As improbable as it may seem, the current wave of speculative enthusiasm is set to diminish.
2025 could be remembered as The Year When Everything Happened in No Particular Order, echoing William Gibson’s assertion that “The future is already here; it’s just not evenly distributed.”
Inflation will be found by those looking for it, while those anticipating deflation will encounter that too. Expecting a stock rally? You’ll see one. A crash? That’s on the horizon as well.
The reliable trends we’ve come to rely on are losing their strength or reversing:
- Interest rates have dropped to near-zero, making credit nearly free.
- Globalization has pushed prices down, making goods cheaper and more disposable.
- Growing workforces have spurred income and consumption.
- Credit and asset bubbles have generated wealth without real productivity gains.
- Energy supply has kept pace with rising demand.
- The hidden costs of our “waste is growth” economy—pollution and depletion—have been ignored.
Despite these changes, many still cling to the belief that the remainder of the 2020s will mirror the 40+ year Bull Market.
Attempts to maintain the status quo—like printing more money—are merely propping up fragile structures as the tide rises.
The first to crumble will be those castles closest to the sea—what I often refer to as the periphery. Meanwhile, those with resources will scramble to shore up their defenses.
Yet the tide remains unyielding, placing us in a state of flux where those benefiting from the current system are battling against the very forces that brought it to its peak.
As they lose ground, they intensify their efforts, implementing increasingly extreme policies that further destabilize the system.
The global economy is a complex, self-organizing system, and blunt policies aimed at safeguarding stability often lead to unintended consequences.
Those attempting to exert control over the system find their grip is tenuous at best.
Long cycles are now at play. Interest rates fell for 40 years—the longest run on record. Now, we’re likely to see a rise in rates, culminating in a financial crisis that won’t have an easy fix, as printing money—once the solution—will now be part of the problem.
Demographic shifts are also significant. Workforces are shrinking while the number of retirees is soaring.
The world’s appetite for energy and consumption is ever-growing, but the easy-to-exploit resources have been largely exhausted. Prices will rise, irrespective of technological advancements.
Physical, chemical, and economic limits will soon come into play.
Whatever we seek, we may find—but it could be fleeting.
While many are on the lookout for Black Swans, that’s not how they operate.
Speaking of swans, the rampant speculation dominating global markets has become so commonplace it might be a Gray Swan that goes unnoticed.
Fortunes have been built on betting that speculative bubbles will continue to rise beyond rational limits.
These profits fuel the ambitions of speculators, big and small, leading to confident pursuits of any rally in speculative assets—now encompassing nearly everything.
The urge to speculate remains exceptionally strong. This drive will manifest in various assets, igniting new rallies and attracting participants from all corners.
However, the unyielding tides suggest that any such speculative excitement may not endure as long as proponents hope.
Machiavelli’s wisdom rings true here: “The wise man does at once what the fool does finally.”
In essence, there may be no certainties within the speculative realm.
It could take several market crashes to temper this fervor. Builders of sand castles might enjoy temporary gains, but the tides will erode their foundations, causing valuations to decline.
The process of diminishing speculative enthusiasm will take time. While it may seem impossible now, the tide will ultimately drain the pool of speculative fervor.
