Fed To "Punch The Economy In The Gut" This Fall? | Darius Dale

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**Darius Dale** (0:56)
In order to take the steam off the boil, from the perspective of inflation fighting and more importantly, from the perspective of regaining some of the credibility with the bond market that a Fed has lost over decades of easier and easier monetary policy, more and more monetary largesse from the perspective of the balance sheet. In our opinion, we think they should do that with the balance sheet because it will target the upper end of the K, all the financing dynamics going on with the AI capex cycle. They don't have to kill the business cycle, they should probably punch it in the gut a couple of times.

**Adam Taggart** (1:24)
Punch it in the gut a couple of times, all right.

**Darius Dale** (1:27)
If they want to save the bond market.

**Adam Taggart** (1:34)
Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Taggart. Very excited to be bringing you the latest monthly update from Darius Dale, CEO and Head Pumbaa over there at 42 Macro. Darius, how are you doing, buddy?

**Darius Dale** (1:50)
It's wonderful to see you.

**Darius Dale** (1:51)
Thanks for having me. Appreciate it.

**Adam Taggart** (1:53)
It's always a pleasure. Darius, folks have been so excited that you've been coming on in a more regular cadence now. These monthly check-ins are just wonderful.
I hope you are staying as cool as you can, because I think you're up there in New York. I think things have been kind of sweltery out there recently. You staying cool enough?

**Darius Dale** (2:13)
It's hard to stay cool as a form of left tackle, so I'll leave it at that, but I'm doing my best. If you see the sweat beads forming up, it's probably because I'm crunching too many numbers for you guys, which I'm excited to do.

**Adam Taggart** (2:23)
Okay. Well, the hardest working man in macro absolutely goes to you, Darius. All right. Look, there's a number of things that I want to talk with you about today. Last time you were on the channel, you had said that you've been pretty bullish for a good while, but you were starting to get sort of short-term bearish, saying that the risks of a 1998 style correction were rising as we headed into Q3, maybe Q4 of this year. I'm curious if that's still the perspective there at 42 macro, or if the data has shifted, that has shifted your outlook at all. Secondly, we talk a lot about the various different plans that you think the administration may be taking. Right now, if memory serves, the administration has been committed to the run it hot strategy. Let's try to grow out of our problems here.
You have said that you understand why they're doing that, and you think that will be in play for some time. But eventually, they're going to get forced to have to pull out the plan playbook, which is essentially the print playbook.
We've got Kevin Warsh now at the helm of the Fed, and there's just an increasing number of inflationary pressures happening out there in the world that aren't really under the direct control of the Fed. So you've got the Iran War creating high oil prices, very much TBD, what's going to happen with them from here. You've got the borrowing demands of the hyperscalers now starting to crowd out government debt. So there's a big credit supply dynamic going on right now, and therefore more options out there, more supply, prices are coming down, yields go up mathematically. Third, you've got some very large countries out there that historically have been pretty large buyers of US. Treasury debt that are now becoming net sellers of it. So China's been doing that for a while. But now we have Japan basically forced to defend its currency, and it's having to try to deal with these high oil prices because Japan is a total net importer and it's had to sell Treasuries to try to do that.