The Reality Shift: Financial Markets Do Not Function The Same Anymore

Portoflio Update / Market Outlook, May '26

1. The Markets Have Changed

2. War

3: Portfolio

Two+ months into the Iran thing, sub-chapter, section of the prologue, maybe. 'Prologue' of a world war - add whatever number you prefer if you choose. Formalize it by adding 'the': The Third World War. Or make it absolute: WWIII. 'Maybe' because... we're already in a-the war. A-the war that marks the end of a centuries long era. Any prologue and its sections to that end passed a while back. 

I like to use artistic expressions to bookmark historic eras. To me, you can point to Michelangelo's Davide as the start of our, the modern, era of history. And to the French Olympic opening ceremony as its end. 

 

1) Financial Markets Do Not Function The Same Anymore. Ya think? 

..what musical suggestion might I place here, something that fiddles in the background creating a mood or a groove or a vague context for those few, mostly friends or people I know, who might peruse the market-ed words and stuff beneath? I haven't much idea what words or stuff will emerge so I've no idea, no feeling, to guarantee - or move to infer that I have - no ritual defense to set, no... meta-lingual affective intent. Hah. 

People neither read nor speak much anymore. Well, directly the later at least. We might 'read' more than ever but sort of like you read an IKEA instruction manual. Use a different word or combination of the same. Something like... vaguely perceive, absorb and acquiesce. Make another horrible acronym: p-a-a. Though still reading, we 'paa' to pixelated text more than ever. We paap a lot. Hah. Hah. 

Why Writing by Hand Is Better for Your Brain

We may write a bit more, in a way, rather than speak. We smart-phone express, or 'spe', a lot, decreasing evermore alternative forms of, well, beauty. You know: 3XHah, or 3XH!. Hah. Hah. Hah. Which may be one of the main deals, themes, ideas, stuff... in the following words. 

Music 1:

That's to say: reality, meaning, has changed. Repeating earlier posts: until roughly 15 years ago the financial markets acted as a representation of reality, always in dialogue of course but the general direction remained. So a good approach to investing via those markets was to look at the world itself, gather as much information as you could and compare it only then to representations in the markets, see if you agreed. (Despite archaic theory to the opposite, markets are not at all efficient. In that phrase are a host of rich subjects not to be touched on here.) Then it, the direction, began an inversion. That is, the real world became increasingly considered to be a mere representation of market representations. Madness. But so it went and has since accelerated. 

Likely why I mentioned, at the beginning of these notes, why, after life had pushed me into a dozen year pause - then - beginning late 2010 or so, that geopolitics had become more determinate than anything else regarding predictive market anlysis and modelling. You still need to study companies or other and see where directions in differing places, real markets or industries - again use what word or words you will - are, of course. I.E. portfolio staples like, say, Millepore (filters) then would be or have been replaced by the Coherent(s) (optics) of today. But much of late 2022- early 2024 was spent studying that yukky word and concept, geopolitics. 

When Geopolitics Becomes an Economic Input

Add to that all the passive bids (automantic distribution of saved income into the markets) and leveraging...today you have so many layers between reality and valuation. ETF's, (exchange traded funds,) were marginal before 'the reality shift' have since exploded as the main means of market investing for retirement funds. Blackrock. Just in case, a quick epanation: Mary and Bob shove a thousand dollars per month each into their 60/40 stocks-bonds retirement plans, the former of which is mostly composed of each of their companies stocks and broad ETF's like QQQ (nasdaq) and SPY (S&P.) Those later are required to automatically maintain certain things, relative proportions, in accordance with their prospectuses. (Which also gives those ETF companies a lot of power. If they ask your fringe company to do a thing or it will be removed from their funds... to avoid market valuation of your company taking a massive hit, you'll likely do it.) 

At some point that direction will reverse. Bob and Mary's children, to whom they are increasingly forced to transfer their savings, will not be able to save a penny a month, let alone thousands. The passive bid heightened by leverage and leveraged ETF's will crumble, funds will be forced to sell, traders will jump ship (a real stat this: in the 1960's the average holding time for an equity was 14 years. Today: 3 months,) the carded house will drop like a lifeless salami. The current starry, starry earnings expectations based on increased AI productivity are fine except...at the end, someone has to buy a thing. If you take away all the money from the someones....all the printing in the world wont sell your stuff. In one colloquial line: the band will keep playing until the actual ship sinks. By that time the privileged few will have settled onto their accompanying yachts leaving everyone else to sink with that ship. (It's hard sometimes to accept but as personnel, emplyees, is termed 'stock' - as in animals to butcher - in most West Coast tech companies accounting pages, to them we are, well, utterly expendable goyim slaves.)

There are also, I think, more fundamental things at work regarding information, systems and time or timing but.. that would be a longer essay and not so appropriate here. One can summarize very roughly: we've been pushed into a present that carries ever less of the past and is, in the west, narrowing or trying to narrow the future. You could rephrase it one colloquial in one line: they're trying to nuke the world, all of us, because they freaked out.  

II…exiting the time of Dada, of managers and whores, of wealth and hypocrisy.

2) We are at war: now or never, boys

Mostly cold-ish but with enough kinetic about to provoke a pause. It should anyway. 

One difficulty as there often is: identifying the warring parties. We're used to framing things by nations, expansion and resultant international conflict. Which is usually at least somewhat, and sometimes mostly, a useful, agreeable way to describe events. Still, often more causal than national interests - if you describe national as referring to both the people and wealth of a determined geographical area - remain societal hierarchy and the fear that usually deleanates it. Rich families. Against the rest of us.

That's the war, often present and nearly always since conditions permitted it, basically over the last 8,000 years or so, that has fully broken out really since the fall of the USSR: the wealthiest vs. everyone else. Nations and financial markets merely serve those wealthiest. Banking, finance and monetary systems are the usual primary mechanisms by which their wealth, that conquest, expands while their risk diminishes if not entirely removed. Of late, resources and the paths, trading routes, those resources follow are ostensibly the things nations are ferociously fighting over. Rather, a monopoly the West is ferociously trying to maintain and where possible, expand. Because the West is broke, by and large, while the current fiat monetary system, banking, needs constantly new real stuff to use as collateral for loaning new money into existence. The West doesn't have much stuff. Iran, Russia, Africa and the South Americas do. No money, no funny. All wars really are bankers wars. 

Again, there are likely more determinate things beneath, systemic expressions carrying fear across changes that delineate their expression, define their purpose and affect. Narrow the recursion. Which means: eliminating alternatives. By shoving everything into one controlled now. It was being done slowly but not so much anymore. Data centers are there and being built not so much to create any intelligent artifact but for intelligence gathering. On everyone. New policies in the West aren't meant to help, to create a community in which you or a family belong and thrive but to isolate and impoverish, to fill us with gratuitous angst and make you believe and act as if we doesn't exist and you can 't do anything about your own world and life. Luckily, it's not working anymore. Unluckily, that's one of the primary reasons things have sped up. 

Project for the New American Century

So the world now is at war, full on. The Iran deal thing, timing, alas became predictable once Syria was eviscerated (by us mostly though israel and others played their parts) and was after all even written up, the ‘plan’ - even the sequence is the same as formulated then, decades ago. Add to that the rather mind-melting amount of missing currency (estimated something like 40 trillion. Read: slush for paying off of course western politicians, relevant judicial systems and the like but very probably also the Venezuelans, Indonesians, Chinese military, Japanese political parties, Ukrainians, ecc. ) the unforeseen impacts of technological change on military influence (ie the debacle of our jet fighters vs chinese radar in the india-pakistan shubble-bubble last year and the like,) and other factors…well, the war was going to be turned up anyway. Now or never, boys. 

It’s not as much to do with our countries than, again, banking and monetary system. That needs collateral. Which, to repeat, we don't have anymore. But Russia does - a lot. And Iran as well - less but it in turn is so marvelously located geographically. So many pigeons with but a single exploding stone. (which is pretty necessary, given the west’s scarcity of stones.) Though the flavor would have been different with a different administration, the sequence would have been awfully similar even if the candidate I voted for - though I’m one of those first few thousands in US history whose vote wasn’t counted thanks to the Democratic party - had by some Douglas Adams-like plot twist been elected (West-Abdullah).  

You mean, it comes from a world of lizards?

3. The Porfolio

disclaim and all: (Note to anyone perusing: for now, I've none of these things - those who know me know the primary cause. He did actually steal literally every thing. Just suggestions these and no conflicts of interest or certified advice. Investing, or betting, is always problematic and filled with risk. Then again, so can be eating a pizza.) 

Overall: It's been kinda' crappy since a few days after the war began, losing about a percent and a half as of this morning. Yes, that still leaves it up 22.8 % since inception last Septemebr 8th vs total returns of the SPY's, 12.4%, and despite the volatility in precious metals over the past 5 months beta, lets call it relative volatility, remains fairly low. Dispersion is relatively high but, unlike indicated in most literature on investing, here that means less, not more, risk (choices of holding are made based on scenarios, not parameters. A large or small cap oil, commodity or fertilizer company earnings would benefit from ongoing West Asian conflict whereas airlines or cruise ships would benefit from peace, etc.)

So... you can take a look at the tickers if you'd like and do your own research on each or any. I'll be going through the holdings summarily, on at a time, maybe by voice, likely by text, with screen shots and a link or two.  Music for equity market screen shot perusing: