Tag: Investing

Quality is the new darling – Walmart

Market has shifted to favor more traditional businesses including Walmart (also read Old economy is new and new economy is old).

Walmart stock is up more than 20% since Q4 2025, while Nasdaq index has returned LST.

In the most recent earnings, Walmart gave FY2027 outlook which is considered as conservative – adj. EPS $2.75 to $2.85 is below consensus of $2.96.

Here I revisited the guidance vs result in the past few years, using the annual guidance issued at 4q specifically.

Meanwhile, two other stories are underpinning the Walmart story.

1/ Higher margin and technology-driven business is growing fast, including ads, memberships, 3rd-party listings. Previous years’ investment entering “return” phase and capex, guided at 3.5% of net sales, is expected to peak this year.

2/ K-shape economy and tariffs are pushing more consumers to Walmart. High-income US consumers to “trade down” while Walmart is also the safety net for the “Downward Arm”.

AI to disrupt games?

AI has created chaos in many areas, including the gaming industry.

Google Genie was a case in point a few weeks ago.

TakeTwo (-10%), Roblox (-10%), and Unity (-20%) all down after Google debuts AI Game Creation Tool
byu/Rukuba inValueInvesting

However, I don’t think code alone is what makes a game successful.

Many successful games are like basketball or soccer.

It’s a cultural and social thing.

Shooting is fun but that’s not basketball is all about.

I bet AI can create and update new games easily but it’s the same for sports.

There can be new “sports” coming up – they can be fun to play as well. However, the number of players, the audience, the whole league/industry around a classic sport are the moat.

In the pre-AI era, I don’t think the studio that has top-tier coders is guaranteed to have blockbuster games.

$RBLX $TTWO $TCEHY

US equity entering a period of 垃圾时间

AI is driving up inflation like those shown in the December PCE – Recreational goods and vehicles (incl. personal computers) prices are up due to higher memory prices.

Higher PCE is limiting Fed’s ability to lower interest rate, which is needed to support US economy and US equity.

I think we shall see this dilemma for a couple of month – faster AI development means higher interest rates for longer, while slower AI development should hit sentiment as well.

Where is bitcoin price heading?

There are many theories out there and one of them is to compare with the 2021-2022 bitcoin crash.

From Nov 2021 to Jan 2022, bitcoin price crashed ~50%

  • $68,789.63 (November 10, 2021)
  • $32,917.17 (January 24, 2022)

From Apr 2022 to Jun 2022, bitcoin price crashed ~63%

  • $47,313.48 (April 3, 2022)
  • $17,708.62 (June 18, 2022)

Things are not the same this time – back then Fed was entering a rate hike cycle, Russia-Ukraine war/conflict broke out, and LUNA crashed.

Let’s say this time things are less severe. Fed is not going to raise interest rate anytime soon, although it may shrink balance sheet, plus major wars may be ending.

From Oct 2025 to Nov 2025, bitcoin price crashed ~33%

  • $126,272.76 (October 6, 2025)
  • $84,209.42 (November 22, 2025)

Let’s call the scaling ~2/3 vs 2021-22.

Then the second crash should be down ~42%.

In Jan 2026, bitcoin price was around $97,860.

To crash 42%, it would be ~$56,759.

We saw recent low at $60,074 on Feb 6, which is ~5% from our calculation above.

See previous posts on bitcoin

Big capex is not longer welcomed

US big tech continue to post higher capex outlook for 2026 and those figures are surprisingly large.

However, you now start to negative reactions.

1/ Their own stocks respond negatively

2/ Nvidia stock, which presumably is a beneficiary for higher capex, hasn’t responded very positively

#Why capex is less welcomed?

1/ It could just be higher inflation across the chain. higher price for infrastructure, power equipment and construction workers etc. Therefore, it’s a less-efficient use of money

2/ Investors don’t see immediate growth. The 2026 growth outlooks, which should be supercharged by already massive capex in 2025, is not impressive enough. Investors fear that marginal incremental growth coming from additional capex looks small, at least in the current year.

Chatted with ChatGPT and created model for gold price

With a 5-year time frame, I tried to create a gold price model for 2028, based on 2023 gold price.

Gold_2028 (USD/oz)
– Low $4,087
– Base $6,070
– High $9,556

gold_2028_model_with_deficit_cb

Disclaimer: I am not expert on gold nor did I have spent considerable time in studying it. But I was trying to understand different drivers behind gold price. I asked ChatGPT to pick the coefficients, so there is little credibility behind these coefficients.

 

Notes of Paul Tudor Jones (PTJ) on AI bubbles

Paul Tudor Jones on the AI Bubble Debate by Bloomberg

The only way to reduce debt to GDP is to have obviously nominal growth exceed your interest rate.

– Paul Tudor Jones

Here are notes for Paul’s interview and my opinions

  • Today feels like Oct 1999, but if this is a bubble, it’s a small one. Past bubbles ran 400–600%. Nasdaq is “only” ~200% off the bottom. Blow-off possible, not inevitable. [I agree; see my previous post Is it like internet bubble? in October]
  • Key bull case: rates. If Fed funds fall toward ~2.25–2.75%, that’s powerful fuel for equities. Markets look 6–9 months ahead, not at today’s data. [Sure]
  • Difference vs 1999: companies are profitable. [I don’t agree; I believe AI model companies like OpenAI etc. are losing a lot of money; let’s see when they publish numbers for IPOs]
  • Risk isn’t traditional leverage like in margin accounts — it’s derivative leverage: options, leveraged ETFs (up 250% from 2022 bottom), and trader-driven equity flows. [Very real]
  • Jones stays a trend follower. Recently, gold & silver > Bitcoin despite massive crypto inflows. He now expects precious metals to outperform crypto into year-end. [I wouldn’t agree back then; but I would be very wrong, so far]
  • Bond vigilantes were held in back; money debasement happened in gold and bitcoin instead. [True]
  • Biggest risk: concentration everywhere — stocks, investors, and policy power. [Agree]
  • Bottom line: short-term cautious, but Paul believes markets can be substantially higher by year-end. Likely long: Nasdaq. Short: Bonds.

Xiaomi smartphone GP may drop 30% given rising memory cost

Some simple calculation:

Xiaomi smartphone GPM was 12.6% in 2024, with 192bn revenue.

Xiaomi sold 1.64 billion smartphones that year.

The GP per handset is about 147 RMB in 2024

Across different smartphone models, memory cost is different, ranging from 50-500 per handset.

But in a nutshell, it’s about 12-18% of BOM.

It’s could be about 150 memory cost per handset for Xiaomi, which is similar to GP per handset.

Then if memory cost is rising 50-100%, the entire GP per handset could be at risk.

To offset, Xiaomi may increase prices for customers.

And as a large customer for memory chips, it may not receive full mark-up immediately.

In the end, maybe 1/3 of the memory cost impact of 120 need to be absorbed by Xiaomi.

Then GP per handset could be more like 100-110 RMB.

And as the price increases, volume could be impacted, plus the RMB appreciation recently (two-thirds of Xiaomi smartphone volume is overseas).

Total impact to Xiaomi smartphone GP could be like 65-75bn, or 25-30% negative impact from 2024 level.

Howard Marks’ fallacy

In his book The Most Important Thing Illuminated, Howard Marks wrote this –

Our goal isn’t to find good assets, but good buys. Thus, it’s not what you buy; it’s what you pay for it.

Obviously there is merit to this. Warren Buffett 1.0 could agree with Howard Marks here.

But clearly this contradicts with Charlie Munger and Warren Buffett 2.0, who are willing to pay fair price for good assets.

The “fallacy”, if any, could origin from Marks’ expertise in distressed debts.

A huge difference between equity and debt is that debt doesn’t have unlimited upside.

Debt’s blue sky scenario is limited – receive full payment in interests and face value. Thus price is extremely important.

Equity could have “unlimited” upside for a good company. These good assets have unlimited upside, which makes paying fair price a good deal.

That unlimited upside makes the additional 10% or 20% discount in entry price less relevant.

 

Assessing 2025 predictions – CICC overseas

1/ US equity

S&P ended at 6,845.50, with ~18% total return in 2025, or doubling CICC’s return prediction.

我们测算，在乐观预期 10%盈利增长的驱动下，标普 500 或从当前的 5800 上涨 8~10%至 6200~6400 点左右。

– CICC Nov 2024

2/ US treasury

In 2025, US 10yr treasury is rarely below 4%; ended ~25bps higher than CICC prediction.

10 年美债利率合理中枢为 3.8-4%

– CICC Nov 2024

3/ US dollar

In 2025, US dollar index is rarely above 100 after Apr tariff announcement, lower than CICC prediction.

我们测算的中枢为 102-106

– CICC Nov 2024

4/ Copper & Oil

Oil declined in 2025, but copper is up 50%.

大宗中性偏多，等待催化剂。铜的需求更多与中国相关，油则更多受地缘和供给影响。从中美信用周期角度，在目前点位进一步看空意义不大，但向上动力和时间目前仍不明朗，需要等待催化剂。

– CICC Nov 2024

 

5/ Gold

Gold is extremely strong, ending 2025 with near $4,300 to over $4,400 per ounce, a lot higher than CICC prediction

黄金短期中性。黄金已经超出我们基于实际利率和美元的基本面模型测算可支撑的 2400-2600 美元/盎司。但地缘局势、央行购金和局部“去美元”需求带来了额外的风险溢价。我们测算，俄乌局势以来溢价中枢上行至 100-200
美元。长期依然可以作为不确定性对冲，但短期我们建议中性。

– CICC Nov 2024