The Institutional Risk Analyst

The fact that Secretary Bessent felt the need to make an announcement of increased bond buybacks in front to the 20-year auction suggests that the Treasury is expecting more weak auctions going forward. How else do we explain Bessent’s behavior? But more important, when will President Trump and Secretary Bessent stop pretending that the situation in the Treasury debt market is not a problem?

Treasury Secretary Scott Bessent stated early in the Trump Administration that expanding the stablecoin market will create a "surge in demand for US Treasuries, which back stablecoins," but he was clearly mistaken. Growth in stablecoins has slowed dramatically as the value of bitcoin and other tokens has plummeted. Notice that Bessent has not had much to say on the subject of stablecoins recently as Treasury yields have steadily risen.

As we noted some time back, whenever the pseudo conversation in Washington regarding inflation (a/k/a “affordability”) becomes difficult, the BLS and/or the Fed moves the goalposts. Just as nobody in Washington wants to talk about the budget deficit or the impending collapse of Social Security, the conversation about inflation is totally contrived and false.

Senator Chris Murphy (D-CT) has already highlighted some of the most egregious instances of Trump, his family, and members of his administration using their positions of power to enrich themselves and do favors for their billionaire buddies at the expense of American taxpayers. Murphy has written a script for a Democratic House to use in impeaching President Trump.

The FOMC meeting this week with Chairman Kevin Warsh was about what we expected. Less is more in terms of forward guidance, maybe pivot to even less talk MT. Models being renovated, personnel evaluated. Maybe the end of the idiotic dot plots is in sight? No guidance will be forthcoming from the Chairman.

We already have diesel prices that are going to be going up. If not hyperbolically, you know, very, very aggressively. And in the case of the Group III lubricants and even Group II lubricants that I've been obsessing about, we have an availability problem starting now.

This week in “The Wrap,” we feature the top events in Washington and on Wall Street over the past week. The IRA is fishing in Maine this week, but please do watch “The Wrap with Chris Whalen” on The Julia LaRoche Show next Saturday on YouTube to catch our discussion of what’s hot and what’s not in the world of finance and investing. This week we address some reader questions at the end of this comment. June 12, 2026 | Yet another week has gone by and there is still no peace a

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.

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.

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?

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 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.

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.

The latest turn of events in Washington has left the Saudis and Israelis profoundly annoyed. The US kicked over the hornets nest in Iran, but now Washington is seeking peace even as the Iranians continue to attack the Gulf states. A few ships carrying LPG for Pakistan have been allowed through the Strait after paying Tehran the extortionate sum of $1 per barrel, payable either in Chinese yuan or bitcoin.

The past week has been a decidedly volatile period, but with spreads widening in response to growing concern about the US fiscal trainwreck ℅ the US Congress and President Donald Trump. Even the possible intervention of the Federal Reserve Board does not impress a market about to see the largest IPO ever in Elon Musk’s SpaceX.

When we want to know what is happening in the world of energy, John Dizard is our first call. His views on the approaching economic collapse due to the US-Israeli war against Iran are disturbing but also suggest some investment themes that we address at the end of the discussion. "Unless there's some miracle within the next few days, we're heading towards diesel rationing in Europe, jet fuel rationing, serious shortages."

“Since the start of the Iran war, base rates are up 48 bps and spreads (the six rates I use) are up 80 bps, for a total impact of 128 bps. The impact on EBITDA to support equity is roughly $5 billion per bp. At an EBITDA multiple of 8-1, each bp reduces equity valuations by $40 billion. SIMPLY STATED, the “cost” of the war now stands at $5.12 trillion in reduced “fair value” of US investments. ARE WE HAVING FUN YET?”

Within a couple of months, the supplies of crucial petrochemical inputs currently on the water will be delivered and there will be nothing in the delivery pipeline after that point in time. Refined products are a far greater concern than oil. Kuwait, for example, produces a lot of aviation fuel for the EU. The Saudis are now shipping phosphates by truck to Yanbu, but this is not even a modest replacement for the disrupted supply chain in the Gulf.

Fed Vice Chair for Supervision Michelle Bowman outlined bank-friendly Basel endgame and GSIB surcharge proposals, reports Ian Katz at CapAlpha in Washington, which she said will be released in a week. Overall, the changes will result in a small decrease in capital requirements for the largest banks and more significant changes for smaller institutions. We’ll be responding to the request for comment on Basel III.