OUT NOW w/ @biancoresearch - Since late summer, two panics have hit the bond market. Long-end Treasury yields are at 20+ year highs. At the same time, AI credit is showing cracks, with Coreweave bonds implying a 60% probability of default*. After being a consistent bear on bonds for many years, Jim @biancoresearch is finally constructive on the Treasury market. He was careful to say he isn’t calling bonds cheap. His argument is that they’re no longer expensive. Over time, long-term yields should roughly track nominal GDP growth, and with about 3% inflation and about 2% real growth, he expects 5–6% nominal growth. Every Treasury from the 7-year to the 30-year now yields above 5%. In his words: “We finally got to the appropriate level. Only took us six years.” On AI credit: Jim’s analogy is detention. CCC is where the problem kids sit after school. Right now CoreWeave is acting up, along with a handful of over-levered cable companies and Aston Martin. But investment-grade and high-yield spreads have barely moved. If you toured a high school and saw a rowdy detention room, you wouldn’t conclude the whole school was bad. He doesn’t see this as a canary in the coal mine. Would he buy CoreWeave’s 2032s at 15%? No. He’d be a seller of “the worst problem child.” But he still likes the space overall. WTBN’s index holds a 5% weight in convertible bonds, about 40% of it AI-related, and he expects that space to go up. On the AI bubble: Jim thinks AI will end in a bubble, as every transformative technology does. He just doesn’t think we’re there yet. His analogy is that it’s 1997, not the spring of 2000. Bubbles peak when everyone abandons the view that the technology is overhyped, and today most of the financial industry still holds that view. His bigger concern is what happens if AI works. Nominal growth runs hotter, the 5% handle on interest rates could become a 6, and the companies at the bottom of the K, like the corner grocery store and the new restaurant, feel it first. We also covered why oil is already effectively $200 a barrel once you add shipping and the cost of naval security in the Strait of Hormuz, why inflation looks stuck at 3% now that two decades of Chinese goods deflation are over, and what Kevin Warsh ending forward guidance means for markets. Thank you, Jim, for one of the most clarifying conversations I’ve had on where bonds stand right now. Apple podcasts.apple.com/us/podcas… Spotify open.spotify.com/episode/2cv… YouTube youtube.com/watch?v=bygJZ4o0… Sponsor (Sarmaya Thematic ETF $LENS): sarmayaetf.com/