Financial Fragility
Stock markets around the world are at or close to all-time highs. I continue to believe the financial system is fragile, that interest rates will continue to rise, and that stocks will fall along with severe financial distress.
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| The next depression could be worse |
The Chicken Little Scenario
The "sky is falling" Chicken Little view predicts a financial calamity because of misguided government fiscal and monetary policy. How can I maintain such a pessimistic view in the face of relentlessly rising global stock markets?
My pessimism persists because so many markets have already fallen. Most importantly long-term US Government bonds have lost more than half their value. The rise in interest rates has been significant, and I believe real rates (adjusted for inflation) can rise much further. Many asset classes had seen large price declines and I believe stocks will fall.
Interest rates began rising soon after the COVID crises and rates around the world continue to move to cycle highs. Gold has lost 25% of its value from its peak. The two biggest cryptos, Bitcoin and Ethereum, have lost 51% and 65%. US commercial real estate prices have fallen, residential rates have stopped rising. Stocks are the last asset standing and they will fall to rising interest rates.
June 2026 Portfolio Performance
In June 2026, the Dow Jones Industrial Average gained 2.54%, while the Chicken Little Portfolio gained 0.26%. Year to date, Chicken Little has returned 0.76% vs. a gain of 9.47% for the Dow.
June 2026 was a modestly positive month for stock markets around the world. Gold and Bitcoin, often called 'safe havens,' each lost more than 10% in the month. Bitcoin continues to be the worst performing asset year to date down over 30%.
July 2026 portfolio position
Chicken Little Portfolio remains 100% in cash. Looking for an opportunity to short stocks.
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