November 5, 2025

QuickTakes

More Thoughts On The Latest

'Big Short' & Other Matters

On Tuesday, investors sold AI-related stocks on news that Michael Burry had shorted Palantir and Nvidia. Today, investors realized that his most prominent short position by far is in Palantir, which currently has a forward P/E of 212.9. Nvidia has a forward P/E of 32.7 (chart). Except for Tesla, the other Magnificent-7 have lower forward P/Es than Nvidia. Burry is famous for his "Big Short" bet on the collapse of the housing market during the Great Financial Crisis. His current stance seems more like a big short on Palantir than a bet that AI is a bubble about to burst.

The stock market gave up some of its gains as the day progressed. The Supreme Court met to consider whether Trump's tariffs are unconstitutional. The judges asked Trump's lawyer questions that suggested they are leaning toward ruling against Trump's tariffs. That sent the 10-year bond yield higher since the Treasury would no longer collect those customs duties and would have to refund what was already collected (chart).

On a 12-month basis, customs duties rose to $202.4 billion through September, with most of that collected since April of this year (chart). Just before Trump's tariffs, customs duties totaled around $100 billion over 12 months. Interestingly, over the past 12 months, corporate tax receipts fell by about $50 billion. This confirms that importers expensed the increase in tariffs, thereby reducing their reported profits to the IRS and the corporate profit taxes they paid to the Treasury.

In other news, October's ADP private payroll employment report showed a gain of 42,000, following declines of 29,000 in September and 6,000 in August (chart). Many economists seem to agree that changes in the labor market suggest a new "breakeven" for payroll employment gains might be 30,000 to 50,000 per month.

Education and health care, and trade, transportation, and utilities led the jobs growth. For the third straight month, employers shed jobs in professional business services, information, and leisure and hospitality.

Also confirming that the economy is growing was today's ISM non-manufacturing purchasing managers survey for October. It showed that new orders and production were strong in the sector, while employment was weak (chart).

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