In an unprecedented move, a group of 11 central bank chiefs (including leaders from the ECB, Bank of England, and Bank of Canada) issued a joint statement of support for Powell. They emphasized that central bank independence is a “pillar of global financial stability”, effectively creating a diplomatic firewall against the White House's pressure. Chicago Fed president Austan Goolsbee went on record calling the use of investigations as a pretext for rate disagreements “a mess” that threatens the credibility of the US dollar. However, with the recent hostile takeover of Venezuela, oil isn't a problem, so credibility isn't an issue here for the Federal Reserve. Could this sound more like they're looking for attention than anything else? 

There was an unusually coordinated statement by a group of central bank leaders and the BIS expressing solidarity with Powell and emphasizing central bank independence as a pillar of global stability. This isn't about liking Powell, it's about protecting a world operation system:

Other central banks have no incentive to “seek attention” here; they have an incentive to prevent a world funding shock

Chicago Fed president Austan Goolsbee publicly warned that using investigations as a pretext over rate disagreements is a mess and framed it as damaging to central bank credibility. Mechanically, that's a warning about risk premia, not optics.

The statement “the Fed uses petrodollars” mixes concepts.

Petrodollars are simply USD revenues earned by oil exporters when oil is sold in USD (and then recycled into financial assets). The Fed doesn't run on petrodollars. The Fed's credibility is priced through inflation expectations, Treasury term premium, stability of the repo/swap complex, and the perception that policy isn't subordinated to politics.

Even if there's perfect energy control and stable oil supply, credibility can still break through non-energy channels. The channels that still transmit credibility damage:

So oil isn't the problem doesn't express credibility isn't an issue

In a late cycle, high leverage environment (basis trades, repo dependence, crowded carry), governance shocks are dangerous because they're nonlinear. The system can look calm until a threshold is crossed; then correlations jump, haircuts rise, funding tightens, and forced selling begins.

That's exactly when foreign central banks want to signal: We're not going to participate in a de-anchoring of the world monetary regime

In other words it's not attention seeking, it's circuit breaker signaling

If policymakers are buying time, the next phase typically looks like:

That's what “late-cycle hegemonic time buying” looks like in practice: minimize the probability of a funding accident while shifting risk onto public balance sheets and regulation.

Trump threatened a 10% tariff (rising to 25% by June) on imports from eight European nations (Denmark, Norway, Sweden, France, Germany, the UK, Netherlands, and Finland). The tariffs are tied to US demand to purchase Greenland, following a Danish led NATO exercise in the territory. EU Commission President Ursula von der Leyen responded by putting the EU-US trade deal on hold and threatening rebalancing tariffs on iconic American goods (i.e. Harley-Davidson, Levi's) on January 19^th. On January 21^st, the primary market event was the de-escalation of trade tensions. Trump's comments to CNBC from Davos about a potential future deal on Greenland provided the immediate boost to investor confidence, leading to a broad market rebound. He said the 10% tariffs on the eight NATO allies would suspend, signaling a cooperative framework for a deal regarding Greenland had been reached. The sudden change of talk from threatening to takeover Greenland and now a deal reached, stirred too much uncertainty with investors. Actions speak louder than words.

A tariff threat that can be turned on/off around a geopolitical bargaining chip forces investors to price sudden changes in cash flows (earnings), supply chain reroutes, and legal/regulatory risk. That increases equity risk premia and credit spreads even if spot prices rally on relief.

Long horizon allocators (pensions, insurers, sovereigns) can handle normal macro risk; what they dislike is jump risk in policy so they hedge more, shorten duration, and reduce exposure to regions/sectors sensitive to executive action.

Even if tariffs are postponed, the credible threat of abrupt trade restrictions tends to support the USD (risk-off impulse), raise term premia (governance/policy uncertainty), and increase funding haircuts in leveraged trades.

That matters in a late-cycle leverage environment because it feeds directly into repo, swaps, and basis trades.

A “relief rally” is often mechanical positioning, not genuine confidence, with systemic funds covering shorts, volatility sellers re-enter, dealers reducing hedges, and macro funds fade in the worst case scenario

But the underlying structural change is that investors now believe the administration is willing to use trade policy as leverage over sovereignty disputes, which is intrinsically harder to handicap than a conventional trade negotiation

The market will stop pricing elevated tail risk only if it sees at least one of the following:

Absent those, the market treats de-escalation as temporary

If this pattern repeats, expect:

Turkey's central bank made a smaller than expected rate cut, signaling persistent inflation worries and influencing EM bond markets and currency trades. This may be a hint at more rate cuts by the Federal Reserve this year.

A smaller than expected cut tells markets three things simultaneously:

This isn't a dovish signal, it's a risk management signal

Emerging markets trade on relative credibility, not absolute rates. The immediate EM interpretation is if even a high inflation EM central bank is cautious, then world disinflation is fragile, not assured. That leads to:

In short: carry appetite narrows, not expands

Indirectly, yes – but not for the reason people think. Turkey's move doesn't suggest inflation is beaten worldwide. It suggests policy space is constrained everywhere. For the Fed, that creates a dilemma:

So the likely outcome is more but reluctant cuts, smaller increments, and heavier reliance on liquidity tools rather than rate cuts

That's consistent with how Fed cuts are happening, but they're not restoring confidence and markets remain hypersensitive to non-economic shocks

When EM central banks hesitate even while cutting, it tells you inflation is sticky, FX stability is fragile, capital flows are fickle, and world policy coordination is weak

In a system already dealing with carry trade instability, funding market stress, policy volatility, and geopolitical shocks, this means the margin for error is shrinking

Turkey's move reinforces the idea that rate cuts don't equal “easy conditions” anymore, monetary policy losing its smoothing power, and volatility is becoming endogenous

Turkey's smaller than expected cut doesn't signal confidence, doesn't validate easy disinflation, and doesn't make a soft landing more likely

It signals that central banks worldwide are trapped: they must ease to prevent accidents, but can't ease aggressively without destabilizing currencies and credibility

That dynamic increases the likelihood of more Fed cuts, but also increases the odds that cuts fail to stabilize markets. Which is exactly the environment where non-economic shocks (funding, FX, geopolitics, governance) become crisis catalysts.

At first people were talking about Kevin Hassett as being the running seat for Fed chair after Powell, but when I closely analyzed that Kevin Warsh had previous experience through the 07-08 crisis during his time at the Fed. I predicted this would be the go to man, now supported by Trump for nomination, with where things are headed economically. Because of such, there was a broad sell off with gold and silver.

From a market function standpoint, the choice isn't ideological – it's regime appropriate. Warsh's experience during 2007 – 2009 matters because:

In late-cycle hegemonic stress markets want someone who has already seen the system break and knows which levers fail first; that's Warsh, not Hassett. Hassett signals policy narrative, growth framing, and fiscal monetary coordination optics. Warsh signals discipline, credibility, and willingness to tolerate volatility to protect the core plumbing. Markets immediately price that difference.

The signal wasn't “new Fed chair soon”, it was re-anchoring policy toward credibility over stimulus, reduced tolerance for inflation drift, higher probability of defending the dollar and term premia, and lower probability of using QE as a first line tool

That changes discount rates, not headlines

This is the key mechanical piece, precious metals sell off when monetary credibility rises, not when risk disappears. Gold and silver had been repricing:

A Warsh signal reverses that and mechanically:

This doesn't mean risk is gone, it means the perceived policy anchor just strengthened

This is important, a Warsh type signal delays the crisis, raises the pain threshold, forces leverage to unwind more slowly, reduces odds of an inflationary blow off, and increases odds of a deflationary/funding event later

In other words: credibility defense now, funding stress later. That's a classic late-cycle behavior.

By selling gold and silver and firming the dollar, markets are saying they believe the Fed will defend credibility, expect higher real rates than previously priced, expect less tolerance for inflation surprises, and expect volatility to be managed, not eliminated

But underneath carry trades remain stressed, funding markets remain fragile, credit quality is still deteriorating, and non-economic shocks still matter. So this is time buying, not resolution.

These are the five investments I’ll be watching, and I’ve received full confirmation with oil and farming. Property, water, and FX are three that are dependent upon position.

Why oil works in this crisis setup is both a real asset and a geopolitical asset, it sits upstream of inflation, transport, food, and military logistics

Policy can't suppress oil volatility without breaking something else. In a late-cycle hegemonic phase oil benefits from supply control, risk premia, policy desperation, conflict optionality.

Even when growth slows, oil can rise on disruption, cartel behavior, sanctions, and strategic stockpiling

Oil is not a recession hedge, it's a system-stress hedge

Water is not a trade — it’s a duration hedge. Water works because demand is non-cyclical, supply is immobile, pricing power rises silently, political risk is local and not worldwide.

Water does not spike fast — it never crashes. It protects against inflation, migration, food stress, infrastructure decay, and sovereign mismanagement

It’s not correlated to equities, rates, or FX in real time. Water is a hedge against policy failure over time.

Property only works if you’re very specific like productive land, residential with inelastic demand, places where people must live – not want to speculate, and areas with water access, food access, and logistics relevance

What fails is over-levered commercial, trophy assets, yield-dependent properties, anything reliant on cheap refinancing

Property hedges currency debasement, not funding stress. So property:

Farming is superior to property in one key way, it produces cash flow + calories.

Why farming works is because food demand is absolute, input inflation passes through, land retains real value, governments subsidize failure, supply shocks are frequent and unhedgeable by policy

Agriculture hedges inflation, population stress, geopolitical disruption, climate volatility, currency weakness

In late-cycle stress, food prices rise even when growth falls. That makes farming one of the most convex real-asset hedges available.

FX is where policy divergence shows first as it reflects funding stress, credibility shifts, and carry unwind. You can hedge without owning assets.

FX can fail it can move violently on headlines, central banks intervene, liquidity disappears during stress, correlations break

FX is not a buy-and-hold hedge. It’s a dynamic hedge that must be sized correctly, monitored constantly, aligned with funding flows. FX is your tactical lever, not your foundation.

Funding stress punishes anything that needs refinancing and rewards anything that is essential, short-duration lease, or can reprice rents quickly, or has embedded scarcity (water/logistics)

Best performers (late-cycle funding stress):

Weak performers (funding stress casualties):

The single most important rule in funding stress, the winning property is the one that doesn’t need the capital markets to survive. Unlevered or conservatively levered, long runway, essential demand.

This is how you avoid the classic failure mode, being right on the crisis but wrong on timing, and getting liquidated.

Clearly the markets are showing a gradual move toward economic resistant investments with the push in gold and silver, but now with other investments like oil, property, farming, water, and skilled FX traders

I have full confidence in these moves being made toward these types of investments that I’m taking and recommending for clients, and suggest that you do your due diligence to hedge your portfolios

For those that hadn’t read last months newsletter, I have the link below talking about the situation in Ukraine, Venezuela, and the central banks which have the utmost push of where things are headed economically

Ukraine, Venezuela, BOJ & the Fed

Images are AI generated and in no way portray realistic situations or people, aside from the screenshots taken.

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