MacroVoices #550 Harley Bassman: In FED We Trust
Summary
Harley Bassman argues that recent Fed hawkishness stems from a need to rebuild market trust rather than combat inflation, which he notes remains low despite rising nominal rates. He highlights severe fiscal irresponsibility, including a 6% deficit, as the primary driver of bond yields and predicts future policy shifts like Social Security means-testing. Bassman also warns that mortgage-backed securities are becoming increasingly negatively convex due to yield curve inversion, creating significant downside risk. Finally, he dismisses AI-driven market disruption fears, asserting that human cr…
Topics discussed
Introduction and the Fed's hawkish surprise
Harley Bassman on Fed trust and forward guidance
Potential conflict between the Fed and Trump administration
Slide deck: Corporate profits, housing, and demographics
Non-bank entities and Treasury borrowing competition
AI regulation debate and hyperscaler debt risks
US debt, CPI accuracy, and the TIPS spread signal
Mortgage bonds, convexity, and yield curve dynamics
Generative AI, alpha generation, and market disruption
Fiscal policy: Social Security, taxes, and debt sustainability
ETF risks: Leverage, volatility drag, and liquidity
Stablecoin statecraft and the future of the dollar
Market Desk: TLT volatility trade setup
Bond market positioning and Fed credibility
Equities: Gamma exposure and sell triggers
Crude oil supply stress and inflation drivers
Dollar breakout and post-FOMC implications
Gold price action and real rate sensitivity
Copper positioning and crowded trade risks
Positioning Pause: Natural gas short squeeze risk
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