Morning.
Hell of a few days in markets as investors price in the impact of the blue tsunami Midterm elections. I disassociated by ripping through Season 2 of The Terminal List on Amazon Prime.
Highly suggest you guys check it out if you like action/military/spy themes and books (written by Jack Carr a former SEAL) are phenomenal too. The author and producer do an excellent job of incorporating real world events, top tier tactical gear, and plots into the show. If you need a new nightly show you can’t go wrong with it.
Epic stuff.
The world remains crazy this week.
On top of markets mayhem we’re also seeing continued black swan events globally including bomb threats on airlines, blackouts, and financial sabotage at banks in Latin America and Japan. NVDA 0.00%↑ had a black swan event of its own as CEO Jensen Huang got caught up in a Chinese honeypot operation with a female spy.
A lot of the things we touched on and predicted in our prepping posts continue to play out across the globe. If you somehow missed the recent posts you can read them below:
19 Things to Have Before You Need Them
Prepping With a SEAL Commander
I shouldn’t need to tell you that we are in a world of complete fuckery now. Don’t forget that and chase the big headlines that drop that are meant to distract you.
We’re covering quite a bit in todays edition:
Top global headlines
How markets are digesting Midterm results
Ray Dalio’s new thoughts on the Midterms and markets
What I bought (am buying) on the pullback for AI and crypto
Trump’s potential flip flop on immigrant amnesty
Where we stand on the Iran War
Crypto’s puzzling behavior right now
And more.
We’re going to cover what might be in store for crypto and equity markets as the AI boom comes under political pressure, major hedge funds and levered players blow up, and the geopolitical events continue to escalate.
Market Insight & Picks for Dip Buying
Last week was a bloodbath for markets, though there’s been an interesting bounce in the last 24 hours or so.
Last week’s dump was an AI led selloff that spread into a broad retreat from risk as markets digested the Democrat wave that swept across the US.
Last week the Nasdaq fell 5.52%, the S&P 500 dropped 4.36%, and the Dow lost 3.44%, with the Nasdaq confirming an official correction.
Thursday was the worst daily decline in 19 months. Trillions evaporated.
Bitcoin fell roughly 6% toward $75,000 and ETH sold off, while gold gained about 1% and Treasury yields declined as investors sought protection
Investors clearly displayed their anxiety that Democratic victories will lead to increased scrutiny and pressure of the AI buildout. Some politicians upon winning in Midterms took to X to say we need to pause the AI race and data center expansion in various states. Democrats have also already vowed to impeach Trump officials and investigate Republican donors next year.
Worth highlighting that hedge funds are taking on some major losses amid the selloff and AI dump.
Last week’s reports describe substantial losses, team cuts, and capital withdrawals following a brutal October for Walleye Capital, though many funds are struggling. Bloomberg reporting (summarized by Hedgeweek) put Value Aligned Research Advisors down about 33% in October, Arini down more than 12%, and Whale Rock down approximately 8%.
Millennium is withdrawing more than $1.5 billion combined from external managers Troluce and Axebrook following large losses. Worth noting these are October figures reported this week, not one week losses. Verition and Lone Pine were also mentioned in various rumors.
As of this this week some Semis and AI names look to be bouncing. The economy ended up adding more jobs than expected last week which should help sentiment into year end.
Major Headlines:
Anthropic was planning to IPO next week according to WSJ reports, sometime around Thursday, except new reports from Reuters now state they just retracted their IPO filing details citing material inaccuracies
Senate Democrats are preparing to impose 10% cap on credit card interest rates (WatcherGuru)
128 Japanese credit unions hit by widespread outages, leaving customers unable to withdraw cash or conduct transactions (WatcherGuru)
The US economy added 165,000 jobs in October which was higher than expectations
The US Bureau of Labor Statistics (BLS) announced that this week's October CPI inflation data will not include year-over-year numbers (Kobeissi Letter)
Xfinity warns GTA 6's launch could trigger the “biggest internet traffic event in its history” as millions of gamers rush to download the game (Polymarket)
House Republican leaders are bracing for enough GOP defections to impeach Defense Secretary Pete Hegseth when the measure comes to a vote this week, per Axios (Unusual Whales)
Ray Dalio’s Take
Ray Dalio the king of doom posting and cycle talk posted to X with a lengthy piece on Midterms and his thoughts on the market (you can read the full thing here). Dalio’s biggest fear is that Washington becomes too divided to manage America’s debt.
Broadly he expects:
More gridlock - He expects more fighting between the parties and within them, making a deal on taxes and spending harder
Treasury market stress - We may see funding and debt ceiling fights push up yields on T-bills exposed to payment delays. Repeated standoffs could erode trust in Treasuries as the world’s go-to collateral
Less U.S. influence abroad - A weakened Trump admin and a more inward-looking Washington could give China more room to assert itself in Asia
He noted that he sees a path through bipartisan cooperation among moderates (ha!). He doubts they’ll take it an I agree. The age of moderate politics is over in case that wasn’t obvious. The Republicans just got absolutely rejected and the Democratic party is hijacked by anti American socialists.
Shopping list and Market Thoughts
We got a nice bounce for this list that I began adding last week. Here are my thoughts on tech and AI given the Midterm results for what it is worth.
The most interesting thing about yesterday’s bounce was that it happened with Nvidia down roughly 6% on the heels of some Chinese Spy cheek clapping by Jensen. AMD was up about 13% (congrats to holders), Broadcom was up nearly 9%, and the chip index clawed back some of last week’s 12% plus drop that slaughtered leveraged traders.
Cheaper oil has definitely helped lift the whole market, so I’d be careful about reading too much into one green session.
That being said good to see the rest of the group catch a bid while Nvidia was dealing with its own drama. Watch out for Anthropic’s potential IPO next week or sometime this month as that might mark another local top and could provide some new opportunities.
We are likely to have an interesting day today given this morning headline CPI rose 0.4% month over month versus 0.3% expected, while core CPI rose 0.3% versus 0.2% expected (highest level since January of last year). Rate hike odds are now soaring on prediction markets.
My read on the midterms is that the market might be looking in the wrong place for the biggest risk to AI. The fight I’m really watching is now over who pays to bring all that power online and how they navigate the upcoming political environment.
If you’re a newly elected governor and voters are already pissed about their electric bills, telling them they’re still going to help pay for a grid upgrade so a trillion-dollar tech company can run more GPUs is a tough sell lol.
If you push a big project out a year and you push out orders for chips, networking gear, cooling equipment, and power. You can have real demand for AI and still have a lousy year owning the companies that need every project to come online on schedule. I think this is short term and it is an opportunity if you are patient.
Retail doesn’t seem to deterred by market action as of late. The Kobeissi Letter is reporting that the 3x leveraged long US semiconductor ETF SOXL 0.00%↑ attracted +$5.1 billion in inflows last week, its 2nd-largest weekly intake on record.
Degens are going to degen!
Still, you should consider some hedges. I put a decent amount into SCHD 0.00%↑ last week looking for some more exposure to some dividend paying companies whose earnings don’t hinge on another year of record AI spending (I also just wanted more).
Stuff like SCHD can get hit in a broad selloff too. What I like about it here is that I can stay invested (keep my cash reserves higher) and not worry about making every new dollar another bet on the same handful of names through single names or ETFs. I think a lot of us have gotten over exposed (whether we know it or not) to the same tech/AI mega theme the last two years.
Here is what I added last week:
SMCI 0.00%↑ - more shares
AMD 0.00%↑ - more shares
PLTR 0.00%↑ - more shares
CRWD 0.00%↑ - new position
XLK 0.00%↑ - more shares
SPY 0.00%↑ - more shares
SCHD 0.00%↑- more shares
SWBI 0.00%↑ - call options for January/March. These are up 100% as of yesterday.
POWW 0.00%↑ - call options for January/March (riskier)
OLN 0.00%↑ - shares
My general strategy right now is to shift slightly cash heavier (just by socking it away). Today’s open is red with NVDA 0.00%↑ down almost 4% and other names getting dragged along with it.
I will buy strategically but think we see a good deal of chop before year end. Don’t be in a rush to ape anything right now. Sitting on your hands and watching can be a valuable skill in a market that is undecided on what headline it wants to move on next.
In regards to defense and drones….
At the moment the flavor of the day seems to be that we might avoid more major combat in Iran. President Trump has said fresh strikes are “highly unlikely” if talks keep moving, and on Monday he said he plans to hold off after appeals from countries in the region, including Qatar. Brent oil prices have dropped below $90 and this week U.S. Secretary of State Marco Rubio said that he sees “no need” for more major operations.
ONDS 0.00%↑ KTOS 0.00%↑ and some of our other drone picks have taken a beating but I think it’s worth repeating, these are longer term bets on the future of warfare, not short term momentum plays on a ground invasion of Iran. I will be adding opportunistically.
The bull case is simply that drones go from small batches and pilot programs to a recurring line item in defense budgets.
Political Trends & Market Opportunities
The gun narrative is a fun play I like to hop in and out of depending on the political temperature. I think we are entering a period where we are going to see elevated social unrest (leading up to the next presidential election).
Texas Democrats just this week FLOODED proposed bills targeting gun rights including new red flag law proposals, restrictions on short barreled rifles, and a whole host of other restrictions. Red flag laws under
More of this will come in other states in the coming weeks and months and it will be a MAJOR driver of panic buying of both firearms and ammunition (prices are already creeping up).
The left is moving quickly in the state introducing new bills on:
Property tax increases
Legalizing Marijuana
Prohibition of construction of border security measures on state park lands
Expand eligibility for Medicaid including low-income individuals
New rules on types of water rights
New rules on subdivisions
Electric utility "monopolies”
If these bills gain traction, the clearest potential winners if the trend continues in other states are cannabis operators and Medicaid focused insurers, with a possible opening for independent power producers if lawmakers loosen incumbent utilities’ grip.
One other post midterm development worth watching for the nuclear trade.I will admit I am no pro on this but the Senate just voted 73–25 to open debate on a bipartisan nuclear permitting bill, with 22 members of the Democratic caucus voting to advance it.
The bill still has to pass both chambers to be fair but it would speed up approvals for power plants, transmission lines, and mines while making large data centers shoulder more of the cost of the grid upgrades.
A few names to keep straight here. Constellation Energy CEG 0.00%↑ gives you exposure to reactors already generating power, Cameco CCJ 0.00%↑ which I have plugged before is a uranium and nuclear fuel play, and then you have Oklo OKLO 0.00%↑ and NuScale Power SMR 0.00%↑which are more speculative bets on new reactor projects.
Outside stock plays we continue to have some incredibly volatile political shifts just days after the Midterms have concluded with the Trump admin making some bizarre statements and public appearances.
President Trump added to his recent unpopularity this week when he said on 60 minutes:
"I'd love to do something on immigration…. I think [immigration] both helped and hurt. I think I got an A+ for closing up the border. I get very high marks for getting the bad ones out, but I get hurt because we also took people that had good jobs, that created one violation or breaking of the law and that was that they came into the country illegally."
Many have interpreted this as Trump getting soft on the Amnesty issue. The Midterms have already started to shift the immigration issue perception globally. New caravans of
I have said it before and I will say it again.
Nothing else in the West matters if officials do not strongly address the immigration issue.
Democrats will absolutely work to open the flood gates again now that they are in power. If it is left unchecked entire voting landscapes will irreparably change (they already have) and the US and other countries will become unrecognizable.
This week the New York Times and other outlets covered Ready for AOC, a progressive volunteer organization that is obtaining support for Rep. Alexandria Ocasio-Cortez, D-N.Y., to run for president in 2028. I mentioned this awhile ago, the shift towards running a full blown socialist candidate is gaining significant steam.
If someone like AOC wins, it is game set match.
You can cope, argue, or disagree but that’s a fact.
Our nation is changing rapidly. It will be entirely unrecognizable if all of this is allowed to continue unchecked. The markets will not react kindly to continued socialist momentum.
Crypto
Crypto’s been in a pretty frustrating bog for some time now after some really promising pumps that, in my opinion, tell us quite a bit about what the next bull market holds for us.
You could make the argument Bitcoin in particular has been resilient but it definitely reacted negatively to the Midterm outcome and this latest CPI print. CoinTelegraph is reporting about $178M of longs got liquidated this morning when the news came out.
I firmly believe we are inside the official bottom range with a little more downside expected into the Winter.
I can tell you as someone who is constantly online, sentiment is pretty abysmal and a lot of people are giving up. If you have a bullish view for next year than it is a great time to DCA into the assets you want exposure to.
The hedge fund reports and news last week were revealing. Renaissance Technologies now has a Hyperliquid position alongside other big giants. If you are looking for indicators for crypto interest from Wall Street look no further, crypto derivatives exchanges have become a trade hedge funds can put on through the equity market.
Despite the uncertainty in the short term the big guys want exposure and they can afford to wait.
Don’t let the emotions and frustration of the chop drive you into capitulating. THIS is the time when those who reap rewards in the bull market get their affairs in order.
The only thing I am adding at the moment in crypto is AAVE.
What I really want to see is Bitcoin knee jerk upward. This would give me some sort of indication of what might be coming early next year. Until then I am an observer.
For those of us who live and breathe markets I know the current price action sucks.
Good time to channel some energy into self improvement while we outlast this chop. Lift some weights, do something outdoors, knock some things off your to do list and understand that we have some short term uncertainty to work through.
See you guys on Thursday morning.
Andy