Rejoice, the Squirrels’ back on The Market House…!
The Blind Squirrel joined us on For the Record, taking a break from delaying baseball at Yankee Stadium to share his thoughts on what lies ahead for the rest of 2026:
🏠Housekeeping Note: While some of this episode is free for everyone to watch, the full episode is for paying subscribers only. Thank you as always for your support. If you’d like to pull up a chair, you can join right here.
Recorded July 22.
WAITING FOR GODOT
The Squirrel “took down risk quite aggressively ahead of the war, and then took that risk down even further once the war started,” he said. “And I set myself a self-imposed ban on adding risk until the Strait was reopened.”
The problem is, “that’s a bit like waiting for Godot right now,” he said. “I think we’re due for ambiguity around the Gulf for some time to come. This could be an open sore for quite some time.”
“I had to take a deep breath and add back some risk towards the end of May, beginning of June,” he said.
RISKS BUILDING
“There’s a lot of brush building up on the forest floor in terms of risk,” 🐿️ said. He listed:
Potential credit problems on the sidelines
The “unbelievable” move in equities with respect to implied correlation and the very crowded dispersion trade
Bonds yields pressing higher worldwide
💡”Ultimately, I think we’re looking at the second half of this year [as] an environment of rising energy prices, rising interest rates, possibly a lower dollar,” the Squirrel said. “It’s going to be quite tough to navigate.”
ENERGY EQUITIES
Rupert is long energy, both oil and energy equities. “Ultimately, I’m with the barrel counters on this one,” he said. “I’m not betting the ranch on it, but I do see energy prices and energy equities higher into the balance of the year.”
Rupert says China has “turned into a monopsony player in energy markets,” as in, they are the single buyer for many sanctioned countries; and China is “the swing price maker” in global energy markets.
China has massive domestic reserves and the ability to withstand price spikes, a concept he calls "The China Collar,” which functions as a long-term put and call on crude, allowing companies to underwrite E&P capital expenditures “with confidence.”
“That is pretty good news for energy equities,” he says. “I feel pretty bullish about where energy equities are right now.”
🪢The Blind Squirrel on The China Collar
CHINA EQUITIES
Longtime viewers will remember Rupert’s been bullish on China for a while:
“You’ve had a green light from the authorities as a Chinese investor to buy equities.” - Blind Squirrel, 2024
This year, there’s been a “phenomenal” AI hard tech bull market within China’s onshore A-share market, Rupert said, pointing out that that much of the A-share outperformance this year is directly tied to this trade.
He cites specifically CXMT, saying China is “serious about creating a national champion in DRAM.” While CXMT is currently smaller than global leaders like Samsung or Micron, Rupert believes China could become a “major market share taker” over the next few years.
❗“China is where margins go to die,” he said. “And if China’s coming into the memory trade, I think you need to sort of think about where those earnings revisions might be in 12-18 months’ time.”
However, the Squirrel remains cautious, citing “silly numbers” regarding valuations for pure-play AI names and warning that if the global AI trade cools, Chinese stocks will likely follow.
The conversation continues for our paid subscribers below, where the Squirrel digs into the need to find the right sectors rather than just buy the China index, why Turkey is on his radar, why it’s the “end of the McKinsey economy,” and of course Latin America. Thank you for your support.
