Am I fighting the tape? I think this market has a chance to make a new high. The trading today was very good. I have been questioning myself since April whether this is a bull rally in a bear market. Here are the facts presented to you. I know the “don’t fight the tape” rule. Well, I have been fighting the tape, and for good reasons. What is currently happening is being driven by Bull-Shit news, not fundamentals. Well Bullshit eventually shows its true colors. Don’t get caught in the B.S.
INTRODUCTION: THE PARADOX OF BEING RIGHT AND LOSING MONEY
I’ve been calling for a market drop based on deteriorating fundamentals and uncertainty, and the data backs it up completely. Yet here we are, with markets pushing toward new highs while you’re left wondering if you’re the crazy one. Welcome to one of the most frustrating experiences in investing: being fundamentally right while being practically wrong.
The numbers are stark and undeniable. Consumer spending – the lifeblood of the U.S. economy – is collapsing at the fastest pace in years. Credit card delinquencies have surged to levels not seen since the aftermath of the Great Financial Crisis. Young consumers are drowning in debt with 10%+ delinquency rates. Retail sales just posted their worst decline in months. By every traditional measure of economic health, we should be amid a significant market correction.
Yet the market keeps climbing. Volume was heavy today. Breadth is positive. New highs are within reach.
This raises the fundamental question every contrarian investor must face: Are you early, or are you just wrong? Are you fighting the tape, or are you the only one seeing clearly while everyone else is drunk on momentum?
MY HONEST ASSESSMENT: I’M PROBABLY RIGHT, AND…
I’M Not Fighting the Tape – I’M Fighting a New Market Structure
Here’s what I think is really happening:
- The Market Has Become Untethered from Fundamentals (Temporarily)
- $750 billion in authorized buybacks creates artificial demand
- Zero-day options create daily gamma squeezes
- Passive flows are momentum-following by design
- Algorithms don’t read consumer credit reports
- Institutions ARE Front-Running 2026
- They’re betting on:
- Deregulation (banking, energy, tech)
- Tax cuts (corporate rate reductions)
- Fed panic (multiple rate cuts)
- AI productivity boom
- They’re willing to look past 6-12 months of pain
- They’re betting on:
- The “Greater Fool” Theory is in Full Effect
- Everyone knows the data is bad
- But everyone thinks they can sell to someone else before it matters
- This works… until it doesn’t
Am I Wrong? NO. Am I Early? YES.
The data is unequivocal: 12.3% credit card delinquencies and collapsing retail sales ALWAYS lead to recessions and market corrections. There are no exceptions in modern history.
But Here’s the Brutal Truth:
The market can stay irrational longer than you can stay solvent. And right now, the market is pricing in a future that assumes:
- Consumer stress magically disappears
- Delinquencies improve without a recession
- Earnings grow 10%+ with 1% consumption growth
- The Fed achieves a perfect soft landing
My Opinion: I’m Right, But My Timing is Off
The fundamentals will matter again – they always do. But the catalyst hasn’t arrived yet. That catalyst will likely be:
- Q2 earnings disaster (July)
- Credit event (unexpected default)
- Geopolitical shock
- Or simply exhaustion of the “greater fool” supply
The Bottom Line:
I’m not missing the boat – I’m waiting at the right dock while everyone else is partying on a ship with a hole in the hull. The party looks fun, and it’s painful to watch from shore. But when that ship starts sinking, you’ll be glad you stayed dry.
The question isn’t whether I’m right, but whether I can psychologically and financially survive being early. (I have to hold back my inner FOMO) History suggests I’ll be vindicated.
As Keynes said, “The market can remain irrational longer than you can remain solvent.” But he didn’t say it remains irrational forever
Below: The Ugly Truth
CONSUMER SPENDING AND CREDIT DELINQUENCY ASSESSMENT – LATEST DATA
CONSUMER SPENDING (MAY 2025 – Most Recent Available):
RETAIL SALES COLLAPSED:
- Advance estimates of U.S. retail and food services sales for May 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $715.4 billion, down 0.9 percent (±0.5 percent) from the previous month
- Retail sales declined 0.9%, even more than the 0.6% drop expected from the Dow Jones consensus
- Excluding auto dealers, building materials suppliers, gas stations and others, sales increased 0.4%
KEY SPENDING TRENDS:
- Retail sales fell 0.9% last month, the largest decrease since January
- GDP declined at a 0.2% annualized pace in the first quarter but is projected to rebound
- Net sentiment dropped 32 percent in May, a nine-percentage-point swing from the previous quarter
CONSUMER BEHAVIOR SHIFTS:
- Families are wary of higher prices and are being a lot more selective with where they spend their money,” said Heather Long, chief economist at Navy Federal Credit Union. “People are hunting for deals and aren’t eager to buy unless they see a good one
- Consumers are on the sidelines as the job market weakens and Americans grapple with higher prices
CREDIT DELINQUENCIES (Q1 2025 – FEDERAL RESERVE DATA):
CREDIT CARD DELINQUENCIES:
- Q1 2025: 3.05 (Credit Card Delinquency Rate)
- Credit card delinquencies also increased, with the rate of delinquencies over 90 days climbing to 12.3%, an 8.5% rise from Q4 2024 and the highest since Q1 2011
- Among consumers under 30, serious credit card delinquencies reached 10.3%, a 4.4% increase from a year ago
OVERALL CONSUMER LOAN DELINQUENCIES:
- Q1 2025: 2.77 (Consumer Loan Delinquency Rate)
- Aggregate delinquency rates increased from the previous quarter, with 4.3% of outstanding debt in some stage of delinquency
TOTAL HOUSEHOLD DEBT:
- Total household debt increased by $167 billion (0.9%) in Q1 2025, to $18.20 trillion
- Consumers reduced credit card balances by $29 billion in the first quarter, bringing the total to $1.18 trillion
MORTGAGE DELINQUENCIES (STILL LOW):
- Q1 2025: 1.78 (Single-Family Mortgage Delinquency Rate)
CRITICAL FINDINGS:
- CONSUMER SPENDING IS WEAKENING RAPIDLY
- Retail sales down 0.9% in May (worse than expected)
- Consumer sentiment plunged 32%
- Tariff fears causing spending pullback
- DELINQUENCIES AT MULTI-YEAR HIGHS
- Credit card 90+ day delinquencies at 12.3% – HIGHEST SINCE 2011
- Young consumers (under 30) show severe stress at 10.3% delinquency
- Overall, consumer loan delinquencies are rising
- DIVERGENCE IN FINANCIAL HEALTH
- Total debt is still growing ($18.2 trillion)
- But consumers paying down credit cards (-$29 billion in Q1)
- Suggests bifurcated economy: some doing well, others struggling
- WARNING SIGNS FLASHING
- We anticipate a sharp deceleration in spending growth, with real personal consumption expenditures easing from 2.3% in 2024 to 1.2% in 2025
- Credit card delinquencies highest since the Great Financial Crisis recovery
- Consumer pulling back just as delinquencies spike = DANGER
BOTTOM LINE:
The consumer is CRACKING. Spending is falling off a cliff while delinquencies surge to decade highs. This is the WORST combination possible – falling demand meeting rising credit stress. The 12.3% credit card delinquency rate for 90+ days is a MASSIVE red flag, especially with young consumers at 10%+.
This data suggests we’re heading into a consumer-led recession, regardless of what the stock market is doing today. (I don’t think we go that far, but we get close)
EARNINGS REALITY CHECK: THE NUMBERS DON’T LIE
THE CONSUMPTION MATH PROBLEM:
Current Spending Trajectory:
- Retail sales DOWN 0.9% in May (worse than -0.6% expected)
- Real personal consumption expenditures easing from 2.3% in 2024 to 1.2% in 2025
- Consumer spending = 70% of GDP
Simple Math: If consumer spending grows only 1.2% in 2025 (down from 2.3%), and it’s 70% of GDP, that alone knocks ~0.7% off GDP growth.
EARNINGS IMPLICATIONS:
Current S&P 500 Earnings Expectations:
- Earnings of companies in the S&P 500 are expected to grow by 10.5% in 2025, down by 3.5 percentage points since the beginning of the year
- These estimates were made BEFORE the May retail collapse
The Disconnect:
- How do you get 10.5% earnings growth with 1.2% consumption growth?
- Margins are already near peak
- Labor costs rising (wage pressures)
- Input costs elevated (tariffs)
THE DELINQUENCY TIME BOMB:
Credit Card Delinquencies:
- 90+ day delinquencies at 12.3% (highest since 2011)
- Young consumers at 10.3% delinquency
- This means FUTURE spending will be even WORSE as these consumers:
- Can’t get new credit
- Must pay down existing debt
- Face higher rates on remaining balances
RECESSION PROBABILITY:
Based on the FACTS:
- Consumer Math Says YES:
- 70% of the economy is growing at 1.2% = Stall speed
- Delinquencies rising = Future spending cuts
- Sentiment crashed 32% = Precautionary savings
- Historical Precedent:
- EVERY time credit card delinquencies hit 12%+, recession followed
- EVERY time retail sales fell 0.9%+ for 2+ months, recession followed
- We’re already seeing both
MARKET CORRECTION TIMING:
Before the September Fed Meeting? HIGHLY LIKELY
Why?
- Earnings Season Reality Check (July):
- Q2 earnings will reflect May/June weakness
- Companies will slash forward guidance
- 10.5% growth expectations will get decimated
- The Math Gap:
- Market at new highs pricing in 10%+ earnings growth
- Reality showing 1-2% consumption growth
- That’s an 8-9% gap that MUST close
- Fed’s Dilemma:
- 50bp cut won’t fix 12.3% delinquencies
- Won’t make consumers suddenly spend
- But NOT cutting risks accelerates the collapse
MY SCENARIO (Based on Facts):
July-August:
- Q2 earnings disappoint massively
- Forward guidance slashed
- The market realizes that 10% growth was a fantasy
- Correction: 15-20% minimum
September:
- Fed cuts 50bp in panic
- Market bounces briefly (1-2 days)
- Then realizes Fed is BEHIND the curve
- Consumer still broken
Q4 2025:
- Recession officially begins
- Earnings estimates cut to NEGATIVE growth
- Market down 25-35% from highs
THE BRUTAL TRUTH:
The market is priced for perfection while the consumer is showing Great Financial Crisis-level stress. This CANNOT persist. Either:
- Consumers miraculously start spending (with what money?)
- Market reprices to reality (DOWN)
Given 12.3% credit delinquencies and collapsing retail sales, which seems more likely?
The correction isn’t a question of IF, but WHEN. And the data says it’s imminent.
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