Blain’s Morning Porridge October 6^th 2025 – Bear in a Bull Market

“Markets are not clever – they simply reflect the weighted stupidity of participants.”

What’s not to like about markets which keep going up? Lots of participants are increasingly certain the current upside momentum is unstoppable. Some of us suffer from the problem of thinking too much and wondering if its sustainable. Being a bear can feel very lonely.

Welcome to a new week playing the Game of Global Financial Markets. What’s not to like….? Er…. In my mind… Lots. The first email I opened this week was from an unhappy subscriber in the USA, cancelling his subscription because of my rabid “Trump Derangement Syndrome” and unremitting bearishness in what is clearly a bull market – sustained by Trump.

Fair enough, but I just tell it how I see it.

And how I see it now… worries me. The US government is in shutdown – yet the euphoric stock market has risen to new highs. The administration is using it as an opportunity to cut its wage bill. Vivek Ramaswamy, the short-lived former co-head of DOGE,  says sack everyone, and we can hire back the ones we need later. Whateva…

Meanwhile, Gold quietly hits a new record high as well… I am listening to Gold more than US stocks… In Bonds there is truth. In Gold there is prophecy.

These markets feel like the Red Queen’s proverbial six impossible things before breakfast! I’ve long struggled with the rhyme of what the market is prepared to believe versus reason and common sense. When my disbelief reaches worrying levels, I calm myself with my mantra: “Trading is about the short-term mood and sentiment of the market – which is not clever or omnipotent. Investment is about long-term common sense.” That gap between reasoned investment and short-term trading fantasies has never felt wider – yet the market seems determined to push on higher.

Let me cite a few examples…

Economics and markets

The Trading case: Following “Liberation Day” back in April, just about every strategist and economist warned of the likely effects on growth and recession possibly triggering stagflation. Today, the US economy remains strong and resilient – and economists are being pilloried for “getting it wrong”. The economy appears buoyant, it has absorbed the tariffs and the debt is falling as a result. According to the trading mood, it’s no surprise stock markets remain strong and rising as the promised collapse in consumption didn’t happen.

The Investment Case: Tariff effects and unforeseen consequences will impact the economy slowly. They are still to impact numbers (and these numbers are now hidden.) On their own tariffs may be limited if price increases are one-off and retailers hike prices gradually while absorbing some costs, but combined with lower interest rates and redirected supply chains, there is a strong likelihood inflation will rise, putting further rate cuts on hold.

Conclusion: We just don’t know yet.

Economic Data

The Trading Case: For decades no one trusted Chinese economic reports. The only way to understand what was going on was to go visit and get away from the modern Potemkin business centres, to visit new towns where tumbleweed blew down the streets and there were zero people, businesses, shops and empty factories. Last Friday the US failed to publish the Sept Non-Farm payrolls because of the Govt Shutdown. It was widely expected to be negative, but the strength of the US economy is not hidden – airlines, hotels, restaurants and shops all report solid consumer spending.

The Investment Case: This week critical data will not be released. We will be dependent on rumours and “someone said” for info on the economy. What should we think of the US economy without data, and a Govt determined to feed us a stream of positive numbers? It’s a more open and transparent economy than China… but who is looking versus who is simply listening to what the administration would like them to hear? Retail investors play an outside role in the direction of the market.

Conclusion: Without clear economic data and a market moving on unverified but apparently plausible data and reports, there is a serious risk the next crisis goes unspotted in terms of consumer defaults or credit spreads missing a turning point.

The AI Bubble

The Trading Case: The front pages are about how much Hyperscalers will spend on AI infrastructure and how quickly it can be built – driving an economic boom. AI is set to change the world – vastly increasing corporate earnings, the productivity of businesses, and creating value across new businesses and infrastructure builders from chips to reactors!

The investment Case: Analysts are increasingly fretful about monetisation. What can AI based firms realistically expect to make vs the froth about how much it’s going to change the world. Last week, the Morning Porridge wrote about how open-weight AI models will prove cheaper and offer users critical data sovereignty.

Conclusion: Spending trillions to make millions is not going to justify current multiples and expectations. Most vulnerable companies will include Nvidia if open-source and open-weight AI firms can use cheaper, plentiful chips.

Crypto

The Trading Case: The current buzz word in crypto is the “debasement trade”, that fiat currencies are in crisis due to govt debt and political instability. (Japan likely to have a female prime minister? Good Grief!) Only Bitcoin (and Gold) offer salvation from the gathering storm. The multiple ways to invest in crypto through direct crypto wallets, ETFs, stablecoins and Bitcoin Treasury firms all make the market more accessible, while political support makes it secure – thus adoption by more and more investors propelling prices higher is inevitable.

The Investment Case: There is nothing wrong with asking the question why? Why does bitcoin exist? What does it do or enable that money and gold don’t already? Isn’t it just an angry libertarian lash back at govt/central bank control of money? Stablecoins offer nothing except as a tool to transact – they are not money but a token, directly linked to the currency, but paying no interest (that goes to the stablecoin sponsor). Bitcoin treasury firms are leveraged bets on crypto which will collapse on a downturn.

Conclusion: Believe what you want to believe. Question everything you hear – Crypto depends on finding the next greater fool, and that’s driven by marketing and stories about rising adoption. If you don’t ask questions, more fool you when it inevitably happens.

Tesla (there are multiple stories to tell about crazy corporate stock prices that make little sense… but Tesla is the obvious one..)

The Trading Case: Tesla just had a record quarter selling cars into California, driving the stock back up close to record levels. CEO Elon Musk is buying stock. The Robotaxi is going to dominate the globe. Tesla’s consumer and commercial battery businesses are thriving. Cathie Wood says Musk is most important inventor in human history.

The investment Case: California sales were a one-off before subsidies close. Tesla was the leading firm in the EV market. Now it is falling behind in the increasingly competitive sector. Its CEO is distracted. There are rising doubts about delivery of new products. Try reading “The Tesla Files”, about how German Newspaper Handelsblatt was passed data by a whilstleblower exposing multiple failures in safety, its toxic culture and Musk. (Great book – read the whole thing on Rainy Saturday.)

Conclusion: I don’t understand why Tesla is worth what it is. Either I am missing something fundamental, or lots of folk are deliberately choosing to ignore the evidence.

I could go on and find lots more reasons to worry about the market’s ability to fool itself… but this is a trading market and the market believes what it wishes to believe. I am keeping my powder dry and waiting for the opportunity.

Some stories to start the week…

FT – Crypto skulduggery isn’t a bug, it’s the whole point.

WSJ – Elon Musk Gambles Billions in Memphis to Catch Up on AI

WSJ – He Drops Trump Jr’s Name in Pursuit of Billion-Dollar Deals. It’s Getting Awkward.

BBerg – Ferrari-loving Trader Burned Wall St with Bond-bet leveraged 11000 – 1

Out of time and back to the day job….

Bill Blain

CEO – Windshift Capital

Author – The Morning Porridge

Partner – Shard Capital