Eye On The Market

A severe case of COVIDIA: prognosis for an AI-driven US equity market

NVIDIA and its GPU customers are now a large driver of equity market returns, earnings growth, earnings revisions, industrial production and capital spending.

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There’s no place like home

A surge in the Japanese Yen is resulting in home repatriation of Yen-funded positions overseas, and close-out of Yen-funded positions abroad. While Google was found guilty of home bias anti-competitive search engine behavior, any judicial remedies may be worse for recipients of Google’s “shelf space” payments than for Google itself. Work-from-home trends have plateaued at ~30%, which has important implications for distressed office investors. Most distressed sales now require discounts of 60%+ vs pre-COVID levels; the fundamentals of the office sector explain why.

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The Lion in Winter

From 1930 to 2010, there were six extended periods of small cap outperformance as it dominated large cap over that entire period. But since 2010, small cap sits alongside value stocks and non-US stocks in the unholy trinity of underperforming portfolio strategies. While poor profit fundamentals argue against a prolonged period of outperformance vs large cap, small cap stocks are at their cheapest levels in the 21^st century with potential market and political catalysts in their favor. First, a few words on the CrowdStrike outage.

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The Supreme Court vs the Regulatory State

The Supreme Court vs the Regulatory State. Recent Supreme Court rulings may now usher in the largest pushback on the regulatory state since the Reagan Administration. A look at the end of Chevron deference, a revised statute of limitations for challenging government regulations, the Major Questions Doctrine, the right to a jury trial and a District Court injunction against Biden’s LNG export moratorium.

A Piece of the Action

Investing in professional sports leagues and related businesses. As rules around private equity ownership of sports leagues expand, we review team valuations and profitability, emerging sports categories, streaming and broadcast revenues, the decline of regional sports networks, drivers and comparisons of league parity, relegation and financial pressures in the English Premier League, stadium subsidies, sport betting and other adjacent businesses, antitrust issues, the esports winter, the worst teams that money can buy and the best basketball players of all time.

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Animal Farm

With spring planting season having arrived in Zone 7, it’s a good time to review agriculture from an investor’s perspective. Topics include agricultural price inflation in the wake of Russia’s invasion of Ukraine; public and private equity investments in agriculture, farmland ownership and the drivers of farmland returns; seed bio-engineering designed to reduce consumption of fertilizer, fungicide and water; and some satellite data on the immense agricultural damage occurring in Gaza and Israel. The Appendix addresses the avian flu’s impact on agriculture and the food supply.

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Cicadian Rhythms

Cicadian Rhythms: the fading prospects of a US disinflationary boom; Japan’s structural reform/M&A emergence; and Eye on the Market mailbag responses to questions on Tesla/Musk, GLPs, housing, China, Truth Social and Meta’s latest open source model

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The Good, the Bad and the Ugly

The Good, the Bad and the Ugly: an investor lens on tech valuations, AI, energy and the US Presidential Election.

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Electravision

This Eye on the Market is about the predominant vision for the future which involves the electrification of everything, powered by solar, wind, transmission and distributed energy storage.

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Five Easy Pieces

Five Easy Pieces: on Magnificent 7 stocks, open source large language models, the No Labels movement, the Armageddonists and bottom-fishing in Chinese equities.

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