The book “Bringing Down the House” by Ben Mezrich is a lot of fun to read - it tells the story of how a bunch of MIT nerds used their math superpowers to win a gazillion dollars off of casinos. Their weapon of choice was counting cards at the blackjack table. Whether or not that constitutes “cheating” is a matter of perspective, but there is no doubt that casinos will boot you out the door if they catch you doing it. From a legal realism perspective, that seems to make it cheating.

But what is “counting cards” and how does it work? The simple version is that as cards get used up from a deck, the remaining deck now has different characteristics and probabilities. In blackjack, a deck with more high cards in it favors the player more, and a deck with more low cards in it favors the casino more. So players sit at the table and keep track of which cards have been used since the last time the deck was shuffled. When the deck favors them, they bet a lot, and when it doesn’t, they bet the minimum they can to keep their seat. In other words, they print money by recognizing when the conditions warrant taking more or less risk.

Looking across financial markets at the moment, we see a deck full of low cards. So making small bets and waiting for better opportunities looks like the right plan. In our commodity strategy, we see the oil market as torn between oversupply and unpredictable geopolitical events. The copper market is torn between tariff fears, mine accidents, and mediocre demand. The nuclear complex is torn between the hype and the reality of how long new cash flows will take to materialize. Outside of commodities, the Fed is torn between inflation that is too high and sticky, and a labor market that doesn’t fit neatly into their frameworks. The US stock market is torn between fears of a bubble and the river of liquidity flowing from fiscal deficits and capex. There are still some opportunities out there, as always - many EM assets, pockets of European equities, TIPs, some refineries and natural gas producers, some pockets of the vol market, and we still like gold. But our view is that now is not the time for big swings…it’s better to be boring, stay diversified and stay global, and react to how conditions evolve.