GS/J. Aron➡Canyon➡Akanthos➡Kao Family Office➡https://nitter.cf/t.co/6Us4owom5j📊Globetrotter✈ Headbanger🤘Star Wars Fan🌌 Mixologist🍸Diver🤿NO INVESTMENT ADVICE
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Joined March 2009
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Michael Kao retweeted
Neoclouds: Credible Bearish Caution
@UrbanKaoboy understands commodities cycles and overbuilds better than almost anyone on X. He doesn't put out bear FUD unlike other ex-wall street big names and very clearly states what to look for on buildout cycles.
Michael Kao states that the rest of the supply chain will move on a second or third derivative speed of GPU pricing and will not wait for the slope to turn negative. Meaning sensitivity is high which is why we are seeing this pullback. This pullback doesn't necessary mean that it's the end of the AI buildout but illustrates well the sensitivity of markets to the downstream suppliers.
As an investor, I'm watching AI demand from the application and research layer to forerun actual AI demand in revenue of Frontier Labs.
Musings of the Day, 10/28/26
Lots of polarized takes on the Anthropic S-1.
I am not smart enough to know how this all plays out, but here are my concerns:
1. When you’re upstream in a supply chain (as data centers are in the AI ecosystem), you are subject to the Bullwhip Effect:
It describes how relatively small fluctuations in consumer demand become progressively amplified as they propagate upstream through the supply chain — from retailers to wholesalers, manufacturers, and raw material suppliers.
For example, a 5% increase in consumer demand might trigger a 10% increase in retailer orders, a 20% increase in distributor orders, and a 40% increase in factory production.
2. Right now, everyone is frothing at the mouth over Anthropic’s parabolic ARR growth and straight-lining tangents off of this trajectory but forgetting that Anthropic is relatively close to the FRONT of the Bullwhip, while data centers, GPUs, and power infrastructure sit further UPSTREAM. Anthropic entering into MASSIVE FIXED UPSTREAM COMMITMENTS could be an example of BYOBSS (Believe Your Own BS Syndrome).
3. Between the Debt Governor (which I have written extensively about) and the increasing popularity of Open Source models, what happens when consumer demand (at the FRONT of the Bullwhip) even hiccups, much less declines?? Indeed, demand doesn’t even have to decline — merely growing slower than anticipated could trigger a massive upstream correction, and Anthropic could be on the hook in a serious way if that happens.
Michael Kao retweeted
Looking forward to hosting @UrbanKaoboy on the @BuchalterLaw AI for Business Podcast next week, covering his takeaways from the Anthropic IPO youtube.com/post/UgkxJPmoA_U…
Michael Kao retweeted
I listened to Michael. One of the more profitable decisions of my life. Rode Fannie/ Freddie commons from 60-70c to about 10-12 USD and promptly exited. Think Michael has analysed this brilliantly a long time ago
Musings of the Day, 10/12/26:
I predicted 2 years ago that the tourists to the GSEs (both prefs and common) who made money on the "Trump Trade" thesis got lucky on the sentiment trade but should really take profits, because the religious True Believers would likely get burned.
Fast forward to the present -- it looks increasingly likely that the Admin has no appetite to take any risks with the mortgage market, and it looks increasingly LESS likely that any SPS forgiveness will occur.
What does that mean for the JPS and common? It means that the FULCRUM likely remains at the SPS level, which means everything below it is worth very little.
This is how the Trump Trade becomes the CHUMP TRADE. ICYMI, here was my piece from 2 years ago:
urbankaoboy.com/p/re-fannief…
$FNMAS $FMCKJ $FNMA $FMCC
Michael Kao retweeted
excellent write and yet another example of the passive bid trumping all fundamentals.
Re: Mental Models - Wile E. Coyote Equities & The Vanishing Bond Floor.
The backup in long-end rates has pulled the “Bond Floor” out from under Equities, and the only thing keeping the longest-duration names aloft is Growth. Wile E. Coyote better not look down!
Anyone who grew up on Saturday-morning Looney Tunes knows the rules. Wile E. Coyote chases the Road Runner straight off the edge of a cliff, and for a long, absurd moment nothing happens: his legs keep churning, he keeps running on pure air, and he hangs there in defiance of physics. Gravity only takes hold at the moment he looks down. Then comes the forlorn little wave to the camera, the long whistle, and the tiny puff of dust at the bottom of the canyon.
Longtime readers know that Wile E. Coyote is an old friend of mine. Back in February 2021 I asked whether “Risk assets marching higher while the 30-yr takes a dirt nap” meant Wile E. Coyote was running off the cliff before he discovered Gravity. The setup today rhymes uncomfortably well with that one.
On Monday I posted a Musing of the Day that has been rattling around in my head all week: “It’s a bizarre tape when Rate Angst dominates ‘rate sensitive sectors,’ yet some of the longest duration Equities still seem impervious to Rates... If growth prospects even suffer a whiff of disappointment, look out below.”
With the long end continuing to get crushed (the 30-year printing its highest level since 2004 and the 5-year clearing 5% for the first time since 2007), I want to lay out why I think the gap between where these Equities trade and where Gravity says they belong keeps getting wider.
This piece ties together many of my past Mental Models and will show you why I think long-duration Equities are behaving like Wile E. Coyote spinning his legs in mid-air before realizing that he is no longer on terra firma.
This is a FREE post, because I think the whole world needs to heed this warning.
urbankaoboy.com/p/re-mental-…
Michael Kao retweeted
This is an insane post 🔥 So many nuanced things we don’t even think about. Absolute must read
@UrbanKaoboy thank you for bringing her on X!
ME supply is recovering, so why aren't oil prices falling?
I assumed folks has an idea of how price discovery works, but I keep seeing the same argument about supply vs price. It doesn't work that simply. Price is not just a function of supply. More supply doesn't automatically mean lower prices, especially not in the middle of a kinetic conflict where the pace and durability of supply recovery remains uncertain.
I am going to try to make this as simple as possible. For those of you who run balances every day, most of this will be old news, apologies in advance. But there seem to be plenty of people genuinely trying to understand why Middle East flows can normalize while oil stays around $100. This is for them.
<Thread>
Michael Kao retweeted
This 👇
" The AI Buildout is increasingly being financed with Debt (High Yield Bonds, Leveraged Loans and Private Credit, the full Leveraged Credit Trifecta), so if Growth expectations start to wobble, I would expect the Short Put holders to look down before the Equity holders do: wider spreads on the Buildout’s financing, softer pricing on new issuance, and eventually Private Credit marks that, true to form as a “Jump-To-Default” Short Put, stay frozen right up until they don’t. This is why I think there is ultimately a Debt Governor on the AI Buildout."
Re: Mental Models - Wile E. Coyote Equities & The Vanishing Bond Floor.
The backup in long-end rates has pulled the “Bond Floor” out from under Equities, and the only thing keeping the longest-duration names aloft is Growth. Wile E. Coyote better not look down!
Anyone who grew up on Saturday-morning Looney Tunes knows the rules. Wile E. Coyote chases the Road Runner straight off the edge of a cliff, and for a long, absurd moment nothing happens: his legs keep churning, he keeps running on pure air, and he hangs there in defiance of physics. Gravity only takes hold at the moment he looks down. Then comes the forlorn little wave to the camera, the long whistle, and the tiny puff of dust at the bottom of the canyon.
Longtime readers know that Wile E. Coyote is an old friend of mine. Back in February 2021 I asked whether “Risk assets marching higher while the 30-yr takes a dirt nap” meant Wile E. Coyote was running off the cliff before he discovered Gravity. The setup today rhymes uncomfortably well with that one.
On Monday I posted a Musing of the Day that has been rattling around in my head all week: “It’s a bizarre tape when Rate Angst dominates ‘rate sensitive sectors,’ yet some of the longest duration Equities still seem impervious to Rates... If growth prospects even suffer a whiff of disappointment, look out below.”
With the long end continuing to get crushed (the 30-year printing its highest level since 2004 and the 5-year clearing 5% for the first time since 2007), I want to lay out why I think the gap between where these Equities trade and where Gravity says they belong keeps getting wider.
This piece ties together many of my past Mental Models and will show you why I think long-duration Equities are behaving like Wile E. Coyote spinning his legs in mid-air before realizing that he is no longer on terra firma.
This is a FREE post, because I think the whole world needs to heed this warning.
urbankaoboy.com/p/re-mental-…
Michael Kao retweeted
🌪️💫 maybe Michael can do another Main Street Alpha 📺 @TonyNashNerd @LeoNelissen great piece
Re: Mental Models - Wile E. Coyote Equities & The Vanishing Bond Floor.
The backup in long-end rates has pulled the “Bond Floor” out from under Equities, and the only thing keeping the longest-duration names aloft is Growth. Wile E. Coyote better not look down!
Anyone who grew up on Saturday-morning Looney Tunes knows the rules. Wile E. Coyote chases the Road Runner straight off the edge of a cliff, and for a long, absurd moment nothing happens: his legs keep churning, he keeps running on pure air, and he hangs there in defiance of physics. Gravity only takes hold at the moment he looks down. Then comes the forlorn little wave to the camera, the long whistle, and the tiny puff of dust at the bottom of the canyon.
Longtime readers know that Wile E. Coyote is an old friend of mine. Back in February 2021 I asked whether “Risk assets marching higher while the 30-yr takes a dirt nap” meant Wile E. Coyote was running off the cliff before he discovered Gravity. The setup today rhymes uncomfortably well with that one.
On Monday I posted a Musing of the Day that has been rattling around in my head all week: “It’s a bizarre tape when Rate Angst dominates ‘rate sensitive sectors,’ yet some of the longest duration Equities still seem impervious to Rates... If growth prospects even suffer a whiff of disappointment, look out below.”
With the long end continuing to get crushed (the 30-year printing its highest level since 2004 and the 5-year clearing 5% for the first time since 2007), I want to lay out why I think the gap between where these Equities trade and where Gravity says they belong keeps getting wider.
This piece ties together many of my past Mental Models and will show you why I think long-duration Equities are behaving like Wile E. Coyote spinning his legs in mid-air before realizing that he is no longer on terra firma.
This is a FREE post, because I think the whole world needs to heed this warning.
urbankaoboy.com/p/re-mental-…
Michael Kao retweeted
"This piece ties together many of my past Mental Models and will show you why I think long-duration Equities are behaving like Wile E. Coyote spinning his legs in mid-air before realizing that he is no longer on terra firma."
Re: Mental Models - Wile E. Coyote Equities & The Vanishing Bond Floor.
The backup in long-end rates has pulled the “Bond Floor” out from under Equities, and the only thing keeping the longest-duration names aloft is Growth. Wile E. Coyote better not look down!
Anyone who grew up on Saturday-morning Looney Tunes knows the rules. Wile E. Coyote chases the Road Runner straight off the edge of a cliff, and for a long, absurd moment nothing happens: his legs keep churning, he keeps running on pure air, and he hangs there in defiance of physics. Gravity only takes hold at the moment he looks down. Then comes the forlorn little wave to the camera, the long whistle, and the tiny puff of dust at the bottom of the canyon.
Longtime readers know that Wile E. Coyote is an old friend of mine. Back in February 2021 I asked whether “Risk assets marching higher while the 30-yr takes a dirt nap” meant Wile E. Coyote was running off the cliff before he discovered Gravity. The setup today rhymes uncomfortably well with that one.
On Monday I posted a Musing of the Day that has been rattling around in my head all week: “It’s a bizarre tape when Rate Angst dominates ‘rate sensitive sectors,’ yet some of the longest duration Equities still seem impervious to Rates... If growth prospects even suffer a whiff of disappointment, look out below.”
With the long end continuing to get crushed (the 30-year printing its highest level since 2004 and the 5-year clearing 5% for the first time since 2007), I want to lay out why I think the gap between where these Equities trade and where Gravity says they belong keeps getting wider.
This piece ties together many of my past Mental Models and will show you why I think long-duration Equities are behaving like Wile E. Coyote spinning his legs in mid-air before realizing that he is no longer on terra firma.
This is a FREE post, because I think the whole world needs to heed this warning.
urbankaoboy.com/p/re-mental-…
Michael Kao retweeted
🫡 “September payrolls printed a stunning 29K … and the long end that had been screaming Fiscal crisis snapped back as the odds of an October hike from the Warsh Fed evaporated. For all the noise, the real economy underneath is still tracking a Disinflationary-Growth path”
Weekly KAOS - Seismic Lies: The Long End, the Truce, and the Debt Governor
Themes of the Week
The long end ripped to two-decade highs then snapped back on a Friday jobs miss, because the needle was jumping for the AI Buildout thundering through the capital markets, not a Fiscal earthquake, while Oil stays maddeningly two-sided, Xi went home with a truce and no Taiwan, and Goldilocks quietly kept its footing.
A seismograph cannot tell an earthquake from a passing freight train; the needle jumps just as violently for both, and you separate them only by reading the shape of the wave.
This week the needle jumped hard, with the 30-year Treasury yield printing its highest level since 2004 and the 5-year clearing 5% for the first time since 2007, and the crowd did what the crowd always does, screaming that the bond vigilantes have finally arrived to collect on America’s Deficit.
I think it’s Cyclical and not Structural. As Jim Reid’s desk at Deutsche Bank pointed out, almost none of this year’s move is higher breakevens; it is real yields back at 2008 highs, which is the signature of a higher neutral rate sitting on a nominal economy still running north of 6%, and of a ferocious competition for capital that increasingly looks like the AI Buildout by another name.
That is the Debt Governor I have been describing since last December, not a sovereign funding strike, and the US is nowhere close to a Fiscal crisis when Japan carries roughly twice our Debt/GDP while lacking every one of the Geographic and Natural Resource advantages that actually underwrite reserve status.
Once again, a Cyclical phenomenon is being dressed up as a Structural one by UST/USD Doomsayers, and Friday morning the tape settled the argument for me: September payrolls printed a stunning 29K, below every forecast on the Street, with the prior two months revised down, and the long end that had been screaming Fiscal crisis snapped back as the odds of an October hike from the Warsh Fed evaporated. For all the noise, the real economy underneath is still tracking a Disinflationary-Growth path.
urbankaoboy.com/p/weekly-kao…
Michael Kao retweeted
Enjoyed this from Michael years ago. It’s worth a read if you aren’t an expert. Even I could pick up and understand it.
Musings of the Day, 9/28/26
It’s a bizarre tape when Rate Angst dominates “rate sensitive sectors,” yet some of the longest duration Equities (Equities whose valuations are mainly rooted in “on the come” cash flows and terminal values) still seem impervious to Rates, due to the market’s belief that their growth can outstrip the underlying move in the discount rate (which effectively drops the “floor valuation” of these long duration Equities).
If growth prospects even suffer a whiff of disappointment, look out below.
Here is a useful way to think about the concept of Duration in Financial Assets:
open.substack.com/pub/urbank…
Michael Kao retweeted
Had a great conversation with Grant and Mike on all things geopolitics and oil.
Kaos Theory Episode 14: Lakshmi Sreekumar
I’ve known Lakshmi since 2018 and think she is the best Oil analyst out there. Grant and I are very excited to have Lakshmi make public interview debut here on KAOS THEORY 14!
9/5/26: Episode 14 — Lakshmi Sreekumar
On this episode of KAOS Theory, Grant Williams and I welcome Lakshmi Sreekumar for her first major appearance since leaving Capital One and a fascinating deep dive into an Oil market that has stubbornly refused to behave the way many expected.
Drawing on her background in energy trading, derivatives and macro analysis, as well as her experience advising the Dallas Fed’s Energy Advisory Council, Lakshmi explains why understanding Oil requires far more than simply counting barrels.
At the heart of the conversation is the Strait of Hormuz, which she argues is neither truly open nor closed (she has called it “Schrödinger’s Strait”) but rather operating as a “sieve,” with the impact of disruption being absorbed through a combination of demand destruction, bypass routes, partial transit and inventory draws.
From there, we explore Iran’s ambitions in the Strait, the role of the IRGC, China’s striking decline in Oil demand and why some of that shift may be permanent rather than cyclical.
Lakshmi also walks us through several possible paths for the conflict and explains why her base case is a prolonged “staring contest” designed to squeeze the IRGC financially, keeping oil prices elevated for now, while potentially setting the stage for a very different supply-demand picture, and even a global oil surplus, by 2028.
Follow Lakshmi nitter.cf/LSREnergy
urbankaoboy.com/p/kaos-theor…
RT @realKunalAShah: I’d argue the Trump administration’s success in being able to effectively release the SoH from the grip of the Iranians…
This quoted post is unavailable.
Michael Kao retweeted
Wow, Capital Structure module is getting fancy!.
UrbanKaoberg Update 2, 8/26/26
The Capital Structure (CPSTR) module now breaks down a company's capital stack into layers by seniority, gives credit and leverage stats, and details near-term maturities.
It is a very useful place to identify potential Fulcrum Securities.
Check it out on UrbanKaoberg.com
nitter.cf/UrbanKaoboy/status/209…
Michael Kao retweeted
Hard to disagree with my friend @UrbanKaoboy here.
The chair changes the answer. Druckenmiller is second to none on macro, but he's optimizing for one variable. A sitting Treasury Secretary is solving for geopolitics, national security, and the auction calendar at the same time, with actual skin in the game.
Same expertise, different hats. Invert it and the spat mostly disappears: put Druck in the chair and he "sings a different tune", and Bessent is the one doing the chastising.
Worth remembering the next time someone tells you what the policymaker should obviously do. 🍻
Musings of the Day, 8/25/26:
I have all the respect in the world for Druckenmiller as an investor, and his Macro expertise is second-to-none.
That said, talk is cheap when you're not the Tsy Sec who also needs to consider non-Macro factors, like Geopolitics and Nationality Security, when it comes to policy.
Bessent and Druck are cut from the same cloth from a Macro expertise perspective; the only difference is in the respective hats they wear.
So before you read too much into this public spat, it's useful to invert and consider the counterfactual:
What would happen if their roles were reversed?
I bet Druck would be singing a different tune, and Bessent might be the one chastising him.
Michael Kao retweeted
If you still think FX only moves on the likes of rate differentials, just after we saw how THEY can be moved, and why, then you aren’t keeping up with the game now being played, its rules, and what some are prepared to do to win. 😉
Musings of the Day, 8/20/26:
Unpopular Opinion:
The current USD weakness has more to do with Geopolitics than with anything else, including Interest Rate Diffs and Deficits.
How the US ultimately fares in Hormuz and in Taiwan will determine the USD's Hegemonic Premium more than anything else.
This is what I wrote in last week's Weekly KAOS:
Michael Kao retweeted
Three of the most informed, thoughtful, intelligent and genuine people you could hope to learn from.
Really a must listen!
See for yourselves.
Kaos Theory Episode 13: Michael Every Redux
Grant and I welcome Michael Every back to the show for a wide-ranging discussion on the latest confrontation with Iran and what it reveals about the rapidly geopolitical landscape.
urbankaoboy.com/p/kaos-theor…
Michael Kao retweeted
This is a great piece with some of my favorite analysts and thinkers between @UrbanKaoboy and @TheMichaelEvery
Kaos Theory Episode 13: Michael Every Redux
Grant and I welcome Michael Every back to the show for a wide-ranging discussion on the latest confrontation with Iran and what it reveals about the rapidly geopolitical landscape.
urbankaoboy.com/p/kaos-theor…
Michael Kao retweeted
It was great to catch up with Michael and Grant again just before the US-Iran situation shifted to become ‘Comfortably Bomb’…
Kaos Theory Episode 13: Michael Every Redux
Grant and I welcome Michael Every back to the show for a wide-ranging discussion on the latest confrontation with Iran and what it reveals about the rapidly geopolitical landscape.
urbankaoboy.com/p/kaos-theor…
Michael Kao retweeted
Form the beginning of the year but still worth a listen: podcasts.apple.com/de/podcas…
With @UrbanKaoboy via @JackFarley96
Michael Kao retweeted
Michael Kao (@UrbanKaoboy) discusses the economy's precarious balance, stating, "we're currently walking a tightrope between wildly divergent macro outcomes." Is inflation or stagnation ahead? #Economy #Stagflation
