The Institutional Risk Analyst

The Entropy Trap treats markets the way physicists treat complex systems under stress. It does not begin with a forecast. It begins with measurement: level, velocity, acceleration, correlation, feedback loops, and whether stress is rising or falling. The central claim is simple: we are not in another normal cycle. We are in a structural reorganisation in which the old equilibrium is no longer recovering.

We have updated the WGA Precious Metals Top 25 for June 2026. Many of the gold funds are down for the year, having given up the gains seen in 2026 in the face of triple digit returns for AI related stocks. As we noted last week in “The Wrap,” when AI stocks are soaring and interest rates are rising, precious metals typically retreat. It's all about short-term yields and chasing the shiny object.

Another week goes by and there is still no peace agreement between the US and Iran. The Strait of Hormuz remains closed and much of the world’s capacity for producing key refined products remains offline. The Iranians have made clear that they are not going to give up the nuclear program nor the Strait of Hormuz. We spoke with our friend John Dizard this week and he wonders why the Trump Administration is refusing to begin planning for rationing for key refined products.

In fact, we expect the war with Iran to result in higher interest rates, higher inflation and rationing of key petroleum byproducts in coming months, something that nobody in the Trump Administration seems willing to discuss. If Washington was populated by serious people, the federal government would already be making plans for rationing key refined products.

“One reason why bank credit statistics look so good is that the markets remain awash in liquidity, forcing asset prices up and default rates down,” notes Whalen. "We estimate that there are now $3 trillion in unused loan commitments to non-depository financial institutions."

Brent was down to about $94/barrel ($103 last week). Gasoline prices also fell to $4.39 vs $4.52 last week, with diesel down to $5.52 vs $5.63 last week. But technology stocks are at all-time highs led by the likes of Micron Technology, Inc. (MU), which is up over 800% in the past year. Are the US equity markets approaching an inevitable reset?

In a system where tax avoidance is a national aspiration, the currency must inflate continuously and at varying rates to accommodate the Treasury’s cash needs. Last week in "The Wrap," we noted that real gasoline prices, adjusted for inflation, are actually quite low. We also predicted that inflation could touch double digit rates later this year as a result of the US-Israeli war with Iran, but the big driver of inflation remains the federal debt.

Meanwhile, Michael Saylor, Executive Chairman of Strategy (MSTR), f/k/a MicroStrategy, stated that the company will "probably sell some Bitcoin" to fund dividends and "inoculate the market," after the firm (now holding hundreds of thousands of coins) faced consecutive quarterly losses. This change marks a stark reversal in Saylor’s public position regarding the value of bitcoin.

We all need to remember that shrinking the Treasury portion of the Fed balance sheet is the easy part. The $2 trillion in notional amount of MBS held in SOMA, which now has an effective duration that is much, much bigger than the rest of the portfolio combined, requires some subtlety. The good news is that the agencies and Ginnie Mae are thinking about a potential Fed MBS swap with Treasury. Wall Street can make it all happen and profit handsomely by selling a lot of “AAA” ra

China bought a record-breaking amount of silver in the first quarter (Q1) of 2026, driven by intense demand for solar manufacturing and retail investment. China imported approximately 1,536 to 1,626 tonnes of silver in the first quarter, confirming our view that silver is likely to continue to outperform gold significantly this year.

AMP is one of the highest valued banks in the WGA Bank Top 50 test group, currently just below 7x book value. Last year and in 2024, AMP touched 9x book value because of the strong growth in the bank’s core advisory business. The stock has traded off because of fears that AI will displace investment managers and a more general rotation away from financials after last year’s blazing performance.

The aggressive behavior of some issuers is distorting pricing for loans in the secondary market and may be creating the circumstances for the next systemic “surprise” in the nonbank sector. To us, Exhibit A in the category of a potential nonbank default event is United Wholesale Mortgage (UWMC), aka “Countrywide II.”

In the past five trading days, gold has moved up almost 3% but silver has done even better. Physical supply constraints in India and Asia are pushing prices for gold and silver higher, illustrating the disconnect between the momentum driven financial markets in the US and Europe and the physical market in Asia.

Of course, in the muddled markets at present, there are a number of low-scoring banks which have done relatively well in recent weeks. The parent company of tiny Merchants Bank of Indiana, Merchants Bancorp (MBIN), for example, saw its stock price rise significantly in early 2026, 2x the S&P 500 over the past year, driven primarily by its inclusion in a major index and strong financial performance.

One aspect of the Powell press conference that has received too little attention was Powell's comments about Warsh possibly replacing Reserve Bank presidents. “That would be the beginning of the end of the Fed’s ability to make monetary policy independently,” he said, but the media did not notice. As we discussed in our interview with Alex Pollock, the 1935 amendments to the Federal Reserve Act made the chairman the CEO of the agency with unilateral power to remove Reserve Ba

We took some of our profits in gold last month, but will be adding to our positions in silver and related miners not dependent upon acid leaching to produce metal. We'll leave the second and third-tier arbitrage trades to the big research houses. In addition, we'll also be updating the WGA Bank Top 100 this weekend.

This change in posture by President Trump opens the way for Kevin Warsh to be confirmed by the Senate perhaps by May 15th. More important, it provides a way for Powell to retire, which opens a second governor seat on the Board. Big question: Even with the investigation by the DOJ ended, does the Trump White House have the votes to get Warsh confirmed?

On Capitol Hill, Kevin Warsh appeared before the Senate Banking Committee this week to consider his nomination as Fed Chairman. Warsh reiterated that Fed “monetary policy independence is essential.” But he got some rough questions from Democrats, especially ranking member Elizabeth Warren (D-MA) She asked whether he will be a “sock puppet” manipulated by President Trump. Warren called Warsh “uniquely ill-suited for the job as Fed chair,” but frankly Warren is uniquely unquali

“Private debt” gating retail investors is the whipping boy du jour, but not the canary in the coal mine, nor the real problem, nor the real risk. Over-investment and malinvestment in things like data centers or unprofitable business models that require cheap money and are based on hype and suspension of common sense, excessive government spending, inflation and currency debasement, populism and socialist rhetoric manifesting itself in real policy and tax decisions, these are

Bank earnings this week have been mostly what we expected, with income up, credit loss rates continuing to trend lower and most banks refusing to provide additional disclosure on private credit exposures. As the private credit mess proceeds in the weeks and months ahead, a lot of the “debt” in these deals will turn to equity – which is what it should’ve been all along.