But what are you looking for on Friday? And what are the risks that you see around those three scenarios that you've laid out? You know, perhaps like, you know, let's say that he doesn't do one of those scenarios or he veers a little bit, you know, talk that through for our listeners.

It's specific to the event that lies ahead of us.

We see three potential options scenarios of many options, and we just want to distill them into three possible outcomes.

One, which has been what we've been seeing a lot in the last couple of times that Chair Warsh has spoken, it's kept his views close to the vest around what is his reaction function.

Even at the press conference, In July, he did mention that he's not clear what sort of speech he was going to give, either some sort of medium term outlook or what to look for in the next couple of quarters.

And by now, I'm sure the speech has been written and prepared.

So we're going to find out, did he take the option of a more longer term shelf life piece? The symposium is geared around digital payments and the evolution thereof and the interaction with monetary policy that could, he can strict strictly just kind of stay focused on the digital side of the conversation.

Yeah,

520 on 30s, is that the right clearing price? Do you just need to go higher than that?

Look, I mean, there's a, there's like a lot of different arguments, right? Like, what do rates reflect ultimately? And that you, you could say there's a fiscal term premium.

There's a lot going on within, like, the composition of real rates are very high.

But if you think about it, like, inflation ex- expectations are actually relatively contained, and, and that's the point that's really interesting to me.

We're, we're commanding a higher real cost of capital, which is, you know, that's the, that's the clearing price.

It's the real rate that matters more.

It's a function of the AI spending, so that's a, that's almost a quasi-government infrastructure spending that's competing now.

So why should the Fed care at all? What do you make of those arguments?

But there it was.

I mean, look, if you think about Augusts are always kind of sneaky.

They come out, they're g- sleep, sleepy time periods in August, and then you get these sort of kinda headline shocks.

It, it...

And if you think about the Augusts that we had post-financial crisis, post-European crisis, like, there was financial reasons why August would get, like, volatile.

Now we're shifting to, like, the sovereigns in the limelight.

So, like, the sovereigns now are really, developed markets, US included, are now having to kind of fend for themselves.

What happens when he has to re-intervene as he intervened yesterday?

Does Kevin Warsh make things more volatile, the reluctance to communicate, to provide forward guidance?

Well, I, I do think that, you know, the, it's kind of refreshing that we're taking, uh, the opportunity to kind of slow things down a little bit.

I mean, perhaps we've had o- overcommunication in some angles, right? And so I, I think it's good to see, uh, kind of a rethink about the communication strategy.

Uh, I mean, the five task forces are now fully, uh, in, in motion.

Uh, I, I think it's an opportunity to kind of rethink, uh, what is the appropriate policy, what, like, how to communicate with markets.

And markets, you know, the bond market's a pr- sophisticated group of individuals.

We can discount things too.

Is there any teeth in this?

Do you think that Kevin Warsh truly can unleash the summer of bonds, uh, given the fact that ultimately he's really squaring off against credibility on one hand, and, uh, the overhang of what could be coming from the White House on the other?

Look, I think we... everyone has to temper their enthusiasm, including myself, 'cause, I mean, we have... let's see what happens with the, the MOU and if that gets, uh, gets done, uh, is a done deal by tomorrow, I think, right? Um, so, like, let's see...

I mean, or Friday.

Let's see what happens there.

Um, but, uh, I think, you know, we're gonna start off at 2:00 and 2:00 to 2:30, right? 2:00, we're gonna see did, A, Kevin Warsh participate in the dot plot submission process.

Like, that's gonna be a big deal.

Uh, and, like, what are the dots telling us? Is there gonna be, like, a, a removal of the easing bias? I, the, at, at the fir- at first blush, I think this is gonna be a kinda gradual toe in to becoming more, like, a, a change at the Fed.

... basically inflation is, prices are still too high and the labor market's not weak enough to have this bias?

Mm

...

in red relative to, uh, o-consumer sentiment from the, uh, University of Michigan.

And you can kinda see, like, up until, like, uh, Trump's second sort of term, the early part of the, uh, second term, there was, like, a little bit of a bump in enth-in enthusiasm around sentiment.

Stocks were going up, and so there was a minor kinda correlation between stocks and, um, and consumer, uh, sentiment.

And then it broke down after Liberation Day, and but yet stocks have kept going higher, right? Uh, we've, we've kind of, uh, identified why that's the case, and I'll get to it in a second.

But look at the chart on the right.

Is that, is that a risk you're concerned about? Is, uh, do, uh, are some of the sort of, you know, repricing and some of the issues that seem like, you know, the co- there's not only one cockroach, uh, have, ha- uh, is it working its way through in the private credit markets? Do they present a risk to the greater economy? How are you thinking about that space?

What do you think we're gonna be disappointed by?

I think we're gonna be disappointed by a number of things.

One, if you go back in, in the analogs of history, and if you look at...

Again, people don't like to go back to two, two distinct periods, 2008 and 2000.

People just don't like those two years.

And you can have good news, and you can have markets end at a high note and then kind of top tick things.

And so earnings really do have to deliver today, and you have a lot of optimism already priced in.

Why hasn't any of that been enough?

What do you b- think is behind the weakness in demand for US government debt right now?

Look, I think it's a, a, a repricing that's happened globally on the rate side.

The US Treasury market really lagged everything else, and this, you know, this s- sort of concern around, like, what is the new steady state for interest rates? And, [clears throat] you know, heading into, you know, end of the month, end of the quarter type environment, these auctions usually do well.

And the fact that they're, you know, under pressure does kind of show that there's been a some sort of kind of buyer pullback.

What's the read-through in terms of what the appetite for debt is internationally?

Yeah, absolutely.

So yeah, that's a great point, the fact that we've seen real rates, especially out beyond the five-year point on the curve.

So the 10-year and the 30-year has largely been a real rate move, you know, potentially capturing this sort of fiscal concern.

When you say baked in, do you mean one more rate cut or two more rate cuts?

Look, so the market has about one and a half to two cuts basically in the back of their mind priced into the forward curve.

It's, it's, it's actually visible.

You know, we think it's all about the sequencing.

It depends on what takes place, who's pulling, you know, the actual rate cuts, uh, forward.

You know, is it gonna be under Chair Powell's, um, you know, kind of last few meetings? We think, you know, maybe one more cut under the current sort of Fed, and then in the future, we don't know.

You know, there's been a lot of questions about Fed independence and will the Fed cut for the right reasons or, you know, for other motives? Either way, we think that the Fed's gonna probably cut further than what's priced into the market.

Does it complicate potentially corporations and whether or not they are going to and when they may pass on more of these costs to consumers?