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Sunday, November 8, 2026

2026-11-08

 ***** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic Fare:




Market Fare:

What does that even mean?

.............. On Thursday 11/5/26 the SPX fell 4.3% and the NDX fell 6.3%. Investors immediately focused on “who blew up?”. This is a reasonable question to ask. Throughout my career, the rapid often forced unwind of positions has caused outsized market moves. Furthermore, when the unwind is over markets recover.

Some of those forced unwinds have been
  1. Extremely broad and long lasting (like banks in the GFC).
  2. Extremely narrow like Victor Neiderhoffer (RIP) in October of 97, or Situational Awareness this summer.
  3. In between version where a few big names get forced to unwind and others less well publicized are forced out at the same time for the same reason like LTCM with all fixed income arbs getting sucked in in 1998, or Merrill and Kidder blowing up in MBS in 1994 dragging Orange County pension fund and the whole hedge industry down with it.
  4. Even retail like Korea this spring, or Mrs. Watanabe when the real yen carry trade exploded in March 2011 after the Fukushima tsunami. 
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The goal-seeking for a bullish narrative was strong among the sell-side analysts today. Here's a roundup of some of the more reasonable ideas behind today's bounce...
  1. Clarity - the event is passed and Trump "absolutely willing" to accept the results and a 'medium bad' outcome for Republicans 
  2. Gridlock - lowers the risk premium. Dem majority plus Trump’s willingness to work with it “should act as a break on extreme policy outcomes and bring down risk premia” - DB Saravelos. 
  3. Plunging Oil - recognition of Iran War as reason for Dem Sweep, Trump confirmed he wouldn't escalate in Iran any time soon, and "expect Dems to use fiscal deadlines to seek to limit the war with Iran" - GS Hatzius
  4. Hopes of Tariff Rollback - "...roll back selected tariffs, and reverse spending cuts enacted last year." - GS Hatzius, and it fits who led today with AAPL/MSFT surging as investors perceived the stock as a winner from the Democratic sweep.
  5. Hedges Unwound - deeply in the money protection was sold (driving down vol and sparking the heavy delta/gamma flow-driven rebound)
  6. Technicals - NDX bounced off its 200DMA
  7. Rotation - Money is moving out of AI CapEx (on worries that Democrats will regulate AI more) and into cash-generating MegaCaps.
  8. Seasonality - 6 months after the past 19 midterm elections, SPX higher 100% of the time, with an average gain of 14.18%.


.......... This year’s drop from “very bullish” to neutral has five precedents:
  • 2000,
  • 2007,
  • 2010,
  • 2015, and
  • 2018.
They are not all the same.

What separated the major tops in 2000 and 2007 from the short-lived drawdowns of the 2010s was the level of inflation, which constrains central banks. 

In the 2010s, inflation was consistently low, so central banks pivoted quickly and reflated markets before the downturns built momentum. In 2000 and 2007, by the time policymakers eased, it was too late. Today, headline CPI is 3.7% and the Fed is still hiking. .............






QTR: Life After AI: Where The Money Is Now Moving
Wall Street is beginning to question the AI spending frenzy, and the beneficiaries may not be the companies everyone expects.

.........I continue to believe tech, particularly the more speculative corners of the AI trade, is headed lower over the short to medium term. Yesterday’s rally didn’t change that view. As I discussed yesterday, citing Gordon Johnson, I think much of the move could be attributable to VIX compression and the unwinding of election-related hedges. Once the election uncertainty disappeared, investors no longer needed as much protection, implied volatility fell, and the resulting repositioning helped push stocks higher.

That doesn’t mean there wasn’t genuine buying, or that the market can’t rally further. But I would be careful about mistaking a mechanical relief rally for a fundamental improvement in the outlook. Valuations remain stretched, financing costs remain a problem, and the economics of the AI infrastructure boom are increasingly difficult to justify. The election, in my opinion, added another layer of risk rather than removing one.

What interests me more than yesterday’s index performance is where money appears to be moving to.

For a few months, I’ve been arguing that 2027 could be characterized by a rotation away from speculative AI and technology investments and toward larger, established companies with real earnings and durable businesses. .........




......... Citrini Research is a well-regarded independent boutique whose thematic and topical reports have made a big splash on several occasions in 2026. With nice timing, its latest output, "State of the Themes," dropped Wednesday, in the immediate aftermath of the midterm elections. It made one bold prediction, of "peak capex growth."

Reducing this argument to simple numbers, the note points out annualized hyperscaler investment is approaching $1 trillion while annual recurring revenue in the whole AI ecosystem sits around one-fifth of that. Clearly something has to give, Citrini observes, and it probably involves a bit of both: reducing the capex and lifting the revenues. .........



Material Fare:




Vid Fare:








A.I. Fare:

Semis were sold off hard, and fear, uncertainty and doubt are back. It is not time to panic. It is time to prepare and do the homework: 19 names, fundamentals and our 10 semiconductor holdings.

................... That is the moment we wrote the rules for. A correction to major support inside a rising trend is where you buy the dip, not where you sell the trend.


Thoughts on the election; will datacenters be stopped? Ai infrastructure margins, the potential for capex plateau, and beware the AI Religion



Charts:
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(not just) for the ESG crowd:

He left a legacy that deserves both admiration and critical scrutiny


Tindale: Decarbonisation: The Fantasy upon which Net Zero is built.
The models behind Australia’s 2050 date need carbon-removal machines at thousands of times today’s scale, and leave out the copper. On the UN panel’s own figures, net zero by 2050 is folly.

The logic of decarbonisation is the foundation of net zero: cut the world’s carbon dioxide emissions to net zero, and warming stops rising.

The decarbonisation models, global computer models of energy and climate, turn the logic into a pathway that reaches net zero around 2050.

Net zero is the policy that carries us along the pathway, and Australia has written net zero by 2050 into law. The path runs through giant imaginary machines that pull carbon dioxide back out of the air.

The decarbonisation models put a dollar price on each machine and skip the question a builder settles before pouring a slab: whether there is enough copper, steel and other materials to build it.

Australia’s target of net zero by 2050 carries out a route drawn by global computer models, and the route holds on a condition that an American economist wrote in three words in 1973: “if it exists”.

The economist was William Nordhaus. ...............................................................



Sci Fare:

New primate research reveals how neurons rapidly alternate between conscious perception and hidden visual worlds.



U.S. B.S.:


........... Instead of defying the deep state, Trump commandeered it, Once despised by the neocons, Trump became their darling when he launched a catastrophic new war on Iran, on a pretext so flimsy that I can’t remember what it is. Something about “preventing Iran from getting nuclear weapons.” Meanwhile, he has prolonged the Ukraine war or the Israeli wars in Lebanon, Syria, and Gaza (if the latter can be called a war at all instead of a slaughter). ... In hindsight, I should have anticipated this in light of the enormous amounts of money entering the Trump campaign from right-wing Zionists, who are inseparable from the neocons and the infamous “Project for a New American Century” in West Asia. Tellingly, Kennedy’s poll numbers—and campaign morale, and my influence in the campaign—began to shrink when he espoused extreme Zionist views after October 7, making him, in the words of Jeffrey Sachs, “half a peace candidate.” I should have understood that Zionism is inseparable from the war agenda, because Israel is an arm of the empire, integral to the imperial project. Unfortunately, I ignored my misgivings and stuck with Bobby Kennedy, reasoning that, after all, he was better than the other two guys (Trump and Biden). Later, I hoped that Trump’s antiwar instincts would prevail over his Zionist backers and he would screw them over (as he has other former allies). 

............ As for corruption, the magnitude of the Trump family’s profiteering, cronyism, and bald-faced self-dealing puts to shame the petty venality of the Biden family, sordid though it was. The Bidens raked in millions; the Trump family, billions. 

............. All of this offers an easy formula for Democrats to win back power, but I think we should aspire to more than that. In tomorrow’s election, the Democrats will probably win a resounding victory. That is good (at least to the extent that Congress can do anything after decades of imperial presidency), because a check is sorely needed on the administration’s deranged and tyrannical actions. But the Democrats are the essence of the very establishment against which Kennedy’s supporters were revolting. The Democrats were the ones that provoked the Ukraine war and sabotaged its negotiated settlement. They were the ones that greenlit the Gaza genocide. They administered the lockdowns and mandates of the Covid era, censoring, harrassing, and debanking dissidents, and expanding the definition of “digital hate” to cover valid political dissent. They cooked up the Russiagate hoax and the lawfare against Trump. They spouted increasingly hateful and belittling views about their opponents’ supporters (a “basket of deplorables”). For a generation now, they have been just as cozy with the intelligence agencies, the Defense Department, the corporations, Wall Street, Big Pharma, Big Tech, and Big Everything as the Republicans. They have stewarded the neoliberal order with its deteriorating health, decaying infrastructure, and hollowing out of the middle class. This state of affairs is what drove millions of people to support Kennedy in the first place.

The Democrats can win this election just by being less bad than Trump’s Republicans. Nothing much will change, though, until they (or perhaps some new political force) embody the authentically populist spirit that animated the early Kennedy campaign. .............


The Republicans didn’t win Tuesday, obviously. But they didn’t lose, either.

“Now that the Democrats have finally scored an unambiguous victory in the midterm elections,” an editor at The New York Review of Books wondered in print this morning, “the question is no longer how they might regain power, but what they should do with it.” This is curious times ten. Amid all the celebrations of the Democrats’ romp at the polls last Tuesday, why would anyone ask what their plan is now that they have won decisive majorities in both houses of Congress? Shouldn’t it be perfectly clear what the out-of-power party is going to do now that it is the party in power?

The short answer is the Democrats do not have a plan. Or is it that the Democrats’ plan is to have no plan? Or, a third and plausible possibility, they have a plan but do not want all those voters who just gave them a political triumph to know what it is?

“What is our assignment?” Chuck Schumer, the New York Democrat who will probably be named Senate majority leader in short order, asked the other day. “First, Americans want Washington to bring down the cost of living.” Assignments do not count as plans or policies, we must conclude. The Democrats have been trying this on for years: State the case but don’t make the case? And what about “second, “third,” and so on down a list the “centrist,” Zionist Schumer does not seem to want to talk about? What about ending the war against Iran? What about U.S. support for the Israeli regime’s genocidal campaigns (plural)? What about the Pentagon budget? What about America’s gross overcorporatization? What about, what about, what about?

This is an important passage in America’s political story. Corporate media invite us to exhale deeply, understand the Democrats’ victory as a groundswell of good old American liberalism, and look forward to the salutary things to come now that “Trumpism” will pass into the past. I read the moment differently. All the jubilation with which the press and broadcasters fill the air is sheer spectacle, it seems to me. In the time Trump has left in the White House he will be licensed to pull this crumbling republic yet further rightward than it has already traveled in the course of some decades. The progression—check that, regression—from republic to empire will be rendered close to irreversible these next two years. And as Trump pulls the Democrats will push in this same direction. 

In net terms the elections just concluded will confirm not only the demise of “the left,” in quotation marks: America has not had a left since the post–Vietnam years. They will also deliver the bitter truth that there is no such thing as American liberalism (and in truth there never has been). The losers last Tuesday stand to win, the winners will serve the losers in just this way, and the true losers—this is nothing like a first in American political culture—will be those whose votes put the winners in power.

There will be no coming back from this—not this time, not as things stand. There is no one in power left to bring America back. Only Americans can bring America back.



Vice President JD Vance made the surprising admission on social media that Trump administration’s war with Iran was what caused the massive Democratic Party sweep of the midterm elections, stating plainly that “The reason we lost is the war.”

Saying “the real reason we lost is obvious to almost everyone,” Vance noted that a poll found Trump 2024 voters who ditched the president’s party in 2026 gave four main answers to the question of what the Republicans could do to win them back: “1) End the war, 2) Focus on cost of living/inflation, 3) Put America First , 4) Change our relationship to Israel.”

................... So the story isn’t that Americans spontaneously transformed into a country full of tender-hearted peaceniks in November 2026. The story is that Iran was able to impose an economic cost on ordinary Americans for the actions of their evil government.

The average American is a propaganda-addled empire zombie who has been indoctrinated into cold-hearted indifference to their government’s abuses in the global south. American voters didn’t reject the war in Iran because they believe it’s immoral to bomb schools and civilian infrastructure in depraved wars of aggression overseas, they rejected it because it was costing them more to fill up their pickup trucks and they were having to pay more money for their buckets of Mountain Dew and ranch dressing. 

If Trump had won the war in four to six weeks as he initially claimed he would, his monstrous attack on Iran would have been no more consequential in the voting booths than his regime change interventionism in Venezuela. It is only because Iran succeeded in doing whatever it needed to do to retain the military strength needed to impose a financial toll on the American electorate that the Republicans lost the Senate for years to come. War with Iran is now officially political poison because of Iranian strength. ....................

US officials love to whine and complain that Iran spends its money on its military instead of on the Iranian people (though the United States is literally the absolute dead-last country on earth who has any business airing such a grievance), and to this day they’re still weeping crocodile tears about the way Tehran aggressively smacked down the CIA/Mossad uprising at the beginning of the year. But Iran has shown the world that a nation must retain its strength if it wants to retain its sovereignty and avoid being turned into another resource extraction scam for the US empire.

Every country that retains the necessary muscle to beat back the US empire’s efforts to absorb it into its power umbrella invariably gets smeared by the imperial propaganda machine as a tyrannical and despotic rogue state, but it is the US empire who makes it necessary for governments to exert force if they don’t want to be replaced with subservient US puppet regimes. Western propaganda likes to frame the global struggle as free democracies versus oppressive autocracies, but really it’s just nations who wish to retain their sovereignty versus the empire who wants to take that sovereignty away from them. ...........



War Fare:


I haven’t written a lot about the US elections. The Democrats will win, since Trump has completely trashed the US economy with his policies and caused a cost of living crisis (you ain’t seen nothin’yet), the only question is how large the Democratic wave is.

Democrats controlling Congress is unlikely to make much of a difference. Even if they have enough votes they won’t remove Presidential war powers, even though constitutionally those belong to Congress and were given by Congress to the President. Likewise Trump’s signature policies of erratic tariffs with no plan and violent immigration enforcement will not cease.

It’s hard to predict Trump, but the evidence suggests another attack on Iran immediately after the election. The US has been shifting massive resources to the Middle East in preparation. The Iranians, once again, seem unlikely to attack first even though they can see the buildup, so I guess they’ll tank the first hit again.  ....................

.............. The world is on the brink. US elections will not change that. Nothing will seriously change until America admits it has lost the war and makes peace on terms that reflect that.

That remains the most likely outcome, but the longer it takes for America to admit it’s loss, the worse the suffering will be. I repeat my advice to stock up on fuel, food, medicine and other goods (motor oil, etc…)

As for America, until there’s an actual opposition party, elections will simply shuffle the chairs on the deck and inexorable American decline will continue.



Geopolitical Fare:


It is said that history is written by the victors, but what’s interesting is that this is also true of the present story. Those who are winning the capitalism game get to set the narrative about what is currently happening in our world.

If you succeed in dominating the humans you share a planet with using our current socioeconomic systems of labor exploitation and resource extraction, then you get to buy up politicians, media outlets, online platforms and influence operations which allow you to determine the mainstream narratives about what’s going on in our world, in the same way the victorious armies of the past often had the power to shape the historical record in their favor.

The present is therefore written by the victors.

Those who’ve landed at the top of the heap have the power to circulate narratives which normalize the abusive system they benefit from, and to scare the public away from seeking to implement other systems of power distribution and resource allocation.

They have the power to shape public perception of world events, to reverse victim and perpetrator in their narratives about international conflicts, and to frame the western empire as a passive witness to the terrible things that are happening around the world rather than the primary driver of those horrors. ..................

Power is the ability to control what happens. Absolute power is the ability to control what people THINK about what happens. Those who are winning the capitalism game are able to exert absolute power over our society.

The real source of power in our world is not money, nor resources, nor armies, nor weapons. The real source of power in our world is narrative, and the ability to control it. ................


QOTW:

Turner: The Democrats are the dogs who caught the car and think they’re really fast and have strong jaws when in reality voter rage at Trump’s losing war on Iran, data center madness, the ongoing genocide in Gaza virtually guaranteed the opposition party a huge win.

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