Macro & Rates

The 30-year Treasury yield crossing 5.2% for the first time since 2007, combined with a $2T annual deficit, $40T federal debt, and bipartisan support for removing the debt ceiling, signals persistent inflation and rising cost of capital that makes 50x earnings semiconductor stocks unattractive versus risk-free 10% pre-tax yields.

With risk-free 30-year yields at 20-year highs and US running $2T deficits with no political will to cut spending, persistent inflation will keep rates high, making 50-100x earnings semiconductor stocks unattractive versus risk-free bonds.

Samuel Benner's 1875 cyclical model (18-year and 9-year waves) aligns with 1929, 2008, 2020 crises; current peak implies declining phase through 2032, prompting Jesús to hold cash for deployment and avoid long-duration venture lock-ups.

Current 15-20% capital gains rate vs 40% labor tax fuels compounding advantage for asset holders; raising capital gains to 40% and removing step-up basis at death would reduce wealth inequality without deterring investment.

Temperature-productivity curve peaks at 13-15°C then declines 1-1.5%/°C with no adaptation evidence in 60 years; recent warming already cost trillions; 20-40% GDP decline by 2100 with poor tropics hit hardest, driving divergence.

Distributional impacts operate through income/employment, not just energy prices; targeted transfers to inelastic-demand households can mitigate both aggregate and distributional costs without undermining emission reductions.

Wealth, jobs, wages, and equities are 'okay to fine' but pervasive distrust after COVID and GFC creates self-reinforcing pessimism; a mild recession could paradoxically reset expectations and reduce cognitive dissonance.

When the world loses faith in a leading power's legal independence, central bank credibility, and reserve currency status, capital and talent abandon it quickly. Norberg warns this 'confidence moment' can unravel a golden age far faster than the slow decay that precedes it, as seen in late Rome and Byzantium.

High-end and low-end retailers benefit from consumer bifurcation, leaving mid-tier players like Target without a clear demographic tailwind.

The Fed has missed its 2% target for five years yet keeps cutting, a reaction function that socializes downside risk. Outside the US, UK, Japan and France are already confronting debt crises; the US is shielded only by AI optimism and tariff revenue.

Tariffs, reshoring, and military spending create immediate inflationary pressure (base 2.5-3% CPI), while AI investment is currently low-labor-intensity and disinflationary only on a J-curve. Central bank independence erosion adds upside risk. Bonds lose diversification value as fiscal limits bind.

The business cycle has not been eliminated and a global recession is foreseeable; the real risk is insufficient fiscal capacity for counter-cyclical spending, as seen in the UK's Liz Truss crisis where sovereign debt panic emerged in 10 days.

Structural inflationary forces including government deficits, remilitarization, infrastructure needs, and geopolitical conflicts make higher inflation more likely than market pricing, which could trigger bond market stress if inflation ticks up 50-75 basis points.

Debt servicing at positive rates crowds out productive investment in infrastructure, AI readiness, and education; with fiscal and monetary space exhausted, governments cannot repeat COVID-era spending, making gradual fiscal consolidation essential — IMF aligns with US Treasury Secretary Bessent on targeting a 3% deficit.

Despite strong labor markets and wealth accumulation, pervasive negative sentiment feeds on itself; a mild recession could align expectations with reality, reducing cognitive dissonance and enabling reinvestment—making bad vibes a contrarian bull signal.

Deals underwritten at today's rates pencil to mid-teens/low-20s IRR without rent growth assumptions; a 100bp rate cut could compress cap rates 20%, turning solid returns into 40-50% IRRs, while downside is protected by tax shields and supply cliff in growing tech hubs.

Quoting George Soros, Kaplan says the existential question for an investor is the currency of denomination. He sold his energy company in 2007 to denominate in gold, viewing fiat as a Ponzi scheme. This macro view underpins his precious metals conviction.

Sununu warns that U.S. interest payments will hit $1.3 trillion annually, surpassing defense spending, creating an inevitable fiscal crisis within 8-9 years unless a balanced budget amendment forces structural reform of entitlements and spending.

Elizabeth Warren's claim that Bezos pays zero taxes ignores that Amazon pays corporate taxes on his behalf; if Amazon were private, Bezos would pay those taxes directly, making the distinction purely accounting rather than economic.

Political deadlock prevents responsible fiscal adjustment (VAT, healthcare cost control), while tax evasion is encouraged; combined with trade agreement violations, this makes the US untrustworthy, requiring decades of responsible policy to regain credibility.

172k jobs added and 4.3% unemployment with rising inflation from Strait of Hormuz closure make rate cuts unlikely and rate hikes possible, directly hurting tech companies with earnings forecasts stretching into the next decade.

AI first makes workers 10x more productive (automating 90% of tasks), then approaches full automation; Anthropic pushes enterprise customers toward 'do more with same resources' not cost-cutting, but transition speed creates dislocation risk.

Data from 1,200 middle market companies shows persistent earnings deterioration, narrowing margins, and 25%+ unable to cover debt service, driving bankruptcy wave while public companies thrive.

Charles Koch identifies occupational licensing (hundreds of restricted occupations), anti-immigrant policies toward working contributors, and tariffs as structural barriers preventing people from discovering and applying their gifts. He argues these barriers force people into 'power or pleasure' pathways (per Viktor Frankl), driving socialism/authoritarianism. The investment implication: businesses and policies that remove barriers to contribution will outperform in a tightening labor market.

Dollar denominates 75% of global trade including between adversaries like China/Russia, giving US unique financial warfare capability via sanctions; this reinforces demand for US financial infrastructure and makes dollar-based fintech strategically vital.

JPY at multi-decade undervaluation vs USD; Japan holds $4.5T net international assets 60% in unhedged USD; new PM with Reagan/Thatcher profile could trigger rapid appreciation as domestic capital repatriates.

Bitcoin's finite supply gives it greatest scarcity value vs gold's 2% annual supply growth; however, kinetic conflict implies cyber warfare taking down electronic assets, and AI-accelerated quantum computing could break Bitcoin's cryptography.

252% market cap/GDP, highest household equity allocation ever, private equity doubled to 16% of institutional portfolios; mean reversion would trigger 35% drop, wiping 80-90% of GDP in wealth, killing capital gains revenue and spiking deficits.

Current supply-chain analysis shows computer/electronic products maintain ~50% network-adjusted capital share (not 100%) because labor adds value downstream. A qualitative shift occurs when entire supply chains automate — network-adjusted capital share goes to 1 — with ambiguous implications for aggregate labor share depending on demand elasticity and variety expansion.

Amazon warehouse 35-40% churn vs 3-4% for good jobs reveals preference. Municipalities banning Waymo will face wrongful death lawsuits when human drivers kill vs zero-death AVs. Convenience/quality of life will drive adoption; patchwork US regulation allows competition.

Extraordinary demand for cluster and robotics financing could push real rates higher until discount-rate pressure outweighs corporate growth.