But what makes this even more critical is the timing. This comes at a time when:

• Stocks are as expensive as they were at the peak of the Dotcom bubble in 2001.

• Interest rates have been rising out of control.

• The national debt has surpassed $40 Trillion and yearly interest payments are now more than what we spend on defense — something that hasn’t happened since WWII.

  

It isn’t surprising that people are now comparing this to the top of the market in 1999 right before everything went kaput. But apart from all the doomy news, what’s real is that this is one of the largest economic interventions since 2020. Unless you’re prepared for the aftermath, you could be taken by surprise, and not in a good way.

So let’s talk about the background and plan for this bond market bailout. But before that, hit the subscribe button to join 41,000+ smart investors who get these updates for free in their inbox by subscribing for free:

Subscribe now

How the government controls the markets

Most people think that the market is driven by company profits or expansion, or even attractive valuations. While all of those contribute to some level, the rising tide that submerges the market is the interest rate, and that tide has been rising very fast.

The culprit is inflation. When investors are worried about long-term inflation continuing to grow, they demand a higher return on their money to compensate for the extra risk — if you thought inflation was going to be 4%, why would you lend out your money at 3%? So the pressure on bond yields is upwards. When interest rates rise, it strains everybody. The interest rate we pay on national debt goes up and mortgages rise. People prefer to invest in treasuries rather than stocks.

And just last week, treasury yields reached their highest level in almost 20 years. You know the last time this happened? Just before The Great Financial Crisis.

So how did the government respond to this? They stepped in to buy their own long-term treasuries, i.e “bailing out the market” by turning on the money printer in an attempt to bring down rates (at least temporarily). But before you panic, you must know this isn’t the first time the US has done this.

• Back in the 1940s, the United States implemented “Yield Control” to finance the war with cheap money. (This caused the stock market to surge 187%)

• Then from 2008-2014, we saw various methods of quantitative easing.

• Of course, we all remember 2020, when the money-printer went BRRRR....

In all these cases, yield control was implemented upfront to prevent the market from melting down. But if they’re stepping in now, the question is: what is the government seeing that the rest of the market is missing? To answer that, we need to look at the stock market.

Why you should be concerned

The stock market has been on an irrational run for longer than anyone has expected. Over the last year, we’re up about 20%, and year-to-date, we’re up almost 12%. Even though we’ve been hitting all time highs pretty consistently, these are record numbers that are making people wonder if the ride will end soon.

There are 5 main concerns people are seeing:

1. The markets are extremely expensive

Look at the data:

• The CAPE ratio right now is almost identical to the market right at the peak of the 2000s Dotcom bubble.

• The Buffett indicator has hit all-time highs above 230% signaling that the market its twice the price it should be.

• A small number of AI stocks are responsible for an outsized amount of these recent gains, meaning that if they crash, they could drag down the entire market with them.

Renowned investor Jeremy Grantham has labeled this “the biggest investment bubble in American history” and he’s been saying so for quite some time now.

2. Weak monetization

The AI hyperscalers are on track to spend $850 billion in 2026 which is a huge portion of the GDP. That would be great — except, we don’t know how they’re going to make their money back.

95% of AI pilots deliver no measurable impact to profits, as per MIT. Others have called this the largest CapEx bubble in history after railroads and telecom fiber, where infrastructure is built far ahead of proven cash flows.

3. Circular financing

Anyone who’s been on social media recently must have seen this chart pop up where companies are all tied up in a weird fashion, investing in each other: They’re buying from companies that are guaranteeing capacity for other companies which are boosting each other’s revenues.

A lot of it just feels like shuffling money around. I give $10 to you, and you give it to your friend, who gives it to me, and we all show $10 in revenue. The net generated value is zero.

4. Similarity to other tech bubbles

The classic story is “we need to deploy massive amounts of capital even if initial returns are weak because future demand is massive.” This is typical of past cycles. When it works out, we see sustainable growth, but when expectations aren’t met fast enough, everything starts to sell off.

5. Extreme concentration

87% of venture capital is flowing into AI. Even Sam Altman — the guy who’s sitting at the top of this chain — questioned: “Are we in a phase where investors as a whole are overexcited about AI? My opinion is YES. When bubbles happen, smart people get overexcited about a kernel of truth“

All of this points to the market being in an overpriced phase, but there are others who disagree strongly. They think that right now could be one of the best opportunities in your lifetime to invest in the markets, just before the government begins to pump money into the economy.

The silver lining

It’s valid to be concerned about the markets because there are some eerie coincidences between what’s going on now and the Great Depression that occurred almost exactly 100 years ago. When you match up the charts, they even look identical, giving further fuel to the idea that we’re at the final stage of the “great melt-up” before everything comes crashing down.

But predicting where the market is going isn’t the same as cutting out pictures of graphs and matching them together. You need to look at what’s really happening underneath, and what’s different this time around. Critics give five reasons why this isn’t a bubble:

1. These companies are making a lot of money

The market is concentrated among Nvidia, Microsoft, Alphabet, Meta, and Amazon. But these are all highly profitable companies unlike the names of the previous bubbles. A lot of their AI buildout is being funded from internal cash, rather than debt or equity issuance.

On top of this:

• Earnings have beaten expectations, signaling there’s real sustainable growth

• Smaller companies are beginning to catch up, possibly balancing out the volatility as the equal-weighted S&P 500 is also hitting all-time highs.

2. The growth is rapid, and it’s measurable

Cloud AI run rates have grown at triple-digit percentages. Anthropic itself reached a 30-fold increase by mid-2026 and they haven’t even IPO-ed yet. Usage metrics are rising as more and more companies adopt AI in their workflow.

All of this signals that we’re at the early stages of a shift that could eventually add trillions of dollars worth of value to the economy.

3. Valuations are extreme, but still not at 2000 levels

Yes, forward PE ratios are similar, but they’re well below the 80x multiples we were seeing 30 years ago — and those were from unprofitable companies that were highly leveraged with no actual basis. In this case, a lot of the market gains are coming from actual earnings growth.

4. Low IPO activity

At the peak of a bubble, you usually see a wave of IPOs and acquisitions for companies that aren’t quite profitable. Yes, SpaceX was the largest IPO ever in history, but one boogeyman isn’t a symptom of a broken market unless we see more companies following suit.

5. Rallies don’t end because the price is too high. They need a trigger

An unforeseen “catalyst” needs to break to trigger a frenzy of selling. But despite rising oil prices, international conflict, and the yen-carry trade, nothing alarming has stopped the march of innovation yet. If it did, we’d see some red flags.

What could these red flags actually be? Fidelity has some suggestions:

1. Shrinking free cash flows even as spending on AI infrastructure grows

2. Increased cross-holding of US stocks on corporate balance sheets (more circular linkage)

3. Debt levels growing out of proportion to profits

4. AI hitting energy usage limits creating a ceiling on how much it could grow

5. Wider credit spreads leading to higher borrowing costs and lower profits

Right now, Fidelity isn’t seeing any of these. It thinks that this is just the very beginning and that the stock market will continue moving higher because of AI.

What indicators are you looking at to track whether we are in a bubble?

Leave a comment

Worst and best case scenarios

What would it take for the market to crash and stay down?

One of my favorite analysts, Ben Carlson, points out that the market doesn’t care about what’s happening today. It only cares about what could happen in the future. Looking at the last 150 years, CAPE ratios look high, but compared to the last 30 years, the average is nowhere as crazy as people think it is.

The fundamentals of the market are bound to catch up soon to the overpriced sentiment.

Now, the devil’s advocate would say, “Look at 1928-1949. For two decades, the stock market went nowhere but down or sideways.” But even in that situation, even if you had invested right at the peak and done nothing for 20 years, you would still have earned 100% in profit from dividends.

And most people aren’t going to sit still — they are going to continue buying the dip once the market crashes, especially considering what a wealth-generating machine it has been.

So could we go the way of Japan, where prices fell for decades without recovering? For that to realistically happen, we would need to match the overvalued level that the Japanese stock market was at just before collapsing. Earnings would need to completely stall out and the S&P 500 would need to rise to more than 14,000 for the US to reach that sort of peak.

So basically, if everything stays the same and the price doubles from today, we risk ending up like Japan. But it seems like the stock market might continue to move a lot higher, and just the fact that we’re talking about a bubble means that some of it has already been priced in.

There’s another thing. History shows that buying stocks at all-time highs barely moves the needle in terms of your overall returns, because the market naturally hits all-time highs when companies grow and inflation increases. Buying at all-time highs isn’t necessarily the worst thing in the world, as long as you hold patiently.

My plan

In terms of my own thoughts about how to invest in this market, I look to a quote that Keynes said nearly a century ago: “The market can remain irrational longer than you can remain solvent.”

As smart as you think you are, if you think you can predict the future, the market will find a way to stump you. It has consistently defied the odds and betting one way or another is usually a losing proposition.

You could be totally correct that the market is overpriced and that we’re poised for a 30% drop. Then out of nowhere, Scott Bessent could say he’s printing money to bring down yields. Now your entire thesis is thrown over as the market rallies higher.

Or maybe you take the other position, that we’re going to the moon. But then Trump could hit Canada with a 50% tariff, and you’re wrong again! It doesn’t matter that you were right on paper because the market only cares about reality.

So my plan is simple:

1. I diversify as much as possible through the United States and International Markets.

2. I hold 20-25% in cash, earning between 3.5-4% after tax.

3. I maintain a consistent income so I can keep buying in, no matter what the market does.

At the end of the day, you can only control your behavior: how patient you are, how much you buy, and whether or not you panic sell at the worst possible time. I firmly believe that if you pay attention to these, you’ll be fine.

If you enjoyed reading, hit the like button, restack, and also share with a friend who needs to see this.

Share

I’ll see you next week.
— Graham

The last time something like this happened, the S&P 500 went on to increase more than 70% over the following four years, and created new all-time highs.

But what’s the chance of something like this actually passing? If even part of this becomes law, the impact would be enormous. This could also impact everyone who owns a home worth under $2 million, which is a lot of homeowners. So let’s break down exactly what’s being proposed and how it’s going to affect you. Before we dive into the details, join 41,000+ smart investors who get these updates first thing right in their inbox for free, by clicking here:

Subscribe now

Capital gains: The short version

Let’s talk about the capital gains tax. Capital gain is just profit on something you sold, like a stock you bought for $1000 and sold for $5000. Once that $4000 capital gain is in your hands, the IRS wants its piece. However, you might pay less or more depending on how long you held the stock.

If you held for less than one year, it’s called a short term capital gain. This is treated just like ordinary income at the normal tax rate, which goes up to 37%.

But if you hold for longer than a year, you get “long term capital gains.” This is treated very differently, with taxes ranging from 0% to 15% to 20%, all depending on how much money you make. Sometimes these benefits are so crazy that a married couple can realize almost $100,000 per year of long term capital gains, and pay nothing to the IRS. And that’s before including the standard deduction which could potentially give that person another $32,000 tax free.

All this comes with two catches:

1. Capital gains stack on top of your ordinary income. They don’t replace it. So if you already made $90,000 at your job, your income fills up the bracket and the gains sit on top of it.

2. Once your income exceeds $200,000 single or $250,000 married, there’s a 3.8% “Net Investment Tax” which gets added on top of your capital gains rate. So the top tax bracket actually goes up from 20% to about 23.8%.

The worse part is that those thresholds have not been adjusted for inflation. This is where Trump’s new proposal comes in.

How taxes are calculated

When you calculate capital gains, the tax code doesn’t adjust your original investment for inflation. So if you invested $100,000 in 1990 and it’s worth $255,000, you made a $155,000 profit. Congratulations! But the thing is, the $255,000 you have in your account has roughly the same purchasing power today as $100,000 in 1990.

So in real terms, you just broke even after 36 years. But for tax purposes, you owe money on your $155,000 capital gain that is just inflation.

The new discussion aims to index your capital gains to inflation. Say you invested $100,000 in 2020 and it’s worth $150,000 in 2026. Ordinarily, you’d pay tax on that $50,000 but since inflation was 28.8%, your “cost basis” would increase to $128,800, reducing your profits to $21,200. The rest is considered lost to inflation.

Home exemptions

On top of this, we also have the home exemption. Right now, when you sell your primary residence, you can exclude up to $250,000 of gain if you’re single, and $500,000 if you’re married filing jointly (as long as you owned and lived in it for at least 2 of the last 5 years). That sounds good, until you realize that homes have the exact same problem as stocks. Those numbers were set by the Taxpayer Relief Act of 1997, and they’ve never been indexed for inflation even once in nearly 30 years. Meanwhile, home values have roughly quadrupled!

Back in 1997 when this act passed, a home clearing $500,000 was very rare. Today that’s not even the price of a basic starter home. The suggestion is that we index that $500,000 to inflation today, bringing the exclusion up to $2 million. That’s what this administration has proposed.

Imagine a couple buys a home in 2005 for $400,000 and sells it for $1.4 million. That’s a $1 million capital gain. With how things stand now, they pay tax on $500,000 plus a 3.8% tax, adding up to $119,000 paid to the IRS. Under the new plan, they will have to pay NOTHING.

Have you ever held onto a house that you otherwise planned to sell, for tax reasons?

Leave a comment

But before you think of this as a “Trump Idea,” note that this isn’t the first time something like this has been suggested. The “No Tax on Home Sales Act” would have eliminated dollar-caps entirely for a primary residence. The bipartisan “More Homes on the Market Act” would have doubled the limits to $1 million while also indexing all gains to inflation going forward. So far, both of these have stalled in congress.

This brings us to the question of whether this will actually pass and what impact it will have on the market.

Who is this holding back?

How does this law impact the market right now? When people know they have to pay taxes on selling, sometimes they just don’t sell. If you’re sitting on a stock that’s up 600%, you know that selling it would need you to hand over a quarter to the IRS right away. So some people just decide to not sell and hold on forever even if they want to reinvest the money elsewhere. This is the “lock-in effect.”

This isn’t limited to stocks. In the case of housing, The National Association of Realtors has been warning about what they call a “capital gains cliff” where a growing number of old homeowners with huge built-up gains are now discouraged from selling. Selling would trigger a tax bill, and they would owe an amount that hasn’t been updated for 30 years, while new home prices are oblivious to this information and keep going up.

The most morbid examples are a little sad. An elderly couple bought their home for $200,000 decades ago. Now that home is worth $2 million and they’d love to downsize, but selling it could trigger a massive capital gains tax, and it would cut into the money they’d want to leave to their children. So mostly they’ll just hold onto their house until they pass away — after which their children can inherit it with a stepped-up cost basis, allowing them to freely sell with no capital gains whatsoever.

This sort of thing is very common in estate planning, but it just locks up inventory that the market desperately needs. Changing the rule could let these folks live the life they wanted.

How would the market react?

If this were to pass, how would the market react?

Initially, we’d see a surge, most probably, followed by a wave of selling, because people are free to sell after waiting on the sidelines for so long. The last time Capital Gains taxes were lowered in 2003 under George Bush, the market surged over 70% and hit record highs in the following 4 years.

But this brings up another uncomfortable fact, that the rich will probably get richer.

The Institute on Taxation and Economic Policy argued that indexing capital gains would reduce taxes the most for the wealthiest households since they own most of the assets.

This does nothing for the vast majority of Americans unless they invest, and long term, it could lead to an even worse federal deficit. The counter argument is that increased selling might reduce asset prices, allowing people to buy in at cheaper prices than they could otherwise. But that needs people to invest, and let’s be honest, most people aren’t taking that option.

Getting it passed

So could this actually pass? Here’s how the press even got wind of this news. In a report from his National Economic Council Director, Kevin Hassett, and former NEC Director Larry Kudlow, it was stated that: “He [Trump] wants to hit people with the things that are promises that we’re going to do if the Republicans have power in the future… So you can expect a lot more policy between now and the midterms… and I’m sure that’s why he was talking to you, Larry, about your great ideas on capital gains.“

Kudlow said he suggested indexing and a bigger home exemption. These were his actual words: “I spoke to him, he liked the idea of the indexing, he liked the idea of a bigger exemption,” and “the boss is very interested” in those ideas. Now, this is a common pattern I’ve noticed. Instead of coming out of with a formal, written policy, Trump likes to float these ideas into social media to see how people react. He pushes them through allies, interviews, and X. If the engagement clicks — BOOM, we’re on. It moves forward.

But sometimes it doesn’t. The 50-year mortgage didn’t take off, and it quietly disappeared (here’s my post on it:)

Now, this one is actually getting a lot of attention, but the bad news is, there’s only two ways to go with this.

1. Through Congress: Most tax changes need legislation. It’s very unlikely that any of these ideas will become law before the November midterms, and even within the party, Republicans in Congress have floated indexing capital gains in the past, but the issue lacks universal support. The worst part is that it comes with an estimated cost of $200 billion, so winning support will be hard.

2. Skipping congress: The treasury could just redefine “cost” in the tax code to mean “inflation-adjusted cost” by regulation. Though this sounds brilliant, this has been considered before under George Bush, and it failed because officials concluded the move probably wasn’t legal. The definition of basis in the statute is quite clear, and that doesn’t leave much room for interpretation, making it an uphill legal battle.

But say it does go through, even then the timing gets tricky.

• Does this apply to new assets?

• Does it retroactively apply even to old assets?

• If it applies retroactively, that could cost $1 Trillion in lost revenue. So how would we make up for it?

• If it doesn’t apply, most of us wouldn’t see any upside for many, many years, and even then only if inflation stays high. So what’s even the point of passing it?

Given all of this, I think the indexing of capital gains to inflation is most likely not happening. I wouldn’t say it’s a 0% chance, but it’s pretty close. However, I do think there’s a chance of us getting something.

My suggestion

Overall I think indexing capital gains to inflation is a logical move because if all of your gains are just eaten away by inflation, and you’re paying tax on top of that, it makes no logical sense.

If the Trump Administration wants to make an actual difference that can actually pass, they can do four things:

1. Increase the capital gains home exclusion: This hasn’t been updated since 1997. Increasing the exclusion would allow people to sell and unlock more inventory on the market, while also letting people write off losses on a primary residence.

2. Increase the $3000 capital loss deduction: Right now, if you make an investment and sell it for a loss, you can only deduct $3000 per year against your income. This limit hasn’t been updated since 1977! In today’s dollars, that’s $16,000, so just update that please?

3. Index the Net Investment Tax with every other tax bracket: The $200,000 number has been frozen since 2013 and it drags more middle-class people into a “rich person tax” every single year. Fixing it costs almost nothing. Nobody would oppose it.

4. Stop double-taxing dividends: Dividends have already been taxed at the corporate level, so it makes no sense that they are taxed again at your income tax rate when they flow to you. It could just be boiled down to a long term capital gain tax for all dividends including REITs.

None of this sounds as newsworthy as “Zero capital gains tax,” I get it. But this is the version that could actually pass. It fixes the parts that are broken instead for the people it would make a difference to instead of just making the rich richer.

If you found this useful, like, restack, and share it with a friend who needs to see it:

Share

I’ll see you again next week.
— Graham

Japan holds so much of their money in US dollars that any significant movement on their part affects us. If they’re forced to sell to prevent their own currency from collapsing, that could trigger an enormous reversal across global markets. The thing is, it’s already started. Japan may have already dumped nearly $59 billion worth of US dollars in its latest attempt to support the yen. Now, the situation has gotten so much worse that the United States has joined them.

So today, I’ll break down exactly what happened, why the US is trying to save Japan before they bring down the rest of the market, and what history tells us is most likely to happen next. If you’re new here, join 41,000+ smart investors who get these updates in their inbox for free by hitting subscribe:

Subscribe now

The Japanese Yen Unwinding

It all comes down to global economies being extremely connected. What happens in Korea affects the US (as we saw last week), the interest rates in one country can affect the demand of another, and when a currency is ‘weak’ money tends to flow into other assets that are deemed safer. Typically, that safe asset is the US dollar.

The dollar is the reserve currency of the world, after all. The more other countries buy into it, the less interest we have to pay to attract more money. There’s no shortage of demand to buy as much of our money as possible. But this also creates an arbitrage opportunity. Every country has its own currency, interest rate, and inflation that’s constantly being compared against the US dollar. You might be able to borrow cheap in one currency, earn a higher interest rate in another, and then profit from the difference. But while you can make a killing this way, you can also get killed when this happens in reverse. That’s what’s happening with the Yen collapse.

Since 2012, the value of the Japanese Yen has been declining steadily. Their financial system was riddled with decades of deflation and an aging population that created weak demand. To incentivize spending, borrowing, and trade, they kept interest rates near zero. Until recently, they could get away with that.

Over the last few years, something changed though. The United States was battling record-high inflation throughout 2022 and 2023. To deal with it, they were forced to raise interest rates at the fastest pace in the last few decades, and all of a sudden, the United States was now paying much more in interest than any other developed economy, creating “risk-free return.”

This brought about the opportunity for the Yen Carry Trade.

Traders could borrow the Yen at a low interest rate, buy US treasuries paying a high interest rate, and pocket the difference. If you could borrow money at 1% and a treasury is making 5%, why wouldn’t you just sit back and collect money on the spread? Add to this the fact that the Yen has also gone down in value relative to the US dollar, which means that by the time your loan comes due, you’ll need fewer dollars to pay it back.

Here’s how the math works:

• You could borrow 1.6 Million Yen at 1% interest, giving you about $10,000.

• You could buy a 12-month treasury earning 4% with that $10,000.

• If everything stays the same, after 12 months, you have about $10,400, equivalent to 1.664 Million Yen.

• You pay back the original loan with 1% interest, and now have roughly $300 worth of profit.

A great idea that works, until it begins to unwind one day.

The Yen’s impact on your portfolio

On Friday, July 31st, Japan made a move that completely shocked the markets. They announced an emergency intervention to buy back their own currency with US dollars, in an effort to prevent the Yen’s value from crashing. The concern was that their falling currency could trigger even more selling. So they stepped in and dumped the US dollar in an attempt to rescue the Yen from collapsing.

If you think this is Japan’s problem and has nothing to do with us, you are wrong.

Japan is the single largest foreign holder of US treasuries on the planet. So when they sell dollars to buy back the Yen, they’re flooding the market with treasuries. This pushes interest rates higher, and that extra cost falls back on everyone else. How?

Even though the Federal Reserve controls the short-term borrowing rates between banks, they don’t control the longer term rates, like 10-30 year treasuries. These are dictated by market supply and demand, and those rates dictate the price of everything — from mortgages, to loans, to corporate borrowing, to stock valuations. Treasury yields are driven by supply and demand, so when countries buy our treasuries, yields go down because there’s already plenty of demand. But when they sell, buyers have to be offered a higher return.

Now that other countries have begun selling those treasuries to protect their own currencies, interest rates have shot up, and 30-year treasury yields are now at their highest level since 2007.

So when Japan sells $53 Billion, the US must act too. If not, Japan could take everyone else down with them.

How could US intervention help?

One way to solve this problem would be to buy Yen with US dollars. This isn’t ideal, but it would hopefully help. How?

Imagine it like this: Say my friend and I both own shares of the same stock. One day, he desperately needs cash, and if he sells all of his shares at once in a fire-sale, he doesn’t just hurt himself. He drives down the value of my shares too. So to stop him from dumping everything on the open market, I raise some cash myself and buy part of his position. I’m not doing it purely to help him, but also because preventing the fire-sale could protect the value of what I own.

That’s what the US did with Japan. But the reality is that this is just a symptom of a larger problem. Demand for our bonds has fallen to 10-year lows.

Even if we do nothing wrong, other countries are facing higher inflation and they need to raise more cash to pay for the increased cost. They raise that cash by stashing and selling our treasuries, and this is also why our 10-year treasury just crossed its 100-year moving average, a century-level technical event that’s basically happened for the first time.

So knowing all this, how has the US intervened, and what does this mean for you?

Will the intervention help?

The United States finally stepped in alongside Japan and bought Yen in a coordinated intervention. This was the first time the US had intervened in foreign exchange markets since 2011. But instead of selling dollars to buy the Yen, the Treasury sold euros. By doing this, the US sent a signal — the dollar stays strong, but they can still support the Yen. Scott Bessent said the US would be willing to participate in another joint intervention if necessary.

Meanwhile Japan’s central bank might have gone further, spending another $36.58 billion and bringing the total up to almost $100 billion supporting its currency in just 48 hours.

All this might be a temporary patch, because this isn’t the first time such a crisis has rolled out. Back in 2024, Japan ran this identical strategy. We saw two rounds of emergency intervention, nearly 10 Trillion Yen spent defending their currency, and it kind of worked... For about three weeks. The Yen bounced roughly 5% off a 34-year low, and then kept falling until it hit a 38-year low a few weeks later.

Compare that to what just happened: A couple of weeks ago, Japan spent a record 59 billion dollars. The Yen ripped down from 163.65 to 157, its biggest weekly gain since February, and then by that Friday afternoon, traders had already shoved it back toward 160. The impact had barely last for a day. Why?

It’s the same reason it failed in 2024 — the intervention fixes the symptom, but doesn’t cure the underlying problem. The root cause of the problem is that the Bank of Japan is holding their interest rates at 1%, the United States is holding at 3.5-3.75%, with 3 members voting to go even higher. Until that gap closes, every dollar Japan spends is only kicking the can further down the road.

So this can end in one of two ways:

1. The Bank of Japan keeps hiking while the Fed eventually cuts rates, and the issue deflates over a year. Nobody gets hurt this way.

2. It closes fast. That’s bad. If the currency trade unwinds all at once, we could see a quick reversal throughout the markets, similar to 2024.

The next real checkpoint is going to be September 16th, when the Fed meets again. If they raise rates once again, it could make this gap wider than it is now, forcing Japan to intervene again.

In terms of my own thoughts, here’s what I think: We aren’t paying enough attention to the coordination between The United States and Japan. The US has intervened twice in the last 30 years with regards to Yen — once back in 1998, and again in 2011. Now that this has happened a third time, this isn’t a small problem.

But I think the most likely way this plays out is that people panic in the short term and trigger a lot of volatility as interest rates spike. Over the long run, we’d see a slow grind back to normalcy until the Bank of Japan hikes enough for the carry trade to stop being worth it.

In the worst case scenario, investors get pushed to the point where it all unravels at once. But given how closely Washington is monitoring the situation, this is unlikely to happen.

Meanwhile, I’ve been using this as an opportunity to buy the dip. When stocks drop, I buy a little more, and as long as we don’t see the economy implode from all of this, the best thing to do is stay the course.

If you enjoyed reading this, like, restack, and share it with a friend who needs to read this:

Share

I’ll see you next week!
— Graham

In the last few weeks, Korea’s stock market has undergone its fastest and largest drop in history — it fell by more than 20% in the last few weeks, and then recovered a bit. But the signals that showed up before the market crashed in Korea are now showing up right here in the United States.

We’re seeing:

1. Extreme concentration in a few stocks

2. A massive rally being carried by AI

3. Record amounts of retail leverage

4. The market being priced at its most expensive level since the Dotcom bubble

The term “Market Bubble” has reached a search volume that’s at its highest level since 2004, in the United States. So the question on everyone’s mind is, if it can happen there, can it happen here?

The goal isn’t to predict the crash and time the market — if I could do that, I’d be the most sought-after guy on the planet — but rather to make sure you’re prepared before it breaks. To get the latest updates that protect and grow your money, join 41,000+ investors for free here:

Subscribe now

While a stock market bubble builds up over months or years, there are things that could change your life in seconds: Like leaving your information up on the Internet where anybody can find it.

Data brokers legally collect and sell your personal information to anyone with a credit card. Your name, address, and phone number are all out in the open and this isn’t just a nuisance. It can lead to risks like identity theft, phishing, and doxing — unless you do something about it.

That’s why I trust today’s sponsor DeleteMe. It’s a hands-free subscription service that removes your information from hundreds of data broker sites all year long. Within just 7 days, you get a detailed Privacy Report showing exactly what they found and what is being removed. They’re the experts. They’ve been doing this for 15 years!

Signing up to DeleteMe is the simplest way to help protect yourself – and your business – from scams and identity theft. Instead of scrolling away, just take a second to click here:

Check out DeleteMe

You get an additional 20% off when you use the code GRAHAM.

What’s happening in Korea?

Just like we have the S&P 500 in the United States, Korea has the KOSPI, an index that tracks the largest companies in the country. For a while, this was one of the best performing markets on the planet!

2026 has been a wild year for KOSPI. At one point, it was up more than 60% in 2026 alone. It overtook London in total market value. One of their chipmakers, SK Hynix, makes the high bandwidth memory that goes into Nvidia’s AI chips. In June, SK Hynix nearly tripled in value, becoming the most valuable company in Korea for the first time in over 25 years!

To put into perspective how insane the situation is, the S&P 500 has 500 companies, and people are worried that Nvidia makes up 7% of the index. The top 10 companies make up about 40% of the index. But in Korea, just two chip stocks made up more than 50% of the KOSPI. So for Koreans, the “diversified national stock market” was a huge bet on memory chips.

Another ingredient adding to this problem was leverage.

Leveraged ETFs

In May, Korea approved a product that had never existed before: Single-stock leveraged ETFs, which is just a fancy way of borrowing money to double the daily moves of one single company. In this case, the ETFs were targeting the two companies that already dominated the market — Samsung and SK Hynix. 16 ETFs launched around the same time, and within just the first two months, retail investors poured in more than $9.6 Billion. They were chasing a rally that had already tripled in size.

Then the regulators decided to step in. On June 22nd, they warned the public that the rally and the leveraged products were becoming dangerously overheated. Korea’s top financial regulator even said that he wished he’d blocked those ETFs from ever launching. Of course this led to a frantic selloff, and it took the entire Korean stock market down with it. As the market fell, a feedback loop kicked in.

• As chip stocks fell, leveraged ETFs lost double.

• They were forced to rebalance by selling more chip shares.

• This pushed the chip stocks down further.

And that created a death spiral. After this brutal sell-off, regulators banned new single-stock leveraged ETFs entirely and tripled the minimum deposit required to trade the existing ones.

But that would just be an interesting incident in a foreign country if it didn’t have some ingredients that we are seeing in our market.

Does the US market look like Korea?

Korea’s crash required five ingredients:

1. Extreme concentration

2. A massive preceding rally

3. Leveraged retail speculation

4. Foreign selling

5. Doubts about AI

Where does the US sit on these parameters? As we speak, the S&P500 is sitting around 7500, about 8% higher than it was at the beginning of the year. On the surface, it all looks fine. Once you dig deeper, things start to get really interesting.

1. Concentration

The 10 largest stocks now make up roughly 37% of the S&P 500. Nvidia and Apple take up 15% between themselves, and the IT sector is 38% of the index. If you buy the index, you’re hoping to spread your money across 500 companies so that any shift in the market doesn’t hit you suddenly, but more than a third of the money is now riding on just 10 companies.

It’s not as bad as Korea’s two stocks at 50%, but if the top 10 fell by 25%, that would drag the index down by 9% along with it.

2. Valuations

The S&P 500’s Forward Price-to-earnings ratio is about 20.7. Compared to the 10-year average of 19, that doesn’t sound too bad. But there’s another measure, the Shiller CAPE ratio that’s around 41 now — during the Dot-com bubble, this measure went up to 44 before the crash, and we’re dangerously close now.

Apart from this:

• The price-to-sales ratio is at a record high

• Dividend yield is near record lows

• The Buffett indicator, which measures the total market value versus GDP, is at 219%

By every long-term measure, this is one of the most expensive stock markets in American history.

3. Leverage

FINRA just reported that margin debt hit $1.5 Trillion in June, 49% up from last year. When you subtract the actual cash in those accounts, net margin debt is up 51% YoY.

If those numbers sound complicated, here’s the bottomline: Investors have been borrowing record amounts of money to buy stocks, and even if we don’t have leveraged ETFs like Korea, the margin debt acts the same way. It’s bullish fuel that crashes on the way down, because falling prices trigger margin calls. This forces selling and falling prices.

4. Sentiment

To buy the dip, you need cash, and right now almost everyone’s gone all-in on equities. Professional money managers are only holding 3.6% of their portfolio in cash. The VIX is around 19, below its long term average. Positioning has been maxed out, and nobody’s hedged for what’s ahead.

5. The insiders

US Corporate Insiders are selling stocks rapidly, and they’re buying at half the normal rate. Insiders sell for all sorts of reasons — taxes, diversification, pre-scheduled plans, etc. But combined with everything else, this isn’t exactly a vote of confidence.

So if retail investors are going all-in and are maxed out on stocks, where are the institutions investing?

The bull case for America

The institutions are telling a completely different story. Morgan Stanley believes that the S&P 500 should continue to rise this year, ending at 7800. CitiBank sees 7700, and both JP Morgan and Wells Fargo see a relatively flat market for these next few months. Basically, all major banks are aligned that it’s more of the same — a market that will continue to go higher instead of collapsing. The earnings data backs this up. The most recent quarter has been incredible:

• Blended earnings growth is near 25%

• Revenue growth is near 13%

• 88% of companies are beating estimates

Analysts expect this momentum to continue through the rest of the year. Compared to the dot-com bubble, where companies literally made no money, this is a very different market. Taking this context into consideration, the “expensive” tag that we saw earlier doesn’t automatically mean that today’s giants are in a bubble: Nvidia, Microsoft, Apple, Amazon, and Alphabet are some of the most profitable businesses in human history.

Have you been holding any of these giants in your portfolio for a long time? How has it worked out for you?

Leave a comment

If we look at the broader market indices, they are actually doing better than the S&P 500. Take the Russell 2000 for example, made of small caps — it’s up over 16% this year, nearly double the S&P 500. The equal-weight S&P 500 where every company counts the same recently hit record highs. This is no longer about seven stocks carrying everything: instead, the average company is now participating in the market.

In the case of bubbles, corporates are usually the first to smell trouble and offload the stocks.

But on the demand side, corporate buybacks are already coming in over $400 Billion, announced through late April. This is up 20% from last year. Index funds are seeing automatic inflows as usual, every two weeks, from 401k contributions. Credit markets, which usually smell trouble first, are showing high-yield spreads near historic tights, meaning that bond investors are seeing almost no stress in the system.

Even if 95% of AI experiments fail, the winners in cloud, semiconductors, and software are already monetizing. Hyperscaler revenue is real unlike the Internet companies in the dotcom era that had no business to show, and this buildout is being funded primarily from profits rather than junk debt and IPO money. If AI delivers even modest productivity gains across healthcare, logistics, finance, and manufacturing, we may simply “grow into” today’s valuations instead of overdelivering. When Amazon grew into its dotcom-era price and became one of the most valuable companies on earth, this is what happened.

When we ask “Are we Korea?”, instead of comparing the symptoms in both cases, we need to look at the structures of the two markets.

The US market is structurally different in a few ways:

1. Our biggest single stock is 7.6% of the index. Their top two stocks are at over 50%.

2. Our market has the most diverse set of buyers in the world — pensions, foreigners, corporations, retail, index funds, etc. Korea was dominated by leveraged retail chasing two companies.

3. Single-stock leveraged ETFs exist in the US but are a rounding error compared to their market share in Korea.

The bear case

Now, the bull case assumes everything goes to plan. But earlier this year, Goldman Sachs also published a bear case: How things could actually go the other way, when an oil shock from the Iran conflict drags the S&P 500 down to 5,400. This would be a 38% decline from today’s levels. The wild part is that the spread between the bull case and bear case was the widest range they’d published since 2020. The range of outcomes is just enormous, right now.

Why could the bear case happen?

1. The bull case depends on 24-25% earnings growth happening. The market is already priced for near perfect execution and double digit growth. But if earnings miss by just 5%, that could cause a 25% decline in the S&P500 even without a catastrophe.

2. AI spending math might catch up. The five biggest hyperscalers are expected to increase CapEx by $534 Billion through 2027 while operating cash flow only grows by about $340 Billion (spending $1.57 for every dollar). If AI revenue catches up, that could work. If it doesn’t, all the major companies could get repriced at the same time just like in Korea, triggering a crash.

3. The wealth gap: Though smaller companies are outperforming right now, bigger companies pull their weight. On more than half the trading days this year, the S&P 500 has moved in the opposite direction of the majority of its own stocks. That level of divergence is comparable to the year 2000.

4. Leverage: $1.5 trillion in margin debt, up 49% in a year, is completely fine until a crisis. Then it becomes the American version of Korea’s leveraged ETF doom-loop: prices drop, margin calls hit, investors are forced to sell, and then prices drop further triggering more margin calls.

5. Cash reserves: Money managers are already 96% invested. So who’s left to buy? Credit spreads at 2.7% mean that bond investors are being paid almost nothing for extra risk. Oil prices swinging up and down threaten the inflation progress that will let the Fed cut rates.

The bear case isn’t that the world ends but rather that everything goes back to normal. Considering how far we’re flying in the clouds right now, normal is a long way down! With so much uncertainty about the future, we need a plan that’ll help us prepare for both the best and worst case scenario.

Will the United States pull a Korea any time soon? I think the answer is no.

Korea’s market is structurally different from ours and it was dangerously unbalanced. On top of that, billions were pumped in all of a sudden into highly leveraged funds in an already unbalanced market. We have decades of circuit breakers and a much more balanced market, and unlike Korea’s regulators, our regulators aren’t going to trash talk the market (hopefully).

But the lesson here isn’t to avoid Korean stocks. We have a problem too: Concentration + Leverage + Euphoria can lead to a disastrous outcome quickly. If you just own the index, a 20-40% drop is tough to swallow, even if not catastrophic. What is necessary is the resilience to overcome that dip.

So it’s the same boring playbook that’s worked for a hundred years that I’m going to recommend:

1. Keep a 6 month emergency fund

2. Diversify as much as possible throughout the United States, International Markets, Bonds, Alternative Assets, Real Estate, etc.

3. No matter what, don’t use leverage to buy stocks.

Nobody knows if Goldman’s right or the bears are right. But in the entire history of the S&P 500, a 20-year holding period has never once lost money. The people who’ve followed that for the 9 years I’ve been making content online have done quite well.

At the end of the day, the truth is that neither does the market have to be a bubble to be dangerous nor does it have to suddenly rally for you to come out ahead. As long as you’re consistently buying in, patient, and investing regularly, you’ll do okay.

If you found this useful, please like, restack, and share it with a friend.

Share

I’ll see you next week.
— Graham

Morgan Stanley just warned last week that we’re going to see a brand new housing market where mortgage rates stay higher, affordability doesn’t recover, and supply is locked. Prices might never fall far enough to save the average buyer. The crash you’re waiting for might never come.

And while you’re waiting, the last chance to buy could already be gone.

Today, I’ll break down exactly what’s happening:

• Why the housing freeze is much worse in 2026

• How it’s affecting different parts of America

• How to think about buying and renting

Reading through this can help you make a smarter decision and save a lot of money. To keep being a smarter investor, join 41,000+ others by subscribing for free:

Subscribe now

A housing reset

Morgan Stanley releases their “home price forecasts” twice a year based on analysis of overall data, prices, and trends. In their latest report, they said they expect a “reset.”

What does this mean? We won’t see a wild 2008 style housing crash that corrects dramatically. In a reset, everything continues to get more expensive, and just stays where it is. Everyone who’s waiting for a crash is going to get priced out. And by the time they finally give in, everything will be way more expensive.

Consider this. Right now:

• The average 30-year mortgage sits at nearly 6.5%. It’s already at a 7-week low.

• The median home price just hit $429,300, up 1.3% from a year ago.

• Housing affordability is getting worse due to the lock-in effect.

Roughly 70% of all homeowners have a mortgage rate below 5%, and half have a mortgage rate below 4%. There’s no incentive for anyone to get rid of their mortgage and exchange it for a new one that would cost 50% more. So instead of selling, they stay put. They’re locked in whether they want it or not.

Are you someone who’s locked in a low mortgage rate? What would induce you to sell?

Leave a comment

Until rates drop or supply increases drastically, this lock-in will freeze the market and cause everything currently on the market to go up in price. Housing turnover is now the slowest in 40 years, and it’s not changed for 11 quarters straight.

So homes are unaffordable because of this weird paradox: Demand is weak, because of high prices, but supply is equally weak because people are locked-in. The two cancel each other out and prices keep creeping up. People expect something dramatic to happen that will correct prices, but that might not happen soon because of a part they’re missing…

The American dream was not meant to last

Harvard just released their own warning a few days ago. While Morgan Stanley’s version looks at where we are now, Harvard’s report is more interested in how we got here. You know the American dream that we grew up believing, about homeownership? Harvard thinks it’s a one-time exception that was never meant to last. Here’s what happened:

After World War II, there was a flood of hopeful, energetic veterans coming back home all at once. Washington was terrified by this flood of people. The memory of the Great Depression was fresh, and now millions of trained soldiers would flood the job market once again with nowhere to live or work. How do you reabsorb so many people into stable civilian life?

Their answer was the housing market. The conditions were perfect:

• Cheap land

• Cheap debt

• Government support

• Fast construction

• Rising wages

• Millions of people needing jobs, family, and stability

All of this led to the GI bill which let veterans buy homes with little to no money down, low interest rates, and federal guarantees backing the loans. At the same time, suburbs, roads, schools, businesses, and communities sprung up around this new way of life, turning homeownership into the centerpiece of the American dream.

But there was a problem with this dream. It only worked because of those specific conditions, which lasted only for a few decades, enabled by a government that was actively trying to expand ownership. Today, these conditions are the exact opposite:

• Mortgage rates are higher.

• Construction is slower.

• Insurance is more expensive.

• Wages haven’t kept up with prices.

Instead of housing becoming easier to access over time, it’s becoming more dependent on whether your family already owns assets. Homeownership is becoming less about income and more about inheritance. If that’s true, then the housing market could be shifting from a system where the average person could work their way in, to a system where you only get to stay if you have help or own something already.

Adjusting to the new normal

In terms of when prices might come down, and what you can do about it, the Morgan Stanley forecast has a part that most people don’t want to hear: The new normal.

The report is clear on the message: Stop waiting for housing affordability to come back, because in their view, it probably won’t. That doesn’t mean you go out and commit to an absurd price you can’t afford. But if buyers are thinking of sitting on the sidelines waiting for a 30% crash and mortgage rates to fall by 3%, that scenario is very unlikely.

Morgan Stanley’s advice is more practical. Buy when the numbers work for your personal situation — when the payment is affordable, the emergency fund is intact, the timeline makes sense, and you’re not relying on a crash to bail you out. In other words, FOMO shouldn’t be the driving force, but an unrealistic dream doesn’t work either. In light of this, here are five predictions from Morgan Stanley for how the market will continue to evolve with time:

One: Prices will stay high

Housing is stuck. Prices won’t collapse, because there’s not enough supply and homeowners aren’t distressed enough to sell. At the same time, they won’t skyrocket because buyers can barely make the numbers work right now. It’ll be more of the same.

Two: The new equilibrium

The housing market has reset to a world where everything costs more, and people have to get used to that fact. A 5.5% mortgage isn’t objectively cheap, but next to a 6.5% rate, it feels cheap. A $2,500 monthly payment seems normal next to $3,000. Buyers waiting for the old market that relied on structural forces might realize it’s gone forever and the new market is driven by the supply and demand of the moment.

Three: Increased rentals

If the forecast plays out this way, the rental market benefits. People locked out of buying will choose to rent and demand would shift to apartments, build-to-rent communities, single-family rentals, etc.

Four: The supply problem

Morgan Stanley says that even if affordability improves, it doesn’t fix the problem. The bottleneck is not just mortgage rates but zoning, permitting, insurance, construction, and labor costs – structural forces that don’t change fast.

Five: The chain reaction

Housing prices trickle down and affect the entire economy. When people buy homes, they also buy furniture, appliances, renovations, moving services, insurance, etc. When inventory stops moving, all of that freezes. People spend less, start families later, and everyone falls further behind.

Expert opinions

Some analysts disagree about where the market is headed though. They don’t think it’s a uniform story throughout the country. Zillow’s latest forecast calls for a slight decline in housing prices, throughout areas like California, Texas, and Florida which are already price-constrained. Other markets in the East Coast could see prices continue to rise, because they are starting from a lower base.

Realtor.com agrees with this somewhat, but they expect that long term, the typical house would be on pace to reach $1 Million by the time millennials reach retirement age, i.e about 25 years from now.

In the most extreme case, CoreLogic anticipates a national YoY gain of 5.1% from all the pent-up demand. They echo the theory that the gates are closing for the average person: “Market activity is increasingly limited to those with enough equity or cash to ignore mortgage rates, which only widens the gap for those trying to get their foot in the door.“

The general consensus seems to be “more of the same” in 2026 and 2027. We’ll expect to see sluggish sales, flat prices, and maybe an increase of 1-3% depending on the area. When interest rates eventually start to come down, we might begin to see some more activity, which could push prices higher until home prices return to a more “normal” 1-3% growth per year.

But just because home prices are going higher in dollar terms, doesn’t mean those homes become more valuable after inflation. They might actually be getting less affordable. So this might just be a slow wearing away of gains as opposed to a sudden crash until the prices balance out with the incomes.

Overall, Morgan Stanley and Harvard are offering sensible guidance. Based on all the research out there, unless we see a massive economic depression that blindsides us, there’s no housing crash coming to bail anyone out (I never thought a day would come when people are praying for a recession). Instead, the market is resetting into a more expensive, locked-up version of itself.

But that doesn’t mean you should give up. Here are some possible steps to consider:

1. Stop waiting for a crash: Prices might dip, but betting your future on a 30% collapse is a gamble. If the numbers work for you today on a payment you could continue even if your income dropped — on a house that you intend to keep for 7-10 years — then it’s a decision worth considering.

2. Refinance if the rates drop: If you buy something you can afford and rates do end up falling in the future, great. Refinance and save that money. But don’t expect this to happen, because rates have a nasty habit of staying higher for longer than you expect.

3. There’s no shame in renting: If you can rent the same home for way lesser than it costs to own it, go for it and invest the difference. Renting isn’t “throwing money away” when buying would cost you more financially and mentally. In a lot of markets, renting is the smarter choice.

I’ve been writing a lot these days about the toll homeownership took on me. Read this before you commit:

For decades, we’ve all been told that buying a house is the best way to build wealth that everyone needs to follow. But the Harvard report shows that this was built for a specific, glorious moment in history that no longer exists. Buying a home might not be the right choice for everybody. While it’s an incredible experience, it’s also a tool and not a requirement for a wealthy life.

So whether you buy or rent, don’t get dragged into the noise. The panic is momentary, but buying a house is a commitment that lasts for years.

If you enjoyed reading that, hit like, restack, and share it with a friend who needs to read this:

Share

I’ll see you next week.
— Graham

What’s worse is that this collapse isn’t slowing down.

Prices have crashed for 35 months in a row, and it’s becoming so bad that a lot of people are wondering: If this could happen in the world’s second largest economy, could the same thing happen here? Are we looking at a 2008 crisis but worse? We need to talk about exactly what’s happening, what this means for your money invested in the US, and whether our housing market is at the risk of heading this way.

To get these timely reports in your inbox that will help you prepare for any situation, join 40,000+ smart investors by subscribing for free:

Subscribe now

A silent wealth trap

A house was never just a house in China. It was a wealth trap.

Until the 1990s, most housing in China was owned and provided by the government. But as the country opened up to the world and started to expand rapidly, they realized housing would need to be privatized. Why? Because:

1. Developers were incentivized to build faster

2. Banks were free to lend more

3. Families would buy homes of their own generating extra economic activity

This led to a real estate boom. Hundreds of millions of people moved from farms into cities. Incomes were rising, credit was cheap, and urban homeownership exploded from about 50% in 1996 to roughly 90% in 2023!

The thing is, Chinese families didn’t really have a lot of options on where to invest their money:

• Their stock market was volatile (and frankly, not trusted)

• Bank deposits paid almost nothing

• Capital controls prevented you from investing abroad

Which all meant that real estate became THE default investment option for the average citizen, not just another investment option. A home was everything for them — a retirement account, a safety net, a college fund, and a social status marker, all rolled into one apartment.

By the peak, 70% of Chinese household wealth was tied up in housing! That’s twice as concentrated as here in the US. About 22% of urban households owned multiple homes!

How the bubble expanded

When this sort of craze kicks off, it creates a feedback loop which works as it’s supposed to in the beginning:

1. Families bought homes

2. Developers borrowed money to build more homes

3. Local governments sold them land – making up 40% of their revenue

4. Banks kept lending

5. Home prices kept rising, making the investment attractive

6. Households bought even more!

Every part of the economy had its hands in the real estate pie, and they were all in this together. At its peak, real estate and everything connected to it made up roughly a quarter of China’s entire economy. Prices increased nearly 700% from 2001 to 2017.

It even got so extreme that buyers would spend up to 23 times their annual salary to buy a home. Demand was so high that several cities used lottery systems to allocate them, and developers “pre-sold” apartments that didn’t even exist yet. Buyers were making mortgage payments on nothing but a promise.

If prices could only go up, what could go wrong? That’s exactly when it broke.

The collapse begins

By 2020, even the Chinese government could tell this was getting out of hand. Prices were skyrocketing, homes were sitting empty, smaller cities were wildly overbuilt, and developers were carrying insane amounts of debt. So Beijing stepped in with a policy called The Three Red Lines. It was a hard cap on how much developers could borrow, based on their debt-to-cash, debt-to-assets, and debt-to-equity ratios. But in real terms, these controls switched off the money printer for developers overnight.

Everything started to collapse.

The crisis started when Evergrande defaulted. They had borrowed over $300 Billion, and suddenly they couldn’t roll over their debt any more. Eventually, they were forced into liquidation. Country Garden, once the largest homebuilder in the country, defaulted on its dollar bonds shortly after.

When the two giants failed, a wave swept the entire housing market. The smaller developers couldn’t finish the millions of apartments they had already pre-sold. Regular families were now paying mortgages on homes that did not exist and might never exist, because the developer was no longer in business. In 2022, this got so bad that buyers across hundreds of stalled projects threatened to just stop paying their mortgage payments entirely. An estimated 1.5 trillion yuan of mortgages was tied to unfinished apartments.

The final domino began to fall soon after: Confidence.

Once people saw firsthand that their neighbor was paying for an apartment that never got built, they stopped buying. When they stopped buying, developers lost their pre-sale money needed to finish the construction. When that construction stalled, it scared away more buyers. The same feedback loop that pushed prices up for 20 years was now working in reverse. There was nothing anyone could do to stop it.

Other factors were making it worse: fewer marriages, slowing urbanization, an estimated inventory overhang (in tens of millions of empty or unfinished units). It was the perfect storm that caused the largest housing crash in history because China’s market was just so massive. How did this affect the average Chinese citizen?

The domino effect

China’s entire housing market is trading at the same levels as it was in 2006. 20 years of growth completely evaporated due to the crash, and the losses aren’t slowing down. 70 of their major cities fell another 3.5% YoY in May, and other areas are down more than 10%. Construction has fallen by a whopping 22%. The equivalent of their entire GDP was gone in a matter of a year.

Beijing is trying to stop the collapse by approving a 7 trillion yuan whitelist program to finish stalled projects, cutting mortgage rates, and lowering payments. But analysts expect prices to fall another 4% this year before maybe stabilizing in 2027. (And that’s a big maybe — even if the money is there, the structure is completely crumbling)

This just doesn’t affect housing prices.

When citizens have their wealth tied to property, a loss leads to a slowdown of spending and a loss of confidence. People start hoarding cash afraid of spending it on anything, and this kicks off a deflationary spiral. When real estate is tied to nearly 15% of all employment in China and land sales make up 40% of all local government revenue, you get a housing crash — and along with that, you get a wealth shock, a spending shock, a jobs shock, and a government revenue shock, all at once.

What does this mean for the US?

The effect on America

First, let me make it clear that this is not going to be another 2008 crisis.

American banks have very little direct exposure to Chinese real estate. Not because there are not takers, but because China’s capital controls and state-run banking system won’t let us. So your bank account, mortgage, and paycheck are not directly tied to some unfinished apartment tower halfway around the world. But there will be other effects:

1. Your portfolio

If you own an S&P 500 Index Fund, well, you own companies that sell a lot of stuff to China: luxury brands, automakers, semiconductor companies, industrial equipment, etc. When Chinese consumers are buying barely anything, this shows up as weaker earnings, and more volatility, in stocks you probably own without realizing.

2. Commodities

Chinese construction consumed roughly half the world’s steel, and 60% of its cement. That’s wild. But it also means that when China stops building, global demand for steel, copper, iron ore, and energy falls right alongside with it. If you’re invested in miners or energy, that’s bad news. But it’s potentially good news for construction costs and inflation here at home.

Have you diversified your portfolio enough to prepare for these risks? What’s your strategy?

Leave a comment

3. The trade war effect

When China can manufacture but can’t sell to its own consumers, there’s only one way out: exporting and flooding the world with cheap goods. Cheaper stuff sounds great on the surface, but that puts pressure on American manufacturers to remain competitive and leads to trade tension. Whether this ends up lowering your prices or raising them depends on how Washington responds.

4. The dollar

Ironically, a property crisis in China is good for the US dollar. When the world gets nervous, money runs to safety in the US treasuries. A weakening yuan makes the dollar look stronger by comparison, and while people keep talking about the dollar being “dethroned,” this is pretty much the opposite scenario (If you’ve been planning a vacation to an international location like Japan, now is a great time, because their Yen is near a record low).

But with all of that said, could something like this happen here?

Not really. While some of the headlines look eerily similar, the US and China markets are very different for three reasons:

1. Concentration: Chinese households had 70% of their wealth in housing. Here, it’s close to a quarter, and even a total collapse won’t wipe out the country’s net worth.

2. Supply: China built too much. We’re still short an estimated 1.2 million homes.

3. Debt structure: Chinese buyers paid upfront for non-existent homes. American homeowners are sitting on 30-year fixed mortgages, locked in under 4%, with record home equity. Nobody is forced to sell.

With all of that said, we still have an important lesson to take away from this situation.

China’s collapse was more about concentration than about real estate.

China put 70% of its wealth into one asset because everyone believed the same thing: “Housing never goes down.” I hate to say it, but I see that same mindset here every single day. The asset might change, but people put everything they have into a house or a stock or a cryptocurrency, not because they understand the risk, but because it’s worked really well for the last 10 years. At some point, it becomes dangerous.

But that’s the whole lesson! Not that any particular market is dangerous, but that any asset becomes risky when it becomes your entire net worth.

Markets can be irrational on the way down as well. Chinese buyers kept trying to catch the bottom in 2023, in 2025, and in 2026. Every single time, prices kept falling because once confidence breaks, the pendulum often swings in the opposite direction. That’s exactly why I don’t try to time markets either way, neither while it’s going up nor down. If an entire government throwing trillions of dollars at the problem can’t call the problem, what makes you or I think that we can?

My answer, as always, is to diversify. Don’t sink everything into one sector, or one asset. Don’t speculate on a single investment just because it’s done well historically. China just gave the entire world a 20 year masterclass in what happens when a house stops being a home and turns into a lottery ticket. The best thing you can do is to learn from that and make sure that your financial life never depends on a single number going up.

If you found that useful, hit like, restack, and share it with a friend:

Share

I’ll see you next week.
— Graham

When you see early success with something, you get to a point where it’s hard to tell apart the success of the outcome from the success of your approach. I did everything right on paper. I bought years ago, locked in low rates, and held through the real estate boom. So I saw the benefits. But over the last couple of years, I’ve been thinking…

Is real estate really worth it for someone getting into it today?

And I think the answer is maybe not. But it’s not a simple yes or no answer — there are so many things I learned in the process of buying and selling properties that don’t show up in the conversation around real estate. Today I’m going to share everything I learned so that you can keep these in mind when making your own decisions.

40,000+ investors subscribe to this newsletter and stay ahead of the market by getting these reports right in their inbox. Join for free here:

Subscribe now

How I got my start

In 2008, I got my real estate license and began working as a real estate agent. I saved up my commissions, and in 2011, I had made enough to buy my first property — a bank-owned foreclosure in San Bernardino for $59,500. I fixed it up, rented it, and from that point on, I was hooked on the idea of renovating run-down houses and turning them into livable properties.

I also had this unique edge, because I was living and breathing real estate every hour of the day. I could see properties the second they came on the market, represent myself, and write up an offer in less than an hour. So I could get some pretty good deals, in theory. At first, it worked. My earnings increased, and I bought 7 properties in Southern California, locked in at 3% mortgage rates for 30 years. The markets went up, the rents covered the costs, and I thought I had it all figured out. Here’s where it’s at today:

• The first home I bought for $60,000 is now worth $400,000

• I sold two in San Bernardino for a 300% return a few years ago

• The home I bought in West LA for $780,000 is now worth $1.3 Million

• I sold my last home for $500,000 more than I paid for it, 7 months ago

But like I said, even though I was able to score some good deals, a lot of my success came from buying in the perfect window. Prices were low, rates were cheap, and rents were strong. Those conditions don’t exist today! The rising market ended up doing a lot of the heavy lifting, and it came to bite me later on.

So let me talk about my biggest mistakes in order. The first one is the most important.

Problem #1: I never raised the rent

Everyone told me to raise the rent, but I never did. My philosophy was this: I had a great deal locked in, and I could afford to not maximize every dollar possible. Instead, I could just pick the best tenant I found, keep them there as long as possible, and never raise the rent. My priority was to find someone easy, who would pay on time, and treat it like their own. For years, that worked. Until it didn’t.

The problem with LA real estate is that a lot of properties are under rent control. You can only raise rent by a small amount each year, and if you don’t, then you can’t make it up later. Instead, your future rent increases will always be based on the lower amount! One missed year can compound into thousands of dollars over time, and I fell right into that.

For many years, I kept the rent unchanged. Then 2021 came around, and boom – all of a sudden, my expenses went through the roof: insurance, repairs, materials all doubled in cost and utilities went up by 50%. Some years I literally broke even when a major repair wiped out entire years worth of profit. So yes, I had to raise rents to keep up with this. But I couldn’t! Because the city of LA imposed a 3 year ban on raising rents. I had never anticipated that a city could ask you to absorb every cost of ownership while having zero recourse against my own rising expenses.

By the time I did finally raise rent — by a measly 3% — it was a fraction of how much my own costs had gone up. If I had consistently increased rents every single year, there wouldn’t have been as much of an issue, but my overheads just shot past my rents. And that’s on me.

When the time came to finally sell these properties, the lower rent didn’t just hurt my monthly cash flow, it hurt the entire value of the property. Investors usually value rental properties based on how much income they produce. If your rents are capped far below market rates, the property looks a lot less profitable on paper. So the building itself might be worth more, but the lower rent can lower the sale price.

Initially, I thought this wouldn’t matter. I thought I’d never sell, the tenant would move out, and I’d be able to reset the rent back to market rates. But things change. When I finally listed it for sale, that decision to not raise the rent by 3% cost me not a few hundred dollars a month compounded over 6 years, but about $100,000 in the final sale price. Every real estate investor had told me I was being an idiot for not raising rents, and you know what? They were right.

The lesson here is that being a good landlord doesn’t mean ignoring the math. You can still be fair, reasonable, and treat your tenants well, while keeping the property financially sustainable.

Problem #2: Non-stop repairs

This is the one that very few people emphasize, and the one that will cost you more than anything else. Everyone knows repairs exist and say “budget 1% for maintenance.” But you don’t truly understand what that means until you’ve owned a property for 10-15 years.

In any year or two, there might be a few small things, here and there. But then there’s one year where:

1. The roof needs replacing

2. There’s a plumbing situation that balloons into a major issue

3. The AC goes out in the middle of August when the heat is rising

And the only person available charges double the cost to fix it immediately. You have years of zero maintenance — years! — and then $20k for something you could not have predicted wipes out a year of profit. Sometimes you bring in the contractor for one issue and find two more and think, “might as well fix it while they’re there.” Even with a property manager in the loop, all of this is still work.

Here’s one memory I can’t get out of my mind: The ice-maker in the refrigerator wasn’t working, and the tenant complained. The property manager sent a repair person out and I got an $800 bill. To fix an ice maker! You could literally buy a brand new refrigerator for that price. It was common-sense. Or this other time where to fix a crack in a sewer line, the city asked me to replace the entire section — $20,000 — but to do that I needed to dig up the side-walk, permits took months, and a $5,000 fix turned into $40,000! Even if your annual repair budget seems reasonable, sometimes the most unpredictable thing can break and set you back by a lot.

If you missed that story, it’s here:

Problem #3: My annual returns

This was one of my biggest blind spots. Usually when people asked me how real estate was performing, I’d point to the appreciation. They’re all worth way more than I paid. But that appreciation is worth nothing until you actually sell it.

Once I backed out every repair, vacancy, insurance increase, utility bill, and maintenance call, the actual return was only around 4 to 5% a year. At that point, when a Treasury bond could pay something similar without tenants, repairs, liability, or surprise expenses, I had to ask myself: Why am I still doing this?

I was taking on the risk of:

• Lawsuits

• Property damage

• Legislative changes

All for a return I could have gotten from a “set-it-and-forget-it” index fund, or even a high-yield savings account. Even with leverage, I’d have made just as much indexing in the stock market. Once you take into account all the time spent on renovations, phone calls, notices, headaches, negotiations with contractors, etc. I was basically taking on a part-time job, while also assuming all the liability!

So I started selling, and that’s when it turned out to be expensive.

Problem #4: Revamp before selling

If you want to get top dollar for your property, you have to make it as turn-key as possible to appeal to the widest buyer demographic. In the last few months, I’ve spent nearly $100,000 between three properties on remodeling, painting, new landscape, staging, and other expenses. I even offered one tenant a voluntary buyout so I can sell the unit without it being tenant occupied — it was expensive, but the cleanest way out for all of us. (I’m fortunate that I have that option. Most small landlords can’t just write a check to solve that problem, and selling a tenant-occupied property is really, really difficult).

So yes, you could do the bare minimum to sell a home. But to get the highest selling price, you need the house to be in the best possible shape. When these places have had tenants for the last 8 years, things WILL need to be upgraded. So that’s what I did. So far, every single place has gotten multiple offers significantly over asking price. Thanks to Jason Oppenheim and Shelton Wilder, whom I highly recommend if you’re in LA. Tell them I sent you, no joke. I was a full-time real estate agent for 12 years, and these are the people I’d trust my own places with.

Problem #5: Deprecation payback

This is a secret limitation. When you own a rental property, the IRS lets you write off the value of the building over 27.5 years. Your income looks a lot lower on paper, and you pay less in taxes. The catch is that when you sell, the IRS comes back for “deprecation recapture” taxed at 25%. Those early tax deductions need to be repaid when you sell, unless you 1031 those profits into another property to keep the process going. But if you’re looking to completely exit the real estate game like me, that’s a significant tax bill.

On top of this, my properties were in California. So I’m paying an additional 10% tax on all profits to the franchise tax board on top of the Federal Capital Gains Tax. Now, the ability to offset rental income through paper losses is a genuine benefit of real estate that you don’t get with stocks. If you never realize those gains, these could be extremely valuable. But depreciation is a deferral, not a cancellation. If you eventually do sell and exit, the taxes will need to be paid.

Problem #6: The Hassle Factor

This one never shows up in a spreadsheet or a projection, unfortunately.

When you own property, you’ll usually have to budget some time, every single month, to make sure everything runs smoothly. Even with a property manager, you’re still getting calls and making the final decisions. You’re still the one responsible for everything that goes wrong, the property manager is just the first point of contact.

A lot of passive overhead never goes away:

1. Insurance renewals

2. City inspections

3. Property tax bills

4. Permits

5. City compliance

6. Rent registries that have to be filed

7. Utility notices

None of these are catastrophic, but they all add up in bits to take up mental inventory that never goes away. It adds up to a level of background stress that I just didn’t account for, when I started.

So what am I trying to say here? Is this me warning people to stay away from real estate? Not at all. I want to be clear about something:

This isn’t me complaining. I’m just showing you that even when real estate goes right, people still underestimate the hidden costs, time, taxes, repairs, and opportunity cost.

I’m also not saying real estate is a bad investment. The early properties were great. They worked because I bought in at the right time, in markets that appreciated significantly, with locked-in cheap debt, and for that I’m genuinely grateful because it’s why I am where I am today.

But if I don’t explain the full picture from start to finish, I’m doing you a disservice. Now that I’m nearly done selling everything off, here’s the truth: the returns were not as good as I initially expected them to be. Some of this is my fault for not listening to everyone’s warnings, but a lot of it was also just outside my control! Policies were implemented without any warning, things broke suddenly… You just have to expect the unexpected sometimes.

If I was starting over today with what I know now, would I still buy real estate?

I would, if I were buying it for myself, in an area I lived in full-time, assuming I had the capacity to handle the mental day-to-day management. But that profile no longer fits me. I live out of state, I last occupied one of the duplexes in 2019, and I’m so busy every waking moment that I can’t afford any more distractions.

For everyone watching though, here’s my advice: Unfortunately, if your property is rent-controlled or there’s the chance it will be rent-controlled, you have to raise rent every year to stay at or near market rate, even if you don’t want to. Budget aggressively for repairs – estimate it will cost you at least 30% more than you expect. Then factor in the cost of your time in dealing with all the random little surprises that come up.

Finally, compare if this opportunity cost is real against the returns of buying an index fund and answer for yourself — is it really worth it? It’s a call you have to take.

There’s a world in which it still makes sense. But a lot of people expect real estate to be passive. In reality, it’s customer service with property taxes.

If you found that useful, hit like, restack, and share it with a friend:

Share

I’ll see you next week.

— Graham

People are beginning to wonder: Is Bitcoin finally broken? Or is this the moment that’s about to create millionaires?

That’s why we really need to discuss exactly what’s going on.

I’m not new to this. I’ve been following Bitcoin for more than a decade, and it’s one of the topics I’ve been covering regularly on my YouTube channel. The surprising bit is that these videos also tend to follow the hype-cycle of Bitcoin: Sometimes Bitcoin videos are the best performing videos I’ve ever made. At other times, I get nothing.

That says a lot about how Bitcoin operates: looking at its history can teach us what to expect in the future. This could either be the single-best buying opportunity in years, or the biggest mistake of your entire life. We need to discuss what’s going on throughout the cryptocurrency market, the dangers that Strategy could be sensing, and when it makes sense for you to buy and sell, based on the data.

For analysis like this that could save and grow your wealth, hit subscribe to join 40,000+ smart investors. You get one email every week, and it’s totally free:

Subscribe now

The Bitcoin sell-off: A health check

There are five main reasons responsible for the recent price collapse:

1. Everyone is going risk-off. When investors get scared, they rotate out of risky assets like crypto into safer assets like treasuries, cash, and bonds. Now, there’s a lot to be worried about — the new Fed, high inflation, a volatile situation in the Middle East — and Bitcoin is usually one of the first casualties.

2. Bitcoin ETFs are working in reverse. When everyone started buying Bitcoin ETFs, the funds had to buy actual Bitcoin which pushed prices higher, causing more people to pile in. Now that people are selling, the opposite is happening, causing the price to fall. Demand fell by 652,000 coins last week alone.

3. Whales are selling. Large holders dumped nearly 45,000 Bitcoin in a single week recently. Even Michael Saylor wound up selling a small amount of Bitcoin, Strategy’s first sale in years, which broke their story that “they’d never sell.” When the big players exit, everyone else panics and follows.

4. There’s no more “Good News” to look forward to. A year ago, we had:

   1. The possibility of a strategic Bitcoin Reserve

   2. New ETF announcements

   3. Institutional buyers flocking in

   4. Price targets of $250,000, $500,000, and even $1 million

   Now, a lot of that has been played out, legislation has stalled; gold, silver, and AI are stealing the spotlight, and there’s nothing new to get excited about.

5. There’s a loss of conviction. For years, Bitcoin was seen as digital gold, the hedge against chaos and inflation that would hold strong when everything else went down. When chaos actually hit last year, gold and stocks went up (even companies like Nokia), but Bitcoin went down. Now people are questioning the Bitcoin story and losing faith in it, so they’re starting to sell.

While investing in Bitcoin could go up and down over years, there are things that could change your life in seconds: Like leaving your information up on the Internet where anybody can find it.

Data brokers legally collect and sell your personal information – including your name, home address, and phone number – to anyone with a credit card. This exposure isn’t just a nuisance. It can lead to risks like identity theft, phishing, and doxing.

That’s why I recommend today’s sponsor DeleteMe. It’s a hands-free subscription service that removes your information from hundreds of data broker sites all year long. They’ve been the experts for 15 years and within just 7 days, you get a detailed Privacy Report showing exactly what they found and what is being removed.

Signing up to DeleteMe is the simplest way to help protect yourself – and your business – from scams and identity theft. Instead of scrolling away, just take a second to click here:

Check out DeleteMe

You get an additional 20% off when you use the code GRAHAM.

Now, let’s get back to Bitcoin and one of the most influential forces that moved Bitcoin’s price recently.

Strategy’s strategy

Strategy is a software company that decided to pivot into a Bitcoin Treasury in 2020. Instead of keeping their cash idle in the bank, they decided to use a portion of their corporate balance sheet to buy Bitcoin. As Bitcoin continued to increase in value, this plan paid off: they began to raise money from investors, issue debt, sell stock, and use those proceeds to buy even more Bitcoin.

Basically, they went from being a software company to a publicly traded vehicle that gave exposure to Bitcoin through their stock. In return, they kept getting more money to buy Bitcoin, and their claim was that they’d never sell.

Eventually, they controlled 4% of all the supply of Bitcoin! (bought at an average price of about $75,600, for a total of $64 billion) But now that Bitcoin is trading at $60,000, Strategy is sitting on a $12.5 Billion unrealized loss.

Here’s the catch: If you think that Michael Saylor could be forced to sell his Bitcoin to pay Strategy’s debts, and that could crash the market down to zero, the truth is that Strategy didn’t buy Bitcoin with a margin loan, to the point where there’s a price that would force a sale. Instead, they raised money by issuing convertible debt and preferred stock, so the shareholder is ultimately the one who takes the hit while Strategy could ride out the fluctuations in price.

Having said that, there’s one more issue here: Dividends. When Strategy was recently raising money, they created a dividend fund to raise more capital to buy Bitcoin, promising an annualized return of 11%, with a stock price that was “supposed to trade” around $100. In a perfect world, Bitcoin would continue to go up, the company would raise more money, and the dividend would be paid out of the profits. If the stock falls, they could increase the return to entice more investors, and the stock price would go back up again. At least, that’s how it works in theory.

But in practice, it’s different: Now we’re seeing that the dividend stock is down substantially from its $100 threshold. The market is pricing in a likelihood that maybe they just can’t afford to pay the dividend, and on top of that, Strategy’s main stock has cratered — it’s down 77% in the last year. For the first time ever, Saylor has gone from saying “we will never sell” to admitting that selling some Bitcoin is now “not unlikely.” That shift spooked the market, and it also brought in the lawyers.

As of last week, the Rosen Law Firm announced it’s investigating Strategy and preparing a class-action lawsuit covering all five of the company’s publicly traded securities. This might sound severe, but it isn’t Strategy’s first lawsuit. In fact, they got hit with a nearly identical suit a year ago, alleging that the company overstated how profitable its Bitcoin bet was, and understated the risk. But that lawsuit got dropped. Now that the stock has fallen further, more lawsuits are back.

A lot of people think these lawsuits are ridiculous. One crypto developer asks, if you bought a stock that literally markets itself as “leverage on Bitcoin,” and then complain that it understated the risk… What did you even expect?

The Bitcoin Cycle

To figure out if this is the end of the story or the next generational buying opportunity, we need to recognize something: As painful as this feels, these crashes are not unusual. In the last 17 years, Bitcoin fell by:

• 99% in 2011

• 56% in 2012

• 83% in 2013

• 84% in 2018

• 74% in 2022

• 50% in 2021

So this current drop of 53% is completely normal by Bitcoin standards, and actually not as bad as it’s been in the past. For the last 15 years, Bitcoin has followed an almost robotic 4 year cycle.

So far it’s never failed.

• It starts with people slowly accumulating into Bitcoin.

• The price grinds higher.

• Then it goes parabolic and the FOMO kicks in. People have to buy in.

• Then it crashes 50-80% and everyone swears it’s dead.

Then quietly the cycle starts all over again, once everyone has lost hope.

On top of that, when it comes to discovering the best entry price, historically one of the most useful indicators is what’s called the “realized price.” This is simply the average price every Bitcoin investor paid for their holdings: think of it like the break-even line for the entire market. As of now, that price is roughly $53,000.

Why does that matter? So far, every single time Bitcoin falls below that line, it forms a bottom before skyrocketing back up. It’s the point of investor capitulation, and this pattern has worked for every bear market — in 2015, 2018, and 2022. Of course, things could turn out different this time around, but it is an interesting pattern to note. But along with the optimism, we need to hear the other side to balance the story:

The $0 Bitcoin

Some people genuinely believe “this time is different.” The consensus seems to be split down the middle. For example, billionaire Jeremy Grantham believes that Bitcoin is a “useless, speculative mechanism going to zero,” and Warren Buffett agrees.

Others like CryptoQuant aren’t so pessimistic, but they believe the real bottom is around $53,600 and that it’s still too early to call the turn. The most bearish charts point to $47,000 before seeing a reversal. One 4chan poster who perfectly called the top in October of 2025 thinks the next ATH won’t be around until September 2029.

Price targets range anywhere from $120,000 to $400,000. Some targets are genuinely absurd, like ARK Invest that models over $1 million by 2030. Others like Peter Schiff claim that its intrinsic value is still zero.

But so far, Bitcoin has survived:

• The single largest liquidation event in its history

• Tariffs with China

• A military conflict in the Middle East

• The most Hawkish Fed in years

• Michael Saylor breaking his “never sell” promise

Through all of it, Bitcoin is still trading at $60,000 which would have seemed absurd 6 years ago. But being historically cheap is not the same thing as a guaranteed bottom. Data suggests that the real capitulation moment might still be ahead of us. Anyone who tells you they know for sure is just guessing.

Let me know what your take on the situation is:

Leave a comment

As for my plan, here it is:

I have about 8-10% of my portfolio in a Bitcoin ETF. It’s money that I don’t need, that I’ve been dollar-cost averaging into for years. I’ve accepted even before I started that it could drop 80% and I’d be totally fine. Usually, when it falls, I buy a little more. If it goes up, I hold. The swings just become white noise after a while.

However, there’s one thing that I am doing when it comes to this, now that the price is down, which is: Tax Loss Harvesting. When the price falls, I sell some of my Bitcoin ETF, lock in the loss on paper to offset my other capital gains, and then eventually, I could buy back in. If you own physical bitcoin yourself, it gets even better – “wash sale” rules don’t apply, and you can buy back in a minute later after locking in a loss, potentially saving a lot of money on your taxes.

Beyond that, for anyone watching this market, and wondering if they should buy at these levels:

1. Your biggest enemy is your own emotions. Hope makes you buy the top, fear makes you sell the bottom, and the only people I’ve ever seen consistently make money are the ones who were controlled by neither.

2. Buy only what you can afford to lose and no more. If a 50% drop would ruin your life or keep you up at night, that’s too much — the right amount is one where you’re okay with it going to either a million or to zero.

3. Don’t blindly follow your gut. Every time I get that panicky “sell before it gets worse” feeling, it’s usually closer to the bottom. When I get the euphoric feeling of “I have to buy in or I’ll miss out,” it turns out it was the top.

If you follow these rules and you have extra money that you’re willing to speculate on, now isn’t a bad time. Especially, when sentiment is some of the worst I’ve ever seen. But don’t expect to get rich or treat it like a sure thing, because it’s not. Every crash is different. We have no idea what might happen in the future, even though I tend to be optimistic.

If you found that useful, do hit like, restack, and share it with a friend:

Share

I’ll see you next week.
— Graham

But now the ground is shifting, and the story might be falling apart. While a lot of it was vibes earlier, we now have the exact numbers:

• How much money does everyone have in 2026?

• Where do you rank?

• Who is falling behind?

Vanguard just released a brand new report that tracks the retirement accounts of nearly 5 million people. On the surface, Americans are richer than ever — the average person now has $167,970 stashed away for retirement. Except, that number is only a half-truth. If you torture the data long enough, it’ll tell any story you want it to.

The reality is that the person standing right in the center has just $44,115. Worst of all, 1 in 4 people have less than $10,000 and 1 in 10 have zero or negative net worth to their name!

The next crisis won’t be people losing money in the stock market, but people in their 20s and 30s slowly realizing that they can’t afford a house or kids, can’t pay to handle emergencies, and despite all of this, they still can’t afford to stop working in their old age. Today, we’ll break down how much money people actually have, the strategy that is quietly turning normal people into multi-millionaires, and the exact moves you can make today to come out ahead.

If you’re new here, join 40,000+ subscribers who get these weekly reports in their inbox and become smarter investors – for free:

Subscribe now

The savings crisis

Every year, Vanguard analyzes the real accounts of nearly 5 million Americans to put together a financial X-ray of the entire country and puts out a report. This year’s report was pretty shocking.

The good news is that we have a “retirement revolution”: 86% of workers now participate in their 401k as opposed to 65% of them 25 years ago. Also, only 5% of people panic sold during the tariff scares, and everyone else just stayed the course and bought the dip.

The bad news is this: Even though the average person has a 401k balance of $167,000, the average is skewed toward the wealthiest people. If I was in the same room as Elon Musk, our average net worth would be $550 Billion, though I’m much closer to 0 than to a billion. That’s why we need to look at the median savings — you arrange everyone’s incomes in order, and look at the savings of the person standing right in the middle. The median person has a less than a third of the average, at $44,000. What’s worse is that 75% of Americans have less than the average balance. So headlines like “Americans have record 401k balances” are really describing a wealthy group at the top and ignoring everyone else.

But where are people actually investing their money?

• 70% of people are in a “professionally managed” allocation.

• 61% of people are in a single target-date index fund

• 79% of all the money invested is going straight into stocks

So most people are not out there gambling on meme stocks, crypto, and IPOs with their retirement money. The average person is basically on autopilot, diversified, and buying consistently — which is statistically still the best thing to do. That’s where things get disappointing though, because when you break it down by age, the reality of the average-versus-median gap becomes huge.

Not enough to last

For people between 55-64, the median 401k balance is only around $95,000. That doesn’t seem so bad, but usually the safe amount you can pull out of your savings every year without running out of money is about 4%. With a $95,000 balance, you can only withdraw $3,800 per year, which is roughly $317 a month to live on, in retirement, after working for 40 years.

For the typical American across all ages, that median 401k balance is just $44,000. This would give you just $147 per month at 4% a year. That amount would barely cover your electricity bill. Most Americans are arriving at retirement with a fraction of what they’re going to need. They’re leaning on Social Security to fill the gap, which currently pays the average person only about $1,900 a month.

As if that weren’t enough, here’s another fact: 40% of Americans have zero retirement savings in any account — no 401k, no IRA, nothing at all. When you zoom out even further, 42% of workers don’t even have access to an employer-sponsored retirement plan. While we have been studying people who do have these accounts, there’s a segment that’s starting from absolute zero.

In terms of how you compare at every age, let’s do a quick check as to how much you should be saving up to assure a safe future:

One emergency away from debt

According to the Fed, the median American household has about $8,000 in their checking and savings accounts combined, and that number gets worse the younger you are. Between a median of $8,000 in the bank and $44,000 in retirement, a huge chunk of Americans are one ER visit, one busted transmission, or one layoff away from going into debt or digging into their retirement accounts.

According to Vanguard, 6% of pulled money out of their 401k hit 6% this year – and that’s the sixth straight year it’s gone up, triple what it was before the pandemic. 13% of people also have a loan against their 401k, meaning people are borrowing from their future selves to survive the present. While the savings rate is collapsing, the market has increased 28% over the last year — this seems like a contradiction, but it’s a picture of a K-shaped economy. Those at the top are doing incredibly well, while everyone else can barely scrape by – 31% of American households are considered upper middle-class, and 4% are “truly rich” (12x higher than it used to be 47 years ago). But everyone else is getting squeezed by rent, groceries, insurance, and childcare that have outpaced their paychecks.

Thankfully, there’s a cheatsheet for anyone wondering how much money you need to have saved up at every age:

• By 30, you need 1x your salary saved.

• By 40, it’s 3x.

• By 50, it’s 6x.

• By 60, it’s 8x.

• When you retire at 67, you need to have 10x your annual salary saved.

So if you make $80,000 a year, the goal is to save roughly $80,000 by 30, $240,000 by 40, and so on. Now that’s enough to hit the “safe” amount for every category, but if you want to be in the top 1%, Yahoo Finance tells you how much you need to have saved up:

• 18-24 years: $150,000

• 25-34 years: $365,000

• 35-39 years: $730,000

• 40-44 years: $1,234,600

• 45-49 years: $1,397,000

• 50-54 years: $2,311,000

• 55-59 years: $3,105,000

• 60-64 years: $3,550,000

• 65-69 years: $4,574,000

If looking at those numbers makes you feel anxious, remember that the median 45-54 year old has saved only about $87,000 against a benchmark of $140,000. You’re not the exception, but in the same boat as everyone else. It isn’t hopeless, as long as you have…

A plan to catch up

Here’s a step-by-step breakdown of what needs to be done.

1. If you have a 401k, get the full employee match – always. If you don’t you’re literally turning down free money.

2. Use auto-escalation. Those who set up a default 401k contribute more to their portfolio, and contribute more frequently. If possible, set your contributions to automatically increase by 1% every year. You won’t feel it, but the difference adds up.

3. If you’re over 50, max out catch-up contributions. The IRS lets you put away an extra $7,500 a year on top of the normal limit once you hit 50. Done consistently for 15 years, that can add about $193,000 to your balance by retirement.

4. This is the one that matters most: Watch your fees! An index fund might charge you 0.03% while an active fund charges 0.75% or more. That sounds like a tiny difference, but over 30 years, it can cost you tens of thousands of dollars.

5. Don’t get discouraged if you’re behind. Almost everyone is falling short of these benchmarks, so you’re in good company. The worst thing to do is to feel hopeless, and then do nothing. The people who win aren’t the ones who started ahead but rather the ones who started from where they were and didn’t stop.

Overall, the economy does seem to be getting better in general. More people are contributing to their retirement, and participation in the market is going up. But the typical person is still dangerously underprepared and under-saving for what they need.

My honest take is that the people who win at this are almost never the smartest, or the highest earners, or the ones who timed something perfectly. They’re just the ones who started early, automated it, and then kept going. That’s it.

In terms of where we go from here, unfortunately, I tend to think that the financial gap will continue getting wider before it gets better. The people who own assets keep pulling away, while everyone living paycheck to paycheck falls further behind. Obviously, this isn’t fair. But it is predictable, and the thing you have some control over is to make sure you’re on the right side of the chart. So:

1. Keep a little cash so the next emergency doesn’t wipe you out.

2. Hold that in a high-yield account so you gain some interest along the way.

3. Grab every dollar of your employer match.

4. Automate it so that you never rely on willpower

5. Buy something simple like a low-fee index fund without doing anything different.

You don’t need to be rich to fix this, you don’t need to time the market, or to pick the next Nvidia. You just need to start with what you have, as soon as possible. If you found this useful, please like, restack, and share it with a friend who could use the help:

Share

I’ll see you next week.

— Graham

1. With Kevin Warsh, taking over, the Federal Reserve has completely flipped the entire outlook for the US economy, inflation, and your money to the point where we could see a complete reversal.

2. SpaceX had the largest IPO ever in history, and the market is euphoric. In a single day, Elon Musk’s net worth grew by more than Warren Buffett earned in his lifetime. But the history of tech IPOs tells a very different story that you need to know as an investor.

3. Bitcoin has fallen 40% from its all-time high. Many are blaming it on an unexpected move by Michael Saylor.

Let’s take a look at what these changes are that could go into effect as soon as next month, how they impact the market, and how this affects your money and investments. The decisions you make now could determine whether you keep your money safe or get left behind.

If it’s your first time here, join 40,000+ other readers who get the most timely updates about the market in their inbox every week by subscribing for free:

Subscribe now

The Federal Reserve’s nemesis

The first thing on the Fed’s priority list is to stop the Inflation boogeyman.

Though prices were steadily trending down, over the last few months, inflation has returned to a 3-year high with CPI coming in at a whopping 4.2% increase, year-over-year.

Almost all of this comes down to one source: Energy. This has nearly doubled in the last 6 months as a result of the conflict throughout the Middle East.

Apart from this, PPI (Producer Price Index) came in significantly worse than expected, at 6.5% over the last year, the highest since November 2022. This is what businesses pay before it ever reaches you, and this cost will eventually be passed on to consumers. This puts the Fed in a tight spot: If oil keeps rising, inflation goes back up, and the Fed might be forced to raise rates just to stop prices from spiraling out of control. But if oil falls, they’re going to have to wait and see for months before making their next move – because the moment a deal falls through, oil jumps back up.

But the bad news is that, as of today, the market is pretty much confirming that unless something breaks, they’re probably not cutting rates anytime soon. Speaking of which, the market has been caught up with something entirely different…

The SpaceX IPO

As SpaceX stock started trading, I was literally glued to my phone. It was incredible to witness how the price was rocketing up in minutes. This was a record-breaking IPO. However, there are some important things you need to know before getting in on the ground floor of a trade like this.

First, do IPOs make money on average?

One analysis looked at every $1 billion+ tech company that went public since 2010. On the surface, returns look incredible. The average IPO company was up 248% in just 5 years. However, the catch is that the average is almost entirely due to a handful of massive winners – including Shopify and Palantir, which both increased by thousands of percent – so when you take those out, the median tech IPO was actually down 7.4% six months after first trading, and still down 3.5% a full year later!

In fact, 52% of $1B+ tech IPOs were trading below their initial offering price a year later. If you zoom out to include every single IPO since 1980 (over 9000 stocks), the data shows that if you buy at the first day close, you tend to underperform the market by about 20% over the next 3 years.

Now, forget the average, let’s look at SpaceX specifically. The reason companies like Shopify and Palantir produced such large returns was that they IPO-ed small, between $2b and $10b, and then they grew into $100 billion dollar market giants, giving investors incredible returns. But SpaceX is already trading at $2 Trillion. From here on, a 30x return seems extremely unlikely because all the “easy money” was made privately years ago, and there might be less room for exponential growth now.

Now, this isn’t to say you should bet against Elon Musk.

He’s generally proved everyone wrong, and his companies have the potential to outperform all metrics that came before, so I’m not suggesting you should short his stock. But buying into the hype usually doesn’t produce above-market returns, and it’s important to remember that as existing shareholders offload their shares (over the next 6 months or so), things tend to cool off.

Is this the market top?

There’s a narrative that the record-breaking SpaceX IPO is a signal of the market top in the middle of an AI bubble, and that private investors are using this as a way to cash out at the top. Two arguments for this according to Yahoo Finance:

1. Bursts of giant, money-losing IPOs have often clustered near market peaks. SpaceX fits that profile.

2. The S&P500’s PE ratio now sits near 40, a level only touched once before, during the dot-com bubble. All this time, free cash flow has dropped to record lows.

Bank of America, Citi, Barclays, and Goldman Sachs all concur, issuing warnings of their own. However, the same Bank of America checklist had hit 70% back in Feb 2025, when the S&P500 was sitting at 6,144. If you had panic-sold back then, you would have missed the market climbing another 20% higher.

That’s why, now more than ever, you need to be careful with your money, avoid blindly chasing the hype, and make sure you’re positioned for both sides. But before we summarize the blueprint for what to do, there’s one asset that has been behaving rather strangely:

Bitcoin fire sale

If you’re a Bitcoin holder, there’s no way to sugarcoat it — it’s been a rough ride. Over the last year, Bitcoin is down almost 40% from the all-time high of $124,000, and, even in the last month, it’s fallen back down another 20% to its lowest point in over a year. Why?

A lot of the headlines want to pin the blame on one person: Michael Saylor. Saylor runs Strategy, which is now the largest corporate holder of Bitcoin in the world, holding more than 4% of the entire supply! So the entire market is exposed to the actions of one company, and to some extent, one person who’s built his entire reputation around “never selling.” However, on June 1st, it was disclosed that his company did end up selling 32 Bitcoin for the first time since 2022.

After this was made public, the entire market began to sell off.

Now, this doesn’t make sense on the surface. Selling 32 bitcoin out of 844,000 is basically nothing. But one person put it perfectly:

Now, this isn’t just driven by sentiment. Strategy accumulates Bitcoin by issuing stock in their company. But to entice people to buy the stock, they’re paying out a 12% dividend yield. But how can they afford to pay it? Well, if Bitcoin keeps going up, they keep raising more money, which they use to pay the dividend while also buying more Bitcoin. But if the value starts falling, they either have to issue more stock to raise money – which dilutes shareholders – or they sell Bitcoin to pay out their expenses.

This could one day lead to a “death spiral” where Saylor is forced to sell Bitcoin to make the payments, causing the price to fall, forcing him to sell even more Bitcoin, and so on… In his defense, he claims this (and he did buy more Bitcoin after selling):

But the risk still remains, and it’s worth noting. The real reason Bitcoin is falling, however, might be less dramatic. A lot of the “Crypto Money” that is now chasing AI stocks and IPOs. Bitcoin has underperformed for the last 5 years, so people have grown tired of it, and are investing their money elsewhere in what seem like more promising ventures.

Until people get excited again, we’re likely to see choppy performance for the foreseeable future:

• Galaxy Research just reported that Bitcoin may not have bottomed yet, with a base case that it could fall to between $40,000 and $46,000 by late this year.

• Standard Chartered thinks the bottom is already in at around $59,000.

Despite all of this, Galaxy believes Bitcoin will hit $250,000 by the end of 2027.

Now, let’s wrap it up looking at what the Fed has in store for the future:

Fed Outlook

A few days back, Kevin Warsh officially gave his first speech as chair of the Federal Reserve. Just like Jerome Powell, he reiterated that they were committed to fighting inflation while protecting the broader economy. Maybe it was just a crazy coincidence, but right before this meeting, a peace agreement was reached with Iran, which gives the Federal Reserve some room to cut rates again when inflation eventually begins to subside.

Right now, looking at the market, they’re probably not cutting rates anytime soon. But starting in 2027, the goal is that inflation is back under control. Then the Federal Reserve can resume cutting rates and pump the market full of more money.

According to the latest “Summary of Economic Projections,” which predicts where they expect rates and the economy to move over the next few years, they expect interest rates to increase a little in 2026 before falling back down in 2027 and again in 2028. They also expect inflation to remain elevated at 3.6% throughout 2026 before falling again.

One of the ways we can tell where the market is headed is with a “dot plot” where each voting member gives the public full transparency as to what they think is best for the economy. But Kevin Warsh wants to get rid of the dot plot entirely. His vision for the Fed is that it should signal less and do more, giving us all zero guidance going forward.

Even if he is able to accomplish this, each member can still vote independently. Kevin Warsh cannot lower interest rates unilaterally without persuading the others, not to mention, Jerome Powell is still on the board. It’s unlikely that anything substantial changes until he completely steps away, although there are rumors that since Kevin Warsh is Trump’s pick, he’ll use it to create far-reaching change at the Fed.

What do you think? Will we see a fundamental change in how the Fed operates?

Leave a comment

Here are my thoughts on all of this: Overall, I think that the coverage around Kevin Warsh is a bit dramatic in both directions. The reality has to do more with the pressure of the situation. This is a guy who who inherited an economy with 4.2% inflation, a war-driven oil shock, a divided Fed, and a bond market that’s already in shambles. The math won’t change unless inflation actually comes down. And as we’ve seen time and time again, literally anything can happen when you least expect it.

The only thing that matters over the next month, from my perspective, is the peace deal. If it goes smoothly, and oil keeps falling, then inflation could evaporate to the point where rates slowly start to go back down. But if something throws a wrench in these plans, oil rips back up, and we’re back to square one. I’m cautiously optimistic that things will work out, but I’m also used to the sudden volatility that comes out of nowhere. No one can predict what happens next.

In the last two weeks, we watched the largest IPO in history, the hottest inflation in three years, a peace deal with Iran, and Bitcoin cut in half. At the end of all that, markets moved higher. A year ago, if you’d tried predicting any of this, you would’ve been wrong. The people who sold everything because “the market’s too expensive” missed it climbing to 7,400. Who’s to say that the people selling now when Saylor sold 32 coins might not be committing a similar error?

All this to say that I’m sticking to my simple approach of buying the market on a regular basis, doing absolutely nothing different. Historically, that’s the path that’s been more resilient.

So stick to your regular investing plan, stay diversified, and please, if you found this useful, like, restack, and share this post with a friend you don’t want to get left behind.

Share

I’ll see you next week,
– Graham

A viral thread on Reddit laid out a very convincing argument last week. Though the post was removed after it went viral, here’s the gist:

Stonks go up is no longer a meme, it is a law, like gravity, only in reverse with money

• We owe 40 trillion in debt. Our interest payments are about to exceed our GDP. This means that the only way to make our interest payments ALONE is to print enough money to cover the interest

• This will cause hyper inflation. But who cares if you own PLTR or TESLA stock? Those will inflate proportionally. You see, it’s actually mathematically impossible for stocks to go down at this point. If they do, then the entire world economy will collapse

This is why you see any “crash” instantly recover within half a trading day. The stock market can LITERALLY NOT GO DOWN. These are not famous last words. This is the new law of the land.

This isn’t the first time that a thesis like this has come up, but the economic conditions this time make it worth some serious thought. So we need to discuss exactly what’s going on, why the government is now forced to continue printing more money than we ever imagined – and what the implications are if this theory is correct.

Because if this theory is correct, then we could witness the largest wealth transfer in history. If not, it’s a rug pull.

Before we dive in, if it’s your first time here, join 40,000+ investors who stay ahead of the market by subscribing. You’ll get one email every week, and it’s totally free:

Subscribe now

The Great Melt-up

The idea that “stonks only go up” is based on a theory economists call “The Great Melt-up.” It works like this: Every bull market keeps going up until it reaches a euphoric phase. Prices stop being driven by fundamentals like earnings and cash flows, and they start being driven almost entirely by momentum. At this point, there’s the feeling that everyone around you is getting rich – while you’re being left behind.

The simple belief is that prices will keep going up because they have been so far. This isn’t as rare as you’d think. The returns during these “melt-ups” can be insane – except until they aren’t.

• In the late 90s, the dot-com bubble happened: From 1995 through March 2000, the Nasdaq rose 400% with the final year alone up nearly 90%. Companies with no revenue, no earnings, and sometimes no actual product were being valued at hundreds of millions of dollars. When the CAPE ratio peaked at 44 in Dec 1999 – the highest in 140 years – investors believed the Internet had changed the laws of the market. (“AI will change everything.” Sounds familiar?) Then the Nasdaq suddenly lost 78% over the next 2.5 years. It didn’t recover for more than a decade.

• Or look at Japan: Their market rose 900% between 1975 and 1989. At the top, their P/E ratio was as high as 60x earnings. Their land was so valuable that the Imperial palace grounds were worth more than all the land in California! It was ridiculous, but nobody wanted to exit first and miss out on the rally. When Japan started to raise rates, the whole economy broke, and the stock market fell 60% in under 2 years. Their economy took 34 years just to break even.

However, this doesn’t necessarily mean every rally is a melt-up.

The early stages of every melt-up are always driven by something real – a new technology, actual economic growth, different policy – but when FOMO and leverage kick in, valuations get stretched and everyone starts thinking the good times won’t end. To understand if we’re in a meltup now, let’s look at the 2026 stock market.

The Reddit Melt-up theory

The theory on Reddit is based on debt. If the US government owes $40 trillion while running an annual deficit of $2 trillion, how do we get out from under it without absolutely destroying our economy?

The easiest path is to inflate away the debt. The dollar loses purchasing power until that $39 trillion is worth less in real terms. This neat trick is called “financial repression” because it destroys the wealth created by the population (I wrote more about how the US government has already used this once – after WWII):

But when a government inflates its currency, anything priced in that currency rises with it – stocks, hard assets – and though the assets become more valuable on paper, they are worth less in reality because the dollar’s worth has gone down. So when Goldman Sachs raised their year-end target for the S&P 500 to 8,000 recently, it’s not a simple win even if it turns out true.

The alternative to an indefinite rally is to actually crash the stock market, which no one is crazy enough to do. But here’s where the numbers get a bit scary:

• By every major valuation measure, the stock market isn’t cheap. In fact, the price people are paying for every dollar of earnings is now near some of the highest levels ever recorded – roughly double what investors have paid historically.

• The CAPE ratio has only gone above 40 twice. Once was during the dot-com bubble in 1999. And the other time is now.

The current market isn’t just pricing in a debt-driven melt-up, but rather acting in a way that’s been recorded only once in 140 years of market history. So how do we check whether the “Great Melt-up Theory” holds or falls apart?

The crash test

There are some claims being thrown around in that Reddit Post we need to examine a little closely:

1. Interest payments are about to exceed GDP – False. The debt-to-GDP ratio is exceeding 100%, but that’s not the same thing. It’s happened before, and they were able to “print their way out of it” causing markets to recover and go higher.

   

2. The only way to make interest payments is to print more money – False. The government can also borrow by selling treasuries to investors, pension funds, governments, and institutions. Of course, this isn’t sustainable forever.

3. Stocks inflate proportionally with hyperinflation – False. Historically, this has not been the case. Between 1918 and 1922, the German Stock Market lost 97% of its value before the hyper-inflationary peak. Most people were forced to sell at the bottom just to pay for rent and food. In Zimbabwe, the market rose 500-fold while the currency dropped 99.8% in dollar terms. Similar things happened in Venezuela in 2018.

Basically, here’s what you need to know: The Great Melt-up isn’t a boon for stockholders. Stocks can rise during inflation, but that doesn’t automatically mean you’re getting richer. If your portfolio goes up 10%, but everything you buy costs 10% more, you didn’t gain anything. So in terms of what you need to know, here’s what you can actually do about all this:

The exit plan

History shows us that most likely: The US does not default on its debt, does not experience unprecedented hyper-inflation, and neither do we see a melt-up based on endless money printing caused by the national debt.

The more realistic outcome is a long, slow period of financial repression where inflation runs a little higher than the interest rate, the debt becomes easier to manage, and the dollar is worth less than it used to be.

The tradeoff is that savers quietly get squeezed. Cash loses value. Prices keep moving higher. Asset prices rise in dollar terms, but after inflation, real returns could be a lot lower than what investors got used to over the last decade.

For the stock market specifically, prices will probably keep drifting higher over the long run, because that’s what usually happens when the dollar loses purchasing power. But just because they go up over time doesn’t mean they can’t crash along the way. The market could still fall 30, 40, or even 60% from current levels. But it could go on to make new highs later. Both these contradictory truths can be true at different times:

• The market is expensive, and one event could cause a 20% sell-off. Nothing is risk-free.

• But on the flip-side, high debt doesn’t automatically mean high-inflation or pumping the stock market.

The bottomline is that you shouldn’t build your entire financial future around the hope that the next bailout is guaranteed.

The way I see it, the Reddit post is directionally right, but it gets the steps wrong in terms of what it takes to get there.

• In a high-debt world, the government has a strong incentive to let inflation do the heavy lifting.

• Over long periods of time, that tends to favor assets over cash.

• BUT that does not mean it’s “mathematically impossible for stocks to go down.” That’s a dangerous assumption.

This kind of assumption makes people jump at every bit of hype thinking it’s their last opportunity to get rich. They buy in at extreme valuations, with no margin of safety, no diversification, and no plan for what happens if the market repeats what it has done many times before – which is to fall.

And I’m not sitting here calling for a crash. Plenty of really smart people think the market could keep going higher.

But throughout history, the people who came out ahead during inflationary periods were usually not the ones who went all-in on the most expensive, highest multiple stocks. It was the people who owned a mix of productive assets – stocks, real estate, some cash, maybe some gold, short-term bonds – and were not forced to sell when things got ugly. Stocks might beat cash over the very long run in a high-debt world, but that can mean 10, 15, or even 20 years where your portfolio goes nowhere after inflation. So instead of being hopeful about your willpower getting you through decades of inactivity, build systems that let you not fall back on hope as a strategy.

So to sum it up – the answer is not to panic or sell everything. But it’s also not to go all-in, use leverage, and assume every dip is getting rescued. These are highly emotional times where you might be tempted with betting everything on a “once-in-a-lifetime opportunity.” But risk cuts both ways.

I think most people are best off staying diversified and not over-concentrating in the most expensive names. Keep enough cash so you’re never forced to sell at the worst possible time. And please DO NOT build your entire financial future around a viral Reddit post.

So stick to your regular investing plan, stay diversified, and please, if you found this useful, like, restack, and share this post with a friend you don’t want to get left behind.

Subscribe now

I’ll see you next week,
– Graham

It’s no secret. This has been on everyone’s radar for a very long time. But the Federal Reserve’s plan to quietly make the national debt disappear is something most people don’t know about.

This isn’t a conspiracy theory. The Fed has literally told people what they plan to do. It’s usually put into such dull language that most people don’t understand what’s happening right under their noses. Back in the 1940s, the Fed used the exact same tactics, and it worked. They didn’t erase the debt. They just transferred it.

How does this new plan work? Who wins and who gets left behind when the Fed pulls the plug this time?

Today, let’s dive into exactly what you need to be prepared for so that your hard-earned wealth doesn’t get eroded by something entirely outside your control. But before you forget, hit subscribe and join 40,000 investors so that these weekly emails on how to keep your wealth safe land right in your inbox – for free:

Subscribe now

How bad is the debt situation?

The US National Debt is in really bad shape. The last time we were doing this badly was during World War II and our survival was on the line:

Let’s look at the numbers:

• The US currently owes nearly $40 trillion.

• It’s on pace to reach $50 trillion by 2030.

• Every single day, the debt increases by $6 billion.

However, the debt itself isn’t actually the biggest problem. It’s the interest we pay. As long as interest rates were low, the cost of carrying the debt was manageable. With inflation kicking in and rates going up to 5%, the interest on trillions of dollars is causing a debt spiral.

Here’s how it works: The more we borrow, the higher the interest payments. This leads to a bigger deficit that forces us to borrow more, leading to higher interest payments the next year. It’s a constant game of passing the hot potato. By 2036, interest costs will reach $2.1 trillion – a number so large that fixing it needs cuts equal to the entire defense budget to stop it from getting worse.

For the first time in US history, we are spending more on interest than on on our entire military, every single year. To combat this, Trump recently called for the Fed to lower rates immediately. Lowering rates might allow us to refinance our debt, saving us a lot of money, but it hasn’t happened so far because Jerome Powell’s first priority was to prevent runaway inflation. The new Fed Chair Kevin Warsh could take an entirely different approach.

But while interest rates can slowly eat away your hard-earned wealth, there are things that could change your life in seconds: Like leaving your information up on the Internet where anybody can find it.

Data brokers legally collect and sell your personal information – including your name, home address, and phone number – to anyone with a credit card. This exposure isn’t just a nuisance. It can lead to risks like identity theft, phishing, and doxing.

That’s why I trust DeleteMe.

DeleteMe is a hands-free subscription service that removes your personal information from hundreds of data broker websites. They use their own technology and real privacy experts to continuously monitor and remove your data all year long, never outsourcing to third parties. After signing up, you receive a detailed, transparent privacy report showing exactly what information they found, where it was, and what they removed.

Signing up to DeleteMe is the simplest way to help protect yourself – and your business – from scams and identity theft. Instead of scrolling away, just take a second to click here:

Check out DeleteMe

You get an additional 20% off when you use the code GRAHAM.

Now let’s understand what Kevin Warsh plans to do.

The three options

When a government has a debt problem this large, there are only three ways out.

1. Austerity:

This is the “responsible adult” solution. You raise taxes, slash spending, run surpluses, and pay the debt down over time. On paper, it works. A Cato Institute report found that the US would need to implement spending cuts or tax increases of about $827 billion a year to make a difference. This sounds sensible, but it’s politically impossible. Raising taxes while cutting Social Security, Medicare, and defense in the same bill is the fastest way to end a political career.

2. Default:

The US government could just say, “Hey, sorry guys. We’re bankrupt and we can’t really pay back what we borrowed.” Though this sounds insane, 14 countries have defaulted on their sovereign debt in some form since 2000 – including Argentina, Greece, Sri Lanka, and Lebanon. However, it’s different for us because the dollar is the world reserve currency. Everything is traded in US dollars and we are the safe haven. A US default would be such a disaster that it would trigger a global depression sending us into the dark ages. So, it’s definitely not happening.

3. The magical third option:

Shrink the debt with inflation. This is how governments quietly reduce debt without admitting they defaulted. All they do is keep interest rates below inflation. As prices rise, they repay yesterday’s debt with today’s dollars that are worth less. On paper, the debt is still there… but inflation is slowly eroding it.

For example, a $10,000 mortgage in 1960 could buy you an entire house. Today it can barely cover a few months of rent. Inflation ate away the value of that mortgage. Similarly, if the government is paying 2.5% interest on $40 trillion of debt, but inflation is at 6%, the debt is actually shrinking by 3.5% per year. The government is slowly reducing its burden – but the people are absorbing the cost.

But this isn’t the first time this is happening. And to know why it’s scary, you need to know who paid the price for it the last time:

World War II and Financial Repression

Debt takes a back seat during war when the first priority is winning. During World War II, we took on more debt than ever, because it was an existential crisis. The hope was that we could win and pay it back later. If we didn’t win, it wouldn’t matter anyway. US debt hit roughly 106% of GDP back then, just a little more than where we are today.

Once the war ended, the question was: How on earth are we going to pay it back?

Here’s what they did: Under direct pressure from the Treasury department, the Fed pegged interest rates at artificially low levels: Treasury bills at 0.375 percent and long-term Treasury bonds at 2.5 percent. Those rates were fixed from 1942, all the way until the Fed-Treasury accord in 1951. This wasn’t because the economy needed it – the government had no choice other than this to stay afloat.

Of course, fixing rates artificially low for a decade meant runaway inflation. While interest rates remained at 2.5%, some points even saw 10% price increases.

In real terms, after accounting for inflation, savers and bondholders were earning negative returns on their money. Buying a treasury technically made you 2.5%, but with inflation at 8.5%, you lost 6% in reality. While savers got poorer, the national debt slowly got healthier. This strategy was financial repression – denying the public the ability to build wealth through savings, so that government debt could be managed.

But it worked. An IMF paper found that without this combination of low rates and “surprise inflation,” the Debt-to-GDP ratio would have fallen to just 74% by 1974. In reality, it reached 23%. The math is undeniable. It wasn’t growth or responsible budgeting that solved the post-war debt problem – it was financial repression.

Why is this relevant now?

Financial repression has been used before, it worked. The conditions to use it again are showing up in almost exactly the same way. So you need to understand what the Fed plans to do:

Shrinking the balance sheet

On May 15th, Kevin Warsh was appointed as the new chair of the Fed, and his entire thesis is this: The best way to get interest rates down is to shrink the Fed’s balance sheet. That might sound completely backwards. If the Fed sells bonds, supply goes up, and prices fall – which usually means rates rise. So why is Warsh saying the opposite?

His argument is that the current system is distorted. The Fed’s own balance sheet is now part of the problem. After years of buying bonds and printing money, the Fed is sitting on roughly $6.6 trillion in assets, and banks are holding a huge amount of extra reserves. If the Fed didn’t do anything now, banks would undercut each other to loan that money out through the financial system. So the Fed actually pays them interest to do nothing.

In other words, the Fed printed more money than the system could handle and has to “bribe” the banks to sit still. On top of that, a massive balance sheet makes outside investors nervous – if the government just keeps printing money to pay its own bills, it creates an “inflation risk premium” where long-term rates stay high because nobody trusts the Fed to bring inflation under control. A smaller balance sheet signals discipline, and long-term rates could start drifting lower naturally.

That’s why, Warsh’s argument is simple: Shrink the balance sheet, banks stop getting bribed with high rates, and the Fed actually regains the ability to cut rates without triggering an inflation spiral.

Finally, there’s the AI wildcard. Warsh believes AI could make the economy grow faster without causing as much inflation. If he’s right, it gives the Fed the ability to lower rates while growth and inflation shrink the value of the $39 trillion debt. Do you think AI will actually deliver on its promise and accelerate the economy?

Leave a comment

If all of this fails, the government could use a sneaky trick to cut interest rates:

Inflation is whatever they say it is

We like to think that CPI inflation reports are accurately telling us the full picture. But when you get down to it, these are all numbers that could be manipulated to tell you whatever they want you to believe. And yes, this has been done before.

For example, there’s the Substitution bias: In the 1990s, inflation was revised to account for “a change in consumer behavior.” The old inflation number assumed that, if steak gets expensive, you’d still buy steak for a higher cost. But the data showed that people instead save money by buying chicken. Therefore, people spend less, and food inflation goes down all of a sudden. Genius, right?

Here’s the problem: It’s true that people adapt to higher prices by purchasing low-cost substitutes, but you’re measuring the cost of what people can afford to buy, not the cost of what they used to buy.

There’s also Hedonic adjustment. If a car gets more expensive, the government can say part of that price increase isn’t really inflation because the car also got better – maybe it has more safety features, better fuel efficiency, or a nicer interior. So they adjust inflation downward to account for the “improved quality.”

Apart from the optics of controlling inflation, a lower CPI means the government owes less in interest. Every 0.25% reduction in measured inflation saves the government hundreds of billions in automatic payment increases over time. There’s no conspiracy here. It’s a plain incentive to push for lower numbers. The same thing could happen with job numbers as well. Initial reports showed strong job creation, and revisions months later showed real numbers were much weaker. The same person working two jobs is counted twice: So if 100,000 people picked up a second job, it says “100,000+ jobs added” – but it’s misleading because those people need a second job just to stay afloat.

Let’s sum it all up and see what it means for you.

Here’s what the government is most likely to do:

1. Taxes are going up: It’s common sense. As deficits compound and the interest burden grows, the political math eventually has to find new ways for the government to make money. Things like “The One Big Beautiful Bill” added another $4.6 Trillion to the 10-year deficit. Someone has to pay for that – and that usually comes from raising taxes on higher earners, closing loopholes, and higher capital gains. The math won’t math without more money.

2. They will print more money and keep rates below inflation for as long as they can. Financial repression won’t be announced in a press conference. It’ll happen through silent pressure on the Fed Chair, until low real interest rates quietly eat into the purchasing power of cash and low-yield savings. The people who will get hurt most are the ones sitting in cash, savings accounts, and fixed-rate bonds.

3. The data will get harder to trust: When the government has an incentive to show smaller numbers, the methods they use will drift in that direction. CPI substitution, downward jobs revision, and random adjustments will be normalized. Not every number is fake, but if the numbers don’t reflect the actual pain you feel when paying for groceries, rent, and gas – then are they right?

The worst thing you can do right now is to sit on a pile of cash assuming it’ll be worth the same thing in 10 years. It probably won’t.

That doesn’t mean you should panic and go all-in on one crazy bet (this is the other mistake people tend to make). Inflation acts over time, and the way to resist it is to own assets that have a better chance of keeping pace, historically, like stocks, real estate, some gold – and maybe even commodities and some bitcoin. None of these are perfect on their own, but they can help with the real issue, i.e inflation eating your money’s purchasing power.

The system usually finds a way to transfer wealth from savers to borrowers. But once you understand what’s happening, you can avoid getting blindsided by it. So keep investing, stay diversified, and please, if you found this useful, like, restack, and share this post with a friend you don’t want to get left behind.

Share

I’ll see you next week,
– Graham

Today’s post is Sponsored by DeleteMe. Take a moment to check them out if you haven’t already.

I’m doing a “subscriber financial audit” for my YouTube channel members. To kickstart things, if you want me to audit your finances and yell at you for spending too much money, email over the following information:

Background (age, occupation, income)
Investment accounts/any spreadsheets/savings
Spending statements/rough spending
What you think you need to improve on
Any problems you’re currently facing
Any other random information you think is relevant

Please hide all account numbers, sensitive information you don’t want shown on a YouTube video, addresses, phone numbers, etc. I’ll just be reacting to this and giving my first impression. I won’t get to everyone, but I’ll pick a few to start with.

Email contact@grahamstephan.com with this info and title “SUBSCRIBER AUDIT”

Starting last week, the Federal Reserve is positioned for a paradigm shift.

Kevin Warsh is taking charge as Fed Chair. For the first time ever in history, the new head of the Federal Reserve is openly calling for a “complete regime change” at the institution that controls the cost of money. If his plan follows through, it could reset everything from:

• the Fed’s balance sheet

• how much it intervenes in the market

• how they calculate inflation, and even

• the way interest rates affect your savings, investment, and mortgage.

But it’s not going to be a smooth transition. There’s going to be friction.

Because for the first time in 75 years, the Former Fed Chair won’t be stepping down from the Federal Reserve. Jerome Powell will be sitting at the same table, as a board member, and overseeing the very regime that Kevin Warsh promises to overhaul. If there’s anything the market hates, it’s uncertainty, and to brace for that uncertainty, you need to know how this could play out. What happens next could decide whether your money starts working for you, or whether it starts to lose value without you noticing.

Before we get into that, hit subscribe to join 40,000+ subscribers and get weekly updates that grow and protect your wealth – for free:

Subscribe now

A house divided against itself

The Federal Reserve is a small group. But this small group decides the direction of the economy. Its entire goal is to help keep our economy stable. They have only a few tools in their arsenal:

1. Influencing interest rates

2. Printing money

3. Siphoning money out of the economy

It’s a fine balance between preventing rampant inflation and slowing the economy into a recession. They meet only eight times a year, but the decisions in these meetings influence every part of your financial life: The rates on your savings account, the cost of a mortgage, how expensive it is to finance a car, whether stocks go up or down, whether businesses keep hiring and expanding, and how fast inflation eats away your paycheck.

Now, a brand new person is steering the ship: Kevin Warsh.

But here’s where things get unusual. Historically, when a new chair is appointed by the President, the old chair steps aside. Except this time, Jerome Powell has insisted on staying on as a part of the Federal Reserve. This is highly unusual. In fact, the last time, this happened was back in 1948. President Truman declined to reappoint Marriner Eccles and chose Thomas McCabe, but Eccles stayed on. That was a period of internal struggles that eventually led to the 1951 Treasury-Fed Accord.

This accord fundamentally changed how the national debt was managed. Earlier, interest rates were pegged to the national debt, and the Fed and Government had to work together because their decisions affected each other. This went away.

Back to 2026, Powell is staying on, citing “unprecedented legal attacks.” It’s no secret that President Trump wants Powell to leave:

To put it lightly, they don’t see eye to eye on cutting rates. Which is why when Warsh and Powell, two people with very different philosophies, sit at the same table, it creates a lot of unpredictability. A lot of people think Warsh is here to do Trump’s bidding. But Warsh is also the most unlikely pick for this purpose, because what he claims he’s going to do is the exact opposite.

So, what is Warsh’s plan and will he manage to bring down inflation?

The Four Part Reset

Kevin Warsh is not planning on a gradual transition. He has outlined a specific blueprint for a regime change that focuses on four pillars of the American economy:

1. Aggressively shrink the balance sheet

Right now, the Fed is sitting on $6.7 Trillion worth of bonds and mortgage-backed securities, that the Fed had purchased during COVID and the 2008 Great Financial Crisis. It was a way to pump money into the financial system and keep it from collapsing. But Kevin Warsh thinks this balance sheet is too large. He said:

You could take down that balance sheet a couple trillion dollars over time, and what you would then do is turbo-charge the real economy.

His logic is that with a smaller balance sheet and less money printing, market distortion would go down. When investors expect less money-printing, there is less “risk-premium” on assets, and inflation would decrease. Potentially this would create more room to cut rates – if investors think that inflation is solved.

But critics argue that shrinking the balance sheet, or taking money out of the system could crash the stock market and cause interest rates to spike even further. The market is already showing signs of panic.

2. End Forward Guidance

This is a new idea. For the last 14 years, the Federal Reserve has issued a “dot-plot.” It’s a graph that shows where each voting member expects interest rates to go over the next few years.

What’s the point of this? Literally every hedge fund, mortgage lender, and investor looks at this to determine where rates are most likely headed. But Kevin Warsh wants to get rid of this, entirely. Not just that, he wants to reduce the number of annual meetings from 8 to 4. Why?

Right now, the Fed is optimizing for clarity and transparency. But Warsh wants a Fed that talks less and surprises more. He thinks this is healthier for the economy. The downside is that nearly everyone agrees that this makes it impossible for the market to adjust to what’s coming next. With no smooth guidance, we could see a lot more abrupt rallies and sell-offs. Expect a more volatile and jagged market if this happens.

If you had to choose: Would you prefer the Fed stick to the dot-plot, or risk a complete reset to try and lower inflation?

Leave a comment

3. The Trimmed Mean Inflation Gauge

This is perhaps the most technical and controversial part of the plan. Under Powell, the Fed prioritized Core PCE, which removes food and energy costs to get a sense of underlying price trends. Warsh wants to move to what is known as Trimmed Mean PCE. This method discards the most extreme price changes on both the high and low ends to find the average.

In practice, this often results in a lower inflation number than the headline figures. This might sound like a more accurate way to measure the economy, but it can also mask the reality of what people are paying at the pump or the grocery store. If oil prices spike due to geopolitical conflict, the Trimmed Mean might drop that data point as an outlier and show smaller inflation figures. This would allow the Fed to justify cutting interest rates, even while the cost of living for the average person is still rising.

4. Earned Independence

Powell treated Federal Reserve independence as a sacred, non-negotiable rule. Warsh has introduced a new concept: independence must be earned by hitting targets. It’s not really clear what “earned” means in this context. This uncertainty is causing a lot of concern among economists who worry that this is just a fancy way to say that the Fed will play along to the government’s wishes, and that the Fed is becoming more political. If the Fed has to hit certain goals to keep its autonomy, it might be pressured to prioritize short-term gains like lower rates over long term stability.

The Bond Market Revolt

There’s a misconception that the Fed has total control over all interest rates. But there are two kinds of interest rates: The short term rate that banks charge each other, and the sticky rates that affect your life, like the 30 year mortgage. The Fed can shift the short term rates by controlling the Federal Funds rate. But the long term rates are controlled by the bond market. They creep up slowly over time, and the Fed cannot do much about it.

Long term rates are dictated by supply and demand, based on the confidence that people have in the US Government and financial markets. Right now, the bond market is in a state of unrest. Even though yields have been rising, countries like Japan that used to be the biggest buyers of US bonds are offloading because their own countries are paying comparable interest rates. To many countries, the rates on US Treasuries are not attractive enough to offset the risk. The market is currently pricing in a scenario where:

• inflation is growing out of control

• oil prices are rising

• the stock market is hot contrary to all reason

If investors believe that inflation is going to stay high or that the Fed is becoming too political, they will demand a higher yield to compensate for the risk. So even if Kevin Warsh cuts short term rates tomorrow, your mortgage rate might actually go up. Because of this, there is a growing possibility that Warsh might be forced to raise interest rates as his first move to gain the trust of the market:

If investors do not trust the new regime, they will continue to push yields higher, making borrowing more expensive for everyone regardless of what happens in Washington.

Winners and Losers in the New Regime

This policy shift creates a very clear divide in the economy.

The Losers

• Variable Debt Holders: Those with credit cards, auto loans, or variable rate mortgages are in a difficult position. With average credit card rates already above 20%, a delay in rate cuts or an unexpected hike will be painful.

• The Housing Market: Mortgage rates are back at multi-decade highs of 7%. Because Warsh wants to sell off mortgage backed securities, there is direct upward pressure on the cost of buying a home. This likely keeps the housing market frozen for the foreseeable future.

• The National Debt: The US is currently managing $39 trillion in debt. Higher yields mean the government has to pay more in interest, which increases the deficit. This creates a feedback loop where more bonds must be sold to cover the interest, further driving up rates.

The Winners

• Savers: If you have cash in a high-yield savings account or short-term Treasuries, this is the best environment in 15 years. With 30-year Treasury yields above 5%, you can earn a safe return without the volatility of the stock market.

• The Banking Sector: Banks benefit when they can charge high rates on loans while keeping the interest they pay to depositors relatively low. This expands their profit margins, which is why bank valuations are hitting all-time highs.

• The US Dollar: Higher interest rates generally make a currency more attractive to global investors. While this can make US exports more expensive, it increases the purchasing power of Americans traveling abroad and those buying imported goods.

My Conclusion

The situation at the Federal Reserve is messy. The presence of Jerome Powell on the board ensures that Kevin Warsh will face internal resistance at every step. A split committee is trying to navigate a high-inflation environment with two different maps.

I believe the market is currently calling the Fed’s bluff. Investors are signaling that they do not believe inflation is fully under control, and they are demanding higher yields as a result. For that reason, I am not betting on cheap money returning anytime soon. I am keeping about 20% of my portfolio in cash, earning between 3.5% and 4%, while continuing to dollar-cost average into my long-term investments.

The next major milestone is the Fed meeting on June 17th. That will be the first time we see how this split board operates in practice and how Kevin Warsh handles the pressure of the bond market.

If you found this breakdown helpful, please like, restack, and share this post with a friend. It helps more people stay informed and also helps the newsletter grow.

Share

See you next week,
— Graham

President Trump recently signed an executive order that’s going to change how Americans save and think about investing for retirement. Seven months from now, this new policy, called the Trump IRA, will go into effect.

Depending on whom you ask, this is either one of the greatest investing opportunities in decades, or a financial disaster waiting to happen. Why?

Because it introduces a powerful alternative to the backbone of American retirements, the trusty 401k. It even features a $1,000 investment match if you qualify. That’s basically free money! But in the background, the conditions that safeguard the 401k are also being tweaked. To understand the impact of this shift, you need to look past the headlines.

Let’s break down the executive order, income thresholds, and whether you should take it. But before we dive in, join 40,000+ investors who get these updates directly in their inbox by subscribing for free:

Subscribe now

You’ll never miss a notification, and you’ll be the first to know when something moves the market. Alright, let’s get started.

Why is the 401k broken now?

If you want to understand what the Trump IRA is trying to fix, you need to understand the ways in which it’s broken now. Everything in the American retirement landscape currently revolves around the traditional 401k. This is an employer-sponsored account, where a portion of every paycheck is contributed before taxes are taken out.

The math is simple: if you earn 100,000 dollars a year and contribute 10,000 dollars to your 401k, the IRS only taxes you on the remaining 90,000 dollars. This allows more of your money to stay invested and compound over decades. You eventually pay taxes only when you withdraw the funds in retirement. Many employers sweeten the deal by offering a match, where you get free money just for participating.

However, the 401k system is built on a massive assumption: that you have a traditional, full-time job. But in 2026, the reality is that 56 million people, including gig workers, freelancers, and employees at small businesses, do not have access to an employer-sponsored plan. These workers are effectively locked out of the primary wealth-building tool in the United States. While preparing for retirement is important, what’s even more vital is staying relevant in a market that’s changing faster than you can imagine.

If you spend any time on the Internet at all, you must have heard about Claude. It’s one of the most talked about tools on the internet right now, and I’ve dabbled with it myself. The tool offers incredible possibilities, and new models and features like Claude Cowork, Claude Design, Skills, and Connectors are launching literally every week.

But maybe you’re wondering where to start, and I get it, it can be a bit overwhelming.

Which is why you need to join the World’s first Claude-a-thon hosted by Outskill.

It’s a 2-day deep dive into Claude, its use-cases, and 10+ other AI tools. It’s this weekend from 10 am-7 pm EST — and they have just 1000 free seats for a limited time.

In the workshop, you’ll do deep research on Claude and use it to:

• Build your own artifacts and dashboards

• Create full presentations

• Set up Claude Connectors like Indeed to automate your job search

And much more. Register now! (free for the next 48 hours)

Register now

Now let’s get back to securing your retirement.

What is TrumpIRA.gov?

On April 30, 2026, the administration signed the order to establish TrumpIRA.gov. The stated goal is to connect American workers who lack employer-sponsored plans with high-quality, low-cost IRAs offered by the private sector.

The website is intended to be a one-stop-shop where workers can compare funds, without being ripped off by the high fees tacked onto so many corporate plans. I’ll be honest, most employer-sponsored retirement plans are subpar. They often charge exorbitant management fees and offer generic funds, just because most people in charge do not take the 30 minutes of searching it needs to find better investments. High brokerage is the number one reason that people get low returns in the long run.

The Trump IRA standards are quite strict.

To be listed on the government site, financial institutions must cap their total fees at 0.15% or less per year. While this is still slightly higher than a standard Vanguard S&P 500 ETF, which might charge 0.03%, it is much lower than the 0.2% to 5% fees seen in many traditional 401k plans.

The $1,000 Savers Match: How it works

The most talked-about feature of this order though, is the Savers Match.

Starting in 2027, the federal government will deposit up to $1,000 per year directly into qualifying retirement accounts. This is a 50% match on the first $2,000 you contribute. (For married couples, it’s a $2,000 match for your first $4,000)

This is a guaranteed 50% return on your investment before your money even hits the market. However, the qualifications are very specific:

• The full $1,000 match is available to single filers earning $20,500 or less.

• The match phases out entirely once you cross the $35,500 threshold.

• For married couples filing jointly, the full match is available up to $41,000 in household income, phasing out completely above $71,000.

This is a massive win for low-to-middle income earners, but even there, there is a logistical hurdle when it comes to actually receiving the money. The government match is expected to show up based on your tax return from the previous year. This means, to get your $1,000 in 2028, you must find the $2,000 to invest out-of-pocket in 2027. For someone living on $30,000 a year, saving $2,000 is a huge challenge.

The privatization of the 401k

Apart from this, there is another executive order in play that is causing concern among economists. Trump intends to expand 401k plans to incorporate alternative assets, including private equity, private credit, real estate, and cryptocurrency. Why?

The logic is that wealthy institutions and pension funds have used these assets for decades to generate massive returns, while retail investors have been limited to public index funds that historically earn less. By opening 401ks to invest in these other assets, the administration hopes to democratize wealth building.

But there’s a slight hitch. The existing options are “safe” and investors can mostly sleep easy. But for companies to invest in these more offbeat options, they have to tread with care. The Department of Labor has been directed to clarify how employers can offer these options without being sued for violating their fiduciary duty. In the past, workers have successfully sued employers for failing to do due diligence or offering high-fee, high-risk investments. Critics argue that this deregulation is essentially a payday for Wall Street, and they need to first prove that they can handle this safely.

Also, private investments aren’t as transparent as public ones.

Unlike the S&P 500, private investments are illiquid and difficult to value. Private equity often uses a 2 and 20 fee model: a 2% management fee and 20% of the profits. Over 30 years, those fees can destroy a retirement nest egg compared to a low-cost index fund. It’s true, sometimes the upside can be legendary, like Peter Thiel growing his IRA to 5 billion dollars. But the risk for the average worker is that these funds might be packaged into target-date products that look safe on the surface but carry high underlying risks.

What do you think? Should the 401k be expanded to include other investments, and what would you include in your own retirement portfolio?

Leave a comment

The Math: Roth IRA vs. The Trump IRA

If you do not have a 401k, the Trump IRA is an excellent option to capture the $1,000 match. But there’s another option to consider: The Roth IRA.

In a Roth IRA, you contribute after-tax dollars. While you do not get a deduction today, your money grows tax-free, and your withdrawals in retirement are also tax-free.

Consider this example: if you contribute $7,500 per year to a Roth IRA starting at age 20 and retire at age 65, assuming a standard 7% return, you would have approximately 2.5 million dollars tax-free!

Of that total, over 2 million dollars is pure profit that you owe nothing on. In a traditional 401k or Trump IRA, a similar balance might look higher on paper, perhaps 3 million dollars, but you would owe ordinary income taxes on the majority of that amount. If you are in a lower tax bracket today, the Roth IRA is arguably the better long-term play because you are locking in your tax rate now.

Final Verdict: Take the deal?

On paper, the Trump IRA is a net positive for the 50 million Americans who have been ignored by the current retirement system. Having a government-vetted portal that simplifies the process and caps fees at 0.15% removes the friction that prevents people from starting.

However, the income limits for the match are quite low. If you make more than $35,500 as a single person, you should probably focus on a Roth IRA or an ordinary brokerage account. If you make anything under that limit, the 50% match is free money that you should take.

The biggest win is not the match, but the simplification. Anything that makes it easier to open an account and start compounding is a win for the country. But if you’re practicing DIY investing, just be wary of the new alternative assets appearing in your 401k. While the promise of private equity returns and other assets is tempting, the fees and lack of transparency can be a trap for the unwary. Stay safe!

If you enjoyed this, hit that like button, restack this post, and share it with a friend to help them secure their retirement funds. It also really helps the newsletter grow.

Share

See you next week!
— Graham

• Staring down unresolved conflicts in the Middle East

• Gas prices are creeping back toward record highs

• The average American is feeling the silent tax of inflation every time they step into a grocery store

And yet… The S&P 500 continues to march higher, totally indifferent to the reality of the world around it. One veteran analyst, Peter Grandich, says that we have entered the parabolic melt-up phase:

But as Grandich warns, this is the exit phase, not the enter phase. In his words, “It’s better to be a year too early, than a day too late.” So should you be worried? And if so, what’s the right course of action?

Today, I want to do two things:

1. Look at what the data is actually telling us

2. Look back at the worst financial disasters in history, and determine if this “Great Melt-up” shares any similarities with them

Then we can figure out the best course of action.

But before we get into it, subscribe to get these timely updates about the market in your inbox every week. Join 40,000+ investors here:

Subscribe now

A different time, and a different place

To understand where we are going, we have to look at where we have been. Right now, a lot of people are overlaying the chart of the S&P 500 today with the 1920s stock market, and they look eerily similar. The 1920s were a period of booming activity. Banks just could not give out money fast enough, to people who wanted to invest it in the next great scheme. And that time ended in the Great Depression.

The thing is, 100 years later this looks eerily similar to the chart of the stock market right now. The patterns of exponential, unchecked growth are nearly identical.

But the scarier comparison might not be another time, but rather, another place: Japan in the 1980s. From 1970 to 1989, the Japanese stock market increased by more than 22% per year. It was known as the Everything Bubble.

It was a simple mechanism.

• Low interest rates flooded the economy with cheap money .

• This allowed companies to speculate on stocks, driving stock prices up.

• The increased corporate valuations allowed companies to borrow more money, to buy more stocks and real estate…

• Which drove stock prices up further.

At one point, the cycle was so unsustainable that the grounds of the Imperial Palace were worth more than the entire state of California! This circular machine worked perfectly – until it didn’t. In 1989, the market crashed by 50% in just one year and went on to lose even more over the next decade. Japan’s market did not fully recover for nearly 40 years.

Today, the S&P 500 is tracking that same path with frightening precision.

The valuations of stocks and real estate are not something you can control, but you can control your value in the market by focusing on this year’s most important commodity: Skills.

If you spend any time on the Internet at all, you must have heard about Claude. It is one of the most talked about tools on the internet right now, and I have dabbled with it myself. The tool offers incredible possibilities, and new models and features like Claude Cowork, Claude Design, Skills, and Connectors are launching literally every week.

But maybe you are wondering where to start, and I get it, it can be a bit overwhelming. Which is why you need to join the World’s first Claude-a-thon hosted by Outskill.

It is a 2-day deep dive into Claude, its use-cases, and 10+ other AI tools. It’s this weekend from 10 am-7 pm EST — and they have just 1000 free seats for a limited time.

In the workshop, you will do deep research on Claude and use it to:

• Build your own artifacts and dashboards.

• Create full presentations.

• Set up Claude Connectors like Indeed to automate your job search or client acquisition.

And much more. (Free for the next 48 hours)

Register now!

The warning metrics

As if that wasn’t enough, we have more warning bells that are ringing:

1. The Shiller CAPE Ratio has hit 41.05 as of May 2026. This is a measure of price relative to 10-year inflation-adjusted earnings, and a rough indicator of how overvalued the market is. This is the second-highest level in 155 years, exceeded only by the peak of the Dotcom bubble. For context, the historical average is around 17.

   

2. The Buffett indicator is at a staggering 229%. This ratio compares the total U.S. stock market capitalization to GDP, and Warren Buffett said that anything above 200% is playing with fire. Berkshire Hathaway is following Buffett’s caution even though he has stepped down from managing it – it ended Q1 2026 with a record $397.4 billion in cash and treasuries, and from the audience, Buffett said, “We’ve never had people in a more gambling mood than now.”

3. The top 10 stocks now make up roughly 40% of the S&P 500! This level of concentration is higher than what we saw during the Dotcom peak in 2001. If the Magnificent 7 sneeze, the whole market will catch a cold.

   

The deeper concern is a phenomenon that economists call Japanization. This isn’t about stock prices but instead, a decay in the engine that powers developed economies.

Japan’s major problem is demographic decline. The U.S birth rate is following the same trend – at 1.6 births per woman, we are well below the replacement rate of 2.1. Fewer workers are paying for systems like Social Security as the programs continue to get more expensive. So is it all doom and gloom?

The Counter-Argument: Why This Time Could Be Different

Now, let us play devil’s advocate. As much as the charts look convincing, there are fundamental differences between 2026 and 1929.

1. Real Earnings vs Hype: In the 2001 Dotcom bubble, companies with zero revenue were being valued at billions of dollars. Today, the companies driving the market like Alphabet, Amazon, Nvidia, Apple, etc. are generating huge cash flows. Roughly 78% of S&P 500 companies beat earnings estimates in the most recent quarter, and net profits are exceeding their 5-year average. In 2001, the average P/E ratio was 65. Today it’s just 28.

2. The AI productivity multiplier: Fidelity argues that we are in the early stages of a massive AI expansion. This growth is fueled by productivity gains rather than cheap debt, and companies in healthcare, industrials, and utilities are using AI to scale without increasing headcount.

3. The cost of cash trap: Let’s say all the fear is justified. Still, people do have the question, “If I don’t invest in the market, where do I put the money?” Over the last 20 years, holding cash has resulted in a 1.8% annual loss in purchasing power. You’re essentially choosing between a guaranteed long-term loss in cash, or a potential short-term loss in stocks. The FOMO is actually a rational response to dollars declining in value.

   

So what do you do in a situation like this? I am a huge fan of the phrase:

The market can remain irrational longer than you can remain solvent.

Isaac Newton was one of the smartest people who ever lived. During the South Sea Bubble of 1720, he invested early and made a fortune. He cashed out, thinking the market was a bubble. But then he watched his friends get even richer as the market doubled again. He could not help himself: he jumped back in near the peak and lost his entire life savings.

The lesson here is not that he should have timed the market or stayed out of it – it’s that he invested emotionally despite being a man of logic, and didn’t stick to his own plan. And that isn’t surprising. It’s the norm. But the people who can buy and hold, not being bucked by their emotions do surprisingly well.

If you had invested at the absolute peak of the 1929 market – the literal worst day in history – and did absolutely nothing for 20 years, you still would have earned an 11% profit from dividends alone. And that assumes you did not buy a single dip during those two decades.

That’s why I’m sticking to my barbell approach:

• Diversification: I am spread between U.S. and International Index Funds.

• The Cash Buffer: I maintain roughly 20% in tax-free municipal bonds and high-yield cash. This is not because I am predicting a crash but to have the mental and financial capacity to buy more if a crash happens.

• DCA is King: I know people joke about me saying just DCA into low-cost index funds, but the people who have done that for the nine years I have been talking about them have done incredibly well!

The stock market’s job is to make you say, “This makes no sense.” Do not fight the market. Just make sure you are diversified enough to survive it.

If you enjoyed this, hit that like button, restack this post, and share it with a friend who is worried about the market. It really helps out the newsletter.

Share

See you next week!
— Graham

For years, the financial world had been primed for a policy of lower interest rates and easy money. Even the high rates over the last couple of years were seen as temporary measures setting the stage for a course-correction this year. That era is now over. During his final meeting, Jerome Powell decided to pause all interest rate cuts for the foreseeable future. However, the real story is in who’s about to take the helm next.

Donald Trump has selected Kevin Warsh to replace Jerome Powell as the Chair of the Federal Reserve. While Trump has been pushing for rate cuts, Kevin Warsh has a track record of opposing stimulus measures during the 2008 Financial Crisis, and he even fought to keep interest rates higher for longer in 2010. Warsh is seen as a hard money hawk who’d rather risk slow economic growth and falling prices than overprint money and devalue it.

So everyone is waiting to see what he’ll do. But why does this matter right now?

You only need to look at the market to understand. Despite warnings of speculation, the markets are back at new all-time highs, Bitcoin is trading near $80,000, and even home purchases are starting to increase. Some analysts are calling this a melt-up in which asset prices are ballooning to unreal levels.

While the party looks like it’s never going to stop, the bill is about to come due. The appointment of a hawk like Kevin Warsh could remove the safety net that investors have relied on for over a decade. This period of transition, when there is a change in Fed leadership, is historically volatile – Since 1930, the stock market has seen an average decline of 16% whenever a new chair takes office at the Fed.

How did this play out in the past, and how should you invest to weather out this transition? That’s what I’ll cover today. But before that, if you’re new here, hit the like button for free and join 40,000+ investors who never miss one of these timely updates.

Subscribe now

The Return of the Hawk

In the late 1980s, there was a major pivot in America’s philosophy. Inflation had been spiraling out of control, and the Federal Reserve needed a leader who was willing to look unpopular doing the hard thing. Along came Paul Volcker, who raised interest rates to unprecedented levels (up to 20%!) in an attempt to break stagflation – and it worked, despite causing a painful recession in the short term.

Kevin Warsh seems to belong to the same school of thought. His history at Morgan Stanley and his previous tenure on the Board of Governors suggest he values the central bank’s independence over everything else – he has stated that monetary policy independence is essential, and that the Federal Reserve must act in the interest of the nation with unclouded decision-making.

This is particularly interesting because Donald Trump has been vocal about his desire for lower interest rates. By appointing Warsh, Trump is choosing someone who might actually defy those wishes in favor of sound money. But Warsh faces an additional challenge as well.

Oil woes

Warsh is being handed the persistent issue of inflation when he steps in. But now this is being driven by a powerful force that he can’t really control: The price of oil. You probably feel the direct effect of oil prices going up when you fill up your car, but it’s also the lifeblood of the global supply chain. Everything from the cargo ship that transports goods to the tractors that bring food to the shelves is affected by oil. When oil goes up, so does everything else.

Every ten dollar increase in the price of crude oil raises inflation by 0.2%.
It also sets back economic growth by 0.1%. So how are we doing?

Earlier this year, oil was trading at $57 per barrel. Today, it sits at close to $102. This spike alone implies that inflation could rise by 0.7% in the coming months, undoing all the progress of the last few years. We are already seeing the effects of this trend – inflation recently ticked back up to 3.3%. If Kevin Warsh wants to focus on long-term stability and bring inflation under control, he is unlikely to lower rates and add fuel to the fire.

The rising cost of resources is a risk to every business, but as an investor, your most valuable resource is your own personal information. If you have ever bought a property, you might be surprised to learn just how much of your transaction history – like your home address and loan amount – ends up as a matter of public record. While this is a normal part of the real estate process, it is important to know how you can shield your financial life from prying eyes.

Unfortunately, data brokers legally collect and sell this public information – along with your past addresses and phone numbers – to anyone with a credit card. As an investor, this paper trail can leave your hard earned wealth at risk for targeted financial scams, phishing, and identity theft.

That is where DeleteMe can help you. It’s a hands free subscription service that removes your personal information from hundreds of data broker websites. Their privacy experts do the heavy lifting, continuously monitoring and removing your data all year long so those records do not just pop right back up.

Today’s post is Sponsored by DeleteMe

Take control of your data. Protect your digital presence and investments.

Get 20% off your DeleteMe consumer plan by clicking the button and using promo code GRAHAM at checkout:

Get DeleteMe

Now let’s look at one of the most baffling puzzles in the economy – the gap between the market performance and consumer sentiment.

The market-consumer paradox

The stock market recently saw a 10% rally in just ten days. This is one of the strongest surges we have ever witnessed. The NASDAQ even went on a thirteen day win streak, which is the longest seen in over thirteen years. On paper, everything looks incredible.

And yet, consumer sentiment is hitting its lowest point ever in the seventy year history of the survey.

How do you explain this disconnect? Here’s what’s going on:

The market is forward-looking, pricing in what investors expect to happen in 6-12 months. Consumers, however, live in the present. Wall Street is betting on a bright future, while Main Street is struggling to pay for groceries and gas today.

Historically, high fear correlates with low market performance. But today, sentiment is low even as prices remain high – this is a very fragile situation, where the market is held together by optimism and liquidity. If the Fed moves forward with its plan to shrink the balance sheet, the liquidity supporting this rally will drain away and cause panic.

Are you finding your sentiment as a consumer different from your sentiment as an investor?

Leave a comment

The Stalemate in Real Estate

The stock market won’t be the only place affected. The transition to a Warsh-led Federal Reserve also has major implications for the housing market. Currently, we are seeing a national stalemate. Home prices have risen another 1.4% YoY, yet organizations like Zillow have downgraded their forecasts across four hundred different markets. They now predict that over the next 12 months, prices in many areas will remain completely flat.

We can see the cracks forming in specific regions, particularly in markets like Las Vegas. During the boom of the last few years, many investors purchased properties with the expectation that values would never stop rising. Now, inventory is piling up as buyers are priced out by high mortgage rates while sellers are getting desperate. It’s becoming common to see properties selling at a 5-15% loss compared to their purchase prices from 2021 or 2022. Sellers are refusing to lower their prices, and buyers are waiting it out. It’s a game of chicken where nobody wants to blink first.

The hope for many has been that the Federal Reserve would cut rates and make homes affordable again. That’s doubtful. But even if it does happen and inflation cools enough to allow for a slight dip in mortgage rates, some analysts believe they will only fall to 5.7% by the year 2030. A drop of that size only increases the purchasing power of a buyer by about 5%. It won’t solve the affordability crisis.

The Digital Hedge

As investors look for ways to protect themselves, many are turning to Bitcoin. While the S&P 500 is up 8% this month, Bitcoin has surged by 13%. More institutional money is flowing into Bitcoin exchange traded funds than ever before, and companies like Strategy now hold more Bitcoin than the United States government.

The narrative around Bitcoin is shifting. It’s no longer just a speculative asset for retail traders, and is becoming a hedge against the rising national debt. Even though Bitcoin is still down from its all time highs, the renewed interest from banks like Goldman Sachs and Citi suggests that the digital asset is here to stay.

I have personally used the recent volatility as an opportunity to lower my average cost. When it fell to $60,000 and the general sentiment was that it would never recover, I saw it as a buying opportunity. In my experience, the best time to buy is often when the rest of the market is the most terrified. However, I maintain a balanced approach, with less than 15% of my portfolio in crypto. This allows me to participate in the upside without risking my entire financial future on a single asset class.

The arrival of Kevin Warsh marks the beginning of a new chapter in American finance. We could be moving toward an era of discipline and hard money, or we could see the independence of the Fed being tested. This transition will not be smooth. There will be moments where the market feels like it is about to collapse, and there will be moments where it feels like it will never stop rising.

The lesson we should take from the recent rally is that the market rarely behaves rationally in the short term. The people who sold everything in April to wait for clarity missed out on one of the fastest recoveries in history. The people who waited for Bitcoin to hit $50,000 missed a twenty percent gain in two months. Trying to outthink the collective wisdom of every hedge fund and algorithm on the planet is a losing game.

The only strategy that has consistently worked is to have a plan and stick to it regardless of the headlines. Decide how much you can afford to invest each month, choose a diversified allocation that allows you to sleep at night even during a major drawdown, and let time do the work. No matter who is sitting in the chair at the Federal Reserve, the power of consistent investing remains the same.

As you look at the headlines over the next few weeks, remember that volatility is the price of admission for long term gains. Keep your head cool, ignore the panic, and continue to build your future one month at a time.

If you found these insights helpful, like this post, restack it, and consider sharing this with someone who is trying to make sense of the current chaos. It helps a lot!

Share

I’ll see you next week.

–– Graham

We are witnessing one of the most significant financial shifts in decades. The global economy is being fundamentally rewired. Yet, the average person is barely paying attention though it’s going to affect them the most. Let me elaborate a bit.

• The US dollar is currently experiencing its worst performance in over 50 years.

• Oil prices are surging once again, bringing back the ghost of 1970s style stagflation back into the picture.

• But most important of all – for the first time in modern history, the United States is starting to lose its iron grip on global trade to China and other competitors.

This isn’t just a collection of bad headlines or a temporary market dip. Major institutions like JP Morgan are now warning that the global balance of power, trade, and capital is shifting. This will completely reshape how you must invest over the next decade. After all, you invest in the US market in the hope that it will continue to dominate over the next decade or two. If that narrative is changing, shouldn’t your plan change too?

Let’s dive in. But before we get into the details, subscribe for free if it’s your first time here and join 40,000+ readers who get these timely updates in their email inbox.

Subscribe now

We lost our exorbitant privilege

To understand where we are going, let’s first see how we got here.

When World War II ended, the United States effectively won the global economy. Europe’s economy was shattered, the pound’s dominance was gone, and only the US was in shape to set new terms. At the 1944 Bretton Woods Conference, the dollar was pegged to gold – and every other currency was in turn pegged to the dollar. When Richard Nixon took the US off the gold standard in 1971, the dollar turned into the world’s financial anchor. On top of this, we possessed the most formidable military, the most robust industrial base, and crucially, the dollar became the world’s reserve currency.

This created what was called an “exorbitant privilege” for the US. The entire world needed dollars to settle international debts, buy oil, and conduct trade. Because of this, the US could run massive deficits and borrow money more cheaply than any other nation on earth. If any other country had printed money at the pace we did, they would have destroyed themselves many times over. We could afford to do it.

We essentially exported our inflation because the global demand for dollars was insatiable. Everyone was plugged into our system, and everyone was buying our Treasuries to park their excess cash in the only safe haven. But as we speak in 2026, that privilege is being challenged by a new coalition.

Nations like Brazil, Russia, India, China, South Africa, and the UAE – collectively known as BRICS – now represent between 40% and 45% of the global GDP after adjusting for Purchasing Power Parity (PPP). In contrast, Western nations including the United States represent just 29.6%.

It’s hard to believe that the Western alliance that built the current world order now controls a much smaller portion of the global economy than a coalition that barely existed thirty years ago. The center of gravity is moving East. The first victim of this move will be the US dollar’s status as the sole global reserve.

Unplugging from the dollar

The numbers tell a scary story. There’s a bank run happening in slow-motion on the US system.

1. In 2016, the US dollar made up about 65% of global foreign exchange reserves.

2. By 2024, that figure fell to 59%.

3. By 2025, it dipped further to roughly 57%.

We are seeing a decline of 8 percentage points in less than a decade and the rate of that decline is accelerating. Now, this sort of decline doesn’t happen by accident. It’s the result of a calculated “De-Dollarization Playbook” that other countries have put together. But why are other countries opting out? Holding dollars was the ultimate safe bet for decades, but then the Ukraine invasion happened. When the United States froze Russia’s foreign reserves, it was a signal to the rest of the world: “If it can happen to them, it could happen to us.”

The dollar was no longer just a currency, and its power as a political tool became obvious. Every non-aligned nation on the planet, from Saudi Arabia to Indonesia, had the same realization: If our assets can be turned off with the flip of a switch in Washington, we need a backup plan. And slowly, that plan has started to kick in.

The most aggressive mover has been China.
In 2010, China held roughly 40% of its reserves in US Treasuries.
By 2025, that number had been cut in half to roughly 20%.

They aren’t just selling our debt. A parallel financial system is being built that aims to make the US financial infrastructure optional rather than a mandatory bottleneck.

The Five Dollar-killers

De-dollarization has been a theory discussed in academic circles for a long time. But there are specific technical mechanisms being deployed right now to bypass the US financial system entirely:

1. Bilateral Trade Settlements: Instead of using dollars as a middleman (which requires routing through a US correspondent bank), countries are increasingly settling invoices in their native currencies. We are seeing this most prominently in the triangle of China, India, and Russia. By skipping the dollar, they avoid the fees, the oversight, and the sanctions risk of the Western banking system.

2. Massive Gold Purchases: Gold is the ultimate neutral asset. It cannot be sanctioned, and it cannot be printed by a central bank. Central banks around the world have been stockpiling gold at the fastest rate in 50 years to buffer themselves against currency risks. This acts as a form of insurance against a weakening dollar.

3. BRICS PAY: This is a joint payment platform designed to allow BRICS nations to transact directly in local currencies. It is intended to be a direct alternative to SWIFT, the Western-controlled messaging system. If SWIFT is the email for international banking, BRICS PAY is a competing service that the US doesn’t control.

4. mBridge: This is perhaps the most sophisticated threat. mBridge is a blockchain-based framework being tested by central banks in China, Hong Kong, Thailand, the UAE, and Saudi Arabia. It allows for the settlement of payments in digital currencies. Unlike current bank transfers that can take days to clear, mBridge settles in seconds without needing a neutral third party like the US dollar.

5. The UNIT: This is a proposed digital settlement currency backed 40% by gold and 60% by a basket of BRICS currencies. The goal is simple: create an asset that has the stability of gold but the utility of a digital currency to avoid the volatility and political strings of the dollar. To be honest, this one is going to take a while to get going – but the point is that countries have initiated the process of moving away from the dollar.

You don’t need to replace the dollar overnight to weaken it. You just need to create enough incentives for the world to use it less. That is exactly what these systems are designed to do.

The Institutional Shift: Where is the money going?

If you think this is just alarmist talk, look at what the biggest money managers in the world are telling their clients for 2026 and beyond.

For the last 40 years, the standard advice was to put 80-100% of your stock portfolio into US markets. It worked because the US was the fastest-growing, most innovative economy. However, the valuations of US stocks are now incredibly stretched. The top 10 companies now make up about 40% of the entire S&P 500. This is a level of concentration risk that no one really talks about. If just five of those tech giants stumble, the entire American retirement system is in danger.

Vanguard’s 10-year forecast is now projecting US stocks to return just 3.9% to 5.9% annually. Meanwhile, they expect international markets to outperform, returning between 4.9% and 6.9%. JP Morgan is even more bullish on emerging markets, projecting roughly 7% annual growth.

The bottomline is this: The easy money in the US market has been made. The next decade of exponential growth is likely to come from the rest of the world. Goldman Sachs projects that China will overtake the US as the world’s largest economy by 2035, and India will become the world’s third $10 trillion economy by 2036. By 2050, emerging markets are expected to make up nearly half of the global stock market, up from just 27% today.

I’m curious: How are you adjusting your own portfolio in light of these forecasts? Are you leaning more into international markets, or do you believe the US’s lead in AI and tech will keep us on top regardless of the macro shifts?

Leave a comment

How to position yourself for a changing world

So, what do you actually do with this information? This is not a “panic and sell everything” moment. The US dollar still has advantages that no other currency possesses: it is liquid, it is backed by the world’s most capitalized military, and there is currently no clean alternative. That’s because:

• Europe has political fragmentation

• China has strict capital controls that make global investors nervous

• Bitcoin, while promising, remains too volatile for sovereign trade settlement in the short term.

The dollar isn’t collapsing, but it’s definitely being diluted. We are moving from a unipolar world where the US was THE global superpower to a multipolar world where it is A global superpower. So my plan and yours need to change accordingly.

Here is how I am thinking about my own positioning:

1. Stop being “All-In” on the USA: It is no longer prudent to bet 100% of your financial future on a single country, even one as powerful as the US. I’ve always talked about avoiding home-country bias, but it’s even more important now. Diversification across borders is now a requirement, not an option.

2. Increase International Exposure: When Vanguard, Fidelity, and JP Morgan independently conclude that international and emerging markets look more attractive on a valuation basis, it’s time to listen. A simple international index fund is often the most efficient way to capture this.

3. A Small Hedge in Precious Metals: When central banks are buying gold at record rates, even at $5,000 an ounce, they are telling us something about their trust in the long-term purchasing power of fiat. A small allocation to precious metals as a hedge against the debt cycle is now a very reasonable move.

4. Commodities: Oil, copper, food, and strategic metals tend to perform well when the dollar weakens and emerging markets grow. Goldman Sachs continues to highlight commodities as one of the best insurance policies for the changing world order.

5. Maintain a Core US Position: Don’t abandon ship! The US is still the leader in AI, semiconductors, and biotech. The companies driving the next wave of productivity are still predominantly American. You want to be invested in the US for its innovation, but you should also be invested elsewhere for the relative valuation and demographic growth.

The world is getting bigger, not smaller. The people who will thrive in this realignment aren’t the ones trying to time the exact moment of a dollar crash. They are the ones who recognize the shift early, broaden their horizons by diversifying, and position their portfolios to capture growth wherever it happens to be.

Stay diversified, stay flexible, and as always, keep an ear to the ground to learn about the forces moving the market. Which is what this newsletter aims to do.

If you found this breakdown helpful, please share this article with a friend. The more we understand these shifts together, the better prepared we all are.

Share

I’ll see you next week.

–– Graham

The post went viral, getting more than 3 million views on X alone. The response was overwhelming. Something about the topic seems to have struck a chord with a lot of people, maybe because of the uncertainty in the economy or your life situation.

Amidst the debate, one question kept surfacing:

“If you’re selling everything, Graham, where is that money actually going?”

It’s a fair question. For years, real estate was the base of my wealth and what I was associated with. It was the reliable bet. But as I sat down to look at my allocations for 2026, I realized I was making a mistake that could have completely screwed over my portfolio for the next decade if I hadn’t caught it early. On paper, it looked like I was doing everything right, but actually I was positioned for a world that no longer exists.

Today, I’m breaking down the Great Portfolio Reset. We’re going to look at:

• exactly where I’m putting my money,

• why the passive dream of real estate has turned into a legal nightmare, and

• the high-conviction shifts I’m making in stocks, Bitcoin, and even collectibles.

Before diving in, hit subscribe and join 40,000+ subscribers so you never miss detailed and actionable wealth blueprints like this one. It’s free and direct to your inbox:

Subscribe now

The Psychology of the Aggressive Pivot

For the last six years, my strategy for the stock market has been boring and consistent. To be honest, it’s borderline religious, and I get called out for it in my video comments every time. I don’t mind – because it’s always worked.

I’ve dollar-cost averaged into an S&P 500 index fund like clockwork, regardless of whether the headlines were screaming about a recession or celebrating new all-time highs. That consistency has paid off. The S&P 500 has crushed nearly every other asset class over the last decade. But as we enter 2026, I’m doing something that feels counterintuitive to many: I’m investing even heavier.

We are currently in a market where valuations are stretched and the narrative around Artificial Intelligence (AI) flips daily between “technological revolution” and “speculative bubble.” In this environment, the natural instinct is to pull back, build a cash pile, and wait for a 20% correction. Here’s the thing – that correction may never come, and waiting on the sidelines for the perfect entry point is something I’ve tried and regretted. Not once in over ten years of investing has timing the market worked out better for me than simply being in the market.

While the stock market is undergoing a structural shift, the labor market is facing its own Great Reset thanks to AI. Regardless of how the market behaves, there’s one thing I strongly believe in: educating yourself to seize the next opportunity.

A new tool just made a thousand AI startups obsolete.
Their chaos can be your opportunity, with today’s sponsor, Outskill.

Anthropic’s Managed Agents tool lets you build and launch powerful AI agents with no backend and no infrastructure. You can go from prototype to production in days, not months. But the real question is: how do you learn this cutting-edge tech fast?

Outskill can teach you AI in just 2 days – the skills that can make you smarter, faster, revenue-driven and absolutely irreplaceable in 2026.

In this 16-hour AI Mastermind, you’ll master real AI use cases, automations, and workflows, turning AI into your edge for 2026.

The best part is: they’re giving it away completely FREE for the next 48 hours! You have nothing to lose and everything to gain.

🧠 Live sessions – Saturday and Sunday
🕜 10 AM EST to 7PM EST

You will also unlock $5000+ in AI resources as bonuses when you show up!

• A Prompt Bible 📚,

• Roadmap to monetize with AI 💰

• Personalized AI toolkit builder ⚙️

Register here for $0 (free for the next 48 hours only):

Secure your free spot

Now let’s get back to my investment strategy. You know that I’m doubling down on the stock market, but let’s talk about the exact split.

Going international: Why I’m Betting Against US Dominance

While I am doubling down on the S&P 500, the other side of my stock portfolio is undergoing an even more aggressive change. Currently, international diversification makes up about 28% of my total account. International stocks have historically been an unpopular take. America has been the undisputed heavyweight champion of returns for years. Many believe that “Home Bias” is actually a feature, not a bug.

But the data for 2025-2026 tells a different story. Year-over-year, my international holdings are up 26%, compared to the S&P 500’s 16% return. Even better, during the recent volatility where the S&P 500 dropped 4%, my international allocation remained positive by 3%.

Here’s why I think emerging markets are an underrated opportunity: Baseline growth. The United States is a mature market constrained by heavy regulation and massive size. However, emerging markets are starting from a much lower baseline. As rising internet access and smartphone adoption give an entirely new generation the ability to adapt to AI at scale, their productivity gains could be disproportionately larger.

I’m viewing this as my ultimate hedge. If the US continues to dominate, I win. But if we enter a period of domestic stagnation, I have a fallback that should smooth out my returns. I’m becoming more aggressive on emerging markets because the asymmetric upside is too relevant to ignore today.

Has your stock market portfolio changed in the last year? How?

Leave a comment

The Real Estate Exit: When winning is losing

Now we have to address the elephant in the room: Real Estate. Selling my entire portfolio (minus my primary residence) was not a decision I took lightly. I bought many of these properties between 2012 and 2018 at incredible prices with 3% fixed-rate mortgages. On paper, these are gold-mine assets.

But the reality of being a landlord in California in 2026 has become a mathematical impossibility for the individual investor. We have reached a point where the state has effectively villainized housing providers to the point of insolvency. My insurance costs have more than doubled. Repair costs have tripled. But the most expensive cost isn’t the roof or the plumbing: it’s the $400-an-hour lawyer I now have to involve in every single communication.

The legal costs have become a lose-lose situation. If you engage a lawyer, it costs a lot. But if you don’t have one, it could bankrupt you. The system is now designed to be litigious:

• If a disclosure isn’t posted correctly, it’s a lawsuit.

• If I don’t document every repair, it’s a lawsuit.

• If even a text message to a tenant is worded poorly, it’s a lawsuit.

Consider a recent case study shared by the Sinai Law Firm on X:

A tenant stopped paying rent, and the landlord did everything perfectly by the book. During mediation, the tenant (who was clearly in the wrong) demanded four months to vacate, cash upfront to leave, a waiver of all owed rent, and a sealed record. Though this was blatantly unfair, the landlord’s own attorney advised them to take the deal. Why?

Because the cost of legal fees, the trial time, and the 75-day sheriff lockout delay meant that even if the landlord won the case, their all-in costs would be higher than just paying the tenant to leave. In California, property owners now lose 100% of the time, even when they are legally in the right.

Back in 2012, an eviction cost me $1,500 and took 60 days. Today, that same process can cost $40,000 to $50,000! If I was starting today, I couldn’t have afforded these mishaps. For a small landlord, one bad tenant is not just a headache anymore, it’s a bankruptcy-level event. I’ve realized that I can take that equity, buy 100% liquid Treasury bonds, and earn a better risk-adjusted return.

Plus it saves me the liability, the stress, and the $400-an-hour phone calls.

Bitcoin and the Institutional Shift

One of the biggest opportunities for 2026 is an asset I previously kept as a tiny position: Bitcoin. Alright, before you set your mind against it, hear me out.

My thesis used to be: “If it goes to zero, my life doesn’t change. If it works out, I retire my bloodline.” While Bitcoin is down significantly from its peak, it has shown remarkable resilience in 2026. As institutional participation grows through ETFs, the “catastrophic drawdown” narrative is beginning to shift. Analysts are now arguing that Bitcoin is functioning more as a portfolio efficiency tool than a speculative bet.

With national debts climbing and governments running massive deficits, the asymmetric upside of Bitcoin is becoming too compelling to ignore. I look at it as a probability play: there may be a 50% chance it becomes worthless, but there’s a 50% chance it hits $250,000 in the next five years. If that was a bet in Las Vegas, I would take it! But that’s exactly how I would treat it too, as a high-risk asymmetric bet where I would allocate my money very cautiously.

Given that inflows have turned positive for the first time since October 2025, I’m increasing my allocation. It’s better to take a calculated risk on a volatile asset than to hold zero exposure to the fastest-growing institutional asset class of the decade.

Cash and Treasuries: My safety net

Despite my aggressive moves into stocks and Bitcoin, 25% of my portfolio remains in Cash and Treasuries. This is split between tax-free municipal bonds (earning about 4.2%) and government treasury funds (3.5%).

I’ll be honest. I’ve held onto this buffer for too long, and at this point I probably have more cash than I need. That’s because my mindset shifted from asking “how do I grow?” to “how do I make sure I don’t lose what I’ve built?” And I don’t think that’s wrong. When you’re in your mid-30s, priorities change, and wealth preservation becomes more important. But in the long run, sitting on excess cash is one of the most expensive things you can do. I am currently in the middle of trimming this 25% down to deploy it into the more efficient market opportunities I mentioned earlier.

Wealth preservation shouldn’t mean stagnation. It should mean having enough liquidity to buy the dip when sentiment is at its worst, without jeopardizing your ability to pay your bills.

Cars, Collectibles, and the Hidden ROI

Many of you know I’m a car enthusiast, but few realize how I view them as an asset class. In 2021, I bought a 2005 Ford GT. Since then, it has increased in value by nearly 65%, performing almost exactly on par with the S&P 500! At this point, it’s an index fund on wheels. In 10 or 20 years, as the pool of clean, manual, analog supercars shrinks, this will likely be a million-dollar asset.

However, not all cars are great investments, and I’m not immune to mistakes. I lost about 30% on my 2010 Tesla Roadster. I thought it would be a future classic like the original iPhone, but Tesla’s brand volatility and high repair costs proved me wrong. The lesson? If you pick correctly – think Honda S2000, 2005 Lotus Elise, 1997 Dodge Viper GTS, manual Audi R8, manual Lamborghini Gallardo, Ferrari 458, Mercedes SLS AMG – you can drive for free and likely see a 2-5% annual appreciation. If you pick wrong, you’d better at least enjoy the drive.

If you are into cars as an investment, you should check out this post I wrote:

Beyond cars, there’s another asset class I’ve been experimenting with: Art. I recently acquired concept sketches from Marc Davis, one of the original Disney animators, including pieces from The Haunted Mansion and The Nightmare Before Christmas. I also bought a Tommy Pickles Rugrats cel from the first episode, and a signed Michael Jordan from Space Jam. Even though this is mainly a hobby, some have doubled in value.

The same applies to my watch collection. Finding a niche you love and hunting for undervalued deals is one way to find alpha outside of the traditional markets.

The Private Equity Regret

Finally, I have to talk about my biggest regret: Private Equity. Over the last six years, I’ve invested in several early-stage companies. On paper, the returns are impressive, and some are up 300%.

But here is what no one tells you: it doesn’t matter what the return looks like on paper if the money is locked up indefinitely. Between redemption windows, K-1 tax filing formalities, and secondary markets that demand a 20-70% discount just to find a buyer, private equity is a trap for most individual investors.

Going forward, my rule is simple: if I can’t trade in and out of it within a few weeks, it’s not worth the hassle. Boring simplicity is undervalued.

The Takeaway

The best portfolio isn’t the one that looks the most impressive on a spreadsheet.
It’s the one that lets you live your life without constant anxiety.

For me, that means fewer moving parts, higher liquidity, and the peace of mind that comes with knowing that the assets I own are working for me rather than the other way around.

Don’t be afraid to course-correct. What worked in 2018 won’t necessarily work in 2026, and the best plan for your 20s might change in your 30s. Run your numbers, be honest about your risks, and don’t be afraid to let go of an asset – even a trusted one like real estate – if the math no longer adds up. If you found this useful, like it, hit the restack button, and share it with a friend who needs to re-evaluate their own priorities. They’ll thank you for it.

Share

I’ll see you next week. Take care in the meantime.

–– Graham

“Maybe I’m making a mistake… maybe I should just let things be.”

But at a certain point, when the costs start outweighing the benefits, you have to be honest with yourself. After years of building, managing, and advocating for the “Buy and Hold” lifestyle, I’ve reached a final conclusion: I am officially selling the rest of my real estate over the next few months and walking away.

This was never the plan. When I bought these properties, I genuinely thought I’d never let them go. I remember working as a young real estate agent and asking every wealthy buyer I met what they’d do differently if they could go back. Every single one said: “I wish I never sold. I should’ve just held.” For a decade, I followed that advice to the letter.

But the world has changed. The “Buy and Hold” mantra which has been a gold mine for as long as I can remember, has recently become a trap for anyone who values their time and mental bandwidth. There are some things that the numbers don’t capture and you need a different kind of math to make sense of it.

Before we dive into the math, do yourself a favor: Hit subscribe if it’s your first time here. You’ll get these weekly updates in your email, so that you can act on them fast. I get the satisfaction of helping you and 39,000 other investors.

Subscribe now

Risk-free > Real-estate: When the numbers don’t tally

Most people picture a Los Angeles landlord as someone sitting on a million-dollar plot of land, collecting massive checks by the beach. The reality of my LA portfolio is far less glamorous. After you subtract:

• property taxes,

• maintenance,

• repairs,

• property management, and

• city registration fees,

my total net cash flow works out to roughly 4 to 5 percent a year on the equity tied up in these properties. That return might have sounded great in 2019, but in the current 2026 economic environment, that return comes with a massive Mental Tax.

Meanwhile, Risk-free Treasuries, money market funds, and high-yield savings accounts currently pay in that same 4-5% range. With those assets, I am subject to zero restrictions, zero phone calls, and zero midnight emails about a leaking roof. Most importantly, I don’t have to deal with the City of Los Angeles telling me I need a $400 permit to replace a $500 fence. My frustration with LA has now become so consistent that it’s almost a meme – but trust me, it’s no fun living that meme.

In any other investment class, if the Risk-Free Rate equals your yield, the decision to sell is a mathematical no-brainer. The only reason people stick longer to real estate is because of the tangible feeling of holding something. The memories they create. While I do have great memories, I hit the point where keeping these properties was no longer a smart financial decision, it was purely an emotional one.

One lesson I’ve learned the hard way is that emotional decisions and investing are a recipe for disaster.

You know what else can lead to disaster?

Leaving your information up on the Internet where anybody can find it.

Data brokers legally collect and sell your personal information – including your name, home address, and phone number – to anyone with a credit card. This exposure isn’t just a nuisance. It can lead to risks like identity theft, phishing, and doxing.

That’s why I recommend DeleteMe. It’s a hands-free subscription service that removes your information from hundreds of data broker sites all year long. They’ve been the experts for 15 years and within just 7 days, you get a detailed Privacy Report showing exactly what they found and what is being removed.

Signing up to DeleteMe is the simplest way to help protect yourself – and your business – from scams and identity theft. Instead of scrolling away, just take a second to click here:

Check out DeleteMe

You get an additional 20% off when you use the code GRAHAM.

The Bureaucracy Gauntlet

My breaking point actually wasn’t a market crash. It was a sewer pipe.

In early 2025, I tried to do the one thing the city constantly says it wants: I tried to add more housing. I planned to take an old structure on one of my properties and convert it into a detached two-bedroom, 700-square-foot ADU. I estimated a $220,000 investment that would provide a clean, new home in a good neighborhood. It felt like a win for everyone.

Then the bureaucracy started.

First came the inconsistent inspections. One inspector failed us for a missing AC drain line. We fixed it immediately. A week later, a different inspector showed up and gave us a completely fresh list of items to fix that the first person never mentioned. According to my contractor, this is simply “how it works.” Each inspector has their own personal checklist, often contradicting the last one. We dealt with it.

The real prank happened during the final sign-off. The city demanded a $600 sewer line CCTV inspection. The camera found an issue deep under the street where my line connects to the city’s line. Despite the unit functioning perfectly, I was told it had to be fixed before anyone could move in. The quote was $22,000.

But it wasn’t the money that broke me: it was the 75-day notice. You see, The City of Los Angeles wouldn’t allow the sewer work to begin until I gave my existing tenants 75 days’ advance written notice that their water might be turned off for a few hours in the afternoon while the repair was done. These were tenants who worked during the day and wouldn’t even be home. Yet, no exemption was allowed, leading to 75 days of forced delay and lost income for a three-hour repair.

Finally, a third inspector showed up and told me I also had to replace 22 feet of sidewalk because the roots of a city-owned tree were causing an uneven surface. To fix the sidewalk, I needed a root-trimming permit from the urban forestry department, a process that took another three weeks of unanswered calls and voicemails.

This isn’t about one landlord’s frustration or a single bad experience. It’s about incentives, timelines, and whether the system actually encourages the outcome everyone says they want. There are hundreds of influencers out there calling real estate “passive income” and in very rare circumstances, it can be. But, when the environment is pushing capital away instead of inviting it in, where does that money go next, and what does that mean for the decisions I’m making right now?

The Pivot to Clarity

I’ve started calling these hurdles Background Noise. It’s not loud enough to stop your life entirely, but it’s always there, humming in the background, crowding out more important tasks and draining your creative energy.

Over the last two years, I’ve been on a mission to eliminate everything that doesn’t serve my focus. I shut down my coffee company and scaled back my production schedule because I value clarity more than anything.

So, what am I doing with the real estate? I’m not panic-selling. My properties are well-maintained and priced to move in a market that has softened over the last two years as inventory has finally started to climb. I’m patiently waiting for a good price, and I’ll be re-investing the proceeds into a mix of:

• Tax-Free Municipal Bonds: Providing steady income without the hassle of midnight phone calls.

• International Index Funds & the S&P 500: Leveraging the growth of the economy on auto-pilot without dealing with repairs and maintenance.

• Bitcoin ETFs: Keeping a small, liquid exposure to the digital gold narrative.

This strategy recreates my rental income without the time constraints. The time and mental peace that it creates buys back my ability to wake up and focus 100% on the task that I’m currently focused on: Whether it’s taking The Iced Coffee Hour podcast from four monthly episodes to five, or building Index, a community of entrepreneurs where they can identify new opportunities and discuss ideas.

The Sunk Cost Fallacy

The hardest part of this was admitting that real estate was part of my identity. I was the guy who bought the worst house on the block and turned it into a bargain deal. I took real pride in that. But holding onto something just because it’s part of your story doesn’t mean it’s part of your future.

Psychologists call this the Sunk Cost Fallacy. It’s the tendency to continue an endeavor once an investment in money, effort, or time has been made, even if the current costs outweigh the benefits. I was a textbook case.

I’m not asking you to be impulsive. But if you’re an investor on the fence, run the numbers. But don’t just run the financial ones. Factor in the stress and the life cost. If the return doesn’t justify the headache, don’t be afraid to walk away. There is no shame or failure in this. Something that might have been a wise decision in the past might have turned into a burden, because the circumstances change. By adapting to the circumstances, you might be able to get the same results with a simpler setup.

Simplicity isn’t just a luxury. It’s the foundation of a happy life.

Recalculate your priorities every year. And as always, thanks for being part of this journey. If you found this useful, like it, hit the restack button, and share it with a friend who needs to re-evaluate their own priorities. They’ll thank you for it.

Share

I’ll see you next week. Take care in the meantime.

–– Graham

Yes, it’s going to affect you.

Whether you have any money in the market, whether you’re an entry level employee, starting out with your own business, or in middle management, or are running a SaaS company, whether you’re in sales or marketing or branding – AI is coming for you.

As we wrap up the first quarter of 2026, the headlines are dominated by one thing: Despite wars and rising gas prices, the market is still holding up due to AI optimism. Almost all of it relies on the massive infrastructure build-out of Artificial Intelligence. The tech billionaires investing in AI are promising a new era of economic prosperity. But beneath the surface, a more controversial narrative is taking shape.

Last month, I came across a piece from Research titled “The 2028 Global Intelligence Crisis.” Honestly, it’s an incredibly convincing look at what happens when the AI novelty phase ends and the economic reality kicks in. The theory is that we are entering an “Intelligence Displacement Spiral.” We’ve all see AI replace basic tasks – but Citrini argue that this is just the start and we’re about to see AI shrinking income, spending, housing, and credit across the entire economy until eventually… something breaks. This change is split into five phases.

But before we dive into the five phases of this potential collapse and why some of the smartest people in the world think this is already starting to play out, we need to talk about how you can futureproof yourself regardless of what happens…

The 2026 Skill Gap

We’re already through Q1 of 2026. Is your skill set still stuck in 2025?

The smartest folks aren’t just planning. They’re already mastering AI, the skill that matters the most. Around 48% of workers globally used AI tools in 2025. 2026 is when AI peaks and goes from novelty to the standard requirement.

The world tells you to learn AI. Outskill shows you exactly how to master it.

In just 2 days, Outskill can teach you AI – the skills that can make you smarter, faster, and focused on the revenue in 2026.

This 16 hour AI course gives you the leverage you need to enter 2026 as an AI powered professional.

🧠Live sessions – Saturday and Sunday (11th and 12th April)
🕜10 AM EST to 7PM EST

Register for $0

You will unlock exclusive bonuses for free when you show up:

• A Prompt Bible

• An AI monetization roadmap, and

• A personalized toolkit builder

You would have to pay 1000s of dollars elsewhere for these invaluable resources.

Now, back to the data –because you need to see how this plays out to understand why that leverage is so vital.

Phase 1 & 2: The Software Collapse and “Zero Friction”

Citrini’s article isn’t just a report. It’s written like a science fiction horror story by a person living in 2028 looking back at how it started to go wrong.

Phase one starts with Software Collapse. AI coding has gotten so good that a single developer can now replicate a mid-market SaaS product in weeks. Of course, this is an opportunity for independent developers. But it also means that businesses are going to pay closer attention to high SaaS prices. When they look at a $500,000 annual software renewal, they’re going to start asking: “What if we just build this ourselves?” This is going to save them money, and it’s going to get their investors excited about cost-cutting. We’re already seeing firms like ServiceNow hinting at $100 million in “headcount savings.” That’s just a fancy way of saying AI is doing the work now.

Then comes Phase Two: Zero Friction. This is where AI agents get so embedded into the system that they start handling everything: insurance renewals, travel booking, tax prep, and even real estate transactions. When a machine handles a transaction, why would it pay a 3% credit card interchange fee or a 2.5% commission? It won’t – instead, it’ll settle transactions for fractions of a penny. This puts massive pressure on firms like Mastercard and American Express, leading to more layoffs.

If you’re new here, you can get these weekly updates in your inbox for free and join 39,000 other smart investors by hitting the Subscribe button:

Subscribe now

Phase 3: The Doom Spiral

This is where it gets rational but sobering at the same time. Displaced white-collar workers don’t just disappear. They either upskill and start taking on more responsibility, or they start settling for lower paying jobs.

The ones who get promoted will be managing their own squad of agents. Meanwhile, when the senior product manager making $180k at Salesforce loses their job to an automated system, they might end up driving Uber for $45k just to keep the lights on. Multiply that by a few hundred thousand workers, and you have overqualified people flooding the service economy, which just pushes wages down for everyone. But that’s not all.

If everyone is earning less, who will be spending?

The top 10% of earners drive more than 50% of all consumer spending in the U.S. If those people lose their jobs or take a 50% pay cut, the hit to the economy is massive. That is the spiral Citrini is worried about.

Phase 4 & 5: Credit and Mortgages

Finally, this spiral hits even the safe parts of the economy: Private Credit and Mortgages. Over $2.5 trillion has been invested into software companies priced as if revenue would grow forever. If that revenue vanishes because AI made the software free or easy to build, those loans start going bad silently.

These firms didn’t just raise money from investors. They bought life insurance companies and used that money to fund their deals, so, this impacts everyday retirement saving, annuities, and life insurance policies – all invested into the same loans that are now under pressure. You can’t even make this up.

But this is different from mortgages, like in the 2008 financial crisis.
In 2008, the loans were bad on day one.
In Citrini’s 2028 story, the loans were good on day one – the world just changed after they were written. If white-collar workers can’t pay their premiums, home prices fall, and the canary in the coal mine finally stops singing. This scenario ends with the S&P 500 down 38% to roughly 3,500, a level we haven't seen since before ChatGPT launched, and home prices falling in all major metros. The scariest part is that some of the smartest people in the world believe at least SOME of this is already beginning to happen…

The Counter-Argument: The Intelligence Boom

Now, I like a good story just like every other person. But I’m a rational guy, and I don’t like only looking at one side of the coin. Shortly after that doom-and-gloom article went live, a counter-piece was published by : “The 2028 Global Intelligence Boom” following the same style, but countering each point in the original.

It makes some really interesting points:

1. Human Adaptation: History shows that technology eliminates jobs, but it does not eliminate work. In 1964, experts told President Johnson that automation would create permanent mass unemployment. Instead, unemployment fell below 4% by the late ‘60s. The automation removed a lot of busywork but moved people to more productive and creative types of work.

2. The Wealth Effect: When AI makes things cheaper, that money doesn’t vanish – the savings get passed on to every individual. If AI saves the average household $5,000 a year on tax prep, legal fees, and commissions, that’s essentially a $5,000 tax-free raise. That money goes back into the economy elsewhere. It’s free to be used productively (though whether it actually will be is another question).

3. Low Barrier to Entry: The same AI that replaces a job makes it 80% cheaper to start a business. That Salesforce manager who lost their job can now use AI to build their own niche compliance tool, and potentially earn more than their old salary within months. One thing that AI is still not able to replicate is the years of embodied experience and judgment that humans have. If you use AI to automate all the busywork, you get to leverage your unique judgment to produce more value.

Every person I talk to is using AI in different ways to upgrade their workflow. How do you use AI in your work or personal life?

Leave a comment

What Should You Actually Do?

Personally, I think the direction of the doomers is probably right.
But their timeline is probably wrong, and that makes a big difference.
People don’t take change lying down. They adapt. Markets adjust.

But you can’t wait for the market to adjust for you. Here’s my advice:

• Build Your Emergency Fund: The best target is to build a fund that covers 6 months of expenses. If the displacement hits your sector, you need a cushion that gives you time to reorient without stressing about making rent.

• Diversify Your Income: If 100% of your money comes from a job that involves repetitive information processing, you are at risk. Create multiple streams of income, ideally that are hard to replace with AI.

• Learn the Tools: This is the most important one. The people who will do best in this transition are not the ones who resist AI but those who use AI to make themselves 10x more productive. AI is only competition if you don’t know how to use it; otherwise, it is leverage. AI is inevitable. Don’t resist it, use it instead.

That’s why I really encourage you to check out Outskill’s AI course on April 11th and 12th. It’s $0 to register, and it’s the fastest way to move yourself from the at-risk category to the AI-powered category.

Don’t panic because you read a scary article, even a well-written one. The market has survived every technological revolution in history, from textile mills to the steam engine to automobiles to the internet. The key is simply making sure you aren’t the one trying to fight the tide but the one embracing it.

Anyway, those are my thoughts. I’m just a guy in a garage (well, a half-converted one) making videos and writing this newsletter, so I could be completely wrong. But I’d rather be prepared and wrong than unprepared and right.

If you found this breakdown helpful, please like this post and restack it. It helps the newsletter grow tremendously. Share it with a friend who needs to see this:

Share

Stay safe, stay prepared, and stay calm. I’ll see you next week!

–– Graham