Great piece, with a profound understanding of the current links between financial markets, tech and geopolitics. What if you consider the excess US consumption - the trade deficit - as the starting point. An excessive (structurally imbalanced) demand that China and other natons by the way only fill and respond to? It does not change the flows of course and your excellent reading of the current coherence in US policies
Ok, can you tie the two together in the livestream? It sounds like you are saying that this is their best option, but the markets are going to go through pain regardless of what they do. Is that right? How will it evolve?
as you mention, on the surface it appears that all the administrations efforts would discourage foreign investment in the US (e.g. tariffs are a form of economic warfare). And the deficits still exist, nothing getting cut, big beautiful bill just adding to deficits. I am struggling to understand how this encourages foreign investment in the US.
A truly phenomenal article. (I've come to it a 2nd time to imbibe it properly, b/c throwing Alex Karp's name around multiple places in the text serves like a skunk avoidance instinct to me....also fyi: the karp "interview" with Warsh....is karp blathering for 45 minutes...i prefer less of this please.....way less).
But this article is otherwise very spot on. Of the 21 trillion (!) poured into US since 2011, only ~5 trn went into treasuries, 16 trn into other wall street stuff (private credit, stock....what else could it be, as you correctly describe). A fantastic article for what's REALLY going on behind in quiet.
The AI arms race is ultimately a balance-sheet war.
Chips get the headlines, but the decisive variables are duration, energy, sovereign financing capacity and who can keep funding capex after private returns begin to compress. Warsh and Bessent matter because monetary and fiscal architecture determines which country can carry that burden longest.
You're right, and the tell isn't in the dot plot. While the rate-cut faithful read the Chair's lips, the capital has already moved.
America now spends more building data centers than every other kind of office building combined.
That isn't euphoria and it isn't narrative. It's poured concrete. The flows were committed long before the consensus finished arguing about a quarter point.
Rates are the misdirection. Allocation is the trade.
This makes me feel that the main risk to the ORCL thesis right now is really just politics? As long as the current administration is around, I find it hard to imagine them just watching ORCL fail
There is a compelling case for funding the energy source transition. Insurers and reinsurers are warning that the losses are catastrophic. Scientists warning that they underestimated the pace of ecosystem damage. When does the US recognize and use capital like China hast to fund the necessary energy transition (which provides the AI power and grid infrastructure we are deficient in) as a beneficial capital flow. This could be our Achilles heel.
I think it showed up in FX and yields a bit, which is why Bessent then stepped in, in coordination with the Japanese. My question was more to see what vol they want to stifle and suppress. My guess would be FX and rates vol, which means vol would transmit into equities. But let's say what Cap says
Great piece, with a profound understanding of the current links between financial markets, tech and geopolitics. What if you consider the excess US consumption - the trade deficit - as the starting point. An excessive (structurally imbalanced) demand that China and other natons by the way only fill and respond to? It does not change the flows of course and your excellent reading of the current coherence in US policies
Are you pivoting away from your earlier analysis on the credit cycle that this won’t end well?
no
Ok, can you tie the two together in the livestream? It sounds like you are saying that this is their best option, but the markets are going to go through pain regardless of what they do. Is that right? How will it evolve?
At best, this is total propaganda to misinform people. At worst, it’s total BS. Dont take my words for it. Ask Stanley Drunkenmiller himself.
Great article and info.
as you mention, on the surface it appears that all the administrations efforts would discourage foreign investment in the US (e.g. tariffs are a form of economic warfare). And the deficits still exist, nothing getting cut, big beautiful bill just adding to deficits. I am struggling to understand how this encourages foreign investment in the US.
more specifically, all investment rates priced/contingent on US Treasury safe haven assets
Really well done and articulate. Something I’ll digest and sit with and stress test all week
A truly phenomenal article. (I've come to it a 2nd time to imbibe it properly, b/c throwing Alex Karp's name around multiple places in the text serves like a skunk avoidance instinct to me....also fyi: the karp "interview" with Warsh....is karp blathering for 45 minutes...i prefer less of this please.....way less).
But this article is otherwise very spot on. Of the 21 trillion (!) poured into US since 2011, only ~5 trn went into treasuries, 16 trn into other wall street stuff (private credit, stock....what else could it be, as you correctly describe). A fantastic article for what's REALLY going on behind in quiet.
The AI arms race is ultimately a balance-sheet war.
Chips get the headlines, but the decisive variables are duration, energy, sovereign financing capacity and who can keep funding capex after private returns begin to compress. Warsh and Bessent matter because monetary and fiscal architecture determines which country can carry that burden longest.
You're right, and the tell isn't in the dot plot. While the rate-cut faithful read the Chair's lips, the capital has already moved.
America now spends more building data centers than every other kind of office building combined.
That isn't euphoria and it isn't narrative. It's poured concrete. The flows were committed long before the consensus finished arguing about a quarter point.
Rates are the misdirection. Allocation is the trade.
Great write up and detailed research!
Thank you!
great article, helped me think about some things I havnt yet drilled down into yet! Thank you!
This makes me feel that the main risk to the ORCL thesis right now is really just politics? As long as the current administration is around, I find it hard to imagine them just watching ORCL fail
There is a compelling case for funding the energy source transition. Insurers and reinsurers are warning that the losses are catastrophic. Scientists warning that they underestimated the pace of ecosystem damage. When does the US recognize and use capital like China hast to fund the necessary energy transition (which provides the AI power and grid infrastructure we are deficient in) as a beneficial capital flow. This could be our Achilles heel.
But isn’t Bessent in coordination with Japan trying to stifle FX vol? Does that mean the vol will show up somewhere else?
it can show up in the economy and trade or interest rates
Isn’t it showing up already in higher yields on the 30Y? Move index up 8% today
I think it showed up in FX and yields a bit, which is why Bessent then stepped in, in coordination with the Japanese. My question was more to see what vol they want to stifle and suppress. My guess would be FX and rates vol, which means vol would transmit into equities. But let's say what Cap says
It’s not a zero sum game and there will be areas one country will have an advantage on the other.
If I buy access and can’t make the livestream are there recordings?
Always