The Compound and Friends - The Most Interesting Macro Moment of My Lifetime with Jens Nordvig

Episode Date: September 11, 2026

On episode 259 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and Michael Batnick are joined by Jens Nordvig to discuss: rising Treasury yields and the risk of something breaking in the bond market, Scott Bessent’s intervention in the yen and Treasury markets, the massive AI capex and hyperscaler debt boom, whether AI is actually inflationary, oil prices and the Fed, the surprisingly resilient consumer and labor market, America’s growing debt problem, and why Korea could be one of the most interesting macro trades heading into 2027. This episode is sponsored by Franklin Templeton and Vanguard.  Learn more at www.ftprivatemarkets.com Learn more about Vanguard bonds at https://vanguard.com/audio Sign up for The Compound Newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Franklin Disclosure: Before investing, carefully consider a fund's investment objectives, risks, charges and expenses. You can find this and other information in each prospectus, or summary prospectus, if available, at franklintempleton.com. Please read it carefully. All investments involve risk, including possible loss of principal.  © 2026 Franklin Distributors, LLC. Member FINRA/SIPC Learn more about your ad choices. Visit megaphone.fm/adchoices

Do you have any friends in your life who you call and they say like sarcastically, like you say, how's it going? And they go, living the dream? Hey, this is my schick. No, do you? Somebody, because somebody, somebody did that with me, but they meant it. Like, they were like, living the dream, bro. I'm living the dream.

Are you living the dream? Oh, that's, no, that's sincere. That's nice. I like that. No, they meant it like they are living the dream. I love that. No, because I don't, I go to a dark place. I'm like, really, that's your dream?

I see how you live it. You're sick. Is that the wrong response? No, the usually. Isn't it douchey though? No, no. To be like, I'm living the dream. I hear what you're saying.

But usually when people say that, it's like, all right, I'm not talking to you, dude. It's like, the conversation is over. If somebody says, how you don't live in the dream, it means like, all right, walk away. Like, I have nothing to talk you about. Well, that's my point. It's a friend of mine. He's dead serious. I'm living the dream.

But if that's your friend, I'm happy for your, I'm happy for my friends. Or sometimes people. But it's a weird response. to literally say, dude, I'm living the dream. I just got this. I'm going to Greece. Like, I am fucking killing it.

It's weird. I hear what you're saying. I just think it's very dushy because if you feel that you are living the dream, you should have the emotional awareness to know that other people don't want to hear that. All right, but you're doing okay. He's not like talking a guy in the street.

I came to work with a cane today. You never know who feel that they're living the dream, right? Like, everybody thinks, okay, the ultimate thing is to have like an exit when you're like done something, right? Yeah. Are you about to break? I mean, you just had an exit.

Yeah, but it's like a... But the next day... We'll not swear it's like a roller coaster, so it's like... But then the next day after the exit isn't as good as the day before. Yeah, and also, you've spent so much energy into this exit that you forgot about doing all kinds of other important things while you were doing it. Okay. So we're going to get the story on your...

In conclusion, Josh wants his friends as miserable as he is. No, I just... I was taken aback. I thought, I thought, because you know what the other thing people say is, oh, another day in paradise. Like, say that. Yeah. Don't, boy, this doesn't sound like an actual, a true friend. There's an acquaintance.

Oh, you know who it is. Actually, I don't want you to guess it because you probably could guess it within three, within two guesses. Is it a home friend or a work friend? No, work related. Okay. You definitely know who it is. All right. And you could picture him saying.

It's one of your colleague. No, it's not the way that works here. Another day in paradise would suffice. We would take that. What do you think about the iPhone? Duo. I think I need to get it because the last iPhone I got was really bad. So I needed an upgrade very soon.

But I like to have a lot of real estate. I was very on the fence going into the announcement of like, I don't know. I could see it like going either way. And 30 seconds in, I'm blown away. I am all the way in. I think it's so spectacular. Yeah. Have you been feeling it?

I think it's going to be slam dunk. The iPhone do it. I think they'll sell out. out however many they can make, which will not be a lot. Probably go on order one before they sell out. October 16th. Yeah. Is that when they go on sale?

Yes. I think they'll sell out immediately because it's novel. Yeah. It's a long time since there was anything novel. Yes. People are complaining about the headline price tag. Yeah. And Gene Monster said the 18 Pro Max, I think, is like $38 a month.

This is 53. This is the thing. It's finance. Who cares? It's $23 more a month. Nobody cares. I also don't think Apple is targeting. the person that's worried about the price of the phone.

That's not who this is for. No, I think it's different from the headset thing. I forgot what it's called. Vision Pro. Right. Like, nobody needs that. That's different. That's different.

That's different. That's different. You're spending $4,000 on your credit card. It's very different. Yeah. So the price is $2,000. Mm-hmm. And I think there's one that was up to fall almost, right?

The tech blogs thought that this was going to come out of $2,500. Yeah. So they actually surprised consumers. with a lower, a lower average selling price for this thing right out of the gates. Which leads me to believe the next iteration will be the Duo Pro and it'll somehow be bigger and faster

and it'll cost more, you know, they gave themselves room to raise the price rather than start out of the high price and have to hear people say, oh, it flopped. I don't know at 2,500 if it sells out. I think at 2000, it's roughly comparable with what the iPhone 18 Pro Max will be. They'll sell them out.

Daniel, you got anyone? Were you excited? He's waiting for the trio. Hater, John? I consider it. Queen? I want the Burgundy 18. To be honest, I'm still missing the BlackBerry for just typing without typos.

BlackBerry was good. For typing, it was better. Great. The key is to lean into the typos. Just let it be part of the situation. So, Jan's living the dream. Things are good? Are you living the dream?

You're living Adrian. Let's put it this way. I've been doing macro markets for a fair few years, and they don't really get any more exciting than we have them right now. You think right now is like prime time. I've never seen markets being more interesting than they are now. Okay. We're going to get into all that.

Let's not step on it. I definitely want to hear that. Do you mind just headphones? Yeah. No, I don't mind. You could tell how he had an exit. Look how laid back. Yeah, do you have a tranquilize before you came here?

You're okay? We're about to do a show. Is there a way to charge this thing, do you think? Yeah. Yeah, we have cords. Yeah. Yeah, we can do that. All right.

And if you can just say close to the mic, please. We have power. There you go. All right, Nicole, give me one second. Switch a row. Here's a stat that stopped me in my tracks. Private Capital is projected to hit $26.7 trillion dollars by 2030. Trillion with a capital T.

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with America's favorite investing podcast. This is the compound and friends. We're coming to you live from Bryant Park in New York City. With me, as always, my co-host, Mr. Michael Badnick. Oh, hello. My name is downtown Josh Brown. First-time listeners, thank you for joining us. You asked for your new favorite show.

Last time listeners, I'm sorry. We did our best. We have a very special guest. The last time Yenz Nordvig was here, the phones lit up. People were like, who is that guy? He knows everything. Do you get that response everywhere you go or just from here? Only here.

Could you read the comments from your video? I have to say... Yenz, you got to get closer. Come on, man. Second time here. Yes. That was quite a good response to that. So, yeah, I've got a lot of people reaching.

I mean, you invented COVID. I would expect that there would be a good response. We're going to blow the phones up once again. Yenz Nordvigg is president and board member of Vanda, an independent data, analytics and insights firm providing positioning data, flow intelligence, and tactical macro insight to investment professionals globally. Yens has spent his career at the intersection of global macro markets and capital. Capital Flows. He founded Ex-ante Data in 2016, building the firm into a leading macro strategy

and data provider serving more than 100 institutional clients globally. Now take us from there. What happened since? Quite a lot of tapen. It's been a busy year. So we merged Excented Data together with Vanda. Vanda is another company that's also focused on flows and positioning. So now we think we can absolutely be the best. class in that space. So you sold ex ante, which was yours, which you started 10 years ago, to Vanda, and now you're involved with Vanda. Yes, I'm the precedent of the company and leading essentially everything we do on the macro research. Why did the two pieces work so well together? Like, what was X ante doing that Vanda wanted and vice versa? So we wanted to have

breath in terms of the asset classes we covered. I've always been extremely focused on currencies, fixed income. And on the Vandas side, they were more focused on sort of macro equity. So there was a nice complementarity there. Because they're known for tracking what investors do in stocks. That's right.

I know they're through their retail flow stuff. Yeah, so that's one of the key products that they have are unequity focused, right? So there was a nice way where we can cover everything. And then the other thing, I think, has to do with technology, right? So we're heading into a period where whoever uses AI most efficient. efficiently and smart is going to have an edge.

And it requires some resources. So the combined resources of the company are bigger than if we're separate. And we're really stepping on the gas on that front. So there's going to be a new platform launch soon called Van Analytics, where we're really going to have more breadth, more depth in all cross-acet, macro assets. and we're going to use AI, I think, in a novel way. So the business will not just be about selling the data, but actually selling the insights that you guys create from the data in-house.

And that's obviously a premium product, because you're not just saying, all right, here's our data feed, figure something out. You guys are actually going to figure things out and share them with select clients. You know from yourself. When you run your own business, you have to learn from your mistakes.

So definitely one of the things we did, at Accented Data early on was we try to have like data only business. Yeah. It's not enough. People want more. Data only business is very tricky, right? Because investors are busy. Portfolio managers are incredibly busy, right?

So they need to be told what data is relevant at a given point in time. There are exceptions. There are some quant funds that are extremely good at finding something in the data. But most people still trade on discretionary basis. And we find that a combination. of having really high-quality data and some lay on top that tells people, okay, this is important right now

is the best model commercially, and we're going to continue with that hybrid model. You know what the corollary is for that to our business, the wealth business? Like, I could give you an ADTF portfolio right now. I could do it off the top of my head without even thinking about it. Then what?

Because that tells you nothing about what the environment's going to be six months from now, a year from now. It doesn't answer anyone's particular questions about their own finances. So, like, the data is not the standalone thing anymore. It's like, what do we get from all this data? And then you can, that's something that hedge funds want, asset managers want.

And then I guess what we really want to experiment with is that this insight that comes on top of the data in my career, I have provided it together with the team. I'm very proud of the team we have from Excented data. now Vanda. And the question now is whether there's some of this insight that we can generate in an AI environment. Right. And we have to get that right because our clients still want to have like the confidence that this is something that's been, you know, vetted.

We're absolutely confident it's true. But nevertheless, there's stuff we can do at a higher speed if we create a robot for it. so we really need to find a right balance between still having it vetted, absolutely driven by like top-notch human sort of conceptual thinking. But then there's bits and pieces where we can say, okay, the robot can actually do this piece better and faster and then put the robot to work there. Yeah, so there's parts of what you guys do

that you can have a machine do like the heavy lifting, but the vetted part is important. In your business, people want your reputation they want you to take a look at it. They don't want a black box where it's like, well, the machine said this, therefore we don't need an explanation for it, just take it at its word.

No, people want that final layer of like, okay, I get it, you're using AI, but what do you think? Yeah. And then you have to have a point of view. Like we can actually see it even in, like when you run a business, like sometimes it kind of goes full circle,

like some of the things you thought a couple of years ago were a bad idea of actually become a good idea again. So we can actually see that there's some of the highest end clients, actually more so than before, actually want to get you on the phone. Yeah. Which a couple of years ago, we thought, okay, that's phasing out completely. But because there's so much information out there that is not vet at all, there's actually some that really want to pay for having something that has like an

extra layer of like total real-time personal color and vetting on top. I have this heuristic where I tell people, rich people don't talk to robots. Rich people pay someone else to talk to the robots and then take whatever that information is and bring it back to them. Like within reason. Wealthy people don't plan vacations on Expedia. If their travel agent is utilizing Expedia for information, that's fine. But they want a person who's responsible.

And I think that corollary is a pretty good one, both for hedge fund world and for wealth management world. you talk to the machine. Tell me what it says. Call me back. I think that's always, there's always going to be a component of that. And it's also a matter of making sure that,

you know, the machine, even though if the machine is mathematically correct, like the machine might get outdated. So we need to continually make sure that we know what's happening in the market. Like there's a lot of our models that are based on, okay, what's the sort of market microstructure that's relevant right now, but it changes all the time.

Right. So we can give, like, one, one is okay if I give a specific example. Go ahead. Yeah, so like Korea is a pretty interesting country now, right? Because it's probably the country where the AI revolution is impacting everything the most. Obviously in the U.S. AI is very important,

but it's a bigger country, right? So in relation to the size of the country, It is an enormous boom that is happening in Korea. Half the stock market is memory. It's unbelievable. Like the trade surplus is just exploding. I've never seen anything like it. And by the way, the currency is having its best run ever now in the last three months.

So it's all playing out. But in relation to this microstructure, I was talking about, it used to be the case that the stock market in Korea was driven by foreigners. And now we've had a period where the stock market has gone up so much and is driven by something else that actually we have the stock market going up and foreigners have to sell to rebalance their portfolio. So the correlation between those flows and the cost period is totally flipped. What happened? The retail population caught stock market fever this summer. The local.

The local. The local. Yeah. So if you had a model that was based on foreigners in the past, right? You would have gotten totally wrong what's happening now. So you need to adjust your models all the time to capture what is new. And that requires that you continually just focus on understanding what's happening and adjust your model. Sometimes the data isn't good enough to know when the environment around it has changed.

I was reading about the thing with LLMs that is constructing what they can actually do. LLMs are great at taking existing information, synthesizing it, and giving you insights from it. but it can't think creatively or if it does it's getting itself into trouble with hallucinations and somebody was saying is a paper arguing that and this is probably relevant to the research

that you guys are doing now and what your end client actually wants from it it's very good at induction LLMs, it can't do what's called abduction and it's like a it's like a thing where like the AI can do statistical patterns matching. It can do all the

deduction. It can take all these facts and spit out a response, but it can't generate novel explanatory hypotheses. Like it will never discover Einstein's theory of relativity. It can't make that creative leap. And we don't want it to.

The way we've built this is we want it to be accurate. We don't want it to be creative. So that's where somebody like you comes in, where you can look at the output and then you could say, okay, here's what the machine says, but here's why that might not be the right thing to say to a client. I think that's exactly right.

So there'll be, you know, new themes developing that we've never seen before, right? So where's the LLM going to understand those new things from? So that's one example. The other example just has to do with we're incredibly focused on actually having proprietary data as a part of our platform, right, which the LLM will not know about. would you do a deal with um have you're smiling would you do a deal with anthropic if they said we want we we want this data as part of our uh model you will we'll have this is this is a real balance there's a real balance there right because we we definitely have clients that want to consume pretty much everything they consume via claude right right and we obviously want to help those clients right

But if we have something that's proprietary and we feel that that aspect of it being proprietary is threatened by us sharing it that way, clearly we'll have to balance those two things. Okay. Yeah, as you said, this is the most exciting, interesting macro environment you've ever witnessed in your long career. Exciting, like we're all about to lose a lot of money. So I think last time you said that Bessent was a client of your former firm. Are you surprised with his comment yesterday where he said, I am the house. And I assume this is the most interesting part of it is what he's doing, what interest rates are

doing, what he's saying, what the yen is doing, the dollar. Is that everything, is that at the crux of what's making this so interesting? So we had Scott Besson speak. We had a 10-year anniversary conference for Excenta Data in March. And Scott Besson was one of the speakers. And he touched some of the issues you're talking about now. He is a very unusual Treasury Secretary. Yeah, this is not normal.

But on purpose. Yeah, on purpose. He has traded tens of billion of dollar yen personally in his life, right? Clearly no other Treasury Secretary has done that. And he's not afraid of the market. Like you would have asked almost any other Treasury Secretary right, they would be very scared about the market. kind of rolling them and currency fluctuation.

Yeah, I think the currency market is pretty scary. But now we have, we essentially have a form of intervention both in the currency market in dollar yen. We also have a form of intervention in the treasury market and with these long and buybacks, right? So he said he doesn't want to intervene in the oil market. So that, for some reason, he thinks that's a little bit different. But he is clearly willing to intervene in a, you know,

in a way we have really not seen for a long, long, long time. And I think what is happening with Japan is fairly logical in the context of his history. He's always been a Japan expert. Actually, the reason I know Scott Besson is that I was head of research in the Moro Securities, which is the biggest Japanese broker, right? And we always talked about Japan together when the economics started. You were ranked the number one currency strategist. by institutional investor for five consecutive years.

Oh yeah, what's the yang to do tomorrow? Smarty Pins. When were those years? Was that 2010 era? Yeah, that joined them more in 2009, and those were the years. Yeah, so there was that when the euro crisis happened. And you think what we're about to see might be even more interesting than that? I think it already is because like investors really have to pay attention to a number of

of things that have not really been in play before. So obviously we have a productivity development around AI that is potentially totally unprecedented, right? We can compare with previous industrial revolutions and technological shocks, but this seems more profound than any of them. So that's that. Why? This is tech that improves itself. Yeah, and also it's just impacting all industries at the same time, right? Like, we can think about the railroads and it was important, but it was like one very specific thing, and this is impacting everything at the same time. Everything is software these days, right? And it's driven by that, obviously. So that's important. And then we can see what's happening with all the hyperscaler build-out, right? The build-out is now so enormous,

and we're just doing these calculations and trying to make them very precise. But roughly speaking, we now have as much bond issuance by hypers in the long end of the curve as the United States government. What, this year? Right now. The moment, not early in the year, but we're getting to this point. The bonds that exist now, it's equal to what the U.S. Treasury has... I would say, let's call it the flow.

How much is coming out right now? This is, and it's not that the U.S. government is not issuing a lot. The U.S. government is issuing a lot. have a 6% of GDP deficit, right? Which is also the, like, at par with the biggest deficit Reagan had when he was, where people thought he's going as hard as you can, right? And nevertheless, we have these, a few private sector companies that together are managing to issue as much debt in the long end of the curve as the U.S. government.

How much do you think that's pushing up yields versus all of the other stuff, the war? The competition for treasuries versus. Is it half? How do you think about that? I think it's hyper-important. Let's put it that way. Like obviously, oil prices matter. Today, we had a massive move, right?

Again, ECB responded to the oil prices and so forth, right? But in the background, this is something entirely new. We've been worrying about the U.S. government issuing too much debt, and now we have another issue, a group of issues, that is equally big. So, like, all these years where we were used to, okay, we have a low inflation environment, right? And if you have a little bit of carry in your credit instruments, you can always sell it, right?

Those days are just gone. Now we have such competition for capital that yields are being pushed higher. Is that bad? Well, it would be nice to know whether that those investments are going to be productive investments, right? Which ones? The hyperscalor ones? Yeah, hyperscale investments. But I think what we can say with great confidence that the companies that are going all in on this, Google, Microsoft, Amazon, meta, and so forth, they're not going to give up anytime soon. Like their CAPEX plans for this year and next year have continued acceleration in them, right? And in terms of how many bonds they're going to

issue. It's kind of like a non-linear thing because initially they could fund it out of their free cash flow, right? So every extra $10 billion is like mapping into the issuance with like high and higher beta. So next year is going to be like dramatically more than this year. So when I look at the long end of the yield curve, it's already pressured, right? We've seen like multi-decade high bond yields now, even if the, the, the Fed Fund rate is not at the high, but the long end is, right? The 10 years at 492, the last time I looked. Yeah. The last time it hit that level was October of 2023.

People were nervous about it then, too. Yeah. And it got over five. It got over five for a cup of coffee. And then the stock market rallied 80% as it fell. Now it's back up at those levels. Stocks have not given up much. We had a momentum wipe out last month.

But the hyperscalor equities are sort of stable. They're not at highs, but they're not at loads. and now the question is if we go through 5% on the 10 year this time and we're already seeing 2007 era highs on the 30 year. What does that do to the market mechanically

or how does that change psychology? So I would say when you compare with like in 2007 we got close to this level, right? 2003 is the right number now. Okay, it sounds like, oh, we've tried this. It's only, you know, 23 years ago, got there. Real rates.

No, 2023, we were exactly where we are now in the tenure. So. But real rates were higher in 07. Yeah, but so people go, yeah, but the bottom line is it's a long time ago since we really have been at these levels in a sustained way. If we look at the last time we were at this type of level, which was before the global financial crisis, that debt levels are totally different. So what we could handle back then with that level of yields.

it's hard to imagine we can handle it now. And this is why Scott Besen is buying back bonds, right? At this level of bonds and the 30 year is like meaningfully higher than the 10 year, right? Curve is pretty steep. They don't want to see those bond yields going on higher. Mortgage rates like 7%, also not that great for that sector, right? So really what's different now is that debt levels are so high. I just wrote a report on the way in here on the, on the, on the, on the, on the, on the, on the,

train and the CBO, right, which is supposed to be a bipartisan, conservative. Congressional Budget Office. Yeah, like a nerdy outfit that just does numbers, that objective numbers, right? That everyone that ignores. I hope that the director is not listening. He's a great guy. So nerdy is a compliment. Like, if you look at their debt projection, right, we got above 100 a couple of years ago.

right, it's going to 200 within like a couple decades like the trajectory is so steep now. So this is why we really have to start to look at these debt levels in a different way right? And there's lots of people

who have been scaremongering about debt levels forever, right? So it's easy to say, oh we've had the wolf crying for a long time. But I do think you can really see Asa start to behave differently here, right? So Which assets?

So I think you can already see it in terms of the long, the long end behavior over the last three, four months has been kind of divorced from economic data, right? It's just doing its own thing. It's not anything the Fed is really saying or data. It's also happening globally. It's also happening globally. Yeah. And then I would say currencies. Currencies, you can see it.

Like, we have like, if you do kind of a basket of who has not a lot of debt and a lot of debt, it's starting to really favor the ones who don't have a lot of debt. So who is at Switzerland, the currency looks better than all the other developments? Yeah, it could be Switzerland, Singapore, Australia is a country that actually doesn't have a lot of debt. So if you have long exposure to those, you've done very well, places that have a lot of debt. Like, okay, you can rank the top 30 economies in the world. Guess who has the worst debt? metrics. Japan and us. It's actually the United States now. Japan used to be the worst.

But isn't the worst the best? Like we are able to sustain such a gigantic debt load because of our economy. Yeah. It's a tricky thing, right? Because the dollar is obviously still the reserve currency, the main reserve currency of the world, right? So is it special? Yes. And it certainly is more resilient than everything else because of that. But it's not it's not trading fantastic. well now. So I think you can start to see some kind of correspondence between when the 30 and the US starts a wobble and the dollar starting to leak. When I say leak, what I mean by that is that you can have a model for, okay, what are the standard things that drive the dollar, obviously short end rates, maybe risk sentiment and so forth. And what you're starting to see is that there's

some little residual that is how to explain with those normal things that is leaking in a weaker direction. And that's what's happening in last couple of months. Is something going to break? Are you like nervous that something's going to happen? I'm, I'm nervous. I think definitely also, so now I work in a company now where we have a lot of equity focus, right? Massive, like Eric Lewis is the head of our equity efforts, right? So massive focus on whether like we are getting into sort of a non-linearity in terms of like the 10 year or the 30-year moving to a degree where we really have an equity puke. So we're very close to an amount of move in the yield curve where the equities get very vulnerable.

Just explain what Besson is doing. Not with the yen. We'll just focus on the U.S. Explain to the audience what Bessent is trying to accomplish by buying longer dated treasuries in the open market and then tell us whether or not you think it's meant to succeed or is it kind of Besson getting his boss off his back and doing something very publicly so that he can tell Trump,

look, I'm doing all the things. Like what do you really think this is about and do you think it can succeed? So I think what's important here is that if you did not have a lot of debt and you had a few coupons you had to pay in the long end, you would just pay, pay, right?

Retire it. Yeah, it wouldn't be a big issue, right? But because the debt is a price, problem. And because they don't want to issue at higher and higher yields, they're trying to do something to save themselves money. So the essence of what is happening is that they fear that the debt dynamics is going to take over and it's going to be a negative spiral right? And they're trying to stop this negative spiral by holding the yields via these buybacks. Is that what he means by I'm the house? Meaning I can buy more treasuries than you can short.

Does that ever work? So, so it's a strong statement that was made in the context of the yen. Here's the statement. I am the house now. So when we intervene with the Japanese yen, I have pretty good insight into what the Japanese, what the Bank of Japan is going to do, what Japanese policy makers are going to do. And you can bet against me if you want. Whenever, I mean, this is a lot.

Whenever people say, oh, well, Treasury Secretary is taking a risk, well, it's my dream. I have asymmetric information. So he's saying that he knows. like a speech that Oliver Stone would write from one of his characters. He knows what the Bank of Japan is going to do. It's almost like Gecko-esque. So he say what? You're right.

That they're going to raise rates. What is he saying? So I've known Scott Besson for a long time. It's extremely unusual what he's doing. But when the intervention happened, the question we got from clients was, okay, how can they intervene when the Bank of Japan has just passed on hiking rates.

They did not hike in July. Why would they intervene if the Bank of Japan was not serious about getting rates higher? And the explanation is very simple, and it's embedded in that statement you just read out. And that was, Scott was pretty confident that he essentially could somehow orchestrate that the hike would come at the next meeting, right? So he was willing to do the intervention on the expectation that the hike is coming. The hike in September, right, was priced by three or four basis points. So nothing was priced when the intervention happened. And now it's priced like more than 90% probability, right?

So fully priced. So he wasn't wrong on this. But the yields haven't stopped moving. So in the long end, you mean? Just right? The tenure is screaming higher right now. Sure. So is he doing this Japan intervention because he wanted to achieve something specific

in the U.S. Treasury mark? market or is he doing it because he actually want the dollar to be weaker? This administration is facing a pretty complex mix of challenges, right? Because they only have so many, you know, policy steps they can do and they need to solve like a hundred different problems with those different steps. So I think they would like to have a weaker dollar against Asian currencies because they feel that could help manufacturing in some parts of the country. So that's the sort of weak A dollar.

Isn't it two things? It's one on shoring. If Japan exports are sort of more attractive, it works against us. And also, my understanding is that this is a cheaper way to influence policy.

So Japan, I think they had to sell what was reported, $94 billion worth of treasuries in order to finance what they're doing. If he can prevent that, that is a more cost-effective way to step in. Agreed. So clearly,

it is not really in the U.S. interest to have the bank of Japan or it's really the minister of finance in Japan. It doesn't matter. Those two. Wizards? The wizard of finance. It's not in the US's interest to have them sell a ton of treasuries, right, their precious up yields, right?

So clearly, by sending some kind of signals where the intervention is successful with less ammo being spent, makes some sense from a treasure market perspective. There's also been talk about them being able to use. kind of some kind of lending facilities more aggressively so they can get the funding to do their intervention without having to sell treasuries. So all that makes some kind of sense. But I think there's a, there's a, there's a currency dimension that is interesting. And it's, it's pretty interesting that we have this kind of currency dimension where the administration is willing to endorse currency weakness and even actively pursue it.

while we have inflation problems at the same time. Right. Those two things don't seem to go together. No. And yet... That just tells you that we have so many conflicting goals and policy. The administration's attitude toward inflation has been sort of like, well, as soon as we get the Iranians under control and we unblock the Strait of Hormuz, WTI will crumble from 100 back

to 70 and everything will be fine again. So that has not happened yet. But like that seems to be what they're saying, even if they're not saying it that way. But it's already, it's already gone on for too long. And that's now, and now higher energy prices are embedded, like are the new like inflation expectation. And it's hard to shake that once it starts. Yeah. Do you guys think that it's strange, given everything that we're talking about with yields, just screaming higher?

That the, and, and mortgage rates are about to hit 7% of all that's been a problem. problem forever, so maybe that's not moving the needle. Gasoline, national averages, keeps bumping up. And yet, the VIX is at 18. S&P equal E2 is like 4% off its highs. There's just no fear at all. Oh, and we just had the nastiest tech momentum crash on record. And yet the stock market is just yawning. Yeah. Are you surprised by that? I will be surprised if we have, I'll be surprised if we have if we have a couple more weeks of this yield move, I'll be very surprised if there's not a reaction in equities. And I think the point you make about oil is important, right?

Because we're now more than six months into this. Right. Right. And it was supposed to last a couple of weeks. We had a deal on the way, right, that is obviously totally falling apart. He called it like an interlude. Yeah. Or something.

Like a day trip to Iran. And I think it's also increasingly clear that the U.S. is expending quite valuable resources. And the opponent is sort of deliberately doing something to make that problem bigger. So that's not going to make the situation any easier. So this could go on for a while. I think we've also had rumors from different people in the administration that they know this could be a multi-year thing. Right. So that's what's being priced into bond yields then.

And you can see it as well. Like if you look at the bond market, right, there's a concept called break even, right? You can split the bonds into what's the real yield in the bonds and what's the inflation that's expected. That people call the break even. And that has also started to move in the last couple of weeks. So if you look at five-year break-even, right, it was 2-2 now. It's 24-25. So that's also relevant for this Fed meeting that's coming up, right?

Like how chill can they really be? The AI inflation is here. the energy inflation is there and they're coming from an inflation level that is already above target. It's hard to be too relaxed. Do you think the administration was hoping that AI would be deflationary

or disinflationary because it would cool down the jobs market which really hasn't happened and now they're looking at this like all right, so it's a capex boom. It's great, great for photo ops. Every time they open a new data center, we can put an official there to cut the ribbon,

but it's not disinflationary at all. And if anything, workers in the bottom 10 and 20th percentiles are actually seeing more meaningful wage hikes. People working in the trades have never been more employed. And it sort of is not playing out the way maybe they would have hoped as recently as nine months ago. Yeah, there's some element of that. Absolutely.

This technology is, it's pretty, it's been, pretty hard to forecast. It's moving so fast and it's hard to compare to these previous technology shocks. And Walsh did a lot of public speaking before he was appointed right where he talked about deflationary effects of AI and kind of used that as an argument not to hike rates. And it's probably one of the things that made him a bit, what should we say, schizophrenic in terms of like sounding hawkish at one meeting and dodwish at the next one. This inflation is not showing up anywhere that it matters. No.

So I think where we are is that there's a technology that has a promise of being deflationer in the long run. But the technology is being built. And as we already discussed, building is so expensive, right, that that demand is creating incredible pressure on DRAM. That's why Korea is benefiting so much. And some other things as well, right? And at the moment, we're just experiencing those inflationary effects. And if the CAPEC is going to continue to ramp up into 27, which seems highly likely, right, it's very hard to imagine that this inflationary force is going to go away anytime soon.

There's a guy called Elon Musk, you might have heard about him, right? So he knows something about some of these issues. So he said, yeah, we're obviously going to get a supply response, right? So we're going to get a supply response clearly. Like you can make a ton of money making... Meaning they will build more memory plans to satisfy all the demand. And by the way, that's what's happening in Korea now. Like we're going to have a massive investment boom in Korea.

I think growth is going to surprise in Korea in a massive way. But his point was, okay, if you really step on the gas and build a lot of extra capacity, maybe within a year two, you can get a 20% increase. And what we need is 100%. Like that was just quoting him. But he's built some data centers himself. I think it's not irrelevant to get these projections from people who are actually in the data center business themselves. And I think it's going to be very hard for supply to match this demand.

And therefore, the price effect is going to be there for a sustained period of time. So that's it. I mean, to not overthink things in terms of why is the market looking past all of these geopolitical interest rate risks? it's because the stock market is not particularly expensive, and earnings growth is 20 plus percent, and it's expected to be that way for a while. Now, obviously, this could look foolish in three weeks if stocks do fall 20 percent. But you just said, everybody's saying the same thing. They're not going, they're not slowing down. No. And until they, until somebody says otherwise, the market will act as if they're telling the truth. Well, could we have bond vigilantes show up in the debt market for corporates,

meaning could alphabet or meta or somebody come to market with another debt offering that instead of being two to three times over subscribed, it's actually underwhelms, the rate goes up or the deal gets canceled. Like that has not happened yet, but wouldn't that be the ultimate signal that the party's over? I think a lot of people have been looking at Oracle as the less strong play in this space, right? And their credit spreads have also been volatile. but I saw today

there was a major bank that upgraded meta. I think the price forecast got raised by 25 or 30% because that company is like having all its existing businesses and now they'll actually have like an enterprise AI business on top.

They launched MUSE, which is going to be like an open weight model, I guess, like a free-to-use model that they'll make money from people using it. Yeah. So there's a lot going on. So I agree when you're when you look at some of these companies, right? Like, actually their valuations,

if they are going to be the winners or one of the winners, like the valuation is not that extreme, right? The trick is that 17 times forward earnings. Nobody wanted it two weeks ago. Exactly. Yeah. So the trick is, okay, who's lunch are they going to eat? Well, but so this has been a rally in three stages.

The initial stage in 2023 was Mag 7. The consensus was the hypers are going to win AI. They are going to be the engine behind it, and that's where the profits will accrue. And then sometime mid-20204, late-20204, everyone's minds were changed. The hyperscalers stopped going up,

and the semiconductors became, I don't know, 20% of the S&P, biggest semiconductor rally in history for half of 24 and all of 25. And then this year, it's switched again. The semis are now reporting blowout numbers and the stocks are falling. What's going up?

The software layer. Now the market seems to have become convinced. Actually, same as ever. It'll be the SaaS, the enterprise SaaS companies who sell the most AI shit to people. And they will be the winners. So we've had like a horse race with three different horses leading in three years. The narratives are changing so fast. I wouldn't even rest comfortably on this new software thesis just because Salesforce came back.

Yeah. What are they going to decide is the AI winner next week? I don't know. If you zoom out and you look at a ratio chart of IGV divided by SMH, obviously it's in a long, long downtrend. It bounced back to its 200-day barely. I mean, if you zoom out, the rally looks like nothing. Yeah.

So we could easily in six months be talking about this all over again. Actually, software is f***. I want add a fourth wave, right? So this is a little bit harder to see. But we deal with a lot of, we deal with a lot of hedge funds around the world, but we also deal with people who take more long-term investments like pension funds, sovereign wealth funds and so forth. And I think their main focus has been on the energy, right?

So they would invest in the power plant or great infrastructure. No matter who wins, it all means energy. Yeah. Or even in the metal space, right? Copper is going to be a part of this as well, right? So there are a lot of kind of derivative expressions. And some of those plays will be maybe not so much in the public market. so you need to have a very big checkbook to participate.

But very big investors have definitely been doing that aspect of it for several years now. You mentioned copper and industrial metal. Earlier, we didn't speak about gold, which traditionally has been the debasement trade. All right, I don't like what's happening. I don't trust the government. There's too much debt. I just don't like this. I'm going to buy gold as an alternative.

Problem is when real rates are going up like they have been, they're the highest they've been since 2007. That is a legitimate competitor. I don't really want to own a precious metal, I'm going to own something that has a very positive real rate of return. Yeah. So that further complicates matters.

So gold has been a lot of fun to analyze in the last couple of years. Like, I never really found that gold was a particularly exciting asset until 22. Like, it moved with the dollar, it moved with real rates. And if you knew what the dollar was doing and he knew real rates were doing, like, you know, roughly what gold was doing, but it wasn't doing anything on its own.

But since 22, and especially in middle of 23, gold has been doing something that's totally different. So I'm not saying that real rates are not relevant, but there's been something else. We think it's central bank buying and speculators betting on more central bank buying. Yeah, we've been through different waves, right? So there was, I would say the liftoff when that correlation to real rates really broke was China. China style to accumulate a ton of gold. is it the Chinese central bank. China is incredibly skilled

at not being totally transparent about what's going on. So finding which specific ballot sheet it's on, it's hard. Either way, you know it's coming from Beijing. They're absorbing it somehow. So that was the first wave. Then there's been broader central bank buying.

Then last year we had an incredible kind of spec wave that both played out in ETF space and also all those GLD options. So silver took off too. Yeah, this is what we do on a day-to-day basis, like tracking all those flows and incredible detail, right? So I would say right now,

it's hard for you to imagine that we're going to get the same level of Bonanza in option trading, retail option trading and gold. So I think that means that the targets you want to have for gold in the next couple of months needs to be tempered from, okay, we already had the biggest Bonanza ever, right? And it's probably not going to repeat what we had in January. but the ETF flows have been incredibly strong, especially out of Europe, actually. So there is some very persistent demand that I think is going to mean that even if real rates

continue to go up, gold is going to have some support. And it's to do with what we started speaking about, right? People are not comfortable buying long in bonds, right? So they feel that there's some kind of hedge involved in the gold trade. And I think on a multi-quarter horizon, that demand will be there. You mentioned earlier that when you're feeding data into a model as the world changes, we might be using an outdated playbook. And I think one of the things that I don't subscribe to anymore is that discretionary stocks tell you a lot about either the stock market or the consumer. So yesterday, I saw a guy, Q Capital 2020.

That's a satirical account. I don't know if he's kidding or not, but it doesn't matter because what he's shown. is real. A lot of the consumer stocks, specialty retail, have been blown to smithereens, right? Like American Eagle today, down 15%. Dix in the last month, down 38%. Burlington guy, Casey General Star. I mean, a million. They're all getting killed. You name it, they're getting killed. So I brought some charts that I want to go through. Let's start with chart 11, please. So this is the United States Red Book Index and retail sales. Right? Just retail sales year over year. Nothing really in here that is noteworthy.

I had the guys take a look at all of the names of companies that reported same store sales going back to 2001. So we have like a decent data set here. Chart 12, please. So this looks pretty similar to this latest chart. So in here, it's a composite of Ross stores, Bath & Body Works, Starbucks, Costco Target, AutoZone, Dine Brands. Brinkler, William Sonobo, Walmart, Maices, Gap, Home, Diapo, Abercrombian, Coles. And same store sales, all right? It's up 5.1% year for year. So where I'm going with this is chart 13, please. If you look on the left at an equal weight, discretionary relative to the S&P 500,

this thing is at the lowest levels. It's crashing. But guess what? It's been crashing. It's been going from the top left to the lower right for the last decade. And it's told you nothing, nothing at all about the stock market. This has happened while the stock market equate and otherwise is at an all-time high. So instead of looking at the stock price, which has all sorts of information in there, it could be valuations, it could be idiosocratic risk.

It could be. I think it's like portfolio managers just don't want to own those stocks. It could be a million different things. It can be a million different things. What does Nike say about the consumer? I don't know. I don't know. So I look to Bank of America as a set of charts that they put out every month.

I'm sure you're aware of this. Let's go through some of these. Consumer spending eased a little in July, chart 14. But the overall picture remains robust. Bank of America, total aggregated credit and debit card spending per household increased 5% year over year. Next chart. So that's spending.

This is household savings. Inflation adjusted relative to 2019 levels. Of course, coming off the sugar high of all that money printing, but still. It looks like back to normal. Above where we were in 2019, inflation adjusted. Next chart. We're looking at total card spending excluding, it's not just gas, excluding gas and online retail, still growing.

Now, there's inflation here, okay? So if you strip that out, it's whatever, it's flat. It's not crashing. Lastly, and this is maybe my final. is my final point here. Necessity spending versus discretionary. And Bank of America serves the nation. It serves a little millions, tens of millions of American households. And discretionary spending is doing, it's hard to say a bad thing about this. It's freaking booming. So I don't think, chart offs, please, I don't, on the one hand, it is a little bit disconcerting to look at all of

these discretionary stocks. Not all of them. Targets working out. property is working, but there's a lot of them that are down 30%. So I don't want to completely dismiss the stock market. But if you go to the source of the truth, I don't know that it says a lot. I don't know that the consumer is cooked because the stocks are. Yeah, so I think one thing that's pretty tricky this year is that we had these big tax refunds. Right. So the big Trump 2 budget giveaway was...

The big beautiful bill. Yeah, it was the fact that we had no tax on overtime and no tax on social security and those types of things. And whatever happened last year only got refunded when you filed your tax return this year, right? So there was a lot of people who got refunds and you can file really in February, but most people file around the deadline in April, right, and then you get your money in April, maybe in May. So a lot of people got money in the bank in May. And then it takes some months to spend it. So I think some of what you're seeing in these charts,

your show there was sort of the juice from those tax refunds. And then the big question is how, over how many months it's going to be spent? If it's just a couple of months, then there could be something coming after that. If it's spread over six months, we have another couple of months of it. But I think that's one thing that worries me a little bit, that we had some extra juice from those tax refunds. Well, we have $5,000 coming. what are you going to do with yours?

Yeah, let me put it this way. I don't think I'm going to spend it before it's in the account. I think you're dividing the charts wrong. So, no, no, you're not making a mistake. I'm saying the way that the market thinks about consumer spending, when they look at stocks, they break it up into discretionary versus staples, right? But consumer staples, mostly food and tobacco. But the reality is if you were to break up the discretionary sector by experiences versus

items, you would find that the experiences chart tells the same story as all those credit card spending charts. Correct. So if you just had a bucket that was golf courses, airlines, yeah, you're right, hotels, live nation, like things that people can do versus items at dicks that they no longer want to fill their garages with, I think that's more close to the truth of what the consumer is doing with their capital right now. Yeah.

You get that from the airlines as well. that, like, I think Delta is expanding the business class. They had record spending in Q2, like during all of the shit. Moynihan was on TV today. He said, there is, I forget the exact wording, but it was literally like, or maybe this is yesterday, he said, so Moynihan is Bank of America CEO, and most of the credit cards run through his hands. and he said the bank's data shows consumer spending and credit remain healthy,

despite rising gasoline prices. Quote, consumers spent in the month of August about 4% more than they spent last August. Last quarter it was 5%. So it's kicking along. That's consistent with a strong growing economy. He would love to be able to come out and say, things are slowing. I think he would love to be able to say that because it's easier for him to make his numbers for next quarter. it's just not what he's seeing.

And people are dying for him to say it. But he's not saying it, Citi's not saying it, JP Morgan's not saying it. None of them are saying it. I trust the credit card data more than I trust the stock price of Dick's sporting goods. Yeah, we've obviously had a big debate about what's happening in the labor market, right?

The labor market has surprised massively on the upside the last couple of readings, right? So the economy is not falling apart, right? And that's also why we have these. inflationary pressures, right? And if the labor market is not soft, they have to respond. Yes, it's amazing how much shit has been thrown at this economy. Tariffs, inflation, frozen housing market, I mean, a frozen housing market. Gas prices. And nothing is budging. Other than interest rates. The terminate economy. It's unbelievable.

Yeah, we have been through a lot. What are you worried about? Is the bond market? Is currencies? is it somebody saying the wrong thing in front of a microphone that's in a position of authority? Like what's the thing that people are coming to you and saying they're worried about? Yeah, so people definitely worried that we're going to just have all prices continuing to go up, right? They've gone up in the last couple of weeks substantially,

but we could go up more. Like, there's not really any solution around the corner. So continued rise is there. That's number one. Well, I don't know. I don't think they're not. I'm not ranking them. So, I would say, the bond, the bond markets are...

You're hearing that from a lot of your clients. Yeah, like, we have trading clients all around the world. Clearly, there's hyper-focus on the oil price now. The long end is really concerning people and concerning equity investors. You think it's concerning equity investors? Yeah, I think it is. I think it's making people nervous that there's this non-linearity. When the long end moves quickly, you know, 20, 30, 35 basis point

it gets into danger territory. So we're very close to that danger territory. So that's the second one. And I would say people are also worried that, okay, like, is this election going to go, okay? We're getting a lot of questions. Is the election going to be all right? Like, is it going to...

Like the sanctity of the election? There's that. And then... Assume no. It's also a long time since we've had a damn sweep. So there's some investors that are concerned about, is that going to move markets too? Yes, does all these worries make you worried, or do you take a little bit of comfort in the fact that there's so much worrying that the market does it for you?

No, I think I do, I don't think I've been like a debt scare Monkramaya whole career, but I do think at some point you have to take it seriously. And I think we're starting to sniff that it's starting to impact the asset allocation. Right. So what matters is when investors respond to it. And I think we can start to sniff it. Don't you think there's enough demand that a 10 year above 5%? gets aggressively bought by allocators who have been waiting for something like this? Or we might find out the emperor has no clothes and there are no buyers?

Yeah, I would say the fact that we have to eat the bonds, both from the U.S. Treasury and the hyperscalers at the same time is a bit game-changing. So I think that makes it harder to say, okay, what kind of level is it? So why isn't Besson saying that? Yes, the White House going to say to the hyperscalers, hey, assholes. Guys, no more. Calm down. But this has to do with the conflicting objectives.

They want the AI sector in the U.S. to be strong. They want them to come and rescue the growth of the U.S. economy. And it is a big source of growth now. Probably part of the reason why we have resilience is that that growth is there. So they don't want to hamper that. So that's why they're doing these buybacks, right, to make sure it doesn't go off the rails too quickly. But I do think getting heading into next year,

it's going to be a problem. It could be a massive problem for housing markets. And so, like, what if we have mortgage rates that are 8%, right? What's a difference? Don't forget. The housing markets already out of business. But don't forget that a lot of people have mortgages that are 3 and 4% that eventually have to roll.

And it's almost like, because there was so much QE and so forth, when we locked in those mortgage rate, we have the hangover of those mortgages resetting to a higher, level with a huge lag. So there are going to be housing sector issues that are going to be exacerbated. On that point, isn't, there were so much financial suppression in the last couple of decades that was pissing everybody off. The same people that are pissed off now about government spending were irate about how much interference the Fed and the Treasury were having with the bond market. I'm not saying that this is awesome and it's all roses and sunshine, But this is a lot more of a normal yield curve in a healthy economy and a growing economy.

This looks a lot more normal than that shit did. Well, if you look at historically, it's certainly more normal to have 4, 5% bond yield than having 1 or whatever we have. Trillions of negative rates, that was abnormal. Yeah, agreed. And you can also see it like in Europe, right? We now have yields that are more normal in Europe, ECB high rates today, right? and banks are making money, right? So it's very hard for banks to exist and make money

we've seen in Japan as well if there's no yield at all. So in a way, it is a more normal situation we're in. The problem is that if this hyperscalor issuance continues to accelerate, then we might get another percent or another percent on top of what we've already seen, and then there's probably some non-linearism kicking it. It would be very ironic and interesting if the bull market for stocks comes to an end

because the hyperscalers went from being like the biggest cash-generating companies in history to being the largest debtor companies in history and they did it on purpose to themselves. It would be very poetic. If we say the market topped when finally... Yeah, I don't know if we stopped it. The market topped when finally

like somebody said no to Amazon in the bond market. Yeah. That would be sort of. of a poetic end. That'll be the signal. Yeah. So we're not rooting for it. Just pointing out that it's possible.

I think that's something to think pretty hard about because if you look at the flows, that's the direction we're going. Okay. Last question. What's the most interesting trade right now going into 2027? Maybe something that you're hearing people putting on themselves or something that you're thinking about. What's something that no one's thinking about that actually might be a good trade?

Well, I think one of the most important. and pronounced macro trends is playing out in Korea, I think that trade can continue to go in a massive way. It's the equity market in Korea? Or you want to say to one? Both, both. I think it's just such an extraordinary situation. It's probably the biggest, you know, macro country's shock I've seen almost.

How do I buy that at the mall? Can I buy Korean, like, mid and large caps that are going to benefit from a richer consumer, or do I have to buy these memory stocks? I think you can do both because it's like, like, the workers are getting paid. Right. The dividends are coming out. Right.

The growth is going to be there. They're going to invest. It's like on all cylinders. Dude, we're going to JFK on Sunday. Let's buy, we'll buy the wand at the airport. Good call. We could do that. All right.

Yenz, do you have fun on the show today? Yeah, absolutely. All right. Well, we were super excited to have you back. As always, we've learned a lot from talking with you. I want to tell people where they can learn more about the work that you're doing at Vanda. I know the company officially, changes over in October. Is that right?

So we called Vanda macro research. So yeah, we have the Vanda macro data and we have the what we call Vanda macro intelligence which is all the insides on top of Yeah, yeah. So vanda.com is the domain now and you can find me on

Twitter X if you want to do that. That's Jay Nordwick. That hasn't changed. All right. Awesome, guys. Follow the ends for sure. Check out Vanda of course. Thank you so much for coming. We appreciate you. John, what do you think? Good?

Daniel, good job. All right. Guys, thank you so much for watching. Thanks for listening. Back with you very soon. We're out. The Royal Canadian Legion is celebrating its 100th anniversary. And now our change has a $2 coin to mark this milestone.

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