The Jenga Tower Economy Is Starting To Topple

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...(WATCH THE FULL INTERVIEW 100% FREE HERE).