Booming Jobs Report Plummeting Market Itk With Cathie Wood

TITLE: Booming Jobs Report, Plummeting Market: What’s Going On? | ITK With Cathie Wood CHANNEL: ARK Invest DATE: 2026-06-05 ---TRANSCRIPT--- On this episode of In the Know, we certainly discuss this employment report, which was a boomer, and the confusion that it’s causing, and give you some bearings, at least uh through our eyes, as to what’s going on out there in the markets. Greetings everyone. Uh it is employment Friday and what an employment Friday. This is uh beautiful employment report. This economy is moving into boom territory. We’ve been talking about this for a while. Uh but the markets are plummeting. What the heck is going on? Uh well, we think we have the answer. Uh I think it has to do with Kevin Walsh, our new Fed chairman, who is not saying anything, at least not yet. and maybe he won’t until June 17th, which is when uh the Fed announces its next interest rate uh decision. Uh so we’ve got roughly 12 days. Um I do hope he says something in the meantime. He may not. Uh but if I understand who he is, he has much more of a supply side policy bent. uh and he does not believe that strong employment and strong growth is bad news. In fact, people who do believe that uh adhere to something called the Phillips curve. Uh when growth goes up, they think inflation goes up as well. And that’s just not true. In fact, the the most vibrant growth periods have been associated with much lower than expected inflation. Why? because of productivity. Uh, and I think the same thing is going to prove true now. Uh, but we have a bunch of hawks on the Fed and they may not be talking as much as they did under Chairman Powell and I think Kevin Worsh is going to styy that a bit because it just causes volatility unnecessarily. Uh but they are out there whispering and uh so a lot of people are afraid they’re going to make uh another interest rate decision um that that is not that is not conducive to growth and lower inflation. Uh and believe it or not that would be higher interest rates. Uh now we think that where this all will end is a clear understanding and we’ll show you in charts what’s going on. It’s clear what’s going on. uh that productivity is driving this economy and that inflation is going to break to the downside and if the Iran war is settled anytime soon and we’re beginning to see oil prices uh peak and and come down already. So there is that anticipation uh that inflation will probably go negative sometime this year and uh that will be first of all the oil price unraveling. Uh but second uh the impact of productivity enabling companies to actually lower prices and we are seeing some companies lower prices. As I know I featured here a couple of months ago, Fredo, which is owned by Pepsi, cut uh the price of some of its products uh by 15%. Uh and we’re hearing other companies like Walmart and Costco saying that they are not passing price increases through as much as one would expect uh because they are seeing efficiency gains and productivity thanks in large part to AI and robotics. Uh so here we are. Uh I think the charts uh tell a very good story. Uh and hopefully Kevin Worsh will be looking to at this and these charts as we pull them together uh and um and weigh in on them. So I’ll start with a Celshi chart. We’re we’re learning a lot about what to do and what not to do in terms of phrasing questions or or statements. And in this case, we realized that federal deficit to GDP falls below 5% for fiscal 2026. Um, our intention uh and again we have to get better at wording uh these things. Our intention was to say that the federal deficit to GDP ratio falls below uh 5% at any given point in fiscal year 2026 whereas this effectively reads on average for fiscal 2026. Uh so we knew uh that it wouldn’t be on average. uh but we do do believe that it is going to drop below 5% uh before the end of fiscal 26 which is September of 26 and uh let me show you a few reasons why. So in other words, we’re learning. We’re going to perfect our um ideas in terms of how we state them. And you know, this is very important. I I any of you who are focused on Cali and prediction markets will know that there was a big controversy having to do with poly market around uh Michael Sailor’s first sale of Bitcoin from Micro Strategy or Strategy as it’s now known. And there was a big halaloo. You can read about it. But it uh had to do with, you know, the explanation of um exactly what uh the statement was trying to say. And again, we made the same mistake. So um uh it will not uh drop below 5% for fiscal 2026. But here you can see why we think it will or could before the end of um this fiscal year September. uh you can see that uh there’s been a bit of an improvement in the last month to I believe it’s uh minus 5.3% roughly around there despite uh here you see corporate income taxes uh down dramatically because of the accelerated depreciation in last year’s tax package that’s accring to the benefit of corporations who are now able to invest much more in this new AIA age. Uh but this should have hurt the deficit, right? Uh as should this this is individual tax refunds. They are up, you see in the black line, they are up roughly 17% year-over-year. So that also should have been a drag on the deficit. And yes, yet it improved a bit. Uh now, um we’ll get back to why we think it’s going to continue to improve. I gave you a hint, not just a hint, in the in the introductory statement, I basically said, you know, this economy is booming and that’s what’s happening here. Uh, and that’s what we thought would happen. Uh, so here on the dollar, how high will the DXY get this year? Again, uh, the way this reads, it could be on average for this year. Uh, what we meant was anytime this year. Now you can see Kelshi is betting uh or is predicting uh 101.9 which is down from where it was roughly 103 but you can see here where the dollar is. It’s a little above 99. So Kelshi or the prediction markets are expecting an appreciation in the dollar despite all of the narratives out there that the dollar is in a death spiral. I mean that’s a bit of an exaggeration but a lot of a lot of forecasters predicting uh the dollar continuing to go down and you can see here it is actually stabilized uh continuing to go down uh because of whether it’s the end of American exception exceptionalism or our twin deficits the budget deficit and the trade deficit. Um but if we are right, the dollar will turn uh up decisively this year as the impact of the tax package which started last year um filters through into booming economic activity and the returns on invested capital in the in the United States continue to go up relative to those in the rest of the world. Now, one other thing I’ll say about the dollar here. High energy prices typically help the dollar uh and uh and and so it should have stabilized if not have gone up because oil is priced in dollars for the most part. Um so, so that didn’t happen and we have to recognize that. Uh but look what is also happening on the other side of that. Here are the holdings of treasury securities by countries uh in the world. We have uh China, Japan and India. And we also have Turkey. Turkeykey’s in the green. And uh I saw the headline uh a couple of weeks ago which said Turkey has effectively drawn down its Treasury reserves to almost nothing uh as it’s been supporting its currency. So what’s it doing? It’s selling Treasury securities, getting dollars for those, and then selling the dollars and buying Turkish lera to try and support the currency. Well, they’re almost at the end of that road. Uh, and they’re also selling gold as is Japan. And I’m sorry, Japan has not been selling gold. Japan has been selling Treasury securities to support its currency. It does not want the yen to depreciate below 160. Um well, it’s it’s kind of below really is above 160. So that’s uh 160 yen to the dollar. So we’ve been getting more and more yen per dollar. it’s been trying to hold the line at 160 uh because that’s uh where uh the its economy really in 1989 1990 started to unravel. The problem is as they sell treasury securities, get dollars, um uh put the dollars out there and buy yen, um to the extent they cannot control, uh the their currency, their inflation rate is going up and they like the US will have a monetary decision in the middle of June and they may take their interest rate to 1% which is still lower than where we are at 3.75% for the Fed funds rate, but the gap has been narrowing um significantly. So, uh and then you can see the others. Japan, uh is in the purple there and we just got the uh latest month they sold 76 billion dollar worth of Treasury securities. You can also see China and India, uh taking down their Treasury securities. And yet our uh our bond yields are they’ve been holding pretty steady in this 4.4 to 4.5 4.6% range. That’s at the long end. These Treasury securities are typically at the short end. Uh but um we’re surprised that there hasn’t been more pressure on Treasury yields given h how much selling of Treasury securities there is out there. Now the other thing to note is when they are selling dollars and buying their own currencies, what is really happening? Dollar liquidity out there is going up and many people are puzzled as to why uh the US market continues to hit all-time highs. Uh today an exception very notably. Um but it is I think one of the reasons is there is more dollar liquidity out there. The other side of this though and I remember this from the 80s. I was very young, very impressionable. I remember everything about it. Uh that when we saw emerging markets especially supporting their currencies as aggressively as Turkey is right now, um there were probably crises brewing. Um we saw it in the 80s, we saw it in the 90s with the Asian crisis. Uh so I’m tuned into this because there could be some brewing crises out there if these countries are being forced to sell treasuries in the case of Turkey sell uh sell gold. We’ve seen Russia selling gold recently. I think this week uh someone uh within I don’t know if it was the Kremlin but within Russia was saying hey we can’t afford this war anymore. Uh so uh you know that to us is very interesting. And then of course in the case of China uh China’s being starved of oil. They got so much of their oil through the straits of Hormuz uh and they’ve had to cut back that there may be something going on there as well that um is causing some disturbances. Um so stay tuned for these foreign uh currency moves. They are important. Um so let’s get into uh monetary policy. So we did fiscal policy impact on the dollar uh monetary policy. Now then we’ll get into economic indicators and market indicators. Uh so here in the purple line you can see uh M2 moved ahead 18 months for monitorists who believe that inflation is a monetary phenomenon and it is to some extent. It just depends what velocity is doing around this and we’ve talked about that before. So money growth seems to have um stopped at roughly I think it’s 4.7 or 8% as of April the last month for which we have data and if you take a look at this chart that’s really in the lower half to lower third of where it has been historically and you can see in the green line uh CPI inflation uh CPI inflation has tended to be below low um M2 growth and the reason especially since 1997 was velocity or is velocity has been coming down uh secularly with some cyclical moves to the upside but has been coming down and the only other thing we can find out there that looks similar to velocity is the labor participation rate uh which has come down and uh it is stabilizing ing here. So, um we don’t think this uh kind of money money growth uh is going to is going to uh increase inflation. You see the CPI here at uh it’s in the mid3s uh somewhere I think u because of energy prices recently. It was in the low 3s. I think it got below three uh at one point um uh before the Iran war. So this is definitely um an impact mostly because of oil prices. And we’ll give you a sense of why we think inflation is going to come down significantly and we really want and hope that uh Fed Chairman Kevin Walsh is paying close attention to this because we are at a very important period. The Fed cannot make another mistake. The mistake we believe, consider the source, but we believe uh in 22 is the Fed was trying to solve a supply shock with higher interest rates. Higher interest rates hurt supply even more. You need to encourage or incentivize increased supply in order to get more supply. So we ended up with the supply shock lasting three years unnecessarily. Um I don’t think that’s going to happen again. Um but the market is behaving especially today like it is. Uh we disagree that was a very tough period for our kinds of strategies. Um and uh given my understanding of Kevin Walsh uh he does not agree with that point of view. uh and uh I think he’ll pay more attention to some of these other variables. So reserves he he does believe in quantitative tightening because he worries that banks will start lending aggressively at just the wrong time. Um so he takes away the kindling which is reserves. Uh and uh so I think uh we’re down quite a bit. were down uh since the peak 30 or 40%. Um and you can see bank loan officers here uh are are on the tight side. They are tightening. It’s above zero. You can see for much of the time after 2000 uh and uh after 0809 uh the the Fed I mean the banks uh were pretty lenient when it came to lending encouraged by the Fed and as we were trying to come out of the tech and telecom bust and the 089 crisis. Now, what’s happening is the private credit uh drama is I guess what I’ll say uh is causing more conservatism. So, we’re not seeing the seeds of uh excessive monetary growth from the banking system. We’re also uh looking at the yield curve, the 10-year versus the 2-year yield, seeing, we’ve been watching for this ever since we saw uh this measure of the yield curve stop at 150 basis points after COVID. We said, “Wait a minute, what does this mean?” it did get back up into that 200 to 300 basis r point range um that we’ve seen in past cycles when monetary and fiscal authorities around the world have put their foot to the accelerator. It is starting to come down from a peak of 70 this time. What does that mean? Does the long bond yield see some deflationary undercurrents um uh brewing out there? Because uh it’s not baking in uh either the oil price, which you see here up 55%. If if long bond yields thought that this was going to uh cause a secular increase in inflation, bond yields would be much higher than they are now. Um and uh if if bond yields thought that this recent increase in commodity prices was going to lead to an inflationary spiral. Um we would not see the yield curve flattening. Now what is what is what what is happening here? the the oil price surge definitely uh because of Iran and now we have I think Venezuela has increased its production in the UAE we’re seeing production going up they’ve effectively pulled out of OPEC and I remember in the 80s in ’ 86 specifically when uh when OPEC started splintering and the members started fighting uh and not not uh agreeing ing to production quotas. Uh Saudi Arabia said, “Fine, you increase, I’ll increase.” And it took the oil price, we had to look it up this morning, uh down from roughly $40 to 10 $10. Uh so I think I don’t I don’t think it’ll be that extreme but I think we are going to see a very significant uh drop in oil prices uh once the Iranian war or conflration or whatever you want to call it now um is over. And uh in terms of this why isn’t the why aren’t commodity prices broadly um concerning the bond market that much? Uh it is because many people understand that because of the Iranian war um manufacturers and others um decided to build inventory so they’ve pulled forward demand and then there is also the supply demand imbalance and it’s a true supply demand imbalance. prices going up are a signal produce more more and more for all of the data center uh and and power construction going on out there. So I find I find that very important and interesting that the yield curve is recognizing this. This is the other thing that’s happening out there and you’ve heard Walmart and other companies saying we’re not passing all of our price increases through to the consumer. we’re absorbing them either through higher productivity which is protecting our margins um or taking a hit to margins. And you can see that seems to be what’s going on. The PPI in green, the core PPI has been above the core CPI now for a number of months. Uh and uh as you can see uh that that rarely happens. uh unless unless we’re in a recession where companies are seeing demand fall off. Well, companies have seen demand fall off as they’ve increased prices and they’re learning not to increase prices and to get more efficient. Um and so here you can see will the core uh P CPI fall below 2.2% this year. Um now this is probably another problem. Is this average or at any point? and we’re going to get a lot better. Promise, Cali. Um, so most people say no, probably because they’re interpreting this as um average for the year. We meant it to be uh at at any point during this year. And you can see we’re already down to uh 2.8%. You know, the the oil price impact getting into finished goods uh other than gasoline. um just hasn’t had that much of an impact. Uh and we do think uh that this will reverse and could get below uh 2.2% this year. And here’s one reason. So this is true inflation. We’ve been featuring this every month. Trueflation um had did tick up because of the oil surge, but look at it. It didn’t get back to where it was and it is rolling over and is back below 2%. Even more important, the core uh true inflation measure and this is consumer price inflation uh is at 1.2 or 1.3%. Uh and really you can see it has broken down. So we uh believe that the surprise uh in inflation this year is going to be uh much lower than expected inflation and maybe a very rapid deceleration in inflation once uh we clear through the Iran war. Um now here’s another reason we expect product uh inflation to be much lower than expected. Productivity here 2.8% 8% uh we think that it’s going much higher and uh I think the astonishing most astonishing number for me among the charts sometimes I need this perspective uh and love doing these monthly calls as as a result but look at unit labor costs they’re roughly half a percent uh and what that is saying is productivity is offsetting most of the compet compensation increases out there. And you can see how different this is from the early 80s. And if you were to go back to the 70s, you’d see that double digit that doubledigit territory for for unit labor costs because we were in cost push inflation back then. Oil prices kept going up and up and up and unions were striking uh and and workers were just saying, you know, I’m quitting. I’m going on to a higher paying job. So to prevent turnover, they had to keep pushing uh compensation uh rates up. Uh that’s not happening now. In fact, quite the opposite. Many people are fearful that uh AI and robotics are destroying jobs and they’re not as demanding when it comes to wage gains and so forth. Um so here is what is happening to corporate America. Uh so this is non-financial corporate revenue um growth on a year-over-year basis that’s in the purple versus private payroll employment. Now, typically private payroll employment growth year-over-year when it’s going down, it’s because revenue growth is decelerating. That’s not happening. Now, this is unbelievably good for margins. And so, you can see these are domestic corporate margins. uh this is as a percent of uh I mean do domestic corporate profits before tax as a percent of nominal GDP. So that’s the equivalent of US revenues and you can see we’re heading up uh towards all-time highs. uh and a a big part of the reason for that is revenue growth accelerating employment growth not productivity gaining and of course AI is a big part of that story now this chart is also quite astonishing this is labor um this is uh compensation as a percent of nominal GDP so this is the flip side of profits uh corpor corporation uh profitability has been going up as compensation as a percent of GDP has been coming down. Now this is what I think is going to change. I think the big surprise in the next few years is going to be labor shortages, not a glut of labor. Now I know that corporations are not hiring right now. um uh at least it’s much lower than normal, but they’re also not firing. Um and in the meantime, and as I’ve encouraged anyone who loses a job or can’t find a job, just go out and start a company, solve a problem with AI, I do think there’s going to be an entrepreneurial explosion and corporations, larger corporations who want to attract labor are going to have to change this dynamic. Um because let me tell you while um I did start my company at the age of 57 and I wish I had done it much much earlier um it is the most satisfying thing. It’s also terrifying. It’s exhilarating. It’s it’s all kinds of emotions. Uh but you know it’s the real American way. And so I think corporations are going to have to compete uh for talent and the the talent is going to lean towards um becoming entrepreneurs, self-employed and I think they got a head start of it um or at it uh in the internet age influencers a lot of those people have quit their jobs and AI is making that even more lut lucrative for them. Uh so I think we’re going to be talking about labor shortages or certainly corporations will be which will increase their need for productivity growth as well. Uh here is household employment. This is on a three-month moving average basis. It’s year-over-year percent change. And you can see household employment which does include small businesses um is declining. Now you can also see from the shaded areas rarely do we see a decline in the absence of a recession and yet here we are now in this month’s employment report which was a barn burner um expectations I think for uh non-farm payroll employment were uh 88,000 an increase of 88,000 the increase was 172,000 and upward revisions to private uh previous months 93,000 and yet wage gains 0.3%. Very well behaved. If you annualize 3.6% and we’re at roughly a 3% productivity growth rate, that’s how you get to unit labor costs down at roughly a half percent. Uh household employment in this last month, this is a three-month moving average. uh monthtomonth they were up about 155,000. So for the first time, you know, in past employment reports I usually say something for everyone, bears and bulls. This was just bullish. Uh and uh and so I think it’s telling us the economy is doing very well. Here you see the labor force growth rate. Again, three-month moving average down year-over-year. And you can see it’s even more rare for this to happen in the absence of a recession or the aftermath of a recession. Um, and it’s happening now because baby boomers are retiring at an accelerated rate. You know, I’ve seen uh some uh individuals out there, we’ve moved into the AI age and they’re basically saying, “Okay, I’m out of here. I’m not doing that.” Uh so maybe there’s uh maybe that’s one reason we’re getting a turnover in in the labor force here. Um, and in order to pull more people into the employment ranks, uh, corporations are going to have to bid up, uh, as, uh, baby boomers retire and as we lose, uh, as we lose, uh, people who, um, are leaving the country, uh, because of the immigration crackdown. Here is the chart we’ve focused on quite a bit in recent months. The top one uh you can see the unemployment rate for young people 16 to 24 year old uh is at 9.4% that is very high. It’s it’s almost double the overall unemployment rate. Um but if if we’re right and young people say to heck with this I’m just going to start my own business. uh and in doing so, showing their initiative and doing it with AI, becoming more attractive to corporations, they’re probably going to be able to uh demand more compensation. Uh so we think that’s going to happen and that this unemployment rate will continue to come down. Uh here’s consumer sentiment. Record-breaking low and and it is heartbreaking. I think there’s so much fear about employment and I’ve just told you what I think which is contrary to conventional wisdom out there. But there are other reasons uh that consumer sentiment is is has been weighed down. um fear fears in from an employment point of view um their saving rates going down and now those who are living hand-to-mouth they have no choice but to take any savings that they have down. Now savings can go down for another reason. It can go down because the stock market’s going up. You saw that in the 90s. Um the stock market’s going up. Um and typically confidence is going up at that time. It isn’t yet. Um but uh it could be the reason at the upper income level the saving rate might be going down. Um you can see what’s going on at the lower income level. That auto delinquency rate, we’ve been watching it for a while. It’s blown out above 089, above COVID. Um and uh and and so what we think could be happening is people are quite happy to let go of their cars now. They can get an Uber if needs be. They’ll work remotely. Uh and it frees up some income. So that may be one reason they don’t mind losing their cars. On the other hand, you see credit card delinquency rates improving. What’s this? I think uh young people especially are paying a lot of attention to their credit scores. Um and I also think that tax refunds in the last year have offset uh the impact of oil price increases. So this is good to see. Here’s consumption. It’s held up pretty well. Although I think we’ll see this roll into a little bit of weakness because uh in the last few months um and and not recorded here uh inflation kicked up uh because directly because of oil but nonetheless it’s still holding up given that kind of sentiment. It’s holding up. It’s okay. Uh, and one of the reasons sentiment is down is, again, I’m going to blame this on the Fed circa 22. Um, basically that the the Fed shut down a generation of homeowners. You know, the the young people cannot find afford a house. They’ve got their student loans. They’ve got the housing prices went up during COVID. Uh, now they’re settling down, but they’re not crashing. Uh, so we still have the affordability issue and you can see where existing home sales are. They’re back where they were. Well, I don’t know how far this goes. I can’t see it quite, but in the 70s when I was in college, I remember this number being above where it is now. I remember being it being at in the four to five million unit range and the population is so much bigger now. So that’s been a travesty and I do believe Kevin Walsh is taking due note. He knows that interest rates have to come down, mortgage rates at least. And if inflation comes down as productivity is increasing, no matter how strong the economy is, I think he will cut rates. Now that is contrarian, I know. Um, but that’s what I do believe about Kevin Worsh. Here you can see, you know, home buyers, that’s in purple, home sellers, just tremendous imbalance. There’s there’s a lot of angst out there. And I would put that in the baby boomer category as well. They don’t want the big houses. They they want to move, but they can’t afford uh mortgage rates that are twice what they have right now. Uh here here we have the interest rate. As you can see, it’s ticked up recently. So, not inspiring confidence and not increasing affordability. Now, onto the rest of the economy. So, that’s the consumer uh and housing. And you know, those two are very related in terms of sentiment. Um here’s the um just in case just in case the Iran war happens, boom. just in case we run into another supply shock, I am going to build inventories. We think that’s partly what’s going on here. And then of course the other uh big development, continuing development is the AI infrastructure boom and it is creating a ripple effect throughout the manufacturing sector. Here, as you can see, uh we’ve broken out of, you know, in the tech and telecom bubble. We went to a high and we had trouble breaking through it until recently and now we’re out. If this were a stock, you’re you’d say we’ve broken out. We had a little cup and saucer or whatever that would be called technically and we’re on our way. We’re on our way because why? because this investment is paying off amazingly. So, uh, XAI, now SpaceX AI has to the best of our ability to discern this from SpaceX’s S1. Um, Brett Winton has done incredible work on this as well along with uh Frank Downing and Joseph on our AI team. Uh we believe that uh SpaceX Space X AI um built Colossus one uh and two I’m not going to get this exactly right, but for roughly $30 billion and Anthropic is renting it out effectively for 1.25 25 billion per month, 15 billion a year and uh the numbers may be even higher than that. So think about that. They invested 30 billion and Anthropic is you know in one year going to return half of that investment. That’s mind-blowing. Uh and so that’s why I think that um SpaceX AI was willing to rent it out. Uh Anthropic was willing to pay and XAI is reorganizing and restructuring. Here you can see tech spending comparing it to where we were in the tech and telecom bubble. This is what scares a lot of people. We’re almost there. Um and this is on a metric uh that will share who put together this chart. It’s it’s around very tech specific categories, hardware, software, maybe R&D as well. So, we’re we’re up there and yet we think we have miles to go. In the industrial revolution, uh capex as a percent of GDP went to somewhere in the five to 6% range. Um right now we are in uh we’re less than half of that, maybe the 2% range. And we think we could go into that five to six% range. So don’t let the tech and telecom bubble and bust scare you. That was too much capital chasing too few opportunities too soon. We didn’t have the cloud. We didn’t have the breakthroughs in AI and everything was way too costly. That fiber laid stayed dark for decades. The GPUs today, as someone said, I don’t know who said this, they’re melting. They’re in such short supply. trade deficit just to round out uh consumption, investment, uh inventories and trade though that’s what makes up GDP. Um you can see pretty much uh status quo at least it’s not getting bigger. I think that would uh uh light a fire under uh President Trump’s rhetoric on on this particular topic. uh we would not be surprised to see uh deficits get worse and as I’ve said we don’t worry about it because the other side of a trade deficit is a capital surplus it all works out we’re see we see a lot of capital inflows into the US here we’re on to markets and fascinated by this chart still uh the gap that opened up and I think this when history is written and has enough hindsight uh we’ll look the 22 2022 rate hikes as you know a massive mistake. It caused a lot of harm. The metals to GDP I metals to gold ratio in the green there went straight down. It is now starting to recover. That’s good news. It’s consistent with the economy uh starting to recover. Um, as you can see, interest rates have pretty much been rangebound in the last few years despite some of uh the the charts I showed earlier in terms of the discouragement of Treasury securities around the world. Uh, and they’re buying gold. If we’re right, that’s going to be a major mistake because if you’ll notice, uh, the day that Kevin Worsh was appointed, that President Trump appointed Kevin Worsh, the gold price peaked. The gold price peaked. Uh, and I do believe that Kevin Worsh, just like Greenspan, uh, will keep a very close eye on gold as an important inflation gauge here. S&P to crude oil uh bouncing back. Uh this is very reassuring. You saw what happened in the 70s. It absolutely imploded and that created a bare market that lasted from 1966 to 1982. And uh and uh you can see we’re we’re we’re not continuing down. We’re moving in the other direction. And we think that will continue especially if we’re right on oil prices. Here is the S&P to gold. And again, I referenced this because I respect Gavcow, uh, a research house out there. They they um tuned us into this many years ago. And you can see again in the 70s, what a disaster. Um, you can see we’re stabilizing here. S&P picking up relative to gold because the S&P is going up and gold is going down. Uh, we do think that’s going to continue today. not withstanding if we’ve got Kevin Walsh right and I think we do. Um here you can see Bitcoin to gold. This this one isn’t as clear-cut. Um there’s been a lot of fear around quantum computing around Michael Sailor selling many people saying oh my gosh you know his debt to asset ratio or debt to market cap ratio I think is in the 40 45% range he may be forced to sell more and more Bitcoin um we shall see we shall see um as I said we I think gold it will continue to come down. Um so that will put upward pressure on this ratio. And as far as Bitcoin, uh there are a few onchain indicators that are saying the bearishness has reached an extreme. We shall see. We shall see. Maybe this is going to be a test. Here two more charts basically saying not a care in the world. And and you know what? If we’re going into a boom, uh that’s right. These credit default swaps, bank credit default swaps, um should be well behaved as should uh junk bond yields or so. These are uh these are the high yield uh high yield yield high yields relative to treasury yields uh on the 10-year spread. And you can see very quiet. You can also see and we always have to um be on guard that you know they’re quiescent until they’re not until there’s a major shock. That’s why everybody was worried about the private credit meltdown. We have not been worried about that. We think it’s isolated. It’s not hitting the banking system and uh so we feel pretty good about that. Just two more charts here uh courtesy of uh Kshi. So this is their new American power index. So uh Kelshi wisely is starting an index business uh and hoping that uh their index become important reference points for traders um and uh and you know increase the liquidity of all of their markets. So this is uh the American power index. Now, given how much power is in the news uh around data centers, I don’t think I would have named it this um but but it is the balance of power here that they’re trying to get at Republican versus Democrat. And I was astonished to see that this has flipped toward Republican. It when the Iran war started, it went negative and now it’s come back. And I do think uh the stock market has had something to do with that. and um uh a lowering or a lessening of uh the in incredibly difficult rhetoric around the beginning of the war and uh an iteration towards hopefully some kind of deal. Uh so so that’s interesting, especially important in this midterm election year. And this is uh um this is another uh chart or market that we suggested to Cali. When will Compass Pathways submit an NDA for comp 360s psilocybin for treatment resistant depression? And what’s interesting about this this is where there are inefficiencies in these markets. You know there are so many positive uh signals here. This started in March. Um, this contract did before uh the FDA or before the president’s executive order on April 18th, I believe, to expedite the approval process for psilocybin and other psychedelics uh for uh mental illness. uh and it also uh there was um the FDA also um cooperated in in essence by taking the approval process or the length of time uh for from 10 months to one to two months. So, we thought all of these would go up uh you know that that the odds of all of these would go up dramatically, but they’ve hardly changed. Uh and amusingly uh the the before January of 27 is higher than the before April of 27. How can that be? Uh so, we’re all getting used to these new markets. I’m enjoying it. I think it’s bringing back active management because we’ll be focusing on the variables that are most important to stock moves and hopefully getting away from mindless a algorithmic trading around macro variables and others. Let’s just get down to business and what really matters in terms of um company by company. Uh so with that uh I know this was a long one. We feel very strongly about who Kevin Worsh is, what he believes. Uh we don’t know how he how strongly he will feel about bringing along consensus before he says anything. Um and so that’s what the market’s grappling with. Uh but truth will win out. We do think um he will be a strong force on the Fed. Uh he’ll be very convincing. He’s very good. uh very good debater uh and um I think uh that his appointment and confirmation bodess very well uh for monetary policy here in the United States uh done correctly and for financial markets generally. So with that I will leave you and wish you a happy official beginning of summer later this month.