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In 1 month, there will be a new FOMC meeting, this time presided by Kevin Warsh, the recently appointed Chairman of the Fed. He wil need to abide to the dual mandate of price stability and full employment, but he has mentioned his views differ on what the Fed has been doing for decades. His take, simplified: (1) the Fed’s balance sheet needs to be small out of crisis. (2) inflation is a choice (3) you can lower rates and decrease the balance sheet at the same time and inflati

Investment into Artificial intelligence infrastructure continues to grow at an incredible pace. Hyperscalers are expected to pour $1Tn in 2017 into data centers , chips, engineers, and whatever else is needed to win the race. But the AI game is an infinite game, only the one that survives wins. And the Mag 7 are desperately trying to be that one. Take a look at the charts below, starting with the bottom one: America is spending more money constructing data centers than buildi

It’s interesting to watch Trump and Xi having good words for each other in public, but it would be more interesting to see the tone of their conversations in closed doors, where they tackle the world problems, their rivalry on AI, access to resources such as rare earth elements or geopolitics. In similar fashion, the S&P 500 keeps reaching new highs, and everything looks good, but in this case we do have some visibility behind the curtain. Please take a look at the charts bel

The meeting between Trump and Xi has started. Polymarket was betting on the length of the handshake between the two leaders: 14 seconds. That’s a long handshake even for the land of symbolisms. Trump was guarded by the 30 CEOs of the biggest companies in the U.S, as a sign of respect, trying to feed Xi’s ego. In the first interactions, Xi spoke about the importance and the need for the two nations to have a fluid and constructive relationship. He also brought up the concept o

The U.S. published its inflation report for the month of April yesterday. Headline CPI was up 3.8% YoY. Core CPI (excluding Energy& food) was up 2.8%. In terms of headline CPI, this is almost 100% more than the Fed target measure. You can see that in the top chart below. But perhaps that was during Powell era. The senate just confirmed a new sheriff at the Fed, Kevin Warsh, which may or may not think the same way. But even the sheriff has a boss, and in this case, the boss is

Risks in the market keep piling up. To the concentration, we need to add leverage. Take a look at the top chart below: AUM for leveraged and inverse single stock ETFs have quadrupled since 2024 to $38Bn. On top of that, the whole leveraged ETF AUM (single stock and indices) has seen $115Bn of inflows over the last month, mostly in tech, and mostly in semiconductors. But the most staggering statistic on leverage is the following: the average stock holder is using 86% of her av

A big week for inflation data in front of us. China just published its numbers, and as you can see in the chart below, there is no more deflation or disinflation: both PPI and CPI came out stronger than expected at 2.8% and 1.2% respectively. India, Brazil and the U.S. wil report tomorrow and price increases are also expected. At the same time, GDP growth rates are coming weaker than expected, which points to a stagflationary scenario, where central banks don’t know what to d

The US is awaiting Iran’s formal response to its latest proposal for an interim deal to extend the truce and move toward a final settlement. Iran says the proposal is still “under review” with no set deadline. Tehran prefers a phased approach: addressing regional conflicts, sanctions lifting, and Hormuz access before deeper nuclear concessions. In the meantime, Hormuz continues to be closed. It’s blocked by both the U.S. and Iran. As a consequence, oil is not flowing freely a

Is the damaged caused by the conflict in Iran permanent or temporary? That might be THE question that investors need to ask and find an answer. There are deflationary forces, mostly caused by technology, more specifically AI, combined with inflationary forces, caused by money printing and now, an oil supply shock. Who wins that battle will depend on how things evolve and how long they last. If the technology boom continues, it might be able to balance the (hopefully) short li

Japan has always been different. In 1945 the country was devastated by WWII, but by 1989, it was the second largest economy in the world. The collapse in real estate prices brought deflation and recession, and the Nikkei spent almost 3 decades until it could regain the highs of 1989. Then came the debt. Massive 250% of GDP. The monetización of debt followed. The BoJ owns, still today, 50% of the outstanding government debt. To do that, it printed money (yen) and used it to bu

The US and Iran are actively negotiating and reportedly closing in on a one-page memorandum of understanding aimed at ending their recent two-month conflict but no final deal has been signed. The key points are no strangers to past demands on both ends: (1) Formally end hostilities and open the Strait of Hormuz. (2) Moratorium on nuclear enrichment (a major US demand). This could include handing over or limiting its stockpile of enriched uranium. In exchange, the US would lif

Market concentration in many levels has been a hot topic: (1) concentration is USD investments, (2) concentartion in US stocks, (3) concentartion in Growth stocks, (4) concentartion in Tech stocks, (5) concentration in Mag7 and AI. The last one, on top of concentration, suffers from inter dependence among the hyper scalers. The chart below quantifies it, and it’s becoming scary: open AI and Anthropic, perhaps the most popular AI agents builders, have combined investment commi

The oil shock due to the conflict in Iran is becoming more permanent than anticipated, and it’s bringing unintended consequences. 66 days into the conflict and the strait of Hormuz continues to be effectively closed, and we’re just one missile away from a re escalation of the conflict. Brent is up playing with $120/barrel, and there seems to be no clear solution to the glut in the short term. The two charts below are self explanatory: no ships crossing the strait imply higher

The S&P 500 index dividend yield (sum of the dividends of all components divided by the price of the index) just touched new all time lows. Companies prefer buybacks to dividends, since they are tax efficient for investors and push the stock prices higher. Dividend payouts are no match for the incredible run up in price, stocks have had. In times of turbulence, dividends can be a meaningful share of total return for an equity investor. Not today. Additionally, the Earnings yi

The global macro economic context keeps evolving. It’s not clear it’s moving to a better place. After the WWII, the world’s major economies got together at Bretton Woods to create the modern monetary system. The U.S. imposed the rules: all currencies pegged to USD, and the dollar pegged to gold at $35. The major condition imposed on the U.S. was to keep the monetary base stable. After almost 3 decades, the U.S. could not hold its part of the deal and in 1971, Nixon broke the

The impact of AI in the US and the world, continues to be mind blowing. The capital it has attracted, the scale and the growth are just insane. The chart below is eye popping. It simply segregates US goods imports between AI related and the rest. If you only look at the overall headline, you would not see how massive it is. But in the chart you can see the imports of AI related goods are up 80% YoY. The rest of imports into the U.S. economy have contracted 25%. We’re all in o

Yesterday, the U.S. published the PCE for the month of March with a YoY growth of 3.5%. This has been, during Powell years the preferred inflation measure used by the Fed to fulfill the price stability mandate. With 3.5% inflation, it will be difficult to justify a rate cut. The Q1 first reading of GDP was also published. The U.S. economy grew 2% (it may be revised lower), which is not an eye popping growth rate. What’s important is that 75% of that growth was produced by AI

As expected, there was no rate cut after yesterday’s FOMC, the last one for Jerome Powell, that will continue as governor, but will pass the chairmanship to Kevin Warsh. And the market thinks that with everything that’s going on in Iran, the Fed will not be able to cut this year , according to Polymarket (see chart below). Bonds didn’t like the conclusion and yields spiked up. The 30 year Treasury touched 5%. It’s a psychological mark, but at this juncture, is important. On t

Open AI did not reach its internal goal of 1 billion weekly active users by 2025, and missed revenue targets for Chat GPT. The goals were very aggressive, and also its valuation. But more importantly, its commitments were even more aggressive. Capital commitments to data centers. Now Open AI will not provide exclusivity to Microsoft on certain licenses, and Microsoft will not share revenue with Open AI. Now take a look at the chart below: what happens if Open AI cannot meet i

Interesting developments in the Private Credit space. Investors in Blue Owl Capital Corp. II (OBDC II), a non-traded business development company (BDC) managed by Blue Owl Capital Inc., largely rejected a tender offer from Boaz Weinstein’s Saba Capital Management and partner Cox Capital Partners. Less than 1% of shares were tendered when the offer expired at the end of last week. The offer was tendered for 8 million shares or 6.9% of the outstanding, with a discount of (drumr