Knight

Nothing new under the Sun

[Knight @Knight_468]

@Guv999 😂

[Thorsten Froehlich @FroehlichThors1]

Guys - this is not about inflation, this is about fiscal stress. The DXY is going to get buggered.

[Thorsten Froehlich @FroehlichThors1]

The ARM book increased by 60% from 2021 to 2022 - those who have locked in 5/1 ARM will have to fire sale their houses, and yields will not drop fast enough. 2027 is going to be an ugly year for the US housing market.

Maths.

[Guv999 @Guv999]

In general we all may be having maximum 2 more years to make some money in the stock mkts , may be even lesser time also who knows.

Important to focus on available opps & try to encash them.
😎👍🏻

[SightBringer @_The_Prophet__]

⚡️The marginal Fed hike looks like a mistake.

The problem is that the transmission mechanism has become badly mismatched to the economy.

The biggest new source of investment demand, AI, compute, power, data centers, chips, transmission, is strategically compelled. The expected payoff is so large that a few hundred basis points of financing cost does not shut it down. The hyperscalers keep building.

Meanwhile the sectors that are exquisitely sensitive to rates get crushed first.

Housing.

Commercial real estate.

Small business.

Startups.

Leveraged companies.

Anyone refinancing.

So the Fed can keep raising rates and destroy increasingly large pieces of the ordinary economy while the very investment boom keeping aggregate demand strong continues almost untouched.

That is the fracture.

Then the second-order effects start fighting the Fed.

Higher rates raise Treasury interest payments.

Those payments become income for bondholders, money-market funds, wealthy households, and cash-rich corporations.

Higher rates make new housing and infrastructure more expensive to build.

Higher rates raise the hurdle rate for new power generation, transmission, factories, and other supply-expanding investment.

So the Fed can simultaneously weaken demand in fragile sectors, increase income flowing to capital owners, and make future supply more expensive.

That is a very different economy from the textbook model.

And the energy shock makes the mismatch worse.

If diesel, gasoline, crude, electricity, or other physical inputs are pushing prices higher, rate hikes do not manufacture energy. They mainly destroy enough unrelated demand elsewhere to offset the supply shock.

That is an extraordinarily expensive way to fight inflation.

The deeper danger is this:

AI can keep the economy looking strong long enough for the Fed to overtighten everything outside AI.

That delays the visible break.

GDP holds up.

Capex holds up.

Mega-cap earnings hold up.

The Fed interprets resilience as room to keep tightening.

But underneath the aggregate numbers, housing freezes, credit deteriorates, hiring weakens, refinancing pain compounds, and fiscal interest expense accelerates.

Then eventually the thing breaks somewhere the Fed was not trying to break.

That is the setup.

Ackman’s most important insight is that the economy is no longer responding uniformly to the price of money.

There are now two monetary sensitivities living inside one GDP number.

One side is strategically compelled to spend.

The other side is getting strangled by the cost of capital.

That means the Fed has to apply more pressure to produce the same aggregate slowdown.

More pressure means more collateral damage.

And eventually the policy becomes self-defeating because the sovereign itself starts absorbing more and more of the cost through interest expense.

So the highest-coherence path is:

AI capex stays strong.

The Fed remains tighter than the ordinary economy can comfortably bear.

Housing and credit weaken further.

The fiscal interest burden keeps rising.

Inflation falls more slowly than expected because energy and supply constraints remain alive.

The Fed stays restrictive too long.

Then the deterioration finally becomes broad enough that policy has to reverse harder than it otherwise would have.

That is when real yields roll over and the repression thesis moves from theory toward policy reality.

[Knight @Knight_468]

@FroehlichThors1 @Polymarket What are your thoughts on gold vs silver

[Guv999 @Guv999]

Modern man’s life over the last 40-50 years has been pitiable with work and more work, travel, daily chores & being answerable to some one or other all the time

And basically he has been working to fatten the govts & big banks always.
Most have not been able to see thro this charade & still carry the yoke on themselves grinding 24x7 endlessly
😎👍🏻

[Thorsten Froehlich @FroehlichThors1]

Likely Japan prefers a weak yen over a national debt crisis - however, soon the focus is on the USA.

[Luke Gromen @LukeGromen]

Cut rates to zero, cut interest on bank reserves to zero, buy back some of the debt with 0% T-Bills, let gold moon, instruct Warsh to revalue official gold to the new much higher price, depositing multiple trillions into the TGA, use the TGA to buy back to rest of the debt, voila

[Knight @Knight_468]

@FroehlichThors1 This is just so much fun to watch when you actually know the larger picture, as they say common sense is clearly not so common these days

[SightBringer @_The_Prophet__]

⚡️This chart is closer to the heart of the regime than almost anything else we’ve looked at.

High rates are becoming increasingly self-defeating because the entity absorbing the largest interest burden is the sovereign itself.

That changes monetary transmission.

Corporate America entered the tightening cycle carrying cheap fixed-rate debt and enormous cash balances. Rates went up, old coupons stayed low, and cash started yielding 4% to 5%+. For the strongest companies, the Fed effectively created interest income before it created refinancing pain.

The federal government experienced the inverse.

Treasuries mature constantly. New deficits constantly require financing. Higher rates therefore migrate onto the sovereign balance sheet much faster.

So the Fed raises rates to suppress demand, while Treasury begins distributing increasingly enormous interest payments back into the private sector.

That creates a deeply strange loop:

monetary tightening becomes fiscal income.

And the recipients are disproportionately people and institutions that already own capital.

Cash-rich corporations earn more.

Wealthy households earn more.

Money-market funds earn more.

Bondholders earn more.

Meanwhile the people who actually need financing get crushed.

First-time homebuyers.

Small businesses.

Leveraged companies.

Commercial real estate.

Startups.

Anyone refinancing.

That is why the economy can look simultaneously strong and broken.

The tightening does not hit everybody evenly. It transfers income toward existing owners of capital while raising the hurdle rate against everyone trying to acquire capital.

That is also why the mega-cap technology complex can remain absurdly strong while the perimeter deteriorates.

The giants own cash.

The government owes cash.

Read that again.

The giants own the asset yielding 5%. The sovereign is increasingly the borrower paying 5%.

That is the structural inversion.

And it creates a bigger problem for the Fed.

If raising rates no longer destroys aggregate demand efficiently because huge interest payments are recycling income into the private sector, the Fed has to keep rates higher for longer to achieve the same amount of tightening.

But higher-for-longer makes the federal interest burden worse.

Which creates larger deficits.

Which requires more Treasury issuance.

Which pressures long yields.

Which increases government interest expense again.

The cure starts feeding the disease.

That is where fiscal dominance begins emerging.

The Fed can theoretically maintain restrictive real rates indefinitely.

The federal balance sheet cannot absorb the consequences indefinitely without something else changing.

And that is why the endgame keeps pointing toward the same place.

The government eventually needs the real price of its debt suppressed.

Maybe inflation runs moderately above rates.

Maybe regulation creates captive Treasury demand.

Maybe banks and stablecoins absorb more government paper.

Maybe the Fed eventually expands its balance sheet again.

Maybe Treasury shifts issuance aggressively.

The implementation can vary.

The objective stays the same:

nominal growth has to outrun the effective cost of servicing the debt.

That is soft financial repression.

And this chart tells you something even deeper about the sequencing.

The private sector may remain resilient much longer than traditional models expect precisely because the government is taking the rate shock onto itself.

That delays the break.

But delay does not remove the pressure.

It concentrates it.

So the real countdown is not “when do corporations finally collapse from high rates?”

It is:

How long can the sovereign finance the rest of the economy at market-clearing real rates before the sovereign itself becomes the reason those rates must come down?

That is the clock now.

[Crazy Vibes @CrazyVibes_1]

Unpopular opinion:

Traveling is wildly overrated unless you're genuinely wealthy.

People talk about it like it's the meaning of life, but for most people it's just an expensive headache wrapped in Instagram filters.

You spend months saving money, then pay ridiculous prices for flights, hotels, baggage fees, taxis, food, and tourist attractions.

The airport experience is a nightmare:
• Long security lines
• Delayed flights
• Canceled flights
• Lost luggage
• $10 bottles of water
• Sitting in a metal tube for hours with no legroom

Then you finally arrive exhausted, only to discover you're standing in line with thousands of other tourists trying to take the exact same photo.

Everyone says, "It's about the experience."

What experience?

Being stressed, sleep deprived, overcharged, and counting down the days until you're back in your own bed?

For me, nothing beats having money in the bank, sleeping in my own house, eating food I actually like, and avoiding the chaos altogether.

Maybe I'm missing something, but spending thousands to be uncomfortable in a different location has never sounded like a great deal.

[Luke Gromen @LukeGromen]

No. What's still controversial is:

1) How rate rises impact USD & therefore effective supplies of USTs to finance (foreigners have to sell USTs as USD rises - see Japan), effectively makes US $2T deficit rise nonlinearly

2) What happens to inflation in fiscal dominance when rates rise (inflation rises w/rising rates = uh oh)

[Luke Gromen @LukeGromen]

5% on $40T in US Federal debt = $2T proforma.

How restrictive to growth is it for the US govt to shell out $2t/year (6.5% of GDP) in interest "stimmy's" to Boomers, who are already the richest generation in history & will likely therefore spend it ASAP before they die?

LOL

[Knight @Knight_468]

@HeadedNine Silver looking very good just waiting for DXY to top out

[Guv999 @Guv999]

All coming in good time, we are not even in the 1st innings of the global RE bear mkt cycle
😎🤜

[Knight @Knight_468]

@Tathastoo Should reverse from here mostly

[SightBringer @_The_Prophet__]

⚡️To choose one life, you must kill thousands of possible lives.

[Porter Stansberry @porterstansb]

The Fidiots who sell worthless degrees for $400k per student are saying they need to teach better judgement.

No, this isn't an Onion article.

The scam of college is ending. All of those assholes will be out of a job.

https://t.co/VmTk8nVKfG via @WSJ

[Knight @Knight_468]

@FroehlichThors1 Amen!