YWR: Project Zimbabwe Update

Alert: These are personal views, not investment recommendations!

June’s Killer Charts is a recap of our main research themes, plus a new one (Cybertron).

The full 74 slide deck is at the bottom of the post.

But here’s a quick table of contents and the main ideas.

#1 Project Zimbabwe Theme

• The persistent theme driving everything.

• An era of higher inflation.

• Stock markets will surprise everyone to the upside.

• Trading speculation will be high, but this is natural when money is losing value. It’s a sign of the times.

• Bond yields rise over time, but remain low relative to inflation and supportive of equity returns.

• ‘Bad is Good’ - Society feels like it is falling apart, but markets go higher.

  

#2 Cybertron Theme

• We are still in the early days of building the AI/Robot economy.

• Winning theme of the last 25 years: Online vs offline.

• Winning theme of next 25 years: Robots vs Humans

• Tailwind behind robot and AI themes. Human industries derate.

• Cybertron Markets (Korea + Japan + Taiwan + China + US) outperform Rest of World?

  

#3 Elysium Theme

• Divergence not convergence

• Divergence of wealth - Extreme wealth of the 1%

• Divergence of Economies - Emerging markets economies don’t converge with the developed world.

• Intense immigration pressure from 3rd world countries to find opportunity in Elysium (developed markets/US).

#4 World Economic Boom

• Nominal GDP is growing strongly

• US + Europe + Japan all booming

#5 Return to Loan Growth

• Banks in Europe + US + Japan have never been healthier.

• Record high Tier 1 capital, record profits, and strong asset quality.

• Change in top down direction from government and regulators.

• Pendulum swings from Post-GFC ‘Never Again’ to ‘Risk On’

• Banks start to lend again.

• A new driver of economic growth.

• Hard to have a widespread ‘credit bubble’ when banks haven’t been lending.

#6 The Final Bottleneck

• Contrarian call on US Natural Gas

• The AI datacenter play no one wants to own

• Unprecedented confluence of demand drivers

• Datacenter demand, LNG export demand, Industrial demand.

#7 Hang Seng on the Launchpad

• Contrarian (but so far not working very well) call for a bull market in Hong Kong stocks.

• Record low valuation

• Earnings inflection.

• Record low Chinese interest rates.

• Negative: HK Tech is food delivery, online retail and video games, while exciting Cybertron tech is listed in Shanghai and Shenzhen.

#8 Software

• AI disruption fears might be overdone.

• Estimate revisions are positive.

• Big difference between vibe coding software and running an enterprise software business (debugging, maintenance, security)

• But is it a value trap because longer-term fears around changes in the business model are warranted?

• Is software a ‘human’ industry?

#9 Gold

• Hard to call gold prices. No press releases or ‘catalysts’

• Bull market drivers intact.

• ETF Flows minimal and Futures positioning neutral.

• After a 10 year winter, gold is entitled to a multi-year bull market.

#10 S&P $10,000

• Counterpoint to prevailing institutional negativity.

• Earnings estimates are rising.

• Earnings are curving upward (earnings growth accelerating)

• Consistent double digit EPS growth with 4.5% 10 year yield justifies P/E > 25x.

• Ask why bond yields are so low, not why market is expensive.

• $400/share sometime by early 2028.

• $400/share @ 25x = S&P $10,000

A link to the full presentation is below.