Dogs of the Dow
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.
Monday, May 11th, 2026
Bill Bonner, from Youghal, Ireland
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.
Regards,
Bill Bonner
One question Bill; why have you never questioned the borrowing associated with supporting the influx of Biden's illegal migrants from all around the world? That cost has to be in the billions if not the trillions. Seems that this would warrant some comment? Maybe you could compare financing the Space Force versus free housing, food, healthcare, education and the cost from crimes committed by Biden's illegals. I have my own opinion as to which is better for the nation, but what have you got to say about it.
Excellent article. Bill Bonner asks the most important question investors should always ask during euphoric periods: Where is all the money coming from?
I strongly agree with the thesis that asset prices and corporate profits have become increasingly detached from real economic growth. The difficult part is not recognising the imbalance, but understanding what could actually trigger a meaningful realignment between prices and fundamentals.
As long as central banks continue expanding liquidity whenever asset prices weaken, it is hard to imagine a sustained correction. Policymakers are not only concerned about falling asset prices themselves, but about their effect on credit creation and economic activity.
Ludwig von Mises described this dynamic more than a century ago in The Theory of Money and Credit (1912). Once an economy becomes dependent on continuous credit expansion, even a meaningful slowdown in credit growth can expose underlying fragilities and risk a sharp economic reversal. Policymakers, therefore, become institutionally and politically incentivised to support the system with ever-increasing quantities of credit and liquidity.
In many ways, we saw this mechanism play out even before COVID. The late-2019 deterioration in liquidity conditions and funding markets was sufficient to trigger visible stress in both the economy and asset prices, prompting central banks to intervene once again.
The real question may not be whether valuations are disconnected from fundamentals, but whether a modern debt-based financial system can still tolerate genuine market discipline.