Capital Flows: Macro Reports

Manias, Panics, and Positioning: The Bubble Playbook

Capital Flows — Tue, 26 May 2026 01:55:07 GMT

Today, Jaymes and I broke down 200 years of bear market history, the three archetypes of corrections, and why the current setup has a flavor of every major historical bear market without being a clean copy of any of them. Most people misdiagnose the regime they are in and then take positions that hurt them, which is why understanding the actual drivers matters more than fitting today into a clean historical analog. By the end of this livestream recording, you will know how to diagnose the regime, where the asymmetric risk actually sits, and why PURR remains my largest concentrated bet even after the Hyperliquid ETF launches.

LIVESTREAM RECORDING FROM TODAY:

Today’s Livestream: Main Talking Points

1. All exceptional returns exist in the tails. Singles keep your seat at the table, tails are how you actually compound. The entire industry is structured around hedging tails so they do not have to think about them. If you are in the business of risk taking, you know returns come from extreme events.

2. Bear markets come in three archetypes: cyclical, event driven, and structural. These are mental models for breaking down drivers, not rules markets must obey. The current setup has a flavor of all three plus the seventies inflation overlay.

3. Diagnose the system or you cannot prescribe a position. Most people misdiagnose the regime and then take positions that hurt them. The right question is what are the actual drivers, not which historical analog do I want to fit this into.

4. Today’s setup is sovereign balance sheet risk, not commercial balance sheet risk. 2008 was commercial leverage blowing up. The current setup is sovereign leverage and currency repricing. The mechanism is fundamentally different.

5. All large equity bear markets compress into specific factor unwinds. Tech in 2000, cyclicals in 2008, broad multiples in 2022. Knowing which factor is the actual risk lets you hedge it directly rather than reducing exposure across the entire book.

6. PURR is the only treasury company in the world with a net positive position on its underlying asset. Hyperliquid Strategies is already up a billion dollars on its hype position. Not even MicroStrategy has that right now.

7. PURR buys back stock when it trades at a discount to NAV and issues when it trades at a premium. That is fundamentally different from every other crypto treasury company. The leadership is increasing the probability of outperformance through capital allocation mechanics most people are not even modeling.

8. Hyperliquid is a pricing mechanism, not a pump and dump trade. It provides ISDA-level leverage to non-institutional players, which changes the cost of leverage globally. The value proposition is the entire thesis, not the ETF flow.

Slide Deck and Playbooks

Here is the slide deck from today:

Capital Flows Livestream 2026 05 24

12.4MB ∙ PDF file

Download

I will send out a final version of the Hyperliquid model from today’s livestream in the breakdown tomorrow. Just putting some final additions on it for you.

Tomorrow’s Livestream: Hyperliquid and Global Capital Flows

Tomorrow, I am going to break down more of the model on mapping the flows for Hyperliquid and HOW global capital flows contextualize disruption in the financial industry.

TOMORROW’S LIVESTREAM: LINK

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Manias, Panics, and Positioning: The Bubble Playbook

Capital Flows — Mon, 25 May 2026 02:50:59 GMT

The Bubble PlayBook Livestream:

Every bear market feels like the end of the world. None of them are. They follow three patterns: cyclical, event-driven, and structural. Once you can identify the pattern, you can map the duration, the depth, and the path back to new highs.

Tomorrow, I’m walking through 200 years of every major drawdown across the US, Japan, Europe, and China. We’ll spend most of our time on the eleven that matter: 1929, 1973, 1980, 1987, the dot com bust, the GFC, Japan’s lost decades, the 2011 sovereign crisis, the COVID crash, and the 2022 stocks and bonds bear.

For each one, we will dig into: the trigger, the melt-up that preceded it, the drivers that pulled it down, the rate backdrop, and the shape of the recovery.

TOMORROW’S LIVESTREAM: LINK

I will also be covering more on my Hyperliquid thesis and PURR trade. You can find the most recent Twitter thread I wrote on it below. Nothing has changed in my thesis, and I continue to hold my PURR position.

Thanks

The 2026 AI Deception and the Coming Storm

Capital Flows — Wed, 20 May 2026 17:34:36 GMT

The intentional deception

There is a continuous feed of disorienting news that is intentionally desensitizing you to the signal in markets, or even worse, manipulating your perception so you can’t tell what is true or what is false. All of us experience this to varying degrees as we navigate WHERE we are in the cycle. Monitoring the situation has become the new way to orient oneself to a world where extreme outcomes are building under the surface but then reveal themselves in a moment of volatility. But the dark side of being terminally online is the endless doomscrolling that comes as an unintended consequence of monitoring the situation.

As a result, the closer you look, the less you see.

The biggest problem I see today is that there is such a massive divergence between what people are focusing on and how the system actually functions. This divergence grows with every day that passes because AI’s retooling of every aspect of reality has converged with a surplus of liquidity, so the speed of the system is increasing, which in turn creates greater disorientation as attention and the psyoping of people become an actual form of liquidity in themselves.

Many CEOs and fund managers have recognized this new environment and understand how to pitch themselves as the new meta that will change everything in the world. If you can control the way someone views the world, they will only anchor to positive developments that confirm their view and chalk up anything negative to “short-termism and impatience.” As a result, operators in financial markets are actively trying to create psychological distortion fields around their shareholders under the guise of “education” or “freedom” in order to create premiums they can use to their advantage.

The end result is that we have a world where not only are people focusing on the wrong questions, but everyone around you is actively trying to misdirect you and harness your attention on the device that constantly sits in your pocket and is the place of safety you turn to when you are uncertain about the world.

Compressing the risks into a single moment in time

The biggest risk in this market is that everyone has been desensitized and so misled that they don't even acknowledge the largest risks that are building under the surface. Risks are building in the equity market, interest rate complex, and FX market that are fundamentally unsustainable (I’ll cover these below), and no one even recognizes them because they have been so desensitized to how black swans actually function.

No one sees the risks because they are too busy “monitoring the situation.” As I said, the closer you look, the less you see.

Stack on top of this the fact that the microstructure of the market has turned into a highly inelastic mechanism that has never seen a true market correction with this amount of 0dte volume and leveraged products.

Ask yourself how in the world $3B in weekly volume in betting markets has been normalized. And this is only a fraction of the prediction markets that exist. Kalshi and Polymarket have become natural parts of everyday conversations despite the fact that the overwhelming majority of users lose all their money.

We have institutionalized and normalized a wealth transfer from the poor to the rich and called it “the freedom to hedge your risk or express yourself.” The newest billionaire class is being made under this guise of “freedom.”

While the younger generation is being lulled into gambling, boomers are being sold the lie that the market is as safe as it’s ever been because index funds will always outperform. Conviction in the market strengthens as passive flows take a larger share of the market and concentration into Mag7 intensifies.

SPY/RSP ratio shows how the indexation effect is causing the top stocks to lift the index significantly above the rest of the broad market.

As the concentration of risk intensifies and gambling is normalized, the largest equity indices in the world are ALL at the highest valuations in human history. When asked to justify valuations, AI narratives are immediately put up as smoke screens even though the high valuations are across indices that have the least exposure to AI disrupters.

The price to sales ratios for the Russell 3k and Topix are also at all-time highs, which indicates that the higher valuations are not just in a single sector but pervasive across industries.

The highest risk companies in the system are outperforming the entire S&P500 index in a manner similar to the 2021 melt up.

The entire point is that all of these factors represent real risks in the system, but everyone has been normalized to their existence instead of understanding that volatility is compressing. The famous saying goes, don’t be a turkey.

The same dynamic exists across the interest rate and FX markets where we have had central banks pretend that the excess government spending in the system doesn’t exist and have allowed short-end real rates to fall for years now.

1-year real rates in the US have been flirting with negative territory for a while now, and as the Fed pauses into an oil shock, we are seeing additional pressure on the system as the policy error pushes long-end rates up.

The same dynamic exists in Japan right now where the BoJ is allowing real rates to sit in negative territory as long-end rates rise:

Long-end rates across every major country are now moving in a single coordinated fashion because of how cross-collateralized every economy has become due to global trade. Central banks are forced to track in lockstep with the Fed in order to export their goods to the United States. Every country has now linked arms and it’s all one trade.

And the US current account has been moving to an extreme we have never seen before. This is a real-time reflection of the impact of Chinese economic warfare as they suppress the value of their currency to export cheap goods to the entire world.

As social media has taken a dominant stance in financial markets since COVID, it has used attention as its currency. The result is that everyone has become desensitized to the actual systemic risks building under the surface as clickbait headlines constantly flash across the screen. AI has taken this environment and amplified it so that the news is tailored exactly to your cognitive biases and delusions are handcrafted for each person.

AI is creating unparalleled progress across every domain, but the unintended consequence of this is the compressing of the tails. AI functions as a form of leverage in the system that empowers those with specialized knowledge but can amplify unintended risks.

My entire point here is that AI is both speeding up the entire system and desensitizing people to the underlying risks. We are seeing the impact of this in real time across social media, financial markets, and the economy.

The economy is beginning to get retooled with a fleet of robots that work 24/7:

And one of the largest universities in the world just booed the CEO of Google off stage for talking to them about AI.

Volatility and risk are compressing across culture, social media, technology, the economy, equities, interest rates, FX, and even down to the intraday ranges in markets with option flow. Small changes transmit through the system with a nonlinear impact in a way that has never been seen. The same driver that is compressing volatility is also creating a continuous feed of disorienting news that is intentionally desensitizing you to the underlying risks. The narrative that is sold is to “monitor the situation.”

The closer you look, the less you see.

Is China Trying to Become the Next World Power and Attacking Global Markets Through Economic Warfare

Capital Flows — Tue, 19 May 2026 20:21:30 GMT

Every macro thesis you read about China comes back to one question: can the yuan replace the dollar. The answer is no, and the reason is so structural that most analysts who get this wrong are working from a frame that does not actually describe how global trade functions.

In today’s stream, Jaymes and I walked through what China is actually doing, why the yuan suppression playbook is functional economic warfare, and what that means for the cross-border flows that determine where your portfolio gets repriced over the next twelve months. By the end of this, you will know which narratives to ignore, which data points actually move markets, and how to position around the Trump-Xi backroom outcomes that the broader market is still mispricing.

LIVESTREAM RECORDING FROM TODAY:

Today’s Livestream: Main Talking Points

1. Time lags are the structural feature of complex macro systems and the current oil-to-rates transmission is the cleanest example. Crude spiked, rates lagged, and now rates are catching up while crude consolidates. The headline-to-core CPI question is what determines whether the lag completes or unwinds.

2. Interest rates rising and equities not falling is the cleanest resilience signal of the cycle. The S&P pulled back to the CPI level on the rate impulse, which is exactly the level we mapped last week. Anyone who says rates up equals equities down is ignoring the data of the entire trend.

3. IGV outperforming SMH on the day is the equity long short positioning unwind playing out in real time. Hedge funds are short software and long hardware. The unwind is going to be IGV bid while SMH gets sold, not a violent rotation crash.

4. China is running a coordinated economic warfare playbook: yuan suppression, consumer squeezing, and rare earth choke points. They moved currency intervention from the central bank to state owned banks in 2014 to dodge IMF currency manipulation accusations. The three trillion dollar trade surplus did not show up in reserves because the state banks did the buying.

5. The yuan replacing the dollar is fundamentally a misread of how trade works. Every industrializing country exports to the United States and gets dollars. If you exit the dollar system, you exit global trade, US geography, and the US military defense system. There is no functional alternative.

6. China’s consumption is 38 percent of GDP and investment is 42 percent. The US is 68 percent consumption and 24 percent investment. That gap is the structural setup of the entire China playbook. China crushes its consumer to subsidize factories and exports.

7. Hyperliquid making new highs while Bitcoin lags is the uncorrelated returns signal. The Circle and Coinbase AQA V2 catalyst plus the regulatory clarity through ETF launches confirms the structural setup. The 37 dollar stop with new ATH upside is intact and the institutional flow is building.

8. The Larry Ellison Oracle thesis is structurally underpriced because narratives lag price. Ellison owns 40 percent of an S&P 500 company and is swinging his entire net worth on the macro AI capex bet. Once Oracle rips to 400, the narrative shifts and everyone changes their tune.

ORCL risk reward levels here: LINK

Slide Deck and Playbooks

Capital Flows Livestream 2026 05 19

4.74MB ∙ PDF file

Download

Tomorrow's Livestream: Matching Your Unique Abilities to Your Trading Strategy and Where We Are in Equities, Rates, and FX

Tomorrow, we will break down how to match your unique abilities to the trading strategy you actually run, and why that mismatch is the single biggest reason most traders underperform their own thesis. We then connect that framework directly to where positioning sits right now in equities, rates, and FX, so you can see how to apply it to the current setup.

TOMORROW’S LIVESTREAM: LINK

Mapping Macro Liquidity and How AI Is Changing the Transmission Mechanism

Capital Flows — Wed, 13 May 2026 22:34:21 GMT

Today, Jaymes and I mapped the entire macro liquidity framework, how AI is changing the transmission mechanism, and why this credit cycle melt up has more left in it than positioning is prepared for. Real interest rates are 30bps from going negative and AI is retooling both the financial market and the underlying economy at the same time.

See the full thread on the credit cycle I referenced in the video here: LINK

LIVESTREAM RECORDING FROM TODAY:

Today’s Livestream: Main Talking Points

1. 80 percent of returns in most asset classes come from macro. Every individual stock and the broad market decomposes into market returns, sector returns, and fundamental returns. Market and sector returns are macro driven. Fundamentals stack on top. If you can map the macro regime correctly, you are already capturing 80 percent of the available return before you even pick a name. That is why the entire framework starts at the macro level and works down.

2. Melt ups are not driven by sentiment or euphoria. They are driven by liquidity and credit. Sentiment can move a single low float stock. It cannot move an entire market. What drives broad based melt ups is the combination of financial market liquidity expanding and credit being injected into the underlying economy at the same time. Both of those are happening right now, and AI is the reason both pipes are open simultaneously.

3. AI is functionally injecting credit into the economy without a bank. That is the single most underpriced macro variable. When AI lets you spin up a company, market it, and build a brand with less upfront capital, that is a liquidity impulse. You need less capital to start a business, which is a supply and demand shift in capital itself. On the financial market side, 0dte options and the explosion of new ETFs are doing the same thing at the trading layer. Both sides are accelerating at the same time.

4. Real interest rates are 30 basis points from making a negative print. That is the chart that determines the next leg of the melt up. When real rates go negative, holding cash mechanically loses purchasing power. Large players borrow and deploy because they get paid to take debt in real terms. This forces capital systematically out the risk curve into small caps, high yield, and the riskier assets like crypto. The 2021 setup was negative four percent real rates. We are not at those levels yet, but the path is set.

5. Money is not a thing. It is a web of asset liability relationships. Your dollar is your asset and the government’s liability. Your bank deposit is your asset and the bank’s liability. A treasury bill is your asset and a liability to the government. There is no fixed definition of money because there is no one enforcing it. Once you understand money this way, you stop thinking about price in nominal terms and start thinking in real purchasing power terms.

6. Every asset has either duration risk, credit risk, or both. That is what drives the risk curve. Duration risk is the uncertainty of real purchasing power over time. Credit risk is the uncertainty of nominal repayment. Long term treasuries are pure duration. High yield bonds are pure credit. Equities are a mix. When you can decompose every asset into these two factors, you can map exactly how it moves in different macro regimes.

7. Macro liquidity is the price of money times the quantity of money. Both are changing right now in the same direction. Price of money is interest rates, especially real rates. Quantity of money is bills, reserves, private sector liquidity, and government spending. Most liquidity indexes mix these together poorly and miss the destination of the flow. The yield curve regime is the cleanest synthesis of both because the curve is itself an input into liquidity and the destination of capital across the risk curve.

8. Crises happen through asset liability mismatches plus an FX or rate shock, not through euphoria fading. The textbook view of expansion, euphoria, contraction, panic misses the actual mechanism. Crises occur when the asset side and liability side of the system get out of alignment and then a rate or currency move shocks the imbalance into repricing. Right now, the data shows no asset liability mismatch. Mortgage delinquencies did not rise through one of the fastest hiking cycles in history, which is the cleanest signal that the system is not mismatched.

Slide Deck and Playbooks

Here is the slide deck from today’s livestream:

Capital Flows Livestream 2026 05 13

13MB ∙ PDF file

Download

Tomorrow’s Livestream: The Interest Rate Complex: Risk Reward Across the Curve, Inflation Risk, Curve Regimes, and the Impact on Equities

Tomorrow, I will do a comprehensive breakdown of the interest rate complex and the risk-reward of rates across the curve. I walk through inflation risk, the curve regimes, and the specific transmission into equities. This is how you read the rate complex in real time and connect it directly to positioning.

TOMORROW’S LIVESTREAM: LINK

The Credit Cycle Melt Up Always Sows The Seed Of Its Own Demise

Capital Flows — Mon, 04 May 2026 04:36:32 GMT

The World Is Short Volatility

The entire world is short volatility, and it has to be. In a system where change compounds faster than capital can react, non-participation is the greater risk. Sitting out is not safety. It is a slow, certain form of loss.

The 2021 cycle made this explicit. Real interest rates were negative. Holding cash meant losing purchasing power every month while the underlying economy was being retooled at a pace without precedent. Digital infrastructure, supply chains, social media distribution, e-commerce algorithms, and global integration all advanced simultaneously. The cost of conservatism was visible in real time. The participants who refused to be long change were quietly liquidated by inflation and obsolescence.

There are two paths to losing money. The first is being so conservative that you fail to adapt to structural change and watch your purchasing power erode. The second is being so aggressive that the eventual bear market washes you out and destroys the compounding you spent years building. Survival does not exist at either extreme. It exists in intentional adaptation. The discipline is knowing when to be long change, and knowing when the system has reached an unsustainable moment in which macro constraints begin forcing participants to sell the positions they have held longest and loved most.

2021 Was A Liquidity Cycle. 2026 Is A Technology Cycle.

The cycle that made cash a losing position in 2021 is repeating itself, only the driver has rotated. In 2021 the constraint was monetary. Real interest rates were negative and capital was pushed out the risk curve by mandate. Today, I believe it is the same mechanism with a different input. The constraint is technological. AI is restructuring the production function of every industry at once, and the participants who fail to engage with it are forfeiting their edge the same way cash forfeited purchasing power. Software margins, distribution channels, supply chains, hiring decisions, and customer acquisition curves are all being rebuilt around models in real time. The input has changed. The mechanism has not.

The cost of sitting out AI is not the slow erosion that defined 2021. In my view, it is competitive obsolescence, and it compounds faster than inflation ever did. A firm that fails to deploy AI loses its cost structure to one that does. A portfolio that fails to own AI exposure loses its return profile to one that does. The decision not to participate is a short position on adaptation, and the position bleeds every quarter, every product cycle, every hiring round. The conservative trap from the survival curve applies with greater force here than it did under negative real rates. Inflation was a slow tax on capital. AI obsolescence is a fast one.

And yet we are seeing the system at the highest valuations in modern history. The SPX dividend yield has compressed to levels that map directly onto the late-cycle dynamic of 2021. The explanatory variable has changed. The compression has not. The marginal AI buyer has already bought.

My Main Point:

The point here is straightforward. We have a very clear analog to 2021, with one substitution. In 2021 the primary constraint was monetary. Today we still have monetary support, with real rates hovering near the zero bound, but the new constraint is technological. AI is forcing capital into equities the same way negative real rates did four years ago.

As I have been laying out for months, every signal points to a credit cycle melt-up unfolding in real time. And no country can afford to let its economy slip into recession right now, because China will use any opening to complete a final hollowing out of the Western industrial base. The credit cycle is no longer just a financial cycle. It is a piece of economic statecraft. Letting it break is not a policy choice anyone can afford to make. I would strongly encourage you to read these reports on the topic!

Walking The Thin Line: How AI Is Compressing The Tails

Tomorrow I’m walking through the thin line the market is currently walking. The credit cycle is melting up, AI is forcing capital out the risk curve, and policymakers cannot afford a recession with China waiting on the other side. Every one of those forces compresses the tails further.

I strongly believe that this is one of the most important periods of time in history, which is why I am doing these livestreams every single day. You can always find the recordings of the daily livestreams here: LINK

Here is the slide deck from the livestream I recorded on Friday (LINK), which explains WHY interest rates cause the rise and fall of nations. I also laid out every resource in the slide deck you would want to dig into if you’re the type of person who wants to build real knowledge about how money actually flows in the economic system.

Capital Flows Livestream 2026 05 03

11.3MB ∙ PDF file

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Tomorrow’s Livestream: LINK

Credit Cycle Playbook: Stagflation vs Melt Up

Capital Flows — Mon, 13 Apr 2026 03:43:24 GMT

Credit Cycle Playbook: Stagflation vs Melt Up

Credit cycles are path-dependent. The sequence of shocks matters more than any individual data point, because each disruption forces the underlying balance sheet of the system into the open. What was obscured becomes legible. What was priced as stable becomes re-evaluated.

The geopolitical shock currently moving through the system is not a distraction from the credit cycle. It is the mechanism by which the next phase of it becomes visible. The injection of liquidity and credit across the global economy over the past several years did not stay contained within national borders. It moved through cross-border flows, altered sovereign balance sheets, and is now being actively weaponized by economies positioning themselves against the United States in a contest that is fundamentally about technological dominance. Those flows are not discretionary. They are mechanical. And when the purchasing power calculus shifts, whether through nominal or real purchasing power changes, investors on the risk curve do not choose to reposition. They are forced to.

That is the period of time we are living through. This playbook traces the logic of it.

(As a reminder, I am doing a livestream every day at 8:30am MST to build the entire framework incrementally so you can have clarity about WHAT is happening and WHERE we are going. Here is the link for tomorrow morning: LINK)

The Misdirected Narratives About Macro Liquidity:

Geopolitical Endgame and Stagflation

Capital Flows — Tue, 31 Mar 2026 04:30:14 GMT

The Volatile Future:

The post-COVID world we have moved into is one where violent shocks are becoming commonplace. The slow trending markets of the 2010s are becoming a nostalgic memory that growth investors fondly look back upon, where they could just buy tech and get paid without taking any significant volatility. Once you take volatility out of the bottle on a structural basis, you can’t put it back into the jar.

If you are brand new to Capital Flows, my goal is very simple: map the macro regime so that I’m on the right side of it, and find the few large, asymmetric bets that become home run trades.

This report is very straightforward and has two things:

First, a video breakdown of the current macro regime, how to think about the pull back in the S&P500, and how it connects to the larger geopolitical context.
Second, a breakdown of WHERE the dollar is going and the current drivers that have caused a significant whipsaw in positioning YTD.

I have been laying out the larger geopolitical context for years now on how China and the US are at odds, and these proxy conflicts will keep coming up until an ultimate endgame resolution is found. I would strongly encourage you to watch the video and go through the connected slide on this here:

Today’s video:

In this video, I break down the previous macro report on the risks of a global recession (link) and then walk through the drawdown playbook as well as the macro regime dashboard. You can find both of these as PDFs below.

PDFs from video:

Capital Flows Drawdown Study 20260330 (6)

2.62MB ∙ PDF file

Download

Regime Dashboard (6)

38.2MB ∙ PDF file

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Agentic Models: (side quest)

A few weeks ago, I did a video on how I use multi-agents to run various parts of my research process for identifying trade ideas. If you want to build something like this with Claude code, I have put together an entire instruction guide here with plug-and-play code.

Ai Arena Build Guide

20.9KB ∙ PDF file

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If you want to connect these larger geopolitical and macro flows with the changes we are seeing in the dollar, the report below breaks down all of the drivers in the dollar.

The dollar is the pure reflection of these flows:

Has the Global Recession Begun?

Capital Flows — Mon, 30 Mar 2026 03:33:02 GMT

This report is not an explicit prediction. It is an attempt to explain what it would look like if the current energy shock were to metastasize into a global recession, one that reverberates through the financial system in a manner that has no clean precedent. There is a difference between those two things, and that difference is the whole point.

To be clear, I do not think this is going to happen. And I will confess I am not among the clever ones who spent the last month long oil and short equities, nursing that position like a grievance until it paid. My largest exposure has been in the Hyperliquid ecosystem (link and link), which has quietly benefited from the geopolitical volatility and sits as one of the few assets up year to date, while Mag7 and Bitcoin are both in the red. I raise it only because the most dangerous thing in markets is a framework built backwards from a position.

The Architecture Assumes It

A supply shock is one of the few economic events that breaks the normal rules. In most environments, growth and inflation move together: the economy runs hot, and prices rise, or it cools, and they fall. Policy is designed around that relationship. The entire architecture of modern central banking assumes it.

What do we hear from the Fed? “Our dual mandate is maximum employment and stable prices.”

The dual mandate assumes growth and inflation are allies. In three of four regimes, they are. In one, they become adversaries, and the mandate stops being a policy tool and starts being a cage.

That cage is not theoretical. Since the late 1990s, stagflationary pricing has appeared in markets less than 10% of the time. It is the rarest regime in the table below, and it carries the worst return profile for the assets most people are holding.

This is exactly the moment we are in right now. The reason volatility is so elevated, and the reason people are so afraid, is not that a recession is certain. It is that we are in the one regime where the Fed cannot do anything about it without making something else worse.

The Transmission Chain

The chart below shows nominal and real spending on food and energy components of the economy. In dollar terms and quantity terms, it shows how much the American consumer is actually spending versus how much they are being charged. When growth and inflation rise together, higher prices do not immediately destroy demand. People absorb them. They grumble, they ask for raises, and they keep spending. That is what happened in 2022, and it is why the Fed was able to hike into that environment without triggering an immediate collapse. Real spending was running at nearly 8% year over year. The economy could take the punch.

We are now sitting at roughly 2% year over year real spending (vs. 8% when the last energy shock happened in 2022).

In 2022, the Fed hiked into an economy with enough momentum to absorb tighter financial conditions. Today, the cushion is gone. If another inflation impulse arrives now, through the food CPI lag that historically follows an energy shock by three to six months, the Fed faces a policy environment with no clean exit. Hike into 2% real spending and you risk cracking the consumer entirely. Hold and watch inflation re-accelerate, and you confirm the cage.

The Atlanta Fed GDPNowcast just crossed below 2%.

The Geopolitical Layer

There is a version of this analysis that stops at the commodity price. Oil is up, input costs rise, central banks are constrained, growth slows. That is a complete enough framework for a lot of portfolios. But it is worth at least acknowledging that the energy shock does not exist in a vacuum.

The United States has spent the better part of two years systematically closing off the channels through which China was accessing discounted energy — Iranian crude, Venezuelan crude, both flowing through shadow networks at well below market rates. Whether Operation Epic Fury was designed with that strategic dimension in mind or whether it simply accelerated an outcome already in motion is a question above my pay grade. What I can observe is the structure of what is happening around it.

The headlines about Jared Kushner operating simultaneously as Trump’s chief negotiator in the Middle East and as a fundraiser seeking $5 billion from Gulf sovereign wealth funds — the same funds belonging to governments he is negotiating with — have been framed almost entirely as an ethics story. I am less interested in the ethics question than in what the behavior reveals about the underlying logic. Kushner is not an idiot, and the people around him are not improvising. When the dealmaking layer is this active this fast, it tells you something about how this administration understands the relationship between military action, economic leverage, and capital flows. Trump is not swinging from the hip. There is a sequence being worked.

For our purposes, the relevant point is narrower: the oil shock is not a random weather event. It has authors and beneficiaries. That matters for how you think about its duration and the policy response to it.

Recession as Strategic Vulnerability

The standard recession framework is economic. Output contracts, unemployment rises, and central banks respond. The framework I want to use here is different. It takes the geopolitical incentive structure seriously alongside the economic one.

A recession is not just an economic condition. It is a shift in the balance of negotiating power between states.

The mechanism is straightforward. A country in recession faces a simultaneous compression of fiscal space, political capital, and external credibility. Its government cannot commit resources it does not have. Its central bank cannot normalize policy without worsening the contraction. Its negotiating counterparties — in trade, in security, in capital markets — know all of this, and they price it into the terms they offer.

The country that avoids the recession, or even just avoids it longer, sits on the other side of that equation. It gets to set terms. It attracts the capital flows that fled the contracting economy. It accumulates the strategic leverage that the other side had to spend down just to stay solvent.

This is not a novel insight. It is the oldest logic in statecraft. What makes the current moment unusual is that the mechanism is running in an environment where the central banks of the major importing economies are already constrained by the cage we described earlier.

The G10 is not a uniform block in this environment. It is structurally divided by energy position. The United States, Canada, and Norway produce more oil than they consume. When the crude price rises, their energy sectors expand, and their central banks face a domestically different inflation profile than the countries on the other side of the ledger. Japan, the United Kingdom, Germany, France, Italy, and most of the eurozone are net importers. Every dollar move in the crude price transmits directly into their input costs, their trade balances, and their headline CPI. They are short oil in a world where oil is being used as a geopolitical instrument.

The cage lands differently on each side. A net exporter facing stagflationary pressure globally still has a revenue cushion and energy sector employment to absorb the shock. A net importer facing the same pressure gets the inflation without the offsetting income. Their central banks cannot stimulate freely because inflation has not cleared. They cannot tighten further because growth is already fragile. The constraint, structurally speaking, bears differently on the net importers than it does on Washington.

Geopolitical, economic, and central bank constraints — and the incentives running through each

At the geopolitical level, the relevant frame is not competition between the importing economies. It is the relationship between the importing economies and the powers that benefit when they weaken. A country in recession becomes a more accommodating trading partner, a less credible security guarantor, and a more attractive target for the kind of patient, long-duration influence that China in particular has demonstrated it is willing to deploy. China does not need to attack a weakening economy. It needs only to wait, offer financing, lock in supply relationships, and extract the kind of structural dependencies that are only available to a counterparty negotiating from strength into weakness. Recession is the condition that makes that possible. Avoiding it is therefore not just an economic objective — it is a strategic one. Every government in the net-importer bloc understands this, even if they do not say it in those terms.

At the economic level, the incentive is to buy time before the growth deterioration forces a more disorderly response. Supply agreements lock in input costs before the next inflation print arrives. Investment pledges attract capital flows that would otherwise price the contraction risk and leave. Trade arrangements substitute for price mechanisms that have been disrupted. None of these are clean solutions. All of them are preferable to the alternative, which is arriving at the negotiating table in a recession.

At the central bank level, the constraint is the most visible and the least tractable. Cutting into inflation that has not cleared risks embedding it further. Holding while growth deteriorates risks a demand collapse that makes the next easing cycle far more costly. The added complication for the net importers is that their inflation profile is partly a function of what the Fed does regardless of their own stance — their currencies move against the dollar as rate differentials shift, which means the cage tightens or loosens partly based on decisions made in Washington, not in Frankfurt or Tokyo or London.

What the framework above describes, taken together, is an environment where the standard central bank reaction function is broken, where governments are substituting fiscal and diplomatic action for monetary policy, and where the capital flows that result are not being driven by yield differentials alone. They are being driven by which economies are successfully escaping the constraint and which are not. That distinction — who is in the cage and who has found a way out — shows up in FX first. It is the market that prices the gap between where policy needs to go and where it is actually permitted to go. And in an environment where that gap is widening across the major importing economies simultaneously, cross-border positioning is not a secondary question. It is the primary one.

Pulling All The Pieces Together:

The question worth sitting with is not whether a recession is coming. It is whether the governments and central banks of the major importing economies will permit one. The last time a demand shock of this magnitude created an opening, China used it. The 2020 recession was the moment China cemented its position as the dominant exporter of goods. That foothold was not taken by force. It was taken because everyone else was managing a crisis, and China was managing a strategy.

Chart from Brad Setser

The central banks facing the cage today know this history. Which means the more interesting question is not whether they will hike into a supply shock and risk a recession. It is whether they will quietly allow liquidity conditions to loosen — tolerating financial asset inflation, letting valuations run — rather than accept the political and strategic cost of contraction. The equity valuation chart above is one way of reading that choice. Markets may already be pricing the answer.

I believe that once consensus and all of the economic talking heads on the news realise they’re missing the forest for the trees, there will be a violent change in markets that shakes FX and rates first and then reverberates into an aggressive chase into gold and silver as the inaction by central bankers speaks louder than any rhetoric games they can play at press conferences.

I believe we are entering the final innings of the endgame for both the macro picture and geopolitical stage.

Tomorrow, Part 2. FX and rates are the instruments that price the constraints and incentives we laid out here. The premiums and discounts embedded in those markets are the clearest read we have on which economies the world believes are escaping the cage and which are not. That is where we are going next.

The Trade Everyone Got Wrong (And What Comes Next)

Capital Flows — Mon, 23 Mar 2026 18:32:43 GMT

The Trade Everyone Got Wrong (And What Comes Next)

I recorded a video breaking down the macro view you need right now.

Crude went from $70 to $120 in days. The rate cut consensus that the entire market was positioned around got wiped out in a week. SONIA moved 45 basis points. EURIBOR flipped from pricing cuts to pricing hikes. The Fed is frozen.

Most of what you’re reading right now is explaining the oil move. That is not the analysis. The analysis is understanding how that move travels through a system that was built for the exact opposite regime, and finding the nodes that haven’t priced it yet.

Watch the video first. Then come back, because below it I’m going to show you exactly how I’m mapping the risk-reward across equities, rates, and crude using the agentic research system I’ve been building.

Positioning Risks and Mechanics:

The Credit Cycle and AI Are Sowing The Seeds Of Risk

Capital Flows — Tue, 03 Mar 2026 00:10:44 GMT

The rules are changing.

When the balance sheet and income statement of the largest economy on earth become cross-collateralized with how AI and global trade unfold together, the way that people thought the world always worked begins to shift. Everyone assumes it’s just a temporary disruption that will mean-revert, and they slap the “nothing ever happens” sticker on it.

This is not a temporary disruption. The rules of the game are shifting at the structural level. AI is simultaneously displacing service-sector labor, enabling autonomous manufacturing, attracting hundreds of billions in credit issuance at the tightest spreads in a generation, and pulling the largest foreign capital inflows into US equities in history. These are not separate stories happening in parallel. They are one integrated system, and the transmission mechanism that links them all is the credit cycle.

Foreign direct investment in the US (white) is at a historic high at the same time the current account (how much the US imports vs exports) is at a historic low. The simple point here is that everyone has taken the dollars they’ve gotten from trade and invested them in US equities.

The capital flows from foreigners have flowed directly into the AI theme, which has pushed US equity markets to the highest valuations in history.

The problem is that as capital flows into AI-related themes, AI is rebalancing the entire labor market and trade, which are themselves the two largest sources of capital supporting these valuations. Notice here that the information technology and financial services sectors have been contracting in their share of the labor market growth, while sectors like construction are rising.

This is playing out in the public markets right now as all of the companies with the highest sensitivity to the power portions of the AI supply chain are benefiting the most, while names in the fintech and information space are getting hammered.

The more important thing to note on the public market side is that the entire earnings yield for Mag7 is negative relative to the S&P 500 Ex Mag7.

This is why the SPY/RSP ratio has been collapsing, because the earnings yield differentials are fairly extreme right now.

The implication BEHIND these moving parts is that the underlying factors are converging and cross-collateralizing in new ways.

So what rules are changing and how does this connect to the credit cycle?

There has been a very simple accounting mechanism that supported the flows into markets over the last 20 years:

Passive flows come from the incomes of everyday people. As people make more income, some of this goes into 401ks and this capital indiscriminately buys the index. It’s an amazing source of liquidity into the greatest companies in the world
Cross-border flows from foreigners. When another country wants to do business with people in the US, they give them goods or services for dollars. If I want to import a bunch of clothes to resell, I need to calculate how much it would cost for me to produce them, and as long as I can import them cheaper than making them here in the US, I give dollars to foreigners who make my goods for me. Here is the thing though: those foreigners who have those dollars end up with A TON left over that they need to put into dollar-denominated assets. So foreigners buy bonds and stocks, which they have been doing for decades ever since globalization exploded. The problem is: what begins to happen when my goods become exponentially cheaper to produce in the United States? I begin to invest in a manufacturing facility here and then begin producing here. In the past, this would mean more manufacturing jobs would get added to the United States, but the problem now is: what if I switch from importing goods to manufacturing them in the United States with robotics supercharged with AI? The foreigners will no longer have the surplus of dollars to funnel into US equities, and I’m not hiring new people who will get income and have part of their income go into passive flows.

So in many ways, the efficiency from AI is sowing the seed for a significant risk. This is why I think the recent clip by Friedberg was so good in touching on the meta behind this larger issue. If you are driving productivity, will we end up having way more stuff than we consume? And then if we shift to a new type of system, will this begin to change HOW capital flows through the system for the channels of macro liquidity and credit?

https://x.com/theallinpod/status/2028504746303054039?s=20

You can see that the presence of AI is in many ways sowing the seeds for dramatic change in a very fragile system. When you churn the entire labor market and shock the system of global trade with geopolitical events, as equities are at all-time highs, it brings into question: WHO is going to be the marginal buyer of equities moving forward?

If the United States is facing these risks, every other country is facing even GREATER risks, especially given how complacent foreigners have become with hedging their FX risk (see the report I wrote here on this risk: LINK)

My entire point here is NOT to say we are moving into an imminent market correction. On the contrary, I believe the fall in real rates will continue after Kevin Warsh becomes the next Fed chair, and the amount of complacency we are seeing in positioning is way too bearish for me to begin betting on the beginning of a bear market.

See the report I wrote on this, linked below

When you have volatility blown out this much in crude and the software sector (IGV) relative to the broad equal-weighted index of the market (orange), it shows how much risk premia exists in the market.

The current earnings yield of the software sector has made a massive deviation away from the earnings yield of the S&P 500 and is functionally pricing in the same level of risk that we saw in 2022 when everyone thought we were going to go into an imminent recession.

The best part about this is that people are only just beginning to realize that the data all these software companies have is going to become the new form of oil in the world we are moving into. Larry Ellison had a great clip on this where he talked about this fact:

https://x.com/Globalflows/status/2028505267810492898?s=20

It is literally insane that the market is pricing default risk HIGHER than 2022 in names like Oracle, which are positioning themselves to be the primary beneficiary of the disruption AI is causing. I firmly believe that in the same way consensus was wrong in 2022 that a recession would materialize and crash the stock market further, we will see people begin to realize the absurdity of “software” being dead and we will move into a new narrative where “data is the new oil.”

See my report on Oracle here:

I will leave you with this final point. Ever since we entered the new era of social media converging with markets in 2020, there has been an excessive and reductionistic focus on recession. The story count for “deflation” and “recession” is now at an elevated level relative to history. There is so much focus on fear, which only clouds people’s judgment.

During this period of excessive fear-mongering, we continued to see equities resume higher after any marginal stress occurred in credit spreads. The Covid crash, tariff shock, and 2022 bear market were the most aggressive drawdowns, but even those turned positive on a short-term horizon.

Focus on the disrupters in the market, because when dispersion and rotation occur, taking advantage of these opportunities is the primary way to generate exceptional returns.

I laid out all my current market views here:

Geopolitical Risk and AI Risk Converging

Capital Flows — Mon, 02 Mar 2026 04:00:01 GMT

Big Picture Summary:

I want to start by summarizing the views and resources I have laid out, and then I am going to jump right into the analysis for flows this week.

First, I laid out my initial macro view and update of the geopolitical situation here. I also showed the new AI tool I am using to map situations.

As a reminder, you can download and save all of the TradingView indicators here (full educational list: Link):

Here is the geopolitical risk assessment I find helpful:

Arena Brief 2026 03 01

88.7KB ∙ PDF file

Download

I put my broad views for this week here:

If we don’t get the tail scenario, there is a lot of premium in crude right now that could get unwound (more on this below)

Finally, my entire thesis on AI, Hyperliquid, and Oracle is all here:

Now let’s dig into the actual flows.

Geopolitical Risk and AI Risk Converging:

The AI Reflexivity Loop (this moment will define you)

Capital Flows — Sat, 21 Feb 2026 05:12:44 GMT

The AI Reflexivity Loop (Video Breakdown)

We are standing inside the biggest technological shift in human history. Not approaching it. Inside it.

Most people are watching from the sidelines, consuming headlines about AI without any framework for how the pieces fit together. They see the noise but can’t hear the signal. That gap is where fortunes are made and destroyed.

Today I’m closing that gap. I built a 79-slide presentation that maps the entire AI ecosystem from first principles. By the end, you will have:

A framework that organizes all of AI into 3 simple buckets and shows how each one feeds the others
A direct line from those buckets to GDP growth
A company-by-company map of who is winning, who is losing, and why
The specific signals to watch so you know when the regime is shifting

You are either going to be a disruptor or you are going to be disrupted. There is no middle ground. The only thing that separates those two outcomes is whether you choose to understand what’s actually happening.

Full Video Breakdown

I’d encourage you to watch this in full. The structure builds on itself deliberately, and the final sections are where the real edge lives.

The Slide Deck

For those who want to move through the material at your own pace, reference specific charts, or share sections with your team, the full 79-slide deck is linked below.

This is the same presentation from the video above. Use it as a companion resource or a standalone reference. Every chart, every framework, every company map is in here.

Ai Slide Deck

2.62MB ∙ PDF file

Download

The Four AI Trading and Business Playbooks

The video and slide deck give you the architecture. These four reports give you the depth.

Each one takes a specific layer of the AI ecosystem and maps it in granular detail: the supply chains, the unit economics, the competitive positioning, the inflection points most analysts are still missing.

If you’re serious about not just understanding this shift but positioning ahead of it, these are the resources that let you go from framework to execution.

The Complete Ai Value Chain A Trading Playbook For 2026 2027

722KB ∙ PDF file

Download

The Ai Disruption Map

568KB ∙ PDF file

Download

Global Ai Ecosystem

652KB ∙ PDF file

Download

The Complete Ai Ecosystem Supply Chain Matrix

935KB ∙ PDF file

Download

Monday Live: From Framework to Actionable Positioning

AI Livestream on Monday, February 23 at 1:30 PM ET

This Monday, I’m going live to break down the macro data points confirming or challenging the thesis in real time.

I’m also going to be releasing proprietary models I have never shared before that display the technical dynamics across this entire space, on both a macro and individual stock basis.

Only the people who show up to the livestream will get these models! Be there!

The livestream will be at this YouTube link (be sure to save this!)

Be the disruptor or be disrupted.

The Economy is Splitting in Two: How to Trade the Rotation

Capital Flows — Tue, 17 Feb 2026 21:41:30 GMT

The Economy is Splitting in Two: How to Trade the Rotation

The video below walks through the macro split that’s defining every market right now. Below, I break down the specific macro drivers and signals you want to be watching in order to understand WHY things are moving and WHERE we are likely to move:

Connected Slide deck from video:

The Economy Is Splitting In Two How To Trade The Rotation

2.19MB ∙ PDF file

Download

All of the educational resources and free models can be found here: LINK

Below is the in-depth report for paid subscribers, further breaking down the specifics in the macro regime, HOW to quantify them, the exact models to use for measuring the regime, and trading implications.

Major Macro Changes: Main Ideas

I Went Through Every Chart On The Credit Cycle – This Won’t End Well

Capital Flows — Mon, 26 Jan 2026 21:01:02 GMT

I Went Through Every Chart On The Credit Cycle – This Won’t End Well

The credit cycle is doing exactly what it always does at this stage: compressing a lot of future pain into a narrow window. In this video, I walk through every key chart so you can see why I don’t think this ends well, and what that means for anyone running real risk.

Subscribe now

If you want to study the charts at your own pace, here’s the full slide deck from the video. This is the same framework I use to map where we are in the credit cycle and how it bleeds into rates, spreads, and equities.

I Went Through Every Chart On The Credit Cycle And This Wont End Well

8.33MB ∙ PDF file

Download

On Wednesday at 11:00 a.m. ET, I’m doing a closed‑door livestream for paid Capital Flows Research subscribers, where I’ll update these charts with the latest data and walk through how I’m actually positioning into this part of the credit cycle.

If you want to see how I’m turning this into concrete rate, credit, and equity decisions in real time, that session is where I’ll lay it out.

CREDIT CYCLE LIVESTREAM DETAILS:

Macro Report: The Collapse

Capital Flows — Fri, 23 Jan 2026 00:29:37 GMT

Macro Report: The Collapse

I have been explaining the extreme imbalance taking place in Japan and HOW it is reverberating across global markets. If you plan to be actively taking risks in Q1, the changes in Japan will impact you.

If you are not up to speed on the context, you should read the in-depth reports as well as the connected videos I recorded. This is the framework for flows moving forward.

If you were a paid subscriber, then you received the message from me explaining the tangible implication, which was EURJPY rallying. This is a trade that is paying while equity rotations continue to chop and crude is figuring out which direction it’s going to take next.

What you need to realize is that when we have currency pairs like AUDJPY and MXNJPY rallying, it is a massive signal about risk-on behavior:

This is why, when we were at the lows in equities earlier this week, I published the equity strategy report explaining that I remained bullish (again, all of the time-sensitive information is sent out exclusively for paid subscribers)

The FX moves are one of the representations we see with liquidity in the system, which is why these pairs against the Yen were leading ES futures multiple times in the session over the last 48 hours.

All of these moves are setting the stage for something much MUCH bigger, though.

The Larger Misconception:

Regime Shift In Japan: The Melt Up Before The Crash

Capital Flows — Fri, 09 Jan 2026 19:48:01 GMT

Regime Shift In Japan: The Melt Up Before The Crash

Everyone got so laser focused on the NFP labor market print this morning that they have completely missed the real driver in markets.

While the NFP print came in below expectations, it only moved hedges around marginally.

The BIGGER piece of news was out of Japan, and it is literally moving global markets and the risk curve across equities in the United States. Over the last 6 months, the situation in Japan has changed dramatically so that it is actually impating global liquidity and risk flows. Today, the news out of Japan is accelerating the entire fiscal impulse.

To give you an idea of HOW LARGE the change has been, here is the budget deficit in Japan right now. When it turns negative, it represents the Japanese government spending MORE than they take in.

As a result, we saw the Nikkei lead the way and outperform the most as ES, CL, and GC all followed. Why is this happening? Because the liquidity changes in Japan impact the entire world.

Japan is the largest foreign holder of US treasuries, which means changes in its country directly impact dollar liquidity in US markets.

A Deeper Look At Liquidity Drivers:

If you want to understand WHY these global changes are taking place and HOW the underlying mechanics inform managing risk, you can watch the recording that I just made for paid subscribers. In the recording, I’ll lay out my full playbook for trading these risks: a deeper breakdown of the underlying drivers, how foreign flows interact with BoJ policy, the key scenarios I’m running, and the concrete ways I’m looking to express these views as the current regime comes under pressure.

The video and connected slide deck are linked below:

Macro Report: Japan’s Policy Is Setting The Stage For The Next Crash

Capital Flows — Thu, 08 Jan 2026 02:33:20 GMT

Macro Report: Japan’s Policy Is Setting The Stage For The Next Crash

I think Japan is sliding into a macro setup that is no longer sustainable. In this note, I lay out the pressures building under the surface and what I’m watching for. If these imbalances start to unwind, I plan to run substantially more risk in Japan this year.

The Coming Storm in Global Carry: Japan’s Pivot and the Flows No One Is Watching

Capital Flows — Fri, 05 Dec 2025 21:14:13 GMT

The Coming Storm in Global Carry: Japan’s Pivot and the Flows No One Is Watching

The global system of trade, capital flows, and crossborder debt has fused into a single, tightly interlocked structure. Over the past two decades, institutions and governments have not only financed each other but have effectively cross-collateralized their balance sheets through currency exposure, offshore dollar borrowing, derivatives, and implicit guarantees.

The result is a world where leverage is shared across borders, where liquidity conditions in one jurisdiction cascade instantly into another, and where the margin of error has narrowed dramatically. Think of a massive ship operated by multiple captains who each have different incentives, different maps, and different agendas. They have taken out debt from one another, stacked cargo far above safe levels, and pushed the vessel into waters that are about to turn violent. When the storm hits, the ship’s stability is determined not by any single captain but by the structural imbalances baked into the vessel itself.

This level of integration means that understanding the global picture is no longer optional. Local shocks now transmit globally through exchange rates, interest rate differentials, offshore funding markets, and derivative exposures. What matters is not just WHO is levered but HOW that leverage is interconnected. Nowhere is this more evident than in Japan, one of the most systemically important players in global finance. Japanese government bonds and the yen sit at the center of an enormous web of carry trades, collateral chains, and duration mismatches. For years, investors have treated Japan as the stable anchor in global markets. In reality, the scale of leverage tied to JGBs and the yen means any structural shift in Japan’s policy stance has the potential to reverberate across every major asset class.

This report will map these risks with clarity and precision. It will explain HOW global flows are shifting, WHY consensus is misreading the signals from JGB yields and the yen, and WHERE some of the largest opportunities are emerging as this misinterpretation widens.

The storm is forming. The objective is to understand the architecture of the ship before the waves hit.

The Structural Flow:

This entire system of global trade is distributed across countries that are either net importers or net exporters. The United States is the largest net IMPORTER in the world (the most red in the map below) while China is the largest net EXPORTER. Every other country falls in between these two countries.

Japan is a net exporter compared to the United States who is a net importer of goods and services. In simple terms, Japan produces more than it consumes, so it ships the surplus (white line moving up) to the United States, which consumes more than it produces (blue line moving down).

Two critical things in the structure of Japan frame HOW it fits into the global system (this will be important to understand for yields and the carry trade):

Japan is the largest foreign holder of US Treasuries. The implication of this is that Japanese financial markets are HIGHLY cross-collateralized with the US Treasury market.

Japan is running a trade deficit with commodity-producing countries because it can’t produce them domestically. In simple terms, it is short commodities.

You will notice that Japan is a net importer of food (blue) and energy (tan)

The net result is that Japan is massively short food and energy. The implication of this is that changes in the currency have a much greater impact on domestic inflation than on countries like the US or China:

This structure of global trade and how Japan fits into it frames the reflexive feedback loop we are seeing taking place between yields, the yen, and domestic inflation.

Reflexivity In Japan:

If you understand Japan’s structural regime along with the current reflexive dynamics in markets, you can see the risks that are accumulating and why consensus is fundamentally misreading the carry trade.

Notice that JGB yields have been rising all year, but only recently have people begun to worry about the Yen carry trade as if the rise in JGB yields creates an imminent risk for the entire system to blow up. The problem with this fear-mongering is that it misinterprets what is actually happening and doesn’t see the opportunity that is actually building.

Main Idea: Japan’s inflation is running well above target, creating upward pressure on long-end yields (notice how large food inflation is). A reflexive loop has formed where a weaker yen is importing more inflation, pushing yields higher and driving the currency even lower.

The idea here is that ever since the BoJ stopped doing yield curve control, the inflation from a weaker currency is GREATER than any pressure that higher yields could put on the economy.

The phrase, “the cure for higher prices is higher prices,” is being felt in real time, and this is where we can connect the import prices vs real imports to the fixed income complex. In the chart below you can see that the 10s30s curve has begun to flatten marginally becuse the higher nominal imports (white) are outpacing real imports (blue). In simple terms, the impulse causing higher yields is fading marginally, which is why 10s30s is flattening. In the pass through mechanism, there is a marginal degree of stagflation as nominal imports run above real imports.

Once 10s30s and 2s10s in JGB yields begin to flatten more, this will likely be an indication that the impulse driving yields higher and the currency lower is beginning to fade.

The biggest misconception about the Yen right now is that the higher yields in Japan are going to push US yields higher but the OPPOSITE is actually taking place as US yields fall against JGB yields (white) and the Yen falls against the dollar. In simple terms, this idea that the Yen is going to blow up and cause US rates to explode higher is misguided.

The key insight and opportunity that exists is HOW this is falling into the larger framework about macro risks that are building.

Macro Risks:

I have been mapping the larger macro risks in the system and how they are all culminating in the endgame with the dollar and geopolitics. You can find the report and the connected video providing an overview here:

You can find the allocation playbook where I map the following here:

Mapping portfolio exposures and where they can actually break
Building a path‑dependent decision tree instead of guessing in real time
Setting concrete signals, models, and a framework for action

And the factor models that will provide a clear view into HOW equities are converging in alignment with macro flows here:

All of this is falling into the much larger geopolitical endgame framework I laid out here:

So how does Japan connect to this? We are seeing the weaker Yen bring in inflation AND more liquidity as the Nikkei earnings yield compresses. In simple terms, liquidity is driving the Nikkei higher, not domestic growth. As the quantity of money in the market and inflation in the economy rise, real yields are rising, but it’s clear that it is nowhere near enough for equities to fall.

The entire reflexive feedback loop taking place is that higher yields and higher equities are a result of a weaker currency. The problem is that the weaker currency is pushing equities and yields higher. How long can this go on for? Functionally, until we see a significant crack in the Japanese economy that causes lower yields and lower equities. The problem is that if this overlaps with a deleveraging in the US, the amount of volatility injected into markets is going to amplify in a MASSIVE way.

In my view, the yield differential between the US and Japan (white line showing US yields falling against JGBs) is moving in lockstep with gold and silver prices because investors are aware that the current liquidity in markets is highly unsustainable, so they are trying to allocate to the release valves of macro liquidity. This is why there is an almost perfect relationship between the yield differential (white) and the metals.

In simple terms, there is too much liquidity and inflation in Japan, which is resulting in higher yields, higher equity prices, and a weaker currency. On the US side, we are seeing too much liquidity in markets, but it isn’t materializing into inflation yet because of the weaker labor market and the fact that the US is not short food and energy prices like Japan.

This is why it will be very important to watch the yield curve differentials as we move into this period of time where macro risk is accelerating.

Pulling Views Together:

The bottom line is that the reflexive feedback loop we are seeing in Japan is unsustainable, but the popular narrative that the Japanese carry trade will crash US equities and send yields higher misinterprets the actual drivers.

It is my belief that macro liquidity is pushing the underlying system to a point where it is unsustainable. The question is all about HOW this links to positioning and the real-time signals in Japanese markets? How does the Japanese yield curve connect with WHERE gold and silver could go from here?

To go deeper and make this as practical as possible, I’m hosting a live, closed‑door webinar for Capital Flows Community Members on Monday, December 8th at 9:00 am EST.

In that session, I’ll walk through the full implementation playbook:

How I’m thinking about allocation decisions as it relates to the Japanese Yen, JGB yields, and the signals for WHEN risks are building.
How to map the scenario analysis and quantify the drivers, so you’re not guessing in real time.
How these connect to the new TradingView models we launched, so that you have the proper modoels to map things in real time. (See Tradingview models here: LINK)

This is a really good moment to step inside the Capital Flows community: become a paid member for a month, get the live webinar plus everything behind the paywall, and if it doesn’t feel like a clear upgrade in clarity and conviction, just cancel after the month and keep what you learned.

Livestream link is below for the Capital Flows Community:

AI Risks and Equity Factors As Macro Volatility Rises

Capital Flows — Wed, 03 Dec 2025 18:51:05 GMT

AI Risks and Equity Factors As Macro Volatility Rises

I recorded a new conversation with my friend Jared Kubin on something most people are ignoring right now

How AI actually changes risk, factor moves, and how to quantify it instead of guessing.

In the interview, we cover:

The real AI risks that matter for portfolio construction (and what’s noise)
How to think about factor moves in a regime where AI is driving dispersion
The exact tool to use in order to quantify these moves, and why I trust it
- Follow Jared here: LINK and map all the most important factors here: LINK

All of these points connect to the larger risks building under the surface that I covered in the livestream yesterday. You can find the recording and the entire playbook below.

Macro Risks Are Building:

Yesterday, I did a longer livestream walking through my broader interest rate framework and how I’m positioning around current dollar liquidity risks that building. Linked here:

Next livestream: from playbook → live Tradingview/Python models

The next livestream will build on that session and focus on the actual TradingView models and processes I use day‑to‑day:

TradingView model stack walkthrough
- How I structure the models that map the macro regime and capital flows
- How each one is used in practice for sizing, timing, and risk
- How to assemble them into a comprehensive, plug‑and‑play process aligned with your own portfolio
Live build with my quant
- You’ll see how he specifies and codes the indicators and dashboards we actually rely on
- You can propose ideas in the chat; we’ll select some and code them live so you see the full pipeline: idea → spec → code → model
Growing the shared tool library
- Every useful model we build becomes part of the Capital Flows toolkit
- Over time, that gives the community an expanding set of tools to map the macro regime and flows, instead of everyone reinventing them in isolation
By the end of this next session, Capital Flows Community members will walk away with an exclusive suite of TradingView models that I actually use to track the macro regime and capital flows.
You’ll have a coherent set of tools you can plug into your own charts to:
- Map the current regime in real time
- See how flows, rates, and FX are shifting
- Tie those signals directly back into the risk and decision framework we built in the first webinar

Tomorrow’s webinar link is on the bottom page of this report (Thursday, December 4th, at 1 pm EST):

My commitment: I’ll keep updating the research, models, and tools in real time as the regime evolves.
Your side: stay plugged in, show up to these sessions, and actually run the process with your own constraints in mind.