Summer Read - Book Ideas

A Core Thesis Laid Out in "When Markets Speak" - Fiscal Dominance Regime and the death of the 60-40 era.

amazon.com/Listen-When-Ma…
"Could it be that Fiscal Dominance is replacing Monetary Dominance. Conversations about asset allocation in a changing world. If the secular regime has shifted from the Great Moderation of the 2000’s and 2010’s to one of Fiscal Dominance in the 2020’s and beyond, then in my view that calls for a refresh of the 60/40 paradigm that most of us grew up in."

Jurrien Timmer, Director of Global Macro at Fidelity Investments, June 30, 2025

There is a price for higher for longer - it's NOT free. Interest rates up, bond prices down.

*Top Four Japan Insurers See $60 Billion in Unrealized Bond Losses - Bloomberg.

**Q: Mark to market losses on this one Apple $AAPL bond?

A: $805M. In October of 2023, Bank of America $BAC equity traded near $24 ($43 last week), with the U.S. 10 year Treasury yield at 4.91% (4.51% last week). Thank God for the Fed's Bank Term Funding Program (BTFP), but a lot of these losses are now sitting on the Fed's balance sheet.

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Book Ideas - "When Markets Speak" - Top Themes --Nuclear Power - AI Infrastructure - Think of this . The $NUKZ ETF is up 25% in May, top 3 holdings are only worth $250B vs. $3300B for Nvidia $NVDA

*Passive investing (Indexing, S&P 500) has everyone's capital in the wrong trade. A Historic week. This is a WW2 like initiative. National security, the USA is WAY behind China. Friday, executive orders were signed. The White House wants to 4x domestic production of nuclear power within the next 25 years, @elonmusk has been making this point for 36 months.

.@SpeakerJohnson warning, you guys are smoking in the dynamite shed. The Limited Life Cycle of a Democracy

Bondage
Spiritual faith
Great courage
Entrepreneurship
Private property rights
Liberty
Abundance
Complacency
Apathy
Dependency
Bondage

*Book - “When Markets Speak”

What do Bonds Know?

*Last 20 years, large equity market risk-off events have -- always -- brought in "flight to quality" buyers of long duration U.S. Treasuries. Not this time.

**Book Ideas - "How to Listen When Markets Speak" on Amazon. Largest Destruction of Equity Capital in the US

2022: Wars / Inflation -$10T (11 months)
2025: Trump tariffs: -$9T (6 weeks)
2020: COVID: -$9T (1 month)
2008: Lehman: -$8T (12 months)

*A powerful, colossal secular shift with a HIGH impact on your portfolio is developing.

Does President Trump realize he has to destroy everyone's 401k to Make America Great Again?

(1) "What multiple do you put on companies that are forced to invest by the state?" with @ces921

*Apple is 7.5% of the S&P 500's composition; a decade ago, the top three holdings were close to that weighting.

Serial Convertible Bond Issuers

SunEdison*
Chesapeake Energy*
SunPower*
Molycorp*
Lehman*
iStar Financial*
Calpine*
Fannie Freddie*
Enron*
Tyco*
Adelphia*
Six Flags*
eToys*
Avaya*
Worldcom*
Tesla
Coinbase
Microstrategy

*went bankrupt. The Last Saloon (2)

"Over the last 30 years, companies issuing more than one convertible bond in a three-year period – filed bankruptcy protection over 80% of the time, our research showed."

thebeartrapsreport.com/blog/2020/07/2…

If this were a stock, would you buy or sell it? Apple $AAPL 2.55% bonds due 2060 are down at 57 cents on the dollar. If long-term bond yields go to 6%, take a guess where this bond will trade?

*Now think of the trillions of USD loans issued in 2017-2021 on bank balance (commercial real estate, mortgages, corporate financings).

Since 2021

Bitcoin

59k to 59k

Gold

1750 to 2500

*Last ten years - Gold’s largest drawdown? 21% vs. Bitcoin -82%, -58%, -65%, -75%.

*A store of wealth holds its value. It doesn’t lose half its value or more every few years. No human being can put large portions of their personal wealth in an asset that drops 50-75% every few years. Gold is a colossal reservoir of liquidity, approaching a $17T market vs. bitcoin at $1.5T.

Chart from @Maverick_Equity

File under another multipolar world headline...

*MAERSK TELLS ALL ITS CONTAINER SHIPS TO PAUSE RED SEA VOYAGES A large percentage of sea-borne container traffic goes through the Red Sea. Even cargo from Shanghai to New York goes through the Red Sea. All the cargo that goes from China to Europe goes through the Red Sea. Very few go around Africa since it's more costly. Halting this traffic has the potential to disrupt a lot of cargo traffic...

With US Treasuries at 5%, Bank of America is close to 45x levered, at 6-7% infinitely levered.


For all of 2008, as Lehman was failing, the value of their core (safety) capital (US Treasuries) was moving higher, NOT lower.

*As interest rates move down, bond prices move up.

Off the Recent Lows

Orange Juice +45%
Natural Gas +43%
Sugar +41%
Gasoline +33%
Uranium +28%
Oil +24%
Lean Hogs +22%
Soybeans +16%
Iron Ore +15%
Coal +14%
Wheat +14%

*Bloomberg terminal data, lows since Dec.
**ALERT: Inflation expectations, US 5yr BEs, at a nine-year high. EU Gas Up 22% today

“The likelihood of a repetition of the crisis of last winter has gone down significantly, which can also be seen in the forward market, “But we have to be clear that the structural change ...

What do bonds know? We are looking at the 3-month US Treasury Bill yield vs. the 2-Year US Treasury yield. The Fed is holding up the front-end T-Bill yields with rate hikes and hits of more vs. market participants pushing down 2’s yield betting on recession - future rate cuts.

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“Policymakers consider themselves vindicated after they followed through on their half-percentage-point rate rise last week despite global market volatility” FT

*the ECB hasn’t figured out banks can’t fund them selves with front end rates this high after the AT1 debacle. The ECB is “smoking on the dynamite shed..”

(2)

Goldman Sachs goes “all in” US consumer finance, then pukes 🤮 it out 18 months later? Really??? Tell me more… Flashback to 2006-2007, Goldman was the FIRST to exit subprime — it was a classic, hall of fame stop 🛑 loss. Today, as colossal interest rate risk hits the $4.8T consumer finance mkt - they cut bait again while most are asleep. History rhymes, indeed.

Dear Equities,

$1M in T-Bills, Interest Paid

February

2023: $51K
2022: $6k

Best regards,

Cash Reverse Robinhood - with $4.8T of consumer credit (auto leases, credit cards, student loans, home equity lines of credit, etc) - every 1% move hits the little guy and gal with $40B of extra interest costs - all the while the top 40% cash in on the interest gravy train.

(2)

Breaking news - Central banks socializing bond market losses and privatizing gains is not disinflationary.

*ECB, Fed, and BOJ $2T of current market-to-market losses - - held to maturity, losses deferred. The year 2022, was the worst year for bonds in 30+ years. In the 90s James Carville famously said: “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would want to come back as the bond market."

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Dear Mr. Powell,

Close to $11T US Treasury bonds maturing - next 24 months, need to be refinanced.

Funding Rate

Current: 1.6% to 1.9%
New: 3.4% to 4.6%

*interest as a % of the budget explodes from 8% to nearly 17%.

**interest (blue) below is a very conservative estimate. On the House GOP's budgeting-cutting enthusiasm -- the goal of cutting $130 billion from discretionary approps without touching defense or veterans' health means freezing those two items and cutting everything else by 21% immediately. That's just not realistic.

via @Brian_Riedl

Interest on $1M in US T-Bills

Jan 2023: $46k
Jan 2022: $3k

* “56% of Americans can't cover a $1,000 emergency expense with savings” CNBC, January 2022. Wealthy investors just got a colossal pay raise vs. the lower / middle class consumer up against inflation. It’s clear, we have two economies in the USA, any company facing the bottom 60% of consumers is taking on encroaching stress conditions while the high net worth consumer is doing just fine up a against the brutal tax that is inflation.

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Colossal Leverage - Underneath the Surface - Liability Driven Investing - LDI turned £5oobn of
underlying assets into £1.5tn of invested money. “The depth of leverage in the system, which is in multiple places that are difficult to
track.” Amundi CIO @FT Dear Clueless Central Bankers - over longer and longer periods of time - when you don’t allow the business cycle to function and suppress the natural - “true cost” of capital, you incentivize and perpetuate this garbage. Don’t kid yourselves, this is NOT an isolated case.

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Friday was a Significant day - Bank of Japan intervention and a Federal Reserve Policy path shift, it was an inside job. Three things you need to know:

thebeartrapsreport.com/blog/2022/10/2… The fix is in -- What is driving equities as we approach the US midterm elections?

Last Few Weeks

DJIA +15%
S&P +11%
Nasdaq +10%

*Dow Industrials are just 11% off all-time highs. Massive short covering in QQQ names - with a colossal rotation in the works.