Control Panel: History in real time

Investment Analysis Clubs Macro Economic Trends and Risks
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I whistled when I saw the Control Panel today. It’s fugly. Stocks and bond prices are falling together. The trade is risk-off as stocks and junk bonds are falling faster than the 10 year Treasury – even though the 10YT is also falling.

The entire yield curve jumped and is now positive over its entire length. The 10 year TIPS yield is rising along with the 10 year Treasury yield which shows that the bond market is pricing in an expectation of higher future yields overall, not only inflation. The 10 year breakeven inflation rate is 2.36%. The bond market is still confident that the Fed will be able to control inflation in the long term though it ticked up slightly this week.

The Chicago Fed’s National Financial Conditions Index (NFCI), a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, shows that financial conditions are tightening. Financial stress is creeping up though still low.

VIX is rising to fearful (though not yet crisis) levels. The Fear & Greed Index is in Extreme Fear.

Gold and silver are stable. Flight to safety means the USD is rising.
Oil is shooting up. The Iran war impacts other countries more than the U.S. but the market is international.

https://www.wsj.com/economy/oil-shock-hits-an-economy-already-showing-cracks-bf7e385d?mod=economy_lead_pos5

Oil Shock Hits An Economy Already Showing Cracks

Consumer spending was slow and inflation stubborn even before the attack on Iran sent oil prices soaring

By Justin Lahart and Matt Grossman, The Wall Street Journal, March 14, 2026

…
A slew of data released Friday portrayed an economy showing cracks, from weaker household spending to cooler consumer sentiment and higher inflation. Higher oil prices, which are already hitting gas stations, airfares and shipping costs, could aggravate all three…

The Commerce Department on Friday said that gross domestic product grew at just a 0.7% annual rate in the fourth quarter of last year…A separate report Friday showed consumer spending expanded at just a 1.6% annual rate in the three months ended in January over the previous three months…

This comes on top of stagnant job growth. Employment declined in three of the past six months…

Excluding the volatile food and energy categories, the price index of personal-consumption expenditures (PCE) was 3.1% in January, essentially unchanged from a year ago and well above the Fed’s 2% target, the Commerce Department reported Friday…

The S&P 500 is down 5% from its record in late January, still relatively buoyant. That could change if the disruption to oil supplies begins to look more protracted, private credit problems spread, or other problems emerge. That, in turn, could undermine financing for the AI investment that has propped up growth or spending by high-income consumers…[end quote]

A teensy bit of air has been released from the stock market bubble…but it’s still a bubble. Will the Iran war or stagflation pop it or cause a decade-long bear market as happened in the 1970s?

The situation is so uncertain that it’s too early to declare a trend change. The Fed won’t cut the fed funds rate with inflation so high and trending upward.

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The METAR for next week is stormy but not hurricane-force. The market doesn’t seem on the verge of a crisis yet because the attack on Iran is a war of choice and … TACO. But even if the U.S. withdraws will the situation revert to the status quo? Stay tuned. It’s history in real-time.

Wendy

Oil is shooting up.

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Control Panel: Gold bubble popped?
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Good for selling options. Several of my calls expire this week.

The Captain

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One of the most interesting, albeit appalling, parts of our outlook is the extreme importance of the upcoming national midterm November elections. Many people seem to have an elevated prognosis of the future if they are thinking optimistically beyond next January, and others are thinking pessimistically at what is going on NOW.
Enougjh to make me want to just grow a second head so as to split the burden?

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Perhaps orthogonal but related to this thread, Fareed Zachariah has commentary today on our seeming need to reorder the Middle East. Again.

Short version: British Empire collapsed chasing foreign wars while neglecting infrastructure and other domestic problems. China is not entangled anywhere and is using its newfound might to build its country, while we spend our blood and treasure - over and over - everywhere but here.

Worth a view, in my opinion.

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Seriously, China and the USA are both going down the wedding aisle together.

While the United States has a higher nominal federal government debt (approx. $38 trillion vs. China’s $\sim$19–20 trillion), China’s total economy-wide debt (government, corporate, and household) is estimated to be over 300% of its GDP, exceeding U.S. debt levels. China’s debt is heavily hidden within local governments and state-owned enterprises.

[image]USAFacts +4

Key Differences in Debt Structure:

  • Total Debt: China’s total debt (including corporate/private) is considered higher than the US, with some estimates putting it at over $51 trillion, almost three times its economy size.
  • Government Debt: While China’s official government debt is lower, adding in hidden provincial and local government debt brings its public burden to roughly 160% of GDP, higher than the US federal level.
  • Structure: U.S. debt is primarily federal, whereas China’s debt is distributed across local governments and state-owned enterprises.
  • US Debt Holdings: China is a significant foreign holder of U.S. debt, holding approximately $750-$800 billion in U.S. Treasuries, although Japan is a larger holder.

[image]USAFacts +5

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China’s grid system is selling bonds like madmen. Deep in debt. This article brags about the debt.

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You already have two heads, the right brain and the left brain, all you need now is to trash the clutter. I remember the first computer program I wrote, some 800 to a 1,000 IBM cards, punched and verified. Fed them into the IBM 650 which immediately bombed. Printed out the memory and set out to debug the code. I could not make heads or tails of it, I didn’t understand my own code no matter how hard I tried. When I trashed the box of cards my fellow programmers told me to stop, why waste all that effort? It was the best thing I did. I had just learned how not to write code. Get rid of the useless clutter!

Sorry Wendy, the control panel is full of useless magic numbers. Tom Nash has a simplified outlook, linked below. I’ve been listening to many comment on current events, the best one was about how the market works out during crises. The world has never ended, it has always bounced back. The investing advice that resonated with me was, “Invest in AI” but not in the AI players, in the hardware suppliers, the data center suppliers, which were already outperforming in my options portfolio.

Revealing The REAL Reason the U.S. Is at War with Iran

The Tom Nash Report
Spoiler alert, it’s about oil and the reserve currency.

The Captain

PS: Why do I like charts? They tell the market’s moods at a glance that thousands of words cannot. :slightly_smiling_face:

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OK, so here’s a “control panel” that will scare the pants off you:

I Predicted the 2008 Financial Crisis. What Is Coming May Be Worse.

At the start of the 2008 financial crisis, I was at a hedge fund. By its end, I was at the U.S. Treasury. At both, I worked with people only a few years out of college. The drama of 2008 was all they knew about financial markets. “Remember what’s happening,” I told them. “You’ll never see anything like this again.”

Now I’m not so sure. Maybe they’ll see worse.

We have returned to a period of risk, one rife with the sort of pressures that have led to major financial crises. This time, the risks are spread across industries, markets and nations: artificial intelligence, the roughly $2 trillion private credit industry, stock markets, Taiwan and now Iran. These risks are analyzed one by one, news article by news article. We understand them in isolation. Yet they are different entry points into the same underlying structure — a complex and tightly coupled system where the specific source of stress matters less than how quickly that stress can spread.

Signs of systemic strain are emerging.

Let’s start with private credit,

Gift link, if I’ve done this correctly:

https://www.nytimes.com/2026/03/16/opinion/financial-crisis-private-credit-ai-iran-taiwan.html?unlocked_article_code=1.TlA.cdcn.xsTihaShnC_1&smid=url-share

Link, if I haven’t:

https://www.nytimes.com/2026/03/16/opinion/financial-crisis-private-credit-ai-iran-taiwan.html

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