Frozen Housing, Driverless Trucking, Gold’s Decline, 2027 Market Outlook, Rising Market Risk & More

The Housing Market Is Frozen, and a Recovery Won’t Be Easy

The housing market continues to struggle, and the latest data shows just how difficult things have become for both buyers and builders. Mortgage rates remain elevated, affordability is still a major issue, and the Federal Reserve's fight against inflation is creating another set of challenges for an industry that is already dealing with a shortage of housing.

Pending home sales fell 7.3% in September, reaching their lowest level since the National Association of Realtors began tracking the data in 2001. Sales were also down 11.3% compared with a year ago. Meanwhile, the average 30-year fixed mortgage rate has climbed to around 7.4%, putting additional pressure on buyers who are already dealing with high home prices.

At these rates, the monthly payment on a home can look dramatically different than it did just a few years ago. Many potential buyers are either being priced out of the market or choosing to wait for better conditions. Existing homeowners with low mortgage rates have little incentive to sell and take on a significantly more expensive loan. More than 95% of mortgage borrowers have rates below current levels, while 65% have rates at least 2 percentage points lower. This creates a difficult environment where buyers struggle to afford homes, while sellers are reluctant to give up the financing they already have.

The problem extends beyond buyers. Higher interest rates increase financing costs for homebuilders and developers, making new construction projects more difficult to justify financially. Housing starts fell 5.2% in September to an annualized rate of 1.22 million units, down 7.4% from a year earlier. Single-family building permits also remained weak, totaling just 845,000, down 4% from August and marking their lowest level since 2023. Meanwhile, homebuilder confidence has fallen to low levels that haven’t been seen in 14 years, reflecting the growing challenges of building homes that buyers can actually afford.

The Federal Reserve faces a difficult balancing act. Inflation remains a concern, and higher interest rates can help cool economic activity. However, housing is particularly sensitive to borrowing costs, meaning the sector often bears a disproportionate share of the burden when monetary policy tightens. The irony is that the country needs more housing to improve affordability, yet the economic conditions needed to bring inflation under control are making it more difficult to build that supply.

Another question worth considering is whether the AI data center buildout is creating additional pressure on the housing industry. The massive investment in AI infrastructure requires enormous amounts of capital, construction labor, copper, concrete, electrical equipment and HVAC systems. Housing developers need many of those same resources. If data center construction continues to absorb a growing share of available materials and skilled labor, could it make homebuilding even more expensive and difficult?

This is not necessarily the primary driver of the housing downturn, and higher mortgage rates remain an obvious obstacle. However, it is worth watching whether the AI investment boom creates additional competition for the resources needed to expand the housing supply. We are trying to build more homes at the same time that another capital-intensive industry is rapidly expanding its demand for construction resources.

Ultimately, the housing market is dealing with several problems at once: high borrowing costs, elevated home prices, constrained supply and rising construction costs. Even if mortgage rates eventually decline, affordability will not necessarily improve overnight if building costs remain elevated and the supply of homes continues to lag demand.

Driverless 18-Wheelers Are Closer to Hitting the Highways Than You May Realize

Driverless 18-wheelers are getting closer to becoming a common sight on America's highways and freeways. Some of the biggest companies developing this technology are names you may not recognize, such as Aurora and Waabi, which has operations in Lancaster, Texas.

Roughly 24 states, primarily in the South, allow autonomous trucks to operate on public roads without a human driver behind the wheel, subject to certain restrictions. These trucks have already logged hundreds of thousands of miles of testing, and major companies such as Amazon, Walmart, PepsiCo, and IKEA have been conducting pilot runs with autonomous vehicles.

Not every fully loaded, 80,000-pound commercial truck will be replaced by autonomous technology anytime soon. However, the technology is already proving useful for large trucks traveling predictable routes day after day. These routine trips are where self-driving trucks have the greatest potential to improve efficiency.

To understand the economics, consider the cost of operating a truck. Based on 2025 data, the average operating cost is approximately $2.34 per mile, with roughly 44% of that amount attributable to driver wages and benefits. That means labor accounts for about $1.03 per mile, creating a significant opportunity for cost savings.

Federal regulations also limit how long truck drivers can stay on the road. Generally, drivers can drive for up to 11 hours within a 14-hour on-duty window, after which they must take at least 10 consecutive hours off duty. Depending on traffic, speed, and other conditions, that can mean roughly 800 miles of driving before a mandatory break becomes necessary.

Autonomous trucks do not need to stop for sleep or mandatory driver rest periods. They still need to refuel, undergo maintenance, and deal with traffic and other operational constraints, but they could potentially keep freight moving for much longer periods.

I believe autonomous trucks could make transporting goods more efficient and reduce shipping costs over time. However, there is another side to this story. The U.S. has more than 2 million heavy and tractor-trailer truck driver jobs, and widespread adoption of autonomous trucks could eventually put many of those jobs at risk. The impact could extend beyond drivers to workers at truck stops and other businesses that depend on professional truckers.

There are still important limitations to the technology. Autonomous semis are not well suited to the last mile, where navigating local streets, backing into tight loading docks, and responding to unpredictable situations require more complex decision-making. Backing up and maneuvering in confined spaces remain particularly challenging.

Instead, the industry is focusing on a hub-to-hub model. A human driver could transport goods from a factory to a distribution center or from a warehouse to a store, while autonomous trucks handle the long-distance trips between warehouses. These predictable highway routes are where self-driving semis are most likely to gain traction first.

California is another important market to watch. Autonomous trucking has faced significant regulatory hurdles in the state. The International Brotherhood of Teamsters recently filed a lawsuit challenging the California Department of Motor Vehicles over regulatory changes involving driverless commercial vehicles weighing 10,001 pounds or more. The outcome could help determine how quickly autonomous trucks expand into California.

The transition will not happen overnight, and autonomous trucks still face technical, regulatory, and public-acceptance challenges. But the technology is advancing, the financial incentives are substantial, and major companies are already testing it.

You may not see driverless 18-wheelers everywhere just yet, but the trucking industry could look very different over the next decade.

Why Has Gold Fallen Nearly 30% From Its Highs, and Will It Rebound?

Earlier this year, gold traded above $5,600 an ounce, and I remember hearing people predict that it would reach $10,000. That kind of talk tends to emerge when an asset is soaring, because people forget how quickly market conditions can change. Gold now trades around $4,000 an ounce, a decline of roughly 28% from its highs. So, what happened?

Gold is simply a piece of metal. It doesn't pay dividends or generate interest. When interest rates rise, investors have more incentive to move money into Treasury bonds and other interest-bearing investments rather than hold gold. With inflation remaining elevated and the latest CPI report coming in at 3.7%, the chances of the Federal Reserve keeping rates higher for longer, or even raising them again, have increased.

Higher interest rates can also strengthen the U.S. dollar. Because gold is generally priced in dollars, a stronger dollar makes gold more expensive for international buyers using other currencies, potentially reducing demand and putting additional pressure on prices.

Institutional investors also appear to be pulling back from gold speculation. An estimated $3 billion was withdrawn from gold-backed ETFs during the second quarter, suggesting that some investors were taking profits or reducing their exposure.

The big question is whether gold will eventually recover and return to its recent highs. Based on the current inflation picture, there is little reason to assume the Federal Reserve will rush to cut interest rates. Depending on how the economic data develops, another rate hike remains likely. That creates a difficult environment for an asset that doesn't generate income.

If you're buying gold because you believe inflation will inevitably push its price higher, consider what happened in 2022. Inflation reached approximately 8%, yet gold gained only about 1.1% that year. Gold doesn't automatically rise just because inflation is high. Interest rates, the dollar, investor sentiment and demand for safe-haven assets all play a role.

Ultimately, keep in mind that gold is a speculative asset rather than a productive investment. It doesn't generate earnings, pay dividends or produce cash flow. Your return depends on being able to sell it to someone else at a higher price than you paid.

Is the Stock Market Setting Up for a Difficult 2027?

Paul Tudor Jones, the billionaire investor who famously predicted and profited from the 1987 stock market crash, is warning that 2027 could be a particularly challenging year for stocks. The founder and chief investment officer of Tudor Investment said on CNBC that the market could face its most negative supply-and-demand dynamics since 2002. While that may sound dramatic, several developments are worth watching as the current bull market continues.

For much of the past four years, corporate stock buybacks and mergers and acquisitions have provided a tailwind for equities by reducing the supply of publicly traded shares. That dynamic could soon reverse. With major IPOs potentially coming from AI companies like Anthropic and OpenAI, following SpaceX’s recent offering, investors could face a wave of new shares entering the market. Companies are also likely to issue additional equity to help finance the enormous cost of building out AI infrastructure. More shares competing for investor capital could put downward pressure on stock prices, particularly if demand fails to keep pace.

Jones sees similarities to 1999, just before the dot-com bubble burst. During that period, excitement around emerging technology drove valuations higher, but a growing supply of new shares eventually created significant pressure on the market. He noted that the current market is increasingly divided between companies benefiting from the AI boom and those being left behind. Jones has indicated that he expects to be short the market throughout 2027, arguing that there is little value left in many stocks. That is a notable warning from someone who built his reputation by recognizing when market conditions were becoming unsustainable.

Another concern is that the earnings growth supporting the bull market could be approaching a peak. S&P 500 companies have enjoyed expanding profit margins, with net profit margins expected to approach 15% in the third quarter of 2026. That would represent the index’s second-highest margin since FactSet began tracking the metric in 2009, and it is roughly two percentage points above the same period last year. Technology and energy companies have been major contributors to that expansion. However, Wall Street estimates suggest quarterly earnings growth could slow considerably over the next three quarters, approaching nearly flat growth by the second quarter of 2027. If profit margins have little room left to expand and earnings growth begins to fade, stocks could become more vulnerable, especially at elevated valuations.

There is also a warning sign in the market’s dividend yield. The S&P 500’s dividend yield fell to a record quarterly low of 1.07% in the second quarter of 2026 and currently sits around 1.05%, not far above its record daily low of 1.01% reached in September 2000. That low-yield environment preceded a substantial decline during the dot-com bust, when the index lost 17% of its value within six months.

Interestingly, S&P 500 companies are returning a record low proportion of their earnings through dividends. In the second quarter, dividends accounted for just 24.7% of earnings, according to CFRA Research. Companies are expected to pay approximately $827 billion in dividends this year, while Goldman Sachs estimates share repurchases could reach $1.4 trillion. Buybacks have become the dominant form of shareholder capital returns over the past several decades, partly because of their tax advantages and flexibility.

Before the 1980s, stock buybacks were relatively uncommon because they were often viewed as a form of market manipulation. In 1970, companies spent 10 times more on dividends than on buybacks, according to Morgan Stanley. That changed in 1982, when a rule change provided companies with legal protection for share repurchases, helping the practice gain widespread popularity. By 2004, companies were spending 1.3 times more on buybacks than on dividends. Since then, buybacks have generally remained the preferred method of returning capital to shareholders, exceeding dividend payments in most periods outside of recessions.

Downsides to buybacks include the fact that they are discretionary and they do not always occur when they make the most sense for shareholders. A McKinsey study found that companies frequently increased repurchases as share prices were rising and reduced them when prices fell. In other words, companies can end up buying more shares when they are expensive and fewer when they are cheap. That makes it important to distinguish between companies generating sustainable cash flow and those relying on buybacks to support earnings per share or investor sentiment.

Taken together, these developments do not guarantee that the stock market will decline in 2027, and Jones's bearish outlook is still only one perspective. However, the combination of elevated valuations, potentially peaking profit margins, slowing earnings growth, historically low dividend yields, and a possible surge in new share issuance deserves attention.

Market Risk Looks as High as It Did During the 2021 Meme Stock Craze

I recently came across a few interesting headlines in The Wall Street Journal that got me thinking about the current market environment. One of the key takeaways was simple: Data is everywhere. Intelligence is not. I think that statement does a great job of explaining why the market has become so speculative and why investors need to be careful about what they are paying for stocks.

Investors today are overwhelmed with information from financial television, newspapers, websites, and especially social media, where it can be difficult to determine who is providing the information and what their motivations are. Having access to more data does not necessarily make someone a better investor. What matters is knowing which information is important, how to interpret it, and how to use it to make sound long-term investment decisions. Plenty of intelligent people invest in the market, but they can still focus on the wrong things, chase recent performance, and overlook the fundamentals that ultimately determine a company's value.

One area that has me concerned is the level of speculation taking place in individual stocks. The notional value of options tied to individual stocks is currently around $700 billion per day. To put that into perspective, the last time we saw this kind of options activity and speculative behavior was during the 2021 meme stock craze, when companies like GameStop and AMC Entertainment became the center of attention. Another warning sign is the growing popularity of short-term bets. More than 50% of the notional value of single-stock options is now concentrated in contracts expiring in less than two weeks. That suggests many investors are focused less on the long-term value of businesses and more on predicting short-term price movements.

Remember Roaring Kitty, the online personality Keith Gill who became famous during the GameStop frenzy? His story was a defining moment of the 2021 meme stock era. He has largely disappeared from the spotlight, making it difficult to know what he is doing these days. He also appears to have maintained a significant position in GameStop, despite the stock delivering a negative 40% return over the past five years. GameStop remains a reminder of how disconnected a stock's price can become from its underlying business fundamentals when speculation takes over. Yet many investors appear willing to chase the next big opportunity without asking whether the price they are paying makes sense.

What makes this particularly concerning is the broader economic and geopolitical environment. The 10-year Treasury yield is above 5%, oil is trading around $100 a barrel, and the war in Iran continues on. These are meaningful risks that investors should be considering when valuing businesses and determining what they are willing to pay for future earnings. However, much of the market's attention seems concentrated on artificial intelligence and recent stock performance, rather than the possibility that higher interest rates, energy costs, or geopolitical uncertainty could weigh on corporate earnings and valuations.

This also helps explain why the market can become so concentrated in a relatively small number of companies. Investors have access to an enormous amount of information about AI, the latest earnings reports, and the companies making headlines. But knowing which companies are benefiting from AI is not the same as knowing whether their stocks are attractively valued. A great business can still be a poor investment if you pay too much for it. When investors focus on exciting narratives and recent returns instead of valuation, they can push prices to levels that are difficult to justify based on fundamentals.

My concern is the higher the market climbs, the greater the potential for a painful decline. That does not mean a correction is imminent, and elevated options activity alone cannot tell us when one might occur. However, it does suggest that speculative behavior is becoming an increasingly important part of the market, and investors should be aware of the risks they are taking.

Our approach has always been to focus on the fundamentals, look for companies trading at reasonable valuations, and avoid paying excessive prices simply because a stock is popular. We want to understand how a business makes money, whether its balance sheet is strong, how sustainable its dividend is, and what we are likely to earn over the long term based on the price we pay today.

The problem is that this approach can seem boring when other investors are making quick money chasing the latest trend. But investing is not about having the most information, predicting every short-term move, or owning whatever has performed best recently. It is about using the right information to make intelligent decisions about the value of a business.

If you are participating in the market by betting on short-term price movements, chasing AI stocks simply because they are going up, or buying companies without considering their underlying value, do not fool yourself into thinking you are investing. At that point, you are taking speculative risks that look a lot more like gambling. And when speculation reaches unsustainable levels, investors can quickly discover that the risk they were taking was much greater than they realized.

Stock of the Week: Levi Strauss (LEVI)

Levi Strauss has been around for generations, and while denim may not be the most exciting business, we like the company’s brand recognition and believe there could be an opportunity in the stock at the right price.

One thing we like is the CEO, Michelle Gass. We believe she has a good understanding of the business and where the company needs to improve. Levi has been working to expand beyond its traditional wholesale business and grow its direct-to-consumer sales, while also investing in its core Levi’s brand and premium products. Direct-to-consumer accounts for close to 50% of the business, which I was surprised by. The latest quarter showed some mixed results, but we like the direction management is taking the company.

For the third quarter, revenue increased roughly 4% to $1.61 billion, coming in slightly below Wall Street expectations of $1.62 billion. Adjusted earnings per share were $0.37, beating estimates of $0.36. Wholesale revenue increased 6%, while direct-to-consumer revenue grew just 2%, with comparable sales roughly flat. Management acknowledged that direct-to-consumer performance fell short of expectations and said it has already taken steps to improve results.

The company also raised its full-year adjusted earnings guidance to $1.54–$1.56 per share, up from its previous range of $1.46–$1.52. However, it lowered its full-year net revenue growth outlook to 7%, the bottom of its previous range. One important caveat is that tariff refunds provided a meaningful boost to profitability. Those refunds contributed approximately $0.16 per share to earnings, so we need to be careful not to assume all of the recent earnings improvement is sustainable.

Looking further ahead, we like the projected growth. Analysts expect sales to increase over 7% this year and more than 4% next year, while earnings per share are projected to grow 16.9% this year and another 6.8% next year. If the company can deliver on those expectations while improving its direct-to-consumer business, there could be room for the stock to appreciate.

The dividend is another positive. Levi offers a yield of around 3%, and the company uses less than 40% of both earnings and free cash flow to fund the payout. That leaves a reasonable cushion to maintain the dividend and potentially increase it over time. We also like the balance sheet, with debt-to-equity around 100% and a current ratio of approximately 1.6, which suggests the company has a manageable debt load and adequate short-term liquidity.

When looking at valuation, we would calculate a target sell price of $27.72 using November 2027 expected earnings per share of $1.67 and our preferred valuation multiple of approximately 16.6 times earnings.

The risks are worth watching. Tariff refunds have helped recent profitability, U.S. sales were down 1% in the latest quarter, and the direct-to-consumer business needs to perform better. We also want to see that future earnings growth comes from the underlying business rather than temporary benefits.

Overall, LEVI is a company that looks interesting at the right valuation. We like the brand, the CEO, the expected earnings growth, the manageable balance sheet and the dividend. As always, we want to buy at a price that provides a reasonable margin of safety rather than simply buying a recognizable name.