Coming endgame of global macro, AI bubble

I feel as if I am no longer skating on thin ice with the AI bubble on Nasdaq but now tiptoeing on a minefield that could well explode at any moment under my feet. Why this premonition of imminent disaster? It is clear that Iran is going to humiliate President Trump and not do any kind of a deal to open the Strait of Hormuz until the November election. The analogy here is with Iran’s hostage crisis in 1979. Khomeini used the imprisoned hostages for 444 days to crush his secular, leftist and nationalist rival, established a theocratic dictatorship, destroyed the Shah’s military elite and utterly torpedo President Jimmy Carter’s failed bid for re-election in Nov 1980. Vengeance is a recurrent theme in Persian mullah geopolitics and Iran only released the US hostages until the precise moment when Ronald Reagan replaced Carter on January 20, 1981.

The IRGC fanatics who now rule Iran know that control of Hormuz and a Hobbesian state of chaos with the great satan and the little satan in the Middle East is their best guarantee of regime survival. So expect the oil shock in the Gulf and the Red Sea to escalate until $5 gasoline at the pump, $6 diesel and a 5.4% Treasury note yield crushes Trump’s GOP in the House and Senate midterm while a MAGA revolt against another forever war in the Middle East instigated by Israel makes a democratic landslide win in the 2028 race for the White House is inevitable. This is pure LBJ after Tet and the civil war at the Chicago Convention that forced the Macho Man from Texas to quit the White House in disgrace.

The signs of raw panic in the crude wet-barrel market are already evident as Brent has surged 7% last week to almost $90 a barrel as I write despite the plunge in Chinese imports. I reckon Iran’s attacks on tankers mean that Brent could well revisit its post $135 a barrel high this winter. Yet the Volatility Index on Wall Street is a mere 15, proving my point that the greed crazed AI leprosy hustlers who roamed the world looking for fresh lambs to fleece are the Pied Pipers of yet another capital market Armageddon, exactly the role the banksters played in 2001 and 2008.

Warsh will do his best to gloss over inflation risk at the next FOMC conclave but the deficit chickens have finally come home to roost in Uncle Sam’s global Ponzi daisy chain. This was the reason Scott Bessent was so desperate not to let the Bank of Japan sell US Treasuries to finance its $95 billion intervention when the yen sank to 164. This was the reason there was a 9-3 dissent vote at the July FOMC. This is the reason why the when-issued 20 year Treasury bond is trading at 5.27% a 19 year high, before this week’s auction. Once inflation trots and then gallops I can easily see the 20 year bond yield rise to well above 6.5% or even higher.

My whole life is a quest to discern macro patterns and sift trade ideas from the real-time swirl of global economic credit FX and risk asset cycle. I cannot forget that 10 out of the last 12 US recessions were preceded by a spike in oil prices. So braise for the fatal impact since I know that the Trumpsters HMS Titanic has already hit the iceberg and there are not enough lifeboats for the gentlemen on the first class deck, let alone all the women and children plus the poor 300 levantine immigrants who will now drown in the pitiless icy Atlantic exactly as they all did that horrible day in April 1912.

Ask the little guy who runs the tape recorder in your head whether this macro scenario will embrace a $2 trillion Anthropic IPO or any IPO at all for OpenAI, a surreal circus whose management team is fleeing a sinking ship because they know that a business with a $40 billion ARR can never meet $1.6 trillion capex commitment. Never.

Samurai Larry, how could you have got it so horribly wrong and will you finally meet the Sun Goddess without shame via Harakiri? Core Weave, are you the short that will finance Matti’s mancave high above the cliffs of my beloved Nice overlooking the Bay of Angels? I do not wait for the FOMC smoke signals to tell me that Kevin Warsh has utterly failed his baptism of fire in the bond market and must now face the Holy Inquisition of the leveraged Tsunami of Peekaboo finance that roams the world at the speed of light, seeking to kill any central banker who falls behind the inflation curve. This is the reason Mr. Buckaroo was a sell at 1.13 euros and Yen-san is as yummy as ever at 160 for an eventual target of 126 when the next ice age descends on Wall Street.

My safe haven du jour is Dr. Copper and the 30X money gusher that lies in the Congo’s heart of darkness. Energy, Auric, China AI hardware, biotech and the world’s top New Age defence techs to hopefully keep the cash register ringing on the long side at Casa Khalid while I leap into the AI tulip mania’s endgame. Nietzsche said it best, duckies “gaze not into the abyss lest the abyss gazes back”.