Rupert and Ben send their deepest condolences to families and friends of the victims of last night’s atrocity on Bondi Beach.
Ben Brey of Capital Misallocation and the 🐿️ - Live broadcast recorded at 8pm EST on Sunday 14th December.
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Pod Summary
Introduction & Market Overview
Review of weekly market moves: The U.S. dollar, bonds, and stocks were down, while banks ripped as they sniff out that yield curve steepener.
Rates and Curves (Minute 2)
Discussion on the 2s10s and 10s30s yield curves. Benny and the 🐿️ argue that while banks benefit from the steepener, small caps are unlikely to rally significantly on just ~30bps of projected rate cuts.
Analysis of the Fed’s “hold steady” approach - the economy has held up well, but the market is oscillating between anticipating cuts and pulling back those expectations.
Identification of “one-time” demand hits facing the consumer: aggressive deportations impacting workforce/demand, student loan repayments resuming ($300–$500/month hit), government shutdowns, and tariffs.
Market Narratives & AI Skepticism (Minute 8)
Debunking the “cash on the sidelines” myth: money market fund assets are structural corporate cash/T-bills and will not flood into equities.
Skepticism regarding the pivot in AI narratives, specifically the sudden focus on “space-based data centers” and solar as a distraction from rising energy costs and physical constraints.
Comparison of AI to past bubbles (3D printing, crypto).
Physical Constraints & Infrastructure (Minute 11)
Discussion on the physical bottlenecks of the AI/power trade, specifically transformers and transmission lines.
Reality check for tech companies: For the first time, tech giants face physical “hard” constraints (grid capacity) rather than just software scalability. Grid operators are now requiring significant upfront capital for forward capacity.
Liquidity, Bitcoin & Capital Scarcity (Minute 20)
Market liquidity issues noted on Friday hitting AI beta stocks.
The “Hunger Games” for capital: A structural shift where tech giants are now competing for bond market liquidity ($500–$600B) alongside governments. This competition for finite capital, rather than just inflation, could be driving term premiums higher.
Private Credit & Market Structure (Minute 26)
Critique of Apollo’s 125-page defense of private credit. Comparison with the peer-to-peer lending bubble (Lending Club, OnDeck)? The credit cycle is deteriorating in “slow motion” due to lack of mark-to-market accounting.
Analysis of a volatility chart (S&P divided by volatility vs. 1-year/1-year forwards). Benny suggests that the current market is being propped up by volatility selling rather than genuine growth expectations, making it vulnerable.
See you on Thursday night at 7pm EST when Brent Johnson of Santiago Capital - “Mr. Milkeshake Man” himself - is joining us LIVE!
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