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Full disclosure, and as many of you already know: I hold bitcoin and hard assets personally and professionally, and I sit on the board of a bitcoin treasury company, so weigh my opinion accordingly. Nothing here is individual advice, and I don't know your personal situation. If you have an advisor, these are conversations you should be having with them.

Today’s Bullets:

• So, What Happened to the Pet Rock?

• What Is JPMorgan Actually Predicting?

• What’s the Catch?

• Is JPMorgan Right About Debasement?

Inspirational Post:

Well said, Matt. Aka, then you win.

Matt Hougan is the chief investment officer at Bitwise, a company that offers the Bitwise Bitcoin ETF (NYSE: BITB).

Like my own Bitcoin Opportunity Fund, Bitwise also benefits from the success of bitcoin and bitcoin-related companies. And so, when you see a research report from JPMorgan naming bitcoin as an asset, you take notice.

This one, JPMorgan’s Long-Term Capital Market Assumptions, is the forecast the bank’s asset management arm puts out every year to help its clients build their portfolios.

And for the first time in the report’s 31 editions, bitcoin was given its own forecast. One that has it coming out ahead of stocks, bonds, and even gold.

For those of you who have been reading my work over the years, you know this represents a major step in the evolution of Wall Street’s recognition of bitcoin.

In other words, we’ve come a long way.

It appears we have, anyway.

But before we jump to major conclusions and latch onto the table in Matt’s post, we need to do some critical thinking and analysis and ask some important questions first.

Like, did JPMorgan really just recommend bitcoin? What exactly is the bank predicting, and over how long? Has Jamie Dimon finally changed his tune regarding bitcoin? And most importantly, what does any of this mean for the portfolios of JPMorgan clients, as well as our own?

Good questions, each of them, and ones that we’re going to answer, nice and easy as always, right here today.

So pour yourself a big cup of coffee and settle into your favorite seat, as we read JPMorgan’s first-ever bitcoin forecast, and the fine print behind it, with this Sunday’s Informationist.

Partner spot

Recently, Ledger users lost funds after purchasing devices through a third-party reseller in a suspected supply chain attack. Ledger is advising recent buyers to hold off on setup, or to move funds to a new device with a new seed.

Like the Coldcard incident this summer, your takeaway should be this: eliminate all single points of failure. If your long-term bitcoin depends on one key, one provider, one location, or one person, then one failure is all it takes to lose everything.

Whether it be a supply chain attack, retirement attack, or even a heart attack: no single failure should put your bitcoin out of reach for you or your family.

Unchained built a short self-assessment to show you where you stand. It’s 3–7 questions, takes about three minutes, and highlights which dependencies deserve a closer look. The answer might not be what you think. Your answers are evaluated in your browser and are never stored.

Find your single point of failure →

So, What Happened to the Pet Rock?

To fully appreciate just how far JPMorgan has come, let’s go back to September 2017.

This is when Jamie Dimon, while speaking at a Barclays banking conference, called bitcoin a fraud. “It’s worse than tulip bulbs,” he said. “It won’t end well. Someone is going to get killed.”

And any JPMorgan trader caught trading it? He’d “fire in a second,” because “It’s against our rules and they are stupid.”

Not really much room for interpretation there.

Then, six years later, while testifying before the Senate Banking Committee, he said, “If I was the government, I’d close it down.”

Good thing he’s not the government.

That was in 2023, and my partners and I were living a version of that oppression while establishing our hedge fund. Because, during what came to be known as Operation Chokepoint 2.0, a number of the big banks were reluctant, and at times flat out unwilling, to facilitate wires in and out of our fund.

They were delayed, refused, and often returned without warning.

Why?

Because the fund has the word Bitcoin in its name.

Back to Dimon.

Perhaps everyone’s favorite comment from him came in January 2024 at Davos when he said, “[Bitcoin] does nothing. I call it the pet rock.”

Less than three years ago.

Now bitcoin is featured in a major JPMorgan report.

So what changed?

My guess is that his clients started asking about it. Because, the same month as the pet rock comment, BlackRock, Fidelity, and eight other firms launched spot bitcoin ETFs. Matt’s Bitwise fund was one of them.

And JPMorgan was involved from the start. Just three weeks after Dimon’s “close it down” line in the Senate, BlackRock named JPMorgan one of the authorized participants for its bitcoin ETF, the firms that help manage the flow of money in and out of the fund.

Bottom line, Wall Street money had started flowing into bitcoin, and JPMorgan wasn’t going to just sit by idly and not be involved in this new digital asset frontier.

And by May of 2025, at JPMorgan’s Investor Day, Jamie Dimon had a message for clients: “We are going to allow you to buy it. We’re not going to custody it.” And then, “I don’t think you should smoke, but I defend your right to smoke,” he said. “I defend your right to buy bitcoin.”

Still not exactly a ringing endorsement from the longtime skeptic.

But Dimon knows an opportunity when he sees it. And as the business kept evolving, by last October, Bloomberg reported that JPMorgan would let its institutional clients use bitcoin as collateral for loans.

Two months later, Bloomberg reported the bank was exploring bitcoin trading for those same clients.

Meanwhile, when asked about bitcoin at a Fortune conference last October, Dimon waved off any answer with, “Then that’s all I’m going to read about in the headlines.”

In other words, no comment.

Watch what they do, not what they say, right?

Because no matter what Dimon says to reporters or at conferences, JPMorgan has begun to build a business around the clients who want it.

This new report comes from the corner of that bank that helps its clients decide what to own: its asset management arm.

So, most importantly, what exactly did the report say, and what are they predicting for bitcoin?

What Is JPMorgan Actually Predicting?

Let’s talk about the row that Matt circled in his post above, and why each of those three numbers is so important.

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🙌 The Informationist takes one current event or complicated concept and simplifies it for you in bullet points and easy to understand text.

🫶 If this email was forwarded to you, then you have awesome friends, click below to join!

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Full disclosure, and as many of you already know: I hold bitcoin and hard assets personally and professionally, and I sit on the board of a bitcoin treasury company, so weigh my opinion accordingly. Nothing here is individual advice, and I don't know your personal situation. If you have an advisor, these are conversations you should be having with them.

Today’s Bullets:

• How Much of September Was Oil?

• How Does a Barrel of Oil Get Into Everything?

• What Happens Between the Producer and the Shelf?

• When Will the Price of Oil Come Down?

Inspirational Post:

Quite an eye-popping chart, this one. Fuel oil, up 74.2% over the past year. Gasoline, up 34.2%. Airfare, up 22.4%.

Each of these is directly related to the price of a single barrel of oil.

And of course, if you filled up your tank this past month, paid a heating bill, or booked a flight lately, you’ve been impacted by that barrel, too.

Heck, I looked to book a flight from Vegas to Miami last week and the best price I found for a direct flight came in at about $1,100. If memory serves, that’s about $300 more than last year.

In any case, Daniel Lacalle’s point in today’s Inspirational Post is that the Fed raising rates in the face of rising energy costs is nonsensical. I mean, unless the Fed starts drilling for or refining oil, there’s not much they can do to bring down the price of energy.

And so it begs the question, just how much impact does the price of oil have on the price of everything? How exactly does the price of a barrel end up in a plane ticket, or a pound of beef? Also, why are businesses warning that more price increases are on the way? And most importantly, when will the price of oil come down, and will the prices we pay for everything else come down with it?

All good and important questions, and ones that we’re going to answer, nice and easy as always, right here today.

So pour yourself a big cup of coffee and settle into your favorite seat, as we sort through how the price of a barrel of oil snakes its way from the gas pump to the checkout line, with this Sunday’s Informationist.

Partner spot

Recently, Ledger users lost funds after purchasing devices through a third-party reseller in a suspected supply chain attack. Ledger is advising recent buyers to hold off on setup, or to move funds to a new device with a new seed.

Like the Coldcard incident this summer, your takeaway should be this: eliminate all single points of failure. If your long-term bitcoin depends on one key, one provider, one location, or one person, then one failure is all it takes to lose everything.

Whether it be a supply chain attack, retirement attack, or even a heart attack: no single failure should put your bitcoin out of reach for you or your family.

Unchained built a short self-assessment to show you where you stand. It’s 3–7 questions, takes about three minutes, and highlights which dependencies deserve a closer look. The answer might not be what you think. Your answers are evaluated in your browser and are never stored.

Find your single point of failure →

How Much of September Was Oil?

On Wednesday, the Bureau of Labor Statistics (BLS) published the consumer price index (CPI) for September, showing prices rose 0.6% for the month.

Extrapolating a full year, that would put prices on pace to be up 7.4%.

Ouch.

Question is, how much of September’s jump can be attributed to the price of oil?

It’s easier to think about these things in terms of dollars.

For example, let’s take $100 worth of spending for a household.

Of the $100, the BLS counts about $7 of it as energy, i.e., gasoline, heating oil, electricity, and natural gas.

Yet that $7 was responsible for about two-thirds of higher costs in September. And most of it was due to gasoline.

Yikes.

If you’ve been to the pump lately, you are well aware of this increase. A gallon of regular averaged $4.33 last week, versus just $3.06 a year ago.

Thank God I don’t live in California, where the regular average last week was $6.10, up $1.65 over the last year.

But, remember, it works both ways.

When oil prices dropped back in June, overall CPI actually fell that month.

So Lacalle has a point about where September’s jump came from, as his post’s graphic showed.

Look at this chart.

When we strip out food and energy, aka the core CPI, the remaining prices are up 2.6% over the past year, about the same as in February, before the war began.

In my opinion, this is the number we should be focused on, because it suggests that oil has, so far, had little impact on the price of everything else.

Which brings us to an important question.

If businesses are paying so much more for fuel, how, and most importantly, when will this increase find its way into the price of everything else?

How Does a Barrel of Oil Get Into Everything?

As many of you know, I like to use first principles when approaching any analysis.

Of course, we can do the same exact thing here when trying to figure out how much oil ends up in the price of anything.

We ask the simplest question.

Read more

Subscribe now

Full disclosure, and as many of you already know: I hold bitcoin and hard assets personally and professionally, and I sit on the board of a bitcoin treasury company, so weigh my opinion accordingly. Nothing here is individual advice, and I don’t know your personal situation. If you have an advisor, these are conversations you should be having with them.

Today’s Bullets:

• What Is Fiscal Dominance?

• Didn’t the Fed Just Raise Rates?

• Where Does All That Interest Go?

• So, Are We In It?

Inspirational Tweet:

Fiscal dominance.

If you’ve spent any time on X lately, you’ve likely seen those two words being referenced, sometimes at the center of a debate.

On one side, there’s Lyn Alden, who shared Jim Bianco’s chart above with a simple caption: “If you want fiscal dominance in a chart, here it is.”

On the other side, there are global macro economists like Dario Perkins, who argue it only counts once the Fed can no longer hit its inflation target because of the deficit. After all, the Fed just raised rates last month, not what you’d expect if the deficit was driving policy.

In any case, the debate comes down to how it all impacts our own savings and investments. And it’s no surprise that the phrase is resurfacing, since the fiscal year 2026 just ended with a deficit of $2 trillion, pushing total US debt over $40 trillion.

To understand all this, and the impact of it, we must ask some simple and not-so-simple questions.

Like, what exactly is fiscal dominance? If we are already in it, why would the Fed raise rates? What happens to all the interest on that US debt? And most importantly, what does any of this mean for our own money?

All good and important questions, and ones that we’re going to answer, nice and easy as always, right here today.

So pour yourself a big cup of coffee and settle into your favorite seat, as we figure out what fiscal dominance really is, and whether we’re already living in it, with this Sunday’s Informationist.

Partner spot

This week, Ledger users lost funds after purchasing devices through a third-party reseller in a suspected supply chain attack. Ledger is advising recent buyers to hold off on setup, or to move funds to a new device with a new seed.

Like the Coldcard incident this summer, your takeaway should be this: eliminate all single points of failure. If your long-term bitcoin depends on one key, one provider, one location, or one person, then one failure is all it takes to lose everything.

Whether it be a supply chain attack, retirement attack, or even a heart attack: no single failure should put your bitcoin out of reach for you or your family.

Unchained built a short self-assessment to show you where you stand. It’s 3–7 questions, takes about three minutes, and highlights which dependencies deserve a closer look. The answer might not be what you think. Your answers are evaluated in your browser and are never stored.

Find your single point of failure →

What Is Fiscal Dominance?

First things first, let’s start with the term fiscal dominance itself, break it apart and define it better.

Fiscal refers to government-associated finances. That means taxes, the Congressional budget, or the borrowing required to bridge the gap between those two.

Monetary refers to Fed-related financial activity. In other words, interest rate policy as well as adding or removing liquidity from the system, i.e., Quantitative Easing (QE) or Quantitative Tightening (QT).

What we’ve been taught is that the Fed runs separately from the government, as we are told over and over again that the Fed is an independent institution. And so, if inflation is running hot, the Fed will raise rates to slow things down, regardless of what that does to Washington’s borrowing costs.

Fiscal dominance is when this relationship is reversed. This happens when the government’s debt load becomes so large that it starts calling the shots, explicitly or implicitly directing the Fed’s decisions around it.

Kind of like the bank’s biggest borrower getting a say in what the bank charges.

This whole idea goes back to 1981, when economists Thomas Sargent and Neil Wallace wrote a paper called Some Unpleasant Monetarist Arithmetic. In their unpleasant arithmetic, they explain that if the government won’t manage its deficits, tighter money today can mean higher inflation later.

Solid title, by the way. It’s nice to see when economists have a little sense of humor.

I walked through exactly what that arithmetic looks like for today’s Fed back in April, when I asked whether anyone could be the next Volcker. Short answer: the math says no.

In any case, the fights on X start when people try to pin down exactly when that reversal happens.

Like Dario Perkins, the economist we referred to in the opening of this issue. Here’s his full definition, posted October 1: fiscal dominance is when the Fed can’t hit its inflation target, either because “raising rates makes inflation worse” or because “the Treasury won’t allow it,” both because of the deficit.

Using that strict measure, he doesn’t think we’re there.

Lyn Alden, on the other hand, posted a couple of days later: “Fiscal dominance is a spectrum and we are firmly within that spectrum now.”

What she’s saying is, fiscal dominance begins when it’s “unclear” that rate hikes fix inflation, and when “the central bank just starts making exceptions for financial stability.”

So what do we notice about their arguments?

Well, I would honestly say they’re running the same two tests, but Lyn just sets the bar earlier, not lower.

In my opinion, her reason for the earlier bar is important for our money and investments.

How?

She points out that the strict definition is the “end-stage terminal” version, where it’s “already priced in.” And she follows that up with, “Border zones matter because that’s where money is made.”

In other words, by the time everyone agrees we’re in fiscal dominance, the markets will have already reacted and many investors will be too late.

Which brings us right back to what I believe is the skeptics’ best point. If we are already in it, why would the Fed raise rates?

Excellent question. Let’s talk about that next.

Didn’t the Fed Just Raise Rates?

It did. And if you side with the literal definition, then that’s your Exhibit A.

On September 16, the Fed raised its target rate by a quarter point, to a range of 3.75% to 4%. The vote was 12 to 0, and it was the Fed’s first hike since July 2023. The statement the Fed delivered with the hike said that “Inflation remains elevated” and “The Committee will deliver price stability.”

Also, the Treasury bill purchases the Fed started last December had wound down to zero by August. A Fed taking orders from the deficit, as the argument goes, wouldn’t do either of those.

Fair enough.

But not so fast, my literally-defined friends.

Because over the last seven years, we’ve watched the Fed add liquidity at least three times, and each time, it seemed to go out of its way to call it something other than QE.

In September 2019, during the Repo market crisis, overnight lending markets seized up. Then in October, the Fed announced it would buy about $60 billion a month of Treasury bills. This was just days after Powell had told a room of economists in Denver, “This is not QE. In no sense is this QE.”

Then in March 2023, Silicon Valley Bank failed and the Fed launched its Bank Term Funding Program (BTFP). Between BTFP and its other emergency loans, the Fed’s balance sheet grew by about $391 billion in two weeks.

And on March 22, the Fed raised rates again.

You can see the activity here.

But then look at last December, when the Fed started buying Treasury bills again, $40 billion worth in the first month.

Powell’s explanation?

“That is completely separate from monetary policy.”

For the love of God, make up your mind, man.

It seems obvious to me that the intent is exactly the same in all three cases. When the financial system needed liquidity, the Fed injected it, whatever it called the program.

Some of you may recall me writing all about this last November.

TL;DR: liquidity is liquidity, regardless of the label.

This is essentially Lyn’s second test in action.

Because if you’re wondering what she means by “exceptions for financial stability,” I’d point to the Fed’s actions in March 2023, when it was raising rates while simultaneously lending billions to banks.

Back to today, in my opinion, a single rate hike doesn’t rule fiscal dominance out.

That, and there may be another reason hikes aren’t working quite the way people would expect these days.

And that has to do with where all that interest goes.

Where Does All That Interest Go?

To track the interest, take a peek at Jim Bianco’s chart from today’s Inspirational Tweet.

The blue line is what the government pays in interest, as a percentage of the whole economy. For 2026, that was about $1.1 trillion, which the Committee for a Responsible Federal Budget estimates is a record 3.4% of GDP.

The orange line is what American companies pay, after netting out the interest they earn on their cash. It’s down to 0.7%, the lowest it’s been since the early 1960s.

Why do these lines matter?

Well, think about it. Rate hikes are supposed to make borrowing more expensive, so we all borrow less, spend less, and as a result, inflation cools down.

Problem is, tons of companies refinanced during the years that the Fed was running ZIRP, zero interest rate policy. These same companies are sitting with piles of cash on their balance sheets, which now earns more interest when rates go up.

Oopsy.

This is the same concept as we talked about last week with homeowners sitting on mortgages below 6%.

As we all know, the biggest borrower of all is our fair government. And so, when the Fed raises rates, the Treasury pays more interest to whoever holds its debt.

Double oopsy.

And where does all that interest go?

Cullen Roche, the founder of Discipline Funds, did the math.

Roughly 30% goes to foreign holders, about 15% to the Fed itself, and the other 55% or so goes to US holders, much of that is held by banks, funds, pensions and wealthy investors.

His point is that those types of holders don’t spend much of it. As he put it, “I don’t spend one single cent of the interest income I get in my brokerage account.” If you have your cash sitting in a money market, you may be in the same boat.

Even being generous, he figures that this year’s increase in interest only adds about $21 billion of new spending in a $31 trillion economy.

His conclusion? “We’re in an era of fiscal influence.”

OK then. But if they don’t spend it, what do they do with it?

Quoting my friend Brent Johnson of Santiago Capital: “Higher rates inject more money into the economy, that money gets allocated to equities.”

Brent posted that on October 6, the day the S&P 500 and Nasdaq closed at record highs with the 10-year Treasury yielding 5.27%.

Lyn replied, “Is Brent becoming my latest ally on fiscal dominance?”

Cullen and Brent are essentially looking at the same money from opposite directions.

See, Cullen is counting how much of that interest gets spent at the store, and he’s probably right that it’s relatively small. Brent is looking at where the rest goes, and a lot of it seems to end up in the stock market.

If rate hikes are pushing money into stocks, it makes us question whether rate hikes in today’s economy actually fix inflation.

That, to me, is Lyn’s first test.

Which brings us all the way back to the question in this issue’s title.

So, Are We In It?

So, are we, in fact, in fiscal dominance?

To me, yes. I’d say we’re in the early part of it, what Lyn calls the border zone.

That said, by Dario’s strict definition, I agree that we’re not at the finish line yet. But more importantly, as Lyn points out, by the time everyone agrees on that, it’s already in the price.

Going back to what we talked about today. The Fed keeps making exceptions for financial stability, in 2019, in 2023 and again last December. And with the US government as the biggest borrower in the world, rate hikes seem to just send a good chunk of that interest right back into stocks and other assets.

That’s both of Lyn’s tests. Check and check. ✅✅

As Lyn put it, “2023 was the start of non-cyclical fiscal dominance, which means the train won’t stop.”

I agree.

So what does all of this mean for our own money?

First, more exceptions.

The next time something in the financial plumbing breaks, I fully expect the Fed to step in with some new fancy acronym or term and add more liquidity to the system.

We’ll know it’s more liquidity by the expansion of the Fed’s balance sheet.

Second, the Treasury continues to soft default day after day, year after year.

Look, I have no doubt that the Treasury will pay back every dollar it borrows. Those dollars will just be worth far less when they come back to the lenders.

Third, if yields on the long end of the bond market do continue to march higher, I’d expect the Fed to eventually step in and bring them back to earth. Cap yields yields with outright yield curve control. The final stage of central bank money manipulation we walked through back in March.

And as most of you are well aware by now, this is the overwhelming reason that I hold bitcoin, gold, and other hard assets.

In the meantime, I’ll be keeping an eye on the Fed’s balance sheet every Thursday afternoon, when it’s released, regardless of what the inevitable program happens to be called.

Because if history is any guide, the next exception will come with a brand new name.

But it will be some sort of QE, just the same.

What I’m Watching This Week

The Treasury’s year-end books, likely Tuesday. With September in the books, the Treasury wraps up fiscal 2026. The report usually hits on the eighth business day of the month, which would make it Tuesday, as Monday is Columbus Day. CBO estimates a deficit of $1,993 billion and net interest of $1,143 billion. Let’s see how the actual official numbers come out.

Bank earnings, starting Tuesday. JPMorgan kicks off third-quarter results Tuesday morning. I’m interested in hearing what their outlook is, considering the Fed just raised rates, and it’s unclear what the rate path is going to be from here.

September CPI, Wednesday. In August, consumer prices were up 3.4% over the year, and 2.4% excluding food and energy. The Fed hiked on those numbers, a hotter number would likely raise the probability of another hike this month. Fed meets again on October 27 and 28.

The Beige Book, Wednesday. The Fed’s summary of what businesses are seeing across its 12 districts, two weeks before their October meeting.

The 20-year bond auction, Wednesday. The Treasury sells $13 billion of 20-year bonds on October 21. This is not exactly the most popular bond with investors, so I’ll be watching how much demand shows up, especially with the 30-year yield at 5.6%.

That’s it. I hope you feel a little bit smarter knowing about fiscal dominance, what the debate is all about, and why I believe we’re already in it.

If you enjoyed this free version of The Informationist and found it helpful, please share it with someone who you think will love it, too!

Talk soon,

James ✌️

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Roundtable Recording: Q3 2026

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Talk soon,

James ✌️

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🙌 The Informationist takes one current event or complicated concept and simplifies it for you in bullet points and easy to understand text.

🫶 If this email was forwarded to you, then you have awesome friends, click below to join!

Subscribe now

Full disclosure, and as many of you already know: I hold bitcoin and hard assets personally and professionally, and I sit on the board of a bitcoin treasury company, so weigh my opinion accordingly. Nothing here is individual advice, and I don't know your personal situation. If you have an advisor, these are conversations you should be having with them.

Today’s Bullets:

• What Is Keeping Mortgages So Elevated?

• What Would Bring the 10-Year Down?

• Can Washington Shrink the Other Two Points?

• What to Expect Next

Inspirational Tweet:

I agree, Mr. Hassett. I agree.

I think we all do.

That said, the “we” that Kevin Hassett is referring to here is none other than the White House.

After all, Hassett is the director of the National Economic Council and one of the President’s top economic advisors. He’s the same Hassett who was in the running for Fed Chair before the job went to Kevin Warsh.

And so, with midterm elections quickly approaching, I believe Hassett is simply expressing the President’s desires here.

Regardless of politics, though, high mortgage rates are painful for just about everyone.

And we’re hearing more and more rumblings about them, with rates climbing steadily higher for weeks and the average 30-year loan now back above 7%.

Question is, what is keeping mortgage rates so elevated, and what needs to happen for them to come back down? Can Hassett and co. do something to speed that up? And most importantly, what should we expect in the meantime, whether we’re buying, selling, or sitting on a mortgage we already have?

All good questions, important ones that we’re going to answer, nice and easy as always, right here today.

So pour yourself a big cup of coffee and settle into your favorite seat, as we figure out what it is going to take for mortgage rates to fall, with this Sunday’s Informationist.

Partner spot

Ask ten bitcoiners how to secure your bitcoin savings and you’ll get ten different answers.

Hot wallet. Cold wallet. Singlesig. Multisig. Passphrase. No passphrase. Dice. No dice.

Meanwhile, the institutional class waves all of it away. In their view, the ETFs are essentially custody solved.

Both camps are missing the point. One ignores that you yourself could be the single point of failure. The other cheers for multiple layers of counterparty risk.

There’s a better way.

Join Unchained’s Tom Honzik and Stephen Hall for a live session on how to get the peace of mind of institutional-grade security without abandoning the properties that make bitcoin worth owning in the first place. Explore thoughtful self-custody built around human relationships, professional guidance, and planning that survives you.

October 6 at 11am CT · Online · Free to attend

Register now → register for live session

What Is Keeping Mortgages So Elevated?

First let’s address one of the elephants that’s standing large in the middle of the room.

In the grand scheme of historical mortgage rates, 7% isn’t really that high.

I remember back in 1980, when I was just a kid, and my parents were complaining about mortgage rates up at 15% or 16%. Check out Exhibit 1 here.

What do we notice?

First the average 30-year mortgage crossed 16% in March of 1980, sat above 17% by the summer of 1981, and peaked at 18.63% that October.

Then if we draw a line at 7%, we see almost the entire chart before the spring of 2002 sitting above that level, with only brief dips below it in 1993, 1998 and 2001. That’s about 30 years of rates mostly above 7%.

So, was it really worse back then?

On the monthly payment, yes. Look at this chart.

What we see here is that in 1980, the median new house sold for about $64,000, and the median family made about $21,000. Put 20% down at 16%, and your payment was about $690 a month.

That’s 39% of the family’s income. Ouch.

And, as of this spring, the median new house sold for about $411,000, and the latest census data shows the median family made about $110,500 last year. Same 20% down, at this week’s 7.28%, and you’re paying about $2,250 a month.

About a quarter of income.

But look at the price of that house. In 1980 it cost about three years of the family’s income. Now it costs closer to four.

You may now be asking, How exactly did we get here?

Once again we can thank our buddies at the Fed who instituted something called ZIRP, or Zero Interest Rate Policy. In response to the Great Financial Crisis and housing meltdown of 2008, the Fed held its rate near zero for seven years, from late 2008 to late 2015, then took it back to zero for two more starting in March 2020. Meanwhile, they bought trillions of dollars of bonds along the way (more on that in a bit).

And, like magic, mortgage rates fell under 3% in 2020 and 2021.

Thing is, most people shop for a house according to what they can afford as a monthly payment. And so, at 3%, the same monthly payment allows you to take out a loan about 60% bigger than you can at 7.28%.

It’s no surprise that all that cheap money went straight toward pricing. According to the Case-Shiller index, the gold standard for home prices, from February 2020 to June 2022 alone, home prices rose about 45%.

And even as rates have come back to 7%, prices have held up. They dipped about 5% into early 2023, recovered within months, and hit a new record this July.

You’ve heard the old realtor motto: “Marry the house, date the rate.”

Using that playbook, a buyer back then took a painful rate on a cheap house, then refinanced as rates fell for the next forty years. In contrast, a buyer today locks in a high cost of a house, with no promise that rates fall from here.

Which brings us to the question of, what is keeping mortgage rates up here?

Bottom line, mortgage rates take their cue from the 10-year Treasury, adding a premium for risk and loan duration. With the 10-year Treasury currently sitting at 5.28%, the 30-year mortgage rate is about 2 percentage points higher. That gap has averaged about 1.75 points since the early 1970s, and it has run anywhere from about 1 point to about 3.

So if we want mortgage rates to fall, one of those two factors has to come down, either the 10-year rate or the risk associated with the 30-year mortgage.

Since the 10-year is by far the bigger piece, we need to first ask, what would it take to bring the 10-year rate down?

Good question. Let’s get into that next.

What Would Bring the 10-Year Down?

Let’s be honest, the mortgage rate we all really want back has a 3 or a 4-handle on it.

So what would it take to get us back there?

Read more

It’s today! Our quarterly live Roundtable starts at 1:00 PM PT (4:00 PM ET). Plan for 90 minutes.

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Full disclosure, and as many of you already know: I hold bitcoin and hard assets personally and professionally, and I sit on the board of a bitcoin treasury company, so weigh my opinion accordingly. Nothing here is individual advice, and I don't know your personal situation. If you have an advisor, these are conversations you should be having with them.

Today’s Bullets:

• What Happened at Wednesday’s Auction?

• Who’s Going to Buy All These Bonds?

• Is There a Way Out?

• Is There a Safe Haven?

Inspirational Tweet:

What a week for bonds, indeed.

If you’ve been paying attention to markets or had the news on this week, you’ve likely seen quite a bit of chatter about interest rates and how yields on Treasuries have gone up in nearly a straight line the past few days.

Inflation worries.

A hawkish Fed about to raise rates again.

Deficits. War. The price of oil.

There’s no shortage of reasons analysts and pundits are giving for the violent move in yields this week.

What seemed to really pour fuel on the move, though, was a terrible 5-year Treasury auction in the middle of the week.

Another auction the next day, this time for the 7-year Treasury, was not much better.

But are these the reason for the move in bonds, or are they signs of a greater disruption underneath all of it?

And if so, just how high are rates about to go? Is there, as Bull Theory puts it, “…no stopping US bond yields”? Or can the Fed and/or the Treasury do something about it? Either way, what does this all mean for our mortgages, savings, and the money we’re counting on for retirement?

All good questions, important ones that we’re going to answer, nice and easy as always, right here today.

So pour yourself a big cup of coffee and settle into your favorite seat, as we work through what is going on with bond yields and where they’re headed, with this Sunday’s Informationist.

Partner spot

Ask ten bitcoiners how to secure your bitcoin savings and you’ll get ten different answers.

Hot wallet. Cold wallet. Singlesig. Multisig. Passphrase. No passphrase. Dice. No dice.

Meanwhile, the institutional class waves all of it away. In their view, the ETFs are essentially custody solved.

Both camps are missing the point. One ignores that you yourself could be the single point of failure. The other cheers for multiple layers of counterparty risk.

There’s a better way.

Join Unchained’s Tom Honzik and Stephen Hall for a live session on how to get the peace of mind of institutional-grade security without abandoning the properties that make bitcoin worth owning in the first place. Explore thoughtful self-custody built around human relationships, professional guidance, and planning that survives you.

October 6 at 11am CT · Online · Free to attend

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What Happened at Wednesday’s Auction?

If you’ve never followed a Treasury auction before, no worries, it’s pretty simple.

When the government needs cash, and it always needs cash, the Treasury sells new notes and bonds at auction. Investors bid for how much they want and the yield they’re demanding, and the Treasury fills the order from the lowest yield up until everything is sold.

That last accepted yield, the stop-out, is what every winning bidder gets.

There are three things we can look at to see how it went.

The first is the tail. See, new notes trade before the auction in something called the when-issued market. Then during the actual auction, if the Treasury ends up paying a higher yield than that, the difference is known as the tail. A large tail means the Treasury had to pay more than expected to find enough buyers.

The second is the bid-to-cover. This is just the ratio of dollars that showed up to the auction versus the dollar amount of Treasuries the government needed to sell. And so if $80 billion of bids showed up at auction and the government sold $40 billion of bonds, then the bid-to-cover would be 2.

The third is the type of bidders who actually bought. Indirect bidders, mostly foreign buyers and hedge funds. Direct bidders, mostly institutional buyers like pension funds and endowments. And primary dealers, the large banks that must bid at every auction and end up taking whatever is left after the other bidders are filled.

I’ve written about Treasury auctions extensively before and you can find a more complete explanation here, if you want to understand them better.

Okay so, what went wrong Wednesday?

First, the Treasury sold $70 billion of 5-year notes with a tail of 3.1 basis points (a basis point is one hundredth of a percent). This was significant because the average of the last six 5-year auctions tailed by just over half a basis point.

Second, the bid-to-cover (BTC) was just 2.21, the lowest we’ve seen since December 2018.

Third, indirect bidders took just 54% of the auction, the smallest share in about five years, leaving the dealers on the hook for almost 16%.

And finally the yield the Treasury had to pay was 5.033%, the highest yield for a five-year auction since June 2006.

Put it this way, the last time the government paid that much to borrow for 5 years, there was no such thing as an iPhone.

Yields had already jumped that morning when a survey of US businesses (the PMI) showed costs rising at the fastest pace in four years. The auction then took them to the highs of the day, and the 10-year closed at 5.11%, its highest since 2007.

Then Thursday, we got the 7-year auction. That one cleared the highest yield since that maturity was reintroduced in 2009.

Some of you may remember the question that we were asking back in August. Is that a rate problem, or a supply problem?

I would say this week was a little bit of both. Wednesday's survey, and oil jumping again Thursday after Iran threatened to expand the war, keep pressure on inflation and, hence, on the Fed. But the auctions definitely told us something about supply, too.

Because it seems that every single week the Treasury has to answer the same question over and over again.

Who the heck is going to buy all these bonds?

Good question, let’s talk about that.

Who’s Going to Buy All These Bonds?

Well, on Thursday the Treasury did try buying some of them itself.

Read more

Quick correction to this morning’s note. Next Thursday’s Roundtable is 90 minutes, not 30. Please plan for 1:00 to 2:30 PM PT (4:00 to 5:30 PM ET).

Roundtable Live

And keep those questions coming. Just reply to this email.

See you next Thursday.

James ✌️

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Next Thursday is our quarterly live Roundtable, and you’re part of it.

The details:

Thursday, October 1, 1:00 PM PT (4:00 PM ET). Plan for 90 minutes. It’s on Zoom, and you don’t need an account or app to join, just click the link below.

Roundtable Live

The format is the same as last quarter. I’ll give you some quick thoughts about where we are macroeconomically, add…

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This first letter is free for everyone and meant to be shared.

As you will see, the letter is written specifically for serious investors and advisors who are looking for a deeper, more thoughtful set of articles that reach into history to help inform us what’s going on in the macroeconomic world today.

A key piece of each quarterly newsletter is the Debasement Pressure Index (DPI). This is a proprietary measure developed by The Informationist that tells us how hard the United States is being pushed toward debasing its currency to help manage its debt. This is the most powerful force driving the price of assets in the world.

The full explanation and components are included in the center fold of the letter, along with other key measures and charts to help you make your own decisions for your overall portfolio and investment decisions, considering the current macroeconomic landscape.

However you want to read this one, it’s up to you. That said, I would imagine myself printing this out, pouring a big mug of coffee on Sunday morning or a few fingers of whiskey in the evening, and settling in to indulge for a while. This is meant to be taken in slowly and enjoyed thoroughly, something of a lost art these days.

OK, enough talking. Here it is.

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September 20 2026

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Before you go. As I said, this first issue is meant to be shared, so please send to anyone who you think would be interested and find value in this, especially serious investors and advisors.

Enjoy,

James ✌️

I want to first thank you for being a founding member and helping bring this to life, and I truly hope that you find value and enjoy the letter.

As you will see, this is written specifi…

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Today’s Bullets:

• What Is a Trump Dividend, Anyway?

• Doesn’t Congress Get a Say?

• Who Coughs Up the Dough?

• What Does This Do to the Price of Milk?

Inspirational Tweet:

Let’s be honest. We’ve all gotten quite used to politicians making all kinds of promises before elections. A tax cut here, a new program there, maybe a shiny new stadium back home.

It always seems to suggest the idea of buying votes, but hidden in just enough rhetoric to keep up the pretense of mere politicking, fair and square.

Recently, it seems we’ve edged closer to dropping that pretense.

Then Wednesday night, on the Republican midterm convention stage in Dallas, President Trump literally placed a cash bounty on the midterm elections. If Republicans win the House and the Senate in November, every adult citizen gets $5,000.

He even named the deal. The Trump dividend. Sounds pretty great, doesn’t it?

Election night, and perhaps a few weeks later, whammo, five grand hits your checking account.

That’s a lot of Chipotle burrito bowls.

But before we go mentally spending that cash, we should probably ask a few questions. Like, how would this even work? Doesn’t he need Congress to be involved? More importantly, how would it even be paid for? And most importantly, what would it do to our grocery bills and the savings we already have?

All good questions, important ones that we’re going to answer, nice and easy as always, right here today.

So pour yourself a big cup of coffee and settle into your favorite seat, as we follow the promise of $5,000 from a Dallas stage to your bank account, with this Sunday’s Informationist.

Partner spot

Reduce risk in your bitcoin setup

If you already self-custody and want to eliminate your reliance on a single device, Unchained can help.

A multisig vault requires multiple keys to move bitcoin. When those keys are stored on different devices, a problem with one device does not give an attacker everything needed to spend the bitcoin. Unchained has been helping hundreds of users on their platform move bitcoin into new vaults, review their setups, and make informed decisions about what to do next.

Strengthen Your Setup is Unchained’s Premium Service Suite for bitcoin holders who want to upgrade to collaborative multisig. Across multiple one-on-one sessions, a dedicated bitcoin expert guides you through creating your first vault and provides advanced security training.

You leave with a fully configured vault, a tested recovery plan, and a setup reviewed by a bitcoin expert. If you hold your bitcoin in a single device and have questions about what to do next, or know someone who does, contact Unchained.

Strengthen your setup with Unchained

What Is a Trump Dividend, Anyway?

First, let’s get Trump’s exact words from the Dallas stage the other night:

“If the Republicans win the House of Representatives and the United States Senate, I will issue a dividend to every adult citizen in the United States of America for $5,000, very much like a successful company will do a cash distribution to its shareholders.”

Notice the word citizen here. Watcher.Guru left that important detail out of its post on X. So it’s not every adult who happens to be currently living in the US, and there’s another catch.

When CBS News Texas asked whether Congress would need to approve the checks, the President said,“We don’t want to have that money spent in other countries.”

So much for that trip to Cabo.

In any case, what exactly is a dividend from the United States government?

I mean, when a company is a strong, cash-flowing type of business, it often takes profits and pays them out to the people who own the company, its shareholders. Like Coca-Cola, which pays one every quarter.

By his logic, the country here is the company, and we’re all shareholders.

And according to the White House, quoting the President, business is good.

“Because we’ve done so well, and because our country is making so much money, only I can make this promise to you.”

Remember that “profits” part of the dividend definition above? Yeah, we’ll come back to that part in a bit.

Of course, governments can pay dividends, too. Alaska sends one to its residents every year, paid from the earnings of a giant fund that was created by royalties from the state’s oil. In 2025, it added up to $1,000 a person.

A lot of money annually to a normal everyday person, but you still have to deal with grizzlies and arctic temperatures. No thank you.

Remember, this administration has toyed with the idea of federal dividends before. In February 2025, the President floated a DOGE dividend, a 20% share of the savings from cutting government spending. Then on November 9, 2025, he posted, “A dividend of at least $2000 a person (not including high income people!) will be paid to everyone.”

Whatever “high income” is these days.

In fact, this most recent dividend promise is the latest of its kind from Trump and Co. Though, as you know, none of the earlier ones actually materialized.

But what about this one? The President also seems to believe that he can make it happen without a vote from Congress.

Wait a minute, can he actually do that?

Hmmm. Let’s dig into that next, shall we?

Doesn’t Congress Get a Say?

Read more

WHAT I’M WATCHING THIS WEEK

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Full disclosure, and as many of you already know: I hold bitcoin and hard assets personally and professionally, and I sit on the board of a bitcoin treasury company, so weigh my opinion accordingly. Nothing here is individual advice, and I don't know your personal situation. If you have an advisor, these are conversations you should be having with them.

Today’s Bullets:

• Tale of the Tape

• The Case for the Bottom

• The Fine Print

• Can They Stand Up to the Macro?

Inspirational Tweet:

The bottom is in, the bottom is in!

I have to admit, when we look at a chart like the one above, as pointed out by Kobeissi, the Bitcoin rally does appear to just be gaining momentum.

That said, we’ve seen much stranger things than a sudden spike and then a just-as-sudden sell-off from this asset before.

It’s Bitcoin after all, and Bitcoin loves to do exactly what the least number of people expect. Especially after what has been such a welcome relief rally from over 10 months of pure pain in this market.

Then again, there does appear to be real evidence that Bitcoin may have bottomed out here. From cycle peaks and valleys to on-chain metrics, there are plenty of signals we can read.

Question is, are any of them strong enough, deep enough in their history to be solid indicators for this type of declaration? And if so, what exactly are the most useful ones telling us, and why? And perhaps most importantly, can they stand up to the current, and possible coming, macro-economic environment?

Great questions, all of them, and ones we will cover in deep enough detail here today. But don’t worry, and don’t feel intimidated by the thought of analytics or math, because we are going to do this nice and easy, as always.

So, pour yourself a big cup of coffee and settle into your favorite seat, as we make sense of the calls for a Bitcoin bottom with this Sunday’s Informationist.

Partner spot

Reduce risk in your bitcoin setup

The recent Coldcard incident is a good reason to review how your bitcoin is secured. If you already self-custody and want to eliminate your reliance on a single device, Unchained can help.

A multisig vault requires multiple keys to move bitcoin. When those keys are stored on different devices, a problem with one device does not give an attacker everything needed to spend the bitcoin.

Throughout the Coldcard incident, Unchained has been helping hundreds of Coldcard users on their platform move bitcoin into new vaults, review their setups, and make informed decisions about what to do next.

Strengthen Your Setup is Unchained’s Premium Service Suite for bitcoin holders who want to upgrade to collaborative multisig. Across multiple one-on-one sessions, a dedicated bitcoin expert guides you through creating your first vault and provides advanced security training.

You leave with a fully configured vault, a tested recovery plan, and a setup reviewed by a bitcoin expert.

If you use a Coldcard or hold your bitcoin in a single device and have questions about what to do next, or know someone who does, contact Unchained.

Strengthen your setup with Unchained

Tale of the Tape

To start this section, we must go back to the trading day of October 10th, last year.

And what a day it was.

There I am, sitting at my desk in my own office, same as usual. Outside, it’s a near-perfect, crisp October fall Friday in Las Vegas. The kind of day that begs you to take the day off, go golfing instead.

I should have, because inside a storm was brewing. A trading market hurricane.

First, the S&P 500 opened green, sitting a hair below the record it had set two days earlier. By the close it had given all of that back and a whole lot more, down 2.7% on the day. The Nasdaq Composite dropped right along with it, ending down 3.6%.

In direct contrast, both gold and silver ended up on the day.

Then there was Bitcoin.

Having closed at $121,705 on Thursday evening, Bitcoin seemed to hang in there, rallying alongside the general markets, and touching an intraday high of $122,587 that morning.

All is good. Maybe we’ll make another all-time high soon.

Or maybe not.

Because the markets began to soften, and Bitcoin drifted right with them.

From $122K to $120K, to $118K, and settling at just above $117K by the close of trading in New York.

Ouch, that was painful. Or so we thought.

Because it was not over.

Remember, Bitcoin itself doesn’t ever stop trading. We just get a closing price struck at 8pm Eastern Time, nightly.

So Bitcoin kept trading.

And at approximately 1:45pm my time on the Pacific, a mere 45 minutes after the NYSE closed. Out of nowhere.

The bottom. Literally. Fell out.

Bitcoin traded from $117,209 to $113,048, down over $4K in 15 minutes, before climbing back up to $114,364.

Then it dropped again, another $4K, to $110,209. Recovered for a few minutes to $112,354.

Then again. Fifteen minutes of punishing selling.

All. The. Way. To.

$105,617.

A fall of nearly $7K.

A total flush. Down $11,600, about 10%, in less than 45 minutes.

We’re not going to get into the reasons behind this leveraged flush, but it’s instructive to understand just how quickly things can change in Bitcoin.

After the dust settled and we all licked our wounds, Bitcoin seemed to find footing for a couple of weeks before it began to really grind lower, starting in November, with a steep drop-off to below $100K by the end of the month.

The selling plateaued in December with Bitcoin trading between $85K and $95K.

Then it dropped again by the end of January. Another sharp sell-off down to $60K in early February, marking over a 50% drop in just a few months.

By the middle of April, Bitcoin seemed to find its footing and climbed all the way back up above $80K in May.

Some investors were calling a bottom at that time because Bitcoin had already dropped over 50%.

And of course, hindsight being 20/20, this was optimistic.

Because by mid-May, Bitcoin started falling again. With a final push down to $57,748 on July 1st.

As I said before, a punishing period for Bitcoin.

Even worse, the markets had marched higher and higher in the same period to crest and reach new all-time highs, again and again, driven by the AI-trade.

But just a few weeks ago, Bitcoin began to recover. There are many reasons this latest wave of buying can be attributed to, and we will get to that in a bit. But for now, take a look at where Bitcoin has come from.

All the way back to over $82K. But then, jobs numbers came in three times consensus, and Bitcoin, gold and silver all got sold together. Bitcoin has since retreated back to $79,850 as I write this on Friday afternoon.

Of course, this could all change again by the time you’re reading this, as that’s two days from now, and this is Bitcoin, after all.

But that is not the point. The point is that Bitcoin has had a severe and prolonged drawdown, tipped off by the leveraged wipeout on October 10.

Confidence was shattered for short-term holders after an apparent exodus of OG’s (original holders from long ago) from Bitcoin. Bitcoin-related companies, like Strategy, were vilified on Twitter and in the media, and relentlessly sold.

It was a gut-wrenching and brutal period for new and long-time investors alike. Perhaps because there was no blow-off top, no Bitcoin mania or hysteria this past run-up to the all-time high. This may be a factor in Bitcoin’s favor, though, as we will talk about in a bit, too.

In any case, with the turmoil, the Bitcoin Fear and Greed index sat near all-time lows, signaling massive investor fear for months.

But as we have seen before, Bitcoin can have violent moves in either direction. And often it happens in a mirror image of a recent move, on no news at all. A total round trip that has earned the nickname of The Bart. And it looks like this.

So the question, and we are all in the right to ask it, is: has Bitcoin, in fact, bottomed for this so-called cycle?

And if so, how can we prove it against the last few times Bitcoin has “bottomed”?

Or are we, as some investors fear, just being set up for another Bart?

The Case for the Bottom

Read more

WHAT I’M WATCHING THIS WEEK

Read more

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Full disclosure, and as many of you already know: I hold bitcoin and hard assets personally and professionally, and I sit on the board of a bitcoin treasury company, so weigh my opinion accordingly. Nothing here is individual advice, and I don’t know your personal situation. If you have an advisor, these are conversations you should be having with them.

Today’s Bullets:

• What Warsh Actually Said

• Operation Verbal Twist

• The Part He Doesn't Control

• Where That Leaves Your Money

Inspirational Tweet:

If you’re an investor, professional or not, you likely knew all about Warsh’s speech on Friday morning.

You know, the one he was to give from a formal Fed lectern in the completely informal setting of Jackson Hole, Wyoming. The location of the annual Fed retreat, known as the US Federal Reserve Economic Symposium.

Affectionately known as the Central Banker’s Boondoggle on Wall Street.

But what we didn’t know is what the heck he was going to say. Especially because Warsh has been adamant concerning his stance that the Fed should not be giving forward guidance to markets anymore.

Regardless, there was quite a buzz and build up, even though most people, economists, investors and pundits alike, figured it would be a whole lot of nothing since he wasn’t going to give guidance anyways.

Oh, how they were so wrong.

Because Warsh started speaking and markets started reacting, almost immediately.

US Treasury bonds had some large moves, and as Joseph Wang points out above, the long bond liked what it heard. And stores of value, like gold, silver, and even Bitcoin, got hammered within minutes.

Question is, was it intentional? Did Warsh set out to make the market react like this? And if he did, why? More importantly, why did some of the bonds reverse much of their moves before the day ended? And most importantly, what does it mean for our own investments and portfolios?

All good questions, important ones that we’re going to answer, nice and easy as always, right here today.

So pour yourself a big cup of coffee and settle into your favorite seat, as we work through the new Fed Chairman’s voice and how powerful it really is, with this Sunday’s Informationist.

Partner spot

Was that the bears’ warning shot?

Bitcoin recently rallied past $80,000 as U.S. debt crossed $40 trillion and the Treasury moved to expand buybacks. It’s the first time bitcoin has traded above its 200-day moving average in nearly 300 days.

I’m sitting down with Mark Moss, Strive’s Matt Cole, and Jeff Vandrew for a live fireside chat on September 1st on the catalysts that could drive bitcoin’s next move.

The discussion covers:

• Whether this recent move suggests the bottom is in

• Where the next wave of demand could come from: ETFs, treasury companies, and institutional buyers

• How to prepare for the next leg, from custody to your long-term financial plan

  Register now to join live and bring your questions for the audience Q&A.

What Warsh Actually Said

For a guy who insists he’s not going to say anything to the press anymore, Warsh sure did seem to say a lot on Friday.

Let’s start with this little gem, for instance:

“…there should be no misunderstanding: The Fed’s price-stability objective of 2 percent, as measured by the personal consumption expenditures (PCE) price index, is a firm, fixed target.”

No surprise that he mentions PCE, as it has long been the preferred inflation measure for the Fed and it’s been running hot for years now. Today it’s at 3.7%.

Once again, in no uncertain terms, the Chairman insisted that the Fed’s target is 2%, and that is not going to change. Period.

After all, as he said:

“The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank.”

Some quick math here, sixty-five months is almost five and a half years. And Warsh pretty much assumed the blame for the Fed itself.

Nuance. He knows he wasn’t there, he knows we know he wasn’t there during those years, but hey, he’s here to clean it up for us.

What a guy.

Once again forward guidance made the transcript:

“Here is a quick overview of what I’ll cover in my remarks this morning. You can call it an outline . . . you can call it a trail map . . . just don’t call it forward guidance.”

He closed with the stance of a man on a mission: “I stand here today committed to a discipline, not to a decision.”

Okay, we hear you Kevin.

But what exactly is he getting at with all this talk about no talking?

Well, he also said this:

“The economic literature has long described the distorting effects: a hall-of-mirrors problem. If markets rely materially on the Fed’s guidance and the Fed relies on market prices, we are all more likely to be blinded to new developments . . . more likely to be caught unprepared for a turn of events . . . and more likely to commit errors in policymaking.”

In other words, if the market is focused on guessing what the Fed will do and the Fed worries about what the market expects, then the two of them are just feeding off of one another.

A near-perfect circular reference.

And then, nobody ends up reacting to the actual economy itself. Which makes all that economic data pretty much useless.

Well, it’s hard to argue that it’s actually useful a lot of the times, but I digress.

In any case, Warsh says he wants a quieter Fed, and he wants cleaner information coming back the other way. His words:

“The Fed needs clear market signals, as unfiltered as possible.”

For some reason, as I was watching this and listening to his words and him saying over and over and over again that 2% is the inflation target and it will not budge, a certain movie scene came to mind.

Some of you more experienced readers may remember the film Cool Hand Luke with Paul Newman. In a famous scene, the prisoner chain gang is out in the fields, and the Captain, Strother Martin, is standing over Luke (Paul Newman) after beating him. And he says, “What we’ve got here is failure to communicate. Some men you just can’t reach. So you get what we had here last week, which is the way he wants it. Well, he gets it. And I don’t like it any more than you men.”

In other words, Luke’s refusal to submit will only bring harsher punishment, like the beating they just watched.

And Luke does break. There’s a scene late in the film where he tells them he’s got his mind right, and it guts every man around him.

But it doesn’t hold. He goes right back to being Luke.

Well, perhaps the long bond here is Luke. And maybe what Warsh was really speaking to was the bond market's refusal to recognize that the Fed has a new chairman, and that he is absolutely intent on keeping inflation in check.

And so, in his speech on Friday, Warsh said the words “2 percent” four times and the word “inflation” thirty times.

There would be no failure to communicate.

And the market took a beat-down for it.

The result?

Well, before the speech, Fed Funds futures were pricing odds of a rate hike in September at about 36%. By close of the day, it was 57%.

Even more, looking across the next two years, expected rate hikes moved from 1.8 to about 2.4. That’s about two-thirds of an extra hike, all priced in on the back of a speech that not once articulated where rates were headed.

Remember, every one of those rate hikes, if they do ever show up, lands squarely on what you and I, and every company in the country pays to borrow.

These days, when the Fed speaks, trading floors have the volume turned up and hang on pretty much every word until the moment it’s over. And then we are hit with a flood of analysis and interpretation of the speech from economists and pundits on every corner for the rest of the day.

Friday was one of those on steroids.

Anna Wong, the highly respected Bloomberg economist, summed it all up in a single line.

Well said, Anna.

Remember, at the Fed’s July meeting, the vote was 9-3 to keep rates unchanged, and the three dissenters wanted an immediate rate hike. So to her point, and I agree with her, the chairman appears to have saddled up alongside those three now.

For those of you who have been reading me for a while, you won’t be too surprised by any of this, because back in July we dug into exactly how Warsh uses his voice.

What we basically concluded was that he talks hawkish in public, possibly to protect his own credibility, and then refuses to commit to anything and keeps every door open to him later.

That’s apparently the exact same playbook he ran on Friday. Because even though he said nothing about rate hikes, the market immediately started pricing some in.

Now the question is, do they actually hike in September?

Even though the market is now leaning toward a yes, I’m not there yet because I think what Warsh wants is some breathing room to operate.

He wants to hold things where they are, and see more data before he makes any concrete moves.

At least that’s how I see it.

One interesting thing, the federal deficit didn’t come up once, neither did the national debt, or the Fed’s balance sheet, or the long end of the curve. The word Treasury was uttered just once in the whole monologue, and only as an example of a market that they’ll be watching.

Of course, this is not surprising or unusual, especially because this was a one-way speech, and there was no press Q&A session.

Though with the debt where it is, those are exactly the questions we would have wanted somebody to put to him.

That’s an extremely important point, though, and we’re going to dig into it in a bit.

But first, let’s talk about the market reaction and how powerful, at least temporarily, Warsh’s words were.

Operation Verbal Twist

First a little history. Don’t worry, we’ll keep it short, but it helps make sense of what happened Friday.

To do so, we head back to 1961, when the Kennedy administration had a problem. See, they wanted short-term interest rates high because money was fleeing the country for higher yields. Raising short-term rates here would help keep that money at home, invested in US markets, not abroad. On top of this, they wanted long-term rates low because those rates are what American businesses, consumers, and home buyers actually borrow at, and the economy needed a boost.

They were so desperate to make this happen, that the Fed and Treasury teamed up.

And so they sold short-term government paper and used that cash to buy long-term bonds. Remember, selling pushes bond prices down and their yields up, and buying does the exact opposite. And so, at the front of the curve, yields rose, and at the back end of the curve, yields fell.

The move was originally called Operation Nudge because the plan was to nudge long rates down while holding the short end rates up. Then someone clever noted that the yield curve itself was pivoting around its middle, and likened it to a super popular song at the time.

Chubby Checker’s, The Twist.

And just like that, the Fed/Treasury move would forever be known as Operation Twist.

So, did Operation Twist work? Sort of. Long rates came down about 15 basis points or 0.15%. Not nothing, but not really helpful either.

Flash forward to the period after the Great Financial Crisis, and the Fed ran it again, this time alone, in 2011. Operation Twist Part 2. That time, they got about a quarter of a percent out of it. Again, not nothing, but pretty expensive for such a small move.

In any case, that’s the play. Lift one end of the curve, push the other one down, and never touch the overnight rate at all.

Now you may be asking, why would they want that today?

Put simply, high short rates would make the Fed look serious about inflation. Lower long rates would ease the cost of mortgages, car loans, and of course, corporate borrowing.

Problem is, if bond buyers recognize you are running Operation Twist, then they inherently know that will just wind up causing more money printing, and eventually more inflation.

And so, I believe the question that both Warsh and Bessent are asking themselves and each other is, how can you run Operation Twist without making it so obvious?

This is how.

Nine days before Warsh stood at the lectern in Wyoming, Scott Bessent doubled the size of the Treasury’s long bond buybacks, then went on CNBC and called it a Treasury Twist.

Not Operation Twist, mind you, because that would mean the Fed was involved, and that would mean more money printing.

If you want to know more about this Treasury Twist, we covered the whole incident just last week. You can find that right here.

To be clear, that move does cost money. Real money, going into the open market to buy real bonds.

But what about the Fed side?

Well, like we said, the Fed is not involved in the Treasury twist.

And on Friday, Warsh didn’t buy a single bond. He didn’t sell one either. He didn’t move the overnight rate by a single basis point. He can’t do that for another two and a half weeks.

At least not without an emergency mid-meeting move, and that would just look like panic. Something that no new Fed chair would ever want to communicate.

So how do you impart inflation seriousness without policy?

Words.

He just talked. And talked and talked.

“Two percent.” Four times.

“Target.“ Twice.

“Inflation.” Thirty times.

And the market reacted. Hook. Line. Sinker.

During the speech, the super-short end, the bills that mature before the next Fed meeting, didn’t really move.

But then look at what the rest of the curve did.

First, the short-end.

With every utterance of the word inflation, the 1-year yield ticked just a little bit higher, moving up from 4.04% and peaking at 4.13% by end of the speech. About a third of a Fed hike of 25bps.

The 2-year moved up 10 bps. About 40% of a full Fed hike.

Meanwhile, the 30-year Treasury yield went from 5.21% before the speech started to 5.16% before the end of the speech. The 20-year had a virtually identical move.

In other words, the reaction of the market as the chairman spoke, was that short yields rose and long yields fell.

I’ve been at this for many years, and that was as clear of a real-time market repricing as anything I can remember seeing.

But no dollars were spent on this one, just words. Lots and lots of one word in particular.

And so we’ll have to call it Operation Verbal Twist.

And for a few hours that morning, it worked exactly the way Warsh would have wanted.

But then, of course, the bond market, as it always eventually does, came to its senses.

The Part He Doesn’t Control

So what did all that talking actually buy Warsh?

To answer that, we need to look at it from three different directions, and they each tell us something different.

Start with the Twist itself.

You could actually see it happen live while he was speaking. The question is whether it lasted.

Here’s the gap between the 30-year and the 2-year throughout the day.

As you can see, it falls off a cliff within the first 20 minutes of the speech, tightening from about 0.96 just before he spoke to around 0.86, and then it just parks there. All morning. All afternoon. All the way up to the close.

It finished 10.7 basis points narrower than Thursday.

Bond investors call that flattening, and for reference, 10 basis points of flattening in a single session is a pretty big move.

OK, now the second direction.

Remember the ten-year breakeven? Exactly, the market’s forecast of what inflation will average over the next ten years. We’ve talked about it a bunch lately because it’s about the best live readout of inflation expectation that we can get.

As Warsh said himself Friday, “It’s the Fed’s job to make sure that inflation expectations do not get unanchored.”

OK then, let’s have a peek at those expectations.

On Thursday, the 10-year break-even closed at 2.3335%. By 8:45 am Friday morning, it had drifted up to 2.3406%

Warsh started speaking at 10am.

Twenty minutes later it had moved to 2.3118%.

This spread never came back either. It closed at 2.3175%, below where it started, and sat parked there for the rest of the afternoon.

OK. Two for two now.

Which brings us to the third direction.

The 30-year Treasury closed Friday at 5.210% right back where it stood before he opened his mouth, and a basis point and a half above Thursday.

And it wasn’t just the 30-year. By the close of trading Friday, every single Treasury bond and bill closed with higher yields on the day. The 1-year rose 12.6 basis points, and from there it falls away, smaller and smaller, all the way down to 1.5 at the 30-year.

Which is also how the flattening ended up sticking. The front end came up hard and stayed up, and the back end barely budged.

So now let’s add it up.

Short-term yields rose, because investors expect rates to go higher as a Fed response to and fight against inflation.

The break-even rate, or expected inflation according to the markets, eased a few basis points.

The 30-year Treasury yield fell at first on Friday, and then it marched higher and ended up on the day.

The question is, if investors expect inflation to be tackled by the Fed, then why would they demand higher rates in the future???

I thought you’d never ask.

It’s because the rent on money has gone up.

If you’ve read the last few Informationist newsletters, you’ll remember this one and what it is all about.

For those of you who have not yet read it, the rent on money is the return that a buyer demands for tying up cash for thirty years. This is on top of whatever they figure inflation is going to do. Bloomberg’s model priced it at about 1.45% on Thursday.

This is against a five-year average of about 0.47%, meaning it is currently priced at about three times the recent norm.

Two more facts.

1. That number hit a five-year high on August 17.

2. The Treasury announced it was doubling the size of its long-bond buybacks on August 19.

Two days apart.

My guess is that somebody at the Treasury was looking at that same exact screen of expectations.

Which brings us right back around to Scott Bessent.

Two men. Two completely different tools. Nine days apart.

Bessent went first, and he chose the path of using money. Real dollars, into the open market, buying real bonds. The 30-year rallied 9 basis points on his announcement and then handed every one of them back within two days.

Then Warsh went, and he chose to use words. The 30-year fell 5 basis points while he spoke and then gave every one of those back by the close, finishing at 5.21, right where it started.

Just about the same round trip, nine days apart.

Interesting.

Look, the US Treasury has to sell the paper either way.

We have gone through this math many times over the years, and we went through it again last Sunday, so I’m not going to repeat it ad nauseam here.

One important number, though.

Over $10.5 trillion of existing debt matures and has to be refinanced, with roughly $2 trillion of fresh deficit borrowing stacked on top of it.

All in the next year.

That is what has to get sold. And it gets sold whether inflation prints at 3.7% or 5% or 2%.

Bottom line, inflation promises can’t shrink a deficit. They can’t retire maturing notes. And they sure can’t conjure up new buyers for the onslaught of new notes that are coming.

We still need old buyers and new buyers together to show up at every auction between now and the end of 2027 to take that paper down. And if you can see the tsunami of debt that’s coming at you, you’d be smart to want to be paid a little more for it.

Which brings us all the way back to the original question for today.

Can the Fed just talk rates down?

Friday proved that Warsh can talk the front end around, and he can talk the market’s inflation expectations down, make them stick. At least for one day. But the long end went its own way.

Where That Leaves Your Money

So what did Friday actually do to the things you might own?

Start with the ones that got hit hardest.

Gold peaked at $4,625.30 an ounce, at 10am ET, on the dot, the minute he opened his mouth. It closed the day at $4,453.67.

That’s $171.63 off the high, down 3.7%.

Silver did the same thing at the same time. High of $71, close of $66.37. Down $4.63 from the peak, or 6.5%.

Both metals started to break right at 10am and continued to bleed all day long, both finishing right near the lows of the day.

Bitcoin ran roughly the same pattern on the day. High of 79,775, close of 77,384.

Ouch.

Gold, silver, and bitcoin are all known as assets to own when money is devalued. They are at the core of the debasement trade.

None of them pay yields, and so higher yields usually lead to some selling in these assets. Kind of expected, especially if the market is telling you that inflation expectations are lessening.

At least for a day.

Because, let’s go back to what we just spoke about.

The Treasury still has to unload more than $10.5 trillion of maturing paper over the next 12 months, with about $2 trillion of deficit borrowing on top of that.

Nothing’s changed there, and as far as I can tell, nothing ever will.

And remember the yen?

Right.

On Friday, the yen closed at 160.09 per dollar. The same day that Japan’s Ministry of Finance published the official intervention total: ¥15.4 trillion over the four weeks to August 26, or somewhere around $97 billion.

The largest four-week intervention they’ve ever run.

Good golly Miss Molly.

If you were with us on August 9, you’ll remember the line. Intervention can move a price, and only policy can move a trend. Four weeks and ¥15.4 trillion later, the yen is right back through 160. Remember that one when September comes back around.

Now, what can we do with all of this?

Here is how I personally think about it, which is pretty much the same way I have been thinking about it for four years now.

When a government has to sell that much paper, the value of the money it’s printed against tends to go in one direction only over time. Friday changed none of that, it just gave it a tough afternoon.

And so, the next time you see a long-term yield jump, and you will, ask yourself one question before you listen to a single word of any pundit or analyst’s own take on it.

Is that a rate problem, or a supply problem?

A rate problem is the market responding to the Fed, and it manifests at the front of the curve. A supply problem is the market responding to the sheer amount of paper coming at it, and it shows up at the back.

It appears Friday’s moves were almost entirely in response to a rate problem. As the day wore on, the supply problem reared its ugly head.

Don’t worry, you’ll get to ask it again soon enough.

The next Fed meeting is September 15 and 16, with a rate decision on the 16th. Almost poetic, the Bank of Japan meets the very next day, the 17th and 18th.

And the Treasury’s expanded buyback window opens on September 9 and runs through November 4.

That’s three shots for us to ask the same question in less than a month.

One more thing, and this one’s for a select group of you. I’ve had a number of RIAs and analysts request deeper dives into some of the topics we’ve covered here in recent months.

If you invest or advise for a living, I’ve been building something meant for you.

The Informationist Institutional launches in September.

It’s a quarterly letter, ten to fifteen thousand words, delivered through Substack with a designed PDF you can print, mark up, and forward to a client or a committee. Institutional depth, written the way I write everything else here, so you never have to translate it for anybody.

Every quarter, the same standing departments.

The state of the system, the Fed’s balance sheet, Treasury issuance and who is actually holding the paper, the credit markets, the dollar, and rates.

Hard assets, including bitcoin.

A running scoreboard of the numbers I watch to gauge debasement, updated every quarter.

And what would break the whole thesis, named well in advance.

Plus a live quarterly Roundtable call with me. We’ll walk through the letter and the themes in it, and then it opens up. You ask whatever you want, about anything in the letter or anything that has happened since I wrote it.

The first issue is free. It’ll land right here, same as everything else.

It’ll address the shift in who owns US Treasuries, and what that shift does to duration and to hard assets from here. Which is to say, it’s the long-form answer to the questions you’ve been asking.

The founding rate is $1,800 a year, and for those who want access to the underlying metrics and the data behind the letter, there will be options for that, too.

Informationist Institutional

That’s it for today. I hope you walk away a little smarter about what a Fed Chairman’s voice can actually move and why the long end of the curve keeps moving on its own.

If you found value in this one, please share it with someone you think would too.

And if you’re not yet a premium subscriber, we’d love to have you join us.

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Join 1,500+ premium readers who get both issues in full every week: the Sunday deep dive, and the Monday Macro Brief before the open.

Talk soon,

James✌️

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Today’s Bullets:

• What Bessent Did

• The Treasury’s Bar Tab

• To QE or Not to QE

• The Market’s Response

Inspirational Tweet:

We sure seem to be talking about the US Treasury Secretary Scott Bessent, quite a bit lately, don’t we?

Fact is, if you’re an investor or an economist, he’s given us little choice. Because the things he’s doing and what he’s been saying have been both newsworthy and impactful to markets.

Like this gem from last week.

“You know what I would call a Treasury Twist.”

-US Treasury Secretary Scott Bessent

Bessent said that on CNBC Thursday morning when describing the newest US Treasury buy-back program. And Joseph Wang nails his assessment of the new bond buying nickname above, which we’ll get into later.

As for the bond market, it reacted almost violently to the announcement and then shifted right back again.

But why did they move in the first place?

And then there was Bessent right back on TV the next morning, promising even more of the operation.

The 30-year didn’t care. At all, as we will get into as well.

So what’s the operation that Bessent is talking about here? Why did the market love it at first and then turn its back right on it the very next day? Is this QE? Is it yield curve control? What does it mean for our own mortgage rates?

All good questions, important ones that we’re going to answer, nice and easy as always, right here today.

So pour yourself a big cup of coffee and settle into your favorite seat, as we work through what the Treasury is really up to here and what it means for both investors and regular people, with this Sunday’s Informationist.

Partner spot

Was that the bears’ warning shot?

This week bitcoin rallied past $77,000 as U.S. debt crossed $40 trillion and the Treasury moved to expand buybacks. It’s the first time bitcoin has traded above its 200-day moving average in nearly 300 days.

I’m sitting down with Mark Moss, Strive’s Matt Cole, and Jeff Vandrew for a live fireside chat on September 1st on the catalysts that could drive bitcoin’s next move.

The discussion covers:

• Whether this week’s moves suggest the bottom is in

• Where the next wave of demand could come from: ETFs, treasury companies, and institutional buyers

• How to prepare for the next leg, from custody to your long-term financial plan

  Register now to join live and bring your questions for the audience Q&A.

What Bessent Did

Let’s talk about Scott Bessent now, shall we? A little history.

Scott knows money. I mean, really knows money. He spent decades of his career at hedge funds, in the trenches, actually buying and selling the exact instruments he’s now charged with governing.

This immediately sets him apart from his predecessor at the Treasury, Janet Yellen.

And so he understands how some hedge funds have been known to call their prime broker and purposely ask about levels or inquire about prices for a certain security or mix of securities. Especially if the prime broker he’s calling is prone to information leakage.

Leading to a whisper, whisper, big hedge fund asking about such and such, you may want to look into it, type of leakage.

Maybe they are seeking to move markets outright or perhaps just to gauge the liquidity of something.

Which brings us to The Notepad Incident.

Just a few weeks ago, the Treasury Secretary of the United States sat down in a cabinet meeting and placed a clearly legible note on his desk.

Sitting right behind him, a Reuters photographer snapped a pic, and a few hours later it was all over the news.

Oops?

No.

Deliberate? To maybe get investors to move the market for him?

How?

Well, if you’re a macro investor and you see that the Treasury is tipping off the world that they’re about to buy yen, you’d want to get ahead of it. You’d want to buy yen first, cover short positions, get out of the way.

Why?

The Treasury has arguably the largest balance sheet in the world. Not a freight train you’d want to step in front of, and certainly one you’d want to get out of the way of.

And so sometimes the announcement itself is the operation.

Okay, so what does this have to do with the buybacks that he’s talking about?

First, the program he’s talking about is the Regular Treasury Buyback program that Bessent inherited from Janet Yellen.

What is it?

A little story time. Back in 1994, when an injury effectively ended my short pro hockey career, I was making the rounds on Wall Street, looking for a job, any job that could help me pay back my loans and bills.

One of the shops I ended up interviewing at was Prudential. Located in mid-town Manhattan off of Sixth Avenue, aka Avenue of the Americas, Prudential housed a floor of bond traders. Big guys, former football players, intimidating physically and over the phone. And on every desk of every trader sat a large stack of dot matrix printouts.

You know the kind of printer that continuously prints sheet to sheet, all connected with a perforation and little wheel holes down each side of the paper?

These things.

They would print these things out every few days, and in the stack was a list of every single bond and the price that was fair value at the time. There was no screen you could pull up with a live, reliable price on every bond, which is exactly why the stack existed. It’s not like stocks, where there were centralized exchanges that aggregate prices and are easy to display on a screen.

The dot-matrix stacks of bond prices were known as the Bond Run.

On the desk, if a customer called and wanted to trade a bond and it was not listed in this stack of papers, then it was treated as off the run.

The trader pretty much had to use a calculator and some bond math, figure out what he would be willing to buy or sell the bonds at.

Because of this, they would often build in a nice big cushion, knowing that they would have trouble unloading these things themselves. Just like a car dealer will only underbid the Blue Book value of a car, knowing that it’s illiquid and their profit can easily be eaten up.

Today, most prices are on a screen somewhere, and off the run means the same thing it meant on that desk, just defined a bit tighter: on the run is the newest issue in that maturity, and everything issued before it is off the run.

Back to the Regular Treasury Buyback program that Bessent has been talking about.

Stay with me, it’s simpler than it sounds.

Basically, the Treasury goes into the open market and buys back its own bonds. Not the new ones. The older ones, the ones that are known as off the run. The treasury pays cash for them, and then raises that cash by selling new Treasury bills.

And abracadabra, markets become more liquid. QE, not QE, yield curve control or not, like I said we’ll get into that.

First, before we go blaming Janet Yellen for this brainchild, it came long before her.

It began because the United States had too much money. Believe it or not, back in the year 2000, DC was actually running a surplus. And, Treasury Secretary Larry Summers announced a program to buy back old high-coupon debt. Flush with cash, the Treasury went shopping for its own bonds. After picking up $67.5 billion of them across 45 operations, the surplus dried up and the program ended just two years later.

It was resurrected by Janet Yellen in May of 2024. Except this time she did it for the exact opposite reason. See, the market for older off-the-run bonds had gotten thin, and Treasury entered the market as a buyer to enhance that liquidity. Since the relaunch, the Treasury has repurchased $450 billion of its own paper. Like clockwork, every week.

Until last Wednesday, of course.

No formal warning, no press conference. Just a two-paragraph bulletin put out by the Treasury stating that the buybacks of long bonds, long-dated Treasuries were going from a maximum of $2 billion per operation to at least $4 billion. And that the operation would run from September 9th through November 4th.

That was it.

And long bonds took off. The 30-year yield dropped from 5.28% to 5.19% in a single session. The 10-year dropped 6 basis points. Gold jumped about $100 an ounce within an hour.

But the move-in bonds didn’t last.

Almost a full round trip on yields by Thursday morning.

And Bessent was on CNBC, telling Sara Eisen “It could be more than the $4 billion per issue.”

And as you can see in the chart, by Friday afternoon, all of the gains the 30-year made had evaporated.

Two days, a total round trip. Nothing to show for it.

So, what happened?

And why did other securities and assets keep moving in the direction they had upon the announcement?

Excellent question, and one that should be the underpinning for every investor’s portfolio today.

Exactly what we’re going to get into next.

The Treasury’s Bar Tab

So why now?

Why would The Treasury Secretary suddenly double an operation that had been running at the same size for two years?

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Today’s Bullets:

• A Tale of Two Charts

• Statistics Can Be Biased

• The Prices Matter

• Who’s Actually Falling Behind?

• What This Means for Your Money

Inspirational Tweet(s):

Forget politics. What we care about today is paychecks. Specifically, are the paychecks we receive keeping up with inflation?

Not theoretical paychecks, actual paychecks. The ones that pay our bills, the ones that pay for the groceries that seem to never stop going up in price.

On the one hand, Treasury Secretary Scott Bessent gives an emphatic yes, pointing out that Main Street wages are growing faster than any other group, and so-called median wages are doing pretty well, too.

But hold on a minute.

In complete contrast, and the very next day, Heather Long says, “Inflation is totally wiping out wage gains.”

She continues with, “many workers will struggle in the months ahead.”

Optimism versus ominous-ism.

I mean, we’re talking about the same country here, right? We’re all using the same numbers from the Bureau of Labor Statistics here, aren’t we?

So, who’s right? Are wages really keeping up with inflation or not? How can two professionals read the same exact government data and give two completely different viewpoints on it? And most importantly, are we in the camp of workers who should be worried about struggling in the months ahead?

All good questions, super important ones. Ones we are going to answer, nice and easy as always, right here today.

Stick with me to the end on this one, because it all has to do with a lot more than just wages.

So pour yourself a big cup of coffee and settle into your favorite seat, as we untangle these wage numbers and see how they actually affect you and your money, with this Sunday’s Informationist.

Partner spot

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A Tale of Two Charts

Looking at the two charts above, if you’re a normal everyday person, e.g., not a PhD economist or econ-obsessed investment advisor, you likely thought something along the lines of, is one of them greatly exaggerating? Or worse, outright lying?

On one hand, you have Bessent saying wages are outpacing inflation, and on the other hand, Heather Long says inflation is wiping those gains out.

And then there’s you and me standing at the checkout line of Costco doing the math in our heads. Ground beef was way cheaper a few years ago.

Like half the cost that it is now.

And that’s exactly what’s so irritating about this whole conversation.

You know exactly how much your money can buy, you’ve watched it change month-for-month, year-over-year. You have the receipts!

But then a PhD economist, or maybe the US Treasury Secretary himself, goes on TV and says everything is great. Wages are outpacing inflation. Americans are doing just fine.

Uh huh. Which Americans, you ask.

Or are you somehow calculating it all wrong?

Hold on to that question, we’re going to come back to it.

Because the important part is that both of the claims above are mathematically correct. Or at least defensible with the data we have from the BLS.

The almighty Bureau of Labor Statistics.

If you’ve been reading me for a while, you know where I usually go from here. I’ve spent plenty of time showing you how the agency creates a basket and then changes the weights of the items in that basket to come up with a number that they can stomach, even if it isn’t exactly founded in reality.

Now you may be asking, is the same thing going on here? Are they cooking the books again?

In short, no.

What’s happening here is not a conspiracy, and it’s actually valuable to understand.

Scott’s measuring what the middle full-time worker earns in a week.

Heather is measuring what the average hour of work pays, including all the private payrolls in the country.

Two completely different surveys answering two completely different questions, and so, of course, they don’t match up.

And there are actually four different main ways to look at wages. Four. All of them published by experts and defensible. Neither of them admitted that.

Scott merely chose one, and Heather chose another.

Question is, which one relates to you and your paycheck? Which one tells us about what’s really going on with the economy?

Because only one of those four follows the same person from one year to the next. Same worker, this year against last year, no averaging, sorting, or mixing.

That’s the one to watch. And be honest, it hasn’t been doing all that great lately.

That’s what we’re going to sort out here.

To recap: Two people read the same government numbers and claimed opposite things about our paychecks. One measured which workers got the biggest raises. The other measured whether the average raise beat the average rise in prices. Both are right, but using entirely different context.

Statistics Can Be Biased

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