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This post is a part 2 to the post below. As should have been mentioned in all of my posts, this is my opinion and thesis. It should not be used as financial advice, and you should be doing the thinking and research on your own too. With that said, I want to continue from where we left off by talking about how interest rate behaved during the dot-com bubble vs what’s happening now in the AI bubble, and why today’s setup is far more complicated and dangerous. Additionally, I am writing this post over several days, so please forgive me if I am repeating ideas or sound like I’m rambling. During the dot-com bubble (1999-2002), the fed tightened into the mania. From 1999 to early 2000, there were six consecutive rate hikes that peaked at around 6.5%. This is what caused the bubble to burst. After the bubble burst, the Fed cut aggressively—lowering the rate from 6.5% to 1% from 2001 to 2003. This allowed capital to rotate into defensive positions, the economy had a mild recession, and the market bottomed out without a full credit meltdown. CPI was tame, so the Fed had full freedom to slash rates, and lowering rates helped stabilize the market without causing inflation panic. The crisis was equity-driven, not credit-driven. The consumers were not over-leveraged, and the credit markets were healthy. The AI bubble and interest rate dynamic is far messier. The Fed already raised aggressively to control inflation—going from 0% to above 5%. To give context, this is the highest/fastest tightening in decades. Yet, the AI bubble inflated despite high rates, showing extreme speculative demand. However, unlike 2000 inflation is still “sticky.” You hear this word a lot. CPI still above 2% with service inflation refusing to go down and housing inflation stays elevated. Wage inflation is moderating but not collapsing. The Fed cannot safely cut rates the way they did in 2001–2003. Then we have the issue of credit stress rising. Auto loan delinquencies at record highs, and credit card defaults rising. You can find this information here. https://ycharts.com/indicators/us_credit_card_accounts_late_by_90_days Student loan repayments are restarting, and commercial real estate is under pressure. One of the more interesting things that people don’t talk about are the high-paying job layoffs that are happening right now. Many of those individuals cannot find a new position to replace their old job. What do you think will happen in 6 months when those guys can’t find a new job with the same pay? They have to file for “hardship relief,” forbearance, grace periods, or payment plans. This will buy them 90 days before they start hitting the default zone. This might set off a housing crisis, but we need more confirmation. So we’re not there yet. Back to what we’re saying, the Fed is basically boxed in. If they cut too early, inflation re-accelerates. If they don’t cut, unemployment rises. This is the reason why I’m betting that they will cut rate in December. If AI continues replacing workers, unemployment rises even faster. This is the 1970s’ dilemma of stagflation risk. The Tech/AI stocks are overvalued. If the economy is weakened, Capex will slow down, and earnings will eventually disappoint. In turn, this will cause credit deterioration to accelerate, consumers to stop spending, and housing to freeze. AI stocks depend heavily on future earnings, which will get crushed when real yields and discount rates remain high. Liquidity will dry up, and demand will weaken. The dot-com bubble only had 1 problem. The AI bubble have three: 1. 1970s inflation & policy errors 2. 2000 tech bubble valuation madness 3. 2008 consumer credit stress The AI bubble unwinding will be slower, ugliers, and harder to stop because we have a hybrid crisis: 1. Equity correction (like 2000) 2. Consumer credit deterioration (like 2008) 3. Stagflation (like 1970s) 4. Weak job market (AI displacement) 5. Limited policy tools (Fed constrained) Honestly, what do you do in this scenario? This is why I am advocating for the investment in big pharma and managed care (health insurers)—after the crash—because these guys tend to be the two of the strongest sectors during crises. They don’t win because things are good. They win because they survive when everything else breaks. Big pharma is a safe heaven because the demand never collapses. Regardless of what happen, people still need cancer drugs, diabetes meds, autoimmune treatmetns, insulin, vaccines, and heart disease meds. It doesn’t matter if unemployment rises, credit defaults spike, inflation eats consumers alive, or tech collapses. Pharma is a non-cyclical demand. The current tech boom depends on money. Pharma depends on illness which sadly does not go away in a recession. When inflation is high, companies without pricing power get destroyed. Pharma is one of the few industries where prices can rise, and they can shift to higher-margin drugs. The government often absorbs the costs, and this protects margins when input costs rise. Even when the U.S. economy collapses, they are still selling their drugs to Europe, Asia, and Latin America. They are not dependent on the U.S. credit cycles. Most people don’t think about this, but big pharma is really boring, but they are really safe. They have low debt, massive cash reserves, strong free cash flow, and long-term revenue visibility. In a liquidity crisis, companies with cash survive—and get rewarded. I also think that big pharma are assholes, but it doesn’t change the fact that they benefit a whole lot when the markets crash. When the economy eats shit, biotechs are the first to die, and their valuation will drop. Big pharma often uses the massive cash reserves to buy the biotechs at discounts. In short, downturns create another growth engine for them. As for healthcare, although they are not as immune as big pharma, they have many powerful defensive traits because healthcare spending is non-negotiable. People can’t just skip dialysis, emergency care, chronic disease treatment, hospital visits, and cancer treatments and screenings. Managed care sit at the center of this. Premiums don’t disappear just because the economy weakens. People such as employers, the government, and those receiving subsidies, Medicaid, and Medicare Advantage still have to pay. I skipped ACA because that is in the air at the moment. If history has shown us anything, government programs expand during crises. Medicaid enrollment tend to increase while Medicare Advantage stay intact. The reason why Medicaid enrollment increases is because the disabled and low-income populations swell. CNC and MOH (Medicaid-heavy) often get more members during economic stress. However, please keep in mind that HR. 1 is introducing huge cuts and barriers to access care. The scenario I mentioned happened in 2001, 2008, and 2020. UNH, HUM, CNC, MOH, CLOV behave like healthcare utilities. They are boring, predictable, defensive, and has repeatable cash flow. This is why institutions rotate into during uncertainty. I won’t talk about Medical Loss Ratio here, but insurers benefit from population aging too. Medicare Advantage enrollment is structurally rising due to baby boombers aging into MA, and seniors prefer managed care for simplicity. Their enrollment has been growing 5-7% per year. This is a secular tailwind independent of the macro picture. For juxtaposition purposes, Tech needs low rates, strong liquidity, and strong consumer spending. All of which disappear in the crisis. However, Big Pharma and Managed Care are the opposite of tech. They are cheap compared to AI names, defensive cash flow, essential demand, anti-cyclical enrollment, and the government backed their revenue streams. For Big Pharma my bets are on LLY, PFE (maybe), MRK, JNJ, NVS, RHHBY, ABBV, NVO (Yes NVO). For larger diversified insurers, UNH is still king. For Medicaid-heavy insurers, I would go with CNC, MOH. For my favorite and medium-risk company, MA-focused newer entrants (CLOV). I’m super bias about this guy because my average cost is like $1 so… I’m not selling it. Please remember, I’m not telling you to buy these companies right now. I’m pointing out that these sectors tend to perform well during a crisis, and their stock prices will likely be much more attractive when the market corrects. That’s when they become true value-investing opportunities—strong companies at discounted prices, backed by stable long-term fundamentals. Now for the fun part. As of the writing of this post, I saw two headlines over the Thanksgiving weekend, which I think are confirmations for the impending problems we will be seeing. They look like two contracting ideas, but they are not. They actually suggest that we have a fragile consumer base. Black Friday shoppers spent billions despite wider economic uncertainty https://www.nbcnews.com/business/economy/black-friday-shoppers-spent-billions-rcna246456 “Adobe Analytics, which tracks e-commerce, said U.S. consumers spent a record $11.8 billion online Friday, marking a 9.1% jump from last year. Traffic particularly piled up between the hours of 10 a.m. and 2 p.m. local time nationwide, when $12.5 million passed through online shopping carts every minute.” Seasonal hiring offers little reprieve for labor market woes “Challenger, Gray & Christmas said in its most recent labor report that seasonal hiring plans through October were at their lowest since the global outplacement firm began tracking them in 2012. The National Retail Federation, a trade group, also said in a press call earlier this month that while strong consumer spending was expected to persist through the holiday season, plans to bring on extra staff could be at “the lowest level in more than 15 years.” Retailers were expected to bring on 265,000 to 365,000 seasonal workers, compared to 442,000 in 2024.” What the data tell us is according to recent reports, this year’s holiday-season hiring—historically a buffer for retail workers and a boost to household income—is expected to be the lowest in 15 years. This mirrors what other macro signals are showing: rising layoffs, labor-market softness, and increasing unemployment risk. https://www.aol.com/finance/feds-beige-book-shows-cooler-194701688.html Despite the labor softness, holiday-season retail—especially online—is posting robust numbers (record or near-record sales in some cases). Part of the spending is driven by payment plans like “buy now, pay later” (BNPL), which allow people to make purchases without paying full price up front. This suggests many households are stretching to keep consumption going even while incomes stagnate or fall. When spending is up but incomes and hiring are weak, it often means households are financing consumption with debt or deferred payments, not by real income growth. That’s a classic stress build-up. BNPL and credit-card debt can balloon fast if incomes don’t recover: missed payments, delinquencies, or higher defaults lead to declining consumer credit health—which hurts consumption medium-term. If people are using debt to stay afloat, they become extremely vulnerable to even modest shocks: job loss, interest-rate reset, inflation spike, rent or utility increases. All of which are happening as we speak. Additionally, retailers and the overall economy get a temporary boost, but it’s brittle boost—not durable. Increase holiday spending, BNPL and weak hiring is not economic strength. The more likely scenario that we’re looking at is a temporary consumption buoy, which will lead to deeper consumer stress and multiyear headwinds for demand-heavy sectors (retail, travel, big-ticket discretionary goods) and credit-sensitive households. As for the next part, I want to remind everyone that this is not a motherfucking financial advice. I’m just laying out the strategic logic based on history. With that said, I think the best time to start entering various positions is when we start seeing a credit-driven sell-off. This is when we start seeing defaults rise, unemployment spikes, AI stocks tank, and forced selling hits the whole market. This will drag down everything, including healthcare. Key indicators to look for are the following: 1. VIX spikes above 25–30 2. Tech corrects 30–40% 3. Consumer sentiment plunges 4. Insurers/Pharma dip 10–20% 5. Credit markets widen 6. Fed panics or pivots. Right now, they are in the whole interest rate cut mode to save unemployment. When they start increasing interest rates, we will start seeing some funny selloff. The rotation will be slow—lasting anywhere from 18-48 months—so buy in slowly. The next part of this post is just a thesis based on Wyckoff. I hope I don’t have to explain to you what a thesis is, but I will do it anyway because some people still don’t understand it. “A market thesis is a structured explanation of an investment idea, outlining the rationale behind it and helping to guide decision-making. It involves research and analysis to explain why a specific asset, company, or market is expected to perform well, considering factors like market trends, company fundamentals, and competitive advantages. Think of it as a strategic roadmap that helps investors stay focused and disciplined, and it’s used by professionals and individual investors alike” I think we are in a late-cycle Wyckoff distribution into a Santa-rally. In a mature bubble or late bull market, the Wyckoff Composite Operator (smart money) typically uses the thin holiday liquidity, retail FOMO, seasonal bullish expectations, and options flows to push prices up one last time. This “Christmas/Santa rally” often appears right before the real markdown phase. Historically, we have seen this four times: 1. 1929 had a late-end “relief rally” before final markdown. 2. 1999 : huge late-year pump that led to collapse in March 2000 3. 2007: strong Q4 rally that led to a crash 3 months later 4. 2021: late Q4 pump that led to 2022 crash It goes from pump, distribution, to crash. In Wyckoff theory, Smart money does not sell into weakness. They sell into strength, where liquidity is highest. The Q4 / holiday / Santa rally gives them higher prices to distribute into, more retail buyers (holiday optimism), thinner liquidity (easier to push stocks up), and options flows that mechanically squeeze the market. If you look at Wyckoff schematics, the Santa rally perfectly maps onto Phase D’s “Upthrust After Distribution (UTAD).” The full Wyckoff Logic looks like this We can Juxtapose it with SPY if you need a clearer picture The reasons why this year rally is especially dangerous is because it’s built on a shitty foundation: – BNPL consumption instead of income https://www.sfchronicle.com/personal-finance/article/buy-now-pay-later-debt-21139346.php – weak retail hiring https://www.reuters.com/business/world-at-work/us-retail-holiday-job-postings-slump-indeed-says-2025-11-12/ and https://finance.yahoo.com/news/seasonal-hiring-offers-little-reprieve-for-labor-market-woes-110044972.html – rising credit-card delinquencies https://www.federalreserve.gov/econres/notes/feds-notes/a-note-on-recent-dynamics-of-consumer-delinquency-rates-20251124.html – auto repos climbing https://www.reuters.com/business/autos-transportation/record-number-subprime-borrowers-miss-car-loan-payments-october-data-shows-2025-11-12/ – student loan repayment stress https://www.dunham.com/FA/Blog/Posts/ai-financing-loops-student-loan-strain-wealthy-consumer-risk – AI replacing white-collar workers https://observer.com/2025/11/anthropic-ceo-warn-ai-displace-white-collar-jobs/ – Fed cutting into inflation (policy error) We will see this in December – AI valuations at dot-com extremes https://www.bloomberg.com/news/newsletters/2025-11-20/the-real-risk-in-an-ai-bubble – record margin debt https://economictimes.indiatimes.com/news/international/us/u-s-margin-debt-hits-record-1-1-trillion-every-spike-like-this-has-ended-in-market-disaster/articleshow/125096049.cms – institutions quietly rotating defensively https://finance.yahoo.com/news/banks-tighten-lending-consumer-credit-144606234.html In short, this is not a foundation for a sustained bull. It is a foundation for Phase E markdown. The Santa rally is completely consistent with Wyckoff Distribution. It is likely the final pump before a 15–20% deleveraging decline. We can also take a look at the Wyckoff distribution schematic and align it with what is happening right now.
As a side note, I also think PG, PEP, and KO are great companies to invest into during the downturn. However, I know jack shit about consumer stables except consuming them so I can’t write anything about them. I have also been buying physical gold bar too, but it is more of an old school kind of thing. Ok at this point of the post, my brain is basically a potato. However, I do want to leave you guys with some indicators that you should keep at the top of your computer or smartphone. Honestly, I don’t know what people are using now. I just learned about BNPL this Thanksgiving. Labor Market Stress (Highest Priority). Unemployment Rate: current unemployment rate for the us is 4.4%
Continuing Jobless Claims Rising for 10+ consecutive weeks means breakdown in labor market. Temporary & Seasonal Hiring Collapsing seasonal hiring = recession precursor (1999, 2007 analog). We’re already seeing this with the 25% less seasonal hiring. Layoff Announcements Tech and corporate AI-driven layoffs are increasing Logistics & retail layoffs are increasing Consumer Credit Deterioration (Second Highest) Auto Loan Delinquencies: The subprime auto loan delinquency rate was 6.65% in October 2025, meaning 6.65% of subprime borrowers were 60 or more days late on their payments. This is a record high, the highest rate since at least the early 1990s, according to Fitch Ratings. Subprime > 6% = yellow Subprime > 8% = major stress Credit Card Charge-offs: https://fred.stlouisfed.org/series/CORCCACBS The most recent charge-off rate for credit card loans from all U.S. commercial banks was 4.17% in the third quarter of 2025. Other sources report a slightly lower but recent rate of 3.92% for the same period. This indicates a recent increase in charge-offs, following a trend of rising delinquencies Above 3.5% = tightening Above 5% = 2008-style consumer pain BNPL Default Trends: While overall Buy Now, Pay Later (BNPL) default rates remain low (around 2%), late payments are increasing, particularly among younger, lower-income, and lower-credit users. As of late 2025, approximately 41% of BNPL users reported making at least one late payment in the past year, a significant rise from previous years. This indicates a growing trend of financial strain among some users, even if they are not defaulting on their loans. https://techcrunch.com/2025/11/16/bnpl-is-expanding-fast-and-that-should-worry-everyone/#:~:text=These%20aren’t%20discretionary%20purchases%20%E2%80%94%20the%20designer,39%25%20in%202024%20and%2034%25%20in%202023 If BNPL (Affirm, Klarna) default rates spike means immediate drag on retail spending. Student Loan Stress: Student loan delinquency is at a record high, with about (10.2%) of total student debt being 90+ days delinquent as of the second quarter of 2025. This spike is due to the end of pandemic-era payment pauses, which has caused missed payments to appear on credit reports for the first time. As a result, about 1 in 4 borrowers with payments due are currently behind, and credit scores have been negatively impacted. https://www.newyorkfed.org/newsevents/news/research/2025/20251105#:~:text=Missed%20federal%20student%20loan%20payments,2025Q1%20and%2010.2%25%20in%202025Q2 Delinquencies rising = household income weakness. Inflation and Fed Policy (Subjective, but I prioritize this as the third highest). CPI + Core CPI:As of September 2025, the Consumer Price Index (CPI) was up 3.0% over the last 12 months, with the core CPI (excluding food and energy) also up 3.0%. The monthly increase for the CPI was 0.3%, and the monthly increase for the core CPI was 0.2%. If inflation stays above 3% while unemployment rises, the Fed is trapped. This causes asset repricing (stagflation-lite) Fed Rate Cuts If Fed cuts into rising inflation, credibility weakens Bonds stop responding mean yields stay high and tech multiples compress Real Yields (10Y – CPI): The current real yield varies by maturity, with the 10-year TIPS real yield at approximately 1.77% to 1.86%, and the 30-year TIPS real yield at around 2.45%. Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis, Inflation-Indexed (DFII10) | FRED | St. Louis Fed High real yields = lethal for AI bubble valuations Watch if real yields stay > 2%, the tech crash will be more severe Finally, we have the Market Structure Indicators VIX (Volatility Index) VIX < 15 = complacency (UTAD pump) VIX 18–20 = Phase D starting VIX 25–35 = forced deleveraging VIX > 35 = capitulation Credit Spreads (Junk Bond Yields) https://fred.stlouisfed.org/series/BAMLH0A0HYM2 If they widen sharply, it means the risk-off is basically confirmed Spread > 4% = mild stress Spread > 5–6% = credit tightening Spread > 7–8% = crisis levels Equity Market Breadth If fewer than 20% of S&P 500 stocks are making new highs, the distribution is underway. For the latter two indicators, there are a few indicators, but you can just Google it and look up what is best for you. Additionally, maybe I am too stupid to read it, but I feel like the last two indicators are kind of useless to me. By the time you see the numbers, you are already dead. submitted by /u/Rainyfriedtofu to r/Healthcare_Anon |