"I Expect A Crash": Harris Kupperman
"...we’ve rebooted for the endless liquidity pulses that seem almost inevitable."
One of my favorite investors that I love reading and following, Harris Kupperman, has offered up his thoughts on where he stands on the market in his Q4 2025 investor letter, out this week.
Harris is the founder of Praetorian Capital and one of my favorite follows and I find his opinions - especially on macro and commodities - to be extremely resourceful. Harris offers a perspective you won’t get on CNBC - and his thoughts are below.
Please be sure to read both my and Harris’ disclaimers, located at the bottom of this post
To date, we’ve had five standard years (2019, 2022, 2023, 2024, 2025), and two years of dramatic outperformance (2020 and 2021). To be honest, I would have expected that the ratio would be more balanced by now. That said, as an investor, I can only take what the market gives. I will not force the issue, nor chase themes that are outside of my wheelhouse.
Unfortunately, I am primarily an investor in ‘real economy’ businesses, and almost completely eschew tech investments. As you can imagine, this has made my job difficult, as the ‘real economy’ has mostly been in recession since 2023—while equity markets have mostly levitated on the back of tech outperformance.
This spring, after getting whipsawed by Trump’s Liberation Day nonsense, I chose to dramatically de-gross the portfolio and go on a self-imposed vacation to think through the world in front of me. How do you invest in a world where the vast majority of the US population is struggling financially, where the vast majority of ‘real economy’ businesses are struggling, and where the political mandate is no longer to try and grow the economy?
For most of the past century, politicians were elected if they could bring prosperity to voters. Now, in a Uniparty political system, all that matters is propping up the numerous asset bubbles. Politicians theoretically could grow the economy, but that is a political decision that they’re loathe to make.
Think back to 2022 when our economy actually started to accelerate as it came out of the COVID funk. Things were booming, restaurants were full, retailers reported great numbers, and wages for most workers accelerated in real terms for the first time in decades. However, it wasn’t so great if you owned assets. Tech stocks crashed, real estate got into trouble as interest rates increased, Private Equity panicked as wage growth hurt margins, and a few banks failed as they took on too much duration.
As a nation, we chose to bail out those with risk assets at the cost of everyone else. The Fed rapidly raised interest rates, the government doubled down on ESG nonsense to slow economic growth, and within a few quarters, the rate of change turned negative.
At the time, I should have recognized this for what it was. Instead, I kept believing that politicians would undertake policies to grow the economy, after tamping down on inflation a bit, as general prosperity was historically necessary for re-election. I now realize the folly of my misunderstanding. We’re going to run the economy to maximize asset values. Everything else is collateral damage.
As I stewed through this collage of information, I kept asking myself how to invest in a world where my universe of investible companies (those with cash flow at low valuations) would likely continue to suffer. Eventually, I returned to first principles—invest where the tailwinds are.
In a world where we continue to blow bigger bubbles to bail out the prior bubbles, there are a limited number of sectors to focus on, while remaining disciplined as a value investor. However, there are some great trends out there, and I’ve doubled down on them over the past year.
Specifically, I want to own everything at the nexus of these bubbles—the transactional and croupier businesses, including brokers, exchanges, and other market intermediaries. We own companies where the 0.1% will choose to spend more of their time when their cities devolve into chaos while escaping taxes. If you haven’t been to Dubai, Cayman, Hong Kong, Miami, or the Florida Panhandle lately, you may not appreciate how severe the 0.1% refugee crisis has become. There simply isn’t enough high-end real estate for everyone fleeing their former homes.
I want to own the beneficiaries of precious metal appreciation, as you can’t have asset bubbles without endless fiscal recklessness and monetary debasement. In a similar vein, while the West collectively faces decades of terrible past decisions, along with the imbalances that they’ve endangered, many Emerging Markets have put their houses in (relative) order. As capital flees the over-indebted West, the Dollar should decline, lifting a great weight off the shoulders of the Emerging Markets.
We have exposure to those countries that are acting like adults, or are nearing elections where adults will hopefully take over.
It’s an eclectic book, some of which we owned before Liberation Day, and much of which we purchased after that event—frequently at prices below the lows of Liberation Day. One of the unique aspects of my investing strategy is that I tend to not own the large cap equities that make up the popular indexes. Our names actually tend to be rather uncorrelated.
As a result, I don’t have to worry about where the overall market goes, nor fear missing out when I’m sitting in cash. Instead, I know that through a bit of patience, I can rebuild a new book of fresh ideas.
At the end of December, the Fund was 101.4% exposed on the long side, which is only slightly below the 115% to 125% range that I target. More importantly, if January of 2026 is any indication, we’re in themes that are finally ‘working.’
You may ask how it is that a guy who’s unusually bearish can run a book that’s more than 100% long. The answer is that my sectors seem to be doing well despite a global recession. You may say they’re doing well strictly because of the imbalances in the world. Sure, if the market were to crash, I’d expect a drawdown, but the resulting liquidity injection would come rapidly, and likely propel our names meaningfully higher.
The world economy may suffer from too much liquidity, but that won’t stop them from applying far more. One day, this will be terrible for duration assets, but thankfully that is not where we’ve clustered our exposure.
In my Q3 2025 letter, I detailed some more of my thinking on these topics. I am now three months further along in this journey and feel increasingly confident that my forced sojourn from the market was the right decision.
Rather than continue to nurse along a bunch of ‘real economy’ stocks that were floundering, we’ve rebooted for the endless liquidity pulses that seem almost inevitable. While I expect a crash, I feel some safety given how far our names are from the nexus of where the current bubbles lie in tech, Private Equity, Private Credit, CRE, and VC.
Bubbles are funny. Once they crash, they take years before they can reinflate. Humans instead go looking for new bubbles to chase. Hopefully, we’re long some of those. If not, we have strong tailwinds at our backs.