coffee and bananas to the benefit of a country like Brazil which, it should be recalled, was suddenly hit by 50% tariffs in late July because Trump did not like the treatment of former president Jair Bolsonaro.

Thus, Trump exempted in November food items such as beef, coffee and bananas from the “reciprocal” tariffs imposed on most US trading partners.

Meanwhile, monthly government receipts on tariffs have declined since the Supreme Court decision from a peak of US$31.354bn in October to US$22.155bn in March.

Tariff Refunds Could Spook the Treasury Bond Market

As regards to the Supreme Court, it might have been assumed that, since Trump appointed three of the nine Supreme Court justices with another three appointed by previous Republican presidents, that America’s highest court would not rule against Trump even though the legal argument of the administration is tenuous in the extreme.

This is because under the US Constitution, Congress oversees taxation, not the president.

The argument of Trump’s legal team on tariffs was that the US trade deficit, which has been a reality for 50 years, is a “national emergency” justifying the unilateral tariffs imposed by the administration.

For the record, the tariffs now average 11.8% based on the latest announced tariffs as of 8 April, the highest level since 1941, according to the Yale Budget Lab.

Still, the Supreme Court decision will now lead to a huge refund bill for the Treasury totaling about US$166bn, resulting in an administrative and bureaucratic nightmare, not to say a costly one. Total tariff collection was US$318bn in the 12 months to March, or a US$235bn increase from US$83bn in the previous 12 months.

An added complication is that the tariff revenue is now part of the US General Fund, which Congress controls, though it is managed by the Treasury.

Certainly, the sudden realisation that the tariff revenue may no longer be “money good” is also a potential negative for the Treasury bond market for those who view the increased revenues from tariffs as one explanation for the relative calm of the long-end of the Treasury bond market in recent months compared with some other G7 markets.

Meanwhile, another sign that Trump has begun to react to the negative impact of tariffs politically is that he proposed in November giving every American, excluding “high-income people”, a dividend of “at least” US$2,000, presumably to compensate for the price hikes caused by tariffs.

In addition to the precedent from Covid of what such handouts can do in terms of exacerbating inflationary pressures, such a policy would also be a negative in terms of the fiscal impact.

This is because such a handout is estimated to cost at least US$400bn. A study in November by the Yale Budget Lab estimated that a one-time US$2,000 per person rebate for Americans earning less than US$100,000 per year would cost US$450bn.

While the Supreme Court decision makes such a policy less likely, anything is possible in terms of stimulatory policies domestically in the run-up to the mid-terms, most particularly as the Iran War has already caused a noticeable pickup in inflation as a result of the surge in energy prices.

The latest US CPI data shows US headline CPI inflation increasing from 2.4% YoY in February to 3.3% YoY in March, and energy CPI inflation rising from 0.5% YoY in February to 12.5% YoY in March.

Meanwhile, it is interesting to note that the mid-terms are the year in the presidential cycle when share prices rally the least.

On that point, in the past 24 presidential cycles since 1929, the S&P500 rose by an average 3.3% in the second year of a cycle with only 54% of those years posting a positive return.

So far year to date the S&P500 is up 0.6%.

With near-term inflationary pressures rising in the US courtesy of the Iran War, the potential risk for the US stock market is a self-off in the Treasury bond market out of the recent tight trading range.

This has begun to happen.

The ten-year Treasury bond yield has broken out of the range which has been prevailing since last August, reaching a peak of 4.48% on 27 March and is now 4.28% (see following chart), as bond investors have focused anew on Iran-driven stagflation risks rather than AI-triggered white-collar job losses which was the main concern prior to the attack on Iran on 28 February.

Any move in the ten-year yield beyond the 4.5% level will surely be negative for equities, as well as causing investors to refocus on America’s fiscal issues.

It is also the case that Treasury bond market volatility has picked up of late, as reflected in the MOVE index. It surged by 28% on 20 March to a high of 108.84.

This was the biggest one-day gain since October 2020 during Covid.

The index rose to a recent high of 115.02 on 26 March, though it has since declined to 74.42.

Prior to this, the Treasury bond market has been benefiting from Treasury Secretary Scott Bessent’s ever-increasing resort to financing at the short end, as well as buybacks at the long end.

On buybacks, in the latest quarterly refunding review in early February, the US Treasury estimated that buybacks, including liquidity support and cash management buybacks, will increase from US$50bn in 1QCY26 to US$53bn in 2QCY26.

Meanwhile, gross Treasury bill issuance totaled US$26.27tn in the past 12 months to March, accounting for a massive 84.9% of the total gross marketable Treasury issuance of US$30.95tn.

Rising Yields Due to Iran Conflict are Making it Harder for Trump to Cut Debt Servicing Costs

The other point is that the energy price shock stemming from the Iran War means that financial markets are less convinced than they used to be that the Fed will be cutting rates this year.

Since the commencement of the Iran War, money markets have gone from assuming 61bp of Fed easing this year to 14bp of Fed tightening in late March and are now discounting only 9bp of Fed easing.

The key focus of the Trump administration remains on reducing debt-servicing costs, with net interest payments and entitlements rising to 92.7% of total federal government revenues in the 12 months to March, though down from a recent high of 95.6% in the 12 months to January 2025.

An added negative in this respect is that the flow of tariff revenue should be drying up as a result of the Supreme Court decision.

As already noted, monthly tariff revenues have declined from a peak of US$31.354bn in October to US$22.155bn in March, down from US$27.742bn in January prior to the Supreme Court decision.

The Art of the TACO

We believe the market is having a tough time deciphering and differentiating between the two kinds of TACO (Trump Always Chickens Out): Tariff TACO vs. War TACO. When physical assets are blown up the ability to execute a clean TACO reduces significantly. This reality left us very skeptical about Monday’s announced two week ceasefire and the ‘immediate’ reopening of the Straight of Hormuz.

First off, let’s start with the traffic data from the Strait of Hormuz, there’s no meaningful change from the prior weeks - the Strait remains effectively closed. And if the latest Trump pronouncement is to be taken as face value, traffic from the Strait is going to zero.

Second, the Strait is booby-trapped. A recent New York Times report highlights a technical nightmare: even if Iran wanted to open the lanes today, they’ve essentially booby-trapped the Strait with mines they don’t even know how to remove.

And lastly, negotiations have not gone swimmingly; the American delegation is headed home without a deal.

This will certainly temper the market’s dovish orientation towards an unfettered War TACO. The dramatic selloff of the energy complex on the back of the ceasefire news highlights the market’s misunderstanding of the structural changes that have taken place and more critically how unloved energy assets are. Heck the only assets more unloved are SaaS (Software as a Service) stocks.

Below is a clip from our recent BNN Bloomberg interview where we shared our view on the profound structural changes taking place in the global energy marketplace, specifically LNG.

Who Wins From The Qatar LNG Shutdown?

The key question for energy investors is who benefits from a disrupted Qatari LNG industry?

In this research note we dig deep into the fundamentals of the global LNG market, quantify the Iranian conflict’s impact so far and outline where we think the investment opportunities are and the timeline for investment.

Lets get into it…

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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.

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