Investors are in Financial Wonderland
Going Down the Rabbit Hole of Fake Profits & Fading Growth
The Coastal Journal | April 16, 2025
“One pill makes you larger, and one pill makes you small
And the ones that mother gives you don’t do anything at all…”
– Jefferson Airplane, White Rabbit
In today’s markets, the pills being handed out aren’t pharmaceuticals—they’re financial illusions. Dressed up as headline beats, they come in the form of inflated EPS, conveniently “adjusted” EBITDA, and growth stories propped up by liquidity rather than real output. Investors, like Alice chasing the White Rabbit—or Neo before he woke up—are being led down a distorted rabbit hole. But this isn’t a fantasy world. It’s a financial bubble.
Welcome to Wall Street’s Wonderland—where logic and proportion have fallen sloppy dead, and even the sharpest-looking balance sheets are built on illusion.
The Magic Pill of Profitability
In this surreal economic landscape, Wall Street is dishing out metaphorical pills designed to make earnings appear larger. Companies point to earnings “beats”, but it’s a result of short term accounting tricks, not rising profits. Revenue are flat or declining, but with inflation running faster than reported, real unit sales are in decline.
That’s the crux: nominal growth is masking real contraction.
Consumers are paying more but getting less. Businesses are charging more but selling fewer units. And investors are seeing “growth” that doesn’t exist once you strip out inflation and accounting tricks. It’s not real expansion—it’s hallucinated prosperity. The latest data proves that as the Atalanta Fed still shows a huge negative print in Q1.
This explains the bizarre dynamic playing out today: M2 money supply is growing, yet real GDP is shrinking. Stock prices may still be elevated, but they’re built on the illusion of profitability in an economy that is quietly stagnating.
“Go Ask Alice…”
“Go ask Alice, when she’s ten feet tall…”
Just like Alice and Neo chasing the White Rabbit, investors are following the headlines on Wall Street without stopping to question what’s real. When executives rebrand cash burn as “strategic investment,” or call rising costs “scaling,” the distortion becomes almost comical. But retail investors buys it up,—until the hallucination wears off and the whales on Wall Street use them for exit liquidity.
(We highlighted how to spot a sucker on Wall Street HERE)
Nvidia offers a vivid example. Priced for perfection at the start of 2025, as the AI race heats up, the company just revealed a $5.5 billion charge tied to unsold H20 chips affected by U.S. export restrictions to China. Inventory levels hit $10.1 billion in the latest quarter. Accounts receivable surged to $14 billion.
These aren’t indicators of strength; they’re warnings. And all these warnings were clearly present in the 10-Q filings. As seasoned short-seller Greg Crennan aptly put it, “I’m not a rocket scientist; I just read the footnotes.” He’s been short Nvidia since its shares were trading at $150 at the start of 2025 and has made a substantial profit not by speculating, but by steadfastly resisting the allure of stories of boundless growth, and the absence of any risk associated with tariffs that many believed would not materialize at the beginning of 2025.
He gave us the insights and complete earnings analysis saying to stay away multiple times below:
The Big Bank Illusion
“And if you go chasing rabbits, and you know you’re going to fall…”
The illusion doesn’t stop with tech. In the financial sector, both Bank of America and Citigroup are presenting headlines that suggest stability and growth. But a deeper dive down the rabbit hole reveals a reality warped by reserve timing, one-time charges, and capital return strategies aimed more at maintaining EPS optics than real performance.
Bank Earnings: A Wonderland of Adjustments
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