$BX $APO $CG $KKR $OWL Whilst these deals may make sense on paper they reflexively increase mkt perception of the Alts being financing mechanisms to the Ai capex buildout, and so expect the stocks to be a pain point in any AI capex bust / slowdown.

I think this recent volatility continues to reflect the misalignment in the product cycle and the capital cycle. The product cycle itself has gotten more complex not simpler due to the continued presence of multiple competing products and the shifting relevance of open and closed models. The capital cycle is adding complexity on the other side of complexity proving two things can be true. The market can be structurally under supplied compute/infra but the capital complexity to finance the build may be over extended and overly complicated. I observe a lot of frustration about this dynamic. If you are super bullish long term this should be great. I think the issue is people are more bullish about the economics caused by the under supply than perhaps their bullishness on the underlying unit economics of the products on the other side of the shortages. The frustration is driven by not getting/keeping a sustained multiple now on the current economics reflexively driven by the supply/demand imbalance. I wont pretend to know what’s going to happen to alleviate supply or not, or what the economics of the models will look like depending on the slope of supply. I just know this kind of uncertainty usually leads to volatility because the market hates uncertainty more than anything. That means being nimble. Just when you think there is a clear trend, something else will change and make you re-think everything you believe today.

The equity market has had a fifteen year tailwind of declining capital intensity, lower cost of debt, and higher margins fueling a debt and fcf driven equity shrink support to eps and multiples. There is a generation of investors now that have not had to think much about capital intensity, capital cycles, return on capital, tightening liquidity. Everyone is in agreement that AI is the most important thing. And AI can dramatically dwarf the capital cycle but the point is that this isn’t just about AI it’s AI vs the capital cycle. And the capital cycle can lose and the market can be fine. But if the capital cycle wins the equity market resets. The right tail is limited and somewhat reflexive based on whether AI would be purely additive or substitutive. The belly of the distribution curve of outcomes seems normal and the left tail seems increasingly fatter.

This isn’t a stock picker’s market. If you just sat in the passive market index, you did fine/well. Stock pickers, who spent lots of time analyzing the stocks they picked, are understandably upset that all that analysis was for naught and doing nothing won. Isn’t that efficiency?

I think if an analyst “gets it” and can really see the thesis but just models too conservatively you have to teach them how to make them see that if their narrative is right their numbers will be wrong and to size it correctly the numbers have to match the narrative. If their numbers are right and they just don’t want to take risk tell them that’s fine you won’t pay them or penalize them on the money made or less. You will keep it all. If they are timid in another way it might be more of a red flag that they’re not gonna make it.

Most juniors are either too confident or too timid. If someone is too confident and they express that confidence with adjectives, respond with questions that can only be answered with #s#. If the problem is the overconfidence is in the magnitude of the # differentials then attack the assumptions behind the #s#. I reject the premise that a junior can ever control a narrative. When someone is feeling too good about themselves, knock them down. When someone is feeling too badly about themselves, pick them up.

My most strongly held investing belief is the way to make the most money is to capture the best long idea in the best accelerating sectors/categories and the inverse for shorts. Sounds obvious but requires real structure and process. My joke with LPs, sell side analysts, teammates, basically whoever will listen for almost three decades has been I wish I had a killer application that monitored, real time, all information collected by the best sector experts ingested into a shared brain, compiled and analyzed by what I think is most important and then visualized real time with a color coded labeling system flashing green, yellow or red delivered via a web based app like a Bloomberg screen. I’d call it the CIO Brain. There would be 3 columns. Consensus in print, Consensus in chatter and Inside view. The cynical response to this is bruh that’s just a revisions visual. But it’s not. Some information moves numbers and some moves multiple. Muse is multiple moving for Meta waaaay before it can be quantified in numbers. Getting in front of the multiple move ahead of the number move is where more money lives nowadays than ever before. If someone builds this no need to send me royalty checks, just send me sign in credentials.

I strongly strongly recommend being a serial specialist which means become a generalist one sector at a time not one stock at a time and the way you determine the next sector to learn is by its adjacency to the last sector you learned