evening wrap, november 5
market vibes
A mixed bag of bad news rallied the stock market today. On November 7, the FAA plans to reduce scheduled air traffic by about 10% at 40 major U.S. airports affecting thousands of flights daily. Controllers warned of “mass chaos” if the shutdown drags on. Sick-outs and unpaid staff caused 5000 delays last Sunday. AAL & DAL were nicely higher. Credit card debt, US household debt and Student debt delinquencies are at or near all time highs.
SCOTUS heard arguements on whether or not Trump’s tariffs are “legal.”
Justice Elena Kagan asked Trump’s solicitor general whether or not the word “lisence” is a noun or a verb using it as an example how grammatical distinctions can define the scope of presidential authority in a particular case.
I am reminded of President Bill Clinton’s famous remark, “It depends on what the meaning of the word ‘is’ is,” in grand jury testimony on August 17, 1998, one of the most controversial moments of the Lewensky scandal. The judge held him in contempt for hair splitting.
Justice Kavanagh said, “Why would the congress give a President (not Trump) the summary power to embargo all trade and not grant the implied power to impose a lesser restriction?
In the markets
S&Ps followed my script to a T with a surge of buying on the opening that didn’t let up for 5 and a half hours. And when it did let up, the rally gave up half its gains in 45 minutes. Stocks are on the lows as I write.
The mags were mixed. GS and JPM are a few ticks from new highs, which may be why the Dow was +250. After hours DASH (doordash) got crushed, down 20% on bad earnings. Pintrest PINS down 30%.
Bonds had a very bad day. I suppose the SCOTUS tariff narrative is bad for everything especially the US treasury… except AI…. Oh wait….
In gold, Asia bought the opening last night, rallied it to $4000, and London maintained the same prices until NY closed. Volume in NY was the lowest in 8 weeks. Gold is is on the back foot tonight.
Silver rallied back to the point of control at $48.08-ish and stalled as expected. These POCs in gold at $4000 and silver are beginning to establish a notable amount of price discovery. Two things can happen now.
The “control” will keep prices within the range, allowing for moderate failed auctions above and below it for months, or prices could move away from it with authority, up or down. There is a large SLV OPEX on the 21st of November, so prices could remain contained until it’s done. Responsive buying under $47 has been reliable but the more often it goes there the higher the probability it will keep going.
WTI fell sharply on a comment from Trump that he intends to get gasoline down to $2.00 per gallon, and he wasn’t talking about RBOB in the NY harbor. December crude closed down $0.90/barrel at a new post-sanctions low.
WTI Jan/March closed down $0.12 at $0.20 backwardation, a hefty move for a 2-month piece.
$100,000 seems to be a red line for the crypto establishment. The psychological impact of a failure at that price would be a mistake to underestimate. In October, confidence in trends was exceptional, so a dawdling Bitcoin got a pass. A hard break and settlement under $100k would have a contagious effect on risk, imo.
In other markets, copper and PGMs followed gold and silver. December DXY settled down 0.6 bps at 100.05.
my vibe
The Democrats think because they won a few elections yesterday, they have a mandate, so it is likely the government stays shut for a while longer…. which will accelerate layoffs and adoption of AI. What we seem to be missing is AI still requires a growing economy to earn money. To a point jobloss is good but there is a tiipping oint when the Ark sinks.
This tariff decision is a black swan if Trump loses. The consensus is he will lose. If he does, the US will lose the AI race, 100%. Trillions of pledges will reneg. There is no way the stock market can sustain that kind of shock, in my opinion. The dollar will crash. Gold will fly.
One more thing. I voted in NJ yesterday, and I spent less than 2 hours reading about the local candidates. I really didn’t know one from the other apart from party but I voted anyway. That’s bad on me. I’ve been voting every 2 years, sort of like going to church on Christmas Eve and Easter. I deserve the government I get.
night all …good luck in Asia…
JJ
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According to Jensen Huang, we lost the AI race already. For reasons that I think have been beaten to death. Alas, one last land acknowledgment before the necessary paperwork for the permit for the natural gas plant is submitted for its initial round of the 48 step process of approval.
https://www.ft.com/content/53295276-ba8d-4ec2-b0de-081e73b3ba43
In 1996 an economist named Robin Hanson put forth a theory known as the “Great Filter” to serve as a response to Fermi’s Paradox, which asked: “if there’s extraterrestrial life in the universe, why haven’t we seen it?” Anyway, Hanson posits that there is one extremely difficult (impossible) step for life to overcome to become space faring and to do advanced things technologically, like harnessing the fusion of stars: Kardashev scale Type II and III civilizations (we are a Type I).
In 2010 NASA made a small change to the Drake Equation that removed L from the equation and put forth a new variation. L being the length of time an advanced civilization would release detectable signals into space. The effect this had was pretty significant in that the number of potential advanced civilizations existing in the cosmos went from between 10-2000 or so, to millions. The bad news was that it meant that of the potential millions of civilizations that had advanced technologically to a point where they could send signals, all had likely succumbed to “something.” Extinction at some point in the past 13.5 billion years.
As we get closer and closer to creating the thing that would likely allow us to advance on the Kardashev scale, I think more and more about that filter. AI, the great paradox.
Tariffs are an anachronism. Friction.
AI is coming, but it’s still just Google 2.0. + Energy.
China holds the cards on the energy front because grid - and has an excess, because renewables. Grok it.
JJ, you are a sage.
The only read I must have. 🥂