Warsh's First Fed Meeting, SpaceX Going Public & A Vice Stock Update

**Danny Moses** (0:02)
Welcome to the On The Tape podcast. I'm your host Danny Moses, coming to you live on tape from Risk Reversal Studios. In Manhattan, where I have a special guest joining me, Dan Nathan, how you doing?

**Dan Nathan** (0:13)
Danny, this is a pleasure.

**Danny Moses** (0:14)
Oh, it's great to be here. So to discuss what's going on in the markets, right, I want to talk about that. Violent moves, obviously. The first Kevin Warsh led Fed meeting next week, I want to get into that. The SpaceX IPO, which is really why I want you to opine on, how the Nasdaq and FTSE are jockeing around. And then there's been some action in some of my favorite vice categories recently, online gambling and cannabis that I want to get into. But Dan, let's start with the markets, because last Friday, on a great jobs number, we saw the market sell off. Rates have steadily moved higher, 10-year yields have moved higher, and the concern is that the Fed now's hands are completely tied. As a matter of fact, Fed Fund futures are now showing better than like one and a half hikes this year.
But it's so funny to me because the data center has been the economy and the growth area, and it hasn't mattered where oil has gone, and it hasn't mattered where rates have gone. All of a sudden, it matters, I think. The irony is that the consumer actually looks a little bit better than expected. The real economy looks a little better, yet the market sold off. So help make sense of this and why it's all just AI driven.

**Dan Nathan** (1:19)
Yeah.
I think to your point, if you think about the contribution of the AI infrastructure build into GDP, it's a huge part of it. I think the combination on Friday of better data, which is great, better jobs data, we're all happy about that. We're not seeing wage growth that's outstripping that of inflation. So that, I guess, is the one wrinkle, if you will. The jobs data has been very volatile. So you can put the last three months together and say, well, things have really firmed up. We still have an unemployment rate though at 4.3 percent.
So when I think about the economic data, any strength means that it's going to make it harder for the Fed to cut, obviously. And then I'm just, the reason why I brought up the data center thing is like, if you do see a slowdown in the data center spend, well, then that contribution to GDP kind of goes away. And then what you're doing is you are relying on a higher earning consumer, which has been driving the consumer right now. So if you have a slowdown in growth, and then you have inflation that stays bid, well, then you're going to have unemployment go higher, right? The jobs data or the labor market is going to get weaker. So it really does put the Fed in a tough spot. Now, the only thing I'll say about the tenure though, it's at four and a half percent. It's not like it's some level. You know where it was about a year ago, Danny, in June? About four and a half percent. You know what I mean? So that's the one thing, and Carter Braxton Worth has been saying this for a long time. So it's about as clear as mud about how the markets want to take economic data because if the market, if the data got a lot worse and it started, CME FedFund's futures started pricing, they go from hike, then back to cut. I don't think that volatility is good for market sentiment.

**Danny Moses** (3:01)
Yeah, I mean, even today when the market was at its lows, some of the home builders were up, some of the restaurant stocks were up.
You know, the focus, and we wrote a note in our sub stack, black hole sun, it's all about AI on Thursday, and then everything sucked in. But here's the irony to me, the market is still not only driven by these AI companies, the wealth effect, I mean, that's what everyone owns. So if you did have a rotation, even if you told me that the market would be flat, but that data center stocks would get killed or AI related stocks and consumer be okay, I think that's actually a negative for the economy. As we sit here tomorrow, as we sit here today, we get CPI tomorrow. And that's the last big number before the Fed. Again, I hate trading one way or another. The market is looking, I think, for 2.9% core, 4.2% overall, year over year.