Analysis of November 2025 Newsletter: 2025 Market Upsets and Speculative Investing Dynamics

This analysis is based on the November 2025 monthly newsletter published on Seeking Alpha [1]. The report identifies 2025 as a year marked by market upsets, where retail investors (referred to as “dumb money”) outperformed institutional investors, driven by AI hype and social media-fueled stock promotions. Over the past six months, unprofitable small-cap companies rose approximately 45%, while their profitable small-cap peers gained less than 5% [1]. Market data [0] shows that while the Russell 2000 small-cap ETF (IWM) gained 16.12% and an AI ETF (AIQ) gained 20.06% over the same period, these broader indices do not fully capture the outsized performance of the unprofitable small-cap subset (likely excluded or underrepresented in AIQ, which may include larger AI firms). Meme stocks such as GME and BBBY exhibited extreme price volatility—for example, BBBY had a 118.20% price range—disconnected from fundamental performance [1][0]. The newsletter also critiques trillion-dollar AI valuations as risky due to unproven profitability and high capital expenditures dependent on bond market support [1].

1. Social Media’s Role in Speculation
   : The democratization of information via social media enables coordinated retail buying, challenging traditional institutional investment strategies [1]. This shift has allowed “dumb money” (retail investors) to drive short-term outperformance in speculative stocks.
2. AI Sector Vulnerability
   : The AI industry’s inflated valuations are highly dependent on bond market conditions. A rise in interest rates or weakening bond market support could lead to significant corrections [1].
3. Small-Cap Market Inefficiency
   : The stark performance gap between unprofitable (45% gain) and profitable (<5% gain) small-caps over six months highlights a temporary market inefficiency driven by speculation rather than fundamentals [1][0].

• Risks
  : Speculative bubbles in unprofitable small-caps and AI stocks pose downside risks, especially if hype fades. Meme stocks like GME and BBBY carry extreme volatility disconnected from fundamentals [1][0]. Systemic risks exist if AI companies’ high capex needs are no longer supported by the bond market [1].
• Opportunities
  : The newsletter’s authors recommend long-term investment in proven, profitable companies as a reliable strategy for wealth building, which remains viable amid short-term speculative trends [1].

The newsletter defines “dumb money” as retail investors or those making decisions based on emotion/short-term trends, contrasting with “smart money” (institutional investors) using sophisticated analysis [1]. Written by David Baskin and Barry Schwartz, lead portfolio managers at Baskin Financial Services, the report emphasizes the importance of fundamental analysis to avoid temporary price bubbles [1]. Market data [0] corroborates meme stock volatility and broad small-cap/AI outperformance, though the article’s focus is on the unprofitable small-cap subset not fully represented in major ETFs.