The U.S. Market Premium Is About To Unravel, Warns Global Investor | Jay Pelosky
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The US is acting like a bad old emerging market but trading at a huge premium over the next several years. Uh the US premium is going to dissipate. Iran as we call it is the single best advertisement for clean energy that one can imagine. Right? All of a sudden clean energy is not woke. It's not it's not crazy. It's simply clean, secure, available. China is one of the last countries that's going to have to raise interest rates. It's finally defeating deflation. >> Do you think the uh secular bull market in bonds is over? >> Look, we've been >> Our next guest specializes in global macro and multi-asset investing. Over the course of his career spanning over three decades on Wall Street, he's invested across nearly 50 countries. And today, he's going to reveal his top three sectors that he believes will dominate all others in the coming years. His name is Jay Pilowski and he's the founder of TPW Advisory. Previously, he was at Morgan Stanley where he co-led the Global Emerging Markets Research Project. This video is brought to you by Koshi. It's the largest prediction market in the United States. Unlike a sports book, you're trading peer-to-peer on real world events from economic data to political outcomes. And the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here to get started. And new users who use my code will get $10 when you trade $10. Right now, traders can place trades on which countries will likely raise interest rates this year. For example, there's a 47% chance that the US central bank, the Federal Reserve, will hike before 2027. If you place a trade on the US, you may yield $98 on $50 if this turns out to be correct. We'll actually be discussing the odds of various central banks across the world hiking interest rates this year with Jay. So stay tuned. You don't want to miss this episode. Jay, welcome to the show. It's good to host you. Thanks for being here. >> Thanks, David. Happy to be here. >> Jay, equity prices are continuing to soar to all-time highs despite the fact that the Iran war is escalating. Just overnight, the the uh Americans had attacked Iran, the southern part of Iran, and Iran vowed to retaliate against the US. Currently, we're speaking at market open on Tuesday the 26th, and stocks are up. The S&P 500 is up, NASDAQ is up almost 1%. despite the fact that oil prices are up. And so the question now is maybe oil prices have decoupled from this inverse relationship that they saw with the S&P 500. In other words, there was a period of time earlier this year and in fact in prior years where higher oil prices may have signal lower margins for the S&P will perhaps signal higher risk. Is that no longer the case, Jay? Well, I think markets today, David, is something we've written about are what I call omnivorous. So, uh, omnivorous in the sense that, uh, markets get a narrative, they eat it, they digest it, and then they move on. And so, Iran for the market has already been fully priced in. Uh, there's an expectation there's going to be a deal. That's a reasonable expectation because it's necessary for President Trump to make a deal. uh given the the the price of gasoline in the US, given impending uh midterm elections, given his plummeting poll numbers, given the fact that the US really doesn't have the leverage in Iran. Iran has the leverage because it can close the straight at any point with a drone attack or two. So, it's really this asymmetric warfare that uh has locked the US into a unfavorable position which it's now trying to get out of through uh negotiation. Uh and and for Iran, you know, there's no rush. Um there's no bombs falling. Uh there's no rush to accommodate the US cuz the US attacked them. And so, they're drawing it out. And uh the question is kind of a when not an if question and the market has been booied very importantly by just you know very powerful earnings and not just in the US but globally and I think this is the this is the forest as we call it the forest is the fact that we're in an unprecedented global spending super cycle as all three major regions of the world Europe Asia and the Americas what we call the triple the world are focused on spending on AI, climate and defense. And that spending is literally unprecedented. We calculate $10 trillion uh this year going to $16 trillion by 2030. And so we have a global economy that is in way better shape and by the way is much less sensitive uh to oil prices than it was 20 or 30 years ago. We had a great chart. We write regularly at TPW advisory. We just did our monthly and had a great chart in there showing that across the developed economies, oil sensitivity is a fraction of what it was. And so yes, there is a decoupling uh to your point about how the market looks at oil price hikes visav uh the past. >> In your three decades working on Wall Street, what have been the biggest tectonic shifts when it comes to themes? If you could place themes into buckets, for example, perhaps the rise of China was one of the major themes in the early 2000s that led chi investors away from certain assets into other assets tied to the China trade. What is it now? And what have been the prior major shifts that you've encountered? >> Well, that's a great question. probably requires more thought than I can give it on the hop here. But uh obviously emerging markets was a huge uh theme when I started my career and kind of coincided with the emerging markets in the early '90s. Um then obviously you had the tech uh in the late '9s uh early 2000s. Uh then you had the financialization of things uh in the mid 2000s which led to well early I guess early to mid which led to the great financial crisis uh and that uh destroyed or blew up globalization which was another kind of an outgrowth of EM or this idea that everything was going to kind of work on the Washington consensus and we're all good to go and the GFC blew that up and uh I think we then spent 10 years trying to get out of that hole. uh basically 2010 to 2020 and uh then we ran right into CO uh and CO uh upset a lot of lot of our apple carts right um and now today we're uh kind of in the the second phase what we call uh as we think about our thematic approach we offer model portfolio delivery services one of our models is a global multi-asset model the second is a thematic model, what we call TPW20, 20 ETFs focused on uh innovation and alternative energies. And we believe that uh when you combine this tripolar world spending super cycle with what came out of the US China summit, which is this idea of constructive strategic stability, that's providing a entree into what we're calling thematics 2.0, I know which is really uh a market that is is seeking out and focusing heavily uh and rewarding and investing in themes uh that are moving very quickly that people see as the future and that is AI that is robotics uh that is uh automation that is autonomy autonomous uh defense uh is certainly a major theme right now. I can tell you that in our global multi-asset model over the last month it's the number one performer uh up over 25%. And so uh this is the focus right we have a we have a market that is uh pricing in an unprecedented spending super cycle across the globe that is leading to a global growth long cycle which is providing earnings support. earnings are forecast to grow roughly 20% across both the US and emerging markets this year and next as an example of that earning cycle and that is underpinning equities and so you know Iran Trump uh you know you name it uh the market sees the narrative discounts it and moves on and the underlying key continued strength is the earning cycle and that cycle allows you to have uh incredible situations like in the tech space where stocks are up 60%. But they're cheaper than they were a year ago because earnings are up 100%. And people are just really struggling I think to kind of wrap their heads around the fact that earnings growth is so robust that Nvidia as an example sells at a significant discount today than it did over the last 3 to 5 years. tech sells at a much smaller premium in the US today versus the the broad market than it has over the last three to five years and people just you know really somehow or not somehow but I think are really struggling to understand that. So the thematic space the push to the future that is the theme that uh that we think is really going to be driving uh markets going forward. >> Are markets pricing in future earnings or trailing earnings? Well, if you look at uh for I think people are focused forward. So uh and and we are as well. I mean we think this is without a doubt a forward-looking market. We think the discounting process is uh accelerating. And we look at we wrote a piece for example several months ago uh the title was pro tip stay invested. This was during the the first bit of the Iran uh kurfuffle, right? And people are are dumping stock and we were like, "No, stay invested because market discounts, the omnivorous market discounts things very quickly." the Trump Liberation Day selloff and recovery and the Trump uh Iran war uh sell off and recovery were the two shortest um kind of peak to trough and backto peak uh movements that we've seen in 25 years uh in global equities and we have a great chart in our monthly showing exactly that because the market structure has changed right the market today is much more driven by systematic trading by algorithmic trading they move to the they have the same models they move to the same levels uh and then uh as I say digest the narrative price the narrative and move on to the next and the underlying uh sustainability of the earning cycle driven by the sustainability of the global growth cycle in turn driven by the spending super cycle uh is what allows people to have confidence that those earnings are going to be there and the market has shown again the first quarter just illustration right going into Q1 going into this earning cycle that just finished for the US for uh earnings expectations for the quarter were 13% yearon-year for the S&P did it end up at 23%. So the market is powering uh ahead on the earning cycle way more than even the analysts expect. And so you're having revisions. So that supports revisions, right? Which people look at because the revisions are telling you how people are pricing the future today. And those revisions continue to improve. And again, it's not just a US story. We think this is the best time to be a global investor in the last 25 years. really going back to uh uh to the great financial crisis. So 20 20 years roughly 15 20 years uh because you know from the bottom in '09 the US equity market outperformed everything through 2024. You didn't have to pay any attention to anything but US equity. And today that's a different story. Emerging markets are leading. So we believe we're in the early innings of a secular leadership change away from the United States to the rest of the world led by emerging market equity. >> We used to when I first started my career doing macro research, we used to challenge whatever thesis we had by thinking about anything that could provide a reasonable doubt. So let's say we were bullish on markets. Let's say we believed in the earnings cycle. Let's say we believed that earnings were to continue growing. We'd have to ask yourself, would anything derail this? thesis. Would anything um surprise earnings to the downside um or stop tech capback spending for example? And if so, then perhaps we we should switch to to defensive. But if nothing comes to mind, then we should stay long. How would you approach this? >> Yeah. No, that's uh you know, that's that's that's good thinking. I mean, I remember when I started at Morgan Stanley, I was hired and worked for Barton Biggs, who's a pretty famous name at Wall Street, and Barton used to always tell me to spend more time reading uh the ca the point of view that I disagreed with than the one I agreed with. Uh so he was always trying to find ways to poke holes into into his own arguments. And so I think that's a worthy uh objective. And you know, we we've we we've had been writing about a theme that's going around Wall Street, which is truth is edge. In other words, in a world of disinformation, in a world of, you know, uh uh people saying whatever they want to say, truth is edge. And so, uh for us, we do spend time thinking about, you know, what could go wrong. And our thesis, what could go wrong would be a recession, a global recession. what would create that global recession uh would be a massive backup in interest rates. Um people are freaking out about interest rates. Uh that is uh something we have been expecting and have positioned for for years, right? I mean we got bearish on global bonds coming out of co and now very clearly we're in a fiscal age, right? We're not in we're in an age where governments and private sector are both spending aggressively to compete in AI, climate, and defense. So importantly, it's not just AI, it's defense. It's not just AI and defense, it's AI, defense, and climate. In Iran, fused those together, right? If you think about AI and defense, asymmetric autonomous warfare is demonstrated in Ukraine daily and more recently in in Iran where Iran can close the straight and deter the world's most expensive, biggest, most powerful navy in the history of the world with a couple of drones that is fusing AI and and defense. On the other side, AI, climate and defense are also being fused by Iran because Iran as we call it is the single best advertisement for clean energy that one can imagine. Right? All of a sudden, clean energy is not woke. It's not it's not crazy. It's simply clean, secure, available, controllable in your backyard as opposed to dirty, expensive, impossible to access, and having to transit thousands of miles. And so, we're big believers that this environment is very powerful. That's why we say it's a super cycle. It's unprecedented. And so, you know, will will rates back up to a level that we think would create a recession in either the US or Europe or Asia? Because again, it's not simply the US consumer. It's not simply China stimulus anymore. The point of the tripolar world is that you have growth in each of the three main regions. It's much more sustainable and much stronger than depending on the US consumer or depending on the Chinese uh stimulus build up. >> Do you think the secular bull market in bonds is over with the 10-year yield now at 4.49% the 30-year at a nearly 20-year high just last weekend. The >> I mean it's been over for years. I mean it does the the global bond bull market you know ended uh with co with the recovery of COVID when you know zero interest rates >> I'm sorry >> do you think it do you think it'll come back do you think rates will start falling again back toward zero and you know whatever we saw postco will reverse >> no no absolutely not look we've been you know in in in our global multi-asset model where bench benchmarked 50% Aqu so global equities 40% Barkley Zag and 10% Goldman Sachs commodity index we have been zero weighted zero in DM developed market sovereign debt for the last 3 years zero position we have no treasury position we haven't had a treasury position in 3 years and so the opportunity as we see it David the opportunity the asset allocation uh level of the investment decision-m process is probably one of the easiest levels today because you definitely want to be underweight bonds and you want to stay underweight bonds to your question because we are in a tripolar world spending super cycle and it's on existential issues like AI like climate like defense in other words people are going to spend they're going to continue to spend they have to spend and so no you definitely don't want to be in developed market sovereign debt uh for years. I I mean I I would imagine we look out at this point we're looking out towards 2030 and uh we think this uh tripolar world spending super cycle is sustainable through that period if not beyond and we would imagine uh and envision being very underweight developed market sovereign debt uh during that period. The good news is that hey, if you're 40% of your benchmark is fixed income and you want to be like we are at 12% 12% versus a 40% benchmark, that gives you 25 30% to play with in your equity in your commodity positions. >> And so in our world, we are, you know, rough numbers, we're 70% or so uh equities versus a 50% benchmark. We're 12% fixed income versus a 40% benchmark. That's 82. And we're 15 to 20% commodities versus a 10% benchmark. >> So, what should replace bonds in the traditional 60/40 portfolio? >> Commodities, >> specifically oil, or or are we looking at metals? >> Yeah. Well, we're I mean we're a big believer that you know the AI age, you know, uh we we coined a phrase a while back, the digital eats the physical. In other words, you have no AI if you don't have physical commodities. If you don't have energy, you have no AI. Um and so yes, uh we want to be we're we're exposed across the commodity uh space including uh energy, including oil. Uh that's more tactical. Uh to be, you know, to be clear, we went long oil in the fall when uh Wall Street was uh penciling in $52 for an average Brent price. Uh we thought it was going to be completely wrong because of the spending super cycle. Nothing to do with Iran. Uh Iran wasn't even on the radar at that point. Um and so and so we continue to hold that position. We've actually trimmed it uh over the last couple of months. uh were very long industrial metals and particularly the miners as well as the precious metals and miners. People again have no idea how much money the miners are making. It's absolutely off the charts. Uh it just think about it, right? The gold miners were working with a gold price of $1,500 an ounce and making money on that. The gold price today is $4,500. What do you think the profit margin is for gold miner? It's better than the tech profit margin. That's again something people have a hard time wrapping their head around. Copper miners are printing money and are going to continue to print money for years and years. And so we're we we have a big position that's our favorite right now in copper miners. Um and we also uh have positions in water which hasn't worked very well but if you know everything that we read suggests that AI requires a lot of water and people require a lot of water and crops and animals require water. So we're exposed across the cycle in the commodities. We're roughly double weighted versus our benchmark and essentially it's a question of you know they run fast and then they pull back. And so you want to you want to have a core position and then you want to be able to kind of play around with the waitings depending on how they're moving. >> This is an interesting trade. This is from Koshi. It's a prediction market and traders are predicting which central banks will hike before 2027. Let me just read through this list. Bank of England is 79%, Bank of Canada 62%, US Federal Reserves 47%, Bank of Japan 95%, ECB 95%. Everything except the Swiss National Bank has a more than 50% chance of hiking this year. Now, I bring this up because prediction markets have been surprisingly well surprisingly to some, but remarkably accurate in predicting events, especially closer they get to the actual event itself. And if we do have a hiking cycle that extends beyond just the US, a global central bank hiking cycle, whether it's coordinator coordinated or not, that may be reminiscent of 2022 is is a concern. Remember in 2022 when the Fed started hiking, everything went down, gold, bonds, stocks, and it wasn't until later in 2023 that things started to recover. How how how should you perceive what you're looking at on the screen right now? >> Yeah, I'm not a surprise, right? Because as we said, we're in a spending super cycle >> and most governments uh have big deficits. We focused uh on two that don't uh uh one is Germany, right? With a debt GDP ratio of about 65%, Germany is finally spending. That's bullish for European growth. Uh and by the way, we're quite bullish Europe. Uh Europe is the big winner from the dual ceasefires. We expect the US Iran deal. So more than a ceasefire, I guess, and a ceasefire in Russia and Ukraine. Uh we think that's way more likely than your prediction markets predict. I think right now that prediction is like 6% by the end of the summer. Uh we think it's much much higher. Um and so in terms of you know central banks raising rates we are coming off of a big global monetary rate cutting cycle right so kind of natural that uh some central banks are moving into rate hiking. Uh Bank of England we spend virtually no time thinking about England. Um we spend a fair bit of time thinking about the ECB. Uh three rate hikes are priced in. Um, you know, look what the market's doing. It's up 4 1/2% over the last month. It's outperforming the US. It's it's exposed the European trade right here is a ceasefire trade because it's so exposed uh to oil. Um, you know, the one you didn't mention, uh, sorry, let's let's touch on Japan going to Asia. Look, what would you rather have uh in Japan, a country with 200% debt to GDP? Would you rather have deflation or inflation? The answer's pretty clear. Inflation. Japan has inflation. Its rates right now are the lowest real rates of any major economy. It needs to raise rates. It should raise rates. Raising rates in Japan confirms inflation is intact and confirms growth. It's bullish. And then the other country where we are very bullish to use that phrase is China. And China is one of the last countries that's going to have to raise interest rates. It's finally defeating deflation which is one of the big themes we've been focused on. Uh and we think that is very bullish for Chinese corporate profits. We think that's very bullish for Chinese domestic investor allocation. Uh domestic investors are looking for someplace to put their money. Can't do it in property. Real rates are really very unattractive. There's a whole cycle coming out of postcoid where there's a lot of higher yielding domestic Chinese savings vehicles that are maturing and the the the uh owners of those um instruments are are confronted with an interest rate environment that is much much lower than what they were getting paid. We think there's real potential for a significant asset allocation shift as we've seen in Japan uh in China to domestic equities and so we're very long uh the ashare market in China >> is that also on the back of rising Chinese tech development Jay >> yes we're very bullish China tech I mean look China China uh has dominated the clean energy cycle uh it is the biggest winner from Iran. Its demand for its EVs, for its solar panels, for its batteries, for its wind turbines is exploding. It's providing all of that to the emerging markets more broadly, which is allowing EM to leapfrog the developed markets. We think that's going to be a big theme in the years ahead. And so we think we look at China and we see it taking those learnings that industrial scale that industrial depth that industrial speed and applying it to uh embodied AI or physical AI or robotics. Uh we think it's uh provide it it's moving into autonomy both autonomous defense and autonomous vehicles. Um and so yes we're very exposed to uh China. It's moving into biotech. Um, we're exposed to China across the spectrum. Uh, we're significantly overweight. >> I'd like to talk about the, uh, framework in which you basically make all your decisions. Tell us about the, uh, T, uh, TPW framework. >> Um, >> sure. >> That you write about. It's the tripolar world framework. >> It's basically the foundation of everything you write about in one or two minutes or less. How does it work? Yeah, exactly. Good, good point because I could go on for a long time. So, uh, TPW, uh, the tripolar world is a thesis we developed. It's our own IP. It came out of the great financial crisis, uh, when globalization was dead and nationalism didn't work. That was confirmed with Brexit a few years later. And so it basically argues that regional integration or regional deepening in the three main regions of Europe, Asia and the Americas is the way forward for the global economy. And you know Brexit proved the point about nationalism. Co proved the point about uh uh regional integration and the need to kind of onshore things. Trump reinforces that. Uh everything that we've seen subsequent reinforces that. And so we're big believers that the tripolar world thesis is manifesting in real time. And as I said earlier, the fact that Europe is spending aggressively, that Asia is spending aggressively, and that the Americas are spending aggressively is very bullish for the global economy and therefore very bullish for risk assets. I'd >> like to bring your attention to this story uh before we close off. This is from CNBC and it goes back to what we were talking about earlier about treasuries and bonds. Japan, China lead foreign government retreat from US treasuries. Foreign governments cut US treasuries in marches of an east war. Forced central banks to liquidate dollar reserves, defending local currencies against energy shock that sent exchange rates tumbling. China reduced its holdings to 652 billion, down roughly 6% from February. Japan, the single largest foreign holder of US government debt, shed approximately $47 billion to $1.191 trillion. This is a trend that's been ongoing for the last couple of months. And first of all, two-part question. Tell us about what's happening. And looking forward, going back to the question about central banks raising rates, if other central banks were to hike rates before the Fed does, would that put downward pressure on the dollar as interest rate differentials favor other countries? Jay? >> Yeah. Um, that's a great question, David. And look, we wrote a piece several months ago uh called the emmification of America. basically arguing that the US was acting in terms of its uh policy volatility, in terms of its domestic political environment, uh in terms of its engagement with allies or lack thereof is and in particularly uh in in terms of uh uh trying to criminalize the Federal Reserve and the chair of the Federal Reserve uh using the Justice Department against the chair uh is being kind of reminiscent of the bad old DM days, which I spent a lot of time covering. and know very very well. And so the difference of course is that the bad old EM were priced as bad old EM and so they traded at a big discount. The US is acting like a bad old emerging market but trading at a huge premium and so we're big believers that over the next several years uh the US premium is going to dissipate and that's across financial assets. So the PE multiple is going to uh shrink the difference between US and rest of the world. I mean one of the reasons why we love EM EM trades at 12 times earnings. US trades at 2122 times forward earnings. Their earnings growth for EM this year 26 and next year 27 is forecast to be better than the US and yet it trades at almost a 50% discount. That's a huge opportunity. And so uh we believe that US PE premium will shrink both the US repricing downward and rest of the world repricing up. We think that treasuries are going to continue to struggle for part of the reason as you mentioned. Look, the US runs a 6% budget deficit and has 2% growth. That's not that's not a great trade. And then in terms of the dollar, yes, the dollar is expensive. the dollar is going to depreciate uh and that's going to continue to provide a tailwind for the rest of the world. Everyone likes to say, well, it hasn't happened yet. The point is that it's happening, but it's it's happening slowly and will just build over time. Uh and so, you know, for us, it's a it's a it's a backs stop of our of our thinking. We are believers that the rest of the world is more attractive than the US. It's much cheaper. It's completely underowned. The FT had a good uh piece uh in talking about China. Foreigners own less than 5% of Chinese uh bonds and stocks. They own 20% or more of US bonds and stocks. As everyone starts to focus on where are we going to get the money to spend on AI, climate, and defense, they're going to press their institutions to buy local. And that's already happening. you you know you see it in Canada, you see it in the UK, government pressure to you know really encouraging their pensions and institutions to buy domestic and so that means they're not going to buy treasuries which puts the onus back on on the US and that's why you have the Treasury Secretary you know touting stable coins and things like this because that's that's how they're going to try and offset this. Uh whether it works or not, I don't know. But again, we're zero weighted in treasuries and we're not really worried about uh treasuries creating a problem for equities, at least not a significant problem. And therefore, um we're focused on the upside of that trade, not the downside. >> I have a final question before you head off. your your comment about the US running a 6% deficit and 2% growth made me think about if you were a global investor meaning if you had to allocate your assets into various global jurisdictions which we can have access to through ETFs then perhaps the trade to make is to just focus on each country's comparative advantage. So if you wanted to invest in US equities focus on what America does better than other countries around the world which may or may not be tech. If you believe it's tech, then just buy US tech. Forget about other sectors. Even if they do well on a fundamental basis, America does tech best. If you wanted to buy things out of China, focus on what China does better than everybody else. And then you'd have a global diversified portfolio with just the best of the best from each place. Can you comment on that strategy? >> Yeah, it's not one that I would adopt. Um, you know, I think, uh, we're benchmark focused, right? We're not a hedge fund. Um, so as a as someone who's got a lot of experience over the years, uh, when you're paid to beat the benchmark, then it's really important to know what the benchmark is and to focus on beating the benchmark. And you know I would also point out that if your idea was to simply buy what is best in each country then you would miss like tremendous transformations uh in the in the country's makeup and how they're focusing their economic policy you know whether that's Japan going from deflation to inflation whether that's China going from you know rural agricultural labor to uh to worldass uh leading edge um prim um high-end manufacturing uh power etc etc. So look, our our as we think about it, we are uh kind of focused on the globe in the tripolar world. Uh we write every week to keep us on the front foot and we have model portfolios that require structure to our ideas and our focus is all about trying to position those models for the best performance visa v their benchmarks. uh and that is both macro, it's fundamental, it's technical, it's having a good vision towards the future as I mentioned earlier, right? The the top five performing positions literally in our global multiasset model over the last month are uh one autonomous warfare, two clean energy, one humanoid robotics, and one uh semiconductor. And so that's, you know, those are and they're spread all over the world. The robotics ETF, for example, is 30% China, 30% Japan, and 30% uh 20% Korea, and 10% something else. So you know, and that that's you know, these supply chains, as you know, David, are spread, you know, widely. The focus is, you know, where as those supply chains kind of regionalize, which is our view, that's what's happening. For example, US gets more AI uh associated imports from Mexico than from China. I mean, that's a sign of regionalization in the Americas. Uh China dominates Asian trade. That's a sign of Asian integration. Europe is is is is building the EU bigger and bigger because more countries want to join it. That's a sign of regional integration. And so that you know there's a bunch of different things in my view anyway that one needs to pay attention to but uh your question is certainly one that's you know worth pondering. >> Just made me think you're um making us all ponder. Thank you very much Jay for your uh time and insights and uh your yeah your your your analysis is ex is exactly what we need to challenge our own style of thinking. What is um the best place to find your work? where can we where can we stay up to date on what you're writing? >> Yeah, thank you for that. I appreciate it. We we write a Substack called the Tripolar World. So, please sign up there. Um, paying customers are most appreciated. And, um, we also offer, as I say, our model portfolio delivery service. You can reach out to me through the Substack or uh, my email is jolowski paloski.com and uh, we can hook you up with uh, some information regarding that service. Uh, but I appreciate the opportunity to be on your show, David, and thank you and congratulations on your success. You've built a great uh a great following in a short period of time and um I appreciate having a chance to speak with your audience and with you. >> Thank you. I look forward to having you back on again and appreciate your kind words. Do make sure to follow Jay in the links down below and uh we'll speak with Jay again soon. Take care for now, Jay. Thank you. >> Thank you, David, >> and thanks for watching. Don't forget to like, subscribe, and use my code Lynn when you sign up to Koshi. When you use my code, new traders can get $10 when they deposit and trade $10. Link down below or scan the QR code here to get started.
The U.S. Market Premium Is About To Unravel, Warns Global Investor | Jay Pelosky
Summary
Click the link http://kalshi.com/r/LIN or download the Kalshi App and use code LIN to sign up and trade today! Jay Pelosky …Transcript
The US is acting like a bad old emerging market but trading at a huge premium over the next several years. Uh the US premium is going to dissipate. Iran as we call it is the single best advertisement for clean energy that one can imagine. Right? All of a sudden clean energy is not woke. It's not it's not crazy. It's simply clean, secure, available. China is one of the last countries that's going to have to raise interest rates. It's finally defeating deflation. >> Do you think the uh secular bull market in bonds is over? >> Look, we've been >> Our next guest specializes in global macro and multi-asset investing. Over the course of his career spanning over three decades on Wall Street, he's invested across nearly 50 countries. And today, he's going to reveal his top three sectors that he believes will dominate all others in the coming years. His name is Jay Pilowski and he's the founder of TPW Advisory. Previously, he was at Morgan Stanley where he co-led the Global Emerging Markets Research Project. This video is brought to you by Koshi. It's the largest prediction market in the United States. Unlike a sports book, you're trading peer-to-peer on real world events from economic data to political outcomes. And the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here to get started. And new users who use my code will get $10 when you trade $10. Right now, traders can place trades on which countries will likely raise interest rates this year. For example, there's a 47% chance that the US central bank, the Federal Reserve, will hike before 2027. If you place a trade on the US, you may yield $98 on $50 if this turns out to be correct. We'll actually be discussing the odds of various central banks across the world hiking interest rates this year with Jay. So stay tuned. You don't want to miss this episode. Jay, welcome to the show. It's good to host you. Thanks for being here. >> Thanks, David. Happy to be here. >> Jay, equity prices are continuing to soar to all-time highs despite the fact that the Iran war is escalating. Just overnight, the the uh Americans had attacked Iran, the southern part of Iran, and Iran vowed to retaliate against the US. Currently, we're speaking at market open on Tuesday the 26th, and stocks are up. The S&P 500 is up, NASDAQ is up almost 1%. despite the fact that oil prices are up. And so the question now is maybe oil prices have decoupled from this inverse relationship that they saw with the S&P 500. In other words, there was a period of time earlier this year and in fact in prior years where higher oil prices may have signal lower margins for the S&P will perhaps signal higher risk. Is that no longer the case, Jay? Well, I think markets today, David, is something we've written about are what I call omnivorous. So, uh, omnivorous in the sense that, uh, markets get a narrative, they eat it, they digest it, and then they move on. And so, Iran for the market has already been fully priced in. Uh, there's an expectation there's going to be a deal. That's a reasonable expectation because it's necessary for President Trump to make a deal. uh given the the the price of gasoline in the US, given impending uh midterm elections, given his plummeting poll numbers, given the fact that the US really doesn't have the leverage in Iran. Iran has the leverage because it can close the straight at any point with a drone attack or two. So, it's really this asymmetric warfare that uh has locked the US into a unfavorable position which it's now trying to get out of through uh negotiation. Uh and and for Iran, you know, there's no rush. Um there's no bombs falling. Uh there's no rush to accommodate the US cuz the US attacked them. And so, they're drawing it out. And uh the question is kind of a when not an if question and the market has been booied very importantly by just you know very powerful earnings and not just in the US but globally and I think this is the this is the forest as we call it the forest is the fact that we're in an unprecedented global spending super cycle as all three major regions of the world Europe Asia and the Americas what we call the triple the world are focused on spending on AI, climate and defense. And that spending is literally unprecedented. We calculate $10 trillion uh this year going to $16 trillion by 2030. And so we have a global economy that is in way better shape and by the way is much less sensitive uh to oil prices than it was 20 or 30 years ago. We had a great chart. We write regularly at TPW advisory. We just did our monthly and had a great chart in there showing that across the developed economies, oil sensitivity is a fraction of what it was. And so yes, there is a decoupling uh to your point about how the market looks at oil price hikes visav uh the past. >> In your three decades working on Wall Street, what have been the biggest tectonic shifts when it comes to themes? If you could place themes into buckets, for example, perhaps the rise of China was one of the major themes in the early 2000s that led chi investors away from certain assets into other assets tied to the China trade. What is it now? And what have been the prior major shifts that you've encountered? >> Well, that's a great question. probably requires more thought than I can give it on the hop here. But uh obviously emerging markets was a huge uh theme when I started my career and kind of coincided with the emerging markets in the early '90s. Um then obviously you had the tech uh in the late '9s uh early 2000s. Uh then you had the financialization of things uh in the mid 2000s which led to well early I guess early to mid which led to the great financial crisis uh and that uh destroyed or blew up globalization which was another kind of an outgrowth of EM or this idea that everything was going to kind of work on the Washington consensus and we're all good to go and the GFC blew that up and uh I think we then spent 10 years trying to get out of that hole. uh basically 2010 to 2020 and uh then we ran right into CO uh and CO uh upset a lot of lot of our apple carts right um and now today we're uh kind of in the the second phase what we call uh as we think about our thematic approach we offer model portfolio delivery services one of our models is a global multi-asset model the second is a thematic model, what we call TPW20, 20 ETFs focused on uh innovation and alternative energies. And we believe that uh when you combine this tripolar world spending super cycle with what came out of the US China summit, which is this idea of constructive strategic stability, that's providing a entree into what we're calling thematics 2.0, I know which is really uh a market that is is seeking out and focusing heavily uh and rewarding and investing in themes uh that are moving very quickly that people see as the future and that is AI that is robotics uh that is uh automation that is autonomy autonomous uh defense uh is certainly a major theme right now. I can tell you that in our global multi-asset model over the last month it's the number one performer uh up over 25%. And so uh this is the focus right we have a we have a market that is uh pricing in an unprecedented spending super cycle across the globe that is leading to a global growth long cycle which is providing earnings support. earnings are forecast to grow roughly 20% across both the US and emerging markets this year and next as an example of that earning cycle and that is underpinning equities and so you know Iran Trump uh you know you name it uh the market sees the narrative discounts it and moves on and the underlying key continued strength is the earning cycle and that cycle allows you to have uh incredible situations like in the tech space where stocks are up 60%. But they're cheaper than they were a year ago because earnings are up 100%. And people are just really struggling I think to kind of wrap their heads around the fact that earnings growth is so robust that Nvidia as an example sells at a significant discount today than it did over the last 3 to 5 years. tech sells at a much smaller premium in the US today versus the the broad market than it has over the last three to five years and people just you know really somehow or not somehow but I think are really struggling to understand that. So the thematic space the push to the future that is the theme that uh that we think is really going to be driving uh markets going forward. >> Are markets pricing in future earnings or trailing earnings? Well, if you look at uh for I think people are focused forward. So uh and and we are as well. I mean we think this is without a doubt a forward-looking market. We think the discounting process is uh accelerating. And we look at we wrote a piece for example several months ago uh the title was pro tip stay invested. This was during the the first bit of the Iran uh kurfuffle, right? And people are are dumping stock and we were like, "No, stay invested because market discounts, the omnivorous market discounts things very quickly." the Trump Liberation Day selloff and recovery and the Trump uh Iran war uh sell off and recovery were the two shortest um kind of peak to trough and backto peak uh movements that we've seen in 25 years uh in global equities and we have a great chart in our monthly showing exactly that because the market structure has changed right the market today is much more driven by systematic trading by algorithmic trading they move to the they have the same models they move to the same levels uh and then uh as I say digest the narrative price the narrative and move on to the next and the underlying uh sustainability of the earning cycle driven by the sustainability of the global growth cycle in turn driven by the spending super cycle uh is what allows people to have confidence that those earnings are going to be there and the market has shown again the first quarter just illustration right going into Q1 going into this earning cycle that just finished for the US for uh earnings expectations for the quarter were 13% yearon-year for the S&P did it end up at 23%. So the market is powering uh ahead on the earning cycle way more than even the analysts expect. And so you're having revisions. So that supports revisions, right? Which people look at because the revisions are telling you how people are pricing the future today. And those revisions continue to improve. And again, it's not just a US story. We think this is the best time to be a global investor in the last 25 years. really going back to uh uh to the great financial crisis. So 20 20 years roughly 15 20 years uh because you know from the bottom in '09 the US equity market outperformed everything through 2024. You didn't have to pay any attention to anything but US equity. And today that's a different story. Emerging markets are leading. So we believe we're in the early innings of a secular leadership change away from the United States to the rest of the world led by emerging market equity. >> We used to when I first started my career doing macro research, we used to challenge whatever thesis we had by thinking about anything that could provide a reasonable doubt. So let's say we were bullish on markets. Let's say we believed in the earnings cycle. Let's say we believed that earnings were to continue growing. We'd have to ask yourself, would anything derail this? thesis. Would anything um surprise earnings to the downside um or stop tech capback spending for example? And if so, then perhaps we we should switch to to defensive. But if nothing comes to mind, then we should stay long. How would you approach this? >> Yeah. No, that's uh you know, that's that's that's good thinking. I mean, I remember when I started at Morgan Stanley, I was hired and worked for Barton Biggs, who's a pretty famous name at Wall Street, and Barton used to always tell me to spend more time reading uh the ca the point of view that I disagreed with than the one I agreed with. Uh so he was always trying to find ways to poke holes into into his own arguments. And so I think that's a worthy uh objective. And you know, we we've we we've had been writing about a theme that's going around Wall Street, which is truth is edge. In other words, in a world of disinformation, in a world of, you know, uh uh people saying whatever they want to say, truth is edge. And so, uh for us, we do spend time thinking about, you know, what could go wrong. And our thesis, what could go wrong would be a recession, a global recession. what would create that global recession uh would be a massive backup in interest rates. Um people are freaking out about interest rates. Uh that is uh something we have been expecting and have positioned for for years, right? I mean we got bearish on global bonds coming out of co and now very clearly we're in a fiscal age, right? We're not in we're in an age where governments and private sector are both spending aggressively to compete in AI, climate, and defense. So importantly, it's not just AI, it's defense. It's not just AI and defense, it's AI, defense, and climate. In Iran, fused those together, right? If you think about AI and defense, asymmetric autonomous warfare is demonstrated in Ukraine daily and more recently in in Iran where Iran can close the straight and deter the world's most expensive, biggest, most powerful navy in the history of the world with a couple of drones that is fusing AI and and defense. On the other side, AI, climate and defense are also being fused by Iran because Iran as we call it is the single best advertisement for clean energy that one can imagine. Right? All of a sudden, clean energy is not woke. It's not it's not crazy. It's simply clean, secure, available, controllable in your backyard as opposed to dirty, expensive, impossible to access, and having to transit thousands of miles. And so, we're big believers that this environment is very powerful. That's why we say it's a super cycle. It's unprecedented. And so, you know, will will rates back up to a level that we think would create a recession in either the US or Europe or Asia? Because again, it's not simply the US consumer. It's not simply China stimulus anymore. The point of the tripolar world is that you have growth in each of the three main regions. It's much more sustainable and much stronger than depending on the US consumer or depending on the Chinese uh stimulus build up. >> Do you think the secular bull market in bonds is over with the 10-year yield now at 4.49% the 30-year at a nearly 20-year high just last weekend. The >> I mean it's been over for years. I mean it does the the global bond bull market you know ended uh with co with the recovery of COVID when you know zero interest rates >> I'm sorry >> do you think it do you think it'll come back do you think rates will start falling again back toward zero and you know whatever we saw postco will reverse >> no no absolutely not look we've been you know in in in our global multi-asset model where bench benchmarked 50% Aqu so global equities 40% Barkley Zag and 10% Goldman Sachs commodity index we have been zero weighted zero in DM developed market sovereign debt for the last 3 years zero position we have no treasury position we haven't had a treasury position in 3 years and so the opportunity as we see it David the opportunity the asset allocation uh level of the investment decision-m process is probably one of the easiest levels today because you definitely want to be underweight bonds and you want to stay underweight bonds to your question because we are in a tripolar world spending super cycle and it's on existential issues like AI like climate like defense in other words people are going to spend they're going to continue to spend they have to spend and so no you definitely don't want to be in developed market sovereign debt uh for years. I I mean I I would imagine we look out at this point we're looking out towards 2030 and uh we think this uh tripolar world spending super cycle is sustainable through that period if not beyond and we would imagine uh and envision being very underweight developed market sovereign debt uh during that period. The good news is that hey, if you're 40% of your benchmark is fixed income and you want to be like we are at 12% 12% versus a 40% benchmark, that gives you 25 30% to play with in your equity in your commodity positions. >> And so in our world, we are, you know, rough numbers, we're 70% or so uh equities versus a 50% benchmark. We're 12% fixed income versus a 40% benchmark. That's 82. And we're 15 to 20% commodities versus a 10% benchmark. >> So, what should replace bonds in the traditional 60/40 portfolio? >> Commodities, >> specifically oil, or or are we looking at metals? >> Yeah. Well, we're I mean we're a big believer that you know the AI age, you know, uh we we coined a phrase a while back, the digital eats the physical. In other words, you have no AI if you don't have physical commodities. If you don't have energy, you have no AI. Um and so yes, uh we want to be we're we're exposed across the commodity uh space including uh energy, including oil. Uh that's more tactical. Uh to be, you know, to be clear, we went long oil in the fall when uh Wall Street was uh penciling in $52 for an average Brent price. Uh we thought it was going to be completely wrong because of the spending super cycle. Nothing to do with Iran. Uh Iran wasn't even on the radar at that point. Um and so and so we continue to hold that position. We've actually trimmed it uh over the last couple of months. uh were very long industrial metals and particularly the miners as well as the precious metals and miners. People again have no idea how much money the miners are making. It's absolutely off the charts. Uh it just think about it, right? The gold miners were working with a gold price of $1,500 an ounce and making money on that. The gold price today is $4,500. What do you think the profit margin is for gold miner? It's better than the tech profit margin. That's again something people have a hard time wrapping their head around. Copper miners are printing money and are going to continue to print money for years and years. And so we're we we have a big position that's our favorite right now in copper miners. Um and we also uh have positions in water which hasn't worked very well but if you know everything that we read suggests that AI requires a lot of water and people require a lot of water and crops and animals require water. So we're exposed across the cycle in the commodities. We're roughly double weighted versus our benchmark and essentially it's a question of you know they run fast and then they pull back. And so you want to you want to have a core position and then you want to be able to kind of play around with the waitings depending on how they're moving. >> This is an interesting trade. This is from Koshi. It's a prediction market and traders are predicting which central banks will hike before 2027. Let me just read through this list. Bank of England is 79%, Bank of Canada 62%, US Federal Reserves 47%, Bank of Japan 95%, ECB 95%. Everything except the Swiss National Bank has a more than 50% chance of hiking this year. Now, I bring this up because prediction markets have been surprisingly well surprisingly to some, but remarkably accurate in predicting events, especially closer they get to the actual event itself. And if we do have a hiking cycle that extends beyond just the US, a global central bank hiking cycle, whether it's coordinator coordinated or not, that may be reminiscent of 2022 is is a concern. Remember in 2022 when the Fed started hiking, everything went down, gold, bonds, stocks, and it wasn't until later in 2023 that things started to recover. How how how should you perceive what you're looking at on the screen right now? >> Yeah, I'm not a surprise, right? Because as we said, we're in a spending super cycle >> and most governments uh have big deficits. We focused uh on two that don't uh uh one is Germany, right? With a debt GDP ratio of about 65%, Germany is finally spending. That's bullish for European growth. Uh and by the way, we're quite bullish Europe. Uh Europe is the big winner from the dual ceasefires. We expect the US Iran deal. So more than a ceasefire, I guess, and a ceasefire in Russia and Ukraine. Uh we think that's way more likely than your prediction markets predict. I think right now that prediction is like 6% by the end of the summer. Uh we think it's much much higher. Um and so in terms of you know central banks raising rates we are coming off of a big global monetary rate cutting cycle right so kind of natural that uh some central banks are moving into rate hiking. Uh Bank of England we spend virtually no time thinking about England. Um we spend a fair bit of time thinking about the ECB. Uh three rate hikes are priced in. Um, you know, look what the market's doing. It's up 4 1/2% over the last month. It's outperforming the US. It's it's exposed the European trade right here is a ceasefire trade because it's so exposed uh to oil. Um, you know, the one you didn't mention, uh, sorry, let's let's touch on Japan going to Asia. Look, what would you rather have uh in Japan, a country with 200% debt to GDP? Would you rather have deflation or inflation? The answer's pretty clear. Inflation. Japan has inflation. Its rates right now are the lowest real rates of any major economy. It needs to raise rates. It should raise rates. Raising rates in Japan confirms inflation is intact and confirms growth. It's bullish. And then the other country where we are very bullish to use that phrase is China. And China is one of the last countries that's going to have to raise interest rates. It's finally defeating deflation which is one of the big themes we've been focused on. Uh and we think that is very bullish for Chinese corporate profits. We think that's very bullish for Chinese domestic investor allocation. Uh domestic investors are looking for someplace to put their money. Can't do it in property. Real rates are really very unattractive. There's a whole cycle coming out of postcoid where there's a lot of higher yielding domestic Chinese savings vehicles that are maturing and the the the uh owners of those um instruments are are confronted with an interest rate environment that is much much lower than what they were getting paid. We think there's real potential for a significant asset allocation shift as we've seen in Japan uh in China to domestic equities and so we're very long uh the ashare market in China >> is that also on the back of rising Chinese tech development Jay >> yes we're very bullish China tech I mean look China China uh has dominated the clean energy cycle uh it is the biggest winner from Iran. Its demand for its EVs, for its solar panels, for its batteries, for its wind turbines is exploding. It's providing all of that to the emerging markets more broadly, which is allowing EM to leapfrog the developed markets. We think that's going to be a big theme in the years ahead. And so we think we look at China and we see it taking those learnings that industrial scale that industrial depth that industrial speed and applying it to uh embodied AI or physical AI or robotics. Uh we think it's uh provide it it's moving into autonomy both autonomous defense and autonomous vehicles. Um and so yes we're very exposed to uh China. It's moving into biotech. Um, we're exposed to China across the spectrum. Uh, we're significantly overweight. >> I'd like to talk about the, uh, framework in which you basically make all your decisions. Tell us about the, uh, T, uh, TPW framework. >> Um, >> sure. >> That you write about. It's the tripolar world framework. >> It's basically the foundation of everything you write about in one or two minutes or less. How does it work? Yeah, exactly. Good, good point because I could go on for a long time. So, uh, TPW, uh, the tripolar world is a thesis we developed. It's our own IP. It came out of the great financial crisis, uh, when globalization was dead and nationalism didn't work. That was confirmed with Brexit a few years later. And so it basically argues that regional integration or regional deepening in the three main regions of Europe, Asia and the Americas is the way forward for the global economy. And you know Brexit proved the point about nationalism. Co proved the point about uh uh regional integration and the need to kind of onshore things. Trump reinforces that. Uh everything that we've seen subsequent reinforces that. And so we're big believers that the tripolar world thesis is manifesting in real time. And as I said earlier, the fact that Europe is spending aggressively, that Asia is spending aggressively, and that the Americas are spending aggressively is very bullish for the global economy and therefore very bullish for risk assets. I'd >> like to bring your attention to this story uh before we close off. This is from CNBC and it goes back to what we were talking about earlier about treasuries and bonds. Japan, China lead foreign government retreat from US treasuries. Foreign governments cut US treasuries in marches of an east war. Forced central banks to liquidate dollar reserves, defending local currencies against energy shock that sent exchange rates tumbling. China reduced its holdings to 652 billion, down roughly 6% from February. Japan, the single largest foreign holder of US government debt, shed approximately $47 billion to $1.191 trillion. This is a trend that's been ongoing for the last couple of months. And first of all, two-part question. Tell us about what's happening. And looking forward, going back to the question about central banks raising rates, if other central banks were to hike rates before the Fed does, would that put downward pressure on the dollar as interest rate differentials favor other countries? Jay? >> Yeah. Um, that's a great question, David. And look, we wrote a piece several months ago uh called the emmification of America. basically arguing that the US was acting in terms of its uh policy volatility, in terms of its domestic political environment, uh in terms of its engagement with allies or lack thereof is and in particularly uh in in terms of uh uh trying to criminalize the Federal Reserve and the chair of the Federal Reserve uh using the Justice Department against the chair uh is being kind of reminiscent of the bad old DM days, which I spent a lot of time covering. and know very very well. And so the difference of course is that the bad old EM were priced as bad old EM and so they traded at a big discount. The US is acting like a bad old emerging market but trading at a huge premium and so we're big believers that over the next several years uh the US premium is going to dissipate and that's across financial assets. So the PE multiple is going to uh shrink the difference between US and rest of the world. I mean one of the reasons why we love EM EM trades at 12 times earnings. US trades at 2122 times forward earnings. Their earnings growth for EM this year 26 and next year 27 is forecast to be better than the US and yet it trades at almost a 50% discount. That's a huge opportunity. And so uh we believe that US PE premium will shrink both the US repricing downward and rest of the world repricing up. We think that treasuries are going to continue to struggle for part of the reason as you mentioned. Look, the US runs a 6% budget deficit and has 2% growth. That's not that's not a great trade. And then in terms of the dollar, yes, the dollar is expensive. the dollar is going to depreciate uh and that's going to continue to provide a tailwind for the rest of the world. Everyone likes to say, well, it hasn't happened yet. The point is that it's happening, but it's it's happening slowly and will just build over time. Uh and so, you know, for us, it's a it's a it's a backs stop of our of our thinking. We are believers that the rest of the world is more attractive than the US. It's much cheaper. It's completely underowned. The FT had a good uh piece uh in talking about China. Foreigners own less than 5% of Chinese uh bonds and stocks. They own 20% or more of US bonds and stocks. As everyone starts to focus on where are we going to get the money to spend on AI, climate, and defense, they're going to press their institutions to buy local. And that's already happening. you you know you see it in Canada, you see it in the UK, government pressure to you know really encouraging their pensions and institutions to buy domestic and so that means they're not going to buy treasuries which puts the onus back on on the US and that's why you have the Treasury Secretary you know touting stable coins and things like this because that's that's how they're going to try and offset this. Uh whether it works or not, I don't know. But again, we're zero weighted in treasuries and we're not really worried about uh treasuries creating a problem for equities, at least not a significant problem. And therefore, um we're focused on the upside of that trade, not the downside. >> I have a final question before you head off. your your comment about the US running a 6% deficit and 2% growth made me think about if you were a global investor meaning if you had to allocate your assets into various global jurisdictions which we can have access to through ETFs then perhaps the trade to make is to just focus on each country's comparative advantage. So if you wanted to invest in US equities focus on what America does better than other countries around the world which may or may not be tech. If you believe it's tech, then just buy US tech. Forget about other sectors. Even if they do well on a fundamental basis, America does tech best. If you wanted to buy things out of China, focus on what China does better than everybody else. And then you'd have a global diversified portfolio with just the best of the best from each place. Can you comment on that strategy? >> Yeah, it's not one that I would adopt. Um, you know, I think, uh, we're benchmark focused, right? We're not a hedge fund. Um, so as a as someone who's got a lot of experience over the years, uh, when you're paid to beat the benchmark, then it's really important to know what the benchmark is and to focus on beating the benchmark. And you know I would also point out that if your idea was to simply buy what is best in each country then you would miss like tremendous transformations uh in the in the country's makeup and how they're focusing their economic policy you know whether that's Japan going from deflation to inflation whether that's China going from you know rural agricultural labor to uh to worldass uh leading edge um prim um high-end manufacturing uh power etc etc. So look, our our as we think about it, we are uh kind of focused on the globe in the tripolar world. Uh we write every week to keep us on the front foot and we have model portfolios that require structure to our ideas and our focus is all about trying to position those models for the best performance visa v their benchmarks. uh and that is both macro, it's fundamental, it's technical, it's having a good vision towards the future as I mentioned earlier, right? The the top five performing positions literally in our global multiasset model over the last month are uh one autonomous warfare, two clean energy, one humanoid robotics, and one uh semiconductor. And so that's, you know, those are and they're spread all over the world. The robotics ETF, for example, is 30% China, 30% Japan, and 30% uh 20% Korea, and 10% something else. So you know, and that that's you know, these supply chains, as you know, David, are spread, you know, widely. The focus is, you know, where as those supply chains kind of regionalize, which is our view, that's what's happening. For example, US gets more AI uh associated imports from Mexico than from China. I mean, that's a sign of regionalization in the Americas. Uh China dominates Asian trade. That's a sign of Asian integration. Europe is is is is building the EU bigger and bigger because more countries want to join it. That's a sign of regional integration. And so that you know there's a bunch of different things in my view anyway that one needs to pay attention to but uh your question is certainly one that's you know worth pondering. >> Just made me think you're um making us all ponder. Thank you very much Jay for your uh time and insights and uh your yeah your your your analysis is ex is exactly what we need to challenge our own style of thinking. What is um the best place to find your work? where can we where can we stay up to date on what you're writing? >> Yeah, thank you for that. I appreciate it. We we write a Substack called the Tripolar World. So, please sign up there. Um, paying customers are most appreciated. And, um, we also offer, as I say, our model portfolio delivery service. You can reach out to me through the Substack or uh, my email is jolowski paloski.com and uh, we can hook you up with uh, some information regarding that service. Uh, but I appreciate the opportunity to be on your show, David, and thank you and congratulations on your success. You've built a great uh a great following in a short period of time and um I appreciate having a chance to speak with your audience and with you. >> Thank you. I look forward to having you back on again and appreciate your kind words. Do make sure to follow Jay in the links down below and uh we'll speak with Jay again soon. Take care for now, Jay. Thank you. >> Thank you, David, >> and thanks for watching. Don't forget to like, subscribe, and use my code Lynn when you sign up to Koshi. When you use my code, new traders can get $10 when they deposit and trade $10. Link down below or scan the QR code here to get started.