Summary

The investment implication of the BBB Act lies not in deficit panic, but in the possibility that tax cuts, sustained spending, and deregulation will extend the asset cycle. The speaker had expected the bill to face further delays; Republicans cleared it with Vance’s pivotal Senate vote and only a handful of votes to spare in the House. He estimates that the combined drag from the BBB and tariffs on next year’s economy may be only about 0.25%, while the main story is deregulation across environmental approvals, energy, mining, and banking. “The US is entering a debt cycle—and that may actually mean it is entering an asset-bubble cycle.”
Treasuries may face a liquidity gap over the next 3–6 months, but long-term demand is not the issue. If the TGA is rebuilt from roughly $480B to $850B, every additional $100B could lift relevant funding rates by 4–5bp; the GC-OIS spread has already priced in about half of that move. The Treasury is expected to keep bill issuance at roughly a 2:3 ratio to coupons, while the Fed has yet to cut rates meaningfully and eSLR relief may not arrive until Q1 next year. The speaker rejects the narrative that oversupply will push the 10-year yield to 5%, arguing that once regulation is eased and carry trades become profitable, banks will provide demand by accumulating bonds.
The 147K payroll gain and 4.1% unemployment rate “look good, but there are strong undercurrents beneath the surface.” Roughly half of the job creation came from the government, while ISM, job openings, ADP, and other indicators point to slowing private-sector hiring; the effects of tariffs and tighter immigration policy may emerge in Q3 and Q4. The speaker sees no July cut, September as a live meeting, and a December cut; from October this year through the end of next year, he expects cumulative easing of roughly 100–150bp.
The S&P 500 is broadly expensive, but earnings are splitting into two sharply divergent paths. The market is already trading on roughly 2% economic growth in 2026 and expects earnings growth to beat Goldman Sachs’ estimate of about 7%; AI, semiconductors, cloud, and high-tech companies may raise guidance, while traditional companies may cut it. South Korea’s 25% tariff notice on Monday, with Japan’s 25% tariff already at the top end of expectations, triggered a roughly 0.75% pullback; the bigger risk is Section 232 tariffs on semiconductors, copper, lumber, and other industries.
The speaker is placing his bet for the true secular cycle of the next decade on semiconductors, not an ordinary handset replacement cycle. AI usage habits are irreversible, and token demand will expand quadratically or even cubically, while fab capacity can increase only linearly. TSMC’s 2025–2028 production schedule is already visible, so “this gap can never be filled.” A shortage could even allow the market to absorb Intel’s 18A/14A capacity and Samsung’s lower-yield output.
Stablecoin adoption is valuable to the dollar system, but it does not imply an RWA or altcoin bull market. Stablecoins can simplify cross-border trade, banking, and SWIFT settlement while extending the dollar’s reach, but they do not create additional dollar liquidity or solve the Treasury-demand problem; opening up access to RWA will not automatically create demand. His database shows funding is negative across most altcoins, with shorts at times paying nearly 1% in a single day, while their correlation with Bitcoin remains broadly above 70%–80%: “The retail punters are gone.”

Deep dive

1. The BBB Passed Faster Than Expected; Deregulation Is the Real Variable

The speaker’s self-correction was that he had expected the bill to drag on, but Republicans cleared it with Vance’s pivotal Senate vote and a House vote decided by only a handful of ballots.
He does not agree with the criticism from Elon and others that the increase in the budget deficit is the core risk. In his framework, the dollar’s global financial role means US debt is “absolutely not a problem”; the debt cycle may instead correspond to an asset-bubble cycle.
In his framework, tax cuts “are effectively handing out money.” Combining the BBB with tariffs, he estimates the drag on next year’s economy at roughly 0.25%, which does not amount to a material fundamental shock.
The longer transmission channel is deregulation: oil, rare-earth mining, and environmental approvals could all be loosened, but entrenched assessment regimes and agency processes mean “there is no way to get this done in just a few quarters.”

2. Bank Capital Relief Creates Potential Demand for Treasuries

Easing SLR/eSLR would change how Treasuries are treated on bank balance sheets, making belly and other intermediate-maturity Treasuries closer to cash while loosening leverage constraints; the previous requirement of roughly 6.5 would also be relaxed substantially.
The speaker’s rough estimate is that about $4T of bank capital could be released, citing Goldman Sachs’ estimate of roughly $5T. This is not capital flooding into the market immediately; it is capital that was previously unable to invest or buy bonds regaining a use.
Some of it could flow back to shareholders. If restrictions on dividends and bonuses when leverage was below roughly 6.5 are relaxed, bank bonuses and dividends could gradually return to 2008 levels. Could banking enter a new secular cycle? His answer: “Hard to say—possibly.”
The more direct opportunity for rate desks is carry: buying lower-yielding short-term debt, holding longer-term debt with a slightly higher yield, and using Treasuries as collateral. But the trade becomes genuinely profitable only when rates fall or the spread is sufficiently attractive.

3. Issuance Drains Liquidity First; Rate Cuts and Bank Carry Come Later

The key elements of Treasury guidance are the bill-to-coupon mix, long-end buybacks, and issuance plans across tenors. Bills currently account for roughly 2 against 3 in coupons, and the speaker expects little change. A major shift toward bills could worsen inflation and make it harder for the Fed to cut rates.
The TGA currently stands at roughly $480B. If it is rapidly rebuilt to $850B, liquidity would be drained from the reverse repo facility and the broader market; the speaker’s rule of thumb is that every additional $100B lifts relevant rates by 4–5bp.
The market has already traded ahead of the rebuild, with the GC-OIS spread having moved roughly halfway. Short-term bonds will absorb some of the liquidity drain first, while longer-term bonds also enter their issuance cycle; the precise scale still depends on the Treasury’s questionnaire and guidance.
With eSLR relief not arriving until Q1 next year and the Fed potentially staying on hold in the near term, the next 3–6 months may produce a “liquidity gap.” That means volatility, not an inevitable surge in the 10-year Treasury yield to 5%. Over the longer term, once bank regulation is eased and carry trades become profitable, bank demand could take over.

4. Employment Looks Resilient on the Surface; Powell Will Still Wait for Policy Effects

The 147K payroll gain was above expectations and above the two warning lines the speaker had previously cited: only below 120K would he call the economy a downturn, while below 80K would be the point at which the Fed might conclude that unemployment had become more serious than inflation.
But roughly half of the hiring came from the government, with almost no clear growth in the private sector. ISM services, ISM manufacturing, job openings, and ADP are collectively pointing to slower private-sector hiring.
Tariffs could weaken corporate hiring, while tighter immigration would hit both employment and consumption. The speaker expects these policy effects to “definitely” appear in Q3 and Q4 data, though the magnitude still requires confirmation from the numbers.
Trump wants rate cuts to demonstrate that he has reduced interest costs and attributes high rates to Powell. But with Powell nearing the end of his term, the Fed chair is more likely to focus on the economic data and wait for the tariff effects. The speaker sees no July cut, September as a live meeting, and a December cut; from October this year through the end of next year, he sees roughly 100–150bp of cumulative room.

5. Rich Index Valuations Do Not Prevent Further Re-Rating in AI and Semiconductors

The S&P 500 is no longer focused on roughly 4% earnings growth in Q2 or about 7% for the year; it is trading on roughly 2% economic growth in 2026. Goldman Sachs forecasts about 7% earnings growth next year, but the market clearly expects more. Whether the final number is 7% or 9% remains unclear.
The speaker’s consistent view is that valuations will split: semiconductors, AI, cloud, and high-tech companies may raise expectations in Q3 and Q4, while traditional companies may cut them. An overvalued index and continued upside in technology can therefore coexist.
Monday’s roughly 0.75% decline was mainly driven by South Korea receiving a 25% tariff notice; Japan’s 25% tariff is also at the top of expectations. Vietnam was previously assigned 20%, while the implementation date originally set for July 9 was pushed back to August 1.
Trump says trade negotiations must be completed before Labor Day, so the market expects an outcome by September. Reciprocal tariffs may gradually wind down, but the bigger story is Section 232: tariffs on semiconductors, copper, lumber, and other industries. The speaker feels most of these will probably be added this year, and the market may not have priced them fully.

6. Exponential Token Demand Turns Chips Into a Long-Term Seller’s Market

The speaker compares Google replacing the library: once people become accustomed to GPT, Gemini, or Google AI, it is difficult to return to manual research. Healthcare, everyday activities, and FSD will expand the use cases further. He also notes that despite AI pressure on Google, advertising revenue remains strong, and AI can become a software capability for Google itself.
He emphasizes that token utilization “does not increase linearly; it increases exponentially,” potentially growing at least quadratically or cubically. Every improvement in algorithmic capability quickly fills the computing capacity it saves with new demand, pushing demand growth beyond the pace of current compute supply.
The handset cycle relies on N7, N5, N3, and N2 to improve density and energy efficiency; AI requires greater volume and die area. TSMC’s capacity can increase only linearly, and its 2025–2028 production schedule is already visible. EUV fab construction is expensive, with roughly 30 variables, so TSMC’s expansion falls far short. In his view, this supply-demand gap “can never be filled.”
During this shortage cycle, the cost of semiconductor tariffs may be borne mainly by US consumers and cloud providers, with limited impact on TSMC. Intel’s 18A yield is viewed as solid and may be used primarily for internal PCs and higher margins, while 14A may be developed more for external customers. Even if Samsung’s yields are poor, any meaningful volume could still be absorbed by the market.

7. Stablecoins Extend the Dollar’s Reach, but RWA Creates No New Liquidity

The real value of stablecoins is allowing participants in cross-border trade to use USDT, reducing reliance on banks, foreign-exchange conversion, dollar accounts, and SWIFT settlement, thereby “greatly extending the dollar’s influence.”
But “if the skin is gone, where can the hair grow?” Stablecoins depend on the dollar; they do not increase the total money supply or solve the US Treasury’s demand problem. In the speaker’s view, the latter only requires eSLR relief to release bank demand.
His objection to RWA is that simply removing KYC, bypassing the SEC, or lowering listing thresholds will not automatically create liquidity. Products such as Bybit’s oil futures and tokenized US equities also fail to answer why users would not simply buy dividend-paying securities directly through Interactive Brokers.
His crypto data shows that in 2021, longs paid funding; today, shorts pay across almost all altcoins, at times nearly 1% in a single day. Smaller coins remain broadly 70%–80% correlated with Bitcoin, showing that they have not developed an independent market, while overall liquidity has continued to decline in recent months.
He therefore “absolutely disagrees” that Stablecoins and RWA will create a major altcoin bull market. Bitcoin follows a different logic, while his clear decade-scale judgment is that the “real secular cycle” is in semiconductors.

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