Hi Again,
Even though we did not have a typical October crash (ie 1929 or 1987), market was brutal for most tech stocks. Is the correction over? Will it rollover to a crash or will it linger on for many months or years? The 10 year treasury over 5% is a big threat to the market. Central Banks are raising rates all over the world to bring down inflation. The Iran war had a negative impact on inflation in the US, but it was brutal in Europe and in other countries. When the Feds start raising rates that trend is sure to continue for a while-historical evidence. That is not good for tech stocks. Bonds is a safe heaven. This is about “capital preservation” and not about “capital gains”. At this time 50% of the bonds are being held by hedge funds.
Martin Edward Zweig (July 2, 1942 – February 18, 2013) was an American stock investor, investment adviser, and financial analyst. In the 1980s he coined the term “do not fight the feds”. Zweig appeared regularly on PBS television's Wall Street Week with Louis Rukeyser, and in 1992 he was voted into the program's Hall of Fame. It was on that very program that he stated on 16 October 1987, that he was deeply worried and did not like what he saw in the stock market. The 1987 stock market crash occurred on 19 October 1987.
Around 1/1/26 and for many months, the best Wall Street experts stated that the US stock market was the worst in the world and most other markets were better and they also stated that the best market in the world was South Korea. I did not buy that hype. The risk factor in those markets is very high. The Korean market ETF is EWY which fell 32% since July 2026. I do not believe that anybody should invest or trade in leveraged ETFs. KORU is the 3x leveraged ETF for S Korea. In the past 3 months, it fell 80%.
Many years ago, I traded Chinese stocks and learned my lesson. It is not a real market. They want to sell below cost and monopolize the global economy. Common sense market rules and regulations do not exist in China. As of this moment, China is going through AI & Tech bubble burst. Since July 2026, the ‘Mainland Star 50’ index has plummeted 40%! It wiped out $480 Billion USD. CSI300 Index was down 20%.
Western Digital or WDC has been one of the best US stocks since 2025. On 8/18/25, it was at $80. On 6/15/26, it peaked at $750. Over the past 4 months, it has gone down 50%! Looking at option tables, it is clear that most traders are very optimistic about the future of WDC. Call option with a strike price of $1,000 has a premium of $50. Let me explain; Let us say you buy 100 shares of WDC for $36,000 and you sell one call option contract (100 shares) that expire December 2028 with a strike price of $1,000 and you will get $5,000.By December 2028, if WDC is below $1,000, your option will expire worthless while you pocket the $5,000 in premiums you already collected. Let us assume that WDC goes up to $1,000, then the buyer of you option will buy your 100 shares of WDC for $100,000 (your cost was $36,600)plus you get to keep the $5000 premium you collected. 10/29/26 was the worst day for Google as it dropped 12% or a half a trillion in market cap. Market has been going down and so was gold and Bitcoins. If you take a stock market chart for the past 100 years and put it on top of a 100-year chart for gold, you will see that gold never acted as a hedge against market crashes/corrections. 1929 all over again?
Now to my favorite punching bag- Intel! I have gone in and out of intel for years. Prior to October 2025, it was always below $40-mostly in the $20s. Then all started saying that data centers need Intel CPUs (not limited to GPUs). Also, Trump invested $10B government money in Intel. Price kept shooting up. I did not buy the hype. As I have been saying for years, the 2 worst companies in the US- Boeing and Intel- terrible management. Changing CEOs will not help. As they say in Asia, “you cannot cure a headache by changing pillows”. About the 3 months ago, Intel hit $140, last week was the worst since 1974 and now it is at $65!!. If it falls to $25, it will be a good buy. As Jim Cramer said on 10/30/26, Intel was his worst mistake. Even when most investors and traders were bullish on Intel, one of the best tech stock analysts stated that Intel has too many problems to become profitable.
Now for a very interesting story. When a company has an IPO (initial public offering) on Wall Street, it comes to the market early in the morning. On 10/30/26, everyone on Wall Street was waiting for the newest IPO to come to the market. Even 30 minutes prior to the close of the market, it was nowhere to be seen. Name of the company: OPAY. A Nigerian fintech company on the US market? What next? North Korean IPO called KIM? Nigeria is a nation of crooks!
Most money managers use option on CBOE Volatility Index (VIX) to hedge against corrections. On 9/3/26, it was at a low 13! Now it is close to 20. Some people buy calls when the VIX go below 15.
On 10/28/26, the US Fed Reserve decided (on 10-2 decision) to keep the rates unchanged. At the press conference, Fed Chair Walsh stated the following:
• Economy is expanding at a steady rate.
• Jobs gains have kept up with labor demands keeping the unemployment rate unchanged.
• “We will provide price stability”
• Economic growth rate has gone up
• Business investments have doubled.
• Unemployment claims at the lowest level in decades.
• Credit has got tighter but not tight enough
• In 2027, thy will hold one meeting solely on policies and it will be increased to 2 in 2028.
• Warsh will attend a meeting at the IMF in November
• In the past few days, while oil prices were going up interest rates were going down-very unusual.
• Only in crisis situations will he give future guidance.
• He looks seriously at the South Korean economy and market. The new Governor of that bank is a friend of Warsh.
• Will not take part in the White House talks to fire Lisa Cook.
Jeffrey Edward Gundlach is an American businessman, investor, and philanthropist. He is the founder of DoubleLine Capital, an investment firm. As he does after every Fed decision, Jeffrey made the following comments on 10/28/26:
• “Feds keep aiming and aiming but they never shoot”. (He wants the Feds to raise rates).
• Inflation will go above 4 for the next 5 months.
• Nominal GDP expected at 6%.
• All credit spreads are widening.
• In the past 2 months alone, the US national debt rose by half a trillion to $40.5Trillion.
• Expect a rate hike in December
• Keep 20% in commodities and 5% in gold. Only 30% should be in equities.
• US 10 year Treasury at 5% is attractive.
Have a great month!
Fernando