🎙️ NEW PODCAST WITH CHRIS MACINTOSH

We have another podcast with Chris to share with you this week. He recently joined Tom Bodrovics on the Competent Investor podcast.

Here’s a smattering of the topics they discussed:

• We’re in a blow-off top, and not just in the markets — this one’s societal too. It’s the inevitable result of years of bad decisions, unsustainable debt, and underinvestment in the things that actually matter (what Chris calls the age of consequences). The result? A society that’s taken to gambling on everything from sports to meme coins to the weather, while podium donuts celebrate new stock market highs and the system quietly breaks down underneath. Chris lays out what this means practically… and how to not be the last one holding the bag when it ends.
• Examining the different parties involved in the Iran war… and what their incentives are (or aren’t) to end the conflict and reopen the Strait of Hormuz.
• What the oil market is refusing to price in right now. Oil prices went from $55 to $112 to $80 — all within a year. Meanwhile, over 12 million barrels per day are currently offline due to conflict and supply chain disruption… dwarfing anything we’ve seen in past crises.
• The fossil fuel protester in yoga pants. It’s a perfect encapsulation of the naivete driving energy policy today (and why it matters for your portfolio).
• The global energy market today operates exactly like your average corner store — optimised to sell out every day and restock overnight, with no backroom inventory and no buffer. As the great Toilet Paper Crisis of 2020 showed us, that can bite you in the a** very quickly.
• How to exit the financial casino. And why the only way to do it is before everyone else figures out the game is rigged.
• Why Latin American countries swinging right in recent elections is not a coincidence… and what it tells us about where the broader political cycle is heading.
• The importance of uncontested geographies. When resource-rich regions are mired in conflict, places like Argentina quietly move to the front of the queue.
• Bullish on Europe? Long-time readers will know that’s not exactly our default position. But there are a handful of specific European stocks we can’t help but be bullish on.
• How much longer until China collapses? Western talking heads have been calling it for years. Chris explains why it hasn’t materialized… and what they keep getting wrong.
• The 2 bond markets every investor should be watching right now (and no, it’s not the US).

Listen to the entire conversation on Rumble here.

🚀 “WHAT WERE YOU THINKING?!”

We’d be remiss not to touch on the IPO of the century: SpaceX.

We dedicated a lengthy section to it in last week’s Insider Newsletter, specifically the things the investment banks pitching this thing would rather you didn’t think too hard about.

The whole thing reminds us of the absurdity that was WeWork (remember that one?) with “elevating the world’s consciousness” as their stated objective. It was a real estate leasing company, for God’s sake!

Except in the case of SpaceX, their mission is “extending the light of consciousness to the stars” (and in case you missed it the first time, it’s repeated 10 times).

But let’s not dwell on the minutiae and look at the numbers instead…

SpaceX is currently valued at 119x sales. The average S&P 500 stock trades at around 3.5x… so only 34 times more expensive than your average stock. No big deal!

This brings to mind a quote from Sun Microsystems CEO Scott McNealy — delivered after the dot-com bust, and probably never more relevant than right now:

“At 10x revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. Zero costs. Zero R&D. Zero taxes. Zero employees. What were you thinking?”

Extrapolate that to SpaceX and the company would need to hand you 100% of their sales for 119 straight years just to break even.

In other words, buy the stock today and your great-great-grandchildren might — might — get their money back sometime in the 22nd century. Good luck to them!

🛢️ AI IS THE NEW SHALE

Our buddy Kuppy wrote a great piece on the economics of AI data centers… and why the AI craze today eerily resembles the shale boom of the 2010s (strange as that might sound at first).

If you’ve been reading these missives, you won’t be shocked to hear his thesis…

Not a single financial model shows these AI data center investments generating a positive return on capital. And yet they’re getting built anyway.

Big Tech is burning through cash flow, taking on debt, and in Alphabet’s case, issuing equity for the first time since 2004. All to fund investments that don’t pencil out.

If that sounds familiar, it’s because it should…

Oil and gas CEOs were doing the exact same thing during the shale boom: drilling unprofitable wells because, well, that’s just what oilmen do.

And in case you forgot how that ended (or were too young to remember): most of them went broke. Not because someone talked sense into them… but because the market eventually pulled the plug entirely.

Kuppy’s piece is one of the sharper things we’ve read in a while… and we’re not saying that just because it rhymes rather loudly with everything we’ve been saying about AI.

📊 NOTHING STAYS ON TOP FOREVER

We’ve referenced a variation of this before but it bears repeating…

The biggest companies in the world have never stayed the biggest companies in the world. Themes come and go. Sectors rise and fall. Geographies cycle in and out of favour.

We’ve spent some time playing with this website.

Kodak was once the second largest company on the planet. IBM was number one. At the time, nobody thought either would ever fall from grace. They did.

And Schlumberger — an oil services company that most investors today have never heard of — was once the world’s 4th largest company. Right after the second Arab oil crisis, when energy was all anyone could think about and oil and gas exploration was booming.

Fast forward to today…

AI and tech companies dominate the charts, and the idea that any of them could fall from grace is about as popular as eating a ribeye steak at a vegan festival.

And that’s precisely what makes this chart worth staring at right now…

Because somewhere out there, there’s a version of this chart dated 2035… and we’d wager good money it looks nothing like today’s.

Whether it’s AI companies that got too big for their own balance sheets, or energy quietly clawing its way back to relevance, the wheel has a habit of turning when nobody’s watching.

 THIS WEEK’S BEST INVESTMENT

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Have a great week!