In this episode, we discuss Japan's latest efforts to stabilize the yen, the latest GDP report, and Chair Warsh's most recent press conference. After the yen fell to its weakest level against the dollar in four decades, Japanese policymakers began selling United States Treasuries, pushing the yield on the 30 year Treasury to its highest level since the Global Financial Crisis. The yen's decline reflected the wide interest rate differential between Japan and the United States, rising energy import costs, and growing concerns over Japan's substantial public debt burden. Although real GDP expanded at an annualized rate of 1.5 percent, much of the apparent strength in consumer spending came from prescription drugs, motor vehicle purchases, food services, financial services and insurance, and nonprofit activity, raising questions about the breadth and durability of household demand. Finally, Chair Warsh's press conference offered little in the way of new information, inviting the question of why it was held at all. While such events are typically cordial, this one became noticeably more confrontational as reporters pressed him on the growing gap between his forceful rhetoric on inflation and the absence of corresponding policy action.

This week, we examine housing, the labor market, rising interest rate expectations, and our broader investment thesis. The Census Bureau's latest report on new home sales modestly exceeded expectations, but sales remain historically subdued as the housing market continues to slow across much of the country. Initial unemployment claims unexpectedly declined, yet the headline figure masks several important developments, including weaker hiring, the retirement of baby boomers, and slower immigration, all of which have reduced labor force growth and complicated the interpretation of employment data. Meanwhile, the yield on the 10 year Treasury note climbed to 4.7 percent, its highest level of the year, as investors responded to concerns over an escalating conflict and the prospect of higher oil prices. The Federal Reserve remains in an increasingly difficult position, confronting a series of supply shocks that monetary policy is poorly equipped to address. Our view remains unchanged. Even if policy rates do not rise further, expectations that interest rates will remain elevated are likely to place additional pressure on households, weighing on consumer spending and broader economic activity.

This week, we examine the latest inflation, consumer, and housing data, along with the sharp increase in stock margin borrowing. While both CPI and PPI came in below expectations, much of the decline was concentrated in energy prices. Given the recent rise in oil prices, those subdued inflation readings may prove temporary. Retail sales growth also slowed in the latest month, reflecting lower gasoline prices and broader weakness in energy related spending. Housing data continued to point to a cooling market. Even housing starts, which exceeded expectations at the headline level, revealed underlying softness upon closer examination. Finally, we discuss the historic surge in stock margin borrowing during April and May and consider how the rapid buildup in leverage may be contributing to the recent sell off in semiconductor stocks.

This week, we discuss the PCE report, new home sales, GDP, and PMI. Inflation continues to run well above the Federal Reserve's target. While personal income growth appeared strong, much of the increase reflected a one time government payment. Adjusting for this temporary boost, the savings rate fell to just 2.8%, suggesting that many consumers are increasingly stretched. New home sales surprised to the downside, while the median months for sale rose to its highest level since 2021, underscoring further weakness in the housing market. Although the final estimate of first quarter GDP was revised higher, the increase was driven primarily by a decline in imports rather than stronger domestic demand. More concerning, consumption growth was revised down from 1.0% in the initial estimate to just 0.5% in the final estimate, adding to evidence of a slowing consumer sector. Meanwhile, the headline manufacturing PMI appeared robust, but much of the strength reflected firms building inventories in response to supply concerns and policy uncertainty. Manufacturers also reported layoffs amid weakening demand and elevated uncertainty. Taken together, while several headline figures suggested resilience, the underlying details painted a considerably weaker picture of the economy.

This week, we discuss recent housing market releases and the Federal Open Market Committee's latest decision under its new chair, Kevin Warsh. Housing starts fell to their lowest level since April 2020, at the onset of the Covid 19 pandemic. Much of the decline was driven by multifamily construction, a notoriously volatile component of the data. Even so, the report is consistent with broader evidence that the housing market continues to lose momentum. Mr. Warsh also held his first press conference as Federal Reserve chair. Among the more visible changes were a shorter policy statement, the decision to withhold his own projection from the Summary of Economic Projections, and a refusal to provide forward guidance. Beneath these procedural changes lies a potentially more significant shift in leadership style. Mr. Warsh has emphasized that policy decisions will emerge from what he describes as a "good family fight" while reaffirming the central bank's commitment to achieving its inflation target. Although a less transparent approach may ultimately lead to better policy outcomes, the immediate effect is to introduce an additional layer of uncertainty into an economy that already faces no shortage of it.

This week, we discuss rising inflation, the upcoming Federal Open Market Committee meeting, and the much anticipated SpaceX initial public offering. Consumer prices continued to accelerate in May, with headline CPI rising 4.2% from a year earlier and core CPI increasing 2.9%. Alternative measures of inflation, including median, trimmed mean, and sticky CPI, also pointed to broadening price pressures. Producer prices rose at their fastest pace since 2022, prompting economists to revise their forecasts for the Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures index, higher. The renewed inflationary pressure complicates the outlook for monetary policy. With inflation moving further from the Federal Reserve's target, policymakers may find it increasingly difficult to justify lower interest rates and could instead be forced to maintain or even tighten policy. We examine the forces shaping the inflation outlook and discuss what investors should expect from the next FOMC meeting under the leadership of Kevin Warsh. We also turn to the SpaceX initial public offering and the broader state of financial markets. Investor enthusiasm for high growth companies remains intense, even as SpaceX, Anthropic, and OpenAI continue to generate substantial losses. The willingness of investors to assign extraordinary valuations to unprofitable businesses evokes uncomfortable comparisons with the technology boom of the late 1990s.

In this episode, we discuss the latest labor market releases, deteriorating consumer balance sheets, and Friday's decline in equity markets. While payroll growth exceeded expectations and the unemployment rate held steady at 4.3%, the composition of employment gains, the timing of the Memorial Day holiday, and several other details within the report continue to suggest a less encouraging picture of the economy. Meanwhile, consumer debt continued to rise, with revolving credit balances, much of which consists of credit card borrowing, increasing at an annualized rate of 10% in April after rising 9% in March. These figures are particularly troubling given that the personal savings rate remains near historic lows and credit card delinquencies have climbed to levels not seen since the Global Financial Crisis. Consumers appear increasingly reliant on borrowing to sustain spending, a dynamic that has rarely ended well. Friday's sell off in equity markets served as a reminder of the fragility underlying the recent rally. Weaker than expected revenue guidance from Broadcom, renewed concerns about inflation, and rising expectations that the Federal Reserve may be forced to raise interest rates before year end all contributed to the decline.

This week, we discuss downward revisions to GDP, persistent inflation and a renewed decline in the savings rate. Real GDP growth in the first quarter of 2026 was revised down from 2.1% to 1.6%, well below the consensus estimate of 2.2%. Meanwhile, inflation remained uncomfortably high. The PCE price index rose 3.8% from a year earlier, while core PCE increased 3.3%, both still far above the Federal Reserve’s 2% target. The same report offered little comfort on the consumer. Real disposable personal income fell 0.5%, consumption rose just 0.1%, and the savings rate dropped to its lowest level since the eve of the Global Financial Crisis.

This week, we discuss a series of perplexing market moves as inflation readings, oil prices, and Treasury yields all moved higher at once. Both headline CPI and PPI surprised to the upside, placing the Federal Reserve and its new Chair, Kevin Warsh, in an increasingly difficult position. According to the latest inflation nowcast from the Federal Reserve Bank of Cleveland, inflation is expected to come in at more than double the Fed’s two percent target. Meanwhile, yields on ten and thirty year Treasuries climbed sharply as investors demanded greater compensation for rising inflation risks and mounting concerns over America’s fiscal trajectory. The yield on the thirty year Treasury bond has now reached its highest level in nineteen years. Oil prices have also continued their ascent. Equity investors, however, appear largely unconcerned, choosing instead to focus on strong earnings reports from the hyperscalers. The divergence between buoyant equity markets and increasingly anxious bond markets suggests that investors are drawing very different conclusions about the economic outlook.

This week, we discuss the Employment Report, the Job Openings and Labor Turnover Survey, and the Berkshire Hathaway Annual Meeting. Although the headline employment figures appeared strong, the underlying composition was less reassuring. Nearly all of the payroll growth came from lower wage sectors and industries where workers are more likely to hold multiple jobs. In that sense, the rise in payrolls may be less a sign of strength than of strain, as more consumers take on additional work to make ends meet. That interpretation was reinforced by a 449,000 increase in the number of people working part time for economic reasons. The JOLTS survey told a similarly subdued story, with low quits suggesting continued uncertainty and caution among workers. Finally, Greg Abel’s message from the Berkshire Hathaway meeting echoed our own: be patient. Warren Buffett noted that there had been only five truly “juicy” periods in his career. Until such opportunities return, Berkshire will continue selling equities and holding cash in Treasuries. Without those rare windows, Buffett’s extraordinary record of outperforming the market by roughly two times over six decades would likely not have been possible.