● Treasury Tsunami, Long Yields Surge, Dollar Wobbles, KRW Vulnerable

Large Increase in US Treasury Issuance This Week: How Far Will Long-Term Rates Go, and How Might Dollar Confidence and the KRW-USD Exchange Rate Be Shaken

This post explains the “nonstandard catalysts” that drive the sharp rise in long-term rates along with the less commonly discussed key factors such as exchanges’ and dealers’ position limits, the buying-selling rails of stablecoins and money market funds, MBS convexity hedges, and Japanese institutions’ dollar hedge costs.

It also unpacks why the KRW-USD exchange rate moves independently despite overall dollar weakness, as well as Korea-specific supply and hedge mechanisms.

Based on this week’s event timeline, scenarios for interest rate and exchange rate outlooks are summarized, along with a positioning checklist ready for use.

Event Timeline and Key Checkpoints for 10/7~10/10

This week, Treasury supply, Fed communication, shutdown risks, and the employment report all coincide to amplify the volatility of “interest rates, the dollar, and stocks” simultaneously.

It is organized from the perspective of the global economic outlook in the order of schedule – impact – strategy.

US Treasury Auction Calendar for 10/7~10/10: A Basic Structure of Short-Term (T-bill) Strength, Long-Term (Coupon) Weakness

October 7, 00:30 KST: 3-month and 6-month auctions.

October 8, 02:00 KST: 3-year auction.

October 9, 02:00 KST: 10-year auction.

October 10, 00:30 KST: 4-week and 8-week auctions.

October 10, 02:00 KST: 30-year auction.

Short-term buying pit 1: Money market funds continue to shift to T-bills offering significantly higher yields compared to RRP.

Short-term buying pit 2: Stablecoin issuers absorb T-bills as collateral or quasi-held assets, thereby supporting demand.

For long-term issues, dealers’ inventories, hedge costs, and VAR limits reduce absorption capacity, creating a “tender tail (winning bid yield exceeded)” risk.

The key to long-term rates is not the Fed, but rather the “issuance mix (bills vs. coupons)” and the “dealer balance sheet capacity.”

Seven Understated Factors as Turning Points for Rising/Stabilizing Long-Term Rates

1) Issuance Mix: If the Treasury increases the proportion of T-bills, the demand pressure on long-term coupons eases; conversely, a coupon-heavy approach leads to an elevated term premium.

2) Dealers’ SLR/VAR Limits: When risk limits tighten around quarter-end or month-end, auction absorption capacity can drop sharply.

3) MBS Convexity Hedge: When interest rates surge, MBS investors reduce duration by selling ultra-long bonds, thereby amplifying rate increases.

4) Hedge Fund Basis Trades: When margin calls on futures-spot arbitrage positions increase, spot selling occurs, intensifying spikes.

5) Japanese Life Insurance and Pension Funds: Higher dollar hedge costs contract demand for long-term US bonds, and non-hedged demand is also constrained by currency risk regulations.

6) Fed QT Pace/RRP Cushion: While sufficient RRP balances keep bill demand strong, they do not directly translate into coupon absorption.

7) Discussions on Treasury Buybacks (Reverse Repos): If a liquidity-improving switch between long-term and short-term is highlighted, it signals an easing of the term premium.

Combined, these seven factors indicate that the key to “whether long-term rates will spike further” lies in the issuance structure and market plumbing, not the Fed’s dot plot.

Prolonged Shutdown and Dollar Confidence: The Issue Is Not Credit but “Data Gaps and Operational Risks”

The longer the shutdown lasts, the more delays occur in releasing statistics, causing both the Fed and the market to lose “data dependency.”

Data gaps increase volatility premiums, thereby intensifying both long-term bond auction tail risks and FX volatility.

While the chance of an immediate credit rating downgrade is low, the reduction of the “governance premium” creates subtle cracks in the structural confidence in the dollar.

Even if the Dollar Index weakens, if a policy uncertainty premium is added, the dollar may paradoxically remain strong in specific currency pairs (e.g., KRW-USD).

KRW-USD Exchange Rate Volatility: Why Does the KRW Weaken When the DXY Declines?

The coexistence of a declining Dollar Index with a rising KRW-USD rate results from the interplay of Korea-specific supply and hedge factors.

1) In periods concentrated on energy import payments, spot dollar demand surges.

2) During foreign investor dividend repatriations or bond exits, increased dollar outflows put upward pressure on the exchange rate.

3) Reduced netting in forward contracts by export companies and adjustments in hedge ratios create spot dollar demand.

4) Asian risk premium: If the yuan and yen weaken in tandem, the won’s beta increases.

5) When both stocks and bonds decline, a “domestic institutional reduction in currency hedging” further pushes the exchange rate upward.

Although fine-tuning by the Bank of Korea reduces volatility, it does not change the overall trend.

The exchange rate outlook sees a volatility range of 1,360–1,420 KRW, with spike risks heightened when real supply events coincide.

Key Points from the FOMC Meeting Minutes (October 9, 04:00): Phrases on “Equilibrium Unemployment Rate and Neutral Interest Rate” Behind the Dot Plot

Two phrases in the minutes are particularly important.

1) An upward adjustment in the equilibrium unemployment rate (NAIRU) implies that despite sluggish employment, inflation remains persistent, thereby supporting long-term rates.

2) A nuance of an upward revision in the neutral rate (r*) indicates a structurally higher term premium.

Conversely, if growth slowdown and tightening credit conditions are emphasized, the upper end of long-term rates is suppressed and the curve steepening becomes moderate.

Key Signals in Fed Chair Powell’s Speech (October 9, 21:30): QT, Issuance Mix, and Data Gaps

Three statements with significant market impact can be highlighted.

1) Mentioning a possible review of the QT pace immediately lowers the ceiling on long-term rates.

2) Comments that acknowledge the issuance burden and market functioning heighten expectations for adjustments in the coupon-bill mix by the Treasury.

3) A cautious tone regarding decision-making amid data gaps serves to reduce the volume of potential interest rate outlook scenarios, thereby easing risk asset volatility.

US September Employment Report (October 9, 21:30): A Pure Signal from the “Previous Month” Unrelated to the Shutdown

If nonfarm employment in September slows and the unemployment rate rises, it signals a reduction in wage and service inflation pressures.

Because core service prices are directly linked to wages, a slowdown in employment reconfirms downward inflation pressure.

In such a case, rather than a “curve steepener (with a 2-year falling and relatively constrained strength in the 10-year and 30-year),” a scenario of “modest rate declines across all maturities” is more favorable.

Investment and Hedge Checklist: Execution Priorities

Treasuries: Approach 10-year and 30-year auctions in portions after confirming the auction tail, and for long-term issues, selectively invest where the roll-down advantage is present.

Credit Bonds: Given the potential for spread widening, use Treasuries for duration and keep spread risk minimal.

Stocks: Growth stock valuations become less resilient when long-term rates spike.

Within the AI capital expenditure beneficiaries, focus on those with strong cash flows and margin defense.

FX: For the KRW-USD exchange rate, set fixed, phased profit-taking and stop-loss criteria in conjunction with the event calendar.

Commodities: When oil prices rise, Korea’s current account sensitivity increases, potentially amplifying the beta of a weaker won.

Additional Insights from the Perspective of AI and the Fourth Industrial Revolution: The Interaction Between Rates and “AI Capex”

Hyperscalers’ AI infrastructure investments are leveraged through corporate bond issuance and leasing liabilities.

Rising long-term rates increase the WACC, thereby raising the project IRR hurdle and delaying investment timing.

However, given bottlenecks in power, heat, and server supply chains, underlying demand remains robust, leading to “speed adjustments” rather than outright reductions.

As stablecoin collateral becomes entrenched in T-bills, on-chain RWA demand reflects short-term market rates in real time.

This reinforces the role of a “digital money market” within global liquidity, potentially widening the supply-demand gap between bills and coupons.

Risk Map: What We Really Need to Watch

1) The auction tail width and bid-to-cover ratio (BTC) for the 10-year and 30-year issues.

2) Fluctuations in money market RRP balances and the spread between 4-week/8-week bill rates and RRP.

3) Weekly data on net long-term USD bond purchases/sales by Japanese life and pension funds.

4) Changes in duration and convexity estimates for large MBS ETFs/indices.

5) The balance of domestic forward positions and the timing of capital flows in and out of foreign stocks and bonds.

This Week’s Conclusion: Scenario Tree

Scenario A (Most Likely): Weak demand for long-term coupons + Powell’s neutral tone + employment slowdown.

Result: A temporary spike in long-term rates followed by stability, mixed dollar movements, and stagnant risk assets.

Scenario B (Less Likely): Strong demand for long-term coupons + dovish tone in the meeting minutes.

Result: Declining long-term rates, a rally in growth stocks and credit, and a resilient fall in the KRW-USD exchange rate.

Scenario C (Tail Scenario): A collapse in long-term coupon demand + compounded MBS hedge + prolonged shutdown.

Result: A re-spike in long-term rates, concurrent pressure on stocks and emerging market currencies, and a test of the upper bound of the KRW-USD exchange rate.

< Summary >

This week’s key factors are the issuance mix and dealers’ capacity, bill demand from money markets and stablecoins, MBS hedging, and Japanese institutions’ dollar hedge costs.

Even if long-term Treasury demand is weak, a temporary spike is possible, but if Powell’s cautious tone and an employment slowdown are confirmed, the ceiling remains capped.

Despite overall dollar weakness, the KRW-USD exchange rate remains highly volatile due to Korea-specific supply and hedge factors.

The strategy is to segment long-term issues, keep credit spread risk minimal, concentrate on cash flow–focused AI beneficiaries, and manage the KRW-USD exchange rate in line with the event calendar.

The turning points in the global economic, interest rate, and exchange rate outlooks lie in the issuance, supply, and hedging market plumbing, not in the Fed.

The inflation trajectory is likely to reconfirm its downward path once the employment slowdown is observed.

[Related Articles…]

US Treasury Rate Surge and the Fed’s Choices: An Analysis of the 10-year and 30-year Volatility

KRW-USD Exchange Rate Outlook: Q4 Supply Calendar and Hedge Scenarios

*Source: [ 경제 읽어주는 남자(김광석TV) ]

– 미국 국채발행 쏟아진다. 국채금리 치솟을까? 셧다운 장기화로 달러 신뢰도 흔들린다. [먼데이픽]

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● Arctic Shipping Gold Rush

Over the Next 5 Years, the Arctic Route Investment Checklist: Shipbuilding, Energy, and AI Logistics Meet at One Point

This article contains three key aspects that others rarely touch upon.

Firstly, the unseen bottlenecks of ‘regulation, insurance, and capital’ that determine the success or failure of the Arctic route.

Secondly, the practical roadmap of AI logistics infrastructure, which encompasses autonomous navigation, satellites, and data cables.

Thirdly, industry-specific timelines and investment strategies that connect Korea’s favorable position with actual orders and revenues.

2024-2025: Reality Check — Overheated Narrative vs. Actual Data

Russia aggressively aims to increase NSR cargo volumes, but the actual annual transport volume remains low compared to its target.

In reality, growth drivers after the sanctions are concentrated on LNG and raw materials, with significant constraints for routes to Europe, while routes to East Asia are sensitive to seasonality and insurance costs.

Key Point 1: Due to Western sanctions, there are accumulating delays in the delivery and operation of Russian Arctic projects such as Arctic LNG 2.

Key Point 2: Issues like ice-class hulls (Arctic Class), the cost of icebreaker escorts, and reinsurance gaps drive up freight rates and act as bottlenecks for decision-making.

Key Point 3: As risks in existing supply chains such as the Suez, Red Sea, and Panama canals increase, the attractiveness of the NSR is highlighted, but “year-round commercial operation” still has limitations.

Conclusion: The Arctic route is not a shortcut, but a choice that becomes profitable only when “season, cargo, and insurance” align perfectly.

It is highly sensitive to variables such as the global economy, interest rates, and inflation.

2025-2026: Catalysts and Realistic Barriers — The Trio of Regulation, Insurance, and Finance

Core 1: Regulation.

Commercial nuclear-powered vessels face an incomplete set of international norms necessary for operation.

The existing IMO nuclear vessel safety codes, along with each country’s port state control, liability, and compensation frameworks, make it difficult for “nuclear-powered merchant ships” to be widely commercialized in the short to medium term.

Core 2: Insurance & Reinsurance.

In a sanction environment, Western reinsurance companies find it difficult to underwrite Russia-related risks, leading to premium hikes and coverage gaps.

Core 3: Finance.

Project financing (PF) for Russian-related projects becomes complex due to potential secondary sanctions and dollar restrictions.

The alternative involves a bundled package of non-dollar settlements, government guarantees, and national policy financing from partner countries, but this is sensitive to political risks.

Investment Implication: In this year and the next, companies demonstrating actual order, delivery, and operational performance will show relative strength over those riding an overheated theme.

2026-2027: Technological Transformation — AI, Autonomous Navigation, and Communications Will Transform Profit and Loss

Leveling Up Autonomous Navigation.

In ice-covered waters, where costs due to human fatigue and judgment errors are high, AI must continuously adjust the optimal route, speed, and fuel scheduling to achieve profitability.

Korea’s autonomous navigation and auxiliary navigation solutions will command a premium as tangible commercial results accumulate.

Data & Communication Infrastructure.

The backbone that ties together radar, SAR satellites, ice prediction models, and ship IoT data via low-latency communications will be the battleground.

The progression of Russia’s undersea cable (dubbed Polar Express), the availability of OneWeb/LEO communications, and regulatory aspects around import and operation in Russia will determine the quality of commercial operations.

Fuel Transition.

With the inclusion of shipping in the EU ETS (carbon costs), the NSR’s short distance becomes inherently advantageous; however, to counterbalance the CAPEX of ice-class vessels and icebreaker costs, high-efficiency propulsion and digital optimization are essential.

2027-2029: The Commercialization Inflection Point — What Really Generates Money

1) Energy: Profitability hinges on transporting LNG, condensate, and crude oil destined for East Asia.

There will be cyclical demand for Arctic LNG carriers, shuttle tankers, and floating storage and regasification units (FSRU).

2) Shipbuilding: Orders for ice-class LNG carriers, tankers, supply vessels, and icebreaking tugs will increase, while bundled solutions for autonomous navigation, sensors, and communications will fetch high value.

3) Ports & Logistics: Investments in ultra-low temperature terminals and hydrogen/ammonia infrastructures, along with digital port operations in Busan, Ulsan, Yeosu, and Pohang, will be interconnected.

4) AI Stack: Engines for ice prediction, collision risk analysis, digital twins for hull fatigue life prediction, and carbon cost optimization will differentiate shipping company performances.

Korea’s Beneficiary Sector Map — Let’s Capture the “Visible Money”

Shipbuilding & Maritime.

Hanwha Ocean: Has experience with ARC7 LNGC from Russia’s Yamal project.

Even though direct contracts are difficult under sanctions, leveraging ice-class and low-temperature cargo system technologies through third-country or alternative projects (Qatar, US, Canada LNG) is possible.

Samsung Heavy Industries: Strong in LNG carriers, FLNG, and ice-class vessel design.

HD Hyundai Heavy Industries, Hyundai Samho, Hyundai Mipo: Portfolios include autonomous navigation (Avikus), fuel transitions (methanol, ammonia), and medium-sized ice-class ships.

Propulsion & Equipment.

Hanwha Engine (formerly HSD Engine/Doosan Engine): Advancing dual-fuel engines and propulsion packages.

The faster the transition to eco-friendly fuel, the higher the premium.

POSCO (Materials): Special steels such as ultra-low temperature and high-manganese, nickel steels.

Energy, Power, & Hydrogen.

Doosan Enerbility: Involved in SMR components, monoblock construction of large nuclear power plants, gas turbines, hydrogen turbines, and fuel cell ecosystems.

While commercial ‘nuclear-powered merchant ships’ face high regulatory hurdles, diversified segments like icebreakers, ice-class ships, nuclear power plants, and hydrogen power broaden the benefits.

Logistics, Ports, & Insurance.

Digital transformation and investments in ultra-low temperature terminals related to HMM and Busan Port Authority will be winners.

Niche insurance and national guarantees will play an enhanced role in bridging the reinsurance gap.

Risks That Others Do Not Mention: A Checklist

1) Sanctions & Compliance.

Issues related to Russia/North Korea still carry secondary sanction risks.

Korean companies should avoid direct exposure by diversifying into third-country projects, parts, and service-type (digital/AI) revenues.

2) Nuclear-Powered Merchant Ships.

While Rosatom’s nuclear icebreaker is a reality, commercial nuclear-powered cargo vessels suffer from insufficient regulations, port access, and liability insurance.

Caution against short-term, overheated narratives is advised.

3) Insurance & Reinsurance.

The potential for large-scale compensation from Arctic accidents limits global reinsurance capacity.

Project-specific specialized structures and government support will be the tipping point for profitability.

4) Climate Variability.

Although reduced summer ice melt is generally beneficial, the risks of shifting ice, increased icebergs, and severe weather can lead to cancellations and delays in shipping operations.

5) Exchange Rates & Interest Rates.

During periods of high global interest rates and a strong dollar, shipping companies and cargo owners may face increased financing costs leading to order delays.

AI Trends: “Instant Money” Models That Can Be Applied to the Arctic Route

Ice Prediction AI: Creating a 72-hour collision risk map by integrating SAR, LiDAR, and buoy data.

Digital Twin for Hull Fatigue & Iceberg Collision: Converting maintenance timing, speed, and route into monetary terms to support decision-making.

Fuel & Carbon Cost Optimization: Simultaneously optimizing fuel mixture, speed reduction, and EU ETS costs.

Synchronized Autonomous Navigation & Escort: Algorithms for icebreaker coordination and group navigation.

Insurance Underwriting AI: Adjusting insurance premiums in real time based on route, weather, and vessel conditions.

Time-Sequential Investment Roadmap (2025→2029)

2025: Check the order pipeline of LNG and autonomous navigation projects among the top three shipbuilders.

Track preliminary studies and orders for ultra-low temperature terminals and hydrogen infrastructures in Busan and Ulsan.

Contracts with attached insurance and guarantees are likely to materialize soon.

2026: Expand orders for ice-class equipment, specialty steels, and sensors.

Successful demonstration of autonomous navigation will translate into revenue.

2027: Peak orders linked to LNG and ammonia projects outside the sanctioned Russian sphere.

Expand licensed commercial use of AI ice prediction and digital twin solutions.

2028-2029: Commencement of commercial operations at ports, FSRU, and hydrogen turbines.

With gradual EU ETS integration, the NSR’s economic advantages will deepen structurally.

Policy & Diplomacy Perspective: What Is Favorable to Korea

The US and European sanction regimes are unlikely to ease in the short term.

Korea should advance “clean exposure” by focusing on technology, digital solutions, autonomous navigation, and specialized materials, while complying with sanctions and coordinating alliances.

Developing Busan as a digital port and a hub for ultra-low temperature and hydrogen will yield tangible benefits in terms of supply chain diversification, regardless of the NSR.

If the government, national financial institutions, and insurers continue to leverage shipbuilding and equipment with “zero sanction risk” projects (US, Middle East, and Canada LNG, North Atlantic/North Pacific cold chain), the cycle will become more stable.

Portfolio Application Method (Practical Checklist)

– Selection: Evaluate the quality of order backlog (ICE, LNG, autonomous navigation), delivery timing, variable cost structure, and foreign exchange exposure.

– Catalyst: Track concrete orders for ice-class and autonomous navigation deliveries, port and FSRU construction starts, and paid contracts for AI solutions.

– Avoidance: Reduce weight on direct sanction exposures, overheated nuclear propulsion narratives, and contracts lacking attached insurance.

– Hedge: In periods of a strong dollar and surging interest rates, secure some exposure to raw materials and gold to hedge against inflation risks while using currency hedges.

One-Line Summary: Why Prepare Now

As risk premiums in existing supply chains become structured, the combination of “short routes + digital optimization” will yield high profitability in the medium to long term.

However, the commercial viability of the Arctic route will only be realized once it overcomes the invisible hurdles of regulation, insurance, and sanctions.

Korea already holds valuable cards in shipbuilding, AI, specialized materials, and hydrogen power.

The next five years is a time to invest not in chasing themes, but in acquiring “proven references and safe exposure.”

< Summary >

The Arctic route’s commercial viability is likely to expand within five years as supply chain reorganization, EU ETS, and AI logistics converge.

The key challenges remain the triad bottlenecks of regulation, insurance, and sanctions.

Korea possesses immediately applicable assets in LNG carriers, ice-class vessels, autonomous navigation, specialty steels, and hydrogen power.

A phased investment strategy that focuses on order quality, proven references, and digital sales is advantageous.

[Related Articles…]

Arctic Route Era, 5 Practical Momentum Factors Busan Can Seize

How Affordable Hydrogen Is Transforming the Economics of Power and Shipping

*Source: [ Jun’s economy lab ]

– 앞으로 5년은 북극항로에 투자해야 합니다 (ft. 박두환 대표 3부)

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● AI Hype to Cashflow, Lynch-Style 2025

Peter Lynch’s 2025 Investment Strategy in One Sentence: Translating the AI Craze into “Money-Making Companies”

My article contains three key points.
I have organized, in chronological order, what the real speed limiter of the AI boom is and how it translates into sector-specific benefits and risks.
I have reinterpreted Peter Lynch’s “Know what you own” for a high interest rate era through a checklist of cash flows and valuations.
It also covers where to focus between ETFs and individual stocks, along with a quarterly big event calendar and positioning rules for 2025.

Translating Peter Lynch’s Phrase into the 2025 Version

The essence is “Know what you own.”
It’s not about whether it’s AI or not, but understanding if the company truly makes money, how much it makes, and through what sustainable means.
Economic forecasts are merely supplementary; preparing with scenarios and focusing on the fundamentals of the holdings determine performance.

Practical Checklist: 30-Second Explanation Test + 60-Minute Thorough Check

30-Second Explanation Test.
You should be able to explain in 30 seconds to an 11-year-old how this company makes money and why you’re buying it.
Memorizing keywords alone does not mean you understand it.
It falters during price drops.

60-Minute Thorough Check.

• Business Model.
  Key products/services and customer segments, pricing power, and irreplaceability.
• The Five Financial Elements.
  Free Cash Flow (FCF) amount/trend, interest coverage ratio of at least 4x, stable total debt/EBITDA, inventory/sales turnover, and share count (diluted) management.
• Valuation Anchor.
  Check if the FCF yield is higher than the 10-year yield plus 3 percentage points, or if high-growth stocks are justified by long-term growth and margin expansion.
• Unit Economics.
  LTV at least three times the customer acquisition cost, cohort retention rate of 90%+, and understanding the variable/fixed cost structure.
• Risk Map.
  Customer concentration, sensitivity to regulations/policies, reliance on external financing, and sensitivity to exchange rates/commodities.

The Essence of AI That Others Often Miss: Speed is Determined by “Power, Packaging, and Cost of Capital”

It’s not the GPU but the power grid that determines speed.
Data center expansion is bottlenecked by power intake, substation/distribution, and cooling capacity, and takes 24 to 36 months from groundbreaking to commercial operation.
Thus, 2025 to 2026 will be a period where the supply of power infrastructure, cooling, network equipment, high-bandwidth memory (HBM), and advanced packaging (COWoS) will be more decisive to performance than GPUs.
The unit economics of AI converge on three variables.
GPU hourly rates, kWh electricity costs, and whether model quality can support pricing.
Price reductions happen quickly, but electricity costs and depreciation decrease slowly.
Ultimately, cash flow must validate it.
In a high interest rate era, the real variable is “cost of capital.”
If the 10-year yield goes up by 100 basis points, the effective multiple for growth stocks can shrink by 10–15%.
Even for the same AI, the mismatch between the “power, components, packaging supply chain” and the “software/service monetization speed” will increase performance volatility in 2025.

ETF vs Individual Stocks, What to Buy: A Decision Tree

• If you cannot explain the business model and cash flows on your own, go for ETFs.
• If you can explain it and connect it to the financial statements, consider individual stocks.
• In periods of high sector concentration risk, a barbell strategy—core in ETFs and only 3–5 high conviction stocks for alpha—is effective.
• If managing volatility is challenging, use a financial quality index ETF (high ROIC/low debt) as the core.

Chronological Roadmap: 2024 Q4 ~ 2026 H1

2024 Q4 ~ 2025 Q1.

• Expectations of a peak in interest rates coexist with the risk of accelerating inflation.
• The Federal Reserve will be cautious with rapid easing until inflation shows clear signs of slowing down.
• The performance drivers include AI infrastructure capex, news flow on increased power, HBM, and packaging, and the timing of resumed U.S. stock buybacks.
• Companies in power grids, utilities, high-bandwidth memory, 800G optical transceivers, and server chassis will reflect order visibility first.

2025 Q2 ~ Q3.

• If inflation cools slowly in the service and housing sectors, the pace of interest rate cuts may slow down.
• A drop in real interest rates may trigger a re-rating of small-cap and capital-intensive sectors.
• Widening credit spreads call for caution regarding increased volatility in liquidity-sensitive small caps.
• As AI software monetization becomes mainstream, “usage-based billing” will determine performance.
• Valuation realignment tends to be swift in this segment.
  High multiples not backed by performance will be adjusted, while value chains with leading cash flows will show relative strength.

2025 Q4 ~ 2026 H1.

• Depreciation of major capex and electricity costs will be reflected on the income statement, revealing true profitability.
• As power infrastructure projects move to commercial operation, improvements in utilities and power equipment performance will be evident.
• AI will begin to show productivity improvements through industrial automation, customer support, and personalized marketing.
• This phase will be when the claim “AI changed the world” is proven by results, and the gap between winners and laggards widens.

Valuation Rules in a High Interest Rate Era: Simple and Solid

• Include stocks in your watchlist if their FCF yield ≥ 10-year yield + 3 percentage points.
• The multiples of growth stocks should be justified by growth rates, margin expansion, and cost of capital.
• For companies with high debt levels, the repricing of interest expenses is a “hidden enemy” to performance.
  Check the refinancing schedule.
• No matter how excellent a company is, if it’s too expensive, it’s a bad investment.
  Both Buffett and Lynch adhere to this principle.

Risk Map: Check Ahead of the News

• Liquidity Cycle.
  The speed of the Fed’s balance sheet reduction (QT), the Treasury’s TGA, and reverse repo balances indicate the direction of market liquidity.
• Options and Share Buyback Calendars.
  Blackout periods for share buybacks and option expiration weeks are periods of increased volatility.
• Refinancing Months.
  The concentration of corporate bonds and leveraged loan maturities in 2025–2026 is particularly sensitive for small caps.
• Power and Regulation.
  Regional electricity rates, power intake capacity, and data center permit issuance speed set the lower bound for AI’s pace.

Small-Caps vs Mega Caps: The Hidden Switch

• A trend in small caps only emerges when a drop in real interest rates, stable spreads, and increased profit sensitivity occur simultaneously.
• If any one of these three is off, after a short cycle, mega caps are likely to lead again.
• Even among small caps, performance gaps can become extreme based on cash generation and refinancing risks.

Portfolio Management Rules: Procedures Over Predictions

• Write down your sell plan before buying.
  Reassess if the price drops 20–25%, shrink positions immediately if the rationale collapses, and increase positions when fundamentals improve.
• A Three-Layer Structure.
  Core (global indices/quality), satellite (theme/sector ETFs), alpha (3–5 high conviction individual stocks).
• Cash is a Strategic Option.
  Being able to deploy cash during periods of high volatility ensures you don’t miss out on the benefits of compounding.

Labor Market and Productivity: AI is About “Changing” More Than “Eliminating”

• AI restructures tasks.
  Repetitive, routine tasks decrease, while high value-added tasks increase.
• Productivity improvements can support both wages and margins.
  There is no need to overstate fears of a recession.
• However, disparities widen during periods of transition.
  Companies and individuals who quickly adopt new tools reap excess returns.

Ten Immediately Actionable “Lynch-Style” Questions

• Can you describe what this company does in one sentence?
• Why do customers choose this company?
• Do customers stick around even if prices rise?
• Is the FCF growing?
• Is the interest coverage ratio at least 4x?
• Is there little to no dilution in the share count?
• Is the valuation compelling compared to the 10-year yield?
• Is it hard to replace or does it have high switching costs?
• Do the numbers align with what management states?
• Have you set a loss limit for a downside scenario?

2025 Key Points Summarized in Keywords

• Interest Rates.
  The post-peak path will determine multiples.
• Inflation.
  Stubborn service prices keep the Fed tied down.
• Recession.
  Although the probability exists, the portfolio should be diversified for various scenarios.
• U.S. Stock Market.
  The intersection of upward earnings revisions and liquidity drives the trend.
• AI.
  It is the triangle of power, components, and software monetization that determines the true winners.

Conclusion: It’s About Cash Flow, Not Trends

Whether it’s AI or not doesn’t matter.
What matters is whether the company makes money, how much it makes, and whether you can explain it.
Stop forecasting; focus on understanding, documenting, and following a procedure.
That is the one principle that will hold true even in 2025.

< Summary >

The key is to translate Peter Lynch’s “Know what you own” into the reality of 2025.
The speed of the AI boom is determined by power, packaging, and cost of capital, and cash flow is what truly matters.
In a high interest rate environment, you defend with FCF, interest coverage, refinancing schedules, and valuation anchors.
Divide between ETFs and individual stocks based on your understanding, and adjust your positions according to the event calendar from 2024 Q4 to 2026 H1.
Procedural discipline triumphs over forecasting, and cash flow wins over trends.

[Related Articles…]

• Signals of Improving Breadth in the U.S. Stock Market
• AI Power Grid Bottlenecks and the Utility Investment Checklist

*Source: [ Maeil Business Newspaper ]

– [홍장원의 불앤베어] 주식시장에서 모르면 죽는 단 하나의 이 문장

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