“My experience of the world is that things left to themselves don’t get right.” T.H. Huxley
The original Rollerball starring James Caan is top of mind for me this morning. Not because I miss those amazing Saturday morning Rollerball matches on Channel 11 from my youth (although…), but because I am gobsmacked by the power and influence we, as a society and country, have allowed the super-wealthy to accumulate. I’m going t
*o paraphrase a famous saying: ‘*With great wealth comes great responsibility.’ Not what I am seeing right now.So, let me ask y’all this:
Are you comfortable with almost all U.S. orbital launch capability (where, let’s be honest, the next war will largely be fought) controlled by a private corporation run by one man?
Are you comfortable with the likely dominant source of global communications—Starlink— being controlled by one man—the same man? As the recent ‘switch flip’ in Ukraine displayed, a man who will use access to that system for his own goals?
Are you comfortable with — oh look,
contributing $500 million (that we know of) to political campaigns of his choosing, potentially overwhelming the electoral process?**the same man —**Are you comfortable with naked threats ( which can be read as threats of physical violence) in response to potential investigations?
Finally (to keep the list short), what about the major media organs being controlled by a small, interlocking group of oligarchs? Shockingly, this same individual just gave $1 billion to Skydance, which controls Paramount, CBS, and CNN.
The original Rollerball, starring James Caan, is top of mind this morning. Not because I miss those amazing Saturday morning Rollerball matches on Channel 11 from my youth (although…).
Rather, I’m gobsmacked by the power and influence we, as a society and a country, have allowed the super-wealthy to accumulate. To paraphrase a familiar saying, with great wealth comes great responsibility. I’m not seeing much evidence of that right now.
So let me ask y’all this:Are you comfortable with almost all U.S. orbital launch capability, critical to national security and any future conflict in space, being concentrated in the hands of a private corporation run by one man?
Are you comfortable with Starlink becoming an increasingly important source of global communications, controlled by that same man? As the recent switch-flip episode in Ukraine demonstrated, access to that system can advance an owner’s objectives, with consequences far beyond the company itself.
Are you comfortable with that same man contributing $500 million, as far as we know, to political campaigns of his choosing, potentially giving him extraordinary influence over the electoral process?
Are you comfortable with threats, potentially including threats of physical violence, in response to the prospect of investigations?
And what about the major media outlets increasingly concentrated in the hands of a small, interconnected group of billionaires? The reported $1 billion transaction involving Skydance and this same individual raises yet another question about the relationship between concentrated wealth and control over the information we consume. The precise transaction and ownership details matter, but the bigger picture matters too.
I am not.
Watch Rollerball, if you haven’t. It offers a disturbing picture of what can happen when corporate power overwhelms individual freedom and democratic accountability.
**Regime.**Stagflationary squeeze, with credit as the confirming instrument. Own the barrel and the funding-stress shorts.I’M WRONG IFthe next dated high yield print comes in under 310bp.**Sector.**Long energy against consumer staples. A $116.72 barrel hits input costs before it hits demand.I’M WRONG IFBrent settles under $105 twice.**The Fed.**A hold Wednesday that keeps December alive, and a 2-year at 4.69% that has drifted too far from it.I’M WRONG IFthe 2-year closes under 4.60% after the statement.**Where the tape is wrong.**The long bond is the only haven left, and one haven is a fragile place to hide.I’M WRONG IFgold settles back above $4,260.
The market priced a war in one asset this week and a peace in two others. Brent rose 6.24% to $116.72. Gold fell 4.14%, and the VIX closed lower at 19.45. The 10-year rallied 9bp, so whatever the bond market feared, it wasn’t inflation.
Which of those prices is lying? My answer is the bond, though I’m less sure of it than I’d like. High yield sat above the 325bp stress line on every dated print this week, 331, 329, 333 and 327, and the long end rallied anyway. A rally with spreads that wide is a funding story.
It got a second chapter Wednesday. AI-found flaws in PHP, the code behind most of the world’s websites, drew millions of exploit attempts within hours (Cloudflare). The case for calm is real: Gulf supply is near normal, and Brent may be carrying a war premium it can’t sustain. I still don’t buy calm with credit at the line.
Five sessions, one turn. The regime moved from ‘growth scare with a hike in the back pocket’ to a stagflationary squeeze: oil up, long yields down, credit stuck at the line.
**Monday.**The S&P 500 rose to 7,690.73 and the 10-year touched 5.15%. Soft-landing hopes, one more time.**Tuesday.**The index added 0.28% to 7,712.57 and the VIX fell to 17.31. High yield printed 333bp anyway.**Wednesday.**The week’s high close, 7,757.17, with the VIX at 16.68. PHP patched the same day.**Thursday.**A 1.21% drop to 7,663.43 as semiconductors fell and Meta repriced. Brent settled $113.17, its first settle above $110.**Friday.**Another 0.52% off, to 7,623.68, down 0.47% on the week. Brent settled $116.72.
Chart 1. The barrel gained 6.24% and gold lost 4.14% in the same week, which is the whole regime in two bars.
**EQUITIES.**The Nasdaq 100 fell 0.79% to 28,957.53 and the semiconductor index fell 3.21% to 10,779.46. Small caps went the other way. The Russell 2000 gained 2.00% to 2,775.90 and the Dow rose 0.41% to 52,215.16. Rotation, then. Not liquidation, though a small-cap bid on a falling 10-year is also consistent with plain short covering.**RATES.**The 2-year closed at 4.69%, down 5bp. The 10-year closed at exactly 5.00%, down 9bp, after a Thursday close of 4.96%. The 30-year closed at 5.33%, down 10bp, and 2s10s flattened to +31bp from +35bp. Bull flattening for a second straight week.
Chart 2. The 10-year and 30-year each fell about twice as far as the 2-year, so the curve flattened from the long end.
Why would the long end rally into a hotter barrel? Barry Knapp’s answer is the Fed itself: the pivot away from an October hike drove long rates, with December kept alive and housing as ground zero. 2s30s at +64bp from +69bp fits that.
It could just as easily be haven demand with nowhere else to go, and the gold tape argues for that version. Knapp also flags the data-center build, where credit spreads and capex against cash flow are both flashing. His template is 2018, when the Fed kept going and credit broke first.
**CREDIT.**High yield printed 331bp on 16 October, then 329bp, 333bp and 327bp on 21 October, the latest dated print. Investment grade sat at 88bp from roughly 84bp. HYG, the high yield fund, gained only 0.25% in a week the 10-year rallied 9bp... so spread ate the rate move.**FX.**The dollar index barely moved, 101.81 from 101.84. The yen gained 0.74%, with USD/JPY at 156.81, and the euro slipped 0.32% to 1.1203. A flat dollar in a week of Gulf mines is its own data point. Nobody needed dollars badly enough to pay up, which says the stress stayed in credit and never reached funding in the dollar.
COMMODITIES. Brent settled $116.72 after a week’s high of $117.41, and WTI rose 1.83% to $103.27. The Brent-WTI spread blew out to $13.45 from $8.45, which says the premium is in waterborne Gulf barrels. Natural gas fell 15.28% to $2.640. Copper slipped 0.84%.
The headlines kept coming. Iran barred US military vessels from the Gulf and the IRGC said two supertankers hit mines. The White House invoked the Defense Production Act for fuel. On Friday the Director of National Intelligence told the Secretary of State that Iranian plotting against US personnel had reached ‘advanced stages,’ in a memo released to the public.
**VOLATILITY.**The VIX closed at 19.45 from 19.99, after a Wednesday low close of 16.68 and an intraday high of 20.66. The switch that cuts every line in my book sits at 22.**FLIGHT CHECK.**Who got the haven bid? Treasuries did. Gold didn’t: it fell 4.14%, and its ratio to the stock index hit a new 52-week low. The dollar didn’t either. The yen gained 0.74%, a small haven bid, or it was simply carry coming off into the BoJ. So the only real haven this week was duration, and a haven that also prices a rate cut can reverse on one hot PCE print.
Chart 3. Gold against the S&P 500 made a new 52-week low, so gold stopped working as the war hedge.
**THE WEEK-AHEAD REGIME CALL.**The squeeze holds, and credit is the instrument that confirms it. Energy carries the inflation, credit carries the growth risk, and the long bond prices the second while ignoring the first. Wednesday’s FOMC and Thursday’s PCE, consensus 3.6% headline and 3.1% core year over year, decide whether the bond is right.The case against this call is strong, and it comes from the barrel. Robin Brooks argues that Gulf supply has almost fully normalized and that front-month Brent prices Gulf output at about 6 million barrels a day against a real figure near 20. His fair price sits closer to $90, with $125 as the ceiling even in a hot war. The December 2027 future hasn’t moved, which says the rise is a short-term premium.
If he’s right, the energy leg of the squeeze is a premium waiting to bleed out. Knapp adds that strong cloud results Wednesday could steady the AI trade, and that would take the credit leg with it. Two legs, two ways to be wrong.
I’M WRONG IFhigh yield’s next dated print lands below 310bp. That says the funding stress cleared on its own and the squeeze was only an oil spike.
I said fade the long-end rally until the FOMC, and the 10-year fell another 9bp to 5.00%. What I got wrong was the duration fade, marked against last week’s call. The regime call, bull flattening, was right: 2s10s went to +31bp from +35bp and the 30-year never came near the 5.60% that would have killed it.
The Sector of the Week, long energy against technology, made 1.73 points, with energy up 1.60% and technology down 0.13%. It worked on the barrel. Technology barely fell, so the short leg added almost nothing; the damage landed in semiconductors, down 3.21%.
Verdict: right on the regime and the pair, wrong on the fade, and the fade was the louder call.
Behind the wall this week:
THE BOOK: 13 live lines, 11 opened this week, each with the factor it monetizes and the level that kills it.
THE PAIR: long energy, why staples are the short leg and the Brent level that ends it.
FINANCIALS SLEEVE: the venue I’d own against the lender I’d short, and the regional bank rally I’m not chasing.
Everything above this line is free and always will be. What’s below is where I put my own capital. $450 a year at marketmusing.com, or the price of one bad lunch a month. Today, I'm going to make the whole note free.
