The Morning Call---The bear case for AI

 

The Morning Call

 

12/12/25

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/gold-silver-jump-bitcoin-big-tech-dump-orcls-grinch-slams-santa-powell

 

                Thursday in the technical stats.

            https://www.barchart.com/stocks/momentum

            https://www.barchart.com/stocks/sectors/rankings

            https://www.barchart.com/stocks/signals/new-recommendations

 

            Goldman sees significant upside to gold.

            https://www.zerohedge.com/precious-metals/goldman-sees-significant-upside-their-4900-gold-price-forecast

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly initial jobless claims totaled 236,000 versus consensus of 205,000.

                          https://www.advisorperspectives.com/dshort/updates/2025/12/11/initial-unemployment-claims-jump-to-3-month-high

 

The September trade balance was -$52.8 billion versus expectations of -$57.0 billion.

https://www.advisorperspectives.com/dshort/updates/2025/12/11/trade-deficit-shrinks-september-2025

 

                        International

 

October Japanese industrial production was up 1.5% versus forecasts of +1.4%.

 

October UK GDP was down 0.1% versus predictions of no growth; October industrial production was up 1.1% versus +0.8%; the October trade balance was -L2.8 billion versus -L1.9 billion; October YoY construction output was up 0.9% versus +1.5%.

 

November German CPI was down 0.2%, in line.

 

                        Other

 

                          Strong Black Friday sales and the Debt Black Hole.

                          https://www.advisorperspectives.com/commentaries/2025/12/11/strong-black-friday-sale-debt-black-hole

 

                          Affordability is neither a crisis nor a hoax.

  https://www.bloomberg.com/opinion/articles/2025-12-11/affordability-isn-t-a-hoax-it-s-not-a-crisis-for-most-either?srnd=homepage-americas&sref=loFkkPMQ

 

 

                          Is there a possible long term regime change in jobless claims?

  https://talkmarkets.com/content/is-thanksgiving-seasonality-masking-a-possible-longer-term-positive-regime-change-in-jobless-claims?post=544161

 

 

            Monetary Policy

 

              Why the Fed’s new ‘reserve management purchases’ are not QE.

              https://wolfstreet.com/2025/12/11/why-the-feds-reserve-management-purchases-are-not-qe/

 

            AI

 

              As AI grows, so does affordability.

              https://www.realclearmarkets.com/articles/2025/12/11/as_ai_grows_in_the_us_so_grows_affordability_1152678.html

 

Howard Marks on AI. This is a long article, but a must read. He covers quite   thoroughly the pros and cons of investing in AI today.

             https://www.oaktreecapital.com/insights/memo/is-it-a-bubble

 

This piece presents a well-researched bear case on AI. Like the above article, it is a bit long. I am not smart enough to comment on many of the points the author makes. So I am not suggesting that the results envisioned will occur. Still, anyone investing or considering investing in the AI stocks needs to read this.

              https://www.nakedcapitalism.com/2025/12/the-u-s-is-betting-the-economy-on-scaling-ai-where-is-the-intelligence-when-one-needs-it.html

 

Everyone seems to be ganging up on AI. Here is a shorter mathematic look at AI valuation.

https://econbrowser.com/archives/2025/12/q-theory-in-a-time-of-ai

 

                  Ed Yardini lowers portfolio weighting of AI.

              AI CALL: The TIME Curse & The Game of Thrones

 

 

            Tariffs

 

              Trump’s ‘Swiss cheese’ tariffs.

              https://www.realclearmarkets.com/articles/2025/12/11/trumps_tariffs_represent_an_attempt_to_achieve_the_impossible_1152510.html

 

            Outlook for 2026

 

              Why the Market will likely rise in 2026.

              https://www.marketwatch.com/story/fed-cuts-or-not-the-stock-market-is-likely-to-move-higher-in-2026-b6f15a9a?st=xmyHvN

 

              Every asset managers’ 2026 (useless) forecast.

              https://behaviouralinvestment.com/2025/12/09/every-asset-managers-2026-forecasts/

 

              What could go wrong?

              https://www.zerohedge.com/markets/prepare-unexpected-these-are-deutsche-banks-2026-curveballs

 

     Investing

 

The impact of fiscal deficits on corporate profits and valuations. This is an absolute must read article. It hypothesizes that deficits serve to increase profit margins as well as multiples. To be sure ‘hypothesizes’ is the operative. However, if even close to being correct, it suggests that when our ruling class gets their fiscal s**t together that will not be a plus for stocks.

https://www.advisorperspectives.com/commentaries/2025/12/09/how-deficits-inflate-profits-equity-valuations

 

            Despite the rate cut regime, long rates continue to rise. (did someone say inflation?)

            https://www.apolloacademy.com/a-mystery-in-fixed-income/

 

            Q3 Russell 2000 earnings dashboard.

            https://talkmarkets.com/content/us-markets/russell-2000-earnings-dashboard-25q3-thursday-dec-11?post=544155

 

    News on Stocks in Our Portfolios

 

Mastercard (MA) declared $0.87/share quarterly dividend, 14.5% increase from prior dividend of $0.76.

 

Altria (MO) declared $1.06/share quarterly dividend, in line with previous.

 

Oracle press release (ORCL): Q2 Non-GAAP EPS of $2.26 beats by $0.62.

Revenue of $16.06B (+13.9% Y/Y) misses by $130M.

 

Oracle (ORCL) declares $0.50/share quarterly dividend, in line with previous

 

What I am reading today

 

           

 

 

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The Morning Call---The Market isn't buying the Fed

 

The Morning Call

 

12/9/25

 

I am having a medical procedure that will keep me out of action today and tomorrow. Back on Friday.

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/hawkish-lean-sparks-cross-market-pain-dollar-gain

 

            Monday in the technical stats.

            https://www.barchart.com/stocks/momentum

            https://www.barchart.com/stocks/sectors/rankings

            https://www.barchart.com/stocks/signals/new-recommendations

 

            New highs up next.

            https://talkmarkets.com/content/us-markets/new-highs-up-next-with-higher-risk-leading-into-fed-meeting?post=543254

 

            The disposable income link to margin debt.

            https://www.zerohedge.com/markets/dpi-link-margin-debt

 

            The latest from Goldman’s flows desk.

            https://www.zerohedge.com/markets/complete-flows-technicals-positioning-market-summary-we-reach-end-2025

 

            The Market isn’t buying the Fed.

            https://www.zerohedge.com/the-market-ear/rates-move-and-market-isnt-buying-fed

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The ADP weekly employment report showed job increases of 4,750 versus -13,500 in the prior week.

 

The November small business optimism index came in at 99.0 versus forecasts of 98.0.

           

                        International

 

The October German trade balance was E16.9 billion versus projections of E15.9 billion.

 

November Japanese YoY machine tool orders rose 14.2% versus estimates of +9.4%.

 

                        Other

 

                          Home prices ‘firmed’ in November.

                          https://talkmarkets.com/content/us-markets/new-highs-up-next-with-higher-risk-leading-into-fed-meeting?post=543254

 

                          More evidence of consumer weakness.

                          https://bonddad.blogspot.com/2025/12/while-capital-spending-increased.html

 

                          Results of NY Fed consumer survey.

                                      https://www.zerohedge.com/markets/ny-fed-consumer-survey-shows-steady-inflation-despite-soaring-expectations-medical-care

 

            Monetary Policy

 

              Fed policy about to be tested.

              https://thehill.com/opinion/finance/5633688-federal-reserve-policy-shift/

 

              Lack of official data leaves Fed uncertain.

              https://www.advisorperspectives.com/commentaries/2025/12/08/jobs-data-alternative-sources-drive-feds-next-move

 

A hawkish tilt in global monetary policy has yet to become dramatic. (‘yet’ being the operative word. In my opinion, this is an early warning signal.)

              https://www.zerohedge.com/markets/global-hawkish-turn-has-yet-become-dramatic-one

 

            Inflation

 

              On housing affordability

              https://scottsumner.substack.com/p/imagine-a-bigger-seattle

 

              Consumer income versus consumer sentiment.

              https://econbrowser.com/archives/2025/12/sectrsy-bessent-the-american-people-dont-know-how-good-they-have-it

 

              Comparing the CPI and PCE price indices.

              https://www.advisorperspectives.com/dshort/updates/2025/12/08/two-measures-of-inflation-september-2025

 

              The healthcare inflation bomb.

              https://mishtalk.com/economics/health-care-inflation-bomb-makes-the-feds-2-percent-target-almost-impossible/

 

            Geopolitics

 

              Zelensky rejects Trump peace plan.

              https://www.zerohedge.com/geopolitical/zelensky-definitively-shuts-door-trump-peace-plan-wont-cede-territory

 

     Investing

 

            The depreciation schedule for AI chips may not be as big a deal as some think.

            https://www.wsj.com/finance/investing/the-accounting-uproar-over-how-fast-an-ai-chip-depreciates-6f59785b?mod=business_lead_pos4

 

            Lower rates continue to favor foreign stocks.

            https://www.capitalspectator.com/the-everything-rally-endures-as-the-years-end-game-unfolds/

 

                The most important market in the world is breaking down.

            https://talkmarkets.com/content/us-markets/the-most-important-market-in-the-world-is-breaking-down-again?post=543234

 

            Inflation is the main risk for investors in 2026.

            https://www.ft.com/content/a62efa48-9265-40bb-b89d-d552cd549eba

 

            How will the rise in Japanese rates impact global markets?

            https://www.ft.com/content/12c35477-5843-4d15-9808-e9563a497648

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

 

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Monday Morning Chartology

 

 

The Morning Call

.

 

12/8/25

 

 

The Market

 

         Technical

 

The S&P continued to tip toe higher. Though it is still below the lower boundary of the former uptrend off its May low (~6891) and its former high (~6920). It seems almost certain to me that it will test that all time high given (1) seasonal factors, (2) that the index is above all three DMAs and in uptrends across all time frames and (3) a December rate cut appears to be lock.

 

Still, I remain of the opinion that this is a market to trade not invest in long term. If you do, be sure to have close in stops.

 

Breakouts everywhere.

https://www.zerohedge.com/the-market-ear/banks-bankers-breadth-breakouts-everywhere-choose-your-mania

 

The latest from Citadel’s desk.

https://www.zerohedge.com/markets/profits-policy-positioning-citadels-flows-guru-remains-constructive-through-year-end-2026

 

 

 

 

TLT suffered another dismal week. It reset its 50 DMA to resistance. If it remains (1) below its 100 DMA through the close today, it will reset that DMA to resistance and (2) below it 200 DMA through the close on Wednesday, it will rest the DMA to resistance. In addition, remember it is in downtrends across all timeframes. Despite the optimism on rate cut this week, the only circumstance I can see as pushing rates meaningfully lower would be a recession. And I hardly think anyone would be happy about that scenario. I wouldn’t bet heavily on a change of direction until TLT breaches the upper boundary of its short term downtrend.

 

 

 

 

 

Gold was down slightly on the week. Although it did manage to make a higher high in the process. So the trend remains to the upside. It is above all three DMAs and in uptrends across all timeframes. I continue to hold my trading position in GDX.

 

 

 

 

 

The dollar confirmed its break of the very short term uptrend off the September low. However, the good news is that it did test its 50 DMA and bounced---a slight positive. It remains within its short term trading range and, optimistically, will continue to do so. Although I don’t think more rate cuts are the answer for its dismal performance.

 

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/most-shorted-mag7-momo-gains-bitcoin-bonds-bullion-pains

           

Friday in the technical stats.

https://www.barchart.com/stocks/momentum

https://www.barchart.com/stocks/sectors/rankings

https://www.barchart.com/stocks/signals/new-recommendations

 

    Fundamental

 

       Headlines

 

              The Economy

 

US stats last week were balanced as were the primary indicators (one plus, three neutral, one minus). Overseas, the numbers were very positive with the inflation data balanced (one plus, three neutral, one minus).

 

After all the fretting about the lack of economic data, with the resumption of statistical releases, nothing has really changed. The US economy is still muddling through assisted by better data from overseas. Ditto my inflation forecast (as good as it is going to get).

 

On the monetary front, a Fed rate cut this week seems assured. While I think it a negative, it reinforces both my growth and inflation outlook. Still I want to see a couple more confirming weeks of data before turning off my yellow flashing light.

 

                        US

 

 

 

                        International

 

                        Other

                       

                          Consumer sentiment improves slightly.

                          https://www.advisorperspectives.com/dshort/updates/2025/12/05/consumer-sentiment-improves-slightly-but-remains-broadly-somber

 

                                                   Update on personal income.

                          https://www.advisorperspectives.com/dshort/updates/2025/12/05/recession-indicators-real-personal-income-september-2025

 

                          Update on real disposable income per capita.

                          https://www.advisorperspectives.com/dshort/updates/2025/12/05/real-disposable-income-per-capita-flat-september-2025

 

                                                    Real income is rising but real spending may be rolling over.

                          https://bonddad.blogspot.com/2025/12/real-income-rises-but-real-spending-on.html

                                               

                          A tailwind for the economy in 2026.

                          https://www.apolloacademy.com/significant-fiscal-boost-coming-in-2026/

 

                          October consumer credit below expectations.

                          https://www.zerohedge.com/markets/consumer-credit-below-expectations-slowdown-student-auto-loans-credit-card-aprs-back-all

 

                        Monetary Policy

 

                          The Fed’s November 30^th balance sheet.

                          https://wolfstreet.com/2025/12/04/fed-balance-sheet-qt-37-billion-in-november-2-43-trillion-from-peak-to-6-54-trillion/

 

                          A Fed Funds rate cut is not likely to have much effect on the economy.

  https://www.bloomberg.com/news/articles/2025-12-05/fed-rate-cuts-don-t-ensure-economic-boost-due-to-tariffs-uncertainty?srnd=homepage-americas&sref=loFkkPMQ

 

 

                        Fiscal Policy

 

                          Living on borrowed credibility.

                              https://www.theunseenandtheunsaid.com/p/living-on-borrowed-credibility

 

                        Inflation

 

                          The PCE measure for housing declined in September.

                          https://www.calculatedriskblog.com/2025/12/pce-measure-of-shelter-declined-to-37.html

 

                       Tariffs

 

                          National security tariffs on toilet paper?

                          https://econbrowser.com/archives/2025/12/national-security-tariffs-sec-232-on-toilet-paper

 

                             The Financial System

 

In an earlier post I noted that banks aren’t nearly at risk from the private credit market as they were the mortgage market in 2008. While that is correct, this article provides an estimate of the banking system’s current exposure to private credit---which is not insignificant.

https://www.bloomberg.com/opinion/articles/2025-12-05/banks-need-shoring-up-against-private-credit-risks?srnd=homepage-americas&sref=loFkkPMQ

 

 

                    Geopolitics

 

                        Trump’s latest National Security Strategy.

                        https://www.zerohedge.com/markets/hedge-fund-cio-trumps-nss-report-reads-cold-war-playbook-deploy-capital-accordingly

 

                    The Outlook for 2026

 

                        Goldman trader first reviews 2025, then opines on 2026.

                        https://www.zerohedge.com/markets/18-more-closing-bells-left-2025-top-goldman-trader-reviews-what-mattered-and-whats-next

 

                        The latest from BofA.

                        https://www.zerohedge.com/markets/hartnett-soon-all-commodity-charts-will-look-gold

 

              Investing

 

              The moment for gold has arrived.

              https://www.realclearmarkets.com/articles/2025/12/05/the_moment_for_gold_and_alternative_bullion_investments_has_arrived_1151379.html

 

              Revisiting the ‘safe’ portfolio withdrawal rate in retirement.

              https://www.capitalspectator.com/revisiting-safe-portfolio-withdrawal-rates-for-retirement/

 

              Time to rebalance.

              MARKET CALL: Rebalancing Domestic & Global Stock Portfolios In 2026

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.