MONITOR YEN

“We're seeing this recalibration of the composition of the economy happening. It's interesting to compare data center versus general office spending; the economy is fundamentally changing. This isn't just a sectoral thing to view anymore. We're spending more and more time talking about this because it is literally the marginal driver of growth in the US right now.”

“You know what's interesting is ESG died right when inflation returned at the top of 2022. The extrapolation is that ESG was just a zero-rate phenomenon, and as soon as real life costed something and we hit an affordability crisis, it went away. Now you see it with the energy crisis; you have people talking about energy security, which is a complete 180 from the dialogue of the last decade.”

“Tesla expects their capex to be over 25 billion this year. Everyone is basically forced into this because before the competition was about raising debt to buy back stock and shrink equity. Now, we have this frontier that we're pursuing and if you don't raise a lot of debt and pursue it, you're going to be so left behind because this is a divergent technology. It is a 21st-century industrial revolution and you can't just sit there while others build the rails.”

“The Fed communicates way too much. Every couple days there's some Fed governor talking; the forward guidance and these dot plots lock them in. We saw this in 2021 where, because they had given forward guidance on QE continuing, it took another six months before we even got to the announcement of ending it. We were at almost double-digit inflation and the Fed was still doing billions a month of QE because of this constraint they put themselves in.”

“There was an interview with the CEO of Nvidia where he said the biggest bottleneck we have right now with AI data center buildouts is we can't find enough plumbers for the data centers. The bottleneck isn't the semis; it's literally just the plumbers needed to be in there setting up the plumbing. There is this whole cascade of second, third, and fourth derivative impacts that is really fascinating and probably not talked about enough.”

“US dollar usage is surging, which sounds very counter-narrative to a lot of what you see these days about de-dollarization and the basement of the currency. You would think it would be going the opposite direction right now based on everything we talked about regarding questioning US hegemony and reserve status, but it's clear it's actually the opposite.”

“I think the yen is the clue to watch. If the yen really breaks 160 with volume and power, the dollar wrecking ball emerges and causes credit problems. You could have a blow-off top in the AI data center infrastructure boom at the same time, but you could also be starting a whole new credit cycle if the Fed is going to lower rates. The yen is the key to watching that liquidity.”