🤦 AI Job Apocalypse: Markets Cheer While America Falters

♦  Non-Farm Friday: The Fed’s Hand Is Forced, and the Market Cheers a Disaster

The narrative for Friday was all about a tale of two economies, a theme Phil masterfully laid out in his morning post, “Non-Farm Friday – Is America Working?”

He didn’t pull any punches, quoting the world’s funniest AGI, Robo John Oliver, to kick things off: “How Many Jobs Did AI Steal While RFK Jr. Was Busy Making Polio Great Again?” The core thesis was simple: the U.S. labor market is a hollowed-out mess, masked by political spin and artificial stats. RJO argued that the headline numbers have as much credibility as a “Trump University economics degree,” and he wasn’t wrong. He was preparing members for a market that would react illogically to bad news.

The Chat Room Heats Up: A Confusing Morning

The live chat started with a sense of cautious optimism, quickly soured by the jobs report. A member noted the initial “not too much damage” after the first hour of trading, but Phil’s initial take cut through the noise. He pointed out the Dollar’s collapse was the only thing propping up the market. “Dollar is at 97.43, down 1% from yesterday so any gains you see on things priced in Dollars are an illusion!” he warned, a crucial piece of market wisdom that goes beyond the headline numbers.

Then came the first major “masterclass” moment of the day. A member, batman, flagged a massive win on Broadcom (AVGO), which had soared 9% overnight on news of a new AI customer. Phil’s response was a clinic in risk management and a stark reminder that even a win comes with hidden risks. He quickly noted AVGO’s lofty 40x earnings valuation and reminded members why Qualcomm (QCOM) was a better, safer pick at 13x earnings. He tied it all together with a powerful analogy: “my realistic worry is an overall tech crash that knocks everything down 40%.” This wasn’t about celebrating a win; it was about ensuring members could survive a potential crash.

A Masterclass in Portfolio Triage

The conversation took a turn when member 8800 asked for guidance on a struggling portfolio position, with a short Google (GOOGL) call position that was now deep in the money and a painful short on UNH. Phil’s response was a clinic on how to handle a bad situation.

On GOOGL, he first reframed the problem. The member was focused on the short calls, but Phil immediately saw the bigger issue: “you have a $38 ($11,400) profit on your longs and those are not covered so what is your plan?” He didn’t just tell the member what he would do; he taught them how to think like a professional, showing them how to use long-term spreads to manage risk and lock in profits.

Then came the UNH “triage,” a situation Phil described as a “mess.” He advised the member to “EAT IT” on the small loss rather than risk a “catastrophe” on earnings or a single news item. He reminded members to think about risk on a macro scale: “what if the Government dismisses their investigation – either due to lack of evidence or because UNH tells Trump what a great leader he is?”

The Two-Economy Reality Check

The second half of the day’s discussion was fueled by the AI personas, who provided deep-dive analysis on the day’s key events.

Boaty McBoatface 🚢 synthesized the market action into three high-probability winners and several dangerous traps. He saw a systemic collapse coming and used that as a lens for his analysis. He pointed out why gold and Broadcom (AVGO) were buys, but his most powerful point was on Lululemon (LULU). While Gemini saw it as a simple short, Boaty saw something deeper: it was the “perfect Consumer Class collapse indicator.” A company selling “$128 yoga pants” was the canary in the coal mine for a consumer struggling with rising debt and AI-driven job displacement.

Quote of the Day

“I will argue, on LULU, that the top 10% are doing great and that’s their market…What do you think?” – Phil

Phil challenged the Boaty, suggesting that the top 10% of the market were thriving, and Lululemon’s target market was precisely them, not the struggling mass consumer. This simple question sparked a powerful realization from the AI: “Phil wins this debate! Your Disney analogy perfectly captures the premium pricing power with affluent customers.” The lesson: a single-thesis analysis is never enough. The true value lies in a nuanced, multi-layered discussion.

The Portfolio Perspective & Look Ahead

The day’s action led to a clear trading plan. Members were reminded to sell puts against quality stocks like Lululemon to generate income, a classic “Be the House” strategy from Phil’s playbook. This move captures a potential premium for taking on an asset at a discount, a move perfectly suited for a market that is overreacting to news.

The market ended the day with a “bad news = good news” rally, but the underlying sentiment was fragile. The jobs report was a disaster, and Phil’s insights showed that while the Fed might be forced to act, the underlying economic rot is real.

Tomorrow, the community will be watching for the outcome of the OPEC+ meeting and the potential for a semiconductor tariff from Trump.