Actionable insights — In FED We Trust

18:22 1. Inflation or trust? Decompose the yield move with breakevens

1. Measure the rise in nominal Treasury yields over the episode (e.g. the 10-year).
2. Compare it with the TIPS breakeven over the same window and against its multi-year average.
3. If nominals rise but breakevens sit at their average, the move is in the real / term-premium part, not inflation. Look for a fiscal or credibility cause (deficit at full employment, institutional trust) rather than CPI.
4. Caveat: breakevens settle on CPI, so allow for CPI measurement bias. It doesn't flip the reading unless the gap is small.

• Breakevens finally rising with nominals (a real inflation scare), or nominals falling as a credible fiscal path appears (trust restored).

26:09 2. Price any payoff by its convexity (the coin-flip test)

1. Write the payoff as up-X / down-Y for a comparable move. Equal is zero convexity, more up than down is positive, more down than up is negative.
2. Demand a yield or return premium for negative convexity and accept a lower yield for positive convexity.
3. Remember an embedded option is most convex when it is at the strike, so the same security's convexity changes as its price moves.

• Securities trading near the strike of an embedded call (callable bonds, MBS near par) are where negative convexity peaks.

24:57 3. Track the coupon stack to see convexity building

1. Pull the MBS index coupon distribution and its average dollar price.
2. A low average price (far below ~105) means a small option, little convexity and tight spreads. A rising share of current-coupon, near-par bonds means convexity is building.
3. Expect spreads to widen with higher rate volatility and, more importantly, with a flattening or inverting yield curve.

• 2s10s flattening or inversion paired with a widening current-coupon MBS spread. Once prices fall well below par, convexity fades and index MBS ETFs start tracking Treasuries (29:09).

14:52 4. Split the credit call from the equity call

1. Ask who actually carries the debt: the cash-rich borrower or the cash-burning supplier it pays.
2. If the borrower's core business covers the coupons many times over, the bonds are "money good" even with wider spreads. The only default path is a structural event (e.g. a forced breakup).
3. Rate the equity separately: overbuilding can crush returns (Global Crossing) while lenders are repaid.

• Borrowing shifting from cash-rich parents to thinly capitalised vehicles or suppliers. That is where the credit risk would actually move.

39:51 5. A three-point ETF due-diligence checklist

1. Leverage type: linear (futures) leverage can be held; daily-reset leverage is a day-to-week tool, because volatility drag erodes it (+20% / −20% leaves 96).
2. Distribution coverage: compare the payout with the income the underlying assets earn. A 10%+ yield when junk pays 6–8% plus a steadily falling price means return of capital.
3. Liquidity match: check the underlyings (derivatives, swaps, illiquid credit). In a vol spike redeemers get NAV while the fund sells below it, and the remaining holders pay.

• A realized-vol jump, widening ETF discounts to NAV, and month-after-month NAV decay in high-payout funds.

45:26 6. Test a "replacement currency" story against underlying liquidity

1. For any claimed rival to a reserve asset, ask whether its backing asset is as deep and liquid as the incumbent's.
2. If not, the rival can't absorb the flow, and the incumbent's wrapper (e.g. USD stablecoins) adds demand for the incumbent instead of an exit route.

• Stablecoin reserve growth showing up as T-bill demand, especially while a large foreign holder (Japan) is selling.

Methods distilled from the public YouTube video (MacroVoices #550, 2026-SEP-17). Not investment advice.