The Everything Bubble Suddenly Feels Unstable

"I think 2025 will be a year that most equity investors will want to forget…"

This one is a “must read” if you ask me.

One of my favorite investors that I love reading and following, Harris Kupperman, has offered up his thoughts on the Fed and markets for 2025.

Harris is the founder of Praetorian Capital, a hedge fund focused on using macro trends to guide stock selection.

Harris is one of my favorite follows and I find his opinions - especially on macro and commodities - to be extremely resourceful. I’m certain my readers will find the same. I was excited when he offered up his latest thoughts, published below.

Please be sure to read both my and Harris’ disclaimers, located at the bottom of this post.

The Wheels Fall Off…

I started following financial markets during the Asian Financial Crisis. I remember the Fed stepping in as LTCM detonated, and I instantly understood the moral hazard of saving financial institutions from their own stupidity. I watched as the Fed panicked over the Y2K non-crisis, only to blow the internet bubble to stratospheric heights. Since then, I’ve watched the Fed rush into every crisis, real and imagined, with unlimited liquidity, and reduced interest rates. I even watched the Europeans trial negative interest rates.

Four years later, we’re still trying to reduce the excess Covid liquidity that the world’s Central Bankers sprayed at literally anyone and everyone who’d oblige by taking it. To a man with a hammer, everything looks like a nail. To a Central Banker, the solution is always more liquidity. To an investor, the lesson has been to hold on for dear life, outlast the crisis, then lever up, because the subsequent liquidity-induced rally will be life-changing.

For the first time in almost three decades, I wonder if the rules have changed. What if the Fed is no longer there to protect investors? What if the Fed will now be forced to penalize investors during the next crisis? What if the investing universe is so pre-conditioned that they can’t appreciate the rules changing?