What we’re reading (12/20)
“The United States Of Fraud” (Business Insider). “Against that backdrop [of AI], some people have turned to petty fraud, policy abuse, and small acts of sabotage as a means of getting back at their economic overlords. They're engaging in spurts of shoplifting, taking part in return shenanigans, and using their credit cards for ‘friendly fraud’ that's anything but. They see — or at least excuse — these acts not as stealing but as small moments of deserved vengeance in a system that violates their sense of basic fairness at every turn.”
“When AI Comes To Town” (Sherwood). “A Delaware company called Laidley LLC wanted to build ‘a multi-billion-dollar datacenter campus in the Parish resulting in several hundred new good paying jobs,"‘ according to the text of the resolution, published later in the local newspaper. At a special meeting, in the middle of the day on a Thursday, the commissioners passed the plan with no opposition. It set a course for the transformation of hundreds of acres of state-owned farmland into a modern-day AI factory.”
“These Air-Traffic Controllers Are Leaving Their Jobs—And Heading To Australia” (Wall Street Journal). “Chris Dickinson was stunned after he took an impromptu tour of an air-traffic control tower in Sydney, Australia. Controllers there worked 36-hour weeks on average and seemed happy, rather than stressed. They had more weekends free. ‘It’s absolutely disgusting how much better their lifestyles are than ours,’ said Dickinson, who worked air-traffic control in the U.S. for 13 years and visited the Sydney tower on a trip two years ago. Now he is one of them. Dickinson is among dozens of controllers from the U.S. leaving for jobs overseeing air traffic in Australia, lured by the prospects of a less stressful work environment. Morale among U.S. air-traffic controllers has eroded, according to interviews with a dozen current and former controllers. Frustration has mounted over challenging workloads and pay that they say has lagged behind the rate of inflation.”
“Government’s Historic Role As Trusted Information Source Is Under Threat” (Washington Post). “Researchers and activists increasingly fear that under the Trump administration, the U.S. government is abdicating its historic role as a clearinghouse for reliable information — a momentous shift for what has been the world’s foremost producer of widely accepted data for everyone including academic researchers, local governments and ordinary citizens. Despite sharp swings in the worldview of successive presidents, most agencies have maintained their reputation for evenhanded information.”
“There’s A 92 Percent Chance Trump Is Making It Up” (The Atlantic). “His fixation on the number between 91 and 93 has been a feature for a while. In April, Trump claimed that egg prices had fallen by 92 percent. (The Bureau of Labor Statistics said 12.7 percent.) And at a rally shortly before last November’s election, while railing against journalists and the media, he allowed that ‘not all of them’ are “sick people.” Just ‘about 92 percent.’ That one, admittedly, is difficult to fact-check…[m]ore often than not, the president links the 92 (or more) percent claim to another[.]”
What we’re reading (12/19)
“NY Fed President Williams Says Some ‘Technical Factors’ Distorted November’s CPI Reading Downward” (CNBC). “New York Federal Reserve President John Williams said Friday that ‘technical factors’ likely distorted November’s inflation data, pushing the headline reading lower than it otherwise would have been…The consumer price index rose at a 2.7% annualized rate last month, a delayed report from the Bureau of Labor Statistics showed. Economists polled by Dow Jones expected the CPI to have risen 3.1%.”
“Musk Wins Appeal That Restores 2018 Tesla Pay Deal Now Worth About $139 Billion” (Reuters). “The ruling overturns a decision that had prompted a furious backlash from Musk and damaged Delaware's business-friendly reputation. It assures Musk greater control over the company, which he has said is his main concern, even after shareholders recently approved a new pay package that could be worth $878 billion if Tesla meets certain targets.”
“When Your Private Fund Turns $1 Into 60 Cents” (Wall Street Journal). “For all fund investors, NAV is supposed to stand for ‘net asset value.’ For some, however, it’s turning out to mean ‘not actual value.’ That’s the hard lesson of recent weeks when some funds that invest in private assets have sought to become publicly traded. Prices that investors expected to be stable have collapsed as soon as the portfolios were exposed to public markets. These transitions from private to public cast doubt on Wall Street’s narrative that investors can have their cake and eat it, too. You can have the mild price fluctuations of nontraded assets, or you can have access to your money whenever you want—but it’s turning out that you can’t have both.”
“The Netflix Chief Who Insists He Won’t Ruin Hollywood” (Wall Street Journal). “Sarandos—a student of Hollywood history who worked as a video-store clerk growing up—has long sought an iconic studio property and production lot such as the sprawling Warner Bros. lot in Burbank, Calif., according to people close to him.”
“Mitt Romney: Tax the Rich, Like Me” (Mitt Romney, New York Times). “If, as projected, the Social Security Trust Fund runs out in the 2034 fiscal year, benefits will be cut by about 23 percent. The government will need trillions of dollars to make up the shortfall. When lenders refuse to provide the money unless they are paid much higher interest rates, economic calamity will almost certainly ensue. Alternatively, the government could print more money, inducing hyperinflation that devalues the national debt — along with your savings.”
November performance update
Prime: +1.96%
Select: +5.66%
SPY ETF: -0.33%
Bogleheads Portfolio (80% VTI + 20% BND): -0.02%
What we’re reading (12/13)
“Expected Returns In Public Equities Over The Coming Years” (Torsten Sløk). “The historical relationship between the S&P 500 forward P/E ratio and subsequent 10-year annualized returns shows that investors should expect to get zero in return in the S&P 500 over the coming decade[.]”
“The Fed Did Banks A Solid This Week. More Favors May Be Needed” (Wall Street Journal). “For banks and other players in the U.S. financial system, the Federal Reserve’s next moves on the size of its balance sheet could matter as much or more than its decisions on rates. Following the Fed’s quarter-point rate-cut decision this past week, banks were among the market’s strongest performers. The KBW Nasdaq Bank index was up over 3% for the week, while the S&P 500 was down. Banks undoubtedly benefit from what is being viewed as the Fed’s ‘dovish’ attitude toward its next rate move...But bank stocks’ sharp outperformance was also helped by something else the Fed did on Wednesday: Its somewhat quieter decision to start expanding its balance sheet by buying $40 billion of short-term Treasury securities this month.”
“The Stock Market’s ‘Santa Claus Rally’ Hasn’t Come To Town Yet — Despite What You’re Hearing” (MarketWatch). “The so-called Santa Claus rally didn’t begin this week. The stock market’s activity was a typical response when the Federal Reserve cuts interest rates — Santa had nothing to do with it. Yet that’s not how many in the financial media were describing the rally. These commentators are forgetting that not every rally in December can be credited to Santa. The stock market’s odds of rallying before Christmas are no better than at any other time of year — and maybe even worse. Those contending otherwise are taking Santa’s good name in vain.”
“Corporate-Bond Investors Party As Hangover Looms: Credit Weekly” (Bloomberg). “Fear is drifting out of the corporate-bond market again, even if the risks aren’t. US high-grade spreads touched 0.76 percentage point earlier this week, their tightest levels since October and close to their highest valuation in decades. They’ve been narrowing since late November. The cost of hedging in the North American high-grade credit derivatives market has been declining in recent weeks as well.”
“Humans Made Fire 350,000 Years Earlier Than Previously Thought, Discovery In Suffolk Suggests” (The Guardian). “Humans mastered the art of creating fire 400,000 years ago, almost 350,000 years earlier than previously known, according to a groundbreaking discovery in a field in Suffolk…The latest evidence, which includes a patch of scorched earth and fire-cracked hand-axes, makes a compelling case that humans were creating fire far earlier, at a time when brain size was approaching the modern human range and some species were expanding into harsher northern climates, including Britain.”
What we’re reading (12/12)
“Fresh Concerns About AI Spending Are Rattling Wall Street” (Wall Street Journal). “The potential delay of hundreds of billions of dollars in promised spending on artificial intelligence is dealing a new blow to the stock-market rally. Investors had piled into shares of banks, industrial firms and materials producers earlier this week, with bets that lower interest rates will reheat a sluggish economy sending the Dow Jones Industrial Average and S&P 500 to new highs. On Friday, that fell apart.”
“Why America Gave Up On Economists” (Vox). “Both parties have turned their backs on traditional economic advice. Is the country paying the price?”
“Of MAGA And Monetary Policy” (Paul Krugman). “[E]ven if Trump isn’t able to capture full control over monetary policy through his pick for Fed chair, the effects will still be negative. Because as I pointed out in my critique of Hassett, in times of crisis the Fed chair has to be capable of showing leadership and gravitas, as well as garnering trust. Given that the Fed’s future task has been made especially difficult by Trump’s chaotic policies, higher-than-desired inflation, a weakening job market, very high future deficits, and a falling dollar, installing a Trump sycophant as Fed chair would mean facing any future crisis without any of the reserves of credibility that got us through the global financial crisis in 2008 and the Covid crisis in 2020.”
“Fed Officials Split Over Risks to US Economy Going Into 2026” (Bloomberg). “Federal Reserve officials — including two who will become voters in 2026 — offered strongly opposing views Friday on what to do with interest rates, continuing a debate that will grip the US central bank into the new year. Three policymakers focused in their comments on inflation risks, though one of them suggested he was advocating only a temporary pause to rate cuts to confirm inflation is subsiding. Two more emphasized risks to the labor market instead.”
“SpaceX Sets $800 Billion Valuation, Confirms 2026 IPO Plans” (Bloomberg). “SpaceX is moving forward with an insider share sale that values Elon Musk’s rocket and satellite maker at about $800 billion, setting up what could be the largest initial public offering of all time.”
What we’re reading (12/11)
“How Likely Is A Stock Market Crash?” (Victor Haghani and James White). “Some well-known market observers see a big crash coming – e.g. Mark ‘the crash guy’ Spitznagel, protégé of Black Swan author Nassim Taleb, Michael Burry of The Big Short fame, and Bridgewater founder Ray Dalio. For example, in a recent interview with the WSJ, Spitznagel said: ‘I do expect an 80% crash…but only after a massive, euphoric, historic blow-off rally.’ A statement such as this suggests that Spitznagel believes there’s a greater than 50% chance of at least a 30% market sell-off coming in the foreseeable future, though he’s a bit vague about the exact timing, and the magnitude of the ‘blow-off rally’ that will precede it.”
“Behind The Deal That Took Disney From AI Skeptic To OpenAI Investor” (Wall Street Journal). “OpenAI and Disney disagreed over whether AI companies have the legal right to train models on copyrighted content, an enduring point of tension between Silicon Valley and creatives. Yet Gutierrez’s fireside chat with OpenAI’s intellectual property and content chief Tom Rubin was collegial, according to people familiar with the matter.”
“Fed Cuts Or Not, The Stock Market Is Likely To Move Higher In 2026” (MarketWatch). “There’s a 66% probability that the stock market will rise in 2026. Good news — but this bullishness is not based on an analysis of current market conditions. The U.S. stock market would have a 2 in 3 chance of rising in 2026 even if stocks had lost money this year or if market valuations were less stretched than they are currently.”
“Wall Street Is Starting To Worry About A ‘Lost Decade’ For US Stocks” (Business Insider). “A dark thought is starting to circulate around Wall Street. What if, after years of stellar gains, the US stock market is basically flat for the next decade?”
“With Trump Watching, Coke Makes Clear Its New CEO Is American” (Yahoo! Finance). “Coca-Cola Co.’s advertising has long made clear that its flagship product is “the Real Thing.” Now, the beverage giant wants you to know that its new chief is a real American. In Wednesday’s press release announcing that Henrique Braun would succeed James Quincey as the company’s top executive, Coca-Cola said Braun “is an American citizen who was born in California and raised in Brazil.”
What we’re reading (12/10)
“Divided Fed Approves Third Rate Cut This Year, Sees Slower Pace Ahead” (CNBC). “A Federal Reserve split over where its priorities should lie cut its key interest rate Wednesday, but signaled a tougher road ahead for further reductions. Fulfilling expectations of a ‘hawkish cut,’ the central bank’s Federal Open Market Committee lowered its key overnight borrowing rate by a quarter percentage point, putting it in a range between 3.5%-3.75%.”
“Oracle Shares Tumble As AI Spending Outruns Returns” (Wall Street Journal). “Oracle co-founder Larry Ellison. Oracle is facing mounting anxiety from investors about how much it’s spending to build out data centers for the artificial-intelligence industry. The cloud-computing company’s revenue and operating income for the most recent financial quarter fell slightly short of analysts’ expectations, while the company raised its spending forecast, adding fuel to concerns over the timeline for turning the AI industry’s ravenous demand for computing capacity into profits.”
“Is It A Bubble?” (Howard Marks). “The role of newness is well described in my favorite passage from a book that greatly influenced me, A Short History of Financial Euphoria by John Kenneth Galbraith. Galbraith wrote about what he called ‘the extreme brevity of the financial memory’ and pointed out that in the financial markets, ‘past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.’ In other words, history can impose limits on awe regarding the present and imagination regarding the future. In the absence of history, on the other hand, all things seem possible.”
“Why The A.I. Boom Is Unlike The Dot-Com Boom” (New York Times). “For all the similarities, however, there are many differences that could lead to a distinctly different outcome. The main one is that A.I. is being financed and controlled by multitrillion-dollar companies like Microsoft, Google and Meta that are in no danger of going kaput, unlike the dot-com start-ups that were little more than an idea and a bunch of engineers.”
“The Elusive Returns To AI Skills: Evidence From A Field Experiment” (Teo Firpo, et al.). “As firms increasingly adopt Artificial Intelligence (AI) technologies, how they adjust hiring practices for skilled workers remains unclear. This paper investigates whether AI-related skills are rewarded in talent recruitment by conducting a large-scale correspondence study in the United Kingdom. We submit 1,185 résumés to vacancies across a range of occupations, randomly assigning the presence or absence of advanced AI-related qualifications. These AI qualifications are added to résumés as voluntary signals and not explicitly requested in the job postings. We find no statistically significant effect of listing AI qualifications in résumés on interview callback rates. However, a heterogeneity analysis reveals some positive and significant effects for positions in Engineering and Marketing. These results are robust to controlling for the total number of skills listed in job ads, the degree of match between résumés and job descriptions, and the level of expertise required. In an exploratory analysis, we find stronger employer responses to AI-related skills in industries with lower exposure to AI technologies. These findings suggest that the labor market valuation of AI-related qualifications is context-dependent and shaped by sectoral innovation dynamics. “
What we’re reading (12/9)
“Fed Cut This Week May Be Last For A While” (Bloomberg). “Federal Reserve officials are primed to deliver a third consecutive interest-rate cut on Wednesday, but the streak may end there. Concerns around lingering inflation have generated a deep division within the US central bank, likely preventing Fed Chair Jerome Powell from signaling any further moves early next year.”
“Massive Debt-Fueled Deals Are Back On Wall Street” (Wall Street Journal). “Big-ticket mergers and acquisitions, or those valued at $10 billion or more, hit a record dollar amount this year, according to Dealogic. Much of the price tag on those deals gets paid for with debt.”
“Netflix’s Swallowing Of Warner Bros. Will Be The End Of Hollywood” (New York Times). “The danger here is not annihilation but centralization. Netflix is the No. 1 premium streaming service. Warner Bros. is one of the most successful of the legacy film studios, and HBO has long been the premier brand in prestige television. These are not middling players; they are two of the main pillars of the modern entertainment industry.”
“JPMorgan Stock Tumbles Over 4% After Company Warns On Higher Spending In 2026” (Yahoo! Finance). “JPMorgan stock fell 4.65% on Tuesday after executive Marianne Lake warned that costs at the bank would rise in 2026 as competition in the credit card space and investments in AI drive higher spending at the firm. The stock's slide made JPMorgan the biggest loser in the Dow Jones Industrial Average on Tuesday. It was the bank's largest one day decline since April 4.”
“Investors’ Bearishness Is Often Overdone — But Their Market Bubble Fears May Be Spot-On” (MarketWatch). “You’re kidding yourself if you think a stock-market bubble can’t form when there is widespread concern about a bubble. Many investors are nevertheless guilty of this line of thinking. They forget that bubbles can — and often do — occur even when many experts and ordinary investors alike are worried about one forming.”
What we’re reading (12/8)
“S&P 500 Closes Lower As Investors Tap Brakes Before Fed Decision This Week” (CNBC). “Weighing on stock sentiment was the 10-year Treasury yield continuing its recent run higher. The benchmark has moved up this month despite the likelihood that the Fed is going to cut this week as investors worried about the state of inflation in the new year and whether the central bank will be able to continue easing.”
“Paramount Makes $77.9 Billion Hostile Bid For Warner After Netflix Struck Deal” (Wall Street Journal). “Paramount launched a $77.9 billion hostile takeover offer for Warner Bros. Discovery, taking its case for acquiring the storied entertainment company directly to shareholders just days after Warner agreed to a deal with Netflix.”
“Leaked Paramount Memo Reveals What CEO David Ellison Told Staffers About Its Hostile Bid For Warner Bros. Discovery” (Business Insider). “‘We believe the combination of Paramount and Warner Bros. Discovery represents a powerful opportunity to strengthen both companies and the entertainment industry as a whole,’ Ellison wrote in the memo to staffers, which was first obtained by Business Insider.”
“The Price Of Free” (Smead Capital Management). “In a textbook world, active managers would simply step into the widening mispricing and restore elasticity. In the real world, they are terrified of being fired. Haddad’s model shows that active managers do respond—by trading more aggressively when surrounded by passive capital, but only enough to offset about two-thirds of the distortion. The remaining one-third festers. Career risk, quarterly benchmarking and consultant scorecards cap how far any human being is willing to deviate before the redemption notices arrive.”
“The Quiet Surrender Of Fed Independence” (EightateEight). “[I]t is my view that financial markets will ultimately endure, adapting resiliently to the altered landscape of a partially independent Fed. Indeed, markets and economic actors alike will continue to forge a consensus on interest rates, navigating the uncertainties with pragmatic resolve. Yet, this shift evokes a poignant analogy: the US; and, by extension, the global economy, will have traded a sleek, fuel-efficient, and dependable vehicle for a dilapidated, second-hand relic, voraciously consuming resources while rattling precariously along the road. It may still convey us to the haven of consensus, but with an ever-present peril of catastrophic failure en route, underscoring the fragility of institutions once deemed inviolable and the profound stakes of their erosion.”
What we’re reading (12/6)
“How A Netflix-Warner Deal Would Change Everything In Hollywood—Again” (Wall Street Journal). “On Friday, Netflix agreed to acquire Warner Bros. for $72 billion after the entertainment company splits its studios and HBO Max streaming business from its cable networks, beating rival bidders Paramount and Comcast. The deal stunned Hollywood, where many assumed David Ellison’s Paramount was the most likely suitor. After Paramount’s aggressive unsolicited approaches to buy all of Warner Discovery prompted the company to put itself up for sale, Netflix’s winning bid came together at a breakneck pace.”
“The Regulatory Path Ahead For A Netflix And Warner Bros. Deal Could Get Dicey” (CNBC). “The size of the deal makes it ripe for scrutiny, from both industry insiders and U.S. lawmakers. The Trump administration is viewing the merger with ‘heavy skepticism,’ CNBC reported Friday, and Sen. Elizabeth Warren has already called for an antitrust review.”
“Beware Of The Unwinding Japanese Carry Trade” (American Enterprise Institute). “The challenge to world financial markets is that the narrowing of the interest rate spread between Japanese bonds and US bonds could lead to an unwinding of the Japanese carry trade and to the repatriation of capital to Japan by that country’s financial institutions. That process could be reinforced by a meaningful appreciation of the Japanese yen, which is currently estimated to be undervalued by between 15 and 20 percent.”
“Main Street Bust Threatens The Entire Economy” (Axios). “More small businesses are filing for bankruptcy under a special federal program this year than at any point in its six-year history. Subchapter V filings, which allow firms to shed debt faster and cheaper, are up 8% from last year, Bloomberg reported, citing data from Epiq Bankruptcy Analytics. Chapter 11 filings — a process used by larger businesses — are up roughly 1% over the same time frame…‘Small firms are the leading indicator what's going on nationally and right now they're signaling weakness,’ says ADP chief economist Nela Richardson.”
“Private Equity Fundraising Remains Glum, Four Years On” (Institutional Investor). “As 2025 nears its end, private equity firms are facing the fourth year of a slide in fundraising. During the first nine months these funds have raised $906.9 billion, down from more than $1.7 trillion in 2022, the year fundraising first began to decline, according to new data from PitchBook. Hilary Wiek, senior strategist at PitchBook, noted that both the number of funds closing and the amount of capital raised remain weak.”
What we’re reading (12/4)
“Layoff Announcements Top 1.1 Million This Year, The Most Since 2020 Pandemic, Challenger Says” (CNBC). “Announced job cuts from U.S. employers moved further ahead of 1 million for the year in November as corporate restructuring, artificial intelligence and tariffs have helped pare job rolls, consulting firm Challenger, Gray & Christmas reported Thursday.”
“Two Types Of Shoppers Are Powering Holiday Spending: The Wealthy And Deal-Hunters” (Wall Street Journal). “The myriad choices these more cautious shoppers are making help illuminate why spending is up but consumer confidence is dragging in the final stretch of the year. On Black Friday, the year’s busiest shopping day, sales rose 4.1% compared with last year, Mastercard data show. Even with holiday shopping off to a robust start, consumers—especially those from less-affluent households—are pulling back on routine purchases as they give priority to gifts and holiday meals. Sales on things that can wait, such as haircuts, pricier razors and fast-casual lunches, are slipping.”
“Manufacturers Shrink For 9th Month In A Row, ISM Finds. Tariffs Hurt Sales And Keep Lid On Hiring.” (MarketWatch). “American manufacturing contracted for the ninth straight month, a survey showed, as uncertainty tied to ever-changing tariffs and a historic government shutdown weighed on business. A closely followed manufacturing index fell to a four-month low of 48.2% in November from 48.7% in the prior month, the Institute for Supply Management said Monday. Any number below 50% signals contraction.”
“Manias, Panics, And AI” (Project Syndicate). “By any metric, the US and, by implication, the world, is now in an intense AI speculative boom. But will all the investment pouring into the industry build something useful? To whom, and for what purpose? And if there is a downside, what will it look like? Kindleberger’s work – and everything that has happened since 1978 – suggests that three salient questions should be used to assess investment booms. First, does the boom involve more than just a run-up in asset prices…Second, is the investment boom financed primarily by issuing debt…The third question may be the most important for this moment: How exactly will this technology be used? Conversations with senior executives of large-cap corporations across traditional sectors – companies commonly presumed to provide high demand for AI solutions – confirm that while all expect to achieve significant savings and efficiencies from AI, almost none can highlight with confidence additional sources of revenue (such as new lines of business).”
“The Spending Bubble Driving Corporate Profits Looks Set To Burst” (Barron’s). “Decades of government deficit spending, share buybacks, dividends, and overconsumption have buoyed profits and inflated U.S. economic output. These profit drivers are all looking increasingly vulnerable. That would dent the profit growth that markets have long used to justify lofty valuations.”
What we’re reading (12/3)
“Goodbye, Bull Market: This Spot-On Indicator Is Saying What You Don’t Want To Hear” (MarketWatch). “Contrarian investors are confident that a major stock-market top is on the horizon — they just don’t know when. That’s because investor optimism can stay dangerously elevated for months before the bull market breathes its last.”
“Sam Altman Has Explored Deal To Build Competitor To Elon Musk’s SpaceX” (Wall Street Journal). “Altman reached out to at least one rocket maker, Stoke Space, in the summer, and the discussions picked up in the fall, according to people familiar with the talks. Among the proposals was for OpenAI to make a series of equity investments in the company and end up with a controlling stake. Such an investment would total billions of dollars over time. The talks are no longer active, people close to OpenAI said.”
“The Case For A New Floating Rate Treasury Note” (Darrell Duffie, Donald Wilson Jr.). “The accelerating digitization of financial markets creates a clear and immediate need for a sovereign instrument that combines the safety of U.S. Treasury credit, the liquidity of overnight funding, and the transparency of on-chain settlement. The Treasury has an opportunity to meet this demand and to increase financial stability in digital-asset markets by issuing a new security, Perpetual Overnight Rate Treasury Securities (PORTS). These notes would be issued and redeemable at par, daily. Given their attractiveness as collateral and as a settlement medium, PORTS would likely yield below the Secured Overnight Financing Rate (SOFR), with a spread that depends on the supply. If we are right that there is significant latent demand for PORTS, the need to issue longer-maturity Treasuries would decline, saving taxpayer borrowing costs. PORTS would also advance the current U.S. administration’s strategy of further empowering the dollar with stablecoins.”
“Living In The Age Of Discontent” (Known Unknowns). “This is an age of discontent. Just note how often we use the word crisis—the affordability crisis, the housing crisis, the everything crisis. And yet we’ve never had so much, not only in terms of wealth (which I’ve written about before), but also income. It’s true the middle class is disappearing—but largely because so many people have become upper-middle class. And fewer people than ever live in poverty—even by real American poverty standards.”
“An Introduction To Auctions” (Homo Economicus). “We have both made incredible progress in estimating the parameters of auctions, and yet have so far to go. We know much less than we think we do about auctions. The assumptions needed to uncover the distribution of valuations are restrictive, and often not met in practice. These assumptions are not trivial, and often suffice to flip the sign of the results. I very often see papers make assumptions, often in a throwaway tone, which are wholly responsible for the observed results. This is not a field which you can very well venture into, reading only the abstracts and expecting never to be misled. One must, in order to choose to believe these papers, carefully consider how their assumptions interact with the results which they have found.”
What we’re reading (12/2)
“Strong Start To Online Holiday Shopping Masks Signs Of A Fragile U.S. Consumer” (Reuters). “Consumer confidence fell again in November. Still, Americans spent a record $44.2 billion online during the period retailers call Cyber Week - the U.S. shopping bonanza that runs from Thanksgiving through the following Monday - according to Adobe (ADBE) Analytics, which tracks shopper visits to online retail websites.”
“OpenAI Declares ‘Code Red’ As Google Threatens AI Lead” (Wall Street Journal). “Altman said OpenAI had more work to do on the day-to-day experience of its chatbot, including improving personalization features for users, increasing its speed and reliability, and allowing it to answer a wider range of questions. The companywide memo is the most decisive indication yet of the pressure OpenAI is facing from competitors that have narrowed the startup’s lead in the AI race. Of particular concern to Altman is Google, which released a new version of its Gemini AI model last month that surpassed OpenAI’s models on industry benchmark tests and sent the search giant’s stock soaring.”
“AI Adoption Rates Starting To Flatten Out” (Torsten Sløk, Apollo). “Data from the Census Bureau and Ramp shows that AI adoption rates are starting to flatten out across all firm sizes, see charts [enclosed].”
“Can Arizona Miners Unleash An American Copper Boom?” (Wall Street Journal). “Advances in mining technology, insatiable demand for the metal that is essential to everything electric, and President Trump’s push to boost U.S. raw-material output have made it worthwhile to revisit old mines and marginal deposits around copper-rich Arizona…The U.S. has plenty of copper in the ground, but smelting capacity is a pinch point. A big chunk of U.S. mine output is shipped abroad and sent back in processed forms that manufacturers can use.”
“The Great Equity Reset - Global Dispersion” (Disciplined Systematic Global Macro Views). “What remains the key theme to watch is the rotation into global equities and emerging markets, which are up respectively by 29.84% and 22.40% through November. These indices are beating large, mid, and small-cap US stocks by a significant margin. Buying a broad set of US stocks is not the direction for success in the equity markets. We are seeing low correlation across US stocks and high dispersion. Investors need to be selective with their stock choices. This is a global stock-pickers market. If you are not a stock picker, you can see it in the differentials across risk premia. High beta and momentum factors are showing strong returns, while low volatility and dividend stocks are underperforming, even amid the current talk of market bubbles.”
What we’re reading (12/1)
“Amazon Offers Test Of ‘Ultrafast’ Delivery In Two US Cities” (Bloomberg). “Amazon.com Inc. plans to offer deliveries of hundreds of household items, including some fresh groceries and over-the-counter medicines, within 30 minutes in a test program beginning in Philadelphia and its home city of Seattle.”
“Office-To-Residential Conversions Are Booming And New York Is The Epicenter” (Wall Street Journal). “Over the past two decades, developers in New York have converted nearly 30 million square feet of office space into residential living, with the pace of transformation picking up in recent years. Most office buildings were considered too wide and mechanically complex to repurpose into apartments with kitchens, bathrooms and bedrooms. But New York developers are solving those problems with new architectural hacks—cut-through notches, carved light wells, and strategic wall-offs of interior cores that create space for new residential floors.”
“Working From Home Is Harming Young Employees. They’re Starting To See That.” (New York Times). “New research sheds some light on why that might be. In a recent paper, a team of economists at the Federal Reserve Bank of New York, the University of Virginia and Harvard University found that younger workers suffered career-wise by working from home, receiving less training and fewer opportunities for advancement. The economists found that remote work even contributed to higher unemployment among younger workers. They calculated that younger workers appeared to be responding accordingly, spending more time in the office than older workers over the past few years.”
“Getting Ready To Party Like It’s 2008” (Paul Krugman). “The clear lesson of 2008 is that effective financial regulation is essential. For three generations after the great bank runs of 1930-31, America avoided “systemic” banking crises — crises that threaten the whole financial system, as opposed to individual institutions. This era, which Yale’s Gary Gorton calls the Quiet Period, was the result of New-Deal-era protections — especially deposit insurance — and regulations that limited banks’ risk-taking. But post 1980, finance was increasingly deregulated. In particular, the government failed to extend bank-type regulation to shadow banks that posed systemic bank-type risks. And the crisis came.”
“Michael Burry Says Tesla Is ‘Ridiculously Overvalued,’ Slams Musk Pay Package” (Yahoo! Finance). “His post took aim at the "tragic algebra" of stock-based compensation, and Tesla was an example. Tesla dilutes its stock by 3.6% a year, he said, and offers no buybacks. ‘Tesla's market capitalization is ridiculously overvalued today and has been for a good long time,’ Burry said, adding that CEO Elon Musk's $1 trillion dollar pay package will dilute Tesla stock even further. Last month, Tesla shareholders approved the controversial pay package at its shareholder meeting.”
December picks available now
The new Prime and Select picks for December are available starting now, based on a model run put through today (November 30). As a note, I will be measuring the performance on these picks from the first trading day of the month, Monday, December 1, 2025 (at the mid-spread open price) through the last trading day of the month, Wednesday, December 31, 2025 (at the mid-spread closing price).
December picks available soon
I’ll be publishing the Prime and Select picks for the month of December before Monday, December 1 (the first trading day of the month). As always, SPC’s performance measurement for the month of November, as well as SPC’s cumulative performance, will assume the sale of the November picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Friday, November 28).
What we’re reading (11/26)
“Nvidia Says It Isn’t Using ‘Circular Financing’ Schemes. 2 Famous Short Sellers Disagree.” (Yahoo! Finance). “Nvidia wrote a seven-page document — first reported by Barron's on Tuesday morning — rebuffing claims that it invests in its own customers to inflate its revenue. The memo was written in response to a newsletter from a little-known Substack author last week claiming that the $5 trillion AI chipmaker is engaged in a "circular financing scheme" — using vendor financing to boost sales — drawing parallels between Nvidia and famous dot-com era accounting frauds committed by Enron and Lucent.”
“Why Is Crypto Crashing?” (The Week). “The crypto industry is having a ‘terrible, horrible, no good, very bad month,’ said USA Today. Bitcoin has lost more than 10% of its value for the year, dropping from a high of $126,000 in October to under $90,000 last week. The drop in digital currency values is due to a ‘whirlwind of factors’ that include shaky showings for artificial intelligence and technology stocks amid growing concerns about the overall economy. ‘No one can say’ when the dust might settle.”
“Tech Trumps Tariffs: Why US Exceptionalism Will Last” (Nouriel Roubini, Financial Times). “[T]he US is experiencing a few quarters of a growth recession (GDP expansion below potential) and a modest rise in inflation rather than a serious stagflationary recession. By next year growth will recover as monetary easing and fiscal stimulus are still under way while financial conditions have eased and the tailwinds from AI-related capital expenditure will continue.”
“Uber Headhunted PhDs To Join 'Project Sandbox.’ After A Month, It Said That Their AI Training Contracts Were Over.” (Business Insider). “The workers are part of Project Sandbox, Uber’s name for the AI training work it carries out for Google. The project represents an early effort by Uber to develop AI tools for other companies under its AI Solutions division. About a dozen contractors were involved in the project, two workers told Business Insider, though it wasn't immediately clear how many were cut. ‘The client has recently communicated a change in their internal priorities, which directly affects ongoing work on this program,’ Uber emailed the affected contractors on Monday.”
“The Untold Story Of Charlie Munger’s Final Years” (Wall Street Journal). “The unexpected last chapter of Munger’s life is less well-known. In the year before his death, Munger made over $50 million from a bet on an out-of-favor industry he had shunned for 60 years. He revved up his real-estate activities, working with a young neighbor to place big, long-term wagers, unusual for a nonagenarian. He faced down health challenges and wrestled with the future.”
What we’re reading (11/25)
“Hassett Emerges As Frontrunner In Trump Fed Chair Audition” (Bloomberg). “White House National Economic Council Director Kevin Hassett is seen by advisers and allies of President Donald Trump as the frontrunner to be the next Federal Reserve chair, according to people familiar with the matter, as the search for a new central bank leader enters its final weeks.”
“Meta Is In Talks To Use Google’s Chips In Challenge To Nvidia” (Wall Street Journal). “A deal could be worth billions of dollars, but the talks are continuing and may not result in one. It is still up in the air whether Meta would use the chips, known as tensor processing units or TPUs, to train its AI models or to do inference, one of the people said. Inference, the process a trained model uses to generate the response to a query, requires less computational power than training.”
“Lofty Valuations Of US Stocks Are Sparking Anxiety – Here’s What History Tells Us” (Ken Fisher). “For most investors, the forecasting power of valuation metrics is pure gospel. With the price-to-earnings ratio of US stocks hovering near 30, many are starting to taking it on faith that these are the last days of the bull market. Yet valuations don’t predict stocks’ direction – and they never have. Heresy? More like history – more than a century of it – proving that today’s lofty PEs mean little.”
“Traders Are Flooding Markets With Risky Bets. Robinhood’s CEO Is Their Cult Hero.” (Wall Street Journal). “Risk-taking is back for individual investors, and few people have done more to stoke those spirits than the 38-year-old Tenev. Robinhood’s trading app makes it easy not just to buy and sell ordinary stocks, but to invest in options, cryptocurrencies and other exotic financial products, even to make sports bets and play the prediction markets. The company’s critics liken the environment to a casino, but its fans credit Robinhood with democratizing the lucrative world of sophisticated investments.”
“Confidently Wrong” (Marginal Revolution). “If you’re going to challenge a scientific consensus, you better know the material. Most of us, most of the time, don’t—so deferring to expert consensus is usually the rational strategy. Pushing against the consensus is fine; it’s often how progress happens. But doing it responsibly requires expertise. This isn’t just my anecdotal impression. A paper by Light, Fernbach, Geana, and Sloman shows that opposition to the consensus is positively correlated with knowledge overconfidence…Light, Fernbach, Geana and Sloman do something clever. They ask respondents a series of questions on uncontroversial scientific topics…The authors then correlate respondents’ scores on the objective (uncontroversial) knowledge with their opposition to the scientific consensus on topics like vaccination, nuclear power, and homeopathy. The result is striking: people who are most opposed to the consensus…score lower on objective knowledge but express higher subjective confidence. In other words, anti-consensus respondents are the most confidently wrong—the gap between what they know and what they think they know is widest.”
What we’re reading (11/24)
“AI Investors Want More Making It And Less Faking It” (Wall Street Journal). “Two events this week illustrate the worsening environment for AI. First, Nvidia and Microsoft pledged to invest $15 billion between them into Anthropic, the No. 2 large language model developer. In turn, it promised to buy $30 billion of computing capacity from Microsoft, using Nvidia chips. This sort of circular deal had led to a nice bump in all the stocks involved in the past—but on Wednesday, nada. Second, Nvidia’s better-than-expected results were hailed by many investors and commentators as proof that there isn’t an AI bubble, and the stock jumped more than 5% on Thursday morning, while smaller AI-related stocks soared. It only took until that afternoon for people to realize that the argument was daft.”
“Wall Street Banks Scramble To Assess Fallout From Hack Of Real-Estate Data Firm” (CNN Business). “Hackers stole a trove of data from a company used by major Wall Street banks for real-estate loans and mortgages, setting off a scramble to determine what was taken and which banks were affected, according to people familiar with the investigation and a statement from the firm. New York-based SitusAMC, which boasts 1,500 clients, said Saturday night that account records and legal agreements related to some of its clients had been impacted in the hack.”
“Vibecessions, Part II” (Paul Krugman). “During the Biden years, inflation did temporarily spike – which people hated even though their incomes were growing fast enough to keep up with inflation. But the anger persisted even as inflation fell dramatically, and continues under Trump…I haven’t found a “unitary theory” of vibecessions. Rather, there appear to be several possible, and not mutually exclusive, explanations…[1] Media negativity [2] Extreme partisanship [3] People care about the level of prices, not the inflation rate [3] The economy is worse than it looks [4] Negative feelings arising from Trump’s chaotic economic policies[.]”
“How Tech Broke The Job Market” (Business Insider). “‘Congestion is the bane of a lot of markets,’ says Alvin Roth, a Nobel Prize-winning economist at Stanford who's helped design programs to better match students with schools, organ donors with patients, and hospitals with new doctors. ‘Successful marketplaces have to fight hard to defeat congestion.’”
“Apple Cuts Jobs Across Its Sales Organization In Rare Layoff” (Bloomberg). “Management notified the affected workers over the past couple of weeks, according to people familiar with the matter. The cuts extended across the sales organization — hitting some teams especially hard — though the company didn’t tell employees how many roles were involved.”
What we’re reading (11/19)
“Nvidia Stock Soars After Q3 Earnings, Forecasts Top Estimates With Sales For AI Chips ‘Off The Charts’” (Yahoo! Finance). “Nvidia (NVDA) reported its third quarter earnings on Wednesday, beating analysts' estimates on the top and bottom lines and offering a better-than-anticipated outlook. For the fourth quarter, Nvidia projects revenue of $65 billion plus or minus 2%. Wall Street was expecting revenue of $62 billion. ‘Blackwell sales are off the charts, and cloud GPUs are sold out,’ CEO Jensen Huang said in a statement.”
“Is AI A Bubble? Not So Fast.” (Tyler Cowen). “It’s far too early to say if AI is a bubble. But the technology’s power to transform society means that believing it’s a bubble can be something of a security blanket.”
“Why The Fed’s December Rate Decision Isn’t The Stock Market’s Biggest Worry” (MarketWatch). “Investors are making too big a deal over whether interest rates will be cut at the December meeting of the Federal Reserve’s interest-rate-setting committee. Interest rates have surprisingly little ability to forecast the stock market’s direction.”
“Private Equity Firms Could Face More Litigation As They Push Into Retail” (Institutional Investor). “Private equity’s push into the wealth and retail channels could lead to class actions from individual investors in a way the sector has not previously experienced. But this increased litigation risk to PE could serve to help indirectly regulate retail investments in private assets, two researchers argue. “Private equity firms are not subject to the same regulations as public companies,” said William Magnuson, professor at the Texas A&M University School of Law. Under the PE model, investors have fewer rights and liquidity can be limited, among other things. In contrast, the SEC requires a long list of disclosures and standards for calculating fees and other expenses. With private equity set to enter 401(k)s, the gap between the two regulatory frameworks could lead to a flood of legal actions against PE firms.”
“Lawsuit Claims Farm Bureau Hid Fraudulent Activity From Insurance Regulators” (Iowa Capital Dispatch). “Two alleged whistleblowers are suing Farm Bureau Property & Casualty Insurance Co. and its affiliates for alleged racketeering, wrongful termination and concealment of information from state regulators. The lawsuit alleges Farm Bureau officials repeatedly concealed from regulators in Iowa and other states instances of fraudulent activity committed by company agents or employees. The defendants’ conduct in the matter amounts to racketeering, obstruction of justice, and mail fraud or wire fraud, the lawsuit claims.”