What we’re reading (10/23)
“September CPI Preview: Inflation Seen Holding Firm Near 3% As Tariffs Complicate Fed’s Path” (Yahoo! Finance). “September's Consumer Price Index (CPI) is expected to show inflation holding stubbornly around 3%, underscoring how tariffs and service-sector stickiness continue to complicate the Federal Reserve's path toward its 2% target. The report, set for release on Friday at 8:30 a.m. ET, was delayed by the ongoing government shutdown. It marks the first major piece of federal economic data since the shutdown began — now the second-longest in US history with no end in sight.”
“Strong Earnings Reassure Jittery, Data-Deprived Investors” (Wall Street Journal). “Strong corporate earnings are easing investors’ anxieties about the health of the U.S. economy, providing support to markets buffeted by renewed trade tensions with China and worries about bad business loans.”
“Intel Stock Jumps As Q3 Earnings Beat Expectations, AI Drives Chip Demand” (Yahoo! Finance). “Intel (INTC) stock jumped as much as 7% after the bell Thursday as the chipmaker reported third quarter earnings and revenue that topped Wall Street's expectations. Intel reported $13.7 billion in revenue for the three months ended Sept. 27, higher than the $13.15 billion expected by analysts tracked by Bloomberg and $13.28 billion the previous year. The chipmaker said that adjusted earnings per share was $0.23, above the $0.01 projected by Wall Street. The company reported a loss of $0.46 during the same period in 2024.”
“Addressing The Gold Price From An Iran/China Barter Angle” (RealClear Markets). “The increase in price since February has not been accidental. This is when the U.S. announced its policy to harshly enforce sanctions targeting Iran’s oil supply chain, to blockade the country’s petroleum exports. The sanctions applied to many entities across countries, but the evidence is that Iran still exported $43 billion of mainly crude oil in 2024, according to estimates by the U.S. Energy Information Administration. Officials estimate that around 90% of those exports went to China. The Wall Street Journal described in an October 5 article how China and Iran avoid the sanctions through bartering. Iran is shipping oil to China and, in return, state-backed Chinese companies build infrastructure in Iran. Involved in this transaction are a Chinese state-owned insurer that, according to the Journal, calls itself the world’s largest export-credit agency, along with a secretive Chinese financial entity whose name is not on any public list of Chinese banks or financial firms.”
“When Will Quantum Computing Work?” (Tom McCarthy). “Huge investments are flowing into QC companies today. IonQ has a $19B market cap, Rigetti has a $10B cap, and PsiQuantum recently raised $1B. This is a lot of money for an industry generating no real revenue, and without an apparent path to revenue over the next 5 years. Qubit counts have not been doubling each year, but even if they did, we'd have 32 kq machines in 2030. There are few - if any - commercial applications for machines of that size. Will these companies keep raising larger rounds until they achieve 100 kq? Or have they got some secret sauce we don't know about that investors are betting on? If there has been a true breakthrough, we should see much faster growth in qubit count, as well as larger and larger quantum processors, running increasingly massive programs. Note that the QC ecosystem is reasonably public and both private companies and university labs are competitive players. Advances tend to get published rather than stowed away.”
What we’re reading (10/22)
“Bubble-Talk Is Breaking Out Everywhere” (Financial Times). “The whole point of financial stability reports is to warn about stuff that might go wrong in the future but probably won’t. Even so, the latest missive from the IMF last week was bracing…These things are extremely precisely worded. When such august institutions talk of valuations ‘well’ in excess of observable reality, and of ‘sharp’ or ‘disorderly’ corrections, they are very much switching on the fasten-your-seatbelts sign.”
“Is There An ‘AI Bubble’? We Asked The Experts: AI Chatbots.” (Forbes). “‘Yes, there’s an AI bubble,’ Grok said, adding the hype around AI’s potential has ‘driven massive investments, inflated valuations and unrealistic expectations, reminiscent of the dot-com bubble.’ The chatbot said many AI startups ‘lack sustainable business models,’ and the ‘gap between promised breakthroughs and actual deliverables is growing,’ but—in the first defensive note—noted ‘AI’s transformative potential remains real.’ ChatGPT—responding ‘yes and no’—argued that while there existed ‘classic bubble behavior,’ including ‘undeniably high’ investment and hype as well as some companies being ‘overvalued or chasing AI without real substance,’ AI is ‘already delivering real utility across industries.’”
“Is The Flurry Of Circular AI Deals A Win-Win—Or Sign Of A Bubble?” (Wall Street Journal). “During the late 1990s and early 2000s, such dependency loops mainly consisted of telecom-equipment makers lending money or extending credit to customers so the customers could afford to buy their gear. In those days, this was widely referred to as vendor financing. The poster child for vendor financing run amok was Lucent Technologies. It lent billions of dollars to upstart telecom providers building out their infrastructure and networks. In the boom years, their purchases helped fuel Lucent’s rapid sales growth. When those customers went bust—because they ran out of cash and couldn’t raise fresh capital—Lucent had to write off their bad debts and book huge losses.”
“‘Finances Are Getting Tighter’: US Car Repossessions Surge As More Americans Default On Auto Loans” (The Guardian). “Alarm bells are ringing on Wall Street. The recent collapses of Tricolor, a used car seller and sub-prime auto lender, and First Brands, an auto parts supplier, have put the finance industry on edge, almost two decades after problems in the sub-prime mortgage lending market set the stage for the global financial crisis. ‘When you see one cockroach, there are probably more,’ Jamie Dimon, the JPMorgan Chase CEO, ominously cautioned analysts this week, after the US’s largest bank disclosed a $170m charge tied to Tricolor’s bankruptcy. ‘Everyone should be forewarned on this one.’”
“RIP Zoomtowns” (Business Insider) .”[T]he big ‘winners’ of the work-from-home reshuffle — metros that drew hordes of footloose workers and disaffected coastal dwellers — have turned into losers. Fewer people are moving to so-called Zoomtowns. Home listings are piling up on the market. Prices are dropping. The anxiety has shifted from buyers trying to elbow their way in to sellers just trying to offload their properties. A new report by the real estate analytics firm Parcl Labs, shared exclusively with Business Insider, shows that home sellers in the lower half of the US, also known as the Sun Belt, are the most desperate in the country.”
What we’re reading (10/21)
“Gold, Silver Tumble In Biggest Daily Drop In Years As Stunning Precious Metals Rally Comes To A Halt” (Yahoo! Finance). “Gold futures prices tumbled in their biggest daily drop in over a decade as a stunning rally in precious metals came to a halt. Spot gold dropped as much as 6%, to hover around $4,105 per troy ounce, its largest one-day drop since 2013. Silver also tumbled more than 8% to mark their largest daily drop since 2021.”
“I Test Drove a Flying Car. Get Ready, They’re Here.” (Wall Street Journal). “Welcome, and congratulations. You’ve lived long enough to see the age of flying cars—privately owned, solo-piloted aircraft, free to operate in unrestricted airspace, much as automobiles can take to the open road. And they’re all electric. I knew you’d be thrilled.”
“Breakthrough Blood Test Could Spot Dozens Of Cancers Before Symptoms Appear” (Fox News). A new type of blood test could help detect multiple cancers early. A team of researchers in California studied a new multi-cancer early detection (MCED) test called Galleri, which can reportedly detect more than 50 types of disease. The study analyzed about 23,161 participants 50 years of age and older across the U.S. and Canada who did not have any symptoms…Out of the more than 23,000 people sampled, the Galleri test detected a cancer signal in 216 of them, 133 of whom were confirmed to have the disease.”
“US Army Turns To Private Equity For Infrastructure Funding” (Semafor). “The army secretary told the Financial Times that he wanted $150 billion in capital expenditure over the next decade, but only had a budget of $15 billion, so needed outside investment. Military spending is growing across the West, and private firms are benefiting. The EU spent a record $402 billion on defense last year, up 19% year-on-year, and the figure is expected to rise, Defense News reported. One military-focused index has seen its value double in the last 12 months.”
“The Internet Is Going To Break Again” (The Atlantic). “Everything is in “the cloud” now, except the cloud is a real place, and it’s in Northern Virginia. Rows and rows of servers stacked in Amazon-owned warehouses across Ashburn, Haymarket, McNair, Manassas, and Sterling make up a chunk of the infrastructure for the modern internet—equipment as crucial as railway tracks and the electric grid. When a technical issue disrupted operations at those facilities yesterday, it was enough to temporarily crash the internet for users around the world. The incident marked at least the third time in the past five years that Amazon Web Services’ Northern Virginia facilities contributed to a widespread internet outage.”
What we’re reading (10/20)
“The Day Amazon Broke The Internet For Millions Of Americans” (Wall Street Journal). “The trouble started a few hours after midnight on the East Coast. A minor update to what’s called the Domain Name System—the kind of software tweak that happens millions of times a day on the internet—sent the well-oiled machine that underpins the modern web careening toward a crash. DNS acts as a kind of telephone directory for the internet, instructing machines on how to find each other. The faulty update gave the wrong information for DynamoDB, an Amazon Web Services product that has become one of the world’s most important databases. Suddenly, machines on the East Coast that tried to process trillions of requests were getting the internet’s equivalent of a wrong number.”
“Massive Amazon Cloud Outage Has Been Resolved After Disrupting Internet Use Worldwide” (Associated Press). “Amazon says a massive outage of its cloud computing service has been resolved as of Monday evening, after a problem disrupted internet use around the world, taking down a broad range of online services, including social media, gaming, food delivery, streaming and financial platforms.”
“White House Economic Advisor Hassett Says Shutdown Could End This Week” (CNBC). “Top White House economic advisor Kevin Hassett on Monday predicted the government shutdown is ‘likely to end sometime this week.’ But if that does not happen, the Trump administration may impose ‘stronger measures’ to force Democrats to cooperate, Hassett, director of the National Economic Council, said on CNBC’s ‘Squawk Box.’”
“Cleveland-Cliffs Stock Soars After Company Touts Plans To ‘Re-Focus’ Its Rare Earth Mining Efforts” (Yahoo! Finance). “Cleveland-Cliffs stock rallied as much as 24% Monday, ending the day up over 20% after the company announced it would redouble efforts related to mining for rare earth minerals, which has become one of the hottest commodities trades on Wall Street this year. ‘Beyond steelmaking, the renewed importance of rare earths has driven us to re-focus on this potential opportunity at our upstream mining assets,’ CEO Lourenco Goncalves said in the company's earnings release.”
“Mysterious Spot In Earth’s Magnetic Field Now Growing Rapidly” (Futurism). “A major dip in the Earth’s magnetic field over the South Atlantic has been puzzling scientists for over a century. Perhaps most strangely, the weak spot — dubbed the South Atlantic Anomaly — has grown rapidly over the last eleven years. That’s according to satellite data suggests showing it’s expanded by an area equivalent to half the size of continental Europe, as detailed in a new paper published in the journal Physics of the Earth and Planetary Interiors. An international team of researchers analyzed data collected by the European Space Agency’s Swarm, a constellation comprised of three identical satellites that measure the Earth’s magnetic signals. The findings could allow us to improve existing magnetic models that play a crucial role in navigation and tracking of space weather, while also furthering our understanding of how the Earth’s layers interact with each other.”
What we’re reading (10/19)
“The Warning Signs Lurking Below The Surface Of A Record Market” (Wall Street Journal). “Wall Street is starting to get a little defensive. In the midst of the market’s most unsettling stretch since August, investors have turned to utilities, healthcare stocks and consumer staples—industries that reliably churn out profits no matter the economic conditions. Electricity, drugs and groceries are always in demand, even when consumers buy fewer cars, phones and streaming services. Those three defensive sectors are on track to lead the S&P 500 index this month for the first time since June 2022. Investors have also sheltered in bonds”
“IMF Chief Economist Discusses Tariffs, ‘Dim’ 2026 Growth Outlook” (Yahoo! Finance). “The International Monetary Fund (IMF) released its 2026 World Economic Outlook. IMF chief economist, Pierre Olivier Gourinchas, sits down with Yahoo Finance Fed Correspondent Jennifer Schonberger to discuss the report and how President Trump's tariff policies contribute to ‘dim’ anticipated economic growth in 2026.”
“Wall Street Has Been Worried About Bad Loans For Weeks. Now Those Fears Are Spreading” (CNN Business). “Several financial groups are wrestling with bad loans, raising worries on Wall Street of more to come. For weeks, investors have focused on Jefferies Financial Group, an investment bank that has at least $45 million worth of exposure to First Brands, an auto-parts supplier that filed for bankruptcy last month. But on Thursday, they turned some of their attention to two regional banks, Western Alliance Bancorp and Zions Bancorp, after concerns about some of their loans as well.”
“Rise Of ‘Shadow Banking’ Brings New Financial Risks, Experts Say” (Washington Post). “A spate of recent fraud cases and bankruptcies has raised new concerns about a growing class of largely unregulated loans, with a sell-off in U.S. banking stocks bleeding into global markets this week. A pair of regional banks this week disclosed lawsuits involving allegedly fraudulent business loans, while the failure of two companies in the automotive sector dinged some Wall Street titans, including JPMorgan.”
“Why The AI Economy Might Not Be 1990s Redux” (Axios). “There are significant differences in the current economic and demographic backdrop — and the nature of the AI rollout — that could mean inflation remains a problem and the job picture more worrying, even if AI lives up to its promise.”
What we’re reading (10/14)
“Fed’s Powell Suggests Tightening Program Could End Soon, Opens Door To Rate Cuts” (CNBC). “Federal Reserve Chair Jerome Powell on Tuesday suggested the central bank is nearing a point where it will stop reducing the size of its bond holdings, and provided a few hints that more interest rate cuts are in the cards. Speaking to the National Association for Business Economics conference in Philadelphia, Powell provided a dissertation on where the Fed stands with ‘quantitative tightening,’ or the effort to reduce the more than $6 trillion of securities it holds on its balance sheet. While he provided no specific date of when the program will cease, he said there are indications the Fed is nearing its goal of ‘ample’ reserves available for banks.”
“Wall Street Is Firing on All Cylinders, Fueled By Deals And Trading” (Wall Street Journal). “Goldman is now on pace for its best year ever in its main investment-banking and markets division. JPMorgan is on track to make over $50 billion in annual profit for the second year in a row. BlackRock is sitting on a record $13.5 trillion in assets under management. The strength is evident across many of the banks’ businesses, reflecting the enthusiasm in the stock market and corporate boardrooms. Record high stock markets fueled increased trading and borrowing by hedge funds and others to buy even more securities. President Trump’s policymaking is adding volatility that keeps traders eager to move, but not so much to spoil the punch.”
“This Gold Rush Is Ominous” (The Atlantic). “The mystery of the current gold rally is that the S&P 500 is also up. The stock-market index reached an all-time high earlier this month, which would seem to suggest that the American economy isn’t quite as close to the brink as the price of gold might indicate. But the reality probably has to do with a bifurcated market. Joe Davis, Vanguard’s global chief economist, told The New York Times on Saturday that this rare case of gold and stocks moving in a parallel upward trend has to do with ‘dramatically different’ investor perspectives: The optimists are going with equities, and the pessimists are going with gold. In today’s economy, there’s room enough for both.”
“‘Absolutely’ A Market Bubble: Wall Street Sounds The Alarm On AI-Driven Boom As Investors Go All In” (Yahoo! Finance). “Bank of America’s latest Global Fund Manager Survey, released Tuesday, cited an ‘AI equity bubble’ as the top global tail risk for the first time in its history. The survey, which polls roughly 200 fund managers overseeing nearly $500 billion in assets, also showed cash levels falling to 3.8%, near BofA’s ‘sell’ threshold of 3.7%. Historically, readings below 4% have marked periods of peak risk appetite, often surfacing late in the market cycle.”
“Salesforce CEO Marc Benioff: Agentic AI Is The Next ‘Revolution’” (Yahoo! Finance). “Benioff framed agentic AI not just as a productivity tool, but as a force that could democratize opportunity across industries. Unlike predictive AI, which analyzes historical trends, agentic systems can act autonomously within organizational workflows, ultimately generating insights, automating tasks, and driving decision making in real time. ‘There's no question it is here,’ he said. ‘You're going to see it over and over again.’”
What we’re reading (10/13)
“The Rules Of Investing Are Being Loosened. Could It Lead To The Next 1929?” (New York Times). “A group of financiers is trying to convince the public to invest heavily in private equity and crypto — a risky gambit with some real 1920s vibes.”
“A Historic Crypto Selloff Erased Over $19 Billion, But Two Accounts Made $160 Million” (Wall Street Journal). “President Trump’s surprise announcement of 100% tariffs against China on Friday triggered a cryptocurrency selloff that wiped out more than $19 billion in leveraged positions. Two accounts that placed bets against the market minutes before the news broke scored a $160 million windfall.”
“Grindr Explores Take-Private After Lender Calls Insiders’ Loans” (Semafor). “Raymond Zage and James Lu, who control a majority of the dating app, are in talks to secure debt financing from Fortress Investment Group to acquire Grindr, which has a market value of $2.4 billion, the people said. The fast-moving talks come after a unit of Temasek, which had made personal loans to at least one of the men secured by their holdings, seized some of the underlying shares last week and sold them, the people said. Zage and Lu have discussed a buyout price of around $15 a share, some of the people said, cautioning that number could change. A deal at that price would value the company at around $3 billion.”
“Silver Hits All-Time High As London Squeeze Sparks Market Havoc” (Bloomberg). “Spot prices rose as much as 1% to $52.8983 an ounce in London, surpassing a peak set in January 1980 on a now-defunct contract overseen by the Chicago Board of Trade — when the billionaire Hunt brothers attempted to corner the market. Gold also climbed to another record high, building on eight straight weeks of gains.”
“Nobel Prize In Economics Goes To Philippe Aghion And Peter Howitt And Joel Mokyr” (Marginal Revolution). “This is a prize for economic growth, and for the ideas of creative destruction. Those are some of the most important ideas in economics, so I could not be happier with this pick. Joel Mokyr in particular has been a long-time associate of GMU and Mercatus, so I would like to congratulate him in particular. Aghion is at INSEAD in France, Howitt at Brown, and Mokyr at Northwestern. It is also nice to see some people outside of “the usual schools” winning the prize. Aghion and Howitt, of course, worked together to produce a model of creative destruction and economic growth.”
What we’re reading (10/12)
“The Big Crash: Are We Really Heading For Another 1929?” (The Telegraph). “The economy is becoming almost wholly dependent on just a handful of tech titan “hyperscalers” chasing a dream of uncertain substance and return. Rarely, if ever, have the fortunes of the world economy depended so precariously on the judgment of such a small cluster of men – the bosses of Meta, Alphabet, Microsoft, Apple, X, Amazon and others chasing the supposed crock of gold at the end of the AI rainbow.”
“The Dangers Of Passive Investing” (Torsten Sløk). “US workers contribute on average around $8,500 to their 401(k) accounts every year, and with 71% of 401(k) assets allocated to equities—and the Magnificent Seven having a weight of almost 40% in the S&P 500—the bottom line is that each worker in the US puts an estimated $2,300 into the Magnificent Seven stocks every year, see chart below. This is passive money going into the Magnificent Seven regardless of whether their outlook is good or bad.”
“The US Really Is Two Economies In One” (Joachim Klement). “[W]hat will show up in the official GDP and retail sales statistics is the change in consumption weighted by how much different income groups spend. And while the unweighted average is a drop in expenditure of 1.4%, the weighted expenditure drop is just a third as large at 0.5%. So, the US statistics will look just fine, but the people will not feel fine at all.”
“Is Private Credit Drowning In Capital? These Are The Strategic Implications For Investors” (Morningstar). “Crowdedness denotes a scenario in which investors collectively and simultaneously acquire significant volumes of the same assets. Those cash flows can drive equity valuations higher. In credit markets, cash inflows not only can drive spreads lower, but they can also lead to increased systemic risk as loan/value ratios can rise and interest coverage ratios fall.”
“California’s Wine Industry Is In Crisis” (Wall Street Journal). “The U.S. wine industry hasn’t had it this bad since Prohibition. The list of problems is long in California, the cradle of American wine. Vineyards have an oversupply of grapes. People are drinking less, especially younger drinkers, and tariffs have caused the biggest foreign market for U.S. wine—Canada—to dry up overnight. With this year’s grape harvest in full swing, way too much wine from previous years still hasn’t been sold.”
What we’re reading (10/9)
“The Big Dollar Short Is Turning Into A Pain Trade For Investors” (Bloomberg). “Betting against the dollar has been the dominant trade this year in the $9.6 trillion-a-day foreign exchange market, but the wager is starting to stumble. The world’s primary reserve currency is around a two-month high even as the US government shutdown drags on, and traders in Asia and Europe say hedge funds are adding options bets that the rebound versus most major peers will extend into year-end.”
“Gold Screams ‘Debasement Trade.’ Bonds Say Otherwise.” (Wall Street Journal). “Debasement fears seem to be everywhere—except the one place they should be most obvious: bonds. Sure, there was a nudge up in global long-end yields this week, thanks to politics. Japan’s ruling party picked a leader who likes big spending and low rates, and France lost yet another prime minister after failing to reconcile the need to save money with a parliament that disagrees.”
“Insurance Companies Likely To Take Hard Stance On Non-Domiciled CDLs” (FreightWaves). “A change in insurance policies could be coming to the trucking industry, signaling a major shift in their approach to non-domiciled commercial driver’s licenses (CDLs). As enforcement of the new non-domiciled CDL rule takes shape, insurance companies are likely to position themselves to avoid potential liability exposure.”
“This Stock And Bond Portfolio Won’t Give You Bragging Rights — But It Does Make You Money” (MarketWatch). “A slow and steady approach to investing is better over the long term than ‘going for broke.’ That’s because of a mathematical fact of life that Brian Chingono, Verdad Research’s director of quantitative research, calls ‘volatility drag.’ By that, he is referring to the percentage gain it takes to recover from a loss. ‘A portfolio that is down 10% in year one and up 10% in year two has lost 1% of value,’ he wrote in a recent email to clients. Similarly, ‘a portfolio down 20% and then up 20% has lost 4% of value, and a portfolio down 30% and up 30% has lost 9%. Linear changes in volatility drive squared losses in total return.’”
“Used Car Prices Are Revving Up” (Business Insider). “There's sticker shock, and then there's whatever is happening with America's used-car market. Prices for a slightly-less-than-new-car have been soaring over the past few years. Before the pandemic, the average price for a 3-year-old vehicle topped out at a little over $22,000. In 2025, the cost is upward of $31,000. And according to Edmunds, which tracks the car market, that number may soon sound like a bargain.”
What we’re reading (10/8)
“A Divided Fed Sees More Rate Cuts Ahead This Year: FOMC Minutes” (Yahoo! Finance). “There was some division at the Federal Reserve's last meeting about whether to cut interest rates and by how much, though most agreed the central bank could cut rates further in 2025. ‘Most judged that it likely would be appropriate to ease policy further over the remainder of this year,’ according to the minutes from the Federal Market Open Committee's Sept. 16-17 meeting, which were released Wednesday.”
“Trump Excludes Generics From Big Pharma Tariff Plan” (Wall Street Journal). “The Trump administration said it isn’t planning to impose tariffs on generic drugs from foreign countries, after months of wrangling over whether to impose levies on the vast majority of drugs that are dispensed in the U.S. The administration has been weighing duties on a range of pharmaceutical products and ingredients, using a tariff investigation under Section 232 of the Trade Expansion Act of 1962, which covers threats to national security. President Trump last month posted online that he would impose 100% tariffs on name-brand drugs on Oct. 1, but didn’t mention generics. Trump ultimately delayed imposing tariffs, as officials said they would allow for more negotiations with drug companies.”
“Is There An AI Bubble? Financial Institutions Sound A Warning” (Associated Press). “Lingering doubts about the economic promise of artificial intelligence technology are starting to get the attention of financial institutions that raised warning flags this week about an AI investment bubble. ‘The risk of a sharp market correction has increased,’ the U.K. central bank said. Officials at the Bank of England on Wednesday flagged the growing risk that tech stock prices pumped up by the AI boom could burst.”
“Share Repurchases And Investment Policies” (Paul Brockman, et al.). “Our study examines the claim that share repurchases lead to reductions in real investments. Repurchase opponents argue that managers forego valuable investments to conduct opportunistic repurchases, while proponents argue that repurchases return excess cash to shareholders. We compare repurchasing firms’ real investments in capital expenditures, R&D, and employment to public and private non-repurchasing firms—holding constant their growth (i.e., investment) opportunity sets. Our results provide no support for the claim that repurchases lead to lower real investments. Consistent with these findings, we also show that financial analysts do not revise downward their capital expenditure forecasts following repurchases.”
“A New Wall Street Trade Is Powering Gold And Hitting Currencies” (Wall Street Journal). “The gold rally of 2025 is unusual in that it hasn’t been fueled by a financial meltdown. A 52% gain in futures this year is on track to outpace similar surges during the first year of the Covid-19 pandemic and the 2007-09 recession, trailing only the inflationary shock in 1979…As investors make increasingly speculative bets that the boom will continue, they are also looking for ways to shield themselves from potential fallout of U.S. policy dysfunction, including widening budget deficits and the current government shutdown. That is pushing them into assets not denominated in dollars.”
What we’re reading (10/7)
“Billionaire Tech Investor Orlando Bravo Says ‘Valuations In AI Are At A Bubble’” (CNBC). “Thoma Bravo co-founder Orlando Bravo said that valuations for artificial intelligence companies are “at a bubble,” comparing it to the dotcom era. But one key difference in the market now, he said, is that large companies with ‘healthy balance sheets’ are financing AI businesses. Bravo’s private equity firm boasts more than $181 billion in assets under management as of June, and focuses on buying and selling enterprise tech companies, with a significant chunk of its portfolio invested in cybersecurity.”
“Gold Prices Top $4,000 For First Time” (Wall Street Journal). “Gold surpassed $4,000 a troy ounce for the first time, signaling an investor rush into alternative assets at a time of concern about the outlook for the U.S. economy and its place in the world. The price of the precious metal has surged this year more than it did during some of America’s biggest crises. Rising more than 50%, futures’ run-up in 2025 has outpaced rallies during the pandemic and 2007-09 recession. Not since the inflationary shock of 1979 has gold catapulted so much higher in a year.”
“Evaluating The Impact Of AI On The Labor Market: Current State of Affairs” (Yale Budget Lab). “Overall, our metrics indicate that the broader labor market has not experienced a discernible disruption since ChatGPT’s release 33 months ago, undercutting fears that AI automation is currently eroding the demand for cognitive labor across the economy.”
“They Got To Live A Life Of Luxury. Then Came The Fine Print.” (New York Times Magazine). “An estimated half of Americans have used B.N.P.L. at least once. Promising instant gratification to an economically eager audience — half of users are early-career individuals under the age of 33 — B.N.P.L. has scaled quickly as an industry, with the total value of purchases ballooning to around $120 billion in 2023 in the United States alone, up from just $2 billion in 2019.”
“America Saw ‘Essentially No Job Growth’ Last Month, Moody’s Warns” (The Hill). “With official data on hold due to the government shutdown, economists are turning to private reports, and the early signs, according to Moody’s, aren’t good. ‘This data shows that the job market is weak and getting weaker,’ Moody’s Analytics chief economist Mark Zandi wrote Sunday on social platform X. Zandi pointed to two separate private reports — from ADP and Revelio Labs — which, when averaged together, suggest there was ‘essentially no job growth’ last month.”
What we’re reading (10/6)
“Wall Street Strategists Lift S&P Targets Ahead Of Earnings Season On ‘Fundamental Strength’” (Yahoo! Finance). “Stocks kicked off the week near record highs on Monday as investors looked ahead to earnings season to weigh whether the AI boom, Fed easing, and resilient economic data can keep powering the rally higher. Despite mounting concerns over a government shutdown and fresh warnings of an AI ‘bubble,’ strategists across Wall Street say there's still upside for US equities heading into year-end.”
“Costco To Sell Ozempic And Wegovy At A Large Discount For People Without Insurance” (NBC News). “Ozempic and Wegovy are coming to a Costco near you. Novo Nordisk, the company that makes Ozempic and Wegovy, announced Friday it will be selling the prescription injectable pens at the warehouse chain's pharmacies. A four-week supply of the weight loss drug will cost $499 out of pocket.”
“Her Stocks Were Quietly Stolen From Her I.R.A.” (New York Times). “It often happens like this: The criminal opens up a new account in a target’s name, using stolen data or a combination of stolen and false information (like an email address or a mobile phone number). Opening an account at Merrill Edge, as well as many other online brokers, doesn’t require much. That’s what the fraudsters did here, and Bank of America said it had received the all clear when it had run identify verification checks. With the new account, the impostor can request a transfer from another existing account, just like a real customer, which the institutions complete through the ACATS framework. But to pull off the heist, they need to know the other account’s details — and that’s what enabled the criminals to steal from the Vanguard I.R.A. belonging to Mr. Tran’s wife.”
“OpenAI’s New Chip Deals Raise A Tough Question: Where Will All The Power Come From?” (Business Insider). “The ChatGPT maker has signed a multibillion-dollar partnership deal with AMD to deploy 6 gigawatts of the semiconductor company's artificial intelligence chips. Just last week, OpenAI and chip designer Nvidia announced a deal for 10 gigawatts of computing power. OpenAI has said that it desperately needs access to more compute in order to realize its ambitious growth strategy, but its recent chip deals have begotten another crucial need: more power.”
“Ridley Scott Says Hollywood Is So “Drowning In Mediocrity” He’s Been Forced To Watch His Old Films” (Deadline). “‘The quantity of movies that are made today, literally globally – millions. Not thousands, millions… and most of it is s**t,’ he said. Scott added that films are too often ‘saved’ by digital effects because they haven’t got a ‘great thing on paper first.’”
September performance update
Prime: -1.13%
Select: +3.82%
SPY ETF: +4.79%
Bogleheads Portfolio: +3.98%
What we’re reading (10/4)
“Stock Funds Hold A 11% Gain For 2025 So Far” (Wall Street Journal). “With stock indexes smashing records, the average U.S.-stock fund rose 7.2% in the third quarter, to push the year-to-date gain to nearly 11%, according to LSEG data. Those are gaudy numbers for mutual funds and exchange-traded funds compared with earlier in the year, when it looked as if the stock market would register a poor year. In fact, stock funds are now on pace to rise in double digits for three straight years, even though the 2025 performance won’t likely match last year’s 17.4% gain or the previous year’s 21%.”
“Are We In A Recession? Yes — If You Live In One Of These 22 States.” (MarketWatch). “The U.S. economy is very close to falling into a damaging contraction — and many states are already in a recession, according to Mark Zandi, chief economist at Moody’s Analytics. Zandi estimates that 22 states and the District of Columbia are now experiencing persistent economic weakness and job losses that are likely to continue. Another 13 states are treading water, he noted. The overall picture is one of a weak U.S. economy that is vulnerable to being pushed into a ditch by a strong wind.”
“The Collapse Of The Econ PhD Job Market” (Chris Brunet). “For decades, a doctorate in economics was a golden ticket. It promised a path to tenure, or at worst, a lucrative role at a central bank, think tank, or tech firm. Not anymore. The economics job market is in freefall, and the profession’s own data proves it.”
“If You’re Not An AI Startup, Good Luck Raising Money From VCs” (TechCrunch). “PitchBook reports that VCs have poured $192.7 billion into the industry so far this year, out of a total $366.8 billion, according to Bloomberg. In the most recent quarter, AI accounted for 62.7% of the money invested by U.S. VCs, and for 53.2% of money invested by global firms.”
“What Bubble? By This Measure, The AI Boom Still Isn’t At Dotcom Bust Levels” (Fortune). “Relentless stock market highs, astronomical valuations for OpenAI, and reports of hyperscalers taking on more debt have stoked fears that the AI boom is another tech bubble ready to pop. Even OpenAI CEO Sam Altman acknowledged this summer that investors were getting ‘overexcited about AI’ and drew parallels with the dotcom bubble. But Capital Economics pointed out that year-ahead earnings forecasts for S&P 500 companies—forward-12-month (FTM) earnings per share (EPS)—are rising and underpin the stock market rally.”
What we’re reading (10/3)
“The Hidden Cost Of Playing The Stock Market’s Slot Machine” (Wall Street Journal). “Exchange-traded funds that seek to magnify the daily gains or losses of a single stock are generating returns that look like typos. Defiance Daily Target 2X Long RGTI, which aims to double the daily return of quantum-computer firm Rigetti Computing, is up roughly 1,000%. It’s only been around since March 31. Tradr 2X Long QBTS Daily targets twice the daily results of computing firm D-Wave Quantum. It has gained more than 700% since launching in late April. Those returns are net of all costs, including annual expenses that typically run 1% to 1.3%—but what buyers might not realize is how high those costs can go. On some of these funds, undisclosed costs can sometimes hit a 15% to 20% annualized rate.”
“The US Stock Market Has Been Exceptional, But One Region Made It Phenomenal” (Morningstar). “Currently, the six largest businesses in the world, as measured by stock market capitalization, are headquartered not merely in the US, but in just two of its 50 states.”
“AI Needs Data Centers—And People To Build Them” (City Journal). “[C]oders and computer programmers, including those with AI skills, account for less than 1 percent of all STEM jobs. But the surprise for our times is how those coders and computer scientists are driving a massive increase in demand for construction workers.”
“Amazon Founder Jeff Bezos Says AI Bubble Is Real, But So Is The Technology” (Yahoo! Finance). “Add Amazon founder Jeff Bezos to the growing list of people calling Wall Street's AI craze a bubble. During a conversation at Italian Tech Week, Bezos said the artificial intelligence hype cycle is pushing investors to spend billions on both good and bad ideas. Despite that, Bezos said he believes AI is a very real product that will impact companies across industries and society more broadly.”
“Netflix Stock Logs Biggest Weekly Drop Since April As Elon Musk Calls For Users To Cancel Subscriptions” (Yahoo! Finance). “The drop comes as Musk amps up calls for a boycott, urging his 227 million followers on X to cancel their Netflix subscriptions and accusing the streamer of pushing alleged transgender messaging in kids’ shows. Over the past several days, Musk has posted or reposted a series of messages criticizing Netflix’s programming: ‘Cancel Netflix for the health of your kids,’ Musk wrote on Tuesday.”
What we’re reading (10/2)
“FICO Shakes Up Credit-Score Market” (Wall Street Journal). “Fair Isaac is upending the credit-scoring industry by giving mortgage lenders a way to get its credit scores without buying them from Experian, Equifax or TransUnion. Shares of Fair Isaac, which goes by the name FICO after its well-known credit score, surged 18% and the shares of the credit-scoring firms fell as much as 11%.”
“Why Nvidia, Broadcom And Other High-Flying Stocks Are Especially Risky Now” (MarketWatch). “October doesn’t deserve its reputation as the month when stock-market crashes occur. Though the two worst crashes in U.S. history happened in that month — 1929 and 1987 — the risk of a marketwide crash is no greater in October than in any other month. Investors worried about a broad market crash in October can perhaps take a bigger sigh of relief. The same cannot be said of momentum investors who are betting on industries that have recently performed the best. A few of their favorite sectors are especially vulnerable to a crash right now.”
“Gold Drops As Dollar Gains, Investors Take Profits After Rally” (Bloomberg). “Gold retreated as the dollar pushed higher and investors booked profits after a five-day rally that saw it reach fresh records. Traders also sought clues on the US economy as the government shutdown delayed key data.”
“Tom Lee sees S&P 500 topping 7,000 by year-end, says don’t be fooled by shutdown calamity talk” (CNBC). “Lee believes the suspension of economic data releases from federal agencies is a “sidebar issue,” adding that past shutdowns have had little lasting impact on equities. The widely followed strategist, who called 2025′s bull run to all-time highs in stocks, expects the S&P 500 to reach at least 7,000 by December with potential for further gains.”
“Move Fast And Break Nothing” (The Atlantic). “Every trip in a self-driving Waymo has the same dangerous moment. The robotaxi can successfully shuttle you to your destination, stopping carefully at every red light and dutifully following the speed limit. But at the very end, you, a flawed human being, will have to place your hand on the door handle, look both ways, and push the door open. From mid-February to mid-August of this year, Waymo’s driverless cars were involved in three collisions that came down to roughly identical circumstances: A passenger flung their door open and hit somebody passing by on a bike or scooter. That’s according to an independent analysis of crash reports the company has disclosed to the government, which found that most of the 45 serious accidents involving Waymos were the fault of other motorists or seemingly an act of God. (In one case, a pickup truck being towed in front of a Waymo came loose and smashed into the vehicle.) None were definitively the fault of Waymo’s actual self-driving technology.”
What we’re reading (10/1)
“Supreme Court Lets Lisa Cook Remain As A Federal Reserve Governor For Now” (Associated Press). “The Supreme Court on Wednesday allowed Lisa Cook to remain as a Federal Reserve governor for now, declining to act on the Trump administration’s effort to immediately remove her from the central bank. In a brief unsigned order, the high court said it would hear arguments in January over Republican President Donald Trump’s effort to force Cook off the Fed board. The court will consider whether to block a lower-court ruling in Cook’s favor while her challenge to her firing by Trump continues.”
“Crypto Stockpiling Craze Cools After Red-Hot Summer” (Wall Street Journal). “The hot crypto-treasury summer is over. More than 200 companies went all-in on stockpiling digital currencies this year. Many investors are already cooling to the idea. Corporate purchases of bitcoin have fallen steadily in recent months, and in September dropped to their lowest pace since April. A quarter of the public companies that adopted a bitcoin treasury strategy are now trading below the total value of their digital-token holdings, according to K33 Research.”
“The Battle To Save Intel: How A Great American Company Ended Up In The Fight Of Its Life” (Fortune). “Craig Barrett, a former Intel CEO, told Fortune recently that this model—customers putting new capital into the company—could save Intel, which desperately needs cash. ‘The only place the cash can come from is the customers,’ he says. ‘They are all cash-rich, and if eight of them were willing to invest $5 billion each, then Intel would have a chance.’ In addition to Nvidia, those companies would likely include Apple, Broadcom, Google, Qualcomm, and a few others that might want a second source of high-value chips that are otherwise available only from TSMC, the Taiwan-based chipmaker that is the world’s largest.”
“As Stock Market Booms, Americans Have More At Stake Than Ever” (Washington Post). “Data from the Federal Reserve Bank of St. Louis showed that households and nonprofits were investing about 45.4 percent of their assets in corporate equities as of the second quarter of 2025 — the highest exposure to stocks ever. An estimated 62 percent of Americans own stock as of May, matching 2024 and the highest level since 2007, according to the polling firm Gallup. And Federal Reserve data analyzed by the Securities and Exchange Commission shows the median U.S. household had about $52,000 in stock holding as of 2022, compared with nearly $46,000 in 2019.”
“The ‘Stupidity’ Of 300 Investment Bankers Tricked By A 20-Something Founder Is A Lesson In Due Diligence” (Business Insider). “Back in 2021, some 300 in-house diligence officers had vetted JPMorgan's decision to buy the then-28-year-old's startup Frank, a platform that helped students fill out federal financial aid applications. The bank didn't realize until a year after the merger closed that Javice's claimed database of 4 million Frank users — college-ready young adults the bank hoped to pitch for credit cards and checking accounts — was a fiction.”
October picks available now
The new Prime and Select picks for October are available starting now, based on a model run put through today (September 30). As a note, I will be measuring the performance on these picks from the first trading day of the month, Wednesday, October 1, 2025 (at the mid-spread open price) through the last trading day of the month, Friday, October 31, 2025 (at the mid-spread closing price).
What we’re reading (9/28)
“Why Microsoft Has Lower Borrowing Costs Than The U.S.” (Wall Street Journal). “Among U.S. corporate bonds rated AAA, two in the main index currently trade a little below the equivalent yield on Treasurys, known as a negative spread. This is extremely unusual, both because companies are in principle much more likely to default than the government that can tax them, and because the corporate bonds are harder to trade, so should yield a little more to compensate buyers for the difficulty in selling them quickly.”
“A Golden Opportunity To Upgrade A 60/40?” (Alpha Architect). “If you like your 60/40 but hate the drawdowns, consider adding a modest gold futures overlay on top. According to Corey/Rod’s research, a hypothetical portfolio can improve excess returns and lower drawdowns. Why? Well, gold’s long-run correlations to U.S. stocks and 10-year Treasuries are basically zero (0.01 and 0.07), and layering this asset into your 60/40 mix has made a lot of sense. Of course, if using leverage isn’t your thing, you could always pull some exposure out of your stocks and bonds and allocate it to gold (Google or ChatGPT, ‘permanent portfolio,’ for some ideas in this direction.). You might hurt your expected returns, but you may improve your risk-adjusted portfolio along the way.”
“Bond Traders Say Rally Hinges On Jobs Data At Risk From Shutdown” (Bloomberg). “The jobs report is what ‘you need to drive a rally from here — it’s the most crucial part of the weak-economy, dovish-Fed story,’ said James Athey, a portfolio manager at Marlborough Investment Management Ltd.”
“Recession Probability Declining” (Torsten Sløk, Apollo). “The consensus probability of a recession over the next 12 months continues to decline and currently stands at 30%.”
“‘The New Normal’: Wall Street Says High Stock Valuations May Be Here To Stay” (Yahoo! Finance). “‘Over the past 20 years, the S&P 500 is trading at roughly a 40% premium to its long-term average on forward estimates,’ he [Sam Stovall, chief investment strategist at CFRA Research] said. ‘But on a five-year basis, when mega-cap tech began to dominate market cap and earnings growth, that premium shrinks to a high single-digit range.’”
What we’re reading (9/27)
“How Zillow Got On Track For First Profitable Year Since 2012” (Wall Street Journal). “Zillow has focused on boosting revenue from services such as rentals and mortgages, while slowing head count growth following a hiring surge in 2021, to reach its profitability goal under U.S. generally accepted accounting principles, Chief Financial Officer Jeremy Hofmann said. ‘Even if the housing market were to stay where it is, we think there’s a lot of growth to come,’ Hofmann said.”
“AI-Generated ‘Workslop’ Is Destroying Productivity” (Harvard Business Review). “A confusing contradiction is unfolding in companies embracing generative AI tools: while workers are largely following mandates to embrace the technology, few are seeing it create real value. Consider, for instance, that the number of companies with fully AI-led processes nearly doubled last year, while AI use has likewise doubled at work since 2023. Yet a recent report from the MIT Media Lab found that 95% of organizations see no measurable return on their investment in these technologies. So much activity, so much enthusiasm, so little return. Why?”
“Big Banks Behaving Badly” (The American Prospect). “In the old days of relationship banking, a local official worked with small-business owners to prevent catastrophe, aiding businesses and the bank’s bottom line. But after decades of bank consolidation, about half of all companies now use large institutions as their primary financial services provider, according to the 2023 Small Business Credit Survey from the Federal Reserve Banks. This often puts key financial decision-makers far from the millions of businesses they serve, without the stake in community success that characterized previous eras. In these instances, off-ramps with mutual benefit were ignored, promises made were not kept, and emotion seemed to take precedence over sound decision-making.”
“Hedge-Fund Stars Are Making So Much Now That They Are Hiring Agents” (Wall Street Journal). “Compared with, say, outfielders, portfolio managers have to evaluate job offers with more complex structures. There’s the amount they’d need to cover deferred and forgone pay at their current employer and the budget needed to staff a team of analysts. There’s the cut of investment gains portfolio managers generate that they get to keep, usually around 20%, and the accelerated payouts they can get on early profits. There’s also the length of the contract itself, usually around three years but sometimes longer.”
“Brace Yourself: Here Comes Stagflation!” (Tyler Cowen, The Free Press). “It seems increasingly likely that the American economy is sleepwalking toward stagflation. In case you’re wondering, that is not a good thing…If I had to guess, I think there’s a decent chance that 18 months from now, America could well have an inflation rate of 4 percent (up from last year’s 2.5 percent) and an unemployment rate of 7 percent, well above the current 4.3 percent.”