You know you live in a blessed financial environment when no one believes in Santa Claus, yet everybody expects a Santa Claus rally and usually gets it.

I’m watching this Bubble with a little more patience than I watched the two most recent ones: Dotcom bubble of 2000 and the Real Estate bubble of 2009. Most significant market tops result in a double top. It simply means the market will probably try to put in a new high level. If it fails, it’s over. And by the “market” in this case, I’m going to say the NASDAQ 100 because the text stocks will be the first to go when investors decide they don’t wanna take any more risk.

Two developments that tell me the bubble has sprung a leak are 1) meme-stock failures, and 2) cratering crypto investments. Gamestop dipped below 20 about a week ago, down over 30% since the summer. Bitcoin dropped like a stone from 125,000 to 85,000 in only seven weeks, destroying a tremendous amount of wealth.

But the action in major AI stocks like Nvidia and Palantir suggest that the market doesn’t see as much blue sky as it used to; both stocks recently announced higher than expected earnings and jumped in after-hours trading, only to reverse sharply from their highs and open much lower the next day.

The overall market is up five days in a row from the low, probably falling back on the old favorite energy source: confidence for another Fed rate cut next month. Really? So maybe the Fed cuts rates 1/4 of one percent and that’s going to justify market lift off?

And my last market post I talked about three bubbles: the AI bubble, the Fed rate-cut bubble, and the Trump bubble.

I think the AI bubble is probably over; the circular pledges of billions in investment for were probably based on fear of missing out (FOMO) more than sound financial projections

I remember in 2000 how all the tech companies were building out networks expecting an exit strategy that never emerged. There was also a lot of corruption at that time that didn’t emerge until “the tide went out.“

The Trump bubble is much less complex: it is based on proclamations made by someone who has a reputation for failing to follow through on his promises. They even gave him his own acronym TACO for it. His family-owned and -run stock, DJT, dropped 50% from its high in the last six months.

This leaves the Fed bubble to drive stock prices higher. The only reason for another rate cut after December (if there is one in December), is if the economy slows dramatically.

Black Friday sales, a key economic data point, showed more online buyers, but it appears that it took deeper price discounts to attract them in the first place. Firms may have had record sales, but that doesn’t mean record profits if the prices were too low.

Some more long-term considerations represent risks in the intermediate term. The first is that the midterm elections – as they usually do regardless of the party in power-should shift back toward the Democrats, which would make it harder for any new legislation to pass. Secondly, AI may be the first development in technology to result in a loss of jobs. Many firms have already announced substantial layoffs. Think about all the jobs AI-powered computers could do across manufacturing and service industries. Usually, new technology creates new jobs. It’s a Catch 22: if AI is as good as everyone seems to think it will be, it will replace jobs, but if it does not meet expectations, than the stock market, and the economy will pay the price: everyone will be all dressed up with nowhere to go.

A few Market posts back I made mention of any number of threats that could derail the US and global economies. Most of those still exist. And I submit that the potential for global armed conflict could increase. Globalization integrated the global economy on an incredible level. Developed export countries were making so much money they wouldn’t think about starting WWIII. Now with a kind of “reverse globalization” appearing to be the new normal, they may start to fight when the money gets tight.

Climate change isn’t going away anytime soon, and bird flu is reportedly affecting humans now. Who knows what could happen in that space? –At these price levels, lot has go very right.

WRH