“Should I shift my exposure more to inference?”

“Am I underestimating the demand for Neoclouds?”

“Is it too late to buy optical connectors?”

And on and on….

AI, AI, AI. It’s all anyone talks about.

It’s fine. It’s warranted. AI is a massive trillion $ trend.

But it might be time to consider some other trends.

The AI 2nd Derivative

Think back to May 2024. May ‘24 was when Nvidia blew everyone’s minds with guidance that Q2 revenues were going to grow +52% quarter on quarter ($7.2bn → $11bn).

It was our first big signal that datacenter capex was going to skyrocket.

Unimaginably.

The rest was history.

Hyperscaler Capex grew from $240bn to $416bn in 2025. Then earlier this year, when we thought we had a handle on things and 2026 capex would be $600bn, everyone came out in April and upped the numbers again. Now we are forecasting almost $1 trillion in Capex by 2028.

The problem is it’s hard to see how AI Capex surprises again from here. Or to the same magnitude. Or, to a magnitude which isn’t already priced in.

The big tech companies are already spending all of their operating profits on capex and beyond. Google did an equity raise, to fund AI, which is kind of unimaginable. Google needing to raise money? And the rumour is Meta might raise money too. And Michael Burry is pointing out all off balance sheet SPV’s and lease agreements also being used to fund datacenters.

I’m not saying this is all going to crash. I’m saying many of the financing levers have been pulled (operating cash flows, off balance sheet financing, capital raises) and the big tech companies are hitting spending constraints.

There are also practical constraints. Even if companies wanted to spend $1.5 trillion on datacenters it’s increasingly hard to find communities to host these data centres or utilities able to power them. It’s going to be hard to spend the money.

We are hitting the near term financial and physical limits on AI spend.

Maybe I’m wrong, but it feels like a lot of the big AI capex surprise has happened.

So why not find on some new trillion $ trends?

Trillion $ trends nobody is positioned for.

Non-AI Trillion $ trend #1: Re-architecting global energy supply

What if Iran is unfixable? I know there is a deal in the works, but will any deal really last? It reminds me of that old Montana saying.

You can’t straighten a crooked stick.

What if we have an angry troll controlling the Straight of Hormuz who can’t be dislodged? Removing the IRGC requires a full scale occupation of Iran, which nobody wants to attempt. Unless, maybe the IRGC collapses of its own accord. Or, maybe like North Korea it just goes on for decades.

It increasingly looks like the future is a prolonged state of conflict and insecurity in the Persian Gulf.

Maybe traffic through the SOH improves, but never returns to 15 million bpd of oil or 112 bpm of natural gas (20% of global LNG). But it’s not just oil and natural gas. 30% of global urea, 20% of ammonia, and 8% of aluminium flow through the SOM. The Middle East built up a massive petrochemical and refining complex to get more value out of their raw commodities.

It’s hard to imagine a world without the Middle East at the heart of energy supply, but maybe we need to start.

Start with pipelines to Turkey and Israel. Does Saipem get billions of dollars of orders to build alternative routes? Does Turkey become a new refining and energy hub?

And Dangote Refinery in Nigeria. Does Nigeria become an important petrochemical hub. Safely tucked away in the Gulf of Guinea.

The problem with Isreal, Turkey and Nigeria though is they are not on the road to India and Asia. How do you fuel Asia if not from the Middle East? The only answer I can think of is more Russia. Does this force some kind of a peace deal with Russia?

An obvious beneficiary is everything in the Gulf of America. The Gulf of America is the world’s new gas station. In Qatar Changes Everything we highlighted the LNG Terminal plays (LNG, VG, NEXT). But the refiners and chemical plants also benefit.

In our YWR estimate monitoring tools these are all the sectors with the highest momentum in the world. Refining, oil and gas, chemicals, coal, aluminium. Everything that comes out of the Middle East.

And what about floating LNG plays like Golar. If we are trying to replace Qatar is the cheaper, faster option to set up floating LNG in Africa? And what are the beneficiaries of floating LNG construction? Do all your semiconductor bottleneck analysis on the shipbuilding industry.

Oil and gas, and chemicals are the obvious plays.

But there will be many creative 2nd derivatives. What happens with airlines? Do the Middle East carriers benefit because they can access stranded jet fuel at low prices, or do traveler’s not want to route through the Middle East? Does Turkish Airways benefit?

Turkey is one to consider because it comes up a lot when you start thinking how energy and trade flows might change and who will benefit.

Do renewable stocks benefit? Do Chinese solar stocks start to work?

I don’t have all the answers. I just want to get us thinking about the size of this trend. Because it’s world changing and the big the big funds haven’t even begun to play it.

Non-AI Trillion $ trend #2: Developed Market Banks

Following on from Non-AI trillion $ trend #1 we are eventually going to have high energy prices.

Inflation and interest rates have been notoriously hard to predict, but all the signs are there that the combination of high levels of government spending, AI capex, industrial reshoring, tariffs and now an energy supply shock is going to lead to higher inflation. We already had a 4% CPI print.

It seems likely that with 4%+ inflation US 10 years could be at 6% soon, and the Fed will be raising rates at least 75bps. The ECB just raise rates and the Bank of Japan is preparing to raise rates too.

And who benefits from higher interest rates?

The banks. Yes, the are pluses and minuses, and the timing of how it all plays out depends on how each bank is positioned, but broad brush, higher interest rates are good for banks. It’s a lot easier to make a 2% spread with 10 years at 6% than it is when they are 4%. And possibly we are going to yet again underestimate the change in interest rates and how much banks will make. Like we did post-COVID.

Banks are another sector the big funds don’t want to own, and yet DM Banks have been one of the best performing trends in the world. The best performing trend nobody talks about.

Banks are making more money from higher interest rates, but the second effect is their risk appetite has improved. Banks are lending again. We see it in the Federal Reserve H.8 statements and it is coming through in the results.

Take Mitsubishi UFG. Do you want to know who is quietly sucking up datacenter debt? It’s the big monster banks in Tokyo. In The Godzilla Trade we wanted to know where the Japanese banks would point their liquidity firehose. Turns out data centers are one of the sectors.

Morgan Stanley originates the debt and MUFG either owns it or sells it on to Japanese insurers.

MUFG’s slide deck highlighted something else interesting.

MUFG were trying to show how they can rerate to be more like Goldman Sachs and JP Morgan (also shows you they intend to take on a lot more risk to be a global player), but what it highlighted instead was European banks. Barclays and BNP are earning the same ROE as MUFG but trading 40% cheaper.

If you want to bring together global data centre capex funding, plus replacing the Middle East infrastructure funding, plus higher interest rates in a sector that is cheap and nobody owns it’s global banks.

Banks are your second Trillion $ Non-AI trend.

Non-AI Trillion $ trend #3: China

What’s the second biggest market in the world, which nobody owns, which is also the cheapest and is at an earnings inflection point?

The JPM chart below confirms the same inflection point we discovered in Hang Seng on the Launchpad. Chinese earnings are about to inflect upward and start growing again after the multi-year property crash.

I will admit I thought this EPS uptrend was supposed to start sooner, and it kind of did, but what I did not expect was the implosion in Chinese online retail earnings at big earners like Alibaba. Bank sector earnings are already recovering.

As a side note take in the significance of the chart below. What is the only equity market which has been able to grow its market share over the last 10 years in the face of the US equity juggernaut?

US equities are 49% of global market cap, but China is the second biggest market in the world for both equities and fixed income (almost) and growing. And nobody owns it.

And question. Does China benefit from the rearchitecting of the world energy supply? They are already leaders in renewables. Do their construction companies benefit too?

Does HK originate a lot of this new infrastructure finance in Turkey, Nigeria and the Middle East?

Yes. Chinese equities have been frustrating this year, but I can’t unsee what looks like a big set-up.

Spread your wings.

So there you go.

Three trillion $ non-AI opportunities that your peers are not focused on.

Please share your thoughts.

I feel these three trends are going to intertwine a lot.

Have a good weekend.

Erik

Let’s analyse the publicly disclosed equity positions at 445 funds with over $3.9 trillion in assets.

We loop through the Top 20 positions at every fund managing > $1 billion and count of which stocks keep showing up. This creates our list of the Top 21 Most consensus stocks. It’s 21 because I wanted 20 different companies, but the hedge funds always own both share classes of Alphabet.

Note: The full dataset with every fund’s Top 20 positions is available at the bottom of the post.

So what do we see when we compare June 8 with January 31?

Amazon is still the most consensus holding.

Nvidia keeps moving up the ranks. It’s up from #3rd most popular holding to second. I’m sure it will beat Amazon soon to be the #1. It used to be that Nvidia was a considered to be a ‘bubble’. Now funds are increasingly comfortable that the earnings are ‘sustainable’.

Meta went from #2 to 5. Investors are nervous about Meta spending similar amounts as AWS or Azure on datacenters, but without a cloud business.

Apple, the steady eddy, no data centre builder is unchanged at #8.

Look how many semiconductor/hardware/memory names are in the Top 21. 11. Up from 7.

It’s incredible that 11 out of the most popular hedge fund stocks are the same theme.

In fact I would argue 17 of the 21 stocks are the same thing. Only Visa, Tesla, Warner Brothers, and Eli Lilly are not a Semi/AI/Datacenter play.

That’s actually quite incredible when you think about it.

No energy stocks, no banks, no GE Vernova, no Netflix, Spotify, ThermoFisher or Salesforce. All the software stocks gone. All the finance gone, except Visa. Mastercard is gone.

It’s a wipeout. Everything is AI.

Which is interesting because in our Global Factor Model analysis the best sectors in the world for earnings momentum are refining, and oil and gas. But the hedge funds are missing it.

The only fund I see catching the refining wave is at Praetorian Capital.

Most Consensus Funds

I also run a count of which funds have the biggest overlap between their Top 20 positions and the Top 21 most consensus stocks. These are the most consensus funds.

The names of the funds move around a little, but what I notice is the distribution of this chart has shifted to the right since January.

The extreme outlier used to be two funds each owning 13 of the 21 most consensus stocks. But now there is DE Shaw with 15, which is a record. And 3 stocks with 14 consensus positions. Interesting that Marshall Wace and SquarePoint, both big users of alpha capture systems, are at the top of the consensusness list.

Tons of alpha there.

Also the 30th most consensus fund used to own 9 consensus stocks, but that has shifted right to 10.

While it looks like the big funds are becoming more and more consensus (owning the same stocks as each other), the overall distribution hasn’t changed for the 445 funds. There are more just outliers in the right tail.

The box plot analysis shows the median is still 1 consensus stock holding for a fund, with 75% of funds having fewer than 5 consensus names.

The bunching into the same stocks is mostly with the bigger funds. The scatter plot below shows equity assets (y axis) and consensusness (x-axis).

To summarise, we see the bigger funds concentrating more into the same names, and those names themselves are all the same thing.

Most consensus, non-consensus stocks.

We also loop through the top holdings of hedge funds which don’t own any of the Top 21 most consensus stocks, to see if there is anything they agree on.

The most consensus stock among non-consensus funds is Talen Energy, the utility which runs the Susquehanna nuclear power plant. Constellation Energy is also a nuclear power utility.

Nu Holdings is the digital challenger bank operating in Brazil and Mexico.

Fund of the Month

Farallon is our interesting fund of the month.

What do we see in their top 20? Let’s strip out all the usual AI derivatives and see what other plays they are making.

There is a lot of healthcare here. Revolution Medicines (Redwood City based cancer biotech). UnitedHealth Group (great trade). Bridgebio, Exelixis, Natera, Protagonist Therapeutics, Lantheus (radiology isotopes), Liquidia (inhaled therapies), Thermo Fisher(lab equipment), and Boston Scientific (medical devices).

Does Farallon’s positioning tell us biotech is a backdoor AI beneficiary where AI accelerates drug development? And if drug development is going to accelerate, is the other way to play it the contract manufacturers like Wuxi AppTec (2359 HK)? The Foxconn of drug development.

Below is a link to the full dataset so you can explore the Top 20 equity positions for over 1,700 funds.

Read more

Erik exited Jomo Kenyatta’s Terminal 2 into the bright blue sky. It was nice to be back. His driver was waiting and waved.

“Good to see you back sir! May I take your bag?

No. It’s fine. I got it. It’s just a roller. Can we swing by my apartment so I can take a shower? Then we need to go to the Horizon offices.”

It had been an overnight flight in the back of the bus on BA. Which was fine, but he needed a shower to refresh, and change clothes before his meeting.

He got in the back of the Landcruiser with its nice leather seats. He really liked the Landcruiser perk. He was going to miss it. Erik thought ahead to the next 2-3 days. Trying to think if he was missing anything. It was impossible to predict how it would all play out exactly, but this felt right.

Later that afternoon after a long meeting with John Kinyua Erik exited the Horizon offices. The meeting with John had gone well. Of course it had. John probably still couldn’t believe what Erik had just presented him.

Next he called Lloyd, his CFO.

“Lloyd. Hi. It’s Erik.”

“Erik. Hi there! How is the London weather? Not too depressing I hope.”

“Actually, I’m back in Nairobi already.”

“What? Why? I thought you were staying there until the deal was signed?”

“Change of plans. Can you please contact Daniel Wanaina’s office at the Central Bank and say we want to meet with him tomorrow morning? And say it’s important.”

“You want us to meet with Daniel tomorrow morning? Please tell me what’s up.”

“I’d rather not and the less you know the better for you. Just ask Daniel for the meeting and please email me when it’s confirmed. My guess is you won’t have any trouble getting the meeting.”

Erik assumed John Kinyua was up in his office right now talking on the phone to Daniel working out the details. Hence Daniel would know exactly why Erik wanted to meet when Lloyd contacted him.

The Nairobi Solution was underway.

The next morning at 9:00am Erik and Lloyd, dressed in their suits, presented themselves to the Office of Bank Supervision. The receptionist directed them to the same large board room where they had met for their last supervisory meeting. The one where they had celebrated with beer and chicken wings afterwards.

They waited by themselves in the boardroom in silence for 5 minutes before Daniel and two other members of his regulatory team entered carrying notebooks and looking stern. They sat down across from Erik and Lloyd.

“Erik, Lloyd emailed me requesting that you wanted to meet about something important.” Daniel said gravely.

“Yes, we do. Thank you for being so accommodating with your schedule. Something has come up and in the spirit of our improved relations with the Office of Bank Supervision we wanted to disclose it as soon as possible.”

“And what is it you feel you need to disclose.” Daniel said slowly.

“You are of course well aware of Turkana Trust’s large single name exposure to the East Africa Rail SPV. It’s an important loan to the bank and because of this we have been working to assist the CEO, Ms Claire Delacroix, with the project. Obviously, it is in the best interests for both our companies for the rail project to be successful. And for Kenya” Erik added.

“Yes. Go on.”

“Recently, we assisted East Africa Rail in finding a new supplier of rolling stock for the project after their original supplier, China Eastern Rail Systems, changed the price of the contract. It was a substantial change in price and would have created an entire review of the project’s feasibility by the IFC. So to try and help solve the problem, and through contacts at Belway Capital we were able to find an alternative manufacturer in Zimbabwe, called EcoRail. EcoRail agreed to take on the rolling stock order at the same original price in the budget so East Africa Rail and EcoRail signed a new agreement.”

“OK. Go on.”

“As part of this agreement two regulatory matters have come up which we feel we need to disclose.”

Daniel said nothing.

Erik continued.

“First, EcoRail had the capability to take on the East Africa Rail project, but had had minimal activity in the prior years and so first needed a loan to revitalise their business as well as to refinance a previous loan they had with Standard Bank. In order to keep the East Africa Rail project on track, and to provide some working capital, I authorised Turkana Trust to disburse a $12 million loan to EcoRail’s subsidiary in Mauritius. This was in July, after our June review and in contradiction of the Central Bank’s guidance to not make new disbursements.”

Daniel breathed heavily.

“And the second regulatory matter?” asked icily.

Daniel was playing this well Erik thought. If Nairobi worked how he thought it did.

“The second issue is that there are currently FX market disruptions in Zimbabwe and EcoRail is having difficulty sourcing steel and parts for the order. This is likely to cause temporary delays to the East Africa Rail project. We feel we need to notify you because these unexpected delays occurring so quickly after the new supplier agreement may, in our opinion, trigger a project review by the IFC which could be lengthy. There is a risk that during this review the IFC may pause all project payments including loan payments to Turkana Trust. None of this has happened yet, but like we said, we value our strong regulatory relationship with the Central Bank of Kenya and want to be transparent and forthright about any banking risks.”

“Did Ms Delacroix know about these EcoRail delays? Because in your latest regulatory filings, which included in the addendum the East Africa Rail Board pack there was no mention of this delay.”

“No, Ms Delacroix doesn’t know about the delays yet. I only found out about it through my connection with the owner of EcoRail. And as soon as a I found out about the delay I immediately came to you and asked for this meeting. I thought it was best to inform you first because this might be market sensitive information.”

Daniel looked across the table at Erik. Erik imagined Daniel must be struggling to not roll his eyes at the kabuki theater they were both playing. After a pause Daniel responded.

“Well. You were right to come to us with these two regulatory matters. The first, the loan disbursement, is a clear regulatory breach. And a serious one. The second matter implies there is a risk the East Africa Rail loan will need to be reclassified as Stage 2. This means a thorough regulatory review and calculation of the potential loss. Turkana Trust is still a fragile institution. A potential credit loss of this size will be material.”

“We are aware of that sir.”

“OK. We will have to convene and likely bring in the Central Bank Governor as well. Thank you for coming in and thank you for your forthrightness. Please go back to your offices and be available throughout the day. We will contact you with our next steps. Good day.”

Later that day at 6pm, after the rest of the Turkana Trust workers had gone home and the local Kenyan stock market was closed, Erik, Lloyd and a small team, opened the front door of their offices to the teams from the Office of Bank Supervision and Horizon Bank. Erik and Lloyd took them up to the 8^th floor where all the files were prepared. Erik and Lloyd answered questions and offered coffees as both teams worked through the night.

The next morning the news hit the streets of Nairobi.

Turkana Trust had been taken into administration by the regulators and sold to Horizon Bank for KES 200 million (less than $2 million). According to the regulatory statement issued by the Bank of Supervision Turkana Trust had asset quality problems and needed an immediate capital injection which Horizon Bank would provide. Importantly, the depositors of Turkana Trust did not need to worry. They were now clients of the Horizon Bank and their money was safe.

The first incoming call was from Claire.

“Qu’est-ce que c’est!!! Turkana is being taken over by the regulator?? What is the meaning of this? Erik! I need a full explanation. Does this have anything to do with the rail project?”

“Claire. Hi. Yes. The bank is being taken over, but it’s OK. The project is fine. It doesn’t affect anything. The only change is you will be dealing with John Kinyua now from Horizon. John and I have already discussed everything. He backs you and will get your railway done. Don’t worry. Anything else we should discuss later. Someday we’ll have a nice coffee in Paris and I’ll tell you everything. For now, you know nothing and stick exactly to what you wrote in your board of director reports. You will be fine. Now it’s best for both of us if I hang up.”

And hour late came the biggie. Dwight.

“WHAT….. THE…. FUCK???? What the fuck am I reading?” Dwight exclaimed down the phone.

“You are supposed to be in London signing our deal with Dipak and instead I’m reading news on Bloomberg that my entire bank has been taken over for $1.5 million. I don’t know how this happened, and I don’t know what game you think you are playing, but you better have a really good lawyer because I am coming after you for this. You are going to be the one responsible for this loss.”

“I was going to need a lawyer anyways.” Erik said calmly. Letting that register with Dwight.

“I don’t know what that is supposed to mean.”

“I think you do. Do what you need to do. Speak to your lawyers. I’ll be back in London next week.”

Finally, a call from Nicole.

“Hey babe. Are you OK? I read the news link you sent. I didn’t understand everything. It doesn’t sound good. Is this why you went back to Nairobi? You can tell me more about what happened when you get back. And don’t worry. It will work out. We’ll be fine. Love you.”

Things were not fine. Erik didn’t see how he would ever have a job again. What had had happened in Nairobi was not something you could explain to a recruiter back in London.

Yet, the Nairobi Solution felt right somehow. It was right for the rail project, right for the team at Turkana, right for Kenya and right for Claire. And somehow, he didn’t know how, he thought it would be alright for him too.

Epilogue:

One year later.

Erik liked his small office in Hammersmith and it’s view of the Thames. It wasn’t a fancy address in the City, but he could come here and do his work in peace and quiet. It was near a section of the river were many of the rowing clubs trained. When he needed a break to think he would stare out the window and watch the rowers.

After the events in Nairobi Dwight’s lawyers had sent some nasty letters, but in the end it had gone nowhere. Everything Erik had done was by the book, and Dwight knew he couldn’t push too hard without exposing the fragile situation of what he had tried to pull off with Opus.

But events in Nairobi also meant Erik was no longer hireable as an analyst or portfolio manager in the City. His career had gone too far off the conventional rails. It was impossible to explain to anyone. Instead, he had started a small consulting firm advising other private equity funds on their Africa investments.

Erik wasn’t sure of his future, or how would get a normal job again, but he was coming to peace with it. His path was apparently not meant to be normal.

A few months ago, there had been a story in the FT about the strength of the Kenyan Schilling along with a paragraph about the surprising growth in Kenyan exports. He had smiled while reading this. It reminded Erik of Grace and her chia seeds. He hoped she was doing well with 15 Degrees.

Today Erik was in his office reading some market news when his phone rang.

He looked down at the screen to see who it was and was surprised. It was Niko. Niko from Zimbabwe. They hadn’t spoken since the call in Mukueni County where Niko had given him the bad news about EcoRail.

“Niko. Hi.”

“I’m good. It’s been awhile. How are you? How are things on your end?”

Erik listened while Niko explained why he was calling.

“It’s a new stock exchange? And it trades in US$’s?”

“How much did you invest?”

Erik tapped his pen on the desk and looked pensive.

“Would it mean moving to Zimbabwe?”

Erik stood up from the desk and walked over to the window. He looked out at the Thames and the rowers, and smiled, still listening to Niko on the other end.

“Obviously, I would need to think about it and talk to Nicole, but it sounds interesting.”

“Oh. One other thing. Does it have a Landcruiser?”

“OK. See you in 2 weeks.”

THE END

Isn’t that what they say?

Semis and memory have been great, but it’s time to hand the baton to someone else.

Like the Hang Seng Index.

The Hang Seng has had a sluggish start to 2026 (-1.5%), but I think it’s still going to be a great year.

Let’s start with the chart. I LOVE the chart. Where else has a developed market index gone sideways for 15 years in hard currency?

This thing looks like a coiled spring. Which is why I remain patient. Because I think the move is going to be big (IMHO).

35,000 at the index level seems very achievable.

Besides the chart why could the Hang Seng be about to gallop?

Here are 4 reasons.

#1 Earnings growth is expected to accelerate from 6% to 11%.

Note: I created my own rough approximation of the Hang Seng Index fundamentals using 89 constituents. So warning, this is an approximation, not the official index.

From 2015-2025 earnings grew at a 6% CAGR, which is slow and caused the index to derate. China and Hong Kong have experienced an epic property crash so the earnings CAGR at the big Chinese banks (ICBC, CCB, BOC), has been just 1-3% for a decade. When you think about it, it’s actually amazing the big banks have been growing earnings at all in the midst of a property crash and falling interest rates. Think back to the Evergrande days. We all expected China would go through their own GFC and these banks would need to get bailed out. Instead they muddled through.

The property problems spilled over into many other Hang Seng constituents like China Resources Land (4% EPS CAGR), China Overseas Land (-9% EPS CAGR), Sun Hun Kai Properties (-5% EPS CAGR), Henderson Land, Wharf, and Hang Lung Properties.

There was also the crash in earnings at Alibaba (3% EPS CAGR),

But that is the past.

Over the next 3 years the EPS CAGR is expected to improve to 11%!

Tencent, the biggest earner, is expected to grow EPS at a 17% CAGR. Alibaba works through the hit to online retail and grows again (+17% CAGR). The Big Banks accelerate to 6% growth (from 3%). PetroChina, CNOOC, China Petroleum & Chemical benefit from the oil price recovery. The New Energy EV stocks, BYD and CATL, also kick in with a 26% EPS CAGR. And the property stocks go from negative EPS growth to positive.

#2 Earnings revisions are swinging positive.

This is one of the most important trends. Earnings are starting to beat expectations. Importantly, the big banks are beating earnings. You have growth accelerating and EPS estimates rising.

#3 HK Property prices are recovering.

For a city built on property it’s a big deal that property prices are recovering. Rising property prices improves risk appetite and collateral values.

After a gruelling 4 years, Chinese mainland property might be stabilising too.

#4 Where else do you find a hard currency index on 10x P/E?

This growth pick up leaves the Hang Seng valuation looking like a dripping roast. If earnings develop as expected the index would be trading on 9x in 2028. Be safe and assume I’m wrong by a turn and it’s 10x 2028 earnings. Again, this is an approximation using 89 constituents and consensus EPS estimates through 2028.

Only a few of us remember the good old days, but Hong Kong investors love to trade, and in a HK bull market this P/E can easily expand to 15x.

Below is the full dataset I used for the analysis if you want to dig in and find the best mix of valuation and expected growth.

Read more

“Give me a call when you can. I need you to come to London.”

He reread the words searching for extra layers of meaning.

Why did Dwight need him to come to London? Was it to fire him? But then why say to give him a call when ‘you can’? It didn’t seem like the right language to use when you need to speak to someone so you can fire them. But you could never tell with Dwight.

It had been 3 weeks since the trip to Emali, the bad news from Niko and the phone calls to Dwight and Claire. He hadn’t wanted to speak to any of them since. He’d stayed in his office, depressed, and focused on bank paperwork.

Now here was Dwight telling him to come back to London.

He picked up his mobile and filled with gloom and dread called Dwight. As he clicked dial Erik made a final mental effort to try to sound upbeat.

“Hi Dwight. It’s Erik. I got your email. What’s up?”

“Hey Erik! Yes. I need you to come to London. When do you think you can make it over?” Dwight sounded strangely friendly. Like a completely different person from the last conversation.

“If you need me there quickly, I can take the BA flight on Wednesday night.”

“Yes. Do that.”

Erik took a big risk next, but Dwight seemed in a good mood and he wanted to know.

“May I ask what’s up in London? Is there something you want me to help with?”

“No. There’s someone I want you to meet. You know Opus? They want to make a bid for Turkana.”

“Opus Partners wants to buy Turkana? That’s great news!”

“Yeah. The price isn’t amazing, but we make a small profit, and the best part is it gets us out of this mess so we can focus on something else. Anyways, they want to meet with you. Part of the due diligence.”

“Tell them anytime Thursday afternoon. I’ll get in that morning, take a quick shower then go to Mayfair.”

“Great. You’re going to meet with Dipak who is a partner and leading the deal. Keep a look out for an email they are going to send through. There’s a whole bunch of documents they want to go over and discuss in the meeting. Thanks. See you soon.”

What amazing news. What a complete turn of events.

Opus Partners was a smaller EM focused private equity fund also based in London. There was a bit of a stink around Opus, but they knew emerging markets and would be comfortable owning an asset in Kenya. Their CEO had been investigated several times by the FCA for questionable transactions but had never been formally charged with anything.

Opus wasn’t the buyer Erik would have wished for Turkana, and the team here in Nairobi, but maybe it didn’t matter as long as Belway got paid and could exit. Likely Opus were getting a good deal from Dwight (0.8x book Erik guessed) with the plan to work through the East Africa Rail situation then get an even higher price down the road. 1.5x or maybe 2x if EM markets were hot. All in 2-3 years. It made sense.

Erik was excited as he booked his BA ticket to Heathrow. Nicole would be happy too. He was going home.

Later that week Erik emerged from Green Park tube station into the grey skies and rain of London. This was the complete opposite of Nairobi Erik thought. He had a short walk to Berkeley Square where Opus had their offices. Erik ran the bell at what had long ago been a nice private residence on the square but was now the posh offices for a private equity fund. A receptionist took his wet coat, hung it in the closet and escorted him to a conference room where Dipak and the rest of the Opus team were waiting for him.

Two hours later Erik stepped back into the rain again to give Dwight an update.

“How did it go?” Dwight asked.

“Good. I guess. They went over all the information we sent them. The financials, the regulatory updates, the internal risk reports, the auditor statements. They asked a lot about the East Africa Rail deal. They kept asking if everything had been disclosed. They also asked me to initial some of the disclosure documents we sent over. They said it was to prove they were verified by Turkana management.”

“That’s normal deal due diligence. They’re just being thorough.”

“Yes, I know. I guess. I was just surprised they didn’t ask anything about the economy, the new government, or the growth strategy of the bank, or anything. It was just all dotting I’s and crossing the T’s about the documents we sent them. Just wasn’t what I expected.”

“Sounds fine. They’ll probably ask you all that stuff in a later meeting. In the meantime, please stay in London until we get this closed. They told me they are willing to focus 100% on this and move quickly. So maybe work from the office here so you can give Opus your full attention and get this over the line.”

“Sure Dwight. Let’s get it done.”

For the next week Erik worked out of the Belway office near Liverpool Street. Mostly he was responding to information requests about Turkana from Dipak. The deal seemed to be moving along. It was also nice to be able to go home and for walks and dinners with Nicole.

Then on Thursday Dipak sent Erik the following email:

Subject: Updated SPA and Disclosure Schedule – Insurer Comments

Hi Erik,

Please find attached the latest mark-up of the Share Purchase Agreement and related Disclosure Schedules.

Nothing substantive — mostly definitional tightening and clarification following feedback from our advisors and insurer. We’ve expanded certain knowledge qualifiers and refined the East Africa Rail disclosure to ensure completeness.

Would be grateful if you could review and confirm the updated language, in particular:

· Clause 7.4 (Material Contracts – East Africa Rail)

· Definition of “Knowledge”

· Bring-down confirmation language for Closing

If possible, we’d appreciate your initials on the revised Disclosure Schedule (attached separately) confirming management verification.

Happy to discuss if helpful.

Best,

Dipak

Opus Partners

What was all this about “We’ve expanded certain knowledge qualifiers and refined the East Africa Rail disclosure to ensure completeness,” Erik thought feeling slightly uneasy.

And what was a “Definition of ‘Knowledge’?

And why are they referring to an insurer?

He was about to get up and ask Dwight, who was over at his terminal staring at stock prices, but something stopped him. He wanted to know more first.

He wanted to run this by Harry.

When most people think of London as a financial capital they think of the investment banks in Canary Wharf, the stock exchange and the fund managers in Mayfair, but underappreciated is that London is also the world’s largest insurance market. Erik couldn’t remember exactly what types of insurance Harry worked on, but it was specialty insurance for a Lloyds syndicate.

Later that week Erik and Harry were seated in a pub in Leadenhall Market where the everyone in the insurance market liked to meet and drink beer.

Harry had a printout of Dipak’s email in front of him.

“So. What do you think?” Erik asked.

“Run me through again what you sent them and what they asked in the meeting.”

Erik went over the events from the previous week.

“Hmm..”

“And they asked you to initial some disclosure documents while you were in their offices?”

“Yes. I realise I probably should have got legal advice first, but it seemed OK. They were the documents we sent then. It seemed to make sense.”

“And they didn’t ask you much about the business, or anything else?”

“No. That was what struck me as strange. Then this email seemed like more of the same. And then the mention of the insurance company going over all the documents. It made me want to run it by you. Dwight thinks this is all standard procedure.”

“And off the record as your friend. Is there anything material you probably should be disclosing?”

“Well… totally between you and me. There is a potential delay involving one of the major suppliers to the rail deal. But it’s not anything official stated, just a ‘likely delay’. Just a verbal phone conversation I had. Nothing’s written down and there is no way they could know it. So I left it out. And Dwight would definitely would want it out because it would kill the deal.”

“Hmm…..” Harry was thinking and kept looking at the printout of Dipak’s email.

Finally, he looked up.

“Erik.. I think given what you are saying that behind the scenes there is actually a delay to the East Africa Rail project (which they are asking a lot about), and now this email from Dipak asking exactly about it in highly specific language, I think you should consider the possibility Opus knows about the delay. Everything they are asking and doing (the extra schedules, the change in the language, getting you to initial the documents) double checking with the insurance company, could be to make sure their claim is 100% watertight if/when they need to file a Representations and Warranty claim that you never disclosed the delay.”

“And if they found something they would get a payout,” Erik mused.

“Like your Dwight guy said it could all be normal, but the fact you said they have been only focused on this and not asking about the rest of the business is suspicious. Erik, I would highly recommend getting private legal counsel before signing anything else from these guys.”

Thanks a lot Harry for reviewing this. You are confirming what I suspected. Thank you again.

Erik got up, left the pub and headed in the direction of the Thames for what would be a long walk. He needed to think.

First things first. Accept brutal truth number #1. Somehow Opus knows about the EcoRail delay and is setting up all the legal language to prove it was never disclosed to them and file a Representations and Warranties claim. Which fit exactly with the Opus reputation and now made sense.

But how did Opus find out about the EcoRail delay?

It could only have come from Dwight or Claire. Or, possibly from Niko. Did Opus know Niko somehow? And why would Niko tell that to Opus? Was there some relationship between Dwight, Niko and Opus he didn’t know about? He didn’t think so. That wasn’t it. And Claire? Some backdoor job offer to come back to London and do private equity? No way too convoluted. It wasn’t Claire.

Brutal truth number #2 was that Opus had to have learned about the EcoRail delay from Dwight.

But why would Dwight tell them that?

Erik kept walking and thinking. He crossed London Bridge over the Thames to the South Bank and started walking back up towards Westminster Bridge.

An upsetting possibility was taking shape in his mind.

Erik calls Dwight from Mukueni County and tells him about the EcoRail delay. Dwight freaks out. He knows the IFC is going to want to review things and delay the project. Eventually, the EcoRail FX problem would get resolved, the project is completed, and the loan repaid. It would all work out, but in the meantime the regulatory accounting would require the loan to be marked impaired, and the regulator would want more capital in the bank. Which Dwight would not want. Which was why he was furious on the call.

Then 3 weeks later all of a sudden Dwight’s happy and has found a buyer for the bank.

But how do you sell a bank with a major loan that is about to go bad?

There was one explanation which answered everything. And it fit why Dwight wasn’t concerned about any of the extra disclosure requirements Erik was being forced to sign as CEO of Turkana. Because Dwight wasn’t the one who was going to get investigated.

What if Dwight had offered Turkana Bank to Opus at a discount with the sweetener that they could file an insurance claim after the deal was closed. Meaning Opus knew about all the problems, and were intending to get both a discounted price for the bank, plus make an insurance claim that they were never informed of the EcoRail delays.

It would explain why Opus was the buyer. Opus were exactly the type of firm who would go for a deal like this. Opus would make money on the deal coming and going, and so would Dwight. Meanwhile, Erik would be the one who the insurance company would be calling. Dwight would say he was never involved in the operations of the bank and knew nothing. It was all Erik. Erik signed everything.

Erik sighed and kept walking. His shoes were getting wet, but he didn’t care. Somehow the rain and the evening lights across the Thames were calming.

An idea started to come to him. A potential way out of this trap.

He pulled his phone from his pocket and called Nicole.

“Hi Nic. I’m sorry I’m late. I went for a walk. Needed to clear my head. I should be home soon. But I’m going to need to head back to Nairobi tomorrow.”

“I know. It’s sudden. I have to meet a few people and do something. But the good news is it’s all going to be over soon, and I’ll be back in London for good.”

“OK Erik. See you soon, but whatever you have on your mind and plan on doing in Nairobi. Make sure it’s the right thing.”

“It is. Don’t worry. Love you.”

Dwight was going to have another thing coming.

Previous: Ch.8

Next: Ch.10

Links to all the ranking sheets and dashboards (YWR Retool Dashboard and Tableau Dashboard) for over 9,000 global stocks are at the bottom of the post.

We always start with the 30 best ranked stocks in the world.

YWR Global Top 30

Who are all these Taiwanese and Japanese electronics firms on <10x P/E’s with earnings estimates going through the roof? We need to know these names better. Here’s a quick run down.

Innodisk (5289-ROCE) — Industrial-grade SSDs, DRAM modules, and memory cards. Sells into factory automation, medical, automotive, defense. Niche but high-margin. Reliability matters more than price for these customers.

Macronix (2337-TAI) — World’s largest NOR flash maker. NOR is the code/boot storage that lives inside automotive ECUs, networking gear, MCUs. Less glamorous than NAND but very sticky — once a part is designed in, customers don’t switch.

Nanya Technology (2408-TAI) — Taiwan’s largest pure-play DRAM company, spun out of Formosa Plastics. PC and consumer DRAM. Sub-scale vs Samsung / SK Hynix / Micron and minimal HBM. The bull case is a commodity DRAM up-cycle plus recovery in non-AI memory.

WPG Holdings (3702-TAI) — Asia’s biggest semiconductor distributor. Channels chips from NVDA, AMD, Qualcomm and dozens of others into Asian OEMs and ODMs. Effectively a leveraged play on Asian electronics manufacturing volumes.

Winbond Electronics (2344-TAI) — Specialty memory and MCUs. Low-power DRAM (mobile, IoT), NOR flash, plus microcontrollers via its Nuvoton subsidiary. Automotive and consumer end-markets. Scrappier than Nanya, less commodity exposure.

ADATA Technology (3260-ROCO) — Consumer memory brand. SSDs, DRAM modules, memory cards, mobile accessories. Brand-led — Adata is what you see on the shelf at retail. Also pushing into industrial, but consumer is the core.

Megachips Corporation (6875-TKS) — Japanese fabless ASIC house. The Nintendo connection is the well-known piece (key supplier to the Switch and successors). The growth engine has actually been SiTime, its MEMS timing-solutions subsidiary.

Phison Electronics (8299-ROCO) — NAND controller specialist. Makes the controller chips inside SSDs and USB drives. Bundles its controllers with NAND from the big three into turnkey storage modules for OEMs. Pure NAND-volume play.

Kioxia Holdings (285A-TKS) — Japan’s NAND giant, formerly Toshiba Memory. IPO’d in Tokyo December 2024. #2 NAND maker globally, JV with Western Digital. Highly cyclical — current bull case is enterprise SSD demand from AI data centers.

WT Microelectronics (3036-TAI) — The other big Taiwanese distributor. Acquired Canada’s Future Electronics in 2024 and jumped into the world’s top three semi distributors. Same channel model as WPG but with global reach now.

Basically, it’s everything in the downstream memory and semiconductor supply chain.

Top 5 Ranked Sectors

What’s the top ranked sector in the world that everyone is ‘neutral’ on?

Energy. Or ‘Integrated Oil’.

When I look at all the factor model data and try to pull out ‘the big’ thing, this is it. Yes, Semiconductors and Taiwanese NAND plays are through the roof, but the time for getting into that trade was last year when it was first starting (Would you be interested in Nvidia on 7x Earnings?). Not now when it’s going parabolic.

Energy looks more interesting. Integrated Oil stocks have the second best estimate momentum score in the world and yet everyone is hesitant to get bullish on oil stocks.

According to the BofA Survey investors are 2% overweight Energy. That’s nothing.

Let’s start to imagine that Iran is turning into the Ukraine War. The US and Israel have a challenge. You can’t bomb the crap out of someone then walk away and leave them with a nuclear bomb. So one way or the other you have to get it out. Mostly likely the hard way. Which is going to take time. Which means the Straight of Hormuz could be like the Donbas and the world’s entire energy flow needs to be rearchitected away from the Middle East. It seems unimaginable, but it’s a possibility.

Maybe in the future the world sources more energy from Brazil and Africa. The US is the new source of stable energy flows (and tokens). Maybe Europe has to rethink its relationship with Russia just for the energy. Maybe it’s a bull market for renewables (Untouchable #8)

But it’s not just oil. Trapped behind the Straight of Hormuz is the entire Middle East petrochemical complex. Which is why Specialty Chemicals is another top ranked sector.

In the YWR Retool Dashboard (link below) you can see the earnings estimates for LyondellBasell inflecting upwards. Interestingly, the shares haven’t moved much if it’s going to earn $10/share. But everyone thinks it’s temporary. Which is the potential trade. DOW looks the same.

We have to also mention refining. It doesn’t make the top 5 sector list, because there aren’t many companies, but refining has the best estimate momentum of any sector in the world. Integrated Oil is second.

The side benefit to refiners like Marathon and Phillips66 is you get their US pipeline networks practically for free. Our big takeaway from The Final Bottleneck was that US natural gas pipelines are in a multi-year bull market as demand for US natural gas grows (datacenter, factories, LNG).

Buy for the refining party, stay for the structural natural gas pipeline bull market.

Can I say another thing?

Look at all those top ranked sectors in the Tableau dashboard for estimate momentum. Go down the list.

Refining, oil, coal, aluminium, textiles, electronics, semiconductors, other metals, chemicals, trucking, agricultural chemicals, industrial machinery, contract drilling, metal fabrication…

It’s an industrial boom. But doesn’t it also seem like a massive inflation wave coming?

And look at the monthly track record below of those top 5 sectors. You can see the wave which started in January. I’m not saying it’s a market killer, but it seems possible 10 yrs go to 6%.

Top 5 Ranked Countries

These trends at the company level lead to country level allocation themes. South Korea is the perfect example. When we bought Korea on the lows in December 2024 (Who am I ETF?) we thought we were making a beaten down country ETF bet. We didn’t realise we were making an AI memory bet. But we aren’t complaining.

Taiwan is another example. It is the heart of the AI supply chain and has the 3rd highest number of top ranked companies in the Factor Model. Their index is also going vertical.

China always has a lot machinery and electronics companies which score well for estimate revisions at attractive valuations but the challenge for investors is the communications gap. To their credit Chinese companies are working on this. When we went to China in September last year I was impressed with the showrooms they built for investors.

The YWR Factor Model data is telling us we need to make more trips to Asia and build up our networks there.

Canada has ranked well all year. First it was because of the gold miners, now it is a mix of energy and mining companies. If this is going to continue TMX Group might be a way to play everything.

Or… if you want the same trend, an exchange exposed to a market with lots of mining stocks, but trading on the lows… you look at buying shares in the ASX.

Below are links to all the rankings sheets, and the YWR Retool Dashboard which I love and use all the time. I like being able to quickly see 12 months of earnings revisions.

I’ve also attached the top stocks which showed up on our inflection screens. They mostly overlap with the energy theme so I didn’t go into it, but shipping shows up as a big sector.

Check it out and let me know any other data insights you have.

Oh, and Chapter 9 of The Nairobi Solution drops on Sunday. We are nearing the end of our story. Can Erik save the Turkana Trust deal and get his payday, or does it turn into a train smash?

Read more

My plan is to buy a small amount every week, but it’s scary to add here. Maybe this is the top.

Or, maybe we under estimate the scale of what’s happening and the S&P is going to $10,000.

I put together our monthly Killer Chart pack (link to the full slide deck below), and as I was going over the slides, it painted the picture of a market which can go higher.

Let me explain.

10 slides which suggest the market can go higher.

#1 Everyone is talking about MAG7, but the other 493 stocks are really starting to pick up too. The boom we’ve been talking about is widening out. Earnings for the ‘493’ grew 17% in Q1.

#2 EPS estimates keep getting revised higher and assumptions for 2027 might be conservative. In 2027 Info Tech is supposed to growth +25% (compared to +40%) in 2026, but energy earnings are supposed to decline 6%. That looks wrong. Energy has been a top growth surprise in 2026 (along with memory) and looks set up to surprise again in 2027.

#3 The S&P is rerating to 25x. Fiddle around with your Gordon Growth model and tell me the right P/E for an index growing earnings consistently at +10%/yr over decades with a risk free rate of 4%? It’s a really high number. We are fighting it, but I think the S&P wants to trade at 25x. 25x on a $400 EPS and we have S&P $10,000.

#4 Investors don’t see the boom underway. They think it is stagflation. They don’t see the triple layered boom. That skepticism is bullish.

#5 Hedge funds aren’t overly bullish. Unlike in 2021 when net exposure got to 85%. Hedge fund net exposure is at 77%. Above average, but not extreme. They are nervous about the direction of the market and prefer to make their money through long/short bets with high gross. This is a positive sign. They aren’t getting carried away.

Read more

Erik sat his desk and leaned back. It was Tuesday morning and as was increasingly becoming the case, things were under control. There were no fires to put out and no new loans to sign off. Aside, from the Zimbabwe loan, which Erik had quietly disbursed after the regulatory meeting, the bank was only granting new loans when old ones were repaid. Things were quiet. This was how it was supposed to be Erik thought. Banking should be like farming. No drama. Just quietly collecting interest.

But it was also slightly boring. Especially for someone with a trading background. What was he going to do the rest of the week? Erik looked out his office window thinking. It was time for a road trip.

He picked up the phone and called Claire.

“Claire, hi. It’s Erik.”

“Hi. It’s been awhile. Should I be concerned that you are calling? Is everything OK?”

“Everything’s good on my side and hopefully yours too. I was thinking we should do a site visit this week.” Erik said playfully. “You know, to check the progress of the railroad.” Erik said switching to a serious boardroom sounding voice.

“What do you mean by a site visit?”

“I was hoping to see the rail construction out near Emali in Mukueni County. It’s about a 2 and a half hour drive. I have a client who wants to grow chia seeds out there. I thought it would be good to drive out and see the area and the railroad construction. Do you want to come? It could be fun. Are you free on Thursday?”

“What? Drive around Mukueni County this week? C’est impossible. I love your adventurous spirit though. Unfortunately, I have a lot of things I need to work on here at the office. I have that big project update to prepare. This is the meeting where I break the news of our switch to EcoRail. It’s a delicate situation so everything has to be perfect. But if Emali is the area I’m thinking of there is a work camp out there. I can call ahead to China Eastern and let the site manager know you are coming. He can show you around.”

“Thank you. That would be perfect. Good luck with the board report. It will go well. Just say you made an executive decision and switched suppliers. You can do that. You’re the CEO.”

“Yes, there are just a few points I’m wrestling with on how to smooth over the gap in time between when we got the invoice from CERS and when we signed the new contract with EcoRail. I sat on a material change in the project for a long time without informing them. But if everything is going smoothly and moving ahead the IFC can probably overlook it. Fingers crossed. Have fun.”

Erik’s driver picked him up outside his house at 7:00am. They had one last stop to make on the way out of town. To get a coffee.

His favourite perk of the job was a driver and a shiny, black Landcruiser at his disposal. The interior had brown leather seats. An African limousine. A luxurious interior with Toyota ruggedness and 4WD to get you where you were going, but most importantly, back again.

Erik hopped out of the truck in front of a new chain of coffee shops in Nairobi. Inside he stared at the board trying to decide what to order. He looked around the clean, modern franchise. He could have been in Santa Monica. It was another sign of how quickly Nairobi was modernizing. He finally settled on a latte, but with oat milk instead of regular. Nicole said cutting out dairy was better for his allergies.

Soon they had left Nairobi and were cruising at high speed down the highway to Mombasa. As Erik looked out sipping his coffee the view was mostly the same mile after mile. Scenic in that it was so open, but mostly flat, dry scrubland with brown grass and thorn trees. It looked really dry. Erik was worried about Grace’s chia seeds. He hadn’t told her, but he was intending approve the loan. He would have to double check what she was doing about irrigation.

Two hours later they rolled into the town of Emali. It looked small, with no buildings higher than 2 stories, but the streets were congested lots of cars, and motorbikes. Low buildings sprawled out from the dusty town center. The town must be a hub for the surrounding area where people came in to shop Erik thought.

Erik leaned forward to talk to the driver. “Claire said we should drive by where they are building the new train station. She said it’s near the Catholic church.”

His driver rolled down the window and waived down the nearest person to ask for directions to the Catholic Church. Everyone was quite friendly and we quickly got directions.

On the south side of town, past the church, was an open space with lots of survey flags planted in the ground. There was also a billboard with a picture of a modern looking train station which would be built there. If it actually looked like the picture, it would be quite impressive Erik thought.

Erik got out and walked around the site. It wasn’t much to look at. Just yellow survey flags fluttering and an optimistic billboard. The town wasn’t much to look at either and no one seemed to be giving the rail site any attention.

This train station was going to be a big deal though. A lot more than the people of Emali realised. It reminded him of the small towns which sprung up across Montana when the railroads first connected the Western US to the East for the first time. The railroads changed everything. Farms near the railroad shot up in value because suddenly they could sell their goods to customers in Chicago. Towns near the railway stations boomed. The same would happen to Emali. It made Erik consider whether it might be a smart idea to buy real estate here. Good idea yes, but then he remembered the long list of other things he needed to do before he had time to speculate in Emali real estate.

Claire had said the China Eastern work camp was 20 miles east of Emali on the Mombasa highway. They should look for a turnoff to the left, and a dirt road about 100 meters past the gas station. Nearby there was a wide river drainage the rail line had to cross and the Chinese contractors were building an elevated section which might be interesting to see.

They drove back along the side streets of Emali then turned east on the highway towards Mombasa. They passed through a town called Simba, which was also going to get a train station from the looks of things. Then they saw the gas station and slowed down to look for the turn off. When they saw it, Erik was glad they were in the Landcruiser.

They followed a highly rutted dirt road until they came to a clearing which looked down on the wide river drainage below. It was the dry season so the river was small and narrow, but the veins in the ground spreading out on both sides across the land showed how wide the river would become during the rainy season.

In the clearing in front of them was a work camp. The work camp was a cluster of white temporary buildings surrounded by a chain link fence. As they drove closer they could see Chinese characters on the sign. Also written in English was the name China Eastern Construction (CEC). This was the sister company of China Eastern Rail Systems which they had met in Shanghai. Off in the distance he could see the beginnings of a bridge they were building across the wide riverbed.

As the Landcruiser pulled up to the front gate someone must have heard the sound of the truck’s tires on the loose gravel. The door of one of the white buildings opened and a Chinese man in a construction hat came out and stood looking at them from the steps. After a pause he started to walk towards the gate where they were parked. Erik got out to say hi.

When the man got to the gate he was speaking in Chinese and making shooing gestures with his hand. Erik tried explaining in English that they were here to see the rail project. He explained that Claire from East Africa Rail must have notified someone that they were coming. After about 5 minutes Erik could tell this was going nowhere. Neither person understood each other and the man was not at all welcoming. He obviously had no idea who Claire was and wanted them to leave. Which was fine.

They drove off a short distance from the gate to an overlook where they could see the bridge CEC was constructing. This seemed to please the man. He went back into his office and left them alone.

Erik could see the engineering challenge. The scrubland was flat so during the rainy season the narrow river overflowed it’s banks and widened considerably. The bridge wasn’t crossing a narrow gorge, but rather a wide, shallow floodplain.

The construction was fascinating. CEC had sunk a line of tall concrete pillars which would support the track. On the east side of the crossing there was already a large steel section with rail connecting several of the pillars. On it was a heavy machine with train wheels and a crane. It looked like the crane was laying track sections ahead of itself. It would lay down the steel section and the rail, then move forward and do it again. Erik had always liked big machinery and trains as a kid, so it was fun to watch.

He had been annoyed with China Eastern at their meeting in Pudong, but seeing their work on the river crossing made him think differently. He had to admire the Chinese. Here they were, in the middle of nowhere, a long way from home, tackling complex engineering challenges on time and on budget with no strikes, complaints, or labor disputes. They just got on with it.

He was interrupted from his observations by his phone ringing. He held up the screen to see who it was. Niko. He should probably answer.

“Niko. Hi. Good to hear your voice. You’ll never guess what I’m doing. Well, I’ll tell you. I’m in the middle of nowhere Mukueni County, Kenya watching the Chinese build a railroad over a river. How are you? How are our locomotives?”

“Erik! Things are good. That’s what I’m calling about.”

“Great. What’s the update?”

“Things are going well. We got the money. Thank you very much and we’ve been refurbishing the buildings behind the main workshop so we can work on multiple trains at once.”

“That all sounds good.”

“Yes, it’s all good. There’s just one small issue with the steel.”

“What do you mean an issue with the steel? Is there something wrong with it?”

“No. I’m sure it will be fine when we get it. The problem is paying for it. As you might recall there is an election coming up here, and the central bank always gets a bit sensitive about the Zim dollar weakening around elections. So they’ve given all the banks a limit on what price they can offer in the FX market.”

“I’m missing what this has to do with ordering the steel. Weren’t you going to order it from South Africa?”

“What I’m trying to say is there is an FX shortage in Zim right now and we can’t get our money out to pay the bank in South Africa to buy the steel.”

“Why did you say things were going ‘well’. That sounds very ‘unwell’. You can’t get the money out for the steel? And why is the money in Zim to begin with, we paid it to the MCB account in Mauritius.”

“Well naturally, we needed to bring the $’s into Zim to pay expenses. We just didn’t anticipate that moving some of it out to buy steel would be a problem.”

Erik slightly doubted an experienced operator like Niko would not have anticipated this was going to be a problem, but he couldn’t yet see the angle.

“OK. Well, this is absolutely not what I needed to hear. How long do you think this FX problem is going to last? A few weeks?”

“Yes, maybe a few weeks. Or maybe a few months, until the election is over. You never know.”

“A FEW MONTHS!! You mean EcoRail is going to sit around doing nothing with no steel for months!!! Niko.. Wow. This is not good. Really not good!” Erik was fuming.

“One solution is Turkana Trust could wire additional money to MCB and we pay the South Africans directly from Mauritius. It would be another loan to EcoRail. Then when the FX markets are working again, we pay back the extra loan. The money is still there in Zim. We just wire it back to MCB.”

“I am absolutely not sending EcoRail more money. That is definitely not the solution.”

“Look. I only said several months as the worst-case scenario. It could resolve itself sooner. And you need to learn to not get so worked up. You’ll get your trains. Just be patient.” Niko added with a touch of edge to his voice to remind Erik he had no leverage in the situation and should cool his jets.

“Thank you Niko. This is absolutely terrible news. Thank you for this update. Now I have to make some awful phone calls. Good bye.” Erik said ending the call.

Who to call first? Maybe Claire. Maybe she could delay again and not bring up EcoRail in the meeting.

“Claire. Hi.”

“Hey. How was the tour? Did they show you around?”

“The tour was great. Thank you. I need to talk about something else. About your update with the IFC.”

“What about it?...” Claire said her voice changing to ice.

“Is there anyway you can not update the IFC about the deal with EcoRail just now? Just put it off again for one more meeting?”

“No way. We signed the final contract with EcoRail and there is a schedule of upcoming payments which the IFC is going to have to approve. Which means I have to bring it up. I have to tell them. What’s the problem?”

“Well, it turns out there is an FX problem in Zimbabwe. Apparently, it’s impossible to get money out of the country until after the next election. Which means EcoRail is having trouble buying materials and it’s causing delays. Maybe a few months of delays.

“A few months of delays? Is this a joke Erik? We have literally just signed the agreement with them and there are already going to be months of delays?”

“I was thinking maybe East Africa Rail can buy the materials itself and then ship them to Zimbabwe so EcoRail can use them.”

“Hors de question! East Africa Rail is not some circus, unlike your bank, where we can wheel and deal and send money all over the place buying train parts. Everything is by the book. Every line item. I’ve done a lot of irregular things already because of you and put myself at great risk. At this point I have to go ahead with the meeting and notify the IFC we’ve switched from CERS to EcoRail for the rolling stock. And you on your end are going to have to sort this out. For the sake of both of us.” Claire added hanging up.

Erik put the phone down and stared at the sky. He could see the cascade of events which was about to unfold. The IFC was going to look into EcoRail, see the FX problems, and see the delays right out of the gate. Question everything. Halt all further funding. Order a full review of the project, which would take 10-12 months (at least), and Turkana would then have to reclassify the East Africa loan as non-performing.

In the middle of the scrublands of Mukueni Country Erik was having an anxiety attack.

And he still had to call Dwight. He looked down at the phone in his hand. At this moment he would almost rather die than have the next conversation.

“Dwight. Hi. It’s Erik.”

“Erik! Hey! What’s up?” Dwight was in a good mood for some reason.

“Do you have a second? I need to talk to you about something.”

“What?” Dwight replied curtly instantly knowing Erik was about to deliver something he did not what to hear.

“We have a problem with EcoRail. Niko says there are problems with the Zim FX market and it’s making it difficult to source parts and materials and there are going to be delays until this works itself out. Maybe a few months.”

“OK. That sounds annoying, but manageable. Is there some bigger problem because of this?”

Erik then laid out the series of events he was worried this delay was going to trigger.

Like in Shanghai what followed next was an eruption. This time with more personal insults layered in about Erik’s numerous failures in life and how Dwight should never have hired him and should never have trusted Erik’s analysis on Turkana and invested in a failing African bank. Like in Shanghai Erik held the phone away from his ear and stared out at the clouds and riverbed and the rail line while Dwight yelled down the phone.

In hindsight maybe he shouldn’t have given Dwight the full picture that day of what he thought would unfold. But he had been stressed and anxious wanted to give Dwight a full no BS assessment of the situation. That was how it worked on trading desk. Don’t sugar coat it. Tell it how it is and take action.

After the call was over Erik was silent. He wanted to throw his phone in the dirt. Furious with himself about everything. He kicked some stones instead. Then walked back to the Landcruiser.

When he was in the back seat the driver asked him softly if everything was ok. He had seen Erik on the phone. Seen he was upset. Seen him kicking stones.

“Is everything OK sir?”

“Yes. I guess so.” Erik said sarcastically. “Just getting really tired of having to solve one impossible problem after another.”

“I know it’s hard. It’s Africa. You’ll get better at it with time,” his driver said smiling at him in the rearview mirror.

Erik was in such a bad mood. The comment did make him laugh though.

“Alright. Enough of this. Let’s get back to Nairobi.”

Next: Ch.9

I’m not wild about this view, but let’s go through it.

The Backdrop: Inflation never died.

Think back to pre-COVID. If I told I had a crystal ball and the Fed was going to raise rates from 0% to 5%, you would have said the economy would crash. No way consumer and businesses can withstand a yield shock like that.

But we did.

I’m always interested in the dog that doesn’t bark.

After the Fed raised rates to 5% we didn’t get the deflationary crash everyone expected. And inflation never went back to sub 2%, despite all the Fed predictions that it would.

Instead inflation stabilised around 3%.

And US 10 year yields hovered in the 4-5% range.

Which creates a concerning chart. A chart which suggests we are in a new era. An era of rising yields. And it’s just a matter of time before we get the next move higher.

Here are the three trends I see converging.

#1 The US Economy is Running Hot.

Every month I try to save you from the bears by putting together Boom Charts presentations which track the economic acceleration underway.

What’s driving it?

We have government deficits running 5-6% (which normally would be recessionary stimulus), on top of corporate capex through the roof because of a revolutionary new technology.

Governments and companies spending their brains out.

Added to this is something the market doesn’t fully appreciate yet.

Banks in the Europe, the US and Japan are back to lending again. Banks are the true money creators. It’s taken a long time, but the post-GFC winter is thawing and banks are getting their animal spirits back. It’s Trump, it’s Warsh, it’s a whole change in tone from the top that it’s OK to take risk.

And now they are.

Total loan growth for US commercial banks is running at 10%, compared with 3-5% previously. Commercial and Industrial loans are especially hot (+15-20%).

I also see another trend. A pick up in consumer lending. Both consumers and corporates have been on a 15 year deleveraging trend since the GFC. Which puts them in the position, that if they want to borrow, they can. The consumer has an amazing balance sheet, a job, wage increases and a debt service ratio at the low end of the range. So consumers are starting to borrow again.

Put it all together (government spending, corporate spending, loan growth) and you get 4% GDP growth.

That’s not China. It’s the US. Bam!

Reason #1 rates can go higher is because we have strong hot economic growth.

#2 Delayed effect of Tariffs

Do you remember all the panic last year around tariffs and how they were going to cause an inflationary spike? Instead inflation was fine, bond yields went nowhere and the market roofed it. That’s when we proposed something radical (S&P $10,000).

But I want to share something from the EM playbook.

When the FX crashes in an EM economy consumer stocks initially get killed. Right after the FX move consumer companies are careful to not shock the consumer. Their costs go up, but they can’t pass it on to their customers. Margins get hammered. But the trade is that that is the time to buy them. Over the next 12-18 months they raise prices gradually and claw back their margin. Revenues grow, margins expand and earnings beat expectations. This is the trade many miss. They assume the margin compression is permanent.

I think we might be seeing this in the US. Tariffs went up but companies were careful about passing it on to consumers right away. Plus they had existing lower cost inventory which they could use to smooth out the effect. But now 1 year later we are seeing the costs come through.

When you look at the PMI reports for Manufacturing and Services the prices component is through the roof.

Everyone is raising prices across the board.

It could be a mix of things, including the strong economy, but I think this is also the tariff impact finally coming through.

A trading thought: Everyone hates consumer discretionary. But if this is like EM where consumer companies gradually raise prices and get their margins back, plus the consumer is starting to borrow again because the economy is pumping… could this be the surprise outperformance sector? Short semis- long consumer?

Reason #2 is the delayed inflationary impact from tariffs finally coming through.

Now reason #3 interest rates go higher.

#3 Energy and Food

The Iran War seems to be stuck in a deadlock. Is this something we need to get used to for the long-term? Do we get another leg higher in energy prices before this is finally resolved?

The move in gasoline prices resembles the early part of the move in 2022.

Same thing with urea prices.

We are getting a pop in energy driven inflation readings.

Overall inflation was +3.3% in March then +3.8% in April. That’s getting close to 4%.

In the context of the last 30 years $100 Brent is not that high, especially given overall inflation ($15 for a beer). That’s why the move to $100 hasn’t been a big deal for the market. ‘Expensive’ oil prices today would be in the $150-200/barrel range.

Putting it all together energy and food prices can go higher in absolute terms which feeds through into CPI for several more months.

Higher energy and food prices are going to be on top of price increases businesses are already pushing through to pay for higher tariffs.

Which means we could have inflation readings in the +4% range for a sustained period.

And because the economy is running hot, and the Fed will be afraid to raise rates, the 10 year rises to 6%.

Let’s leave it there and have a think about it.

Have a good weekend and remember The Nairobi Solution Ch.8 drops on Sunday.

Here’s Chapter 7 to get you caught up.

Erik

You should own hardware instead.

Right?

This is the consensus view. In fact our FoF friend says the software short position across her hedge fund holdings is so pervasive it could be a systemic risk. She’s worried she needs to go long as a hedge. Just in case (HF Manager Notes).

The first reaction is not always right.

We have a disruptive technology on our hands, and in our podcast research, ETF theme trading era, everyone wants a clever, insightful answer, and they want it now.

The market’s initial reaction to the rise of vibe coding and the concept of agentic workflows which didn’t need a software interface was that software as a service would get disrupted. Anyone would be able to make their own custom software and agents wouldn’t need software subscriptions. Or, if AI did need a subscription it would cost a lot less than human subscriptions. The existing software model would be disrupted.

From this line of thought the conclusion ‘Software is an AI loser’ quickly became a theme. The IGV ETF got immediately smashed. Nobody wanted to be the last to realise their software stock was actually a newspaper company. They sold first and asked questions later.

Now that the selling rush is over, and everyone is short, the market has time to work out the nuances of how software will be incorporated into AI workflows, and whether it’s a benefit or a negative. The picture is nuanced and I don’t think it’s all bad. In fact it mostly likely positive.

Here are 10 bull points to consider about software.

#1 Estimate revisions are positive. Despite the rapid adoption of AI (the fastest adoption of anything ever according to AMD) earnings estimates for most software companies are going up. This is the biggest warning sign that shorting software companies is going to be a mistake.

Let’s focus on some hated companies, like Adobe. Everyone knows AI can make images without help from Adobe, and we will also create our own video editing software. Yet, the earnings outlook for Adobe is remarkably stable, and growthy (13% CAGR).

Same with Salesforce. We all know we will create our own CRM’s in the future with AI and yet, somehow analysts are raising earnings estimates for Salesforce, especially 2029 estimates (when Salesforce should be the most dead). Analysts forecast 17% earnings growth.

Same thing with tax software (Intuit). Surely that should be dead by 2029 too. And yet earnings estimates are stable/rising and imply 16% annual growth.

#2 All software is not Bloomberg: Part of the reason finance professionals are so negative on software is the software they use everyday (Bloomberg and Factset) is the most challenged. Analysts use Bloomberg. It’s what they know. They don’t use Salesforce or Autodesk. Bloomberg and Factset are super expensive seat licenses which repackage public information. That’s going to be a hard business model to repurpose for AI workflows and come out revenue neutral. But all software is not Bloomberg.

#3 Software usage is going to explode. AI and Software are complimentary goods. Software is deterministic while AI is probabilistic. When you run software, (unless randomness is specifically inserted) you get the same outcome every time. That’s valuable and usually what you want. When you prompt AI you don’t get the same outcome every time. Each has its strengths. Many steps of an AI workflow need to be deterministic and use software. As AI workflows increase, so will the use of software. We will have an explosion in the AI use of software.

#4 Just because you can, doesn’t mean you will: Vibe coding is amazing. But just because I can prompt an AI to build my own version of Salesforce, it doesn’t mean I want to, or will. The same way just because I have a kitchen and can cook my own food, doesn’t mean I no longer go to restaurants.

Vibe coding a one-off software prototype also gives no consideration to the incredible amount of maintenance work and debugging when a large number of 3rd party users use software. It’s a never ending task. Running a large software company is not the same as creating a piece of software.

The more sustainable outcome is that new vibe coding developers will build software specific to their business and add in supporting software tools as API’s. This is the model where you build you a core app, but bring in 3rd party services like Google Maps for location, Stripe for payments, Youtube to embed video, etc. You don’t try to build (and maintain) all these 3rd party software integrations yourself even if theoretically you could.

Instead, you focus on the parts of the app which are core to your offering. For example, Salesforce has created their AgentForce suite of AI customer service agents to service this model. If you need a customer support agent for your app, don’t try and build one on your own, just plug in one of theirs, and let Salesforce maintain it.

Vibe coding doesn’t replace existing software, it instead creates new use cases through backend API integrations. The software companies just need to make sure they adapt and create these backend versions of their products.

#5 Rise of the Solopreneur: New business formation has exploded since COVID. There are a laundry list of reasons for this; the need for side hustles to survive, the rise of remote work, wokeness in the workplace, job insecurity, and most importantly the ability to run businesses with the help of AI. AI is your expert partner for everything you don’t know.

For the software industry small business formation is a gold mine. Solopreneurs need tax software and email marketing programs (Intuit). They need content studios to make sure their logos and images are consistent across platforms (Adobe), they need AI customer support agents (Salesforce), and a cloud database for their AI agents (Snowflake). This is what the bears miss. They are picking apart whether an LLM can do some of these workflows. They are not thinking about the new entrepreneur who suddenly has to do business accounting, or manage employees and has no interest in creating their own software.

The bears are also missing how this whole segment of users is going to continue to grow in the future. The flip side to the white collar workers getting laid off by AI is they all have to start companies. Look at the rise in new ‘professional services’ companies.

#6 Clouds as Agent Platforms and Marketplaces:

Read more

Erik and his team had arrived at 9 am for their regulatory review with the Central Bank of Kenya. They were seated in a large boardroom across from the regulatory team. This was Erik’s second meeting with Daniel Wainaina, head of Kenyan bank regulation.

Daniel was tall, good looking, liked fancy suits, and took his bank regulation seriously. Everything was by the book. Their initial meeting when Erik had first arrived in Nairobi had been a dressing down. Daniel was not happy about the outsized single loan exposure to East Africa Rail. He wanted this loan monitored very carefully. Daniel had also been upset with how Turkana was overdue on several filings. Also the bank needed to increase its liquidity with the Central Bank. It was a laundry list of problems, but Erik and his CFO, Lloyd, had been working through them.

Erik was hoping that in this meeting Daniel would appreciate the progress they had made, but right now it was hard to tell. Daniel was quiet with his head down, studiously reading whatever report was in front of him. No one was saying anything. Finally, Daniel finished reading. Took off his glasses and looked up at Erik and his team.

“This is still not an acceptable situation, but it’s better than before. The bank is current on its filings, the reserves with the CBK are back to more acceptable levels. The new equity from Belway Capital has restored the Tier 1 ratio back to the minimum level, and the bank’s risk processes are improving, but we still don’t want to see any new expansion of the balance sheet. If the bank’s next review goes well and the improvements continue, maybe at that point Turkana can engage again in new commercial lending. But, overall, we are pleased with the progress of the bank.”

This was Daniel’s way of saying ‘good job’. The review had gone well. Obviously, there was the small problem of the $12 million railway loan Erik had just promised Niko in Zimbabwe, but one thing at a time. Erik and Lloyd thanked Daniel for his time and all the hard work the regulatory team had put into their review and gratefully exited the building.

The Turkana management team proceeded to a nearby restaurant for a celebratory lunch. They decided getting Daniel Wanaina’s begrudging approval deserved some Tusker beer as well.

Two beers and a plate of chicken bones later Lloyd leaned over and said “Erik, I don’t want to ruin the celebration, but there’s something I wanted to flag to you.”

“Yes. Shoot. What is it?” Erik said wiping BBQ sauce off his mouth.

“You know Horizon?”

“Of course. Well kind of. They are the second biggest bank. The CEO is John Kinyua. Why?”

“Recently, they have started an aggressive deposit campaign in Turkana. They never used to be there, but for some reason now they have two branches and are paying 1% more than us on savings accounts. It’s getting a lot of buzz. My family is back there and everyone’s talking about it.”

“A full 1% more? That’s kind of aggressive. And you’re saying Horizon didn’t used to have branches in Turkana, but now they have 2?” Erik was still new to Kenya and didn’t know the lay of the land and competitive dynamics like Lloyd.

“Right. Most of the time the big banks never care about Turkana. It’s poor and there is no one to lend to, but Horizon started moving in recently. It’s not a problem yet, but if they keep getting traction, and we have to counter, it will eat into our deposit margins. Which is why I wanted to flag it.”

Erik was thinking. Why was Horizon making a move now? And why so aggressively? Was it because this John Kinyua saw Turkana had a new outside CEO and thought there was a weakness to exploit? But they were such small fish in the scheme of things. A guy like John Kinyua must have bigger strategic issues than trying to take market share in remote areas like Turkana. Erik sensed something else was at play, but wasn’t sure what.

“Lloyd, I think I’m going to see if I can have dinner with Mr. Kinyua. I’ll poke around a bit, see if he says anything. I might offer that he doesn’t need to be so aggressive. It probably goes nowhere, but let’s see. Rajiv always had good connections, but I don’t know anyone. It would be good for me to get to know these other bank CEO’s.”

“Like you said Kinyua probably won’t say anything, but give it a try. I’ll get his email for you. Ask him to meet you for dinner at INTI. It’s where they all go.”

John Kinyua had been surprisingly available and was free for dinner on Friday that same week. Erik was excited to meet him. Horizon Bank was a big underdog success story.

The biggest bank in Kenya had always been Kenya Commercial Bank (KCB). KCB was the government owned bank which automatically got all the government deposit accounts and payments business. KCB also got the big corporate loans. In contrast to KCB John Kinyua had started Horizon with a different market position and advertising.

Horizon was to be a bank for the individuals and small businesses. While KCB instituted high account balance minimums and fees to discourage small customers clogging up their branches, Horizon was the opposite. They courted these customers.

Horizon Bank was also highly innovative. The bank had created an agent system where small shop owners who sold Safaricom airtime minutes and processed Mpesa mobile money transactions could also make withdrawals and deposits for people with Horizon accounts. It was the same system behind the Safaricom mobile money, but applied to bank accounts. It meant small mobile money vendors with shops everywhere also became mini-Horizon bank branches. With strategies like this Horizon grew like a weed to become the second largest bank. Later Horizon was first to take advantage of mobile banking and their own mobile payments network. It would be interesting to meet such a dynamic bank CEO like John Kinyua even if it was because he was coming eat Turkana’s lunch.

On Friday Erik’s driver dropped him off outside INTI. INTI was a Japanese-Peruvian restaurant on the top floor of a building with views out over Nairobi. Erik was wearing a suit for the occasion as well as the new Paul Smith shoes Nicole had bought him. He took the elevator up to the 6^th floor. On the sixth floor the elevators opened up directly into the restaurant. There was a long bar down the left side of the room with tables in the middle. Then at the back of the room was a terrace looking out over the Nairobi skyline sparkling in the evening. It was pretty.

The hostess led him past the tables in the main room and out to a private table on the terrace. John was already there. When he saw Erik, he stood up from the table with a wide smile and a handshake.

“Erik! Nice to meet you! Welcome to Nairobi. I know you’ve been here a while, but you know what I mean. I’m glad you reached out.”

“Hello. Yes. I guess I’ve been here 9 months, but I still feel new. Thank you for your flexibility and being able to meet so soon.”

They made polite chit chat and John was really nice. He asked where Erik was living in Nairobi and gave him some suggestions of other neighbourhoods to consider. He gave him another route to the office with less traffic. They even discussed their mutual nemesis, Daniel Wanaiana. John had helpful pointers there as well. Erik really liked getting to know him, but eventually he had to get around to the main topic he wanted to ask.

“John, I really appreciate all of this good advice. Thank you. But may I ask you something about Horizon?”

“Yes. Go ahead.”

‘Lately, Horizon has been making a big push into Turkana County. You’ve never had a presence there, but now of all a sudden you’re paying 8% on savings accounts and opening new branches. May I ask what this is about? It seems rather sudden.”

“Well of course we are a big nationwide bank and are expanding everywhere, but you are right. Turkana has become of special interest to us and it’s not a coincidence. You see, I know Rajiv quite well and he naturally came to me looking for advice after you fired him. We had lots of chats together, and he even offered to sell us his family’s stake. During those exploratory conversations we learned a lot about your bank. We hadn’t realised the healthy deposit margins the bank was making in Turkana County. We concluded we didn’t want to buy a minority stake in the bank, but maybe the deposit market in Turkana County was more profitable than we realised. So we decided to make a push. You understand that business is business of course.”

Rajiv had tried to sell his stake to Horizon. That explained everything. He’d had a feeling that Dwight firing Rajiv was going to lead to some problems. Rajiv was too well connected.

“No. You’re right. Business is business. And it makes sense to expand into Turkana. I just don’t think you need to be quite so aggressive on your savings product. I’m sure you could pay 50bps less and still grow your market share. It might be better for both of us.”

“Thank you for the advice. And now can I give you some advice? Because I think I like you.”

Erik nodded.

“Turkana Trust has two fundamental problems. Maybe more, but 2 are obvious. First, it has a small but profitable deposit franchise in a remote county. However, you have an expensive branch network and aren’t using technology. This leaves you vulnerable to getting undercut by more efficient players using mobile banking. The second problem is that there are no good borrowers in Turkana so you have to come to Nairobi and compete with the bigger banks for the good borrowers. This means you always have to take on the riskier loans and price them lower than everyone else to win business. Take the rail loan for example. We wanted that loan too, and it would have been a better fit for a large bank like Horizon. But Rajiv was desperate to grow his family bank and so went out on the risk curve, undercut all the other banks on spread and got the business. But it’s a Pyrrhic victory. The loan is too big for the bank and, as you are probably finding out, is causing a lot of regulatory scrutiny. This is Africa. Delays and problems are guaranteed. When problems pop up, as they inevitably will, there is a high chance that one loan will bring down your bank. Sorry to be so negative, but I expect you will have a lot on your hands, and your time in Nairobi will be stressful.”

Boy did John Kinyua hit the nail on the head. There was a reason he was the best banker in Kenya.

Erik took a moment to finish what he was chewing.

“John, thank you for your advice. And thank you for your assessment of Turkana Trust. It’s right on the money. And yes when Belway Capital invested in the bank we knew the railway loan was a risk which needed to be managed, but for us it was a risk worth taking. We are managing the loan, and I’ll admit it has been difficult, but I’m happy to say the project is basically on track and coming along.”

“Well cheers to that!” John said raising his wine glass. “All of Kenya wants it to succeed. We are all cheering for you.”

John and Erik clinked their wine glasses and toasted to the future success of East Africa Rail. Erik looked out and admired the Nairobi skyline, which at night looked like any other modern city. For the first time since coming to Nairobi he felt like things might work out.

Previous: Chapter 6

Next: Chapter 8

Well I know you do, because we have been calling for markets to make new highs since the Hormuz lows (4 reasons we make new highs, Insanity Trades), but I’m talking about the rest of the non-YWR world.

This upside crash in the NASDAQ is the last thing the bears expected.

I know it’s painful but take a moment to remember all the bear calls from the last 2 months. While events are fresh in our minds let’s remind ourselves of the key market lessons.

Lesson 1: At the bottom of the market the downside is always clear and logical. It’s why bears always sound smart and bulls seem naive (Stupidly Bullish). It’s because the problems are obvious while the solutions aren’t. The bulls might not sound smart but they make more money.

Lesson 2: Always take sentiment and positioning into account. The future is unknown, but the risk/reward of unexpected outcomes is highly dependent on how investors are already positioned.

Remember these lessons. We’ll come back to them.

Accelerating AI Growth

AMD gave a presentation this week on the growth of AI.

I attached a copy at the bottom of the post.

Their message is we’ve never seen anything like this.

AI usage reached 1 billion users in 3 years, while it took the internet 10 years. In the next 5 years we will add 4 billion new users. Take that in. Everything so far has been 1 billion users. We are about to add the rest of the world.

Compute demand is going exponential. Computation is growing so quickly, +100X, they had to invent a new word for it. ‘YottaFlops’. We go from 100 ZettaFlops in 2025 to 10 YottaFlops by 2030. It’s more users (+4 billion) all using AI more.

Customer growth is huge, but the real power trend is Enterprise adoption. Yes, lots of companies have people using chatbots, but AMD estimates only 5% of companies have moved to AI workflows. AMD has worked with AI-first companies and seen their usage, which makes them excited that enterprise AI usage is a big opportunity.

Enterprise spend on AI is only 4% of global enterprise software spend. $38bn out of $1 trillion.

Think about that.

Biggest tech trend ever and companies are still spending 96% of their IT budget on legacy things like Microsoft, software licenses, or whatever.

The gasoline on the AI trend is that it keeps getting smarter. AI is coding itself. Every 4 months we get new models able to do things previously thought unimaginable (images, coding, video, financial modelling).

And then around the corner is robotics.

So it’s super bullish and exciting.

And AMD is trading at 35x.

But it’s not just AMD.

This 100X growth to 10 YottaFlops drives everything.

It’s the story of the whole market.

Playing Bottlenecks

There’s a $700bn AI gold rush going on and everyone is scrambling to play it. Everyone is hunting for the bottlenecks.

Initially the bottleneck was GPU’s (NVDA, AMD, TSMC).

Then the bottleneck was memory (SK Hynix, Samsung, Micron).

As datacenter construction trend got underway the bottlenecks moved to the physical world. Utility grid connections, distributed power (CAT, GE Vernova, Siemens Energy, Mitsubishi Heavy), electrical equipment (Schneider Electric, Eaton), optical connectors (Amphenol, Coherent, Lumentum) and even human capital (electrical engineers).

GE Vernova made an illustrative comment that in the last 18 months there was a ‘run on the bank’ for turbines. Everyone had to have turbines.

These AI bottleneck stocks are going vertical.

But we should be cautious about this trend.

We are in the heat of the moment.

The big hyperscalers came out with 2025 earnings results and instead of guiding down 2026 Capex (which the bears had been expecting), they did the opposite. Capex budgets went even higher. Unbelievably, $500bn in spending went to $700bn.

General investor consensus is the hyperscalers are in an existential AI arms race and will continue to plough every dollar of free cash flow into new data centers. Spending could reach $1 trillion by 2030.

But the risk to all this bullishness is we have had a huge implosion in hyperscaler free cash flows from $224bn in 2023 to just $65bn in 2026. And the delta in investment from here could be a lot more moderate. Maybe spending grows much slowly, or even flatlines. Who knows the exact number, but it’s hard to repeat the explosive move in capex expectations from $200bn to $700bn.

So that’s a risk to be mindful of.

But let’s think ahead.

There is a construction surge underway.

What happens when the bulk of these mega campuses (Hyperion, Stargate, Prometheus) are constructed and online?

What happens when all those GE turbines fire up?

Then the bottleneck shifts to something else.

A bottleneck which lasts 15-20 years.

A bottleneck nobody likes or wants to own.

• The Final Bottleneck

• Domino 1

• Domino 2

• Domino 3

• The Inverse of the Crash

• The Pushback

• Remember your lessons

Read more

It was early evening at a bed and breakfast in Harare, Zimbabwe and an older white farmer was recounting war stories from the infamous farm invasions of the early 2000’s. The farmer was telling about the part where his farmhouse had been completely surrounded, and he had had to make a run for it. But one of the invaders caught him, pushed him to the ground, stood over him, and swung an axe towards his head. The blade almost split the farmer’s head open, but instead clipped his ear. After the axe swing missed he had got up and made a run for it. He had survived, but his ear ended in a straight line just above his eardrum.

While listening to the farmer Erik drank his Castle Lager and reflected on how he never expected this to be his finance career. He was supposed to be an MD at Goldman. Instead he was sitting in Harare drinking beer with a farmer with half an ear. What twists and turns had led to this?

In an unpredictable chain of events Erik could not have predicted, he was on a wild goose chase to Zimbabwe to meet with a business partner of Dwight’s, who supposedly had a locomotive manufacturing business, which would save the railway project in Kenya, which would save the bank Dwight’s hedge fund, Belway Capital, had invested in. And Erik was supposed to meet Dwight’s Zimbabwean business partner tomorrow.

It turned out that Dwight, in one of his other ventures, had been working on a deal to sell wheat from Belway’s farm in South Africa to a major grain distributor in neighbouring Zimbabwe. The owner of the grain distributor was a successful businessman who also owned a lot of other businesses. One of these other businesses was a struggling manufacturer of railway locomotives. This seemed an unbelievable coincidence at first, that there would be a train manufacturing company Zimbabwe, but he learned subsequently that Zimbabwe had a strong history in manufacturing which dated back to the Rhodesian War.

During the Rhodesian War with Mugabe’s National Liberation Army the country had been sanctioned and cut off from the rest of the world. Without access to manufactured goods from Europe the Rhodesians had had to learn to manufacture their own cars, tanks, weapons and aircraft. Which had created a diverse manufacturing industry in the middle of Africa. This manufacturing heritage from the Rhodesian War still continued on, but was slowly dying out.

Dwight’s business partner, Mr. Niko Mavropoulos, was of Cypriot heritage and rumoured to be worth over $100 million with money deposited offshore in Switzerland. Erik didn’t really care how much money this Niko guy had, or where he hid it. He just hoped this story about a train manufacturing business here in Zimbabwe was true, because right now listening to the half-eared farmer it felt highly unlikely.

Erik thanked his host for the fascinating stories, dinner and the beer and excused himself to go to bed.

The next morning Erik took a taxi the B&B had arranged for him a short distance to the address Dwight had emailed him. When the taxi came to a stop Erik asked the driver to double check the address was correct.

“Are you sure this is the place?”

This looked like a house not an office. It was a 1 level suburban house surrounded by a large garden in both the front and back. Like something out of 1950’s California.

“No this is correct. This is Mr. Niko’s office,” the driver assured him.

Erik got out of the taxi with his Orvis computer bag and walked up the driveway to the house. Erik noticed a brown, beaten-up 1970’s Datsun parked at the top of the driveway. This couldn’t be right.

The front door was already open and led into what appeared to be a craft store full of candles and locally made leather handbags. There was a middle-aged white woman behind the desk.

“Hi. I’m sorry to bother you. I’m not sure I’m in the right place, but I’m here to see a Mr. Niko Mavropoulos. My name is Erik.”

“Yes. Please wait just a minute. I’ll tell Niko you’re here,” whereupon she came out from behind the desk and disappeared down a hallway.

Erik wandered around the room looking at the candles. Maybe he should buy one for Nicole he thought. The books say you are supposed to buy things when you are on trips. Would she like a candle, or would she say it was useless clutter?

“Erik! Nice to meet you!”

He snapped out of his candle pondering to see a 50-year-old balding man in a worn out T-shirt and baggy pants smiling and walking towards him with his hand out. Erik shook his hand automatically, but was having a hard time processing that this was Niko the multi-millionaire tycoon. But Niko’s immediate impression was engaging and friendly. It was hard not to smile in return.

“Follow me. Have you had breakfast? Can I offer you anything? Tea or coffee?” Niko was talking rapid fire as he led them down the hallway, through a back room and out into the garden behind his house. They continued walking across the grass to a table and chairs surrounded by bushes and trees. A private garden meeting room. As soon as they sat down someone came out and asked them how they would like their coffee.

“So how is Dwight?” Niko asked? “That guy is something isn’t he?”

“Dwight’s good,” Erik replied not nothing how to respond to the second part.

“I like doing business with him. Love how direct he is.” Niko went on. “So how can I help? Dwight said you might be in the market for some trains?”

“Most likely, yes. I’m not sure how much Dwight told you, but we are heavily involved in the East Africa Rail project up in Kenya. And we’ve had a misunderstanding of sorts with one of our Chinese suppliers and so exploring alternatives. Dwight said you might have a potential solution.”

“I do. Let me explain. One of my companies is EcoRail. It used to be a big business. Not so much now. But back in the day, it built most of the locomotives and rolling stock for National Railway of Zimbabwe. Over time NRZ deteriorated, like everything in Zim, and so did EcoRail. NRZ has fallen into disrepair and barely operates anymore. To keep EcoRail going we pivoted to mining and have been building trains for the copper mines up in Zambia.”

They took a break as their coffees were served.

“They ship copper out of Zambia by train?” Erik asked. “I somehow thought it was by truck.”

“They do both. There is no easy way to get copper out of Zambia. It’s a long way to the coast in any direction. It’s worse for the DRC, but at least Zambia has three rail routes. There is the TAZARA line which heads east out of Zambia to the port of Dar es Salaam in Tanzania. TAZARA was built by the Chinese in the 1970’s. Interestingly, there are discussions going on with the Chinese right now to modernise it. It would be a big project. Then there is the main route south through Zimbabwe to Durban, which is over 3,000 km. Then the route west to Angola using the new Lobito railway.”

African rail logistics was increasingly interesting to Erik. Travelling around Africa for Turkana Trust and working on the East Africa Rail project he’d learned to appreciate the incredible distances in Africa and the importance of better railroads to the continent’s economic development.

“Could EcoRail potentially supply rolling stock for the Kenya project? It’s a big project. And you’d be contracting with the East Africa Rail SPV. It’s an IFC backed venture. They are looking for 8 locomotives, 40 passenger coaches and 80 intermodal container wagons. I imagine they could stage it in tranches. But can EcoRail handle something of this scale?

“Theoretically, yes. But the business has been in a state of semi—hibernation. We would need to buy new tools, expand our manufacturing facilities and bring on new workers, but yes, we could do it.”

“So it’s doable?”

“Yes. Don’t worry. We will find a way. It’s what we are famous for in Zimbabwe. There might be a few financial matters we would need help with though. And East Africa Rail will need to be patient with us as we ramp up. But the answer is ‘yes’, we can build your trains for you. And think about it. For the IFC it will be great PR to switch to EcoRail. They can spin it as ‘African trains’ for an ‘African railroad’.”

Erik could care less about the IFC’s PR.

“What do you mean by ‘financial matters you need help with’?” Erik asked, feeling like he was about to hear the catch to this amazing solution to his problem.

“Well as you may understand Zimbabwe is not in the best of graces with the international financial community. As a Zimbabwean company EcoRail has a hard time getting US$ financing. We did a deal 7 years ago to borrow money from Standard Bank in South Africa. This was to finance for our train leasing service for the mines in Zambia. Rather than buy trains we offer that the mines can lease them from us. It’s back-to-back. We take in the lease payments and pay back Standard Bank. It was a 7-year loan and now they don’t want to roll it. They want their money back, so we need refinancing. If we can’t refinance the loan, EcoRail can’t stay in business.”

“How much are we talking?”

“Not too much. $10 million. $10 million for the lease deal. But then we probably also need $1-2 million to fix up the business to accommodate such a big order. We would need to buy new equipment, new heavy lift cranes, and expand the workshop. That would get us started. Then we will negotiate with East Africa Rail for the main purchase terms.”

This was the catch. Niko wanted a loan for his struggling train leasing business and another $2 million for EcoRail. All before he was about to get a life changing order from East Africa Rail.

Erik thought back to his meeting with the Kenyan bank regulators. They had been clear that Turkana was on strict probation. The bank was prohibited from growing the loan book or adding new risk assets. The regulators in Nairobi would flip their lid if they saw he’d made $12 million in new loans to a company in Zimbabwe. But Erik was stuck between a rock and a hard place.

Niko was looking down pretending to be focused on his coffee. Erik assumed he was trying to hide his smile.

“OK. Here’s the deal. Turkana Trust will lend the $12 million, but two things. First, you have to wait until mid-July. I need to print the June financials. The bank cannot have this loan on the books for the half year filings. After June we can disburse the money. Second. You need to set up a Mauritian company for this. If I lend directly to a Zimbabwean entity, it will be an immediate red flag.”

“We can do that. Totally acceptable. This is going to work out great for both of us.”

Erik was less sure. It was always like this in Africa. You solve one problem and it creates another. He had the rolling stock problem potentially solved, but now had figure out how to accommodate a $12 million Zimbabwe loan in Turkana’s balance sheet in a way which wasn’t going to show up in the regulatory filings. He would have to find a way to reduce exposures elsewhere in the bank. But at least he had a few months to figure it out. It was like spinning plates.

“Would you like to take a drive? I can show you the EcoRail workshop and give you a quick tour of Harare on the way.”

They finished their coffees and Niko led them back through the house and out to the driveway where he gestured to the 1970’s Datsun.

“So that is his car!” Erik thought. “A Zimbabwean multi-millionaire dresses in a ratty T-shirt and drives a 70’s Datsun.”

On their way to the train workshop Niko explained why Harare was unlike other African cities. The early Rhodesians had called it Salisbury. They had planned the city to be like back home in England with wide streets, nice residential neighbourhoods and lots of parks and golf courses.

Erik saw what Niko was saying. Harare was more spread out, and greener than Nairobi. It did have a lot of potential.

As they drove Niko pointed to the large green campus of the University of Zimbabwe. “You won’t see a university campus like that anywhere else in Africa. One day that will be the Harvard of Africa.”

They started to leave the leafy suburbs and entered an industrial area on the south end of town. As they drove Erik stared out the window at the people walking along the side of the road, and jammed into white passenger vans. It looked tough. Walking long distances everywhere along the side of the road in the dust. Or being one of 10 people jammed into a van meant to carry 6 people with your face smashed against the window.

Erik realised why Niko wore T-shirts and drove around in a 70’s Datsun. It was smart. He wanted to keep both his ears.

Eventually, the Datsun pulled up to large industrial building partially obscured behind a metal fence. Niko said this whole area was the National Railways of Zimbabwe switching yard. Surrounding them were numerous rail spurs running in different directions. One rail line led through the front gate and into the main EcoRail workshop. These rail lines must be how the finished trains left the workshop and were delivered to the mines in Zambia.

The front gate was open and they could hear clanking and banging noises coming from inside a large, corrugated metal building. Like the other buildings in Harare it appeared to date from the 1980’s and needed investment.

In the middle of the workshop was a semi-finished locomotive. Next to the locomotive was a welder with his torch attaching a metal plate to its side. The locomotive wasn’t sleek, modern or beautiful, Erik thought, but if it could move copper out of Zambia, then it could move a 20-foot shipping container.

Erik could see why Niko needed the $2 million loan. In order to work on multiple locomotives at once EcoRail would have to expand the workshop plus use some of the abandoned facilities at the back of the property. For EcoRail it would be a big change to go from tinkering away on 1 locomotive at a time to building 10 locomotives plus coaches and intermodal container wagons. Looking at the sleepy operation in front of him Erik was slightly worried how it would work out. But that was Niko’s problem. For now, he had confirmed EcoRail existed and had a functioning train workshop. They would have to go with it.

“Thanks Niko. Thank you for the tour. I see what you mean about needing to reinvest in the business for such a large order. I should probably get back to the B&B to pick up my luggage then get to the airport. Let’s get past June then I can get you the loan. In meantime set up your Mauritian entity. Claire at East Africa Rail will contact you and start work on the procurement order. It’s the IFC so expect tons of paperwork and bureaucracy, but it will happen.”

Later at the airport while waiting for his flight, Erik reflected that he had really liked his visit to Zimbabwe. It was better than its reputation.

Now back to Nairobi and next week’s meeting with the regulator.

Previous: Chapter 5

Next: Chapter 7

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This week I met with my favorite fund of funds manager. She’s great. I share my views and she shares her summary of what the fund managers are saying. I also love her spin on things, because she smiles, listens and then thinks the complete opposite.

She was the one who called the bottom in the Euro at 1.03 the end of 2024 for the sole reason that nobody she spoke to could think of a single reason for the Euro to go up. None. In fact if you were bullish the Euro at that time they would strap you to a stretcher and wheel you away as a crazy person. Which was why she liked it. Classic YWR Insanity Trade.

Her top 12 takeways:

#1 Went to a hedge fund conference in Rome and the European managers are underweight US because they hate Trump. This is the complete opposite of several years ago when the same managers were all overweight US and bragging about it (while underweight Europe). Suggests the US could continue to do well.

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NASDAQ has ripped a hole in the sky, meanwhile Chinese tech stocks are on their lows.

In the US chip spend is booming. Capex is booming, and cloud revenues are booming too. Revenue growth at the top 3 clouds (AWS, Azure and Google Cloud) is accelerating from 20% growth to 30% growth. The AI’ification of US and European workflows is underway.

So if AI is good for US tech, why isn’t it good for Chinese tech stocks?

Instead of bullishness, we have Tencent, the heart of Chinese tech commerce (payments, games, social media, cloud, online advertising) trading at one of its lowest P/E multiples ever (13.6x).

And there you have a paradox.

Chinese technology in AI and Robotics is going to leapfrog us, and yet nobody wants to own it.

I read Tim Boldt’s takeaways from his visit to the Prosus tech week in China and it genuinely makes me anxious we in the West are not moving fast enough.

The cliché about China is that it copies. What I saw was a country determined not merely to imitate, but to lead - in academic output, in green energy, in EVs, in autonomous driving, in robotics, in agentic workflows, and in the commercialisation of AI. Whether it wins across all those fronts is almost secondary. The important thing is that it is no longer psychologically organising itself as a fast follower. It intends to be first.

-Timo Boldt, Founder of Gousto.

Fear of Involution

But investors are not irrational. They know China is great at tech, but they also know the rule of thumb that nobody makes any money in China. Yes, there will be drone food delivery, autonomous taxis, household robots, NVIDIA level chips… and meanwhile earnings for all of these companies will be negative.

And there is some truth to this. Online retail earnings for Alibaba, Meituan and JD.com have been a bloodbath. And the paid search business for Baidu has been terrible too. These are major tech stocks in the KWEB ETF and it has dragged down interest in Chinese tech.

But I think the baby is getting thrown out with the bathwater, especially with Tencent and Baidu.

Tencent

Tencent is one of the all time greats. It took me a while to appreciate their interlocking business model of social media, games, online advertising and payments combined with WeChat. It has tremendous network effects and why their earnings growth has been consistent over the years.

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Erik kept the phone to his ear, but got up from the desk and walked across the office to close the door before continuing.

“Claire. I need you to keep the problem with the Chinese quiet. Just for now.”

“What do you mean keep it quiet? How am I supposed to do that? Tu es completement fou! I have a board meeting coming up and I’m putting together the packs for the directors. They are going to want to the full status of the project. How am I supposed to not tell them there is a major change in the cost of the rail stock? And that assumes the Chinese will still deal with us after you told them to go stuff themselves in Shanghai”

Claire was uncharacteristically agitated.

“Look technically we are just working through a potential misunderstanding. They sent an alarming letter, but nothing has been decided. We are still working through things. At this point there is no need to startle the board and trigger a big review. Tell them about how the track laying is on schedule. Which is true. And you are moving ahead with procurement of the rolling stock. Which is true. End of meeting. And we move on. Just say that.”

“Erik… you are asking me to conceal material project information from the IFC. Do know how absolutely fucked I am if this comes out?”

“Nothing is going to come out. You and I are the only ones who know about the letter from CERS. I am going to find us a solution for the rail stock.”

“And how are you going to do that? The Chinese are right. The Japanese will be even worse. Where in the world are you going to magically find a low cost supplier of train locomotives on absolutely no notice?”

“I have a potential solution,” Erik lied. “Just don’t blow everything up with the IFC by getting them into a tizzy about the Chinese. Buy me some time, and keep the project on track, it’s what we both need. I’ll figure it out.”

“Possibly, I can fudge my way through this meeting. But that’s it. Not the next one for sure. You have to get this sorted. Do you understand? Otherwise, you know what happens. The funding stops, your loan blows up and your bank with it.”

“I’ll find a supplier,” Erik said with fake confidence. “Goodbye. And thank you!”

Erik released a long breath of air and stared out at the Nairobi skyline. This was stressful. How was he going to sort this out? Ever since the Shanghai meeting he had that same sickening feeling. The feeling when a trade is going wrong and you know you should sell and get out of it. But there was no simple way to sell and get out of this trade. No click of a button. He was stuck in it. The only way out was forward. Through it. He had to find a way.

Erik was broken from his rumination by a knock on the office door. It was his secretary.

“Miss Wanjiru is here to meet you.”

Oh yes. He’d forgotten. As part of being CEO he also had to review new loans if they were material to the bank. This Wanjiru meeting was about a potential agricultural loan. Erik needed a risky farming loan right now like a hole in his head, but he smiled and asked the secretary to waive in Miss Wanjiru.

Miss Wanjiru was taller than Erik, well dressed and her shoes clacked as she walked across the office to the shake Erik’s hand. Erik smiled, said hello and gestured to an arrangement of couches for them to sit for the meeting.

They both asked for coffees, Kenyan coffees, and made polite chit chat. Her first name was Grace and she had printed out copies of her presentation.

Finally, their coffees arrived. It had been a long day. Erik needed it so he could perk up and focus intelligently on her proposal.

“So Grace. My understanding is you are looking for 90 million shillings to start a farm in..” Erik forgot the name and had to look at his papers again “Makueni County. Can you tell me what you have in mind and also what a chia seed is.”

“May I ask where you are from?”

“Well. I’m not sure. I grew up in Montana. Worked in San Francisco for a few years and now live in London.”

“So, you lived in San Francisco and don’t know what a chia seed is?”

“I take it that somehow living in San Francisco means I’m supposed to know what a chia seed is? Is it a health food thing? Must be.”

“Yes. chia seeds are highly nutritious, high in Omega 3, high in fiber and especially good for your gut. It’s a growing trend. California is the biggest market and where it all started.”

“And you can grow them in Kenya?”

“Kenya is perfect for chia seeds. The ideal growing location for chia seeds is a narrow band between 15 degrees north and 15 degrees south of the equator. Kenya falls in that band.”

“Ahh.. I see. Got it. That’s why the name of the company is ‘5 Degrees’ as in 5 degrees south of the equator. OK. Makes sense. Now that I understand better what you’re doing I want to give the numbers another look. Can you give me a minute?”

Erik sipped his coffee and looked over the tables in her spreadsheet.

“Are these chia prices realistic? I have no idea.”

“There actually about 25% conservative.”

Erik continued reviewing the numbers He noted the yield assumption, the equipment investment assumption, the land lease assumption, the cost of goods sold, the shipping cost assumption. The projections were that 5 Degrees would lease the land in year 1, scale up in year 2, and then be in full production by year 3. Leasing instead of buying the land made sense.”

“Are these transportation costs realistic? Is it really feasible to ship chia seeds from Kenya to California?”

“Now? No. But I’m calculating that by the time we are ready to run at full production the new railway will be operational. The land we are looking to lease is 10 km from where they plan to build a station in Emali. We will dry the seeds, package them with our own brand, then truck them to the railway, where they will go to Mombasa. From Mombasa we will send them to either Europe or the US.”

The new railway… Erik let out a breath of stress again. He didn’t want to think about that.

“Hmmm…. And what do you do now Grace? Are you in the agricultural industry? Is that how you came up with this idea?”

“No. I’m in the accounting department at Kenya Power. My current job has nothing to do with farming. I know farming because my Dad was a farmer and we grew up on a farm. But I want to start a new farm that sells high value health food with its own brand and is profitable and modern. 5 Degrees. Once we get the chia seeds going I have 2 other products we will launch to further grow the brand and our relationship with the grocery chains.”

Grace was impressive. A real whipper snapper. Bored of her accounting job, wants to start a farm, and smart enough to build her own brand and earn proper margins.

“How much are you and your partners contributing into this project? What will be the starting equity?”

“Around 6 million shillings.”

Erik looked up from the presentation and saw Grace was struggling to maintain her smile and confidence while knowing this was probably a deal killer.

Such is Africa Erik thought. Young and full of dreams, but no money. One day that would change, but for now it was both a stumbling block and an opportunity. It was why banks like Turkana could make lots of money with high spreads. It was why he was here.

“If I have to. I can add my father’s farm as collateral too.”

Erik had just met Grace, but he liked her. He liked her spunk. Liked that she had come prepared with detailed forecasts and a proper business idea which she had pitched well with confidence. It was impressive. He wanted to back her.

“I like the name. I like ‘5 Degrees’. Need to review this again with my team, but it makes sense. I see why you are excited and the numbers seem to work.”

“Thank you very much Mr. Anders. Thank you for meeting me and I assure you, you won’t regret supporting 5 Degrees.”

They shook hands again and Erik walked her out of the office and said goodbye.

He closed the door. On his way back to the window to ponder again his life’s problems he stopped and looked at Grace’s presentation where it still lay open on the coffee table.

He sat back down on the couch and flicked through it again. His eyes couldn’t help stopping at the slide with Grace’s shipping cost assumptions.

Erik thought of something. He pulled out his phone and called Nicole.

“Hi Nic. Do you have a second?”

“Yes. I’m just on High Street Kensington, but what’s up?”

“Are chia seeds a thing?”

“What do you mean?”

“Do your health nut friends back in California eat chia seeds? Like Ameilia. Does she eat chia seeds?”

“Yes, definitely. Amelia especially. Chia seeds have lots of antioxidants and are good for your gut. I used to buy them when we shopped at Whole Foods but then you always complained about the cost of our grocery bill, so I cut them out.”

“OK. That’s what I wanted to know.”

Just then Erik’s phone started to beep. It was Dwight on the other line.

“I have to go. Dwight is calling on the other line.”

“Just quick. When are you going to be back?”

“Maybe 2 weeks. I don’t know. Gotta go. Dwight is calling.”

“OK. Love you.”

What was Dwight calling about? And which Dwight was it going to be this time? Friendly, best friend Dwight, or Mt. Vesuvius?

“Hi Dwight. How are you doing?”

“Good. Really good in fact. I might have found a solution to your locomotive problem.”

Interesting choice of words but Erik didn’t comment.

“That’s fantastic! Tell me. What’s the plan?”

“Pack your bags. You’re going to Zimbabwe.”

I didn’t find the stock idea I expected.

I was rewarded with 3 realisations instead.

1. Stocks need ‘communities’

2. Dividends might be better than buybacks

3. All roads lead to BlackRock, and maybe we should buy it.

Let me explain.

Two weeks ago I joined a London ideas dinner and was blown away by all the great ideas. We enjoyed great food, wine and war stories of undiscovered stocks from the past which had 5x’d. At the end of the dinner we were discussing what might be ‘the next thing’.

Which beaten up sector, or stock could be the next AST SpaceMobile?

In the end we came up with this former darling which has completely fallen from grace and is now massively hated.

Payment companies: Paypal, Fiserv, Remitly, Adyen, Global Payments, Western Union, Fidelity Information Services

So this week I spent some time looking at their results and presentations. In the end Global Payments (value play) and Remitly (still growing) looked pretty good. They will probably do well. Capital was at the dinner and is the real expert on them.

But I struggled to get excited.

I was thinking of that Buffet quote if you only had 10 stock investments you could make in your life, would this be one of them?

Not really.

It caused me to reflect on why I couldn’t get myself excited about them. Because the management teams were saying all the things you are supposed to say.

And here is what I came up with:

• The whole thing sounded ‘corporaty’, all about sales channels, routes to market, returning capital, and nothing really about innovation. Nothing interesting.

• No cool founder/leader. If the CEO is great, I’ll kind of invest in anything.

• No macro variable which was going to change everything, like interest rates for banks, or the oil price for energy stocks. The one possibility is that the upcoming inflation surge boosts the payment volume growth temporarily from 1-3% to 3-5%.

And playing 3D chess, I was worried the rest of the US retail army wasn’t going to care about this financial sub-sector either.

Which made me reflect on what things the US retail army cares about. And you realise attention is a scarce thing and you need a dedicated constituency of investors who still care about a sector even after it falls out of favour. Tech has its Silicon Valley groupies. Mining stocks have the Vancouver Mafia. The energy sector has Texas. Cryto has its hodlers. There is even a community of investors who like investing in shipping stocks. For international stocks in smaller markets the dedicated constituency is the domestic investor base.

But who cares about mid-cap payment companies fighting for their life in a market like the US when you have stocks like Nvidia? You realise that in a market with so many choices, and the best companies in the world, payment companies fall through the cracks.

And if the US retail trader isn’t going to care about struggling payments company, then who else will?

Maybe a smart ‘value investor’ at a mutual fund? But then you realise she is getting redeemed in favour of an index ETF and doesn’t have any money to invest.

Maybe a cunning PE fund will swoop in an take these undervalued gems private. Then you realise the PE funds own a whole portfolio of similar companies and rather than buy more, are struggling to get liquidity so they can return money to their investors.

And this is where I came to my three realisations.

Realisation number #1: Stocks need to build ‘communities’: The active management community in public markets is under a lot of pressure. Over the last ten years $3 trillion of funds has exited active managers to buy index ETF’s.

Which means companies can’t assume there is some smart analyst at a big fund co with lots of screens and tools who is going to do the work, figure out their company is a great opportunity and buy hundreds of millions of $’s of their stock for the long-term. They can’t trust the markets will automatically be efficient. What is replacing the active manager is a thriving retail trading community. But their attention span is fickle.

So there is this sad state of affairs where there is an attention span cliff. When stocks fall out of the narrow band of investor interest (high growth, innovation, high-vol) they quickly become worthless because there aren’t any active investors to save them. It’s why there is such a wide dispersion in valuations. The 25 year average P/E multiple spread between the 20th and 80th percentiles is 11.8x. Currently, it’s 15x. You are either interesting, or you are not.

Which means in this new normal companies have to build up their retail investor base. It means they have to go to smaller conferences, meet smaller investors, use social media, go on podcasts, etc to build a retail following. The crypto world has learned this.

Realisation number 2 is that when stocks become ‘no-growth value traps’ maybe they should pay out the cash as dividends instead of buying back shares.

If you are a dying star, that’s fine, but give us the cash so we can milk it and use the money to reinvest in something else, like Buffet did with Berkshire Hathaway. Take Paypal. They say they are going to return $6bn in share buybacks when the market cap is $45 billion. Which sounds great, but what if they are just shovelling more cash into the furnace? What if the stock price still goes lower despite all the buybacks because they are losing market share and payment volumes aren’t growing? If Paypal paid $6bn out as dividends at least we would have the cash.

The second benefit for a company from paying dividends is that it shows up on dividend screens. Lots of investors screen for stocks for dividend yields. And a company with a high enough dividend yield might even get picked up by a dividend ETF. There is a home for stocks with double digit dividend yields, but not for stocks which aren’t growing and have dividend yields of 1%

The market structure has changed.

What you realise is the market structure has changed. It used to be that financial advisors allocated money to the institutional active fund managers who had good access to the companies, were relatively long term and had a value bias. The analysts at the active fund managers would build their spreadsheets and identify which company in the sector had the best ROIC, and pick that one, even if it wasn’t the most liked. They would never buy a stock like Tesla for example. Meanwhile, the financial advisor would sit back and leave the stock picking and tough decisions to the active manager.

But with the rise of ETF’s for every possible sector, country, index and theme that structure has changed. The investment decision shifted back to the advisor. The advisor now became an asset allocator. And ETF’s are the lego blocks they use to build their client portfolios.

The financial advisor doesn’t care about some one-off aircraft part company in Wisconsin which is cheap. Or, a cheap payment company. The advisor cares about sector and country beta. They need to make sure they don’t miss the hot ‘themes’. They can’t be the advisor who missed ‘EM’ or ‘Korea’ or ‘Semis’. It’s why so many financial advisors read YWR.

This is how ETF’s changed the game. We went from stock picking to theme picking.

And it’s why the more I looked at the dying payment companies and the appreciated the challenges they would have in attracting investors, the more interested I became in BlackRock. Because the death of the payment company share prices is directly related to the success of BlackRock ETF’s.

If you aren’t big, aren’t liquid, aren’t growing, and aren’t in the ETF’s, and there isn’t some retail community which cares about you, you don’t exist.

Realisation #3: If BlackRock ETF’s are a Death Star taking over the market, shouldn’t we own the Death Star?

Is the big takeaway from analysing the payment companies, that we should be buying BlackRock?

You thought we were going to buy the small, edgy undervalued stock with 5x upside? Nope. Fake Left. Go Right.

We are buying the Death Star instead.

Bam!

Could BlackRock be on the verge of an earnings acceleration and a move to $1,700/share by 2030?

• Platform as a Service

• The NYCERS Insight

• More Legs to the ETF Story

• YWR EPS Estimates and Earnings Model

• Risks

Platform as a Service

The thing about great entrepreneurs like Larry Fink, and why you want to invest in them, is they never stop thinking about the next thing. They are always moving the goal posts. So while the rest of the asset manager community is finally getting around to launching their own ETF’s, Larry is turning BlackRock into a platform which they call 1BLK.

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And it dominates everything.

One trend to rule them all.

But let’s do this by the books and start with the top 30 stocks in the world ranked by our combination of earnings estimate revisions, valuation and price momentum.

Links to all of our tools and dashboards are at the bottom of the post.

YWR Global Top 30

Most of the earlier trends still exist.

Memory: SK Hynix EPS estimates are going insane. The 2026 EPS estimate has jumped from KRW 160,000 to 260,000. Just to give you some perspective in October 2025 I thought I was edgy in predicting SK Hynix could earn KRW 50,000/share when consensus was 40,000. Instead the number is approaching KRW 300,000.

Despite being the market leader in the biggest AI bottleneck, SK Hynix is still trading on a P/E of 4.5x. Samsung is the same. Samsung’s 2026 EPS estimate has jumped from KRW 23,000 to 34,000. Samsung with a $1 trillion market cap and a more diversified business is trading on a P/E of 6x!! You get all the optionality of if Samsung can ever be ‘the next TSMC’ foundry for free.

Taiwan Tech: the Taiwanese semiconductor supply chain still has some of the best estimate revision trends in the world. It’s Nanya, Macronix, Winnbond, Innodisk, Elite Semiconductor, and Phison.

Gold and Other Metals: Surprisingly there is only one gold miner in the Top 30. Aura Minerals is a gold-copper producer. Nexa Resources is Zinc. Century Aluminum is also in the top 30 on the back of the rise in aluminium prices.

Potential 2nd derivative play: Aluminum prices rising might also be good for steel. On Monday last week Stevie sent me an interesting snippet from the Cleveland Cliffs conference call about automakers switching from aluminium to steel.

“In my long career in this business, I have never seen so much momentum and substituting aluminum with steel... Automotive OEMs are prioritizing supply certainty, total cost and safety.”

Does US HRC steel roof it next?

Oil and Gas: Finally, the monster trend. The YWR Top 30 is flooded with oil and gas companies. This is the dominant new trend taking over everything. The estimate trends are strong, the price momentum is high and the valuations are still low, because nobody trusts the move. Nobody wants to be the idiot who buys oil and gas stocks the day before the Iran War is resolved.

Top 5 Ranked Industries

Integrated Oil is the top ranked industry in the world this month. It has displaced gold, which falls to #2. Then we have Other Metals, and Semiconductors.

Number 5 is interesting. It’s Chemicals. Chemicals prices are also benefitting from the disruption in the Middle East. Stevie surfaced this snippet from the DOW call.

“Roughly 20% of global oil capacity is currently offline and approximately half of global ethylene and polyethylene supply is either offline, constrained, or directly impacted... The longer these conditions persist, the greater the potential for further industry changes. And lastly, it is not likely that the pricing impact of these events will be temporary.”

In the monthly trends chart below we see the sharp acceleration in Integrated Oil and Chemicals. We also see the falling momentum for precious metals.

Three other observations:

#1 Refiners: Estimate revisions for refiners are going through the roof as well. The valuations are also attractive because everyone doubts if the earnings are ‘sustainable’.

#2 Banks look good too: Banks don’t make the top 5, but the estimate trends there are positive too. It’s a positive backdrop for our Global Boom trend. Also, if interest rates are not going to fall, and we have higher for longer, it’s positive for net interest margins. First Hawaiian mentioned this.

“With the markets now expecting no rate cuts this year, we have revised our full-year NIM outlook to be in the 3.22% to 3.23% range.”

#3 Do we have an inflation spike coming? If the top ranked industries globally for estimate changes are energy, metals and chemicals… do we have an inflation spike coming?

Top 5 Ranked Countries

The Top 5 countries are the same suspects. The US always has the most top ranked stocks, which is a reflection of both strong growth and the higher number of stocks across all industries. Then comes China, the biggest market nobody ever owns, at #2. Then South Korea and Taiwan because of the semiconductor/memory boom. Canada (and Australia) rank well because of their commodity stocks.

But what do we almost never see? Aside from the UK every now and then, the European markets struggle to rank well. Which is why I keep thinking Asia is the New Europe. Do we need to shift our focus from US + Europe to US + Asia Pac? I’m trying to travel to Asia more.

Inflection Analysis

This is an exercise where we identify downtrends in estimate revisions which have flip positively in the last 6 months.

Everything to do with energy has inflected sharply this year. We noticed this early on in December (Global Inflections), but the trend has gone supersonic.

I’ve included below two Google Sheets with the top inflection stocks by country and industry.

Oil Services: Stevie pulled this snippet from the Haliburton call on how the pick up in oil services will not be temporary.

“The cumulative production deficits are in the several hundreds of millions of barrels and trending towards a billion. This represents several years of meaningful incremental demand to replace strategic reserves on top of what I believe will be continued structural demand growth. Big picture, this means the world is fundamentally tighter in oil and gas than it was sixty days ago.”

The Million Dollar Question

Having reviewed all the data together. Having reviewed the trends across energy, chemicals, oil services, refining, shipping and bank net interest margins, we come to the million dollar question.

Are we in a prolonged period of energy scarcity?

Go back and reread the Halliburton quote.

The energy disruptions in the Middle East have coincided with a global investment boom (‘structural demand growth’).

Does it mean energy prices stay higher for longer? ($200 oil pops the bubble).

Could the energy theme be bigger than AI/Semiconductors and Memory?

What does this mean for global interest rates?

What does this mean for geographical allocation?

John Burbank’s quote is in my head.

“Investors always underestimate the magnitude and persistence of trends.”

Answer to the Million Dollar Question: My sense is energy prices are going to be a problem for a long time and we are going to have to live with it. And we all need to bite the bullet and be bigger in energy related stocks (personal view). In Qatar Changes Everything I gave my view that the US LNG terminals are good long-term beneficiaries without the risk of getting whipsawed on commodity prices. But maybe you need to own the integrated players like Total and Shell which are still trading at < 10x earnings.

Below are links to all your data tools; the Tableau dashboard to review industry estimate trends, the Retool data dashboard with the estimate trend charts (I love this tool), the Google rankings sheet, and the inflection sheets.

Read more

So much for ‘remote control’ Erik thought as their Landcruiser forced its way onto the crowded road leaving Mombasa port.

Erik looked out from behind the tinted glass window at the snarl of container trucks, scooters and taxis grinding up the hill and out of sight. Erik and Claire would exit for the airport in 10km to fly back to Nairobi, but these trucks would continue their journey for up to 1,000km as they fanned out across East Africa delivering their goods. Mombasa Port was the main port serving 140 million Africans across Kenya, Uganda, Rwanda and Southern Sudan. It was the most important port on the East Coast of Africa and the starting terminus for the East Africa Rail project.

They had just met again with the Kenyan Port Authority to try and bring the rail line into the port so containers could be loaded directly from the ship to the intermodal rail cars. The Port Authority and their engineers kept saying it wasn’t possible. The containers would need to be trucked a short distance out of the port and up the nearby hill to a larger railyard. This meant the trucks and their containers would have to drive through the incessant traffic jam outside the port gates. The same traffic they were stuck in right now.

Claire was looking out her window in the back of the Landcruiser. She was dressed well, with nice shoes and sunglasses perched on her head. She had nice perfume.

“It’s too bad about the port, but maybe it’s manageable. Not ideal, but manageable,” Erik said to break the silence.

“Easy for you to say. You only have to answer to your crazy hedge fund boss. I have to write this up in a report for the directors back in D.C and explain why the whole starting point of the railway has moved and why this wasn’t known from the beginning and disclosed in the initial proposal.”

“Well it’s Africa. They are going to have to get used to it. Nothing goes like in the proposal.”

Erik thought back to Belway Capital’s own initial expectation of what they were getting in to with Turkana Trust.

Erik had done his initial review of the bank’s financials and surmised that if they could invest at 0.5x book value the risk/reward looked good. Their key concern had been the bank’s large project loan to the East Africa Railway SPV to fund the early years of the railway’s construction. The project was to build a transformational railway from Mombasa Port all the way to Kampala, Uganda over 1,100 km away. The railway was to be completed in stages with Stage 1 running 480km from Mombasa to Nairobi.

For the bank it was an attractive loan. Erik understood why they had made it. The loan paid 12% in US$’s. Yes, it was high-risk to build a new railroad in Africa, but there were mitigating circumstances. The main one being that the IFC had invested equity into the SPV. This meant strict governance and project management. The second benefit of having the IFC on board was their deep pockets. The IFC wasn’t likely to quit funding a high profile, transformational railroad in Africa if it turned out there were a few unexpected delays and it needed a little more money.

To Erik and Dwight it seemed a safe bet that the IFC would keep funding the project, and eventually the railway would be completed. Plus, there was a highly capable company like China Eastern overseeing the construction.

Once the railroad was operational it would be easy for East Africa Railway to get an infrastructure loan at 7% to pay back the loan from Turkana Trust Bank. This one large loan repayment would reduce the stress on the bank, improve the capital ratios and rerate the bank back to 1.5x book. The trade for Dwight and Erik was to get through this uncertain patch in the middle while the rail project wasn’t yet complete. Then later after the bank was derisked, Belway Capital would sell the bank to a private equity fund.

As part of the due diligence they had both flown down to Nairobi to visit the bank and meet its CEO, Rajiv Desai. Erik learned that despite being worth hundreds of millions of dollars Dwight liked to save money and fly coach. In Nairobi they had had many pleasant meetings and dinners with Rajiv and his team of bank managers. Rajiv was always smiling and answering their questions, but was obviously stressed.

Erik empathised with Rajiv. It must be a lot of pressure to be the third generation to run your family bank then be the one who was in danger of losing it all. And Rajiv must be thinking of all the turmoil over the years which is father and grandfather had successfully navigated. But, now when it was his turn he had failed and had to sell a large stake to a London hedge fund.

As part of their due diligence Erik and Dwight had also taken a drive out to Turkana County in the Western part of Kenya where the bank had most of its branches and deposit base. It was a desolate and poor area of Kenya. The bank was named after the large Turkana Lake. It wasn’t a prosperous area, but there were no other banks competing in there so it was a profitable place to raise deposits. It had a niche.

The challenge of Turkana was that it didn’t have much industry. While driving around Turkana they observed a new wind farm being installed. They also noticed the trucks for a UK oil company which had made an oil discovery. Unfortunately, the oil production would be years away. Otherwise, there wasn’t much going on.

Back in Nairobi they had met Claire, the attractive French CEO of East Africa Rail. Claire was part of the IFC’s strict project management. Her explanation of the extensive due diligence which had gone into the project, as well as the ongoing controls and frequent reporting back to the IFC gave Erik and Dwight confidence about the bank’s East Africa Rail exposure.

In the end they had done the deal and Dwight had wired $20 million for a 44% stake in Turkana Trust Bank which made him the largest shareholder. Rajiv’s family was diluted down from 60% ownership to 34%. Several other wealthy Kenyans owned the remaining 22%. Erik was appointed to the board to represent Belway Capital and be Dwight’s eyes and ears. It involved flying down to Kenya every other month to attend meetings.

The deal had gone well for the first year. Rajiv ran the bank and Erik attended the board meetings. Erik’s job was to monitor the East Africa Rail loan like a hawk. Track laying was on schedule. But then had come the time to order the locomotives and the railway wagons from CERS. Then there had been the shock invoice from China Eastern which had necessitated the trip to Shanghai. Then the call with Dwight followed by an unpleasant trip to Nairobi to deliver news to Rajiv that he was no longer running his family bank and in fact would have no role whatsoever in the daily operations. And then explaining to Rajiv that he Erik, who had never run a bank before, would be moving to Nairobi to be the new CEO. He felt bad for Rajiv, but Rajiv had failed in running the bank, misled them about the credit guarantee letter and needed to be cut.

Which was why he was in this Landcruiser outside Mombasa port, sitting next to Claire, stuck behind a container truck.

“So, tell me. You’re French. How did you end up in Africa? How did you become the CEO of an African railway?”

Claire looked out the window and could see it was going to be a long, stop and go ride to the airport. They had a lot of time to kill. She let out a small sigh.

“I grew up in Biarritz. It’s on the Atlantic Coast near Spain. From there I went to business school at Aix-Marseilles. It’s not a great school in France, but I earned good grades and managed to land an entry level job at SocGen in Paris. I worked my way up through the investment banking division and worked on a lot of infrastructure finance deals. I was quite good at it. Then after the financial crisis I was laid off from SocGen as part of a restructuring.

“I sympathise. Same thing happened to me. Not investment banking, but a fund I was working for also shut down. It was a hard time to get a job. What did you do?”

“Travelled a bit. Lived off my savings. Like you said, it was a hard time to find a job. All the French banks were trying to reduce risk. Two years later I managed to get a consulting job, which I did for a while, also related to infrastructure. But I hated it.”

“How did you end up at the IFC?”

“A friend of mine was working in the their distressed debt division. She was always working on Africa deals and found out they needed someone to analyse African infrastructure deals. The IFC had been financing projects across Africa, but were running into lots of problems. The projects always looked great on paper with promises to ‘transform’ the continent, but the execution phase would inevitably run into delays, corruption and cost overruns. They realised they were good at funding projects, but not good at executing them. The IFC was losing tens of millions on these projects and decided to conduct a review of their whole approach to infrastructure investment. Everything became more rigorous with strict processes. And the other thing the IFC realised was these big infrastructure projects were being run by managers with social aid backgrounds and no finance experience. So they made changes to the department. They wanted people who had worked on big deals for investment banks. Hence me.”

“And then what? You went to work for the IFC, and somewhere along the way they said, ‘Hey, can you move to Kenya and run the East Africa Rail project?’”

“Yes. Basically. For them East Africa Rail was a big ‘transformational’ project.” Claire said holding up her hands to make air quotes. ‘So rather than wait for it to go bad and then afterwards bring in Western management to fix it, they decided to start with a Western CEO in the first place.”

“And now you are living by yourself in Nairobi running a railroad.” Erik probed.

“Not that my personal life is any of your business. But yes.”

“And when you finish this is the goal to get a job back at a bank in Paris?”

“Again, none of your business. But yes.”

“Thank you. We are working a lot together so it’s just nice to know a little bit about who you are. I’d tell you my own story but it’s long and depressing. The conclusion is the same though. We both need this to work.”

Erik looked out the window again at the traffic and the people walking on the side of the road. There was no sidewalk and they were mostly wearing T-shirts and shorts with flip flops. Some were carrying things. Some were balance things on their heads. Erik wondered how far they would have to walk this afternoon to get where they were going.

His mind continued to drift and he thought of the truck drivers and what their next 20 days would be like as they slowly made their way West to the interior of the continent. Long days and nights. Police check stops. Bandits. Long waits at the border crossings. And the cost of it all. He’d read it cost the same to sail a container the 10,000 km from Shanghai to Mombasa as it cost to get it the next 1,000 km to Uganda. That was what the railway was meant to fix. Or at least help fix.

Claire needed the project to work. Erik needed the project to work. And for the first time Erik realised how much the people out there on the road needed it to work too.

Next: Ch.5

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