May, 2026 The market has significantly deviated from any rational sense of fundamental / business logic It seems most have forgotten the law that governs all assets. From bonds to stocks and real estate. - All investments are judged by the present value of all future cash flows Cash flows are: - Net operating profits after tax, adjusted by CapEx and other investments or acquisitions Since 2023, the $SPY $QQQ have deviated from all factors responsible for delivering excess returns above the $TLT $SHY bond risk-free rate Factors like momentum, quality, value, and growth. The reason is that, since 2023, the market has been driven by one thing and one thing only: $MAGS and AI being responsible for 80% of all stock market returns, not unlike previous extremes like 1929, 1999, 2007 etc. So what's the problem? There isn't one, except for what we saw in 1Q'26. $GOOGL $AMZN and other hyperscalers reported massive EPS beats on paper, though in reality 40% of these earnings came from non-cash items (accruals). The problem with accruals is that they can be written off should the industry's underlying demand slow down. Which directly impacts the net operating profit side of cash flows. Then comes the CapEx and investment side of the equation: ~$700 billion in CapEx to be invested in 2026 toward AI, an area which currently returns less than 5% of its invested capital. In other words, the market's biggest companies have pushed free cash flows out by 20 years on average. Yet their valuations reflect a boost in immediate cash flows instead. Two years ago, these companies traded at exuberant forward P/E ratios to reflect the expectations of growing profits and cash flows. Let's take $NVDA for example. Today, they have all been repriced lower as these expectations melt in real time. These companies are taking longer to pay their accounts, and even longer to collect cash, hence the growth of accruals as a share of net income and EPS. So I think the market is correct in repricing these multiples lower because: - EPS are much weaker than they seem - Cash flows are 90% lower than they were a year ago - Cost of capital is rising as inflation pushes higher, and the $SPX expected returns fall to -2% / +2% for the next decade You may say this time is different You may say the CapEx outflows will 100x eventually I ask how much of that is already priced in? I ask what happens to expectations when cash flows to shareholders get cut by 90%? Surely, accruals and intangible assets drive earnings more than ever before, so P/Es may not be as significant as they once were. But, here's one thing that will NEVER change: - How much equity do you buy with one unit of currency? So I leave you with this chart, the $SPY / M2 Money Supply ratio. 1999 highs.

1,492 insider sells. $23B volume. Sounds bearish. Reality: insiders sell for many reasons—and this happens often. Not a reliable crash signal. Don’t react. Stay disciplined.