That’s one of the central ideas behind ’s appropriately-named new book, The Awesome Portfolio (Released September 8, but you can pre-order now).

We sat down with him to discuss The Awesome Portfolio, how he approaches markets, and the the biggest mistake investors make.

FOCUS ON RISK FIRST

“Most people look for the highest returning thing and invest in that, and they don’t really care about the risk,” Jared said. “And what I’m saying is, you should find the appropriate level of risk, and from there back out the returns.”

The reason Jared believes that is because when Lehman Brothers went under (he ran the ETF trading desk there), he “got cut in half.” “I lost half my money,” he said. “A lot of that was Lehman stock that was restricted, but I also had some Vanguard mutual funds, some stocks... they all got killed. So from 2007-2009, I lost half of my net worth. And that was about the time I was starting The Daily Dirtnap, and I said to myself, ‘I’m never doing this again.’”

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THE PROBLEM WITH INVESTING IN THE S&P INDEX

“The reality is, if you’re an index fund investor, if you invest in the S&P 500, there is almost a 100% chance you’re going to take a 50% drawdown sometime in your investing career,” Jared said. “It’s going to happen. Maybe twice, maybe three times. And how you behave during that bear market is 100% going to determine your returns at the end.”

And Jared isn’t predicting a bear market necessarily, but he is saying: “We’ve been going up for 18 years. Most people have forgotten how bad it was during the financial crisis. The market went down 57% and people sold at the lows because they thought it was going down more.”

“It’s not some immutable law of physics that stocks go up forever,” he added. “Meb Faber posted something on Twitter [showing that] there was a 60-year period in the 1800s when bonds actually did better than stocks. So we just have no knowledge of what’s going to happen in the future.”

THE AWESOME PORTFOLIO: BACK-TESTED

Everything goes down in bear markets, right?

Yep, but while the S&P went down 57% in the GFC, Jared’s Awesome Portfolio went down 9%. That’s as bad as it got.

“This portfolio returns a little less than the S&P, 1-2% less, with half the volatility,” he said. “And the worst drawdown it has ever had in 50+ years is 12%. The next worst was 9%, which was the financial crisis. And the 3 next worst drawdowns were 1%. And this thing returns 9% a year.”

Plus, The Awesome Portfolio is easier to implement than some of the traditional wisdom around changing your allocations depending on your age. “You literally just set [The Awesome Portfolio] and forget it,” he said. “It’s appropriate for every stage in your life.”

THE LIFE HEDGE

Jared says that most people’s actual lives and financial lives are hugely correlated; and that actually, one should hedge the other.

Basically, people do well in their jobs and shovel money into the stock market, and all is going great, but actually “what you’ve done is made your life more pro-cyclical,” he said. “The economy is doing well and your company is making more money and you’re getting paid more.” But then the market tops and your portfolio starts going down and if the economy is involved you might get paid less or lose your job, and your life is way more volatile.

“I’ve always been in search of the investment that zigs when your life zags,” Jared said. “You want something that is losing money when times are good, and making money when times are bad. That doesn’t really exist, but The Awesome Portfolio is about as close as you can get.”

WHAT MOST INVESTORS GET WRONG

Jared says a lot of people show “a lack of imagination as to the types of things that can happen.” Just before the Great Financial Crisis, Wall Street knew there were big issues (the Big Short guys figured out the best way to execute on it). “It was an open secret that it was a giant housing bubble,” he said. “I knew there was a bubble; I thought the banks would go down a little bit, I thought homebuilders would go down a little bit, I thought we’d get a little bit of a bear market, stocks would go down 20%. But no, the entire world came to an end. It was way worse than I thought it was. It was way worse than anybody thought it was, because people lack imagination.”

SIXTY-FORTY SCHMIXTY FORTY?

Jared isn’t saying the 60/40 portfolio is a terrible portfolio. “It’s really not a bad portfolio,” he said. “But it’s a much less efficient use of risk [than The Awesome Portfolio]. It has a much lower Sharpe ratio.”

Add to that, another problem with 60/40 is that “you have this portfolio that’s made up solely of financial assets, stocks and bonds,” he said. “You don’t have any real assets, you don’t have any commodities, you don’t have any gold, you don’t have any real estate.” And so, when a situation like 2022 comes along, where you get inflation and the Fed rips rates, both stocks and bonds are down a lot. “And that’s the vulnerability of the 60/40,” he said.

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JD ON...

THE DEFICIT

“The deficit at various points in history has been worse,” he said. “The absolute number is big, but a 6% deficit to GDP is really not a cause for hysteria.”

THE IMPORTANCE OF REAL ASSETS

Owning real assets is attractive “because they are really not correlated with anything, [which] brings down the volatility of the portfolio,” Jared said.

LEVERAGED ETFS

“Leveraged ETF assets have gone up 4-4.5 times in the last few years,” he said. “Those swaps in the leveraged ETFs are getting rebalanced at the end of the day, and when volatility picks up, they can cause huge market on close orders on the buy side or the sell side, which can really exacerbate volatility. We haven’t really been through a period where we’ve had that kind of volatility with [this level] of leveraged ETFs under management.”

AND FINALLY... FOOD FOR THOUGHT

“What’s interesting about stocks in the last six months is that, in the past, the moves lower were the high volatility moves, and the low volatility moves were when the market went higher,” Jared said. “And now it’s completely reversed. We grind lower and the market explodes higher - it happened a couple of weeks ago, it happened back in March... Something about the market has changed in the last six months.”

Spidey-senses tingling...

If you want to remove some of the volatility from your life, we highly recommend getting The Awesome Portfolio. We’ve read it, loved it, and think it is enormously important in a world of “just buy the index!” and the gamblifcation of investing.

Get The Awesome Portfolio

Enjoy the full interview… we’ll be back Talking Markets with you very soon.

Important: This article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

The founder and CIO of Praetorian Capital presented the idea of economic feudalism at ’s TG Macro conference back in February, and he’s done a lot more thinking about it since then.

In this episode, recorded August 28, 2026, he expands on the theory, how he came to it, and how he’s acting on it at Praetorian.

🏠This is a special episode of Macro Sessions. Normally, Macro Sessions is behind a paywall, but as Talking Markets is on summer vacation, we’re making this available to everyone. Thank you for your support.

MULTI-SPEED ECONOMY

“I’m not so sure inflation is the enemy,” Kuppy said. “If wages are going up, that’s inflationary. If the price of goods is going up because there’s a lot of demand for the goods, that’s inflationary. That’s also good demand. That’s a good economy.”

Kuppy says there is a “multi-speed” economy in the US. “Interest rates right now are obviously too high for home building or automobile purchases or anything that requires financing,” he said. “But then you look at data centers and they’re cash-funded for the most part. And that’s driving a lot of economic growth here.” The Fed is having “a lot of difficulty” managing that multi-speed economy, he said.

Regardless though, “from a holistic standpoint, what we need in this country is real GDP growth, and that starts often with nominal GDP growth,” he said. “And sometimes you can have inflationary growth. I’m not sure it’s much of a problem if you have slightly higher inflation, as long as the economy is growing with it. What you don’t want is stagflation, which is what everyone’s scared about.”

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MONETARY POLICY “KILLED THE 2022 RECOVERY”

Kuppy says the 2022 economic recovery was actually “the first real recovery we had in 14 years after the Great Financial Crisis. “And monetary policy went out there and killed it.”

“Think back to 2022,” he said. “All the restaurants were full, people were traveling, everyone was having fun, the economy was booming... Yeah, inflation was high, but people actually felt good. Now, people feel miserable.”

“Voters don’t want inflation, and in democracies the voters have a say in this, so people want to clamp down on inflation,” he said. “I get that. At the same time, I think your average voter wants economic growth more than they care about inflation.”

KUPPY’S THEORY OF ECONOMIC FEUDALISM

Kuppy developed this theory in trying to answer this question: Why, with nominal GDP at 6-7%, are all sorts of businesses really struggling, especially anything touching the consumer, such as restaurants, retail, home-building, auto, etc?

The K-shaped economy explains it somewhat, but “the K-shaped economy makes it sound very happenstance, like, ‘yeah, some people are doing well, some aren’t, tough luck,’” he said. But Kuppy thinks that it’s actually “very much premeditated, and I think it’s a structural thing that’s been going on for a long time.”

On a government level, Kuppy says it’s policy to have a “never-ending asset bubble.” “In our version of economic feudalism, we want to have asset bubbles,” he says. “That’s all we want. And so we keep jamming liquidity into the system. And then some of that liquidity leaks out into the real world and creates inflation. We’re doing our best to do this Red Bull and vodka thing, where we’re jamming liquidity in, but whatever liquidity escapes, we’re trying to slow it down - and part of how we do that is by having the dollar be overvalued.”

And, he said, jamming that liquidity buoys the stock market a lot “but then that hollows out your economy,” he said. “When business people go and buy stocks instead of buying plants and equipment, it’s their view that there’s nothing productive they can spend their money on that has a high enough return on capital versus buying an existing plant and equipment and hoping someone else will pay you more for it tomorrow.”

There are different stripes of economic feudalism elsewhere, he says.

• In China, they “hate assets going up,” he said. “They’ve deflated their stock market for 20 years, they just deflated their real estate bubble. They want everyone to stay poor, but their goal for doing this is to be an export powerhouse.”

• In Europe, “they want everyone poor,” he said. “They’re kind of torn. They sort of want this asset bubble, but more on the real estate side. But at the same time, they also just want to invest in US equities. And so they’ve done all this climate and regulatory stuff to just slow down the economy and basically stop any economic growth.”

• In Japan, “they genuinely want growth, but they don’t know how,” he said.

So these 4 blocs, the US, China, Europe, and Japan, “are kind of frozen,” he said, “and I think the common denominator is that if the vast majority of your population doesn’t have much disposable income, and it’s on purpose, then they can’t go spend, you don’t have a multiplier, and you don’t have economic growth; which means you can jam liquidity into assets and have an asset bubble.”

Going back to 2022, Kuppy says that people were spending the money they were given post-COVID, and so that money circulated quickly. “I feel like this moment absolutely terrified the elites globally,” he said. “Because in 2022 tech stocks went down, interest rates went up, real estate is priced on cap rates, that went down, VC started to struggle, PE got squeezed because labor went up... Everyone’s profit margins got squeezed, and so you had assets going down at the same time as the cleaning lady and gardener want a raise. And so the guys at the top got squeezed, and said ‘never again.’”

The result? Kuppy says he thinks “that’s why Jerome Powell hiked rates like a lunatic, and they put this handbrake on the economy. And just like we did, everyone else did. And once I saw that, I kind of realized this was a policy decision and not an accident.”

WHAT IF IT WERE REVERSED?

“I truly believe you can run your economy for any set of goals,” Kuppy said. “If you want to have the largest, most vibrant middle class, which is what we did for 200 years in America, then that’s your policy goal. If you’re terrified of inflation, you’ll go fight inflation. If you want to be an export powerhouse, great. And if you want to have an asset bubble, which is what we seem to want to do, well then we’re going to have the best asset bubble ever. And that’s a policy decision we’ve made at a governmental level.”

Changing that policy decision - e.g. returning to a policy prioritizing a large vibrant middle class - would come at a cost to asset owners. “Stocks would go down, and you’d have a long period of readjustment,” Kuppy said. “The wealth effect would go in reverse. Take multiples down to historic levels, mid-high teens, and you’re kind of in the 3,000 range for the S&P and maybe that’s the number.”

However, Kuppy doesn’t think the government should target the stock market. “I think the easiest way to do this is just to tax foreign inflows,” he said. “If you charge foreigners 5% for the right to buy our NVIDIA, then it’ll solve itself really fast. They’ll take their money home, our dollar would go down, and most of this stuff would get resolved. It’s the elegant solution rather than Trump trying to tariff the penguins and fight with Canada.”

But he doesn’t see it happening, “because the stock market will go down and boomers will feel poor, and large corporates will feel poor. We’re just not going to do it. Instead, we’re going to just keep doing this feudalism thing.”

AI AND FEUDALISM

“Everyone is cheering AI because it accelerates feudalism,” Kuppy said. “The end goal for AI is to replace all the humans at a company. I don’t know who’s going to around to consume products if no one has jobs. Everyone’s excited about feudalism because if you own assets, great, everyone’s gonna make more money.”

And more than that, Kuppy asks: “How do you fund a couple of trillion dollars of data centers? You fund it $5,000 at a time with tens of millions of people with little Robinhood apps that are trading data centers with each other. I guess the monkey JPEGS were the entry drug, and now they’re doing the thing they actually want, which is [people] funding data centers that take their job away.”

WHAT’S AN INVESTOR TO DO?

As many of you reading this will know, Kuppy’s long been a hard assets, real economy guy. But based on his theory of economic feudalism (which BTW he started developing as a way to figure out why his consumer retail stocks were doing poorly despite what seemed like decent GDP growth), at Praetorian they don’t really own real economy stuff anymore.

“We don’t own anything that needs GDP,” he said. “They’ve told you that they’re going to make a giant casino and call it a stock exchange. [So] we own brokers, we own exchanges, we own the plumbing in the back office of this. We’re betting on the 1% doing very well, and the 0.1% doing even better. We’re in the sorts of trades that do well when feudalism reaches its final end goal.

Other ways his theory has affected his investing:

• “We’re not short anything. I pity anyone who’s short.”

• “I’m not massively levered long either. Even in Weimar, there are multiple nasty pullbacks.”

KUPPY ON...

JACKSON HOLE

Kevin Warsh said the Fed is committed to getting inflation down to 2%. The 2% target lives(!!!) “He says a lot,” Kuppy said. “He’s the master of speaking for 30 minutes without saying anything. I don’t think he’s there to rock the boat; I think he’s there to find an excuse to cut rates.” Add to that, Kuppy is skeptical on the 2% target. “We’ve never actually done any research on why 2% is the right number,” he said.

THE BIGGEST PUSHBACK HE GETS ON FEUDALISM

“People think I’ve lost my mind,” he said. “They say, ‘they wouldn’t do this. All the politicians are saying they support me as a middle class guy. They’re on my side.’ And I’m not saying the Davos guys all get together and manipulate these things. I’m saying guys at the top had a panic moment in 2022, and they said ‘never again.’” 2008 was another ‘never again’ moment, he said, whereas “if we had let the stock market and all the banks fail, we’d be in a better place today... It would have been 18 bad months, instead of 10 bad years.”

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Whew. There’s a lot to take in there. Let us know what you think in the comments.

For more from Kuppy on feudalism (all free to read):

• Feudalism

• What is Inflation?

Important: This article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

Following the US Treasury’s decision to double its buyback of government bonds, we recorded another For the Record episode with Aahon Menon, founder of . He shared what his models are saying about inflation, GDP, the business cycle, and more.

Recorded August 24, 2026.

🏠Housekeeping Note: While some of this episode is free for everyone to watch, the full episode is for paying subscribers only. Thank you as always for your support. If you’d like to pull up a chair, you can join right here.

BOND MARKET BLUES

“The bond market over time tends to follow a pretty tight relationship with nominal GDP,” Aahan said. “And so trends in nominal GDP tend to impact which way bond yields are headed.” However, in the post-COVID era that relationship has deviated, “which has driven a lot of the difficulties of the bond market,” he said. “The bond market doesn’t seem to have been able to recalibrate to a new higher nominal GDP world.”

And so, he thinks, the US Treasury’s decision to double its buyback of government debt, criticized by Stanley Druckenmiller yesterday, is “a reaction to that dynamic, where treasuries continue to stay under pressure because they are dynamically at odds with the ongoing pace of nominal GDP,” Aahan said.

As to the why of the bond market-nominal GDP relationship breakdown, Aahan points to several possible culprits:

• A structural change in the demand for bonds

• A misplaced expectation that interest rates, the economy, and inflation would revert to the pre-COVID norm.

• A potential repression of yields through a combination of monetary and fiscal policy

THE STATE OF THE ECONOMY

The fastest reads Prometheus looks at are “telling us nominal activity 6%,” Aahan said:

Looking under the hood of that number, Aahan sees a very strong domestic private sector, comprised of he US consumer, and business investment.

On the US consumer: “The US consumer is just persistently strong,” he said.

On business investment: A little more nuanced. “Things like housing and industrial production, industrial equipment investment, those things are looking mediocre to weak,” he said. “But we have this new really buoyant part of the economy in the form of tech capex investment, which is making up for any and all weakness that’s in those traditional sectors.”

INFLATION PROBLEM?

“By all empirical measures I think it’s very hard to make the case that we don’t have an inflation problem,” Aahan said. “What are we at, our sixth year past target?” Add to that, the composition of this inflation concerns Aahan:

“We are increasingly now seeing demand-driven inflation,” he said. “And that tends to be a much more persistent type of inflation relative to supply-driven inflation.”

Add to that, the nominal demand is the source of that demand-driven inflation, he said, and so “as long as we have this persistent nominal demand that’s way higher than anything we’ve experienced over the last two decades, we’re likely to have inflation that’s inconsistent with what we’ve experienced over the last two decades as well.”

❗”Demand-driven inflation alone right now by our measures is north of 3%,” he said. “And demand-driven inflation at those levels perpetuates further demand-driven inflation.”

That’s the end of part 1. Part 2 of the conversation continues for our paid subscribers below, where Aahan discusses the Fed vs the Treasury, the “reverse wealth effect,” and what the market signals mean for investors.

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🏠Housekeeping Note: While some of this episode is free for everyone to watch, the full episode is for paying subscribers only. Thank you as always for your support. If you’d like to pull up a chair, you can join right here.

CONSUMER PAIN, BOND MARKET REACTION?

Per the University of Michigan Consumer survey, “consumer sentiment has never been lower,” said Erik, who dug into the survey in his Killer Charts pack here.

“It’s negative about people’s current prospects, negative about how they feel a year from now, negative about how they feel about their job outlook,” he said.

He also flagged what the survey says about one year forward price expectations. Back in the 70s, when the survey began, it was up at 12-14%, and bond yields were high. “And then interestingly, consumer price expectations dropped relatively rapidly in the early 80s to 3-4%,” Erik said. “That number stayed roughly in the 3-4% range for 40 years, until 2020.” While expectations came down pretty quickly in the 80s, Erik pointed out that it the bond market moved more slowly - “It took several years to come down to 5-6%,” he said.

So, then in 2021 we saw a sharp jump in consumer inflation expectations with COVID. “They are now making a new all time high and the consumer is expecting 8% inflation,” Erik said. And if the bond market follows the same pattern, “it’s suggesting that we should imminently have a high move up in the 10-year, to 5-6%.”

What Erik thinks is “the biggest disconnect in the market right now” is that, the chart is saying “bond yields are going up,” while the Fed is signaling that inflation is going to decline.

He compared the situation to Zimbabwe, where there was very high nominal inflation and the stock market going through the roof, while the central bank didn’t react. In the US, if the Fed keeps saying everything’s under control and the bond market agrees with it, that would mean “equity investors having our cake and eating it too.” Other reasons he thinks the Fed may be slow to react is, Trump doesn’t want rate hikes, and the Fed is trying to get through to the midterms.

💡The risk that Erik is keeping an eye on is that the 10-year doesn’t buy what the Fed’s selling, and say “hey, wait a second here. 4.5% isn’t the right number here. This should be closer to 6%.”

Note: This conversation was recorded the morning of the Fed meeting on July 27 - there was no rate change.

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S&P: “INSANELY GOOD” PICTURE ON THE META LEVEL

If you step back and look at the S&P at the meta level, “the index level earnings are insanely good,” Erik said. “The estimates for next year are another 17% growth. And that’s with energy supposed to decline next year. The analysts have heard the bubble story, and yet they are going back to their model and having to raise numbers quarter after quarter after quarter. And now we’re looking at $400 a share EPS estimate for 2027 on the S&P.

Last year, after the tariff tantrum, Erik made the brave call that the S&P would go to 10,000 by the end of 2027, up 40% from where it was then. “I thought that by the end of 2027, you’d be looking ahead to 2028 earnings and that the 2028 EPS estimate on the S&P could easily be $400. And that $400 estimate that I expected to be happening in 2028 is [now expected to happen] in 2027.”

What’s fueling it is “everything,” Erik said, including government spending, the fact that the bond market is not freaking out about government spending, corporates “are spending their brains out,” and an underappreciated factor, which is that banks are now being pushed to lend and take risk again.

💡”Every lever is pumping,” Erik said. “The government is spending money, the companies are spending money, and the banks are spending money, and that’s also why I have a really hard time buying these credit crisis arguments.”

That’s the end of part 1. Part 2 of the conversation continues for our paid subscribers below, where Erik shares the biggest themes he’s watching now, and why we could be underestimating the AI trend. Thank you for your support.

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joined us on For the Record, taking a break from delaying baseball at Yankee Stadium to share his thoughts on what lies ahead for the rest of 2026:

🏠Housekeeping Note: While some of this episode is free for everyone to watch, the full episode is for paying subscribers only. Thank you as always for your support. If you’d like to pull up a chair, you can join right here.

Recorded July 22.

WAITING FOR GODOT

The Squirrel “took down risk quite aggressively ahead of the war, and then took that risk down even further once the war started,” he said. “And I set myself a self-imposed ban on adding risk until the Strait was reopened.”

The problem is, “that’s a bit like waiting for Godot right now,” he said. “I think we’re due for ambiguity around the Gulf for some time to come. This could be an open sore for quite some time.”

“I had to take a deep breath and add back some risk towards the end of May, beginning of June,” he said.

RISKS BUILDING

“There’s a lot of brush building up on the forest floor in terms of risk,” 🐿️ said. He listed:

• Potential credit problems on the sidelines

• The “unbelievable” move in equities with respect to implied correlation and the very crowded dispersion trade

• Bonds yields pressing higher worldwide

💡”Ultimately, I think we’re looking at the second half of this year [as] an environment of rising energy prices, rising interest rates, possibly a lower dollar,” the Squirrel said. “It’s going to be quite tough to navigate.”

ENERGY EQUITIES

Rupert is long energy, both oil and energy equities. “Ultimately, I’m with the barrel counters on this one,” he said. “I’m not betting the ranch on it, but I do see energy prices and energy equities higher into the balance of the year.”

Rupert says China has “turned into a monopsony player in energy markets,” as in, they are the single buyer for many sanctioned countries; and China is “the swing price maker” in global energy markets.

China has massive domestic reserves and the ability to withstand price spikes, a concept he calls "The China Collar,” which functions as a long-term put and call on crude, allowing companies to underwrite E&P capital expenditures “with confidence.”

“That is pretty good news for energy equities,” he says. “I feel pretty bullish about where energy equities are right now.”

🪢The Blind Squirrel on The China Collar

CHINA EQUITIES

Longtime viewers will remember Rupert’s been bullish on China for a while:

“You’ve had a green light from the authorities as a Chinese investor to buy equities.” - Blind Squirrel, 2024

This year, there’s been a “phenomenal” AI hard tech bull market within China’s onshore A-share market, Rupert said, pointing out that that much of the A-share outperformance this year is directly tied to this trade.

He cites specifically CXMT, saying China is “serious about creating a national champion in DRAM.” While CXMT is currently smaller than global leaders like Samsung or Micron, Rupert believes China could become a “major market share taker” over the next few years.

❗“China is where margins go to die,” he said. “And if China’s coming into the memory trade, I think you need to sort of think about where those earnings revisions might be in 12-18 months’ time.”

However, the Squirrel remains cautious, citing “silly numbers” regarding valuations for pure-play AI names and warning that if the global AI trade cools, Chinese stocks will likely follow.

The conversation continues for our paid subscribers below, where the Squirrel digs into the need to find the right sectors rather than just buy the China index, why Turkey is on his radar, why it’s the “end of the McKinsey economy,” and of course Latin America. Thank you for your support.

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🏠 Before we dig in, a quick programming note: Talking Markets will be taking a summer break for the next few weeks, and will return in September. But… we do have some epic interviews lined up for you in August, including with the amazing and equally amazing . Stay tuned…

Thank you so much for your support and we'll see you back here soon.

GOLD BREAKS OUT?

“Everyone thinks it’s a breakout, and it could be,” Dale said. “But I still have some skepticism.”

Dale thinks there could be a dollar rally in store to maybe $103, which could push gold back down.

He’s also skeptical about silver rallying, saying he thinks the trade right now might be “over embraced.”

WTI: THE KEY TO ALL MARKETS

“I’m looking to buy it down here right around the 78.6 [Fib] level, around $72.50,” Dale said. “Because if this is a 5-wave structure [in the chart], that is not a bearish wave - that’s the beginning of something new. So I’m thinking we put in a higher low at $72, and that opens the door for us to take out the highs over $120.”

❗”This is really going to be the whole game for the market,” Dale said. “Because if [taking out the highs] happens, we’ll have risk off. And everything will suffer except maybe oil shares…. Everyone should hope that crude takes out that low at 67. But if we put in a higher low, start to think about protecting your principal and more of the return of equity rather than the return on equity.”

S&P: “SKEPTICAL” OF THE RALLY

Dale’s skeptical of S&P rally yesterday as there’s daily divergence, “so I wouldn’t be long the market right here,” he said. “I think we’re going to put in a high and pull back [to 6,900] this time… There could be a 10% correction coming with if we get higher yields and another rally in the dollar.”

TECH

Nasdaq “looks like a failing rally” to Dale. He shorted it because it didn’t make a new high….

And he’s covered his short in Micron, but would love to put it back on if it gets back over $1,000, as, he said, “I still think it’s going to $400.”

LOOK OUT FOR… PAYROLL ON FRIDAY

Dale’s still looking for 10-year yields to get above 5%. “Friday could be an important day,” he said. “If the [payroll] numbers are strong, that could put Warsh in a box. He doesn’t want to raise rates, [but] the market’s already starting to think he’ll have to because of the bond reaction - the bond market wanted hikes and that’s why it sold off [after the FOMC meeting]. That’s why the dollar sold off, why the market blew off, why gold and silver are rallying big. So if we get a strong jobs number, the market might start to think about the Fed [being] in play in September.“

AND FINALLY….

❗As Talking Markets is off for a few weeks, Dale wanted to flag the USDA crop report coming out on August 12. If you’re in the grains trade, Dale said the “safe play is to be out” ahead of that report. “Why take the risk? Predicting the report is gambling,” he said. “Reacting to the report is trading.” That’s Coach, always with the wise words…

See y’all soon.

Thank you , , , , , and everyone else for tuning in live!

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Important: This article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

💡Quick PSA: After a stellar first year, TG Macro Conference returns to Nashville on February 18-19, 2027, with a fantastic line-up. Details and tickets this way.

BIG BREAKOUT DAY

Yesterday [Monday] was “a big breakout day” for markets, which Tony in part puts down to the removal of some uncertainties .

Yes, the Iran war is continuing but the headlines are starting to have decreasing marginal impact on the markets. Add to that, “everybody knows the pace now,” Tony said. “War [happens] over the weekend - Friday, Saturday, Sunday. Sunday night, we have peace talks. Monday morning, ‘Iran is looking to make a deal.’ On Friday [Trump’s] mad at them again.”

Meanwhile, on Sunday Japan and the US confirmed that they jointly intervened late last week to backstop the yen, which had been in freefall:

And former currency trader/current US Treasury Secretary Scott Bessent said he would intervene again if deemed necessary. “The dollar index (DXY) backs off with that, so we get a little bit of natural resources tailwind,” Tony said.

Another uncertainty removed for now: “We removed the Fed question mark,” Tony said. “Everybody’s all hopped up about inflation and staring at the Federal Reserve, and Kevin Warsh comes in and says ‘play the ball, play the inflation data, don’t play me.’ Basically, Warsh is “setting expectations and letting the market do the work for him,” Tony said.

💡So, with some of those uncertainties removed, “the market today says, okay, green light go,” Tony said. “We’ve got two sigma rallies in internet stocks, two sigma rallies in airlines and software… The market is sending signals today, and I’m listening. This was a bullish day for the stock market.”

SEMIS & SPACEX

Tony’s got a short semis position on his view matrix right now that is in the money. “I’m trying to write it down and capture a profit in it before that gets away from me,” he said.

But he thinks that the trade could still go lower, “until SpaceX finds a bottom.” “Today the market was up, and semis weren’t up that much,” he said. “So there was a little bit of relative weakness.”

Tony shorted SpaceX “because the market can’t have it both ways,” he said. “You can’t have the expansion of a semiconductor bubble into the stratosphere and then also land a mispriced $2 trillion [stock] on the tape, while Google is raising $80 billion. The market just can’t absorb all of that in one bite.”

❗”I was able to knock on wood, crush it from 190 to 160 or so and stayed short from there. So I don’t want to talk my book too much, but I did recommend it,” he said. “As a trader, [if] the markets give you something that pans out the way you thought, you better make money. That’s the deal. That’s what we’re doing here.”

GOLD: ZOOM OUT

TG gives short shrift to anyone who’s carping about gold sitting around $4,000. “We were all praying gold would go somewhere when it was sitting there at $1,500 and then it went to $5,500,” he said. “And now it’s backed off to $4,000 and everybody’s b!tching.”

Tony isn’t going to be shaken out of the gold trade. “We know what’s coming [over time]” he said. “Lower rates, more money printing, higher M2, yield curve control, the whole kit and caboodle. If we have another 100-day episode where it wiggle waggles and squiggles around $4,000, who cares?”

A YEAR OF ROLLING MACRO BREAKOUTS

“We’re in like the sixth regime of 2026 already,” Tony said. “My head is spinning.”

At the start of the year, it looked like another year for the precious metals trade. But in January and February, oil services stocks just took off… and then in April semis took off… then we had oil explode.

“You’re having these rolling macro breakouts,” Tony said. “The problem is, nobody’s sitting flat - we’re all trying to trade the trades that are in motion, and then all of a sudden you see something break out and you’re like, ‘should I be liquidating everything I have and trading this internet stock breakout?’ It’s really difficult.”

THEY SHOT ALL THE TRUMP TRADES IN THE BACK

Another surprising feature of 2026 so far: “They shot all the Trump trades right in the back,” Tony said. “Bitcoin, Coinbase, Uranium, Rare Earths, throw solar in there… Those were all trades that really took off with the admin when they were layout their plans, and then backed off just as fast as Trump’s approval rating approaches zero.”

TONY ON...

BITCOIN

“It’s a slow bleed,” Tony said. “The idea of hodling is completely absurd now that MicroStrategy is a net seller of Bitcoin. I just don’t like what’s going on around it.”

BANKS

Tony thinks the banking sector is happy with Kevin Warsh, and that XLF looks great. “I think the sector realizes that there are going to be some higher interest rates, or at least there’s this visibility that we’re not going to 2% and sitting there.” Tony wants to be long but he’s waiting for an entry point: “I’ve got to wait for [the chart] to migrate back to me.”

SEASONAL WEAKNESS INCOMING? MEH.

“I don’t look at seasonal weakness when you’ve got the Trump administration,
Tony said. “He’s going to overrun any kind of seasonality in anything.”

Thank you , , , , , and everyone else who tuned in live…! We’ll be back Talking Markets on Wednesday with Dale.

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Important: This article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

“The truths Phaedrus began to pursue were lateral truths; no longer the frontal truths of science, those toward which the discipline pointed, but the kind of truth you see laterally, out of the corner of your eye.” — Robert M. Pirsig, Zen and the Art of Motorcycle Maintenance

Earlier this month, we caught up with and the conversation took some very interesting turns, as it always does with our favorite chicken. So we decided to split it into two; part one covered his thinking around energy, geopolitical risk, and market expectations. If you haven’t watched it, you should check it out:

Part 2 is really fascinating conversation about lateral thinking, which he’s currently writing a book about. Suffice it to say, we can’t wait for that book to come out.

🏠Housekeeping Note: While the first few minutes of this special bonus episode are free for everyone to watch, the rest is for paying subscribers only. Thank you as always for your support. If you’d like to pull up a chair, you can join right here.

THE POWER OF BRAINSTORMING AROUND “GARBAGE”

The core distinction between these two ways of processing the world lies in how one handles assumptions. Linear thinkers, Doomberg says, are bound by the search for truth, whereas lateral thinkers are bound only by utility. He elaborates on this fundamental difference:

“A lateral thinker can brainstorm around an assumption, even if that assumption is not true and they know it. And that is the big difference. So a linear thinker goes in search of assumptions that must be true and then brainstorms around those. Whereas a lateral thinker has no emotional attachment to the correctness of an axiom that is used for brainstorming.”

To illustrate this, he offers a “garbage assumption” currently in his book draft: the idea that Vladimir Putin is a puppet of Western intelligence. Doomie doesn’t believe it’s true. But the exercise of kind of pretending it is allows him to view the world through a different lens:

“What would that mean? What would that look like? How plausible is that? If that were true? Does that explain the world? Maybe it doesn’t quite explain the world, but it lets you think about the world in a different way, and then certain events replayed through that new axiom look a little different... a linear thinker views brainstorming around knowingly false axioms as a waste of time. We’ve got to get to the right answer quickly.”

💡Basically, just because an assumption is garbage, “doesn’t mean all of the outcomes from brainstorming around it are garbage,” Doomberg said. “Occasionally you need somebody to connect weird dots, and one of the ways that lateral thinkers connect weird dots is they’re very comfortable brainstorming around false axioms.”

MENTAL MODELS: UTILITY OVER EGO

From lateral thinking comes the concept of the operative mental model. For Doomberg, a model isn’t a statement of moral or factual “truth,” but a predictive tool that is kept only as long as it works:

“A mental model is a set of axioms, no matter how wrong you might think they are, that predicts. And as long as it keeps predicting, it’s working, and it’s what we would call operative. It’s an operative mental model.

If your mental model is predicting accurately, you keep it, and the moment it stops, you discard it. And having no emotional attachment to it in the first place makes it easy to discard.”

🪢Last year, the Doomberg team did a presentation for their Pro tier, Mental Models: Six Axioms That Explain the World as It Is (For Now).

One example they brainstormed around was the fact that “the US has started arresting former presidents”:

“Once you brainstorm around that axiom, you come to the conclusion real quick that the odds of Trump not leaving are pretty high. Because in a world where former presidents get arrested and you’ve busted through that taboo, existing incumbents don’t want to leave. They certainly don’t want to turn it over to their political enemies... And so we asked in that presentation, whatever your partisan views are, did we see the last peaceful transfer of power in 2024, in the US?”

Sure, it’s provocative. But again, if you’re thinking about it laterally you get to skate around and connect some of the “weird dots” and maybe some of those weird dots will end up being very useful indeed.

One of the main ingredients for effective lateral thinking is having “no emotional attachment to the way you think the world works,” Doomberg said.

Doomberg’s interview continues for our paying subscribers below, and in the full video above. Doomie keeps his philosopher’s hat on to discuss AI and lateral thinking, the problem with emotional attachment to axioms, some classic lateral thinking examples, and how to try it out yourself.

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A BUCKING BRONCO

During yesterday’s volatile market action, Dale felt like a “yahoo riding a bucking bronco” (and had the shirt to prove it). After the Fed announced it would be holding rates steady (with 3 dissents), stocks puked into the close and investors sold bonds, sending 30-year yields to 2007 levels.

“I would say it’s close to disorderly,” Dale said of the market action.

Dale’s been looking for 6,900 in the S&P, and said it had a “big failure” into the close (above). It wasn’t just the S&P, either - there were breakdowns across the board, including in silver and gold.

TECH UPDATE

The rout continues in semis, with Micron (which Dale said 150 bucks ago was in a “failing rally”), Sandisk, and others continuing to fall.

Meanwhile, Meta fell yesterday on earnings, while Microsoft rose on earnings in aftermarket trading:

“Compared to everything else, Microsoft doesn’t look terrible,” Dale said. “But I don’t think that this liquidation in the market is over. I think we could have a real sharp rally, but when when they raid the bar, they take all the girls, including Microsoft. So I’m not comfortable being long much, except oil.”

And Apple “looks like a top.”

“Book it, Dano,” Dale said. “If it has good earnings, I’d sell into it. I think there’s going to be a pretty big break because people are buying Apple like it’s a safe haven.”

TLT “GOT HAMMERED”

Yields rose yesterday pretty much across the board, but “TLT really got hammered,” Dale said. “We’re at new lows.”

Elsewhere, Dale thinks yields in the 10-year have further to climb, mentioning 5.13% as a possibility he’s looking at, which is about 45bps higher than where we are now.

❗”Looks like we could have a bond market crash, a confidence crisis,” he said. “The new Fed chairman is not instilling confidence… He disappointed the bond market [by not hiking rates] and so the vigilantes came in.”

Dale thinks “they’re going to have to implement yield curve control, meaning you just peg the 10-year at something like 4.5% if inflation keeps climbing,” he said. “The implications of that: it’s inflationary, it’s debasing the currency. The dollar will be the sacrificial lamb in yield curve control.”

SPEAKING OF THE DOLLAR

“After [Wednesday], I really need to see more action before I’m compelled to take positions,” Dale said. “But if I’m a believer in what happened [yesterday], then the dollar is peaked for a correction at least. We could have a pretty good break, maybe back to 99, though it’s going to take closes under 99 to break the uptrend. Otherwise, I think the dollar is going to be a buy around 99.5, and that we’ll still get another run, maybe up towards 103.”

Elsewhere, Dollar/Yen also “looks ready to correct,” he said. “I wouldn’t be playing the long side of the yen right now. The pullback could be pretty deep, we could see 160 again.”

DALE ON…

BITCOIN

“It’s good that it’s stayed ‘eerily stable’ in all of this, but I still think that for it to advance, you’ll need of see some of the pressure come off risk,” Dale said. “I’m not impressed with it. I thought it might have enough juice to get to 70k, but the way risk is falling apart, I think taking out the lows of 57k is more likely.”

AGS

• Wheat: “I view this pullback as a break to buy. I don’t think we’re just going to fail.”

• Corn and beans: The pullback here is “due to a relief rally and some precipitation expected.” Corn has more constructive chart than corn, but maybe the beans drag corn down, Dale said. He added that corn would have to take the lows out before he considered his bullishness wrong.

Thank you , , and everyone else who tuned in live…!

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Important: This article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

Let’s get right into it…

THREE LENSES

Mish is looking at the current situation through three different lenses.

1. WHAT’S THE ECONOMIC MODERN FAMILY SAYING?

Mish has been using her Economic Modern Family as a way to judge the health of the US economy for 10 years (and now has an educational YouTube channel on it - subscribe and share with your kids!)

Each "family member" is an ETF representing a key sector of the economy, whose performance tells a story that helps gauge overall market health: IWM (Russell 2000), XRT (Retail), KRE (regional banks), IYT (Transportation), IBB (Biotech), and SMH (Semis).

❗“Except for semis, they’re all in bullish phases on their weekly charts and all of them are near all time highs,” Mish said. “There’s still this sort of separation of what’s happening ‘over there,’ and the US economy still being in better shape than most other countries, and that exceptionalism we’re still experiencing.”

2. “NUANCED” INFLATION

Mish is focused on the longer-term effects of sustained higher oil and food prices. “Even though inflation numbers have come down, it’s been very nuanced and pocketed,” she said. “The things we need the most are still very expensive. What is that going to do in our expanding K-shaped economy? And can it actually lead to a recession?”

3. WHAT ARE COMMODITIES DOING?

“We’re having tremendous volatility in the commodities market,” Mish said.

What that means for Mish now is that:

“You just have to alter how you trade commodities versus how you’re trading stocks. You absolutely have to look at buying weakness right now, because nothing has fundamentally changed. If anything, we have a situation where things, particularly with food prices, could get worse.”

• On oil specifically, Mish pointed out that the chart itself “supports buy the dip, sell the rally, because we have a potential inverted head and shoulders in the oil futures chart. If you think about it as a $75-$95 range, buy it closer down to the dip - that’s support - and sell it closer to the rally, until one day we see something escalate.”

• On gold, Mish “got bullish a couple of weeks ago” after getting out at the highs. Her reasons for getting back into the trade are fundamental: uncertainty and volatility around mid-term elections, the debt ceiling conversation, another potential government shutdown, etc. $4,040 is Mish’s new level of support and she thinks “if we can get back up to $4,125 and definitely $4,200, maybe we’re going to start to see some of the narrative change, it will certainly be a good sign for gold… I’m looking to make this one of my biggest positions as we go into the second half of the year.”

• The copper story looks different though: “To me, it just looks sideways and uninteresting,” Mish said. “And I think that’s a perfect reflection of how people are thinking, ‘well, is the economy going to grow? is it going to contract? Are oil futures going to be a problem for us longer term, or does it really not matter? Is the Fed going to be hawkish, or isn’t?’” For Mish, copper is telling you, “we don’t know the answer. Right now, Dr. Copper is probably looking for a diagnosis and not necessarily ready to find one yet.”

• Mish, like Dale, was on top of the ags trade with DBA long before it was being talked about more widely. Now, she says: “If you look at ags in general - including soybeans, corn, and wheat - I think they get very volatile here, but I think they’ve already formed a base,” Mish said. “They’re testing that higher level of support, and we’ll continue to do that until there’s a reason for them to go higher. It could be El Nino, it could be Ukraine, it cold be the hurricane season coming up… All I know is, I’m not bearish.”

MISH ON…

NEW HIGHS

“What I’m starting to see in staples, utilities, commodities, is a new range based on what we saw in the beginning of the year, versus the big dump we had in May and June,” she said. “And now there is a lot of support and ranging that could easily break out and take us into new high territory in sectors that are different than what we’re used to.”

THE DOLLAR

“The dollar is still very strong, even with all the talk about petrodollars and foreign countries not buying our dollar,” she said. “And unless DXY breaks down under 100, I would say the dollar doesn’t look like it’s in any great threat in terms of its world reserve currency status.”

BONDS

Mish keeps an eye on TLT, and noted that it bounced up yesterday (Monday) after selling off last week. If yields drop further, she thinks it’s partly because the US is “buying back its own bonds at record rates,” and on an investor level, “maybe we need bonds as a safety play.”

DAY TRADING

Mish loves day trading right now “because you can wake up and find something, it goes up 10%, and then the next day it’s down 15%.” And SpaceX is one of those somethings - she bought it last week for a day trade. She thought it might have found fair value and bottomed at $113, “so I bought it at $113 and then I got out of some of it and just put on a no loss stop.” (When it comes to day-trading, worth remembering Mish has been trading for decades.)

P.S. If you’re involved in the financial literacy space (or know someone who is), DM here on Substack. And if you’re not following the ‘Trades of Our Lives’ series on YouTube, right this way.

Thanks to everyone who tuned in live…! We’ll be back tomorrow at 4pm ET for Fed Day with Dale.

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Important: This article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

Let’s dig in…

OIL: “DO OR DIE”

Last week, Dale said he’d need to see WTI close over $89-$90 before he’d think we were going to new highs. That hasn’t happened yet, though it’s certainly in a climb, fueled by the fragile situation in the Strait of Hormuz, and now, the Red Sea.

“It looks like do or die here,” Dale said of the WTI chart. “We’ve attacked major resistance at $88.”

For context, Dale had bought WTI under $70 and got out a little over $80. Now, he said: “Here, I’d certainly be taking partials in case this is just a bear market rally, despite the news… If you’re bullish, I think there’s going to be a pullback to buy it. I wouldn’t chase it up here, unless you get a real solid close over $90, then something else is going on.”

GOLD WAKES UP

In Dale’s Discord room (you can join for free here), he said on Sunday he talked about trying the long side as gold had started making higher lows over the previous few days, “so I thought we could get a rally to $4,150-$4,200.” As of yesterday (Wednesday), he thinks if people got into that trade they should consider “taking partials and snugging up their stops.”

In the coming days, if we start closing over the $4,160 level (one of the blue lines in the chart above), Dale thinks that “opens the door to $4,400.” But there still is a chance that this rally is “pretty much it,” and “there still is a chance for one more marginal new low into August.”

Silver has also picked up, but Dale isn’t convinced we’ve seen the lows. “Gold looks better than silver as far as I’m concerned,” he said. “And the gold/silver ratio still hasn’t gotten above 80, which is my long term target I’ve been talking about for weeks.”

BOND SURPRISE

Last week, looking at the 10-year yield, Dale thought “we were on the verge of rolling over,” he said yesterday. “And here we are testing the high in the 10-year. I was wrong about lower rates, at least so far.”

We’re seeing new highs in 2-year yields too, while TLT “is holding on by its fingernails,” Dale said. “We’ll need a pullback in energy for us to have any relief.”

TECH UPDATE

Dale flagged the break in Micron last week, and ended up covering his short positions in semis on Friday and Tuesday. Now, he said, he’d like to see Micron back up to $1,100 i he market keeps rallying, in order to “lay my shorts back out again, because I don’t think [we’ve seen] the bottom… I’m looking at this as turning into a failing rally.”

More broadly, Dale said: “When you’re talking about the market in terms of relative strength, S&Ps have been much stronger, because they’re not as heavily tech weighted, especially against the Nasdaq 100.”

Side note: ICYMI, Google reported better-than-expected Q2 revenue yesterday, but (as Dr Divergence flagged in the live chat), the stock traded down in extended trading thanks to an increase in capex forecast. However, Dale said the chart looks “constructive,” although he sees better opportunities elsewhere.

AGS UPDATE

Dale’s been right on ags for months, and the trade is far from over. Here’s wheat:

As Dale first said on Talking Markets at the start of the year, he sees wheat as the “silver of the grain complex,” and right now, it’s going through a weekly breakout. “If we start to fail here (green candle in chart above), tighten up your stops,” he said. But he still thinks it can get up to $9.

Elsewhere, “beans in the teens are on deck,” corn is “on the verge of breaking out,” and sugar is looking “okay.” Cocoa has been slammed but Dale would “buy breaks.”

DALE ON…

NAT GAS

“We held Monday’s low, and this is hopeful,” Dale said. “It’s a good close, nice action… Maybe there’ll be a rotation out of WTI into nat gas.”

CRYPTO

“The preferred long between Bitcoin and Ethereum would be Ethereum for me,” Dale said. “[The chart] has a much better look… Bitcoin’s had a nice bounce, but if I’m right about a lot of liquidation happening in August, I think that for Bitcoin, the bottom was not $57,000. It’s only 10 grand away from the low now. Bitcoin could do that in a week.”

Thank you to everyone who tuned in live! We’ll be back Talking Markets on Monday, July 27, with the great .

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Important Disclaimer: This article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

We weren’t the only ones thrilled to have Katie back on with us…

❗Side note: You can request a Fairlead Strategies 30-day free trial right here.

CHOPPY CONSOLIDATION & LOSS OF MOMENTUM

In the major indices, Katie says there’s a “coiled up formation that just looks like choppy consolidation… It’s what our indicators were supporting. There’s a loss of momentum, especially behind the AI trade, and that has resulted in this consolidation phase.”

In this phase, there’s a relative balance between buyers and sellers, but “ultimately, someone is going to win out,” Katie said, so she’s watching the boundaries of this consolidation phase closely.

On the S&P specifically, she said the upper boundary of the consolidation phase is about 7,620. The lower boundary, defined by shorter term gauges like the 50-day moving average and Fairlead’s daily cloud model, is around 7,340.

“So we have this very tight range to watch for the S&P 500,” Katie said. Another metric of concern: “When we see our overbought metrics like this stochastic oscillator rollover from 80% [highlighted in yellow on chart below], that’s our so-called sell signal,” she said. “The last time it happened was in early Feb. I’m not saying we need that kind of corrective action, but it does increase risk.”

That, combined with recent Nasdaq 100 action, means Katie thinks that a breakdown from the consolidation phase is more likely than a breakout. That said, she added: “If a breakout unfolds, we’ll be happy to listen to it because this is a market that has responded to breakouts.”

WHERE’S THE DOWNSIDE?

Looking at the next support levels, Katie flagged around 7,000 for the S&P.

It’s a more dramatic story for SMH, “just by the nature of how far and fast they’ve run up,” she said, but there’s actually now a short-term oversold reading on SMH, “so we’re looking for maybe a little stabilization partly off of that reading.”

Another ETF Katie tracks closely is the Global X Artificial Intelligence & Technology ETF (AIQ), which does have short-term support but it’s also down 19% already. “[That’s] already getting into major correction territory,” she said. “ That is a risk for the broader market because it’s just been carrying it.”

That fall in AIQ isn’t really impacting the S&P yet, partly because the mega caps have stepped in. “There’s been enough rotation into the big heavyweights of the market that’s allowed the S&P to not break down yet,” Katie said. “But if you start to see the mega caps stall, that could be problematic… And we know that mega caps have collectively fallen out of favor from a longer-term perspective.”

💡”If you take the ratio of the MAGS ETF to the S&P 500, you’ll see a big relief rally,” Katie said,” but it’s within the context of a cyclical downtrend, so we are not totally convinced by the staying power of that mega cap relative strength.”

THE OIL PICTURE

Looking at crude oil, Katie said it held key support right around $67 per barrel. “And with the successful test of that support level, we now have an intermediate term oversold upturn,” she said. “So we think it’s a pretty meaningful recovery that could have already started in the price of crude oil, something that could be more lasting.”

Longer-term, Katie said: “I do think our new normal is a more elevated level, perhaps in the mid 80s.”

💡”The opportunity is in energy, where you can find some great setups right now, some oversold upturns on the weekly charts, so I think that’s compelling if you believe that there’s more upside to crude oil like we do,” Katie said. However, she added that there’s risk to that of course, because of headline reaction.

GOLD: INTERMEDIATE DOWNTREND

What’s happening with gold “is more than a correction now, it’s an intermediate downtrend within the context still of a secular trend - but one that’s obviously lost long-term upside momentum,” Katie said.

The price is now below Fairlead’s cloud-based support, and “unless we get a big bounce, literally this week, we will see this level broken,” Katie said.

Add to that, “the DeMark indicators have signs of downside exhaustion on a short-term an intermediate-term basis, not yet on a long-term basis,” she said. “But they do at least suggest there’s a good opportunity here for gold, and also silver, to see a good relief rally that is tradable for most of us. But I really want to see that convincing upturn where the cloud-based support holds. [And] that’s not going to be the case if we don’t see a pretty substantial bounce this week.”

💡Looking at Fibonacci retracements [below], Katie said: “The 38.2% retracement seems to be in jeopardy, and if it finishes the week again below that, then this 3,600-ish area becomes the next support level.”

DOLLAR BREAKOUT?

After a long period of being rangebound and choppy, DXY has broke out from a trading range above some key resistances, Katie said. “You can see the turnaround that’s unfolded [highlighted in yellow below] and now we have a breakout.”

“It’s not like it’s free and clear of additional resistance or necessarily off to the races,” she said. “But the breakout does suggest that the next few months should have more of a dollar bullish bias to them.”

→ Support is the former resistance, 100.3

→ Where Katie would say this is a false breakout is below roughly 99.7

BONDS: MIXED PICTURE

Looking at 10-year yields, Katie said it’s a range-bound set-up where resistance kicks in around 4.74:

The indicators are “somewhat mixed right now,” she said. “Some are pointing higher supporting the intermediate term uptrend,” and now on the monthly chart there is a MACD buy signal, for the first time since late 2023. If and when it does break out, you could certainly make a case for 5-5.25.

However, it’s a slow-moving ship, Katie said. “You get this action, it feels like a real directional move, and it just doesn’t see the follow-through. So our thinking is to respect the breakout if it occurs. Otherwise a long-term neutral bias is appropriate.”

SECTORS: A TRANSITION PHASE

“We’re in this transition phase on the sector front,” Katie said. “It’s a rotational market. We’re mostly, from an intermediate term perspective, equal weight, because we’re underweight technology and have been for a few weeks now. Almost everything else has done better and stabilized after mostly underperforming.”

• The healthcare sector “has stood out to us as having better relative strength for a few weeks now, and it appears meaningful,” she said.

• Industrials have been range-bound but with a lot of volatility, but the chart (looking at XLI) looks prone to more consolidation but it is in a “nice uptrend.”

However, it’s worth remembering that if the S&P corrects, “it’s really rare to see anything just completely shrug it off,” Katie said. “We’re generally saying, limit new long positions to those that have brand new positive catalysts.”

Thank you , , , and everyone else who tuned in live! We’ll be back Talking Markets tomorrow with Dale.

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Important: This article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

The crux of this For the Record is the idea that every mental model of the oil market broke this year. When war with Iran didn't send crude spiking above $150 or $200 (as virtually everyone had assumed it would), it forced a reckoning: either prices were being manipulated, or they were telling us something we didn't yet understand. Doomberg is firmly in the second camp. In this conversation, recorded July 1, he lays out what he thinks prices are actually saying, and follows the thread outward into into Europe's energy self-harm, a Russia that emerges from sanctions stronger, an underappreciated war risk on NATO's doorstep, and why AI may just be the next commodity headed lower.

🏠Housekeeping Note: While the first c. 15 mins are free for everyone to watch, the entire 50 minute episode is for Market House full subscribers only. If you’d like to pull up a chair, you can join right here.

“EVERYBODY GOT OIL WRONG“

“Anybody who said they didn’t anticipate oil would spike above $150 or $200 is lying to you,” Doomberg said. “Everybody assumed, including us, that oil would spike. And when it didn’t, then [it became clear that] something is wildly inconsistent with everybody’s mental model of how the oil market is currently working.”

When it became clear that $125 was going to be the peak, there was a split into two camps, Doomberg said:

• Camp 1, including Doomberg, , and a few others, said “Wow, prices are telling us something we didn’t know, let’s pay careful attention and try to understand it.”

• Camp 2 argued that “prices are being manipulated and the oil spike is just around the corner.”

Doomberg argues that Camp 2 are clinging onto a narrative and therefore missing what’s going on underneath the surface.”

So, what were prices actually saying?

Doom says price was shouting that “China has made fungible the entire suite of hydrocarbons,” making crude oil is far less important than it was before. The volume of natural gas liquids (NGLs) is “exploding,” Doomberg said: “People who are clinging to the ‘I want the price of crude oil to go up’ narrative don’t like to count NGLs as oil, but it is oil.”

“China was able to make fungible 4 million barrels a day of crude demand, and one of the ways they were able to do that is because the US NGL production exceeded all expectations and plugged a big hole for China, thereby keeping the price of crude under wraps.”

(🪢For more on this, see Doom’s ‘Peak “Not Oil”’)

That all means that now, “we have a glut of crude oil, and a very temporary shortage of refined products,” Doomberg said.

So, the situation has changed, and “unless Iran blows up the Middle East, which could happen, that spike is not around the corner,” Doom said. “The risk premium in oil is not how long it will take for the Strait of Hormuz returns to normal volumes. The risk premium in oil is whether Iran blows up Saudi Arabia.”

“LONG TERM, THE REAL PRICE OF ALL COMMODITIES IS LOWER”

The reason Doomberg and team think that long term, the real price of all commodities is lower, is because “to assume otherwise is a giant short bet on human ingenuity - and ingenuity in supply chains logistics, innovation, engineering, finance… All of those things converge to make the lifeblood of the economy ever cheaper,” he said.

We’re seeing it already, he thinks, with not getting that $150-$200 oil spike. Because there's such an abundance of hydrocarbons in the ground globally, and China has made the whole suite of hydrocarbons fungible, supply isn't as dependent anymore on any single route. If one passage gets blocked, producers just push more volume through another.

Problem is, all the metrics in the oil and gas space “are backwards looking, and they don’t correct for technology,” Doomberg said.

*Important caveat: Doom doesn’t consider gold a commodity here.

“WORLD WAR III IS NOT DONE”

Iran is still getting most of the headlines, but Doomberg thinks the “US-Israeli attack on Iran is just a separate battle in a broader World War III.”

The Doomberg team is keeping a close eye on the rest of its political risk board:

• Russia recently closed rail connections with Finland, Estonia, Latvia, Lithuania: “That’s something you do before you attack them,” Doom said.

• President Trump met with Ukraine’s President Zelensky to discuss a drone attack campaign into Russia, and a “profound psy-op information war against Russia, to try to destabilize Putin.”

Doomberg’s interview continues for our paying subscribers below, and in the full video above. In it, our favorite chicken talks about the infinite demand for energy, the risks around Russia, why it was a “catastrophic” decision to go to war against Iran, and more.

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THE TROUBLE WITH MICRON

Dale told us last week he went short Micron, saying it had “turned from being a meteorite to being the relative weakness in the market.”

Well, that’s working out so far:

“When I started talking about $400 Micron, people started mailing me lithium to stabilize me,” Dale joked. “But if we break down under $850, it’s a simple measured move, that gets you back to the 200 day moving average… And it might be a great buy there.”

Overall, Dale would “avoid the chips for now,” he said. “They’re going to get real cheap.”

THE RETURN OF MAG 7?

Just as the ol’ “Lag 7” phrase was beginning to catch on, looks like some life has been breathed back into the Mag 7:

“They’ve done nothing wrong yet,” Dale said. “Looks like they want new highs on the weekly here, it looks like they will… Maybe that’s where some of the rotation out of chips is going into.” However, Dale said that new incoming high “could turn out to be an important top,” as it doesn’t currently look like it will confirm.

On Apple specifically, which had a nice pop yesterday on news that its AI tools have received government approval in China, Dale said it’s “part of the blow-off melt-up scenario,” but that he “wouldn’t chase it here, [as] we’re not confirming on the daily… There’s nothing wrong with the chart right now, but I’m not a big fan of buying new highs that are not confirming with momentum.”

BOND INFLATION REACTION

After cooler than expected inflation data this week, yields pulled back a little. “It’s more concentrated in the front end,” Dale explained. “We’re getting some steepening. I think this is an important week - I think that yields have peaked, and it’s a reversal week.” He added that 3.72 looks like a natural target now for 2-year yields.

It’s a different story on the long end, though, Dale said, with TLT hardly moving:

“It’s still possible [TLT] is digging its heels in for a higher low,” he said, “but I feel more confident about lower yields on the front end and even in the 10-year.”

AGS UPDATE

If you’ve been with us the last few months, you’ll know what Dale has been absolutely masterful at guiding us through the ags trade.

On Talking Markets, Dale called the wheat bottom back in Jan/Feb, told people to get out at the highs in May and said to wait until June/July to get back in. And the proof is in the chart…

Dale is still riding ags trades, but said there’s nothing wrong with taking partials. He said he could see 900 happening for wheat in the chart above, saying “we’re on the verge of breaking out,” and could retrace towards the highs of the Ukraine war breakout.

He’s also been saying it’s a good idea now to get back into corn and beans, too. And as he’s mentioned a few times, DBA is a decent ETF way to play the thesis:

PRECIOUS METALS

Gold is holding up better than silver, but to declare that we’ve seen the bottom, Dale needs to see it close over $4,200. He still thinks we could see $3,800, which he would buy, “maybe aggressively.”

As for silver, Dale pointed out that even with the dollar “getting smashed” yesterday, “silver really couldn’t get up off the mat”:

Elsewhere, platinum is holding up much better, but Dale could see one more drive down.

DALE ON…

THE RUSSELL

Dale said previously he thought the highs could be for for IWM, and he still thins that’s a possibility - “It’s sitting right on the 50 day,” he said. “It could blow off but it won’t confirm… It’s like Wile E. Coyote sitting on a ledge.” However, in terms of the major indices, the Russell would still be Dale’s choice to buy on weakness, over the NASDAQ and the S&P, as he thinks that over the longer term it will continue to outperform.

WTI

“If we happen to close back over $89-$90, then I think we’re going to new highs,” he said. That said, he’s now out of the long trade and wouldn’t be getting back in yet, partly because “the oil shares didn’t do too well today, even with crude up.”

SPACEX

The stock is now down at 125 from the IPO highs in the 220s, but Dale thinks there will be a rally “because a lot of the insiders couldn’t sell for 180 days, so they’ll generate something so they can unload some stocks.” But there’s likely some capitulation here, as there are plenty of people underwater.

AND FINALLY… SOMETHING TO PONDER

Dr. Divergence in the live chat flagged:

“If you average SMH (semis) and Transports (to get a "modern" transport index) and Compare to Dow Industrials, you're looking at one hell of a Dow Theory sell signal...”

To steal from our friend Grant Williams, that’s a thing that makes you go hmmm…

Thank you , , and everyone else who tuned in live! We’ll be back Talking Markets on Monday. But stay tuned later today where we’ll be bringing you a fantastic conversation with the great .

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Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

THE SENTIMENT READ

Right now, retail volume on down days is 3.5 times higher than retail volume on up days. Jared pointed out that retail volume on down days is always higher, “but this is exponentially higher than any other period in time,” he said.

“So it’s ‘buy the dip,’” he said. “People are just buying the dip… Even on a day like today, when we’re back at war. The S&P is down about 80 bps; on a normal day it would be down a lot more.”

More sentiment tidbits:

• Leveraged ETFs have 4.5 times more assets than they did in 2020…

• At Citadel, the average expiration of an option is 3 days…

• And a third of them are 0dte options.

• Money is pouring into semiconductor leveraged ETFs

• One month correlation (COR1M) is at all-time lows (Tom pointed this out too).

“So, retail is the underlying bid in the market,” Jared said. “That’s why we can’t sell off. But one of these days it’s going to happen. I don’t know what the catalyst will be, and then [retail volume] will disappear and it’s going to turn into an avalanche of selling.”

When and how? Who the hell knows, but Jared doesn’t think it’s unlikely to be the Iran war (unless it really escalates), because that’s now a known known.

“Buy the dip has worked for the last 18 years, and it’s going to continue to work until it doesn’t,” Jared said.

THE CPI READ

“Even if we get 0.3 on the core, I think everyone is so short bonds, they’re going to have to cover,” Jared said yesterday. “0.2 would be great, 0.1 would be amazing… If we get 0.4 we’re going to get a big dislocation in the bond market.”

Well, here’s the print this morning, down more than estimates expected:

UKRAINE… CATASTROPHE NOT PRICED IN?

One thing Jared’s concerned about that hasn’t been making many headlines lately is Ukraine. He pointed out the severity and duration of the conflict, saying that “Russia has lost a million men” and that “Ukraine is attacking all the way into Moscow.”

A primary concern for Jared is how Putin will react to these ongoing setbacks. “Do you think he’s just going to turn tail and leave and say, okay, you win, I lost?” he said. “I don’t think that’s going to happen.” He suggested that a desperate situation could lead to extreme measures, such as Putin dropping a “low-yield tactical nuke into some deserted area of Ukraine” to signal that “the next one’s going to be on Kiev unless this is over.” Although Jared describes this as perhaps a “10% possibility,” it being as high as even 10% makes it the “scariest thing in the world.”

And… he doesn’t think it’s priced in. While he thinks the Iran war is pretty much priced in, excluding a dramatic escalation, it’s not the same for Ukraine. He even went as far as to say it is “negative priced in” because the options used to protect against such a crash are “cheaper than they’ve ever been.” Because he views this as a legitimate threat, Jared has “bought all the tails” he can find, positioning his portfolio with “puts on the S&P” and “calls on gold” and bonds to prepare for a potential “avalanche of selling.”

JARED ON…

GOLD

“Gold has been basically negatively correlated to oil, so if you see oil go to 85, then gold is probably going to break support and make new lows.”

IPOs

“Back in the dotcom bubble you had 2,000 IPOs and they were much smaller,” he said. “And now we have around 10 IPOs and they’re enormous. The amount of money raised by these big IPOs dwarfs the amount raised by the 2,000 IPOs in Y2K. Really what you’re looking at is additional supply put on the market.”

FINALLY… THE AWESOME PORTFOLIO

Jared’s been thinking about and working on The Awesome Portfolio since 2019. Essentially, he thinks that the way most people save for retirement now is “absolutely idiotic,” and that The Awesome Portfolio is the solution.

Our take is that even if you are happy with how your retirement saving plan is going, it’s always good to stress-test or challenge your thinking, especially when it’s with the help of someone as sharp as JD.

“It’s an airtight, bulletproof case for investing across asset classes,” he said. “

Let’s all get him on the bestsellers list. Here’s where you can preorder the book, out September 8.

Thank you , , , , and everyone else who tuned in live! We’ll be back Talking Markets tomorrow (Wednesday) with Dale.

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Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

For more from Juliette: JDI Research

🏠Housekeeping Note: While the first c. 16 mins are free for everyone to watch, the entire 47 minute episode is for Market House full subscribers only. If you’d like to pull up a chair, you can join right here.

STICKY INFLATION

While Juliette doesn’t think core and supercore (supercore being core minus food, energy, and housing) inflation will explode, she does think it’ll remain very sticky over the next while. “We’re basically running above 4% on a 6-month basis,” she said:

She thinks there is consensus that the oil shock is the main force behind the burst of inflation we’ve seen in the US (and elsewhere) - and she thinks that consensus is wrong. An example of this is soaring import prices:

“Import prices have exploded in the US,” she said. “This is not at all just all oil; it’s plastics, it’s chips.”

Adding to that sticky inflation picture is a sudden strong stabilization in the labor market…

…And that “at the moment, AI is super inflationary.” While AI may eventually become disinflationary (more on that later), Juliette says its current impact is to drive up costs that are increasingly being weighed against labor budgets.

She also discussed a recurring pattern where falling oil prices paradoxically fuel services inflation: “When you get that purchasing power coming back in the goods market it will translate into higher demand and services.”

All of this means Juliette is bearish US bonds. “I’m bearish the short and the long end. I’m recommending [shorting] the long end because I see lots of inflation in the pipeline and I don’t see the resolve to really get ahead of it,” she said, adding that the 10-year yield could reach 5% if data remains strong and the Fed fails to deliver on hawkish rhetoric.

THE IRAN WAR: PLENTY OF RISK AHEAD

Ahead of the mid-terms in the US, Juliette said that “one thing that investors are really hanging onto is how much Trump really needs oil down much more than he needs to put a hand back on the 440 kilos of enriched uranium.” She said this political necessity creates a tactical advantage for Iran: “Trump cannot afford to have gas coming back higher ahead of the midterms so in a way, basically whatever Iran does he will fold into it.”

This perceived weakness in the US administration’s position leads Juliette to warn of continued volatility. She suggests that this “clear weak spot... opens the world to anyone having a hold on a choke point, using it for whatever they might want in the future, including Iran.” Consequently, she anticipates a possible “mini crisis this summer where [Iran] decides they actually want more than what they’ve already got just because they can get it.” For investors, the war represents a persistent supply-side “fragility” that remains a primary “risk ahead,” she said.

THE FED

The backdrop for the Fed has completely changed, Juliette said, “and when you’ve got sticky inflation above 4% and rates below 4%, you’ve got a little bit of a problem.” With the labor market stabilizing, the Fed has “lost one anchor for the doves,” she said. “And that’s why now, the doves are looking to stay on hold and the hawks are looking for hikes.”

In fact, Juliette said that if payroll numbers were strong on July 2 (this interview was recorded on June 30), that the Fed would have to hike in July. Payroll numbers cooled, but were still strong.

Juliette’s interview continues for our paying subscribers below, and in the full video above. In it, she talks more about AI vs the labor market, why Europe is more resilient than people think, the big problems facing US hyperscalers, the US vs China AI race, and more.

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Let’s get into it…

OIL

Oil jumped after President Trump said the ceasefire with Iran was over.

But right now, Dale is taking it as “possibly being a bear market rally, back to maybe $80. What would change the whole thing for me is if ever close over $90,” he said. “Then the shortage scenario would be on.

LONG FOOD MARKETS

Dale’s been talking to us for a while about being long food markets, and “buying the rain breaks.”

SUGAR

Dale thinks we’re going to take those highs in sugar: “Buy pullbacks.”

SOYBEANS AND CORN

“The strongest grain is now soybeans,” he said. “They had a tremendous week.” Dale said the USDA report in June warning of drought in the Midwest “bottomed” beans, as well as corn:

“Although we failed at this moving average I still think you have to accumulate corn.”

WHEAT

Wheat is “at resistance.”

“You’ve gotta buy pullbacks in all these food groups,” Dale said. “It’s embryonic… And they’ll really get going when we have a dollar turn.”

A lower beta way to participate in the grains is DBA, Dale added. “Buy it anywhere and hope it pulls back, because it’s going to take out the high.”

PRECIOUS METALS

Dale still thinks silver is going to $50, and that’s where he’d start buying physical. But, after being bearish on precious metals since the beginning is now constructive on gold.

Long-time Talking Markets viewers will know that Dale’s been talking about sub $4,000 gold for some time (which happened last week). Now, he thinks we could see “one more flush,” perhaps with a pop in rates and yields and a pop in the dollar. “I’m looking to buy a break under $3,900 in the next several days, for at least a good rally,” he said.

As for gold miners, they’re “dirt cheap, and leading the way down.”

Meanwhile, Dale is still bearish copper, and thinks it will take out $6, and maybe even $5.40. “If I’m right about Micron [more below], I think copper will go lower too,” he said. “Because it’s more of an economically sensitive metal, rather than a monetary metal like gold.”

THE DOLLAR

Dale’s long term targets for DXY have been 102-103, and we got up to 101.60 so “it’s a little trickier now,” he said.

Dale thinks now we maybe rally back up towards the highs one more time, and then “we get a dollar correction at least,” he said. “I don’t think we’ve completed this bear market rally in the dollar.”

Related decent trades could be getting long Aussie or shorting Canada, he added.

MICRON: FROM METEORITE TO RELATIVE WEAKNESS

Dale went short Micron a few days after their estimate-beating Q3 revenue results. “[Micron] had a top on good earnings [see chart] and got hammered,” Dale said. “I’ve been talking about Micron for a while, and I said I wasn’t sure when it was over, and I had a few unsuccessful attempts… but one of the Ps is Persistence.”

Comparing it to silver’s parabolic rise earlier this year, Dale pointed out that silver dropped 50%, and so if MU was to come back down to earth in a similar way, that would be a drop to $600. “That’s my call,” he said. “It’s turned from being a meteorite to being the relative weakness in the market.”

New highs would change his mind, but he doesn’t think there’s new highs in it.

BONDS: A NASTY PULLBACK

“Bonds had a nice run, and the way they’re pulling back is a little bit nasty with gaps,” Dale said. “It speaks of illiquidity, which has got a hold.”

“Maybe we have another bout of higher yields,” he said. “One more pop in the dollar, one more washout in gold, pullbacks in the S&P to 6,900, NASDAQ pull back pulling back to 26,000.”

Thank you to everyone who tuned in live! Stay tuned later today for a fantastic episode of Macro Sessions with the brilliant Juliette Declercq, founder and CEO of JDI Research.

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Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

AN “INCREDIBLY CHALLENGING” ENVIRONMENT

Markets are still in full-on speculation mode, Tom said, which means the way he invests is “really out of favor.” But that creates opportunity in certain places. One thing he has noticed is that implied one month correlation is at 4:

What does that mean?

Well, low values (like now) mean investors think stocks are likely to move independently; higher values suggest stocks are expected to move together.

So, the current range means “it’s a stock picker’s market,” Tom said. But still, “you’ve got a lot of people positioned on one side of the boat in certain places.”

THE TECH TRADE: POSITIONING RISK

While “the strategists they’re trotting out on TV are saying earnings growth is off the charts” in tech, Tom said, “if you take out the AI names and the memory names, earnings growth is okay [but] not spectacular - 3-5%.”

When it comes to the memory names, “I think positioning risk is a bigger problem than fundamentals,” he said. “The fundamentals for memory chips can’t get much better. It’s really the positioning and leverage and short-term options in this group” that he sees issue with.

KOREA: WILD SPECULATION

And it’s not just in US markets. Tom flagged Korea, where “basically two stocks, SK Hynix and Samsung, have done all the heavy lifting in the index… There were more stocks down last quarter in Korea than up, and the market was up huge.”

“You have people selling their life insurance policies that are 50-60 years old and putting it in the Hong Kong listed SK Hynix double leverage [ETF],” Tom said. Harry Melandri flagged what’s happening in Korea for us last week too:

“I don’t think people quite understand the amount of risk they’re taking because you have people buying calls and 3x levered ETFs and that’s just leverage on top of leverage on top of leverage,” Tom said. “And that’s concerning to me.”

SOME OF WHAT TOM’S BUYING (AND SELLING)

Tom is “more than happy to buy stuff out of favor,” he said. “There’s a lot of stuff that’s down 50-75% off the highs, super good quality companies.”

• Tom is scaling into gold, which is a “relatively new” trade for him. Citing Rick Rule, Tom said “Gold is great at times when people in charge have no idea what they’re doing, and I think we’re kind of at that place politically, and globally.”

• He’s also started a small long position in GDX, with gold sentiment down at 3 year lows.

• He’s back in Adobe (having gotten in early and then trimmed), but “it hasn’t really worked”

• He bought some Oracle Tuesday (July 6)…

• …And shorted Apple: “I think Apple is a great short, partly because they’re raising prices - and I think the consumer is probably going to have a tough time justifying paying $200-$500 more for their phone.”

• On semis: Tom was “barbecued” by some of the semis, and had cut his semi exposure right down. But about a week or so ago he went short again on Micron and Sandisk and they’re down since then - but he’s playing it very tight. “I don’t know what the catalyst will be of when things will break, but it may not need that much when you have this type of positioning.”

• He’s currently buying a lot of stuff in Hong Kong and China including Ali Baba (partly because of the moves they’re making in AI), it’s down 50% from the highs so he’s more than happy to buy it here; and EV giants like Xiomi and BYD.

• In general, the Hang Seng index in Hong Kong has been “absolutely crushed.”

• There’s some stuff Tom likes on defense tech side, including Leidos Holdings

• Tom still likes nat gas, and is still holding Golar

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TOM ON…

WWTFD? WHAT WILL THE FED DO?

Tom thinks we’re going to see inflation cooling down a bit, primarily due to gasoline prices coming down. “That will probably get the people who are looking for a hike to turn more neutral or even look for a cut in the future,” Tom said. “I don’t see the Fed doing anything dramatic before the midterms.” However, Tom doesn’t see inflation coming back down to say, 3%, “unless we have some sort of market calamity.”

COMMODITIES GOING NUTS

“Commodities are going nuts again on the upside, coffee’s up 16, cocoa’s gone nuts,” he said. “There’s a lot of drought concerns around the world. So there’s places to look at [in] commodities.”

THE BIG PICTURE

Tom and team are in the middle of a total rebuild of the Hedge Fund Telemetry site, and have recently launched a new note called The Big Picture. “It’s a once a month note with a couple of interim updates throughout the month, and it filters out a lot of the noise,” he said. “We’re also going to add a third note during the day that’s going to be actionable, short and intermediate term ideas.” If you’re interested in subscribing, right this way.

Thank you , , , , and everyone else who tuned in live…! We’ll be back Talking Markets on Wednesday with Dale.

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Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

Harry’s seeing something rumbling in credit markets, and is reducing his risk in the face of that and the earnings bubble (but reminds us that bubbles can soldier on for longer than you think).

EARNINGS BUBBLE

Stocks broadly rallied yesterday, showing some spark again after a rough week last week. Harry thinks a contributing factor could be Friday’s announcement that SpaceX will be added to the Nasdaq 100 index on July 7, a very quick addition, meaning investors who hold index funds and ETFs tracking the Nasdaq 100 will own SpaceX from July 7 whether they want to or not.

SpaceX’s fast-track to the Nasdaq 100 “has got to be a supportive factor because it forces people to buy SpaceX and sell small amounts of everything else in the index,” Harry said.

Harry has been thinking that the markets “could keel over and die in a horrible way,” which hasn’t happened. But he still thinks it’s “pretty obvious that this is some kind of bubble, and reasonably obvious that it’s an earning bubble. From his fantastic One Meme to Rule Them All Substack piece:

As Harry said, “bubbles always go an awful lot further than you can imagine… The point at which people describe it as a bubble is generally not the top.”

💡Still, Harry is reducing his risk positions, raising cash, and nibbling some bonds - “generally trying to take my risk down to a sensible level.”

CREDIT CONDITIONS TIGHTENING?

For Harry, “it’s becoming increasingly obvious that certain corners of the capital markets are losing access to funds.” Some of the canaries for that:

• Elon Musk choosing now to take SpaceX public

• Google decided to tap markets for about $85 billion worth of equity (having not tapped markets for equity since 2004)

• Rumors that Meta is looking to issue

• Some other stocks Harry holds are also going equity raises

“So something’s up,” he said. “People have decided that they need more capital.”

The elephant in the room, Harry says, is the AI buildout. The enormous cost of it “does explain why capital is getting a little tighter for some to access,” he said. “Hyperscaler CapEx is enormous. They can’t finance it out of profit anymore, so now they’re issuing paper and equity… We had these companies that were buying back their own stock for God knows how long, and now they’ve switched from being net buyers to net sellers. That’s not a great sign.”

Add to that, SpaceX is “sucking in liquidity and the money that would be elsewhere.”

And add to that, Harry pointed out that “we are seeing a lot of talk among guys in the street about the pressure in leveraged ETFs in Asia. Korean retail has gone absolutely stock crazy. They’re making Wall Street Bets look like they’re risk averse investors.” In fact, they’re buying so much that they’re “stretching brokers’ ability to finance leveraged ETFs, and that’s tightened up credit availability in those corners.”

FINANCING PROBLEMS INCOMING?

Harry thinks there is a looming “problem in getting the banks to finance hyperscaler lending” because, quite simply, it is “not an attractive place for banks to gain.” Banks are playing it safe in the repo market with “completely collateralized risk-free lending where you can get easy money for taking almost no risk.”

When the bond market saw the bill for the AI buildout, Harry said the response was a resounding “hell no, not us.” That forces hyperscalers like Meta (which Harry notes is “burning cash” without a cloud arm to monetize the capacity) to dump equity and paper onto the market instead. This “game of musical chairs” creates frictional problems because the gap between what needs financing and what banks actually want to touch is just too big.

THE INFLATION QUESTION

Harry says that when government bonds aren’t “attractive enough,” the Fed must pivot to draw in capital, which leads to officials like Kevin Warsh “talking tough” about inflation. Harry thinks this is designed to manage the yield curve; by appearing hawkish at the front end, the Fed aims to keep long-term “bond yields and mortgage rates... as low as he can get them.”

Harry thinks we “need to have an open mind on the inflation impact of the Iran conflict,” and then also an open mind that the AI boom could “up productivity and be disinflationary.” “What I am confident in is that Kevin Warsh will take the best path to satisfy the inflation mandate and the growth mandate,” he said.

And back to the question of who pays for the AI buildout - Harry thinks the American consumer may end up footing a lot of the bill, “the people who have electricity bills, the people who have to go to supermarkets and pay higher prices. Even if that’s not an inflationary spital, we have a one-off increase in pricing.”

Thanks to everyone who joined us live! We’ll be back Talking Markets tomorrow with Dale. Same bat time (4pm ET), same bat channel (Substack, X, YouTube).

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Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

Before you dig in, we highly recommend you read Michael’s fantastic report here, The Index Trap.

🏠Housekeeping Note: While the first c. 20 mins are free for everyone to watch, the entire 50 minute episode is for Market House full subscribers only. If you’d like to pull up a chair, you can join right here.

THE PROBLEM WITH PASSIVE

Today, more than 50% of market flows in equities are passive, meaninginvestors are buying ETFs without regard for earnings, price, or even what the company actually does. This has created a self-reinforcing loop that has funneled massive amounts of capital into a handful of names.

As Michael explains:

“The big companies and mostly the 10 top companies get more of the flows because they have a more, they have a bigger weight on the index. But this is a self-reinforcing mechanism because the more people buy into the index, the big become bigger, and this outperformance continues. So besides the big companies being good, they also have a mechanical bid which is being reinforced by the passive investor.”

This mechanical bid has made life miserable for active managers. If an active manager holds cash for a correction or tries to find value outside the top 10, they almost inevitably lag. Michael pointed out that “79%, I think, of active managers in 2025 lagged in terms of passive investment” because they simply couldn’t compete with a mechanism where every dollar invested is fully deployed into the market regardless of valuation.

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AI ENTERS THE GAME → BRINGING “K-SHAPED” CORPORATE PERFORMANCE?

While an index provides a tidy “average” return, Michael says that AI is a force so massive that it is about to blow the concept of an “average” company to pieces, creating what he calls a “K-shaped performance.” In this new regime, the market will split into two divergent paths: the super winners who harness exponential change and the super losers who are hollowed out by it.

Michael warned that the index will soon function as a mask for extreme internal volatility:

“The surface will seem okay, but underneath it’s going to be chaos. Buying the index in the next 12 months, I might be making, let’s say, 10%. But there will be stocks that went up 300% and there will be stocks that went down 80%. Yes, I’m going to do well in terms of performance, but again, the surface will seem okay, but underneath it’s going to be chaos.”

This dispersion will be so material that the index will eventually represent a collection of companies that no longer share a common economic reality. Unlike previous cycles where companies were tethered to general economic fundamentals like GDP growth, the AI transition creates a polarization between those who can achieve radical efficiency and those who struggle to adapt. Michael points out that because the human mind struggles to conceive of exponential change, many will be caught off guard by how quickly these gaps widen.

As AI adoption accelerates (whether through capex, internal utilization, or product deployment), the performance in terms of earnings and efficiency will materially change. Michael expects that once these numbers hit the year-end results, the market will see “very abrupt” shifts. A company that successfully uses AI to slash costs and skyrocket revenue will see its market cap increase disproportionately, while laggards will face a “death by a thousand cuts” as they are outcompeted by more agile rivals.

Michael says that “the next 12 to 18 months” will be the period where these internal shifts reshape the index entirely. Investors who remain blind to this chaos, thinking the index offers its traditional safety, may find themselves owning a “muddled middle” that is being dragged down by the weight of the super losers.

THE RETURN OF THE ACTIVE MANAGER?

For the better part of the last decade, being an active fund manager has been tough. Since roughly 2015, the “mechanical bid” of passive investing has flattened the field As Michael put it, the industry has spent “a decade in the desert.”

But Michael believes the AI revolution, and the corporate split into winners and losers it will bring, is the catalyst that finally makes the active manager relevant again:

“You’re front running the passive flow index because you saw what’s coming early. And as this comes in, because the passive is mechanical, it’s not a decision-making process. So if there are flows, they buy... if you can understand which companies are going to do well, I think the opportunity here lies for active managers to come back with a vengeance after 10 years in the desert.”

The strategy is simple in theory but requires a specialized eye: identify the “rising stars” that are successfully utilizing AI to radically alter their profitability. When these companies report year-end results that show revenues going up and costs going down simultaneously, their market cap will spike, Michael said. Because passive ETFs are forced to buy based on weight, they will be obligated to pour capital into these winners regardless of price. By getting in early, the active manager gains a massive tailwind from the very passive flows that used to be their headwind.

However, winning this game isn’t about being better at math. AI can already crunch numbers and analyze momentum faster than any human. The new “edge” is entirely qualitative, Michael said. This “edge of being human” comes down to sitting across from a CEO and discerning if they are playing offense or defense. It involves understanding the cultural DNA of a company, seeing who is truly leaning into the exponential change of AI and who is merely a “smart dinosaur” trying to protect a regulated monopoly.

For the active manager who still knows how to do site visits, talk to people, and perform deep-dive qualitative research, the next 12 to 18 months represent a once-in-a-generation window to generate meaningful excess returns, Michael thinks. The robot might be able to calculate the trajectory, but only a human can see the pilot’s intent before they even take off.

Michael’s interview continues for our paid subscribers below, and in the full video above. In it, he talks about the “b” word, the commoditization of AI, finding winners in this new landscape, an AI agent future, and more.

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