2026 Investment Framework: The End of Globalization, AI Supply and Demand Mismatch, and the Madness of Silver

Author: Campbell

Translation: Deep潮 TechFlow

Yes, we were a bit late with the update. The New Year’s Eve was mostly spent trading—to rebalance the portfolio for 2026 and clear the books. I thought I’d have more time to analyze before hitting publish.

“What big events could happen in the first week of the new year?”

The first misjudgment of 2026.

Silver surged dramatically. Maduro (Venezuelan President) was caught like a night thief. Iran, turbulent? Greenland issues back at the negotiation table? Ships of Russia, Iran, and Venezuela seized by special forces? Today, Trump also banned defense contractors from working with the government while paying dividends or conducting stock buybacks, and prohibited institutional investors from entering single-family home businesses.

Although our blog update was late, the world seems to be gradually accepting the framework we’ve been nagging about: the end of globalization, resource nationalism, re-monetization of silver, China’s gold reserves, the “Horseshoe Theory” of political spectrum coming true, and the urgent need for “New New Deal” policies amid machine-driven inequality.

Clearly, the markets also recognize these views—we ended the year with a 131% return. This was mainly thanks to our large positions in silver and gold.

Remember: we are just small players, not on the same level as the big guys. Part of our benefit comes from operating a relatively small investment portfolio, while those managing pensions and endowments may face 10 to 1000 times higher trading, liquidity, and institutional costs. This is not the same game—they are professionals, and I am just an amateur. The design of this portfolio is more about hedging my illiquid startup equity and capturing returns consistent with our overall Stoic macro investment framework.

Read more: Stoic Macro Investment Framework

Current State of Silver

Instead of obsessing over returns, let’s look at the actual composition of the portfolio. As seen, our portfolio’s correlation with silver has increased, and our volatility target remains around 30.

Note that silver experienced sharp retracements after previous squeezes—these fluctuations are still visible in data from decades later. We know this wave will end in a similar manner. The question is: will it end at $85, $200, or $1000? And how long will it take to get there?

Short sellers are waging war. An interesting observation is that the index rebalancing is imminent—silver’s weight in some commodity baskets will fall from nearly 10% to its historical average of 2%. I believe the ultimate outcome will be a structural increase in silver’s weight, but short sellers are not wrong: this will indeed put selling pressure on Western markets.

The phenomena we see in the silver market remind me of trading crude oil back in the day.

When I trained interns, I always started with a question: “What is the price of crude oil?” See what answers they give. The problem is, there is no single price for crude oil. When people say “oil price,” they are actually referring to an abstract concept—representing a series of market prices. These markets each have different prices, which are then integrated into a complex basket or linked via some strange formula to dollar-denominated futures markets.

So, “What is the price of crude oil?” actually raises more questions:

Where is the difference between US WTI and European Brent? — Different locations.

Is it today’s price, tomorrow’s, or five years from now?

What about the type of oil? For example, Dubai crude?

What about product types? Gasoline, naphtha, or fuel oil?

What currency is used for pricing? For example, crude traded in Shanghai?

This leads us to the silver market.

Short sellers are not wrong: the index needs adjustment, and the current rally is unsustainable; plus, if silver breaks $100, producers will accelerate plans to substitute silver with base metals.

But mid-term, these short-term pressures will gradually ease and turn into buying opportunities. The rebalancing of the index will eventually end, and record short positions will be closed—this liquidity will actually be bullish for silver prices.

Part of this impact is reflected in market positions, and part directly in prices.

But when we zoom out, all these seem to become less important. Why?

First, substituting copper takes time.

Based on my rough estimate: it takes over 4 years and about $16 billion in capital expenditure to achieve this. Feel free to suggest other models for discussion.

This means, before the shorts’ so-called “short-term squeeze” truly evolves into a situation where solar panel manufacturers have to choose alternatives, we still have time—and before that, silver could still rise by 50%.

At the same time, another scenario is entirely possible: efficient frontier solar developers develop panels that greatly improve energy capture efficiency, and these panels happen to require more silver. In fact, this is a recent trend (though names like TopCon and HJT are easy to forget).

Second, when considering “What is the price of silver?” we need to view it in the context of actual markets:

New York (COMEX): current price $76.93, with relatively ample inventories, futures curve showing typical contango—short-term prices below long-term prices, as holders need to pay a premium to cover holding costs.

London (LBMA): as the “Old World” home of silver, inventories are scarce, and short-term prices are above long-term—showing backwardation.

Shanghai/Mumbai/Dubai: now the “ultimate destination” for physical silver. Trading prices in these markets generally carry premiums. Moreover, the government has just banned (or heavily restricted) silver exports. Now, silver in Asia needs a “passport” to leave the country.

This is why we love this market. The long-term story of silver is so vibrant that you can enjoy tracking daily developments. That deep understanding of a market—not predicting where it’s headed (even the best forecasters only achieve 55-60% accuracy)—but understanding its behavior patterns: the shape of the curve, the nature of volatility.

Investment strategies:

We have adjusted our silver positions from over 30% direct long and 15% derivatives exposure to the following:

Calendar spread:

Capitalize on the shift of COMEX from contango to backwardation.

Long March contracts, short June contracts.

Since September, COMEX inventories have decreased by 81 million ounces.

Butterfly options strategy:

For markets with expensive upside skew and where we recognize downside risks, use at-the-money butterfly options.

Using silver as the underlying, allocate 5% of funds into SLV (iShares Silver Trust ETF) 70-90-110 June butterfly options, costing about $2.50.

Target profit around $10, with a maximum of about $20, and a potential return of roughly 7x.

We will close or roll positions near the middle strike (around $100/oz futures price) or 1-2 months before expiry.

Other adjustments:

Shorten duration, increase crash protection:

Replace mid-term Treasuries with puts on SPY (S&P 500 ETF), improving margin efficiency and gaining higher convexity in downturns.

Short student loan servicers:

US student debt exceeds $1.7 trillion, with the SAVE (debt relief) plan facing lawsuits.

Government’s accounting “fictions” are becoming harder to sustain, with default rates rising. Loan servicers will be hit hardest, feeling the most direct pressure.

Mainstreaming GLP-1 drugs:

Peptide drugs (like GLP-1) will become widely popular, possibly covered by insurance.

These drugs are not only for weight loss but also show potential in heart, kidney diseases, addiction treatment, and even Alzheimer’s. If clinical trials are positive, this could become the most prescribed drug in history.

Horseshoe Theory and Robotics:

The proliferation of AI will bring major changes to the labor market, sparking rare bipartisan consensus on inequality issues.

Programming jobs paying $150K are disappearing. Caregiver roles paying $45K are increasing. This may lead to new social policies akin to a “New New Deal” to address emerging economic and social challenges.

VI. Markets

Japan’s Policy Normalization:

The Bank of Japan (BOJ) is exiting Yield Curve Control (YCC), with 10-year JGBs trading freely. Japanese investors hold over $1 trillion in US Treasuries. If domestic yields rise, these funds may flow back to Japan. The August 2024 market movements may already be a preview.

Private Credit Under Pressure:

Private credit exceeds $2 trillion. Pension funds chase yields by investing in less liquid loans, which are not marked-to-market.

Commercial real estate (CRE): at risk. 2021 leveraged buyouts (LBOs) face higher interest rate pressures. If equity markets start factoring in cash flow gaps, credit markets will likely react similarly.

Market arbitrage opportunities in GPU-as-a-Service companies:

Credit spreads reach 700+ basis points, while stock volatility remains at only 80. Analyzing Coreweave’s credit spread (700bp) and leverage via the Merton model, what is the actual volatility of 5-year debt? This could offer new market insights.

One company projects Capex of $26 billion, with revenue of only $12 billion, EBITDA of $8 billion, leading to -$18 billion cash flow, with only $2 billion in cash on hand.

No wonder some are choosing a “straddle” options strategy. We cannot predict direction, but it’s clear the current situation cannot last.

Oil price curve flattening:

Although we haven’t positioned in oil, the chart says it all:

WTI (West Texas Intermediate) price from a $75 spot backwardation has collapsed to parity at $60.

Venezuela and Iran’s oil returning to the market confirms previous assumptions. The “bump” in the mid-term price curve may have been arbitraged away.

Core logic throughout:

AI demand is real: infrastructure is gradually improving. When agentic AI can truly perform work, usage will grow exponentially.

Energy supply landscape shifting: metal prices rising, oil prices falling. Resource nationalism is rising, and oil supply is becoming oversupplied.

Policy environment changing: Greenland is now a policy focus. Monroe Doctrine re-emerging.

Short-term cash flow gaps: will pressure markets temporarily. But long-term, the investment logic will be validated.

Investment strategies: adjust positions accordingly.