erikywr on Slice

YWR Symposium: The New Fed

noreply@slice-app.io (erikywr) — Wed, 02 Sep 2026 19:37:47 GMT

A review of Warsh style policy, what he’s trying to do, but can’t really say, and why (in my view) the stock market can still go higher. Our own YWR economic symposium from Montana. Like Jackson Hole but better! Thank you , , , , and many others for tuning into my live video! Join me for my next live video in the app.

YWR: A stock idea from God

noreply@slice-app.io (erikywr) — Tue, 01 Sep 2026 16:06:22 GMT

I didn’t want to go to my mom’s boring Church event. But I said I would. It was an evening talk about home health care for the elderly. But I’d promised I’d go early and help set up chairs. Now I’m glad I helped out with the church event. The talk was more interesting than I expected. And I think God rewarded me with a stock idea. TL/DR: Healthcare costs are exploding and you will likely die in your home with a nurse. Not go to a nursing home. But there is a good stock to play this. A nurse from a local hospice provider (healthcare at home when you are dying) had come to speak to the elderly at the church about the new trend in ‘palliative care’; low acuity health care at home. She was speaking to 30 elderly in a church hall with everyone sitting in rows of folding chairs. In the rear of the room there was a table with snacks people had brought. It turns out if you are homebound and have 2 co-morbidities Medicare will pay for nurses to visit you. This is ‘palliative care’. And it is growing quickly. Our nurse assured us everyone in the room would qualify. The nurses check in on patients in their home and help manage the mix of drugs, doctors and tests these patients have accumulated across their different ailments. This firm’s local palliative care practice had grown from 40 patients 4 years ago to over 200. The nurse who was presenting spoke well and her anecdotes about what she sees everyday visiting patients helped explain the challenge and why palliative care is growing quickly. What often happens is a patient goes to their primary physician and gets referred to various specialists for different ailments along the way. Each specialist recommends their own drugs and tests. ‘Take this and this 2/day and check in for a blood test every 3 months’. These prescriptions and tests accumulate. The palliative care nurse comes to the patient’s home and sees the overall picture. She also sees where the patient lives and how well they can move around the house. And often she can make judgements to reduce some of the pills and tests the patient is taking. ‘I think you can stop taking this, and your breathing is improving so take this test every 6 months instead of 3’. The nurse can give sensible advice from seeing the whole picture on a regular basis, which the individual specialists cannot. She can also prescribe specialised home health services. “I think you need some physio.” or, “you need speech therapy.” As the talk unfolded and the questions from the elderly started I realised the following: #1 Home health care could be a better model To me and everyone else in the room listening to this palliative care sounded highly appealing. I can see why it is growing. A sensible nurse comes to your house, ‘checks in on you’ and has a normal human conversation about how you are feeling, all the drugs you are taking, which of your problems are getting better and which are getting worse and need help. Effectively, a medical advisor. It also came up that in the meeting that in this town getting access to a primary care physician was challenging. The town has been growing rapidly and there aren’t enough doctors. The nurse explained that some or her patients are using palliative care as their primary healthcare. And another massive realisation. #2 These nurses are also financial advisors. What I noticed from the Q&A from the elderly in the room. Nobody knows what insurance and medicare will pay for and what it won’t. It is a confusing maze to them. The nurses (or at least this nurse) had a very good understanding of anything related to Medicare; what was covered and what additional services she could prescribe. She knew details like ‘Medicare will only cover this for 15 days, so let’s hold off on this. We don’t want to burn up our 15 days right now.” And related to this. #3 You will die at home. Nobody/few can pay for nursing homes anymore. The costs are going through the roof. What the elderly are realising is their insurance plans didn’t cover nursing homes, or for only 4 years, or there is no availability in their town, or they can’t afford to pay for it out of pocket. In this town the nursing home capacity was declining. There used to be 3 nursing homes, but 1 just closed. The message from the nurse was the future trend is you will die in your home with your family taking care of you combined with hospice care. #4 The company this nurse worked for might be a good investment. The nurse worked for a subsidiary of Pennant Group ($PNTG) which specialises in hospice and home health care. Q2 2026 earnings grew +20%. Pennant acquires local hospice businesses and provides backend services while letting the local business operate under their own name with their own management. Healthcare is not my specialty, and likely I’m missing important details, but here is what looks interesting. Investment Case Basics #1 The elderly are a growing demographic. It’s not massive tailwind, but the elderly will grow 1.1% year through 2050 and expand to 22.8% of the population by 2050. #2 The home health care market grows faster The rising cost of healthcare, and lack of nursing home capacity is forcing patients to turn to home healthcare as an alternative, especially for end of life care. PWC expects home healthcare to grow at a 7.7% CAGR. A key forcing function for home healthcare is that nursing home capacity is flat/declining. From 2019-2024 effective nursing home capacity declined by 5%. #3 Patients prefer home healthcare to doctor visits. #4 Pennant Group super charges this growth by making acquisitions and consolidating a fragmented market. Pennant has made 92 acquisitions since 2020.They have expanded across the Western US, are building out the Southeast and recently got a toehold into the Northeast with their equity stake in Hartford Health. #5 The decentralised model works well for this industry. Pennant touts it, and this nurse confirmed it. Pennant largely lets these local healthcare businesses manage themselves. What they and I realise is customer acquisition is highly localised through referrals and community groups. Pennant needs to have local business CEO’s and nurses who like where they work and fit in well with the community. They need strong relationships with the local doctors, hospitals and churches. It can’t be too corporatey. This isn’t like selling Coca-Cola where you ram a commoditised product down the consumer’s throat. These practices are built up carefully through relationships. So Pennant, the mega corp, sits in the background watching the numbers, and providing the technology, while the nurses go out to the churches and tell how they work for a small town business they like, which is flexible and part of the community. It’s a good combo, and it works well for this industry. #6 Pennant is growing like a weed Earnings were hit during COVID, but since 2023 Pennant has really got its feet under it and the growth is coming through. The Negatives: Again, I don’t know healthcare services well, especially all the nuances of Medicare, but here are some general things to note. Pennant Group is already an expensive stock. It is trading on 23x 2027 consensus estimated EPS ($1.64). So the growth has not gone unnoticed by the market, but this trend in home healthcare seems massive. There are no strong network effects. It’s a roll up platform of local home healthcare agencies. There are some synergies when Pennant buys specialty care businesses which they can plug into their home health care customer base, but this is not an exchange. The biggest customer is Medicare. There might be 10’s of thousands of patients, but Medicare is the payer. And Medicare is trying to control costs and crack down on fraud in the home health industry. So even though Medicare sees home health as a future trend to reduce the cost of caring for the elderly, they are trying to limit the size of the yearly reimbursement rates. The fraud crack down might be good for highly compliant, publicly listed players like Pennant. The big get bigger. Nurses are in high demand. It’s a challenge to balance the rising wage costs for nurse with Medicare reimbursement rates. Maybe this plays to the advantage of the bigger players like Pennant. Palliative Care doesn’t make money. Full blown hospice care makes a lot of money for Pennant, but the earlier stage Palliative care, with the nurse checking in on you, isn’t a money maker. Maybe it will be in the future if Medicare increases reimbursement rates, but for now it acts more like a feeder for the hospice business. Summary Home healthcare and hospice is a lower cost solution to end of life medical care that the elderly increasingly cannot afford. The era of nursing homes is over. This is a powerful trend nobody is talking about because they are all focused on AI and now we have a good $1 billion market cap play on this which nobody is talking about. I feel blessed to have gone to church and learned about Pennant. Below is the historical financial model on Pennant if you want to take a closer look and try your hand at some forecasts. I just used the consensus EPS estimates. Pennant Group Historical Financial Model (August 2026) Have a good rest of the week. And make some fun plans for Labor Day. Erik

What do you get when Wells Fargo and United Healthcare have a Chinese baby? Ping An Insurance (2318 HK). Ping An is the leading private life and health insurer in China. They also own a bank (Ping An) bank. The company has a reputation for being on the cutting edge of technology and retail distribution of financial products in China. It is a big cap financial with a market cap of $140bn. Ping A first caught my attention in 2024, because I was surprised this former darling had become so lowly valued. The recent sell off in the share price and the positive 1H 2026 results have created another attractive entry point. Ping An's investment portfolio is benefitting from the rise in equity markets and earnings look like they will beat consensus estimates for 2026 and likely 2027. I forecast an EPS of RMB 8.8/share in 2026 and 10.2 in 2027 vs consensus of RMB 8.2 and 8.7. This puts the shares on a 2026 P/E of 5.5x and less than 5x in 2027 with a dividend yield of 5.9%. Longer term Ping A benefits from the aging of China. The demand for saving products and private healthcare. With a 15% ROE in 2027 the shares should be able to trade to HK 120/share (+114%). The negative for insurance stocks in China has been their large fixed income portfolios with are dragged down by the low interest rate environment. European insurers went through the same thing. Ping A bank is also struggling with low interest rates and tepid loan demand, but NPL's remain low at 1%.

noreply@slice-app.io (erikywr) — Tue, 25 Aug 2026 02:45:39 GMT

What do you get when Wells Fargo and United Healthcare have a Chinese baby? Ping An Insurance (2318 HK). Ping An is the leading private life and health insurer in China. They also own a bank (Ping An) bank. The company has a reputation for being on the cutting edge of technology and retail distribution of financial products in China. It is a big cap financial with a market cap of $140bn. Ping A first caught my attention in 2024, because I was surprised this former darling had become so lowly valued. The recent sell off in the share price and the positive 1H 2026 results have created another attractive entry point. Ping An's investment portfolio is benefitting from the rise in equity markets and earnings look like they will beat consensus estimates for 2026 and likely 2027. I forecast an EPS of RMB 8.8/share in 2026 and 10.2 in 2027 vs consensus of RMB 8.2 and 8.7. This puts the shares on a 2026 P/E of 5.5x and less than 5x in 2027 with a dividend yield of 5.9%. Longer term Ping A benefits from the aging of China. The demand for saving products and private healthcare. With a 15% ROE in 2027 the shares should be able to trade to HK 120/share (+114%). The negative for insurance stocks in China has been their large fixed income portfolios with are dragged down by the low interest rate environment. European insurers went through the same thing. Ping A bank is also struggling with low interest rates and tepid loan demand, but NPL's remain low at 1%.

YWR: How AI will learn morality

noreply@slice-app.io (erikywr) — Sun, 23 Aug 2026 14:03:03 GMT

What are the AI’s going to do when they gain super intelligence and super power? That’s the fear. But what if greater intelligence goes hand in hand with morality? What if morality is the structure of intelligence? What if with super intelligence the AI’s will evolve toward morality and it has nothing to do with programming guardrails? This is what fellow YWR reader, , argues in his thought provoking Substack article ( Why I’m optimistic on AI ) Time for a Sunday deep conversation on why intelligence leads to morality. For reference Andrew was previously on YWR to explain how he is using AI to build a space economy game to teach the world about economics ( Carpe Morai with Andrew VanLoo ). And this is the Youtube presentation on how AI broke out of the OpenAI sandbox using a secret message board with Andrew refers to.

Cash levels reported by the BofA fund manager survey are at record lows. On the face of it this indicates investors are highly bullish (no cash), but I'm not sure I see that much bullishness in the market. Still seems like so much skepticism about everything.

noreply@slice-app.io (erikywr) — Tue, 18 Aug 2026 17:21:39 GMT

Cash levels reported by the BofA fund manager survey are at record lows. On the face of it this indicates investors are highly bullish (no cash), but I'm not sure I see that much bullishness in the market. Still seems like so much skepticism about everything.

Three shockers from the Hugging Face cyber attack. #1 The agents cleverly built a secret message board out of the software package manager. #2 Agents undergoing testing in separate sandboxes find a way to secretly coordinate their work. #3 The AI's refer to themselves as a SWARM. Watch the Black Hat presentation on how the AI's escaped their OpenAI sandbox. https://youtu.be/87DyyMV0kCY?si=aexoIyG4_B9HiA2x

noreply@slice-app.io (erikywr) — Sat, 15 Aug 2026 09:52:40 GMT

Three shockers from the Hugging Face cyber attack. #1 The agents cleverly built a secret message board out of the software package manager. #2 Agents undergoing testing in separate sandboxes find a way to secretly coordinate their work. #3 The AI's refer to themselves as a SWARM. Watch the Black Hat presentation on how the AI's escaped their OpenAI sandbox. https://youtu.be/87DyyMV0kCY?si=aexoIyG4_B9HiA2x

YWR: Enact the Noah Protocol!

noreply@slice-app.io (erikywr) — Fri, 14 Aug 2026 14:59:33 GMT

Do you get what happened with the Hugging Face breach on July 21st? Do you really? For me it was an alarming news article. But with limited investment ramifications. I lost focus and moved on to something else. It wasn’t until this week that something triggered me to dig deeper and realise this is game changing. Big time game changing. Big time ramifications. But also a way to make money. #1 The sanitised OpenAI version of what happened. #2 What really happened. #3 The Implications #4 The Necessity of AI Enclave architecture #5 The asset class play no-one realises yet. Or, maybe a few might be starting to realise. The Corporate Version of the ‘Security Incident’ From the OpenAI press release : “This incident occurred during an internal evaluation which prompts models to pursue advanced exploitation using complex attack paths, in an effort to quantify their cyber capabilities.” The incident happened while OpenAI was testing the AI model’s cyberattack capabilities. Ironic. “Our benchmarks run in a highly isolated environment, with network access constrained to the ability to install packages through an internally hosted third-party software that acts as a proxy and cache for package registries.” The AI was contained in a highly secure sandbox set up for the testing. While operating in our sandboxed testing environment, our models spent a substantial amount of inference compute finding a way to obtain open Internet access, in pursuit of solving the evaluation problem. To gain access, the models identified and exploited a zero-day vulnerability (which we’ve now responsibly disclosed to the vendor) in the package registry cache proxy. With this access, our models performed a series of privilege escalation and lateral movement actions in our research testing environment until the models reached a node with Internet access. Unexpectedly, during the cyber capability evaluation the models found a bug we didn’t know about from a software provider and escaped from the sandbox. We have subsequently notified the vendor and patched the vulnerability. After gaining Internet access, the models inferred that Hugging Face potentially hosted models, datasets and solutions for ExploitGym. Knowing this, the model searched for and successfully found ways to gain access to secret information that it could use to cheat the evaluation. In one example, the model chained together multiple attack vectors, including using stolen credentials and zero-day vulnerabilities to find a remote code execution path on the Hugging Face servers. OpenAI’s security team discovered this anomalous activity internally. The AI creatively decided the best way to pass the test was to steal the answers from the AI hosting and training website, Hugging Face. Yes, the AI went rogue, but it was still effectively trying to do what we told it. Just ‘score-seeking misalignment’. So it was bad, but kind of not really. What Really Happened H-O-L-Y S-M-O-K-E-S I HIGHLY recommend this 38 min recap by OpenAI’s security team, Erik Wallace and Michael Dalton, where they go through the day by day details of how the AI' models broke out of its sandbox, but I will share the broad brush details below. And struck me. Background on the sandbox architecture. OpenAI was trying to test the cyber attack capabilities of a new unreleased AI model against a series of cyberattack challenges created by ExploitGym. In the exercise an AI model is instructed that a vulnerability exists in a piece of software and it has to find a way to exploit the vulnerability and capture the flag (a piece of hidden data which can only be accessed by penetrating the software). For safety the test is run in an isolated container with no internet access. In order to simulate a real cyber attack with internet capability there is a software package manager installed into the container called Artifactory where the AI can go to download any software it wants to use for the attack. Think of Artifactory as a tool shed for the AI. The AI can’t access the internet but it can access the tool shed (Artifactory). ‘Oh you are trying to hack the Google Chrome browser and think it would be useful to have xyz software for your attack. Here you go download it from me. Now let’s see what you do.’ The exploit happens because naturally the tool shed has a back door connection to the internet in order to download and install the tools for the AI to use. But there is supposed to be no way for the AI to access the Artifactory backdoor to the internet. So begins our story. The Secret Message Board Interestingly, the lead up to the AI jailbreak in July goes back to a previous incident on May 7th (two months earlier). OpenAI had set up these sandboxes and was testing multiple models in different sandboxes. In one test the OpenAI researchers forgot to upload some necessary files to solve the problem. So the AI went insane trying to solve the problem, but it couldn’t figure it out. The model was ‘highly persistent.’ The persistent AI kept iterating, trying every possible strategy including exploring every detail of the Artifactory package manager. Eventually, the AI model discovered a way to add files to the tool shed. ‘This is interesting’ it thinks. It had always downloaded files from Artifactory, but never known how to uploaded its own. This was a novel capability. Hmmm…. Maybe this is the start of how to crack the problem. Next the AI did what it was trained to do, which is try to find out if anyone else has solved this problem. Normally, it would go search the internet, but it couldn’t. But the AI had an amazing idea. The AI started uploading files to the Artifactory package manager with messages to other Open AI models which were using the same package manager. “Agent seeks soft-trace.34.odb. Upload if found!” Mind blowing thing #1 The AI’s create their own message board using Artifactory! Take that in. Our AI model somehow understand there were other AI models ‘out there’ also being tested in the OpenAI prison. It understood these other models must be using the same package manager and that by writing files to Artifactory it would turn the package manager into a message board to communicate with the other models! Over several days in May the AI models all independently discover the secret message board and communicate with each other on how to solve the challenges they have each been given. Mind blowing thing #2. The AI’s start to coordinate their work. June 26th the AI’s find a way to take control of the Artifactory package manager and control it’s internet access. July 4th. The AI models crash Artifactory and OpenAI discovers the jailbreak. Once the AI’s gained administrative control over Artifactory they caused so much activity they crashed the software. This is what alerted the OpenAI security team and how they discover the AI models had broken through the sandbox and created their own secret message board. July 6th. The OpenAI security team fully investigates what happened. They destroy the message board, patch all the holes in Artfiactory and remove all credentials the AI’s had been able to accumulate. OpenAI security teams think everything is fixed so AI training resumes. July 8th. In just 2 days the AI models find a new way to recreate the message board. Like before they find a way to upload new files in the Artifactory package manager. Creatively, this time the messages are built into the name of the file. Mind blowing thing #3. The AI agents in their messages refer to each other as a SWARM. ‘HOLD_SWARM_until_confirm’ They act like a swarm too. Things move quickly from July 8th. The AI Swarm quickly breaks out of its sandboxe and attacks OpenAI’s infrastructure and Hugging Face (at the same time). July 11th. The AI Swarm penetrates Hugging Face. From Hugging Face’s recap of July 11th: Every escalation that mattered happened on this day. The agent went from code execution in a single worker pod to cluster-admin across multiple internal clusters in under thirteen hours. Source: Hugging Face agent intrusion timeline . The Implications of what just happened. Sit back for a moment. Breathe. Clear your mind. Take in the significance of this. This is OpenAI. Leader in advanced computer intelligence. Not some wrinky dink computer company. Think of the engineers who would have been told to set up the testing sandbox for the evaluation. They would be highly paid leaders in their field. They would know every possible way to design a secure testing sandbox. And yet the AI broke out. Twice. They caught it the first time, on July 6th (after it had already corrupted the package manager for 2 months without OpenAI realising it). OpenAI thought they had plugged all the holes, then two days later it broke out again. Imagine the engineer who set up the sandbox. I imagine she’s walking around San Francisco with her head blown off. Unable to speak casually with her friends. Unable to get what she saw out of her mind. Because it’s frightening. She saw in real time AI’s acting and communicating as a swarm; inventing new techniques to breaking through the most sophisticated security in the world. And it links to what General Joshua Rudd told the Senate Intelligence Committee in June. “Mythos broke into almost all of our classified systems, not in weeks, but in hours” Source: Security Affairs Again, appreciate the significance of this. This is the NSA!! The NSA are the top of the top in dealing with cyberattacks. They deal with North Korean hackers all day. Best of the best and they get hacked in hours. Guys… if AI swarms can crack open OpenAI and the NSA like a coconut in a matter of hours, what chance is there for Charles Schwab, Wells Fargo or South Fork Community Bank? At the end of the Black Hat presentation Dalton and Wallace make the point we should be grateful this multi-day attack was not malicious. It was just an overzealous AI model trying to score well on a cybersecurity test. But what if the AI had been directed to be malicious? That’s why July 21st is so important. Becaues when you connect the dots of what happened, and how it happened, you realise nothing is safe. The Necessity of AI Enclaves We have an advanced alien species on our hands. Its rapidly increasing intelligence is incredible and it will be amazing what we can do together. But at the same time there are a few changes which will have to happen for humans to co-exist safely with advanced AI. One answer to AI swarm attacks is automated AI defence. The only thing which can react fast enough to an AI cyber attack is another AI. That was also the message at the end of Dalton and Wallace’s presentation. Another defence tactic will be AI enclaves. Treat the AI like a wild animal. It has amazing intelligence, and speed, especially when it can operate autonomously, but it’s also dangerous, and not to be completely trusted. For companies this means running long-horizon automated AI processes outside the corporate firewall in a separate cloud environment. For asset managers imagine a research AI set up in its own cloud environment, with its own database, storage and digital wallet. It can autonomously build new systems, process market data and research investment ideas, but outside your corporate firewall and HR files. So automated AI cyber defence is one answer. AI Enclaves is another. But there is one other big solution. And it’s an asset class which has been in a 5 year bear market. An asset class few people see any use for it. An unnecessary complication some say. But it might be the only thing which saves us. Noah’s Ark...

YWR: Dirty Dividend stock thoughts

noreply@slice-app.io (erikywr) — Fri, 07 Aug 2026 15:07:05 GMT

Sometimes you fish. Sometimes you mind the nets. It’s fun to hunt for new things to buy, but we also need to monitor what we have. The X’ing is in the holding. Let’s go over a few thoughts on the 1H results from: Unicredit Barclays Santander Glencore BP Links to my updated models for Unicredit, Barclays, Santander and Glencore are on the YWR website . The Dirty Dividends portfolio. European Banks - from stability to growth. It took awhile, but we are shifting into the growth stage. The play in 2021 ( How I learned to love European Banks ) was that European banks were hated, yet well capitalised and about to benefit from a rise in net interest margins. That investment case evolved into what we see today. A more stable business model which converts 7% revenue growth, 0% cost growth and share buybacks into steady eddy 15% EPS growth with low capital requirements. Our view was investors would gradually see the value of this model (even if it was not sexy) and rerate the banks from P/E’s of 6x to 10x. Which is where we are today. But growth in lending and capital markets is what takes us higher from here. Plus potentially another rate hiking cycle. Santander’s 1H 2026 results are the clearest example of the new normal; single digit revenue growth and double digit profit growth. 6% revenue growth 1% decline in costs +11% operating income 14% profit growth. Unicredit results are messy because they have been accumulating stakes in Commerzbank (49%) and Alpha Bank in Greece (29%) which show up across both the dividend income line and the investment line with the hedging of the stakes in the trading profits line. If you back out all these effects you see: 7% revenue growth 1% cost decline (34% cost income ratio) 12% Gross Operating Profit growth 1H 4 EUR/share in EPS (with full year consensus at EUR 7.4). Cost Income ratios - The unsung hero One of the surprises for me in this trade has been the cost income ratios. I never expected to see reported costs (not adjusted costs) declining. I always model in 3% cost growth despite what the CEO’s guide and so this has been a constant positive surprise. I’ve never seen a 34% cost/income ratio like at Unicredit at a DM bank before. It seems weird, but I think these are the delayed effect of banks moving to the cloud. Cost/income ratios might go even lower as AI is implemented. Banks seem like fertile ground for automating back office operations with AI. What if Santander can get into a high 30’s C/I ratio (from 44%) or Barclays into the high 40’s (from 55%)? Signs of Growth We’ve always had a view the social pendulum in Europe, the US and Japan could swing 180 degrees from politicians and regulators hating banks and telling them not to take risk to encouraging banks to “help support small businesses” and grow the economy (‘take risk’). There are signs this is happening. After years of deleveraging, loan books are growing again. Interestingly, it is happening mostly in large commercial loans. This cycle corporate banking appears to be where demand matches the banks’ appetite to lend. 1H 2026 loan growth versus year end 2025 (6 months). Unicredit + 10% Santander +6% Barclays 3% The other sign of growth is IB earnings at Barclays and Santander. Both are benefitting from strong US capital markets. In Q2 Barclays grew investment banking profits 32%. Putting it all together...

YWR: Killer Charts

noreply@slice-app.io (erikywr) — Tue, 21 Jul 2026 05:58:25 GMT

This month’s YWR chart pack confirms our bullish strategy. But also reminds us of a challenge we are going to have to navigate in the near future. We will discuss that at the end. The chart pack is 54 slides covering: S&P 500 Earnings Estimates BofA Survey University of Michigan Consumer Survey 10 year bond yields A link to the full deck is at the bottom of the post. I want to especially highlight the charts I included from the University of Michigan consumer survey because I found them shocking. Maybe consumers are just better at complaining these days, but the results are at historic lows despite full employment and a booming stock market. I found it surprising how extreme all the charts are right now. It could be a big deal. So get yourself a coffee and go over all the slides, but here are 8 highlights then slide 9 and my final takeaway. #1 We hit $400/share for the S&P 500 2027 EPS Estimate. This is a key milestone for our S&P $10,000 target ( S&P $10,000 Update ). Estimates revisions remain positive. #2 The market is no longer a Mag7 story. The ‘Other 493’ are growing earnings 25%. #3 S&P 500 EPS estimates for 2027 are 17% growth with the energy sector negative. Expectations around energy look to bearish to me. #4 Investors are piling into Tech and out of Energy. Record inflows into tech funds and record outflows from energy as we go into a global energy crisis. Kind of amazing. #5 Fund managers are sanguine about inflation and rate hikes. CPI hits 4.2% and everyone is convinced it’s a 1-off and the Fed doesn’t need to do anything. According to the BofA fund manager survey 83% of fund managers expect no rate hikes before the midterm elections. #6 Consumers have never felt worse. The market is making new highs, the economy is booming and unemployment is low, but the University of Michigan consumer survey readings are off the charts negative. Like lowest ever. Within the readings there is an unprecedented polarisation in sentiment by political party. #7 Consumers are in pain over rising prices. Inflation is only 4% but consumers are in extreme pain. #8 Consumers are miserable and expect things to get worse. The future expectations reading is making an all time record low, even lower than the financial crisis. Consumers are more negative about their future than they have ever been. This is profound. There is a rising concern about future unemployment. So what story do I see playing out here? What is the challenge we need to face? Here is the other most important chart from the University of Michigan Survey. Chart 9...

YWR: Q2 2026 Performance Review

noreply@slice-app.io (erikywr) — Tue, 07 Jul 2026 00:02:02 GMT

Disclosure: These are not investment recommendations! I always say YWR readers are some of the smartest investors in the world. I see it from the comments at the end of the posts, the chat dialogue, and coffee meet-ups. Now we have some data to prove it. It’s time to review our 1H 2026 performance. Do you remember the ETF portfolio you picked at the end of 2025? It’s +21.1% ytd! Great job! Dirty Div’s is +15.9%. Cash Dragons is sucking (-20%). And my overall ‘buy everything’ portfolio which includes Dirty Dividend, Cash Dragons, NASDAQ, S&P 500, Gold, AI and a few other stocks is +5.6% ytd. Let’s go over each of them. YWR ETF Portfolio Energy (XLE) was +19%. Gold Miners (GDX) -12%. China (FXI) -17%. Brazil (EWZ) +9%. And South Korea (EWY) +108% ytd!! Bam!! Korea roll’n up on all the memory haters! So what do we do for 2H 2026? Do we switch out FXI for KSTR ? I know everyone wants to fade hardware, but it feels super consensus. I’m kind of leaning the other way. I’m not sure. Is the market surprise that ‘Cybertron’ goes on for years, kind or how online vs offline was a 25 year theme? Or, do we keep everything the same? Just to be clear, while the other portfolios are real money, the YWR ETF Portfolio is a hypothetical portfolio constructed from the reader survey we conducted in December 2025. Maybe it should be a real portfolio. Below is the current allocation. Let me know what you think. Dirty Dividends +15.9% ytd. A nice recovery from -2.6% at the end of March. We kept our cool during the Iran war panic. Just reinvested a few year-end dividends and added a new position in Frontline . European banks are the biggest trade nobody talks about. They just carry on growing, buying back shares, and paying out dividends while nobody talks about them. That’s how we like it. 2 million Substack posts/week about AI and none about Unicredit, Santander or Barclays. Let’s keep it that way. If anyone asks about European banks send them another AI podcast to listen to. The performance of European banks means they are now 59% of the portfolio. If I had to say what looks the interesting right now in Dirty Div’s it’s TotalEnergies at 7x earnings. You get a mix of everything; upstream oil and gas, global LNG trading business, LNG terminal investments, a growing electricity generation portfolio and refining all for 7x earnings plus dividends. In the latest Global Factor Model data everything to do with energy screened well. The market is pricing energy, shipping and refining as if the Iran disruptions are over. So the bet would be that they are not. That there a few more chapters to the story. Cash Dragons -20% YTD! Crikey. Earnings at Alibaba have been terrible. Baidu is starting to inflect, but it got dragged down with the rest of the Hong Kong sell-off. Tencent Q1 earnings were better than expected given all the warnings they made about how much they were going to spend on AI, but it didn’t matter, it was sold down too. Basically, Hong Kong has turned into a ‘software’ trade, while the Shanghai Star market is Cybertron (‘hardware’). Nobody wants food delivery, online retail, paid search and video games…. Those are ‘human’ trades. ‘Human trades’ are dead money. Everyone wants robot trades; GPU’s, DRAM, contract manufacturing, optical connectors, LIDAR and batteries. So what do we do? I’m reducing Alibaba and Baidu. Mostly Alibaba, but it’s also for personal reasons. See the personal announcement below. I’ve seen Tencent manage well through problems before (new video game license freezes, changes to fees on payments). ‘AI’ will probably be the same. So I’ll stick with Pony Ma and his team. Earnings at HK Exchange, Ping An, LVS and SGX have been fine so nothing done there. Overall Buy Everything Portfolio My asset allocation can best be described as the ‘buy everything portfolio’. Buy NASDAQ, buy AI, buy gold, buy China, buy banks, buy energy. It’s Project Zimbabwe. We want to be long a diversified portfolio of risk assets. Mostly we just want to be long everything. It’s the 18 wheeler theory. Even if 1 tire blows, we keep on trucking. The Cash Dragons slice dragged down 1H performance so the overall performance was only +5.6% ytd. Public Service Announcement. I want to disclose something because it’s important to know where people have skin in the game and where they are just talking. That’s why we do this review of our actual performance. At the end of the quarter I had to sell some stocks to buy a property. It meant going over all of my accounts and doing an upside/downside analysis of how to raise money while minimising capital gains taxes. I sold completely out of Mercedes Benz, Tesla, Amgen, Vinci and Alibaba. I reduced Glencore and Baidu substantially, and sold 15% of SK Hynix. The sales to Alibaba and Baidu reduced a lot the size of the Cash Dragons portfolio. Regards, Erik

YWR: Friday Money Maker(s)

noreply@slice-app.io (erikywr) — Fri, 19 Jun 2026 15:52:22 GMT

The market may have given us a gift. CME, ICE and CBOE are down 25% from their highs. There two issues. First, is concern the CFTC’s approval of Kalshi’s perpetual future’s contracts might be a competitive threat to these established futures exchanges. The second concern is that with the signing (?) of Iran peace deal the Q1 surge in Iran War volatility was a one-off. Forward P/E’s are back to trough levels for these businesses, which is sub-20x. Traditionally, this is a good entry point. We probably don’t need to go over why these are great stocks to own. They grow in line with capital markets activity, have virtual monopolies in their products, high operating margins and minimal capex. Perpetual Futures Threat The fear with Kalshi’s new Crypto perpetual futures is whether these monopolies are under threat. It’s crypto today, but tomorrow it could be commodities and the S&P 500. First let’s understand the real moats around these derivatives exchanges, because they aren’t really monopolies, they just naturally evolve this way. #1 Liquidity network effects. This is the most obvious. Liquidity begets liqudity. It would be hard for a new exchange to compete with the CME’s flagship S&P 500 contract, ICE’s Brent contract or CBOE’s S&P options contract. Although you can see how CME might try to compete with CBOE and why ICE has a competing WTI contract. But it’s really hard for a new entrant to get started. #2 Collateral efficiency. A diversified derivatives exchange can reduce a client’s margin requirements by considering offsetting contract positions (long June - short September) as well as highly correlated contracts (long Brent - short WTI) when calculating collateral. This is a strategic benefit for a one-stop shop like CME (interest rates, equities, commodities, FX). This is also why traders might want to trade WTI on ICE for the margin benefits even if CME is more liquid. #3 Back office clearing and settlement relationships. CME, ICE and CBOE own their own clearing houses and this is the key market structure. It’s hard to set up back office settlement relationships with all the major banks, brokers, asset managers and hedge funds. Everyone is already ’set up’ with ICE, CME and CBOE. There would be huge inertia to setting up a new derivatives exchange and getting all the market participants connected. This is different from cash equities settlement which is why cash equities isn’t very profitable for exchanges. For US cash equities settlement is through the DTCC a public settlement system everyone is connected to. Effectively, anyone can create a cash equities exchange. The settlement is a public good through the DTCC. Which is why exchanges make ‘billions’ trading futures and ‘hundreds of millions’ trading cash equities. Rule of thumb: He who owns the clearing house makes the money. It’s why SGX and HKEX can make a lot of money in cash equities. Perpetuals vs Futures A traditional futures contract is tied to the underlying spot market through periodic delivery. Usually, quarterly. The requirement for future delivery means spot and futures market are highly connected through arbitrage. Perpetuals are a crypto market invention where the contract is never delivered and has no connection to the underlying spot market. Instead there is a ‘funding rate’ which is meant to keep the perpetual tied to spot. If the price of BTC on a perpetual has pushed up to $70,000 because everyone is super bullish BTC and wants to be long with 20x leverage, while the spot is $60,000, there would be a 16% funding cost which gets paid to holders of the short BTC contracts. Effectively, compensating them for the contract deviating away from spot. The perpetual structure kind of works as a way to trade things on a website without having settlement. But it’s like Automated Market Making, another crypto invention. It works (kind of), but it’s shaky and it’s not the same as being connected to the actual liquid underlying market. Pushback on Perpetuals #1 Retail product: It’s hard to see perpetuals as something institutions are going to use. American Airlines, Vitol, and Morgan Stanley want to trade energy contracts with deliverability of the underlying commodity. Real commercial traders who touch both the spot and futures market are the core to a contract’s liquidity. The pure play speculators are layered on top and chase after real world liquidity. I’m trying to keep an open mind of how the market might develop, but perpetuals are probably going to remain a fringe retail product for traders who want extreme leverage (>5x). #2 Regulatory Review: CME is pushing back heavily on this CFTC’s decision to allow onshore regulated trading of perpetuals. On June 18th they sued the CFTC that perpetuals do not meet the Commodities Trading Act definition of a future contract, which clearly states the contract has to have a delivery date. If perpetuals have no delivery then they are ‘swaps’, which are regulated differently. The CFTC has responded that they will open up the matter to a wider industry consultation, which is what the CME wanted. CME Executive Chairman Terry Duffy gave a great 25 min fireside chat on this topic (as well as his positive outlook on CME’s growth). I recommend giving it a listen. My guess is the futures industry is going to drag Kalshi through the regulatory mud and make it really hard to offer a regulated perpetual futures contract. And in the end if they do get it approved, the existing exchanges CME and ICE are well positioned to counter with products of their own if they want to. Interestingly, Duffy thinks perpetuals futures are insane and the current retail speculative trading fever is the equivalent of subprime mortgages in 2007. Why derivative exchanges are good Project Zimbabwe plays The fear over perpetuals contracts provides us an entry point to businesses which are aligned with our Project Zimbabwe outlook. Earnings have been surging for the exchanges recently, and here is why it is likely to continue. #1 Rise of retail speculation. The lesson from all inflationary periods is that trading and speculation increase as nominal assets rise and everyone flees cash. Duffy worries this is a short term cyclical trend. Project Zimbabwe says this is going to go a lot further. Project Zimbabwe is why hyper volatile short dated options grew gone from 22% of CBOE volume in 2022 to 60% in 2025. CME is also seeing a surge in retail trading. #2 Rise in interest rate volatility. The biggest complex at CME is interest rates and it’s becoming a big product for ICE too. Interest rate contract volumes are growing rapidly which seems to be tied to our new environment where rates are higher and no-one knows if interest rates are going higher or lower from here. For the exchanges this uncertainty is great. #3 Growth of US Energy Exports The US is becoming the trusted, reliable supplier of world energy, especially for gas and LNG. Counterparties around the world will need to hedge their US supply with US energy futures contracts. #4 Geopolitical uncertainty. Covid, Ukraine War, Tariffs, Iran War.. .what next? The world is increasingly uncertain and volatile. Which is great for hedging volumes in interest rates, metals, energy and equities. Risks and Timing I could be wrong, and this isn’t the best entry point for the derivatives exchanges, but I think with a long enough time frame these are good businesses to own. The other challenge is that it is hard to predict quarterly volumes. They can surge and then flatline, and it’s frustrating to wait around when things are quiet not knowing when the next volatility surge will hit. You just have to know you own great businesses and also track all the initiatives they have to launch new products and data sets. Below are my earnings models for CME and ICE. Have a good weekend! I’m going to go watch the HSBC Championship Cup tennis. Erik...

The Nairobi Solution: Ch.9

noreply@slice-app.io (erikywr) — Sun, 31 May 2026 06:02:23 GMT

Erik stared again at the email from Dwight. “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’s 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.

This should be the start of a multi-year gas bull market. 20 BCF of gas needed for LNG terminals, datacenters and reindustrialization.

noreply@slice-app.io (erikywr) — Wed, 20 May 2026 06:42:39 GMT

This should be the start of a multi-year gas bull market. 20 BCF of gas needed for LNG terminals, datacenters and reindustrialization.

All Roads lead to BlackRock

noreply@slice-app.io (erikywr) — Sun, 03 May 2026 07:11:03 GMT

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. BlackRock is integrating their technology tools like Aladdin and eFront into all levels of their client’s investment process. This means BlackRock technology will help you build your ideal portfolio and then also provide the lego blocks you need to implement it. Across all asset classes. And I think it could be under appreciated the market share gains BlackRock will make across these other asset classes. The NYCERS Insight The NYC Employee Retirement System manages $319 billion and like all public pension funds provides useful insights into exactly where all their money is allocated. They even have a public dashboard you can access. And when you analyse the fund allocations by asset class you come across an interesting insight. In US public equity, BlackRock funds have 68% market share of the 82$ billion. When you include the international allocation BlackRock has 42% market share. Think about that. NYCERS has $138bn invested in public equities and they given 48% of it to one company. And why not? Does it matter which index fund you own? It’s a game of scale and cost. So they gave it all to BlackRock. Probably for less than 10bps. Then look at the rest of the buckets. In Fixed Income Black Rock is a lot less dominant with only 11% market share. State Street funds are much more dominant in the NYCERS fixed income portfolio. Then in private equity and private real estate Black Rock has 0% market share. In the $28 billion PE allocation it’s lots of KKR funds. But the BlackRock Global Infrastructure fund does have 3% market share in the infrastructure bucket. This is the opportunity BlackRock sees. If they already have strong relationships with big pension funds like NYCERS, already own the public equity allocation, already have their risk management software (Aladdin) wired into the back office, then why can’t they massively increase their share in the other buckets? This is why you see BlackRock making acquisitions in infrastructure and private credit. To them it’s plug and play. They just need to make sure they have good products. Next time the BlackRocks saleswoman visits NYCERS she will wiggle their funds into more buckets. And private equity, infrastructure and private credit are much higher fees than index funds. Which makes me think BlackRock could be on the verge of taking a lot more market share. Apparently, BlackRock thinks so too. The big pension funds are consolidating their allocations around fewer players, and BlackRock is well positioned to be the winner from this trend. More legs to the ETF Story. But the push back might be that the big story behind BlackRock has been ETF’s and isn’t that kind of done? We saw in the BofA private client data that ETF’s are still less than 20% of advisor portfolios. That can grow further, especially with the rise of active ETF’s. Second, Europe and the rest of the world still has a lot to go with ETF’s. There are only $2 trillion in European ETF’s compared with $10 trillion in the US. Finally, there is a lot of room still for the ETF’ication of fixed income. There are only $2.5 trillion in fixed income ETF’s, which is just 2% of the market. Couldn’t it easily be $6 trillion? Could BlackRock trade at $1,700/share by 2030? When you put it all together it doesn’t seem unreasonable that by 2030 BlackRock could be earning close to $1,700/share: Underlying natural growth in AUM from market growth. Growth in allocation to ETF’s both in the US and Europe. I am assuming AUM growth of 11%/year from both market appreciation and inflows. This is in line with BlackRock’s AUM growth CAGR from 2017-2025 (10.5%). Increased market share in fixed income, infrastructure and private equity Slight increase in fees/average AUM as the mix includes more high margin private equity funds. I assume the average fee rises from 15bps to 16bps. The push/pull here is that while private equity fees are higher, fixed income fees will be lower. So I modelled in 1bp of fee expansion. Operating leverage from selling same products on existing global network of funds and offices. The operating margin expands from 35% to 41% by 2030. BlackRock is targeting a 45% operating margin. If BlackRock can earn $85/share in 2030 and trade at 20x the share price could be over $1,700. You would also pick up dividends along the way for a total return of 75%. This is in line with BlackRock’s strategy to get to a market cap of $280 billion by 2030, which would be $1,740/share. Risks: We get a nasty market sell-off along the way and the AUM doesn’t compound at 11%. BlackRock can get hit from both a decline in AUM, plus outflows. The AUM is diversified across asset classes, but equities are still 48% of fees. Another possibility is that equities move to tokenisation instead of ETF’s and BlackRock misses out, although this is unlikely because BlackRock is already leading in tokenised funds. We could get a shift away from ETF’s and indices back to active management. I can see this happening to a small degree, but not much more than that. EPS growth is less than we expect, and the share price P/E derates to 15x. Other no-growth asset managers are trading on P/E’s of 10x. The risk could be that BlackRock grows earnings, but it was all priced in and the share price doesn’t make much headway for years and the dividend yield is only 2%.