For the week ending May 23, 2025
Theme of the Week: High Risk, Low Reward: From Outlaws to Outliers
This week’s 🚦Signal & Noise is a tribute to financial overconfidence in all its delusional forms. We opened with Bonnie and Clyde, America’s original bad asset allocation who went full YOLO and learned the hard way that risk without a plan ends in rural ditches and bullet holes. From there, we examined the slow-motion unraveling of the wealth effect, where even Walmart’s cheese aisle is starting to look like a cry for help, and Delta is flying optimism in basic economy. We followed that with a reminder that the Efficient Market Hypothesis (EMH) isn’t just alive, it’s bench-pressing your overfit quant model in a three-piece suit. And then, naturally, we ended with someone on X declaring financial Armageddon because the Fed did its job. Gold to $25,000, Bitcoin to $1 million, and a heartfelt plea for divine mercy because nothing says sound analysis like apocalyptic vibes and price targets from the Twilight Zone. One thing is clear: not all risk is created equal and some of it is just bad fan fiction in a trench coat.
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ON THIS DAY: May 23, 1934 Risk Management Died in a Ditch
On May 23, 1934, Bonnie Parker and Clyde Barrow, America’s most photogenic felons, learned the hard way that not all risk is good risk. After a two-year crime spree that was equal parts bank robbing, gas station loitering, and posing for Instagram-worthy black-and-white selfies with shotguns, the duo was ambushed near Gibsland, Louisiana by a posse of law enforcement who had clearly read up on how to set a trap and why you don’t let criminals road-trip unchecked.
The trap worked spectacularly. Approximately 130 rounds of ballistic persuasion later, Bonnie and Clyde were less of a power couple and more of a cautionary tale in risk assessment. Turns out driving a stolen Ford with a loaded arsenal and zero exit strategy doesn’t qualify as a diversified portfolio.
Let this be your financial reminder: just because something has a high return doesn’t mean it’s worth the exposure. Risk, unmanaged, ends not in riches but in a smoking heap on a rural road. So before you YOLO your retirement fund into meme coins or load up on triple-leveraged ETFs, ask yourself: “Is this a Bonnie-and-Clyde move?”
And if the answer is yes, remember they didn’t make it to 26.
The Wealth Effect is Dead. Tell the Airlines and Walmart's Wine Section
Because nothing screams economic despair like a Delta downgrade and Pinot Grigio on rollback.
The market gods giveth, and the market gods taketh away. Usually while mumbling something about valuation normalization as your retirement shrinks faster than a promised equity vesting schedule in a tech layoff. The S&P 500 is currently trading at a less-than-inspiring 5,842.01, down a microscopic but symbolically tragic 0.04% from the previous close. Sure, it’s not the apocalypse, but when every index walks like it’s headed to couples therapy, you know the vibes are off.
Correction territory is no longer just a place for edgy NFTs and crypto. The broader market has officially hit its 10%+ drop, meaning we’re now legally obligated to use phrases like “market jitters” and “consumer headwinds.” Meanwhile, the Russell 2000 (our favorite indicator of American economic optimism) has faceplanted over 16% since November. If small caps are the canary in the coal mine, that bird is now face-down with a tiny top hat and a foreclosure notice. Retirees and near-retirees are bailing on equities like rats on a sinking Peloton IPO. Bonds, Treasuries, and other dull-yet-dependable vehicles are suddenly hot again, because nothing says risk-off like a 4% yield and the moral superiority of being boring. This isn’t just cautious, it’s a full spiritual retreat from optimism. The wealth effect used to whisper sweet nothings into our ears: "Buy the dip, you gorgeous genius." Now it screams: "Sell everything and hoard canned beans."
And even the vibe check from Main Street is a downer. The latest Conference Board survey shows small business owners are flipping their optimism faster than a politician caught in a Reddit AMA. “Business better” sentiment is down 11%, while “business bad” saw a comforting 2% bump. Fun fact: small business uncertainty is now at its second-highest level in 50 years. And when your barber and your barista are stress-testing balance sheets, it’s time to worry.
Adding to the unease is the stunning fact that 43% of U.S. household financial assets are in stocks…btw, the highest ever. That means almost half the country is emotionally and financially invested in the mood swings of the NASDAQ. This isn’t just about losses; it’s about lifestyle recalibration. If the market keeps tanking, say goodbye to casual splurges, luxury yoga, and second-tier ski vacations. The feedback loop is real: when stocks drop, spending slows, earnings shrink, and the market eats its own tail.
You don’t need to look far for proof. Delta’s already cutting guidance. Walmart is now selling gourmet cheese to the same customers who used to shop at Whole Foods. This isn’t economic theory, it’s a damn noir film. Retailers are watching the top 20% of earners behave like they’ve just discovered what a grocery budget is. Discretionary spending is collapsing in on itself like a dying star, and nobody’s even bothering to fake it with Afterpay anymore.
If you’re looking to historical valuation data for comfort, don’t. The CAPE ratio is at a nosebleed-inducing 37.6—its highest level since people used the phrase horseless carriage unironically. This isn’t just pricey, it’s preposterous. And when bubbles burst, they don’t deflate politely. They explode like a WeWork earnings call. As the old saying goes, markets tend to get cheaper much faster and more painfully than anyone ever expects, except your most depressing Twitter mutual, who’s been calling this crash since 2018.
= > If this all sounds dire, that’s because it is. But investing was never meant to feel like a bottomless mimosa brunch. It’s for those with iron stomachs, dry powder, and the ability to scroll past economic hot takes that include phrases like “end of capitalism” or “I told you to buy gold, bro.” Now’s the time to channel your inner Bogle, Buffet, and the ghost of Munger. They were the high priests of rational optimism who understood that wealth is built by staying in the game when everyone else is bailing for crypto casinos or doomsday bunkers. Diversify like an adult: own broad global equities (yes, the world exists outside the S&P 500), build across asset classes, and rebalance with the discipline of a stoic monk, not a Reddit forum.
Because while doomscrolling feels productive, it’s just intellectual self-harm in a fancy font. Real investors know the market will dip, surge, and generally behave like a caffeinated squirrel. But the trend line—if you zoom out far enough—still points up. So breathe. Stay diversified. And for the love of Pete, mute the guy on YouTube who keeps saying fiat is dead.
“Next time I’ll aim a little lower.” —Clyde Barrow
The Efficient Market Hypothesis: Still Smarter Than Your AI-Powered Gut
Because every generation thinks they've cracked the market code—until they haven't.
This right here is the ole siren song of the savvy investor: "This time is different." It’s the financial equivalent of shouting “I’ve hacked the Matrix!” after figuring out ChatGPT can write haikus. Every era has its chosen delusion whether it the dot-com day traders to crypto cowboys to AI-soaked quant bros with an Excel sheet and a dream. And yet, the Efficient Market Hypothesis (EMH) remains unbothered, unshaken, and entirely undefeated.
Eugene Fama’s 1970 foundational work laid out a deceptively simple idea: markets are ruthlessly efficient. Prices reflect all available information. Not most. ALL. And despite decades of financial revolutions, technological sorcery, and caffeinated fintech bros shouting alpha into ring lights, EMH remains the quiet adult in the room saying, You’re not special. The market knows.
EMH stands on three pillars, none of which have crumbled despite every effort to bury them in crypto whitepapers and startup pitch decks. Weak-form efficiency tells us that historical prices are already irrelevant—if you’re trying to divine the future from a line chart, you might as well use tarot cards. Semi-strong form says public info is priced in faster than you can hit refresh on your earnings calendar. And strong-form posits that even insider info is ultimately a party trick, well, unless your cousin is Jerome Powell and he’s drunk at Thanksgiving, you don’t have an edge.
This isn’t just philosophical musings in a dusty econ textbook. The math behind EMH tells us that any new information is priced into the market instantly, which means trying to outwit it is like bringing a spoon to a knife fight where the knives are quantum trading bots.
And here’s the kicker: technology hasn’t disproved EMH. No, it’s made it stronger. AI was supposed to make us all investment gods. Instead, it gave everyone the same overfitted models and crowded trades. If everyone has the edge, no one does. High-frequency trading, machine learning, and algorithmic desk jockeys don’t make markets dumber, they make them ruthlessly efficient. Your margin for advantage now lives in nanoseconds and micro-decisions. Blink and the trade is gone.
Behavioral finance gets hauled in like a contrarian savior, claiming that irrational humans make EMH obsolete. Cute theory except EMH already accounted for that. Irrational behaviors create arbitrage opportunities, and rational actors, armed with Bloomberg terminals and caffeine addictions, are there to exploit them before you’ve even clicked place order. Human folly isn’t a glitch in the system; it’s the gasoline EMH runs on.
Even the crypto crowd, you know those swashbucklers of decentralization can’t escape EMH’s gravity. Bitcoin, despite the chaos and memes, exhibits weak-form efficiency. Its price movements mimic randomness more than they do patterns, which makes all that next resistance level chart sorcery look even sillier. As the market matures, Bitcoin becomes more efficient, not less. It behaves like the boring old financial instruments it was supposed to replace. Even stablecoins, crypto’s attempt at Xanax, reflect traditional arbitrage dynamics. You can wrap it in blockchain, but you can’t outrun math.
Every generation believes they’ve found a cheat code to the markets. In the 1600s, it was tulips. In the ’90s, it was tech stocks. In the 2020s, it’s AI and DeFi and whatever new acronym’s getting peddled on CNBC. But every time the dust settles, we’re left staring at the same conclusion: the market remains maddeningly efficient, because human behavior is maddeningly predictable. We overreact, we get greedy, we panic, and then, WHOA…surprise! And just like that prices adjust.
And no, regulation doesn’t break the system. It refines it. The SEC isn’t here to topple EMH; it’s here to ensure people stop tweeting insider tips like it’s 2004. Every new rule is just another variable for the market to digest information faster and more efficiently than you can schedule a compliance webinar.
Here’s what all of this means for you: stop trying to beat the market. Index funds and asset class funds win not because they’re sexy, but because they’re honest. They don’t claim clairvoyance, they don’t charge 2 and 20, and they don’t blow up your portfolio with whatever the hot sector of the month is. Over the long haul, they outperform most active managers. Not because of luck, but because they obey the cold, clean logic of EMH.
Even those rare active outperformance stories usually collapse under the weight of risk-adjusted scrutiny. Once you strip away the noise, what remains is a truth as clear as your broker’s commission fees: the cost of trying to outthink the market (time, taxes, transaction fees, ego bruises) is rarely worth it.
In the end, EMH isn’t a doctrine. It’s a defense mechanism. In a financial world addicted to dopamine hits, it whispers a quieter truth: you don’t need to be brilliant. You need to be diversified, disciplined, and perhaps most painfully boring.
So the next time someone claims the old rules no longer apply, remember: the market has seen your grand idea. It priced it in. And it’s already moved on to the next guy who thinks he’s cracked the code.
Alright, I am done ranting. But…in the end, it’s not the hedge fund cowboy, the algorithmic wunderkind, or the Reddit-fueled moonshot artist who wins. No, it’s the quietly consistent investor who buys the market, ignores the noise, and treats rebalancing like dental hygiene: boring, regular, and absolutely necessary. The one who understands that time in the market beats timing the market, and that emotional discipline isn’t just a trait, it’s a superpower. While others chase alpha like it’s a crypto Ponzi scheme with influencer endorsements, the everyday investor who sticks to the plan, diversifies globally, and stays cool when everyone else is screaming has the highest odds of walking away not just solvent, but successful. Not because they outsmarted the market but because they had the good sense not to try. For all you advisors, keep sharing this timeless wisdom to your investors. It may feel like you are on repeat, but who cares…keep repeating it.
BREAKING: The Apocalypse Was Live-Streamed by a Guy with a Gold Bug Filter
This TWEET showed up in my feed this week:
THE END is HERE: WHAT if you threw a party and no one showed up? That is what happened yesterday. The Fed held an auction for US Bonds and no one showed up. So the Fed quietly bought $50 billion of its own fake money with fake money. The party is over. Hyperinflation is here. Millions, young and old to be wiped out financially. Good news. Gold will go to $25,000. Silver to $70. Bitcoin to $500 k to $ 1 million. “The Big Print” the title of Larry Lepards latest book is on. Please read it. THE END I have been warning the world about is HERE. May God have mercy on our souls
The sky has fallen. The Fed threw a party…a sexy little bond auction soirée…and no one showed up. Not even Janet Yellen with a bag of Trader Joe’s snack mix. According to this person this is it. This is “THE END,” all caps, like a horror movie title but with less subtlety and more gold dust.
Let’s be clear: the tweet reads like Harry Dent and ChatGPT had a baby during a currency crisis. The Fed supposedly bought $50 billion of “its own fake money with fake money,” which is a hilarious misunderstanding of monetary policy and also possibly an avant-garde art performance. The real story? The Fed recently made some quiet Treasury purchases. It’s called liquidity management or QE not witchcraft. The only thing truly fake here is the idea that the Fed secretly panic-bought bonds like it was raiding the clearance rack at a Doomsday Prepper Costco.
And then the pièce de resistance: “Hyperinflation is here.” We’re told millions will be financially vaporized. Picture a tsunami made of Weimar banknotes and economic think pieces. Reality check? U.S. inflation is 2.3% as of April 2025. That’s not hyperinflation. That’s brunch inflation. That’s your oat milk is up twenty cents inflation not “wheelbarrow full of cash for a banana” inflation. Unless the apocalypse comes with avocado toast, calm down.
Naturally, this descent into financial nihilism is accompanied by asset predictions pulled from a fever dream. Gold to $25,000? Sure, and my dog is the reincarnation of Alan Greenspan. Bitcoin to $1 million? Maybe if we outlaw fiat, ban electricity, and replace the Federal Reserve with a subreddit. These aren’t forecasts; they’re Mad Libs for maximalists.
The tweet wraps up with a plug for The Big Print, a book that sounds like it should come with a free bunker. Larry Lepard, the author, is a known critic of Fed policy. Fine. He’s got views. But even he didn’t claim financial Ragnarok is live and happening. His book is more of a watch the trendlines, folks, not pray for mercy, you fools.
But here’s the real kicker. The tweet ends with: May God have mercy on our souls. Yes, thats right, the FOMC has been replaced by the Four Horsemen.
Let’s call this what it is: financial fan fiction. A grim little fantasy where the dollar dies, gold wins, Bitcoin ascends like a techno-Messiah, and the author gets to say “I told you so” while eating powdered eggs in a Montana compound. It’s economic cosplay with a side of trauma dumping.
In conclusion, the only thing hyper here is the hysteria. The Fed didn’t lose control of the bond market, inflation isn’t spiraling out of hell, and you’re not going to need a wheelbarrow of Dogecoin to buy groceries. The financial system has problems. Yes there is debt, dysfunction, and enough liquidity to float a small planet but it’s not collapsing in real time. And if it ever does, a tweet isn’t going to save you. Not even one with gold emojis.
So breathe deep, rebalance your portfolio, and maybe read something other than doomsday manifestos before breakfast. Hyperbole isn’t hyperinflation. And the only thing dying today is financial literacy.
That’s a Wrap
As Memorial Day approaches, it’s more than just a long weekend and an excuse to char something on the grill. No, it’s the unofficial Signal that summer has arrived. So as markets do their thing and economists argue over semantics, I suggest you plot out a summer reading list (yes, even if it includes a paperback thriller. But forego John Grisham and read something by Elmore Leonard instead), unplug a little, and make a few memories that don’t involve a screen or a spreadsheet. Do something fun. Something reckless—like starting that novel, learning to cook something French, or finally figuring out how your espresso machine works (or master the Mocha Pot). Life’s short. Summer’s shorter. Make it count. And, say your prayers.
Cheers,
Lawain
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