Submitted by QTR’s Fringe Finance

I recently talked to Adam Taggart of Thoughtful Money and gave him my comprehensive take on all things macro, markets, and the fragile psychology underpinning both. The video is at the bottom of this post.

My goal was to get a full hour of telling you the things directly to your face that the cowards and hapless sell side imbeciles on financial media won’t tell you to your face — at least until the shit hits the fan and they are begging for market shutdowns and running off the newsdesk like they are having an impending bowel movement.

The charts that accompany many of my points in this interview can be found here.

What I Argued On The Show

I opened by pointing out where we are in this cycle: “we’ve got a stock market at all-time high valuations.” On multiple measures—market cap to GDP, Shiller PE, and others—we’re “either at or damn close to all-time highs.”

I argued this isn’t about fundamentals anymore. Instead, the tape is dominated by flows and mechanics. A narrow group of companies—Nvidia, Tesla, Amazon, Microsoft—have outsized influence. The buying that props them up, in my view, is coming from “an incessant passive bid” and from “options gamma” that forces dealers to buy stock whenever calls are purchased.

That dynamic has been amplified by a new generation of market participants. I described “an entire generation of young… speculators” who only know options. If you scroll WallStreetBets, I said, “every post… the wins and the losses are options.” Mechanically, that matters because when retail piles into calls, dealers have to buy the underlying shares.

Overlay that with two decades of monetary policy rescues and you get a mindset where “people just believe nothing bad can ever happen.” My conclusion: “we have a pornographically overvalued market” and a “batshit insane investor psychosis” sitting on the edge of reality.

Why The Jobs Data Matters For Markets

The recent labor data was, in my words, “one of the first real clarion calls” that the economy is slowing. But the importance goes beyond economics. The passive machine is directly linked to employment. When people lose jobs, they turn to “brokerage and retirement accounts” for liquidity. Many funds don’t hold cash to meet redemptions, so they would “become sellers of stocks.” That’s when “the machine that’s been going one way for 25 years” could suddenly “start to go in reverse.”

That’s also when valuations will matter again. I said, “no one cares about historical PE when passive flows keep buying,” but when redemptions force selling, everyone will drag out the charts and remember that the historical mean is closer to 16x earnings, not 38x.

Positive Real Rates As A Time Bomb

I said that “positive real rates” are “like putting a time bomb into the plumbing of the economy.” It just takes time for the pressure to work its way through. Then “you start to see cracks”—first in discretionary spending, then “credit card delinquencies, then auto loan delinquencies,” and eventually housing.

Student loans make it worse. The delinquency line “just shoots straight up.” Re-imposing a monthly bill that didn’t exist for five years “right as the economy is starting to crack” is “pushing the snowball down the hill faster.”

The Jenga Tower Economy

I compared the system to a house that’s been added onto for decades. Every policy tweak has been another addition, until “our little house has become this mile-long, top-heavy monstrosity.” Now it’s one loose block away from collapse, like a Jenga puzzle.

That block could be commercial real estate and the regional banks that financed it. I warned there’s “a ton of… subprime crap… that hasn’t been marked and even ‘AAA’ pieces are wobbling.” The Sillicon Valley Bank episode showed how quickly confidence can vanish.

The other candidate is the bond market itself. I said there will be a point when “the bond market really does crack up,” and then “there’s nothing left other than for the Fed to step in and start buying bonds”—QE or even yield curve control.

What Happens When Policy Arrives

If and when the Fed steps in again, it will be confronting a more skeptical public.

During COVID, memes about “money printer go brrr” turned policy into a joke. Next time “the print will be larger,” but now more people understand the game—thanks to Bitcoin, memes, and lived experience with inflation.

That’s why I said the path looks like this: “we’re doing 100 miles an hour right now; we’ll slam on the brakes down to 20,” and then after the rescue, “we’re going up to 300.” Translation: a sharp deleveraging, then an inflationary aftermath.

How I’m Positioned (Not Financial Advice)

I told Adam that I “love to own gold… sound assets… things that can’t be printed.” I prefer world markets to U.S. equities, and I keep diversified both in and out of the dollar—gold, gold miners, silver, silver miners, a little Bitcoin, and a little real estate.

This isn’t a recommendation; it’s my approach. My one rule of thumb is universal: “if you don’t understand it, don’t invest in it.”

I stressed that the bigger risk is psychological. Investors have been coddled by policy and by financial media. Even a 30% drop followed by ten years of sideways grinding would be a “psychological death march” that many aren’t prepared for.

That’s why I said that the next crash could “push us out of our financial safe space.”

Markets now demand both equity analysis and psychological analysis. As I put it, “bad news isn’t just bad news. Bad news is good news when people expect stimulus.”

When flows reverse, that mental model will reverse too.

Where I Net Out

To sum it up: we are at “a truly unprecedented jumping-off point.” Positive real rates are eroding the cushion. Delinquencies are rising. Student loans are back. Breadth is deteriorating even as a few giants levitate the indices. The economy is grinding to a halt while markets are pricing perfection.

I’m preparing for “violent repricing,” followed by a massive money print.

As always, read my disclaimer and be sure to pressure-test your own thinking and decisions with your own financial advisor.

Here’s my hour with Adam:

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.

This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions. All positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. If you see numbers and calculations of any sort, assume they are wrong and double check them. I failed Algebra in 8th grade and topped off my high school math accolades by getting a D- in remedial Calculus my senior year, before becoming an English major in college so I could bullshit my way through things easier.

The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.

*  *  *

Reminder: Secure your order by Sunday night for Wednesday delivery