Exorbitant Hubris

Trump has been building up troops in the Middle East in order to prepare for his Plan B ground attack. We don't know exactly where ground troops will be deployed, but the highest probability target remains Kharg Island. Nevertheless, it doesn't matter where U.S. troops land, because the market reaction will be the same: Panic, over the idea that this war could go on for several months or longer, and in the process implode the global economy. Markets know that there are only a few weeks left of this current Hormuz blockade before oil hits $150 at which point the global economy will collapse like a cheap tent. It will be a pandemic level collapse in global demand, however this time without any support from central banks. Meaning that the younger generations will experience their first in a lifetime "hard landing".

In order to slow the collapse of global markets Trump has been shit posting various messages claiming that progress is being made in negotiations. Time after time Iran has rejected his claims that "talks" are taking place:

Recall: this is what I wrote in my last blog post The Point Of No Return:

"The strategic miscalculation the U.S. military made was believing that after having attacked Iran last June that they can just show up whenever they want and start carpet bombing the country without any consequence. It was a foolish mistake and a strategic blunder"

This is what the Iranians said this week in response to Trump's request for a ceasefire to begin talks:

"Iran was bombed twice over the past nine months while engaged in talks with the U.S., referring to attacks last June and the conflict that began on Feb. 28."

In other words, BOTH times in the past year that the U.S. was having official talks with Iran the U.S. spontaneously started bombing Iran without any warning. And yet Trump and his merry band of morons believed that Iran would fall for it all over again. Unfortunately, Trump has totally destroyed his own reputation to the point that he is no longer a viable negotiator. Which leaves him backed into a corner because Iran's demands are too steep for him to capitulate, therefore it's extremely likely that he is going to commit U.S. troops to a suicidal land campaign solely to spare his MASSIVE ego.

That's what I call exorbitant hubris.

Which gets us to the financial markets.

The pattern of Trump escalating towards the end of the week and backing down at the beginning of the week is now well known by investors. It's called the "TACO" trade as in Trump Always Chickens Out, which is a carry over from last year's trade war. The end result of Trump's propensity to TACO is that investors have become more and more complacent about Trump's escalation threats, which clearly will be a disaster if he commits troops to a land campaign. You can't TACO from a land campaign. It's a long-term commitment.

And yet amid all of this uncertainty and risk we learn that stock analysts who rate stocks are the most optimistic in the past decade. A total disconnect from reality:

"Wall Street analysts are bullish on the stock market. It could be a big reason to worry."

Despite the slowing U.S. economy and the war in Iran, stock analysts at investment banks and research firms are more optimistic about the market than at any time in more than a decade"

It's like we are living in the Twilight Zone.

This is how many markets have ALREADY imploded:

Software and many other "AI disrupted" industries

Hyperscalers: Meta, Microsoft, Amazon, and now Google

Crypto currencies

Gold and silver, copper and industrial metals

Emerging markets

European stocks

Private equity

Banks and financials are imploding because private credit is imploding

The global bond market is imploding which is taking down "safe haven" bond proxies such as consumer staples

What does that even leave?

Obviously Oil and gas (Energy) stocks are leading the market. The Dow Energy index is up 14 weeks in a row which is a record winning streak.

Those are the ONLY stocks making new highs right now.

Which means that MOST of the market has already imploded, but the major indices are hanging on by a thread due to continual sector rotation. In other words, the severe damage underneath is not visible on the surface.

Here we see the Dow is very similar to last year when Trump SHOCKED markets with his reciprocal tariffs which was at the end of March 2025:

And yet we see that S&P 500 down volume ALREADY equals last April's collapse volume before any type of war escalation has started:

Here we see the 10 largest cap Tech stocks (FANG+) index are at critical support:

Due to the war risk and oil exposure, global investors are selling Emerging Market stocks at the fastest pace since the 2008 Global Financial Crisis:

"Foreign investors have sold $50.45 billion in Asian equities so far this month. If that pace sustains for this month, it would mark the largest monthly outflows since 2008 and the onset of the Global Financial Crisis"

As I showed on Twitter, Indian stocks and the Rupee are getting obliterated by this war:

In summary, there is going to be a showdown between the U.S. and Iran, and I suggest that TACO investors are not prepared for a major escalation in the war because they have been told that imaginary "talks" are taking place right now.

Going back to the Barron's article about how bullish Wall Street analysts are right now:

"Colas points out the last time analysts were this uniformly bullish was in February 2022"

Position accordingly..