RiskReversal Pod

Great show

February 22nd, 2026 to June 30th, 2028 "The unemployment rate printed 10.2% this morning, a 0.3% upside surprise. The market sold off 2% on the number, bringing the cumulative drawdown in the S&P to 38% from its October 2026 highs. Traders have grown numb. Six months ago, a print like this would have triggered a circuit breaker. Two years. That’s all it took to get from “contained” and “sector-specific” to an economy that no longer resembles the one any of us grew up in. This quarter’s macro memo is our attempt to reconstruct the sequence - a post-mortem on the pre-crisis economy. The euphoria was palpable. By October 2026, the S&P 500 flirted with 8000, the Nasdaq broke above 30k. The initial wave of layoffs due to human obsolescence began in early 2026, and they did exactly what layoffs are supposed to. Margins expanded, earnings beat, stocks rallied. Record-setting corporate profits were funneled right back into AI compute. The headline numbers were still great. Nominal GDP repeatedly printed mid-to-high single-digit annualized growth. Productivity was booming. Real output per hour rose at rates not seen since the 1950s, driven by AI agents that don’t sleep, take sick days or require health insurance. The owners of compute saw their wealth explode as labor costs vanished. Meanwhile, real wage growth collapsed. Despite the administration’s repeated boasts of record productivity, white-collar workers lost jobs to machines and were forced into lower-paying roles. When cracks began appearing in the consumer economy, economic pundits popularized the phrase “Ghost GDP“: output that shows up in the national accounts but never circulates through the real economy. In every way AI was exceeding expectations, and the market was AI. The only problem…the economy was not. It should have been clear all along that a single GPU cluster in North Dakota generating the output previously attributed to 10,000 white-collar workers in midtown Manhattan is more economic pandemic than economic panacea. The velocity of money flatlined. The human-centric consumer economy, 70% of GDP at the time, withered. We probably could have figured this out sooner if we just asked how much money machines spend on discretionary goods. (Hint: it’s zero.)” Go Orange!

Great show. I listen to a lot of podcasts - for some reason the volume on your show is low and hard to hear despite putting my earphones on high

These guys always say the same thing. It’s always negative…always doom and gloom. These guys have been negative for the past few years while the stock market has exploded higher. Now that the market is pulling back, they’re ecstatic, but if you followed their advice the past few years you would have missed out on massive gains. Always being negative hurts their credibility. If they were sometimes optimistic, their negative views at times would be more meaningful.