This Next Market Crash Will Break Our Fragile Brains

Submitted by QTR's Fringe Finance

I always find it funny when I think about critics of people viewing the economy from an Austrian lens. The old joke is that “newsletter writers” like myself could never cut it managing a portfolio and, to make a living, need to scare people into reading and subscribing—not only to my view on the economy, but to my newsletter.

But at least for now the stocks I’m watching for 2025 are holding up this year (currently about +10.4% vs. the S&P +1.9% as of this weekend, on an equal weighted basis) and, as I’ve explained on countless podcasts, I write an Austrian-centric newsletter because it is derived from the basis of my core beliefs about the economy and the world of finance, as best as I can understand it.

In other words, I’m an Austrian school thinker first, and a “fear monger” second.

Take, for another example, my friend Peter Schiff. I know Peter well and believe him to be a person who is ethically beyond reproach and someone who comes by his steadfast views on free market capitalism honestly. He is constantly criticized as someone who is disingenuous in his economic beliefs because he happens to run a gold company. But I know the truth: he runs a gold company because it is based on his beliefs to begin with, not the other way around.

And let’s be realists for a second. Our “pessimistic” beliefs on markets and the economy—simply referred to by people like me as “reality”—are vastly outnumbered by the majority of perma-bull financial market participants: retail investors, institutional investors, sell-side analysts, corporate executives, financial media personalities, the government, central bankers, and almost every single other person that has some place in the global financial economy. Not unlike us “newsletter writers” that supposedly need to shill our beliefs to make a living, the majority of other people in the financial universe also need to shill their shit and their beliefs to hold up in order to make a living.

While us Austrians haven’t upended modern monetary theory just yet, every time the Fed can’t predict what inflation is going to do, and every time CNBC anchors and Wharton professors shit their pants at the first sight of a market drawdown, and every time a financial institution goes bust from being too optimistic with its capital, credibility erodes slightly from the mainstream financial bedrock and osmoses itself over to our little dark, tinfoil-hat-wearing corner of the financial world.

And I’ll be the first to admit: the “establishment” view on the global economy has continued to dominate—not just the nominal stock market scoreboard but also the prevailing state of mind of all participants contained therein over the last few decades. When you're a sports bettor that constantly lays the chalk on the favorite, and the favorite has come in the last 99 times out of your last 99 bets, why wouldn’t you take the favorite one more time on the 100th bet?

So once again, after this past Friday’s market selloff, strategists like a concerned-looking Tom Lee do what they do best: return to financial airwaves in order to proclaim that everything is fine, this time definitely isn’t different, and investors should consistently be buying the top of the market regardless of macroeconomic conditions, valuations, or a guarantee of certain death via asteroid the very next day.

Stop me if you’ve heard this one before.

It’s difficult to ignore that Tom Lee has “nailed it” on markets over the last decade, and I need to give credit where it’s due. Holding your nose and buying stocks without giving a single solitary fuck about valuations or the macroeconomy has sadly been the most effective way to generate returns over the last decade or two. But as every piece of financial literature you’ve ever read says somewhere on it: past performance is not indicative of future results.

Though the tune of buying the dip has hardly changed, the environment it’s being sung in has. Stocks now trade at a Shiller PE that’s approaching 40x, a level only eclipsed once in history during the 2000s dot-com bubble.