This Week in Barrons: 5.25.2025

• The Risk Roller-coaster … has caused massive weekly breaches of the Expected Move.  This marketplace is unruly – moving on tweets and nuance.  Between: tariff risks, bond market chaos, having more debt than we can pay back, and interest rates spiking to financial crisis levels … investors can pick their marketplace poison.

• If you’re not watching the bond market, you’re missing the game.  It’s not some shiny new AI play that has traders excited, but rather the bond market that is falling apart.  Its ripple effects will hit everything: stocks, housing, and credit.  No one’s talking about it, but trust me – they will be.

• You always bet on the Jockey – not the Horse … Batman used gadgets as his competitive advantage, while Henry Ford used machines to produce a price advantage.  Per Seth Godin: Current technology is both widely available and cheap.  Tech is the change engine that is no longer concentrated in the hands of a few.  Remember, fast cars are not rare – good drivers are.

• SPEED == the most valuable lesson that NOBODY teaches.  Regardless of your livelihood, life is a never-ending, decision-making maze.  The speed at which we make those choices is an underrated and rarely talked about skillset.  Factually, sustained success is a by-product of quick decision-making.  There is a phrase amongst traders: “See it. Queue it. Trade it.” Most people who enjoy the financial world both over-think and over-analyze, and that leads to professional mediocrity.  Life and entrepreneurship are about improving our speed of decision-making.  In trading, correcting a bad decision is simply a commission away.  We all can learn something from traders: “See it. Queue it. Trade it!”

• “We can grow our way out of debt” …. When Treasury Sec. Bessent made this comment, it told me that our: Tip #1: Fiscal Policy will remain Bullish for Gold. ‘Growing your way out of debt’ is all about nominal growth (i.e. real GDP growth + inflation).  While it can be hard for governments to drive sustainable growth, driving nominal growth tends to entail: currency debasement + monetary expansion.  This is a downside risk for bonds, and an upside risk for: stocks, gold, and bitcoin.

• AI Agents are: ‘Everything, Everywhere, and All-at-Once’: Microsoft unveiled a new AI coding agent feature that can-do complex tasks without human oversight. OpenAI announced a similar product on Friday, and Google is working on a similar release.  Everyone is working on ‘Agents’ that can be built, sold, and shipped.  The similarity between what the companies are releasing – is understandable. 

• Institutions have the lowest allocation to US equities in 2 years … Stocks have been going up, but the big pools of capital are not participating at the same rate as retail investors – that saw their share of the market hit 36% in April.  

• Tesla had stopped accepting Cybertruck trade-ins ... trying to hide lower demand and consumer dislike for the product.  An owner of a $100,000 Tesla Cybertruck (w/ 6,000 miles on it), was offered $65,400 for their trade-in.  That’s a ~35% loss-of-value in one year, while FORD’s F-150 won’t lose that much in 3+ years.  [FYI: The clear financial advice is to only Buy pre-owned Tesla’s.]

• The top 10 stocks now control 37% of the S&P 500 … 10% higher than the dot-com peak.

• From 2022 onward, Meta is finding that …  “70% of their newly, active advertisers are promoting scams, illicit goods, or ‘fake’ products.”  Meta still refuses to crack down on that revenue stream.

• Moody’s (the credit agency) … took away the U.S. Government’s AAA credit rating – sending the 10-year Treasury higher. 

• Job searches in Ireland & Portugal have surged … as more Americans eye Europe to escape the drama.  U.S. talent being hired by European companies has risen +16% YTD – with over half being hired for mid / upper-level roles.

• Netflix snapped up the rights to distribute Sesame Street … and threw a much-needed lifeline to the nonprofit behind Big Bird, Cookie Monster, and Elmo.

• A bankrupt 23andMe was bought (for $256m) by Regeneron … At its peak, 23andMe was valued at $6B.

• What screams retirement savings more than … buying a bar of gold and a 40-pack of toilet paper.  Costco allows you to buy as much toilet paper as you need, but limits you to 2 ounces of gold per day.

• Subaru is raising prices … the same amount as FORD.  FORD sited tariffs as the reason, but Subaru said it was the rising ‘costs of doing business.’

• At Google I/O 2025 … Google wove Gemini and agentic tools into everything from Android and Chrome, to coding, to content creation, and e-commerce.  [FYI: If you’re NOT building agents or assistants – you’re helplessly behind.]

• In Austin, Tx, tech startup employment declined ~5% YoY … while, New York and San Francisco are on a comeback.

• Apple’s original iPhone designer is going to OpenAI … as OpenAI is acquiring Jony Ive’s company (Io) in an all-equity deal valued at $6.5B.

• The U.S. will soon stop making cents … Our Treasury will stop adding new pennies into circulation by early next year.  Each penny costs 3.7 cents to make.   [FYI: Each nickel costs 13.8 cents.  How long until the nickel is gone?]

• The latest Treasury auction was ugly …  A lack of bidders sent yields over 5.1% - causing stocks to find religion.

• CEOs are more pessimistic about the next 6 to 12 months … than ever before.  Meanwhile, the Nasdaq parties like it's 1999 – near all-time-highs.

• Gold & Bitcoin … Chinese investors are pouring money into Gold funds at a record pace.  China gold ETF net inflows have more than DOUBLED over the last 12 months, driving gold prices up an impressive 38%. 

• Bitcoin touched All-Time-Highs … as the world’s largest cryptocurrency surpassed $111,000.  On-chain data reflect less selling pressure and increased liquidity across crypto markets.  Bitcoin is up ~25% in the last month.

• Bitcoin demand is coming from institutions … and Bitcoin’s outperformance relative to smaller cryptocurrencies is widening.

• Thursday was ‘Bitcoin Pizza Day’ … celebrating the very first real-world transaction using bitcoin.  On May 22, 2010, programmer and bitcoin fan Laszlo Hanyecz offered ~100 bitcoin ($40 in 2010 and $1.12B today) to anyone who’d be willing to order and deliver two pizzas to him.  Papa John’s answered the call – and is MUCH RICHER for it!

• In 2024, publicly traded companies held over … 600,000 BTC on their balance sheets.  By 2026, corporate Bitcoin holdings will be over 2.3m BTC, driven by institutional treasury management decisions.

• Deutsche Bank said that the U.S. can eliminate its entire trade deficit… by collapsing / debasing its Dollar currency by 40%.  [FYI: When major banks start publishing dollar collapse scenarios as policy solutions, maybe it’s time to diversify out of dollar-denominated everything?]

• Monday:  Friday evening, Moody's (the credit agency) decided to downgrade the U.S. credit rating.  It’s something they've never done before, and that’s why we have red futures this morning.  Markets could certainly use a bit of pullback to digest the move it's made.  Less than a month ago, the DOW was at 38,170, and Friday it closed at 42,654. That's a big up-move in a short time period.  So, we’ll probably get a day or two of sideways and down, but there will be a lot of ‘dip-buying’ going on out there.  Today, five FED heads are talking and even more tomorrow.  I’m sure they will have a lot to say about the credit downgrade.

• Wednesday:  The futures are grumpy this morning and most are saying it's because of more tariff crap, but I think it goes deeper than that.  The Japanese bond market is in big trouble and went "No Bid" for two consecutive days.  Due to a decade of cheap paper via the Japanese Carry Trade – hundreds of billions worth of cheap paper was purchased in Japan, then exchanged for higher interest rates somewhere else.  With Japanese interest rates hitting all-time-highs, that has wiped out an entire industry – and that has large implications in U.S. brokerage houses.  Today after lunch, markets suddenly cratered due to a botched 20-year Treasury Bond auction.  Demand for our bonds was so weak that yields had to move over 5% in order to drum up interest (declining bond prices == rising yields). For months, equities have ignored rising bond yields, but that streak ended with today’s auction. Think of this bond auction flop as a referendum on the U.S.’s fiscal trajectory. Major buyers are questioning what it means to lend to a government with unsustainable deficits, political gridlock, and high borrowing costs.

• Thursday:  The problem is the debt market.  Japan held 2 – no bid auctions, and yesterday our own 20-year auction was dismal.  The 30-Year has now hit 5.15%.  We need to offer higher yields because: nobody wants to buy, and those that are holding – are selling.  Why?  We're broke.  Japan is broke.  Europe is broke.  The world is mired in debt that can't be repaid, and we're in the beginning stages of a debt crisis – that could usher in a financial reset.  

• Friday:  Trump ‘tweeted’ that he wants a 50% tariff on the EU starting on June 1.  He also said that if AAPL doesn’t start making phones here – they need to pay a 25% tariff on their iPhones.  Unless of course, that’s Trump’s way of helping Tim Cook out and incentivizing prospects to purchase iPhones in Q2.  Trump also signed an executive order that eased the regulatory approval process for new nuclear reactors, and strengthened fuel supply chains.

• “90 percent of college students are using AI to learn & cheat”… but that could be a good thing.  Per Tyler Cowen: AI models are great cheating aids because they’re amazing, non-judgmental teachers.  AI models are often cheaper-faster-better than the human teachers we put in front of our kids.  Make-no-mistake – re-engineering academia will be a painful process.  In my 17 years of teaching Entrepreneurship at CMU – I created my own avatar assistant: ABBY.  As a test of effectiveness, I allowed half of my classes to receive 6-weeks of education from ABBY, and the other half were taught by me == the human me.  It shocked me when ABBY’s students scored higher on the exam.  It further shocked me when CMU told me that they knew that this would be the outcome – and not to tell anyone.  Knowledge transfer driven by incentives can be a powerful learning technique.  [FYI: When I asked ABBY whetherUniversity faculty would support AI-based reforms – her answer was: “Mostly not.”]

• With the lack of foreign bidders at our latest T-Bill auction … our own government’s debt is becoming toxic waste.  Our Treasury’s biggest customers have stopped showing up to our sale; therefore, we’re entering uncharted financial territory.  Every uptick in yields impacts collateral quality in the global lending markets.  Trump and future admins can’t cut spending enough without triggering economic Armageddon.  Therefore, they will choose currency debasement over fiscal responsibility every single time.  Tip #2: Buy Bitcoin & Gold.  If you already own ‘em, buy more Gold!

• The Sell-off that everyone was waiting for … has finally arrived.  The market (technically) was ripe and primed for a pullback, and simply awaiting some news or narratives as a reason/excuse.  Per Callum Thomas:

  - The S&Ps sold-off from resistance and overbought conditions.

  - It’s been 69-days since the last all-time-high on the S&Ps.

  - Stocks are expensive and bonds are cheap – and getting cheaper.

  - Surging short interest and PUT buying shows a defensive / hedging interest.

  - With the ebb and flow of government policy and macro narratives, there’s a new acronym in town: “RTFL” (Range Trading For Longer).

  With re-shoring talk rising, and tech capex dominating - where are the raw materials?  Where will we find all the energy to run the new economy?  Where are the materials to build the structures, the products, the devices, and wire it all together?  TIP #3: Buy more Bitcoin (IBIT) and Gold (GLD and/or physical).

• The VVIX crossed the 110 line, and that means that the next 2-3 weeks could be a minefield for unhedged traders – even if markets rally back on Tuesday.  Tip #4: Watch the Bank of Montreal MicroSectors FANG Index -3X Leverage (FNGD).  If FNGD breaks above its 20-day moving average, start hedging and playing defense.

• I don’t believe that the pseudo-strength that we’re seeing in technology – is bullish.  The gap between CEO Expectations and Nasdaq reality is at record levels.  When executives lose faith but stocks continue to rise, someone is definitely wrong - and it's probably not the people actually running companies.  Tip #5: This market action often precedes a monster downside gap-fill. 

• The Volatility Futures (/VX) are now completely flat - which means complete ‘ambiguity’. Which really means: Risk-n-Fear during the coming weeks.

• The 10-Year Treasury Bonds could very well trigger: ‘Panic at the Disco’.  Tip #6: If the 10-Year continues its climb toward 5%, Spoiler-Alert == BUY PUTS on the SPY ASAP.

• SPX Expected Move (EM):

  - Last Week’s EM = $92 and we moved ~$150 to the downside.

  - Next Week’s EM = $128 … in only 4 trading sessions.  Tuesday alone could deliver a $63 move.  Bottom Line: In 2 trading sessions, we went from ‘Cancel the Recession – Everything’s Fine’ to ‘Panic at the Disco’ and the smell of fear in the air.

• HODL’s: (Hold-On for Dear Life)

  - (+) PUBLIC.com Bond Portfolio (7.74% yield) / TLT (10-year T-Bills)

  - (+) IBIT – Blackrock’s Spot Bitcoin ETF ($61.83 / in at $24)

  - (+) Physical Commodities = Gold @ $3357/oz. & Silver @ $33.6/oz.

  - Bitcoin (BTC = $107,600 / in at $4,310)

  - Ethereum (ETH = 2,518 / in at $310)

  - (+) GLD – Gold ETF ($309.7 / in at $212)

   

• Options for Income:  De-Risking a Portfolio… (using IBIT for example)

  - BUY-n-HOLD the IBIT ETF

  - BUY PUTs: 1 Std. Dev. Lower, Expiring = 3-weeks away, OTM (out-of-the-money) for protection.

  - SELL Covered CALLs: 0.75 to 1 Std. Dev. Higher, Expiring = 2-weeks away, OTM for income and to finance the PUTs.

• ‘De-Gen’ Economy:

  - Singapore (SE = $164 / in at $107)

   

  Please be safe out there!

_{Expressed thoughts offered within the BARRONS REPORT, a Private and free weekly economic newsletter, are those of noted entrepreneur, professor and author, R.F. Culbertson, contributing sources and those he interviews.  You can subscribe by visiting: https://rfsfinanicalnews.beehiiv.com/subscribe.}

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