Korea (EWY): The Scarcity Treadmill Needs a New Part
Why the AI rally is a hunt for manufactured scarcity, and how a double calendar on EWY's memory-driven parabola handles a month crammed with catalysts.
What came of it
The Trade Alert on EWY closed on 6 July 2026, after 21 days, at +27% on the capital at risk.
The Scarcity Treadmill
Strip the AI rally to its skeleton and what remains is a crowd hunting for whatever is in short supply. First GPUs, then the electricity to run them, then memory, and lately ceramic capacitors that cost pennies apiece. Every time one bottleneck eases, the herd digs into a smaller and more obscure component so the shortage story can keep breathing. The letter calls it a treadmill: the machine only works if a fresh bottleneck appears, because the old one always gets engineered away.
The tell sits in the opposite corner. While the chasers hunt parts, the boring money walks toward things no server farm can duplicate. Buffett's successor picks up a homebuilder. Diller circles a casino. Another billionaire eyes Caesars. Buildable land, a hotel, a gaming floor on the Strip: nobody prints more of those. Manufactured scarcity dissolves once the music stops, because the whole exercise was hunting for the next part. The real kind sits still, dull and immovable, and after every mania the left-behind names have a habit of leading the way out.
The E Does the Lifting
None of this makes the tape an easy short. Most of the advance since ChatGPT arrived traces back to profits actually growing rather than a fatter multiple; the market's earnings ratio even slipped a notch while profits jumped. Software has staged a violent comeback off its spring lows after Jensen Huang dismissed the SaaS-is-dead panic and Snowflake reported better than feared, though the software ETF now leans on heavy resistance looking thoroughly overbought.
The odder signals come from the tin. Alphabet is raising equity on a stunning scale, including an at-the-market program of the sort usually reserved for meme stocks and a discounted block for Berkshire, with much of the proceeds earmarked for employee equity tax bills. A giant that size passing the hat to retail for its tax payments says plenty about where free cash flow has gone. Bonds, meanwhile, sold off as oil climbed, and the conversation flipped from how many cuts to whether a hike lands before year end.
A Parabola Without the Stretcher
Korea is where all of this converges. EWY has gone vertical on SK Hynix and the memory frenzy, making the fund the purest listed proxy for the most crowded bet on earth. Shorting a parabola outright is how traders get carried out on a stretcher, so the letter declines the dare. What a parabola does hand you is near-dated implied volatility priced as though the next fortnight settles everything, sitting over longer-dated premium that lags. A double calendar, short the near expiry and long the later one, turns that gap into the position: it works if Korea merely cools, retraces and then keeps grinding, while the far leg outlives the catalyst minefield.
A collapse in implied vol is the real risk, though the holding period is short enough that the sting may never arrive. Spreads on Korean iShares options run wider than a purist likes, even if liquidity has finally deepened after years in the wilderness. And the position is really a bet on a pair of companies rather than a country, both reporting after the expiries involved.
Broadcom Before Payrolls
The letter's week is event risk stacked to the ceiling. JOLTS on the Tuesday, ADP and ISM Services on the Wednesday, and Friday brings the main event in May payrolls. Broadcom reports Wednesday as the semiconductor bellwether, with Hewlett Packard Enterprise and CrowdStrike for the hardware and software read-across. Beyond that wait inflation prints and a new Fed chair's first meeting, which decide whether hike chatter hardens into policy.
For Korea the prints matter less than the reactions: whether Broadcom extends the memory frenzy or gives the crowd its first reason to hunt elsewhere, whether EWY's near-dated vol deflates on its own, and whether the treadmill finds its next part before the parabola gets to cool. The rally is hunting scarcity, the longest-compounding money is quietly collecting the sort that cannot be manufactured, and Korea is where the manufactured kind trades at its most feverish.
This page is the write-up. The full letter, with the trade and its exit rule, is on Substack.
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