2025: The Year In Review, And Get Stuffed

by Karl Denninger

Well here we are at the close of 2025, heading into 2026 and that means time to score my 2025 predictions, of course.

So here we go!

• “Deport ’em all” will be a bust.  Ding-ding-ding-ding.  I said it would be a show and it has been.  8 USC 1324 had all the tool he needed and he didn’t use it. Point.
• No effective action on H-1bs and will likely make it worse.  Ding-ding-ding-ding.  Expanding students is just part of it of course and simply put, TACO is properly-named on that one too.  Point.
• Inflation monster Godzilla-style.  Miss.  Yes, it still well-elevated but I can’t take credit for that one.
• Recession declared this year.  Miss; its in the data but I said “declared” and it wasn’t. 
• Medical monster will not be addressed.  Ding-ding-ding-ding-GONG-GONG-GONG!  If I could give myself two points I would, but that’s not the rule.  As I pointed out it has now gone vertical in CMS and of course the Obamacare subsidies.

 

• Despite rhetoric MAHA will go nowhere.  I can’t take more than half-a-point for that.  The impending black-box warning headed to a shot near you doesn’t get there and neither do the other “tinkering around the edges” stuff, never mind that there is now on the table proof that the PREP Act’s immunity was pierced by obvious fraud in multiple places and yet no prosecutions.  IMHO this is a bust.
• Ukraine is lost and settled.  Lost recognized yes, settled no.  Half-point, unless something happens before Jan 1, and it might.
• Middle East becomes much less stable.  Miss.  About the same; I certainly can’t take credit for less stable.
• Bubble pops in asset markets.  Miss.  I may be only a month or two early, but early is early.
• Housing is a five-alarm mess.  Ding-ding-ding-ding.  Just got reports that price levels are now actually going down and if you look at the listings and what’s moving in a lot of places, including those that were “hottest”, the drops are not small.
• CRE’s doom loop will tighten.  I’ll take a half-point on this; it didn’t blow, but I didn’t predict a blowup — just the tightening of the doom.  That’s there and it’ll continue for a good long while.
• Collapse of Green Mandates.  Ding-ding-ding-ding!  Yep.  What mandates?  Not here in the US anyway.
• EVs have had their day.  Ding-ding-ding-ding!  Indeed; the collapse in subsidies and the lack of real progress in the places where it needs to occur for them to continue (hint: There are physics problems with that) means in the US at least the game’s over.
• Chevron Deference will drive change.  Half point.  It has led to substantial changes, many upheld and a few on hold but not finished.  But since I expected more, half.
• One Supreme Court vacancy.  Miss.  Unless someone kicks in the next few days.
• One or more major scandals.  I’ll take credit for that and its not done.  Minnesota (and now Ohio, it appears) anyone?  Uh huh.
• Trump swallows the H-1b mess wholesale and all of this will trash 2026.  Ding-ding-ding on the predicate, more on that below because the prediction had a carry-forward into this year which I still think is very real.

So let’s add it up.

10 hits (between halves and clear hits), 5 clean misses for 59% of the total.  Not awful and better than last year.   If I only count full hits its 8, with 9 misses which is not quite-so-good but I’ve always counted half-points so there you go.

So with that said….. Let’s go for 2026!

• Health care detonates for 10+ million.  The Obamacare subsidies are effectively dead since the 15th (enrollment deadline for Jan 1) has come and gone, the Senate has killed both a Democrat and Republican proposal (the Democrat one just extended the Biden subsidies) and there’s no reasonable expectation anything will get done since both House and Senate are out on recess until after January 1st.  Anyone with either little or no use or who is willing to accept “I’ll get on a plane to another nation and pay cash if I can walk, and if not well, my sand has run out” will, if they’re sane, drop it entirely since $20,000+ before a single penny is paid makes no sense for 95% of the population ($1k/month in premium with a $10,000 deductible.)  If you can go abroad virtually anything can be worked and addressed for that sort of money therefore its a no-brainer unless its impossible (e.g. acute, “must now or else you die” situation.)
• The AI ‘wobble’ is recognized as real and trouble.  Those who have placed bets (and there’s a lot of them through industry and the markets) are going to have severe indigestion this year.  That doesn’t mean there won’t be survivors or even perhaps “winners”, but it does mean current valuations and the expectations driving them are going to cause problems across the markets, never mind projections for “AI data centers” that are farcical in that there is simply no power production capacity available and lead times to build out said power sources are in the realm of a decade or two, not a year or two — never mind that it is China that has the corner on cheap electrical power due to our (and Europe’s) fascination with “green” energy which is, on a delivered kWh basis with utility-grade reliability, materially — like double that of carbon-based fuels with modest emission controls — more-expensive.  To make the prediction fair the point will require any of Nvidia, Microsoft, Oracle or Google to be down by 20% or more from the 12/31/25 closing price during the year.  This is specific to the “AI” sector but if this prediction hits the general market is boned because of the concentration of those stocks in the indices. 
• To go with the above the market will finish flat-to-seriously down (no more than a couple percent up to half or more negative) in 2026.  Why?  Because on a valuation basis it hasn’t been here since just before the Tech Wreck and that portends years of poor returns.  Does the detonation have to come this coming year?  No, it doesn’t, but it is rather unlikely that the stupidity we’re seeing today in this regard goes materially further, thus the prediction.  If the blow-up comes this year it could be hideously bad — 2000-style or worse.  Compared with the late 90s the hype machine is equally bad if not worse; circular financing, huge expenditures and no operating profits in the “AI” field.  Oh sure, they say it will come.  Uh huh.  That maff don’t maff as I’ve been saying yet just like the Coyote off the cliff, its just that nobody has looked down yet. 
• Housing will not stabilize in 2026.  The cracks are already serious and so are price declines; people have been pulling listings rather than deal with reality.  That works for a while until someone breaks the ice with a non-distressed sale for personal or job-related reasons and that sale resets the market expectations and comparable valuations in a given area.  I’m already seeing some foreclosures when people think they can get “their price” and find out that it collides with their checkbook.  That’s going to continue and while I believe this might be the year we get a large dislocation in that market I’m not confident enough to go that far to get the point; a flat-to-negative trend (which is contrary to everyone’s expectation that I can find) will do.
• The Fed may cut rates another time but it won’t matter on the long end, just as it hasn’t thus far, and absent an economic wipe-out there will be no large reduction in rates.  The above prediction of course will miss if this one does — unless this one misses because of a crash in the economy, which is possible.  Specifically there’s a real issue out there with CMS and spending, and right now its being mostly ignored, along with The Fed doing their “liquidity” thing on the short end which strongly implies they have data I do not that implicates serious trouble in the commercial lending market.  No, there is not and never is a problem with people wanting to buy short-term bills; they’re the obvious place for corporate excess cash as they can trivially duration-matched to expected invoice activity on the payables and payroll side and thus contrary to many unwise people’s beliefs there is unlikely to ever be revulsion in that part of the curve unless the government actively fails entirely at which point it doesn’t matter at all. 
• Trump will not, nor will the GOP Congress, actively take on the medical cost problem.  Tinkering does not count as a miss; to be a miss real cost reductions targeting 50-80% must be implemented because nothing less will help.  Implementation of something akin to this would certainly be a miss but neither he or Congress will do it despite the fact that in the first month CMS spending on drugs was at four hundred percent of last year’s comparable month and both doctors and hospital spend was up by half again.  We’ve entered the exponential part of what was, without doing something akin to that link, inevitable and I’ve warned of it for more than a decade.  Here we are and there is only one way to address it; you can’t subsidize it on the consumer or business end because that just shifts the problem onto the federal balance sheet and you can see what that did with a few year delay in October’s numbers.
• The GOP loses the House in 2026 despite the gerrymandering and may lose the Senate.  I take the point on the House loss irrespective of the Senate which might wind up 50/50.  Trump’s recent claim that “affordability is a Democrat conspiracy theory“, which he was crazy enough to say out loud, along with the refusal to go after the medical industry generally, which is the largest driver of this problem and which the Executive can address irrespective of Congress through 15 USC Chapter 1, will lead to the loss — and a really nasty set of predictions for 2027 (but we’ll save those for next year’s prediction Ticker.)  Most people, other than the top 5 or 10%, think the economy sucks and they have a legitimate point — for them it does.  In the end people vote their wallets on the margin and time is rapidly running out for Trump to address this with actual changes.  Gimmicks will not do; everyone was promised much lower prices and better affordability and with the exception of gasoline prices (and no, Trump didn’t do that; its simply the usual cycle in the oil patch) it has simply not been delivered; indeed everything else has gone up in cost even more. 
• Ukraine either settles or gets overrun.  I was early last year but not on the path — only on the finish and timeline in my opinion, so I’ll try again.  Russia is not going to back down materially from their position as I’ve said since this started; they have no reason to and the “screws” you can turn on them economically have been used.  The EU has already decided at least for them that the “sanctioned” (e.g. frozen) assets are going to be purloined so that bargaining chip is off the table by the EU’s own hand and its entirely possible some of the banks and others that allegedly have “custody” of said assets may have dissipated (or worse) them by now, meaning they can’t repatriate them and if forced to might blow up.  Russia likely sees this as effectively having paid for the additional territory, albeit at literal gunpoint (and more.)  That’s not a value judgement as to “right or wrong”, it is simply a statement of the facts on the ground.  In addition as I’ve noted Russia has no interest in “getting the band back together” as it was a fiscal disaster and they know it so all the bleating to the contrary is nothing more than war-drum nonsense out of the EU and Britain.
• We get negative job prints on the unadjusted household survey beyond January (which is an expected one for seasonal firing.)  The January report (due out in February) should show net loss in the unadjusted numbers; it basically always does due to seasonal hiring that is then cut in January.  However, if it continues, well, that’s not a one-off and any material continuation of that pattern through the year is both a hit and will resonate into the “recession” category. 
• Trump’s claims on “mass deportations” will prove to be a chimera both in fact thus far and on a forward basis he will wind up walking off on it (but claiming success.)  The January job report (issued in February) will tell the tale when it comes to reality because that is the rebase for the civilian non-institutional population so if he’s telling the truth it will show up there, exactly as did Biden’s last year of attempting to flood the nation this year.  That survey is pretty good as its the ACS and runs all year long, but the rebase comes exactly once, in January.  It also has as its cover letter some extremely threatening language if you “toss it in the trash” and they do send humans around to follow up too even though whether or not those threats are enforceable is of some question.  Thus in February I will either get or lose this point.
• The Minnesota “Somali” scandal will prove to be both not-Minnesota specific and much larger than the $1 billion currently estimated.  Its likely tens of billions annually but I’ll go with $5b or more nationally as clear scams (that is, the money was and is being simply stolen thus not a close question) to take the point.  It could be much larger and if it is, and is exposed, that by itself could trivially set off a major economic dislocation since stolen or scammed funds still get spent and if those scams and thefts stop so does the spending.
• “MAHA” will collapse with nothing more than “around the edges” nonsense.  RFK is done; he had his crack at documenting the schemes, knowingly non-replicable study work, deliberately destroyed data sets at the CDC that prevent re-analysis of prior work that was done and much more.  He had to be willing to go nuclear with criminal referrals immediately (legitimately-so too as destruction of government data is a serious felony as is any sort of trial fraud) but didn’t and there’s plenty in the public view at this point — what’s still not disclosed is almost-certainly far worse.  Ditto for the FDA and the black-box warning their own scientists recommended; they didn’t do it and the reason is simply that with one any sort of “follow-up” advertising on a maintenance basis for that drug is prohibited by law.  Money, in short is all that matters up and down the line in these agencies, all of whom have long since been captured by industry, and any real answers, even if the benefit is modest, would interrupt money flow and thus it won’t happen.  RFK claimed to be putting people before that, but he lied just as has Trump (both when running for his first term and now) in the same context.
• Encrapification (yeah, you know the real word) will reach critical mass this year across multiple realms.  When times are flush people tend to ignore it more than when they’re not.  We’re well into the “not” range now which poses a serious problem.  I find it astounding, as one example, that GM has basically gotten away with a multi-year part of this with their 6.2L 1/2 ton truck engines and not had to eat all of them and/or be criminally charged; a huge percentage have failed due to the collision between trying to eek out another quarter of a mile per gallon to lessen CAFE-based fines and the lack of their capacity to hit machining tolerance requirements to safely run lighter oils plus what looks like too much chamfer on the crank journals and variable-volume oil pumps (again, trying to eek out a tiny additional fuel burn benefit.)  The in-warranty replacement expense they’ve eaten thus far has to be well north of a billion but for those engines that make it out of warranty and then fail the customer eats that and its huge – $10k with labor is not an unreasonable expectation.  Ditto on Allison withdrawing approval to put their badge on said trucks as well (due to rampant 10sp transmission failures and their loss of confidence.)  This is just one tiny example of the general destruction of quality that occurs when “other things” become more-important, all of which lead firms to believe they can save another buck or two.
• There will be a serious backlash resulting in severe economic losses, violence or both against both government and private firms with their tracking and related scams.  Its everywhere and while so far the backlash has been quite muted when economic pressure rises on the public they’ll look for places and reasons to go after firms and government entities.  A recent investigation by Reuters regarding scam ads and how a certain firm handled entities running them which they were quite certain were scams is likely just the tip of the iceberg — and yet the operating revenue impact from not only allowing those practices but deliberately designing pricing to profit from it is very real and a large part of the underpinning of stock price performance in the social media space.  The idea that a firm can simply “pay a fine” and that this is a cost of doing business when their practices lead to ordinary people getting ripped off by scams they’re aware of will, for me to get this point, require meaningful correctional direction.  If it just continues and fines are paid its a miss, in short, since that’s what we have now.  We’ll see.

As always I reserve the right to revise and add until 12:01 January 1st, 2026 at which point other than typo corrections this Ticker will both be fixed and marked exempt from roll-off so it can be viewed throughout the year.

 

••••

The Liberty Beacon Project is now expanding at a near exponential rate, and for this we are grateful and excited! But we must also be practical. For 7 years we have not asked for any donations, and have built this project with our own funds as we grew. We are now experiencing ever increasing growing pains due to the large number of websites and projects we represent. So we have just installed donation buttons on our websites and ask that you consider this when you visit them. Nothing is too small. We thank you for all your support and your considerations … (TLB)

••••

Comment Policy: As a privately owned web site, we reserve the right to remove comments that contain spam, advertising, vulgarity, threats of violence, racism, or personal/abusive attacks on other users. This also applies to trolling, the use of more than one alias, or just intentional mischief. Enforcement of this policy is at the discretion of this websites administrators. Repeat offenders may be blocked or permanently banned without prior warning.

••••

Disclaimer: TLB websites contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to our readers under the provisions of “fair use” in an effort to advance a better understanding of political, health, economic and social issues. The material on this site is distributed without profit to those who have expressed a prior interest in receiving it for research and educational purposes. If you wish to use copyrighted material for purposes other than “fair use” you must request permission from the copyright owner.

••••

Disclaimer: The information and opinions shared are for informational purposes only including, but not limited to, text, graphics, images and other material are not intended as medical advice or instruction. Nothing mentioned is intended to be a substitute for professional medical advice, diagnosis or treatment.