The Morning Line
What Rough Beast?
If you can’t guess what commodity the chart shows, you must be living on Mars. It is in fact a long-term picture of silver, which went ballistic in December. The price has doubled since, blowing out a $50 top that had stood since 1980. That price became a part of silver’s legend, since it is where one of the wealthiest men in the world, oil tycoon Nelson Bunker Hunt, met his financial Waterloo. With his brothers, Lamar and William, ‘Bunky’ had attempted to corner the market by buying up silver and futures contracts amounting to about a third of the world’s supply. Comex regulators responded by raising margin requirements so high that there were just two players left in the game: the Hunts and Eastman Kodak, a huge industrial user of silver. From a record $50.45 per ounce, the price plunged by half in mere days, forcing the Hunts to sell nearly everything they owned to meet margin calls. In retrospect, they seem not to have broken any rules. However, the Comex was forced to crush them in order to stabilize the metals market.
What Does It Mean?
Silver’s current rise has been orderly, more or less, but with a pitch so steep that it caught many players with their pants down. No reason to feel sorry for them, since they are ethically and morally on a level with child molesters, broad-tossers and cannibals. But the radical shift in precious-metal prices relative to all other classes of investable assets raises a question that should concern us all. For it is not happening in a vacuum, and we can only guess at what it will mean years down the road. Will silver resume a monetary role? Is Trump licking his chops over the prospect of borrowing against all of the gold supposedly stored in Ft. Knox? Is gold predicting a crisis that would leave the global money system in wreckage? We’ll have our answer eventually, but it could already be very late in the game for those seeking the bomb-proof safe haven that gold has always offered.
Don’t Worry, Be Happy: The Bots Are Coming
Readers can be forgiven for wondering how long the ‘topping process’ I’ve alluded to over the last several months will drag on. As you will have long since concluded, no one can answer that question with confidence. For all that we supposed experts know, the bull market begun in 2009 could still be chugging blithely along two years from now when Trump’s successor takes office. But this will be the last you’ll hear from me about a topping process, even if the bear market for which it will set the hook is as likely as tomorrow’s sunrise. It will be a doozy, catalyzed by the unwinding of an Everything Bubble that already owns us, up to and including M&A superstars and big-time real estate developers. The implosion will inflict hard times on most Americans, especially Baby Boomers who went all-in with Nvidia shares, private equity schemes and rental properties mortgaged to the eaves.
How worried should you be? I’d suggest taking doomsday predictions with a grain of salt. Speaking as a die-hard permabear who has been predicting a Second Great Depression for as long as anyone can remember, I’d be the first to concede there is no reason why the Dow Industrials and the S&Ps could not co ascend, possibly doubling or even tripling over the next 5–10 years. Just realize that any reported gains in the standard of living would be largely illusory, even as quality-of-life amenities that we took for granted in the 1950s continued toward extinction. Things like doctors making house calls, and mothers being able to stay home with their children. That was America’s Renaissance, even if no one knew it at the time.
Science to the Rescue!
Technology will come through for us as it always has, right? AI wizardry, huge productivity gains and millions of robotic workers are about to make life’s necessities plentiful for everyone, including baristas, down-and-out middle managers and college grads with useless degrees. If Elon Musk is right, savings will become optional, or at least less important, as thinking machines attend to our needs. They will help us navigate the shoals of daily life, sleeping with the homeless in doorways, and keeping them warm with blankets made from used styrofoam cups. They will cure cancer and make diesel fuel from spent cooking oil if an energy shortage should strand yachtsmen. And why not? If you believe Musk, the robots will be smarter than we are in five years. So deep and sincere is his faith in AI that we must assume he thinks the bots will be even smarter and more capable than he is. If such a world is coming, why worry about the stock market and the economy? Why worry about anything, really?
Why the Bull Market Doesn’t Need MAGA
The Dow is poised to hit 50,000 this week, a milestone that would have seemed surreal when the blue chip average, plagued by covid, was bottoming near 18,000 six years ago. Although there can be little doubt that Trump helped kick stocks into high gear, one could argue that a powerfully bullish economic cycle made the man rather than the other way around. Stated another way, the stock market’s spectacular rally reflects a cyclical mood-change across America that made Trump’s election not merely possible, but inevitable.
Would shares be at these heights with Kamala Harris in the White House? It seems implausible, since she could never have matched Trump’s ambitious agenda. This is not to suggest that all or even most of his initiatives will succeed. In fact, some of the most important ones could lay an egg. Tariffs, for instance. They amount to little more than a new tax on global trade, with consequences that have yet to produce a clear result, let alone a positive one. His promise to make life more affordable for most Americans could also be a non-starter for reasons explained here a couple of weeks ago. And his plan to revitalize Venezuela’s oil production has already been labeled ‘uninvestible’ by the CEO of ExxonMobil. As for the reshoring of manufacturing. no one is talking about how revived and new factories would have to be practically worker-less to compete with heavily robotized plants in South Korea, China, Japan and elsewhere.
What Jobs?
And what about Trump’s plan to radically reorganize the mortgage market so that young people can buy houses? Although this sounds appealing, what will be the source of their income? The job market is changing so rapidly, especially with AI increasingly replacing more white-collar workers, that even seasoned recruiters can no longer predict where the jobs will be in ten years.
Stocks have soared nonetheless, not because Trump will necessarily succeed at making American great again, but because, for better or worse, he is perceived by investors and the entire world as being solidly in command of the nation’s affairs. Realize that stocks rose sharply during Biden’s first two year in office. If shares could do that while a head of cabbage occupied the White House, their turbocharged performance under Trump should have surprised no one. Even a do-nothing Harris might have enjoyed the economic Grand Supercycle’s runaway finale by simply holding onto the reins.
So Much Is Riding on Silver!
The speculative frenzy in silver has provided welcome relief from AI claptrap, but will it last? There are a hundred theories about why silver has come exuberantly to life after lagging gold for so long. I’ve been puzzled myself, since my technical runes suggest that gold futures could make an important top at $5132, about $800 above Friday’s settlement price. Silver would likely peak at the same time, unless the squeeze on physical supply were to pick up enough climactic energy to cause an historical readjustment in the gold:silver ratio. The Founders thought 15:1 was the correct peg, implying silver could be trading for $342 with gold at $5132. That sounds farfetched, but stranger things have happened in the financial world, especially in markets caught in short squeezes.
What is most peculiar about the current run on silver is that it probably couldn’t have occurred without Trump’s blessings. He has said he wants a much higher gold price in order to monetize America’s few remaining, unhocked assets (including residential real estate). Letting silver off the leash would make almost everyone feel at least a little richer. The problem is, some of Trump’s most powerful buddies in the banking business are short silver up the wazoo. Citi and B of A alone reportedly have loaned out at interest $4.5 billion of silver they do not possess, exposing themelves to potentially catastrophic losses if AG quotes should soar anew.
Trump’s Fortunes
And what if gold goes no higher than $5132? A corresponding top in silver followed by a steep slide in both could cap Trump’s fortunes. It would certainly destroy the comforting illusion that financial markets are under control. Of course, crazy ideas like that can only persist in bull markets. If stock averages were to sell off by 30%-40%, which they absolutely will at some point, whoever is President at the time will be not just a lame duck, but a dead duck. Keen for more of my latest rantings? Find them on This Week in Money by clicking here.
Holiday Greetings!
My best wishes to you all for the holiday season and the New Year. May you and yours enjoy good health, prosperity and serene contentment in 2026. My regular weekly commentaries will resume with the edition scheduled for publication on Sunday, January 4. In the meantime, trading ‘touts’ (see below) will update as usual late Sunday afternoon.
Grand Supercycle Will End with Trump
The widespread notion that a U.S. president can significantly influence the economy is mistaken. In observable fact, the broad cycles that bring us good times and bad, booms and busts, are vastly larger and more powerful than the presidency, too overwhelming to even affect, let alone command. Even the radical policies of Roosevelt’s New Deal were insufficient to end a depression that had taken more than a generation to gather force. America’s eventual emergence from those very hard times happened gradually during the administrations of Truman, Eisenhower and Kennedy. Moreover, the post-war rebuilding process that made Europe and Japan America’s best customers arguably would have happened cyclically without a Marshall Plan, and the U.S. financial system would have receded naturally from the fiscal excesses of a war that itself was an uncontrollable cyclical event.
In this view, Kennedy, Clinton, Obama and Biden were simply lucky to have been elected with the economy and the stock market at cyclical lows. For in no way did they cause the upswings that shone on their terms in office, nor the felicitous shifts in the mood of consumers. The bullish cycle had to have been particularly strong to survive the misbegotten policies of Obama, the first president to revile American exceptionalism, if not America itself.
Surfing the Big Wave
Which brings us to Trump, the president who has come closest to affecting the economy both inside and outside the U.S. Trump inherited a fiscal blowout impelled by the covid hoax, but he has since turned it into a credit and fiscal bonfire that can only end in ashes. Trump has merely extended an especially powerful upswing that he did nothing to cause. It should have ended with the senile Biden and his autopen administration, but Trump’s aggressive economic activism kicked already booming asset values into high gear. It is no ordinary boom, but rather the spectacular finale of a Grand Supercycle that long-wave forecasters date back as far as the 1700s. It was logical and perhaps even inevitable that the coming, severe downturn should have summoned so grandiose a personality as Trump to stage a last hurrah.
His popularity and credibility have already peaked with his all-in bet to give Americans ‘affordability’. This should have been apparent to anyone who watched his relatively short, heavily stuffed speech last week. Trump trotted out charts and tables to show how the cost of eggs, gasoline, poultry and such have begun to fall. Well, whoopee doo. But even if half-price Ozempic for every American were to arrive before midterm elections, the nation will still be dealing with the deeply structural, intractable problems of unaffordable big things: housing, healthcare, insurance, college education and automobiles. Trump’s affordability promise is doomed to failure, and every American senses this. His hubris will put a fitting end to the Grand Supercycle, and it is the reason why the stock market has seemed so dead-tired lately. [For an earful on silver, AI and ‘lunatic-sector’ stocks that have begun to sputter out, click here for my latest rant at HoweStreet.]
Conviction, Guts Finally Paying Off in Bullion
Just one more push could exhaust a bull market that is coming up on its seventeenth year. Although that’s only about three dog years, it equates to about 120 human years. In fact, no other bull market has lasted even remotely that long. The next-oldest, birthed at the low of the October 1987 Crash, was 13 years old before a crash in tech-sector stocks ended the dream for millions of investors grown stupid on greed.
Could it happen again? Only a fool would ask that question. My recent commentaries have warned with increasing shrillness that stocks are in a topping process. I have purposely left the details vague, since bull-market tops are notoriously full of deceptions. However, the chart above provides a compelling number for the party to end, a 7492 Hidden Pivot target for the E-Mini S&P futures that lies 8.6% above.
Last week featured the second straight Friday on which bulls and bears did little more than screw the pooch. Usually, Fridays are fun, or at least interesting, for one group or the other. But lately it’s been like watching a heavyweight slugfest that turned bloody in the seventh round. Bears have lacked the guts to deliver the haymaker, but the buy-the-dips junkies, who have been winning on points since 2009, seem too fatigued and lacking in conviction to counterpunch. Thus did stocks fall to end the week, although not enough to worry anyone, much less spook the herd.
Paralyzed by Doubt
All the excitement was in gold and silver, which have been rising since early 2024 in a steepening trajectory. The uptrend is practically vertical now and in need of a rest. But that is not how bull markets work, as many bulls are discovering. Although they’ve been praying for a big move for years, now that it is finally happening, they are paralyzed with doubt, unable to board an uptrend that left them waiting at the station months ago. And so they sit on their thumbs, hoping to scoop up bullion near the bottom of a big correction that never comes.
Some who frequent the Rick’s Picks trading room are notable exceptions. They have been sitting on bullion stocks and ingots for months or even years. As one of them notes, the big money is made not by playing the whipsaws and joining in the madness, but by waiting patiently for an enduring bull market that was always certain to come sooner or later. It is here now, and those with the patience and conviction to stay with it are reaping outsize rewards that implicitly rebuke the trader mentality.
Zuckerberg’s Huge Branding Problem
Stocks looked leaden as the week ended, adding to the impression that the aging bull market is topping. The Dow tacked on a perfunctory 104 points, or 0.22%, and it wasn’t pretty. There was little life in the lunatic sector (aka ‘the Magnificent Seven’), which until recently could be relied on to celebrate its wildest flights of fantasy on Fridays. The biggest winner in the bunch was META, which rose 1.80% on news that Zuckerberg is having second thoughts about his all-in bet on a metaverse.
If you’re unfamiliar with the term, it refers to a virtual world in which users interact online through avatars. Zuckerberg evidently thought there were hundreds of millions of us, if not billions, eager to escape the pain and drudgery of day-to-day life. He was so certain about this that he changed the name of his company in 2021 from Facebook to Meta. But after sinking $70 billion into the concept, there has been precious little payback. Even more troubling to investors is that there are no obvious ways to make back what has been spent already, nor to recoup any further sums Meta might pour into the idea.
Counting on Investors’ Stupidity
To cover up this boo-boo, and to avoid being thought clueless, Zuckerberg did what any muckety-muck CEO in the digital world would have done: a twisting somersault onto the AI bandwagon. “AI is the most important technology we are working on,” he said, evidently hoping investors have forgotten that he spent the last four years taking pains to separate the supposed;y lucrative potential of metaverse from the vague and so-far profitless promises of AI. This latest statement to the press was a smart move if you believe that the $10 gain recorded by META on Friday was the beginning of a lasting rally. More likely is that it will be reversed on Monday or Tuesday, adding to the disillusionment that has been weighing on the broad averages for the last few months.
Meanwhile, Facebook is stuck with a moniker and a concept that are perceived as dead on arrival. Although Zuckerberg is known as a smooth talker, watching him try to extricate himself from this memic trap promises to be entertaining. Faced with a branding problem that is not merely tricky but potentially fatal, he doesn’t dare return to the name ‘Facebook’, since that would be admitting failure and the stupidity of his biggest-ever idea. But if he changes the company’s name a second time to some as-yet-unclaimed, nebulous variant of AI, he will look like a flake. My guess is that he will stick with Meta, forever associating himself with a virtual Edsel. Like Johnny Cash’s boy named Sue, Zuckerberg will have to work three times as hard to be taken seriously, particularly by his billionaire cohort who are already well aloft in their splendiferous AI hot-air balloons. [Click here for the rest of it in my latest conversation with Jim Goddard on This Week in Money.]
Bear Sighting Was Premature
Like UFOs and Bigfoot, far more bear market sightings are imagined than real. I thought I’d spotted Papa Bear myself when Nvidia announced terrific earnings a couple of weeks ago, only to see their shares reverse and dive sharply after a deceptive spike higher. Was this the needle prick that burst the AI bubble? It certainly seemed like it; for it was not merely plausible, but logical, given that Wall Street and the entire investment world were desperately counting on a single company, albeit a $5 trillion one, to turn sagging markets around. They got their wish, but it was a delayed reaction that must have spooked many investors. Stocks plunged for several days after the announcement before catching a bottom and reversing steeply.
Your editor was one of the non-believers who were certain stocks had entered a bear market that was long overdue. It wasn’t just Nvidia’s performance, either. Trump’s fortunes, if not to say his very credibility, seemed to be ebbing, in part because his nemesis Epstein was creeping back into the headlines. The President was uncharacteristically back on his heels, seemingly in synch with falling stocks. But within a few days, NVDA appeared to be basing, Trump was masterfully diverting the news media toward a possible peace pact between Russia and Ukraine, and stocks were in a steep recovery. It was sufficiently ferocious to seem like a classical bear rally, and that’s what I assumed it was — until, that is, in just three days, the broad averages had already maneuvered to within easy distance of new highs. That was on Friday, and there’s no point pretending the rally is a fake, destined to end with a whimper.
Place Your Bets
I continue to believe, nonetheless, that stocks are in a topping process. However, a bear market is unlikely to begin now, with bullish seasonality revved to the max and corporate media beating the drums for more Fed easing. In a sane world, investors’ fatal addiction to Fed credit injections would have been rebuked years ago by a severe recession. These are crazy times, though, and ending them may call for a more potent kind of symbolism than NVDA’s price histrionics. In that regard, the question whether Elon Musk will become the world’s first trillionaire springs to mind. It’s time to place your bets.
Nvidia’s Dive Is More than Merely Disappointing
There’ll be more to say about the bear market as it develops. It has taken some baby steps so far, with a 2,100-point slide in the Dow over several days, then a stunning, 1,115-point reversal to the downside after Nvidia announced strong earnings last Thursday. Talking heads and editorialists opined that quarterly numbers were not quite as sensational as investors had anticipated, but they missed the point. For just as poor earnings barely fazed stocks during the 16-year bull market, merely decent earnings are unlikely to provide more than fleeting upticks in a bear market. Get used to it, because this new dynamic will be with us until shares hit bottom years from now.
With respect to Nvidia, it didn’t help that Wall Street and every investor on earth was desperately counting on their earnings announcement to reverse the slide of the broad averages in the days preceding the report. When the Dow notched a record high on November 12, pundits paid scant attention to the failure of the usually feisty Nasdaq Index and the ‘Cubes’ (QQQ) to follow suit. Six months from now, however, this divergence will be seen as one of those bells that supposedly doesn’t ring at the top.
Making Disney a Has-Been
Although my vantage point on Nvidia is purely technical, others saw the stock’s punitive reversal as related to the questionable way they report earnings. One analyst cited the exceptionally long lag time between billings and receipts. Were the global economy to fall into recession, he notes, the manufacturer could conceivably get stiffed by strapped customers, wiping billions of dollars in profits already recorded from Nvidia’s books.
‘Fundamentals’ undoubtedly figured into NVDA’s surprising plunge, but the long-overdue deflation of AI hubris was surely a more powerful factor. I address this subject in a recent interview with Jim Goddard on This Week in Money. I also talk about how AI’s latest gift to the masses, Sora, has sounded the death knell for Hollywood studios. These days, even kids can make professional-quality movies scripted by machines and vividly realized using apps like Sora, an OpenAI product. The quality of homemade-video content on YouTube has already surpassed the wretched, vacuous bilge that Disney’s bean counters have been churning out for decades. Moreover, because 14-year-olds are unlikely to be inhibited by copyright laws, we can expect to see an online bazaar develop for their creative work that will supplant the big studios and suburban multiplexes. This cottage industry will grow in the hands of home producers and in countless streaming venues that have already made theaters obsolete. The technology is highly disruptive to the extent it has begun to dominate content on YouTube channels that reach as many as 375 million viewers.