This is why Mondays are meaningless:
This is also why we hedge. Aside from protecting our portfolios, hedging protects our sanity so we don’t feel pressure to “do something” when the market is dropping for just a day or two – even if there is a reason. There’s certainly no reason for this morning’s bounce other than perhaps, the toothlessness of Bessent’s announced Iran sanctions – which led to a relief sell-off in Oil, back to $82.50/89.62 as we’re back to “situation as usual” – still no ships in the Strait but at least nothing is actively exploding.
Oh, scratch that, Iran did hit and disabled a tanker near Oman (Trump doesn’t like them either now – if you are keeping score) this morning – but that IS the new normal and the energy markets shrugged it off:
Indeed, World War III is losing momentum – mostly because the guy who started it already ran out of missiles and his Navy ships have run out of toilet paper and other vital rations for the thousands of sailors who have been deployed there for 6 months with no relief (because we’re also out of troops and ships).
- Greenland: Since early 2025, Trump has repeatedly refused to rule out military force to seize Greenland from Denmark – a fellow NATO member. In January 2026 the crisis escalated: Trump threatened a 25% tariff on several European nations unless Denmark ceded the territory, while his own advisor’s wife posted a map of Greenland covered in the American flag captioned “SOON“. Danish PM Mette Frederiksen warned this could mean “the end of NATO.” Greenland’s PM Jens-Frederik Nielsen had to publicly state the obvious: “Greenland is not for sale“. Trump ultimately reversed course at Davos on January 21, ruling out force after NATO’s Rutte intervened – walking back a threat against an ally that never should have been made in the first place.
- Mexico: Trump signed a secret directive in August 2025 authorizing military force against Latin American drug cartels, then in January 2026 told Hannity the U.S. would start hitting cartel targets on Mexican “land,” not just interdicting at sea. By November 2025, NBC reported the administration was actively planning to deploy U.S. troops and intelligence agents onto Mexican soil – threatening a sovereign neighbor and NAFTA/USMCA trading partner with unilateral land incursion over a domestic law-enforcement problem.
- Iran/Hormuz — where the bravado met reality: This is the one actually exposing the hollowness. CSIS data shows 41% of all deployable U.S. Navy ships are currently tied up in the Middle East for a fight against a country whose navy doesn’t functionally exist. And the fleet still can’t rotate fast enough to avoid a crisis: the USS Abraham Lincoln has now spent 250+ days at sea with a single one-day port stop, the longest carrier deployment since Vietnam-era Gulf of Tonkin missions. Sailors have attempted to jump overboard from burnout. Food had to be ordered 30 days in advance through a resupply hub in Diego Garcia — 2,000+ miles from the strike groups – after Iranian attacks damaged the actual Bahrain logistics hub in February. One sailor’s on-record quote: “Logistics was a complete failure the entire time out there — food, supplies, parts“. When Trump was asked if the Lincoln’s deployment had gone on too long, he said “not nearly long enough” – the Commander-in-Chief dismissing a documented mental-health crisis among his own sailors as insufficient.
A retired Navy acquisitions chief testified to Congress that the U.S. is “an 11-carrier Navy in a 15-carrier world” – thirteen years ago. Today it’s still 11, dropping to 10 when the USS Nimitz retires this year. Missile inventories on Navy destroyers are described as “critically low” from the Iran war and two amphibious warship deliveries just got pushed back a full year to 2027 and 2031 – meaning the readiness gap isn’t closing, it’s compounding!
This isn’t a failure specific to one administration’s competence, though the “logistics was a complete failure” and Bahrain-hub-destroyed-forcing-a-2,000-mile resupply chain details are specific to how this conflict was run. It’s a decades-old structural mismatch between global commitments and fleet size that Trump’s simultaneous threats against Greenland, Mexico, and Iran – three fronts, one already-strained Navy – have simply made visible to everyone watching, including Putin – who obviously has his own issues at the moment.
A Superpower that talks tough but visibly can’t sustain multi-front pressure is, paradoxically, less destabilizing than one that could actually follow through.
Denmark, Mexico, and Iran have all watched threats get walked back or bog down in logistics failures rather than escalate into sustained multi-front action – that’s arguably a stabilizing discovery for smaller states everywhere, even if it’s an embarrassing one for American deterrence generally.
It is worth stating that distinction plainly: this is a story about capacity, not really about strategy or intent – the intent was real in all three cases, the capacity to execute all three simultaneously (or even one at a time) simply doesn’t exist!
And now President Trump and Treasury Secretary Bessent seem determined to demonstrate America’s monetary impotence as well, with a series of Lucy-level hare-brained schemes to prop up the Treasury market and the economy: doubling long-bond buyback purchases to $4 billion, unscheduled and unannounced in advance, followed by trial balloons about tapping the nearly $1 trillion Treasury General Account to suppress yields directly.
Bessent’s own mentor isn’t buying it. Stanley Druckenmiller – who hired Bessent at Soros Fund Management more than three decades ago and later seeded Bessent’s own hedge fund, Key Square Capital – published a scathing Wall Street Journal op-ed Monday titled “Let the Bond Markets Speak,” and didn’t pull a single punch:
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- “This wasn’t liquidity management, it was price management – and a mistake far larger than $4 billion suggests.“
- “Governments defending prices against fundamentals always lose.“
- “The bond market wasn’t being a vigilante. It was being a pushover that had finally begun to clear its throat and Treasury moved to quiet even that.”
Druckenmiller’s argument cuts to the heart of why this matters beyond one op-ed: the 10-year yield already sits near the economy’s nominal growth rate, meaning financial conditions are accommodative, not restrictive – there was no actual crisis to solve.
What Treasury is really trying to buy its way out of, Druckenmiller argues, is a solvency conversation, and “you can’t buy your way out of a solvency conversation with liquidity tools.” His line on the 30-year is the one worth quoting in full: “If the thirty-year must trade at 5.5% to clear, that isn’t a crisis: it’s an invoice.“
And then the detail that should worry anyone still giving Treasury the benefit of the doubt: Druckenmiller pointedly noted the enlarged buyback operations “happen to run through the final stretch of a midterm campaign,” warning that “debt management that even appears to follow the political calendar spends the one asset that took two centuries to accumulate: the credibility of the Treasury market. That asset doesn’t regain its value so easily.“
When the man who trained both your Treasury Secretary and your Fed chair nominee (Druckenmiller mentored Kevin Warsh too) takes to the Wall Street Journal to say your signature bond-market intervention isn’t liquidity management but political price management timed to an election, that’s not a partisan attack – that’s the room agreeing the emperor has no clothes and this time – it’s coming from inside the family!
But, thank goodness, this is now business as usual in the United States of America, who just had the most depressing 250th birthday celebration of all time because our Democracy is circling the drain – as out of favor as the political party that was named in its honor.
Fortunately, there aren’t any other real alternatives to investing in the US – we issue 60% of all the world’s debt (like that’s a good thing) and our stock market is $80Tn out of a global $160Tn – larger than the next 9 markets COMBINED so investors have no choice but to put their money into US Equities – even at these insane valuations.
Global Inflation causes cash to be a bad idea, which leaves Bonds (60% US), Real Estate or the Markets (1/2 US) as alternative investments. That’s why we are seeing a strong uptick in new business formation – as that too is an alternative – but the stressed-out Consumer makes even that an iffy idea.
In fact, DKS (Dick’s Sporting Good) just announced earnings this morning and they are down 18% and now you see them really paying for their acquisition of Foot Locker (FL), who made a huge hole in DKS’s balance sheet!
Also speaking of alternatives, Mexico’s bonds are now trading like junk as their $130Bn bailout of Pemex (oil) has NOT borne fruit – even in a year with $85 Oil – who have received an additional $50Bn in just the past year under Sheinbaum, who inherited this disaster. This would be like the US bailing out XOM for $2Tn and it’s still failing!
“The cash infusions have staved off an immediate calamity at Pemex, long-time Mexico watchers say, but just paper over the real problems — a bloated workforce that pulls ever-shrinking quantities of crude out of aging wells. Worse yet, they say, the payments are effectively transferring the financial rot inside Pemex over to the government’s balance sheet.
So rather than Pemex sinking quickly toward a debt debacle on its own, the company is slowly dragging down the entire government and exacerbating its fiscal woes. In May, the country was dealt a one-two blow when Moody’s Ratings cut its credit rating to just one notch above junk status and S&P Global Ratings threatened to do the same, slapping a negative outlook on the rating.
Bond traders have already begun to treat Mexican debt like junk, demanding higher yields to lend to the government and, in the process, making financing more expensive for all borrowers in a country that badly needs more investment to jumpstart its sputtering economy.“
Wow, 6.5% is a junk-rated bond crisis that can take down a nation? Let’s keep that in mind folks:
Trump 2028!
