The Bond Market Is Pricing In Something Worse Than Inflation | Weekly Roundup

Anthropic

Across the shows: 17 speakers in other episodes, 9 bullish and 28 bearish calls, past 30 days

• Quinn Thompson · Lekker CapitalBearish

  Anthropic's revenue growth is slowing, which hits data centers, credit and semis; not a durable trend.

  Felix's view on Anthropic's Q3 ARR: ARR still rises, but the rate of change came in below expectations and the derivative itself is slowing. Because Anthropic is a major demand driver, the slowdown trickles into data center, credit and semiconductor and memory names, which are the core flywheel driving top-line growth. That makes the AI trade fragile at a time when the rest of the economy is weak.

  “[Q3 ARR] there, which just has huge trickle down effects... Even though it's still increasing, the rate of change is lower than expectations and... the rate of change itself... is slowing as well.”at 13:36

Core Scientific

• Quinn Thompson · Lekker CapitalBearish

  Core Scientific's debt is probably money good with hyperscaler backstop, but its equity is a poor hold.

  Quinn applies the same logic to Core Scientific. Its debt is probably money good because the company is tiny relative to Magnificent Seven balance sheets, so Nvidia or a hyperscaler could easily backstop it, and the hyperscalers may simply wait for the price to get cheap enough. Equity holders absorb the drawdowns and dilution, so he doesn't think it is a good business to hold equity in long term. He notes most of these companies were Bitcoin miners that pivoted to AI and restructured before, so this is standard for the model.

  “the debt on a [CoreWeave] or a Core Scientific or the higher quality ones is probably money good because these companies are minuscule compared to the Mag Seven market cap.”at 29:09

CoreWeave

Across the shows: 5 speakers in other episodes, 0 bullish and 6 bearish calls, past 30 days

• Quinn Thompson · Lekker CapitalBearish

  CoreWeave's debt is money good with backstop potential, but its equity is a poor long-term hold.

  These neocloud and former Bitcoin-miner businesses are extremely capital intensive. A company worth $5-10B that needs large new capital must dilute or issue debt, and the equity gets diluted repeatedly. Quinn thinks the higher-quality debt is money good because hyperscalers or Nvidia could backstop these companies cheaply relative to their balance sheets, since the assets are valuable to them. He wouldn't want to be an equity holder long term, though buying the debt of companies heading toward distress could pay off. Backstops are reasons to buy distressed debt, not reasons to be long equity, and most of these companies have restructured before.

  “That said, I wouldn't want to be an equity holder... long term, probably not a good business to be equity holder in.”at 29:51

US Treasuries & yields

• Quinn Thompson · Lekker Capital

  Yields may have peaked for now, but won't plunge toward 4% without a real reignition in the economy.

  Quinn thinks the yield peak may be in, though only as a short-term scalp. Positioning had become extreme: record bond shorts built up over weeks of easy money from shorting bonds, then the curve flattened and the front end joined the reprieve, forcing a squeeze. He had shorted some of the long end that day for a trade he might hold a week or two. He doesn't expect yields to fall to 4% for any good reason, nor credit spreads to heal without an economic reignition, nor oil to fall while Strait of Hormuz tanker strikes continue. He sees this as a short-term hysteria move, not a durable bond rally.

  “I do think, you know, maybe the peak is in probably for yields, but for scalp here, I think the positioning rents got pretty extreme today.”at 6:14

• Quinn Thompson · Lekker Capital

  Bonds' negative correlation with stocks is not a safe assumption; it is positioning-driven and can reverse quickly.

  Quinn says the narrative of bonds as a sound flight to safety keeps returning. Yet many earlier market declines coincided with a positive stock-bond correlation: yields up, stocks down, dollar down. He argues no correlation should be assumed to hold forever because much of the current move is positioning. Positioning can unwind quickly and revert, so one or two days of moves should not be read as a regime change.

  “I don't think any correlation is assumed to be safe or assumed to stick in perpetuity because a lot, a lot, a lot of stuff here is positioning.”at 45:59

• Quinn Thompson · Lekker Capital

  Bond yields have cyclically peaked, though the high may be retested or be a slightly lower high.

  Quinn says he generally believes the top in yields is cyclically in. He does not think the high is final, since yields have moved hard and could double top, make a higher high or make a slightly lower high. He warns against assuming a 4% ten-year yield holds right away.

  “I generally think the top [in] yield cyclically is in. I generally think that.”at 46:24

US rates & the Fed

• Quinn Thompson · Lekker Capital

  Fed talked October hike off the table; November likely no meeting move, few or no more hikes needed.

  About 70% odds of an October hike two to three weeks earlier rested on inflation accelerating a fourth month and a resilient labor market. After bond markets wobbled, several Fed speakers (Williams, Waller, Bowman, Jefferson) explicitly talked the market off October, and odds fell to roughly 20-30% even after two scalding inflation prints. Quinn reads this as Fed forward guidance that shifts with market conditions. With the Fed unlikely to hike into a slowing economy whose inflation is largely energy-driven, November looks off the table and he doesn't think many more hikes, if any, are needed to set up 2027 weakness.

  “I think that's very pivotal for the next two weeks because if there's a 30... 25 to 30% chance of a hike in October, November's off.”at 11:18

• Quinn Thompson · Lekker Capital

  Policymakers are many months away from materially backstopping markets; the bottom-up assumption of a quick rescue is a mistake.

  Quinn argues that policymakers are not close to the point where they would step in with a material backstop or printing. The biggest mistake in these episodes is assuming that intervention will come much sooner than it does. He describes the wait as many months away, so he does not expect quick relief.

  “It's not like we're very far from ... seeing the whites of the policymakers' eyes ... We're many months away from that.”at 40:15

• Quinn Thompson · Lekker Capital

  Rate hikes still tighten financial conditions on net; the effect is masked by other central bank interventions.

  Quinn disagrees with Felix's view that rate hikes have a dampened effect. He says a 25 basis point hike alone would do little, but the hike does have a net tightening effect. That effect is obscured by other interventions: repeated currency weakening, bond yield suppression and direct futures market intervention. He argues these interventions are the real reason a hike seems to do nothing.

  “I think that it does have net tightening, but I think it's obfuscated by all of the other bajillion intervention measures they're doing.”at 42:52

US stock market outlook

• Quinn Thompson · Lekker Capital

  Not a new bull market; structural issues persist into early 2027 despite relief rotations.

  Quinn sees a slowly decelerating growth and inflation environment that offers relief, but not a resumption of a new bull market. The Russell has been down eight weeks in a row, with regional banks, housing and restaurants hit hard. The rotations between equal weight and Nasdaq show liquidity is low and waning, and such violence often precedes bigger moves. He expects structural issues to weigh as the market heads into early next year, so the relief rally from lower yields is not the start of a sustained advance.

  “is this a new bull market that's going to be resuming? I don't really think. I think there's a lot of structural issues to contend with as we head into early next year.”at 19:33

• Quinn Thompson · Lekker Capital

  Beaten-down real-economy and equal-weight sectors offer a near-term rotation trade before the AI trade's influence fades.

  The Russell has been down eight or nine straight weeks, which Quinn calls extremely rare. He attributes this to restrictive financing conditions from the supply of debt capital hyperscalers bring to the market, which squeezes the bottom half of the market. Housing and equal-weight stocks are already down roughly 20-40% after two months of selling, so the risk of selling them now is lower and relief may be near. He sees a tradeable window of a few weeks to a couple of months for these sectors. He notes that a housing or real-economy stock is largely independent of the AI trade, except that it would benefit if the AI trade blew up and rates fell. He cautions that the rally may fade within months.

  “there's a window here where they've already been sold off for two months. So if you were going to sell those things, it's probably not going be after they're already down 20, 30, 40%”at 38:05

Market sentiment, positioning & volatility

• Quinn Thompson · Lekker Capital

  Stretched record bond shorts drove a squeeze, so the rally reflects positioning more than fundamentals.

  Weeks of record bond shorts built across the market, after two-plus months of easy money from shorting bonds. The curve flattened first at the long end and then the front end joined, so the trade turned countertrend while positioning stayed very long. When hot inflation came in, the market was offsides, and the position unwinding drove a violent rally in bonds. Quinn sees that positioning drove the move rather than a fundamental shift.

  “coming in, you've had weeks of record bond shorts all across the market.”at 3:49

US inflation

• Quinn Thompson · Lekker Capital

  Inflation likely accelerates again next month, extending the hot-print trend into a fourth month.

  Quinn had been saying for weeks that a hot print was coming, and the recent CPI report confirmed it. The inflation trend has been accelerating for several months, driven largely by energy prices. He thinks the next month could be another month of acceleration, which keeps the Fed on alert even though the market has priced out an October hike.

  “We think actually next month could be another month of acceleration.”at 4:59

AI infrastructure & data centers

• Quinn Thompson · Lekker Capital

  AI build-out is the main source of debt demand pushing up rates; its cracking would ease yields.

  The AI trade is the largest source of demand for debt capital, crowding out everything else, and that financing demand pushes up rates and the long end. If the AI trade cracks, its access to capital is constrained and forward supply of AI-related debt shrinks, so yields can come off. That relief then helps the rest of the economy, which has been strangled by high rates. Quinn sees this counterintuitive dynamic, not a rebound in AI, as behind the violent rotations between equal weight and Nasdaq.

  “That is the number one source of demand for debt capital in the market right [now]. Everything else is crowded out.”at 14:59

Oil & fuels

• Quinn Thompson · Lekker Capital

  Oil prices won't fall for quite some time; natural gas has joined, and commodities signal persistent inflation.

  Oil is pressing into the upper bounds of its range, and with around 10 tankers a day being struck in the Strait of Hormuz, Quinn doesn't see a path for oil to come down. Natural gas has now joined the move. Quinn says all commodities point to inflation staying here for a while, which is why he sees the Fed unable to bring inflation down quickly and why the energy-driven inflation problem persists.

  “oil prices are not coming down and they are not going to come down for quite some time.”at 18:35

Commodities (broad)

• Quinn Thompson · Lekker Capital

  Fixed-supply power, energy and raw materials, plus debasement hedges, are the cleanest backstop beneficiaries.

  Government backstops support AI assets because financing supply exceeds natural demand, but buying AI names before a rescue is not attractive. The better places are assets with fixed supply, such as power, energy and raw materials that companies need to build, since government money printing would lift their prices. Debasement protection is probably the cleanest trade, though nothing is fully safe because the AI-related names would be rerated lower first and everything could fall together.

  “the cleanest would probably maybe also be then the debasement. Debasement protection.”at 35:50

US growth & recession risk

• Quinn Thompson · Lekker Capital

  Without AI investment, US growth would be near 1% a year; the real economy is weaker than headlines suggest.

  Quinn argues the US economy now rests on one trade. He says the whole economy is AI and that without it growth would be about 1% a year. He backs this with a 5% fiscal deficit that is still being run and real wages that have been negative for seven straight months, so the bottom half of the economy is squeezed. He concludes the real growth outlook is weak and questions whether investors should own equities at all.

  “The whole economy is AI. Without it, we'd be growing at like 1% a year. Real wage has been negative for seven straight months.”at 39:06

US consumer

• Quinn Thompson · Lekker Capital

  A reversal in the AI trade would hit consumer spending through the wealth effect of top earners.

  Quinn says the economy is strongly driven by the wealth effect of the top 10% who own most of the assets. Their spending drives more than 50% of consumer spending. Because of this, the broader market and economy are highly exposed to one trade, the AI trade. If it breaks, the wealth effect reverses and consumer spending weakens.

  “we know how much the economy is driven by the wealth effect of the top 10% owning all the assets and their spending driving over 50% of consumer spending.”at 39:45

Middle East & Iran

• Quinn Thompson · Lekker Capital

  Re-escalation in the Middle East is certain, likely adding market volatility ahead of the midterms.

  Quinn says there is absolutely going to be re-escalation. He expects increasing volatility and a lot of theatrics as the midterms approach. He notes that Western coverage of the conflict is poor, so information flow is unreliable and mostly comes from third-party sources.

  “There's absolutely going to be reescalation.”at 49:14

US elections & politics

• Quinn Thompson · Lekker Capital

  Administration will likely use market-moving headlines in the two weeks before the midterms to manipulate markets.

  Quinn argues the two weeks before the midterms are the period when markets are most open to manipulation. He says the administration waited seven months and gave up polling and approval to ignite the situation just before the vote. He expects fake tweets and headlines, followed by a reversal after the election, and believes investors will be fooled again.

  “if there's a period of time to manipulate the markets the hardest, it would be the lead up in the two weeks to the midterm.”at 49:19