Title: With "Terrible" Economic Data, Treasury Bonds at 5.3% are a Bargain, argues Jared Dillian Show: The Monetary Matters Network (host: Jack Farley) Guest: Jared Dillian — The Daily Dirtnap; co-host, Macro Dirt (with Tony Greer); author, The Awesome Portfolio Date: 2026-09-03 URL: https://youtu.be/-pR9bTQ--J8 Length: 32:21 Note: YouTube auto-transcript; (mm:ss) cues real. Verbal fillers (um / uh / "you know" interjections) removed and stutters/false starts collapsed; wording otherwise verbatim — no paraphrase, reordering or additions. Auto-caption misspellings corrected to the real names: The Daily Dirtnap ("Daily Dirt Dap" / "the daily journ"), Warsh ("Wars" / "WH"), Torsten Slok ("Torsson slot" / "Torson Sllock"), Paul Volcker ("Paul Vulk" / "Vulkar"), Lehman ("Leman"), Bear Stearns ("Bear Sterns"), Sahm rule / Claudia Sahm ("SOA rule" / "Claudia SM"), Barron's ("Barrens"), immunotherapy ("imunotherapy"), Rogaine / minoxidil ("roane minoxidil"), Anthropic ("Enthropic"), OpenAI ("open AI"), Absci Corporation ("Absky Corp"), palladium ("platium"), laggard ("lagard"), Situational Awareness, and the obvious homophone slips (bear market, two weak payroll reports, late '70s, goes t.u.). One garbled phrase at 07:29 is marked with an ellipsis rather than guessed at.
00:00 joined today once again by Jared Dillian of The Daily Dirtnap and the new book, The Awesome Portfolio. Jared, good to see you. >> Good to be here, man. Thanks for having me. >> Yeah, you too. Jared, looking at the front page of Bloomberg, global bond sell-off sends yields to highest level since 2008. What do you make of the bear market in bonds that we've had? The fact that these long-term government bond yields can't really seem to catch a bid.
00:28 Your thoughts? >> How much time do we have? >> As much time as you got. >> This is a very long story. So I am of the belief that there is a mind virus going through people in the market. People believe that deficits are out of control. People believe that inflation is out of control.
00:56 We are really back to where we were in the late '70s when people were calling bonds certificates of confiscation. The reality is that inflation is not that high. It's come down quite a bit in the last couple of months. It continues to come down. Yes, it's been above the target for 5 years. Yes, Warsh did say it's a firm target.
01:18 I don't understand the obsession currently when the rest of the economic data is actually terrible. Right? So, we've had two weak payroll reports. The estimate for the next one is 55,000 jobs and we have a 66% chance of a rate hike. It's madness. All the other data has been — like I said, inflation is coming down.
01:41 Before I walked in here, we got — we had Chicago PMI the day of the Jackson Hole, which was 10 points lower than expected. JOLTS was terrible today. ISM was slightly below expectations, but the point is that not only is inflation not a concern, it looks like we are entering a slowdown in growth.
02:08 Right? Getting back to the deficits point, everybody is worried about supply of bonds. In absolute terms, the deficit is $2 trillion, which is a scary number, but it's only 6% of GDP. And back in 2010, it was 12% of GDP. And people showed up at the auctions. The auctions had bid to covers of three or higher.
02:38 So it's very easy to measure the supply of bonds, but nobody ever talks about the demand for bonds, right? So if we had a big risk-off event triggered by some unknown catalyst, but if stocks were down 20%, trust me, interest rates would be much lower, right? People would show up and buy bonds. So I am not worried about the bond market at all.
03:02 I'm insanely bullish. I think 5 whatever on 52, 53 on 30 years is an incredible deal. I think 47 on 10 is an incredible deal. I personally have moved a huge portion of my money into bonds in the last month. And this is a very long-term trade for me. I'll hold this for three to five years, but I am a big believer in this.
03:29 >> And you think — so you're bullish on bonds. Do you think that the narrative that bond yields are going to go to the moon has gotten totally out of hand? >> Oh my god. Yeah. I mean, somebody just sent me — I guess Ray Dalio wrote a piece in Time magazine about bonds. Like you said, it's on the Bloomberg front page every single day.
03:52 Like every single day, people are obsessed with it. And I'm a sentiment guy, so when I see stuff like that, I'm just >> naturally going the other way. >> Yes. And the point you make about supply is interesting because there's a video I've seen of Paul Volcker — rest in peace, legendary Fed chair, probably 1978, 1979, somewhere around there, maybe early early 80s, but the long-term yields were at like 12%.
04:21 And he was asked, "Why are yields so high?" and he said, "Well, the government is having to compete out in the market and there's just not enough — there's just so much bonds that are being issued, the private sector, the government," and obviously what we have now is >> 10 to 50 times higher in terms of of issuance.
04:41 So, I think that demand is going to catch up. It definitely is. It is interesting. You said 2010. I think that you're totally right that everyone wanted bonds in 2010. I think the unemployment rate then was a lot higher. We came out of a financial crisis when everyone lost money from taking too much credit risk and bonds rallied.
04:58 Then there was all this regulation passed to make credit risk unattractive to take and it incentivized taking duration risk, interest rate risk, bond risk. >> Yeah. >> Now we come out — everyone in fixed income lost so much money from buying duration. So, I think it is a slightly different scenario, but I'm inclined to agree with you.
05:17 >> Yeah. One point I do want to bring up is that a lot of this AI issuance is weighing on the bond market. So when Google comes to market with a $40 billion bond issue, that puts a lot of pressure on the market. So, you were talking about Volcker basically talking about the crowding out effect. Yes.
05:35 >> The government borrows first and the private sector borrows second. But if you're getting a trillion in bond issuance out of the private sector, that obviously puts a lot of pressure on yields, too. >> Yeah. And also just a sentiment thing, there's a very popular AI podcast and they were talking about how basically AI is just going to rule the world.
05:56 There's going to be so much demand for capital that yields are going to go to double digits or maybe even triple digits. So I think as a sentiment indicator that's pretty — Yeah. And these people are very smart about AI but obviously less well versed in finance. So I think that that's a pretty strong sentiment indicator.
06:13 >> Yeah. Yeah. I mean, look, it's been pretty lonely. I mean, I'm sure you saw the Torsten Slok comments from over the weekend and just break it down real basic. He was talking about AI and he said, "Look, there's two possibilities here.
06:33 AI succeeds and it's massively deflationary and yields come down or AI fails and the market crashes and yields come down." He's like, "I don't see a scenario where yields don't come down here." I have a lot of respect for Torsten Slok. He's one of the more thoughtful economists out there. >> He absolutely is.
06:52 And for a long time he stuck his neck out saying that rates would be higher than normal which he obviously was correct about. Yeah. I love Torsten. I will say that I think that argument is probably true on a 10-year time horizon. But like so many people in tech they always say that tech is so deflationary.
07:07 It's like I don't know. Have you paid your Netflix bill? It's not that deflationary. And also I think that the demand for capex — demand for capital from capex is going to be so much more of an inflationary force than the deflationary force of increasing productivity. >> I also think productivity is kind of fake.
07:29 >> You think it's fake? >> I think that productivity is a real concept, but I think that it's just such a hard thing to measure. One thing I'll say is that productivity skyrocketed in March and April 2020 because so many people got laid off. So if capital and labor are in the denominator and that goes down it causes productivity to be kind of artificially … .
07:51 So I'm a fader of productivity, in the practical world I would say. >> Okay cool. >> Yeah. What do you think about stocks, Jared? It's funny. I have an assistant. He's also my execution trader. And I had him pull up the top 50 stocks charts in the S&P this morning.
08:16 And it's a really interesting exercise. I used to do this when I was at Lehman and I haven't done it in years, but when I was at Lehman, I would literally get a glass of scotch and sit down and go through all 500 charts in the S&P. And if you do that, it starts to paint a pretty clear picture as to what is topping, what is bottoming, right? So it looks to me like semis, healthcare and financials are topping right now.
08:49 On the Macro Dirt podcast that I do with Tony Greer, I talked about financials topping a couple weeks ago. I talked about how JP Morgan was a pretty good short. Goldman Sachs, Morgan Stanley, Wells Fargo all look like they're topping. Healthcare, Johnson and Johnson, and also Nvidia, AMD, couple of other semi names — I'm seeing some charts that are bottoming interestingly enough.
09:18 Intel looks like it's bottoming. Oracle looks like it's bottoming, but I'm seeing a lot more charts that are rolling over than charts that are basing. >> Okay. Yeah, healthcare had been a laggard but has been recently catching a bid. Semis have been on fire for three years.
09:41 Tell me your view on semiconductors powering the AI trade and in particular sentiment on semiconductors. Do you think everyone is still balls long semiconductors and so convinced that Nvidia could never go down 30%? Yeah, I mean I think you have to distinguish between people like you and me, like smart people and people who work at hedge funds versus your average retail people.
10:07 I teach college students, right? And I have a student who showed me his portfolio. It's 50% Nvidia and 50% Broadcom and that was his entire portfolio. And my suspicion is that's the case with a lot of retail investors in the US. They were the darling stocks for a long time.
10:30 Everybody piled into them. I hesitate to use the word dumb money because they've been right, for sure. But they're probably not going to sell at the highs. Okay. So I don't really think of things in terms of fundamentals. The last Nvidia earnings, the leather jacket guy said they were growing at 70% and the stock ripped.
10:58 I mean, for sure, Nvidia is growing at 70%. What I've been waiting for for the last six months is for that second derivative of growth to change. And you see the growth rate start to come down to 60 or 50%. And that's when the stocks are going to top. So >> yeah, Nvidia — I think earnings are accelerating.
11:25 I think earnings — revenues were growing like 200% a few years ago and they slowed down to like 50 or 60. So I think he's guiding for — Yeah. Revenues were growing like 55%. And so they did slow down and now — yeah, he guided, the CFO guided for 70% growth over the next 12 months. Jared, I actually have some data from a company called Vanda Research.
11:49 I'm lucky enough to be on their distribution, which is like top of the line positioning data on retail. And they actually say that retail positioning in semiconductors is among the lowest it's been over the past two years and that actually the selling in overall single stocks for retail community in late — sorry, late July.
12:11 So basically the hedge fund unwind was the biggest since 2020. So I think, Jared, who is extremely long semiconductors is hedge funds and institutions. I think institutions are very very long semiconductors. But interestingly I just want to offer that as a potential data point about how retail was maybe calmed down a little bit.
12:36 >> I like it. I like it. I can go with that. I mean if you think about — look, I would never want to work at a pod shop, because I sustain drawdowns larger than 5%. It's very difficult to manage money in that environment, right? But my guess is all the multistrategy hedge funds, all those pods were long semis and related stuff for a long time.
13:06 I mean, you have to be right. That's just the way that business works. So then you had the shakeout a couple of months ago. I guess it was last month, but >> I think that the bottom was like July 27th. >> Yeah. >> Yeah. Do you think that that was the bottom in semiconductors? We had a strong bounce coming out of that.
13:32 Faltered a little bit. Well, I think anytime you have a leverage player that goes t.u., that usually marks a bottom, right? And so Citadel got the cleanup print on that and now they're pretty much out of that trade at this point. But >> just for audience — so Situational Awareness, a hedge fund, was very long semiconductors and they liquidated most or all of their publicly traded securities, sold them in block trades to Citadel. That was announced July 27th or 28th and then in
14:13 the middle of August, like later August, Citadel announced that they had sold the bulk of those positions. So yeah I agree with you. Hedge fund deleveragings are actually bullish because the owners go from weaker hands to less weak hands. >> Well, the thing is that if you go back to the financial crisis, there were a number of blowups.
14:35 But when Bear Stearns blew up, it was March 17th of 2008 and there were a lot of people who said that's it. That was the bottom and the S&P rallied 17% over the next three months. >> Wow. So everybody thought the coast was clear and then of course the main event happened which was Lehman.
14:58 So I kind of struggle. I mean, look, Situational Awareness was a gigantic fund. It was humongous. But I struggle — it's the same thing, the most leverage player gets taken out first, but there's still so much leverage in the system. So my guess is there's another Situational Awareness coming in the months down the line.
15:26 There's too much leverage in the system. >> Very interesting. Jared, could you share more of your thoughts on sentiment with regards to semiconductors or AI broadly? >> Well, we had four magazine covers on AI in the last week. One from Barron's which said something like it will never end or something like >> but I read it in your newsletter, The Daily Dirtnap. I think it was something like the AI bubble will never end so they're doing that classic journalist thing that I've done sometimes of playing both sides
16:01 being like the AI bubble — you're calling it a bubble but you're still bullish. It's like make a call. So yeah, the four magazine titles are — it's a little brutal on the sentiment side >> yeah yeah for sure. So, look, I mean, there's nothing in the S&P chart that leads me to believe we're going to crash tomorrow, next week, next month.
16:21 The chart is pretty neutral. I'm not seeing any huge red flags in the technicals. The market's actually pretty quiet all things considering. I mean, it's not Labor Day yet. I'm sure things will perk up after Labor Day, but yeah, that's basically where I stand.
16:41 So >> yeah. Also, the S&P's held in so much better than I would have thought with the massive sell off in semiconductors. I would have thought, oh my god, if semiconductors go down 30%, the S&P will be down 18%. And that was not true at all. And so what do you make of what has been rallying to fill the gap? >> Well, you're looking at banks, you're looking at healthcare, you're also looking at energy, and industrials, although industrials have been coming down in the last couple of
17:11 weeks. But yeah, like I said, when I went through that chart package, this is all the stuff that looks like it's topping to me. Especially the broker dealers. Goldman Sachs and Morgan Stanley have very scary charts. >> Tell me about copper. >> Out of all the metals, I am least bullish on copper.
17:36 I'd much rather own gold, silver, platinum, palladium than copper. I think sentiment on copper is pretty hot because of the AI trade. So the chart — I mean, the chart's in the upper right hand corner. That doesn't necessarily mean you sell it, but it doesn't really look like it's topping, but the last couple days have been kind of ugly.
18:01 So, I'm not sure. >> What about gold? >> So, I think people are freaking out about gold after Jackson Hole. So basically we rallied 15% in a month with gold which is a huge move and it was well needed. After Warsh's speech gold broke back down through the 200 day at 4500. So now all the amateur technicians are like, oh, it's back through the 200 day so it's going to go back down to 4,000.
18:34 It might. We might retest 4,000. I kind of doubt it. I think once you cross through the 200 day a number of times, it kind of loses its significance. So I'm cautiously bullish here. There really isn't support until 3,900 or 4,000, but that doesn't mean it's going to get there.
19:00 And ultimately, if you look long term — I mean, basically, we have payrolls this Friday, right? And the jobs data keeps getting worse and worse and worse. It's 55,000 expected. If we get a super ugly jobs print like negative 50,000, negative 100,000, something like that, this whole trade is going to reverse and Warsh is going to be the best gold salesman of all time >> because he's going to be dovish.
19:27 >> Yeah. Yeah. >> Yeah. So Jared, obviously, as you know, the non-farm payrolls is quite correlated with immigration. So we could have huge levels of immigration, legal and otherwise, that causes non-farm payrolls to be good. So like under a Biden administration when we had like 300,000 non-farm payrolls a month in some months that wasn't necessarily amazingly a sign of a strong economy.
19:55 And likewise during Trump when migration is neutral or even negative, maybe the break even rate is like 40,000 or 50,000. So really the unemployment rate has been going down. So yes, payrolls have done exactly what you said. They look abysmal, but the unemployment rate has actually gone down. >> Well, that's because of the participation rate, right? >> Yeah.
20:16 >> Yeah. >> Yes. And I think that's because in part native-born Americans have a slightly lower participation rate than immigrants, I would imagine. So yeah, the unemployment rate has 4.1% and not only on an absolute level is it good, but it has momentum.
20:36 It was at 4.5%. So unemployment has been going down. So I'm curious, just how weak is the labor market? >> Yeah, the unemployment rate is a little bit of a head scratcher. If you remember when it got up to 4.5, everybody was saying that it triggered the Sahm rule, right? And Claudia Sahm came out and said actually technically it triggered the Sahm rule but it probably did not and sure enough the unemployment rate has come down to 4.1.
21:03 So >> tell us about baldness drugs. >> I don't know anything about it. Literally I just saw a tweet and I put it in the newsletter. I will say I do have a history of finding — >> you do. Eli Lilly. Yeah. So years ago, this was like in 2015 or 16, I think it was 2016, I did a lot of research on immunotherapy.
21:30 Which is basically a cancer cure. It's a drug that attacks cancer cells, which your immune system does not. And bought something called Kite Pharmaceuticals, which was an immunotherapy biotech. And basically it was a three-bagger. Got taken out I think by Bristol Meyers.
21:53 And then a few years ago I was early on the GLP-1s trade. >> You made a bunch of money for subscribers. So shout out. Yeah. >> Yeah. So I kind of have a philosophy about this: invest then investigate, right? The first time you hear about something, you should buy the stock and then you do your research because inevitably what happens is people say, "Oh, it's a baldness drug.
22:22 All right, I'm going to research that. I'll get to that later." And then they never do. And then the stock's up 200% and they miss the whole trade. So, I gave it to my subscribers. I'm like, "Look, I'm just putting it out there. Research this and maybe it turns into something." >> Yeah, that is good.
22:43 I actually have been looking into some of these stocks myself. So I think probably there's one, Absci Corporation, that says it's AI powered drug discovery. So I get a little skeptical there. I think the other one is — the ticker is m—, like you have a long flowing mane such as you do, Jared, and really what it is is just extremely high-powered Rogaine, minoxidil, which — I'll be honest, I'm on minoxidil and normally the reason that they don't crank up the dosage a ton on minoxidil is because it can cause like
23:13 heart palpitations and heart issues. So they're saying we're able to crank up the dosage and give people a ridiculous amount of minoxidil in a way that isn't going to give them heart issues — not heart issues, but heart palpitations. And it's like, it's not like it's some drug. Do we know if it works or do we not know? We know it works. It's extremely powerful at growing hair. It's just being able to do that extra extra power.
23:28 There's another company begins with a C and it's a European company that also has an angle there. But yeah, I've been looking myself. So, when I saw you were writing about it, just wanted to say that.
23:49 Jared, do you think that AI is a bubble? I do. I do. I'm not bashful to say that. I do. Let me just back up for a second. We were talking about the debt issuance from Google and the hyperscalers and stuff like that. In my lifetime, this is the first time I've seen tech being financed with debt.
24:17 >> Usually you finance tech with equity, right? Because the asset has a very short lifespan. It's going to be obsolete in a couple years. You don't want to take out 10 or 30 years worth of debt to finance an asset that's going to be around for two or three years. So the
24:38 dot-com bubble was all equity. Nobody was issuing debt and this time we have a lot of debt. And the leverage is what gets people into trouble. Also, this is debt at high interest rates. So, I don't know what the spread of Google paper is over treasuries. It's probably like 60 or 80 basis points or something like that, but they're essentially paying a 6% coupon on this debt. It's a lot.
25:03 >> It's certainly higher than the 2% or 2 and a half % that they pay in 2021. Jared, I do think though, you hear this argument that with bond yields rising, are the hyperscalers going to stop issuing debt? It's like no way. They don't care at all — obviously the finance people working at these companies are aware of this issue but are the CEOs going to say, oh my god, the 30-year Treasury just hit 6%, stop capex? It's not going to happen. It's not going to happen. Jared, tell us
25:36 about your new book. >> Yeah, so I have it right here. It's The Awesome Portfolio and I'll tell you a secret about this book in a second, but first of all, the way we save and invest for retirement is very very dumb. And when I say we, I mean your average person, right? Basically ideas catch on when they are simple.
26:00 Okay? And people have been taught a very simple thing over the last 20 or 30 years. Very simple. You say, "Put all your money in the S&P 500 in the index fund, dollar cost average it, ride out the volatility, and never sell." That's very easy for people to understand. And that has worked for a really long time.
26:22 Maybe it continues to work. I don't care. That's not the point, right? The point is that when you invest in an index, you get the returns of the index, which are very good, but you also get the volatility of the index. So, me personally, maybe I'm just more conservative. I don't want to put my life savings into something that moves around 1% a day or back during the tariff tantrum last year is moving around 9% a day.
26:52 I don't want my life savings in that. I don't want to take a 20, 30, 40, 50% draw down, right? Because draw downs affect your psychology. So if you take a giant draw down on your life savings, number one, you're going to be miserable and you're going to be miserable until you get back up to the high water mark.
27:12 And number two, there is a decent chance that you're just going to tap out and sell and stop the pain. And that's the worst thing you can possibly do because then you stop compounding, right? But we've seen this a bunch of times before. This is the antidote to that. So instead of just being in stocks, you're diversified across asset classes.
27:34 Stocks, bonds, gold, cash, and real estate in equal proportions. The interesting thing is that you're only giving up about 1 to two percentage points in performance, but your volatility is cut in half. And the worst draw down that has ever happened with this portfolio is down 12%, whereas about 40% for the S&P 500 in a calendar year.
28:01 Right? So this is the answer. This is the answer. And it's the answer not just — look, if you buy the S&P 500, you will have more money when you retire than if you have the Awesome Portfolio. That's if you can hang on. If you can hang on. But this is if you want to be happy. If you don't want to be checking your account balance every day, seeing what the market is doing and panicking when the market is down three or four percent.
28:30 >> People should buy the book. We'll include a link to the publisher and on Amazon. Jared, two sentiment questions for you. One, you made a brilliant call saying that private credit is screwed and alternative investments generally, private equity and private credit. You were not a believer in that.
28:47 I think we did that interview maybe two years ago. Yeah. And I'm almost positive that pretty much every single alternative asset stock is lower now than it was then. We had a wash out in private credit and some fundraising issues and literally every single day it was these Bloomberg articles about private credit doom, private credit doom.
29:08 Has your sentiment view changed given how much the negativity has been in the headlines at the beginning of the year? >> No. I mean, yes — yes and no. I was very bearish when we talked a couple years ago. I'm still bearish. I think all of this is connected. AI, private credit, something else — I think it's all connected.
29:39 And I think if AI unwinds, private credit will also or vice versa. So what I told you at the time, what I was telling everybody at the time is this was going to take a long time to play out. In the public markets, when something unwinds, there is liquidity. You can sell, right? And the market will reprice very quickly.
30:02 In the private markets, that doesn't happen. So, what you've seen in private equity and private credit is stuff just being held, like portfolio companies not being sold for a really long time and it's just going to take a long time to find that liquidity. So a bear market in the privates is just going to take a much longer time to play out, but we have not found the bottom yet.
30:29 We haven't >> in private credit and private equity. >> Yeah. >> Another sentiment question for you, Jared. I'm sure you've heard the following statement. There's a bubble in the stock market, but the bubble is not in valuation. The bubble is in earnings. When you hear that, is that not just an admission that the bears are wrong, that the earnings are so good that oh, there's a bubble not in valuation, but there's a bubble in this other thing.
30:53 >> I haven't heard that before, but that's a really interesting quote. Yeah, I mean I put a chart in my newsletter today, yesterday, about — it was the S&P relative to wages and how it had completely decoupled from wages over time. But really if you overlay a chart on that of corporate profits as a percentage of GDP, it looks pretty similar, right? So corporate profits have gone up a lot and there are a lot of analogies to the
31:31 dot-com bubble 25 years ago, 26 years ago but the one thing that's different is there are profits. I mean, except for maybe in OpenAI and Anthropic, but there are profits. So yes, but that revenue growth in Anthropic and OpenAI has been tremendous. So the bear argument was like where's the revenue in the labs, OpenAI, Anthropic. And I just want to say as someone who's kind of calling balls and strikes, the revenue growth has been quite quite good, like among the best ever for history of companies.
32:04 >> You know more than me on that. >> Well Jared, thanks so much for joining us. People can find you on X at dailydirtnap and we'll link to your book, The Awesome Portfolio. >> Awesome. Thanks Jack.