We’d like to kick things off by talking about someone who is very close to our hearts. There’s been quite a bit of a stir on social media lately regarding the closure of the Aquamarine Fund, the life’s work of Guy Spier. A few misinformed voices started spinning tales about a Buffett disciple closing his fund, claiming it’s a sign that active investing is officially dead. They even jumped straight to a convenient explanation: that thanks to AI, research and stock picking have become pointless.

The narrative is gaining traction because 2024 saw a massive exodus from actively managed funds. Capital is flowing heavily into ETFs, mostly passive ones, but also into ETFs that make active choices. Reports from Morningstar and State Street Global Advisors indicate that the gap between active and passive investing in the US widened even further last year.

In 2025, actively managed funds in the United States saw a net outflow of approximately $560 billion. This marks the ninth consecutive year of negative figures for this group. Meanwhile, ETFs attracted a record-breaking $1.6 trillion, primarily driven by pure passive index-trackers. Investors are clearly ditching expensive fund structures in favor of cheaper ETFs. While the dominance of passive funds is less extreme outside the US, the trend is the same.

All of this fuels a growing narrative: “active investing is dead.” And to be fair, active managers who hug the index, taking very little risk of underperforming while still pocketing premiums for their supposedly “active” management, honestly deserve to be pushed out of the market.

Logical-sounding narratives tend to reinforce one another. However, they are wrong. Active management is not dead.

In our view, deliberate stock picking is more relevant than ever. It’s precisely because of this blind index-following that opportunities are opening up. We are experiencing a two-speed market of extremes: the expensive large-cap stocks that drive the performance of the big indices, and the small-cap stocks that, at current prices, offer dividends healthy enough to make waiting for a price recovery well worth it.

Our take is shared by Guy Spier’s broader network. In the various WhatsApp groups where we’re active, the sentiment is clear: the opportunities for stock picking are only growing.

The stock market: still a leading indicator? 

In the last century, the common wisdom was that the stock market moved about six to nine months ahead of the real economy. If the market corrected or crashed, it was a signal that the real economy would slow down significantly or even hit a recession anywhere from a few months to a year later.

Today, we are witnessing two wars with a significant financial impact on the economy, yet the stock market remains largely unfazed. It’s particularly strange how the market seems to shrug off the reduced supply of oil and gas as if it’s just a footnote. Despite ongoing electrification, high oil prices—especially over an extended period—remain incredibly damaging to the economy. Currently, refineries are even paying premiums for short-term oil delivery on top of the standard Brent price.

In Europe, we’ve already felt the sting of high energy prices after the ban on cheap Russian gas. That gas didn’t disappear, it simply moved to other customers. Now, getting oil to where it needs to be has become a logistical challenge.

The fact that markets are reacting so lukewarmly, seemingly more preoccupied with Trump’s tweets, is a cause for concern. Is the market underestimating the impact? Or are we being too pessimistic, and will the conflict truly be over soon? Even if a ceasefire holds, it will take months or more for oil production to return to previous levels. It’s baffling that the market isn’t pricing this in.

Does the market genuinely believe in a swift resolution regarding the conflict in Iran? Or are there other factors at play keeping the decline in check?

Since the Covid crash, investors seem conditioned to “buy the dip” every time the market stumbles. Every drop has been viewed as a buying opportunity, and people have dove in headfirst, and they’ve been rewarded for it. It’s created a bit of a Pavlovian response.

Alongside the “buy-the-dip” crowd, passive investors are likely another reason the market hasn’t dropped yet. These investors keep buying regardless of the economic outlook or the growing list of concerns. They stick to their systems, sometimes out of conviction, sometimes simply because their pension contributions are automated. Large fund houses, bound by prospectuses that tie them to specific indices, have no choice but to follow along. They have to keep dancing as long as the music is playing.

We don’t expect a truly sharp correction or crash until US job numbers start to fall and this feedback loop is finally broken.

We no longer view the stock market as a reliable leading indicator. It’s more likely that the economy will have to slow down significantly first before we see the market correct in proportion. While there’s no hard proof for this theory yet, that evidence could arrive sooner than we think. For now, the US labor market remains strong, but we’re seeing the first signs of a cooldown. Expensive oil will have global repercussions, sharply increasing the odds of an economic slowdown or recession. And make no mistake: oil prices are rising in the United States as well.

Ultimately, we see this as an opportunity. Our smaller companies, and those managed by the funds we invest in, were already undervalued. Since they aren’t part of the major indices, we don’t expect them to be dumped in a fire sale when pressure builds. They are also resilient enough to weather a storm. On the flip side, we have solid protection through an options fund to capitalize on the opportunities the market presents.

Howard Marks, the manager of Oaktree and author of The Memo, remains our North Star in these uncertain times. You can’t predict the market, but you can position yourself to withstand the worst-case scenarios. And that’s exactly what we’ve done.

A portfolio should be ready to handle any kind of weather, whether it’s a drought or a storm. Vitaliy Katsenelson calls it an “All-Weather Portfolio.” That is precisely what we aimed for when we reshaped our portfolio, allocating capital to strong managers across various uncorrelated sectors worldwide.

Risks are rising

In the US, markets are sitting at absolute record highs, capital is flowing freely, mainly toward the world’s largest companies, and earnings are beating analyst expectations. On the surface, everything looks rosy.

To me, it feels like we’re tearing through a corner in a race car while keeping the pedal floored. The risk of spinning out is becoming massive. A prophecy of doom? No, not at all; the car might keep accelerating for a while yet. But the other possibility, that it actually flies off the track, is growing more likely by the day.

We’ve already mentioned wars and passive investing as risk factors, but the list is much longer. Here is a selection of insights from the quarterly letters of the funds we are invested in.

Let’s start by looking at the companies driving the momentum:

• First of all, the multiples being paid today for a dollar of profit are exceptionally high. The more you pay for a dollar of profit, the lower your chances of a good return. Based on current multiples, stock market history teaches us that an annual return of 0% to 2% is the most probable outcome for the coming decade.
• The earnings of the “hyperscalers” are artificially inflated. They sell a lot of products to one another, meaning a dollar of revenue for one is booked as a capital expenditure for the other. Profit is recognized entirely in year one, while costs are accounting-wise depreciated over several years. Sam explains this perfectly in his article (Dutch) https://www.samhollanders.be/p/consistent-niet-dom-doen.
• For years, big tech companies bought back shares, creating upward pressure on stock prices. Ten years ago, that could still be defended at reasonable prices; today, much less so. The big four (Amazon, Google, Microsoft, and Meta) will collectively invest $750 billion in AI this year. That simply leaves too little free cash flow to continue share buybacks. That upward pressure is disappearing. At Alphabet and Meta, buybacks completely stalled in the first quarter of this year.
• Shares were often bought back to be given to staff as compensation. That practice continues, so you’ll eventually see a net reverse movement. There is also plenty to be said about share-based compensation and its accounting treatment, which makes profits appear higher than they actually are.
• Big tech companies are financing each other and their customers to keep them buying products. Call it circular investing. NVIDIA invests $100 billion in OpenAI, which then uses that cash to lease NVIDIA chips. We saw something similar with Cisco in 2000, just before the dot-com bubble burst, when they lent money to customers so they could buy switches.
• The S&P 500 is looking to relax its own rules so SpaceX can be included. The requirement for four quarters of profitability would be weakened. OpenAI and Anthropic are also lining up. If this happens, the S&P 500 will no longer be a hallmark of financial health, but merely a mirror of market capitalization. The index investor is no longer buying quality, they are simply buying everything large enough not to be ignored.

Let’s just say that top-tier multiples for top-tier revenue—and sometimes top-tier profits—are a dangerous cocktail. But there’s more going on in the broader market.

Speculative fever is reaching enormous proportions.

• So-called zero-DTE options (options that expire the same day) are being bought en masse by retail investors. Warren Buffett doesn’t even call this speculating; he calls it pure gambling. These types of options now account for more than 50% of all trading.
• The extent to which American households are invested in US stock markets is at an all-time high. There is very little cash buffer to absorb a shock.
• Leveraged products are being launched daily. Classically, they follow an ETF with a 2x or 3x multiplier. But for the gamblers among us, there is the 5MAG ETF, which amplifies the Magnificent 7 five times over. Due to the daily rebalancing of the leverage, you lose value very quickly in high volatility if the price moves sideways. This effect is so extreme at a 5x factor that the product is almost guaranteed to go to zero in the medium term.
• Even crazier is the 3x leverage on MicroStrategy (remember CEO Michael Saylor and his Bitcoin hoarding?). In 2025, the company’s value was halved. Its corresponding ETF lost 98%… It is estimated that about $50 billion is added to these types of “Casino products” annually. 
• We find another type of speculation in the world of private credit and private equity. While the banking sector was heavily regulated after the great financial crisis of 2008/2009, private institutions took over the riskiest parts of lending—the shift to so-called “Shadow Banking.” This market has grown into a colossus of over $2,000 billion in 2026. Because these loans aren’t on bank balance sheets, they fall outside the direct supervision of central banks. The risk hasn’t disappeared; it has simply moved to a less regulated environment. In 2026, there is a record amount of unused capital—dry powder—in these funds. The pressure to invest this money leads to lower standards and higher speculation: they “must” enter the market, even if the deals are actually too expensive. Rising inflation could lead to the perfect storm. While the 5MAG investor sees their money evaporate in broad daylight, a much larger, silent speculation is taking place in the basements of the financial market. The $2,000 billion-plus in Private Credit is a black box: loans without public ratings, valued by the lenders themselves, and often piled onto companies already up to their necks in debt.

Besides the concentration of hyperscalers and the increase in speculators, there is another underlying force gradually raising the risk: American Exceptionalism is undermining itself.

The belief that the United States is unique and not subject to the normal laws of history or economics that apply to other countries is visibly fading. The idea of the USA as a beacon of democracy and freedom is, to put it mildly, under pressure.

• For a long time, people thought the US debt (now well over $35,000 billion in 2026) didn’t matter. But the laws of gravity are starting to pull. Interest costs on US debt now exceed the defense budget. When the market starts to doubt whether the US can (or wants to) ever repay that debt without printing the currency into oblivion, the “exceptionalism” of the risk-free government bond vanishes.
• The dollar is no longer neutral since it was weaponized. Since the freezing of Russian assets and increasing sanctions, countries like the BRICS+ have been searching for alternatives. If global demand for dollars falls, US interest rates rise and purchasing power drops. The US can then no longer “export” its deficits to the rest of the world. Geopolitical overconfidence is becoming more visible by the day.
• Institutional erosion, corruption, and polarization are silent killers. A large part of the “US Premium” stems from trust in American institutions (the Fed, the legal system, democratic institutions, independent administrations, etc.). The rule of law is weaker than ever, and norms are fading at a rapid pace.

The S&P 500 now makes up an absurdly large portion of the world index. If the American model falters, there is nowhere for the passive investor to hide. If exceptionalism disappears, American valuations will fall back to the global average. That would mean the US stock market would have to drop by 30% to 40% just to be “normally” priced relative to Europe or emerging markets.

The American system works as long as everyone believes it works. Once that faith drains away, there is no way back to the old status quo.

In this world, we are very cautious.

Please note: we are not predicting a crash. We are, however, prepared and positioned with an all-weather portfolio.

If the dough collapses, we will emerge stronger with our companies and our managers. If the dough keeps rising, we’ll happily rise along with it.

The Fund

This part is reserved for our partners

Kind regards and thank you for your trust,

Sam & Joël