Two things struck me from the Opinion page:

–“The only thing that is novel about Trump’s Iran war is the immediate obviousness of its bankruptcy.” Basically, as the FTs US chief correspondent sees it, this is the LBJ Vietnam playbook, as well as Bush’s in Iraq–administrations dazzled by US military might, but with no understanding of the political/social situation in the countries we attacked. Look how those worked out.

–“The Gulf crisis may just be starting” writes the FT’s chief economist, and may morph into the “biggest energy crisis in history.” The main premise is that the world’s overall demand for oil is relatively inflexible. While the Trump blockade may ultimately succeed (if that’s the right word), it could easily trigger higher inflation, higher interest rates and recession before reaching its end goal.

If any of this is close to the mark, we as stock market investors may soon have more to worry about than the pecking order within the tech sector. I hope not, but will the gigantic clown car that Washington has become figure things out in time?

Over the past 12 months, the S&P is only a tad behind the EAFE index of foreign stock markets. Year to date, it’s ahead--although it still lags behind the rest of the world since the inauguration by about 10 percentage points.

Like almost everything in the stock market, in my experience, this is good news …and it’s also bad news. The Financial Times points out in today’s issue that US-based investors have pretty much abandoned the domestic bond market in favor of stocks, thereby helping the S&P along. This is because the market believes that the goal, though unstated, of the administration in Washington is to “solve” the issue of Federal indebtedness by creating inflation that will reduce the real value of our repayment obligations. The next chapter in this story will open with the arrival of Trump’s hand-picked Federal Reserve head (approved by Congress), whose mandate is presumably to make this happen.

If we look at the S&P, it’s up by 23% over the past 12 months. IT and Communication Services are ahead by around 43%. These two sectors make up 45% of the overall S&P market cap. This implies, in rough terms, that they have contributed 19 of the 23 points the S&P has gained this past year. The rest of the market, then, the part that represents the US as a place, is ahead by only 7%.

The Energy sector is up by 46%+ so far this year, thanks to Trump’s attack on Iran, but Consumer discretionary is barely in positive territory. ICE and tariffs, the centerpieces of the Trump agenda, are the culprits, I think, and there isn’t a peep of opposition from either party in Congress that might signal that better times are on the way.

All in all, I get the point that IT is what might be called a crowded trade. But where are the alternatives? Typically, you’d gradually roll out of the strong-performing sectors into laggards. But given how the administration seems to be breaking everything in sight, these seem distinctly unattractive.

Concept, as I see it, is the elevator speech that sums up the general case for buying either individual stocks or aggregates like industries or sectors. The ultimate issue is the why for earnings to be higher than the market expects and/or for longer than the market expects. I typically use Walmart as an example, but let’s take Micron Technology (MU).

MU makes memory chips that are used as storage in just about every computer device. They’re also key elements of AI chips. Demand is very high and, if anything, is increasing. The industry is running at full capacity right now. Significant new capacity that’s in the works will take several years to come online. In addition, ASML, the premier maker of chip manufacturing machines, will also likely actively control the amount of new capacity created. In the meantime, the price of output, which is already up a lot, will continue to rise.

Valuation, again as I see it, is the issue of how much of the potential good news is already factored into today’s stock price. In today’s world, this can either be because our estimate of future earnings is higher than the consensus, or because brokerage house trading bots are programmed for fast reaction to actual company announcements rather than to anticipation of them.

Sort of like baseball, each side gets its turn at bat.

My sense is that until relatively recently, the year to date has been dominated by concept. Now, though, it seems to me that valuation is up at the plate. How long this half inning will last is unclear. But, assuming I’m correct, while it’s going on, year to date winners will have a difficult time, while previous laggards shine.

Two choices, in my view: do nothing; or try to strengthen the portfolio by selling stuff that has been hiding in the dark corners of the portfolio and use the funds to buy stronger names that are selling off. Knowing one’s own tendencies–meaning how this has worked out in the past–will tell us which of the two to do.

CBRS is a California-based semiconductor firm. It designs chips that are as big as a dinner plate and that take up an entire semiconductor wafer. TSMC makes the semiconductors. They’re being installed in data centers in the UAE, where potential users can rent time. The chips are apparently super-fast and generate less heat than conventional designs.

The company went public yesterday.

Early talk had been that the IPO price would be around $125 a share. Demand was high enough, however, that the underwriters upped that to $150 and then to $185.

The stock didn’t open until after noon, implying that there was initially an immense imbalance between supply and demand. It debuted at a price of $385.

As I’m writing this, just after 10am eastern time, the stock is at about $285.

This reminds me a lot of the ipo of Meta (then Facebook) in 2012. …same situation, insanely high demand, a struggle to find an opening price. That ipo marked the cresting of a wave of speculative interest in the internet. And, in hindsight, it signaled that one should become more defensive. Of course, the stock is now 13x the ipo price, despite its first-year dip, handily outperforming NASDAQ, which is up by about 9x over the same span.

The main difference I see between now and then is that the unusually low growth, rising inflation economy that the administration in Washington has fashioned doesn’t seem to offer clear alternatives for investors to diversify into. It may be that even pricey tech is the best shelter available against Washington’s ineptitude.

In what follows, I’m taking off my hat as a human being and a US citizen and putting on my stock market hat.

I’ve been struck by the number of what appear to me to be significant leaks of information from inside the Washington establishment recently. Heather Cox Richardson points out that these seem to be cya moves–i.e., I know I’m part of a train wreck but I’m just a passenger.

Their general thrust, as I see it, is to reveal that the US attack on Iran is not going anywhere near as well as the administration is saying–in terms of control of the battlefield, the number of US casualties, or damage to civilian installations targeted by mistake. In addition, the reputational damage to the US from this war seems to be huge and the elevation of China in the eyes of the rest of the world that it has enabled equally significant. And that’s not factoring ICE into the equation.

More than that, I saw this morning an article that revived Warren Buffett’s criticism of what he has regarded as Trump’s excessive use of financial leverage. There’s even reference to the one public Trump venture we have substantial access to through SEC filings–the bankruptcy of his casino operations in Atlantic City. Of course, there are also things like Trump University, where there’s information through court filings.

There’s also the Saturday Night Live skit that’s gone viral–the one that shows actors playing Secretaries Hegseth and Patel, together with Justice Cavanaugh, drinking in a bar.

All of this makes it understandable, for me at least, why it has been a good strategy since the inauguration to overweight companies with revenues outside the US and domestic costs, as well as to avoid companies that are purely domestic or, worse, have foreign costs and US revenues.

The scoreboard: Since Trump took office, the S&P 500 is +26%. The EAFE index of non-US listed companies is +37% in $US, or 40% higher. My sense is that a portfolio of only US-listed companies, selected to have costs in $US and foreign revenues–in other words, making positive use of the damaged US economy rather than avoiding it entirely–would be at least 10 percentage points higher than EAFE.

My question: one of my bosses from the 1980s loved the expression “trees don’t grow to the sky.” He was right–nothing does. But is it time yet to reverse course and begin to neutralize the bet against relative economic growth in the US, or is it still too early to even throttle back a little?

The counter-argument has two parts:

–the damage to the rest of the world from the oil shortage is, in the short term at least, worse outside the US rather than in

–it seems to me that the purely financial damage to the US is only going to get worse as time passes. On the other hand, this increases the likelihood that the November election will run strongly against the administration–and set a reversal of the current trend in motion. On the other-other hand, that’s a long time in the future.