1. The game just changed (??)
I mentioned in my last note that a key concern of mine (and no doubt the markets) was rapidly rising yields in longer dated bonds.. and that if they continued moving higher with energy prices then it was going to be problematic for many parts of the economy and the market.
Well it seems like the game changed this week… US treasury secretary Scott Bessent came out and said the US Treasury would ramp up its purchases of long-dated treasuries saying current yields “don’t represent underlying fundamentals”. He then went on to basically say this would be just the beginning of the intervention if yields don’t respond and that Treasury has a “big toolkit” it could unleash to achieve their desired outcomes.
In response we saw Gold up 5% for the week and risk on ‘debasement’ Assets like Bitcoin (+23%) flying. All the while yields shrugged off the announcement and finished the week higher. We also saw the US dollar decline and oil up +6%. I get the feeling the market will put Bessent to the test but for now it feels like game on for risk assets. Hope you’ve got hard Assets.
Just as an aside… I said the below in the note A Royalty Rerate
If you can borrow in fiat at a rate below the rate of true inflation as these large royalty companies can and collect a royalty or stream linked to the price of industrial metals which grows at a rate above that of broader inflation… then you are capturing a huge value arbitrage.
If we are going to get intervention to push bond yields down (arguably below the rate of inflation) then I think business models such as royalty and streamers are truly going to flourish.
Enjoy this short clip of Trump being asked about the kinds of things they could do to intervene with bond yields 😳..
2. El Nino wreaking havoc on supply chains
This week we saw the Panama Canal announce a move to restrict traffic in response to extreme weather events from El Nino (read here). We also saw more copper disruptions from a second El Nino storm that hit the Andes. And the wild weather has also sent crop prices rising. Hello inflation… which seems to be popping its head up everywhere.. even corn (hope you’ve got hard Assets!)
3. Gas Turbine sales growing exponentially…
This week I spent a couple of days looking at Western gas and wind turbine manufacturers… companies like GE Vernova, Siemens Energy, Caterpillar and Vestas. The next couple of observations effectively comes from this analysis… and whilst my takeaways are nothing new, let me tell you - it is one thing to read about a trend but it is another to nerd out and trawl through quarterly reports and see the raw data with your own eyes.
The first of these observations relates to gas turbine sales… we’ve all heard the stories that it’s a 7 year wait now to get a gas turbine.. well this doesn’t look to be hyperbole to me when you peel back the numbers. GEV for example currently has capacity to produce 15 gigawatts of gas turbines each year.. and received orders for 20GW in just the first six months of the year (I have annualised the 2026 figures below). GEV will invest to double capacity to 30GW per year but this won’t be done until 2030.
Likewise Siemens has gone from receiving gas turbine orders of 12-13 billion Euro’s per year only a few years ago to receiving orders of 19 billion Euro in just the first six months of the year.
Caterpillar has seen its backlog of orders grow exponentially from US$30bn to US$70bn.. they can’t keep up! And whilst CAT don’t break down the order book to work out how much is gas turbine related you can read managements commentary and see this is the growth driver.
The increase in gas turbine orders are coming predominantly from data centre demand but Siemens even mentions an expected >10GW order from the German government (so much for Energiewende!)..
AI is a energy hog… and if you’re not a conspiracy theorist believing that events such as the regime change enforced in Venezuela earlier this year, the closure of the Strait of Hormuz and the destruction of Russian energy infrastructure were in part a play to choke US competitors from energy required for an AI arms race then have a watch of this…
4. Wind Turbine sales are cooling…
While gas turbine orders are growing exponentially for the likes of GEV and Siemens, their wind turbine order book is going the other way. GEV had orders for just 1.2GW of wind year to date, down from over 9GW a couple of years ago and Siemens likewise has seen orders plummet from over 16 billion euro’s to just 1.9 billion for the first half of 2026.
A lot of this is due to Chinese competition.. as the below shows none of these businesses make any margin selling wind turbines. Some of it is also permitting related with many large projects hitting roadblocks… maybe the death of fossil fuels was indeed greatly exaggerated…
5. Energy prices just getting warmed up?
If the above didn’t make you bullish traditional energy then just take a look at European natural gas prices … which this week hit their highest level since the Iran war began.
As an energy bull I am biased but the entire energy complex looks ripe for a move higher… just take a look at the charts below of European and Asian gas along with Coal and Uranium.. inflation anyone?
6. Miners Multiple Expansion
Just going back to Siemens (ENR), GE Vernova (GEV) and Caterpillar (CAT)… If you look at their share prices over the past ~18 months, Siemens is up 10x, GEV up 9x and CAT up 3x… whilst their earnings are up ~3x (these are multi billion dollar companies by the way). So there’s been multiple expansion as the market prices in “structural” earnings expansion (EBITDA margins went from <5% to ~18%).
I couldn’t help but notice this week as BHP’s share price hit record highs that their earnings were materially down on FY22 (US$28bn vs US$38bn). So why has BHP’s multiple expanded from ~4x EBITDA to ~8x EBITDA? My guess is that 2022 which was steel driven earnings (iron ore and coal) was seen by the market as not structurally sustainable… whereas perhaps the higher copper earnings coming through today is given the underlying demand (and supply) drivers. But I also wouldn’t be surprised if passive flows and algo’s have something to do with it.
Final Thought
This market is telling you that you want to be long anything to do with AI. The chip makers, data centre providers or even gas turbine manufacturers are all seeing huge earnings growth and margin expansion.. and the stocks are seeing multiple expansions as a result. Even BHP with its copper mines beginning to mint a healthy return is seeing its multiple rerate due to the linkage to AI.
The AI bottleneck being warned of by the worlds richest man (linked above) is energy… how are all those gas turbines being ordered from GEV, Siemens and CAT going to be powered? It strikes me as odd that you can buy quality energy names today for something like 3x EBITDA all because the market doesn’t want to stomach some volatility given the geopolitical games being played.
With AI demand and electrification driving energy demand, supply still massively constrained in the Middle East and a Northern Hemisphere winter now not entirely out of sight… it feels like it may be energy’s time to shine (but I could be delusional!).
Respeculator
**Disclaimer - this is NOT intended as financial advice - before acting on any information, you should consider the appropriateness of the information provided to your financial situation and seek advice. Whilst every effort is made to ensure the accuracy of data provided there’s a good chance inaccuracies exist. This is opinion only.**
Great read - I was left with confusion though - should one own real hard assets or not, it really wasn't made clear 😉
Very much thank you for your insights. Every time I read your posts it is like a very good meal (for thought's). If I may suggest another post to be about those quality energy names for 3x EBITDA you mentioned.