The Risk is in the Water | Graeme Forster on Six Courageous Questions for 2026

28 snips

Dec 6, 2025

Graeme Forster, an investment professional at Orbis and author of influential research papers, shares insights on shifting global macro trends. He discusses the potential reversal of the U.S.'s long dominance, the attractiveness of international markets, and the evolving role of the dollar. Graeme highlights the implications of AI and capital expenditure on investment strategies, emphasizing the importance of humility and adapting valuations to new market realities. He also cautions against conflating mega-cap stocks with American exceptionalism while exploring opportunities in emerging markets.

Ask episode

AI Snips

Chapters

Books

Transcript

Episode notes

INSIGHT

Invisible Market 'Water' Distorts Judgment

Investment environments can become so familiar they turn invisible and distort decision making.
Graeme Forster warns that noticing shifting 'water' is critical before those distortions cause major pain.

INSIGHT

How The China–U.S. Cycle Fueled U.S. Outperformance

A 25-year self-reinforcing cycle began as China joined the WTO and exported to the U.S., recycling dollar savings back into U.S. assets.
That flow depressed global rates, boosted U.S. asset prices, and powered long U.S. outperformance.

INSIGHT

Distortions Trigger Capital To Rebalance

Long cycles create distortions that produce political, macro and corporate reactions pushing capital back home.
Forster argues that this shifting water would change which assets outperform over coming decades.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

In this episode of Excess Returns, Graeme Forster of Orbis joins us to discuss two major research papers: Six Courageous Questions for 2026 and Sunrise on Venus. We explore how long-running global trends may be reversing, what that means for U.S. dominance, the future of international and emerging markets, the risks and opportunities created by AI and massive CapEx spending, the dollar’s shifting role, and how investors should think about valuation, humility, and navigating a world where the economic “water” is changing. This conversation is packed with global macro insight, long-term investing lessons, and practical frameworks for building more resilient portfolios.

Topics Covered:
• Why long-term market “water” becomes invisible to investors
• Self-reinforcing global cycles and how China’s WTO entry reshaped the world
• Signs the 25-year U.S. outperformance cycle may be breaking
• How tariffs, political shifts, and corporate reforms change the global landscape
• Why international and emerging markets may now offer better expected returns
• Why U.S. large caps are not the entire story of American exceptionalism
• How to think about valuation, margins, and discounted cash flow models across markets
• The AI boom, bubbles, capital cycles, and asymmetric outcomes
• How AI CapEx constraints influence winners and losers
• The shifting role of the U.S. dollar and why market shocks may behave differently
• Maslow’s hierarchy, needs vs. wants, and the return of state-driven capital investment
• Deglobalization, reshoring, and the national-security lens for investing
• How to evaluate China and Taiwan inside emerging markets
• Why humility is an investor’s greatest edge

Timestamps:
00:00 Introduction
01:02 Why Orbis wrote Six Courageous Questions for 2026
03:44 The David Foster Wallace “water” analogy and investing
06:12 How a 25-year self-reinforcing cycle powered U.S. outperformance
10:12 Signs the cycle may be breaking
12:00 Corporate reform and opportunity in Asia
13:55 Why active share, benchmarking, and incentives distort investor behavior
17:31 Decomposing S&P 500 returns: margins, valuations, fundamentals
20:20 Expected returns inside and outside the U.S.
22:34 Why international stocks offer richer opportunity sets
24:25 Currency implications and weakening dollar dynamics
26:18 American exceptionalism beyond the top 10 mega caps
28:49 Where Orbis is finding value today
30:25 Biotech, healthcare, and post-COVID dislocation
31:05 How Orbis thinks about valuation in an intangible-heavy world
32:09 Is AI a bubble or the beginning of something bigger?
34:30 Game theory of AI CapEx and right-tail outcomes
36:00 CapEx cycles, history, and who benefits
38:00 Indirect AI beneficiaries and the SK Square example
40:35 Maslow’s hierarchy and the shift from wants to needs
42:32 Deglobalization, national security, and domestic reinvestment
44:00 Capital returning to home markets and strategic industries
46:00 Can anything reverse these structural trends?
48:00 Balancing bottom-up investing with macro awareness
49:45 The deeper risk in emerging markets: owning vs. avoiding
51:00 Valuation still matters for long-term returns
52:29 Corporate behavior, dividends, and re-rating cycles
53:52 How Orbis views China vs. bottom-up opportunity
55:34 Why great investors must be right 90–95% of the time in decision quality
58:00 One lesson Graeme would teach the average investor