The Tech-vs-HC Gap, Private Credit's Bermuda Triangle, A Fragile Ceasefire and the Path Back to Cuts

本站添加: 2026-05-30

[00:00:03]RENMAC offscript originated as a weekly internal research meeting designed to summarize and discuss what happened in Washington, the markets, and the economic data over the past week. It was always intended to be and remains a free- flowing conversation with no discernable objective other than to extract the wisdom and opinion of our analysts and their expertise. This is a conversation among colleagues.

[00:00:25]Individual circumstances are unique and nuanced. Do not mistake these conversations for investment advice because it's not. Here we go.

[00:00:36]>> All right. Welcome to Renmack Offscript where we openly discuss markets, economics, policy, history, and life. It is Friday, May 29th, 2026. I'm Steve Duttonoffer.

[00:00:46]>> I'm Jeff Degraph.

[00:00:47]>> I'm Neil Da.

[00:00:49]>> And I'm Steve Pavle.

[00:00:50]>> Well, I think we got to start off talking about the uh the equity markets at all-time highs. Although I see Jeff and what was it? Terry cloth. What kind of shirt is that?

[00:00:59]>> It is. I >> Yeah.

[00:01:02]>> What is this? You go you go out to Coachella.

[00:01:06]>> That's exactly That is You hit the nail on the head. I'm in Palm Springs and I'm a little short on clothes and my wife's I'm like, "You know what? This got such a 1960s vibe out here. I'm going for it." Not only that, but my wife comes back and we're having a 1950s party tonight. So, you're supposed to dress up like you're right out of 1950s. I don't exactly what that means, but I think this shirt probably works.

[00:01:29]>> Yeah. Well, this shirt's going to go just fine >> with the martinis and the and >> Weren't you born in the 1950s? So, you can just go as yourself, right?

[00:01:39]>> I I wasn't, but it was close.

[00:01:43]>> You know, that's a little too close to home, Neil.

[00:01:46]>> Damn it.

[00:01:47]>> Well, I can't wait for next weekend or next week when we talk about your 50s party on this podcast. It's going to be good.

[00:01:53]>> Yeah, we'll see. A lot of stuff. I Well, my wife's like, "Can you make martinis in a in a batch?" And I'm like, "That seems like a terrible idea." Like, I you know, you're not serving I mean, you can I guess you can serve martinis at a party, but like you have one and you're already, you know, halfway to the moon and you have, you know, you have two and you're at Mars.

[00:02:11]>> Those glasses back in the 50s and 60s for the martinis had to be smaller than they are now, right? Probably.

[00:02:16]>> These guys would do like the two and three martini lunches.

[00:02:18]>> It's like McDonald's. They super size everything now, right? So, yeah, that's probably right.

[00:02:23]>> All right. So, let's talk about those equity markets, Jeff. Uh, how do you play this? We're at all-time highs. What do we do?

[00:02:29]>> Well, um, look, you've got, uh, you got trends in place. Uh, breadth is kind of mediocre. It has improved since last week, but it's not, you know, it's not stunning by any means.

[00:02:40]>> You know, I'm trying to be the the, uh, the sober driver here, you know, at the Speaking of parties, right? Yeah. I'm trying to be the sober driver here at parties, which means I still want to play. I still want to be at the party, but I, you know, I want to be able to drive home, too, right? So um you know one of the things that that we um we published in the last couple days here um is this relationship that we have we have this model that we call SERM which a standardized excess return model um so it measures how much return you're getting per unit of risk and we'll offset those so sectors versus the market industry groups whatever doesn't work that well for individual stocks but it works for industries and sectors anyway. So we use that um against each other and we've done that for say discretionary versus staples. you can get some sense as to where that rubber band is likely to revert. And um you know here this week we've got um we actually had healthcare equipment um versus the market in its worst condition since the late 1980s. So you've had you you have not experienced this bad of return per unit of risk which is even a bigger disaster um in healthcare equipment since the late 1980s. But the real punch line is if you look at tech, this is equal weight, but you look at tech versus healthcare, that disparity is as large as what we saw back in 2000.

[00:03:53]I know there's a lot of 2000 parallels are getting thrown out there, but what I would say is that you know when when you're looking at um you know taking profits or trying to reduce exposure if that's your game uh in tech, the logical place in our view is some of these breakouts that are developing in healthcare. Now some are premature and we'll see if that happens. you had a big day in Agyant yesterday and some of these uh life science or yeah life science tool names um that you know didn't break out but they were they were big days uh and that's pretty typical of something that starts to develop when the group is washed out. So, I like that this isn't a New York term call. This is kind of a thinking the next three years.

[00:04:29]And, you know, one of the things that that we've been wrestling with is um is AI going to start to transition from, you know, the producers of AI, the Claud, Geminis, etc. Microns, um to those that are the beneficiaries of the usage. And I don't know if that's going to happen or not, but um certainly that's something we're keeping uh on our radar. And I think you've seen it in biotech and I think you'll probably start to see it in some of the healthcare names. So, pharma looks pretty good to us. Um just, you know, we can talk about semis all day. Um there's not much to say other than they're, you know, they're going up. They're high momentum names. They're getting into nosebleleed, you know, kind of thin air.

[00:05:04]Um and as uh uh Chancellor said, I think I put it in the daily today. Um in his book, Devil Take the Henmost. Um what did he say? He said, "Capital chases the parabola until there's nothing left to chase. Then it goes looking for the rooms nobody wants to sit in." Uh and I think that's, you know, that's uh uh really a a shorthand way or a long-hand way of saying well we were talking about the SER model between healthcare and tech right so um I think you play it you know you're we're there I'm there uh personally and as a friend of mine said I had lunch with him uh last week he said so what you're saying is you play it until you know until they crack and then you go so you shoot them in the back I'm like well that's a that's a crass way of saying it but that is true you know you you go as long as you can and then you shoot them on the way down you don't shoot them on the way up so anyway that's how uh how we're thinking about Padock, I expected you to chime in there about your your gun.

[00:05:55]>> Yeah. What would you use, Pavl? A 44, a Glock 9. What's uh what's your what's your gun of choice there?

[00:06:01]>> It's 9 millimeter. I haven't had to use it yet. Hopefully, it won't have to, but it's there if anybody's looking to come to my house and you weren't invited.

[00:06:08]>> Well, the good news is you can if you do and you go to capital, you can, you know, participate in the compensation fund, right?

[00:06:15]>> Oh, I I thought you were going to shooting in the bag. I thought that was going to be like the segue to what's going on in DC. But yeah, we can we can go there in terms of the the compensation fund. Look, I'll take the politics outside of it just because these so-called like settlement slush funds have been used by both parties.

[00:06:31]But uh in terms of the practical impact here, uh there are two things that I see. One, it derailed Republican efforts to get this reconciliation bill done before they left, which was something they were looking to do, which means they're going to try to do it next week.

[00:06:45]I haven't seen any public reporting suggest they've been able to resolve their concerns with the administration and really just poor timing because I don't know why they had to unveil it the week they were trying to get this bill done. Uh but that's just me. But it's also bleeding over into crypto. Uh because I think if you look at the Clarity Act and its prospects, you know, if you look just near-term, if they were to have a vote right now or early in June, it's hard to see how Democrats would be able to support that. Uh because one of the issues that they're still demanding are that these ethics concerns that they have and ethics concerns is just code for we want some provisions in this bill to prevent the Trump administration from benefiting from its crypto holdings. And it's hard to see in the context of this compensation fund how they're going to get what they want and it's still going to be in a position where Trump will sign the bill. It's hard to see how you square that circle right now. Now that said, two months from now is an eternity in politics. So that's sort of what I'm watching is, you know, can they actually get this Clarity Act bill signed uh by more that say the the end of July, August before they adjourn because I don't really think it's likely to happen if they don't do it uh at that point. I know when you look at the prediction markets, they're saying it's about a 35% chance that it's going to be done by August, but they're still giving about a 53% chance it's going to be done before the end of the year. And I just have tough time seeing how that's going to be done during the lame duck session. if the election goes the way that polling and prediction market suggests, which is with Democrats winning control of the House. I just why they would have the incentive to do it then, uh, which is why I think we talked about last week.

[00:08:19]These next few months are really important if you're in the crypto space.

[00:08:22]>> And that was with Zack Pangle uh, last week was all over that. But something Jeff's going on in that space, right? I mean, I don't I don't want to be have a narrative looking for an event, but you know, if you look at payments companies, if you look at some of the banks to crypto stuff, it doesn't look that promising. No, crypto looks bad. I mean, the the there's big tops in everything with the exception of maybe Neil's pet pet project. Um, but they look uh they look weaker and the payments look terrible. Um, in fact, the XLF made a 52- week relative strength low yesterday. Um, so, you know, financials are not, you know, really in a good spot here with the with the market. And I would say the good news is that of the financials are actually doing well. um you are seeing it in kind of the regional banks, not the big guys and certainly not the second tier kind of brokers. Um so there's some big tops are developing. You know, we've been uh talking about the the private credit stuff for a while and how it bleeds into into the um private equity funds and you know, you're seeing big tops in a lot of those private equity funds and that from a sequencing standpoint is about right.

[00:09:26]you know, you you miss the payments, the private credit stuff uh they they start to get come under pressure, those marks tend to travel back uh into the private equity side uh about two or three quarters later. So, that sequencing is about right, you know. Um again, we don't think it's a 2008 event, but um certainly I think that there's u there is some some probably some fire underneath the smoke that's been billowing from from private credit. So, keeping an eye on that. But the good news, you know, is that the kind of traditional credit measures that we look at, the uh BA spreads versus treasuries made a one-year low um last week or this week actually. So, um you know, the kind of traditional credit measures in terms of how the credit markets are functioning are still doing well. The you know, the kind of ancillary part of it uh is the one that there's some concerns. The only reason I mention that is because that's kind of how it starts historically. You know, it started with subprime. It doesn't start, you know, with kind of the the the big stuff first. It starts at the margin somewhere and that's what you have to be careful of. So, you have these little sparks that can cause the forest fires. I don't think we're in a forest fire, but um certainly we want to keep an eye on it and make sure that's contained. So, we we'll continue to do that with uh with updates to our clients on uh on Saturdays with what's happening in private credit.

[00:10:40]>> Yeah, you have those great reports out on, you know, as you said, the updates around private credit. you did that uh conference call with Howard Mason um on private credit uh and he we both talked about like the potential risk in say the insurance companies paths there's something going on in DC right the Bermuda triangle right the thoughts around where where this private credit uh issue may present itself >> well right I mean building off what uh Jeff and Howard talked about during the call I mean you're starting to see more attention focused on this and sort of that three-part relationship which is where you get the Bermuda triangle reference you have private target, we have life insurance and then we're they're getting this reinsurance market which is primarily in Bermuda and there's a opacity there with in terms of what the reinsurance uh regulations are with respect to Bermuda and that's one of the reasons it's more attractive and lower capital standards and the like.

[00:11:32]And so, you know, if this thing starts to actually uh spiral, I think that's probably one logical place to look at.

[00:11:39]And that's probably one of the reasons that the Treasury Department was hosting meetings uh with insurers uh and presumably some of those from Bermuda as well. There are regulatory authorities there. But I mean, I think that's something to watch because the fear is, you know, if this thing does spiral out of control, are uh these uh policyh holders going to be at risk? I think that'd be a very unfortunate situation that I hope we can avoid.

[00:12:03]>> Well, it always, you know, the and the important thing with credit too, right?

[00:12:06]And I this I don't want this to sound ultra bearish because that's not the camp that we're in, but we're certainly watching things. Um, is that it it starts to become impactful when it hits the kind of kind of common citizen, right, who had no idea what was going on. Like you can you can say, all right, you know, tough luck at Lehman Brothers as a former alum. um you know, tough luck. You know, you get what you what you signed up for, but you know, when it's uh when it's mom and pops and they're like, "What happened to my annuity?" I mean, that's where it becomes, you know, more of a hot button.

[00:12:35]So, and just to build off Jeff's point, because it's the mom and pops that are also voters and they start complaining to the legislators and that's when they get involved and can obviously sometimes make things worse. Uh so, I know that's sort of you're looking at what the response from Washington's going to be.

[00:12:50]I think that's an important thing to to keep an eye on. Hey, Jeffy Graph here.

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[00:13:21]Now, back to the show.

[00:13:23]>> Neil, what's going on in your world?

[00:13:24]Inflation numbers.

[00:13:26]>> Uh, I mean, there's a lot going on. Um, I think, um, you know, I mean, I would start with some of the housing data. Um, so new home sales were weaker uh in April. Uh, obviously, mortgage rates have come up a bit since then. So, if you know, um, sales were already sluggish in April, uh, it probably stands to reason that they'll get a little bit worse in May, um, because rates have gone up a little bit more since. And then on top of that, you have um, you know, builder profit margins are a lot weaker uh, this year relative to last year. And there's not a lot of pipeline um in terms of new residential construction. So if you look at new homes sold that haven't been started, uh they're down about I think 20 25% against last year. Uh so that probably introduces some downside risks at least in the near term to single family residential real estate uh construction and home starts. Uh so uh that's I think one thing to keep them keep an eye on. Um the other thing that's kind of caught my attention is uh you know what's going on in the rest of the world. You know I mean uh the ca the Canadian economy uh looks sluggish. Um not surprisingly um the markets are pricing out rate hikes from the Bank of Canada. Um if you look as an example at residential investment in Canada, it's very weak. So that would kind of argue for the idea that maybe neutral is is lower. Um and you see a similar kind of situation unfolding uh in the UK uh where they've had uh weaker than expected employment data, weaker than expected uh consumption like sort of retail sales numbers. Uh similarly in France um you know there's been some sluggish economic uh data and then lastly I think even in Japan I mean they might hike later this year. here. I mean, some of these banks might hike later this year, but if you look at if you look at the uh the inflation uh data in Japan, I mean, it's nothing to be particularly alarmed by, I don't think. Um, so I think that matters because a lot of what drove I think and I mean I I suspect Jeff would probably agree with this. I mean, a lot of what drove the increase in US interest rates was yes, expectations of hikes, but a lot of that was being driven by what was going on in the rest of the world. And um that's coming undone now. Uh so I just think it's interesting. Um you know, it's kind of one of these things where you know, let these uh you know, let the idiots across the pond and uh you know, in in the igloos up north be the big guinea pigs with this and see how it goes. Um and uh you know, the Fed will just sit back, watch >> north and east. I would say igloos are surprisingly warm though. I've spent spent some time in igloos. But anyway, beyond that, >> I mean, I just I think it's it's you know, it's a reminder that um you know, we're I I do think that we're fortunate that I mean, it's it's good, especially when you think about what goes on with the ECB that you know, we don't have a single price stability um mandate, right? So, it kind of allows us to avoid these uh these scenarios.

[00:16:54]I mean, to Neil's point, you've got real yields, right, which are have been driving particularly the short end and and frankly the 10-year. Um, so when you decompose the rates, right, you can decompose rates into three components.

[00:17:07]There's credit risk, which believe it or not, there's a few basis points of credit risk in every treasury, which is kind of ridiculous, but it is out there.

[00:17:14]Uh and then there's real yields which is the um the residual of accounting for nominal yields minus the inflation component minus the uh the credit component. And real yields are if you take those and look at them as a percentage of each one, real yields are above 50%. They're about 55% of that uh of that math. Um and so that that that tends to be more of a riskoff environment that the markets are pricing um you know more of a slowdown or at least demanding more of a premium. Um and so what we do from there is we then look at well what's happening in credit spreads because if real yields are going up and credit spreads are going up well then you've got the recipe for a recession and the market is is looking at that. Um and that's not what's happening, right? So you can start looking at the the acceleration in real yields taking place as you'd expect when the beginning of March when these hostilities started with Iran. Um they've since cooled off from you know the the the kind of hotness or with the hotness of the war. Um but they're still more elevated, right? So I think you know to that point you've got um not the you know as we've said it before not the Ray Dallio story of the end of the dollar and the end of the empire. this is more just demanding, you know, a higher uh return as a hurdle rate and you're seeing that in real yields and I suspect that that'll cool if uh we see continued cooling um with uh with Iran.

[00:18:34]So I think that's the good news that you know this is really about uh a premium that's in the markets uh through uh through fixed income more than it is this fear that um you know oil is going to stay at 120 bucks or whatever is going to drive this inflation premium out because you know the 5year 5-year forward inflation rate I think is at 225 today which is you know within 25 basis points of kind of the Fed's long-term uh stated objective or loose objective and you know that just says the Fed still is maintaining credibility which I is important.

[00:19:05]>> Well, we did get a 60-day extension on the ceasefire, right?

[00:19:09]>> Well, we're recording this Friday at 9:30.

[00:19:12]>> There's the public time stamp. I knew it had to come in sometime. The public time stamp.

[00:19:18]>> Uh, we have reports, but as of the time that we're recording this, uh, President Trump has signed off on that. Uh, so I think it's probably in both sides interest.

[00:19:30]uh and I think that's pretty clear but sort of delaying these difficult issues with respect to uh Iran's nuclear capabilities and aspirations and the sanctions relief the administration sort of putting out this hey no dollars no dust um so you know linking the two uh I think is going to be uh very difficult to try to reconcile and resolve those issues uh in the 60-day time frame and so even if we do actually get some theory reopening of the straight what's the appetite going to for the shippers and the insurers. Uh knowing the fragility, some would say fiction of the ceasefire because both sides continue to shoot at each other. I don't know what the uptake's going to be to to resume uh travel through there. But then knowing that, you know, hey, the more difficult issues here if you have you don't think they're going to be resolved. Um you know, what's your willingness to really endure that kind of risk? I'm not sure that it's going to be there, but you know, I hope for everybody uh that, you know, it does work out and we have a more peaceful world. I guess I'm just not necessarily banking on this. The other thing I'm sort of watching too is, you know, we have these reports uh and we don't really know uh I guess what we don't know in terms of, you know, I think Iran's economy is being hurt by this. Um, and clearly, uh, there's been this effort to focus on their oil production and get to a point where, um, you know, Iran's going to be forced to basically shut down these wells. Well, I mean, we're always assuming that we're dealing with rational actors and, you know, I think they don't have the same political pressure as we do here. I don't think the IRGC necessarily carries cares as much about the economic harm they're causing their constituents. Are they going to actually stop producing?

[00:21:08]Are they just start dumping oil out to keep this production going? I mean, somebody saw on TV the other day was talking about, "Oh, they wouldn't do that because of the environmental impact." Like, really? You really think that's what they're concerned with? I mean, you have guys over there like riding around on camels and chopping off heads, and you think because they're concerned about the environmental impact, they're not going to dump the oil in the ocean? I digress. But, you know, I just didn't think that was the best take that I saw out there that day.

[00:21:32]>> Do Do they um How do they handle the bathroom situation in public schools? Do you know >> that? I don't know. I can't say.

[00:21:41]Well, I know, but I'll just let that one go.

[00:21:46]Uh, let's go to the mailbag real quick.

[00:21:48]Harry, good morning.

[00:21:49]>> Hi, good morning. Today, we have the question come from Tim Pirate.

[00:21:54]His question is for Neil. To what degree do you see the wealth effect of asset prices and the general wealth transfer driving spending given the discount between spending and real wage growth?

[00:22:11]That's it. Thank you.

[00:22:12]>> Tim Paratt, thanks for uh putting that question in. No, Tim, a good friend out at Wealthfest.

[00:22:20]>> Neil, that's thanks Tim. I mean, I think Tim knows my answer to this. He saw he sees he's on the work, right? So, um, but at any rate, um, no, I think >> he gets a hat anyway. We'll get him a hat.

[00:22:31]>> Yeah, absolutely. Um, throw him some golf balls, too. Um, I would just say that, um, you know, I mean, the wealth effect is having a profound effect on consumer spending, right? Like, so, you know, at one, so for example, this week, uh, we got the personal income and spending data and I think it's pretty clear that consumer spending is sluggish. Um and that's as income growth remains weak.

[00:22:56]Not just nominal income growth. I mean if you I mean it's important for people to remember that um wages wage and salary growth is only up about 3 and 12% uh in the private sector over the last year. That's that's really no great shakes. I mean it's essentially whenever you have a situation where uh nominal wages and salaries are running at about the rate of the overnight fed funds rate, it's normally not a good thing. Um it's sort of a classic sign that policy might be a little bit restrictive. Um, and that's kind of where we are. Uh, now to Tim's point, the wealth effect, the fact that, um, you know, asset prices are up relative to incomes, um, or net worth, excuse me, is up relative to incomes is probably one reason why the savings rate is as low as it is, right?

[00:23:40]Um, so you you do have this, um, you know, kind of view that, you know, the savings rate should keep going down because where wealth is going up relative to income. people look at that wealth creation as sort of a low-risk form of income generation that they can spend out of. Um, you know, we'll see. I mean, it's like anything in economics. You put two people in a room and, you know, you get multiple opinions. Some people look at the decline in the savings rate as a function of the wealth effect. Other people look at the decline in the savings rate as a sign that consumers are running on fumes. Um, it's probably a little bit of both. Um and I would just say that you know what that what that means I think implicitly is that uh because the wealth act wealth effect has had an important uh sort of uh you know has been important in driving uh consumer spending over the last year it probably makes you vulnerable to a market selloff if it does happen right I mean financial market sentiment can shift abruptly um you know I mean that's that's happened many times in the past right so um if that happens. I mean, I could see a scenario where consumer spending slows a bit more. Um, you know, the other side of this, of course, is the inflation piece. Um, inflation has come up because of energy prices. Um, you could make the argument that maybe people drew down their savings because they view the shock as temporary. Um, but then that begs the question, um, if they're right and the shock is temporary and gas prices go back down over the summer, does that mean they're going to go out and spend the money or does that mean that they'll go and replenish the savings that they drew down? I'd argue it probably be the latter. So you kind of have to you just go back to first principles which is like where are wages and salaries and um you know what is the you know financial market kind of equity market uh tailwind and um you know I still feel I it still feels like wages and salaries remain pretty sluggish. Uh you know I mean it doesn't look like the labor markets are really reheating in a meaningful way. I mean wage growth is benign I think so there's not much of an inflationary impulse out of the job market. Um, and we'll see what happens with stocks, but um, you know, I don't think it's a particularly controversial thing to argue that maybe the equity wealth effect flattens out over the next, you know, 12 to 18 months as people rotate away from tech into something else as hyperscaler spending slows down. I mean, that's that's well within the range of of possibility. And if that happens, I mean, you should expect consumer spending to be somewhat more sluggish as a result.

[00:26:11]>> You think we're going to be talking about Fed cuts by the end of the year?

[00:26:13]The market's going to be thinking about it.

[00:26:15]>> Um, Yeah, I do. I mean, I don't know. I mean, but I look, I've been I have to do like a Maya. I mean, you know, I don't I've been on the dovish end of of of the of the fence for a while. It hasn't, you know, it's it worked well, you know, in 24 and 25. Hasn't worked as well this year. Um, but I mean, you know, let's sort of go down the list, right? I mean um in um you know as I mentioned uh the first point um wages are basically running at the level of the overnight Fed funds rate. Um that's normally not a sign that policy is loose. Um we know that fiscal policy transitions from a tailwind now to a headwind later this year.

[00:27:07]um you know that's sort of the nature of uh the the OB3 um and um you know people seem to be thinking that it's the level of deficit to GDP that matters uh for growth but that's not what matters for growth rates right it's that's sort of the change so you know policy is is less of a tailwind and it's a modest headwind I mean if you look at the Brookings uh fiscal impact measure as an example it it goes from from tailwind to headwind u you know sometime in the second half of the Um, I think hypers scale or capex is probably not as strong a year from now as it is today. And I think the rest of the world is hiking and at some level, you know, I mean, I don't know how many times they'll hike. I mean, they'll probably hike once or twice. Um, I don't know how wise that is, but at some level that's probably doing a little bit of the Fed's work for it. And, um, I would just remind everyone that exports were a big driver for growth over the last year. they've added like half a percentage point to GDP. Do we think if global growth is more sluggish um with with with rate hikes in those economies, is that is that going to be good for US exports or not good for US exports? So, um that's kind of where I'm at. I mean, so yes, I mean, if you're asking me like do I think the conversation can shift uh in a year's time, uh yeah, I do. Um >> yeah, and that and by the way, that doesn't mean they're going to, you know, ease by the end of the year. just means the conversation is going to is going to start to shift.

[00:28:37]>> Yeah. Well, I think I mean also like I also don't like and I wrote about this last week. Um I I really and maybe we talked about it too. I I don't recall.

[00:28:44]But um I don't like how the sell side kind of just says well it's like sort of stages of grief, right? Like it's like oh they're not going to cut. Oh uh they're going to remove their bias around additional adjustments. Okay fine. Oh they're going to hike. How many times are they going to hike? Oh, once sometime in Q2 2026. Like that's not going to happen. Okay. Like the I don't think the Fed doesn't hike just once.

[00:29:11]Okay. Um if they're going to hike, they're going to take away all the insurance cuts that they put in place last year. So that means I think at least like a baseline if you're going to call for hikes, you should be calling for 75 at a minimum and they should be starting soon.

[00:29:27]So, it's either it's either they go 75 and even even the Hawks are basically saying now that they don't think that that hikes are necessary right now. Like Qashqari was just on the tape saying that. So I don't like so I think to me it's like you either like for the markets it's the distribution is basically either they hike 75 basis points uh they don't do anything sort of an extended hold or you know I mean things turn out the way uh I mentioned earlier and you know you're kind of back to pricing in like a couple of you know cuts because you think neutral might be a little bit more higher than you do right now uh or or you know or excuse me lower than you do right now. And um but that to me is the distribution, right? It's not one hike. It's 75 basis points of hikes, nothing at all, or we go back to pricing in a couple cuts. So I think the market is sort of in that left tail zone where it's like, oh, let's price in more hikes. I think we'll gravitate towards like nothing to cuts at some point in the next um you know, let's say 12 months.

[00:30:38]What do you think, Jeff? Jim, thank >> does that make sense to you? Jeff, >> what do you think?

[00:30:42]>> What do I think? I mean, the charts the charts are bottoming, but they, you know, haven't officially broken out. Um, I think if you look at that decomposition between real yields and the like, I think that's, you know, I think that's important because it does give that some room, you know, instead of just looking bluntly at the chart, um, which would say higher, uh, if you kind of look at that decomposition, you could start to see it, um, you know, at least be stable, if not come down. So I I'm I'm actually not as bearish on the bond market as what the charts would otherwise have me you know other you know believe because of that um that decomposition. So uh cuts we'll see. I mean you definitely have to have something that um moves our market cycle clock in a more favorable position to the um uh the inflation inputs. I just think the Fed's going to have a hard time with that. But if you start transitioning to it then those conversations matter. And to Steve's point it's it's not necessarily that they act. that the expectation is that they're going to act and they've got room to act and and that has a big impact on on equities. You know, we don't live in a vacuum, right? I mean, we all know that, right? But, uh, a lot of listeners might not where it's the anticipation of events that gets priced in. It's not that the event actually has to happen. Um, and it's one of the things that that I think is important with energy. I mean, one um, you know, one one sidecar here with energy is these these were good charts before, you know, US Iran. Um these were relatively cheap charts in a market before USI ran.

[00:32:05]And if you look at kind of the expectations of what's going to happen to oil um you know there's uh if you look at the Koshi markets or you can just look at the you know the the option pricing which we use. Um there's an expectation that those prices are going to start coming down um as we get into the the end of the year. Um so to me if you get some resolution that's meaningful it's probably priced. Um maybe it's not fully priced, but I think they actually the these energy names become a buy because the longer this goes on, the more anticipation there is that there'll be this resolution and the more people position for it and therefore the actual event itself becomes, you know, more of a nothing burger because people have talked about it enough, right? So um that's where it becomes interesting. I mean look no further than say Nvidia last week with earnings, right? you know, people talking about it, talking about it, and they blew the the cover off of the ball in every way, shape, or form you can imagine. Um, and the stock just kind of said, "Okay, thanks. Uh, I'm sure uh that Jensen is pulling his hair out."

[00:33:07]But, um, you know, rightfully so.

[00:33:10]>> Tim, thanks for that question. We'll get you a trucker hat for sure. Maybe we'll meet at the Elks Club. How about that?

[00:33:15]For a cocktail, speaking of the 1950s.

[00:33:18]Um, >> do you have that move where you like hold it and you can stir with the one finger while you hold it? I'm going to try to perfect that tonight where you you know you've you've got the that's that's a pro.

[00:33:28]>> That's the move >> with a cigarette hanging out of your out of your mouth and talking and then the cigarette kind of flickers like that.

[00:33:33]I've I've never smoked a cigarette side car in that in that little silically you had there. That was pretty good. Sidecar martinis.

[00:33:40]>> I'm more of an old fashioned guy, but yeah, whatever it takes.

[00:33:42]>> There you go. There you go. Steve, what are you watching this week?

[00:33:46]>> We hit on Iran. We hit on reconciliation and Congress coming back. So, I'm going to look at something for the month and that's a Supreme Court because the court's term usually ends the end of June and we see a flurry of a lot of the decisions they've been putting off. And one thing we've talked about before that we're still waiting on is the Lisa Cook case, Trump's ability to fire a governor for cause. Uh I think the expectation is the court will not allow him to do that.

[00:34:08]Uh but that's something that I'll be watching for and I'm sure maybe now Fed Governor Jerome Pal will be watching for too as he sort of assesses how long he wants to remain there uh as a governor.

[00:34:20]>> Neil, >> well, it's going to be pandemonium in New York next week. Uh I don't think I'm going to be doing any client dinners uh next week. Uh I refuse to go into the city. Um, >> did did you hear by the way I if they make it to a game six >> Oh, it'll be a disaster.

[00:34:40]>> The same night with the World Cup.

[00:34:42]>> Oh my god, I know. Oh no.

[00:34:44]>> Closing station.

[00:34:45]>> Let's go Knicks. I mean, this is like um I don't know if I'm should be happy or somewhat ominous, guys, because the last time the Knicks were in the finals, it was 1999.

[00:34:55]Um >> I got to tell you, I didn't feel the same way.

[00:34:58]>> Nice parallel.

[00:35:01]>> Nice parallel for sure. Yeah. Um I didn't um >> the last time they won though >> was 1973 >> which was basically like I think a recession year anyway like not you know it doesn't um let's not go down that rabbit hole but I will say I mean just on a personal note I mean it's it's great I think but you know this is like they actually have a chance like in 1999 we were just happy to be there. You know what I mean? It was like there was no way there was like that sort of ra you know uh ragtag group of uh you know Allan Houston, Latrell Spreewell. Ewing was injured the entire series. Uh they played the Spurs. Um you know we'll see uh what happens uh out west. I mean hopefully they keep going you know triple overtime in game seven. I don't I you know let them keep playing until uh until Tuesday for all I care. Um but uh you know so anyway let's go Knicks. Uh in terms of the data, um we get the ISM uh manufacturing number. We'll be firming up our estimates after the Chicago PMI, which comes out later today. Uh and we also get data on, uh jolts, so that'll be important. Um job openings, labor turnover, and then lastly, we book end the week with employment. Uh so that'll be the main event. Um you know, there's a lot of chatter about like the labor market kind of rewarming.

[00:36:23]Um, you know, market's looking for 100,000 on non-farm payrolls. Um, I'll be keeping a close eye on wages. Um, I think that's that's important. I mean, the shest sign of a tight job market is accelerating wage growth, and wage growth isn't really accelerating even though employment growth has been. Um, so we'll see how that how that shakes out. There's typically a lag between the two. Um, but there's also like a lot of like inongruencies in terms of like where is the break even rate, right?

[00:36:49]Like we're generating 100,000 jobs. um uh a month uh now it feels like, but you haven't really seen the unemployment rate come down yet. Um and that's because the household measure of employment has been a lot weaker. So, we'll see how all this kind of reconciles uh next week.

[00:37:07]>> Hey, Jeff. Uh James Soulful Eyes Harden.

[00:37:12]>> Yes, >> he's he's around. Is he coming to your party?

[00:37:14]>> That was my that was my wife's comment, not mine. Uh I I don't think so. Oh, I don't think he's in town, but um it would be >> James if you're a listener.

[00:37:22]>> Yeah, you're you're welcome.

[00:37:24]>> The address is um >> Yeah, exactly. So, what am I watching, Dutt? Um, you know, I think a couple things uh are important as we get into, you know, some of the the parabolic moves as we talked about. Um we talked about this a little bit on CNBC yesterday. Um you know, you you look for there there's kind of a couple ways to think about this. You can either VTOP it, which is what the bubble watch does.

[00:37:48]It puts a higher probability of a VTOPOP than normal. And that would be things like uh gap openings, massive massive volume. So you gap higher uh on the day on the open and then you close lower um significantly. You know, some of the the terms we use are an outside reversal day on big volume. That would be troublesome. You can go back and look at Qualcomm in in 2000. That was a pretty good case study uh in something like that. Um failure to to respond well to good news. Um, so you get, you know, what is unequivocally good news and you get some type of outside reversal. Those are things that that are warning signs.

[00:38:24]Um, and you actually get narrowing with within the the industry, right? So we can see like the number of 20-day highs within semis. We measure that daily. Um, and so, you know, if you start to see that narrow, then, you know, you're really dealing with just a few names that are are driving things just like you do with the market. Um, but it just becomes, you know, more focused on on those areas. That's something to keep an eye on. And then if it's a little less of a of a uh you know critical kind of Eiffel Tower top, uh you look for uh relative strength divergences, right?

[00:38:54]The stocks keep going up and the relative strength starts to lag. So we start seeing those and that's where I shoot them in the back, right? That's where you you start saying, "Okay, I'm not, you know, I'll I'll I'll start to let some of that go." Um and that's kind of a checklist that we're looking at right now. 7 uh 7333 7333 is the uh support level in the S&P. Um and um I'm watching the emergence of you know what's to come next, right? Where do I want to allocate dollars um as I move away from parabolic moves that you know at some point are going to give me an opportunity to start uh using them as a uh source of funds and where I want to look for that usage of funds. So I think healthcare is it and we're going to keep an eye on some of those names. That's good stuff. Well, let's end it there. Uh we'll be back obviously next week to uh talk about all the things that we're watching uh for uh next week. Uh go Knicks. Jeff, have a great time at the party tonight. We're interested to hear what you have to say about that. Steve, good luck in the swamp. And Tim Ferate Wealthfest will get you a hat at the Elks Club. Until next week, I'm Steve Duttoner.

[00:40:00]>> I'm Jeff Degraph.

[00:40:01]>> I'm Neil Da.

[00:40:02]>> And I'm Steve Pavick.

[00:40:04]>> Thanks everybody. Have a great week.

[00:40:05]>> See you boys.

[00:40:06]>> Hey, it's Steve. Thanks for listening to the show. Small slice of what we do here at Renmack. So if you liked it and aren't already a client, go to renmack.com and request a free trial.

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