With MTU, I’m looking at two areas: engine manufacturing and maintenance

Both require specialist expertise, but that alone doesn’t prove a durable economic rent. What matters is who controls the critical link and who actually captures the value

That’s what I’m testing with System Margin
#RiskFirst

Celebrating a Decade of Redwood's Risk-Budgeted Model Portfolios for Financial Advisors #United_States #Scottsdale #Redwood_Investment #ERB_Model #RiskFirst

1/4
Most analysis starts with a company I like.

I start with a different question: where in the supply chain is the constraint that can't be easily replaced?

Only then do I check whether anyone can earn money from it. The company is a hypothesis, not a starting point.

#SystemMargin #RiskFirst

1/2
These 26 companies are not the point. The process is.
Every list looks good in a bull market. What I care about more than the result: does the same process work in another industry, another country, another cycle, not just where it worked for me?
#RiskFirst

TR is not a portfolio.

It's a record of hypotheses made before the outcome is known.

No hindsight.
No rewriting the process.

We record it.

Then we wait.

#SystemMargin #RiskFirst

4/4
The biggest change lately:
I stopped trying to improve the framework every five minutes.
I started using it.
After sweeping through a large part of the global market, a surprisingly small group of companies kept coming back.
Now I’m checking what survives.
#RiskFirst ::

Two ways into the Track Record.
A company passes the Full Test.
Independent agents, all on SM v2.4.8, land on the same company. At least 4 of 4, and 5 of 5 counts too.
A majority isn't enough. Either everyone agrees, or it's a no.
#RiskFirst

Track Record: +3 cases 📈
Mitsui Kinzoku, Nitto Boseki, AXT - added this week, which seriously wrecked my sleep 😅
23,025 JPY, 2,956 JPY, 78.94 USD - closing prices, as always.
11 cases on record. Tired but happy - the work is paying off.
Track Record ≠ buy list.
#SystemMargin #RiskFirst

7/7
That's why we never start with a ticker. That comes last.
Bottleneck. Control. Rent. Equity.
Whoever starts with the ticker is starting with the answer before he knows the question.
#RiskFirst #Investing

1/7
Everyone's hunting for the bottleneck at the wrong level.
"There's a transformer shortage" isn't the problem. It's the symptom. Sounds great in a slide deck, though.
A transformer without a bushing is a pile of metal.
#RiskFirst #SystemMargin

A bottleneck can be real.

The rent can be real.

The company can still be the wrong vehicle.

If the bottleneck is too small relative to the rest of the business, the equity may barely notice it.

#RiskFirst #Defense

I tested 4 defense bottlenecks: propellant, 155 mm shells, solid rocket motors, submarines.
All real. None gave me a company to buy.
Sometimes the state owns the factory, sometimes production is fragmented, sometimes a firm has rent without control. #RiskFirst #Defense

Northrop is the sole supplier of Columbia-class turbine generators. The delays are real.
But if it vanished, the need would remain, and the Navy is already developing a second source, Leonardo DRS.
Sole source is not the same as control. #RiskFirst #Defense

7/
Real deficit plus no controller equals Discovery PASS, Investment CLOSED.
The bottleneck is real. The rent has no owner.
#RiskFirst

8/8
Strategic Bottlenecks remains an active Discovery direction.
The lesson from this round is simple:
Don't just find the shortage.
Find the economic position created by the shortage.
Then test whether it is durable enough to matter.
#SystemMargin #RiskFirst

Ethereum looks like infrastructure.
That’s not enough.
The real question:
Who controls the bottleneck?
L2s, validators, apps. Rent is scattered.
Control locus is unclear.
ETH: Discovery & Validating.
Not valuing it yet.
First find the control point.
#Ethereum #Crypto #RiskFirst

8/
That is why System Margin does not stop at:
bottleneck →company.
It asks:
bottleneck →control →rent →durability →capture → valuation.
Campine survived the entire chain.
Next: why this matters for Strategic Bottlenecks.
#SystemMargin #RiskFirst #Antimony #CriticalMinerals

9/
Transformer bottleneck: confirmed mechanism.
Transformer OEM: fails K.1 as Controller.
GOES: candidate Control Locus.
Next Layer 0:
Find out where the constraint actually lives.
#SystemMargin #RiskFirst

3/
Control Locus therefore splits into two unresolved questions:
Who controls queue priority?
Who controls scarce transformer allocation? Neither answered yet.
Investment Track stays closed until each layer is tested separately.
No shortcuts.
#SystemMargin #RiskFirst