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Beneath the Surface

Crash Alert: Priced for Perfection in an Imperfect World

Loading ...John Rubino

December 12, 2024 • 51 second read


crisisgoldInflation

Crash Alert: Priced for Perfection in an Imperfect World

By John Rubino, John Rubino’s Substack

 

The last few US inflation reports have been ominous, with the general trend morphing from sharp decline to gradual increase. Here’s the Core Services index, which is now rising at a 4% annual rate:

Stocks, meanwhile, are priced for perfection, with the second highest price/earnings ratio on record:

Investors are getting cocky, as evidenced by the soaring popularity of leveraged ETFs:

And gold has shaken off its post-election correction and is now threatening its all-time-high:

Can the Fed keep easing into all this?

Today’s stock market enthusiasm is based in part on the expectation of ever-easier money for the balance of the decade. But can the Fed really deliver this in the face of soaring financial assets, off-the-charts speculation, and rising general inflation? Wouldn’t that spike inflation? Probably. So at some point in 2025 the Fed will have to stop lowering rates.

What happens then? Well, check the above P/E chart for what became of the last few priced-for-perfection markets.


Private Credit’s Creditanstalt Moment

November 17, 2025 • Andrew Packer

The market seems to know something about private credit that we don’t. And in a big enough liquidity event for private credit, investors will have to sell off more liquid assets if they want capital.

That’s the danger private credit poses today, exactly at a time when rules are being eased to make it easier for retail investors like us to buy into this asset class.

I’m in the camp that this smells like a way to keep the party going by providing another source of liquidity – the passive investment flows from your regular 401(k) contributions. The smell takes on a sour note as this sector starts to falter.

Perhaps today’s selloff is simply a reaction to declining interest rates, the growth of private credit, and a few inevitable deals that have gone sour recently.

Private Credit’s Creditanstalt Moment
The Tariff Gobstopper

November 17, 2025 • Addison Wiggin

More money sloshing around in the system means daily life has gotten more expensive. Not rocket science.

We’ve all observed certain goods — TVs, laptops, the gadgets we don’t need but buy anyway — keep getting cheaper, often while getting better.

But the Big Four killers of household budgets:  healthcare, housing, childcare, and education, are marching upward like a military parade.

Add Biden-era price-level stickiness and Trump-era tariffs whose full effects haven’t even landed yet, and you get the stew voters have been choking down.

The Tariff Gobstopper
Strain Hits the Credit Markets

November 17, 2025 • Addison Wiggin

Credit default swaps (CDS) are a tool that measures the cost to insure against a company’s debt.

A soaring CDS suggests that investors are demanding a higher return. The implication? That debt isn’t as safe as it may appear.

It’s also a sign that the liquidity crisis and dangers in the private credit market are starting to show up in the mega-cap companies that are raising debt to invest in AI and data centers. And if that starts a slowdown, it could mean that the stock market hits the brakes.

Strain Hits the Credit Markets
Peter Thiel: Capitalism Isn’t Working For Young People

November 14, 2025 • Addison Wiggin

I’m obviously very biased against socialism. I don’t think socialism has solutions to these problems. I don’t think Mamdani particularly has solutions. I don’t think you can socialize housing. If you just impose rent controls, then you probably have even less housing, and eventually, it’s even more expensive.

But to Mamdani’s credit, he at least talked about these problems. So my cop-out answer is always to say: The first step is to talk about the problems, even if you don’t know what to do about them. There’s been a failure of, let’s say, the center left-center right establishment to even talk about them.

Peter Thiel: Capitalism Isn’t Working For Young People