The Last Trump Casino

Sometimes I blog not because I want to, but because everything I am reading in the mainstream press makes ZERO sense, therefore I need to clear my own thoughts. This is one of those times.

Let's set the table:

It's mid-July and the Iran war that no one expected in the first place, resumed THIS week. During the first phase of the war Trump vowed to end the war quickly, so markets soared to new all time highs led by a melt-up in the AI super bubble.

That promise to end the war quickly has now been officially broken.

Which means that at this juncture Trump is totally off the reservation, Democrats are obsessing over reflecting pools, the AI bubble is imploding due to RECORD debt and equity issuance, and the Strait of Hormuz is closed again. Meanwhile, the VIX is trading with a 15 handle as complacency is rampant. All coming at the lowest liquidity period of the year - Q2 earnings seaon.

If anyone had told investors at the start of 2026 that the above situation would abide on July 15th, they would have said it's an automatic sell. But instead, fund managers are ALL IN:

"They have cut their cash holdings to an “uber-low” 3.6% and upped their allocations to U.S. equities, taking their exposure to its highest level since late 2024, according to Bank of America’s monthly fund manager survey."

There are now only THREE full months left until the mid-term elections, so time is running out for Trump to "win" the war with Iran. He has to do something decisive soon or else soaring oil prices, soaring inflation, and soaring interest rates will hand Congress to the Democrats.

Needless to say, a MAJOR escalation in the war now would be a worst case scenario for markets. So investors are accepting a HUGE amount of war risk.

In the meantime, another timely article in the Wall Street Journal today highlighted the RECORD amount of AI stock and bond issuance taking place in 2026:

"Overall, U.S. companies will issue a net $500 billion of equities over the next year, compared with a net reduction of $1 trillion in recent years, mostly from stock buybacks, according to Elm Wealth, an advisory firm.

"Comparable issuance took place in 2021, as investors hoovered up shares of special-purpose acquisition companies, also known as SPACs. Many of those deals ran into problems, costing investors big money, though the S&P 500 shook the concerns off, soaring 27% in 2021"

In other words, this year will see the LARGEST net issuance of stock in market history. So large that it will cancel out all stock buybacks for the first time in decades. Collapsing stock market liquidity.

The second paragraph above wrongly asserts that the SAME amount of issuance took place in 2021 and the market absorbed it fine. That would be true if 2021 had ended in July. But here we are in mid July with ALREADY the same amount of IPO issuance that took place in ALL of 2021. Which was followed by a bear market.

I have to point out the obvious which is that the AI bubble is already imploding. The Wall Street Journal has a stellar history of never seeing a bubble imploding, before, during, or after it happens. It's up to buried investors to figure it out for themselves.

The rotation to safety is now imploding, deja vu of what happened at the start of the war.

In summary, I don't know WHAT investors are thinking right now.

I don't even know IF investors are thinking right now.

I only know that they are ALL CROWDED into the Last Trump Casino.

And they are not getting out intact.