Fed and Inflation: The guest argues the Fed is making a policy error by easing too much, favoring higher inflation ahead and advocating selling Treasuries while being long inflation breakevens.
AI and Semiconductors: Heavy focus on the AI buildout with semiconductors as the key driver; NVDA remains in a strong uptrend into earnings with potential upside momentum.
MAG7 Dispersion: Detailed breakdown of big tech shows mixed signals—AMZN bullish on a fresh breakout, while META broke down, MSFT lacks momentum, and GOOGL’s gap risks exhaustion; AAPL looks extended.
US Dollar: Expectation of a near-term dollar rally as EUR, GBP weaken and USDJPY strengthens, potentially disrupting consensus reflation trades.
Gold and Miners: Gold likely consolidates after a swing high; miners could see a deeper shakeout before offering attractive buy-the-dip opportunities.
Crude Oil Setup: Oil remains in a downtrend but sits near a technical pivot where a breakout above the 50-day could trigger a sharp CTA short-covering squeeze.
Bitcoin Risk Signal: Bitcoin weakness at key technical levels is flagged as a canary for broader risk appetite, especially if AI enthusiasm fades.
China Geopolitics: China’s strategic strength and industrial policy are highlighted as underappreciated market factors, with supply-chain leverage and war-gaming implications for global assets.
Transcript
[music] Hit it. >> It's Friday, October 31st, 2025, episode 277. I'm Patrick Szna. >> And I'm Kevin Mure. This week, we welcome Marvin Bar to the show. Marvin is a capital markets veteran who has spent some time on the buy and sell side, but also started his career at the Federal Reserve. We have a fascinating discussion about global markets, and he shares the policy error mistake the Federal Reserve might be making. And no, it's not in the direction you probably think. Then Patrick is in Mexico, but his charts work just fine down there. So, he boots up his computer to give us the latest read in talking charts. >> Yeah. Um, folks, uh, stick around. We might even drink some beers along the way. Actually, Danny, what beer am I drinking today? >> Today you are drinking one of English England's finest bands, Iron Man. >> Absolutely. You put in one of English bands. >> Yeah. >> Abs. It is absolutely >> Dickinson. He's he's a legend, buddy. >> Okay. >> And they have he has his own plane and his own beer. Like that's >> He's got his own plane. He must be awesome. >> Exactly. >> Everyone that's cool has their own plane. >> Anyway, let me give this a try while you give us some disclaimers. Um, you're going to have to give me a second, Patrick, because I screwed up and I closed the disclaimer thing. Let me just get it. Here we go. Nothing in this podcast should be viewed as investment advice. Listeners should consult an investment professional before making any decisions regarding topics mentioned in this show. Side effects of too much huddle may include the DDS which is the doubbish disappointment syndrome something the markets seem to be experiencing. >> Yeah, >> the AI bubble burnout, the otherwise known as AIBB. And then finally, the one that I think everyone's suffering from, which is E, the earnings euphoria exhaustion. >> Yes, that's uh that's a nasty one. All right, let's get the guest on. It's our great pleasure to welcome to the show someone I've been looking forward to chatting in person in a long for a long long time. It is Marvin Bar, the author of Thematic Markets and seriously Marvin Substacks. Um Marvin, thank you very much for making time for us. >> Hey, thank you. I've been uh a big fan. Um I'm really excited to be on the podcast. Thank you. >> Oh, it's we're great to have you. And you know, let's just start with that. Seriously, Marvin. Um I you I take it you didn't name that and uh why don't you tell the story of how you how you got that name? Well, um so I had um I have a a a institutional grade um thematic uh markets research um Substack and um you know one of the things that I've realized expost is that um despite the fact that a lot of people in the institutional space knew of me from my you know years in policy work and on the cell side very few people outside of that sphere knew me. And so I was trying to look for a a way to raise my um profile on on Substack and my um I decided to create a a a sort of free product, but I was like, "What what what can I do?" Um and my wife said, "Hey, you have all these crazy ideas all the time [laughter] and you get bogged down in trying to research them. why don't you just throw your crazy ideas out there? >> And so and and she named it >> where it came from and and she came up with the name because she was like that's what she says to me almost every morning when I have these crazy ideas. She's like seriously Marvin >> that's awesome. It's a great great name. And uh listen, let's you you mentioned all your time on doing policy and stuff like that. Let's get to know you a little bit better. Um, first of all, let's talk about where you grew up because I think although you're coming from London today, you're actually a Californian. Californian. >> Uh, I am. I was actually born in Colorado. I was a military brat, but we moved to California when I was 10. >> Yeah. And >> so I grew up there and lived there until I was 28. Um, uh, you know, got all my education in in California, the the University of California system. Um uh and then I went off to the Federal Reserve Board in Washington. Um where >> Okay. One second because I'm I'm gonna sorry to interrupt, but I want to actually dwell into your background a little bit more because I think it's a fascinating one. >> Your dad was in the military and he wasn't he wasn't like flying, you know, jets or anything like that. He was actually kind of a >> was a navigator. >> Oh, he was. >> Yes. Oh, because I because you when I heard you tell these stories, you often talked about him being a scientist. >> Well, this is the thing. The guy is is so he didn't have the he wanted to be a pilot. >> Okay. >> So, he, you know, went to the naval academy before there was an Air Force Academy, which by the way, that I was born at the Air Force Academy in Colorado. That's why I was born there because he was teaching there as a professor. But initially he went in because he thought, "Hey, they've got created this new um air force. I want to fly." And even though his eyesight was not good enough, he thought that he could somehow sneak in if he was a navigator. [laughter] And of course, that didn't work. So meanwhile, he just decided to pursue, you know, a a um masters and a PhD in electrical engineering. and then you know afterwards took the GI bill and yeah he he got a um a jurist doctorate an MBA um he's a CPA he is like the most overly educated person in the world I think there's probably again um uh world records for this he should be there for that but yeah he's most of his life he was a he was a scientist >> right and so you described him as the most intellectually curious person. >> Yes. >> And and talk a little bit about like did that rub off on you? Are you do you feel like you you are following his footsteps that way? >> Um well, I haven't gotten quite as many degrees as him. I I only got one I only got a masters and a PhD. I mean, I'm I'm I'm summing it over here, but [laughter] uh um I definitely feel like he instilled in me that sort of creative curiosity and I do think that that has been a critical element to what I would term my relative success in terms of seeing things that other people haven't. I think there there are sort of two critical elements that one is that curiosity he instilled in me to think about lots of different things. You know I'm I I'm always studying lots of different topics and you know for people who've read my research or if you read Seriously Marvin my my free publication you'll see it all the time. I'm drawing in things from all different sciences all over the place because those it's just interesting and and I'm I'm curious. The other aspect is um you were right to stop me in glossing over growing up in you know an agricultural town in California because you know I think and I didn't appreciate this enough until I was working at you know policy institutions or on a trading floor that not that many people come from that background in our sort of world right you know most of them um came from cities um from you know uh top-notch uh educational institutions um and it gives you a very different perspective and I'll give you a great example of this um so one of the things uh one of the things that I saw that other people didn't was Brexit and Trump's first election right so I called both those at the time and you know there were other people who did it, but it was a a relatively rare thing. And everyone on the trading floor was like, "What the heck? How did you see this?" And um I don't know if if you have ever come across this, but um Charles Murray um one of the authors of the bell curve, the infamous bell curve book, um he was being interviewed on um PBS about um uh the working class being left behind in the United States. and he talked about how most elites live in this bubble and they just don't even actually understand anything about the um rest of the country in which they live. And he designed with PBS this bubble test and you you can probably still if you Google it you can probably still get this bubble test [snorts] and go take it. And so what I did is I started asking people clients, people on the trading floor, everything. I said, "Hey, go take this bubble test and come back and tell me your score and then I'll reveal my score." And the higher your score, the more sort of salt of the earth, you know, close to the working class, the average American you are. The lower your score, the more sort of elite in the bubble you are. And there was only one person in two years of asking people to take that test. And this is hundreds of people that I met in markets who had a score that was only one point higher than me. Everyone else was way below me. And it and I think it comes from growing up in that agricultural community and working or you know going to school with uh people who weren't on the same path that I was on. They were on a very different path. That is hilarious. I'm sure everyone right now, including me, is googling it. Yes, you can go to the PBS website and you can take it. Are you going to tell us your score so people can compare you to or do you remember? >> Um, I was either a 56 or a 57. >> Okay, there we go. >> And and and I should issue a caveat because I know you're in your your audience is international. Several of the questions on there are very American culture specific. So, if you are not American or didn't grow um haven't spent a lot of time in America, you're unlikely to score that high just because of that sort of cultural prejudice that's built in there. But if you're an American, yeah, um and you know, um post reply to me on on X or uh wherever and tell me what your score is because I'd be interested. >> That's a great story. Okay, so you're there in California growing up and with this father who's intellectually curious, he passes down a lot of these things. Where do you go to university? What are you studying? And do you have a plan to get into markets? Because it doesn't sound like you come from a family that was, you know, that valued markets probably more so academia would have been what your father would have valued and your your parents. You know, it's it's it's funny uh that you you put it that way, but um so I went to UC Berkeley and I you know, despite the fact that, you know, I was the top student in my high school in math and science and things like that, I said, you know, I want to go into business or law or something like that, right? You know, I wanted to go make money. Um okay. Um, and so I went uh to UC Berkeley and I I wanted to try and study something like that. But while I was searching around for a major, I came across economics. Um, UC Berkeley had this I don't know if they still have it, but they had this really weird system for undergraduates where under the economics degree, you could get the hardcore economics degree, which was like, I'm going to go study for a PhD, >> okay? Or you could do this one that literally had only four upper division classes to fulfill the measure. And >> the soft the softcore one. >> Yes. And your degree at the end said the same thing. I graduated with a BA in economics. And I was so interested in everything else because of that intellectual curiosity, >> right, >> that I was like, "Oh, I want to do this." And so, you know, I I almost effectively double majored in history. I took classes in like African-American studies, film, um you know, computer science, uh um art. >> Very UC Berkeley of you. >> Yes, very very much so. Um my dad um politically um described me as um going to Berkeley uh to a little to the right of Ailla the Hun and coming back somewhat normal. Um >> all right. So, you graduated from there and your first job is at the Fed. And I I just very rarely do you get somebody that was at the Fed and then went to the sell side or the buy side and is we can like learn how the Fed operates. So, I'm going to I'm going to actually quiz you on this because I think a lot of people have misconceptions of the Fed and and don't really understand how it operates. So, first of all, tell us a little bit what you did there. You know, what your positions were. Then after that, if you could explain to us what you think most people get wrong when they think about the Fed in terms of, you know, their view about how it operates and because I you hear all this stuff and I'm sure you're going to debunk it about like, oh, they're doing this and this and they assign a level of nefariousness or int, you know, or cunning that just doesn't exist. >> That's probably true. Yeah. Um so I will so I went there and even though my dissertation um uh for my PhD was in uh um purely domestic monetary theory um and um monetary policy. I was actually put in the international division and I was dropped in in the middle of the Asian financial crisis as the Southeast Asian desk officer. >> Wow. So I was just like thrown into the fire immediately. Um and I mean it was a challenge but it was a lot of fun. Uh it was really interesting. Um the Fed um what you know one little sort of side story related to that that gives you a little bit of insight to the Fed is it is seen as the sort of intellectual and policy pinnacle of the entire Washington community. Right. So the IMF, the US Treasury, the World Bank, all those people, they always call you in to talk to you about part of it is the Treasury asks for that because they have oversight over those institutions, right? They know that the Fed is the people who really know what's going on. But it's in general there's like a whole collegiity there that you know so when you know we're talking about Thailand um in the middle of its crisis you know I would be going to all these IMF briefings and you'd get you know firsthand report but you'd also be pressing back on on the um uh country team and you know hey have you checked on this have you done this and um you know the um am I allowed to use a swear word on >> Oh yeah you for sure you Yeah. Okay. So, um my my boss at the time, um Steve Cayman, who is one of the funniest people on earth, um I was coming back from one of these and I was telling him about it and he said, "Marvin, I want you to make it your personal mission that every single person should come out of that room and say, "Who the hell was that fed asshole?" [laughter] I mean, yeah. So, so yes, that was a really cool part about this is is that you were especially in international division really connected to the rest of of of Washington and also you know after that much several years later um the other interesting thing is I was sent to the bank for international settlements in in Boswell Switzerland which is sort of like the central bank two central banks and those sort of opportunities were available to me because I was in the international division in a way that they were less likely to be open to me in the um domestic divisions. So that's that's one part is that um the Fed is actually far more international than I think people realize. It is really paying attention to what's going on to the rest of the world. Now policy is going to be set for the US economy, but they are very aware and very engaged with what's happening in the rest of the world. So I think that's one important thing for people to realize. >> Okay. Um, as soon as the crisis died down, uh, I started to get bored. And, um, this gets to another really interesting part about the Fed is that the Fed, um, now it has almost 500 economists. It's just crazy and mind-boggling, over the top. But even when I was there, there were 225 um, uh, economists, PhD economists there. And just to give you a a an a sort of insight into the quality of these people in terms of their intellectual rigor, when I was on the academic job market, my adviserss were very clear on this. If you get an offer from a top 10 economics department in the world, you take that. If not, the Fed over anything else. >> Okay. >> Okay. That's the level of people you're dealing with here. And what's really nice about the Fed is that they kind of allow you to self- select whether you want to pursue academic research and they give you plenty of time for it or you want to be more involved in policy research. And as your career evolves, if you're like publishing papers in top journals and things like that, they're going to give you more time for research uh you know, pure academic research. if you aren't or you're showing a strong proclivity for policy research, they're going to load your plate with more policy research. And the way that applied to me is that I didn't like the whole academic process. You know, it was crazy to me that like my dissertation, the main paper from my dissertation, by the time it was finally published was four or five years later, you have to go through all these different robustness checks and things like that. I have long since lost any interest in that topic. I'm moving on to the next thing because something else is going on. Right. >> Right. >> Yeah. >> And especially being thrown into that hot seat immediately and seeing how exciting and fun policy could be. >> Right. >> That was, you know, I was hooked. I was a junkie for this now. >> So, um, you know, as soon as the crisis started to, I was like, I want something else. So they moved me to the financial market section. >> Okay. >> And that was a section that all the people who wanted to do research tried to avoid because you actually have a lot of policy work on your plate. This is the section there were four of us. >> Yeah. >> And at that point >> every week this section briefed the the board at its board meeting. They've changed the structure since, but now but back then it was that section briefed the board on the foreign exchange outlook and the global outlook every single week. And since it was four economists that meant every four weeks in a rotation, I was sitting across from Alan Greenspan, Roger Ferguson, Larry Meyer, the rest of the board um briefing them the first line of defense on what was going on in the global economy. >> Wow. No, wait. I I didn't realize they have weekly board meetings. >> Yes. So >> of all or is that New York Fed only? >> What >> is that? New York Fed only or is that >> No, no, this is our board of governors down in Washington. So remember the So let's take a step back. The structure of the Fed is you have um the centerpiece of the Fed is a government um agency, the Federal Reserve Board in Washington DC. The one that Donald Trump visited and said, "You've spent $ three and a half billion dollars, you know, renovating three buildings, which like seriously I worked in those buildings. I was there two weeks ago. I was looking at this. I was like, "What the hell?" Like I I mean they are right to be fully criticized for this. But anyway, um that's the Federal Reserve Board and that's where you have the seven governors. >> Yeah. >> Seven governors, the chairman of which is the chairman of the Federal Reserve Board and the chairman of the F Federal Open Market Committee that sets policy. >> Okay. >> The governors are responsible for um setting the um uh regulations, the Fed, all all of that. And all seven governors always vote in FO in every FOMC meeting. They have 14-year terms to make them apolitical. >> Um, and the chairman and two vice chairs of which have four-year terms inside a as chair or or or um vice chair, but they're underlying they're a governor appointed for 14 years. >> Okay. This is why next year, if you notice, um, uh, Chairman Powell's term as chairman ends in January or February, I can't remember which, but he doesn't actually end as a governor until, I think, May or June. So, he will still be there even in if he chooses to be, >> right? >> Even after he's uh um removed as chairman. >> Okay. Anyway, then you have the 12 Federal Reserve banks around the country and those are actually private institutions. They're federally chartered chartered. >> Oh, okay. >> But they're private institutions that are owned by their member district banks and their presidents are selected by member district banks. Although the board of governors has a big say, they can basically veto or or force it. So, >> okay. Okay. So, the FOMC is is those uh all the district members plus the the Fed board and then you're just briefing the Fed board on a weekly basis and they meet every week. >> Exactly. >> Yeah. I didn't realize that. Okay, great. So, you got this opportunity. You're sitting there across from Alan Greaseband. >> What's that like first of all, like you know, did it scare the out of you at first like when you were or was it like by this point you kind of knew the guy and it wasn't that big a deal? No, I mean Alan Griezban was not a a friendly cuddly person. No, is not a friend. He's still alive. Um uh he is he look I have immense respect for for the man. I I mean I hold him up as one of the best um Fed chairs ever and I I take umbrage to a lot of the criticism he gets. I think you know yes he sort of set the stage for things later but that was because he did his job so well that's the problem and and I think there's a lot of lessons to be learned so we will probably come back to that but >> I I mean >> the first time I briefed the board yeah >> um uh uh it was a bit nerve-wracking and of course um my then boss um walks and he sits on the opposite side of the table, comes in, sits down, and then he gets up and he looks and he sees me in the chair. He gets this surprised look and he runs around. This is before the governors get in and he slaps me on the back and he says, "I have almost perfect faith that you're not going to completely screw this up." [laughter] Walks away. >> Almost perfect faith. [laughter and gasps] >> So, um yeah, that was a a good start. But um the it it was um definitely a really challenging experience. I mean yeah you know you are the first line of defense so you get to um brief the board on and everything you say to the board has been reviewed by you know your written materials by like 50 people. >> Okay. >> Um so >> so it's it's a group you're you're presenting the view of the group that you're working for. >> Exactly. >> Okay. So then they can ask you questions and you have to be ready. >> All right. You have to be ready. >> Now you get to ask and if you get in trouble then all the three baronss as they're called the division directors of international finance my division research and statistics the main domestic division and monetary affairs the sort of other >> domestic sort of financial and moniary um division are there to back you up. and then arrayed around the room are like 50 60 economists who will pop up and um you know answer specific questions. >> Okay. Um so one of one of the things that um so back to my original question, what do you think people get wrong about the Fed? And then the other thing that I just want to highlight here is that you before we were chatting, you know, before the show started, you you were saying something about that you actually try to avoid talking to people on the Fed. explain to us why you try to avoid them and then also what you think that the market gets wrong in terms of um thinking about the Fed. >> Um okay so let's start start with the um first one. I think one of the things that's really important is go back to that point that I said about the Fed allowing people to sort of select their own path. Um and um you often see people say the Fed published a research paper saying this this must mean what they mean. No, that's literally an individual economist given full academic freedom to write whatever the hell they want. Uh, one one of my papers that I wrote that was released as um uh an international finance discussion paper of the Fed quoted a congressman saying that raising rates to um fight inflation is like throwing gasoline on a fire, >> right? >> I was allowed to publish that. Nobody stopped me. Right? So do not think that any sort of publication of the staff necessarily reflects anything that the govern the governors or the FOMC are thinking. That's just not true. >> Okay. >> Now you do have to take with a grain of sight. Like, you know, one of the things I I tend to think that QE was largely ineffective um and QT is a lot less um uh important than people think. Um but there's all this academic research out there that will tell you otherwise. Well, guess what? If you look at most of the academic research, it's all produced by Fed staff. And guess what? That was almost certainly because the governors kept asking them questions. Can you show that this actually is working and doing things? [laughter] It's sort of a CIA exercise, right? And you know, so it's not that it's not related to what they're thinking, >> right? >> But don't immediately assume that it is. So that's I think one important thing, >> right? >> The um second thing that I think is most important, and this sort of gets to the point of why I think Greenspan was so impressive. um is that you know especially after the last decade where everyone you know focused on thinking that central banks drove markets or whatever there is this sense that central banks are these infallible unbelievable omnisient beings who know everything and they're going to tell you where things are going to go and this gets to the point for why I don't like to talk to people at the Fed I I do occasionally because I have lots of friendships there, but I generally try and avoid talking policy with them because actually they're mostly wrong. I mean, the fact of the fact of the matter is, and I can point to this, I have a far better track record of predicting the economy, um, inflation, and even their interest rates than they do, >> right? >> Far better. Okay. And that's because they do suffer from a lot of group think. Um I think that problem has gotten a lot worse over the years. Um you know in the early days of my career there uh you had a more diverse group of governors. Um okay >> uh in that they weren't all PhD economists. Um a lot of them were like political hacks, community bankers, all these sorts of things. And you say, well, and even at the time, I admit this is an air, like, you know, I used to think, why are those people on here? They should have PhDs like me on the board. And the problem is now they have PhDs like me on the board and they think exactly like the entire staff and they have no diversity. But go back and and I mean diversity of thought. So go back and look at the transcripts from 2006 through 2008. Who is the one governor? the one governor who is talking about, hey, you know, I think there's something wrong with this whole subprime thing and we should really be digging in here because I'm hearing a lot from my community banking contacts that these things their terms are completely screwy and the credit underlying this is is terrible. There was only one person doing it was Susan Bes, >> okay, >> who was not an economist. She was a community banker was appointed to the board and literally the entire rest of the board of governors including all the illustrious people including Alan Greenspan by the way were all dismissive of her on this and I remember as a staff person when she was appointed to the board. I remember us all sniggering at some of her questions like [laughter] what does she know? [clears throat] But no, that that is part of the the the problem. Too many low bubble scores. >> Well, no, it's a specific bubble, right? Right. >> Academic economist bubble. And this is what I was going to say about that's impressive about Allan Greenspan is that >> you know in you remember the whole productivity miracle back then, >> right? Yeah. you know, he singlehandedly discovered that the entire staff and all the rest of the board was fighting him on this >> and he just kept pressing them and saying, "No, how are you explaining this earnings growth? How are you explaining the capex? How are clearly something else is going on you guys are missing?" And he just kept beating the staff over the head until they finally actually went out and did the research and showed, oh, actually, you're right. there's some sort of productivity boom going on, >> right? >> Was 100% him. >> And you know, credit to Larry Meyer for this. Larry Meyer was the massive thorn in his side at that because Mary Larry Meyer had a very strict, you know, academic view of where um structural unemployment so-called Nairu the non accelerating inflation rate of unemployment. >> He thought it was at 6% and he was fighting chairman Greenspan the whole time. He thought it was six. >> He thought it was six at the time, which was which which was not unusual back then. Everyone now is talking is like, "Oh my gosh, unemployment at 4.3%. This is like practically a recession." I'm like, "What [laughter] are you talking about?" You know, 20 years ago, >> y >> you would have had a hard time finding anyone who thought naiu was below five. >> Okay. Shows you how things have changed. Yeah. >> Yeah. No. And um Larry Meyer in his book admits it. He says, "Look, I got it totally wrong." And Allan Greenspan singlehandedly nailed this. And it was because he didn't just listen to the thing. He went out and talked to people on the street. He had a whole roa of CEOs and others that he would call to find out what was going on. He was really much more a narrative economist than a model economist. And he saw things that all the model economists missed. >> Okay. So, listen, we could talk about Fed stuff forever and it's fascinating. But let's get a little let's just finish up with your career and then we'll talk about your views currently. Um so from the Fed you move what to the you say this is I wanted to be in the real action. You moved to the sell side. >> Yeah I uh um decided uh I one of my mentors had left a few years before me and he had uh told me look if you ever decide to go over to the dark side please call me first. And uh um I um took him up on that and went to Croup um where I um you know moved to London and um was covering global foreign exchange, >> right? >> And uh I I did that for a few years. Then an interesting just happen stance um opportunity came to go back to Washington. this time to go work for the US Treasury Department as the chief economist for international affairs. Okay. >> Where I was the primary adviser on um foreign economic uh policy and dollar policy um to the uh under secretary um uh for international affairs. Um and then I went off to a distress debt fund to a um outsource chief investment officer which is sort of like an allocation for endowment style investing. Um and then back to uh um London to lead foreign exchange and emerging market strategy for uh Barclays before I started thematic markets a few years ago. >> Uh one of the things that I find fascinating is a guy from Southern California has has made London his home. Have you gotten used to the the lack of sunshine? Take extra vitamin D. You taking extra vitamin D, bud? [laughter] It Yes, I do. Um it it was a concern of mine when I first moved here. I will say and and I don't think that this is entirely my rationalization, but the reality is, yeah, it would be nicer to have more sunshine, but when you get down to it, there aren't a lot of places in the world that have it's not California sunshine. It's the especially along the coast, it's this really narrow temperature range. So, it's, you know, along the coast of of California, it's basically 50 degrees Fahrenheit to 85 degrees Fahrenheit all year round. Right. Right. 15 to 25 Celsius for people out there. And the difference with London is that it's, you know, 10 degrees Fahrenheit colder, but it's basically the exact same thing. And there are very few other people places in the world that have that really >> you just don't like the variability in temperature. >> Yeah. >> Well, don't come don't come to Canada, bud. Uh >> yeah, exactly. >> Exactly. We have a little bit more of a variation. Okay. So, let's talk about what you're thinking about the markets here. Uh let's start with one of your big themes that you're talking about with your institutional clients, and that is the idea that the Fed might be making a severe policy error. Yeah. >> And I think the policy error is going to surprise folks because most people will hear that and they go, "Whoa, they are not cutting enough." And you actually feel like maybe it's opposite. >> Yeah. I I think it's the exact opposite. I mean, look, I I this is where this is part of the reason why I brought up the the Allen Greenspan sort of narrative feeling the economy um uh story is is that that collection of all PhD economists has sort of gone off the rails in my view in terms of being far too model focused. They are very convinced that they understand where Rstar the um real neutral interest rate and remember what that means is that the real interest rate I minus inflation expectations is set at such a level that unemployment should not vary and the economy should be growing a trend. Now they're pegging that at 1%. So, you know, you add your 2% inflation, the 3% nominal Fed Fed funds rate, and they're also telling you that real growth in the US economy is 1.8% per year. Okay. Now, let's just review the facts here. These are facts. >> Yeah. >> Over the last three years, the average one-year real interest rate has been two and a quarter%. So more than double what they think our star is. Over that same period, the US economy has grown at better than two and a half% almost a full percentage point higher than what they have. And inflation has been above target that entire time. Oh, and by the way, it's reacelerating now. >> Right >> now, I don't know about you, but that doesn't seem very neutral. I I mean I'm thinking and you know if you look like right now we don't have any data coming in right but the data that we have had coming in is telling you the US economy is absolutely on fire we have some of the fastest rate of investment growth in US history um despite all the so-called uncertainty that was supposed to suppress investment if you look at actual capital announcements by um companies out there you um companies year to date have announced over $2 trillion in new investment spending for the United States. That is more than 75% of the global total. [laughter] And it's not all just in AI. A lot of it's in manufacturing, a lot of it's in pharmaceuticals. You it's across the board. This is not a one-dimensional story. And so the US economy is very clearly booming. Um and the only thing that you can really point to and this is what the Fed has pointed to that's you know saying oh well there's a well first of all our models tell us that that's wrong. Well your models have been wrong for multiple years now. Maybe you should perhaps revise them think about something else. I don't know. Um, but the other thing that they've now leaned on is that well, non-farm payroll growth has slowed and there's been a slight edge up in unemployment. And you you look at this and you say, well, wait a second. Every single, you know, Trump skeptic out there at the beginning of the year was telling you that when he shut off the door to immigration, you were going to get a massive contraction in the labor supply curve. >> Why isn't that what's driving this, not demand for labor? I mean, you had the story beforehand. It seems to have worked out exactly as is. And then there's very straightforward tests for this, right? Like any of your audience members who've studied economics before, even if you just took a basic introductory class to economics, it's pretty simple. If it's the demand curve shifting back, you know, output or um uh demand for labor falls, the number of of new uh employees falls, but so do their wages, right? If [snorts] it's the supply curve shifting back, you get that the number of people being hired falls, but wages rise, >> right? >> Which, by the way, is inflationary. >> Um, >> well, lo and behold, what do the data say? This is not hard. The data very clearly say it's a supply curve shock. And that's exactly what people have predicted, and yet they now seem to have forgotten it. But the other thing is I've done a lot of work digging into basically um people like myself. Now I wouldn't be counted because I'm not a US resident but if you look at what uh are called soloreneurs so people who set up um you know companies to work for themselves. And so you know a lot of people focused on like the gig economy and you know they think about Uber or Deliveroo drivers and think this is low wage. But if you actually look at the data, this is first of all a big trend. It's almost 15 to 16% of the US labor force. Now this is not a small number, right? Um and if you look at where all the growth has come, especially since COVID, it's actually in higher income earners. I mean like the the places with the fastest rate of growth are revenues over a million dollars a year. We're not talking about Uber drivers, >> right? >> Okay. And those people are not counted in non-farm payrolls. So when you add it all up, you add up, you know, what what is the labor supply shock from, you know, cutting off immigration, then you should expect that well actually the growth of employment should be somewhere between 25 and 50,000 persons per month. Okay, which is by the way below where non-farm payrolls are. But then if you add in the fact that non-farm payrolls don't count soloreneurs because they're not part of the institutional survey. >> Yeah, >> I calculate those guys are growing at 30 to 50,000. So in reality, non-farm payrolls break even, that is the economy standing still should be zero, >> right? And yet the Fed is cutting rates on the basis of non-farm payrolls being 60 70,000. >> Yeah, this is a mistake. Um now there's one fly in that ointment and I'm actually writing about it this week so you know people can uh read about it uh next week when I publish. Um which is that the unemployment rate has like ticked up a little bit, >> right? And you know one point goes back to our earlier part of this discussion is where is Nairu actually you know it's entirely possible that COVID pushed us below Nairo which is why inflation was so high. So actually we're actually just getting back to Nairu a sustainable rate of frictional unemployment in the economy. But the other part is that I think that there's a big skills mismatch in the economy and that AI is exposing this. Right? So one of the things that um uh happened over the last few decades is that we told everyone and their mother you're not even a human being unless you go to university. And the fact is that actually most people don't need to go to university. In fact, you know, they're not going to be the top scientists. They're not going to be the top programmers. They're not going to be the top lawyer or or or whatever. And being, you know, less than the top actually doesn't pay huge rewards in in in this economy. But those people were able to find jobs as manufacturing went elsewhere. And um uh you know, you had more service jobs. you needed more people to do copy editing, to do, you know, all sorts of things where you needed some degree of literacy that was better associated with a university degree than someone without. But of course, chat GPT now does most of those things better than those people. And meanwhile, we've had a geopolitical shift that means that we have massive structural shortages of electricians, welders, pipe fitters, um all of these things. I mean, there are literally hundreds of thousands of those jobs, which by the way pay a lot more than most college graduate jobs, >> right? >> Yeah. >> Um out there that are sitting unfilled. Well, lowering interest rates isn't going to solve this problem. It's all those people who got, you know, peace and conflict studies dis um degrees um need to go actually take a course in being an electrician or something like that to raise their wages significantly, but it's going to take time for that structural unemployment to get over. So, I think the rise in unemployment probably reflects more of that these structural issues than anything cyclical. So, I I love the fact that you're one of the few that I like after [clears throat] listening to you, I would call you Trump sympathetic or at the very least you're willing to look at the positives of Trump, right? More so than some. Um, and yet what I find kind of frustrating is that a lot of those people that lean that way are now taking the view like Trump says the rates should be lower, so therefore I think rates should be lower. And they're just they're just not thinking it through. And I what what kind of makes me mad about this is that if you think back to a a year and a half ago, everyone was complaining about the Fed, you know, missing their mandate, um losing credibility, all yada yada yada that that famous speech that one of the or not speech, that famous story that one of the governors gave about the janitor coming and knowing who Arthur Burns was. Arthur Burns was the guy who created inflation and even the janitor knows this. So therefore, we're not going to be it. And to your point, I find it just kind of fascinating that we're in this environment where the Fed has still not achieved target. Still not achieved target. >> Exactly. >> And not only that, financial conditions are just ripping. Like there's no doubt about it. And yet we're pushing for lower rates. So my question to you is that's not going to change that obviously the we're going down this road. We're making this policy error. What do you think the consequences of that policy error are? Um so look there's another whole issue there and it's one that I don't have a high conviction on but we should probably come back to which is are we going to stay on the current path that we're on? But let's suppose that we do and answer your your direct question then you know one it's kind of crazy look at break evens across the curve like you know inflation break evens the difference between nominal um bond uh treasury bond yields and inflation protected bond yields. So what is the market pricing for future inflation? Those are pricing in 2.4% 4% which is roughly what they they averaged the last decade, right? >> Like could you count on on the Fed or sorry the government being truthful about the CPI going forward because that I used to be that I love that trade and it was something I always wor you know felt that was a great trade to own. Increasingly I'm scared he's already fired the B head of the BLS because he got one bad employment number. What's going to happen when you have 5% inflation? um like has he broken that market? >> There's all sorts, by the way, there's all sorts of other people out there who who who uh um and I'm certain you've probably had some of them on your podcast who before Trump were saying these inflation numbers were all cooked. [laughter] That's >> right. So, I mean, I'm not even sure. But, um >> sorry, I view Trump as an accelerant. So, I agree that that was the direction we were headed, but I think it's going to happen quicker than we expect. Anyways, go back. So, >> break even. >> So, so, so look, but that shouldn't change nominals, right? In the sense that um if you're a bond holder, >> you're going to face actual inflation. Who cares what funny number the government you should be selling >> longdated um bonds. And actually in this is another interesting thing is that after the whole you know blowoff I' I've been arguing for two years more than that actually you know I think I go back to 2021 I started writing about you know term premia being insanely low um and that they need to go a lot higher because of the Fed's policy errors and because of the broader uncertainties we face in the global economy. You finally started to get a reaction for that after liberation day. Right. >> Yeah. But if you look since um the end of August, early September, actually um uh swap spreads >> uh have have cheapened. >> Yeah. >> Um you've uh had the the 1030 spread, which I find to be a much better measure of what's going on with term premia. >> Okay. >> Um come down. >> So what do you think is happening there? Why? >> So I'm frankly a bit perplexed, I have to say. Um because you know I think the narrative or certainly what I perceive most people talking about is that yeah Trump's going to make this so much worse. And so as bad as whatever the Fed is doing now and you know my argument would be just based on the current Fed we have you should be selling treasuries right [laughter] you should be you know long break evens because inflation is going to be higher than what's predicted that's for sure >> um just based on them but if you also have this view that Trump is truly going to do all these terrible things then of course it should be so I I have to admit I'm totally perplexed by that. >> Okay, >> that said, I do have a theory. >> Okay, here >> let me go back to something you said about my being sort of more Trump sympathetic. Like look, um you know, it's a matter of public record. You can go look up when I was at the Treasury, I was a political appointee. I was a Republican political appointee in the administration of George W. Bush. [sighs] Um, and when I realized Donald Trump was going to be our next president back in April of 2016, um, and yes, I did realize it that early, I literally almost started crying because, you know, this was not the sort of Republicanism that I, you know, I'm a small C conservative, small government kind of guy, right? >> Okay. >> Um, uh, and I've never voted for the guy. I'm I'm not on the Trump bandwagon, but I will say that term two, this guy really took his time in the wilderness. I actually think he's one of the most fascinating characters in US history. He is really, really interesting because he was clearly totally unprepared and also just not interested in being in government um being president of the United States in term one. Right. >> And yet he's such a competitive guy. This is my read that when he lost he's like I'm GOING TO COME BACK AND I'M going to [laughter] And he assembled a team, call it project 2025, whatever you want, but he really thought about what was going to be the policy that he want. And he's had, I would say, a very comprehensive grand strategy to get there. And a lot of it I actually agree with. A lot of it in terms of the, you know, countering Chinese economic warfare, which is what I see as most of his policies, I think is absolutely not just advisable, but essential at this point. Um, and I also think very clearly what he is aiming for when people say, you know, Trump wants to do this for himself, great, fine. What is his incentive? I think his incentive is very clearly to be on Mount Rushmore. He doesn't care about the Nobel Prize. He wants to be on Mount Rushmore. He wants to be remembered in US history as one of the great presidents who was transformational. And you may not disagree with everything that he's doing. That's fine. But if he thinks that he's going to do that by following these policies, you should expect he's actually going to do that and do policies that are going to put him on Mount Rushmore. And I have a really hard time seeing how causing a hyperinflation is going to put you on on Mount Rushmore. So, I do have this very strong suspicion that we are being hoodwinkedked right now, that all his low um interest rate rhetoric that he and Steven Moran, who is just like, you know, basically his um I I I call Jason Moran the the uh or or Steven Moran the the Jason Ferman of the MAGA movement, right? He's he's he's like he's he's he's a very smart economist who will say whatever his who will find an economic justification for whatever his principles want. Right. >> And and that's the way you should read them. There's no information content there. You just have to listen to the big guy instead. >> Yeah. >> And I think this whole thing is about it gives him a great way to point the Fed for all the failures if anything goes wrong next year. >> Right. And so why not complain that they're not doing their their job this year, but next year, precisely to the point that you raised, Kevin, is that Trump's voters, more so than anyone else, hate inflation. And I think his incentives flip next year. And next year, it's too late for him to affect the midterm elections with policy then. So his appointments then are not going to help him out, but they are going to affect inflation in his place in history. And I have a strong suspicion we will actually get someone hawkish next year, despite all his rhetoric now. And that's because I mean, think about it. When has Trump ever when have you ever been able to hold Trump to anything he said? >> Well, that's true. [laughter] That's true. You shouldn't whatever he says, you know. People think it's a Democrat. It might change the same the same sentence. It might actually change, not just tomorrow. Yeah. >> Okay. So, so your argument is although we're going down this road, reality is that, you know, inflation will perk up and he'll change his tune and very quickly we'll the Fed will have to be raising rates again. >> I I I absolutely think this is a distinct possibility. I say it that way because as with most things Trump, it's really hard to have a high conviction in in these things, right? But when I think through my model of what motivates Trump and what drives his actions, it's hard for me to reconcile him appointing a dove. >> Okay. Uh can you give us your best pick on who you think it'll be? They've gotten five now. So it's is it going to be one of the the kind of outliers that is low odds right now? that's probably on the Fed already. >> So I I I I can say one of the people who's in the leading in the betting markets, Waller, I'm 99.999% sure it will not be him because think about Donald Trump. Donald Trump likes people who either are, [snorts] you know, like Stephen Moran going to do exactly what he says. >> Yeah. or likes people who have some hutbah and you know independence and are leader types. >> Yeah. you know, Christopher Waller has shown himself to be a complete, you know, uh, flag in the wind, right? Like, >> yeah, >> and there's no way Trump's going to appoint someone like him. Just on personality alone, he will never appoint, um, uh, Christopher Waller. Um, so um, I I think you can rule him out. Um, I was thinking it would be Worsh because Worsh actually has been the most consistently hawkish throughout, you know, early on and he didn't change his story, but he was never taken out of the running, right? >> Okay. Yeah. >> Um, and so if my theory about he will actually end up appointing a Hawk, that seemed like a pretty good one. And the other thing was is that, you know, this was somebody who was important to his campaign and otherwise and he hasn't gotten a position. >> Okay, >> that said, some of the stuff he said recently, I think is sort of uh um putting question. >> It's got you crazy lately like the now well, you know, let's bring actually >> can I give you my dark horse? >> Yeah, sure. Give give me your dark horse. >> My dark horse is is Scott Besson. And the reason for that is go back to who was um George W. Bush's um chairman of his vice presidential um selection committee. >> Oh, the the the Dick Cheney. >> Dick Cheney. Oh, yeah. You're probably right. And if you're a macro guy like Scott Bessant, >> do you want to be Secretary of the Treasury? You've already put your signature on a dollar bill. You've already done that. >> Oh, yeah. Good point. I think that's a great point. >> Chairman of the Fed. So, actually, go let's go back to Worsh though because recently I heard him talking and he was almost talking like they were going to like he wants to abandon the the floor system and go back to a corridor system of reserves >> which which I yes which would be >> so do you agree that that is what he was implying and then next up do you do you do you think that there has been any distortions in the financial market because of that? I happen to think they there has been and what would be the consequences of moving back to a corridor system. >> Okay. So, um look, I am a huge fan of that. By the way, let me just point out one other thing in support of my theory that he's not going to support a dove. I mean, they are either the stupidest bunch of people on Earth, which I would suggest given their track record so far, whether you agree or disagree with them, they clearly haven't been stupid. And you would have to be stupid to decide that you're going to move away from a large balance sheet, but monetize the debt because, you know, how does that work, [laughter] >> right? >> Yeah. >> Kind of difficult to do that. Um, so exhibit A in they're not actually probably going to be as dovish as their rhetoric suggests is that um, every single member of the team from Scott Bessant who's in charge of picking uh, the next Fed chair down is talking about a smaller balance sheet Fed and moving back to a corridor versus a floor system. >> Now having said, I'm just going to push back real quickly on that. Scott Besson was also talking about 3% deficits to GDP. >> So they are flexible in what they say like you just we've talked about it as well. So I'm I'm not >> if if if we have time let's come back to that one because I'm I'm not sure he's not >> okay anyways go on let's keep going on the corridor versus the floor. >> Yeah. But the um >> and why don't you explain to people what it is because I you know some people will be like what are you talking about and stuff like that and they don't realize the fundamental change at the Federal Reserve in the way that we conduct um monetary policy that occurred at the GFC. >> Okay. So it's easier to talk about it in terms of the way most European central banks did it because their corridor system was much more clearly defined. Okay. >> Right. In the US the the bottom of the corridor previously was zero. Right. [laughter] Right. So, but typically you had what was um you know a marginal lending and a marginal borrowing rate. This is what the the ECB used used to have. And you didn't actually go out and buy bonds or assets. You just did repos with markets to meet banks reserve demands. And reserves are this funny money that only um banks and the central bank have. Nobody else gets to touch reserves. So when people talk about printing all this money, they didn't print any money. They printed reserves. Do you have a reserve account, Kevin? >> No. >> I mean, no. [laughter] >> Unless unless you got a banking license, you you can't have reserves, >> right? Um so uh a and the way you sort of controlled the overall economy was by moving the um nominal interest rate at the front end of the curve, the sort of overnight rate among banks, which is like the least risky part of the market um interest rate structure. um by adjusting the level of reserves that these banks were trading with each other and then to make sure that there were no mistakes cuz you know it's really hard to judge how much banks need in reserves because you'll get strange um payment needs or things like this that pop into the the the system. You would put a corridor in. So, you'd say, "Look, we are willing to lend you the bank's reserves um at this penalty rate above our our policy target, and we're willing to borrow them from you at a um uh penalty rate below the target." And so then the interest rate never really goes outside of that range. >> Okay. >> Okay. And that's a normal corridor system. The Federal Reserve pre208 had a bastardized uh um corridor system. As I said, there was no lower bound. It was zero. >> And the other thing was is their sort of you can um borrow from us rate was actually below their policy rate. The discount rate used to be below. It was really weird. But nobody used the discount window because if you use the discount window, the bank examiners would come and say, "Well, what's wrong with you? Why did you need to borrow money? >> Right? >> So, [laughter] nobody did. So, if you go back and look, this is a fun exercise. If you have the data, and I think you can actually do this on um uh St. Louis Fed Fred Fred, >> go back and look at daily Fed funds effective rates. and pre208 you will see that you would have the Fed funds rate spike to 35% overnight on a day because simply because the Fed screwed up and didn't put enough reserves into the market that day >> right >> just that would happen >> right >> guess what the economy didn't break everything was fine >> yeah [laughter] >> so they tried to run for people to understand instead of you know having a ton of ample reserves that the that the that the Fed Fed would suck up or provide liquidity for. They tried to pinpoint the level of reserves and they bought and sold T bills in the open market to actually affect the rate. So that was like I remember in my day when we used to watch for the Fed to come in at 11:45 to figure out if they changed rates. They didn't even tell us. >> Exactly. Exactly. 1994 they did not announce what their target was. They just came into the market and you know bond traders like oh I guess they've changed the rate. >> Yeah. And you figured out and so they had this kind of just perfect level or they what they hoped was the perfect level of reserves for the for the target rate that they were trying to achieve but in the process as you rightly point out there was points when it would cause stress and and rates would go to some stupid level. So now do you think and then in GFC what happened was we came we put it to zero we found that we couldn't put it below zero so they did QE and in doing so they lost control of the balance sheet and they could no longer have just the minimum level reserves or whatever they call that the whatever. So now since then we've gone and that's why we have the reverse repo facility and now the standing re uh standing repo facility. So the two of them are in essence trying to create this corridor or whatever. But now do you think that when we switched to that I was always kind of amazed that we switched to this point of a you know ample reserves and um we never thought about going back to scarce reserves and do you think that they're trying to go back to scarce reserves? >> Um so I think that is a big political uh disagreement. though what you might largely call democraticleaning economists um are very much on the side of well we should just stick with the current floor system. We have ample reserves and we put in a um interest on reserves rate below that that you know keeps interest um uh rates from falling below that lur. And you know because of all the ample reserves nobody ever has to chase reserves and the rate never spikes up. So it basically just sits >> right >> right on IER or um interest on on reserves. Um and then on the sort of populist/Republican and those are not the same thing by the way. Remember MAGA is very different from Republicans. Um, but this is an area where a lot of the Republicans tend to have sympathy, right? Is that we don't like this idea of the central bank having all this power and being this influential in our markets. There's something wrong with that, right? >> There's fundamental feeling underneath that. That's wrong. >> Um, and so they want to get rid of that. And that's really where the whole Bessant um, Wars um, even Trump on occasions has has made comments about this um that you know they want to go back to a corridor system because the central bank just should not be this involved in owning assets and that it is blurring the boundary between fiscal policy and monetary policy in their view and I have a lot of sympathy for that view. >> So so so I agree so I I that's terrific analysis. What do you how do you handicap the chances of them doing it and what would be the financial market consequences of that? >> Okay, so this gets back to actually the question we didn't tackle that you asked earlier which is what were the sort of effects of all of this? And I've mentioned earlier in this um uh um discussion that I'm not a big believer that QE or QT have significant effects. I think their biggest effects were always on signaling. So if you look in the early days, the moves that you got, I mean, there's always a liquidity move. So a lot of the Fed research, if you look at it, shows, oh, we had a 40 basis point move um on the in the 15 minutes after we announced. Well, yeah, because there's a big liquidity effect. What was the effect over, you know, um the next several days after the market absorbed that, right? >> Probably not that much. And what you do see is that it's basically a credible commitment to forward guidance because if you're saying, "Hey, I'm going to be buying bonds, you're clearly not talking about raising interest rates." So the forward term structure of interest rates is effectively credibly absorbing your forward commitment through QE. >> Okay. So it [snorts] it probably had an effect there. I think they completely destroyed that effect in the same way that their um what was it in was that 2004 or five? Remember they said we're going to keep rates low for an extended period. >> Right. And then six months later they're hiking and everyone said okay well we'll never believe you again. Right. Right. That's why QE was sort of necessary later. That's that credible commitment. Oh but we're buying bonds. Yeah. You have to believe us. >> Okay. But then of course they blew that in 2021 and 2022. Right. [laughter] Right. So I don't think it'll ever work the same way again. Um what it has done is go back to what I said about what happens to the Fed funds market. >> Yeah. >> Fed fund market becomes much more stable. So actually you see a much lower level of interest rate volatility in the most fundamental interest rate in the markets and that affects the volatility structure of the entire curve. And so as you go back to a corridor system, a small balance corridor system where you >> scarce reserves, scarce reserves, we'll call it >> scarce reserves. >> You are going to have as you had before screw-ups. they're gonna get it wrong. The rate's gonna bounce around. >> And that's probably a good thing. I mean, I I'm a big believer in the view of Minsky moments happen for a reason. If you create too little volatility in in in markets on a persistent basis, if you as a policy maker try to stamp out any source of volatility, you're going to create a big problem, right, >> rather than a bunch of little problems. >> Oh man, Marvin, I got so many things I want to talk to you about. Um, [laughter] Let's just uh let's do these ones quicker because I I um and we'll start with I heard you talk about the belief that China is stronger than the US militarily, which I found kind of shocking. Um why don't you explain to people, you know, I'm sure that there's, you know, caveats to that discussion and stuff, but I at the very least they're stronger than I guess the market understands versus, you know, versus expectations. They're definitely stronger. Why don't you talk to people about what you believe there and why it's important for markets? >> Yeah. So I think the issue is so what I would say very precisely is I think they clearly have overwhelming superiority and would easily win a war in the Western Pacific. >> Um uh a global war it's not yet clear but they're clearly moving in that direction. Um uh but right now I mean it it's just straight up fact. You can look at the um you know uh missile advantage they have in the Western Pacific land-based um intermediate range um hypersonic um precisiong guided missiles that have a range out past Guam. Um and they have literally thousands and thousands of these things. You cannot bring a large US surface ship into the Western Pacific without it being taken out by one of these missiles. So all of a sudden, how is the US Navy going to actually engage China in a war on this? Now, the one thing that you have is submarines. And so what this probably means is that you have a situation where US submarines are preventing ships from coming into China. But China is also preventing any ships coming into Japan, South Korea, Taiwan, the Philippines, any of the US allies in the region. And so it's really a starvation game. And when you look at it that way, um Taiwan is not food uh self-sufficient and has um uh about three months worth of food. South Korea, same position. Japan has about 5 months worth of food. China though it imports a lot of food has actually that's largely uh um uh you know extras in their their diet. they have actually made it very um clear state policy that they are um uh food self-sufficient in a time of war. So, China actually doesn't face that that that problem. They've built up massive supplies. I mean, a lot of the runup in commodity prices um at the beginning of this year um was yet another significant build in um uh all sorts of raw commodities in including oil. um which by the way adds a downside element to oil when you look forward right as they stop doing that and so I I think the point is very clearly that if China wants to they can just announce an embargo over Taiwan and there's not a lot the US can do about it um >> okay [clears throat] >> now you one of the things that you've I've also heard you say is that the FX reserves that China owns of US treasuries um you said that they were a sunk cost to their re-industrialization. I thought this was a very interesting comment. I've often kind of been surprised when people have said, "Oh, the US has got the negotiating upper hand." And I'm like, "What do you mean the, you know, China owns all those bonds?" And I get and I and I guess I understand the argument that the US can just zero them overnight. But you're I found it just fascinating. You were thinking they've already kind of zeroed them in their minds. Like they they >> I definitely think so. And and and and by the way, like look, this is uh um let's go back to this this le leverage point in in a moment because I think what's been going on with the the negotiations this year, there's something definitely needs to be explored about an internal weakness in China that is under appreciated. Okay. But to your exact question, you know, my take on China and what they've been doing is, you know, they saw back in 1991 a an army um a military that looked identical to their own in the Iraqi military. [snorts] Um it had the exact same equipment, the exact same technologies. Um and it was actually not even that much smaller than the Chinese mil military. I mean, Iraq had an immense army um uh as a sort of military state as it as it was and their entire military was eviscerated in 48 hours on the highway of death, >> right? >> And China had always [snorts] counted on strategically that it was such an immense country with such a huge military that that would prevent anyone else from attacking them. >> And they saw, whoa, that's not true. These Americans have such superior technology and industrial capacity that they can wipe us out in the early days of the war and there's nothing we can do to fight back. And so they've pursued a very clear path for um the past 35 years to unwind that. And you know we in the west think about um efficiency in terms of profitability in economic efficiency but in their mind it's about time efficiency. How do I as rapidly as possible industrialize myself and simultaneously if I can do it de-industrialize the US and any other adversary >> okay >> and climb the technological curve. Well, to do so was to effectively subsidize their manufacturing and this is why we have in every single industry, industry after industry, all this excess capacity. Now, if you think about the sunk cost, the losses that just the Chinese auto industry is making right now, I mean, the reserves that this pales in comparison, it's nothing, right? I mean, they're probably going to lose their, you know, almost a third of their reserve value just in corporate losses this year in in in China. >> That's just one year, right? >> So, what do you what do you push back on the people that say that that the f the Chinese are actually very weak and they can't afford this and it's just a house of cards and what would be your push back on the China skeptics? Um look if so there's there's some things that the US could do very immediately that might disrupt China's plan. And I'm going to leave it there. But >> if the war isn't over in 48 hours, then it's China's war because we run out of missiles very quickly. >> Okay, forget about the war. What about just from a financial point of view? Like you're arguing that they're actually, if I'm not mistaken, implied in there is that they're actually much stronger and that they've achieved more than people realize. and and there's all these folks that are, you know, very like, let's just call it the Kyle Bass, you know, collapse in on itself. Uh those kind of China skeptics. What would you say to them in terms of their pessimism regarding their economy and their society? I would say the big difference between China and Japan um I mean there are a lot of differences but one of the key economic ones is that um in China you have one entity um that has its own um uh source of credit and completely controls savings and investment in the economy. >> [snorts] >> In Japan, you had a bunch of zyatu, right? >> Yeah. >> And once one or two of them started to crumble, they couldn't keep up the wall and the whole thing um collapsed. So, it's not it there's no question China's overinvestment has a cost. But if you save here and you know you can absorb massive losses, yeah, it Yeah. You paid people to dig ditches and fill them back in again. And that's a huge economic loss. There's no getting away with that. But if you're saving so much that you can afford that, you're going to do it. And if you have the liquidity backs stop, the PBOC behind you to get you through the liquidity portion of that because there's only one entity, >> you're done. >> It's fine. So they they will have losses. There's no question. The Kyle Basses and all them are going to be right about longun economic growth. But getting them through this is is difficult. That's what I find really interesting about these trade negotiations is that the reality is that China does hold all the cards in my view. I mean in terms of it's not just rare earths and the permanent magnets that you produce with them. It's APIs for pharmaceuticals. It's all these other things. They could literally shut down global industry outside of China like that if they wanted to. Within three to four weeks, people would be running out of serious supplies all over the place. Why haven't they Why have they submitted to these negotiations? There clearly is something much weaker underneath that I'm missing. Oh, that's fascinating. All right, Marvin, you know what? I'm going to call it there because, as I said, I I still have more questions, but we're going to we're going to have to get you back on the show. So, you know, as long as you promise to come back, um, we'll stop there. But before we do, let's, uh, end with a couple of things. First of all, we have to do our Trader Desert Island uh, picks. And for those who don't know this game, we play, there's a BBC, um, show called Desert Island where celebrities pick 10 albums or bands that they would be stuck on an desert island with. We do Trader Version, which is three albums or three bands and then we ask them to also pick a trader that from any time in history. you could go back in time or any time uh that they would want to be stuck on the desert island with. So, we'll start with your three bands or albums. What do you got? >> Um so, Weezer, um >> Weezer, >> great greatest rock band. I I mean, I love the fact that Weezer, like literally every single album is a good album. They've been around for 30 years and every single album is good. There's very few bands you can you can say that about. Do you remember in that Windows 95 when they they they showed us the great video and I think they put a Weezer video in it. >> Yes. Yes. Exactly. I mean, they're that old and yet they're still turning out great music. >> Okay. So, Weezer number two. >> Weezer. And you know what? This is going to re really um throw throw you on that that one. Um is um Kanye West. >> Oh, okay. because I was having this debate with my nephew about the greatest band and I was saying Weezer and he said, "Yeah, but what you just said about Weezer is absolutely true of Kanye West." And I had not paid enough attention. I went back, "That guy is a mirror musical genius. I'm not kidding. He may be a You're not afraid that you're not afraid to take the the the [laughter] controversial stands." No, he may be a nut job, but is really a a musical genius. >> Well, I'm just glad you haven't picked him as your trader that you're going to hang out with because you there's not going to be enough baby oil. Okay, number three. Uh, so getting down to to three, it it it gets um really hard, but I I have to say that um one of the things that um I've been um uh listening to a lot that my kids turn me on to is is um 21 Pilots. I I I I just really like their stuff. It's it's good. What can I say? [laughter] >> I have to give you credit. Those were not three that I would expect. And I love it. It's just it's just emblematic of the outside the box thinking that you have. All right. Which trade are you taking on your desert island? >> You know, I'm going to take one that is um it may seem like a self-serving advertisement, but it's not. Um there's a reason why I've started this little uh podcast, Thematic Edge, with my friend Mark Ferington. >> And it's because he was a client. You know, I started working with him as a client 25 years ago, and this guy's ability to call turning points is like no one else in the world. He has never missed one. >> He's had a couple false positives o over the last 30 years, okay? But he's never had a false negative. He's called every single turning point. And this is one of the great problems that I see all over the place in asset management today is that everybody wants uncorrelated. You don't want uncorrelated. You want perfectly negatively correlated with the equity risk premium. That's what you want. [laughter] And he does it every time. >> So listen, I I don't didn't know you had a podcast. Take your take a moment to to pump the podcast and then after that tell us about your letter and uh give us the whole nine yards. >> Yeah. So, um I just started this um podcast with um the aforementioned Mark Ferington um who has his his own um Substack um called the Global Watchtower. Um and we just we always talk uh about these things ourselves and we and um again my wife suggested you guys should actually put this out there people. So, it's it's just us talking about our our latest thoughts on on markets. It's >> okay. So, where do they find it? You can find it e everywhere. Um Spotify, it's published directly through Substack. Um so if you look for my thematic markets uh substack or my seriously Marvin substack, you can find find it on either of those. Those are my two substacks. Thematic markets is my institutional grade research. It's um paid research. Um that's where I really dig into the issues. I don't write on a regular schedule because it's basically when do I have something interesting and deep to write about and have had um done the research be behind it. Um in this era of information overload I think it's really important not to just publish stuff just because it's you there's a the calendar tells you to. But I do violate that principle on on seriously Marvin. that is the one that we talked about at the beginning of of this up seriously Marvin on Substack. It's um uh just sort of my um weekly unconventional thoughts on the world that haven't been as thoroughly researched. Um so, you know, take them with a grain of salt. >> There you go. Thematic markets for the institutional uh you know, high netw worth individuals or even just guys that want to learn a lot more. That's your institutional type product. And then seriously, Marvin is your uh Substack that for it's free. It's free for everyone. So, everyone should go and sign up and listen to it. Um do you want to take a moment? Are you on Twitter? Do you want to tell people about that? I don't >> I'm on Twitter. Um both uh as Marvin Bar and as Thematic Markets. Um Thematic Markets probably the one to follow because that's the one I'm more consistently um posting from. Um, and you know, uh, that's Yeah, that's pretty much >> There we go. Marvin, this has been a real pleasure. I've really enjoyed this and as I say, I hope to have you back. >> Likewise. I really enjoyed this. Thank you very much for having me on, Kevin. >> Thanks. Take care. >> Take care. >> All right, Patrick, lots to talk about this week. What do you got for us? >> Boy, uh, it, uh, it is definitely interesting. like I don't think that um there has been an extraordinary move in the markets but I actually think it's quite significant what we're witnessing actually happening right now and it's a great opportunity to talk about it. So just on a on a bigger picture basis that we want to highlight that we had that pig in the python moment of news. We had four central banks coming out uh all uh within 24 hours of each other and we had uh five of the mag seven earnings all coming out within um within 24 hours of each other all lumped into one and it's like the market was almost in a holding pattern waiting for this. >> Yeah. >> Then we got it like the mark we just uh got a big wave of it and now we get to sit here and look at the charts as to what's happened. So let's dive into this. So overall, the first reaction is the S&P. A little bit of weakness and fading off the high. Nothing that I think we should be overly alarmed by. I I think we can talk about the S&P in a moment, but I feel like what we should first start off and talk about the impacts where we saw them first and foremost in um the FOMC. So Powell uh at least uh in the prior meeting it became very very clear that they had a path of three rate cuts this year and the market went and almost immediately priced all three rate cuts in. Right. And >> well I'm going to push back a little bit there. I don't think it was very clear. I think the market interpreted it that way. They wanted to interpret it that way. >> Fair. Fair enough. They wanted to interpret it that way because it was priced in like at >> 100%. It was 100% priced in. It was 100% priced in. Yeah. And uh and he took a little bit of that dovish uh um tailwind out of the uh out of the market. Said uh you know it's not 100% and the market went through repricing. So um you know the way I I want to start off by showing it here is this is the Fed funds futures and we can see that we went from like a 93 or 95% probability of a rate cut in December down to 63%. So now it's like a two and three. It's still better odds than not that there is going to be a cut, but um it was a a substantial repricing. And when we look at where that was, I I think just looking at the very shortterm December 2025 sulfur pulled out 10 basis points almost instantaneously. uh the moment um uh that FOMC uh statement and uh conference was over and so uh quickly that market is taking some of that doubish. So, I'm going to just give you an opportunity because I think you have a great way of of interpreting what because we talked even before the Fed meeting and you you almost set it up this way and so I'd like you to kind of give the playbyplay of what we're thinking about and uh and how you now see it playing out. >> Yeah. So we I had the good fortune to chat on one of your uh big picture trading uh seminars and we were chat chatting before the meeting and the way I looked at it was it was very clear we were going to cut this this past meeting you meaning the Wednesday meeting and there was no debate there that was that was fully priced in. The real question ended up being how did he guide going forward? And at that point we had a situation where I think that the the the December uh meeting was pretty well fully baked in for a cut. I think it was 98% or something like that and then the January meeting was at like 60% or something of that nature. And one of the things that I highlighted was that I said I suspect that the reality is that that is too high of a certainty that the Fed is going to cut. And my reasoning was that yes, I understand the bearish argument and about how they're just returning back to a less restrictive space, but at the same time, we still are in a situation where the Fed has now been four years or something since they've achieved their inflation target of 2%. Um so you can't argue that they've that they shouldn't be at least somewhat restrictive. There's a lot of in uns um kind of uncertainty regarding what the um employment data is telling us because of the ICE and the immigration issues. And not only that, we're not even getting uh those numbers anymore. So the reality is that without those numbers, you could make an argument that the Fed uh should just be on hold, which is what um Powell uh highlighted. But the real thing that I kind of was focusing on was it's difficult to say we're in a restrictive monetary stance with financial conditions ex you know being as loose as they are. The stock market's flying things are going well in terms of financial conditions. So if I'm sitting there at the Fed, I'm not getting any information. I see f the stock market ripping. I see financial conditions really loose and I'm not really sure where what is neutral. I got to think well at the very least I'm going to take a little bit of that certainty of future cuts out of the market and I think that's exactly what we've seen. So we went as you highlighted we've gone from a 100% chance of a cut next meeting to now a twothirds chance. Uh the January meeting was kind of um where were we? So that's now a 33% chance of a cut there. So in essence, we had kind of almost two cuts, like 1 and 3/4 cuts priced in for the next two meetings and now we're at one cut. And that's what's happened. They've introduced some uncertainty and they should because it's not this, you know, the Fed started easing and it's just going to continue on there. And Marvin highlighted this and he he definitely believes the Fed's making a mistake. I'm not sure as confident that the Fed's making a mistake, but I do believe that the Federal Reserve understands that with financial conditions doing that, it it's increasing the chance that they are making them. They are too easy, >> you know. Uh I I'll push back uh from just what I'm seeing. Like, okay, first of all, uh let's let's uh take the boogeyman out of the recession word for a moment because in order for a really bad recession to happen, um there it creates there has to be some sort of negative feedback loop that really starts spiraling things out of control. Uh so let's call it an economic contraction period. Let's just uh to to get take that off. I still think the risks are very high. You know, the interesting thing is is that like I like watching the poly markets. I know that it's u not an official thing, but the poly markets is a betting market where people put real money to work in terms of betting uh on outcomes. And so I like it when it's not an analyst, some economist that has his job on the line in terms of uh you know whether he's going to be too bearish or too concerned about a recession. here. It's just straight out money. People voting win the machine. And right now, the odds of a recession next year are being uh bet on at 40% rate of a recession. And uh and I I see certain things that still to me uh are showing those signs. As an example, there was that big article about how slow things are in Vegas. Now, I know I don't want to specifically talk about that, but I'm here in uh Mexico in Plyel Carman where where I have a place and I have to tell you right now is the beginning of high season and I haven't in a decade seen it this slow. It is dead over here. This is a huge tourist area. There's huge flow. Now I'm not saying that that is some evidence but I feel things are tight and uh and and and I feel that uh it is hitting main street and it may not result in some nasty bare market and some nasty recession but things are tight and I'm not convinced that things shouldn't be looser. I actually think that >> so but Patrick let's just be very clear here. We when we're trading instruments, we are trading the forward expectation of where the Fed is. And so the reality is that that concern you have is already in the market in that the like let's look at this the March 2027 is trading at 310 the 3 months so far. >> So yeah, we're like we're basically at 3% for uh for the uh December 2020. And and not only that, as it doesn't occur as fast, it it we have to shift it and then maybe it's not going to be as deep. And so we have to just keep that in mind that we're not trading whether the economy is going to roll over. We are trading how much the market has priced in about the chances of the market of the economy rolling over and the Fed having to cut. And so what has occurred now is that people have had to change their expectation of the Fed in terms of what they do. And listen, I'm with you. I actually think the economy is weak. And I do suspect that we are going to have problems and it will roll over. Does that mean that those sulfur futures are a buy? It might, but it might not because it the the rollover might be shallow enough and it might be that it just gets it's just it just the Fed follows the curve down. >> Yeah. So, you know what? My look at the sofa futures is not so much about what whether I know I'm going to be right about uh them ripping because the rates are going to go. I actually think it's actually still incredibly asymmetric to be in this trade because I I look at what is it that would uh um cause uh a 100 basis points to be uh knocked off of these to where if you're long these sulfur futures out to ne end of next year that they're going to be ripping to a 4% rate. Now, it's possible that probability isn't zero. Uh, but I don't view there. I think there would have to be an incredible pivot globally on an economic basis in order for that to be a risk. >> But, Patrick, well, here I could I could make the case for that. We have this situation where there was all the uncertainty caused by the liberation day tariffs and the and the the the problems with the trade wars. We settle that down and then all of a sudden we have a situation where all this AI spending and all this other capex spending and then the fact that the rest of the world is doing fiscal we have this situation where there's a lot of money in the system and we don't roll over and if we don't roll over and imagine instead of losing jobs we start adding jobs I could see the curve very quickly shifting and taking out that entire 100 basis points of cuts that are out there. No, I don't think that's gonna happen. >> Probility that probability isn't zero. And I think >> I don't I don't even think it's a sure thing that it doesn't like. >> I think that you're a little too >> I still think that the asymmetry is completely the downside risk to me is uh and on a especially on a probabilities adjusted basis versus the upside. I still think that you're going to carry uh with less risk and if the outlier happens I think that the upside rip can actually be very rewarding relative to the risk of >> upside rip meaning that the Fed cuts folks like just make be clear I want to make sure um so so one second Patrick so I I I hear you about that one thing I will will kind of agree with you is that I I think that the kind of really the benefit benefit to that trade your trade is if the financial markets come unglued and if we had a situation where like all of a sudden let's just imagine that Nvidia misses or let's say next time it misses like everyone kind of pulls back on the AI all of a sudden we get a dramatic repricing of stocks we get a 25% correction and people start losing jobs which we're seeing all over the place so let's let's say accelerates but it doesn't just accelerate on an economic basis but it accelerates with financial markets, risk markets getting hit, then I agree. I I think that you could see a situation where that terminal rate, like the forward point at which the the Fed is going to cut to goes from 3% 310 down to 2%. Like, everyone's so sure it's 3%. Like, why why are we so sure it's 3%. It wasn't that long ago that everyone used to tell us it was going to be zero again. >> Well, I don't think she the case. So I'm agreeing with you there, but I think that your bullish scenario on sulfur futures is very dependent on it being accompanied by a riskoff real problem and therefore is that really the best bet if that's the case? I don't know. >> All right. Well, listen, uh it's it's a it's what we're going to talk about in months to come. I mean, this is uh this is why we do this show. Let's just a quick thing. the entire right across the entire duration that you had rollovers. The 10-y year uh started the giving back, the third year gave back. Uh do you think any is it just that it was a little too far ahead of itself or do you actually think something meaningful uh pivoted here on the on the long bonds? Well, so I've always been scared of the long bond and um I haven't been able to be long that for years and I continue to be worried about it. Um and I do suspect that the next easing cycle the curve will get exceptionally uh steep. >> So I don't I continue to not believe that it's that's the place to play. Having said that, having said that, yeah. Yeah. Short term, the real problem is that that we have this situation where if the Fed actually gets tighter and let's just let's just say the Fed starts pushing back and saying we're not going to be easy, that's actually going to flatten the curve. Meaning that we're going to get a situation where the long end is going to do better. And that's the part of the kind of paradoxical point of view that people a lot of people fail to realize. They think, oh, they want the Fed to cut. That's going to be great for long bonds. A Federal Reserve that is cutting too much and potentially causing inflation is actually a long bond investor's worst nightmare. And really, if I was a long bond investor, I would want I would be frustrated right now that the Fed is as easy as they are. And I could see a situation where if we got like let's imagine my um scenario where the economy ends up being stronger than expected occurs and the Federal Reserve gets a backbone and starts pushing back and and taking out all those cuts. I think you could see a strange situation, Patrick, where the long end does way better than people expect because there's a lot of steepeners out there and folks will say, "Okay, the Fed's going to tighten into the next recession." And that's what remember that's what we had when they went in 2022 and started their tightening campaign. People kept buying the long bond because they expected the Federal Reserve's front end tightness to cause real pain out and and actually cause a recession. So I could see that as well. I think it's a very difficult time to be trading all these things because there's so many nuances. We're so much we're so much on the cusp of so many things like it, you know, we're sitting there on a knife's edge going, you know, are we aren't we going to go over and there's so many inputs. I just think there's better trades out there than trying to pick the trade the long bond here. >> All right, so let's talk about the number one thing to watch this week. >> The dollar the But listen, Kev, who's been calling this? Who's been calling this? I don't know. Have you been calling it? I can't remember. I'm so freaking >> I can't remember what you said last time. Did you Were you bullish? I think you probably were actually. You're always bullish. So, the reality was >> No, I was. Anyway, >> just tell us what you said. I'm sure like, you know, people will remember other folks other folks pay attention than I do, so they'll all >> We were looking We were looking to see whether or not it was going to bullishly break out. And after the Fed uh the well the ECB really it was after the ECB where the breakdown in the euro happened just between yesterday and today. Yeah. >> Breaking now to a lower low. But the pound sterling has been eating it on the downside for for for two weeks now. And it's now broken to a lower low from its July low. So we have a double top uh and a breakdown on the pound sterling. The euro is breaking down here. not really the weakest of the currencies but definitely starting to turn. Then we have a after the Bank of Japan spoke uh that it broke to a higher high like it it's been basically three months above its 50 four months above its 50-day moving average >> and that's the higher high on USD JPY which is yen weakness just for those who >> Yes. Yeah. weakness, US dollar strength. Uh so this thing is uh is autopiloting and uh and the US CAD after Bank of Canada hit that base at the 50-day moving average trading back higher here. Like you can pretty much go right across the board and actually even like let's say the Aussie and the Aussie is probably the most neutral of the currency pairs. But point being that uh that things are shaping up for a dollar move. And this is the interesting part is is that the entire reflation trade that's been working so amazing all year has actually been grounded and anchored off of a weak dollar and um and it's been such a consensus trade. And I know you were gonna we've had the argument where you're saying well it's consensus but I don't think everyone's positioned that way and so on. like I don't think we need to go there but point is is that a US dollar rally I think here is going to be an intermarket disruptor uh because it's going to uh have knock-on effects about questioning about every other thesis that's been working all year and if this uh grabs hold now first of all I'm not in any way structurally long-term bullish the US dollar this is not me making a long-term bull call it's about the fact that we had a downtrend for nine months. That was a pretty decisive thing that became outright consensus. >> And uh and now we're getting a counter trend that is going to basically wash out uh and flip the script. And the question is is that if we have uh this uh in any way um underway on some sort of a rally, the question is is when is it going to spill over into all the other asset prices, including potentially corrections in the commodity space? >> I can't disagree with you there, Patrick. Actually, I think that's some good analysis. And we just have to know, you know, the reality is that you guys on that podcast you cheat on me with, I suspect that Luke Roman is being the highlight and everyone's tried to have him on and you guys haven't had Brent Johnson on. Uh, >> actually, uh, you didn't check. It was Brent Johnson was yesterday. >> Oh, it's so funny I say that. [laughter] >> What are you guys doing having Brent Johnson on when when the reality is he's probably >> But but you know, he didn't talk much about the US dollar. Of course not because Oh, great. I'm going to tune in for that one. Um, yeah. So, the reality is that the milkshake folks, we haven't heard, you know, I haven't had to listen to people talk about milkshakes in so long and it's got, you know, it's been just beautiful. Like, it's, you know, a year of almost no milkshakes. And I suspect that you're correct that we could get a rally here that brings back the milkshake milkshake boys. And uh at that point when they're start talking about that and you start telling me how when you structurally become a long-term bull again, well then you then I'm going to get bearish. >> All right. >> Yeah. But no, I but Patrick, I can't disagree with your analysis. I think that's great analysis about the short-term squiggles. And it does feel like that is occurring. It doesn't it there's very few pe people out there that are advocating long positions, right? Like let's face it. >> And and and who's talking about this? Nobody out there is >> do you feel like one of the things I I had a buddy ask me the other day um he was asking about you know what I've seen on CAD and I was trying to and he says like usually you're good at understanding the mood of the markets and I don't know about you Patrick but this last like two to four weeks I everyone's been so focused on like AI and the US stock market that it feels like nobody's trading anything else and nobody's talking about anything else >> and it's and it's very difficult >> setups and some >> like everyone's just so busy, you know, speculating on what Nvidia is going to do or whatever and they're not even thinking about all those other things. So, one of the things that I'm finding difficult right now is to get a judge of the mood of the markets. I can tell you that the like the mood that I see is the bulls and the year-end rally, you know, folks are are overjoyed and basically slamming the hoop and, you know, taking victory laps every single time. >> We're going to talk. We're going there. Listen, I want to talk about that. Let's >> Yeah. And and and then the other mood I see is that the bears are just despondent and think the world's ending and they can't understand things. and th those two uh kind of feelings are just overwhelming my feed, my traders that I talk to and and that's all everyone's focused on. So, I look forward to a point where we're talking about the dollar again. I look forward to us talking about the the sulfur futures and other things of that nature because it it felt just overwhelming to me the focus on the stock market. Well, you know, it's funny is I I everyone is obviously focused on where all the money has been made on the perception that the money will continue to be made, where it's where it's been going. >> Bingo. Yes. >> The question is where is the money about to be made that nobody's talking about because that's the next big trade. >> You should make a bumper sticker with that. Big picture trading wisdom. >> Well, it's it's big picture trading wisdom, but this is why people tune into the huddle, sir. This is like we we we dig deep. We dig deep on the huddle. Okay. So, uh so let's uh just a quick thing on uh the asset that sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh shall not be named. Uh the um Bitcoin had a bounce to the 50% retracement, failed at the 50-day and it's at edge of a cliff and I uh and to me this is the um this is the stereotypical risk asset. It is it is the risk asset and if and I think if Bitcoin here breaks uh that's something you shouldn't ignore. >> Do you think Bitcoin is going to lead the NASDAQ down if that's the case? >> Well, not necessarily. It's just a why would the NA uh the Bitcoin be going down at all if uh there wasn't something bigger going on in the risk? And uh do I want to market time it that the moment Bitcoin breaks, I'm going to short the NASDAQ? I don't think I'm going to make that kind of equation. But it is definitely one of those canary in the coal mines that something's wrong. It'll be like something's wrong if Bitcoin's downtrending uh in in an environment where we're risk. It's it's not supposed to be happening is my opinion. Want to push back on that? I no I understand that argument but I I tend to believe that the Bitcoin's suffering because money is going into the AI trade and and they found and gold I think even gold has started to take money out and I've seen days where it felt like there was like programs going on where gold would go up and then that Bitcoin would go down. It felt like there was waves of of switch occurring. And I suspect that if you're sitting there and you're um I don't know, let's call a high net worth family and you're got you know, you know, let's say you have 5% in the bucket of like alternative currencies that will have gold and Bitcoin. I think that they were chasing the positive momentum on gold and selling the Bitcoin and it doesn't feel like anything more to me than just folks being bored with Bitcoin and going on to the next trade. Having said that, Patrick, I'm with you. It's trading like I think it's headed a lot lower, but I'm I'm structurally a long-term bear, so I I kind of always feel that way. >> Okay. So, so let's talk let's pivot. So, we were FOMC. What are the impacts of the interest rates? We kind of went a little bit farther with the Bitcoin, but let's circle back to the other big thing, which was the earnings, right? So, we had the MAG seven earnings. So to me there is uh um the way that uh I um I think it was Charlie Mceligotate that was saying like that would define the current mark is anti-dispersion anti- breath and complete conc max concentration uh which is essentially uh saying that at this moment there there is no breath in this market the indices are telling a very different story than most stocks are and really the entire performance of the market is anchored off of the fact that the MAG7s have 36% of the market capitalization of the S&P now and so how seven stocks go decides everything and so the best way to to kind of illustrate this like Kev the S&P 500 is literally a stone throw away from 7,000 yesterday was at an all-time high and this is the the breath of the number of stocks above their 50-day moving average is 41%. 60% of stocks are downtrending. This has been deteriorating all year. This is like the fact is is that there is nothing actually under the surface of working. So what has been working? It's all been concentrated in what the mag sevens have been ripping and the mag sevens from uh the uh liberation day bottom to top has been a 76% rip in the last six months right and so so the entire S&P 500 has been on the back of this and that and it's now even now narrowed down to the SMH because the semiconductors have are one of the few areas that have broken out of a little horizontal uh triangle formation and are literally at this moment still in bold trend making this rip making AMD, Intel uh Nvidia and company all like the the backbone of this last impulse on this market and this is why I felt that this earnings was so critical because I am a seller on the idea that the market is going to rewiden on its breath and that somehow there's going to be this big save of everything coming back up to keep this going. The reality is that if the S&P is going to 7200 or 7,400, it needs the AI bubble going. It needs it needs the MAG7s going and it needs to run. And so what I wanted to see on these MAG7s was do they show that exhaustion that this is they've already fully priced in everything and there's no uh new incremental buyers to take them higher or that there's still momentum here for them to run and keep things going. I think that's a very important puzzle to solve because if these MAG7s, we'll go through them right now, are not actually going to be able to take it higher, then it's now going to be the semiconductor index alone and Nvidia's [clears throat] earnings are in a couple weeks and it's two days before the November opex, which is basically going to put the entire market into a this narrow thing of where it's going to be whether Nvidia beats or not that is going to decide whether or not the AI bubble bursts this year. Uh it's uh is is my little speculation. Okay. Like so so here it is. So with the MAG7s uh a little bit of gyration here on the MAG uh 7 ETF, but let's actually dissect what happened on these earnings. And so let's start off uh with uh the one that uh that broke, right? The only one really badly broke and that was Meta. and uh and Meta uh was kind of grinding it out for months. It tried to get above the 50-day moving average going into its earnings. Clear disappoint stock slams, you know, 10% lower and um and more importantly is decisively trading below uh a trade range established for three months. Whether you want to call that a head and shoulders pattern or whatever geometric shake shape you want to jam on there technically bottom line is is it broke with a breakaway gap through this trade range. This is the only chart in my opinion on the MAG7s that is decisively bearish. Actually no Netflix if you want to include that one is pretty bearish. But uh but the next uh one which was disappointment uh that followed was Microsoft. But Microsoft even yesterday or the day before wasn't that bad because in my opinion it had sort of no business being up here before its earnings anyway. It should have been a post earnings move that that decided whether or not it belonged near 52- week highs. But irrespective it gapped down and has been selling all the way back to the trade range that it was establishing uh into the latter part of the summer. And so that could develop into a double top. Now, I'm not calling that yet, but we're right at the 50-day moving average. And clearly, there is zero momentum in Microsoft right now. Zero momentum. That's more important than whether it's technically breaking down because in order for the S&P to make the next high, it needs leadership and it needs a few of these MAG7s going. So, the question is which ones are they going to be driving this momentum to keep feeding the the index higher? As far as I'm concerned, Meta and Microsoft are in big enough trouble where they're not going to be able to contribute to the S&P working its way higher. Now, the one that uh did uh gap higher was Google. But now, Google uh gapped higher and somewhat holding the gain. But to me, my I always have a fear when a breakaway gap like this happens that they develop into what's known in technical analysis as an exhaustion gap because it's happening at the end of a symmetrical move which is like a measured move like this. It means that while it was bullish and it certainly contributed higher, the question is how much higher is Google going to go from these levels? I mean, uh, is there room for Google to go another 10% or 20% higher to make that that impact on the index? And, uh, while it's definitely one of the most bullish charts on the MAG 7s, I'm skeptical that this thing is going to be clearing 300 and 320 with momentum on the upside. And so, to me, this is a a neutral in regards to its upside potential. the then the only one as far as I'm concerned that came out yesterday was Amazon and that one uh was the most bullish out of all of them. Uh the the fact that it consolidated for several months and the breakout was not just a breakout to new high uh it was a breakout to all-time new highs like it cleared every previous resistance level with a very clear gap. Here's a here's a one mag 7 that could run to 270 to 290. Like if I was to pick one MAG7 to be bullish on, uh Amazon would be the one. And this is this is the one that can in my opinion offer some, but it's not the big super big one anymore. Like when you're talking about Nvidia having a five trillion cap, you know, Amazon isn't uh got the the kind of muscle in this uh to to be the the big incremental change and then you have Apple which uh gap higher but gave it back already finishing again some of these measured moves. So it wasn't exactly like you know that this was going to create a huge tail. Point being, I honestly think that other than Amazon that this is now up to the semiconductor index to keep this going. I I don't see these MAG7s in a position uh to be the ones that take the index to the next level. Opinion. >> I listen I thought that was some great stuff. I just let you go. I let you cook. You're cooking. >> Yeah. But you know, but any but any comment though? Um, I I I do think that you're correct that there's some exhaustion out there and I I I think it's going to be difficult for the these stocks to continue to beat forward guidance, right? Just like when we talked about the the Federal Reserve and the and the real problem is for you to make money on those sulfur futures. You not only need a recession, but you need a recession that is worse than what is currently priced in. And increasingly, I feel that these MAG7s are pricing in some forward expectation that's just so high that it's going to be tough for it to, you know, to meet it. And I I could see a situation where we get into a point where they're actually meeting the the kind of proper numbers, but the expectations were so high beyond that and the excitement and everyone's just long that it's uh the the things just sag on their own weight. And that's the one thing that I just kind of find, you know, funny about this market is that people assume that there's no uh top end to how high these things can go. And I and I do understand that um kind of thought process that really there really is nothing stopping them. But I remember what Dennis Garmin used to says like it's he used to say something like you know for a stock to keep going up you need a lot of new buying and all you needed for it to go down is for you know that new buying to just dissipate dissipate >> right like the reality is that there's that you know the world's changed the world's changed a little bit now with all the buybacks and things like that but you know someday you know Jensen's going to want to sell some you know Elon's going to sell some Like I was at some point this this people are going to want to monetize this and it just doesn't go on and on and on forever and there's valuation levels that just make no sense. Like you know I wrote this piece Patrick like highlighting you know the fact that everyone's talking about this being 1998 or 1999 and that they're expecting the things to still double. What they fail to realize is that in 98 or 99 like the the S&P was 75% of GDP. We're sitting at 225% or some crazy number like that. So, so if you think this thing's going to double, you think the stocks are going to be worth 450% of GDP? >> Sure, maybe. >> I It just these things just don't feel like good bets to me. And uh I know that we just end up looking like grumpy old men taught yelling at clouds. >> Well, it's a pretty big cloud. No, but the >> [laughter] >> uh the uh >> you know what's going to be funny though, Patrick, is that the thing will turn and then everyone will have called it. That's the best part. That's going to be awesome >> that we're just going to everyone's going to be like, "Oh, yeah, I called it. I called it. Yeah, yeah, yeah. I've been warning for this for a while." But there, you know, these will be the same people that were like criticizing us for, you know, pushing back on the the bullish narrative. So, so what I want to uh just touch on is is that I still won't rule out that the S&P has one more leg higher and uh that's because there's a two-eek window two two plus week window to Nvidia's earnings and um and in the interimm Nvidia has broken to all-time new highs. All the cement semiconductors are hot and there's going to be a lot of excitement about this idea of betting on Nvidia's earnings. Considering the kind of ridiculous AI bubble that we're in, I will not be shocked if uh if we have something that happen like Nvidia runs in the next two weeks up to 250 bucks. Uh like it's >> 250. I'm just there's your 7500 or whatever. >> Like that would be a lot, man. >> No, but a point point I'm saying is that you don't want to get in this thing's way just yet. Like this is there's no reason there's no reason why October 31st here on Halloween is going to have been the top of Nvidia. >> For sure. So, and so what what I feel is going to be happening is uh is in the next couple weeks a few of the other mag seven generals are going to be shot. They're going to reverse and you're going to see the narrowing of the breath going to go narrower and narrower and narrower and then you'll start seeing reversals on a couple of the semiconductors that aren't Nvidia. Maybe Intel peaks out and turns. Maybe uh AMD puts a short-term top in and starts to turn. you're going to see that it's becoming narrow and narrow and then all you need is the expectations to be high for Nvidia's earnings and um and they simply can't meet the elevated expectations. They reverse and there's nothing to hold the market up >> right buddy. I I like Yeah. All I'm saying is your 250 call then not call uh putting it out there for 250 it's going to be just wild if it occurs. Like I hope it happens. Like let's just let's just but uh but the the sem the symmetrical move is 250 right so like this is just using rules of symmetry um that is the measured move you know so uh so a move to 230 to 250 on Nvidia um is just a technical measurement uh and let's see let's see what happens but it the one thing is Nvidia's chart is still bullish like I you know I as much as I want to on it uh like like the thing is is that Both Google and Apple are at exhaustion points. They've finished symmetrical moves. They've already had big extended moves. It's going to be hard from think. But Nvidia has been trading sideways for two months and it just broke out to 52- week highs. So, it's not exhausted. It's actually been resting for two months. It's um it it's not it has more room than the others. And that's the crazy part. And maybe that's how this AI bubble ends. It ends with Nvidia having a eight trillion dollar cap. Who knows how ridiculous. >> Maybe it gets so narrow, the market gets so narrow. You'd already highlighted that it's moved from Mag 7 to SMH. Maybe it just goes to one stock. >> Yeah. Like and and Nvidia is just ripping and and it becomes the bubble and when Nvidia inevitably bursts, the whole thing unravels. It could happen that way, but you know, I don't think it's over. Uh, not for these stocks. But the one thing is is that when will we see the S&P 500 show exhaustion because there there isn't enough things pulling it up? And that's going to be the puzzle to solve. uh you know I I feel that uh it's now becoming incredibly clear that the November opex and Nvidia earnings are uh something to circle on the calendar for the next kind of inflection point for when uh when we could have some kind of uh a meaningful turn. And if that's happening with Nvidia trading up in the 230 to 250 range, I may even lean into a short. We'll see. Wow. go. But but but I'm not doing it now. I'm not short Nvidia. I'm not even I don't I'm not even contemplating on the short term or shorting Nvidia. But I but I'm just saying if we got there in the right conditions, it would be some sort of a convex way with some sort of spread trade or something, there might be something there to to play it. >> Well, you heard it. >> All right. All right. Anything else you want to talk about? Well, we just have to talk about precious metals here briefly like uh and and we can touch on gold, sorry, oil a little bit. So, let's just quickly on precious metals. This had that exhaustion uh thing and and everyone is still sure that gold will be at all-time new highs uh by uh a year end. I I was me saying that the last four corrections that happened the la over the last two years even though they were corrections sideways each gold correction was anywhere from 60 to 120 days of trading sideways not necessarily down uh and uh this was a swing high. I don't see this being different. Uh I I I'm a real seller that gold makes new highs this year. I feel that we're we're in a um uh it exhausted itself. We're going to be in a consolidation. The if it if the consolidation is like prior ones, then this will stay near or above around its 50-day moving average in a sideways pattern. But if this was truly an exhaustion move and then it could be a a deeper, more violent correction. I'm I don't think uh I'm actually so obsessed about calling which one of the two scenarios other than uh you know there was a a a swing high. We're going to go through a consolidation and I'm still long-term bullish gold which means these consolidations are buying opportunities. So probably in mid to late November into early December we'll have to start looking at where the buying opportunities are for the next uh kind of gold move. But right now, I think um even if here even if we get a bounce to 4,200, it probably will fade back to 3,900 and it's going to you're going to get chewed up far more in a trade range than anything else on uh on gold for the next little bit. The bigger question though is how deep do the gold miners revert? And this is this to me is a an uh what what I I'm always reminded of what happened with uranium uh stocks in 2024. And the uranium story in in 2023, the uranium story in 2024, and the uranium story in 2025 were all the same. And all the same scenario is super bullish uranium. And uh and to be honest, there's uh it will be the same story for 2026 and because there's a big macro fundamental reason why uh uranium is bullish and I think that it's good they're going to this going to continue. But it didn't stop the fact that uranium stocks went through two corrections in 2024. 30% drop and a 40% drop uh in uranium stocks that happened that were just buy on dips but there was maximum volatility and it caused huge pain during those pullbacks in the same manner I get the gold sto uh minor bull story I understand that they're uh that their uh balance sheets are improving their earnings are great uh everything is good and that story just the way uranium was bullish for three years. That gold story is going to be bullish for the next few years. But I'm wondering how deep this goes if is are we going to get a flush out that is going to shake and rattle all of these guys that went overweight the hottest market because the gold miners in gold were the hottest best performing asset this year. Uh and um and they basically ripped. So the question is, do we have something that shakes at the core all of these stock renters that came in to chase momentum and they have to get flushed out here with some serious volatility? Like could we have a reversion where we're trading under 60 bucks or 55 on GDX just for a wash out purpose? I won't rule it out. >> Yeah, I don't disagree at all. like that's a very likely possibility and I think that folks are not uh aware of the risks that are there. Yep. >> But that it will be an amazing buying opportunity. I don't want to I'm not long-term bearish these right um this is uh on that the last thing I want to touch on then we'll wrap here Kev >> is oil. >> Okay. Uh there was uh a little bit of speculation on the internet that uh uh that some sort of uh confrontation with Venezuela could escalate any day now. Oil didn't really move that much and I don't know whether the the rumor uh is maybe just being dismissed. Um, but I wanted to just ask you if you had an opinion uh like if there was an escalation uh with Venezuela uh on the um uh on the short term, do you what kind of an impact do you think that would have on the oil markets? >> Do you think that that's something that would squeeze it? I I I was confused because, you know, one of my subscribers reached out to tell me why he was so bearish oil because he thought that Russ US was going to go and um bomb, you know, Venezuela and take it over and therefore all this supply is going to come on the market. Do you know how long it's going to be before that supply comes on? Like it's not that easy. Like it it really isn't. And >> it's not as easy to just go bomb a country and take it all over and stuff like that. I'm just >> But it's not that but it's also but it's also not that Venezuela hasn't already put that oil on the market. Uh you know like I mean I think I think the oil that's coming on the market is going to be the guy Guyana. >> Yeah. But that's different and and I just that's why I'm confused. I don't think that the Venezuelan geopolitical thing is going to affect oil except in the very very very long run. And if you're trading oil based upon uh you know them bombing Venezuela and taking it over, I think that's the wrong narrative. And just the fact that people are willing to you know contemplate that on as a reason to be short oil is yet another example of why I think that everyone's looking for excuses to short and to be selling oil. I >> to me to me it's a reason to be long oil not short. Like to me uh any confrontation is a disruption to the supply chain. Well, yeah. I Yeah, that too. And I just I I don't know, Patrick. I saw that the the Brent uh you know, contract has the biggest short position it's ever had. I understand that that's kind of a like a shitty stat because the reality is that as markets grow, they're always the biggest ever. But there's no doubt that there's a lot of bearishness out there on the energy basis. And I'm with you. I know you've been looking at this on the long side. I'm looking as well. I think that uh >> you got to just pick your spots, but it's I think it's coming. The chance to be long oil, long net gas, long these stocks. >> For me, right now, uh notice how it's trading right at it 50-day moving average and right at the fib retracement zone. So, the way I look at this is that this chart is uh structurally bearish. Lower highs, lower lows, failing at the 50-day moving average. Everything is still in a bare trend. And this is why, for instance, no CTAs are going to get squeezed on their oil trades just yet. You're not you're not seeing um short sellers have a reason to cover yet. But we're actually at a a falculum point almost like th if if we have oil break above this fib zone in this 50-day moving average that actually would neutralize the downtrend and it would almost certainly trigger a bunch of CTAs to start covering and and so there is room and and I remind everyone uh you know because if if you recall uh on this one podcast me and you here. Uh we talked about the squeeze back over here before it happened. We talked about how the oil market was ready to be squeezed. Who who knows like could we get a dja vu where suddenly all you have is all of these shorts are getting squeezed and they have to cover. If that happens like we could have a surprise move to the upside that's driven purely by flows. Has doesn't have to have a single fundamental reason behind it. uh other than a trigger point. No, >> I get it. I And I listen I I appreciate you pointing that out because here I am. I'm sitting here thinking about there's no rush. I got my time to accumulate a position and things like that, but it when you highlight that there's points where this might flip and might get squeezed, I'm like, "Oh geez, I better get on that and I better be ready for it." And that's one of the things that I really enjoy about listening to talking with charts with Patrick is that you do highlight these things for me. >> No, I'm I'm actually not. That is that is I know it was I was being tongue and cheek, but the reality is I do appreciate that because that is the kind of thing that I'm not paying a lot of attention to, but I but I suspect that you with your wisdom of watching these things and knowing when it's going to flip that that is correct and that those are the things that that I appreciate the heads up on. So oil the bottom line is oil hasn't flipped and so it's still in a downtrend. It could still stay in a downtrend, but this is like a a moment where it's a fine line. And so it's sort of the way the markets a couple weeks ago were at the edge of a cliff uh that could have triggered the systematics to sell. In the same way, we're at a very sensitive moment where where uh where things could uh pivot on the flows. And that uh some those are the moments you really want to be watching whether or not this thing turns. All right, >> remember this. I'll we'll leave you on this one note. You said there's a fine line and it just reminded me of the spinal tap and there's a fine line between clever and stupid. [laughter] >> And when we start being clever, we >> Yeah. When we stop being stupid, you know that it's going to be clever. >> No, no. When when when it's No, no. When when it's clever, we'll put it behind a payw wall. But right now, it's stupid. So, we'll get give it for free. >> [laughter] >> Okay, is that it? Are we Is that it for talking charts? On that note, everybody. >> Okay. Uh, thank you everyone for tuning in. Uh, remember Patrick, where can they find you in your wonderful analysis? >> At bigpicturetrading.com and I got that YouTube channel up and running at patrick_na uh where I pump out videos all uh all week long. So if come and follow my stuff for sure. And Kev, where can they find you, buddy? >> Well, and folks, you do have to go follow Patrick on YouTube. He has cut down the cigar smoking and it's some great stuff on there. Um, [laughter] >> by the way, you're never going to live that down. Danny, hop on because Danny Danny made me put smoke the cigar. >> Oh, Danny, are you the one that's responsible for that abomination? >> It's all my fault. I'm so sorry. >> Yeah, absolutely. [laughter] >> I'm I'm gonna blame him. It was Danny's Danny's like he's getting paid by you. He's just gonna say, "Of course, it's my fault. Yes, sir. Yes, sir. Yes, you're a leader. By the way, you are the most wonderful president we've ever had. Uh listen, you can go check me out at macroourist.com and bull market bear market. We just having fun and glad you spent some time with us on this wonderful ride nesting around for the after [music] show. All right, Patrick, tell us about your Iron Maiden beer. >> Oh, it's fantastic. You know what? I uh I'm usually not a stout drinker. Uh, and you know, it's just for some reason it it um sounds heavy when I'm thinking steps like like I I usually like just like easier drink, but I super enjoyed this. Uh, I'm going to give this an 8.2. I I would totally >> I coming out. I heard a nine coming out. >> No, no, no. But they get a nine for the the label. Like that's a pretty epic uh label. It's >> And Danny, what are you drinking there alone in the car? No, don't don't don't say anything. They >> Well, I was gonna say I I was going to say, Patrick, did the VM make you run to the hills? But I don't know if anybody's going to get the reference cuz >> Absolutely. A bunch of >> Okay, [music] fine. Okay. >> I was I was a huge I was I was a huge Iron Man fan when I was a kid. Like I was I was the opposite. Kev Kev was the uh Depes Mode uh prep boy and uh and I was the I was the rocker with the uh with the Iron Maiden and Led Zeppelin shirts. That's uh that's >> And yet we yet we can still be friends. >> That's true. Just let me show you. >> Left, right, new age, heavy metal, we can all be friends. >> Absolutely. >> Because we're adults. >> Oh yeah. >> Are we? >> No. But [laughter] uh but Kevin like I want to like pivot back to this like I cannot believe uh Padel Carman is uh in like the restaurants are empty like I I you know for for this being um the start of high season uh I I don't think I've [music] ever seen it this dead and there was like um a big Tulum real estate drop uh and uh you know they completely [music] overbuilt here. But you know what's the interesting reason why I consider it an e you can push back on me if if you don't agree with this, but the reason I actually consider an economic thing [music] because when they did this build out in Mexico, it's very very hard to get a mortgage. Uh and but the real but the condos and you could buy a condo for 100 grand. You [music] could buy a condo for 150 200 grand. And so what a lot of Americans and Canadians [music] would do is they would take out their uh home equity uh lines of credits. Oh, at their leverage their home back home back home and go and buy their vacation property with cash, >> right? >> And the thing is is that right now no one's buying. There's guys that literally have dropped their condos from 165,000 down to 115,000 and they've been on the market for two years >> and they can't get rid of the thing. and uh like liter and and to me that's actually a sign of weakness not in Mexico because this is a vacation place tailored to selling to North Americans. And so literally uh all of those people that were levering up uh out uh off of uh in North America they're not coming and they're not buying and uh and that to me uh I I still I think that that's a economic indicator buddy. I now listen I I am not going to push back Patrick like the reality was I was just giving an example of of if I was bullish on the economy the argument you could make I happen to agree that I think that the that the economy is sagging way worse than people understand >> I think it's being held a loft from the K-shaped recovery and the K the upper part of the K meaning the wealthy people that are spending are keeping it going. They're also keeping the stock market going, which makes it look better than it is. But I I I'm with you. I think Main Street's struggling. And I and I'm I'm not gonna fight your argument at all. >> So a year ago, I was here in Ply as well. And that was when I came on the huddle episode with my Day of the Dead. >> That's right. You always go to hell. You go to Mexico for hell. >> That bottle bottle of vodka. Not always, but I I it just so happens that I'm here second year in a row at that this time. Um and but the uh the party begins. It's uh I'm >> Oh, are you going to put on [music] the You're going to go put it on? >> Absolutely. I'll I'll send you a pick afterwards. But it just worked out last time that uh I was the day after and I actually passed out drunk from with the face paint on and so I might as well do the huddle episode the next day. It was uh >> it's not something Yeah, that's not something that I'm necessarily totally proud of, but >> No, no, you are proud, don't it happens. >> Okay, well, we'll let you everyone go. Happy Halloween, everyone. Stay safe and uh we [music] won't iterate and talk about a certain sports thing that's going to happen tonight. But don't it, don't say anything. >> I won't say anything, but I heard there's a Jay's game, though. >> I heard that there might be some of some baseball game that people are interested in, but who knows? Um, take care everybody. See you later. Take care guys.
SERIOUSLY, MARVIN?! (Guest: Marvin Barth)
Summary
Transcript
[music] Hit it. >> It's Friday, October 31st, 2025, episode 277. I'm Patrick Szna. >> And I'm Kevin Mure. This week, we welcome Marvin Bar to the show. Marvin is a capital markets veteran who has spent some time on the buy and sell side, but also started his career at the Federal Reserve. We have a fascinating discussion about global markets, and he shares the policy error mistake the Federal Reserve might be making. And no, it's not in the direction you probably think. Then Patrick is in Mexico, but his charts work just fine down there. So, he boots up his computer to give us the latest read in talking charts. >> Yeah. Um, folks, uh, stick around. We might even drink some beers along the way. Actually, Danny, what beer am I drinking today? >> Today you are drinking one of English England's finest bands, Iron Man. >> Absolutely. You put in one of English bands. >> Yeah. >> Abs. It is absolutely >> Dickinson. He's he's a legend, buddy. >> Okay. >> And they have he has his own plane and his own beer. Like that's >> He's got his own plane. He must be awesome. >> Exactly. >> Everyone that's cool has their own plane. >> Anyway, let me give this a try while you give us some disclaimers. Um, you're going to have to give me a second, Patrick, because I screwed up and I closed the disclaimer thing. Let me just get it. Here we go. Nothing in this podcast should be viewed as investment advice. Listeners should consult an investment professional before making any decisions regarding topics mentioned in this show. Side effects of too much huddle may include the DDS which is the doubbish disappointment syndrome something the markets seem to be experiencing. >> Yeah, >> the AI bubble burnout, the otherwise known as AIBB. And then finally, the one that I think everyone's suffering from, which is E, the earnings euphoria exhaustion. >> Yes, that's uh that's a nasty one. All right, let's get the guest on. It's our great pleasure to welcome to the show someone I've been looking forward to chatting in person in a long for a long long time. It is Marvin Bar, the author of Thematic Markets and seriously Marvin Substacks. Um Marvin, thank you very much for making time for us. >> Hey, thank you. I've been uh a big fan. Um I'm really excited to be on the podcast. Thank you. >> Oh, it's we're great to have you. And you know, let's just start with that. Seriously, Marvin. Um I you I take it you didn't name that and uh why don't you tell the story of how you how you got that name? Well, um so I had um I have a a a institutional grade um thematic uh markets research um Substack and um you know one of the things that I've realized expost is that um despite the fact that a lot of people in the institutional space knew of me from my you know years in policy work and on the cell side very few people outside of that sphere knew me. And so I was trying to look for a a way to raise my um profile on on Substack and my um I decided to create a a a sort of free product, but I was like, "What what what can I do?" Um and my wife said, "Hey, you have all these crazy ideas all the time [laughter] and you get bogged down in trying to research them. why don't you just throw your crazy ideas out there? >> And so and and she named it >> where it came from and and she came up with the name because she was like that's what she says to me almost every morning when I have these crazy ideas. She's like seriously Marvin >> that's awesome. It's a great great name. And uh listen, let's you you mentioned all your time on doing policy and stuff like that. Let's get to know you a little bit better. Um, first of all, let's talk about where you grew up because I think although you're coming from London today, you're actually a Californian. Californian. >> Uh, I am. I was actually born in Colorado. I was a military brat, but we moved to California when I was 10. >> Yeah. And >> so I grew up there and lived there until I was 28. Um, uh, you know, got all my education in in California, the the University of California system. Um uh and then I went off to the Federal Reserve Board in Washington. Um where >> Okay. One second because I'm I'm gonna sorry to interrupt, but I want to actually dwell into your background a little bit more because I think it's a fascinating one. >> Your dad was in the military and he wasn't he wasn't like flying, you know, jets or anything like that. He was actually kind of a >> was a navigator. >> Oh, he was. >> Yes. Oh, because I because you when I heard you tell these stories, you often talked about him being a scientist. >> Well, this is the thing. The guy is is so he didn't have the he wanted to be a pilot. >> Okay. >> So, he, you know, went to the naval academy before there was an Air Force Academy, which by the way, that I was born at the Air Force Academy in Colorado. That's why I was born there because he was teaching there as a professor. But initially he went in because he thought, "Hey, they've got created this new um air force. I want to fly." And even though his eyesight was not good enough, he thought that he could somehow sneak in if he was a navigator. [laughter] And of course, that didn't work. So meanwhile, he just decided to pursue, you know, a a um masters and a PhD in electrical engineering. and then you know afterwards took the GI bill and yeah he he got a um a jurist doctorate an MBA um he's a CPA he is like the most overly educated person in the world I think there's probably again um uh world records for this he should be there for that but yeah he's most of his life he was a he was a scientist >> right and so you described him as the most intellectually curious person. >> Yes. >> And and talk a little bit about like did that rub off on you? Are you do you feel like you you are following his footsteps that way? >> Um well, I haven't gotten quite as many degrees as him. I I only got one I only got a masters and a PhD. I mean, I'm I'm I'm summing it over here, but [laughter] uh um I definitely feel like he instilled in me that sort of creative curiosity and I do think that that has been a critical element to what I would term my relative success in terms of seeing things that other people haven't. I think there there are sort of two critical elements that one is that curiosity he instilled in me to think about lots of different things. You know I'm I I'm always studying lots of different topics and you know for people who've read my research or if you read Seriously Marvin my my free publication you'll see it all the time. I'm drawing in things from all different sciences all over the place because those it's just interesting and and I'm I'm curious. The other aspect is um you were right to stop me in glossing over growing up in you know an agricultural town in California because you know I think and I didn't appreciate this enough until I was working at you know policy institutions or on a trading floor that not that many people come from that background in our sort of world right you know most of them um came from cities um from you know uh top-notch uh educational institutions um and it gives you a very different perspective and I'll give you a great example of this um so one of the things uh one of the things that I saw that other people didn't was Brexit and Trump's first election right so I called both those at the time and you know there were other people who did it, but it was a a relatively rare thing. And everyone on the trading floor was like, "What the heck? How did you see this?" And um I don't know if if you have ever come across this, but um Charles Murray um one of the authors of the bell curve, the infamous bell curve book, um he was being interviewed on um PBS about um uh the working class being left behind in the United States. and he talked about how most elites live in this bubble and they just don't even actually understand anything about the um rest of the country in which they live. And he designed with PBS this bubble test and you you can probably still if you Google it you can probably still get this bubble test [snorts] and go take it. And so what I did is I started asking people clients, people on the trading floor, everything. I said, "Hey, go take this bubble test and come back and tell me your score and then I'll reveal my score." And the higher your score, the more sort of salt of the earth, you know, close to the working class, the average American you are. The lower your score, the more sort of elite in the bubble you are. And there was only one person in two years of asking people to take that test. And this is hundreds of people that I met in markets who had a score that was only one point higher than me. Everyone else was way below me. And it and I think it comes from growing up in that agricultural community and working or you know going to school with uh people who weren't on the same path that I was on. They were on a very different path. That is hilarious. I'm sure everyone right now, including me, is googling it. Yes, you can go to the PBS website and you can take it. Are you going to tell us your score so people can compare you to or do you remember? >> Um, I was either a 56 or a 57. >> Okay, there we go. >> And and and I should issue a caveat because I know you're in your your audience is international. Several of the questions on there are very American culture specific. So, if you are not American or didn't grow um haven't spent a lot of time in America, you're unlikely to score that high just because of that sort of cultural prejudice that's built in there. But if you're an American, yeah, um and you know, um post reply to me on on X or uh wherever and tell me what your score is because I'd be interested. >> That's a great story. Okay, so you're there in California growing up and with this father who's intellectually curious, he passes down a lot of these things. Where do you go to university? What are you studying? And do you have a plan to get into markets? Because it doesn't sound like you come from a family that was, you know, that valued markets probably more so academia would have been what your father would have valued and your your parents. You know, it's it's it's funny uh that you you put it that way, but um so I went to UC Berkeley and I you know, despite the fact that, you know, I was the top student in my high school in math and science and things like that, I said, you know, I want to go into business or law or something like that, right? You know, I wanted to go make money. Um okay. Um, and so I went uh to UC Berkeley and I I wanted to try and study something like that. But while I was searching around for a major, I came across economics. Um, UC Berkeley had this I don't know if they still have it, but they had this really weird system for undergraduates where under the economics degree, you could get the hardcore economics degree, which was like, I'm going to go study for a PhD, >> okay? Or you could do this one that literally had only four upper division classes to fulfill the measure. And >> the soft the softcore one. >> Yes. And your degree at the end said the same thing. I graduated with a BA in economics. And I was so interested in everything else because of that intellectual curiosity, >> right, >> that I was like, "Oh, I want to do this." And so, you know, I I almost effectively double majored in history. I took classes in like African-American studies, film, um you know, computer science, uh um art. >> Very UC Berkeley of you. >> Yes, very very much so. Um my dad um politically um described me as um going to Berkeley uh to a little to the right of Ailla the Hun and coming back somewhat normal. Um >> all right. So, you graduated from there and your first job is at the Fed. And I I just very rarely do you get somebody that was at the Fed and then went to the sell side or the buy side and is we can like learn how the Fed operates. So, I'm going to I'm going to actually quiz you on this because I think a lot of people have misconceptions of the Fed and and don't really understand how it operates. So, first of all, tell us a little bit what you did there. You know, what your positions were. Then after that, if you could explain to us what you think most people get wrong when they think about the Fed in terms of, you know, their view about how it operates and because I you hear all this stuff and I'm sure you're going to debunk it about like, oh, they're doing this and this and they assign a level of nefariousness or int, you know, or cunning that just doesn't exist. >> That's probably true. Yeah. Um so I will so I went there and even though my dissertation um uh for my PhD was in uh um purely domestic monetary theory um and um monetary policy. I was actually put in the international division and I was dropped in in the middle of the Asian financial crisis as the Southeast Asian desk officer. >> Wow. So I was just like thrown into the fire immediately. Um and I mean it was a challenge but it was a lot of fun. Uh it was really interesting. Um the Fed um what you know one little sort of side story related to that that gives you a little bit of insight to the Fed is it is seen as the sort of intellectual and policy pinnacle of the entire Washington community. Right. So the IMF, the US Treasury, the World Bank, all those people, they always call you in to talk to you about part of it is the Treasury asks for that because they have oversight over those institutions, right? They know that the Fed is the people who really know what's going on. But it's in general there's like a whole collegiity there that you know so when you know we're talking about Thailand um in the middle of its crisis you know I would be going to all these IMF briefings and you'd get you know firsthand report but you'd also be pressing back on on the um uh country team and you know hey have you checked on this have you done this and um you know the um am I allowed to use a swear word on >> Oh yeah you for sure you Yeah. Okay. So, um my my boss at the time, um Steve Cayman, who is one of the funniest people on earth, um I was coming back from one of these and I was telling him about it and he said, "Marvin, I want you to make it your personal mission that every single person should come out of that room and say, "Who the hell was that fed asshole?" [laughter] I mean, yeah. So, so yes, that was a really cool part about this is is that you were especially in international division really connected to the rest of of of Washington and also you know after that much several years later um the other interesting thing is I was sent to the bank for international settlements in in Boswell Switzerland which is sort of like the central bank two central banks and those sort of opportunities were available to me because I was in the international division in a way that they were less likely to be open to me in the um domestic divisions. So that's that's one part is that um the Fed is actually far more international than I think people realize. It is really paying attention to what's going on to the rest of the world. Now policy is going to be set for the US economy, but they are very aware and very engaged with what's happening in the rest of the world. So I think that's one important thing for people to realize. >> Okay. Um, as soon as the crisis died down, uh, I started to get bored. And, um, this gets to another really interesting part about the Fed is that the Fed, um, now it has almost 500 economists. It's just crazy and mind-boggling, over the top. But even when I was there, there were 225 um, uh, economists, PhD economists there. And just to give you a a an a sort of insight into the quality of these people in terms of their intellectual rigor, when I was on the academic job market, my adviserss were very clear on this. If you get an offer from a top 10 economics department in the world, you take that. If not, the Fed over anything else. >> Okay. >> Okay. That's the level of people you're dealing with here. And what's really nice about the Fed is that they kind of allow you to self- select whether you want to pursue academic research and they give you plenty of time for it or you want to be more involved in policy research. And as your career evolves, if you're like publishing papers in top journals and things like that, they're going to give you more time for research uh you know, pure academic research. if you aren't or you're showing a strong proclivity for policy research, they're going to load your plate with more policy research. And the way that applied to me is that I didn't like the whole academic process. You know, it was crazy to me that like my dissertation, the main paper from my dissertation, by the time it was finally published was four or five years later, you have to go through all these different robustness checks and things like that. I have long since lost any interest in that topic. I'm moving on to the next thing because something else is going on. Right. >> Right. >> Yeah. >> And especially being thrown into that hot seat immediately and seeing how exciting and fun policy could be. >> Right. >> That was, you know, I was hooked. I was a junkie for this now. >> So, um, you know, as soon as the crisis started to, I was like, I want something else. So they moved me to the financial market section. >> Okay. >> And that was a section that all the people who wanted to do research tried to avoid because you actually have a lot of policy work on your plate. This is the section there were four of us. >> Yeah. >> And at that point >> every week this section briefed the the board at its board meeting. They've changed the structure since, but now but back then it was that section briefed the board on the foreign exchange outlook and the global outlook every single week. And since it was four economists that meant every four weeks in a rotation, I was sitting across from Alan Greenspan, Roger Ferguson, Larry Meyer, the rest of the board um briefing them the first line of defense on what was going on in the global economy. >> Wow. No, wait. I I didn't realize they have weekly board meetings. >> Yes. So >> of all or is that New York Fed only? >> What >> is that? New York Fed only or is that >> No, no, this is our board of governors down in Washington. So remember the So let's take a step back. The structure of the Fed is you have um the centerpiece of the Fed is a government um agency, the Federal Reserve Board in Washington DC. The one that Donald Trump visited and said, "You've spent $ three and a half billion dollars, you know, renovating three buildings, which like seriously I worked in those buildings. I was there two weeks ago. I was looking at this. I was like, "What the hell?" Like I I mean they are right to be fully criticized for this. But anyway, um that's the Federal Reserve Board and that's where you have the seven governors. >> Yeah. >> Seven governors, the chairman of which is the chairman of the Federal Reserve Board and the chairman of the F Federal Open Market Committee that sets policy. >> Okay. >> The governors are responsible for um setting the um uh regulations, the Fed, all all of that. And all seven governors always vote in FO in every FOMC meeting. They have 14-year terms to make them apolitical. >> Um, and the chairman and two vice chairs of which have four-year terms inside a as chair or or or um vice chair, but they're underlying they're a governor appointed for 14 years. >> Okay. This is why next year, if you notice, um, uh, Chairman Powell's term as chairman ends in January or February, I can't remember which, but he doesn't actually end as a governor until, I think, May or June. So, he will still be there even in if he chooses to be, >> right? >> Even after he's uh um removed as chairman. >> Okay. Anyway, then you have the 12 Federal Reserve banks around the country and those are actually private institutions. They're federally chartered chartered. >> Oh, okay. >> But they're private institutions that are owned by their member district banks and their presidents are selected by member district banks. Although the board of governors has a big say, they can basically veto or or force it. So, >> okay. Okay. So, the FOMC is is those uh all the district members plus the the Fed board and then you're just briefing the Fed board on a weekly basis and they meet every week. >> Exactly. >> Yeah. I didn't realize that. Okay, great. So, you got this opportunity. You're sitting there across from Alan Greaseband. >> What's that like first of all, like you know, did it scare the out of you at first like when you were or was it like by this point you kind of knew the guy and it wasn't that big a deal? No, I mean Alan Griezban was not a a friendly cuddly person. No, is not a friend. He's still alive. Um uh he is he look I have immense respect for for the man. I I mean I hold him up as one of the best um Fed chairs ever and I I take umbrage to a lot of the criticism he gets. I think you know yes he sort of set the stage for things later but that was because he did his job so well that's the problem and and I think there's a lot of lessons to be learned so we will probably come back to that but >> I I mean >> the first time I briefed the board yeah >> um uh uh it was a bit nerve-wracking and of course um my then boss um walks and he sits on the opposite side of the table, comes in, sits down, and then he gets up and he looks and he sees me in the chair. He gets this surprised look and he runs around. This is before the governors get in and he slaps me on the back and he says, "I have almost perfect faith that you're not going to completely screw this up." [laughter] Walks away. >> Almost perfect faith. [laughter and gasps] >> So, um yeah, that was a a good start. But um the it it was um definitely a really challenging experience. I mean yeah you know you are the first line of defense so you get to um brief the board on and everything you say to the board has been reviewed by you know your written materials by like 50 people. >> Okay. >> Um so >> so it's it's a group you're you're presenting the view of the group that you're working for. >> Exactly. >> Okay. So then they can ask you questions and you have to be ready. >> All right. You have to be ready. >> Now you get to ask and if you get in trouble then all the three baronss as they're called the division directors of international finance my division research and statistics the main domestic division and monetary affairs the sort of other >> domestic sort of financial and moniary um division are there to back you up. and then arrayed around the room are like 50 60 economists who will pop up and um you know answer specific questions. >> Okay. Um so one of one of the things that um so back to my original question, what do you think people get wrong about the Fed? And then the other thing that I just want to highlight here is that you before we were chatting, you know, before the show started, you you were saying something about that you actually try to avoid talking to people on the Fed. explain to us why you try to avoid them and then also what you think that the market gets wrong in terms of um thinking about the Fed. >> Um okay so let's start start with the um first one. I think one of the things that's really important is go back to that point that I said about the Fed allowing people to sort of select their own path. Um and um you often see people say the Fed published a research paper saying this this must mean what they mean. No, that's literally an individual economist given full academic freedom to write whatever the hell they want. Uh, one one of my papers that I wrote that was released as um uh an international finance discussion paper of the Fed quoted a congressman saying that raising rates to um fight inflation is like throwing gasoline on a fire, >> right? >> I was allowed to publish that. Nobody stopped me. Right? So do not think that any sort of publication of the staff necessarily reflects anything that the govern the governors or the FOMC are thinking. That's just not true. >> Okay. >> Now you do have to take with a grain of sight. Like, you know, one of the things I I tend to think that QE was largely ineffective um and QT is a lot less um uh important than people think. Um but there's all this academic research out there that will tell you otherwise. Well, guess what? If you look at most of the academic research, it's all produced by Fed staff. And guess what? That was almost certainly because the governors kept asking them questions. Can you show that this actually is working and doing things? [laughter] It's sort of a CIA exercise, right? And you know, so it's not that it's not related to what they're thinking, >> right? >> But don't immediately assume that it is. So that's I think one important thing, >> right? >> The um second thing that I think is most important, and this sort of gets to the point of why I think Greenspan was so impressive. um is that you know especially after the last decade where everyone you know focused on thinking that central banks drove markets or whatever there is this sense that central banks are these infallible unbelievable omnisient beings who know everything and they're going to tell you where things are going to go and this gets to the point for why I don't like to talk to people at the Fed I I do occasionally because I have lots of friendships there, but I generally try and avoid talking policy with them because actually they're mostly wrong. I mean, the fact of the fact of the matter is, and I can point to this, I have a far better track record of predicting the economy, um, inflation, and even their interest rates than they do, >> right? >> Far better. Okay. And that's because they do suffer from a lot of group think. Um I think that problem has gotten a lot worse over the years. Um you know in the early days of my career there uh you had a more diverse group of governors. Um okay >> uh in that they weren't all PhD economists. Um a lot of them were like political hacks, community bankers, all these sorts of things. And you say, well, and even at the time, I admit this is an air, like, you know, I used to think, why are those people on here? They should have PhDs like me on the board. And the problem is now they have PhDs like me on the board and they think exactly like the entire staff and they have no diversity. But go back and and I mean diversity of thought. So go back and look at the transcripts from 2006 through 2008. Who is the one governor? the one governor who is talking about, hey, you know, I think there's something wrong with this whole subprime thing and we should really be digging in here because I'm hearing a lot from my community banking contacts that these things their terms are completely screwy and the credit underlying this is is terrible. There was only one person doing it was Susan Bes, >> okay, >> who was not an economist. She was a community banker was appointed to the board and literally the entire rest of the board of governors including all the illustrious people including Alan Greenspan by the way were all dismissive of her on this and I remember as a staff person when she was appointed to the board. I remember us all sniggering at some of her questions like [laughter] what does she know? [clears throat] But no, that that is part of the the the problem. Too many low bubble scores. >> Well, no, it's a specific bubble, right? Right. >> Academic economist bubble. And this is what I was going to say about that's impressive about Allan Greenspan is that >> you know in you remember the whole productivity miracle back then, >> right? Yeah. you know, he singlehandedly discovered that the entire staff and all the rest of the board was fighting him on this >> and he just kept pressing them and saying, "No, how are you explaining this earnings growth? How are you explaining the capex? How are clearly something else is going on you guys are missing?" And he just kept beating the staff over the head until they finally actually went out and did the research and showed, oh, actually, you're right. there's some sort of productivity boom going on, >> right? >> Was 100% him. >> And you know, credit to Larry Meyer for this. Larry Meyer was the massive thorn in his side at that because Mary Larry Meyer had a very strict, you know, academic view of where um structural unemployment so-called Nairu the non accelerating inflation rate of unemployment. >> He thought it was at 6% and he was fighting chairman Greenspan the whole time. He thought it was six. >> He thought it was six at the time, which was which which was not unusual back then. Everyone now is talking is like, "Oh my gosh, unemployment at 4.3%. This is like practically a recession." I'm like, "What [laughter] are you talking about?" You know, 20 years ago, >> y >> you would have had a hard time finding anyone who thought naiu was below five. >> Okay. Shows you how things have changed. Yeah. >> Yeah. No. And um Larry Meyer in his book admits it. He says, "Look, I got it totally wrong." And Allan Greenspan singlehandedly nailed this. And it was because he didn't just listen to the thing. He went out and talked to people on the street. He had a whole roa of CEOs and others that he would call to find out what was going on. He was really much more a narrative economist than a model economist. And he saw things that all the model economists missed. >> Okay. So, listen, we could talk about Fed stuff forever and it's fascinating. But let's get a little let's just finish up with your career and then we'll talk about your views currently. Um so from the Fed you move what to the you say this is I wanted to be in the real action. You moved to the sell side. >> Yeah I uh um decided uh I one of my mentors had left a few years before me and he had uh told me look if you ever decide to go over to the dark side please call me first. And uh um I um took him up on that and went to Croup um where I um you know moved to London and um was covering global foreign exchange, >> right? >> And uh I I did that for a few years. Then an interesting just happen stance um opportunity came to go back to Washington. this time to go work for the US Treasury Department as the chief economist for international affairs. Okay. >> Where I was the primary adviser on um foreign economic uh policy and dollar policy um to the uh under secretary um uh for international affairs. Um and then I went off to a distress debt fund to a um outsource chief investment officer which is sort of like an allocation for endowment style investing. Um and then back to uh um London to lead foreign exchange and emerging market strategy for uh Barclays before I started thematic markets a few years ago. >> Uh one of the things that I find fascinating is a guy from Southern California has has made London his home. Have you gotten used to the the lack of sunshine? Take extra vitamin D. You taking extra vitamin D, bud? [laughter] It Yes, I do. Um it it was a concern of mine when I first moved here. I will say and and I don't think that this is entirely my rationalization, but the reality is, yeah, it would be nicer to have more sunshine, but when you get down to it, there aren't a lot of places in the world that have it's not California sunshine. It's the especially along the coast, it's this really narrow temperature range. So, it's, you know, along the coast of of California, it's basically 50 degrees Fahrenheit to 85 degrees Fahrenheit all year round. Right. Right. 15 to 25 Celsius for people out there. And the difference with London is that it's, you know, 10 degrees Fahrenheit colder, but it's basically the exact same thing. And there are very few other people places in the world that have that really >> you just don't like the variability in temperature. >> Yeah. >> Well, don't come don't come to Canada, bud. Uh >> yeah, exactly. >> Exactly. We have a little bit more of a variation. Okay. So, let's talk about what you're thinking about the markets here. Uh let's start with one of your big themes that you're talking about with your institutional clients, and that is the idea that the Fed might be making a severe policy error. Yeah. >> And I think the policy error is going to surprise folks because most people will hear that and they go, "Whoa, they are not cutting enough." And you actually feel like maybe it's opposite. >> Yeah. I I think it's the exact opposite. I mean, look, I I this is where this is part of the reason why I brought up the the Allen Greenspan sort of narrative feeling the economy um uh story is is that that collection of all PhD economists has sort of gone off the rails in my view in terms of being far too model focused. They are very convinced that they understand where Rstar the um real neutral interest rate and remember what that means is that the real interest rate I minus inflation expectations is set at such a level that unemployment should not vary and the economy should be growing a trend. Now they're pegging that at 1%. So, you know, you add your 2% inflation, the 3% nominal Fed Fed funds rate, and they're also telling you that real growth in the US economy is 1.8% per year. Okay. Now, let's just review the facts here. These are facts. >> Yeah. >> Over the last three years, the average one-year real interest rate has been two and a quarter%. So more than double what they think our star is. Over that same period, the US economy has grown at better than two and a half% almost a full percentage point higher than what they have. And inflation has been above target that entire time. Oh, and by the way, it's reacelerating now. >> Right >> now, I don't know about you, but that doesn't seem very neutral. I I mean I'm thinking and you know if you look like right now we don't have any data coming in right but the data that we have had coming in is telling you the US economy is absolutely on fire we have some of the fastest rate of investment growth in US history um despite all the so-called uncertainty that was supposed to suppress investment if you look at actual capital announcements by um companies out there you um companies year to date have announced over $2 trillion in new investment spending for the United States. That is more than 75% of the global total. [laughter] And it's not all just in AI. A lot of it's in manufacturing, a lot of it's in pharmaceuticals. You it's across the board. This is not a one-dimensional story. And so the US economy is very clearly booming. Um and the only thing that you can really point to and this is what the Fed has pointed to that's you know saying oh well there's a well first of all our models tell us that that's wrong. Well your models have been wrong for multiple years now. Maybe you should perhaps revise them think about something else. I don't know. Um, but the other thing that they've now leaned on is that well, non-farm payroll growth has slowed and there's been a slight edge up in unemployment. And you you look at this and you say, well, wait a second. Every single, you know, Trump skeptic out there at the beginning of the year was telling you that when he shut off the door to immigration, you were going to get a massive contraction in the labor supply curve. >> Why isn't that what's driving this, not demand for labor? I mean, you had the story beforehand. It seems to have worked out exactly as is. And then there's very straightforward tests for this, right? Like any of your audience members who've studied economics before, even if you just took a basic introductory class to economics, it's pretty simple. If it's the demand curve shifting back, you know, output or um uh demand for labor falls, the number of of new uh employees falls, but so do their wages, right? If [snorts] it's the supply curve shifting back, you get that the number of people being hired falls, but wages rise, >> right? >> Which, by the way, is inflationary. >> Um, >> well, lo and behold, what do the data say? This is not hard. The data very clearly say it's a supply curve shock. And that's exactly what people have predicted, and yet they now seem to have forgotten it. But the other thing is I've done a lot of work digging into basically um people like myself. Now I wouldn't be counted because I'm not a US resident but if you look at what uh are called soloreneurs so people who set up um you know companies to work for themselves. And so you know a lot of people focused on like the gig economy and you know they think about Uber or Deliveroo drivers and think this is low wage. But if you actually look at the data, this is first of all a big trend. It's almost 15 to 16% of the US labor force. Now this is not a small number, right? Um and if you look at where all the growth has come, especially since COVID, it's actually in higher income earners. I mean like the the places with the fastest rate of growth are revenues over a million dollars a year. We're not talking about Uber drivers, >> right? >> Okay. And those people are not counted in non-farm payrolls. So when you add it all up, you add up, you know, what what is the labor supply shock from, you know, cutting off immigration, then you should expect that well actually the growth of employment should be somewhere between 25 and 50,000 persons per month. Okay, which is by the way below where non-farm payrolls are. But then if you add in the fact that non-farm payrolls don't count soloreneurs because they're not part of the institutional survey. >> Yeah, >> I calculate those guys are growing at 30 to 50,000. So in reality, non-farm payrolls break even, that is the economy standing still should be zero, >> right? And yet the Fed is cutting rates on the basis of non-farm payrolls being 60 70,000. >> Yeah, this is a mistake. Um now there's one fly in that ointment and I'm actually writing about it this week so you know people can uh read about it uh next week when I publish. Um which is that the unemployment rate has like ticked up a little bit, >> right? And you know one point goes back to our earlier part of this discussion is where is Nairu actually you know it's entirely possible that COVID pushed us below Nairo which is why inflation was so high. So actually we're actually just getting back to Nairu a sustainable rate of frictional unemployment in the economy. But the other part is that I think that there's a big skills mismatch in the economy and that AI is exposing this. Right? So one of the things that um uh happened over the last few decades is that we told everyone and their mother you're not even a human being unless you go to university. And the fact is that actually most people don't need to go to university. In fact, you know, they're not going to be the top scientists. They're not going to be the top programmers. They're not going to be the top lawyer or or or whatever. And being, you know, less than the top actually doesn't pay huge rewards in in in this economy. But those people were able to find jobs as manufacturing went elsewhere. And um uh you know, you had more service jobs. you needed more people to do copy editing, to do, you know, all sorts of things where you needed some degree of literacy that was better associated with a university degree than someone without. But of course, chat GPT now does most of those things better than those people. And meanwhile, we've had a geopolitical shift that means that we have massive structural shortages of electricians, welders, pipe fitters, um all of these things. I mean, there are literally hundreds of thousands of those jobs, which by the way pay a lot more than most college graduate jobs, >> right? >> Yeah. >> Um out there that are sitting unfilled. Well, lowering interest rates isn't going to solve this problem. It's all those people who got, you know, peace and conflict studies dis um degrees um need to go actually take a course in being an electrician or something like that to raise their wages significantly, but it's going to take time for that structural unemployment to get over. So, I think the rise in unemployment probably reflects more of that these structural issues than anything cyclical. So, I I love the fact that you're one of the few that I like after [clears throat] listening to you, I would call you Trump sympathetic or at the very least you're willing to look at the positives of Trump, right? More so than some. Um, and yet what I find kind of frustrating is that a lot of those people that lean that way are now taking the view like Trump says the rates should be lower, so therefore I think rates should be lower. And they're just they're just not thinking it through. And I what what kind of makes me mad about this is that if you think back to a a year and a half ago, everyone was complaining about the Fed, you know, missing their mandate, um losing credibility, all yada yada yada that that famous speech that one of the or not speech, that famous story that one of the governors gave about the janitor coming and knowing who Arthur Burns was. Arthur Burns was the guy who created inflation and even the janitor knows this. So therefore, we're not going to be it. And to your point, I find it just kind of fascinating that we're in this environment where the Fed has still not achieved target. Still not achieved target. >> Exactly. >> And not only that, financial conditions are just ripping. Like there's no doubt about it. And yet we're pushing for lower rates. So my question to you is that's not going to change that obviously the we're going down this road. We're making this policy error. What do you think the consequences of that policy error are? Um so look there's another whole issue there and it's one that I don't have a high conviction on but we should probably come back to which is are we going to stay on the current path that we're on? But let's suppose that we do and answer your your direct question then you know one it's kind of crazy look at break evens across the curve like you know inflation break evens the difference between nominal um bond uh treasury bond yields and inflation protected bond yields. So what is the market pricing for future inflation? Those are pricing in 2.4% 4% which is roughly what they they averaged the last decade, right? >> Like could you count on on the Fed or sorry the government being truthful about the CPI going forward because that I used to be that I love that trade and it was something I always wor you know felt that was a great trade to own. Increasingly I'm scared he's already fired the B head of the BLS because he got one bad employment number. What's going to happen when you have 5% inflation? um like has he broken that market? >> There's all sorts, by the way, there's all sorts of other people out there who who who uh um and I'm certain you've probably had some of them on your podcast who before Trump were saying these inflation numbers were all cooked. [laughter] That's >> right. So, I mean, I'm not even sure. But, um >> sorry, I view Trump as an accelerant. So, I agree that that was the direction we were headed, but I think it's going to happen quicker than we expect. Anyways, go back. So, >> break even. >> So, so, so look, but that shouldn't change nominals, right? In the sense that um if you're a bond holder, >> you're going to face actual inflation. Who cares what funny number the government you should be selling >> longdated um bonds. And actually in this is another interesting thing is that after the whole you know blowoff I' I've been arguing for two years more than that actually you know I think I go back to 2021 I started writing about you know term premia being insanely low um and that they need to go a lot higher because of the Fed's policy errors and because of the broader uncertainties we face in the global economy. You finally started to get a reaction for that after liberation day. Right. >> Yeah. But if you look since um the end of August, early September, actually um uh swap spreads >> uh have have cheapened. >> Yeah. >> Um you've uh had the the 1030 spread, which I find to be a much better measure of what's going on with term premia. >> Okay. >> Um come down. >> So what do you think is happening there? Why? >> So I'm frankly a bit perplexed, I have to say. Um because you know I think the narrative or certainly what I perceive most people talking about is that yeah Trump's going to make this so much worse. And so as bad as whatever the Fed is doing now and you know my argument would be just based on the current Fed we have you should be selling treasuries right [laughter] you should be you know long break evens because inflation is going to be higher than what's predicted that's for sure >> um just based on them but if you also have this view that Trump is truly going to do all these terrible things then of course it should be so I I have to admit I'm totally perplexed by that. >> Okay, >> that said, I do have a theory. >> Okay, here >> let me go back to something you said about my being sort of more Trump sympathetic. Like look, um you know, it's a matter of public record. You can go look up when I was at the Treasury, I was a political appointee. I was a Republican political appointee in the administration of George W. Bush. [sighs] Um, and when I realized Donald Trump was going to be our next president back in April of 2016, um, and yes, I did realize it that early, I literally almost started crying because, you know, this was not the sort of Republicanism that I, you know, I'm a small C conservative, small government kind of guy, right? >> Okay. >> Um, uh, and I've never voted for the guy. I'm I'm not on the Trump bandwagon, but I will say that term two, this guy really took his time in the wilderness. I actually think he's one of the most fascinating characters in US history. He is really, really interesting because he was clearly totally unprepared and also just not interested in being in government um being president of the United States in term one. Right. >> And yet he's such a competitive guy. This is my read that when he lost he's like I'm GOING TO COME BACK AND I'M going to [laughter] And he assembled a team, call it project 2025, whatever you want, but he really thought about what was going to be the policy that he want. And he's had, I would say, a very comprehensive grand strategy to get there. And a lot of it I actually agree with. A lot of it in terms of the, you know, countering Chinese economic warfare, which is what I see as most of his policies, I think is absolutely not just advisable, but essential at this point. Um, and I also think very clearly what he is aiming for when people say, you know, Trump wants to do this for himself, great, fine. What is his incentive? I think his incentive is very clearly to be on Mount Rushmore. He doesn't care about the Nobel Prize. He wants to be on Mount Rushmore. He wants to be remembered in US history as one of the great presidents who was transformational. And you may not disagree with everything that he's doing. That's fine. But if he thinks that he's going to do that by following these policies, you should expect he's actually going to do that and do policies that are going to put him on Mount Rushmore. And I have a really hard time seeing how causing a hyperinflation is going to put you on on Mount Rushmore. So, I do have this very strong suspicion that we are being hoodwinkedked right now, that all his low um interest rate rhetoric that he and Steven Moran, who is just like, you know, basically his um I I I call Jason Moran the the uh or or Steven Moran the the Jason Ferman of the MAGA movement, right? He's he's he's like he's he's he's a very smart economist who will say whatever his who will find an economic justification for whatever his principles want. Right. >> And and that's the way you should read them. There's no information content there. You just have to listen to the big guy instead. >> Yeah. >> And I think this whole thing is about it gives him a great way to point the Fed for all the failures if anything goes wrong next year. >> Right. And so why not complain that they're not doing their their job this year, but next year, precisely to the point that you raised, Kevin, is that Trump's voters, more so than anyone else, hate inflation. And I think his incentives flip next year. And next year, it's too late for him to affect the midterm elections with policy then. So his appointments then are not going to help him out, but they are going to affect inflation in his place in history. And I have a strong suspicion we will actually get someone hawkish next year, despite all his rhetoric now. And that's because I mean, think about it. When has Trump ever when have you ever been able to hold Trump to anything he said? >> Well, that's true. [laughter] That's true. You shouldn't whatever he says, you know. People think it's a Democrat. It might change the same the same sentence. It might actually change, not just tomorrow. Yeah. >> Okay. So, so your argument is although we're going down this road, reality is that, you know, inflation will perk up and he'll change his tune and very quickly we'll the Fed will have to be raising rates again. >> I I I absolutely think this is a distinct possibility. I say it that way because as with most things Trump, it's really hard to have a high conviction in in these things, right? But when I think through my model of what motivates Trump and what drives his actions, it's hard for me to reconcile him appointing a dove. >> Okay. Uh can you give us your best pick on who you think it'll be? They've gotten five now. So it's is it going to be one of the the kind of outliers that is low odds right now? that's probably on the Fed already. >> So I I I I can say one of the people who's in the leading in the betting markets, Waller, I'm 99.999% sure it will not be him because think about Donald Trump. Donald Trump likes people who either are, [snorts] you know, like Stephen Moran going to do exactly what he says. >> Yeah. or likes people who have some hutbah and you know independence and are leader types. >> Yeah. you know, Christopher Waller has shown himself to be a complete, you know, uh, flag in the wind, right? Like, >> yeah, >> and there's no way Trump's going to appoint someone like him. Just on personality alone, he will never appoint, um, uh, Christopher Waller. Um, so um, I I think you can rule him out. Um, I was thinking it would be Worsh because Worsh actually has been the most consistently hawkish throughout, you know, early on and he didn't change his story, but he was never taken out of the running, right? >> Okay. Yeah. >> Um, and so if my theory about he will actually end up appointing a Hawk, that seemed like a pretty good one. And the other thing was is that, you know, this was somebody who was important to his campaign and otherwise and he hasn't gotten a position. >> Okay, >> that said, some of the stuff he said recently, I think is sort of uh um putting question. >> It's got you crazy lately like the now well, you know, let's bring actually >> can I give you my dark horse? >> Yeah, sure. Give give me your dark horse. >> My dark horse is is Scott Besson. And the reason for that is go back to who was um George W. Bush's um chairman of his vice presidential um selection committee. >> Oh, the the the Dick Cheney. >> Dick Cheney. Oh, yeah. You're probably right. And if you're a macro guy like Scott Bessant, >> do you want to be Secretary of the Treasury? You've already put your signature on a dollar bill. You've already done that. >> Oh, yeah. Good point. I think that's a great point. >> Chairman of the Fed. So, actually, go let's go back to Worsh though because recently I heard him talking and he was almost talking like they were going to like he wants to abandon the the floor system and go back to a corridor system of reserves >> which which I yes which would be >> so do you agree that that is what he was implying and then next up do you do you do you think that there has been any distortions in the financial market because of that? I happen to think they there has been and what would be the consequences of moving back to a corridor system. >> Okay. So, um look, I am a huge fan of that. By the way, let me just point out one other thing in support of my theory that he's not going to support a dove. I mean, they are either the stupidest bunch of people on Earth, which I would suggest given their track record so far, whether you agree or disagree with them, they clearly haven't been stupid. And you would have to be stupid to decide that you're going to move away from a large balance sheet, but monetize the debt because, you know, how does that work, [laughter] >> right? >> Yeah. >> Kind of difficult to do that. Um, so exhibit A in they're not actually probably going to be as dovish as their rhetoric suggests is that um, every single member of the team from Scott Bessant who's in charge of picking uh, the next Fed chair down is talking about a smaller balance sheet Fed and moving back to a corridor versus a floor system. >> Now having said, I'm just going to push back real quickly on that. Scott Besson was also talking about 3% deficits to GDP. >> So they are flexible in what they say like you just we've talked about it as well. So I'm I'm not >> if if if we have time let's come back to that one because I'm I'm not sure he's not >> okay anyways go on let's keep going on the corridor versus the floor. >> Yeah. But the um >> and why don't you explain to people what it is because I you know some people will be like what are you talking about and stuff like that and they don't realize the fundamental change at the Federal Reserve in the way that we conduct um monetary policy that occurred at the GFC. >> Okay. So it's easier to talk about it in terms of the way most European central banks did it because their corridor system was much more clearly defined. Okay. >> Right. In the US the the bottom of the corridor previously was zero. Right. [laughter] Right. So, but typically you had what was um you know a marginal lending and a marginal borrowing rate. This is what the the ECB used used to have. And you didn't actually go out and buy bonds or assets. You just did repos with markets to meet banks reserve demands. And reserves are this funny money that only um banks and the central bank have. Nobody else gets to touch reserves. So when people talk about printing all this money, they didn't print any money. They printed reserves. Do you have a reserve account, Kevin? >> No. >> I mean, no. [laughter] >> Unless unless you got a banking license, you you can't have reserves, >> right? Um so uh a and the way you sort of controlled the overall economy was by moving the um nominal interest rate at the front end of the curve, the sort of overnight rate among banks, which is like the least risky part of the market um interest rate structure. um by adjusting the level of reserves that these banks were trading with each other and then to make sure that there were no mistakes cuz you know it's really hard to judge how much banks need in reserves because you'll get strange um payment needs or things like this that pop into the the the system. You would put a corridor in. So, you'd say, "Look, we are willing to lend you the bank's reserves um at this penalty rate above our our policy target, and we're willing to borrow them from you at a um uh penalty rate below the target." And so then the interest rate never really goes outside of that range. >> Okay. >> Okay. And that's a normal corridor system. The Federal Reserve pre208 had a bastardized uh um corridor system. As I said, there was no lower bound. It was zero. >> And the other thing was is their sort of you can um borrow from us rate was actually below their policy rate. The discount rate used to be below. It was really weird. But nobody used the discount window because if you use the discount window, the bank examiners would come and say, "Well, what's wrong with you? Why did you need to borrow money? >> Right? >> So, [laughter] nobody did. So, if you go back and look, this is a fun exercise. If you have the data, and I think you can actually do this on um uh St. Louis Fed Fred Fred, >> go back and look at daily Fed funds effective rates. and pre208 you will see that you would have the Fed funds rate spike to 35% overnight on a day because simply because the Fed screwed up and didn't put enough reserves into the market that day >> right >> just that would happen >> right >> guess what the economy didn't break everything was fine >> yeah [laughter] >> so they tried to run for people to understand instead of you know having a ton of ample reserves that the that the that the Fed Fed would suck up or provide liquidity for. They tried to pinpoint the level of reserves and they bought and sold T bills in the open market to actually affect the rate. So that was like I remember in my day when we used to watch for the Fed to come in at 11:45 to figure out if they changed rates. They didn't even tell us. >> Exactly. Exactly. 1994 they did not announce what their target was. They just came into the market and you know bond traders like oh I guess they've changed the rate. >> Yeah. And you figured out and so they had this kind of just perfect level or they what they hoped was the perfect level of reserves for the for the target rate that they were trying to achieve but in the process as you rightly point out there was points when it would cause stress and and rates would go to some stupid level. So now do you think and then in GFC what happened was we came we put it to zero we found that we couldn't put it below zero so they did QE and in doing so they lost control of the balance sheet and they could no longer have just the minimum level reserves or whatever they call that the whatever. So now since then we've gone and that's why we have the reverse repo facility and now the standing re uh standing repo facility. So the two of them are in essence trying to create this corridor or whatever. But now do you think that when we switched to that I was always kind of amazed that we switched to this point of a you know ample reserves and um we never thought about going back to scarce reserves and do you think that they're trying to go back to scarce reserves? >> Um so I think that is a big political uh disagreement. though what you might largely call democraticleaning economists um are very much on the side of well we should just stick with the current floor system. We have ample reserves and we put in a um interest on reserves rate below that that you know keeps interest um uh rates from falling below that lur. And you know because of all the ample reserves nobody ever has to chase reserves and the rate never spikes up. So it basically just sits >> right >> right on IER or um interest on on reserves. Um and then on the sort of populist/Republican and those are not the same thing by the way. Remember MAGA is very different from Republicans. Um, but this is an area where a lot of the Republicans tend to have sympathy, right? Is that we don't like this idea of the central bank having all this power and being this influential in our markets. There's something wrong with that, right? >> There's fundamental feeling underneath that. That's wrong. >> Um, and so they want to get rid of that. And that's really where the whole Bessant um, Wars um, even Trump on occasions has has made comments about this um that you know they want to go back to a corridor system because the central bank just should not be this involved in owning assets and that it is blurring the boundary between fiscal policy and monetary policy in their view and I have a lot of sympathy for that view. >> So so so I agree so I I that's terrific analysis. What do you how do you handicap the chances of them doing it and what would be the financial market consequences of that? >> Okay, so this gets back to actually the question we didn't tackle that you asked earlier which is what were the sort of effects of all of this? And I've mentioned earlier in this um uh um discussion that I'm not a big believer that QE or QT have significant effects. I think their biggest effects were always on signaling. So if you look in the early days, the moves that you got, I mean, there's always a liquidity move. So a lot of the Fed research, if you look at it, shows, oh, we had a 40 basis point move um on the in the 15 minutes after we announced. Well, yeah, because there's a big liquidity effect. What was the effect over, you know, um the next several days after the market absorbed that, right? >> Probably not that much. And what you do see is that it's basically a credible commitment to forward guidance because if you're saying, "Hey, I'm going to be buying bonds, you're clearly not talking about raising interest rates." So the forward term structure of interest rates is effectively credibly absorbing your forward commitment through QE. >> Okay. So it [snorts] it probably had an effect there. I think they completely destroyed that effect in the same way that their um what was it in was that 2004 or five? Remember they said we're going to keep rates low for an extended period. >> Right. And then six months later they're hiking and everyone said okay well we'll never believe you again. Right. Right. That's why QE was sort of necessary later. That's that credible commitment. Oh but we're buying bonds. Yeah. You have to believe us. >> Okay. But then of course they blew that in 2021 and 2022. Right. [laughter] Right. So I don't think it'll ever work the same way again. Um what it has done is go back to what I said about what happens to the Fed funds market. >> Yeah. >> Fed fund market becomes much more stable. So actually you see a much lower level of interest rate volatility in the most fundamental interest rate in the markets and that affects the volatility structure of the entire curve. And so as you go back to a corridor system, a small balance corridor system where you >> scarce reserves, scarce reserves, we'll call it >> scarce reserves. >> You are going to have as you had before screw-ups. they're gonna get it wrong. The rate's gonna bounce around. >> And that's probably a good thing. I mean, I I'm a big believer in the view of Minsky moments happen for a reason. If you create too little volatility in in in markets on a persistent basis, if you as a policy maker try to stamp out any source of volatility, you're going to create a big problem, right, >> rather than a bunch of little problems. >> Oh man, Marvin, I got so many things I want to talk to you about. Um, [laughter] Let's just uh let's do these ones quicker because I I um and we'll start with I heard you talk about the belief that China is stronger than the US militarily, which I found kind of shocking. Um why don't you explain to people, you know, I'm sure that there's, you know, caveats to that discussion and stuff, but I at the very least they're stronger than I guess the market understands versus, you know, versus expectations. They're definitely stronger. Why don't you talk to people about what you believe there and why it's important for markets? >> Yeah. So I think the issue is so what I would say very precisely is I think they clearly have overwhelming superiority and would easily win a war in the Western Pacific. >> Um uh a global war it's not yet clear but they're clearly moving in that direction. Um uh but right now I mean it it's just straight up fact. You can look at the um you know uh missile advantage they have in the Western Pacific land-based um intermediate range um hypersonic um precisiong guided missiles that have a range out past Guam. Um and they have literally thousands and thousands of these things. You cannot bring a large US surface ship into the Western Pacific without it being taken out by one of these missiles. So all of a sudden, how is the US Navy going to actually engage China in a war on this? Now, the one thing that you have is submarines. And so what this probably means is that you have a situation where US submarines are preventing ships from coming into China. But China is also preventing any ships coming into Japan, South Korea, Taiwan, the Philippines, any of the US allies in the region. And so it's really a starvation game. And when you look at it that way, um Taiwan is not food uh self-sufficient and has um uh about three months worth of food. South Korea, same position. Japan has about 5 months worth of food. China though it imports a lot of food has actually that's largely uh um uh you know extras in their their diet. they have actually made it very um clear state policy that they are um uh food self-sufficient in a time of war. So, China actually doesn't face that that that problem. They've built up massive supplies. I mean, a lot of the runup in commodity prices um at the beginning of this year um was yet another significant build in um uh all sorts of raw commodities in including oil. um which by the way adds a downside element to oil when you look forward right as they stop doing that and so I I think the point is very clearly that if China wants to they can just announce an embargo over Taiwan and there's not a lot the US can do about it um >> okay [clears throat] >> now you one of the things that you've I've also heard you say is that the FX reserves that China owns of US treasuries um you said that they were a sunk cost to their re-industrialization. I thought this was a very interesting comment. I've often kind of been surprised when people have said, "Oh, the US has got the negotiating upper hand." And I'm like, "What do you mean the, you know, China owns all those bonds?" And I get and I and I guess I understand the argument that the US can just zero them overnight. But you're I found it just fascinating. You were thinking they've already kind of zeroed them in their minds. Like they they >> I definitely think so. And and and and by the way, like look, this is uh um let's go back to this this le leverage point in in a moment because I think what's been going on with the the negotiations this year, there's something definitely needs to be explored about an internal weakness in China that is under appreciated. Okay. But to your exact question, you know, my take on China and what they've been doing is, you know, they saw back in 1991 a an army um a military that looked identical to their own in the Iraqi military. [snorts] Um it had the exact same equipment, the exact same technologies. Um and it was actually not even that much smaller than the Chinese mil military. I mean, Iraq had an immense army um uh as a sort of military state as it as it was and their entire military was eviscerated in 48 hours on the highway of death, >> right? >> And China had always [snorts] counted on strategically that it was such an immense country with such a huge military that that would prevent anyone else from attacking them. >> And they saw, whoa, that's not true. These Americans have such superior technology and industrial capacity that they can wipe us out in the early days of the war and there's nothing we can do to fight back. And so they've pursued a very clear path for um the past 35 years to unwind that. And you know we in the west think about um efficiency in terms of profitability in economic efficiency but in their mind it's about time efficiency. How do I as rapidly as possible industrialize myself and simultaneously if I can do it de-industrialize the US and any other adversary >> okay >> and climb the technological curve. Well, to do so was to effectively subsidize their manufacturing and this is why we have in every single industry, industry after industry, all this excess capacity. Now, if you think about the sunk cost, the losses that just the Chinese auto industry is making right now, I mean, the reserves that this pales in comparison, it's nothing, right? I mean, they're probably going to lose their, you know, almost a third of their reserve value just in corporate losses this year in in in China. >> That's just one year, right? >> So, what do you what do you push back on the people that say that that the f the Chinese are actually very weak and they can't afford this and it's just a house of cards and what would be your push back on the China skeptics? Um look if so there's there's some things that the US could do very immediately that might disrupt China's plan. And I'm going to leave it there. But >> if the war isn't over in 48 hours, then it's China's war because we run out of missiles very quickly. >> Okay, forget about the war. What about just from a financial point of view? Like you're arguing that they're actually, if I'm not mistaken, implied in there is that they're actually much stronger and that they've achieved more than people realize. and and there's all these folks that are, you know, very like, let's just call it the Kyle Bass, you know, collapse in on itself. Uh those kind of China skeptics. What would you say to them in terms of their pessimism regarding their economy and their society? I would say the big difference between China and Japan um I mean there are a lot of differences but one of the key economic ones is that um in China you have one entity um that has its own um uh source of credit and completely controls savings and investment in the economy. >> [snorts] >> In Japan, you had a bunch of zyatu, right? >> Yeah. >> And once one or two of them started to crumble, they couldn't keep up the wall and the whole thing um collapsed. So, it's not it there's no question China's overinvestment has a cost. But if you save here and you know you can absorb massive losses, yeah, it Yeah. You paid people to dig ditches and fill them back in again. And that's a huge economic loss. There's no getting away with that. But if you're saving so much that you can afford that, you're going to do it. And if you have the liquidity backs stop, the PBOC behind you to get you through the liquidity portion of that because there's only one entity, >> you're done. >> It's fine. So they they will have losses. There's no question. The Kyle Basses and all them are going to be right about longun economic growth. But getting them through this is is difficult. That's what I find really interesting about these trade negotiations is that the reality is that China does hold all the cards in my view. I mean in terms of it's not just rare earths and the permanent magnets that you produce with them. It's APIs for pharmaceuticals. It's all these other things. They could literally shut down global industry outside of China like that if they wanted to. Within three to four weeks, people would be running out of serious supplies all over the place. Why haven't they Why have they submitted to these negotiations? There clearly is something much weaker underneath that I'm missing. Oh, that's fascinating. All right, Marvin, you know what? I'm going to call it there because, as I said, I I still have more questions, but we're going to we're going to have to get you back on the show. So, you know, as long as you promise to come back, um, we'll stop there. But before we do, let's, uh, end with a couple of things. First of all, we have to do our Trader Desert Island uh, picks. And for those who don't know this game, we play, there's a BBC, um, show called Desert Island where celebrities pick 10 albums or bands that they would be stuck on an desert island with. We do Trader Version, which is three albums or three bands and then we ask them to also pick a trader that from any time in history. you could go back in time or any time uh that they would want to be stuck on the desert island with. So, we'll start with your three bands or albums. What do you got? >> Um so, Weezer, um >> Weezer, >> great greatest rock band. I I mean, I love the fact that Weezer, like literally every single album is a good album. They've been around for 30 years and every single album is good. There's very few bands you can you can say that about. Do you remember in that Windows 95 when they they they showed us the great video and I think they put a Weezer video in it. >> Yes. Yes. Exactly. I mean, they're that old and yet they're still turning out great music. >> Okay. So, Weezer number two. >> Weezer. And you know what? This is going to re really um throw throw you on that that one. Um is um Kanye West. >> Oh, okay. because I was having this debate with my nephew about the greatest band and I was saying Weezer and he said, "Yeah, but what you just said about Weezer is absolutely true of Kanye West." And I had not paid enough attention. I went back, "That guy is a mirror musical genius. I'm not kidding. He may be a You're not afraid that you're not afraid to take the the the [laughter] controversial stands." No, he may be a nut job, but is really a a musical genius. >> Well, I'm just glad you haven't picked him as your trader that you're going to hang out with because you there's not going to be enough baby oil. Okay, number three. Uh, so getting down to to three, it it it gets um really hard, but I I have to say that um one of the things that um I've been um uh listening to a lot that my kids turn me on to is is um 21 Pilots. I I I I just really like their stuff. It's it's good. What can I say? [laughter] >> I have to give you credit. Those were not three that I would expect. And I love it. It's just it's just emblematic of the outside the box thinking that you have. All right. Which trade are you taking on your desert island? >> You know, I'm going to take one that is um it may seem like a self-serving advertisement, but it's not. Um there's a reason why I've started this little uh podcast, Thematic Edge, with my friend Mark Ferington. >> And it's because he was a client. You know, I started working with him as a client 25 years ago, and this guy's ability to call turning points is like no one else in the world. He has never missed one. >> He's had a couple false positives o over the last 30 years, okay? But he's never had a false negative. He's called every single turning point. And this is one of the great problems that I see all over the place in asset management today is that everybody wants uncorrelated. You don't want uncorrelated. You want perfectly negatively correlated with the equity risk premium. That's what you want. [laughter] And he does it every time. >> So listen, I I don't didn't know you had a podcast. Take your take a moment to to pump the podcast and then after that tell us about your letter and uh give us the whole nine yards. >> Yeah. So, um I just started this um podcast with um the aforementioned Mark Ferington um who has his his own um Substack um called the Global Watchtower. Um and we just we always talk uh about these things ourselves and we and um again my wife suggested you guys should actually put this out there people. So, it's it's just us talking about our our latest thoughts on on markets. It's >> okay. So, where do they find it? You can find it e everywhere. Um Spotify, it's published directly through Substack. Um so if you look for my thematic markets uh substack or my seriously Marvin substack, you can find find it on either of those. Those are my two substacks. Thematic markets is my institutional grade research. It's um paid research. Um that's where I really dig into the issues. I don't write on a regular schedule because it's basically when do I have something interesting and deep to write about and have had um done the research be behind it. Um in this era of information overload I think it's really important not to just publish stuff just because it's you there's a the calendar tells you to. But I do violate that principle on on seriously Marvin. that is the one that we talked about at the beginning of of this up seriously Marvin on Substack. It's um uh just sort of my um weekly unconventional thoughts on the world that haven't been as thoroughly researched. Um so, you know, take them with a grain of salt. >> There you go. Thematic markets for the institutional uh you know, high netw worth individuals or even just guys that want to learn a lot more. That's your institutional type product. And then seriously, Marvin is your uh Substack that for it's free. It's free for everyone. So, everyone should go and sign up and listen to it. Um do you want to take a moment? Are you on Twitter? Do you want to tell people about that? I don't >> I'm on Twitter. Um both uh as Marvin Bar and as Thematic Markets. Um Thematic Markets probably the one to follow because that's the one I'm more consistently um posting from. Um, and you know, uh, that's Yeah, that's pretty much >> There we go. Marvin, this has been a real pleasure. I've really enjoyed this and as I say, I hope to have you back. >> Likewise. I really enjoyed this. Thank you very much for having me on, Kevin. >> Thanks. Take care. >> Take care. >> All right, Patrick, lots to talk about this week. What do you got for us? >> Boy, uh, it, uh, it is definitely interesting. like I don't think that um there has been an extraordinary move in the markets but I actually think it's quite significant what we're witnessing actually happening right now and it's a great opportunity to talk about it. So just on a on a bigger picture basis that we want to highlight that we had that pig in the python moment of news. We had four central banks coming out uh all uh within 24 hours of each other and we had uh five of the mag seven earnings all coming out within um within 24 hours of each other all lumped into one and it's like the market was almost in a holding pattern waiting for this. >> Yeah. >> Then we got it like the mark we just uh got a big wave of it and now we get to sit here and look at the charts as to what's happened. So let's dive into this. So overall, the first reaction is the S&P. A little bit of weakness and fading off the high. Nothing that I think we should be overly alarmed by. I I think we can talk about the S&P in a moment, but I feel like what we should first start off and talk about the impacts where we saw them first and foremost in um the FOMC. So Powell uh at least uh in the prior meeting it became very very clear that they had a path of three rate cuts this year and the market went and almost immediately priced all three rate cuts in. Right. And >> well I'm going to push back a little bit there. I don't think it was very clear. I think the market interpreted it that way. They wanted to interpret it that way. >> Fair. Fair enough. They wanted to interpret it that way because it was priced in like at >> 100%. It was 100% priced in. It was 100% priced in. Yeah. And uh and he took a little bit of that dovish uh um tailwind out of the uh out of the market. Said uh you know it's not 100% and the market went through repricing. So um you know the way I I want to start off by showing it here is this is the Fed funds futures and we can see that we went from like a 93 or 95% probability of a rate cut in December down to 63%. So now it's like a two and three. It's still better odds than not that there is going to be a cut, but um it was a a substantial repricing. And when we look at where that was, I I think just looking at the very shortterm December 2025 sulfur pulled out 10 basis points almost instantaneously. uh the moment um uh that FOMC uh statement and uh conference was over and so uh quickly that market is taking some of that doubish. So, I'm going to just give you an opportunity because I think you have a great way of of interpreting what because we talked even before the Fed meeting and you you almost set it up this way and so I'd like you to kind of give the playbyplay of what we're thinking about and uh and how you now see it playing out. >> Yeah. So we I had the good fortune to chat on one of your uh big picture trading uh seminars and we were chat chatting before the meeting and the way I looked at it was it was very clear we were going to cut this this past meeting you meaning the Wednesday meeting and there was no debate there that was that was fully priced in. The real question ended up being how did he guide going forward? And at that point we had a situation where I think that the the the December uh meeting was pretty well fully baked in for a cut. I think it was 98% or something like that and then the January meeting was at like 60% or something of that nature. And one of the things that I highlighted was that I said I suspect that the reality is that that is too high of a certainty that the Fed is going to cut. And my reasoning was that yes, I understand the bearish argument and about how they're just returning back to a less restrictive space, but at the same time, we still are in a situation where the Fed has now been four years or something since they've achieved their inflation target of 2%. Um so you can't argue that they've that they shouldn't be at least somewhat restrictive. There's a lot of in uns um kind of uncertainty regarding what the um employment data is telling us because of the ICE and the immigration issues. And not only that, we're not even getting uh those numbers anymore. So the reality is that without those numbers, you could make an argument that the Fed uh should just be on hold, which is what um Powell uh highlighted. But the real thing that I kind of was focusing on was it's difficult to say we're in a restrictive monetary stance with financial conditions ex you know being as loose as they are. The stock market's flying things are going well in terms of financial conditions. So if I'm sitting there at the Fed, I'm not getting any information. I see f the stock market ripping. I see financial conditions really loose and I'm not really sure where what is neutral. I got to think well at the very least I'm going to take a little bit of that certainty of future cuts out of the market and I think that's exactly what we've seen. So we went as you highlighted we've gone from a 100% chance of a cut next meeting to now a twothirds chance. Uh the January meeting was kind of um where were we? So that's now a 33% chance of a cut there. So in essence, we had kind of almost two cuts, like 1 and 3/4 cuts priced in for the next two meetings and now we're at one cut. And that's what's happened. They've introduced some uncertainty and they should because it's not this, you know, the Fed started easing and it's just going to continue on there. And Marvin highlighted this and he he definitely believes the Fed's making a mistake. I'm not sure as confident that the Fed's making a mistake, but I do believe that the Federal Reserve understands that with financial conditions doing that, it it's increasing the chance that they are making them. They are too easy, >> you know. Uh I I'll push back uh from just what I'm seeing. Like, okay, first of all, uh let's let's uh take the boogeyman out of the recession word for a moment because in order for a really bad recession to happen, um there it creates there has to be some sort of negative feedback loop that really starts spiraling things out of control. Uh so let's call it an economic contraction period. Let's just uh to to get take that off. I still think the risks are very high. You know, the interesting thing is is that like I like watching the poly markets. I know that it's u not an official thing, but the poly markets is a betting market where people put real money to work in terms of betting uh on outcomes. And so I like it when it's not an analyst, some economist that has his job on the line in terms of uh you know whether he's going to be too bearish or too concerned about a recession. here. It's just straight out money. People voting win the machine. And right now, the odds of a recession next year are being uh bet on at 40% rate of a recession. And uh and I I see certain things that still to me uh are showing those signs. As an example, there was that big article about how slow things are in Vegas. Now, I know I don't want to specifically talk about that, but I'm here in uh Mexico in Plyel Carman where where I have a place and I have to tell you right now is the beginning of high season and I haven't in a decade seen it this slow. It is dead over here. This is a huge tourist area. There's huge flow. Now I'm not saying that that is some evidence but I feel things are tight and uh and and and I feel that uh it is hitting main street and it may not result in some nasty bare market and some nasty recession but things are tight and I'm not convinced that things shouldn't be looser. I actually think that >> so but Patrick let's just be very clear here. We when we're trading instruments, we are trading the forward expectation of where the Fed is. And so the reality is that that concern you have is already in the market in that the like let's look at this the March 2027 is trading at 310 the 3 months so far. >> So yeah, we're like we're basically at 3% for uh for the uh December 2020. And and not only that, as it doesn't occur as fast, it it we have to shift it and then maybe it's not going to be as deep. And so we have to just keep that in mind that we're not trading whether the economy is going to roll over. We are trading how much the market has priced in about the chances of the market of the economy rolling over and the Fed having to cut. And so what has occurred now is that people have had to change their expectation of the Fed in terms of what they do. And listen, I'm with you. I actually think the economy is weak. And I do suspect that we are going to have problems and it will roll over. Does that mean that those sulfur futures are a buy? It might, but it might not because it the the rollover might be shallow enough and it might be that it just gets it's just it just the Fed follows the curve down. >> Yeah. So, you know what? My look at the sofa futures is not so much about what whether I know I'm going to be right about uh them ripping because the rates are going to go. I actually think it's actually still incredibly asymmetric to be in this trade because I I look at what is it that would uh um cause uh a 100 basis points to be uh knocked off of these to where if you're long these sulfur futures out to ne end of next year that they're going to be ripping to a 4% rate. Now, it's possible that probability isn't zero. Uh, but I don't view there. I think there would have to be an incredible pivot globally on an economic basis in order for that to be a risk. >> But, Patrick, well, here I could I could make the case for that. We have this situation where there was all the uncertainty caused by the liberation day tariffs and the and the the the problems with the trade wars. We settle that down and then all of a sudden we have a situation where all this AI spending and all this other capex spending and then the fact that the rest of the world is doing fiscal we have this situation where there's a lot of money in the system and we don't roll over and if we don't roll over and imagine instead of losing jobs we start adding jobs I could see the curve very quickly shifting and taking out that entire 100 basis points of cuts that are out there. No, I don't think that's gonna happen. >> Probility that probability isn't zero. And I think >> I don't I don't even think it's a sure thing that it doesn't like. >> I think that you're a little too >> I still think that the asymmetry is completely the downside risk to me is uh and on a especially on a probabilities adjusted basis versus the upside. I still think that you're going to carry uh with less risk and if the outlier happens I think that the upside rip can actually be very rewarding relative to the risk of >> upside rip meaning that the Fed cuts folks like just make be clear I want to make sure um so so one second Patrick so I I I hear you about that one thing I will will kind of agree with you is that I I think that the kind of really the benefit benefit to that trade your trade is if the financial markets come unglued and if we had a situation where like all of a sudden let's just imagine that Nvidia misses or let's say next time it misses like everyone kind of pulls back on the AI all of a sudden we get a dramatic repricing of stocks we get a 25% correction and people start losing jobs which we're seeing all over the place so let's let's say accelerates but it doesn't just accelerate on an economic basis but it accelerates with financial markets, risk markets getting hit, then I agree. I I think that you could see a situation where that terminal rate, like the forward point at which the the Fed is going to cut to goes from 3% 310 down to 2%. Like, everyone's so sure it's 3%. Like, why why are we so sure it's 3%. It wasn't that long ago that everyone used to tell us it was going to be zero again. >> Well, I don't think she the case. So I'm agreeing with you there, but I think that your bullish scenario on sulfur futures is very dependent on it being accompanied by a riskoff real problem and therefore is that really the best bet if that's the case? I don't know. >> All right. Well, listen, uh it's it's a it's what we're going to talk about in months to come. I mean, this is uh this is why we do this show. Let's just a quick thing. the entire right across the entire duration that you had rollovers. The 10-y year uh started the giving back, the third year gave back. Uh do you think any is it just that it was a little too far ahead of itself or do you actually think something meaningful uh pivoted here on the on the long bonds? Well, so I've always been scared of the long bond and um I haven't been able to be long that for years and I continue to be worried about it. Um and I do suspect that the next easing cycle the curve will get exceptionally uh steep. >> So I don't I continue to not believe that it's that's the place to play. Having said that, having said that, yeah. Yeah. Short term, the real problem is that that we have this situation where if the Fed actually gets tighter and let's just let's just say the Fed starts pushing back and saying we're not going to be easy, that's actually going to flatten the curve. Meaning that we're going to get a situation where the long end is going to do better. And that's the part of the kind of paradoxical point of view that people a lot of people fail to realize. They think, oh, they want the Fed to cut. That's going to be great for long bonds. A Federal Reserve that is cutting too much and potentially causing inflation is actually a long bond investor's worst nightmare. And really, if I was a long bond investor, I would want I would be frustrated right now that the Fed is as easy as they are. And I could see a situation where if we got like let's imagine my um scenario where the economy ends up being stronger than expected occurs and the Federal Reserve gets a backbone and starts pushing back and and taking out all those cuts. I think you could see a strange situation, Patrick, where the long end does way better than people expect because there's a lot of steepeners out there and folks will say, "Okay, the Fed's going to tighten into the next recession." And that's what remember that's what we had when they went in 2022 and started their tightening campaign. People kept buying the long bond because they expected the Federal Reserve's front end tightness to cause real pain out and and actually cause a recession. So I could see that as well. I think it's a very difficult time to be trading all these things because there's so many nuances. We're so much we're so much on the cusp of so many things like it, you know, we're sitting there on a knife's edge going, you know, are we aren't we going to go over and there's so many inputs. I just think there's better trades out there than trying to pick the trade the long bond here. >> All right, so let's talk about the number one thing to watch this week. >> The dollar the But listen, Kev, who's been calling this? Who's been calling this? I don't know. Have you been calling it? I can't remember. I'm so freaking >> I can't remember what you said last time. Did you Were you bullish? I think you probably were actually. You're always bullish. So, the reality was >> No, I was. Anyway, >> just tell us what you said. I'm sure like, you know, people will remember other folks other folks pay attention than I do, so they'll all >> We were looking We were looking to see whether or not it was going to bullishly break out. And after the Fed uh the well the ECB really it was after the ECB where the breakdown in the euro happened just between yesterday and today. Yeah. >> Breaking now to a lower low. But the pound sterling has been eating it on the downside for for for two weeks now. And it's now broken to a lower low from its July low. So we have a double top uh and a breakdown on the pound sterling. The euro is breaking down here. not really the weakest of the currencies but definitely starting to turn. Then we have a after the Bank of Japan spoke uh that it broke to a higher high like it it's been basically three months above its 50 four months above its 50-day moving average >> and that's the higher high on USD JPY which is yen weakness just for those who >> Yes. Yeah. weakness, US dollar strength. Uh so this thing is uh is autopiloting and uh and the US CAD after Bank of Canada hit that base at the 50-day moving average trading back higher here. Like you can pretty much go right across the board and actually even like let's say the Aussie and the Aussie is probably the most neutral of the currency pairs. But point being that uh that things are shaping up for a dollar move. And this is the interesting part is is that the entire reflation trade that's been working so amazing all year has actually been grounded and anchored off of a weak dollar and um and it's been such a consensus trade. And I know you were gonna we've had the argument where you're saying well it's consensus but I don't think everyone's positioned that way and so on. like I don't think we need to go there but point is is that a US dollar rally I think here is going to be an intermarket disruptor uh because it's going to uh have knock-on effects about questioning about every other thesis that's been working all year and if this uh grabs hold now first of all I'm not in any way structurally long-term bullish the US dollar this is not me making a long-term bull call it's about the fact that we had a downtrend for nine months. That was a pretty decisive thing that became outright consensus. >> And uh and now we're getting a counter trend that is going to basically wash out uh and flip the script. And the question is is that if we have uh this uh in any way um underway on some sort of a rally, the question is is when is it going to spill over into all the other asset prices, including potentially corrections in the commodity space? >> I can't disagree with you there, Patrick. Actually, I think that's some good analysis. And we just have to know, you know, the reality is that you guys on that podcast you cheat on me with, I suspect that Luke Roman is being the highlight and everyone's tried to have him on and you guys haven't had Brent Johnson on. Uh, >> actually, uh, you didn't check. It was Brent Johnson was yesterday. >> Oh, it's so funny I say that. [laughter] >> What are you guys doing having Brent Johnson on when when the reality is he's probably >> But but you know, he didn't talk much about the US dollar. Of course not because Oh, great. I'm going to tune in for that one. Um, yeah. So, the reality is that the milkshake folks, we haven't heard, you know, I haven't had to listen to people talk about milkshakes in so long and it's got, you know, it's been just beautiful. Like, it's, you know, a year of almost no milkshakes. And I suspect that you're correct that we could get a rally here that brings back the milkshake milkshake boys. And uh at that point when they're start talking about that and you start telling me how when you structurally become a long-term bull again, well then you then I'm going to get bearish. >> All right. >> Yeah. But no, I but Patrick, I can't disagree with your analysis. I think that's great analysis about the short-term squiggles. And it does feel like that is occurring. It doesn't it there's very few pe people out there that are advocating long positions, right? Like let's face it. >> And and and who's talking about this? Nobody out there is >> do you feel like one of the things I I had a buddy ask me the other day um he was asking about you know what I've seen on CAD and I was trying to and he says like usually you're good at understanding the mood of the markets and I don't know about you Patrick but this last like two to four weeks I everyone's been so focused on like AI and the US stock market that it feels like nobody's trading anything else and nobody's talking about anything else >> and it's and it's very difficult >> setups and some >> like everyone's just so busy, you know, speculating on what Nvidia is going to do or whatever and they're not even thinking about all those other things. So, one of the things that I'm finding difficult right now is to get a judge of the mood of the markets. I can tell you that the like the mood that I see is the bulls and the year-end rally, you know, folks are are overjoyed and basically slamming the hoop and, you know, taking victory laps every single time. >> We're going to talk. We're going there. Listen, I want to talk about that. Let's >> Yeah. And and and then the other mood I see is that the bears are just despondent and think the world's ending and they can't understand things. and th those two uh kind of feelings are just overwhelming my feed, my traders that I talk to and and that's all everyone's focused on. So, I look forward to a point where we're talking about the dollar again. I look forward to us talking about the the sulfur futures and other things of that nature because it it felt just overwhelming to me the focus on the stock market. Well, you know, it's funny is I I everyone is obviously focused on where all the money has been made on the perception that the money will continue to be made, where it's where it's been going. >> Bingo. Yes. >> The question is where is the money about to be made that nobody's talking about because that's the next big trade. >> You should make a bumper sticker with that. Big picture trading wisdom. >> Well, it's it's big picture trading wisdom, but this is why people tune into the huddle, sir. This is like we we we dig deep. We dig deep on the huddle. Okay. So, uh so let's uh just a quick thing on uh the asset that sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh sh shall not be named. Uh the um Bitcoin had a bounce to the 50% retracement, failed at the 50-day and it's at edge of a cliff and I uh and to me this is the um this is the stereotypical risk asset. It is it is the risk asset and if and I think if Bitcoin here breaks uh that's something you shouldn't ignore. >> Do you think Bitcoin is going to lead the NASDAQ down if that's the case? >> Well, not necessarily. It's just a why would the NA uh the Bitcoin be going down at all if uh there wasn't something bigger going on in the risk? And uh do I want to market time it that the moment Bitcoin breaks, I'm going to short the NASDAQ? I don't think I'm going to make that kind of equation. But it is definitely one of those canary in the coal mines that something's wrong. It'll be like something's wrong if Bitcoin's downtrending uh in in an environment where we're risk. It's it's not supposed to be happening is my opinion. Want to push back on that? I no I understand that argument but I I tend to believe that the Bitcoin's suffering because money is going into the AI trade and and they found and gold I think even gold has started to take money out and I've seen days where it felt like there was like programs going on where gold would go up and then that Bitcoin would go down. It felt like there was waves of of switch occurring. And I suspect that if you're sitting there and you're um I don't know, let's call a high net worth family and you're got you know, you know, let's say you have 5% in the bucket of like alternative currencies that will have gold and Bitcoin. I think that they were chasing the positive momentum on gold and selling the Bitcoin and it doesn't feel like anything more to me than just folks being bored with Bitcoin and going on to the next trade. Having said that, Patrick, I'm with you. It's trading like I think it's headed a lot lower, but I'm I'm structurally a long-term bear, so I I kind of always feel that way. >> Okay. So, so let's talk let's pivot. So, we were FOMC. What are the impacts of the interest rates? We kind of went a little bit farther with the Bitcoin, but let's circle back to the other big thing, which was the earnings, right? So, we had the MAG seven earnings. So to me there is uh um the way that uh I um I think it was Charlie Mceligotate that was saying like that would define the current mark is anti-dispersion anti- breath and complete conc max concentration uh which is essentially uh saying that at this moment there there is no breath in this market the indices are telling a very different story than most stocks are and really the entire performance of the market is anchored off of the fact that the MAG7s have 36% of the market capitalization of the S&P now and so how seven stocks go decides everything and so the best way to to kind of illustrate this like Kev the S&P 500 is literally a stone throw away from 7,000 yesterday was at an all-time high and this is the the breath of the number of stocks above their 50-day moving average is 41%. 60% of stocks are downtrending. This has been deteriorating all year. This is like the fact is is that there is nothing actually under the surface of working. So what has been working? It's all been concentrated in what the mag sevens have been ripping and the mag sevens from uh the uh liberation day bottom to top has been a 76% rip in the last six months right and so so the entire S&P 500 has been on the back of this and that and it's now even now narrowed down to the SMH because the semiconductors have are one of the few areas that have broken out of a little horizontal uh triangle formation and are literally at this moment still in bold trend making this rip making AMD, Intel uh Nvidia and company all like the the backbone of this last impulse on this market and this is why I felt that this earnings was so critical because I am a seller on the idea that the market is going to rewiden on its breath and that somehow there's going to be this big save of everything coming back up to keep this going. The reality is that if the S&P is going to 7200 or 7,400, it needs the AI bubble going. It needs it needs the MAG7s going and it needs to run. And so what I wanted to see on these MAG7s was do they show that exhaustion that this is they've already fully priced in everything and there's no uh new incremental buyers to take them higher or that there's still momentum here for them to run and keep things going. I think that's a very important puzzle to solve because if these MAG7s, we'll go through them right now, are not actually going to be able to take it higher, then it's now going to be the semiconductor index alone and Nvidia's [clears throat] earnings are in a couple weeks and it's two days before the November opex, which is basically going to put the entire market into a this narrow thing of where it's going to be whether Nvidia beats or not that is going to decide whether or not the AI bubble bursts this year. Uh it's uh is is my little speculation. Okay. Like so so here it is. So with the MAG7s uh a little bit of gyration here on the MAG uh 7 ETF, but let's actually dissect what happened on these earnings. And so let's start off uh with uh the one that uh that broke, right? The only one really badly broke and that was Meta. and uh and Meta uh was kind of grinding it out for months. It tried to get above the 50-day moving average going into its earnings. Clear disappoint stock slams, you know, 10% lower and um and more importantly is decisively trading below uh a trade range established for three months. Whether you want to call that a head and shoulders pattern or whatever geometric shake shape you want to jam on there technically bottom line is is it broke with a breakaway gap through this trade range. This is the only chart in my opinion on the MAG7s that is decisively bearish. Actually no Netflix if you want to include that one is pretty bearish. But uh but the next uh one which was disappointment uh that followed was Microsoft. But Microsoft even yesterday or the day before wasn't that bad because in my opinion it had sort of no business being up here before its earnings anyway. It should have been a post earnings move that that decided whether or not it belonged near 52- week highs. But irrespective it gapped down and has been selling all the way back to the trade range that it was establishing uh into the latter part of the summer. And so that could develop into a double top. Now, I'm not calling that yet, but we're right at the 50-day moving average. And clearly, there is zero momentum in Microsoft right now. Zero momentum. That's more important than whether it's technically breaking down because in order for the S&P to make the next high, it needs leadership and it needs a few of these MAG7s going. So, the question is which ones are they going to be driving this momentum to keep feeding the the index higher? As far as I'm concerned, Meta and Microsoft are in big enough trouble where they're not going to be able to contribute to the S&P working its way higher. Now, the one that uh did uh gap higher was Google. But now, Google uh gapped higher and somewhat holding the gain. But to me, my I always have a fear when a breakaway gap like this happens that they develop into what's known in technical analysis as an exhaustion gap because it's happening at the end of a symmetrical move which is like a measured move like this. It means that while it was bullish and it certainly contributed higher, the question is how much higher is Google going to go from these levels? I mean, uh, is there room for Google to go another 10% or 20% higher to make that that impact on the index? And, uh, while it's definitely one of the most bullish charts on the MAG 7s, I'm skeptical that this thing is going to be clearing 300 and 320 with momentum on the upside. And so, to me, this is a a neutral in regards to its upside potential. the then the only one as far as I'm concerned that came out yesterday was Amazon and that one uh was the most bullish out of all of them. Uh the the fact that it consolidated for several months and the breakout was not just a breakout to new high uh it was a breakout to all-time new highs like it cleared every previous resistance level with a very clear gap. Here's a here's a one mag 7 that could run to 270 to 290. Like if I was to pick one MAG7 to be bullish on, uh Amazon would be the one. And this is this is the one that can in my opinion offer some, but it's not the big super big one anymore. Like when you're talking about Nvidia having a five trillion cap, you know, Amazon isn't uh got the the kind of muscle in this uh to to be the the big incremental change and then you have Apple which uh gap higher but gave it back already finishing again some of these measured moves. So it wasn't exactly like you know that this was going to create a huge tail. Point being, I honestly think that other than Amazon that this is now up to the semiconductor index to keep this going. I I don't see these MAG7s in a position uh to be the ones that take the index to the next level. Opinion. >> I listen I thought that was some great stuff. I just let you go. I let you cook. You're cooking. >> Yeah. But you know, but any but any comment though? Um, I I I do think that you're correct that there's some exhaustion out there and I I I think it's going to be difficult for the these stocks to continue to beat forward guidance, right? Just like when we talked about the the Federal Reserve and the and the real problem is for you to make money on those sulfur futures. You not only need a recession, but you need a recession that is worse than what is currently priced in. And increasingly, I feel that these MAG7s are pricing in some forward expectation that's just so high that it's going to be tough for it to, you know, to meet it. And I I could see a situation where we get into a point where they're actually meeting the the kind of proper numbers, but the expectations were so high beyond that and the excitement and everyone's just long that it's uh the the things just sag on their own weight. And that's the one thing that I just kind of find, you know, funny about this market is that people assume that there's no uh top end to how high these things can go. And I and I do understand that um kind of thought process that really there really is nothing stopping them. But I remember what Dennis Garmin used to says like it's he used to say something like you know for a stock to keep going up you need a lot of new buying and all you needed for it to go down is for you know that new buying to just dissipate dissipate >> right like the reality is that there's that you know the world's changed the world's changed a little bit now with all the buybacks and things like that but you know someday you know Jensen's going to want to sell some you know Elon's going to sell some Like I was at some point this this people are going to want to monetize this and it just doesn't go on and on and on forever and there's valuation levels that just make no sense. Like you know I wrote this piece Patrick like highlighting you know the fact that everyone's talking about this being 1998 or 1999 and that they're expecting the things to still double. What they fail to realize is that in 98 or 99 like the the S&P was 75% of GDP. We're sitting at 225% or some crazy number like that. So, so if you think this thing's going to double, you think the stocks are going to be worth 450% of GDP? >> Sure, maybe. >> I It just these things just don't feel like good bets to me. And uh I know that we just end up looking like grumpy old men taught yelling at clouds. >> Well, it's a pretty big cloud. No, but the >> [laughter] >> uh the uh >> you know what's going to be funny though, Patrick, is that the thing will turn and then everyone will have called it. That's the best part. That's going to be awesome >> that we're just going to everyone's going to be like, "Oh, yeah, I called it. I called it. Yeah, yeah, yeah. I've been warning for this for a while." But there, you know, these will be the same people that were like criticizing us for, you know, pushing back on the the bullish narrative. So, so what I want to uh just touch on is is that I still won't rule out that the S&P has one more leg higher and uh that's because there's a two-eek window two two plus week window to Nvidia's earnings and um and in the interimm Nvidia has broken to all-time new highs. All the cement semiconductors are hot and there's going to be a lot of excitement about this idea of betting on Nvidia's earnings. Considering the kind of ridiculous AI bubble that we're in, I will not be shocked if uh if we have something that happen like Nvidia runs in the next two weeks up to 250 bucks. Uh like it's >> 250. I'm just there's your 7500 or whatever. >> Like that would be a lot, man. >> No, but a point point I'm saying is that you don't want to get in this thing's way just yet. Like this is there's no reason there's no reason why October 31st here on Halloween is going to have been the top of Nvidia. >> For sure. So, and so what what I feel is going to be happening is uh is in the next couple weeks a few of the other mag seven generals are going to be shot. They're going to reverse and you're going to see the narrowing of the breath going to go narrower and narrower and narrower and then you'll start seeing reversals on a couple of the semiconductors that aren't Nvidia. Maybe Intel peaks out and turns. Maybe uh AMD puts a short-term top in and starts to turn. you're going to see that it's becoming narrow and narrow and then all you need is the expectations to be high for Nvidia's earnings and um and they simply can't meet the elevated expectations. They reverse and there's nothing to hold the market up >> right buddy. I I like Yeah. All I'm saying is your 250 call then not call uh putting it out there for 250 it's going to be just wild if it occurs. Like I hope it happens. Like let's just let's just but uh but the the sem the symmetrical move is 250 right so like this is just using rules of symmetry um that is the measured move you know so uh so a move to 230 to 250 on Nvidia um is just a technical measurement uh and let's see let's see what happens but it the one thing is Nvidia's chart is still bullish like I you know I as much as I want to on it uh like like the thing is is that Both Google and Apple are at exhaustion points. They've finished symmetrical moves. They've already had big extended moves. It's going to be hard from think. But Nvidia has been trading sideways for two months and it just broke out to 52- week highs. So, it's not exhausted. It's actually been resting for two months. It's um it it's not it has more room than the others. And that's the crazy part. And maybe that's how this AI bubble ends. It ends with Nvidia having a eight trillion dollar cap. Who knows how ridiculous. >> Maybe it gets so narrow, the market gets so narrow. You'd already highlighted that it's moved from Mag 7 to SMH. Maybe it just goes to one stock. >> Yeah. Like and and Nvidia is just ripping and and it becomes the bubble and when Nvidia inevitably bursts, the whole thing unravels. It could happen that way, but you know, I don't think it's over. Uh, not for these stocks. But the one thing is is that when will we see the S&P 500 show exhaustion because there there isn't enough things pulling it up? And that's going to be the puzzle to solve. uh you know I I feel that uh it's now becoming incredibly clear that the November opex and Nvidia earnings are uh something to circle on the calendar for the next kind of inflection point for when uh when we could have some kind of uh a meaningful turn. And if that's happening with Nvidia trading up in the 230 to 250 range, I may even lean into a short. We'll see. Wow. go. But but but I'm not doing it now. I'm not short Nvidia. I'm not even I don't I'm not even contemplating on the short term or shorting Nvidia. But I but I'm just saying if we got there in the right conditions, it would be some sort of a convex way with some sort of spread trade or something, there might be something there to to play it. >> Well, you heard it. >> All right. All right. Anything else you want to talk about? Well, we just have to talk about precious metals here briefly like uh and and we can touch on gold, sorry, oil a little bit. So, let's just quickly on precious metals. This had that exhaustion uh thing and and everyone is still sure that gold will be at all-time new highs uh by uh a year end. I I was me saying that the last four corrections that happened the la over the last two years even though they were corrections sideways each gold correction was anywhere from 60 to 120 days of trading sideways not necessarily down uh and uh this was a swing high. I don't see this being different. Uh I I I'm a real seller that gold makes new highs this year. I feel that we're we're in a um uh it exhausted itself. We're going to be in a consolidation. The if it if the consolidation is like prior ones, then this will stay near or above around its 50-day moving average in a sideways pattern. But if this was truly an exhaustion move and then it could be a a deeper, more violent correction. I'm I don't think uh I'm actually so obsessed about calling which one of the two scenarios other than uh you know there was a a a swing high. We're going to go through a consolidation and I'm still long-term bullish gold which means these consolidations are buying opportunities. So probably in mid to late November into early December we'll have to start looking at where the buying opportunities are for the next uh kind of gold move. But right now, I think um even if here even if we get a bounce to 4,200, it probably will fade back to 3,900 and it's going to you're going to get chewed up far more in a trade range than anything else on uh on gold for the next little bit. The bigger question though is how deep do the gold miners revert? And this is this to me is a an uh what what I I'm always reminded of what happened with uranium uh stocks in 2024. And the uranium story in in 2023, the uranium story in 2024, and the uranium story in 2025 were all the same. And all the same scenario is super bullish uranium. And uh and to be honest, there's uh it will be the same story for 2026 and because there's a big macro fundamental reason why uh uranium is bullish and I think that it's good they're going to this going to continue. But it didn't stop the fact that uranium stocks went through two corrections in 2024. 30% drop and a 40% drop uh in uranium stocks that happened that were just buy on dips but there was maximum volatility and it caused huge pain during those pullbacks in the same manner I get the gold sto uh minor bull story I understand that they're uh that their uh balance sheets are improving their earnings are great uh everything is good and that story just the way uranium was bullish for three years. That gold story is going to be bullish for the next few years. But I'm wondering how deep this goes if is are we going to get a flush out that is going to shake and rattle all of these guys that went overweight the hottest market because the gold miners in gold were the hottest best performing asset this year. Uh and um and they basically ripped. So the question is, do we have something that shakes at the core all of these stock renters that came in to chase momentum and they have to get flushed out here with some serious volatility? Like could we have a reversion where we're trading under 60 bucks or 55 on GDX just for a wash out purpose? I won't rule it out. >> Yeah, I don't disagree at all. like that's a very likely possibility and I think that folks are not uh aware of the risks that are there. Yep. >> But that it will be an amazing buying opportunity. I don't want to I'm not long-term bearish these right um this is uh on that the last thing I want to touch on then we'll wrap here Kev >> is oil. >> Okay. Uh there was uh a little bit of speculation on the internet that uh uh that some sort of uh confrontation with Venezuela could escalate any day now. Oil didn't really move that much and I don't know whether the the rumor uh is maybe just being dismissed. Um, but I wanted to just ask you if you had an opinion uh like if there was an escalation uh with Venezuela uh on the um uh on the short term, do you what kind of an impact do you think that would have on the oil markets? >> Do you think that that's something that would squeeze it? I I I was confused because, you know, one of my subscribers reached out to tell me why he was so bearish oil because he thought that Russ US was going to go and um bomb, you know, Venezuela and take it over and therefore all this supply is going to come on the market. Do you know how long it's going to be before that supply comes on? Like it's not that easy. Like it it really isn't. And >> it's not as easy to just go bomb a country and take it all over and stuff like that. I'm just >> But it's not that but it's also but it's also not that Venezuela hasn't already put that oil on the market. Uh you know like I mean I think I think the oil that's coming on the market is going to be the guy Guyana. >> Yeah. But that's different and and I just that's why I'm confused. I don't think that the Venezuelan geopolitical thing is going to affect oil except in the very very very long run. And if you're trading oil based upon uh you know them bombing Venezuela and taking it over, I think that's the wrong narrative. And just the fact that people are willing to you know contemplate that on as a reason to be short oil is yet another example of why I think that everyone's looking for excuses to short and to be selling oil. I >> to me to me it's a reason to be long oil not short. Like to me uh any confrontation is a disruption to the supply chain. Well, yeah. I Yeah, that too. And I just I I don't know, Patrick. I saw that the the Brent uh you know, contract has the biggest short position it's ever had. I understand that that's kind of a like a shitty stat because the reality is that as markets grow, they're always the biggest ever. But there's no doubt that there's a lot of bearishness out there on the energy basis. And I'm with you. I know you've been looking at this on the long side. I'm looking as well. I think that uh >> you got to just pick your spots, but it's I think it's coming. The chance to be long oil, long net gas, long these stocks. >> For me, right now, uh notice how it's trading right at it 50-day moving average and right at the fib retracement zone. So, the way I look at this is that this chart is uh structurally bearish. Lower highs, lower lows, failing at the 50-day moving average. Everything is still in a bare trend. And this is why, for instance, no CTAs are going to get squeezed on their oil trades just yet. You're not you're not seeing um short sellers have a reason to cover yet. But we're actually at a a falculum point almost like th if if we have oil break above this fib zone in this 50-day moving average that actually would neutralize the downtrend and it would almost certainly trigger a bunch of CTAs to start covering and and so there is room and and I remind everyone uh you know because if if you recall uh on this one podcast me and you here. Uh we talked about the squeeze back over here before it happened. We talked about how the oil market was ready to be squeezed. Who who knows like could we get a dja vu where suddenly all you have is all of these shorts are getting squeezed and they have to cover. If that happens like we could have a surprise move to the upside that's driven purely by flows. Has doesn't have to have a single fundamental reason behind it. uh other than a trigger point. No, >> I get it. I And I listen I I appreciate you pointing that out because here I am. I'm sitting here thinking about there's no rush. I got my time to accumulate a position and things like that, but it when you highlight that there's points where this might flip and might get squeezed, I'm like, "Oh geez, I better get on that and I better be ready for it." And that's one of the things that I really enjoy about listening to talking with charts with Patrick is that you do highlight these things for me. >> No, I'm I'm actually not. That is that is I know it was I was being tongue and cheek, but the reality is I do appreciate that because that is the kind of thing that I'm not paying a lot of attention to, but I but I suspect that you with your wisdom of watching these things and knowing when it's going to flip that that is correct and that those are the things that that I appreciate the heads up on. So oil the bottom line is oil hasn't flipped and so it's still in a downtrend. It could still stay in a downtrend, but this is like a a moment where it's a fine line. And so it's sort of the way the markets a couple weeks ago were at the edge of a cliff uh that could have triggered the systematics to sell. In the same way, we're at a very sensitive moment where where uh where things could uh pivot on the flows. And that uh some those are the moments you really want to be watching whether or not this thing turns. All right, >> remember this. I'll we'll leave you on this one note. You said there's a fine line and it just reminded me of the spinal tap and there's a fine line between clever and stupid. [laughter] >> And when we start being clever, we >> Yeah. When we stop being stupid, you know that it's going to be clever. >> No, no. When when when it's No, no. When when it's clever, we'll put it behind a payw wall. But right now, it's stupid. So, we'll get give it for free. >> [laughter] >> Okay, is that it? Are we Is that it for talking charts? On that note, everybody. >> Okay. Uh, thank you everyone for tuning in. Uh, remember Patrick, where can they find you in your wonderful analysis? >> At bigpicturetrading.com and I got that YouTube channel up and running at patrick_na uh where I pump out videos all uh all week long. So if come and follow my stuff for sure. And Kev, where can they find you, buddy? >> Well, and folks, you do have to go follow Patrick on YouTube. He has cut down the cigar smoking and it's some great stuff on there. Um, [laughter] >> by the way, you're never going to live that down. Danny, hop on because Danny Danny made me put smoke the cigar. >> Oh, Danny, are you the one that's responsible for that abomination? >> It's all my fault. I'm so sorry. >> Yeah, absolutely. [laughter] >> I'm I'm gonna blame him. It was Danny's Danny's like he's getting paid by you. He's just gonna say, "Of course, it's my fault. Yes, sir. Yes, sir. Yes, you're a leader. By the way, you are the most wonderful president we've ever had. Uh listen, you can go check me out at macroourist.com and bull market bear market. We just having fun and glad you spent some time with us on this wonderful ride nesting around for the after [music] show. All right, Patrick, tell us about your Iron Maiden beer. >> Oh, it's fantastic. You know what? I uh I'm usually not a stout drinker. Uh, and you know, it's just for some reason it it um sounds heavy when I'm thinking steps like like I I usually like just like easier drink, but I super enjoyed this. Uh, I'm going to give this an 8.2. I I would totally >> I coming out. I heard a nine coming out. >> No, no, no. But they get a nine for the the label. Like that's a pretty epic uh label. It's >> And Danny, what are you drinking there alone in the car? No, don't don't don't say anything. They >> Well, I was gonna say I I was going to say, Patrick, did the VM make you run to the hills? But I don't know if anybody's going to get the reference cuz >> Absolutely. A bunch of >> Okay, [music] fine. Okay. >> I was I was a huge I was I was a huge Iron Man fan when I was a kid. Like I was I was the opposite. Kev Kev was the uh Depes Mode uh prep boy and uh and I was the I was the rocker with the uh with the Iron Maiden and Led Zeppelin shirts. That's uh that's >> And yet we yet we can still be friends. >> That's true. Just let me show you. >> Left, right, new age, heavy metal, we can all be friends. >> Absolutely. >> Because we're adults. >> Oh yeah. >> Are we? >> No. But [laughter] uh but Kevin like I want to like pivot back to this like I cannot believe uh Padel Carman is uh in like the restaurants are empty like I I you know for for this being um the start of high season uh I I don't think I've [music] ever seen it this dead and there was like um a big Tulum real estate drop uh and uh you know they completely [music] overbuilt here. But you know what's the interesting reason why I consider it an e you can push back on me if if you don't agree with this, but the reason I actually consider an economic thing [music] because when they did this build out in Mexico, it's very very hard to get a mortgage. Uh and but the real but the condos and you could buy a condo for 100 grand. You [music] could buy a condo for 150 200 grand. And so what a lot of Americans and Canadians [music] would do is they would take out their uh home equity uh lines of credits. Oh, at their leverage their home back home back home and go and buy their vacation property with cash, >> right? >> And the thing is is that right now no one's buying. There's guys that literally have dropped their condos from 165,000 down to 115,000 and they've been on the market for two years >> and they can't get rid of the thing. and uh like liter and and to me that's actually a sign of weakness not in Mexico because this is a vacation place tailored to selling to North Americans. And so literally uh all of those people that were levering up uh out uh off of uh in North America they're not coming and they're not buying and uh and that to me uh I I still I think that that's a economic indicator buddy. I now listen I I am not going to push back Patrick like the reality was I was just giving an example of of if I was bullish on the economy the argument you could make I happen to agree that I think that the that the economy is sagging way worse than people understand >> I think it's being held a loft from the K-shaped recovery and the K the upper part of the K meaning the wealthy people that are spending are keeping it going. They're also keeping the stock market going, which makes it look better than it is. But I I I'm with you. I think Main Street's struggling. And I and I'm I'm not gonna fight your argument at all. >> So a year ago, I was here in Ply as well. And that was when I came on the huddle episode with my Day of the Dead. >> That's right. You always go to hell. You go to Mexico for hell. >> That bottle bottle of vodka. Not always, but I I it just so happens that I'm here second year in a row at that this time. Um and but the uh the party begins. It's uh I'm >> Oh, are you going to put on [music] the You're going to go put it on? >> Absolutely. I'll I'll send you a pick afterwards. But it just worked out last time that uh I was the day after and I actually passed out drunk from with the face paint on and so I might as well do the huddle episode the next day. It was uh >> it's not something Yeah, that's not something that I'm necessarily totally proud of, but >> No, no, you are proud, don't it happens. >> Okay, well, we'll let you everyone go. Happy Halloween, everyone. Stay safe and uh we [music] won't iterate and talk about a certain sports thing that's going to happen tonight. But don't it, don't say anything. >> I won't say anything, but I heard there's a Jay's game, though. >> I heard that there might be some of some baseball game that people are interested in, but who knows? Um, take care everybody. See you later. Take care guys.