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I started grading exams at three in the morning Tuesday.

Forty-nine students. Corporate finance midterms. Questions about capital budgeting. Breakeven analysis. Degree of operating leverage.

Most of them got it right. The math, anyway. The formulas. The technical mechanics of how businesses calculate risk and return.

But sitting there at my desk before sunrise, I kept thinking about what they don't understand yet. What nobody can teach them from a textbook.

They're learning capital budgeting in a market where capital doesn't follow normal rules anymore. 

They're studying breakeven analysis while millions of Americans are breaking even every single month. 

They're memorizing formulas for evaluating investment decisions in an economy where the biggest investment decision is whether you can afford next month's rent.

The cold hit hard this week. Thirty-seven degrees when I walked out Wednesday morning. Twenty-nine the night before.

The buses got rerouted because they're closing bridges into the loop for construction. My office at Loyola sits right in the heart of it. So I walked. Two and a half miles through the cold. Gave me time to think.

About what I'm seeing every day. About what people are telling me everywhere I go. About the disconnect between the numbers Wall Street celebrates and the reality everyone else lives.

Something's not adding up. And this weekend, I want to talk about what happens when the line between holding steady and breaking completely finally gives way.

What People Tell Me When Nobody's Listening
 

Every day this week, I heard the same thing from different people.

At the gym. At the supermarket. From students after class. From friends I've known for years.

The conversations start different ways but always end the same place. Prices aren't coming down. Anywhere. Groceries cost more every week. Gas fluctuates but never drops to reasonable. Insurance premiums jumped 35% for people who never filed a claim.

Nobody's panicking yet. But everyone's adjusting. Making trade-offs. Deciding what's essential and what's optional.

That's not recession talk. That's recession reality showing up in real time.

Consumer sentiment just hit a ten-year low. If you remove the COVID crash, it's the worst reading in a decade. The lower classes are already in recession. The middle class is heading there fast. And the top five percent is buying another Ferrari wondering what everyone's complaining about.

Wall Street looks at this data and says everything's fine. Raymond James put out a note this week saying they see no problems with the economy. The market rallied 80 points Thursday like none of this matters.

But it does matter. Because when everyone tells you the same story from different angles, you're not hearing noise. You're hearing signal.

The Data Nobody Wants to Face
 

The numbers came out this week that confirm what I'm hearing in those conversations.

Nearly 900,000 new homeowners are already underwater on their mortgages. First-time buyers who closed less than a year ago. They're defaulting already. They can't make the payments.

Some are asking for extensions. Some want renegotiations. A hundred thousand have requested mortgage payment suspensions for two months so they can find work.

Think about that. People bought homes in the last year. They made it through closing. They survived the first few payments. And now they're already drowning.

That's not a soft patch. That's structural damage at the foundation level.

Car loan delinquencies hit record highs for the riskiest borrowers this week. Subprime. Super subprime. The worst credit profiles in the system.

They're not paying for the cars. They're not paying for insurance. They're just defaulting and walking away.

This is the exact pattern that preceded 2008. Consumer stress showing up in hard goods and housing before it cascades into everything else.

And here's what really bothers me about teaching right now. My students are walking into this completely unprepared.

What My Students Don't Know Yet
 

Friday mornings I teach corporate finance at Loyola. This semester they gave me 49 students. Normally I get ten.

Ten is perfect. I know everyone's name. I challenge them individually. We dig deep into real portfolio management. Not theory. Application.

Forty-nine is chaos. I'm trying to scare ten of them out because the workload is massive.

But the bigger problem isn't class size. It's what they're inheriting.

These kids have never seen a real correction. They don't know what 2008 looked like. They weren't trading in 2000. They thought Friday's 227-point drop was significant.

It wasn't. It was day one.

I show them the data. The average annual drawdown hits 16.3%. Not the median. The average. Which means we're mathematically owed at least 15% more pain from current levels just to hit normal.

And we're not in normal territory. We're in historic overvaluation territory.

They stare at me like I'm speaking another language.

That's the conditioning problem. Everyone's been trained to buy every dip. Anchor to recent highs. Think 6,500 is a bargain because we were at 6,700 last week.

The algorithms don't anchor. They calculate probability every millisecond. While you're married to your cost basis, the machines are preparing for mean reversion.

I look at these students and think about what they're walking into. A market held up entirely by call buying and algorithmic support. Consumer spending concentrated among the wealthy. Discretionary sectors already bleeding. And nobody teaching them what happens when that support disappears.

They're learning portfolio theory in a market that has nothing to do with fundamentals. That's like teaching someone to swim in calm water and then pushing them into a hurricane.

The Fed Member Who Sees What's Coming
 

Lael Brainerd came out this week pushing hard for immediate Fed rate cuts.

Not because inflation is under control. Car insurance and health insurance premiums are rising. Inflation is nowhere near contained.

Not because the economy needs stimulus. Wall Street keeps celebrating record profits.

She's pushing for cuts because she sees structural problems in the financial piping system. Something in the mechanics of how money flows through the system isn't right.

Blake Young and Garrett Baldwin have been saying this for weeks. Something's breaking under the surface. Nobody can put their finger on exactly what it is. But it's there.

The VIX is walking higher. Financials are walking lower. The pieces don't fit together.

And a Fed governor is essentially confirming it. There's risk in the financial system that needs immediate intervention. That should make you pause.

Because when Fed members start pushing for emergency rate cuts while Wall Street celebrates, they're seeing something you're not. Something that doesn't show up in the market indexes yet.

Something's Gotta Give
 

Wall Street and consumer sentiment are at polar opposites right now.

Wall Street comes out every day saying everything's great. Raymond James. Morgan Stanley. Goldman Sachs. They all paint the same picture. No problems. Strong economy. Buy more.

Meanwhile, consumer sentiment hasn't been this low since COVID. And if you remove COVID as an outlier, it's a ten-year low.

One of these forces has to win. Either consumers are wrong and the economy really is fine. Or Wall Street is papering over structural damage that's about to cascade.

I'm betting on the consumer. Because the consumer is telling me the truth in every conversation I have.

Wall Street is painting a turd. Coating it. Optimizing it. Making it look presentable for another quarter.

The trap door is opening. I can feel it. I'm not saying I know the exact day it gives way. I can't predict the hour.

But I know what happens when nearly a million homeowners default within a year of buying. When car defaults hit record levels. When Fed governors start warning about structural problems in the system.

The slope is breaking. The integrity is failing. And once that happens, the algorithms flip from defending every dip to attacking every bounce.

The One Thing That Matters Most
 

My dad taught me something when I was younger. God rest his soul. He used to help me hang pictures in my house.

He'd always say: Measure twice. Cut once.

It means if you get it right the first time, you never have to do it again. You don't waste time. You don't waste materials. You just do it correctly from the start.

That principle applies to everything. Teaching. Trading. Building systems. Preparing for what's coming.

I've been doing this 38 years now. Building order flow systems. Teaching technical analysis. Trading every market condition you can imagine.

And if someone asked me to summarize everything I've learned in one sentence, here's what I'd say: The slope integrity is never wrong.

If the slope points up, the position is viable. If the slope points down, it's unviable. If the slope's flat, it's a two-sided market where you can roll the dice.

Right now we're on a downward slope on the daily. We're breaking to a downward slope on the weekly. That's not a prediction. That's just reading what the algorithms are already doing.

What I'm Doing Right Now
 

I'm raising cash. Cutting long exposure. Building short positions in names that have no business trading at these valuations.

I'm not trying to pick the exact top. I'm not trying to time the perfect entry. I'm just respecting what the data shows and what the slope confirms.

When the trap door opens, the machines position ahead of the break. They always do. They're calculating debt sustainability ratios in real time. They're measuring when consumer stress crosses thresholds that historically preceded corrections.

Most traders won't see this until the weekly MACD rolls over and systematic selling has already begun. By then you're watching your account drop 10% in three days wondering what happened.

The machines saw it weeks earlier. They detected when consumer delinquency data confirmed the debt cycle was accelerating. They repositioned before the crowd knew there was a problem.

That's why I'm positioned the way I am. Not because I'm predicting a crash. Because I'm responding to the same calculations the algorithms are processing.

This Weekend, Ask Yourself One Question
 

Turn off the screens. Stop checking positions. Take a breath.

Ask yourself: Am I prepared for what happens when the line breaks?

When nearly a million homeowners default. When car delinquencies hit record levels. When Fed governors warn about structural problems. When consumer sentiment hits decade lows while Wall Street celebrates.

When all of those forces converge, the algorithms don't wait for confirmation. They position before the break becomes obvious.

The question isn't whether this corrects. It's whether you're positioned for correction or still betting on continuation.

I appreciate every one of you who shows up to learn. You could be anywhere. But you're here. That means you're thinking differently than the crowd.

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