Good Friday evening MacroEdge Readers & Community,

It’s another late, late evening here - as most are - I really enjoy this time of night where the messages cease, the windows are opened, and I can take a step back and get a clear view of everything without distraction. Tomorrow I hit the road again, and then will be heading to New York City later in the week, for a short 3 day stint. On Tuesday, we should have our 1H oil and gas forecast and report out for Oil & Gas Research and Oil & Gas Advisory readers and clients. I know there are many waiting for that.

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Weekend Schedule -

Saturday - Oil and Gas Research Macro Note

Sunday - Weekly Macro Note

Back in the days before we could log on our phones and have 40 different forecast variations, weather models, and live cameras to spot storms heading our way, we relied on archaic methodologies and warnings from animals of said storms on the horizon. While that comparison may sound odd, I (and those in our organization) see structural shifts taking place under the hood that will impact what the horizon looks like, both in the short term and over the next 12-18 months. During Powell’s ‘Valhalla Period,’ as I came to label it (from early 2023 to the end of his term), there was almost a guarantee that both fiscal and monetary policy would align to melt up asset prices, particularly equity indices, up and to the right. This phenomenon wasn’t limited to here in the United States. We saw it across our MacroEdge Global Bubble Index components in Korea, Taiwan, Spain, and Canada, and elsewhere in the world from Poland to Brazil, Argentina, Venezuela, and beyond. Enormous structural changes are already underway that won’t be reversed, such as global demographic issues through collapsing birthrates, particularly in West and East Asia. Even so, markets have simply entered an inflation-driven ‘melt-up’ mode as investors rush to bypass the perceived austerity of a life without asset ownership. These dynamics have combined to create a unique parabolic impulse, and our own GBI has enabled us to effectively track the ferocity of this move. The days of life being a little too easy, coupled with all-time high household wealth being tied up in equities in this ‘i-shaped’ macro dynamic, are likely to shift in the next 12-18 months.

In the post-2008 era, the masses have been religiously programmed to expect a bailout any time a mistake, big or small, is made. In the GFC era, the taxpayer saved the reckless banks. During the pandemic, the taxpayer bailed out the largest companies first. And in smaller cases like 2023, the Fed rushed in to save the wealthiest Silicon Valley investors from any consequence of their own poor risk mitigation strategy, in order to prevent anything ‘systemic’ from occurring in regional banking. Big or small, the story stays the same. These interventions and our failed policy dynamics globally are creating a toxic mix: an asset bubble, record-high wealth inequality that continues to worsen, and a fiercely nihilistic society of mostly young people in the under-30 segment. Together, these create the ingredients necessary for things like civil unrest, as we’ve now seen in France. What’s ironic is that we dropped the ever-so-revolutionary ‘AI’ and the subsequent data center buildout on top of all this (the latter of which I call our version of the Chinese ghost cities). Over the last 8 weeks, it appears that the Iran war situation and a potential revenge of the ‘Old World economy’ may set up a major rebirth in the months and years to come. This rebirth will have large consequences. Though we no longer live in an era where we have to rely on astrology or birds to predict and forecast changing winds or storms on the horizon, I do sense that the old world is calling us yet again for a potential reality check on everything it means to live in a hyper-financialized modern economy.

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In the meantime, just over a week out from the midterm election - the GOP is dealing with record low economic readings across the board as Project South Africa continues… Ironically or not, I don’t think a revenge of the old economy, as labelled by Jeffrey Currie, will be enough to reverse many of these trends that have been in motion in the post-2008 Frankenstein macro world.

(UMichigan)

(UMichigan)

What will these mean for markets and where we’re heading? More on that in the sections below, and I will dive into how we’ve adjusted our own macro frameworks to better fit and match this hyper-interventionist world.

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On 11/1 - we are increasing Ozone pricing for both monthly and annual tiers to support our organizational growth, and continue to add capacity to our data tracking capabilities. (From $33.33 to $45/mo and from $350 to $399/yr).

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Winds of Change

One of the greatest challenges for investors in the 2023-2026 period has been developing strategies that carry nuance. That means navigating things like our ‘Powell’s Valhalla’ market dynamics while, at the same time, understanding that what we’ve done to markets is enormously harmful. One of the most egregious stretches was April to May of this year, when the Trump Administration decided to pour gasoline on an inflation fire to push equity prices higher in a single impulse move, while the lower 90% of the ‘i’ faced record-high costs across almost every single item in the CPI basket (and outside of it). Since that April to May period, we’ve seen blowoff-style moves across the board that look like final impulse moves into distribution, and we’ll discuss those more in the weeks to come. What I want to emphasize, once again, is that adjustments to our methodologies and tools do not constitute timing instruments on the macro side of things. The reason we introduced the MacroEdge Flagship Growth Portfolio with our partner Plutus is to be able to make agile moves in real time, while my broader macro strategies and frameworks remain in effect on much broader timeframes.

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I hope you have had a fantastic first half to your week and you were able to catch the early morning note - which I think I squeezed out about 3am PST… it was a late, late one here on my end. In the Strategy Note this evening - Six will take it away and deliver commentary in “The Collision course - Bonds, Barrels, and the Post-Election Escalation Window” - exploring the latest in the bond market, energy market dynamics, and opportunities that we can capitalize on during the quarter.

My intro will stay very short this evening since I will be providing a longer update over on MacroEdge Oil and Gas Research and there’s more to come this week, which you can find outlined in the Weekly Macro Note schedule for the week.

Have a fantastic second half of your week, and let’s keep rocking.

Strategy Note: The Collision Course - Bonds, Barrels, and the Post-Election Escalation Window

Flagship performance as of today’s close has completely eliminated the drawdown since inception but we still have work to do to set a new high watermark. Last week I wrote that I was looking forward to eliminating the drawdown and pulling ahead, and we are well on our way. On the shorts highlighted last week, the morning of the 15th CRWV and its bonds were bouncing and the sell side came out in voracious defense of the neocloud that at that moment in time was the epicenter of fears driving that leg of the selloff, so I closed the short positions in EWY and SMH. The shorts had already paid over 10% each in just a few sessions. Both have bounced since which is fine. We were paid for the move that we had a view on.

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It’s very early morning in the Pacific Time zone and I wrapped up a packed day… There’s more in store tomorrow and then Thursday I will be back on the move. From a macro perspective - we started the week off as expected coming off of a Friday with overly negative sentiment, which signaled enough of an upside potential in a squeeze rally for longs to begin playing ball. What I am observing now, however, is the red flags we have mounting in the data center and AI ecosystem, in addition to what we have going on on the war front. It’s very possible now that we see escalation in the conflict once again prior to midterms - and Iran may be waiting for the week prior to deliver a maximum pain campaign to the party in power… With diesel at $7/gal and WTI at $100/bbl - I continue to get asked of late: what’s the upside from here? That will be out soon with our initial 1H outlook and review that is currently in the works.

This evening - we’re going to keep things relatively short and to the point since we have both Strategy Notes coming out tomorrow evening - for Macro Research, under Ozone, and for Oil and Gas Research.

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Charts are starting to present themselves as being deeply degraded - and that doesn’t mean that we cannot see further upside, bounces, or rallies - as all of the above can be seen, I simply want to highlight the structure of where we’re at in this cycle versus the peaks in previous cycles - measured beyond the dot-com bubble, etc… I had several conversations today - particularly on the data center front - and I couldn’t, couldn’t, couldn’t believe what I was hearing… These conversations only served to further reinforce my belief that Jensen Huang & the other backers of this once-in-a-lifetime bubble are in their final window of time to either decide to get out themselves, or play musical chairs until the entire thing breaks… There was some general confusion regarding a tweet I put out that ‘this cycle is over’ - which was specifically referencing the AI and data center cycle as we begin to transit this plateau period we now find ourselves on.

Welcome, my friends, to the plateau.

This evening we’re going to cover two sections - with the first looking at the early signs that the AI and data center cycle are done - and the second providing an update to the MacroEdge Global Bubble Index.

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This evening we’re going to explore the latest market dynamics - and look at how NVDA is really the only thing worth monitoring at this point for the broader equity market - along with oil and yields… The latter two will continue to get direct attention and intervention from both the US government and foreign governments - like we’re seeing with the situation in France - and countries around the world have started clamping down on exports of their own petroleum products (the latest to be Niger)...

Equity markets in the US are in a very fragile place - and some of my brightest friends in our industry have such varying opinions as to what will happen next. While there remains the possibility of all-time highs on the Nasdaq - it will garner much of my attention on the US equity side here for the remainder of the year - and likely in the first half of 2027. With early signs of headwinds mounting for things like data center construction and neocloud IPOs - there’s going to be a race to get Anthropic and OpenAI offloaded onto the retail bagholders before the end of the year - though there is still real possibility that one or both are delayed. My consensus story is that we will see many companies in the space get blanked here over the next 24 months - but the government will have a say in picking the winners - per se - with tax dollar support.

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Negative beta in the markets is at its highest level ever as just a few heavy weighted equities now drive market performance:

In overnight markets - futures are advancing in the US and Japan is off to a strong start to the week. With Nvidia and broader tech being at such an important spot - this is really what’s going to drive things. Sentiment got very bearish on Friday - and it will reverse and everyone will be ‘I told you so!’ tomorrow - we’re at a very idiotic time in markets with the levels of leverage and retail involvement we now have today. There’s one video I posted back in May of a ‘trading group’ that I continue to think will be useful for us to look back in the future about this point in time in markets.

On the oil price front - prices are off slightly overnight (about 1.5%) and I expected at least one more major effort to try and drop oil prices before midterms… that may come with some joint announcement made with Russia - and I noted more extensively in the Weekly Oil & Gas Macro Note that the Russian Foreign Ministry ‘congregation’ will be traveling to both GCC nations and Iran early this week for discussions. I find it highly unlikely at this point that we don’t see some kind of meaningful escalation pre-midterm to exert maximum pressure on the Trump Administration - which may come from the Iranian side through a combination of pressures in the Strait of Hormuz and through their proxy - Ansarallah in Yemen. We’ve labelled the trade there thus far with ‘patience through October’ in which we start to see a market better price in the risks facing the global oil market - especially as countries shift towards protectionism - and don’t just blindly blow their own emergency reserves to save other countries.

This evening we’re going to keep it sharp with the following covered:

> Report Schedule for the Week and Macro Week Ahead

> Weekly Oil and Gas Macro Note and Intro

> Nvidia Roulette - the Fate of the Broader Market

> Mentally Preparing for the Final Super TACO

> A Look at Asia - the TSE/Nikkei/Nasdaq and AI/Japan Correlation

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Report Schedule for the Week and Macro Week Ahead

In the week ahead - we’re going to cover a lot of ground as always… This week isn’t particularly exciting on the macro data front - and we’re in a Fed blackout window now. It is, however, busy for the AI thematic and earnings reports… outlined below.

• Tuesday: War Note and Macro Data Exploration - Inflation and Employment

• Wednesday: Ozone - Portfolio Strategy Note, Oil and Gas Research - Strategy Note

• Friday: Redeye Macro Note

• Saturday: Oil and Gas Research - Strategy Note

Macro Week Ahead —->

Monday: n/a

Tuesday: n/a
Wednesday: n/a
Thursday: US Housing Data (Claims I ignore these days)
Friday: S&P Global Flash PMIs

Earnings This Week >$300bn Market Cap

• GE, PM - Tuesday

• Meta, Tesla - Wednesday

• P&G - Thursday

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Right now - it’s about a 10% chance the Fed moves rate the week before midterms. I would say it’s closer to zero. The Fed isn’t that serious about the inflation fight - even with CPI being ~4% or so right now - which means 7-10% for the things consumers and businesses actually have to buy. China is also seeing pretty elevated producer inflation - and as long as we’re living in the ‘illusion of abundance’ with emergency fuel supply releases - they are keeping a lid on things in the short term, in terms of a 4.5+% CPI read, which remains possible in 2027 with current dynamics.

Weekly Oil and Gas Macro Note and Intro

If you missed the latest Weekly Oil & Gas Macro Note - we covered a lot, lot, lot of ground in there - beyond what we’ll discuss below in ‘Mentally Preparing for the Final ‘Super’ TACO’. With Nvidia being the flywheel now for the entire broader equity market - and at a very critical spot - we’re likely to see all levers pulled over the next 2 weeks in this pre mid-term window to keep sentiment on the rails. There’s apathy like we’ve never seen in markets - and people think these ‘heaven-like’ conditions are here to stay, and AI will simply take care of us and hand us money when we wake up in the morning. As nominal price level debasement continues at a speedy clip given its endorsement by the Administration in charge - we remain focused on the opportunities that are going to make us money through both of our portfolio strategies.

Find the latest below:

MacroEdge Oil and Gas Research

Oil and Gas Research - Weekly Energy Macro Note - 'Waiting for the Stars to Align' - 10/17

Good Sunday morning MacroEdge Oil and Gas Research readers and community…

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6 days ago · 9 likes · MacroEdge

Nvidia Roulette - The Fate of the Broader Market

Let’s face the reality: Nvidia is the driving force behind the entire AI buildout and financial performance of said companies/equities. Jensen has turned himself into a celebrity-like figure - now doing tours and speeches daily - and any & every time we have a minor correction or dip he says things like ‘brush it off’, ‘don’t worry, be happy’, and ‘keep buying, because we’ve got you’. The entire thing continues to blow up so large - beyond anyone’s largest imagination (including mine, dating back to my late 2024 and even 2025 skepticism) that we’re going to be forced as taxpayers to save some of these firms from creating systemic risk that they will be creating.

Continue reading below with Ozone access…

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This evening is not a Macro Note, data coverage, or a report. It’s simply an update on the changes and enhancements we’re making as an organization between now and the end of the year, as we prepare for a successful 2027. 2026 has been a unique year for us. We expanded our oil and gas coverage in January alongside our sister companies’ direct asset ownership, and we continue today to expand our global client network. Since July, I’ve made some adjustments to how we run our organization from a team and personnel perspective, to better fit our long-run 3 to 5 year outlook and enhance what we’re doing as an operation. This evening I want to take the time to outline what you should expect from us for the remainder of the year and into 2027, specifically the changes and enhancements we’ll be delivering to you over the coming weeks and years.

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One of the most important elements of this entire shift is our emphasis on streamlining our offerings between our two core focus areas: Macro Research and Oil and Gas. Below, in ‘Changes and Enhancements on the Horizon,’ I think it’s quite apparent why these changes are positive, why they make what we do more understandable, and why they’ll enable our team to deliver better products, services, and results to you, our readers and clients. In the 2026 landscape, technology and data-based professional services are becoming increasingly competitive, while our opportunities continue to grow in a much more robust fashion closest to our core: the global macro and financial landscape. We’ve serviced, and continue to service, some of the largest companies on earth with our professional services solutions, and we’ll keep supporting those existing clients. Going forward, however, we will not be originating new professional services clients, barring outlier arrangements made through our streamlined and improved verticals, highlighted below.

Our organization and roadmap will thrive best as we remain lean and mean, with hyper-competent individuals at the helm doing the work necessary to keep us growing and serving you for years to come. I want MacroEdge to be eclectic. I want us to push the boundaries of thought and bump up against consensus narratives, and I want us to have a ‘sexy’ edge that 99% of firms in our industry lack. We thrive when we’re unique, and we won’t if we just try to become yet another sell-side slop shop, or a KPMG peddling pre-packaged professional service solutions. The future is bright for our organization, and I am glad to have you all along for the ride.

Outside of MacroEdge, we are expanding our presence in the oil and gas industry through direct partnerships with our sister companies. Both firms are involved in direct asset ownership in the oil and gas sector, specifically in North Dakota, Wyoming, and Texas. On top of their core ownership, they are expanding into enhanced oil recovery research and A&D services.

Changes and Enhancements on the Horizon

Our website and client portal are undergoing significant changes and enhancements between now and the end of the month. I apologize for any downtime or inconvenience during this period.

You can find our team members at:
@DonMiami3 - Don Johnson, Chief Economist & Founder
@SixFinance - Six, Head of Portfolio Strategy
@MrAwsumb - Ulysses Awsumb, Real Estate & Energy Research
@RealJohnGalt - John Galt, MacroEdge Radio & Chief Sarcasm Officer

In media interviews and discussions in the coming weeks and months, you may also see me referenced under another name. Don Johnson is the pen name I’ve written under for the better part of four years, so don’t be alarmed.

Our 50+ strong contributor network, the ‘HOA’ group as we call it, remains fully operational and intact from our 2023 days. Executives, business owners, and experts are in constant contact throughout the day, talking through the latest news and sharing their thoughts. It’s great to see everyone thriving.

An all-new social media team member joins us on Monday and will run our MacroEdge pages on X, Substack, and LinkedIn. If you haven’t already, you can find our X pages at:

@MacroEdgeRes
@MacroEdgeEnergy

The rest of our platforms are discoverable through a quick Google or AI search.

Going into 2027, we’re streamlining the organization around our two core areas, Macro Research and Oil and Gas, with Social Media as the engine that delivers both to you. From a focus and understanding standpoint, these are the things getting 95% or more of our attention, so the move is natural.

Macro Research

Under our Macro Research team, you will continue to find Ozone, which delivers 3-4 global macro reports weekly. You’ll also get access to our Flagship Portfolio Strategy here, along with commentary and updates from Six.

We will be transitioning Ozone to a macro-based, strategy-first focus, measured by portfolio performance. We’re not only focused on all of the critical data; we’re focused on how the information we have can be profitable, and we’ll talk about the opportunities to bridge that gap.

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On 11/1, MacroEdge Ozone will increase to $45/mo from $33.33/mo at present. Current subscribers will be grandfathered at their existing rate.

You can find more information on Ozone at MacroEdge.world/subscribe

General economic advisory will be serviced under our Macro Research umbrella. All current MacroEdge datasets, and development of new datasets, will be maintained by Macro Research and are now delivered and priced to clients on an individual basis. Existing dataset clients will continue on current terms through 2027. You can contact info@macroedge.net for more information about our general economic advisory services and how they can fit your enterprise, family office, or fund.

Oil and Gas

Our Oil and Gas team and umbrella will drive the growth of our organization for years to come. Under Oil and Gas Research ($75/mo), you will continue to get the best of our energy-sector research, which includes 2 reports a week and our Oil and Gas Growth and Income Portfolio Strategy. This product is useful for allocators, individuals, and small operators looking for the high-level insights that help drive intelligent business and portfolio decisions.

Learn more about Oil and Gas Research at MacroEdgeEnergy.substack.com/subscribe or via MacroEdge.net.

For those directly in the oil and gas world, our Oil & Gas Advisory offering starts at $1,200/month, with custom engagements priced to the solution we design for you. The base retainer includes a monthly Oil and Gas Advisory Briefing, our weekly Oil and Gas Research Notes on macro and strategy, a weekly commentary email from our Oil and Gas Research Team exclusive to advisory clients, two hours of 1:1 or group call time each month, risk management and hedging strategy review, and priority email access with responses within two business days. For clients who need more, we offer add-ons priced separately: acquisition screening, deal sourcing, asset reviews and M&A guidance, hedging strategy construction, and land, title, and A&D services powered by LX Oil and Ranch.

Social Media

Under our Social Media umbrella falls our X, YouTube, LinkedIn, and Substack operations, which all feed one another.

MacroEdge Radio will continue to expand, and we may grow our YouTube and media operation to include private, limited-access discussions with our extensive network of macro and financial experts. We will also continue to seek out and expand our extensive partnership network, as well.

… What’s Being Sunset?

MacroEdge Solutions
MacroEdge RESights

We are closing the curtain on MacroEdge Solutions and MacroEdge RESights. Not only have the product distinctions started getting confusing, they’re blurring the lines of what we are as an organization, which is the last thing I want. As highlighted above, we want to push boundaries, we want to be eclectic, and we want to make decisions with a 5-year outlook in mind, which these two components no longer support. Current RESights subscribers will be moved to Ozone, and Solutions clients - you should’ve already heard from me or us directly.

One More Thing: December

In December, we’ll turn the page on this new chapter with a gathering somewhere in the mountains, and you’ll all have a chance to help pick the location via a poll we’ll post by Friday on X. This will likely be a 24-hour event. We’ll fly in to the venue in the morning, have an organized lunch and a few macro and energy-focused discussions, and then share drinks and dinner, with an activity and departure the following day. Space will be limited to about 20, and the event is open to subscribers and MacroEdge clients. Plus-ones must be included in your RSVP. More details will be available by the end of the week, since I know December is a busy time of year for everyone.

Stay tuned for more.

The future of a streamlined, more intelligent, and more deliberately eclectic MacroEdge has arrived, and I look forward to the remainder of 2026, with a brilliant 2027 just beyond the horizon.

Let’s MacroEdge on, intelligently, together.

Don Johnson
Chief Economist & Founder
Don@MacroEdge.net for email correspondence and questions

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As we settle into this new cadence with these Wednesday Strategy Notes - Six & John are at the helm here for Ozone, and I will be providing the Oil and Gas Research Note. We’ve had a successful roll-out of our Flagship Portfolio through Plutus - and if you haven’t yet checked it out - you can do so here: MacroEdge Flagship Growth Portfolio.

It’s been dynamic week thus far and we’ve had some notable volatility out of Asia - that we’ve discussed extensively in the last few months. Asia (namely Korea) continues to get pulverized, and I very soon - especially given the pre-midterm period we’re in - expect emergency measures to be announced by foreign governments to quell drawdowns. In a world more reliant than ever on equity markets melting up and to the right in the face of declining real hourly earnings for the lower 90% of the ‘i’ - I’ve strongly taken to adopting Dr. Burry’s approach of seeing the opportunity as it presents itself, with healthy pragmatism, and then exploiting them. While we cannot change or alter our addition to inflation or equity market interventions, we can continue to get a better grasp and understanding of all of the complicated global macro dynamics, and position ourselves accordingly - whether it be through portfolio decisions, business decisions, personal decisions - the list really goes on & on.

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Hopefully you are all having a great week & the second half is even better. Stay tuned for the Oil and Gas Research note out shortly.

Don

Portfolio Strategy Update - 10/14/2026 @SixFinance

• September CPI came in hotter than expected and bonds sold off hard before climbing throughout the day. The correlation of yields up stocks up is showing initial signs of breaking down.

• The AI trade’s second derivative is decelerating. Anthropic 3Q26 ARR report fell short of expectations, and there is a substantial deceleration in growth rate into an already bleak AI trade tape, while indices remain less than 2% off their all time highs.

• The Flagship model returned 1.8% today as the SMH and EWY shorts that we put on Friday have continued to print, along with PFE LEAP calls as Pfizer hit a new YTD high today. Bonds appear to be inflecting, and bond futures are rallying hard in the overnight session. Regime change looks to be arriving.

Energy prices are leaking into services, with car and truck rentals up 5.4%, hotels 2%, airfares 1.2%, and transportation services 0.6%. Airlines and rental fleets are passing through fuel costs. The beige book today noted that higher energy prices are affecting every district, and diesel costs are moving through supply chains. Several districts expect further cost increases as contracts expire and hedges fall off.

Fed messaging has shifted today staunchly back toward inflation being the main risk. SOFR futures sold off hard initially on the print before regaining ground. 3 hikes are already in the forward curve.

(Continued below: Portfolio Strategy Note, updates, and why the GOP is toast in November) →

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The most important datapoint today was that bonds round tripped their decline and stocks did not. The US10Y rose over 10bps before falling on the day. Stocks continued to slide all day. Long semis and short bonds are the first and second most crowded trades in the BofA Fund Manager Survey, and both appear to be unwinding simultaneously.

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Hopefully you are all having a successful start to your week. We continue to watch dynamics evolve in the Middle East - particularly between the Houthis and Saudi Arabia - this shiny object (being Yemen) is getting shinier as a distraction, though it appears that Trump is showing restraint in order to prevent broader escalation in this pre-midterm window. With early voting already underway, the party in power is heading into midterm elections with diesel prices at all-time highs (they should be at or near on Friday) and retail gasoline prices set to rise further once again in the coming weeks. We may have another TACO in the pipeline - that may serve as the last - though there are still additional emergency measures that the President may undertake during this energy shock such as:

> Diesel export ban

> Oil export ban

> Additional SPR releases under state of emergency

> Seizure of foreign oil

> Defense Production Act (we’ve already seen this for refining capacity)

While some of these may sound ‘far off’ at this point given the $95 WTI / $110 Brent environment we have today, I don’t think several of them are that far off once we get through the midterm period and are looking at a President that could escalate things once again with Iran. With the Strait of Hormuz on the verge of seeing flows meaningfully impeded once again - we are in a world where that can simply not happen given the rate at which emergency barrels are being released.

We appear to be in an environment where we are slowly normalizing higher prices for longer, and look no further than the curve pricing in >$80bbl now, through November, as further evidence.

Diesel prices shifting to a higher for longer mindset too? I think so.

The next major shift we are likely to see from an energy policy standpoint, globally, is one from cooperation to protectionism.

Outside of the energy environment - which I expect will remain the most critical thing, along with bonds to watch for the remainder of the year - the AI landscape in Asia, particularly in South Korea, continues to see a wobble that’s getting more violent. In the Sunday Weekly Macro Note - I highlighted the tremendous vulnerabilities emerging in Korea on both a technical and leverage standpoint - and it appears that foreign investors are in fact taking notice of that tremendous concentration risk. If you’re not following our two, live portfolio strategies, we continue to position ourselves and adjust intelligently for this dynamic, yet apathetic landscape, make sure to get Ozone below before the price goes up at the end of the month (to $45/mo, from $33/mo):

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On the docket this evening:

• Schedule for the Rest of the Week

• Mid-Month Update Out Thursday Evening

• Asia Red Flags for the Semiconductor Landscape, Checking on the IBEX

• Walking a Tight Rope

Schedule for Rest of Week

• Wednesday: Oil and Gas Research - Looking at CRC and ACDC - Strategy Note, Portfolio Strategy Note - Ozone - Flagship Strategy Comments

• Thursday: Mid-Month Update, Changes, December Event

• Friday:

Mid-Month Update Out Thursday Evening

This Thursday - we’ll have our comprehensive mid-month update out on all of the changes, transitions, and positive things coming to MacroEdge. We are enhancing our organization with 2030 in mind: with improvements, changes, and a place to connect in December all in the pipeline.

• Ozone → Transitioning to a Macro-based Strategy-First Focus - based on performance

• Expansion of our Oil and Gas team —> Advisory Offerings and Oil and Gas Research focusing on private and public market opportunities

• Revitalizing our MacroEdge Social Media landscape —> New MacroEdge team members will deliver critical data on a 24/7 basis, during US and EU hours - on both our Oil and Gas Research and the official MacroEdge page on X and Substack

• Boosting MacroEdge Radio to a mainstream show —> Weekly Live Episodes, Recorded and Shared on our Platforms

• Expanding our partnership network with new data providers and more - to bring you the latest real-time, and near real-time that actually matters

Asia Red Flags for the Semiconductor Landscape, Checking on the IBEX

Red flags continue to mount in Asia - driven by wobbles in Korea, Taiwan, and Japan. While Bessent has a vested interest in continuing to bailout and protect Japan - the first two look very vulnerable with concentration and leverage risks at all-time highs.

KOSPI - bear flag galore:

Measured move potential, based on technicals:

Taiwan - lots and lots of nasty divergence potentials now:

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I’ve had a day of travel - with two flight cancellations en route to my destination and plenty of excitement in between with dust storms in Phoenix… It’s great to be back at the desk and set up for a great week ahead. Tomorrow is a ‘technical’ holiday for banks and the federal government - but equity and commodity markets will be open. Tuesday evening in the ‘War Note’ we’ll start to go over things that will be changing in the 4th quarter - and particularly in 2027 as we complete some changes here as an organization.

Tomorrow is going to be a very light volume day with the holiday and futures haven’t done a whole lot in the overnight session. In Korea - the KOSPI continues to look like a dumpster fire, and I am not sure that there is much to be excited about across the entire semiconductor space as investors will be forced to ‘re-discover’ that it’s much more commodity-like than anyone would like to admit right now.

While domestically, we have a much broader backing and support for backstopping the entire AI-ecosystem right now - especially as it pertains to data center construction - I think the charade will start to see an unwind either this quarter or next as construction signals start to flash warning signs. While political opposition alone hasn’t been enough to move the needle on data centers, I do expect that we see an uptick in the environmental opposition and more difficulties in financing the additional buildout as we start to see demand wobble.

Let me be clear that there is no profit moat for just about every single business in the space right now - and mislabelling LLMs as some sort of Manhattan Project is simply bizarre. There are some fundamental questions we need to ask ourselves before committing to a backstop of any of these organizations - many of whom are run by deeply questionable actors… This discussion is one for a different day and time, but even though the cycle itself has been dragged on by relentless backstopping and just off the charts levels of delusion, all of the points still stand.

From a market standpoint - oil and bonds are likely to continue to drive market action and direction for the remainder of the year. With ‘patience through October’ fully in motion - I am increasingly confident in our patience narrative - and the bulk of our research focus will come from MacroEdge Oil and Gas Research between now and the end of November. With emergency reserves draining and quite literally zero plan to stem the bleeding - other than by way of begging other global leaders to sacrifice their own supplies - this energy cycle is likely to fundamentally and permanently change things, including from a price standpoint. The general consensus on X and elsewhere is that it’s time to short bonds - and the labor market is fantastic according to macro pundits… While the signals are undoubtedly noisy, I do not think that they’re overly noisy - and from an oil and gas perspective, strongly encourage our patience through October narrative right now. On Friday - we’ll discuss two new opportunities in the pipeline from a private market standpoint, and there’s a lot coming this week, as highlighted below.

Let’s make it a great week - and whether or not you will be enjoying a day off tomorrow - I hope you’re staying sharp as we head further into Fall.

Report Schedule for the Week

• Tuesday: War Note & Updates

• Wednesday: Strategy Note - Oil and Gas Research, Strategy Note - Ozone

• Thursday: Enhancing our Vision with 2030 in Mind: Improvements, Changes, and a Place to Connect in December

• Friday - Redeye Macro Note: Unlocking Oil and Gas Opportunities with LX & TREX

• Saturday - Oil and Gas Research

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Macro Week Ahead

Another relatively quiet week, with the exception of CPI. Prices paid from an input standpoint rose again in September - so we’ll see if this reflects in CPI - it should be in the non ex-energy basket, though it will likely not be enough for the Fed to move on another hike, yet.

Just continue to watch oil prices, the curve, refined products, and bond yields - the rest is sort of going to follow at this point as everything is marching in a relatively close correlation.

• Monday: Bond Market Closed - Columbus Day

• Tuesday: Existing Home Sales

• Wednesday: Consumer Price Index (September)

• Thursday: Producer Price Index

• Friday: Industrial Production & Regional Manufacturing Surveys

Peak Apathy is Here

We’re reaching cycle high levels of apathy across the board. From tech to everything else - there is very little care or belief that there is any material downside case to this federalized market we’re witnessing.

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In this evening’s Strategy Note and update - Six has the latest on our model portfolio changes and shifts - there are many interesting macro developments underway - and I continue to expect to see our final interventions from the Trump Administration in the oil and gas markets over the next two weeks - before inevitable escalation from both sides. The situation in the Strait and in the Middle East is becoming untenable for both sides, and Iran is now showing signs that they are once again willing to attempt to close the Strait with the blockade still in place. Trump has pulled back briefly, but as discussed extensively yesterday evening, and on my X today - you can learn more about why I think this is just short term noise.

Patience through October remains my thesis, and stay tuned for the latest updates over the weekend.

Yield of Dreams

Portfolio Strategy | October 7, 2026

The real economy is absorbing three costs at once: diesel prices that reached all-time nominal highs in September, a ~7.5% 30Y mortgage rate at near all-time median home price to median household income ratios, and a Fed hiking into weak payroll growth. A “perfect storm” of factors is driving a global bond selloff as real rates continue to tighten.

Read the full Portfolio Strategy report with Ozone access.

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*Ozone pricing will increase on 11/1 to $45/mo.

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Tonight’s War Note will be a brief one as we explore the latest Strait of Hormuz dynamics - and continue to monitor for signs of escalation between Saudi Arabia & Ansarallah in Yemen, which is occurring. The war dynamics have shifted slightly in this pre-midterm period, and Iran is using proxies to continue the war in a ‘more’ sustainable war for them for the time being. Sustainable is a bit of a ‘loaded’ term - as the situation is untenable beyond December for Iran given the economic calamity occurring - but that means, in my mind, they will be forced to escalate before that period of time. With midterms in the United States just around the corner, I expect to either see escalation now from Iran & proxies either about 2 weeks out from midterms, or post-midterms in an even more dramatic fashion. While the situation remains relatively fluid, attacks on Saudi infrastructure have not let up - and if the situation devolves into anything like the Russia/Ukraine situation in terms of attacks on civilian and energy infrastructure - the world is in for a ride when it comes to scarcity dynamics.

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With the US pulling B-1s back from the front-lines, patience is warranted as we continue to tango through this complex pre-midterm and direct war lull period (specifically between the US and Iran directly), and we also see how Iran and the IRGC react to higher Strait of Hormuz flow levels. In the last 3 days or so, we have seen meaningful escalation in the Strait, and that translates to a tighter oil market with a lag, in the future - contrary to the narrative that market reactions will be immediate on this front. In this dip over the last two weeks, I noted a week ago that this felt a little like that pre-May period, and it feels like we’re in that now. From a technical standpoint, there are still some vulnerabilities to the downside, but we continue to march toward a further entrenching of the $80-$82/bbl floor on WTI.

Very little weakness on the back-end of the oil curve is extremely positive for operators, rational explorers/producers, and non-op firms:

January 2027 also showing really nice strength:

Technology and high beta data center/AI-related equities continue to charge higher on a mandate from the Administration - though I am starting to wonder if we are in the final wave of this crack-up melt-up - on a more cyclical basis. As we know, this year has been relatively unprecedented, and I do not expect them to just fold up on the entire AI-ecosystem bubble, especially with just how much nominal growth is being driven by data center construction right now. Throughout the year our data has pointed to a Q4/Q1 27 rollover in the total construction # - and I think we’re probably close - especially if a blue wave materializes and environmentalism begins to pick back up as a societal theme.

Mr. Wyckoff - is it you again?

We will soon find out…

Keep an eye on the KOSPI in the next month →

In other news today - the MacroEdge Flagship Growth Portfolio went live through our partner Plutus today. This investable portfolio solution from Plutus allows you to invest directly in our in-house portfolio strategy design - and there’s a second strategy on the way, that I will personally oversee - arriving before year-end or early next year. If you missed the announcement on the new offering, and how it enhances our brand as we start to make this 2027 elevation shift - please see below:

Important Ozone pricing note… on November 1st, 2026 we will transition Ozone from $33/mo currently to $45/mo - reflecting the improvement in our Ozone capabilities and reach across and beyond the Substack platform. Those who subscribe or upgrade before the 11/1 deadline will be grandfathered into the $33/mo pricing. Annual subscriptions will increase to $500.

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This evening’s War Note:

• Latest War Dynamics

• Next SPR Release Begins Soon: Consolidation Continues - Patience Pays

• The French Circus

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Latest War Dynamics - The Strait and Saudi/Houthi Situation

• Escalation signs continue to emerge between Saudi & Ansarallah forces - UK/French Air Forces are providing support, along with US assets

• Houthis are likely to play the long game, they have absolutely no reason to over-escalate, while the Saudis do have a time game working against them - especially on the Strait of Hormuz/Bab-el-Mandeb front

• Saudis will be flying solo (not literally) until after the US-midterms

• Ground war for the Saudis will be disastrous, and they are well aware of this - Saudi ground assets are very weak, and they will rely heavily on mercenaries and rental forces until other nations commit to providing assets

• Saudi allies are also smart enough to know a ground conflict in Yemen could be a multi-year nightmare against a highly unconventional force, and the IRGC could be utilizing Yemen as a trap and distraction before their own escalations in November and December

• Iran cannot last through December without escalation right now given oil export levels, or they will be forced to close the Strait to levels we saw in August/September

• I continue to expect a significant US escalation post-midterms, especially if the results are poor for the GOP - I actually think that gives maximum clearance for the President to go more ‘all out’ - especially on the Hormuz front, which is not open

Next SPR Release Begins Soon: Consolidation Continues - Patience Pays

The next SPR announcement arrives soon from the G7/IEA - and is likely to be in-line with what we already know - 100 million barrels.

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Introducing the MacroEdge Flagship Growth Portfolio

By: @SixFinance, Head of Research

Every position and every change in this book has been tracked on Plutus since July 2, 2026.

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We didn’t build MacroEdge Flagship Growth to track a benchmark or beat the S&P 500 by a couple hundred basis points in a good year. It exists for a single reason: to find the largest macro mispricings in the market, own the most leveraged way to be right about them, and compound capital at a high rate across full market cycles.

The “Growth” in the name isn’t an expectation to trade alongside growth ETFs or mutual funds. It represents our capital appreciation target. We aim to make money regardless of what broader equity markets are doing.

The Mandate & Portfolio Construction

This is an absolute-return, concentrated macro book. You should not expect a diversified 50-stock portfolio here. We will typically hold fewer than 20 positions.

Macro regimes shift, and this portfolio moves with them. We have no interest in sitting in losing investments for long periods just to maintain a static strategy. We predominantly trade global equities (with a heavy US domestic focus), ETFs, and options when we want maximum convexity.

Every single idea starts with two questions:

1. What does consensus already believe?

2. Where is that belief creating asymmetry?

Once we find that gap, we hunt for the maximum leverage to the thesis. We aren’t looking for the safest company or the best-run business on paper. We want the security with the most operating and financial leverage to the thesis from today’s price.

A great business bought at a fair price simply cannot offer the upside that a hated business at the bottom of its range can offer. We want to know what the emergent theme is, why capital is going to flow to that area of the market, and when that shift is likely to happen.

Hunting for Troughs, Not “Value”

This is not a traditional value investing framework. We aren’t buying things just because they look cheap on a historical multiple.

Instead, we invest in assets that are deeply underappreciated by the market in areas that are about to inflect, both in their underlying fundamentals and their security prices.

We spend a massive amount of time looking for troughs. We want stocks, sectors, or whole asset classes that have suffered large drawdowns where something meaningful is beginning to change that the market has not yet priced in.

Current Macro Environment & How We Are Positioned

Three months into tracking this portfolio, the macro backdrop is fascinating:

• The S&P 500 sits at all-time highs, heavily concentrated in tech equities, while equity breadth is the worst it’s been since 2000.

• Interest rates sit at 20-year highs, global yields are ramping, and France is bordering on a sovereign crisis.

• Employment is weakening, credit spreads are starting to expand, and global inflation remains elevated as central banks tighten.

• An energy crisis is on our doorstep, with diesel prices sitting at all-time highs.

We adjust as the landscape changes. As yields rose, employment weakened, and credit spreads began to widen, we added long duration treasury exposure to nearly 40% of the portfolio.

Large opportunities in new trends are emerging, and we plan to capture them.

Conclusion

MacroEdge Flagship Growth is designed to compound capital at a high rate across full market cycles by systematically exploiting macro asymmetry, capturing high-leverage inflection points, and remaining completely unconstrained by market benchmarks. As we continue to execute on this absolute-return macro mandate on Plutus, MacroEdge Research is actively expanding its specialized coverage. We are currently in the development phase of our upcoming Oil and Gas Growth and Income Portfolio, led by Don Johnson (@DonMiami3), our Chief Economist. Alongside this new strategy, we also have two private market oil and gas vehicles currently in development.

Visit the Portfolio

Disclosures & Terms

Fee Structure & Returns

Our Plutus MacroEdge Flagship Growth model portfolio carries a 1% annual management fee and no performance fee. Any strategy returns cited above do not reflect this management fee. Applying a 1% annual fee would reduce the compounded net returns over time. Prospective investors evaluating performance on Plutus should review net-of-fee projections. MacroEdge maintains a compensated relationship with Plutus.

Educational Purpose & Regulatory Disclaimer

This article is published on Substack by MacroEdge Research as an educational piece on investment philosophy, macroeconomic analysis, and portfolio construction. It does not constitute an offer to sell or a solicitation of an offer to buy any security, derivative, or financial product. Investment decisions regarding model portfolios on Plutus or strategies managed by MacroEdge should be made solely based on official offering documents and investor disclosures.

General Investment & Suitability Risk

Past performance is no guarantee of future results. Concentrated macroeconomic, option, and leverage strategies carry significant financial risk, including potential illiquidity, extreme short-term volatility, and total loss of invested capital. Readers must consult with qualified legal, tax, and financial advisors to assess the suitability, tax implications, and risk profile of any strategy relative to their individual financial situation before investing.

It was a warm day in the Phoenix-area today and tomorrow & Tuesday I will be finishing our office setup this way that will serve as the new brain of our businesses. There are going to be a ton of positives to come out of this new hub, and I am excited to transition into planning mode over the next few weeks to prepare for a fruitful 2027. More on that mid-month, so stay tuned for the update.

This weekend was relatively quiet on all fronts - I expect that to remain the case while we head closer & closer to midterms that are now in just over a month. Current numbers show the in-party heading for a lot of trouble which will be a large driver of policy interventions and short term bandaids over the next month to paper over the problems that live under the surface. Bond yields have not spooked policymakers or Bessent enough to push for even larger buybacks or quasi-YCC policy, though I do think that is something that is likely in the next 12 months now. His admission this weekend that sometimes the ‘house’ as he referred to himself as about a month ago - sometimes loses - was notable. On the equity market front - given how reliant the consumer economy is now on stocks going up and to the right - that will continue to be the focus over the next few weeks. While a select few equities are doing the bulk of the lifting now, as has been the case for much of the year, it still looks like the data center engine is going to be losing steam through the 4th quarter and into 2027 from a raw driver standpoint. The buildout is essentially acting as the ‘growth engine’ - yet ironically - the long-term gains are unlikely to be anything significant in the current shape & form of ‘AI’... it will not be called ‘SI’ here for obvious reasons.

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On energy prices and bond yields - these two things will continue to be the driving force now of both equity market performance and Fed action through the end of the year. While we can use complex and convoluted justifications to find reasons to call inflation ‘low and under control’ - private sector readings from things like the ISM Prices Paid are giving us a decent idea of where things stand from an inflation standpoint - especially on input costs:

Again, I read economist after economist - especially in the PhD category - try and find every way to justify things like the Truflation numbers - and it’s straight up nonsense. This war (with an oil power) and war in general is extremely inflationary, and until the war dynamics change - WTI will continue to solidify a higher base in the $80-$82/bbl range.

Finding the signal through the noise this month is going to be especially difficult, which is why I’ve titled this Weekly Macro Note the ‘Do Not Disturb’ period, since I will be turning off my notifications on the headlines and subsequent noise on platforms like X. Based on how the last 2 weeks have gone - especially with claims that Hormuz flows are normalizing at pre-war levels, and with the fact that the US has withdrawn B-1 bombers from forward-UK deployments - it looks like there’s going to be a combination of escalation led by non-US countries in the region & particularly an escalation in the conflict between Saudi Arabia and Ansarallah in Yemen (Houthi forces).

This evening - we’ll cover the following:

• Report Schedule for the Week

• Macro Week Ahead

• Midterm Noise and Signal - The Do Not Disturb Period

• Yields & Oil - Living in the Driver’s Seat

• Red Flags Ab’EU’ound

Have a great start to your week, and let’s make it a great one.

Don

Report Schedule for the Week

• Tuesday: War Note / Update on Portfolio Strategy

• Wednesday: (Ozone - Strategy Note and Portfolio Update - Six) (Oil and Gas Research - Strategy Note and Update, Part 3 of 3 - On the Ground from the Permian - Don)

• Friday: Redeye Macro Note

• Saturday: Oil and Gas Research - Weekly Macro Note

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Macro Week Ahead

Relatively quiet earnings week this week - with Delta and Pepsi being the most notable - also a very light macro data week… That means that oil prices, yields, and war headlines will continue to serve an outsized role in market performance. The long bond crowd remains very loud, especially after that noisy employment report, and if we’re to have an 87-style event, that final ‘snap’ noise still needs to be heard under the surface - and hasn’t yet.

> Monday: ISM Services - watch the inflation print here

> Tuesday: US Trade Balance

> Wednesday: FOMC Minutes

> Thursday: n/a

> Friday: n/a

From a technical standpoint, as highlighted below, the next two weeks are very important for oil - especially front-month, as the back-end of the curve tightens up. Keep an eye on gasoil, ULSD, spreads, and gasoline prices as well - as large movements will likely be met with interventions in the next 4 weeks. On top of that, it’s likely that we start to see SPR releases re-accelerate under the final allocation under the March program, to the tune of 3-5mmb, with tomorrow landing about 3.5mmb.

Odds of a rate hold this month are now up to 80%, though we may see a second hike later in the year once we’re through the AI IPOs. The can is going to be kicked as long as possible on the AI IPOs, and they’ll need to secure their taxpayer bailouts before going public in US equity markets… (hence the many meetings with the White House in recent weeks). If you think I’ve got a third eye in saying this - please outline the long-term profit moat for any of these businesses which simply does not exist. Do we need to dive into data centers again, too?

Midterm Noise and Signal - The Do Not Disturb Period

We are in a completely bizarre world post-2020 in terms of the levels of propaganda that are so openly propagated across media channels (social media, traditional legacy media, non-traditional media like Substack, etc) - and this trend only seems to be accelerating. While I think a limited percentage of the population is actually able to see through this - I am not certain that it’s a majority, and I am reminded of that by events that have occurred over the last decade, many of which have raised my skepticism levels to higher levels.

With odds looking like this, the mandate for the GOP has simply shifted to damage control:

(Kalshi - House Odds)

This means over the course of the month - the obsession with front-month crude, fuel prices, inflation, etc. will only get louder - even though the narrative cannon will be on full blast about things like this being a ‘small price to pay’ etc. I am still quite confident that the Middle East situation - whether it be Saudi/Yemen, Israel/Iran, etc. escalates pretty significantly within the next 30-60 days. I also do not think Iran can afford to weather the blockade without more major political upheaval come December/January - though they are utilizing their proxies as a creative deflection and distraction right now to shift power balances in the region. The only way they will see the blockade lifted right now is through a major escalation, but we’ll have to see how that materializes in the next 60 days.

With that being said, this period is going to be very, very noisy, and I don’t want to spend too much time overanalyzing noise.

Yields & Oil - Living in the Driver’s Seat

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My time in the Phoenix metro is coming to an end in just a few days now. If you noticed our announcement on X, and through Substack, we are transitioning to a hub & spoke model in the new year to better service our client network and entities in and outside of the macro-sphere. As we continue to grow, even through this minor adjustment period, there are many positives to the coming changes. More on this is available below, and a full announcement will be available mid-month, on the necessity for this transition, adjustments to our services and deliveries, expansion of our oil and gas operations in and outside of advisory, our portfolio strategies, & more.

I sometimes feel compelled late on a Friday evening to publish a note, and this evening is one of those. This Redeye Macro Note will be structured in more of a rant fashion, which means less structure than our traditional publications, but such is the hour of the night. We’re quickly approaching a world in which the only thing being celebrated (or maybe that’s left to celebrate by those in charge) is equities going up and to the right on a nominal basis. The doublespeak in the last week has just reached levels of crazy that I did not think we would be seeing until the 2030s - up is down, left is right, the sky is green, the Strait of Hormuz flows are at pre-war levels, and we should turn our collective ignorance levels to 1000 as we turn “the game!” on TV up a little bit louder… While that seems to be consensus living in these times, and more & more are simply checking out - I challenge our audience this evening to seek out a mission to see through the fog and find purpose.

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For the remainder of the article, please pardon any typos, I have drafted some of it from Substack on the mobile browser.

The ‘slop-society’ as I now label it - is pervasive, and it’s only getting worse… Next time you’re in an airport, or at the train station, or maybe even just the grocery store - walk around and take mental notes of what you see? Particularly when it comes to observing - I notice a general sense that the light has simply left the eyes of most Americans. Maybe that’s a little critical or jaded, but I tend to occupy that label with ease these days, as does anything falling outside of the realm of ‘collective ignorance’. I also think there’s a tremendous opportunity for those of us that don’t see in monochrome. All of this to say, much of what we’re seeing isn’t something special in the context of societies and economies - we’ve simply chosen, collectively, to sedate ourselves with short-term enjoyment and benefit, rather than ever take the medicine necessary to correct the very troubling course we’re on. Yet more signs emerge by observing the levels of self-enrichment from the very top, corruption wide out in the open, and almost Orwellian doublespeak (mentioned above) that has become the norm since the pandemic days.

While I have hope that the bond market and the so-called ‘bond vigilantes’ are finally starting to see through some of the noise, especially as it pertains to BLS employment reports, I also know the measures taken in response to the bond market movements at some point will pour gasoline on the underlying ‘Project South Africa’ machine that gains a little more momentum with each passing year. This book concept has not yet made it off the ground - and won’t for some time given our expanding commitments and what will be a fantastic end of the year and 2027 - but the underlying concept is simply something that we can continue to observe and understand. Sure, it can be uncomfortable to discuss, but history shows us time & time again that history is not bliss.

In February of this year, when I spoke with Business Insider, I warned that the US was missing a so-called ‘growth engine’ - that growth engine has become nominal inflation with data centers stacked on top. The latest shiny object understood by few, celebrated (and even worshipped) by many, remains something that I am deeply skeptical about - especially with who is behind the ‘growth engine’. What looks on the surface like an economic miracle in a post-2007 era of relative stagnation, is much more likely to be a mirage as we turn the corner into 2027. Though we no longer publicly publish our data center construction data - especially after drawing a special kind of heat from that crowd earlier in the year - America’s latest rehashed bubble, still called a miracle, has a date with destiny sooner than most think.

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Also… this is a headline you might excerpt to read in a paper in Argentina, Venezuela, or Zimbabwe -

Here in the United States? Well it’s simply consensus policy now… we don’t want to talk about it, but it’s exactly what both sides are planning on doing until the bond market tells them otherwise.

A reminder… Equities going up and to the right, without examining the underlying cause(s) is not inherently a positive thing, in and of itself →

Argentina is one lesson, in motion:

The IBVC is another:

& we can go on and on, with lessons from history…

Let’s not over extrapolate a flight to safety, and 10,000 other causes driving our policy failures, as success in a vacuum:

Ie. Zimbabwe

The end result of regime after regime and inflation at this point in our stage of debt-burden is that each one will get more & more obsessed with the short-term stimulus boosts, the ‘data center’ style growth engines, pulling forward a quality of life boost for an aging population, and nominal everything.

Turning our attention to what I will cover briefly this evening - so I don’t continue to write past the 3am hour - I want to briefly touch on the SPR release announcement today, discuss our future as an organization, and look at Europe - which is soon to find itself in major trouble without immediate course correction.

In one of the most well-telegraphed groups of policymakers of our time - is this a warning we should heed seriously?

This is certainly an outcome that cannot be ruled for large EU nations as we progress through October. A wildcard, however, is that Europe could back-out of the agreed to SPR release today - and that is not something that would surprise me after the President went out and said he was never planning on an export ban. While political upheaval is becoming a real thing, particularly in France, a lot of these tremors have some 2008-style elements - particularly on the energy price front… This month is likely the last where we see these announcements have any sort of meaningful impact on energy prices, especially if conflict escalates across the Middle East as I expect it to. Saudi, particularly, in choosing to invade Yemen with what will end up being a mostly conscripted force - will go down as one of the largest military blunders in modern war history if it occurs. US military leaders know what that would look like and chose to take the ‘back-out’ route, rather quickly today, for very obvious reasons. A Saudi-Yemen war has the exact setup for something that could last years & years, or until the Saudi economy buckles and they stop the fighting, but I do believe that escalation is once again just around the corner. In the last few days, there’s been a very quiet (ironic) yet loud shift in talks about peace, the war, deals, etc - and it’s because the globe is realizing that the clock is ticking and things aren’t really changing. Subsidizing global oil and refined product demand with strategic petroleum reserves, emergency buffers, and shrinking inventories - as refineries are bombed daily, Iran retains partial control over the Strait, and Houthi forces can target Saudi energy infrastructure at will - is totally unsustainable - and markets under the hood know this already.

The Brent reaction today should tell you much of what you already need to know…

Quickly on the labor front today - the report should be taken with a massive grain of salt, but…

No - it’s not just retirements driving concerning figures like this….

Demographically speaking, labor numbers will continue to provide more & more signal than noise in the coming years as our labor force age and composition continues to shift. We need to stop overplaying things like claims, antiquated methodologies, and U3 - especially when we have the full capacity to track more accurate data - but we absolutely do not want to as a society as the results would be akin to taking lipstick off of a pig… Of course, for this very brief period of bond market sanity - it seems that we in this community of ours aren’t the only ones that have taken note of said data quality or legitimacy:

Our Future

From an organizational standpoint - there has been and will continue to be some major change through the end of the year. The largest shift that will be covered this evening (or now morning) and explained at much greater length mid-month in our full Welcome to Q4 & What’s Ahead report. Our highly discombobulated structure of spreading out between Florida, North Texas, and everywhere in-between caused a lot of friction, unnecessary time on the road, and lost productive time that could’ve been better serving you. The new structure introduces sound bases for our different practices and businesses, unlocks that time to better serve you, and puts us closer to where our customer hubs are thriving - particularly in Arizona and Southeast Florida. While I had time to explore the Northwest Florida option, there simply wasn’t enough going on to make it make sense - and the below is what we’re going to build from through the end of the year, but particularly at the beginning of the new year.

The new hub & spoke model - designed to serve you better:

• Scottsdale, Arizona [New Office Location - HQ and ‘brain’ for everything]

• Wichita Falls, TX [Oil and Gas - Operating]

• Williston, ND [Oil and Gas - Advisory and Economic Research]

• Fort Lauderdale, FL [Macro & Advisory]

As mentioned above, more detail and color will be added to each of the above mid-month, there’s a lot I have to add on why these changes make sense, and how they will serve as the foundation for expansion from this fantastic foundation into a broader coverage across the Western Hemisphere.

We thrive through intelligent growth, and this is going to continue to enable that as we head through this quarter and beyond. I appreciate patience regarding these changes, and including with our team adjustments that are nearly concluded - and I am excited to share more mid-month.

Digesting the SPR Release - More of the Same Policy Failure, Good for O&G Sector

The IEA/G7 SPR release was something that we had been expecting for weeks - and remains part of the ‘patience through October’ narrative that I am sure has gotten exhausting for some of you to read.

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It’s quite unbelievable that we’re already turning the page into the 4th quarter. With each passing note that I author and with every flight I board, there are days that feel long & slow, and others not so much, but broadly speaking - it seems like someone hit a fast forward button around that 2020 year. With all of the time each of us spend looking at markets, charts, and obsessing over the slightest headlines & adjustments - don’t forget to occasionally take a step back and take a breath, too, before taking the next steps forward. For those of us in this transition period on the team at MacroEdge, it feels a little like a compass that’s recalibrating for our next level of ‘scale’ both inside and outside of the macro-sphere that we’ve now occupied for 3+ years. With our oil and gas operations expanding in size and responsibilities, I am thrilled to see what the rest of the year has in store, especially as a search begins soon for a small operator in North Texas. One of the elements that has continued to make us extremely unique in this landscape has been our combination of real-world expertise coming from our 50+ strong contributor network, and our ability to forecast things correctly from expertise that lives outside of both Wall Street and the academic world. While this landscape continues to get more cloudy in my mind, especially from a traditional economic perspective, I also continue to think that our capacity to predict and forecast is improving with time.

This evening Six will provide the latest Portfolio Strategy update and commentary on both our portfolio strategy performance and on the broader macro picture. Internals have continued to deteriorate over the last several weeks and the bond market has been little help as it pertains to performance of the book. In catching up with Six today, important changes have been implemented for the strategy prior to the strategy going live next Tuesday. Following the launch and announcement - of which there will be more information over the weekend - the second investable portfolio strategy will be available within the next few months through our partner (to be announced in said announcement).

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Today’s PCE release was brushed off as noise by the bond market - as it should be - and we have Friday’s job data as one of the last *relevant* data releases going into the October FOMC decision. I really think the absolute obsession over these Fed moves is a joke until fiscal gets its act together (which at this point will only happen when the bond market really breaks something). There isn’t a single politician talking about curbing spending, the runaway debt, etc - the list goes on for days - and for the time being it finally feels like the bond vigilantes have gotten comfortable with turning up the heat in the interim in this window of opportunity. While vigilantes may not be the right term months from now if the ‘trade to fade’ bonds becomes greater consensus, bond longs have continued to bleed out slowly since the start of the Iran war. The war is very inflationary, and the Fed cannot prevent that inflation. Given those two points - inflation is just going to continue to rip - both from the energy price component & non. To simply strip energy prices and point to that as any sort of useful signal in a world where petroleum products live up and down every single supply chain is rather embarrassing - and it appears that bond traders have finally taken note of many of these matters at the same time.

I won’t go on & on endlessly here since I will soon be penning the Oil & Gas Research Strategy Note for Wednesday - but the ship is once again teetering on the edge and in this centrally planned market environment (and increasingly so - the economy if you look at things like government stakes in startups) - risk has to materialize in an almost combustible fashion if it is going to take policymakers off guard… Either outcome won’t be particularly positive for the lower 80-90% in the economy - but our job is to simply acknowledge that fact and then position ourselves in the best way possible to capture upside from understanding the landscape.

These people in charge are addicted to inflation in all of the wrong ways, and the only way an addict like this will learn as less is to get a true shock to the system as a wake up call…

With that being said, I will let Six take the remainder of the note away, and I will see you in the Oil & Gas Strategy Note…

– Don

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No Country for Long Bonds

The US10Y after flirting with 5% has now broken decidedly through and bond vol has exploded higher. The move thus far has been driven by real yields, and has not seen meaningful participation from inflation expectations. So what the heck is going on here?

The predominant factor(s) driving the move in rates really depends on who you ask and on what day, and how much rate sensitive exposure they have, but the move in global rates can primarily be attributed to procyclical fiscal policy across the globe at crisis-level deficits, amongst a confluence of other factors.

A perfect storm of other factors are all hitting together as well. Supply shocks from the Iran war.

Demand shocks from Infrastructure buildouts across the world attributable to AI and military-related deglobalization trends. Hawkish and hiking central banks. Hyperscaler competition for capital. The $40T psychological level on the US debt has been breached.

Despite all of this, bonds are starting to appear genuinely attractive for the first time in years. Allocators who for years who have allocated to private equity, private credit, hedge funds and liquid alternatives due to snoozingly-low yields on bonds now have a serious additional investment option with a return that is meaningful again. The marginal buyer finally has a place to park capital that is both convex and hedges the growth cycle that appears to be the only game in town(as it always does near the top of the cycle). Second quarter GDP was revised up to 2.2%, and Atlanta FedNow GDP is tracking at 5% for 3Q.

Today the Core PCE, the Fed’s preferred inflation metric, came in meaningfully under expectations, rates briefly rallied… and then sold off once again to new cyclical lows. What’s a sovereign debtholder to do?

Real yields driving the move while inflation expectations have barely budged and financial conditions indices remain loose tells the story that things are just fine. This is true in upper tranches of credit and equity indices, but while the SPX is a hair off all time high, equal weight SPX is trending straight down, and CCC- bond spreads have widened substantially.

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I hope you all are having a great start to the week… I am starting the first half of the week off in Arizona and to get to enjoy Arizona at 75 degrees with snow up in the northern part of the state is a great time to be here. As I mentioned on my X this morning - one of the themes I continue to notice is a complete lack of understanding around price pressures among business owners/decision makers & in particular how they are all tied to the Middle East/Hormuz situation. While it’s extremely complicated when broken down on a granular level - the reality from 30,000 feet is that so long as the Strait and Bab remain impeded to any meaningful degree - we will continue to see sizable price pressures and impacts across the globe.

We got yet another meaningful acknowledgement of these price pressures today with the announcement from the Trump Administration that they are moving forward with releasing the final 40 million barrels of the large Iran war tranche - which will be lent out to willing takers. This was an important component to my well-defined and outlined ‘patience through October’ narrative which has picked up traction among the smarter minds and commentators on & off of X.

With the announcement of this now in effect, I suspect (and agree with HFI Research) that we start to see SPR releases climb back to the 3-6 million barrel per week range, which will likely take us into early/mid December. What I do not think that it does, unlike the May instance where the combination of headlines + SPR release occurred, is impact front-month prices to any meaningful degree. While we’ll discuss this more in depth tomorrow in the Oil and Gas Strategy Note - and later in the week on Saturday - the back-end of the oil curve is looking more and more robust. I am not using this as my base case price signal, but with the announcement today, I think we are moving toward solidifying that $80-$82/bbl price floor for WTI, which should bring some additional confidence back in the space - which still won’t mean a whole lot given the general permanent bearishness that operators and industry insiders alike continue to hold… It is a bizarre phenomenon, but probably more of an engrained survival instinct, above all else after decades of ruthless cycles.

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Outside of the energy landscape, which continues to look robust - with patience, of course - yields have continued an absolutely mega run.

We’re starting to enter a parabolic shaped move in yields, though I still think the real ‘spook move’ could still be behind the curtain. The current move has been enough to spook policymakers to a degree, but other than securing another rate hike or two, equity investors continue to fly blind and roll the dice that a move like 1987 is simply impossible in today’s landscape. I personally think the exact opposite - in the predictable market of today that is relentlessly intervened in and protected at all costs - it will take a black swan to actually get any meaningful shock to the system… and it may even (very briefly) spook policymakers into action. The higher yields are having a dampening effect on cyclical business activity - and we’ll take a look at freight and housing below… Freight is getting the double whammy of diesel prices at/near record highs, and this is something that I have continued to call for softness in as we head into the holiday season.

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This evening we’ll cover:

• The final SPR tranche… for now - right on time

• A Look at the Cyclicals - Freight and Housing

• Losing Steam - Data Centers, AI, and Tech

Report Schedule for the Week

• Oil and Gas Research Strategy Note (Wed) - Don

• Portfolio Strategy Note and Updates (Wed) - Six

• Midweek Macro Note (Thursday) - Don

• Oil and Gas Research Macro Note (Sat) - Don

The Final SPR Tranche… For Now - Right on Time

Today marked a predictable announcement from the Administration in this pre-midterm period that they are moving forward with plans to loan out the final 40 million barrels from the committed SPR tranche that was announced at the beginning of the Iran war. While I do not think this is the end of the SPR saga - they also began prodding the EU to release emergency diesel supplies to get prices lower (a move which looks less likely to happen now than it did a week ago).

All of these moves are signals from a group that has little to no plan, in my opinion, regarding the war - and we could be on the brink of broader escalation once again if Iran finally cracks & lashes out against the naval blockade. There’s a complex economic war balancing act going on right now with Iran choosing to let flows increase through the Southern Omani lane and with ships having been moved further out to sea that were enforcing the blockade. While what we have seen thus far has brought about record high prices - the next phase - if Iran chooses to escalate, will be a grenade pin on prices… I do anticipate that the pin does get pulled, though the patience through October story means we need to maintain patience as emergency measures are burned through and announced.

The technical structure for WTI (front-month) remains extremely robust, and the downside case has narrowed, as discussed below:

(Continued below —> The Final SPR Tranche… For Now cont., A Look at the Cyclicals, Data Centers/AI & More)…

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It’s early Monday morning PST now, but we’ll leave the greeting unchanged to kick-off what should be a fantastic, and very dynamic week ahead of us.

This weekend we saw a similar re-run to many other weekends throughout the year - with talks of peace, war, escalation, and everything in between. Price action (in equities) has broadly been very boring over the last 6-8 weeks, and specific cyclical, and fuel sensitive industries like freight, airlines, and cruise companies have finally started to respond to the negative impacts from record high jet fuel and diesel prices. Additionally, there’s been some minor tremors in regional banking again marked by the failure of Nano Bank - a bank with about $750 million in assets in Irvine, California. Again, while not enormous, it is something to keep an eye on with yields surging to cycle highs. In this oil price transition month - being October - which I discussed more in-depth this evening in the Weekly Oil & Gas Research Macro Note - I continue to expect that bond yields will see further upside pressure. The inflation situation is completely and totally underreported by CPI (and other alternative measures right now) and the bond market seems to be the last place we’ll get a real take on what’s actually going on… Bond vigilantes are still in the 6 month window for price discovery - which I marked starting in May - beyond that point we could very well find ourselves moving toward a YCC-world…

The 10Y going parabolic will have real implications for the economy - all the way down to things like data center financing:

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My intro here will be brief this evening - as Six & John provide more than enough fantastic information to carry us through the evening and into the second half of the week. My time is coming to a close in West Texas for the time being, and I am making my way to Dallas & onto Phoenix next… There are more exciting conversations ahead (more on this in the next few weeks). A few new stops are being added along the way for the next 12 weeks, and my goal during this transition period is to complete as much on the front-end as possible before presenting those changes to you all.

In addition to the above announcements coming in the next few weeks, stay tuned for information on the two investable MacroEdge portfolio strategies that will become available/investable through our new partner in the next few days… more on that soon.

Don Johnson

Chief Economist - Partner

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9/23 US Market Update - Since 2007 or 1987

Uh-oh.

Today’s market can be best summed up by one theme this author heard repeatedly on various financial news reports:

“…. since 2007.”

Be it the US 10 year bond yield, the disproportionate breadth in the equity markets, the broken 5 year bond auction today (which really deserved a D-), and the unbelievably bad reports starting to emerge from the high yield credit market that was the mantra of the day in financial markets and media.

But what really has been standing out to this author is this chart when unwittingly in an effort to stiffen the upper lip, Alan Greenspan raised rates to fight inflation at the same time Secretary of the Treasury James A Baker III decided to engage in an aggressive currency skirmish with Germany and Europe. The results are as one might say, are history, as reflected by the US 10 year Treasury yield of that era.

Is this author calling for a 1987 style crash?

Not yet, but the house of cards seems to be aligning towards a major event of similar severity.

Could the market action be signaling something far worse as the President’s midterm election prospects are dimming faster than his ability to stay awake at cabinet meetings?

Perhaps, just perhaps, it is just as simple as Trump v1.0 in 2018. A relatively new Fed Chair in Jay Powell slowly beginning to raise rates in an attempt to “normalize” the cost of money back to traditional levels at the same time President Trump wanted to ramp monetary growth for his administration to brag about a super hot economy via much higher GDP while inflation was tame.

What was amazing to see was the parallel of oil pushing prices slightly higher and rising proportionately with stocks in that time period:

Is it really that simple?

The Democrats had seized control of the House of Representatives but overall the damage was contained thanks the Republicans gaining two more seats in the Senate. Unfortunately for President Trump all that did was amplify the circus and paralyze any policy initiatives as the Covid pandemic would change the economic landscape for the United States just two years later.

These pages do not think it is that simple, although the 2018 Christmas Crash is indicative of a period of strong economic growth with great credit and liquidity risk coming to the forefront when one least expects it.

The 1987 era however has many of the same identifying markers however, that we are witnessing today. For a point of comparison, let us look at this article by Anise C. Wallace in the October 11, 1987 New York Times and pinpoint the parallels and differences today. I shall do so by highlighting points from Wallace’s article versus this time period.

-Overvalued but not overpriced equities (as perceived by Wall Street metrics and media) and once again, using the Artificial Intelligence pump, the same mantra is being promoted.

-Uninterrupted economic growth. 59 months in 1987. In this era, 17 months since the negative print of 2025, but 51 months since two consecutive negative back-to-back GDP prints for the undeclared Biden recession.

-During that era it was rightfully proposed that peace with the USSR was happening. In this era it is peace in the Middle East from an unwise conflict in addition to a soothing of relations with China, or at least an attempt to do so.

-Continuous buying of stocks by international investors. Think about that statement from 1987 and look at our markets today exposed to buying from not just Japanese investors, but sovereign wealth funds in the Middle East and of course, Europe.

-“The strong underpinning for the 100 largest-capitalized stocks.” That was actually the theory in 1987 in conjunction with Asian buying. Unfortunately it ignored the rot underneath the surface, especially in the abusive use of speculation via options and derivatives, much like the media is refusing to cover in detail for over a year now.

The article turned into an unfortunate marker for the week which would follow and the abject terror which hit Wall Street and Main Street as visions of 1929 danced through the minds of traders and retirees alike.

Does the US look similar to that era as far as arrogance and ignorance?

Unfortunately, yes.

The Dow was up 44% year to date before the crash of 1987. What is terrifying by comparison is that since 2022 and the lows of 2023, the S&P 500, a much broader and more appropriate measure of equities today is now up over 73%.

The United States became a massive believer in the concept of “portfolio insurance” to prevent a sudden liquidation event or crash.

Today, the Gods of Artificial Intelligence and algorithms have promised our financial overlords stability and no possible way a severe event could occur like the past; despite the same group of arrogant geeks never exactly explaining why so many flash crashes in indexes, commodities, or individual equities for no apparent reason.

Lastly, the belief that the Federal Reserve always knows best has yet to be tested like Greenspan in 87, 98, and 01. Or Bernanke from 2007 to 2012 and Powell in 2018 and 2020. Kevin Warsh just wanted to be left alone to do his thing and “normalize” rates to what the economic gurus think the cost of money should be; even thought the economic regime of what is “normal” has changed dramatically in the past forty years.

In 1987 the smart money gave warnings but no one listened after the crash and happened with the Savings and Loan crisis followed by a major recession after Gulf War I was easy to project if one followed the bond market.

After the crash of 1987, the S&L crisis plus post war reaction to a short period of skyrocketing oil prices was exacerbated to the point where economic instability of persistently higher prices led to an inversion of the 2s and 10s. This was followed by a parallel decline in both long and short term rates leading into the late 1990 recession. Weirdly enough, the recession occurred on the precipice of the personal computer and internet technological revolution of the 1990s; just as economic uncertainty and instability now is at the doorstep of the AI and robotics revolution.

Is THIS the Big One?

It truly is too hard to tell at this point. If an event were to occur leading to a massive market decline the circuit breakers at 20% would stem the fall and probably close the markets for a day. But would that stem a perfect Fibonacci retracement or correction of 38% or more? Unfortunately unlike 1987, no matter the course of action of the Federal Reserve, political reality indicates the Trump administration could potentially suspend trading until after the midterm elections should a major stock market crash occur in the next 40 days.

Such a reaction would definitely introduce massive instability into the US economy and worse, all of the liquidations and trading in the dark pools or off market trades (which account for over 50% of all equity activity) would eventually be reflected in the public arena when the major exchanges reopened. This is an outcome the gurus of greed never considered as a possibility that private off market action in equities and derivatives would eventually expose the public to such dramatic leveraged risk outcomes.

Personally speaking, the conditions of the economy, the markets, and political instability are not, I repeat NOT identical to 1987 or 2018.

Because this time it is different, and the outcomes will probably be substantially worse.

Flagship Macro Portfolio Strategy Update

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This evening I am writing to you from Midland, TX. This has been a fantastic start to the nearly 3.5 month journey ahead of me - and there are plenty of takeaways to share thus far that I will begin writing about tomorrow in a rolling ‘On the Ground Notes’ series over the course of the next week. With how busy the last few days have become - the Oil and Gas Strategy Notes will be resuming next week on Saturday evening - but our ‘On the Ground’ notes will be published through Oil and Gas Research directly. You can subscribe to that below:

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In terms of updates to our entire ecosystem - changes are well underway that were highlighted a few weeks ago, and these will be announced over the next several weeks as developments are finalized. Stay tuned for one or two full announcements/updates on the matter during this period of time.

As for the overnight market action - equities are up a blip and oil is off about a point as of the time of this writing (2:08am). I expect that with how bleak the midterms look, and with potential pending global G7 SPR action (+EU diesel action) this could be yet another can kick for oil inventories very briefly, but I do not think that it is sustained for any period of time. The theme that I am calling this as it pertains to the oil and gas trade(s) is the ‘patience through October’ theme, which remains in force as global inventories continue to run down with little sign of improvement in the months ahead. I expect that we will likely start to see a louder and more noticeable resumption of TACO headlines in the next few weeks due to midterms, and that is going to impact oil and gas equities, and coupled with an SPR release, be enough to briefly keep a lid on things. While the war did not flare up over the weekend, that could happen at any moment, and Iran/the IRGC may be waiting for the most opportune time to strike energy infrastructure pre-midterms so that people notice what’s going on and the in-party gets harmed significantly as a result. We’re getting quite close to being at the point where growth concerns come back into play - especially as aggregate data center construction slows - and the likely outcome will be the same as the last several years - just inflate and cover our eyes until no tomorrow.

This evening is going to be a brief kickstart to the week - and we’ll review the report schedule for the week, talk about the macro week ahead, look to ‘mind the gap’ that is currently the upside target for a fill in tech/high-beta equities, discuss what the truckers and builders are telling us, and wrap up with the crude and natgas start to the week.

Let’s dive in.

Report Schedule for the Week

• Monday - On the Ground Notes from the Permian Pt. 1

• Tuesday - War Note

• Wednesday - Oil and Gas Strategy Note + On the Ground Notes from the Permian Pt. 2

• Thursday - Midweek Macro Note

• Saturday - Oil and Gas Macro Note

Macro Week Ahead

This is a relatively light week as planned - Trump is scheduled to meet with Xi (which could actually be a catalyst for massive equity market action if it is coupled with loosening China/AI regs - but we will cross that bridge when we get there). Lots of Fedspeak as well which is noise in this era, and Costco is the notable company reporting this week.

Minding the Gap

In terms of equities - this action was completely to be expected as of about 14 days ago when the gap emerged at about the green bar level on the chart.

The structure of this setup is about to break hard one way or the other soon - but it does look like a resolution will come before the end of October.

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My time is winding down on the West Coast and it’s been a very fruitful two weeks. There are times that it’s nice to step away from the screens, machines, and never ending decisions & to do lists that we all get caught up in, in this ‘technology age’ or whatever the GenZ or Millennial folks might be calling it these days. Next up on the docket is the Permian Basin - and I will be joined by Six & a few others for a combination of on the ground research, discussions, and dealmaking opportunities that we are hoping to unlock in the coming weeks. One of the biggest changes from a social media standpoint in the coming weeks will be a much heavier emphasis on our Substack pages over the X page. There have been a lot of changes to X in recent months, and given our organizational changes that we are undergoing - especially in terms of juggling 5 different balls at once - optimizing where we’re putting out the best content matters much more to me than simply putting out content for the sake of staying relevant in the algorithm. Some of you have probably already noticed my page, @DonMiami3, getting a larger emphasis in the recent weeks…

More will come on some of the changes within the next two weeks as they are finalized.

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This FOMC meeting is being overhyped to a degree that I have not seen since the 2022 days, with full-style college football coverage expected tomorrow. Regardless of what the Fed does, which we’ll discuss below, the bond market has already done additional tightening that was reflected through movement in bond yields. It’s very obvious (apparently not to PhD economists - that there is a massive runaway fiscal problem that any administration, both sides, seem totally unwilling to address) and with that we’re starting to see said consequences both in the United States - but also around the globe. Couple that with the worst energy shock in 20 years, and there’s a recipe for higher inflation (CPI likely running about 4% YoY right now, don’t trust the Truflation figures)... While we may still see brief intermittent pullbacks on front month WTI, such as back into the mid-90s briefly, directionally there are many reasons to think that this cycle is going to be a structural change shifting to a higher base price level for a long time, rather than a cycle where the price move is short lasting. What we’ve seen thus far is still not enough to cause demand destruction, and relative to the supply situation, just about everything in the petroleum products space is still underpriced on a nominal basis.

In the Oil and Gas Strategy Note tomorrow we’ll discuss what I call ‘the final TACO’ and when it may be announced.

This evening we’re going to briefly review the report schedule for the remainder of the week - in which we’re going to cover a lot of ground previewing the upcoming Permian Basin visit. Then we’ll look at the diesel and refined products situation and preview the FOMC decision tomorrow, as well as discuss likely outcomes.

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Report Schedule for Rest of Week

• On the Ground in the Permian Basin, Oil and Gas Strategy Note (Wednesday)

• Portfolio Strategy Update (Wednesday)

• Welcome to the Permian - Midweek Macro Note & FOMC Recap (Thursday)

• Saturday - Permian Thoughts Part 1

Diesel and Refined Products Tighten Further

Front month WTI continues to act as expected, with a higher base right now in the mid-90s at current Hormuz flows and inventory levels:

Gasoil has almost tripled this year, and I’d like to see consolidation before the next leg up - though that may be very brief:

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This week we’ve got an interesting one with the FOMC decision ahead - where it looks like that the FOMC will raise interest rates by 25 basis points amid elevated & embedded inflation, and amidst the largest energy shock of the decade (surpassing the starting days of the Russia-Ukraine war). There are many factors at play here beyond energy prices, though they are undoubtedly going to play the largest role (along with other commodities) and bonds into and through Q4.

There has been a lot of outrage this week on X amongst the ‘beta bros’ - who are desperate to keep the high inflation status quo going to keep tech equities sideways or higher. The reality has been since May that inflation has started running too hot and putting a damper on the broader tech and AI trade…

As inflation pushed the final surge higher - we now have a dynamic where there are crosscurrents emerging among messaging - and we are still looking at an overall slowdown in data center construction going into 2027. Democrats have adopted more of an ‘anti’ data center messaging campaign strategy - as I suspected they would earlier in the year - and that is going to resonate strongly with voters this cycle. Even as the headline labor #s mask actual labor market weakness right now - and will continue to do so - the anti-AI messaging is going to continue to grow in popularity into 2027.

With some of these crosscurrents emerging - we have tech starting off the week on a softer note - but I would take it with a grain of salt right now. I suspect that October is going to be a very interesting and dynamic month with the energy shock, and we’ll talk more about that below. On top of the potential (and likely rate hike), which will not solve the underlying supply shock, Asian markets are also continuing to wobble - with the KOSPI failing to reclaim its major uptrend going back 12+ months. All of these red flags warrant paying attention to, and there is total apathy about the severity of this energy shock - which is mind-boggling…

This evening we’re going to cover the macro week ahead - which will focus heavily on the FOMC meeting, discuss FOMC odds and whether or not their decision will matter as yields continue to rise, highlight a few technical looks - notably from Asia, and wrap up with ‘the inflation problem’ - which is something that the Fed cannot alone solve… This time higher prices and shortages may have to do that.

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MacroEdge Schedule for the Week

• Tuesday: War Note

• Wednesday: Portfolio Strategy Update, Oil and Gas Strategy Update

• Thursday: Midweek Macro Note

• Friday: Radio Show - TBD

• Saturday: Weekly Oil and Gas Macro Note

Macro Week Ahead

Developments in the bond and energy/commodities markets will continue to set the tone on everything through the remainder of the year, as it looks very unlikely that the Strait of Hormuz is going to reopen by that point. The decision this week is going to get a lot of attention, but either way - hike or not - the bond market will do the work as investors love faith in Bessent and the runaway fiscal train in the US.

Housing & industrial data is scattered throughout the week.

• Wednesday: FOMC Rate Decision (USA), US Retail Sales

• Friday: BOJ Rate Decision (Japan), National CPI (Japan)

Reporting this week:

• FedEx

• General Mills

• Darden

FOMC Week and Odds

The Fed is very likely to increase the policy rate this week, by 25 basis points. Odds are anywhere between 75-90%, and I would peg it about 95% right now. With the President threatening additional tariffs if the Fed hikes, the bond market is well aware that the problem actually lies with Congress and not the Fed, even though the Fed has largely become an enabler of policy failure after policy failure.

In the prediction markets - odds are relatively similar:

(Kalshi)

As Tom says frequently on X… follow the 2Y and disregard the noise:

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