Forward Guidance: Is The Fed Panic Already Fading? | Weekly Roundup

Sourced by podcast-ingest on 2026-07-10. Auto-transcribed via AssemblyAI (universal-2, en). Speakers identified by AssemblyAI Speaker Identification using the per-podcast host/regulars hints; the resulting label→name mapping is in the frontmatter. Duration: 59m. Episode page: (not provided). Audio: https://traffic.megaphone.fm/BWG7929985694.mp3.

Show notes (from RSS)

The Fed scare that dominated markets may already be losing momentum. Now investors are asking what comes next as the AI trade, inflation picture, and market leadership evolve.

This week, we break down why the Fed may be nearing the end of its hiking cycle, how AI investment is reshaping markets, and where capital is rotating next.

We also discuss peak inflation, hyperscaler capex, market dispersion, active management, and why new leaders could replace the old winners. Enjoy!

TIMESTAMPS:

00:00 Intro

01:16 FIFA World Cup

04:24 Peak Hawkishness Fading

09:53 Oil, Gasoline, And Disinflation

12:28 Why Inflation Stays Sticky

14:22 Monetary Policy vs AI CapEx

19:43 Warsh: Balance Sheet & Rates

25:22 Hyperscalers Hit The CapEx Wall

29:38 Passive Investing Cracking?

33:37 Market Leadership Rotating

42:07 The Productive Capital Cycle?

44:24 MicroStrategy Hits Reality

50:09 Bitcoin, AI, And Power

55:26 Do Things IRL

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› Quinn – https://x.com/qthomp

› Tyler – https://x.com/Tyler_Neville

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DISCLAIMER

Nothing said on Forward Guidance is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only. Any views expressed are opinions, not financial advice. Hosts and guests may hold positions in the companies, funds, or projects discussed.

Transcript

Quinn: I continue to stand by my view that we are traversing peak inflation and peak growth probably for the year.

Felix: I just don't really see the logic in how these monetary policy tools of like interest rates are supposed to help this.

Quinn: For as much as he didn't want to say he gave forward guidance, it was implicitly forward guidance and it did what he needed to be done to set the stage for, I think, not actually hiking.

Tyler: Even if they raised 50 basis points. I don't think it really matters when you have a trillion dollars of spending this year and trillion dollars next year from the private sector.

Quinn: So maybe they take the air out of the AI trade a bit if there's actually inflation showing up from it and they need to cool it. The other thing that I just don't think is being talked about enough is

Felix: nothing said on for guidance is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests and the Blockworks team may hold positions in the company's funds or projects discussed. As always, investments in blockchain technology involve risk. Terms and conditions apply. Do your own research. All right, what's going on, everybody? Welcome back to another roundup edition for guidance. World cup edition. Quinn showed up on camera with his jersey from. What do you got going on there?

Quinn: The Netherlands?

Felix: Are you part Dutch? Are you just a fan?

Quinn: Just a fan. Fan of the people in the country.

Tyler: What is your heritage there?

Quinn: Kind of like a Midwestern mutt, I think. German, Irish?

Tyler: Yeah, I'm about the same. Felix looks the most Canadian I've ever seen him in that red. Canada.

Felix: I know I got the fresher. I was at the. So we were just saying before we record. I went to the Vancouver, Switzerland game yesterday and it was just. It was pretty incredible. Like, I've been. I've been a big soccer fan for a long time. Like I was. It's my main sport. I was a kid, but I was never used to Canada being in the World Cup. So it's. It's sort of this novel thing to actually be able to support them. I was looking at.

Tyler: There's a stat like, wait a second. Can I. Can I just frame this for a second? Felix is about six foot six. Six, like £250. I'm having a hard time picturing you playing soccer, dude.

Quinn: I was.

Felix: I was like on. On the defense line.

Tyler: Yeah. Were you just wrecking people?

Felix: Yeah. No, I Run. Like, what's. What's his name? Holland, from Norway. The striker, he's like this big Viking guy, and he just chases people down. That's like. Yeah, yeah, that's.

Tyler: No, that was you just a lot slower.

Felix: Yeah.

Quinn: Did you see Justin Trudeau?

Felix: No, but I did see Mark. Mark Carney was in the building.

Quinn: Nice.

Felix: Our brown minister. No, it was fun anyway, I had to put the jersey on support. It was good fun. Work up. So fun. It's been amazing. I don't know if you guys have been watching much of it, but it's been good fun.

Quinn: Yeah. Feels like the world. World's been enjoying it. It's been good to have something to do, too.

Tyler: You know what one of my friends started sending me is, like, these, like, international people that eat food in America.

Quinn: It's.

Tyler: It's the funniest ever. It's like some Japanese guy eating, like, Texas barbecue or some German guy eating, like, you know, I don't know.

Felix: I've been seeing some amazing videos of the Japanese in Mexico. They're playing against Mexico, so there's like, the Japanese audience and they have sombreros and they're, like, taking tequila shots of the Mexicans. And it's like just the greatest combination of cultures I've ever seen. Everybody's just having the best time.

Tyler: This is what so funny is like. Sports is a great equalizer. It's what multiculturalism should be, is like going and seeing other people's cultures not going, you know, like, whatever it morphed into. Multiculturalism is just like, you know, hating each other for all your differences. It's. It's so fascinating. But you get these brief moments through sports where, like, it's just the most beautiful, beautiful part of humanity.

Quinn: So I love it. We had the tartan army down here, and they were marching through, like, all parts of town. It was pretty sweet. Playing the bagpipes and stuff. I love bagpipes. It was. It was cool.

Tyler: That's awesome.

Felix: Apparently the Scots drank Boston Dry before they moved on. There's no more pints left. It's just awesome. I love it.

Tyler: So good.

Felix: Yeah. Anyway, aside from the World cup, looks like markets are still. Still a thing. I want to start with just a follow up on what we were talking about last week around peacockishness, which has become a bit of a saying for us the last few weeks. But last week, obviously, we had the war thing. We had a pretty significant sell off in rates, and, I mean, so far that was the low in bonds or the high in yields. If you look at the two year or something like that. Curse if it's tracking how you guys expected. I know. Tyler, you've posted a couple follow ups on your Twitter since then. What are you thinking?

Tyler: Yeah, I mean we were a little early on the peacockishness narrative but I think people are starting to get it which is the market was pricing in. And what I meant by peak hawkishness was like the market was pricing in a bunch of hikes that just shouldn't be priced in with nominal break evens going lower. I think the one year break evens are right at 2% now. So we're around there. So that whole thing was really fascinating. And then to put the nail in the coffin, you got bank of America saying there's going to be three hikes this year which is just like absolutely, you know, hilarious. But I'm pretty sure, you know we, we're seeing the dollar rolling over here now. The dollar kind of looks like toppy. A lot of the, the precious metals went from. What's so fascinating me is how extreme things get. You get, you know, a couple months ago everyone was talking about the debasement trade that gets completely reversed. Everyone prices in like insane hawkishness based off CPI right as it's rolling over. And now we're in the exact opposite thing where all the stuff that's gotten absolutely annihilated that the debasement trade is probably good value here. And you just watch how these narratives, it's just centralized asset management run amok. Where you see call skew at the highs to the 90 plus percentile, put skew at the lows, go to the 90 percentile and everything, you know, you just gotta fade all the dumb narratives once it gets you know, extreme. So that's, that's what I'm saying in terms of the hawkishness but how it plays out. What's really fascinating to me is like guys are getting beaten up because they're, they've been long. The fang so long in the indexes are doing nothing. But if you look on a sector basis, this is the main thing is they are threading the needle here from a policy perspective in a lot of senses where it's getting, it's rotational. It's not like 2008 where you see credit spreads blow out. There's a massive crisis. Everything is going to different sectors. So that's sort of what I, if you're, if you're in the right sectors like industrials are crushing it, making new highs, banks are crushing it, making new highs, it's all old school stuff. And one of the guys I'm about to have drinks with who watches the show, he said just buy the old economy stuff. Trump loves old economy like intel, IBM, you know, that's just, that's just what works. And so I think we're seeing a lot of those rotations and people are mad because a lot of the high flying sectors, the meme stuff are getting taken to the woodshed. So if you're there that really hurts. So that's where I'm at right now.

Quinn: Yeah, I don't disagree with any of that. When you look at the bond market, it's been a straight line since over the last few weeks, yields just plummeting and I think the long end's leading the front end because you have the twos and in really tied to Fed communications and the long end is basically saying there's no growth or inflation run amok issues to be seen. And so you've had this huge flattening

Tyler: of the yield curve.

Quinn: I think I continue to stand by my view that we are traversing peak inflation and peak growth probably for the year in both cases. Not that either need to fall out of the bed and it's like recession or anything. But I do think from a base effect and kind of moving forward fiscal impulse wanes in the second half. So yeah you really have probably just three this next July meeting if they, if they were going to hike, if he, if Warsh is unsuccessful in getting the committee around to what I believe to be is his view of wanting to just have a hawkish hold then they, they would need to move this, this meeting and if they don't in July they're inflation's going to keep coming down and they're not going to do it in front of the, in front of the election. So I think it's sitting good. Next week could be interesting like the World cup, you know, maybe providing some, some boost to the US Economy and so you could get some maybe you know some people are calling for a hotter jobs print but I don't know. I think everybody's kind of looking through to oil's down pre war levels like it was an oil induced inflation boom and now we're back down.

Felix: So you know it's not down though. So I was just looking at trying to get caught up on what's going on with the oil markets and everything and this is just an interesting chart. But gasoline isn't following oil down anymore. It's caught up in the highs. And then if you dig Deeper, the crack spreads are actually surging. So this is a bit of an issue if we're seeing oil move like this, but the refined products aren't. That's the only part that really matters. That's quite interesting to me. Apparently this doesn't. I don't know, Quinn, you're the guy who used to work in the oil markets. Like how unique is this?

Quinn: Well, those are the same chart because this, the crack spread is what you sell the gasoline for minus the input of the oil. So that is true because we depleted all of the reserves of fuel oil. And these finished products, I actually wrote about this too. But those will get replenished and we're heading into peak driving season, peak gasoline demand in, into the summer months. So it's a confluence of factors. But if they keep their foot on the neck of the crude price, it will flow into the finished products. It's just there's a lag because the supply chain was backed up and refinery capacity utilization has been maxing out. But over when we get past the summer months, I would expect this gap to close.

Felix: So, so that tells me that even though oil is down to basically pre war levels, like the, the disinflationary aspect of gasoline still has way. Ways to go because it's not, it's not followed yet.

Quinn: Yeah, I would agree with that. I think. Okay, yeah, one, there's probably an argument to be had that it might not close completely. But yes, I would say it, it will follow is my view could be wrong.

Felix: But trying to think through like where that leads us because I, I mean we've been talking about this like in terms of the, the disinflationary aspect. Like there's this whole debate right now between core versus headline. Is this just oil oil related or is there actually like disinflationary tailwinds? And obviously there's a, there's the aspects of oil markets that trickle through into things like transportation, et cetera, et cetera which like, you know, we just got some core PCE data that was still pretty hot. Like core PCE is, is ripping. It feels like even though this is the high in inflation, it's still going to be a lot of work to get any sort of like meaningful disinflation. It's more likely to just chop around. Do you guys agree with that?

Quinn: Yeah, I, I think there's a floor like we basically saw the floor was already at like 3%, 2% is not happening. Like this is just not happening. But does that like, if you can look through this Oil, the oil part, because it's proven to be transitory. This actually like the Fed is so scarred from calling things that aren't transitory transitory, and they're making mistakes that now when things actually are transitory, they won't acknowledge as such. But the oil price move clearly has proven itself to be transitory. So that component is. But you're right, the other thing that oil does is bringing it down so quickly is it reinforces in a way the core trends because it provides stimulus and support to the consumer. When you lower gas prices, it helps their spending in other parts of the market. So that's one way that it reinforces core. But in kind of the other light, like the Fed, what can the Fed do to get core inflation down from 3 to 2? Like nothing. So that's a, that's a fiscal pro, you know, profligate spending problem. Like they're still running 5 to 6% deficits to GDP. If the Fed cranks up real rates any higher, all you do is just cause market problems that you have to reverse on anyways. So getting. I don't think it's really possible to get core inflation down sub 3% when the government's spending 6 as a percentage of GDP every year in deficits. And I think they understand that. I mean, it will come out in the data. So I just continue to think they do this hawkish hold type of thing for the remainder of the year.

Felix: I think that brings up a good point of just how broken these modern monetary policy tools are for like state capitalism and just like very production industrial heavy investment boons like we're having. Like there's this whole discussion right now about how, okay, you know, Micron just had their earnings yesterday and memory's absolutely ripping. And then today we had news that Apple's hiking prices of all their, of all their fleet. And then Xbox I saw did the same thing. Like anything that is dependent on, on ram, they're, they're hiking up prices because the price prices are just going absurd because of the AI buildout. And then of course that trickles into inflation metrics. If all those disposable income spending like that is surging like that, that's going to lead into inflation. So then there's this whole narrative now of like, oh well, maybe the Fed will have to hike rates because memory prices are going up. And it's like, I just don't really see the logic in how these monetary policy tools of like investment rate, investment rates, interest rates are supposed to help this. I mean, yeah, Maybe it causes some demand destruction, but I don't know, just the whole thing seems so archaic to me into how to handle these things. It's like, okay, these like yes, super inelastic curves are just going crazy and now we need to hike interest rates. But oh wait, there's so much debt in the economy that if we hike interest rates everybody who's in money market funds is just going to get more money every month. Like the whole thing just needs to be rethought. I don't know, it doesn't make sense to me.

Tyler: I, I'm gonna actually play devil's advocate. Like I think it's for the first time in a long time, I think it's working. It's working like you're actually getting a capex spend. They're forcing, not forcing, but there's actually something to invest in on the private sector where the spending from raising debt on the hyperscalers is stewing this big boom to build that new infrastructure. And you know, go to chart 45, this is high Yield, the spreads on High Yield. So you can kind of see what I was nervous about last week was the market started pricing in or or a carry trade unwind, which doesn't appear to be the case because bonds are actually getting bought. We're actually creating more liquidity from the private debt markets. And to give you a sense, spreads are basically at their lows on High Yield. And when, you know, this week we saw, just to give you a sense of how salubrious the credit markets are was SpaceX decided to issue 30 billion in bonds and it was oversubscribed by 90 billion. It ended up raising 90 billion on, on their paper and, and that's kind of. There's so much savings from boomers through life insurance plans, pensions, etc that it keeps these rates down. And that's global I guess. I'm guessing it's international buyers as well for this stuff. And what I was nervous about was the dollar broke out to new highs and I thought we might potentially get like okay, let's get out of, you know, as dollar assets get more expensive on a global stage you'd get kind of international investors selling their bonds. That hasn't happened yet at all. Which means like this could get a lot wonkier because when you can, when you keep issuing this debt, obviously you know, some of that debt went to go pay off previous debt, the refi in SpaceX. But a lot of other companies can raise debt at really, really advantageous prices and that just becomes like topline revenue somewhere else. So to, to your point last week Felix, where you were like, you know, what is, what is raising interest rates on the front end really do or you know, you lower it by 25 basis points. Doesn't really matter. It's just a fun game we like to play. I think it's, I think the real, the real game is like what Besant is doing is just he's like a magician with the supply of the stuff coming to market and issuance. Like that's, that's the real Houdini move there. Because like does. It doesn't matter even if they raised 50 basis points. That one thing, it really matters when you have a trillion dollars of spending this year and trillion dollars next year from the private sector. It's like the system might actually be working the way it should right now. Is, is the odd thing. Whereas before when you had super low rates, that wasn't advantageous to, to actually build anything because you could just buy back your stock. So it created this massive inequality. At least it feels like we're playing the game capitalism again a little bit. Besides the fact that like, you know, guys like Bernie Sanders and Bondani are, are more socialist and like the communists, you know, the polls of communism are kind of going up. It's like even with capitalism. But I, I think it's because we haven't actually had capitalism, we've had crony capitalism. And so maybe, maybe it's resetting here is kind of what I'm saying is like maybe that getting the government out of misaligned incentives is kind of happening before our eyes. So that's where I'm at with it. But tell me why I'm wrong.

Quinn: Yeah, I mean, I agree. I've been writing in the same way that the Fed's balance sheet stuff is way more impactful because if they actually the yield curve is flattening it. It's, it's historically suppressed. And so what that tells you is the problem is not the front end. The problem is there's suppression of long, long end and that war gets it. He, you mentioned balance sheet policy rejiggering like five times in his speech. And everyone he, he like in my opinion astutely gave credence to the committee's general view of the very hawkish dot plot, which was completely wrong and is the Powell fed, you know, third, third mistake, hawkish pivot in a row year 24 and 25, they did the same thing. So he, he didn't throw, you know, water on it and poo. Poo it because you know that would have, you have to play the game. That would have lost respect. But he, he wasn't the one that was hawkish. He was just saying, he, he was just saying I'm going to do my job and get price stability. Yeah, he, he gets that. It's actually the balance sheet accommodation stuff that is messing with it. And he, he spoke about the imbalance in the economy saying the housing market looks very restrictive but the stock market looks loose. And, and he knows this and actually the, with all this talk about inflation potentially coming from the AI stuff with the memory and the data center build out and all that, all that sort of thing flowing into, into inflation readings that's actually also a reason if you're the Trump admin, to take some wind out of the sails of the AI trade because if that's what's they don't want to hike, you know, they, they will do anything to hike. So they're draining oil reserves, they're pushing, you know, cutting shitty deals with Iran and handing over $300 billion. When he campaigned on the bad deal Obama took to give them 6 billion and here we're giving them hundreds of billion. So he's willing to do anything. So maybe they let take the air out of the AI trade a bit over the summer into the fall if there's actually inflation showing up from it and they need to cool it. They try to manipulate everything. So I could see that.

Tyler: See I don't think the AI inflation is that bad. Like this is probably me being too simple on it but like Apple raising their prices by what was it, 20% or something? I don't, I don't even know something like that. But like does that really affect me like in all my spending throughout the whole year, like that 20% on whatever versus you know, what really affects me is health care going up 15% a year like that, that crushes me. Yeah, when you got, when you got three kids or whatever or daycare, you know, that's what crushes me. Like that doesn't the technology and like my, my, my Claude Bill or OpenAI Bill going up a tiny bit. Like I don't know, like I'm more productive, I'll pay for that. But like it's all the other stuff like housing costs are actually going down now because they kind of oversupplied the market. There's like some tailwinds of oversupply. But so I don't, I don't think that part of the inflation really matters. Maybe I'm. But I do think that war absolutely nailed when you actually just pegged to, to price stability, you actually let private sector supply and demand take its. Do its thing.

Quinn: Right?

Tyler: Like that's. And so that's why the long end has really come down because it's like, all right, we're actually going to like, listen to prices and not listen to like, weird Fed slop forward guidance.

Felix: Well, well, it does bring.

Tyler: Is actually like name their podcast for guidance.

Felix: It does bring up the merits. It does bring up the merits, though, of what he talks about around trimming inflation, where it's like, no matter what, there's always going to be these huge outliers. But like, in terms of actual percentage or consumption, like, to your point, memory is not a huge basket of, of your average monthly spend. So even though it's one of the ones that is driving the most, like, if you trim the mean, if you trim, if you use like windsorize or whatever, trim. Trim it on, on the super inflationary and the super either disinflation or deflationary components, you do get a better gauge. Because I don't think it's like effective monetary policy to be hiking rates just because that tiny bucket is going up a bunch. That's what that was kind of my point, which is just like, I think we need to ground ourselves here a little bit in terms of what's actually moving the needle, what should drive monetary policy.

Tyler: Absolutely.

Quinn: Yeah. It is funny how for as much as War said he doesn't want to give forward guidance, he talked about markets more than Powell would just never go there and saying we shouldn't be talking about markets. But Warsh is a better markets person. He understands it. And he also understands for that reason, if you come out and say, as a newly appointed Fed chair, you have the fresh credibility, just like any new politician. They come in, people think you're going to do what you're going to say, say and all this stuff. And he just kind of achieved what he needed to achieve out of the gates by. By jawboning. For as much as he didn't want to say he gave forward guidance, he. It was implicitly forward guidance, and it did what he needed to be done to set the stage for, I think, not actually hiking.

Felix: That's fair.

Tyler: Absolutely.

Felix: I want to get your guys's take on while we're talking about this whole memory thing, the interplay between, well, this theme that we've been talking a bunch about, which is that, okay, sell what the hyperscalers are selling and buy what they're buying. Memory. And that's sort of been the trade for a while. But if you just look at this, I was looking at the interplay between. So this is DRAM etf, which is all the memory ETF or memory stocks and then the mag sevens, I. E. The hyperscalers. And you can see up until the first week of June they're positively correlated. It's sort of just like the whole complex was rising up, everything was awesome. And then basically as soon as Google announced the offering of the $80 billion equity issuance, that positive correlation has flipped negative. And now suddenly it feels like there's a lot more of a. It's not just like a rising tide lifts all, all boats. We have to actually think about opportunity, cost and return on investment. And if so it feels like the easy part of the trade's over. But this was just kind of interesting to see how quickly that positive, that positive correlation flipped negative. I'm curious if you guys because this seems to be like the primary market narrative right now of what's driving these things. Things.

Quinn: I love how long this trend is playing out because if you look at Mag 7 Performance versus all the indices, it's a straight line down since last October, end of October, early November. And we've just continued harping on it. Normally when you talk about something for six months and just keep saying it's it eventually, like there's a timer, right? There's like a shot clock on, on when things stop working and people get so have been still getting so flustered when you say, when you talk shit about the, the Mag 7 it's like, you know, an untouchable category I guess because everybody owns them, you know, up to their eyeballs in their retirement accounts. But yeah, I mean at some point you have to stop your share price decline. And the other thing that I just don't think is being talked about enough is this has to be more like I, I got some pushback a couple weeks ago. A bunch of people were like putting snarky comments on my tweets when I was talking about this problem and they're like, oh, you actually think investors are buying, you know, or selling the stocks based flows of dividends and buybacks and capex and all this stuff. I was like, well no, what you're missing there is the fact that in the same way that the whole software industry has been re rated lower in multiple, you know, a lot of them still growing, etc. But their multiples have gotten crushed because you can now create software overnight. The whole hyperscaler complex is being re rated from a multiple basis because they are moving from cash flow, rich dividend buyback, rich financial profiles to leverage leverage balance sheets with no cash flow. And so that's a hugely different commands, a different multiple that like, that's like an oil industry where it's way more, way more volatile. You have these boom bust cycles, the Capex cycles. So it's a different, totally different multiple that you assign to the industry. And so that's what I think is going on here that people don't talk about enough because it's not like I just don't think it's going to go back to where it's like okay, if they just like stop their dumb spending they're going to rip again because they're now fundamentally different businesses. If they stop their spending they fall behind in the AI race. Their models are already losing share to the, to the free Chinese and kind of open source ones. So now they're in this hamster wheel rat race that they is basically unwinnable because it's, it's just continuing to shrink margins and, and price sensitive consumers. So anyways, long story short, you know probably here after like they've been sliding 3% a day for a week straight is not a good time to get super bearish. But from a longer term perspective I don't think they just start ripping again anytime soon. Like the upside on these things is very, very cap for the foreseeable future in my opinion.

Tyler: You know who the biggest loser in all this is and thank God I think is passive management and like closet indexers. Because for, for such a long period of time it, it was if you were an active manager like a mutual fund and you'd actually have to buy all the things in huge size and as the indexes would kind of like make them larger market cap of, of the overall index and maybe we're seeing like the, the end of this whole, you know, cutting fees to just create bubbles type M money management because there's so much dispersion in the market right now and that's so I think it's so healthy like finally it's not like money come in buy buy QS anymore because it's massively underperforming. So all the pensions are probably diversifying and like the, in, in a good case this happens over a long period of time and then they become less of a problem and the indexes rebalance and you know there's new leaders that emerge, et cetera. In a bad case you'd see kind of a crash in a lot of the indexes. And I actually think today was really fascinating because there was these crazy program trades that would come in specifically and they would smash down, you know, the index names, large cap index names, just. And then it would slowly kind of find its way to other, other parts of the market. And that, that's, that's, you can see it in real time getting reallocated. And what I'm watching to make sure it's not like a crash scenario is the implied correlation. So Felix, you might have to refresh, but if you go to slide 49, if this was a real like capitulation in the indexes, you'd be seeing, you know, implied correlations rising. So right now it's like kind of putzing along the lows at 10. It was, it was, it was at 6 before but you know, when we were up and like selling off, it was at 40, you know, which is just, it basically means everything is acting the same and all stocks go down together. They go up together when they're, when implied correlations like this, you get a massively rotational market, which is, this is great for active management. Finally, like maybe, maybe the market's getting more efficient at pricing things too, which is, you know, you, you can make the argument like money seeks the highest productive sectors and growth a lot faster than it used to. So you're seeing these sectoral rotations like really fast. Some like algo switches on the CTA and systematics. It comes flying out, you know, of, of large cap, you know, fangs and it's going into industrials or it's going into the banks and you can see it kind of in real time kind of flee, which is really fascinating to me. But I, I'm really nervous at some point. Like all these firms that they, they're high net worth or just like they're asset gatherers and they say, oh, I'm going to put you in like 20% Q's and all the 401k plans that just say like, here's what you can invest in SPY and large cap growth and medium cap growth. If they underperform for like long enough, it's gonna be really good for a lot of people that are not just like, like I bet people are feeling kind of left out in this last rip higher because a lot of the people that just put their 401k in and the market's just been flat for like a couple months, but it's been in the right pockets. You've, you've crushed him so I don't know. That's just my like, little market strip.

Felix: Yeah, this is a good one too. I saw Queen, you just put in similar idea, almost the mirrored version of that implied correlation. But return dispersion. I, I mean, it's interesting to look at how the return dispersion matched the 2010s when we were in that secular stagnation at the same time that, like, the only game in town was buying the mags to get the buybacks. Like, okay, the best, the best thing we could do with all this capital and all this free cash flow is just give it back to investors because we don't know what else to do with it. Like, we. The 2010s, in some ways was just this. I don't want to say like a silent depression, but definitely a depression in terms of just innovation. Like, the best innovation we could really do was social media, like Google search ads.

Tyler: And buying back your stock.

Felix: Yeah. And buying back your stock and then just like. Yeah. Going into passive funds. So it's interesting to see that like the investment boom, the dispersion, the correlation, they're all. It's all changing at the same time. That's. It's very. And this is all. You know, I've been reading the Price of Time, this book by Edward Chancellor. I don't know if you guys have read it, but it's really fantastic. And that's part right now where it just talks a bit about debt traps and what happens when, when you have. When you look at history at times of low interest rates, like near zero interest rates, you actually, it's, it's. It's very paradoxical, but you do get this lack of. Of innovation and, and really fundamental economic

Quinn: growth,

Felix: even though you would think that it would stimulate it in the same way. What does it stimulate? It stimulates, you know, housing bubbles and things like that. And if you look at the data, which in this book, housing bubbles are actually correlated with economic stagnation because it's just like this huge misallocation of capital. So, like, all those trends are what we just went through in the last 10 years or so. And it's really interesting to see that flip now that we have higher rates. Yeah, yeah. Capital matters.

Tyler: This is really interesting too, because in 2000, you know, the tech boom where you had a misallocation and all, you know, the Internet stocks. And then what happened after that was money came pouring out of the tech boom and then it went into small caps that were trading like basically below at crazy valuations. So when you see that dispersion go up. You can see the, it's a rotation thing. What the problem was in 2008 was everything was levered and you had a giant systemic crisis. We don't have that anywhere just yet. And so my point being is you could potentially see a lot of money come out of large cap tech and go into a lot of other interesting stuff and new leaders emerge, right? Like these, these things, 20, 20 year cycles. It's really hard to stay on top for, for the mega cap tech stocks for, for longer than that.

Quinn: I mean just think about it too from a big picture perspective like the Mag 7. There's, I mean first of all there's all these acronyms names and ETFs after them. So like it's not a new trend, right? It's a multi year thing that's on its last legs and it's fading hard and it's rotating out into other parts of, of tech into more speculative, more cyclical, you know, semis are very cyclical industries and into the kind of corner pockets like just like in crypto when you go from like bitcoin makes its move, then you know, mid, mid caps, then the small caps start running while the majors start stalling. Like these are all very characteristic things of very long time horizon distribution and market topping patterns. So as much as like the dispersion is healthy because it's like nice to see an industrial company and of the you know, smaller caps and main street type stuff doing better for once instead of just getting left behind for dead. It is I would say overall like a big long term topping thing for what is 40% of the S&P 500, right? So like at some point that matters. Like at some point these things just being 100 pound weight in the ocean and just drifting lower, that will matter at some point. Maybe not this month, maybe not next month. Maybe they keep the plate spin until the election. But it's not a healthy. Some, some parts of it are good maybe but, but in terms of market health, I'm not sure you know what.

Tyler: One of my favorite guys that I've, I've followed for years, this guy named Brian Reynolds, he, he basically talks about all this stuff is really just fixed income corporate bonds just hone in on a sector and then they over supply the crap out of it. So in, you know he Talks about in 2008 it was housing, right? You just, you created so much nonsense of, of debt backed by you know, housing and it creates this massive boom. And then in you know you had a Commercial real estate. And then you had it in, in 2015, you had it in like commodities where you had all these like oil producers leveraged, you know, to the, to the tilt. And then when they, the oil price rolls over, everyone defaults and goes under. You had it in gold in you know, 2014 too also. And like we're seeing that replay of all the pensions go into the yield bearing assets to lever things up. You, you know, you built out the telecom industry, you built out, you know, all these things. We're just doing that in the AI sector right now and at some point that will roll over. But right now it's, it's like, you know, guns a blazing on, on the debt side of things. What was really messed up about the 2000 and tens though? You could, those you basically like just created use pensions and endowments and old people to annihilate the middle class. Because there wasn't really like it was just social media. You were just like, you were just doing advertising and they were cash using your data and they were issuing debt, buying back a stock and it was just kind of like messed up. Like I guess you could say that allowed us to get to this point in AI and have some productivity. But you know, the whole 2010s was really a pillaging of. When you, when you think about it, none of that was super productive in, in my opinion, like compared to what we've seen.

Quinn: Right.

Tyler: You're building smart nuclear reactors. You're building, you know, all sorts of new stuff that's pretty cool. And I don't know.

Felix: Yeah, I mean even like the health space. What's going on in there right now? Some of the innovations, like what Eli Lilly is doing, all these GLPs, like, I know they're coming out with like a single shot that can permanently help your cholesterol. Like stuff like, like we're actually doing now after like a deck. Yeah.

Tyler: Biotech's breaking out to new highs. There's new, new crap happening every single day where you're like, oh my God, that's, that's amazing.

Felix: Yeah.

Tyler: And I see it, I see it, you know, every day. Like my, my son has a little heart condition and there's new stuff being created all the time, which is just super awesome. It's very, it's, you know, even though like we could be super pessimistic, there's, there's pockets of the world that are actually changing, which is fantastic.

Quinn: There is a big difference between the stock market and the economy too, because we can, I mean, accurately have been bearish on Mag 7 for six months plus. But all these things you describe are awesome to see for the economy and a rebalancing towards productive uses. And the other side effect of this is secular inflation, which is ultimately how you get out of it and what you need because the money is being invested. So the demand for financing increases the cost of financing the demand for anything and then it being put to work towards real economy things and real difference making things versus just buying back shares of like the social media mind virus companies. Like that is inflationary, it pushes things through it, it's a push and pull effect through the economy. So I agree. And it kind of comes full circle because you know, that factors into why, you know, growth is high, inflation will not go away to 2% anytime soon. And they basically need to keep this plate spinning because everybody from Warsh to Besant to Trump knows that growing your way out of it, nominally speaking, includes inflation alongside the growth. And that's what they'll just keep doing. Like for how hard the run it hot trade has gotten rinsed on the back of these fake narratives that Warsh is this gigahawk. I wouldn't be surprised if that's where the hot ball of money flows to next. Now, now that it's, it's had that,

Felix: I think the, the unintended, like you know, you never really know how things are going to pan out in, in markets, right? Like for, for years the narrative for Bitcoin was to be an inflation hedge. And it's like okay, running it hot, all this irresponsibility, yada yada yada, like okay, own bitcoin as a hedge to that. But suddenly we get secular inflation and it's actually creating very different outcomes than I think what a lot of people expected. It's creating this, this incentive and you know, to, to put money into, into productive capacities. Because okay, if I'm getting debased, may as well try to you know, put into these sectors that are actually doing things. And then you know, you suddenly have this narrative come to a head where you have like microstrategy right now is really struggling and bitcoin's lost for a bit of a narrative because it's like, okay, wait, if, if we have the secular inflation and rates aren't at zero anymore, there's actually a lot of things to do with my money. Is the best use of my money and capital to just give it to sailor to sit and like either do more financial leverage or do nothing with. There's things to do with capital now, I guess that's my take.

Quinn: Yeah. It's interesting to hear people's bearishness hitting a crescendo on Bitcoin and Saylor's whole thing as MicroStrategy trades into its nav par value. So like, if you shit talked MicroStrategy for the last two years, you got harassed. I mean, you know, look at my, look at Twitter.

Felix: And then, yeah, look at your Twitter, Quinn. You, you were getting decimated two years ago at the peak, the, literally the day of the peak, people were murdering you.

Quinn: The stock is like down 90 from the highs in a fairly like orderly fashion. I mean obviously some peaks and troughs, but. And now everyone's like, oh wow, sailor. You're like after cheering him on for so long, like being their appointed savior for years, like the majority of the industry, like bending over backwards to get him at your conference, like having him guest speaking, like, you know, just drooling over what was obviously a, like not sustainable. And, and it's just funny to me, that's all I'll say on it. Because you don't want to like kick people while they're down. And it, this moment needs needed to happen to, to rinse the excess from the industry. But it's just like this happens time and time again. It's just so crazy.

Tyler: You know what, we should just start as a, we should start a fund about how, how much hate you get on the, like the extremes on social media where it's like you could pretty much buy when you, when you're like, oh, okay, you're getting so much hate at the highs versus the lows. It's such a great, I mean, such a great tool.

Quinn: There's probably some like 18 year old whiz kid out there who's developed a Twitter like AI driven algorithm that just scrapes Twitter data for peaks and like troughs in sentiment on different. Oh yeah, asset classes. And it's probably printing bazillion dollars from it. And it's just like in January, sell all your metals and go short, you know, like, yeah, in, in 2025. Same with crypto, like just, it's just rolling bubbles across sectors as the capital rotates and eventually it's probably like, you know, damaging enough I guess. Now if the rolling bubble that's getting popped is mag seven and they're 40% of the S&P 500, maybe that has like longer term, bigger picture ramifications than if it's just like, you know, some.com era CEO who's you know, imploding a second company, but we'll see.

Felix: Okay, Mr. Contrarian. So when are we, when are you, when are you turning bullish on Microstrategy or is it just flat or bearish?

Quinn: No, I would, I would turn bullish on it at some point, but it's not here. I mean I certainly, I, I have shorted it this year and I, I'm not short it anymore. I mean this, it. Things are looking capitulatory across its capital structure. I mean it's, it's preferred security is paying 12 or whatever is trading in the 70s. So it's not. But it is still unresolved. It's still unresolved. I mean also the other thing is at these current levels he's. His debt and pref Service burden is 6% annual dilution on MSTR common. So is if bitcoin just stays flat, he's diluting MSTR holders by 6%. So it's just a, it's just not going to work for a long time in terms of providing really good.

Felix: It's kind of in limbo. It's like it's not going to work and outperform. But there's no either like clear clearing function. Like they're, they're leveraged but they're not like liquidation levered, you know.

Quinn: No, people don't understand. People don't get that right. It's not going to go, he's not going away overnight. The incentives are to keep this going for forever. But it's the same thing happened last cycle. Like it gets to the depths of the bears. He can't buy any bitcoin for a long time. It trades as a discount to nav. Like people dismiss it. It's just basically like GBTC again. And then eventually if the discount gets big enough, maybe that's 20, maybe that's 30%. People are like, all right, I'm going to step in here and buy this instead of bitcoin. And then all of a sudden that bottoms and then you're like, okay, this is trading up to par. People must be liking bitcoin again. Okay. You know, so well, I guess the

Felix: difference, the difference though is this time he either has to pay a dividend for stretch or pause the dividend. And like both are issued. There's issues in that. But there's no like, yeah, there's no like forced seller. Like if they sell it'll be on their own terms in their decision.

Quinn: Yes, agreed. Because like he can still issue a lot more equity, you know, to keep to keep for the next few years to keep their cash flow obligations. Yeah, it's, it's going to be interesting because he comes out a couple days end of the month for the STRC dividend adjustment. So we'll see what he does because like it's never traded this low so the dividend increase would have to be very large to get it back to par. So almost begs the question if you even raise it at all because like why raise it 50 bips knowing it's not going to get back to par? Like maybe he just leaves it, which would be an interesting twist. I could see it because then it maybe preserves MSTR's value a little bit longer and he can raise more capital that way. But yeah, it's, it's, it's going to get really interesting. Just not quite yet. It's getting closer.

Tyler: I think it has way more to do with the, the power like AI power and the AI miners, meaning the flip over because it's so economical to sell your power to AI companies. Now you get a 10 year deal for billions of dollars instead of mining bitcoin at a paltry sum at this price. And the electricity costs are rising because of all the data center's AI using it. So it's just an ARB we're watching. Just very simply, it's the ARB between centralization, decentralization. I say that every single week and I don't think anyone really gets what I'm saying but has to do with electricity, right? Like that's, it's literally electricity is, is the input which is causing these miners to build out, you know, their AI capacity. And then it's going to flip back and forth at some point, you know, they'll overbuild and you know they'll have too much capacity for AI. But we, it's probably the point is, is that this bitcoin is still a cockroach that you just probably won't kill. And you have a lot of people lever up and there's a lot of like, you know, with, with hyper liquid and all the leverage embedded in bitcoin as an asset class along with like your DATs and all this other stuff. It's just going to have these like crazy cycles and then there's, there'll be bearishness and then it'll be advantageous to mine bitcoin again. And I think that's just the nature of, of the beast. And you'll also have 10 year cycles where there's not productive things to put your money in like Where. Yeah, there's other assets. Like, you know, you, you see the chart between like, Micron and Bitcoin, it's like completely inverse and there's, it's. That says a lot. You know, it's. It's because there's, there's things that actually are making lots of money and they're at relatively, you know, cheap valuations. Like, I'm not making a pitch for anything, but like, sometimes that makes a lot more sense and that's the way markets should work. You know, for, you know, 10 years, it was just like, put your money in anything that, like, doesn't debase. And I, I just think we're in a whole new era and it's a great. It's the first turning, baby. Like, we're, we're having new institutions replace old, you know, bureaucratic ones.

Quinn: Yeah. One of those assets is post bubble pop and the other is pre bubble pop.

Tyler: Yeah. You know what? I would love to get like a. There, there's two interesting things is like, I would love to get a peek inside what it's like at like a fang company from a bureaucratic standpoint. Like how many committees are in there.

Quinn: And like, there's a lot of layoffs.

Tyler: Is what's your average employees just being like, there's the culture when you're that big and you're just not growing anymore, people start cannibalizing each other, just start backstabbing each other. And they're like, I. And I've been at one of those companies where, you know, it's, it's a huge mega company where it's all the older people, when they're feeling threatened, just start crushing each other. And I'm like, oh, my God, that's the side. You gotta, you gotta get the hell out when they start backstabbing each other. And I would love. I think we're at that point with the Fangs is my, My, my point. But we'll see.

Quinn: Yeah. I mean, it's turmoil, I would say there's a lot of layoffs. I mean, there's. The top people are leaving for all these crazy, lucrative deals from AI, other AI companies.

Tyler: Yeah, it's passing of the torch, baby. First turning.

Felix: Yeah.

Quinn: I mean, they're all monop. Monopolies. So in many ways, like this should be welcomed by people, because breaking up monopolies or reducing the, the power that they have is good for everybody except for them. But in terms of the greater good, so I think that's interesting. On the other hand, they're probably just pumping monopolies in these other sectors.

Tyler: But, well, you know what's interesting is I think to that point, remember when Exxon and Chevron were so big and they were the largest companies in the world and even they bowed the knee eventually to. And it forces, at some point, it forces innovation elsewhere because the returns are so asymmetric. And now we have all sorts of different power, nuclear power, like people are starting to solve for, which is why it's really hard to keep oil up because it is commoditized. There's lots of other energy, solar. So similarly, hopefully the same thing happens to social media. I can already see the social media slop, dude, when you post on Twitter and there's like, there's like some random AI guy that goes, yes, it's funny you said that. And like, like automated like AI slop. And you're like, this is gonna kill, this is gonna kill things. You know, all the social media eventually is just gonna be slop and people are just gonna get off of it.

Quinn: I agree. I mean, there's already those laws in Europe that they're passing to ban social media. I mean, yeah, that's good. Get some people outside and doing real things some more. Get, get people talking to each other like.

Felix: Yeah, get people irl. Go to. Go to events in person. Go. Go to World cup if it's in your city. It was the. I'm so happy I did it. The tickets are expensive, but man, it was, it was so fun. Go, go do stuff in person.

Tyler: I got, I gotta, I gotta share a story now that we're almost ending. But every morning I go to this, this coffee shop called Summer Moon. And it's, it's like the Texas coffee shop, but they hire high school kids that are like. But they make them look at you in the eye and talk to you every single morning. It's egregious. It's like a buck or two more expensive than like Starbucks. But like, these kids are so nice and well mannered and like, they, they, they don't have anxiety. They're taught like, to look you in the eye and to have a nice day and like, have a conversation with you. And like, if you verse like Starbucks, which is like, you know, overpriced, terrible coffee and like, you know, they don't really talk to you. Really. And my, my point being is there is something changing in the social dynamic for the younger kids because for a while I think they were just always on their phone bones. But like, it really is, it made me feel really good and I'm happy to pay $2 more for my coffee if you know these, these kids are, you know, there's kids out there like that that aren't just complete, you know, social anxiety demons.

Felix: I was just thinking like, so when I was a teenager, I was a cashier at a grocery store. That was my main job. And it was like a great place to learn how to just small talk and you know, shoot the. And yeah, yeah, it was awesome.

Quinn: Yeah.

Tyler: Look at you now. Podcast host.

Quinn: That's where I learned still shoot the.

Felix: Exactly.

Tyler: I'm telling my kids to get a job at one of those spots.

Felix: I could not recommend it enough.

Quinn: I started work. Yeah, I started working like before I was 16 and when I turned 16 and could drive, I, I would work like 70 hour weeks in the summer. I think is the best possible, like from a personal and professional development standpoint, the best possible thing.

Felix: I was, I was. Yeah, I was 14 when I started. My mom had to write a note saying that I'm allowed to work.

Tyler: That's awesome.

Quinn: Yeah.

Tyler: I did construction for a summer and just got absolutely abused by like, oh, nice. You know, that's really.

Quinn: Yeah.

Felix: Yeah. I did a summer of labor too and I just got. Yeah, you get wrecked. You get, you get told a lot of things too.

Tyler: Yeah, it's so good.

Quinn: But you just get taught that is real. Like the, the idea that like, I think it's so healthy. Like even if you have money and resources making your kids have. Have to sustain a job, like that's going to teach them. It also does the hard aspects of parenting probably for you. Like kid doesn't show up and they get fired and the, the boss is like, you, you're fired. Like at least you know, you don't have to. As a parent, it's like, well, you learned your lesson from someone else is the bad guy, not me, you know, So I think there's just so many good things about it. You got to be working. Yeah.

Tyler: Now you go get your belt.

Quinn: Yeah, exactly. Well, you, you probably got some crazy things in that, in that room anyways. With those like toys hanging behind you.

Felix: Yeah. Your belts, your bars.

Tyler: Quinn was making fun of me because this thing is like, it's a pull up bar and I, because I'm old as, I can't do like really a lot of pull ups without using one

Quinn: of these rubber bands.

Tyler: He's like, what kind of weird sex toys do you have in your office?

Felix: His.

Quinn: His dungeon.

Felix: Dungeon? Yeah.

Tyler: Like you've never seen one of these. Yeah, Come on.

Quinn: I love it.

Tyler: Oh, Boy, this really took it.

Felix: All right, guys. Good fun. That's nice. Yeah. That's the perfect spot to end.

Quinn: Yeah. Go, USA all right.

Tyler: See you guys.

Felix: Go, Canada. See you guys.