“The next leg of the bull market is going to have to be a fundamental leg, not a liquidity leg, and investors are in a little bit of a malaise trying to figure that out,” said Anthony Scaramucci of Skybridge Capital.
Global Market Comments
July 2, 2025
Fiat Lux
SPECIAL ISSUE ABOUT THE FAR FUTURE
Featured Trade:
(PEAKING INTO THE FUTURE WITH RAY KURZWEIL),
(GOOG), (INTC), (AAPL), (TXN)
This is the most important research piece you will ever read, bar none. But you have to finish it to understand why. So, I will get on with the show.
I have been hammering away at my followers at investment conferences, webinars, and strategy luncheons this year about one recurring theme. Things are good, and about to get better, a whole lot better.
The driver will be the exploding rate of technological innovation in electronics, biotechnology, and energy. The 2020s are shaping up to be another roaring twenties, and asset prices are going to go through the roof.
To flesh out some hard numbers about growth rates that are realistically possible and which industries will be the leaders, I hooked up with my old friend, Ray Kurzweil, one of the most brilliant minds in computer science.
Ray is currently a director of Engineering at Google (GOOG), heading up a team that is developing stronger artificial intelligence. He is an MIT grad with a double major in computer science and creative writing. He was the principal inventor of the CCD flatbed scanner, the first text-to-speech synthesizer, and the commercially marketed large-vocabulary speech recognition.
When he was still a teenager, Ray was personally awarded a science prize by President Lyndon Johnson. He has received 20 honorary doctorates and has authored 7 books. It was upon Ray’s shoulders that many of today’s technological miracles were built.
His most recent book, The Singularity is Near: When Humans Transcend Biology, was a New York Times best seller. In it he makes hundreds of predictions about the next 100 years that will make you fall out of your chair.
I met Ray at one of my favorite San Francisco restaurants, Morton’s on Sutter Street. I ordered a dozen oysters, a filet mignon wrapped in bacon, and drowned it all down with a fine bottle of Duckhorn Merlot. Ray had a wedge salad with no dressing, a giant handful of nutritional supplements, and a bottle of water. That’s Ray, one cheap date.
The Future of Man
A singularity is defined as a single event that has monumental consequences. Astrophysicists refer to the Big Bang and black holes in this way. Ray’s singularity has humans and machines merging to become single entities, partially by 2040 and completely by 2100.
All of our thought processes will include built-in links to the cloud, making humans super smart. Skin that absorbs energy from the sun will eliminate the need to eat. Nanobots will replace blood cells, which are far more efficient at moving oxygen. A revolution in biotechnology will enable us to eliminate all medical causes of death.
Most organs can now be partially or completely replaced. Eventually, they all will become renewable by taking one of your existing cells and cloning it into a completely new organ. We will become much more like machines, and machines will become more like us.
The first industrial revolution extended the reach of our bodies, and the second is extending the reach of our minds.
And, oh yes, prostitution will be legalized and move completely online. Sound like a turn off? How about virtually doing it with your favorite movie star? Your favorite investment advisor? Yikes!
Ironically, one of the great accelerants towards this singularity has been the war in Iraq. More than 50,000 young men and women came home missing arms and legs (in Vietnam, these were all fatalities, thanks to the absence of modern carbon fiber body armor).
Generous government research budgets have delivered huge advances in titanium artificial limbs and the ability to control them only with thoughts. Quadriplegics can now hit computer keystrokes merely by thinking about them.
Kurzweil argues that exponentially growing information technology is encompassing more and more things that we care about, like health care and medicine. Reprogramming of biology will be the next big thing and is a crucial part of his “singularity.”
Our bodies are governed by obsolete genetic programs that evolved in a bygone era. For example, over millions of years, our bodies developed genes to store fat cells to protect against a poor hunting season in the following year. That gave us a great evolutionary advantage 10,000 years ago. But it is not so great now, with obesity becoming the country’s number one health problem.
We would love to turn off these genes through reprogramming, confident that the hunting at the supermarket next year will be good. We can do this in mice now, which, in experiments, can eat like crazy, but never gain weight.
The happy rodents enjoy the full benefits of caloric restriction, with no hint of diabetes or heart disease. A product like this would be revolutionary, not just for us, health care providers, and the government, but, ironically, for fast food restaurants as well.
Within the last five years, we have learned how to reprogram stem cells to rebuild the hearts of heart attack victims. The stem cells are harvested from skin cells, not human embryos, ducking the political and religious issue of the past.
And if we can turn off genes, why not the ones in cancer cells that enable them to pursue unlimited reproduction, until they kill their host? That development would cure all cancers and is probably only a decade off.
The Future of Computing
If this all sounds like science fiction, you’d be right. But Ray points out that humans have chronically underestimated the rate of technological innovation.
This is because humans evolved to become linear-thinking animals. If a million years ago we saw a gazelle running from left to right, our brains calculated that one second later it would progress ten feet further to the right. That’s where we threw the spear. This gave us a huge advantage over other animals and is why we became the dominant species.
However, much of science, technology, and innovation grows at an exponential rate, and it is where we make our most egregious forecasting errors. Count to seven, and you get to seven. However, double something seven times and you get to a billion.
The history of the progress of communications is a good example of an exponential effect. Spoken language took hundreds of thousands of years to develop. Written language emerged thousands of years ago, books in a 100 years, the telegraph in a century, and telephones 50 years later.
Some ten years after Steve Jobs brought out his Apple II personal computer, the growth of the Internet went hyperbolic. Within three years of the iPhone launch, social media exploded out of nowhere.
At the beginning of the 20th century, $1,000 bought 10 X-5th power worth of calculations per second in our primitive adding machines. A hundred years later, a grand got you 10 X 8th power calculations, a 10 trillion-fold improvement. The present century will see gains many times this.
The iPhone itself is several thousand times smaller, a million times cheaper, and billions of times more powerful than computers of 40 years ago. That increases the price per performance by the trillions. More dramatic improvements will accelerate from here.
Moore’s law is another example of how fast this process works. Intel (INTC) founder Gordon Moore published a paper in 1965 predicting a doubling of the number of transistors on a printed circuit board every two years. Since electrons had shorter distances to travel, speeds would double as well.
Moore thought that theoretical limits imposed by the laws of physics would bring this doubling trend to an end by 2018, when the gates become too small for the electrons to pass through. For decades, I have read research reports predicting that this immutable deadline would bring an end to innovation and technological growth and bring an economic Armageddon.
Ray argues that nothing could be further from the truth. A paradigm shift will simply allow us to leapfrog conventional silicon-based semiconductor technologies and move on to bigger and better things. We did this when we jumped from vacuum tubes to transistors in 1949, and again in 1959, when Texas Instruments (TXN) invented the first integrated circuit.
Paradigm shifts occurred every ten years in the past century, every five years in the last decade, and will occur every couple of years in the 2020s. So fasten your seatbelts!
Nanotechnology has already allowed manufacturers to extend the 2018 Moore’s Law limit to 2022. On the drawing board are much more advanced computing technologies, including calcium-based systems, using the alternating direction of spinning electrons, and nanotubes.
Perhaps the most promising is DNA-based computing, a high research priority at IBM and several other major firms. I earned my own 15 minutes of fame in the scientific world 40 years ago as a member of the first team ever to sequence a piece of DNA, which is why Ray knows who I am.
Deoxyribonucleic Acid makes up the genes that contain the programming that makes us who we are. It is a fantastically efficient means of storing and transmitting information. And it is found in every single cell in our bodies, all 10 trillion of them.
The great thing about DNA is that it replicates itself. Just throw it some sugar. That eliminates the cost of building the giant $2 billion silicon-based chip fabrication plants of today.
The entire human genome is a sequential binary code containing only 800 MB of information, which, after you eliminate redundancies, has a mere 30-100 MB of useful information, about the size of an off-the-shelf software program, like Word for Windows. Unwind a single DNA molecule, and it is only six feet long.
What this means is that, just when many believe that our computer power is peaking, it is in fact just launching into an era of exponential growth. Supercomputers surpassed human brain computational ability in 2012, about 10 to the 16th power (ten quadrillion) calculations per second.
That power will be available on a low-end laptop by 2020. By 2050, this prospective single laptop will have the same computing power as the entire human race, about 9 billion individuals. It will also be small enough to implant in our brains.
The Future of the Economy
Ray is not really that interested in financial markets, or, for that matter, making money. Where technology will be in a half century and how to get us there are what get his juices flowing. However, I did manage to tease a few mind-boggling thoughts from him.
At the current rate of change, the 21st century will see 200 times the technological progress that we saw in the 20th century. Shouldn’t corporate profits, and therefore share prices, rise by as much?
Technology is rapidly increasing its share of the economy and its influence on other sectors. That’s why tech has been everyone’s favorite sector for the past 30 years and will remain so for the foreseeable future. For two centuries, technology has been eliminating jobs at the bottom of the economy and creating new ones at the top.
Stock analysts and investors make a fatal flaw in estimating future earnings based on the linear trends of the past, instead of the exceptional growth that will occur in the future.
In the last century, the Dow appreciated from 100 to 10,000, an increase of 100 times. If we grow at that rate in this century, the Dow should increase by 10,000% to 1 million by 2100. But so far, we are up only 6%, even though we are already 14 years into the new century.
The index is seriously lagging, but will play catch-up in a major way during the 2020s, when economic growth jumps from 2% to 4% or more, thanks to the effects of massively accelerating technological change.
Some 100 years ago, one-third of jobs were in farming, one-third were in manufacturing, and one-third were in services. If you predicted that in a century farming and manufacturing would each be 3% of total employment and that something else unknown would come along for the rest of us, people would have been horrified. But that’s exactly what happened.
Solar energy use is also on an exponential path. It is now 1% of the world’s supply but is only seven doublings away from becoming 100%. Then we will consume only one 10,000th of the sunlight hitting the Earth. Geothermal energy offers the same opportunities.
We are only running out of energy if you limit yourself to 19th-century methods. Energy costs will plummet. Eventually, energy will be essentially free when compared to today’s costs, further boosting corporate profits.
Hyper-growth in technology means that we will be battling with deflation for the rest of the century, as the cost of production and price of everything fall off a cliff. That makes our 10-year Treasury bonds a steal at a generous 2.60% yield, a full 460 basis points over the real long-term inflation rate of negative 2% a year.
US Treasuries could eventually trade down to the 0.40% yields seen in Japan only a couple of years ago. This means that the bull market in bonds is still in its early stages and could continue for decades.
The upshot for all of these technologies will rapidly eliminate poverty, not just in the US, but around the world. Each industry will need to continuously reinvent its business model or disappear.
The takeaway for investors is that stocks, as well as other asset prices, are now wildly undervalued, given their spectacular future earnings potential. It also makes the Dow target of 1 million by 2100 absurdly low, and off by a factor of 10 or even 100. Will we be donning our “Dow 100 Million” then?
Other Random Thoughts
As we ordered dessert, Ray launched into another stream of random thoughts. I asked for Morton’s exquisite double chocolate mousse. Ray had another handful of supplements. Yep, Mr. Cheap Date.
The number of college students has grown from 50,000 to 12 million since the 1870s. A kid in Africa with a cell phone has more access to accurate information than the president of the United States did 15 years ago.
The great superpower, the Soviet Union, was wiped out by a few fax machines distributing information in 1991.
Company offices will become entirely virtual by 2025.
Cows are very inefficient at producing meat. In the near future, cloned muscle tissue will be produced in factories, disease-free, and at a fraction of the present cost, without the participation of the animal. PETA will be thrilled.
Use of nano materials to build ultra-light but ultra-strong cars cuts fuel consumption dramatically. Battery efficiencies will improve by 10 to 100 times. Imagine powering a Tesla Model S1 with a 10-pound battery! Advances in nanotube construction mean the weight of the vehicle will drop from the present 3 tons to just 100 pounds, but it will be far safer.
Ray is also on a scientific advisory panel for the US Army. Uncertain about my own security clearance, he was reluctant to go into detail. Suffice it to say that the weight of an M1 Abrams main battle tank will shrink from 70 tons to 1 ton, but it will be 100 times stronger.
A zero tolerance policy towards biotechnology by the environmental movement exposes their intellectual and moral bankruptcy. Opposing a technology with so many positive benefits for humankind and the environment will inevitably alienate them from the media and the public, who will see the insanity of their position.
Artificial intelligence is already far more prevalent than you understand. The advent of strong artificial intelligence will be the most significant development of this century. You can’t buy a book from Amazon, withdraw money from your bank, or book a flight without relying on AI.
Ray finished up by saying that by 2100, humans will have the choice of living in a biological or in a totally virtual, online form. In the end, we will all just be files.
Personally, I prefer the former, as the best things in life are biological and free!
I walked over to the valet parking, stunned and disoriented by the mother load of insight I had just obtained, and it wasn’t just the merlot talking, either! Imagine what they talk about at Google all day.
To buy The Singularity is Near at discount Amazon pricing, please click here. It is worth purchasing the book just to read Ray’s single chapter on the future of the economy.
Did You Say “BUY” or “SELL”
The Future is Closer than You Think
“The future ain’t what it used to be,” said the former New York Yankees baseball manager, Yogi Berra.
Global Market Comments
July 1, 2025
Fiat Lux
Featured Trade:
(THE NEXT COMMODITY SUPER CYCLE HAS ALREADY STARTED),
(COPX), (GLD), (FCX), (BHP), (RIO), (SIL),
(PPLT), (PALL), (GOLD), (ECH), (EWZ), (IDX)
When I closed out my position in Freeport McMoran (FCX) near its max profit earlier this year, I received a hurried email from a reader asking if he should still keep the stock. I replied very quickly:
“Hell, yes!”
When I toured Australia a couple of years ago, I couldn’t help but notice a surprising number of fresh-faced young people driving luxury Ferraris, Lamborghinis, and Porsches.
I remarked to my Aussie friend that there must be a lot of indulgent parents in The Lucky Country these days. “It’s not the parents who are buying these cars,” he remarked, “It’s the kids.”
He went on to explain that the mining boom had driven wages for skilled labor to spectacular levels. Workers in their early twenties could earn as much as $200,000 a year, with generous benefits.
The big resource companies flew them by private jet a thousand miles to remote locations where they toiled at four-week on, four-week off schedules.
This was creating social problems, as it is tough for parents to manage offspring who make far more than they do.
The Great Commodity Boom has started, and in fact, we are already years into a prolonged super cycle.
China, the world’s largest consumer of commodities, is currently stimulating its economy on multiple fronts, including generous corporate tax breaks and relaxed reserve requirements. Get a trigger like the impending settlement of its trade war with the US, and it will be off to the races once more for the entire sector.
The last bear market in commodities was certainly punishing. From the 2011 peaks, copper (COPX) shed 65%, gold (GLD) gave back 47%, and iron ore was cut by 78%. One research house estimated that some $150 billion in resource projects in Australia were suspended or cancelled.
Budgeted capital spending during 2012-2015 was slashed by a blood-curdling 30%. Contract negotiations for price breaks demanded by end consumers broke out like a bad case of chicken pox.
The shellacking was reflected in the major producer shares, like BHP Billiton (BHP), Freeport McMoran (FCX), and Rio Tinto (RIO), with prices down by half or more. Write-downs of asset values became epidemic at many of these firms.
The selloff was especially punishing for the gold miners, with lead firm Barrack Gold (GOLD) seeing its stock down by nearly 80% at one point, lower than the darkest days of the 2008-9 stock market crash.
You also saw the bloodshed in the currencies of commodity-producing countries. The Australian dollar led the retreat, falling 30%. The South African Rand has also taken it on the nose, off 30%. In Canada, the Loonie got cooked.
The impact of China cannot be underestimated. In 2012, it consumed 11.7% of the planet’s oil, 40% of its copper, 46% of its iron ore, 46% of its aluminum, and 50% of its coal. It is much smaller than that today, with its annual growth rate dropping by more than half, from 13.7% to 2.3% in 2020.
What happens to commodity prices if China recovers the heady growth rates of yore? It boggles the mind. If China doesn’t step up, then India certainly will.
The rise of emerging market standards of living will also provide a boost to hard asset prices. As China goes, so do its satellite trading partners, who rely on the Middle Kingdom as their largest customer. Many are also major commodity exporters themselves, like Chile (ECH), Brazil (EWZ), and Indonesia (IDX), are looking to come back big time.
As a result, Western hedge funds will soon be moving money out of paper assets, like stocks and bonds, into hard ones, such as gold, silver (SIL), palladium (PALL), platinum (PPLT), and copper.
A massive US stock market rally has sent managers in search of any investment that can’t be created with a printing press. Look at the best-performing sectors this year, and they are dominated by the commodity space.
The bulls may be right for as long as a decade thanks to the cruel arithmetic of the commodities cycle. These are your classic textbook inelastic markets.
Mines often take 10-15 years to progress from conception to production. Deposits need to be mapped, plans drafted, permits obtained, infrastructure built, capital raised, and bribes paid in certain countries. By the time they come online, prices have peaked, drowning investors in red ink.
So a 1% rise in demand can trigger a price rise of 50% or more. There are not a lot of substitutes for iron ore. Hedge funds then throw gasoline on the fire with excess leverage and high-frequency trading. That gives us higher highs, to be followed by lower lows.
I am old enough to have lived through a couple of these cycles now, so it is all old news for me. The previous bull legs of super cycles ran from 1870-1913 and 1945-1973. The current one started for the whole range of commodities in 2016. Before that, it was down for seven years.
While the present one is short in terms of years, no one can deny how business cycles will be greatly accelerated by the end of the pandemic.
Some new factors are weighing on miners that didn’t plague them in the past. Reregulation of the US banking system has forced several large players, like JP Morgan (JPM) and Goldman Sachs (GS), to pull out of the industry completely. That impairs trading liquidity and widens spreads— developments that can only accelerate upside price moves.
The prospect of falling US interest rates is also attracting capital. That reduces the opportunity cost of staying in raw metals, which pay neither interest nor dividends.
The future is bright for the resource industry. While the gains in Chinese demand are smaller than they have been in the past, they are off a much larger base. In 20 years, Chinese GDP has soared from $1 trillion to $14.5 trillion.
Some 20 million people a year are still moving from the countryside to the coastal cities in search of a better standard of living and improved prospects for their children.
That is the good news. The bad news is that it looks like the headaches of Australian parents of juvenile high earners may persist for a lot longer than they wish.
Buy all commodities on dips for the next several years.
Global Market Comments
June 30, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE LOOKING GLASS MARKET)
(SPY), (GLD), (CRCL), (CRWD), (PANW), (FTNT), (ZS), (AVGO), (DHI), (KBH), (LEN), (PHM), (MSTR), (TSLA), (BA), (WPM), (AAPL), (TLT), (QQQ), (SPY)
We all read Alice in Wonderland when we were kids. In it, Alice enters a strange world where everything is the opposite of reality. Chess pieces can walk, and cats can talk.
Traders these days can be forgiven for believing that they have also stepped through the looking glass and entered a strange world where up is down, expensive is cheap, and IPO’s which offer zero added value see their shares rocket on the first day.
The big conundrum is how high a market can go when the economy is clearly headed into a recession. The short answer is that stocks can go up quite a lot in a looking glass world.
Try as I may, it is tough to find positive data points on the economy. Real estate is in free fall, agriculture looks like a Great Depression replay, and international tourism has virtually disappeared. Foreign trade is a disaster area. If you work in construction or restaurants, your life is hell. The 14%-15% earnings growth reported in Q1 will likely drop to zero by year-end. But if you are in a Bitcoin business, it is boom times.
The 23% rally we have seen off the April 9 (SPY) 4,800 bottom has been one of the most dramatic in history. It has also been one of the narrowest. The bull was led really by just 50 technology stocks we all know and love. The other 450 companies in the S&P 500 are still down on the year, with the indexes at all-time highs.
The “Wall of Worry” has crumbled and disappeared.
Erratic government policies are to blame for this extreme volatility, which changes by the day, if not by the hour. One minute, there is a 145% tariff on imports from China and a complete cutoff of rare earth supplies to US technology companies; the next minute, there isn’t.
My old friend Ken Griffin at Citadel tells me this has been the most difficult trading year in his company’s 25-year history because the swings in basic economic assumptions have been so wide and violent. Same-day options are driving the market, greatly increasing any downside volatility, like we saw in 1987, 2000, and 2025.
I agree.
Most concerning is the flow of money into crypto plays, which are sucking in much of the speculative money in the market. That’s why gold (GLD) has sold off 5% in the past two weeks, with hot money moving over to more fashionable digital plays.
Some of the recent crypto IPO’s have been laughable in their pretensions. Circle International Group (CRCL) promises to issue stablecoins based on US dollars. In other words, you are taking on the credit risk of a small startup to own a US dollar just so it can be cheaply transferred. Yet the shares soared from $31 to $300 after it went public, giving it a market capitalization of an eye-popping $50 billion.
This will end in tears.
When the entire crypto industry was worth only $2 trillion, it could have all gone to zero and not have much effect on the economy, which it almost did. It was mostly Millennials who got wiped out, betting their life savings on hopes and prayers and then finding themselves in court, vainly trying to get their money back.
Now, the total crypto market is worth $7 trillion and is growing rapidly. If it gets much bigger and then all that money gets lost, it could trigger another Great Depression. Past periods of uncertainty brought a flight to safety. Now there is a flight to crap.
It all underlines the extreme short-termism of the modern business. It’s become a “take the money and run” economy. Tough luck for your retirement fund if you forget to sit down when the music stops playing.
It all sets up a trading range for the S&P 500 for the rest of 2025 of 5,500 to 6,500. I expect some kind of weakness in the summer. Then we get a grind up to year-end.
AI stocks will be the leaders and will dominate the global economy for the next decade. That’s why investors are willing to look through trade wars, the Iran War, and a war on immigrants, and hope for the best. Financials will follow on the promise of future deregulations, which will assure another financial crisis down the road.
Cybersecurity will be another big frontrunner. Algorithms are becoming so sophisticated that enormous expenditures will be required to keep the bad guys at bay. Cybersecurity spending could be an incredible 10X AI spending. Morgan Stanley estimates that spending will increase from $15 billion in 2021 to $135 billion by 2030. CrowdStrike (CRWD), the current leader, has become a big winner for Mad Hedge this year.
The Cybersecurity industry is made up of 4,000 players, most of which are small and private. Five big companies dominate: CrowdStrike (CRWD), Palo Alto Networks (PANW), Fortinet (FTNT), Zscaler (ZS), and Broadcom (AVGO), and will eventually gobble up the rest, leading to trillion-dollar market valuations. It’s the old concentration play again.
An interest rate cut from the Fed by year-end to get the US out of recession is another stimulus for traders. That brings me to a sector I abandoned last October and left for dead, the homebuilders. With rate cuts a certainty by May 2026 at the latest, you might start thinking about buying bombed-out homebuilders’ names now. Investors are dying to pick up any sector that hasn’t doubled in the last three months, which has growth potential. I’m talking about (DHI), (KBH), (PHM), and (LEN).
My June performance rocketed up to +15.32%, taking us to new all-time highs on all metrics. That takes us to a year-to-date profit of +45.01%. My trailing one-year return exploded to a record +100.46%. That takes my average annualized return to +51.14%, and my performance since inception to +796.90%. These are all non-compounded numbers.
It was a week when the market ground up every day except for Friday. I stopped out of my long in gold (GLD) for a small loss. I then jumped into another short position in (TSLA), which then immediately fell apart. That leaves me with 90% cash and 10% short Tesla. The June 20 option expiration saw us bring home maximum profits in (MSTR), (TSLA), (BA), (WPM), (AAPL), (TLT), (QQQ), AND (SPY).
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.
My Ten-Year View – A Reassessment
We have to substantially downsize our expectations of equity returns in view of the election outcome. My new American Golden Age, or the next Roaring Twenties, is now looking at multiple gale-force headwinds. The economy will completely stop decarbonizing. Technology innovation will slow. Trade wars will exact a high price. Inflation will return. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old. My Dow 240,000 target has been pushed back to 2035.
On Monday, June 30, at 8:30 AM EST, the Dallas Fed Manufacturing Index is printed.
On Tuesday, July 1, at 7:30 AM, the Jolts Job Openings Report is announced.
On Wednesday, July 2, at 1:00 PM, we get the Challenger Job Cuts.
On Thursday, July 3, we get Weekly Jobless Claims. We also get the Nonfarm Payroll Report for June.
On Friday, July 4, the US has a National Holiday. All markets are closed.
Punitive Tariffs Return on July 9, possibly bringing the stock rally to a grinding halt. Yes, that would include the 145% tariff for China. Countries are hesitant to sign deals without knowing how these sectoral levies will impact them, and some, like India, are pushing for commitments from Washington that any deal will match the best agreement offered to any other nation.
Consumer Sentiment Improves, in June to a four-month high, with the final June sentiment index increasing to 60.7 from 52.2 a month earlier. Consumers expect prices to rise 5% over the next year, down from 6.6% in May, and they see costs rising at an annual rate of 4% over the next five to 10 years. Despite the improvement in sentiment, consumers remain anxious about the potential impact of tariffs, and their views are still consistent with an economic slowdown and an increase in inflation to come. It’s really very simple: rising share prices make people more confident.
US Equity Funds See Sixth Weekly Outflow, as of June 25, as investors took profits near record highs and stayed on edge ahead of key growth and inflation data. According to LSEG Lipper data, investors withdrew a net $20.48 billion from U.S. equity funds during the week, posting their largest weekly net sales since March 19.
Bitcoin Buying Firms are Multiplying. Over the past year, the number of bitcoins held by companies has jumped nearly 170 per cent. A total of about 130 listed firms hold a combined $87bn of bitcoin, equivalent to about 3.2 per cent of all the bitcoins that will ever exist. MicroStrategy (MSTR) started the trend and now holds a heart-stopping $33 billion in Bitcoin. Among those pivoting to a “bitcoin treasury” strategy is the Trump family media firm. While some firms’ main focus is on buying bitcoin, others are hoarding it while still running other, larger business lines.
As for me, to say that I was an unusual hire for Morgan Stanley back in 1983 was an understatement, a firm known as being conservative, white shoed, and a paragon of the establishment. They normally would not have touched me with a ten-foot pole, except that I spoke Japanese when they wanted to get into Japan.
Of 1,000 employees, there were only three from California. The other two were drop-dead gorgeous Stanford grads, daughters of the president of the Philippines, hired to guarantee the firm’s leadership of the country’s biannual bond issue.
When the book Liar’s Poker was published, many in the company thought I wrote it under the pen name of Michael Lewis. Today, the real Michael lives a few blocks away from me, and I kid him about it whenever I bump into him at Whole Foods.
At one Monday morning meeting, the call went out, “Does anyone have a connection with the Teamsters Union? I raised my hand, mentioning that my grandfather was a Teamster while working for Standard Oil of California during the Great Depression (it was said at the time that there was never a Great Depression at Standard Oil. It was true).
It turned out that I was virtually the only person at Morgan Stanley who didn’t have an Ivy League degree or an MBA.
My boss informed me that “You’re on the team.”
At the time, the US Justice Department had seized the Teamsters Pension Fund because the Mafia had been running it for years, siphoning off money at every opportunity. I made the pitch to the Justice Department, a more conservative bunch of straight arrows you never saw, all wearing dark suits and white business shirts.
It was crucial that we won the deal as Barton Biggs was just starting up the firm’s now immensely profitable asset management division, and a big mandate like the Teamsters would give us instant credibility in the investment community.
We won the deal!
Once the papers were signed, the entire Teamsters portfolio was dumped in my lap, and I was ordered to fly to Las Vegas to investigate. It didn’t hurt that I was half Italian. It was thought that the Teamsters might welcome me.
The airport was still a tiny, cramped affair, but offered an abundance of slot machines. Steve Wynn was building The Mirage Hotel on the strip. Howard Hughes was still holed up in the penthouse of the Desert Inn. Tom Jones, Frank Sinatra, Siegfried & Roy, Wayne Newton, and Liberace had star billing.
It turned out that the Teamsters Pension Fund owned every seedy whorehouse, illegal casino, crooked bookie, and drug dealer in town. If you wanted someone to disappear, they could arrange that too. As Lake Powell has dried up, missing persons started reappearing.
I returned to New York and wrote up my report. I asked Barton to sign off on it, and he said, “No thanks, you own this one.”
So it was with a heavy heart that I released a firmwide memo stating that employees of Morgan Stanley were no longer allowed to patronize the “Kit Kat Lounge”, the “Bunny Farm”, the “Mustang Ranch”, and 200 other illicit businesses in Nevada.
I never lived down that memo.
I actually knew about some of these places a decade earlier because they were popular with the all-male staff of the Nuclear Test Site, where I had once worked an hour north of Las Vegas as a researcher and mathematician.
Then later in the early 2000’s I had to drive my son from Lake Tahoe to the University of Arizona, and we drove right past the entrance to the Nuclear Test Site. The “Kit Kat Lounge”, the “Bunny Farm” were long gone, but the Site access had improved from a dusty, potholed dirt road to a four-lane superhighway.
That’s defense spending for you.
Even today, 40 years later, my old Morgan Stanley friends kid me if I know where to have a good time in Vegas, and I laugh.
But whenever I ride the subway in New York, I still get on at the front of the train, just to be extra careful. Accidents can happen.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty,” said the late British Prime Minister, Winston Churchill.
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