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Digging Deeper into Recent Economic Developments

The AI Energy Bottleneck: What Is the Market Actually Buying?(Posted 3/12/2026)

This post explores what the market actually buys when attention to the "AI energy" bottleneck spikes, revealing a stark rotation away from nuclear and fossil fuels. By analyzing recent market flows, I show that investors are implicitly pricing deployment speed, heavily rewarding fast-building solar and clean energy assets over long-term grid infrastructure. 

The Toothpaste Indicator:  Why the Market is More Fragile Than It Looks(Posted 3/1/2026)

Everyone tracks the classic sector rotation to gauge market fear, but standard cap-weighted indices are currently flying blind due to Big Tech noise. By stripping away that distortion and looking at the equal-weighted performance of "average" companies, you uncover a pure macroeconomic signal that actually predicts future returns. Right now, that true fear gauge remains stubbornly low, signaling that the market is still too complacent and pointing to a negative return for the S&P 500 over the next year. 

Decomposing the AI Value Chain (Posted 2/15/2026)

Since roughly 2019–2020, the AI value chain stopped trading as a single “long tech” factor: even after controlling for Nasdaq (QQQ) beta, semiconductors (SMH) load positively on yield moves while software (IGV) loads negatively, and this sign split becomes structurally stable. The implication is that “tech” is no longer a sufficient risk label—hardware behaves more like a cyclical/capex asset in the AI build-out phase, while software behaves like a long-duration equity claim dominated by discount-rate risk. 

Predicting the S&P 500 in 2026: six "classic” signals, six different stories (Posted 2/8/2026)

Using six classic one-year-ahead predictors, I generate simple, transparent forecasts for the S&P 500’s 2026 return—and the main message is disagreement: most signals cluster around a “normal” single-digit year (~6–10%), while the gold-to-platinum ratio stands out with a much more bullish ~20%+ forecast. The punchline isn’t that any one model is a crystal ball, but that the divergence itself is informative . 

Kevin vs. Kevin: Markets Are Betting on the Next Fed Chair (Posted 1/26/2026)

Markets aren’t just pricing the next Fed Chair—they’re pricing the type of Fed that will emerge after Powell. Prediction market data reveal a sharp contrast: Kevin Hassett is associated with looser policy and higher inflation risk, while Kevin Warsh is priced as a stabilizing force that lowers inflation expectations and volatility. Subtle as it is, equity returns weakly suggest investors prefer credibility and lower uncertainty over aggressive rate cuts. 

I am Certainty Uncertain About an AI Bubble (Posted 1/19/2026)

Today’s elevated equity valuations may look like a classic bubble, but they are hard to understand without accounting for extreme uncertainty about AI-driven growth. Because valuation is convex in growth, large upside uncertainty can rationally sustain very high P/E ratios even when average growth effects are modest. In this sense, AI uncertainty may be “good” uncertainty—one that boosts prices without proportionally increasing systemic downside risk.