Dennis Lau, CFA
MANAGING MEMBER & PORTFOLIO MANAGER

● A test of temperament: Dow & NASDAQ notch correction, S&P 500 drawdown hit 8.9% 

● Long-term bullish: recent market angst means little to the long-term business prospects particularly of AI leaders. For all businesses, it’s not oil’s level so much as the shock, and the worst is likely in the past. An eventual peace dividend may be in the offing 

● AI is somewhere around iPhone 3: it will seem utterly nonsensical to have sold out of rapidly growing companies leading a transformative wave because of IRGC bombast, the Houthis, or a spike in oil prices 

● Transitory pass? Weak February jobs, inline CPI at 2.4%, weak Q4 GDP at 0.7%, warm PCE and PPI at 3.1% and 3.4% respectively 

● Toxic assets in private credit? “Big Tobacco” moment for Meta and Google? 

● Added two new positions: a non-bank financial and a data analytics leader

● Irony and relief: Warsh, a former Fed governor with a record arguably more hawkish than incumbent Powell named as next Fed chairman 

● Clear and Present Danger: Hollywood comes to life in Venezuela, but how should investors respond to this or other military actions? Consider the lesson of the Cold War 

● Canada’s PM Carney causes a stir in Davos, but EU history shows his proposal is easier said than done 

● Fed holds rates steady after soft December jobs report and in-line November PCE 

● Earnings season underway: big stock reactions, higher and lower, signal a discerning market, which should allay concerns of runaway bullishness. The runaway freight train has been in metals

● Stocks rebound after weakness for much of the month

● “What's your model?” vs “Beware cyclical views of history”

● Natural gating that limits excess? Not as easy to create an AI business as it was to

start a dotcom, let alone grow tulips or pile into real estate

● Selling on AI valuations seems a pretext for less highfalutin angst the Fed may take

away the punchbowl

● Nvidia reports, yet stock falls: follow the business, not the daily trade

● Russell 2000 small cap index finally pierces all-time high set November 2021 

● Legal relief for Google: no forced divestiture of Chrome, but can no longer enter exclusive search deals 

● Fed cuts 25bps, expects two more cuts this year 

● Supreme Court to hear challenges to Trump tariffs on November 5 

● AI models represent added voices, not a singular one, which will benefit humanity because the intellectual realm is not a fixed pie and we’d all benefit from greater truth discovery

● Zero sum falsity: Big declines do not necessarily follow big gains for great growing businesses 

● Progress on trade: EU deal outlined, China talks continue 

● Healthy economy but flashing yellow flags: strong GDP growth, but a softening jobs market with still elevated but stable inflation 

● Fed decision and intrigue: July meeting continues the pause on rate cuts amid a small but notable chorus forming to call for Powell’s resignation 

● Q2 earnings: Reporting deluge continues with mixed results including both strong and and disappointing results causing sizable stock moves

● Crazy like a fox! Markets cheer US-China preliminary trade agreement

● U.S. Court of International Trade strikes down Trump tariffs: unexpected bullish news,

though the administration may yet find a workaround or win on appeal

● Thinking about inflation, bond yields, and stock valuations

● Berkshire, the S&P 500, and T-Bills from 1965-2024: 55,024x, 392x, and 7.5x

respectively. End of an era as Buffett announces he’ll step down as CEO

● Berkshire owns 5% of Treasury market, but I'd much rather that they had the money in the S&P 500; better yet, in exceptional companies

● A market correction: Efficient markets or a market of lemmings?

● Opportunities in the pullback: no sales, but we made purchases augmenting two

existing holdings, and added a new position in medical devices

● Bruises not scars: Bet on Trump accepting of short-term volatility, but sensitive in not causing enduring market harm

● To sell quality is to err: you’ve exchanged an asset likely to appreciate for considerable market timing risk and a tax bill due next year on any realized gains

● Even a stalwart like Apple, for instance, saw its stock decline 11.3% in Q1. If those of Gladiator rallied around the creed, “Strength and Honor,” sage investors would profit greatly by embracing, “Patience and Equanimity”

● DeepSeek sparks a selloff: initial reaction to sell US AI may be backwards. Portends greater, not less, investment if you believe a maturing AI industry will tend toward winner-take-all instead of a highly fragmented outcome

● Earnings season underway: healthy financial results, but mixed stock reactions

● Eyes on the Fed: rate cuts and easy policy are not de facto good for investors. What’s best is that the Fed gets policy right vis-a-vis their dual mandate

● Market performance viewed over the course of various administrations is encouraging. Despite Trump’s Covid challenge and Biden’s inflation scare, the market performed well over both their terms, as it has over most administrations

● Napoleon and America’s economic empire: Trump’s tariff wars may thrill supporters, but history warns about overstepping and unintended consequences

● U.S. and Israel attack Iran: energy prices spike, but broader market impact likely marginal if, as the president anticipates, the conflict ends relatively quickly 

● Boost to economy and the Fed: Supreme Court strikes down Trump tariffs, which should raise growth and lower inflation 

● Data suggests a Fed on hold: decent jobs growth, but weak GDP amid stubbornly elevated inflation 

● Sellers strike crypto, software, and stalwarts like Amazon, Microsoft, and Meta. We’ve been accumulating shares in software and a non-bank financial institution 

● Theory must accord with data, but most focus on the wrong data: it’s long-term financials, not short-term stock prices that matter. Same with policy: whether trade or Fed, economic data over stock reactions 

● Nvidia earnings: impressive by any measure, but shares slide. It’s foolhardy to trade the volatility of any company riding poised on the AI wave

● Strong year achieved tax efficiently: a delightful result particularly given the tariff-induced market chaos of just eight months ago 

● Dr. Pangloss vs Dr. Doom? Whether of AI or markets, extreme commentary is like partisan political news: a Scylla and Charybdis enticing with dopamine hits from bolstering confirmation bias and contempt, rather than illuminating with insight 

● Dec. Fed rate cut: dot plot predicts another cut in 2026 and one more in 2027 with overnight rates eventually settling around 3.0%. One would have to be speculative of a considerable economic slowdown or market turmoil to advocate for much lower rates 

● Dangerous precedent: a president should not be consulted by the Fed on interest rates 

● Trump allows Nvidia H200 sales to China, but not their top-tier Blackwell chips 

● Best purchases of the year: ASML, Salesforce, and Costco. TBD: Align Technologies. Worst: UnitedHealth

● Is it time? Regional banks and bad loans, musings of an AI bubble 

● Q3 tech earnings onslaught: Meta slides, Alphabet and Amazon jump, Microsoft and Apple meander 

● Revisiting Reagan on trade, an ongoing government shutdown, and a Fed rate cut 

● China/U.S. trade truce: encouragingly uneventful 

● Artificial Jagged Intelligence: Critical flaw or anthropomorphic waystation?

● Federal appeals court rules most Trump tariffs illegal! If affirmed by the Supreme Court, this would be a major positive for the economy and investors 

● Fed signals September rate cut: good economic growth, but weakening jobs and warm inflation 

● The Ides of Tariffs are not yet gone: Trump is funny, but Goldman’s chief economist will probably be right without policy changes 

● Should we run a “stagflation risk” portfolio? 

● Econ 1776: Adam Smith warned us to prioritize consumers over producers. May this American redux of the British mercantile system be short lived 

● Earnings reports: fundamentals strong, but stock slips? Useful insights come from fundamentals, not stock reactions

● Trump and Xi talk: US-China trade deal confirmed 

● Geopolitical storms: 12-day war breaks out between Israel and Iran, drawing the US into targeted strikes and then into brokering a ceasefire 

● Crystal balls and broken clocks: better to be a pragmatic futurist who looks wrong short term but proves right long term, than a perennial bear exhibiting the inverse 

● Great vices along with great virtues: Musk's spectacular breakup with Trump demonstrates Plato’s suggestion on great natures and adds to Tesla investor frustration 

● Jobs, inflation and a shadow Fed chair? Clever politics, but still a dangerous idea

● A VIX spike and a bear market for the Nasdaq and Russell 2000

● Trump and trade: Crazy or crazy like a fox?

● An economic Cuban Missile Crisis? Bet on the deterrence of mutually assured

economic destruction leading to a US-China trade resolution

● Focus on near-term negatives imbalance the discourse: don’t forget the longer-term positives. AI, for instance, is still in the MS-DOS phase

● The farther ahead one sees, the more valuable: Investors must exercise the uniquely human quality of correctly imagining states other than the present

● Built two new full-sized positions including in an AI-related company I’ve coveted, and augmented other positions at exceptional prices

● Perma-bulls vs. Perma-bears: We tend to reside in a third position, but between these two, perma-bulls will likely achieve meaningfully higher lifetime returns

● A stutter step or the final step? After a pause, tariffs on Canada, Mexico, and China are set to begin March 4. Trump also proposes 25% tariffs on the European Union

● Warm CPI, inline PCE: inflation data supersedes Trump’s prior calls for rate cuts in concert with tariffs

● Heeding Ferguson’s Law: serious efforts to tackle the pernicious expansion of

government spending and debt

● Earnings continue: Nvidia reports impressive results, but stock slumps