Will Fed Chair Warsh ruin NVIDIA’s profits party tomorrow?

Happy Thursday at 1342, your Skipper here at Derrius Delta, present our macro minute for Thursday, August 27th, 2026. Hope everyone's having a great week. So, as always, we'll start with the executive summary from today's Late Off Morning Note. So, let's dive right in. Today's key macro question is, "Will Fed Chair Wash ruin "in video's profits party tomorrow?" The short answer is probably not, given that our probable range model was signaling a three-to-one downside upside ratio in the US dollar index over the immediate term. This is important because the threat of incremental financial oppression and monetary debasement is now a key driver of asset markets. Because the net impact of Fed Chair Wash's five task forces is likely to be dovish, the Fed may opt to play action paths to set up the run by tightening now to create scope for substantial easing over the long term. Our Besson's bridge theme reduces the probability of this hawkish outcome. It also reduces the severity of its impact on asset markets should the Fed proceed with tightening this fall or for signals tightening tomorrow, neither of which is likely to be previewed by Chair Wash tomorrow. So, in today's Late Off Morning Note, we obviously unpacked the Nvidia earnings guidance and what it means for the broader ecosystem. But most importantly, we did a big, deep dive barring on some of the work from our August macro scouting report presentation. Big, deep dive on basically where the Fed is and its decision tree. We updated our Fed decision tree model, which looks at 12 different, has 12 different dimensions on multiple vectors in terms of should the Fed tighten now or should the Fed be doing over the immediate term and then what should it be doing over the intermediate term as a relate to its policy. And so ultimately, one of the key takeaways is the Fed probably shouldn't be tightening right now. And if that is true, then the only reason they would tighten is to appease the bond market, to bend the need of the bond market, which has obviously gone fed up with the Fed's declining credibility and is also being exacerbated by the incremental tax on capital, global capital that is from coming from the AI infrastructure build out. So definitely check that out, especially if you're a monetary policy geek or if you're somebody operating in the fixed income markets and you want to get a front row seat of what's likely to happen, not just tomorrow, but as it relates to the medium-term outlook of our Fed monetary policy. Again, we think it's going to be surprisingly dovish in 2027 and 2028 relative to current market expectations and pricing. So as always, we'll transition to 42 macro dashboard. We'll wrap up with a question from our community. This was titled Paradigm E versus Luke Roman's framework. Says, "Hey, Dee, Dee, for my understanding, you ultimately believe that we are headed towards Paradigm E as a result of our debt problem and supply demand and balance in the treasure bond market." What do you think of Luke Roman's basic framework as I understand it, that the US debt problem is probably too large to solve through spending cuts, tax increases are simply growing our way out of it. Instead, the more realistic path is some form of financial oppression. Keep nominal interest rates below inflation for an extended period of time so that the real value of the debt gets eroded over time while allowing hard assets like gold to reprice much higher. A major gold revaluation could also strengthen the treasure's balance sheet and potentially get policymakers more flexibility to support or buy back treasuries without issuing as much new debt. Is this realistic or do you think it's something our government will do even if it means high inflation for an extended period of time or do you think all roads still lead to Paradigm E? Thanks for everything you do. So a fantastic question. This is the stuff I love geeking out on. You know, I'm a huge fan of Luke Roman. I think he would probably say the same, but we kind of attack the problem from two different vectors. We're much more on the kind of stochastic data driven, you know, robustly researched few. He's robustly researched as well, but he's sort of pieced the puzzle together with more qualitative data points. They're both very valuable. As I said, I'm a huge fan of Luke and what he's bringing to the table as it relates to, you know, I would say, you know, being as close to the Vanguard, you know, him and us are about as close to the Vanguard of understanding these dynamics as anybody I see out there in global financial markets. And I meant no words about that. I know that's not particularly humble comment, but again, you know, we're putting in the time in the hours to derive these conclusions. And we're, you know, waking up to Wall Street Journal op-eds and Bloomberg headlines that are basically telling global Wall Street what Luke and I have been telling you guys for many years. And so, you know, that statement was well deserved, in my opinion. But getting back into the question, you know, so a few things here. So our paradigm A3 framework, you know, we'll just quickly refresh A being the fiscal dominance perpetuating the treasury bond to sacred laborium, B being cut the deficit, C being grow, boom, the economy try to grow your way out of it, which is our current paradigm. And then D, which is default via debatement, it's kind of the logical progression. That's why it's A, B, C, D, and E. E would be major political realignment and total war. So the question is essentially asking, you know, will they be able to do enough, you know, paradigm C and D to eventually stave off paradigm E. And our opinion is unlikely. Obviously, it's hard to forecast something like major political realignment such as, you know, state nullification or a secession or, or, you know, the DSA and MAGA coming together to form one party, which in my opinion, is a pretty high probability outcome based on yesterday's labor share of national income dynamic. But that's neither there for this question. So in our opinion, we don't think paradigm E will be staved off by any of these dynamics, particularly in the context of what paradigm D brings, paradigm D is default via debatement. Inflation will rapidly deteriorate and meaningfully deteriorate a already bad nationwide affordability crisis. Recall that the bottom of the K is still in recession, by the way. We can't see it in the aggregate, because statistics, because us and the top of the K are doing so well that it's masking the decline in activity from, you know, we're interested in the sectors of the economy. You look at housing still in recession. You look at the low income consumer, median income consumers are still in recession, has evidenced by GFC type levels in charge of the link with C's for credit cards, autos, student loans, et cetera, you know, this is an economy that is very clearly two-speed economy. One's being obviously booming AI CapEx, also benefit from stock market appreciation and the favorable treatment of the capital income and the tax code relative to labor income. And then everybody else in the W2 class is obviously sucking wind from, you know, that disparate K-shake policy and another K-shake policies. And so, you know, in our view, we don't think you're going to be able to stave off paradigm E. There's kind of this thought process on re-valuing gold is neat. But the reality is that that's only going to make matters worse. If you re-value gold, gold is an asset. So there has to be a commensurate re-valuing of the liabilities, which means in order for the gold value to increase on the asset side of the balance sheet, you have to have a commensurate increase in the liability side of the balance sheet. That means you have to increase either the monetary base or the currency encirculation by the same amount that you re-value in the gold, which ultimately contributes more to the nationwide affordability crisis. That's creating political volatility in this country. That's ultimately likely to create geopolitical instability around the world at some point in the next five to 10 years, particularly in the context of the U.S. having violated Ferguson's law. So in summary, we don't think paradigm E will be staved off. I would be a fool to forecast, you know, with precision the exact date of when we will start to see major politically re-alignment and gearing up for total war. But I think anybody paying attention to me talk would have to be a fool to assume that that's not at the highest probability outcome based on the kind of drivers of these types of dynamics when you think about the cantalana effect, the reverse robinhood effect, the foreturning, and then the broader breakdown of the geopolitical disintegration that Dalio cites in his work as well. So we'll wrap it up there. Darry Steele here presenting our macro-minute for Thursday, August 27, 2026. I will not be here tomorrow, so we'll be catching up with you guys on Monday of next week. Everyone have a wonderful weekend, cheers. If you enjoyed this content, please remember to like and subscribe. Thank you. This content is for informational purposes only and does not constitute an offer or a solicitation. 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