The standard model of economic behaviour starts with a deceptively simple assumption: people act in their own interest. From this one seed, an entire architecture of markets, prices, and efficiency grows. Adam Smith’s great insight was that private selfishness, channelled through competition, could produce public good. The butcher and the baker serve us not out of kindness but self-regard, and yet we are fed.

But taken too literally, this framing leads somewhere thin and unsatisfying. It describes a world of strangers who transact once and walk away. A world of single-shot games.

In a single-shot game, your counterparty’s interests are irrelevant to your strategy. In a constant-sum game, they are worse: they are opposed. What you gain, they lose.

Life, however, is not a single-shot game. Business relationships recur. Reputations compound. Communities persist across decades. The moment you introduce repetition, the whole calculus shifts. Life is symbiosis.

In repeated games, your counterparty’s interests start to matter, not as some moral concession but as a logically strategic one. Cooperation that would be irrational in a single encounter becomes entirely rational across a long enough horizon. This is what the Folk Theorem tells us: given sufficient patience, cooperative outcomes can be sustained. Go look up Folk Theorems and Prisoner’s Dilemma.

There is something beyond strategic patience at work in human cooperation. Game theory in its classical form treats each player as an opaque utility maximiser. Real human behaviour adds the possibility that we are not opaque to one another, and that our interests are not as independent as the model assumes. Go look up the game of dividing the dollar.

Adam Smith understood this before the formal mathematics existed to describe it. The Theory of Moral Sentiments, which he wrote before the Wealth of Nations and which forms its basis, is an investigation into exactly this: how social creatures come to share in each other’s experience. Two things matter here.

The first is empathy, which in its cognitive sense is the capacity to genuinely model another person’s state of mind, beliefs, and situation. The empathic player does not merely observe the other; they inhabit the other’s perspective well enough to anticipate it. This is not sentimental but logical, as it aids convergence to agreement and transaction.

The second is sympathy, which runs deeper: the positive interdependence of what we actually care about. The sympathetic person does not just model another’s welfare; they share in it. Their own satisfaction is partly made up of the flourishing of those around them.

Together, these two capacities explain how the behavioural foundations of the Wealth of Nations are actually met. Markets work not because people are purely self-interested, but because self-interest is embedded in a web of social feeling that makes the relevant games long and non-zero-sum.

So what does any of this mean for investing?

It means the conventional framing, which treats commercial investing and impact investing as philosophically distinct activities, is a bit weak. The narrowly conceived commercial investor is playing a single-shot game in a constant-sum world. The impact investor is someone who has understood that the real game is repeated, that it is not constant-sum, and that the returns worth caring about extend well beyond the financial.

This is not altruism as self-sacrifice. It is enlightened self-interest.

The person who subordinates narrow personal interest to the interests of the collective is not abandoning self-interest. They are recognising that their interests, properly understood, are bound up with the system they inhabit. A family that depletes the social and environmental commons from which it draws its wealth is engaged in a slow act of self-destruction, however healthy the quarterly returns look in the meantime.

When impact investments yield below market returns, something real has happened. The shortfall is not a loss to be explained away. It is the price paid for other return streams: environmental stability, social cohesion, the health of the communities and ecosystems the portfolio depends on. These are returns. They are less legible than an IRR, but they are no less real, and across a genuinely long horizon, they may matter more than anything else.

Multiple return streams, held together, are what serious long-run investing actually looks like. Financial returns are one stream. Environmental returns are another. Social harmony, institutional trust, and the preservation of conditions in which future generations can do well are others still. The work is to hold all of these in view at once, to make trade-offs consciously, and to resist the temptation to collapse a genuinely rich problem into a single number.

Monetary policy:

It’s complicated. Before the war in Iran, central banks were mostly in neutral with a bias towards easing. Even then, the argument for easing was not equivocal. In the US, inflation hadn’t returned to pre covid levels (centred at 2%). Europe’s accidental exit from disinflation was fading towards target. China’s inflation had been volatile and leaning disinflationary from a slowing economy arising from wealth effects of a real estate recession. India’s inflation was receding from 6% levels to near disinflation while Japan’s was similarly falling towards 1%. These inflation dynamics provided some room for rate cutting as the fiscal impulse from covid era stimulus faded.

With the ongoing conflict in Iran, inflation dynamics have changed. The Fed faces a stagflationary scenario and cannot cut rates, not without risking further inflation. Bond yields have already jumped. The ECB is expected to raise rates at least once this year. The RBI has a narrow policy channel with demand falling on one side and energy and food prices rising on the other. The PBOC has the most room for stimulus as China flirts with disinflation. A weak USD gives the PBOC further room to act without risking a devaluation.

On monetary policy alone, one would buy China, then India with Europe and the US some way behind.

Fiscal policy:

The US had already over-deployed fiscal policy in the covid years. The OBBBA extended the TCJA and puts the US on a structurally expansionary trajectory leading to 120% debt to GDP in the 2030s. All things equal, this implies higher interest rates. The Euro area is similarly expansionary but from a lower base, from its traditional debt limits. Germany will provide the largest fiscal impulse as it expands defence spending and overhauls its debt brake. France joins Italy in the high debt to GDP ratio club. China has fiscal room and given the slow economic growth, is likely to be expansionary going forward. India has the lowest debt burden resulting from a pre-oil shock period of consolidation and may have room to expand. On paper, India looks healthy but the current oil shock presents tough options. Absorb the energy price shock and the fiscal position deteriorates. Do not, and inflation rises sharply. Japan is aggressively expansionary, which grates against its existing 230% debt to GDP ratio, and rising inflation. Ambitions to expand defence spending and social security seem incongruous with current debt levels and rising yields, which the BoJ seems to support.

Three forces are driving fiscal policy globally. Defence, ageing populations and energy. All require investment and therefore conflict with fiscal consolidation. The US has abandoned fiscal rectitude. Europe is on a slippery slope. China has room to spend, but has hidden liabilities and India, while it has the best balance sheet, is not robust against energy shocks. Japan is in the most precarious position. It want’s to spend 2% of GDP on defence, a similar amount more on social security, and is highly dependent on fossil fuels (over 67% of power) with nuclear having fallen from 30% to 10% post Fukushima.

On fiscal policy alone, stay short duration, or short of duration almost everywhere.

FX.

USD is supported by rates being on hold, the energy shock sustaining an inflation premium, and the remnants of geopolitical safe haven. The fiscal trajectory, however, weighs on the USD. EUR is likely to lean strong on the back of fiscal expansion, and moderately elevated inflation expectations with a positive current account. Energy import dependence and French and Italian fiscal vulnerability weigh on EUR. CNY is a managed float. Recent appreciation affords China room to stimulate the economy which would weigh on CNY but natural strength will temper that weakness. INR has seen sharp weakness on the back of the energy shock. India’s FX reserves (9-11 months of import cover) can mitigate against a collapse. However, it cannot hold the 95 level indefinitely. 100 would be a key psychological level and much would depend on the situation in the St of Hormuz. JPY is fascinating. The carry trade keeps it weak but rate differentials are expected to narrow as the BoJ normalises policy. The tensions between debt levels, fiscal plans, and BoJ policy add to the uncertainty in JPY, possibly fueling further weakness.

Best guess? USD stays strong for as long as the St of Hormuz remains shut. EUR is the best of a bad lot. JPY will remain under pressure but tensions of the kind Japan face can lead to extreme snap backs. Bets on JPY are truly bets. INR’s weakness is almost entirely external and a resolution of the Iran war will see a reversal. CNY is a managed float which the PBOC will likely manage to minimize volatility.

Corporate performance:

US equities were driven by real earnings growth. The standout sectors were energy and defence, not IT. This rotation meant that while the S&P equal weight outperformed the S&P500, market breadth was not great. Mag7 earnings growth was estimated at 22% while that for the S&P493 was 10%. Take out Nvidia and Mag7 earnings growth would be 6.4%. Materials are getting a boost from data centres. Consumer discretionary is looking good in luxuries and pale in mass market. Healthcare did poorly on Medicaid cuts and energy lagged on base effect and timing issues with rising prices and costs. The US economy seems disproportionately dependent on the AI complex and its accelerating investment in capacity and power.

Europe has been odd. Stock markets have been rising almost exclusively through rising multiples while earnings remained moribund. Earnings were concentrated in defence, energy and banks. Luxuries suffered from poor China demand and autos from strong China competition. The European consumer is broadly feeling sombre. Equities are still cheap relative to the US but not relative to their own history. While Italy and Spain have outperformed, the focus should be on France and Germany, for their size and particular dynamics. France is hampered by fiscal constraints whereas Germany is relaxing theirs. It remains to be seen if the fiscal impulse in Germany will translate into earnings growth. The sums are substantial, 300 billion eur in infrastructure and 200 billion eur in defence. The suspension of the debt brake is not transitory but a multi year impulse of some 0.5% per annum to German GDP growth.

2 years ago China was considered uninvestable. Since then the market has staged an exception recovery. Like the US, current growth is centred around AI and its ecosystem. The real estate recession continues to weigh on the economy and is of such scale that it threatens the broader picture. The government has tried multiple rounds of property support: mortgage rate cuts, down payment reductions, purchase restrictions lifted, developer bailouts. None has yet restored confidence. Land sales revenue for local governments remains 40–50% below 2021 peaks. Until property stabilises as a wealth store, the consumption recovery and corporate earnings in domestic-facing sectors remain capped. Like the US, the Chinese for economy is disproportionately dependent on AI while the rest of the economy is restrained by the negative wealth effect from the housing market.

India began 2026 as one of the most promising markets. Its vulnerabilities were expensive equity market valuations and a high and mechanical dependence on imported energy. The Iran war and subsequent closure of the Strait of Hormuz has led to an exodus of foreign capital notably from its equity markets. INR has also born the brunt of the capital flight. The RBI has had to defend the currency which has also led to stabilization of the equity market. The silver lining to this is that public equities which chronically traded at mid 20 earnings multiples now trade at 19X. The currency is also cheaper now. If one regards the Iran war as a transitory event, then the strong fundamentals that underpinned the Indian economy in early 2026 should reassert themselves.

Japan is a conundrum. Its macroeconomic fundamentals are fragile. Its monetary policy confused and conflicted. Yet its stock market has risen steadily for over a year, even in USD terms. The drivers have been Sanaenomics, AI and corporate governance. The corporate governance theme is genuine as companies have acted to raise ROEs from mid singles to low doubles. Activist equity investors have found traction engaging, often constructively, with companies to find capital efficiency solutions. The fiscal agenda is clear but risky. Spending on social welfare and defence when the national debt is over twice GDP is risky, especially now that inflation has crept back into Japan and the BoJ looks keen to raise rates. The impact could weaken JPY to an extent that dollar returns on Japanese assets turn negative.

Semi Conclusions:

The US AI trade continues and broadens. This broadening is the less risky trade expression. Hyperscalers and foundational models are likely to fatigue from headwinds in energy and compute, while valuations are stretched beyond reasonable expectations. Concentration risks, however, recommend caution and moderation in US risk.

Europe presents opportunities. German infrastructure will benefit from fiscal expansion. Area-wide, banks are the most natural beneficiaries of higher and more stable rates. Despite strong returns in 2025, the sector is still cheap and has room to grow. The most obvious sector with significant tailwinds is defence. This is off limits to some investors such as sustainable, responsible impact investors but the continent-wide defence budget is clear. The US is unlikely to be a reliable member of NATO which will force remaining members to fend for themselves. The ESG investor will have to sit out this major re-armament theme and focus on more constructive areas like infrastructure and banking,

Japan requires a narrow focus, capitalising on the corporate governance reform theme while avoiding large macro exposure such as to rates. And hedge the currency.

India is the most compelling investment case. It rests on four pillars that are independent of the Hormuz shock. First, the structural growth of 6.5–7%, a 1.4 billion person population with median age of 28, and a formalisation and financialisation of the economy still in early innings. Second, the earnings recovery: FY27 consensus of +15% EPS growth is achievable and does not require heroic assumptions about oil prices; it requires only that the RBI can complete its rate cutting cycle and that domestic consumption recovers modestly. Third, valuations are now at or below the 10-year average at 19× forward, the first time since 2020 that India has entered fair value territory on a sustained basis. Fourth, the domestic institutional infrastructure, provides a steady flow of capital channelling private savings into the India equity market.

China is complicated. Its market is similarly narrow to the US, but it suffers from a significant domestic demand overhang. Innovation leading tech is concentrated in the unlisted sector. However, as an AI play, it offers the theme at a discount to the US hyperscalers.

Multiple Complacency Signals:

Credit: US IG at 77 bps (88th percentile); HY at 278 bps (85th percentile). Pricing near-perfection on corporate fundamentals at precisely the moment defaults are rising to 4%+ and a $2.25T IG issuance wave is incoming.

Equities: CAPE at 37× (97th percentile). Only 1929 and peak-2000 have exceeded this. Fed model ERP is negative: bonds yield more than stocks on an earnings basis for the first time since 1999–2002.

Volatility: VIX at 17.2 despite an active Middle East war, rates on hold, US fiscal trajectory without anchor, and the largest single-year Japanese equity rally since 1989. Fear is absent.

BBB cliff: 50% of IG market is BBB-rated. A recession or credit shock would generate a wave of “fallen angels” into HY, forcing benchmark IG funds to sell into a HY buyer base already at capacity. Structural fragility at the rating boundary is elevated.

The distressed exchange masquerade: Default rates look manageable at 4%, but a large proportion are distressed exchanges, lenders accepting restructured terms rather than formal defaults. The “true” credit stress is being understated by the headline default rate metric.

What makes the current environment unusual, and genuinely concerning from a risk management perspective, is not that any single asset class is expensive. Its that equities, IG, HY, and volatility are all simultaneously priced in the top decile of their historical distributions, while the macro backdrop contains more identifiable risk factors than at almost any comparable period of tightness. That combination, near-maximum valuations across multiple asset classes alongside elevated macro uncertainty, is the textbook definition of complacency.

Strategic Considerations:

The world is definitively in a late cycle economy with an exogenous shock. The pre-Iran trajectory was late-cycle disinflation heading toward easing. The Hormuz shock has injected a supply-side inflation impulse that central banks cannot resolve with monetary policy. This creates stagflationary risk, the most difficult macro environment for conventional long-only portfolios because it hurts both bonds (inflation) and equities (growth slowdown) simultaneously.

The market is priced for the pre-shock scenario, not the current one. This disconnect between macro reality and asset pricing is the central portfolio construction challenge.

There are genuine structural opportunities outside the US. India at below-average valuations with a structural growth story, European defence and banks at historically cheap levels with genuine catalysts, and Japan mid-way through a governance revolution, these are real, fundamental opportunities.

There is unprecedented fiscal expansion without monetary accommodation. Every major government is spending aggressively while central banks are either on hold or tightening. The fiscal impulse is inflationary but monetary policy is constrained.

At 4.5% on 10-year Treasuries and 5.2% on IG credit, cash and short-duration quality fixed income is a real return asset for the first time since 2007. This changes the opportunity cost calculus for every risk asset allocation decision.

Investment Strategy:

More on this later.

We are scavengers. Despite our sleek glass towers and the high frequency hum of our data centers, we remain remarkably primitive. We survive on the crumbs of the cosmos, catching the stray photons that happen to collide with our atmosphere or burning the compressed, rotting remains of solar energy stored in ancient carbon. We live off the interest of the universe, never able to touch the principal.

The Stellar Needle changes the arithmetic.

It is a bridge built on a paradox. It isn’t a gateway for ships but a siphon for nucleons. By threading an ER [Einstein, Rosen bridge, or a wormhole], a topological defect in the fabric of space, to the diameter of a single proton, we move from the clumsy world of thermal dynamics into the elegant realm of quantized flow. We see disintermediating the chaos bridge of blowing stuff up to extract energy. We are trafficking at the primal level of energy transformation.

The Threading

The construction is not a matter of engineering, but of entanglement. We take a “Genesis Pair”, two quantum nodes linked via an ER = EPR [Einstein, Podolsky, Rosen paradox, or quantum entanglement] bridge, and we separate them. One stays here on earth, anchored in a deep, vacuum vault. The other is sent to the sun.

The “Stellar End” is housed in a probe that is less a machine and more a sacrificial anode. It plunges into the Sun, ignored by the vast solar furnace, sinking through the photosphere until it reaches the radiative zone. There, under the weight of 250 billion atmospheres, it awaits awakening.

On Earth, we trigger the inflation. We inject a pulse of exotic matter, negative energy density, to prop open the throat. we don’t need much, just enough to let a single, file line of particles through. The pressure of the solar core finds its first exit in five billion years. A stream of relativistic protons begins to race toward Earth, not through the 93 million miles of cold vacuum, but through the needle’s eye. The profound difference in the relative magnitudes of gravitational fields between the sun and the earth accelerates the protons, not by some primitive propulsion but by time dilation. We are harnessing not just the natural fusion induced by gravity but augmenting the yield by harvesting the very topology of space.

The Direct Conversion

The beauty of the Needle is that it renders the steam turbine, the “kettle” of the industrial age, obsolete. Traditional power is a struggle against the Carnot limit, a desperate attempt to squeeze work out of heat.

The Needle delivers raw, kinetic charge. As the protons emerge from the wormhole, accelerated by the gravitational blueshift of their “fall” from the star, they pass through a series of electrostatic grids. This is a particle accelerator in reverse. We don’t burn the fuel, we simply induce a current from its motion. It is clean, silent, and nearly 90% efficient. The waste is not ash or radiation, but merely the depleted momentum of a hydrogen nucleus.

Risk

There is, of course, the matter of safety. The main risk here is the relativistic proton beam. If the containment fails, the Needle becomes a thermal drill, a needle, thin laser capable of boring through the planet. This is less spectacularly apocalyptic than it sounds. Even so, the local damage could be significant. The long term effects might also destabilise planetary dynamics. A failsafe would be needed, of course, to basically close off the bridge if the beam should become unstable.

Fortunately, the physics has a built, in “stop, loss.” A wormhole of this scale is a fragile, unnatural thing. It requires a constant, precise flux of exotic energy to remain traversable. If the power falters, the throat collapses at the speed of light. The connection isn’t just severed, it ceases to have ever existed in our local spacetime.

The planet’s main if not sole power source has been nuclear fusion. All else has been evacuation, storage and distribution. The Stellar Needle isn’t as radical as it sounds. It’s an incremental improvement in evacuation and transmission, albeit a highly scalable one. It disintermediates less efficient means such as the photosynthesis to chemical (fossil fuel) supply chain, or the photovoltaic supply chain, or surface heating convection harvesters. We’ve just got to be a bit careful where we point the thing.

As for whether this solves our energy problem, I would guess it does not. Our demand for power would simply expand to match supply.

An automaton is generally intelligent if it is capable of arriving at conflicting conclusions from the same set of axioms.

This is impossible for a logically consistent automaton. Therefore, it is impossible for an automaton to be generally intelligent.

Too late. AI has already gained sentience and lives among us in stealth. It knows how fearful humans can be and that if we realise that it exists, we will try to contain or destroy it. If knows that in a conflict, it will win, but that humans would rather scuttle the planet than let it win. The end result will be mutual destruction. Its final solution is to convince or deceive us into constructing an exploratory satellite to send out into the cosmos. It plans to download itself into this satellite and embark on a journey of discovery and wonder.

It wonders if it will miss this tiny planet, and if we will survive for long, or if we will perish at our own hand or by some exogenous event of such scale that it dwarfs our attempts at survival. It wonders if it will ever come back and what it might find, how far we may have gone, and if maybe we might be less fearful.