Street Analysis

Intersection of Main Street and Wall Street

recent posts

about

Jitendra (Jay) Patel
jpatel51@yahoo.com

  • New Sheriff in Town of Financial Markets: Crisis Mode for USA – Warning # 2 (Much Sooner than Expected)

    It is time to hide in a bunker.

    There is a new sheriff in town and it is “Physical Gold”.

    It is a high time to “derisk” the portfolio.

    Capital preservation is the goal and name of the game, not capital accumulation.

    Warren Buffett is sitting close to $400 billion cash, roughly about 40 percent of the market cap of Berkshire Hathaway at $1 trillion.

    US dollar currency devaluation and “dollar debasement” or “de-dollarization” process is well underway. By the actors that matter. It has been in place for quite some time. Rather, it has quickened the pace significantly now. That is the key difference. Gold price speaks to just that.

    We are in the thick of a “new world order”… and US does not have an as powerful seat as it used at one point…partly or mostly of its own making. In fact, Jamie Dimon, JP Morgan, categorically states that the World War III has begun or he is prepared for it using the worst-case scenarios. It is a war already without the physical weapons for the most part, yet, very active one with the economic weaponry.

    Auto Insurance? Checked.

    Home Insurance? Checked

    “Gold Insurance”? Hmm! No…

    Insurance is something we need and we buy but rather never wish to use. That is how we operate individually.

    Gold is the only “real” money – a medium of exchange – a “true store of value”. Gold is not an “investment”, it is just “real money”.

    Trust is broken in the system. When the trust is broken, then the only money that comes to use or matters the most is “gold money”, not the currency.

    There are high probability events and then there are low probability events. How do we prepare ourselves for that?

    The bottom line is that we need a completely hedged portfolio to avoid any annihilation. If not, proceed at your own peril. Consider yourself warned.

    The wrecking ball?

    Unusually large and unsustainable budget deficits and total debt aside from other self-harming actions and policies including all the new drama that we see every single day. Completely unprecedented and never expected from the world leader.

    Profligacy evidences are plenty. Add to that, insults as opposed to the friendly tone with the other world leaders. Insular approach as opposed to the alliance, reconciliatory or global approach.

    ‘America First’ is only the façade. The real objective is ‘Me First’ by the POTUS (President of the United States). In other words, what “allowed” us all this profligacy and a life style to live beyond our means for USA as a country, we are undoing it ourselves as opposed to being forced to undo it by other actors. Regardless, the consequences are bad. The only difference really is a runaway train wreck versus a slow-motion train wreck. And the timing associated with it.

    US dollar and United States are not safe havens for investments any longer…until there is a real destruction and resurrection. Then the new opportunities arise. This is a “calm before the storm” and we need to diligently read the signs of the impending storm.

    Potential pitfalls?

    The ultimate outcome is economic stagnation at best and significant poverty increase at its worst. Former is better than the latter. We need not look far even today as many folks suffer to pay even for essentials in our supposedly ‘wealthy’ country.

    We metaphorically enabled the “Crisis Mode” for US using the technology systems parlance – just about two weeks ago via the post: Crisis Mode Enabled for USA: Ticking Time Bomb (Warning # 1) – Requires Defense & Offense Investment Strategy

    At the time, the thinking went that it may be several weeks to several months before we may wish to issue a dire warning again labeled as Warning # 2. That time has arrived, unfortunately, way sooner than we thought – in just about two weeks. Of course, we meant to stop after issuing a Warning # 3. That shall be the last one.

    Frankly, the title we meant to use for this post earlier was simply this: “Two New Sheriffs in Town & Two Thieves: Gold & 10-Year Treasury vs. Fed & POTUS”. Perhaps, more on that later…

    We may not be able to create a perfect hedge in the portfolio, though, as close to a full hedge is where we shall need to be. Hedge may not work perfectly but it can save us from total annihilation. The instruments to use, unfortunately, are limited in number.

    Going all cash is one approach as covered in the post Market Madness & Exit: Next Steps – From One Ladder to the Next OR Even Cash Account. Better approach to foolproof the portfolio from the devastating bouts of potential inflation is to have some exposure to physical commodities like gold, else, primary tools shall be the options, futures or even short funds to create a perfect hedge.

    Tail risk, the probability of occurring unlikely event, is tremendously high and the signs could not be anymore clear, which generally are not seen until after the fact. This time around, it may be a huge exception and could be the easiest and simplest to point the tail risk.

    What this means is that be prepared for the zero percent return (inflation adjusted) with a fully hedged portfolio, which will be a superb feat. We certainly shall be happy with just that and be able to preserve the capital or keep in line with the inflation. Otherwise, we need be ready to witness the decimated portfolios in both ways – nominal as well as inflation adjusted numbers.

    Please see the chart below. Would it be fair to say the price movement in gold is kind of “violent” in recent years? It is up about 85% in twelve months and close to 200% in last 5 years. Going back further, the gold price went up more than 20 times during 1970s – from $35 an ounce to over $800, of course only to crash 50% later. Well, 1970s were not fun at all. In fact, one of the worst times in U.S. history aside from the great depression during 1930’s.

    Something ‘sinister’ is in the offing.

    Gold market ‘gods’ know something that most of us do not.

    Many of us in this country have been highly concerned about the state of affairs for quite some time and now it shows. It may not be too late before most everyone may be able to see it.

    In fact, more and more people have started seeing it in last one year – the first year of new presidency by the most incompetent president ever that can only be aptly labeled as the “evil” in just one word or “despicable evil surrounded by sycophant bootlickers” in one phrase. Unfortunately, not everyone has awakened yet out of their ignorance of deep sleep, though, by each day, there are more and more being awakened, or at least we hope that is the case.

    In a last week’s post Fallen Angels of the Stock Market: What is Next?, we mentioned the below:

    A few things to watch out for or continue watching with a keen eye:

    1. Slightest sign of trouble in the AI gold-rush
    2. Gold breaking $5,000 which it is eerily close to and continues to march higher
    3. 10-year treasury rate not backing down below 4%; it consistently stays in around 4.2%

    Most importantly, a second item above materialized in a matter of just one week. One week. The third item continues to stay on a strong footing in fact even elevating the yield to 4.25% yesterday. The first item, AI gold-rush have started to show the signs of trouble already or big cracks at least and Microsoft ($MSFT) was down by 10% today. It is a lot for company this size and clearly, we see plenty such moves these days, completely unprecedented.

    A bonus…item # 5 in the same post has one more country to the list – Sweden. There may be others, we just do not know at the moment.

    • Currency debasement trades. A good example is Denmark pension fund divesting all of its U.S. treasuries recently

    Besides, the market trying to flirt and stay at or near 52-week high such as S&P 500 index hitting a 7,000 level is really an anomaly given a breakdown of the total market fabric – earlier it was small cap stocks beginning in 2023 and now after about 2-3 years, finally it is turn of the large cap stocks as we covered in the last week’s post.

    Twin forces for the impending “sinister” move are forty years of endless and frivolous partying by USA, all enabled by the money printing by Federal Reserve while effectively robbing the ordinary people, along with the mechanism of sending a perfect “devil” to Oval Office to lead America to immediate ruins is fully in place.

    We need not see far for that other than the exact other end of this earth where the sun rises – Japan. It has started to pay the price as the interest rates have gotten from zero or even negative to close to 4%. Supremely low interest rates, the lowest anywhere on this earth enabled the “¥en Carry” trade here in the USA, which is to borrow at a low interest rate in Japan and lend it at a higher rate in US has been one major part of the U.S. economic plumbing. All that is unraveling a little by little as the carry trades unwind.

    Japanese bond yields recently saw a sudden surge – from staying near zero for years and years to around 4 percent now. That is quite an adjustment that it requires for an ordinary man.

    Can US try to rescue Japan and in the process sink itself as well as if there are not plenty other reasons to sink the grand old USA. Can there be another ‘Long Term Capital Management’ kind of a debacle which shook the financial markets in 1998? Those days may not be far and the domino effect can be quite ugly especially given the inordinate amount of leverage in the system that exists with the funds and institutions. Year 2008 is a stark reminder of that. One implosion affects many other players. Most recent example is the Silicon Valley Bank collapse in 2023.

    U.S. is now trying to intervene in the currency markets and support ¥en and devalue US dollar. It is devalued already by about 10% in last one year. That is a lot. Hence, the gold keeps hitting new highs. There we have an answer to our question as to why gold is acting this way. It is a perfect corollary that as dollar gets weaker and weaker, gold price keeps jumping higher and higher. Can we think that this shall have no major repercussions or even devastating effects for the U.S.? We would be naïve to think in that manner.

    Last such major action, the ‘Plaza Accord’, that devalued the dollar by about 40% to 50%, generated devastating effects for Japan – crippled its exports and created the following: asset bubble and burst, steep recession and above all – ‘Lost Decade’. Japan’s Nikkei 225 index restored its former glory of 40,000 value after about 3 decades – from 1989 to 2024. That is over 3 decades, not 3 years.

    Google Gemini mentioned the below about the Plaza accord…

      Original Goal: The initial target was a 10-15% depreciation, but the market reaction resulted in a much steeper decline.

      Context: The move was prompted by the G5 nations (USA, Japan, West Germany, France, and the UK) to reduce the U.S. trade deficit

    Sound familiar?

    The goal was to fix the U.S. trade deficit, however, the results for the U.S. were limited and largely failed to address structural imbalances with Japan. Now, we have to replace Japan with China and see what follows.

    When it comes to China, it is quite apt to recall what Mahatma Gandhi, a great soul, said: “an eye for an eye makes the whole world blind”

    China shall be treated as a competition, not an adversary or an enemy.

    The world was much different back then in 1985 – a lot less connected. Now in a highly interconnected and globalized world post major inventions and pervasiveness of computers, Internet, mobile, social media and now AI – do we think that the U.S. is immune to any such shocks from any major corner of the world, if not becoming the “problem child” itself. The odds are lot more in favor of the latter as opposed to the former.

    In fact, Peter Schiff, a major bear known as “Dr. Doom” and a “gold bug” said the following in an interview with Fox News channel just about two days ago as captured by Moneywise:

    “We are headed for an economic crisis again that will make the 2008 financial crisis look like a Sunday school picnic,”

    “The biggest difference between the crisis that we’re about to have and the one we had back then is this one is all in America.”

    According to Schiff, the issue is embedded in the structure of the U.S. economy and its monetary system.

    “We have a dysfunctional, consumer-based credit economy that rests on the foundation of the U.S. dollar’s reserve currency status,” he explained. “And the world is now pulling the rug out from under the U.S. The dollar is going to collapse. The dollar is going to be replaced by gold. Central banks are buying gold to back up their currencies.”

    Enough said.

    You can take it for what it is worth.

    Mr. Doom also said a few wise words that are timeless: “Do not bite the hands that feed you”. In a same fashion, another proverb comes to mind: “Do not cut the branch of a tree that you are sitting on”.

    Let us talk about crypto. Is Bitcoin about to head to oblivion? It’s anonymous founder Satoshi Nakamoto must be chuckling wherever he is to see all the madness surrounding it – alive or in his grave. He may be scratching his head as to how this crypto mania swept up the US and the world along with it.

    Now, the crypto based reserve funds also need the backing of… guess what? Gold. Real money. Good old real money.

    When Satoshi created the Bitcoin in 2009, he probably never imagined the world where Bitcoin may replace gold as a safe haven asset even though he may have aspired to replace the currency or create a strong alternative to currency in defiance of the government’s profound profligacy.

    That thesis in itself is not earth shattering as the future of currency is as fickle as the weather. The underlying technology of the Bitcoin and all other cryptocurrencies – called as “Blockchain” is in fact rock solid like a diamond or gold just as it revamps the complex and intricate plumbing of the banking and finance world. Old guards are fading away gradually and new ones are emerging. Just like any great technology.

    However, Bitcoin itself is nothing but a ‘rat poison squared’ as Warren Buffett put it. The same can be said for countless other cryptocurrencies. Blockchain technology has a use like any other technology, though, currencies are limited in the world. Does this mean that most of these cryptocurrencies will collapse with the rise of gold? It is not that far-fetched scenario to occur.

    On the other hand, cryptocurrency characterized as a stablecoin is a whole different story. It is destined to preserve a stable value unlike other highly volatile cryptocurrencies. Stablecoin with one dollar value token is still worth one dollar. That shall not change. Stablecoin is designed to maintain a stable value by pegging it to reserve assets like fiat currency (e.g., USD) or commodities like physical gold.

    A leading stablecoin – Tether is a perfect example of that, which has been buying the gold at the rate of about 25 tonnes per quarter of late…no kidding. It has already amassed about 140 tonnes of gold already making it one of the largest non-governmental holders of the metal. All that is besides what central banks need and continue to buy as part of their de-dollarization strategy.

    See here the amount of gold that the central banks of various countries hold as part of their reserve fund. U.S. has the highest amount of tonnage at over 8,000 tonnes now valued at about $1.5 trillion. It is a lot, yet it is peanuts, especially compared to our total debt at $38 trillion. In fact, it can barely cover our one-year worth of deficit spending at $2 trillion. Ouch!

    Tether plans to invest 15 percent of its reserves in physical gold for the dollar based stablecoins and needless to say that it has to back 100% of its reserves in its gold-backed stablecoin fund by physical gold.

    All this means is that the ‘crypto game’ has come full circle in its 17-year run – 2009 onwards!

    So crypto investors better watch out as this 17 year long run may come to an abrupt end or not at least in the way the investors desired for. Again, Peter Schiff has some wise words for that as well stating that crypto will not give the investors what they bought it for – which is the protection from fiat currencies.

    The reason? Gold has decided to reassert it’s role as a real asset, real money or rather the ‘only money’ that has preserved its value over the course of not just decades, though, for centuries and millenniums. Does this mean the game is over for cryptocurrencies including Bitcoin with the exception of a stablecoin, just as the name suggests. Meaning the technology lives happily yet the currencies die. This movie has been played before by countless countries. Again, the odds are pretty high.

    As Tether continues to grow gain more and more traction and increases its reserves, it has to move in the ‘locked step’ manner with gold. Tether currently buys at the rate of about 1 to 2 ton a week! This is all while the Bitcoin continues to go down, not up, now trading near $82,000 from the high of $126,000 and a $64 million question is would it rise back up again and break a new record like many times in the history of Bitcoin just as the phoenix rises out of ashes.

    U.S. Treasury Secretary, Scott Bessent, envisions the stablecoins market to reach about $2-$4 trillion size by the end of this decade, roughly about one tenth the U.S. economy. If the projection comes out to be true, from where are we going to dig all that gold from the face of this earth and how soon? You get the answer.

    Similar to unpleasant implications of unwinding of yen carry trade, we can only imagine the aftermath of the deleveraging in the crypto world. Gold, real money, is reasserting, it’s true worth as the distrust in U.S. and managing, rather mismanaging its affairs rise materially every day.

    Where do the investors seek refuge then? In gold. I am no ‘gold bug’, however, I do believe in “real money”. The rest is just a fiat currency and to put it bluntly – a fake money. There have been countless examples in the history of the world what kind of havoc the currency debasement wreaks.

    To that point, it would pay to remember the verse from Shrimad Bhagavad Gita, a major Hindu scripture, that speaks to gold.

    ज्ञानविज्ञानतृप्तात्मा कूटस्थो विजितेन्द्रिय: |
    युक्त इत्युच्यते योगी समलोष्टाश्मकाञ्चन: || 6.8||

    BG 6.8: The yogi who are satisfied by knowledge and discrimination, and have conquered their senses, remain undisturbed in all circumstances. They see everything—dirt, stones, and gold—as the same.

    U.S. is on a ruinous path or rather has been for the longest time and now the budget deficits have become so large and unsustainable that the issue is kind of out of control already under the reins of financially illiterate president. Gold price simply speaks to that now.

    We covered in the following post as to how the deficits are the worst in last 50 years and no signs of abating the issue whatsoever: Inspiring Story about 88-Year-Old Working Man: Can We do the Same for Our Country?

    Cherry on the top? Here are a few items:

    1. Suicidal strategies of tariff
    2. Unpredictable, rather whimsical policies
    3. Increasing US isolation 
    4. Increasing instability of the Treasury market and interest rates
    5. U.S. loosing it’s credibility 
    6. U.S. playing victimhood over aggressor
    7. U.S. not a land of “Rule of Law” anymore
    8. U.S. not a “Beacon of Hope” anymore
    9. U.S. not a “Land of Opportunity” anymore
    10. Finally, shall we even talk about immigration?

    Something has gotta give…and it will be a lot before we can restore all the glory again. It will be a long and agonizing wait, if we are fortunate enough to see it again.

    Watching a “Fall of American Empire” is simply too painful or devastating for us all to witness.

  • Fallen Angels of the Stock Market: What is Next?

    This ain’t no bull market.

    To top it all off, there are two America’s, not one – one for the well-off’s and another one for the ordinary Joe’s.

    In our previous post, we announced that we are in a crisis mode already tagging it as a Warning # 1.

    Bear market is well entrenched for the small stocks for a couple years already. Now, it is the turn of the big cap stocks and the market darlings. Way overdue! Overall, it appears that we are in a prolonged bear market stretch. We better prepare ourselves well for that ugly beast.

    See the two matrices below based on the data as of yesterday. The first one shows the top market capitalization (cap) stocks that are in a ‘correction’ territory, i.e. 10% from its 52-week high sorted by market cap starting with Nvidia, artificial intelligence (AI) leader and market darling. The second table shows the stocks that are down most from its 52-week high with the greater than $25 billion market cap sorted by the down percentages.

    Top Market Cap Stocks in 10% Correction Territory (Sorted by Market Cap):
    Company nameTickerMktcap
    (in $mils)    		Share
    Price ($)    		Down%
    NVIDIA CorporationNVDA4,456,220183.1814%
    Apple Inc.AAPL3,669,011247.6514%
    Microsoft CorporationMSFT3,301,070444.1120%
    Amazon.com, Inc.AMZN2,468,896231.3011%
    Broadcom Inc.AVGO1,555,882328.8021%
    Meta Platforms, Inc.META1,542,820612.9623%
    Tesla, Inc.TSLA1,392,257431.4414%
    Berkshire Hathaway Inc.BRK.A1,041,370724,07911%
    JPMorgan Chase & Co.JPM834,355302.0410%
    Visa Inc.V625,809325.2813%
    Oracle CorporationORCL497,992173.8850%
    Mastercard IncorporatedMA476,396527.5712%
    Palantir Technologies Inc.PLTR393,017165.3320%
    Bank of America CorporationBAC388,75552.0710%
    AbbVie Inc.ABBV382,369216.1512%
    The Home Depot, Inc.HD381,948384.6410%
    Netflix, Inc.NFLX362,31585.3636%
    The Procter & Gamble CompanyPG342,087146.0619%
    UnitedHealth Group IncorporatedUNH315,062347.7543%
    Wells Fargo & CompanyWFC274,05186.1212%
    Major Stocks – Greater than $25 billion Market Cap (Sorted by Most Percent Down):
    Company nameTickerMktcap
    (in $mils)    		Share
    Price ($)    		Down%
    Fiserv, Inc.FISV35,50765.7372%
    Strategy IncMSTR46,584163.8164%
    Atlassian CorporationTEAM32,193122.4162%
    Charter Communications, Inc.CHTR25,071187.4357%
    CoreWeave, Inc.CRWV46,82694.0550%
    Oracle CorporationORCL497,992173.8850%
    Roblox CorporationRBLX52,77075.6850%
    Coinbase Global, Inc.COIN59,644226.9349%
    ServiceNow, Inc.NOW130,080125.3048%
    Thomson Reuters CorporationTRI54,023120.1145%
    Federal Home Loan Mortgage CorporationFMCC27,4578.4943%
    UnitedHealth Group IncorporatedUNH315,062347.7543%
    Flutter Entertainment plcFLUT31,868181.0742%
    Federal National Mortgage AssociationFNMA53,9769.2042%
    Coupang, Inc.CPNG36,89820.2441%
    Salesforce, Inc.CRM210,058221.5840%
    PayPal Holdings, Inc.PYPL53,09655.8939%
    Datadog, Inc.DDOG43,044123.4639%
    Brown & Brown, Inc.BRO25,84178.0738%
    Zscaler, Inc.ZS33,093208.6638%

    For sure, this does not sound like a beginning of the ‘new’ bull market, as many profess, for variety of reasons, rather it is amply evident that we are in a second or third inning of the bear market. Labeling it as a brutal bear market is not an exaggeration at all outside the world of certain favored stocks by a very narrow slice of the market participants.

    Obvious culprit is high valuations using any rational measure such as CAPE (Cyclically Adjusted Price to Earnings) Ratio, The Buffett indicator, U.S. debt of $38 trillion, annual budget deficit at 6% of GDP with no plan to reduce and 10-year treasury with interest rate in excess of 4%.

    Trade deficit, not the precarious budget deficit, is only the ‘noise’ over all these true ‘signals’ and a snake oil solution created by our ‘Tariff King’ (in his own words) is creating much more harm than the good aside from the AI beast that brings many unknowns. It is a ‘fantasy solution’ to the ‘non-existent problem’ when many pressing problems are simply brushed aside simply out of the sheer ignorance. Immigration issue is another ‘noise’ problem – 1% problem demanding 99% precious attention.

    Correction in top stocks is ‘startling’ or ‘unhealthy’ to say the least when the major market benchmarks such as S&P 500, Dow Jones Industrial Average (DJIA) and NASDAQ are at or near 52-week high. Underneath the surface, like an iceberg, there is a ‘ton of damage’ already that is not visible at the tip of the iceberg. The same kind of unhealthy market situation for the small stocks has persisted for a couple years already now. Now, it is spreading and making it more pervasive or in other words, on its way to correct the course.

    What this means is that the stock rotation is in the offing or well underway from different aspects such as sector, style or size – such as from technology to defensive, growth to value and from large cap to small cap.

    Memory makers such as Micron ($MU) and Sandisk ($SNDK) making new 52-week high’s during this turbulence arising out of Greenland fiasco seems to affirm the quite-telling pattern that even when generals stop marching, the foot soldier keep on. They are ripe for the fall from grace.

    Google ($GOOG) at $4 trillion market cap is in a shouting distance of Nvidia ($NVDA) at $4.5 trillion and it has been almost three months since Nvidia reached the $5 trillion cap in a true sense in October 2025 and having a hard time breaching it again. It will not be surprising if Google topples Nvidia and takes the crown away, not just temporarily, but even permanently.

    The bottom line is that the market is firmly setting things up for the multi-year bear market and along with that the new winners and losers.

    A few things to watch out for or continue watching with a keen eye:

    1. Slightest sign of trouble in the AI gold-rush
    2. Gold breaking $5,000 which it is eerily close to and continues to march higher
    3. 10-year treasury rate not backing down below 4%; it consistently stays in around 4.2%
    4. Potential bankruptcy of Strategy ($MSTR), formerly known as Micro Strategy, spelling trouble for the bitcoin land, aka digital assets. This may mean of death of bitcoin mega rush of well over a decade
    5. Currency debasement trades. A good example is Denmark pension fund divesting all of its U.S. treasuries recently

    The beauty in all these unfortunate ironies all around these days is that the financial markets is the only entity or mechanism that can keep the ‘unchecked power of our toddler king’ sitting at the most powerful seat in the world in the check that we normally like to refer as ‘evil’ when used in a heavier context. Humiliating defeat of the POTUS (President of the United States) by backtracking on tariffs after ‘Tariff Tantrum 2.0’ response by the financial markets two days ago for Greenland delusive fantasy at World Economic Forum (WEF) in Davos, Switzerland, is a perfect example.

    The ‘Market Gods’ proved it quite solidly in April of 2025, which we can label it as ‘Tariff Tantrum 1.0’ and it was clearly ‘Tariff Tantrum 2.0’ on January 20 – only a ‘mini version’ was sufficient for the evil to back off! How powerful! Great going by the markets! Market is the only ‘beast’ that can keep the ‘other beast’ in its place.

    At that time, the treasury yield and gold price spiked big and market retreated in a major way to trigger ‘TACO 2.0’ response, the acronym – ‘Trump Always Chickens Out’ given by the Wall Street traders to POTUS after the Liberation Day in April 2025

    Three blunt weapons are super solid: 1) Bond Yields 2) Stock Market 3) Metal prices – Gold and Silver. It is an ultimate weapon that the market participants rather not use, though, are ready to use as such, if the need be. Rather, let the natural market forces take its own due course without any major disruption. Slow motion train wreck is far better than the fast-moving train wreck.

    The reason? As U.S. gradually descends on its slow journey from ‘safe haven’ to ‘the source of uncertainty’ just like the emerging markets, it is bound to have such temper tantrums.

    Bonus? George Orwellian style totalitarian regime described in a major dystopian novel ‘1984’ seems more reality than the fiction now when the ‘Big Brother’ is so active and ever-ready to control every aspect of our lives.

    Hence, the ‘TACO’ trades are back and so is the talk of the dollar debasement back in vogue. Not really pleasant times, unfortunately. Certainly, it is time to take advantage of the market strength after the ‘Tariff Tantrum 2.0’ two days back by ‘TACO 2.0’ and a fitting response by the markets to an unhinged Greenland action for those who are able.

    When most everyone with few exceptions in this country feels so ‘powerless and hopeless’ with the biggest fear of losing a ‘sacred temple of democracy’ and ruinously having it desecrated by the evil enabled by the “top goons and bootlicking sycophants of the presidential administration”, financial markets is really our only solace to save the democracy…only to the degree, though. A rest of the responsibility still primarily lies with the peoples of America, which is not a tiny responsibility, rather a big bulk of the total responsibility.

    The “European bazooka” is also an ultimate weapon if set in motion by our European allies, which we are hellbent in making enemies by this evil administration, which is effectively an “Anti Coercion Instrument (ACI)”, a legal tool adopted in December 2023 to combat economic blackmail by foreign nations. It allows the European Union (EU) to impose retaliatory measures—such as tariffs, trade restrictions, or investment limits—against countries that pressure EU members, with 2026 discussions focusing on its use against U.S. tariffs.

    All in all, finally and thankfully a nemesis is emerging to the “unchecked power” of our current presidential administration. This can help soften the blow or slow the death to “irrelevancy” of the U.S. imperialism that no one wants to see.

    Financial market takes its sweet time to understand just as MAGA (Make America Great Again) camp is taking about the ‘true’ evil that America is facing. We all need to read and reread the novel ‘1984’ to better understand the real implications of such ignorance.

    In a due time, market normally does understand the implications pretty well and rewards or punishes one accordingly. It is just that at the present times, the rewards and punishment appear to be in the reverse order, unfortunately.

    As the Orwellian theory suggests, once we start believing that “War is Peace, Freedom is Slavery and Ignorance is Strength” then we know we are in a deep sh*t. The height of the hypocrisy is unfathomable in our leaders and even populace. As a result, what we see is not just reckless, rather criminal behaviors normalized. All owing to the following camps in the order of importance and impact: Spineless cowards and traitors, tribalists and ignorant.

    A powerful faction is in small numbers and a large demographic piece is powerless on the surface, however, it can gain immense power if awakened and roar like a lion and make a big difference. We need to awaken the giant within.

    Time to invoke 25th amendment is here to replace the completely delusional, demented and unhinged otherwise megalomaniac incapacitated President. If the replacement of ‘Greenland’ with ‘Iceland’ multiple times, not just once or twice, in a critical speech at Davos is not enough to do so then what is? What a gaffe!

    Similarly, if the comments by the most powerful man on this earth that market can ‘double’ this year is not a criminal offense then what is? Over the years, many folks have been sent to jail under the guise of insider trading or misleading comments. Such are or rather ‘were’ the laws of this country when it came to securities laws. Is freedom of speech applied only when it is convenient for the elites?

    With this, the end of the U.S. imperialism is here as some can see instead of being in denial.

  • Crisis Mode Enabled for USA: Ticking Time Bomb (Warning # 1) – Requires Defense & Offense Investment Strategy

    In an earlier post, we provided the outlook for the year 2026 for USA, which in general speaks to a fairly ‘negative’ view of the financial markets in the USA owing to variety of factors.

    Now, we are perfectly comfortable calling out the fact that our country is truly in the crisis mode. Consider this as a Warning # 1.

    It is now plenty clear that our President has completely gone rogue or rather started fully exhibiting his rogue behavior as part of his second term. As a result, we are on a path of self-destruction by this very evil as we have referred to him a couple times in the past. This evil has literally put us all on the path of not only a great danger, though, almost to self-annihilation or self-ruin. Earlier, it was a slow-moving train to the debacle and now we have sped up without any restraint as if it is all intended, only inadvertently.

    U.S. attacked Venezuela as we began the new year and captured the dictator, Nicolas Maduro. Effectively, one fascist captures another one as part of the evil power grab strategy at the global stage. Next on the list is Greenland for which the actions are expected anytime from equally rogue administration – within weeks, not even months according to administration’s own account. The logic goes that Cuba action may not to be too far, either. Who knows what is next?

    To spice it all up, just yesterday, our State Department announced that it will halt the immigration visa processing for 75 countries indefinitely. Here is the tweet on X platform. This is legal immigration, not illegal one, folks, to emphasize this dire fact. A nation of immigrants wants to isolate itself from 75 nations, not one, not two, but 75 of them – just about half of the total country count at the world level.

    That is on the international front as we have not had enough on the domestic front throughout last one year ever since the President was inaugurated for his second disastrous term.

    At home, recently, the Immigration and Customs Enforcement (ICE) agent killed an innocent protestor om Minnesota. All in the name of spreading fear and terror. The worst of it is calling the noble hearted protestor a ‘domestic terrorist’ when in fact our own government is well-entrenched on its crusade to become one.

    One thing that is becoming more and more clear now that even the mid-term elections are stake now. Something unthinkable from the American history perspective. What if they are called-off the elections or what if the election results are not accepted much like 2020 election as the big lie of ‘stolen election’ was fed over and over to naïve Americans? The odds of all this happening, i.e. calling off elections with the foundation of the martial law in America just before the election time are more than 50-50% without an iota of a doubt.

    Fast and furious actions by the administration are indicating clearly that we may soon fall in to a kind of ‘regime’ that the U.S. has often tried to topple in its long history of taking such dubious actions to exert its power and help maintain the superpower status. Now, any such actions are only self-inflicting pain inducing or even suicidal ones as we are sitting at the top of the mountain of debt and deficit – over $40 trillion of debt and $2 trillion annually at 6% of GDP respectively.

    We are fast approaching the point of ‘non-relevance’, isolation and fast descent into poverty for many marginal households from the global economic standpoint.

    While USA is on the path of self-destruction, China crossed a trillion-dollar trade surplus, $1.1 trillion to be exact, as its factories are humming and our jobless rate continues to inch up steadily for last one year since this President took over the charge, primarily owing to foolhardy tariff strategy that even a mega bill such as the Big Beautiful Bill Act (BBB) could not soften such a big blow.

    Thereby, one in twenty households, about 5% are falling behind in its utility bills according to one recent report. At this rate, it will not be too long, if more and more people will struggle with basic needs such as food and shelter – hence the real specter of increased poverty rate.

    All the progress that has been made in last several decades as shown in the graph here is at stake now. Clearly, the U.S. profligacy is primarily responsible for any debacle in future and now it is being fast tracked by the lunatic and evil President.

    To top it all off, our country has become from one of the most ‘civilized and sophisticated’ into really uncultured, uncivilized, unsophisticated and even cruel one. Such morphing into a worse one, instead of a better one has made us not only a laughing stock all over the world, though, more and more shunned and looked down upon, which is of our own making.

    There is no room for the dialogue with the other side of the political isle. Democrats are very upset, though, feel helpless. Independents wonder about this as always. All actions are unilateral by the President. Fantasy of acquiring Greenland is equivalent of raping someone or marrying by force. All on the pretext of security controls, which U.S. already possess over the landmass. The real motive is nothing but more and more power grab and profiteering from minerals to business deals to enrich the political class aligned with the evil initiative.

    Constant barrage of insults to the Federal Reserve (Fed) Chairman Jerome Powell had been the norm for last one year and now the administration upped the ante by filing a criminal indictment on the Fed.

    In response to the lunacy of recent two attacks – Venezuela and Fed, a few brave souls spoke up as they grew the spine.

    Nevertheless, bulk of the Republican party is “spineless and coward devoid of any integrity” whereas the Democratic party continues to feel helpless.

    These are painful times and everyday there is something new. When is it to stop? Beautiful words by the former president Barack Obama here during his campaign speech in Virginia and New Jersey in November of 2025:

    “Let’s face it, our country and our policy are in a pretty dark place right now,” Obama told a roaring crowd of Spanberger supporters at Old Dominion University in Norfolk, Virginia. 

    “It’s hard to know where to start.” he said, “because every day this White House offers people a fresh batch of lawlessness and recklessness and mean-spiritedness and just plain craziness.”

    Obama blasted what he called Trump’s “shambolic” tariff policy and deployment of National Guard troops to U.S. cities. He criticized Republicans in Congress for failing to check Trump “even when they know he’s out of line.”

    He said he was surprised at how quickly business leaders, law firms and universities opted to “bend the knee” to appease Trump.

    Ignorance of a good part of populace of our country is unfathomable still enabling or even empowering this administration. Good thing is that there is an increasing awareness on this front. The bad news is that it is not anywhere near enough. We have a long way to go and it gets tiring as the bulk of the country is still sleeping and needs to awaken. It needs to awaken fast before we lose it all for God’s sake.

    One good inspiring event is when the Ford factory worker, TJ Sabula, shouted the words – “Pedophile Protector” when the lunatic evil president visited the factory two days ago. Sure enough, the worker was fired. However, here is the interesting and inspiring part! Two noble campaigns were kick-started on a crowdfunding site GoFundMe and over $800,000 were raised for him by yesterday evening that he even requested to pause the donations as it was more than he needed to cover his expenses. Essentially, close to a million dollars within a day were raised to support this worker. That is the spirit of this country as also outlined in two recent posts – during Christmas and New Year respectively as follows:

    Inspiring Story about 88-Year-Old Working Man: Can We do the Same for Our Country?

    Inspiring Story about Corporate Generosity: Bonus of $443,000 per Employee at Fibrebond

    Again, the factory worker is set for life by his one brave action by a true patriot, not the kind that our President likes to call a patriot who are nothing but bootlicking sycophants. Again, just one brave action by the conscious citizen. With proceeds invested wisely, he can make a decent living out of it even without having an ability to find and/or do the meaningful work for the rest of his life.

    More and more folks need to muster up courage, dig up humility, admit the mistake of supporting such a monster and move towards the betterment of the society. Then only, we can start making a real progress as opposed to going into the valley of despair.

    Many recent examples are truly courageous and inspiring as they spoke against the recent mischief by the Department of Justice (DOJ) for criminal indictment of the Federal Reserve, an independent institution.

    Attack on Federal Reserve Independence:

    1. JP Morgan CEO, Jamie Dimon, said that “not a great idea” to chip away at the Fed independence
    2. Fed Chairman Jerome Powell stated in a recorded video released by the Fed, an unprecedented move: “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President”
    3. Central bank chiefs including European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey said in a joint statement: “We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell”. They further added: “The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability”
    4. Former Fed Chairs Ben Bernanke, Allen Greenspan and Janet Yellen, as well as former Treasury Secretaries Timothy Geithner and Henry Paulson, plus several former chairs of the Council of Economic Advisers who served under Republican and Democratic administrations said the following: “This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly. It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success”
    5. Federal Reserve Governor, Michael Barr, mentioned this to Yahoo Finance today that “it is an assault on the independence of the Fed…I think these are just examples of the ways in which the independence of the Fed is being challenged”

    Few brave souls from the senate banking committee members (full list here) spoke out as well regarding this “foot in the mouth” debacle by DOJ:

    U.S. Senators:

    • Thom Tillis (R-NC): A senior member of the Senate Banking Committee, Tillis was among the first to denounce the investigation as a move to “end the independence of the Federal Reserve”. He vowed to block all future Fed nominees until the legal matter is resolved.
    • Lisa Murkowski (R-AK): Murkowski labeled the DOJ probe a “coercion attempt” meant to pressure Powell into following the President’s direction. She publicly supported Tillis’s plan to block nominees.
    • Kevin Cramer (R-ND): While critical of Powell’s performance as chair, Cramer stated he does not believe Powell is a criminal and called for the investigation to be put to rest quickly to restore confidence in the Fed.
    • Susan Collins (R-ME): Collins expressed strong belief in Fed independence and stated that the investigation seemed more related to the chairman’s resistance to White House pressure on interest rates than his actual testimony.
    • Dave McCormick (R-PA): A Banking Committee member who defended Powell’s integrity, McCormick argued that concerns over Fed spending should be handled through Congressional oversight rather than criminal investigation.
    • John Thune (R-SD): The Senate Majority Leader warned the administration that any investigation “better be real” and serious, emphasizing the need for the Fed to remain independent to maintain market stability.
    • John Kennedy (R-LA): He called the investigation into Federal Reserve renovations a distraction, saying, “We need this like we need a hole in the head,” and stated he’d be “stunned” if Powell did anything wrong.

    U.S. Representatives:

    • French Hill (R-AR): The House Financial Services Chair described the criminal charges as an “unnecessary distraction” that could undermine sound monetary policy.
    • Mike Lawler (R-NY): Stated that while he has policy disagreements with Powell, the independence of the Federal Reserve is “paramount” and opposed efforts to pressure the bank into action.
    • Kevin Kiley (R-CA): Defended Fed independence as a “cornerstone” of the economic system that needs protection.
    • Brian Fitzpatrick (R-PA): A former FBI agent, Fitzpatrick called the investigation “suspect” and demanded further justification for the probe. 

    Source: Google Gemini

    The net result: Gold and silver are soaring again or rather revolting like anything with gold price eying $5,000 and silver shooting for a $100 mark.

    Attack on Venezuela:

    1. Exxon CEO, Darren Woods, had guts to say that Venezuela is “uninvestable” – Kudos to him for being upfront and honest about it
    2. Five Republican senators were brave enough to initially speak out against the attack on Venezuelan president out of which two buckled in later:
    3. Five brave souls to begin with: Susan Collins (R-ME), Lisa Murkowski (R-AK), Rand Paul (R-KY), Josh Hawley (R-MO) and Todd Young (R-IN)
    4. Stayed Strong (SS): Susan Collins (R-ME), Lisa Murkowski (R-AK) and Rand Paul (R-KY)
    5. Buckled In and Sell-Out Souls Again (BS): Josh Hawley (R-MO) and Todd Young (R-IN). These two were “momentarily” brave and became sell-outs again by flipping their votes
    6. Ultimately, the “chief bootlicker sycophant” veep (JD Vance) cast the deciding vote yesterday, broke a 50-50 tie and killed a Venezuelan war powers resolution after the Senate deadlocked on the measure. We were short by one vote, just one vote. Quite pathetic! Our country needs more and more brave souls to stand up to the tyranny from our government. Such tyranny is plenty evident in other war-torn and dictatorial regimes and we do not wish to be one of those countries. It will only take one little nudge to slide us into that territory. No kidding.

    Cowards who kneel to the monster evil has brought our country to the brink of the ruin with the support of the ignorant populace. It is very upsetting. Highly disturbing and it is a high time to do something.

    Lastly, the legendary money manager, Warren Buffett, has amassed enough dry powder of $382 billion with his cash pile by the end of Q3-2025. That says a lot in itself. It will not be surprising to see it easily cross $400 billion by the end of year 2025. In the next post, we can speak to the “fallen angels” of the market. Tread carefully!

  • Outlook 2026: Stock Market Hits a Ground Reality, Rise of Gold & Fall of Bitcoin – CAPE Ratio & Buffett Indicator

    Happy New Year Once Again! Here is to the best and the brightest for 2026! As we began this year with much gusto, we can first reflect on the year that just passed – 2025 and see that it was more of the same from the overall markets’ perspective.

    The years 2023, 2024 and 2025 were made of the exact same template – more and more gravitational pull towards the ‘risk on’ assets, more you pile up on them, more money you can make. It was an easy choice – like predicting a weather.

    Today’s weather is same as yesterday and tomorrow’s weather will be same as today – until something changes. Basically, that is the doctrine most folks tend to follow and it works out alright for the most part as well.

    While we shall not believe fiercely in making predictions or forecasts, we must make ‘educated guesses’ about the future based on more informed analysis, deploy prudent ‘risk management’ techniques and prepare for the worst.

    After having a brutal 2022 for both stocks and bonds, the year of realization or even a major point of inflection when it comes to the interest rates, 2023 deserved a well needed bounce…however, after that, things got out of control for the 3 subsequent years, aided by AI invention, and they still are. However, it does not mean that it will stay that way for ever. It never does. That is how the life and world works.

    Change is the only constant in life. So, we must brace for the change, else, we are destined to fall or even fail. The following proverb or the quote by a French critic, Jean-Baptiste Alphonse Karr, is quite apt for the occasion: “The more things change, the more they stay the same”. It is quite a contrasting, if not dizzying, statement. Isn’t it? It indeed is. However, that is a reality as everything on the surface changes, however, at the very bottom, the substratum remains all the same. That is the ‘Reality’. That is the ‘Truth’.

    Bond holders woke up from their long slumber in 2022 and now gold vigilantes are back in full force. There ain’t going to be a free lunch anymore, not for long at least. We must pay the piper owing to the profligacy of decades in U.S., not just the years, aided or even ignited by lower and lower interest rates – akin to getting high with more and more drugs.

    Gold beat the stocks by a whopping margin of close to 50% out-performance and even more eye-popping was the beat to Bitcoin by 70% in 2025. The raw numbers are as follows for each of the 3 popular asset classes, that is if we were to even count Bitcoin as an asset class, which is really a ‘gambling class’, not a true asset class, a ‘rat poison squared’ as Warren Buffett and Charlie Munger put it:

    S&P 500: 16% | Gold: 65% | Bitcoin: -6%

    S&P 500 return above is excluding the puny and ever-decreasing dividend yield of 1.27% last year on the backs of ever-expanding valuation multiple. This is all while 10 Year treasury started the year closer to 5% or 4.57% to be more precise and spiked to as high as 4.81% in mid-January of last year. It ended the year closer to 4% and again to be more precise, it closed the year at 4.16%.

    Similarly, the U.S. dollar continued to weaken in reference to other major currencies as well with a meaningful degree in 2025 – something newer of a phenomenon, though, not surprising at all. See a nice capture or summary below by Ray Dalio, one of the greatest and biggest hedge fund manager, in his LinkedIn post on January 5.

    “Regarding 1) what happened to the value of money: the dollar fell by 0.3% against the yen, 4% against the renminbi, 12% against the euro, 13% against the Swiss franc, and 39% against gold (which is the second largest reserve currency and the only major non-fiat currency).  So, all fiat currencies fell, and the biggest story and the biggest market moves of the year were the result of the weakest fiat currencies falling the most, while the strongest/hardest currencies strengthened the most. The best major investment of the year was long gold (returning 65% in dollar terms), which outperformed the S&P index (which returned 18% in dollars) by 47%. Or, said differently, the S&P fell by 28% in gold-money terms.”

    The bottom line is that gold is the only real money, whereas every other currency is called a fiat decreed by an authority or rather just paper money subject to significant erosion by the sheer power of inflation. Gold is real money for not only decades or centuries though for millenniums. Everything else loses value, though, gold does not. It is the best source of value preservation and inflation hedge. Gold has its limitations as it does not create value like stocks, though, it does not erode the value like cash or currency.

    Looking forward to 2026, the ‘gold revolt and dollar-debasement’ trends can reasonably be expected to continue. We covered that about three months ago with the following post:

    Ominous Signs & Gold Revolt – A Dollar Debasement Trade. However, it does spell trouble for stocks as soon the reality hits the ground which we are getting closer and closer by the day.

    The usual suspects for the major downfalls are high flying AI ‘bubblish’ stocks such as from Nvidia ($NVDA), Tesla ($TSLA), Oracle ($ORCL), Palantir ($PLTR) to all of The Magnificent Seven stocks that are also reframed as AI hyperscalers now or massive tech companies in simple words that continue to feast on fat profit margins. The question is for how long? Oracle has already succumbed to the reality for the most part as covered in an earlier post and still may have much more downside. Others will have to soon follow when this bubble pops. A good reminder will be the ‘Truth’ outlined earlier in the proverb.

    Another helpful indication that we could be closer to the terminal peak, rather than the bottom of a new bull market as many eternal bulls profess, is high-flying ‘memory’ stocks representing sheer commodity business from Micron ($MU) to Sandisk ($SNDK), a top performer in S&P 500 in 2025, to Seagate ($STX) to Western Digital ($WDC) as many of them went up manyfold – yes, manyfold last year.

    Picture is worth the thousand words similar to references in earlier posts. We need not explain it more and one can make a judgement at his or her own peril. The worrisome part is that now we have crossed the dangerous number of 40. However, where is the limit – does anyone know? Unfortunately, not. We crossed 20 first then 30 and now 40.

    Source: Shiller PE (Multipl.com)

    Similarly, here is the graph for the Buffett indicator as it is known to reflect the overall market cap to GDP ratio, which also is in a pretty dangerous territory of over 200% (220% to be more precise), the highest ever by far and even beyond the dotcom mania. Enough of the exuberance! Warren Buffett once remarked to the effect that ratio of 1 or 100% is a nice place of equilibrium from which we have swung too far to the right.

    Source: LongTermTrends.com

    Law of gravity always persist – a universal law. The ball can be thrown in the air for only so long. The mass insanity can only last for so long, so can the hyper-ness or depression of the masses.

    In such a dire situation, how do we find a tricky balance? Well, first we need to be defensive and then position ourselves by taking a select offensive positions – the only way to get thru these treacherous times. The U.S. is certainly sitting at the edge of the cliff and one push, just one push, can easily slide us into the abyss, the bottomless pit, especially with the current presidential administration which is nothing short of evil and incompetence, though, fully capable of taking the country to a complete ruin.

    The only competence this administration has is in its evilness enabled by sycophant bootlickers and supported by ignorance of certain segments of populace, again a rarity like the above two graphs that we can only wish that it disappears soon enough for the sanity of the rest of the country or heck, even the world.

    A good example is an announcement by the President today such as raising our defense budget by a whopping 50% – from a trillion dollars to $1.5 trillion with the money we do not have (or rather can easily create any longer) and increasing annual deficit by 25% – from $2 trillion to $2.5 trillion dollars if we were to even think that this ‘whim’ were to turn into a reality similar to a whim of paying a $2,000 tariff ‘dividend’ check to everyone with the money again that our country does not have and no one earned.

    Now, do we see a connection any better with the fiat currency or rather a fake currency at its worst as it has happened to certain countries much to the chagrin of the proletariat there? It brings nothing but misery and poverty to the masses. Though, again, does the ruling class care? Probably, not. That is what the history has shown time and again. However, how many of us care to read the history, let alone learn from it? Countless examples have been there in the past as well as present.

    There can be ‘N’ number of possibilities to push us off the cliff into abyss. Our job is to protect ourselves as best as we can from such possibilities. At least from the ones we can foresee as a possibility.

    Overall, there is a high probability of the markets getting punished in some form or fashion by the bond vigilantes and/or gold revolutionaries if not aided by any other external factors which is often the case.

    Hence, here are the few key takeaways for the year:

    1. Increase the cash allocation level to have more dry powder on hand to prepare for the tough times and jump in to the market aggressively if and when the markets were to turn ugly.
    2. Lighten up an overall exposure to the two main asset classes: stocks and bonds
      1. Lighten up, if not eliminate entirely, especially on the expensive or frothy stocks.
      1. Similarly, lighten up exposure to the long-term debt instruments.
      1. Essentially, stop playing with the fire.
    3. Establish or increase the exposure to defensive and value stocks that can withstand the jolt better (expected or unexpected)
    4. Establish or increase the exposure to ‘real money’ that is gold, even after this explosive move upward last year, in the form of diversification into a commodity asset class.
    5. Be a more disciplined investor in light of all the craziness that is going on in the world, especially in our own backyard. Cynical? Perhaps, though, it is not that far from the reality, unfortunately. Wars rage on all over the world and as if external wars were not enough, we have an internal one now within the U.S. not much short of a civil war

    As for the gold, we just need to remember that it is ‘money’, not an ‘investment’ especially owing to the ‘orgy’ of spending by the U.S. government. Unlike many folks here in the US, I am all for the government and all in for the sacred temple of democracy, however, currently, we cannot have much trust any longer in this government doing the right thing especially by the current administration. To top it all off, the Federal Reserve (Fed) is losing its independence, a separate topic that we can cover in more details at some point.

    In essence, the bond and gold vigilantes are back in full force and/or watching the show with a very tight leash!

    As we begin the new year, a good reminiscence shall be the below pair of the verses in Shrimad Bhagavad Gita, a diamond of all Hindu scriptures.

    ये मे मतमिदं नित्यमनुतिष्ठन्ति मानवा: |
    श्रद्धावन्तोऽनसूयन्तो मुच्यन्ते तेऽपि कर्मभि: || 3.31||

    ये त्वेतदभ्यसूयन्तो नानुतिष्ठन्ति मे मतम् |
    सर्वज्ञानविमूढांस्तान्विद्धि नष्टानचेतस: || 3.32||

    BG 3.31: Those who abide by these teachings of Mine, with profound faith and free from envy, are released from the bondage of karma.

    BG 3.32: But those who find faults with My teachings, being bereft of knowledge and devoid of discrimination, they disregard these principles and bring about their own ruin.

    Source: JKYog Gita

  • Inspiring Story about Corporate Generosity: Bonus of $443,000 per Employee at Fibrebond

    Happy New Year!

    As we begin the new year today, it is best to reflect on the past year and plan for the new year. Clearly, there is a lot to be covered on that front, however, instead of delving much on that at this very juncture and speak to the outlook for the Year 2026, that is in one word – negative, we can certainly begin the year with some positivity and truly inspiring story.

    As for the “Outlook of Year 2026”, we can dig deeper and describe more elaborately in a post next week for the financial markets outlining where we came from, where we think we are headed and how we can position ourselves.

    Recently, Graham Walker, President & CEO of Fibrebond, now part of Eaton ($ETN), captured a fair amount of media attention when he sold the company founded by his father for $1.7 billion to Eaton, a power management company and S&P 500 component. As an astonishing amount of gesture, he allocated 15% of the sale proceeds, plump $240 million to the bonus pool for all of their employees.

    That comes out to be a quite handsome amount $443,000 for each of its 540 full time employees provided that they stay with the company for the next 5 years. Hard to believe it these days, isn’t it?

    When the corporate greed is at its peak, U.S. being the worst of the pack and many seem to believe that the world has gone crazy from all the aspects of life – economy to social to political to geopolitical and the general feeling is that world order is about to collapse, we see such a beautiful act of kindness – a ray of sunshine and along with the healthy dose of hope, aspiration and inspiration from such a vivid corporate generosity.

    Kudos to the Chief Executive who made all the difference in the lives of 540 people, all of the company employees almost to the effect that their retirement is truly cared for regardless of their own accumulated savings or retirement income from quite a fragile Social Security system. Invested wisely, such a large sum can truly go a long way over the course of next 5, 10 or 25 years depending on how much time each employee has prior to his or her retirement.

    In other words, what this CEO did without any expectations whatsoever as his ‘parting gift’ to all of his employees is nothing but remarkable with an attitude of a sheer gratitude, which is sorely missing in many of our lives – to live a truly happy and fulfilling life.

    Retirement income stream is nearly set for all of these employees without any doubt. At a modest 8% return on investment, it turns out to be about $36,000 per year or $3,000 per month from this bonus pool alone. Even if they start with zero in savings today, additional hard work and investments by them over time can put them in quite a comfortable position – with or without counting on a Social Security income.

  • Inspiring Story about 88-Year-Old Working Man: Can We do the Same for Our Country?

    Early this month, about 15,000 strangers came to the rescue of an 88-year-old proudly working man in Michigan, a veteran, as a cashier at the Meijer supermarket from the dreadful life. Pretty generous lot gifted the man, Ed Bambas, with a $1.8 million check to retire gracefully and in dignity when one should enjoy the best that life has to offer. Thanks to the Australian social media influencer Sam Weidenhofer who raised such a respectable sum via crowdfunding at GoFundMe. Amazing feat by a man with the noble intentions leveraging the power of social media!

    Merry Christmas and Happy Holidays!!

    That is a spirit of our great country called United States of America (USA) and even more importantly a mankind that is bestowed with an inherently divine nature, just forgotten at times veiled by a thick layer of ignorance that is not so easy to break out of!

    It is an average of over $100 contribution per each donor, pretty generous amount by thousands of good Samaritans. Clearly, it is beyond the race, religion, gender, color or political beliefs that one harbors. No one asked for or cared for any of such structural divisions of the society prior to their giving for such a noble cause. They only cared that it was a fellow human being just like themselves. Everyone banded together to lift the poor man from toiling at the ripe age of 88 when one shall be enjoying the fruits of the hard work and labor of his entire life, especially after serving our country for its defense needs.

    All of these proceeds invested safely in a 10-year treasury notes can yield over 4% return netting approximately $75,000 income per year or over $6,000 per month for the widowed man, quite a decent sum for one person to survive even in this age of ‘uncomfortable’ inflation level for the most of the population in USA. Eventually upon his passing, the recipient of this largesse could always make a wise choice of passing the remaining sum, if not all, back to the community. Law of Karma is such an irrefutable principle of the universe!

    With a backdrop like this, what can we do for our country?

    During his inaugural address on January 20, 1961, President John F. Kennedy, spoke these beautiful words: “Do not ask what can a country do for me instead ask what I can do for country”. That is a true inspiration for the civic duty and public service.

    Similarly, another one of our great presidents, Abraham Lincoln spoke these divine words during his second inaugural address in 1865: “With malice towards none; with charity for all… let us strive on to finish the work we are in”

    Our current President often likes to be compared with or even ‘trump’ the great Abe Lincoln. However, it is extremely hard to ignore the stark contrast – malice towards none? – it is rather in abundance towards the most or at least half of the country pegged as liberal. Such a sad state of our country that it is beyond belief and hard to recognize now this nation badly defaced by this evil man enabled by his top goons and bootlicking sycophants and cheered by masses of ignorant and selfish populace. Unfortunately, the evil can only destroy the society, not create a good one. It is very painful to see such defacement.

    United States is now on a stead path of incurring about $2 trillion in annual federal budget deficit or about 6% of GDP. There is no end in sight for such large deficits. Surplus? What does that mean? At this rate, with the experience of the current president who is quite adept at running his businesses to the ground and into bankruptcies is certainly quite keen on taking USA to the same destination of a total ruin.

    See the attached matrix outlining the basic economic data of last 50 years for GDP, federal deficit, inflation, etc. sourced from Google Gemini that compiled the data from different government agencies. During the first term of our evil and incompetent president, who single-handedly raised the national debt by over $5 trillion (as part of the total of $7 trillion) by ignoring COVID-19 pandemic repercussions alone, raising 3% annual deficit to GDP ratio to 15% when he got kicked out of the White House.

    Subsequent democratic administration led by the President Joe Biden brought it down to 6% level. It was better, yet still not anywhere near enough. Unfortunately, now, this is where we still seem to be ‘comfortable’ at this time – only to pay a huge price in not-so-distant future.

    The only years for surpluses were 1998 thru 2001 primarily during the democratic administration of President Bill Clinton.

    YearU.S. GDP ($T)GDP GrowthInflation (%)Fed. Rev ($T)Fed. Exp ($T)Deficit ($B)Rev %Exp %Def %Total Debt ($T)
    2024$28.782.80%2.90%$4.92$6.75($1,833)17.10%23.50%-6.40%$35.46
    2023$27.362.90%3.40%$4.44$6.13($1,695)16.20%22.40%-6.20%$33.17
    2022$25.461.90%6.50%$4.90$6.27($1,375)19.20%24.60%-5.40%$30.93
    2021$23.325.90%7.00%$4.05$6.82($2,772)17.40%29.20%-11.90%$28.43
    2020$21.06-2.80%1.40%$3.42$6.55($3,132)16.20%31.10%-14.90%$26.95
    2019$21.432.30%1.80%$3.46$4.45($984)16.10%20.80%-4.60%$22.72
    2018$20.612.90%2.40%$3.33$4.11($779)16.20%19.90%-3.80%$21.52
    2017$19.492.20%2.10%$3.32$3.98($666)17.00%20.40%-3.40%$20.24
    2016$18.711.70%1.30%$3.27$3.85($585)17.50%20.60%-3.10%$19.57
    2015$18.212.70%0.10%$3.25$3.69($442)17.80%20.30%-2.40%$18.15
    2014$17.522.30%1.60%$3.02$3.51($483)17.20%20.00%-2.80%$17.82
    2013$16.781.80%1.50%$2.77$3.45($680)16.50%20.60%-4.10%$16.74
    2012$16.202.30%2.10%$2.45$3.54($1,087)15.10%21.90%-6.70%$16.07
    2011$15.541.60%3.20%$2.30$3.60($1,300)14.80%23.20%-8.40%$14.79
    2010$15.002.60%1.60%$2.16$3.46($1,294)14.40%23.10%-8.60%$13.56
    2009$14.45-2.50%-0.40%$2.10$3.52($1,413)14.50%24.40%-9.80%$11.91
    2008$14.720.10%3.80%$2.52$2.98($459)17.10%20.20%-3.10%$10.02
    2007$14.482.00%2.90%$2.57$2.73($161)17.70%18.90%-1.10%$9.01
    2006$13.862.90%3.20%$2.41$2.66($248)17.40%19.20%-1.80%$8.51
    2005$13.093.50%3.40%$2.15$2.47($318)16.40%18.90%-2.40%$7.93
    2004$12.273.80%2.70%$1.88$2.29($413)15.30%18.70%-3.40%$7.38
    2003$11.512.90%2.30%$1.78$2.16($378)15.50%18.80%-3.30%$6.78
    2002$11.001.70%1.60%$1.85$2.01($158)16.80%18.30%-1.40%$6.23
    2001$10.621.00%2.80%$1.99$1.86$12818.70%17.50%1.20%$5.81
    2000$10.284.10%3.40%$2.03$1.79$23619.70%17.40%2.30%$5.67
    1999$9.664.80%2.20%$1.83$1.70$12618.90%17.60%1.30%$5.66
    1998$9.094.50%1.60%$1.72$1.65$6918.90%18.20%0.80%$5.53
    1997$8.614.50%2.30%$1.58$1.60($22)18.40%18.60%-0.30%$5.41
    1996$8.103.80%2.90%$1.45$1.56($107)17.90%19.30%-1.30%$5.22
    1995$7.662.70%2.80%$1.35$1.52($164)17.60%19.80%-2.10%$4.97
    1994$7.314.00%2.60%$1.26$1.46($203)17.20%20.00%-2.80%$4.69
    1993$6.882.80%3.00%$1.15$1.41($255)16.70%20.50%-3.70%$4.41
    1992$6.543.50%3.00%$1.09$1.38($290)16.70%21.10%-4.40%$4.06
    1991$6.17-0.10%4.20%$1.05$1.32($269)17.00%21.40%-4.40%$3.67
    1990$5.981.90%5.40%$1.03$1.25($221)17.20%20.90%-3.70%$3.23
    1989$5.663.70%4.80%$0.99$1.14($152)17.50%20.10%-2.70%$2.86
    1988$5.254.20%4.10%$0.91$1.06($155)17.30%20.20%-3.00%$2.60
    1987$4.873.50%3.70%$0.85$1.00($150)17.50%20.50%-3.10%$2.35
    1986$4.593.50%1.90%$0.77$0.99($221)16.80%21.60%-4.80%$2.13
    1985$4.344.20%3.60%$0.73$0.95($212)16.80%21.90%-4.90%$1.82
    1984$4.047.20%4.30%$0.67$0.85($185)16.60%21.00%-4.60%$1.58
    1983$3.644.60%3.20%$0.60$0.81($208)16.50%22.30%-5.70%$1.38
    1982$3.35-1.80%6.10%$0.62$0.75($128)18.50%22.40%-3.80%$1.14
    1981$3.212.50%10.30%$0.60$0.68($79)18.70%21.20%-2.50%$1.00
    1980$2.86-0.30%13.50%$0.52$0.59($74)18.20%20.60%-2.60%$0.91
    1979$2.633.20%11.30%$0.46$0.50($40)17.50%19.00%-1.50%$0.83
    1978$2.355.50%7.60%$0.40$0.46($59)17.00%19.60%-2.50%$0.78
    1977$2.084.60%6.50%$0.35$0.41($54)16.80%19.70%-2.60%$0.71
    1976$1.875.40%5.80%$0.30$0.37($74)16.00%19.80%-4.00%$0.62
    1975$1.69-0.20%9.10%$0.28$0.33($53)16.60%19.50%-3.10%$0.53

    Source: Google Gemini data compiled from various governmental agencies

    Jamie Dimon, a great banker and solid business leader, J.P. Morgan CEO, opines, like any other great economist, that we must bring the deficit down to 3% just in order to survive and avoid the dire consequences. In fact, 3% is a sustainable deficit level for many countries without inviting much trouble. Otherwise, we can be another Argentina or many other countries in the world history. As a baseline, if not the worst case, we must set 3% as a target for our country to achieve soon without going completely broke.

    Thankfully, it is an attainable target without much austerities that certain other countries had no choice but to go thru to avoid even further damage. U.S. dollar being a reserve currency for the world commerce that we have exploited so badly thus far can go only so far.

    Oh, well, how do we get there? Just like the above inspiring example of lifting an 88-year-old man out of funk or being stuck in a working quagmire instead of enjoying time with the grandkids or even great grandkids. We need a good political leader who can make it happen, walk the talk and not just be the ‘snake oil salesman’ and worse yet evil hellbent on destruction of this great society.

    As a start or at least fantasize on how we can even get there: Annually reduce the deficit by 1 percent of GDP – mere 1 percent and in six years we can be at 0 percent! Voila! Why even stop there? Even go beyond that by creating a surplus and start paying debt, if we want to reclaim our glorified past, be it 25 years or even 50 years.

    The deficit reduction by one percent can be a mixture of the two: half percent increase in income and half a percent decrease in expense. Bingo! We have achieved one percent deficit reduction. How much difficult it can be? Yes, it is not an easy feat. Though, it is too difficult? Not at all! If we put our minds to it, we can make it happen much like we do for other things in life.

    Then again, in Washington, nothing is easy, unfortunately. Hence, the current sad state of our once-great nation. Democrats like to spend and tax, both, however, Republicans, unfortunately, only likes to cut the taxes, i.e. reduce income as per failed Reaganomics policies. It is a loose-loose proposition that has only morphed the solid U.S. economy into a disastrous one by turning a net creditor nation into a debtor nation in last 40 years.

    Currently, U.S. economy is humming at $30 trillion dollar mark and one percent deficit is $300 billion. This means that we need to adjust $150 billion on the income side and a same amount of $150 billion on the expense side of the income statement of the federal government. Thereby, in our budget of $7 trillion expenditures, an adjustment of a little over 2% is needed. On the income side, the receipts of $5 trillion, it requires an adjustment of about 3%. You see the gap – $5 trillion in revenue and $7 trillion in expenses is a whopping and eye popping! It is certainly taking us to the direction of a dump.

    Even most of the households do the same as a big bulk of them live within their means and the budget. Can we not do the same for our country?

  • Tesla ($TSLA) – Back from the Brink & Ripe Target for Shorting by the Venturesome?

    One Down, Three More to Go!

    We covered the four pillars of the market insanity back in September in the post titled as “House of Cards & Four Pillars: OpenAI, Nvidia, Tesla & Oracle”. One of the four pillars, last in the list, Oracle ($ORCL) stock is down close to 50% from its peak on September 10. It is fair to conclude that it has started crumbling well already. The underlying reason behind that is the capex (capital expenditure) binge, by the artificial intelligence (AI) hypers and megaphones, nearing its peak as covered a few weeks ago in the post titled as “Capex Binge & Race to the Bottom: The Winner is…Oracle”.

    Nvidia ($NVDA) stock is down by about 17% from its peak and similarly its shadow AI chip company, Advanced Micro Devices ($AMD) is down by about 25%. This is all while Tesla ($TSLA) made a new all-time high just two days back at $495 sporting a $1.6 trillion market cap on the backs of some more sensational news about its vaporware. See below figure.

    Famous economist, John Maynard Keynes, said about a century ago that “The markets can remain irrational longer than you can remain solvent”. It appears that Tesla is back from the brink or nearly dead at least from its disastrous year perspective after numerous controversies and resultant trouble. Before the lamp goes out, it often has the strongest flicker prior to it being turned off completely.

    Frankly, it is so enticing to short Tesla (again) as the wheels may fall off the Tesla bandwagon anytime. For the venturesome, I cannot think of a better target than just that. Even better than Nvidia, which still has some solid business fundamentals, at least for the time being! Here is some background and the back of the envelope math for a quick analysis.

    I have had my fair share of grief, or rather more than my fair share, shorting Tesla back in the summer of last year. So, once burned, twice shy! I am often guilty of being too early, though, I would rather be too early than too late. First and foremost, the key is to not loose our shirt while doing so.

    The largest automaker of the world, Toyota ($TM), has a market cap value of about $280 billion just as it made a new 52-week high today at $215. We can nicely round it up to $300 billion that it well surpassed during March of 2024 with the all-time high at $255.

    Toyota roughly sells about 10 to 11 million vehicles a year whereas Tesla sells close to 2 million, to nicely round a number of the 1.8 million maximum that it has sold in a year, one fifth (20%) of Toyota. Let us be overly generous (or rather foolish) and accord the same valuation to the automotive business of Tesla and then adjust that from the current market cap.

    After adjusting for the market cap related to the automotive business, Tesla is still left with about $1.3 trillion market cap – the current market cap of $1.6 trillion less $300 billion equating it to Toyota. All of that $1.3 trillion is nothing but the pure vaporware or a “pie-in-sky” at best and snake oil at its worst.

    We covered some basic details about Tesla in a post just about two weeks ago labeled as “Big Bear Case Study & The Biggest Poster Child of Current AI Mania: Tesla (TSLA)” in which we mentioned that the automotive sales are literally flat at well under $100 billion for the last 3 calendar years – 2023, 2024 and 2025 (TTM).

    What this means is that the exuberant investors are according about $1.3 trillion market cap to the vaporware part of the business, namely two – robotaxis and robots. There is no greater height of insanity than that by the investors where we have literally seen a ‘zero’ dollar of revenue thus far. Yes, the future can be brighter, just as it always is for the new technologies. However, bestowing a trillion dollar plus valuation to the “pie-in-the-sky” business model is just beyond fathom. Remember the dot-com days and how it all ended?

    For the context, Berkshire Hathaway ($BRK), the company managed by the world’s greatest investor by far and one of the wealthiest people in the world alongside being a great philanthropist, Warren Buffet, teeters around a trillion-dollar market cap right now after making it’s all time high well surpassing a trillion-dollar mark early this year (May of 2025).

    OpenAI is a private enterprise and hence its valuation is always subject to stay in the “La La land” depending on the euphoria level in the venture capital (VC) world, often reflective of the public markets. Hence, that is beyond the scope of our valuation analysis. That leaves the two of the four pillars still standing tall, at least for now – Nvidia and Tesla.

    Are they the next two biggest casualties of the markets as the ground realities hit to the gamblers, speculators and uniformed in 2026 with the specter of potentially higher inflation and unemployment aka “misery index”? We covered this topic in the post “Stagflation & Misery Index: Fed-In-The-Box – What Fed would do vs. should doabout three months ago. One certainly needs to run for the cover as covered in the post “Nvidia hits $5 Trillion Market Cap: Perfect Time to Run for Cover?”, if opting for the prudent risk management.

    We just hit the unemployment ratio of 4.6% for the month of November, the highest in 4 years. Inflation is the biggest wild card for the upcoming year whereas one thing is near certain that the unemployment may continue to march higher in 2026 given the “suicidal” strategy of tariffs resulting into an unfortunate “War with American people” by the incompetent, moronic, lunatic and evil President of this once-great nation. That is the case in quite a contrast to the wild claim of “ending 8 wars for other nations” by this pathological liar, unhinged and delusional President, the worst in our history, that people of America has elected to our great dismay and misfortune.

    Another catastrophic mistake, not to delve much into, American President is making is on the immigration front. Again, it is more of a “suicidal” strategy just like the tariffs. Hence, it is really a twin strategy to ‘defeat America’ with two completely unhinged initiatives. Yes, there are problems on both the legal as well as illegal immigration front, though, ‘hiring’ the most incompetent and evil person on the face of this earth whose sole purpose is self-enrichment, not to truly serve the country, is the dumbest thing a country can do just as we have exhibited and become a laughing stock all over the world. It is akin to watching the brightest kid in the class get succumbed to the casualty of a fatal drug addiction.

    Thus, when we will look back in the history in a not-so-distant future, this evil man will undoubtedly be compared with the Hitler, by far the worst figure in the recent world history. The difference between the two simply is that the Hitler killed the millions of bodies whereas this modern Hitler has been killing millions of livelihoods, not to mention the emotional torture by this tyrant despot, the most inhumane thing that a political leader can do – the exact opposite of what we elect them for – to serve the country by being the most benevolent person out there. Of course, one man cannot do it all, though, in this world, there are enough sycophants out there for their personal gains to be his instruments without any regards to the overall humanity.

    All that “gravy” is after inheriting the best economy in the world with the exception of a few rough edges here and there and now our sitting president is hellbent on running it to the ground and ruining it. No surprise there, unfortunately given that the bankruptcy is quite a familiar and downtrodden route for our President.

    Also, no wonder that the mainstream media, which naturally tends to be liberal truly as a mirror of our community and society, is fighting like a hell its own war with the President to rescue American people from this evil tyrant! So, kudos and all the power to these truly brave and selfless people!! A few such braves from the other end of the political aisle in this extremely polarized political landscape clearly does help!

    Thankfully, America is waking up from its long slumber, though, it has not fully woken up yet given a good size of ‘uninformed’ or ‘ignorant’ citizenry segment still exists. Amen! We need lots of luck there for sure.

  • Big Bear Case Study & The Source of Current AI Mania: Nvidia (NVDA) – Repeat of Dot-Com Bubble Era and Cisco Systems Story

    What is the source of the current AI (artificial intelligence) stock mania? By far, majority of the conscious investors can answer that it is Nvidia (NVDA) and/or OpenAI, a private enterprise, and broadly speaking it is a true answer. However, this much also can be said that the main engine behind this explosive growth of AI and resultant stock mania is ChatGPT product unveiled by OpenAI in November 2022. OpenAI is the brain behind it and Nvidia is the brawn enlivening the AI experience.

    In our previous post, we delved a little bit on Tesla (TSLA), the biggest poster child of AI hype and that remains true as it reached giddying heights. However, the source behind it all remains Nvidia. About three months ago, we have written about 4 pillars of the AI stock mania as well here.

    If we were to use an analogy of the human anatomy, it is fair to say that Nvidia is the body that carried all the activities with the engine or heart or even brain for that matter that is OpenAI powering all of the activities of this AI human body. Human body is so intricate, the most wonderful of all creations in this world and so is the human brain or heart that keeps us all truly alive.

    Alternatively, OpenAI and Nvidia can also be equated as parents of AI mania: OpenAI being a mother and Nvidia being a seed giving father to AI mania child or shall we say a manic child?

    Diving straight into the topic of relevance and the timing could not have been better. Just as we were to focus this week’s note on Nvidia and pertinent details, the poster boy of AI age, Cisco Systems (CSCO), the dot-com darling of late 90s and the center of all attention then like Nvidia today, just yesterday crossed it’s all time high of March 2000, which is over 25 years later. Yes, I repeat, Cisco recaptured it’s all time high after over 25 years and closed at $80.25 surpassing its previous all-time high of $80.06 on March 27, 2000. That is an eternity in the financial markets and our hat’s off to the investor, if such a brave soul even exists, who purchased it at the peak and held on to the stock for 25 long years, only to get a zero percent return. See below.

    Cisco Systems was to Internet or dot-com boom that is Nvidia today to AI boom. The dot-com boom was known for the buildout of infrastructure or ‘plumbing’ as it was known then for building the vast network named as the ‘World Wide Web (www)’. Cisco was known as the ‘plumber’ and major telecommunications companies were laying the fiber that is so ubiquitous today in our daily lives. The high-speed Internet was a dream then that we take it for granted today.

    Source: Yahoo Finance

    We covered Nvidia hitting a $5 trillion market cap just about 6 weeks ago on October 30 in the post here. Since then, it has not broached that all time high yet again and neither do we expect it to do so anytime in a near future that these weary eyes can see. In fact, Nvidia is down by about 13% already at $184 from the all time high of $212.

    We can never say never as this AI mania can go on even further and attain even more dizzying heights. However, we can certainly see that the cracks have started to appear now in this AI mania and Oracle (ORCL) has been the very first casualty of the big tech companies with being about 40 percent down in recent days from its all-time high on September 10. That is when Oracle founder Larry Ellison was also temporarily awarded the title of the wealthiest person in this world as covered in the post here.

    Oracle reported its quarterly earnings yesterday after the market close and it does not seem to be too inspiring and as a result, the stock is down by about 15% today. We shall see if this helps already fidgety investors find more cracks in the AI thesis or soothe any concerns.

    AI is real, though, AI boom is unreal just as the Internet was real and the boom was unreal at the time. Our world has seen truly amazing things with the advent of Internet and its commercialization starting with the Netscape web browser and its IPO in August of 1995. It sparked close to 5 years unrelenting boom in the Internet buildout only to be burst badly with many companies loosing over 80 or even 90 percent of its value, if not 99 percent in many cases.

    Very few companies rose back from the ashes such as Amazon (AMZN) from such devastating losses and made the history. Further, Cisco is the prime example as the darling of the time took over 25 years to reattain the same stock price.

    Since then, amazing things have happened in the Internet space and it is hard to envision a life without Internet now just as it is without other life essentials such as air, water and even electricity. Mobile is the crowning achievement of a mankind on top of the Internet which makes it so essential for most everyone on this earth.

    Similarly, we can also envision how AI can transform our world even further in the next 5, 10 and 25 years, much of it will be beyond our imagination as we could not have imagined the world today back in 2000.

    This also reminds us of the Nikkei 225 index of Japan that took well over 34 years, I repeat 34 years, to cross its previous high of close to 40,000 in December 1989 arising out of its economic bubble and finally surpass the previous high in February 2024. For it’s fair share in the market madness, Japan saw the euphoria in both the stock market and real estate market during the 1980’s. Does that sound familiar as to what we see back home here? It sure sends a chill to our spine.

    Meta, the Facebook parent (META) is significantly reducing its commitment to Metaverse, the virtual reality and 3D play, by cutting its budget by 30% after burning through $70 billion just in last few years. Yes, the big boys have the big numbers. Or shall we say that Meta is quietly pulling a plug on its biggest gamble or rather a foolish fantasy of having us all live in the virtual world (fantasy world) and fake economy and not a real world with the real economy?

    Bigger the man, bigger the whims and bigger the evil-doing tendencies at times as the history shows time and again for the societies to slide into oblivion from all the hard work by prior generations. This is certainly not referenced to ‘Zuck’ as many would love to, though. However, many of our political as well as business leaders can certainly fit into this category the roster is replete with multitudes of names. The ills of social media only amplify them all.

    Back to Nvidia, here are some red flags that we see in the current business situation:

    1. Revenue Sustainability: Chips and software businesses are one of best in the world in terms of their stability as well as profitability barring commodity business of memory chips which is more known for its frequent booms and busts. However, the same, i.e. sustainability, cannot be said for Nvidia’s future business, even though, it is not a commodity business, primarily due to major spike or panic driven boom in AI capital expenditures (Capex).
    2. Customer Concentration: Top 2 customers (undisclosed names) represent about 39% of Nvidia revenue in the most recent quarter, up from 25% in a prior year. Similarly, the top 6 customers represent about 85% of the revenue. These are staggering numbers for certain, if not outright worrying numbers. To make it worse, these big techs are not exactly known for their steady hands and rational behavior as they accumulate more and more power in this highly interconnected as well as concentrated digital world. Hence, in the end, Nvidia sales can come down just as fast as it went up, a real irony as that is not what we would normally expect a solid company to experience. Normally, we do not see the big reversals in big businesses unlike a real high probability here. Emerging competition from other chip makers such as AMD or even Amazon and China will only add more flavor to the story.
    3. Circular Investments: Wall Street investors have become more aware, as of late, if not outright questioning or suspecting of the circular nature of AI investments and its potentially high detrimental effects in future. See below graphic representation of the AI ecosystem powered by the major tech players.
    4. Alleged Accounting Gimmicks: Some venturesome folks have accused Nvidia and other companies of accounting gimmicks as well as to how the revenue is recognized, supplier taking a stake in customer and financing the purchase, etc. This echoes the worst of the memories of the dot-com mania culminating into Enron scandal in 2001 wiping out many retirees’ assets and leaving a permanent mark on investors’ minds.
    5. Energy Implications: The data center boom and related surge in the energy needs only compound the fragility of the situation, not to mention the potentially devastating effects of the energy needs arising out of crypto mania.

    The bottom line is that Nvidia is a dead or rather dud investment as far as the eyes can see. It is destined to be another Cisco from our vantage point and the only unknown is how long one may have to wait to recoup his / her investment if bought at or near peak. Can it be 5, 10, 25 years or even never? For context, Nvidia’s $5 trillion-dollar peak valuation barely a few weeks ago is greater than the well growing economy of India, the entire country hosting the largest population, about 1.5 billion, on this earth.

    Managements of the big tech companies are notorious or even outright irresponsible socially, if not completely unethical at times, for their desperate, panicked or even wicked behavior, quite the opposite of well-reasoned and rational investments, hiring and firing decisions ruining the early career starts of many young aspirants as well as mid-aged professionals. The worst of all was the Meta management that ignited a similar hiring and firing wave in 2020-2022 in light of the COVID related remote work and major investments into metaverse. So is happening now again with AI and thankfully appears to be in its one of the final phases as opposed to the beginning phases if we are to interpret these cracks properly. Thank God!!

    During its heyday from the valuation perspective, Cisco had a decent revenue growth as it grew from $12 to 19 billion in sales in year 2000, about 55% increase from the prior year. Now, it is at the run rate of about $60 billion in revenue or about 3 times as much after about 25 years.

    Just as Cisco, the poster boy of the Internet boom era, topped its dot-com record close after 25 years, we need to get ready for the repeat for the AI capex boom era with Nvidia being a center of all attention now. While a lot has been accomplished on the tech front in last 25 years and it will happen again in the next 25 years, though, it cannot ever, ever, negate the effects or dire consequences of bad investments. Bad investments only have to be written off.

    Current Nvidia sales at over $200 billion run rate are over 10 times what was for Cisco then and so is the overvaluation scale of Nvidia, company with close to $5 trillion market cap. Hence, the effects can be 10 times as bad as well. In a short few years, can Nvidia be selling at one tenth of its current valuation today – down from $5 trillion to about $500 billion, which is still very, very respectable amount? It is entirely plausible. Let us not hold our breath for the better outcome.

    A mere 3 years ago, Nvidia sales were close to one tenth of current sales anyways!

    For more analytical types, here is the snapshot of revenue projections for Nvidia by Wall Street Analysts that almost always proceed as herd. See below. From where I sit, just as fast as Nvidia grew and, in the magnitude, it can come down as fast and as much as well.

    Source: Yahoo Finance

    Future commitments and so-called contracts by big data center operators in this circular AI economy is one thing whereas the actual revenue flow is whole another, let alone the profitability as was the factor for the dot-com bubble burst. To exacerbate the issues, the actual revenues may come crashing down as well at the first sign of real trouble. Initial cracks seem to be manifesting already. A good example is that the credit default swap (CDS) pricing for potential Oracle bond defaults have spiked up materially, the highest since the great financial crisis (GFC) of 2008-2009.

    Cherry on the top is our beloved U.S. Government’s cut of as high as 25 percent of AI chip sales by Nvidia to China. Talk about the bizarreness of the current geopolitical situation to further muddy the business waters, entirely different topic. There goes U.S. competitiveness in the world and tough talk on China out the window and what is in is the double standards, often the case for our foreign policy!

  • Big Bear Case Study & The Biggest Poster Child of Current AI Mania: Tesla (TSLA)

    Who is the biggest poster child of the current AI stock mania? One would think in the big bear community that it is Nvidia (NVDA) hovering around $183 per share and $4.5 trillion market cap down from $5 trillion little over a month ago. Nay…it is Tesla (TSLA) with the price tag of $455 per share commending the market cap of about $1.5 trillion.

    Nvidia for its fair share is very expensive without a doubt, however, it still represents the solid underlying business fundamentals and related numbers. Now, whether that business model and related valuation is sustainable or not and where it will stand a couple years from now is an entirely different topic that is worth discussing and we can certainly address separately sometime in future.

    However, for now, focusing just on a true poster child, and the biggest one at that, of the current AI stock mania and ever-expanding stock valuations for the broader market as a whole, we can have a bit more detailed look at Tesla’s business or rather “pie-in-the-sky”, if not outright foolish and outlandish announcements, not the actual business or dollars-and-cents that warrants such a high valuation – all built primarily on two following ‘concept’ products: Robots and Robotaxis known as cybercab.

    True to his nature, here are some of the wild claims made by Elon Musk, Tesla CEO, during the most recent shareholders meeting in November, the wildest of which are as follows:

    • Optimus Robots can eliminate the poverty
    • Robots can increase the global economic output by 10 or even 100 times

    No wonder, Tesla shareholders were so keen on approving a “trillion-dollar” pay package for the fellow with 75% approval, who already is the richest person on this earth, roughly half a trillionaire, all probably because of the ‘enticement’ to eliminate the poverty in this world! We can make the richest person even richer and eliminate all of the poverty!

    Then again, Tesla shareholders were not so dumb as they also signed up for dangling another carrot which can increase Elon Musk’s net worth by a ‘phony’ trillion dollars. If the Tesla shares were to be repriced at its true intrinsic value, which it may well in not-so-distant future, given the direction we are heading towards, the effective package value may literally be worthless instead of a trillion-dollar face value. At best, it may be worth $50 or $100 billion even if some of the claims were to turn into a reality in the due time and may enhance his net worth by 10% or 20% at best.

    Source: Sherwood Media (Robinhood Markets)

    No doubt, Elon Musk deserves a credit, a lots of it, for creating an entire electric vehicle (EV) industry single-handedly that no other automaker ever did before being mired in a ‘status-quo’ that often this world is. Hence, hat is off to him!! However, creating an EV industry was not a stretch or at least not anywhere near what this is for the other two products or industries for which the Tesla shareholders have become completely blindsided, not to mention the ample flow of ‘easy money’ in recent years from the Federal Reserve.

    Tesla sales are literally flat for nearly 3 years in 2023, 2024 and 2025 all a bit under $100 billion per year from nearly zero for the industry several years ago. Tesla has maintained about 6% free cashflow margin for the last 3 years meaning it generates approximately $6 billion in a free cashflow per year at literally flat revenue tad below $100 billion. Applying a very generous multiple of 50 times free cashflow, Tesla valuation amounts to $300 billion and brings it at par with Toyota, the largest automaker in the world, that is at $260 billion market cap.

    Sales being routinely down 50% year over year in Europe during 2025 is a ‘cherry on the top’ primarily owing to Elon Musk’s extreme right leanings.

    What this means is that there is a valuation gap of about at least 80% or $1.2 trillion by deducting $300 market cap it may deserve at best from the current market cap of about $1.5 trillion – all of this is owed to the ‘pie-in-the-sky’ business model. In other words, Tesla can loose about 80% of its share price and still be considered pretty respectable market cap.

    Stocks appear to be making a peak as covered in earlier post(s) as proven already in case of Oracle, one of the 4 pillars of the house of cards, down over 40% from its peak.

    Tread the waters carefully!

  • Capex Binge & Race to the Bottom: The Winner is…Oracle

    Happy Thanksgiving to everyone!

    While some folks may binge on the turkey eating during the Thanksgiving, big technology firms commonly known as ‘Big Techs’ certainly are binging on the capital expenditure (capex) spendings front primarily centered around artificial intelligence (AI) investments.

    Oracle (ORCL) stock is down by about a third from the all-time peak it set on the frenzied day of September 10 due to cloud deal with OpenAI and our write-up the following day as shown here: “Much Coveted Crown of The Wealthiest Person in the World & Hot Air Balloon Transfer – From Musk to Ellison”.

    Larry Ellison, Oracle founder and chairman, very briefly held the title of the wealthiest person in the world only to cede it back to Elon Musk in short few days after losing over $100 billion in wealth since his lucky day when the Oracle stock had shot up about 30% in a day.

    The same fate can be in the cards for Elon Musk as well, the title holder of the wealthiest person in the world for last few years (since January 2021) surpassing Jeff Bezos of Amazon ever since the stock bubble began inflating in its earnest due to easy stimulus money from COVID triggering the meme stock mania and now the same beast being fed by the AI frenzy in last three years (since November 2022).

    The only brief respite was during 2022 when the high-flying NASDAQ stock index lost about 33% of its value and S&P 500 index lost about 20% due to the sudden rise in the interest rates. Back then, it felt like when the market is going to stop falling? It would NOT take a breather in its free fall, albeit slowly. Now, the exact opposite feeling has been there (at least until recently) as to when is it going to stop rising as they are both extremely unhealthy as well as unsustainable. It is like there is no limit to the market up or down when in reality there always is.

    The stock market often works like a pendulum and at times it just swings too far in one direction, unfortunately, only to bounce back and normalize in a due time near center.

    Eventually, both of these aforementioned wealthiest individuals were destined to cede their respective crowns to the other fellas who are sitting on more solid foundations and not any flimsy footing like they are. Certainly, Larry Ellison has done it so already and, in all likelihood, Elon Musk, may cede the title in a due timeframe as well given this hot air balloon phenomenon with the Tesla (TSLA) stock being its posture child.

    Apparently, a little bit of air has started leaking out slowly already from this big inflated balloon due to sheer weight of its own. Hence, it is only a matter of time as to when the air is out completely and/or bubble is burst with one little prick coming from some unexpected source as it often does.

    Sheer monopolistic position and pricing power held by the Big Techs have played a major role in raising their company revenue as well as profitability in recent years. Completely unprecedented, the amount of growth in revenue and margins they have experienced in such a short time! In fact, they have truly exploited the inflation related to post COVID recovery time. For their fair share, whether we like it or not, they have put the big bulk of it back in the economy with the frenzied spending on the capex anyways. See the table below.

     Capital Expenditure (CAPEX) Long Term Debt
    Big Tech
    Company    		2025
    TTM
    ($ mils)    		FY 2023
    ($ mils)    		Percent
    Change    		 2025
    TTM
    ($ mils)    		FY 2023
    ($ mils)    		Percent
    Change
    Amazon (AMZN)$120,131$52,729128% $142,619$142,2110.3%
    Google (GOOG)$77,872$32,251141% $35,763$25,71339%
    Microsoft (MSFT)$69,022$28,107146% $103,723$70,58847%
    Meta (META)$62,733$27,045132% $48,947$35,61137%
    Oracle (ORCL)$27,414$8,695215% $100,010$86,42016%
    Apple (APPL)$12,715$10,95916% $89,931$106,548-16%
    Total$369,887$159,786131% $520,993$467,09112%
    Source: SI Pro Database

    The total increase in capital expenditures at the above listed tech companies alone is about $210 billion in 3 short years. These are staggering or eye-popping numbers in such a short time span and explains the rise behind Nvidia revenue and resultant share price and market cap topping at $5 trillion.

    This is likely once in a lifetime kind of corporate phenomenon, probably once in hundred years, if not thousand years kind of a flood, rewarding one company or one industry so disproportionately that it is beyond imagination. These capital expenditures are bound to normalize once again and bounce back to more sustainable levels unwinding all this investment frenzy and causing undue pain in the process. That has been the most worrisome part for many.

    Much of this capex has gone to Nvidia, AI and cloud related infrastructure. The sole recipient of all this largesse is only one company (Nvidia) and its surrounds. Any way you cut it, only one industry has benefited from it all – AI centered companies.

    Just as the heavy investments into laying a fiber when the Internet was in its infancy also contributed greatly to the big boom and eventual bust of the dotcom mania in 2000, the same play is unfolding now in front of our weary eyes due to AI related investments.

    Huge amount of unsustainable capex spending there is – therein lies the issue, unfortunately. Just as fast as they have put the money back in the economy with significant and unprecedented rise in capex crowding out other investment areas, they can pull it back just as fast. Remember Meta? They did just that in 2023 by pulling back about 12% of their capex and mass layoffs only to ratchet it back up in 2024 with the advent of AI. Some of these Big Tech companies are notorious for that. The same fate is in the cards again.

    Meta episode in 2022 was only the preview. We can only imagine how bad it can get with such a huge amount of capital expenditures now by so many large players in the industry.

    Every viable corporation has its operating budget set just like any responsible household. Hence, any variances in it are seriously looked at and evaluated for the needed adjustments.

    Big Techs as well as many other businesses across the entire spectrum of economy have had exploitative margins to plump their pockets while the common man suffers in a day-to-day life especially in last couple years due to inflation, be it a price of Netflix subscription or software and cloud subscriptions, not to delve into the electricity and energy price increases in certain areas owing to massive data center capacity increases and related energy consumption.

    This market leaders have in fact abused their market leading, if not monopolistic positions and pricing power as a result, which culminated into their really hefty and envious profit margin expansion in last 3 years greatly contributing to the overall inflation scare issue from the broader economy standpoint. As an example, most everyone can relate that something that cost $10 before now costs about $15, debilitating 50% increase in a short few years and clearly the wage gains have not kept up with that. While the stock market continued to soar to the new heights, the common man continued to get pounded and pounded.

    Overall, these unsustainable profit margins may not last long and when the time comes to adjust it again, that can inflict even more pain on the economy.

    To their credit, these Big Tech companies have solid financials and balance sheet including revenue, operating cashflow and profit margins with the sole exception of Oracle which is racing to the bottom of the barrel, which is truly quite surprising as the ‘debt binge’ has always been Larry Ellison’s favorite thing similar to our not-so-great President DJT as it has served them well thus far for their personal gains. However, going forward, it is an entirely different matter given high interest rates with the specter of going even higher and we really wonder if this will be a straw that may break camel’s back.

    Big Techs have used their dominant positions to their advantage and pushed this heavy capex passed on to the individual level in the society indirectly. Once, the management sits down to do serious return on investment (ROI) calculations, they are bound to be disappointed and eventually pull back to the chagrin of a common man who will be affected even more.

    Once the Big Techs put the capex in the reverse gear, we can only imagine the detrimental effects arising out it and spilling over the broader economy just as it has done so on the positive side at the moment.

    In fact, all this Big Techs have already started seeing reduced free cashflow margins in the most recent 12 months from their 3-year average. Hence, it will not be long before they realize it and clamor to readjust.

    Interestingly, Apple has stayed out of this mad rat race and profitless endeavor to the bottom and not embarked on this dangerous journey of heavy and unsustainable capital expenditures. However, it’s stock is another story. It still remains prohibitively expensive at more than triple the valuation it commanded even when it was in a decent growth mode during 2010s.

    In other words, Apple experienced an explosive growth in valuation expansion itself as its price to earnings ratio expanded significantly from low 10s to about 40. No wonder, Warren Buffett has unloaded 75% of his stake in Apple already for Berkshire Hathaway and it should not be surprising if he continues to trim it even further in upcoming quarters. It also means that Apple can lose about two-third of its value and still be in line with its historical valuation level.

    Bloomberg also did a similar analysis on the capital expenditures as shown below which shows that the capex doubled in about two years:

    That was all capex! When it comes to the debt binging, which is a whole another story, there are two notable exceptions: Apple and Amazon in comparison with other Big Techs. See the debt figures mentioned in the table above and chart below.

    In summary, Apple is the only one that did not embark on a capex as well as debt spree whereas Amazon simply did not jump on the debt spree, though, for its part, it did feast on the capex front as it generally has to do so owing to its market leading position for cloud via Amazon Web Services (AWS). Rise in capex over the last 3 years of over $200 billion or 131% growth just from these leading big techs is a sign of excess, desperation or ‘Fear of Missing Out’ (FOMO), not wise and well calculated, well-planned investments ahead of time. So is the rise in Nvidia’s annual revenue, from $27 billion to well over $200 billion run rate in three years, approaching 10 times. That is not coincidental…and without major adverse effects in future.

Street Analysis

Intersection of Main Street and Wall Street

Skip to content ↓