Jackson Hole: Why the Fed Isn't Cutting and Mortgages Stay High

DANO WEIR: It's Friday, August 28th, 2026. Most schools are back in session, but the Fed is still wrapping up their summer vacation with a big meeting, their annual meeting at Jackson Hole, Wyoming. What did Fed Chairman Kevin Warsh say about rates? That's what we're going to look at this week and how that might affect your portfolio, how it might affect the market. Also, what's your approach as an investor?

DANO WEIR: We're going to take a decade-wide look at diversified investing like... Like Berkshire Hathaway versus the boom and bust of the NASDAQ. You may have heard about Lake America this week. How about the Gulf of American homebuyers to sellers? We're going to look at the historic imbalance between those two and why Daren thinks you shouldn't read anything into the market until Labor Day, and he'll tell you why. Let's roll.

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DANO WEIR: Managing principals of the firm, Daren Blonski, CFP, Chris Sipes, CFP. Chris, I can always count on you to kick. Things off with a cartoon, with a meme, with a little bit of humor.

CHRIS SIPES CFP®: Yeah, this one might generate a little nervous laughter, right? And for those that are listening but not able to watch, it shows a person at a computer with, what are those called, Dan, when you're trying to be verified from a security standpoint, those little pictures?

DANO WEIR: I don't know the official name, but it's like a CAPTCHA, you know, it's like a... Captcha. This is a human verification. Verify you're not. I am not a robot.

CHRIS SIPES CFP®: Yes. And this one says, to prove you're a human, click on all the photos that show places you would run for shelter during a robot uprising.

CHRIS SIPES CFP®: Oh, boy.

DANO WEIR: So, as we said, the Fed holds an annual meeting at Jackson Hole, Wyoming. New Fed chair this year. Fed Chair Kevin Warsh. We watch Fed Chair comments as though they were Groundhog Day. And did he see a shadow or not? So what did he say today? First of all, inflation is a top priority. I'm just going to read this off the slide if you're watching.

DANO WEIR: He issued a hawkish signal stating that recent data does not show underlying inflation trends have meaningfully improved. And he declared that, quote, the Fed's predominant focus right now should be on prices. He also said they are officially ending the era of forward guidance.

DANO WEIR: He signaled a preference for a quieter Fed, which has been discussed for months now with the departure of the so-called dot plot, meaning they're not going to indicate, well, it might be or might not be changing rates. He argued the practice of giving explicit forward guidance has overstayed its welcome and urged markets to form their own expectations based on real-time data.

DANO WEIR: And then finally, he evaluated AI's economic impact, highlighting artificial intelligence as a potential engine for substantially higher growth. He announced a Fed task force to study how AI, productivity, and rising token sales affect employment, value distribution, and monetary policy. So, Chris, the comments kind of seemed like what we would expect and potentially indicating a rate increase coming.

CHRIS SIPES CFP®: Well, you would think so, yes. I think it was... And Daren actually listens, so he probably has better commentary than I do. But just from what I've seen, it looks like the market took his comments as pretty hawkish, except for the fact that the expectations around the September meeting are still a toss-up from a rate hike or cut, or sorry, staying flat or hiking rates perspective.

CHRIS SIPES CFP®: So the market's not all that sure that he's going to follow through with this hawkish stance that he's taking now.

CHRIS SIPES CFP®: The Fed funds rate is pretty significantly below the two-year treasury, which the two-year treasury is kind of considered the market's expectation of short-term rates. And so that's showing that the Fed maybe is a little too loose. And I think Kevin Warsh even said something to that effect, is that the monetary conditions are maybe a little loose.

CHRIS SIPES CFP®: But I think Jim Bianco has a great take on this. Jim Bianco from...

CHRIS SIPES CFP®: Bianco research and i've heard him say a couple of times that look the the bond market can stop panicking when the Fed starts to panic, meaning that if the markets feel that there's a sheriff in town who's going to take inflation seriously and be on patrol if inflation starts to take off, then the bond market's not going to worry so much that inflation's going to get out of control.

CHRIS SIPES CFP®: And so that might actually counterintuitively lead you to lower interest rates based on the fact that the market gets some comfort that there's going to be some oversight from the Fed when it comes to inflation.

DANO WEIR: Daren, any reactions that you had to Warsh's comments?

DAREN BLONSKI CFP®: You know what I was thinking about? I was at the gym this morning listening to him talk. And I was thinking about, I'm like, you know, I wonder.

DAREN BLONSKI CFP®: How many people in the audience he's speaking to because i i don't i don't know this but my vibe of worse is he's not exactly like the insider guy that everybody wanted in that position right and you still have chair pal hanging out right he didn't just go away and retire i was just thinking like how many like dagger eyes this guy's getting when he's giving his talk you don't see the other side they just show you him talking right and I was listening really carefully for like the, the meta tone in like the meta conversation, the conversation that's happening, but not happening.

DAREN BLONSKI CFP®: And he made one point that was like, I appreciate all the solicited and unsolicited advice you all have given me.

DAREN BLONSKI CFP®: And I was like, wow, he definitely made some people roll in their chairs on that one. And that was kind of how I took it overall. It was just kind of, Hey, new dog in town. Here's what we're going to do now. We're not doing that anymore.

DAREN BLONSKI CFP®: You know, I'm just waiting for The New York Times to publish some like anonymous op-ed of we are the resistance inside the Fed come out like that happened during the first Trump administration. Because I just can't imagine that the people in the Fed are super supportive of this guy. People who we know actually who have worked at the Fed were a little bit critical of him when he came in and still are.

DAREN BLONSKI CFP®: So it's... Kind of an interesting, it'll be interesting to see how he dances and he threads the needle. And he's singing this very like hawkish tone. For those who don't know a hawkish tone, you think like a hawk flies over and the dove delivers the olive branch. And so in theory, some Fed presidents are more dovish and they bring the olive branch to the market.

DAREN BLONSKI CFP®: And the Fed presidents that are more hawkish, they're flying above and kind of pointing down and making tweaks. And he's basically saying, hey, I'm going to fly above the markets and the economy. I'm going to make tweaks where I say I'm going to make tweaks, but I'm just not going to tell you when I'm making the tweaks.

DAREN BLONSKI CFP®: That's kind of the vibe you got from him. I think that's how the market read it. I think that was a confirmation on the market, and the market is more or less non-reactive to what he had to say. And actually, I would argue that's still bullish, but we'll talk about that in my segment.

CHRIS SIPES CFP®: Chris, this is a key lingo that you have to know as you watch our show. Is, is the animal references, right? When you're talking about the Fed, you've got the hawks and the doves. So the hawks are going to be tighter monetary policy. The doves are going to be looser.

CHRIS SIPES CFP®: And then when you're talking about markets, you've got the bulls and the bears bullish are, you know, thinking that the, the, the price is going to go up, and then bears are the prices are coming down. So some lingo and slang that you should know, cause we, we reference it a lot.

DANO WEIR: We've also got the kangaroo market. Don't forget. And there's also the honey badger market. So we've got a full zoo available for everyone who listens to On The Markets.

CHRIS SIPES CFP®: You know, I feel like we should make a zoo key, right? Like we could have a key in it and we'd be like, well, this is the dove.

DAREN BLONSKI CFP®: And when we say the dove, this is what it means. And when we say honey badger, this is what it means. We can have like the whole zoo and the key for each of the zoo.

CHRIS SIPES CFP®: Animal legend.

DANO WEIR: I'll tell Marianne right on that.

DAREN BLONSKI CFP®: That would be pretty, we should make icons on our website, the dove, the hawk, the honey badger.

CHRIS SIPES CFP®: Well, it's interesting how much drama there was this week. You mentioned The New York Times op-ed. I think that's where Druckenmiller published his opinion piece that he wrote with AI this week. So Druckenmiller is a trader that is very famous in the financial world.

CHRIS SIPES CFP®: I've been talking about the, you know. The issues of the U S government's finances for a long time. And he and Scott Besant used to work, with, George Soros. Right. And, and somehow Warsh did too, right. He was, he was somehow included in that whole mix.

CHRIS SIPES CFP®: So those three guys, Besant. Warsh and Druckenmiller know each other very well. And it was interesting to see the speculation around like, why would Druckenmiller kind of openly drag Scott Besson and his decision to interfere in the bond market, you know, in this op-ed piece.

CHRIS SIPES CFP®: And, oh, he's giving Warsh cover to be more hawkish and good cop, bad cop. And they're, you know, conspiring to work together to... Communicate to the bond market. It makes it very fun for people that like to follow this stuff like a financial soap opera.

CHRIS SIPES CFP®: Now, we didn't even talk about the new tariff war with Canada, but this is interesting. We don't have too much on it this week, but from the Visual Capitalist showing the import partners. Within the United States and look at how much of Canada, Canada is the top import partner for 23 states followed by Mexico with nine and Taiwan with five. So by far our biggest import partner.

CHRIS SIPES CFP®: And oops, we didn't get the export one on there, but there is, there is one for exports as well. And Canada and Mexico are the top export partners for 37. Of the 50 states. So Canada being a major, major trade partner for us, both in imports and exports. And so it's going to be interesting to see how that plays out.

CHRIS SIPES CFP®: We had the whole beef crisis that we talked about last week and how Trump, one of the things he was doing to reduce beef prices was removing the tariffs temporarily. So obviously he has some... View that that's going to affect prices, right? Or else you wouldn't have been trying to take those tariffs off in order to reduce those prices.

CHRIS SIPES CFP®: But the upshot is that we have a dramatic increase in the tariffs, both on the goods coming in from Canada and our goods that are going to Canada, Canada's retaliation against us. So those don't start until I think September 8th. On the Canadian side. But so far, the market was kind of like, meh, maybe it's assuming that nothing's going to happen and that there's going to be some sort of deal that's reached.

CHRIS SIPES CFP®: The classic throw the grenade in the room, blow everything up and come back and try to negotiate a deal. So let's hope that that's the case. I hope the market knows better than we do. But at this point, it's kind of looking like, oh, geez, this isn't going to be good for... Inflation moving forward, at least in the short term.

CHRIS SIPES CFP®: All right. Thanks, Dan, for showing, throwing that up there. Okay. Now when we talk about trade balances, this from Joseph Wang and just to read his commentary on Joseph Wang used to work at the Fed, now he's independent, but he says, the U S is highly, highly dependent on imported goods, not just rare earth, but basically everything.

CHRIS SIPES CFP®: The goods trade. Deficit is over a trillion dollars. Without these imports, inflation would surge and living standards plummet. That is why big talk on sanctioning China is nonsense. That's according to Joseph Wang. And so how does that factor into what we're talking about with Warsh?

CHRIS SIPES CFP®: Well, as we've discussed, one of the big inputs with bond prices and interest rates in general, the cost of money is what... Investors feel is going to be the inflation outlook because they call it fixed income for a reason. You're going to get a fixed amount of money in return for your bond investment.

CHRIS SIPES CFP®: And if that fixed amount is going to be worth less because of inflation, you're going to require a higher rate of return to compensate you for that inflation. Unknowns around inflation, all things being equal, are going to funnel into higher interest rate prices in the markets.

CHRIS SIPES CFP®: All right. So AAII survey this week, a pretty decent jump in bearishness as of this Thursday, where we jumped up to 44%. The CNN fear and greed index is at 58, pretty much unchanged. It went into the greed territory. And it was at 53 neutral last week, but not a big change in the number amount.

CHRIS SIPES CFP®: And then Bitcoin's jumped all the way up to 71 greed. And that's higher than 62 greed last week. We saw a sell-off in both gold and Bitcoin today with that hawkish Fed commentary. So we'll see if that's a sustained thing or not. I'm sure Daren will cover that in the candles.

CHRIS SIPES CFP®: But up until the talk today, after the moves that Besant was making in the yen and making in the rates market, both gold and Bitcoin were doing pretty well. Kind of under the assumption that there was going to be more liquidity injected into the economy.

CHRIS SIPES CFP®: Now, before we jump into some things around the bond market, I'm sure a lot of people are like, why would I even invest in bonds? From an investment perspective, why do I even care about this stuff? Isn't the S&P 500 just the best place to put my money?

CHRIS SIPES CFP®: It pretty much goes up every year. Why even worry about bonds?

CHRIS SIPES CFP®: If you look out longer periods of history, the S&P has had multiple times where it's not gone up. And in fact, it's gone down. And it's actually been down for several years in a row. So one of the things that you can do to help mitigate that risk is to use diversification. And this is just a very simple illustration that doesn't happen in the real world because this is assuming no correlation between assets.

CHRIS SIPES CFP®: And in real life, that doesn't happen. There's always some correlation change from day to day, say between stocks and gold or stocks and bonds, U. S. Stocks versus foreign stocks, etc. So that correlation, meaning how they move, whether they move together or they move separately or they don't really move together at all, which would be a non-correlation.

CHRIS SIPES CFP®: Is always a moving target. But here we illustrate if you're able to find two assets that both have the same expected return, here the example's 8%, they both have the same volatility, which is kind of the normal fluctuation of 20%, and they both have a compounded growth rate of 6%.

CHRIS SIPES CFP®: So you take two identical assets from a return and volatility perspective, but they don't correlate to one another If you put them together in a 50-50 blend, you end up getting better returns, lower volatility.

CHRIS SIPES CFP®: And that is the math behind why diversification is something that most advisors talk about, most fund managers talk about. The quote-unquote free lunch of diversification is from a math perspective. That's why it works.

CHRIS SIPES CFP®: And over a long period of time, that that extra compounding can make a huge difference and that's and that's not anything to say about the fact that in general all things being equal lower volatility is easier to stick with than higher volatility people tend to freak out when big losses come very few people can hang on for years and years and we i think we've all experienced that where you know most recently you look at Bitcoin it was down significantly, kind of sideways for several years.

CHRIS SIPES CFP®: You start to think, gosh, is it broken? Is this never going to work again? Famously during the dot-com era, Berkshire Hathaway was down something like 45% while the NASDAQ was up like 200 and some percent. So just imagine being an investor at that point. You're going, gosh, has Warren lost it? You know, is, is everything different now?

CHRIS SIPES CFP®: Etc, etc. So you start to get these doubts in your head based on where you're at in this in the cycle. It happens to everybody. So the lower volatility path, it tends to be an easier path to stick with for us as humans. And so that's why we look for the diversification benefits. That's why you talk about bonds.

CHRIS SIPES CFP®: And hey, maybe bonds can have a low correlation to stocks and can fulfill some of that expected return that we're looking for to find the assets that we need to get that diversification bonus. I don't know. Hopefully that made a little bit of sense. But here we've got the world's largest government bond markets. And what you can see here is the U. S. Is by far number one.

CHRIS SIPES CFP®: And this is by the amount of dollars outstanding. And this is a big reason why the U. S. Has the reserve currency most of the rest of the world trades in dollars. And has traded in dollars for a long period of time, most notably the oil when Saudi Arabia decided to exchange or allowed oil to be purchased in dollars in the 70s.

CHRIS SIPES CFP®: That was a big driver for why people use dollars all over the world. You see number two is China and number three, I think probably most importantly, is the Japanese bond market. Which is at 11.8 trillion. And the yen is up again, or down, I get, sorry, versus the dollar again today. And so they had just announced that they did something like 95 billion of intervention in the yen over the last month.

CHRIS SIPES CFP®: So I don't think that story is over yet, but it's a developing story and in general the the world's interest rates have been going up, not just in the United States, but global rates, including Japan, have started to go up. And those interest rates, that is the cost of money for people that are borrowing. For investors, that is more correlated with the expected return on those bonds.

CHRIS SIPES CFP®: So it's kind of two sides of the same coin. And if you look at long-term bonds, these are 30-year treasury rates. Interest rates were north of 5% now. But you really look at that time period from, say, 2010 through 2021 was really sort of an anomaly in the bond market, whether you're looking at the 30-year or the 10-year.

CHRIS SIPES CFP®: Those interest rates were artificially suppressed. They were also very low because growth was very low. We just went through the great financial crisis, which was a deflationary bust. And essentially what happened was there was so much credit in the system and half of those loans turned out to be worthless. And so that credit goes out of the system. Think of a balloon deflating.

CHRIS SIPES CFP®: All that credit goes out of the system. It deflated the asset markets. Deflationary bust. That's also what the Great Depression was. And that kept interest rates low because there was There was not inflation. There was actually deflation. There's very low demand for money. Nobody could borrow money. Nobody wanted to borrow money.

CHRIS SIPES CFP®: And so those interest rates were low for a very long time because we just went through a hundred year flood in the financial markets. Well, fast forward to post-COVID, we have an inflation crisis followed by a massive outbreak in... The AI build out. And suddenly there is a huge demand for money combined with a legacy inflation shock. And so the bond markets have just taken off to the upside in terms of interest rates.

CHRIS SIPES CFP®: Now you should know that bonds work like a teeter-totter with interest rates. So if interest rates go down bond values go up Interest rates go up, bond values go down. And so those interest rate increases that we experienced from 2020 to where we're at today, we're very, very tough on the bond market in a very convex way, which we'll show in a few slides.

CHRIS SIPES CFP®: But hopefully it will be a little different. It mathematically will be very different and going from, say, 5% to 6% or 7%, even 5% to 10% mathematically from a bond perspective would be completely different than going from 0% to 5%. That was a very, very, very painful transition in the bond market because of that convexity that we'll talk about here in a second.

CHRIS SIPES CFP®: So if we look at a measurement of the cost. Of the government debt on a couple of different ratios here. This is from Double Line Capital, and they're showing this is the net interest burden as a percentage of revenue. So what is the government, the U. S. Government, bringing in? Okay, so this would be taxes, essentially. Tariffs, I guess, would factor into this as well.

CHRIS SIPES CFP®: So revenues to the government versus... How much they're paying in interest on that debt. Now, that is at a high that we have not seen since the early 90s. Now, in the early 90s, we had a lot higher interest rates at that time compared to where we're at today, but lower government debt. So that was causing that.

CHRIS SIPES CFP®: Now, we have much, much higher debt, lower interest rates as an average rate that the government is paying. But you can see that nonetheless, that percentage. So if you think about it on a household level, which is always dangerous when you're comparing a you know, a government's balance sheet or income statement to a House.

CHRIS SIPES CFP®: But just think about in your own life, if you make, you know, if you make a thousand dollars and that, and, and, in a, as a percentage, more and more of your income is going towards the interest on the debt that you owe, that's a problem. And that's what double line is saying here. Now, if you look at that, same cost of interest, but as a percentage of the overall spending were sort of normal.

CHRIS SIPES CFP®: And part of that is those interest rates that we just looked at where, you know, maybe, maybe the spending has come, come down a bit, but the interest rates have gone up. So, so that it's offsetting, you know, that.

CHRIS SIPES CFP®: Where you can see here that that percentage of overall spending was lower than average, say after the great financial crisis, a lot of that had to do with the fact that our, our interest rates were so low, not so much that we weren't spending as much.

CHRIS SIPES CFP®: Now those interest rates have come up and that percentage of our overall spending that is going towards interest has come back up to its kind of normal, normal range. Historically.

DANO WEIR: Now, in line with all that, Chris, I came across this this week. This is from Daniel LaCalle, who's a economist who is also on the We Have The Data Instagram page. Shout out to them. They have some really interesting stuff. But in line with what you're talking about, they were showing the difference between the nominal deficit and the primary deficit for the United States.

DANO WEIR: And the difference there is one includes what the interest that we're paying on old debt and the other does not so the primary deficit is simply what are the programs the actual money we're sending to Social Security to defense and on and on and on versus the revenues and so when you look at that for 2025 at least Trump is doing what he said he'd do which is that he's cutting expenses and that it's veering closer towards which is only $600 billion deficit in the hole.

DANO WEIR: But the problem is when you look at the total amount that they're paying out, there's just a massive increase because of the interest on the old debt. So I just thought it was an interesting depiction of, you know, much of what is a noose or whatever you want to call it around their neck, around the federal government's neck is really the ghosts of past payments.

CHRIS SIPES CFP®: Yes. And that's a big part going back to last week when we talked about. 29% of all government debt has been accumulated under the two terms of Trump. And a big part of that is the overall principle of that debt and the interest that's being charged against that principle.

CHRIS SIPES CFP®: So that snowball has gotten so big that whomever takes over after him. Is going to have the same problem where like a massive amount of debt is accumulating just based on the fact that the interest is going to be such a significant amount of the overall snowball, right? That snowball is getting bigger and just rolling on itself.

CHRIS SIPES CFP®: Now, I would argue also from a bond market perspective, this is all completely known. In the prices. This is not a surprise to the market. This is a surprise to anybody. Everybody knows this globally. Everybody knows the US government's fiscal situation, et cetera, et cetera. So this is not a surprise.

CHRIS SIPES CFP®: And we all know that the assets are actually, the changes in the market are based on the relative performance. Relative to expectations. There's a certain amount priced in. Okay. And it's the surprises that make the difference in the, in the prices. And so, on the inflation front, despite Warsh's comments this week about inflation still being a problem.

CHRIS SIPES CFP®: The PCE price index, we did get a little bit of relief there, a little bit of a downtick. And the PCE was a kind of favored measurement of the Fed. So we'll see if that continues. Warsh is saying they're going to do a lot less forward guidance moving forward. But that one solo measure.

CHRIS SIPES CFP®: At least this month, did go in the right direction. And so this chart is what I wanted to show in terms of the convexity of bonds. And what this is showing is the change in principle, a hypothetical demonstration of the change in principle based on various interest rate scenarios. So this was from Ben Carlson at Ritholtz.

CHRIS SIPES CFP®: But he was referencing this calculator that anybody can use from FM Investments. So it's a pretty cool, really neat tool.

CHRIS SIPES CFP®: So you've got on the left-hand side the different maturities. Shorter maturities have less convexity. And what is convexity? It's the upside potential versus the downside potential. So how convex is something? What's the reaction?

CHRIS SIPES CFP®: You know, if, if you get, a change in those interest rates and you can see on the shorter terms, changes in interest rates don't have a huge impact on the, on the principle of the short term two year treasuries. So, for example, if we get an increase in interest rates of 3% on interest rates, the two-year treasury is likely to see an increase in...

CHRIS SIPES CFP®: Value of about 1.5%. Now, you go down to the bottom where you look at the impact on a 30-year treasury, that is going to have a negative convex effect where if we get a 300 basis point jump or 3% increase in interest rates, that would equate to almost a 30% drop in principle on 30-year treasuries.

CHRIS SIPES CFP®: Now, on the flip side of that, if interest rates were to go down by 3%, those two-year treasuries would see about a 7% increase in their value versus the 30-year is going to see almost a 70% increase in value with a 3% drop in interest rates. And so you ask yourself, well, geez, what would cause interest rates to go down? Well, some of the opposite of what we're seeing today, which is instead of a massive boom in the...

CHRIS SIPES CFP®: Demand for money, we would see a cooling off there. So maybe AI things slow down for whatever reason in terms of the demand for money. If we were to see some sort of credit crisis where loans start going bad across the economy, where you get a deflationary impact in the loans value going down, which would deflate the value of the assets and that would cause a deflationary pressure on the economy.

CHRIS SIPES CFP®: And then last but not least, if they do get their control over inflation, let's say we get our trade stuff figured out and the wars end and instead of having inflation to worry about, we go to a deflationary environment. Well, those could all have an impact in the bond market on a positive way, which will be the leverage of that will depend on the maturity level of the bonds.

CHRIS SIPES CFP®: They have a different effect, almost like a whip has a different effect based on the part of the whip that's closer to your hand versus the end of the whip. The end of the whip is going to have a way bigger fluctuation in value, if that makes sense.

CHRIS SIPES CFP®: Interest rates will also have an impact on other asset classes. And this from Goldman Sachs, where they say that every 50 basis pointer.

CHRIS SIPES CFP®: Half a percent increase in real bond yields is roughly a three percent hit to the S&P 500 valuation so that's due to you know basically competitive rates of investment in other areas if you can get if you can get a more known return in one place that certain interest rate that's that's your hurdle rate for taking risk in another market like equities, that price of money is also going to have an impact on things like housing.

CHRIS SIPES CFP®: And we're already seeing that major impact. 2021, of course, was when they started to raise interest rates. And we had a lot more buyers in 2021, very few sellers.

CHRIS SIPES CFP®: And that has changed completely today to where we've got, as far as I know, this is the most sellers versus the least amount of buyers in the history of this data. From Redfin. And, so it's definitely a, a buyer's market when it comes to real estate out there, as according to Redfin, but who can borrow at those rates, right?

CHRIS SIPES CFP®: You got, you got interest rates, pretty high right now. And most people are not wanting to, to go out and borrow money at that rate. So that would seem to put continued pressure on the real estate market from a price perspective.

CHRIS SIPES CFP®: Did I put you guys to sleep?

DANO WEIR: Not entirely, but our Bond episode on It's All Money certainly will. So you can go ahead. You don't need to refill your Ambien prescription. Myself and Chris sat down and went into Bonds in depth on our other show, It's All Money.

DANO WEIR: I personally really wanted to do the episode because what Chris just described, I'm it Full transparency. Both of us know it can feel super. There's something about bonds. They feel super boring. It influences so many things in the market and in your own portfolio.

DANO WEIR: So I just want to give a shout out to that episode. It's on this channel wherever you're listening. So if it's on Apple Podcasts or Spotify or YouTube, you could find that episode. And it is the bonds episode from It's All Money. So shout out on that one.

CHRIS SIPES CFP®: Well, just real quick, I mean, can you guys think? Of any asset class that is more hated right now than bonds and specifically anything that's more hated than u. s treasuries right now slash more angst and worry etc etc i.

DANO WEIR: Can't think of anything i don't know if you guys know and what and and so it's like why would you even talk about it or discuss it right now and yet we know so many times you know That's the moment, right? It's when it seems like it's on the outs or when it's done or God, why would you even think about that? That could be the opportunity. You never necessarily know, but that's sort of how we look at things.

CHRIS SIPES CFP®: Right. Everybody's on one side of the boat at this time.

DANO WEIR: Yep.

DANO WEIR: Mr. Blonsky, why don't you show us the other side of the boat? What is happening in the market and what did you see this week?

DAREN BLONSKI CFP®: You know, right on time, actually, for the bonds, I just always find this so interesting, right? Like You have a downward trend line right here on the egg. The egg is a U. S. Aggregate bond ETF. So it's the proxy for when we say the bond market, just to continue this discussion in bonds. And we have this downtrend, right?

DAREN BLONSKI CFP®: And you can see that spiked up here. It was doing really well back in April, or I guess March, and then went down. And then it looks like we were going to get this double bottom thing and then rejected. That didn't work. And then now we keep losing this line of resistance, this trend line.

DAREN BLONSKI CFP®: So, you know, for the people who don't want to hate bonds in their life, we need to break above this line, this downtrend on the bonds to get any further breakout. And it isn't coming today, folks. And you can see this candlestick went up, traded right into that, pretty much that zone of that trend line and got rejected and went down.

DAREN BLONSKI CFP®: I just find the symmetry so fascinating. You could look at the symmetry of the markets, know nothing about what Walsh was saying today, and make a presumption that, you know, possible that it's going to get rejected today at that area, regardless of what he said, just because it went to a certain place on the tape, as we say.

DAREN BLONSKI CFP®: So right around 97, 96 on the ag, that was resistance. And it sold off. So we need to see this recover. And then it closed below that 20-day moving average, which tells you, you know, The risk is to the downside. But if we look on the weekly, you see a close below the weekly, 20 weekly moving average and continuing another week of close down there.

DAREN BLONSKI CFP®: I will say on a positive side, you can see it's making higher lows for the week. So perhaps we're going to break out above this. So there is hope for interest rates yet. Which leads me into my thinking. This is just me surmising. Throwing spaghetti at the wall and seeing what hits.

DAREN BLONSKI CFP®: But when we walk into August, we see this period of time in the markets where there's low volume. And when there's low volume in the markets, the markets tend to float higher. We've certainly seen that over the last four weeks.

DANO WEIR: Low volume means what?

DAREN BLONSKI CFP®: Just not a lot of people in the markets, not a lot of traders, not a lot of buyers, not a lot of sellers, right? I had a client yesterday ask me, well, how's your summer going, Darren? And I said, well, my summer has been over since the beginning of August, because that's when they sent kids back to school. But I think for anyone who doesn't have kids, it's still summertime.

DAREN BLONSKI CFP®: And really, the end of summer is historically and traditionally looked at the end of Labor Day. And the end of Labor Day happens, and we tend to see more activity in the markets. More people come back. The traders come back in from their vacation spots. And then we start to see the volume pick up in the markets. Well, you know, again, just this is me throwing spaghetti at the wall.

DAREN BLONSKI CFP®: But when, you know, the traders come back, they don't want to buy the market at what it was or what it is now. They want to buy it what it was in the beginning of August. So why not create some volatility and slam that market down? For September, October. Hey, we got this magical little thing called the midterm with a lot of people feeling insecure about the markets and not sure what's going to happen.

DAREN BLONSKI CFP®: And one side of the House is thinking the world's ending. The other side of the House is thinking this is their chance. Who knows what's going to happen? But that creates volatility because the market likes to know and cues off predictability. So we walk into midterms, it's say September, October, we see volatility. We figure out that, okay, now we know what's going to happen in the poly market.

DAREN BLONSKI CFP®: Predictions come out. And in fact, you know, Democrats take the House and the Senate, and then we know what we're dealing with, right? Then we get to see the next two years of a mass amount of executive action and people trying to impeach people and yada, yada, yada, it turns into a mess. Well, let's say, you know, the Democrats don't take the Senate and then we have a split House.

DAREN BLONSKI CFP®: Nothing gets done. They just fight and we see executive actions anyway. The, Again, the markets like to... Security. Just an aside, I noticed a headline come across today. I don't know if you guys caught this, but the federal judge ruled that states can now regulate sites like Polymarket as gambling.

DAREN BLONSKI CFP®: There was also another headline of a service member, I believe, who worked in the Pentagon, right?

DAREN BLONSKI CFP®: But I believe he worked in the Pentagon, they haven't released who it is yet, but that's what I was guessing out here, made a million dollars betting on what was going to happen on Polymarket because they had insider information on what the military was actually doing. Yeah, the great equalizer.

DAREN BLONSKI CFP®: It just always bothers the, you know, what out of me, the idea that we're going to go after our service members for insider trading, yet just over the Potomac, sitting in the House and the Senate, we have all our politicians who are making...

DAREN BLONSKI CFP®: Gobs and gobs of money off insider trading, but we're going to bust up our military people because they're insider trading just like our politicians. Okay, whatever. But it's just crazy in my mind. So the S&P 500 closes the week up in positive territory, right? So regardless of everything going on, it's still closed positive.

DAREN BLONSKI CFP®: Now it didn't close above. Last week's candlestick, which is this candlestick here, but it did close positive for the week inside that candlestick. I look at this as a consolidation. That's about all you can look at it right now. Why? Because we're coming back into Labor Day.

DAREN BLONSKI CFP®: Coming back into Labor Day, we start to see more activity pick up in the markets. We start to see more signal in the markets. Right now, it's really hard to know what the market wants to do and is going to do because it's, in theory, just kind of floating around higher.

DAREN BLONSKI CFP®: So that's why I'm saying, hey, don't take a read on the market right now. Hold it, suspend your judgment. Wait and see what happens. What did cue off Warsh's comments today was risk assets. So higher risk assets like Bitcoin, even like gold, all got a whack-a-mole today off the Fed's comments.

DAREN BLONSKI CFP®: Now, gold didn't go down below the 20-week moving average, so I wouldn't be concerned with the pattern of gold. I think the rotation could still be upward and risk to the upside. Bitcoin looking a little precarious at the moment. Now, the market does not close for the week until 5 o'clock.

SPEAKER 6: I think we're not seeing your...

DAREN BLONSKI CFP®: Oh my, I guess you missed all my great charts.

DAREN BLONSKI CFP®: Yeah, there we go. There we go. You're like, what is this guy talking about? Why are we still looking at Democrats and Republicans? All right, so this is the Bitcoin chart, and you can see this building this huge double bottom potentially. I'm really watching this neckline, which is this green line.

DAREN BLONSKI CFP®: If we close below this green line right here and we fail to break out above that neckline for the week, Stop. Looks a little risk off. I wouldn't go as far to say, hey, I would abate some positions kind of thing, but it doesn't look as strong as perhaps it did earlier in the day when it broke and just blew through that.

DAREN BLONSKI CFP®: If we look at kind of the number two cryptocurrency, you can see it's really buying resistance along this downtrend line right now, and it's coming up against it. The fact that it didn't just sell off, hit that and go back down in a big way, I think it's still promising, right? I think you still have risk to the upside potential here. So I wouldn't go crying and I would enjoy your weekend and not worry about it.

DAREN BLONSKI CFP®: But it is something to keep one eye open to, maybe not two. What happened today with Warsh when he talked is he really pushed the front end of that interest rate curve up. So we saw the weekly number on the short end of the curve go up, right? That means in order, which I guess in some ways in the short term is healthier for people who want to buy bonds, right?

DAREN BLONSKI CFP®: Because their rates are going up. But that can kind of have a slowing down effect. And that's the market basically saying that, I don't know, maybe inflation isn't done yet. And maybe there's more to come in inflation. And so the 10-year is staying strong. And it looks to me like it's headed up versus down at this point.

DAREN BLONSKI CFP®: It's not looking like resistance. It's looking more like a bull flag On The Markets. So I think rates are to the upside, likely to go up based upon what I see here. But gold and silver having incredible runs. And now they're selling off and coming back under that 20-week moving average.

DAREN BLONSKI CFP®: So you have to say, based upon this close today, that the risk is still the downside. The structure doesn't look awful, but the fact they didn't close above that weekly average, the trend is still down. You can't say the trend is now broken. We want to get above this red line here, that 20-week moving average, and close a week above that to say, hey, the trend is now up.

DAREN BLONSKI CFP®: As far as this chart looks, gold and silver, you still have to argue they're a bit in the downtrend, except... The gold one's holding on better than silver, but silver's looked at as more risk because you're above that 20-weekly moving average. That's why I like this chart better than I like the silver. Silver's still down. Gold looking a little bit better.

DAREN BLONSKI CFP®: Oil, let's talk about U. S. Oil. Oil, we've been talking a lot about this 80 to 100 range. We're kind of floating there. Be interesting to see now. We're kind of working down. Lower band here to this 80. I did see a headline that's coming through on some of the OSINT stuff, which is the Outsource Intelligence Networks.

DAREN BLONSKI CFP®: These are just basically people that do intelligence around the world using internet and offer intelligence on what's going on. Before you see something big geopolitical happen, you tend to see the OSINT intelligence community get really loud and they start saying things.

DAREN BLONSKI CFP®: But I did see one of the groups, there's some surmising that the U. S. Has actually been doing a bunch of dredging and creating a secondary channel near Oman to allow ships to get through, which I thought was kind of interesting. And then, of course, we had that really, like, odd visit to Moscow by CIA Director Radcliffe out of nowhere this week, and the OSINT community was really boisterous about that one.

DAREN BLONSKI CFP®: There is some kind of brewing discussion. Even the Wall Street Journal published this article. Where they said that, hey, Russia might be getting ready to test NATO. And so some people are surmising that the CIA director flew to Moscow to warn Moscow intelligence, don't test NATO.

DAREN BLONSKI CFP®: Now, right before Russia invaded Ukraine in a big way in 2023, the same kind of warning happened. So people are kind of on nerves with that, which would be really interesting if we get...

DAREN BLONSKI CFP®: To the bottom of this 80 number and then all of a sudden we see something get really ugly and spike with the Ukrainian russian war people are also surmising that u. s went there and told Russia this you know they need to back peace with iran stop supporting them or else who knows what they really said Trump said it wasn't a big deal it was just routine visit but he's a Unbelievable character, right?

DANO WEIR: I thought he was going to end all these wars. I could have sworn he said they never would have even happened if he had won.

DAREN BLONSKI CFP®: It turns out he probably doesn't have the power to control the entire world.

DAREN BLONSKI CFP®: So what you see this week, guys, is just the return of the AI trade. I was talking to a client this morning who's heavily involved in the industry. And even people in the industry are starting to be like, I don't know, this is looking weird. And the fact that we're seeing all these rumors of IPOs tells me we're getting longer in the tooth to this bubble.

DAREN BLONSKI CFP®: Now, most of the time we're going from bubble to bubble in the markets, right? But the AI bubble is the fact that all these big companies want to IPO. Either their capital is drying up or there are a whole lot of people that own AI stock that want out and they want to liquidate themselves and pass off the buck to the investor.

DAREN BLONSKI CFP®: So starting to see some interesting cracks there, but still the AI trade is going strong and still outsizing the rest of the market. So this is the cap weighted index, the S&P 500, and the bigger squares mean they represent more of the capital than the S&P 500.

DAREN BLONSKI CFP®: It's just shocking to me like Exxon and Chevron could fit like five times over inside NVIDIA. I don't know if it's five, but it's close. And these are like major companies, right? That just gives you a sense. How powerful NVIDIA has become.

DAREN BLONSKI CFP®: It'll be interesting, though, because eventually the musical chairs will stop and all of these different AI companies will stop passing their money around. And then we'll see what happens and who's left standing. I think it'll probably be much like the 2008-2001 blowout. Will the markets tank as drastically? I don't know. Because in 2001-2008, at least... We knew of, the U. S.

DAREN BLONSKI CFP®: Government wasn't stepping in and buying indexes, right? But we saw that happen. The Fed bought the indexes during the COVID Crisis, right? So there's precedent that they might do some extraordinary thing. And that's why it doesn't really pay to bet on the sideline that it's just going to all implode because you don't know. And I think because we've become so long in the tooth on this US debt.

DAREN BLONSKI CFP®: Debt and it's just ripping and going up like we're just printing dollars right so they have to keep the regime going they've got to keep the reserve currency in place we lose reserve currency everything changes in this world and the government's just there's there's like why would they do that why why Democrat or Republican i don't really care like why would they sit back and like yeah we're gonna let the dollar lose its reserve currency unless like Elon Musk x you yesterday discovered there's like they they discovered a 200x account bot farm trying to impact AI and political politically influence the u. s markets in the bot farms so like there are players trying to influence our demise like don't be naive China would love for us to not be the power in the world Russia would love for us not to be in the power of the world it's simply idiot to think otherwise.

DAREN BLONSKI CFP®: However, the U. S. Is going to do anything it can to perpetuate its power, to perpetuate its reserve currency position, right? How does that flow into the market? Well, if there is a history of stepping in and buying the index in extraordinary moments like COVID, it's foolish to think that the government couldn't justify an extraordinary moment.

DAREN BLONSKI CFP®: And heck, why would the politicians want to get off the bus when it comes to insider trading? Like, that would be crazy. Why would they let all their investments go to ground? So at least they're incentivized to keep the markets going.

DAREN BLONSKI CFP®: I don't know. Just a thought.

DANO WEIR: You mentioned the IPOs, which may be happening, which would be, of course, Anthropic and ChatGPT. One of those has already happened. Could you bop in on SpaceX real quick? What's happening with that?

DAREN BLONSKI CFP®: Yeah, let's take a look. So we've gotten into lockup period where internally SpaceX employees can now starting... Unlock their positions. Interestingly enough, the bottom was really this 108. We're now climbing into the 140 area. We got resistance in the 150, but that still looks fairly bullish. It's still working higher. It looks like a short-term downtrend.

DAREN BLONSKI CFP®: I would watch this 20-period moving average, call it 134 at the moment. Watch what that does because the market seems to be pushing up along that. We lose that red 20-period moving average, 20-day moving average on this chart. Then I would get concerned we're headed for the down. You could also argue, though, that we are in a downtrend in SpaceX still making lower highs.

DAREN BLONSKI CFP®: So I think the bet at the end of the day is you have to decide which company is going to make it through when everything gets blown out. Because at some point it's going to. I don't know when. It might be five years from now, 10 years from now, 20 years from now. There's going to be a reset, right? You don't run forever like this. These squares don't stay their size forever.

DAREN BLONSKI CFP®: Nifty 50 days, Exxon was one of the biggest. At some point, there's a shift. And when that shift hits, it comes hard, it comes fast. But because of our debt cycles and because of where we're at debt and so many dollars being printed, I think you have to be on the lookout for extraordinary monetary action by the powers that be. That they're not going to just let the markets, maybe, maybe they just get blown out.

DAREN BLONSKI CFP®: Maybe they let the S&P get cut in half. But I mean, really look at this. Like what would be the impact? To the entire economy and every politician, if this thing got cut in half from where it was right before COVID, which is right here, it would be so significant. And there'd be so much economic calamity.

DAREN BLONSKI CFP®: And namely to many of the baby boomers who are stepping into retirement with IRAs and 401ks, and they're all invested. And now that you have America every two weeks piling into their 401ks, which is actually a pretty new thing, no politician can stand the market getting cut in half like it once was. Doesn't mean it won't happen. I just think the political risks of it are far greater.

DAREN BLONSKI CFP®: And I think that the temperament of the voter to allow such a thing is far less unwilling than perhaps we once were. Now, don't get me wrong. It would be to our complete benefit, our total benefit, if we all could just look at each other and say, hey, we're going to make some changes and it's going to hurt for a while, but we're going to be better when it's done because we got to get this runaway debt problem.

DAREN BLONSKI CFP®: But it's just not a reality, right? Prisoner's dilemma. We're not going to slow our economy down so we can adjust our debt, get rates down, get inflation. There's too many disparate actors, too many different.

DAREN BLONSKI CFP®: Hands in the pot too many different geopolitical powers that would love to take our position to make the dollar the non-reserve currency so i think the end game is that eventually wheels come off the bus i don't know if it's in my lifetime or my kids lifetime or their kids lifetime but eventually the dollar loses its reserve currency status and we have a lot of history to support that right like every reserve currency has always lost its reserve currency status at some point and the question is what's next and what are we becoming to the future?

DAREN BLONSKI CFP®: And that's what's going to demand extraordinary leadership through that moment. And whether or not we get that in the U. S. And support that in the U. S. Because at this point, I'm questioning how we support everything we do support, but we are and we're continuing to support it. So overall, I think you have to bet that the debt calculator continues to go up.

DAREN BLONSKI CFP®: And as Chris mentioned earlier, if this sucker continues to go up, the U. S. National debt continues to go up because nobody can touch Medicare, Social Security, defense, or they tried. Trump's really tried to get our interest rates down, but he's not having a lot of success doing it. Then that continues to come out somewhere.

DAREN BLONSKI CFP®: And maybe in the short run, it comes out of the market for a little bit of a dip, but ultimately the dollar continues to print. And that's the base case thesis. If that thesis fails, then we have a different regime to look at, a different situation to look at. But unfortunately, I think inflation is here to stay. I think we're going to have to inflate it away. And that's our only way out.

DAREN BLONSKI CFP®: And the only way to do that is to print more dollars. And we print more dollars. That comes out in the market. That's why if you park money in cash, you park money in banks, those type of things, it can be actually really risky. Because you're inflating away your money. You're guaranteeing the inflation. I'm not saying you should or you shouldn't. It's not advice.

DAREN BLONSKI CFP®: I'm just saying you should really think twice when you're parking money nowadays because the environment we're in is fundamentally different than it has been over the last 10 and 20 years. All right, I'm going to leave it there. I hope everyone has an awesome weekend and enjoys. It's like kind of gets some rain in Northern California, it feels like almost. It's kind of weird weather.

DANO WEIR: And that last point there, Darren, that you made is a perfect example of what we're doing on this show, which is that we're giving you the high, high level, everything that we see going on. And then back to you, what does that really mean to you? How these macro conditions can affect your micro, life, the, the things that are happening right in front of you.

DANO WEIR: So we hope you've enjoyed this week's episode of On The Markets. Thank you to our clients. Thank you to our prospective clients, new people. This is your first time watching subscribe. Subscribe to the channel. Hit that bell icon on YouTube so you can get notifications.

DANO WEIR: You can leave us questions in the comments section. Let us know what you think. Give us reactions. I'm sure you can thank us for helping you get a little bit drowsy, drift you off to sleep with our bond talk. And we appreciate you checking out the show. We do this every single week. We will catch you next week. Learn more about the firm at SonomaWealth. Com.

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CHRIS SIPES CFP®: This content was produced by Fermata Advisors, LLC, DBA Sonoma Wealth Advisors, DBA Fermata 401K, DBA Fermata Tax, the opinions expressed by Fermata Advisors LLC on this show are their own. Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.

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