Holdings Letter: Oil Eased, and the Market Wants to Chase Again

This week's market weather: expensive valuations / moderately tight liquidity / euphoric sentiment.

One-line translation: macro has not truly improved, but the market is already rushing to buy the idea that the worst is over.

Three things worth remembering this week.

First, the Fed has a new chair. Kevin Warsh has officially taken over as Federal Reserve Chair. The leadership change matters, but the timing matters more: oil prices, inflation, and long-term yields are still pressing on the market. Investors want to hear about rate cuts, but the Fed may not have that freedom yet.

Second, AI is still too hot. Nvidia's results remain strong, and data center revenue is still exploding, which shows AI demand is real. But that is also the problem: good news has already been celebrated by the market again and again. The more people believe “this time is different,” the less I want to chase at the hottest moment.

Third, I swapped RIO for TSM. RIO used to be my resources and dividend safety cushion, but my view changed this week: if the physical AI cycle continues, TSM is closer to the real production bottleneck than RIO. It is not cheap, and it is not a low-volatility asset, but it sits closer to the base layer of the AI boom.

My strongest feeling this week is simple: AI is too hot.

So hot that it is not unbuyable, but it cannot be bought casually. If you rush in now, you can easily buy a great company at a bad price.

So my move this week was not to chase the strongest names, but to shift the portfolio a little closer to the deeper and more certain part of the chain. TSM is not a bet on short-term upside. It is an acknowledgment of one fact: if AI spending continues for the next few years, the companies that capture long-term orders may not be every company telling an AI story, but the few companies that control manufacturing capacity.

Still, the final reminder in this letter is: don't chase highs.

The market is best at moving the car to its most expensive spot right when you feel that if you do not get on now, it will be too late. My choice is to acknowledge the main trend, but not let sentiment push me around. Capturing a steady part of the move is better than rushing in to bet on the final leg.