The Capital Allocator

Performing well this week despite being levered and AI sell off

Trading Performance over the last 12 months. Strong Balance Sheets Strong Profitability Strong Momentum Prudent Leverage

While the AI trade is unwinding quickly - staying disciplined pays off - companies with strong fundamentals and great long-term chart setups pay off.

Has the era of U.S. stock market outperformance come to an end?

Why owning an ETF has always been a brilliant idea. You don’t know which companies will still be winners in 10 or 20 years. With an index, you don’t have to.

Whenever someone tells you stocks are cheap because of some forward valuation metric, show them this chart. Forward multiples can make almost anything look reasonable when earnings expectations are high enough.

How concentrated can a market get? Over the past 150 years, most major bubbles peaked when a single sector reached around 40% of the market. The big exception was the railroad boom of the 1870s at 63%. The ten stocks at the center of the AI boom are now at 42%. Chart: BofA

The S&P 500 is still trading close to all-time highs. Under the surface, it’s a very different market. 59% of its constituents are already in a bear market, down 20% or more from their highs. Rarely has the index been held up by so few stocks. Chart via Don Durrett

The relationship between stocks and interest rates is anything but constant. At lower yield levels, rising rates can coexist with rising equities. But as yields move higher, that relationship can change dramatically. The level of rates matters just as much as the direction.

Is this sustainable? It takes a lot to impress a log scale. Even exponential growth looks linear. US earnings are now pulling decisively away from their historical compounding path. That rarely happens outside recession recoveries—and analysts expect it to persist.

In Germany, you effectively hit the top income tax rate at around the average wage.

AQR’s latest piece on inflation risk highlights a key point: 60/40 portfolios—and even private assets—can be vulnerable to the same inflation shock. Commodities and trend following offer genuine diversification. No surprise AQR sees 15%+ trend as relevant. #trendfollowing

Roger Federer was the most dominant player the tennis world has ever seen. His record of 237 consecutive weeks at world number one remains unsurpassed. #Tennis

How should an “All Weather Portfolio” really look? For most investors, it can be surprisingly simple: Global Stocks Commodities Treasuries Trend Following Four building blocks for a robust, forecast-free portfolio that can adapt across different market regimes. Chart: AQR

One of the biggest differences between private and public markets is the dispersion of outcomes. In PE and VC, the dispersion between managers can be huge. Picking the right fund can make a meaningful difference to the outcome. In public markets, that dispersion is much smaller

5.25% on the U.S. 10-year could be an important inflection point. Historically, above this level, stocks and bonds tended to sell off together—meaning higher volatility and wider credit spreads. For asset allocators, 5.25% is a level worth watching.

Wide Moat Stocks for the long run

Another company with strong fundamentals and a great chart setup: $EXEL Setup: High Base Breakout ROIC: 40.8% Operating Earnings Yield: 6.2% Entry: $59.01 Stop: $53.43 Strong fundamentals + a clean technical setup. Now let's see if the breakout can follow through.