Speaker 1Happy Thursday out there, Team 42. It's your skipper here, Darius Dow, to present our macro minute for Thursday, October 22nd, 2026. Hope everyone's having a great week. So as always, we'll start with the executive summary from today's lead-off morning note, so let's dive right in. What did we learn today that will likely have the greatest impact on your portfolio? The Meta and Tesla results and guidance supported the durability and severity of the current risk-off inflation market regime. Specifically, signals from Meta, CapEx up, stock down, and Tesla, CapEx down, stock down, point to investor fatigue with respect to most tech stocks amid historic concentration in the sector in the U.S. and global stock markets. It will likely take an NVIDIA or a roughly equivalent company to demonstrate balance sheet discipline amid booming earnings and expanding margins to truncate the negative sentiment. That's a lot. What key macro data or policy signals supported our active themes or consensus expectations? Supporting our staking inflation theme were data that indicated average annual employer or family health plan costs hit 28,000, and 2026 up 5% year-over-year. Worker contributions rose 9% to $7,471 with small firm employees bearing more of the cost. No key macro data or policy signals challenged our active themes. What other key macro data and policy signals did we analyze in today's Lead Up Morning Note? Number one, the Pentagon intends to purchase at least 850 more Lockheed Martin F-35s, the program's largest contract in 25 years. We recall someone highlighting the rising probability of the U.S. descending into Paradigm E, a.k.a. major political realignment and total war. And the reason we think this supports that, obviously, is the fact that, you know, we're seeing a tremendous amount of success from an asymmetric warfare perspective for much lower capitalized countries like Ukraine versus Russia, like Iran versus the United States. And so the natural logical conclusion is that war is just a lot cheaper than it used to be, while at the same time, we have countries like the United States spending trillions and trillions at an accelerating rate on big war, on machines. And so eventually the people who get paid trillions and trillions of dollars to propagate big war and create big war machines are eventually going to have an existential crisis because that money is going to get taken away and reallocated to different, you know, social programs, health care, child care, you know, housing insecurity, food insecurity. People are going to start to ask questions. If you can get your butt kicked by a bunch of cheap drones, why are we spending $2 trillion a year on destroyers and F-35s? And so in our opinion, we think the folks who propagate the big war machine are going to feel very highly convicted. In their desire for war in the coming years. So number two, the 10-year nominal oat yield spread over the 10-year nominal German boon yield widened to 168 basis points, the most since 2011, which is the 99th percentile data that goes back to 1990. The Italy-Germany spread right into 121 basis points in the 65th percentile. Investors must respect the coincident and prospective implications of this spread widening for the global liquidity cycle. And then finally, number three, per Goldman Sachs, hedge fund short positioning is near a five-year high, raising squeeze risk on any rebound. Global equity shorts outpace longs five to one with short leverage in the 99th percentile over the five years. If Q4 2026 winds up resembling Q4 2018 in risk-off inflation market regime terms, then these data suggest Q1 2027 is highly likely to resemble Q1 2019, which caused severe type two errors among the perma-bear community, errors that were briefly truncated by the COVID crash, but subsequently persisted throughout to 2020. So let's wrap it up, as always, with a question from our community. This one's titled Silver Sell-Off. It says, I appreciate the 42 macro signals before this happened. I'm curious, though, what the knowledgeable people in this community think about the recent silver sell-off. I understand that some of the headwinds reduced global liquidity, macro forces, rising treasury yields, and softer industrial demand, among others, but I'm not in finance, so I appreciate value perspective. So not being the number one reason why silver is collapsing is you had a negative inflection in the monetary market. You've had a negative inflection in the monetary policy cycle from a tailwind to a meaningful headwind, according to our macro weather model. You've had a negative inflection in the liquidity cycle from a tailwind to a meaningful headwind, according to our macro weather model. So, you know, those are the things that will cause things like gold and silver to accelerate to the downside alongside cryptocurrencies, et cetera. So let me just go check where we're at on silver. So, yeah, it's our BAM signal on silver. So you obviously can see that it's, you know, it's accelerating to the downside there, so breaking down to new lows as well. So I'd be very cautious at trying to accumulate silver here. I would much rather be waiting on getting a lot closer to the Fed Treasury Accord 2.0 catalyst that we still think is on the horizon in Q1 of next year or the latest by Q2 of next year. But that's a lot of time and space to risk manage between now and December 31st. Recall the accelerated decline that we saw in asset prices on Q4 '18 truncating or culminating with folks, you know, in the fetal position under their deaths on the day before Christmas. So we'll wrap it up there. Darius Stell here presenting our macro minute on Thursday, October 22nd, 2026. Best of luck out there. Have a great day. We'll catch you back here tomorrow. Cheers.
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