Monday 1-5 #bubblewatch is BACK!

During the holidays while bubblewatch was suspended the 'Santa Claus Rally' mostly failed to happen, due to tech stock worries.

> Wall Street ends year's final session lower but posts big annual gains for 2025. https://www.reuters.com/business/us-stock-futures-inch-down-thin-trading-wall-street-eyes-yearly-gains-2025-12-31/

It looked to be much the same once normal trading resumed last Friday, but then things took a turn unrelated to tech.

> Wall St rallies amid energy boost after Venezuela strike; Dow hits record. https://www.reuters.com/world/americas/us-stock-futures-tick-up-oil-companies-jump-venezuela-shock-2026-01-05/

Tuesday 1-6 #bubblewatch

Stolen oil fever still pushing market values high, but today there is unwarranted optimism about the upcoming jobs report as well.

> Tech, healthcare extend Wall St rally in jobs-report week; Dow at record high. https://www.reuters.com/business/wall-street-futures-muted-investors-pause-after-rally-2026-01-06/

> "… you've got a new sense of optimism in the market ... this is a week where we're going to get real economic data for the first time in months and that's going to help clear out some of the fog …"

Wednesday 1-7 #bubblewatch

The USA jobs report came out today and … not glowing. In fact indications of a downturn. Given my concerns about government data from this administration I'm wondering if they massaged those numbers from even worse ones.

In any case the market REALLY wants to stay optimistic. I can't help but feel like it's a perky gym worker trying to rally an exhausted cardio class.

> S&P 500, Nasdaq climb on tech boost, investors take labor data in stride. https://www.reuters.com/business/sp-500-nasdaq-futures-inch-lower-after-rally-labor-data-focus-2026-01-07/

Related: I just found this Paul Krugman interview with Paul Kedrosky from December 3rd and I'd call it 'must reading' if you want to understand what's happening *inside* the bubble. Plus there's some interesting macro thoughts as well.

> Talking With Paul Kedrosky. https://paulkrugman.substack.com/p/talking-with-paul-kedrosky

I'm still working my way through it. The first third is a mid-level introduction to how LLM AI actually works, so it might be skippable. Nonetheless I found it worth my time for a few things I didn't know.

OK, finished it. Some key points I picked up on:

- AI is a *resource extraction economy*! The capex for physical data centers is only a portion of the cost of the chips in those data centers, which they are burning out faster than normal lifetimes.

- The other resource is data to feed the models – and they are running out because they've already mined the entire Internet and every book they could find. Like an oil well going dry.

- Yet another resource is *electricity futures*!

[contd]

- Since power is so important to the data centers they have been buying up contracts for future electricity production; which not only drives up the cost of electricity, there's only so much new power generation you can spin up within the contract's lifetime. As a result it's getting harder and harder to find someone willing to sell electricity futures.

- But, since new powerplants are already coming online as a result? It's distorting the current market. FIFO in action.

[contd]

- Separately, the snake oil sales pitch to 'replace human labor' doesn't take into account the side-effects on the economy of replacing human labor at scale.

- Given all the things said above (and others)? Future revenue predictions for AI are not just inflated, they are pure fiction. And that's assuming the LLMs actually *can* replace human labor at scale.

- There does seem to be a future in more limited models (the Chinese method).

- This might be the biggest bubble *ever*.

[fin]

Thursday 1-8 #bubblewatch

When the market reflects political/social world realities in the darkest way possible. But it does make one wonder if the only thing holding back the #AI #bubble from bursting was a lack, until now, of somewhere else equally terrible for that money to go.

> Wall Street mixed as tech dips and defense stocks rally. https://www.reuters.com/business/us-stock-futures-dip-defense-firms-climb-up-trump-budget-plans-2026-01-08/

Friday 1-9 #bubblewatch

And (some) tech stocks come roaring back.

> S&P 500 hits record high as chipmakers lead broad gains. https://www.reuters.com/business/us-stock-futures-subdued-ahead-crucial-jobs-report-tariff-ruling-2026-01-09/

This back and forth, up and down, is so headspinning. It's probably best to think of it as an example of a confused market searching for stability, but instead lurching back and forth between different industries and market segments. This is *not* a stable market.

Monday 1-12 #bubblewatch

The market is up a bit today, going against the common wisdom that investigating Fed Chair Powell should be of concern. I've seen some people suggesting this is because Big Tech, like Real Estate, loves lower interest rates because they depend so heavily on debt for operations.

You will note the Financial sector isn't doing as well – they know the Fed needs to be independent of the Administration.

> Wall Street indexes gain with tech, Walmart. https://www.reuters.com/business/finance/wall-st-futures-slip-worries-over-fed-independence-financial-stocks-slide-2026-01-12/

The worst part about this whole thing between the Administration and Fed Chair Powell: we probably can't trust either side.

What do I mean by that?

Well, I really doubt Powell is an angel. Like almost anyone else who arrives at a high post in government it's highly likely he is a sociopathic asshole and has done skeevy things. Normally these are overlooked by the powers that be, because they are all the same. (Rocks. Glass Houses.)

But this Administration deserves no trust at all.

Tuesday 1-13 #bubblewatch

The market is down across the board today. Weirdly, the given reason is the Administration threatening to cap credit card rates. It's not clear to me how this would affect tech and industrial stocks, although the throughline to the finance sector is pretty clear.

> Wall Street falls with JPMorgan, credit card companies. https://www.reuters.com/business/wall-street-futures-dip-ahead-jpmorgan-earnings-inflation-data-2026-01-13/

NOTE: It's also not clear to me it is possible to cap lending rates without Congressional action. Maybe it is?

Grrr. Fixing the thread again!

Wednesday 1-14 #bubblewatch

Most market sectors recovered from yesterday's declines, with the exception of Financial and Tech. The Financial losses have a clear reason (see up-thread), but Tech stock valuations wouldn't be affected by that. For now I'm assuming it's more early #AI #bubble investors moving their profits to safer investments, like arms manufacturers.

> Wall St skids after mixed results from big banks; tech stocks retreat. https://www.reuters.com/business/wall-street-futures-decline-ahead-big-bank-earnings-2026-01-14/

NOTE: I accidently broke this thread in late November, losing a few posts. Here is the original start of the #bubblewatch thread from early November:

> https://rustedneuron.com/deck/@jackwilliambell/115495970020295124

(Including this for anyone wanting to be a completist enough to read the whole thing, but assuming it's really only for my records.)

Thursday 1-15 #bubblewatch

And today Finance and Tech sectors are recovering as well. In the case of Tech, this is mostly because chipmakers are predicting record profits this year because of #AI. So it's really just more #bubble talk and some segment of the market is still believing it.

> Wall Street rebounds as banks gain following results; chips rally with TSMC. https://www.reuters.com/business/wall-st-futures-rise-tsmc-sparks-semiconductor-rally-financial-earnings-deck-2026-01-15/

Friday 1-16 #bubblewatch

Mixed trading today. Tech values still buoyed by chipmaker profit predictions … and chipmaker profit predictions still based on assuming the #AI #bubble keeps expanding.

Anyone who thinks the market is always rational has a hole in their head.

> Chip stocks lift S&P 500 in volatile trading ahead of long weekend. https://www.reuters.com/business/wall-st-futures-rise-chipmakers-advance-end-choppy-week-2026-01-16/

Related: Interesting article pointing out the #AI #bubble carries political risks as well.

> ‘Show me the money’ time for AI as political risks loom. If investors start to lose faith in AI, it could dent economic growth and put more pressure on the GOP in the midterms. https://www.politico.com/news/2026/01/16/ai-money-political-risk-00733145

Thing is? Even if the bubble doesn't pop, it's unlikely the #genai sector is going to be profitable this year; if ever. Has anyone done a serious cost analysis of AI usage per prompt?

Monday 1-19 #bubblewatch

I wasn't going to do a bubblewatch today because the market is closed for a USA holiday. But that doesn't mean markets are not operating elsewhere and recent #uspol events have shaken things up.

> Dollar at week low as geopolitics revive 'Sell America' trade. https://www.reuters.com/world/asia-pacific/dollar-week-low-geopolitics-revive-sell-america-trade-2026-01-20/

I've usually avoided making predictions on this thread and the few times I tried I either missed the mark entirely or was only partially right.

But I'm gonna try again.

[contd]

So, first two things: The dollar is taking a bath and USA stock futures (to be settled tomorrow morning) are tanking.

This doesn't bode well for the market tomorrow, but could lead to bargain hunting driving prices back up. HOWEVER…

However, USA Treasury bonds have been doing badly lately, with rising yields and not enough takers. And now we have European countries threatening to pull their money out of the USA bond market.

This is bad. This is really bad.

[contd]

Why? Because all European countries together hold more USA Treasury bonds than even China. If they pull out it could devastate the USA bond market and not just for Treasury bonds.

But it gets worse. If bond values tank from this we could see all foreign AND DOMESTIC bond holders trying to get out before values completely flatline. Think bank run, but on the entire country.

(This is bad for my own investments!)

And I'm not done yet…

[contd]

When the market as a whole looks bad money tends to flee to blue-chip Industrial and Energy stocks. Right now the biggest single sector of the market is the #AI #bubble. And major holders of AI stocks include European retirement and sovereign funds. So if the market looks hinky to them they now have two good reasons to sell and sell quickly.

Meaning, even if it's only those stockholders selling, the AI sector tumbles.

So, will the bubble pop this week? I don't know.

[contd]

What I'm saying is, I don't know if the European national and retirement funds are actually going to do those things. Right now the market is indicating there are fears it will happen, but it could also even out tomorrow. Who knows?

But I do feel fairly confident in predicting the AI bubble will pop if European funds start divesting from USA bonds and stocks in a big way. Only if it does? It's now 99% more likely it will take the rest of the economy with it.

Black Tuesday? We'll see.

[fin]

MORE:

Here is a helpful explainer from 2024 on how USA Treasury bonds work and how things can go wrong if bond buyers decide the USA is *not a good investment*.

> How to tell if the US Treasury is having trouble borrowing in the bond market. https://www.brookings.edu/articles/how-to-tell-if-the-us-treasury-is-having-trouble-borrowing-in-the-bond-market/

What this article doesn't cover in-depth is what happens if that day comes. The answer is simple: the dollar crashes and the USA economy goes off a cliff. Most likely dragging the rest of the world along with it.

Holding off on today's #bubblewatch until the market closes. But, if you want to see how it's going so far?

I'll keep watching.

All that said? It's important to note CNN's 'Fear and Greed Index' is currently neutral. Which is a sign the market could recover some value by end of day.

> https://www.cnn.com/markets/fear-and-greed

Tuesday 1-20 #bubblewatch

Well, in the end today's trading was neither a complete collapse of the market nor a recovery due to bargain hunters. Tech stocks ended down the most, but all market segments were down significantly. I was talking about potential issues with USA bonds above, but today the Japan sovereign bonds were in play. Still, the 'Sell America' talk continues. (Mentioned in the article.)

> Global bond markets shaken by Japan selloff, Greenland worries. https://www.reuters.com/world/asia-pacific/japanese-selloff-greenland-fears-ripple-through-debt-ridden-global-bond-markets-2026-01-20/

It begins…

> Danish pension fund to divest its U.S. Treasuries. https://www.reuters.com/business/danish-pension-fund-divest-its-us-treasuries-2026-01-20/

Still, $100 million is a drop in the bucket. But if there are a hundred such drops? Then we have a storm.

ETA: I should point out I'm not cheerleading this! If the USA bond market collapses it will take a big chunk of my investments with it. This is money I'm counting on to get me into a care home where they change your diaper regularly when I get to where I need that.

Wednesday 1-21 #bubblewatch

It appears the market believes TACO (Trump Always Chickens Out) is in play. Yet, as optimistic as those voices are? The market has not yet gained back all the ground it lost recently. Crowing about a percent and a half increase today means little if it was a two and a half percent *decrease* yesterday.

> Stocks stage dramatic rebound after Trump announces Greenland framework. https://www.reuters.com/world/china/global-markets-wrapup-1-pix-2026-01-21/

Meanwhile Europe was still poked with a stick. This isn't over.

Paul Krugman agrees with me, but as usual he says it better than I.

> MAGA Delusions of Economic Leverage. Europe can easily stand up to Trump’s bullying. https://paulkrugman.substack.com/p/maga-delusions-of-economic-leverage

> "However, we can say something about the likely effects of his attempt to coerce Europe with tariffs — namely, that it won’t work. Only in Trump’s fantasies does American possess huge economic leverage over Europe. To the extent that we have any leverage over them, it’s matched by the leverage they have over us."

Thursday 1-22 #bubblewatch

In case you needed any more proof the market consists mostly of people who think they are smart, but act like they are stupid? Take a look at how they are celebrating the last two days of geopolitical news by getting excited when the DOW is up a two-thirds of a percentage point, but still down from last week.

> Wall Street finishes up as investors buoyed by tariff relief, upbeat data. https://www.reuters.com/world/europe/futures-rise-further-greenland-relief-2026-01-22/

Wisdom of the market my ass.

Friday 1-23 #bubblewatch

I didn't want to post today's bubblewatch until the market closed because I figured yesterday's irrational exuberance wouldn't last for another full day of trading. I was right.

> Dow ends lower after topsy-turvy week, as Intel's outlook weighs on market sentiment. https://www.reuters.com/business/us-stock-futures-dip-intel-plunges-geopolitical-concerns-linger-2026-01-23/

Monday 1-26 #bubblewatch

The stock market is up slightly, in anticipation of both Fed moves and some upcoming big name quarterly reports. (Why the market always assumes profits will be up is beyond me.)

However, other markets are, as they say, 'volatile' as the dollar skids and gold jumps to new heights.

> Dollar under fire again as investors reassess Trump policies, geopolitical risk. https://www.reuters.com/business/dollar-under-fire-again-investors-reassess-trump-policies-geopolitical-risk-2026-01-26/

Wednesday 1-28 #bubblewatch

(Sorry, skipped yesterday.)

The stock market was up a bit, but slipped today, along with the dollar, as the Fed decided to stand pat on interest rates. However, gold jumped again; signalling more money is trying to find a safe haven.

> Gold tops $5,300 for first time on dollar weakness ahead of Fed decision. https://www.reuters.com/world/asia-pacific/golds-blistering-rally-continues-past-5200-dollar-plunges-4-year-low-2026-01-28/

If you believe in the predictive power of the market the message is clear: Many investors are afraid of a BIG crash right now.

Thursday 1-29 #bubblewatch

Days like today are why I bother with this long-running thread.

> S&P 500, Nasdaq close down as Big Tech's soaring AI budgets trigger flight. https://www.reuters.com/business/us-stock-index-futures-edge-up-markets-digest-big-tech-earnings-2026-01-29/

If you've been following me here, you know I railed about the market's unwarranted optimism ahead of this week's earnings reports. Guess what?

And then there's the larger questions associated with the USA Administration and various geopolitical risks. 'Storm clouds' indeed…

That big drop in tech stock values today? Turns out #Microsoft alone was about two thirds of it.

> Microsoft Stock Tumbles 12.1% In Worst Day For Company In Years. https://www.huffpost.com/entry/microsoft-stock-tumbles-121-in-worst-day-for-company-in-years_n_697bb80ae4b04b6f3b7f3200

And gold is still advancing, along with silver now gold stocks are getting tied up. After all, if you are buying gold as a hedge against hyperinflation, selling it at a profit is meaningless.

NOTE: I do not recommend buying gold. Please don't take that from this.

#news

Paul Krugman on why #gold and #silver values are going crazy right now.

> The Lowdown on Debasement. https://paulkrugman.substack.com/p/the-lowdown-on-debasement

This is essential reading if you are trying to understand money flows at the moment. Especially if you want to understand the dangers to the USA #economy as foreign and institutional investors pull out of the USA bond market and hedge by moving their #money to precious metals.

Friday 1-30 #bubblewatch

Not a good day for the stock or currencies markets and the bond markets wish they were doing that well. For good reason: bad earnings reports, bad economic news, and now an incoming Fed Chair who scares the pants off of anyone looking for stable economic policy.

> US stocks fall, as investors fret over Trump's Fed nominee, earnings, inflation. https://www.reuters.com/business/wall-street-futures-fall-trump-set-announce-fed-chair-pick-2026-01-30/

You know what *is* up? Values of companies making the kinds of things you stock up on for emergencies.

Monday 2-02 #bubblewatch

Welcome to February bubblewatchers! It's been weird over the weekend and today.

1. The boom in precious metals sagged; I guess those goldbugs and debasers weren't all that serious about hedging against hyperinflation

2. But the crypto selloff continued, albeit at a slower pace because there's even less buyers

3. The dollar is finally going back up a bit

4. Stock trading was mixed, Asia down

> TRADING DAY Solid data over hard assets. https://www.reuters.com/world/asia-pacific/global-markets-trading-day-graphic-2026-02-02/

Tuesday 2-03 #bubblewatch

Bubblewatch is late tonight because of Reuters. It's not my fault.

Oh, OK. I forgot to recheck if they finally posted a market recap until now. But they were late first!

Anyway… The entire market, including – because I'm posting so late – Asian stocks, is down. Tech stocks are especially hard hit, nearly a percent and a half.

> Asia shares wobble, oil prices climb and gold makes a comeback. https://www.reuters.com/world/china/global-markets-global-markets-2026-02-04/

Also, whoever was selling their gold horde ran out…

Wednesday 2-04 #bubblewatch

I complained about Reuter's being slow with their market recap yesterday. Today's is not only on time, it is also on the front page as the leading article!

> As software stocks slump, investors debate AI's existential threat. https://www.reuters.com/business/media-telecom/global-software-stocks-hit-by-anthropic-wake-up-call-ai-disruption-2026-02-04/

And, yeah, #AI stocks are down. But so is the rest of the market. But the real news is the way market analysts are finally starting to call AI booster promises into question as actual results of AI rollouts come in.