The MacroEdge Flagship model portfolio is up 5.01% since July 2 inception. Two meaningful changes to report in this note: one large upsizing of an existing position, and one new sleeve adding right-tail exposure, increasing our gross market exposure from 100% to roughly 110%.

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Good Tuesday evening MacroEdge Readers & Community,

In this edition of the War Note - we’re going to keep it very brief - and discuss the latest developments in the US-Iran War, with the primary focus being the escalation in tanker attacks in both the Bab-el-Mandeb and the Strait of Hormuz over the past week. In just the last 48 hours, there have been ~half a dozen attacks on tankers and cargo ships. What we’re seeing is the dynamics of the war shifting to an economic one - and the Administration in the US is between a rock and a hard place. With the Trump Administration backing off on Canadian tariffs and reducing them to zero overnight as Canada threatened energy-related actions, this is playing out in real time. I continue to harp on energy/commodity cyclical bulls being patient through the October timeframe as the setup takes time to develop. There remains a single, and very important, ‘TACO’ in the chamber - and that will be the next release/allocation announcement from the Strategic Petroleum Reserve. From that point, what we’ll see is a market acknowledge that they may help the front-end very briefly, but the back-end of the curve is continuing to reprice to higher levels. I believe that there is less than a 10% chance that Strait of Hormuz traffic will normalize this year - which means more expensive foodstuffs, goods, etc. On the energy price side - we have diesel trading right under the previous all-time high - with the diesel spread up to $102/bbl - and trading near $200/bbl. Jet fuel is moving higher, and there’s no reason the entire energy and commodity landscape can’t continue to reprice; just give it the next two months for the entire dynamic to continue adjusting.

Markets today moved flat to lower - the tech and AI names got hit hard - and several technical warning signals continue to flash red - including things like the ‘Titanic Syndrome’ - Hindenburg clusters, et al. The ‘TACO-team’ (instead of A-Team) will continue to throw out airbags to roll out Sam Altman’s and Dario’s bags onto everyone’s head sometime in the next 8-16 weeks, and this will of course have implications for market liquidity. We may even see a pivot to crypto and everything else if the 2022 inflation trade is reborn with vigor going into the turn of the year. I am still beyond surprised when I see academics stuck in their textbooks and theories try to drum up reasons for ‘deflation’, ‘disinflation’.... No, no, no. Do they go to the same stores and food places that you and I go to?

Tomorrow evening we launch the Oil and Gas Strategy Note series - covering positioning, portfolio strategy, operated & non-operated opportunities - and you don’t want to miss anything our Oil and Gas Research team is putting out. Subscribe below:

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In other news, the Saudi government has pulled funding for the F1 team for the 2027 season as lower exports start to bite:

Let’s dive in.

Tanker Attacks Accelerate - Hormuz/Bab Update

Hormuz transits are between 0 and 5 per day right now on the inbound/outbound readings:

I suspect that there is some traffic not being counted (even in the counters that are supposedly tracking shadow readings), but there is between 3-5mmbd leaving Hormuz, and the total outage is likely around 7mmbd. Still off the cycle high, but the effect is compounding as reserves continue to plummet, especially in the US. Expect another draw tomorrow in the EIA data, and I expect the next SPR announcement to come around the end of September window if there’s anything left to sell.

Bab traffic is dipping as tankers come under attack, too. The Iranian-Houthi proxies know that they can do real damage if they make the route uninsurable…

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Good Sunday evening MacroEdge Readers & Community,

This weekend was almost unusually quiet - but this is to be expected now, heading into midterms, with almost disastrous GOP polling/prediction market data rolling through - and the President trapped in a predicament regarding the Strait of Hormuz and Bab-el-Mandeb (also to be expected) as projected by many, including us here at MacroEdge, from before the war even started. We continue to sleepwalk toward a much more significant energy and commodity-related crisis (including the food-basket commodities) the longer both Straits remain impeded. On Tuesday evening, we’ll discuss the food-focused commodities in greater detail - but for the time being, I expect that the Trump Administration is going to start to get increasingly panicky about the Strait as we approach September. October is really the month of greatest return - but with the SPR approaching a sub-290mmb reading - we will soon be at another reading where they will have to announce an additional allocation for sale to the market - which I expect them to do now. After the DoE comments of last month about being able to run the SPR down to 70mmb (completely laughable without total structural destruction of the cavern infrastructure) - this is something that could, of course, occur as we head into the October timeframe with little sign of any Hormuz traffic flows.

(Hormuz traffic flows through 8/15).

In the overnight markets - which I would take with an absolute grain of salt given the low volume and final vacation week for most that’s ahead before school season gets into full swing - markets are flat across the board - with the Nasdaq up .15%, WTI spot up .5%, Bitcoin flat, and the Dow down slightly. Not much action in natural gas either - but that’s to be expected given current forecasts through the end of August.

We’ve got a lot of fantastic updates and strategy notes in the report pipeline this week - so stay tuned for everything in store.

For the evening - we cover the report schedule for the week, take a look at the macro week ahead - including what’s important from a macro data release (not much anymore) and earnings that might matter, discuss a brief update on energy/commods/& bonds, take a look at the latest from Asia, and provide an update on our Global Bubble Index for August - which we have not updated since early June. There’s a lot to cover, so let’s dive in…

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Report Schedule for the Week:

• Tuesday -> (War Note + Portfolio Strategy Note - Food Commodity Discussion)

• Wednesday -> (Oil and Gas Research Strategy Note - Thiel Goes Long Shale)

• Thursday -> (Midweek Macro Note)

• Friday AM -> (Midyear AI Bubble + Data Center Report Pt. 3 of 5)

• Saturday -> (Oil and Gas Research Weekly Macro Note)

• Sunday -> (Weekly Macro Note)

We will also be discussing the release date(s) for both the Oil and Gas Portfolio Strategy and broader Flagship Portfolio Strategy Basket. Strategy discussions will begin on Wednesday for Oil and Gas Research for both public and private markets.

Macro Week Ahead

I am expecting another snooze fest this week as we continue to march towards midterms and Jackson Hole / next FOMC meeting. It looks less likely now that the Fed will consider a rate hike in September - though I believe it’s the last chance they consider such an action this year with midterms coming up. Inflation remains hot relative to the 2% mandate, and continues to compound, and things like electricity prices continue to charge higher. Fools on X do things like adjust electricity prices chained to 1973 without adjusting for purchasing power decline, rendering such datapoints useless in real terms.

This week, macro data-wise, Japan GDP growth already came in slow, while in the US we have the NY Empire State data, NAHB release, permits/starts, industrial production, and claims data in the pipeline. None of this is particularly market-moving or relevant - and as highlighted below - energy, commodities, and bonds will likely be the driver of market action now through the end of the year.

Energy, Commods, and Bonds - The Key Themes for August - The Illusion of Abundance

The pattern on WTI is constructive and could continue to take several months to play out - the floor has moved higher here in the 72-74/bbl range - but no real reason to rush into anything directly as it pertains to spot price. Equities themselves in the E&P/drilling spaces remain much more attractive as they begin to reprice higher for longer energy prices as the Hormuz reality catches up to markets:

Continued below with Ozone —>

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Good Thursday evening MacroEdge Readers & Community,

This week validated our projections on both CPI and PPI - with t-ball inline prints that should be taken only at face value. These prints (designed for some midterm padding by the Administration) will not help the November numbers - and Iran continues to dig in as it pertains to Hormuz and Bab traffic - with ship attacks happening now for the last 11 days. I see it as very unlikely (and increasingly so) that we see Hormuz traffic levels normalizing before the end of the year - because Iran (by proxy of China) knows the damage that will inflict on the incumbent party.

Prediction markets are seeing the declining chance that I am - over the course of the year - that traffic is going to return to normal, pricing just a 36% chance of that happening.

Markets continue to mechanically tick higher on the back of a record July budget deficit month - nearly $500 billion - and this crazy runaway fiscal train is showing no signs of stopping for the time being until some sort of tax hike comes along (won’t be until post-2028) and both sides simply cannot help themselves by pulling forward everything toward the short-term solutions of today that they are addicted to. For markets - this has meant a continuation of a more ‘third-world’ style equity market - as the lower 90% in the ‘i-shaped’ continues to get bulldozed by stagnant wages and high inflation - and those holding most the assets are seeing the value of those assets compound at a rate that wages won’t ever come close to matching. The tariff refunds and buyback window have provided another short-term stimulative dose for markets and the economy, and conversations I’ve had with business owners have highlighted these refunds acting like a short-term boost for them. Whether or not it’s by design, the operators of the system are simply addicted to the short-term solutions, and that will have long-term consequences, as it has been for the last 20+ years.

Overall, not a very eventful week with some earnings here and there - layoffs remain at similar levels to the last four months - and retirements are surging massively on the back of this equity rally - which is distorting a lot of the employment data.

This evening, we’re going to dive briefly into the CPI/PPI T-Ball, discuss the snoozefest week that this has been, and highlight the continued need for cyclical patience as an energy trader in this record tight oil products market.

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There’s a lot in store this year with Oil and Gas Research and Portfolio Strategy in the pipeline - and you don’t want to miss it.

Let’s dive in.

CPI/PPI T-Ball

Rate hike odds for September have ticked lower - to about 35% on the back of a soft CPI/PPI reading ->

This was completely expected, as the last thing the Trump administration wants is a rate hike one month from the midterm election. While I don’t really think it will impact anything - September is probably the Fed’s last chance to hike this year - and we’ve also got Jackson Hole coming up - where we could get a Warsh that commits to taking this brutal underlying inflation more seriously (though I don’t totally have my hopes up). I continue to believe that regardless of what Warsh does now, energy markets and the bond market are starting to take the driver’s seat on the inflation fight, and that will probably have far more significant implications for the economy than a 25 basis point hike.

The CPI is 5+ years above target and still running hot. Another spike in energy prices, and this will begin ticking back up - feeding back into everything.

PPI saw some reprieve on the back of a softer commodities print:

These are really just noise at the end of the day - with the 10Y ticking slightly lower to close trading today, and we’re sort of right on the threshold where odds for a hike in September start to trend much lower if data continues to roll out in this fashion (even though yields and underlying inflation may not change by a whole lot between now and then).

Continue reading below with Ozone…

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Good Wednesday evening MacroEdge Readers,

This evening marks the beginning of our first ‘Portfolio Strategy Notes’ - for the time being, these will continue to operate under Ozone, so if you are subscribed to Ozone - you will get these updates, our commentary, input, and more over the next month or so. Stay tuned for an announcement sometime next week for more.

These notes will be delivered each Wednesday, and we look forward to what’s ahead with all things Portfolio Strategy.

Don

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MacroEdge Flagship Model Portfolio Strategy Note from Six (@SixFinance) - Head of Research

In Portfolio Strategy, we will be doing something different moving forward, something durable and easily trackable, and soon to be investable, but more on that very soon. The Portfolio Strategy notes will be focused on a discussion around an actively managed portfolio, utilizing securities that are easily traded without extensive trading permissions, and are not overly derivative heavy. We have spent the last six weeks testing out a new interface and semi-actively managing a model portfolio, on which more details will be shared shortly.

The above holdings make up the current composition of the MacroEdge Flagship portfolio, which will be adjusted dynamically, and position-level updates will be shared as changes are made. In fairness to investors in the product itself, this may be done with a lag. The Portfolio Strategy notes are designed to share insight into how the Flagship model portfolio is being managed and why.

Key Points:

1. The book is currently structured to endure a stagflationary environment of low growth and inflationary tailwinds. Should the Iran war reach a real conclusion, adjustments will be made.

2. Hard assets and international equities make up a large percentage of the book’s positioning, as we look for value and diversify risk from overheated U.S. markets.

3. Rate hike odds for September are dwindling, and recent payrolls combined with an in-line CPI report today should be sufficient to forestall a September hike.

What we think is happening:

The market is at odds with an ongoing energy supply shock which has impacted roughly 1/5th of global oil and LNG supplies. Transits through the Strait of Hormuz have dropped to effectively zero. Oil is held down by consistent rhetoric from the Trump administration that a deal is right around the corner. Levered speculators are being washed out of their positions by this rhetoric, punishing active speculators and warding off marginal potential speculators.

Iran has pivoted to the insistence of large reparations, sanctions relief, and permanent tolling of the Strait of Hormuz, something that is politically untenable for the United States. They have publicly stated their goal of outlasting Trump politically, which signals that the Iran conflict is likely to add tailwinds to inflation for some time and is likely to create a favorable climate for energy equities over the medium term.

The United States is running a deep fiscal deficit, and is courting a large 2027 military budget increase. Simply returning to long-run annual budget deficit levels would mathematically induce recession.

There is a bubble in artificial intelligence supply chains, namely semiconductors, as the AI buildout has powered this highly cyclical industry to levels and multiples that will prove difficult to sustain in the medium to long term. Semiconductors broadly are uninvestable at these levels, although they remain tradeable.

Cybersecurity is undergoing a secular demand boom, as new AI models and the coming (albeit further out than many of the quantum equities are currently pricing) quantum threat to legacy systems drives huge demand for protection.

Korean investors and U.S. AI funds like Situational Awareness and Value Aligned Research Advisors have induced a parabolic rise in many AI supply chain stocks that has now culminated in a washout in positioning, delivering the sector. With positioning reset, and hyperscaler earnings behind us, a relevering may occur. It will be difficult to get as much firepower back into that trade as on the initial parabolic move higher. Jensen is raising $500B for AI infrastructure, and Anthropic rushes to IPO into a positive liquidity environment.

The fiscal backdrop is broadly supportive of equity prices, and the Trump regime has shown itself to be highly supportive of risk assets. Shiller CAPE ratio is at the 99th percentile; this is one of the most expensive equity markets in history by that metric.

Much of the earnings boom seen this year is a result of circular investment over tangible end demand. Also contributing to this earnings boom are the mark-to-market gains of private market investments and SPCX that have been reported as other income by hyperscalers. This doesn’t presently have a substantial impact on our positioning, but it is on our radar.

Against this favorable backdrop for equities, sector rotation has been a major driving force, with sectors quickly coming in and out of favor, and hot money ruling short-term pnl’s. In this regime, selective trough buyers in out-of-favor industries are likely to be rewarded more quickly than in other market regimes, if inflections can be identified and prepositioned.

Current Positioning

Metals

Real rates have risen dramatically, sending gold and other precious metals into a bear market. Gold is now emerging from that bear market, and central bank gold purchases remain robust. Gold functioned the way a reserve asset is supposed to function, and was sold in the early days of the Iran crisis. The metals complex now appears to have built a base and is now breaking out again. This is a largely technicals-driven trade, and new lows would give us the impetus to exit these positions.

EIDO

Indonesia represents one of the most interesting macro opportunities on the board right now. A threatened downgrade from EM2 to Frontier market status caused a collapse in the equity market. Large institutions are sidelined until the decision is derisked, while the Indonesian government has responded forcefully and rapidly to make the adjustments in line with retaining EM2 status. If Indonesia is not downgraded, there will be a large initial pop that managers will be forced to chase.

BABA

Alibaba represents a single representation of the Chinese hyperscalers thesis that we have been discussing. Alibaba owns a large chunk of just about every major AI company in China, and their Qwen models power much of Asia. Cloud intelligence grew 38% YoY, and EPS is expected to aggressively ramp. This position is still in our book but has grown from a $101 basis.

CRK

Comstock Resources is majority owned by Cowboys owner Jerry Jones and is somewhat of a “wildcatter” natural gas play. Natural gas is oversupplied in the US currently due to an inability to export more natgas to supply global demand, but export capacity is rapidly ramping over the coming years.

WOLF/FRMI

These are sized small for upside exposure to datacenter power. Wolfspeed is a vertically integrated silicon carbide manufacturer, which is where the puck is going in semis, and Fermi has finally locked in its first tenant after a tumultuous entry into the public markets.

SE

Sea is a rapidly growing e-commerce business in Asia. It complements the broad Indonesian exposure.

TM

Toyota is, despite being a juggernaut in automotive, a sleeper in robotics, with the Toyota Research Institute and Woven City sitting at the forefront of robotics development. A multiple re-rating is in the cards for them once they start leaning into robotics PR, similar to how Hyundai did with Boston Dynamics.

HRL

Consumer staples play, offering branded pricing power, a conservative balance sheet, and a long history of dividend performance. This is somewhat of a cash alternative within the portfolio and may be reallocated to riskier assets depending on market conditions.

ZS/S

Cybersecurity laggards. While the PANW and CRWDs have seen parabolic share price appreciation, we believe that the current cybersecurity wave is a rising tide that lifts all sector boats, and these offer much better asymmetry than chasing after the sector leaders at this stage of the rally.

CAI/XRAY

CAI and XRAY were both added to the model deep in the hole. CAI offers high beta to the genomics theme, while XRAY is the leading supplier of dental equipment and is non-cyclical.

ZROZ

Zero-coupon bond ETF. Long-duration yields are likely near their cycle highs, and this position offers extreme convexity to any weakening of the economy, while providing a hedge and a source of funding for future risk positions.

We will be pushing out updates as we make model portfolio adjustments, and we will provide an update soon on accessing the model portfolio.

For more details, please refer to our Terms and Conditions.

Good Tuesday evening MacroEdge Readers & Community,

This evening we’ll be going over the start of the week, some of the latest war developments, preview what’s ahead for the remainder of the week, and more. This week has been largely uneventful - and we’re turning our attention to the ‘next best thing’ being a CPI report. There’s not a whole lot else this week other than a few earnings events in the sub $500bn market cap category, and we continue to monitor energy prices closely. Today, markets traded slightly flat to sideways - oil moved higher about a point, and diesel is nearing its highest daily close for the cycle - advancing overnight to its highest reading since April 7th. Many are surprised by how wide the spreads are versus refined products vs front month spot on WTI/Brent - but there are many contributing factors to that. Tomorrow evening, we’ll have the first of many energy strategy notes in the months and years ahead - these will arrive every Wednesday evening - and discuss on the public equity market side of things opportunities that the Oil and Gas Research team sees. It will also feature updates and discussions on movements to the Oil and Gas Portfolio Strategy - which will soon be trackable through a third party resource for those subscribed. Subscribe to Oil and Gas Research below:

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Oil and Gas Research will be foundational to many reports for the rest of the year, as I suspect it is going to play an important role in how market dynamics evolve between now and midterms - and from there on out through early into Q1. This year just seems to be accelerating in pace, and with school starting once again - soon we’ll blink, and midterms will be a weekend away, and then we’re looking at the holidays. The most important things to watch out for over the next few months will be bonds and oil/energy prices - spot & not. We’re also seeing the yen give up gains from the massive intervention round, and the Administration is seeking to run inflation white hot going into election day now to get assets pumping. The KOSPI is up over 4% overnight (Korean local time), and below we’ll look at the technicals of the major US indices in ‘flag or drag’.

A cool CPI tomorrow could send yields tumbling down temporarily and kick assets into overdrive once again -

Every report since Erika has been booted from the BLS has come in-line, so do I really expect a surprise tomorrow? Not really, because that would be ammunition for a 25bp move in September - which they want to avoid strongly. Either way, the AI trade will start to vibrate violently if rates are increased - just as we saw in 2000…

This evening we’ll take a look at the next reports in our research sequence, talk about the continuing standby in the war - and the dynamics of oil and diesel prices (with the potential for WTI to enter a new cyclical bull come November), and also explore the technicals of the major US indices in ‘Flag or Drag’, and continue on with a CPI Preview.

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Reports in the Sequence

• (Wednesday) Oil and Gas Research Note -> Strategy Note

• (Thursday) Midweek Macro Note

• (Friday) Part 3 of 5 - Midyear AI Bubble and Data Center Construction Update

• (Saturday) Redeye Macro Note - Ozone, Oil and Gas Research Macro Briefing - O&G

• (Sunday) Weekly

The Standby Continues

The *war* is now in a standby state - with Hormuz traffic effectively closed (about ~5mm barrels) transiting through on a daily basis on a 7-day rolling basis, so about 8 million/bbl lower than pre-war. While China demand has remained suppressed, that has begun recovering, and China cannot keep their foot off of the demand pedal forever. We’re also starting to see US exports drop sharply, which explains the large build today in the API report; the EIA report tomorrow will likely show something similar, and that will begin adjusting next week. The market will continue to digest data as it comes in - and patience is warranted through October and this midterms period as we figure out what’s going to happen with both Hormuz and Bab, and the conflict itself.

WTI - in a compression formation - I would call this highly pre-cyclical for something like an 08 move - so be patient.

For gasoline - the large flag is a bit different - but same sentiment as above:

Diesel is the tightest market - just shy of cycle highs - which should see $6/gal return for diesel in many states:

(Continued below with Ozone - The Standby Continues, Flag or Drag, CPI Preview for July, Gold’s Rebound and It’s Warning - John Galt)

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Good Sunday evening MacroEdge Readers & Community,

This evening since, I am starting the Weekly Macro Note considerably later than usual due to my laptop croaking while on the move, this update will be slightly more brief than anticipated. That’s actually an okay thing - since there is going to be no shortage of things to discuss this week, with reports coming Tuesday, Wednesday, Thursday, Saturday, and Sunday. If you missed the Welcome Note from our new MacroEdge Oil and Gas Research team, make sure to catch up on that. The link to Oil and Gas Research is below:

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In the Redeye Macro Note we discussed, briefly, some of the geopolitical events that have transpired over the weekend. The Administration is seeing an internal rift between those that want to continue the war in Iran and those who continue to seek out an offramp. Iran has been emboldened to the point of making their own demands, and it’s getting increasingly unlikely that the Strait of Hormuz reopens to pre-war traffic levels for at least the remainder of the year.

(Bloomberg - Renegade Resources)

The Houthis are also growing increasingly bold, striking Aramco facilities at will - and with midterms three months out now - I expect that the Trump Administration will try to navigate a tightrope with the situation to avoid an immediate spike in energy prices. The structural setup continues to look quite positive for oil - and as I’ve stated numerous times over the past several weeks - this bull thesis will require patience through October to start clicking into place now:

The tightening range should be positive for E&P names, and $79/bbl is really a sweet spot balance between consumers not getting crushed (yes - spreads are crazy) and producers doing very well. Keep an eye on the close for XLE this week:

Outside of the spin cycle continuing for the war - the macro-data continues to be overweighted by those on X and Substack for the time being - I do not think it’s going to be particularly important until midterms now. Oil and the bond market are going to play a much higher level of importance than the former items - and with data quality in the absolute tubes - I’m not sure why we’re obsessing over these releases like they’re a sports draft. The CPI reading should show those negative MoM base effects rolling off from the June print & same goes for PPI. Look for any signs of real retail sales slowing down - though I do not think this shows up until August/September data based on early signals I am seeing. Some of these datapoints will shift the September odds - and CPI will play a role in a possible September hike. If the Fed doesn’t hike in September, the bond market will do the work for them going into midterms.

This evening we’ll take a look at the macro week ahead - looking at data releases and earnings, discuss the homebuilder situation update, take a look at the transportation sector, and highlight the bulls that we see back over their skis - as gauges like the BofA sentiment reading hit all-time highs and we’re seeing deli-shop workers and salespeople quit their jobs to trade and sell courses full-time.

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Report Schedule for the Week

• (Tuesday) War Note

• (Wednesday) Oil and Gas Research Note - Portfolio Strategy Briefing #1

• (Thursday) Midweek Macro Note

• (Saturday) Oil and Gas Research Note - Macro Briefing, Ozone - Redeye Note

• (Sunday) Weekly Macro Note

Macro Week Ahead

• Wednesday - CPI

• Thursday - PPI

• Friday - Retail Sales, UMich Prelim - watch the inflation reading signals here, if for anything

Earnings >$300bn market cap: CSCO, AMAT

Homebuilder Situation Update

Builders popped last week but they’re sitting on near-record unsold inventory.

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Good Saturday Evening MacroEdge Readers & Community,

It was a very warm week last week and felt shortened by my travel on Monday. I had a very successful few days in Arizona, and it’s good to be back in the office and firing on all cylinders. This is going to continue to be a very busy second half of the year, and everyone at our organization is rocking and rolling full steam ahead while it seems that many others have logged off for their final summer ‘siestas’... Now, don’t get me wrong - I don’t mind a siesta every now and then; it just seems like a large part of our society lives on a perpetual vacation subsidized by a smaller and smaller group of producers - and I think that math is going to be very, very problematic in the long run for Western countries.

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This evening we’re back with the Redeye Macro Note to cover the latest geopolitical events from the Friday evening & first half of the weekend, discuss the *hilarious* BLS release on Friday morning, and other pertinent macro data from the previous week. It continues to look very unlikely that we’re going to see any meaningful shift as it pertains to the Strait of Hormuz for the time being - with ship traffic remaining near zero on a moving-average basis - the clock to the *red alert* days continue to tick lower:

While we continue to subsidize demand with the SPR for the time being - this dynamic is not sustainable on a long-term basis, and cyclical energy bulls should remain patient through October while this hot potato dynamic continues to mold itself into form. US officials are starting to get antsy about getting out of the conflict due to advanced munitions shortages (that are also impacting Saudi Arabia, Kuwait, Bahrain, & Iraq) - but today, it was noted in an Israeli news report that they may attack again if the US Administration is unwilling to take said actions to continue the conflict. Just as I said from the beginning of this thing - the general theme is that there seems to be absolutely no plan or objective to this day - and fighting a war in the Middle East against the most formidable regional opposition in the region (in hindsight) is never, ever, a good idea. All of this to say, I continue to think the clock is ticking on *everything* right now - from the AI/data center trade, to the labor market, price levels on everything, and many of the other things going wrong in the United States right now. When the majority of a society has to resort to gambling and nihilism to stay above water on the cost of living, and we see travel data like we’re seeing now - there are many flashing lights that things are going wrong under the surface (and frankly, have been for a long time)... This isn’t some doomer take - for the Wall Street economists and portfolio strategists who think things are just dandy - I suggest they get out and take some of the trips that I’ve taken this year to get a perspective on the real world beyond the guard gates & golf courses… It’s quite eye-opening.

Anyways, for the next couple of months now on the energy front - we’ll continue to ‘knock on Heaven’s door’ as we TACO-waltz around the minefield and continue to drain critical energy supplies. They’ve bitten off more than they can chew - and it’s going to sting them… yet inflation is the only tool they have to keep nominal growth going… what a bizarre dynamic we’ve fallen into.

This evening - we’re going to briefly cover the following:

• Latest Geopolitical Events

• Bizarre BLS Release and Nonfarm Summary

• Pertinent Macro Data from the Last Week

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Next Reports in the Queue:

• Sunday: Weekly Macro Note: Macro Week Ahead, Homebuilder Situation Update, A Looking at Transportation, Bulls Over Their Skis for a Month or Two More

• Tuesday: War Note

• Wednesday: Oil and Gas Research (Portfolio Strategy & Briefing #1)

Latest Geopolitical Events

The US has paused attacks for a third straight week - as we head into midterms - there’s going to be a growing rift on attacks during this period. There’s now between 8 and 12 weeks before things get to *red alert* levels on the oil inventory front - and some are looking for a way out of the conflict - but I think it’s rather unlikely now that we see Strait traffic normalize… We’re shifting to the ‘denial… acceptance’ cycle among officials right now - and while there are still TACOs to come to control the front of the oil curve, gas prices are notably higher right now than they were when RB futures were at these levels at the earlier low of the year.

Houthi forces carried out two attacks on Aramco assets this evening (US time):

Continue reading below with Ozone (Latest Geopolitical Events… Continued, Bizarre BLS Release and Nonfarm Summary, Pertinent Macro Data from Last Week, and More)…

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Good Thursday evening MacroEdge Readers & Community,

This week has absolutely flown by with my Monday travel day - and it already feels like we’re nearing the end of it. Hopefully you had some time yesterday evening to catch up with our announcement relating to Oil and Gas Research. This addition to MacroEdge is going to be transformative - especially as we continue to navigate a complicated global energy landscape. Much of theme for the remainder of the year in Oil and Gas Research I expect to revolve around being patient for the next few months as the inventory situation and reality catch up to markets - but with things remaining as dynamic as they and governments intervening as much as they are around the globe - we will be providing all of the necessary information and data to remain diligent and make good decisions during this murky period of time. Make sure to subscribe to Oil & Gas Research below, and don’t miss the Saturday welcome note from the team:

MacroEdge O&G Research

In markets today, we saw some of the euphoria from the front half of the week fade as it has become clear that the headline lies can only work for so long from a market manipulation standpoint. While they aren’t done being deployed, the clock continues to tick on the oil inventory situation both in the United States and globally. Notably, July marked the first time in decades that the US imported no oil from Saudi, and with our declining exports in recent weeks, it’s clear that barrels are starting to be re-routed domestically as the market for them becomes more competitive. The ‘TACO trade’ will remain intact through the midterm period, but that’s just 3 months away now, and the Iranians know they can inflict maximum pain by simply doing very little, keeping the Strait effectively closed, and attacking tankers in the Red Sea through their proxies in Yemen. While the entire region seems to be on the verge of ‘tinderbox’ status once again, there’s also the entire market situation ex-oil everywhere else in the globe that remains completely unhinged, too.

Tomorrow is a non-farm payroll day, which we’ll discuss briefly below - and I expect that the Trump Administration will likely cook something mid-range or to the downside in order to cap a further yield rise in the interim. With a rate hike very much on the table for next month (about 70% pricing for a hike this year) - bond vigilantes have arrived on the scene late, but will play an important role in potential Fed action for the remainder of the year. I think if we get a hot labor print for July, again - even not putting much weight into these initial NFP reports any longer - a September rate hike will shift to 80-90% odds immediately following and then retreat over the coming weeks. If there’s a super hot print, it may actually have an opposite reaction than implied in a ‘good headline’ as the market is looking for lower yields.

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This evening - we’re going to cover:

• Reports for the Remainder of the Week

• The Energy Situation This Week

• NFP Preview - July

• Asia - Clock Ticks On

Reports for the Remainder of the Week

• (Friday) AI Bubble and Data Center Construction Situation Part 3 of 5

• (Saturday) A Welcome Note from the Oil and Gas Research Team - O&G Research

• (Saturday) Redeye Macro Note - A Brief Recap on NFP and the Week, MacroEdge Global Bubble Index Update

• (Sunday) Weekly Macro Note

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The Energy Situation This Week

Oil traders (and bulls) just need to keep their heads screwed on and stop looking at 5-minute charts, as I continue to see on X:

The current setup continues to look very constructive - even in the face of the relentless ‘TACO’.

Continued below… “The Energy Situation This Week Continued… NFP Preview, July… Asia - Clock Ticks On’ - read the full report with Ozone:

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Good Wednesday evening MacroEdge Readers and Community,

This evening is full of exciting updates as to what we are rolling out this month under our Macro Research offerings over the course of August. Part 3 of 5 of our Midyear AI Bubble & Data Center Construction series will be available on Friday afternoon - between the Midweek Macro Note - available tomorrow evening, and the Redeye Macro Note - available Saturday evening.

MacroEdge Ozone will continue to serve as the backbone of our global macro research, data, strategy, commentary, and more - but these new offerings serve as enhancements for those individuals and firms looking to build on the MacroEdge experience and take it to the next level. Many will find the experience of all three: MacroEdge Ozone, MacroEdge Oil and Gas Research, and MacroEdge Portfolio Strategy - to be the best way to experience MacroEdge, and I would recommend it as such for a variety of reasons. Each offering will bring something unique and different to the table - as outlined below.

This update is going to be kept brief to go over each one of our new offerings on an individual basis, and we’re going to skip the non-op oil and gas component until Saturday - when we’ll have more time to cover it in greater depth.

As for the next Ozone Reports - and Oil and Gas Research Reports - the schedule is as follows:

• Thursday (Midweek Macro Note)

• Friday (Midyear AI Bubble and Data Center Construction Report, Part 3 of 5)

• Saturday (Redeye Macro Note) and Welcome to Oil and Gas Research (O&G Research team)

• Sunday (Weekly Macro Note)

Below you will find the breakdown of each offering and the soft and hard launches - two of three of these additions will be expanded here within the Substack ecosystem - and will be extremely easy to access and subscribe to for the nearly 23,000 of you reading and following us now on Substack.

Also - a very nice comment to echo the sentiment I have about everything we’re building both here at MacroEdge, and beyond in our other portfolio companies - thank you to Em from Japan:

MacroEdge Oil and Gas Research

Arriving Saturday 8/8 for Soft Launch, Wednesday 8/12 for Full Launch

Follow the Oil and Gas Research team on X at @MacroEdgeEnergy

@MacroEdgeEnergy on X

The welcome note will be available on Saturday 8/8, while the first report will be available on Wednesday 8/12.

Energy markets are not governed by financial abstraction or surface-level headline narrative. They are driven by physical realities, structural capital cycles, and complex wellhead economics.

MacroEdge Oil & Gas Research is our entry-level intelligence platform built explicitly for those deploying capital across the energy value chain. We bridge the gap between high-level global commodity macro: tracking structural underinvestment, physical supply-demand imbalances, and capital flows, and ground-level asset performance across upstream operations and non-operated working interests.

While consensus follows lagging data and rear-view financial modeling, MacroEdge evaluates the structural drivers moving the sector before they manifest in price discovery. Whether you are an upstream operator, non-operated working interest holder, private equity sponsor, family office, or independent investor, our platform provides the empirical rigor and actionable strategy required to navigate volatility, manage downside risk, and capitalize on structural market dislocations.

What’s Included with Oil & Gas Research

Subscription Pricing:

• Standard Tier: $75 / month (or $750 / year)

• Team Tier: 20% discount for 3+ users

• Corporate Tier: $2,000 – $5,000 / year (Custom institutional seat allocations & direct advisory access)

Subscribe at MacroEdgeEnergy.substack.com/subscribe to upgrade.

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1. Weekly Oil & Gas Macro Update (Every Saturday)

The Pulse of Oil & Gas: Every Saturday morning, we deliver a deep-dive macro synthesis dissecting the physical and financial forces driving the energy complex. We look past headline noise to map out structural shifts across:

• Physical market fundamentals (crude & natural gas balances, inventory draws/builds, decline rates)

• Global capital expenditure trends, cost of capital, and rig/frac spread dynamics

• OPEC+ strategy, geopolitical friction points, and global trade flow dislocations

• Broader macro liquidity, monetary policy impacts, and inflation dynamics

2. Weekly Strategy Update & Live Portfolio Access (Every Wednesday)

The MacroEdge Oil & Gas Portfolio: Every Wednesday, we release our dedicated Strategy Update, walking through our active positioning across public equities in the energy sector. As a subscriber, you get real-time transparency into how we translate macro frameworks into actionable risk management and portfolio execution.

• Real-Time Portfolio Access: Continuous visibility into active holdings, asset allocation, and cash positions.

• In-Depth Commentary & Analysis: Comprehensive breakdowns of the fundamental thesis behind every position.

• Trade Update Notes: Instant alerts and notes published as trades, rebalances, and exits are executed in real time.

3. Real-Time Intel, Market Event & Headline Flash Notes

Energy moves fast, and structural dislocations do not wait for a weekend column. Throughout the trading week, subscribers receive frequent, high-conviction updates covering:

• Breaking market events, supply disruptions, and policy/regulatory shifts.

• Real-time analysis of earnings, M&A activity, and A&D deal flow across key basins.

• Tactical trade setups, opportunistic entries, and strategic risk-mitigation notes.

Position Your Capital Ahead of the Market

In an era defined by capital discipline, geopolitical realignments, and shifting energy regimes, static analysis leaves money on the table. MacroEdge Oil & Gas Research equips you with the institutional-grade data, field-tested expertise, and forward-looking clarity needed to act before the crowd catches on.

Subscribe at MacroEdgeEnergy.substack.com/subscribe to upgrade.

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Looking for More for More? MacroEdge Oil and Gas Economic Advisory Services and Offerings Available on Tuesday 9/1

At MacroEdge, we view energy through the dual lens of global macroeconomic drivers and ground-level asset economics. We provide specialized economic intelligence and strategic advisory designed specifically for those operating and deploying capital in the oil and gas ecosystem.

With decades of combined experience in the industry, our vantage point is fundamentally different from traditional financial desk research. We look past rear-view economic indicators to focus on leading physical signals: rig counts, wellhead economics, infrastructure bottlenecks, and capital flows. By synthesizing macro liquidity and global supply dynamics with micro-level asset performance, we pinpoint emerging market dislocations, supply-side constraints, and asymmetry in risk well before they manifest in consensus forecasting.

We partner alongside private equity, family offices, upstream operators, and non-operated interest holders to translate macro volatility into a competitive advantage. Whether evaluating deal flow, hedging exposure, or timing capital deployment across the commodity cycle, MacroEdge delivers the rigorous, data-driven foresight required to position capital ahead of the market.

Interested in custom institutional research, bespoke modeling, or strategic board-level advisory? Contact our team directly to discuss full Economic Advisory engagements.

O&G Economic Advisory

MacroEdge Portfolio Strategy

Arriving August 27th for Soft Launch, August 29th for Full Launch

Portfolio Strategy is a subscription offering at $85/mo or $900 annually, giving members book access to our flagship strategy vehicle. Subscribers get access to both MacroEdge Portfolio Strategies — the MacroEdge Global Macro Flagship Strategy and the MacroEdge Oil and Gas Strategy — along with strategy notes, ongoing updates, and a once-a-week Portfolio Strategy update to keep you positioned as the market moves.

More information available next Wednesday, following the first official Oil and Gas Research publication.

I am thrilled to see where these new offerings take us for the rest of the year and beyond, and look forward to enhancing decision-making around the globe for you, our readers, clients, and community members.

Have a great evening, and catch you tomorrow.

Don

For more details, please refer to our Terms and Conditions.

Good Tuesday evening MacroEdge Readers & Community,

Today marked another ‘TACO-driven’ melt-up day, starting from the very early morning. At about 4am, we got another headline that Qatari mediators were confident they could have the Strait of Hormuz reopen within 24 hours… To match, the Secretary of the Treasury (who now comments on war matters) says that by the afternoon, or tomorrow afternoon, there would be an announcement to reopen the Strait of Hormuz. We’ve seen this same playbook now for almost 6 months - and the nominal-train continues to run itself hot (and off the tracks). It remains a very murky environment - with things like crypto actually starting, from a technical perspective, to look more constructive, while the high-beta names have all shot right back near or to all-time highs. The S&P and Dow both hit all time highs, with the Russel and Nasdaq not particularly far behind. This was expected with midterms now just 3 months out, and measuring the true ‘borrowed time’ in nominal terms remains a very complicated task. The action once again looks similar to April - when the Administration began a major sequence of TACOs against war escalation. Needless to say, this pro-asset melt-up regime remains inflationary, and it is unlikely that much changes, at least in midterms, from a policymaking standpoint towards assets now - barring a shock to the system at the moment, like 1987 - that some very smart minds are now highlighting. I think it remains difficult to get very bearish nominally - barring a black swan event like such - and until crypto leads lower to a greater degree - they’re going to continue the game of musical chairs:

I think an oil/price shock remains one of those potential events - as the Administration is simply kicking the can on a day of reckoning in oil markets. By pushing the front-end of the curve lower, they are only pulling forward relief in the interim. Broadly speaking, the technicals for the energy space continue to look positive and overlooked, amidst relentless government intervention on a global basis (a line once used frequently by Charif Souki, for those around in the Tellurian days). While the environment is unpredictable, we can simply play what is in front of us - and continue to watch for a major inflection point in energy markets that finally pushes things past the point that interventions can no longer stop momentum (ie: a snowball rolling down the mountain). We’re not at that point yet, but it’s something that by September could start rearing its head if the Strait of Hormuz remains in this *effectively closed* status. I find it highly unlikely that the IRGC will hand back control over the Strait - and it appears that there are battling factions now over the matter in Iran.

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This evening - we’re going to take a look at what we’ll be covering the remainder of the week - including with our new offering release tomorrow evening with Oil and Gas Research, Portfolio Strategy, and Oil and Gas Economic Advisory services, and then shift into the discussion on our report topics:

• A Crude Time for Patience

• TACO-Howitzer

• Latest Hormuz Developments

• Asia Situation Pt. 7

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Remaining Reports for the Week

• Wednesday: MacroEdge Offerings Arriving in August, Non-Op Oil and Gas Opportunities

• Thursday: Midweek Macro Note

• Saturday: Redeye Macro Note - Reviewing the Week

• Sunday: Weekly Macro Note

A Crude Time for Patience

Crude oil was *once again* down relatively sizeably today on the back of a double-TACO before market open. The first came from the Qataris - and the second came from the Treasury Secretary, who stated that the Strait of Hormuz would be reopened by this afternoon (8/4) or the following - leaving this statement one more afternoon away from being false, yet again. It’s the same playbook we’ve heard over and over again for the past 5 months - a deal is around the corner, Iran is begging for a deal, on and on… The bigger reality is the US’ inability to wage war against a large regional opposing force that has significant natural resource control. The equity market and bond market have rendered the US in a fragile state, and escalation is something that the Administration will continue to dance around even as the wheels come off of the bus for one reason or another.

Yet another ‘TACO’ headline for the evening as of about 11pm ET:

More and more jawboning with little to no context - but proving successful time and time again - and they’re now almost 1:1 to each tanker attacked. I had this discussion earlier in the day - but it’s important to remember who’s at the levers of power right now - with one of them being a man who made a living manipulating the markets. Until we see a sustained bounce, or a retest of the uptrend and a move higher - this bleed lower has almost become mechanical - sort of like a volatility instrument:

While I am not sure it will be positive for equities on the aggregate for Hormuz to reopen - because the magnitude of damage will then have to be analyzed - I could absolutely foresee a situation where they announce that Hormuz is reopened and do a press conference even if it’s not. Going into midterms, I don’t think there’s going to be very many brakes applied to another nominal impulse - and they will be trying to spool up another blowoff at all costs, as we saw from April to early June in equities.

(Continued below: A Crude Time for Patience, TACO-Howitzer, Latest Hormuz Developments, Asia Situation Part 7)

Continue reading with Ozone…

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Good Sunday evening MacroEdge Readers & Community,

I hope you’ve had time to catch up on both Part 2 of 5 of our AI Bubble & Data Center Construction series on Friday evening and our Redeye Macro Note yesterday evening. There was plenty to take away from the broader data center theme - which is now starting to experience broadening pressures - and yesterday we covered the enormous ‘TACO’ announcement from the evening and how it will weigh on markets, particularly in the oil and gas space this week. We also have very public announcements on the part of the Treasury in ‘yenterventions’ - with the yen popping considerably higher in recent days as the US has begun to intervene to save the yen from further weakening. While all of this is happening, it looks like the administration in charge is ‘pulling all of the stops’ to intervene in markets now going into midterm season, which hits full swing come September. With just 3 months until the midterms, the Trump Administration knows that with high energy prices, inflation, and poor nominal equity performance, they are in for a world of hurt in election performance terms.

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This weekend we saw one of the largest ‘TACO’ announcements we’ve seen to date - which we discussed yesterday evening. Friday evening after market close, there was an announcement that the Trump camp was going to begin a massive bombardment against critical Iranian infrastructure - which was quite obviously a fallacy if you’ve been following action in the bond markets and in oil markets. I highlighted Friday evening that the 10Y action, oil prices, and sideways action were the perfect formula for that announcement to never happen - and sure enough, come Saturday evening it was all walked back. Interestingly enough, this corresponded with the launch of the $100K/month paid Truth Social feed for insider and early traders to get the posts before they are leaked to the public. What’s interesting about that is we will now know that there has potentially been a post if markets start to move before any headline has even hit the tape… I don’t expect this service to have a very useful lifespan in the post-midterm world, but for the next 3-4 months, there’s a viable revenue stream for the family as the war continues.

In futures markets overnight, the Nasdaq is up about 0.8%, while the Dow is up about 0.5%. WTI is down about 5.5%, which I expect will reverse as soon as we have confirmation that the Iranian side is not participating in this suggested ‘deal’ called-out on Saturday evening. There has already been a tanker targeting during this period of time, but I do not expect Iran to retract control over the Strait of Hormuz for at least the remainder of the year. The reality is that a major part of the war has shifted to the commodity-price front and we’re seeing that play out with these ‘TACO’ headlines. Iran does not want Brent to live believe $85/bbl, and the US certainly does because of the inflation risk and underlying price pressures, and China also wants to see oil prices at a level with their buffer that punish the United States, but don’t harm demand to any great degree from the manufacturing products that they sell… ie: a recession, but not a depression. Everything in this world of instantaneous revolves around immediate policy intervention - and from South Korea, to the US, Japan, and beyond - that is precisely how policy operates in the world today.

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Tonight we’re going to keep it quite brief on the report side of things - because things are changing so quickly and we’ve got the next update coming Tuesday evening. The ‘run it hot’ dynamic that is being pushed is eventually going to contribute to a September rate hike whether or not it is desired, and that’s regardless of oil prices being at $70/WTI or $90/WTI. I’ve positioned ourselves on the oil and gas side to be rather insulated from these silly swings - and I would focus on the businesses that maintain a very low cost basis to benefit from the near-inevitable price upside when it comes. Such is the commodity world… right?

This evening - we’re going to cover the following, briefly… I had a fantastic and very brief weekend in southern Arizona, and I look forward to getting back to the office tomorrow evening. This was a rather successful trip, and I will share more on it in the Wednesday evening update - talking about our operation from a higher level. Weekly Macro Note breakdown:

• Reports for the Week

• Macro Data Ahead

• Assessing the TACO Magnitude

• The Carry Trade and Asia Update Pt. 6

• Crypto… Not a TACO Participant?

Since there’s been so much data published on our end in the last 48 hours, I want to make sure everyone stays caught up. If you haven’t read the last two reports, I highly recommend

Reports for the Week

• (Tuesday) War Note

• (Wednesday) MacroEdge Offerings Arriving in August, Non-Op Oil and Gas Opportunities

• (Thursday) Midweek Macro Note, Global Bubble Index Update

• (Saturday) Redeye Macro Note

• (Sunday) Weekly Macro Note

Not yet upgraded to paid MacroEdge Ozone…? Don’t miss all of our research, data, portfolio strategy, and new releases coming throughout the month of August below:

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Thank you all for getting us in the Top #100 financial Substacks two days in a row this week, to match. I am confident that by October, we’re going to live on the Top 100 list on a much more permanent basis - which speaks volumes as to the power of our data, research, team, and so much more:

Macro Data Ahead

• Monday- (US) ISM Mfg, S&P Mfg, Construction Spending (June)

• Tuesday - (US) JOLTS, US Trade Balance

• Wednesday - (US) ISM Services, ADP Employment Change, S&P Services

• Thursday - (US) Q2 Productivity and Claims (useless…)

• Friday - (US) Nonfarm Payroll Data

As another employment data week - I think these reports are meaning less over time. With such flawed methodology, reporting, and poor survey response rates - I am paying less and less attention to them over time. A lot of what they serve to do is reinforce the popular narrative (or things already known - like surging retirements) while at the same time providing cover for a much weaker labor market than they are making it out to be.

For mega-cap earnings this week - just Novo and LLY… so not a whole lot there.

It’s going to be a geopolitical + employment-focused week, and continue to pay attention to the events in Japan as the administration remains extremely active in markets (now across the globe), which is a theme I expect to accelerate going into midterms.

Assessing the TACO Magnitude

While enormous in terms of the capitulation level (Trump essentially giving up the war and Iran many things that they want), I do not expect this latest little pause to last any serious amount of time. That is primarily demonstrated from the last 6 months of the conflict - and due to the fact that Iran wants to keep Brent above the $85/bbl level - capitulation on their end, to terms not written by them - seems very unlikely.

For the magnitude in the overnight hours:

This is a relatively muted reaction in everything except crude and gasoline. Both are down about the same this evening - and I expect that this current reaction in the oil markets lasts for about 3-4 days before changing course once again. The war remains very fluid, and I do not think it will be ending anytime soon, even if we see a resumption in the very fragile MoU that was agreed to the first time around. I do suspect that Iran and China are well aware of the TACO at this point in time - though this time is unique because there’s really no offramp for Trump even if he continues to try and search for one.

For WTI - another Sunday-night gap down driven by a Saturday evening headline:

The tech sector is trying to land outside of this parabolic rounded top move - but this is not a certainty going into mid-week.

(Continued below: Assessing the TACO Magnitude, The Carry Trade & Asia Update, Crypto… not a TACO Participant?)

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Good Saturday evening MacroEdge Readers & Community,

This is actually being written mid-morning as I head cross-country for 2 days of summer Arizona golf… It’s a great time of year to get out on the courses in Arizona because summer pricing is in effect and there’s usually no one out there past the 11am tee time. Ever so often, these weekend trips are a great reset to get some clear thinking and go over everything that we’re building. August is also a special month since it’s the month that I made the decision to exit the corporate sphere, now almost 3 years ago, and transition into our organization in a full time leadership capacity.

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There’s a lot of exciting things that continue to come out of our organization, and the second half of 2026 is going to be a period of growth and acceleration - both in and outside of the global macro sphere. More to be discussed on this on Wednesday in its own report/update as I outline some changes coming in the second half of the year. Under our Macro Research division, we will be introducing Portfolio Strategy, Oil and Gas Research, and expanding our economic advisory solutions to oil and gas firms across the Western Hemisphere. Included in Portfolio Strategy will be two flagship portfolio strategies managed by our team, key market driving insights, and real-time updates to said strategies. Under oil and gas research - like it sounds - this will also be a standalone offering focusing strictly on the oil and gas world. The sector continues to be grossly underweighted in market cap terms relative to its importance - and as worsening demographics globally come into greater play, I continue to believe we’re heading toward, and not away from, an era of much greater scarcity amid the print/inflate/pray models that we continue to see implemented across the West and Asia. Our economic advisory solutions will be expanded to the oil and gas sector, additionally, and made available primarily for upstream & non-operated financial firms in the sector. More on all of this will be available on Wednesday in much greater detail. As discussed on Thursday evening, as well, our new partnership with two oil and gas firms is enabling us to expand greater into that space - and as new opportunities come available for alternative investments, I will be sharing this information for those interested in the entire oil and gas landscape beyond the very small public equity world…

In this brief Redeye Macro Note (yes, my eyes are indeed red from the very early morning flight time)... we’ll be covering the following:

• Reports in the Pipeline

• Macro Data from the Past Week

• Weekend Geopolitical Events, Thus Far

• The Latest Energy Technicals

Since this report is being drafted morning/midday depending on your timezone, it may not have the absolute latest geopolitical/war/headlines, so I recommend checking our X account (@MacroEdgeRes) in the event anything does come up. On the macro data side of things, the last week was mostly uneventful outside of

& thank you to our fantastic community for getting us back on the Top 100 Rising list to start this very warm weekend! It has been great engaging with many of you in the comment sections, etc., of recent reports (and on X)... it’s something that I am trying to get better at amidst greater schedule demands.

Reports in the Pipeline

• (Sunday) Weekly Macro Note - What’s Next for Bond Vigilantes, Japan Satellite State Status, Week Ahead, Asia Update Part 5

• (Tuesday) War Note

• (Wednesday) A MacroEdge Update - What’s Ahead and What’s New in 2H of 2026

Not yet a MacroEdge paid subscriber? Upgrade to paid Ozone on Substack to get all of our reports, data, commentary, portfolio strategy, and much more - with more exciting things on the way this month.

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Macro Data from the Past Week

In terms of notable macro data for the past week, GDP was already discussed in the Midweek Macro Note. Real growth is anemic with inflation absolutely ripping (it continues to do so, contrary to the opinions of those on X) - just look at the bond market.

PCE came in hot again (the month/month decline is noise) - and rate cut odds are ticking higher as a result:

This Administration only knows one thing: inflate, inflate, inflate - and we’re going to see them attempt to do just that - especially with midterms only being 3 months away.

September rate hike odds (25bp) are now about 70/30:

The FOMC dropped the ball on a rate hike, and Warsh is being overhyped as a 5D intellectual chess player… What I saw was not Greenspan in any way, shape, or form - but we’ll see as things progress into the September meeting. If Warsh does get consent to cut the number of FOMC meetings per year - that would actually be a tremendous victory for us all.

10Y reaction to the FOMC meeting and press conference:

The 10Y was even more extreme - again hitting multi-decade highs.

In Japan, they held rates as expected, and outside of that event - they may hike one more time this cycle before the wheels start coming off the bus. Note the correlation over time between the BoJ beginning to ease and the wheels coming off the bus of the global economy - they are generally very coordinated - and even more so given how much this political administration is pulling Japanese decision-making under their influence.

Weekend Geopolitical Events, Thus Far

(Continued below: Weekend Geopolitical Events, Thus Far - A ‘Supersized’ Trump TACO, The Latest Energy Technicals, & Much More’…)…

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Good Friday evening MacroEdge Readers and Community,

This evening we’re going to have a shorter (following some feedback and comments to Part 1) look at the state of data centers and data center construction. In Part 1, I focused heavily on the what, why, and buildout - so if you haven’t yet read through Part 1, I recommend doing so that Part 2 makes sense.

Part 1 Table of Contents:

The report came at an apt time in the momentum/AI/data center trade - as large unwinds began to occur over the last 14 trading days (especially with the liquidation of the ‘Situational Awareness’ public equities book). While many are choosing to cite their elevated Anthropic pre-IPO buy-in as evidence ‘still’ of Aschenbrenner being a genius - I suspect that over time that label will wane, and eventually the mask will be lifted. Every cycle, these false market oracles are created - and I don’t think that this one is done yet, especially judging by South Korean intervention in markets - and massive intervention in Japanese currency markets. While somewhat unrelated to what we’ll be discussing tonight, the global markets are essentially all one trade now. For the better part of a year now, I’ve warned that correlations continue to grow across this entire trade - and as the financing of it gets more interconnected and government-backed, those correlations will only grow further.

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Look at the US AI ETF (AIS) versus the Nikkei 225, as one example that I’ve frequently highlighted:

The KOSPI correlation is even stronger:

Well… what does this have to do with data centers? A whole lot. The public equity bubble, as we discuss below, has been a huge enabler of the entire data center boom, and as it matures and eventually boosts, we’ll see a shift toward government-financing through the military, etc as the private sector math stops penciling. One of the greatest risks to the entire buildout with future construction is now opposition at the local level to the data center facilities through the withdrawal of local tax incentives. This is a strategy already proving successful in Texas - and even though the massive buildout is well underway and (in my opinion) shifting toward that mature phase for the current cycle - there is now downside room on the construction side to create an air pocket before we start to see intervention on the construction side more directly. Data centers have been utilized like a Soviet Union-style economic program to prop up, stimulate, and ‘grow’ the economy - and they’ve done a masterful job of keeping up construction employment that way too. Look at the latest construction-related data via FRED:

(Total Construction Spend, Nominal):

(YoY - % Terms Basis)

Ex-res real estate:

Is there any public employment data to be trusted anymore? It’s certainly getting harder:

Specialty contractor employment:

While I could claim that I don’t have a clue why we’re undergoing a buildout of this scale for something that is unlikely to ever generate long-term profits in its current form - I do have many clues - and the answers are not pretty. This entire buildout has served as a beautiful faux growth source during a period of innovation stagnation - especially at the ‘hyperscalers’ and Magnificent 7 companies. It’s a question that I pose frequently to my community on X - in the last 5–10 years, from a technology standpoint (outside of LLMs - which are also questionably labelled AI in their current form) that has revolutionized anything? Not particularly. Peak innovation comes at peak cycles, and we’re far more interested today in a Roman-style print-and-forget philosophy until something breaks - and the bond market is finally starting to reprice that reality - which will also inevitably negatively impact the entire data center ecosystem.

Without rambling on too much more to finish off the introduction - we’re going to jump right into the content we’ll be covering tonight - which is focusing not on the background, tax incentives, buildouts, construction data, etc. - but on the following:

• (Part 2) The Public Equities

• (Part 2) The Financing Wobbles

• (Part 2) Are Data Centers Shale on Steroids?

• (Part 2) Data Centers and the Rings of Empty Chinese Cities

• (Part 2) Finishing Comments - A National Security Pivot

Let’s dive in.

Catch up on Part 1 of 5 - Midyear State of Data Centers and the AI Bubble Report

Next in the Series and Upcoming Reports

In the ‘Midyear State of Data Centers and the AI Bubble Report’ - we are covering everything over five parts. Below are following three parts that are still to come (and will be released on Wednesday for the next three weeks):

• Part 3: A Look at the LLMs and Assessing the Moats

• Part 4: How Big is the Bubble, and Will There be Bailouts?

• Part 5: A Summary and What’s Ahead for the Second Half

Outside of this series - over the weekend - we’re going to be covering a lot of ground. In addition to this Part 2 report, we’ll also have:

• (Saturday) Redeye Macro Note

• (Sunday) Weekly Macro Note: The Zimbabwe Roadmap

• (Tuesday) War Note and What’s Coming Soon

• (Wednesday) Product/Offering Previews, Partnerships, and an Update

• And more on the way

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The Public Equities

Let’s talk about the pure-play US equities that have been riding shotgun on this entire data center buildout, because the divergence between them tells you almost as much as the spending and construction employment data we just went through (not very much)...

Continue reading below with Ozone <The Public Equities continued, The Financing Wobbles, Are Data Centers Shale on Steroids?, & much more…>

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Good Thursday evening MacroEdge Readers & Community,

This evening we’ll take a look at the rally action underway in the US and Asia with the KOSPI and Nikkei up big off of key moving averages. From a technical standpoint, both were absolutely gutted and oversold, and the KOSPI bounced hard off of the 200 daily moving average, sitting below it for a day. The key driver was liquidations, a giant short squeeze, and the government of Korea announcing a nearly $14bn injection into the sovereign wealth fund to invest in AI, data center, and technology equities. While this hasn’t happened yet - it’s enough to quickly restore confidence in the short run - and as seen below in the technicals, it’s almost textbook where these bounces happened.

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Overnight - the KOSPI sits up 12%, while the Nikkei is currently up 1%, and the Nasdaq is up about .4%. The Bank of Japan is making its rate decision this evening - but that won’t happen for nearly 3 hours from the time of this writing, so it will be something that gets covered in the Redeye Macro Note. These moves have the classic characteristics of a 2000/2022 style countertrend rally - so I wouldn’t get too excited about them yet, unless the Nasdaq decides to break the parabolic rounding top pattern it’s been in since the Iran-war melt-up began.

On the oil and gas front - the UKMTO appears to have stopped reporting tanker incidents/attacks - and oil futures are off about a percent, 3-2-1 spread narrowed slightly today off of all-time highs - but the technicals continue to look constructive, covered below briefly.

Today’s GDP real GDP number came in softer than expected, and we continue to print more and more - while not getting very much out of it (other than market meltups in nominal terms?):

The ‘comedy’ post of the day - the US State Department used AI for a presentation on Africa, and the results are, shall we say… to be expected?

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This evening we’ll be covering the following, briefly, because tomorrow’s data center update is going to be much more lengthy:

• Next Reports

• Coming Soon to Our Macro Research Suite

• Non-Operated Oil and Gas Opportunities

• The Dead Cat… Dragon? JPY Puck Save and BoJ Decision

• Oil and Gas Update

Next Reports

• Friday: Data Center Construction Part 2

• Saturday: Brief Redeye Macro Note

• Sunday: Weekly Macro Note

Coming Soon to our Macro Research Suite

• Oil and Gas Research – Once a Week Report and Commentary, along with the MacroEdge Oil and Gas Portfolio Strategy

• Portfolio Strategy

• Solutions Sector Integrations: Oil and Gas - Economic Advisory, Aviation - Technology

An exciting metric for our Substack community as we hit a new all-time high for readership this month - with two reports to go:

Non-Operated Oil and Gas Opportunities

As we continue to expand our capacities as an organization, one of the most exciting opportunities to come out of the year has been a significant expansion into the oil and gas industry. Mid-August, our team will have an update on an opportunity in the space, and we will be sharing more about that then. Stay tuned.

The Dead Cat… Dragon? JPY Puck Save & BoJ Decision

The market is a weird spot post-FOMC. There’s a lot of retail exit liquidity that needs to be sold into come August (with the last two large AI IPOs) and with midterms top of mind for the Administration - I suspect that they are extremely cognizant of market performance now. August marks a turning point, and just 3 months remain until the midterms. Per prediction markets, races like the Texas Senate race are virtually 50/50, and with the Iran War continuing and fuel prices remaining elevated, the situation could continue to worsen for the GOP. I suspect it will be another cycle of populism over qualification - and will really only be paying attention to the key ‘swing’ states come election time.

The question on the equities side is shifting to whether or not this bounce is going to be once that takes most indices back or above previous all-time highs, which would really occur between now and midterms.

You’ll notice that the Nasdaq is fighting this parabolic trend off of the move today:

On moves like these (as we saw into April), what really matters or not is if the trend can recover all-time highs or not, to determine if this is a ‘dead cat bounce’ or a ‘dead cat dragon’ that turns into a more powerful pre-midterm rally.

The Nasdaq is probably good for a 1K+ point rally or so if it breaks this intermediate trendline:

(Continued below: The Dead Cat… Dragon? JPY Puck Save and BoJ Decision, Oil and Gas Update, and FOMC Statement from John Galt)…

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Good Tuesday evening MacroEdge Readers & Community,

This evening we’ll keep the note brief - John has a fantastic piece of his thoughts on the FOMC meeting tomorrow (below) - and I am going to cover four topic areas that I think are relevant for the evening. While I expected to cover the non-op oil and gas opportunity component, we are going to kick that to Thursday evening and focus primarily on the latest Middle East war updates and the FOMC meeting tomorrow. As I’ve stated several times over the past few weeks, I think July and September present the only opportunity for the Fed to actually hike this year. Employment data sort of continues to meander lower (the aggregate basket of employment activity), and inflation is way too high. Now of course, I acknowledge that some will say the Fed didn’t make a policy error in 2008 when oil hit all-time highs, and that’s true - but the inflation of the last 5+ years now has been much more embedded and the forces at play are very different (things like record retirements, poor youth demographics, a massive market bubble) - the list goes on and on.

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This evening we’re going to explore four primary topic areas - the latest geopolitical updates from the last 48 hours - where we will discuss Houthi involvement and the $85 Brent threshold for escalation that I suspect Iran is now using as a signal to ‘flare up’ the conflict through things like action against tankers - as we’ve seen tonight - or with their latest missile barrage at a US base in Jordan - which has conflicting reports on impact. We’ll also cover the Asia situation - which is one of great volatility as the semiconductor and memory trade suffers its biggest challenge of the cycle. The cyclical industry is facing tremors - not yet a ‘cracking moment’ - but one that gives those of us with ‘memory’ flashbacks to similar technology troubles seen in Dotcom. While I do suspect that governments will intervene in markets as they seemingly always do, the last hike from the Bank of Korea was a useful signal that excess had gone absolutely out of control - to have that much leverage sloshing around a country that small - and with workplace issues in people quitting to trade and gamble full-time - it was something that policymakers were eventually going to address.

We will also cover the FOMC preview - in which I outline the roulette scenario for tomorrow. July and September, in my opinion, present the only opportunities for the Fed to move rates higher this year. There are, of course, significant implications if they do that - namely for the entire technology sector - and for other sectors like CRE. Yields have indeed pulled back some in recent days - but regardless of how it goes - I suspect that the vote itself will be extremely close tomorrow between 50/50 as members disagree with how to proceed. When a supply shock becomes a structural shift in supply chains that may last a year, the stakes are higher and different. Lastly, I will briefly touch on gasoline and diesel, and we’ll explore if they’re telling the real story of market tightness versus front-month crude prices that continues to paint a mixed picture.

A relevant post on ‘X’ from my friend Dario in Hong Kong:

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Next Reports

• Thursday - Midweek Macro Note & Exploring Non-Op Oil and Gas Opportunities

• Saturday - Redeye Macro Note

• Sunday - Weekly Macro Note

Latest Geopolitical Updates from the Last 48 Hours

• Houthi forces ink agreement with the Chinese on Red Sea passage

• Yemen discusses similar toll structure for the Bab-el-Mandeb as is currently seen in Hormuz.

• Iran launched a pre-emptive strike on a US base in Jordan in the early morning hours - sending crude and gasoline higher and erasing most losses from the last two trading days.

• The US continues to enforce the blockade of Iranian ships.

• Trump met with both Netanyahu and Zelenskiy today - and Ukraine’s Foreign Minister did everything but directly apologize over the targeting of a Chevron contractor ship.

• $85 Brent remains the level I think Iran intervenes at to lift oil, and lower than that they are not comfortable with.

• Spreads continue to show market tightness.

• With the Strait of Hormuz effectively entirely closed, there are really two outcomes between now and October: massive escalation of the conflict to reopen the Strait, or continue to buy time through TACOs to keep oil in a subsidized range while trying to negotiate a deal - the latter is now becoming the riskier strategy because the US simply is running out of time now to do so with the oil inventory situation.

Asia Situation

In Asia - both Korea and Japan continue to see very large drawdowns - the KOSPI in Korea is down 20% in two trading sessions - driven by losses in its hyper-concentrated cap-weighted names. You’ll know the importance of these in our Global Bubble Index - which I will update over the weekend - though I also highlighted today that Spain and the TSX in Canada have not broken yet, unlike the KOSPI and Nikkei.

The KOSPI is now down almost 50% since late June - one of the largest and fastest major index declines in history.

As I expected, the won is also strengthening alongside the move:

The Nikkei is off about 3% in the evening session:

Both of these technical patterns had been flagged weeks ago as we started the Asia Note (Pt) series.

It’s also time for the yen to rally - or else the Prime Minister will be stepping down:

FOMC Preview

Tomorrow everyone will be obsessed with the FOMC outcome and decision - look at the vote over the actual headline - and the statement for direction on September.

Continued below: FOMC Preview, Gasoline and Diesel Telling the Real Story?, Most Critical FOMC Meeting Ever (Sort of) - Preview (John Galt)

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Good Sunday evening MacroEdge Readers & Community,

This evening we’ll be discussing a plethora of topics - looking at the FOMC week ahead, as well as what data will accompany it. Yesterday evening we discussed the latest developments from the Middle East - including the latest on the Strait of Hormuz and Bab-el-Mandeb traffic trends. For those that caught the Redeye Macro Note, I will try not to repeat too much of what was covered in reviewing the TACO headlines yesterday - but I suspect the Houthi attack on the Aramco refinery played a major role in the US calling off attacks this weekend. Overall, until we get through the FOMC week and get a pulse on what the Fed, now under Warsh, expects to do the remainder of the year, ranges will remain in place for the time being. Additionally, I expect the second half of the year to deliver a very binary outcome (discussed in Weekly Macro Note of two weeks ago) in either a final crack-up leg higher before the Fed is forced to take action and finally hike due to higher inflation, or this sideways intervention action sort of continuing through midterms by which point we could start to see the winds leave the sails of the entire AI/data center/momentum trade more broadly.

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Because the stock market is in fact the economy under this ‘i-shaped’ regime, there are a lot of forces well beyond what we can see at face value that have an interest in keeping the 2026 party going. While inflation and war drove equities to new highs in the first half of the year as the war kicked off, this momentum has been stalled since May as inflation has been elevated, and oil prices refused to return to pre-war levels. Oil prices, along with yields and FOMC discussions this week, will play a key role in determining how the above-mentioned outcome resolves.

Prime Minister Netanyahu will also visit the United States this week, and I suspect that we see an update on those discussions before the end of the week when it comes to the Iran-war situation. The Houthi involvement clearly marked a point on the escalation ladder at which US leaders were not comfortable continuing to wade into.

On the futures front - the Nasdaq is up about 1%, CL (WTI spot) is down roughly 5% - though technically continues to look very positive, Bitcoin is near $64,000 - also about a 1% move, and these futures moves based on Saturday headlines can all change on a dime, so I wouldn’t read too much into them. On the Asian market front - which I will also touch on below - Korea and Japan are at possible technical spots for a bounce - though it appears unlikely that they will hit new all-time highs for some time without massive government/central bank involvement, coupled with re-leveraging.

Keep in mind that the war itself can not be stopped for long in order to keep equities rising at this point. The market needs further inflation for multiple expansion to continue - which is already at very thin levels historically (even though the juniors on X think they’ve got it all figured out… or we’re just Argentina in the not-so-distant future)...

This evening we’re going to cover the following:

• Report Schedule for the Week

• Macro Week Ahead

• FOMC Week

• Asia Bounce?

• Macro Data Review of the Last Week

• Takes Two to ‘TACO’

• Crude Roadmap Simplified

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Report Schedule for the Week

• (Tuesday) War Note & Non-Op Oil and Gas Opportunities

• (Thursday) Midweek Macro Note, Portfolio Strategy Update, Oil and Gas Research Coming Soon

• (Saturday) Redeye Macro Note

• (Sunday) Weekly Macro Note

Macro Week Ahead

• Monday: N/A

• Tuesday: Conference Board Sentiment

• Wednesday: FOMC Decision & Rate Statement

• Thursday: Real GDP, PCE, Bank of Japan Rate Decision (Evening - US time)

• Friday: n/a

Major corporate earnings this week:

• Microsoft (Wednesday)

• Meta (Wednesday)

• Apple (Thursday)

• Amazon (Thursday)

Energy Earnings:

• Baker Hughes

• Shell PLC

FOMC Week

There is a relatively high chance of a rate hike this week. Warsh has left the option open, and with energy prices as high as they are (I know people on X say that’s not inflationary) - I would give it about a 50% chance right now given the dissents last time around. Either way, I expect the actual vote to be extremely close - and if that is the case and the Middle East supply shock continues - then the Fed will likely move in September instead. The base case right now among retail seems to be that the Fed will not act this year; the bond market does not agree with that thesis.

While I don’t have a crystal ball, the Fed has two chances to move being now and September given the inflation backdrop. The July MoM energy base effects will go away in the next CPI report, and Fed officials know this. Inflation is nowhere near the 2% mandate - and we’re going on 5+ years of more of the same. I do expect that similarly to 2000, the rate hike will act as a major denting factor in the AI trade and capital is going to stay away - especially from the data center financing side of things.

Hello Fed, anyone home?

The time to hike is this meeting or next… That’s all I have to add.

Asia Bounce?

To start the week - the tech trade is showing a little bit of life on WTI being off around 5% - that’s not really reflecting into Asia - and I would warrant caution in expecting this bounce in Asia to be like the rest. The major bounce off the trendline is going to be a major test now - especially for the KOSPI - and as I’ve noted now for almost a year - the wheels really tend to come off the bus when the Asian central banks actually have to cut instead of continuing the course with hiking as their rates blow out while their currencies get smoked.

(Continued below - Asia Bounce Odds Analysis, Macro Data Review for the Last Week, Takes two to TACO, & the Crude Roadmap - looking at the latest crude and gasoline data/technicals).

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Good Saturday evening MacroEdge Readers & Community,

I am starting this article before the evening turns to Sunday morning, so I will keep that greeting in place - even though I know that many of you will be catching this on Sunday morning. It’s going to be an early morning for me tomorrow, and we have a very busy week ahead - but stay tuned for another potent Weekly Macro Note tomorrow evening. This evening I noted that I would also be discussing oil and gas opportunities on the non-op side, but I will move that to the Tuesday evening War Note so that this stays short and focused on the latest updates on the Strait of Hormuz and Bab, as well as the several ‘TACO’ headlines that were announced earlier in the day.

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The re-emergence of the ‘TACO’ is not surprising if you read the Midweek Macro Note, as oil prices have returned to prices that will essentially sink the party currently in power (GOP) in the Midterms - and time is running out for it to actually make a difference in the mind of the consumer. Right now, the consumer economy for the 80-90% continues to be greatly harmed by high prices, the war, and the closure of the Strait of Hormuz (while Bab is now partially closed to some Saudi vessels) - though I expect that this latest pause will once again end up short-lived.

Weekend CFDs show oil down about 3.5% - though from a technical point of view, I like what I am seeing emerge if a higher base is now formed in the mid-80s (covered in the Saturday TACOs section).

This evening I am just going to provide a brief update on the traffic situation in the Strait of Hormuz and Bab - both of which are impeded - though Hormuz to a much higher degree. I expect that Ansarallah involvement in Yemen played a role in Trump suspending further action for the time being in Iran, with a major attack launched against an Aramco facility - and several other locations in the country in the last 48 hours. Another Saudi crude carrier was also impacted in the Red Sea, and the US continues to fight the war from (what I say as a non-war expert) a very odd position? Additionally, I will provide a brief update on the Saturday TACOs seen today - which sent weekend oil CFDs down slightly, though when zooming out in the technical context, this could be very positive to finally land in the 90-110 range on a much longer-term basis. Tomorrow evening, we’ll be exploring macro data from the last week, the FOMC week-ahead, and much more - so stay tuned.

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Upcoming Report Schedule

• Sunday: Weekly Macro Note: Macro Data from the last Week, FOMC Week, and More

• Tuesday: War Note & Non-Op Oil and Gas Opportunities

• Thursday: Midweek Macro Note

• Saturday: Redeye Macro Note

A Look at Hormuz and the Bab

News ‘broke’ this morning that Oman was leading a new delegation in Iran to resume talks on Hormuz traffic, while this is occurring, it was also noted that the President of the US halted attacks on Iran, and this halt has now lasted two days.

It appears that there are a variety of reasons contributing to the President getting spooked again on a broader attack - but one of those is the fact that Hormuz is once again fully closed - hitting zero crossings on Saturday (which marks just the second 0 reading for the month of July):

Insurers still won’t touch vessels entering and exiting the Strait - and the fact that this is still as closed as it is will be a huge problem the remainder of the year if there aren’t workarounds to a much greater degree than the ones in place today as the US runs through its SPR… and other countries do too.

(Continued below: A Look at Hormuz and Bab, Saturday TACOs - Will it Continue? More Inflation Warnings at the Pump)…

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Good Thursday evening MacroEdge Readers & Community,

This evening we’re going to provide a brief Midweek Macro Note after the lengthy AI Bubble + Data Center Construction report yesterday evening. The report has been well received thus far - and I don’t want to spoil any of the details if you haven’t yet had a chance to read it - you can do so below:

Pt 1 AI Bubble + Data Center Report

The war has continued to point toward signs of escalation throughout the week - even though it was leaked today that Trump attempted to pass a ceasefire to the Iranians through the Iraqi PM. Right now, oil is tilting back in a range where it becomes much less feasible for Trump to sustain the conflict going into elections in just a few months - if oil remains anywhere near these levels for a duration of time - the election is absolutely cooked for the party currently in charge across all branches of the government. At the pump, gas and diesel are both noticeably higher than a month ago - and even though demand continues to be subsidized with the Strategic Petroleum Reserve - both in the United States and abroad - we are heading toward an ‘energy emergency’ again as spreads are screaming. Today, Russia announced the possibility of a diesel export ban for a month and gasoline for 6 months - they have also begun importing crude oil from India to meet the refining gap caused by Ukrainian strikes.

For my own fill-up today (93 octane - yes, those fellow V8 owners will understand) - a full tank is back to about $110. The national average is ticking higher as gasoline futures move higher - and diesel is back near a cycle high. This weekend is going to act as a major determining factor toward any potential offramp from escalation in my opinion - as we’re riding the escalation ladder back up - this time, though, there are no airbags for politicians to ride on (maybe shorting oil futures along with BS news stories comes back in style?). It looks like the Fed will be forced to come in hawkish next week, and bond vigilantes have awakened from a multi-year slumber to actually put pressure on all of this idiocy. Wall Street and academic economists continue to whiff over and over on inflation, and just a few weeks ago were once again morphing into their true deflationista selves on a negative MoM inflation print driven by energy base effects.

As discussed in the War Note on Tuesday, the driver of market action will oscillate between oil and the bond market here for the next few weeks as everyone assesses how significant the energy impacts will be. While the United States can absorb an energy shock better than many European and Asian countries, it cannot replace the lost barrels on the market. With the Houthis (Ansarallah) threatening to close the Red Sea route, the accumulating impacts on Russian energy infrastructure, and Hormuz back to being effectively closed, these effects will compound as reserve releases wear off if closures/impacts continue.

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This evening - we’re going to look at the latest oil and gas updates, provide some brief notes on the conflict from between Tuesday and now, look at Asian markets in part 5 of the brief ‘Asia Update’ briefings, and highlight action in the bond market and how the rising risks of a rate hike this year are tempering the AI/data center/tech trade.

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Next Reports in the Pipeline:

• Saturday Evening: Redeye Macro Note (Macro from the past week) and Non-Op Oil and Gas Opportunities

• Sunday: Weekly Macro Note

Latest Oil and Gas + War Updates

Oil and gas markets are once again flashing warning signals in terms of available inventory. Spreads are at/near all-time highs, and Brent surpassed the $100/bbl level, while other Middle Eastern crude is surpassing the $110/bbl level. I still do not think that these levels are high enough to induce demand destruction - as long as the subsidization of demand continues from the Department of Energy and the Trump Administration.

Brent-WTI spread:

(HFI Research)

• Energy equities got way, way, way oversold on the WTI ‘dip’ - this next leg up has a gap now to fill below at some point - for the time being, the pain is on as the march for WTI toward $100/bbl continues once again.

On the 10m setup, this flag setup could propel prices to $95/bbl

(continue reading with Ozone - Latest Oil and Gas Opportunities, War Updates, Asia Update Part 5, Bond Market Update, Portfolio Strategy Update + Commentary from Six)

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Good Wednesday evening MacroEdge Readers and Community,

Hopefully you’ve had a great start to your summer and are enjoying these long July days. I know many of our readers tune in specifically to this report series (and not many of the other reports that are put out) because of its relevance and role in the economy and markets today. Over the last several years, the AI and data center story has been one that has put even the biggest disbelievers in a state of surprise for a number of reasons. We’re now hitting what I believe to be terminal altitude for the data center boom cycle - and we’re going to cover a lot in this Part 1 report.

I’ve decided to break this report into five parts to give us ample time to actually cover and break down different areas within this entire behemoth - that way we’re not lumping everything in when it shouldn’t be. The five parts of the ‘State of Data Centers and the AI Bubble Report’ will be as follows:

• Part 1: (Part 1) Data Centers and Data Center Construction

• Part 2: (Part 2) Data Centers and Data Center Construction

• Part 3: A Look at the LLMs and Assessing the Moats

• Part 4: How Big is the Bubble, and Will There be Bailouts?

• Part 5: A Summary and What’s Ahead for the Second Half

Parts 2, 3, 4, and 5 will be released on Wednesday for the next four weeks of reports (five including this release).

The data center cycle has been one of the most prolific infrastructure buildouts in decades - but there are so many pertinent questions about it all, namely with the ‘what, why, and how’ as the overarching themes… It’s one of those things that I think we will look back at and not in fact compare to the railroads, oil infrastructure, and highway buildouts of decades past. While we are undoubtedly continuing to propel ourselves into a more & more digital reality and this unique world we are living in has enabled people like me to reach tens of thousands of people in an instant - much of that technology has been around for decades now. AI itself - in its current form - is really not ‘AI’ in any way, shape, or form. It’s essentially an enormous content vacuum that’s permeating absolutely everything we do - and much more a data collection and ingestion mechanism than anything else. While I know some of the proponents will respond to this with ‘but, but, but’ - but the next time you log in to your email, or have your face scanned to check in at the airport, or send a message on Twitter (X) - just remember that you are part of the ‘AI’ project. As an ingestion system in its current form - current LLMs and AI technology is astoundingly inefficient - on X I’ve likened this to ‘Soviet-style’ technology and infrastructure where we’re building something to build it. When it comes to the commoditization of the space, US AI executives are panicking about innovation going on elsewhere in the world that threatens their business models through open source methodologies. The how or why in this technology is a story in and of itself - and now we find ourselves going - just how much infrastructure are we willing to commit to that could potentially be obsolete just a few years from now? Are we really supposed to sit here and believe that data centers and this technology won’t evolve? If so - is this particular technology really a technology at all - or are there forces behind it that don’t meet the eye? We will find all of those things out as this entire cycle continues to evolve.

The point of Part 1 is to look at the data centers supporting this entire thing - and I remember in the early days just how fast these things were getting approved. In a fun fact about me - I was actually dating a banker in West Texas at the time and recall with great detail just how fast Stargate approvals, permitting, and details were rammed through without second thought. Local (municipal) and county-level politicians for the first several years of this buildout cycle got away with committing to these deals behind closed doors, and behind a defense written by lobbyists that impacts to the community would be permanent and profound in many cases - which is where the story starts to falter. On that front, what I expect to see as we roll through the second half of the year, and construction teams start to wrap up their work at these ‘hyperscaler’ sites - is an interest from the Trump administration in figuring out how they can prolong the buildout of these facilities - even if they aren’t needed. Yes, to my point above, that puts this infrastructure buildout more closely to something we might expect in China or the Soviet Union - but as someone that believes we are at or very near ‘peak innovation’ for the current tech innovation cycle - politicians are far, far, far more interested in the short term benefits than any long term consequences - especially given what they (and I, and likely you) know about the attention spans of voters at any level. When you look at the current technology landscape - and it’s something that I do frequently as we have an entire practice at our firm delivering such solutions - I agree with Ed Zitron and others that ‘peak innovation’ is something that we are witnessing now, but maybe on more of a rolling basis than a single event.

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AI and infrastructure buildout popped out of nowhere a few years ago - and all of the companies sitting on hundreds of billions of dollars in cash decided that it was the sexy new thing that they should chase, and that there would be some sort of return in the end. What I know about commoditized infrastructure buildouts is that they look very sexy in the beginning, but the endings across whatever the commodity might be do not look so hot. Months back, those that read our smaller Macro Note series will know that I likened the infrastructure buildout with data centers to the shale boom of the early 2010s - but on an even grander scale. The stakes could never be higher for the politicians that have committed wholeheartedly to making this (almost) the entire economic engine of the United States for the time being, and I expect that they’re going to ride on the wagon until they make it to the Oregon Trail. Is the next era of ‘innovation’ we want to leave behind for the future generations, one populated by infinite data centers (taxpayer-backed), an existence devoid of any social interaction, and one that we engage in these Chinese-style buildouts for ‘number go up’ economics where we dig holes and then hire people to refill them? That’s a question that collectively, people will have to decide for the remainder of the decade and beyond.

My goal has never been to make that decision for anyone else, and I think with the discussion focus areas and data below, there are many useful findings and facts about the current state of this major economic driver, so I hope you find this series very useful for portfolio strategy, business, or even personal decisions or choices outside of the financial or technology worlds. One of the most compelling parts of what I do is seeing our organization compile all of this data, and then knowing that there are tens of thousands of brilliant readers, minds, traders, business owners, and so much more interpreting it in their own light.

If you did not have a chance to read the first part of this broader series from February and March, I highly recommend that as a starting point so you can get a sense of how the sector and space has progressed since then, from the time I issued a warning that the Trump administration had better find its newest growth engine, to the Iran War starting shortly thereafter and inflation and equities booming side by side… It’s been an interesting year thus far and this five part series is not about my broader macro market commentary - which for the remainder of the year is focused on a very binary outcome - either the gates to inflation (hell) being opened with everything melting up concurrently, or inflation/war getting to a point where things finally stagnate - and along with things like data centers - this sideways stall out ends up materializing into a more significant slowdown - whether through stagflation or through cooling of said economic activity.

Maybe - in the end - this will sum up the whole phase of this buildout:

In Part 1 of 5 of this ‘Midyear State of Data Centers and the AI Bubble Report’, focusing on data centers and data center construction - we’re going to cover the following sections:

• Background to the Current Capex Cycle, Tax Benefits, Backroom Deals, and More

• Current Data Center Technology

• Consumer Power and Water Impacts

• State of Data Centers - Data Center Construction Data

• State of Data Centers - Moratoriums, Bans, and Much More

• (Part 2) State of Data Centers - the Public Equity Markets

• (Part 2) Are Data Centers Shale on Steroids?

• (Part 2) Data Centers and the Rings of Empty Chinese Cities

• (Part 2) Finishing Comments

Obviously, each section is going to be unique, but there’s enough information in here for everyone -regardless of what you’re here for - to take something useful away. I hope you find this compilation of our data, my thoughts, commentary, (yes, opinion too), useful on this very warm July week. It’s going to be a very interesting second half of the year for this entire capex-funded space, and I am most of all interested in seeing how things progress from where we are now to the December/January update when we get another many months under our belt.

Background to the Current Capex Cycle, Tax Benefits, Backroom Deals, and More

The current capex cycle

The current AI capex cycle is historic. We’re currently sitting at/near the cycle peak - and I expect us now to be slightly off of the highs from earlier in the year. Just because the hyperscalers are dropping ridiculous forward capex guidance does not mean that those figures cannot be adjusted if the math finally hits some of these enterprise leaders over the head (I expect that it will). In today’s Alphabet earnings, they announced a higher capex figure than scheduled by ~$20bn or so; markets did not react positively to that line. As someone who frequently utilizes Gemini and other Google AI solutions - the product quality seems to be rapidly degrading - and even though Alphabet is able to *handle* what they’ve taken on - I am not sure that means they should be. The amount of data collection occurring now through Google is also astonishing.

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