The Consumer Cushion Is Almost Gone | Weekly Roundup

Added: 2026-05-15

[00:00:00]I I'm a believer that it is a bubble.

[00:00:02]It's just, you know, not every bubble is going to look the exact same.

[00:00:05]>> On a short-term basis, I do think we're like super frothy on the derivative side. If you get an unwind, it's going to be really painful, especially cuz I think retail's piled in here. So, yields are pushing above five. Oil's pressing above the highs. The consumer's smoked.

[00:00:20]Retails in the gutter across the board.

[00:00:22]Things are getting more expensive. And the question is is like how long can the consumer hold on before they tap out?

[00:00:27]And which which leg of the K is the one that is really propping things up here.

[00:00:31]>> I don't know how the administration doesn't introduce stimulus this year. I mean, but the bond market's already twitching. It's 2021 until someone removes the punch bowl.

[00:00:41]>> Nothing said on Ford guidance is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the company's funds or projects discussed. As always, investments in blockchain technology involve risk terms and conditions apply. Do your own research.

[00:01:13]All right, what's going on everybody?

[00:01:14]Welcome back to another episode of Forward Guidance roundup edition. The trio back as ever, always as ever.

[00:01:20]What's going on, guys?

[00:01:22]>> Howdy, howdy.

[00:01:23]>> Howdy, howdy. Howdy. Um, we should talk about the elephant in the room, which is that you guys are not bald yet, even though we've been talking about it on X this week, but well, I'm I'm gonna open up the floor to to this to this initiative you guys both put together. Tell me about it.

[00:01:41]>> You go.

[00:01:42]>> Well, >> yeah, you go.

[00:01:44]>> Yeah. I mean, it's a we we've been talking about it for a while like uh you know, we like to joke around on here, so uh make make good use of it. And I think we we get good feedback from the listeners. We figured we'd enlist everybody's help and support and and backing a good cause. So, uh, you know, this one's close to home for Tyler and we decided to make that the the donation recipient and try to get people to donate. We said we'd shave our heads, but I thought we were batting around like 3K, five like I thought it was going to take a couple weeks. So uh we we >> it's already done before the end of the episode episode aired.

[00:02:22]>> It was in eight hours after we put it out. It was crazy. Unbelievable, you know, community we have for that.

[00:02:29]That that's just super cool. So no, Tyler and I were going to try and coordinate in person to to do it, but I it might not work out. So next next week we'll for sure have have the buzz cuts.

[00:02:41]We we won't checking out.

[00:02:43]>> Yeah. Yeah. my wife.

[00:02:44]>> Oh, tell us about the about the foundation, the charity.

[00:02:47]>> Yeah. So, you know, Dell Children's is, you know, Austin based uh hospital here and Michael Dell created it. But, you know, specifically, it's hits close to home because my second son was born with a congenital heart defect. It was called transposition of the great arteries, which is, you know, your your pulmonary artery and your aort flipped. So, he had to have surgery uh when he was born and they flipped it back normally. And uh it's pretty incredible being in there.

[00:03:15]You we were in there for months. He has pulmonary hypertension and they've just been an incredible uh support system for us. And uh you know, thank you for everyone that donated because when you're not as close to these things and you know, we basically lived in the hospital for two or three months and then we'd go home and then you come back and you know, you you sleep in these places. realize most of these doctors and nurses and basically everyone there is just they're the heroes of society that no one really, you know, talks about on a daily basis. So, I wanted you to thank you guys for supporting this, too. And hopefully, you know, we can support um other stuff that you guys are, you know, hits close to home for you guys. So, anyway, uh before I get too emotional, thank you for everybody.

[00:04:06]Appreciate it.

[00:04:07]>> Yeah, man. So awesome. I I'm I got like >> almost a foot of hair here. So, >> mine might not come back.

[00:04:15]>> Yeah.

[00:04:18]>> Oh, man. All of it. You know, we uh we're out here just clicking buttons every day. So, it's cool to uh do those have have those clicking buttons go in the right direction for some good causes. So, super.

[00:04:28]>> I guess the reward for everyone who donated is next week they get to roast the living daylight.

[00:04:33]>> Oh, yeah. It's going to be great. Yeah.

[00:04:35]We got We need some good nicknames coming through.

[00:04:39]Oh, by the way, to the the guy uh who won the t-shirt the other week, I I went I need to tell this story. This guy named Tate, uh I went to go to FedEx to Fed to FedEx this thing. And like this is an incremental economy thing. They were going to charge me, he lives in Canada, they were going to charge me $140 for two days shipping to to do this. And I was like, it's a t-shirt. like it's it's the $10 t-shirt.

[00:05:09]How the heck are you gonna charge me $140? I was like, that's impossible. And the guy at FedEx was like, well, it's like a flat rate, blah blah blah. And I I was like, all right, give me the cheapest way to get there. Like, sorry, t but I'm not paying $140 to send a t-shirt to you. And but I could I couldn't like my mind exploded that that's the real inflation that we talk about every day. Yeah. and it's going through and at some point I don't I don't know I was like give me the cheapest route to get there and was still like $40 but so I'm going to go to USPS and send it from there instead. So sorry date delay delay because of it >> the straight of hormuse blame it on hor there you go. Yeah that's that Canadian US border is the straight of horses.

[00:05:53]>> Yeah.

[00:05:54]>> Yeah. All right. Um let's get into the swing of things. I want to start with talking about these monster earnings we've been experiencing and then tie that into the to the positioning situation of markets. So suffice to say, you know, you can have you can have multiple expansion rallies or you can have earnings driven rallies and this has certainly been underneath the cause. We we've talked a bit about where are these earnings really being driven from and obviously a lot of it is just the this this AI related thing but fact of the matter is is that profit margins are going up only right now and at the same time as well comes the the earnings associated with that. So, it's just been absolutely nuts and this is a great chart from Yuri Tim Fidelity who's a great guy, one of my favorite macro macro folks out there. And yeah, it just shows the the earnings estimate progression and how absolutely insane this is because um if you just look over the past decade or so, like the only real comparable like we're not going to compare 2021. that's just never going to like happen to go from like the world shut down to the world reopen. That's just a ridiculous comp. But the 2018 comp, we're right there. And the 2018 comp was coming out of a a pretty significant growth scare at the time. Um pretty close to a recession. Some may still call it a mini recession. Um but the fact of the matter is is that this one's coming off like the 2025 earnings estimate progression was the closest one to it last year. So, it's like strong earnings and then on top of those strong earnings, we're having even more absurdly strong earnings. Um, that seems to be to be the theme of of earning season here. I'm curious what you guys are thinking about this.

[00:07:35]Yeah, it's I think that's why the I tweeted and wrote about it last week why why this is such a hotly contested topic the bubble of of risk assets and stocks because you are seeing the earnings rise commensurate obviously multiples are back basically to highs and there's you know overbought conditions out there but I I'm a believer that it is a bubble it's just you know not every bubble is going to look the exact same like 2000.

[00:08:06]There's, you know, the Nifty50. There's all these different historical contexts, but this one's maybe a bit different because it's been able enabled by policy makers and the Federal Reserve and and fiscal authorities at the Treasury. So, it's harder to upend without uh policy change. And, you know, we'll see what Worsh does when he comes in at the Fed, but it's quite unlikely that he's going to reverse course too hard. Uh so yeah, they can last longer than than you think. But the earnings have been fantastic. You know, there's no doubt about it. Uh but whether that's sustainable is probably a different question.

[00:08:47]You know, the way I think about it is just the economy is undergoing some massive transition of we're actually getting reinvestment from the capex in from the hyperscalers and we're undergoing like a 21st century revolution and um I guess how our economy works and we're going you know through this this bumpy road. The one thing where I'll differ is like the fiscal definitely provides like a tailwind but there there is money coming from the debt for the hyperscalers. So I just wanted to go through a couple charts is slide 58.

[00:09:25]So all these things with the addition of you know monet monetary and fiscal policy are kind of pushing everything into the one trick pony AI economy. So, here's the um bonds sold this year, bond issuance this year. Uh we've already surpassed 2025 bond issuance. And then if you go to the next chart, you can kind of see um the total net issuance and HPC like the hyperscaler issuance.

[00:09:57]This is uh monthly. So, April, you could see the percentage of debt is coming from hyperscaler debt issuers. and they're actually coming out um oddly enough it's becoming such a big component of of high yield debt now that there this I don't I haven't heard really anyone talk about this but this was from JP Morgan but there is a a passive uh part of the high yield index that could get unlocked and buy some of this debt. So this this actually be a a massively bullish tailwind because if they recategorize part of the high yield market to buy debt about 80 billion of passive flows could come in and buy hyperscaler debt. So we could see this like this could be going on for a long time. Um and then you know we can talk about kind of the leverage. So check out um this is also from JP Morgan slide 60.

[00:10:57]This is last 12 months debt to ibida. So we're we're seeing debt go up, but we haven't seen that blowoff type where you get the defaults just yet. It's growing.

[00:11:08]Um and then the following chart too, you can kind of see the coverage ratios uh between public and private debt. So we're also in the public markets the coverage ratio is the bottom where Evid DA over net interest expense you actually have a lot of coverage whereas the private market there's only 2.3 times uh coverage. So a lot of the bad debt is sitting in private markets and leverage loans but like public high yield debt is actually quite stable. I mean think about it like there's a lot of cash flows coming from the hyperskalers that can pay it down. So my end point is a lot of that money that's raised from the hyperscalers is going into other companies like topline earnings and we're seeing like a reinvestment finally into like a new growth frontier backed by the government. It's just it just feels imbalanced. I guess you could say the same thing probably happened when we went from like you know horses to to cars, right? You saw all that investment get sucked in. Maybe that's a good analog for this. Um, my my the scary part is I go back to that scimitar capital thing we tal about is what happens to the the humans like we're not thinking about this as like a you know when you go from uh cars from horses and the horse population drops off I I get that they're horses right but if you do that with humans like what is what is the the policy we're going to come up with we need to start thinking about these things and that's I think we can we can kind of take it from there But that scares me.

[00:12:40]And then on a short-term basis, I do think we're like super frothy on the derivative side. So, we'll get into that after. But we'll stick with earnings for now.

[00:12:52]Yeah. I mean, I guess the big question is like where does the next leg of uh I don't know either marginal capex or marginal demand come from? And what's been really interesting to me is seeing what's been going on with this uh China US summit with Trump and Xi Jinping. And you know, there's a lot of there's a lot of speculation in the earlier part of the week that all eyes were on whether Nvidia CEO Jensen Hang was going to be on that trip or not. And initially, it looked like he wasn't going to be. And then last second he uh hopped on a plane in Alaska and then hopped on to Air Force One and now there he is. And obviously the the big reason that that's important for understanding where the you know the the next big hyperscaler trade or what have you goes is that the big question at hand is whether they'll allow Nvidia chips to be sold into China. Um because if that happens obviously like the there's a lot of runway for Nvidia which therefore means there's a lot of runway for equity indices because of how much it's it's benchmarked to it and just like how it trickles out into the other parts of of the totalable addressable market. So, it's been really interesting to see some of the the you know, we don't have any any fully verified outcomes out of the these meetings yet, but it is looking like they'll be able to sell some sort of legacy chips to to China. Obviously, they're not going to sell the the state-of-the-art, you know, Blackwell chips or anything to China. But, it does look like something's starting to percolate there, which I find quite interesting if we just I've been thinking a lot about this this flywheel for how the the economy and and the markets stay propped up. And it's just like there's all this there's this AI trade which leads to equities up which leads to uh you know the top line of the the the K-shaped economy to keep spending and and disave and and lower down their savings rate. I have a few charts to go through it later. um but they feel confidence to spend because their portfolios are going up because of the fact that there's like this demand for for the AI builder and it's just this loop and this loop in this loop and it just feels like the uh I see runway for this next move here if it does happen. I'm curious what you guys think.

[00:14:56]>> I don't know. I I'm kind of shortterm I see a lot of chasing and I'm looking at a lot of the >> Oh yeah. derivative like short term I'm I'm with you but yeah.

[00:15:05]>> Yeah. like it scares the hell out of me.

[00:15:07]Like I'm fine.

[00:15:09]>> What the these type of things, this is just, you know, talking, you know, personal investment, but like >> these type of things at the upside, I'm happy to let you know, retail take GameStop to infinity and not chase because like what what kills me is when you wake up and something's down like 10%. Uh but there was this guy um one of one of the the guys at Goldman. This is there are two good charts I have to show. It's uh slide 63 and 64. Um they're this is the levered long ETF AUM. So basically, you know, these 2x 3x levered semi products just went parabolic. So I'm wondering like how much of this is priced in you know long term they're probably fine right like these this is the major component for AI but short term you know you see something go like parabolic and I'm looking at a lot of the volatility metrics where the implied V is in the like 90 plus percentile relative to realized volatility.

[00:16:14]>> Yeah.

[00:16:15]>> And it really makes and then go to the next one. This is the gamma. So the gamma is the rate of change of delta. So like if you get a disappointment in this sector, I mean it could keep going. You could get more GameStop type phenomenon, but it's a bipolar distribution at this point. If you get an unwind, it's going to be really painful, especially because I think retail's piled in here. So there's there's probabilities of um you know blowoff, but you have Nvidia earnings next week and that's going to be like the World Series of you know you have so many catalysts and I just you know this is like when the insurance is high you sell the insurance type scenario.

[00:16:55]>> Yeah.

[00:16:55]>> But it makes me nervous in the short term is what I'm saying.

[00:16:58]>> Yeah. No, I fully agree. Like I'm talk when when I talk about selling the China, that's like a two-year thing, but like short term it's like yeah, this is pretty pretty extended.

[00:17:07]>> Yeah.

[00:17:09]>> Yeah.

[00:17:09]>> Yeah. I think it I mean I think it's all priced in and I I think that this is just mania. Like there's there's no other rational explanation in my view.

[00:17:20]But the beauty of it is like I I'm not a chip memory or you know Korean stock market expert. So there's a thousand other tickers I can play in whether it's FX, commodities, and bonds. So I I'm I'm enjoying my pool outside of that and trying my hands at tactical shorts where I think it makes sense. But >> there was a great tweet where is like for what it's worth somebody said like my my uncle has been great at he's been the greatest contra indicator on every single trade for the past like five ten years and he just asked me about buying semiconductor stocks like >> I mean yeah the the e the easy money is done for now like I don't know I mean so here's another one I want to show from Nimura Charlie Miguel he always has some great microstructure stuff too. And this is just looking at NASDAQ skew and volatility. And I don't know if people remember like the the first reason I got sort of bullish a couple months ago was when we were looking at put skew and just how ridiculous it was in the opposite direction that you see right now. Um and I mean you can see it in these charts, right? Like look at where in in the bottom left three-month call skew in the cues was just like end of March, you know, it was it was way way way down. It's just like, okay, regardless, everybody's way too protected here. Um, we got to go, we just got to have this relief. And now it's the complete opposite where you can see like call skew is at the highest, put skew on the bottom right there is at the lowest. Um, things like the derivatives data has completely flipped upside down very, very quickly.

[00:18:58]This is where you get in. We talk about this a lot, but gambling markets when you make zero days till expir options and retail can buy those for next to nothing. That's what happens. You have a bipolar outcome where things just go to massive extremes and you're you it's a weird combo if you really you know that chart Quinn posted of labor and capital.

[00:19:22]So you have like the centralized economy of capital, right? And then labor basically pushes these things in massive extreme directions because the centralization. So I think that's really the market structure. Yeah. Is is showing itself in the derivatives. This is why Theres are way more important when you have like that centralized um liquidity and then you have this this man manic depressive uh labor component whipping things around for for cheap until until they break, right? How did the housing market break is when you know the the labor pool essentially levered up on on homes and then got taken to the cleaners. So maybe that's a good transition for kind of what you wanted to talk about, Felix, right?

[00:20:10]>> Yeah, let's talk about it. Um, yeah, let me get my slides here. Yeah, the the retail sales data came out today and it was quite illuminating to see and understand how consumers have been reacting to this oil shock because you know when you have gasoline prices surge like they did over the last couple months, the the first question goes which is just like how much can the consumers absorb of this? What do the substitution effects look like? When does it turn from inflation to demand destruction because they no longer can go on the road trip that they're hoping for the summer and that sort of thing and then maybe they stay at home? All these sort of questions. So, we got some retail sales there starts to paint a picture here. Um, and overall remember that retail sales is a nominal metric.

[00:20:52]It's it's not real. Um, so have to keep that in mind when we look at this. But what we see here is that again even though it was pretty strong on a nominal basis a lot of that was related to gas prices to gasoline. Um interestingly enough some stuff there around electronics and sporting and hobby what I find really interesting is just looking at the tales here of okay gasoline up that much and then at the bottom here it's just all discretionary spending. So, autos, clothing, furniture, department stores, you know, right off the bat, we're starting to see that there is that shift in in the composition of of retail spending. And obviously, this is all still mostly goods space. It's not as clean of a look into services, but regardless, you can see that the shift is starting to occur.

[00:21:36]Um, and so again, that's on nominal basis.

[00:21:40]When you look on real terms, okay, we got the CPI prints this week. Well, we got inflation. We knew it was going to be hot. it was still hotter than what was expected. CPI month overmonth was 6% and then you know you have retail sales headline of 0.5% um control group of48%. So on real terms we actually have a negative prints on on on retail sales it was just nominal due to inflation. Um and again you can see this across the board PPIs came on way above consensus import prices everything that were imported that's all been surging. um across the board things are getting more expensive and the question is is like how long can the consumer hold on before they tap out and which which leg of the K is the one that is really propping things up here and I think what's um folks remember a couple months ago I went through like a little bit of a presentation looking at just this the big beautiful build tax refund component that was going to happen and how it was going to lead to this big uh stimulus of of short-term spending and an impulse there and so in instead of it being the stimulus or this impulse it's more so acting like a shock pocket absorber where when you just see that uh total man refund being $47 billion this year quite significantly above uh above last year's is that instead of that just being the stimulus it's acting like a shock a shock absorber instead. So you can see that, you know, even though energy prices are surging, consumer spending is is having to shift into just having to spend more in energy, it's it's that shock absorption, I think, of of the uh the tax refunds that are really holding people up here and why we haven't seen things deteriorate as much as many people thought. And then at the same time too is that people have been disaving. uh talked about this yeah early in the show which is that okay even though you know for the past few years until like maybe a year ago we were living in this regime where a lot of the growth of the economy was was income led incomes were were surging uh people were doing well and then we saw you know people's savings rates increase and that whole thing and that's just not the case anymore. we're we're we're seeing more so the opposite where consumption is being, you know, overcome by by what uh consumers are bringing in in terms of income. So the net of that is that they have to draw down their savings rate and they feel confident to do that because their their 401ks are just up and to the right. So as long as the equity prices stay up, they feel confident to to lever up and spend. Um and you can see that too just in this last chart here that I'm going to find um is that on top of that. So you have one the tax refunds you have two uh the levering up of of their or the the saving of their savings rate because of equity prices going up and then you have the levering up of their balance sheets as well at the same time. We're starting to see credit card um percent of balance of 90 days delinquent that's starting you know people are getting stretched in that regard. So, it's like this interesting vacuum that we're in right now. We're all three of those. Um, you're starting to see it in this data here of the delinquencies as people lever up.

[00:24:43]They're starting to just save. But, you know, you got to wonder how long is that sustainable? Not that long. Um, so really the only thing really holding this up is this tax refund that just was it was this nice coincidence that it hit right around when the Iran war started and you know everybody got this nice instead of again instead of a stimulus check it was a shock absorber. Um, but now you got to wonder what comes next, right? Like if gasoline prices stay this high and then consumers deplete those tax refunds, [ __ ] shit's going to start getting real.

[00:25:16]When you see delinquencies already up at the highs like this, it's uh you know, it makes me wonder about the runway.

[00:25:22]Yeah.

[00:25:23]>> You know what also is how many of these people are yoloing QQQ calls just to make up the gap? You know, like these things >> when you when you create a Ponzi and everyone is levered to the Ponzi, >> then it's like self-reinforcing, right?

[00:25:43]It margin debt goes up, then the only way you can stay ahead is if you lever up and you know you stay ahead of the inflation. If that's these things can be uh proyical where you know on the way up that works but then on the way down it it causes like oh [ __ ] I have to my personal balance sheet is lever to the market now I have to cut cut expenses and it's like a snowball effect.

[00:26:05]>> So I you know that's something to look out for if this ever does turn. I mean maybe it doesn't and AI is that productive. um would love to believe that and but it and a part of me thinks it it could I'm I'm very open to that as well. You know, a lot I think a lot of those stocks get bought even on on a dip just because it's backed by the the hyperscaler debt which is pretty much we know that for the next two or three years they're going to do it. So, it's uh battling those those those uh different timelines is really hard. Mhm.

[00:26:39]>> Yeah, I think it's pretty obvious at this point what's happening to Main Street. You know, the Dow Jones and the equal weight S&P 500 haven't broken to new highs. Only the tech weighted Q's and and S&P 500 market cap have. So, it's quite clear they're I mean, if you look at the NASDAQ to equal weight or NA like any Main Street index, they're crushed. Regional banks smoked. XRT retail smoked. uh JP Morgan getting like any business like tied to the actual health of the the consumer and average person is is getting crushed. Uh if you go to slide 47 Felix there's this chart too which the the bottom part of the K the majority of people in the you know country main streets been in a recession since late 24 or early 24. And now throw on top of this cuts pushed out. So the front-end borrowers that they are uh their financing costs continue to be elevated while the Fed's balance sheet suppresses the long end which helps the mega caps. And now you're getting this inflation spike that is putting real wages negative. I mean, Besson and people would point to Japan as having negative real wages and their their citizens getting crushed by inflation.

[00:28:04]Now, it's on our home turf. And if you go to the next slide, I thought this was really interesting. If we averaged uh, you know, just a a 2.4% 4% uh inflation rate going forward. The year-over-year number doesn't get to a 2% rate until a year from now, which is basically just saying that the the base effects of this huge energy surge are, you know, they last for for a year since when it started. So, I mean, when I go through think about what I'm looking at and then what you pointed out, Felix, like I don't know how the administration doesn't introduce stimulus this year. I mean, but they don't the bond market's already twitching. So, it's a really tough predicament because that they've completely done to themselves because by doing all these liquidity measures that they've done to support stocks, it's killed Main Street because they can't cut rates now because inflation's a problem. Again, they supported the long end. So, the market won't correct uh and and actually provide the inflation suppression and growth suppression to get the cuts. So, it's it's totally by their own doing, but it's it's a nightmare because the bond market, if they want to do stimulus, which is one of the reasons why I'm I'm very very concerned about or not concerned about, I just think it's probably going to happen is the export controls because that's something that would instantly stimulate the consumer, provide a huge relief. If you bring, you know, US gas prices at the pump way down, it would screw over everybody else in the world.

[00:29:45]But when push comes to shove, like it's a lot of these things are lining up pretty nasty going into midterms for for the consumer. So I they're just going to be throwing the kitchen sink. If they did that though, I feel like the carry trade would unwind, which maybe that's what we're seeing here with the yen. the yen, no matter what they're trying to do, keeps bumping up like close to that 160 level. And the dollar keeps going higher and higher. And I think, you know, we're we're getting we're obviously getting that 1998 Asian financial crisis influx into US markets, but there's a lot of funky stuff, you know, percolating as well.

[00:30:26]>> Totally. I mean if they did if they did a policy like that I think that causes like you know oil goes skyrocketing and you know non US >> well yeah but elsewhere but then how many people repatriate because they now have to you know that that's the unforeseen circumstance.

[00:30:46]So >> that's what that's what that that's this is the ramifications though of the policies that they've chosen to support stocks at all costs because you create these trillemas or quad lemmas or whatever you want to call them where you can't solve everything and eventually something you thought you were in firm control of you no longer are. So I mean >> yields are pushing above five. Oil's, you know, pressing above the highs. The consumers smoked. Retails in the gutter.

[00:31:19]And you have the their chosen sector of AI, you know, at all-time highs and the, you know, the oligarchs. And I mean, it's insane. Like it's it's so opposite of what Trump was elected to do. like it it could not be more opposite of a for the people populist policy strategy. I mean it's it's it's a nightmare. Um so yeah, they they they're going to have some tough tough uh tough decisions to make for sure.

[00:31:54]>> Yeah.

[00:31:54]>> Here's another good one since we're bumping up against uh you know 4.5 on the the uh 10-year yield. Go to slide 57.

[00:32:05]So in the face of all the you know the euphoria I'd say this is kind of interesting this is from Piper median weekly S&P return when 10ear is rising by level so you can see like what when the 10 years below 3.75 the market's up 1%. But once you get to like you know 4.25 25 to five the med median weekly return for the equity market is you know negative so we're we're bumping up against that J you know Japanese yen 160 level we're bumping up against the you know 4.5% tenure the dollar is breaking out and like and then you have like balls to the wall yolo call options in a lot of this stuff and it's just like there's that just makes me nervous but um you And I think to be fair when you get the skew like you said Felix to the downside where people are buying puts now everyone you know it's almost reversed where everyone's long calls. So just you know be prepared because there's the macro is not saying game on like used to.

[00:33:14]>> I mean this is this is the kind of what I'm seeing is is this chart from from Auger that looks at their growth and inflation surprise index compared to the 10-year. And you know it's like they've they're throwing everything at it to keep it suppressed here. keep the keep the tenure below five. And um you know, you got >> you got Besson who's pulling out every yellomic trick in the book and he's he's he's maxed out there for a long time.

[00:33:39]Um, and yet here we are where we're looking like we're about to go into a hiking cycle where the 10-year starts that hiking cycle at a 4.5 handle is like how do you how do you navigate I don't know like I mean when you look at the just obviously it's a bit of a chart crime sometimes you know people think to do these double charts like this but look I mean the 10-year yield should be higher right now. Come on.

[00:34:03]>> Well it's I mean inflation's going to print over four and real growth is over two. So I like that six to seven nominal GDP growth. It's like clearly there's it's capital C capital flows has actually had a good perception of this where he said you know you're basically have negative real rates. You're you're getting close to negative real rates here because you and growth is ripping.

[00:34:28]So you know that could lead you know it's a new regime but it you you might as well stay in equities in a lot of sense. That's a good contra to to all this is if growth is just that good.

[00:34:41]>> Well, that's why I think and that's what I've been like we've been talking about this for a few weeks now. I It's 2021 until someone removes the punch bowl.

[00:34:51]Like that's just what it is. Like we >> Yeah. So you can that's why I've just been I don't want to gamble at the casino because I I think that I don't know when the punch bowl's going to be removed because sometimes policy makers remove it and sometimes it's removed outside of their own hands and not by choice. So for me it's like play commodities which you benefit from inflation protection and the running it hot of growth and be short bonds as your hedge and because all the easing all the suppression all the stuff they do it makes the problems on the long end worse. So, as long as you're not betting on zero DTE on TLT, uh, and you're structured your trade so you have time to to watch, you know, for it to play out, like there's one path that this leads. It's just a matter of time horizon when they allow free market forces to take hold.

[00:35:47]>> Yep. Yep.

[00:35:49]>> Yeah. I mean, it's a tough one. I I don't Yeah. I don't know. It's um I mean you have wars coming in now, June meeting coming up. You have rates markets are starting to price in hikes.

[00:36:05]I mean what's going to bring what's going to take the punch? Yeah. I mean maybe maybe bond yields higher. Like you said the market will, but I just don't really see any sort of real commitment or signal for the like it's going to take a couple meetings for Worsh to get a handle on things. He has the most divided Fed already that he's coming into. Who knows what Powell's going to be doing when he's voting, right? Like there's just so many uncertainties that I just feel like you're not going to get that committed resolve from the Fed to take the punch bowl away at this juncture. So like what do you do?

[00:36:34]>> Well, that that's true. I don't I don't think they're hiking anytime soon. Um but >> you are losing Moran who was the dub biggest dub and you're basically replacing him with >> a centrist. I guess you could call War or whatever he is. I don't know. uh pragmatist hopefully. Uh but the I mean there's a world where if they just did what Besson and Worsh and all these guys said they were going to do around the balance sheet that would fix everything. If they actually let the long end correct this yield curve steepen and just let equities come down a little bit, you could correct this situation and actually pave the way for cut like a cut or two cuts in the next 12 to 18 months if they let the long end and that would even out the economy and help Main Street and that would you know it would be a headwind for stocks. But like there's multiple ways to get there.

[00:37:31]I think it's just a matter of their resolve in doing so. But if you look at the last meeting minutes, even prior to this FOMC, next week we get the latest minutes, they were already the committee is wanting to transition to a more hawkish stance. So I I think like the writing's on the wall. Not that they're going to hike in the next meeting. I don't I wouldn't even bet money that they're going to hike before the election, but they have to tighten up somewhere. You would imagine. I I would You know what? This reminds me of you remember in 2021 when it was so obvious to everybody that inflation was surging and they need to hike but they kept doing QE for 6 months. I feel like we're in that same regime >> where like just the bureaucracy of getting a new Fed chair and all this crap also. I mean to to a point that was also around the time where Powell was gunning to get renominated by this by Biden to be the new the new Fed chair.

[00:38:23]So that's why he was being in this super easy bias. It feels like there's a lot of repeats there where we're just gonna we're going to have this runway where inflation gets worse and because of the bureaucracies associated with it, you get this six to eightmonth runway before before the rubber meets the road.

[00:38:37]>> That's why I'm in commodities and bond shorts because I have no idea when cues.

[00:38:42]But if you go back to that time period, >> if you XLE risk adjusted over the next 12 to 24 months from from that time period outperformed any >> dude, I'm so long XLE right now. I'm with you. careful though because it's super US focused. So make sure you but I just using as a oil and gas proxy but >> like so for me it's like I don't want to bet when the when the dealer's going to, you know, crush crush everyone and the house is going to take all the chips. So I'm just sitting in these things that benefit from the inflation and not the gambling. But you're right, Felix, it it is >> I'm also gambling. I I own I own the oil producers, but I'm also gaming gambling in the chips. So barbell it.

[00:39:24]There's a good write up from Ral. Um he said this in his GMI. He said the most important variable in the macro environment over the next decade is whether monetary policy obstructs that routing or accommodates it. A Fed that fights the AI buildout with restrictive rates strangles a substrate transition the entire economy global economy now depends on. A Fed that accommodates it lets the productivity wave do its work.

[00:39:49]So like he's you know he he's you obviously we know he's full balls to the wall long this stuff but you know I just can't politically imagine that they would be dovish now and and to a certain extent it's kind of counterintuitive maybe if you if you lowered interest rates or jawbone them lower you might have that productive capacity come online and then supply would would match it. It's like kind of counterintuitive to think about like the more you actually tighten rates then you have the the retail crowd and XRT and like all the you know the the the labor kind of backed companies just fall out of bed if you actually tighten and then the credit crisis hits because like all those things credit cards student loans blah blah blah that that hits the fan if you tighten but and then the end of the cycle happens but if you do the counter thing we'll see we'll see from Worsh where Yeah, if >> he does ease or stay cubrious, then >> I mean I'm a I'm a I'm in the AI believer camp. I think people know at this point, but I think it's the sequence of events that matters. I think we got to get through this hiking cycle first. I think we got to get through this like, you know, inflationary spiral compute, you know, hard materials crunch first before the the benefits of deflation from, you know, a productivity boom come force. That's like a that's in a couple years. I I feel like we just have this interim and people are forgetting about the first part until and just looking at the second part. I mean in that frame if you could you imagine I think and Trump is good at this ending Iran really fast oil implodes China there's this you know copathetic moment where you hug it out and say hey we're going to work as like you we're going to be competition on the not not a war front but a you know a global trade front >> capital front. Yeah. and then you get this massive unlock of maybe it becomes disinflationary from commodities at that point. That's possible, >> but I don't I we'll see what happens.

[00:41:58]My only point is like to what that Ral quote is like that sounds good until inflation's above four and then pushing five and real wages are negative and like sure let's make Sam Alman a trill a two trillionaire instead of one trillionaire and just sure great AI is like off to the races but then you have 95% of the people just drowning on that point.

[00:42:23]>> Yeah. And the midterms coming up and all of that. Yeah. Yeah. Go to slide 50, Felix. I I um I found this interesting and no one's talking about it, which is surprising to me how so tariff revenues are in a straight line down from their peak in October. They're down 30%. Meanwhile, import volumes are up. So the effective tariff rate, if you go to the next slide, the effective tariff rate there, you can see it. We peaked at 31 billion a month in October.

[00:42:54]We're down to 22, but that's on higher trade numbers. The effective tariff rate is from 13 to 8 right now. So, and before Trump's, you know, big liberation day, it was like in the two to four range. So, it's like >> he's unwinding this like whole policy agenda item under the under the surface without making a big deal. Effectively, more expensive and hurt Main Street.

[00:43:23]But with he doesn't want anyone to talk about it, right? He does doesn't want anyone to to mention it because it was such a failure to the to the polls and his approval ratings. So they're just basically unwinding the tariff policy overnight. So that's why I was writing like, oh, Trump's g people the news was saying Trump's going to go to China and make a grand deal and all this stuff. I was like, I mean, sure, but if you just look at the data, he's already walking back everything he, you know, caused caused this huge ruckus about, which is pretty wild because when you compare like h China hawk to like no wars to to main street president to AI president, China buddy and starting wars is like >> look that just as a just as a Canadian bystander Er, I found it a bit rich when all the Americans were complaining about Carney buddying up to China, but when Trump does it, it's okay. Just saying.

[00:44:20]>> So true, dude. So true.

[00:44:23]>> Everyone's like, "Oh, Canada's co-opted by China." And then it's like, "Oh, let's go make let's go sell some Nvidia chips to China." It's like, come on, >> dude. It's all, you know, I've been thinking about this a lot lately is like if you think about what it takes to be a politician in the public eye. Like think about our crappy little podcasts where the heat we get from people of like you're wrong, you're a [ __ ] blah blah blah. Like if you're a real politician, you need to be a sociopath because like >> you like that's probably like the number one staple is like you you have to have like some crazy part of you where like people they will tear you apart and find every little skeleton in your closet for the past 50 years. Like you have to be a psychopath to just deny like all your flaws and just sit there and be like ah yeah, you know what I mean? So, it's just part of the cycle we're in now.

[00:45:18]>> Do you think they've always been that way? Like always, always >> not everyone, but a lot. I just don't know.

[00:45:26]>> I think it es and flows. I mean, >> yeah.

[00:45:28]>> I don't know. I Yeah. On on a recent uh air I was on a recent airflight and I was I was watching the Winston Churchill movie and man, that guy was just he was a guy for his time and place. That guy was a so sociopath, but he was a sociopath at the right time. you know, they needed they needed a guy like him at the time for so I mean it's like it just depends on on what the world or what the society needs at the time and and suddenly you just need an insane person like that and he's a like oh my god I we also need more guy like I don't know >> maybe that sociopath but it's like someone who believes so deeply in their reality that like they can block everything else out it's it's fascinating >> just yeah stick to your guns and have conviction I don't Yeah >> I had there was a great this is probably too psychological. But Deion Sanders had to create he's like I had to create Showtime like but a whole another persona to deal with it. And a lot of the celebrities actually do that. They they create like Michael Jackson was really shy and whatever, but then he created like a whole other persona when he'd go perform. It's probably the same thing with a lot of these uh the politicians, too. I I don't know. I I just want to know who who's advis I mean well I know who who's advising Trump on these policies because they're all they all benefit one very particular cohort of people which is the very wealthy elite. Uh you know notice how we pro no one I haven't heard the word Epstein in like two months since he started binging Iran. So >> uh I guess that's they all the elite see that as a win. But uh Sanders and AOC it just introduced a bill to halt all data center all AI data center construction and so >> dude that's so bullish that's so bullish for for so many things.

[00:47:20]>> Yes. But if you are boots on the ground it just seems to me that there's a layup here. I if we if you believe that the the country and world for that matter but focus on the US here is moving in a populist direction towards towards you know more fair and equality principles if you agree you know that's why Trump was elected because he promised to do all these things if you agree the electorate is doing that if you agree that boomers are aging out of the voting base and millennial younger people genz coming into the voting base um then there's kind of a layup here for for populist Democrat or anybody that's doing anything opposite of what Trump has been doing. And so that's what I'm I'm just thinking about like it it just I mean we're probably setting up for a for a lame duck of all lame ducks because you know if they if they lose control which they probably will at least of the House Senate they might win. Um it's just there's nothing going to happen. It's going to be ugly. I mean, but I just can't believe how little It's surprising to me how little this administration is caring even six months out from the midterms about Main Street. I I that's that's really surprising to >> Yeah, >> because they're not one there is dumb.

[00:48:40]>> No, they just Yeah, they don't care about the midterm for one reason or another. I don't know. Yeah, >> but they do. They have to like It seems I mean I don't know. I can't I can't square the circle.

[00:48:54]>> We'll see. Maybe it's a global peace dividend before then and you know all the polls start, you know, turning up. I did I did think I nailed the bottom when I said I'm so bearish on Trump that I'm bullish because like these things are always a little bit cyclical. But >> for sure yeah might be a dead cat bounce in that soon.

[00:49:11]>> You know what is funny? I I listen this was actually a really good interaction.

[00:49:15]It was Shawn Ryan with Joe Lansdale and they both had like really good points.

[00:49:20]Like Joe Lansdale kind of framed the reason why we should be in Iran. He's obviously like huge, you know, American defense um pro pro like American defense uh person. And then Sean Ryan was like, you know, I I actually served and my buddies were killed in war and I don't want us going back after we butchered Afghanistan and Iraq. And like Londale was kind of like, you're kind of right about that, but this is also really a regime that's that's really really bad.

[00:49:54]But my my point is is that Sean Ryan was also like, and you know what really gets under my skin is Epstein. It's like that was just, you know, completely, you know, everything about it and then now we just don't talk about it anymore. And and it's so true. And I think when it comes to voting time, people kind of remember that stuff even though it's, you know, stayed out of the the mainstream narrative. It's not like like we all know. It's almost like you now know that this has all been happening to everybody for years and years and years and you can't really do anything to change it and it's just the way it is.

[00:50:30]It's just kind of like it's always the game's always been set up for capital to actually stomp on labor, but and and that piece now we know. So I think labor is just going out and yoloing calls and being like, "Well, screw it." Like that's you want to we'll play that game.

[00:50:45]We'll play your game.

[00:50:47]>> I think that's true to very I mean the problem is that most people don't own stocks and can't even afford to play the game. It's >> I know. I know.

[00:50:57]Well, you can't some some some to some extent you can on like Robin Hood.

[00:51:02]There's zero commission, etc. It's been way easier than it ever has been before.

[00:51:06]>> Yeah. Yeah. Yeah. It's it's it's >> you still need the money to put that in there.

[00:51:12]>> Yeah. True. Very true.

[00:51:14]>> Tough time.

[00:51:15]>> Yeah.

[00:51:15]>> All right, Jens.

[00:51:17]Think we can leave it at that. That was always a pleasure.

[00:51:21]>> Next week we'll be bald and really Yeah. My wife's like, you know, your hair might not grow back. Are you sure you want to do this?

[00:51:32]All right, I'll just grow out some facial hair and like, you know, wear start wearing like a necklace and get some tattoos.

[00:51:39]>> Wow.

[00:51:40]>> Yeah. Yeah. Next one. When we're bald, then the next one is uh >> if if you get a tattoo, if if we hit the donation marks.

[00:51:49]>> Yeah. Now, we need like if we hit 10 grand, let's add on this. We gota we put put some comments in. what what we have to do because if we hit 10 grand, I think we gota maybe we'll throw a dinner on us for I don't know >> if if we hit 10 grand by next Monday or Tuesday or something, I'll fly I'll fly to Austin to do it live with Tyler >> and we'll record it if we hit 10 grand.

[00:52:16]>> Let's do it. Let's do it. So, donate link in the link in the bio.

[00:52:22]>> Like and subscribe.

[00:52:23]>> Do all good stuff. do all those things.

[00:52:26]>> Hell yeah. All right, guys.

[00:52:27]>> All right.

[00:52:28]>> Have a good weekend.