“Oil prices are racing back toward $100 this morning after Tehran-backed Houthi militants claimed attacks on two Saudi tankers in the Red Sea, threatening another important route for oil flows and stoking fears that the U.S.-Iran conflict could escalate further,” the Wall Street Journal reports.
Just dropped · Trial Balloon · Ep. 191
Blue Wave Update
Trial Balloon · Ep. 191: Blue Wave Update
Kevin Warsh’s Fed Communication Strategy Has Trade-Offs
“Federal Reserve chairman Kevin Warsh testified before Congress over two days last week, totaling more than five hours. Yet it was comments from several of his colleagues that gave the clearest picture of what the central bank is likely to do at next week’s policy meeting,” Axios reports.
“It is a central paradox of Warsh’s communications strategy. He is determined to get out of the business of giving markets and the public much guidance on future policy, which means the markets fill in the gaps based on comments from other officials.”
“That isn’t necessarily a bad thing — it preserves flexibility on interest rate policy that was diminished when former Fed chiefs all but preannounced upcoming rate moves.”
The Economy Is Increasingly Relying On the AI Boom
“There is an adage in the financial world: The stock market is not the economy,” the New York Times reports.
“Except that, right now, maybe it is.”
“Major stock indexes have set record after record in recent years, fueled by seemingly boundless appetite among investors for anything connected to artificial intelligence. The total value of the U.S. stock market has more than doubled over the past decade to over $75 trillion, roughly two and a half times the annual output of the entire U.S. economy, itself a record ratio.”
“Much of that value exists only on paper, bets on future profits that may or may not materialize in the years ahead. But the boom is supporting real economic activity today, pumping trillions of dollars of investment into semiconductor factories, data centers, power plants and transmission lines. And the wealth it is creating is helping to drive consumer spending, particularly among affluent Americans, whose appreciating stock portfolios make them more willing to shell out for luxury vacations, pricey electronics and meals at high-end restaurants.”
The AI Bubble Is No Ordinary Bubble
Annie Lowrey: “No less an authority than Sam Altman is arguing that we are in an AI bubble. The International Monetary Fund is citing it as a significant risk to financial stability and warning about what might happen when it bursts: diminished investment, tighter credit, reduced consumption, disrupted trade flows.”
“That’s pretty much what happens when any bubble pops, as a Dutch tulip obsessive could have told you in 1637 or a bitcoin evangelist could have told you in 2011, 2013, 2014, 2018, or 2022. Yet the AI bubble is no ordinary bubble. Hyper-rich corporations are stoking it, rather than kitchen-table investors. They’re blowing it up when credit is fairly expensive, not dirt cheap. That might make the bubble less fragile and longer lasting than those of the past. But it won’t make it any less painful when it pops.”
Bond Traders Are Tuning Out Trump Posts
“Three months into the Iran war, bond market traders are tuning out President Trump’s posts on his personal social media site, Truth Social, analysts say,” Axios reports.
“Researchers from JPMorgan show that for the most part, his social media posts are noise, with very little ability to move the market.”
Jamie Dimon Says Markets Underestimate Risks
“JPMorgan Chase CEO Jamie Dimon said investors are underestimating the risks facing the global economy and that he wouldn’t buy either equities or long-dated U.S. Treasurys at their current prices,” CNBC reports.
Wall Street’s New Obsession Is Reading Washington
Politico: “As investors hunt for the Trump administration’s next winner, they’re increasingly trying to anticipate which industries and companies will benefit from White House policy — from tariffs and export controls to procurement, subsidies and even presidential attention itself.”
“That has changed how investors think about risk. Beyond earnings and cash flow, they’re weighing which CEOs have the White House’s ear, whether a presidential announcement could transform a company’s prospects overnight, or whether a public falling-out could wipe out billions in market value.”
Fed Officials Were Split On Interest Rates
“Federal Reserve officials were split last month about the future of interest rates, with policymakers entertaining scenarios in either direction,” CNBC reports.
Trump Rings Market Opening Bell at White House
“President Donald Trump on Monday morning joined the New York Stock Exchange and the Nasdaq in ringing the opening bell from the White House Oval Office for the first time ever,” CNBC reports.
“The event marking the launch of ‘Trump Accounts,’ the administration’s new tax-advantaged investment vehicles for U.S. kids, is also being attended by a raft of CEOs who are supporting the new accounts, including Dell chief Michael Dell and Visa CEO Ryan McInerney.”
Internal Report Warns About the Dangers of an AI Bubble
“A draft report inside the Treasury Department is set to warn of the risks posed by the artificial intelligence market, likening key aspects of it to the dotcom bubble that upended the U.S. economy when it burst in the early 2000s,” NOTUS reports.
“The document, the existence and contents of which have not been previously reported but was obtained by NOTUS, is a significant departure from the Trump administration’s public tone, which has focused on encouraging unrelenting investment to unlock exponential growth.”
White House Marks Trump Accounts Launch
“The Trump administration will cheer new savings accounts for children by ringing the NYSE and Nasdaq opening bells from the White House on Monday, as officials hope to turn the bipartisan idea into a campaign boost,” Semafor reports.
“More than 6 million kids had already signed up for Trump Accounts, enacted last year as part of the Republican tax bill, before they launched on July 4.”
Wall Street Journal: What to know about “Trump Accounts,” the new savings account for children that for the next few years come with $1,000 of seed money from the Treasury Department for newborns.
Nearly a Million Investors Lost $3.8 Billion on Trump Coin
“An up-to-date tally of Trump followers turned crypto investors is in. And for them, the overall results are remarkably bad,” the New York Times reports.
“Nearly 1 million people who bought President Trump’s memecoin have lost money through the end of June, according to a report by the cryptocurrency analytics firm Nansen. Their losses total $3.81 billion.”
Trump Insists ‘Nothing Wrong’ with His Big Crypto Gains
“President Donald Trump suggested on Thursday that he was not aware of the extent of his digital asset holdings but said there was nothing illegal about his involvement, following disclosures about his family companies’ crypto windfall,” Bloomberg reports.
Said Trump: “I could know about it. I didn’t.”
Trump Thinks Musk Will Donate SpaceX Stock
“President Donald Trump said he thinks Elon Musk will donate SpaceX stock to the Trump accounts initiative, following other technology executives who have embraced the new investment vehicles for children,” Bloomberg reports.
New York Times: Less than 10 percent of eligible children have Trump accounts.
The Federal Reserve’s Independence Is Still on the Line
“On the surface, Monday’s Supreme Court ruling that keeps Lisa Cook in place as a Federal Reserve governor for now was a win for believers that the central bank works best when insulated from the day-to-day control of the president. The details aren’t so clear,” Axios reports.
“The court punted on several key questions that will determine how much ability President Trump and his successors have to fire Fed governors.”
“Moreover, the decision was closer than many court watchers anticipated, with four of six conservative justices dissenting.”
SpaceX to Discuss Stock Donation for Trump Accounts
“The Trump administration has spoken with SpaceX about donating stock to the children’s savings accounts known as Trump Accounts that are expected to launch next week,” Semafor reports.
Trump Renews Threat to Fire Fed Governor
“Shortly after the Supreme Court blocked President Trump from immediately ousting a sitting governor from the Federal Reserve, the president struck a defiant note, signaling he would not surrender his long-running fight to gain more sway over one of the most important stewards of the U.S. economy,” the New York Times reports.
“In the eyes of Mr. Trump, the 5-to-4 decision reached by the justices on Monday amounted only to a legal setback, not an insurmountable defeat. Even as the court acknowledged the century-old tradition of political independence at the nation’s central bank, it did not totally foreclose on the president’s ability to try to dismiss its officials in the future.”
Trump Renews Threat to Fire Fed Governor
“President Trump renewed his intention to try and fire Lisa D. Cook from the Federal Reserve on Monday, saying he would look for a way to oust her after the Supreme Court blocked his previous attempt to fire a sitting governor at the central bank,” the New York Times reports.
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Taegan Goddard
Taegan Goddard is the founder of Political Wire -- which for more than two decades has been one of the nation's most influential political news sites.
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