The Market Outlook for the Week Ahead, or Reality Check

I’ll never forget the most interesting start to a college course I ever attended.

I enrolled late for my freshman year at the University of Southern California because a full all-expense paid scholarship came in only at the last minute. I thought the best value for money major I could take was in the sciences because I thought the future was in DNA research.

However, all the good science courses filled up on the first day of registration in the spring. One of the few classes still open was Psychology 101 because it could accept 200 students. So, Psychology 101 it was at the expense of the taxpayers of California.

Right at 9:00 AM sharp, when the class started, a woman ran up the center aisle screaming at the top of her lungs. She was chased by a man firing shots from a Smith & Wesson .38. The whole thing was over in 15 seconds.

The professor then walked out on the stage and welcomed us to the class. He then asked us to take out a piece of paper and I write down everything we just witnessed in as much detail as possible.

After we handed the papers in, he introduced the two actors who had staged the whole thing. The professor then asked everyone to recall what they wrote.

Every detail was wrong. The genders, hair color, number of shots, the clothing were all erroneous. The Prof informed us that eyewitnesses in criminal cases are almost completely useless. The great majority of observers completely freeze during an event like the one described above and can’t remember anything. They are either in shock or hiding under their chairs.

The stock market got its own screaming woman fleeing gunfire last week, the precipitous decline in Meta (META), and others of its ilk. If anyone is asked to name the top AI stock of the year, it would be Meta with its $100 billion-plus capital investment program planned for 2026. Yet, after last week’s 25% swan dive, the shares are up only 3% in 2025 at the Friday low.

Reality check: Stocks can go up and down.

And just be happy you didn’t drink the rare earths Kool-Aid. MP Materials (MP) fell 50% and NioCorp Developments (NB) cratered 55%. It turns out that government subsidized investments in money-losing industries aren’t such great equity investments.

Virtually every stock I watch raced down to its 50-day moving averages on Friday morning and churned for an hour. Then the inevitable rumors about an impending vote and end to the government shutdown started circulating at 12:30 PM EST, and it was straight up from there. The 50-day moving averages held.

The action revealed which stocks are going to lead any future recovery, all the ones that fell the most this week: Meta (META), Palantir (PLTR), Robinhood (HOOD), Coinbase (COIN), Alphabet (GOOGL), and Amazon (AMZN). It also shows you why I am not running any big shorts right now. They are just too dangerous.

There was another important message from the market last week. It represents that big tech has reached a ceiling on its AI buildout. For the first time, investors have said “Enough is enough” and that companies that overinvest in capital spending will pay the price of a lower share price, at least for the short term. In fact, borrowing costs for big tech have been rising steadily for two months, even though interest rates have been falling.

I have been getting a lot of questions about the stock market consequences of what happens if the Trump tariffs are ruled illegal by the Supreme Court. I mentioned to a concierge client the other day that it will be easy to know when the decision comes out. Your portfolio will be down 10%. That will be the shock value for an adverse decision for the president, who already seems to be paving the way for it.

It is somewhat tricky to game out the longer-term consequences. The tariffs have been rolled out in fits and starts, changed by the day, wiping out some industries while subsidizing others.

I think it is safe to say that if you reverse a tax increase, you get a tax cut. So after the initial shock value, the impact on the economy should be positive. Companies that suffered from surprise 100% tariffs will be the biggest beneficiaries, like in the auto industry.

But it will also put Trump’s economic plan in tatters, as companies will no longer have an incentive to move factories back to the US. That could be a big negative for the economy.

Over the long term, there should be no change. The drivers for the stock market will remain impending hyper-liquidity, AI, and falling interest rates. If anything, the end of tariffs should prompt the Fed to lower interest rates even faster.

We live in an uncertain world, and developments like this are why investors are long….and terrified.

As one of the world’s most active traders in Tesla options, I would be remiss in not commenting on Elon Musk bagging his $1 trillion package, after 75% of shareholders approved. I highly doubt he’ll ever get it.

He may hit one of his benchmarks to get this much money, but certainly not all 12. A win for Musk was widely expected as the billionaire was allowed to vote his roughly 15% stake after the automaker moved to Texas from Delaware.

The goals for Elon Musk’s $1 trillion pay package are a series of ambitious milestones designed to increase Tesla’s market value from the current $1.4 trillion to $8.5 trillion and achieve significant operational targets. These include delivering 20 million Tesla vehicles, deploying 1 million self-driving Robotaxis into commercial operation, and selling 10 million Full Self-Driving (FSD) subscriptions at $1,200 a year. Musk also must sell 1 million Optimus humanoid robots, which don’t even exist yet.

I was a huge early supporter of Musk back when the shares were a split-adjusted $2.35 a share. His goals were relatively modest, and the upside was unlimited. Here at $429, not so much.

I ended up getting an “A” in Psychology 101, because with combat experience, I was one of the only students who described what I saw in detail, because I was not hiding under my chair. It turned out that the class changed my life.

The stock market isn’t just about earnings and math. Half of it is about Psychology. Know what people are going to do, and you will know what the stock market is going to do. This is what pure quants don’t get. That’s half of the game right there.

So far in November, I am up +1.34%. That takes us to a year-to-date profit of +60.70%. My trailing one-year return stands at +78.65%. That takes my average annualized return to +51.05%, and my performance since inception reaches a new all-time high of +812.59%. These are all non-compounded numbers.

I now hold three long positions in Netflix (NFLX), Goldman Sachs (GS), and Zoom (ZM). That leaves me 30% long and 70% in cash awaiting the next market bottom, where I will try to buy into the year-end rally.

Some 63 of my 70 round-trip 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.

October Job Cuts Hit 22-Year High, according to Challenger, Gray & Christmas. Job cuts for the month totaled 153,074, a 183% surge from September and 175% higher than the same month a year ago. It was the highest level for any October since 2003. This has been the worst year for announced layoffs since 2009.

US Extends Critical Metal Designation to Silver, Copper, Coal, and Uranium, along with seven other minerals no doubt lending price support here. The list serves as a blueprint for Washington’s push to secure supplies of materials needed for defense, manufacturing, and clean energy technologies. It determines which projects qualify for federal incentives, informs national stockpiling and research priorities, and signals to private investors where the government sees long-term strategic value.

US Headline Unemployment Rises to 4.4%, according to the Chicago Fed. The bank has been providing twice-monthly estimates of the jobless rate since shortly before a now-record-long federal government shutdown cut off the flow of published reports on the economy from the BLS, Bureau of Economic Analysis, and Census Bureau. The last U.S. jobless figure published by the BLS, for August, put the rate at 4.3% – the highest since October 2021, when it was 4.5%.

ADP Adds 42,000 Jobs. Private employment increased by 42,000 jobs last month after an upwardly revised decline of 29,000 in September, the ADP National Employment Report showed on Wednesday. Economists polled by Reuters had forecast private employment would rise by 28,000 jobs after a previously reported drop of 32,000 in September.

Hedge Funds Dumping Stocks at Fastest Rate in Two Years. Data compiled by Bank of America shows hedge funds and other large investors are dumping tech stocks at the fastest pace since July 2023. Specifically, the bank looked at net buying and selling activity within the sector on a weekly basis as a percentage of market capitalization. BofA added that net technology single stock sales topped $5 billion last week, by far the (SPY) sector with the most selling. Those sales have been reflected in the broader market’s recent moves.

US Cuts 10% of All Flights at 40 major airports in response to the government shutdown and the lack of air traffic controllers. The drastic plan sent airlines scrambling to make significant reductions in flights in just 36 hours, and passengers flooded airline customer service hotlines with concerns about air travel in the coming days. It will be a big hit for the economy and the stock market. The Volatility Index hit $20.

Amazon Rockets an incredible 10%, with $209 billion in Q3 revenues. Store revenues were $67 billion. Ads grew by 22% to $17 billion YOY. The company announced a $38 billion deal with OpenAI for the ChatGPT developer to access hundreds of thousands of Nvidia’s (NVDA) AI chips through its cloud computing infrastructure. Buy (AMZN) on dips.

Netflix Announced 10:1 Share Split, sending the shares up $45. When you own great companies, all the surprises are to the upside. Investors were suddenly reminded that the company is still growing at a prodigious rate. The streaming giant previously split its stock 2-for-1 in 2004 and 7-for-1 in 2015.

US Manufacturing Falls for 8 Consecutive Months. The Institute for Supply Management’s manufacturing index eased 0.4 points to 48.7, according to data released Monday. Readings below 50 indicate contraction, and the measure has been in this range.

Palantir Beats, but the Stock Tanks, repeating the pattern of previous tech announcements. Palantir shares slid roughly 9% on Tuesday even after the software company beat Wall Street estimates for the third quarter and offered upbeat guidance. Investors have grown increasingly wary of lofty valuations in AI-linked names. Palantir’s stock, which was up 173% for the year heading into Tuesday’s trading, has a forward price-earnings ratio of 228X. CEO Alex Karp ranted against short sellers, calling out specifically Michael Burry after a filing revealed the investor of “The Big Short” fame had bets against the artificial intelligence software firm.

Chile’s Codelco Announced Record Profits, off the back of the copper boom, which reached all-time high prices. The state-owned company posted a pre-tax profit of $606.9 million in the nine months to September, slightly below the $612.2 million reported in the same period last year. The miner said its own output totaled 937,000 metric tons, up 2.1% from the same period last year.

China Rushes to Top Up Oil Reserves, taking advantage of multiyear low prices caused by the current glut. China has spent months building up its oil reserves. That might come in handy in the wake of the new sanctions the U.S. recently imposed on Russian crude. During the first nine months of the year, the world’s second-largest economy imported on average more than 11 million barrels of oil a day, an amount above the daily production of Saudi Arabia, according to official customs data. Analysts estimate 1 million to 1.2 million of those barrels were stashed in reserves each day.

Apple Cuts Deal with Google. Apple plans to use a 1.2 trillion-parameter artificial intelligence model developed by Alphabet’s Google to help power a revamp of its Siri voice assistant. The companies are finalizing a deal that would have Apple pay about $1 billion a year for access to Google’s technology. The iPhone maker will use Google’s Gemini model as a stopgap until its own systems are ready. The model’s 1.2 trillion parameters, a measure of AI model complexity, would dwarf Apple’s current systems.

Robinhood Beats, but the shares fall 3%, topping third-quarter profit estimates on Wednesday as retail traders shrugged off bubble fears, and the online brokerage announced the retirement of its longtime finance chief. The results suggest that small investors seized opportunities presented by the momentum in the markets and drove up trading volumes in crypto, options, and equities. Buy (HOOD) on dips.

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, November 10, no government economic data will be released because of the government shutdown.

On Tuesday, November 11, at 8:30 AM EST, the ADP Private Jobs Report is announced.

On Wednesday, November 12, at 8:15 AM, the API Crude Oil Stocks are disclosed.

On Thursday, November 13, at 8:30 AM, Initial Jobless Claims are released….maybe?

On Friday, November 14, Retail Sales are published. At 10:00 AM, we obtain the Baker Hughes Rig Count.

As for me, I am sitting in the Centurion Lounge in San Francisco Airport waiting for a United flight to Las Vegas, where I have to speak at an investment conference. I have time to kill so I will reach back into the deep, dark year of 1968 in Sweden.

My trip to Europe was supposed to limit me to staying with a family friend, Pat, in Brighton, England, for the summer. His family lived in impoverished council housing.

I remember that you had to put a ten pence coin into the hot water heater for a shower, which inevitably ran out when you were fully soaped up. The trick was to insert another ten pence without getting soap in your eyes.

After a week there, we decided the gravel beach and the games arcade on Brighton Pier were pretty boring, so we decided to hitchhike to Paris.

Once there, Pat met a beautiful English girl named Sandy, and they both took off for some obscure Greek island, the ultimate destination if you lived in a cold, foggy country.

That left me stranded in Paris.

So, I hitchhiked to Sweden to meet up with a girl I had run into while she was studying English in Brighton. It was a long trip north of Stockholm, but I eventually made it.

When I finally arrived, I was met at the front door by her boyfriend, a 6’6” Swedish weightlifter. That night found myself bedding down in a birch forest in my sleeping bag to ward off the mosquitoes that hovered in clouds.

I started hitchhiking to Berlin, Germany, the next day. I was picked up by Ronny Carlson in a beat-up white Volkswagen bug to make the all-night drive to Göteborg, where I could catch the ferry to Denmark.

1968 was the year that Sweden switched from driving English style on the left to the right. There were signs every few miles with a big letter “H”, which stood for “Hurger”, or right. The problem was that after 11:00 PM, everyone in the country was drunk and forgot which side of the road to drive on.

Two guys on a motorcycle driving at least 80 pulled out to pass a semi-truck on a curve and slammed head-on into us, then were thrown under the wheels of the semi. The driver was killed instantly, and his passenger had both legs cut off at the knees.

As for me, our front left wheel was sheared off, and we shot off the mountain road, rolled a few times, and were stopped by this enormous pine tree.

The motorcycle riders got the two spots in the only ambulance. A police car took me to a hospital in Goteborg, and whenever we hit a bump in the road, bolts of pain shot across my chest and neck.

I woke up in the hospital the next day, with a compound fracture of my neck, a dislocated collar bone, and paralyzed from the waist down. The hospital called my mom after booking the call 16 hours in advance and told me I might never walk again. She later told me it was the worst day of her life.

Tall blonde Swedish nurses gave me sponge baths and delighted in teaching me to say Swedish swear words and then laughing uproariously when I made the attempt.

Sweden had a National healthcare system, then called Scandia, so it was all free.

Decades later, a Marine Corps post-traumatic stress disorder psychiatrist told me that this is where I obtained my obsession with tall, blond women with foreign accents.

I thought everyone had that problem.

I ended up spending a month there. The TV was only in Swedish, and after an extensive search, they turned up only one book in English, Madame Bovary. I read it four times, but still don’t get the ending.

The only problem was sleeping because I had to share my room with the guy who lost his legs in the accident. He screamed all night because they wouldn’t give him any morphine.

When I was released, Ronny picked me up and I ended up spending another week at his home, sailing off the Swedish west coast. Then I took off for Berlin to get a job since I was broke.

I ended up recovering completely. But to this day, whenever I buy a new Brioni suit in Milan, they have to measure me twice because the numbers come out so odd. My bones never returned to their pre-accident position, and my right arm is an inch longer than my left. The compound fracture still shows upon X-rays.

And I still have this obsession with beautiful, tall, blond women with foreign accents.

Go figure.

Brighton 1968