Ivar Kreuger was a Swedish engineer who turned global financial engineer, building a huge multinational conglomerate in the 1920s. By funding cash-strapped European governments in exchange for exclusive monopoly distribution rights for safety matches, a nineteenth century Swedish invention.

Kreuger raised hundreds of millions of Dollars from global capital markets unaware that his glittering, empire was built on forged Italian bonds and creative accounting.

His empire finally collapsed when a massive, complex pyramid of subsidiaries was exposed, bankrupting millions of investors.

The Rise and Fall of the Match King

Kreuger’s business model was deceptively brilliant. Safety matches were one of the most widely used technological breakthroughs of the late nineteenth and early twentieth centuries. In the pre-electrification era, everybody needed fire. Before safety matches, this usually came from dangerous, often unpleasant smelling ‘Lucifers’. The leap forwards to safety matches must have seemed at the time like adding AI to the internet seems to today’s consumers. Whoever owned global match supply would seemingly wield great financial power and influence.

Dividend We Fall

To ensure the continuous flow of dividends to investors, Kreuger became increasingly ‘creative’ using complex corporate structures, cross-border arrangements and counterfeit bank notes to hide his ever-mounting financial losses.

Endgame

In March 1932, cornered by global banks and carrying a recently acquired 9mm pistol Kreuger seemingly ended his life in a Paris apartment, leaving a farewell note that said: “I have made such a mess of things that I believe this to be the best solution for everybody concerned.” ion. The systematic lies and massive financial frauds he had been using to sustain his companies were about to be exposed. Decades later, Kreuger’s brother and others came forward with theories that he was assassinated by business or political rivals, or by international intelligence agencies or rival financial syndicates, pointing out that the gun was supposedly fired with his left hand, even though he was known to be right-handed. Additionally, one of his fingers was reportedly missing from the hand holding the weapon. At the time of his death, he was due to travel to Berlin to provide substantial funding to the democratic government in Germany. His death prevented that meeting, and the subsequent fall of the democratic regime paved the way for Adolf Hitler to rise to power. At the time, there were also rumours that speculated that Kreuger’s suicide was a hoax and that he had faked his own death and fled to Sumatra in order to escape his mounting financial debts and criminal exposure.

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MBMG Investment Advisory is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.



For more information and to speak with our advisor, please contact us at info@mbmg-investment.com or call on +66 2 665 2534.



About the Author:

Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:

1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.

3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledged all risks and have been informed that the return may be more or less than the initial sum.

We are all in the gutter, but some of us are looking at the stars.— Oscar Wilde

“I’ve come to believe it’s not so much what you believe... it’s how hard you believe it.” – Indiana Jones (Dial of Destiny)

HEADING SOUTH

The South Sea Company was a British joint-stock enterprise founded in 1711 to resolve the problem of the spiralling debt burden of the newly formed Kingdom of Great Britain (England and Scotland had been joined in 1707 by the Act of Union – a shotgun wedding in which around one million reluctant Scots were forced to the sovereign altar).

It is best known today for triggering one of the most devastating financial crashes in human history—the South Sea Bubble of 1720.

1. An ambitious plan….

The company was devised by Tory Lord Treasurer Robert Harley as a public-private financial mechanism to alleviate Britain’s national debt crisis. (it’s worth remembering this when you hear the likes of Kemi Badenoch talking of Tory financial rectitude or when public-private partnerships are proposed as the solutions to financial problems.

Britain’s involvement in the actual first world war (The Thirty Years War) had left a legacy of debt that became increasingly problematic during Britain’s expensive involvement in The War of the Spanish Succession. The British government owed over £9 million to various army, navy, and civilian creditors and in the pre-FIAT days, this was a debt that had to be backed by bullion. In fact each unit of the British currency was originally backed by one pound of Sterling Silver – hence the derivation of the term ‘Pound Sterling’.

The Swap

The government allowed creditors to exchange (swap) their unsecured state debt for shares of the newly formed South Sea Company.

The Incentive

The government guaranteed the company a permanent 6% interest payment on the total debt absorbed. More enticingly, Parliament granted the company a total monopoly on British trade with South America and the surrounding “South Seas”.

2. The Problem

Unfortunately, the newly formed Kingdom of Great Britain was not a major power in South America, where Spain dominated in the most part and Portugal had laid claim to Brazil for over two centuries.

3. Asiento: The Slavery Contract

The South Sea Company did have trading rights with the mainly Spanish colonies, however. The War of the Spanish Succession concluded with The Treaty of Utrecht, in which Spain stripped Britain’s competitors of the Asiento de Negros (the Negroes’ Contract) and awarded it exclusively to Britain, mandating the South Sea Company to supply 4,800 enslaved Africans per year to Spanish-held American plantations for a span of 30 years along with one general trading ship per year to its ports.

4. The Illusion:

Even though actual slave-trading revenues were minimal and plagued by high operating costs, the company’s directors heavily exaggerated the market potential to artificially pump-up stock prices.

5. The Bubble

By 1720, the company pivoted from simple trade to a massive scheme to assume the entirety of Britain’s remaining national debt (£31.5 million). Directors bribed politicians, handed out stock options to royalty, and offered loose credit terms to buyers. This fuelled a frenzy, in which the stock price skyrocketed in mere months. Sensing the opportunity, a myriad of other joint stock companies were launched. Exchange Alley in the City of London was the physical centre where Stock-jobbers, brokers, and eager investors crowded into the alley’s coffee-houses (primarily Jonathan’s and Garraway’s) to speculate on the wildly surging shares of the South Sea Company and hundreds of other fraudulent “bubble” companies.

6. Exchange Alley

Exchange Alley was, and still is, a narrow-cobbled passage opposite the Royal Exchange on Cornhill, linking Cornhill with Lombard Street. At the height of the bubble it was jammed with speculators, brokers and carriages. Barred from the Royal Exchange for their ‘rowdiness and poor manners’, stockbrokers made the alley their domain. Much like the open-outcry pits of the twentieth century, it was a testosterone-fuelled theatre of aggression, shouting and fast talk. With no official stock exchange building, trading took place in or on the doorsteps of local coffee houses.

At Jonathan’s, jobbers posted daily stock prices on chalkboards for investors fortified by coffee, tea and meat pies. Garraway’s specialised in stock auctions and commodities. The alley’s proximity to the General Post Office also appeared to confer an information advantage in the days of physical mail, which in turn encouraged manipulation as jobbers exploited rapid price swings and spread false rumours. With no electronic tickers or central boards, prices were shouted from chairs or coffee-house windows, and by the time a buyer walked from one end of the alley to the other, the crowd’s momentum could already have driven South Sea stock up several pounds.

7. Daniel Defoe

Defoe (~1660 – 1731) was an English writer, journalist, merchant, and government spy. Best known as the author of Robinson Crusoe, which was published in 1719, the year before the South Sea Bubble finally burst. He is widely celebrated as one of the primary founders of the English novel but was a much less successful investor. In the same year (although the image shown opposite is the 1750 re-print), he wrote some of the most acerbic warnings about the worst excesses of the various bubble schemes:

The General Cry against Stock-Jobbing is such, and the Complaint of the Mischiefs it brings upon the Publick is so loud... It is a Trade founded in Fraud, born of Deceit, and nourished by Trick, Cheat, Wheedle, Forgeries, and Sham Stories; it hath wester’d into a general Witchcraft upon the Nation; and it is high time to let the World know what kind of Vermin these are that have thus plagued us.[1]

8. Isaac Newton and the Gravity of the Situation

Sir Isaac Newton, the ear’s leading physicist and mathematician (at least according to British history books) had been a Warden of the Royal Mint since 1696 and was appointed Master of the Royal Mint in 1700.

Six years after the South Sea Company was founded, Newton also misjudged the exchange-rate relationship between silver, gold and British currency. By valuing a gold guinea at 21 shillings rather than 20, he created a one-shilling arbitrage that contributed to a shortage of silver, informally nudging Britain towards a gold standard. This sat alongside the liquidity-driven speculative excess that sent South Sea stock from around its £100 par value for most of the period after issuance in 1711 to £128 in January 1720, then to £1,000 by August, before collapsing 87.6% to £124 by year-end and settling back in the £90–100 range the following year.

Newton had acquired 100 shares in the company at par value in 1712 shortly after its founding, attracted by the fixed yield of 6% per year.

In May 1720, having seen his holding increase in value from £10,000 to around £35,000, Newton sold 80% of his holding for £28,000, a profit of £20,000 or 250%. He then sat back (smugly I imagine), to await the crash, famously proclaiming that he could “calculate the motions of the heavenly stars, but not the madness of people.”. When this hadn’t happened by August, Newton decided to go ‘all in’ at the new higher price of £700 per share. Which promptly collapsed catastrophically, leaving Newton holding only 6,000 shares instead of 10,000 and facing a permanent loss of £4,000 (equivalent to around £700,000 today). This is widely cited as one of the earliest recorded examples of FOMO (Fear Of Missing Out) investor behaviour, although to be fair, Newton quickly learned the value of diversification and by late 1722 had moved half of his holding of restructured South Sea Company stock into safer Treasury Stock that he held until his death. Seemingly humiliated by the ordeal, Newton reportedly banned anyone from uttering the words “South Sea” in his presence for the remainder of his life.

9. Enterprise Value

A story popularised by journalist Charles Mackay in his highly readable 1841 book, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds[2] claimed that a master swindler opened an office in Cornhill, London, secured £2,000 in deposits in a single morning for investment into “an undertaking of great advantage, but nobody to know what it is” and immediately fled the country. While some claim that Mackay’s story may be apocryphal or exaggerated, other claim that it should be seen as a slight embellishment or parody created by critics to mock the absolute gullibility of investors during the height of the bubble.

[1] The Anatomy of Exchange-Alley; or, a System of Stock-Jobbing – Defoe, 1719

[2] https://www.trendfollowing.com/whitepaper/mackay_extraordinary_popular_delusions.pdf

Initially we were also pretty shocked that the Taiwan stock index fell by around -11%. We thought that it would be much more - mainly because the Trump Administration has made it very clear to China that

1. Rules no longer apply

2. China is seen (by the Trump White House and anyone who listens to them) as America’s number 1, comic villain enemy right now.[1]

We note that in recent weeks, Trump has tried to ‘declare peace’ on Iran, repeatedly touting how successful negotiations have been.

Unfortunately, Iranian spokespeople deny that any such negotiations have actually taken place.

Geopolitical conflict always entails a high risk of unintended outcomes.

Geopolitical conflict with psychologically damaged, mentally unstable central characters massively increases those risks.

In times of such uncertainty, safe havens attract a premium as everyone wants an investment comfort blanket.

As long-term advocates of gold within a balanced portfolio, we exited almost all gold holdings in portfolios late last year.

Not because we don’t like any more (we like any asset class that has better prospects for making gains rather than losses).

Not because we thought that gold couldn’t go up anymore.

But simply because gold had stopped behaving like gold.

It had become more of a speculative bet than a safe haven.

In the current crisis that is exactly how it has behaved:

The typically volatile, tech-heavy stock index, the NASDAQ Composite (turquoise) has fallen by 5.2% in March with some hefty swings along the way. Gold (blue line) has fallen -11.4% this month, being over -18% down at one stage, and often suffering its wildest down days on bad days for the NASDAQ.

Safe haven no more, gold has become highly volatile but also not a diversifier of capital market risk at this time.

Not so Dire Straits?

Before we bask too long in the plaudits for being right about having forecasted the downward direction of both stocks and gold, we have to admit that there are parts of the plot that haven’t gone to plan during the recent uncertainty.

We’ve long held that EuroZone Sovereign Bonds are neither useful nor ornamental – high risk, low reward. The orange line bears that out. We’ve not been much more optimistic about GILTS – the purple line vindicates that view. We believe that US Treasuries are inherently superior and while they have performed marginally better, they’re still in loss territory of almost -1% (the blue line).

While we’ve advocated patience, especially following the Japanese election, we’re ultimately positive on Yen and Japanese Government Bonds (JGBs) in the medium term. They have had a rotten March, although our longer-term views remain constructive so we’d see this (and to a slightly lesser extent US treasury weakness) as a buying opportunity.[2]

Fortunately, we did find room in larger client portfolios for just about the government securities that have proved to be a safe haven – Chinese ‘guvvies’ (the black line), which added over 2% for the month but demonstrated a resilience and stability that other ‘safe havens’ would do well to emulate.

This strength in CNY bonds may reflect Chinese economic performance prior to the US attack on Iran:

· Retail sales for the first two months of the year rose 2.8% from a year earlier.

• Industrial output climbed 6.3%, also exceeding expectations for a 5% jump.

• Investment in fixed assets, including property, advanced 1.8% year-on-year. .

Maybe the Chinese capital markets might also provide Taiwan’s light sleepers some comfort that whatever is happening geopolitically right now, China seems to be winning economically and therefore might not see any pressing need to change its peaceful policy towards Taiwan, although we wouldn’t be surprised to see more ‘military exercises’ take place in the Straits for maximum visual effect, especially as donkey Trump has had to postpone his planned summit with Fire Horse Xi (although a state visit from the big brother of Trump’s Epstein party buddy Andrew Saxe-Coburg-Gotha-Mountbatten-Windsor has been planned instead) , while Trump tries to extricate himself from the mess that he, or possibly Epstein’s erstwhile alleged employers, has created in the Middle East.

Don’t push too far your dreams are china in your hand
Don’t wish too hard because they may come true
And you can’t help them
You don’t know what you might have set upon yourself
China in your hand – T’Pau

[1] Around 80% of Iran’s oil exports were sold to China and together Iran and Venezuela, supplied around 1/3 of China’s crude, at prices heavily discounted to unsanctioned supply. This would clearly appear to be an economic strike at China, designed to disrupt China’s energy imports and drive-up Chinese costs and inflation. In addition, TSMC’s semiconductor manufacturing facility in Arizona has announced over the last year or so that it would be 3 times larger/more expensive than originally announced and while currently only producing the fairly standard 5 nm semiconductors, will be producing the much higher grade 3nm chips next year and 2 nm by 2029 and unspecified much higher technology ‘fabs’ beyond that. This is incredibly provocative. While we don’t believe that Chinese policymakers have deviated from their plans to ‘persuade’ Taiwan to submit to fuller Chinese sovereignty by voluntary means, Trump’s various global adventures should not make anyone in Taiwan sleep easier at night.

[2] Church House’s Jeremy Wharton wrote a typically insightful piece about how Trump incompetence has created bond market buying opportunities (Jeremy focused on the GILTS market):

“The Trump attack upon Iran swept away any forecasts of 2026 being a rerun of 2025.

There was no cunning plan as ever, if one at all, and despite comments to the contrary, his administration seemed surprised at the effect on stocks, bonds and energy prices.

Initially there was only a limited effect on indices which were coming off all time highs (probably part of his ‘thinking’) but as the conflict has escalated, volatility has increased and energy prices and sovereign yields have reached some uncomfortable levels. As this goes to press, we have just seen a classic TACO [Trump Always Chickens Out] moment as Trump backs away (for five days) from vowing to obliterate Iranian civilian infrastructure, possibly advised by his allies that this will lead to a failed state. It looks to be a while before this is over and even when it is the damage to Gulf energy infrastructure will take years to repair whether the Straits of Hormuz are open or not.

The Fed had no choice but to remain on hold and there were few changes to their statement. There was and there were few changes to their statement. There was support for looking through energy prices but the spikes in Treasury yields do not create an environment for cutting rates and the new Chairman will have a job convincing the FOMC to vote for the levels of cuts that Trump wants (except Miran).

The ECB remained on hold with a hawkish tone and retain their option to act either way (‘agile and vigilant’). This check in global stability comes at a time when growth was just beginning to become more established across the Euro area but the block as a whole remains exposed to the negative effect of energy price spikes and supply disruption.

The BoE scrapped any thoughts of rate cuts and remained on hold with a 9-0 decision and remain ‘ready to act’. They are in a fair pickle now as growth forecasts are halved and inflation expectations raised, not an environment to cut or hike. Market expectations aside they are likely to remain on hold for the rest of the year, as things stand.

Gilts yields saw a concerted move higher across the curve with the 30-year suffering a peak to trough move of over 50bp, a loss of near 8% in capital, the sharpest rise since Truss/Kwarteng. The two year saw a move of over a 100bp in yield (a 2% drop in capital) as the market moved to price in four rate hikes in 2026, this seems excessive……. Sterling spreads are back to where they were in the middle of last year and with the move in Gilts there are some cracking all-in yields on offer.”

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:

Paul Gambles is licensed by the Securities and Exchange Commission as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:

1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.

3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledged all risks and have been informed that the return may be more or less than the initial sum.

Of course, not all of the problems of America or indeed the world lie squarely at the feet of Donald J. Trump (or his similarly incompetent predecessor, Joseph R Biden). Many are deeply structural. However, the clown show at 1600 Penn Avenue for the last 10 226 years hasn’t helped.

American households are suffocating under rising debt burdens:

Hard liabilities, soft assets

One of the clearest signs that the US economy has been swallowed by the AI bubble came via soft forward guidance from chipmaker AMD, whose CEO admitted to underestimating just how inflated the AI bubble has become—a bout of honesty for which she was punished with a one-day stock plunge of almost -20%.

Mind you, that one day bout of honesty only served to drag AMD back down to the 2026 performance of the likes of Nvidia (which has also disappointed markets) – both are down by over -6% this year although in AMD’s case that’s around -22.5 below where it peaked in January. As a benchmark, the perennially woeful ARK Innovation exchange traded debacle is down by almost -15% this year and Bitcoin’s utterly fictional price is -23% lower.

One exception is Marvell Technology. We suspect that you’ll be hearing a lot more of this stock (and its psychotic, feckless, reckless CEO Matt Murphy) in the future (in the same way that pets.com came to represent the dot.com bubble burst), especially now that Nvidia has used AI magic finance to buy a stake in Marvell by selling Marvell lots of Nvidia things without Marvell having to actually pay for them (Dire Straits ‘Money for nothing’ should be the leitmotif that plays whenever the 2020s AI bubble is mentioned).[1]

Cropped Circles

Marvell is a market leader in the fantasy world of data centres where everyone is furiously building and committing to build but everything is done on credit or circular financing or asset swapping because nobody actually has any hard cash. Around ¾ of Marvell’s supposed revenues are generated in this space which is why it is so dependent on its suppliers and lenders and broader sources of funding, that its debt levels exceed its fantasy EBITDA. If When the AI bubble bursts, we’d quickly expect this to balloon above the 4-5 x EBITDA level that is indicative of often terminal distress.

Blinking is actually a human trait, Matt……

As Warren Buffett’s late partner, Charlie Munger, often said “the liabilities are always real”.

Reducing that to our level, the MBMG dictum is that “When the revenue stream is nonsense and the liabilities are real, you’re headed towards a major problem.” Or as hedge fund supremo Ray Dalio has pointed out – the wealth versus money mismatch will ultimately burst fantasy bubbles (like the AI circular financing game).[2]

Private credit seems to have started to fall of a cliff.

Equities are suffering fall out.

Yet high yield credit is still holding up one of these things ain’t like the others

Marvell’s double counted, fictitious deal was quicky overshadowed at the very end of March by a record-breaking phony transaction which Open AI’s CFO, Sarah Friar claimed “blows out of the water even the largest IPO that’s ever been done.” [3]

However, the largest IPO that’s ever been done was funded by real money.

whilst Open AI (the provider of ChatGPT) has taken $3 billion from retail investors, alongside the hapless Cathie Wood who has committed to burn more of her long-suffering investors’ hard-earned cash[4], the biggest chunk of the $122 billion that seems to have so excited Sarah Friar is AI-money (just as unreal as Monopoly money but much more dangerous).

$50 billion is being provided by Amazon (except in the small print it’s actually $15 billion which in itself no doubt involves a high degree of circular financial engineering).

$30 billion of dizzyingly circus-ular financing is coming from Nvidia, thereby enabling Nvidia to claim that it sold another $30 billion of AI chips and picked up a free investment in Open AI.

Serial scammers financial engineers Softbank have also dropped in a fake $30 billion

Softbank wannabees including Andreessen Horowitz, Abu Dhabi’s MGX and D.E. Shaw Ventures have made up the rest of the OPM (Other People’s Money).[5]

The bigger the fantasy transaction, the harder the landing when reality kicks in and the greater the certainty that it will kick in, especially as back in the real world, Carmaker Stellantis (Jeep, Ram, Dodge, Chrysler, Fiat, Maserati, Peugeot, Vauxhall, Opel etc) which fell 27% in one day in February ended that month by announcing its first annual loss since the company was formed, while Warren Buffett bowed out of Berkshire Hathaway with a -30% fall in operating earnings in his final quarter and US unemployment surprised most analysts by rising quite sharply (we were shocked – not that unemployment rose but that people hadn’t seen this coming).

Meanwhile the oil price skyrocketed, peaking around 50% higher than before President Don K Trump decided to bring about the opening of the Straits of Hormuz by bringing about the closure of the Straits of Hormuz.[6]

[1] Marvell CEO Matt Murphy’s prominence/notoriety is largely founded on claims in a recent earnings call (edited transcript) “As a result, we expect data center revenue in fiscal 2028 to grow close to 50% year-over-year. Achievement of our forecast would result in 3 straight years of data center revenue growth compounding at well over 40%.....we’ve seen this in a lot of our emerging product areas when we get into them. Once they start doubling, they kinda keep doubling…let’s say, like, this last year doubling this year, you know, maybe over doubling again the year after…We’re in good shape…We’ve grown (custom) business from 0 to $1.5 billion. It’s gonna grow again this year. It’s gonna double the year after….I’m in the AI market…Look at our results that we’re guiding. Look at our outlook for this year. Look at our outlook for next year. Do you see me blinking? You don’t. Yes, we’re in the business. We’re gonna be in the business. Our customers want me to be in this business, and we’re gonna drive a major significant revenue company at Marvell. I’m very fired up on this topic…….if I go back four years, five years, 10 years, this business has been growing at like 35%, 40%, 45% for a very, very long time, and it’s gonna continue to do that. For next year, we’re looking at that growth accelerating, you know, closer to 50% next year.” I guess there are people who want CEOs to talk and think like that but it’s not exactly Warren Buffett is it?

[2] https://www.facebook.com/reel/1454618869604482

[3] The largest IPO ever done was a partial listing of Saudi Aramco for $25.6 billion

[4] The share price of Wood’s ARKK scheme has more than doubled in the past 3 ¼ years, meaning that it is now only around -60% below its peak at the end of 2020. We actually think that it’s good that Wood is committing to invest in Open AI – the final implosion of ARKK will make the capital markets a safer place to be. We just hope that as many victims as possible are able to get out in time. (https://mbmg.substack.com/p/ark-still-sinking )

[5] We’ve previously explained how VC’s ‘Ramp & whomp’ works (or rather doesn’t) - https://mbmg-group.com/everything-ventured-the-inevitable-fall-of-silicon-valley-bank-others/

[6] Maybe the Donald should have learned at least the basics about 1970s oil shock stagflation and how it cost one of the least bad President’s his job - https://www.thoughtco.com/stagflation-in-a-historical-context-1148155

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:
Paul Gambles is licensed by the Securities and Exchange Commission as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation. 2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledged all risks and have been informed that the return may be more or less than the initial sum.

“Not by virtue and valour, like the noble Aryans,

But in mockery and scorn, like the demons.

By force they have taken away from men

They have demanded again the tribute, a heavy impost.”

The Ballad of King Vahram (transl.) – trad/Farya Faraji

Horsey mistypes

Disclaimer: Although we wrote this on April 1^st we actually believe that everything that we’ve written here is actually true..

For over 2,200 years, the Chinese calendar has assigned each year to one of the 12 animals of the zodiac in a duodecennial cycle. Each animal’s distinct traits are believed to manifest in those born under its sign. Beyond the animal cycle, the Chinese zodiac also rotates through the five traditional elements—earth, wood, fire, metal, and water.[1]

February 17^th ushered in the Year of the Horse—a symbol of forward movement, independence, and endurance. Crucially, it is also the Year of Fire. Ergo, we have entered the Year of the Fire Horse: a rare, blazing return that only comes around once every 60 years. For many of us, this will be our final Year of the Fire Horse—our last shot at it.

The horse is deeply revered in broader Chinese culture thanks to its historical roles in agriculture, transport, and warfare. In the zodiac, it specifically symbolizes strength, grace, endurance, loyalty, freedom, and success. It’s a good symbol to be born under (though, in its own way, so is each of the other 11). This is reflected in the traditional saying “When the horse arrives, success arrives.” Its energy is inherently yang—active, dynamic, life-generating, and steeped in ambition and vitality.[2]

The most recent Year of the Horse (or Bing-Wu Year) was 2014, but that was tempered by the wood element and we all know how stories of wooden horses play out – invasion, destruction, deception….

The Fire Horse is a different beast entirely. It shares the horse’s core traits—power, stamina, independence, loyalty, and prosperity—but each is amplified by its combination with fire, the most volatile of the five traditional elements.

Because the aftermath of fire is growth, the Fire Horse provides immense opportunities. Individuals are encouraged to push forward with personal goals, embrace change, and endure the process for the ultimate reward. The Fire Horse is also a fast-sprinting animal, indicating that 2026 will see events unfold rapidly. Experts note the year will demand “bold action and risk-taking,” a stark contrast to the cautious progress of 2025’s Year of the Wood Snake.[3]

Historians point out that Fire Horse years historically disrupt the existing order, carrying a long-standing association between Bing-Wu years and periods of social or political instability.

Enter the donkey.

The bipolarities of America’s single party state[4] are visually represented by cartoons of a donkey and an elephant.

The donkey association dates back to the 1828 presidential election—a rematch of 1824, where Andrew Jackson won the popular vote but lost a contingent election in the House of Representatives to John Quincy Adams. In 1828, however, Jackson’s electoral triumph was convincing, requiring no House intervention to secure the 7th presidency of the USA.

A stubborn, tough old veteran of the War of Independence and the War of 1812, Jackson had acquired the nickname “Old Hickory.” However, in the mud-slinging 1828 election, his opponents preferred the alliterative insult “Jackass.” Jackson, positioning himself as a man of the people (the white people, that is), decided to embrace the slur and plastered illustrations of donkeys on his campaign posters. Because 1828 was the first electoral victory for the modern Democratic Party, the donkey attached itself to the institution. Several decades later, it was rendered an enduring symbol of America’s visual culture by the maverick cartoonist Thomas Nast at Harper’s Weekly.[5]

Donkeys generally get a pretty rough deal in popular perception, often disparaged as “stubborn” or “stupid” or, as we’ve seen, even being compared to US presidents or political parties.

Horses, when frightened, will often rear up or bolt, whereas when a donkey perceives danger, its default setting is to refuse to move. This is often interpreted as stubbornness but also a tendency to be difficult.

Throughout history, horses were associated with nobility, wealth, and war, while donkeys were seen as the working-class, agricultural “labourer’s” animal, often owned by poor tenant farmers, and tasked with hard, menial labour and low standing.

Consequently, from biblical stories like Balaam’s ass to Aesop’s Fables, Chaucer, Shakespeare, and modern depictions like Shrek, donkeys have tended to represent stupidity, ignorance and a lack of cleanliness. Since the 16th century, “ass” has been widely used as a synonym for an idiot, reinforced by its ‘hindquarters’ anatomical association.

As unfair to donkeys as these representations may be, most of the world seems to be viewing Trump’s utterly ill-conceived attack on Iran that began at the end of month as asinine rather than incandescent or equine.

Really Dumb animals

Koalas have a strong claim to be much dumber animals than donkeys in that their brain to body mass ratio is exceptionally low and this may explain why they are legendarily difficult to train – to the extent that if you take their habitual source of food (eucalyptus leaves) off the branch of a eucalyptus tree, they can’t even recognise them and will starve to death.

But arguably the strongest claim is that of the sunfish. I’m no expert so I’ll quote science blogger, Dr. Noss:-

“Sunfish are the world’s most useless and dumbest animal. But why? First off, sunfish can’t swim like normal fish since they don’t even have a full tail. They aimlessly bob around in the water, relying on their fins to guide them to get around.

This makes them super easy targets for predators, and they end up with bites taken out of them. But since sunfish are full of bones and covered in mucus predators will just spit the pieces out. Sunfish also have brains the size of walnuts kinda like twitter users.

They do feel pain but they really don’t even understand what’s happening to them. Basically the survival instincts of a jellybean Even worse, sunfish are covered in parasites. These parasites feed off their skin, making their lives even more miserable.

They try to float to the surface to let the sun’s rays kill the parasites or wait for the birds to peck them off but it won’t help much. Even when fishermen catch them they throw them back since they are useless. But the worst part is what they eat.

They can’t even close their mouths so they just float around waiting for something to come in like plankton or jellyfish. They have to consume tons of jellyfish just to get enough energy to survive, leading to a pretty bad diet. The only reason they haven’t gone extinct yet is because a female sunfish will lay 300 million eggs. An ocean full of dumb useless mindless blobs. Kinda like politicians I guess.” - https://www.facebook.com/drnosofficial/posts/sunfish-are-the-worlds-most-useless-and-dumbest-animal-but-whyfirst-off-sunfish-/882802921009521/

There are definitely some politicians who fit this bill!

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:
Paul Gambles is licensed by the Securities and Exchange Commission as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation. 2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledged all risks and have been informed that the return may be more or less than the initial sum.

[1] https://www.nationalgeographic.com/culture/article/year-of-fire-horse-lunar-chinese-new-year

[2] Ibid

[3] Ibid

[4] The United States is also a one-party state but, with typical American extravagance, they have two of them.”– Julius Nyerere

[5] “The two beasts – the former representing the Democratic Party; the latter, the Republican Party – are mainstays of America’s visual culture, as recognizable as Santa Claus or Uncle Sam. Yet most Americans would be surprised to learn that both political symbols (as well as Santa Claus and Uncle Sam) were popularized, and given their modern forms, by the same maverick cartoonist. His name was Thomas Nast and over the course of his tenure at Harper’s Weekly, from 1862 to 1886, he became America’s first great political cartoonist – and one of its harshest satirists.”

“One of the first challenges facing Reza Shah Pahlavi was the renegotiation of terms under which the previous regime had sold Iranian oil rights to the British.”

Scene set

In the aftermath of WW2, American imperial domination replaced British imperial influence, globally and in the Middle East and North Africa. While this changing of hierarchy became irrefutable during the Suez Crisis of 1956, it had been apparent during the previous decade.[1]

David Niven playing James Bond in the spoof 1967 version of Casino Royale

Reza sharp?

Iran had acquired even greater strategic importance in the twentieth century, when it was discovered to possess significant oil reserves.[2]

The Anglo-Persian Oil Company (APOC) was a British company founded originally by Burmah Oil in 1909 following the discovery of substantial oil fields in Masjed Soleiman. In what was described by First Lord of the Admiralty, Winston Churchill as “a prize from fairyland beyond our wildest dreams”, the British Government soon acquired the majority stake. Churchill’s interest was that APOC production was sufficient to more than meet the energy demands of the British navy.[3]

APOC was to become both the first company to extract petroleum from Iran, and also Britain’s largest overseas asset, and a source of national pride, that thanks to regular updates in Pathe newsreels was known to almost all British cinemagoers and to the minority who owned a TV.[4] In 1935 APOC was renamed the Anglo-Iranian Oil Company (AIOC) following Reza Shah Pahlavi’s edict that the country be known by its formally asked foreign countries to refer to Persia by its endonym.[5]

Construction on the refinery at Abadan began just before WW1.[6]

Striking a nude eel

Upon assuming the leadership of the country, Reza Shah Pahlavi began attempts to renegotiate the terms of the concession that the previous regime had granted, even prior to the incorporation of APOC. British delays and chicanery dragged out negotiations until the 1930s, when Iran was more desperate to achieve a settlement and the world demand for oil was falling sharply during the Great Depression.

A deal was finally struck in 1933:[7]

The concession area was reduced;

Persia was guaranteed a fixed royalty of four shillings per ton of oil plus 20% of the company’s worldwide profits that were actually distributed to shareholders above a certain minimum, subject to a minimum annual payment of £750,000;

The royalties payable for 1931 and 1932 were to be recalculated on the new basis;

‘Persianization’ of the workforce was to be accelerated;

The duration of the concession was extended from 1961 to 1993.

Iranian acceptance of the above final settlement terms was largely driven by Reza Shah Pahlavi. This sacrificed several demands that had been made earlier by other Iranian negotiators, notably the requirement for APOC to move its headquarters to Tehran in order that its affairs could be fully subject to local scrutiny.

Stephen Kinzer notes that the agreement also committed to provide labourers better pay and more chances for advancement and to build schools, hospitals, roads and a telephone system but that APOC/AIOC did not fulfil these promises.

The Empires strike back again

During WW2,a joint Russo-British operation (largely reliant upon troops from Indian regiments) invaded and occupied Iran, securing the oil fields and refineries and opening a secure supply route to the USSR, through which over 4 million tonnes of American Lend-Lease and other materiel were transported.

Indian soldiers marching into the Abadan Refinery in 1941

The allies prevailed on Reza Shah Pahlavi to abdicate in favour of his recently graduated son, who would be known as Mohammad Reza Shah and was assumed by the allies to be far more manageable by allied interests.

In the febrile atmosphere following WW2, Abadan became a key rallying cry for Iranian nationalists anxious to escape the de facto shackles of the British Empire, who typified and in many ways dominated the rise in nationalistic sentiment throughout the Middle East.

Playing up, playing up

Although AIOC, aided by Iran’s pro-western post-war government under Prime Minister Ali Razmara, initially resisted nationalist pressure to further revise AIOC’s concession terms still further in Iran’s favour, the British Government, in 1949, offered a placatory “Supplemental oil agreement” which increased the annual guarantee to £4 million, in order to appease anti-western, and specifically anti-British unrest in the country. This entailed further undertakings to train a greater number of Iranians to ultimately run the company.[8] At this time however, there was granted no additional management powers and no right to audit the company books. Iranian discontent was further stirred when in December 1950, it was announced that the American-owned Arabian American Oil Company (ARAMCO) had agreed to share profits with Saudis on a 50-50 basis, something that the British Government immediately dismissed as a possibility for AIOC. Rising nationalist sentiment led to the assassination of Ali Razmara.

“Wages were 50 cents a day. There was no vacation pay, no sick leave, no disability compensation. The workers lived in a shanty town called Kaghazabad, or Paper City, without running water or electricity, ... In winter the earth flooded and became a flat, perspiring lake. The mud in town was knee-deep, and ... when the rains subsided, clouds of nipping, small-winged flies rose from the stagnant water to fill the nostrils .... Summer was worse. ... The heat was torrid ... sticky and unrelenting—while the wind and sandstorms shipped off the desert hot as a blower. The dwellings of Kaghazabad, cobbled from rusted oil drums hammered flat, turned into sweltering ovens. ... In every crevice hung the foul, sulfurous stench of burning oil .... in Kaghazad there was nothing—not a tea shop, not a bath, not a single tree. The tiled reflecting pool and shaded central square that were part of every Iranian town, ... were missing here. The unpaved alleyways were emporiums for rats.” Manucher Farmanfarmaian (Iranian Director of Petroleum).

In March 1951, the Iranian parliament voted to nationalise AIOC (renamed the National Iranian Oil Company, or NIOC). The following month, Mohammed Mossadegh the leader of the main nationalist movement and leading ‘champion’[9] of nationalisation, was elected prime minister; ‘sparking the Abadan Crisis.[10]

This left Mohammad Reza Shah compromised between his reliance on western, mainly British allies, who increasingly resorted to aggressive posturing in relation to Britain’s ‘assets’ in Iran and the recognition that Mossadegh’s nationalism represented vox populi.

In the final part of this trilogy, we look at how this ended - spoiler alert, it hasn’t - it’s continuing before our very eyes.

British.

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:
Paul Gambles is licensed by the Securities and Exchange Commission as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledged all risks and have been informed that the return may be more or less than the initial sum.

[1] It has even been suggested that the power shift following WW2 is well captured in Ian Fleming’s first James Bond novel, Casino Royale, where bond has to borrow money from the CIA’s Felix Leiter, to defeat the villain, Le Chiffre at the baccarat tables.

[2] With around 140 billion barrels of proven oil reserves and almost 30 trillion cubic meters of proven gas reserves. Iran currently ranks third in terms of oil reserves and second in gas reserves.

[3] With WW1 fast approaching Churchill was keen to upgrade the British naval fleet from a coal-fired to oil powered marine but sought to avoid dependence on the foreign interests that controlled Royal Dutch Shell (a 60% Dutch owned entity at that time) and the Rockefeller-owned Standard Oil Company. Churchill was subsequently employed by APOC to lobby expensively for its interests during the 1920s!

[4] “In the late 1940s and early 1950s some high British officials still believed that Persian petroleum was actually and rightly British petroleum because it had been discovered by the British, developed by British capital, and exploited through British skill and British ingenuity.”-William Louis, an American historian.

[5] In 1954, the company was renamed The British Petroleum Company, and subsequently became BP Plc.

[6] Abadan life can be glimpsed from footage such as- www.youtube.com/watch?v=bEJYVye4Hog although this glosses over conditions for local workers – “Small pox raged, bandits and warlords ruled, water was all but unavailable, and temperatures often soared past 50°C” Stephen Kinzer, All the Shah’s Men

[7] The Prize: The Epic Quest for Oil, Money, and Power Daniel Yergin

[8] Instructive in this context is the following news reel - www.youtube.com/watch?v=6iisvxI8eco

[9] www.en.wikipedia.org/wiki/Anglo-Persian_Oil_Company

[10] Ibid.

“I walk along the avenue, I never thought I’d meet a girl like you
Meet a girl like you, With auburn hair and tawny eyes
The kind of eyes that hypnotise me through, Hypnotise me through
And I ran, I ran so far away
I just ran, I ran all night and day” – I ran, A Flock Of Seagulls

Tale as old as time

The Mesopotamian civilization of Assyria developed from the city state of Assur in the Bronze Age to an empire that lasted throughout the Iron Age. The empire peaked and then ultimately collapsed in the Neo-Assyrian period, defeated by a coalition of the subject Babylonians and Medians, in 758 BC.

Various Median tribes united under the leadership of Deioces, the autocratic first king of Medes, who ruled from 694-665 BC from his base at the new kingdom’s first capital, Ecbatana.

Deioces commands the Medes to set forth on their course of conquest - Louis Boulanger

Although the Median kingdom lasted only a little over 200 years before it was conquered by the rival Achaemenid Empire, in 550 BC, its founding and subsequent emergence as a major player in the Mesopotamian region, is seen as a key event in the timeline which, according to Hegel and others, places Iran as the world’s oldest, most continuously enduring sovereign nation. That claim, whether or not it was in fact the very first or one of the first, means that all modern nation states are, to some extent derivations from this model. In a sense, the modern American state can trace a line of heredity back to ancient Media.

A Great time

Founded by Cyrus the Great in 550 BC, the Achaemenid Empire’s unprecedented conquests created, relatively quickly, the largest empire of the time, ranging from the Balkans and Europe in the west to the Indus Valley and Asian in the east, and northern Africa in the south. Despite its broad record of martial success, the Achaemenid Empire is perhaps remembered best militarily for its attritional and ultimately unsuccessful attempts to expand into Greece (with Xerxes’ famous victory at Thermopylae more than offset by Darius’ defeat at Marathon and Xerxes’ defeats at Salamis and Plataea) and by even more crushing defeat at the hands of Alexander The Great of Macedon. After the death of Alexander and the collapse of the Empire that he had built during his relatively brief life and career, an autonomous Kingdom ultimately re-emerged in the region, after the intermission of the relatively brief empire established by Alexander’s general, Seleucus I Nicator.

The resulting two dynasties, known today as the Parthian Empire and the Sasanian Empire were in turn the most persistent adversary of ancient Rome and of Byzantium (later named Constantinople after Constantine The Great) and ultimately survived almost 900 years, lasting until 651 AD. During this time, parts of the empires were occupied periodically by Rome, but was never permanently conquered.

Who’s zooming whom?

Following the rise of Islam in the region, the Sasanian Empire fell to the early Muslim conquests, initiated by Muhammad and continued by the Rashidun Caliphate (and later to Mongol invasion).

Following the early Islamic schisms, and after over eight centuries of subjugation to foreign powers, Iran eventually became the main centre of the Shia faith. The persistence of local culture, which ultimately survived and in many ways triumphed over foreign occupation gave rise to the aphorism that

“conquered Persia takes captive her conquerors”.[1]

While the countries’ adversaries may have been victorious in battle, and even imposed occupations that lasted for multiple centuries, the strength of its cultures is claimed to have triumphed over and ultimately absorbed the culture of its occupiers. In other words, any country that achieves military victory over Iran, will still find its own culture overtaken by purportedly superior Persian culture.[2]

The Empires strike

By the 16^th century Iran re-emerged as a leading global power. Its main rival continued to be Constantinople, which had by this time of course evolved into the centre of the Ottoman Empire, Istanbul.

In the 19th century, Iran was largely treated as a strategically-located prize over which the British and Russian empires fought.[3] Defeat to the Russian Empire resulted in the loss of the South Caucasus.

One of the major acts by the declining British Empire amidst the regional turmoil following WW1, was the subversion of the ruling Qajar dynasty. Groomed by the British, Reza Khan Pahlavi, an Iranian army officer, was declared Shah of Iran on 12 December 1925. Pahlavi reportedly planned to declare an Iranian Republic, in the way that Mustafa Kemal Atatürk had replaced the Ottoman Sultanate in Turkey a couple of years earlier until he was seemingly prevented from doing so by British opposition, who installed the Pahlavi dynasty as rulers of Iran as an autocratic monarchy, with its founding member referred to as Reza Shah Pahlavi. One of the first challenges facing Reza Shah Pahlavi was the renegotiation of terms under which the previous regime had sold Iranian oil rights to the British.

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledged all risks and have been informed that the return may be more or less than the initial sum.

[1] Growing up in northern England in the 1960s, I recall stories told by my grandparents of a time when people wouldn’t lock the door when leaving their house. This myth of a happier time was somewhat shattered by the caveat that this was largely because nobody had anything worth stealing in those days and even if they did, locking the door wouldn’t have kept determined burglars out. In our family, there was also one other factor, Mick. Mick was a small black mongrel who had long realised that he lacked the strength and ferocity to keep potential invaders out of his domain. What he lacked in physical strength and intimidation, Mick more than made up for in cunning. Mick’s party piece was to allow strangers into the house but then, once they were in, he’d wrap himself tightly around their ankles to prevent them leaving. In the case of one unfortunate postman new to the patch, this lasted for several hours until a family member returned home and freed Mick’s hostage. Conquered Mick certainly too captive his conquerors.

[2] The terms Iran and Persia are often used interchangeably but Iran, which is often mis-pronounced in American media -

But Iran (the land of the Aryan people) is the indigenous terminology. Persia comes from the Greek rending of Parsa, the part of southwestern Iranian from which the founders of the early Persian Empire that rivalled the Greek city states, hailed. To that extent, Persian is essentially a sub-set of the Iranian people. This is reflected in the inscription of Darius The Great, which stated: “I am Darius, the Great King... an Achaemenid, a Persian, son of a Persian, an Aryan of Aryan lineage.” Today, we would be more likely to use the term Iranian than Aryan in general descriptions of people of the region.

[3] In 1892, George Curzon, the British Viceroy to India, famously described Iran as “pieces on a chessboard upon which is being played out a game for the dominion of the world.”

Watchers of Thai politics face a similarly protracted process to learn the outcome of this weekend’s election.

The Election Timeline

• Voting Day: Elections take place on Sunday, February 8, from 09:00 to 17:00.

• Results Announcement: At least 95% of the MP results will be announced by April 9, 2026.

• Parliamentary Session: The first parliamentary session, where the Speaker of the House is elected, is anticipated in April 2026.

• Prime Minister Election: The vote to elect the Prime Minister is expected in May 2026.

• Government Formation: The new government will probably take until mid-June 2026 to form its Cabinet, be sworn in, and issue its policy statement.

At that point, the new government should have fully taken office.

The Previous Election Fallout

In the prior election on May 14, 2023, the Move Forward Party (MFP) won the largest number of seats (151 out of 500) and the most substantial share of the popular vote (36.23%). After lengthy negotiations, MFP leader Pita Limjaroenrat announced a coalition with seven other parties to form a government. However, in the vote for Prime Minister, Pita fell short of the required 375 votes—leading to popular protests reminiscent of disenchanted football fans reacting to a VAR decision.[2]

Six days later, Thailand’s Constitutional Court suspended Pita from his MP role, on grounds which many commentators viewed as a mere technicality.[3]

MFP expressed its understandable opposition to Pheu Thai’s new coalition. An opinion poll showed a significant rise in support for MFP, largely at the expense of Pheu Thai, who had alienated many supporters by breaking a pre-election promise not to form a coalition with the United Thai Nation and Palang Pracharath parties, to which Pheu Thai had been historically opposed.

On the same day, that the Court suspended him as an MP, Parliament blocked Pita from a second vote for premiership.

MFP’s largest coalition partner, the Pheu Thai Party (PTP), which had secured the second-most votes, proceeded to form a coalition without MFP.

Just over three months after the election, Srettha Thavisin of PTP was elected as Prime Minister.[4] This coincided with the return of former PM Thaksin Shinawatra after 15 years in self-imposed exile. Thaksin began serving an eight-year sentence for corruption. One week later the Royal Gazette announced that this had been commuted to just one year.

The following day, Srettha received Royal assent to become Thailand’s 30th Prime Minister. Srettha’s cabinet was sworn in on 5^th September.

Political Turmoil and Shifting Alliances

Just over four months after the election, Pita stepped down as leader of Move Forward, in view of the uncertainty over his status as an MP.

In January 2024, over eight months after the election, Pita was acquitted of media share ownership charges. However, his celebrations were short-lived; the Constitutional Court ruled that MFP and its leaders had violated the constitution with their campaign to amend Thailand’s strict lèse-majesté laws. The Court deemed this an attempt to overthrow the monarchy. As had happened to its predecessor, the Future Forward Party[5], MFP was subsequently dissolved, with a ten-year political ban imposed on its leaders in August 2024.

The following week, the same court removed Srettha from office for allegedly following Thaksin’s orders in appointing as a cabinet minister, a former Thaksin lawyer, who was one of three individuals sentenced to six months in prison for contempt of court after ‘mistakenly’ giving Supreme Court officials a lunchbox containing ฿2 million inside a paper bag, left at the Court on the day that Thaksin and his wife Potjaman were due to appear. The mistake was apparently the fault of a driver who had been supposed to leave an identical bag containing chocolate for the Supreme Court officials.

Current Outlook

In the eighteen months since Srettha’s removal, Thailand has had two acting PMs and two actual PMs, all minted from the Pheu Thai/Bhumjaithai rival sides of the same coin.

Based on this precedent, anyone expecting a quick and tidy outcome to this weekend’s election is likely to be even more frustrated than football fans venting against VAR.

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledged all risks and have been informed that the return may be more or less than the initial sum.

[1] In this instance VAR refers to Video Assistant Referee (not VaR or Value at Risk, an investment risk management system that we’ve written disparagingly about on many occasions). VAR uses video clips and other media and technology to assist on field referees to review decisions. While it may have helped improve the accuracy of decision-making, the delays for decisions to be confirmed have created frustrations among football fans.

[2] Space prevents us covering the 2019 election, which was in many ways even more convoluted.

[3] Pita had inherited shares in a defunct media company from his father, Pongsak Limjaroenrat.

[4] In the KPI opinion poll taken immediately prior to the May 2023 election, Srettha ranked 5^th out of 6 major possible PM candidates, attracting the approval of only 6% of respondents polled.

[5] Among complaints against Future Forward that were rejected were that it used the symbol of the Illuminati as a covert call to overthrow the Thai monarchy. Ultimately it was disqualified for a technical breach of election funding rules by accepting a loan from the party’s billionaire founder, Thanathorn Juangroongruangkit.

Francis Barlow’s illustration of the fable, 1687

The Aesopica, is a collection of oral-tradition fables, still reread, repeated and re-interpreted today, which are credited to 6^th century BC storyteller, Aesop. Originally aimed at adults, these stories were intended as ethical guides exploring religious, social and political themes but are more widely used latterly in children’s education as “fictions that point to the truth.”(https://en.wikipedia.org/wiki/Aesops_Fables.)

Bushy Tale

Fable 210, “The Boy Who Cried Wolf,” gave rise to the English idiom “to cry wolf,” meaning to raise false alarms so often that genuine warnings are later ignored. In the tale, a shepherd boy repeatedly tricks villagers into thinking a wolf is attacking his flock. When a wolf finally appears and the boy cries for help, the villagers dismiss him as a prankster and the wolf devours the sheep. In later English retellings, Victorian retributive justice resulted in the boy himself also being eaten.

Aesop’s moral—commonly rendered as “liars are punished: even when they tell the truth, no one believes them”—echoes Aristotle’s observation that true statements from known liars go untrusted.

False Negative

Modern research across multiple disciplines connects the fable to what we now call alert or alarm fatigue: repeated false alarms reduce responsiveness to real danger. That dynamic has contemporary political resonance. We have long warned that the real danger of Trumpism is not so much ideological but more accidental — incompetence cloaked in arrogance can break systems. Trump may feel that by nominating and Warsh as Fed Chair, Trump will be able to control the policy decisions of the FOMC to a far greater extent, then under the chairmanship of Jerome Powell. However, FOMC policy decisions require a majority vote.[1]

The risk with Kevin Warsh is that having allowed his political leanings to influence his highly vocal policy flip-flops, and having aligned himself so closely to the Trump administrations, his credibility with fellow FOMC members may be fatally compromised. When Warsh most feels the need to warn that aggressive accommodatory policy responses are needed, his dovish cries might result in more hawkish colleagues devouring him.

When the biggest bubble in capital market and economic history finally bursts, the Fed balance sheet, much derided by Warsh, will be the only cushion to break the fall, assuming that a coordinated and well aligned Fed is willing to deploy it.

Warsh’s past false alarms may well result in policy paralysis and inability to act just when it matters most.

“Haven’t you heard it’s a battle of words?”
The poster bearer cried
“Listen, son,” said the man with the gun
“There’s room for you inside” – US & Them, Wright and Waters (Pink Floyd)

[1] All 12 voting members of the FOMC (the 7 Board of Governors members plus the NY Fed President and 4 other regional Fed bank presidents in rotation) each cast one vote on monetary policy decisions. The Chair gets no extra votes, but typically has significant influence as the meeting chair, guiding discussion, helping to build consensus, and summarising prior to any vote. FOMC decisions are made by majority vote. In the event of a tie, there is no tie-breaking vote – any tied motion would simply fail to pass.

Warsh endured the archetypal education for neoliberal politics and neoclassical economics[1], incurring a PPE BA from Stanford[2], a JD from Harvard before ‘learning’ about ‘market economics’ and ‘debt capital markets’ at MIT Sloan and Harvard Business School. Any hopes that Warsh could make any kind of recovery from these impediments were dashed when Warsh joined Morgan Stanley.

Like many lost souls before him (except with greater alacrity than usual[3]), Warsh pirouetted seamlessly from Wall Street to DC, becoming George W Bush’s Special Assistant for Economic Policy, and Executive Secretary of Bush’s National Economic Council, as well as joining Bush’s Working Group on Financial Markets. In short, Warsh quickly became the Bush administration’s interlocutor between Wall Street, regulators and government. As a reward Bush nominated Warsh for one of two Fed Board of Governor vacancies. Despite criticism and concerns Warsh’s nomination was confirmed, making him the youngest appointment in Fed history.

The Governor of Error

Once installed as a governor, Warsh seized the opportunity to demonstrate his limited understanding of key aspects of policy and his deeply flawed grasp of economics. A speech in 2007 highlighted that while Warsh was aware of the dangers of excess liquidity drying up, he had at best an extremely superficial understanding of the processes and causes - even though broad academia in general and the Fed’s own researchers specifically had already drawn attention to these processes and causes.

Warsh arguably exacerbated the Global Financial Crisis. Throughout 2008, he warned repeatedly that the policy response (to which he contributed) would lead to high, persistent inflation, and argued consistently for higher interest rates. He was wrong. He was also accused – rightly in the judgement of many observers - of favouring Wall Street over Main Street.

The Mercenary Years

Since resigning from the Fed Board in 2011 (seven years ahead of his term expiry), Warsh has devoted his split energies to teaching at Stanford[4], attending G30 meetings[5], advising the Congressional Budget Office, plotting the furtive pursuits of the Bilderberg Club and being paid handsomely for ‘consulting’ to the likes of UPS, Korean e-commerce operator Coupang and digital asset business Electric Capital Partners

During this time, his criticism of his erstwhile Fed colleagues and other policymakers has continued to grow even louder, leading Warsh to be described as a “hard money hawk” (although coming from the coke-addled brain of Lary Kudlow, that was presumably intended as a compliment).

For the last ten years, however, Warsh has aligned himself with Trump, resulting in a remarkable strategic, condottiere-like flexibility. Consequently, while Warsh was recently touted as a potential Fed Chair, Senator Elizabeth Warren asked Treasury Secretary Scott Bessent whether Warsh could be sued by the DOJ for not following instructions that Trump might issue to cut interest rates.[6]

The Nomination and The Record

On January 30, 2026, President Trump announced he had officially nominated Warsh as the next Fed Chair, succeeding Jerome Powell.

One of the better analyses of this appointment came from Bloomberg’s Odd Lots team, featuring guest Skanda Amarnath.[7] They argue that in addition to getting big calls wrong, Warsh has a history of aligning his policy views with partisan considerations. Amarnath highlights the challenges Warsh will face to establish credibility within the FOMC (especially those members that have faced his most trenchant criticisms) and the consequent challenges this will cause the next time the Fed has to step in during a period of crisis.

Amarnath points out that Warsh’s “public intellectual” history may come back to haunt us when the Fed matters most – i.e. in a crisis.

Amarnath highlights that Warsh’s crisis record is abysmal:

• The 2008 Blind Spot: While Warsh is eager to play up his presence during the crisis, but at the time, he was touting the strength of the financial system right up until the moment Lehman failed. He emphasized the inflation threat in the summer and fall of 2008, while the floor was falling out.

• The 2009 Inflation Phantom: Into 2009, with unemployment historically high, Warsh argued this wasn’t the Fed’s primary problem. He pushed to normalize rates, claiming inflation was going to explode and that QE was “really bad.”

• The Balance Sheet Confusion: He offered various shifting reasons for why he hated the size of the Fed’s balance sheet, none of which have been validated by subsequent events. As Amarnath notes, this reflects a fundamental misunderstanding of what the Fed’s balance sheet actually is and does and remains a favourite hobbyhorse of Warsh.

The Partisan Pivot

“He missed the whole financial crisis, but the more concerning issue is the growing pattern of obsequiousness and partisanship in how he orients his macro and monetary policy beams…..

For most of 2024, Warsh was clearly in the camp of the Fed keeping rates high enough for long enough to kill inflation. But his policy views changed in November 2024, when he executed a 180-degree turn on his previous policy views. He turned dovish the moment the election result was clear….

His tendency to worry about inflation and fiscal excesses during periods when a Democrat is in the White House…tends to flip to productivity growth being disinflationary when a Republican is in the White House. That flexibility has dialled up even further in the last 18 months. And that speaks to What exactly did Warsh have to promise Trump to get the job?” – Skanda Amarnath

(War, huh) Good God, y’all

(What is it good for?) Absolutely nothin’ – Norman Whitfield and Barrett Strong

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledged all risks and have been informed that the return may be more or less than the initial sum.

[1] Although deriving from neos, the Greek word for new ‘Neo’ as a prefix to liberal or classical tends, in practice, to mean supplanted by something that pretends to be but really isn’t. Wikipedia defines neoliberalism as “a political and economic ideology that advocates for free-market capitalism, which became dominant in policymaking from the late 20th century onward. The term has multiple, competing definitions, and is most often used pejoratively.” We prefer the prefix ‘shit’ (urban dictionary defines a shitlib as a “performative-progressive”, who, according to Lama Abu-Odeh “lays claim to the progressive vanguard while remaining complacently invested in the economic status quo…….motivated by the fear of Republicans winning, rather than any deeper discontent with prevailing material conditions”).

[2] Admittedly Stanford is generally ‘more Silicon Valley than Wall Street’ but has shown a willingness to cross over between the grubbiest aspects of both and today would arguably head American academia’s ‘Hall of Shame’ current form league with its involvement in ‘scandals’ including the Theranos biotech fraud, the resignation of the university’s president following charges of plagiarism, an admissions scandal, one of the highest crime rates of any major university campus, spending $800,000 to hire para-military thugs to beat up students expressing pro-Palestinian sympathies, failure to disclose corporate funding in legal submissions, manipulating pharma research data, granting tenure to Joe Bankman, the father and business associate of crypto-fraudster Sam Bankman-Fried and granting tenure to Barbara Fried, the mother and business associate of crypto-fraudster Sam Bankman-Fried. The hits keep coming for Stanford, as America, thanks to the carefully drip-fed release of morsels from the Epstein papers, pores over the sexual mores of Bill Gates, the eponymous hero of Stanford’s computer science building, courtesy of $6 million donation. Further revelations about the extent of Elon Musk’s involvement with Epstein might prove less damaging as Musk dropped out after 2 days on a Stanford Ph.D. programme to focus on making money (allegedly illegally) through his first major venture Global Link Information Network, AKA Zip2).

[3] “I hope that my prior experience on Wall Street, particularly my nearly 7 years at Morgan Stanley, would prove beneficial to the deliberations and communications of the Federal Reserve.”- Warsh’s confirmation hearing remarks.

[4] Admittedly Stanford is generally ‘more Silicon Valley than Wall Street’ but etc. etc. etc.

[5] The Group of Thirty, or G30, is an international body of academics, bankers and former policymakers, which aims to influence economic and financial policy.

[6] This refers to the investigation of Jerome Powell and the Federal Reserve mentioned in Part One of this note as well as the ongoing DoJ investigation into Lisa Cook for alleged mortgage fraud.

[7] https://metacast.app/podcast/odd-lots/BsS6SNUS/lots-more-with-skanda-amarnath-on-the-risks-of-kevin-warsh/P4dX5rEc

In complex systems (i.e., those with three or more variables), as Steve Keen has explained[1], the interaction between variables matters much more than the change in any single variable. This is a phenomenon invariably overlooked by mainstream economists.

“Economists worship ‘equilibrium’ - the myth that economies settle into balance. Irving Fisher (America’s ‘most influential economist’) finally admitted: ‘Assuming the economy stays in equilibrium is like assuming the Atlantic has no waves.’

Engineers understand the world better than economists. They know systems have feedback loops, time delays, and non-linear relationships that create booms, busts, and chaos. We need SYSTEM DYNAMICS... My advice? Study engineering, coding, or Systems Dynamic Modelling. Then apply it to economics.” — Prof. Steve Keen (Don’t study economics at university. –8^th May, 2025)

The impulse to seek solutions predicated on equilibria reflects a flaw in human cognition. We use heuristics—mental shortcuts—to apply linear frames of reference to non-linear situations.

The Disconnect

This disconnect between theory (equilibrium) and reality (chaos) is painfully evident right now in a momentously eventful year. Just look at the timeline:

• The “Donroe” Doctrine[2]: US military forces enacted a modern twist on the Monroe Doctrine by invading Venezuela to depose the elected government. It was a throwback to the overt approach of Teddy Roosevelt’s 19th-century ‘Rough Riders’—a stark contrast to the covert methods American policy has favoured for the last century.[3]

• The Snub: Following the invasion, Trump snubbed María Corina Machado—the strongly pro-Trump (but unsuccessful) Venezuelan candidate—in favour of her fiercely anti-Trump rival. The rumour mills suggest this is purely because Senora Machado won the 2025 Nobel Peace Prize, an honour much coveted by Trump.

• European Celebration: EU’s so-called leadership led sycophantic cheerleading of America’s latest military triumph, though Spain, Ireland, Hungary, Austria, Slovakia, and Slovenia condemned it, and Denmark expressed ‘concern.’

• Code Brown: Less than a week later, Trump followed up by threatening to invade Greenland. Danish concern elevated to what might be called a full ‘Code Brown’.

• The Pivot: Trump explained his invasion plans to a gathering of world leaders. The EU contingent present experienced a dramatic epiphany, suddenly aware of new downsides to US military footwear trampling other countries’ soil. Even Trump read the hostility in the room. The next day he declared that he never planned to invade Greenland, wondered how anyone had got that idea, and launched his ‘Board of Peace’.[4]

• Starmer’s Almost Last Stand: Moving from the grub-crime to the ridiculous: The UK Government, in the death throes of Starmer’s political career[5], desperately chased the limelight by offering ‘boots on the ground’ to Ukraine.

• Low Seas Piracy: Having failed to elicit the hoped-for response, Starmer decided to preserve the “rules-based international order” by engaging the Royal Navy in piracy against Russian or other merchant ships sailing in a “suspicious manner.”

• The Limelight War: Although Starmer was ignored by everyone outside (and most inside) his own cabinet, Trump worried that the hapless Sir Keir might steal Don’s thunder. He reverted to US intelligence (an oxymoron?) type by destabilising Iran’s regime and threatening 25% additional sanctions on anyone who had ever been seen in Iran’s vicinity.

• Domestic Chaos: Having created global chaos, Trump turned his sights on Minnesota (which he may have mistakenly presumed to be a foreign country). Agents of Immigration and Customs Enforcement (AKA ICE) exterminated two American nationals for the crime of being “legal non-immigrants.”[6]

• The Final Target: Trump then turned his attention even closer to home, launching a criminal probe against the Federal Reserve and its officers.

Meanwhile in Thailand, most voters polled ahead of this weekend’s election either don’t want anyone to win or else want a candidate who almost certainly won’t be allowed to win.

The Bottom Line

It has been an extraordinary year.

And we still have eleven months remaining. Even by the standards of the Trump-Starmer-Merz-von der Leyen-Macron-Kallas world order, this is no ordinary time.

And yet, none of these events—not the invasions, the piracy, or the sanctions—moved markets nearly as much as Trump’s nomination for Fed Chairman.

Proof, if we needed it, that the worship of the false God of equilibrium is alive and well, despite the actual chaos that surrounds us.

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit, it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledged all risks and have been informed that the return may be more or less than the initial sum.

Footnoted

[1] Steve Keen has used the 3-body problem in physics as an analogy for dynamic economic systems. The three-body problem, which involves calculating the gravitationally influenced motion of three celestial bodies, is notoriously complex and incapable of solution by simple formulae as the resulting orbits involve chaotic, irregular or unpredictable motion.

[2] The doctrine, originated by President James Monroe in 1823, decreed that Europe’s turn was over and henceforth colonization and intervention in central or South America was entirely America’s prerogative.

[3] Since 1946, American agencies have been responsible for almost 100 attempted changes of regime - https://en.wikipedia.org/wiki/List_of_CIA_controversies

[4] It’s hard to describe Trump’s Board of Peace with a straight face – kudos to Bruce Jones for not trying- “Several world leaders showed up for a Trump-convened ‘peace summit’ in Sharm El-Sheikh to lend their diplomatic support. So imagine their surprise when, in January, they received their formal invitations to a wider Board of Peace, attaching terms of reference that appeared designed to replace the U.N. The text was stunning in its breadth and its absurdity: Trump himself would be the chair, both while president of the United States and afterward; Trump himself would have sole authority to accept members and decide on the body’s direction of action; members could buy a permanent seat for $1 billion, but Trump himself would control the funds. And he, and only he, could decide when the chair—himself—would step down, and who would replace him. Him, him, him. It was written in the word-salad-y language of formal institutions, purported to be the “mandate” of an international organization (minus pesky details like a treaty), and would come into force when—wait for it—three countries signed up. The Sunni Arab states collectively sidestepped the issue—they agreed to join the board but, in the language of their acquiescence statement, made clear that they were narrowly interpreting the board as germane only to the Gaza question as specified by the U.N. authorizing resolution. (“Yes, I’ll marry you; and by marry, I mean date; and by date, I mean maybe we’ll have coffee once a month.”) All of which culminated in a “signing ceremony” in Davos, minimally attended. Among the heavyweights in attendance were the presidents of Uzbekistan and Mongolia.” www.brookings.edu/articles/trumps-board-of-peace-and-the-multilateral-order/

[5] In this case ‘career’ is probably the intransitive verb meaning “to move uncontrollably”

[6] Alex Pretti and Renee Good were 2 of the 9 deaths at the hands of ICE in January.

This was first sent to clients as MBMG’s November 2025 Outlook

I’ve seen the present brother, it is murder…. - Leonard Cohen

“Men, it has been well said, think in herds;

it will be seen that they go mad in herds,

while they only recover their senses slowly, and one by one”

– Extraordinary Popular Delusions and the Madness of Crowds , Charles Mackay

The flow of socioeconomic, financial and political news has become an overwhelming deluge, little of which makes any rational sense any more outside of its immediate context of short-term pursuit of immediate profit or benefit. This pursuit is, in itself, not only logical without reference to broader context, but is entirely natural.[1]

However, short-termism can have longer-term unintended consequences and the disregard of these, can later look like the popular delusions and madness lamented by Charles Mackay in his seminal nineteenth century work.[2]

It has struck us for some time that the prevailing environment fits even less neatly into monthly reviews and outlooks than it ever did before and therefore, we plan to continue the rather uneven pace of recent updates by sending out client notes at greater but more irregular frequency. In the works we have our latest stream of minimal consciousness and a summary of an eye-opening analysis of how the AI stock bubble manages to continue feeding itself both of which we intend to send in the coming weeks with a further note about the ‘resolution’ of the longest shutdown in US history before that.[3] But for now, we’re enclosing an edited transcript of Paul’s recent chat with CNBC’s Martin Soong.

I’m forever blowing bubbles,

Pretty bubbles in the air,

They fly so high, nearly reach the sky,

Then like my dreams, they fade and die.

Fortune’s always hiding, I’ve looked everywhere,

I’m forever blowing bubbles,

Pretty bubbles in the air.

- I’m forever blowing bubbles, Kenbrown & Kellette[4]

Paul recently joined CNBC’s Martin Soong for a wide-ranging chat about the state of the markets and various economies, starting with a discussion of China’s latest 5-year plan[5], with Martin asking Paul whether it was a surprise that the details that had been released of the plan didn’t more specifically reference AI (or what we at MBMG refer to as ‘Feigned Intelligence’).

Paul saw this as a reflection of China’s self-confidence and strength right now: - “They don’t have to talk about AI. One the one hand, you have [Nvidia CEO] Jensen Huang running around the world, and in particular running around Asia, at the moment doing his snake oil selling tour of APEC CEOs[6], whereas what we’ve seen coming out of XI has remained consistent for quite some time and is incredibly logical.

China has needed to pivot to a much more domestic consumption model; that’s not new, it’s something that’s been in the background rumbling away for years and policy has been heading in that direction.

We’ll probably see the continuation of a lot of the things that have actually been successful in China in terms of building the consistent growth of domestic consumption.

This could well end up in with markets reaching a point of disappointment if and when stimulus turns to be quite restrained with gradualist policy. Although we’re waiting for the details they’re unlikely to be mind-blowing because they don’t have to be while China remains on a reasonably steady course.

It doesn’t need to change course dramatically, especially its long-term focus. We’ve long been talking about one of the ways to play China is the domestic consumption theme and probably the best way to play that is that it’s exposure to domestically focused, typically smaller Chinese companies.

So, from a policy perspective, the plan sounds really logical. Also, I think that Chinese policymakers are highly aware that on a global level we have got a massive bubble in AI. They have learned the lesson from when they copied the US property boom that caused the Global Financial Crisis of 2007 to 2009.

China unfortunately copied that and had a property market bubble of its own 10 years later. I think this time they’re watching, they’re learning and they’re not going to repeat the western mistakes of creating a massive AI bubble. They don’t need to. This just shows that they think they have it under control. I think they’re probably right.”

Paul then commented on the expected meeting between Xi and Trump on the sidelines of the APEC Summit. Paul felt that while China might agree to “delay execution and implementation of their curbs on exports of ‘rare earth’ minerals[7] for another year in return for an acceptable quid pro quo”.[8]

Martin pressed Paul for what such a bargaining chip might be.

Paul felt that the tone of the White House rhetoric might need to change:-

“In the meantime Trump will have to give up resorting to childish threats of 100% tariff increases overnight.[9] America is the government with everything to lose here because China has its strategy in place. This isn’t a new strategy - it’s been in place for some time; hence I’ve been talking about increased exposure to domestic consumption plays for the last few years.

Exports and overseas markets are still important to China, they’re still a major part of GDP, especially exports to the United States and obviously China wants to keep a major part of that but China is much better prepared than America is for a world where China doesn’t have such an active trade relationship with the United States.

America has everything to lose and so President Xi has a strong negotiating position.[10]

In the short-term obviously things like Electric Vehicles (EVs) are a major factor in Chinese exports but Biden’s ban on chip exports from America to China[11] really messed up the relationship dynamics by forcing China to develop its own chip industry.

Since listing in 1999, Nvidia has suffered a huge correction every few years ever since its first correction, which started just a year after listing when it fell by over 90%, after a surge not too dissimilar to the run up that it had recently.

Nvidia falling by 90% shouldn’t be a shock – it should be a base case - it’s just what Nvidia does – it spikes by several 100% and then crashes by somewhere between 60 and 90%. There have been 15 episodes over the 25 years that it’s been listed[12] but what’s really different this time though is that the previous times when Nvidia’s share price collapsed, it wasn’t in any way systemic. Twenty-five years ago, it was just a relatively small new entrant to the NASDAQ.[13] Today, Nvidia is obviously the biggest company in the world[14], the leader of S&P 500 and also the leader of the US listed stock markets. It’s also a major factor in the US economy. When we get Nvidia’s next reset, which is now overdue, the reverberations will be much, much wider than just the NVDA stock price. It’s really going to be a systemic problem.”

Paul also picked up on comments that Nvidia’s Jensen Huang had made about needing to open the chip export door to China:

“When Jensen Huang talks about how AI and tech needs to be American AI because it’s actually in danger of becoming more and more Chinese, then you know that in fact that’s already started to happen. Mistake after mistake of the various US administrations are all starting to come home to roost so the next 90% Nvidia share price collapse which is now overdue, is becoming more imminent.

China’s response to the Biden ban on chips has seen China, in a relatively short space of time, develop a significant chip industry. There’s still a gap and China is still playing catch up and so anything that America can do [such as easing restrictions on high-grade chips] to help to play catch up even faster is obviously going to go down well with China and could also be a short-term boost that keeps the AI bubble growing.”

Paul noted that one problem with this would be that domestic narrative in America has been about how dangerous it would be to let China get absolutely leading-edge chips, and that this would therefore be a “hard sell” to the Us electorate heading into mid-term elections, even for Donlad Trump, “the Master of the flip-flop.”

However, that “last sugar rush” for the AI frenzy appears to have been ruled out by China’s reticence to buy, rather than America’s reluctance to sell, so that places the AI bubble on even shakier ground.

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit, it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledge all risks and have been informed that the return may be more or less than the initial sum.

[1] As acknowledged by Adam Smith in the serially misquoted passage –“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” Smith’s acknowledgement is widely misused as a defence of a capitalist free market that not only didn’t yet exist in Smith’s day but, at least in its current form, stands for almost everything that Smith opposed in his writing and teachings.

[2] For anyone who still hasn’t read Mackay, we’d commend it once again – a free version can be found at - https://www.gutenberg.org/files/24518/24518-h/24518-h.htm and various other websites.

[3] A resolution has now been passed but the wave of relief following this seems to disregard the potential for deeper damage with consequences that only become fully apparent later.

[4] A Tin Pan Alley song/waltz from 1918 first popularised in the USA by various dance bands. In the UK it was performed by many artists and ultimately featured in the repertoire of Vera Lynn. The song was used by Pears Soap in advertising campaigns before being later adopted by fans of West Ham United.

[5] Since Mao Zedong’s proclamation of the People’s Republic of China in 1949, following the defeat of the Kuomintang in the aftermath of World War II, China’s economy has been shaped through the Plenums of the CCP’s Central Committee and the national congresses of the Party, which are held every five years and since 1953 have resulted in the issuance of successive Five-Year Plans for the economy, although since 2006, these have been referred to as ‘guidelines’, 规划 ( guīhuà) rather than plans, 计划 ( jìhuà), drawing a distinction from the Soviet-inspired tradition of central bureaucracy. Recent strategies have increasingly focused on issues such as environmental protection and education & training. The fifteenth five-year plan (for the period 2026-2030) was unveiled last month (although there has been consultation during the last couple of years about the shape this might take). The WEF (https://www.weforum.org/stories/2025/10/how-china-s-15th-five-year-plan-signals-a-new-phase-of-strategic-adaptation/), notwithstanding whatever its own agenda may be, has described the plan “not as a continuation of business-as-usual, but as a recalibrated strategy for a world that looks far more unpredictable than it did five years ago”, noting that “Those shifts carry global implications, from cross-border technology ecosystems to supply-chain design and capital flows” creating a critical juncture for China’s modernization journey where “strategic opportunities exist alongside risks and challenges, while uncertainties and unforeseen factors are rising”. The WEF analysis highlighted the following key tenets:

China’s domestic growth model is shifting from infrastructure investment and away from property to new drivers, with technology “a central arena for competition, which both requires and pressures China’s push towards innovation self-reliance and industrial resilience. Against this backdrop, the 2026–30 plan aims not only to uplift growth, but to reshape its foundations”, with consumption no longer solely as an economic booster, as household-centred policies are seen as underpinning growth resilience: employment, childcare, education and social safety nets which are no longer simply “livelihood” issues, but also productivity and confidence issues. “The goal appears to be less cyclical stimulus and more structural empowerment.”

Industrial modernization supplants the previous headline theme of technological innovation: “The sequencing reflects a practical focus: turning laboratory breakthroughs into scalable, high-value production capacity. Frontier sectors such as advanced manufacturing, semiconductors, next-generation information technology and aerospace rise to the top because they offer both strategic resilience and growth multipliers.”

Innovation must lead to real-world value: “During the 14th Plan, the priority was ‘breakthroughs’. Under the new plan, the emphasis moves to conversion, application and ecosystem shaping. The message is clear: progress from zero-to-one matters, but the decisive impact will come from one-to-100. This recalibration suggests competitive pressure is pushing a more outcome-driven innovation culture.”

Economic security and opening up are now interlinked, reinforcing openness but through “a more strategic lens. Rather than emphasizing quantity of trade and investment, it highlights consolidating high-standard opening-up and deepening cooperation in specific regions and industries. This reflects a reality in which de-risking and diversification pressures globally are reshaping how interdependence is managed, not abandoned.”

Governance of regional growth will be more selective.

[6] Nvidia’s CEO had attended the 2025 Asia-Pacific Economic Cooperation (APEC) CEO Summit in Gyeongju, cheerleading the so-called AI revolution, throwing chips into the Asian pot, announcing a major deal to build out Korean AI infrastructure (i.e. sell the Seoul government billions of Dollars of Nvidia chips – in the distorted world of AI, nobody sells or buys any more – instead they enter into strategic partnerships to supply or build out) and, according to Nvidia’s in-house propaganda (https://blogs.nvidia.com/blog/korea-ai-apec-ceo-summit/), Huang “emphasized that AI will have a profound impact on every industry and stressed the importance of building AI infrastructure, noting that the AI era presents enormous opportunities for South Korea. He also spoke at a press conference about the virtuous cycle of AI investment driven by profitability and the ongoing transition to accelerated computing.” One of the major challenges facing Nvidia right now is the constrained demand for imported chips in the world’s largest economy (since 2016 China has been the world’s largest economy as measured by purchasing power parity (PPP) and the second largest in terms of nominal GDP), as an unintended consequence of American industrial policy originated by the first Trump administration and ramped up under the Biden White House, which pretty much forced China to develop a domestic chip sector (see https://www.economist.com/science-and-technology/2025/10/22/chinas-chipmakers-are-cleverly-innovating-around-americas-limits). Obviously, China developing its own chip industry smacks of genuinely free markets, which is something that America has consistently been opposed to since assuming global economic pre-eminence, especially in the post-WW2 era (cf Kicking Away the Ladder: Development Strategy in Historical Perspective. By Ha-Joon Chang (2002) and is therefore deeply unsettling for market leaders, such as Nvidia (https://timesofindia.indiatimes.com/technology/tech-news/nvidia-ceo-jensen-huang-has-a-complaint-says-china-has-made-it-very-clear-they-dont-want-/articleshow/124894809.cms), caught between Trump’s cluelessness on trade policy and Biden’s ineptitude - we suspect that Biden had been inculcated to cheerlead the extent to which US behemoths like Apple, Microsoft, Meta (formerly Facebook), Alphabet (formerly Google) achieve global dominance by predation on participants in economies that were unable to compete and were denied the protection to be able to develop to a level to be able to do so (hence kicking away the ladder – a phrase coined in the nineteenth century by German economist Friedrich List to describe the exploitative behaviour of primarily the British Empire) but bungled the execution, whereas the Trump administration seems to completely lack understanding of this.

[7] Rare-earth minerals contain one or more of the 17 rare-earth elements, which have unique geochemical properties that prevent them from easily forming minerals, and are therefore not normally found in deposits large or concentrated enough for mining. This is the reason they are called “rare earths”. (https://en.wikipedia.org/wiki/Rare-earth_mineral). The unique properties of these elements have become essential in manufacturing magnets for ‘speakers, microphones, communication devices, and many other modern necessities’, in construction materials and in renewable energy, conductivity, aircraft assembly, and as a radioactive tracer. America, which also has rare earth deposits, currently imports around 10,000 tonnes per year of rare earth magnets from China, whereas Europe imports more than 25,000 tonnes.

[8] This article from Reuters summarises they key aspects of the agreement between Presidents Xi and Trump https://www.reuters.com/world/us/what-did-trump-xi-agree-tariffs-export-controls-fentanyl-2025-11-01/ However, it should be noted that reliable organisations such as Bloomberg have reported that Chinese orders have now fallen back again https://www.bloomberg.com/news/articles/2025-11-12/china-s-purchases-of-us-soybeans-stall-despite-trade-truce, leading right-wing websites such as Tucker Carlson’s Daily Caller to accuse China of back-stabbing https://dailycaller.com/2025/11/13/is-china-already-stabbing-trump-in-back-on-recent-trade-deal/

[9] In the first ‘100 days’ of his Presidency, Trump threatened to levy tariffs of at least 100% on many imports from China before extending a truce until November. Following their 30^th October meeting, Trump indicated that a trade deal was coming ‘pretty soon’ and in particular, announced an immediate end to retaliatory tariffs levied on Chinese goods in response to Beijing’s alleged failure to stop the flow of ingredients used to make fentanyl. The White House subsequently confirmed details which broadly confirmed Paul’s take on the deal, including U.S. tariff reductions and a pause in Beijing’s new restrictions on rare earth minerals and magnets:- “The deal, which also includes resumption of Chinese purchases of American soybeans, averts Trump’s threatened 100% tariff on Chinese goods and extends a delicate trade truce between the world’s two largest economies for about a year.”

[10] A number of other commentators have also noted this but expressed concerns about the risks to stability posed by changes in the relationship dynamic, for instance Research Fellow Kevin Chen’s article- https://www.channelnewsasia.com/commentary/us-china-trade-deal-rare-earths-xi-trump-5450516

[11] In fairness to Joe Biden, the first Trump administration in prohibited the use and procurement of equipment from certain Chinese suppliers by U.S. government agencies in 2018-9 due to “security concerns” (the specific rationale given by FCC commissioner, Ajit Pai, was that they were Chinese and therefore obligated to work with Chinese intelligence services). This ban strengthened the growth trajectory of the Chinese technology sector, which by 2020 included eight of the twenty fastest growing chip manufacturers in the world. By 2021, this increased to nineteen out of twenty. In 2022 President Biden banned the sale of advanced AI chips to China, again citing so called ‘national security risks’. President Trump has lifted the ban in return for US chipmakers paying a 15% levy on proceeds to the US government, although there has been much discussion about lifting the remaining restrictions on the highest-grade chips, such as Nvidia’s Blackwell. However, in a neat volte face, China has now seemingly banned the import of US chips into China, which has rendered this point moot - https://internationalbanker.com/finance/why-china-has-banned-domestic-firms-from-buying-nvidias-ai-chips/

[12] NVDA is an incredibly volatile stock, which has exhibited strong periods of outperformance, followed by sharp pullbacks of greater than 50% (three times in 2000, 2001, a -90% drop in 2002, twice in 2003, a -65% drop in 2004, 2006, a fall of -85% in 2007-08, 2010, 2011, 2018 &most recently -70% in 2021).

[13] We explained this in our outlook for February this year “Nvidia isn’t just another stock anymore—it’s the entire market’s keystone. AI euphoria has turned it into the most important trade of this cycle, but that also makes it the most dangerous—with the potential to determine the fate of tech and, by extension, the broader equity market. The history of Nvidia, a company whose unofficial motto is ‘only 30 days from going out of business’ has historically ridden cycles of huge booms and massive busts, often getting ahead of itself before collapsing under its own weight when gravity exerts a devastating pull….. Nvidia is priced for perfection in a highly imperfect world. Nvidia’s previous periodic corrections were painful for shareholders but had limited broader impact. Today, Nvidia’s impact would be more systemic. A major stumble could trigger a cascading effect across American and global equities, forcing a brutal reassessment of overinflated valuations. Valuations in Asia, including Chinese technology, look relatively more attractive.” – This is now available online at https://mbmg.substack.com/p/you-want-it-darker-nvidia-killed

[14] In October 2023, Nvidia’s market capitalisation (the aggregated price of all its shares) fell below $300 billion – that’s not insignificant and currently would fall just outside the 30 biggest American stocks by market cap. Although it’s fallen back to just over $4.5 trillion at the time of writing, just a couple of weeks ago, Nvidia’s market cap broke through the $5 trillion barrier, representing almost 15% of the NASDAQ 100 and 8% of the S&P500 (https://finance.yahoo.com/news/nvidia-forms-5-trillion-club-110000846.html). One of NVDA’s periodic 90% price collapses alone would result in a 13.5% fall in the NDX or 7.2% of the SPX, quite aside from the devastation that it would wreak across the entire US AI, tech and broader stock neighbourhoods.

By Paul Gambles, MBMG Investment Advisory

“This is the end
My only friend, the end Of our elaborate plans, the end
Of everything that stands, the end.” – The Doors, The End

Funerary incensed

One of the news items that has dominated this month has been the fatal shooting of Charlie Kirk and the response that it has prompted, especially in Kirk’s native America.[1] Prior to Kirk’s death, MBMG had no particular knowledge of Kirk.[2] However, it has subsequently become increasingly difficult to remain unaware of Kirk and his elevation to the status of “icon” of contemporary conservatism and Christian nationalism.[3]

The shooting has been framed within broader political debates. Some Republicans have accused liberals of “inciting violence with rhetoric”, leading to counter allegations that Republicans were exploiting Kirk’s death for political gain, while gun control lobbyists have justifiably linked the killing to further discussions of gun legislation.

Examples of the adulation of Kirk include Donald Trump’s address to the nation from the White House on the day of the shooting (having previously used his social media channels to call for prayers for Kirk and the holding of vigils in Kirk’s honour at a number of US embassies, including Vienna, the city where Hitler first encountered racist polemic and rhetoric).[4]

Vigils were also held at significant sites in America, such as the JFK Arts Center [sic], while his memorial at a sports stadium in Arizona attracted a crowd of 200,000. It’s been announced that Kirk will posthumously receive an honorary degree from conservative institution, Hillsdale College. Trump posthumously awarded Kirk the Presidential Medal of Freedom, while in Israel a traffic junction has been renamed in his honour (even though Iran’s national news agency and others have claimed that Kirk may have been assassinated by Mossad.)

Trump also ordered that the Stars and Stripes be flown at half-mast for 4 days at the White House, at public buildings and grounds, at military posts and naval stations, and on naval vessels as a mark of respect for Kirk (not all areas participated, especially in New York and New Jersey). Right wing campaigners sought revenge for Kirk’s killing and began to accuse Kirk’s opponents of celebrating or justifying Kirk’s death, seeking to have Kirk’s critics silenced and even dismissed from their employment.[5]

With emotions running high, the campaign quickly broadened to openly targeting statements that were critical of Kirk without celebrating his assassination, leading to The Washington Post firing columnist Karen Attiah for posts that lamented how “white America” was not ready to solve gun violence while citing Kirk’s denigration of the intelligence of prominent Black women such as Michelle Obama.[6]

The campaign was criticised for being “a conservative version of cancel culture” and the rise of the “woke right”.[7] We’d also note that it diminishes the humanity of Kirk - however objectionable many of his views may have been, ultimately, he was the son, brother, father or husband to his parents, siblings, children and bizarre wife. He was still a person.

Toxic shock

The reaction of Kirk’s political opponents was more nuanced. Democrat former presidents Clinton, Obama and Biden echoed Trump’s call for prayers for Charlie Kirk.

Pentagon Colonel Scott Stephens was the highest ranking of several senior serving military officers suspended from duty for their comments about Kirk’s death.[8]

Fair’s Unfair

A county fair in Ohio shut down a Democrat Party booth for selling badges, specifically the examples shown below. (https://www.msn.com/en-us/news/us/is-he-dead-yet-trump-buttons-get-democratic-booth-kicked-from-fair-oh-cops-say/ar-AA1N17L)

Facing the risk of regulatory action from the US broadcast regulator and license issuer,[9] the Federal Communication Commission (FCC), the Disney-owned TV and radio network, ABC[10] suspended its previously long-running late night show, Jimmy Kimmel Live, because the show’s eponymous hero had dared to question the narrative that Kirk supporters, including Trump, had immediately propagated with no basis or evidence, that Kirk’s killer was a left-wing extremist and had also mocked Trump’s response in the following monologue:

At the time of writing Kimmel has now been unsuspended, but many franchises and local channels are not yet re-instating the show.

No publicity is bad publicity.

The role of the FCC prompted wider debate about free speech, in the aftermath of Trump’s suggestion that networks giving him “bad publicity” should be stripped of their licenses and in light of restrictions imposed by the Trump administration on reporting, including restrictions on coverage of the US military. [11]

This highlights what we see as a major socio-economic and political risk presently facing America. The history of American media ownership over the last 150 years has seen the emergence of media oligarchs (initially the likes of Pulitzer, Hearst and Scripps but subsequently Murdoch et al and latterly, the Zuckerbergs etc). This phenomenon has become even more pronounced in recent years:

It is mistakenly assumed that this phenomenon enables media barons to control the hearts and minds of America. We don’t believe this to be true. We believe that it allows the groups whose ultimate bidding these media companies perform (not necessarily the press barons) to control the hearts and minds of America. This is replicated across most ‘liberal’ western ‘democracies’, which promote the virtues of freedom of speech because they have been able (with a few speedbumps along the way – e.g. McCarthyism) to ensure that there has been no freedom of thought.

Party Partay

The 2-party system is an extension of this – by distracting the population with Potemkin democracy, western neoliberal societies have been able to ensure that all criticism is contained within the system – i.e. Republicans blame Democrats and vice versa, even though the differences between them, on the broadest scale are negligible – enabling the system itself to avoid scrutiny or criticism, however broken the system may be.

The Overton Window is essentially the range of broadly acceptable political topics and possibilities. When added to the unacceptable possibilities, this creates the entire range of political possibilities. In a neoliberal two party state, the very centre ground of the Overton Window represents the safe space at the heart of the manufactured political consensus. The two-party state relies on the conflict between all participants in the system being largely, if not exclusively, concentrated on manufactured tension between the parties (in this example Dems and Repubs) to prevent any challenges to the system itself, as almost all political energy is expended on this very narrow conflict, preventing the broader system being subjected to scrutiny or criticism.

Risky Business

In Trump’s America, there are now two major challenges to this long-established organisational structure.

The first is that the process of manufacturing conflict between the two parties is evidently in danger of spinning out of control. Kirk’s death is far from an outlier. During last year’s election campaign, Trump was the target of two assassination attempts, having previously been the target of various attempts in 2016, 2017, 2018 and 2020. United Healthcare CEO Brian Thompson was murdered in New York last year while walking to a conference. Democratic lawmakers were attacked in Minnesota. All these incidents highlight the extent to which confected factionalism has spiralled out of control, “the growing divide in American politics may perhaps be at its worst point in decades….Dr. Adam Meyers of the Political Science Department at Providence College noted a trend of tribalism in American politics: ‘it’s not just that we disagree with each other more, but we increasingly view our political groups as our identity groups and our political opponents as threatening our identity.’”[12]

Interestingly, in the days after Kirk’s death, Americans were equally divided in terms of a favourable or an unfavourable opinion of him, but intensely held in both directions. It seems to us that the extremity of the level of conflict poses a risk of unpredictable, unintended systemic consequences that might most typically manifest in changes to America’s established socio-political framework. These could, in turn, result in significant capital market and economic consequences. In the worst case, which is less likely but ultimately not inconceivable, civil war and even international conflict could ensue.

Idiot-syncratic Risk

The second challenge is that Trump’s approach is so strikingly different to the status quo and betrays a lack of understanding of how the American system actually works. The system is therefore not only under threat from the confected partisan conflict spinning out of control of its own accord, but also from the added risk of leaving the ship of state in the hands of a drunken, utter novice sailor.

This dangerous confluence of socio-economic and political challenges poses an unquantifiable market risk at the worst possible time.

Last Word

We’ll leave this to Charlie Kirk (with some slight modification)-

Many people believe that Charlie Kirk was a scumbag….does that mean that he deserved to die?[13] Of course not. Those are two totally different things.[14]

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

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[1] On 10^th September, while on stage at a TPUSA rally at Utah Valley Charles J Kirk was fatally shot in the neck, in front of an audience of about 3,000 people. As far as we can ascertain, Kirk is believed to be no relation to the fictional Captain of the Starship Enterprise, James T Kirk, in Star Trek. Immediately before being shot, Kirk was debating mass shootings, which Kirk appeared to equate primarily with gang violence. The New York Times has noted that this was “a grim coincidence that has fed into online conspiracies and speculation”. Kirk has been described as an “American right-wing political activist, entrepreneur, and media personality”. Kirk dropped out of university aged 18 to co-found Turning Point USA (TPUSA) in 2012. His controversial writings and talk radio appearances led to Kirk becoming a prominent voice in the pro-Trump MAGA faction of the Republican Party. TPUSA’s polemical activism, including mass college rallies but also the maintenance of a McCarthyite ‘watchlist’ denouncing so-called ‘progressive’ academics has been seen as fostering interest in and support for political conservatism and right-wing extremism among American youth.

[2] In fact the only prior interaction between ourselves and Kirk that we can trace is that we had blocked Kirk’s social media outpouring because of what we deemed to be the unacceptable nature of some of the views that he espoused. Examples of Kirk’s comments include:

“If I see a black pilot, I’m going to be like, boy, I hope he’s qualified….if I’m dealing with a moronic black woman in customer service, is she there because of her excellence or because of affirmative action…I wouldn’t want a black lesbian to remove my appendix….the war on white people continues….there’s no such thing as white privilege or racism…the country made a mistake when it passed its civil rights act….reject feminism, women need to get married younger so they can start having kids…Democrat women want to die alone, without children….the Democrat Party supports everything that God hates….we’re dealing with maggots, vermin and swine here… birth control is worse than the Holocaust [and it] really screws up women’s brains ….women are lying about being raped….you should submit to your husbands….Joe Biden should be given the death penalty for crimes against America [that’s why] I keep saying ‘buy weapons’…..[judicial executions] should be public, should be quick and should be televised [from age 12]…..watching an execution would make my day better…native born Americans should buy weapons and have a lot of guns at your disposal….never leave your home without a weapon…it’s worth to have gun deaths every single year so that we can have the Second Amendment….we have more guns at TPUSA HQ than you could imagine.”

[3] https://www.thecowl.com/conservative-icon-charlie-kirk-assassinated-at-campus-event/ and https://religionmediacentre.org.uk/news/charlie-kirk-from-secular-activist-to-christian-nationalist-icon/

[4] The Rise and Fall of the Third Reich: A History of Nazi Germany – W L Shirer

[5] Vice President Vance called on the general public to inform on anyone who said “distasteful things” about Kirk’s assassination - “When you see someone celebrating Charlie’s murder, call them out and hell, call their employer.” Republican-controlled states such as Florida, Oklahoma and Texas have launched investigations of teachers accused of inappropriate statements after last week’s assassination. The U.S. military has invited members of the public to report those who “celebrate or mock” the killing and said some troops have already been removed for their comments. (https://apnews.com/article/charlie-kirk-speech-republicans-firings-government-vance-e65a4939b80e4f4822db188e978d8812) A website called “Expose Charlie’s Murderers” (whose domain was registered anonymously and which claimed not to be a doxxing site, when that’s exactly what it appeared to be) “received nearly 30,000 submissions” to be converted into a searchable database, filterable by location and profession, before it was taken down. The vast majority of the 30,000 named/shamed individuals neither referred to themselves as activists, nor called for violence. MAGA Senator Laura Loomer posted : “I will be spending my night making everyone I find online who celebrates his death Famous, so prepare to have your whole future professional aspirations ruined if you are sick enough to celebrate his death.” https://edition.cnn.com/2025/09/13/business/charlie-kirk-death-fired-comments

[6] Press freedom group, PEN America, warned that Attiah’s firing “risks creating a chilling effect.”

[7] https://www.nytimes.com/2025/09/19/us/charlie-kirk-free-speech-republicans.html

[8] Stephens’ most cited post was “The death of Charlie Kirk in Utah was tragic. However, we can take comfort in the fact that Charlie was doing what he loved best — spreading hate, racism, homophobia, misogyny, and transphobia on college campuses.” https://www.yahoo.com/news/articles/pentagon-suspends-army-colonel-celebrating-174003712.html

[9] The FCC was created in 1934, tasked with authorising broadcast frequencies (radio and subsequently TV). Currently it regulates local TV and radio franchises, but doesn’t generally regulate cable, satellite or online content and doesn’t directly oversee the national networks (e.g. NBC, ABC, CBS, Fox etc) which provide news, sport and other programming to local outlets, but sets rules for disclosing sponsors, emergency broadcasts, and content regarding obscenity and decency. The FCC is run by five commissioners, including a chairman, with no more than three commissioner from the same political party. They are nominated by the president, subject to confirmation by the Senate.. The current chairman is Brendan Carr. A Republican commissioner since Trump’s first term Carr was promoted to the chair earlier this year. Carr led public calls for action against Kimmel, threatening “remedies” - “We can do this the easy way or the hard way….These companies can find ways to change conduct and take action, frankly, on Kimmel or there’s going to be additional work for the FCC ahead.” Within hours of Carr’s threats, dozens of local stations across the country announced that they would stop airing Kimmel’s programme and ABC confirmed that Kimmel’s program would be suspended indefinitely. Commissioner Gomez, a Democrat, issued a dissenting statement criticising the Trump administration pressure, which accused ABC of “cowardly corporate capitulation”, adding “We cannot allow an inexcusable act of political violence to be twisted into a justification for government censorship and control. This FCC does not have the authority, the ability, or the constitutional right to police content or punish broadcasters for speech the government dislikes.” https://www.bbc.com/news/articles/c87yel3wgqgo It’s widely recognised that Trump may have been using the furore surrounding Kirk’s death to settle old scores with long-time critics - https://www.latimes.com/california/newsletter/2025-09-22/canceling-jimmy-kimmel-live-less-about-charlie-kirk-more-about-trump-revenge

[10] The transcript reads as follows: “We hit some new lows over the weekend with the MAGA gang desperately trying to characterize this kid who murdered Charlie Kirk as anything other than one of them and doing everything they can to score political points from it.”

He then commented on a viral clip of Trump speaking to reporters outside the White House, mocking his “grieving” as the president was reportedly close friends with Kirk.

“In between the finger-pointing, there was grieving. On Friday, the White House flew the flags at half-staff, which got some criticism, but on a human level, you can see how hard the president is taking this.”

A clip of the President was then shown where, when asked by a reporter how he was holding up following the passing of Kirk, he replied, “I think very good, and by the way, right there where you see all the trucks, they just started construction of the new ballroom for the White House.”

Kimmel observed: “Yes, he’s at the fourth stage of grief, construction. This is not how an adult grieves the murder of someone he called a friend. There’s something wrong with him, there really is. Who thinks like that? This is how a four-year-old mourns the death of a goldfish.” (https://www.aol.com/articles/full-transcript-jimmy-kimmel-said-121448035.html)

[11] https://www.reuters.com/business/media-telecom/news-outlets-criticize-pentagons-new-restrictions-media-coverage-2025-09-21/

[12] https://www.thecowl.com/conservative-icon-charlie-kirk-assassinated-at-campus-event/

[13] There has been very little meaningful discussion of whether Charlie Kirk’s death can be in any way, justified. It’s now nearly 80 years since Jean-Paul Sartre explored the potential for justifying killing another human being in his play Les mains sales. Many of the points examined by Sartre (whether killing can be justified on a quantitative basis by reference to the number of lives potentially saved by such an action, by whether the world and society are better as a result and the inability to make objective determinations) remain just as relevant today, especially the issue of both humanising and dehumanising of political allies and opponents. The English translation is here: https://archive.org/details/lesmainssales0000unse_o7f2 and the original here: https://ia801508.us.archive.org/13/items/in.ernet.dli.2015.503831/2015.503831.Les-Mains_text.pdf

[14] Kirk said about the death of George Floyd “the guy was a scumbag….does that mean that he deserved to die? Of course not. Those are two totally different things.”

Steve Keen (left) seen with Richard Duncan (author of “The Dollar Crisis” and “The Money Revolution”) and Paul Gambles, at MBMG IA office in 2013

The following transcript (lightly edited for clarity) is of a discussion earlier this year between Paul and his long-time mentor and friend, Steve Keen. Steve has done a great deal to revolutionise and inspire novel approaches to understanding economics and in doing so to antagonise the economic establishment which he has variously described as “inconsistent, unscientific, and empirically unsupported.”

Steve was one of the few economists to foresee the Global Financial Crisis of 2007-8. For this foresight, he received the Revere Award. He has since taken a keen interest in the economics of climate change and his formative work on the role of money creation in the modern economy has been more widely embraced by heterodox economists, including many who have embraced Modern Monetary Theory (MMT).

“So take the lively air; And, lovely, learn by going where to go.” – Thomas Roethke, The waking

The Introduction

For those who prefer audio, this is available at https://mbmg.substack.com/p/3e02d67f-ab4e-47a2-8a95-251c143839d0 and runs to around 1 hour and 15 minutes

As always, don’t hesitate to fire back any questions or thoughts.

Paul Gambles - It’s the 14th of August 2025. I’m sitting here with my good friend and great mentor, Steve Keen. I’ve known Steve for many years, and I think most of the good stuff I’ve picked up about economics has largely come from that association and friendship. Any gaps in my knowledge are entirely down to myself.

Steve, welcome back to Bangkok. I wanted to talk today about something that you were instrumental in opening my eyes to, and that is money creation in modern economies. You were maybe not quite a lone voice, but not far from it.

When we first started talking, probably the best part of 20 years ago, many of the things you were saying in the lead-up to the GFC in 2007–2008 were striking because they were so different from the mainstream[1] but I’d like to go back a little bit further than that and talk to you about one of the first examples in my career of what happens when policymakers really get it wrong in terms of money creation.

Part Two – The Original J-‘pop’

Paul Gambles & Steve Keen discuss how the fallacy of ‘loanable funds’ (the idea that banks take money from depositors and lend that to borrowers, which is in fact now recognised as being incorrect in that bank loans actually create new money and new deposits but is still widely taught in conventional economics) had influenced Japanese policymakers in the late 1980s and triggered ‘lost decades’ for the Japanese economy.

Paul Gambles- A mutual friend of ours, Richard Werner, wrote a book about the Japanese crisis. He was based in Japan at the time, and he made some fairly astute comments about Japanese policy. I’ll quote here from the preface to his book Princes of the Yen, which I’ve recommended many times, where Richard talks about how the central bank constantly defied goals by the government, the finance minister, and the prime minister to create more money to stimulate the economy and to end the recession –

“At crucial junctures, such as 1992, 1993, early 1995, and much of 1999, the Bank of Japan even actively reduced the amount of money circulating in the economy. This shrank purchasing power, reduced domestic demand, rendered the government’s currency intervention ineffective, strengthened the yen, and aborted all the emerging recoveries. Lacking sufficiently supportive monetary policies, the government had to rely on fiscal policies. These weren’t effective and instead produced the largest national debt mountain of any industrialized country.”

Richard’s book is largely about why the Bank of Japan went down this route. It felt the need to reform Japan, and its process of reform was to reduce credit going into the economy. That clearly led to the lost decades. For me, the Bank of Japan was an extreme example of how policymakers globally were thinking at the time. This was pure neoclassical economics.

Steve Keen - I’m going to disagree immediately with part of Richard’s reasoning. Recently, we had a fight on Twitter over whether the government creates money or not. He believes that government borrows, which is the conventional belief. Ninety percent of economists believe that if the government spends more than it takes back in tax, it has to borrow that money from the private sector. Which is intriguing, because I’d like to know where the private sector hides its printing presses. He is completely correct on private money creation. He’s done some great original work on that front, and I quote him for it. He showed what actually happens inside a bank when it creates a loan, which therefore creates money. It doesn’t involve reserves; it doesn’t involve deposits. He’s done the best work on that front.

Paul Gambles – Yes, he called it the empirical proof of money creation by banks.[2]

Steve Keen - Yes, and he deserves respect for that. But here’s the problem: he thinks fiscal policy produced the largest national debt mountain of any industrialized country. That means he sees government money creation as borrowing from the private sector. That is neoclassical economic thinking. If you look at how neoclassicals think banks operate, they see banks as intermediaries that enable savers to lend to borrowers. They treat households as the savers and the corporate sector and government as the borrowers.

So if the government borrows money from the household sector, there’s less for the firm sector. That slows the economy down. The government has to repay what it borrowed, and that causes a crisis. That is completely wrong. When you look at how banks create money—and Richard is correct on this—banks, when they create a loan, make an entry for the amount of the loan in their asset column. Absolutely. They make an identical entry and it has to be identical, because on the deposit side of the bank’s balance sheet is the borrower’s account. If you borrow money directly from a bank, your bank account goes up, and the debt you owe goes up identically. If you use a credit card to go shopping, you swipe the card, and the bank records the debt as yours and the deposit in the shop’s account. In both cases, credit is created: an entry on the asset side of the bank’s ledger (the loan), and an identical entry on the liability side (the deposit). That is how banks create money. Now, Richard is not aware that he’s still thinking in loanable funds terms when it comes to the government. But for private banking, he is thinking correctly, in endogenous money terms. This makes the situation worse than Richard describes, because fiscal policy can be effective. It should have been what the government did. And it did some of it—that’s partly why Japan didn’t sink as deeply as it could have. Credit money went from 25% of GDP in 1989 to minus 20% in 1995. That was a huge private credit-driven downturn. Fiscal policy compensated for it, but not enough.

His view is that the central bank creates money. But when you look at the accounting, the central bank creates money when it buys bonds from the private non-bank sector. It does not create money when it deals with banks. His accounting is wrong. That’s what I find frustrating: his insights into private-sector money creation are correct, but his accounting of government money is wrong.

Paul Gambles - What I find interesting is that policymakers at the time were also trapped in that same model.

Steve Keen - Yes, and even worse. They don’t understand that the private sector creates money.

So what you get are policymakers stuck in textbook supply-and-demand diagrams. Say “supply and demand,” and everyone imagines an X on a graph.

When they look at the government, they say: the government spends more than it takes back in taxes, so it borrows from the private sector. That supposedly reduces supply. But when you do the accounting, it’s the exact opposite. Government money creation increases the supply of what they wrongly call “loanable funds.” There are enormous fallacies on both sides.

Paul Gambles - Exactly. That was the environment at the time, and I think it was a major factor behind Japan’s policy mistakes for decades. One interesting point Richard makes is that banks had become so unwilling to extend credit that he argued the Japanese government should have lent directly into the economy to replace private credit. Again, I think he was right.

Steve Keen - He was on the right track.

Part Three – Making money, with Ray Dalio…..

Steve explains how government money creation, for example through bond issuance, is primarily an asset swap as governments bonds ultimately end up as privately held investments, and therefore flow of funds analysis, such as that undertaken by Richard Vague, have indicated that this ‘cancellation’ of governmental money creation, effectively transferred dominance of money creation to the private sector, even after exceptional periods of government money creation such as during World War II or in the COVID lockdowns.

Steve Keen - I’ve been reading Ray Dalio[3] recently, and he makes similar mistakes. His success is in understanding that credit adds to demand. But he still thinks banks are intermediaries. He doesn’t see banks as creators of credit. He sees credit as simply “I’ll pay you back later.” In fact, private banks create most of the credit in the system. The change in private debt is the major contributor to credit. So Dalio and Werner are both correct about private money creation, but both are wrong about government.

Paul Gambles - They’re hung up on the idea that gets drilled into everyone—that this is where money comes from. They’re a step ahead of most people in realizing that bank-created money adds to the money supply.

Steve Keen - Exactly. They’re better than most, but they still make mistakes about government money creation.

Paul Gambles - Right. I think this misunderstanding still echoes today. Policymakers and the system as a whole keep repeating myths about sovereign deficits: that a country is “borrowing” money, instead of recognizing the contribution that new money makes.

Steve Keen - Yes. Government spending in excess of taxation creates money. It doesn’t borrow it. A simple way to see this: when the government taxes you, it takes money out of your bank account, reducing the money supply. When the government spends, buys something from you, or gives you a welfare check, it increases your bank balance. If government spending exceeds taxation, it increases the amount of money in your bank account. That is not borrowing—it is creating money.

Paul Gambles - Exactly. When I first started following you, private credit creation was the dominant factor. But since then we’ve had periods when government money creation has played a larger role, especially during crises.

Steve Keen - COVID was the most recent crisis. World War II was another.

Paul Gambles - Yes. Unless people understand how money is created, they risk missing the real drivers of the economy. I think unless people have the understanding you just outlined—how all money is created—they’ll miss the bigger picture. The danger for people like Ray Dalio is that they won’t look at aggregate money creation. Aggregate new money creation is what we need to look at as the driver.

In the past, government creation of money was fairly constant, the minor player relative to banks, and private credit was the real driver. But in the last few years we’ve lived through, we need to look at the aggregate of government and private money creation.

Steve Keen - Exactly. Richard Vague makes that point as well. He’s a banker who became a critic of private debt and has done some of the best historical research around.

Paul Gambles - Agreed – readers should note that his website can be found at www.tychosgroup.com

Steve Keen - Yes, named after Tycho Brahe, the astronomer whose observations enabled Copernicus and Galileo to create their theories.

Richard Vague went through the flow-of-funds data and shared it with me recently.

In 2020, there was roughly $5 trillion in deposit accounts in America.

By 2024, that had risen to $21 trillion—so a $16 trillion increase.

Most people think that’s government money creation. But Richard broke it down: two-thirds was private money creation through loans creating deposits.

The remaining 30% was bank operations that also create money—for example, when private banks buy bonds from non-banks (which could be hedge funds, rich individuals, or others). When banks do that, the value of bonds held by the private sector falls, but their deposit accounts rise.

Richard concluded that of the $16 trillion increase in U.S. money supply between 2020 and 2024, 91% was created by the private sector.

Paul Gambles - That’s counterintuitive.

Steve Keen - Yes. But remember when the private sector creates money, it does so through loans. An increase in loans creates an identical increase in deposits, and there aren’t many mechanisms to reverse that.

By contrast, when the government runs a deficit, that creates money. But then it has to sell bonds to match the deficit plus interest on existing bonds. That’s an asset swap for the banks: their reserves go down; bond holdings go up.

If that were the end of the story, government money creation would be large—6% of GDP in recent deficits. But banks then sell those bonds on the secondary market. When they do, buyers pay by reducing their deposit accounts. So the sale of bonds reverses the government’s money creation.

There’s no equivalent mechanism that cancels private bank-created money. That’s why Richard is right about private-sector dominance.

Part Four – Flow rider….

Having discussed how the fallacy of ‘loanable funds’ had influenced Japanese policymakers in the late 1980s and triggered ‘lost decades’ for the Japanese economy, Steve went onto explain how global government money creation, for example through bond issuance, gets mopped up by the private sector, negating government money creation and how this resulted in most of Japanese policymaker efforts to supply liquidity to the economy failing to flow beyond the financial sector, and therefore propping up excessive private debt balances, rather than tackling the root problem.

Paul Gambles - Another point that Richard Werner makes is his focus on how funds are used. He distinguishes between productive and nonproductive uses of credit.

I think this came from his Japanese experience. He wrote that sometimes the BOJ claimed it was injecting money into the economy, but it mostly went into the narrow money market, which only banks had access to. So after the crisis, when Japan did get money creation, much of it was negated because it didn’t go to businesses—especially SMEs that needed credit. Instead, it went into money market operations and the financialized economy, not the real economy.

Steve Keen - Exactly. When the central bank buys bonds, if it buys from banks, it only changes the assets backing the money supply—it doesn’t change the money supply itself. If it buys from non-banks, then it does increase the money supply.

But in practice, central banks mainly transact with the financial sector, since they are the main bondholders. Fiscal policy, by contrast, creates money across the whole economy. That’s why fiscal policy is the tool that works.

Paul Gambles - Which was Richard’s point—that the BOJ should have been lending directly to consumers and SMEs instead of relying on banking channels.

Steve Keen - Yes. Fiscal policy could have achieved that. My main issue with Japan’s “lost decades” is this: during the bubble economy of the 1980s, there was an enormous increase in private debt. Most of it went into stock market and real estate speculation. That loaded up banks and corporations with debt.

Japanese corporations, unlike American ones, rely more on debt than equity to finance investment. So when the bubble burst, they were overleveraged, demand collapsed, and they couldn’t reduce debt. They stopped investing and innovating.

Paul Gambles - Exactly. They stopped borrowing except to service existing debt.

Steve Keen - Yes. What needed reducing was private debt, not government debt. That’s where even Richard gets it wrong.

Paul Gambles - Agreed. He recognizes the policy mistake was in not increasing sovereign balances enough to fund the real economy. Whatever increase in Japanese government debt there was ended up just propping up bank balance sheets and doing asset swaps—without reducing private debt.

Steve Keen - What you need to reduce is private debt, not government debt. This is where even Richard makes mistakes.

Paul Gambles - Agreed. He recognizes the main policy mistake was not increasing sovereign balances enough to fund the real economy—the private sector and non-bank sector. Whatever increase in Japanese government debt occurred was largely ineffective because it just propped up bank balance sheets and didn’t reduce private debt.

Part Five – Debt wish

Having discussed how government money creation, for example through bond issuance, gets mopped up by the private sector, negating government money creation and how this had resulted in most of Japanese policymaker efforts to supply liquidity to the economy failing to flow beyond the financial sector, propping up excessive private debt, Steve advocates the millennia old policy solution of a private debt jubilee[4]. This leads Paul and Steve to touch on the issue of so-called central bank independence, something that both Paul and Steve find alarming on the grounds that central bankers are the last people who should be allowed independence, being so dependent on their discredited and outdated economic models.

Steve Keen - To clear debt, you don’t prop it up.

This is why I argue for a modern debt jubilee—using government’s money-creation capacity to cancel private debt. That would mean a short-term increase in government debt levels, but it would also remove the burden on households and firms.

If people have high private debt, they try not to spend, because they’re saving to pay down debt. When individuals do that, they reduce GDP. The only way out is to reduce the overhang of private debt from past crises like Japan’s bubble economy, the Asian financial crisis, and so on. Reducing private debt would revive the economy. But because policymakers ignore it, they’ve done nothing. In fact, they thought they should increase it—improve credit channels—without realizing the real issue is the huge overhang of private debt. That’s the main thing stifling the economy.

Paul Gambles - Exactly. That’s something you’ve done a lot of work on, including your book Can We Avoid Another Financial Crisis? One of its main themes is the buildup of private debt and how policymakers are failing to manage it.

Steve Keen - Yes. Look at the Great Depression: private debt peaked around 150% of GDP in 1932. Then, after the New Deal and World War II—with the massive money injections during the war—individuals and firms paid down their debts.

By the 1950s, private debt was about 50% of GDP, not 150%. At that level, with interest rates of 2–3%, servicing debt was easy, and taking on new debt wasn’t a big problem. Credit boosted the economy through the 1950s and 1960s.

But later, when private debt hit 100%, 150%, and eventually peaked at 170% of GDP, people didn’t want to take on more credit. So instead of “secular stagnation,” as some call it, what we really had was credit stagnation.

Paul Gambles - That’s a really good segue into the next point. Before I do, let me read one final quote from Richard’s preface, which I think some may find provocative.

He describes how the Bank of Japan became politically independent and replaced much of the power previously held by the Ministry of Finance. His preface begins with a story about a Japanese diplomat crying on New Year’s Eve 2000 because the Ministry of Finance was being reformed, renamed, and made subservient to the BOJ.

“Most experts felt that central bank independence was a good thing. But the arguments in favour of central bank independence—whether in Europe or Asia—have serious flaws. This includes the argument that the German Bundesbank’s success was based on its independence. The truth, as we should see, was actually the opposite.”

So Richard is clearly not a fan of central bank independence.

Steve Keen - Nor am I. What you have are neoclassical economists with insane models in their heads—dynamic stochastic general equilibrium models. In those models, inflation is caused by expectations of inflation.

They think raising interest rates reduces inflation expectations, and problem solved. Juvenile, stupid nonsense. In reality, it’s not interest rates that drive investment, it’s expectations of profit. Neoclassical models assume away those expectations by assuming we’re all “rational.” And by “rational,” they mean having the capacity for accurate prophecy.

Paul Gambles - So basically all-seeing, all-knowing.

Steve Keen - Exactly—as if we’re gods. Which raises the question: if we’re gods, why do we need money in the first place?

Part Six – Out with the old…back in with the old again….

Paul Gambles & Steve Keen focused on this issue of policymakers perpetuating economic fallacies and mistakes enshrined in discredited but still widely taught conventional economic teaching, such as Reinhart and Rogoff’s widely read book.[5]

Paul Gambles - Richard’s final comment in his preface is that in Japan, it’s not the government but the BOJ that decides whether the country has a boom or a recession. It’s a criticism of giving so much power to central bankers.

You were just saying that excess leverage constrains the economy. Once private-sector leverage is too high, you can’t keep increasing it. There’s a servicing constraint, a lending constraint, and ultimately a ceiling on how much the private sector can grow.

Fast forward to 2009–2010: the financial crisis happened pretty much as you had predicted, caused by excessive private debt and credit turning negative. That made the system unsustainable, triggered a spiral of slowdown, falling asset prices, deleveraging—a full feedback loop. Am I oversimplifying?

Steve Keen - No, that’s pretty accurate.

Paul Gambles - So, to be fair to policymakers at that time, they did realize—at least to some extent—the need to inject fiscal support into the economy. We both have an issue with the fact that most of it went into supporting the banking system rather than the real economy.

Everybody remembers the summer of 2008, when it seemed like every major bank was at risk of collapse. Some managed to raise external funding, others were bailed out.

You’d think that experience, and the willingness of policymakers to engage in unconventional policy, would have taught even the most die-hard neoclassical economists something. But by 2009–2010, the best-selling economics book was Reinhart and Rogoff’s This Time Is Different. A paper was published to accompany the book.[6] Let me quickly read the abstract:

We study economic growth and inflation at different levels of government and external debt. Our analysis is based on new data from 44 countries spanning about 200 years. The dataset includes 3,700 observations across many political systems, institutions, exchange rate regimes, and historical circumstances.

Our main findings are: first, the relationship between government debt and real GDP growth is weak below a threshold of 90% of GDP. Above 90%, median growth rates fall by 1%, and average growth falls considerably more. Second, emerging markets face lower thresholds for external public and private debt, usually denominated in foreign currency. When external debt reaches 60% of GDP, annual growth declines by about 2%. At higher levels, growth rates are cut roughly in half. Third, there is no apparent link between inflation and public debt levels in advanced economies, though in emerging markets inflation rises sharply as debt increases.

There’s a lot there I’m sure you’ll want to respond to.

Steve Keen - The first point is that their results were wrong. A master’s student at the New School of Social Research, Thomas Herndon, tried to reproduce them and found spreadsheet errors in Reinhart and Rogoff’s database.

The worst example was their weighting system: one bad year in New Zealand accounted for much of the negative results. When you corrected the weights, the results disappeared. It was one of the worst pieces of research in economics history—and that’s saying something.

Paul Gambles - And yet, much of what Reinhart and Rogoff claimed in that paper and book is still widely accepted, even today.

Steve Keen - Yes, because of the supply-and-demand thinking economists rely on. That’s why I built my software, RAVEL. It has two main functions: first, to model the monetary system using double-entry bookkeeping; second, to analyse data.

When I think in RAVEL terms, I think in double-entry bookkeeping. Neoclassicals think in supply-and-demand curves. That mental model is so deeply ingrained that it dominates their thinking—even when real-world events prove it wrong.

Paul Gambles - Can you explain that a bit more?

Steve Keen - Sure. Supply-and-demand curves are like the old Ptolemaic astronomy model with spheres and epicycles. It was completely wrong, but you could make it fit the data if you tortured it enough.

Neoclassicals think the same way. For example, they believe when the government runs a deficit, it reduces the supply of “loanable funds.” So they draw a supply curve moving in, and conclude it crowds out investment.

But if you do the actual accounting, a government deficit adds money to bank accounts—it expands supply, not reduces it. They’ve got it completely backwards.

Paul Gambles - So they present it as a causal relationship, when in fact the reality is the opposite.

Steve Keen - Exactly.

Part Seven – Teaching old economists new tricks but not new habits

Having discussed policymakers perpetuating discredited but still widely taught deeply flawed conventional economic teaching, Paul asks Steve why lessons haven’t been learned or worse still have been so quickly forgotten.

Paul Gambles - All of this gets to the heart of what I wanted to ask you today.

If Japan was an extreme example of bad policy—neoclassical austerity thinking imposed on a failing economy—and if the GFC showed that aggressive monetary and fiscal policy, even unconventional policy, could succeed, why is it that just a year later, after the biggest financial crisis of our lifetime, the neoclassical worldview reappeared and dominated again?

Supported by mathematical errors, conceptual errors, and practical errors, yet still widely accepted.

How do we ever move away from these false constraints that policymakers tie themselves up in?

Steve Keen - We’ve got to break them out of that model. This is why I say supply-and-demand thinking is the most dangerous meme in human history.

If you pick up Mankiw’s textbook,[7] it will tell you a government deficit borrows money from the private sector, reduces investment, increases interest rates, and burdens future generations.

Politicians repeat this because their professors told them the same thing. The supply-and-demand meme is simple: you just shift a curve. But they shift it in the wrong direction. They think they’re right, and it’s embedded so deeply that even crises don’t shake it.

It’s like Galileo turning up with a telescope and saying the sun is the centre of the solar system. At the time, everyone “knew” the Earth was fixed at the centre and everything rotated around it. They couldn’t accept otherwise.

Paul Gambles - And yet we almost had that moment, didn’t we? Based on your work, Michael Hudson’s work, and others’.

Steve Keen - The heretics are here. That’s why I like that Richard Vague calls his website Tycho’s. But we’re being ignored more than Galileo ever was.

Paul Gambles - Even Modern Monetary Theory (MMT),[8] which picked up on some of the empirical evidence of money creation, had traction. And then in 2014, the Bank of England published that famous paper, Money Creation in the Modern Economy.

At the time, you and I thought it could be a pivotal moment.

Steve Keen - But it wasn’t. The Bank of England explained[9] exactly what non-orthodox economists had been saying since Basil Moore in the 1970s: loans create deposits. Banks are creators of money, not intermediaries.

I thought surely neoclassicals can’t ignore the Bank of England. But they did. They ignored both the Bank of England and the Bundesbank,[10] which said the same thing.

Then the Nobel Prize was given to Ben Bernanke for work based on the “loanable funds” model. If you read the prize announcement and the supporting scientific paper, there’s no reference to the Bank of England or Bundesbank at all. They hadn’t even read it.

Paul Gambles - Worse, the Bank of England paper wasn’t even absorbed into policy. It sat there as research, but the Monetary Policy Committee didn’t act on it.

Steve Keen - Exactly. Neoclassical economics is a religion. They think they’re doing mathematics, but really it’s “mythmatics.” My friend Asad Zaman calls it “matheology.”

It’s like telling the Vatican you’ve found the body of Jesus—evidence that contradicts the faith. They’d reject it outright because it can’t be reconciled with their belief system. That’s why economists ignored the Bank of England.

Paul Gambles - So the world just reverted to denial again.

Part Eight – Crash coming, full steam ahead!

With the ‘Eureka moment’ of the Global Financial Crisis quickly forgotten by policymakers, Paul and Steve explored how this currently impacts financial markets, with valuations stretched far too high by the use of excessive leverage.

Paul Gambles - So the world just reverted back to its default denial position. Then we got to 2020, to lockdowns, and at that point we probably saw the most dramatic policy shift in my lifetime.

You’ve said before that the only comparable example was at the end of World War II, when there was also a dramatic adoption of aggressive, unconventional policy by governments.

So, there’s a sense that when things get bad enough, policymakers will abandon their beliefs and do what actually works. But again, after 2020, we reverted back into denial.

Steve Keen - Exactly. There’s been no progress in economic theory. Paul Romer, who won the Nobel Prize in 2016, wrote a paper called The Trouble with Macroeconomics, where he said the field had actually gone backwards for 30 years.

Why? Because neoclassical economics paints a seductive picture: a market economy in equilibrium, inflation as a purely monetary phenomenon, everyone paid their marginal product, perfect competition everywhere.

It’s a vision of a perfect anarchist society. But it’s not science—it’s a cult. A cult doesn’t revise its beliefs. If you reject even one part, the whole edifice collapses. So they double down, even when confronted with contradictory evidence.

A good example: neoclassical theory assumes rising marginal cost as output expands. But when researchers looked for it, they found constant or falling marginal cost. Alan Blinder, who was Deputy Governor of the Federal Reserve at the time, did a survey and reported that 89% of firms had constant or falling marginal cost.

He called it “overwhelmingly bad news for economic theory.” Yet 15 years later, in his textbook, he went straight back to the old story of rising marginal cost. He ignored his own research.

Paul Gambles - How many people have actually crossed over—left neoclassical economics after confronting contradictions like that?

Steve Keen - A trivial number. There are always a few spontaneous combustions—individuals who can’t ignore the evidence. They get tenure, so they can’t be fired, but they’re pitied and excluded from the mainstream.

Paul Gambles - And you’ve experienced this with publishing too.

Steve Keen - Yes. My work has been rejected by leading journals. That’s one reason I know it’s good. Thomas Kuhn described this in The Structure of Scientific Revolutions. Every field has paradigms that dominate research. In astronomy, the paradigm was that the Earth was the centre of the universe. Data that contradicted it was ignored or tortured to fit.

You couldn’t just add “the sun is the centre” into the old model—you had to abandon the model. But most people can’t reject their intellectual religion. They defend the paradigm at all costs. Neoclassical economists are the worst example in history of this behaviour.

Paul Gambles - One last point on this before we move into something else. Since 2020, U.S. policy quality seems to have improved slightly—at least at the margins.

Even though the rate of money creation hasn’t matched 2020 levels, the Fed has responded more aggressively than in the past. That has helped support the economy somewhat, though mostly it has supported financial markets.

David Rosenberg showed that margin debt has now gone above $1 trillion. It has grown by 25% in the last year and doubled in the last four or five years. So a huge amount of money creation has gone into financial assets.

Now we have a big new fiscal bill that claims to cut deficits but really shifts taxes in a way that benefits those least likely to spend. Doesn’t that create big risks for capital markets and the U.S. economy in the near future?

Steve Keen - Yes. Assets are massively overvalued, and margin debt is a big part of that.

In my new book Money and Macroeconomics for Elon Musk and Other Engineers: First Principles, I show the relationship between margin debt and stock valuations.

In the 1920s, margin debt went from 1% of GDP to 9%, fuelling the stock market bubble. Then it crashed to 0.5% of GDP. For decades it stayed low, except around 1987 and the 2000 dot-com bubble. Now it’s back at 3–4% of GDP, the highest ever.

When you look at the correlation between changes in margin debt and changes in cyclically adjusted price-to-earnings ratios over 100 years, the correlation coefficient is 0.74[11]. It’s extraordinary. Margin debt drives stock valuations.

So, yes, we’ve allowed far too much leveraged money into stock markets. That causes bubbles—and crashes. Personally, I’d ban margin debt entirely. If you want to buy shares, use your own money.

Paul Gambles - That makes sense. So you are as concerned as we are about the ability of financialized debt to keep supporting asset prices.

Steve Keen - Yes. Debt has pushed valuations too high, and it won’t be sustainable.

Part Nine

Financial market valuations being stretched far too high by the use of excessive leverage also has serious implications about the use of funds that have been created and consequently the terrifying underinvestment in tackling climate change, with potentially disastrous effects for the global economy and the global population. Paul asked Steve whether any countries are taking a much more responsible approach to climate issues.

Paul Gambles - Okay. Let’s go back to the original question, but with a twist.

If there are fewer constraints on government creating money than the neoclassical model suggests, and if the real constraint is psychological—mindset and misunderstanding—how does that play out globally?

Because what we really need is massive investment to prevent a climate crisis. Will there be a road-to-Damascus conversion at some point?

Steve Keen - I think it will only happen after disaster strikes. My guess is Dallas will be the first “Damascus.” I’ve said for years that economists are responsible for our failure to act on climate change. William Nordhaus did the most negligent work in academic history.[12] He argued that three degrees of warming by 2100 would only reduce GDP by 3.12% compared to no warming. He claimed the damage would be trivial. That conclusion has misled policymakers for decades.

Paul Gambles - This is the man who basically argued that most of life is indoors, so climate change won’t matter much?

Steve Keen - Exactly. Completely ignorant of climate science.

Paul Gambles - Even though the planet may reach the point where ice caps are melting and cities like Bangkok are underwater, Nordhaus claimed it would only have a trivial impact on GDP.

Steve Keen - Exactly. He assumed that roofs protect us from climate change, that average global temperature rises of two or three degrees are insignificant compared to natural daily ranges, and that there’s nothing to worry about.

But this is profoundly ignorant of climate science. Because of work like his, we’ve done almost nothing. The Limits to Growth study in the 1970s warned we should stabilize energy consumption at 1970s levels. Instead, we’ve quadrupled it. Their “business as usual” scenario is now playing out: collapse in food production, collapse in population, collapse in resources.

It’s not just economists or politicians. We all want to believe there’s nothing to worry about because we enjoy the lifestyles fossil energy gives us—airplanes, fast cars, refrigerators, air conditioners, mobile data centres. We’re addicted to energy.

But if the science is right, ignoring this will destroy civilization.

Paul Gambles - One specific risk is food supply. You’ve spoken to climate scientists—how worried are they about global food security?

Steve Keen - Very worried. I’m not a climate scientist, but I work closely with them. Some, like Michael Mann, are optimistic that we can still turn things around by 2050. But others believe we’re doomed.

Tim Lenton, the expert on tipping points, was once asked at a conference what civilization would look like in 2100 if we stayed on this track. His answer: “Not a chance.” In other words, no civilization—just survivors as hunter-gatherers.

Economists say GDP might be 3% lower. Climate scientists say civilization won’t exist.

Paul Gambles - But if we get an early warning sign, like a food crisis, don’t humans have the ability to change behaviour? In finance, we’ve seen that the biggest constraint on money creation is psychological. But in a crisis, like 2020, the shackles can be thrown off. Couldn’t the same happen with climate?

Steve Keen - It would have to be a very big warning sign. I’ve often said nothing serious will happen until lots of white people die.

For example, when 150 white Christian girls died in Texas during a heatwave, that was the first “holy shit” moment. But one event isn’t enough. We’ll need multiple devastating events in politically dominant regions before there’s real action. At that point, maybe economists will be ignored and scientists will finally be asked, “What can we do?”

There are ideas: a group called MIRRORS (Mirrors for Earth’s Energy Rebalancing) proposes covering 1.3% of the planet’s landmass with cheap reflective mirrors. That could reduce global temperature by 1°C.

But survival would also require rationing—food rationing, energy rationing. It would be a complete mindset shift away from laissez-faire toward emergency survival.

Paul Gambles - And is that universal? Or are some countries already doing more than others?

Steve Keen - China has actually done quite a lot. Do you remember the APEC event in 2008? At that time, factories within a 50-mile radius of Beijing were shut down so the skies would be clear. People joked that the sky was “APEC blue.”

When I last visited in 2017, Beijing’s skies were much clearer than in the 1990s. China has been reducing coal consumption and investing heavily in solar, wind, and nuclear. They may even pull off nuclear fusion, but I’m more confident about their molten salt reactors, which are already becoming commercially viable.

They’re also building high-speed rail, which reduces the need for trucks and cars. Their objective is clear: to become energy self-sufficient and independent of coal and oil.

Paul Gambles - That was a loaded question—I assumed China is doing more than the West. Even Russia, to some extent.

Steve Keen - I’m not so sure about Russia, but certainly China. They’re moving toward food self-sufficiency and closing the gaps in their industrial production system.

For example, they control much of the rare earths supply chain. One rare earth mineral, essential for magnets used in countless technologies, has been restricted for export. That forces other countries to scramble.

Meanwhile, the U.S. tariff war is encouraging China to become even more independent. Eventually, they’ll be able to say, “We don’t need you anymore.”

Paul Gambles - I saw yesterday that Trump offered China a scaled-down version of NVIDIA’s Blackwell chip. The Chinese government’s response was to warn Chinese companies not to buy or use it.

They can take that stance because the U.S. export ban on advanced chips has forced China to accelerate its domestic development.

Steve Keen - Exactly. Decoupling is accelerating. And if any country is positioned to survive global warming, it’s China. Maybe Papua New Guinea or New Zealand will also manage, though New Zealand is filling up with billionaires building bunkers. But for large, organized societies, China is best prepared.

The West is walking blindfolded into disaster. By the time they realize they need to reverse course, they may not have the resources left to do so.

Paul Gambles - That’s a terrifying thought.

Epilogue

Paul Gambles – That is a terrifying thought. Before we finish, Steve, maybe tell us what you’re working on now. I know you’re doing online education courses; you’ve got Patreon and Substack, but what else are you focused on to help people see economic reality more clearly?

Steve Keen - The main project is my RAVEL software, which I’ve been working on for a decade. It’s now commercially released, though we’re only selling it through Patreon at the moment.

It’s available at patreon.com/ravelation. The basic modelling package is $2 a month, and the modelling plus data analysis package is $10 a month.

The software provides a graphical interface for handling multidimensional data. It also uses flowchart-based equations for modelling, which makes the work self-documenting in a way spreadsheets never can.

But the most important feature is what I call “Godley Tables,” named after Wynne Godley. They use double-entry bookkeeping to show financial flows. Once you see this, you can’t believe in the money multiplier anymore, or in loanable funds. You realize government spending creates money, and you see the dangers of excessive private sector lending.

That’s why I call RAVEL the “monetary telescope.” It lets you see the true structure of the financial system.

Paul Gambles - So who would benefit most from using RAVEL?

Steve Keen - Anyone selling anything who wants to understand why people buy. It was originally designed for marketing, back in the days when I reviewed computer software. It grew out of online analytical processing databases.

I pitched the idea to a company called PC Express, but they were bought out by Oracle before we could finalize a deal. In 2012, Russell Standish and I decided to build RAVEL on top of the Minsky modelling platform in our spare time.

Now it’s a commercial tool. If it succeeds, it can fund my research indefinitely.

Paul Gambles - And what about the Keen Institute? How close are we to seeing that launched?

Steve Keen - That’s still in development. Crowdfunding has fallen for this —it peaked at $10,000 a month in 2020 and I’m now down to $4,500. That makes it harder to fund original research.

The idea of the Institute is to get institutional backing so I don’t have to rely only on crowdfunding. My ambition is to hire around 40 researchers and 20 support staff, producing realistic research and driving neoclassical nonsense out of dominance.

Paul Gambles - And a lot of the focus would be on exactly the issues we’ve discussed today—debt, money creation, and climate change.

Steve Keen - Exactly. The world is going to wake up one day to famine and fire and ask, “How did this happen?” Unfortunately, I’ll be one of the few people who can explain why. That’s why I want the Institute: to put real economics at the centre of policy before disaster hits.

Paul Gambles - And your new book—tell us about that.

Steve Keen - It’s called Money and Macroeconomics from First Principles—for Elon Musk and Other Engineers. It’s short, about 170 pages, available on Kindle and soon in paperback. It went to number one in macro and monetary policy on Amazon upon release, despite being self-published with no media backing. The paperback should be out next week.

Paul Gambles - Do we know if Elon Musk has read it?

Steve Keen - I spoke with Grok, who said Grok would bring it to Elon’s attention. Whether it did or not, I don’t know.

Paul Gambles - We’ve been talking to clients a lot about AI recently, and I think AI—along with Bitcoin—is one of the biggest wastes of energy in an energy-constrained world.

Steve Keen - Exactly. If we take climate seriously, three industries should be shut down immediately: Bitcoin, AI, and international travel. Cutting those would reduce global energy demand by about 10% and buy us some breathing space.

Paul Gambles - That would buy us time.

Steve Keen - Not much—maybe a year. But yes, it would help.

The deeper truth is that GDP and energy consumption are tightly linked. The correlation between changes in world GDP and changes in energy use is 0.83. GDP is essentially energy turned into useful work.

So if we’re going to survive, GDP will have to fall. That’s the reality nobody wants to face.

Paul Gambles - I remember your line: a machine without energy is a statue, and a human without energy is a corpse.[13]

Steve Keen - Exactly. And we’re heading toward a world where both will be true unless we change direction.

Paul Gambles – That’s great coverage of wide-ranging topics. Steve, thank you. We’ll put links in the text version so people can find your Patreon, your online courses, and your new book.

Steve Keen - Thank you.

The Links

Steve Keen Patreon - https://www.patreon.com/ProfSteveKeen

Steve Keen online teaching -

https://www.stevekeen.com

Ravel software - https://www.patreon.com/ravelation

For those who prefer it, the audio distribution of this is available at https://mbmg.substack.com/p/3e02d67f-ab4e-47a2-8a95-251c143839d0 and runs to around 1 hour and 15 minutes

For more information and to speak with our advisors, please contact us at info@mbmg-investment.com or call on +66 2 666 4878.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit, it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledge all risks and have been informed that the return may be more or less than the initial sum.

---

[1] In economics, the mainstream is generally referred to as ‘neoclassical’ economics – it has been defined as “a broad approach that attempts to explain the production, pricing, consumption of goods and services, and income distribution through supply and demand. It integrates the cost-of-production theory from classical economics with the concept of utility maximization and marginalism.” - https://corporatefinanceinstitute.com/resources/economics/neoclassical-economics Major criticisms, especially by Steve & Paul are that it assumes that all ‘participants’ in an economy are rational and have perfect foresight and the ability to always act in their own best interest, that it assumes that all economies tend to revert to perfect equilibrium and that money, in and of itself, has no special economic function and is simply a form of intermediation. It takes this last point to the extreme in using models that assume that banks simply lend out the funds deposited by savers and that therefore the amount of money in every economy is a constant despite clear evidence that this isn’t so.

[2] Can banks individually create money out of nothing? — The theories and the empirical evidence – Prof. Richard Werner https://www.sciencedirect.com/science/article/pii/S1057521914001070

[3] Ray Dalio recently retired as CEO of leading hedge fund, Bridgewater Associates, which he founded in 1975. He has been increasingly sharing his thoughts on politics and economics as well as capital markets – e.g.

[4] One of the leading exponents of modernising the historic debt jubilee has been Prof. Michael Hudson e.g. https://www.washingtonpost.com/opinions/2020/03/21/debt-jubilee-is-only-way-avoid-depression/

[5] https://press.princeton.edu/books/paperback/9780691152646/this-time-is-different

[6]https://www.researchgate.net/publication/227486731_This_Time_Is_Different_Eight_Centuries_of_Financial_Folly

[7] Steve is referring to Greg Mankiw’s Principles of Economics, one of the most widely used academic primers in economic courses - https://www.amazon.com/Principles-Economics-N-Gregory-Mankiw/dp/1305585127 Needless to say, this contains many of the old ideas about economics that have been proven wrong by events and yet remain widely, almost universally taught.

[8] MBMG remains sympathetic to MMT, describer by Wikipedia as “is a heterodox macroeconomic theory that describes the nature of money within a fiat, floating exchange rate system - https://en.wikipedia.org/wiki/Modern_monetary_theory

[9] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-in-the-modern-economy-an-introduction

[10] https://www.bundesbank.de/en/tasks/topics/how-money-is-created-667392

[11] Correlation is a statistical observation. It makes no qualitative inference about causation. However, a correlation of 1.0 indicates perfectly synchronous directional movement between two variables. In other words, there is a very strong historic relationship between changes in margin debt and changes in the most commonly used measurement of how expensive stocks are.

[12] Rather than quote Nordhaus, this is one of Steve Keen’s rebuttals - https://www.ucl.ac.uk/news/2020/sep/nobel-prize-winning-economics-climate-change-misleading-and-dangerous-heres-why

[13] https://www.rebuildingmacroeconomics.ac.uk/post/labour-without-energy-is-a-corpse-capital-without-energy-is-a-sculpture

Readers of our most recent post - https://mbmg.substack.com/p/the-48-trillion-question will be aware that we recently wrote a 40-page client outlook focusing on (what else?) AI.

This was broken into 2 parts (as our outlooks tend to be):

Fundamentals

Technicalities

To spare casual readers the pain of ploughing through 40 pages, we then used AI to summarise. We published a (significantly corrected and edited by hominids) version of Gemini’s attempts to precis Fundamentals - https://mbmg.substack.com/p/the-48-trillion-question

For today, we had intended to use ChatGPT’s stab at doing the same with Technicalities. But we can’t. It’s just too awful. Instead, here is a combined summary of both sections written by humans. Apologies for any repetition of https://mbmg.substack.com/p/the-48-trillion-question

An example of how AI’s LLMs lack the basic conceptual understanding of 2 year olds.

MBMG - “Er, AI Bot, in the research that we got you to do on the size of current and future data centres (which you insist on calling centers, even though we’ve set the language to British English) relative to cities and city states, you mention that Manhattan, with an area of 22.7 square miles is bigger than Hong Kong Island, even though Hong Kong Island has an area of over 30 square miles”

AI Bot - “That is correct.”

MBMG “No it isn’t correct. I mean it’s correct that you said it but as a statement of fact it is wrong.”

AI Bot “I have checked. While it is true that Hong Kong Island is larger than Manhattan, Manhattan is in fact bigger than Hong Kong Island.”

MBMG “Uh?”

AI Bot “While it is true that Hong Kong Island is larger than Manhattan, Manhattan is in fact bigger than Hong Kong Island.”

MBMG “Ok, we give up.”

AI Bot “Thank you.”

And yet so-called AI now underpins everything….

Anyway, back to human insights -

This article focuses on the broad financial implications of the AI boom, using the internet bubble as a comparison.

Understanding Data Centres and the Intensifying Data Landscape

The information and communication technology (ICT) landscape has evolved rapidly from the pioneering of Charles Babbage and Alexander Graham Bell, through a history marked by advances, breakthroughs, regulatory shortcomings and economic bubbles to the current era marked by huge data centres.

The Oxford Dictionary defines a data centre as “a large group of networked computer servers typically used by organizations for the remote storage, processing, or distribution of large amounts of data.”

MBMG’s alternative definition of data centres is “huge structures operated by organizations who launch a constant barrage of mainly subliminal data in order to generate financial rewards.”

The volume of data consumed and processed by end-users (i.e. people) is becoming overwhelming:

• In the 16th century, a highly educated individual processed around 74 GB of data over a lifetime.

• By 1986, the average American processed this amount weekly.

• Less than a decade ago, this became a daily figure for many individuals.

• Now we process this volume each day just during our leisure time.

Even more astonishing than the amount processed is the sheer volume of information to which we are exposed. Most data is absorbed subliminally through cognitive shortcuts known as heuristics, rather than actively processed. Our exposure to such data is estimated to be around 250,000 times greater than what we actively process.

While these figures are only estimates, it’s clear that we’re processing more data without improvements in our human cognitive hardware. This highlights how adaptive the human brain is at filtering information to avoid overloading. As data volumes rise, our filtering mechanisms ramp up, leading to the paradox that the more information that we have, the less we might truly understand.

The Scale of Data Centres

Data centres are vast undertakings. Every app you use, every video streamed, and every file saved is supported by data centres - massive facilities essential to the backbone of modern technology, managing everything from cloud storage to national security.

The largest data centre today - China Telecom’s Information Park in Mongolia, which covers almost 11 million square feet – will soon be dwarfed by the campus of the upcoming Meta Hyperion project (comparable in size to Manhattan). Hyperion is projected to need about 120 Gigawatt Hours of electricity per day, which is more than 30 times what China Telecom’s data centre requires, highlighting the growing energy demands in this sector:

The Investment Landscape

Technology giants like Amazon, Google, Meta, Microsoft, and Oracle have made substantial investments in new data centres, funded by circular financing deals and private borrowing. While these investments aim to capture future AI profits, there’s a concern that if the anticipated AI revolution fails to live up to expectations, the economic implications could be severe. The best precedent for this could be the boom of the 1990s when ICT (Information and Communications Technology) businesses invested heavily in anticipation of the internet boom. This of course ultimately led to the tech bubble and dotcom collapse.

The 1990s – seen this movie before?

The Telecommunications Act of 1996 sought to open the American market for communications to increased competition, by removing monopolistic vertical integration (local exchange carriers were only able to offer long-distance and international calls once local competition had been established). In reality, the Act resulted in a highly competitive investment race and significant consolidation in the telecommunications industry which critics argue restricted access for newcomers, contradicting its original intent.

Economic Boom and Subsequent Bubble

Between 1997 and 2000, telecom network providers invested over $100 billion in fibre optic infrastructure to capitalize on expected internet growth. Such frenzied investment activity, predicated on extreme but ultimately vastly overstated demand growth assumptions, contributed to the dot-com bubble and fuelled excessive stock valuations and massive overborrowing. The tech-heavy NASDAQ Composite stock index surged over 600% from 1996 to March 2000 while the blue-chip S&P 500 index exhibited slightly less irrational exuberance, increasing by over 200% in the same period. On the liability side, corporate debt increased by almost 50% during this period and margin debt (borrowing against securities, including dotcom stocks) grew at between 25-30% per year from 1995 to the summer of 1998 and again in 1999.

The Bubble Burst

Early warning signs started to appear in 1999 – an American auction for a 3G spectrum license failed when the winning bidder was unable to pay. This default set the stage for a decline in confidence. Once it became clear that the telecom sector debt burden was unsustainable and the growth assumptions underpinning many dotcoms were unrealistic, businesses collapses ensued. The FCC (the US Federal Communications Commission) Chair admitted that $1 trillion of the debt owed by the sector would likely never be repaid.

In the aftermath of the collapse, the vast majority of new fibre optic capacity remained unused, garnering the nickname “dark fibre.” Meanwhile, The NASDAQ Composite fell nearly 80% and took until 2015 to recover, while the S&P 500 experienced a 47% drop and slow recovery.

A relatively shallow recession followed the bubble’s burst, but unemployment persisted. Policy responses, including low-interest rate policies fostered the conditions that created the GFC (Global Financial Crisis).

Fast Forward: Is there an AI Bubble today?

Major technology companies, referred to as “hyperscalers,” are increasing capital expenditures dramatically. AI-related capital expenditure is forecasted to exceed $600 billion next year. This activity is contributing significantly to global GDP growth; varying estimates talk of it adding $10-20 trillion to global economic activity.

However, some financing strategies within the AI sector are deeply concerning. Partnerships and deals among supplier companies like Nvidia, hyperscalers and numerous AI startups involve complex financial arrangements that essentially bet on future profits without any indication of how debts and liabilities will be repaid. Many metrics today look much frothier than the dotcom era, even when adjusted for inflation to today’s values. Capex is around three times higher and the most speculative aspects (bubble) of that expenditure are more than double the levels of twenty-five years ago:

The capitalisation of the NASDAQ’s component companies is approximately $54 trillion today, around nine times greater than the peak in 2000. Nvidia’s market capitalisation alone recently exceeded $5 trillion. Twenty-five years ago, the NASDAQ collapse wiped out over $4.5 trillion of stock market so-called ‘value’ (which would be almost $9 trillion today, adjusted for inflation). A fall of the same magnitude today among technology-related US stocks would destroy almost $30 trillion from those stocks alone.

For the broader US equity market, a repeat of the Y2K broader collapse would erase around $35 trillion. But the market has fundamentally changed. Technology and AI are no longer mere components of an otherwise much less distorted market. They have become drivers of the whole market, much like TMT drove the NASDAQ at the end of the last millennium:

Conclusion

The current market is characterized by a heightened concentration of risk based on excessive debt held within the technology sector in various forms. As the dynamics continue to evolve, concerns mount over potential market corrections and their impact on the broader economy. The timing and nature of these shifts remain impossible to accurately quantify but a significant decline in technology stock valuations could lead to far greater losses in capital markets than during either the dotcom collapse or the GFC.

Once again, we apologise for repetition.

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MBMG Investment Advisory is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.

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For more information and to speak with our advisor, please contact us at info@mbmg-investment.com or call on +66 2 665 2534.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit, it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledge all risks and have been informed that the return may be more or less than the initial sum.

“During bubbles, every experiment or idea gets funded. The good ideas and the bad ideas. And investors have a hard time in the middle of this excitement, distinguishing between the good ideas and the bad ideas.” – Answer given at Italian Tech Week, October 2025 by Jeff Bezos

Fundamentals – Executive Summary (with some help/hindrance from Gemini)

We’re going to try something different.

This month’s Outlook (Fundamentals and Technicalities) ran to almost 40 pages about the AI bubble.

It was a huge effort to write but, like James Joyce famously said of his greatest work (not that we’re drawing any remote comparison) it will probably take just as much effort to read. To spare casual readers that effort and to inflict some kind of karma on AI, we asked two of the most widely used (in the west) AI engines to create summaries, which we added to the full reports as Executive Summaries but which we’ll post to Substack in lieu of the full article. If anyone wants to subject themselves to the full report email us (info@mbmg-investment.com) and we’ll arrange to send.

1. Introduction

The information and communication technology (ICT) landscape has evolved rapidly from the nineteenth century pioneering of the likes of Bell and Babbage, through a chequered history marked by regulatory shortcomings and economic bubbles.

2. Historical Context in USA

• Communications Act of 1934: The Act aimed to regulate interstate and foreign commerce in communication, ensuring all Americans had access to efficient communication services at reasonable charges. It established the Federal Communications Commission (FCC) to enforce its provisions.

• Intent vs. Reality: While lawmakers intended to promote competition to prevent monopolistic practices, it inadvertently led to the creation of a nationwide telephone monopoly, primarily dominated by AT&T.

3. Telecommunications Act of 1996

• Objectives: The Act sought to open the market for communications, allowing any business to compete in any communications sector.

• Actual Consequences: It resulted in a highly competitive investment race, which led to significant consolidation in the telecommunications industry which critics argue restricted access for newcomers, contradicting its original intent.

4. Economic Boom and Subsequent Bubble

• Investment Surge: Between 1997 and 2000, telecom network providers invested over $100 billion in fibre optic infrastructure to capitalize on expected internet growth, leading to a dramatic increase in capital expenditures by U.S. telecoms.

• Bubble Formation: The extensive investments, coupled with overestimated growth assumptions, contributed to the dot-com bubble. Profitability was sidelined in favour of potential growth narratives, resulting in overvaluation and overborrowing practices.

5. NASDAQ and Market Dynamics

• Market Surge: The NASDAQ composite saw a notable increase, reaching over 5,132 in March 2000, while the S&P 500 peaked shortly after at 1,552.92.

• Economic Contribution: IT investments significantly impacted U.S. GDP, contributing a considerable portion of economic growth during this period.

6. The Bubble Bursts

• Early Warning Signs: A 1999 auction for 3G spectrum failed when a winning bidder defaulted, setting the stage for a decline in confidence.

• Corporate Failures: Many dotcom and telecom businesses collapsed as it became clear that the telco sector debt burden was unsustainable. FCC Chair Michael Powell highlighted that $1 trillion owed would likely never be repaid.

7. Aftermath of the Collapse

• Unused Capacity: Post-bubble, a vast portion of new fibre optic capacity remained unused, garnering the nickname “dark fibre.”

• Market Decline: The NASDAQ composite fell nearly 80% and took until 2015 to recover, while the S&P 500 experienced a 47% drop and slow recovery.

8. Lessons Learned

• US Recession Impact: A shallow recession followed the bubble’s burst, but with persistent unemployment. Policy responses, including low-interest rate policies nurtured the Global Financial Crisis (GFC) and other economic distortions.

9. Current Landscape: The AI Bubble

• Investment in AI: Major tech companies, referred to as “hyperscalers,” are increasing their capital expenditures dramatically, with estimates suggesting over $600 billion in AI-related capital expenditure next year.

• Economic Ramifications: The AI bubble is contributing significantly to global GDP growth, and varying estimates talk of it adding $10-20 trillion to global GDP.

10. Market Comparison: Then and Now

In terms of capital markets, the black line on the chart below traces the rise (and fall) of the NASDAQ Composite from 1995 to 2003. The green line on that same chart traces the NASDAQ from 2020 to today. Although the two datasets haven’t been matched to scale, the similarities are broadly clear, especially the 54% spike in the last 7 months, which is eerily reminiscent of the blow off top in late 1999 and early 2000 (when we were all too buys worrying about whether Y2K would ground flights and close ATMs).

• Tech Stock Valuations: The capitalisation of the NASDAQ component companies is approximately $54 trillion today, around nine times greater than the peak in 2000. Nvidia’s market cap alone recently exceeded $5 trillion.

• Potential Collapse Consequences: A significant decline in tech stock valuations could lead to greater losses in the capital markets than the tech wreck or GFC.

11. Conclusion

The current market is characterized by a heightened concentration of risk based on excessive debt in various forms. As the dynamics continue to evolve, concerns mount over potential market corrections and their impact on the broader economy. We left shadow banking behind long ago – we’re now deeply entrenched in pitch dark, dirty borrowing.

It seems extremely likely that something will go wrong.

What’s much less clear is when?

That remains the 48 trillion Dollar question…..

The timing and nature of these shifts remain impossible to accurately quantify but broad US equities may face falls of 70-75%, not the roughly 50% that they fell in the two previous crises.

You may say that a 50% fall is so painful that a 75% fall isn’t incomparably worse. I remember the sadly late, great Scott Campbell and Martin Gray jointly imparting the following priceless wisdom:

“A 50% fall is when markets fall by half. This leads to margin calls, bankruptcies, defaults, unemployment and widespread hardship.

A 75% fall is when you have that 50% fall with all those margin calls, bankruptcies, defaults, unemployment and widespread hardship.

And then you have another 50% fall from there. And that one is far, far worse.”

There has never been so much risk concentrated on such shaky foundations in the history of modern capital markets.

Sign up for MBMG newsletter from Co-founder & Managing Partner Paul Gambles

MBMG Investment Advisory is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.

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For more information and to speak with our advisor, please contact us at info@mbmg-investment.com or call on +66 2 665 2534.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit, it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledge all risks and have been informed that the return may be more or less than the initial sum.

Even at this early stage of 2025, global capital markets are exhibiting potential signs of experiencing significant turning points with regard the Fed’s identity crisis, the slow-motion repricing in bonds, the return of political risk under Trump 2.0, and what we have termed the precarious ‘NVIDIA fork’.

The Fed: Drifting or Drowning?

The Fed’s addiction to ‘data dependency’ has morphed into knee-jerk reactivity to the extent that the Federal Reserve’s outlook seems completely unanchored, bouncing from data release to data release to the extent that it looks increasingly like policy is made up as it goes along. Policy pivots, conflicting economic signals, and reactionary decision-making have left investors asking the same questions: Is inflation truly under control? Will rate cuts arrive in time to prevent a slowdown? Or is the Fed simply kicking the can down the road, hoping that economies and markets don’t notice? The Fed, like other central banks, is trapped in a self-created feedback loop—one that fuels more volatility instead of taming it.

The worst bond bear market in history appears to have reached its low point in October 2023, when 30-year rates touched 5.2% in late 2023, the highest since the summer of 2006. However, the fall in rates and therefore the recovery in bond prices, which move inversely to rates, since then has been lamentably slow.

Bonds: The Smart Money’s Pain Trade “Being early is painful, but being late is fatal.”

That’s been my stance on bonds for the past eighteen months. Increasing allocation, extending duration and ramping up Beta, has so far proved painful, as each attempt to break out has stalled: However, the thesis that economic growth is slowing and that the inflation spike is dying slowly and fitfully remains intact.

Therefore, in the long run, notwithstanding the elevated uncertainty about everything right now, we still see this as possibly one of the best risk-adjusted trades of 2025.

Liquidity is tightening, growth is moderating, and yet investor sentiment continues to price equities as the only game in town.

Government bonds have become the asset class that most investors don’t want to touch—yet.

Which is precisely why we’re advocating leaning in even more, especially as option pricing on government bonds now offers asymmetric opportunities through structured and derivative exposures.

30-year breakeven inflation (i.e. the level that the markets have priced inflation at for the next 30 years) is pretty slow moving but has been fairly solidly in a range of 1.5% to 2.5%.

The monthly recorded change in the actual inflation (CPI) rate fell apart during the shock of lockdown, falling to zero but policy mistakes then created a surge or spike in inflation which briefly exceeded 9%

The 30-year treasury yield has, throughout this time, reflected Fed and Treasury policy.

When it dips below inflation expectations – which it was for most of 2020 after the Q1 and early Q2 recession, this is potentially expansionary/inflationary.

At the point where the monthly CPI reading started to recover and broke above the 30-year yield in late Q3 and in Q4 of 2020, Fed policy should have reacted (assuming that monetary policy has the influence that Fed models imply, which is a whole other discussion).

Instead, the 30-year yield remained at 2% for all of 2021 and into 2022, only breaking back above the pre-lockdown levels in mid-2022, by which time inflation was well over 8% and closing in on the peak rate of 9.1% in June 2022.

In other words, in 2 ½ years, inflation ran away from below 2% to over 9% and the Fed reaction saw 30-year rates move up from 2.3% at the start of 2020 to 3.2% in June 2022.

Having missed the boat on hiking rates but seeing the inflation genie escape the bottle (as stated, these two things not being as directly or causally linked as neo-classical economic models reflect), interest rates, as we have seen, only peaked some 16 months after inflation peaked and started to recede. The extent to which inflation is an outlier is apparent on longer-term charts.

What is less clear is the extent to which the Fed created this extreme inflation spike by implementing the extended direct payment stimulus polices during and after the latter part of lockdown – the second and third programmes in December 2020 and March 2021 were the most significant drivers of the subsequent inflation spike. Essentially, inflation was a policy error, which policymakers were far too slow to address, with the disastrous consequences in terms of inflation.

Equally, the Fed has been equally late to the party in terms of cutting. Inflation has now fallen from just over 9% to just below 3% and the Fed’s response has seen 30-year rates remain at 4.9% at the start of this year and 4.5% today.

Even a move back to the June 2022 level of 3.2% would see a more than 50% increase in the current price of the highest Beta form of unleveraged treasury exposure, ZROZ. A move back to levels of 5 years ago, when both yields and inflation were below 2% as shown in the chart below would see a gain of between 100 150%.

Our most deeply held conviction is that investment strategy in 2025 should continue to be built around exploiting this (while also being aware that the risk of unknown unknowns may be greater than ever and that something unprecedented could happen).

As mentioned, options pricing is creating opportunities. We are continuing to monitor these and expect to issue an update on strategies and opportunities in the bond markets in the coming weeks. From a technical perspective, the fact that retests of the bond price lows/interest rate highs have held above/below the Q4 2023 levels, indicates that the worst is now over.

If so, the only question may be how long it takes before the pain trade finally turns into a major gain trade.

The ‘NVIDIA Fork’ - The AI Inflection Point

Nvidia isn’t just another stock anymore—it’s the entire market’s keystone. AI euphoria has turned it into the most important trade of this cycle, but that also makes it the most dangerous—with the potential to determine the fate of tech and, by extension, the broader equity market.

The history of Nvidia, a company whose unofficial motto is ‘only 30 days from going out of business’ has historically ridden cycles of huge booms and massive busts, often getting ahead of itself before collapsing under its own weight when gravity exerts a devastating pull.

Right now, the operating window for Nvidia’s continued bubble to keep expanding looks ever more precarious. Specifically, we’re facing the ‘NVIDIA fork.’

This is our description of the two outcomes that we envisage:

1. AI hype fades, and the ensuring disappointment prompts one of Nvidia’s regular 60-90% share collapses—this time dragging the tech-heavy US and global stockmarket down with it.

2. AI continues to thrive, but the ‘crowding effect’ sees Nvidia’s market dominance eroded by the additional competition, including much lower cost competitors like China’s DeepSeek, again resulting in the inevitable 60-90% price decline.

Either way, Nvidia is priced for perfection in a highly imperfect world. Nvidia’s previous periodic corrections were painful for shareholders but had limited broader impact. Today, Nvidia’s impact would be more systemic. A major stumble could trigger a cascading effect across American and global equities, forcing a brutal reassessment of overinflated valuations.

Valuations in Asia, including Chinese technology, look relatively more attractive.

This article is a negligibly edited reprint of the February 2025 MBMG IA Client Outlook, provided to clients of MBMG.

Flash subscribers can also receive this by replying to this email requesting a copy.

Click >> REQUEST MBMG OUTLOOK Feb 2025

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For more information and to speak with our advisor, please contact us at info@mbmg-investment.com or call on +66 2 665 2534.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit, it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledge all risks and have been informed that the return may be more or less than the initial sum.

“Here in the bosom of America, we sit at our computer all night long, We pour ourselves a drink and then we tweet before we think!

What could possibly go wrong?”

- What could possibly go wrong? (Charlie and the Chocolate Factory) – Marc Shaiman & Scott Wittman

Been here before….

- “Envy, resentment, revenge and self-pity are disastrous modes of thought... Every mischance in life is an opportunity to behave well and learn. It’s not to be immersed in self-pity but to utilize the blow constructively.” - The late Charlie Munger

We’ve put together this lengthy post about Nvidia’s share price. This document represents a strategic analysis of the Nvidia opportunity and risk rather than a short-term tactical timing call.

In short, Nvidia’s share price is exceptionally volatile. This wasn’t such a problem when Nvidia was simply a stock. However, it has come to transcend that and has become a significant signpost for the direction of US and global equity markets and maybe even the US and global economy.

It even symbolises the hope of new technologies and a new era.

The bad news is that we have a sense that we’ve been here before.

In this warning note, we explain why the biggest risk facing NVDA might not be that AI fails dismally bit rather that it succeeds spectacularly, just as the internet did a quarter of a century ago.

Tech-nicalities

Cisco Systems Incorporated (generally known just as Cisco, stock ticker symbol $CSCO) is a multinational technology business, headquartered in San Jose, California. It has long been a major player in the development, manufacturing and distribution of networking hardware and software and telecommunications equipment. Today, it is seen as a leader in fields such as domain security, video conferencing, energy management and the much-vaunted Internet of things (IoT). Its well-known products and services include Webex, Open DNS, Jabber and Jasper.

Cisco Systems was founded in 1984 by Leonard Bosack and Sandy Lerner, Stanford alumni computer scientists who had pioneered the concept of a Local Area Network (LAN) to connect computer terminals over a router system. The company went public in 1990, with a market capitalization of $224 million.

Cisco was included in Fortune Magazine’s 2023 Global 500 listing for the 24^th consecutive year. Its 274^th place ranking last year was the lowest level since it first entered the index (with a ranking of 409) twenty-four years ago. The company generated over $57 billion revenue in 2023 and has almost 85,000 employees.

1990 proved to be a propitious time to be at the leading edge of networks development, and Cisco became widely touted during the dot.com stock bubble as ‘the backbone of internet’. By the beginning of March 2000, Cisco’s stock price peaked at $80 per share. At this moment, the company’s market capitalisation reached $500 billion, some 2,232 times greater than at IPO, briefly making Cisco the most valuable publicly listed company, overtaking Microsoft.

The stock price journey had been exhilarating:

But as well know now, it was also unsustainable.

The tech-wreck that blighted technology stocks from 2000 until 2002 saw Cisco stock fall by around -90% from peak to trough.

Although the stock price rallied from these oversold levels, even in 2012, it traded at a price some -80% below that a dozen years earlier. By 2020 it had regained further ground and reached a post-crash high that was ‘only’ -20% lower than almost decades previously, but has since fallen back again and trades today (8^th March 2024) at $49.42 per share, over 38% lower than the peak price 24 years ago:

Nvidia Corporation Inc (generally known as Nvidia, stock ticker symbol $NVDA)) is a multinational technology business also based in California.(around miles and 10-20 minutes’ drive from Cisco HQ), although incorporated in the tax-friendly state of Delaware. It is one of the leading designers and manufacturers of graphics processing units (GPUs), application programming interfaces (APIs) and system on a chip unit (SoCs). Above all, Nvidia has emerged as the leading supplier of artificial intelligence (AI) hardware and software.

Nvidia was founded in 1993, by Jensen Huang, Chris Malachowsky and Curtis Priem. Huang had been born in southern Taiwan to Taiwanese parents before his family moved firstly to Thailand and then emigrated to America. Huang has been CEO since Nvidia was founded at a meeting held at a Denny’s diner. According to corporate legend, the co-founders hadn’t chosen a name at that stage, but in the period from then until the formal incorporation of the company, chose to label all their files NV (and acronym for “Next Version", and consequently led to three founders to decide that the company’s name should begin with NV. From a shortlist of zero, they decided to adapt the Latin word for envy, invidia, as Nvidia.

Ater a brush with failure in 1997 that left the company “thirty days from going out of business”, a remarkable resurgence saw the company publicly listed in 1999, at a valuation of $625 million. In 2001 Nvidia replaced the failed Enron in the S&P 500 Index, even before the company embarked on a series of acquisitions, which have continued subsequently, although the most ambitious plans. To acquire rival, ARM, from Softbank in 2020, had to be abandoned because of regulator objections on anti-competition grounds. In 2007 Nvidia was named ‘Company of the year’ by Forbes.

The following data reflect the various NVDA stock splits and are based on intraday high and low levels.

Nvidia listed too late to experience the full run-up that Cisco enjoyed at the end of the second millennium, rising much more modestly before falling back a far less devastating -60% (in the space of just over a month in 2000), before rallying and in the following months and then dropping almost -50%, rallying again and falling by over one third, before then surging to a new high of $3.56 in September 2000. Before the year was out, it had fallen back around two-thirds to $1.18:

Nvidia made a new high of over $4 per share in June 2001 before falling back -55% by September and then rebounding to over $6 per share before the year end. Extreme as this journey had been, this was nothing compared to 2002’s roller coaster ride of volatility, falling over 90% in 9 months, all the way back to lows not seen since 1999.

November 2002 to February 2003 was calmer with a ‘mere’ -48% pullback, followed by a rebound, then a further -45% correction during the summer. 2004 saw a calmer climb back above $2 per share before once again falling back by two-thirds. 2005 was calmer for NVDA which powered back above $5 per share in the summer of 2006 before again dropping around 45% in just two months:

NVDA peaked at almost $10 per share in October 2007, before falling back over -50% within 6 months, rallying briefly before falling back to a multi-year low, of around $1.4, over -85% lower, the following year:

By the end of 2009, NVDA shareholders were undoubtedly dizzy, but relieved to see the stock price approaching $5 per share again, before the now customary -55% drop in 2010. A sharp move higher at the start of 2011, was followed by another -55% price drop into the summer, en route to a cycle bottom the following November:

From 2015 Nvidia stock surged over 17 X, reaching a new peak of over $70 per share in 2018, before once again dropping by over -50%

An almost ten-fold increase during the online boom of the pandemic was followed by another drop of almost -70% from November 2021 to September 2022 before the latest +640% increase:

The conclusions that we draw from Nvidia stock price performance are:

Even though Nvidia now has the 3^rd largest market capitalisation, and one of only 4 companies currently with a market cap exceeding $ 2 trillion, it remains highly volatile – it has the second highest Beta (roughly twice the market, depending on the period reviewed) – i.e. on average it moves up or down twice as much as the market, although at times, it can be much more extreme than this.

UPDATE - SEPTEMBER 2025 - THE SITUATION IS NOW EVEN MORE CONCERNING AS NVDA’S MARKET CAPITAISATION HAS INCREASED TO $4.5 TRILLION MAKING IT BY FAR THE LARGEST STOCK, ALMOST 20% LARGER THAN MICROSOFT AND APPLE IN SECOND AND THIRD POSITIONS. NVDA ALONE NOW REPRESENTS ALMOST 3.5% OF TOTAL MARKET CAP. (https://companiesmarketcap.com/total-marketcap)

In other words, NVDA is an incredibly volatile stock.

It tends to have extremely strong periods of outperformance, followed by regular major pullbacks typically of greater than 50% (three times in 2000, 2001, a -90% drop in 2002, twice in 2003, a -65% drop in 2004, 2006, a fall of -85% in 2007-08, 2010, 2011, 2018, and most recently -70% in 2021).

Fifteen major downside episodes, in twenty-five years is a warning signal to buyers – NVDA’s huge gains are typically partially offset by spectacular downside volatility. This is perhaps tolerable for investors looking for a high Beta, high return, high risk, speculative stock. However, NVDA is now a market leader and the consequences of its price action are far broader than just NVDA shareholders.

The price action on March 8^th, 2024, saw NVDA move from morning session gains of approximately 5% to closing losses of -5.55% - a swing that from peak to trough saw nominal losses of over $250 billion.

To put that into perspective, that one day loss is of a similar order to the total value of a company such as Bank of America, Nestlé, Chevron, Hermès, L'Oréal, Netflix or Coca-Cola (which are ranked in the 40 largest companies), or somewhat larger than the total value of PepsiCo, McDonald, Shell, Astra-Zeneca, Novartis, Disney, Wells Fargo or Intel (which are ranked just outside the top 50) or the equivalent of wiping out any two of the companies ranked just outside the 100 biggest stocks globally, such as UPS, Goldman Sachs, Unilever, Deutsche Telekom or even NVDA’s rival, ARM Holdings. This just shows the scale of NVDA, which is a major difference from the size of the company during its earlier roller coaster ride.

UPDATE, SEPTEMBER 2025 - SINCE THE REPORT LAST YEAR, NVDA’S BIGGEST PULLBACK WAS LESS THAN 40% FROM NOVEMBER 2024 TO THE BEGINNING OF APRIL THIS YEAR.

Speaking of which, NVDA’s volatility couldn’t have come at a worse time for Arm. The British semi-conductor designer and manufacturer listed on September 14^th. It had previously been taken private when acquired by Masayoshi Son and his highly leveraged, incredibly dubious, multi-tentacled serial stock spruiking enterprise, Softbank. Arm is the last family silver in Son’s cabinet whose Softbank cartel has come under increasingly pressure to raise good cash to throw after some terrible bets in recent years. In a signature Son move, only 10% of Arm was actually listed (the scarcity intended to drive the price higher and allow Son and Softbank to keep drinking from the Arm well at progressively higher prices in future). However, on Thursday (March 14^th) Arm’s post-IPO lock-up period expires, allowing insider stakeholders, such as Arm employees, who currently hold around 12.5% of the listed shares, to sell. This is likely to create volatility. Son and Softbank are unlikely to sell their stake and may even look to leverage their much higher unlisted stake to buy Arm stock to support the price (a trick from the dotcom bubble when IPOs with limited free float received share-buying support from insiders who by pushing up the much smaller free float also pushed higher their much larger privately held stakes[i]). Many Arm employees will have made more from their stakes in the company since IPO than from their salaries and it obviously also suits Son and Softbank for this to continue. However, if it becomes obvious, or even suspected, that they are having to intervene to support the price, this could go one of two ways – at a certain level, it could be seen as a sign of confidence. Beyond that, it might start to smell of desperation.

All of which bodes badly for a sector that, just like the internet of twenty-five years ago, dangles the promises of great rewards but it remains unclear to us when and how this will be monetised and whether the existing ‘backbone’ of AI will be any more successful at capturing this opportunity going forwards than the backbone of the internet was a quarter of a century ago.

We have no doubt that the current pricing of Nvidia implies a great deal of froth, as it has on numerous occasions in its history and as the price of Cisco used to do. Remember that when the internet was at what might be seen as a comparable stage to where AI is today, there didn’t seem to be much difference in market perceptions of the promise held by CSCO and that of NVDA:

It was the successful evolution of the internet that resulted in the market realising its promise but through multiple suppliers and service providers, which left Cisco trailing in the wake:

Something from which Cisco has never really recovered:

If AI fails to fulfil its promise, NVDA looks egregiously overvalued.

Our worry is that if AI does fulfil its promise, that will open NVDA open to next generation usurpers, and NVDA might look even more overvalued.

MBMG Investment Advisory

MBMG Investment Advisory is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.

For more information and to speak with an advisor, please contact us at info@mbmg-investment.com or call on +66 2 665 2534.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they acknowledge all risks and have been informed that the return may be more or less than the initial sum.

[i] Imagine a situation where a company has a market value of $100 billion but only 10% of the shares are publicly traded and the remaining 90% are owned by a single shareholder. Whatever happens to the 10% effectively dictates the value of the 90% (as it is presumed that some or all of them could be listed at that same price). Therefore, if the share price of the 10% doubles, making them worth $20 billion in market trading, the value of the 90% is presumed to have also doubled, making them worth $180 billion. Of course, they are private and can’t be readily traded but institutions will typically lend against them, using the 10% traded shares as the guide price (let’s assume that they will lend 80% of the indicated value of the private shares, but that they can issue a margin call if the share price falls and this exceeds 75%). The 90% shareholder has an outsize interest in maintaining the price of the 10% free float and even driving it higher. In an extreme example, it will even make sense for the 90% shareholder to acquire as much of the 10% as necessary if they seem to be falling in value. In normal conditions, this creates a kind of backstop from the price of the free float, as it’s presumed that the 90% shareholder will always support the price and can easily borrow against the 90% to do so. But in abnormal times, this might not always work. For one thing, an aggressive operator might determine to only float 10% in the knowledge that they can borrow 80% of the remaining 90% (this would make sense to a risk-taking entrepreneur who is betting that the price will go up after IPO, partly because they trust their ability to make that happen by manipulating the free float). Let’s say that in order to do that, they decide only to borrow 70% of the 90% ($63 billion), leaving spare capacity to borrow to acquire the free float). In current conditions, this might look to have been a smart move. If the share price has doubled since IPO, then the 90% stake has double in value and the leverage against that (70% of 90%) is now only $63 billion against security of $180 billion - or just over one-third. Our risk-taking entrepreneur has plenty of dry powder to acquire the entire free float and drive it even higher of needs be. Except that being a risk-taking entrepreneur, he will likely use the available leverage as he now has an additional $81 billion that he can borrow ($180 billion x 80% = $144 billion, less the existing $63 billion) .Perhaps he’ll borrow to acquire smaller businesses whose values are growing even faster than his because they’ve done something similar but even more aggressively. Maybe, to appear prudent, he might only draw down $60 billion of the amount available, leaving $21 billion in dry powder, so that he can, if necessary, buy the entire free float to support the market price. This kind of approach worked well during the NASDAQ boom of the late ‘90s….until suddenly it didn’t. Entrepreneurs had tended to ratchet up leverage (to spend on other pursuits) as the share price had risen and faced with a market crash, found that lenders were suddenly revising or not renewing borrowing covenants and in effect the entire NASDAQ faced a margin call that nobody was able to meet, even if they had been able to find ways to fund the acquisition of entire free floats – and been able to overcome the regulatory hurdles in doing so). Faced with a falling market and tightening lending terms, our entrepreneur may find himself squeezed on both sides. If the value of the listed shares falls by 20%, the free float is now only worth $16 billion (down from $20 billion) but before he can intervene, the value of the 90% holding is suddenly down to $144 billion, with debt against it of $123 billion, breaching the 75% x $144 billion (i.e. $108 billion) maximum loan covenant. He faces a margin call of $15 billion when he most needs to be able to have cash available to buy the free float to support the share price. From being in control of the stock price, he is now entirely at the mercy of it and may find that the bank either has the right to tighten the covenant, to maybe 65% or even lower, or to not renew his lending facilities. This kind of approach has been the MO in both public and private markets of enterprises such as Softbank, and saw the conglomerate lose over 95% of its value in just one year during the dotcom crash:

This wasn’t in fact the bottom, the share price fell another 75% over the next 2 years, representing a fall of approximately -99%.

Bloomberg’s Lizzy Burden recently interviewed Paul - https://www.bloomberg.com/news/videos/2025-08-12/horizons-middle-east-africa-8-12-2025-video (starting around 7 minutes and five seconds). Lizzy reminded him of his caution earlier in the year, when in February he had advised being cautious, fearful rather than greedy. Lizzy pointed out that since then ‘Liberation Day’ had come and gone and asked Paul whether he now regretted that caution.

Paul explained why he continues to prefer non-directional strategies: “We’ve said all along that there will be volatility in both directions. When that works for you, then you're going to be incredibly happy about that, but equally, there will continue to be plenty of times when it works against.” At the moment, with markets, such as the S&P500 reaching record highs at the end of last month, it is favouring the brave, but obviously there have been drawdowns along the way:

The S&P500 closed July just 1.8% higher than its mid-February level, having been lower for most (72%) of the last 6 months than they were in mid-February, whereas many absolute return or non-directional strategies have matched or outperformed stocks, at far lower risk, in a much more stable manner. Paul expressed continuing caution in relation to the medium-term picture:

“There's a lot on the greed side that we'd be we'd be very, very suspicious about. If you have a 5-year horizon, then probably the best thing you can do right now is short NVIDIA. But if you do, you’ll likely be wrong to start with before you end up being massively right. So, now, just like we were saying six months ago, collapse may not be imminent, but there will be these massive bounce and rallies of volatility within an expectation that over the medium-term horizon we're still looking for risk assets, especially American risk assets, to end up significantly lower than today. By all means, take the upside when it’s there but in order to do that, keep using protection. To take the upside in a market with such great vol, you really need to have protection against the downside. So anybody who was outright long risk in this market might have made money over the last three to six months, probably as much if not slightly more than we have over the last three months, but short-term speculation is not really what we're about. We're about long term, sustainable, safe as possible returns as you can get from markets. If anything you need that downside protection more than ever right now.”

Lizzy made the comment “So, the headline is Paul Gambles isn’t gambling in this market” before pointing out that this caution was at odds with Citigroup’s latest increase in its year end baseline forecast for the S&P500 index to 6,600, over 5% higher than the July close. Citi started 2025 forecasting a close in December of 6,500 which has been revised multiple times, as low as 5,800 before this latest estimate. Paul highlighted the futility of this dizzying, constant tail-chasing:

“The problem is that groups like Citi feel the need to give year end estimates. One difficulty is we don't know what will fall out of Donald Trump's mouth in the last week of December, so you've got no way of knowing what the 31^{st of} December close will be. So trying to forecast a particular level on a particular date is just a fool’s game. Citi could be right, they could be under, they could be over, but so what? Nobody's going to be selling the market on a particular day, so it’s much better to look at trend and the trend still remains short term up but long-term worrying.

Lizzy and Paul also discussed the latest tariff negotiations. Paul cited Michael Hudson’s comments that there are two things that tariffs aren’t about; they’re not about the tariffs themselves and they’re absolutely not about national security. One thing that they are about is trying to create a wedge between America's trade partners and the new Cold War bloc of China and Russia that America is trying to create and isolate.

Lizzy picked up this theme, pointing out that one thing that everyone is waiting to hear fall out of Donald Trump's mouth is the name of Jerome Powell’s replacement as Chair of the Federal Reserve, with Fed vice chairs, Michelle Bowman and Philip Jefferson, and Dallas Fed President Lorie Logan throwing their names in the hat for the vacancy. Paul spoke of the “beauty parade prostrating themselves in front of Trump and Treasury Secretary Scott Bessent to position themselves for the role.” Paul indicated that while he thought that the likeliest candidate might be a Fed outsider, the key qualification would be promising to do Donald Trump's bidding the way that Donald Trump wants it done, adding that “the best thing you can say about Donald Trump is thank God, at least he's not Joe Biden and similarly, whoever the next Fed Chair is going to be, thank God at least it's not Jay Powell. These words could come back to haunt me, but it's hard to see that we could get in anything other than an upgrade on Jay Powell. So I think whoever it is has to be better for the US economy.”

Paul and Lizzy finished their wide-ranging chat by discussing the agreement for NVIDIA and AMD to pay 15% of revenues for H20 chip sales to China directly to the US government in exchange for export licences. The backstory here is that the Biden administration had blocked chip sales to China in 2022 which resulted in the rapid development of the chip industry in China. This has been so successful that the Chinese authorities have sent “notices to a range of firms discouraging use of the less-advanced semiconductors. The guidance was particularly strong against the use of H20s for any government or national security-related work by state enterprises or private companies.” (https://www.bloomberg.com/news/articles/2025-08-12/china-urges-firms-not-to-use-nvidia-h20-chips-in-new-guidance)

Paul saw the response of NVIDIA and AMD as opportunistic but also worrying: “There's a relatively short lifespan on each of these new chip technologies. NVIDIA know they've got to maximise that. This is a smart move for NVIDIA in terms of maximising revenue on that, but it also shows just how fragile the NVIDIA position is. This is a business that regularly sees a pullback of between 60% and 90% in its stock price every few years. That's just baked into the way NVIDIA operates. This might delay that day of reckoning and push the peak a little bit higher before that happens. Short term, this is a smart move but long-term NVIDIA is a horrible model for investors.”

(Our detailed analysis of Nvidia and Cisco from March 2024 is available upon request).

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MBMG Investment Advisory is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.

For more information and to speak with our advisor, please contact us at info@mbmg-investment.com or call on +66 2 665 2534.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit, it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they have acknowledge all risks and have been informed that the return may be more or less than the initial sum.

This is the first compilation of recent musings on various topics…

(Dis)content warning - some of the following may be more socio-political than financial or economic and is intended to offend those who will be offended by it.

Abnormal MBMG substack service will be resumed but will be interrupted at times by more Off the beaten track….

Data centre boom (early days)

Data centres are a key component in the toolkit of governmental control over the people whose commons are being laid waste in order to satisfy the egregious energy demands of the data centres.

In response to – “rising demand shows no signs of slowing. The International Energy Agency (IEA) projects that global electricity demand from data centers [sic] will more than double by 2030, reaching approximately 945 terawatt-hours (TWh) – roughly equivalent to Japan’s current total electricity consumption. In the U.S., data centers [sic] are expected to consume 580 TWh annually by 2028, accounting for 12 percent of the nation’s total electricity use. AI will drive most of this increase, with electricity demand from AI-optimized data centers [sic] expected to more than quadruple by 2030.” https://www.erm.com/insights/data-center-power-crunch-meeting-the-power-demands-of-the-ai-er

Electoral dysfunction

Prior to the various revolutions of the last quarter of the 18^th century and the first half of the 19^th century, the playbook for ruling regimes was generally an extreme form of autocracy, in which even the smallest demands of the population were denied. Presumably the assumption was that granting any kind of concession created weakness, and that any resulting small crack would then grow into a deep fissure that would ultimately break the entire systemic edifice.

The emergence of new forms of government, in both the newly independent United States of America and the redrawn nation states of Europe gave rise to a more nuanced form of autocracy in which populations were placated by having been encouraged to believe that they had a greater involvement and participation in the systems of government, and consequently the decisions taken by those systems, than was really the case.

This ushered in an age of meretricious counterfeit consensus, which broadly continued from the second half of the 19^th century until very recently. Systems that fell outside this new paradigm were typically seen as hostile, especially systems that involved broader autonomy and greater individual agency and freedom. International opposition to the various iterations of the Russian republic was a direct response to the fear of people power extending westwards from the various Soviets that assumed power in the aftermath of the 1917 revolutions. In order to maintain the counterfeit consensus, autocratic forms of government, such as American and British performative so-called democracy, actually portrayed these more genuinely liberal approaches to government as an authoritarian threat to be rallied against.

That phase – the NATO fake democracy stage – is now exhibiting signs of starting to unravel and revert to cruder, nineteenth century-style authoritarianism.

In response to:

Trump recently firing Dr. Erika McEntarfer, the Bureau of Labor Statistics commissioner, hours after the agency reported that American job growth had slowed to a near-halt. “The stunning move came the same day that the BLS reported a gain of just 73,000 nonfarm jobs in July, below market expectations. In addition, the bureau revised the two previous months down sharply, cutting a combined 258,000 from the prior counts, putting the three-month growth rate at a paltry 35,000. It was the biggest two-month downward revision since April 2020, the early days of the Covid crisis.” (https://www.cnbc.com/2025/08/01/trump-erika-mcentarfer-jobs-report-fired.html)

And:

In the UK 522 people, the majority of whom were aged over 60, were arrested last weekend under the Terrorism Act (2000) for carrying placards that stated I oppose genocide, I support Palestine Action at a peaceful demonstration in Parliament Square. The Terrorism Act has been invoked even though blogger and activist Craig Murray has obtained and published an abridged version of the Joint Terrorism Analysis Centre’s (JTAC) assessment for proscribing the group under the Terrorism Act. The former diplomat said that the report, prepared to set out the UK Government’s case for the ban, showed that Home Secretary Yvette Cooper “had consistently lied about Palestine Action in a panicked attempt to defend the proscription”. He said that her central claims, including that the group were “violent”, were not backed up by the JTAC report.

Invested to the hilt?

The recent stock boom has been increasingly dependent on financial conditions that have been excessively easy for capital markets but at the expense of, rather than in conjunction with the real economy. Previous instances of this dependency have created bubbles have demanded ever-increasing financial accommodation that has proven impossible to sustain, resulting in savage bubble bursts.

In response to:

Guess what the biggest driver of this stock market rally has been? Leverage. For the first time ever, margin debt has topped $1 trillion and has ballooned +25% over the past year. Fully one-fifth of all the leverage supporting the stock market has been built up just in the past year alone; almost half of the outstanding margin debt has come in the past five years alone. That is quite an achievement. It’s also pretty scary. – David Rosenburg

Policy things can only get better, can’t they?

The best thing you can say about Donald Trump is thank God, at least he's not Joe Biden and similarly, whoever the next Fed Chair is going to be, thank God at least it's not Jay Powell. These words could come back to haunt me, but it's hard to see that we could get in anything other than an upgrade on Jay Powell. So I think whoever it is has to be better for the US economy.

In response to:

Discussion with Lizzy Burden about the choice of successor to Jerome Powell, following an earlier conversation with Professor Steve Keen about whether Trump or Biden is more dangerous.

MBMG Investment Advisory is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.

For more information and to speak with an advisor, please contact us at info@mbmg-investment.com or call on +66 2 665 2534.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.

Disclaimers:
1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
2. Please ensure you understand the nature of the products, return conditions and risks before making any investment decision.
3. An investment is not a deposit; it carries investment risk. Investors are encouraged to make an investment only when investing in such an asset corresponds with their own objectives and only after they acknowledge all risks and have been informed that the return may be more or less than the initial sum.