The AI Unwind And Warsh's Long-End Gamble | Weekly Roundup

Nothing said on Ford guidance is a recommendation to buy or sell any investments for products. All right, what's going on everybody? Welcome back to another roundup edition of Ford guidance. Just to do it this week, Tyler is on summer, dead duties on vacations right now. So we'll give him a break as the two guys without children. So, you know, sometimes you got to do that. We missed it Tyler, but yeah, what's going on, Quinn? Now much, man. Another week fine by. I can't believe it's August already next week. So yeah, no shortage of excitement for a summer training week. That's for sure. Yeah, I know. I was hoping for a chill summer, but it's like definitely not that. We'll get into it. All right, before we get into it, dude, just want to do a quick shout out, quick chill here about the digital asset summit. Conference is coming up this fall. We're going to Asia for the first time, Singapore. One day of fair right around token 24.99 happening at the same time too. So the whole industry will be there. But yeah, get your tickets. That's going to be a great one. Got the digital asset summit as well in London that we're doing once again in November as well. So keep an eye out for that. Tickets will be going up in a couple of weeks, I believe. So make sure you get it early because yeah, as always, these things sell up pretty quickly and prices go up in time. So yeah, get ahead of yourself and get a ticket. It should be fun. That'll be a good time, man. Should be good stoked. Yeah, I've never been to Singapore. So it'd be cool to see that. I don't know. I don't know if I have you. Yeah, I've been. It's a cool place for sure. It's yeah, it's a cool city. Nice, man. All right, with that out of the way, why don't we get into things? So we're recording Thursday today and want to talk about the the talk of the town talk of the news right now around the wonder kid, Leo, Leo pulled aspraner. Once again, Icarus flew a little too close to the sun. Yeah, obviously, we've been talking about the AI trade on wind over the last few weeks here. And it's obviously starting to hit the big dog. Yeah, I knew started to come out that last night, I believe he was looking to try to raise capital. Typically, if you know, if your if your main market that you're trading is in a downtrend and you're trying to raise capital, it's probably not for good reasons. So there's already a hence of that coming down the pike. And then this morning came up with news that yeah, basically they had to basically sell off their whole public markets position. I think some of their private marks too, like in Thropic and everything. And you know, first off, it came out that it was just a single buyer and lo and behold, the legend himself came Griffin, Kenny Griffin, Citadel, came in and yeah, bought the lows once again. Man, I'm curious to your thoughts, like especially from the market practitioner aspect, if you see a main character develop, like, you know, suddenly everybody was tracking his 13Fs and try to copy trade and you know, you have that and then you have the wash out and then the forest liquidation. Feels to me like that's a pretty meaningful signal, Alisa. I don't know if I'd say that we're going to be, you know, obviously we saw the reversion higher as the big the big buyer/seller was was taken out of the market and everybody coming back into the trade today, pretty big rotations back into long duration tech and everything. Yeah, as a low end, what do you think? Well, the macro conditions, which we'll talk about the fat and environment after this, but just as it pertains to this example, I think obviously you get a fat mean reversion. I would have been writing starting Tuesday that the selling had started to get pretty not necessarily disorderly, but high volume and pretty aggressive and was covering things up a bit from the short side and then yesterday I was very surprised in the morning how heavy the tape still was because you had rates sort of lower a little bit, you had sofa, futures, up. Like I specifically wrote there's a lot of things about this that don't make sense because you just had this idiosyncratic like huge selling in equities and I just sort of drew it up as F1C panic, but the rates market wasn't panicking. You had a couple of these big calls, one of them from Citadel, which supposedly unrelated to this I guess, but saying rate height could happen. So I guess there was that vibe that some people thought to de-risk ahead of it. But yeah, man, it's, you know, we've talked on the show about how much of this weeks and months ago it was like, is it priced in? Are these things trading at fair value? Is the AI trade fully appreciated by the market? And I would always, you know, we'd point to the fact that how much of the semiconductor asset class and sector was being driven by these 3x retail ETFs that were causing rebalancing of, you know, basically every day the socks moved four to seven percent. There was no 1% day because if there was, it would be a 3% day because the market was all levered ETFs. And so when you just take a step back and you're like, all right, that got flushed, right? The AUM is like cut and cut by two thirds. You have Korea, the Korea degeneracy that obviously margin call. We all saw those stats last week. And then you have this situation, which, you know, one of the most successful AI investors of the past few years, who, you know, what he started as fun at like a couple hundred million or something. Yeah, it was like two 25 million, I think. And yeah, ran it up to billions. Like these are huge, huge numbers that are completely separate from the fundamental story, right? Like the 3x levered ETF AUM growing from 2530 to 100 billion. The Korean margin stuff, this, this stuff, like, yeah, that that it's very detached. But what I think is important to recognize is like where we went with all of that stuff and the perfect narrative, the perfect story. Like it would be very surprising to me if we got back up to those levels, just given how much leverage induced that move. It took to go there. Yeah. Yeah. And there was the fundamental story too, did also start to get into question because SK high necks had their earnings miss. And it was the first meaningful miss of that whole complex. So there was, I don't know, I'm a fan of reflexivity. Like I don't think it's a coincidence that the same time that you get the first SK high necks miss is also when you get the maximum of leveraging the system. And also like, you know, the sort of tape warfare that we saw here. Like, I don't know, the rumor middle is swirling that leopold's firm was shopping around for buyers as late as last week. So you know, if the shark smell blood, they're going to start to short those names. Obviously, you did have that fundamental aspect of SK high necks missing. And it makes sense to see it to beat down. But I also don't think it's a coincidence that at the same time you had the sharks swirling in the waters, trying to short these things. And you know, when a big player has a target on their back, the market's always going to test them. Yeah. It also just reinforces the idea that it's totally price that drives narrative that drives price and not the other way around because in a situation like this, as the market's declining, right? And selling off bigly, there's all these things being drummed up as the reason like the atre, the friends, like the mag seven's going to slow spending, every possible. And so everyone's trying to put their finger on it. And then it comes out that weight. It was like these huge leverage liquidations on multi-billion dollar players. And then it's like, now it feels like everyone's like, oh, that's what it was. You know, thank God, it has nothing to do with the fundamentals, nothing to do, you know, we're back. And so it's, it's just the market can be so flippant in both ways. Yeah, I think like 100% to get back, like what, Sandes needs a double to get back to all time highs. Like that's a lot of leverage like a built up to get back there. I think like again, I mean, I've been harping on this since we start talking about this memory trade. Like time horizons, risk sizing, leverage, or spotlight, these are things that you should have pre-planned before you get into the trade to know what you're working with. And you know, if you have a year long horizon, obviously when a big player gets taken out like this, it's, you know, it might be a good spot to put some in, but don't expect all time highs in the week. Like I don't know, like you'll see that sort of V reversal right back into things. But you know, maybe just some low bleeding, like low volatility chop from here on out. Obviously, at the meme reversion today, some of these names up 20% and you know, that part's done. And yeah, I can see it, you know, just kind of chopping around for a little bit here. Obviously, there's like we're gonna get into. There's so much context around this from what was going on with the fed too, that we need to piece apart. But yeah, I don't know. Again, like it just matters what time horizon you're playing and how you actually are express the trade. Like pat dependency is so important, you know. Leo pulled thesis like I don't know if anything of it isn't question, but he's been carried out now just because of the way he implemented that strategy and executed on it. You know, years time he could be proven completely correct and then some but still lose like. Yeah, markets are hard. He was proven very extremely correct for a long time. I mean, it's tough man. I think it's also helpful to think back to these recent trades that have captured the narrative attention flows and zeitgeist when you think about the metals and silver, even around oil for a bit there. Yeah, even crypto last year, last summer. It can be a pretty long period of digestion once enough, once there's been enough damage like if you're in an uptrending aggressive bull market like semis and these assets have been over the course of the past few years. So the dips get bought, the dips get bought, but when you when you really injure and damage that that buyer base and reaction function, I think it can. Yeah, it can take. So I mean, you know, maybe maybe maybe the brain, it's best to just avoid the brain damage of the sector and for six months, kind of like metals. And like if you're stepping into gold now after just shelving it for six months in January, you did better than any like metal specific trader because you just avoided chop and. Yeah, headache that mental model is so good to like have a cool down period on tickers like I've been plenty guilty of this before you know where if you if you make a bunch on a certain ticker. So I don't need to spend more time attention on that ticker and you try to trade that ticker more often and in the opposite to maybe you lose a bunch and then you want to make it all back and then you try to do that using that same ticker there's there's nothing wrong with just. You yeah, you don't need to express a view here, you know, you can you can make a funny tweet a funny meme about whatever happened with set of the old and leopold and then just. You know just sidestash that for a little bit and then just let it sort itself out you you don't need to be the hero every single day it's it's you can go look at a different sector let it cool down like to your point that's exactly what happened gold. It had its run and then it had its cooldown period and yeah if you if you just try to knife catch these things throughout those cooldowns and especially if you're coming from a place of weakness it's it's a tough recipe. Yeah totally man. All right let's talk about the Fed other big news this week of course we we had the the second meeting from Kevin Warsh yesterday odds going into there we're pretty uncertain definitely a part of the new era of the Fed that we're in now. Yeah I think going in there odds are around 60% for a pause 40% or so for a hike and presented with with a pause but with three dissents which is super interesting and you know I think Kevin Warsh character as it is he asked for a good family fight and he got one and so I think it's it's somewhat by design but yeah I think there's a couple of good takes here this is just from Nick Timoros's piece on the Fed meeting yesterday and his take and also from from the nary looked like he he had a. A little commentary from Mark Abana who's a really great Fed watcher from for the Bank of America and he said this is a classic central bank credibility shock the long and its stocks turned together roughly 3pm while Warsh was still speaking. Investors have priced in nearly two increases over the next 12 months what they heard Wednesday was a chairman who's willingness to deliver them they now doubt. And really importantly this is might be good place for us to start here but there was three things that really unsettle investors like just a bit of context here. On the initial statement that came out you know when the markets priced for only 60% odds of the pause obviously going to see some sort of a really really frowly we saw that but then when the press conference came in. I was listening to Joseph Wang's deep refund and he called it a disaster of a press conference yesterday but I think yeah it's just obviously we have a lot more uncertainty so of that uncertainty there's. You know just this question mark of what even inflation gauge are we using Kevin Warsh was asked about it and asked about what inflation measure relies on from the feds official PC gauge but said that. He left room basically to look beyond it when he said his own lens is broader and that the central banks overarching strategy statement which lays out how it argues and targets inflation which are reissues each January could change so. You know obviously if you're a bond investor and you don't know what inflation gauge the fed is even trying to focus on that's going to cause. So we saw pretty meaningful rate volatility and we saw that the 30 year bond sold off pretty meaningfully and also asked whether higher rates for the remedy for inflation that won't come down he said that well could be part of the solution but wouldn't say whether they're the main one and suggested the markets own tightening had done some of the feds work so yeah lots for us to piece of park curious what was your high level take on on yesterday. I can't remember an event I can't remember some less so markets oriented sometimes political where I like fundamentally like diametrically disagree and oppose the consensus coming out of the event I think the level of I guess clearly the communication was was really needed some work because if you are from if you've read his his comments his writings his listen to his press conferences and speeches and talks over last you know multiple years. You you like it was very clear what he was trying to signal throughout the speech one if you look back at that article you just post. And the long end increased was because he said that he wanted to remove balance sheet accommodation for the long end he said at the outset he said a core question I posed to the committee and our task forces is how much accommodation is the long end is the fed balance sheet providing the market and monetary policy and it's obviously a lot because you have a record. A record flat yield curve and you've had fed balance sheet growth that started again massively last year and when they expanded their balance sheet they doubled it in COVID they never unwound it to the same extent they just height rate so we've been talking about this for a long time that to properly rebalance monetary policy and therefore the economy which has been extremely balanced and just helpful to attack in large cap corporates over small business and medium and consumers is you need to let the long end see free market prices and so he was basically saying that he wants to let the balance sheet take remove the fed's footprint from the balance the the treasury market and let. And so he said that the long end yields rose and then when you do that it restricts one at discount it's a higher discount rate so it the lower valuations but it also restricts financing conditions and you also saw credit spreads wide and so. And so that's a very good question made perfect sense based on what he said and then you know those other things versus people said well he didn't want to say that rate hikes are the main tool well if they if they let the long end reprise to where it should be without fed intervention that's probably another 50 to 75 maybe a hundred basis points higher in the long end of the bond market you bet you're going to get a stock market correction you're going to get lower growth and you're going to get lower inflation like if they actually so I think that's a good thing. So I think I guess clearly everyone just didn't understand him but I think they will over time so maybe you know that's feedback for his communication but I think that my biggest question is not around what he communicated yesterday I think it was very clear about based on everything you know we know today but where I would just question is like again it's easy to talk tough when stocks are 2% off all time highs. The equal I just made new highs etc so at some point I don't I don't think you'll be able to be this hawkish but I mean he was he never ruled out rate hikes he just was trying to express without saying it that they want he wants to use the balance sheet tightening tool first and I think he's right that that will fix things it's already caused a dampening and stock market momentum it's called credits. I think it's all credit spreads the widen real rates are high like this will slow the economy 100% this will slow the economy it will slow the housing market and it will slow inflation like that's what you have to do you have like you have to take pain so to me it was just him trying to dance around like him trying to say pals like August 2022 there will be pain speech without and try to be a little cuter about it without saying there will be pain. But yeah it was pretty straightforward in my view I think I think there's a lot and a lot of misinterpretation and misunderstanding around it. See that there's a lot of emotion around it too. Yeah, there are a lot of people. People just seem to really mad. They were furious, dude. I could. I was just surprised. I actually was actually in some of my accounts, but I just bought some things because like, man, I've not seen people this. It was very, it was like, I saw a tweet, Anna Wong from Bloomberg, who's like a very, I think, straight and narrow, like, down the middle person. Like, she's not emotional or ridiculous in any political way. She's just like, this is the same exact reaction as when basically is pop like when the long end rose when Powell cut, but the outrage is just from different based on your political leaning. Yeah, it was so weird, man. I was like, wow, I've never seen people over. It was sort of one of those things that just snowballed like one or two accounts were like chirping and meaning about the bed. Yeah, and like, and then everybody just piled on because it was like the cool thing to say, but by the time you were reading your timeline, nothing that people were saying made any sense. And it was like, it was weird. It was weird. Yeah, I don't know. Yeah, I mean, like, we need to look at, so it's just looking at the two's thirties, which is where all the action was yesterday. It's still like, not that steep. I mean, obviously there was quite a bit of cuts priced into the two year at one point. So that obviously, you know, when you reverse that, you saw quite a bit of flattening. But now obviously we've seen to your point about how the thirties was where a lot of the action was. This was actually a really good chart from Lighthouse Macri, who was on the show a couple weeks ago. He has some good stuff. But just piecing about the composition, all changes in the curve yesterday, which I think is a really good way to look at all of this, because you can see just how, yeah, if you're just looking at the nominal yields, I think you missed a little bit of the action of what was going on, because you can see like the shorter end, the twos, or the five, the five series, the shortest duration on it. And you can see like a lot of what that affected was more so on the tip-sealed. And therefore, you know, higher inflation expectations. Obviously, because you know, there's partly, you know, 40% odds of a height coming in. And if that's not happening, that's going to lead to short term higher inflation expectations. But then you look at the thirties duration, it's completely different. You know, so higher real yields. And you know, maybe you can make the argument that this is where some of that credibility questioning was brought in. But you know, in the same vein, I think a reasonable way to look at this is what you're saying, which is that look like everybody has been saying for years how the longing has been suppressed, that it's leading to lose her financial conditions, that we don't have a true fair value long-term discount rate. And a lot of that is because of the balance sheet and what they've been doing there. And you know, if there's, if there's talk about removing that, there was a lot of people who would have been supportive of that idea that were actually quite upset about what was going on yesterday. So I do find that a bit confusing. Yeah, it was like classic, you know, everybody doesn't want inflation and wants to hawkish Fed when until it affects like your levered, you know, asset other things that you're, you're, you're, and then that's where all the emotion came out. It was just weird. Maybe there's, there's valid criticism that like, look, if you're really trying to do this wide entry hike yesterday. Because that's the wrong reason. Yeah, the reason for that is because the, the, the front end is actually not that far from where it should be in a normal operating environment. If you look back in history, it's, it's pretty standard that the front end is anywhere from zero to like 50 basis points above inflation. And if you think inflation is like run rating in the three to three and a half area right now and, and the front end is like three, five to three, seven, five. Yes, it might be a little loose, but all else equal. It's the back end. That's way too low. And the reason it's low is because the Fed and that's what Worsh is saying, Worsh is saying, hey guys, look, we could hike rates because we do really want to get inflation down. But I mean, there's, we're not going to just go crazy here. It's, you know, we're 40 days in or whatever you said. And we're going to start with the biggest problem, which is the long end of the curve, which should go higher. And he obviously should have done a much better job communicating because the people that were crying out about credibility and oh my god, he's losing the long end. Like, I would bet a lot of money that he walked away from that meeting and we'll walk into the next FOMC and say, hey, hey committee, I told you this would work. We restricted financial conditions. Forward inflation swaps and break evens are falling precipitously after that speech because real yields cranked higher. And we didn't even have to hike. Meanwhile, yeah, you know, stocks are down 5%, credit spreads are wider. Like, everything he said he wanted was happening. So it's very hard for me to take that and say, wow, his credibility is wrecked. Like, yeah, I was watching the price action. I was like, wow, everything's doing exactly what he wants from this meeting. Yeah, I mean, maybe, yeah, it might just be semantics around this corner. He's pinning himself in around this communication style that he's trying to pursue. Like, not saying anything, while also kind of saying things like, yeah, there's something there about that, I would say, could be improved. Like, look, directionally, a lot of the things that you're trying to achieve here, I agree with. Like, on that point, the short rate is not the lever to pull here to achieve what we need to achieve. It's the long end. It's letting long-term bond yields go higher. That's that's what needs to happen. It's just, you know, maybe the way they went around that was because he's trying to tow this line of pretending to knock you forward guidance while also kind of saying, hey, we're trying to focus here. I think that's a little messy. I think the reason for that is because you need to vote and you need committee, you know, consensus and approval to make these changes. He can't just come in and say tomorrow, we're going to do this to the balance sheet. And we know that the whole committee, obviously, Paul's still there, they all are like very dead set on balance sheet expansion, which never was a thing, pre, you know, all these interventions. And so, he was trying to basically steer the market towards his view without having the approval and sign off of the committee to go there and say, we are going to do this. But he was trying to like guide the market towards it, I think. But he didn't have the full ability to say that was definitively going to happen. It was my, yes, it's weird. Yeah. It's this weird period too, where he has these task forces that he wants to let provide the guidance on where to go. And he obviously needs to wait for that to play out before he can, you know, shows cards. So maybe there's a bit of that too. You knew, you knew there was, like, I knew it was going to be a, like, it was an emotional, like, response when there was some accounts, like one of them, an economist, like Claudia Samar, whatever. Yeah, I think she was not stoked. She's the most classic representation of the yelling era fed. Yeah, she's, she's very political obviously. But she was complaining that, I can't believe this statement. There's no fed reaction function. There's no mention of the data. Like, she listed like three things that are like one, they were never in the statement. Like, then you never, they never listed their reaction function. Like, if data does this, then I, like, and also the data is public. And like, why do I need the fed chair to tell me that the unemployment rose rate rose in this happened? Like, just look at the data and make a decision. And also the, he didn't, what, what didn't make any sense to me was like, the market going in went to 30% no hike, are 30% hike and 70% no hike. So, and then coming out, everyone said he lost credibility by not hiking. But the market wasn't expecting a hike. So you don't get your cake and eat it too, where somehow he does what the market wanted, but then lost his credibility because, like, there was so many things that didn't make sense about people's responses that had just showed how much emotion was. Yes, it was all over the place. Yeah, I agree. Where do you think we go from here? Obviously, the next, so there's no meeting until September, but we do have the Jackson Hole symposium, which historically is a venue for fed chairs to provide that more, you know, one year time horizon type of outlooks. Or, you know, if, if the plan is to really focus on the balance sheet and the long end, I would assume that discussions are, you know, Kevin Worsh's speech, Kino's speech at the Jackson Hole symposium is probably going to be related to that. I don't know what you think, if you think he's just going to, you know, give a couple platitudes and then just wait until the September meeting. Yeah, he talked about it, which was funny, like, one of the reporters asked what he's going to use his speech for. I mean, that's That's a dumb question. Like, why would he know today? Or tell you, like what? I think probably, because he did say he's going to be talking to the task forces and seeing what they say, I would, we already know what they're going to say. Obviously, like the people put in the task force are to kind of come around to his views. But let's give him the benefit of the doubt that there's actually some integrity and like going through the motions. I would say he probably does talk about the balance sheet because if the communication, if the feedback from this presser was that the communication was poor and obviously these press conferences are not really the place to go into like a deep dive tutorial on why something big picture policy is the way it is. I would say it's probably a decent idea for him to kind of make the case publicly and explain why this is a better way to transmit policy, which I think people are confused because he's saying, I want to use rates. I want to use the rate policy transmission mechanism going forward in the future. And what he actually means is I want to use that to ease, but he doesn't really want to use it to high risk strict. And it's actually fair because there's so much accommodation on the long end right now that he should restrict that first and then use all the restricting needed there. It would very much slow the economy and slow inflation if they see it through and that would yield curve steepens and other 100 bips with the long end going to 5, like 5 and a half, 6. And then you could think about where the front end comes in. So I guess that would make the most sense, but to me, economically speaking, you just had a huge dent in the number one driver of growth in the economy with the AI stuff. And the Meg 7 is still putting up earnings and everything. But it's important to remember, I think, how much of the wealth effect and spending and the economy has tied to this one aspect and also even further how they're performing in the equity market. And so I definitely don't think it's an all clear. There's not really any liquidity was bad going into yesterday. And clearly, we're seeing $40 billion hedge funds blow up. And yesterday, the only result between now and then was like liquidation relief, but no policy or fundamental directional shift in inertia. And so for me, I think that's still like a slowing growth type environment, although not recession, nothing like that. But, you know, equities are still basically at the highs. So I don't think the upside is that amazing here over the next few weeks. Yeah. I've been trying to think through the outlook of growth from here on out. And it's always like today, we got some GDP data that came out. And again, GDP data is extremely lagging. You don't want to be making forward-looking assessments too much on it compared to one. For sure, one of the biggest drivers of consumer wealth lately has just been stuff like people feeling rich for the memory trade and AI stuff. The AI build out, CapEx build out, Terra for refunds, the Boons on tax season from the big beautiful build out we've talked about, just like how big those refunds were. These were all sort of flashes in the pen that are all definitely starting to slow down a bit here. And at the same time, like we got this GDP data today, that is quite interesting. Because on the surface, it actually missed and came from consensus was 2.1%, came in at 1.5%. But the vast majority of that miss was having to do in that exports and all that nonsense. It's really important these days to try to isolate that dynamic just because of all the stuff that's going on with tariffs and just changes in terms of trade. But the actual personal consumption expenditure was very strong. If you isolate this is again a really good way to, if you're looking to try to get the core understanding of how the engine of the economy of the US is without all that noise, looking at PDFP or real final sales to private domestic purchasers is a really good way to do this. And that print came out super strong. So the way I'm starting to think through this is that the core engine of the economy was quite strong going into the last week or so. But then you have this tightening of financial conditions from Morse on the line. You have the total liquidation of the AI trade. You have further questioning of CapEx build out from hyperscalers. Like meta is down eight or nine percent today or something like that. Yeah, there's a lot of dynamics that look like this is a bit of an inflection in growth. Are you still thinking about that way? Yeah, I think that Q2 definitely, I mean, you also had like things like the World Cup and all those stimulus measures. Yeah, that too. But I am less optimistic on growth going forward. Again, not calling for a recession because when the government spending 6% annually deficit to GDP, it's like almost physically impossible to get a nominal or even real recession. But I definitely think a lot of the big boosts are sort of evaporating and on top of that. So let's just say you have those things going away, World Cup, one beautiful bill stimulus, stock market momentum, wealth effect. If you have some of those things kind of peering out at the same time that you have real rights, rising, credits, bread rising, bond yields and financing conditions. It's usually the case that we see this obviously with a leg, like maybe in a quarter or two, but the market's forward looking. And so I would expect that people's growth estimates or an in-exestimance start to come out from the recent, come down from the recent peaks because the out, like the first principles outlook based on where market prices are and where policy gets to over the next two or three quarters is nowhere near the same as it was the last three quarters. And so I think you have to bet on this 3-ish percent real rate growth coming down to closer to. Yeah. Knowing that makes me want to say that this was the top and long term yields, but I also know that's like the worst thing you could say over the last five years. I mean, this is the thing with bonds, right? They're self-correcting in many ways. Like the cure for high price is higher. The cure for high yields is high yields. So as we ratchet up higher, it's almost, I've heard it be described before as like a pendulum, or you know, the higher the 30 year goes, the more it's going to have more kinetic power to swing the other way next. And if you have a Fed that isn't trying to tamp out that ratcheting of real rates, like that paired with all those other dynamic like World Cup, you know, Welfac, etc, etc. I don't know, feels like it's a top. Yeah, I mean, the hysteria rounded to an sentiment would tell you that at least locally I mean, I'm sure we're cooling off. I guess the thing is is that every, the real test is if and when equities come down. Yeah, it's still been all dispersion and rotation. Like S&P is like 2% from the highs. Yeah, it's, it's all like deficits are kind of creeping back up again. Most expenses rates have rise, have risen, interest expense as a percentage GDP. Those things are like we're seeing these spending reconciliation bills come back. Like the progress that Besson and Trump made in the first 12 months is of, you know, bringing spending growth down, which they just lowered spending growth. They never actually took spending neck growth negative. That stuff is kind of going the other way now. And so, and that's again without, that's without equity weakness, which we know is a huge part of tax receipts and then spending in corporate income and then government, you know, corporate taxes. So, the proof in the pudding is always when there's a, there's a correction in stocks. And until then, it's very easy to talk tough and be hawkish, which I think, washes. And I also think they fully understand that you need the cover to flip to easy policy. Like the quick, the 10 to 20% equity correction, the quicker you can, for example, you know, money again and get out of the equity correction. So I just think that I'm taking worse seriously in the near term in terms of this administration has a history of creating volatility events to see through what they want to get done. But I definitely not believing his resolve long term. And I think he will kind of turn out to be the same once we start to get some, because no matter what inflation isn't going back down to low three or two percent, like everybody knows it, Worsh isn't stupid, he also knows it. I think he's just trying to sort of muster enough room and energy and momentum against inflation before the inevitability of having to expand the balance sheet monetize that cap industry, it's et cetera again. So yeah, like it's just weird nuance, classic, right? You have to hold two things one one one brain. It's like can they talk hawkish and try and talk the market down in the short term? Absolutely. Does that mean you should believe every word they say and like trust they're not going to just fold like all the doves of the past? Absolutely not. So that's kind of where I said like this sort of view. I like that because it just brings in the framing of like the question I keep coming back to is okay, we're a few months out from the midterms and like by not hiking today for this week, you know, it does put a bit more onus on a September hike and getting that close to midterms to hike like just feels untenable. Like that's just the Fed per, you know, they will hike if they need to in front of election season, but they definitely certainly prefer not to impact that in any way. And so it does feel like a bit of a bet is being made here, which is that look, if we can if we can talk financial conditions and the tightening here without actually hiking the short end and just really focusing on that long end and talk as if like a hike is given by September, but by the time we get there, you know, it is good timing that we don't have a meeting in August, by the time we get to September, we may not need those those hikes because the long end is already taking care of it. So it does feel like a bit of a bet is being made and you know, maybe a lot of other stars aligned in terms of what's going on with the Iran war and oil that this all sorts of self out by September, but yeah, I guess holding those two ideas to me is just there's a bet being made that this recipe is going to lead to some sort of stable equilibrium come midterms. I don't know. I completely agree. I think they're I think they know exactly that is the case. I think I think it will work out because at the end of the day, who has the power here to control the outcomes in the short term, not necessarily long term, but they're working with asymmetric information. I mean, imagine right, we're like traversing August and indices are chopping and like right now the rate hike odds are like 55% for a September hike. Okay. You know, let's say there's some pressure growing on Worsh to to hike in September, the odds sort of point there. And then we get to September and they just Trump, best it has Trump tweet something outrageous or stir up some volatility. We get a 5%, 10% pull back in the equity market and rate hike odds all the sudden go to 30% again. And then it's like, oh, I I didn't hike because of this. Like, that it's totally the game being played. And I I mean, maybe to some of that sounds conspiratorial, but if you've been following this administration for the last year and a half, I think that's this like right down the center of the strike zone for what they've been doing. So yeah, I don't know, maybe I don't know. I don't know what the opposition case that is because like they've literally been operating like that for the whole entire administration with very, very close coordination on all fronts. So I think that has to be the base case that they're going to they're going to manufacture the outcome they need. Yeah, I mean, look at even look at this week, right? Like it's it's it's sort of like, but passing the baton between different branches of the government to get what they want through like, oh, you need a little vol crush and popping indices, you know, tweet that the Iran war is over, Trump, or you need, you know, to talk the market down and strengthen dollar, bas and goes on TV and does it. You know, you need war to do this like it's it's just it's like an orchestra just in concert. It's I can't see it any other way because almost nothing about it is like organic. It's and I'm not saying they have like some 5D chess pre planned like siop perfect like, you know, on January 18th, we're going to do this and I'm not saying they all that, but that's still a strategy like that's still manipulation. They still have way more information and control than any one market participant. And so like and you have two hedge fund managers running the treasury and the Fed that were trained understandly jokin Miller. Like, it's got a comical like obviously manipulating markets like obviously. Yeah, yeah, big time. We'll see. All right. Well, I think that's yeah, enough on the Fed and all that. Anything else you're watching before we wrap? Um, yeah, it's it's interesting. I think that, you know, we're going into this heart of the seasonal seasonal slumpiness usually like August, September and it's worse during midterm years. So yeah, I think I think on the bright side, the Iran war stuff is going to kind of float to the background because there's enough problems out there for for the markets that I don't think they can really afford to re escalate in a big way and bring that back to center stage. Like if you if you look at, you know, the back end of the oil curve hasn't nearly reacted like it did the first price spike. It's mainly just front months and similarly, oil volatility sort of making a much lower high here. So I think that kind of fades into the back and which is kind of good for like everyone's brains, but also like peace, which is nice. Hopefully not going to. But I do think that these restrictive real rates and financing conditions will catch up to more than just the AI trade because the dispersion when AI was getting clobbered had had has hasn't had been helping equal way small caps is very economically sick sensitive stuff. But assuming there's no immediate or rapid change to, you know, the intentions that were shrolled out yesterday, like that will start to have an effect across the board. And and I think that that's that's like the next thing like there could be the rotation back the other way in the in the total opposite direction here. Yeah. If growth does slow a bit. So I don't know it's it's it's going to be an interesting period because you know they're going to be I mean, we're getting a crunch time for when things matter the most for midterms. And so they're not obviously going to want to cause any market problems and will be quick to probably support them. But at the same time, I don't they don't have a ton of tools to without liquidity from the from the Fed to really like juice it like they have in the past. Yeah. Yeah, I agree with that. All right. I think we can leave it at that. Obviously. Yeah. Longer news that you'd expect for the last week of July. But here we are. Yeah. Hopefully August is brighter. Yeah. Have a good weekend, bro. All right. Have a good weekend. You too, man. Nothing said on four guidance is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only and the views expressed by anyone on the show or solely their opinions, not financial advice or necessarily the views of block works. Our hosts, guests and the block works team may hold positions in the company's funds or projects discussed. As always, investments and blockchain technology involve risk, terms and conditions apply. Do your own research.