Every pilot dreads a stall.

Pull your nose up so high that you are unable to maintain adequate speed, and your plane flips over and enters a spiral dive. Those who are skilled at stall recovery can right their plane in seconds and live to fly another day. Those who don’t meet a violent end.

As an aerobatic instructor myself, I have been in quite a few stalls. In some planes, stall recovery is a piece of cake, such as with a 1936 Boeing Stearman biplane. Try it in a 1942 P51 Mustang and you haven’t a chance unless you know the special recovery tricks unique to this ferocious aircraft.

Looking at my stock charts this weekend, I am getting a feeling of déjà vu all over again. The markets are stalling, losing momentum, and running out of fuel all over again. More concerning was the sector rotation that took place. Traders are fleeing aggressive big tech and financials and moving money into bombed-out utilities, health care, and energy. Technical warning lights are flashing red everywhere.

The only question is how far down we dive this time. The 200-day moving average at (SPX) $5,740 is begging for attention. After that, we have the 50-day moving average at 5,587. Below that, there’s nothing but thin air until we reach the April 7 low at 4,820.

Bombs away!

It all just highlights how far we have come in a mere seven weeks. Is it time to sell in May and go away? Sounds like a good idea to me.

Of course, a lot could depend on the economic data in the coming weeks, which could do anything. The world has been put through such turmoil this year that the data won’t be reliable or predictable for at least a year.

We head into the weekend with more bad news from Washington, DC. The Chinese have been dithering in the trade negotiations as I expected, and cut off the supply of essential rare earths to the US. The US has responded by doubling the tariff on steel imports to 50%, most of which comes from China. (All of Trump’s US hotels were built with Chinese steel.)

In addition, American courts have ruled that the new global 10% tariffs are illegal, which I also anticipated. It could be months before the Supreme Court renders a final decision. All this does is extend uncertainty for US companies by months, if not years.

There’s that blasted word again. I’m sure “uncertainty” will be named the word of the year by the Oxford English Dictionary if “tariffs” doesn’t get it first. Last year’s winner was “brain rot,” which refers to the impact of consuming excessive amounts of low-quality online content, especially on social media (click here).

Some competition.

This is not what bull markets are made of.

I have a strange feeling that the White House has hired an able technical analyst. Whenever markets are on the verge of complete breakdown, great news magically appears out of nowhere, enabling the Dow to rally 6,000 points. But after markets have enjoyed their big run, the bad news starts to dribble out again, and the market tanks.

I have been getting a lot of requests to update my long-term model portfolio. From a decades-long point of view, nothing has really changed. The global economy is being fundamentally remade by artificial intelligence, and those companies at the forefront will deliver the best investment performance. Never underestimate the earnings power of US tech companies. Notice how well big tech led the last rally. They will lead every new rally from here on. Trade wars, inflation, recessions, politics, and an exploding national debt are just temporary distractions. Keep focused on the big picture.

The only unknown is whether it will take four months or four years to resume the long-term trend. If it happens quickly, we may be able to recover a 10% annual return for stocks. If it doesn’t, the four-year return for stocks could well be zero. The government is learning the hard way that it is easier to break things than to put them back together. But whatever happens, even if stocks do come back into fashion again, the 95% return we saw over the last four years will remain but a fond memory.

On a final note, keep a sharp eye on all of the silver plays, including (SLV), (SIL), and (WPM). It has been trying to break out to the upside and catch up with gold for the past year. The next selloff in stocks might be just the elixir silver needs. The poor man’s gold, the white precious metal’s day is coming.

By the way, if you want to see some of the best aerobatics ever performed, watch 62-year-old Tom Cruise in the latest Mission: Impossible movie, The Final Reckoning. Even I was astounded. Which planes were they flying? Four 1936 Boeing Strearmen were shipped to South Africa for the filming.

My May performance picked up +1.29%. That takes us to a year-to-date profit of +29.69% so far in 2025. My trailing one-year return stands at a record +86.60%. That takes my average annualized return to +50.54% and my performance since inception to +781.58%.

It has been a relatively quiet week in the market. I stopped out of a long in (MSTR). That loss was more than offset by a double short in the same name. I also added a new short in (TSLA). That leaves me 70% “RISK OFF” in (GLD), (SPY), (MSTR), (AAPL), (QQQ), and (TSLA), 10% long in (MSTR), and 20% cash.

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

Try beating that anywhere.

1936 Boeing Stearman in US Army Colors

Courts Toss Global US Tariffs, as we are not in a state of war, the basis on which the administration based its emergency actions. Where that leaves us is anyone’s guess, but stocks like it for 15 minutes, with the Dow up 550 points, which it quickly gave away. The Supreme Court will have to weigh in before we get a final decision. The Constitution clearly gives the power to impose taxes and tariffs to Congress, not the White House.

Core Personal Consumption Expenditure comes into light. April showed a slight increase, resulting in a 2.1% year-over-year inflation rate, below economists’ expectations of 2.2%. Core PCE, which excludes food and energy, rose 2.5% year-over-year, consistent with forecasts and marking the lowest level for the index in over four years. 

The US Economy Contracted at an Annualized Rate of 0.2% in Q1 2025, a slight improvement from the initial estimate of a 0.3% decline, but still marked the first quarterly GDP contraction in three years. The upward revision was driven by stronger-than-expected fixed investment, which partially offset weaker consumer spending and a larger-than-anticipated drag from trade. Imports of goods and services soared 42.6% as businesses and consumers rushed to stockpile goods in anticipation of higher prices following a series of tariff announcements. Additionally, consumer spending growth slowed to 1.2%, the weakest pace since Q2 2023, while federal government spending dropped 4.6%, the steepest decline since Q1 2022. In contrast, fixed investment rose by 7.8%, the strongest gain since mid-2023, and exports increased by 2.4%.

Weekly Jobless Claims Jump, up 14,000 to 240,000. The number of Americans filing new applications for jobless benefits increased more than expected last week, and the unemployment rate appeared to have picked up in May, suggesting layoffs were rising as tariffs cloud the economic outlook. The report from the Labor Department on Thursday showed a surge in applications in Michigan last week, the nation’s motor vehicle assembly hub. The number of people collecting unemployment checks in mid-May was the largest in 3-1/2 years.

Nvidia comes in line, with both sales and profits, taking the shares up $7. China is still a dead weight, with the administration’s national security bans rendering $15 billion worth of inventory worthless. Despite earnings growth still on fire, the shares are unchanged YOY, which is what you get when everyone in the world already owns it. Buy (NVDA) on big dips.

Pending Home Sales Hit Three-Year Low, 6.3% in April to 71.3 on a signed contract basis. The decline in pending sales suggests the resale market will continue to struggle until prices come off their record levels and mortgage rates settle closer to 6%.

Home Prices are Still Rising, according to the S&P Case Shiller National Home Price Index in March, up 3.4% YOY. On a monthly basis, it was the decline since the pandemic. New York City leads with an 8.0% gain because of back-to-the-office orders. Chicago followed with a 6.5% increase and Cleveland with a 5.9% gain. Hurricane hit Tampa is still the only loser with a 2.2% loss.

Tesla Sales Still in Free Fall, with Europe down 49% in April versus an overall 31% decline for EVs in general. There is a ferocious price war in China. European consumers are also showing a preference for hybrid electric vehicles — cars with a small battery that still mainly run on traditional fuel. Hybrid electric vehicles account for just over 35% of the total European car market.

U.S. capital Goods Orders are collapsing, down 1.3% in April amid mounting uncertainty over the economy because of tariffs. That suggests business spending on equipment weakened at the start of the second quarter. The report from the Commerce Department on Tuesday also showed shipments of these goods falling last month. The government’s flip-flopping on import duties was making it difficult for businesses to plan ahead. That has been evident in the deterioration of sentiment among businesses.

Japanese Interest Rates are soaring, part of a worldwide trend, with ultra-long 40-year bond yields hitting 3.675%. Heavily indebted Japanese government bonds are the “canary in the global duration coalmine.” Long-dated debt has sold off on concerns about tax cuts and a chaotic roll-out of sweeping tariffs by the U.S. that will stoke inflation and force governments to spend more.

MicroStrategy (MSTR) issued $2 billion in Preferred Stock, yielding a 10% dividend, which it will use to buy more Bitcoin. The shares fell by 7.5%, even though the dilution of existing shareholders is only 2%. It gets back to my argument that even though total Bitcoin issuance is limited to only 21 million coins by 2040, there is no limit on Bitcoin derivatives.

Global Shipping Rates are soaring as a result of the on-again, off-again trade war. Port congestion is worsening at key gateways in northern Europe, with waiting times for berth space increasing significantly in Bremerhaven, Antwerp, and Hamburg due to labor shortages and low water levels on the Rhine River. The congestion is also affecting other hubs, including Shenzhen, Los Angeles, and New York, and is expected to continue for several weeks, with shipping lines facing delays and higher costs that may require freight rate hikes. Waiting times for berth space jumped 77% in Bremerhaven, Germany, between late March and mid-May.

The 60/40 Portfolio is Dead for Now, with both stocks and bonds going down at the same time. This isn’t supposed to happen. Bonds usually rise going into a recession. But foreign boycotts of new US bond issues and the “Sell America” trade have taken the (TLT) down from $94 to $83 this year, a loss of 11.7%. In the meantime, stocks have gone nowhere this year.

The Shale Oil Boom is Over, due to tax-subsidized US overproduction, weak Chinese consumption, and recession fears. As a result, oil companies are scaling back capital investment. Texas, Oklahoma, and Louisiana will get hit the hardest.

My Ten-Year View – A Reassessment

On Monday, June 2, at 8:30 AM EST, the ISM Manufacturing Index is printed.

On Tuesday, June 3, at 7:30 AM, the JOLTS Job Opening Reports are announced.

On Wednesday, June 4, at 1:00 PM, the ISM Services PMI is released.

On Thursday, June 5, at 8:30 AM, the Weekly Jobless Claims are disclosed. We also get the Challenger Jobs Cuts Report.

On Friday, June 6, at 7:30 AM, we get the Nonfarm Payroll Report for May. At 1:00 PM, the Baker Hughes Rig Count is published.

As for me, while working for The Economist magazine in London, I was invited to interview some pretty amazing people: Margaret Thatcher, Ronald Reagan, Yasir Arafat, Zhou Enlai.

But one stands out as an all-time favorite.

In 1982, I was working out of the magazine’s New York Bureau on Third Avenue and 47^th Street, just seven blocks from my home on Sutton Place, when a surprise call came in from the editor in London, Andrew Knight. International calls were very expensive then, so it had to be important.

Did anyone in the company happen to have a US top secret clearance?

I answered that it just so happened that I did, a holdover from my days at the Nuclear Test Site in Nevada. “What’s the deal?” I asked?

A person they had been pursuing for decades had just retired and finally agreed to an interview, but only with someone who had clearance. Who was it? He couldn’t say now. I was ordered to fly to Los Angeles and await further instructions.

Intrigued, I boarded the next flight to LA, wondering what this was all about. What I remember about that flight is that sitting next to me in first class was the Hollywood director Oliver Stone, a Vietnam veteran who made the movie Platoon. When Stone learned I was from The Economist, he spent the entire six hours grilling me on every conspiracy theory under the sun, which I shot down one right after the other.

Once in LA, I checked into my favorite haunt, the Beverly Hills Hotel, requesting the suite that Marilyn Monroe used to live in. The call came in the middle of the night. Rent a four-wheel drive asap and head out to a remote ranch in the mountains 20 miles east of Santa Barbara. And who was I interviewing?

Kelly Johnson from Lockheed Aircraft (LMT).

Suddenly, everything became clear.

Kelly Johnson was a legend in the aviation community. He grew up on a farm in Michigan and obtained one of the first master’s degrees in Aeronautical Engineering in 1933 at the University of Michigan.

He cold-called Lockheed Aircraft in Los Angeles, begging for a job, then on the verge of bankruptcy in the depths of the Great Depression. Lockheed hired him for $80 a month. What was one of his early projects? Assisting Amelia Earhart with the customization of her Lockheed Electra for her coming round-the-world trip, from which she never returned.

Impressed with his performance, Lockheed assigned him to the company’s most secret project, the twin-engine P-38 Lightning, the first American fighter to top 400 miles per hour. With counter-rotating props, the plane was so advanced that it killed a quarter of the pilots who trained on it. But it allowed the US to dominate the air war in the Pacific early on.

Kelley’s next big job was the Lockheed Constellation (the “Connie” to us veterans), the plane that entered civil aviation after WWII. It was the first pressurized civilian plane that could fly above the clouds and carried an astonishing 44 passengers. Howard Hughes bought 50 just off the plans to found Trans World Airlines. Every airline eventually had to fly Connie’s or go out of business.

The Cold War was a golden age for Lockheed. Johnson created the famed “Skunkworks” at Edwards Air Force base in the Mojave Desert, where America’s most secret aircraft were developed.  He launched the C-130 Hercules, which I flew in Desert Storm, the F-104 Starfighter, and the high-altitude U-2 spy plane.

The highlight of his career was the SR-71 Blackbird spy plane, where every known technology was pushed to the limit. It could fly at Mach 3.0 at 100,000 feet. The Russians hated it because they couldn’t shoot it down. It was eventually put out of business by low-earth satellites. The closest I ever got to the SR-71 was the National Air & Space Museum in Washington, DC, at Dulles airport, where I spent an hour grilling a retired Blackbird pilot.

Johnson greeted me warmly and complimented me on my ability to find the place. I replied, “I’m an Eagle Scout.” He didn’t mind chatting as long as I accompanied him on his morning chores. No problem. We moved a herd of cattle from one field to another, milked a few cows, and fertilized the vegetables.

When I confessed to growing up on a ranch, he really opened up. It didn’t hurt that I was also an engineer and a scientist, so we spoke the same language. He proudly showed off his barn, probably the most technologically advanced one ever built. It looked like a Lockheed R&D lab with every imaginable power tool. Clearly, Kelley took work home on weekends.

Johnson recited one amazing story after another. In 1943, the British had managed to construct two Whittle jet engines and asked Kelly to build the first jet fighter. The country that could build jet fighters first would win the war. It was the world’s most valuable machine.

Johnson clamped the engine down to a test bench and fired it up, surrounded by fascinated engineers. The engine immediately sucked in a lab coat and blew up. Johnson got on the phone to England and said, “Send the other one.”

The Royal Air Force placed their sole remaining jet engine on a plane that flew directly to Burbank Airport. It arrived on a Sunday, so the scientist charged with the delivery took the day off and rode a taxi into Hollywood to sightsee.

There, the Los Angeles police arrested him for jaywalking. In the middle of WWII, with no passport, no ID, a foreign accent, and no uniform, they hauled him straight off to jail.

It took two days for Lockheed to find him. Johnson eventually attached the jet engine to a P-51 Mustang, creating the P-80, and eventually the F-80 Shooting Star (Lockheed always uses astronomical names). Only four made it to England before the war ended. They were only allowed to fly over England because the Allies were afraid the Germans would shoot one down and gain the technology.

But the Germans did have one thing on their side. The Los Angeles Police Department delayed the development of America’s first jet fighter by two days.

Germany did eventually build 1,000 Messerschmitt Me 262 jet fighters, but too late. Over half were destroyed on the ground, and the engines, made of steel and not the necessary titanium, only had a ten-hour life.

That evening, I enjoyed a fabulous steak dinner from a freshly slaughtered steer before I made my way home. I even helped Kelly slaughter the animal, just like I used to do on our ranch in Montana. Steaks are always better when the meat is fresh and we picked the best cuts. I went back to the hotel and wrote a story for the ages.

It was never published.

One of the preconditions of the interview was to obtain prior clearance from the National Security Agency. They were horrified by what Johnson had told me. He had gotten so old he couldn’t remember what was declassified and what was still secret.

The NSA already knew me well from our previous encounters, but MI-6 showed up at The Economist office in London and seized all papers related to the interview. That certainly amused my editor.

Johnson died at age 80 in 1990. As for me, it was just another day in my unbelievable life.

1947 Lockheed Constellation

SR-71 Blackbird

My Former Employer

Good Luck and Good Trading,

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