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Jitendra (Jay) Patel
jpatel51@yahoo.com

  • 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.

  • Fed & POTUS in the Box: Trouble Ahead & Time to Buckle Up

    “You can fool all the people some of the time, and some of the people all of the time, but you cannot fool all of the people all of the time.”, the quote, widely attributed to the President Abraham Lincoln, says it all of current times.

    Time has come and the Truth is out…for the most part.

    No, it is not the Epstein files, the current rage of the populace. “It’s the economy, stupid”, the famous words associated with the President Bill Clinton and his campaign advisor during 1990s.

    Party is over. Literally and figuratively…it is unofficially official! 😊

    Genie is out of the bottle and these two, the most powerful actors in the world – Federal Reserve (Fed) and the current President of the United States (POTUS), Donald J. Trump, both are IN the bottle or boxed in metaphorically.

    “Bakari dibbe me” as the saying in Hindi language goes, i.e. ‘goat in the cage’.

    What people of America could not do easily, “Law of Karma” did or at least appears to start doing… just as it always does.

    Federal Reserve (Fed):

    Federal Reserve (Fed) is really in a tough spot with the current economy. Misery index (inflation plus unemployment) is only getting worse, not better, by the month. Split opinions on the rate cut by the Fed Governors for the upcoming December meeting precisely demonstrates that conundrum. The contemplated rate reductions due to heavy political pressure and the state of economy are being heavily debated within the Fed meetings.

    On the one hand, we do need to reduce the interest rates given the weakening economy, though, on the other hand, we cannot ‘afford’ to do what is needed simply because it risks a major unleashing of even greater and greater inflation and dangers associated with it, which already is kind of out-of-control to a degree with its highly elevated level for the longest time with no indication of budging to more acceptable level. See the Consumer Price Index (CPI) chart below for the last 60 years, which shows it currently at one of the highest readings in last 30 years outside of the post COVID recovery time.

    Similarly, 10-year treasury rate continues to hover around 4%, near 25 years high, and not backing down below that level in spite of two interest rate cuts this year. So is the case with the 30-year mortgage rate which also stubbornly stays at well upwards of 6%.

    See the 10-year treasury rate chart below for the last 60 years.

    President of the United States (POTUS):

    President of the United States (POTUS) is out with two ‘unhinged’ proposals adding or crowning his long litany of highly questionable and even completely deranged things he has charted to do all along. They are both economic items pinned on usual suspects of getting attention and plain ‘appearance’ of doing something meaningful, a knee jerk reaction, conceived out of sheer fear of losing the ground further after election losses to democrats in New York, New Jersey and Virginia.

    Snake Oil Product # 1:

    First is the $2,000 ‘dividend’ check for everyone in America. Clearly, what does the term ‘everyone’ mean is being debated and discussed in the crony, corrupt and inept presidential administration which is full of thugs, goons and attack dogs. By the way, it is the money America does not have and cannot afford to dole out no matter how badly we want.

    A simple math shows that the US has collected $192 billion thus far in the tariff revenues in FY2025 and if we were to give this handout to everyone, it will be upwards of $700 billion with the giant gap of $500 billion. That is on top of the $5 trillion deficit spending bill passed this summer via the President’s Big Beautiful Bill (BBB), which in fact, was nothing but one hUmongous, Ugly, Underwater Undertaking (U4).

    In a major contrast, Norway, the Scandinavian country, has about $2 trillion sitting in its sovereign wealth fund amounting to about $400,000 per every individual in the country…every Individual. Whoa is the only word in terms of the positive feeling and astonishment! In America, instead we have a debt of about $38 trillion increasing by $2 trillion every year now which equates to over $100,000 for every individual…again…every Individual. In other words, the gaping hole of about half a million dollars per person between the two countries. Norway is positive. We are negative here.

    We printed much money during the COVID time with a lot of stimulus. No one questions whether it was necessary. The only question was how much of it was necessary. Just as during the Great Financial Crisis (GFC) of 2008, Trouble Asset Relief Program (TARP) was necessary. Whether we underdid it or overdid it then during the GFC remains a lifelong debate.

    However, right now, there is no basis to print more money…that is unless we want to go down to the hellhole at even the faster rate than we are going at this time. Suffering is on the rise on much of the populace here in America and we can only quicken the pace if we print more and more money like this that our buffoon President has no clue about except to fill his own pockets and his cronies’.

    All we need to do is watch both the gold price and the 10-year treasury rate like a hawk. None of that is pretty, unfortunately. They both portend some more ugly times to come. Gold is up over 50% this year already at $4,000 an ounce and 10-year treasury rate does not want to go down below 4%.

    Besides, even the revenue that has been generated out of the tariffs falls significantly short of what the outlay could be for the tariff ‘dividend’ checks as a simple math showed up above. It is another ‘terminology scam’ like that is being commonly used for ‘social security fund’, the fund that does not exist in reality with the U.S. government. Similarly, tariff ‘dividend’ is not out of some investment, which is generally the case with any dividends. It only will be out of even more deficit spending, if it were to even materialize, for which the odds are not that great.

    Snake Oil Product # 2:

    The second ill-conceived, if not outright foolish idea floated by the POTUS, is the 50-year mortgage product in wake of the recent election losses. It is akin to one ‘desperate’ person dangling a carrot in front of another ‘desperate’ person, a distressed house buyer who is planning to make the biggest purchase of his / her life during this housing affordability crisis. Actually, it is worse, it is not a desperate man dangling a carrot, rather it is the biggest conman in the U.S. history selling a snake-oil to an innocent or uninformed buyer. Chances are it is not going to fly, at least this time around. Thank God!!

    Poll numbers for the POTUS are tanking materially with his popularity waning little by little even within his base. That is a good sign! He is getting in trouble gradually for sure. A little bit of a progress made by America, no matter how little. He even admitted that his numbers are ‘bad’, really the first or rather rarity per his conman playbook, though, the numbers are good amongst the ‘smart’ ones according to him. Imagine that! Oh, well, all we need to do is replace ‘smart’ with the ‘bootlicker supplicants’. That is where he does well and has always done well anyways without a doubt.

    The stock ticker ‘DJT’ representing his eponymous firm, Trump Media & Technology Group, where bulk of his fortune is tied, clearly is a good proxy as it trades near 52-week low at around $10 now that ‘People of America’ are waking up gradually out of their long slumber, about 10 years. Enough damage, intentionally or inadvertently, has been done already, though, hoping no more at least from the actions of this country’s individual citizen’s standpoint. Thank God again!!

    In summary, this $2,000 ‘dividend’ check and ’50-year mortgage’ are two snake oil products that can only inflict more harm on Americans if we end up buying it after having such products amply sold in last 10 years by this greatest conman in our history, the man who can be described in only three words: “Delusional Monstrous Evil” symbolizing recklessness and lawlessness unlike of Real America.

    However, enough is enough. No more non-sense this country can tolerate. Everyone is at his or her wit’s end. Media is outright in the rebellion mode. It is quite refreshing to see how media stands up, really to this biggest bully of the world. People for their part are starting to wise up from their foolishness as well.

    Also, take some MAGA (Make America Great Again) folks or firebrands. Major cracks have started to appear as they are turning on each other, not to mention some of the voters to this evil conman who have started to realize their mistake of voting for this evil to their and country’s detriment.

    On the financial markets front…Nvidia (NVDA) announced solid results yesterday just as it was expected and has been reporting since it is on the tear due to artificial intelligence (AI) wave for the last 3 years. As a result, the rise in Nvidia stock price is not only breathtaking, but rather meteoric during this AI craze, which also appears to be peaking now.

    Going forward the major capital expenditure (CapEx) outlays behind the AI party will be scrutinized heavily by the corporate world and need to be justified with the proper return-on-investment (ROI) calculations.

    When and where would it all stop is anyone’s guess. However, the stock market is starting to crater after years of excesses and it appears to be the ‘beginning of the end’ for its irrational behavior. We can only hope that the rational heads prevail soon – in both the corporate world as well as the investor world.

    AI CapEx binge may peak in a year or two, if not less, whereas the stocks are already peaking now.

  • Quadriplegic Ills of America: Debt, Deficit, Inequality & Healthcare

    Oops! These are the words we can use for the ‘heart’ of America, which is ‘governance’, as it just skipped the beat. Federal Government shutdown ended with the stunning defeat of democrats. They stood for something (healthcare) yet achieved nothing. Republicans stood for nothing and gained everything.

    Similar, oops was said from the financial market’s perspective as well when OpenAI CFO made a comment about the government ‘backstop’ for AI investments only to be retreated later by CEO to avoid further carnage. In other words, the quiet part was said out loud by the center of all excitement and hype of current times – AI, raising all sorts of alarms on top of that are already out there in an elevated state.

    Another one is the intentionally pursued slower depreciation schedule by mammoth big tech companies to beef up their earnings. Heart of corporate America is ‘valuations’ or asset prices, which is also at a precipice with a great danger of falling off the cliff as covered in an earlier piece.

    As for the government shutdown, it was like a super exciting game when the outcome is not certain till the very last moment as to which team will win the game, or worse yet, the game changes in a last minute only to see the least likely to win team ends up winning the game. How sad! Certainly, some folks and constituencies are to be disappointed in quite a meaningful way.

    Except that this was not a game of real life; it is a serious matter, in fact a super serious matter that affects the livelihood of millions of people in dignity that the ‘kids of Washington’ do not seem to grasp (or rather do not want to grasp) and have not been able to figure it out for years.

    Instead of Republicans that may have fallen flat on their face as expected in this longest ever and 6 weeks long government shutdown fight, the exact opposite happened after weeks of all pain and no gain. Democrats are in disgrace with such shameful defeat on their ideological fight.

    The end result is that ‘Rich and Powerful’ (select few) won and ‘People’ (24 million to be exact) lost with huge spikes in their healthcare premium without government subsidies as part of the Affordable Care Act (ACA), one of the most successful legislation in recent decades. This is probably the biggest blow thus far from Republicans after 70 attempts earlier to repeal the act. What a shame for America!

    None of this consternation was necessary without accomplishing something useful. Fight was fought for nothing. The only thing it accomplished was inflicting pain upon people of America.

    Healthcare in America is whether a right or privilege is a much debatable topic unlike it being well accepted in other advanced economies that it is a right, not privilege for the societies that can well afford a universal healthcare.

    Oh well, election spending by billionaires says it all. The following picture is worth the thousand words. Really.

    With that one can easily see, how exactly, this once great nation on earth became quadriplegic, the roots or seeds of which were sown in early 80s with then U.S. President, Ronald Reagan, chopping the top federal income tax rate from 70% to 30%. All in the spirit of ‘Reaganomics’. See below.

    Source: Bradford Tax Institute

    If the heart is in the right place, then everything can be solved, the biggest or only issue for America. Heart that is weak (rather small), debilitated or with the evil intent in fact is causing self-inflicting wounds on American people and making it quadriplegic with four limbs – two arms and two legs paralyzed with four major issues – debt, deficit, income / asset inequality and healthcare. Yet, they are all interrelated.

    In fact, you solve one and solve them all. That is how interconnected they all are. Such a simple thing it is, however, only if we have a right intent and heart in a good place.

    Twin ‘untouchable’ rails of politics are social security and Medicare that no politician seems to be able to touch it until some brave soul comes along on this soil of America and rescues it. One such soul did arise here on this land, aka, Donald J. Trump, our current President, and created a humongous phenomenon called ‘Trumpism’ during his 10-year tenure inside and outside his presidency.

    However, it is all with the ill or rather evil intents, the exact opposite of what was needed in this country fostering division instead of unity and pursuit of higher goal and happiness. Trumpism is nothing but a ‘social unrest’ except that it is using the wrong ‘instruments’ and hence led by unscrupulous leaders to deceive the less educated and uninformed. These so-called leaders define and turn the good into evil and evil into good. That is how deviated these leaders are.

    Social unrest has arisen in its current form due to variety of issues such as income and asset inequality, housing affordability, poverty, minority rights (LGBTQ+, transgender), abortion, hatred, division, immigration, racial tension, social injustice, two-tiered justice system and culture wars.

    The hate and extreme division we see in the American society is by design and to a smaller extent all over the world as the most polarizing institutions for the mankind are politics and religion which can often foster the hatred, the most lethal form of ignorance or evil in other words.

    One of the most recent obnoxious actions or rather delusional is floating an idea of a 50 year mortgage by our President as a knee-jerk reaction to Democrats’ recent win in off-cycle election in few places such as New York City, New Jersey and Virginia, which obviously is not only the dumbest idea in desperation by the evil forces rather it is akin to selling a snake oil to unsuspecting public as an ill-devised and ill-fated cure to the housing affordability crisis.

    To top it off, $2,000 carrot was thrown in the mix as a dividend for tariffs, another ill-devised and ill-fated idea from the suicidal strategy arising out of delusion with the money U.S. does not have and cannot afford. Not even a simple math was done as to it is way too higher than the tariffs received already by our government. In other words, a freebie without a compensating tax collection only to exacerbate the U.S. debt problem even further to put on a show of sound strategy.

    Such depravity from the leader of the greatest country on this earth is beyond fathom.

    This place truly can be a heaven on this earth, a model for the entire world and very, very close to the ‘Perfect Union’ that this country’s founding fathers envisioned over 200 years ago. Really, it can be done, almost like a utopia…only if we are truly determined to do so. Instead, we are crumbling a little by little that is playing out like a slow-motion movie as we horribly watch this society collapse – from a highly civilized and cultured place to uncivilized and uncultured – a bit by bit and day by day. There is no place for a civil dialogue, only accommodation is for the division or rather extreme one at that with the bonus of hatred.

    In troubled times like these, what are we supposed to do?

    Reflect. Reflect ruthlessly. Reflect more and more…we try to become ‘nobody’ from ‘somebody’. That is the ultimate of life. That is the ultimate Truth. We truly need to ‘transform’ ourselves, the highest vocation of life! Each one of us, myself included.

    Using a similar analogy of ‘Mother India’ as it is commonly known in India, my birthplace (janmabhumi), if USA, the land of my karma (karmabhumi), can be called the ‘Mother USA’, then the mother is for all children, not just for a select few. No mother does that. Mother often has her favorites for the right reasons though does feed them all with the same love.

    From my perspective, the proverbial mother has 4 kids – Republican, Democrat, Independent and Self-Realized. Republican kid is the furthest away from God, the Supreme entity, let us say about 3 feet distance. Democrat is about 2 feet away. Independent is 1 foot away and Self Realized has essentially merged with the Supreme, hence, no distance, it is zero-distance from God.

    Hence, the goal for us here is as follows:

    • If you are a Republican then drop the Republican hat (identification) and put on the Democrat hat as a first step of evolution and see yourself as a bigger part of the whole and certainly not turn the blind eye to the misgivings of your own
    • If you are a Democrat then drop the Democrat hat (identification) and put on the Independent hat and train yourself to look at the things quite objectively without any inherent biases we carry
    • If you think you are truly independent (identification) then be assured that we are still not there for the most part. We eventually need to drop the hat of independent and work towards Self-Realization and wear no hat at all. Be a mere witness. See things as they are without getting identified with it. Be mere existence just as the great scriptures of the world advise us to do

    This is exactly how we progress on a scale of evolution from utterly selfish person and activities to being a completely selfless soul, a true rarity on this earth.

    In this context and framework, where does our current president fit in? Oh well, he is miles away, not just a couple feet away from God like an ordinary American. The fact that the Christian community has put so much faith into this evil fellow is beyond me, my understanding and my limited brain capacity. In fact, how, this greatest country on earth, America, has elected and even re-elected such a felon is beyond my understanding. Probably the biggest surprise of my entire life.

    MAGA (Make America Great Again) band on the other hand, I understand. Some of them are of the same ilk as the leader of the pack – some with the evil intent similar to the leader whereas the others are innocent, if not uninformed, citizens who really want good for them and the society. They all just happened to pick the wrong leader or associate them with the wrong band, the leader who does not have the best interests of masses in his mind, rather strictly of his own and his cronies or supplicants, the marketing mastermind and greatest bully and con-artist of all.

    MAGA initiative really needs to turn into MATGA (Make America Truly Great Again) or MAAWGA (Make America and World Great Again)! Amen!!

  • Financial Markets at Catastrophic Precipice: Disaster Waiting to Happen

    Nvidia (NVDA) hit $5 trillion market cap, largest ever, as covered in the last week’s post.

    Buffett Indicator, i.e. market cap to GDP ratio is at 220%, the highest in over 50 years, a third higher than the dot com days 25 years ago.

    CAPE ratio (Cyclically Adjusted Price to Earnings for 10 years) is at 40, first time ever since the dot com days.

    Outright dangerous territory…

    Why? Financial markets are at unprecedented valuation levels.

    Profiteers from all walks of life go after artificial intelligence (AI) frenzy like there is no tomorrow.

    Our beloved magazine Barron’s writes an article that the next stop for NVDA is $6 trillion. Can it happen? Yes, absolutely, it can as the day dreamers continue to dream as long as the party continues. Eventually, they have to wake-up. Trees can flourish, though, they do not grow to sky.

    Fed is on the collision course with the real specter of sticky inflation, which is under-reported.

    Tariffs from the suicidal strategy, probably the largest lunacy of a century, are starting to bite the real economy where the average Joe continues to pay higher and higher for the everyday goods and services.

    Voters rage at display with significant wins by Democrats recently in key election races while Republican trifecta (Senate, House and President) is in power.

    Federal Government shutdown continues, the longest ever now for over 5 weeks as the second presidential administration term breaks its own record from the first term of 35 days long shutdown.

    Bond holders are being very meek, though, have certainly awakened from their long slumber (multi-decade) of accepting lower and lower yields (lately in low single digits) and stock holders are being foolhardy by being the staunch “greater fool theory” practitioners.

    Some sign of sanity? Yes, there is one we could see in recent days…the largest fund in the world with $2 trillion in assets, Norway Sovereign Wealth Fund, plans to vote against the ludicrous, if not inconceivable, compensation package of $1 trillion for Elon Musk, Tesla CEO, while the rest of the investor base, primarily the cronies, continue to support the hot air balloon.

    10 year treasury rate is being stubborn and persistently sticking around 4% even after 2 recent rate cuts totaling fifty basis points or 0.50% by the Federal Reserve (Fed). This is where the real inflation is yet the reported print is around 3% (core CPI) having adjusted for food and energy as if we can live without food and energy. Reaching back to 2% inflation target remains a pipe dream.

    Yet the Fed continues to pursue “easy money” policy due to extreme political pressure, an understatement, and owing to our addiction and current extremely fragile setup for long for low interest rates. It is going to end very badly without a doubt unless they change the course. In fact, regardless of the course, there is a price to pay. Hence, now, the Fed is NOT just boxed in as mentioned in an earlier post, though, rather on a real collision course now trying to deal with two ugly opposing realities. Either way, we are in a pickle. We go low and we overshoot an inflation. We go high and risk collapsing the economy. Either choice or option is not pretty. What is a lesser of the two evils is anyone’s guess.

    Profiteers on the Street and political world keep insisting (rather forcing) on super-low interest rates, however, it ain’t happening most likely and caving into such pressures will only make things worse for the economy by stoking higher inflation and stagflation (low growth) for years to come. Sub 5% interest rates and continually trending down have been the name-of-the-game primarily after The Great Financial Crisis (GFC) of 2008 with the intense money manipulation by the central banks of the world which now has come to the end in the post COVID environment when it troughed near zero interest rates in 2020-21.

    The real effects and chaos are starting to take place already for the Main Street as well as Wall Street with the effects of the Federal Government Shutdown showing up in from the food stamp program to the airport delays to missed paychecks for the government employees. Now, thankfully, the end appears to be near for the shutdown given some realization (Thank Heavens!) by Republicans after major losses in high profile races. However, there is no guaranty that it may end soon without even a larger amount of chaos given the history of current administration and its crony congress.

    At this time, the Democrats appear to be winning the ideological battle of healthcare with Republicans during this shutdown. Further, the conservatives (Republicans) may fall flat on the issue this time around as well after having attempted 70 times, yes, you read it right, the repeal of Affordable Care Act (ACA), aka Obamacare in the past 15 years, one of the most successful and powerful legislation of recent decades.

    Back to the financial markets…

    Palantir (PLTR) at a whopping 142 times sales of $3.4 billion.

    Nvidia (NVDA), the largest market darling, at 31 times sales of $165 billion.

    Broadcom (AVGO) at 29 times sales of $60 billion.

    Arm Holdings (ARM) at 43 times sales of $4.1 billion.

    Strategy (MSTR) is at 158 times sales of less than half a billion dollars, though, it is more of a bitcoin play than the real business.

    By the way, just as a reminder, these are price to sales ratios, not price to earnings ratios! A perfect trap for the next leg down with these sky-high valuations.

    Yet the profiteers on the Street continue to promote the lunacy to the masses or fools who buy in to this cool-aid.

    Another sign of sanity…Michael Burry, ‘The Big Short’ famed investor for the book and Oscar-winning film, who profited handsomely (in tune of $1 billion) from the housing market crash in 2008 just announced a major short bet, close to $1 billion between Palantir and Nvidia.

    In response: “It’s not even clear he’s shorting us. It’s probably just, ‘How do I get my position out and not look like a fool?’” Alex Karp, CEO of Palantir said to CNBC.

    We will check back in about a year or less who is a real fool between the two and who profited.

    Disclosure:

    The author has no long or short positions in any of the stocks mentioned in the post

  • Nvidia hits $5 Trillion Market Cap: Perfect Time to Run for Cover?

    The biggest lesson from the history is that we do not learn any lesson from it.

    The year 2000 of dotcom mania and 2008 market crash in both housing as well as financial markets is not a distant memory.

    Greed may, may have a limit, though, the foolishness does not. It is amply evident from the history of a mankind.

    Nvidia (NVDA) hit $5 trillion market capitalization yesterday. The first ever company to achieve that valuation level. This number is greater than the GDP of the entire country – India, hosting the highest population, 1.5 billion people, on the earth.

    While this happened…

    Fiserv (FI) was down a whopping 45% erasing $30 billion in market cap yesterday.

    Chipotle (CMG) is expected to be down today by 20% losing about $10 billion in market cap.

    Meta (META) is expected to be down today by about 10% erasing about $200 billion market value.

    Synopsis (SNPS) plunged by 36% on September 10 wiping out about $24 billion in a single day.

    Similarly, it will not be long before the very same investors (trigger happy, fickle, not to say insane) sour on AI and all hot tech stocks. This is all while the ‘real’ economy suffers.

    If someone thinks that it cannot happen to the market darlings, think again.

    Nvidia (NVDA) itself was not immune to the mad rush as it was down 17% in a single day on January 27, 2025 wiping out about $600 billion market value. Can it happen again? Why not?

    Meta (META) was down 26% on February 3, 2022 wiping out about $232 billion market value that day.

    It has been a little over two years since the things have started getting out of control and it appears that we are in the last innings of the game, certainly not the beginning.

    OpenAI is now eying an IPO with a trillion-dollar market cap sometime in 2026. It is another sign that we are closer to the end game.

    All this while the federal government shutdown continues and air traffic delays continues to get worse. It finished 4 weeks today with no end in sight. It already is the second longest shutdown and will soon surpass the longest ever, 35 days long under the same presidential administration, next week.

    Tale of two Americas continue as one part of America is flourishing like anything while the other one is going to be shut out soon of receiving food stamps on November 1. This is all for the ideological battle of healthcare, which is considered the basic right in the advanced countries.

    Market pendulum has only turned more violent now with the advent of social media and AI as the information travels at the lightening speed. Hence, the insane moves in stock prices are not the rarity or inconceivable any longer, rather they are regular occurrences or a norm in many cases.

    Countless other idiotic moves downward have been observed for many large cap and mega cap stocks in the last couple years, a relatively new phenomenon.

    Very few safe havens are left out there for the cautious investors to hide and it is a perfect time to find one. Major market crash is not a remote possibility any longer, it is almost a given. The writing is on the wall.

  • Canary in an AI Coal Mine (or Gold Mine): Surprising Super Micro Business Guidance

    So much for the AI hype and circular contracts that we have seen as of late! Yesterday, Super Micro Computer (SMCI), high performance computing server manufacturer, which saw its revenue skyrocket along with Nvidia (NVDA) almost 10 times in a short few years, to support the plumbing of eagerly anticipated and participated AI gold rush, announced the following:

    Finally, it seems like that rational heads may begin to prevail as it always does – wisdom prevails in the end. Sometimes, it is too late (like this time around) and if we are fortunate, it is early enough. Ultimately, the costs may need to be justified and profitability becomes the guiding factor as the blind faith goes only so far.

    In here, even the best-case scenario for Super Micro was not so glimmering 15%. Instead, it will be more like a flat linish now…

    As a result, the stock went down by 9% on the news yesterday.

    It is only the beginning of the AI mania reckoning. We certainly seem to be in the final innings of an AI gold rush and the beginning phases of the “Great Reset”. The unfortunate part is that along with that, it will take many aspects of economy down as so far that has been the only shining city on the hill.

    This may well have been the first shoe to drop could be Super Micro. The day Nvidia disappoints, it will be really ugly and there will be no place to hide. The second shoe or countless more will be lining up soon after…

    So, what is the message from Super Micro warning? Get off the band wagon as we have indicated in the earlier posts…fast…

    Naturally, questions arise such as…

    1. If the AI business is so strong why such a significantly downward revenue guidance by Super Micro, a leading indicator like Nvidia providing the guts of AI?
    2. If the AI gold rush is a reality, not a hype (in spite of its real potential) then why the numbers have started to plateauing instead of continuing its breakneck speed like initial few quarters at Nvidia?
    3. If the AI is going to transform every aspect of our lives NOW (eventually it will) then why did we see numerous “circular” investment and contractual agreements?
    4. If AI gold rush requires about a trillion-dollar worth of investments from various constituents as has been professed, what is another billion or two for Super Micro that they could not cough up this quarter?

    Basically, the timing is impeccable and it is all coming together just perfect with the slew of announcements of these circular investments between OpenAI, Nvidia, Oracle, AMD, etc., which signify the tail end of the AI gold rush and now Super Micro is a proof in the pudding.

    In good old days, such contracts could have been called “let us scratch each other’s backs” at best and Ponzi scheme at worst as criminals would try to extract every last dollar from the innocent ones.

    The real or even more powerful proof will be in the numbers from Nvidia in about a month. Canary has spoken its last words before it died from the toxic gases of gold mine (or coal?).

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