What Lies Behind Extreme Fear: How I'm Reading This November 2025 Market Downturn

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What Lies Behind Extreme Fear:

How I'm Reading This November 2025 Market Downturn

Thursday morning, November 14, 2025. I arrived at my convenience store, poured myself a glass of water, and opened my portfolio.

Tesla, despite being bought at a good price, was seeing its returns steadily decline. UnitedHealth Group was the same. My ETFs had all dropped a few percentage points from the day before. I wasn't in the red. But the upward momentum I'd seen for months had vanished. The market felt suddenly frozen.

I checked the CNN Fear & Greed Index. 21. "Extreme Fear" territory.

The VIX was hovering above 20, up from 18. The Nasdaq had dropped 2.3% in a single day. The S&P 500 was only 3% below its all-time high, yet the market atmosphere felt heavy—as if something major had broken. Investment communities were buzzing: "Is this the start of a real crash?"

In Korea, there's a clown meme that appears during market selloffs. The message is clear: "We're all gonna die!" I saw that meme everywhere.

I closed my portfolio and started reading the news. And I realized something. This wasn't panic. This was three negative catalysts hitting simultaneously. More importantly, all three catalysts were temporary.

First Catalyst: 43 Days of Data Blackout

From October 1 to November 12, 2025, the U.S. federal government shut down.

43 days. The longest government shutdown in American history. 800,000 federal employees entered unpaid furlough, and the economic indicators the market relied on most simply weren't released. October PCE inflation, employment reports, consumer sentiment... the data that served as the market's compass all disappeared.

The consequences were immediate. The Consumer Sentiment Index fell to 50.3—the lowest since 1952. Federal workers' paychecks were delayed, and approximately $670 billion in back pay accumulated. Cash piled up in the Treasury General Account (TGA), and short-term money market rates spiked.

The bigger problem was psychological. No data meant uncertainty. Markets hate uncertainty. Investors worried that "once the shutdown ends, all the bad numbers that have been hiding will pour out."

On November 12, President Trump signed the funding bill, ending the shutdown. But markets didn't feel relief. They felt more anxious. The fear was: "Now we'll see the real numbers."

I saw it differently.

The shutdown ending meant trapped liquidity would be released. The cash piled up in the TGA would start flowing into back pay, federal contracts, and small business support. Historically, a "relief rally" appears within 1-2 weeks after shutdown endings. By market close on November 13, futures were already rebounding 0.2-1.5%.

But the market wasn't convinced yet. Because the second catalyst had just hit.

Second Catalyst: The Fed's Hawkish Pivot

On November 13 and 14, Fed Chair Jerome Powell and other Fed officials began speaking.

"Inflation remains sticky."
"We need to see more data."
"A December rate cut is not guaranteed."

Markets froze. Just a month ago, the probability of a December rate cut was 96%. Within two days, it plummeted to 50%. A coin flip.

Watching the CME FedWatch Tool, I shook my head. This wasn't genuine hawkishness.

Powell's comments were "insurance hawkishness" coming from a data vacuum caused by the shutdown. The Fed was like someone driving in fog. Powell himself said, "When you're driving in fog, you slow down." This wasn't abandoning rate cuts—it was postponing them.

More importantly, once data starts coming out, labor market softening will likely be confirmed.

During the shutdown, flight delays increased 14%. Air traffic controllers were working without pay. According to Challenger, Gray & Christmas, October layoffs were the worst since 2003. ADP employment data also came in weaker than expected.

Once these numbers are officially released, I expect the probability of a December rate cut to recover to 70-80%. The market hasn't fully priced this in yet.

But the third catalyst was the most powerful.

Third Catalyst: Michael Burry's Bombshell

On November 4, Michael Burry's 13F filing was released.

That Michael Burry. The "Big Short" investor. The one who predicted the 2008 financial crisis. His hedge fund, Scion Asset Management, had purchased put options worth approximately $187 million on Nvidia and $912 million on Palantir.

Massive short positions against the two pillars of the AI boom.

Market reaction was immediate. Palantir dropped 9% in a day, 11% for the week. Nvidia fell 3-4% consecutively. Super Micro crashed 23%. Approximately $685 billion evaporated from AI-themed market cap.

But what Burry really attacked wasn't the stock prices. It was the accounting practices.

On November 11, Burry posted a lengthy thread on X (formerly Twitter). The core message:

"AI hyperscalers (Oracle, Meta, Nvidia customers, etc.) are artificially extending the useful life of server and data center assets to reduce depreciation expenses. Nvidia chips and servers have 2-3 year product cycles, yet they're calculating 5-7 years. This is one of the most common fraud tactics of the modern era."

He estimated that from 2026-2028, approximately $176 billion in depreciation would be understated. Oracle's profits could be overstated by about 27%, Meta's by 21%.

Palantir CEO Alex Karp immediately fired back: "Shorting the two companies that are actually making money—how does that make sense? It's batshit crazy."

I read both arguments. And I thought:

Burry's point is correct. But his timing is wrong.

AI infrastructure investment is genuinely overheated. AI startups with P/E ratios of 200-600x are everywhere. Palantir's P/E of 143x is the highest in the S&P 500. This is clearly a bubble.

But when the bubble bursts is a different question. Markets can remain irrational for a long time. More importantly, AI companies are actually making money. Nvidia's Q3 revenue grew 94% year-over-year. Palantir is in its 9th consecutive quarter of accelerating growth.

Burry's bombshell flushed out FOMO investors from the AI theme. Leveraged positions and options speculation got cleared. The stocks got lighter.

This is not a bad thing. We might even need to thank Burry.

In fact, when Nvidia, Meta, and Palantir beat expectations in the Q4 earnings season starting late November, a short-term 10-15% rebound is entirely possible. The market has already priced in the worst.

What I See: A Moment of Highlighted Negatives

On November 14, I opened my portfolio again.

Still red. But now I understood what this color meant. This wasn't panic—it was correction. Healthy correction.

What the market sees right now is only the negatives:

  • Data blackout from the shutdown
  • The Fed's temporary hawkish pivot
  • Burry's AI bubble warning

But what the market hasn't seen yet:

  • $2.5 trillion liquidity injection from shutdown ending
  • Labor market softening data → rate cut expectations recovering
  • AI theme overheating cleared → fundamentals-based revaluation

Right now, we're in a phase where negatives are highlighted. But as data gets released, positives will start emerging.

History tells us this. After the Fear & Greed Index falls below 20, the average 3-month return is +12.8%. When the Nasdaq corrects less than 10% from its peak, over 80% of cases resulted in new all-time highs.

Sectors Are Already Telling the Story

What's interesting is that markets are already moving.

While the Nasdaq dropped 5%, the Dow hit all-time highs. Healthcare rose +2.3%, financials +1.5%, industrials +1.8%.

This is classic de-risking. Money flowing out of risk assets into defensive sectors. This is a healthy signal that frequently appears at fear extremes.

My UnitedHealth Group holding is part of this flow. Tesla is correcting, but fundamentals will speak in the long term. My ETFs are absorbing volatility and finding balance.

I'm watching and waiting.

This isn't the time for panic selling or blind buying. It's time to watch the December data releases. Unemployment, consumer spending, inflation numbers will come out one by one. Those numbers will show the direction.

How I See This Downturn

November 2025's extreme fear came from an information vacuum.

The shutdown erased the numbers. The Fed spoke conservatively in the fog. In that information vacuum, Burry sent a bubble warning. Everything hit at once.

But the information vacuum will be filled.

The shutdown is over. Data will soon be released. The Fed will reassess based on that data. AI companies will speak through earnings.

I see this downturn as the middle stage of a classic cycle: "Overheating → Fear → Washout → Revaluation." When markets overheat, corrections come. When corrections come, fear comes. When fear comes, weak hands leave. Then the market climbs back up healthily.

Right now, we're in the "Fear" stage. Next comes the end of the "Washout" and the beginning of "Revaluation."

Looking at my portfolio, I think:

"This isn't a loss. It's still profit. The market is temporarily overreacting. The data will tell the story."

And I wait. I try to see the forest, not just the trees. You have to make that effort to see the market's overall flow.

Right now, the market is startled once by the Fed's hawkish tree in a foggy forest, and startled twice by Burry's shadow. Eventually, when the fog clears, I hope there's a peaceful path ahead.

(Of course, predictions can be wrong.)

References

  1. The Washington Post - "Trump signs bill to reopen government, ending longest shutdown in U.S. history" (2025.11.12)
    https://www.washingtonpost.com/business/2025/11/12/government-shutdown-vote-end/

  2. CNN Politics - "President Trump signs bill to reopen government" (2025.11.12)
    https://www.cnn.com/2025/11/12/politics/government-shutdown-funding-bill-house-vote

  3. CNN Business - "Wall Street has its worst day in a month as traders dial back expectations for Fed rate cuts" (2025.11.13)
    https://www.cnn.com/2025/11/13/economy/us-stock-market

  4. CNN Markets - "Fear and Greed Index"
    https://www.cnn.com/markets/fear-and-greed

  5. CNBC - "Markets no longer view the December rate cut as a sure bet" (2025.11.13)
    https://www.cnbc.com/2025/11/13/markets-rethink-december-rate-cut-amid-fed-doubts.html

  6. CNBC - "'Big Short' investor Michael Burry accuses AI hyperscalers of artificially boosting earnings" (2025.11.11)
    https://www.cnbc.com/2025/11/11/big-short-investor-michael-burry-accuses-ai-hyperscalers-of-artificially-boosting-earnings.html

  7. The Motley Fool - "'Big Short' Investor Michael Burry Just Placed a Big Wager Against AI Giants Nvidia and Palantir" (2025.11.10)
    https://www.fool.com/investing/2025/11/10/big-short-michael-burry-wager-ai-nvidia-palantir/

  8. Fortune - "'Big Short' investor Michael Burry follows up cryptic AI bubble warning with bearish stock activity" (2025.11.04)
    https://fortune.com/2025/11/04/big-short-investor-michael-burry-nvidia-palantir-puts-alex-karp/

  9. CME Group - "FedWatch Tool"
    https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

  10. NBC News - "Stocks tumble as hopes fade for December Fed interest rate cut" (2025.11.13)
    https://www.nbcnews.com/business/markets/stocks-fall-fed-interest-rate-cut-hopes-fade-rcna243751


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