The Market Outlook for the Week Ahead, or Flying Blind

During the 1980s, I ran Morgan Stanley’s equity trading desk in London. Every summer, I used to park my family at my villa in the mountains above Cannes in the South of France with a spectacular view of the Mediterranean. On weekends, I would fly down to Cannes in my twin-engine Cessna 340 with the long-range tanks. It was about a three-hour trip.

I left every Friday afternoon. As I approached the villa, I went into a steep dive from 20,000 feet and buzzed the house at 400 miles per hour, pulling up just before I hit the water. That meant passing over Yves St. Laurent’s summer home at rooftop level, a source of constant complaints. The kids would wave beach towels to indicate they heard me. That was the signal for my wife to jump in the Mercedes and pick me up at the airport.

One Friday, meetings at Morgan Stanley ran very late, since New York is five hours behind London, and I wasn’t able to get on the air until midnight. Somewhere over Paris, I heard this loud THWACK, and the lights went out. My gyroscope had blown up, taking out some electronics and all my navigation. The plane started to bank left and go into a spiral dive. The next thing I heard was Paris Control screaming at me that I was deviating from my approved flight plan. I ignored them.

I knew I only had seconds to act. With no instruments and in pitch dark, I grabbed a flashlight and shone it on my canteen, which I used as a makeshift artificial horizon. It showed that I was plummeting to earth at a 30-degree angle. So I used the canteen to stop the dive and level the plane.

Then I called Paris Control back and cried out, “MAYDAY, MAYDAY, MAYDAY.” They suddenly became very accommodating and gave me a vector for an emergency landing at Canne Airport.

It took me a week to get a new gyroscope from the US, and I found myself on an impromptu and unplanned summer vacation. The next day, I found myself floating with kids out to sea in inner tubes rather than executing aggressive trades.

The stock market today reminds me of that stressful flight 40 years ago. Without a steady stream of government economic data that we all rely on, suddenly we are all flying blind.

So far, no news is good news. The privately published ADP and Challenger Jobs Reports last week were disastrous and showed that if the Bureau of Labor Statistics had issued a report, it would have been awful, and stocks would have tanked. Instead, we got nothing, and the Dow Average rose 500 points to a new all-time high above 47,000.

The people coming in off the sidelines at this late date and pouring cash into the market are definitely playing catch-up. They are not delusional Perma bulls soaking up the happy talk. Their goal is to be fully invested at year’s end when stocks close at yet higher highs. Normally, this is career suicide. But this time, they may actually get away with it.

And these are the reasons why.

When the Trump administration takes control of the Federal Reserve next May, they plan to flood the financial system with unprecedented liquidity. We saw part one of this with the expansion of the National Debt by $5 trillion with the passage of a new budget in June.

Part two will come with cutting the Fed funds discount rate by 300 basis points. Part three is the return of quantitative easing, or the Fed’s buying of trillions of dollars of government bonds and mortgage-backed securities. A large part of this liquidity will pour into stocks, precious metals, and cryptocurrencies.

It gets even better. The Unmagnificent 493, the stocks that haven’t moved in years, are finally starting to move. Notice that pharmaceuticals and energy, the worst-performing sectors of this year, just had great weeks. If this continues, an entire new bull market will ensue that could take the major indexes to new all-time highs well into 2026.

There is one possible speed bump. If stocks rise with the onset of the government shutdown, will they fall at its end? The first hint of these will be mass sick-outs by air traffic controllers. Working 60 hours a week in a high-stress job wears thin after a month. That is what ended Trump’s last shutdown in 2018, when he lost the fight.

Eventually, this liquidity surge will lead to insane valuations and runaway inflation, and a major market crash of 50% or more will implode as it always does. Remember 2000 and 2008? So keep in mind, we are trading against a future known crash. That can be tricky for you average retail investor. Just keep reading Mad Hedge Fund Trader to find out exactly when that is going to be.

You gotta love gold, which has been up almost every day for six weeks. Gold ETFs are now the top-performing asset class of 2025, up 43%. Crypto and technology ETFs follow. This year has brought us a perfect storm in favor of gold: falling interest rates, a collapsing US dollar, attacks on the Fed, rising inflation, and central bank accumulation. Now we have a government shutdown, a long-awaited dream come true for all gold bugs.

I have long had a gold target of $5,000 an ounce for 2028. But I traded gold during the last major top in 1979. You could find me in a long line of South Africans in Johannesburg selling my one-ounce Krugerrands when gold futures hit $900, up from $34 in a mere seven years. The gold market today is starting to look a lot like that. If that is the case, gold could hit $5,000 not in 2028, but by the end of 2025.

My September performance closed out at +2.45%. October is up 0.46% so far. That takes us to a year-to-date profit of +56.71%. My trailing one-year return rose to +88.11%. That takes my average annualized return to +51.06%, and my performance since inception reaches a new all-time high of +808.60%. These are all non-compounded numbers.

I am going into the October 17 options expiration with a cautious 30% invested and 70% in cash. I am long Goldman Sachs (GC), and Strategy (MSTR), and short Tesla (TSLA). Tesla shares conveniently dove $50 after Musk made some ill-considered political comments about Netflix.

Some 63 of my 70 round-trip flights in 2023, or 90%, were profitable. Some 74 of 94 trades were profitable in 2024, and several of those losses were really break-even. That is a success rate of +78.72%.

Try beating that anywhere.

Visibility has Become Invisible, with the complete disappearance of government economic data. You’re just going to have to close your eyes and buy. Private data and independent news sources like Mad Hedge Fund Trader have never been more valuable. By the way, the private data universally show that the US economy is worsening.

Goldman Sachs (GS) upgrades the US Market, taking it to “overweight” from “neutral” over the three-month horizon, citing improving economic momentum across regions, attractive valuations, and growing support from monetary and fiscal policy. “We think that good earnings growth, Fed easing without a recession, and global fiscal policy easing will continue to support equities,” Goldman analysts said in a note.

Private Hiring Collapses, with the ADP down -32,000, the biggest decline in 2½ years during September, a further sign of labor market weakening that compounds the data blackout accompanying the U.S. government shutdown. Economists surveyed had been looking for an increase of 45,000. In addition to the drop in September, the August payrolls number was revised to a loss of 3,000 from an initially reported increase of 54,000.

Chicago PMI Comes in Weak at 40.2, the 22^nd consecutive reading below 50. Since the index’s neutral point is 50, a reading further below 50 suggests a faster pace of decline. This weak reading is considered a red flag for the broader U.S. economy, as the Chicago PMI is often a bellwether for national manufacturing health.

JOLTS Job Openings Up Slightly, at 7.22 million. The US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. This reading followed the 7.2 million openings reported for July and came in above the market expectation of 7.2 million. Over the month, both hires and total separations were little changed at 5.1 million,” the BLS noted in its press release. Within separations, both quits (3.1 million) and layoffs and discharges (1.7 million) were little changed.

Soybean Farmers are Going Broke, after China canceled all orders, the world’s largest buyer. It is the bitter fruit of the trade war. Cries for welfare payments from Washington from farmers are rising, causing the National Debt to ratchet up further.

Oil is Headed for New Lows, after OPEC+ moves to increase production by 500,000 barrels a day at their meeting this weekend. Russia needs to fund the Ukraine War, and Saudi Arabia needs to fund a lavish lifestyle. Saudi Arabia would prefer to see double, triple or even quadruple that figure, as it has the ability to ramp up production quickly and wants to grow market share.

Buy Freeport McMoRan, says UBS. The Indonesian flood is a temporary setback. The investment bank upgraded Freeport (FCX) to buy from neutral in a report out Thursday, raising its 12-month price target on the stock to $48 from $42.50, implying more than 23% upside from Thursday’s close. The stock is up 13% since my LEAPS recommendation went out weeks ago.

Elon Musk Wants to Boycott Netflix over a single animated movie that conservatives find offensive. (NFLX) dove 5%, then bounced hard. Tesla also fell $10 despite slightly better than expected Q3 sales figures of 4997,099, up 7% YOY. There was a rush to buy EVs in September ahead of the expiration of tax credits. Expect a terrible Q4 with no tax credits. So much for Elon’s promise to his board to stay out of politics. Buy (NFLX) on the dip, sell (TSLA) on any rallies.

US Hiring at 16 Year Low. U.S. employers announced fewer layoffs in September, but hiring plans so far this year were the lowest since 2009, adding to evidence of a labor market standstill as the demand and supply of workers fall because of policy and technology advances. The report from global outplacement firm Challenger, Gray & Christmas, does not normally attract much attention. But together with other private data, it has become more prominent due to a U.S. government shutdown that has led to major economic releases being suspended, including the closely watched employment report for September that was due on Friday.

Publicly Listed US Companies Drop by Half in 30 Years. The number of publicly traded firms in the U.S. decreased from nearly 8,100 in 1996 to just over 4,000 by the end of last year. You can blame a massive wave of mergers and acquisitions, which have concentrated ownership in a handful of giant companies. Companies are increasingly choosing to remain private longer or go private. Lower interest rates are expected to boost take-private transactions.

The Options Market is Turning Hyper Bullish, with trading volume hitting a new all-time high after the Fed meeting, mostly on the call options side. Big-cap tech names are leading. Out-of-the-money calls are now showing an inverse skew, which means they are more expensive than at-the-money, from 3% to 12%, which is unheard of.

Is Gold the New “Safe” Asset? The barbarous relic has rallied in every bear market of the last 50 years. Bitcoin matched the downside 70% of the time. You decide what is “safe”.

Pending Home Sales Bounce. Sales of previously owned U.S. homes increased solidly in August as lower mortgage rates pulled buyers back into the market, though a softening labor market could curb further gains. The National Association of Realtors said on Monday that pending home sales, based on signed contracts, rebounded 4.0% last month. Economists polled by Reuters had forecast contracts, which become sales after a month or two, rising 0.2%.

My Ten-Year View – A Reassessment

We have to substantially downsize our expectations of equity returns over the next four years. My new American Golden Age, or the next Roaring Twenties, is now looking at multiple gale-force headwinds. The economy will completely stop decarbonizing. Technology innovation will slow. Trade wars will exact a high price. Inflation will return. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old. My Dow 240,000 target has been pushed back to 2035.

On Monday, October 6, the government will release no economic data.

On Tuesday, October 7, at 8:30 AM EST, the API Crude Oil Stocks are released.

On Wednesday, October 8, at 8:30 AM, the government will release no economic data.

On Thursday, October 9, the government will release no economic data.

On Friday, October 10, at 5:30 AM, we will learn the University of Michigan Consumer Confidence report. At 10:00 AM, we obtain the Baker Hughes Rig Count.

As for me, few Americans know that 80% of all US air strikes during the Vietnam War originated in Thailand. At their peak in 1969, there were more US troops serving in Thailand than in South Vietnam itself.

I was one of those troops.

When I reported to my handlers at the Ubon Airbase in northern Thailand for my next mission, they had nothing for me. They were waiting for the enemy to make their next move before launching a counteroffensive. They told me to take a week off.

The entertainment options in northern Thailand in those days were somewhat limited. Phuket and the pristine beaches of southern Thailand, where people vacation today, were then overrun by cutthroat pirates preying on boat people who would kill you for your boots.

Life was cheap in Asia in those days, especially your life. Any trip there would be a one-way ticket.

There were the fleshpots of Bangkok and Chang Mai. But I would likely contract some dreadful disease there. I wasn’t really into drugs, figuring whatever my future was, it required a brain. Besides, some people’s idea of a good time was throwing a hand grenade into a crowded disco. So, I, ever the history buff, decided to go look for The Bridge Over the River Kwai.

Men of my generation knew the movie well, about a company of British soldiers who were the prisoners of bestial Japanese. At the end of the movie, all the key characters die as the bridge is blown up.

I wasn’t expecting much, maybe some interesting wreckage. I knew that the truth in Hollywood was just a starting point. After that, they did whatever they had to do to make a buck.

The fall of Singapore was one of the great Allied disasters at the beginning of WWII. Japanese on bicycles chased Rolls-Royce armored cars and tanks the length of the Thai Peninsula. Two British battleships, the Repulse and the Prince of Wales, were sunk due to the lack of air cover, with a great loss of life. When the Japanese arrived at Singapore, the defending heavy guns were useless as they pointed out to sea.

Some 130,000 men surrendered, including those captured in Malaysia. There were also 686 American POWs, the survivors of US Navy ships sunk early in the war. Most were shipped north by train to work as slave labor on the Burma Railway.

The Japanese considered the line strategically essential for their invasion of Burma. By building a 258-mile railway connecting Bangkok and Rangoon, they could skip a sea voyage of 2,000 miles in waters increasingly dominated by American submarines.

Some 12,000 Allied troops died of malaria, beriberi, cholera, dysentery, or starvation, along with 90,000 impressed Southeast Asian workers. That earned the line the fitting name: “Death Railway.”

The Burma railway was one of the greatest engineering accomplishments in human history, ranking alongside the Pyramids of Egypt. It required the construction of 600 bridges and viaducts. It crossed countless rivers and climbed steep mountain ranges. The work was all done in 100-degree temperatures with high humidity in clouds of mosquitoes. And it was all done in 18 months.

One of those captured was my good friend James Clavell, who spent the war at Changi Prison, now the location of Singapore International Airport. Every time I land there, it gives me the creeps.

Clavell wrote up his experiences in the best-selling book and movie King Rat. He followed up with the Taipan series set in 19^th century Hong Kong. We lunched daily at the Foreign Correspondents Club of Japan when he researched another book, Shogun, which became a top TV series for NBC.

So I navigated the Thai railway system to find remote Kanchanaburi Province, where the famous bridge was said to be located.

My initial surprise was that the bridge was still standing, not destroyed as it was in the film. It was not a bridge made of wood but concrete and steel trestles. Still, you could see the scars of Allied bombing on the foundations, who tried many times to destroy the bridge from the air.

That day, the Bridge Over the River Kwai was a quiet, tranquil, peaceful place. Farmers wearing traditional conical hats made of palm leaves and bamboo strips, called “ngobs,” crossed to bring tropical fruits and vegetables to market. A few water buffalo loped across the narrow tracks. The River Kwai gurgled below.

Once a day, a train drove north towards remote locations near the Burmese border where a bloody rebellion by the indigenous Shan people was underway.

The wars seemed so far away.

The only memorial to the war was a decrepit turn-of-the-century English steam engine badly in need of repair. There were no tourists anywhere.

So I started walking.

After I crossed the bridge, it wasn’t long before I was deep in the jungle. The ghosts of the past were ever present, and I swear I heard voices. I walked a few hundred yards off the rail line, and the detritus of the war was everywhere: abandoned tools, rusted out helmets, and yes, human bones. I didn’t linger because the snakes here didn’t just bite and poison you; they swallowed you whole.

After the war, the Allies used Japanese prisoners to remove the dead for burial in a nearby cemetery, only identified by their dog tags. Most of the “coolies” or Southeast Asian workers were left where they fell.

Today, only 50 miles of the original Death Railway remain in use. The rest proved impossible to maintain because of shoddy construction and the encroaching jungle.

There has been talk over the years of rebuilding the Burma Railway and connecting the rest of Southeast Asia to India and Europe. But with Burma, today known as Myanmar, a pariah state, any progress is unlikely.

Maybe the Chinese will undertake it someday.

Every Christmas vacation, when my family has lots of free time, I sit the kids down to watch The Bridge Over the River Kwai. I just wanted to pass on some of my experiences, teach them a little history, and remember my old friend Cavell.

Good Luck and Good Trading,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

Walking the Bridge Over the River Kwai in 1976