In May I argued the consumer was sick of high prices, but not broken. The University of Michigan print was hot; the other three surveys were not. My take was simple: watch Conference Board Expectations, the New York Fed’s longer-horizon inflation expectations, and NFIB Uncertainty together. If all three start rolling over together, then the regime is shifting.

Five months later, we can run that test with fresh numbers. Spoiler: we are closer, but not there yet.

Reminder: UMich alone is still not enough

Michigan’s final September Index of Consumer Sentiment printed 48.1, up from the May final of 44.8, but still ugly — down from 51.7 in August and a four-month low at the time (University of Michigan Surveys of Consumers, final September 2026; release commentary Sept. 25–26, 2026). Long-run (5-year) inflation expectations there were 3.4%in September, down from 3.9% in May.

That is progress on the political-noise problem I suggested in May. It is not a clean bill of health. Treat Michigan as one input among many - never the whole case.

The three-indicator test, May vs now

1. Conference Board Expectations — rolling over

Then (May): Expectations rose 1.0 point to 74.4. Forward-looking consumers were getting less worried, not more.

Now (September): The Expectations Index fell 5.9 points to 63.6 — its third consecutive monthly decline. The headline Consumer Confidence Index fell 6.7 points to 81.9, from 88.6 in August. Present Situation dropped to 109.3. (The Conference Board / PR Newswire, Sept. 29, 2026.)

PNC Economics’ series read puts that 81.9 headline at the lowest since August 2013 (PNC Economics Research, Sept. 29, 2026). Conference Board’s own release does not state the historical comparison; I am citing PNC for that claim.

This leg of the panel has clearly rolled. Labor-market perceptions softened (jobs plentiful minus hard-to-get down to +1.7%), and write-ins leaned hard into prices and fuel.

2. New York Fed SCE — long end still anchored; short end hot

Then (May): One-year inflation expectations 3.6%; five-year stable at 3.0%.

Now (September): One-year rose 0.3 points to 3.9% — the highest since May 2023. Five-year unchanged at 3.0%. Three-year ticked up to 3.3%. (Federal Reserve Bank of New York, released Oct. 7, 2026; fielded Sept. 1–30, 2026.)

So the FOMC’s preferred long-horizon anchor has not rolled over. Near-term inflation anxiety has. Spending growth expectations also jumped to 5.5% (highest since May 2023) while households’ self-assessed financial situation deteriorated — a stressed consumer who still expects to spend more nominally, which is consistent with price pressure, not with a clean demand collapse.

The May tell was the 90bp gap between UMich’s 5-year (3.9%) and NY Fed’s 5-year (3.0%). That gap is now 40bp (UMich 3.4% vs NY Fed 3.0%). The two surveys are converging. That is useful. It does not mean the long end has broken.

3. NFIB Uncertainty — no longer falling

Then (May): Optimism ticked up to 95.9; Uncertainty dropped four points; seven of ten subcomponents improved.

Now (September, released today): The NFIB Small Business Optimism Index fell 0.8 points to 97.9, a tenth below its 52-year average of 98.0. The Uncertainty Index rose 1 point to 90, from 89 in August, still well above the historical average of 68. Labor quality/availability was the top problem (26%); inflation was second (20%, up 4 points). Only 7% said it was a good time to expand. (NFIB press release, Oct. 13, 2026; full SBET PDF.)

Optimism is near average, not collapsing. Uncertainty is elevated and nudged higher — the opposite of May’s “uncertainty falling” signal. This is the supply-side household (small-business owners) saying: proceed with caution.

Side by side

Credit check: still holding

Bank credit-card delinquency is 2.85% in Q2 2026, seasonally adjusted — down from 2.91% in Q1 and 3.04% a year earlier (FRED DRCCLACBS / Board of Governors Charge-Off and Delinquency Rates; updated Aug. 25, 2026). That is the commercial-bank rate, not the New York Fed’s credit-file 90+ day share (a different construction). On this measure, the wallet is stressed but not breaking into a delinquency spiral.

Verdict on the May test

May’s signal set said: one rising (Expectations), one stable (SCE long end), one improving (Uncertainty falling).

October’s read after NFIB: Expectations have rolled. Uncertainty has stopped improving and sits far above average. The SCE five-year has not rolled.

That is two of three in the wrong direction, with the Fed’s long-horizon inflation anchor still holding. Under my own rule — all three rolling over together — this is not yet a regime shift. It is a clear step toward the warning I set in May. Fragile and stressed has gotten more fragile. “Not broken, yet” is still the honest line — with less room under it than in May.

If you are trading “broken consumer” (defensive staples only, dump cyclicals, duration on a Fed panic), you are still early relative to this panel. If you are ignoring the Conference Board Expectations slide and the sticky NFIB Uncertainty print because Michigan bounced off the floor, you are late to the deterioration that actually matters.

Watch the same three. The next tell is whether NY Fed five-year stays at 3.0% while Expectations and Uncertainty keep worsening — or whether the long end finally joins them.

Hope that helps.

— Matthew

Not investment advice. Macro datapoints sourced from public releases: University of Michigan Surveys of Consumers (sca.isr.umich.edu); The Conference Board (conference-board.org / PR Newswire Sept. 29, 2026); Federal Reserve Bank of New York Survey of Consumer Expectations (newyorkfed.org/microeconomics/sce, Oct. 7, 2026); NFIB Small Business Economic Trends (nfib.com, Oct. 13, 2026); Board of Governors via FRED DRCCLACBS (updated Aug. 25, 2026). Historical “lowest since August 2013” comparison on Conference Board headline attributed to PNC Economics Research (Sept. 29, 2026). Reader is responsible for their own due diligence.

Grok now has native, built-in access to search, read, and monitor live posts directly on X. It’s direct real-time access to monitor anything on the platform. I put it to work to give me a sense of current market.

Is Crash Talk Up?

Yes, crash talk on X picked up this week, but it reads as worry in words rather than real fear. Posts about a market crash more than doubled from Monday to Thursday’s chip selloff, and “AI bubble” posts rose about 75%. Both have eased since. Buy-the-dip and all-time-high posts rose just as fast, so bullish talk still outweighs crash talk about 2.5 to 1.

The positioning numbers people cited back that up, though I haven’t checked them against their direct sources. The equity put/call ratio, which compares puts traded with calls, sat at 0.80–0.86 all week, which isn’t that high. CNN’s Fear & Greed index was at 43–45, on the fear side but not extreme at all. The AAII retail survey shows 48% bearish, while trading shows heavy call buying. As one macro account put it, “Stated fear, traded appetite.”

So we have people talking about a crash but still looking to buy.

This is going to be a nice fee add to my macro watch.

Other Early Signals

I’m learning to follow and use more macro data. Broadly speaking my main worry is coming from the 10-year yield at about 5.3%, the highest since 2002, and from how narrow the rally is: 89% of Russell 3000 stocks are more than 10% below their highs. Thanks to Hedgeye, I was able to turn those concerns in decent trades with PFIX and by exiting IWM.

About a week ago, Hedgeye Risk Management put out an elegant overview of the AI buildout and bubble. Go subscribe for the full take but I’ll share that it has me watching credit and the flow of money. Last week gave us some AI financing concerns:

Coreweave credit. AI credit is moving from yellow to red in my mind. CoreWeave’s 9.625% bonds due 2032 were quoted around 85 cents on the dollar on Oct 7, a yield of about 13.5% (via BondTerminal). Junk-bond pricing for one of the biggest AI cloud builders.

Oracle AI project credit. Red. Oracle’s five-year credit default swaps also hit a record of about 257 basis points on Oct 8 (via IFR).

OpenAI revenue. Getting close to a red light. On Oct. 8th, the FT reported OpenAI’s annualized revenue is closer to $50B than the $70B reported earlier, which is just not a good signal.

The demand side still looks strong: TSMC’s September revenue was up about 55% from a year ago. But the companies borrowing to build AI capacity are paying more for money.

Add these early AI financing worries to oil around $100 and bank stocks in a correction mode and you get ripe environment for Michael Burry to be calling for a downturn (of course with no date).

My take: None of these are reasons to completely panic out of AI immediately, but it is a reason to stop adding to the most leveraged AI names and favor the cash-rich ones. Take profits (or in some cases take your losses), stay nimble. Pay attention to rates and inflation.

Hedgeye’s Keith McCullough isn’t calling a crash, yet; on Oct 9 he signaled a buy on one of the largest tech stocks and stressed hedging. BUT: The bond market usually notices strain before stocks do, and it’s worth reading his post, “The Last Time Yields Did This, I Called the 2008 Crash”

Bond prices are from bond-data websites, not official trade reports. Not investment advice.

The setup: land and water rights

Limoneira Company (NASDAQ: LMNR) is a 132-year-old California-headquartered agricultural company. The asset base sits across four jurisdictions, with the Chilean and Argentinian holdings now actively being divested.

I think this asset is misplaced. The thesis lives in the ~5,800 acres of US holdings — predominantly Ventura County, California plus the Yuma County, Arizona parcel — plus the water portfolio attached to them.

The 3,000-acre long-term developable bucket is the engine of the rerate thesis. Those acres sit predominantly in the Santa Paula corridor in California, with material additional optionality in the Yuma Mesa Arizona parcel.

Management discloses the water portfolio at $90M to $120M of net asset value at $30,000–$70,000 per acre-foot on the California rights. In 2023 the company launched a strategic alternatives review that closed in March 2025 without a transaction. The market is treating that closed-without-transaction outcome as a verdict on the asset.

I think you should read that outcome through the lens of the buyer-set the process engaged. The buyers who would have underwritten the highest-value use of this asset were likely never seriously engaged. Of course I am talking about the hyperscalers.

That is the whole pitch. Everything that follows is the math and the precedent.

I’ve read some Substack opinions on LMNR but I think they both missed the data-center angle:

and

Waterboy Stocks

Limoneira

Limoneira (“place of the lemon” in Portuguese) is an agribusiness and land development company that was founded in Ventura County, California, in 1893. As citrus boomed and acreage multiplied throughout the 20th century, so did the company’s number of owners…

Read more

10 months ago · 28 likes · 2 comments · Waterboy Stocks

Missed by market: Assets for days

What the market saw in 2023–2025: A sub-scale ag operator with declining citrus margins, an awkwardly-paced real estate JV, a Sunkist marketing transition that immediately hit the income statement, and a sale process that produced no buyer. The stock went from the mid-$15s to ~$13 over twenty-four months and most generalists deleted it from their screens.

What is actually there in 2026: An asset stack of land + water + power-favorable geography that — independent of the citrus business — sits squarely inside the most aggressive industrial capital-deployment cycle in the post-war American economy. Hyperscaler data center capex hit ~$80–100B in 2025 alone. The binding constraints on building DCs in the United States today are, in order: power, water, grid interconnect, and political/permitting tolerance. California ag land with water rights and a sympathetic local political story checks three of the four.

The 2024–2026 comp set already trades this reframe. Applied Digital (APLD) ran from ~$3 to north of $30 by reframing its land-and-power stack as AI hosting capacity. IREN, WULF, CleanSpark, Crusoe — every one of them is a “we used to do X, but the substrate we own is what AI capex actually needs” story. Cadiz Inc. (CDZI) — a land + water story with no operating business worth speaking of — trades materially above its underlying ag-economics value because the market correctly recognizes water-rights optionality in the West.

LMNR has not yet been priced for that optionality. The capex cycle came; the asset got missed.

Management knows its undervalued

The most important fact in this entire setup is that you do not have to take any of the framing above on my word. The company is publishing the numbers themselves.

Limoneira’s November 2025 investor presentation contains an explicit sum-of-the-parts page in which management discloses the following:

• Total pre-tax Net Asset Value: $556M to $656M, against net book value of $192M.

• NAV per share: $32.23 to $37.88, against net book value per share of $11.69 and a current market price of roughly $13.

• Premium Water Asset Portfolio value: $90M to $120M. That bucket contains 9,430 acre-feet of adjudicated Santa Paula Basin water plus 1,500 acre-feet of conserved monetizable rights at $30,000 to $70,000 per acre-foot — and 12,000 acre-feet of Class 3 Colorado River pumping rights plus 7,280 acre-feet of conserved monetizable rights, with explicit guidance that monetization is “by fallowing or outright sale.”

• Real Estate Asset Portfolio value: $556M to $656M. That includes 220 acres of near-term land use conversion, 550 acres of currently entitled development land, and 3,000 acres of long-term developable land with $3B+ of potential through 2040+.

• Five-year value-creation pipeline: ≈$300M of identified asset realizations through 2030, comprising $50–$70M of water monetization through 2027, $155M from the Harvest at Limoneira real estate JV through 2030, $100–$150M from Limco Del Mar through 2030, and $40M of non-strategic assets through 2026 (the Chilean ranches sold for $15M in November 2025 are inside this bucket).

This is the company’s own SOTP, in management’s own slides, published in November 2025. The disclosed NAV is roughly 2.5x to 3x the current market price.

And it was preceded, in March 2025 — concurrent with the formal conclusion of the strategic alternatives process — by CEO Harold Edwards stating in the 8-K announcing both the conclusion and a $30M share repurchase authorization:

“The initiation of our share repurchase program reflects our board of directors’ strong confidence in our strategic direction and our conviction that our current share price significantly undervalues Limoneira’s substantial portfolio of opportunities.“

You do not have to be on this Substack’s side of the argument to take that quote seriously. That is management telling you, in the formal regulatory filing that closed the sale process, that they believe the share price meaningfully misvalues the asset. The buyback authorization that ran simultaneously is the textbook “no deal at acceptable price, return capital, signal confidence” combination.

Where the deck stops short — and the variant perception lives — is on the question of end-use. The 3,000-acre long-term developable bucket appears as a generic “$3B+ potential” with no end-use named. Management is signaling the asset value publicly; the highest-value repositioning of those acres is still off the public deck. That gap between disclosed NAV and end-use optionality is where the upside above $32–$38 per share would be earned.

They had a banker problem (and why Stephens was maybe a mismatch)

Limoneira retained Stephens Inc. of Little Rock, Arkansas to advise on the strategic alternatives review. Stephens is a respected, well-regarded boutique with deep, decades-long relationships in agriculture, consumer staples, and food and beverage. Their rolodex includes the most important strategic and financial buyers across the ag complex — Calavo Growers, Dole Food, Fresh Del Monte, Sunkist, Wonderful, Driscoll’s, ADM, Cargill — and they do excellent work for that buyer set. None of what follows is a criticism of the quality of their work.

It is a question of fit between the firm’s natural buyer rolodex and what this particular asset actually is.

When a 4,500-acre California land-and-water asset is brought to market through an ag-specialist boutique in 2023–2025, the call list will be ag-specialist buyers. And ag-specialist buyers in 2023–2025 were navigating a tough citrus cycle, a cost-of-capital that made greenfield acreage acquisition unattractive, and balance sheets already digesting prior deals. The Calavos and Doles of the world had little reason to write a $400–500M check for incremental citrus exposure they could grow into more cheaply.

The asset’s highest-value framing is the substrate underneath the citrus business — land, water, power-favorable geography — repositionable to one of several adjacent uses, the most economically significant of which is data center / industrial / mixed-use development. The natural buyers for that repositioning rarely show up on a typical ag-M&A call list.

Who, by the nature of the process specialty, would not have been the primary focus: Microsoft Corp Dev. Google Corp Dev. Amazon Web Services real estate. Meta infrastructure. Oracle Cloud infrastructure. The DC platforms — Equinix, Digital Realty, CoreSite, CyrusOne. The AI-native hyperscalers — CoreWeave, Crusoe, APLD. The infrastructure private equity giants — Blackstone Data Center platform, KKR Global Infrastructure, IFM Investors, Brookfield Infrastructure, Macquarie Asset Management.

And the buyer no ag-process call list anywhere would have included — but who is literally down the road: SpaceX. Santa Paula sits roughly 60 miles north of SpaceX’s Hawthorne headquarters and 85 miles southeast of Vandenberg Space Force Base, where SpaceX has been expanding Falcon 9 cadence and building the foundations of West Coast Starship operations. SpaceX has a documented willingness to acquire large, water-secured land positions to support launch, manufacturing, and habitation infrastructure (the Boca Chica / Starbase playbook in Texas being the obvious reference). Add xAI — currently building the largest training cluster in the United States, in an active scramble for West Coast DC capacity to handle latency-sensitive workloads — and Tesla, which is running AI training capacity at Reno and Austin and has explicit incremental capacity needs. The Musk ecosystem has been the most aggressive non-traditional bidder for land + water + power assets in the past twenty-four months, willing to move faster and structure less conventionally than Big-4 corp dev. The natural ag-M&A call list does not include SpaceX, xAI, or Tesla. The natural DC / AI-infrastructure call list emphatically does.

These are the buyers who would underwrite the substrate-rather-than-citrus thesis at a value the equity market would re-rate to. Reading the 2025 closed-without-transaction outcome as a function of the buyer set engaged by the process specialty does more analytical work than reading it as a market verdict on asset value. Management is holding out for a higher bid - I know just where those can be found.

$500M+ is an easy check for a hyperscaler

Let me put the magnitudes side by side, because this part is sometimes harder to internalize than it should be.

The Big 4 numbers are disclosed 2025 capex run-rates and forward 2026 capex guides from the most recent earnings cycles. The Tesla number is the disclosed FY2025 capex. The SpaceX and xAI numbers are estimates based on the most recent funding-round valuations (SpaceX December 2024 tender at ~$350B, with reported subsequent rounds pushing it materially higher; xAI mid-2024 round at ~$50B, with reported subsequent rounds at $80B+) and on publicly reported infrastructure spend (xAI Memphis Colossus reportedly ~$3–4B for initial buildout with Colossus 2 announced at materially larger scale; SpaceX Starship development reportedly $5B+ annually on top of Falcon 9 / Starlink capex).

$500M of land plus water in California is a single line item on a single regional VP’s quarterly budget for any company in the top half of that table. At Tesla, SpaceX, or xAI it is a slightly larger commitment in relative terms — but a slightly larger commitment with a much tighter strategic fit. Big 4 corp dev teams are already running multiple DC builds. SpaceX and xAI need land-and-water-and-grid-adjacent capacity in California specifically and imminently. At none of those seven companies would the internal review process treat $500M for a power-favorable, water-secured California parcel as a meaningful capital commitment relative to strategic fit.

Precedent: Meta paid roughly $360M for ~2,400 acres at Eagle Mountain, Utah. Amazon has paid in the $400–600M range for individual Virginia data center parcels (look at the Loudoun and Prince William deeds). Google paid ~$190M for 187 acres in Mesa, Arizona. These are floor prices for desert or remote land in markets where the buyer is bringing their own water and entitlement work. LMNR’s combined stack — California land plus a credentialed water-rights story plus 12,000+ acre-feet of Lower Basin Colorado River entitlement plus an Arizona parcel that is already in the right hydrology jurisdiction — should trade above the desert comps, not below.

Treat $500M as the floor of where the asset should clear if a real DC-substrate process were run to the right buyer set. The right-tail prints higher.

Even if development turned out to be near impossible, owning these land and water assets gives any hyperscaler significant negotiating power with local, state, and federal regulators.

The water-rights play (interesting!)

California water-rights reclassification has explicit statutory grounding and a tested process behind it.

Let’s get some knowledge:

California Water Code §1700–1735 provides a formal “change of purpose” petition process administered by the State Water Resources Control Board. A holder of a water right can petition to change the place, purpose, or method of use of that right. The process is contested, time-consuming, and requires no-injury findings to other rightholders. But it exists, and it has been used.

The direct precedent is the 2003 Quantification Settlement Agreement (QSA), in which the Imperial Irrigation District agreed to transfer up to ~280,000 acre-feet of Colorado River water to the San Diego County Water Authority. That transfer involved fallowing, infrastructure investment, and a multi-year political negotiation. It happened. It is operating today. It is exactly the structural template that would apply to a Limoneira–Metropolitan Water District (MWD) transaction on Class 3 Colorado River entitlement.

The political-unlock structure: Limoneira surrenders or leases water rights to LA County / MWD in exchange for state and county support on entitling Santa Paula and Yuma Mesa parcels for higher-value mixed-use development — including data center capacity, an expanded housing JV with Lewis Group, and a token preserved orchard. This single transaction would solve three California priorities simultaneously: urban water supply, housing affordability, and high-tech jobs. It flips CEQA and NIMBY hostility into political support.

Water Rights Expert on the Board Already: Board Chair Scott Slater is a water-rights attorney with the Western Water / Best Best & Krieger water practice. He is one of the most credentialed water-rights lawyers in California. If anyone knows whether the §1700 path is real or theoretical for this specific water portfolio, it is him. I am sure he has other angles as well. The single most diagnostic data point on whether the structural unlock is being worked is the pace of Slater-led water disposition activity — and so far it has been only incremental Yuma Mesa fallowing since 2022. That pace will either accelerate visibly in the next twelve months, or it won’t. I’m watching.

The Colorado River portability point (or: why “California is impossible” misses the asset)

The most predictable pushback on this DC-substrate framing is some version of: California is impossible for data center entitlement. CEQA, NIMBY, drought politics, moratoriums. You can’t actually build anything there. Pass.

That objection is real for a generic California land asset. For this specific asset it carries materially less weight, for one reason that rarely gets talked about.

The Colorado River water rights are Arizona water. The entire LMNR Colorado River entitlement flows through the Yuma Mesa Irrigation and Drainage District in Yuma County, Arizona, and sits inside Arizona’s ≈2.8 million acre-foot Lower Basin allocation under the 1922 Colorado River Compact.

LMNR’s 12,000 acre-feet of Class 3 Colorado River pumping rights plus 7,280 acre-feet of conserved monetizable rights — disclosed at the portfolio level in the November 2025 investor deck — all derive from the YMIDD allocation. The FY2025 10-K confirms the attribution verbatim: “We use federal project water in Arizona from the Colorado River through the YMIDD.” Monetization happens through intrastate Arizona mechanisms — fallowing agreements, conserved water programs, and statutory transfer pathways — with no §1700 SWRCB petition required. The 10-K discloses that LMNR has fallowing agreements in place through calendar year 2026, and that the U.S. Bureau of Reclamation’s August 2025 Tier 1 shortage declaration requires Arizona to forfeit roughly 18% of its yearly Lake Mead allotment in 2026. Conserved water held inside Arizona becomes more valuable to in-state buyers under that scenario, not less.

This changes the buyer set materially.

An Arizona-based DC developer who acquires the Yuma Mesa parcel and the associated Colorado River rights avoids the interstate transfer problem entirely. Land and water both already sit in Arizona. The transfer mechanism is intrastate, and Arizona’s statutory pathways for converting agricultural water rights to municipal and industrial use are well-developed and more predictable than California’s §1700 process. Maricopa County and the surrounding Phoenix-metro municipalities — Buckeye, Goodyear, Mesa, Apache Junction — have been progressively restricting new DC builds specifically because of water-availability constraints. A DC developer who arrives with existing Lower Basin water rights in hand is exactly the kind of buyer those municipalities welcome. That is structural pricing power.

The natural buyer universe for Arizona DC sites is the universe Stephens never engaged. Microsoft has its hyperscale campus in Goodyear. Meta is in Mesa. Google is in Mesa and Apache Junction. Amazon is in Goodyear and Tolleson. Oracle is in Phoenix. CoreWeave, Compass, Vantage, Aligned, EdgeConneX, CyrusOne, QTS, Iron Mountain — all active in the Phoenix metro DC corridor. Phoenix is the third-largest DC market in the United States after Northern Virginia and Dallas, and it is growing faster than either. Water is the binding constraint on Phoenix DC growth. The asset under discussion is water — in Arizona, already.

The California-internal §1700 path on the Santa Paula Basin water remains the right pathway for the California-allocated portion of the portfolio, and the political-unlock structure described in the previous section is the right way to think about that piece. The Colorado River piece sits inside Arizona’s Lower Basin allocation, and the universe of buyers for whom that matters is the entire AI-capex hyperscaler complex with Arizona exposure.

When a generalist says “California is impossible, skip this,” the right answer is that California has nothing to do with the largest single component of the water portfolio.

Our Man on the Inside

OK there is a lot of work to be down here but I have good news.

Peter Nolan filed an SC 13D on LMNR on October 5, 2023 — eight weeks before the company announced its strategic alternatives review. Nolan is a serious capital-markets veteran — chairman of Nolan Capital, his family office in California, and a senior advisor to Leonard Green & Partners, where he was a managing partner from 1997 through more than two decades of West Coast PE work. Between September 8 and October 5, 2023, he used personal funds to acquire 1,006,115 shares of LMNR at prices between $14.48 and $15.20, taking a 5.6% beneficial-ownership position. He continued buying through October and into mid-November, reaching 1,103,750 shares (6.1%) at a cost basis between $14.12 and $14.73 by the time he filed his amendment in December.

The Item 4 “Purpose of Transaction” language in the original 13D is the part that matters. Nolan disclosed that he “may engage in discussions with the Issuer and Issuer’s management and board of directors, other stockholders of the Issuer and other interested parties that may relate to the governance and board composition, business, operations, cost structure, management, assets, capitalization, financial condition, [and] strategic plans” — and that he “may propose or take one or more of the actions described in subsections (a) through (j) of Item 4 of Schedule 13D, including but not limited to, solicitation of proxies.“ That is the standard activist 13D template, with the explicit proxy-fight threat preserved as a stated option — quite different in posture from the passive-investor 13G language a long-term family-office holder would file.

On December 1, 2023 — eight weeks after the 13D — the company announced its strategic alternatives review.

On December 15, 2023, Limoneira and Nolan entered into a Cooperation Agreement. The agreement, disclosed as an exhibit to the SC 13D/A filed three days later, gave Nolan a board seat effective January 1, 2024 with a term running to the 2026 annual meeting. In exchange Nolan agreed to voting commitments, customary standstill restrictions, and mutual non-disparagement provisions. The public press release describing the board change framed it as “filling the vacancy created by the retirement of Elizabeth Blanchard Chess.” The actual mechanic in the SC 13D/A — and in plain legal terms — is a settlement: the company gave a board seat to an activist who had filed a 13D with proxy-solicitation language, in exchange for the activist agreeing not to use it.

Cooperation Agreements are a normal and often productive outcome of activist engagement, and the board’s decision to settle rather than fight is consistent with directors acting in good faith on a real value-realization opportunity. The mechanics are what they are, and they matter because of what happened next.

The standstill period expired before the strategic alternatives process formally concluded in March 2025. Per the Cooperation Agreement (Exhibit 10.1 to the December 18, 2023 8-K), the Cooperation Period runs from the effective date until “the date that is thirty (30) calendar days prior to the notice deadline under the Company’s Amended and Restated Bylaws for the nomination of director candidates for election to the Board at the Company’s 2025 Annual Meeting of Stockholders.” That works out to roughly mid-February 2025 — a month before the March 17, 2025 8-K formally closing the strategic alternatives process. The specific standstill restrictions Nolan was released from at expiry are detailed: no >20% accumulation, no proxy solicitation, no stockholder meeting calls, no §220 books-and-records demands, no public board-composition proposals, no §13(d)(3) groups, no public Extraordinary Transaction proposals. All of those tools became available to him again before the process closed. He used none of them. He stayed on the board, kept his seats on the Risk Management Committee and the Audit and Finance Committee, and ten months later bought more stock in the open market.

And on January 5, 2026 — twelve months into his board tenure, ten months after the standstill expired, with the stock at $12.74 in the open market and a brutal Q1 just behind the company — he bought another 20,000 shares with personal capital. He averaged down $1.50–$2.50 below his original 2023 cost. He did this from the board, after the standstill, with the process already closed and no public catalyst announced.

That is the highest-signal insider behavior pattern in the small-cap universe.

He is the activist who is still inside the building — with cost basis, working from the seat rather than from the outside. His decision to stay rather than go hostile after the standstill expired is itself a statement: he believes the inside-the-room path to value realization beats the public-fight path.

What that tells the rest of us: The buyer-set question almost certainly sits on Nolan’s desk in the boardroom. He knows the asset, he knows the cost basis, and he brings a private-equity-trained sense of how to surface latent value in an asset stack that is not yet being valued at its highest economic use.

Where the board deserves credit

Standard activist pieces pivot from here into attacking the directors. This one does the opposite.

The board recognized in 2023 that the asset was undervalued and engaged a banker to run a process. They picked a firm whose specialty turned out to be a mismatch for the asset’s most economically valuable use case — and that deserves to be named honestly, without anger. They engaged seriously with the question, ran a real process, and brought the outside activist inside rather than fighting him. That is the institutional behavior of a board that wants the right outcome for shareholders.

Scott Slater is well-positioned to chair this board for what comes next. A water-rights attorney chairing a board whose biggest unrealized value driver is water-rights optionality is the right specialization for the moment. The open question for Slater is one of pace: will the water-side work accelerate visibly over the next twelve months in the way the optionality argues for?

CEO Harold Edwards has stewarded this company for 22 years through real cycles and is widely respected as an operator within the California ag community. The structural observation worth making — and worth keeping at the governance level rather than the personal level — is that any company shifting from an operating-business posture into an asset-monetization phase faces a natural question about whether the management compensation structure is aligned with the new chapter. That is a board-level governance question Nolan now sits in the right seat to work through alongside the rest of the directors.

The board’s job from here is straightforward: refresh the banker engagement with one whose specialty matches what the asset actually is, run the right process to the right buyer set, and let the asset clear at the right price. They have already done the hard part by acknowledging there is a process to be run.

Worth the hold? The four catalysts that would re-rate the stock

These are listed in order of likelihood, not chronology.

1. A banker engagement refreshed toward a DC / digital-infrastructure M&A specialist. Lazard’s data center / digital infrastructure team, Evercore ISI digital infrastructure, Moelis & Company infrastructure group, or Greenhill / TAP energy + infra would all bring a credentialed hyperscaler and DC-platform rolodex. Any 8-K naming a new or additional financial advisor with that specialty is the cleanest single re-rating event the stock could see. I would handicap this at roughly 50–60% over the next twelve months, given an inside activist with cost basis and the natural lifecycle of a strategic alternatives review that has run its initial course.

2. Public reframe of the asset story. Investor day, conference presentation, or press release that explicitly references the land-and-water optionality with respect to industrial or data center use. Even without a deal, this resets the comp set the market uses to value the equity. ~40% probability over twelve months.

3. A hyperscaler or Musk-ecosystem land deal or option agreement. Any one of Microsoft, Google, Amazon, Meta, Oracle, SpaceX, xAI, Tesla, or a major DC platform announcing a parcel-level transaction or an option agreement on Santa Paula or Yuma Mesa acreage. This is the bull-case re-rating event. ~15–20% probability over twelve months, but the magnitude of the move would be substantial — equity to $25–35 against a current ~$13 print. SpaceX in particular is the structural left-tail surprise: Vandenberg is 85 miles away, Hawthorne is 60 miles away, the company has a documented track record of moving fast on water-secured land, and they were never engaged by the formal process.

4. SWRCB §1700 change-of-purpose filing. Any public regulatory filing that puts a number on water-rights monetization potential. This would not move the stock as much as a deal, but it would materially shift the analyst-community framing from “this is an idea” to “this is a process.” ~25% probability over twelve months.

Any one of these gets the re-rate started. Two of them gets it most of the way home.

Questions every investor or analyst on this name should be asking right now

1. Who is currently advising on the strategic alternatives review, and when does the Stephens engagement formally end? The 8-K trail on this question is the most important catalyst telltale.

2. What is the precise specification of Limoneira’s water entitlement? Class 3 Colorado River allocations, Santa Paula Basin pump rights, Yuma Mesa rights, riparian, appropriative. The investment thesis is materially different depending on which buckets hold which acre-feet. The 10-K disclosure is incomplete on this; the question deserves direct management attention.

3. What has Scott Slater been doing on the water side since he became board chair, and what is his stated view of §1700 vs. §1735 paths for the existing portfolio? This is the diagnostic question. The pace of his work is the diagnostic data point.

4. Has any hyperscaler, DC platform, Musk-ecosystem entity (SpaceX, xAI, Tesla), or infrastructure-PE firm conducted due diligence on the Santa Paula or Yuma Mesa acreage? Even if they were never the primary focus of the formal process, they may well have approached the company independently.

What the trade actually is

I am long a probe-sized position as of last month. I am holding for now. I am not adding without one of the four catalysts above firing — there is real Q2 print risk on June 9 (a meaningfully worse-than-expected adjusted EBITDA print would force a re-evaluation of the bridge math), and there is execution risk on the entire reframe regardless of probability. But the asymmetry — at a ~$230M market cap, against management’s own published NAV of $556M–$656M (≈$32–$38 per share), and an asset stack with a $500M-plus DC-substrate floor on top of that, plus a meaningful tail of larger outcomes — is significantly better than the current price reflects.

For asymmetric expression rather than common stock, look at the cleaner trade of a $12.5 or 15 strike calls with six-to-nine month expiry. There is just very little option activity so it’s just a sweetener. That captures the right-tail without carrying the operating bleed. Treat that as a structural idea, not a recommendation.

The disclaimer

This piece is opinion and analysis, not investment advice. I hold a long position in LMNR equity. I have no business or advisory relationship with the company, with Peter Nolan, with Stephens Inc., with any of the hyperscalers, Musk-ecosystem entities, or DC platforms named, or with any law firm or political entity referenced. The probability estimates throughout this piece are the mine and my AI agent’s subjective judgment, not the output of a formal model. If you trade on this, do your own work. The thesis and thinking are mine, I use AI to help build out the case, especially around things like water rights.

On sourcing. All facts, figures, and quoted material in this piece are sourced from public SEC filings (Limoneira 10-Ks, 10-Qs, 8-Ks, SC 13D and SC 13D/A filings, Cooperation Agreement exhibit), publicly-disclosed company investor materials (the November 2025 investor presentation and prior decks posted on Limoneira’s investor relations site or presented at public investor conferences), public earnings call transcripts, and third-party reporting. I have no access to non-public information about Limoneira and am not under any confidentiality obligation to Limoneira, its board, its management, its advisors, or any party referenced in this piece. The November 2025 investor presentation cited extensively is a public investor disclosure under Regulation FD.

On private-company figures. The capex and valuation figures in the table for SpaceX, xAI, and Tesla’s AI infrastructure spending are estimates derived from public reporting on funding rounds (SpaceX December 2024 tender offer at ~$350B with reported subsequent rounds materially higher; xAI mid-2024 funding at ~$50B with reported subsequent rounds at $80B+) and on publicly reported infrastructure buildout costs (xAI Memphis Colossus, SpaceX Starship development). These are not disclosed financials. Where actual disclosed figures exist (Tesla’s FY2025 capex), those are used. The relative-percentage comparisons in the table are conservative — actual 2026 capex run-rates for the private companies are likely materially higher than the table reflects, which would strengthen rather than weaken the argument that $500M is a small commitment relative to strategic fit.

But: this is the most mispriced land-and-water story I have seen in the S&P 600 in the AI capex cycle, and there is an inside activist already in the room working on it.

Worth watching and riding shotgun with Peter Nolan. It works for me both as a real asset counter-AI landing pad and still has some AI upside potential.

— Matthew

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A lot of things about this current economy don’t make sense.

The University of Michigan Consumer Sentiment Index posted a final May reading of 44.8 on Friday — a record low, down five points from April, with the survey revised lower from a preliminary 48.2 and 57% of respondents spontaneously volunteering “high prices” as the thing eating their finances. The financial press ran with it. Recession imminent. Consumer breaking. Sell something. Sell everything.

The market reacted with a bit of a yawn so far this week. Why?

The UMich Index is Not Enough

Turns out the UMich Index has been a political tell more than a consumption signal for the last few cycles — Dem and Rep sub-indices diverged by historic margins post-2020, and the headline whipsaws on partisan composition more than on actual spending intent. Treating it as one input among many is the right call.

Three other indicators printed recently. They disagree with UMich. Loudly. And yet we’ve heard very little about them. “Sentiment” is a highly political measure - both by those doing the measuring and by those being measured.

To get better idea of what’s going on the economy, its worth looking at these other measures. Here they are:

The Conference Board’s Consumer Confidence Index

Conference Board CCI is more labor-market sensitive — its “jobs plentiful vs. hard to get” spread is one of the cleaner recession leads we have, and it tracks payrolls/UR better than UMich tracks PCE. There is less political contamination because the questions are more concrete.

Finding: The CCI dropped this week at 93.1, down a rounding error (0.7 points) from April and beating the 92 estimate. The Present Situation component softened — fair enough, gas prices, geopolitics — but the Expectations sub-index actually rose 1.0 point to 74.4. Forward-looking consumers are getting less worried, not more.

The New York Fed’s Survey of Consumer Expectations

NY Fed SCE is the inflation expectations workhorse — 1yr, 3yr, 5yr inflation expectations plus labor market expectations (job loss probability, reservation wage, finding-a-job probability). This is what the Fed actually watches, so it matters for policy reaction function.

Finding: The New York Fed’s Survey of Consumer Expectations, the survey the FOMC actually anchors its inflation-expectations math against, has one-year inflation expectations at 3.6% and five-year at a stable 3.0%.

UMich’s five-year inflation expectations? 3.9%.

That’s a 90-basis-point gap between two well-resourced national surveys, run on the same population (sort of), in the same month.

The NFIB Small Business Optimism Index

NFIB is the supply side of the same coin — small business sentiment, hiring plans, compensation plans, single most important problem (inflation vs. labor vs. taxes vs. sales). Hiring Plans and Compensation Plans lead BLS wage data by ~2 quarters. The “Uncertainty Index” sub-component is underrated.

Finding: The NFIB Small Business Optimism Index, meanwhile, ticked up 0.1 to 95.9 with the Uncertainty Index dropping four points and seven of ten subcomponents improving including a six-point pop in firms reporting higher earnings.

Sure my expanded panel covers different things than UMich, but that is the point. The divergence in outlook is fact and it’s actually a textbook case for why the four-indicator panel makes sense.

The findings side by side:

That 90bp gap between UMich and NY Fed on 5yr inflation expectations is the tell. Same economy, same month-ish, two well-resourced surveys, completely different signals. The NY Fed survey is anchored — that’s what the FOMC reaction function watches. UMich is unanchored and screaming “I hate Trump.”

Not Regime Shift, But Gird Your Loins

UMich is the noise.

CCI Expectations + SCE long-end + NFIB Uncertainty is the signal.

There is not regime shift, yet.

We are also all feeling some serious price-level frustration. That’s the rational response of a US population that just watched gasoline rip on Hormuz headlines straight to the gas pump. That’s all I’m picking up in the UMich Index. CCI is labor-sensitive. SCE is what many in the Fed watch. NFIB is the supply side of the same household — small-business owners. All three say the same thing: fragile and stressed, but not broken, yet.

That’s one of the reasons why the curve isn’t pricing emergency cuts off the UMich number.

The one thing to walk away with:

The consumer is sick of high prices, but not broken. The distinction can make you some money this week.

If you position for “broken” - pile into defensive staples, dump cyclicals, buy duration on the expectation of a Fed panic — you’re trading off the noisiest, most politically contaminated read. Maybe you’re early. But the other three surveys, looked at together, describe an economy that hates the gas pump and is deeply unenthused about prices, but isn’t completely shutting the wallet or changing plans.

Watch the other sentiment indicators above in the coming weeks. If all three start rolling over together, then the regime is shifting. Right now? One is rising, one is stable, and one’s uncertainty is falling.

Hope that helps.

— Matthew

Not investment advice. Macro datapoints sourced from public releases: U. Michigan Surveys of Consumers (sca.isr.umich.edu), The Conference Board (conference-board.org), Federal Reserve Bank of New York Survey of Consumer Expectations (newyorkfed.org/microeconomics/sce), NFIB Small Business Economic Trends (nfib.com). Reader is responsible for their own due diligence.

Problem: Powell

Crazy Idea: Fire him

Short reaction post today!

Powell just threw the entire market under the bus with that performance. And it was a performance - not a serious discussion. The guy’s supposed to be the adult in the room and instead he’s out there sounding like a deer in headlights. Where do we find these guys!

Powell’s Greatest Hits Today 🎭

• “Data-dependent” — Translation: “I have no f’ing clue what I’m doing or I am politically motivated.”

• “Monitoring inflation closely” — While it’s already re-accelerating past 3.2% Isn’t this Mr Transitory?

• “Patient approach” — Patient? The house is on fire, Jerome.

• Dodged every question about fiscal dominance — Because he knows they’re trapped and he’s got a political agenda.

The man basically confirmed what every macro guy I follow has been screaming: The Fed is paralyzed. Can’t cut into 3.2% inflation. Can’t hike into -0.8% GDP growth. Policy effectiveness = ZERO. He waited too long to act and now he’s screwing everyone.

Remember he’s the guy that printed all the money.

— Matthew

Tough problem: AI removed legal friction

Crazy Idea: Immediate tort reform

What are the chances that a horde of really smart, often vindictive and newly broke people go hungry without a fight?

The Friction Was a Feature

I have often thought that our civil legal system has always had a natural speed limiter built in: money, time, and expertise.

The minimum realistic cost to bring a civil complaint/lawsuit is around $10,000 once you factor in court fees, attorney time, depositions, motions, and discovery.

That’s real friction and that friction was a feature.

$10k is enough to filter out at least some level of nuisance. It's a tax on bad-faith litigation. Tax something and you get less of it. Until recently, you needed a case that at least needed to be worth putting out some money to pursue.

What happens when AI removes money, time, and expertise as limiters?

The AI Wave

AI is dismantling the expertise barrier from both ends of the system simultaneously.

On the plaintiff side: tools like DoNotPay previewed a world where anyone can access legal logic on-demand. The FTC eventually slapped them down, requiring the company to pay $193k and barring it from claiming it could substitute for professional legal services. But they can’t stop progress. Claude, GPT-4, and a dozen specialized legal tools can now draft a complaint, identify statutory violations, and research case law in minutes. For next to nothing.

On the supply side: law firms are already cutting. Baker McKenzie eliminated between 600 and 1,000 roles (~10% of its global workforce) with AI explicitly cited as a factor. For the most part, the lawyers themselves haven’t been cut yet. But the support infrastructure that made their work possible is being hollowed out.

So as firms shrink and junior lawyers get squeezed out of a profession that’s shedding its entry-level pipeline, those lawyers don’t disappear.

They need to eat.

The most natural thing a trained lawyer knows how to do is sue.

Welcome to the Statute Jungle

Hungry lawyers are ready to eat.

American companies violate consumer protection statutes, employment laws, and data privacy regulations every single day. Not out of malice, but because the regulatory stack has become genuinely incomprehensible. CCPA, BIPA, TCPA, FCRA, ADA, WARN Act, state UDAP statutes, wage-and-hour rules that vary county to county. I could literally type any 4 letter combo and it’s probably some regulatory law they need to follow. The books are full of technical violations that have historically been too small, too obscure, or too expensive to litigate.

Historically.

They won’t be too expensive much longer.

When the cost to identify a violation drops to near zero - an AI can scan a company’s practices against 50 applicable statutes in minutes - and the cost to initiate a lawsuit drops nearly as fast, the calculus changes completely. The rate of pro se litigants relying on AI tools is already increasing according to Above the Law, and that’s before the wave of displaced legal professionals turns their skills outward.

It Will Kill Small Businesses

It’s going to get ugly. Large corporations will absorb this. Small businesses won’t. The FTC will be focused on the wrong things as usual.

Small businesses already have few ways to defend against abusive lawsuits, since budgetary constraints prevent them from employing legal or compliance staff. This isn’t theoretical, the ADA alone has produced waves of serial “tester” plaintiffs who file complaints against small businesses with no intention of ever being actual customers, extracting settlements through pure cost asymmetry. The U.S. lawsuit system already costs America’s small businesses $160 billion annually according to the Institute for Legal Reform

Litigation expenses for small businesses have increased by nearly 60% over two decades, with average costs ranging from $3,000 to $150,000 per case. If litigation results in a settlement or judgment against the business, small businesses may struggle to pay, leading to further financial difficulties or even bankruptcy. They have no chance against hungry piranhas.

I read that Walmart gets sued an average of 20 times a day - roughly 5,000 cases a year (NatLawReview) They can afford it, you can’t.

This becomes yet another structural advantage for scale. Big companies can build compliance infrastructure. They can run AI against their own practices before plaintiffs do. They can maintain in-house counsel ratios that small businesses can never afford.

It’s moat for them, death for you.

What This Does to Human Beings

On personal level, you better watch out too. You a walking target if you have a job.

This is terrible for society.

Think about what happens when individuals and small business owners internalize that any human interaction is a potential lawsuit. People stop interacting with any level of humanness.

The rational response to a zero-friction litigation environment is to reduce exposure.

And the primary way you reduce exposure is to reduce interaction.

When every interaction carries legal tail risk, people stop taking them.

No Tort Reform; Just Torture

This is going to get worse before it gets better.

The right long-term answer is tort reform —> higher bars for filing, fee-shifting provisions with real teeth, loser-pays where the violation is technical rather than material.

Ain’t gonna happen in the near term.

In the meantime, we’re entering an era of technically-valid, practically-marginal civil litigation at industrial scale. Companies will have to budget for it the way they budget for theft, a cost of doing business, paid quietly in settlements that never see a courtroom. Small businesses will eat it or fold. Almost always fold. Individuals will pull back from each other.

The displaced lawyers won’t be on the street. They’ll be at their laptops, with an AI co-pilot, hunting for violations in your break policy. Eating your lunch.

Good luck out there.

— Matthew

Thoughts? Hit reply. Or don’t — I’ll probably just sue you.

Tough Problem: AI changes the economics of movie making

Crazy Idea: Go make a movie

Everyone’s panicking about AI video. A few weeks ago, Seedance 2.0 dropped and we immediatly got things like a hyper-realistic clip of AI-generated Tom Cruise fighting Brad Pitt on a rooftop, and the internet lost its mind. Rightfully so. Disney fired off cease-and-desist letters. Deadpool & Wolverine co-writer Rhett Reese watched it and declared, “It’s likely over for us.” Guillermo Del Toro says he’d rather die than use AI in his films. Rian Johnson called it a technology that’s “making everything worse in every single way.”

I’ve spent enough time with these video models and pipeline tools to have a different take. I think there’s a silver lining here and it’s one that most people are maybe missing because they’re too busy mourning a version of Hollywood that wasn’t worth saving in the first place.

The Movies That Are Actually Threatened Were Already Dead

Let’s be specific about what AI puts at risk. It’s not cinema. It’s the $200-million, 300-person-crew, committee-approved, four-quadrant tentpole. The Marvel Universe movie. The franchise installment that exists not because someone had a burning story to tell, but because a studio needed to justify the logos on lunch boxes.

And the market is already telling us what it thinks of those films. “Superhero fatigue” isn’t a buzzword anymore - it’s a balance sheet problem. Captain America: Brave New World did $415 million against a $180 million budget. Thunderbolts pulled $382 million on the same budget. Both are essentially break-even propositions once you factor in marketing. Even films with strong reviews can’t break through the ceiling. The age of the automatic billion-dollar blockbuster is over.

As one exhibitor told Variety: “People haven’t stopped loving superhero films, but they stopped loving mediocre entries in those worlds. There’s a demand for higher quality.”

A film teacher quoted in Verde Magazine nailed the core issue: “People are just getting tired of the same old plot structure. There’s going to be the hero, and the villain, and the big showdown, and at least three big action sequences, and lots of CGI. And there’s only so many variations you can have on that formula.”

These movies were soulless to begin with. They were so expensive and so risky that there was no room left for art, for genuine acting, for the kind of writing that makes you lean forward in your seat. When your film costs a quarter-billion dollars, you don’t take creative risks — you run focus groups. That’s not filmmaking. That’s product management.

What AI Can’t Replicate

Here’s what the doomsayers miss: AI video tools are extraordinary at generating spectacle. They can conjure cityscapes, animate explosions, create seamless visual effects. What they absolutely cannot do - and won’t be able to do for a while, if ever - is replicate the electricity between two actors in a room.

Think about the films that endure. Glengarry Glen Ross - a handful of guys in a real estate office, and you can’t look away. The Conversation. Dog Day Afternoon. Get Carter with Michael Caine. Network. Chinatown. The great films of the ‘50s through the ‘80s worked not because of visual spectacle but because the writing crackled and the performances were so alive that you forgot you were watching a movie.

The pacing was right. The lack of CGI wasn’t a limitation - it was a discipline. It forced filmmakers to earn every frame through story, character, and craft. When you can’t blow something up to hold the audience’s attention, you’d better have something to say. Film.

As XYZ Films’ Nate Danella put it: “Fundamentally, I believe in the human flaws, in the good and bad that comes with human filmmaking.” His colleague added the perfect coda: “If you don’t have that humanity in it, it’ll be all frosting and no cake.”

The Real Opportunity: Small Teams, Big Stories

I don’t think we’re headed toward a world where one person with a laptop replaces Paramount. I think we’re headed toward something more interesting: a resurgence of small, creative troupes — writers, actors, directors working in tight collaboration, who use AI tools to strip out the costly friction of production while doubling down on the things that actually matter.

The economics are already pointing this way. As indie producer Bryn Mooser told The Hollywood Reporter, AI represents “the democratization of studio-level films.” An $80 million animated feature that was once a non-starter for independent financing becomes viable at under $10 million with AI assistance. Not because AI replaces the creative team, but because it handles the expensive scaffolding — the establishing shots, the VFX cleanup, the localization — so that budgets can flow toward more shooting days, better talent, and the kind of patient storytelling that the studio system has systematically squeezed out.

We’re already seeing proof of concept. Ryan Coogler made Sinners for $90 million — a fraction of a Marvel budget — and it grossed $365 million worldwide, becoming the highest-grossing original film of the 2020s. And I know these budgets get much, much lower. We’ve already have lots of examples of films shot on a shoestring, winning audience and critical acclaim, and that should remind everyone that the most compelling stories on screen are often the smallest in scale. The writers are out there. The actors are out there.

As No Film School observed about the current box office: “Originality is King again. Audiences are craving new stories, new worlds, and new characters. Your original screenplay and your unique vision have never been more valuable.”

A New Golden Age for Human Craft

Here’s my prediction: we won’t see the 200-to-300-person mega-productions much longer. Catering might take the biggest hit. What we’ll see instead is something that looks a lot more like the ‘70s - small ensembles, writer-directors with genuine vision, stories built on human texture rather than pixel count. The tools will get cheaper and more powerful, and that will lower the barrier to entry for people with taste and talent. But the differentiator - the thing that separates signal from noise in a world flooded with AI-generated content - will be the quality of the writing, the authenticity of the performances, and the specificity of the human experience on screen.

As one commenter on The Media C-Suite wrote: “It’s not studios that make films, it’s talent - which is something AI can’t replace. What AI will do is make it easier for talent to make films.”

I didn’t like the movies Hollywood was making anyway. The last fifteen years of franchise-dominated, CGI-saturated, risk-averse filmmaking already felt like a creative dead zone. So I’m not mourning the demise of the machine. I’m excited about what comes after it.

Give me more Glengarry Glen Ross. Give me more Michael Caine in a ‘70s thriller. Give me small rooms, great actors, and writers who trust their audience. That’s the renaissance AI might accidentally make possible - not by replacing human creativity, but by finally making it affordable again.

Hollywood is in trouble. Human creativity isn’t. Those have always been two very different things.

— Matthew

This is what I put together.

There is a Real Demand Case — Regardless of Whether the Alzheimer’s Signal Is Real

There are at least 4 growth vectors that make creatine interesting:

Cognitive health — the signal that changes the calculus. Let’s start with the study that caught my attention. Researchers at the University of Kansas gave twenty Alzheimer’s patients 20 grams of creatine monohydrate per day for eight weeks. Alzheimer’s patients are supposed to deteriorate. These patients improved — across four cognitive measures, with statistical significance on three of them.

The limitations are real. n=20, no control arm. You cannot cleanly separate a creatine effect from natural disease progression, placebo response, regression to the mean, or test-retest familiarity. The statistical significance is genuine but fragile at this sample size.

The signal is also real, though. The median is moving up in a population where it should be moving down. Prior creatine trials in Huntington’s and ALS showed nothing — but those are motor-dominant diseases. Alzheimer’s is fundamentally an energy metabolism disease. Creatine is an energy metabolism molecule. The mechanistic fit is tighter here than it was in the trials that failed. If a 200-300 patient Phase 2 study reproduces this with a proper control arm, creatine enters clinical channels for cognitive decline virtually overnight — it’s cheap, safe, has thirty years of safety data, and requires no FDA drug approval. That inflection point is probably three to five years away. The window between now and then is where this thesis lives.

GLP-1 co-therapy. Forty million Americans are on or about to start GLP-1 drugs. These drugs work. They also cause muscle loss alongside fat loss, and every major endocrinologist and sports medicine physician is now recommending creatine as the standard co-therapy. That’s a medically-directed demand channel that didn’t exist three years ago. When physicians recommend something through clinical channels rather than supplement retail, the quality and sourcing requirements change entirely. Seems big.

Longevity mainstreaming. Creatine is transitioning from supplement to something closer to a semi-essential nutrient. The EU has approved health claims. Women are now a major adoption cohort. The global market is projected to reach $4.7 billion by 2034 from $0.7 billion today — a 6x expansion over ten years — and clinical adoption hasn’t begun.

Performance cognition. A meaningful share of developers, founders, and operators are already taking creatine specifically for cognitive performance. The research supports it: creatine improves brain energy metabolism in healthy adults with documented effects under stress and sleep deprivation. This is quietly standard practice in knowledge-worker culture.

Any one of these forces would merit attention. All four converging simultaneously against the same supply chain is the setup.

The Tough Problem - Supply

China controls roughly 80% of global creatine production. That’s not concentration — it’s near-total dependence on a single geopolitical adversary for a molecule that physicians are beginning to prescribe.

The immediate problem is quality. Peer-reviewed analysis of Chinese-sourced creatine has documented contamination with up to 5.4% dicyandiamide, 0.09% dihydrotriazine, 1.3% creatinine, dimethyl sulfate, thiourea, and elevated heavy metals including mercury and lead. These are the byproducts of different chemical precursors, poorly controlled synthesis, and inadequate filtration. Dihydrotriazine is structurally related to known carcinogens. The established tolerable daily intake for dicyandiamide is 1 mg/kg body weight; some analyzed products exceed 50 mg/kg concentration. This is not hypothetical — it’s documented contamination in products on shelves now.

The larger problem is structural. In 2021-2022, Chinese factory restrictions and trade friction moved creatine from ~$5/kg to ~$42/kg — an 8x spike on sports nutrition demand alone. Clinical demand hasn’t materialized yet. When it does, the 2021 price event is the preview of what supply disruption looks like, not the main event.

The contamination problem, on its own, has a policy solution: raise FDA import standards, require pharmaceutical-grade documentation for clinical channels, let China meet the bar or lose the market. Regulation solves quality without requiring domestic manufacturing.

The concentration problem is different. When 80% of supply sits in a single adversarial country and clinical demand arrives on top of existing sports nutrition demand, the 2021 price spike is the preview, not the main event. How that concentration became permanent — and what it actually means — is a longer story.

Why There Is No US Domestic Producer

The chemistry is not the barrier. Creatine monohydrate is synthesized from sodium sarcosinate and cyanamide — two precursors combined in reactors at 60-80°C, with creatine precipitating as water is added, then crystallizing, filtering, drying, and milling. The process is well understood and has been for decades. China’s dominance is not a function of technical complexity. It’s the outcome of deliberate industrial policy, executed over twenty years and ratified by American legislative decisions that have never been accounted for.

China dumps the US industry out of existence. Through the 1990s, China’s state-subsidized manufacturers — backed by government capital, subsidized loans, and effectively zero environmental compliance costs — flooded the US market with creatine priced below fair value. This was not market competition. It was an industrial policy campaign. The domestic US creatine industry, which had existed and served the early bodybuilding market, was systematically undercut until it ceased to function.

One company fights back — and wins. Pfanstiehl Laboratories of Waukegan, Illinois filed an antidumping complaint in February 1999. The ITC investigated and found unanimously that the US industry had been materially injured. On February 4, 2000, the Department of Commerce issued an antidumping duty order. The PRC-wide dumping margin was 128.63% — Chinese manufacturers had been selling creatine into the US market at less than half the cost of production.

Congress opens the floodgates anyway. Three months after the antidumping order was issued, the House passed the United States-China Relations Act, granting China Permanent Normal Trade Relations status. Clinton signed it. China joined the WTO in December 2001. What followed, across sector after sector including specialty chemicals, was Chinese state-subsidized production operating with structural cost advantages no American company could match: externalized environmental costs, government capital support, accumulated scale, and control over precursor supply chains.

The protection lapses because there is nobody left to defend it. Antidumping orders require a five-year sunset review — the domestic industry must affirmatively request renewal or the protection is revoked. In 2005, the Department of Commerce initiated that review. No domestic party responded. The US creatine industry had been eliminated so thoroughly that there was no one left to file. On April 4, 2005, the order was revoked. Chinese creatine returned at standard tariff rates. The window Pfanstiehl had fought to open closed permanently.

Tariffs since have not changed the underlying calculus. Recent SCOTUS ruling notwithstanding, import rates on creatine range from 3.7% to 25% and are moving higher, but tariffs raise prices without building plants. The structural economics never recovered because no premium market segment, nor government subsidy, existed to justify rebuilding against Chinese commodity pricing. That premium segment is now arriving, twenty years after the industry was destroyed. And so is the subsidy.

There Is One Non-Chinese Producer

One company produces pharmaceutical-grade creatine monohydrate outside China: AlzChem Group, headquartered in Bavaria, Germany. Their branded product — Creapure — has been the quality standard used in virtually all serious clinical research on creatine, precisely because researchers required certainty about what they were administering to subjects.

The moat is not the reaction chemistry, which is well known. It is purification, impurity documentation, and — most importantly — vertical integration into precursor inputs. AlzChem manufactures their own cyanamide and sodium sarcosinate rather than sourcing them externally. That means control over input pricing, supply continuity, and the full quality documentation chain from raw material to finished product. When creatine enters clinical prescription, the HCP channel — physicians, hospital systems, compounding pharmacies — will require exactly this: pharmaceutical-grade purity with auditable provenance from precursor to finished ingredient. AlzChem is built for that specification. No other Western producer is.

Their stock has appreciated 560%+ over the past three years. Their current €120M capacity expansion is deepening vertical integration further - and the same US government that sold out the domestic producers are now funding their plant in the US.

Why the DoW (frm DoD) Is Funding This German Company — And It Has Nothing to Do with Health

The US Department of Defense War has committed $150 million to help AlzChem build a US manufacturing facility. The commitment is not specifically for creatine. It is for nitroguanidine — a propellant compound used in artillery shells, triple-base ammunition, and airbag inflators. AlzChem is one of the only non-Chinese producers of pharmaceutical-grade nitroguanidine, and the DoW needs a domestic source. The structure is a preliminary contract: AlzChem identifies a suitable US site, and the DoW pre-commits the capital to build by end of 2029.

Nitroguanidine and creatine monohydrate share the same upstream chemistry — same precursor infrastructure, same NCN chemistry platform, same core manufacturing competency. A US nitroguanidine facility built with DoD capital is structurally a beachhead for US creatine monohydrate production from the same company. The manufacturing infrastructure, regulatory relationships, and domestic precursor supply chain transfer directly. Most analysts are treating this as a defense subsidy. It is a US market entry for the only non-Chinese pharmaceutical-grade creatine producer in the world, funded by the US government.

The uncomfortable corollary: the DoW is committing $150M to give a German company a US manufacturing foothold because there is no American company capable of doing what AlzChem does. China’s industrial campaign in the 1990s did not merely eliminate the US creatine industry — it hollowed out an entire category of NCN chemistry manufacturing. The capability atrophied. The institutional knowledge dispersed. Now the United States is paying a foreign ally to rebuild it onshore, because no domestic alternative exists to receive the contract.

That’s the policy failure. Here’s what it means strategically: in a Taiwan conflict scenario, Chinese creatine supply goes to zero — not because it’s dirty, but because the trade routes close. A therapeutic being prescribed to tens of millions of Americans, sourced 80%+ from a single adversary nation, with no domestic production and no allied backup at scale. The DoW isn’t funding a German chemical company because creatine is good for soldiers’ workouts. They’re funding it because the NCN chemistry dependency is a real vulnerability — and this contract is the most direct evidence that someone in the procurement chain understands exactly what was lost.

The Investment Position

AlzChem Group (ACT1.DE) is the direct expression of this bull creatine thesis in public markets.

The bull case is not volume growth in sports nutrition. It is re-rating. The market currently prices AlzChem as a specialty supplement company. If clinical adoption plays out — if creatine enters formularies for Alzheimer’s prevention, GLP-1 co-therapy, and longevity protocols — the purchasing specification transforms. Physicians and hospital systems will require pharmaceutical-grade purity with documented non-Chinese provenance. That is a market AlzChem can serve at scale. No other company can. A business priced as sports nutrition that actually functions as pharmaceutical infrastructure trades at very different multiples.

The DoD contract is a second vector the market has not fully priced. The $150M commitment establishes a US manufacturing presence before the clinical market materializes — capacity building funded by the customer, ahead of demand. The same facility that produces nitroguanidine for artillery shells produces creatine monohydrate for clinical prescription. The infrastructure investment is underwritten by the Defense War Department.

The position on this: long AlzChem, not despite the policy failure documented above — because of it. The institutional failure that produced this supply chain crisis is precisely what makes AlzChem’s moat durable. If Washington were likely to fund a domestic newco and redirect the next contract toward American manufacturers, the calculus would be different. The evidence — legislative, regulatory, and procurement — points the other direction. The path of least resistance runs through Bavaria again. It ran there last time.

The policy argument and the investment thesis are the same analysis. Washington had twenty-five years to build a domestic alternative and didn’t. AlzChem wins because DC won’t fix it.

Long ACT1.DE. This is not financial advice. Do your own work.

The Crazy Idea — What Should Actually Happen

The $150M that went to AlzChem should have gone to an American newco. That no such company existed to receive it is the indictment. The partial proof of concept that one could exist is already in Nebraska.

Vireo Systems / CON-CRĒT, Plattsmouth, Nebraska is the first US domestic creatine manufacturer — a $16.6 million project producing 500,000+ kg annually in a GMP and ISO certified facility with Walmart as anchor distribution. The state incentive model worked. The facility exists.

The critical limitation: Vireo makes Creatine HCl, not Creatine Monohydrate. These are different molecules. Monohydrate is the gold standard for 95%+ of clinical research and the form that would be prescribed for Alzheimer’s and GLP-1 applications. Vireo has demonstrated that domestic creatine manufacturing is viable. It has not solved the pharmaceutical-grade monohydrate problem.

The actual gap is a US-based, pharmaceutical-grade creatine monohydrate manufacturer, vertically integrated from precursors through finished ingredient, purpose-built for the clinical channel. Competing not on commodity price but on provenance — non-Chinese, auditable, DoW/FDA-approvable — and on purity documentation that clinical buyers will eventually require.

The capital requirement is $50-150M. The DoW just demonstrated willingness to commit exactly that figure to bring NCN chemistry to US soil. The same argument applied one level down the chemistry stack — to the molecule about to be prescribed to tens of millions of Americans — is not a policy stretch. It is the obvious next step that the current contract structure forecloses.

The timeline is the constraint. EPA permitting for cyanamide handling: 12-24 months. FDA GMP certification: 18-36 months. HCP channel qualification: non-trivial. From groundbreaking to meaningful clinical-grade output is 3-4 years. That window has to be started before the Phase 2 RCT results make the opportunity obvious — because once it’s obvious, AlzChem’s government-funded US facility will have foreclosed the domestic market.

Downside scenario if the Alzheimer’s thesis doesn’t replicate: a premium domestic supplement manufacturer in a market growing 18%+ annually. The asymmetry is favorable.

I am calling for this explicitly, while acknowledging it probably won’t happen without deliberate policy action that is not currently on the legislative agenda.

What Would Change the Thesis

The RCTs don’t replicate. Larger controlled trials show no cognitive benefit in Alzheimer’s populations. This is the primary risk. The Kansas pilot is promising, not proven.

A superior Alzheimer’s treatment wins the market before creatine arrives. Leqembi, donanemab, or a next-generation therapy becomes standard of care for cognitive decline before creatine enters clinical channels. Plausible — though even in that scenario, creatine likely plays a supportive energy-metabolism role alongside disease-modifying treatments. The GLP-1, longevity, and performance cognition vectors are independent of the Alzheimer’s thesis.

The clinical channel proves indifferent to provenance. Medical adoption occurs but physicians and hospital systems decline to specify non-Chinese sourcing. Unlikely given the current geopolitical direction and the direction of DoW procurement policy. Not impossible.

New non-Chinese capacity enters at scale. Multiple producers in Germany, the US, or India announce pharmaceutical-grade monohydrate capacity and eliminate the supply gap. Watch AlzChem’s capacity guidance and any new entrant announcements carefully.

Chinese supply becomes structurally reliable. Trade tensions ease, the provenance premium evaporates. Low probability in the current environment.

A different molecule captures the GLP-1 co-therapy market. The longevity and Alzheimer’s vectors would carry the thesis without the GLP-1 leg, but the total addressable market contracts.

Who Should Be Reading This

The questions this analysis doesn’t fully answer — and that any serious operator or policymaker would need to resolve: Who currently produces cyanamide and sodium sarcosinate outside China, and at what scale? What are the precise impurity specifications and documentation standards that HCP channel buyers require today? What does a US cyanamide handling compliance pathway look like under current EPA rules? Is there an early-stage company already attempting to build the monohydrate version of what Vireo built for HCl?

That last question is the most important. The most intelligent version of the opportunity here is probably not building the plant — it’s finding the company that’s already attempting to, or directing the next DoW preliminary contract toward a domestic newco rather than a foreign incumbent.

If you’re an investor, operator, policymaker, or someone who just checked the label on their creatine tub — the questions are now harder to avoid.

This is not financial advice. The author is probably wrong about everything. The author holds a long position in ACT1.DE. Not a clinician, chemist, or lobbyist — but someone who thinks seriously about supply chains, industrial policy, and where structural gaps produce investable theses. Corrections, additions, and building inquiries welcome.

— Matthew

Check out my daily macro brief as well.

I’m leaning toward adding a separate Substack with just my occasional raw investment research and notes for those who prefer their data straight up.

If you want in, let me know. If the interest is any there, any at all, I’ll start shipping some posts.

Here’s an example of a typical screen I’ll run for myself any given morning with my analyst. I’ll follow it up with deeper dives into a name or two. Today, I had some small robotics names I wanted to check in on. Not investment advice, just some thoughts to get you thinking.

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SMALL CAP ROBOTICS QUICK SCREEN - January 28, 2026

Macro Context: US ECON (Growth ↑, Inflation ↓) | VIX: ~15-16 (Investable Bucket) | Pro-Growth Positioning Favored

SERV - Serve Robotics | $13.03 | Mkt Cap $952M

The “physical AI” darling just announced a $29M stock deal to acquire Diligent Robotics, expanding from sidewalk delivery into healthcare. Northland calls it “one of the best investments in physical AI” with 150% upside. Management guiding 10x revenue in 2026 from 2,000 active robots. Still burning ~$25M/quarter but sitting on $210M cash. Nvidia selling its 10% stake spooked sentiment, but the stock is basing out. QUAD 1 tailwind for tech/industrials. Next catalyst: Q4 earnings Mar 5.

Signal: MODERATE LONG | Verdict: RESEARCH

KITT - Nauticus Robotics | $1.28 | Mkt Cap $36M

Underwater robotics play that nearly got delisted twice in 2025. Just regained Nasdaq compliance in December. The Aquanaut subsea robots look interesting for energy infrastructure and deep-sea mining, but this is a company with $5.5M cash against $46M in current liabilities. Q3 revenue hit $1.98M (up 435% YoY), but they lost $6.6M in the quarter. Balance sheet is a prayer, not a plan. May need capital raise at terrible terms.

Signal: WEAK LONG (Speculative) | Verdict: PASS — revisit post-capital raise

ARBE - Arbe Robotics | $1.40 | Mkt Cap $140M

4D imaging radar chipsets for ADAS and autonomous vehicles. Picks-and-shovels play on autonomy with real news flow: won a China state-owned automaker L4 radar deal (production Dec 2026), secured $15.7M convertible bond follow-on, and announced NVIDIA computing integration at CES. But 2024 revenue was $768K—basically pre-revenue. Burning ~$11M/quarter with Dec 2026 bond maturity looming. QUAD 1 tailwind but requires patience.

Signal: WEAK LONG | Verdict: WATCH — revisit on production timeline clarity

RR - Richtech Robotics | $4.94 | Mkt Cap $1.06B

CES 2026 star. Unveiled “Dex” industrial humanoid robot on NVIDIA Jetson Thor and retail went feral—stock up 70% YTD. Real products in commercial deployment: Matradee restaurant bots, ADAM bartenders, DUST-E cleaning robots. HC Wainwright target $6. The catch: FY24 revenue was DOWN 52% to $4.2M (business model pivot), losses ballooned, warrant dilution relentless. Momentum name but extended short-term.

Signal: MODERATE LONG (Momentum) | Verdict: RESEARCH — wait for pullback to $4.00-4.20

STXS - Stereotaxis | $2.56 | Mkt Cap $233M

The “boring robotics” play—medical robotic magnetic navigation for cardiac ablation. Just got FDA clearance for GenesisX, CE Mark for Synchrony, and signed CardioFocus partnership for robotic Pulsed Field Ablation. Unlike others here, this is a real business: Q4 revenue guided >$9M, full-year growth >20%, recurring revenue at $5.6M/quarter with 67% gross margins. MAGiC catheter generating >$300K in first two months. High insider ownership (30%) is a nice tell. Healthcare underweight in QUAD 1 but medtech marches to its own beat.

Signal: MODERATE LONG | Verdict: RESEARCH — best risk/reward in the group

SUMMARY

SERV ($13.03) - Mod Long — QUAD Tailwind — Catalyst Mar 5 — RESEARCH

KITT ($1.28) - Weak Long — QUAD Neutral — Catalyst Mar — PASS

ARBE ($1.40) - Weak Long — QUAD Tailwind — Catalyst Mar 4 — WATCH

RR ($4.94) - Mod Long — QUAD Tailwind — Catalyst Done — RESEARCH

STXS ($2.56) - Mod Long — QUAD Neutral — Catalyst Mar — RESEARCH

Bottom Line:

Deep Dive: STXS - Best fundamentals of the bunch. Real revenue, FDA tailwinds, insider alignment.

Momentum Play: RR - If chasing the humanoid theme, this has actual products. Wait for pullback.

Watch: ARBE - China L4 win is meaningful if it materializes. Revisit Q2.

Pass: KITT - Balance sheet is a mess. Too much survival risk.

“The whole world would be wise to pay close attention to the drama of incipient decline and resistance now unfolding in California, for the future that begins there tends to spread across the world.”

Three decades later, that “incipient decline” has lead record numbers of businesses and productive residents leaving. The ghosts of 1991 remind us that California’s current state is not merely the result of a few bad bills in Sacramento; it is the final act of a long, willful neglect of the constitutional firewalls and civic foundations that once protected the Republic.

A population incapable of calculating the compounding interest of its own debt is a population incompatible with a free Republic.

From Falling Down to Flying Away

Just two years after that TIME piece, Hollywood released a dark commentary on the state’s fraying nerves: Falling Down. We watched an ordinary defense worker abandon his car in a traffic jam and embark on a crusade across a decaying Los Angeles.

While we need not worry about billionaire venture capitalists losing their shit at a ‘Whammy Burger’ like in the movie, the underlying frustration remains. Today’s most ambitious “makers” have realized that the State is now governed by a class that gets rich solely by presiding over decline.

Hollywood, of course, cast the fed-up main character as the villain - a decision that, in retrospect, looks like the industry digging its own grave. They were so intent on pathologizing the breaking point that they missed the signal for the noise: the very civilization that built their soundstages was being liquidated by the same policies they championed. Politics truly is downstream from culture.

For the last 30 years, California culture slowly rotted away. In modern California, you are more like to find children in the government schools filing remedial math than water in the hydrants. If you are a builder, a ‘maker’, you will certainly find a suffocating regulatory regime and a legal system engineered to favor the ‘takers.’ The zombie-like citizenry seems aloof; a population incapable of calculating the compounding interest of its own debt is a population incompatible with a free Republic.

Threatened by confiscatory taxes and a bloated bureaucracy, today’s frustrated citizens simply opt to fly away. California’s rulers view the exit of these ‘makers’ as a tactical victory; the clearing of the board for their utopian ambitions. They don’t mourn the loss of diversity; they celebrate the departure of dissent.

Nowhere to Run

To the refugees self-deporting to Texas or Florida: fleeing a burning house provides a reprieve, but not a remedy. You cannot outrun this fire. The architects of California’s decline have no intention of letting their failure be measured against a successful free-market benchmark. They intend to burn not just the house, but the entire neighborhood.

To hide their failure, California’s rulers must export it. They cannot allow a benchmark like Florida or Texas to exist. They intend to light the match in Sacramento specifically so the fire spreads to Austin, Nashville, and Miami. Wherever you land, their comrades will be waiting.

Beautiful But Broken

The ‘takers’ long, slow march through our institutions is complete in the Golden State. To restore California to its status as the ‘Promised Land’ for America’s best requires a wholesale reform of every single institution. We need inspiring, selfless leaders to begin the arduous task of rolling back the architecture of the administrative state in its entirety.

Eliminating fraud, restoring integrity to elections, and ensuring an educated citizenry require brave souls willing to pledge “their lives, their fortunes, and their sacred honor” to serve. Without them, California will become Italy or Brazil - beautiful, but broken.

Can California turn course? Not without her best engaged in the restoration.

In 1850, Frédéric Bastiat, a Frenchman with the unfortunate habit of being right about everything, observed a curious glitch in the civilizational matrix. He noticed that the Law, historically intended as a bulwark for private property, was being steadily retooled into a highly efficient vacuum cleaner for the citizen’s pockets. He called this “Legal Plunder.” For roughly a century, the American Republic stood as the world’s only functioning firewall against this particular brand of larceny, largely because the Founders had the foresight to treat the federal treasury like a loaded gun.

Not Ours To Take

Under the old regime, guided by what the Romans called the Mos Maiorum, or the “custom of the ancestors”, Uncle Sam was a lean, occasionally petulant umpire. Balls and strikes. He subsisted on a diet of tariffs (plunder of different kind!) from imported silks and the excise on a gentleman’s tobacco. If the federal government harbored any ambitions of a “direct tax” on a man’s actual existence, it ran headlong into the Apportionment Clause. This was the constitutional equivalent of a “No Trespassing” sign; it mandated that taxes be levied proportionally across the states. It was the ultimate social contract: if a Congressman had the audacity to demand a dollar from you, he had to look his own neighbor in the eye and demand the same.

Consider the awe of Alexis de Tocqueville, who in 1830 marveled at an America where the state was essentially a ghost. Invisible. He noted that “the motor is nowhere to be seen,” yet the laws were executed with a vigor that left Europeans (accustomed to the heavy hand of over-administration) utterly baffled. This was a society that moved itself, without the need for a central bureaucrat to grease the wheels with other people’s money.

Decades later, the legendary Davy Crockett would provide the moral exclamation point to this era. When faced with a bill to provide a widow with public funds, he famously rebuked his colleagues with the icy reminder that “it is not ours to give.” Crockett understood what the modern “Pied Pipers” have spent a century trying to make us forget: that the legislature has no “charity” to dispense, only the seized property of the people they represent. It’s a sentiment that makes the modern public school educated voter squirm a bit, but was core to the founding of the country.

Surprise, You’re Rich

Then came 1913. The year the Pied Pipers of the Progressive era finally led the children into the mountains. A concern over “swollen fortunes” mixed with a rising ambitious government class eager to get into line of business to sway the public to change the Constitution.

The 16th Amendment was not merely a “modernization” of the fiscal apparatus; it was a moral coup d’état. It was sold with the same greasy sincerity a used car salesman uses to move a lemon. “Fear not,” the Progressives cooed, “this is merely a levy on the unimaginably opulent. It shall never touch the common man.” It was the original “Tax the Rich” bait-and-switch—a populist siren song that convinced the many to sharpen the knife that would eventually be used to skin them. In 1913, only one in 271 Americans was invited to pay, at a rate so microscopic, 1%, that it seemed more like a rounding error than a revolution. Proponents scoffed at “alarmists” who suggested the rate might one day reach twenty percent. Twenty percent? One might as well have predicted that horses would fly.

The ‘alarmists’ were proven to have Nostradamus-like abilities. You my friend, are rich.

Well, the children went off the cliff and the rats are still here (and probably always will be) because the Pied Pipers were playing a more subterranean long game. By excising the Apportionment Clause, they didn’t merely secure a new revenue stream; they legalized envy. They opened the door to legalized plunder. They successfully transformed the federal government into a gargantuan, state-sponsored, idiocracy-powered vending machine where a simple majority can vote for a productive minority to pay for the refreshments. It is an immutable law of political physics: perverted law inevitably causes social conflict. So here we are , divided, with a broken system, just the right environment for a new breed of progressives to regurgitate the same income tax arguments, only this time to push a wealth tax. Less freedom will follow.

A Note on Mr. Khanna

We are often tempted to treat Mr. Khanna with the soft bigotry of low expectations - to assume he is merely an earnest victim of a substandard California education (he’s from Pennsylvania!), genuinely unaware that he is playing with civilizational matches. But that is far too charitable. Ro Khanna is no naif; he is a man of significant credentialed intelligence who knows exactly what he is doing. He is not stumbling into these arguments; he is carefully choosing his notes on the Progressive flute to see just how many children will follow him toward the cliff. He understands the history, he understands the math, and yet he persists in peddling the same “Bait and Switch” arguments precisely because he knows that his base has already been lobotomized by government schools and media. It’s his path to more power.

A Broken System

Perhaps Mr. Khanna truly believes a wealth tax is just the remedy we need to cure the ills of our divided nation. But we know how this plays out. Bastiat warned that once the ‘excluded classes’ realize they have the franchise, they don’t seek to end the plunder - they seek to participate in it, whether that’s through confiscatory taxes or elite educational instructions like the “Learing Centers” in Minnesota. I would certainly like to see all Americans improve their lives, but this is not the way to more freedom and a better country - as good false philanthropy might make Ro Khanna feel. Corrupt and ineffective governments should be the last institutions that we entrust the fruits of our labor or the wealth of our nation. Less, not more government is the way.

1913 was the moment we ceased being independent stakeholders and became clients of a predatory administrative state. The radical Progressives of the era didn’t just rewrite the tax code; they broke the seal. The income tax brought an expanded Federal government and less individual freedom. Progressives ushered in American version of Lex Sempronia Frumentaria. From here forward, the bread and the vote would be linked. And as any armchair historian of the late Roman Republic can tell you, once the mob discovers it can vote itself the contents of the granary, the music doesn’t stop until the granary is empty and the flute player is thrown from the Tarpeian Rock.

Mr. Khanna has already caused the largest exit of wealth from California ever according to Chamath Palihapitiya. Mr. Khanna reponse? He mocked them because he knows he doesn't need because he’s coming after your money, too. Already he looks to make his wealth tax Federal. How long before he wants to build a wall?

Writer’s Note

A Note on Manners: While the preceding may strike some as a trifle uncharitable toward Mr. Khanna, I assure you it is born of the highest respect for the intellect he purportedly possesses. In an age of performative ignorance, I find it only polite to assume a man of his standing is a conscious architect of his own ideology, rather than a mere passenger on the Progressive short-bus. So he has that going for him.

I am an enthusiastic student of the Western Civilization and a firm believer that Ronald Reagan’s “nine most terrifying words” were intended as a warning and a punchline, not a creed and an outline.

They congratulate Indiana out of one side of their mouth but condemn the system that produced it out of the other side. We are told that college sports are “broken.” I am quite certain they are not.

You’ll recognize the guilty by their platitudes:

→ The transfer portal is out of control,

→ NIL collectives are “buying” players, and the lack of a salary cap has turned the locker room into a band of Hessians.

→ This is followed by the usual pieties about “greed” and “student-athletes,” as if a twenty-year-old making money is a violation of the natural law.

And therefore, the cry goes up that “something must be done” - usually involving a massive dose of collective bargaining to “stabilize” the sport.

Hogwash.

I am convinced of the exact opposite.

Free markets are turning college sports into the finest professional league in the Republic - provided the bureaucrats don’t find a way to ruin it.

College sports are now operating closer to a genuine free market than any other “professional league” in America. What we are witnessing is the glorious, messy reality of athletic labor when you stop hitting it over the head with coordinated wage suppression.

College sports now resemble a real free labor market, offering both opportunity and a robust form of civic pride.

Professional sports, meanwhile, resemble a managed cartel.

We’ve Been Duped by the Cartels

We have been conditioned to view the NFL, NBA, and their ilk as the gold standard - the “fair” models of labor in sports. But collective bargaining does not “solve” economic problems; it merely institutionalizes a distortion and gives it a nice haircut for TV.

Salary caps, draft rights, and franchise tags are not “natural” features of sport. They are cartel mechanisms jointly enforced to benefit a small group of owners and a handful of stars at the top of the food chain.

The athlete quickly discovers that the real minimum wage is, and always has been, zero.

Why would the owners and the unions do this? These legacy leagues maximize earnings for a protected class by excluding a much larger population who could compete at the margin.

Consider the “Tom Brady Problem”: a sixth-round pick, buried on a depth chart, one injury away from a lifetime of selling insurance. (Sincere apologies to all my insurance selling friends) How many great athletes never get the chance to earn because of these artificial bottlenecks? In a capped system, the media is co-opted into protecting cartel assets, treating scarcity as if it were excellence. The NFL has 32 teams by decree, not by demand. They conspire to strangle any competing league in its crib.

You can’t do that with college, however.

College Sports: The Accidental Free Market

The amusing part is that college sports never intended to become market-based. The powers that be would have sooner sold their own grandmothers. They fell into it because the NCAA lost its ability to coordinate price controls, and the courts began punching holes in the “amateurism” bucket faster than the deans could plug them.

The result is a labor market that is chaotic, yes, but real.

A top college quarterback today possesses more labor freedom than a mid-tier NFL veteran. He can solicit competing offers, move house immediately, and re-price his value annually. Pro sports spent decades securing legal exemptions to control labor, and suddenly the “amateurs” blew the whole thing up.

The irony: the professionals are less free than the top college players.

The one remaining vestige of the old regime is “eligibility” - the NCAA’s way of reminding you they still exist. They want to keep the pro leagues happy by pushing talent up the ladder. Abolish this, and you have a full-scale competitor to the legacy cartels.

What Kind of Teams Do You Want to Support?

There is a deeper layer here: College teams are actually embedded in their communities - they are the kinds of institutions we actually want. That is a problem for the pros. And they know it.

Pro teams are franchises cosplaying as civic institutions.

Modern pro teams are privately owned monopoly assets. They are mobile at the owner’s whim and often extractive toward taxpayers. Owners “license” a civic identity to the fans, but the fans have no say in the governance.

The jersey says “New York,” but the board room says “Private Equity.”

College teams are different. They are permanently rooted. A university does not relocate to Las Vegas for a better stadium deal. Its fan base is grown, not imported.

NIL has actually deepened this bond. While the critics call it “buying players,” it is actually participatory capital. NIL collectives channel supporter money to athletes directly. It turns fans and alumni into active participants in the ecosystem rather than passive consumers of a “product.”

In college sports, money flows down and outward into the community. In the pros, it flows up and inward to the league office.

A Choice of Systems

What unsettles people about college sports isn’t “greed” - it’s price discovery. For decades, we used the mask of amateurism to hide the true value of athletic labor. Now that the mask is off, the “chaos” is simply the sound of the market finding its level.

We have a choice:

1. Legacy Professional Sports: ‘Stability’ and ‘parity’ achieved through artificial scarcity and cartel management.

2. College Sports: Opportunity and participation expanded through an open, if uneven, market. And that ‘unevenness’ might just give us an Indiana National Champion.

Do not confuse cartel stability with moral clarity. College athletics has become the most honest expression of competition we have left - open, imperfect, and wonderfully dramatic.

I take much more issue with the legacy professional leagues than I do with college sports. I love seeing players get paid. I love the Indiana story. My only real grievance is the NCAA’s eligibility circus.

So where does this leave us?

The Realistic Three Endgames

I don’t see a world where today’s NIL “situation” persists forever. I also don’t think we end up with something pure by any measure. It just feels like we are not at equilibrium that makes the power brokers happy.

The vacuum created by the NCAA’s practical demise will be filled. The only question is what the new container looks like. We are heading toward one of three conclusions:

1. The European Model (yes, European)

We stop pretending and realize college sports are like the English Premier League. No caps. Small schools become “selling clubs.” Power programs become global brands. It is unequal, but it is the most honest market in the world. And really, there is nothing more American than the threat of relegation.

2. The Institutionalized Cartel (captured, again)

This is what the traditionalists are praying for. Schools admit athletes are employees and form a massive Collective Bargaining Agreement. They trade salaries for caps and restrictions. The market gets “tamed,” the “chaos” ends, and we go back to the supply-restricted stability of a managed labor cartel. Grotesque.

3. The Great Decoupling (for the PE guys)

The “University” brand becomes a licensing play. Teams operate as private professional entities that wear the school colors and rent the stadium on Saturdays. This ends the “student-athlete” charade, but it likely severs the civic threads that make college sports special. It’s a Private Equity dream. And we know what PE does to things we love.

The opportunity here is substantial. It would, print money my man.

Final Thought: The Protectionism Trap

College sports have revealed that the “stability” we craved was built on the backs of suppressed labor. As legacy professional sports become more financially engineered, college sports are becoming more authentic. If they can make minor tweaks without restricting opportunity, they will become a bigger threat to the NFL and NBA than anyone realizes.

Writer’s Note: Thanks for reading. This is my first foray into the writing side of Substack. Appreciate any feedback!