Trump fails to reach a deal to avert a shutdown, gold and silver power to fresh highs

A looming government shutdown is on the horizon as an agreement between the President and congressional leaders failed to materialize. This shutdown could halt the release of crucial economic data, impacting the Federal Reserve and Wall Street. Meanwhile, gold has surged to record highs, fueled by dollar weakness and central bank purchases, with silver outperforming gold year-to-date, potentially signaling a silver squeeze.

The tech landscape sees a significant boost in AI development with OpenAI generating $4.3 billion in revenue in the first half of 2025, a 16% increase over the entirety of 2024, despite burning $2.5 billion in cash for R&D. In mergers and acquisitions, the third quarter witnessed a record number of mega-deals, surpassing $1 trillion, with investment bankers reporting their best quarter ever.

Looking ahead to October, seasonality analysis suggests a positive outlook for the market, although volatility is expected to rise. Despite concerns about the US leading the AI race, Chinese tech companies are making substantial strides, driven by domestic investor enthusiasm and government support, though they still lag behind US technological development in certain areas.

• A government shutdown is imminent due to a lack of agreement, potentially disrupting economic data releases.
• Gold and silver have experienced significant rallies, with gold hitting record highs and silver outperforming year-to-date.
• OpenAI reported $4.3 billion in revenue in the first half of 2025, driven by AI development and ChatGPT.
• The third quarter saw a record $1 trillion in M&A activity, with investment bankers achieving their best quarter on record.
• Asian tech stocks, particularly in China, are on the rise, fueled by AI optimism and government support, despite ongoing competition with US tech firms.

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Government Shutdown Imminent [00:42]

• President Trump failed to reach an agreement with congressional leaders to avert a government shutdown.
• Lawmakers have until 1 minute past midnight on Wednesday for a potential partial shutdown to kick in.
• A shutdown would lead to mass firings, airport chaos, and the cessation of economic data publication.
• The jobs report, crucial for the Federal Reserve and Wall Street, is scheduled for Friday.

The lack of an agreement between the President and congressional leaders points towards an imminent government shutdown, which could have widespread consequences, including the halt of essential economic data.

We're headed to a shutdown because the Democrats won't do the right thing.

Gold and Silver Market Surge [01:48]

• The dollar has been broadly weaker against a range of currencies.
• Gold continued to surge, hitting another record high.
• The prospect of a shutdown has clouded the Fed's monetary policy path.
• Central banks have been purchasing gold, and the Fed's easing cycle began this month.
• Dollar weakness has sent gold prices higher, with the US dollar down about 10% over the past year.
• This dollar weakness creates an outsized move in precious metals.
• Silver has outpaced gold, up 58% year-to-date, while gold is up 45% year-to-date.
• This could indicate a silver squeeze.
• Silver futures are nearing their all-time high closing from 1980 at $48.70.
• Goldman Sachs forecasts a base case scenario of $4,000 per ounce for gold by mid-2026, with a bull case for $5,000 by the end of 2026.
• Wall Street remains structurally bullish on gold due to ongoing demand.

Gold and silver have seen substantial gains, with gold reaching new record highs and silver demonstrating stronger year-to-date performance, suggesting potential for further price increases in both metals.

So, we could be seeing a bit of a silver squeeze as we're watching right here.

Tariffs and Trade Implications [04:27]

• President Trump announced 10% tariffs on softwood timber and lumber, and a 25% tariff on certain upholstered wooden products, effective October 14th.
• Canada is expected to be significantly impacted as the US's largest wood supplier, already facing 35.2% duties.
• Countries with existing trade deals will face lower rates; for instance, tariffs on wood products from the UK will not exceed 10%.

New tariffs on wood products are set to impact trade, with Canada facing significant consequences due to its role as a major US supplier.

Countries that have already carved out deals with the US have lower rates.

OpenAI's Revenue and AI Development [05:01]

• OpenAI generated $4.3 billion in revenue in the first half of 2025.
• This revenue is 16% higher than what was generated in the entire year of 2024.
• OpenAI burned through $2.5 billion in cash, primarily due to R&D costs for AI development and running ChatGPT.
• Nvidia is set to invest up to $100 billion in OpenAI and supply data center chips.

OpenAI has achieved substantial revenue growth in the first half of 2025, driven by its AI advancements, though significant investment in research and development has led to considerable cash burn.

OpenAI generated $4.3 billion in revenue in the first half of 2025.

Record M&A Activity and Investment Banking Performance [05:36]

• The third quarter saw a record number of mega-deals.
• A $55 billion leveraged buyout of Electronic Arts pushed M&A activity past $1 trillion in Q3.
• 47 deals valued at more than $10 billion were completed in the last three months.
• Investment bankers advising clients at Jefferies reported their best quarter on record.
• This performance is attributed to higher valuations on M&A deals, lifting firmwide profits by 34%.

The third quarter has been exceptional for mergers and acquisitions, with deal values exceeding $1 trillion and investment banking firms experiencing record-breaking quarters.

The last thing you need to know about is that we have seen a record number of mega deals in the third quarter.

ExxonMobil Job Cuts and Industry Challenges [06:17]

• ExxonMobil plans to cut approximately 2,000 jobs globally.
• The company intends to consolidate smaller offices into regional hubs as part of its long-term restructuring.
• These reductions represent about 3% to 4% of Exxon's global workforce.
• The job cuts are part of the company's ongoing efficiency drive.
• This move signals ongoing challenges within the oil industry.

ExxonMobil is undertaking a significant restructuring, including global job cuts, to consolidate operations and improve efficiency, reflecting the broader challenges facing the oil industry.

ExxonMobil plans to cut about 2,000 jobs globally.

October Market Seasonality and Volatility Outlook [07:26]

• September, historically the worst month, did not live up to expectations and showed decent returns.
• The fourth quarter is typically the most positive quarter of the year.
• Seasonality refers to predictable, recurring changes in data that occur around the same time annually.
• Two models for median returns since 1990 and 1928 are presented, with the latter being a preferred predictor.
• October is expected to see a quick rise in the early part of the month, followed by a drift lower and a slight bounce at the end.
• The median return since 1990 suggests a slight negative performance in the middle of the month, turning positive towards the end.
• The VIX (volatility index) has shown muted volatility so far this year, despite the historical tendency for volatility to rise in October.
• There is potential for volatility to increase, even though it hasn't been observed yet.
• October will have 23 trading days, more than the usual 21.
• Stock markets will be open on Indigenous People's Day (October 13th), while bond markets and banks will be closed.

The upcoming month of October is anticipated to bring positive market performance, though an increase in volatility is also a possibility, as historical data and current trends suggest.

The point is depending on how you slice and dice the data, you can come up with wildly different models.

Trending Tickers: Wolfspeed, Firefly Aerospace, Alphabet, SanDisk, Etsy [12:06]

• Wolfspeed (WF) surged over 1,700% yesterday and is up another 39% in pre-market trading after completing its chapter 11 restructuring, reducing debt by nearly 70%.
• Firefly Aerospace shares are down over 10% in pre-market after its Alpha rocket's core booster was destroyed during a ground test, just weeks before its return-to-flight mission.
• Alphabet (Google's parent) agreed to pay $24.5 million to resolve claims of censorship made by President Trump.
• SanDisk, a maker of hard drives, is up over 20% in after-hours trading over the past two days due to positive updates and analyst upgrades amid strong demand for memory to fuel the AI era.
• Etsy will transfer its stock listing to the New York Stock Exchange on October 13th, moving from NASDAQ. The stock rose 15.8% yesterday on the news.

Several companies are making headlines: Wolfspeed is experiencing a massive surge post-restructuring, Firefly Aerospace faces a setback with a destroyed rocket booster, Alphabet settles a censorship claim, SanDisk sees gains driven by AI demand, and Etsy is set to switch its stock exchange listing.

Wolfspeed, a huge mover today.

China's Role in the AI Race and Tech Sector [14:57]

• The Shanghai Composite rose 3% in September, its longest monthly rally since 2017, driven by optimism in Asian tech stocks linked to AI developments.
• Chinese tech companies like Alibaba, Tencent, DeepSeek, and ByteDance are noted for their innovation, though they lag behind US counterparts.
• These Chinese tech stocks trade at cheaper valuations, and domestic investors are rediscovering their value.
• Alibaba is up over 113% year-to-date, and Tencent is up almost 60%.
• The government is providing increased support for entrepreneurs, a change from the past four years.
• Alibaba's partnership with Nvidia is significant, despite Beijing's previous advice against buying from Nvidia.
• Nvidia has a technological lead, but faces geopolitical challenges in China.
• Huawei is making significant efforts to double its AI chip output but is still several years behind Nvidia.
• Chinese engineers in both the US and China are crucial to the global AI race.
• US immigration policies are a factor in retaining international AI talent.
• The IPO market in China shows promise, with Zingen Gold raising $3.2 billion and performing well on its first day of trading, targeting global investors.

China is emerging as a significant player in the AI race, with its tech sector showing strong innovation and growth, supported by domestic investment and government initiatives, though it still faces competition and technological gaps compared to the US.

Well, there's kind of a joke that is going around Silicon Valley and Chinese tech circles that really what's happening is a competition between Chinese engineers in the US and Chinese engineers in China for dominance in AI.