All Notes

So what brings attention to the United States as a special case of feckless monetary and fiscal and everything else policy? What snaps us out of (what seems to me, anyway) this period of wild complacency? When does <<waves hands wildly>> all this actually matter?

Why are wages +3.9% in the latest employment report even as job growth flattens out to nothing?

Because labor supply is tightening more than labor demand is declining.

If people start to believe that GPT-5 marks the end of the current AI cycle …

Two big aspects of last Friday's jobs debacle to cover in this note:

1) what’s going on with the jobs data? is it rigged? is it broken? can it be fixed? and

2) where are we in the economy? what’s next?

I figure Jay Powell never dreamed that he would be the Sudetenland in our latest historical reenactment, but if you serve long enough you're pretty much destined to be a cautionary tale.

Trump and Bessent are going to run it hot, artificially depress interest rates, and blow a bubble in everything they can.

Weimar-a-lago, here we come.

1. US election spurs fiscal deficit.
2. Phony War between Israel and Iran gets real.
3. Preventive war between US and China over tech embargo.
4. New GFC stemming from shadow banking sector.

1. US election spurs even greater fiscal deficit
2. Phony War between Israel and Iran gets real
3. Preventive war risk between US and China over tech embargo
4. New GFC risk stemming from shadow banking sector

I think we are about to experience a pretty dramatic resurgence in inflation.

This is a common knowledge moment for the global financial system -- everyone now knows that everyone now knows that the US deficit cannot be controlled, much less reversed, over the remainder of Trump's term -- and it puts us on a pretty straightforward path to a global sovereign debt crisis.

I think we are now resuming our regularly scheduled entertainment, which means dollar down, gold up, and everyone – and I do mean everyone – poised with itchy trigger fingers to blast away at long-dated Treasuries as soon as the Big Beautiful Bill passes.

We’ve built and published a new set of narrative storyboards on traditional safe haven assets like US Treasuries, and we discuss that in this live Zoom call with ET Pro members, along with some additional narrative datapoints on fiscal policy.

It’s really pretty stunning how the largest sovereign bond market in the world (the United States) and the third largest sovereign bond market in the world (Japan) are now no-fly-zones when it comes to safe havens and risk-off behaviors.

Like every insurance CIO at this conference, I also think that the Fed will step in as a buyer of last resort if we have a flash crash in Treasuries.

But I don’t think that’s enough.

A recording of our Professional Call held on Friday April 24, 2025.

I think that no matter what happens in the US-China trade war, the professional investment and allocation world no longer trusts the global prime broker functions of the US government.

I know it feels like everyone in our world is talking about capital flight out of the US, and our gut reaction (or at least my gut reaction) is to fade that sort of professional, inside baseball narrative consensus. But I think that reversion approach is a mistake here. Common knowledge on the repatriation trade still hasn't cracked.

Our technology shows two narratives -- “Foreign Investors Repatriating Capital” and “Investors see Gold as Better Alternative to UST” -- exploding in financial media density over the past eight weeks. We're not far from a fundamental shift in market common knowledge regarding US home bias and USD bias, with potential tectonic shifts in longstanding asset correlations and allocation models. In this webinar we'll discuss a model portfolio to respond to this profound shift in power, narrative and behavior.

I’ve got some ideas on what a model portfolio looks like to manage both the exit from the old regime and the entrance into the new, and I’d like to talk about that in a webinar for Professional subscribers on Friday, April 11th at 11a EST: What Happens When the United States is Just Another Country?