• Medicare Advantage (MA) has become the sweetest honeypot for the entire US healthcare industry. It’s growing faster than overall Medicare spending, which itself is growing faster than overall federal government spending, which is itself growing faster US GDP. Having access to this is like owning a money printer.

• MA was established in 1997. It allowed Medicare enrollees to receive their benefits through private insurance companies. The government offloaded some of its insurance function to private carriers with the idea to reduce overall costs by using the power of competition.

• This is not working at all. This year alone, tax payers will spend $76bn (!) more for MA enrollees than they would spend for them under traditional Medicare coverage. This is 10% (!) of the primary deficit of the US Treasury.

• Over the last twelve years, US tax payers have paid more than $600bn (!) extra to US health insurance companies. The total excess spending since the program’s implementation likely exceeds a trillion Dollars.

• This is not a coincidence. Health insurance companies are deliberately gaming the system to get more compensation from the Treasury than a proper risk assessment would justify.

• The US Treasury is not treasuring anything anymore. Their doors are wide open for raiders like health insurance carriers. And instead of fighting back, the general public joins the looting by eagerly buying the stocks of these companies. What a cynical world we live in.

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The original article

On June 24, 2025, I published the article below on UnitedHealth , America’s largest health insurer.

I argued that much of its business is just freeriding the US healthcare system without provide much value to it. Its most important business segment is Medicare Advantage (MA), which was originally designed to lower costs through the use of private carriers. In theory, these should have an incentive to direct enrollees into a more efficient use of healthcare services, thereby lowering the bill for US tax payers.

However, the average MA enrollee is today far more expensive for the tax payer than he would be under traditional coverage. And why? Because private insurance carriers like UnitedHealth are gaming the system.

Almost a year has passed since I wrote that article. Several reasons make me feel compelled to provide an update:

• Firstly, a proper correction has not happened. Instead, UnitedHealth stock is up 33% since then. It has even outperformed the S&P 500 which is up ‘just’ 22% over the same period.

• Secondly, the Medicare Payment Advisory Commission (MedPAC) has published their 2026 report in the meantime with updated figures, serving as a reminder that the problem remains unmitigated.

• And thirdly, this is not just a story about UnitedHealth. There are several other companies running the same scheme. Their shares prices are also up considerably over the last year, some even more than UnitedHealth.

So, let’s dive one more time into the complex and fascinating US health insurance industry. First, let’s understand how the entire US healthcare system works and how health insurance fits in.

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How the US healthcare system works.

Americans spend about $5.5tn per year on healthcare, which is about 18% of US GDP and about $16,000 per capita. About half of that is spent on hospital care, physician and clinical services. Retail prescription drugs account for roughly 9%, nursing homes and dental services for 4% each and home healthcare for 3%. The remainder includes chiropractic, optometry, hearing aids, other healthcare services and admin services.

The vast majority of this spending is covered by insurance providers. Private health insurance accounts for 31%. Medicare accounts for 21% and Medicaid accounts for 18%. Only about 11% of healthcare spending happens out of pocket.

This means the payer is not the same as the consumer for about 90% of all healthcare products and services in the US. This separation is a unique feature of the healthcare industry, at least at the scale of trillions of dollars annually. It creates a power imbalance between providers and the economic buyers which the providers can take advantage of.

The issue gets amplified when the economic buyers are not operating for profit and are run by people that have little incentive to keep costs under control. Privately sponsored health insurance plans would shop around if costs get out of control. Public plans are less likely to do so. There are no bonus payments at stake for the civil servants overseeing them.

That’s why Medicaid and Medicare have become the sweetest honeypots in the healthcare industry, esp. for health insurers who have direct access to them. Medicaid offers income-based public health insurance. Medicare offers universal public health insurance for nearly everyone age 65 or older who has sufficient work history.

Over the last 30 years, the US Treasury’s spending for Medicaid has grown from $164bn to $1,039bn (+6% p.a.). Over the same period, Medicare spending has grown from $191bn to $1,311bn (+7% p.a.)

Over the last 30 years, the growth in both cost categories has significantly exceeded average federal expenditure growth which has been 5% on average. Together, Medicaid and Medicare now account for more than 16% of the Treasury’s annual gross spending. Their combined share was 11% in 1996 and less than 3% in 1966.

Some of this is due to demographic reasons. America is ageing and therefore healthcare needs are rising disproportionately. But we have reason to believe that some of this growth is also the result of regulatory failure.

Historically, Medicare operated a so called Fee-for-Service (FFS) model, i.e. the government assumed the role of an insurance carrier. The patient went to a healthcare provider and received a service. Then the provider submitted a claim to Medicare which then paid for each pre-approved service.

In 1997, the federal government introduced MA under which it gave people the option to choose a private insurance carrier. The federal government then paid an annual flat rate for each insured based on a risk score taking various health-related metrics into account (age, sex, existing medical conditions etc.). The goal was to lower spending by letting private carriers manage healthcare services. They were deemed more capable to direct patients into a more efficient use of healthcare services.

MA has become very popular among America’s seniors. Today, about 55% of all Medicare enrollees are using MA vs. 45% who use FFS.

In 2026, the federal government will pay more than $600bn to private health insurers for administering Medicare Advantage plans. The largest publicly listed ones are UnitedHealth , Humana , CVS Health , Elevance Health and Centene . Their combined MA market share is about 65% and they are sporting a combined market cap of $660bn.

The end game seems to be that MA will be 100% of all Medicare spending. These five companies will keep dominating MA and hence ingest a large share of the entire Medicare spending of the government.

Unless people start reading the MedPAC report which has bombshell information in it…

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2026 MedPAC report

The Medicare Payment Advisory Commission (MedPAC) was created as an independent agency by Congress in 1997 to analyze Medicare spending, most importantly with respect to whether providers are paid appropriately.

They published their 2026 report in March 2026. Here’s its key statement:

“In 2026, we estimate that Medicare will spend 14 percent—a projected $76 billion—more for MA enrollees than it would spend if those beneficiaries were enrolled in FFS Medicare.”
2026 MedPAC report

It’s a brutal statement which they basically repeat every year with slightly different numbers. Almost thirty years after the implementation of MA, this effectively demonstrates the complete failure of this program. It should make news headlines in my opinion. But it’s being entirely ignored by all media outlets.

Appreciate for a moment how profound this is. The central purpose of MA was to lower costs in the US healthcare system. Instead, it has become a tool for shrewd health insurance managers to extract an enormous amount of money from US tax payers and provide zero value in return.

For reference, the US Treasury finished its FY25 with a $1,775bn deficit, $970bn of which was net interest. Hence, its primary deficit was $805bn.

If MA was abolished tomorrow, the US Treasury’s primary deficit was shrink by almost 10% per year instantly. And nobody would be worse off (except the shareholders of health insurance companies and their employees). It might be the single biggest waste item in the entire budget of the US Treasury. It’s a mystery to my why DOGE didn’t identify it as problematic.

And this $76bn waste is just from one year. The 2026 MedPAC report also lists the historical excess spending back to 2015. The total excess spending for 2015 to 2026 amounts to $615bn.

Isn’t it crazy how this information is in the wide open and nobody cares about it?

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Now you might be wondering…

How exactly are health insurance carriers gaming the system?

The MedPAC report distinguishes two main types of excess spending both of which result in the measured risk score (and hence compensation to insurers) being too high:

1. Selection: Select patients who are generally healthier in ways the risk model doesn’t measure.

2. Coding: Document more diagnoses to get a higher risk score and hence a higher payment.

There are various ways how an insurance carrier can game this. With respect to selection for example, they can design their plans to appeal to seniors who have gym memberships or who are generally active. There are tons of variables with predictive power about someone’s health trajectory that don’t go into the risk scoring.

And once they have these seniors with above average health, they can dial up the payment from the government by encouraging these patients to document more medical conditions even if these conditions won’t immediately raise the likelihood of medical treatments. For example, they can pay for preventative health screenings to uncover abnormal health data, they can educate physicians to improve documentation or they can use software to identify missing diagnoses.

I’m not just speculating here. Most major health insurers have been found or suspected guilty of similar wrongdoing. CVS paid $118m in March 2026 over coding allegations. UnitedHealth is currently under criminal and civil investigation as I discussed in my article last year. Humana and Elevance have faced lawsuits about illegal broker kickbacks for advantageous selection. So far, these remain isolated events without a major public outcry. When caught, companies just pay to keep playing. That’s how the modern US economy works. We have seen it unfold many times in the tech industry for example.

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Isn’t this an unacceptable situation? Why is this not a media scandal?

You probably remember Dieselgate. In 2015, Volkswagen was found to have test-rigging software in its cars. The cars knew when they were in an emission testing situation and throttled emissions to comply with emissions regulations. It was a huge scandal. It cost the company $35bn in fines, settlements and compensations. Volkswagen stock dropped 65% in six months. The reputation of the diesel engine collapsed. Numerous executives were prosecuted.

What you may not know is that the underlying information for this scandal had been in the public domain for years before it hit the mainstream. It was an open secret among many engineers and academics. Between 2000 and 2015, numerous third parties tested the real world emissions of Diesel vehicles and noticed that they vastly exceeded the test results. The cheating technology was so well known that it even had a name: defeat device.

I don’t know whether US health insurance companies are merely taking advantage of a system that happens to be rigged in their favor or whether they actually have the criminal energy to manipulate the system at a larger scale in a way like auto OEMs did. Hardly anyone can blame them if they merely apply data analytics to optimize their profits. But what if they are actively bribing policymakers to turn a blind eye on their scheme? $600bn per year is a lot of money and a strong incentive to spend some money on lobby work.

It’s certainly suspicious that the government is not acting on a financial leak of this size. Shouldn’t it be easy to mandate health insurers to disclose their internal risk models to adjust the risk scoring to a more appropriate level? After all, tax payers are paying them hundreds of billions of dollars per year, justifying much of their stock market valuations.

Dieselgate proves that a scandal can take a long time to brew. Evidence of wrongdoing hitting the public domain is not a sufficient condition for it to erupt. The information needs to be spread by the large information multipliers, like media outlets, politicians or influencers. Elon could put this into the spotlight with one tweet. But he’s busy obsessing about other scandals. So, the scheme will continue. For now.

Sincerely,

Rene

TLDR Summary

• The original advantage of the US was that it was the first country to understand the potential of fully unleashing human entrepreneurial spirits. It was the first and the most serious to establish a democracy based on liberal values which – in combination with its geographic advantages – allowed it to create the most successful economy in the world.

• Once its success became obvious, it started offering a deal to other nations: Join our way, accept our leadership and get a piece of our success. Many nations agreed to that deal, in most cases voluntarily.

• Over time, America played its hands more aggressively. In a second iteration of the deal, it started charging these nations for its leadership. Partner countries had to invest in the US. This capital created jobs and income for Americans. And draining it from partner countries impeded their own economic growth. As a result, the US economy kept outperforming its peers further.

• We are now witnessing the third iteration of that deal. Other nations still pay to play. But now playing is not voluntary anymore. They are coerced to. It’s the most aggressive way America has ever played its hand. It’s a regime shift that likely won’t end with Trump. Understanding what Americans are doing and why they are doing it will be crucial for anyone with the ambition to build a macro opinion.

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What is liberalism?

In its literal definition, ‘liberalism’ is about the value of freedom. It’s one of the most butchered and most misunderstood terms in the dictionary though. Today, ‘being a liberal’ has little to do with the original meaning of liberalism. Its definition also changes based on where you are and who you talk to. For example, liberalism is associated with the political left in North America while it’s associated with the political right in Germany and other parts of Europe.

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Also, you can’t adequately describe this bull market without pointing to the extraordinary technological innovation associated with large language models and neural networks generally. Commercially scaling this technology is insanely capital intensive. Corporate spending provides a release valve for the fiscal stimulus and as such drives economic growth as well.

The fiscal regime and the technology regime are important and well-understood pillars of this bull market. They are not the only ones though. There is a third pillar. A pillar that gets a decent share of media coverage as well. But also a pillar the true force of which is underappreciated, especially with respect to how it interacts with fiscal deficit spending and the corporate capex binge.

I am talking about the meteoric rise of ETFs which fundamentally changed how markets operate and which will likely make future historians call the 2020s: The Great ETF bubble.

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TLDR Summary

• Investing is tough. But there has been one sure thing at least: Buy a diversified equity ETF and you will do fine. Let others do the work and simply get paid for bearing volatility. This principle has created millionaires for decades.

• I’m not so sure it’ll continue to work though given how popular this approach has become. US-domiciled mutual equity fund holdings are being converted into ETFs at an annual rate of $1tn! That’s more than the entire annual saving of US households. If this trend continues, there won’t be any mutual equity funds left in ~10 years. Since most ETFs have passive mandates, price discovery will then be only on an army of retail investors and a few surviving hedge funds.

• Markets are already feeling dislocations from this trend. Prices feed themselves rather than being fed by business fundamentals. It has all become about Momentum. There are gamma squeezes everywhere because shrewd traders know how to exploit the dumb algos that govern passive investment products.

• This also reshapes management decisions for the worse. An entire generation of CEOs doesn’t believe anymore that their main job is to grow earnings and cash flows. Instead, they believe that their primary job is to attract ETF flows through storytelling and more outright forms of market manipulation. Once they have ignited an initial bid, the passive machine drives the infinity bid.

• As a result, markets are losing the ability to perform their central function: to direct capital into the ventures with the highest productivity. This will be detrimental to overall economic growth. Investors will have to pay the price for that eventually.

• Protection against the incoming storm can only be found outside of the most popular market segments. In assets where the actual sustainable cash generation matters more than the idea of finding a greater fool later.

The dominance of Momentum is driven by the rise of Passive.

In August 2025, I published the article below which I called The Momentum Bubble.

In that article, I linked the brutal outperformance of the Momentum factor to the dominance of passive (or more precisely: primitive algorithmic) investment products.

In contrast to active investing, passive investing is valuation indifferent. It validates any prior price because it simply enters ‘market buy’ orders for every asset weighted by its current market cap. This amplifies mispricing to both upside and downside. Stocks don’t run out of buyers/sellers when they rise/fall too much. Instead, a rising stock automatically gets a larger bid the next day.

As a result, trends become stronger and last longer. Fertile ground for Momentum factor investing. You can simply buy more of what has been working well because you can trust that primitive algos with massive financial firepower do the same thing.

Smart corporate executives are exploiting this. If they create initial demand for their shares through clever marketing, they can tap into an infinite stream of indiscriminate buying from ETFs. The smartest of them even manage to create real competitive advantages in doing so by lowering their cost of capital below that of their peers.

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Passive keeps booming.

After gaining popularity for decades, passive strategies surpassed active management in the US for the first time in February 2024.

And they have kept growing since then. The Investment Company Institute (ICI) tracks the flows into US-domiciled investment funds, including both mutual funds and ETFs.

Since January 2024, equity ETFs have received net inflows of more than $2tn while mutual equity funds have lost more than $2tn. Mutual funds are dying. They are being liquidated and converted into ETFs at a monthly rate of $80bn and an annual rate of $1tn!

For reference, this is more than the entire annual saving of US households which currently stands at just $942bn.

The combined equity fund assets in the US mutual fund industry currently stand at $17tn. Hate them for their poor performance if you want. You should still appreciate that this industry has historically been primarily responsible for active investment decisions in public markets to move asset prices to fair levels over time.

If this trend continues, there won’t be a single Dollar invested in a mutual fund on US soil by ~2040. Price discovery will then only happen through retail investors and surviving hedge funds (which are currently collectively at $2tn AuM, a significant amount of which is algo-driven).

Granted, not all ETFs pursue passive investment strategies. There are active managers using ETF structures, such as Cathie Wood for example. But most ETFs are not like that. They simply buy a predetermined basket upon inflows and sell it upon outflows.

Especially levered Passive.

Levered ETFs do the same as standard ETFs, but on steroids. They don’t just buy when they get investor money. They buy every day the underlying basket appreciates and sell when it depreciates. Buy into strength, sell into weakness. Levered ETFs behave like giant call options, dialing their delta up and down with the price of the underlying. The perfect vehicle to bet on Momentum. And since Momentum is working so well, these funds are very popular.

The largest levered ETF is . With $40bn in net assets, it commands a $120bn stock portfolio that is rebalancing based on Momentum every day. The total levered ETF AuM currently stands at almost $200bn, up tenfold from six years ago. Assuming an average leverage of 2x to 3x, this means that levered ETFs are now controlling about $400bn to $600bn stock market value. By the time you read this article, it might already be significantly higher.

The boom is also happening at single stock level. The moment a stock does well, it gets its own levered ETF to fuel its momentum.

Single stock levered ETFs currently have $65bn in AuM. Many of these are 3x levered, meaning that they likely control a total stock value north of $150bn.

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Collapsing price discovery

Owning stocks makes money because investors get compensated for bearing volatility. It’s an important investment rule. But it’s also a rule that requires basic market mechanics to be intact. Bearing volatility alone is only a sufficient condition to make money as long as there are other investors who actually do the work and reward companies for positive business inflections or punish them for negative inflections. If you think through passive investing, its freeriding nature becomes really obvious. You piggyback the decisions of others without putting in the effort yourself.

US stock investors haven’t even been exposed to an appropriate amount of volatility lately for their annual returns north of 20%. Based on calendar month returns, the realized volatility of this bull market is hovering just above 10 while the VIX typically trades at 17+. How can anyone claim the recent return of the S&P 500 is a fair compensation for bearing such a small volatility?

Now, the VIX should of course over time trade at a premium to realized volatility just like the insurance premium for your car or home should be above your expected loss. Providing an insurance function needs to have a positive return. Otherwise nobody would offer it. But the amount of that return has been unusually strong for years.

We’re at a point where it’s completely reasonable for most people to treat their S&P 500 shares not as a risky long-term investment, but as a savings account with little risk. People ‘save’ in the S&P 500 just like previous generations have done in savings accounts or Treasuries. Nobody got ahead doing what everyone was doing at that time by the way.

The more the ‘passivation’ of the stock market progresses, the more will a small minority of active investors be overwhelmed by huge amounts of dumb algos that were originally designed to follow the active investors they now dominate. The tail then starts wagging with the dog. Instead of analyzing business fundamentals, investors will start analyzing algorithmic flows and follow them (or try to frontrun them). Chart analysis is so popular these days exactly for that reason. This compromises the market’s ability for price discovery further.

A comprehensive view of the current market regime.

If I had to describe the current market regime based on the three main pillars, I would do it like this:

It all starts with the US Treasury. After 2020, US politicians realized that there is so much demand for US assets domestically and from abroad that they can fix the anemic economic growth of the 2010s through a persistent fiscal impulse. If ageing Americans are too hesitant to spend, then their government can make the spending decision for them.

The economic and political benefits of that approach exceed the political costs (aka inflation). Politicians optimize for votes. People certainly hate inflation. But they like their stock market gains more. At least politicians have concluded that by not addressing the deficit issue.

Given the structure of the US economy, most of that fiscal impulse ends up with US corporations. They are the primary entities which the fiscal impulse compels to spend. AI innovation is happening at exactly the right time to act as a catalyst for that spending. I’m even tempted to assert that the AI capex boom doesn’t just coincide with the fiscal dominance experiment, but is triggered by it. I know that’s a highly speculative and not falsifiable claim. But it’s a plausible one in my opinion.

Most AI spenders don’t have a clear idea how their transformed business will exactly look like once they have ‘AI’-fied everything. They also don’t have a clear expectation of their RoI of their AI investments. But they spend anyway, simply because they can. Demand for compute seems infinite because companies are flush with cash and are willing to spend it.

The passive investment boom acts as an accelerating grease in that machanism. The fiscal impulse gets funneled to companies faster when investors don’t worry much about valuations before they buy. They simply buy the hottest stocks the moment the liquidity provided by the Treasury arrives. These hot stocks enjoy an extremely low cost of capital which encourages them to spend more money to ensure the fiscal impulse remains effective.

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How to deal with this?

There are two possible choices for an investor dealing with this market regime: Play or don’t play. You can either join the party, betting that it will continue since there are no clear catalysts in sight to end it. Or you can avoid the best performing stocks, betting that every excess will eventually have to heal through a shock.

It probably won’t surprise you that I consider myself in the second camp. I don’t expect satisfactory long-term returns from assets that are popular among indiscriminate buyers. And I doubt that a ‘greater fool’ investment approach can be sustainable. I don’t want to rely on finding a buyer in the future. I want the stocks/assets I own to work well for me if I never sell them.

That’s why I believe this is the time more than ever to bet on neglected cash generating assets. Assets that provide a service to society that is underappreciated right now. Assets that are in unpopular industries. Assets that are getting removed from the large indices rather than getting added to them. Assets that are cutting or suspending their dividends to preserve cash because investors are not giving them money voluntarily. Assets that are at their 52W lows rather than at new all time highs.

Don’t get me wrong. This is not about buying garbage for the sake of being contrarian. It’s about buying tangible and essential assets the depressed prices of which grant them superior long-term returns from here.

The good thing is that there is tons of them:

Sincerely,

Rene

Selling consumer product stocks to investors is arguably even harder. Nobody cares about B2C. It’s all about B2B. The problem with that is that B2B can’t exist alone. Every economic process requires a human at the end of it who is willing and financially able to buy.

There is a major rotation incoming from overhyped and overpriced B2B assets to neglected B2C assets. This is one of my strongest contrarian beliefs right now. I don’t know whether that rotation will happen as an extension of the current bull market or whether it will happen inside of a market consolidation. But either way, I have high confidence that it has to come eventually.

Once the tide turns, the most hated stocks in the most hated market segments will likely perform best. Like mismanaged and financially struggling burger chains for example.

This is the story about a company that has been frying burgers in the US for 75 years. That has pioneered drive-thru fast food and grew rapidly during the postwar rise of American suburbia. That has gambled its assets away in multiple financial engineering experiments. And that now has an opportunity to fix itself.

This the story about Jack in the Box.

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TLDR Summary

• The stock is down more than 90% from its all-time high, in part due to unfortunate circumstances, in part due to poor decision making.

• GLP-1s, record high beef prices and the cost of living crisis generally are spoiling the appetite of Americans for burgers. All fast food chains are struggling with that. But JACK has a bunch of company-specific issues on top.

• The company overdid its financial engineering efforts that worked so well in the 2010s and backfired so badly in the 2020s. They levered up too much and retired too much stock ($2.4bn between 2013 and 2024, 10x its current market cap!). They executed a major acquisition very poorly and lost 80% on the purchase price in just four years. A capital burn that would make even Silicon Valley proud.

• Short sellers are smelling blood. JACK is now one of the most shorted stocks in the US. These short sellers have a problem though: The company is still profitable even during this difficult time. It’s trading at just 2x P/E. That is an actual GAAP E in the denominator by the way, can you believe it? And based on an earnings level that is depressed from cyclicality and the company’s current restructuring efforts.

• I hate to say it because I don’t want to be a pumper: a major squeeze seems to be only a matter of time.

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Company roots

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TLDR Summary

• Institutional investors seem fairly desperate in chasing the current rally, in part because they are afraid to miss out on the technology boom (AI Trade), in part because they fear another inflation wave (Debasement Trade). Portfolio imbalances feel severe enough once again to trigger a significant correction.

• Both the AI Trade and the Debasement Trade ultimately depend on a resurrection of the (US) consumer. Corporate capex can only be sustainable if it creates products that customers are willing and financially able to buy. And that’s also the only scenario where a lasting inflationary impulse could occur.

• Interestingly, investors don’t expect anything from actual consumers. Betting on AI and monetary debasement while at the same time holding an ultrabearish view on consumers is a disconnect that will in my opinion ultimately drive a consolidation in the assets leading this bull market.

• Various market segments look hopelessly overbought. Some are getting interesting though. B2C generally of course. But I’m also closely watching the capitulation in healthcare for example.

• The momentum factor still rules the US stock market. Buying call options or levered ETFs is the technically the same as hedging an oversized stock portfolio with put options. The greatest single day crash in US stock market history happened when investors did exactly that.

Performance summary

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Homeowners are trapped by ultralow mortgage rates which they don’t want to give up. And potential homebuyers are discouraged by elevated prevailing mortgage rates.

This housing freeze is clearly unsustainable. Irrespective of where mortgage rates are trending, people’s life circumstances change and housing needs do as well. Then they have to move. One way or another, this situation will have to resolve.

There are various ways to bet on such a resolution. One could bet on home builders or mortgage originators. One could buy real estate directly to anticipate a positive price reaction once transaction volume picks up again. Or one could bet on companies making products that people will want to buy when they buy a new home.

Whirlpool is such a case.

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TLDR Summary

• Break, better or buy. There are three circumstances that make you shop for a new refrigerator: When the old one breaks, when you renovate your home or when you buy a new place. The housing freeze and record low consumer sentiment have effectively removed the latter two of these three occasions.

• As the leading producer of major domestic appliances in the US, Whirlpool has been hit hard by this consumer strike. Revenues are down 25% from the pre-pandemic average. EBITDA is down 50%. And the stock is down more than 80% from its peak in 2021.

• Virtually all of this collapse is cyclical in nature. There is no sudden increase in competition or substitution. In fact, the trade war strengthens Whirlpool’s competitive position because they manufacture more of their products domestically than their peers.

• People need appliances today just like they needed them yesterday. And they will continue to need them even if economic and political disruptions put their incomes under pressure.

• Not considering any near-term pent-up demand, Whirlpool should be able to generate $20bn in revenues and $1bn in net income sustainably at a mid-cycle level. This puts the stock’s current price to midcycle earnings multiple at under three.

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Company background

If you’re from the US or Canada, this company probably doesn’t need introduction. If you’re not: They produce and sell domestic appliances, basically anything electrical you need to run your home, including refrigerators, washers, dryers, dishwashers, ovens etc.

These products are typically categorized as major domestic appliances (MDAs) and account for more than 90% of the company’s revenues (75% of which is from North America and 25% of which is from Latin America). Whirlpool generates about $10bn annual revenues in its North American MDA segment, giving them a 23% market share in a $43bn market.

The company’s product offering comes via eight main brands, which are mostly differentiated by consumer segment, ranging from budget/value-oriented to high-end/premium-oriented.

Manufacturing is a key differentiator for the company. 80% of Whirlpool’s MDAs sold in the US are produced in the US and 75% of their SDAs (cooking equipment) sold in the US are produced in the US. They have 11 factories in the US, 6 of which are located in Ohio.

Most of Whirlpool’s competitors are importers and face tariff levies to a greater extent. This is a substantial advantage for the company in the current political climate, where the US administration and the general public want more domestic manufacturing.

“Because we proudly manufacture the vast majority of our products domestically and continue to invest in domestic manufacturing, this trade policy strongly supports our position. We estimate that the 25% tariff impact on our competitors will now be between 10% to 15% of our competitors' total US major appliance net sales. By contrast, the impact of our MDA North America business is estimate to only be about 5%. Ultimately, these changes bring much needed predictability to the industry and deeply strength our competitive advantage as by far the largest domestic appliance producer.”
Juan Carlos Puente, Executive President, 1Q26 earnings call

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1Q26 earnings

On May 7, 2026, Whirlpool reported 1Q26 earnings. They generated $3.3bn in revenues during the quarter (down 10% YoY, 6% organically) which translated to a modest bottomline loss.

Management primarily blamed poor consumer sentiment for this weak performance:

“The consumer sentiment was already on a very low level by any historical standard. But the war in Iran amplified consumer concerns about the cost of living. As a direct result, the Consumer Sentiment Index in the US plunged, reaching the lowest level on record in March. Now, while our view is that consumer sentiment is unsustainably low and should rebound from here, these events clearly pressured our industry, and particularly discretionary demand. […] The US appliance industry demand declined 7.4% in the first quarter, with March being down 10%. This level of industry decline is similar to what we have observed during the global financial crisis, and even higher than during other recessionary periods.”
Marc Robert Bitzer, CEO, 1Q26 earnings call

They further highlighted that additional downside for the business is likely limited because much of the discretionary demand is absent:

“Keep in mind that we’re operating in an environment where duress replacement demand drives more than 60% of the industry, and this part of the demand is relatively stable. So this gives you a sense about how dramatic the impact on discretionary demand was.”
Marc Robert Bitzer, CEO, 1Q26 earnings call

While they don’t anticipate a further collapse of revenue and earnings, they also don’t expect a quick recovery. Therefore, as a response to the operating weakness, management decided to suspend their common dividend to prioritize debt paydown. They also cut their 2026 guidance significantly to $15bn revenues (-3% vs. prior guidance) and $630m ongoing EBIT (-28%).

The stock got diarrhea trying to digest all of that. It’s down another 26% since the earnings release. Today alone it fell another 6% to sub $40 as of this writing.

It feels like a capitulation is happening here. How interesting is this from a valuation perspective?

Valuation

After the recent sell-off, Whirlpool is now trading at a $2.5bn market cap and an $8.5bn Enterprise Value. This means Whirlpool now trades at 0.6x their current year revenue guidance and 13.5x their ongoing EBIT guidance. Looking at its historical valuation multiples, it’s not necessarily cheap based on this year’s performance. But this year is hardly a useful predictor for the company’s long-term earnings potential.

For most of the 2010s, Whirlpool had a fairly stable business with revenues growing modestly, reaching just over $20bn in 2019, and an EBITDA margin hovering at about 10%. The pandemic housing boom gave them a temporary revenue and earnings boost when they generated $22bn in revenues and a 13% EBITDA margin.

Analysts expect that 2026 will be the bottom for Whirlpool’s operating performance. But they are very cautious regarding the subsequent recovery path, not expecting a return to prepandemic levels anytime soon.

I think we can be a bit more optimistic than that, can’t we? Whirlpool’s business is not hit with a sudden increase in competition or substitution. Most of this is a cyclical demand shortfall. And with every day that passes, the appliances installed in American kitchens are ageing another day.

If we assume that the company can return to $20bn annual revenues and apply a 10% EBITDA margin, their sustainable EBITDA is about $2bn. They have about $350m in annual depreciation and amortization which is presumably fairly close to their sustainable capex level. That suggests a sustainable EBIT of $1.65m. Assuming $300m in net interest expense and a 20% tax rates, a high level estimate of the sustainable net income amounts to about $1bn.

That’s only 2.5x the company’s current market cap! And it doesn’t even consider that several years of housing freeze have likely created a sizable pent-up demand. It also doesn’t assume any appliance inflation compared to 2019.

Sincerely,

Rene

• Root posted strong 1Q26 results. They achieved a record profit with record margins, driven by a record low loss ratio and a record low operating expense ratio. Underwriting growth is reaccelerating. Management seems to be gaining confidence that the industry cycle is turning sweet again.

• The structural growth story remains fully intact. And now, the stock might be on the cusp on receiving cyclical support again. Consensus opinion on insurance is poor. Institutional investors are afraid of rising competition and another inflation wave. Both risks are overblown. Consumer sentiment in the US will improve. And no trade war or actual war has so far caused a new inflation wave in the categories relevant for Root.

• Lemonade is still hopelessly overvalued. There is a ton of dumb money engaged in this space. However, I am not so afraid anymore that this is spilling over to Root. The current valuation is driven by fundamentals in line with the industry.

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Setting the stage for this quarter

In my 4Q25 earnings review, I appreciated Root’s continued resilient performance against weak industry trends. However, while I considered the investment case fully intact for the long-term, I feared that the deceleration of the company’s topline growth might weigh on sentiment in the near-term, esp. since many insurtech investors will likely have to capitulate on the fraudulent competitor Lemonade soon. Their incoming capitulation could hurt Root as well.

Both stocks have essentially gone nowhere for the last three months. Let’s see how the latest earnings keep shaping the story. I don’t want to waste too much of your and my time on Lemonade. But since both companies are playing on the same field, I believe it’s relevant to keep an eye on Lemonade as well.

Root

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I had always been wondering why everyone seems to believe that urban robotaxis should become the first commercial application of autonomous driving. The global freight trucking market is about 10x the size of the global taxi market, cargo freight is much less needy than human freight, and…

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TLDR Summary

• NVIDIA originally developed GPUs for video game graphics. It’s a coincidence that this technology turned out to be so powerful for the deep learning that we simply refer to as ‘AI’ today. Therefore, GPUs are likely not the most optimal hardware to run AI on.

• Video game graphics require a ton of parallel processing. That’s helpful for AI as well. But it’s not necessarily the limiting factor for AI chip performance. Cerebras management contends that the bottleneck for AI is in fact latency. Since communication is thousands of times faster on-chip than across chips, they developed a huge chip that is made from an entire wafer.

• Getting that done with an acceptable yield is extremely difficult. The probability of a chip defect scales exponentially chip size. Power and heat management is challenging as well. It seems that Cerebras has successfully overcome these challenges. Their chip is greatly outperforming NVIDIA in tests on popular open-source models. Partnerships with leading AI companies such as OpenAI and Amazon add to credibility.

• The company is at a very early stage. But if they can scale the business properly, they are the first who can potentially challenge NVIDIA’s dominant position. A monster narrative might be in the making here with trillions of Dollars of market capitalization at stake.

• They have started their investor roadshow today and they plan to raise up to $4bn at a $40bn valuation. This would value the company 10x higher than the original IPO plan from two years ago. Momentum is clearly on their side.

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Original IPO plan

In 2024, Cerebras announced its intention to go public when they filed an S-1. I covered that attempt in the article below:

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• If you want to sell branded products, you need to get your customers excited. Nike’s reinvention of road running shoes in the late 2010s is a perfect example. After Eliud Kipchoge won the 2017 Berlin Marathon in the freshly launched Vaporfly 4%, its stock ran more than 200% over several years. And then it topped shortly after Nike’s shoe dom…

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In spite of continued restrictive monetary policy, bank lending is currently growing at an annual rate of 7.5%. It’s growing at the fastest rate in ten years (if we ignore pandemic borrowing volatility). It’s growing faster than on average over the last 50 years (6.8%). And the growth rate is even accelerating further.

This is happening while consumer sentiment is at record lows, while the US economy has barely created any new jobs in over a year and while the housing market is effectively frozen. What is going on? How is this possible?

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TLDR Summary

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• Homebuyers and real estate investors are capitulating. Not because they are forced to sell as part of a margin call, but because they are enviously looking at the stock market where returns are much higher. This sentiment is reminiscent of the late 1990s. A megabid into real estate followed when stock market returns started disappointing.

• The…

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In my March 2026 Market Strategy, I argued that we need recession fears before a buyable bottom can occur. These recession fears would then move Treasury yields and investor positioning to more balanced levels. The Treasury’s tax drain could facilitate that sentiment shift. Let’s see how the picture has evolved since then.

TLDR Summary

• So far, markets are defying fiscal seasonality. They have staged a stunning comeback, also completely seeing through any uncertainty associated with the Strait of Hormuz standoff. I believe this is risky for anyone vulnerable to high oil prices. US assets are not vulnerable to high oil prices. As I discussed in my recent piece on crude oil, this energy crisis can act as a catalyst to move capital back into the US.

• The US Treasury has drained $164bn from the US economy in April so far and will likely drain another $100bn until the end of the month. Fiscal seasonality will then turn sweet and remain supportive until May 15, the next Treasury interest payment.

• Over the last month, institutional investors have rotated from international assets to US assets. But there is still plenty of room left for further rotation. I expect continued strength in US assets and US Dollar.

• From a sector perspective, investors love B2B industries and they hate B2C industries. Consumers are always the final demand. B2B can’t live without B2C. If everyone loves the former, the latter likely has positive inflection ahead. I consider this sector positioning a pristine signal to bet on the American consumer.

Performance summary

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• Since July 1, 2023, is up 93%. is up 150%. is up 103%. is up 98%. is up 207%. These companies run very simple, actually dull business models. They own physical locations where consumers can get their staples. Yet they have handily outperformed the S&P 500 which advanced ‘just’ 50% during that period. And they didn’t start this run from distressed valuations. Most of them had performed very well for years before.

• This is not normal. Some of these stocks have charts like Biotech companies that found cancer cures. For the most part, their businesses haven’t even inflected positively. Many of them haven’t grown faster recently than before the pandemic. Margins haven’t expanded either. The majority of their share price performance is multiple expansion.

• The change is mostly in value perception. The post-pandemic bull market has coincided with a dramatic value shift among B2C businesses. Successful brick-and-mortar retailers have captured value previously owned by large consumer brands. Value is not assigned anymore to those who give products their identity. It goes to those who actually deliver them to paying customers.

• Well-managed brick-and-mortar retailers get that value because they are perceived as more defensive than other B2C businesses. They have also rerated due to their suitability as inflation hedges. They have great customer bargaining power, fast inventory turnover and their private labels win when consumers are hit by an unexpected inflation surge. Some of them have also demonstrated strong cash management with falling inventories in relation to their revenues which releases cash and boosts profits.

• We are living in a K-shaped economy where many B2C businesses struggle to find willing and financially able customers. They need help from distributors. That’s why the ad businesses of Meta and Google work so well in the digital world. Retailers are doing well in the physical world for the same reason.

• There is no bear case for Walmart and Costco. Everyone loves them. And that is in my opinion the bear case. There are tons of possible reasons why either their operating performance might disappoint in the future or why one shouldn’t pay more than 40x for their earnings. I have discussed five of those reasons in this article.

It’s November 2021.

Imagine you are the most average investor who always holds the deepest in-consensus opinion. We’re at the peak of the pandemic bull market. You observe that physical distribution channels are still aching from lockdowns and their aftermath. Online distribution rules. You believe it was anyway destined to conquer the economy. The pandemic just accelerated the process.

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In my opinion, there is one safe conclusion to make one month into the Iran escalation: Oil prices will likely stay elevated for longer. Even a potential quick resolution won’t change that. It’s the appropriate base case to work with. There are several additional conclusions downstream from this base case. This article will dive into which ones.

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TLDR Summary

• We won’t go back to $60 oil even if the Strait of Hormuz situation resolves quickly. Risk premia will remain at normal or above-normal levels for the foreseeable future. The complacency of 2025 will not come back.

• The global economy has benefitted from that complacency. Low energy prices have supported economic activity and avoided recessions where they would have otherwise occurred. Now, higher energy prices will hit the global economy and oil importing countries will be hit hardest.

• Theoretically, the US is shielded from global supply shocks because they produce more petroleum products than they consume. However, they are deeply integrated into global energy trade. They are exporting half of their production because they lack appropriate domestic refining capacity. Therefore, American consumers can’t be shielded with protectionist measures such as export controls.

• Protectionism is not needed to save them though. American petroleum producers might generate $300bn in extra profits this year as a windfall gain from the global supply shock. It’s a huge amount, about 1% of GDP, that could be redistributed via taxes to consumers should high energy prices force them to their knees.

• The US is not nearly as vulnerable to exogenous energy price shocks as they were in past recessions. Other jurisdictions can’t say the same. China, the EU, Japan and India…they are all massive oil importers with very limited domestic production. Their economies will do very poorly should oil prices stay elevated.

• Investors don’t seem to pay attention to that risk. They are heavily invested in the EU and in emerging markets and they are underweight US Dollar and US assets in general. The next forced asset rotation cycle is looming. All the money back to the US?

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1. Oil prices will likely stay elevated for a while.

Last year in June, I published the article below on the energy sector.

At that time, the sector was heavily underweighted by institutional investors and ignored by retail investors. This bull market is driven by innovation in software and semiconductors. I argued that energy is a risk-off sector in that environment. You bet on it when you want to bet against productivity gains in the darling industries.

Energy doesn’t participate in the hottest innovation themes of our time. It’s a hedge against their failure. Investors pay for that insurance through an inferior return during good times. But the more hate energy gets, the more overextended the bull market in other segments likely is and the more attractive the hedge becomes.

But there is more to the underweight in energy than this investor allocation arithmetic.

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TLDR Summary

• It’s the perfect storm. First, the company struggled with rising delinquencies and rising refinancing costs. Then they shot themselves in the foot by revealing insufficient risk management and accounting practices. As a result, investors are running for the doors. Reputation destroyed. And rightfully so.

• But the situation might actually be less dire than it seems at first glance. The company managed to refinance their debts quickly. A liquidity crunch a la Silicon Valley Bank is off the table. I expect that they will guide 2026 to be profitable when they release earnings tomorrow.

• The company’s cash generation is prolific and will recapitalize them rapidly. Not getting a dividend for a while is a small price to pay. Flushing out dividend investors now might in fact help with forward returns.

• At 0.5x P/B, markets have priced in that the company’s distribution network is worth nothing and that there are $600m of additional charge offs hidden in the books. I consider that way too punitive.

The original investment case

About two years ago, I published the bullish piece below on goeasy Ltd.

I argued that a global rate cutting cycle was incoming and that this rate cut cycle would perhaps for the first time ever not coincide with a slowdown of corporate earnings, but an acceleration thereof. I further argued that this would cause surging credit demand, especially from borrowers that were hit hardest by the prior tightening cycle.

In my opinion, the case for that scenario was stronger in Canada than in many other places. Monetary policy was ultratight in the context of tight fiscal policy and overleveraged household balance sheets. I felt that goeasy was well-positioned to capitalize on incoming rate cuts.

They had been consistently taking market share from chartered banks, which had been subject to much tighter lending standards since the GFC. Immigration continued to be the main economic growth driver and newcomers tended to have low credit scores which would make them turn to alternative lenders. At that time, the stock was trading at $160.

I updated my view in September 2025. There had indeed been a number of rate cuts between my first and second article. However, the Bank of Canada had been pausing rate cuts for much of 2025. I reckon they feared another inflationary impulse should rate cuts put more pressure on the Canadian Dollar.

Policymakers were stuck between a rock and a hard place. Cut rates to save the real estate industry, the most important industry of the country. Or keep rates high to defend the value of the Dollar and hence the attractiveness of the country for international capital.

At that time, goeasy stock was trading at $210. They had kept growing and printing money in spite of Canada’s dire economic situation with falling real GDP, rising unemployment and weak credit demand. At 12x LTM earnings, I didn’t feel that the stock was overly ambitiously valued given their growth and the potential for Canada to eventually regain some economic momentum. I felt moderately bullish.

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The crash

The stock started sliding shortly after my second article. The biggest catalyst were 3Q25 earnings on November 5, 2025 which made the stock drop 20% in one day. They missed consensus by 11% on EPS, primarily due to higher delinquencies. Management blamed the softness of the Canadian economy.

“As we have mentioned previously, the Canadian economy continues to operate under a degree of economic pressure not seen since the COVID pandemic. Unemployment at 7.1% is at its highest level since May 2016, excl. the volatile years of 2020 and 2021. GDP growth is absent, Q2’s number coming in at negative 1.6% annualized. With over 70% of small and medium businesses impacted by tariffs and 18% of Canada’s GDP coming from exports to the US, there remains a high degree of economic uncertainty about the future.”
Jason Appel, Chief Risk Officer, 3Q25 earnings call

In addition to the economic weakness, interest rates had resumed climbing in 2025. The 2-Year is lately even signaling that rate hikes might be in the cards.

The mix of rising delinquencies and tightening financing conditions was a toxic cocktail for goeasy stock. It finished 2025 at just $131.

This trend continued in 1Q26. By March 9, 2026, the stock had dropped to $110.

Then, on March 10, 2026, the company issued a profit warning. They announced that they expect to incur

• an incremental charge off in 4Q25 of $178m against gross consumer loan receivables of $5.5bn and a related write down of $55m for loan interest and fees,

• a total net charge off in the quarter of $331m for 4Q25 and

• they withdrew their outlook for 4Q25 and their three-year forecast.

The incremental charge off relates to their LendCare segment, a subsidiary that goeasy acquired in 2021. It seems that LendCare grew its loan book too aggressively with insufficient credit risk management practices. They also revealed weak accounting practices. Some interest payments were considered received when they were in fact still being processed. Pretty bad look!

As a result of that write off, the company didn’t comply with certain financial covenants anymore which required refinancing negotiations with their lenders. They postponed their 4Q25 earnings release from March 25 to March 31 to be able to come to an agreement before.

All in all, a pretty terrible picture. The stock is now trading at just $36, down 66% over the last month and 83% from the top. It’s a full-blown crisis of trust, potentially lethal for a leveraged lending business.

However, I do believe there are reasons to be optimistic about the eventual outcome. It’s a high risk/high reward situation. Here’s why some optimism is warranted for tomorrow.

The resurrection?

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• Popular investment themes can create powerful momentum for both winners and losers. This momentum often takes prices far beyond sustainable levels. Winners then come back to earth and losers reemerge from the ashes. 20/21 was the peak of the renewable energy trade. Back then, the right move was to bet on oil. 23/24 was the peak of the GLP-1 trade. Many supposed GLP-1 losers have outperformed broader indices since then.

• Today, AI predicts the death of the white collar worker. Investors shun any stock with white collar exposure. Recruitment firms, gig work marketplaces, professional services firms and employment infrastructure companies…many of their stocks are down massively and deemed too toxic for future-proof portfolios. This offers a compelling opportunity to look into contrarian ideas.

• CBIZ offers a particularly interesting setup in this context. It’s a middle market professional services firm that successfully compounded for decades. Their growth has been stalling lately which has made the stock sell off dramatically.

• Investors fear that AI will eat their business. But so far, AI hasn’t eaten anything. The company is rather struggling with a cyclical softening in the middle market and with the integration of a transformational acquisition.

• The stock is broken. The business is not. Once this consolidation period has passed, markets will discover that. The stock is now trading at just 6.5x their 2026 earnings guidance.

• If you are afraid of AI, worry about companies the most important assets of which are technology assets. Because the replacement costs of those have potentially fallen drastically. Companies that are heavy on relationship assets are likely more protected. Professional services firms are mostly relationship assets.

Anti-thematic investing

Remember the renewable energy bubble of 2020/21? When EV start-ups reached market caps north of $100bn on barely any revenues and Cathie Wood’s ARK Invest raised more capital than Blackrock and Vanguard? That was exactly the right time to buy into oil & gas stocks.

Or remember the GLP-1 bubble of 2023/24? Investors were not only longing Novo Nordisk, Eli Lilly and some other GLP-1 related start-ups. They also shunned or even actively shorted companies that capitalized on obesity, most importantly sugar dealers and obesity care providers. Investors braced themselves for a world with eradicated obesity.

And what happened then? Many of those ‘losers’ performed actually quite well, in fact even better than broader indices, at least on a volatility-adjusted basis. Dialysis provider Davita is up 110% since its low in late 2023. Coca-Cola is up 40% since then. McDonald’s is up 25%. Intuitive Surgical (bariatric surgery exposure) is up 78%.

You can make a ton of money by being early in a major innovation theme. But you can also make money by being early in betting on its unravelling.

The AI trade of today rhymes with the renewable trade of 2020/21 and the GLP-1 trade of 2023/24. All three cases relate to impactful technologies that are changing consumer preferences and disrupt existing business models. In 2020/21, investors called peak oil. And were wrong. In 2023/24, they called peak obesity. And were wrong. Today, they call peak white collar work. Will they be wrong again?

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The death of the white collar worker

You can see the consensus in the public discourse in traditional and social media. But you can also see it in the performance of stocks with exposure to white collar work:

• Take recruitment firms for example. Robert Half is down 80% from its peak. ManpowerGroup is down 79%. ASGN is down 69%.

• Or take gig work marketplaces. Upwork is down 81%. Fiverr is down 97%.

• Or take the large professional services firms. Accenture is down 52%. Infosys is down 48%. Tata Consultancy is down 46%.

• Or take employment infrastructure companies. H&R Block (tax filing) is down 51%. ADP (payroll processor) is down 36%. Paychex (payroll processor) is down 42%. Thomson Reuters (white collar software) is down 68%.

I won’t show screenshots of their charts here for space reasons. But check them out if you’re interested. Some of them are crashing at breathtaking pace. They look like meme coins after the rug pull.

However, what differentiates them from meme coins is that they are actually still profitable. Most of their drawdowns are not earnings-driven, but valuation-driven. As a result, some of them are trading at remarkably low forward earnings. Upwork is at just 8x. Fiverr is at 5x. H&R Block is at 6x.

I can imagine that several of these stocks have unique investment stories to tell if I investigated them more closely. But there is one stock that struck me more than any of them when I explored this theme: CBIZ.

I think you will like them, too. Let’s dive in.

Enter: CBIZ

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TLDR Summary

• Bank valuations are stretched. The four largest US banks are trading at a weighted average P/B multiple of 1.5x (vs. 1.0x last 10 year average) and 19x P/E (vs. 12x last 10 year average).

• Investors expect a cyclical acceleration of bank earnings, most likely from a continued steepening of the yield curve. Banks typically borrow short-term and lend medium/long-term. The steeper the yield curve, the stronger their net interest margin should be in theory.

• The steepening thesis is predicated on the idea that the Fed will cut rates into a robust macro environment. Rate cuts would then lower the short end of the curve and their inflationary impacts would raise the long end. It’s part of the Debasement Trade. The dominant macro theme of the last 12 months.

• It’s a flawed thesis. In my opinion, the 10-Year Treasury yield has not held up so strongly because rate cuts are expected to reignite inflation. It has held up because of the robust growth of the US economy due to the AI capex boom. This capex boom may very well continue. But it will be more challenging going forward to keep GDP growth high.

• And even if the yield curve get steeper, bank earnings won’t necessarily benefit as much as investors seem to hope. The steepening of the last two years has actually done very little to the net interest margin of banks.

Understanding banking

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