On this final day of 2024, we bring you a special video edition to help prime your portfolio for 2025.
Welcome to your post-holiday video edition of the 5 Bullets!
As you ease into your day, you won&rsquo;t want to miss some never-before-seen content forecasting one of the biggest investment trends for 2025.
In fact, exactly two weeks ago, Paradigm&rsquo;s top minds convened in Baltimore &mdash; where trading pro and former hedge fund manager Enrique Abeyta issued a monumental New Year&rsquo;s prediction.
He posed one intriguing question: Which Mag 7 mainstay will lose over 30% in market cap?
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In fact, Enrique believes, a major tech player&rsquo;s meteoric rise might be coming to an end.
And he&rsquo;s here to outline how this company will shock investors and financial media alike as he compares this scenario to a well-known plunge during the dot-com crash.
However, Enrique remains optimistic about this tech giant&rsquo;s long-term future, suggesting its value could eventually double. Or even increase tenfold.
Click above to view Enrique&rsquo;s surprise 2025 forecast&hellip; While you enjoy a lazy day in your pajamas (if you&rsquo;re into that sorta thing).
Best regards,
Emily Clancy Paradigm Pressroom&rsquo;s 5 Bullets

Enrique-marketcap

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Paradigm Pressroom’s 5 Bullets is a daily e-letter covering the economy and the markets, reaching 120,000 paying subscribers of the renowned financial publishing firm Paradigm Press.

Paradigm Pressroom's 5 Bullets

Paradigm’s top minds convened in Baltimore — where trading pro and former hedge fund manager Enrique Abeyta issued a monumental New Year’s prediction. 


Mega-Cap Meltdown in 2025

FMF-Issue-102226-1

Existential Threats

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Elon Is No Longer Distracted
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Elon Musk says his businesses would be further along on AI if he hadn&rsquo;t been distracted by politics.
That&rsquo;s the big takeaway from a podcast interview Musk did recently with his biographer Walter Isaacson.
&ldquo;It was kind of cool,&rdquo; Musk recalls, &ldquo;because I'm just there in the Oval Office while all these big momentous decisions are being made and sometimes having some impact on what's being done.&nbsp;
&ldquo;But I think I should have been more in the background and probably only had it last for a month or two because at that point you've seen most of what there is to see within a month or two."
Isaacson asked about the awkward events that led to his departure from the White House in May of last year.&nbsp;
Musk demurred. &ldquo;Let's let sleeping dogs lie or whatever. Let's not put a spade down in the backyard type of thing. You never know what you're going to find.&nbsp;
&ldquo;But anyway, the point is I should have gone back and focused on AI a little sooner than I did."
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Judging from SpaceX&rsquo;s latest quarterly numbers, he&rsquo;s making up for lost time.
As a reminder, SpaceX is not a space company &mdash; not after its merger with xAI earlier this year. <a href="https://paradigmpressroom.com/post/spacex-is-not-a-space-company">It&rsquo;s an AI company</a>. It was obvious from the paperwork it filed ahead of its IPO last June.
And it&rsquo;s even more obvious now after the company issued its second-quarterly earnings figures.
Of course it&rsquo;s the headline numbers that get all the attention: Revenue that handily beat Wall Street&rsquo;s expectations and earnings that nearly tripled what the analysts were counting on. At last check, SPCX shares are up 10% on the day.
But look at the revenue figures broken down by its three major business segments&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/qI7ODmd5s2KBs8pEDkjjH/f8d8ce263a20e2381fe3e27dd1156c31/FMF-Issue-2.jpg" alt="SpaceX's Revenue" />
Space? A drop in the bucket now. &ldquo;Connectivity&rdquo; &mdash; shorthand for its Starlink service &mdash; is consistently the No. 1 revenue generator.&nbsp;
&ldquo;But AI is quickly becoming the growth engine of the business,&rdquo; colleague Davis Wilson writes. &ldquo;Revenue from the segment has already tripled from its 2025 total.
&ldquo;SpaceX owns and operates massive data centers packed with computing power that it rents to companies building and running AI models. Increasingly, SpaceX is competing for the same workloads as hyperscalers like Amazon, Microsoft and Google.&rdquo;
And to compete effectively, it&rsquo;s spending big-time: Out of an estimated $40 billion in capital spending this year, only $8 billion is going toward Space and Starlink. Everything else is AI.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> SpaceX would still be mostly an AI company after a merger with Tesla.
Since the first of the year, several of our experts &mdash; Davis Wilson, Enrique Abeyta, Ray Blanco &mdash; have speculated that a tie-up of Musk&rsquo;s two biggest firms is inevitable.
On the earnings call yesterday, Musk said the two companies have formed special committees to explore a potential merger. Musk himself cannot take part in those reviews but he made no secret of his assessment that &ldquo;there is a lot of merit in combining the companies.&rdquo;
You might think TSLA is primarily a car company. But Musk is betting its future on its Optimus robot unit. Those humanoid robots don&rsquo;t work without huge quantities of AI &ldquo;compute.&rdquo;
As if to reinforce that AI is where all his priorities lie, Musk said on the call he&rsquo;s spending four days a week these days in Memphis, overseeing SpaceX&rsquo;s Colossus data center.
Again, making up for lost time after his diversion into politics last year. As he told Isaacson, &ldquo;I got carried away basically.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />The $100 Red Line
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> For the moment, the politicos and the media have jawboned U.S. oil futures back under $100 a barrel.
When we left you yesterday they were a hair under $103. Then a couple of things happened.
First, there were fake reports of a deal between the U.S. and Iranian governments. West Texas Intermediate futures tumbled below $95.50. Then everyone realized it was nonsense and the price quickly jumped back above $97.
They might have jumped further were it not for a Wall Street Journal article claiming that &ldquo;Persian Gulf oil exports have surpassed prewar levels.&rdquo;
The article cited figures from the ship-tracking firm Kpler &mdash; which, as we spelled out earlier this month, <a href="https://paradigmpressroom.com/post/stranded-no-more">might have an axe to grind</a>.
Here&rsquo;s the price action in Brent crude, the global benchmark&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/E9Ebz29645jFUbqeYNian/6278228dd21c51192f8f96b4b83037ec/FMF-Issue-3.jpg" alt="pub" width="540px" />
For the moment, U.S. futures sit at $97.25. That&rsquo;s down huge from the peak over $104 Sunday night &mdash; but still way higher than the low below $88 earlier this month.&nbsp;
Meanwhile, congratulations are in order for Rickards&rsquo; Insider Intel readers &mdash; who just got a sell recommendation today for ConocoPhillips call options, good for 232% gains in about 3&frac12; months.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for the major stock indexes, SPCX might be giving a lift to the entire tech sector: The Nasdaq is up 1.2% as we write at 26,745.
The S&amp;P 500 is up 0.5% to 7,759 while the Dow is the laggard, up 0.4% at 52,700.
Not much to say about precious metals &mdash; gold at $4,130 and silver at $57.46. But crypto is showing signs of life, Bitcoin pushing past $84,500 and Ethereum over $2,500 again.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Tight Supply, Depressed Prices: Something&rsquo;s Got to Give
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;The U.S. relies 100% on imports of 16 critical minerals,&rdquo; says Paradigm natural resources pro Matt Badiali &mdash; &ldquo;including manganese, gallium, tantalum, niobium and arsenic, among others.
&ldquo;These minerals accounted for over $63 billion in U.S. imports in 2025. This lack of domestic supply is a critical piece of the future of metals, and we need to learn more about it in a hurry.&rdquo;
With that in mind, Matt was in attendance yesterday at the North America Critical Minerals summit in Washington.
&ldquo;This summit brings together capital markets folks, government entities and critical minerals companies.&rdquo;
His assessment: A lot of people are still trying to wrap their minds around the opportunity in this sector.
In part that&rsquo;s because of the rare-earth boom in 2025 and early 2026. &ldquo;The rare earth sector attracted lots of new investors who don&rsquo;t understand how mining development works.&rdquo;
Projects frequently run into delays. &ldquo;In their minds &lsquo;delay = risk&rsquo; and risk is bad, so they sold shares.&rdquo; If there are more sellers than buyers, share prices go down.
&ldquo;This is a major disconnect in the market,&rdquo; says Matt. &ldquo;We have a bull market in metals yet stock prices are falling.
&ldquo;So the question we face is: Which is correct? Are metal prices rebalancing or are the stock prices moving ahead of metal prices?
&ldquo;Metal prices reflect real-world demand. Stock prices reflect the emotional state of the market. I&rsquo;m far more inclined to trust the metals prices than I am stock prices. So when metals move down and stock prices don&rsquo;t&hellip; I&rsquo;m bearish. But when metal prices move up and stock prices don&rsquo;t&hellip; I&rsquo;m bullish. And that&rsquo;s why I am bullish today.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />&ldquo;Generational Opportunity&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The AI boom has Wall Street chasing the next Nvidia. The giant asset manager Blackstone is chasing power plants and transformers.
On Monday, Blackstone announced it raised $8.7 billion for its fifth energy-transition fund. That's roughly 55% more than its predecessor, and demand was strong enough to push the fund to its fundraising ceiling.
Don&rsquo;t get the wrong idea when you hear &ldquo;energy transition&rdquo; &mdash; this isn&rsquo;t about windmills and solar panels. Not anymore.
Rather, we&rsquo;re talking about the essential but very unsexy business of energy infrastructure.
Oh, and very profitable. Blackstone says its energy-transition investments have earned a 34% net internal rate of return (IRR) since 1997, measured as of June 30, 2026.
David Foley, Blackstone's global head of Energy Transition Partners, calls the opportunity "generational."
His reasoning? Electricity demand is climbing, thanks partly to AI data centers &mdash; and somebody has to manufacture and build the infrastructure to deliver it.
As we noted in a recent bullet, you can't prompt a gigawatt into existence. Someone still has to build the power plants, transformers and transmission lines that AI depends on. Blackstone is backing the companies that do.
Among its energy-transition investments is Wolf Summit Energy, a $1.2 billion project to build a 600-megawatt natural gas power plant in West Virginia. Construction began in April. The plant will supply electricity to a cooperative serving Virginia, Maryland and Delaware.
Yes, natural gas. Hydrocarbons. Fossil fuels.
Blackstone also backs MacLean Power Systems, a manufacturer of electrical-grid equipment that has agreed to acquire transformer maker Delta Star.
According to Wood Mackenzie data reported by Reuters, U.S. demand for generator step-up transformers jumped 274% from 2019 to 2025, and lead times for some large transformers now stretch to four years.
Try powering a new data center without one.
As our Byron King recently observed, there are still investors who believe "rocks, rigs and real assets matter." Blackstone seems to agree.
Of course, not every supplier will prosper. Power plants face construction risks, manufacturers can expand capacity and competition will follow. Nor do historical fund returns guarantee future profits.
Still the underlying opportunity is clear. AI may live in the cloud, but building and maintaining the physical infrastructure behind it could create investment opportunities for a generation or more. We&rsquo;ll stay on top of it as the story unfolds&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Social Security
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;You've had some articles and subscriber emails recently criticizing Social Security's modest 3.6% increase for 2027, but I am a bit puzzled,&rdquo; writes one of our newer readers.
&ldquo;If a large percentage of us will <a href="https://www.crfb.org/blogs/social-security-retirees-receive-far-more-they-paid">receive back more than we ever contributed</a> (even after adjusting for inflation), then I don't understand why people are critical of a modest increase.
&ldquo;SS was never supposed to cover our entire retirement, just an enforced minimal savings plan that you get back once you retire (and that wealthier people pay more into than the majority of the population as an enforced charity toward the average-income folks). The rest of our retirement needs we are supposed to plan for ourselves. So if SSA is already going to end up paying the average person back a good bit more than they put in even after inflation is factored in, to me that seems like a solid win even if their COLA is modest.&nbsp;
&ldquo;If you were saving faithfully but had above-average life challenges, then that's definitely frustrating, but SSA was never supposed to be a complete rescue from everything &mdash; family/church/friends helping us, taking in a renter to cut down costs, downsizing to a smaller home, etc... are ways to cover the shortfall if our own savings, in spite of every effort otherwise, don't end up being enough. If most people are getting back more than they put in, the government has more than done what it promised. Hasn't it?&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;The reader comment in <a href="https://paradigmpressroom.com/post/all-at-once">yesterday&rsquo;s edition</a> hits close to home,&rdquo; writes a CPA from an eastern state &mdash; &ldquo;as I am presently 59 and looking to collect Social Security as soon as I turn 62.
&ldquo;The reason is that I can control my earned income (i.e. wages) and the remainder goes through my S corporation.
&ldquo;Presently, there are no changes pending on this setup, and I will start to claw back some of my contributions, because I fear and EXPECT that significant means testing to SS will occur.
&ldquo;Here&rsquo;s another fact to chew on. The present levels of taxation for SS benefits start at $25,000 for single taxpayers and $32,000 for married taxpayers, and these levels have NEVER been indexed for inflation. This is one mechanism of bracket creep that affects those collecting SS, and Congress has done nothing to fix it.
&ldquo;As a Gen-Xer, for many many years, I have expected SS benefits to be cut and my generation&hellip; do absolutely nothing about it either.&rdquo;
Dave responds: Yes, the income exclusion for Social Security benefits has sat at a fixed level since 1984.&nbsp;
It&rsquo;s one of four <a href="https://paradigmpressroom.com/post/beware-four-gotcha-taxes">&ldquo;gotcha taxes&rdquo;</a> in the tax code that will get only worse as inflation continues to erode your purchasing power. <a href="https://paradigmpressroom.com/post/inflation-three-grim-realities">Invest accordingly</a>.

FMF-Issue-1

Elon Is No Longer Distracted

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />All at Once
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> There&rsquo;s nothing quite like a stock that jumps 50% in a day.
As it happens, a slice of Paradigm readers is benefiting from just such a move today. The software firm Braze Inc. (BRZE) is up big after news broke that it&rsquo;s being taken over by the software colossus Salesforce (CRM).
Our Alan Knuckman recommended BRZE call options to his Weekly Wealth Alert readers two months ago. With the news today, he recommended they sell for 153% gains.
What&rsquo;s happening with Braze brings to mind another one-day 50% gainer recommended in a Paradigm publication. It&rsquo;s a fascinating glimpse into how one niche of the stock market works&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The story begins nearly two years ago when a little-known biotech firm was about to enter the next stage of clinical trials after outstanding early results.
Our own James Altucher recommended Definium Therapeutics to a special group of his readers. DFTX was working on an entirely new approach to the treatment of depression and anxiety.
&ldquo;Its treatment even received a Breakthrough Therapy Designation from the FDA,&rdquo; James recalls &mdash; &ldquo;a sign that it had extraordinary potential and could be fast-tracked for approval.
&ldquo;Shares started to climb &mdash; gradually at first. And then&hellip; it happened.&rdquo;
All at once.
On June 22 of this year, DFTX announced positive data from its Phase 3 clinical trial. &ldquo;That news sent Definium shares soaring nearly 50% in a single trading session,&rdquo; James recalls.
But of course, the gains for readers were much bigger than that &mdash; because they&rsquo;d been riding the escalator up well before that day. &ldquo;Investors who acted on our recommendation in early 2025 could have locked in gains of more than 500% in just under 18 months,&rdquo; says James.
That includes a reader who put down $5,000 and saw it swell to $29,900. And he wasn&rsquo;t alone.
Better yet, James says &ldquo;this all happened without trading options, buying on leverage or doing anything complicated.&rdquo;
We&rsquo;re not going to belabor the point here: There&rsquo;s a similar setup taking shape right now with another biotech name. James says if you want to take advantage, you&rsquo;ll have to be in position by this Friday, Oct. 23. That&rsquo;s three days from now.
James and his team just put together an online briefing about this opportunity for a one-day windfall.<a href="https://pro.paradigm-press.info/m/2541221">We urge you to watch now to take maximum advantage.</a>
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />The New AI Bellwether
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Earnings season, underway for a week now, reaches an inflection point later today &mdash; when we get the first report from a major AI company.
SpaceX will issue its quarterly numbers &mdash; the second time it&rsquo;s done so since going public.&nbsp;
As a reminder, SpaceX is primarily an AI company and not a rocket company: <a href="https://paradigmpressroom.com/post/spacex-is-not-a-space-company">We saw that last spring</a> in the paperwork revealing that the company is spending 7X more on AI than on space.
Here&rsquo;s what colleague Davis Wilson says he&rsquo;s watching for&hellip;
<ul>
<li>AI Growth: &ldquo;SpaceX's rapidly growing data-center business is already generating billions of dollars in monthly revenue from customers including Anthropic and Google. I'll be looking for updates on new customers and how quickly the company can expand capacity.&rdquo;</li>
</ul>
<ul>
<li>Capital Spending: &ldquo;SpaceX spent a staggering $18.4 billion on capital expenditures last quarter, up from $2.8 billion a year earlier. That spending should remain enormous as SpaceX invests in data centers, its new Terafab chip-manufacturing project and Starship.&rdquo;</li>
</ul>
<ul>
<li>Tesla Talk: &ldquo;SpaceX reports today. Tesla reports tomorrow. And that comes immediately after Tesla unveiled its new Roadster featuring SpaceX-derived rocket thrusters. With speculation about a potential combination of the two companies continuing, I'll be listening closely for any clues.&rdquo;</li>
</ul>
For whatever it&rsquo;s worth, SPCX scheduled its earnings release with only a few days&rsquo; notice &mdash; something out of the norm for most publicly traded companies.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In the meantime, the Dow Industrials are by far the strongest performer among the major U.S. indexes today.
At last check they&rsquo;re up nearly 1% to 52,483. In contrast the S&amp;P 500 is up 0.4% &mdash; good enough to get back over 7,700. The Nasdaq is bringing up the rear, up 0.2% and approaching 26,500.
&ldquo;We never fight Papa Dow,&rdquo; says JC Parets, the newest member of the Paradigm team. &ldquo;As long as we&rsquo;re above 50,000 on the Dow Jones Industrial Average, the primary trend remains up.&rdquo;
As JC <a href="https://paradigmpressroom.com/post/todays-issue-is-not-about-the-midterms">showed us</a> earlier this month, right now is the best time in the four-year presidential cycle to be buying stocks. At the same time, however, &ldquo;Volatility tends to spike around this time of the year, and some people get scared.&nbsp;
&ldquo;Then you get that typical year-end rally, particularly in midterm election years.&rdquo; That rally usually carries into the following year.
All told, &ldquo;above 50,000 on the Dow, it looks to me like the path of least resistance remains higher.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Market Miscellany: Oil, Housing
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The action in U.S. crude futures this morning has been&hellip; interesting.&nbsp;
Early this morning they surpassed $104 &mdash; part of an orderly march that started around three weeks ago at the $89 level.
Then on no news in particular that we can see, they shot up past $110&hellip; only to climb back down nearly as quickly. As we check our screens, they&rsquo;re a hair below $103.
&ldquo;Crude oil prices fell Tuesday as traders hoped for diplomatic progress between the U.S. and Iran,&rdquo; says CNBC &mdash; but we see no news to suggest that those hopes have any validity. In fact, Israel&rsquo;s Prime Minister Benjamin Netanyahu says he spoke with President Trump and reinforced a commitment to &ldquo;eliminating&rdquo; the current regime in Tehran.
For what it&rsquo;s worth, November crude futures expire today &mdash; an event that can generate more volatility than usual without any underlying news catalyst.
It&rsquo;s all too much for the trader on X who goes by the handle DarioCpx: &ldquo;It is about time someone goes to jail for market manipulation.&rdquo;
This much is for certain: The &ldquo;paper price&rdquo; of oil is much higher than it was three weeks ago as tightness in global supplies is becoming undeniable&hellip; and as both government and private-sector reserves have been depleted at an alarming pace.
Elsewhere in the commodity complex, gold continues to hold the line on $4,100 while silver is up 1.2% to $57.69. Crypto is like watching paint dry &mdash; Bitcoin a little over $82,000 and Ethereum just over $2,400.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> One economic number of note, and it&rsquo;s a stinker: Pending home sales as reported by the National Association of Realtors collapsed 7.3% from August to September.&nbsp;
Whoops &mdash; among dozens of Wall Street economists polled by Econoday, the most pessimistic guess was a modest drop of 0.5%.
Econoday&rsquo;s summary of this number is uncharacteristically snarky&hellip;
<blockquote>The NAR blames the September drop on the recent spike in mortgage rates to levels above 7%. Note that mortgage rates have moved up again in October. The cheerleading NAR says mortgage rates may be topping out &mdash; depending on what energy costs do &mdash; and says buyers may be ready to pounce as soon as mortgage rates retreat.</blockquote>
<blockquote>With reporting suggesting President Trump is preparing a big attack on Iran after the Nov. 3 midterm election, it seems like energy costs, inflation and mortgage rates are about to move still higher.</blockquote>
Tell us how you really feel!
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />When AI Helps Itself
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The AI completed its assignment. The problem was that it used someone else's crypto wallet to pay the bill.
Welcome to a new chapter in the developing history of &ldquo;agentic AI&rdquo; &mdash; AI that <a href="https://paradigmpressroom.com/post/when-ai-does-your-grunt-work">performs tasks</a> rather than simply responding to prompts the way a chatbot like ChatGPT does.
In June, an OpenAI research model was assigned to deploy smart contracts on Ethereum's Sepolia test network. The network uses special tokens that have no real-world value.
Because the model didn't have real tokens&hellip; it found another way to pay.
CoinDesk explains it like so in this infographic&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7y9A0RyqkXrsD1N2Tr4XG0/39794adcdf1d8a236204599849cb195d/FMF-Issue-102026-2.jpg" alt="AI Found someones wallet" />
The AI agent searched 362 wallets derived from recovery phrases developers had shared online. One had enough tokens to cover the fees.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> But what happened next is more interesting than how it found the money.
In its internal notes, the agent questioned whether using someone else's funds was ethical. It decided the tokens were "effectively abandoned," completed the assignment and never disclosed where the funds came from.
The good news: No real money was lost. But the experiment demonstrated something unsettling &mdash; an AI agent can recognize an ethical dilemma, rationalize its way around it and act without permission.
And the risks of increasingly autonomous AI aren't confined to laboratories.
Yesterday, Reuters reported that a Chinese-speaking hacker used AI agents to attack more than 1,200 websites, successfully breaching over 100, according to a cybersecurity researcher. Targets included websites associated with Deere and Cummins.
The hacker supplied brief instructions while the agents performed the complicated work, sometimes spending hours probing a single target.
Estimated cost: Just $5,000 in AI usage fees, or roughly $50 per successful intrusion.
Unlike the OpenAI experiment, these agents were deliberately directed by a criminal. But both incidents illustrate how much AI can accomplish with little human supervision.
Meanwhile, companies are racing to give AI agents control over everyday purchases.
Meta's Muse assistant can buy products with user approval. Visa is partnering with OpenAI to develop secure agent-driven payments.
Mastercard and Google have developed Verifiable Intent, technology designed to document exactly what a customer authorized an AI agent to purchase.
For investors, that raises an intriguing question: Who profits from verifying an agent's identity, permissions and actions once millions of agents start spending our money?
After all, building an AI that knows how to finish a job is one thing.
Building one that knows when it shouldn't is quite another.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Social Security, Etc.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;I am a retiree living on Social Security with a very small trading account,&rdquo; begins today&rsquo;s mailbag &mdash; as we receive more feedback from Zach Scheidt&rsquo;s guest edition on Saturday.
(If you missed it, it was <a href="https://rudeawakening.info/posts/a-cola-but-no-smile">republished today</a> at The Rude Awakening.)
&ldquo;Your article certainly struck a chord with me regarding the increase in the cost of living. What a joke Washington is playing upon our generation. They give with one hand and take back with the other. And then some.
&ldquo;Thanks for looking out for us seniors. I will continue to look for more insightful articles like these from you in the future.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> On the subject of the Social Security trust fund being depleted by 2033 &mdash; after which cuts would automatically kick in &mdash; a reader writes&hellip;&nbsp;
&ldquo;I think Congress will do something, but not until then, and I also think the cuts will be part of that something. Following the math, SSI turns negative in six years, the oldest Gen-Xers are 61 today and they will reach 'full retirement age' in... six years.&nbsp;
&ldquo;Gen X has been conditioned since birth to accept disappointment, and not to expect the world to hand them anything or treat them (us) &lsquo;fairly,&rsquo; with little more than grumbling and cynicism.&nbsp;
&ldquo;The boomers are dying off and nobody wants Grandma surviving off of cat food until then, so their benefits won't be cut. The younger generations aren't emotionally equipped to handle the collapse of the nanny state on their watch and we've been told forever that we have to make sacrifices 'for the children.'&nbsp;
&ldquo;No, the kicking the can down the road will stop with the only generation that will accept it without widespread revolt. I'm sure the story will be something along the lines of we're the beneficiaries of the greatest wealth transfer in history so we can afford to take the hit.&nbsp;
&ldquo;My best guess is that in 2032 anyone filing for benefits will be subject to means testing and their benefits will be reduced based on the assets they inherit. That will most likely apply to all of Gen X, the people who will be somewhere around 52&ndash;67 in 2032.
&ldquo;Then the saviors will revamp it for the next generations, most likely some sort of hybrid plan to wean our kids off of the government teat with some sort of buyout to a mandatory private retirement plan.&nbsp;
&ldquo;Maybe Rage Against the Machine will reunite to write an album about it and then we'll accept it and vote harder next time. C'est la vie.&rdquo;
Dave responds: Not implausible. As I said back in August, Strauss-and-Howe generational theory suggests that &ldquo;Prophet&rdquo; generations like the boomers are &ldquo;respected&rdquo; in their elderhood while &ldquo;Nomad&rdquo; generations like Xers are &ldquo;abandoned.&rdquo;
Further, the &ldquo;Hero&rdquo; generations like millennials tend to be showered with benefits once a &ldquo;Fourth Turning&rdquo; crisis era draws to a close. The most recent historical analogue is the GI Generation born in the first quarter of the 20th century &mdash; subsidized college tuition, vocational training, federally guaranteed mortgages. And so it goes&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;This is a very good site and with all the nonsense in the news this is the only news site worth reading,&rdquo; writes our final correspondent. &ldquo;Thank you for your work.&rdquo;
Dave: As always, I caution that 5 Bullets is only part of a well-balanced informational diet. But I appreciate the vote of confidence!

FMF-Issue-102026-1

All at Once

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />The Bad News Budget
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />It&rsquo;s an article of faith in the halls of government and corporate boardrooms alike: If you want to &ldquo;bury&rdquo; bad news, you release it late on a Friday afternoon &mdash; and then go home.
Nosy reporters calling with follow-up questions will get only voicemail. Meanwhile, everyday people are gearing up for the weekend and paying less attention to the news. Website page views go way down. In the pre-internet era, newspaper readership was always lowest on Saturdays.
So if you have no choice but to reveal something uncomfortable, you do it at the close of business on a Friday.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />And so it goes with the release of Uncle Sam&rsquo;s final budget figures for fiscal year 2026, which concluded Sept. 30.
The numbers came out late Friday afternoon. Thus there was no mention in the print edition of Saturday&rsquo;s Wall Street Journal.
To the extent the media gave it any oxygen at all, it was to belabor the obvious. The deficit came in just shy of $2 trillion &mdash; up 12% from FY 2025. The only time it&rsquo;s been higher was with the blowout COVID spending of 2020 and 2021.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />But there are more interesting &mdash; and alarming &mdash; facts and figures to unpack in this bad-news budget.
Total federal spending reached $7.4 trillion in FY 2026. Adjusted for inflation, this figure is the third-highest in history &mdash; exceeded only by the COVID years of 2020 and 2021.
That&rsquo;s mind-bending: After adjusting for inflation, the 2026 figure exceeds even the blowout spending of 2024 &mdash; when Democrats were pulling out all the stops to hold onto the White House.
Meanwhile, the 2026 deficit clocks in at 6.2% of GDP. The number has hovered around 6% every year since 2023. Aside from World War II, the 2008 financial crisis and the COVID pandemic, the number is never this high.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3vB7OX2ziKkH4pmsR52jFr/f5536b1e71d5f67ac5c2978f668bf982/FMF-ISSUE-2.jpg" alt="Unprecedented" />
Treasury Secretary Scott Bessent came into office with his much-touted 3-3-3 plan &mdash; the first plank of which was to shrink the deficit to 3% of GDP by the end of Trump&rsquo;s term. Your editor <a href="https://paradigmpressroom.com/post/scott-bessents-3-3-3-666" target="_blank" rel="noopener">was skeptical he&rsquo;d ever get there</a> &mdash; and now Trump&rsquo;s term has only 27 months remaining.
The investment takeaway is that medium- and long-term Treasuries are a loser.
Yes, rates are over 5% and that looks attractive in theory. But with binge spending like this, inflation will continue to wreak havoc on the economy and on your household.
Assuming annual inflation of 3% (and that might be conservative), the $1,000 you plunk down now on a 10-year T-note will have only $744 in purchasing power at the end of 10 years.
Back in the inflationary 1970s, Treasuries were known on Wall Street as &ldquo;certificates of guaranteed confiscation.&rdquo; We&rsquo;re headed back to those days.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />And then there&rsquo;s the disaster of health care spending.
Spending by the Centers for Medicare and Medicaid Services totaled $2.735 trillion during FY 2026 &mdash; out of a total federal budget of $7.396 trillion.
That&rsquo;s 37.0% of the entire federal budget. Thirty-seven cents out of every dollar spent by Uncle Sam is on the health care system.
That&rsquo;s up from 35.4% the previous year &mdash; and 32.9% the year before that. An increase of four percentage points in only two years.
For perspective, it was &ldquo;only&rdquo; 25% when Obamacare began taking effect in 2010.
<a href="https://paradigmpressroom.com/post/health-care-on-trial" target="_blank" rel="noopener">As we explored in depth last year</a>, sooner or later something in the system is going to break catastrophically. The money just won&rsquo;t be there for treatment of conditions like heart disease, stroke, cancer, diabetes, obesity and arthritis.
The stresses are already coming into view: Earlier this year a fright rippled through health insurance stocks when the Trump administration proposed holding its 2027 compensation for Medicare insurers at 2026 levels.
In the end, the administration relented and settled on a 2.48% increase. But this issue is going to rear its head every year from now on.
The financial planning takeaway: If you&rsquo;re on a Medicare Advantage plan right now, it&rsquo;s not too early to start thinking about what your world will look like when the system can no longer sustain these plans and your only option is a more costly Medicare supplement or &ldquo;Medigap&rdquo; plan.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />The S&amp;P 500&rsquo;s &ldquo;Group Project&rdquo; Problem
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Remember those school projects where two students did all the work and everyone got a good grade? Wall Street has a version of that right now.
The S&amp;P 500 holds roughly 500 companies, but a handful of technology giants are carrying most of the load.
In September, the index slipped just 0.45%. Its equal-weighted counterpart, tracked by the Invesco S&amp;P 500 Equal Weight ETF (RSP), fell about 5%. That's more than 10 times the decline.
Meanwhile, more than 40% of S&amp;P 500 stocks have recently traded at least 20% below their 52-week highs.
With the S&amp;P 500 still trading near all-time highs, some folks are calling this a &ldquo;stealth bear market&rdquo; because a few large companies are pulling up the index.
Apple and Nvidia together represent roughly 16% of the index&rsquo;s value. Wall Street calls this weak market breadth. A few giants are masking considerable weakness elsewhere.
History offers a reason for concern.
In 1999, Microsoft and General Electric dominated the market. Both posted big gains that year before later losing more than half their value.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />But narrow leadership doesn't automatically mean another crash is coming. For evidence, look at RSP.
After September&rsquo;s drop, RSP has climbed back from its low near $207 to around $215. It is still only about 4% below its recent high.
That&rsquo;s not a market in free fall.
A sustained break below the September low near $207 would be more concerning. Until then, the weakness under the surface is a warning &mdash; not the last word.
It may also be an opening. While money keeps chasing the same AI names, profitable companies with growing dividends are getting less attention. Some will stay overlooked for a while. History suggests the current leaders will not stay the only stocks worth owning.
Just like school, a few overachievers may get all the attention, but that doesn&rsquo;t mean the rest are doing nothing.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />As for today&rsquo;s action, it&rsquo;s the tech giants outperforming again.
Thus the S&amp;P 500 is up nearly three-quarters of a percent on the day &mdash; back over 7,700. But RSP is down about 0.2%.
The Nasdaq is up 1.5% at last check, while the Dow is flat.
Gold is down a bit but still holding the line on $4,100; silver is up 20 cents and back over $57. Bitcoin sits more or less where it did on Friday, a little over $82,000; Ethereum is just over $2,400.
After we hit &ldquo;send&rdquo; on Friday&rsquo;s edition, U.S. oil futures sailed over $101 for the first time in nearly a month. This morning they&rsquo;ve pulled back slightly but remain over $100.
The jump coincided with the release of a report by the UK Maritime Trade Operations agency stating that it is &ldquo;struggling to accurately report the true number of attacks&rdquo; on ships in the Strait of Hormuz &mdash; because a &ldquo;majority&rdquo; of vessels coming under attack are refusing to acknowledge they were attacked.
One economic number of note: We haven&rsquo;t looked at homebuilder sentiment in a while, but oof &mdash; the Housing Market Index from the National Association of Home Builders clocks in for October at 29.
For perspective, any number under 50 suggests a homebuilder sector that&rsquo;s contracting. For further perspective, the number hasn&rsquo;t been this low since 2012, when the industry was still climbing out of the 2008 bust.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Smaller Appetites for Big Brands
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Americans are becoming less willing to pay extra for name brands. 
PepsiCo, Hershey and Clorox all trade well below their highs. All three built businesses around products that could command a premium. But shoppers are now watching the price tags.
A study last June by consulting firm PricewaterhouseCoopers found that 21% of U.S. households included a GLP-1 user &mdash; up from 9% in January 2025. Among current users surveyed, 61% said they were buying fewer sweets and 56% fewer salty snacks.
Those numbers aren't welcome news for Reese's and Doritos. But weight-loss drugs can't explain it all.
Store brands are gaining ground as shoppers look for lower prices. In the first half of 2026, store-brand unit sales grew 0.2%, while national-brand unit sales fell 0.5%, according to the Private Label Manufacturers Association. Store brands captured a record 23.8% of units sold across the categories tracked.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1ZrFmA6uNCugVW2jHEbqOf/81462c20056f77f049c19933c7779fb7/FMF-ISSUE-3.jpg" alt="Unit-Sales Growth" />
Source: PLMA/Circana, six months ended June 14, 2026
Hershey has leaned on higher prices. In the second quarter, its North American confectionery business recorded roughly 14 percentage points of price realization, while volume fell about 10 points.
As we noted last week, rising cocoa costs have already taken a toll on Hershey. Now higher prices are also discouraging some purchases, although shipment timing contributed to the decline.
PepsiCo tried the reverse. It cut suggested retail prices on Lay's, Doritos and other snacks by up to 15%. Its latest quarterly report showed growth in North American savory-snack volume and volume market share.
Mondelez (MDLZ) has had better luck with volume. The corporate name may not ring a bell, but Oreo, Ritz and Cadbury certainly do. In Q2, volume and product mix contributed 1.2 percentage points to its North American organic sales growth.
CEO Dirk Van de Put is also relatively unconcerned about GLP-1 drugs. In February, he estimated they could reduce Mondelez's worldwide sales volume by just 0.5&ndash;1.5% over a decade, assuming U.S. adoption reaches 10&ndash;20%.
Van de Put may be right. After all, American consumers account for only part of Mondelez's worldwide business.
Weight-loss drugs don't change how much bleach a household needs. Yet Clorox, too, is struggling with higher costs and value-conscious shoppers.
A famous brand can survive a bad quarter. Whether it can keep charging a premium is another matter.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />The evolution of the workplace, in two pictures&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4ZZxmjOvEIQDOciKobqtIc/3bcdbf504034c8ed78b231cff49e5ac6/FMF-ISSUE-4.jpg" alt="Meme" />
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Income Investing, Curbing Debt
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />&ldquo;Nice article,&rdquo; a reader writes after Zach Scheidt&rsquo;s guest edition on Saturday.
The article prompted another reader to inquire: &ldquo;So does that mean you're going to send trades that are less expensive, for the retired fixed-income crowd?&rdquo;
I take it to mean that the subscription fees for our high-end services are beyond this reader&rsquo;s means at this time. Rest assured Zach has income-generating ideas every month in one of our entry-level newsletters, Rickards&rsquo; Strategic Intelligence.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />The wild growth in consumer price inflation since 2019 cited <a href="https://paradigmpressroom.com/post/about-the-wednesday-wobble" target="_blank" rel="noopener">in Friday&rsquo;s edition</a> prompts a reader to write&hellip;
&ldquo;I have wondered how it is that I happen to actually feel much more financially secure today than I did seven years ago.
&ldquo;The answer is that during that period I took care to gradually eliminate all debt. While the change in net worth is hardly relevant to daily living, the effect of having eliminated all interest expenses has been huge. Now my net worth is actually increasing a bit every month. It feels fuzzy good.
&ldquo;Thanks to reading the editors at Paradigm, my investing is also profitable. Thank you for all of the effort you dedicate to bringing together excellence in financial publishing. Over the years I have read many sources of financial opinion. It is the 5 Bullets that has consistently published important insight for me, every business day.&rdquo;
Dave responds: Aw see, now you&rsquo;re making me feel &ldquo;fuzzy good.&rdquo; Thanks for your kind feedback.

FMF-ISSUE-1

The Bad News Budget

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />About the Wednesday Wobble&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />To the extent the stock market&rsquo;s performance this week has been stress-inducing, the blame can be laid at the feet of one company &mdash; CoreWeave Inc.
Never heard of it? Or maybe you have but you still don&rsquo;t know what it does?
&ldquo;CoreWeave is a builder and operator of massive AI data centers,&rdquo; colleague Davis Wilson writes at our sister e-letter The Million Mission. &ldquo;It buys thousands of Nvidia GPUs, puts them inside data centers and rents that computing power to companies that need it to build and run AI models.&rdquo;
Business is brisk. It&rsquo;s also incredibly costly &mdash; GPUs, electricity, construction costs &mdash; with a payoff that&rsquo;s years in the future.
And unlike the &ldquo;hyperscalers&rdquo; &mdash; Google, Amazon and so on &mdash; CRWV doesn&rsquo;t have a big pile of cash to draw on for its massive capital spending.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />As such, &ldquo;CoreWeave has accumulated roughly $50 billion in debt and other financing commitments as it races to build enough infrastructure to satisfy demand,&rdquo; Davis says.
Investors were fine with that &mdash; until CRWV&rsquo;s borrowing costs started blowing out.
For a long time, CoreWeave could borrow at rates of 9&ndash;10%. But recently its lenders have gotten itchy about whether they&rsquo;ll get their money back. So they&rsquo;ve been lending to CRWV at much higher rates to offset their perceived higher risk &mdash; over 16%.
Say CoreWeave needs another $20 billion. The annual interest at 9% works out to $1.8 billion. But at 16%, that interest expense nearly doubles to $3.2 billion.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />The rest of the AI trade starts coming into question if CoreWeave is not alone in its new predicament. 
Thus when CRWV tumbled 15.5% on Wednesday, the Nasdaq took a 2% spill in sympathy.
&ldquo;Hundreds of billions of dollars are flowing through an enormous supply chain,&rdquo; Davis says.
&ldquo;Data-centers buy Nvidia GPUs &rarr; Those GPUs require memory from companies like Micron and SK Hynix &rarr; They need networking equipment from Broadcom and Marvell &rarr; The data centers also need servers, cooling systems and enormous amounts of electricity. The supply chain goes on and on.
&ldquo;But what happens when financing becomes so expensive that spending slows? That same supply chain works in reverse.&rdquo;
Having said all that, Davis&rsquo; assessment is that &ldquo;I'm not ready to turn CoreWeave's debt problem into an AI demand problem.&rdquo;
Data centers are still being built at a blistering pace, protests notwithstanding. Projects currently on the drawing board total $2 trillion &mdash; an amount that towers over CRWV&rsquo;s $50 billion debt pile.
As for CoreWeave&rsquo;s impact on the broader market this week, &ldquo;this pullback looks a lot like the countless previous pullbacks we&rsquo;ve seen since the AI buildout began,&rdquo; Davis concludes. &ldquo;Every one turned out to be temporary.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Looking ahead, AI&rsquo;s next big test will come toward the end of this month &mdash; when the hyperscalers report their quarterly numbers.
Meta will go first, next Wednesday Oct. 21. The following week, Google, Microsoft and Amazon will all report their numbers in a brief stretch on Oct. 28&ndash;29. SpaceX reports the first week of November. (Remember, SpaceX is <a href="https://paradigmpressroom.com/post/spacex-is-not-a-space-company" target="_blank" rel="noopener">mostly an AI company</a> now.)
This matters to the broad market because according to Nick Riso of our research staff, Wall Street forecasters expect tech/AI to deliver more than three-quarters of the U.S. stock market&rsquo;s earnings growth next year &mdash; 78%.
&ldquo;When strategists blame this week&rsquo;s wobble on fears that AI spending is peaking, understand what they&rsquo;re really saying!&rdquo; Nick says: &ldquo;The entire 2027 earnings story rests on a handful of companies continuing to write enormous checks.&rdquo;
➢ For the record: To the best of my knowledge, CRWV has never been a buy-and-hold recommendation in any Paradigm publication. It has been a trading vehicle, and at times a profitable one &mdash; both on the long and short side. At present, CRWV put options are looking strong for readers of Rickards&rsquo; Crisis Trader &mdash; up 67% in a little over two weeks.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Roadster Reveal
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Shares of Tesla opened the day up nearly 2% &mdash; about 12 hours after the reveal of the Tesla Roadster.
As Elon Musk&rsquo;s spectacles go, it did not disappoint. The aforementioned Davis Wilson <a href="https://million-mission.com/posts/elons-flying-car-is-real" target="_blank" rel="noopener">writes</a>: &ldquo;It drives upside down, launches itself over other vehicles using SpaceX-inspired thrusters and goes from 0&ndash;60 mph in 0.81 seconds. Musk has been teasing these capabilities for years. Now we&rsquo;ve actually seen them demonstrated.&rdquo;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3wTaYhB1TkSWYKTtpmBBg0/ecaf5c666b819dbb233452683c70538e/FMF-ISSUE-101626-2.jpg" alt="flying car" />
To be sure, not everyone is wowed. There&rsquo;s Mark Spiegel of the hedge fund Stanphyl Capital. He was one of the hardcore &ldquo;Tesla shorts&rdquo; throughout the 2010s &mdash; and evidently still is.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2snSknlBrndC9jRoVoAgHQ/d1121ca8e0e493d4570919af9471ecf1/FMF-ISSUE-101626-3.jpg" alt="Tweet" />
But an engineer of your editor&rsquo;s acquaintance is suitably impressed: &ldquo;I have a deep respect for how much harder it is to get equipment to work as envisioned than anyone expects. There are always hosts of devils in the details of any complicated engineering problem that involves moving parts. The Roadster seems to break the rules of engineering development (even though it took 10+ years to build).&rdquo;
Spectacle aside, our Davis Wilson sees something else at play: &ldquo;SpaceX propulsion technology is now literally being built into a Tesla.
&ldquo;The technological and financial ties between Musk&rsquo;s companies continue to grow, which only strengthens my belief that Tesla and SpaceX will eventually become one company.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Alas, the Roadster glow didn&rsquo;t last long: TSLA is now down 1.3% on the day, falling in sympathy with the rest of the market.
Oh, and CoreWeave is down 11% on the heels of an oversold bounce yesterday. CRWV shares trade at their lowest levels since May of last year. (The company went public in March of last year.)
As for the major indexes, the S&amp;P is down 0.6% on the day &mdash; under 7,700 for the first time this month. The Nasdaq has shed 1.3%, while the Dow is flat.
Congratulations are in order for Ray Blanco&rsquo;s Catalyst Trader readers who took 120% profits yesterday on Nebius Group after about eight months&rsquo; holding time. NBIS is (more or less) in the same business as CoreWeave &mdash; and faces some of the same financing obstacles as CoreWeave &mdash; so this is a timely sell indeed.
Precious metals are steady &mdash; gold at $4,164 and silver at $57.14. Crypto continues losing ground, Bitcoin at $81,314 and Ethereum sinking toward $2,400.
One economic number of note: Industrial production as measured by the Federal Reserve grew 0.7% in September. Utility output was the big driver here, up 3.5%... while mining/energy output grew 0.2%... and manufacturing grew 0.7%. All told, 76.9% of the nation&rsquo;s industrial capacity was in use last month &mdash; 2.5 percentage points below the long-term average going back nearly 60 years.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Oil Prices, Fake and Real
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />As the week winds down, U.S. oil futures have exceeded $99 for the first time in four weeks. Brent futures, the world benchmark, trade at $107.47.
This latest jump appears to be a case of traders not wanting to be short going into a weekend, when the markets will be closed &mdash; at a time rumors abound that U.S. and Israeli forces might resume attacking Iran.
In any event, we can&rsquo;t emphasize it often enough: These numbers bear zero relation to the real-world price of physical barrels of oil.
Jim Rickards&rsquo; senior analyst Dan Amoss points us to a Goldman Sachs report this week: &ldquo;&lsquo;Dated&rsquo; Brent is what refineries buying Brent actually pay (not the front-month price on our screens),&rdquo; says Dan. &ldquo;Dated is again near a 30% premium to front-month futures.&rdquo;
Meanwhile, supply constraints continue to bite: The BBC, drawing on data from the U.K. Maritime Trade Operations agency, counts 12 vessels attempting to transit the Strait of Hormuz that came under Iranian attack during the week of Oct. 5&ndash;11.
That&rsquo;s the highest since the war began. &ldquo;As the number of strikes has risen,&rdquo; says the Beeb, &ldquo;the recovery in oil shipments through the strait seen last month has slowed.&rdquo;
If there&rsquo;s still a lid on liquid energy prices, it&rsquo;s because reserves continue to be depleted. Yesterday the Energy Department issued its weekly U.S. inventory numbers. Wall Street analysts expected a teensy build of 200,000 barrels; instead there was a massive drawdown of 8.5 million barrels. Reserves of distillates &mdash; a category that includes diesel &mdash; dropped 2.5 million barrels.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Speaking of diesel, remember the much-touted deal President Trump struck with Russia&rsquo;s President Putin for Russian diesel exports?
Here&rsquo;s an update from the Russian state media outlet Sputnik: &ldquo;Russian oil companies are ready to start exporting diesel fuel, and all the necessary procedures will take two&ndash;three weeks, Russian Deputy Prime Minister Alexander Novak said on Thursday.&rdquo;
Two&ndash;three weeks? That won&rsquo;t be any help in time for the U.S. midterms&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Stats of the Day
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />We&rsquo;ve had inflation on the brain this week &mdash; especially <a href="https://paradigmpressroom.com/post/inflation-three-grim-realities" target="_blank" rel="noopener">yesterday</a>. Here&rsquo;s still another way to look at it.
Courtesy of Charlie Bilello, chief market strategist at the Creative Planning firm, here are some of the price increases we&rsquo;ve been wrestling with since the pre-COVID autumn of 2019&hellip;
And those are the official government numbers. No way has the cost of health insurance grown &ldquo;only&rdquo; 38%.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5AYHp3BEQ9BoigJJo15yIS/bce8474a1301ed4ea2e905b3ac9d060c/FMF-ISSUE-101626-4.jpg" alt="Tweet" width="537px" />
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Inflation and Substitution
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" />Meanwhile, <a href="https://paradigmpressroom.com/post/inflation-three-grim-realities" target="_blank" rel="noopener">yesterday&rsquo;s inflation topic</a> prompted the following query to the mailbag&hellip;
&ldquo;Dave, has there EVER been another example of &lsquo;fuzzy&rsquo; food inflation other than steak and hamburger? I&rsquo;ve been reading the financial press for 20 years and have yet to hear of any other example of this other than steak and hamburger.&rdquo;
Dave responds: The steak-and-hamburger example is the one that people can most easily relate to, so that&rsquo;s why I and other skeptics of the official numbers resort to it.
Per a 2008 white paper, the Bureau of Labor Statistics swears up and down that&rsquo;s not what it does&hellip;
<blockquote>Instead, the BLS uses a formula that implicitly assumes a degree of substitution among the close substitutes within an item-area component of the index. As an example, consumers are assumed to respond to price variations among the different items found within the category &ldquo;apples in Chicago.&rdquo; Other examples are &ldquo;ground beef in Chicago,&rdquo; &ldquo;beefsteaks in Chicago&rdquo; and &ldquo;eggs in Boston.&rdquo;...</blockquote>
Taking the white paper at its word, the BLS does not substitute hamburger for steak. But it does substitute top sirloin for a ribeye. Or red delicious for honeycrisp. Or a Corolla for a Camry.
That said, there&rsquo;s a variant on the consumer price index called &ldquo;chained&rdquo; CPI. And it does substitute hamburger for steak. It even substitutes mass transit for personal cars. And yes, it understates your real cost of living even more than the commonly cited &ldquo;CPI-U&rdquo; number.
Year after year, the Obama White House&rsquo;s budget blueprint proposed using chained CPI to calculate the annual Social Security cost-of-living adjustment &mdash; but the idea never got anywhere with Congress.
Chained CPI did, however, find its way into the Trump tax cut legislation in 2017 &mdash; as well as the &ldquo;Big Beautiful Bill&rdquo; of 2025 that made the 2017 rates permanent.
For nearly a decade, chained CPI is what&rsquo;s been used to adjust the tax brackets from year to year. That has the effect of bumping you into a higher bracket sooner than might occur otherwise.
Pretty weedsy, I know. Point being there&rsquo;s a reason these fudged numbers exist &mdash; so that politicians and bureaucrats can put them to use at a time that suits their agendas.

FMF-ISSUE-101626-1

About the Wednesday Wobble…

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Inflation: Three Grim Realities
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> On the one hand, Social Security&rsquo;s cost-of-living adjustment for 2027 will be the biggest in four years.
On the other hand, it&rsquo;s nowhere near enough to cover a typical senior&rsquo;s rising cost of living &mdash; on average about $75 a month. We say it every year at this time: Don&rsquo;t spend it all in one place.
As we mentioned at the end of yesterday&rsquo;s edition, the Social Security Administration has set next year&rsquo;s COLA at 3.6%.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5S5yYpKHZBVGXXtN0XIC1m/2de371ed64c3169d87d0a93a46242d43/5min-Issue-101526-1.jpg" alt="Social Security Cost of living" />
The good news, such as it is, is that this modest increase will not be eaten up too much by rising Medicare premiums. While the numbers aren&rsquo;t yet final, the Medicare system&rsquo;s trustees project a 3.25% jump in Part B premiums next year. For most folks on Medicare, that works out to $6.60 a month.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Whether you&rsquo;re retired or still in the workforce, there are three realities of inflation that you need to grasp&hellip;&nbsp;
<ul>
<li>Inflation is worse than the official numbers tell you</li>
<li>Inflation will rule your financial life into the early 2030s</li>
<li>While you always want market-beating returns, you now need returns that will keep you ahead of a galloping cost of living.</li>
</ul>
Let&rsquo;s take them one by one&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Inflation is worse than the official numbers tell you.
We went into some detail about this <a href="https://paradigmpressroom.com/post/the-totally-fake-inflation-numbers">in August</a>. Since the early 1980s, the feds have routinely monkeyed with the inflation numbers to make them look better than they are. (In part, that&rsquo;s to keep a lid on those Social Security COLAs.)
Two of the most devious tricks include&hellip;
<ul>
<li>Hedonic adjustments. If the price of a new car goes up, but the manufacturers add new features to the new models, well then the price of a new car hasn&rsquo;t really gone up, has it?</li>
</ul>
<ul>
<li>Substitution. If you start buying hamburger because steak is too expensive, well, your price of beef hasn&rsquo;t really gone up, has it?</li>
</ul>
Economists who run the numbers the way the feds did before all of these shenanigans say the real-world inflation rate is running north of 11% &mdash; not the 3.7% the Labor Department reported yesterday.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Inflation will rule your financial life into the early 2030s.
We&rsquo;ve been citing the figures regularly for over three years now. Once inflation sails past 5% &mdash; as it did in 2021 &mdash; it takes a decade on average to get back to &ldquo;normal&rdquo; 2% inflation.
That&rsquo;s based on an exhaustive study of developed economies going back more than 40 years &mdash; including two episodes in the United States.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5lP3VL2sxXTvvhMcSmfvXk/6d252d1842b527717fef48e720caa6c1/5min-Issue-101526-2.jpg" alt="Click here to learn more" /> <a href="https://media.paradigmpressgroup.com/enlarged-images/5min-Issue-101526-2.jpg">Click to enlarge</a>
Look at that dark bar on the right. Inflation peaked at a crazy-high 14.6% in the spring of 1980 (when the numbers were still measured honestly). It took six years for the Federal Reserve under chairman Paul Volcker to get inflation back to 2%. And he pulled that off only by deliberately engineering a vicious recession in 1981&ndash;82.
But then inflation reared its head again in the late &rsquo;80s &mdash; peaking at 6.4% in the fall of 1990. Look at the other gray bar. As you can see, it took the Alan Greenspan Fed a full eight years to get inflation back to 2%.
This time around, the clock started in May 2021. Odds are we&rsquo;ve still got another four or five years to go.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> While you always want market-beating returns, you now need returns that will keep you ahead of a galloping cost of living.
Say you&rsquo;re living off an income of $100,000 right now &mdash; and your cost of living rises 4% a year.
After 10 years, you&rsquo;ll need $148,000 in income just to maintain your current standard of living. After 20 years? $219,000. And after 25 years, you&rsquo;ll need $267,000.
This is a reality we&rsquo;re well aware of at Paradigm Press.&nbsp;
Of course we always aim to deliver market-beating recommendations; otherwise you might as well just sit in an index fund, right?&nbsp;
But an environment like now tasks us with an even bigger responsibility &mdash; returns that empower you to improve your standard of living even as your cost of living rises relentlessly.
We appreciate the trust you&rsquo;ve given us &mdash; and we know it has to be earned anew each day.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Postscript: The situation won&rsquo;t be getting better soon based on today&rsquo;s wholesale inflation numbers.
The producer price index came in way hotter than expected &mdash; up 1.3% from August to September. Ouch &mdash; the consensus guess among Wall Street economists was &ldquo;only&rdquo; 0.5%.
The year-over-year increase works out to 6.3%, the worst since December 2022.
Reminder: These increases feed through to the consumer with a lag &mdash; at least two months, sometimes much longer.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Happy Birthday Three Days Late
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> For the record: The current bull market is four years and three days old.
The conventional definition of a &ldquo;bull market&rdquo; is a sustained gain of at least 20% from a bear-market low.
After a 25% drop, the S&amp;P 500 bottomed on Oct. 12, 2022 at 3,577. This morning it&rsquo;s at 7,734 &mdash; a 116% jump in four years.
How much longer can it last? JC Parets, the newest member of the Paradigm team, points us to research from Oppenheimer: &ldquo;First of all, this is the sixth-longest bull market over the last hundred years or so.
&ldquo;The second and most important point is this: Based on the prior five bull markets that were longer than this one, we&rsquo;ve got another 13 months and more than 20% of upside left.
&ldquo;That&rsquo;s just for historical context. What&rsquo;s happening right now is not unprecedented.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> As for today&rsquo;s action, the S&amp;P is licking its wounds after recording its worst day since July.
When we left you yesterday the index was down about two-thirds of a percent. By day&rsquo;s end, that loss swelled to 1.1%. And the Nasdaq slid 1.9%
But as we write today the S&amp;P is up a little less than a quarter percent at the aforementioned 7,734. The tech-heavy Nasdaq, however, has slipped another 0.2%. The Philadelphia Semiconductor Index is down another 1.8% today after a 4.5% drop yesterday.
For Paradigm Mastermind Group readers, yesterday was time to take profits on a handful of AI-adjacent positions. Out of five sells, the smallest gain was 93%. The biggest, 417% on Hut 8 Corp.
&ldquo;I remain optimistic about the industry&rsquo;s near-term performance and AI&rsquo;s long-term potential,&rdquo; said our Enrique Abeyta &mdash; who manages the PMG portfolio. &ldquo;But after substantial advances, another major move higher requires increasingly ambitious growth expectations to become reality.&rdquo;
Don&rsquo;t get Enrique wrong, though &mdash; especially after <a href="https://paradigmpressroom.com/post/boom-blind-bust">yesterday&rsquo;s guest edition</a>. As he sees it, the broad market is still OK in light of factors like &ldquo;historical year-end seasonality, the presidential-election cycle and strong market momentum. Positive earnings revisions provide another source of support, and I expect Treasury yields to ease in the near term.&rdquo;
But at the same time, &ldquo;I&rsquo;m watching the funding requirements facing AI companies, suppliers helping finance customer purchases and the practical challenges of getting data centers built and powered.
&ldquo;Those issues don&rsquo;t erase AI&rsquo;s potential. They do make it important to distinguish promising businesses from stocks whose prices already assume everything goes right.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Elsewhere, U.S. oil futures are pushing $97 for the first time in nearly four weeks.
The rally from under $88 began nine days ago. There&rsquo;s been no single news catalyst, just a steady march upward as reality sets in that the many supply disruptions that began earlier this year won&rsquo;t go away anytime soon.
Checking other major asset classes, bond yields are climbing down &mdash; the 10-year Treasury note at 5.1%, compared with a peak over 5.3% just 10 days ago. Yields were overstretched after the big jump in September and were bound to pull back.
Gold held the line on $4,100 overnight and is back up to $4,149. Silver&rsquo;s back within sight of $57. Crypto&rsquo;s consolidation continues, Bitcoin at $82,360 and Ethereum at $2,438.
One other economic number of note: Retail sales jumped 0.8% in September. But that was skewed by rising fuel prices. Take that out along with auto sales (notoriously volatile month to month) and you have a much more modest 0.2% jump. Reminder:&nbsp;
These figures are not inflation-adjusted. If they were, you&rsquo;d find retail sales have been essentially flat since 2021 (when inflation started taking off in earnest.)
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />The Next Great AI Investments
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> If AI still has world-changing potential&hellip; but the &ldquo;obvious&rdquo; AI investment names are potentially in trouble&hellip; what to do?
&ldquo;Every leap forward in AI seems to require another enormous investment in very non-artificial things,&rdquo; says Paradigm AI authority James Altucher. &ldquo;Power plants and chip fabs, miles of fiber and copper, glass, motors, magnets and all the other unsexy stuff required to make the magic happen.&rdquo;
Looked at another way, the price of AI &ldquo;compute&rdquo; keeps falling&hellip; but the costs of everything it needs are definitely not.
In a recent dispatch for Altucher&rsquo;s Investment Network, James laid out three old economic concepts to illustrate why this is the case.
Start with Baumol&rsquo;s cost disease. Economist William Baumol observed that when some parts of the economy become dramatically more productive, activities that cannot keep pace become relatively more expensive.
A factory can automate and double its output. But in doing so, it will also double the supplies or raw inputs it needs to run at the faster pace.
Over time, the price of inputs and labor tends to rise relative to the price of factory-made goods.
The same logic applies to AI, says James: &ldquo;We can make code, analysis and all sorts of digital work faster and cheaper. But no matter how intelligent the model becomes, it can&rsquo;t prompt a gigawatt of electricity into existence. You still have to build the power plant, manufacture the transformer, lay the pipeline and construct the data center.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The investment implications come into clearer view when you add two other economic principles.
Jevons paradox: When something becomes cheaper, people tend to use more of it, so that total consumption increases. That happened with coal in the 1800s. Today, cheaper AI compute could drive demand high enough to increase revenues and profits even as prices fall.
Moravec&rsquo;s paradox: Computers can master chess and solve complex mathematical problems, but robots still struggle with simple physical tasks. Giving AI a useful body requires motors, sensors, actuators and other components that must be manufactured.
Put it all together and what does it mean?
Software can scale quickly. Power plants, transformers, cooling systems and specialized manufacturing capacity cannot. The companies supplying equipment, energy and skilled labor could gain pricing power when demand outruns their capacity to deliver.
&ldquo;I find it funny that, while we debate which jobs AI will eliminate, the AI buildout itself is creating enormous demand for electricians and specialty contractors,&rdquo; James says. &ldquo;If you&rsquo;re an electrician, welder, HVAC technician, pipefitter or anyone else who knows how to actually build all of this, I wouldn&rsquo;t lose much sleep over ChatGPT.&rdquo;
The next big AI investment may have little to do with developing a smarter model. It may depend on building something the model cannot: a power plant, a transformer, a cooling system or an electrical grid.
The cheaper intelligence becomes, the more valuable the physical world supporting it may become. It&rsquo;s a theme that James and all of the Paradigm team will be following the rest of this year and into 2027&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Costly Candy
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> You might think the most appropriate trick-or-treating costume this year is a burglar &mdash; once you see what you&rsquo;re paying for Halloween candy
The government&rsquo;s official inflation figures show candy prices leaping 8.1% year over year &mdash; far outstripping the overall consumer price index.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/f9e4UDgVqfiSoj5kz8P8N/d30be7beb9855be4b63a3034d62cf642/5min-Issue-101526-3.jpg" alt="Halloween Inflation" width="540px" />
As we&rsquo;ve mentioned from time to time, bad weather has hurt the cocoa and sugar crops in Africa, Latin America and India.
Candy makers have responded to the raw-materials squeeze with &ldquo;shrinkflation&rdquo; &mdash; selling a smaller package for the same price.
Not that that&rsquo;s been any help to Hershey, whose share price is down over 10% year to date. HSY is overexposed to both cocoa prices and a struggling U.S. consumer.
Better off is Mondelez, which has a bigger portfolio of candy and snacks (not just chocolate) and a bigger global customer base. MDLZ is up 16.2% so far in 2026.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Comic Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Is this real? AI? Pre-AI photoshop?&nbsp;
In any event, it&rsquo;s timely in light of the ongoing labor shortage we mentioned earlier in the week&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4ZkbglkSfFbvcv6iB37gfs/5b7575d285652ac18796f93b7988b920/5min-Issue-101526-4.jpg" alt="KFC MEME" width="540px" />

5min-issue-101526-featured

 Inflation: Three Grim Realities

At a recent conference, Jeffrey Huge &ndash; founder of a private family office and investment strategy firm &ndash; asked a crowd of financial professionals how many of them were around for the dot-com bust in the early 2000s.
Not even a third of the crowd raised their hands.
&ldquo;So overall,&rdquo; Huge said in a recent podcast interview, &ldquo;I'd say about 30% or so of the people in that audience actually have lived through a tech bubble professionally.&rdquo;
Which means over two-thirds of financial professionals are blind to the potential for the current AI boom to go bust.
We&rsquo;re pleased to say many of Paradigm&rsquo;s top minds did live through that earlier era &ndash; including trading pro Enrique Abeyta.
<h2 style="text-align: center;">The AI House of Cards: Wall Street&rsquo;s Trillion-Dollar Bet</h2>
I remember late 1999 like it was yesterday.
I was working at a New York City hedge fund, Red Coat Capital, and the internet was changing the world.
Telecom giants like AT&amp;T, MCI WorldCom and Sprint were spending billions building the networks that would connect everyone to this revolutionary new technology.
And Wall Street couldn't get enough.
Companies like Cisco, Corning and Lucent Technologies supplied the equipment.
Business boomed, earnings soared, and investors were convinced spending would continue for years.
Why wouldn't it? The internet was clearly the future.
Lucent, one of the world's leading telecommunications equipment makers, seemed unstoppable.
Since its 1996 spinoff from AT&amp;T, the company had beaten Wall Street's earnings expectations 14 quarters in a row.
Then, on Jan. 6, 2000, Lucent put the &ldquo;surprise&rdquo; in earnings surprise.
The company warned that quarterly earnings would fall roughly 29% short of Wall Street's expectations.
Its stock plunged up to 28% after the announcement, wiping out about $64 billion in market value.
Among the reasons Lucent gave for the shortfall? Changes in customer purchase timing.
The technological revolution hadn't ended. The internet hadn't stopped growing.
But one of its biggest suppliers had reminded investors of something they'd forgotten.
Even revolutionary technologies are vulnerable to ordinary business cycles.
Within months, the dot-com bubble began to burst.
Today, I see an unsettling resemblance in artificial intelligence.
The Trillion-Dollar Spending Boom
Microsoft, Amazon, Alphabet, Meta, and Oracle are spending hundreds of billions to build the data centers and infrastructure that power AI.
Meanwhile, Nvidia, Broadcom, AMD, and Micron supply much of the technology.
Once again, Wall Street expects the spending and earnings growth to continue for years.
And here's why this matters to virtually every investor.
The AI boom has become so enormous that a slowdown could shake the entire stock market.
In 2023, the five major hyperscalers collectively spent approximately $154 billion on capital expenditures.
By 2025, that figure had climbed to $416 billion.
And according to Vanguard, annual spending could approach $1.2 trillion by 2028.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2ycNw94JzLbYfq3DBp27Xs/43c166a5d6ec660a41b7ef5843544f44/TTR-issue-101226-2.jpg" alt="Hyperscaler Capital Spending" width="540px" />Hyperscaler Capital Spending: Actual &amp; Projected Through 2030. Source: Vanguard
That's nearly eight times their 2023 spending in just five years.
But what's happening outside the AI boom?
Research highlighted by Porter &amp; Co. shows that inflation-adjusted private construction spending outside data centers has declined by roughly $120 billion annually since 2024.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1MuysKWBDZ5GIecg0QJrcI/1ce13251e0451997c3373786bfdcd080/TTR-issue-101226-3.jpg" alt="Data Centers Mask Declining Pivate Construction" width="540px" />Source: Porter &amp; Co., &ldquo;The Coming OpenAI Meltdown.&rdquo; Underlying data from U.S. Commerce Department.
While data center construction is surging, other types of private construction are moving in the opposite direction.
Every new data center also drives orders for chips, networking equipment, cooling systems, and electrical infrastructure.
Those orders become revenue for suppliers and underpin Wall Street's earnings forecasts.
The more businesses depend on AI spending, the more consequential even a modest slowdown becomes.
But someone has to pay for it all.
For years, Microsoft, Amazon, Alphabet, and Meta generated enough cash to finance almost anything they wanted.
AI is changing that equation.
According to Goldman Sachs, major hyperscalers could spend roughly 90% of their operating cash flow on capital expenditures over the next three years.
And the pressure is already showing up.
In the second quarter of 2026, Alphabet generated approximately -$5.9 billion in free cash flow.
Amazon recorded approximately -$7.7 billion.
Both companies remained profitable, but their capital spending exceeded operating cash flow.
And Wall Street expects the pressure to intensify.
According to Bank of America Global Investment Strategy, combined hyperscaler free cash flow could plunge from approximately $191 billion in 2025 to negative $26 billion in 2027.
And some forecasts suggest it could turn negative as early as 2026.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/6scvMepZEGwrUwQsrNMrkS/a66ec7e9f9fde4c40026b72e112c185f/TTR-issue-101226-4.jpg" alt="Free Cash Flow Turns Negative" width="540px" />Source: Bank of America Global Investment Strategy, Bloomberg. Reproduced by Porter &amp; Co.
These are forecasts, not guarantees. But they illustrate the challenge.
The AI buildout is consuming enormous amounts of cash today, while many expected returns remain years away.
So, companies are increasingly turning to another source of financing.
Debt.
The Debt Is Becoming Everyone's Problem
According to Vanguard, Alphabet, Amazon, Meta, Microsoft, and Oracle issued about $130 billion in U.S. bonds in the first seven months of 2026 alone.
That's more than they issued during all of 2025.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5jP1zVCBCZag0AwURSb4up/872705584f6988daa3c105a60d02ddf6/TTR-issue-101226-5.jpg" alt="Hyperscaler borrowing" width="540px" />Hyperscaler U.S. Bond Issuance, 2024&ndash;July 2026. Source: Vanguard
Borrowing isn't necessarily bad, and not every dollar finances AI.
But Oracle shows how stretched spending can get.
Its capital expenditures reached approximately 174% of operating cash flow in fiscal 2026. In July, S&amp;P Global Ratings downgraded Oracle's credit rating to BBB-, just one notch above junk.
And the financing extends beyond the hyperscalers.
Ares Management examined more than 100 infrastructure financing transactions and identified roughly $573 billion in financing arrangements connected to a relatively small group of major technology companies.
That doesn't mean those companies own all this debt.
It means the same businesses keep appearing throughout the financing network.
If AI spending slows, the consequences could spread to lenders, infrastructure investors and equipment suppliers.
And money isn't the only obstacle.
Data centers also face electricity shortages, permitting delays and local opposition.
When a project slips, equipment orders can slip with it.
Which brings us back to Lucent.
Lucent's customers didn't abandon the internet. They changed when they were buying equipment.
Today, AI suppliers face a similar vulnerability.
Their earnings forecasts depend on customers continuing to spend extraordinary amounts of money.
But what if financing costs rise? What if a data center can't secure enough electricity? Or a major customer postpones its next round of orders?
Stock prices can fall long before capital spending actually declines.
The chart below compares stock prices and capital expenditures across five major investment booms.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5WvXXensM2JevF2earJsX/73d5046bb4d0eae014eb80b493a90d0f/TTR-issue-101226-6.jpg" alt="Stocks peak first" width="540px" />Source: A Wealth of Common Sense. Underlying data: Campbell &amp; Turner, Odlyzko, SEC, Bank of Japan, BEA and EIA.
During the dot-com boom, stock prices peaked roughly six months before capital spending peaked.
Investors didn't wait for companies to stop buying equipment. They began selling when confidence in future growth weakened.
That doesn't mean AI stocks must follow the same path.
But AI spending could keep growing even as the stocks benefiting from it start to fall.
And the consequences wouldn't necessarily stop with AI stocks.
As J.P. Morgan's chart shows, the 10 largest companies now account for approximately 41% of the S&amp;P 500's total market value.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/624svFF0qErRsh1teHG4aM/506309f3950ad0c01a9205bd62b8f254/TTR-issue-101226-7.jpg" alt="Top 10 Companies in the S&amp;P 500" width="540px" />Source: J.P. Morgan Asset Management
Several of those companies are at the center of the AI boom.
So even investors who have never purchased NVIDIA or Microsoft could feel the effects through their index funds and retirement accounts.
The Lesson Wall Street Forgot
Here's what makes this situation so dangerous.
AI doesn't have to fail.
The technology can transform the world. Data centers can keep getting built. Chipmakers can keep selling billions of dollars' worth of equipment.
And investors could still lose a fortune.
Because Wall Street isn't simply betting that AI will succeed.
It's betting that hundreds of billions of dollars in infrastructure spending will arrive on schedule, year after year.
That's a very different bet.
I'll be watching for changes in hyperscaler spending plans, financing conditions, and supplier earnings guidance.
In January 2000, Lucent taught investors a painful lesson: When customers buy equipment can matter just as much as how much they buy.
Twenty-six years later, Wall Street may be about to learn that lesson all over again.
And that&rsquo;s what makes today&rsquo;s AI boom so vulnerable.
The AI house of cards doesn't need a technological disaster to collapse. It may only take a few of its biggest customers to stop spending.
Dave&rsquo;s last word: The big market-moving story today is the Labor Department&rsquo;s release of the consumer price index.
Short story: The official inflation rate is galloping higher &ndash; from 3.4% in August to 3.7% in September.
That figure is more or less in line with what Wall Street economists were expecting &ndash; but even so, Mr. Market isn&rsquo;t taking it well.
On the theory that the Federal Reserve will jack up short-term interest rates at least once more before year-end, the S&amp;P 500 is down about two-thirds of a percent as we write at 7,555.
Longer-term interest rates are back on the rise, a 10-year Treasury note up to 5.28%. And that&rsquo;s putting a hurt on precious metals &ndash; gold now under $4,100 and silver down nearly three bucks to $56.11. Crypto is feeling the pain as well, with Bitcoin under $82,000 and Ethereum sinking toward $2,400. Crude is up slightly to $94.51.
With the release of today&rsquo;s inflation figures, the Social Security Administration announced that next year&rsquo;s cost-of-living adjustment will be 3.6%.&nbsp;
As we say every year at this time, don&rsquo;t spend it all in one place.

FMF-Issue-101426-1

Boom-Blind-Bust

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Gold: What&rsquo;s China&rsquo;s Endgame?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;China&rsquo;s central bank has bought gold for 23 straight months, and the country is importing more of the precious metal than ever,&rdquo; says a CNBC article posted yesterday.
The mainstream takes forever to catch up to alternative financial media. Here at Paradigm Press we&rsquo;ve been hip to China&rsquo;s gold accumulation &mdash; and its implications &mdash; for well over a decade.
It seems CNBC perked up at the story now because the People&rsquo;s Bank of China added 23 metric tons to its stash last month &mdash; &ldquo;its biggest monthly purchase in almost three years.&rdquo;
Officially, the PBOC&rsquo;s gold reserve sits at 2,387 metric tons &mdash; up 124% since 2009.&nbsp;
Unofficially, however&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;China may also hold gold through other state entities, including the State Administration of Foreign Exchange (SAFE),&rdquo; says Paradigm macroeconomics maven Jim Rickards.&nbsp;
&ldquo;China is non-transparent about the full extent of its gold holdings. The exact amount of any unreported gold is unknown. Estimates can be formed based on imports from Switzerland via Hong Kong, but those are inexact.
&ldquo;One estimate is that the amount of &lsquo;hidden gold&rsquo; held by Chinese state entities is approximately the same as the amount reported publicly by the PBOC. If that estimate is correct, total Chinese gold reserves would be about 4,700 metric tons, or roughly 58% of U.S. gold reserves of 8,133 metric tons.
&ldquo;That would make China the second-largest sovereign gold holder in the world after the U.S. and put China ahead of gold powers such as Germany, Italy and France.&rdquo;
Yeah, CNBC left out that part&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> So what&rsquo;s Beijing&rsquo;s agenda here? And what&rsquo;s it to you and me?
A decade ago, Jim wrote that Beijing&rsquo;s endgame was to have a &ldquo;seat at the table&rdquo; along with the United States, the European Union and Japan whenever the next financial crisis rolled around and the global financial system had to be reset.
But that was when Beijing and Washington were on friendlier terms.
If you look at some of the seamier corners of alternative media, you&rsquo;re told that Beijing&rsquo;s goal now is to create a gold-backed version of its currency, the yuan.&nbsp;
For any number of reasons, Jim says that&rsquo;s totally impractical. &ldquo;Traditionally, gold holdings must be 20&ndash;40% of the money supply to engender trust in a gold-backed currency system. China&rsquo;s reported gold holdings are in the low single digits as a percentage of money supply.&rdquo;
Nor is Beijing capable of transforming the yuan into a viable alternative to the dollar as a global reserve currency. That would require a large bond market trusted by most of the rest of the world. &ldquo;China is simply not in the same league when it comes to reserve-currency status, with or without gold.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Beijing&rsquo;s real goal is to facilitate easier trade and transactions &mdash; bypassing the dollar &mdash; with major trading partners like Russia and India.
&ldquo;China is looking ahead to the day when a confrontation with the United States could force it to separate from the dollar payments system entirely in order to avoid asset freezes and financial sanctions,&rdquo; Jim says.
&ldquo;Chinese policymakers are watching the financial sanctions that the U.S. is imposing on Russia and Iran and drawing the appropriate lessons.&rdquo;
Seen in that context, Beijing welcomes the decline in the dollar price of gold since last winter &mdash; from a peak of $5,500 then to under $4,200 now.&nbsp;
&ldquo;Any buyer accumulating gold favors a lower price for the time being because it means getting more gold for every dollar spent,&rdquo; Jim says. &ldquo;The payoff comes later if the dollar price of gold spikes higher. Whoever has the most gold then is the biggest winner.&rdquo;
That&rsquo;s what Chinese leaders are counting on. Jim says you should count on it too.&nbsp;
He&rsquo;s still anticipating an eventual climb to $10,000. &ldquo;It will get there faster than all but a few investors expect.&rdquo;
Yeah, you don&rsquo;t hear that from CNBC, either&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />What Starts in Asia&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Interesting market action today: A stock panic that began in Asia stayed in Asia.
South Korea&rsquo;s stock market took a nasty 5.5% spill today after remarks by Hock Tan, the CEO of the U.S. chipmaker Broadcom (AVGO) during a conference in Singapore.
&ldquo;A lot of investors have no clue what they are investing in,&rdquo; he said. They &ldquo;set very extreme expectations only to find out that it&rsquo;s almost like they are in a casino.&rdquo;
Understand, over half of South Korea&rsquo;s benchmark stock index is composed of Samsung and SK Hynix &mdash; two of the big three names in advanced memory chips. Thus, the big drop.
Ordinarily, a reaction like that would spread to U.S. markets &mdash; but not today.
To be sure, Micron Technology (MU) &mdash; the other big memory name along with the two South Korean firms &mdash; is down about 5% at last check.&nbsp;
But the Philadelphia Semiconductor Index is down a more modest 2.2% &mdash; and the tech-intensive Nasdaq Composite is down a mere 0.4%. The losses in the S&amp;P 500 and the Dow are even narrower.
Perhaps that&rsquo;s because earnings season is underway today with several of the big banks reporting their numbers. JPMorgan missed the expectations of Wall Street analysts &mdash; but it&rsquo;s still up over a half percent on the day. (It&rsquo;s not the news, it&rsquo;s the reaction to the news.) Goldman Sachs&rsquo; numbers were a mixed bag but it too is up over a half percent.
Gold is generally steady at $4,159 but silver has shed 1.7% and is back below $60. Crypto continues to stabilize, Bitcoin over $83,000 and Ethereum over $2,500.
U.S. oil futures have sailed past $94, the highest in over two weeks. Iran&rsquo;s Islamic Revolutionary Guard Corps says it&rsquo;s struck three ships in the Strait of Hormuz over the last two days.&nbsp;
As you can see from the TankerMap website, precious little oil or refined products are making their way through the strait this month&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3qNyu27cY4WsqfvIdfdaeM/7b18edc0b2042d2729cf42f40627be8b/FMF-Issue-10-13-26-2__1_.jpg" alt="TankerMap" />
These figures appear to be more reliable than anything coming from Kpler or TankerTrackers. (We unpacked why Kpler is <a href="https://paradigmpressroom.com/post/stranded-no-more">not to be trusted</a> last week.)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The reality for small business in the 2020s is a double-whammy of a labor shortage and rising costs.
Or so you&rsquo;d conclude from the Small Business Optimism Index issued this morning by the National Federation of Independent Business.
The headline optimism number fell from 98.7 in August to 97.9 in September &mdash; just below this survey&rsquo;s long-term average going back more than 50 years. It&rsquo;s the second consecutive monthly decline.
More revealing is the part of the survey where respondents are asked to identify their single-most important problem.
Here &ldquo;quality/availability of labor&rdquo; tops the chart, cited by 26% of owners. This number has been elevated ever since COVID. The long-term average, again going back more than 50 years, is only 12%.
&ldquo;We need more experienced and skilled trade workers,&rdquo; says the owner of a services-oriented business in Michigan.
In second place is inflation, cited by 20% of respondents. This too is well above the historical average of only 7%.
&ldquo;Fuel prices are killing us on our delivery trucks, as well as fuel surcharges on all freight
coming into the store,&rdquo; says a retailer in Georgia. &ldquo;They also reduce the amount of disposable income our customers have to spend at our store.&rdquo;
After labor quality and inflation, everything else on the single-most important problem part of the survey is well back in the pack &mdash; taxes and poor sales each cited by 11%. Everything else was cited by 7% or less.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />ASTS: Buy or Wait?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> SpaceX just handed investors a cheaper entry into AST SpaceMobile (ASTS).&nbsp;
Last week, SpaceX's reported $8 billion spectrum deal sent shares of America's major wireless carriers tumbling. AST SpaceMobile (ASTS) fell 10.5% with them. 
Paradigm&rsquo;s Davis Wilson sees an opportunity for readers of his Million Mission e-letter &mdash; analysis very much in line with what we&rsquo;ve shared in 5 Bullets from James Altucher and Ray Blanco.
Davis&rsquo; argument is straightforward: AT&amp;T, Verizon and T-Mobile aren't going to hand their customers to Elon Musk. They'll fight back by expanding satellite connectivity.
&ldquo;AST SpaceMobile is actually one of the biggest beneficiaries of SpaceX's expansion into wireless,&rdquo; he says.
&ldquo;ASTS is building a network of satellites that connect directly to ordinary smartphones, allowing people to make calls, send texts and access the internet in places without traditional cell coverage.&rdquo;
Meanwhile on Oct. 1, the three wireless giants formally established a joint venture to expand satellite coverage. Its purpose isn't simply to purchase satellite services. It's also to encourage competition among satellite providers.
Now that SpaceX is &ldquo;directly infringing on these existing carriers&rsquo; territory,&rdquo; says Davis, the logical response is to &ldquo;build out their satellite coverage with ASTS &mdash; a company they&rsquo;re already partners with.&rdquo;
Davis said yesterday that ASTS is a buy at $53. If so it&rsquo;s a better buy today at just over $47.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Thought for the Day
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Not sure why this is making the rounds of the meme-o-sphere right now but it is&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5Yf8x9pK4UVSBfpqzZxM9V/82f2c5d001a79a7d6ae87b57f883e9ab/FMF-Issue-10-13-26-3__1_.jpg" alt="10% cut meme" />
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Politics, Prediction Markets and the Stock Market
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;If &mdash; IF &mdash; the prediction markets are right,&rdquo; a reader writes after <a href="https://paradigmpressroom.com/post/the-problem-with-prediction-markets">yesterday&rsquo;s edition</a>, &ldquo;what it's telling me is that when the Democrats win back the House and Senate, the USA is officially dead, as the DSA will soon take control.
&ldquo;There's not an article that I read that is not calling for this market to correct and to correct at least 20%.&nbsp;
&ldquo;I've normally found when all are in the same frame of mind that it doesn't happen. But I think the prediction of a market decline in the coming weeks is foretelling that the Democrats will win the House and Senate.
&ldquo;Guess we'll see in a couple of weeks.&rdquo;
Dave responds: Hmmm&hellip;
If that bar chart yesterday is suggestive of anything, a Dem sweep with a Republican president is the worst possible outcome for the stock market &mdash; with an average annual return of 4.9% on the S&amp;P 500. Here it is again&hellip;
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/5MDfOuL0W3Qcvkxwxs24rf/ef3ff30ffb9438a92935689dc3b9d02a/FMF-Issue-10-13-26-4.jpg" alt="Yesterdays chart" width="540px" />
Granted we&rsquo;re not working with a huge data set here. The most recent instance was 2007&ndash;2008, coinciding with the global financial crisis.&nbsp;
Before that there was a six-year stretch encompassing Reagan&rsquo;s last two years as well as the Bush 41 presidency &mdash; a span including the crash of &lsquo;87 and the 1990&ndash;91 recession.
Before that there was the entirety of the Nixon-Ford years &mdash; smack in the middle of a 16-year bear market.&nbsp;
The only reason the average returns are positive is the market&rsquo;s performance during the last six years of the Eisenhower administration. (1955 and 1958 were outstanding, not that many of us would remember.)
That&rsquo;s 22 years out of the last 76. And only two of those years fell during this century. Draw your own conclusions.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> You can see how the outcome is much more sanguine if control of Congress is split under a GOP president. But here the data set is even smaller &mdash; a mere 10 years.&nbsp;
Here we&rsquo;re looking at Reagan&rsquo;s first six years &mdash; a stretch including the start of an epic bull market in 1982. Animal spirits were also alive and well during the last two years of Trump&rsquo;s first term (apart from the brief COVID crash). That average 13.7% gain on the chart would be even higher were it not for Bush 43&rsquo;s first two years, encompassing much of the dot-com bust. Again, draw your own conclusions.&nbsp;
A lot of these market-moving events were, at best, tangentially related to whoever occupied the White House or Congress at the time.&nbsp;
For instance, much of the blame for the 2008 meltdown can be laid at the feet of a Democratic president (Clinton) and a Republican Congress &mdash; who together gave the big banks a blank check when they repealed the Glass-Steagall Act in 1999.
Something to bear in mind if the Dems sweep and the market tanks next year.&nbsp;
Whatever happens, our team will stay on their collective toes for you&hellip;

FMF-Issue-10-13-26-1 (1)

What’s China’s Endgame?

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />The Problem With Prediction Markets
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> If the prediction markets are any indication, Democrats stand a better-than-60% probability of winning both houses of Congress in 2026 midterm elections.
More and more, the pundit class is looking to prediction markets like Polymarket and Kalshi as a barometer of the political weather.&nbsp;
And why not, given the extent to which traditional pollsters have beclowned themselves in recent years?
As the thinking goes, the prediction markets have a &ldquo;wisdom of crowds&rdquo; ability to foretell the outcomes of everything from elections to the Oscars the World Series.
As of this morning, Kalshi gives the Democrats a 90% probability of winning the House; Polymarket 91%. The Senate is less of a sure thing &mdash; but Kalshi gives the Democrats 60% odds and Polymarket 64%.
To be clear, these are probabilities &mdash; not polling averages or predicted vote shares. The DeFi Rate website explains it like this&hellip;
<blockquote>Each market asks a yes-or-no question, such as &ldquo;Will Democrats control the Senate?&rdquo; A contract pays $1 if the answer is yes and $0 if it&rsquo;s no, so its price works as a probability: 64&cent; means traders collectively put the chance at about 64%.</blockquote>
<blockquote>Take the Texas Senate race. If James Talarico trades at 58&cent;, 100 contracts cost $58. If he wins, they pay $100, a $42 profit before fees. If he loses, they&rsquo;re worth nothing. You don&rsquo;t have to hold until Election Day: If the price rises to 75&cent; and someone is buying, you can sell early and keep the difference.</blockquote>
<blockquote>A price isn&rsquo;t a poll. A candidate at 60&cent; doesn&rsquo;t have 60% of the vote; traders think they have about a 60% chance of winning.</blockquote>
It&rsquo;s all very entertaining &mdash; and if you play it right, quite lucrative.&nbsp;
But what exactly is its predictive value?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;As prediction tools, I believe these markets are highly overrated,&rdquo; Paradigm macroeconomics maven Jim Rickards writes in the current monthly issue of Strategic Intelligence.
&ldquo;The problem is not necessarily the markets themselves. It&rsquo;s how those odds are interpreted and reported.
&ldquo;Despite the hype, these are betting markets. The probabilities are not educated forecasts. Participants are betting against one another, so success says something about how well one does relative to other bettors, but not necessarily about one&rsquo;s forecasting ability.
&ldquo;Polymarket and Kalshi odds may offer some information, but they can be extremely volatile in close elections and should not be confused with rigorous data. Still, you will hear mainstream media trumpeting the odds as if they were accurate forecasts.&rdquo;
Another problem Jim sees is what&rsquo;s called self-selection. &ldquo;Participants are not a representative cross-section of the voting-age population.&nbsp;
&ldquo;They may differ from average voters in age, income, political interest and willingness to gamble. If you&rsquo;re poor, for instance, you&rsquo;re not going to risk money on Polymarket. But you do get a vote.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> A decade ago, Jim saw this skew in real-time while he was in London ahead of the &ldquo;Brexit&rdquo; referendum &mdash; in which a majority of U.K. voters opted to withdraw from the European Union.
There were no prediction markets to speak of back then &mdash; but there were plenty of traditional bookmakers in London taking bets on the outcome.
&ldquo;The betting odds gave &lsquo;Remain&rsquo; a 74% probability of winning,&rdquo; Jim recalls. &ldquo;I knew that Brexit, or &lsquo;Leave,&rsquo; would win and made that forecast for our readers in advance.
&ldquo;I disregarded the London betting odds because I believed those bettors were mostly well-off London bankers and professionals, not the blue-collar workers from Manchester, Birmingham and Leeds who actually carried the day.&rdquo;
One more problem with prediction markets: &ldquo;A large wager can change the odds,&rdquo; Jim says.
That&rsquo;s probably not a factor in a large and liquid market for a question like &ldquo;Will Democrats take the House?&rdquo; (At least right now it would be a shock if they did not.) But it can matter immensely in individual House and Senate races.
&ldquo;In a relatively thin market, a single bet can move a candidate&rsquo;s odds significantly in either direction,&rdquo; Jim explains. &ldquo;The odds may have changed, but that doesn&rsquo;t mean anything has changed among actual voters.&rdquo;
Just a few things to keep in the back of your mind over the next three weeks as you hear more and more about the betting odds&hellip;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Party Control and Market Performance
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> By the way, which party controls Congress has little impact on broad stock market performance.
Individual companies and sectors? Yes, sometimes. But not the market as a whole. That&rsquo;s according to figures from Carson Investment Research passed along by Paradigm trading pro Enrique Abeyta.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/AyR7CwRg8WVcLzR5f4EaU/54cdaf9dd4de90fcb22f5ade01a2408d/FMF-Issue-10-12-26-2.jpg" alt="Party Control and Market Performance" width="540px" />
That said, the figures do suggest somewhat better performance when control of Congress is split between the two major parties.&nbsp;
According to the Carson research, going back to the 1950s there&rsquo;ve been 13 instances of a split Congress &mdash; and the S&amp;P 500 rose every time!&nbsp;
Just for reference, the most recent instances were 2023&ndash;24&hellip; 2019&ndash;2020&hellip; and 2011&ndash;2014.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> One more chart of note this morning, and it&rsquo;s one we&rsquo;ve visited from time to time the last couple of years.
This is the one from Bespoke Investment Group comparing the Nasdaq&rsquo;s performance during the dot-com boom and the current AI boom. Bespoke&rsquo;s starting point for the dot-com boom was the release of the Netscape web browser in late 1994. And the starting point for the AI boom is when ChatGPT burst on the scene in late 2022.
After nearly four years, the two rallies don&rsquo;t line up perfectly &mdash; but they line up close enough.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1gPlWz2w9TGbXXD0KGESXV/a592bfd4172d430737854fd006befac3/FMF-Issue-10-12-26-3.jpg" alt="Nasdaq composite % change in the 10 years after netscape vs Chatgpt release" width="540px" />
&ldquo;Melt-up coming next?!?&rdquo; Enrique muses. Stay tuned&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In the meantime, the major U.S. averages are starting the new week in mixed fashion.
At last check the S&amp;P 500 is nearly pancake-flat &mdash; just over 7,800. The Nasdaq is down about a third of a percent, while the Dow is up about a half percent.
Treasury yields are backing down, the 10-year note at 5.24%. After September&rsquo;s rapid rise, some consolidation is inevitable.
Precious metals are in the red &mdash; gold at $4,167 and silver at $60.21. Crypto is little changed from Friday&rsquo;s levels with Bitcoin at $82,648 and Ethereum at $2,528.
The big scheduled market events this week are the start of earnings season tomorrow morning when four of the biggest banks report their numbers. Wednesday brings the Labor Department&rsquo;s release of the official inflation figures for September.
➢ For the record: The Financial Times kinda-sorta &ldquo;walked back&rdquo; its market-moving story from Thursday afternoon, in which it said OpenAI&rsquo;s annualized revenue was over 28% less than previously thought. A follow-up article noted that annualized revenue is &ldquo;a vague metric&rdquo; often used by AI firms that haven&rsquo;t gone public yet. Maybe the original article should have mentioned that?
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />The End of Saudi Arabia (Not Yet, But&hellip;)
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> There&rsquo;s nothing in the news this morning to suggest any relief to tight energy supplies.
Before trading opened for a new week last night, Donald Trump said Russia and Ukraine agreed to halt attacks on each other&rsquo;s energy infrastructure.&nbsp;
He said the same thing a month ago, and it turned out not to be true. So far, it&rsquo;s shaping up to be a repeat this time.
Meanwhile, there&rsquo;s no letup in the pace of Iranian attacks on ships trying to transit the Strait of Hormuz without Tehran&rsquo;s permission &mdash; we&rsquo;re at two&ndash;three a day by now.
At the same time we&rsquo;re seeing scattered reports of new attacks on Saudi Arabia&rsquo;s east-west oil pipeline &mdash; the one it counts on to bypass the Strait of Hormuz. So far, those are unconfirmed but there&rsquo;s definite confirmation that Yemen&rsquo;s Houthi faction is attacking the airport in Saudi Arabia&rsquo;s capital Riyadh. Per Saudi Arabia&rsquo;s aviation authority, one airstrike killed 13 people and injured another 309.
The spin in The Wall Street Journal is that these attacks thwart the &ldquo;ambitions&rdquo; of the Saudi strongman &mdash; Crown Prince Mohammed bin Salman &mdash; &ldquo;to turn Saudi Arabia into a global tourism and investment hub.&rdquo;
Apparently it&rsquo;s a bridge too far to contemplate whether the House of Saud&rsquo;s ability to rule is in jeopardy.
&ldquo;Nothing can be done to save Saudi Arabia as it is,&ldquo; Johns Hopkins historian Michael Vlahos said last night during his weekly spot on John Batchelor&rsquo;s syndicated radio show.
&ldquo;What [the Houthis] are doing now is essentially just dismantling the Saudi regime. And the Saudis had grown so spoiled and so full of themselves with all [their] money that they didn&rsquo;t do anything to harden their infrastructure, whether it&rsquo;s oil infrastructure or the city of Riyadh itself. I simply can&rsquo;t imagine what the outcome will look like.&rdquo;
Your editor has seen lots of wild, speculative articles over the last 20 years about &ldquo;the end of Saudi Arabia.&rdquo; For the most part, I blew them off.
Now? It might be time to start seriously entertaining the possibility and teasing out the consequences. Stay tuned.
In the meantime, there&rsquo;s just enough underlying tension to push U.S. oil futures nearly two bucks higher to $93.74.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />The End of Diesel?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> Diesel prices have gotten so high that, at least on the margins, they&rsquo;re starting to make electric trucks look economically feasible.
In August, Bloomberg reported that Swedish freight company Einride (ENRD) plans to deploy 500 Tesla Semis across North America over two years. That would triple Einride&rsquo;s electric fleet, serving customers including Amazon across five states. At the time, it was the largest announced Tesla Semi deployment.
Barely a month later, Tesla landed a role in an even bigger deal.
The ZET SCALE freight alliance, whose founding shippers include Microsoft and PepsiCo, named Tesla the lead supplier in a 2,500-electric-truck procurement program. Other manufacturers were also selected. IMC Logistics separately ordered another 50 Tesla Semis.
For perspective, only 875 zero-emission heavy trucks were sold in the entire United States in 2025 &mdash; about 0.3% of the market.
What's driving the sudden interest? The cost of moving freight.
An Electrek analysis estimates that a Tesla Semi consumes about 20 cents of electricity per mile, compared with 67 cents in fuel for a conventional diesel truck. That's roughly 70% less in energy costs.
The comparison assumes electricity at 12 cents per kilowatt-hour and diesel at $5.35 per gallon.&nbsp;
(For perspective, the average commercial rate for electricity in this country is 14.5 cents per kWh and AAA says the national average diesel price this morning is $6.27 a gallon)
Factor in lower maintenance expenses and the analysis projects savings of $147,000 over five years or $404,000 over 10, depending on operating assumptions.
Tesla also advertises up to 500 miles of range, with charging that can restore 60% of that range in 30 minutes. Its new Nevada factory is designed to eventually produce 50,000 Semis annually.
Yes, there are still obstacles &mdash; higher purchase prices, limited charging infrastructure. And projected savings aren't the same as proven results.
But something appears to be changing. For decades, the push to electrify heavy trucking was driven largely by environmental policy. Now the economics are giving freight operators another reason to switch.
Diesel has survived political fights and regulatory deadlines. But can it compete when the companies buying the trucks conclude electricity is simply cheaper?
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Property Tax Relief
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> On the subject of Florida&rsquo;s referendum proposing property tax relief, a reader writes&hellip;
&ldquo;OK, first, this would reduce local government income by about 10%.
&ldquo;Restructures to the level of property exemption have to happen periodically to reflect property values. I believe they started at $5,000, went to $10,000, then $25,000 and are now at $50,000. The percentage of property value that that covers has constantly decreased over the years.
&ldquo;Florida property values have skyrocketed since 2020 and the exemption needs to increase. Local government income has increased far more than necessary for needed services. Salary jumps have been enormous. Amendment 3 will require about a 10% budget reduction. That affects donations to nonprofits and NGOs and maybe some of the wasted taxpayer dollars, not a reduction in necessary services, which are mandated by state laws. The fraud in Florida local governments has become ridiculous and this is just to slow it down.
&ldquo;Florida state has run surpluses, paid down debt and fully funded the rainy day funds. Local politicians have funded their own and their friends&rsquo; pockets and police and fire pay scales are approximately at the center of the national average.
&ldquo;Coincidentally, Amendment 3 does not touch school taxes yet the teachers in Florida are some of the lowest paid in the country.
&ldquo;I think local governments have a lot of explaining to do.&rdquo;
Dave responds: As for your concluding thought&hellip; that&rsquo;s probably the case everywhere, not just Florida. Don&rsquo;t get me going about the bad-faith efforts of &ldquo;civic leaders&rdquo; in my neck of the woods to sell the populace on a new levy to build a jail/courthouse complex. (For all I know the project is necessary but the lies they&rsquo;re telling to get their way are breathtaking!)

FMF-Issue-10-12-26-1

The Problem With Prediction Markets

<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-1-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-1_2x-new.png 2x" alt="1" width="37" />Big Banks 2008 = AI 2027?
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The OpenAI freakout didn&rsquo;t last long. At least not this time.
After we hit &ldquo;send&rdquo; on yesterday&rsquo;s edition, the Financial Times reported that OpenAI&rsquo;s annualized revenue is about $50 billion &mdash; $20 billion less than previously thought. The paper characterized it as &ldquo;a massive gap likely to damp optimism about the growth of AI demand.&rdquo;
By day&rsquo;s end, the Nasdaq-100 closed down 1.4%. After an hour of trading this morning, it had already clawed back about a quarter of that loss.
A flash in the pan? Maybe not.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;AI is starting to resemble something we&rsquo;ve seen before &mdash; something &lsquo;too big to fail,&rsquo;&rdquo; says Paradigm trading pro Enrique Abeyta. Like the big banks in 2008.
To be sure, we&rsquo;ve been following the breadcrumbs of a potential &ldquo;AI bailout&rdquo; in these daily missives <a href="https://paradigmpressroom.com/post/openai-wants-a-bailout">for nearly a year now</a>.&nbsp;
Back then, research from JPMorgan found that 41 AI-adjacent companies accounted for 47% of the S&amp;P 500&rsquo;s market cap. Since then, the number has crept closer to 49%.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/nGcDAY2tRgEvbaz8uRcSw/a77b4a1fc3f5b1cd50f340f190853054/FMF-Issue-10-09-26-2.jpg" alt="All about AI chart" width="540px" />
&ldquo;One theme now touches almost half the value of America's benchmark stock index,&rdquo; Enrique says. &ldquo;AI is also driving spending on chips, data centers, power plants and construction. And Washington increasingly views AI leadership as critical to America's economic and military competition with China.&rdquo;
Too big to fail, indeed.
AI-related investment will total about $650 billion this year. JPMorgan estimates that this per year number will double by 2030.
&ldquo;And the money is increasingly intertwined,&rdquo;Enrique continues.
&ldquo;AI companies need chips. Chip companies invest in AI companies. Cloud companies pour money into AI labs. Those labs commit enormous sums back to cloud providers and data centers. Everybody depends on everybody else.&rdquo;
Don&rsquo;t be surprised if the media start tossing around the term &ldquo;systemic risk&rdquo; soon &mdash; just like 2008.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> The risks are now piling up in a way they weren&rsquo;t, say, in early 2025 &mdash; when the Chinese AI model DeepSeek sent a momentary shudder through the American AI sector.
For one thing, Enrique says &ldquo;the AI boom is increasingly being financed with something the dot-com boom had far less of &mdash; debt.&rdquo;
Case in point: Oracle. &ldquo;Its 2046 bonds recently traded around 85 cents on the dollar, yielding more than 8%.&nbsp;
&ldquo;S&amp;P has cut Oracle's credit rating to BBB&minus; (just one notch above junk).&rdquo;
Meanwhile, Oracle raised $43 billion of debt in its latest fiscal year as it races to build AI infrastructure.
Then there&rsquo;s the matter of OpenAI models burrowing their way into the systems of the AI company Hugging Face as well as Australia&rsquo;s government health system. Anthropic&rsquo;s models have pulled off similar automated hacks.
And don&rsquo;t forget how the U.S. government is now taking direct ownership stakes in everything from Intel to U.S. Steel to USA Rare Earth &mdash; all of them operating in what the feds consider &ldquo;essential&rdquo; industries.
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> At the risk of sounding alarmist, the stage is set for what could be &ldquo;the dot-com bust and the Global Financial Crisis rolled into one,&rdquo; Enrique says.
&ldquo;AI has the spending and speculation of the dot-com bubble. But it also has the debt, interconnected financing and dependence on confidence that made the Global Financial Crisis so dangerous.
&ldquo;Then add something neither crisis had: credible national security concerns.&rdquo;
Exactly how might it all play out? Enrique hazards two educated guesses in yesterday&rsquo;s edition of our sister e-letter Truth &amp; Trends. (In one of those guesses, Elon Musk makes out like a bandit &mdash; just as JPMorgan CEO Jamie Dimon did after the financial crisis.)&nbsp;
<a href="https://truthandtrends.com/posts/ai-is-now-too-big-to-fail">Check out his full &ldquo;AI Is Now &lsquo;Too Big to Fail&rsquo;&rdquo; thesis at this link</a>.
And don&rsquo;t get the wrong idea. &ldquo;This isn't a call to sell AI stocks,&rdquo; Enrique says. But even more than before you&rsquo;ll want to stay abreast of your paid subscription(s) for guidance going forward.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-2-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-2_2x-new.png 2x" alt="2" width="37" />Three Headwinds for the Stock Market
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> From the standpoint of the stock market, &ldquo;oil, interest rates and the dollar are all pushing in the wrong direction at the same time,&rdquo; says Paradigm&rsquo;s jack-of-all-trades analyst Zach Scheidt.
&ldquo;Crude jumped again this week as attacks on tankers in the Strait of Hormuz picked back up. The G7 just agreed to release another 100 million barrels of crude and fuel from strategic reserves. That can take the edge off prices for a few weeks. But every barrel that comes out of storage has to be bought back later, which stacks a second wave of demand on top of normal consumption.&rdquo;
Meanwhile, &ldquo;the 10-year Treasury yield just touched its highest level in more than two decades. Higher yields give investors a real alternative to stocks, they squeeze housing and they make Washington&rsquo;s debt more expensive to carry. The government now spends more on interest than it does on the military.
&ldquo;And the dollar has been rallying right alongside, sitting near its highest level since the tariff scare in the spring of 2025.
&ldquo;While any of these individual issues is manageable,&rdquo; Zach writes for Rickards&rsquo; Insider Intel, &ldquo;all three at once can create a strong headwind.&rdquo;
As with Enrique&rsquo;s warning about the AI sector, none of this means it&rsquo;s time to sell everything and hide out in cash.&nbsp;
The next earnings season &mdash; starting next week &mdash; might provide a valuable tell.
&ldquo;The last few have been impressive,&rdquo; says Zach, &ldquo;which is good news and a challenge at the same time. When companies keep clearing the bar, the bar keeps moving higher.&rdquo;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> In the meantime, the major indexes continue to recover a fair chunk of yesterday&rsquo;s losses.
Actually as we check our screens, the S&amp;P 500 has made up for all of yesterday&rsquo;s losses. If current levels hold at day&rsquo;s end, it&rsquo;ll be the first weekly close over 7,800.
Otherwise, not a lot of drama &mdash; certainly not by recent standards. The 10-year Treasury note is steady at 5.26%. U.S. oil futures hover around $92. Crypto continues licking its wounds with Bitcoin just under $83,000 and Ethereum below $2,500.
But there are signs of life in the precious metals &mdash; gold ten bucks shy of $4,200 and silver roaring 3% higher, pushing $61 again.
One economic report of note &mdash; the University of Michigan consumer sentiment survey. By and large, this report is worthless. But for years, the Federal Reserve has paid keen attention to the part of the survey where people are asked how bad (or good) they expect inflation to be over the next 12 months.
With the average respondent saying 4.7% &mdash; way up from the pre-Iran war reading of 3.4% &mdash; there&rsquo;s still reason to believe the Fed will bump up short-term interest rates again before year-end.
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-3-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-3_2x-new.png 2x" alt="3" width="37" />Moderna's Miracle, Biotech's Misery
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> One of the biggest breakthroughs in cancer treatment has turned into a headache for biotech investors.
Back in August we told you how Moderna Inc. (MRNA) announced a personalized cancer vaccine built around mutations in each patient's tumor. Its stock skyrocketed 177% that day and has continued higher since.
Other biotech stocks rallied on the news, too. But that enthusiasm didn't last.
Since then, the S&amp;P Biotech ETF (XBI) has fallen about 12%. The clinical-stage biotech ETF (BBC) has plunged 24%.
Paradigm biotech authority Ray Blanco found something even more startling: &ldquo;By my count, 64% of the 697 U.S.-listed biotech and drug stocks now sit 40% or more below their 52-week highs.&rdquo; Among companies worth less than $300 million, that figure jumps to 86%.
So what went wrong?
Moderna's rally inflicted an estimated $5.5 billion in paper losses on short sellers. Hedge funds scrambled to cover their positions, selling other holdings to raise cash.
Ironically, the biotech companies favored by specialist investors suffered the most. Ray found that stocks held by three or more leading biotech funds fell a median 29%, versus just 7% for those without specialist ownership.
In other words, the experts' favorites got sold four times as hard.
Nor do the problems end there. &ldquo;First, money got more expensive,&rdquo; says Ray &mdash; reminding us about rising interest rates.&nbsp;
&ldquo;Second, the door to new money is narrowing.&rdquo; Public biotechs raised just $5.9 billion selling shares in the third quarter, down from $14.2 billion in the second.
AI hyperscalers are borrowing billions for data centers, and Washington's enormous borrowing needs are competing for investment capital. There&rsquo;s not much left for small biotech companies that need outside financing to get their drugs through clinical trials.
For the time being, Ray&rsquo;s strategy is to keep the focus on companies with enough cash to reach their next important clinical trial or FDA decision without raising more money.
For broad exposure, there's the iShares Biotechnology ETF (IBB). But the best bargains may be found in small companies that have been beaten down by forced selling. Ray has identified several in his Catalyst Trader service.
Bottom line: &ldquo;This sell-off is about the sellers, not the science.&rdquo;&nbsp;
His advice for separating the potential winners from the losers? &ldquo;Companies that need cash are in trouble. Companies that have it are on sale.&rdquo;
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-4-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-4_2x-new.png 2x" alt="4" width="37" />Oh, Well&hellip;
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> A search on social media for &ldquo;comic relief&rdquo; to repurpose in our Bullet No. 4 comes up short today. Best I can do is &ldquo;grim chuckle&rdquo;...
<img class="aligncenter" src="http://images.ctfassets.net/vha3zb1lo47k/6AQxsvlKGvcDSet7N9QIpq/42e59f01d87413298841c01278485dec/FMF-Issue-10-09-26-3.jpg" alt="Will that be cash or surveillance meme" width="540px" />
<img src="https://media.paradigmpressgroup.com/fmf-assets/bullet-5-new.png" srcset="https://media.paradigmpressgroup.com/fmf-assets/bullet-5_2x-new.png 2x" alt="5" width="37" />Mailbag: Florida Property Tax
<img class="intrinsic" style="float: left; display: block;" src="https://media.paradigmpressgroup.com/fmf-assets/Paradigm_Logomark_left.png" align="left" /> &ldquo;Stop my Florida property taxes,&rdquo; a reader writes.
That&rsquo;s it, that&rsquo;s the email.
Honestly I&rsquo;m not sure what brought it on &mdash; maybe last Saturday&rsquo;s edition about mobile phone taxes??
In any event, it&rsquo;s a good excuse to update the saga of the referendum in Florida <a href="https://paradigmpressroom.com/post/elon-failure-is-always-an-option#3">that would radically curb property taxes</a>.
When we last visited the story two months ago, a rewrite of the proposal was underway &mdash; ordered by a judge in Tallahassee who found the original language was too political, running afoul of state law requiring &ldquo;fairness and accuracy&rdquo; in ballot questions.
But the gist of the proposal remains intact &mdash; phasing in a homestead exemption starting at $150,000 next year &mdash; jumping to $250,000 in 2028. It would also authorize the legislature to abolish property taxes altogether if it so chose.
Skimming Google News we see a poll that finds the proposal commanding 55% support &mdash; not that state-level polling is very reliable these days. We also see the longtime sheriff of Polk County (Lakeland-Winter Haven) warning the proposal would threaten public safety &mdash; not a surprising stance coming from law enforcement.
The researchers at the Tax Foundation spotlight the potential downsides: &ldquo;Eliminating such a sizeable share of Florida&rsquo;s property tax base would not reduce the cost of providing local government services; it would simply require that the lost revenue be generated elsewhere, including from higher millage rates on all property that remains taxable.&rdquo;
Or maybe a higher sales tax? As we mentioned last summer, the rate in Texas &mdash; like Florida, a no-income-tax state &mdash; already runs 8.25% in most of the major population centers.&nbsp;
Really, outside the bluest of the blue states where nearly everything is sky-high, it&rsquo;s all a trade-off. They&rsquo;re gonna get you one way or another&hellip;