Ep. 373: Jon Turek on the 'Owl' Fed, the US Treasury's Bond Buybacks, and AI Capex Durability

Welcome to the Macrihyde Conversations Podcast. I'm Bilal Hafiz, Head of Strategy at Macro-Hive. Before we dive in, a quick update following Macrihyde's acquisition by the BGC Group, BGC has launched a new regulated business called Macrihyde Markets. At the first time, onboarded clients can also access execution services via Macrihyde Markets. This new workflow will allow macro institutional investors to benefit from strategy and quant insights alongside access to global liquidity. Please contact Andrew Simon or Guillermo Cbrian on Bloomberg or click the link in the description below for more details on Macrihyde Markets and its service offering. Now, onto this episode's guests, John Turek. John is the founder and CEO of JST Advisors, a hedge fund advisory service that publishes a weekly research note with global macro trade ideas. JST Advisors works closely with hedge funds on developing asymmetric macro trade ideas and market themes. Outside of JST Advisors, John worked as a portfolio manager at Breppen Howard and as an analyst at Mall Capital. Now, onto our conversation. Greetings and welcome, John. It's always great to have you on the podcast show. Great to be here. Now, before we start our conversation, I do need to timestamp our conversation because there's lots of market events occurring at the moment. We're speaking on Thursday, the 20th of August. We recently had an announcement by the US Treasury about a buyback program, which we'll talk about as well. And by the time this podcast will have come out, we would also be in the middle of the Jackson Hole as well, which we don't know about this stage. So with those caveats out the way, let me kind of kick off, John, with just asking you about your thoughts on the wash fed. You know, since he's come in, we've had this kind of odd market people have had an odd relationship with him. When he came in as the rock star, then most recently his last meeting, people thought, hang on, he may be not as much of a rock star as he thought he was. He's not giving the forward guidance. So what's his story and what's he trying to do at the fed? Yeah, no, I mean, I think it's, I think he phrased it well. I mean, I think when he came in, there was sort of this, you know, the initial assumption was that he was attached to Trump. It was sort of like this, you know, pro cyclical, you know, we were in the middle that say more like a dollar debatement narrative. You know, I think that there was no secret that the president has been an advocate of lower interest rates. It seems that Worsh got the job on the promise of lower interest rates, his testimony in terms of his confirmation hearing, certainly gave every indication that he was starting to look at alternate measures for inflation, very much leaning into the supply side narrative of AI, or a supply side potential of AI. So I think the markets, so, you know, you kind of have to start preparing with like the initial conditions where that this is going to be sort of a dovish pivot. And then we had his first press conference, which was no inflation tolerance, you know, going, I think, at the time of the June meeting, September was maybe priced at, you know, eight or nine basis points of hikes. And we left the June meeting with July price at eight or nine basis points of hikes in September almost price of full hikes. And then we had a lot of people swing in terms of how we viewed him and it was sort of this like inflation credibility was sort of the name of the game. And then the July hikes didn't come. And, you know, he kind of, I thought, you know, given his inability or his lack of desire to give, you know, forward guidance, it kind of gave the feeling that this sort of inflation credibility message that he tried to switch markets up in June was not, is not earnest and self-entity. And then we are now where it's like on the one hand, we have this like June that from seaworsh, which was introducing inflation credibility and we have this July f of seaworsh, he was like, well, he's all talk, he won't actually do anything. Because it is worth noting he was given the option to hike rates in July. The market was very much giving in that lane. There was a lot of very smart, credible people calling for that as the move. And he decided not to take it even though he had we know at minimum that he had three people on the committee who wanted it as there was three to sense. And also, as we saw from the July minutes, it just came out last night. I think the language was several participants favored. So I think now the kind of question is like, well, you have, you know, Worsh sort of like in the in line of this like parallel green span fed where he's really the one in charge. And the key is going to sort of bend the committee in his direction. Or, you know, something I've kind of been writing about is the ideas that like maybe he's actually much more of a legar type figure. And if you remember back to when Lagarde was introduced in her press conference, she called herself, she's not a hawk, she's not a dove, she's an owl. And I kind of been, you know, pushing this idea that maybe Worsh is more of an owl. And he doesn't really have sort of the, at least yet, doesn't really sort of have the strong, strong enough pull over the committee. And I think he's still sort of in this feeling himself out in terms of what he wants. I don't think, you know, when people ask me, is he like hawkish on air as a dumbass. And I think he's both. I mean, I think he really does believe in sort of the productivity gains to come. And that is going to be a structural disinflationary force. I also think he's uncomfortable with the level that, you know, CorpiC is a 30.3%. And I very much of the idea that he doesn't want to be sort of, you know, a fed share that's looked at as like, you know, having done repeated the 21 to sit. I mean, just in terms of the owl analogy, I think that's a great one, by the way, it was a consequence of that. You know, so is that that that we just have to kind of watch what all the other intellectual FMC members are saying all the time. And we have to try to work out like how he'll manage them or like what level of evidence will he have or does it also mean he has like the guard, we know kind of has a strong relationship, you know, with various national governments as well. And you can kind of sense there's a dynamic there. So is there something here with with wash as well. Yeah. So I think that, you know, we definitely have to watch the influential. I think the idea that, you know, a person like Waller become less influential because it's museum or his style seems very antithetical to the way that, you know, Wash wants to go about things that I think is is not true and actually paradoxically, I think people that can become more important because in the vein of the lagard, lagard, handicapped, her reactions function or how, you know, she would present at press conferences became at first, it started with like, well, what was lane saying and that very much at a feed through in terms of what lagard say and more recently, the person who seemingly has her ear the closest is Schnabel. And having a view of what Schnabel is going to say has been a very good forward or predicting leading indicator of, you know, how lagard is going to sound. So I think that, you know, it's still very early. I mean, he's only been in the job for, you know, nine, 10 weeks. But I think the person who does like speak to him, quote, unquote, the person he feels is that their message resonates with him, well, we'll kind of learn that as press conferences come and go. I think that's going to those type of people will be will have begin to have outsized influences. And I think that because the board of governors right now is, you know, let's say very, you know, if Waller and Powell is sort of the intellectual leadership outside of that and don't really have much. I think the regional bank presidents do become increasingly important. And then you have a lot of strong voices between Laurie Logan and Dallas that have a Cleveland, Neil Kashkari, Minneapolis. So I think that those, you know, and finding a leading indicator on the committee for how war for what mess is going to resonate with war. I think it's going to be important. And then I think, you know, kind of finishing the lagard comparison. Lagard is a politician. And I think more shows the politician to now he doesn't have sort of the, you know, experience of a lagard. He's much more like the buy side, he's been an academia, he's been at the Fed, but I think he thinks in political optimization less so is like a, you know, I'm Ben Bernanke and I have a ton of conviction in my model. Or I'm Jerome Powell or is like a lot more, you know, got our green stand is got. So I think that he really is solving for political optimization. It's a very similar way to Lagard was and the guard has been able to sort of, you know, crack two or manage very well sort of the different governments in Europe and also a very wide range of views on the ECB. And I think, you know, she has, as a whole manage that quite well. So I think it's going to be a little bit more nuanced than what we're used to. I think we're used to sort of the Fed share being this like, you know, big personality, strong views, coalesce to committee, sort of this like very Mario drugie figure. I don't get the sense that that's what Worsh is. Maybe Worsh would like to be that, but at least so far, I don't get the sense that that's what he is. And in terms of the aesthetics, I mean, he does come across as a very slick politician. And I kind of almost think that like after he'll do slick. Yeah, I mean, after Fed share, he's going to run for president or something. It really does feel like that when I see him, you know, present and stuff. He's got that kind of folksy kind of. He's very confident in himself. And listen, he has, you know, his credentials are very impressive. And I think the, you know, sort of the question I think that will get pushed is sort of like how long does the market really tolerate his style? Because it's, you know, again, it's not only is it, I think the market was like, oh, this is refreshing in June. And now it's like, wait, there's a difference between, you know, having a framework, having a reaction function and like spoon feeding us. And like, you know, there's certainly a middle ground there. And I think going into Jacksonville next week, you know, I think most people have written it off as sort of a, you know, he'll say nothing, task forces, etc. Sort of the answer is he's given thus far in his press conference. But I actually think it's a kind of a good outlet for him to put a little bit more meat on the bone. I think he, I think the way July went and the negative feedback he got from that both from a narrative and a market sense in terms of that we had that bear steepening after the press conference. You know, I think that there is something around him that he, you know, he does sort of need to give a little bit more of the way in just the way he's thinking about things without being in, you know, overly pre-committal or anything like that. I don't think he's going to be a wall or in the sense where he's going to be like a 0.3 out of 0.2. I'm not going to be on hold like it's not going to be anything, you know, Odyssean or Delta like that. But, you know, I think in terms of thinking like what are the things he's looking at most closely, even if it's a range, he's not going to say I'm looking at like this subcomponent of PC. You know, I think we'll help the market and I think Jack's whole is kind of a good venue for it because he doesn't have to answer to anyone he's speaking to a bunch of his colleagues. And, you know, you can kind of. have a lot more, you know, bang for his buck without sort of, you know, Nick Timorios, never Nick Timorios asked him to follow up. So I think that it'll be interesting, but I think that from his style, I think it's going to be a little bit of a tug of war between him and the market, because I don't think the market is going to kind of saw in July. It's just going to tolerate this like, you know, we're going to get inflation back down. How can't tell you what's going on, can't tell you. Yeah, it seems like there's a fade into that. And what is your core view on the economy for rest of this year, you know, on the growth side, inflation side, labor market as well? Yeah, so I think it's a very interesting setup right now, from a nominal growth perspective. I remember when I was on last year, you know, I think the key themes that we were talking about was like, the tariff inflation didn't really show up. Energy prices were very low. The unemployment rate was starting to nudge up. And the question was like, what if there could be a little bit, you know, faster trade cuts and we didn't get three towards the end of the year. But now, like the interesting thing is like, if you kind of look at what the 2025 backdrop was, feels very different now. You sort of have, you know, forgetting sort of the energy tail never really realized, but it's certainly not a $50 to $60 energy, you know, backdrop. The unemployment rate seems biased lower, not biased higher. You know, housing looks like it was going towards a pretty like self-fulfilling negative spiral that towards the end of last year. Nothing that's strong right now, but it seems to have stabilized, even though sentiment's pretty poor. You know, and inflation was, you know, I think the Fed had in their December dots, had 26 Corp DC finishing me at 2.2%. And it seems like it's going to be another year at 3 or plus. So I think we're in a different backdrop. I think the growth, the growth picture, it feels to me uneven, but I think that on aggregate, it's still an economy that's producing a lot of nominal growth. And, you know, I kind of look at, you know, we're going to get the GDP number, you know, week ago, we see that, you know, it's still not even economy. Consumption sort of has these bits, the, you know, some months are strong, and others are kind of sort of like July retail sales. You know, but at a core level, PDFP printed, I think it was, you know, close to 4% in the second quarter, which I think was a lot louder than, you know, 1% GDP or, you know, negative retail sales. So I think that it's become a little bit more narrow because so much of it is, you know, from AI CapEx, and we're, you know, we're used to thinking about the US economy and more of a consumption, you know, type lens. But I think my general disposition towards US growth and until something makes it clearer that, you know, AI CapEx is going to slow. And I think that from the levels is that it's at now, slowing with the very problematic, because I don't see how it would be a linear slowdown. I find it hard to be really too worried about the less tail on the US. I mean, I'm sure there's those financial conditions elements that's, you know, always said there's something exogenous. But from an endogenous perspective, you know, I think that the unemployment rates low consumption is mostly a trend, you know, housing is weak, but it's not getting, from an impulse perspective, it's not getting much weaker, it seems. And the, like, we keep rewriting, go forward AI CapEx. I mean, one thing I had a question around was, with the unemployment rate falling, I mean, why is wage growth not stronger? You know, and the reason I ask is I'm almost kind of thinking, is this like a Japan scenario where policymakers are in reality really trying to target wage growth rather than inflation? So it's a good question. I think it's probably a little too soon to sort of lean that the unemployment rate falling is not going to equal wage growth. I mean, we've only really seen it falling over the last couple of months. And it is true that, you know, I think average hour learnings in the last NFP report came down from 3.5% to 3.2%. You know, aggregate weekly payrolls, which I kind of like is sort of a, you know, broad indicator of where nominal growth is going actually has been slowing over the last couple of months, you know, for the balance of the year, it's been quite strong. I think it's a little too soon. I think that what's clear is that the unemployment rate of the last couple of months has been falling more from a supply side than the demand side, right? Because you kind of have this weird, where for the first half of the year, the unemployment rate was very stuck in around 4.34.4. We had a pretty material acceleration in nominal payroll growth. And the last few months, we've finally seen unemployment rates start to come down just as NFP over the last couple of months has been negative. So it's been sort of like a hard one to match. I would just say the way I'm, you know, I wouldn't have a lot of confidence yet that, you know, because this is a different labor market tightening. It's coming up. It's seemingly completely coming from the supply side as of now. You know, I wouldn't take a lot of confidence yet that the meaning of the go forward wage growth is not going to be there. You know, I think that's, you know, something that's a little noticeable to me is that, you know, we were trending lower in ECI and the Fed's preferred wage tracker. And Q2 was a point not. So I do hear your point as we have seen average hour earlier and things come down. But I would still be nervous of the, well, because I think we're still very new into this, you know, how long it goes, where it goes, we don't know. But it does seem to be more supply side than demand side. Again, taking the unemployment rate, unemployment rate down to 30 basis points over the last few months. So I think the, you know, what the externalities and second derivatives are about are a little less clear than, you know, okay, we jammed 150,000 jobs. We took the unemployment rate down. And because we keep pulling higher in the angle of raising wages, because that's a much cleaner mechanism. And on the AI side, you know, you mentioned, you kind of hinted that your optimistic on the AI Capac story was that right or was I reading too much into the subtext? I am optimistic. I would define my optimism, my technology and information or ability to predict the technologies is much weaker than yours. But to me, the way I've kind of looked at it from sort of a thematic perspective is I think you have to treat this as the tales in both parts of the distribution have gone up. And I think the way that I've kind of thought about it is, you know, you've introduced this incredible amount of not only spend, but now we're going to have financing into the economy. As we've seen, it's very asymmetric in terms of earnings growth because the way just from an accounting perspective, you know, it's immediately booked as profit and revenue for someone. It's not new. So it's a very, very powerful force. My only thing is that, you know, differentiation, I wouldn't call it, but you know, you know, as someone who's not a technologist and follow like, like, which is going to be the next bottleneck is from the information that we have. It seems that in well, empirically, we just keep rewriting the academics higher. That is something that's happening. And seeing the economics do justify that. And I would say from a second, you know, what's kind of driving this from a hyperscale of perspectives, which I think is very interesting, is that it's not as much to me. It doesn't feel as much as like a right-tail function as a left-tail function. And they're actually so much of the spend is coming from, well, if we don't do it, we could be like, God bless. And, you know, I think for macro people who are just like looking it was like, oh, well, there's starting to be some credit-marketing digestions. Does that mean they slow things down? Like, my answer to that is the like, no, because to them, they're like, while 50 basis points in Google's tenure 30-year bond is not changing the calculus for them. The calculus to them is that if they don't do this, the business could be gone. And if they do do this, it could be a 10x on return. So like, you really raise the bar for this stuff to not get done. In a way that I don't think is like as, you know, we kind of think about these things that especially as macro people in like overly linear terms. You know, and I got a few, you know, from clients talking, you're like, pitching sort of the meta-com from 2022. When they were like overly invested in VR, they bledfully cashed a negative, the stock went down, I don't know, 60, 70%. And eventually, there was a stopout from Zuckerberg and the year of efficiency came, and all that. And I would say the difference between then and now, let's say just using that micro example. Obviously, the macro context is mildly different, is wildly different. You know, Meta didn't view, at least from what I understand. Meta didn't view VR. It's like if VR didn't work, Meta's out of discs. And I think things like, yeah, I think that similar in the sense of the heap, you know, they viewed this as sort of this huge right tail they were going to try and get. But I don't think they viewed it as if we all have we stopped it or we're going to fall completely behind everyone else. Like, it doesn't seem that that was sort of, so that that job really matters. And I'm sure we'll, you know, get into a lot of the, you know, Treasury term agreement dynamics. But like, you do have now these like two actors in the economy who are commanding a massive amount of capital. We're both basically acting from A. We have to do this perfect. We don't have a choice. And that's governments. And so I think it's very hard to assume at least now that, you know, 27 is going to be lower than 26. And this is sort of the beginning of the end of this because they're not telling you that, you know, all, and we got the Q2 earnings now from hyperscalers. You know, I think Meta was the only one who didn't really give a guide for 27. But most of them were like, yeah, 27 is going to be significant going higher than 26. I think, you know, over the next 12 months, it seems reasonable. There's going to be over a trillion dollar fence between the hyperscalers. I mean, these are fiscal programs. You know, Germany announced a trillion dollar fiscal programs in March of last year. It was a really big deal for markets. So like I'm treating it like that. And I think it's, you know, I think at the same time, what's going to be, I think, very challenging, but potentially, you know, very interesting is there will be a time where either something in the economics change or something in the market's ability to finance this change is maybe we started the head. So over the last few weeks, that constrains their ability to actually do this. And then as the economy has become so dependent on this spent, as we like kind of noted with the GDP equation, it's become a very outsized influence in terms of growth in the US, assuming that once the second derivative does kick in and the market starts right slow. I'm like, you don't usually slow from, you know, trillion dollars is spent to eight hundred hundred billion. It usually goes from a trillion to two hundred. It's very significant once you decide to change direction and change course. I think that only gets amplified as these numbers have gotten bigger. Which is why I kind of like thinking it is important to a little bit have the framework is like, yes, the right tail has gotten bigger on the spend. It's gotten bigger on the potential of sort of what this technology is. But you know, capex spots are painful. And this is turning out to be the biggest capex cycle that we've seen. So I think you have to be acknowledged that the left tail is also gone. Yeah, I hear you there. And I guess we have to come around to the long end of the US curve now. So if it was going to 30 years moving to like multi a highs, I think the highs in almost 10 years or so and the 10 years moving up as well. I mean, first of all, why are yields going up so much? Yeah, I think there's a few reasons. You know, we've obviously changed. I would say sort of post-war versus pre-war in terms of the market wants to price upward sloping curves everywhere, not in a US thing, not in Japan thing, Europe, UK, Sweden, everywhere is upward sloping curves. And I think that's a function of the volatility around inflation has gone up. And it's asymmetrically higher from central bank targets, right? There's no one's really assuming that, okay, I'm going to go back to two. And then it's both sides of the distribution aren't even from there. So I think it's a function of that with a lot more, you know, markets around neutral policy rates. It makes sense to have upward sloping curves and upward sloping curves, you know, you kind of have to have a mechanistic change in terms of what that means for long ends. So there is that I think that there was certainly some fear around, you know, how credible is the Fed to its 2% target? There's political noise, there's understanding a new Fed share. You know, you're about to have your third year in a row after the Fed said inflation can be back at two in a relatively short time after 22. You're about to have your third year in a row of 3% for PC. It is fair to ask, you know, what is actually the inflation target? So I think all those things are relevant. I don't want to dismiss any of them. To me, the big thing, though, is that from the 2010s, there was a lot of savings and not so much investment. You know, governments weren't physically expanding a lot of them were actually contracting, most notably in Europe. And a lot of financial markets were geared towards return to shareholders. How do you drive free cash flow higher? How do you buy back more stock? It was much more oriented towards savings. And that was reflected in pretty low nominal growth rex. Now what we have is a little bit of the ups where we have physical expanding everywhere still, which is pretty amazing to say six years, five years after COVID. And now we have introduced a massive, you know, private sector cat bike cycle, which we really haven't seen. I mean, we had a, I would say in relative terms, we had a mini one with shale in the early 2010s. But we had one in commensurate size, I would say, in terms of housing in the US in the 2000s. And at the beginning of this, where I think why the long end wasn't as perturbed until more recently, I would say, is that this was coming, this spend was coming from operating cash flows of these companies. So, you know, Google was making money and then using the money they made to, you know, sort of invest in this is this cat fix. You know, and what's begun to happen is that the free cash flow is now gone because there's spending so much. And that means they have to come to market to get the money. Now, not only do they have to come to market to get the money, but actually they're coming to market to get the money. As the amount of money they claim to spend is going up and up and up. Right? So if you actually look like this is something I was saying to one of my clients is maybe disagreeing with why I thought this was so significant is that, you know, in 2024 or 2025, the cat fix bill was 200 billion, that was 400 billion, you know, round those numbers. And that's when they were pulling free cash flow. That's when they took free cash flow to zero. Now we're going to do, you know, this year it seems that's going to be 7,800 next year over a trillion. And most of that has to now be fine. So I think what you really have from a big picture perspective, from a global duration perspective, is you have the the IS curve has just moved dramatically. And you have, you know, a ton of investment need, which is fundamentally a call on capital. And the amount of savings to meet that need is not moving in a commensurate way. And how could it be because you have a time now where the prep, you know, kind of using the Richard Q balance sheet economics, like you the prime sector and the public sector are both the same. So, you know, really the only one sort of to, that you could say, quote, put it savings is, you know, East Asian households. It's not American households anymore. The savings rate has gone down and you could say Europe to some degree. But that savings is also being called by European fiscal. We got from Germany last year. It doesn't seem like that's going anywhere given the balance of risks from specialist management, security perspective, and also a trade perspective continue to grow. So I think what the market really had a fundamental level is sort of not only undoing the 2010s that it's playing out a little bit in reverse, where you have a massive need for capital. And it's happening at a rate that's faster than global savings are growing. And that's putting pressure on fundamentals that weren't great to begin with in global markets. It is notable to me that, and the incremental perspective is that that budget deficits globally are still, you know, not some of that best they're saying. And at worst, you know, they're going materially wider. So what do you make of the announcement by the Treasury recently to do buybacks at the long end? I think it's a big deal. And I know that the numbers are not big. I know it's, you know, taking buyback operations from two billion to four billion, even though assuming that there has go forward implications that now we kind of reset and sort of if you analyze those numbers, they're actually not nothing. You know, but at a surface level, it's not a big deal. I think the context in which it happened was just so notable because as we were talking about before the show, you know, it really happened when there was no Treasury dislocation at all going on, right? Swaps spreads on the month were tight. Not massively, but they weren't wide name. There was no, you know, off the run, all the run issues in terms of a Treasury basis. And it was really just that the Treasury seemingly decided that they didn't really like the number on the screen in terms of the level. And I would also argue it's not, you know, back involves like untethered, but certainly starting to pick up and like it makes sense sort of prospectically for, you know, that to expand as we kind of like British new levels that in back and really use. There's nothing really going on to say like that this was, you know, you really need to smooth market function. It was really just, you know, I don't like the level and I don't like the level kind of has a pretty big connotation to it. One, you really invite the market to fight as we kind of see the dollar yet. And then from a second perspective, it's like, well, that's the second derivative of all this. And I think it was really interesting to see yesterday. I don't, you know, have a super strong view on the dollar as it now, but it was really, you know, dollar Swiss goes down one to quarter percent, euro dollars, almost up. One percent, gold's up, almost four. Those are big moves. And I think that, you know, the bigger questions now that start to get asked is are you just kind of moving one market in balance from one asset class to another, which is sort of like what the Japanese have been doing and it go back and forth basis between like, a long end and dollar, yeah, long end dollar, yeah, and front end dollar. Like it's, you kind of just doing a whack-a-mole because you don't want to deal with the underlying problem. You mentioned the yen there. Obviously, the US did join intervention with the Japanese recently. Now we have the spyback. And then on top of that, there's been the, you know, the FX swap facility, you know, that has been widened. You know, can we join all the dots there in terms of from the US? That's right. I think you can. Yeah, I'd also say this, you could argue this really started in January of this year when Besson Ray checked through the New York Fed dollar yet. And the context for that happening was similar to where we are now in the sense that I would say it was a little bit more specific with JGB. But the view then was dollarian going out was putting pressure on long end yields in the US. And Besson wanted to sort of, was, wanted to cut that off, which I think made a lot of sense actually locally because it did seem at the time of that move was very sort of dollarian-driven. It also felt like it was in the context of a political hand-off within like, Takagi, she just won the LDP race. So it was basically, can you buy time for Takagi, and cut the llama to sort of form the way to plan of what they're going to do, how that fits in with what the BOJ is going to do? I thought that actually made a decent amount of sense. I think this time, it's a little trickier because, sure, dollarian was at the highs, but it didn't feel like this was a JGB driven global sell-off. So now it's starting to feel like really the solve is just like, the solve is 30-year treasuries, and every action is sort of like a derivative of that. And I want, you know, what can plug that in the moment. So yeah, I do think, I think it makes sense to connect with us. I think it's expanded, you know, I would say in risk, it's expanded in terms of policy risk, but I think that it is all connected, and I think the solve, what I'm going to put the solve is for, is for long-end yields. And it's just like the outlook then for the curve. And does one just go with this then and put steepness on or just go outright short duration? Because it feels like, OK, this is potentially a regime change, so you want to lean into it, but then on the other side are we, you know, over reading kind of something in the short term, and then we, you know, it just goes sideways again. Yeah, I think it's a tricky one. I'm left with a few, a few great takeaways that kind of feel most notable to me. I would say one is that you've invited pressure now from the market to test this thing. I think now, the same way that the Japanese did with 160, you end up making it the market a little bit more of a floor than a ceiling, and you did it in the context of, again, pretty benign macro conditions, right? Yes, the level of yield was going up and it was going up in a non-trivial way. But the market was comfortably saying, in the balance of the FCI is pretty easy on balance, that the cost of capital should rise. And I don't think that that's sort of this, you know, this plugin in. It's happening for fundamental reasons. And then it's not happening yet, in sort of a, you know, massively disabilizing way. So you have invited, I think, you know, more risk around now the market has to push, I think. I think you want to be respectful of that, like, as we have seen with Dollar-Yan, like when these guys want to do something, there's a lot of firepower to do. So even in the US, where it does seem like the mechanism that they can kind of try to do here is it's basically a form of operation twists, right? Where it's you basically have to sell the front end to buy the back end. So I think you need to be respectful of that. I think that the way I kind of thought it was, like, I don't think this changes the structural trend by any means. But you now would know that one of the main actors in the game is going to fight. So I think that has to change something. I think the other impact here that seems very notable to me is, you know, I think we got to a point over the last, that's a few weeks, really, where it seemed like the biggest risk from an economic perspective was that the cost of capital will sort of cut off the AACAPX story, which would then lead to a negative economic outcome. And if you're starting to get this idea that there's going to be a lot of the, most meaningful actors in economy are going to try to limit how much damage the cost the capital side can do to the AACAPX side, which we have seen now. We had, it's, I think it was also notable is you had a week or two ago, you had a video announcement, they have this $500 billion fund backed by every major Wall Street firm, which is basically like how do we like, you know, smooth financial conditions for the most capital intensive within the supply chain. And then, you know, and then you kind of come and you follow that on with best and effectively intervening. So if the main actors are trying to make this, you know, knowing that there is sort of this like financing element, but they're sort of going to try to push back on it, does that make to spend at least over the near term a lot more durable? And if that makes to spend a lot more durable over the near term, the growthy parts of fixed income, which I would argue is sort of like the reds and so far and five or your notes and treasures, like you really have to factor into the chance that the left tail from rates cutting this thing off has actually gone down, which means that we maybe we can, I don't know what necessarily means for the September FMC, we can sort of have that conversation as well, but I do think that's possible now that you could actually price terminal rates higher in the US because the chances of something, you know, cutting off this positive growth and pulses actually gone down. So I think there's a lot of really like potential interesting ramifications and I think that the market, the likely outcome is that the market sort of does this, this whack them all between it all. I mean, is it a clearer expression to the dollar than just a weak dollar from here onwards, but as you say, I mean, if the fed ends of hiking because terminal rates up, I mean, it's less clear and we're not going in circles. Thank you, answered your own question. I think that as an impulse, I think the dollar was 100% right to do what I did yesterday because if you really gained theory of this out and this is something I was actually thinking about my walk to work this morning, if you really play this out and Besson does this again and again and again, let's just say where you kind of like upside these buybacks and you sell bills to do it. You eventually have to run into a risk that especially as now the Fed is not doing many reserve management purchases, which is something they started last year, which was kind of smoothing bill issuance into funding rates, which was dragging like Fed funds rates higher than where they wanted them to be. If you really play this out, that pressure should return if you're going to have to even do more bill issuance to fund buying back the loan into the curve and then if the Fed was to say, well, that's in comparing with our policy rate, we have to restart reserve management purchases. I don't know if that's technically QE, but that sounds like QE to me. So I think from the dollars perspective, that's only the distribution that not only, you know, you can really envision this world now, we're, you know, Corpis, this last two CPI brands, NFP brand kind of gives the Fed rope not to hike and then you could kind of play out this potential of that RMPs are basically funding, you know, best at intervening in the long end. And that seems like a terrible outcome for the dollar. So I think the the modal path is not fear because it's possibly just being at the cycle a bit more durable, which actually means that maybe the Fed could actually have like a mini hiking cycle here. I need a chance of that to actually did go up, but you know, I think now I don't know how to be still comfortable buying the dollar on that because I think this is going on in the background. So I think from like a bigger picture disposition sense, I think the dollar now has its left hills is much bigger than its right hill, but it's say it's it's not so clear if the Fed hikes off set this because then it really is sort of this whackable. And you talk about the US and Japan, is there anything to say about Europe at all in terms of Europe macro markets there? Yeah, I think there's a lot to say, honestly, I think a little bit different to what's going on in the US and Japan, where it's, you know, obviously definitely not as activists in terms of their respective treasury departments. But I think that, you know, within Europe right now, you sort of have this new debt growth is quite meager. You're stealing with these supply shocks and the ECBs inflation forecast too high. And okay, they'll probably do another hike, but then they won't do another. They won't do one after that. And maybe we should be, you know, hiding on the back end of that or something, something of that. And if you look at the market, like the markets that no desire to price, well, just because after September, it's unlikely that ECB hikes, the market price is a full hike into the next year. And, you know, I think that, you know, what's kind of been missed, I think, in the Europe narrative is the ECB has communicated a very asymmetric reaction function that slightly below two doesn't really mean much. And slightly above two is still going to get dealt with. I think that sort of been the, I think we kind of got that post their strategy review in 2025. And it's why they didn't really cut when inflation was printing 1.8 annualized. And now obviously, in the situation there and now where inflation risks are to the upside, inflation's realizing, you know, above target, you know, they're acting. But I think that's kind of set a, you know, a floor for where European yields can be is you have this asymmetric central bank reaction function that's hawkish. And, you know, I think you have this very interesting structural dynamics within that going on in the background where, you know, Germany now is a four percent budget deficit. It doesn't seem to be getting smaller as growth continues to not really show up. It's actually mechanically going to get bigger. And, you know, you have a French election coming up next year. You have, I thought was very interesting just looking at, you know, some of these local elections that are coming up in Germany, you have like where AFD is pulling. It's, you know, as in this one poll, I saw that pulling at 42% there in the leak. And you have also in the background, you have, you know, I think that's what's been a turn over the summer in terms of Germany's approach to China. And it was a very, you know, hands-off approach for, you know, much of the last two years as China's completely in their lunch from a trade perspective. And something seemingly changed and we kind of got that crystallization at this at this French German summit at the end of June or beginning of July. And it seems that after the summer break, that there's going to be actual action in terms of either German tariffs or broad European tariffs on China, which if you're looking at Europe right now, the big disinflationary impulse is coming from Chinese goods and that might be about to change. So I think there's a lot of things going on. I think that for me, I think what's, you know, setting the stage is that you have this asymmetric reactions function from the ECB that's hawkish. And then you have on top of that these structural dynamics that are going on, both from an national security perspective and a trade perspective, an absolutely a perspective that are really interesting. So it sounds like your bias then is to look for short term yields to go up more than people are expecting kind of like the ECBs will end up being more hawkish than people think. Is that fair? Capitalization or mostly fair. I would say I'm more looking in the belly, out of belly and long end of Europe. I think the ECB, I think will be a tactical question of when that, you know, after September, I think there's a bigger question in terms of are you hiking to a new policy stance? Are you moving from neutral to restrictive? Which I think so far, the question has really been why I feel like these hikes have been low stakes for them as they feel they're hiking within neutral. So I think you're going to have to ask a bigger question hiking to 275 or three, but I do think that all of this, if you kind of take this holistically from the baseline of the market, it's not going to be able to price cuts. I think it's still decent amount of pressure under European yields and upward pressure. So I think the direction of travel and things like blends is still higher in yield even from, you know, 325, wherever we are today. Yeah. And then the final kind of macro question I have for you was really the whole oil story, you know, the on-off wall, straightforward moves and stuff. And it's kind of a weird one, you know, oil is kind of grinding higher. And when you speak to oil specialists, especially if they keep saying, like, this is real, this is something really bad. But then macro markets don't seem to care. And many people got burnt in the first phase of the war. So how are you looking at that, the whole straightforward moves, energy prices, crack spreads, the whole complex? Yeah. As someone who is, you know, I feel like as a macro person, sometimes when there's other markets that are driving, you kind of have to become like a taker of sort of like, of information. And it's been a hard one, you know, to read because you have all these like fundamental guys who are like, well, this is the most blatant supply and demand amounts of all time. And then like, you know, I turn on the screen. I'm like, well, well, that's 78. So unless everyone in the world who trades oil is missing something, like, it's hard to square. The way I've kind of looked at it, and my approach has been, I think it's very hard to have a strong view in terms of like, like, is this right tail right? Should I think that? But you have enough now to say that commodity markets are especially oil is just much more fungibles the right word, but they're much more elastic than we assume based off what this bottleneck was. I mean, we saw how China was able to shut off imports. We saw that they were able to somehow even sell or find product in the heat of this thing. We saw how a lot of trade has been rerouted through the US and the US seemingly become a big beneficiary from an export perspective from all of this. So I think it really does show that as bad as this bottleneck clearly was, that I think the elasticity of these markets was just greater than people assume. So I think you don't want to, I don't think that the message is bad is to fade it. But at the same time, I think that, because I don't trade oil, but as a sort of a taker of this input, I think that I'm more convinced in the floor than the ceiling at the moment. Because I think you have two things that are going along. You have one that the actual product side is quite tight and something that your analyst for Ash who's just so on top of this stuff, there's been highlighting is that yeah, cracks are still the hots. And that is the stuff that actually feeds into inflation. So that is one part which I think from an inflationary impulse, it's still an asymmetrical one. And then I think the second thing from just the war, I was like, no, I'm not a geopolitical strategist or anything of the sort. But it does seem that this is sort of like a thorough paradigm where we are. Like the stuckness of this kind of feels right. Like Iran and the US, from a low oil price, Iran loses leverage. The US gains like operational ability. And from a high, like an overly high oil price, like Iran doesn't really want to get bought. And the US doesn't want an energy crisis. So like this sort of in between, the game theory of the in between makes a lot of sense and it doesn't seem like they're close to any actual deal. They can't even like figure out like a straight deal, like it doesn't seem like an organic nuclear deal. And it does seem that they're both by time, right? Like the Iranians kind of view this as sort of like how do we hand off our deterrent from the straight to something either like nuclear or something more, you know, military that's durable. And for the US, it's the straight as a leverage point in all this has a huge amount of negative care because every day, the Emirates, the Qataris, the Saudis are building pipelines around it. And you know, you and I both been to that part of the world, they both put what they decided to do it. So, you know, we could be looking in like the middle of next year, even that there's like there's pipelines online that totally circumvent the straight. And so I think that they both sort of feel that they're that time is their friend in a weird way. So my kind of view is that this is sort of durable. It's weird because the war is not over, but it also feels like the bar to return to like a high level of military conflict, like, you know, from a kinetic perspective, it feels quite high. And it just seems like there's enough oil going through this system that keeps falling, right? So this is, you know, in the $75 to $90, $95 range, and that's, you know, broadly tolerable. And I think the irony of all this is that it actually more durability raises inflation risk because it's, you're letting it linger longer instead of having this like big spike that cuts off growth and then actually disinflationary on the slope side. Like this is, I would say sort of like the worst case where you kind of like sustain a higher level of refined products. And that sort of, well, you know, central banks so far have seemingly, you know, been positively surprised that there's been no second round effects. The BOE's sort of been like the most notable of celebrating this fact, but, you know, it's only really been six months. And we know from a lot of these economies that, you know, demand is a lot more uneven consumer sector, very imbalanced. Is it automatically like that in December, January? If there's no change, it's sort of the underlying backdrop that I don't know. So the way I've kind of approached it is not necessarily that we're like sort of returning to a obvious, you know, choke point, well, it goes to 130. But it does feel to me that like even though the fundamentals in the oil market structurally do seem oversplied, locally speaking, it does seem like both parties are incentivized to act below 70 in their own ways, which to me kind of will keep the market above there. And it's just that doesn't really take off the pressure and refined products. And it kind of keeps this like, you know, simmer in terms of where, you know, energy prices are cyclically more of an upward pressure on inflation and a downward pressure on foot, which they were last year. Yeah. And now let me just round off with a couple of kind of non-market question. One is, you know, I interact a lot with that we do have so many young listeners as well, you know, who've recently graduated or will soon graduate, they're going to enter the job market. And most of them are really pessimistic, you know, and we've been taking on a huge amount of interns to try to help people, you know, just get their put on the ladder and so on. I mean, what advice would you give to youngsters, you know, who are entering the job market today? Yeah. I think it's definitely an interesting time. I don't envy it. It's kind of a time and perspective. I'm very sympathetic. But I think it's also, you know, the flip side is that, you know, you're entering, I think especially if you're very passionate about something. And I think that kind of will be like my, my underlying takeaway. And you're very passionate about something. The ability now to, you know, grow that from a technical perspective and then share that in terms of a, you know, either between, like, social media, sub-stat, whatever, it's just that the friction has never been lower. And you know, I kind of like go back to where, you know, it feels a lot longer than 10 years. But I go kind of go back to 10 years ago when I was like kind of coming out and like, you know, trying to get a job at a hedge fund. And, you know, to get sort of up to speed from a technical perspective as someone, you know, didn't come from a, you know, particularly, you know, good school or, you know, didn't sort of have this, didn't have access to like the resources that I'm very fortunate to have. It was very hard to really get, you know, up to speed, especially macro, but it was, you know, so for strips and things like that, like, you know, I go on the CMU website and it'd be prices from like a day ago. And so I think that what I could have done with a chat GPT or a clause and then combine that with like the low barrier to being able to share thoughts and information, I think it should be viewed very positively and then should be taken advantage of. It's like you, like, you know, you kind of get to interact with people over Twitter. And I also, you know, I'm hanging on an intern in the fall. And so I put on Twitter that I'm like looking for an intern and the people who came in. I was like, kind of blown away. And I think that it's a really interesting time for like you could really, you know, ramp up your technical skills outside of the classroom. And that to me is like just differs a lot from sort of where it was, you know, when I was coming out. So that to me is like exciting. And I think that, you know, I always kind of, the advice I kind of always give, you know, to people is just, you know, business was, you know, my start is just right and share it and keep sharing it. Like the nice thing about our business, there's a lot of faults in it. But the nice thing about it is it like, it really is to some degree in ID and air talker seat. And people are no matter how big of a PM they are at Citadel or, you know, how or wherever they are as a strategist or whoever, everyone's desperate for information and everyone's desperate for a new way of thinking about things. And, you know, my experience was, you know, I shared a blog with someone who worked it more and it was like, why don't you come here for a summer? Like, and I don't think that that's, you know, one-of-one story in our industry, I think it's happened actually a lot. And I think it will continue to happen. So I really think that it's never been easier to sort of ramp up if you're really passionate about something in terms of your technical side. And then, you know, the leap I think is share your thoughts. And you'll be surprised who's interested in that. Yes, that's great advice there. And then, final question, you mentioned some fact there, what's the best way people to follow your work and to just interact with you? Yeah, sure. So, have a website, JST Advisors. And on Twitter, JTurk18, and if you want to, you know, be in touch about sort of my like advisory business, what I'm working on, trade ideas, et cetera, best email is info at JST Advisors.com. Great, and I'll include all of that on the show notes as well. So with that, John, thanks a lot. That's a great, fantastic world tour of financial markets. It's a lot going on and you really give them a very clear framework for us all to think about that. So thanks a lot for all of that. Thank you very much. Appreciate it. 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