Oct 29, 2026 · 56 min
Hormuz pressure collides with Treasury stress and AI doubts
MacroVoices #556 Luke Gromen: US Midterms & Beyond
The episode connects geopolitical disruption, fiscal strain, monetary policy, and an uncertain AI investment cycle to the outlook for markets and elections.
- 1Luke Gromen argues that bond-market pressure could constrain Western policy more effectively than a military victory.
- 2Rising Treasury yields may reflect fiscal stress, while the Federal Reserve faces competing demands over rates and debt.
- 3The AI boom faces a test as weak consumer credit, scrutinized cash flows, and political uncertainty challenge its durability.
Don't miss
Luke Gromen argues that Iran could constrain Western policy through bond-market pressure without defeating the United States militarily.
The brief
Luke Gromen revisits the prolonged Strait of Hormuz disruption, separating what earlier forecasts got right from what they missed about oil, reserves, refining, and markets.
Gromen’s central argument is that Iran need not defeat the United States militarily: enough pressure on bond markets could constrain Western policy around the election.
The discussion turns to Treasury yields and the Federal Reserve, weighing a hawkish stance against the fiscal pressures that may eventually force money creation to support government debt.
Gromen and Patrick Ceresna question whether the AI investment boom can survive weaker consumer finances, tighter scrutiny of cash flow, and politically driven policy support.
Ceresna’s market desk tracks Capital One credit risk alongside divergent signals in the dollar, oil, gold, copper, uranium equities, and corn positioning.
The standout tension is the possibility that a sound long-term AI thesis still produces severe malinvestment, financial losses, and pressure for an official response.
What was said on this episode
47 statements · 11 positive · 33 negative · 1 mixed · 2 neutral
The Federal Reserve will print money to purchase Treasury securities.
“The Fed's going to have to print money and buy treasuries”
Listen at 0:01
Unaffordable fertilizer will reduce crop yields next year and later increase food inflation.
“the first stage of a real problem... that will show up in food inflation around the world, it's not going to show up this year. It's going to show up in theory in lower yields next year if if fertilizer isn't bought and applied and therefore yields are down.”
Listen at 3:09
Reduced fertilizer use will lower agricultural yields next year.
“It's going to show up in theory in lower yields next year if if fertilizer isn't bought and applied and therefore yields are down.”
Listen at 3:15
Lower fertilizer use will ultimately raise row-crop prices.
“in something that's ultimately very, very bullish for prices, for crop prices, row crop prices”
Listen at 3:49
Iran can gain leverage by pressuring the U.S. bond market rather than defeating the United States.
“Iran has more leverage than the Western narrative suggests because Iran doesn't have to beat the U.S. It just has to beat the bond market.”
Listen at 8:05
U.S. air-defense missiles will be depleted when usage exceeds replenishment.
“The Americans burn 200 to 300 missiles a month. The Americans can only replace 100 missiles a month. The Americans are going to run out of air defense missiles on X date.”
Listen at 9:48
Iran, Russia, and China will support prolonging the conflict.
“I think it's going to continue dragging on because I think the Iranians are happy to have it drag on. I think the Russians are happy to have it drag on. I think the Chinese are happy to have it drag on.”
Listen at 12:52
The Federal Reserve should not raise interest rates under current conditions.
“I think raising rates all else equal is the wrong thing.”
Listen at 13:51
Rapid fiscal consolidation would depress stocks and commodities while benefiting bonds.
“stocks are going to tank, commodities are going to tank, and you're going to want to own bonds.”
Listen at 17:34
A prolonged contested election would harm risk assets.
“if Trump contests the election, as I've seen serious people talking about in certain areas and it drags out. That wouldn't be good for risk”
Listen at 19:30
Artificial intelligence will displace many white-collar workers.
“if you assume that AI is going to really displace a lot of white collar jobs”
Listen at 20:41
AI will displace many white-collar jobs.
“I think it's foolish to think they won't”
Listen at 20:52
AI-displaced workers will struggle to find comparable employment.
“all of these people getting laid off, they're not going to find another job. Not easily and probably not at the same wage”
Listen at 21:52
AI-driven unemployment could cause 5% of consumer loans to default within three years.
“if you just kind of play that out over several quarters, that $19 trillion in consumer loans, let's pretend 5% of those default as a result of AI, just sometime in the next two years, three years.”
Listen at 22:06
A five-percent consumer-debt default increase would equal 40% of U.S. bank equity.
“every 5% default rate increase on consumer debt as a result of AI unemployment or deflation in wages is equal to 40%, 4-0% of the total equity base of the United States banking system.”
Listen at 22:32
Banks’ responses to AI-related losses would damage economic growth or markets.
“Or you slow the economy down a whole bunch. But none of those are good outcomes.”
Listen at 23:36
Luke Gromen holds 30% of liquid net worth in cash and Treasury bills.
“I'm sitting in 30 percent of my liquid net worth and cash and T-bills”
Listen at 25:18
AI has become too economically significant to be allowed to fail.
“AI is now too big to fail.”
Listen at 27:57
An AI credit bust would cause massive losses and a recession.
“So if the credit mania bursts, then, yeah, there's going to be massive losses. You're going to have a recession”
Listen at 28:13
A collapse in AI credit financing would cause massive losses and a recession.
“If the credit mania bursts, then, yeah, there's going to be massive losses. You're going to have a recession”
Listen at 28:14
A recession could increase the U.S. deficit by $1.8–$2.4 trillion.
“600, 800 basis points of GDP is $1.8 to $2.4 trillion. So that's how much more of the deficit's going to go up in a recession.”
Listen at 29:18
An AI-driven recession could add roughly $2 trillion to the U.S. deficit.
“In a recession caused by a bursting of the AI mania, you very easily could add another $2 trillion deficit.”
Listen at 29:31
Investors should sell or avoid a rally in long-term Treasury bonds.
“I would fade the bond rally all day long.”
Listen at 30:16
The Federal Reserve will become the only buyer of expanded Treasury issuance.
“There's only one buyer. It's the Fed. The Fed's going to have to print money and buy treasuries.”
Listen at 31:59
The Federal Reserve will create money to buy Treasury securities during a crisis.
“The Fed's going to have to print money and buy treasuries.”
Listen at 32:00
AI will achieve the capabilities its proponents claim.
“if AI actually does what it says it's going to do”
Listen at 37:04
Preventing an AI collapse could produce five years of U.S. social unrest.
“here's the next five years of social unrest in the United States.”
Listen at 38:30
AI-related political conflict will intensify in the United States in 2027.
“I think it's going to start getting litigated in 2027.”
Listen at 39:05
AI-driven job losses will trigger social unrest in U.S. cities beginning in 2027.
“I think it's going to start getting litigated in 2027. And how do I think it's going to get litigated? I think it's going to get litigated with model top cocktails in city centers around the United States”
Listen at 39:05
Elite overproduction combined with wealth inequality leads to recurring social instability.
“Elite overproduction plus massive wealth inequality always ends the same way. Always.”
Listen at 39:51
Capital One shares could fall further if they fail near the 50-day moving average.
“A failure around this level would reinforce the bearer structure and leave the stock vulnerable for another leg lower.”
Listen at 41:46
Patrick Ceresna recommends a January 2027 Capital One bear put spread.
“I'm looking at the January 15, 2027, 200 by 175 bear put spread, trading around $5.96 net debit.”
Listen at 41:58
Buying Capital One January 200 puts is a reasonable bearish alternative.
“owning even the January 200 put outright for $7.95 is also a reasonable alternative for seeking greater downside participation.”
Listen at 42:29
Investors are scrutinizing whether AI spending generates sufficient cash flow.
“The AI spending cash flow is now under scrutiny.”
Listen at 43:24
The U.S. dollar remains in a bullish trend after the Fed decision.
“the prevailing bull trend in the dollar remains intact.”
Listen at 46:47
“if this 111 level gives out, the euro may be starting. another leg down.”
Listen at 47:05
Oil will continue higher, anticipating post-midterm geopolitical re-escalation.
“oil is trending higher and very likely anticipating a re-escalation of the situation in the post-midterm period.”
Listen at 47:59
Crude oil remains in a strong upward trend.
“crude oil remains in a decisive bull trend”
Listen at 48:09
WTI could rise toward its previous high near $120.
“a technical upside is back to the $120 previous highs on WTI.”
Listen at 48:21
Gold risks a further 5–10% decline without a catalyst.
“Gold remains at a risk of a breakdown because a key technical breakdown like this would leave room for even a 5% to 10% further drawdown.”
Listen at 49:10
Gold remains a strongly attractive long-term asset.
“Overall, I remain very bullish gold long term”
Listen at 49:20
Copper below 650 could force liquidation of crowded bullish positions.
“any breakdown... below 650 could squeeze out the very crowded trade.”
Listen at 50:28
Investors should remain neutral on copper until accumulation appears.
“I would remain relatively neutral copper until we see some sort of technical price action showing some meaningful accumulation.”
Listen at 50:34
Uranium-mining equities remain in a strong downtrend despite firm uranium prices.
“the equities remain in a decisive downtrend and continue to be hurt considerably.”
Listen at 50:57
Uranium equities may become a significant buying opportunity after further weakness.
“whether that. ends up being a critical buying opportunity.”
Listen at 51:16
The Magnificent Seven’s post-earnings performance will drive major index direction.
“the mag 7 remain the focal point can the mag 7 bullishly resolve themselves in the post earnings period”
Listen at 52:24
Corn traders sold roughly 166,000 net contracts over two weeks.
“We saw roughly 166,000 net contracts sold over the last two weeks, both long liquidation and fresh shorting.”
Listen at 53:44
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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