Dogs of the Dow

Source: Getty Images

[Click to open in a new window]

The secret to being a successful follower is not to ask too many questions.

That is true in the stock market…in the corporate world…and just about everywhere. In the military, ‘I was just following orders’ is a favorite of war criminals.

But sometimes, asking the right question at the right time can make a big difference. It could help you avoid the Big Loss.

“How is Mr. Madoff able to produce such good returns…and so regularly?” was worth asking. “But Mr. Lincoln, don’t you need a little more security?” would have been a good question. “What if they close the Strait of Hormuz?” should have come up in planning discussions.

And today, we’ve got a question.

Last week’s report from the ever-sharp Charlie Bilello, told us that prices are going up.

Gas prices in the US have moved up to $4.56 per gallon, their highest level since July 2022. The 53% spike over the last 10 weeks ($2.98/gallon to $4.56/gallon) is the biggest we’ve seen in the past 30 years.

The Pentagon, too is asking for a 42% increase. The Hill:

Pentagon wants $1.5 trillion for Golden Dome, drones, troop raises

As for corporate profits (and the stock market itself), they’re going up asymptotically too. Bilello:

An unrelenting move higher in corporate earnings with expectations of more gains to come. The S&P 500 is on pace to grow its quarterly earnings by 27% year-over-year, which would be the strongest growth rate since Q4 2021. And net profit margins are on pace to surge to another record high at 14.7% (the previous record high was 13.2% in Q4 2025). For the full year 2026 earnings are now expected to growth 22%, a significant uptick from expectations only a month ago (+18%).

How nice!

Everyone’s ‘in the money.’

Except…here’s the question trend followers shouldn’t ask:

Where is all this money coming from?

Consumers are paying more for gas. How can they spend more at Google and Meta too? The feds are running a $2 trillion per year deficit; and paying $1 trillion a year interest on their debt already. How can they afford an even bigger, and more lethal!, military/industrial/surveillance/university/Israeli/think tank complex?

Are we ‘growing our way’ into it? Nope.

GDP is only growing at a 2% rate. That’s all there is. Grosso modo, it is not possible for corporate revenues…wages…or federal spending to grow much faster than that for very long. And even that GDP number is a bit of an imposter. It includes government spending, which can hardly be used to pay for more government spending!

But let’s keep our eyes on the stock market. Google revenues went up 22% last year. Apple increased its revenues 19%. Amazon grew at a 17% rate too. Meta beat them all with 33% growth. Even Microsoft — a very mature corporation — saw revenue growth of 33%. Bilello:

The combined revenues of the Big 4 US tech companies hit a record $1.94 trillion over last 12 months. That’s larger than the GDP of all but 13 countries.

And here comes that annoying question mark again: How is it possible for the biggest corporations in the country to add wealth ten times faster than the economy creates it?

Looking at it more broadly, US stocks were said to be worth $62 trillion a year ago. Now, they’re worth $71 trillion — a $9 trillion gain. Where did that money come from? Before the Funny Money Era began in 1971, stocks and GDP ran kinda neck and neck. It took a $1 dollar increase in GDP to produce a $1 gain in stock values.

But someone must have de-activated the electronic collar that kept the stock market in the yard. Last year, it gained more than $10 for every $1 in GDP gain. Whose space has this hound invaded? The neighbor’s poor pooch must be cowering under the porch. Either, other companies are shrinking, as the leading US firms take sales and profits from them…

Or, the whole shebang is based on new credit. Either way, the money flow must be regarded as temporary or fraudulent. Probably both.

Ain’t no friend of ours.