Submitted by QTR’s Fringe Finance

“Activism is a way for useless people to feel important, even if the consequences of their activism are counterproductive for those they claim to be helping and damaging to the fabric of society as a whole.” — Thomas Sowell

Once upon a time, Greta Thunberg lectured a bunch of people who think they are important at a climate conference and the world declared her the Joan of Arc of climate change.

“You have stolen my dreams and my childhood with your empty words,” she barked at a room full of people she had never met before at age 16. “How dare you?”

Self-loathing liberals loved it. A 16 year old that had likely endured little, if any, actual discomfort in her life, berating them and all but telling them they were actual pieces of shit for not acting on climate change fast enough.

Whereas I would have chuckled, grabbed another free martini, and walked out, a room full of adults instead decided to canonize a teenager as the patron saint of planetary guilt.

After all, nothing says “serious policymaking” like outsourcing your conscience to a 16-year-old with a hand-painted sign and the emotional range of an fire truck siren.

Fast forward 6 years and now Thunberg has pivoted from carbon footprints to geopolitical flashpoints, weighing in on the Israel–Palestine conflict as though taking on new causes was trying to catch every Pokemon.

For someone who once demanded we “listen to the science,” Greta seems very comfortable being a roving generalist.

Her newest chapter? A “kidnapping” by Israeli forces while attempting to deliver aid, complete with dramatic details of mistreatment that sound as if they were storyboarded for viral video.

According to The Guardian, some detainees said people were left “hours without food or water.” Also known as a trip to the dentist, a flight on Spirit airlines from New York to Orlando, or the Easter Mass at Catholic Churches when there’s too many baptisms — all harsh conditioned “kidnappings” we voluntarily endure daily.

In statements after her release, Thunberg said she could talk “very, very long time” about her own abuse but preferred to focus on what she calls the systemic abuses against people in Gaza. In fact, the focus was so on the people of Gaza, Thunberg enjoyed herself a “coming home” party, complete with crowds of adoring automatons, flowers, and smiles. She’s so brave!

Maybe it’s just me, but this all feels oddly staged — and that may be the point. And how can she smile after her “dreams were stolen” from her over the past decade?

Thunberg has always understood the power of spectacle. Whether sailing across the Atlantic to lecture the U.N. or live-streaming her arrests, the activism is never just about the cause — it’s about making sure the cause is photogenic. Her latest “capture” fits neatly into that pattern: a made-for-media moment that reinforces her identity as the world’s most recognizable [insert cause of the day here] activist.

As my readers already know, when talking activism, I have a litmus test. I always like to reference “brave” instances against the activist I admire most. In 1963, Vietnamese monk Thích Quảng Đức sat cross-legged in silence on a Saigon street, doused himself in gasoline, lit a match and set himself ablaze.

The New York Times journalist who witnessed the act said: “I was too shocked to cry, too confused to take notes or ask questions, too bewildered to even think. As he burned he never moved a muscle, never uttered a sound, his outward composure in sharp contrast to the wailing people around him.”

Now think of how he’d feel if he was forced not to eat for hours!

But seriously, he didn’t wave a banner, didn’t call for cameras, didn’t narrate his suffering. He didn’t put himself at the center of a cause; he erased himself for it. His immolation stunned the world and forced change, not because it was optimized for social media, but because it was an act of genuine, irreversible sacrifice.

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Thunberg, in contrast, has mastered the art of the recurring headline whilst sacrificing nothing. In fact, her entire theater is one giant PR stunt to further her own status. The cause? Less important. One week it’s climate strikes, another it’s trade summits, and now it’s Middle Eastern geopolitics. The shift doesn’t necessarily reveal depth, but it does ensure that Greta stays on the news ticker.

Where Quảng Đức gave everything without saying a word, Thunberg’s activism depends on saying everything as loudly and as often as possible — with maximum camera coverage. If her activism was a t-shirt, it would be the one with the coffee mug on it that says: “Coffee! Do stupid things faster!”

And this isn’t to dismiss the seriousness of the conflict she’s chosen to enter. But it does beg the question: when protest becomes indistinguishable from performance, what’s the real priority — the cause, or the spotlight?

The uncomfortable truth is that Greta has never risked more than her comfort. She has not sacrificed her safety, her health, or her future. Instead, she has repeatedly placed herself in situations designed to look dangerous enough to inspire sympathy, but not dangerous enough to demand irreversible cost. The result is a kind of protest theater: gripping to watch, but ultimately more about the performer than the issue.

Thích Quảng Đức set himself on fire and said nothing. Greta Thunberg sets herself in front of cameras and says everything. History will know the difference.

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Endnotes

1. “Greta Thunberg accuses Israel of kidnapping Gaza flotilla crew,” The Guardian, June 2025.

2. “Greta Thunberg alleges torture in Israeli detention; Israel rejects claims,” Reuters, Oct. 2025.

3. “Greta Thunberg mistreated by Israeli forces in detention, activists say,” Al Jazeera, Oct. 2025.

4. “Greta Thunberg’s detention in Israel: bedbugs, dehydration and forced posing,” The Guardian, Oct. 2025.

5. On Thích Quảng Đức’s protest: David Halberstam, “The Burning Monk,” The New York Times, June 1963.

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The data drought is about to end (with some footnotes).

The Bureau of Labor Statistics, which we reminded our followers some time ago is not just behind the monthly jobs report but also the various inflation updates…

As a reminder, PPI and CPI (reporting next two days) are also under the BLS umbrella

— zerohedge (@zerohedge) September 9, 2025

… said it will publish the September consumer price index on Oct. 24, marking a rare exception to release data during the government shutdown.

The report will come out that day at 8:30 a.m. in Washington, compared to the original publication date of Oct. 15, the agency said Friday.

“No other releases will be rescheduled or produced until the resumption of regular government services,” BLS said in a statement. “This release allows the Social Security Administration to meet statutory deadlines necessary to ensure the accurate and timely payment of benefits.”

Yesterday, Bloomberg News reported that the agency had recalled staff to prepare the report by the end of the month. The government uses third-quarter CPI data to determine the annual cost-of-living adjustment for Social Security recipients for the following year. The COLA announcement is typically made shortly after the BLS releases the September CPI. A BLS spokesman said that the SSA will make the COLA announcement on Oct. 24 as well. 

So why Oct 24? because the next FOMC decision is on Oct 29, which means Trump is working overtime to assure another cut, and maybe even going for a jump. It also means that the CPI report will be “nudged” just enough to come (notably) below Wall Street estimates.

Fed Governor Christopher Waller said in an interview earlier Friday that having the CPI report for that meeting will help “a lot.” However, he’s more concerned about the labor market, and the BLS still hasn’t released the September employment report that was due Oct. 3.

The BLS had suspended all operations, including data collection and the production of economic statistics, as a result of the government shutdown. In its latest contingency plan, the Labor Department said scheduled BLS releases wouldn’t come out during a shutdown, nor would the agency’s website be updated. Out of the BLS’s roughly 2,000 employees, the plan only prescribed the commissioner to work during a lapse in funding.

It also said that a delay of the CPI report released in October “might have an impact” on the COLA announcement.
The recalled staff have only been tasked with preparing the September CPI, according to Friday’s notice. That suggests staff are not collecting data for the October CPI due next month, nor are they working on the jobs report that was scheduled to be released last week.

When the government reopens, agencies like the BLS, as well as the Census Bureau and Bureau of Economic Analysis, will typically put out an updated schedule of publication dates for key economic reports.

For the September CPI report, which was originally scheduled for Oct 15, estimates are for a 0.3% MoM increase in headline CPI and 0.4% MoM increase in Core CPI, translating into 3.1% YoY increase for both metrics. 

The BLS collects prices for the CPI throughout the entire reference month, meaning all data collection for the September report would have been complete by the time the government shut down on Oct. 1. Once the data is collected, it usually takes about eight to 10 business days to produce the report. Dozens of economists and IT specialists are typically involved in preparing and disseminating it.

The White House has begun laying off a “substantial” number of government employees, OMB Director Russ Vought announced Friday on X. 

“The RIFs have begun,” Vought wrote, referring to reduction-in-force plans. 

The RIFs have begun.

— Russ Vought (@russvought) October 10, 2025

“Can confirm RIFs have begun and they are substantial,” an OMB spokesperson told POLITICO, adding “These are RIFs not furloughs.” 

The news comes on the 10th day of the government shutdown after Senate Democrats insisted on maintaining Obama-era benefits that include illegal immigrants, and both sides of the aisle have repeatedly failed to pass subsequent packages to fund the government. 

According to the report, the layoffs have hit agencies including: Interior, Homeland Security, Treasury, EPA, Commerce, Education, Energy, HHS and HUD.

On Thursday, Trump said his administration would target programs backed by Democrats – saying during a cabinet meeting: “We’re only cutting Democrat programs, I hate to tell you, but we are cutting Democrat programs,” adding “We will be cutting some very popular Democrat programs that aren’t popular with Republicans, frankly.”

The move follows an OMB memo leaked two weeks ago which ordered Trump administration officials to prepare to carry out reduction-in-force (RIF) plans during the shutdown, targeting employees that aren’t legally required – OR, those which conflict with Trump’s priorities. 

Democrats are of course freaking out.

“We believe that they are not only unethical and immoral but illegal for him to be RIFing people in a shutdown,” said Rep. Sarah Elfreth (D-MD) on Friday. 

The cuts also come hours ahead of a court deadline for the DOJ to file a report detailing any plans to terminate workers during the shutdown – ahead of an Oct. 16 hearing on a request by federal worker unions to block layoffs.

Over 2/3 of civilian federal employees have remained on the job during the shutdown, between essential workers or jobs that receive longer-term funding. The vast majority of employees are going without pay. 

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US equity markets are tumbling following comments from President Trump threatening “a massive increase of tariffs on Chinese products” being imported into the US, accusing China of becoming “hostile” due to their export controls

Additionally, Trump said he saw “no reason” to meet Chinese President Xi Jinping

This immediately prompted a wave of selling pressure across all equity indices with Nasdaq down over 2%…

But, US rare earth companies popped…

Treasuries are bid…

VIX spiked above 21…

Trump took to social media and penned a lengthy, angry note (emphasis ours):

Some very strange things are happening in China! They are becoming very hostile, and sending letters to Countries throughout the World, that they want to impose Export Controls on each and every element of production having to do with Rare Earths, and virtually anything else they can think of, even if it’s not manufactured in China. Nobody has ever seen anything like this but, essentially, it would “clog” the Markets, and make life difficult for virtually every Country in the World, especially for China.

We have been contacted by other Countries who are extremely angry at this great Trade hostility, which came out of nowhere. Our relationship with China over the past six months has been a very good one, thereby making this move on Trade an even more surprising one. I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right!

There is no way that China should be allowed to hold the World “captive,” but that seems to have been their plan for quite some time, starting with the “Magnets” and, other Elements that they have quietly amassed into somewhat of a Monopoly position, a rather sinister and hostile move, to say the least.

But the U.S. has Monopoly positions also, much stronger and more far reaching than China’s. I have just not chosen to use them, there was never a reason for me to do so — UNTIL NOW! The letter they sent is many pages long, and details, with great specificity, each and every Element that they want to withhold from other Nations. Things that were routine are no longer routine at all.

I have not spoken to President Xi because there was no reason to do so. This was a real surprise, not only to me, but to all the Leaders of the Free World.

I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so.

The Chinese letters were especially inappropriate in that this was the Day that, after three thousand years of bedlam and fighting, there is PEACE IN THE MIDDLE EAST. I wonder if that timing was coincidental? Dependent on what China says about the hostile “order” that they have just put out, I will be forced, as President of the United States of America, to financially counter their move. For every Element that they have been able to monopolize, we have two. I never thought it would come to this but perhaps, as with all things, the time has come.

Ultimately, though potentially painful, it will be a very good thing, in the end, for the U.S.A.

One of the Policies that we are calculating at this moment is a massive increase of Tariffs on Chinese products coming into the United States of America. There are many other countermeasures that are, likewise, under serious consideration. Thank you for your attention to this matter!

Trump’s comments come after China slapped new port fees on US ships and started an antitrust investigation into Qualcomm, following fresh moves to restrict the flow of rare earths needed for numerous consumer products.

How long before the TACO trade kicks in?

Rep. Jerry Nadler (D-NY) – the guy who said Antifa violence is a “myth,” just humpty-dumptied himself into social media oblivion after both brain cells managed to produce yet another retarded comment. 

In response to RFK Jr. suggesting that circumcised children have double the rate of autism – likely due to the use of Tylenol to manage the pain, Nadler cried antisemitism. 

“This is an antisemitic remark. I call on all my colleagues on both sides of the aisle to clearly denounce it,” Nadler wrote on X.

He was met with a blistering Community Note – pointing out that 60-80% of US males are circumcised, while Jews are roughly 2% of the population. 

This is an antisemitic remark. I call on all my colleagues on both sides of the aisle to clearly denounce it. https://t.co/thmrjgCfOY

— Rep. Nadler (@RepJerryNadler) October 9, 2025

He also got a harsh ratio (more comments vs. likes):

The replies were also hilarious. 

Sir, gentiles are allowed to have autism too

— George Alexopoulos (@GPrime85) October 9, 2025

Didn’t you poop yourself one time and had to waddle off the stage?

Ban infant circumcision. Child abuse has no place in a civilized nation.

— Styxhexenhammer666 (@Styx666Official) October 10, 2025

you’re insane

— The_Real_Fly (@The_Real_Fly) October 10, 2025

What the actual hell are you doing Jerry? This is not an anti semitic comment. It’s not only Jewish babies who are circumcised. He doesn’t say not to circumcise babies, he says not to give them Tylenol. Idiot.

— Poetrypainter (@poetrypainter) October 9, 2025

Explain your conclusion since more than 1/2 of American male infants are circumcised????

Explain this chart sir. https://t.co/E8DjCkyEzF pic.twitter.com/oDhmq8eon6

— Sandi Titus (@SandiTitus1) October 9, 2025

Typical Jerry… 

At least 19 people are unaccounted for (probably dead) after a massive explosion at a Tennessee explosives plant on Friday, while secondary blasts forced rescuers to keep their distance. 

The blast took place at Accurate Energetic Systems near Bucksnort – approximately 60 miles southwest of Nashville. The company specializes in the development, manufacture, handling and storage of explosives and other products for military, aerospace, and commercial demolition markets. 

According to WKOW, the blast occurred during a regular shift change, so there may have been more people coming and going. 

On Friday, October 10, an explosion was reported at a Tennessee explosives manufacturer in Hickman County.

The explosion took place at the Accurate Energetic Systems in the Bucksnort area. pic.twitter.com/B7MA2VJgyR

— NewsChannel 5 (@NC5) October 10, 2025

“We do have several people at this time unaccounted for. We are trying to be mindful of families and that situation,” said Humphreys County Sheriff Chris Davis, adding “We do have some that are deceased.“

Video from the scene shows flames and heavy smoke rising from a debris field, while residents from miles away reported feeling the explosion. 

Residents in Lobelville, a 20-minute drive from the scene, said they felt their homes shake and some people captured the loud boom of the explosion on their home cameras. –WaPo

“I thought the house had collapsed with me inside of it,” said resident Gentry Stover, adding “I live very close to Accurate and I realized about 30 seconds after I woke up that it had to have been that.”

Hickman County Advanced EMT David Stewart told the Washington Post that emergency crews were initially unable to enter what was left of the plant due to continuing detonations. 

After weeks of intensive interviews – some running two hours, Treasury Secretary Scott Bessent has narrowed the field for the next Federal Reserve chair down to five candidates from an initial 11, according to CNBC, citing senior Treasury officials. The group includes two current Fed policymakers, Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller; former Fed Governor Kevin Warsh; National Economic Council Director Kevin Hassett; and Rick Rieder, BlackRock’s chief investment officer for fixed income.

Bessent plans a fresh round of interviews is planned in the coming weeks and months, however given next week’s World Bank and IMF meetings in Washington, officials said the process could slip until after Thanksgiving.

The current plan under discussion would have the president first nominate the chosen candidate to the Fed’s Board of Governors and then elevate that person to chair at a later date. One consideration, officials said, is the remaining term attached to specific board seats. Outgoing Chair Jerome Powell’s seat carries roughly two years left on its 14-year term, while the seat formerly held by Adriana Kugler, now occupied by Stephen Miran, expires in January and could provide a full term for a prospective chair. Officials emphasized that the sequencing and seat choice remain fluid.

Trump has already publicly named Warsh, Hassett and Waller as finalists, making Bowman and Rieder the newest additions to the White House’s short list. The administration has adopted a more open vetting process than recent predecessors, periodically announcing names as the field has grown – and now, narrowed.

According to Polymarket, Hassett is the current favorite to be Powell’s replacement…

The search unfolds amid unusually direct criticism of Fed policy from the White House. The president has repeatedly urged sharp rate cuts and previously threatened to remove Powell. He also fired Fed Governor Lisa Cook over alleged mortgage fraud – allegations she denies. Lower courts have blocked Ms. Cook’s removal, and the Supreme Court is set to hear the case in January. Those moves have intensified concern about political pressure on the central bank and raised the stakes around the chair selection.

Waller appeared on CNBC Friday morning, where he suggested more rate cuts. 

“I want to move towards cutting rates, but you’re not going to do it aggressively and fast, in case you make a big mistake on which way that things go,” he said. 

He also suggested that “Job growth has probably been negative the last few months. it doesn’t look like it’s doing much better. I don’t hear anybody with big hiring plans.”

Fed Governor Christopher Waller: “Job growth has probably been negative the last few months. it doesn’t look like it’s doing much better. I don’t hear anybody with big hiring plans.” pic.twitter.com/aXDZPNTixq

— Aaron Rupar (@atrupar) October 10, 2025

Full interview: 

Bessent’s Criteria – and Rieder’s Appeal

Treasury officials offered the clearest view yet of what Mr. Bessent is seeking in a nominee. He wants a central banker open to fresh thinking on monetary strategy and the Fed’s institutional design, with demonstrated experience across economics, monetary policy, bank regulation and management.

Bessent recently authored an essay sharply critical of the central bank’s trajectory, calling for reviews of its policy tools, structure and mission. He has argued the Fed has grown too large and strayed beyond its core mandate, signaling a preference for scaling back its footprint and curbing reliance on extraordinary tools – particularly when it comes to quantitative easing.

No single candidate is viewed as a front-runner, officials said. Still, they acknowledged that Mr. Rieder has left a strong impression. A fixture on Wall Street and a frequent television commentator, Mr. Rieder oversees one of the industry’s largest fixed-income platforms and is known for closely tracked analysis of the bond market and the Fed. CNBC suggests that his outsider status – he is the only finalist who has never served at the central bank – could be a selling point for an administration signaling it wants change.

What It Means for Policy and Markets

Investors will parse the shortlist for clues about the central bank’s policy tilt and appetite for institutional reform. Bowman and Waller bring continuity and recent policy experience; Messrs. Warsh and Hassett would be viewed as policy veterans aligned with a more muscular critique of post-crisis Fed activism; Rieder would represent a market-savvy outsider with management scale and a data-driven reputation.

Authored by Lance Roberts via RealInvestmentAdvice.com,

If you want to understand where we are in the cycle, skip the noise and follow profits. Corporate profits are the lifeblood of investment, hiring, and market returns. Crucially, linkage to the real economy is very tight. In the national accounts (NIPA), the BEA’s “profits from current production” (with inventory valuation and capital consumption adjustments) rose in Q2-2025, but only modestly: up $6.8 billion from Q1, and notably revised down by $58.7 billion from the prior estimate. That’s not the surge you’d expect if we were entering a new, powerful profit upswing. The correlation is unsurprising, given that economic activity generates the revenue to obtain corporate profits.

While the revision to the third estimate of real Q2 GDP growth increased to 3.8% annualized, all was not what it seemed. The reversal of the import surge in Q1 to get ahead of tariffs did the heavy lifting in Q2. More notably, consumer spending, the main driver of economic activity, showed continued weakness. Again, the linkage between PCE and corporate profits is critical, given that spending generates corporate revenues.

The point for investors is that while the economic growth number “looks” hot, the profits revision tells a quieter story about corporate income momentum. In other words, output accelerated, but profit growth didn’t follow in lockstep. That divergence matters for equity investors who ultimately get paid in earnings, not GDP. On a level basis, after-tax corporate profits (CPATAX) stood at roughly $3.26 trillion SAAR in Q2-2025, near the high end of the post-pandemic range but not breaking decisively higher. However, net profit margins have come under pressure, and economic growth has slowed. That “plateau with wiggles” profile of the last two years remains intact, and while margins remain elevated, when margins flatten as price multiples rise, future return math tends to get harder.

Zoom in on the listed companies, and you get a similar nuance. FactSet’s S&P 500 Q2-2025 dashboard shows blended earnings growth accelerating year-over-year with net profit margins around 12.3%, still above long-run norms and reflecting solid breadth of beats. Good news, but the market had already priced a lot of good news. However, the rest of the economy is not seeing the same growth. The deviation between large public and small private net operating surpluses is quite dramatic.

Regular readers of our work at RealInvestmentAdvice will remember we’ve been writing for years that profits and the economy move together over complete cycles, and that revenue and profits don’t levitate indefinitely above economic capacity. The thread through my prior pieces, specifically on Kalecki’s profit identity, is the detachment of markets from fundamentals. The earnings-economy linkage, fiscal impulses, savings behavior, and trade balances can push profits temporarily above trend, but gravity eventually reasserts itself.

That lens is still helpful in 2025.

Profits, Prices, and Pay: How Inflation Filters Into Margins

The revival of an old debate followed the pandemic and its aftermath. Are corporate margins the cause of inflation, or the result of it? As discussed in Corporate Greed Is Not The Cause Of Inflation, corporations are victims of inflation, not the cause.

“One simply has to reason through the claim to uncover the absurdity. If corporations can willy-nilly raise prices and enjoy “excessive” profits, why don’t they do it all the time? Did corporations suddenly get greedy in 2021? And why did the Federal Reserve spend a decade fretting about inflation being ‘too low’ as it struggled to hit its 2% target? Was there not enough corporate greed before coronavirus?” – Michael Maharrey

The European Central Bank (ECB) was one of several studies confirming our previous thesis. “Profit-led inflation” can emerge when factors constrain supply but demand remains high. Fed Chair Jerome Powell also noted such:

“The ongoing episode of high inflation initially emerged from a collision between very strong demand and pandemic-constrained supply. By the time the Federal Open Market Committee raised the policy rate in March 2022, it was clear that bringing down inflation would depend on both the unwinding of the unprecedented pandemic-related demand and supply distortions and on our tightening of monetary policy, which would slow the growth of aggregate demand, allowing supply time to catch up.”

In other words, basic economics states that if the supply/demand curve shifts, inflation will be the consequence if supply constricts.

While the “greedflation” narrative resonated with media pundits, corporations struggled with a supply shortage amid a stimulus-driven demand surge. However, that tailwind for profit margins is now gone. As the San Francisco Fed noted, markup fluctuations have not driven U.S. inflation in the post-pandemic disinflation phase. As supply chains healed and demand normalized, the contribution from markups cooled. Inflation’s path has increasingly reflected costs and supply/demand rebalancing rather than persistent profit-push. The nuance matters as it tells you whether margins will keep inflating prices, or mean-revert as costs and demand fluctuate.

With inflation moderating, but still somewhat sticky in services, maintaining profit margins is becoming more difficult. If the economy slows as demand slows, that difficulty will increase. Crucially, unit labor costs, the most essential recurring input, increased by just 1.0% in Q2. When price growth slows while labor-cost pressures ease, margins can hold up, but only if top-line growth remains decent. That’s the narrow path corporate America is walking today, as shown in a recent analysis by Albert Edwards at Societe Generale.

“Unit labour cost inflation, which economists regard as the key source of cost push inflation, has slowed to below 1%, suggesting that the sharp fall in NFCB (non-financial corporate business) inflation is not anomalous.”

Let’s pull the macro and micro together. Corporate profit margins are still very elevated versus history. While Q2 earnings did fine, slowing economic growth is a risk. Furthermore, as inflation gravitates toward the Fed’s target range and productivity rebounds, the “easy” boost to margins from price hikes fades. Profits depend more on real demand growth, productivity gains, fiscal impulse, and mix, not just pricing power. That’s consistent with the Kalecki framework. Government “dis-saving” (deficits), household saving behavior, net investment, and trade flows explain the macro profit pool.

“The Kalecki Profit Equation clearly explains that while debts and deficits erode economic growth and are deflationary through the diversion of capital from productive investment, a reversal of deficit spending suggests risk for investors. Valuations are high, partly because investors assume elevated profit margins will persist. However, the cumulative change of the inflation-adjusted price of the market significantly exceeds the profits being generated. Previous such deviations have not ended well for investors, which is what the Kalecki equation suggests.”

If deficits shrink and households retrench, profit margins become harder to defend, no matter how clever the pricing strategy.

Valuations, Sentiment, and Profits

Now to the uncomfortable bit. Valuations and sentiment have been running ahead of the actual improvement in the profit base. As discussed in the “Bull vs Bear Case,” valuations are already elevated. Forward P/E for the S&P 500 sits at 22.5x earnings with trailing earnings at 25x. UBS notes that such readings are among the top 5% since 1985.

Furthermore, high valuations mean expectations are high and reflect investor sentiment. The risk, of course, is that if earnings disappoint, then forward valuations (expectations) must be recalculated, and currently, the margin for error is slim at best. Notably, given that earnings are derived from actual economic activity, the current gap between the annual change in earnings and GDP is notable. The long historical correlation between the two suggests that a higher risk to investors may be present more than realized.

Sentiment says the same thing. Investor sentiment readings have spent much of Q2 and Q3 above their long-term average, and “greed” metrics have frequently leaned hot, even as breadth narrows to a handful of mega-caps. When optimism, narrow leadership, and premium valuations line up, the market becomes more dependent on flawless execution from profits. Revisions don’t need to be disastrous to cause price air pockets; they only need to be “less great.”

Notably, some of this cycle’s EPS strength is still financial engineering rather than organic profit growth. Corporate buybacks remain enormous, and on pace to exceed $1 trillion in 2025. While they reduce share counts to lift per-share earnings, it also depletes capital that could have been used for more productive purposes. That’s not a moral judgment; it’s simple arithmetic. But it does mean EPS can look stronger than underlying profits, which matters when investors pay a premium multiple for that EPS.

This is why, at RIA, we’ve kept hammering on the detachment theme in 2025. When markets run far ahead of the profits-GDP complex, future returns compress, and the margin for error shrinks. That doesn’t mean an imminent crash, as bulls don’t die of old age, but it does mean risk-adjusted returns deteriorate when price outruns earnings power.

Conclusion: The Investor’s Risk Map From Here

Here are the four take aways for investors from this discussion.

• Profits are fine, not fabulous. The national accounts show profits rising slightly but being revised lower; S&P 500 margins remain high but not accelerating. That constellation is “good enough” for a range-bound market, but fragile if growth cools or if a sector with heavy index weight wobbles.

• The inflation tailwind for margins is fading. Disinflation plus a downshift in unit labor cost growth is constructive for margins, but it also takes away the easy price-pass-through that boosted 2021–22 profitability. From here, real demand and productivity have to carry the baton. Revenue growth will test today’s margins if consumer spending slows, because of resumed student loan payments, tighter credit, or slower job gains.

• Valuation risk is no longer theoretical. With forward P/E north of ~22× and sentiment often leaning greedy, the market is paying for growth, durability, and AI-era productivity gains to materialize broadly. That can work if the profits/GDP engine follows through. But it also means negative EPS revisions, narrower breadth, or even “less great” guidance can trigger outsized drawdowns.

• Financial engineering can’t do all the lifting. Buybacks will keep underpinning EPS, but they don’t expand the economy-wide profit pie. When insiders sell aggressively into repurchase programs, the optics (EPS) can look better than the underlying economics (aggregate profits), especially if the fiscal impulse fades in 2026. That’s a classic setup for multiple compression even without a profit recession.

The economy is growing, profits are okay, but risk is ahead as inflation cools, and labor-cost pressure eases. That mix can support near-term stability, but not complacency. If you’ve benefited from this year’s rally, think in terms of risk-budgeting: where are your exposures most tethered to unchallenged margin assumptions, optimistic revisions, and valuation premia? That’s where small disappointments can have a significant price impact. The playbook that’s worked for us all year remains intact: trim extensions, add on weakness, keep duration and factor exposures diversified, and let the data lead.

In markets, corporate profits write the checks. Make sure your portfolio is aligned with the part of the story that’s actually funding the narrative.

Venezuelan President Nicolas Maduro has condemned Washington placing Caracas in its crosshairs for a newly resurrected ‘war on drugs’ – which Maduro has said is really all about pursuing regime change.

At a moment of the Pentagon’s largest build-up of forces ever off Venezuela’s coast, Maduro is calling for an emergency UN Security Council meeting to convene, in order to condemn these “mounting threats” from the United States. This has resulted in diplomats indicating that a meeting is indeed set to take place Friday afternoon in New York.

Venezuela’s foreign ministry has said that the US military build-up, and recent strikes against at least four alleged drug-smuggling boats, endangers “peace, security and international and regional stability.”

Maduro wants the security council to hold a formal debate on the crisis and “make recommendations to curb any plans of aggression” on Washington’s part.

So far, there have been at least 21 deaths reported from the US military intervention in the southern Caribbean, and interestingly Colombia has said at least one of the boats was operated by its own traffickers.

The UN council is likely to pay special attention to the fact that President Trump informed Congress last week in a letter that the US is currently in “armed conflict” with the drug cartels.

The Trump administration has said that in reality Maduro is the de facto leader of these cartels, and so he’s not the legitimate leader of resource-rich Venezuela. On this point, the NY Times is out with the following bombshell on Friday:

Venezuelan officials, hoping to end their country’s clash with the United States, offered the Trump administration a dominant stake in Venezuela’s oil and other mineral wealth in discussions that lasted for months, according to multiple people close to the talks.

The far-reaching offer remained on the table as the Trump administration called the government of President Nicolás Maduro of Venezuela a “narco-terror cartel,” amassed warships in the Caribbean and began blowing up boats that American officials say were carrying drugs from Venezuela.

Under a deal discussed between a senior U.S. official and Mr. Maduro’s top aides, the Venezuelan strongman offered to open up all existing and future oil and gold projects to American companies, give preferential contracts to American businesses, reverse the flow of Venezuelan oil exports from China to the United States, and slash his country’s energy and mining contracts with Chinese, Iranian and Russian firms.

However, the report says that President Trump still rebuffed this offer. The consensus is that Secretary of State Marco Rubio’s hard anti-Maduro line has prevailed, also in favor of oppositive activist and leader María Corina Machado, who was just awarded the Nobel Peace Price on Friday. The Nobel was awarded, supposedly, as she has kept “the flame of democracy burning”.

Why give the Nobel Peace Prize to an opposition leader who applauds US pressure against her country when the US Navy is preparing for an attack on Venezuela?
– Is the logic that democracy delivers peace, and the US military delivers democracy through war? pic.twitter.com/6q1cUHtxFT

— Glenn Diesen (@Glenn_Diesen) October 10, 2025

“Behind the scenes, however, Venezuela’s senior officials, with Mr. Maduro’s blessing, have offered Washington far-reaching concessions that would essentially eliminate the vestiges of resource nationalism at the core of Mr. Chávez’s movement,” NY Times continues.

Apparently the US administration is currently more enticed by her own economic pitch. She has argued that only democracy, rule of law, and openness to the international community can truly allow foreign access to Venezuela’s resources, and that Maduro will not deliver:

“She argued that even greater economic wealth — $1.7 trillion in 15 years — awaited U.S. companies in Venezuela if her movement launched a political transition. (Ms. Machado was awarded the Nobel Peace Prize on Friday for what the Norwegian Nobel Committee described as “her tireless work promoting democratic rights for the people of Venezuela.”)

It is indeed curious that the Nobel Committee while denying Trump, has chosen to award a person potentially at the center of US regime change policies in Venezuela.

Celebrating “Peace” regime change according to Norway’s Nobel committee…

They’re setting up the world stage against Venezuela so everyone just accepts an invasion! Don’t fall for it https://t.co/njJMI6OKpV

— Sopo Japaridze (@sopjap) October 10, 2025

Machado’s economic adviser, Sary Levy, argued to the Trump White House that “What Maduro offers investors is not stability, it’s control — control maintained through terror.” She told the Times, “The Trump Administration has shown a clear intention to not fall for these offers of easy solutions.”

After Thursday night Israel’s security cabinet formally approved Trump’s 20-point peace plan for Gaza, the ceasefire has formally taken effect Friday, and the Israel Defense Forces (IDF) reportedly completed a withdrawal to agreed-upon deployment lines within Gaza at noon.

The IDF withdrawal, which occurred under cover of artillery fire and airstrikes in some areas, starts a 72-hour countdown during which Hamas is to release all remaining hostages as part of the first phase of the US-brokered deal. The IDF released footage of its drawdown.

“CENTCOM has confirmed that the Israeli Defense Forces completed the first phase withdrawal to the yellow line at 12PM local time. The 72 hour period to release the hostages has begun,” Steve Witkoff posted on X, offering US verification.

With the withdrawal, Israel’s military now effectively controls a little over half of the Strip’s territory, but which is mostly outside urban zones.

Al Jazeera is reporting that displaced residents of the north have begun seeking to return to their largely devastated homes and communities. This as Gaza’s Government Media Office is urging Palestinians “to cooperate and be disciplined” as the resumption of aid starts flowing.

Hamas-linked Palestinian police forces in Gaza have begun moving back into areas the IDF withdrew from, saying officers will “fulfil their duties of serving and supporting citizens, and protecting public and private property.”

“We call on citizens to be extremely cautious and vigilant when returning to their homes and residential areas for the presence of suspicious objects, hazardous waste, and unexploded bombs,” it said.

In some places, fighting and shelling continued even as the historic ceasefire was announced, as Israeli media documents:

• Media outlets in Gaza reported Friday that five people were seriously injured in an IDF strike on a school that had been serving as a shelter for displaced people in Jabalia, in northern Gaza City.
• ahead of the deal taking effect, an IDF reservist soldier was killed in a Hamas sniper attack in Gaza City on Thursday afternoon.

IDF Spokesman Brig. Gen. Effie Defrin said in a video address while getting visibly emotional the ceasefire in the Gaza Strip “is an emotional moment for the people of Israel and for the IDF troops and soldiers who have fought and acted over the past two years with courage, bravery, and out of a sense of mission and dedication.”

The Red Cross in Israel is getting ready to receive the hostages, and early Hamas reportedly indicated it will not release them with any kind of ceremony or other propaganda, as it did in initial rounds.

Hamas has meanwhile said it got no clear indications on its submitted list of Palestinian prisoners it expects to be returned, instead, as Times of Israel details:

Israel has published the full list of 250 Palestinian security prisoners serving life sentences slated for release as part of the hostage-ceasefire agreement.

The list, published by the Justice Ministry, comes the morning after the cabinet approved the US-backed deal, aimed at returning the remaining hostages and permanently ending the Gaza war. Of the 250 prisoners, 15 will be freed to East Jerusalem, 100 to the West Bank and 135 are slated for deportation.

🎥WATCH: Southern Command troops in the midst of adjusting operational positions in Gaza. pic.twitter.com/P0ruvWTmQ9

— Israel Defense Forces (@IDF) October 10, 2025

Hamas wanted to see Popular Front leader Ahmad Sa’adat and senior Hamas figures Ibrahim Hamed and Hassan Salameh on the list of those to be released, but they are not.

Meanwhile Prime Minister Netanyahu has threatened that full war will return to the Gaza Strip if Hamas doesn’t fulfil its end of the deal, and if it doesn’t do things “the easy way”.