Chris Reilly here.

As you may recall, we recruited John Pangere onto our analyst team earlier this year. John is a leading expert in warrants and using them to express trades in opportunity-rich areas of the market, like artificial intelligence (AI), gold, and rare earths.

John’s not “just” a warrants investor. He credits his success to analyzing macro trends and being willing to invest in anything. Every week, he writes a free letter called Strategic Edge, in which he shares his thinking and best ideas.

I caught up with John on his current views—including why everyone, especially Wall Street, is wrong on inflation. Our conversation follows.

If you’d like to hear from John every Thursday, get his free Strategic Edge here.

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Chris Reilly: John, most people know you as "the warrants guy," but that's actually only a small part of what you write about in Strategic Edge.

John Pangere: I'm known as the warrants guy because that's what I mainly do in my premium advisory, Strategic Trader. But warrants are really only a small part of my portfolio. They're my favorite way to speculate, but I have to get those ideas from somewhere.

Strategic Edge is my thought process. It's like a diary of what I'm thinking about at the moment. Maybe I'm seeing something in the markets where my view is completely different from the consensus. Writing those thoughts down helps me organize them, and I think it's helpful for readers to follow that process, too.

Chris: You're constantly traveling. You've written about visiting bitcoin (BTC) mining facilities, attending conferences, and getting out into the field. Why is that such an important part of your investing process?

John: You can't really get ahead in investing if you're just sitting behind a desk reading SEC filings. You have to get out there and talk to the people working in these industries. That's where you get an edge.

One of my recent trips was to a bitcoin mining facility. I wanted to see it for myself because you hear all kinds of things on social media and in the news about these big data centers. I wanted to know what was actually happening. The reality was completely different from the perception.

The first thing I noticed was the noise, or lack of it. We hear all the time that data centers are noisy. This was far from it. Only when I stepped inside could I hear what noise the machines made. And it was no louder than the white noise machines my kids use at night when sleeping.

Another was water. This facility actually doesn’t use water to cool its machines. It uses mineral oil that it changes out about every five years. The only water they use in the building is to fill water bottles and flush toilets.

 John on site at a data center

So I think at some point, more people will realize the myths about data centers are just that. It’s a trend that’s worth figuring out how to play.

Once you see that firsthand, you start asking better questions. How can I invest in this trend? Which companies benefit directly? Which ones benefit indirectly?

Chris: With AI, getting it out into the real world is becoming even more valuable. AI can summarize earnings reports or SEC filings in seconds, but it isn't shaking hands with CEOs or touring facilities.

Let's talk about the market. We're in an interesting spot. The S&P 500 just struck a new all-time high, yet every time a big tech stock stumbles, people start talking about the AI bubble bursting.

What's one thing investors are getting wrong now?

John: I think too many investors are assuming inflation is about to take off again and force the Fed to raise interest rates.

I don't see that in the data. Yes, we had a temporary spike because of oil prices. But if we were really heading back to the kind of inflation we saw in 2021 and 2022, oil would be dramatically higher than it is today.

Instead, I think inflation continues to normalize. That's why I believe the consensus is wrong about where interest rates are headed. As I wrote in Strategic Edge, I think it’s Wall Street’s worst call of the year.

Whenever I see the consensus leaning hard in one direction, I start asking what happens if everyone is wrong.

One of my favorite ways to position for that possibility right now is through gold. We're already starting to see gold strengthen again, and I think gold stocks stand to benefit if this plays out the way I expect.

Chris: That brings us back to warrants. If someone agrees with your outlook on gold, they might buy a gold ETF or a gold mining stock. Where do warrants fit into that picture?

John: Warrants are simply a higher-upside way to express that same view. The biggest thing is understanding your risk. They're speculative instruments, so I always tell people to use money they can afford to lose and to size their positions accordingly.

But warrants aren’t nearly as complicated as many people think. If you're comfortable buying a stock, you can buy a warrant. It's just a stock with a different ticker symbol.

We own several gold warrants in Strategic Trader. We've already taken "Free Rides" on some of them, while others are still buys. Because these warrants have years until expiration, we have the luxury of being patient and letting the thesis play out.

Chris: Last question. You've been investing for decades. What's the biggest lesson you've learned?

John: The biggest challenge isn't finding investments. It's managing the emotional side of investing.

The money isn't made in the buying. It isn't made in the selling. It's made in the waiting.

And waiting is the hardest part because we're constantly bombarded with news and opinions every minute of the day.

One of the best trades we've ever had in Strategic Trader was down around 80% before it eventually turned into roughly a 3,000% winner.

Patience is what separates successful investors from everyone else.

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Chris Reilly again. I read John’s free letter Strategic Edge every week.

If today's conversation resonated with you, you'll enjoy it too. Sign up for John’s Strategic Edge here. It publishes on Thursdays.

Chris Reilly Executive Editor, RiskHedge