I’ve been a trader and investor for 44 years. I left Wall Street long ago—-once I understood that their obsolete advice is designed to profit them, not you.
Today, my firm manages around $4 billion in ETFs, and I don’t answer to anybody. I tell the truth because trying to fool investors doesn’t help them, or me.
In Daily H.E.A.T. , I show you how to Hedge against disaster, find your Edge, exploit Asymmetric opportunities, and ride major Themes before Wall Street catches on.
Table of Contents
H.E.A.T.
For the last two years, “AI investing” mostly meant one thing: whoever was spending the most on GPUs and data centers must be winning. But 2026 is shaping up as the year the market stops rewarding ambition and starts demanding economic proof. Hyperscalers are moving from asset‑light software models into asset‑heavy, utility-like capex, and investors are beginning to ask the only question that matters: where’s the ROI? That’s why the rotation we’re seeing isn’t “AI is over.” It’s AI is maturing—and the profit pool is shifting from the platform narratives to the physical bottlenecks that AI can’t scale without.
Here’s the core idea: AI ultimately runs on scarcity. Not scarcity of “models,” but scarcity of electrons, memory, foundry capacity, networking throughput, cooling, and metals. If the world is going to spend hundreds of billions building AI infrastructure, the winners aren’t only the companies selling the dream. The winners are the companies selling the inputs—the ones that get paid every day when AI is used at scale, and the ones that make AI cheaper, faster, and more deployable. This is why markets are increasingly rewarding hard assets and enablers (memory, power infrastructure, metals, grid buildout) while becoming more skeptical of anything priced on a “we’ll monetize later” promise.
Add one more accelerant: global fragmentation. China’s structural advantage isn’t just manufacturing anymore—it’s cheaper electrons, which is a direct compute advantage. Europe is moving toward digital sovereignty (the “Eurostack” directionally), which pressures the “one global hyperscaler stack” story. And Japan’s rates/FX volatility (and potential intervention signaling) reminds everyone that macro is back—which keeps a bid under real assets as portfolio insurance. The message from the tape is simple: until the platforms prove monetization, capital prefers scarcity + cash-flow visibility.
=============================== THE HARD-ASSET RESET (2026) WINNERS vs. LOSERS
WINNERS (who gets paid as AI scales in the real world)
MEMORY + BANDWIDTH BOTTLENECKS
HBM/DRAM pricing power, “sold-out” supply dynamics, capacity buildout
Watchlist: MU (and the broader memory complex)
FOUNDRY + SEMI “PICKS & SHOVELS”
Advanced nodes, packaging, lithography, inspection = toll booths on compute
Watchlist: TSM, ASML, LRCX, KLAC
POWER, COOLING, GRID + “AI AS INDUSTRY”
Data centers turn electrons into earnings; power delivery becomes strategic capex
Watchlist: VRT, ETN, PWR (plus grid-build supply chain)
METALS (THE PHYSICAL AI TRADE)
Copper/aluminum/steel intensity rises with data centers + grid buildout + rearmament
Watchlist: FCX, AA, diversified baskets like XME/COPX
HARD-ASSET HEDGES (WHEN POLICY VOL SPIKES)
Gold acts like neutral collateral when rates/FX/geopolitics destabilize narratives
Watchlist: gold exposure + quality miners (vehicle depends on your risk tolerance)
LOSERS (where the squeeze shows up first)
“AI-NARRATIVE” PLATFORMS (IF ROI DOESN’T SHOW UP IN P&L)
Rising capex, higher burden of proof, multiple compression risk
Watchlist: the mega-cap platform complex (name-by-name dispersion will be huge)
DOWNSTREAM HARDWARE THAT EATS INPUT COST INFLATION
Memory/component inflation can hit margins in consumer devices, autos, telecom gear
Watchlist: price-takers with limited ability to pass through costs
“AI VENEER” SOFTWARE (NO WORKFLOW MOAT)
If AI commoditizes features, seat-based pricing without lock-in gets pressured
Watchlist: tools that don’t own an end-to-end workflow
BOTTOM LINE: The market is paying for SCARCITY + CASH FLOW VISIBILITY. Until AI monetization is proven, not promised, the center of gravity stays “real economy.”
News vs. Noise: What’s Moving Markets Today
Japan Just Became the “Rate & FX Switchboard” for Global Markets
Here’s the real story: Japan is no longer a background macro footnote. Long-dated JGBs and USDJPY are now the live wires that can shock U.S. rates, global risk appetite, and cross-asset positioning in a hurry. Last week said it all: 30Y JGB yields whipped up to ~3.86% (roughly +45 bps YTD) before easing back, while USDJPY rolled over hard—down to the 153 handle after flirting with ~159. When both the long end of JGBs and USDJPY start moving like risk assets, that’s your signal Japan has shifted from “local story” to “global transmission mechanism.”
What’s NEWS
Sanaenomics = Abenomics vibes, but in a post-deflation world. The policy DNA is familiar—easier fiscal, growth-first, strategic self-reliance—but the backdrop is totally different: inflation has been running above 2%, debt is higher, and valuations aren’t “2013 cheap.” That makes the bond market far less forgiving if Tokyo leans populist and unfunded.
The long end has fewer natural buyers than people assume. Positioning is still haunted by the old QE/YCC playbook (“just own the long end and clip carry”). If that positioning hasn’t been fully washed out, the long bond can remain structurally twitchy into the Feb 8 election.
Repatriation risk is real. As yields rise, Japanese investors don’t need to “dump everything,” they just need to prefer domestic over foreign at the margin. Once hedged JGB yields compete with (or exceed) alternatives like Bunds, global duration can feel the pressure through the “who’s funding deficits?” channel.
What’s NOISE
Intervention gossip… matters mainly because it forces positioning changes. Whether it’s a formal operation or “market theater,” the effect is the same: it spooks yen shorts, compresses USDJPY quickly, and forces fast de-risking in crowded carry trades. The headline matters less than the mechanics: when traders start believing intervention is “in play,” the yen can reprice violently.
Day-to-day political headlines. Elections always create narrative fog. The market doesn’t need perfect polling—just the possibility of bigger fiscal promises to demand a higher term premium in the long end.
The simple takeaway
Don’t trade Japan like it’s 2016. In this regime, Japan is a volatility source, not a volatility sink. If you’re looking for the clean read, it’s this:
Long-end JGB volatility is the rates shock risk (spillover into USTs, Bunds, spreads).
USDJPY is the positioning shock risk (carry unwind, global risk rotation, equity factor flips).
The 3 levels that matter
30Y JGB yield behavior (not the exact level—the speed and the disorderliness).
USDJPY 150 vs. 160: 160 is where policy alarm bells start ringing; 150 is where “yen strength is real” becomes the market’s default assumption.
Post-election policy tone: a clear mandate + fiscal expansion talk = renewed pressure on the long end.
Winners and Losers
Winners (if yields stay volatile + yen firms):
Japanese financials (banks/insurers): higher rates can finally mean better economics—as long as it doesn’t become a disorderly shock.
Policy-favored sectors: defense, strategic tech, domestic “self-reliance” winners.
Japan equities (selectively): if the mix is “growth support + not-too-aggressive BoJ,” equities can grind higher even as bonds stay messy.
Losers:
Long-duration JGBs (especially the far long end): thin sponsorship + political risk = bad convexity.
Yen-funded carry trades: a fast USDJPY drop is the classic “everybody runs for the same door” setup.
Exporters with unhedged FX exposure: a strengthening yen can be a quiet earnings headwind (unless operational leverage or pricing power offsets it).
Japan isn’t just a currency story anymore—it’s a global duration story. Watch the long bond and USDJPY like you watch the S&P.
Can the Mag 7 rally into earnings? The setup says yes—not because the fundamentals magically improved overnight, but because positioning and expectations have been reset. After the first three weeks of January’s rotation into “real economy” leadership (materials/energy/industrials), tech has been left under-owned right as we hit the most concentrated two-week stretch of index-weighted earnings (with MSFT/META/TSLA/AAPL this week, then AMZN/GOOGL next). When the market walks into a heavyweight earnings window underweight and hedged, you don’t need a blowout quarter to get a bid—“not as bad as feared” + light positioning can be enough to force re-risking, short-covering, and performance-chasing back into the liquid index anchors. The tell will be guidance: capex discipline vs. AI monetization, plus any read-through on demand (cloud/ads/consumer) and whether management teams can frame 2026 as “proof year” rather than “trust us, spend more.” If guidance clears a low bar, Mag 7 can absolutely grind higher into/through prints simply because they’re still the market’s steering wheel—and when they start moving, the index follows.
A Stock I’m Watching
Today’s stock is Datadog (DDOG)….
Datadog is a cleanest “numbers > narrative” setup : after a big derating, Stifel’s put out a note on Monday and it’s checks suggest a larger-than-usual beat and, more importantly, core growth re-acceleration (ex-OpenAI) with OpenAI remaining a manageable piece of revenue. If that shows up in the print and management frames security as a credible next leg, DDOG can shift from “observability is crowded” to “platform is compounding,” which is exactly how you get multiple expansion again. The bear case is straightforward — any wobble in OpenAI contribution, any signs of pricing/competitive pressure, or a guide that implies spend without growth payoff — but that’s why it works as a “stock I’m watching” right here: the next datapoints should be decisive, not squishy.
In Case You Missed It
The H.E.A.T. (Hedge, Edge, Asymmetry and Theme) Formula is designed to empower investors to spot opportunities, think independently, make smarter (often contrarian) moves, and build real wealth.
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