If you manage portfolios, set policy, or just watch the cross-currents between FX and rates, dive into the full breakdown:.

This has nothing to do with AI power demand. It’s a result of the 150% jump in forward natural gas prices in 2022. Utilities locked those costs in and pass them through over 12–24 months via fuel riders and default service contracts, so the spike only now shows up in bills.

Policy operates with long lags. So the most critical skill for a voting member of the Fed is forecasting the econ. It’s long overdue the FOMC brought in someone sharp at it. Neil Dutta would be a home run pick.

9/ A Fed cut reduces the hedge cost and flips the post-hedge pickup on Treasuries back to positive territory. That entices foreign lifers and pensions to return, relieving the term premium - without increasing the trade deficit.

8/ Now we see why Bessent and Miran (both former FX traders) are hammering Powell to cut rates. It's not just about growth. It's about hedge costs. They want to shift foreign flows from unhedged (bad for trade) to hedged (neutral). But that only works if hedging is affordable.

7/ But it created a new problem: With foreign buyers sidelined, who absorbs US duration?.Japan's bond market - newly freed from yield curve control - is where pressure built most dramatically. JGB yields surged 90 bp. And that gravity is pulling US term premium higher.

6/ By squeezing these unhedged, overextended foreign investors, the administration reversed capital flows – which drive trade deficits – without having to resort to capital controls.

5/ These accounts were sitting ducks. When Trump signaled aggressive trade policies and potential dollar devaluation, every unhedged position lit up risk models. The result: forced selling of USD positions.

4/ By 2021 foreign real money accounts abandoned currency hedges entirely bc the hedge costs ate up all the yield. So they went naked long dollars. Massively. Asian life insurers cut hedge ratios from 90% to 45%. Global fixed income hedge ratios collapsed below 80%.

3/ For decades, the US ran massive trade deficits funded by foreign capital inflows but the marginal buyer of Treasuries has rotated over time:.• Reserve-building central banks.• Hedged European & Asian accounts.• Unhedged European & Asian accounts.

2/ The Trump tariff blitz was supposed to push the dollar up. Instead it lit the fuse on the biggest dollar sell-off since 2008. My new report explains why.

1/ Something extraordinary just happened in global markets. The administration engineered a $200+ billion capital flow reversal without implementing a single capital control. They broke the dollar's structural bid using nothing but market volatility. Here's how they did it 🧵

“Navarro and Copley told the meeting that a floor price for rare earths extended to MP Materials earlier this month as part of a multibillion-dollar investment by the Pentagon was "not a one-off" and that similar deals were also in the works, the sources said.”.

AI will consume endless energy to solve every problem known to man….Except power efficiency.

RT @michaeljmcnair: @R_EL98 I believe this new US Japan investment fund is less about trade rebalancing and more about re-shoring critical….

Re-reading Geoffrey Moore’s late 90’s classic, The Gorilla Game. It’s still one of the best ways to think about investing during periods of discontinuous innovation. Who will be the gorilla in the AI value chain?

Meant the DFC, not ESF.

❗️There was a game-changing industrial policy tool buried in OBBBA that most everyone missed. The Office of Strategic Capital (OSC) was launched in 2022 as a pilot inside the Department of Defense. Its mission is to finance critical minerals and dual-use technologies. The pilot.