[Authors Note: This content is created for entertainment and educational purposes only. Investment decisions should include professional assistance or guidance.]

THE THREE BUBBLES: Trump trades, the Fed lowering rates, and Everything AI, are collapsed or at least the premises behind them are invalidated. But the last phase of the multi-year mania that brought day-traders the world over together, has yet to occur. The last phase of any mania is that money leaves the stock market and goes to cash or bonds.

That’s what happens next.

Right now, Bitcoin is down 45% from the high, Gold and Semiconductors have each fallen 25% from the high, but the broader Nasdaq 100 is only down 6% and the S&P500 is only down a few percent from the high.

When a market (in anything) goes up for years on end, it’s hard to get off the party wagon. But interest rates are up, inflation is up, global politics are a shambles, and IMHO the elections will NOT go smoothly. But who cares?

The stock market has created its own reality. And this is key: Untold millions of people today, lacking an Object Reality, are content to create their own personal realities. Here’s the punchline:

Markets are made of people.

And just as those people who play games with Reality eventually meet the Real Thing in a harsh way (i.e. harsh reality), the market will face the reality that those incredible sums borrowed and those unbelievable valuations paid for AI ventures will not jive with the payoff as pundits are already beginning to suspect. The other Reality that will come calling is that the economy can’t handle 4% inflation and the highest mortgage rates in 20 years because this economy is fueled by people, too.

–WRH