Volume and VIX

- NYSE volume 5% below its one-month average

- NASDAQ volume 2% above its one-month average

- VIX index: up 4.05% to 16.43

Closing Breadth

Sectors

% Movers

Nasdaq 100 Heat Map

On the shows we hear cheerleading.

Here is something you will not even hear being discussed on the shows — a conspicuous divergence (and a measure of the narrowing of market breadth I expressed over the last 24 hours):

The guests and hosts on the shows are now fearless.

As Grandma Koufax used to say, "Rotzaruck":

Earnings After the Close Tuesday 

Earnings Before the Open Wednesday 

More than once, more than twice and more than three times, money managers have expressed the view (now, quite directly) that there is virtually no reason to diversify out of large-cap tech.

The consistent message being conveyed (often by those that previously recommended diversification) is to "stay with what is winning."

As I expressed earlier, it's the dot-com domain game redux:

No Questions Asked

We are at the point in the AI cycle when any company that is mentioned to have a new alliance, relationship or joint venture with Nvidia (NVDA) , gaps higher in share price.

Stocks are purchased aggressively with no questions (and certainly no skepticism).

Listen on...

GTC October 2025 Keynote with NVIDIA CEO Jensen Huang

By Doug Kass Oct 28, 2025 1:45 PM EDT

We are at the point in the AI cycle when any company that is mentioned to have a new alliance, relationship or joint venture with Nvidia  (NVDA) , gaps higher in share price.

Stocks are purchased aggressively with no questions (and certainly no skepticism). 

Listen on...

GTC October 2025 Keynote with NVIDIA CEO Jensen Huang

No trades since last report in my Diary.

I have a short research call at 1 PM.

Equities gap on "news" that Xi and President Trump are making tariff progress.

Discounting the same news time and time again ...only to get back to where the tariff status was at the start (months ago) makes no sense.

But that is the state of the market today.

This tweet encompasses some of my continued concerns over the last few years — state silos (and absence of uniform legislation at federal level), ultimate distributions issues/solutions, the proliferation of illicit weed (and lack of enforcement), the generally hospitable rules (and lack of restrictions) towards hemp, etc.

Freeing cannabis legislatively and rescheduling remains a popular idea but, apparently, not an important one — from a political standpoint:

I have covered one half of my remaining half of my Microsoft  (MSFT)  short at $542.

From earlier:

Window Is Closing: Covered Half My MSFT Short Rental

I have covered half of my (MSFT) trading short rental at $544.

Last post:

I Saw an Open Window for a Trade in Microsoft

I have taken a trading short rental in (MSFT) (at $555.48) after this announcement with OpenAI. Microsoft agrees new terms with OpenAI worth $135 billion stake

No one should follow me into this trade!

Position: Short MSFT S

By Doug Kass Oct 28, 2025 9:41 AM EDT

From Peter Boockvar:

Home prices slow/Subdued consumer confidence/Richmond mfr'g still in contraction

According to S&P Cotality (a switch from CoreLogic) Case-Shiller, home prices nationally in August rose 1.5% y/o/y, the slowest pace since July 2023 (which only slowed after the 2021-2022 spike). The problem for first time buyers though remains the 51% price cumulative increase over the past 5 1/2 years and why the recent dip in mortgage rates is just not providing enough relief. And mortgage rates are still double where they were pre-2022.

S&P said this, “Mortgage rates remaining above 6.5% continue to weigh on buyer demand, even during what should be the busy summer season. The combination of high financing costs and prices that remain near record highs has limited transaction activity. Markets that experienced the sharpest pandemic-era gains are now seeing the largest corrections, while more affordable metros with stable local economies are holding up better. Looking ahead, the housing market appears to be finding a new equilibrium after the pandemic boom.”

Also, “With price growth running at half the rate of inflation and several major markets in decline, the rapid appreciation of recent years has clearly ended. This adjustment may ultimately lead to a more sustainable market, but for now, homeowners are watching their real equity erode while buyers face the dual challenge of elevated prices and high borrowing costs.”

Home Price Gains y/o/y

According to the Conference Board, and similar to what the UoM told us, consumer confidence in October remained subdued. Its index slipped to 94.6, a six month low and which is not too far from the Covid low of 85.7. That is down 1 pt m/o/m and for perspective it was at 132.6 in February 2020.

After a 5 pt drop in September in the Present Situation, it rose 1.8 pts m/o/m but was offset by an almost 3 pt drop in Expectations. One yr inflation expectations was 5.9%, up one tenth from last month and remaining elevated.

On the job answers, jobs Plentiful rose .9 pts but after dropping by 3.3 pts in September. Jobs Hard to Get rose .2 pts but was down by .9 pts last month. Overall, both have been reflecting a softening pace of hiring this year. And to this, expectations for ‘more jobs’ in the coming 6 months fell .8 pts to 15.8 which is a 6 month low. Income expectations slipped a touch to a 4 month low.

Spending intentions were mixed, rising slightly for autos but falling for homes. Mixed for major household items.

Breaking it down further, “By income, confidence fell for consumers making less than $75K a year, but improved for most of the income groups making more than $75K, with the largest increase among those earning over $200K. Younger consumers and consumers earning over $75K have been the most optimistic overall.”

Also, “By partisan affiliation, confidence improved among Independents, declined among Democrats, and was also slightly down among Republicans.”

Bottom line, the higher cost of living is what is most on consumers minds. “Consumers’ write-in responses were led by references to prices and inflation, which continued to be the main topic influencing consumers’ views of the economy. References to tariffs declined further this month but remained elevated. Mentions of jobs and employment eased somewhat after picking up in September.”

Finally of note, “References to US politics were up notably, with the ongoing government shutdown mentioned multiple times as a key concern.”

My bottom line, nothing market moving here but this anecdotal data point continues to reflect the bifurcated US consumer and the two lane highway that they are driving down with upper income/stock owners driving in the fast lane and everyone else in the slow lane.

Consumer Confidence

One yr Inflation Expectations

More Jobs in coming six months

Lastly today, the October Richmond manufacturing index joined most of its peers in contraction coming in at -4. That though was an improvement from the -17 seen in September and the estimate of -12.

Expectations for both prices paid and received did moderate.

The Richmond Fed said simply, “Fifth District manufacturing activity was slow in October.”

My pals Guy and Dan reference my negative breadth observations from yesterday and today — despite another day of higher averages.

Run, don't walk to watch MRKT CALL!

Let's go to the tape. 

Warning: Stock Market Collapse of Epic Proportions Ahead

As of 10:40 AM:

Oaktree's Howard Marks takes "A Look Under the Hood." A Look Under the Hood

Here are today's things:

I added to my short Index positions:

*  (SPY)  $686.24

*  (QQQ)  $629.48

I added to my large  (GRNY)  short (elders abuse!) at $26.10.

I shorted  (MSFT)  $555.48 and covered half at

$544.

ICYMI: David Rosenberg Says Falling Home Prices Will Lead Stock Market

From Peter Boockvar:

Now 18% above the 200 day/It's not just D's and R's, Independents have a say/Earnings/Dallas mfr'g

Just a heads up that the NASDAQ 100 is now almost 18% above its 200 day moving average. As seen below, it is the most since July 2024 when it got to 20% right before a 13% correction. Just as gold got very extended and is currently in the midst of a shakeout, the NDX is now going vertical.

NDX

We know the UoM consumer confidence index more reflects one’s politics than their actual financial situation and outlook but we can look at the Independent category to get a view on consumer confidence that is not politically slanted. The final October read seen Friday has the confidence of political Independent’s at just 49.5 vs 101 in February 2020 and only 3.3 pts off a multi year low. I will argue again, we have an extraordinarily mixed and uneven economy and one’s standing is highly dependent on how much money one makes, how much stock they hold and what industry they work in. That is obviously always the case but seemingly ever more so now.

Consumer Confidence of Independent’s

I haven’t mentioned uranium in a while but we remain positive and long stocks that produce it, not the highly valued SMR hopefuls. In case you didn’t see today, the US government announced a deal with Westinghouse, Cameco and Brookfield to build $80b worth of new nuclear reactors in the coming years. Cameco owns 49% of Westinghouse with Brookfield owning the balance.It’s not just publicly traded companies that I try to glean macro messages from, along with their individual fundamentals, I’m always reading to get info on private companies too. In yesterday’s NY Times business section in an article talking about how companies are dealing with tariffs they interviewed Richard Rosenfeld, the owner of Two Leaves and a Bud, a Colorado based tea company. As tariffs are hitting him with the import of product, what comes next? “There’s a lot of elasticity in the system” he said and then the article mentioned “But the rubber band has stretched as far as it can go, and he recently imposed the largest price increase in his company’s history.” He then was quoted again, “We’ll have another price increase absolutely coming soon. And I can’t imagine that we won’t have multiple rounds of price increases next year as all these tariffs affect not only us but all the suppliers who supply us and supply our suppliers.”On the public side, we’ve heard plenty of large companies that are able to mitigate the impact of tariffs to some extent (with the consumer also being a part of that mitigation via higher prices) but smaller businesses don’t have as much flexibility.From Carter’s, the children’s clothing maker:“The gross impact of tariffs on gross margin was $20 million in the third quarter. On a consolidated basis, we made good progress in raising prices, which were up in the low single digits, but this higher pricing did not fully offset the higher product costs in the quarter. Our US Retail business made particular progress in raising prices. Third quarter AURs in US Retail increased in the mid single digit range over last year.” I bolded.“As I noted earlier, consumers accepted higher prices in the quarter...From a product point of view, baby continues to be a key driver.”As for guidance, “we have not reinstated sales and earnings guidance given the ongoing and significant uncertainty regarding tariffs. We’re still in the early days of gauging consumers’ response to higher prices and seeing how our peers and the competition will deal with the challenge of tariffs.”Why again are we putting tariffs on imported clothing that we will never make here? National security?From DR Horton who missed eps estimates:“New home demand is still being impacted by ongoing affordability constraints and cautious consumer sentiment, and we expect our sales incentives to remain elevated in fiscal 2026, the extent to which will depend on market conditions throughout the year.”From Royal Caribbean and whose stock is trading down pre market as guidance was light:Business still seems good though, “We continue to see strong momentum across our business, powered by accelerated demand, growing loyalty, and guest satisfaction that is at all-time highs.”“Looking ahead, while it’s still early in the planning process, our strong booked position gives us confidence for 2026 and beyond.”“The company continues to be encouraged by the demand and pricing environment for its vacation experiences. Booked load factors remain within historical ranges at record rates for both 2025 and 2026...Bookings for 2026 have come in at rates that are well above the prior year, resulting in a y/o/y rate growth at the high end of historical ranges. Guest spending onboard and pre-cruise purchases continue to exceed prior years, driven by greater participation at higher prices.”Yesterday the October Dallas manufacturing index remained in contraction at -5 vs -8.7 in September and the six month outlook fell to a 5 month low. Here were some respondent comments in a variety of industries and highlighting again how mixed and uneven the economy is, I’ll say again, with manufacturing in particular still in a recession:Beverage and tobacco product manufacturing

• Overall uncertainty about the strength of the economy is our largest concern. We believe the risk of a recession has increased, although it is hard to quantify. Lower economic opportunities, especially for younger people, is putting downward pressure on our future sales.

Computer and electronic product manufacturing

• We are considering closing our company at the end of the year and filing for bankruptcy. We have had a huge drop in sales, and I think it’s due to the loss of government funding. I don’t think I can recover the company from it.

Fabricated metal product manufacturing

• Our sales outlook is slightly down for 2026.
• Customers are delaying projects to 2026, and requests for quotes have decreased.
• Our customers want to buy, but they lack cash on hand. Multiple competitor closures are funneling demand, but our customers lack liquidity to fund required deposits and interim payments.

Furniture and related product manufacturing

• There’s a slowdown of commercial construction bid requests.

Machinery manufacturing

• Sales have been strong and steady over the past few months. We hope this trend continues.
• The free market is prevailing despite the central planners’ well-intentioned but misguided tariff policies.
• Up and down, back and forth. We are thankful for the work, but the waves continue.
• We expect some gain as well as some loss going forward in 2026 and through the remainder of the current year. We do believe the good will outweigh the bad overall. The DFW area continues to thrive, Texas remains a good place to do business, and the U.S. remains favorable for business as opposed to many world markets. We’re thankful we are where we are geographically and economically.

Miscellaneous manufacturing

• Tariffs. We manufacture in the U.S., but input materials come from China. We don’t have $600 million to get relief from tariffs like some companies do.

Paper manufacturing

• Business is steady at very slow; no uptick in sight at this time.

Primary metal manufacturing

• We suspect other countries, including Mexico, Vietnam and Cambodia are cheating and not paying full Section 232 tariffs on aluminum-extruded products coming into the U.S. This has been reported to the Commerce Department. They are producing two invoices, one for the raw aluminum and another for the other portions of their prices resulting in not paying the full Section 232. If this is allowed to continue our industry will lose jobs and shutter equipment. Most of the foreign countries are subsidizing exports to the U.S. to the detriment of our industry.

Printing and related support activities

• We have gotten very slow and we worry about the general state of our industry. We have a few large jobs that are keeping people busy in the plant, but soon if things don’t change there will need to be some significant reduction in hours worked on the plant floor. There is just not much going on right now, and we believe it’s all tied to the chaos and uncertainty coming from Washington. We are hearing about significant price increases on materials coming soon due to the effect of tariffs.
• Tariff costs (a tax) are having an impact of slowing down economic activity in all sectors. It’s all to do with economic uncertainty.

Textile product mills

• We are very unsure of how the holiday season will play out. Input prices continue to increase as duties and tariffs take effect and remain in place. We are unsure of demand, and we will also need to increase our prices due to rising costs.

Transportation equipment manufacturing

• The interest rate reduction is positive. There’s a need to improve the government shutdown and trade turmoil, and the outlook would be very promising.
• Continued volatility with import tariffs and interest rates continue to stifle the trucking market. Trucking companies continue to struggle, and there is a regular cadence of bankruptcies being reported.
• Business is up, yet we are also affected by the government shutdown in our ability to work with regulators to approve next steps.

I have covered half of my  (MSFT)  trading short rental at $544.

Last post:

I Saw an Open Window for a Trade in Microsoft

I have taken a trading short rental in (MSFT) (at $555.48) after this announcement with OpenAI. Microsoft agrees new terms with OpenAI worth $135 billion stake

No one should follow me into this trade!

Position: Short MSFT S

By Doug KassOct 28, 2025 9:14 AM EDT

Bets on bets on bets and using the markets to do it…..What can go wrong??

Trump Media Plans to Enter Booming Prediction Markets Business

I have taken a trading short rental in  (MSFT)  (at $555.48) after this announcement with OpenAI. Microsoft agrees new terms with OpenAI worth $135 billion stake

No one should follow me into this trade!

Upside:

-CCJ +16% (US govt, Westinghouse, Cameco and Brookfield enter a strategic partnership that will see at least $80B of new nuclear reactors constructed in the US)

-PYPL +15% (earnings, guidance; OpenAI partnership regarding ChatGPT Wallet deal)

-SWKS +14% (earnings, guidance)

-ATI +13% (earnings, guidance)

-QRVO +12% (Skyworks and Qorvo to merge in $22B deal to create US RF semiconductor leader; earnings)

-UPS +12% (earnings, guidance)

-W +11% (earnings, color)

-CHKP +9.8% (earnings, guidance)

-DJT +9.3% (confirms Truth Social to become World’s First Social Media Platform offering prediction markets via Exclusive Partnership with Crypto.com)

-ALKS +8.5% (earnings, guidance)

-WULF +7.8% (reports prelim Q3 revenue; TeraWulf and Fluidstack form 25-year HPC joint venture for 168 MW critical IT load at Abernathy, TX, expected H2 2026)

-SFD +6.7% (earnings, guidance)

-PONY +6.1% (UBER said to be planning to invest in Pony AI and WeRide Hong Kong listings)

-NEO +5.8% (earnings, guidance)

-WGS +5.6% (earnings, guidance)

-SHW +5.2% (earnings, guidance)

-UNH +4.8% (earnings, guidance)

-IVZ +4.3% (earnings)

-REGN +4.0% (earnings, guidance)

-VFC +4.0% (earnings, guidance)

-CAR +3.8% (earnings)

-AXTA +3.2% (earnings, guidance)

-WRD +3.1% (UBER said to be planning to invest in Pony AI and WeRide Hong Kong listings)

Downside:

-RMBS -15% (earnings, guidance)

-CVLT -9.6% (earnings, guidance)

-RCL -8.5% (earnings, guidance)

-CECO -7.2% (earnings, guidance)

-AMKR -6.0% (earnings, guidance)

-GLW -5.8% (earnings, guidance)

-DHI -5.3% (earnings, guidance)

-SYY -4.5% (earnings, guidance)

-WM -4.1% (earnings, guidance)

-NCLH -3.5% (lower in sympathy with RCL)

-AOS -2.4% (earnings, guidance)

-FLUT -2.0% (Truth Social to become World’s First Social Media Platform offering prediction markets via Exclusive Partnership with Crypto.com)

11:00 a.m.: Treasury Announces a 4, 8 and 17 Week Bill Auction; 11:30 a.m.: Treasury hosts a $50B 52-Week Bill Auction; 

11:30 a.m.: Treasury hosts a $95B 6-Week Bill Auction; 

1:00 p.m.: Treasury hosts a $44B 7-Year Note Auction; 

2:00 p.m.: Treasury buyback (liquidity support)

Walsh: Forget it, Jake. It's Chinatown.

- Chinatown (1974) Ending - "Forget it Jake, It's Chinatown"

Interesting excerpt from this piece, which is quite good and should be read in its entirety. My comments to follow: Could China devastate the US without firing a shot? 

If I were advising Xi, I would say this: If you think of America as an adversary, understand that America has essentially become a giant bet on AI. If the Chinese can take down the valuations of the top 10 AI companies — if those 10 companies fall 50, 70, even 90% like they did in the dot-com era — that would put the U.S. in a recession ……..How can they do that? Pretty easily. I think they’re going to flood the market with cheap, open-weight models that require less processing power but are 90% as good. The Chinese AI sector, acting under the direction and encouragement of the CCP, is about to Old Navy the U.S. economy: They’re going to mess with America’s big bet on AI and make it not pay off.

This scenario is not impossible to imagine. I guess the U.S. could firewall the Chinese apps and systems off, but this never works. Alternatively, it is easy to imagine someone in the U.S. figures this out and rolls out a model and system that does exactly what the Chinese are already doing. The technology is already there, and quite simple and not hard to architect with 20% or less of the silicon and systems (Alibaba Cloud claims to slash Nvidia GPU use by 82% with new pooling system). 90% as good is actually more than good enough for the most common applications. It usually is. Compare Walmart's revenue to that of Neiman Marcus, for example.

The other issue referenced in this piece is that capital is not flowing to alternate approaches to AI, that actually may have promise:

Nonetheless, a very large fraction of our economy is going into the world of price wars and little moat, massive, massive investments into companies that are all basically following the same strategy of investing more and more money into one single idea, viz. scaling ever larger language models, in hopes that something magical will emerge. Troublingly, the nation is now doubling down on these bets, still largely to the exclusion of developing other approaches, even as it has become clearer and clearer that problems of hallucinations and unreliability persist, and many are starting to report diminishing returns.

This is one of the problems with irrational capital markets. All the capital ends up in the wrong places (malinvestment). Even though the technology is not working right, and is tremendously resource intensive, to the point where it is breaking the power grid and decimating people’s powers bills, more money keeps flowing to the same thing, because for the time being it makes stock prices go up. In a more rational investing environment, the stock prices would not be ripping up on diseconomic investments into a broken technology and more of the investment dollars would therefore flow towards developing a new approach that held more promise, and was not as dis-economic and resource intensive.

Broken capital markets have different forms of consequences. I referenced two big issues, but there are more of them. The credit markets are now involved in the mess too, they always get dragged in, and that just adds to the risk. The massive Oracle  (ORCL)  debt offering that just went off is a good example. Here is an interesting article in that regard: https://archive.is/ABqms

Oh, and then there are these. The market goes up everyday, right. Seems hard to be long, and not make money, right?

And this. Yup. This is what it does, makes sh*t up:

[an anonymous caller has telephoned Gittes]

Ida Sessions: Are you alone?

Jake Gittes: Isn't everybody?

- Chinatown Chinatown 1974 | Another 10 Best Quotes

* In a Game 3 classic, the Los Angeles Dodgers' Freddie Freeman and Large-Cap Technology did it again on Monday...

* But, it ain't over til its over (Yogi Berra)

Look at that mountain

Look at those trees

Look at that bum over there, man

He's down on his knees

Look at these women

There ain't nothin' like 'em nowhere

Century Boulevard (We love it)

Victory Boulevard (We love it)

Santa Monica Boulevard (We love it)

Sixth Street (We love it, we love it)

We love L.A!

- Randy Newman, I Love LA

An epic 18-inning World Series game seems to be consistent with Monday's grandiloquent stock market rally.

Despite unexceptional market breadth and high valuations, the S&P 500 has surged since Wednesday's close — with the best three-day skein in six months.

* Yesterday's market breadth was negative for both of the senior averages — with selected and anointed large-cap technology stocks contributing to all of the market's better-than-1% advance. This is a unique occurrence — something I have not anticipated:

* Valuations (though not a reliable timing tool) are getting more extended — with the Shiller CAPE hitting 41 for the first time since 2000 (and if we adjust for lower tax rates today, the CAPE is near 47(!):

* Bonds appear to be rolling over (at the very least they are experiencing polarity) — yet the equity market didn't flinch, it kept rising and rising all day (closing at the highs):

* The advance occurred despite a sticky inflation print late last week and signposts of slowing global economic growth.

* The Nasdaq and the S&P index had a full head of steam on Monday despite the S&P Short Range Oscillator well in overbought (4.96%).

I am basically at a loss for words.

I and my cousin Sandy Koufax ("the left arm of God") applaud both games.

But that was Monday, today is Tuesday — we are playing the "long game":

“Why does everyone talk about the past? All that counts is tomorrow’s game.”

- Roberto Clemente

Bonus — Here are some great links:

S&P Has Fallen in 4/7 Fed Cut Announcements 

I Am Not a Permabull

The 10/10 Mini-Crash

Year-End Rally Watch

Trillion-Dollar Caps Since ChatGPT 

The S&P Short Range Oscillator is at 4.01% vs. 4.96%.