Sep 17, 2026 · 1h 7m
Harley Bassman says markets are losing faith in institutions
MacroVoices #550 Harley Bassman: In FED We Trust
The episode connects fiscal deficits, Fed credibility, financial innovation, and crowded trades to a broader question of whether markets still trust U.S. institutions.
- 1Bassman argues that restoring confidence in the Federal Reserve matters more than debating the exact size of a rate hike.
- 2Nonbank lending, mortgage convexity, ETFs, stablecoins, and hyperscaler debt are changing how policy and leverage move through markets.
- 3Higher yields pressure equities and gold while crowded copper and natural-gas positions leave both markets vulnerable to sharp reversals.
Don't miss
Bassman’s argument that trust in U.S. institutions matters more than debt-to-GDP ratios or a single inflation measure provides the episode’s organizing insight.
The brief
Harley Bassman frames the macro problem as a crisis of trust: deficits and institutional damage may matter more than any single inflation reading or rate decision.
Bassman argues that private credit weakens monetary transmission, while mortgage convexity, ETFs, stablecoins, and hyperscaler debt create new channels for leverage and Treasury demand.
The AI discussion turns on competition and limits: inexpensive Chinese models could pressure current leaders, while AI may reshape active management without reliably predicting the future.
The Market Desk translates the thesis into trades: long Treasury volatility, caution on equities and gold, and skepticism toward crowded bullish copper and bearish natural-gas positioning.
The standout tension is between strong structural stories and fragile positioning, as higher yields and a hawkish Fed test confidence across bonds, stocks, commodities, and currencies.
What was said on this episode
29 statements · 10 positive · 14 negative · 5 neutral
The Federal Reserve needs to restore market trust.
“the Fed needs to go and regain the trust of the market”
Listen at 0:11
Corporate profits’ GDP share doubled from 6% to 12%.
“corporate profits as a part of GDP basically have doubled. Gone from 6% to 12%.”
Listen at 8:28
Housing affordability is at its worst level in 30 years.
“housing affordability. It's terrible. It's as bad as it's been in 30 years.”
Listen at 9:16
AI companies will likely implement internal controls despite political opposition.
“I suspect that there will be some internal controls”
Listen at 14:16
Hyperscaler-related bonds will probably remain money good.
“I think the bonds are probably money good.”
Listen at 15:12
Hyperscalers are unlikely to go bankrupt.
“I just don't see a bankruptcy with the hyperscalers.”
Listen at 15:19
Meta, Google, Amazon, Microsoft, and Oracle bonds are solid.
“I think the bonds are solid.”
Listen at 16:38
Further yield-curve inversion will worsen mortgage-bond conditions.
“And if the curve keeps inverting, It's going to get worse.”
Listen at 28:52
Mortgage-market participants should exercise caution.
“if you're involved in the mortgage market, yeah, be careful.”
Listen at 29:19
Bitcoin will eventually fall to zero.
“I do think that Bitcoin at some point is going to zero.”
Listen at 44:52
Bitcoin is ineffective as a transactional tool.
“Bitcoin as a transactional tool is kind of worthless.”
Listen at 45:06
USD stablecoins would create demand for Treasury securities.
“I think it's a grand idea because it will be a demand for treasury securities”
Listen at 45:14
Promoting USD stablecoins is a good policy idea.
“So I think it's a good idea.”
Listen at 45:52
The TLT long strangle needs roughly a 7% move to break even at expiration.
“If held to expiration, we would need roughly a 7% move either way to break even.”
Listen at 49:00
Markets correctly priced the Fed’s hawkish rate decision.
“the market priced it right.”
Listen at 50:58
The Federal Reserve’s credibility problem remains unresolved.
“the credibility of the Fed is still a concern that is not resolved.”
Listen at 51:34
Higher oil prices are driving inflation and rates across the Treasury curve.
“the entire curve moving. At this stage, this is inflation coming in. oil pressing higher driving that inflation and simply higher rates right across the curve”
Listen at 52:11
Higher yields compress equity multiples and weigh on stock markets.
“the hurdle rate continues to compress multiples and it continues to be a drag on these markets”
Listen at 53:51
Equity markets may remain range-bound into next week.
“the base case still should be that the market may be far more range bound”
Listen at 55:10
Oil-market fundamentals remain tight.
“the fundamentals really continue to be tight.”
Listen at 56:12
Traders should respect the prevailing oil-price trend.
“I want to respect the prevailing trend”
Listen at 57:12
Dollar strength has not yet confirmed a new bull trend.
“there isn't enough follow through yet to confirm that somehow the U.S. dollar is in a new bull trend.”
Listen at 58:55
Rising real rates and a stronger dollar drove gold’s correction.
“rising real rates and a U.S. dollar that was generally strong”
Listen at 59:57
Gold breaks toward 4,200 or 4,000 would indicate a false breakout.
“If we see any legitimate breakdowns to like 4,200 or 4,000, it really does mean that this was a false start.”
Listen at 1:01:14
Mine constraints, electrification, and AI demand support copper’s long-term bull case.
“We do have mine supply constraints, grid electrification, AI demand. All the structural bull cases are there to back this up.”
Listen at 1:02:01
Copper positioning is extremely crowded.
“the trade is incredibly crowded.”
Listen at 1:03:17
Natural-gas shorts should use convexity or an options hedge.
“if you want to stay short natural gas, you need to put that on with some sort of convexity or overlay some sort of an options hedge.”
Listen at 1:05:05
Extreme natural-gas short positioning can trigger severe volatility during a squeeze.
“when natural gas gets this kind of positioning, it can cause some very serious volatility when a squeeze”
Listen at 1:05:16
Commitment of Traders reports measure crowding rather than predict reversals.
“Cot reports are not a crystal ball. It's a crowding map.”
Listen at 1:05:46
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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