Fed To Trigger ‘1987’ Market Crash This Week? | David Woo

David Woo (0:00)

If this thing goes down, it's the end, because they know anything happens to this thing, it's game over. It basically collapsed, and then, you know, it's the end.

David Lin (0:08)

How high interest rates have to go before everything starts falling apart? Where does it need to be for the AI trade to blow up? It's Monday, September 14th, and the US. Tangier Treasury Yield finally hit 5% this morning. It's highest since 2023 The 5% level has many economists already spooked. What's going to happen next? Brent is near $108, Barrow and WTI is near $103. And so what is the US. Treasury going to do about the fact that Tangier has already hit 5%? Our next guest says Trump and Secretary of Treasury bested must do everything they can to cap the long end of the curve from going up even more, or the AI trade blows up. And the entire stock market in the US is dependent on the AI trade. President Trump even posted on Trade Social today that whoever wins AI wins.

With oil above $100 now, markets are pressing in a 90% chance of a Fed rate hike this week. Is Kevin Warsh about to cause a 1987 style crash? Well, it all hinges on oil. Our next guest is long oil, but how high does it go? Right now on Kalshi, traders are placing a 46% chance that WTI oil will go above $115 by the end of the year. If you agree, then a $50 trade can yield a payout of $105 if you're right. This video is sponsored by Kalshi, the largest prediction market in the United States. Unlike a sportsbook, you're trading peer-to-peer on real-world events from economic data to political outcomes, and the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here and use my code Lin, and new users can get $25 when they trade $25.

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David Woo, founder and CEO of David Woo Unbound joins us now. He holds a PhD in economics from Colombia and was previously head of global FX strategy at Barclays and head of global rates, FX and emerging markets at the Bank of America. Welcome back, David. Good to see you again.

David Woo (2:05)

Thanks for having me back.

David Lin (2:07)

As we speak, oil is now above $100, firmly above $100, both the WTI and Brent.

Brent near 108, WTI near 103 And like I mentioned in the introduction, the 10-year yield, the US 10-year, is now at 5%, the highest since 2023 Markets are selling off. Now, stocks are selling off because of higher oil or higher yields, or both.

David Woo (2:30)

I think it's both.

I think, I have to say, to be honest, I think David, you know, I'm short stocks and I'm long oil, and I'm surprised the stock market isn't down much more today, right? I mean, in fact, I'm surprised that the stock market didn't go down much more in the last two weeks because yields have been surging, oil has been surging. I know, I'm actually asking myself, what's the stock market been thinking? Is it thinking like, you know, the stocks have become the new safe haven? But I do think that what this means is that, you know, oil price is going to keep going higher, you know, until the stock market goes down, because Trump is not going to taco until the stock market goes down. You know, so oil price is going to keep going higher, and yields, I can tell you there's no doubt that bond yields are going to keep going higher until the stock market goes down, because central banks believe that, you know, that rising stock market has each financial condition. So from that point of view, you know, yields can keep going higher. So I think from that point of view, the question is, first of all, why isn't the stock market gone down already? But I think more importantly, I think my observation is that if the stock market doesn't go down, then rates are going to keep going higher, and oil is going to be going higher. So I think from that point of view, I think the stock market is definitely not out of the woods by any stretch of the imagination.

David Lin (3:45)

Yeah. And as we're speaking right now, the CME Fed watch was pricing at a 90% chance of an interest rate hike this week at the FOMC meeting on Wednesday. Now, which is a bigger risk for the stock markets right now? You mentioned you're short, when you're going back to shorting stock markets. So which is a bigger risk right now? The Iran war, which will push up oil even more if it escalates, or the fact that the Fed is about to raise interest rates? Keep in mind that 2022, the last rate hike cycle, was very bad for risk on assets and bonds alike.