Interesting TACs of the Week (July 28 – August 3, 2025)

Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.

Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.

 

1.FOMC – Join us 3.75% – Better Late than Too Late!

Back on April 19, 2025, we asked in our Section 5:

• “why doesn’t the Treasury publish its own overnight rate, a rate that is set by the Treasury Secretary on advice of say a committee? And this Treasury Overnight Rate can be changed as necessary due to economic developments, market conditions & feedback from the rest of the Treasury market.”

And added:

• “Today, for example, the TOR can be set at 3.75%, 5 bps below the 2-yr Treasury yield. The Treasury could then price shorter auctions using the TOR and not have to pay near 4.375% Federal Funds Rate. Repos can then be priced off the TOR as well. The cost savings to the country can be substantial.”

Then a week later on April 27, 2025, we wrote:

• “The Treasury curve as of Friday was – 30-yr at 4.725%; 20-yr at 4.742%; 10-yr at 4.26%; 7-yr at 4.062%; 5-yr at 3,878%; 3-yr at 3.751%; 2-yr at 3.76%; 1-yr at 3.975%. These levels with the growing prospect of deflationary conditions rising both within US & overseas, we believe that a sensible Over Night Rate (ONR) should be maintained at  3.75% and hence that is the recommended rate by Macro Viewpoints.”  

Despite this week’s plunge in Treasury yields after the release of revisions to past 2 months, the 2-yr closed at 3.68, a mere 7 bps below the MV-ONR of 3.75%. If you look over the past 3 months, you will find that 3.75% has been a much more realistic ONR than the Fed’s 4.375%, an outrageously incongruous & harmfully restrictive rate.

Another, followed by widely respected Jim Paulson & others, put a different brand on the mistake above:

A sensible & hopefully correct comment came from: 

How could that not be given the scale of the disaster? Who can trust the FOMC after they allowed this level of wrong data to color their opinions for two months? The first head rolled quickly:

• Markets & Mayhem@Mayhem4Markets – Fri Aug 1 – Fed Governor Kugler is resigning from the Fed board, effective August 8th.

We have neither any color nor sense of how the rest of the FOMC feels but we know how they should feel. If the actual number was not bad enough, the data might hint at a a bit worse of a slowdown.

• Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi –  Aug 2 – GS: The Birth-Death Model Could Be Leading Payrolls to Overstate the Pace of Job Growth by a Small Amount

We think the FOMC has an excuse if they act quickly. They can say truthfully that they are as stunned as all about the scale of revisions. And then they can announce that they have decided to lower the Fed Funds rate to where they would have had they known about the scale of revisions to the Jobs Number. 

By the way, as an analyst pointed out:

• “household survey was just as ugly; we are talking about -300,000 in the month of July after being down huge in May & only rebounding a small amount in June & then down again huge … the participation rate fell again which means the adjusted unemployment rate has now soared above 5% … ” 

We do think it is time for the FOMC to disassociate themselves from this gargantuan error by the BLS & immediately reduce the Federal Funds Rate to where they would have had they known about the revisions. That may be 4% (about 25 bps lower at the lower bound) or, as we recommend reducing it down to 3.75%. 

That reduction to 3.75% would send a clear, unambiguous message to all that the FOMC is on the job and they understand, as Fed Governor Waller, pointed out on Friday that “when labor markets turn, they turn fast“. 

And that could protect the FOMC if the annual benchmarking comes out to be as humongous at Goldman says it might:

So we urge again – Please Join Us at 3.75%, FOMC. That gives America a new starting point & puts the entire revisions mess behind us. 

PS: Allow us to be crystal clear that we were totally lucky to have chosen 3.75% as our ONR. We do not claim to have either expertise or smarts. The only smarts we have is to prefer to be lucky than appear wise.    

That brings us to someone who has real market-driven opinions on this topic. And that is how Katie Griefeld of BTV began speaking with Rick Rieder of BlackRock on Friday just before the stock market opened down bigly. She asked “should Fed have cut rates on Wednesday?” Rick Rieder answered:

• “I do; .. the housing market is interest-rate sensitive; you have seen mortgage applications, housing starts, building permits at literally all-time lows … I think that’s a big deal … interest-sensitive parts of this economy are under some pressure; … so would I have cut? Yes, I would have cut … the big picture though we can cut the rate by 100 bps & still be above where interest rates are tracking; .. I would have & I think they will in September…”

Then in response to another question, Rick said:

• “take the broad context where labor in today; … job hiring is way down … you have a hiring market that is pretty stagnant … companies are not laying off but if you look at hiring numbers – gosh, they are pretty soft today … the reason I think we should cut rates is we can get to stall speed on hiring … I am not worried about the economy but the rate threshold today is not consistent with what I think it should be … “

We counted 8 affirmations that he would cut rates. This is an exceedingly smart and steady man who, despite the hundreds of billions he manages, has the best interests of the American people on his mind & in his heart. We feel very happy that, last week, we nominated him as our first choice for a new Fed Governor.

And his target for Fed Funds rate is consistent with our public exhortation to the FOMC to reduce the Fed Funds rate by 50 bps to 3.75% this coming week. Then they can, as necessary, reduce it for the second time to 3.25% in September. 

 

2.Credit

A slowdown in hiring could not only lead to lower Treasury rates but also possibly to credit underperforming Treasuries. 

• Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – Junk bonds $HYG worst day vs $IEF since the Friday after Liberation Day

If that happens, it could catch the credit market in an overbought position as  Bill Eigen, JPMorgan Asset Management CIO of absolute return fixed income said last week:

• “the way people are going about in their fixed income portfolios is wrong; .. you should not be buying investment grade credit & high-yield credit at the tightest spreads you have ever seen;”

When asked by CNBC’s Andrew Ross Sorkin what he thinks of private credit funds right now, Mr. Eigen replied:

• “Boy, you know what? I am getting shadows of 2007 a little bit; not the extent of back then but the thing that I am nervous about there is a big push to put assets in mutual funds & ETFs and things like that ; things that trade by appointment & putting them with things that trade in seconds & whenever ; when I start to see things like that I personally get a little bit nervous; I am not saying private credit is bad at all; that’s not what I am saying; .. this huge push to take illiquid assets & put them with liquid assets – some of these things trade by appointment; there is a lot of private credit out there that should not be trading at par-value but that’s where it is marked …”

He added ( a la 2007):

• “So I think you have to be very careful about that …. makes me nervous when I see that … you know what happened … back in the day with ABX index & taking illiquid mortgages & putting them with liquid vehicles & the rest in history … what I am seeing recently gets me nervous … what I have seen last week is unbelievable … it tells me that investors are very unafraid right now..“

What Mr. Eigen refers to as “very unafraid”, Goldman refers to as “complacent”. 

• Markets & Mayhem@Mayhem4Markets- HY spreads are extremely narrow here, as Goldman warns of growing credit market complacency risks

What happens when “complacent” or “very unafraid” investors get suddenly nervous & then want to lessen their exposure, especially if the exposure is in a credit product that is NOT very liquid? One example we recall was the steep fall in Emerging Markets Debt Funds in the 2nd half of 1998.

(MSD vs. 10-yr Treasury yield from July 1 to Dec 31, 1998)

That created the specter of a market meltdown because of illiquidity at a Hedge Fund with massive long positions in Emerging Debt. And it took Fed Chair Alan Greenspan 2-3 large interest rate cuts to enable the broad markets to get out of that mess. 

Hopefully, today’s conditions are nothing like the illiquidity of EM Debt trap in the 2nd half of 1998. But why risk any crisis from any credit problem now? That is another reason why we suggest an immediate rate cut of 50 bps, as early as next week. Especially when the sudden, unexpected geyser in Revisions has been sprung on the FOMC by BLS. 

Look at the performance of the big banks this week:

• BAC down 5.8%; C down 4.4%; GS down 2.7%; KRE down 5%; APO down 8.5%; BX down 4.3%; KKR down 6.3%. 

That is not flattering for the state of the Credit market. 

 

3. Repeat of the post-Nov 1998 performance in November 2025 into 2026?

If we bring up the steep crisis from EM Debt in August-October 1998, shouldn’t we also highlight what happened from November 1998. Especially so since we are urging the Fed to lower rates fast & hard to avoid a crisis. The 1998 crisis was addressed & resolved by the joint efforts of Fed Chair Greenspan & Secretary of Treasury Robert Rubin and by Greenspan stunning the markets with rate cuts including a surprising & possibly unnecessary rate cut in November 1998.

A similar joint decisive action by the FOMC & Treasury Secretary Bessent would resolve any crisis in Mortgage Securities & Treasury yields by Thanksgiving at the latest. If so, what might then happen in financial markets?  

Read what Russ Brownback, BlackRock Strategic Income Opportunities Fund co-PM (counterpart at BlackRock to Bill Eigen of JPM?) said to BTV’s Sonali Basak on Friday, August 2 on Bloomberg Real Yield (minute 3:23 onwards):

• “… the economy structurally is very very sound today; … rates today are hurting disproportionally the lower income parts of the household sector at a time when the velocity in the housing market & labor market are slowing demonstrably … will give more impetus to ….members of the committee to cut rates in September… ” 
• “the economy structurally is very sound today …. now you have a very stimulative fiscal package with the items that will be recapitalizing cap-ex front-loaded; … its happening at a time when Fed is bringing rates down … its a very powerful setup … technicals are completely under-appreciated in terms of how powerful they are …. “

Then he delivered details of numbers what are truly “transcendent” (his adjective):

• “we live in a world with too much money and not enough yielding assets; there is $25 trillion of cash on the balance sheets of the private sector today; that’s more than all marketable Treasury Debt that is outstanding; there  is $218 trillion in private sector net-worth; the aggregate index, a proxy for high quality bonds in the US is only $29 trillion; there is about $3 trillion that markets spin out in terms of income  – stock buybacks, dividends, that needs to get re-invested every year … so this is a transcendent influence that people have under-estimated “

If the above is not enough, look what we saw on Friday, Aug 1:

• The Market Ear – Aug 1 – Foreign investment into the US is skyrocketing – US net capital inflows reached a record +$1.76 trillion over the 12 months ending in May. This metric shows how much outside money is entering US financial markets to buy assets. Net capital inflows have doubled over the last several months and surpassed the previous peak from a few years ago. After a bumpy start to the year, foreign investment is piling back into the US market.

 

But before we experience this transcendent influence, we first have to extinguish the flames of the jobs-crisis & the housing-crisis that erupted on Friday, August 1.

 

4. Equities 

How did many enter this week?

• Markets & Mayhem@Mayhem4Markets – 7-29 –  CTAs are back ... to being very long US equities, per Nomura. 

And,

• Markets & Mayhem@Mayhem4Markets – 7-29 – Vol control added prolific exposure within US equities (over the last month) – Nomura

And the above is despite a 6 for 6 track record:

• Ryan Detrick, CMT@RyanDetrick – Stocks have never been higher in August under a second term president in a post-election year. 6 for 6 lower.

• Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – SPX bearish engulfing on the weekly
  @fundstrat

 

• Seth Golden@SethCL – Update: – Now the 2 biggest sector (Tech $XLK) and industry (Semi $SOXX $SMH) components within $SPX come into the trading week BELOW their respective 21-EMA Unless a quick recovery, more downside for major indices, which we anticipate in August. $NDX $QQQ $NVDA $MSFT $AAPL $AVGO

And,

• Seth Golden@SethCL – Semiconductors have now gone PARABOLIC for the 3rd time in less than 24 months. Both prior moves resulted in a PLUNGE back below the 50-DMA, but from where remains indeterminable. I’m not bearish on all-time highs in Semis, but I’m patiently await to buy consolidation. $SPX $QQQ $SOXX $SMH $NVDA $AMD $MU $NDX

As in Section 3 above, allow us to end on a positive note.

• The Market Ear@themarketear – Aug 2 – Financial conditions are loosening aggressively – trying to take out a 3-year low.

And in a vein similar to what happened from November 1998 into 1999:

• Gainify@gainify_io – Aug 1 – UNPRECEDENTED TIMES: the world’s top 4 CapEx spenders all hit record highs! $AMZN $GOOG $MSFT $META Billions poured into AI, cloud, and infra at unmatched scale. Leadership is no longer emerging. It’s being locked in.

 

Would Mr. Russ Brownback call this super-transcendent?

 

5. Adjectives fail for the below

Cloud avalanche followed by a rainbow at the top of the world. Just watch:

 

This is about 2 years old. A friend sent it to us this week. Will never get old. 

By the way, given Meta’s performance this week, allow us to say that any one who doesn’t use WhatsApp to chat, call, correspond, exchange clips etc. is just nuts.  Virtually everybody in the world, but hardly any one in America does. 

 

 

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