Before we dig into how regulation is shifting the flows of capital and macro liquidity, I want to share a few personal thoughts that will function as guiding principles for our future work.
First, I feel incredibly grateful and privileged to be able to have a seat at the table in markets. I have had some amazing people in my life who have helped me grow and bet on me. If you are reading this, then you are also part of those people who are deciding to actively bet on who I will be in the future.
Second, I want to curate the highest-quality macro research product that empowers you to make the best decisions for your unique bet you're taking on yourself right now. Your unique bet may not look like everyone else's, which is why it’s YOURS, and it’s special to YOU. The Capital Flows Substack has taken a lot of different forms over the years as I learn the best way to both put myself in the best place to produce high-quality insights as well as bring the best macro analysis from my unique perspective. I have decided that the best way for me to accomplish this is to focus solely on writing the highest quality analysis that fully represents my views instead of doing a daily livestream. While I enjoy the daily livestream and interacting with everyone, I don’t feel that it’s the best environment for me to share my best work.
Third, I will still have livestreams once in a while when I feel that the moment merits it. The main focus will be me sharing higher-quality reports multiple times a week to accurately map the capital flows of each country and draw attention to the places I am actively generating alpha. I will also be more active in the Substack Chat to answer questions and provide daily updates (
link).One of the greatest edges I have had over the years is to be asset class and country agnostic. This allows me to shift toward the highest opportunities in the world while employing my fundamental macro framework as an anchoring point. When this edge of being asset-class agnostic is combined with taking highly concentrated positions, there is immediate differentiation from the rest of the world, who are chasing beta and giving up future upside to decrease short-term drawdowns. This is the space I will continue to live in because it allows me to lean into the unique aspects of who I am as a trader and find alpha that is perfect for ME to gain an edge. Bringing this to you in the Capital Flows Substack in the highest quality form possible is my goal.
Ok, let’s dig in now.
The largest structural changes that occur in an economy or financial markets almost always stem from regulatory changes. Regulation functionally changes the path and potential for capital to flow between various assets. We are seeing a coordinated effort by the current administration to increase US dominance across every lever in financial markets, economic activity, fiscal policy, monetary policy, energy independence, and global trade.
The most recent actions by Bessent in the Yen markets and now in the Treasury buyback program illustrate this exact dynamic. But WHY is Bessent doing this? And why is he doing it in this exact way? This is the question we need to answer. If we can understand the WHY behind Bessent’s actions, then we can understand WHERE capital is likely to flow.
There are 3 major ideas to understand the WHY behind Bessent’s actions:
First: Bessent, Warsh, and Trump are actively coordinating to conduct an economic and financial counterattack on China. If they can fix the largest imbalance in the world, the largest problems will begin to fade away. I explained the entire logic behind this for global trade flows and how it connects to AI in this article:
Second, the utopian dream of laissez-faire economics has ZERO place in today’s world. In a nonlinear system, more and more components are becoming critical for national security. Bessent, Warsh, and Trump understand this, and they are actively taking every lever to shift how the very essence of free markets works.
Third, the three policy levers are working in the same direction. Warsh is holding rates below where the neutral rate would put them. Bessent is stabilizing the FX market, so the carry trade doesn’t unwind, while adding liquidity through buybacks. Trump is unlocking a new layer of financialization via Hyperliquid. The combined effect is that more capital can be deployed into the US financial system.
So how does the net effect of these three things connect to WHERE capital is flowing in markets?
