Stubborn Bull

So much for the AI bust thesis _ it's already over. At least for now.

Anthropic's freshly released S-1 ( an IPO listing prospectus) is out, and it is a 335-page blockbuster. Thankfully, you don't have to read it. Just use Claude for that. It's what AI does best. And despite including a detailed section describing an existential risk to humanity, it has somehow soothed the bull's nerves for now.

The bloodletting in AI momentum seems to be bottoming out just as investor angst over the potential twin threats from the Fed and Trumpian meddling in the Midterms is rising. So the rotation into bonds, defensives, and Quality-factor stocks has ended almost as soon as it started. A performance turnaround is pending.

MTUM ETF

Such has been the nature of this market since the start. AI hype has morphed several times. The leadership has shifted from Hyperscalers to Semis to capex suppliers. Now the focus is on the Model developers like Anthropic and OpenAI.

Through it all, the purveyors of doom in the financial media have breathlessly pushed an impending AI-bust narrative. Much of it echoes earlier flame-outs like the railroad, electricity, and the internet manias. So far, though, the market hasn't signaled an imminent blow-up. Credit spreads for weak borrowers are a fraction of the dangerous levels seen during the Dot-com, GFC, and COVID-19 eras.

Junk Bond Spreads

Market breadth is trying to broaden out, with a series of counter-trend rallies in the equal-weighted index against the tech-heavy broader market. This economy needs to see broader participation, especially in housing and consumer discretionary spending, before the true trend change can take hold. That seems to depend on Trump reversing tariff policy, lower oil prices, and stronger wage growth, all of which are debatable outcomes for now.

So most investors' default option seems to be stubbornly running on the same treadmill until exhaustion sets in. It may not be the best way to stay fit in the long term, but if everybody's doing it, you might as well join the club.

Risk Model: 3/5 - Risk On

The Copper/Gold relative is getting interesting. A major downtrend line is being challenged. Despite rising fears, the economic picture may actually be improving. The oil shock has dampened economic confidence, but nobody has told Dr. Copper. As a result, I still hold to a positive view of the current economic expansion.

Let's imagine things going 'right' for a change. What would that look like? First, food, oil, and other supply-constrained commodities need to decline in price, giving much-needed stimulus to the low-end consumer left out in the cold. Geopolitical calm needs to replace the fractious polemic that impedes global economic cooperation. Monetary policies need to hold steady, allowing term premia to decline.

AI capex and model adoption need to slow, allowing capital demand and job losses to be absorbed smoothly. Fiscal imbalances need to be addressed. Consumer confidence needs to recover from its 25-year low. Global climate change needs to reverse.

And I need to start breaking 80, and the Leafs need to win the Cup. Oh well, as long as we're dreaming _ dream big!

Air Canada

If you are feeling optimistic about the future, here's a second chance to get in on the fun. Buy Air Canada. After trading out of my position at $30, I'm getting back in here. The selling pressure seems to be waning, and lower oil prices could be the perfect catalyst. A new CEO starts in January. A new broom sweeps clean.