first of all, have a great 2026 with many accomplishments, personal and professional!

Keep compounding: family, friends, hobbies, community, work, independence, capital, knowledge, research and mindset!

The U.S. economy enters 2026 with solid growth, stocks at all-time highs, broadening profit drivers, big investments, a strong consumer, and a Monetary and Fiscal policy mix that remains supportive for stocks.

Hence, time for a forward looking view with my 2026 Top 25 Maverick Predictions!

Before proceeding further, in case you missed the 2025 review, I highly recommend it as it sets the stage for this 2026 outlook, hence a solid grounding for a 2026 clean state!

✍️ 2025 Top 50 Maverick Charts! The Year in Independent Review!

Next year, holding myself accountable (Skin In The Game), I’ll review the predictions, and present an overview with the results. Grading system: 0.5 points for getting the predictions directionally right, 1 point for getting both the direction & the level right.

Table of contents = the ‘What’! Executed in a succinct manner with the aim of a high density of ideas, because the best writing respects the reader’s time!

👍 Predictions 101: how they are powerful and useful — even when proven wrong

👍 Predictions 102: the easiest job in the world = the post fact predictions “expert”

📊 Equities: S&P 500, Berkshire, Nvidia, Palantir, RobinHood, UBS, Real Estate

📊 Macro & Fixed Income: Jobs, Inflation, Yield Curve, Credit Spreads, MMFs

📊 Currencies & Commodities: USD, CHF, Gold, Silver, Copper

📊 Crypto: Bitcoin & MicroStrategy

📊 Thematics: AI, Trade War, Geopolitics

📊 Vice of The Year: Betting Markets and Insider Trading

👍 Bonus: 2026 Outlook — Strengths & Tailwinds VS Threats & Headwinds

👍 Incoming Maverick-esque Independent Investment and Economic Research

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Predictions 101 & 102 before anything, in order to clear up key confusions about them, setting up expectations and also clearly outline how and why they are useful!

👍 Predictions 101: how and why they are powerful and useful, and both if I get them right and in case wrong:

1) Building Conviction: as the future unfolds, new information shows up which makes our initial case stronger and stronger by validating our analysis and assumptions, hence helps acting consistently and committing to the long term

“A-Ha” moments where we go like: “Oh yes, we are so on the right track with this one!”

2) Risk Management: with new information becoming available, some of our initial thesis are becoming more and more clear that they are wrong, hence we can abort

“Oh, this is not going into our foreseen direction, time to abord mission and simply move on!”

Therefore, predictions are both a Risk Management and a Financial Returns tool coupled with deeper know how and a solid overall framework — I bet you did not see that one coming!

Overall, the value is in the process, hence even if I get many wrong = still valuable! Other than that, just like everybody else, I do not have next years’ Wall-Street Journal on my desk … ahead of time to know for sure how things will play out! If anybody knows somebody that gets that, just please email me 😉!

👍 Predictions 102: the easiest job in the world = the post fact predictions ‘expert’

Predictions = a “shit*y business” in general because when:

• you get them wrong: there will always be “experts” after the fact to pinpoint how wrong you were, some even remind you after years — yet if you ask them how many they got right, silence: most do not even dare to make any predictions given ego, lack of forethought, scared to be wrong and be ridiculed

• you get them right: many would say you got lucky, or all the events leading to the prediction coming true will make the prediction less bold, and/or ‘easy’ to have that one figured out before the fact!

This is usually the view from folks that do not understand how predictions are useful, those afraid to put themselves out there, without much understanding in the first place, prisoners of the past, the pessimists, the cynical types and associates.

Then too many also have one of the easiest ‘jobs’ on planet earth: calling out others for being wrong after the fact … a bit like “armchair experts” watching sports and saying after the game how wrong was X player, or the coach, or the weather, or the fans … .

Funnily enough, besides politics, also in the corporate/banking world (across countries), I noticed (too) many people making great careers with the behaviours above — some ecosystems signal to me that humans are quite strange species rewarding these kind of people, isn’t it? Funny because it is (too) often true? 😉

You the audience are high quality people, many with decades of experience, and I am confident you have seen this kind of behaviours here or there. It is good to be aware, yet we can only focus on what we control, and from there move forward with a Realist-Optimist mindset. Everything else is just noise, wasted time & rabbit holes!

Mavericks are built differently, and with Skin In The Game, DO-ing versus TALK-ing we all move forward — the world has too many talkers, doesn’t it? 😉

‘Bonus’ from my side = Independent Thinking = Independent Research = unfiltered unbiased non-partisan coverage which is key nowadays! Common sense is sometimes not so common, conflicts of interest are too common, hence the true edge & hedge is Independent Investment & Economic Research for the win! In case you missed it:

✍️ Why Independent Investment and Economic Research = Paramount Nowadays!

= no bosses, no interferences of any kind to control the narrative, not paid to say what somebody wants or not say what somebody doesn’t want, no fear to speak out, no self-censorship, unflinchingly freedom of thinking for the win!

Together we all benefit as truth is born from debate “In disputando veritas gignitur!”.

“If something is nonsense, you say it and say it loud. You will be harmed a little but will be antifragile — in the long run people who need to trust you will trust you!” Nassim Taleb

And now time to start the spicy, juicy and tricky Maverick Predictions!

📊 Equities

1. S&P 500 the mighty ‘market’ index:

👉 to register one or more -15% drawdowns — I would not be surprised even about a 20%-25% drop, hence a bear market!

👉 to be sure, I am not saying the S&P 500 will have a bad/negative year — in 2025 the drawdown in April was 19%, yet the index ended the year with a great 17.72%!

2. 👉 to end the year with a higher volatility than in 2025, meaning above 14.5 (VIX)

3. 👉 S&P 500 will likely underperform the Rest of The World (RoW)

• S&P 500 17.72% in 2025 vs ACWI ex-US (ACWX) a whooping 32.59%

S&P 500 developments in terms of both performance & valuation (undervalued, fairly valued, or overvalued) will be covered extensively via the quarterly 2 reports which are materially improved in all areas: structure, insights & special metrics you rarely see!

✍️ S&P 500 Report: Valuation, Fundamentals, Special Metrics & Leading Indicators

✍️ S&P 500 Report: Performance, Sentiment, Seasonality, Technical Analysis

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4. Buffet’s Berkshire (BRK-B) cash position:

👉 to reach $425 billion from the current $382 billion — Cash Stash Away Baby!

5. Nvidia (NVDA):

👉 to register a +20% drawdown (strong case for even 25-30%) — if one likes the stock now, wouldn’t they like it more after a 25% or bigger drawdown?

6. Palantir (PLTR):

👉 to register one or even more +25% drawdowns (strong case for even 30-35%) — if one likes the stock now, wouldn’t they like it more after a 25% or bigger drawdown?

👉 it is always more tricky to go for a drop in stock price because if the market overall does fine and goes higher, it carries basically most stocks also regardless of valuation

Valuation rare and fun fact via the S&P 500 Top 5 by Price/Sales (LTM) multiple:

👉 Palantir = drum rollllls ... 108x !!!

👉 = 3.25x greater than the 2nd highest P/S ratio in the S&P 500 which belongs to AppLovin (APP) at 33x

👉 = 4x greater than the 3rd highest P/S ratio in the S&P 500 which belongs to Texas Pacific Land (TPL) at 27x

Let that one sink in & bring the sink if you wish 😉!

It is Sales, not even Earnings! Hence, a sexy business, but too sexy of a stock now!

N.B. during waves, the stock is not the business and the business is not the stock!

7. RobinHood (HOOD):

👉 to register a +30% drawdown (strong case for even 35-40%)

8. UBS Group AG (UBS) the mighty Swiss universal bank:

👉 will trade again at 2x Price/Book from 1.8x now — last time it happened in 2010!

👉 this will be tricky as it would imply the stock to go up a further 15-25% + banks are very hard to get right — but willing to take this one regardless!

9. Real Estate sector:

👉 to have a better 2026 than 2025 when it lagged massively with just a +3.24% (VNQ)

📊 Macro & Fixed Income

10. Labor Market when it comes to Job Openings VS Unemployed People:

👉 from a ‘tight’ labor market between 2021-2023, 2024 and 2025 made it for a more balanced labor market

👉 2026 will be a year where the labor market will likely become more ‘loose’ = more unemployed people than job openings

👉 $7.146 million job openings VS $7.831 unemployed people, hence a 685k deficit

Implications of a cooling labor market:

• lower wages growth, hence helping to cool off inflation (wages are a “sticky’ variable for inflation)

• on the other side, it will benefit further corporate America margins and profitability

11. Inflation = the hot topic of the last years, what is going on there? A Maverick chart with 110 years of Inflation rate (CPI YoY%), a very long series!

👉 2.7% now, it’ll likely stay between 2.5% and 3% in 2026 = not too hot, not too cold!

👉 3.3% average, we have been now been below that level for 18 straight months

12. U.S. Yield Curve (YC): “mighty curvy curve, how will you behave in 2026?” I ask because you are connecting monetary policy, the bond market, with the economy overall and the stock market via the S&P 500 = Macro-Finance!

👉 the Yield Curve will keep un-inverting / steepening, and end up higher than 0.5%

13. Credit Spreads:

• both Investment Grade (IG) and High-Yield (HY) = quite ‘Perfect World’ tight!

• in 2026 likely to widen and end the year higher than 279 b.p (HY) and 79 b.p. (IG)

14. Money Market Funds (MMF):

👉 Total assets to go above $8 trillion from the current $7.48 trillion

15. 👉 Retail assets to go above $2.4 trillion from the current $2.25 trillion

Macro wise, way more via my improved U.S. Economy deep dive — and that for both Top-down & Bottom-up approaches, connecting the Macro-Finance bridge:

✍️ The State of the U.S. Economy in 75 Charts

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📊 Currencies & Commodities

16. U.S. Dollar, the mighty USD:

👉 after a 9.38% drop in 2025, hence with one of the worst years in decades among major currencies, to continue depreciating in 2026

17. The Mighty Swissie Swiss Franc (CHF):

👉 on the other side and after a great 2025, the Swiss Franc to keep appreciating against most currency majors!

18. Gold

👉 to break above the 5,000 threshold, hence a minimum further 12% increase — and that after the whooping 78% in 2025

19. Silver:

👉 to drop below 60 from 87.50, hence a minimum 31% drop!

20. Copper, ‘Dr. Copper’:

👉 to cool-off also from 5.97 and drop below 5.25, hence a minimum 12% decrease

📊 Crypto

21. MicroStrategy (MSTR) & Bitcoin (BTC):

👉 after a massive 66.69% drawdown (which I did call way before it happened), the stock will drop lower in 2026 — from the 167.79 current price

👉 medium-long term (2027-2028) I see it below 100, and below 50 later

👉 nonetheless, tricky to bet against the Bitcoin crowd as all it takes is some good sentiment and another crypto bull run — hence even MicroStrategy could run up again and go above 200, 300, or even 400

👉 MicroStrategy has been diluting shareholders by issuing shares like there is no tomorrow: +46% in the last year alone, +230% in the last 5 years!

N.B. I still find it very strange that investors are buying the share issuances, and especially their debt/bonds — but hey, with great marketing (quasi or outright lies) and getting rich quick ‘guidance’, everything is possible, isn’t it?

22. Bitcoin:

👉 analogous, it will be down for the year below $90,000 from 93,469 now

👉 fun fact: check below the historical drawdowns and notice how often they reach even a crazy -80% — we can debate what the Bitcoin features are, what is the outlook, but given those heavy and often drawdowns, how can one call it a ‘store of value’?

N.B. when an asset is down 80%, a reminder: it needs a 400% increase to break even and return to its original value — I don’t make the rules, the math is the math 😉

Thematics:

23. 📊 AI

👉 U.S. Data Centers construction spending = to keep going up

👉 AI chatter: mentioned during earnings calls in the S&P 500 = even more

👉 AI LLMs going IPO, at least one of them - likely this will happen in 2027, but willing to be wrong early this year

24. 📊 Trade War

👉 topic will likely continue to fade away, hence reduced intensity and importance

25. 📊 Geopolitics

👉 to continue being elevated, yet not much importance to the markets just like in the last years — hence, the opportunity to harvest geopolitical risk premia

26. 📊 Vice of The Year: Betting Markets and Insider Trading

Online betting markets bigger with more and more people, especially young demographics which are the easiest target:

👉 less patience, less of a burn to grind out in their careers, yet with a mindset of grinding for months and years ‘learning’ stocks day trading and crypto trading (which is fool’s gold)

👉 social media a core role: people constantly thinking they are left behind, and others have it better (which is a weird mix of silly, superficial, toxic and untrue)

👉 just like in Casino gambling, the house never losses in online betting markets — it is a place where definitely “people have a negative edge“, yet gambling is seen as their salvation — in Economists’ terms, this is the “convex utility in losses“: when already losing, one prefers a small chance of getting back to even over a certain moderate loss. It's the same mindset & reason people double down at blackjack when they're behind!

“What is the solution Mav?“ Well, there is no solution, but I know the future 2 outcomes as the classic in advance well-intentioned advice falls on deaf ears!

• people will take the losses, most will have it as a lesson learned, regroup, get back to classical hard work and investing which works

• some will ‘learn’ that the ‘system is rigged’, go down into the online rabbit holes, become keyboard warriors, toxic in society, and frustrated will vote ‘accordingly’

More insider trading cases with bigger online betting markets:

👉 we already have quite some insider trading cases or well, highly suspicious cases

👉 in a way, this can be spined positively: insider information held and traded by the insiders & gatekeepers, will be now available to the public as wild outlier public bets — decentralized inside information for the masses: everybody can go online and see the odds and the volumes related to various bets, hence spotting patterns, weird timing, as outliers can signal inside information is behind the bet

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👍 Bonus: 2026 Outlook — Strengths & Tailwinds VS Threats & Headwinds

Overview table with the key points for 2026, both Bullish and Bearish factors that will shape the year going forward. These key themes will be monitored, analysed & presented as we progress into 2026!

👍 Incoming Maverick-esque Independent Investment and Economic Research

Economy wise, way more via my improved U.S. Economy deep dive — for both Top-down & Bottom-up approaches, connecting the Macro-Finance bridge:

✍️ The State of the U.S. Economy in 75 Charts

Stock market wise, namely the S&P 500 key index, to be covered quarterly via my two S&P 500 distinct reports, and lately materially improved in all areas: structure, flow, insights and special metrics you rarely see!

✍️ S&P 500 Report: Valuation, Fundamentals, Special Metrics & Leading Indicators

✍️ S&P 500 Report: Performance, Sentiment, Seasonality, Technical Analysis

Then the Maverick Special reports covering individual thematics, connecting the Economy with the Stock Market, aka crossing the Macro-Finance bridge. Examples:

✍️ Warren Buffett’s Cash Pile & More ... Stash Away Baby! Berkshire Hathaway Report #2

✍️ Switzerland and the Swiss Franc = Safe Haven

✍️ The Number 1 Feature Any Investment Portfolio Really Needs To Have

✍️ Is the U.S. Stock Market in a Bubble (Part II)

✍️ Market Pockets of Overvaluation, Animal Spirits Behaviour and Bubbly Territory

✍️ Bitcoin & Gold, not Bitcoin VS Gold

✍️ Screening for Stocks that just Switched to Profitability - Maverick Treasure Hunting

✍️ In Defense of Short Selling

✍️ U.S. Public Debt Reduction = Hard but Feasible

Regarding the coverage from the other sections, there you go:

• Full Equity Research = new kid in town, the much awaited single stocks coverage

• Model Portfolios which compound, yet in the same time take care of the downside, sequence risk, diversified, very low fee, passive and easy to implement

• Maverick Equities & Macro Charts of the Week as highlights will continue

• Hedges, Trades and Special Situations for the more active investor

And way more Independent Investment and Economics Research is coming to town!

“In Disputando Veritas Gignitur!” — together we all benefit as truth is born from debate!

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Research is NOT behind a paywall and NO pesky ads here unlike most other places!

Did you enjoy this by finding it interesting, saving you time and getting valuable insights? What would be appreciated?

Just sharing this around with like-minded people, and hitting the 🔄 & ❤️ buttons!

That’ll definitely support bringing in more & more independent investment research: from a single individual … not a corporate, bank, fund, click-baity media or so … !

Like this, the big positive externalities become the name of the game! Thank you!

Have a great day! And never forget, keep compounding: family, friends, hobbies, community, work, independence, capital, knowledge, research and mindset!

With respect,

Your Maverick 👋 🤝

are you ready for the New Year’s Eve and have a great start in 2026? I hope so, I am!

Before that, it’s time to review and highlight the 2025 Top 50 Maverick Charts!

There is a lot of value doing and going through this as we set the stage for 2026:

• distinguishing between fundamentals and noise, seeing the "Forest for the Trees"

• understanding the lag-times between policies and future economic reality

• identifying Structural vs. Cyclical Shifts

• strategic “Re-Anchoring” for investors and entrepreneurs of all kinds

• educational value by gaining contextual depth on interconnected events

• historical parallels as memories are surprisingly short in finance: X years from now when policies like Trade Wars or other industry booms (like AI now) come to town, will be a primary source for understanding how the markets and the economy adjusted to the specific variables of this era

• forward looking: shape a 2026 outlook with a solid grounding and fresh views!

In January you will also get my top 2026 predictions which is quite a spicy, juicy and ‘dangerous’ business … 😉! So, let’s let the show begin!

✍️ 2026 Top 25 Maverick Predictions!

50 cherry picked Maverick Charts of the year say 1,000,000 words or more = the ‘How’!

Table of contents = the ‘What’! Executed in a succinct manner with the aim of a high density of ideas, because the best writing respects the reader’s time!

📊 Performance Overview

📊 Equities: S&P 500, Thematic and Single Stocks

📊 Macro & Fixed Income

📊 Currencies & Commodities

📊 Crypto

👍 Bonus: +200,000 views Maverick Tweet of the Year — Nasim Taleb retweet!

Objective: both data-driven insights + valuable food for thought = the ‘Why’!

📊 Performance Overview

1. First of all, how did U.S. Stocks, Bonds, Gold and Bitcoin do in 2025?

👉 S&P 500 (SPY) continuing the big bull market with another great year: +19.03%

👉 Nasdaq 100 (QQQ) similarly with another whooping: +22.63%

👉 SHV (short-term treasury bills 1-year or less, cash proxy): +4.15%

👉 IEF (intermediate treasury notes between 7-10 years): +8.24%

👉 TLT (long-term treasury bonds +20-year maturities): +4.86%

👉 AGG (IG broad maturities: treasuries, corporate, MBS, ABS, municipals): +7.32%

👉 Gold shinning bright as the big outperformer with a mega run: +72.80%

👉 Bitcoin the big laggard: -7.28%

Overall, the vast majority of investors should be very happy with 2025!

More nuances and rationale on these performances will be presented below.

2. below a casual reminder with the exact same chart, but with the 2022 bear market:

👉 except short-term treasury bills with a slight +0.94%, all were down big time!

3 takeaways and reminders on yearly performances:

👉 from my experience, investors when shown these 2 very different years, they appreciate way way more what they have now in a good year — just human nature!

👉 if there is quite a certainty in investing, one is that occasional bad years will not go away: fear & greed will always be present (human nature), hence clean ups and excesses are to be cleared out which is actually good!

👉 additionally, Volatility = Opportunity, and not Risk: recall Buffet’s 2024 letter where he says that while great businesses are very hard to be bought in their entirety (not a problem for us), small fractions of these gems can be purchased very occasionally, and at bargain prices — and this applies basically to any good business/stock out there!

P.S. in 2026 I will start covering in details this kind of businesses

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📊 Equities: S&P 500, Thematic and Individual Names

📊 S&P 500 Performance Ins & Outs

3. S&P 500 with a great +19.03% — what where the key narratives & factors in 2025?

👉 POTUS Trade War 2.0 = which where basically the 3 negative months of the year followed by a sharp rebound and an overall very very good year — with also a positive December, it will mark 8 straight green months = the longest streak since the mighty 10-month streak which ended in January 2018

👉 the vastly untold story of the stock market rally in 2025 = the falling interest rates = lower discount rates/cost of capital = a key and huge variable!

👉 the AI gold rush is on! AI spending bonanza = tech CAPEX spending as % of the aggregate S&P 500 CAPEX spending at 47% = let that one sink in!

4. Volatility & Drawdowns — the big moves caused also by the Trade War 2.0:

👉 Volatility: VIX spiked to 52 and now at 14 now is ending the year below the 19 average for the year

👉 Drawdown: with a maximum of 19%, and a price drop of maximum 15%, it was not far from registering a bear market in April

The volatility caused by the Trade War 2.0 created an interesting acronym named "TACO" = “Trump Always Chickens Out!“ which was an investment strategy in response to Trump’s tariff on and off policies — buying as the market dips when Trump announces steep tariffs on the assumption that he will back off/negotiate his tariff stance, hence the market to rebound.

5. Before the "TACO" trade was even a thing on Wall Street, way earlier I had my original "MATT" = “Maverick Ate The TACO!“ Meaning on the 5th of April (just 3 days after Liberation day from April 2nd) I had my call of the year on the matter:

👉 " I mean at some point Trump will have to negotiate, kick the can down the road, switch to blaming the FED or whomever"

👉 "In any case, for me a good period to collect / harvest geopolitical risk premium"

That was the preview of the playbook which happened right after and you got it: via the typical Maverick-esque fashion, bringing you here key insights via forethought and delivered with clarity, calmness, coolness!

6. Check this one: when we plot all 500 names by returns and holding weight, we see none of our top 10 performers (green quadrant) bear a major weight in the index!

“So, Mav, who is driving the returns in the S&P 500 these days?" Well, for that we need a return attribution analysis to see who brings most of the contribution:

👉 from the +18.23% return in 2025, 10.35% (1,035 b.p. basis points) is driven by the top 12 names below — that translates to more than half, namely 56% of the returns

7. This market concentration is seen nicely also when we compare the performance of the S&P 500 weighted via the SPY ETF with the unweighted RSP ETF:

👉 +18.22% for the SPY (weighted) while note the RSP (unweighted) +11.92%

👉 both great returns no matter how we look at it, though note the concentration which is present, but it is less than 2023 and 2024

8. Value & Growth in 2025 for a styles view:

👉 Growth leading like in 2023 and 2024, but value also doing well this time around which translated to a broadening more healthy rally …

👉 VUG Growth (green) +20.08% while VTV Value (value) with +15.74% = both great!

👉 note that VTV Value did drop way less during the April Trade War 2.0 debacle … remember that one for the next volatility, drawdown and/or general downturn …

9. What about the mighty Magnificent 7 stocks?

👉 +24.9% for the Mag 7 stocks (green)

👉 +16.35% for the S&P 493, hence excluding Mag 7 (orange)

👉 +19.17% for the S&P 500 (blue)

10. What about the S&P 500 Top 10 Performing Stocks, or like they say in Top Gun: “Up There With The Best Of The Best!”

👉 Western Digital (WDC) +296%, Seagate (STX) +234%, Micron (MU) +229%

👉 Robinhood (HOOD) +228%, Newmont (NEM) +186%, Warner Bros (WBD) +172%

👉 Palantir (PLTR) 155%, Lam Research (LRCX) +144%, AppLovin (APP) +125%, KLA Corporation (KLAC) +102%

11. Lastly in terms of performance, zooming out and coupling it with the technicals:

👉 check the S&P 500 bull uptrend in off the COVID low! what a recovery and bounce!

👉 as usual, U.S. equities did in 2025 what they do best: go higher — recall Warren Buffett once famously saying: “Never Bet Against America!” (medium-long term)

👉 on the short term, also because it is America, a lot of things can happen as we saw in Q1 2025 with the POTUS Trade War 2.0 — it could have been worse and longer!

👉 going forward, the question with U.S. equities becomes one of Risk/Reward given where we are now in this sweet trend: at the upper bound!

📊 S&P 500 Valuation

12. Forward P/E ratio — the evolving path in 2025:

👉 = 23.3x now, and we begun 2025 very similarly at 22.6x — with a 19% return! ‘What happened Mav’? It has gone about nowhere in 2025! ‘Why? What’s going on?’

👉 19% very solid 2025 rally with a major factor being the mighty Earnings growth (the ‘E’ denominator in the P/E ratio), hence not a price/multiple expansion this time around (the ‘P’ numerator in the P/E ratio) = a very good development!

👉 note the April Tariff War 2.0 / Liberation day saw a 18.8x P/E bottom as the market was tanking like there is no tomorrow = yet that was actually an opportunity!

👉 as a rule of thumb, every 4-5x fast drop in the forward P/E (15-20% drop in price) is a good buying opportunity, or just a sentiment and algo driven big fast correction

For way more, I will make 2 Maverick Special reports which shall be ‘evergreen’, and serve via being recalled anytime it is needed in the years and decades ahead:

✍️ Big Volatility & Drawdowns = Juicy Returns

✍️ Harvesting Geopolitical Risk Premium Through the Financial Markets and Economic Storms

13. Zooming out via the Forward P/E ratio (last 20 years) — ‘Buy it Low Sell it High’

At a forward P/E of 23.2x now:

👉 = sitting very close to the +2 SD (Standard Deviations) of 23.5x

👉 = 37% higher than the 20 year average of 16.9x

👉 = not far from the 2021 stock market mania levels of 25x

14. Free Cash Flow Yield (Free Cash Flow/Enterprise Value) — ‘Buy it High Sell it Low’

👉 at 2.43%, we are even below the -2 Standard Deviations (SD) of 2.44%

👉 = 33% lower than the 20 year average of 3.6%

P.S. way more on the S&P 500 via the quarterly 2 distinct reports, and lately materially improved in all areas: structure, flow, insights and special metrics you rarely see!

✍️ S&P 500 Report: Valuation, Fundamentals, Special Metrics & Leading Indicators

✍️ S&P 500 Report: Performance, Sentiment, Seasonality, Technical Analysis

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📊 Thematic

15. 'Tech is Taking Over the World Baby!' chart via XLK/SPY, Tech relative to S&P 500:

👉 XLK US tech ETF sitting 2 standard deviations above the mighty S&P 500 SPY

👉 way above the mean, then during 2020 Covid it broke above the +1 Standard Deviation (SD) while since the 2023 ‘AI run’ now even above the +2 SD

👉 while tech today is real, it works, it is an integral part of all sectors of the economy, brings a lot of value (2001 dot-com empty concepts many), it’s hard to ignore the parabolic run lately, and how much future growth is baked into the valuations

16. ‘Semiconductors are Taking Over the World Baby’ chart via SOXX/SPY:

👉 SOXX semis ETF sitting 2 standard deviations above the mighty S&P 500 SPY

👉 way above the mean, then during 2020 Covid it broke above the +1 Standard Deviation (SD) while since the 2023 ‘AI run’ now even above the +2 SD

N.B. I do not compare the tech & semis to some gyzmo volatile empty sector, but to the mighty S&P 500 ... which is not a shabby construct at all, it’s the 11 sectors of corporate America which also derives 40% of revenues from outside the US ... and has performed very well since many many decades (if I would make the comparison with the S&P 500 excluding tech & semis, then the ratio would be even way higher!)

Let that sink in & ... food for thought(s) ... 😉

📊 Single Stocks

17. Buffet’s Berkshire (BRK-B) cash position — Stash Away Baby!

👉 spiked to $382 billion from $167 in 2023 for a 2.28x, and 33% as total assets!

👉 that yielding around $15 billion annually in a risk-free fashion!

👉 contrary to many headlines on the significance of this record cash pile, Buffett is NOT ‘forecasting’ a recession / market crash, he isn’t market timing, he isn’t making a ‘macro’ bet … he said he is not doing that many times! So, ‘what is he doing Mav?’

That will answered and a deeper coverage in the 2nd edition of The Berkshire Report!

✍️ Warren Buffett’s Cash Pile & More ... Stash Away Baby! Berkshire Hathaway Report #2

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18. Nvidia (NVDA) via 2 Maverick charts to make you go 'hmmmmm ...':

👉 the parabolic performance we all know: 3,153% return for a 79% CAGR since 2020!

19. With that incredible outperformance, check the valuation via forward P/E = 27.2x:

👉 it dropped 16.8 points since the launch of ChatGPT!

👉 and way below the 37.3 average, hence a 10.1 points drop

20. From Nvidia AI bro’ to retail non-AI bros, Walmart & Costco valuation via forward P/E:

👉 P/E of 42.5x for Costco and 39.1x for Walmart

👉 that is way higher than the Nvidia 27.2x …

Let that one sink in … bring the sink if you wish … and food for thought for you 😉

21. Musk danced with robots as Tesla shareholders approve a $1 trillion pay packet = largest in corporate history = $0 salary, all performance-based stock grants!

Before the targets for the $1 trillion check, a visual to show how Tesla did so far:

👉 Tesla IPO-ed in 2010 valued at $1.7 billion, and finished the 1st day at $2.2 billion

👉 2025 valued at $1.580 Trillion with a 60% CAGR since the IPO

22. Bonkers pay = bonkers milestones in order to get that $1 trillion pay:

👉 $8.5 trillion market capitalisation target — from $1.4 now!

👉 20 million cars delivered

👉 10 million FSD (Full Self-Driving) active subscriptions

👉 1 million Robo-Taxis into commercial service

👉 1 million humanoid robots

👉 10-year deadline: all targets must be achieved by 2035

👉 Elon’s stake if achieved would go approximately from 15% → 25%!

Let these ones sink in also, I did not see these takes of mine out there:

• $1tn pay for Musk for lifting the market cap by $7.1tn in order to reach $8.5 tn

• = 14% performance fee (total/cumulative by 1/7.1), and NO base fee = way lower than many funds: hedge funds, private banking, VC/PE, mutual funds (Europe) etc

• Maverick’s opinion = that is actually very decent, or even quite cheap! — I mean I personally got to know across time many CEO’s, entrepreneurs, investors, bankers, lawyers that would not move a finger for 14% for 10 years … so yeah …)

• Super Solid Skin In The Game (SS-SITG): Musk must remain as CEO or in an executive role over product and operations for a specific period (at least 7.5 years) for the shares to be fully vested + reputation, legacy & inspirational for so many!

I did tens of thousandths of charts so far at many places and countries: stocks, bonds, macro, commodities, asset management, investor relations, investment banking, strategy, lending, leasing, risk management … charts for bank CEOs that were meeting Ms. Christine Lagarde ... you name it ... nonetheless, I never ever have thought I will make this truly special outlier one on Musk and Tesla! 😉

Why are some criticizing the pay package? It is their own shareholders who said YES for the pay = they can do whatever they want with with their own company & money!

Independent research here for sure, no politics, though a tendency I noticed generally:

👉 socialists angle: ‘crazy, too much, no way, not fair …’

👉 capitalists angle: ‘what targets need to be met?’

How achievable are the targets? Well, definitely ultra ambitious! If met, Musk deserves the trillion, if not met, then not met, hence not given! After all, as I always like to say: ‘you need 100,000 dreamers to make breakthroughs happen!’ So let’s let the people dance, dream and let’s see the achievements coming in, we need innovation!

23. Marathon Petroleum Corporation (MPC) — Oil Baby Oil, Energy Baby Energy!

👉 7.79% buyback yield, +20% for quite a while, 14.18% average in the last 5 years, hence shares outstanding getting lower lower lower ...

👉 dividend yield = 2.3%, increasing dividend payments, 4 years in a row

👉 stock return in the last 5 years? 352% with a whooping 35% CAGR — not a sexy business, not in the headlines, not popular … yet delivering solid energy/oil & returns!

24. Robinhood ‘alpha’ trader vs Robinhood alpha stockholder (HOOD) = why it is bad to be a Robinhood trader, but great to be a Robinhood stockholder:

👉 Robinhood stockholder ringing the cash machine like there is no tomorrow:

• +239% since IPO (July 2021) with a 23.73% CAGR

• +198% last 12 months, and

• +217% in 2025 (sales & net income performing very well lately via direct fees, PFOF & more)

👉 since 2021, typical Robinhood user/trader/investor not even breaking even, and that is as expected of course, at least by me (chart 2)

‘Why this performance gap Mav? It is upside down!’

Simple: the latter (stock) is due to the former (client) … let that one sink in also!

P.S. it’s a bit like MicroStrategy & Bitcoin, and generally with Crypto: bad if you trade it, great if you own of the infrastructure, heads you win tails you win = more trades, more hype, more money (not to mention the bitcoin/crypto pumpers and scammers)!

25. Lululemon (LULU) sexy leggings get tighter and tighter, yet the stock can’t resist the heat (pun intended):

👉 from a $65 billion market cap in December 2023, now at $24.5 billion market cap

👉 shed a remarkable $40 billion in market cap in the last 2 years & a 59% drawdown

👉 nonetheless, stock rebounding in December on the back of the resignation of long-term serving CEO, Calvin McDonald, and as well announcements of activist activity

📊 Macro & Fixed Income

26. U.S. GDP — quarterly data since 2005 to capture well the business cycle:

👉 Q3 2025: +4.3% real growth annualized = strongest growth in two years = above prior quarter's Q2 3.8% increase = growing way above the 2% average since 2005

👉 Q4 2025: +3.0 via the December 23rd GDPNow Altanta FED estimate and +2.1% via the December 26th New York Fed Staff Nowcast = 2.55% average of the two

👉 once the data is out for Q4, hence 2025 overall = a good year in any case!

P.S note the 2007-2009 recession, and also the 2020 Covid stop & go big swing

27. Labor Market not tight anymore — Job Openings VS Unemployed People:

👉 more Unemployed People (red) than Job Openings (green) = quite a contrast since the 2021-2022 job hiring and stock market mania

👉 7.670 million job openings VS 7.831 million unemployed people = as a ratio that is 0.98 from a crazy 2.02 back in 2022

👉 not an ‘employees market’ anymore will likely push down Wage Growth (which is still quite good) which would lower Consumption, but on the other side it will help with inflation (Wage Growth is a “sticky” inflation variable), hence lower interest rates

N.B. Unemployed People and Job Openings ‘matrix’ is a nice monthly visual overview, while I will go deeper with other metrics for more insights & timeliness — until then, as a preview: the labor market is not too tight nor too hot, quite balanced overall

28. A special one now: Business Investment Activity aka ‘core CAPEX’ — it is UP!

👉 New Orders for Non-Defense Capital Goods (excluding aircraft) with a very sharp rebound since the 2020 pandemic, and currently at a high level of $78 billion (also known as ‘core CAPEX’ or simply put ‘Business Investment’ so that you can connect the dots and/or do not get confused with other research or media reports)

👉 while it did slow down a bit in the 2022 economic slowdown and bear market, a very solid rebound since 2024, hence signalling a positive outlook and economic strength in the months to come

The main message behind this indicator:

👉 it reflects very broad trends in Business Investment and Private Sector confidence, both very important for the investment-production-consumption loop

👉 the key insight = purely focused on orders for long-lasting business equipment, and removing large fluctuations from defense and commercial aircraft orders

👉 Core CAPEX is regarded as a key factor driving the economy and one of the leading indictors of Business Activity or Business CAPEX

29. What about Housing & the mighty Consumer? Well connected & stable? For that we look at the Home Equity values compared to the Total Value of Household Real Estate:

👉 Owners’ Equity in Real Estate as a % of Household Real Estate, solid at 72.56%

👉 the longest continuous stretch above 70% since the late 1950s, hence, we have the strongest Consumer-Housing Balance Sheet in 70 years

👉 “But what about affordability for new homeowners Mav?” Well, yes, it is low, but that is another story, and in general, at any given point, it won’t be good for everybody

Maverick’s net takeaway:

1) Housing will NOT take DOWN the Economy which I hear quite a lot these days

2) Owners’ equity in their homes is important via the ‘wealth effect’ which is real: higher confidence, invest more into stocks, higher consumption patterns, HELOC loans etc. In general, Real Estate is a big part of the economy and with its many facets it is quite complex. Commercial Real Estate (CRE) has some issues, and I will offer more dedicated insights in the future.

30. How are Delinquency Rates doing for payment on loans? Overview loan types:

👉 with higher interest rates given the 2021 inflation spike, higher overall

👉 yet not at worrying levels for now, and dropping rates act as more cushion

👉 nonetheless, to be monitored in 2026 …

All this will be covered in 2026 through my quarterly deep dive into the U.S Economy:

✍️ The State of the U.S. Economy in 75 Charts

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31. U.S. Yield Curve (YC): “mighty curvy curve, what are you telling us?” I ask because you are connecting monetary policy, the bond market, with the economy overall and the stock market via the S&P 500 = Macro-Finance!

Yield Curve 10Y-3M (blue) = 0.485% again positive, and un-inverting strongly in 2025! Chart = last 30 years of YC inversions/un-inversions (blue), recession periods (grey), S&P 500 price (green) and S&P 500 drawdowns (red) — all for the famous markets/economics mantra ‘Is This Time Different?’

👉 2022 recession wise: YC inversions most of the time signals an incoming recession, though most recently it gave us the head fake (false signal) in 2022 as the most anticipated recession never came = ‘It Was Different This Time’

👉 2022: stock market wise: though the signal was still partly valid also for the 2022 bear market as the YC was falling fast and became inverted = ‘It Was Not (That) Different This Time Either’

Maverick takeaways:

👉 Recessions wise:

• YC inversions are to be watched for likely incoming tough periods

• note that the exact inversion points are not the real/true signal for an incoming recession, but it’s the un-inversion period coming right after — in other words, it is the steepening post un-inversion that is when things start to happen

• given that the YC is positive again and un-inversion is happening now, technically the YC could still foresee a recession should it go higher / steepen

• on the other side, this inversion & un-inversion has been going on for +3 years which is very atypical — in any case, the current steepening is to be watched!

👉 Stock Bear Markets wise:

• just like Maverick in Top Gun going inverted, it very likely DOES show us the birdie, hence the incoming bear market - fair & nice guy, no? 😉

• each of the past 4 big bear markets since 1995 were preceded by YC inversions or they happened as the YC was dropping fast towards inversion (being negative)

Hence, the Yield Curve is still to be watched both for the economy & stock market!

N.B. there is for sure a lot more about the Yield Curve special topic:

• more yield curve types, context, nuances, other variables, hence still judgement calls to be made on a case by case (regime by regime) basis

• that is why in 2026 I will also do a Maverick Special dedicated report covering: longer history, more key stats, more intricacies, more insights and takeaways

✍️ Yield Curves, Recessions and Bear Markets = a Deep Dive! Maverick Special

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32. Inflation, the hot topic of the last years, what is going on there? A Maverick chart with 110 years of Inflation rate (CPI YoY%), a very long series!

👉 2.9% at the start of 2025 with 2.7% to finish, below the 3.3% long-term average

👉 therefore, with further stabilisation closer to the targeted 2%

👉 inflation chatter is that the FED should change to target closer to 3%, hence if you ask me, if that happens, based on this very long historical average, we should not be that surprised and that big of a deal

33. Inflation Growth vs Level = Wall-Street inflation vs Main-Street inflation visualised! CPI growth (YoY %, blue) and CPI Consumer Price Index level (red):

👉 for the Level of inflation to go Down, we would need a Negative Growth Rate, hence we would need to have deflation (trust me, that is something not too many people really want, or well, they should not want …)

👉 once we get inflation spikes and we are at new higher levels, hence even when the inflation growth rate finally slows down and stabilises, the level/base is and feels to be way higher — it is not ‘linear’ and ‘smooth’ as before the high inflation period!

👉 one cay say, the Level/Base = how most People see and feel inflation, while the Growth rate = how Economists see inflation

Inflation is a very complex phenomenon, hence besides the current growth rate and level with a historical perspective, what about the ins & outs, and most importantly, what about pricing + forward looking metrics and indicators?

All that requires naturally a deeper dive, and most of all, practical implications: myths about inflation, which measures to track, which ones are the best and most reliable, and an outlook for the short term, and as well for the medium-long term.

Hence, I will do a 2-part Maverick Special Report (Macro-Equities lens) covering:

✍️ Inflation - Nuts & Bolts, Ins & Outs!

+ by far the most favorite & requested:

✍️ Inflation: Pricing, Expectations & Leading Indicators!

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34. Interest Rates — Fed Funds Rate & 2-year Treasury Yield:

👉 FED lowered rates 3 times in 2025, and is now in the range of 3.50% to 3.75%

👉 FED signaled a more cautious approach to further easing in 2026, yet the direction and current pricing is for LOWER rates

👉 therefore, with that expect lower Fed Funds Rate and 2-year treasury yields also!

👉 while AI was the big headliner for the big stock market rally, not many told you that a material factor are the falling interest rates = lower discount rates/cost of capital

35. FED Balance Sheet:

👉 a big 26.87% balance sheet reduction since 2022 all-time high, yet note the very small yet important uptick in December — what happened?

👉 on December 10th, the FED stated they “will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves” — remarking that “reserve balances have declined to ample levels”

👉 hence, the balance sheet has expanded in the last 2 successive readings

Money Market Funds (MMFs) time!

36. $7.48 trillion Total Assets (blue) = a record = a very solid potential dry powder

Wordplay: “A Trillion Here, a Trillion There, and Pretty Soon You’re Talking Real Monay!“

👉 with interest rates dropping (red), that super liquid cash equivalent has to go somewhere — some say it is not dry powder for stocks, but if one sells a MMF unit and buys with it stocks, what is it then? Via JPM: “...there is more than $7T in MMFs, suggesting plenty of dry powder to buy stocks especially if we do see the Fed cut rates, dropping the return on MMF assets.”

👉 until then, with high(er) interest rates (red), it is normal for MMFs to increase as the Risk Free rate pays a decent level of interest for the 1st time since 2007, namely pre-GFC/Lehman Brothers (2018 & 2019 was also a brief period with some yield)

👉 note also the price change % rolling 1-year: a very high growth with 14.25% now

37. $2.25 trillion Retail Assets (blue) = also a record from Retail

👉 MMFs pay way better pay/yield than bank deposits (CDs)

👉 note also the price change % rolling 1-year: a very high growth with 13.99% now

📊 Currencies & Commodities

38. U.S. Dollar, the mighty USD with quite a bad year:

👉 USD down 9.53% versus the DXY (fixed basket of six major foreign currencies)

👉 USD is basically having one of the worst years in decades among major currencies

39. For a medium-long term investor though, obsessing about the Dollar is not good!

👉 mighty USD has gone nowhere in the last 50 years! At its average these days!

👉 if one is worried about the Dollar, one has 4 options (one of them or a mix):

• own the Swiss Franc (CHF)

• own Swiss bonds and Equities for implied ‘natural’ diversification and hedge!

• own Gold

• hedge it!

40. For a more short-term tactical trader, check the post-GFC bull uptrend:

👉 despite several tests, it continues to hold — rather a rebound from here

Given the Dollar obsession and many calling the end of the Dollar since ages, one day I will do a Maverick Special report on it where I cover many angles & the many myths!

✍️ The Mighty Dollar and its Mighty Myths!

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41. The Mighty Swissie Swiss Franc (CHF) on the other side = currency of the year!

👉 CHF/USD: Swiss Franc keeps doin what it does best - going higher!

👉 +14.9% appreciation for the Swiss Franc versus the Dollar

👉 at 1.2676 trending higher in the multi-decade channel

Investing insights and food for thought:

👉 why aren’t more investors looking into Swiss stocks? Ok, only around +200 listed, but still ... well, no worries, I will cover quite some Swiss stock in the future ...

👉 why? natural FX and cash flow diversifier + neutrality + fiscal discipline + innovation + SNB balance sheet + federalism & more ... ahh + chocolate 🍫

👉 performance wise and also returns expectations, many investors forget to adjust for currency differences — for example:

• the Swiss Market Index (SMI) is +14% in 2025

• the CHF gained 14.9% versus the Dollar in 2025

• for an US investor, once returns are translated into USD terms, returns are way way higher given the USD … simple, but many times forgotten!

Not just against the dollar, but the CHF appreciated against most currency majors!

42. Swiss government bonds:

👉 the 2-year did go negative once again

👉 the 10-year yield kept trending lower and was not far from going negative again

43. Gold, goldie gold, the oldest asset of them all, you shiny yellow metal!

👉 with a +78% in 2025, = the best year since 1979! Note also that it is very rare for both Gold and the S&P 500 to have great runs together!

👉 lately, it seems everybody is digging gold and/or becoming a gold digger? Just pun intended! 😉

👉 joke aside: geopolitics, geopolitical risk premium, fiscal dominance, currency debasement, fiat currency worries, central banks huge buyers, there is a lot going on!

Hence, 2 Maverick Special reports will cover in depth the mighty gold!

✍️ Gold, A Strategic Asset In A Multi-Asset Portfolio

✍️ Bitcoin & Gold, not Bitcoin VS Gold

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Until then, you can check the Maverick Special Situation report from March 2025:

✍️ Maverick Special Situation #6: 🪙 Gold Special Seasonality Pattern

44. It’s not just Gold, but other commodities also having a crazy good year:

👉 Silver +149.83% also the best year since 1979 when it ripped 5x in famous fashion

• Silver is needed in many industrial processes, semiconductors etc, hence not good

• an ounce (31 grams) of silver is worth twice as much as a barrel (159 liters) of Russian crude oil (has only happened once before in 1980) — let that one sink in!

👉 Platinum +136.24%

👉 Palladium +84.04%

👉 Copper +38.68%

These are not good in order to tame inflation and have it anchored in terms of expectations, though I think they will run out of steam rather sooner than later.

When everybody suddenly becomes a precious metals expert, and that coupled with parabolic fast runs up, more likely pointing to a top and/or bubbly behaviours … .

More on that in the future Maverick reports!

45. Zooming out for the last 40 years, they are quite cyclical, isn’t it? Food for thought!

46. Oil, you ‘crude’ oil, the commodities underperformer of 2025!

👉 down -19.1% in 2025, quite surprising many …

47. Gold to Oil ratio, quite a rare Maverick chart — every time there are big moves in Gold and/or in Oil, I like to make the ratio of the two and infer from there various insights and forward looking ideas:

👉 Gold-to-Oil ratio = 74.6, and the classical interpretation when the ratio surges is that of a rather warning signal (grey periods = recessions):

• rising gold prices reflecting growing fear and risk aversion

• while conversely a dropping price in Oil indicating weak demand, aka weak confidence in the global economy

👉 I actually think “It Is Different This Time” and the situation is not that bad: there are different variables at play this time around which will be covered in the future

📊 Crypto

48. One of the biggest disappointments in 2025 is Bitcoin and its so called ‘treasury company’ MicroStrategy( MSTR). The “Bitcoin & MicroStrategy symbiosis“ chart:

👉 Bitcoin -30.39% drawdown

👉 MicroStrategy -66.69% drawdown

👉 complementary, since July: Bitcoin -27%, Strategy -65%

👉 MicroStrategy filed to change its name yet again, new name = Strategy. I wonder why? I mean when one has a great strategy, why change the name so often? 😉

All in all, 2 takeaways:

👉 how many times we heard in 2025 “Bitcoin to 200k? 500k 1 million?“. The easiest way to get attention is to make outlandish claims and targets. Similarly to people that shout about 100-baggers etc … most of them are grifters, the left tail of humanity!

👉 if one really wants to own bitcoin, why would anyone get bitcoin exposure via MSRT? That is still beyond me — well, actually I know: it is mainly because of the ‘yield’ which lures investors … but I also know a thing or two about the yield and the following MEME says it all 😉

49. MicroStrategy-Bitcoin case will very likely get historical and a textbook use case. Hence, I might do a Maverick Special report on it! Stay tuned!

👉 until then, just check the Micro-Strategy Free Cash Flow / Share …

✍️ The Bitcoin & MicroStrategy Symbiosis

50. Last but not least, Bitcoin and Gold financial flows via their top dedicated ETFs:

👉 after a great start in 2024, Blackrock’s IBIT spot Bitcoin ETF is recording heavy outflows, whereas world’s largest Gold ETF GLD with massive inflows

👉 recall that neither Gold nor Bitcoin carry any yield and have no intrinsic value, they are mainly driven by narratives and flows

👍 Bonus: +200,000 views Maverick Tweet of the Year — Nasim Taleb retweet!

👉 +200,000 views for this Maverick tweet which was quoted/commented also by the legendary Nassim Taleb … so great from his side and I thank him a lot!

👉 common sense is not so common, conflicts of interest are too common, hence independent investment and economic research for the win!

👉 such an important topic that I did write an entire dedicated post about it:

✍️ Why Independent Investment and Economic Research = Paramount Nowadays!

‘If something is nonsense, you say it and say it loud. You will be harmed a little but will be antifragile — in the long run people who need to trust you will trust you.’

Nassim Nicholas Taleb: Commencement Address, American University in Beirut

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Just sharing this around with like-minded people, and hitting the 🔄 & ❤️ buttons!

That’ll definitely support bringing in more & more independent investment research: from a single individual … not a corporate, bank, fund, click-baity media or so … !

Like this, the big positive externalities become the name of the game! Thank you!

Have a great day! And never forget, keep compounding: family, friends, hobbies, community, work, independence, capital, knowledge, research and mindset!

Have a great 2026!

With respect,

Your Maverick 👋 🤝

first of all, the anniversary: Maverick Equity Research publication just turned 3! More than 100 posts, accompanied by +5,000 Maverick Charts for a +1,000,000 site visits.

+17,250 people from 50 U.S. states & 164 countries with great & various backgrounds enjoy here the independent investment and economic research! With some of you I got the chance to meet in person after you emailed that you are in town, a pleasure. 2024 I also got featured by the Substack team after their cherry-picking evaluation!

3 great years during which we enjoyed the U.S. bull market but also International, with Europe recently joining strongly. From the commodities side, Gold has been also on a historical run. As I like to say, even in overall bear markets, there is always a bull market somewhere. As well, diversification is the only free lunch we get in investing.

The first 3 years was actually just getting started, hence way more incoming from my side. There is a lot of hard work (and data costs) that goes behind all this, and quite a lot is work in progress in the pipeline with many unique and insightful reports!

Step by step, with a big focus on quality & insights (not frequency, polarisation, news)!

WHY independent economic & investment research is so important, especially nowadays, is the special & important thematic I chose for the 3-year anniversary.

Table of contents = report structure + highlights:

📊 Intro: +200,000 views Maverick tweet + independent research has a future

📊 Wall-Street & Government: Houston, we have a big conflict of interest problem + a major self-censorship pattern!

📊 My Experience & Real World Examples: some serious food for thought

📊 Your Very Practical Takeaways: Read the room, then decide for yourself

📊 The Biggest Value You Will Get From Maverick: Independence + together we all benefit as truth is born from debate “In disputando veritas gignitur”

📊 Bonus: 3 more Maverick hot tweets for +600,000 views

📊 Intro: +200,000 views Maverick tweet + independent research has a future

No better way to start than the following from the one and only Nassim Taleb:

“If something is nonsense, you say it and say it loud. You will be harmed a little but will be antifragile — in the long run people who need to trust you will trust you!”

A strong message should be accompanied by a strong & viral Maverick tweet, right?

+200,000 views for this Maverick tweet which was quoted/commented also by the legendary Nassim Taleb … so great from his side and I thank him a lot!

• with that strong start, let’s see how that relates to the current economic & investment research, specifically Wall Street and the U.S. administration

• additionally, for an even more crystal clear non-partisan independent approach I will replace the word ‘Trump’ with ‘POTUS’ (President Of The United States) which will simply just mean and apply whomever is at the White House

📊 Wall-Street & Government: Houston, we have a big conflict of interest problem + a major self-censorship pattern!

Not even 10 days after the 2nd of April ‘Liberation/Tariff day’ declared by POTUS, on the 10th of April we have the Bloomberg scoop (read below) addressing a key point:

• self censorship, a climate of fear to speak out, where corporations and individuals are pressured to avoid criticizing the POTUS administration

• hence, opting for ‘anticipatory obedience’ just so that they avoid real or potential backlash for their views = which poses a major career / job risk!

The main subject of this episode is well respected strategist Michael Cembalest who is a great strategist, and voice that myself I am looking forward to read. A solid study case showcasing how hard it is to be independent & objective these days:

• 45-minute client presentation where he called Trump’s tariffs a "sledgehammer, brute force" approach, but withheld opinions due to firm concerns

• the report titled "Redacted: Straight talk from the CEO front lines on Liberation Day" includes blacked-out sections on tariffs, reflecting self-censorship pressures

“This is the first time I’ve ever had to do a call where I had to think about the things that I was saying, not just in terms of how they reflect our views on markets and economics,” adding he never before taken such considerations into account in a +30 years career span

Is this new in the world of Wall-Street, big business & government? No, for sure not! It just is unfortunately more common lately, and/or more people speak out about it.

It’s not just Cembalest/JP Morgan, other prominent analysts/bankers like Mike Mayo and Dick Bove sharing personal experiences of facing backlash for their comments.

You can also just check online for many other previous similar cases, where the analysts are outright being fired for just being professional, doing their best job so that via their independent judgement they capture best the economics and investing implications of certain policies in the given economic landscape.

📊 My Experience & Real World Examples: some serious food for thought

From my own banking experience, I know very well these kind of ‘games’. In general they do not happen, but there are times when they do, especially the bigger the stake, and sometimes they are not clear from the beginning: why, for whom, what’s the deal?

So, quite some times myself and other colleagues we were told to ‘edit this’, ‘edit that’, and sometimes it is clear why. Other times it isn’t and when asking for the rationale, it goes along like: ‘some things are better you do not know, and that is for your own good’. In simple translation: don’t stick your nose too deep into this, just execute what told, or you could face consequences. Well, it is never rocket science, and connecting the dots one can find the conflict of interest, or the special deal for one side or the other.

Overall, there are 3 levels of independence:

1. Internal to Internal: within a corporate, business - own example & experience:

👉 it can be something on budgets between divisions, countries and related capital allocations, and of course, bonuses = very sensitive! There are people, especially the ‘dark triads’ types (7% of the population) that their one and only reason and meaning of their job is the bonus (in order to get there, crush many people down along the way)

👉 which external consultant buddy gets the next big and lucrative contract

👉 naturally, also about game of thrones / internal politics on who is getting the promotion, who is the future boss left or right so that one can ‘position’ properly

2. Internal to External - own example & experience:

👉 one day I was doing ‘some slides’ for the CEO of the bank that was about to meet Ms. Christine Lagarde (ECB current President, former IMF Managing Director and Chairman of the 24-member Executive Board): I cannot say how many versions of the slides had to be made, how many edits, how many countless hours in meetings, further ‘meetings before the meeting’ had to be done until it was finalised: some stuff made sense, some did not … you just execute and draw your own conclusions, and ideally keep them for yourself, and do the balancing act … in the end one simply cannot get out and get too specific with the details, the ‘confidentiality’ clauses are there for a reason, even though at times they are abused (freedom of speech) …

👉 the above example with the Wall Street strategist and current U.S. Government administration is a very ‘classy’ example in terms of how things can go

3. Anonymity, the third and the ultimate layer of independence, a feature which I bet many did not expect to be placed in such a high position

👉 let’s be honest, for better or worse, a bug or a feature, once somebody puts their name out there, their organisation, their government, once one puts the nice tailored suit on, it is close to impossible to be 100% independent

👉 the higher the stakes, also likely the forced edited & pre-scheduled narrative: one cannot simply think freely for oneself and for whom he/she should truly serve

👉 therefore, how many can be independent out there and truly say what they want

Food for thought for you … it is what it is, I don’t make the rules, it is human nature.

👉 that is why, anonymity is in the same time the big hedge for one’s career/job risk, which is naturally also very personal at the end of the day, we all have responsibilities

👉 also, anonymity by default puts the focus on the research, not the author / person

👉 last but not least, anonymity by default stops one for chasing attention, clicks, views, validation, yet focus on the research — conversely, online trolls, hate, envy, insults, are silly shots in the dark which anyway say more about the ones doing that

👉 quiet confidence for the win (vs loud voices) … doing vs talking for the win

To summarise, just this key part from the my About section:

Independence = being free to say, write and both agree and disagree with whatever I think is the right approach in order to generate insights. Independence might sound basic and fundamental, but trust me, actually it’s a key feature given that a lot of talks & takes out there are not independent, though they might look professional & sound.

📊 Your Very Practical Takeaways: Read the room, then decide for yourself

Many of you reading this do work in finance, and as a heads up if you ever get an internal memo (or managers acts weird) where the wording is something similar to:

👉 ‘going forward, it is best for us / it is recommended to assume a conservative position regarding … ’

👉 ‘going forward, all research, client notes, external communications etc will be subject to additional clearing before being published’

I would be really careful at least for a while in terms of what goes sent out:

• the stakes might be high, hence also the pattern of self-censorship or even deceiving. Read the room way more intensively, be aware ‘who is who in the zoo’, double/triple check data, ask around, connect the dots

• it’s natural to be more defensive, protect and keep your job, nothing wrong, nothing to be judged - or one can also ignore that, keep independence, check the pros and cons, though risk it even though clearly doing the right thing

• the most exposed areas/divisions are: research, investor relations, group strategy, communications, investment banking overall, though also way less known and public, big corporates commercial lending

I am not a conspiracy theorist, but a realist-optimist, hence my main message is:

👉 things do work most of the time as they should, though it is important to be very aware when that is not the case, and also how often it is not the case: if too often, for your own good, safety and sanity, it is better to change places, way better

👉 the reality is, especially in banking, while one can find many top notch people, type A personalities, real friendships for decades, there are also plenty of people do not like or want to actually work: they want to talk about work, coordinate, manage, be a ‘leader’, a voice, they want to be heard and their egos tickled … spotting them as fast as possible is a key skill to develop, the earlier the better …

👉 are these a bug or a feature? well, mostly bugs I would say, but in some places, oh boy, they are more features … never thought it is possible … until I was confronted with it, not just some coffee/lunch story … when a feature, better to leave …

👉 also, the higher the stakes, issue, topic, jobs, high positions, bonuses, money involved and other implications, the MORE likely conflicts of interest, self-censorship, game of thrones are present, hence independence starts to be more and more in question … the correlation is very strong …

📊 The Biggest Value You Will Get From Maverick: Independence + together we all benefit as truth is born from debate “In disputando veritas gignitur”

Without any doubt, the biggest value you will ever get from my investment and economic research is my independence, and that is my pledge to you, my IOU: Independent Objective & Unbiased.

Unflinchingly freedom of thinking + evidence based approach which as we saw is not always the standard, but many times a luxury to both do and receive! Therefore, full freedom from any interference of any kind and from whomever!

Individuals search for truth, groups search for consensus! Here no group thinking! The issue is that normally we all want easily to get along in a group, hence one would not want to stand out way too much, or ‘the tall puppy gets cut’. Yet on the other side, ‘If everyone is thinking alike, then somebody isn’t thinking’.

👉 U.S. coverage: based in Europe and not a U.S. citizen (though I lived there) it is natural and easy for me to be non-partisan, detached and independent, hence can focus solely on the job: data & facts driven, together with objectivity for the win

👉 I aim to be right most of the times, but at times I will naturally not be right as the future is uncertain and things can change - why do I say that I will ‘naturally’ be wrong at times? Simple, because nobody is right 100% of the time, anybody telling you that, it is very simple: run away, just run from that BS as fast as you can

👉 I escape competition through authenticity, why? Because no one can beat me at being myself - that is how I can outlast medium-long term, and deliver to people

👉 I am not paid to say what somebody wants or not say what somebody doesn’t want, as a ‘Maverick’ I just I strive to say what needs to be said … simple!

👉 I say what I mean and mean what I say = I walk the walk and I talk the talk

👉 no bosses, no interferences of any kind = I have 0 reasons to embellish the truth

And, this is why independent economic investment research has a future! Common sense is sometimes not so common, conflicts of interest are sometimes too common, hence the true hedge is independent investment and economic research for the win!

Together we all benefit as truth is born from debate “In disputando veritas gignitur!”.

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📊 Bonus: 3 more Maverick hot tweets for +600,000 views

1. Remember the Bill Ackman and Carl Icahn feud from back in 2013? It came back a bit in 2023, and somehow I got involved as I posted a few statements and data:

👉 +350,000 views for a few tweets, and +500 DMs from various folks from both sides ‘of the trade’, many appreciating the independent added value, some wackos threatening me with my personal safety … well, as always, being calm, cool and collected is key … and I guess that is the jungle of the internet … 😉

2. +250,000 views for ‘The Trump Trade’:

👉 this was less heated to most than the previous one, and many appreciating the independent and data-driven research note

3. Maverick Ate The Taco (MATT) = April 5th tweet (3 days after Liberation Tariff day) where I outlined the POTUS playbook that happened right after:

👉 negotiations …

👉 kick the can down the road …

👉 blame the FED …

In any case, for me a good period to collect / harvest geopolitical risk premium!

Research is NOT behind a paywall and NO pesky ads here unlike most other places!

Did you enjoy this by finding it interesting, saving you time and getting valuable insights? What would be appreciated?

Just sharing this around with like-minded people, and hitting the 🔄 & ❤️ buttons!

That’ll definitely support bringing in more & more independent investment research: from a single individual … not a corporate, bank, fund, click-baity media or so … !

Like this, the big positive externalities become the name of the game! Thank you!

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Have a great day! And never forget, keep compounding: family, friends, hobbies, community, work, independence, capital, knowledge, research and mindset!

With respect,

Mav 👋 🤝

back after the ‘summer break’? That is great, I am back too & energised. Well, except for two weeks I never left. I was working in silence and ‘behind the scenes‘ (as always) on the future reports which will come with major improvements in all major areas: from structure, flow, insights to special metrics you rarely see, all are work in progress!

Step by step, with a big focus on quality & insights (not frequency, polarisation, news)!

Now let’s resume with a Maverick Special report.

With markets making all-time highs, margin debt higher and higher, people posting their great returns online (some are fake with simulated/virtual brokerage accounts & boosted by crazy leverage, some MEME stocks, some ultra high beta stocks), it is always natural to ask ourselves if we are in bubble territories. Hence, 3 charts on S&P 500 valuation, 3 on making the case for NO bubble and 2 bonus on S&P milestones.

1. S&P 500 valuation via Free Cash Flow (FCF) Yield (quite a popular one as I did post it also on Twitter/X and it got +28,000 views):

👉 S&P 500 (blue) trades even below -2 Standard Deviations (SD), and that is both on a Market Cap (chart 1) & EV basis (chart 2), 2.32% and 2.4%

👉 trading 90% higher than the 10-year average of 4.42% (market cap basis) and 51% higher from 3.64% (EV basis)

👉 quite a distance to reach only the -1 SD at 3.51% (market cap basis), and 3.08% (EV basis) which is still not cheap

👉 buying zone = rather within the 4-6% FCF yield range ... for example see when at +1 SD (2022 bear market), and even more so at +2 SD (Covid crash, 2018 bear market)

Maverick net takeaways:

• an inverted metric a’ la Maverick in Top Gun 😉, meaning this shall be seen as a “Buy High, Sell Low” ... & ... “Sell Low, Buy High”

• lack of margin of safety (MoS) these days ... and/or …

• high price paid for value received “Price is what you pay, value is what you get”

2. S&P 500 Free Cash Flow (FCF) Yield on an EV basis/denominator:

3. What about the S&P 500 valuation via the Price/Earnings (P/E) ratio?

Forward P/E = 23.7x (blue) with +14,500 views on Twitter/X:

👉 = above +2 SD (Standard Deviations)

👉 41% higher than the 20 year average of 16.8x

👉 = highest level since 2021 stock market mania (highest this century)

Now a great follow up question & chatter what I naturally hear a lot nowadays is:

Q: “So Mav, is the stock market these days fairly valued, overvalued or in a bubble similar to the 2000s Dot-com bubble? This is what we all need to know buddy!”

A: “Great question, though for a proper answer that would require a very thorough research backed up by serious data and rationale!”

Q: “All right, though for now can you pull up at least one of those Maverick Charts for 10,000 words? A bit like in the Joe Rogan podcast when he asks his technical producer for evidence: “Pull up that Jamie!“ … “Pull that sh*t up Jamie!“ … So, can you pull that up Mav?”

A: “Now that is kind of a funny way to put, and yes, I can pull that sh*t up!” 👇👇👇

4. Global IT sector late 1990s (1995 indexed) VS Global IT today (2021 indexed):

👉 2000s = price went parabolic, but earnings not (left side of the chart)

👉 nowadays since 2022 ChatGPT launch: price went parabolic, earnings followed parabolically also … fundamentals matter, and that does say 10,000 words or more …

Maverick net takeaway:

• with a 97% price return VS 87% earnings, there is a current gap of 10%, and I will monitor and update you as we move forward via my future reports - until then and for now, it is very hard to say that we are in a bubble!

• therefore, via the typical Maverick-esque fashion, bringing you here insight via evidence and delivered with clarity, calmness, coolness … enjoy! (also this chart had decent views on Twitter/X with +72,000 views)

5. A complementary view also via Profit Margins:

👉 compared to 2000, this time margins support the high earning multiples

On this key topic, so many wrong charts circulate around and spread like wild fire, yet don’t say much or are wrong. But they ‘work’ to attract eye-balls for ads or for even worse reasons. Do you want an example? There you go: I did pull that sh*t up too! 😉 👇Now it isn’t my style to name call or ridicule others, so the source won’t be mentioned, but I can say that just this chart had +500,000 views, and many more out there …

6. Nasdaq Now (2023-nowadays) VS Then (1998-2001):

👉 while it is a nice analogue, a beautiful correlation & chart, what does it tell you?

👉 1st reactions are many along these lines: ‘oh wow, that is crazy, it is a bubble!’

Maverick net takeaway:

• The Global IT sector via MSCI ACWI IT is not exactly the Nasdaq-100, but I think quite good proxies to each other - hence, which chart you ‘like’ more? The one below, or one above? where do you lean more into?

• there are pockets of the market that start to exhibit more and more of a bubbly behaviour (I will show them with the next Maverick Charts edition), but until then, overall I do not think we are in a bubble which would cascade with a lot of negative effects and spiral down heavily

After answering ‘Is it a bubble or not?’, what about regarding the stock market being:

1) highly undervalued

2) undervalued

3) fairly valued

4) overvalued, or

5) highly overvalued?

Well, that is quite a different ballgame which requires very solid research. That will also be answered via my future two distinct S&P 500 reports, and materially improved in all areas: structure, flow, insights and special metrics you rarely see:

✍️ S&P 500 Report: Valuation, Earnings, Fundamentals & Special Metrics

✍️ S&P 500 Report: Performance, Sentiment, Seasonality, Technical Analysis

📊 Bonus: Milestones of Global Stocks and the S&P 500

7. Global Stocks milestone = close to the $150 trillion mark:

👉 +31% since the April 2025 ‘Trade War 2.0’ low, for a +$34 trillion in added value

👉 +137% by adding +$83 trillion in value since the 2020 March pandemic bottom

8. S&P 500 milestone = close to the $60 trillion mark:

👉 +12.8% in 2025 alone and adding $6.7 trillion

👉 +8.7% for an extra $9.3 trillion from the same date in 2024

And that was with the Maverick Charts 39th edition, 7 key charts with many insights! You can check all the previous 38 editions in the Maverick Charts section!

Research is NOT behind a paywall and NO pesky ads here unlike most other places!

Subscribe now

Did you enjoy this by finding it interesting, saving you time and getting valuable insights? What would be appreciated?

Just sharing this around with like-minded people, and hitting the 🔄 & ❤️ buttons!

That’ll definitely support bringing in more & more independent investment research: from a single individual … not a corporate, bank, fund, click-baity media or so … !

Like this, the big positive externalities become the name of the game! Thank you!

Share

Have a great day! And never forget, keep compounding: family, friends, hobbies, community, work, independence, capital, knowledge, research and mindset!

With respect,

Mav 👋 🤝

U.S. equities at all-time highs, MEME stocks & retail favorites going parabolic, hence one topic making the rounds = Margin Debt (leverage/borrowing) by Retail Investors!

As usual, too many out there (no name calling) are using just the level $ values to chase clicks, fear monger, practice politics-like polarisation, or simply not doing more of the work required to provide more angles and nuances for better insights.

Well, that is why I am here, and I guess also why you enjoy this independent research!

Hence, as you got used to, in just 7 Maverick Charts I will ‘say’ 10,000 words or more!

1. Margin debt in brokerage accounts (FINRA data):

👉 tops $1 trillion for the 1st time in history with a +9.4% growth from May to June, and marking the highest jump since November 2020

👉 topped even the 2021 madness as retail investors go into debt to buy 'stonks', hence July data likely even higher, maybe +$1.1 trillion ... melt up is underway ...

👉 big margin spikes into local tops = a pattern happening before equities drawdowns (red shaded areas), just check the boxes = pun intended 😉

N.B. this chart and post had +20,000 views on Twitter

2. Enhancing the chart by adding also the S&P 500 - a similar message:

3. Margin Debt as % of U.S. Total Stock Market Value and equities drawdowns (red shaded areas) in order to 'standardise' / 'normalise' this data series:

👉 looks way way less troublesome and worrisome at 1.39%

👉 2000s Dot-Com bubble and 2007/GFC/Lehman spikes were very noticeable (check the 2 boxes), hence only when we would have a similar vertical increase, I would be more confident to say this metric signals that the local top is just around the corner

👉 therefore, for now hovering around 1.4% it is just a flat & boring line since 2023, hence just 5,000 views on Twitter despite being more insightful …

4. Margin Debt as % of GDP:

Some say to see Margin Debt via GDP is a bit of a stretch given that MD exists within financial markets, and not the real broader economy, but on the other side let’s recall the fact that stock market values change quickly sometimes - 2025 latest example with a 19% market drop in April before an almost immediate recovery. And in general it happens certainly way more than the economy (GDP).

Therefore, also a valuable angle I think, especially that in general and many times we have it like I like to say it: 'In research there are no exact magic solutions or metrics, just various weights to variables and trade-offs'

👉 Margin Debt as % of GDP = 2.94% it does not look that troublesome

👉 not the case currently, but check for big vertical spikes into local tops like before = a pattern happening before equities drawdowns (check the boxes = pun intended)

5. Margin Debt change to GDP (Y/Y, %GDP), going funky a bit now:

👉 at 0.65%, more is needed to reach troublesome signalling territory, yet to check for big vertical spikes into local tops like before = a pattern happening before equities drawdowns (check the boxes = pun intended)

6. Margin Debt as % of Real Disposable Personal Income:

👉 at 5.17%, lower than the recent 5.62% peak during the 2021 stock market mania

👉 more and a vertical spike is needed to reach troublesome signalling territory

7. Margin Debt as % of Real Disposable Personal Income + the S&P 500:

👉 relatively 'low' to the S&P 500 latest up kick

👉 to signal trouble, margin debt should kick higher and faster than the S&P 500

A final few key notes for some extra food for thought:

• given high(er) interest rates nowadays, margin debt is way more expensive than it was during the low / very close to 0% interest rates era (ZIRP) when one could so easily leverage up their investments

• behaviour wise, when speculation and mania kicks in, likely not even higher borrowing costs are a big deterrent as animal spirits can kick in (FOMO)

• all margin should not be assumed to only ‘chase upside’ - many see the market very overvalued nowadays, hence margin is to be used also to finance short selling

Bonus: recall ‘The Triple L’ via Charlie Munger, and with a wordplay & jokey vibes: Leverage does it quickly while Ladies & Liquor take longer but do the same too 😉.

Maverick’s net takeaways aka conclusions:

👉 Margin Debt current nominal historical record above $1T is clearly surpassing 2000's ~$300B, 2007's ~$400B and 2021’s $930B peaks

👉 that said, relative to market capitalisation, GDP, and real disposable personal income, it looks way less troublesome currently

👉 vertical spikes in both $ absolute amounts, and especially in % relative terms are to be monitored going forward should they get into troublesome signalling territory

All in all, as I don’t chase clicks, fear monger, do polarisation & similar ‘marketing BS’, I rely on you sharing my independent investment & economic research around your networks! Like this, the big positive externalities become the name of the game! Thank you!

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N.B. in the future, and just like with all the other Maverick Special Reports, you will get this one as well on an ad-hoc needs-based frequency. Just in case you missed the previous 6 report, you can read them here.

F.A.Q.: ‘What is your view on the market in terms of valuation?’ Deep dive on that via my future 2 distinct and materially enhanced S&P 500 reports:

✍️ S&P 500 Report: Performance, Sentiment, Seasonality, Technical Analysis (#Ed 6)

✍️ S&P 500 Report: Valuation, Fundamentals, Special Metrics & Leading Indicators (#Ed 6)

Complementary, the U.S. economy will also be covered given the interconnectedness between the real economy and the financial markets - that is Maverick Macro-Finance!

✍️ The State of the U.S. Economy in 75 Charts (4th edition)

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Have a great day! And never forget, keep compounding: family, friends, hobbies, community, work, independence, capital, knowledge, research and mindset!

With respect,

Mav 👋 🤝

the U.S. debt pile has been, is and will be quite a topic going forward. While it is an important issue, one that definitely needs to be addressed, my take here will focus that for now it is not as dramatic as the media and many economists claim it to be.

The theme is naturally complex, yet in just 10 charts I will ‘say’ 10,000 words or more!

Table of contents:

📊 Have other developed countries with high debt done it before?

📊 The U.S. debt case - key question: a Revenue or a Spending problem?

💡 Solutions & food for thought - Maverick charts you rarely see!

📊 Have other developed countries with high debt done it before? 📊

1. First of all, yes and many! Just check the recent history European public debt reduction episodes - off the charts given both magnitude & how fast:

👉 Greece in 5 years slashed almost 60%, Ireland in 11 years

👉 Cyprus in 5 years with 50%, Belgium in 12 years

So, if it was in these 9 cases, why not the U.S.? Not easy at all, but feasible I believe! At least we cleared that one out! Way more on that below as we progress further!

Bonus: I personally asked on Twitter/X last week Danielle DiMartino Booth (former adviser to the president of the Dallas Fed) about any real reason(s) why U.S. could not do an European style debt reduction? Below her valuable feedback:

Thanked her naturally for her take, and added the note it is also in a way what Buffett was saying in other words:

Fresh from Buffett via yesterday’s Berkshire's 2025 annual shareholder meeting:

"I wouldn't want the job of trying to correct what's going on in revenue & expenditures of the United States with roughly a 7% gap, when probably a 3% gap is sustainable. And the further away you get from that, the more you get to where the uncontrollable begins … It's a job I don't want, but it's a job I think should be done and Congress does not seem good at doing it."

📊 The U.S. debt case - key question: a Revenue or a Spending problem? 📊

Let’s do a walkthrough of the US debt step by step, and then at the end show you charts on the topic that you rarely see … which also sends the main message!

U.S. General Government Total Debt (blue, 000s) & Recessions (grey) since 1965:

👉 $35 trillion as of the end of 2024, with $36.79 trillion the latest in April

👉 has been going up a lot starting with the 2000s, and especially once we had the 2007-2009 GFC recession, and then going parabolic since the 2020 Covid pandemic as fiscal stimulus is a lever to get out of a recession

U.S. Government Debt as % of GDP (yellow) & Recessions (grey) since 1965 (total $ amounts is the most basic way to show debt levels, so as % of GDP = an improvement)

👉 developed economies are carry higher debt burdens than others, with an average debt-to-GDP ratio of 110%, compared to 74% for emerging and developing economies.

👉 U.S. at 121.85% is definitely high and ranks #8 from the IMF’s WEO 186 countries

Combining the 2 charts above for an initial decent overview as we keep building here: U.S. debt (blue, L, 000s) and as % of GDP (yellow, R, %) & Recessions (grey) since 1965

👉 one major direction and that is up for both as we expected

👉 though note that as a % of GDP (yellow) it has been going DOWN since the 2020 Covid peak at 132.85% (since 2023 going back up)

A key question is: does the U.S. have a Revenue problem or a Spending one? Charting: U.S. Federal Government Total Expenditures (red dotted, 000000s) & Receipts (green)

👉 the bad news: they decoupled materially starting with the 2000s, the 2007-2009 GFC created the first big gap, while the 2020 - 2021 Covid made it for a huge gap (between 2015-2020 note it was quite decent, could have become a balanced budget)

👉 the good news: Revenue is there and growing well, hence the U.S. does NOT have a Revenue problem, but a big spending one (also like other countries & couples lol 😉)

Curious how are the U.S. federal expenditure doing in 2025 vs the previous 2 years?

👉 higher … I’ll update this chart in my next extensive research on the U.S. economy

Generally, a revenue problem is harder to engineer and address than a spending one: you have way more control and quicker to act upon on the latter than on the former. Issue is that is a statement rather valid in the private sector than the government one.

💡 Solutions & food for thought - Maverick charts you rarely see! 💡

What happens at high debt levels is that the higher it gets, the harder it is to fix it in a manner minimizing economic pain & avoiding a severe recession and unemployment. Kicking the can down the road ‘works’ .. until ugly deleveraging (not orderly and not gradual) is necessary as debt levels become unsustainably high relative to income.

What are the 4 main intertwined ways one can reduce debt aka deleverage?

• Defaulting on its debt and/or debt restructuring is the most painful one given how deflationary that is with a recession and high unemployment basically a given - it would also take a lot of time to get back to growth / potential GDP

• Austerity via big spending cuts & savings via rising taxes are also ugly given how deflationary and detrimental are to growth (corporate capex & consumer spending)

• Wealth transfers (from the wealthy to the less wealthy): you do that too much, and investment and growth will suffer … though some can be helpful overall

• Debt monetization (QE central bank "printing money") & lower interest rates: stimulative for the economy (growth, higher revenues) though inflationary

1. A “beautiful deleveraging” has to be the goal and approach:

“A “beautiful deleveraging” happens when the four levers are moved in a balanced way so as to reduce intolerable shocks and produce positive growth with falling debt burdens and acceptable inflation. More specifically, deleveragings become beautiful when there is enough stimulation (i.e., through “printing of money”/debt monetization and currency devaluation) to offset the deflationary deleveraging forces (austerity/defaults) and bring the nominal growth rate above the nominal interest rate—but not so much stimulation that inflation is accelerated, the currency is devaluated, and a new debt bubble arises.” Ray Dalio

Highlighting ‘Bring the nominal growth rate above the nominal interest rate’:

• Nominal Growth (GDP) above Interest Rates (cost of funding) is one key indicator for assessing U.S. debt sustainability - a hallmark of a ‘beautiful deleveraging’ given that it allows the debt burden to shrink relative to income as the economy grows

• also the subject of the following charts that you rarely see (as mentioned above). They were also part of an online course offered by the IMF which I did more than 10 years ago, called ‘Debt Sustainability Analysis (DSA)’ with their overall framework. Finally, after many years I make use of that course, and especially do my own charts with my conditional coloring and all (‘art work’ is a key part of the job basically 😉):

Chart = 10-year Treasury Yield (R) minus Nominal GDP Growth (G) as Red & Green bars and areas, and the U.S. debt as % of GDP (yellow line) since 1965

👉 when R < G (green bars & shading in the chart) = GOOD: economic growth is outpacing the interest rate the government is paying to raise debt, which is a sign that government spending is driving economic growth effectively. Meanwhile, increased tax revenue from a growing economy also helps sustain or reduce the national debt burden. As an example, after the 2008 financial crisis, the low interest rate environment that lasted for 8 years allowed the U.S. government to borrow at a lower cost while the economy continued to recover, preventing the debt-to-GDP ratio from entering a vicious upward cycle, at times the ratio even went down - overall, an example of a nice orderly and gradual adjustment

👉 when R > G (red bars & shading in the chart) = BAD: government’s borrowing costs are higher than the rate at which the economy is growing. With high interest expenses, the debt burden swells and can even result in a self-reinforcing debt spiral. An example is the 1980s when then Fed chairman Paul Volcker had to raise interest rates aggressively to curb inflation, which pushed interest rates above economic growth causing the national debt-to-GDP ratio to climb and creating significant fiscal pressure - an example of a hard decision that had to be made versus a more ideal approach via an orderly & gradual adjustment

As of the end of 2024 (like in the chart), R < G = GOOD:

• 10-year Treasury yield was at 4.5%, and U.S. nominal GDP growth stands at 5.0%

• this means that we still have a negative spread, hence green bars and shading

• under this mix, the gap between the two indicators is not expanding, indicating that for now the U.S. debt has not fallen into a dangerous vicious cycle

Bonus chart: the exact same chart upgraded with with Recessions as grey bars:

👉 when recessions come, higher Debt/GDP ratio is next via fiscal spending/stimulus

N.B. as of 1st Quarter 2025 (U.S. BEA April 30th Advance Estimate), R > G = BAD:

• 10-year Treasury Yield at 4.2%, while U.S. nominal GDP growth stands at 3.5%

• this means that we have a positive spread, hence red bars and shading

• under this mix, the gap between the two indicators back again expanding, indicating that the U.S. debt really needs to be addressed

N.B. I will update these charts in my next extensive research on the U.S. economy

✍️ The State of the US Economy in 75 Charts, Edition #4 (3rd edition here)

Above I used the 10-year Treasury yield given it is a widely referenced benchmark for government borrowing costs, though let’s give that an upgrade and use the average interest rates the U.S. government pays

Chart = Average Interest Rates (R) minus Nominal GDP Growth (G) as Red & Green bars and areas, and the U.S. debt as % of GDP (yellow line) since 2000

The same interpretation as before:

• when R < G (green bars & shading in the chart) = GOOD

• when R > G (red bars & shading in the chart) = BAD

Bonus chart: the exact same chart upgraded with with Recessions as grey bars:

👉 when recessions come, higher Debt/GDP ratio is next via fiscal spending/stimulus

Maverick 2 key takeaways:

👉 looking ahead, investors should continue to keep an eye on the gap between the two indicators to monitor U.S. debt sustainability: as long as Fed policy stays accommodative, trade war does not escalate, fiscal expenditures and waste are addressed (DOGE), the job market stays good, and most importantly, the U.S. economic growth remains resilient, the U.S. debt risk should not be a cause for excessive concern

👉 All in all, when/if nominal growth (GDP) is > Bond Yields (cost of funding), that is when a "Beautiful Deleveraging" can be engineered, hence a more sustainable public debt is on the horizon

2. After a “beautiful deleveraging” was presented as an ideal solution, more nuances:

👉 basically, it is a ‘game’ of deflationary and inflationary forces that needs to be mixed properly, orderly and gradually for a decent final outcome

👉 all this to work requires a very good balancing act between the fiscal policy (U.S. government) and the monetary policy via the independent FED - currently they are not in very much sync given POTUS just the other week said (ordered rather) that the FED should cut interest rates … but yeah, not the 1st time, should be all right with the next narrative change and focus

👉 Inflating the debt away: tricky to play with as inflation can suddenly become ‘ketchup inflation’ as you can get way too much at once, and also it can feed on itself

Fresh from Buffett via yesterday’s Berkshire's 2025 annual shareholder meeting: "We still have very substantial inflation in the United States, but it's never been runaway…yet. And that's not something we want to try and experiment with, because it feeds on itself."

👉 DOGE: the idea behind this bold fiscal reform is new and excellent

• results are starting to come as inefficiencies and waste & fraud are present as expected: recall that Musk did lay off 80% of the Twitter/X workforce which given the private sector should be more efficient than the public government side: and Twitter still works, some say even better than before or let’s say, issues present, but progress has been made I would say

• now in any major restructuring (be it in a government or a corporation) there will be collateral damage where good and competent people will take a short term hit, (it sucks big time, it happened to me personally also), yet those will find a way also sooner or later somewhere else

👉 lowering taxes is often very good idea with a net benefit (boosting growth G)

👉 deregulation, innovation, efficiency & political gridlock should be in focus in order for growth (G) to be there and allow room for lower debt

👉 cut spending / austerity:

• this is a path the U.S. is very foreign of, a way that was not taken for decades now, but rather the opposite: every recession was addressed by higher and Q.E. …

• the crux of the issue is … politics! The name of the game is kicking the can down the road given that any austerity would mean the ones that decided on it will lose their seats in the next election cycle - maybe now as POTUS is addressing it soon in the 1st year of the presidential term could make it work … but let’s see …

All in all, there you go:

👉 the most important thing: the U.S. does not have a problem of being able to tackle this issue, though albeit tricky, a willingness one, politically specifically …

👉 Is it or will it be easy? Definitely not. ‘But why is it not easy Maverick’? Because … politics buddy! But if many European countries could do it materially in 5-12 years as those 9 examples from the 1st chart, then U.S. can also ... also in Europe losing the next elections was/is always an issue which is the main crux of the issue everywhere

👉 I do not think the economic structure is that different: US does not have such a big revenue/income problem, but a spending one ... European countries have/had bigger revenue/income issues overall given lower growth or no growth at all …

👉 the U.S. economy is very fluid & flexible, the human and intellectual capital is very high, and it attracts the highest hungry and talented people on the planet. All that wealth there will not just fly or disappear out of the blue …

👉 even if there is a recession (which happens every 6-8 years since WW2), the U.S. will come out of it stronger just like it did after the 2007-2009 Global Financial Crisis (the 2nd worst since the Great Depression from the 1930s) - recall that a recession brings lower stock prices, many opportunities to buy value/quality at discounted prices

👉 way more on the U.S. economy via my dedicated and extensive research on it:

✍️ The State of the US Economy in 75 Charts, Edition #4 (3rd edition here)

Maverick overall simple ‘algo’:

• government debt issue needs to be addressed? Yes, definitely!

• is the current state dramatic? No!

• will there be a solution one way or the other? Yes!

Long U.S. and many other countries where investing opportunities are always there! Many of them I will cover in detail in the future, stay tuned!

Research is NOT behind a paywall and NO pesky ads here unlike most other places!

Did you enjoy this special report? Found it interesting, saving you time and getting valuable insights? What would be appreciated?

Just sharing this around with like-minded people, and hitting the 🔄 & ❤️ buttons!

That’ll definitely support bringing in more & more independent investment research: from a single individual … not a corporate, bank, fund, click-baity media or so … !

Like this, the big positive externalities become the name of the game! Thank you!

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Have a great day! And never forget, keep compounding: family, friends, hobbies, community, work, capital, knowledge, research and mindset!

Mav 👋 🤝

“Compound interest is both the ultimate and biggest natural hedge!” Maverick Equity Research

P.S. if you are into piano music, there you go with another thematic recommendation for a calm and relaxing Sunday … note the 2:34 and 3:55 tempo changes! Enjoy, cheers!

first of all, 15,000 subscribers milestone reached after 2.5 years of ad-free & paywall free independent investment research delivered to 164 countries and 50 U.S. states!

Way more incoming from my side, though one thing at a time, research and quality are very time and data intensive. Quite some drafts are currently work in progress …!

Table of contents:

📊 Economic Policy Uncertainty & Corporate Bonds Spread: not kissing anymore!

📊 Why is Trump so fast pausing and entering into negotiations? ‘Bond Vigilantes’!

📊 Maverick takeaways: trade war affairs + zooming out & mindset overall

👍 Bonus charts: Bloomberg Trade Uncertainty + Google ‘Recession’ trends

🤓 Quiz: what was Apple’s FCF yield when Buffett started to buy in Q1 2016?

📊 Economic Policy Uncertainty & Corporate Bonds Spread: not kissing anymore!

5th edition of from the Maverick Special Report series aims to disconnect, zoom out and get a birds eye view on the current ‘trade war’ circus and fiasco (or however we can call it) mixed with social media on steroids full of clickbait for advertising money.

With a cool head as always, one key question is: what is a very relevant, fast and easy framework to look at the current debacle without having to go down the rabbit hole?

Not easy at all to cover those 3 key features in the same time without a very long essay. Nonetheless and as pretty much always, the solution is through a few or some more Maverick-esque sleek charts that simply say 10,000 words!

Inverted spoiler alert 1st: nope, I’m not looking at the latest tariff headlines, nor the S&P 500, Nasdaq-100, Dow Jones, nor the VIX, China, EU, gold, inflation, or bitcoin!

It is the bond market, the ‘bond vigilantes’ baby! And now, let’s get visual for that!

1. Disconnected: U.S. Economic Policy Uncertainty (EPU): Daily News Index (blue) & U.S. Investment Grade (IG) Corporate Bonds Spread (green), Recessions (grey): this 1st chart highlights a historical correlation between economic policy uncertainty and bond spreads, with synchronized peaks during financial crises and volatile periods

‘But Mav, the current period shows a huge disconnect between the 2, what the heck bro’? Yes:

👉 Policy Uncertainty ≠ Policy Outcome (more likely = quite a circus or silly show)

• after Trump won the 2nd presidential term on November 5th 2024, the EPU index started to rise given the new proposals, anticipated changes and headlines about fiscal shifts and tariffs (a hot topic also during Trump’s 2016-2020 1st term), and climaxed recently with the April 2nd Tariff/Liberation debacle

• the EPU went from a 82 low to a bonkers 558 and now at 543, lately going down: a big part of the spike upwards was also done given the way news ‘work’ in a social media on steroids kind of way: chasing controversy, making controversy also where there is not much the case, over-exaggerating almost everything

• policy real outcomes are not clear at all as Trump backpedalled lately, paused, entered negotiations, then again with the typical verbal rhetoric, back & forth …

👉 IG spreads did react from the 77 (basis points) low to 121 and currently at 114 = a jump, but by far major, and lately went actually down (note also: it went up from the lowest level in more than 20 years, arguably it was ‘too’ low anyway)

👉 Corporate Fundamentals: corporate balance sheets are still strong and a lot of the refinancing activity happened especially in 2024, hence low current credit risk overall

👉 Liquidity and Central Bank policies: 100 bps of Fed rate cuts happened in 2024 and overall ample liquidity which suppress risk premiums even as uncertainty rises

2. Disconnected: U.S. Economic Policy Uncertainty (EPU): Daily News Index (blue) & U.S. High Yield (HY) Corporate Bonds Spread (green), Recessions (grey): this 2nd chart has the same logic with the 1st one, just looking here at the naturally more sensible & responsive high-yield (HY) corporate bonds spread

👉 HY spreads did react from the 259 (basis points) low to 461 and currently at 409 = a jump, but by far major, and lately went actually down (note also: it went up from the lowest level in more than 20 years, arguably it was ‘too’ low anyway)

👉 Corporate Fundamentals: same message as before, with the key note that the refinancing in 2024 were done in particular from the high-yield (HY) corporate issuers, which makes for a lower current credit risk overall

Overall, the historical pattern VS the current environment:

• Normal cycle: rising EPU → higher risk premiums → wider spreads

• 2025 outlier: EPU spike did not cause similar spreads widening due to solid fundamentals, liquidity and huge ambiguity - how much is it real and how much in some ways a show given that we are just 7% down (S&P 500) from the 2nd of April Trump Liberation/Tariff day

📊 Why is Trump so fast pausing and entering into negotiations? ‘Bond Vigilantes’!

I mentioned above that Trump backpedalled lately, paused, entered negotiations, and now even blaming the FED for not cutting rates … why did he backpedal so quickly after the mighty 2nd of April ‘Liberation/Tariff day’ which was just 2 weeks ago?

Before the rationale, recall my April 5th tweet which was exactly the playbook that happened right after: negotiations, kick the can down the road, blame the FED …

3. Yes, the stock market, other nations response & other variables, but mainly again the bond market, the ‘bond vigilantes’ baby! Let’s get visual also for that!

👉 especially the longer 10-year and 30-year U.S. government bond yields reacted higher, and they do carry a big stick - the ‘bond vigilantes’ were on and they showed the stick clearly to the U.S. government and their tariff war implementation

4. Stock market in action - let’s get visual also for that!

👉 S&P 500 (blue), Nasdaq-100 (orange) and the Dow Jones all went down materially after the 2nd of April ‘Liberation/Tariff day’ … and volatility got very high and still is!

Fun and key fact from my side: on balance, the bond market is smarter than the stock market - yes, I admit that easily despite as the name says my focus is on equities, hence I’m looking many times at the bond market!

Overall, Trump going deeper now into the negotiations route is a positive aspect! Were all these threats & decisions on trade policy needed just to be able to negotiate? I highly doubt so, U.S. is the U.S. and they could have entered negotiations (even with the upper hand) without creating a mess (a big one, but not a very big one for now) in both the financial markets & the real economy.

📊 Maverick takeaways: trade war affairs + zooming out & mindset overall

Maverick current state of the trade war affairs takeaway in simple words:

👉 the name of the game & bonds pricing is heavily denoted by a "wait-and-see" approach to real trade policy outcomes, and the real effects down the road

👉 does it mean everything is fine and we are coasting smoothly forward? No! Is volatility here to stay? Very likely yes, and for the next months or even entire year

👉 though despite the news headlines, both current stability and expected stability (via bonds spreads, chart 1 & 2) is present and the base case scenario

👉 I give credit and put trust into the bond market than any media coverage out there

👉 in other words, until bond spreads (green line, chart 1 & 2) goes parabolic, there is no big drama or worry (except in the media space to chase views for ad money)!

Maverick takeaway via zooming out and mindset overall:

Issues were, are and will always be present! Being skeptical is great and needed, but one cannot invest, have a growth mindset, do serious research if always negative. So no bear-porn 24/7 here, no doom & gloom, no fear-mongering, no everything given a negative or controversial spin … stir the pot … .

And yes, overall, I am a realist-optimist! The way humanity and economies evolved exponentially especially in the last 100 years with the Industrial Revolution in the West, and as well the momentum behind the re-emergence of Asia is off the charts! (one day, I’ll do an extensive research piece exactly on this topic via Maverick charts!)

I don’t see us stopping here at all! Setbacks yes, but upwards & onwards for the win!

In case you missed the 2nd ‘Charts of the Week’ edition:

✍️ Maverick Charts of the Week #2: Charts Off the Charts ... Though Back to Breakeven!

👍 Bonus charts: Bloomberg Trade Uncertainty + Google ‘Recession’ trends

5. Bloomberg also has a great Trade Policy Uncertainty index

👉 while it dropped a bit recently like the EPU from above, trade certainty remains a very distant wish now, and like the EPU I see it not cooling off on the short-term

👉 I am subjective here, but I like my EPU and Bond spreads visual way more: it is more insightful as I can connect the dots from the trade uncertainty to the finance world via the bond market, and from there generate real insights and takeaways

6. U.S. 'Recession' via Google trends

👉 not far from 2020 Covid levels

👉 way lower than in 2022 - the most anticipated recession ever that never came ...

👉 higher than 2008 Lehman bankruptcy, but note the impact of the online space: social media algos, news and headlines way more nowadays than back then ...

Way more on the U.S. economy with a view on both the short and long-term via my dedicated report which is work in progress and coming with further improvements!

• 4th edition quick preview: current tariffs game is not fun, high stakes and they point to a combo of higher inflation + lower growth, hence a stagflation scenario.

• you can read as reference the previous edition from June 2024:

✍️ The State of the US Economy in 75 Charts, Edition #3

👍 Quiz: what was Apple’s Free Cash Flow (FCF) yield when Buffett started to buy the stock in Q1 2016? (Free Cash Flow yield defined as FCF/Enterprise Value)

First of all, give it a mental guess! Secondly, give your best shot via my dedicated poll!

Third of all, vote & check the distribution of answers from my Sunday Twitter/X poll: you get a decent guess before I provide the answer & chart via my next research piece:

✍️ Maverick Special Report #6: Big Volatility & Drawdowns = Juicy Returns which will cover the practical aspects on how can uncertainty, volatility and drawdowns be seen not as a threat, but as an opportunity! Counterintuitive for some, but it works!

Research is NOT behind a paywall and NO pesky ads here unlike most other places!

Did you enjoy this special report? Found it interesting, saving you time and getting valuable insights? What would be appreciated?

Just sharing this around with like-minded people, and hitting the 🔄 & ❤️ buttons! That’ll definitely support bringing in more & more independent investment research: from a single individual … not a bank, fund, click-baity media or so … !

Like this, the big positive externalities become the name of the game! Thank you!

Share

Have a great day! And never forget, keep compounding: family, friends, hobbies, community, work, capital, knowledge, research and mindset!

Mav 👋 🤝

“Compound interest is both the ultimate and biggest natural hedge!” Maverick Equity Research

first of all, welcome to the +1,000 new inquisitive minds that subscribed in 2025 to this publication doing independent economic and investment research! Currently delivered to 160 countries and 50 U.S. states to a smooth group of +13,200 people!

2025 research is work in progress, many ideas with a focus on quality over quantity! The next extensive research will cover key topics via sleek visuals for 2025 & beyond:

✍️ Top 50 Maverick Charts to Watch in 2025 & Beyond! ✍️

Until then, the 4th edition from the ‘Maverick Special Report’ series is dedicated to Berkshire Hathaway which just reported its 2024 Annual Report and its 4th-quarter earnings, alongside the renowned letter from the Chairman and CEO Warren Buffett.

My insights & highlights will cover the much debated Buffet’s cash pile, or better said 'Berkshire’s STASHaway', and many other key and useful data points that we can all get!

Report structure for a clear and concise reading:

📊 Performance: $1 trillion and outperforming

📊 Cash pile: heads one wins, tails one wins! Optionality! Keep compounding!

📊 Stock Buybacks: thank you, but no at these prices, not for now

📊 Outlook & Focus: net seller, opportunities, valuation, size issue, U.S. focus

👍 Bonus: Taxes, CEO transition, a message to Washington

Delivery is as always, via the typical Maverick sleek visuals which say 10,000 words! That is because research means data and facts first, opinions only after!

📊 Performance: $1 trillion and outperforming 📊

👉 Berkshire reached in 2024 the $1 TRILLION market capitalisation for the 1st time ever with a current $1 trillion and $32 million which is about the all-time high!

👉 also the 1st company ever to reach 1 trillion outside of the technology sector!

👉 how long did it take? 44 years, 5 months, and 13 days! While Zuckerberg was the fastest with Meta/Facebook with 9 years, 1 month, 10 days, in general, I prefer the slower & steadier yet solid way, than the yes/no focus on any single company

What about Berkshire and the S&P 500, aka ‘the market’? Many did criticise Buffett for not managing to outperform the S&P 500 index, yet not much coverage on how he did in 2024, the last 3 years, or the last 5 years: outperformance despite a value driven portfolio, and overall a rather conservative approach (high cash position, more below)!

👉 2024: 27.09% for Berkshire (green), 24.89% for the S&P 500 (blue)

👉 last 3 years: 52.08% for Berkshire (green), 44.37% for the S&P 500 (blue)

👉 last 5 years: 109.82% for Berkshire (green), 92.05% for the S&P 500 (blue)

👉 Revenues reached $371.4 billion, up from $364.5 billion the prior year

👉 record Operating Earnings of $47.4 billions despite more than half (53%) of the company's operating businesses reporting lower earnings: "In 2024, Berkshire did better than I expected though 53% of our 189 operating businesses reported a decline in earnings,"

📊 Cash pile: heads one wins, tails one wins! Optionality! Keep compounding! 📊

👉 cash pile = record $325 billion in 2024 from $167 in 2023, an almost doubling is the biggie - yielding around $12 billion annually in a risk-free fashion: "We were aided by a predictable large gain in investment income as Treasury Bill yields improved and we substantially increased our holdings of these highly-liquid short-term securities."

👉 contrary to many headlines on the significance of this record cash pile: Buffett is NOT ‘forecasting’ a recession or a market crash, he is not market timing, he is not making some ‘macro’ bet … he said he is not doing that many times!

So, ‘what is he doing Mav?’? Just business as usual, no panic, just a ‘value’ bet:

👉 looking for value, cheap high quality businesses via a risk & return lens - when valuations are high, he rather sells hence taking profits than buying new businesses

👉 after the era of low interest rates, also cash (treasury bills) compounds now at +4%

👉 hence, Buffett is like a cat, no matter what will happen, landing on top & smiling = taking profits and building a huge cash large pile which compounds = heads he wins, tail he wins ... keep compounding! Basically doing the ‘T-bill & Chill’ strategy ...

👉 +Berkshire gets optionality via that cash: buy undervalued companies that they will find or buy the same should we have a correction/recession

👉 note: cash went down during the 2007-2009 Global Financial Crisis as Buffett was buying quality businesses for dirt cheap prices - waited & capitalised properly!

👉 if we get a recession (reminder: sooner or later it will happen, it is just the basic 101 business cycle), what do you think Buffett will do? Same thing again!

Offense and Defense in the same time and at its very best:

• Defense = no/low emotional stress which is a big factor in investing

• Offense = that defense gives room to one to make the best of incoming opportunities, and all that while being covered from the downside

As the old adage says, ‘watch the downside, the upside will take care of itself!’

Overall, I call this the compounding/getting paid to wait ‘T-bill & Chill’ ‘T-bill & Wait’ strategy: all while hunting for opportunities that always come along sooner or later ... in other words, have a growing war chest waiting to swing at an incoming fat pitch!

Specifically, the cash position breakdown via the balance sheet:

👉 $286.5 billion in U.S. Treasury Bills

👉 $44.3 billion in the insurance and other businesses

👉 $3.4 billion in the Railroad, Utilities and Energy business

Moving further, let’s look at Buffett's cash pile as a % proportion of total assets:

👉 highest level in +30 years at 28.6% currently

👉 cash pile build-up happened nicely before both the 2001 and 2007-2009 recessions, yet from the moment the cash peaked, it took 1-2 years until the recession came …

👉 hence to me that is not short term market timing, but a question of valuation overall, opportunities to be found, very diligent on capital allocation via a strict risk & return lens, and that is value investing!

👉 we could say though he is doing ‘value/valuation timing’ where patience is key! It could be 3 months, 6, 12, 24 or 3 years until the price will mean a big opportunity, and that is because it is almsot always like this: ‘Price is what you pay, Value is what you get!’

👉 the idea is NOT to time a recession / market correction, but to be in a position that no matter what happens, one will be good anyway … that is key in investing, not short term gains, YOLO, FOMO and all that … that is fun and exciting, but in the very vast majority of cases unsustainable …

2 rare data points on the treasuries holdings:

👉 Buffett = the new FED in terms of treasuries holdings? Buffett holds now more US Treasury Bills than the US Federal Reserve ...

• Buffett own $325 Billion = around 5% of all T-Bills issued to the public … VS the Fed owning $195 Billion and tapering as expected …

👉 Berkshire's T-bill holdings and the 2024 U.S. budget deficit:

• equal to 16% of the entire deficit

Overall, recall Buffet’s old priceless mantra: "Cash combined with courage in a crisis is priceless." & "Only when the tide goes out do you discover who's been swimming naked."

📊 Stock Buybacks: thank you, but no at these prices, not for now 📊

👉 the great returns lately from the Berkshire stock (and the market overall) really made Buffett wonder about valuation: after buying back his own stock materially since the 2020 covid times, lately no stock buybacks … $0 of stock in Q4 2024 and marking the 2nd straight quarter without any buybacks

👉 that is a clear sign that it would be a capital allocation decision that would NOT bring further value to shareholders - unwilling to pay the highest multiple to book value the stock has traded at in over a decade

👉 in other words, Berkshire stock is either fairly valued or overvalued, and rather use the cash to buy treasuries and keep compounding via the risk free way - cash at more than 4% return + plus the potential for future acquisitions (optionality value) means he likely values that mix more than the current Berkshire stock itself

"The math isn't complicated: When the share count goes down, your interest in our many businesses goes up." … "... IF repurchases are made at VALUE-ACCRETIVE prices."

📊 Outlook & Focus: net seller, opportunities, valuation, size issue, U.S. focus 📊

👉 Berkshire has been a net seller of equity securities for 9 straight quarters

👉 notice the material buys made during the 2022 bear market, patience is key!

👉 before drawing the wrong take-away, Buffett still owns a lot of equities, a great majority: marketable securities went down, yet the private equities and their related value increased and remans far greater than the value of the listed stocks

In terms of new buys, be it businesses entirely or fractions:

👉 entire great businesses very seldom come along … naturally …

👉 yet, listed stocks very occasionally sell at bargain prices which is the takeaway: patience, patience and patience … and opportunity will come!

👉 ‘Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities’. On this aspect, recall also Charlie Munger’s complementary key note:

"People are trying to be smart - all I'm trying to do is not to be idiotic, but it's harder than most people think. It’s remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."

👉 recall now also the 2 core notes from Berkshire’s annual meeting from May 2024: “I don’t mind at all, under current conditions, building the cash position” ... “When I look at the alternative of what’s available in the equity markets and I look at the composition of what’s going on in the world, we find it quite attractive.”

The general take-away for me is similar for both the more macro & more micro level:

• the market overall is richly valued or even over-valued - therefore, currently it is rather easier to find opportunities to book profits by selling than new investments

• in 2024, the S&P 500 was up 23.3%, and booked 2 years in a row with +20% returns - last time that happened? 1998! Hence, we have historically speaking a very strong bull market, yet Buffett does not buy his own stock … valuation baby!

On the general market valuation, the 6th edition of my S&P 500 Report is currently work in progress: the focus is on valuation, earnings, fundaments & special metrics. Before the new improved editions comes out, you can check the previous one:

✍️ S&P 500 Report: Valuation, Earnings & Fundamentals + Special Metrics #Ed 5

• when the market is running rather hot, any given decent single stock is going to be more expensive than usual - recall here the aphorism "A rising tide lifts all boats"

On this aspect, I will cover under-covered, smaller and medium sized stocks with a focus on the U.S., Switzerland, Canada and Europe via the dedicated section:

✍️ Full Equity Research will start in 2025, stay tuned!

👉 Buffett reminding about the size issue - size matters and in investing it can become a drawback: he cannot buy small, not even many medium-sized companies, cannot make big sales, exits, buy again, sometimes a year is needed to invest or divest an investment. In other words, value is to be found in smaller stocks, just not for a giant like Berkshire, while naturally the very vast of investors do not have this issue.

👉 Buffett reassuring shareholders that the focus will be kept on U.S. equities

👍 Bonus: Taxes, CEO transition, a message to Washington 👍

Taxes:

👉 Berkshire paid in 2024 $26.8 billion in taxes = 5% of ALL U.S. corporate taxes, and also the most any individual company has ever paid to the U.S. government

👉 $1 million check sent every 20 minutes to the Treasury, and still would not have made it for the entire tax bill in 2024 … let that one sink in!

CEO transition - communication, culture & duty going forward:

A message to Washington:

👉 Buffett urged Washington to spend money “wisely” and support those who draw the “short straws in life.” A call for a “stable currency“ was made also as “paper money can see its value evaporate if fiscal folly prevails“.

👉 one can be republican, democrat, independent … one can agree or not with the current government measures & ways it is done, but one cannot simply ignore the budget deficit issue, or even worse, add or double down on it forever …

👉 how to end the U.S. deficit in 1 go, nothing to add on this one from my side:

Did you enjoy this special report? Found it interesting, saving you time and getting valuable insights? What would be appreciated?

Sharing this around with like-minded people + hitting the 🔄 & ❤️ buttons are key!

That will boost bringing in way more independent economic & investment research! Like this, the big positive externalities become the name of the game! Thank you!

Share

Subscribe now

Have a great Sunday and next week! And do not forget, keep compounding: friends, capital, community, knowledge, research and mindset!

Mav 👋 🤝

“Compound interest is both the ultimate and biggest natural hedge!” Maverick Equity Research

P.S. in case you missed the previous ‘Maverick Food For Thought’ 3 editions:

✍️ Maverick Special Report #3: U.S. Presidency - Does It Really & Deeply Matter?

✍️ Maverick Special Report #2: Value vs Growth ... or ... Value & Growth?

✍️ Maverick Special Report #1: Zooming Out via 100+ Years Charts = Leveraging Deep History to Navigate the Future

P.S. also my latest from the ‘Education’ series:

✍️ Who Is On Your Team in 2025 And Beyond? Maverick Principles & Food For Thought #3

there you go with my independent, non-partisan, unbiased, evidence-based take on the U.S. presidency. This approach is UN-emotional, goes against any labeling, polarisation for clicks & views for ad-money which are very prevalent nowadays.

Delivery: via the typical Maverick-esque fashion, via charts that say 10,000 words! Why? ‘If you can't show it via a chart, then it is very likely not true or an empty opinion. Work is a prerequisite for opinions: show me your data and work first, opinions I hear all day from everybody, then we talk and constructively all benefit! Belief is an enemy of knowledge, data & facts counter that in order not to fall into the natural urge to be right, but rather to be closer to the truth. Knowledge is power!’

One visual you’ll see took Twitter/X by storm last week and registered +200,000 views!

In investing and finance, there are many ‘zealots’: value, deep value, growth, hyper growth, GARP, systematic, quant, technical, fundamental … yet those zealots are tiny in comparison with the echo chambers and confirmation bias that politics exhibit - and from there, polarisations, extremes and radicalistic views are not far.

Hence, this should ad you value by ‘just’ taking things as they are, not as I or anyone wishes, and from there derive forward looking logical insights. While definitely there are many nuances on very complex topics like this, overall logic has to beat emotions.

It is enough that for the personal life, it can get quite different right? 😉

Doing independent investment research is quite a rare bird, doing truly independent investment research, even more so! Economic and Investment Research should never be about personally embracing or not any political candidate or party!

This will be an evergreen piece - it will serve as a benchmark in 4 years time also, and the same for the next many elections cycles!

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Report structure, 4 parts - Macro to Micro & Micro to Macro + takeaways + bonus:

📊 For Investing: Zoom Out and Always Forward Looking

📊 For Short term, Tactical, Trading, Special Situations, YOLO/FOMO

📊 For the Economy

📊 For the Sovereign Individual

👍 Maverick Food for Thought & Takeaways

👍 Bonus: Maverick Mindset Playbook for Investing but also in General

📊 For Investing: Zoom Out and Always Forward Looking 📊

Maverick punch line to begin with: whoever holds the presidency in any country takes way more credit when things are good, and way more the blame when things are bad! A major asymmetry is present pretty much all the time!

First of all, let’s take the last 2 presidential cycles and the S&P 500:

👉 67.53% return during the 2017-2021 Trump presidency

👉 58.06% return during the 2021-present Biden presidency - add a good year-end with a Christmas rally + January new money flows (as I wrote here in January 2023) and we can be above 60% as well and even closer match the previous

N.B. bonus stats since the last 4 election cycles: +675% since 2008, +400% since 2012, +207% since 2016, +81% since 2020

Second of all, zooming out with the S&P 500 and Down Jones since the 2009 bottom:

👉 Dow Jones from 6,500 to +44,400 last week … for the 1st time in history

👉 S&P 500 from 666 to +6,000 last week … also for the 1st time in history

Let that one sink in … and … bring the sink if you wish …! 😉

Long the stock market = Long owning cash flow = Long the economy = Long humanity fixing problems, long humanity making strides = Long society … !

Third of all, zooming out a bit further with 40 years of S&P 500 yearly returns (price return, not total) recessions and drawdowns:

👉 not nice and smooth, ups and downs, but we get paid to stomach volatility

👉 and not because we voted for X or Y, neither because X or Y is president

Making the big case with a big zoom out, S&P 500 and Presidents’ Parties since 1945 via a very simple message: investing wise, I would not pay too much attention to the circus of politics. Were you afraid of any from the duo ‘KK’ or ‘TTT’? Namely:

👉 ‘Komrad’ Kamala? (KK)

👉 Trump The ‘Terrible’? (TTT)

No need to! The stock market tends to rise no matter who sleeps at the White House, there is no distinct relationship with any president or party. What is quite sure is that political events have a short shelf life in the financial markets!

Now let’s transition from Maverick visuals to Maverick $ numbers, namely:

👉 $45,000 invested 30 years ago via the simple S&P 500 = $1,001,653, so millionaire

👉 adding $250/500/750/1,000 a month would have been way bigger or faster ... I will make some simple simulations like these and visualise them one day …

Casual Maverick reminder:

• how many could stick to a simple recipe like this?

• how many sold given that ‘There’s Always A Reason To Sell’ (see chart from below)

Voice of the narrator: not many and many ...

Last 70 years, $1,000 invested since 1953 depending on which party held presidency:

👉 peanuts results invested only when democrats or republicans

👉 ∼$1.6 million if invested the entire time, which ain’t peanuts 😉!

N.B. invested when a Democrat is running is just a bit better, overall irrelevant, hence investing mainly on the US presidency and party = a fool's game

Recall my mantra: “Compound interest is both the ultimate and biggest natural hedge!”.

Recall Charlie Munger: “The first rule of compounding: never interrupt it unnecessarily”.

One more to show how little Presidencies matter for the stock market: how much revenue does the S&P 500 generate internally in the U.S. ?

👉 No, it is not 80-90%, but 59% … 41% international

👉 how much of the 41% from abroad has to do with the Presidency? ‘Peanuts’ no?

What about other markets not just the US? Business has no borders:

👉 publicly traded companies in the U.K., Europe and Japan generate more than half of their revenue from abroad - US with the 41% mentioned and EM with 36%

👉 there are no borders in business, we are inter-connected in a globalised world, hence particular presidencies don’t matter much … except for headlines & emotions …

Politics covered, what about Geopolitics? They are everywhere everyday even if you don’t have a TV. Visualise that also by zooming out with major historical events:

👉 ‘There’s Always A Reason To Sell’, bigger or smaller … only issue many investors sell at the bottom … plenty of empirical data on that, and I saw that myself with client data not once not twice, but many times … it is not a cliche …

Concluding on politics, geopolitics and investing:

👉 having a solid portfolio & staying invested should do well independent of any countries’ political circus and/or showmanship

👉 many geopolitical events came, many will keep coming - staying invested is not just a good idea, but actually geopolitical risk premiums should vastly be harvested

👉 A portfolio is like soap, the more one touches it, the more it shrinks!

Recall also the following:

• sovereign wealth funds, mutual funds, private banks, pension funds, Warren Buffett do not unload or load their portfolios based on any presidential election, but they focus on the business, the value creation for clients and valuation

• what counts is the success of individual companies via their products & services

• I’ll cover myself in the future very interesting businesses via the dedicated section

✍️ Full Equity Research, namely single stock deep dives with a clear structure

📊 For Short term, Tactical, Trading, Special Situations, YOLO/FOMO 📊

For these purposes, yes! US elections and short term effects are there and do matter!

1. First of all, what was the reaction of Global Assets once Trump was elected:

👉 Top 4: bitcoin, US Dollar, Magnificent 7, US Small Cap

👉 Bottom 4: Chinese equities, WTI Crude Oil, Gold and Euro Area Equities

Second of all, Trump’s 2024 win for his 2nd US Presidency begs 2 key questions:

• How did markets react in 2016 when Trump was for the 1st time elected?

• How did markets react now in 2024 when Trump was for the 2nd time elected?

Q: Is it even possible to visualise that instead of writing a book? A: Maverick can!

This visual took Twitter/X by storm and registered +200,000 views, let that sink in!

2024 vs 2016 overlay as 'The Trump Trade' until year-end: 12 forward-looking ideas via a single Maverick visual for 10,000 words (blue = current data, grey 2016 data).

➡️ S&P 500 = Up, way stronger reaction in 2024, positive now about par with 2016

➡️ US Equities vs International/RoW = Up & big initially, US outperformed by the highest amount since the GFC (rolling 5-day), about par now with 2016

➡️ Small Cap vs Large Cap = Up initially, more than 2016, now lagging

➡️ Bond Yields = Up like both the Real Yield and Breakeven Inflation - less than 2016, yet higher reflecting Trump’s inflationary program expectations

➡️ US Yield Curve = Up initially like in 2016, now less than 2016 - a steepening curve

➡️ USD = Up in real terms vs TWI (Trade Weighted Index), but less than in 2016 - USD/CNY with the US Dollar appreciating stronger now than in 2016

➡️ Gold = Down in 2024 like in 2016, something I did expect quite strongly given the high starting level of Gold now in 2024

➡️ Chinese equities = mixed initial reactions, down now in 2024 and stronger than in 2016 - tariffs … back to US-China focus and show aka ‘trade war’ circus

➡️ Bitcoin = Up and parabolic, the big winner, pricing in a lot already - $100,000 would be a big milestone - with a Christmas rally and sentiment can happen

Visual overall also a solid candidate for the 2024 U.S. post elections Chart of the Year!

👉 markets’ reaction is quite similar relative to the 2016 Trump victory, pretty much like a Trump re-run - some are even more powerful (‘Trump beta’ higher this term)

👉 the visual with the data is the most updated one possible as of November 15th - I will update you with it as we move along, especially by year end as we track the ‘overlap’ in terms of Trump policies and financial markets reaction function - I will maybe even add more assets and create 2 distinct dashboard (proposals = welcome)

The visual overlay is by year end, but what about going further 1-year ahead? Yes!

➡️ I will not comment much this zoomed out forward looking one … food for thought for you to connect further your own dots via the 12 data series I chose … enjoy!

How closely will markets evolve forward relative to 2016? Which of the 12 ideas?

We have a popular humorous maxim about history usually attributed to Mark Twain:

“History doesn’t repeat itself but it often rhymes”

N.B. naturally, economic & financial conditions are not the same as in 2016, different starting points and levels (e.g interest rates in 2016 and 2024), but you got it! In any case, it is definitely an interesting thought experiment, food for thought … . As well, no one that is sane is building an entire and solid trading thesis around one or two data points, or historical comparisons. It is the nature of the ‘game’!

P.S. on day trading, give it a hard pass, let this one really sink in from Howard Marks: ”The way I see it, day traders considered themselves successful if they bought a stock at $10 and sold at $11, bought it back the next week at $24 and sold at $25, and bought it a week later at $39 and sold at $40. If you can’t see the flaw in this— that the trader made $3 in a stock that appreciated by $30— you probably shouldn’t read the rest of this book.”

📊 For the Economy 📊

A big issue with the economy and US presidency is neither the economy per se nor the specific US president that currently resides at the White House. But it is the public perception from the citizens on aggregate on whether the economy is ”good” or ”bad” just because it is a Democrat or a Republican ruling.

I make that case via the chart below with consumer sentiment by party identification:

👉 check the big swings in sentiment from BOTH republicans and democrats as a function of: pre-pandemic, 2020 pandemic begins, Biden elected, Trump re-elected

👉 I cannot explain the swings there given that:

• they are about a 30 trillion ecosystem economy which is a slow moving giant - it does not change shape or form that fast, yet perception does, especially in our culture of information being instant

• on aggregate, the citizens’ current financial standing (job, income, wealth, consumption, affordability etc) is hard to say it shifts over night and entirely based on whomever sleeps at the White House and congress structure

• in short, the real economy isn’t what people have it, but what team they’re on - everyone likes to be on the winning team … even if it is not the best team …

• in any case, people that changed their views on the economy simply because Trump won and not Kamala, hence via a swing state of mind = ‘no bueno mi amigo’

Maverick recall: open dialogue with solid arguments between opposing viewpoints is vital to a healthy economy and democracy!

‘But Mav, you are only showing there the last 6 years, that is nothing!’. Yes, hence zooming out since 2006 and a lot has happened since back then:

👉 in general, republicans cheer louder and boo harder - what is hard to explain how could republicans ‘feel’ worse in the last 4 years vs. the 2007-2009 lows of the Great Financial Crisis (GFC) - conversely hard to understand Democrats ‘feelings’ when we corroborate it with hard fundamental data … you got the point!

Let’s add another layer by not focusing on politics exactly, but in general regarding how do Americans assess their own finances + the national economy:

👉 72% think their own finances are doing at least OK - note also how pretty constant that is, it is not as volatile as their beliefs on the political leadership

👉 yet, only 22% believe the national economy is good or excellent

Houston, we have a big big personal VS national disconnect here … let that sink in!

There you go also - the U.S. economy quarterly growth rate & recessions since 2006:

👉 we are growing now by 2.8% with the average for the period of 2.05%, and we had the trouble some periods of the 2007-2009 GFC and the 2020 Covid

👉 very hard to argue any were caused by either the Republicans or Democrats, conversely give credit to any for the very good times in between - also, it is hard to corroborate any of the periods with the consumer sentiment by party identification

👉 the problem = the immediate partisan sentiment flip is real, hence individual beliefs are not a great model for how the world works …

Going forward, independent of new policy action, they will take time to be implemented and even more to have its real effects through the economy.

For example, Fiscal policy & Monetary policy:

👉 Fiscal policy takes a long time to be decided, while once done the effects are relatively fast - Monetary policy action is quite fast with some estimates suggesting that it takes between 1 and 2 years to have its maximum planned effect

👉 there is both a clear interplay at work there, but also lagging effects - add that one is the government, one is the independent central bank and sometimes they work against each other and sometimes in the same direction, pro-cyclical: a big example on the latter is the inflation which we got after the 2020-2021 big fiscal bazooka stimulus and very loose monetary policy

Add some more, like many and deep inter-dependencies with the other countries, from neighbors to Europe to far east to China. Independently of who is running the White House, they do inherit the decisions made in the past, be it good ones or bad ones. Not only that, but past decisions have multi-lagged effects: some that are felt for 1 month, 1 year, 4, other for way longer 10, 20 years or even decades.

What is rather valid is that the US economy has proven to be very consistent and flexible over time. When hiccups show up, the recovery happens fairly fast. 2007-2009 as the Great Financial Crisis / Great Recession was the largest economic downturn since the Great Depression of the 1930s. Other than that, things were not that big and for almost 100 years that is not bad at all!

For that, check U.S. GDP since 1945 by President’s parties - no special relationship:

In other words, no single president from any party from any country can simply singlehandedly ‘break’, ‘mage great again’, ‘fix the economy’, 'kill inflation’, ‘create inflation’, impossible, it is a $30 trillion mammoth! No single variable can be the primary reason, clearly an exaggeration. If it was that simple, the solution would be also very simple. We would just have a magic wand, a cook book recipe and every single country would just apply it ‘by the book’, literally. Anybody telling you otherwise, either blinded by politics, hidden agenda or trying to brainwash.

Understanding the level of complexity is the 1st step in order not to be blinded by politics (for votes and own interests), and the path for a further better understanding of the innerworkings and many nuances. Further examples and nuances:

👉 the U.S. public debt and deficit is quite historical, it did not show up over night, neither party is fiscally responsible - food for thought going forward: which president or congress will gain votes by cutting spending? Who will take the pain during their mandate so that the next president and party only to later reap the benefits?

Maverick private sector parallel:

• many years ago I was in a relatively big bank and very close with my work to the Board of Directors, CEO and Chairman. Only for people living under a rock it was clear that without digitalisation via omni-channels in order to be the main bank for clients, the path was downfall

• However, a digital transformation project for a big and old bank with a ‘spaghetti’ of IT systems and patches, is not an easy task: it is not the IT tech part, but the costs and governance. Who wants to spend a few hundred millions that only show costs for some years, so that when the next game of thrones happens, the new guys only to reap the benefits?

• ‘Just costs under my mandate? Then not under my mandate …!’. This is an issue in any industry, government or country: interests not aligned medium-long term, and there is no real skin in the game. A big short term orientation fallacy and timing of incentives matter, we like it or not!

On the good side when it comes to the U.S. economy and the last 5 years:

👉 what about the U.S. energy independence? A net total energy exporter since 2019. Latest 2023 numbers, total energy exports exceeded total energy imports by about 7.80 quads, the largest annual margin on record!

👉 what about the fact that no recession since the most recent inflation spike, high interest rates and war in Europe? Actually no recession since 2007-2009 as we can consider 2020 Covid was rather a pause and quick restart

👉 remember 2020 Covid and the related Operation Warp Speed?

Resilience baby!

Going forward, both Trump and Kamala would have inherited all this from the past. Their proposed programs and focus were quite different: from tax policy, housing, healthcare, immigration, energy, financial regulation policy to geopolitical strategies especially with the war. Yes, they are not the same, though neither can massively re-engineer the economy. Somehow, sooner, slower, with more or less issues, it shall be good also this time around for the future.

Sure, leadership and policy matters, the society needs to see and have somebody in command, but also to internalise the following and separate what is what and when:

Recall Charlie Munger: ‘People are trying to be smart - all I'm trying to do is not to be idiotic, but it's harder than most people think.’

To conclude this section for the economy:

👉 while the economy does not change overnight the economic policy changes indeed - yet the issue is the policy change is mistaken for a new actual economic state

👉 as long as one is a realist-optimist and believes human progress will continue, societies will evolve which will all be simply reflected in asset prices - the direction is up, with ups and downs, but trending up!

Thoughts? Would love your take, maybe I’m missing some, many nuances for sure!

N.B. working now also on the 4th edition of the State of the US Economy which will come with further improvements. Until then, check the mid-year 3rd edition update:

✍️ The State of the US Economy in 75 Charts, Edition #3

📊 For The Sovereign Individual 📊

Last but not least, what about politics and the sovereign individual? In the end, each of us play a role via our various beliefs and actions that determine the nature of social structures, institutions and practices.

Digging now into the Households level with the Real Median Household Income since 1984 (median values way better than skewed averages):

👉 the usual dips with the business cycle, but clearly trending up: now close to the pre-pandemic levels … back on track, heading up …

Breaking that further for the Real Median Personal Income, also since 1984:

👉 very similar pattern … also close now to the pre-pandemic levels …

👉 on a shorter time frame, the business cycles is the business cycle, every 6-8 years we get a hiccup, and after we go back again upwards & onwards. Only ‘funny people’ always shout ‘the recession is coming’ or ‘the crash is coming’ to back their agenda, and funnily enough, just like even a broken clock is right twice a day, they will be ‘right’ also sooner or later. One can simply be certain to be ‘right’ via that shady ‘strategy’. Even more funny, it often works … for themselves, but not for people.

👉 should one vote? Definitely! How much to expect from politicians? Not much!

• some are good & decent, some mediocre, some have no clue, some are a big net positive, some a big negative, just like in every industry … they are ‘us’ in a way!

• in one of my former jobs in the headquarters of a bank, we had once a big 20% cost cutting program which all said was impossible to reach ‘without creating waves and destabilising the culture’ - and I just proposed: ‘let’s all just come to the office 4 days a week, I am confident things would still work, if not maybe even better (more rest, more focused work, less useless meetings)’ - everybody gave me the weird and long look … which proved that I was right

• same with politicians, if they would come to the office just 4 or 3 days a week would we be all worse off? I would say very likely better off …

👉 don’t be the product of the rising Negative Media for clicks/views for ads money, a phenomenon which I have witnessed going wild in the last 10 years - I have the data:

• 2022 study: since 2010, the media massively increased headlines that use fear, anger, disgust, and sadness - it has also decreased articles of neutrality and joy (no surprise that few media outlets are covering this meta point)

👉 how much time to spend with politics? Not much! It is a big opportunity cost!

• I had to leave friends behind that were spending at least 10 hours a week on politics, and that in just two 4-year cycles are more than 4,000 hours! The issue was not their political views, but their overall heavy emotions … or … toxicity: ‘Got too much time bud? Heads down, ride an Uber 10 hours/week, see you in 4 years, I’m sure you will be better off!’ - some didn’t listen, some did & thanked me later 😉, and right now they are up to way bigger things, financially & mindset …

• there is much out there to learn, do, play, experiment … especially in our age! Even doing nothing is better, not to mention more sleep, more rest which makes for more calmness, tolerance, ideas and forward looking mindset and energy

• one is better off on focusing on what one can control, which on the micro level counts a lot, while on the politics/macro level is not much, peanuts, mostly emotions

• reading, studying, listening, eating well, sleeping well, exercise, volunteering, charity, anything which is good for the close community - all these compound very well over time, and like this one is a big net positive for themselves, their close communities and also on the macro societal level

“Most people overestimate what they can do in one year and underestimate what they can do in ten years.” Bill Gates

👍 Maverick Food for Thought & Takeaways 👍

This was a long piece so that it is evergreen. It will be very valid also in the next elections, and the ones after and the ones after the after. Have it as reference!

Main highlights as food for thought and takeaways:

👉 both the economy and the stock market tend to fair well under all government configurations = a portfolio is like soap, the more one touches it, the more it shrinks! Political events have a short shelf life in the financial markets and the economy!

Chart with: Real GDP and the S&P 500 since 1947: growth/returns by government in charge, averages and % of time in power - kind of ‘says it all’!

👉 the US Economy is like a serious train, once started it has a few pauses and hiccups along the way, but it does not stop - most political regimes have not much effect on short-term economic performance (be it good or bad), though policy in aggregate has a considerable large long term effect which is mostly positive

👉 the economy’s state for people is mostly a function of their own financial and personal situation at a given time (how happy/sad) and their perception about it. It is rarely much about how it is per se - we need to focus on the medium-long term large scale background shifts, not on the entertainment of the noisy daily news & headlines

👉 investing mindset: Bears Make Headlines & Lose Money, Bulls Make Money! Investing is about the future, inherently forward-looking, hence the engrained belief is that tomorrow will be better than today. It takes an optimist to be an investor!

👉 investors of all kinds: don’t let how you feel about politics overrule how you think about investing, zooming out & logical thinking is key, while emotions are the enemy! Investing is not hard otherwise, given that compound interest does not only not care about politics, but it beats the hell out of it!

👉 volatility is your friend: I am always puzzled by how investors can be impacted by some 2-5% variability - I don’t know about you, but I rarely wake up each day with a lower variability than that

👉 short term traders need to have a very solid thesis considering many variables and nuances which change quite fast in terms of driving factors

👉 don’t expect much from politicians, don’t waste much time with it, focus on what you can control: your time, your skills, your investing, your effort, your community

👉 negativity drives online news consumption - don’t be the product of it

👉 detachment and logic is key! Seeing the world accurately and rationally is prime, particularly for me doing independent investment research - going down any political rabbit hole is a big big No Go

👉 ‘just’ taking things and data as they are, infer from there for the best insights and forward looking outcomes given the situation - detachment is easier to be said than done by anybody, but it is very important:

‘Detach, detach, detach … !‘ … and then logically … ‘Act, and make the best out of it … !‘

Going forward I am very bullish medium-to-long term on:

• the economy, consistent and fluid bringing home the goodies: products & services

• the stock market, ownership of cash flow, creator and compounder of wealth

• the start-ups, the small-medium companies, innovators and solopreneurs

• the sovereign individual: the dreamers, go getters, risk takers, the ‘crazy’ ones challenging the status quo - failure is okay when it happens, actually it is a condition for any meaningful human achievement …

"Those who keep learning, will keep rising in life!" by Charlie Munger

“If you have a zero-sum mindset, the only way to get ahead is by taking things from others. If the pie is fixed, the only way to have more pie is to take someone else's pie. But this is false. The economic pie has grown dramatically over time” by Elon Musk on value creation

“No pessimist ever discovered the secrets of the stars, or sailed to an uncharted land, or opened a new heaven to the human spirit” by Helen Keller

"There are risks and costs to a program of action, but they are far less than the long-range risks and costs of comfortable inaction." by John F. Kennedy

"Slow success builds character, fast success builds Ego" by Ratan Tata

👍 Bonus: Maverick Mindset Playbook for Investing but also in General 👍

The following are useful evergreen reminders when needed, and a list that will further keep developing as I trial & error, learn and evolve. They developed from both my former athlete days & professional finance experience. You might like it & add to it:

• play, forgive, apologise: play hard, forgive fast, and when wrong do apologise

• preparation: if you are prepared you do not panic, if not prepared, work to be prepared, keep going forward - things happen left or right, yet they turn out best for the individuals that are able to make the best out of the way things turn out - opportunity comes to the prepared mind

• goals: have structured goals, short and long term ones - many will not be reached exactly and become moving targets, but once you start your own train, it will be headed into the right direction - without goals clarity, it’ll be down to luck - luck is needed also, but usually luck shows up where conditions for it were prepared

• improving & success: question yourself, even in the best of times when you tend to forget that, yet that is the best time to do it - be your own stress test as like this when envy and critiques will come, both good and bad, they’ll not be a surprise to you and you’ll be able to separate fast which is fair & square and which are BS

• making mistakes: only people that do not work or learn never make mistakes, you learn more from your mistakes than your successes

• ‘Thank You’! being polite and grateful by just saying thank you can go a long way

• character, reputation and mistakes: character is what you really are, reputation is just what others think you are - making mistakes doesn’t mean a lack of character, they are part of developing a character - there’ll be people using your mistakes to damage your reputation, yet mostly that says more about them than about you - character and reputation do converge nicely on the medium-long term in any case

• you and others: good or bad, don’t rush and place a big label to somebody after a few interactions - you might be wrong with your initial perception - in time the true view will converge

• talent & luck: nice to have, not must to have, hard work & consistency for the win

• downside and upside: watch the downside, the upside will take care of itself

• work life balance: finding it is possible - disconnect, charge the battery, not a sprint but a marathon, find the right balance between fire and ice

• help others, give back, have an impact: in your closer community, not necessarily financially, but offer your time, expertise, learnings from mistakes, inspirational, or just listening can go a long long way, in many cases way more than money - don’t expect anything back, just pay it forward

All in all, via your energy & skills be a net positive for your community and society!

As I did not take a political side, some of you might not ‘like’ this given how controversial and emotional it is - will unsubscribe, and that is okay - while most of you will see the value exactly in that given the evidence based big picture view.

I am not catering to the audience’s wishes to what they ‘want’ to hear, nor writing to engage into controversy and polarisation, that is the ‘media’ business for clicks & views & ad money (there are no ads or sponsors here).

My research is evidence based because that is what people ‘need’ to hear - that is the value that I should bring in the end of the day - and ‘need’ is not at all in order to change one’s mind, but it is about another perspective where one does not need to agree, but to agree to disagree … and we all win like this via big positive externalities!

And this is how and where I can add value via the research that I do, and likely one reason why YOU as almost 12,000 people from across the world subscribed!

If the evidence is strong and you get a different perspective, food for thought and valuable insights, then it means I am doing a good job. You are the judge … 😉.

What would be appreciated from your side?

Just sharing this around with like-minded people, and hitting the 🔄 & ❤️ buttons! That’ll definitely support bringing in more & more independent investment research: from a single individual … not a bank, fund, nor a click-baity media company or so … ! Like this, the big positive externalities become the name of the game! Thank you!

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A general evergreen key takeaway for your investing journey:

‘Compound interest is the ‘secret sauce’ for compounding wealth over time, and that is the amazing miracle of finance. Thing is, it gets lost by many in the daily distractions of the markets: news, headlines, politics and hot takes. The ticker moving is one thing, the underlying business value is another. Just do not let moving prices on a screen and public emotions take advantage of you, but use the public markets to your advantage! Keep compounding!

Maverick Equity Research

Have a great week!

Mav 👋 🤝

P.S. in case you missed the 1st Maverick Food For Thought edition, check it out:

✍️ Maverick Food for Thought #1: Value vs Growth ... or ... Value & Growth?

starting a new series here with the 1st edition of the ‘Maverick Food for Thought’.

Big ideas & trends will be the focus, key questions & thematics for further reflection. The thought-provoking subjects will be the economy and investing, or Macro Finance. Naturally, it is where I will be less opinionated given the many nuances that these subjects carry, yet there will be my own thoughts and insights.

Frequency: ad-hoc, whenever things come along and deserve attention. As you got used to it, this is about research, not news, headlines or the latest hot takes.

Delivery: via the typical Maverick fashion, via charts that say 10,000 words!

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Report structure:

📊 Value VS Growth: Maverick Insights

👍 Maverick Food for Thought & Takeaways

📊 Value VS Growth: Maverick Insights 📊

This very first edition will be about Value VS Growth as investing styles and factors.

First of all, how did they perform in the last 20 years? Taking Vanguard index funds as proxies, specifically, Growth (blue, VUG) outperformed massively Value (green, VTV). Growth domination started around 2009 as we were getting out of the 2007-2009 Global Financial Crisis (GFC).

👉 very low interest rates helped Growth a lot as low discount rates boost the valuation of growth companies (‘duration’) way more than value (it all comes down to the magic of discounting cash flows)

👉 tech companies also making their full effect into the economy via the many efficiencies they bring across the sectors

An interesting way to see when Growth took over big time is by plotting Vanguard Growth (VUG, blue) & Value (VTV, green) relative to the market via the S&P 500 (SPY).

👉 Growth outperformance started in 2009, yet the exceptionalism in 2017, and then went parabolic as the US government and the FED deployed the bazooka stimulus during the 2020 Covid times

👉 2022 was the most anticipated recession that never came, a time when Value was catching up strongly as inflation and high interest rates showed their teeth also

👉 most recently, AI makes for another big Growth run relative to Value

A more pronounced ‘gap’, but a similar message when we also look at the Russell 1000 proxies for Growth (IWF, blue) & Value (IWD, green):

Another way to look at Value & Growth is also via Schwab’s SCHG/SCHV proxies, Large-Cap Growth / U.S. Large-Cap Value, last 10 years: recall 2017 when growth started the 1st major run while in 2023 ramping up via the new kid in town, AI boom!

You saw the last 20 years, what about zooming out further for the very big picture? Sure, almost 90 years of U.S. Value vs Growth return differences in one single visual:

👉 Value did dominate BIG time the 20th century with a 4.9% average, a period marked by many historical economic and geopolitical events

👉 about 15 years of a difficult period for value investors as growth took over ...

On this, curious for an outlook for financial market going forward? Via Vanguard:

👉 US Value, Small Caps, REITs, Global Equities (excluding US), Global equities developed markets (excluding US) in the green

👉 in the red? US growth: a lot is baked in already into the valuation, great execution and a blue sky scenario.

Do not forget, starting valuations always do matter! Price is what you pay, value is what you get! Like with everything … .

P.S. I will also cover interesting US REIT’s and small caps via the Full Equity Research section, valuations look pretty good!

👍 Maverick Food for Thought & Takeaways 👍

So, are tables turning anytime soon between Growth and Value?

👉 how about Growth keeps going as expected via the AI and lower interest rates combo, while the AI tech boom is also adopted by the more traditional value companies, hence also value to perform well. That is all the major 11 sectors that shape the S&P 500 benefit also … Heads we win, tails we win …

👉 how about going GARP (Growth at a reasonable price) style a’ la Peter Lynch? That is combining Value & Growth investing by hunting companies that exhibit strong revenue and earnings growth potential while at the same time not trading at very high valuations, case where where a lot is baked into the price already.

👉 Maverick’s way will be a mix of Value, Growth and GARP for the diversified win! Also diversifying geographically from US with a focus on Switzerland. More on that in the next ‘Maverick Food for Thought’ edition: ‘US vs International Valuation’. Independently, it all comes down to the underlying business and valuation (see below).

It is key to hunt for changes that may cause longer term shifts, but a big reliance on any single thing is not my way - the big saying in finance is that there is no free lunch, well no, diversification is a free lunch, and it is the only one I believe!

N.B. US, Swiss (and more) stocks will be covered in the Full Equity Research section.

👉 is all this Value, Growth, GARP confusing or not worth thinking about? Then simply take Charlie Munger’s mighty & simple approach which I definitely like a lot:

“All intelligent investing is value investing - acquiring more than you are paying for. You must value the business in order to value the stock.”

That is like the common denominator of all investing ways and approaches! It will never get old, it will never get out of fashion or trend … it will simply be there forever!

Buffett complementary on that one: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

What are your thoughts? What is your approach? Just comment …

Research is NOT behind a paywall and NO pesky ads here unlike most other places!

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Have a great weekend!

Mav 👋 🤝

a special today via the just published great Global Investment Returns Yearbook 2024, which across time has clearly become an authoritative guide to the historical long-run returns that any investor should now just know about, but fully immerse into it.

Now in its 25th year, the body work by Professor Paul Marsh, Dr. Mike Staunton of London Business School, and Professor Elroy Dimson of Cambridge University is a great source for the analysis of the long-term performance of global financial assets.

Specifically, it covers all the main asset categories in 35 markets. Most markets, as well as the world index have 123 years of data since 1900.

Awesome work and definitely one of my favorite reads every year!

You can read the 57 pages, and/or below you can save time via my 15 key highlights and charts, and also gain insights via my complementary personal notes. After the yearbook coverage, my 7 bonus charts and key insights that are very complementary!

Report structure and table of contents as a logical and smooth preview:

📊 Global Investment Returns Yearbook 2024 - 15 key highlights and insights

1. Switzerland investing = when ‘swissness’ is real and works

2. USA investing = the biggest and the best, though be aware of ‘success’ bias

3. How much do US stocks return to investors + how are returns distributed?

4. What about US government bonds returns to investors + the distribution?

5. The Evolution of Global Equity Markets from 1899 to 2024

6. New Economy vs Old Economy = Innovation & Disruption vs Classic players

7. What Do the Bad & the Good times (business cycle) tell global investors?

8. The Fear of the Downside and how does Downside look like exactly?

9. After the Bad and Ugly Downside Drawdowns, how do Recoveries look like?

10. US debt market by type of security

11. Default rates on US Corporate bonds

12. Going global: default rates on global Corporate bonds by bond rating

13. Key points & Bonds 101 - defaults rates, recovery rates and ultimately the most important credit loss rates

14. Countries time: Moody’s credit ratings for sovereign bonds around the world

15. Lastly on bonds, the Credit Premium: how large is the credit risk premium?

👍 Bonus: 7 long-term Maverick Charts … that say 10,000 words! 👍

1. 110 years of Inflation in one Maverick chart

2. 35 years of Inflation rate and M2 money supply growth

3. Real GDP quarterly growth rate for the last 20 years

4. Zooming out with the same GDP real quarterly growth via a 75-year time frame

5. The mighty S&P 500: 35 years of US interest rates, quarterly returns & drawdowns

6. 'US Tech is Taking Over the World Baby!'

7. 'US Semiconductors are Taking Over the World Baby!'

📊 Global Investment Returns Yearbook 2024

Before juicy charts, why are IMHO long-term time series very important and useful?

• long term historical data is the past, while investing is an uncertain forward looking endeavour, yet a rich history is a good gauge of future outcomes

• it shows how do asset classes behave in terms of risk & return across many business cycles, where in general each is caused by different factors and events

• from there we need to be aware that the structure of the economy in 1900 is not the same with the one from the 1930s, 1980s, 2000, let alone 2024 … yet human psychology in both bad times and good euphoric ones is not that different

  e.g. example of different economies in time is the banking system. I see too often many doom & gloom, fear mongering charts on Banking these days and analogies to 2007-2009: well, the today’s banking system is way more solid than back then. Additionally, the resolution mechanisms and tools that regulator have are way more and bigger. Just check how the First Republic Bank (FRC) and Silicon Valley Bank (SVB) were handled in US, and Credit Suisse (CS) in Europe … then check how much banking stocks gained since then, and also stocks in general …

• from there, making parallels and further useful inferences for the future is a judgement call based on experience, skill and other good complementary data

• long-term data across business cycles is something all types of investors & traders should be looking into heavily, be it for the short or long term, focused on stocks, bonds, macro, real estate, crypto or commodities … you name it!

• last but certainly not least, in the daily flow of news, hot takes and all the noise around (most useless imho), losing sight of the key big picture is easy, hence my post serves as how important it is to zoom out & have a ‘Maverick’ birds eye view ;)

1. 👉 Switzerland investing = when ‘swissness’ is real and works

Switzerland is a place that I rarely see across the radar of US investors especially, and still to today I cannot understand why. Maybe because the marketing and narrative is more like the Swiss culture: discreet, neutral, no hype, no YOLO, FOMO, EOMO, don’t attract much attention, privacy as a strong value & asset, and just let things work!

I really believe most investors’ portfolios should resemble the description above, and not focusing on alpha, beta, YOLO, FOMO, 10-100 baggers, showboating with results in good times, hiding the results in bad ones, hot trades, short term thinking, treating investing as a pis*ing contest relative to friends, neighbors and strangers online.

Only institutional investors have the burden and big limitation of having mandates and benchmarks, hence from there face career risk. As a retail investor, one is fully free which not many realise how big of an advantage it is!

Special situations, cheap hedging opportunities and occasional opportunistic trades have their sweet place, but overall good medium-long term investing is rather boring & smart, not the high thrill of randomly moving tickers on a screen … .

Back to Switzerland now:

The Swiss stock market traces its origins to exchanges in Geneva (1850), Zurich (1873), and Basel (1876) and it is now the world’s 7-largest equity market, accounting for 2.4% of the total world value.

Performance wise since 1900 = many bad time & business cycles, hence time tested, let’s see now what the data says in terms of real returns (after inflation is counted):

• Swiss equities: 4.5% real return (equal to the median across countries) while in recent history: 6.1% for the period 1974-2023 and 6.2% for the period 2004-2023

• Swiss Bonds: Switzerland has been the world’s best performing government bond market, with an annualized real USD return of 2.8% (it ranks 2nd in real local currency return, with an annualized return since 1900 of 2.1%), while in recent history: 3.1% for the period 1974-2023 and 2.6% for the period 2004-2023

• Swiss non-inflation: the world’s lowest 124-year inflation rate of just 2.1%

• Swiss Franc = the world’s strongest currency

I will also cover soon stocks from Switzerland via the Full Equity Research section! Swiss bonds will also be covered via ‘Model Portfolios’ that I will offer in the future!

What is the general rationale to invest in Switzerland (not just home biased countries)?

Investing channel:

• Cash flow diversification

• Currency diversification which can also act in the same time as natural hedges via the Swiss franc (CHF) for outside international investors

• Save haven / flight to safety in times of geopolitical tensions and business cycle turns for an overall more balanced, less volatile & with lower drawdowns portfolio

Economic, political and until lately, under considered but key Geopolitical reasons, specifically quite a ‘Maverick-esque’ opinion that often raises eyebrows when I say it: “In the of the day, there is only one true AAA rating country out there: SwitzerlAAAnd!”

• Neutrality, no wars, trusted by the rest of the world which was a key factor for a lot of generations after generations to accumulate and compound wealth

• Direct democracy & federalism works given the decentralized driven efficiencies

• Balanced fiscal budget

• Conservatively managing current account C/A surplus

• Low debt & low rates of inflation

• Swiss National Bank (SNB) reserves: 100% forex reserves relative to GNP, big 'mutual fund' inside tracking MSCI USA index with a 80/20 allocation between bonds & stocks (algorithmically rebalanced)

• Low taxes with loads of 🧀+⛰️+🍫

Wrapping up this section, a great time to bring a key yearbook takeaway from UBS:

“It’s only by looking at the rise and fall of various asset classes over time that you can truly understand the importance of diversification and the full value of a disciplined asset allocation approach.”

2. 👉 USA investing = the biggest and the best, though be aware of ‘success’ bias

• US = the world’s biggest economy and political power

• US = has the mighty green dollar $ as the world’s reserve currency

• US = the world’s number one oil producer

• US stock market accounts for 60.5% of total world value, which is almost 10 times as large as Japan, its closest rival; the US also has the world’s largest bond market

• This reflects the superior performance of the US economy, the large volume of IPOs, and the substantial returns from US stocks. No other market can rival this long-term accomplishment

• Though be aware that extrapolating from such a successful market can lead to “success” bias - investors can gain a skewed view about future equity returns both elsewhere and for the US itself

Going global with investing might not be a bad idea imho. Investors can diversify and potentially have a more resilient portfolio without sacrificing a lot of the returns. In investing it is very hard to increase expected returns, yet not hard to keep expected returns similar, yet reduce downside risk via lower drawdowns and volatility.

Performance wise since 1900 = many bad time & business cycles, hence time tested, let’s see now what the data says in terms of real returns (after inflation is counted):

• US equities: 6.5% real return, the highest common-currency return while in more recent history: 6.9% for the period 1974-2023 and 6.6% for the period 2004-2023

• US bonds: 1.7% real return, while in more recent history: 3.3% for the period 1974-2023 and 1.5% for the period 2004-2023 (2022 biggest bear market with the big drag, but likely looking way better going forward as the recovery is underway)

3. 👉 How much do US stocks return to investors + how are returns distributed?

• in an average year, the real return on US equities was 8.4% (the worst performance over a single year was in 1931 while the best in 1933) as the returns include reinvested dividends and are adjusted for US inflation

• the histogram shows not only the distribution of historical returns, but also the years in which returns of various magnitudes occurred!

4. 👉 What about US government bonds returns to investors + the distribution?

• In an average year, the real return on US government bonds was 2.2%. The worst

  performance was in 2022 while the best in 1982

5. 👉 The Evolution of Global Equity Markets from 1899 to 2024

• “The US equity market overtook the UK early in the 20th century and has since been the world’s dominant market, apart from a short interval at the end of the 1980s when Japan briefly became the world’s largest market. The US has regained its dominance and today comprises an astonishing 60.5% of total world capitalization.“

• “This reflects the superior performance of the US economy, the large volume of IPOs, and the substantial returns from US stocks. No other market can rival this long-term accomplishment. But this makes it dangerous to generalize from US asset returns since they exhibit “success bias.” This is why the Yearbook focuses on global returns.“

• “Russia was a large market in 1900, accounting for some 6% of world capitalization. Austria-Hungary was also large in 1900 (5% of world capitalization) and, while investors didn’t experience total losses, in real terms, it was the worst-performing equity market and the second worst-performing bond market of our 21 countries with continuous investment histories“

6. 👉 New Economy vs Old Economy = Innovation & Disruption vs Classic players via Industry weightings in the US (left) and UK (right) since 1990 to 2024:

• “In the 2015 Yearbook, we asked whether investors should focus on new industries – the emerging industries – and shun the old declining sectors. We showed that both new and old industries can reward as well as disappoint. It all depends on whether stock prices correctly embed expectations.

• For example, we noted above that, in stock-market terms, railroads have been the ultimate declining industry in the US in the period since 1900. Yet, over the last 124 years, railroad stocks have beaten the US market, and outperformed both trucking stocks & airlines since these industries emerged in the 1920s and 1930s.

• Indeed, the research in the 2015 Yearbook indicated that, if anything, investors may have placed too high an initial value on new technologies, overvaluing the new and undervaluing the old. We showed that an industry value-rotation strategy helped lean against this tendency and generated superior returns.”

7. 👉 What Do the Bad & the Good times (business cycle) tell global investors?

Bad times - notable episodes of world political and economic turmoil since 1900:

• The 6 worst episodes for global equity investors were the two world wars and the four great bear markets: the Wall Street Crash and Great Depression, the first oil shock and world recession of 1973–74, the 2000-2002 bear market that followed the internet bubble, and the Global Financial Crisis (GFC) centered in 2008

Good times - real returns over 4 “golden ages” for stock market investors:

• The 1990s was a period of great performance for the US market (276% real return) via the tech boom, while globally was the most muted of the four, with the world index showing a real return of 114% (held back by Japan)

• The world index rose way more during the 1980s (247% in real terms) and the two post world war recovery periods: 171% in the decade after World War I (1919-1928) and 383% over World War II (1949–1959)

• US had its most exceptional returns after each of the 2 World Wars: 376% & 430%

Complementary, looking at volatility after in the 2 tables we looked at yearly returns:

• chart shows that volatility appears to be mean-reverting, with long periods of subdued stock fluctuations and occasional bursts of extreme volatility

• the latter are associated with economic or market shocks that come as a surprise to the market: examples are the Wall Street Crash, the 1970s Oil Shock, Black Monday in October 1987, and the Global Financial Crisis

• Shocks, by definition, are hard to anticipate, but the chart shows that subsequent volatility has historically dampened down quite rapidly

8. 👉 The Fear of the Downside and how does Downside look like exactly?

Investors are concerned about buying assets and then experiencing a dramatic fall in their value. To examine the prevalence of this historically, we can evaluate a portfolio’s drawdown in value, relative to its prior high-water mark.

So, US Stocks and Bonds Real Drawdowns (peak-to-trough decline during a period):

• after the Wall Street Crash (Great Depression 1930s), US stocks fell to a trough in July 1932 that was 79% below their September 1929 peak in real terms

• next large drawdown was from January 1973 until October 1974, when down by 48% in nominal terms & 56% in real terms

• after the tech bubble burst in March 2000, US equity prices again collapsed and, by October 2002, had fallen 52% in real terms

• Global Financial Crisis with the low point in Feb 2009, down 56% in real terms

• the next big drawdown (hairline thin red line because of its brevity) began in February 2020 when US stocks fell 35% in real terms due to the COVID pandemic

9. 👉 After the Bad and Ugly Downside Drawdowns, how do Recoveries look like?

• Wall Street Crash (Great Depression 1930s): long recovery period 15.5 years

• January 1973 - October 1974: only 26 months to recover the nominal high, but in real terms, equities were underwater for over 10 years

• 2000s Tech bubble: lower recovery period = 7.5 years

• 2007-2009 Global Financial Crisis = 4 years to recover

• 2020 Covid pandemic: rapid recovery was markable = 5 months

Did you spot the tendency? Recovery periods are shorter and shorter and shorter!

👉 Switching to Bonds now because … ‘My name is Bond, Yield Bond!’ and in case you missed my recent 2 part series on investing in Bonds/Cash/Credit, there you go:

✍️ My name is Bond, Yield Bond! The Return of Yield! Getting Paid to Chill ... (Part I)

✍️ My name is Bond, Yield Bond! The Return of Yield! T-Bill & Chill ... T-Bond & Long (Part II)

Research is NOT behind a paywall and NO pesky ads here unlike most other places!

Before moving on, do you enjoy this extensive research by finding it interesting, saving you time & getting valuable insights? What would be appreciated from you?

Just sharing it around (restack, email, forward, re-tweet) with like-minded people & hitting the ❤️ button. Your support will naturally also make possible more & more independent investment research: from a single individual … not a fund, bank, click-bait media company or so … !

Share

10. 👉 US debt market by type of security:

Figure 75: grey-shaded areas show general government securities (treasuries dominating 43.4%), while the red-shaded corporate debt securities (mortgage-backed securities (MBS), the biggest category with 22.1%, Corporate bonds 18.5%)

Figure 76: distribution of Standard & Poor’s (S&P) credit ratings with the final bar combining CCC, CC, C and D ratings:

• fewer than 4% of bonds are high-grade, or just over 10% by value

• around half of corporate bonds fall into the Investment Grade (IG) category, representing 78% of corporate bond value

• high-yield (hereafter, HY) bonds (also referred to as “non-investment grade” or “junk” bonds) are those rated BB (Ba) or lower. While just over half of all bonds fall into this category, they represent just 22% of overall value. Clearly, these

  issues are individually much smaller than IG bonds

11. 👉 Default rates on US Corporate bonds:

• default rates since 1866 have clearly fallen over time

• the average default rate was 4.0% in the late 19th century, 1.3% from 1900-1945, and just 0.3% from the end of WW2 until 2008

“Default rates cluster in time, with a serial correlation of 0.63. The worst cluster occurred in the 1870s, when the massive boom in railroad construction of the 1860s was followed by a decade of defaults. From 1873–75, defaults totaled 36%. This was much worse than during the Great Depression when the worst three-year default total was 13%, placing it only fourth worst among all three-year periods on record.”

12. 👉 Going global: default rates on global Corporate bonds by bond rating:

Figure 79 provides further insights with the average annual default rate (as a percentage of issuers) from different credit ratings, over the 103 years from 1920 to 2022. It shows that:

• default rates are very low for IG bonds, ranging from zero (to one decimal place) for AAA bonds through to 0.3% for BBB bonds

• the average annual default rate across all IG bonds was just 0.1%

• default rates for HY bonds were far higher, ranging from 1.0% for BB bonds up to 10.3% for bonds rated CCC or below

• the average annual default rate across all HY bonds was 2.9%

• across all corporate bonds, the annual average default rate was 1.2%

13. 👉 Key points & Bonds 101 - defaults rates, recovery rates and ultimately the most important credit loss rates:

• default rates overstate the loss to bondholders, as in almost all cases, there is recovery of value; more senior bonds typically offer a higher recovery rate as they have a greater claim to assets compared with bonds ranked lower down the pecking order

• GLSS research assume a 50% recovery rate as an average across corporate bonds and over time. They cite Hickman (1960) who found an average recovery rate of 63% over 1900–44 and Moody’s which reported an average of 41% for 1982–2008

• Moody’s (2023) reports that the average value-weighted ultimate recovery rates from 1983–2022 were 56% and 39% for first and second lien bonds; 34% and 27% for senior unsecured and senior subordinated bonds; and 28% and 14% for subordinated and junior subordinated bonds

Hence, figure 80 via Moody’s on credit loss rates over the 40 years from 1983 to 2022:

• losses were much higher during recessions and equity bear markets, most obviously for HY bonds

• HY bonds with 2.7%, while for IG bonds, it was just 0.2% (peanuts)

• the average annual loss rate for all corporate bonds was 1.0% (not much at all)