The latest CPI numbers were released for August 2025.  The CPI was up 0.4% for the month.  The year-over-year now stands at 2.9%.

The median CPI, which tends to be less volatile, was up 0.3% on the month and stayed at 3.6% annually.

Forecasts had predicted a monthly rise of 0.3% and an annual rise of 2.9% for the CPI.  This means that it was a rounding difference, but the actual numbers came in slightly higher than expected.

To offset this little bit of bad news was more bad news.  The number of unemployment filings came in higher than expected.

Therefore, the bad news of slightly higher price inflation was offset by the bad news of higher unemployment.  The first piece of bad news indicates that the Fed can’t be as loose with its monetary policy.  The second piece of bad news says, “Don’t worry about the first piece.  The higher unemployment gives us a green light to lower rates at the next Fed meeting.”

In other words, the bad news that favors lower rates typically wins out.

Investors Love Everything in Bubble Mania

Higher price inflation?  Who cares?  Buy more stocks and mutual funds.

Higher unemployment?  Who cares?  If anything, this just gives the Fed more incentive to lower rates.  Buy more stocks and mutual funds.

It doesn’t matter what the news is these days.  Even tariffs don’t seem to bother investors any longer. No matter what it is, the market just keeps marching higher.

The Dow closed above 46,000 for the first time ever.  The Nasdaq closed above 22,000 for the first time ever.

This is bubble mania.  No matter what the news is, it is twisted into a good reason to buy more equities.

When the markets hit new highs, it means that the economy is strong.  And since the economy is strong, you should buy more stocks.

Does this all make sense?  It only makes sense in the context of bubble mania.

We don’t know when the bubble mania will end, but we know that manias always come to an end.  They end when the irrationality can’t get any more irrational.  They also end when people don’t have any more money to speculate because they are using it for necessities.

The bubble mania will end slowly and then all of a sudden.  Then there will be a mania in the rush for the exit door.  You don’t want to sell when everyone else is trying to sell.

The U.S. medical care system is really messed up, but the Health Savings Account (HSA) is a great vehicle to use if it is available to you.  In order to have an HSA, you have to have a high-deductible health insurance plan.

The Health Savings Account allows you to contribute pre-tax money into an account and use that money for eligible medical expenses.  It is somewhat similar to a 401k except it is supposed to be for medical expenses instead of general retirement.

In addition, some employers will make a contribution to your HSA, somewhat similar to a 401k plan.  Unlike a Flexible Spending Account (FSA), an HSA plan carries forward.  If you don’t use any of the money in a particular year, it stays in your account.

You can technically spend your HSA money on anything, but it will negate any tax benefits.  You will owe income taxes on non-qualified expenditures.

A Strategy for Growing Your HSA

There is a small segment of people out there, including a few financial advisors, who will suggest that you not use any of your HSA money while you are working and earning money.  Instead, you should keep all of your medical receipts and keep growing and investing the money that is in your HSA account, which will grow tax-free.

When it comes time to retire or when you really need the money, you can then redeem your money with all of the receipts you have saved.  If you have $30,000 in medical receipts over the course of 20 years, you can then withdraw $30,000 tax free as long as you have the receipts to show for it.

This is a strategy that is commonly employed in the FIRE (Financial Independence Retire Early) community.

Personally, I am not a fan of this strategy for multiple reasons.  I’m not saying it is a disaster if you are currently doing it, but I do want to warn about a few things.

Are You Maxing Out Your HSA and 401k?

If you are not maxing out your pre-tax accounts, there is no point in doing this strategy.  Actually, there is only downside to doing it.

If you can legally contribute more to your pre-tax accounts each year – particularly your HSA – then it doesn’t make sense to not claim your medical expenses now.  Why would you not claim $1,000 in medical expenses while still being able to contribute another $1,000 per year to your HSA?

You are better off getting reimbursed now through your HSA and maxing out your contributions.  If you are not maxing out your HSA contributions, then there is no tax advantage to saving your medical receipts to get reimbursed in the future.  It is just complicating things.

A 401k is not as accessible as an HSA, but you really should be maxing out your contributions to a 401k too before you consider deferring HSA reimbursement.

A Bird in the Hand

If I find an old receipt, the print is often faded.  After 10 years or so, how do you know you’ll be able to read what is on the receipt?  If you can’t read it, then you can’t document it to the IRS.  You could end up in a situation where you can’t get reimbursed for some of the qualified medical expenses that you did have.

Maybe you are really organized and have scanned all of your medical receipts.  Even here, it is possible that you could lose a file or a file gets corrupted.  If they are stored on a home computer and not in the cloud, you are always at risk of a fire or some other damage.  The same holds true for paper receipts.

Plus, just the organization of it all sounds like a nightmare.  You have to have really great organization skills to track receipts for many years and not lose them.

Other Factors

There are other problems that come to mind with this whole strategy.  Do you really want to wait for 20 or 30 years and then claim, say, $50,000 or more in medical expenses?  This sends up smoke signals to the IRS to be audited.  You are almost begging to be audited, and then you will have to prove out $50,000 in receipts for one year.

Meanwhile, if you were spending something like $1,500 per year on average in medical expenses using your HSA card, it would not be nearly as burdensome if you were audited the following year.  It wouldn’t be as big of a deal if you couldn’t prove some of the expenses.  Also, it would be much easier to possibly retrieve a receipt for something that just happened in the last two years or so.

Another factor is that it is just easier when you go to the doctor’s office to pay with your HSA card and to save the receipt.  Again, if you are going to save receipts for many years or decades to be reimbursed later, you need exceptional organizational skills.

If you aren’t maxing out your pre-tax accounts, there is no point to this strategy, as discussed above.  If you are maxing everything out, you are probably in a position where you don’t need this headache anyway.  Just take the money now.  If you still want to invest it, put it in a regular brokerage account.  You won’t get the tax benefit with your investment returns, but you will have easy access to your money, which isn’t always the case with a 401k plan.  And you don’t have to use it for medical expenses.

In order to employ this strategy of saving your receipts to get reimbursed in the distant future, you should have a strong cash flow outside of pre-tax accounts while also maxing out contributions to your pre-tax accounts.  Most people aren’t in this position.

If you are in this position, you are already doing extraordinarily well.  Why give yourself these possible headaches for the possibility of a few extra tax-free bucks?

Last week, the U.S. Court of Appeals for the Federal Circuit issued a ruling saying that Trump lacks the authority to implement most of his tariffs.  The ruling does not take effect until October 14.

Trump has now indicated that he will request an expedited ruling from the U.S. Supreme Court.

Trump absurdly declared, “If you take away tariffs, we could end up being a third-world country.”  Actually, if Trump keeps dictating unconstitutional acts (such as tariffs), we could end being a third-world country.

Tariffs are a tax, plain and simple.  They are a tax on imported goods.  You can argue about who ultimately pays the tax, but it is still a tax.

The reason America grew so wealthy in the 1800s and early 1900s wasn’t because of tariffs.  It was in spite of tariffs.  Up until 1913, there was no Federal Reserve.  There was no 16^th Amendment, which instituted a federal income tax.  Government spending was a tiny fraction of what it is today.  And most things were not regulated by the federal government as they are today.

Trump is a complete fool when it comes to economics.  You can be sure though that Trump will find anyone else to blame when we hit a recession.  He will blame “Too Late” Powell.  He will blame the courts for striking down his tariffs.

A Test for the Supreme Justices

This will be a great test for the justices on the Supreme Court.  The so-called liberal justices will probably vote in favor of striking down the tariffs just because it goes against Trump.

The interesting thing will be the so-called conservative justices.  Will they actually follow the Constitution, or will they play politics by giving Trump and some of his supporters what they want?

To be sure, these tariffs are absolutely unconstitutional.  Trump is just dictating them from his throne.  They seem to change from day to day on a whim.

The Constitution is clear.  The very beginning of Article 1, Section 8 states, “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises…”.  It is the first thing there assigned to Congress.

Section 10 states, “No state shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws.”

There is certainly no authority for the executive branch to institute taxes on imports.  It would have to be done by Congress to be constitutional.

The Trump administration has used the International Economic Powers Act as justification for Trump’s tariffs.  This act in itself is probably unconstitutional.  But even here, is Trump really going to claim that all of his tariffs constitute an emergency?

He has cited so many different reasons for putting tariffs on various countries.  Will they argue that India buying oil from Russia is an emergency?  Politics in Brazil is an emergency?  The trade deficit is an emergency?  A foreign leader not doing what Trump wants is an emergency?  They will have to argue that anything qualifies as an emergency.

Alito, Gorsuch, and Thomas

It will be interesting how the more conservative justices will rule on the tariffs.  There are no libertarians on the Supreme Court.  There are no true constitutionalists.  But the closest ones are probably Thomas, Alito, and Gorsuch.

These are the unpredictable ones.  Even though there is nothing “conservative” about tariffs, will they side with Trump on this?  Or will they do a proper reading of the Constitution and rule against these taxes?

This will be a good litmus test for them to see if they are on the side of politics or the Constitution.  For the rest of them, it doesn’t matter how they vote because we already know they are charlatans.  Again, the leftists will just go against Trump.  It just so happens that that is the correct and constitutional decision in this case.

We can only hope that these tariffs will get struck down.  It is possible the Supreme Court just doesn’t hear the case, which means that the previous ruling against the tariffs will stand.

Even though Trump will blame the courts, it is the best thing for Americans.  We are getting a recession either way.  We don’t need added taxes to the things we buy on top of the recession.

There is a book by Annie Duke called Thinking in Bets.  One of the terms she coined is “resulting”.  Resulting is when someone judges a decision based on its outcome.  The problem is that the result itself isn’t always indicative of whether the decision itself was proper at the time it was made.

Annie Duke was a professional poker player.  If you get a hand with pocket aces, it makes sense to play the hand and probably to raise the stakes.  This doesn’t always mean that it will result in you winning the hand.  You may get unlucky.  Someone else might have had a 2 and a 7, which is typically a terrible hand.  But if two more 7s come up on the flop, it is all of a sudden a great hand.

The reason this is so important is because you don’t want resulting to dictate future decisions.  If you lost a hand with pocket aces, it doesn’t mean you shouldn’t bet with them in the future.

For another example, think about an insurance policy.  You pay $3,000 for an annual insurance policy for your house.  During the year, your house doesn’t burn down.  You don’t have any severe damage to your house from anything, so you don’t file any claims with your insurance.  Should you conclude that it was a waste of money to get the insurance?

If you could have predicted the future and known that there would be no damage to your house in the next year, then it would make sense to go without insurance.  But you don’t know what the outcome will be.  You have to make the decision with the knowledge you have at the time.

Investment Performance

Even though the above makes sense to most people, they tend not to apply this thinking to their investments.  Let’s say someone has half their investments in stocks and the other half in a money market fund.  The stocks go up 20% in one year, while the money market fund returns 3%.  It would be easy to say, “I should have put it all in stocks.”  In fact, that’s what many would say.

But like your poker hand, you didn’t know what the outcome would be.  It would make sense to say, “If I had known, I would have put everything in stocks.”

But you didn’t know.  Nobody knows what the stock market will return in the next year.  The whole point of diversification is that you don’t know what the future holds.  That is the point.

This is why it also doesn’t make much sense to judge a portfolio based on its results, especially in the short run.  Tell someone that you invest in the permanent portfolio or something else with diversification.  In most cases, they won’t analyze the holdings and how the assets perform in different environments.  Instead, they’ll want to know the returns.  They’ll want to compare it to the S&P 500 or maybe their own portfolio.

This isn’t a way to judge a portfolio.  This is especially true when you are in a major bull market in stocks.  At the very least, you need to look back at how it performed during different economic environments.

The Everything Bubble

Just because we have been in a bull market, it doesn’t mean that the same things will keep going up.  In fact, it is a good reason to go the other way and be more protective of your investments.

Going just based on results, it would have been better to invest in stocks in the last 10 years than in bonds or in the permanent portfolio.  Actually, it would have been even better to put your money in Bitcoin.  But this doesn’t mean that would have been the right decision based on what was known at the time.

And it certainly doesn’t mean that is the path forward.  Based on the results of the last 10 years, you should put your money in Bitcoin if you think the next 10 years will be similar.  But that isn’t typically what happens, and it would be extremely risky (and probably irresponsible) to put all of your money in Bitcoin.

We are probably in an Everything Bubble where all major assets are in a bubble.  Some are worse than others.  Stocks and crypto currencies may be the biggest of the bubble.  Even here, I can only make decisions now knowing what I know now.  I won’t focus on the results of previous decisions except as far as it helps my decision-making process going forward.

The Securities and Exchange Commission (SEC) has a disclaimer that “past performance is no guarantee of future results”.  As Harry Browne said, this is one statement by a government agency that is truthful.

Judge your portfolio based on whether it is doing what it is supposed to do.  Don’t judge it by comparing it to a particular asset class.  Ask yourself whether your portfolio will hold up in any economic environment, perhaps with the exception of a complete collapse of the division of labor.

If your portfolio isn’t well diversified, are you accepting of the fact that you are vulnerable to losing a large percentage of it?  If you aren’t ok with that, then it probably makes sense to change your portfolio.

On Friday (August 22, 2025), Jerome Powell delivered a speech at Jackson Hole, Wyoming.  He said, “With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”

With that one sentence, U.S. stock indexes soared higher to new record highs.  You know there is something wrong with our system when one bland statement from one person can dramatically impact the economy.

Mr. “Too Late” Powell (Trump’s nickname) was essentially saying that there is a good chance the Fed will lower its target rate at the September meeting.  The chances for a 25-basis point reduction went up to near certainty after these comments.

So, it looks like Trump is going to get what he wants this time out of “Too Late”, although maybe Trump would favor a much bigger cut.

The nickname isn’t a bad one, but it isn’t because he is too late lowering rates.  It is because he was too late in hiking rates and stopping the monetary inflation when price inflation was already spiking in 2022.

It wasn’t until March 2022 that the Fed finally hiked its target rate to a mere range of .25% to 0.50%.

And prior to that meeting in March 2022, the Fed was still increasing its balance sheet via monetary inflation, even when it was quite evident to most Americans that consumer prices were rising far faster than the Fed’s 2% target.

Now that Powell has indicated that the Fed will go back to lowering rates, perhaps he can answer some of these questions.

Questions for a Central Planner

If stocks continue to soar higher with new all-time highs, why is the Fed lowering interest rates?

There is a seemingly contradictory policy of lowering rates while continuing to deflate the balance sheet.  If the Fed is lowering rates, why is it also continuing to sell off debt from its balance sheet at the same time?

What will the Fed do if price inflation goes higher from here?  Will it start hiking rates again?  The PPI numbers recently came in showing a 0.9% rise in just one month.

What happened to the Fed’s policy of looking for an average of 2% price inflation over time?  We haven’t even been able to hit the 2% mark once in the last several years, so why is the Fed going to lower rates again?

What will the Fed do if we get some kind of stagflation where we have high price inflation and low (or negative) economic growth?  Which one will take priority?

Happy 90^th birthday to the great Ron Paul.  He was born on August 20, 1935 in the midst of the Great Depression.  While he is best known for his promotion of liberty, Ron Paul is the ultimate family man.

He has been married to Carol Paul since 1957.  They had 5 children together and now enjoy a large family with many grandchildren.

Ron Paul became a doctor and delivered thousands of babies.  One interesting factoid is that Dr. Paul delivered Selena, the late and famous singer.

He was elected to Congress in a special election in 1976.  He had become interested in economics prior to that.  He has cited Nixon’s closing of the gold window in 1971 as an event that got him more interested in the subject.  He became familiar with the Austrian school of economics (free market economics).

While Ron Paul was in and out of Congress several times, he is probably most well-known for his presidential runs.  He ran on the Libertarian Party ticket in 1988, but it just wasn’t his time to shine yet, as this was before the internet era and also coming off of the Reagan presidency.

Ron Paul gained huge notoriety in 2007 when he ran for president on the Republican Party ticket.  In the debates, Paul emphasized his positions on a non-interventionist foreign policy and fixing the monetary system.  It surprised many people, especially libertarians, when he would go around the country giving speeches and there would be crowds chanting “End the Fed”.  There was also a large percentage of young people who were attracted to his campaigns.

Paul ran again in 2011/ 2012, but again fell short of getting the nomination.  There was still a strong establishment presence in the Republican Party that made it difficult for an outsider to gain traction on a national scale.  Still, Ron Paul allowed the world to see that you could be in favor of low taxes and low spending and also be firmly against war.  In fact, he stressed that you have to be against war and running an empire if you actually favor low taxes.

For better or for worse, Ron Paul paved the way for Donald Trump to enter the scene in 2015.  Trump was actually able to get the Republican nomination while being somewhat critical of war.

Ron Paul as an Example

Ron Paul is a great example of someone to emulate.  Ron Paul has demonstrated what it means to be a Christian and a family man.  But unlike many in politics, he did not wear his Christianity on his sleeve.  He practiced his Christianity more than he preached it.

This is not to say that you should follow Ron Paul and be a politician.  But he was never really a politician in how we think of that term in today’s world.  He used his platform, not to exert power over others, but to spread the message of liberty.

Paul himself will say that different people should do different things to promote liberty.  For some, it might mean through entertainment such as comedy or music.  For others, it might mean writing or speaking or hosting a podcast.  You can effect positive political change without running for political office.  And if you do run for political office, be sure that you are well grounded with a firm set of libertarian principles.

Ron Paul was able to do something that very few people are able to do.  He was elected and continued to stick by his principles.

There was a great celebration for Ron Paul in advance of his 90^th birthday where many big figures in the liberty movement came out to honor him.  For most libertarians today, Ron Paul has played some kind of an influential role.

It is hard to state just how important Ron Paul has been for the advancement of liberty.  Before 2007, the hardcore libertarians probably made up less than half a percent of the population.  That number has multiplied several times since then.

Finally, it is impressive that Dr. Paul is still “working”.  As he hits the age of 90, he is still writing and doing a show 5 days per week where we can still learn from him.  Whether it is on the latest foreign policy debacle or monetary policy, he is still giving us the same message of liberty.  Even at the beginning of the Covid madness in 2020, Dr. Paul was firmly against lockdowns and never bought into the hysteria.

Here is a big thank you to Ron Paul for your many decades of spreading the message of liberty.

Happy Birthday!

There is really only one way that Trump can end the war in Ukraine.

First, we have to understand the causes.  Trump likes to call this Biden’s war.  While the actual Russian invasion of Ukraine started under Biden, the whole conflict started long before this.  It goes back to at least Obama, if not before then.

Of course, Biden was vice president under Obama and had his hands in Ukraine then, so Biden really does share a large responsibility.  Plus, Biden could have prevented this in 2021/ 2022 when Putin sent a letter to the Biden administration looking for security assurances.  The Biden people just blew him off.

This really goes back to the end of the Cold War when Russia was given assurances that NATO would not expand to the east towards Russia’s border.  This was broken before Obama was ever on the scene.

But the whole Ukraine fiasco really got underway in 2014 when the Obama administration helped orchestrate a coup against the democratically-elected president in Ukraine.  The president that was overthrown was trying to seek peaceful relations with Russia.

How would Americans feel if the Russian government overthrew the prime minister in Canada and installed their own handpicked leader, with intentions of forming an alliance and placing missiles on the border of New York?

On top of it all, the Ukrainian government then persecuted the ethnic Russians in eastern Ukraine and allowed many thousands of people to be killed from 2014 and on.

It should also be noted that after the 2014 coup, the people in Crimea overwhelmingly voted to leave Ukraine and join Russia.  The establishment refers to it as Russia annexing Crimea, but it could just as easily be said that Crimea seceded from Ukraine.

Russia is “Winning”

There are rarely actual winners in war other than the military-industrial complex and the “leaders” of the countries involved who often enjoy support and increased power.

But if you had to say that one side is winning in this war, it is Russia.  This is why it is ridiculous for Zelenskyy or anyone else to make these demands of Russia giving back Crimea and just withdrawing and going home.  Why would Putin do this?  Why would Russians support this, especially when they are winning the war?

For Zelenskyy to say this, it basically means he doesn’t want peace negotiations.  He doesn’t want a ceasefire unless it is temporary so that his side can have some time to recover and rearm.

This is why it is basically useless to have Zelenskyy involved in any kind of negotiations or attempt at a ceasefire.  It is also useless (or worse) to have the main European leaders involved.  They don’t want to see this thing end in a way that is actually possible.

Trump should just deal with Putin.  He can meet with Zelenskyy just to let him know what they decided.

When Trump met Putin in Alaska, we should all hope that Putin gave a clear explanation of what was going on.  It needed to be in Fox News talking points where it doesn’t get too complicated, but not with the Fox News bias towards war.

Let’s hope that Putin explained to Trump that his buddies Obama and Biden started this whole thing with a coup in 2014.  Trump has probably never heard that from Fox News or anywhere else.  (Robert Kennedy Jr. is aware of this fact.)

Putin has the upper hand to the degree that anyone does here.  He is not going to give back Crimea.  He wants assurances that the U.S. will not admit Ukraine in NATO.  Those two things are non-negotiable.

What may be somewhat negotiable is who controls the territory in eastern Ukraine.  Putin does not want a return of the slaughtering of ethnically Russian people.  Perhaps he would be willing to negotiate these areas as being neutral or independent states.

The Only Thing Trump Has

There is only one possible way that Trump can get this thing negotiated and bring an end the fighting.  It all comes down to one thing:  Funding.

Trump has to be willing to take on the deep state and those around him.  He has to be willing to stop funding Ukraine with money and weapons.  He has to credibly tell Zelenskyy and everyone else to pound sand.  He has to make it clear that the funding is about to stop.

This is what will bring an end to the conflict.  Maybe the Europeans will attempt to fund it themselves.  Trump has to make it clear that there will be no funding from NATO or else the U.S. stops sending any money to NATO.  The Europeans will not be able to prop up Ukraine for very long, and Zelenskyy probably knows this.

Trump can talk to Putin and Zelenskyy all day long, but he ultimately has to be willing to cut the funding to Ukraine.  This is why Trump is in charge of negotiating with Putin and not Zelenskyy.  It really is a proxy war that the U.S. is fighting with Russia because the U.S. is funding it.

Trump can negotiate everything with Putin.  The agreement can be that Russia keeps Crimea.  The U.S. agrees to not admit Ukraine into NATO and not use Ukraine as a place to put missiles.  The eastern parts of Ukraine can be deemed independent states.  Maybe there will be some kind of buffer zone.  In return, Putin will withdraw all troops out of Ukraine.

If they can negotiate a deal like this, Zelenskyy won’t like it.  The war hawks in the U.S. won’t like it.  The only way Trump can enforce this agreement is by pledging to withdraw all funding and weapons going to Ukraine.

At that point, if Zelenskyy still wants to fight on, then it is his fight.  It will be up to the Ukrainian people to get him out of power.  Russia may just take all of Ukraine at that point.

The key is the funding.  It’s not clear if Trump understands this.  Any threats or talks are meaningless unless he is willing to stop the funding.  Trump and Putin can end this conflict very quickly if Trump is willing to defy the western establishment and stop the funding.

After the CPI numbers came in close to expectations and showed a year-over-year rate of 2.7%, a couple of days later we got the Producer Price Index (PPI) numbers.  These numbers showed a much different picture from the CPI.

The PPI rose 0.9% in the month of July.  The Dow Jones had estimated a 0.2% rise.  This is quite a difference.

This is a measure of wholesale prices.  For an entire index to rise almost 1% in a single month is significant.  If this trend holds, you have to believe that consumer price hikes of this magnitude are not far behind.

Stock investors loved the news of the relatively good CPI numbers.  They saw it as a go-ahead for a Fed rate cut in September.  Yet, when the PPI numbers came out, there wasn’t that much negative sentiment.  Why didn’t the script flip?  Why didn’t investors fear that there would be no rate cuts coming any time soon because price inflation is obviously still a problem?

The only reasonable answer is that we are in a mania.  We are likely nearing the peak of a massive bubble.  Good news is good news for stocks.  Bad news is good news for stocks.  It doesn’t really matter at this point.

Tariff Effects

Some defenders of Trump’s tariffs have pointed out that the tariffs have had little negative impact on the markets or economy at this point.

When the tariffs were first announced in early April, stocks went down significantly.  But after Trump seemed to backtrack and leave the door open for negotiations, it has been “up, up, and away” for stocks, even as new tariffs are announced.

Maybe investors still don’t believe that Trump will follow through on most of his talk.  But the tariffs are already a reality.  Still, say the Trump tariff defenders, it hasn’t caused our prices to rise.

But just as there is a delay between monetary inflation and price inflation, there will also be a delay here.

Some of these tariffs have only been in effect for a short time.  Even with that, many retailers in the U.S. are selling inventory that was received before the tariffs went into effect.

And think about making something like a car.  It doesn’t get done in just a few days.  It takes time.  The steel and other materials that are imported that go into making a car are just now arriving at the higher price.  Steel tariffs went up in early June.  Any car being sold right now was probably made with steel from the previously lower tariffs (taxes).

This very significant PPI number that came out is a warning sign.  We could be facing significantly higher prices in just a matter of months.

The one thing that could offset that is a major recession, which also isn’t out of the question.

Take your pick – higher prices or a deep recession.

What if we get both?  It will be quite devastating to the living standards of the average American.

Donald Trump has relentlessly attacked the chairman of the Federal Reserve, Jerome Powell.  Trump has nicknamed him “Too Late” Powell.  Trump’s problem with Powell is that he is taking too long to lower interest rates.

Trump is a low interest rate guy, going back to his days as a businessman.  There are reasons that Trump wants lower rates now.  It would mean lower rates of interest on U.S. debt, which means the government can spend and borrow more with lower interest costs.  Lower rates could also mean the economic boom is greater and longer, at least according to conventional wisdom.

The problem for Powell and the Fed is that we are coming off a period of high price inflation.  The numbers have still not returned to the Fed’s target of 2%.

The CPI numbers for July 2025 came out.  They were mostly in line or slightly better than expectations.  But the year-over-year rate is still coming in at 2.7%.

Since the numbers came in slightly lower than expected, stocks roared higher, hitting new all-time highs. Investors are pricing in a rate cut from the Fed in September.

But why should there be a rate cut if the economy is supposedly booming and the stock market is hitting new highs?  Plus, price inflation is still not down to the Fed’s target.

Sabotaging Trump

Some people think that Powell is purposely not lowering rates just to get at Trump.  This may or may not be true.

If Powell really wants to sabotage Trump, he should just give him what he wants.

Let’s step into the shoes of Powell.  Forget for a moment that there should be no such thing as a central bank that is centrally planning the economy by controlling the money supply and short-term interest rates.

Let’s also pretend that Powell really does want to sabotage Trump and step away leaving him a mess and that he doesn’t really care one way or the other about the economy.  If Powell doesn’t quit or somehow get fired, then he will leave his office in May 2026.

Powell should just give Trump what he wants.  He should lower the Fed’s target rate.  Go 50 basis points at the next meeting and then another 50 at the one after that.

When trouble inevitably arrives, it will be hard for Trump to blame Powell at that point.  We may get more of a temporary boom in asset prices, which could delay a recession until after Powell leaves office.

Between the lower rates and the much higher taxes (tariffs) from Trump, it would be likely that price inflation would accelerate again.

Meanwhile, the Fed can maintain its policy of actually deflating the balance sheet while lowering short-term rates (a somewhat contradictory situation).

The deflating money supply and the normalizing yield curve (after being inverted for almost 2 years) should still bring on a recession.  But Powell will be exiting while having given Trump his lower interest rates.

Trump is going to have an economic disaster on his hands regardless of what Powell does, but at least Trump won’t be able to as easily blame Powell if he aggressively lowers the Fed’s target rate.

No Sympathy for Powell or Trump

This was just an exercise in what Powell could do to get back at Trump.  But don’t feel sorry for Jerome Powell.  He shares a lot of fault for the massive price inflation we saw in 2022.  He helped Congress run the trillion-dollar deficits in 2020 and 2021.  He kept rates low and kept inflating the money supply right up to the point when price inflation spiked higher.

But Powell is just a regular establishment guy.  He is not much different from other members of the Fed.  He tries not to rock the boat, but Trump has rocked his boat.

Trump deserves what is coming to him.  Unfortunately, the American people do not deserve it.  Trump is completely unhinged at this point, especially with him using tariffs as a means to dictate foreign policy and punishment for anything he doesn’t like from a foreign government.  The problem is that it actually punishes American businesses and consumers.

Imagine if price inflation spikes higher while we also have a massive recession and a crash in stocks.  Will Trump just double down and give us even higher tariffs, effectively sanctioning the whole world and ourselves?  Will Trump push through even higher spending?  Will we get $5 trillion annual deficits?

It sounds absurd, but the things Trump is doing these days are absurd.  He has completely squandered the work of DOGE while giving Americans one of the biggest tax increases of all time with his crazy tariffs.  He is bragging about the increased “revenue”, which is nothing more than tax collections.  Meanwhile, the national debt continues to grow at a staggering pace, even with the higher taxes.

Actually, forget the plan laid out above for Powell.  If I were Powell, I would hand in my resignation tomorrow morning.

The term “reversion to the mean” is used somewhat interchangeably with the term “regression toward the mean”.

According to Wikipedia, a regression toward the mean is, “the phenomenon where if one sample of a random variable is extreme, the next sampling of the same random variable is likely to be closer to its mean.”

When it comes to finances, a reversion to the mean says it is likely that asset prices and investment returns will revert back towards their historical long-term average.

However, you do need to account for inflation here.  If there is 20% annual price inflation and stocks go up by 20% in a year, they are effectively flat in real terms.  A reversion to the mean would suggest that stocks might actually go higher since the real return has been zero.

In the definition above of the regression to the mean, it refers to a sample.  In other words, let’s say you flip an evenly weighted coin ten times and you get heads nine times and tails one time.  If you flip the same coin again ten times, there is nothing to suggest that you will get tails nine times to even things out.  A regression to the mean will mean that ten more flips should tend toward the result of five heads and five tails.

When it comes to stocks, let’s say the historical average is a return of 8%.  If you have one year where stocks go up by 50% (assuming little or no inflation), then it doesn’t mean the following year will tend toward the historical 8% return.  It is not a new random sample.  The stocks are already inflated by 50%.

In this scenario, if you are going to revert to the mean of 8%, the previous 50% rise in stocks will mean that they will go down approximately 22% in the following year to get back to the 8% average – in this case, over a 2-year span.

$100 x 1.08 x 1.08 = $116.64 (2-year return with 8% per year)

$100 x 1.50 = $150

$150 x .78 = $117 (2-year return with a 50% gain and a 22% loss)

The Nasdaq Bubble

In August 2025, U.S. stock market indexes are hitting all-time highs.  Stocks are not the only asset at or near all-time highs, but it is the financial asset that is most commonly used by Americans to invest.

(While a primary residence is often considered to be a financial asset, it is really more of a consumption item at least up until the point of selling or renting it out.)

Let’s look at the Nasdaq.  It has been so incredibly volatile over the last 3 decades, it is hard to pick a good starting point.  The index closed the year at 1,577 in 2008 after the financial crisis had already hit.  By the end of 2015, it was back up to 5,007, which is actually near where it peaked at the height of the dot-com bubble in 2000.

For easy numbers, let’s start in 2015 when the Nasdaq was around 5,000.  The Nasdaq is now sitting above 21,000.  In 10 years, the Nasdaq has gone up approximately 320%.  That is a compounding return of a little over 15% per year over the course of 10 years.

If we go to the Bureau of Labor Statistics (BLS), it shows that $5,000 from June 2015 has the same buying power as $6,758.37 in June 2025. That is a little more than 3% compounded annually, but it was skewed higher because of 2022 and 2023.

Even if you think the BLS price inflation numbers are off, they aren’t off by that much.  Compare $6,758.37 to over $21,000 (the Nasdaq).  Even if you think stocks should average 5% higher than inflation, it isn’t even close.

Price inflation over the last 10 years is just over 3% according to the BLS.  The Nasdaq has been returning over 15% per year on average over the last 10 years.  This doesn’t connect unless you conclude that we are in a massive bubble.

The Higher It Goes, the Harder It Falls

Starting in 2015 is also rather generous.  If we go back to 2008, the Nasdaq actually reached a low below 1,300.  The Nasdaq is over 16 times higher than the low it hit in 2008.

The Nasdaq is extremely volatile.  If there is a crash and the Fed doesn’t step in with massive monetary inflation, it will fall well below what would be considered a “normal” valuation.  Even if the Fed does step in with massive monetary inflation, it might be too late to save the crash.  And, of course, it will only make things worse economically.

From 2000 to 2002, the Nasdaq dropped almost 80%.  In 2008 alone, the Nasdaq fell over 50% from its high to its low.

If the Nasdaq went down to 5,132, the peak of the dot-com bubble in the year 2000, it would mean a fall of over 75% from where we are right now.

The higher this thing keeps going, the harder it’s going to fall.  We can go to the adage that things that are unsustainable have a tendency to stop.

Are you prepared if U.S. stocks crash by 75 or 80 percent?  How will it impact you mentally?  Will it significantly change your plans for the future?

Forget about the overall economy and inflation just for a minute.  If stocks fell by 80%, how well will you handle this?  If it will greatly impact your financial well-being, then you should consider a different strategy.

This isn’t an all-or-nothing game.  It doesn’t mean you have to sell all of your stocks.  It just means that you should be well-positioned if and when we have a stock market crash.