CWS Market Review – August 11, 2026

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The U.S. Economy Lost 23,000 Jobs Last Month

Last Friday, the S&P 500 closed at a new all-time high of 7,757.64. Although the index did wander above that level on Monday and Tuesday, it wasn’t able to close at another new high. Since its recent low on March 30, the market has rallied more than 22%.

Will the rally continue? That’s hard to say, but we do know that the labor market has hit a rough patch. On Friday, the government released its jobs report for July, and it wasn’t very good. The report said that the U.S. economy unexpectedly lost 23,000 new jobs last month. Wall Street had been expecting a gain of 83,000.

The losses were driven by a drop of 53,000 government jobs. The jobs number for June was revised downward by 20,000, and the figure for May was lowered by 66,000.

Despite the number of jobs lost, the unemployment rate fell to 4.1%. That was partially due to fewer Americans looking for work. The labor force participation rate fell to 61.4%. That’s the lowest participation rate in five years. Except for Covid, this is the lowest labor force participation rate in 50 years.

Here are some more details from the report:

The drop was led by a 50,000-job decline in local government education and a loss of 19,000 retail jobs. Financial activities also posted a fall of 14,000 and leisure and hospitality lost 40,000, a possible consequence of the World Cup tournament ending.

Healthcare, which has been the leading sector for job creation, rose by 22,000, which was below its 12-month average of 36,000. Construction also saw an increase of 22,000.

Private payrolls did increase for the month, up 30,000 as government jobs declined by 53,000.

While jobs held flat, worker pay also saw virtually no gain during the month. Average hourly earnings increased by just 2 cents, bringing the 12-month average down to 3.2%, below the forecast increase of 3.5% and the lowest since May 2021.

That last part concerns me. The U.S. economy can run past just about any disruption, assuming worker pay continues to rise. If not, that means fewer shoppers which means lower revenue for businesses. Right now, average hourly earnings are barely keeping pace with inflation. Nearly all the wage gains folks are getting are eaten up by inflation.

Here’s a look at the dwindling pace of job creation:

We’ll learn more tomorrow when the government releases the CPI report for July. For July, Wall Street expects headline inflation to be up by 0.1% and core inflation to be up by 0.2%.

Last week, the Federal Reserve voted to keep interest rates unchanged. However, there were three dissenting votes from members who wanted to raise rates immediately. The recent jobs report isn’t helping them make their case.

The Fed’s next meeting is scheduled for mid-September, and futures traders are evenly split. Half are expecting a 0.25% rate increase while the other half expects rates to stay the same. Not too long ago, a September rate hike was widely assumed. Not anymore.

For the October meeting, the odds of a rate hike have risen to 63%. There are still a lot of doubters out there. It’s very possible that over the next year, the Fed votes to hike rates only one or two times.

Michael Burry Versus Palantir

You may be familiar with the name of Dr. Michael Burry. He’s a hedge fund manager who spotted the subprime mortgage crisis and profited enormously from the wreckage in the financial system. Burry was featured in both the book and movie The Big Short.

He’s had a new target in the form of Palantir Technologies (PLTR). Burry thinks the stock is overvalued. Very, very overvalued. Burry has said that over the long term, Palantir will be less than $1 per share. He’s been betting against Palantir since last year.

I must credit Burry for putting his money where his mouth is. He’s bought March 2027 put options in the mid-$100 range. Burry has already covered some of his short positions at $107, but he has opened it up again.

Is Palantir over-priced? Of course it is. PLTR is going for about 100 times cash flow. That’s nuts, but Wall Street loves nutty things. As we know, just because something is overpriced doesn’t mean it can’t or won’t become even more overpriced. Burry also points to a growing number of off-balance sheet items.

Burry had been running a hedge fund called Scion Asset Management which he later shut down. Now Dr. Burry mostly communicates with investors via his Substack, Cassandra Unchained.

Burry has criticized the high valuation of many AI stocks, but he’s been particularly critical of Palantir. He’s also criticized its business model and even its management team. He’s also highlighted the stock-based compensation that Palantir has used.

The problem for Burry, and his legions of followers, is that Palantir is doing very well. In its recent Q2 earnings report, PLTR said its revenues nearly doubled to $1.9 billion. The demand is being driven by heavy demand for its Artificial Intelligence Platform (AIP).

Over the last 12 months, Palantir has made about $3 billion on revenue of $6 billion. The company has a net margin of close to 50%. For this year, the company expects revenues of $8.1 billion and operating income of nearly $5 billion. The company has a ton of cash and zero debt.

Of course, Burry doesn’t need PLTR to fall to $1 to make a huge amount of money. Even if it gets to $100 or so, he’ll make a nice haul.

Palantir’s CEO Alex Karp has called the short position “super weird” and “batshit crazy.” (My apologies for the crude language, but this is Wall Street.)

Burry’s short bet has been highly volatile. Last Tuesday, the stock jumped more than 30% on very strong earnings. The stock has also done well after being praised by President Trump on Truth Social. At one time, the stock has been down more than 40% on the year. As of right now, it’s nearly flat on the year.

What’s my take? I’m not going near the thing. Burry is most probably correct that we’re in an AI bubble, but there’s always the issue of when the bubble will pop. Lots of people knew we were in a housing bubble, but the timing was hard to get right.

The most dangerous guru is not the guy who’s always wrong but the person who was once briefly correct.

Also, bubbles may not be the death knell of a stock. If you bought Amazon (AMZN) at the top, you would have lost 95% of your money, but the stock is still up 50-fold from its top.

I’m especially leery of shorting Palantir given its profitability. Shorting a rapidly growing company based on valuation does not seem like a sound strategy. I’m staying far away. By the way, Burry also owns Zoetis (ZTS) which is a former Buy List stock.

That’s all for now. The July CPI report is due out tomorrow morning. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on August 11th, 2026 at 6:07 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.