I get the idea that there might be some version of Yield Curve Control (YCC**) or other government intervention to hold down interest rates. But remember, what's freaking the market is inflation. If the Fed and/or Treasury does anything to suppress interest rates that is perceived as inflationary, such as expanding the balance sheet, not cutting interest rates when it is expected, shortening duration, or outright bond buying, which is perceived as stimulative. The market will take this as potentially creating more inflation, and the result will be even higher interest rates. What the market wants to bring yields down is a commitment to getting inflation under control. You want mortgage rates down; HIKE(!) the funds rate. -- ** A number of people are arguing for YCC. They should know it has a perfect track record... of never working! This is the ultimate definition of insanity: doing the same thing over and over and expecting a different result.

Situational Awareness still exists and it is still up 80% YTD. Leopold is still a hedge fund manager with a good track record, and a big learning experience. He will raise big dollars in the coming weeks/months. —- Wall Street has a long history of giving money to managers after they blow up. Partial list: John Meriwether, Long-Term Capital Victor Niederhoffer Mike Vranos, Ellington Howard Rubin, Merrill Lynch Jon Corzine, MF Global Boaz Weinstein, Deutsche Bank Brian Hunter, Amaranth Gerald Tsai, Manhattan Fund … and let’s not kid ourselves, when he gets out of prison, SBF will be among the largest hedge funds managers in the world.

Explain to me like I’m 5 or a golden retriever how Citadel’s rate hike call 1 day before the Fed meeting, market had a 38% prob of a hike, impacted Situational Awareness positioning. It barely moved Treasury yields. Those making this insinuation hurt their own credibility.

Let me rewrite the opening sentence: Trump has ordered fresh attacks aimed at getting Tehran to surrender that could begin as soon as the NYSE closes on Friday and last until crude oil reopens in Asia on Sunday night.

The Fed should allow the dissenters to put out these rationales with the statement on Wednesday. Then Warsh could be asked about them, in addition to defending his vote, which I assume would be in the majority.

Episode 2 of Rational Dissent, "This Is Not Your Father Fed." Available on YT, Spotify, Apple, etc. --- 00:00 – The Fed Put & Market Expectation 00:51 – Introduction & "Rational Dissent" Overview 01:22 – FOMC Meeting Recap & Warsh's Agenda 02:30 – Removing Forward Guidance: History & Impact 06:18 – The Risks and Moral Hazard of Forward Guidance 11:15 – Warsh's Vision: Independent Markets Check the Fed 13:36 – The Unintended Consequences of the Fed Put 15:38 – The "Good Family Fight": Dissents & Board Dynamics 18:18 – Historical Perspective on Fed Dissents (Volcker to Present) 25:34 – Reaction Function vs. Forward Guidance 30:30 – Lightning Round: Biggest Risks of Warsh’s Approach 33:41 – Closing Remarks & Wrap-Up

Dudley wants the Fed to publish its reaction function. Whose? Warsh just drew three dissents and calls the family fight a "design feature." This isn't 12 voters with one reaction function anymore. It's 12 voters with 12 reaction functions. Dudley's right that Warsh at least owes us his. But a function of what? Warsh: "We're going to deliver two percent inflation and not a whisper more. But to achieve that, I'm looking at a broader set of inflation data than PCE." He needs to define the metric before he can give us the rule. Then we're only 11 short of understanding this Fed. @NickTimiraos @lebas_janney

Doesn’t the market usually start finding a bottom when somebody finally blows up? Now we have Situational Awareness, a levered AI/infrastructure book with big losses in weeks and a public stock portfolio sold to Citadel, and the AI complex ripping immediately after. UBS AI winners Stock Index is up over 10% today. • 1998: LTCM • 2018: Volmeggeon - XIV / short-vol unwind • 2020: Treasury basis trade / forced deleveraging • 2021: Archegos, more idiosyncratic, but same forced-liquidation pattern 2022: UK LDI pension/gilt crisis Add in Korea’s emergency response after Samsung/SK Hynix-driven volatility, and it feels like we may have just seen the forced seller finally get cleared. Of course there were the Lehman/Bear blowups that revealed a bigger credit problem, not bottoms. But when the issue is crowded positioning with leverage resulting in margin calls, the blowup often marks the point where the selling becomes visible, concentrated, and exhaustible. So the question for today’s rally: is this just a bounce, or was Situational Awareness the AI-trade liquidation event that marked the bottom?

Crossing now: *TRUMP: WARSH WOULD LOVE TO SEE LOWER INTEREST RATES *TRUMP ON FED: WARSH IS FANTASTIC Does Trump understand that talking about cutting rates is causing this (red headline on Bloomberg)? *TREASURY 30-YEAR YIELD TOPS 5.20% FOR FIRST TIME SINCE 2007

The chart below starts on Sept 18, 2024, the FOMC meeting at which they kicked off the rate-cutting cycle with a 50 bps move. 30-yr yields went straight up (I would argue in response to that cut) and, on May 19, 2026, hit a 19-year high of 5.18%. I continue to argue that the problem is that the Fed has not been taking the inflation "problem" seriously, and that the bond market has been rejecting its easy policy. So, a surprise hike might "fix" the bond market rather than worsen it. The Wall Street adage "bond investors can stop panicking when the Fed starts panicking" applies. A little Fed-driven panic about inflation might calm bond investors. Holding steady and the yield uptrend below will just continue until they do "choose" (Warsh's word) to deal with inflation.

Real Yields operate with cycles or regimes. During the "money printing" era from 2009 to 2022 (red), the 10-year real yield averaged just 0.23%. We are not in a zero-yield, money-printing era anymore (thank god). Before this (left blue), the 10-year real yield averaged 2.74%. I have argued the current period (right blue) should look like the pre-money-printing era (left blue), and it does. It also means 10-year real yields can go much higher before they become too restrictive (probably above 3%). What would cause 10-year real yields to go higher? Sticky inflation (we have now) and a Fed that does not "choose" (as Warsh terms it) to act on it. @Marcomadness2