Forward Guidance: Washington Is Suppressing Volatility To Keep The AI Boom Alive | Weekly Roundup

Sourced by podcast-ingest on 2026-08-15. 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/BWG5090845235.mp3.

Show notes (from RSS)

Washington is shifting from monetary management toward state-directed capitalism and the consequences could reshape where capital flows next.

This week, Tyler joins us for his final roundup before heading to Shoten Capital, unpacking the shift toward state-directed growth and volatility suppression.

We explore Fed-Treasury coordination, the AI capex boom, energy abundance, and whether Bitcoin is approaching a turning point. Enjoy!

TIMESTAMPS:

00:00 Intro

00:58 Tyler's Farewell

04:34 Markets Enter A New Regime

06:22 Treasury Takes Control Of Volatility

15:11 Nuclear Power Supercycle?

20:18 Backstopping The Global Short Vol Trade

24:50 Are Policy Band-Aids Creating Bigger Risks?

28:48 Gold Sniffs Out The Policy Pivot

33:35 The AI Capex Boom Becomes Statecraft

40:42 Can Markets Survive The Midterms?

44:19 Regulation Builds The AI Moat

46:01 Bitcoin Enters A Cleansing Phase

50:31 How Narratives Drive Capital Flows

55:34 Final Thoughts

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Transcript

Jack Farley: Nothing said on Ford Guidance is a recommendation to buy or sell any investments or products. All right, what's going on, everybody? Welcome back to another Roundup edition. Ford Guidance summer edition. So it always seems like one of us is not in our home office. It was me last week. It's both of you this week. Summertime, man. What's going on, guys? Good to see you.

Tyler: What's happening?

Quinn: We really see Tyler. It's just, like, ahead with all that camouflage.

Tyler: Sorry. The lighting here is not great. I'm in a basement in. In Lake Tahoe. And it's.

Quinn: We got.

Tyler: We got all the points covered. Quinn's in Beirut, you're in Vancouver. I'm in Tahoe.

Jack Farley: Yeah, yeah, yeah, yeah. Quinn's. Quinn's out there solving the Iran war.

Quinn: Good to see it. Yep. Negotiating peace. Yeah.

Jack Farley: Good job. Good job. Well done.

Quinn: All right.

Jack Farley: Excited for this one. Also a little sad for this one. Bit of a. Bit of a bummer news, but our boy Tyler is unfortunately moving on to better pastures. But you're going to a new firm, and I'm very excited for you. But also part of it means that you're going behind the veil of compliance once again, it sounds like. So. So this will be a last one for a while, which I'm sad about. But, yeah, tell us. Tell us what you're up to and what's going on, man.

Tyler: Yeah, yeah. No more, you know, pontificating about the market publicly, unfortunately. So I'm heading to this. This fund called Shoten Capital. They're basically investing in. In real things like they think with. With AI kind of commoditizing a lot of the software sectors. What can't you replicate? It's essentially large industrial companies and things like that. So, you know, the secular play here is large capex things that you can't reproduce. And maybe AI commoditizes a lot of things, and you get bigger margins from historical businesses. You never thought. So I think it's a great macro play. And not only that, but these guys, they're ex Sorbonne X third point and super smart guys, and it's going to be interesting secular play, but I'm super excited they moved from New York to Austin, too, which is like another one of my. You know, and I think a lot more funds are doing that. You're not necessarily Austin particularly, but out of New York, you know, we're seeing the. The political reigns in both New York and California. Kind of slowly squeeze some. So it's, It's. It's fallen into all of my buckets of of macro secular plays, which is awesome. So I'm really excited for it. But gonna miss the guys at Money Waters. They were awesome. They were good dudes, best in the biz, and, you know, one of the last short sellers left in the market, Although they don't just short sell. That's the funny thing is, like, they have a lot of different fun, so I still. I still love them. Carson and Freddy and Anthony, we're awesome guys.

Quinn: So congrats, bro. You're gonna crush.

Jack Farley: Yeah, yeah. Happy for you. You're gonna kill it. There's a lot of tailwinds there.

Quinn: Yeah.

Jack Farley: I'll try to wrangle you on.

Tyler: We'll try. We'll try to. I mean, I'm trying to get them to let me talk some macro, but we'll say it's.

Quinn: They're.

Tyler: They're, you know, in the process of raising big, big institutional capital and it's, you know, growing fast. So I don't want to do, derail that.

Quinn: Yeah, you're a big liability. I can understand.

Jack Farley: Yeah. If there's. If there was one guy I wouldn't be sure to trust, like, with complain.

Tyler: What are you talking about?

Jack Farley: You are reliability in the best way. In your honor.

Quinn: In your honor, we'll. We'll release a. A. A. Edits, cuts, highlight, re reel for all the habit listeners.

Tyler: Can we roast me? You guys have five minutes to roast me at the end of the show.

Jack Farley: The roast of the towel is roasting me before.

Tyler: Side note was we were talking about the food in Beirut and how good it is, and he's like, tyler, you're too American. You just probably eat chicken fingers and french fries and, you know, greasy, processed foods. I was like, what am I like, crock? Only like American food and hamburger.

Quinn: Three kids will do it to you.

Jack Farley: All right, well, we won't. We won't dwell too much. We'll obviously talk more about what's next for the roundup and everything like that, but. Yeah, one last ride in the interim here. Let's. Let's make it a good one, guys. How are we thinking about markets? What's going on? What's going on? You guys mind?

Tyler: Quinn, why don't you start?

Quinn: Yeah, man. I think there's a lot of action for. For late summer. This. And the volatility at the surface is a lot lower than what I think is otherwise happening else, you know, under. Underneath the hood. So the. We haven't seen as crazy of a rotation market the last week, given the bounce that's occurred across the board. And in the AI related and tech specifically. But it's been sort of broader based with small caps and equal weight and things doing well in addition. But we are seeing more and more signs of policy intervention. I think that is going to not only increase but become even more material. So we had a number of obviously a lot of stuff from the Fed and the Japan intervention and now the QRA news. And so I think that probably explains the gold move. It explains why just inflation protection broadly I think has been doing quite well. And yeah, we still have three months till the midterm. So I expect the circus of headlines and policymaker attempts to stifle volume will not subside. It's only going to pick up. So get ready because every time yields start rising, the move starts rising, dollar starts rising. They seem to have an answer for it.

Tyler: Yeah, on that note, I just think we crossed some Rubicon of volatility controlling where it moved from the Fed to the Treasury. And obviously you have Warsh talking a little bit more hawkish lately. But Besant comes out with a generational plaza cord esque I think volatility Stifler. And what's so incredible about these moments is they do it almost perfectly. And we found out after the fact that war and Besson and Trump talk all the time. So they're literally watching the charts just like we are at the breaking point when skew kind of like goes nuts. And I posted this chart about 2TLT SKU where everyone was expecting yields. It was at the exact point where yields were about to break out and probably cause havoc in the bond market causing credit spreads to rise, et cetera. And they come in and they smack it, defend the yen, sell the euro. It's exactly what I said was Besant learned after breaking the bank of England was it 30 years ago? 20 years ago. Now he's on the opposite side of the trade. Instead of like betting on volatility increasing, he is volatility stifling. And let's we will see if he'll be able to always control these things. I think if economic growth stays higher than inflation you can de lever the economy and that's, that's the policy going forward. But in, in terms of these, these kind of like when imbalances rear their heads, it's really geopolitical statecraft. We're watching the whole last 20 years. You could synopsize it as you know, I guess more Fed driven liquidity with less fiscal. And that caused essentially like a complete gap between the rich and poor. Because if you had the ability if you had a big balance sheet and you could lever up while rates were low, you made a lot of money. You could buy back your stock, you increase your equity. Now this is more statecraft. It's like how do you grow an economy from the top down and you know, grow it for the middle and lower classes. This has been a two speed economy. Obviously I think they're trying to figure that out and make it more level. But you know that's, that's what the new policy is. It's, it's statecraft. It's not just watch the Fed, you know, and I think that's taking out the forward guidance from it all and now moving to like how does this affect our allied partners in the larger game? That's, I think it's a healthy thing. Although we might be moving into a world where, you know, it's more like directed growth, almost similar to China, how they say, okay, we're going to build new memory now and they direct economic growth towards a certain sector. Now we're going to be probably doing that. You know, we did it with the CHIPS act, we're doing it more in like think, see what happened to the CHIPS act with all the semiconductor stocks, like that type of stuff where you hone in on a specific sector infrastructure. This is, this is why like industrials and machinery and railroads and things like that are really interesting from a long term perspective. It's basically geopolitical. It's a huge geopolitical thing that you need to figure out. Right. And so if the world starts globalizing based on two different systems, those things become a lot more important. So I think that's, you know, I'm yammering here but like that's the world we're walking into and it's, it's diametrically changed.

Jack Farley: Yeah. I think there's multiple definitions of what is a similar trend. One is that geopolitical statecraft that you mentioned. I think another version that you can call that is like you mentioned state capitalism or also just this, you know, formalization of a version of fiscal dominance as well. And I think it's really interesting to contrast that with where the market's been at just based on how it's perceiving war. So far, you know, he's been pretty tight lipped, trying to talk a real hawkish talk during his press conferences. But then you start to get these news releases of what's really going on and one of them to, to your point is about the fact that I think war and Trump have Already talked way more than Trump and Powell ever did through probably both of his terms. It came up pretty quick on, on Wall Street Journal that, yeah, Trump and war are talking all the time about the implications of the Iran war, implications of the AI buildout on the economy. It's, it's becoming evident that even though, you know, you've seen real rates ratchet higher, you've seen, you know, gold dump like crazy off the back of that and also just this, you know, perception of maybe you want to call it Fed credibility or return to Fed credibility. And it looked on the surface like Warsh was trying to, to get out of the game of managing the long end. But I think what's starting to emerge now is actually that on the surface when you, when you just read from what Warsh is saying, it seems that way. But then when you look deeper, one notch deeper, you see what's going on with what Besson's doing with, with the yen intervention, with war, talking to Trump every single day or every single week or whatever it is, that it's actually just we're moving towards this regime of fiscal dominance now. It seems like,

Quinn: yeah, the really nuanced thing, as always, is how there's good and bad in everything, right? It's politics, it's policy, there's never something that's all good or all bad. There's always trade offs. And I think with respect to this Fed and Treasury, like on the one hand we all know that if they just let the free market forces take, take off from here and operate, it's not a good outcome. Debt to GDP is where it's at rising interest expense to deficit ratio like all these things. So it's a very precarious position for developers, market economies who are extremely indebted. And so that that result that everybody is in Japan, the us, Europe requires very close coordination between the Fed and Treasury in order to maneuver through what, what will be a tougher patch to, to kind of heal some of these things that are 20, 30, 40 years of built up excesses and leverage. That said, you don't also love all of the manipulative interventionists and tactics that are sometimes used. And I think the wash Fed sits in the middle of that where there is a lot of good things about it like reducing the Fed's intervention in the long end and letting the yield curve steepen and the long end kind of find a more market value like organically. But then they're intervening heavily on the front end, skewing duration towards bills and all these other Sort of tactics. And so you have to kind of be able to assess it all objectively and say okay, well this is what's going on here. It might be more free market and on this side it's less. And it's really interesting because the resounding effect of all these weaker dollar repoing treasuries to provide liquidity, reducing duration of coupon issuance, it's all stimulative and fiscal's still running so hot everywhere. It's going to be inflationary. So it's going to be really interesting because it feels like we are entering into a period where you have the election and midterms and incentives pointing towards one set of outcomes and behaviors. But there's also more and more things they can't control. Inflation is still 3.5%, oil is problematic, global reserves are drained, core is still very, very high. And they're having to resort to these inflationary stimulative tactics, liquidity, additive tactics despite all that. And, and it's, it's a risk because the risk is that it instills inflation in this higher run rate place and the next crisis or commodity supply chain shock or what have you, you know, that might send it to 5, 6, 7 again. You know, we're not, we're no longer in the ones and twos.

Tyler: See I, I'm going to take a contra to that. I think we're on the cusp of like a energy surplus that we've never seen before basically because they're going to state direct like right into nuclear power. I think that's the next big theme where you get, you know, if nuclear, they're probably diversifying their reserves because of the oil problem. Right, because of the Hormuz problem. What do you do is you try to make that part of the world less of a threat. And you're starting to see all the fission company fusion companies and then you have the SMR companies that are doing really late stage rounds like Valor, Atomics, Elo Atomics, like there, there's a whole bunch of like series C, series D, like nuclear companies that are about to come on and if you, if they really work we're going to be in like an abundance of, of commodities and energy. And so yeah, I, maybe that's further along than I think in it, but over the next five years just feels like maybe the market takes that into account.

Jack Farley: But I think that's the layer of the cake of that like state capitalism component and how it lends itself that the big bet being made here is if you just zoom out a little bit. Obviously there's the race of AI and wanting to make sure we beat out China. That is one of the biggest priorities. And part of that is also funding the energy like that you mentioned and having a heavier hand in terms of capitalism. And then there's the other side too, which is just making sure we get to that other side in one piece without too much volatility, which brings forth what we're starting to see now in terms of this yen intervention. We always joke around about the fact that anytime that something needs to happen, a new acronym comes out and we have that new acronym now. Actually, I want to walk through how this intervention worked. This was pretty cool. I was going back and forth to chatgpt around just how the mechanics of the different interventions and then how to make an infographic. So obviously it's AI, so maybe I'll say it's 95% correct. I mean, I tried to verify as much as myself as I could, but it's still really interesting. So what is the new acronym that we had is this FIMA facility, which actually is, you know, it's not new, it's been around for a little bit. But Scott Besson mentioned that in a tweet he wants to utilize that more, which is interesting because that's actually a Fed reserve facility that he's encouraging usage for. And so, so there's that dynamic, which is interesting. It's, it sounds to me quite similar to what happened with the BTFP term funding program where it's, it's these, these, you know, liquidity positive loans. I think another way to look at it is just usage of swap lines. But what is the goal here? The goal here was that one, when Besson intervened in the end, he did not sell dollars to fund that he sold euros from the esf, the exchange stabilization fund. Why did he do that? Because the last thing they want to do is spook the bond market. If you have to sell down bonds to then get the US dollars to then go buying yen, that's not great for the long end. That's not great for bonds. But if you sell euros on the esf, if you use these FIMA facility or just think of it as just a loan for those bonds so that you get dollar liquidity to go buy yen, what does that net out for you is that you basically still indirectly get a lower dollar without having to sell bonds. Because by nature of the fact of selling those euros, you're looking at strengthening dollar yen, dollar yen. The other side of that is obviously the dollar. So you indirectly see the DXY go lower. So even though the US dollars were not directly involved here, you did see the DXY go lower because it's, it's so heavily skewed towards the yen. And then you think about all the correlations that are correlated to the DXY as, as a basket. It's a, it feels to me like a way to get weaker dollar policy without spooking the bond market. And if you have lower dollar, that obviously has some insinuating effects to it that are liquidity positive. So it really shines a light on how the big macro bets of beating China at AI and all these, and the state capitalism that you mentioned and then you have this additional layer of these different dynamics that are making sure that we get to the other side in one piece. Obviously so much of the AI build out is being funded now that we've tapped out all operating cash flow. So much of that build out is being tapped by the debt markets. The debt markets are attached to the, to the long end bond market, not the short end. You want to make sure that you don't, you don't blow a gasket in that whole build out. So you can just see these different parts really starting to come together. I feel like we're starting, you know, the past six months we've just, the big question has been like what is, what is the war, you know, best and Fed treasury dynamic look like? And I feel like we're starting to get clarity here.

Tyler: You know, what I think's happening is they're backstopping the global life insurance business model, which is essentially short volatility. And what breaks the short volume model, what they want is the short volume model to slowly degrade instead of have this crisis. And what these life insurance plans have done is they match assets with liabilities, right. And when you get volatility across currency, that causes that sale of those bonds that they bought as the asset against the liability, right? So they take in, you know, a pre, they take in premiums from people paying their life insurance. They take that money, they go buy, you know, say it's a US bond of a corporate, you know, this is a Japanese life insurer and they make sure cross currency wise that, you know, if you adjust it, they're still getting a real yield. And now that what, what Besant really did was just stifle the fall of the fixed income market and, and the market so that you can still have that same life insurance recycling policy. And yes, it might degrade I think really the truth is as long as you keep the financing costs lower than the inflation rate and growth keeps up, you naturally deliver the economy over, you know, say a 10 to 20 year span. And take, that's how the, that's how you work your way out of the boomer Ponzi scheme is boomers essentially take the tax of inflation on all the bonds they own and the new generations invest in growth. And so that's, I think that's, that's really what they're trying to do here now. Now what happens is you get these moments where geopolitically things aren't, you know, copacetic and go to slide, let's see, slide 36. And what messes up this whole life insurance model? And it's really, this is all just maybe you might have to refresh. Yeah, there we go. So you can kind of see like volatility is another way of. This is just me being, you know, metaphoric. But volatility is the price you pay for returns, right? So when, when volatility happens in the market, it's, it's two different realities coming to terms. You got, you know, what we saw is like all these Twitter heroes were basically saying, oh, they carry trade. Like the Mike guy of the world, he's like, you can almost always fade him. I think he gets everything, but he makes money off of being the bear. So like, and I do really like his stuff, don't get me wrong. But it's like when you see all those bears calling for Armageddon, they're probably right. If you had a free market. But then, you know, you have the state, the state, the problems are too big. You'd have, you'd have literal chaos. So they come in and they stifle the volatility. But these two different realities always hit and you get the spike. You can see this is the CBOE emergency stocks volatility gauge. This is your chance to actually take a stand. And you know, we saw a massive deleveraging, situational awareness. A couple other funds went under, the degrossing across the industry because of that. And, and now it's like, is this really a growth play? Is this, or, you know, is this the beginning of, of something, you know, complete bust? I probably think it's, you know, it's your opportunity here, but you're going to have to deal with the high single stock volatility. And as that comes down, these are usually great buying opportunities over the long term. But, you know, that's assuming all the geopolitics calm down besant and war can kind of. You need to have stop losses in clearly I'm not saying just go balls long here but like this is the environment where this is where you buy if you want good returns and in these sectors that kind of got screwed. But overall you can see that index volume, that's where the spy's making new highs. The QS look great, IWM looks great, RSP looks fantastic. You're seeing the whole market breath is actually getting healthier right now. Even in the face of all this. I think it's, I think it's really hard to fade the bull market right now in general.

Quinn: Yeah my, my concern with it because I, I think there are a lot of signs from this week that something has changed but I'm not reading into it to as great of extent as you are in terms of saying like, like on a more swing multi week, multi month basis because it's like this, I view it as this like very slow deterioration of, of of underlying fundamentals in terms of exhausting the fiscal impulse of the first half. The AI trade cracks haven't changed one bit. The MEG7 hyperscaler problems haven't changed at all. Like none of them are going not, none of this stuff is like crash stuff but it is slow deterioration. You know, there's no buybacks left for the meg 7. Their cash flows are negative, their credit spreads are widening, you know, like so but then all of these band aids are also temporary to like stifle volume. And the thing I have a hard time putting together is like okay, what changed outside of two large treasury and central bank interventions? Nothing. Like you know, situational awareness was over levered and you know, got deep and got liquidated and that caused so much selling in a reversion. But now we're kind of back into the trend for the tech stuff. Like I don't think semis or much of these like Japan, Taiwan, Korea stuff. I don't think it looks that good here and then and all this leverage washed. But to me I kind of read it more as like, like warning lights than than like green flags because again I don't by not a fundamental problem I have with the situation from a big picture perspective is by not letting the, the brush on the ground burn you're accumulating tinder. And again I'm not, not in any way calling for like B. Like you know, I think it's going to be very choppy for the next three months but I don't, I can't really get that excited. There's some sectors I'm getting very excited about for the reasons you mentioned, the fiscal policy, directly supporting and investing behind some of these power and energy things. The geopolitical issues are not going away all that. But in terms of the leaders and the tech that side of things, I'm still skeptical because like the dollar right here, it looks like it's going to bounce again. And you know, I guess fundamentally if

Jack Farley: everything was pushing up like yen is weakening again as well right now.

Quinn: Yeah, like that. I think the treasury market stuff like the move has come off but not crazy. They barely got yields to budge lower. So to me the problems are just still there. They're just doing a more interventionist, manipulative, I guess you could say better in that regard. Management of the volatility which is keeping things supported. But I do question what it does to like the medium term health of things. I don't know how it ends because I do agree with you. It's like, okay, you can get, you can let the volatility event happen and you sort of clear the, clear the forest of the fire and regrow and you, you have the seedlings for, for a big trendy move. But you know, maybe like, I guess if you apply a hundred band aids to like a leaky dam, okay, maybe like it actually does resurrect things for a little. But like fundamentally on like a medium to long term picture, it's still problematic to me. So I think it's a very, I don't think it's going to be any easier the next few months than it has been the last few, to be honest, from a trading perspective.

Jack Farley: Yeah, I don't know about like specific sectors, but I mean look, look at the rallying gold the last couple days. I feel like it's really starting to sniff out this, this pivot because look, the whole market was all in on this hysteria around Warshire's gonna clamp down on everything. Like we're gonna get rate hikes. Like people were convinced about a rate hike in July and now there's still some conviction in a rate hike in September. And you know, this, this normalization of the Fed was going to occur. And you saw, you know, gold sell off like mad off of that. And then suddenly you started to see behind the veil of what's really going on, which I think is the theme of this week. And then you see gold starting to rally like Matt. And obviously there's, there's the yen stuff that we talked about. Then there's also this Quarterly refunding announcement news that came out this week as well. The teaback that happens every quarter. And that was really is a great way to see about how you know best treasury is thinking about coupon issuance because that's al. That's obviously been the big game over the last few years and there's a lot of expectation of, of whether they would hold, whether they would increase the amount of, of long bond issuance or not in the coming year or so. And what was really interesting is that in the statement so I highlighted here in red but you know, typically it says looking ahead, treasury continues to evaluate potential future increases to nominal coupon and efron FRN auction sizes and they changed it to changes. So they went from increase to changes. So what does that do? That opens, you know, this, this is a new forward guidance. Like they talk about the amount of quarters that they're planning to have, the amount of coupon issuance and suddenly they're talking about changes which opens up the tail of decreases to coupon issuance, which is, I don't think that was on anybody's radar. So that is just absurdly dovish. I'm curious, I know you're looking at this as well on the QRA side of things. What was your read on it?

Quinn: Yeah, so they, they have consistently had this increased language for like three or four quarters. You know, they, they, everybody knows that, that, that issuance levels are growing, the TGA minimums are growing. So it's, it's a pretty big change. Like, and I think the context clues are key because there, it's, it's just funny. Like, it's like we, we might be able to lower issuance of, of duration because demand is so great, but the demand that's so great is coming from the Fed, which is our other pocket. And then it's like, and then it's like, oh, we should lower the cost. We're going to lower duration because it's cheaper because they're steepening the yield curve now and it's like well yeah, no, like that's also not some crazy intervention that's or invention. That's, that's just the mechanics of borrowing short versus long. And there's reasons you don't do this because it's very stimulative. Like it's very propelling of the wealth effect which drives 50 over 50% of consumer spending, which drives demand. Like there's reasons you, the market forces create natural, you know, green lights and red lights and brakes and gas. Like when you mess with this, you mess with the, the integrity of the capital markets and that their health as well as the signals and, and direction you can take from it going forward. So that's why my, I have mixed feelings. I like some of the things they're doing at the Fed. Like I don't think they should be blabbering the 15th governor what he thinks about tomorrow's, you know, CPI. Like that is useless in every sense. But there's also these other sides which is like you're really, you know, tampering with, with the fabric of the money supply and the free market forces that on the other hand can lead to unforeseeable problems because you know, you can't control everything forever. So you know, it works in the short term. And there you have two hedge fund managers running the most powerful financial institutions in the world. You know, you could say Besson's now Japan's, you know, senior monetary and fiscal authority as well. Like he's running the two biggest balance sheets, you know, known to man. So of course they're going to manage it. Like, of course, but, so I see that, but I'm conflicted because I also respect the markets and I also think that like, you know, Leopold is the most recent example of like you can't outsmart smart the markets forever if you're doing, you know, stuff that, that has risk. So I, I don't know, it's interesting,

Tyler: you know what I mean? We could talk about the Leopold stuff separately. I missed last week, but they, they artificially created a gamma squeeze and this is the market structure stuff is if you look at single stock Vol, it's probably largely them. You're, you're, you're, the supply of, of the stuff they're buying is not big. And then you get the piggybackers and then you get the retail crowd that buys the call options. I'm not saying this, they should have expected it, but for guys that smart, you know, when you see single stock fall that high, there's ways to hedge and I'm really shocked given having read that piece, that that's what happened to them. I, I'm really, and maybe they needed a, a trader to hedge that out a bit, a bit better. But like that it's, I, I, they needed a risk.

Jack Farley: You can't just run the whole thing with just a bunch of effective altruist. Like he needed a risk manager in there to say hey man, maybe we should dial back the leverage here.

Tyler: I mean like that's what's so, you know, what is this is. This is maybe me being a little conspiratorial there. Having read that piece. It's like my favorite quote is talent recognizes genius, but mediocrity know knows nothing higher than himself. And he and the other guy are, are autodidacts. They should know all this stuff. And I'm kind of wondering if, if this gamma squeeze almost opened up everyone's eyes to the larger geopolitical game which is like, you know, the AI war needs to be won. And so that's why I'm thinking like the statecraft is actually the bigger picture. You get the first boost of capital in and look, look what's happened. Go to slide 32 to your point on the Fed and Besant. This is interesting from Torsten Slok. So hyperscaler capex as a share of GDP is higher than the telecom capex share of GDP in the 2000s. So you got the narrative right. So now everyone's really levering up to do this because this is now statecraft and you can see in the green, this is hyperscaler company capex as a percentage of GDP and versus the telecom boom in the 1990s. You can see it completely decimates it. And now what I think Bessant and War and Trump are all trying to do is keep this going. You're trying to create like self reinforcing private growth not backed by, you know, the government and then go to the next slide. This is even more fascinating this. Now look at the hyperscaler capex as a percentage of GDP relative to residential investment and I will make the argument here. So the green is still, you know, this is, you can, you can, you can see relatively the residential. This is where macro is really fascinating. You can make the argument and this is what I call the boomer Ponzi scheme. Is this the gdp, the share of gdp? Capex and residential investment was largely just a generational extraction mechanism where you had rentiers and renters and it wasn't, it created growth on a GDP basis. But you then you created so much of residential investment it increased the cost of capital for the next generation because they became the renters, not the renters. And I would actually make an argument that like at least this hyperscaler investment, maybe it's the same thing where you're creating like this Olga class that just taxes people for using AI, but which is, which is very possible. But you could also be in a 21st century economic boom where like this is actually real capital allocation instead of like an extraction mechanism where it actually like tenfold economic growth and in that and that you know, maybe from a, from a relative perspective this is just beginning. And you know to play contra on this is what's really interesting to play contra on the issuance of the hyperscaler credit spreads at some point because boomers need yield and all these life insurance companies and the whole boomer yield thing. You get Oracle bonds at like say 8, 9%. That's a steal man. This company, that's an investment grade company at 8 or 9%. Right. You know Google look at their bonds. That's this is like an absolute bond buying spree where you see baby boomers can actually hoover these things up and actually get real yield from companies that probably are not going out of business. Right. They're tax on the system. And so like I don't know what I'm. At some point you got to keep the geopolitics copacetic and you got to keep. But this is the real name of the game is this is what I think Besant and Warsh and Trump are really trying to do is keep this capex going.

Jack Farley: Yeah.

Tyler: Keep all the geopolitics and effects copacetics so you can grow your way out of it and at least going into housing like if there is a boom right now, this is what's actually fascinating. You step back and you're like there's no, like housing is unaffordable but if you can get the American middle class to take part in this boom and then, then housing naturally de levers itself and the generational problems go away.

Jack Farley: I think the interesting distinction here between this and 082 is that you know, they've, they've learned their lesson about supporting these, these build outs and these runs. Like you know they intentionally let Lehman fail. They know Congress intentionally waited until the last second to, to roll out tarp. Like this time at the first second of, of bond market volatility, they're stifling it down. So you know I, they will throw everything at this before it even gets hairy. So to your point, yeah, I mean Oracle bonds are a buy.

Tyler: Well at some point like you know, why wouldn't you just sell. If you're a boomer you just sell your equity and just buy those bonds because like at, at that yield, you know, it's not going out of business like at that yield, it's actually a great buy.

Quinn: Right.

Tyler: Relative to you know, some other companies you're probably not going to buy some high yield companies that are over levered etc like Core Weave Bonds. I can actually talk about single stocks for like one more day. But like you know, get it out

Jack Farley: while you can here, let's see it.

Tyler: Like well Oracle is like you know, 89 the everyone's calling about Oracle CDS but it's that like 2, it's like 200 some BAS basis points whereas like I think core weaves was like 800 at the peak. So you're like, you're talking about two different capital structures here that are, you know, entirely different where I, I don't know. I think at some point if they can keep the rate vol down on the treasury aspect, the hyperscaler bonds are a steal, you know and they, but you need, you need that geopolitical thing to just calm down and maybe that's what they're trying to do into midterms.

Quinn: Well, the only thing I would just say as a reminder for people listening to keep in the back of your head is this administration has also shown a very willing appetite to play both sides of the manipulation game. And what I mean by that is right now, you know, right now we're in the thick of peak political incentive period to keep things afloat. The midterms are coming up. They're probably going to lose the House. The Senate's a toss up. They're about to go on recess. Congress, Senate and House with a very pretty shitty last few weeks and months of activity and momentum. All these spending bills and Clarity act and all this stuff is just chopping. No one wants to do anything. And Trump's approval and popularity ratings are in the absolute toilet like, like lower than his first term setting new records. Iran war is ongoing. The straightforward moves not open like a lot of eggs on the face. So they have a lot of making up to do and we're in this peak period look historically in the last two years even is the tariff thing, Iran thing like a lot of also manufactured volatility where they were not supporting everything at all costs. And frankly like if you, if you do keep this band aid approach, you have to keep going back to the band aid well week in and week out, jawboning and jawboning hit the end, weaken the dollar, intervene here versus if you do investment. Being a markets guy also knows this like he's not trying to spend the next two and a half years of his tenor like just like a, you know, Simon the Hedgehog or whatever at each little problem occurrence. So I think that's, that's the name of the game for the next three months where yeah you really just, you kind of have to just assume they're going to throw the kitchen sink at things and you know, they can't completely eliminate volatility. But they're going to. The Vix is going to go to 20. They're going to throw the kitchen sink at it. Down, Vix go to 20 down. But like again, you just create these problems that add up and also the market is forward looking. So if everybody starts seeing these behaviors then does the, does the ball stay afloat until midterms? I don't know. It's, it's a really interesting. It's, it's like a real time experiment frankly, in my view. Like, it's, it's interesting.

Jack Farley: Yeah, I mean like, I guess one way to think about it is okay, post midterm, say Democrats sweep, you know you're going to have impeachment hearings every single day. You have like, like the AI data center anti AI moratorium stuff that is becoming very politically popular for Democrats to support. Like yeah, if you do have this structure all built up on just like applying band aids every five seconds and then suddenly you have the person applying the band aids, the band aid machine is busy with impeachment hearings and AI data center moratoriums. Like that does create an air pocket that is. Yeah, like it's, it's a good point that it, that can be quite concerning.

Quinn: So then the answer is war and spending. That's, that's how politicians fix it.

Tyler: Yeah.

Quinn: Not my, not my favorite by any

Tyler: stretch, but that's, you know what that AI data center thing, this is what's I keep going back to. This is like people are reading it as bearish for the companies in the market. But I hear something completely different when I see, oh, AI Data center, we got to regulate these things. My favorite is Bill Gurley saying regulation favors the incumbent and it literally like makes these companies monopolies where if you have access to the grid or power, you're literally like, you're like a toll taker. Ching, ching ching. You already got access. And not only that, but your balance sheet's big enough where you can finance the, the next regulatory like all these hurdles. It's like what happened to hedge fund industry, right? You start a hedge fund in the 1990s with 500 grand and you didn't have to do all this crazy stuff. Now you need at least $100 million of investment to pay for the lawyers and the regulatory and the tax and the audit and all this stuff just to maintain it. It's the same principle here is like regulation Favors the incumbent. All these power guys, you know, the bitcoin miners that are, you know, transitioning to AI power, it's going to be just like absolutely monstrous the more regulatory regulations you put on this.

Jack Farley: Yeah, I mean the frontier models are doing this too. Like anthropic has their entire strategy right now is, is trying to create a regulatory moat through hysteria of saying, oh my God, like you know, we can't be trusted with these, these frontier models. You know, we need to have these safeguards and only us can be the ones that bestow that upon the. So we need to, we need to put out these regular regulations, pull up the ladder, you know, only, only we can be trusted with that. So I mean there's, there's, there's levels to the game right now.

Tyler: Yeah, yeah, there's so many interesting macro things going on with that stuff too. It's like, I mean especially you know, here, here's one macro. Other things. When I left the show with Mike Iolito years ago, I think I top ticked the bitcoin market. And I'm thinking as I leave the show here, I'm bottom tick. I feel like I'm almost bottom ticking bitcoin because I think a lot of the, the transition, I think a lot of this supply from bitcoin has basically been. Because AI has been winning the battle between centralization and decentralization. And now we've seen all the treasury companies get taken in the woodshed. The leverage there, sailor changed is tuned. You had all the bitcoin miners pivot to AI. They sold supply to finance it. They're still selling with supply but at some point hash rate drops low enough where you can actually mine again profitably. And maybe you have some weird tax thing where you know, the, the, the bitcoin, the AI infrastructure guys have to pay more for electricity and you know, it makes bitcoin mining a little bit easier. And the electrical, the, the electrical capacity grid, you know, the grid gets built out a little more. Anyway, all these things are, are colliding. But I think they're, there are two. In 21st century economy, the power is where you really have to be concentrated. That's the backbone of everything because we've commoditized capital. So you have to go one up. What's the next thing to keep economic growth in a 21st century economy and it's power.

Jack Farley: I think there's some interesting tailwinds to the whole bitcoin thing right now because there's all that you mentioned and then there's also Just this cult of bitcoin maximalism that. I don't know, it became very toxic. In my opinion, that is starting to wash out now. And you also have, you know, Sailor dominance. Like, no, he's not going to get, he's not going to get carried out. But I think you'll also have less relevance moving forward. And I think that's, you know, I, I don't like owning an asset with such key man risk where all I have to, like, where the price action is entirely determined on like what one guy is deciding on a given day of what he's prompting ChatGPT with in terms of like new, new structures. So, yeah, I don't know. There's. There's an interesting, there's an interesting tailwind there. Like, it really feels like this cleansing period right now that not a lot of people are paying attention to.

Quinn: I agree completely. I, I would not be like. I don't think now is particularly like. I think we're kind of in this middle ground. I don't think it's a, an amazing like entry in either direction, but I certainly do think.

Jack Farley: But you don't want to short it either. I don't think, like, yeah, it's, there's no. You just let it heal.

Quinn: Yeah, it's like, yeah, yeah, this. And the volumes are low. Like, positioning's low. We're going into the worst seasonal month of the year. Like summer doldrums. It's just brain damage. It's like. Feel like I always remember you making fun of the last two weeks of the year. It's like, like, why does anyone ever trade the last like week or two weeks, whatever it is, of the year? And because you always post the bitcoin chart, It'll be like 61 60, 61 60. And it's like, it's kind of like going to be that probably for the next, like, yeah, there might be some volume if we get macro Vol, but there's not. It's no longer a crypto idiosyncratic problem. We, we diverge from equities a year ago and like equities are the problem and we know the fix to the equity problem is printing. And they just started their intervention tactics like way preemptively when the S and P was off two and a half percent. So it's like, yeah, it's starting to get a lot more interesting. I still think we have some time of brain damage to go, but definitely no longer. Like, you can't get bearish. Sailor just raised 4 bill and a cash Reserve like that's, that's done bit. Mine still has cash.

Jack Farley: He's fine.

Quinn: Yeah. Yeah, you had a bunch of the dats. Kind of it would be nice to get some clearing event, a bigger clearing event. Maybe we had it with micro strategy, but maybe like one or two big DATs, like kind of like calling it or something, you know, but can't always get what you want either.

Jack Farley: Yeah, I mean, you just decide how to approach it. Like, you know, buy a little bit slowly over time, like. Yeah, it's not the time to do like a high level, a high leverage swing right now, that's for sure. What are you going to say, Tyler?

Tyler: Well, I, I think what's, what's interesting about these new, the market structure is like it's, there's a whole new process of what's happening is like you, you get a narrative where you get a capital inflow and then you get the retail crowd tracing, chasing, and then you get the, the high frequency guys making extreme. Because every inflow causes like an asymmetric price move. That's why like last price is a liar. Price is the equilibrium of liquidity. And the problem with crypto is it just doesn't have a narrative right now. Like it really, there's no reason, like, if you were an allocator, why, why would you invest there specifically? Like, it's, there's a lot of dead projects just floating, doing nothing. I mean, I, I get Bitcoin. Like, Bitcoin's probably the best one. Maybe, you know, Stablecoins, Ethereum and certain projects that generate yields make sense to me. But I don't know, I think they need a rehaul marketing campaign to get new capital and then, and I just don't, I, I don't see that happening with the same people. There needs to be a new, a new person that emerges that has the right narrative, like a Gavin. What Gavin Baker is doing to the AI trade is like fascinating. And what I found is like, I call them inceptors. There's people that like find the narratives early and then because they know it's so stone cold and they see the inflection, they kind of like, they become kind of like the person of the moment. And you know, that. I think Gavin Baker really nails that this, this cycle. You know, we saw, was it Josh Wolf in the VC world? And we saw, you know, Leopold and we saw, you know, you have these like little mini celebrities that, that come along and Cathie Wood, right? And, and I think it's important to watch those People like Jack, Jack Mahler's nailed the first bitcoin one. It's important. I think Jack's still going to be like a, a long term, first turning character. But you have to watch these people and their narratives because when, when it changes and you see the capital inflow into certain sectors. Like, I think there's going to be a nuclear guy. That's my next figure. There's going to be a guy that's like the nuclear guy, like Adam Rodman at Segreg Capital. I thought, yeah, he's the nuclear guy.

Quinn: I love traders.

Jack Farley: I love that, I love that framing. And I think it's also useful to think through as a trader. Like how do you, how do you balance opportunity costs within that? Because you know, if, if you are willing to wait it out, like you can start buying now in the expectation of those people to emerge. Whether it's, you know, the next version of, or narrative of bitcoin. Yes, it doesn't exist today, but that means it's also not on the price. And you can, if you have a expectation that that's going to occur, you can sit on and wait. But the other side of that is that it could take a while, it could take a couple years, I don't know. Are you willing to allocate capital to that for that amount of time when there's amazing narratives that are happening elsewhere right now?

Tyler: Yeah.

Jack Farley: It's an interesting way to think through it. Like I'm always very sensitive to opportunity costs with what capital I allocate.

Tyler: Yeah. You know what the next one I think is along with nuclear is like autonomous. I think there's going to be an autonomous guy that emerges who becomes the expert.

Quinn: There's always these rolling like bubbles, I mean, or narratives. And you're so right, Tyler. Price begets narrative, begets price. It's not the narrative that kicks things off, it's the. So it is interesting because you had the time in the markets where Palantir was it, where Carvana was it, where crypto was it, where semis were at.

Tyler: But it's all a market structure.

Quinn: Exactly. Position gets rinsed, no one's there. A couple headlines, liquidity comes in the market. It's fascinating because, I mean really, what's going to end that? Probably nothing. Like, it's. As long as the government's increasing their heavy handedness, there's going to be increasing concentration of these insane moves because it's like you get these narratives of like, oh, the government's supporting it. Why, why would you buy anything Else. And then they get. Then you get the 3x levered ETFs, then you get the Forex levered hedge funds, and then. Then rent it out and repeat.

Tyler: So, I mean, Shoten Capital is going to crush it here. We're gonna be. Industrials are the new AI, bro. Industrials. Industrial.

Quinn: Industrials fund.

Jack Farley: Yeah.

Tyler: We're gonna launch a 5x levered industrial DTF. It's like all of a sudden, something's changing. Industrials and

Jack Farley: run. The Leopold Gambit.

Quinn: All right, bro, you better cut that piece because they're never gonna let you make a guest appearance on the show.

Tyler: Now, is this the most. Is this the roast section? Give me your best shot.

Quinn: You're a good dancer. At least. They might. They might love.

Jack Farley: Yeah, you're good. I don't know, man. Man, I don't know if I can say anything bad about you. Not off the top of my head.

Tyler: I'm a great dancer. They used to call me on my. My basketball team. I was the one white guy. And they'd say. They. They would call me Wonder Bread.

Quinn: That's good, man. I like it. Yeah.

Jack Farley: That's amazing.

Quinn: Good luck. Well, Wonder Bread, gonna miss you.

Jack Farley: Yeah. Yeah, it's.

Tyler: It's.

Jack Farley: It's been a. It's been a joy. Yeah, man. Best of luck with it.

Tyler: Thank you guys for everything. I'm sure we haven't seen the last of each other and.

Jack Farley: Nope, we will.

Tyler: I'll try to pop on if I can get the. The. Okay. But thank you to everyone, too. I've learned a lot. Like, and please keep hitting me up. There's some incredible people on Twitter. And, like, I just talked to one guy that was just. He hit me up on Twitter. We had like an hour long conversations. Guy was absolutely brilliant. And I there, I just get such a. This is. I'm the miss Most is like, the inbounds from people that watch this show are absolutely unreal.

Jack Farley: The caliber is absurd. I mean, it gives me, like, pretty big imposter syndrome. I'm not gonna lie. Because I'm like, holy. These guys are like, so goddamn smart and they're listening to me and I'm like, the dumbass.

Tyler: I feel. I feel so stupid. But what's fascinating is like, you know why this show will never really scale is because, like, we're talking about, like, volatility and everything. But, like, yeah, people that watch it, if you could. We could do like an event sometimes like a dinner or like a get together. It is. It's really.

Jack Farley: It's insane.

Tyler: Who you have, you know, watching it.

Quinn: So congrats, in November, we'll come to you.

Tyler: Actually, let's do, let's do like a dinner or something because I'm, I think I'm still going to go to that event.

Jack Farley: Yeah, that AI summit that Gavin Baker's putting on. Which, I mean, yeah, to your point about celebrities, if, if they're hosting their own conferences, he's definitely on the up right now.

Tyler: Yeah, yeah, exactly, exactly. Gotta monetize while you care. Gotta monetize the ball. Let's get one last thing to roast myself. There is. There was a guy that made a comment and I was like, roasting Jane street and Citadel and Susquehanna from, you know, monetizing the volatility. Once you get like single stock fall goes up and he's like, dude, you're such a hypocrite. Like, he goes, you, you were, you were pumping sailor. Monetizing the ball on bitcoin.

Quinn: But.

Tyler: And I was like, oh, yeah, you got, you got a really good point. I was totally total. So like, that's the type of stuff like you learn, you learn from yourself and you know, everyone's a hypocrite.

Quinn: But before you go, you can't do a send off show and not get the P word out. Tyler.

Tyler: That's what Bessant Bessant did. He's.

Jack Farley: You just.

Tyler: He solidified the boomer Ponzi. But like, boom. I think this time, you know, to leave on a good foot, it's. It's actually the incentive is to regrow a first turning economy. So, hey, shout out to all the boomers that have been watching. I know I roast you. I love you guys. You're the good boomers. You're not the extractors, you're the multipliers.

Jack Farley: Yeah, yeah. You're not in Congress.

Tyler: Yeah, it's mostly the politicians in the fact that, you know, boomers are hoodwinked by, you know, mainstream media. But yeah, besides that. Yeah.

Jack Farley: All right, guys, it's been a joy. Been a pleasure. See you later.

Quinn: See you boys. Have a good weekend.

Jack Farley: Nothing said on for guidance is a recommendation to buy or sell any investment 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.