Tactical Edge Podcast - Brought To You By TWM - Episode 8

Okay, here we are with episode number eight in the middle of May of 2026.

And we have a title, today's market, a sheep in wolf's clothing with a question mark.

That's the question a lot of folks have out there.

What appears to be a breakdown in the global supply chain that's coming down the road.

People are asking, why is the stock market rising? And of course, no one knows for sure.

There's a lot of factors at play.

But one angle that we've been posing for a number of months actually makes the most sense to us right now that could be a driving force.

And that is the idea of a right tail outcome that could be manifesting right now.

And the best way to think of a right tail outcome is really more about a debasement in the underlying currency.

If I look at this ratio that we posed way back in September of last year, we had this numerator over denominator.

And when we look at a price of anything, we're always assuming, generally speaking, that the denominator is constant in nature.

We don't think that's the case anymore.

And so if a denominator in a ratio gets smaller, the only way to account for that is for the numerator to become larger.

And so if we take the S&P over a dollar, for instance, well, what's been happening with this dollar over the past 40 years? Politicians and policymakers have really gone to town with the dollar being the target.

And we look at it through just what the Federal Reserve has posted.

We're talking a 42-fold increase in the supply of dollars vis-a-vis the M2 calculation and And if we look simply how many $20 bills would be needed to acquire one ounce of gold, it's gone from one and three quarters in 1970 to nearly 240 today.

That's a 99% decline in the dollar's purchasing power to gold.

And so obviously, if we look at the S&P, for instance, and we have a dollar that's getting smaller, well, the S&P obviously would be getting larger.

Certainly, we have higher earnings and other factors at play.

But the main focus here we're talking about is to understand how much a declining currency value or the purchasing power of that currency could impact pricing for a host of things, including home prices.

So if we look at a nice house in suburban St. Louis in the early 1980s, $250,000 would have gotten you a really nice house.

Today, $1,250,000 gets you something like this.

We're talking 530 some odd dollars a square foot versus 33 a foot.

That is insane unless you understand fully that this is mostly about U.S. dollars losing value.

Of course, all currencies around the world have also lost value, but we're focusing on the U.S. dollar today.