Positioning for What’s Next

To our Families, Clients and Friends: 

We just got back from the CAZ Investments Themes event in Houston with 1,000 co-investors and investment managers. We came away even more convinced the macro shift into the Exponential Age – tech, AI, quantum computing, space, genetics, robotics and energy abundance - isn't just noise, it's the next chapter. Getting there, however, will be a bumpy ride.

January marked a volatile start to 2026 as equity markets retraced from their late-year highs. After a strong 2025 driven largely by the “Magnificent 7,” we are now seeing early signs of broadening market participation and a potential shift in leadership away from the most crowded areas of technology. Gold and silver experienced sharp pullbacks from their January 2026 all-time highs amid profit-taking, dollar strength, and volatility after a massive rally last year. Cryptocurrencies - BTC, ETH, and SOL primarily - have all posted negative returns year-to-date after strong 2025 rallies, with sharp corrections from recent peaks driven by profit-taking and broader risk-off sentiment.

A classic cycle in crypto: early winners in the trade cash out, and new long-term believers buy in cheaper. Not the end of the trade, just the handoff.

Last, we have the recent announcement that Kevin Warsh will be the President’s nominee to replace Jerome Powell as the next Chair of the Federal Reserve which has been met a mixture of reactions especially from market participants who believe the economy requires lower rates and more liquidity.

Earnings guidance and macro data suggest we may be entering a period of consolidation, with the possibility of a 10% or greater market correction over the coming months starting as early as Monday, February 1^st, and lasting until mid-Summer. 

A 10%+ correction is reasonable to expect though not guaranteed. Markets haven't seen one in 8-9 months, and historical patterns suggest we're due every 8-12 months amid high valuations (e.g., mega-caps at 30-40x earnings), extremely bullish investor sentiment surveys (Investors Intelligence Bulls > 60%, which is ironically a technical sell signal), and persistent geopolitical/policy risks. A possible anti-QE tilt from a potential Warsh Fed could cap upside even if the dollar softens.

We’re watching all this closely, and positioning more defensively makes sense while this plays out. Accordingly, we have fully exited bitcoin and other crypto and related equities and further taken partial profits in tech positions CTHRX and XLK, trimming exposure to areas that have run ahead of fundamentals. We are building cash reserves as a tactical hedge, ready to take advantage of market dislocations when/if they occur. However, we also continue to deploy capital selectively into areas of relative value and structural growth, including: 

Ø  Energy through allocations to utilities index fund XLU and private investments in the CAZ Energy Evolution Fund which invests commodity and energy production assets capitalizing on surging demand (AI/data centers, EVs) and years of underinvestment;

Ø  Private Asset Manager Ownership via the CAZ GPO Fund which is invested in 62 underlying managers who earn strong, uncorrelated returns via management fees on, balance sheet investments in, and preferred returns on profits in their funds;

Ø  Broader Market Participation beyond the mega-cap technology including all-cap equities in materials, industrials, aerospace and other non-tech sectors poised to benefit from capital rotation, real asset demand, and US re-industrialization; and

Ø  International and Emerging Markets, where currency stability and improving earnings trajectories create attractive relative opportunities, particularly if the US Dollar remains relatively weak.

We continue to look forward to public listings of PowerLaw10 and SpaceX as well as realizations across our private investment portfolios.

We believe these adjustments position portfolios for resilience and participation in the next phase of market leadership, characterized by more balanced sector performance and global diversification. As always, our focus remains on compounding long-term value through thoughtful capital allocation, disciplined portfolio construction, and opportunistic deployment amid volatility. 

We look forward to connecting with each of you this year! Also, we’ve uploaded our updated 2026 privacy policy and Form ADV to your portal for your review and reference.

Best regards,

Jeff & Biff

PS We completely failed to announce that last year we were once again named (despite our best attempts to lay low and out of sight) by Financial Advisor Magazine as one of the top advisors in the country. Please don’t hold this against us. Article and rankings (look for us at number 354 in the $150mm - $250 mm in Assets Category) at: https://www.fa-mag.com/news/2025-ria-survey-and-ranking-ai-wars-83085.html