Dear New World Investor: “Space – the final frontier. These are the voyages of the starship Enterprise – its five-year mission to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before.” And so William Shatner, speaking as Captain James T. Kirk, opened the first episode of the original Star Trek in 1966. Eleven years later, George Lucas’ Star Wars opened to packed theaters. Since then, progress in space has been steady if not spectacular, transitioning from huge government programs to private companies like SpaceX and Rocket Lab. Like...

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Dear New World Investor: AI stocks are getting pounded today due to the Chinese company Deepseek releasing an open-source AI model that’s much less expensive than OpenAI, Llama 2, or any of the other major competitors. What the market is missing is that this is all massively bullish for the AI supercycle. Deepseek just improved efficiency dramatically and every other top Large Language Model will adopt Deepseek’s methods and improve their models faster, and do it all with more efficient use of compute power. That means better AI apps and AI agents are coming sooner, faster, and better than previously...

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Dear New World Investor: NOTICE: No newsletter next week, as unlike days of yore nothing much happens during Thanksgiving week. The day after Thanksgiving used to be a major tell for the next market move – now it’s a nothingburger. I’ll be back on December 5, more than ready for the Santa Claus rally. In the near term, I expect inflation to continue to slowly fall – in large part because I still think a brief, shallow recession is coming. But two years from now I think inflation will be higher as Trump tries to undo many of the policies...

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Dear New World Investor: The October Consumer Price Index (CPI) headline number increased 2.6%, right on the consensus but a bit faster than September’s 2.4%. The month-over-month increase was 0.2%, the same as the last three months and also right on the consensus. As usual, a few outliers warped the numbers. Auto insurance is still much higher than a year ago while gasoline – which is not in the core inflation calculation – is much lower. Click for larger graphic h/t Yahoo Finance The core CPI excluding food and energy was up 3.3% year-over-year and, for the third month in...

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Dear New World Investor: The August payrolls report showed 142,000 nonfarm payroll jobs added, fewer than the 165,000 expected by economists. July was revised down from +116,000 to +89,000. But the unemployment rate fell from 4.3% in July to 4.2% in August, the first decrease in the unemployment rate since March. Traders pretended a 0.1% difference for one month would make a big difference to the Fed, which is obvious nonsense. Wednesday morning’s initial market reaction to the August Consumer Price Index (CPI) – down 88 points on the S&P 500 – was not about the numbers, the numbers vs....

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Dear New World Investor: This morning’s first revision of the June quarter real GDP report raised the annual growth rate from 2.8% to a healthy 3.0%. That’s more than double the sluggish 1.4% growth rate in the March quarter. Click for larger graphic h/t Yahoo Finance Consumer spending, which accounts for about 70% of U.S. economic activity, rose at a 2.9% annual rate last quarter, up from 2.3% in the initial estimate. Business investment expanded at a 7.5% rate, led by a 10.8% jump in investment in equipment. The Federal Reserve’s favorite inflation measure, the Personal Consumption Expenditures Index (PCE),...

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Dear New World Investor: This morning’s first estimate of June quarter real GDP growth surprised me by coming in at 2.8%, pretty much right on the Atlanta Fed’s GDPNow model estimate I reported last week at +2.7%. I wrote: “The Atlanta Fed’s GDPNow model forecast for June quarter real GDP growth rose to +2.7%, well above the Blue Chip economists’ forecast. I don’t see how it could be that strong, but we’ll find out next Thursday morning.” Click for larger graphic h/t Yahoo Finance Well, I was wrong and the consensus for +2.0% was really wrong. March quarter GDP was...

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Dear New World Investor: A major PC crash slowed and shortened this issue. No fractal, GDPNow, or bitcoin graphics. My apologies for that – the little laptop did its best and we’ll be good to go next week. Yesterday’s core Consumer Price Index (CPI) report for May showed a month-over-month increase of just 0.2%, a tick below the 0.3% expected as well as April’s 0.3%. The Fed now expects only one quarter-point (25 basis points) reduction in the Fed funds rate this year. They now expect four cuts in 2025 instead of three, so not much really changed. As always,...

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I was planning to issue a Buy recommendation on Palantir (PLTR) in this Thursday’s letter, but after the company reported a great quarter today Wall Street is clobbering the stock in the aftermarket. That’s dumb, and I want you to take advantage of them. I’ll have the basic write-up on Thursday. PLTR is an outstanding Big Tech dominator of AI software. I recommended PLTR in Boomberg on October 28, 2022 at $8.64 Their business has improved so rapidly that it’s still cheap. Here is this week’s Boomberg write-up: Palantir (PLTR) reported a good March quarter, raised guidance for the year,...

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Dear New World Investor: Although tomorrow is a stock market holiday, we are supposed to get the February Personal Consumption Index inflation. Core PCE is estimated at over 3%, which will keep the Fed in “High – but not higher – for longer” mode. Click for larger graphic h/t @Mayhem4Markets Next Friday, April 5, we see March payrolls. There is a simple rule to predict the beginning of a recession: A 10% rise in unemployed people. Click for larger graphic h/t @MichaelKantro To get there, we need to see services weaken. According to the St. Louis Fed, over the past...

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