This Week in Barrons: 12.21.2025

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• Some problems, like the acquisition of money and power, represent infinitely deep holes where the initial gift merely fuels a desire for more.  Other problems have more known solutions. It pays to understand which type of problem we’re attempting to address from the beginning.

• The latest Job’s Report suggests we are digging into an infinitely deep hole. The unemployment rate rose to a 4-year high of 4.6%. This coincides with the number of people holding multiple jobs soaring by about half a million in two months, while full-time workers plunged by nearly a million to a 2025 low of 134m.  Conversely, part-time workers surged by a million to an all-time high of 30m. Manufacturing employment, as H. Thompson notes, sits at its lowest level since early 2022, its promised boom is still theoretical.

• Meanwhile, market sentiment offers its own selective realities. Crude oil hit $55/barrel, its lowest level since 2021, now priced below an ounce of silver, with a clear path open to the $35-$45 zone. These "low energy costs" are credited with strengthening consumer discretionary stocks, including Victoria's Secret, Gap, Abercrombie & Fitch, and American Eagle. The S&P 500 posted a new record high, though the NASDAQ did not, signaling both rotation and a distinct warning. Financials, led by JP Morgan, Bank of America, and Goldman Sachs, are driving this breakout to multi-year highs.  Bank of America, perhaps the poster child for long-term solutions, finally recovered all its losses from the 2007 Great Financial Crisis - 19 years later.

• Google has unveiled a significant leap in cross-language communication technology, potentially fulfilling the long-held ambition of seamless multilingual interaction. Their new Gemini-powered Translate system, operating with any headphones, offers instant, human-sounding translations across over 70 languages. This advancement is notable for its ability to comprehend real-time context, slang, and cultural nuances, marking a fundamental shift in how global conversations can occur.

• US government finances show a notable improvement, occurring concurrently with ongoing quantitative easing measures. Treasury Secretary Scott Bessent highlighted a significant reduction in the calendar year-to-date deficit, which currently stands at $1.52T. This marks a 21% decrease YoY - signaling a positive trajectory for federal fiscal health.

• The current narrative of a precarious labor market is significantly shaped by a sharp decline in federal government employment, a trend that could otherwise obscure underlying economic resilience. The government sector has experienced the largest job losses among all industries tracked by the BLS this year, primarily attributed to reductions in federal employees by DOGE. Treasury Sec. Scott Bessent characterized this as a necessary "detox period" to address prior excess employment within the federal government, with the current annual decline on pace to be the most substantial since 1953.

• Zoom launched a new AI assistant that provides an agentic suite of tools, capturing meeting takeaways in real-time, generating post-meeting deliverables, and integrating with common workplace tools.

• Nvidia debuted its Nemotron 3 family of open-source models, designed for building multi-agent AI systems, marking the chipmaker's most significant push into frontier model development. This initiative provides Western developers with a competitive open-source option and encourages continued development on Nvidia's hardware.

• Tesla shares reached their 2025 high, nearing their all-time peak, following the company's confirmation of testing fully driverless Robotaxi vehicles in Austin, Texas.

• Waymo is seeking to raise over $15B at a valuation nearing $100B, with Alphabet set to lead the funding round.

• Meta announced a new "conversation-focus" feature for its Ray-Ban Meta and Oakley smart glasses, designed to amplify the voice of a speaker in noisy environments.

• Warner Bros. Discovery urged shareholders to reject Paramount’s $77.9B hostile bid, citing concerns over Paramount’s funding stability and arguing it is riskier than Netflix’s $72B deal for its studios and HBO Max.

• JP Morgan moved hundreds of billions of dollars from Federal Reserve reserves into Treasuries to secure yields, an action that contributes to dollar debasement.

• The U.S. government launched its Genesis Mission, uniting leading AI companies like OpenAI, Google, Microsoft, Nvidia, Amazon, Palantir, and Accenture.  This initiative aims to combine cutting-edge AI with federal datasets to dramatically accelerate scientific breakthroughs in energy and drug discovery.

• Bitcoin long-term holders are liquidating positions at an accelerated pace, indicating a notable shift in market flow dynamics.

• Coinbase is expanding into prediction markets, a development that could modify market structures and product offerings within the crypto ecosystem.

• The U.S. government has launched the 'U.S. Tech Force,' an initiative to recruit 1,000 AI engineers for two-year federal roles. Offering competitive salaries ($150k-$200k) and partnering with major tech firms. The program aims to bolster U.S. technological leadership and foster public-private talent mobility.

• Oracle shares saw a decline following reports that private lender Blue Owl withdrew support for a proposed $10B data center financing deal.

• OpenAI is reportedly in advanced discussions with Amazon for an investment potentially exceeding $10B. The deal could include commitments for OpenAI to integrate Amazon's AI chips and cloud infrastructure into its operations.

• Manus, the parent company of Cursor, has achieved over $100m in annual recurring revenue within eight months of its launch, underscoring rapid market penetration and growth.

• The Bank of Japan has hiked interest rates … to their highest level in 30 years, which will likely influence the Yen, carry trades, global liquidity, and volatility.

• Prediction markets have gained popularity … and are expected to reach $1T in trading volumes by the end of the decade. Sports predictions account for nearly half of this volume, with Polymarket, Kalshi, and Robinhood giving traditional sports betting books and apps a run for their money.

• Google’s Gemini 3 Flash … a speed-optimized version of its recently released flagship model that still maintains frontier-level intelligence, becoming the new default model across Gemini and in Google Search’s AI Mode.  Gemini 3 Flash offers an unmatched intelligence and speed combo at prices that significantly undercut the competition. Google continues to eat away at OpenAI’s market share, and Flash is looking like yet another reason for that trend to continue.

• Inflation … The government reported inflation metrics that came in below economists’ expectations.  The CPI was forecast to be 3.1% year-over-year, but instead the data came in at 2.7% - 40 basis points lower than predicted.  Core CPI was no different as expectations were 3.0%, but the actual numbers came in at 2.6% YoY.  Deflation is smacking the US economy in the face.  AI and robotics are deflationary. Deportations are deflationary.  My guess is that GDP growth will accelerate in the coming months and asset prices will continue to move higher.

• Irrational Price Discovery: The market's reaction to Ford's $19.5B EV write-down, where the stock inexplicably rallied, signals a troubling breakdown in rational price discovery. This suggests that the current wave of order flow, rather than fundamental valuation, is increasingly dictating outcomes.

• Retail Speculation & Market Structure: The surge in retail trader activity is a significant concern. Individual investors now represent 54% of 0DTE options volume, contributing over half of the $1T in daily notional flow.  Small trades in SPX 0DTE have doubled since 2021, highlighting a market increasingly influenced by speculative, short-term flows.

• Valuation & Corporate Fundamentals: High price-to-sales ratios remain sustainable only with strong growth or "greater-fool dynamics." However, with signs that U.S. corporate profit margins may have peaked, I anticipate a potential unwinding of the "Greedflation" era, which could remove a critical pillar of current valuations.

• Synchronized Market Dynamics: The highly correlated gains observed in 2025 across gold (+60%), silver (+110%), gold miners (+130 to 170%), critical minerals (+200%), copper-linked assets (+65%), and uranium (+35% this year) – indicate a phase-driven market rather than a stock-picking environment. This points to broader, systemic drivers.

• Behavioral Signals: Current market behavior emphasizes the need to question consensus, study market structure over noise, and acknowledge that supply and demand remain undefeated. The increasing popularity of public markets also reflects a growing "gambling" addiction across America.

• Macro Setup: While explicit monetary policy shifts are not currently driving immediate concerns; the underlying corporate profit landscape warrants close attention. I’m seeing potential indicators that U.S. corporate profit margins may have peaked, suggesting an impending unwinding of the "Greedflation" era that characterized the 2020s.  This shift could remove a significant tailwind for equity valuations, particularly for companies with high price-to-sales ratios that have relied on either robust growth or "Greater-Fool dynamics" to justify their valuations.  The sustainability of current market levels will increasingly depend on a genuine improvement in fundamentals rather than manipulated margin expansion or speculative inflows.

   

• Factually: (a) The “Presidential Cycle” points to a volatile and ranging 2026.  (b) Global stocks have significantly outperformed U.S. stocks this year.  (c) Fund managers are running record low cash allocations.  (d) Mid-Cap stocks look cheap in absolute and in relative terms.  Overall, per Callum Thomas: It’s been a very interesting year on both the risk and return fronts.  There are a few key inflection points in play that are going to be worth keeping close tabs on into 2026. 

  TIPS on Trades:

  - Tip #1: GLD: 85,000 GLD 30 Jan. Call Spreads targeting +$410 / - $425.  Gold has been quietly outperforming everything – pushing back toward its October highs.

  - Tip #2: HYMC: Keep Buying this Gold / Silver stock

  - Tip #3: SPY:  150,000 SPY 23 Jan. Put Butterflies were purchased: -$500 / +$550 / -$600.  Serious capital expects the S&P to drift lower into the new year.

  - Tip #4: GOOGL: Buy 31 Jan. +$175 / -$165 Put Spread

  - Tip #5: ALB: 12.5% short interest / Buy 16 Jan. +$155 / -$160 Call Spread

  - Tip #6: NEXT: 10.8% short interest / Buy 20 Feb. $6 Calls @ $0.37

  -  Tip #7: SLV: Silver has breached their expected move 4 weeks in a row with ~1m contracts being traded daily.

   

  HODLs: (Hold-On for Dear Life) – Learn to like Precious Metals …

  - Reducing:

  o (-) Ethereum (ETH = 2,980 / in at $310)

  o (-) Bitcoin (BTC = $87,800 / in at $4,310)

  - Increasing:

  o (o) IBIT – Blackrock’s Bitcoin ETF ($49.9 / in at $24)

  o (+) Physical Commodities = Gold @ $4,368/oz. & Silver @ $67/oz.

  o (+) SLV (silver ETF) == ($60.9 / in at $27)

  o (+) GLD – Gold ETF ($399 / in at $212)

  o (+) CCJ (uranium) == ($90 / in at $84)

  o (+) ICSH (short term bonds = 4.65% yield == paid monthly)

  o (+) GDX (gold miners) == ($87.7 / in at $52)

  o (+) HYMC (gold & silver miner) == ($16.4 / in at $13.8)

  o (+) SIL (large silver miners ETF) == ($84.7 / in at $82)

  o (+) SILJ (junior silver miners ETF) == ($28.4 / in at $26.5)

  o (+) COPX (copper ETF) == ($70.3 / in at $55.3)

  Please be safe out there!

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