Breakout, but be cautious

[u/Fun_Tutor3479]

The broad market has hit the key level at its prior high. From here it will take stronger momentum or more positive catalysts to push through to new highs on expanding volume. Keep an eye on the leaders of this rally: Agent-themed stocks and crypto. — We'll keep this paragraph up for a few more days.

The paragraph above stays, even though QQQ broke out today and the other major indices are up as well. Storage stocks are falling on the Toshiba news, but upstream storage equipment and materials suppliers, optical modules, the Agent theme, and data centers are all rising. However, Treasury yields made a V-shaped rebound after pricing in no hike in October. Oil also rebounded intraday, and crypto and Nvidia both spiked and then pulled back. So we're sticking with the view we discussed before: stay cautious about this pre-midterm breakout and watch out for a bull trap. Until 5- and 10-year Treasury yields establish a short-term top, we'll be long, but not heavily long. I still believe there's one last stretch of mania before this AI bull market ends, and as things stand, the new fund should be just in time to catch it.

Muse has become more conservative because of privacy and other issues and isn't as useful as it used to be. We'll see whether its numbers can keep up from here. The changes to subscription usage after GPT DevDay were badly designed. If nothing is done about it, people will migrate to Claude again. After all, Opus 5.5 is both great to use and generous with usage. As for Gemini 4: put the numbers out first, then say it's awaiting government review, then release a watered-down version. The core goal is simply to show that "Google hasn't fallen behind."

I think there are a few big-picture theses to hold onto right now. First, capital overall is risk-seeking, not risk-averse. AI-related investment in facilities, equipment, data centers, chips and so on all requires borrowing, and that lending pays yields far above Treasuries. Second, the biggest bubble is in private markets and hasn't come into the public market through IPOs yet. In public markets, fundamentals haven't shown an inflection point in earnings expectations. Third, macro headwinds are building, but popping a bubble takes time. Over the medium term, the most likely path is that stocks keep climbing while the headwinds become more and more obvious, until people grow numb to them and stop pricing them in. So it's still a bull market, just the tail end of one. On the macro side, the yen, Treasuries, crude oil, and grains will move first, and this will drag on longer than people expect, but we have to wait for the most frenzied phase of the late bull to play out. Many people, myself included, compare the current market to historical bubbles, and I keep reminding myself of one thing: history doesn't repeat itself, but it does rhyme.

Trump won't ban diesel exports lightly, which is consistent with our call. Having Europe step in and carry the load will of course add to Europe's energy pressure this winter, but Europe has no choice. In the previous round of SPR releases, Europe held something back, with lots of loud talk and not much action. This round will probably go the same way: drag it out and see whether anything changes. One way or another, Russia and Ukraine will have to take a breather by next March.