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The Permanent Distortion Theory

Submitted by QTR's Fringe Finance

“This time it’s different” is supposed to be the dumbest phrase in investing.

It’s the phrase people use right before they get obliterated. It was the rallying cry of dot-com lunatics buying companies with no revenue in 1999. It was the intellectual foundation of housing perma-bulls in 2006 who believed home prices could only go up because, apparently, Americans had collectively decided real estate was immune mathematical reality.

It’s typically what people say when they’re trying to justify paying absurd prices for dogshit assets while pretending the laws of valuation have been permanently repealed: “this time it’s different”.

Which is why it’s deeply annoying and borderline humiliating for me to admit that this time, it actually may be different.

As someone who has spent years living in the world of fundamentals, valuation discipline, and the radical idea that cash flows should matter at least a little when valuing businesses, I hate where the evidence keeps leading me. I’ve spent years mocking the market as distorted.

Everyone in Austrian economics circles loves that word: distorted. Markets are distorted by central banks, distorted by artificially low interest rates, distorted by endless intervention. Distorted, distorted, distorted. Fine. But at some point, if a distortion lasts long enough, survives every crisis, and becomes embedded in how markets function, is it still a distortion? Or is it just the market now?

Look at this chart of the NASDAQ tripling off Covid lows just 5 years ago before you answer. An index. Tripling.

And in ten years, the index (read it again, index) is up 534%.

And now, back to the question: “if a distortion lasts long enough, survives every crisis, and becomes embedded in how markets function, is it still a distortion?”

That’s the uncomfortable question fundamental investors increasingly refuse to confront. We continue dragging out valuation charts that go back to 1900 as if they’re sacred scripture. We point to historical average P/E ratios and the Buffett Indicator and say things like “the market has always reverted.”

I’ve said such things on this blog for years.

But the market that existed in (throw a dart) 1952 has almost nothing in common with the one we have today. Back then there were no ETFs mechanically absorbing retirement contributions every two weeks regardless of valuation. There was no passive investing machine blindly funneling trillions into the largest companies simply because they’re already the largest companies. There were no options markets large enough to create absurd gamma-driven price movements detached from fundamentals. There were no retail armies weaponizing leverage from their phones while posting rocket ship emojis.

And there sure as hell was no widely accepted assumption that if markets fall hard enough (3%, give or take a percent?), the Federal Reserve will eventually arrive with fresh liquidity and soothing words about financial stability.

For fifteen years, investors have been trained like goddamn lab rats to expect intervention whenever things get ugly enough. In 2008, the financial system nearly collapsed and the response was unprecedented monetary intervention. In 2020, the world shut down and trillions appeared almost overnight. Every time markets experience genuine pain, policymakers magically “discover” yet another reason why extraordinary intervention is necessary.

The lab rats participating in this market have learned a very simple lesson: the adults will not tolerate prolonged asset deflation. They may talk tough about inflation. They may posture about financial discipline. But when enough things start breaking, they fold. They always fold.

Markets now operate with the deeply embedded belief that liquidity will always return when things get sufficiently bad. That belief alone changes behavior. It encourages risk-taking. It compresses risk premiums. It makes traditional valuation frameworks feel increasingly obsolete because those frameworks were built during periods when markets still had to fully purge excesses. Today, excesses are often interrupted, softened, or reflated before true cleansing can occur.

Meanwhile, people love pretending the stock market’s relentless rise is purely a reflection of corporate innovation and productivity gains. Some of it absolutely is. But a meaningful portion of what investors celebrate as “wealth creation” is simply the declining purchasing power of the currency in which those assets are priced. If you continually debase the measuring stick, asset prices are going to look fantastic. Stocks haven’t always become more valuable. Dollars have become less valuable.

If your denominator is quietly melting, your numerator tends to look heroic. It can even make the performance of an ex-bartender from Philadelphia writing a finance blog look great.

This forces an almost heretical conclusion I’ve been toying with for a year or two: maybe what we consider “expensive” is anchored to a market regime that no longer exists. Maybe 20x earnings is not expensive anymore because 20 years of future earnings are guaranteed in a way they weren’t 50 years ago. Maybe for dominant, cash-generating businesses, 20x is the new bargain bin. Maybe historical comparisons to decades that lacked passive flows, algorithmic trading, derivatives-fueled volatility, trillion-dollar buybacks, and perpetual monetary intervention are becoming less useful by the year.

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I can already hear the response. Shit like “this article really must mean the top is in” and “QTR has caved, we can crash now!” Look, of course valuation still matters. Gravity still exists too. But if central banks keep dropping trampolines underneath the market every time gravity starts doing its job, people should stop acting shocked when assets bounce higher than historical models suggest they should.

This doesn’t mean crashes disappear. Something will absolutely break eventually, and probably the moves lower will be sharper and faster, before they aren’t, because that’s what leveraged systems do. But each break seems to justify larger interventions, which creates even bigger distortions, which produce even larger asset bubbles, which eventually require even more intervention. It’s a magnificent ouroboros of financial engineering and moral hazard.

And that’s the truly infuriating part for people like me. I want old valuation frameworks to still work cleanly. I want patient fundamental analysis to feel like an advantage rather than a history hobby. I want “cheap” and “expensive” to retain actual meaning. But markets increasingly feel like they’re operating under a new regime where liquidity overwhelms nearly everything else over long enough time horizons.

“This time it’s different” remains a dangerous phrase because human beings are still perfectly capable of creating idiotic bubbles. But pretending this market functions like the one our grandparents invested in may be its own form of delusion.

If the Fed has effectively made permanent distortion the foundation of modern markets—and if it cannot stop until something truly catastrophic breaks—then maybe we need to admit the obvious: the market is no longer broken. It’s functioning exactly as designed: rigged.

But of course, now that I’ve penned and published this piece, a medieval-style return to the investing dark ages is probably right around the corner.

Now read:

• Congrats, Elizabeth Warren, On The Death Of Spirit Airlines
• Buying One Staple Stock That's Been Crushed
• Stocks Now In “The Biggest Bubble Of Modern Times”
• Glowing Numbers...With Glaring Omissions

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QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.

This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions. All positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. If you see numbers and calculations of any sort, assume they are wrong and double check them. I failed Algebra in 8th grade and topped off my high school math accolades by getting a D- in remedial Calculus my senior year, before becoming an English major in college so I could bullshit my way through things easier.

The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.

Tyler Durden Sun, 05/03/2026 - 21:00

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China Tries To Assert Dominance Over Canada After Carney Trade Deal

Historically speaking, crawling to communists for help has never been a good idea; there's always a catch.  By extension, making trade deals with China and the CCP from a position of weakness usually ends with diplomatic concessions instead of mere economic concessions.  That is to say, the Chinese are less interested in economic benefits, and more interested in political submission. 

Canadians are about to speed run this lesson after Prime Minister Mark Carney's "new strategic partnership" formed with China early this year.   The announcement has been heralded as a pragmatic reset in Canada-China relations after years of tensions, aimed at diversifying Canada’s trade amid U.S. tariffs under Trump.  The goals of the deal include increased bilateral trade, agricultural agreements, currency swaps and energy exports. 

The problem is, Carney also wants Canada to maintain its relationship with Taiwan, which the CCP views as a violation of their "One China" policy.  Not surprisingly, China is already using their newfound economic leverage to pressure Canada to submit to their demands on Taiwan.

Chinese Ambassador to Canada, Wang Di, has warned that the new strategic partnership between Canada and China could be damaged if Canada continues sending parliamentarians (MPs and senators) to Taiwan, or if they continue transiting warships through the Taiwan Strait. 

Wang emphasized the One China principle, stating there is "only one China in the world, and Taiwan is an inalienable part of China’s territory." He described Taiwan as a core interest and political foundation for bilateral relations, warning that official engagements by Canadian parliamentarians with Taiwanese officials would be "hurtful."

🚨CHINA ISSUES ULTIMATUM🚨

First, Carney pulls MPs out of Taiwan.

Now China is warning Canada not to go back - and not to send ships either.

Carney told Canadians he was dealing with China because the U.S. was "unreliable".

So much for a “strategic partnership.” pic.twitter.com/HkxF0YFMrP

— Northern Perspective (@NorthrnPrspectv) May 1, 2026

Canadian MPs and senators have long visited Taiwan, including numerous meetings with the president and foreign minister.  But, this year their trips to Taiwan have been cut short, with Canada showing a quiet willingness to "de-conflict" high-profile visits when they overlap with China diplomacy. 

Taiwan's envoy to Ottawa warned that Canada's burgeoning attachment to China could put them in a vulnerable position and lead to "trade weaponization" by the CCP. 

Canadian Prime Minister Mark Carney has led his country into economic chaos as one of the few leaders unwilling to negotiate a basic trade deal with the Trump Administration.  He should have been the first to make a deal, given that around 75% of Canada's export economy relies on US markets and there is no viable alternative that will bring anywhere close to the same trade revenues.

Canada's housing market is currently in shambles with prices still skyrocketing.  Jobs losses are climbing.  Factories are shutting down.  Food prices are inflating.    

It's a matter of simple math and basic geography:  The US is the largest consumer market by far with 30% of total global buying power.  China is around 12% of the global total and their consumer spending is far less liquid (and spread out over a much larger population).  Furthermore, shipping goods 6000 miles to China is a lot more expensive and inefficient than shipping goods right across the border to the US.  It's not complicated - making a deal with the US is the superior option. 

However, Carney and his globalist ilk are not interested in common sense trade policies, they are engaged in an ideological war with the Trump Administration.  This is about an increasingly "woke" and socialist Canadian regime vs an increasingly nationalist and anti-woke US government.   

Carney has consistently painted the situation between the US and Canada as a war, and he has made it clear he intends to "win".  This means cutting deals with traditional enemies like China; not because it makes sense financially, but because it's a way to spite Trump and conservatives in America. 

In the end, it is a foolish plan which will only end up costing Canadians billions in export revenues and possibly enslave them to eastern geopolitical interests; further inflaming tensions with the US.       

Tyler Durden Sun, 05/03/2026 - 20:25

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