Crash Alert: Priced for Perfection in an Imperfect World

December 12, 2024 • 51 second read

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.

Daily Missive

Crash Alert: Priced for Perfection in an Imperfect World

John Rubino

December 12, 2024 • 51 second read

crisis gold Inflation

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?

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

The Tech Meltup, Exhibit A

September 16, 2025 • Addison Wiggin

Overall, the S&P 500’s RSI hit 70, the low side of overbought territory — for the entire index.

“Fed rate cuts tomorrow are likely priced in,” writes portfolio director, Andrew Packer, “it may not trigger a selloff, but at these levels, investors may be disappointed with a .25 cut.”

Tech investors will remain bullish on the prospect of multiple rate cuts over the next few meetings.

But be wary of any indication the Fed tries to rebuff Trump’s overtures and, God forbid, remain independent tomorrow.

Plowshares into Swords

September 15, 2025 • Bill Bonner

The empire is in decline. Demographics, regulatory tightening, fake money and the mis-allocation of trillions of dollars (much of it on pointless wars) have sapped the vitality of the economy. The Federal government gets bigger and bigger, but there is no longer enough output to pay for it.

The interest on the debt alone takes more more than a trillion dollars a year. The US faces a financial crisis. And for the first time in history, our children face a poorer future.

The welfare state model no longer works; the center — consensual democracy — wobbles towards the extremes. What to do? Beat our plowshares into swords?

The Shadow Fed Rises

September 15, 2025 • Addison Wiggin

A separate University of Chicago poll warned that political interference would push up U.S. borrowing costs and raise risk premia on government debt.

And yet, trust is draining away.

In 2001, amid the turmoil of the tech wreck meltdown on Wall Street, Gallup found 74% of Americans had confidence Alan Greenspan would “do the right thing.”

In 2025, only 37% say the same of Jerome Powell. For the first time since Trump and Powell shared the stage, more Americans trust Trump than Powell to steer the economy.

That does not bode well for Fed independence.

U.S. Government Spent 51% More Than It Took In Last Month

September 15, 2025 • Addison Wiggin

The government spent more than half of the money again, as much as it earned last month. Imagine how long spending like that would last if it were your family budget.

U.S. Government Spent 51% More Than It Took In Last Month

The Tech Meltup, Exhibit A

September 16, 2025 • Addison Wiggin

Overall, the S&P 500’s RSI hit 70, the low side of overbought territory — for the entire index.

“Fed rate cuts tomorrow are likely priced in,” writes portfolio director, Andrew Packer, “it may not trigger a selloff, but at these levels, investors may be disappointed with a .25 cut.”

Tech investors will remain bullish on the prospect of multiple rate cuts over the next few meetings.

But be wary of any indication the Fed tries to rebuff Trump’s overtures and, God forbid, remain independent tomorrow.

Plowshares into Swords

September 15, 2025 • Bill Bonner

The interest on the debt alone takes more more than a trillion dollars a year. The US faces a financial crisis. And for the first time in history, our children face a poorer future.

The welfare state model no longer works; the center — consensual democracy — wobbles towards the extremes. What to do? Beat our plowshares into swords?

The Shadow Fed Rises

September 15, 2025 • Addison Wiggin

A separate University of Chicago poll warned that political interference would push up U.S. borrowing costs and raise risk premia on government debt.

And yet, trust is draining away.

In 2001, amid the turmoil of the tech wreck meltdown on Wall Street, Gallup found 74% of Americans had confidence Alan Greenspan would “do the right thing.”

In 2025, only 37% say the same of Jerome Powell. For the first time since Trump and Powell shared the stage, more Americans trust Trump than Powell to steer the economy.

That does not bode well for Fed independence.

U.S. Government Spent 51% More Than It Took In Last Month

September 15, 2025 • Addison Wiggin

The government spent more than half of the money again, as much as it earned last month. Imagine how long spending like that would last if it were your family budget.