For readers of my work and members of The Pragmatic Investor, this should not come as a surprise.

I have been highlighting Nebius repeatedly over the past several months as one of the most compelling AI infrastructure plays in the world, and it has since become my largest single stock position.

The reason we identified it early comes down to a simple framework that I apply across markets: The Pragmatic Investor Model.

This model aligns macro, fundamentals and technicals allowing us to identify opportunities before the broader market fully recognizes them.

Nebius was a textbook example of that process.

The macro backdrop pointed to an AI infrastructure boom, while the technicals suggested the market was offering an opportunity.

Now the market is finally catching up.

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The Macro Thesis: AI Is Becoming Infrastructure

When I first began highlighting Nebius, the market was still focused almost entirely on the obvious winners of the AI boom.

Companies like Nvidia and the hyperscalers dominated the narrative.

But the real shift underway is deeper than just chips or models.

AI requires massive compute infrastructure.

That means data centers, GPU clusters, power infrastructure, networking, and AI cloud platforms.

In other words, AI is becoming a new layer of global infrastructure.

And infrastructure businesses tend to become extremely valuable once demand explodes.

This is especially true in Europe, which currently relies heavily on foreign hyperscalers for AI compute.

That gap creates a massive opportunity.

Nebius is positioning itself as Europe’s AI infrastructure champion.

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The Fundamentals: Hypergrowth With Visibility

The company’s operational performance has only reinforced this thesis.

Nebius recently reported 547% year-over-year revenue growth, while also achieving positive EBITDA.

More importantly, the company exited 2025 with $1.2 billion in annual recurring revenue and expects to reach $7–9 billion ARR by 2026.

Demand has been so strong that management has repeatedly stated that capacity is effectively sold out months in advance.

The company is also rapidly expanding its infrastructure footprint, targeting more than three gigawatts of contracted power capacity by 2026.

This combination of growth, visibility, and infrastructure scale is extremely rare.

Which is why Nebius has become one of the most compelling AI infrastructure companies in the market.

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The Technical Setup: Buying When Fear Was High

But fundamentals alone are not enough.

Timing matters.

After rallying sharply in 2025, Nebius experienced a significant correction, falling below $90.

We bought before this rally, but also made sure to highlight the oporutnity on the dip.

Double bottom, bullish divergence, and never breaking the 200 EMA. Strength in play sight.

This was exactly when many investors began to question the entire AI infrastructure narrative.

This is where the Pragmatic Investor framework becomes powerful.

The macro thesis remained intact.

The fundamentals were strengthening.

And the technicals suggested the market was offering an opportunity.

The Catalyst: The Meta Infrastructure Deal

The recent announcement that Nebius will participate in Meta’s massive AI infrastructure expansion is exactly the type of catalyst that can unlock value.

The AI industry is entering a phase where the largest technology companies are investing tens of billions of dollars into compute infrastructure.

And the reality is that there simply are not enough suppliers capable of delivering hyperscale GPU clusters.

Nebius is one of the few companies capable of doing so.

Unlike smaller AI infrastructure providers, Nebius is building gigawatt-scale data centers while also providing a full AI cloud stack.

This makes it far more comparable to an emerging hyperscaler than a simple GPU rental provider.

The Meta deal reinforces exactly what we believed from the beginning.

Nebius is becoming part of the backbone of the AI economy.

Why The Story May Still Be Early

Even after the recent rally, I believe Nebius remains in the early stages of its growth story.

If management achieves even the low end of its $7B ARR target for 2026, the company could justify a dramatically higher valuation.

But the real upside may lie in the strategic position Nebius is building.

As AI becomes critical infrastructure, companies capable of delivering large-scale compute capacity could become strategic assets within the global technology ecosystem.

That is why I previously argued that Nebius may eventually deserve a “strategic asset premium.”

And if that happens, the long-term upside could extend well beyond the recent rally.

Why Finding Opportunities Early Matters

Nebius is a perfect example of why the Pragmatic Investor approach exists.

The best opportunities rarely look obvious at first.

They emerge when macro trends, fundamentals, and technicals align before the broader market fully recognizes the opportunity.

That alignment allowed us to identify Nebius early and build conviction while the market remained skeptical.

Today the market is beginning to catch up.

But if the AI infrastructure boom continues, and I believe it will, this story may still be in its early chapters.

And those are exactly the kinds of opportunities we focus on finding.

AI is real.

The productivity gains are undeniable at this point, and anyone still dismissing this as a passing fad is simply behind the curve.

But the market’s core mistake is assuming that AI is, first and foremost, a software story.

It isn’t.

AI is a capital structure story, a margin story, and ultimately a macro story. Once you frame it that way, a lot of what we’re seeing in markets stops looking confusing and starts looking inevitable.

It’s time to break down exactly what AI is doing to tech and the economy, and how to profit (Over 20 stocks listed below)

How AI Is Reshaping Tech

The services economy is the real casualty

AI is doing something profoundly uncomfortable to technology: it is destroying the scarcity of code.

For decades, software was the holy grail: asset-light, high-margin, infinitely scalable.

You paid eye-watering license fees because building things internally was expensive, slow, and fragile. That world is ending.

That’s the key point most investors still miss:

When code becomes cheap, pricing power disappears.

AI doesn’t compete with software services; it commoditizes it.

And once that happens, price points of $15,000–$20,000 per seat don’t compress gently; they collapse.

Outside of true enterprise behemoths, we’re likely talking $99 a month at best.

The golden child of private equity and private credit, software services, is facing a reckoning.

CAPEX Is Still The Story

AI is not asset-light; it is brutally physical.

While software margins compress, something else is accelerating: capital intensity.

AI does not live in the cloud. It lives in:

• data centers

• power grids

• chips and networking

• cooling, land, security

• energy, energy, and more energy

Big Tech capex has exploded, and importantly, this spending is being funded, mostly, internally. That makes it sustainable, but not painless.

This is a regime shift away from the asset-light models that justified premium multiples for the last decade. Higher capex doesn’t automatically mean poor returns, but it does mean:

• more cyclicality

• higher operating leverage

• real depreciation risk

• and far less room for execution error

The irony is obvious but still underappreciated:
AI makes software cheaper while making infrastructure more valuable.

Markets are only halfway to pricing that reality.

Software Isn’t Completely Dead

But its role has changed

AI doesn’t kill software outright; it kills feature-based differentiation.

Anything narrow, easily replicable, or built around a single workflow is now on borrowed time. If it can be built quickly with AI, it can be copied just as quickly. That category is being priced correctly by markets.

Where software survives is higher up the stack.

In an AI-abundant world, value no longer comes from features.

It comes from frameworks.

This is what I meant when I recently talked about a rotation into names that could leverage AI infrastructure.

As individual capabilities like code generation and analysis become cheap, the scarce resource shifts to coordination: deciding what happens, when it happens, who (human or agent) can act, and how outputs remain coherent across an organization.

That’s not a point-solution problem. It’s an orchestration problem.

The software that compounds in this environment focuses on:

• managing and governing multiple agents

• preserving enterprise context and permissions

• enforcing structure, quality, and reuse

• and making other software more powerful

Rigid software is dying. Adaptive, orchestration-layer software is not.

Even so, the conclusion doesn’t change. Surviving software is more capital-intensive, more enterprise-cyclical, and more tightly linked to physical infrastructure.

Software isn’t gone, but its asset-light, high-multiple golden age probably is.

What AI Means for the Economy

AI is inherently disinflationary.

It attacks prices through:

• labor substitution

• productivity gains

• automated competition

• collapsing service fees

This is the “good disinflation” phase. Output rises, unit costs fall, margins compress, and consumers benefit, temporarily.

But the second-order effects matter far more.

As AI hollows out entry-level and mid-tier white-collar work, it quietly undermines demand.

Fewer professional wages mean weaker consumption growth. That’s when disinflation risks tipping into outright deflation.

The paradox is uncomfortable:

• productivity rises

• labour income falls

• demand weakens

• prices fall

• investment slows

For now, fiscal spending and massive capex programs are masking this. Structurally, however, AI is a deflationary force, not an inflationary one.

AI Recession?

Yes, but not the one people are waiting for. This won’t look like a classic balance-sheet recession, at least not initially.

Instead, we’re seeing a composition recession:

• services weaken

• software weakens

• labor demand weakens

• while physical buildout remains strong

That keeps headline GDP afloat while profit pools migrate elsewhere.

If and when physical bottlenecks ease, power, grids, data centers, the deflationary impulse reasserts itself, that’s when things could get messy.

Ultimately, AI will reshape the economy, and it will create pain. This is what creative destruction means.

But I am a techno-optimist and free-market economist at heart.

In the long-run, we will adapt, thrive and emerge stronger.

AI will increase individual productivity and lead to massive gains.

Technological progress and human inventiveness are not a trend you want to fade, even if valuations are getting frothy.

What This Means For Stocks

AI is not broadly bullish for “tech.” There will be winners and losers.

Structurally Bullish Buckets

Hardware

• NVIDIA: Still the compute bottleneck, despite crowding

• Broadcom: Networking + custom silicon leverage

• Super Micro Computer: Direct data-center buildout exposure

Power Infrastructure

• NextEra Energy: Grid + renewables at scale

• Duke Energy: Regulated power, data-center demand

• Eaton: Switchgear, transformers, grid bottlenecks

Data Center Real Assets

• Equinix: Global interconnection moat

• Digital Realty: Hyperscale landlord

• Iron Mountain: Underappreciated data-center pivot

Critical Materials

• Freeport-McMoRan: Copper = electrification bottleneck

• Albemarle: Volatile, but structurally scarce

• Rio Tinto: Scale exposure to energy transition metals

Automation Tied to Physical Output

• Rockwell Automation: Factory + process automation

• ABB : Robotics + electrification

• Emerson Electric: Controls, sensors, real-world systems

Structurally Bearish Buckets

Software Services

• Salesforce: Pricing power under pressure

• Workday: HR automation cuts both ways

High-Multiple SaaS

• Snowflake: Usage risk in an AI-insourced world

• Datadog: Crowded, easy to replicate

• Zoom: Commodity software reality

Labor-Intensive Platforms

• Upwork: AI eats the supply side

• Fiverr: Race to the bottom pricing

• Accenture: Human-wrapped software compression

Asset-Light Models with Weak Moats

• Shopify: AI lowers barriers for merchants

• HubSpot: Feature parity risk

• Asana: Workflow tools most exposed to agents

The Software That Still Works

But some “software” companies will thrive in this environment.

1. Orchestration & Control Layers

AI creates chaos; these sell order.

These companies don’t generate output; they decide what happens, when, and under what rules.

• ServiceNow: Workflow control, approvals, permissions. Not easily replaced by agents

• Palantir: Enterprise context, decision frameworks, real-world integration

• Atlassian: Coordination layer across humans + agents (still early, but positioned)

2. Infrastructure Software

(Software that makes hardware usable)

This is software with a physical anchor.

• Broadcom: VMware + networking = control plane for AI infrastructure

• Cisco: Boring, but owns the pipes, security, and reliability layer

• Arista Networks: Software-defined networking tied directly to data centers

3. Security, Identity & Permissions

AI without guardrails is a liability.

• CrowdStrike: Security as continuous infrastructure, not a point tool

• Palo Alto Networks: Platformization + AI-driven threat models

• Okta: Identity becomes more valuable as agents multiply

4. Vertical, Regulated, or Physical-World Software

Where mistakes are expensive and humans stay in the loop.

• Veeva Systems: Deep regulatory moat in pharma

• Cadence Design Systems: Software tightly coupled to physics and manufacturing

• Autodesk: Physical output, not abstract workflows

Final Thoughts

We are transitioning from a world where we paid for processes to one where we only pay for results.

When that happens:

• code gets cheap

• services get squeezed

• margins migrate

• capital matters again

We are going to build things again. And for once, markets appear to be rotating in the right direction.

Position accordingly.

A replay of the dot-com era, a frenzy detached from fundamentals.

But looking across markets, policy, and technology, the data paints a very different picture.

The “AI crash” we just saw wasn’t the bursting of an AI bubble. It was the unwinding of an OpenAI bubble, an…

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For years, Warren Buffett has openly regretted missing two tech giants: Amazon and Google.
Charlie Munger put it more bluntly:

Well, regret is finally turning into action.

Berkshire Hathaway just revealed that it bought 17.8 million shares of Alphabet, a position worth roughly $4.3 billion at the end of Q3, Buffett’s largest new stock addition last quarter.

And it couldn’t have come at a more interesting moment.
Wall Street is debating whether the AI boom is the next dot-com bubble… just as Buffett is quietly buying one of the biggest AI hyperscalers in the world.

It’s no secret that Google is my favourite stock.

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If you only make a few good decisions in your life — and hang around people better than you — you’ll do just fine.”

— Warren Buffett

At 94 years old, Warren Buffett stood before thousands in Omaha for what may be his last annual shareholder meeting as CEO of Berkshire Hathaway. And he didn’t hold back. From reflections on his life and investing style to timely macro commentary and portfolio strategy, Buffett delivered a masterclass for investors.

Let’s unpack the key insights and how you can apply them to your own investing playbook.

 1. Patience is the Ultimate Edge

Buffett reiterated a point that feels more important than ever in a high-frequency, AI-powered market: doing nothing is a position.

Things get extraordinarily attractive very occasionally… We’ve made a lot of money by not wanting to be fully invested at all times.

With Berkshire now sitting on a record $347.7 billion in cash — more than Apple, Amazon, Google, and Microsoft combined — Buffett is signaling something profound:

We are not seeing a lot of screaming bargains.

Investor takeaway: You don’t always need to act. Sometimes the best move is to wait with dry powder. Buffett’s philosophy teaches that it’s better to be underinvested and opportunistic than to chase mediocre returns in overvalued markets.

2. Why Buffett Sold Some Apple — and Still Loves It

Buffett acknowledged reducing his Apple stake but was clear: Apple is still Berkshire’s most important investment.

 Tim Cook has made more money for Berkshire than I have.

While Apple’s performance in China was a concern — with Buffett noting weak iPhone sales and nationalism affecting purchasing decisions — he reaffirmed confidence in the company’s management, buyback strategy, and long-term moat.

Investor takeaway: You can trim a position for portfolio flexibility without losing conviction. Buffett’s move wasn’t about losing faith — it was about maintaining discipline while Apple’s valuation ran hot.

3. Berkshire’s Cash Horde: What’s It Waiting For?

Buffett made it clear why Berkshire isn’t making massive acquisitions right now:

• Markets are expensive

• There’s little distress

• The environment lacks forced sellers

That said, he hinted that Berkshire’s war chest could fund a $200–300 billion deal if the right opportunity arose.

We’re not in a market with lots of distress… but when there’s a bargain, we’ll be ready.

Investor takeaway: Keep a portion of your portfolio liquid. You don’t need to chase every rally. Position yourself so that if and when markets correct, you can act decisively — not desperately.

4. Tariffs and Global Tensions: Don’t Panic, Adapt

Buffett and Berkshire execs were candid about the uncertainty created by Trump’s 2025 tariff threats, especially the July 9 decision that could jack rates up to 40–50% on key imports.

But instead of fear, they highlighted resilience:

We’ve been able to offset tariff impacts thanks to vertical integration and local-for-local manufacturing strategies.

This is Buffett’s version of anti-fragility: own businesses that can adapt, not just survive.

Investor takeaway: Reevaluate companies with global supply chains. Winners will be those that can localize production or pass on costs. Tariff-proof companies may outperform in the second half of 2025.

5. For Young Investors: Choose Your Circle Carefully

Perhaps the most heartfelt takeaway came during Buffett’s advice to young investors:

 You’re going to go in the direction of the people you associate with… Hang around people better than you.

He didn’t talk about options, AI tools, or technicals. He talked about character, relationships, and integrity.

Investor takeaway: Build a network of long-term thinkers. In investing, your peer group shapes your decisions more than your knowledge. Follow people with patience, humility, and skin in the game.

Why  I’m Launching A “Buffett Portfolio”

As I explained last week, I am going to be launching a “Buffett Portfolio”.

What does this mean? And why now?

It has become quite clear to me that we are entering a macroeconomic environment (I’m talking up to a decade) that could in many ways resemble that of the 1970s.

• High Interest Rates

• Inflation

• Political Instabiltiy

Based on some of Berkshire’s last moves, I think Buffett may think this too.

In the environment laid out above, it’s likely we will see.

• Value Outperformance

• Commodity Outperformance

• Emerging Market Outperformance

After two decades of markets being led by mega caps/growth, we could soon, (not yet) enter a period where value investing stock pickers thrive again, and there’s arguably noone better at this than the Oracle of Omaha.

In the next two weeks, I will unveil my first 10 Buffett stocks, and we will add at least 10 more throughout the coming six months.

Each stock will be accompanied by an in-depth review so you can understand exactly the logic behind each pick.

And of course, we’ll be updating the portfolio regularly.

If you’d like to join us in this journey, you can now take advantage of this 15% discount. 

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You’ll also get access to.

• Our YOLO and EOW equity portfolios

• Our Macro ETF Portoflio

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Final Thoughts: Buffett’s Legacy Playbook

Buffett may be in the twilight of his career, but the playbook remains timeless.

 Be patient when others rush.

 Buy quality at a fair price — or wait.

 Invest in people, not just numbers.

 Keep your powder dry for when it really matters.

And above all?

That optimism, combined with prudence and discipline, is the core of Buffett’s success

and the reason his ideas will continue to endure.

It’s a struggle, I know. There’s so much wrong with the world and so much more that could go wrong.

True, we have witnessed over 70 years of world peace, but to believe that what has been the case in that relatively small amount of time will be the case for the next 50 years would be to fall victim to recency bias.

Ray Dalio very eloquently lays out these ideas in his book The Changing World Order.

I’ll summarize here some key takeaways with a couple of charts and tables:

Firstly, empires rise and fall. Seems like an obvious statement, but I believe it is a consideration few investors take the time to consider these days. Hard to believe that my home country, Spain, was a world superpower back in the 1500s.

In fact, the dollar was originally a Spanish silver coin (thaler).

For most of our lifetime, we have seen a period of US dominance, but according to this chart, the US has peaked. Though not reflected here, China, which for the better part of 20 years has been a growth story, is now facing similar problems as the US.

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This is not to say I avoid US assets all altogether or that a major shift is going to happen soon, though it might. This is to say that things change, and investors need to be aware of this.

Perhaps the biggest secret to wealth preservation is diversification

The last 20 years have gotten us used to easy returns, both in stocks and bonds, but this is not the norm.

The chart above illustrates returns by asset class for some of the world’s major economies. On aggregate, just preserving wealth has been a challenge. We have had full decades, like 1910-1920 where returns in cash equity and bonds were negative across the board.

With that said, for the most part, there was always some area of outperformance. With the right foresight, investors could have done very well.

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But even if you get things right most of the time, there were still plenty of black swan events that could have blown up your whole portfolio.

Just to name a few examples, we can see above how wars specifically have been really good at destroying wealth.

Expect the best and prepare for the worst

I don’t mean to come off as a doom-and-gloom permabear. I am merely trying to highlight the risks associated with investing. This is especially true when you are dealing with a large amount of wealth you want to preserve in the long term.

And though I am expecting the best, I want to prepare for the worst. Simply consider a few of these questions.

• Are fiscal deficits becoming a bigger problem?

• Are more currencies today at risk of substantial devaluation?

• Is government oversight becoming more or less prevalent?

• Is it becoming easier or harder for governments/institutions to seize your money?

But at the same time;

• Is technology advancing well beyond our expectations?

• Do we have more freedom and opportunities today?

• Are investors now capable of protecting their wealth in more ways?

I embraced a long time ago that the world is made up of opposite forces, constantly pulling on each other but also balancing. The ying and the yang.

If you want to be successful LONG-TERM, you must embrace this.

With that said, I present to you the three tenets of my long-term investing philosophy.

Step 1: Stay Diversified

I’ve mentioned this before, but it’s worth repeating since this is so important.

Diversification is the most important way to achieve long-term wealth preservation and peace of mind. Now, it’s very important to also note. This will not get you great gains. Great gains are achieved by concentrating your wealth.

If that’s where you are right now, then you can check out my YOLO portfolio. Again, it’s all about the Ying and the Yang. Ideally, you should allocate some money to a long-term portfolio, and have some money to “gamble”. (Or ff done right, gambling with the odds in your favor)

But in order to preserve wealth in a responsible fashion, you need to stay diversified in many ways:

Diversify your asset classes

Of course. You can’t just own stocks. You also need bonds, commodities, crypto and even alternative investments.

These are the simple tenants of the All-Weather portfolio.

If, indeed, as history shows, the world revolves around cycles, and indeed our capacity to predict them is limited (that’s not to say nil), then we need assets that will perform in every sort of macro environment.

At its most core level, that means being well equipped to deal with rising/falling growth and rising/falling inflation.

Bonds have tended to work well in periods of low growth and inflation. Meanwhile, commodities like energy and gold serve to protect us against deflation. Stocks, on the other hand, work best during growth, although the right companies can perform well in different environments.

To this matrix, we would definitely have to add Bitcoin, which shares many properties with gold, but could also perform well during “growth” periods. Also, real estate.

Diversify your investment styles.

Now, within your different asset classes, we can also diversify. There are, for example, various ways of getting exposure to commodities. Futures, ownership in stocks, or even outright ownership.

Same with stocks. A stock can be any company, and there are literally millions of companies doing millions of different things.

Even when it comes to bonds, we can diversify in terms of duration.

• Diversify your Geographies

This is really important too. As we have seen in the table above, anyone who had all their wealth in Russia in 1900, or Germany in 1923, would have lost it all.

A well-rounded portfolio should have exposure to numerous different geographies. Every country is unique, and each has something to offer.

In this area, as investors, we do have some room to get ahead. Just like there are better stocks, there are also better countries. Certain dynamics can show us whether a country is becoming more or less prosperous, and this will have a direct effect on how assets in that country perform.

Diversify Yourself

Lastly, it’s worth mentioning that, in order to be fully bulletproof financially, you need to be diversified too.

Ideally, you should aim to have multiple bank accounts, brokers, income streams and even nationalities/residencies. This is increasingly easy in today’s globalized world, and if done right, it can ensure that there is no single point of failure.

Step 2: Invest in The Right Places

Now, this might be slightly contradictory, so let’s be clear about one thing. I still advocate for being diversified. With that said, we should look to gain more exposure (be overweight) in the areas and regions that hold the most promise over the next decade.

Also, as tides shift, we should be equally ready to switch our allocation to different assets.

In order to do this, we need to understand two things.

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Macro and Business Cycles

To the best of our ability, understanding business cycles can help us be better positioned to capture gains/reduce losses in our long-term portfolio. I’m not talking about going all cash or shorting the market. The way I view this is that you should be looking at staying ahead of the curve. When euphoria is at a max, go defensive. When there’s a dip you want to buy, understand what the best way is for you to raise cash.

Macro is something I am deeply focused on, and it guides a lot of how I invest, especially when it comes to short-term trades. However, it also guides many of my long-term trades.

Secular Trends

Beyond the purely macro, identifying secular trends is also a recipe for success. Specifically, I always ask myself two questions;

What are the most interesting areas of growth over the coming years?

To answer this, we must ask ourselves another question: What do we want? Human life is a constant race to fulfil our needs. In fact, our needs are literally never fulfilled. There’s always something more we can do, something new to discover.

With that said, here’s what I see as the key areas I’m looking to invest in long-term.

Healthcare: We have conquered almost everything, but death is still the great equalizer…or is it? Everyone wants to live longer, maybe even forever. Health and longevity will surely be the largest area of growth over the next few decades. People are sitting on millions and billions, and they'd pay any price to cheat death.

AI and Robotics: AI is all the rage, and while I truly believe we are getting ahead of ourselves here, this is the future. Artificial Intelligence will change the way we do business and even interact with each other.

While AI is still forming as an idea and software, I believe the next key level of AI evolution will be its implementation into robotics. Fully independent and functioning machines will be a game changer.

Cybersecurity: As basically all the information we have and create moves into the cloud, protecting it will become a bigger business. The more people can benefit from exploiting cyber weaknesses, the more important cybersecurity will become. This applies both on a business as well as governmental and institutional level.

Energy: Of course, what do all of the above have in common? Everything requires energy, and that’s not going to change any time soon. We are undergoing a massive energy transition, and positioning for the future will be key.

What are the best countries to invest in the next 20 years?

Don’t get me wrong. The West may be declining, but it is still a great place to invest. Especially when it comes to tech and innovation, the US is still unrivalled worldwide. Many of the companies I invest in are located in the US and Europe.

With that said, there are a few countries I am particularly interested in since, in my opinion, they will experience the most notable.

• Brazil

• India

• Vietnam

• UK

Step 3: Invest In The Right Way

Secular trends are the macro, but in order to be successful, we must also look at the micro. Once we have identified the right places to invest, we must identify the right companies, too.

What does that mean exactly?

While I have highlighted key areas of growth in the section above, my objective here is to build a robust long-term portfolio.

In other words, I am not interested in speculative ideas right here but rather in companies that can stand the test of time and deliver consistent results to investors.

I want a company that will thrive even when the world is burning around it.

This is what we do in our End Of The World Portfolio, and also what we track in our Macro Portfolio.

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For over a decade, U.S. markets have been the centre of the financial universe. Capital from all over the world poured into U.S. equities and the dollar, chasing innovation, liquidity, and shareholder-friendly governance.

But signs are now pointing to a reversal—a slow, structural unwind of what some have called "American exceptionalism."

This isn't a sudden crash, but a quiet regime shift. Global investors, especially in Europe, are starting to rethink their allocations. What's driving it? Geopolitics, fiscal policy, and a change in narrative around where the world’s real economic momentum is headed.

Capital Flows: Reversal in Motion

Since 2020, roughly $10 trillion flowed into U.S. assets. The U.S. was seen as the safest house on the street, especially after COVID, during the AI hype cycle, and as war broke out in Ukraine. But the dynamics have started to change.

A pivotal moment came when the U.S. signalled that it no longer wanted to act as the world's policeman. For Europe, this meant the security umbrella was gone. In response, Germany tore up its post-2009 fiscal restraint and announced a €1 trillion stimulus plan, half of which is targeted at rebuilding domestic defense capabilities. That kind of money doesn’t stay in Treasuries or S&P 500 ETFs—it starts getting deployed at home.

China’s “DeepSeek” Moment

Around the same time, China had its own pivotal moment. A domestic AI model rivalled the performance of OpenAI’s GPT-4, but with a fraction of the cost and no access to high-end Nvidia chips. This "DeepSeek moment" was a signal: the U.S. no longer had a clear technological moat.

It challenged the idea that only U.S. companies could lead in AI. For global investors, especially in Asia, it was a green light to reconsider Chinese equities and domestic innovation stories that had been left for dead.

From a Trade to a Trend

What began as a tactical shift has the makings of a long-term trend. Think of it like the financial version of the “UNO Reverse Card.”

During the COVID era, the U.S. went big on deficits and stimulus while Europe stayed austere. Now it’s flipped: the U.S. is talking budget discipline, while Europe is spending aggressively.

Meanwhile, capital is seeking growth and predictability. If the U.S. is entering a "detox phase" while Germany and China are going fiscal, global money will go where it’s treated best. This isn’t about abandoning the U.S., but rebalancing after a one-sided decade.

What to Do Now?

The right response might not be to go all-in on Europe or short the U.S.—that’s a false binary. Instead, a barbell approach makes sense. Maintain U.S. exposure but complement it with international assets: European defense stocks, emerging markets, and Chinese tech. Diversification is no longer just about sectors—it’s about geography.

For years, investors could ignore the rest of the world. That luxury is fading.

Of course, at The Pragmatic Investor, we’ve highlighted the importance of global diversification for years, something which we’ve achieved through our End Of The World Portfolio.

That’s why almost 50% of this portfolio is allocated outside of the US, and it’s the reason we’ve managed to outperform the market in the last month.

Over the coming months, we’ll be focusing on buying more international stocks, especially in Europe.

Final Thoughts

The U.S. remains a dominant economic power. But the rest of the world, particularly Europe and China, is finally starting to stir. This isn’t about collapse or crisis. It’s about normalisation. For global investors, the key is recognising that the regime has changed—and positioning accordingly.

CoreWeave’s rocky IPO may be the first true warning shot that the AI bubble is losing air. Once hyped as a $32B darling, the company was priced at $23B amid weak demand and rising scepticism.

Combined with recent layoffs at Microsoft, declining startup funding, and the rise of cheap AI challengers like DeepSeek, investors are starting to rethink the entire AI narrative. But where there’s a burst bubble, there’s also opportunity—for those who know where to look.

Expect to learn:

• Why CoreWeave’s IPO flop could be a turning point for AI investing

• Five signs the AI bubble may already be deflating

• How to profit from the shift: strategies beyond the hype

• The new winners in a post-AI-mania market

The Coreweave IPO

CoreWeave has become the first major AI company to test investor appetite with a high-profile IPO—but early signs point to disappointment.

The IPO was priced at $40 per share, giving the company a $23 billion valuation, notably lower than the $32 billion figure bankers had touted weeks earlier. This suggests investors are cooling on AI hype, with tech stocks like Nvidia and Oracle also down year-to-date.

The lukewarm reception stems from growing scepticism. Many investors are uneasy about CoreWeave’s dependence on key partners like Microsoft and Nvidia, its aggressive cash burn, and the significant stock already sold by its founders.

While some bullish investors view these as temporary growing pains and a necessary trade-off for scaling during a unique technological shift, broader sentiment has shifted.

A recent confidential survey of 135 investors revealed deep concerns: 90% believed CoreWeave lacks a sustainable competitive moat. One participant bluntly described the company as “radioactive.”

Ultimately, while some see this IPO as a chance to buy into the AI boom at a discount, many are wary. CoreWeave’s debut may reflect a broader fatigue with the AI narrative—and a market now demanding profitability and defensibility over promise and hype.

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Has The AI Bubbled Burst?

Recent developments suggest that the artificial intelligence (AI) sector is experiencing significant turbulence, indicating that the AI bubble may be deflating. Key signs include:

1. Major Tech Layoffs and Strategic Shifts

Microsoft, a leading player in AI, has implemented layoffs affecting cloud solution architects and customer-facing roles. These cuts are part of broader organisational adjustments aimed at aligning the workforce with evolving business needs.

2. Decline in AI Startup Funding

While AI investments surged by 62% to $110 billion in 2024, overall startup funding declined by 12%, indicating a consolidation where only select AI ventures attract significant capital.

3. Investor Skepticism Toward AI IPOs

The recent initial public offering (IPO) of CoreWeave, an AI infrastructure firm, was scaled back due to weaker-than-expected demand. The company priced its shares at $40, below the anticipated range, reflecting investor caution.

4. Emergence of Cost-Effective AI Models

The introduction of DeepSeek, a Chinese AI model developed for under $6 million, challenges the prevailing notion that effective AI requires substantial investment. This development has led to significant market reactions, including a notable drop in tech stocks like Nvidia.

5. Cultural Shift in Tech Industry

Tech companies are moving away from a culture of extensive perks toward emphasizing performance and efficiency. Firms such as Meta, Amazon, Google, and Microsoft have initiated large-scale layoffs and heightened performance expectations, signaling a focus on profitability over growth.

These indicators collectively suggest a recalibration in the AI industry, with a heightened emphasis on sustainable growth and tangible returns.

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How Can Investors Profit?

If, the AI bubble has popped, which is a very big if, then there’s a few key ways investors can profit from this.

If the AI bubble is indeed bursting, investors can still find opportunities to profit—by adjusting strategy, avoiding hype, and leaning into fundamentals. Here are some smart ways to position:

1. Short Overhyped or Overvalued AI Stocks (Not recommended)

Companies with unsustainable valuations, weak moats, or excessive reliance on hype are potential short targets. CoreWeave, for example, has drawn criticism for its cash burn and dependency on key partners, making it vulnerable in a risk-off environment.

I do not recommend shorting generally as it is highly risky.

2. Rotate into "Picks and Shovels"

Even if AI stocks deflate, infrastructure plays with real demand and pricing power may hold up better. These include:

• Semiconductor foundries (e.g. TSMC)
  

• Networking hardware (e.g. Arista)
  

• Datacenter REITs (e.g. Equinix)
  

• Power & cooling providers (e.g. Vertiv)
  

These are more insulated from software/AI narrative shifts.

3. Buy Quality at a Discount

Established tech names like Microsoft or Nvidia might see temporary pullbacks due to sentiment, offering chances to buy long-term compounders at better valuations.

I talked about the Mag 7 stocks that I like most last week.

4. Look for AI Use-Case Winners, Not Builders

Focus on companies using AI to drive measurable efficiency or revenue, not just building models. Think of firms like:

• ServiceNow (automating workflows)

• Adobe (integrating AI into creative tools)

• Palantir (government/enterprise deployment)

5. Rebalance Toward Value & Cyclicals

If AI hype unwinds like past tech bubbles, capital often rotates into value sectors like energy, industrials, or financials. These can benefit from rising interest rates or inflation-resistant fundamentals.

Something I mentioned a few weeks ago.

If we are approaching a stagflationary-like environment, then small value caps might be the way to go.

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Conclusion

The CoreWeave IPO could mark a pivotal moment in the AI investing cycle, where narrative gives way to numbers, and hype yields to hard scrutiny. While this doesn’t mean the AI story is over, it does suggest a shift in tone: investors are demanding real moats, profits, and sustainable growth.

For savvy investors, this environment offers a chance to reposition, focusing on resilient infrastructure, discounted quality, and practical AI applications. Whether this is a temporary reset or the end of a bubble, one thing is clear: the market is no longer buying the dream without seeing the delivery.

Have you been enjoying the Pragamtic Investor?

Over the last year, I have added numerous features and sections to the Substack so that you can benefit too.

• My Long-term Stock Portfolios

• My Swing Trades and Trendspider Algorithm

• My recently developed Macro Matrix

Everything I do, you can track right here. The good and the bad.

Could Elon Musk really be planning to buy Intel? With reports from trusted analysts and rising buzz on social media, this rumour is gaining traction. If true, Musk’s involvement could spark a monumental transformation, redefining Intel’s future and reshaping the semiconductor industry. Investors are already taking note, with Intel’s shares up nearly 10%.

Expect to Learn:

• Why Musk’s history of disruption could revolutionise Intel’s strategy.

• How Intel could leverage its core strengths and new opportunities under Musk’s vision.

• What this means for the semiconductor industry and Intel’s valuation.

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Is Elon Musk Eyeing an Intel Takeover? Rumours Swirl of a Game-Changing Acquisition!

The tech world is abuzz with whispers of an extraordinary rumour: Elon Musk might be in talks to acquire Intel! According to SemiAccurate, a trusted research firm, there’s a 90% likelihood of an Intel buyout—and Musk’s name has surfaced as a key player. This explosive claim has sent shockwaves through the industry, sparking intrigue and speculation about the future of the semiconductor giant.

Adding fuel to the fire, Dylan Patel, a well-known industry analyst, recently teased on X (formerly Twitter) that Musk is involved in discussions alongside Qualcomm and GlobalFoundries, allegedly held at Mar-a-Lago. The implications of such talks could be monumental, as the Tesla and SpaceX visionary has a history of redefining industries.

Intel's potential suitors include heavyweights like Qualcomm, AMD, and ARM, but Musk's involvement could elevate the stakes dramatically. Speculation even suggests a Musk-led Intel could embrace revolutionary strategies, potentially reshaping the semiconductor landscape.

Citibank analyst Christopher Danely has weighed in, calling Musk’s potential influence transformative but cautioning that a leadership overhaul may be necessary for true success.

Investors are already feeling the buzz—Intel’s shares have surged nearly 10%. While these rumours are unconfirmed, one thing is clear: if Musk is in the mix, the tech world should brace for seismic change!

What Could This Mean For Intel?

​​A potential Elon Musk takeover of Intel could signify a dramatic shift in the company's direction, strategy, and culture. Here’s what it might mean:

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1. Revolutionary Leadership and Innovation

Musk’s track record at Tesla, SpaceX, and Neuralink shows his ability to disrupt industries. Under his leadership, Intel could pivot toward ambitious, forward-thinking projects, such as advanced AI processors, quantum computing, or even chips for space exploration. Musk’s penchant for risk-taking could reinvigorate Intel's innovation pipeline.

2. A Renewed Competitive Edge

Intel has faced stiff competition from AMD and ARM in recent years. Musk’s involvement could inject fresh energy into Intel’s R&D, enabling it to reclaim its dominance in the semiconductor industry. By leveraging cutting-edge technologies and scaling manufacturing capabilities, Intel could secure a competitive edge.

3. Integration with Musk's Ecosystem

Musk might integrate Intel’s technology into his existing ventures, creating synergies across Tesla’s autonomous systems, SpaceX’s satellites, and Neuralink’s brain-machine interfaces. This cross-industry integration could position Intel as a key enabler of futuristic technologies.

4. Potential Strategic Overhaul

Musk might steer Intel away from its traditional business model, focusing on custom chip production or other niche areas. Exiting less profitable segments, like the merchant foundry business, could streamline operations.

5. Enhanced Investor Confidence

Musk’s involvement often boosts investor sentiment. His name alone could attract significant capital and partnerships, driving Intel’s stock price and market value upward.

6. Cultural Shake-Up

Known for his hands-on and sometimes controversial management style, Musk could radically alter Intel’s corporate culture, prioritising speed, efficiency, and innovation over bureaucracy.

While exciting, a Musk-led Intel would also come with risks, such as overambitious projects, cultural clashes, or execution challenges. However, his vision could potentially redefine Intel’s role in the tech world, propelling it into uncharted territories.

Is Intel a Buy?

Intel Corporation is at a critical juncture. With Pat Gelsinger stepping down as CEO, the company has an opportunity to redefine its strategy under fresh leadership. While Intel’s stock has plunged nearly 50% in the past year, the low valuation and signs of recovery make it an intriguing investment prospect.

Challenges and Opportunities

Intel’s struggles predate Gelsinger, including lost market share and underwhelming R&D output. However, a new CEO and takeover could replicate successful turnarounds seen in other companies. For example, Howard Schultz revitalised Starbucks, and Mary Barra spearheaded General Motors’ recovery during challenging times.

For Intel, the path forward involves cutting bloated operations, shedding underperforming assets, and doubling down on promising segments like its 18A process and fab business. These focus areas, coupled with strategic investments in emerging technologies, could reinvigorate growth. Intel’s success with Mobileye exemplifies its potential in identifying high-growth opportunities.

Valuation and Timing

Intel’s stock trades below book value, presenting a compelling opportunity for investors.

Technically, the stock has stabilised near a strong support level, setting the stage for a potential rally. External factors, including the AI boom and a favourable policy environment under a potential Trump administration, could further boost Intel’s position as a key player in re-industrialising the US.

Final Verdict

At its current valuation, Intel offers limited downside and significant upside if the new leadership executes a robust turnaround strategy. By streamlining operations, refocusing on core strengths, and leveraging its resources in AI and other growth areas, Intel could achieve a dramatic recovery. For investors willing to take a calculated risk, Intel is a buy.

Have you been enjoying the Pragamtic Investor?

Over the last year, I have added numerous features and sections to the substack so that you can benefit too.

• My Long-term Stock Portfolios

• My Swing Trades and Trendspider Algorithm

• My recently developed Macro Matrix

Everything I do, you can track right here. The good and the bad.

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If you are considering subscribing to gain full access, I strongly suggest you take advantage of this offer, as I will also be increasing the price in the coming month.

It’s time to pull back the curtain and reveal exactly how I make all my investing decisions.

The Pragmatic Investor sticks to what works. The problem is there are thousands of different strategies that CAN work for certain people.

But simplicity is key, and that is why I have narrowed down my investing ethos into three key ideas, which combined create what I like to call…

The Pragmatic Investing Pyramid.

Pretty simple and self-explanatory, but let’s explain it nonetheless.

And if you make it to the end of this post, you will also receive a special gift…

Macro Moves Markets

Macroeconomics is the foundation of everything. Only by truly understanding economic forces can we hope to determine the direction of markets on larger time frames. 

There are limitations to how much we can predict, but I do think there’s enough data available, even to the retail investor, in order to predict recessions with some accuracy.

Thankfully, I have found an outstanding source of macro intel, which has helped me create my patented Macro Matrix.

Cash Is King

Bear markets are a response to economic recessions and dislocations, but when the S&P 500 drops by 20%, that doesn’t mean every stock in the index drops by that much. Some companies may weather the storm better, and some might even thrive while markets collapse.

Ultimately, even when multiples are contracting, it’s hard for a company that is steadily increasing revenues and, perhaps more importantly, cash flow, to lose value.

When investing, you are ultimately buying a cash-generating asset, and this will determine the fundamental/intrinsic value of a stock.

This is why fundamentals are key to my research process, and why I have built long-term stock portfolios that you can track right here.

Technical Analysis Is Not Astrology For Men

TA is a controversial subject, and believe me, I have been on both sides of the fence. 

Now, I am a Pragmatic Investor, and while I acknowledge the limitations of TA, I also admit that is a very powerful tool.

Moving averages, key areas of volume and tracking price structure is something tonnes of investors/traders are doing, as well as plenty of algos run by hedge funds. 

To suggest that the price will not react aggressively to certain levels, at least in the short term, is naive.

This is why I use TA, and have actually developed my own Algorithm, which can be extremely helpful in determining short-term trend changes.

You Will Need Help in Your Journey

Investing is a hard, but rewarding road. Making the right decisions today will set you up for the future. 

Investing will help you retire comfortably, support your loved ones and even fulfil lifelong dreams.

Everything I do is geared towards achieving financial success, and I share it here with you so that you can too.

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Each of the layers of my Investing Pyramid helps me build up my investing system, and each of these is in turn supported by one of my strategic partners.

The Macro Matrix

The Macro Matrix is what I call my list of 10 indicators that I watch in terms of determining economic health and the likelihood of a recession.

It is my attempt at trying to predict and preempt the business cycle.

I track and update these indicators every week, but I would never be able to without the great data and insights provided by MacroMicro.

Gain real-time insights, intuitive charts, and powerful analysis tools to optimize your investments. Their data-driven platform focuses on market cycles and global trends to help you make smarter decisions. You can also access exclusive reports, explore key trends, and join a vibrant community of professionals. 

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End Of The World and YOLO Portfolio

Valuing companies can seem overwhelming at first. There are plenty of different ways to do it and it can be hard to know where to start.

That’s okay. If you follow my work, you will receive in-depth reports on stocks on a weekly basis, where I cover all aspects of the investing process in detail.

My End Of The World Portfolio is specifically designed to protect your wealth, and it is filled with stocks that will thrive even during harsh times.

On the other hand, our YOLO Portfolio is filled with high-potential stocks that will supercharge your portfolio gains. (With higher risk too, of course)

But whether I’m looking for a dividend Aristocrat or the next NVIDIA, I always use data and insights from Seeking Alpha.

Access coverage on more stocks than major Wall Street firms, with diverse bull and bear perspectives. Use customizable stock screeners to discover hidden gems and top-rated picks. Rely on AI-powered Quant Ratings to consistently outperform the market. 

Take your investing further with Seeking Alpha!

Swing Trades

Trades are short-term plays I like to take, generally based on technical analysis, but also often supported by some form of a catalyst or fundamental.

The key to these Swing Trades is having a clear understanding of our risk/reward ratio. This is why I always suggest a stop-loss and take-profit.

When it comes to looking at short-term trades, I rely heavily on my personalized Algorithm, which I developed on the Trendspider platform.

Save time and money by consolidating your research and trading tools into one platform. With professional-grade features, real-time data for 65,000+ assets, and powerful charting capabilities, TrendSpider is accessible to everyone.

Explore strategies with 50+ years of historical data, generate real-time trade ideas, and automate your workflow. TrendSpider’s sophisticated tools help you find better setups, improve accuracy, and time trades with precision.

Streamline your trading with TrendSpider and discover your edge today!

So, what next?

I have laid out above the basics of my investing strategy. I have personally been in the game for around a decade, and I enjoy being an active investor and trader, but also believe in the importance of buying and holding for the long term.

This is why I have a long-term portfolio and trades, and always stay up to date with the lastest macro developments.

That doesn’t mean you have to do the same. I encourage you to find out what works for you, while also encouraging you to stay tuned to my upcoming reports.

If you’re still very new to this and don’t know what to do, I’ll make it simple, by giving you a list.

1. Find out what type of investor you are; determine your objectives, risk tolerance and overall strategy. Even if it isn’t 100% hashed out, you need to have some idea.

2. Fund a brokerage account and start investing. Buy something and see how it makes you feel. 

3. Stay up to date with news, find investing ideas and educate yourself online. There are countless great substacks here, such as this one, or any of the ones I recommend. 

4. In order to take your trading and investing to the next level, consider using some of the tools I mentioned above. Keep costs in mind, and make sure you are getting a good return too. (This is also an investment decision)

5. If you have any questions, reach out to me! I’m always happy to talk to subscribers paid or free.

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*Some of the links on this website are affiliate links, meaning I may earn a commission if you click through and make a purchase, at no additional cost to you. This helps support the site and allows me to continue providing content. I only recommend products or services I genuinely believe in.

**The information provided on this website is for informational purposes only and does not constitute financial advice. Always do your own research and consult with a licensed financial advisor before making any investment or financial decisions.

These are ideas, both theoretical and practical, that I personally use when making investing decisions. 

We’ll start with the basics and got more complex as we go along

Introduction

Investing is, for the most part, an endeavour to understand and value companies. 

An investor will “win” or benefit if he correctly assesses the value of a company. This will come in the form of payments from the company, income, or capital appreciation.

Therefore, the job of an investor is in its essence to find a mismatch between what he perceives to be the real value of a company and what “the market” believes it to be. This means the investor needs to make his own assessment of a business in order to derive its value.

This can be done through an intrinsic valuation or a relative valuation method.

Intrinsic Valuation

Intrinsic valuation posits that a company's or asset's value is the present value of its expected future cash flows, discounted at a rate reflecting its risk and opportunity cost. 

This involves estimating cash flows, growth rates, and discount rates using models like discounted cash flow (DCF), dividend discount model (DDM), or residual income model (RIM). Unlike market prices or investor opinions, intrinsic valuation focuses on the fundamental value based on the company's or asset's inherent characteristics and performance.

Relative Valuation

Relative valuation determines a company's or asset's value by comparing it to similar market entities using multiples or ratios like the price-to-earnings (P/E) ratio, enterprise value-to-EBITDA (EV/EBITDA) ratio, or price-to-book (P/B) ratio. This method involves identifying relevant multiples from market data or industry averages and applying them to the company or asset in question. Unlike intrinsic valuation, relative valuation is influenced by market prices and investor opinions, reflecting the relative value based on how it compares to other market participants.

Advantages And Disadvantages

Both intrinsic and relative valuation methods have their advantages and disadvantages.

Intrinsic Valuation

Advantages: More rigorous and consistent, relying on the company's or asset's fundamentals rather than market fluctuations.

Disadvantages: More complex and subjective, requiring numerous assumptions and projections about the future, which may be uncertain or inaccurate.

Relative Valuation

Advantages: Simpler and more intuitive, using observable and comparable market data instead of estimating cash flows and discount rates.

Disadvantages: More prone to errors and biases, potentially overlooking unique features or risks of the company or asset and possibly reflecting market irrationality or inefficiency.

When Should You Use Each?

The choice of valuation method depends on the purpose and context of the valuation, as well as the availability and quality of data and information.

Intrinsic Valuation:

Best For: Long-term investors interested in the intrinsic worth of a company or asset, independent of market conditions.

Purpose: Provides a fundamental, long-term view based on future cash flows and inherent value.

Relative Valuation:

Best For: Short-term traders interested in the market price of a company or asset relative to similar entities.

Purpose: Offers a market-based, comparative perspective using current multiples and ratios.

Using both methods together can cross-check and validate results, offering a more comprehensive and balanced view of the company's or asset's value.

Closing Remarks

We will learn both types of valuation in this series, and discover the intricacies of each as we dive deeper.

In general terms, I do agree with the fact that cash is king, and therefore cash flow will ultimately hold a strong correlation with a stock's price.

But calculating cash flows can be difficult, many companies aren’t even profitable and this doesn’t always help paint the full picture.

Meanwhile, relative valuation offers a simpler approach, which can often yield better results, and it gives more options to value a company.

Ultimately, though, it’s important to note that most valuations are wrong. There’s just too much that we can’t account for, and understanding the limitations of any valuation model is important.

This takes me to my next point, which is that simple is often better. Investors wrongly think that forecasting more variables will make their valuations more accurate. It still doesn’t prevent error, and in fact, more variables mean more possible miscalculations.

Lastly, be aware that valuations are biased, be it yours or those of others. Biased by our own emotions, perceptions and even intentions. Don’t try to avoid being human when you value a company but do understand its pitfalls.

Are you interested in getting more data on valuations, earnings reports and access to countless high-quality articles on stocks?

Then I highly recommend you check out Seeking Alpha. 

Though I am now a full-time analyst and contributor, I first started writing for SA only because I wanted to obtain access to their tools and data. (That’s where I got the charts above)

I use SA every day to scan for stocks, find great ideas, make investment decisions and also participate in its thriving community.

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During the last few days, I have delved into Broken Money by Lyn Alden. Not the most practical book to carry around the beach in Merida, Mexico, but definitely worth the effort.

In this post, I will cover some of the finer details in the book that I found to be interesting, expanding into each with some of my own ideas.

This will likely be the first of a series of posts.

Let’s get to it

What Is Money? Unit of Account vs Store of Value

The book begins with a comprehensive explanation of what money is and its origin, as one would expect. Having been a monetary theory enthusiast for over a decade, I considered myself well-versed in this matter, but that changed when I first read The Bitcoin Standard. Broken Money also helped to expand on a key point I only managed to grasp, though perhaps not yet fully, a few years ago.

For years, coming from the “gold camp”, I was very much an advocate of commodity money, and believed that it was indeed commodities that made up the first form of money; precious stones, shells and cattle have been documented as early forms of money.

But that’s not really true.

The first form of money to be used was debt, probably through an informal agreement between parties. Before humans even conceived of exchanging goods, it’s likely that they exchanged and even accumulated ”wealth” through favours.

I do something for you, with the implied expectation that in the future I will be able to call upon you to do something for me. One party is essentially indenting itself though an informal and perhaps even unverbalized contract. But still, this debt is in effect money.

Lyn Alden, therefore, concludes that the first form of money was, in fact, ledgers. The first ledgers were informal records kept inside our own minds, which then evolved as complexity demanded it. The oldest written ledgers to be found are 5000 year old Mesopotamian clay tablets.

Point is, and despite what hard-money libertarians and economists might argue, that the first form of money is debt, which is a perfectly valid form of money.

In my opinion, both commodity money and credit money can, ney, must coexist, and each has its unique properties, advantages and disadvantages.

In creating a Unified theory of Money, I think it is necessary to now introduce the concept of the Pyramid of Money, highlighted in the Bitcoin Standard.

Atop the pyramid of Money is the oldest and most reliable commodity money, gold. We could argue that Bitcoin deserves a place up there too.

As we go down the pyramid, we find more ubiquitous forms of money, like US Treasuries, dollars, and bank deposits. The further down the pyramid we go the lower the “quality” of the money. Bank deposits are, in fact, credit, though they are insured in the United States up to a point by the FDIC. 

Below that, we could include even less credit-worthy money, such as a personal loan made to a friend. 

The money at the bottom of the pyramid is less reliable, yes, and in the event of an economic or, worse yet, societal collapse, some of this money will become worthless. The natural tendency will be for economic agents to try and make their way up the pyramid, trying to find refuge in more reliable forms of money.

However, it’s important to note that credit/ledgers as a form of money also offer advantages over gold, as it is easier to transact and settle in, and in times of growth it is necessary in order to grow the money supply.

In my humble opinion, as a free-market economist, it is precisely the natural preferences of free economic agents deciding which money they want to hold at any given time that will allow us to reach long-term equilibrium.

Of course, in the short-term, this means allowing economic agents to freely deleverage and contract the money supply as well as grow it.

However, there is a natural tendency for “organized societies” (ie ones with large governments) to intervene in these affairs.

This normally involves trying to prevent deleveraging and favouring credit creations, though as we will learn in the next post, it also happens the other way, with governments and rulers intervening when it comes to deleveraging the economy.

For over an hour, I listened to one of the most hated persons in the world give a thorough and detailed account of his thoughts, actions and general understanding of the current geopolitical climate.

It was absolutely fascinating, and there are a couple of points towards the second half of the interview that will stay with me for a long time, and which will be the subject of this piece.

• Has the US made a huge mistake in weaponizing the US dollar?

• Will technology actually accelerate the demise of the US?

With that said, I have also been fascinated by the reaction the interview has created on the internet, and in the people around me.

So, first off, here are some quick thoughts on journalism, freedom and evil.

Fighting Fire With Fire

I have found that a very visceral reaction takes place in people when you tell them that you actually listened to Vladimir Putin talk.

Why would one even bother? What could there be to gain from this? He is clearly an evil and deranged megalomaniac. What more do you need to know?

But as pointed out by Gurwinder Bohal, the term evil does not explain actions; merely describes them.

Words like evil, bigot, nazi, racist, transphobic etc, may be useful in describing behaviours we don’t like, but they should not be used as a cheap way of discrediting opinions and silencing them.

Putin is evil. His actions are evil. 

But that’s not why he does things, and it does not contribute to my understanding of the situation.

In today’s cancel-happy culture, silencing differing views is commonplace. But that is neither helpful to the silencers nor to the silenced.

Fire must be fought with fire. 

While bad ideas can be silenced, they can only be eradicated by good ideas.

Tucker Carlson has done the world a favour by conducting this interview.

Yes, he has also given Putin a platform to spread misinformation and spout evil lies. But so what? 

Let him dig his own grave, and in the process, we might actually learn something useful.

Is the US making a mistake?

At the risk of making even more enemies, I’ll leave the political and philosophical discussion there. You are most likely here for takes on the economy, so let’s steer the conversation back in that direction.

At one point in the interview, Tucker Carlson asks Putin point blank what he thinks about the role of the US dollar. Putin’s answer is certainly interesting. 

To paraphrase, he says the US has made a terrible mistake in weaponizing the dollar as a foreign policy tool.

First off, what does this mean exactly? And is he right?

The US dollar sits at the center of the global financial system. It is the currency that most countries use to settle international trade, and, until recently, the only currency in which one could buy oil.

To anger the US, means to not be able to participate in the US dollar “system”, which not only gives you access to dollars, but also to Treasuries, allowing countries to earn an interest on their dollar reserves.

Of course, when Russia invaded Ukraine, it suffered numerous sanctions, and perhaps the most significant was being excluded from the dollar system.

Or was it?

Before the Ukraine war, over ⅓ of Russia’s transactions were conducted in dollars. Now, it’s about half in Yuan and half in the local currency, the Ruble.

But despite some volatility around the event, the Ruble has maintained a stable value in terms of gold over the last six months. Far from being an absolute disaster, it seems like there is life after the dollar.

Not that anyone would choose to trade in Rubles over the dollar, but, as was pointed out in the interview, the US has set a very dangerous precedent.

It’s only normal that other countries relying on the use of the USD, might have some concerns. The US may be the land of the free, but the USD cannot be freely used by every land.

According to estimates from Barron’s, around 20% of the world’s oil is selling at a discount because of US sanctions, with Russia accounting for about half of that.

And though it may have gone unnoticed to a lot of investors, the world’s largest oil exporter and, by some measures, the world’s largest economy, have signed a currency swap agreement that will help completely bypass the US dollar in their trade.

Currency swaps, are just one way of bypassing the US dollar. The other alternative? Replacing it completely.

BRICs Gold currency

The BRICs summit in August was also overlooked by a lot of investors, but to those paying attention, it has become very clear tha big changes are happening.

Firstly, the alliance welcomed six new countries: Argentina, Egypt, Iran, Ethiopia, Saudi Arabia and the United Arab Emirates.

These countries now account for 42% of the world’s population and 30% 1/4 of global GDP. De-dollarization will be a painful step for these countries, but one which they have clearly decided to take.

And it seems like a gold-backed currency could be in the works. More likely, I would expect this to take a similar form to the post-Bretton Woods monetary regime, where all currencies were redeemable in US dollars, which in turn were redeemable, for a brief period, in gold.

For the BRICs currency, I’d expect the Renminbi to take center stage. 

For practical reasons, this would make sense,  but a lot of these countries would then face the same problem, as they would still be, to an extent, beholden to the whims of a foreign government.

Still, one thing has become clear in the last decade.

The dollar is not irreplaceable, and there is certainly an appetite to move away from it.

Will technology accelerate the demise of the US?

This is another pretty interesting insight from the interview.

Empire’s rise and fall that we can all agree on, but it takes time.

According to this chart by Ray Dalio, the US’s position as top dog would have peaked around the 1960s. There’s definitely a lot of arguments to defend the idea that things were better in those decades.

There’s some truth to this, but also some misguided nostalgia. In the past, I actually made the argument that technology would support the continued dominance of the US, and that this in fact, made it stand out from other countries.

It seems like a good time to point this out again, as not tech-related stocks make yet another low.

Tech is propping up our lifestyle, the country and the stock market. What would we do without it?

The idea that technology could accelerate the fall of the US is intriguing. I only see two ways this could happen.

• Another country uses technology to de-throne the US.

• The US implodes under the weight of its own technological advancements.

With technology advancing exponentially, it is possible that another country could actually surpass the US in a matter of just a few decades.

But does this seem likely? The US is still home to the best talent. You want to make it in tech, you go to the US. Certainly not China, and definitely not Russia. Somewhere like India, however, could one day pose a challenge.

Technology changes fast, but people and ideas change much more slowly.

Alternatively, perhaps the US will become a post-apocalyptic AI wasteland. With how reliant we are on technology today, it does make you wonder. What would happen if the world went dark?

And that’s just one of the many things that could go wrong. The AI race of today bears a lot of resemblance to the nuclear arms race of the past.

Final Thoughts

I tried to write this to answer two questions, and I feel like I have just opened Pandora's box, as I am left with many more.

For now, suffice to say that, despite new all-time highs in stock markets, I am deeply concerned about what is brewing under the surface of today’s geopolitical landscape. Things are going to change, perhaps faster than I had anticipated.

I’ve just finished reading Morgan Housel's latest book, Same as Ever—a thoroughly enjoyable read, which I devoured over the last week.

The book was filled with great insights into the human mind supported by fascinating stories. 

In this article, I’d like to go over four of the chapters that I found the most impactful and highlight specifically how I think we can apply them to ourselves, markets and investing.

My tribute to the best book I’ve read in 2023.

Best Story Wins

Humans love stories. It is the basis behind our communication. How we express something matters just as much, if not more, than what we express.

A beautifully woven story has the ability to burn itself into our minds and re-shape the cultural zeitgeist of our time.

Housel uses the book Sapiens as an example. 

Objectively speaking, the book offers no new insights into human history and evolution, something the author himself admits. 

And yet, through the power of its prose, Sapiens became an overnight best-seller and Yuval Noah Harari a household name.

Truly novel content is hard to come by. There is nothing new under the sun. 

As an aspiring author, I was particularly touched by this chapter. 

I set out to write a book on Money almost a decade ago but was quickly discouraged as my research into the subject led me to two sad realizations:

• The more I researched, the more I realized how little I knew.

• Incredibly bright and better-informed people than I have already written extensively on the subject.

What could I possibly bring to the conversation? What value could I add?

That’s something I am still figuring out. But I see now that there can still be value in writing a book on Money, even if it isn’t groundbreaking.

But how does this apply to markets?

Well, it is undeniable that narratives have become VERY strong drivers of stock valuations, which has undoubtedly been amplified in the age of information.

Stock Price= Future cash flows X a story that investors tell themselves

Narratives drive expectations, and expectations drive prices.

Just like at NVIDIA, Tesla, Gamestop…

The list goes on and on. 

Stories don’t just explain reality; they have the power to shape it. 

Definitely something worth keeping in mind.

Risk Is What You Don’t See

Hardly a novel idea, but I guess I was just compelled by Morgan Housel’s narrative. 

The 1930s depression seems obvious to economists today, but no one at the time was able to predict it. 

How many issues of The Economist or Bloomberg mentioned COVID or a global pandemic as a risk factor before 2020?

How many were expecting the recent escalation in the Israel-Hamas conflict? 

This is one of the longest-standing feuds in modern history, and yet the October 7th attack took us all by surprise.

Risk is what’s left over after you think you’ve thought of everything.”

- Carl Richards

How do we apply this today? 

Let’s carry out a simple thought exercise.

Make a list of all the things you think could go wrong in 2024. If you’re out of ideas, a quick scroll through your X feed will inspire you.

• Unwinding of the Yen Carry Trade

• Another banking crisis

• China’s Economy cracks

• Taiwan invasion

• NVIDIA’s chips try to take over the world

• Europe suffers a sovereign debt crisis

• Orchestrated attack against the dollar

Now, for each of those, just realize that there are another two risk factors you can’t even imagine right now.

Trying Too Hard

Every investor is guilty of this one.

Complexity is more appealing than simplicity.

We have some misguided belief that things that are hard to understand have more value.

Investors often believe that more complex theories and ideas will yield more accurate predictions. Surely, a model that takes into account thousands of variables has a better chance of predicting market turns than one that only looks at four.

Complexity sells better and is actually one of the reasons bearishness also sells. Fear sells, yes, but we also find these bearish theories compelling because they are wrapped in complex, often far-fetched theories.

Housel uses cancer research as an example of this. A lot of time, effort and money has been put into curing cancer over the past 50 years. We’ve come a long way, but it is an ongoing battle.

Arguably, though, a lot more lives could be saved if these resources were diverted towards the prevention rather than the cure of cancer. 

Getting everyone in the world to quit smoking would be a simpler (but not easy) and likely more effective way to reduce cancer.

But there is no glory in cancer prevention. No fancy machines, no Novel prizes and no intellectual stimulation. 

Preventing cancer isn’t as fun as curing it.

I am afraid I, too, have fallen victim to the allure of complexity. 

I devote my life to the very, very complex task of understanding markets and even trying to predict them. The hubris.

To be candid, I would probably be doing my readers a favour by simply expounding simple tenants of finances and investing. 

Spend less than you make, invest it, and don’t touch it for 30 years. Boom. That’s real wisdom right there.

But I’m selfish.

I enjoy tracking markets, the Fed, geopolitics…developing theories, and speculating. It’s an intellectual challenge, and it sparks a fire within me.

I’m not the guy who's going to tell you how to max out your 401K and explain discounted cash-flow analysis. I’d much sooner blow my brains out.

But at least I will be honest with you.

Part of my Pragmatic Investor ethos involves accepting my own limitations and accepting we are on a constant quest to learn. 

It’s why my weekly Podcast, where I get to grill my unsuspecting guests for an hour, has quickly become the highlight of my week.

I hope to provide honest, thoughtful and well-rounded insights into markets.

Wounds Heal, Scars Last

To wrap up, the key to understanding the prevalent paranoia that has characterized investing over the last 20 years.

The physical damage from the 9/11 attacks can no longer be seen, but its impact is still felt around the world.

Want to get on a plane? Not before going through a full-body X-ray machine and getting a clumsy pat down from TSA.

Wounds heal, scars last. We forget, but we don’t forgive.

Today’s generation of investors is very scared, and this is reflected in their way of thinking.

• The tech bubble 

• The Great Financial Crisis 

• Europe’s Sovereign Debt Crisis

• The Covid pandemic 

It seems like crises and black swan events are becoming more frequent and markets more volatile. 

This has fundamentally changed how a lot of people view markets. Investors are always looking for the other shoe to drop. 

Upset that house prices haven’t collapsed yet. 

Mystified at how the stock market continues to make new all time highs.

This could actually be due to the overload of information we are subject to. Another topic the book covers. New bearish arguments can be made every day, and bad news spreads much faster than good news.

Closing Remarks

I absolutely loved this book. Easy to read and understand and also filled with great insights. Not much else to say. 

Buy it and find out for yourself.

One would hardly believe the country has experienced over 100% inflation over the last year. Although locals express their frustrations, restaurants and shops are full, and life goes on. 

“I wish I lived in Europe,” a local lady told me today as she was shopping for clothes. And though I did not say it, my first thought was, “This feels pretty similar to Europe”. 

I may be an ignorant tourist, and I certainly don’t want to minimise the plight of the Argentinian people.

I’m just saying hyperinflation is a very charged word, and it might give the wrong idea to some. And though everything is substantially cheaper than in the US, my hopes and dreams of buying a villa and retiring in Mendoza have been put on hold.

No More (Argentine) Central Bank

But it’s official: Javier Milei, Argentina’s new president, will be shutting down the Central Bank.

This is  “non-negotiable”, according to Milei, and it’s the first step towards dollarising the economy.

Interestingly, the Argentinian peso/USD rate spiked back above 1000 following the elections but has since fallen back to its pre-election levels.

A government ready to prioritize fiscal discipline should be good for the peso.

But, ironically, dollarizing the economy will require dollars that Argentina does not have, which could mean an even more substantial devaluation of the peso could be on the cards.

What I find even more ironic is that Milei will only be replacing Argentina’s Central Bank with an even bigger central bank, the almighty Federal Reserve.

Of course, I already went quite deep into why this might be in last week’s article.

Today, though, I wanted to expand on the idea of centralization/decentralization, something that has been on my mind following everything that has happened with Binance.

Crypto Under Attack

A concise and mostly accurate interpretation.

Changpeng Zhao reached an agreement with the DoJ. He will be pleading guilty and stepping down, and Binance will be paying a $4.3 billion fine.

Bitcoin may be a decentralized currency, but Binance is a very centralized exchange, and if it wants to sell crypto in the US, it will have to follow the government's rules.

No doubt, the newly appointed CEO, Richard Teng, will have a much easier time complying, given his experience working at the World Economic Forum.

Is Centralization That Bad?

Bitcoin was started as a permissionless and decentralized peer-to-peer electronic payment system. However, it would appear a lot of the “peers” are struggling with the decentralization part.

To be fair, the percentage of Bitcoin held in exchanges has been decreasing since 2020.

More and more people are choosing to hold Bitcoin in wallets, which is great, but the “establishment” is doing its best to control the on and off ramps from crypto.

The beauty of crypto is that it gives us a choice and decentralized exchanges are fairly efficient and easy to use.

But is centralization really that bad?

Of course, it has its problems. 

Centralization creates a single point of failure and can lead to corruption, but it has also been a great tool for human development.

A lot is said about how great gold was as a form of currency, but trading in gold only really became practical following the implementation of standardized coinage, which itself was only possible thanks to large governments. 

Many of the largest companies in the world can attribute their success to centralising and scaling their operations. Why have thousands or millions of independent sellers/producers when Amazon can do it all? Okay, that’s not exactly how it works, but you get my point.

Centralization itself can be a great tool. The real obstacle here is the concentration of power and inevitable corruption.

Gold coins worked great until those in coining began abusing their power. (I’m looking at you, Rome).

Similarly, “Centralizing” the world’s gold supply and financial system seemed like a great idea until the US went rogue in 1971. 

Decentralization Isn’t Perfect Either

Bitcoin entered the world to solve just this issue. The power and authority of gold and banking, without the need of any ruling entities running the show.

To a degree, though, Bitcoin only brought the problems of 1000 years ago into the modern day. 

The blockchain trilemma of balancing decentralization, security, and scalability is the same humanity faced a thousand years ago with gold. 

We gave up decentralization to increase scalability through coinage, paper notes, and security.

Bitcoin does a decent job at improving on decentralization and security, but it leaves a lot to be desired in terms of scalability, which is why so many other blockchains have appeared.

Something like Solana, or Ethereum, is much faster at transacting, but it inevitably achieves this by increasing centralization.

Besides this, and as I’ve argued before, decentralization isn’t perfect either.

This issue is very present in crypto today, and it is in fact, the reason one of my favourite coins, RUNE, is doing so well. RUNE serves to enable cross-chain transactions, which can be very complicated and expensive.

In other words, having thousands of different blockchains is becoming an obstacle to growth and innovation. RUNE is fixing this by creating a ”centralized” place where different chains can more easily interact.

I am playing fast and loose with the word centralized here, but the point is valid. Even the most ardent crypto advocates admit that we can’t have a world with thousands of blockchains. 

It would seem that we are at least ready to concede to some centralization within the world of decentralized distributed public digital ledgers.

Final Thoughts

Don’t get me wrong, I am a big believer and defender of decentralization, but as always, we have to take the pragmatic view.

Centralization has happened for a reason. It has contributed to our development as a species, and it is, in fact, a part of what makes us human.

We build relations and communities in order to thrive. 1000 years ago, survival was only possible through centralization, by relying on your neighbours and sharing resources.

Technology has empowered decentralization, and for better and worse, we are now mostly fully self-sufficient individuals.

We no longer need each other, and there is a great shame associated today with not being “independent”. 

But has this increased atomization of the individual really made us happier? I’d say there’s plenty of evidence to the contrary.

It may be more efficient, but it is opposed to our very nature in many ways. 

Decentralization comes at a price, and I fear our souls may be the ones paying for it.