Fragile Investors, Fragile Markets

Submitted by QTR’s Fringe Finance

This past weekend I joined internationally acclaimed journalist, news anchor, and producer Michelle Makori for a wide-ranging conversation on markets, monetary policy, and the future of global finance.

Our discussion dug deep into market valuations, The Fed, gold, bitcoin, where I see value in the markets and other general uncomfortable truths most investors don’t want to hear — and why I think the next five years in the U.S. markets may look unlike anything in living memory. I pointed out one name that is up 13% already from the interview, which took place on Sunday, and reviewed my list of 25 names for 2025 and other names I find interesting heading into the back half of the year.

I opened the conversation with a stark warning: “I don’t think the next five years in the U.S. are going to look like anything of years past. The market could potentially have a seismic enough pullback that it is going to, and I wrote this, break the brains of the very fragile market participants that we have created today through monetary policy.”

I wrote about this earlier this year in This Next Market Crash Will Break Our Fragile Brains.

The idea that investors are psychologically unprepared for a prolonged period of pain framed much of our dialogue. Too many market participants, I argued, have been conditioned by years of Fed backstopping and relentless market cheerleading.

That complacency, I said, could prove fatal when the tide finally goes out.

Michelle pushed me on whether I thought we could see an actual 40–50% pullback, and my answer was that the catalyst doesn’t have to be obvious ahead of time. “These black swans come out of nowhere and we again have leverage on top of nonsense, on top of valuations, on top of relentless market cheerleading.” History has shown that cracks in the system often remain hidden until the moment they explode into full view.

Much of our conversation revolved around the Federal Reserve and how its actions have warped natural market mechanics. I argued that the Fed has been “working the gas and the brake at the same time,” floating the idea of rate cuts despite inflation still running above target. “The notion that they’re entertaining interest rate cuts in an environment like this shows they’re not really concerned about price stability at all.” Investors may cheer every dovish hint, but I warned that many of the worst crashes in history began only after the Fed’s first rate cut.

We also discussed the distortions of passive investing and options-driven flows. Instead of fundamentals driving the market, I explained, ETFs and options hedging have created artificial bids that keep valuations inflated, as I wrote in The Passive Bid Crash Awaits.

“You have a $2 trillion crypto air pocket with leverage layered on top of all-time high valuations which are being driven by major market mechanics that have nothing to do with common sense fundamentals.” In that environment, a sudden air pocket or credit event could easily turn into multiple “limit-down” days.

This is a thesis I explained first in Crypto Will Cause The Next Trillon Dollar Crash, which I published just days ago. 

Michelle pressed me on what a prolonged sideways market might look like, and I made it clear that this scenario could be just as devastating as a sudden crash. “Maybe we just crash 20% and stay there for 10–15 years. That’s also a distinct possibility and I don’t think anybody psychologically, including the new horde of investors now in the market, is prepared for it.”

A generation raised on Robinhood options trading and passive ETF flows has no concept of markets that grind sideways for decades, as happened in Japan, I noted.

Still, I wasn’t purely bearish. We talked about the sectors I remain constructive on, such as gold miners, uranium, oil companies, and select emerging markets. Gold in particular, I argued, is more relevant than ever. Michelle asked when I would think about selling gold miners, which are up about 80% this year. I told her:

“When will I think about selling gold? I’ll think about selling gold when the people on CNBC can’t stop talking about it. And that hasn’t even happened because they—the reverse Cramer index, right? When Cramer tells you to buy gold.”

Despite strong performance this year, I believe miners remain undervalued, especially given the likelihood of a monetary reset.

That led us into a broader discussion of geopolitics and national security. I explained why I think the Trump administration’s strategy of taking stakes in critical companies is just the beginning. “If we return to some type of gold standard, the miners would eventually be nationalized. So here’s 73 other companies that the government might want to keep close if this is what their playbook is going to be.”

I wrote my list of 75 Critical U.S. Public Companies that the government may get close to just days ago. From rare earths to semiconductors to cybersecurity, the U.S. appears to be moving toward closer control of strategic industries.

Ultimately, my message was that the U.S. is in unprecedented territory. Monetary policy has gone so far off course that at some point a reset is inevitable, likely tied to gold and possibly Bitcoin.

“One thing I think is for sure is nobody’s ready for it.” Whether the reckoning comes as a sudden crash, two decades of sideways trading, or a global monetary reset, investors lulled into complacency by years of easy money are unlikely to weather it well.

You can watch our full 2 hour long chat here:

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.