"This Is A Bubble". You'd Better Invest Accordingly | Cem Karsan

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**Cem Karsan** (0:41)
We can say, look, given where interest rates are likely going, given the inflationary outlook, given the valuations, this is a bubble, and it is a bubble. There's no way that anybody can convince me that this is not a bubble. You would have to convince me, first of all, that 2000 was not a bubble. And then you'd have to convince me that, you know, that the risks facing us are less than that moment to begin with. This is a bubble.

**Adam Taggart** (1:13)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Today's guest is the perfect expert to discuss a year as volatile as 2025 has been so far. Cem Karsan is founder, CIO and managing principal of Kai Volatility Advisors & Kai Wealth. He's widely known as Cem Kwasant on X. Heading into 2025, Cem warned us that he predicted it would be a year of heightened volatility, and that certainly proved true in the first half of the year. But what about the road ahead? Are we through the worst of the bumps, twists and turns that the market will throw at us this year, or is the ride about to get rocky again? Well, let's hear straight from the man himself. Cem, thanks so much for joining us today.

**Cem Karsan** (1:57)
Wonderful being here. Thanks for having me back, Adam.

**Adam Taggart** (1:59)
It's a pleasure, Cem. And I got to apologize. I made the mistake of asking my followers on X if they had any questions they wanted me to ask you, and boy, did they ever. So I only got about 2,309.
We'll get through as many of those as we can. But real quick, given that it's been the better part of the year since we've talked, well, I guess we talked back in April, but a lot's happened since then. So just quick at a high level, Cem, what's your current assessment of the economy and the financial markets right now at this stage of the year?

**Cem Karsan** (2:30)
Well, those two things are often not the same. Exactly. So I'll separate them and start first with the economy, with the understanding too that, again, the financial markets might be very, very different than we'll get there. We front-loaded a bunch of demand in the economy by announcing we were going to do tariffs, then putting them on pause for 90 days. So there was a bunch of demand earlier this year.
After the markets bottomed on Liberation Day, employment looked quite strong, no effects of inflation that we get yet at that point, given that the tariffs were paused. We thought, as the Fed had also alluded to, that coming in July or August, that we would need to start being ready to see maybe the effects of the incoming tariffs and the slowdown, and the inflationary pressures at the same time. Sure enough, the last unemployment number here that we had in August was a pretty big surprise, and the PPI number that came right after it, which is leading on the inflation front was also way hotter than expected. We've talked about stagflation here and other venues for some time. That's a function of structural populism and protectionism and all the things that come with that, and tariffs are the tip of the spear on that. So not surprisingly, we're starting to see that. My expectations is this is the beginning on that front. Stagflation is a very, very tough thing for particularly the working man, right? On the bottom of the stratification bubble, people are dependent on their jobs, A, but B, they spend 100% of their money on goods, right? And so inflation is a flat tax and not great for those people. So in a populist environment, that is going to increasingly make people unhappy and is frustrating. So in terms of economy, not great. Not great. Stagflation is not great.

**Adam Taggart** (4:42)
Sorry to interject here, but just on this, we just went through a massive cost of living spike coming through COVID, which people are still smarting from. And it sounds like you're saying, hey folks, the beatings are going to continue until morale improves. Like it's, it's more of a sin.