HX Weekly: August 4 - August 8, 2025

Hello reader, welcome to the latest issue of HX Weekly!

So, what's HX Weekly all about?

Each Friday, we bring you a new edition of HX Weekly that includes three distinct sections.

In the first section, Thoughts on the Market, we'll offer insights into current economic and market news.

In the second section, HX Daily Redux, we'll revisit investing concepts, tactics, and more from past issues of HX Daily.

And in the third section, Market Wizard’s Wisdom, we’ll share thoughts, quotes, and theories from the greatest investing minds of all time.

Now, let's dive in!

Thoughts on the Market

Our SECOND Most Important Note of the Next Five Years

I (Enrique Abeyta) have been doing this for a long time!

My first interest in the stock market began when I was 16-years old or 36 years ago. A couple of years later, I arrived at Wharton and began my intensive study of the markets.

My first full-time job on Wall Street (Lehman Brothers) start almost exactly 30 years ago today. Just two years later, I would join a money management firm and would be managing a quarter of billion dollars by the time I was 26 years old.

It is quite accurate to say that following the markets is my life’s work.

One of the benefits of having done it for so long is the ability to look back at my experiences from over these decades and see similarities.

In particular, the periods of crisis that we have seen in the market that have had the most impact.

I operated as an active money manager though the financial crisis of both the Internet Bubble (1999 to 2002) and the Global Financial Crisis (2007 to 2009.) Not to mention the many smaller crises in between.

What was unique about those two major crises, though, was the magnitude. In both, the S&P 500 was cut in half, and the more volatile NASDAQ composite went down even further.

In looking back at why these periods were so bad in the stock market, the reason was because we saw excitement about a very legitimate trend result in vast overspending in the real economy. This also lead to massive excesses in the capital markets. Both in stocks and lending markets.

The first of these crises was set up by excitement about the Internet. As we sit here twenty-five years later, every one of the most optimistic views on the success of the internet has been achieved. In fact, we have probably seen five to ten times the most optimistic predictions.

The second of these crises was set up by excitement about a long-term shortage in housing in the United States. This one has not had as much time to age as the Internet, but we STILL have a shortage, and prices are STILL well above the pre-GFC highs.

We now believe we can clearly see the NEXT crisis that will cut the stock market in half.

We don’t say this lightly as we have not made this kind of call at any point in the last fifteen years. TODAY we are making it.

We believe that the capital investment cycle around the (legitimate) excitement around the AI Revolution has reached a point where it will set us up for the next crisis.

It has now had a massive impact on the real economy. It also is setting up with the same sort of excesses we have seen in both the equity and debt markets.

We are as certain of any call in our career that the crisis IS coming.

We are sure over the next few years that we will be writing about it extensively.

We have some good news for our readers though!

First, we have seen this play before, and we recognize how it can evolve.

We also have access to incredible resources.

As an example, we recently read an OUTSTANDING article by technology writer Ed Zitron and posted it to my X/Twitter account. Here it is…

We mean what we wrote in the post! As soon as you finish THIS article, go to Substack and check out Ed’s note.

It will show you the same kind of market structures that we saw in both of the prior crises and how they are developing.

The second piece of good news for our readers is that I know how to MAKE MONEY during these crises. I have successfully done it through every one of them dating back to 1998.

Our readers through our various publications (HX, Signal Trader Pro and Paradigm Press) can follow me and we can help them navigate these periods. Not just by conserving your capital in the volatility but growing it.

We will end this note today by referencing the title we wrote above – this is the “SECOND” most important note we will write over the next half decade.

We now can see the storm that is coming. We are 100% sure it IS coming.

What we don’t know is when…

The final piece of good news, though, is that our more than three decades of experience has taught us how to recognize when the crisis period begins.

It is tricky because some of the biggest gains in the stock market cycle come right before the end. Rest assured, we are ready and prepared to help our readers benefit from those AND thrive in the forthcoming crisis.

We will let you know when to be ready…

HX Daily Redux

Sam Bankman-Fried Version 2.0: Beware of False Idols – Tune Out the Noise

In light of our views of the evolving crisis, we wanted to share a note about a company and an entrepreneur we think is GROUND ZERO for the Bubble.

Here is an article we ran back in October of last year. Enjoy!

At HX Daily, we typically talk about companies and stocks, however we don’t normally dive into insider industry news. However, occasionally, the actions of specific business leaders are so impactful that they affect markets and investors like you.

Over the past few years, Silicon Valley drama has resembled a winner-takes-all dramatic series like Billions or Game of Thrones.

An immense concentration of capital surrounds a small circle of people whose activities and decisions have the power to affect everyone.

Right or wrong, Silicon Valley business leaders like Elon Musk, Mark Zuckerberg, Larry Page, and others have become household names and celebrities.

OpenAI CEO, Sam Altman, is one of the main characters in this ongoing drama. We will examine his background and offer our perspective on his broader importance to investors.

Sam Altman was born in Chicago in 1985 to a dermatologist mother and a real estate agent father. He received his first computer at eight and quickly learned to code and take apart hardware.

After 2 years studying computer science at Stanford, he dropped out and founded his first company, Loopt, in 2005 at 19.

In 2011, he became a partner in the famed startup incubator Y Combinator.

In 2012, he co-founded Hydrazine Capital, and in 2015, he co-founded OpenAI with Elon Musk, Peter Thiel, and other Silicon Valley luminaries. As you most likely know, OpenAI is the company behind ChatGPT.

This isn't about ChatGPT or even AI, but rather the cult of personality surrounding Sam Altman, a business leader who people think has the Midas touch.

In 2023, Time Magazine named Altman one of the 100 most influential people in the world.

Behind the constant and primarily positive media onslaught surrounding Altman hides a more nuanced and, some would say, problematic story.

Few will recall that in 2020, Y Combinator fired him for appointing himself Chairman without authorization.

More recently, in November 2023, OpenAI’s board ousted Altman as its CEO for being “not consistently candid in his communications with the board” before reinstating him following an intra-company employee revolt.

In fact, many controversies surrounding Altman resemble patterns displayed by notorious former Silicon Valley royalty like Sam Bankman-Fried (FTX) and Elizabeth Homes (Theranos).

All three founded companies at very young ages.

All three rubbed elbows with Valley legends like Musk and Thiel.

Politicians, market pundits, and the media at large crowned all three as future kings and queens of the business world.

In addition, rumors of impropriety have surrounded all three.

We're not saying that Sam Altman is the same as SBF or Holmes, or that he has done anything wrong. We’ll leave that for the market to decide.

So, you may be asking how this affects me as an investor?

We believe Altman's story offers a classic and cautionary tale.

After all, SBF and Holmes ended their stories by obliterating billions of dollars of investor capital. The moral of their story is don’t believe in FALSE IDOLS.

The great thing is that America's system works, and people like Holmes and SBF do not last. Capital always eventually flows to legitimate winners in the marketplace.

As we always recommend at HX Research, when considering a new investment, DO THE WORK. Focus on a company's fundamentals, such as earnings per share and profitability, and tune out the NOISE from the media and market pundits.

This is a solid perspective for both the markets and life in general!

Market Wizard’s Wisdom

The Intrepid Short Seller: The Wisdom of Herb Greenberg

While our prediction is that we are going to see one of the best times to be SHORT stocks in the last twenty years in the next few years, right now is a terrible time to short them.

As we said above, the final phases of a BULL market are often when we see the most explosive returns.

When eventually, however, we do enter into the next BEAR market there are a select few out there who can help you make the most of it. One of those is our esteemed former colleague Herb Greenberg.

In anticipation of the AI Crash of 202?, here is some of Herb's wisdom on the markets. Enjoy and stay safe!

We have been lucky to meet and work with some incredible folks in our thirty-year career. One of the best is my old friend and colleague, Herb Greenberg.

Many of you are probably familiar with Herb.

He began his career as a journalist more than forty years ago and, after several stops, built a great franchise as a business reporter for the San Francisco Chronicle. He built a reputation there for doing critical reporting (and research) on the many "questionable" companies emerging during the bubble.

This attracted Wall Street's attention, and Jim Cramer eventually recruited him to his upstart financial website, TheStreet.com.

This was in 1998 when Herb and I first met. Just a year earlier, I had started as an analyst and was already a portfolio manager working on a $25 million hedge fund and $3 billion of long-only money.

While most of our assets were long only, my specialty was focusing on the short side for the hedge fund. This brought Herb and I into close contact because there was NO ONE in the media discussing shorts in any way. We soon became good mutual contacts and built a friendship.

Across the next two decades, Herb would continue to evolve his career, moving on to create a short-focused research firm. We were one of his clients!

Finally, just a few short years ago, Herb joined Whitney Tilson and me at our former newsletter company, Empire Financial.

Herb and I have known each other for more than twenty-five years, and I continue to be impressed by him.

Not only is he super bright, but he has an incredible work ethic. I'm not sure how he does it, but it feels to me like he puts in a LOT of hours!

The output of all that work is also consistently excellent. He combines a critical viewpoint with a healthy dose of plain common sense. It is a rare combination.

Recently, he joined several intelligent and experienced investors to create a new company called Wall Street Beats.

Imagine a group of seasoned veterans gathering daily to talk about their views on the markets and what they are doing in their portfolios. Except you have a seat at the table and can hear all their insights.

He has lined up an incredible group of folks, and I think it is a terrific opportunity for investors. Again, you should check it out and subscribe.

Last week, we had the privilege of having Herb on the HX Podcast. We went through our long history and shared some stories about the past, but the last few minutes of the podcast were the most important.

(By the way, you can watch it on YouTube here.)

On the HX Podcast, we like to ask our guests a few (three to five) pieces of advice they would give folks interested in investing but don't have the benefit of their years of experience.

In answer to this question, Herb had some powerful advice!

His advice? As an investor - KNOW YOURSELF.

Understand what your goals are, what your risk tolerances are, and what your comfort levels are.

Herb has a fascinating juxtaposition where he has been willing to take huge risks in his career, but he is very conservative as an investor.

He built an excellent portfolio of recommendations at our former firm that performed very well. They all were well-established businesses with deep moats and strong cash flow, and that paid dividends.

Herb built a portfolio of stocks that reflected his tolerances. It was a portfolio that also did great.

Here is what he said on the podcast…

“…what I said here is very basic, but you know what? I think I have a decent finger on the pulse of the average guy. And I can tell you that people get carried away. And the reality is, I come back to know what your risk tolerance is. And if your risk tolerance is that you love to be in the game, it's going to be very different than me. But you know what the reality is? There's no right or wrong way to it. There's zero. There's no right or wrong way to invest and make money.”

Where investors make big mistakes and do real damage to their wealth is when they think they are one type of investor, but they are really a different type. THIS situation leads to permanent capital loss and can set folks back.

We strongly encourage you to check out Herb’s work. Follow him on Twitter, subscribe to his newsletter on Substack, and sign up for Wall Street Beats.

You rarely find someone with this experience, critical insight, and plain old common sense. I am honored to have him as a colleague and friend.

Check out Enrique Abeyta’s conversation with Herb Greenberg of Wall Street Beats on the HX Podcast. 

We hope that you’ve enjoyed this week’s issue of HX Weekly…

Do you have any thoughts, questions, or feedback? Tell us more in the comment section or at [email protected].