The Credit Market Warning That Could Hit Stocks | Jeff Snider

Key Takeaways

• Snider argues that tighter lending could affect stock valuations before a borrower actually defaults. He does not describe an imminent collapse.
• He sees the AI buildout as an added pressure on a wider credit cycle, with financing obligations potentially arriving before the expected profits.
• Private credit has links to banks and other lenders, while locked-up capital and withdrawal restrictions can reduce immediate selling pressure.
• Snider discusses a possible shadow-bank run as a downside scenario and explicitly says it is not his base case.
• Sarna shares concerns about a possible computing overbuild but is less convinced that market anxiety means the cycle is about to end.
• Snider and Sarna place different emphasis on bonds. Their comments do not amount to a shared permanent portfolio allocation.

Key Moments

00:00:29 - Early signs of credit stress Snider describes lender caution while qualifying how severe the warning is.

00:06:02 - Private credit and lending standards How he connects weaker underwriting with broader credit conditions.

00:09:28 - A downturn as a process Why he argues credit problems can develop over years.

00:13:53 - Why this is different from 2008 The discussion separates banking failures from other forms of credit stress.

00:24:47 - Shadow banking and circular financing The links between customers, suppliers and lenders, including hypothetical downside scenarios.

00:31:05 - The connection to stock investors How a change in funding conditions could reach equity valuations.

00:40:16 - Bonds as a possible counterweight Snider explains his view of Treasuries during a credit downturn.

00:48:00 - Silver and precious metals His interpretation of supply squeezes and the limits of inflation narratives.

00:59:45 - Stablecoins and the dollar system The conversation turns to monetary infrastructure and possible changes over time.

01:03:19 - Andrew Sarna joins A second perspective on AI investment, market anxiety and overbuilding.

01:08:30 - Diversification and overlapping exposure Sarna discusses how the AI trade can reach different parts of a portfolio.

01:11:12 - Different views on bonds Why Sarna describes a tactical role while raising longer-term fiscal concerns.

You don't have to own a private credit fund for a lending slowdown to affect your portfolio. The companies behind your shares may depend on lenders to finance expansion, refinance old debts or keep a project moving before it earns any money.

That is the connection Jeff Snider, founder and host of Eurodollar University, explores with Maggie Lake. His concern is that investors watching the artificial intelligence (AI) boom through stock prices alone could miss a change in the money financing it. In the conversation recorded November 3, 2026, he describes growing caution among lenders, while stopping short of calling an imminent financial collapse. ¹

Maggie Lake speaks with Jeff Snider about credit markets and the artificial intelligence (AI) buildout, then discusses the outlook with Andrew Sarna. The episode also covers Treasury bonds, precious metals, the dollar and stablecoins.

The pressure can begin before anyone misses a payment

A credit market is where businesses and other borrowers obtain debt financing. When lenders become less comfortable with a borrower's prospects, they can demand a higher return or tougher terms. A company may still be paying its bills even as the money needed for its next project becomes harder to obtain.

One measure of that change is a credit spread: the extra yield investors demand above a comparable Treasury security. Federal Reserve material describes that difference as compensation for risks such as a company failing to repay or an investor having difficulty trading the debt. ²

Snider's argument is that a change in those expectations can reach stocks before a company actually fails. More demanding financing terms can make an expansion less profitable or force a business to scale it back. Shareholders then have to reassess the future earnings they had expected. ¹

That is different from saying every rise in a credit spread predicts a crash. A lender can become more cautious about one borrower, one industry or the economy as a whole. The breadth and persistence of the change determine how much can reasonably be inferred from it.

How the AI buildout enters the credit story

Snider sees AI as an addition to an existing credit problem. He argues that weaker lending standards and a more difficult economic environment were creating pressure before the technology buildout became the dominant market story. ¹

AI adds a particular timing risk. Computers, buildings and electricity connections have to be paid for before a new facility produces the revenue expected from it. If the business borrows to cover that gap, interest and loan repayments follow their own schedule. The technology can become more useful while the borrower struggles to earn enough from its investment.

The interview also examines vendor financing, where a supplier helps finance a customer that buys its products. Snider's concern is that the supplier's sales and the customer's ability to pay can depend on the same optimistic growth assumptions. When those assumptions change, an apparently strong sales relationship can become a financing exposure. ¹

That does not establish that every commercial relationship in the AI industry has this structure. It explains why the source of a customer's money matters alongside the size of its orders. Borrowing, an equity investment and a purchase paid from existing cash create different obligations and risks.

Private lending does not mean isolated risk

Private credit involves loans negotiated outside public securities markets and ordinary commercial-bank lending. The International Monetary Fund (IMF) describes an industry that can provide tailored, long-term financing, while also creating risks through difficult-to-trade assets, uncertain valuations and financial connections that outsiders cannot easily see. ³

Those connections include banks. In a March 12, 2026 research brief, the Treasury Department's Office of Financial Research explained that some private credit funds borrow from banks and other financial institutions. Many funds use little or no borrowed money, but a fund that fails to repay its own debt could transmit losses to its lenders. The brief identified links worth monitoring; it did not conclude that a systemic crisis was underway. ⁴

Snider therefore rejects the idea that trouble outside deposit-taking banks must be harmless. He discusses a possible run on a nonbank lender, often called a shadow bank, as a downside scenario. He explicitly says it is not his base case. Lake also clarifies that the named companies discussed are hypothetical examples, rather than firms the interview establishes are headed for bankruptcy. ¹

That qualification is essential. Concern about a fund's loans, a fall in the value of investors' fund holdings and the insolvency of its management company are separate events. The effect depends on who owes money, who has supplied it and which entity must meet a withdrawal or repayment request.

Withdrawal terms change how stress develops

A bank deposit and a private fund investment do not offer the same access to money. Traditional private credit funds often lock investors' capital up for years. Other structures offer periodic withdrawals subject to limits. The IMF explains that restrictions can reduce the pressure to sell hard-to-trade loans quickly, while more frequent withdrawal opportunities can create additional liquidity risk. ³

That distinction was visible in the Federal Reserve's May 2026 Financial Stability Report. It reported increased withdrawal requests at certain private credit vehicles and noted that managers had limited how much investors could withdraw. The report judged the associated financial-stability risks limited and manageable at that time. It also warned that continued withdrawals and negative sentiment could reduce credit availability for some borrowers. ⁵

This helps explain how the economy could feel a credit downturn without a repeat of the banking failures associated with 2008. A fund may limit withdrawals and preserve cash, while making fewer new loans. A company that was counting on that financing then has less room to invest or refinance. The immediate effect can be a slower flow of money rather than a dramatic failure.

Snider's concern is that this process could develop across several markets. The official research establishes channels through which pressure can travel, rather than proving the severe outcome he discusses is inevitable.

Snider and Sarna agree on the risk but differ on the outlook

In the second discussion, Andrew Sarna, portfolio manager at Forthlane Partners, acknowledges the risk that computing capacity could eventually be overbuilt. He is less convinced that market anxiety means the cycle is about to end. He describes demand for computing as still strong and sees the possibility that fears have run ahead of developments. ¹

They also differ in their emphasis on bonds. Snider expects a weakening credit cycle to support longer-term government bonds. Sarna sees a possible shorter-term role for bonds while remaining concerned about government spending over a longer horizon. Their disagreement concerns how lasting that role would be. ¹

The underlying bond mechanism is straightforward. If comparable yields fall, an existing fixed-rate bond generally becomes more valuable. If yields rise, its price generally falls. Longer maturities usually bring greater sensitivity to those changes. Treasury repayment promises do not guarantee the market price received by someone selling before maturity. ⁶

The interview's warning is therefore about dependence on financing. Strong demand for a technology does not settle whether every borrower can fund its plans or earn the returns shareholders expect. Tighter lending could alter those outcomes before defaults appear. Whether that becomes a contained adjustment or a wider downturn depends on the losses, funding terms and economic conditions that follow.

Frequently Asked Questions

Can credit stress affect investors who only own stocks?

Yes. More expensive or less available financing can change a company's investment plans and the earnings shareholders expect.

Does private credit operate separately from banks?

The loans are made outside ordinary bank lending, but some funds themselves borrow from banks and other institutions. ^3 4

Did Snider predict an imminent shadow-bank failure?

No. He discussed a possible downside scenario and explicitly said a shadow-bank run was not his base case. ¹

Would Treasury bonds necessarily rise during credit stress?

No. Falling comparable yields generally support fixed-rate bond prices; rising yields have the opposite effect. ⁶

Full Cleaned Transcript

Jeff Snider in conversation with Maggie Lake

Maggie Lake: Joining me to discuss the outlook for global markets is Jeff Snider, host of Eurodollar University. Hi Jeff, how are you?

Jeff Snider: Hi Maggie, good to see you again.

Maggie Lake: Are you seeing signs of stress right now? What do things look like?

Jeff Snider: Well, I mean there are signs of stress, but you don't want to oversell it just yet. I mean, first of all, I think the biggest topic is always going to be AI and the debt cycle. AI is on everybody's radar as it should be for both good and bad reasons. Good reasons that you know down the road AI is going to change the world and probably for a lot of good ways, not necessarily just you know the dystopian future where it steals everybody's job and we're all kind of wandering around the streets wondering where we're going to get our next food.

AI has a lot of productive capacity. The problem is we got to get there first. And unfortunately AI is following every previous disruptive technology bubble that we've ever seen. And there's no reason to believe that this time is any different. So if there is a difference, it's the fact that there's so much debt being attached to the AI capital expenditure boom. It really is more of a debt story than it is maybe a stock market story. So, we look at the debt story and yes, there are concerning signs in the debt markets that suggest the cycle overall has turned.

There's a bit more reluctance to fund AI in unlimited quantities at the lowest possible rates.

Jeff Snider: But it's not like the market is screaming this sucker is going to go down tomorrow. It's just getting to the point where you're seeing more and more push back, more and more anxiety and palpable anxiety. And not just in the AI space, it's spilling over to other places, too. Because we have to remember AI is not the only story we should be following. We also have macroeconomic issues, including an energy shock that is still going on eight months after it started. So

Jeff Snider: The debt cycle overall, I think, is front and center in analysis. And like I said, there's a couple of concerning signals there, but it's not screaming, "Red alert. This is really falling apart." But it does look like a lot of other cycles that we followed, throughout history.

Maggie Lake: Yeah. So, I think that's first of all, great to have an honest answer because it's like super easy to stir up the doom, right? And the fact that we're on the eve of...

Jeff Snider: I lie. This thing is going to crash tomorrow.

Maggie Lake: And the problem is like we're all we have so much anxiety because that's what we hear every day and people are really concerned obviously about you know preserving their wealth or trying to figure out what to do. So the fact that we're not sort of you know at the sort of cliff's edge maybe is a little bit reassuring. It gives us time maybe.

Jeff Snider: Yeah. That's the thing though because we know how this goes. Right?

Jeff Snider: The reason you should be concerned is because you have to be concerned. This sucker goes up and then it goes down. And so you want to be on the up, but you don't want to be on the down because the down is coming. I use this quote all the time on the videos I do on AI and the debt cycle from SoftBank CEO from just a couple weeks ago.

Jeff Snider: And he's sitting there matter-of-factly saying, "Yes, there's always going to be a correction." And what he meant was, "Yeah, it goes up and then it crashes and then afterward you get the smoother adoption cycle." So, we're kind of in that initial phase where everybody's just throwing all the money they possibly can at AI because you have no idea what's going to win, what's going to lose, what's going to pay off in the short run, what's going to pay off in the long run, who's not going to be around, who's going to be destroyed.

It's basically a blank slate. So, you're kind of forced into and money managers, especially professional money managers, they have no choice. They've got to chase the AI dollars and the AI performance, otherwise they're going to lose all their clients, too. So, we're still in that initial phase, which is where this anxiety comes from because everybody knows how this ends. We've seen it a number of times. If you're old enough like me, you remember the dot-com boom. Same exact stuff. The problem is we don't know if this is, 1997, 1999. Have we already passed the peak?

Is this maybe middle 2000? Because if you remember, the dot-com cycle was not a straight up and straight down. Dot-com cycle went straight up and then kind of went down a little bit over time for the next three years and before you knew it was way down. So the anxiety is real and I think again like I said before it pays to watch the credit markets because the credit markets this time are much bigger part of the overall cycle and that is maybe the part that's most frightening is I've been saying a lot recently I really hope this bubble pops now rather than you know two years from now because two years from now you're going to have however many more trillions attached to over capacity in AI whether it be compute or technology or equipment is much easier to handle if it's a two trillion than say six trillion two years from now.

So I kind of hope the bubble pops well sooner rather than later.

Maggie Lake: Yeah. That we have some sort of corrective. So the other thing I think you said that's really important is that this is happening at the same time some other sort of big macroeconomic things are happening and I think that is making it more it's sort of feeding into the anxiety and a bit more concerning when you're trying to figure out what to do. So, you mentioned the energy, the geopolitical backdrop. How does that sort of factor into how you're thinking about this when it comes to the credit stress you're seeing or at least the economic impact when we're looking at that energy shock?

How are you laying that on?

Jeff Snider: Yeah, that's an additional dimension and additional risk that does, there's definitely feedback there. Like I said, if credit is the main story in AI and as you just mentioned, Maggie, there are other factors involving the credit market or affecting the credit market, then you got to pay attention to those because they're all connected together. So, the credit market, at least the cycle shift that I've been observing didn't start with AI. AI has kind of come along at the end. You go back to last year, private credit was on everybody's lips because all of a sudden we heard about Tricolor First Brands and all these cockroaches as Jamie Dimon described them which were egregious frauds and they weren't big by themselves but what they demonstrated repeatedly one after another is just how bad the underwriting had been during the bubble period in private credit.

So you know roughly 2021 to 2022 all the way up until 2025 a lot of stupid stuff was done. Let's face it. I mean human nature is the same every time. And what bubbles really are human nature. We all get greedy. Minsky cycles, all that kind of stuff. It absolutely the same thing every time. So last year we got confirmation that it wasn't AI, it was just bubble cycle, bubble dynamics in the credit markets and you started to get a bit of a backlash. Led to investors pulling their money out of all of these private credit funds and it kind of seemed like it was going to go nowhere from there.

And then the energy shock and Iran conflict came along and it seemed to go on the back burner. But what really happened is the energy shock kind of reignited fears across the wider credit market not just in private credit but also public credit that the overall cycle really was turning. So by the time we get to this summer and this fall now you've got the AI numbers that are just absolutely ridiculous. The math just doesn't work. So you already have a credit cycle that was shifting last year seemed like it was located I hate to use the word contained in private credit because it wasn't contained began spilling over more and more into the public marketplace and then fears over AI start to come in.

So what you have is fears of AI plus the macroeconomic fears which were driving the private credit bust to begin with and they never really went away. You throw in $100 per barrel oil or really, $5 or $4.50, let's call it, per gas or per gallon gasoline prospects for six, seven, maybe eight dollars in diesel. Suddenly, you have, especially in the corporate middle market space, separate from AI. You've got an economy that was pretty fragile and concerning to begin with. Then you got energy shock that's really hitting margins. We've seen that recently with trucking companies.

The big Wendy's franchisee that just went bankrupt because their margins are really are being squeezed. So there are macroeconomic fears that are becoming more and more prevalent in the public credit market on top of AI. In fact, the more we get the risk aversion and spreads rising and in some cases blowing out in the public credit markets, the more that's going to impact the credit availability for AI and hyperscalers and everything else. So if we do get a true downturn in the economy that's triggered by the energy shock or just something else that for that matter, it is going to have a major funding impact on AI which potentially means that we don't just get a downturn in the credit cycle or the general economy.

You get the AI bust that comes along on top and almost comes along for the ride because of you know all the fundamental factors we just went over.

Maggie Lake: So the bubble that we're so afraid of we should maybe be paying attention to another bubble that's the real problem which is credit right which isn't private credit that pre-existed AI is just sort of like the extra floater on top so what you're concerned about is a credit event that is really sort of started in private credit but never actually it never actually unwound right that bubble never really burst.

Jeff Snider: No, these cycles, that's the other thing, too. I think there's a misconception about what these cycles mean. And a lot of it has to do, experience in 2008, which, obviously that's, what everybody remembers for credit cycles for really obvious reasons. But these things are processes. They play out over multiple years. It's not like, I think the impression most people have is 2008 showed up in September, in the middle of September, Lehman Brothers failed, the world fell apart. It all happened in a space of about three or four weeks. The credit cycle really started to shift way back in 2005 and 2006 and we got you know major warnings in early 2007 when Bernanke said subprime was contained.

So my point is it's a multi-year process and yes it wasn't contained in private credit this time around. Private credit is simply where just like subprime mortgages a generation ago. It's simply where the most egregious behavior became public. That's the irony. Private credit became public first. And so we got some glimpses and insight into just how bad it had been on the way up. And no surprise, I mean, like I said, bubbles are the same every single time. It's attached to human nature. What we found over and over again is nobody did any due diligence.

Everybody was just focused on volume, volume, volume because I want my bonus. Really don't care about what happens five years from now if these people ever pay back the loan because I'm going to get paid today. Since there's money to be made, we're just going to sign as a few documents as we possibly can and do as little due diligence as we possibly can and just get these deals done.

Jeff Snider: And once that behavior becomes uncovered, the economy becomes a little bit more questionable. That was one of the things last year when we started to get negative payroll reports. I think that's one of the reasons why it triggered the backlash in the credit cycle is because suddenly if you think the economy is resilient, you're going to continue to do all the bad egregious behavior. The garbage lending as Jeffrey Gundlach called it. Suddenly you get negative payroll reports and the economy doesn't look so robust. Some of these companies don't look like such a good lending opportunity as it did before.

Suddenly you start double-checking and rechecking. You actually start taking a little bit of care and maybe doing a little bit of due diligence that you weren't doing before. And after several years of just egregious behavior, that's really when you got the backlash. So the point is the backlash only began last September. And in these slow processes that play out over multiple years, what you're really looking for is whether or not it truly is contained. So if private credit was contained, we'd see, the gating of all these funds that are preserving their capital.

That would, limit the damage. There would be no forced selling. Investors would eventually their disdain would die out and the whole matter would just kind of go off in the back burner. No spill over into any other parts of the marketplace. But that's not what we saw. Instead, we've seen public markets, especially, leverage loans, risky junk bonds, spreads there have continuously risen ever since last September. So, the downturn of the credit cycle isn't just contained to private credit. It actually is spilling out into the public marketplace. And it has been doing so consistently for well over a year now, which is really, I think, the most compelling aspect of it.

So, while we're not necessarily at the end of that credit cycle, the downturn of the credit cycle, we keep getting more and more confirmation and evidence that the credit cycle downturn is continuing to develop, which is why when you combine that with what's going on in AI, in how AI and how disruptive technology cycles play out, you've got the underlying credit cycle related to the economy on top of AI. We're always concerned about that to begin with. There's enough there to keep you busy doing analytical work seeing where we are keeping track of where we are in that cycle.

Maggie Lake: Yeah. Or keeping you up at night I thought is where you were going to go with that because that feels appropriate too. So one thing I have heard when we've talked about this and this came up a lot. It comes up both with AI but also with the private credit issue is that well there are definitely some things to worry about but it's at least unlike 08 0708 it's not in the banking system itself right it's private and so therefore there is a kind of wall that's going to help prevent this from turning into a GFC style situation because that's always the benchmark and the concern right does that give you any

Maggie Lake: You know any confidence or any sort of you know more of an optimistic outlook that it doesn't become a larger economic because it is not in the actual banking system itself or do you think that's a kind of red herring and misinformed?

Jeff Snider: Yeah, it is in a way because we need to put 2008 to rest. We're never going to see another 2008 again. That's I mean not in our lifetime. I'd hate to use Janet Yellen's term. I'm not saying we're not going to have a financial crisis. We're just not going to have another 2008 event. However, that doesn't mean that if we have a credit cycle downturn, it's just going to be completely nothing or that, we'll have a credit cycle downturn and nobody will notice. I think that, there's the truth is somewhere in the middle between those two opposites.

We don't need to go to, oh my god, the world's going to collapse in 2008 style and or it's going to be completely fine and there's really no problem with it and we're really just kind of, doing fear-mongering here. What we really need to do is, like I said, set 2008, set 2008 aside and analyze the credit cycle on its own terms. And the credit cycle this time is obviously different than the last credit cycle. The last credit cycle was focused on especially bank balance sheet expansion and doing a whole lot of stupid stuff that you know again happens in every cycle.

Banks have acted responsibly. That doesn't mean that they're not exposed because they certainly are, but they're not exposed in the same way that everything was in 2008. So the propagation of a downturn in the credit cycle doesn't turn into a whole banking sector panic where we get another Lehman Brothers and all that. But that doesn't mean we can't get a credit cycle downturn typical type of damage scenario where you know you have a credit crunch across the general economy. Instead of you know Lehman Brothers and large commercial banks failing like happened you know 20 years ago.

It's not out of the possibility we don't get some shadow banks that fail because we don't really know how they would perform in a downturn. So, like I said, we have to take this credit cycle on its own terms. Not compared to 2008. And if the downturn continues to go on, even if it doesn't involve the AI cycle, there's going to be some economic fallout and some financial fallout, too, as well. So

Jeff Snider: It's not like it's a nothing. It's just different. And the difference is, okay, we're not going to have a Lehman Brothers. We're not going to have, the whole world melting down. That doesn't mean it can't be painful in the real economy where you know a credit crunch is always painful leads to job losses higher unemployment in the marketplace it's going to lead to financial volatility maybe it doesn't lead to a crash in the market maybe it does we don't really know so I again the point is we do have a credit cycle and really we haven't seen a credit cycle downturn since 2008 so we're kind of due for one to begin with

Jeff Snider: And we need to look at this credit cycle as it actually is regardless of any previous historical precedent.

Maggie Lake: Yeah, I think that's really important because that's where everybody's mind goes to. And so it does make it sort of, difficult. That's the long sort of ghost of the great financial crisis. I guess there's a there's another aspect I think that has people concerned when we're talking about the macroeconomic backdrop and it's why it feels so tricky and difficult right now even for people who've been through past crisis because you've got so many kind of confluent events and that are you're we're trying to make sense of and you seem we seem to be at a situation where there's a lot of concern about total government debt right sovereign bond health at the same time.

So, we've got and it feels like we've kind of hit the end of the road maybe that bond investors are sort of waking up to this. Do you see trouble in the sovereign bond market as well

Jeff Snider: In pockets of it, but not for the reasons that most people are citing? Everybody's got this idea that there's a limit to how much governments can borrow and it seems like that should be the case and we wish it was the case. In fact, we wish it was the case 20 years ago, but over the last 20 years, we've seen time and time again how that's not the case. What's really happening is central banks are coming off of zero interest rate policies and therefore the front end of the yield curve is being interfered with more and more by central banks and that's causing longer-term rates to rise more than they were during the 2010s and the first part of the 2020s.

And everybody is searching for reasons why interest rates aren't as low as they were in 2019, which is again the wrong mindset. You always need to look at spreads, not actual nominal levels. So, it isn't the fact that the market is rejecting government bonds. The market is reassessing the interest rate environment for the unique circumstances that we have here. That being said, though, if we do get a downturn in the credit cycle, it would not be surprising to see all the government bond yields go lower. In fact, I expect that government bond yields are going to go lower through the rest of this decade because that's what the markets keep betting on and keep all the market indications and curves keep indicating.

So, but you do get you do get pockets where concerns rise. France being a big one today, but it's not the market saying the France French fiscal situation has hit its limit. It's really the market assigning a uncertainty premium to French debt over the political uncertainty. And let's face it, France is getting to a point where we got, almost a two-tail model here. Goes in one direction or the other direction. The bond market doesn't really know how to price it. So it's not that the French government has hit the wall as far as its deficits and debts go.

I mean that's certainly part of it, but really it's political uncertainty, therefore social uncertainty that becomes part of the market story. So that's a unique case in government bonds where other government bond examples around rest of Europe, the United States, I know that's another one. You see the 30-year long bond hit its highest rate in 25 years. And that sounds like the market is ringing alarm bells about the US government's deficit. And again, we wish that was the case, but it's really about reassessing the amount of interference in the short end of the yield curve from the Federal Reserve.

Is the Fed going to overreact to oil prices and the energy shock and thereby raise rates? Well, the answer is yes. They already did once. They're likely to do it again. So when you look at the trajectory of long-term bond yields, it's reassessing the interest rate environment overall in the 2020s, which includes a higher premium for central bank interferences because the central banks are not replicating the policies that they had in the 2010s. And by the way, the 10-year or the 30-year Treasury or the 10-year, the 10-year hit its highest yield since 2002.

These are not high rates. Let's keep in mind the historical context here. The 30-year long bond at, say, 5.50% historically is pretty low. So it's not like the market is assigning, market is going crazy about the US government debt. It's really just it's just the yield curve repricing the dynamics that we find here. And again, you get a credit cycle downturn that really deepens. You start to see more and more impact in the macro economy. The 30-year goes from 5.50% to 4.50%, maybe 3.50% really quick.

Maggie Lake: Wow. Do you So what is this? What kind of shape is the economy in? Because it sounds like you're rejecting the idea that there's this underlying strength and resilience and that's all we hear people saying and that you know it can take a lot. It's kind of take taken everything that's been thrown at it and is still sort of powering forward and you certainly hear that as we're heading into the midterms when everybody wants to project economic strength. But what do you see happening in the economy?

Jeff Snider: Again, it's the standards. What standard do we use to judge the situation? So the idea is the economy must be resilient because it's not early 2009. We don't see job losses in the tens of millions, right? Or multiple millions. So therefore, the economy must be resilient. However, again, you analyze the cycle on its own terms, not in comparison to, what it was in 2008, 2009. You can't just say it's not 2008 all over again. Therefore, we must be fine. I think that's the categorical error that category error that people are making.

We have seen job losses and lack of hiring first and foremost for several years now. And that's the economy that most people are actually living in. Which is why when you use the term resilience, that resonates on Wall Street in the stock market and it pisses everybody off on Main Street because they're saying, "What the hell are you even talking about?" We've given it euphemisms like the K-shaped economy or the two-speed economy. These are really admissions that the economy is not resilient. It is not performing in the way that it actually needs to.

And therefore that's a whole different ballgame as far as you know when you add credit cycles and the downturn in marketplaces it has a whole effort a whole angle a whole different angle. If the economy was generally resilient there would be less to worry about as far as you know credit cycle interplay with the real economy. When you have a fragile situation and then throw an energy shock on top. What happens is the probabilities and scenarios start to skew more and more to the downside with less and less left for the upside.

Again, it doesn't mean that the, we're going to experience 2009 style or 2009 waves of layoffs. It just means the economy is not performing. And that lack of performance can get worse as we move forward. Just it's going to get worse on its own terms, not in comparison to 2008. And that's really, I think, the error that a lot of people make. Again, as you said earlier, we're scarred by 2008 and therefore every 2008 becomes, the standard of measurement for basically everything that happens. And like I said, we've been in this situation for several years.

People, consumers, voters feel the situation. They know that it's not resilient. They know it's not working for them. It just doesn't look like the worst case scenario. But that doesn't mean that it's actually resilient.

Maggie Lake: Yeah. It's when we So, let's talk about this idea. And I think one of the reasons that people keep going back to 0809 is because we learned a lot about counterparty risk then, right? Like we were like how could this one thing have almost unraveled the entire global financial system like what you know how and so it sort of every time you see whether it's the AI buildout or whether it is a credit problem you're like we're going to find out that someone's going to go belly up and then everyone's tentacles are going to be in it.

So like let's say there was some questions about Apollo right some of these p big private credit lenders like are if they mark to market today are they really solvent and if they were to go under like what the heck right they are involved in everything andor with all the circular financing and AI if everybody had to mark to market all the accounting interesting accounting that's going on around that would that blow up a major company that would then have this weird kind of like digital run on confidence if not actual money.

I think those are kind of like the kind of fear

Maggie Lake: Scenarios and there lots of people

Maggie Lake: Backing them as well. Does that seem like remotely possible?

Jeff Snider: Well, it's not just possible. It's actually happening. That's really the downside. So when you're looking at the downturn of the credit market, we don't know exactly how it'll play out, but there are several different scenarios and they keep getting the more confirmation we get in the downturn of the credit cycle, the more it involves AI. The darker those scenarios actually become because of what you're talking about because again, like I said before, this is human nature. These bubbles play out in basically the same way every time because that's how bubbles go.

It's just like basic human nature. I keep saying that because it's actually true. And so part of it, if you go back to the dot-com, they saw the same type of behavior where leaders in the dot space used their leadership reputation and credit profile to basically extend vendor financing to all of their new startup customers so that the new startup customers would be able to buy their products. That's really the circular financing we're talking about. We don't need to make it complicated. Yes, it gets very complicated with some of these structures, but really all it is vendor financing.

So the vendor borrows the money, lends it to their customers. The customers buy their products and the idea is that these new startups are going to grow exponentially and eventually become profitable. They pay back all the loans that the vendors gave them as well as you know any other debt that's outstanding. They become hugely profitable and everybody wins. And that's true except you go through the bust phase first where we find out who was swimming naked and who wasn't. And this time around is no different except the numbers have gotten a hell of a lot bigger and some of the financing structures have gotten a hell of a lot more complicated especially these residual value deals where u collateral is always a central part of every bubble cycle as on the way up as well as the way down.

This time we've got GPUs and other forms of creative financing that uses all of these the equipment that's being bought as collateral and then there's residual value guarantees from the vendors. So, as you're saying, Maggie, everything is interconnected. That's absolutely true. And when something goes wrong, it's difficult to isolate it and contain it in one part of the system because necessarily it involves everybody else. And we have such opaque complex structures, you're already, the gun's already to your head because you have information asymmetry plus everybody knows everybody's exposed. So when one thing starts to go wrong, it's very easy for that to turn into, well, hell, I don't know who's really holding what.

So 2008 style, I start to pull back. That's the downturn in the credit market. Like I said, that we don't know where the downturn in the cycle is going to go. But increasingly, that's possible, especially when you put into you put it you combine it with AI overall. I mean, let's face it, you mentioned Apollo and other shadow banks. There's a very real chance that you know we do have a shadow bank run at some point. Again that's not a base case but it's certainly a possibility where Apollo becomes insolvent.

So Apollo becomes our you know our Lehman Brothers. The positive of that and the limiting factor of that is you know Lehman Brothers and the commercial banking system as well as the depository banking system involve depositors where shadow banks we're only talking about you know the equity value of wealthy individuals plus the back leverage providers and leverage providers who've lent loans to those shadow banks. So it can be pretty bad. But the other part of that too is what if Broadcom goes belly up? Broadcom's a huge company or Google. Let's face it here.

A the biggest fear in the AI bubble is there's going to be over capacity because everybody is seeking to build the same exact thing. Well, generally the same idea. We're all building capacity and there's just not enough room for everybody to win. Which means some of these businesses who have basically risked everything on AI and borrowing massive sums that we can't possibly comprehend, they're not going to win. Some of them are going to lose, which means there's going to be what, half a trillion in debt that's going to have to be wound down and liquidated and resolved in some fashion.

Yeah, there is there are downturn scenarios here where this gets pretty ugly. And it looks a lot like 2008. It looks a lot like every other bust that we've been through before, which is why people should be concerned because it is exactly the same type of situation. We just we're just kind of earlier in the process

Maggie Lake: Right? And depending on how things play out, it that's like the worst case scenario, but there are other paths that are not quite as sort of, apocalyptic. By the way, we're not suggesting that any of the firms that we mentioned are going to go bankrupt or that's in their future. We're just using them as an example when you're, trying to sort of game theory out what might happen. So, just so we're clear on that. Do

Jeff Snider: Yeah. The other part, sorry, Maggie, the other part of it is you don't have to have one of those firms go bust. You just need the market to start thinking that's a possibility. And it doesn't even have to be a big possibility because the marketplace on the on the credit market upside, nobody is priced for downturn scenarios. Nobody has enough hedges and everything. So you start to see a small uptick in the possibility even the remote possibility that say Google goes bank or excuse me Alphabet goes bankrupt. It doesn't have to be a huge possibility.

It doesn't have to be a tomorrow scenario. It just goes from a 1% scenario to a 5% scenario. The backlash across the marketplace will be substantial. And so that's what we're really talking about. It's always about expectations versus reality. And on the upside of every cycle expectations are way up here. And about everything about the debt's going to work. The technology is going to work, the adoption cycle is going to work, the economy is going to stay resilient, everything's going to go fine. And then slowly over time, you start ratcheting down expectations.

You get more and more information. Oh, the economy isn't resilient. Oh, Google's they're borrowing a hell of a lot more than we thought they were. Their adoption curve is a little bit slower than we thought they were. And suddenly, expectations go down and you get to a certain point where it triggers the more generalized and broader question. So, yeah, you're right. We're not saying that Google's going to go out of business, but it's a it's at least a it's going it's I think it's going to be a possibility that has to be taken seriously at some point.

And the structures, the debt, the marketplace is just not prepared for that type of backlash.

Maggie Lake: Yeah, investors are going to get a lot more discerning in that. And there's going to be a price paid for the higher probability of something going wrong.

Jeff Snider: That's where the shakeout really comes from. As we reassess everything and as you're reassessing you have to reprice risk based on new information.

Maggie Lake: What is the biggest if individuals are listening to this where are they likely most exposed to this risk?

Jeff Snider: Well, I think most people's just in the stock market. That's you know vast majority of people their investments either their house or the stock market. So equities are like I said the AI bubble it sounds like it's an equity story. It sounds like it's the dot-com all over again, but really it's downstream of the credit market. So if the credit market really starts to reject and reprice become more and more risk-averse, start demanding more risk premiums to AI and everybody else, which is already happening by the way. Eventually that becomes a friction in you know everybody's expectations for how AI will play out in the stock market, right?

Because we're expecting that the adoption cycle goes relatively smooth because you kind of have to. There's really no way to model it otherwise. So, the stock market is pricing the AI future of the 2030s and we get there with relatively relative ease, everything goes smoothly, we don't have a whole lot of hiccups and bumps along the way. That's the stock market price. And as you start to see more and more push back from the credit markets and repricing the credit markets, that makes that future 2030s AI abundant economy less and less likely, which then leads to more and more questions in the stock market.

There's less support for equity prices and equity values that are gotten in many places gotten to be absolutely obscene. So the stock market grows a little bit wobbly, but that doesn't mean that it turns into, October 2008 either. Like I said before, the dot-com bust was a many ways worse because it took three years to get to the eventual bottom and every time it looked like, okay, we got to the bottom and it rebounded a little. Now there's a next leg down and back and forth like that. So the biggest risk is I think the bigger risk is that you have a dot-com style reaction to the overall AI bubble story which leads to the air kind of slowly deflating out of the AI bubble.

One way it would be preferable to go through a crash is because you get the crash, everybody's kind of shaken out and then you got recovery on the way back relatively sooner. Whereas the dot like I said it took many years to get there. But that's the primary risk that most people have with their investments is that this is going to be a bubble bust scenario. We don't know when the bust shows up. We don't know how bad it will be and we don't know the pathway that it's going to take.

So there's three major unknowns which why people are apprehensive and anxious. But it starts with the credit cycle. So that's where you want to focus. Even if you're an equity investor, you want to pay attention to what's going on in credit markets and bond markets and rates markets because those will be the big clues about what happens downstream from it.

Maggie Lake: Do does it seem like there is a likely government response because there are plenty of folks who feel like it's almost too big to fail or too important to the economy with the wealth effect and that at the first sign of any kind of pain or slow bleed out which is kind of what you're describing that you'll get the government to the government will step in the US government at least anyway will step in.

Jeff Snider: Yeah, that's part of the modern playbook. I mean, that's the post-2008 that has stuck around. Anytime there's a hiccup, somebody's, somebody in some government somewhere is going to say, "Okay, we're going to do some kind of stimulus." That's just part of the modern playbook. The question is whether or not first of all it would be effective and second of all, what's the reaction function? Because if we do have say a dot-com-style bust where it happens slowly, you don't give the government a chance to step in and say, "Okay, the markets are crashing. We're going to step in." The mythical plunge protection team doesn't get activated and we don't have, we don't have Jay Powell in March of 2020 talking about buying corporate credit again.

That's so the two unknowns there because I think that the first part is absolutely the governments are going to respond. That's what they do. The markets know that by the way. So the second

Maggie Lake: Start pricing it in. I mean, you already see like a sign of a slowing economy. Somehow we're going to get some kind of reaction.

Jeff Snider: Yeah. To me though, that's a negative and I think the markets take it as a negative. The more the government has to do, the more there's a problem that the government feels it has to do about, the more negative that becomes because governments never solve any of these problems. They just kind of at best paper it over, which gets us into the argument about how stimulus is more about jobs saved than it is job creation. And really, the more the government does, the less room there is in the private economy, the less the more that is going wrong in the private economy.

But for the marketplace in the response to something like AI, I mean, the US has said AI is, it's almost like a national security issue at this point. That doesn't necessarily mean they're going to rescue individual stocks. It doesn't necessarily mean that they're going to step in somehow to start buying all the data. Are they going to take over all the data centers that don't get finished and promise to rebuild them? I don't necessarily think that's the case. And that's really what we're talking about with over capacity. Over capacity is a very different issue.

Is the Senate going to vote on buying the compute capacity that's left over from the marketplace to keep, compute and token economics from deflating necessarily? So, yeah, the government's going to respond, but the way the government's going to respond doesn't necessarily help the situation. And then, like I said, the other question is what will it take before they feel that they need to respond? Because a lot a bad a lot of bad stuff can happen between, when it really starts to turn and when you finally get some official response to it.

So it's not as it's not like there's this implicit guarantee, a Fed put or, the plunge protection team that's sitting out there waiting for every little downturn in the marketplace to turn it around. That's the idea that they're trying to sell. That's the idea they always want to try to sell, which is, what the Fed put really was wasn't the effective capacity of the Federal Reserve. It was just this idea so that anybody who even thought about negative scenarios and selling was, oh, no, no, we don't fight the Fed here.

The Fed wants us to continue to buy risk assets, we're going to do, but the marketplace doesn't actually perform like that. That's more of a narrative that goes that's been thrown around than anything else. But yeah, government's going to respond, but there's that's not the end of the story. That's just one factor to consider.

Maggie Lake: There has been when you mentioned that sort of slow bleed out. I think one of the things that in investors struggle with is they worry about the scenarios you talk about but they're every time technology sells off that buy the dip you know reaction and it's kind of worked too you know it hasn't it's kind of been a self-reinforcing when you're chasing returns like it's worked and if you've sold out because you're worried and then you sat on the sideline as you s saw things rebound as these like little mini bubbles have, worked their way through and Mag 7 was dead and oh, it's back now.

It's the safety trade. What will it take to break that sentiment or do you worry that sentiment sort of creates a lot of excess on the upside?

Jeff Snider: Oh, it always does. But that's the thing, you never know. You absolutely have no idea. This is completely and utterly unpredictable. So, you have to make two choices. One of two choices. One is you consciously choose to sit out waiting for the bubble process to play out, which could take years. Again, like I said before, we don't know if this is 1997 or if it's already May of 2000. We don't know. It's impossible to predict and it's impossible to tell. So, you have to decide for yourself how you're going to play this.

If you really can't stand the not knowing and can't stand the possibility of owning some risky assets that might go through the bust side and not be able if you're worried about becoming the greater fool, then don't get in the marketplace to begin with. Find something else to do. Wait for the cycle to play out and then when you get to the bottom of the cycle, buy some cheap stocks and cheap bargains and just play it that way. Most people can't do that and it's understandable why they can't do that.

Most people have to chase the returns because as soon as you hear on social media somewhere or regular media or whatever, traditional media, record high stock prices, people they just can't help themselves. They have to be in the marketplace. So, the thing to do is if you're going to be in the market, understand what this actually is. This is a bubble and you're you are participating in a bubble. You are not going to be able to pick the top in the marketplace. You are not going to be able to time when the bubble becomes a bust.

You are going to ride some level and some degree of the downturn. What you have to decide is what are your signals for getting the hell out of the marketplace and being happy with those signals and being able to stick with them. Which is why I'm saying one of the things you could do is look at the credit markets. When the credit market starts sending really sub some substantial validated widespread signals that might be when you wherever the stock market happens to be that might be where you say okay that's enough I'm going to pack up and see where everything goes but participating in this market means you are participating in a bubble which leads to an unavoidable risk of also participating in the bubble going bust there really nothing you can do about it so you got to make that decision today

Maggie Lake: Are there places that will get by fairly unscathed if this bubble either, is sort of the worst case scenario or even if it's a sort of slow bleed out and we see some of these excesses have to work through the system. Are there asset classes or safe havens in the way there used to be before?

Jeff Snider: Oh, sure. I mean, that's where the bond market comes in at the very least. That's, like I said before, if we have a credit cycle downturn that involves AI, the 30-year is going to go from five and a half to three and a half. So you can buy duration and be happy with duration as a hedge at the very least against being participating in the downside of the stock market. And there are also parts of the stock market that will perform reasonably well. And there are always timing differences within the marketplace.

That's another misconception a lot of people have for understandable reasons is that the market is the market. There's one marketplace and it's all stocks. And part of it has to do with, how people how most people invest, which is through index funds. So as far as they're concerned, there really is one market and that's all that really matters. But if you're a little bit more active than that, there isn't one market and there's variations in timing, there's variations in intensity. So if AI goes into a bust, yeah, the AI stocks, there's going to be bad time for those, but there are other parts of the market that might hold up reasonably well.

It might actually be a counterbalance to what's going on in AI. Plus, there are other havens, too. You think like precious metals, gold, though they can be they can tend to be volatile. So you have to take keep that in mind. But there are definite ways that you can invest in the marketplace even if it's experiencing the financial volatility that comes along with the downside of a hopefully not too massive a credit cycle.

Maggie Lake: So there was a time when the popular narrative was that bonds are just uninvestable. You know we're going to see a devaluation in the dollar. Bonds are uninvestable. They should be kicked out of the 6040. You should be in other things.

Jeff Snider: Yeah. That was again a narrative that wasn't shared by anybody outside of the marketplace. The consensus in the marketplace is yes, central banks are interfering in the front end of the yield curve and we get a credit cycle downturn and maybe a recession, a full-blown recession in the economy. They're not going to interfere in the interfere in the front end of the yield curve. What you're seeing now is that yeah, the 10-year got to around 5% even the institutional money managers who before was saying you need to avoid bonds are saying yeah let's start buying them again.

It really the dollar debasement, too many treasuries, deficits are going to matter. These are all narratives that sound plausible because it sounds like they should make sense and they should happen. It's just that they don't. These are narratives that people have come up with that don't have any or they're not shared by the marketplace itself. So you can look at the market positioning, you can look at futures, you can look at swaps, you can look at all parts of the marketplace and see

Maggie Lake: Is the market actually buying a pathway to something like debasement that would lead to interest rates rising year after year after year. Before you know it, the 10 years at 10% or something like that. That's a common scenario that people talk about on social media all the time.

Jeff Snider: Yeah, we have the biggest most sophisticated markets in the world. Trillions of dollars trade hand and all these markets say the same thing. That's not a thing. There is no debasement trade. There is no debasement risk. There is no risk of the US government going bankrupt and treasuries becoming unnegotiable. That's it's just not in the marketplace. What the marketplace is worried about is everything that we've talked about. The macroeconomy being fragile and therefore the energy shock leading to adverse scenarios in the macroeconomy independent of AI in the bubble. But then you add AI in the AI bubble, that just adds more downside risk to everything in the macroeconomy, financial volatility, which would be bond market positive.

Because at the end of the day, the bond market is focused on growth and inflation expectations. That's what bond yields are. It's not deficits. It's not dollar debasement, which by the way is not happening. It's never going to happen. It's really growth and inflation expectations plus interference from central banks at the short end. So in a downturn scenario, you got less interference from central banks. You've got lower growth expectations. You got obviously lower inflation expectations, which means rates go down. So because we haven't seen that in the marketplace over the last couple of years as the market has to redigest and reprice the 2020s as being somewhat different from the 2010s, it feels like something is fundamentally shifted when it's really just central bank's response to the 2020 conditions.

So bonds have not performed well in pockets since really 2022, 2023, but that doesn't mean that interest rates have a clear path to double digits.

Maggie Lake: And do you feel like we're in an inflationary environment? That's been a concern for bonds, too, that we're in this sort of resource nationalism, disrupted global supply chains, not enough energy, it's going to be a commodity super cycle, and just super inflationary.

Jeff Snider: No, not at all. Again, go to the marketplace. The marketplace is unequivocal on the inflation risk. You look something simple like tips and tips break evens. Relative demand for CPI protection paid by the Treasury Department. So if the marketplace thought that CPIs were going to get out of control either slowly or all at once, you would see demand for inflation protection that is paid out by the US Treasury based on the CPI. You would see demand for tips go through the roof. And what you see in the tips market is sideways.

Not just sideway this year, not just sideways this year and last year, but sideways for years. The marketplace has said that yes, there is inflation. It is inflation that is somewhat elevated compared to the 2010s, but it is not accelerating inflation and is not likely to get out of control. That doesn't mean it eliminates these scenarios where we see volatility which are triggered by non-economic factors like in 21 and 22, the major supply shock. But that was I'm going to use the word transitory. That was correct to view it as transitory because it was transitory by the middle of 2022 CPI rates were coming that back down again.

So every time that we've seen an oil shock whether it be 2023 remember Saudi Arabia cutting back on production you know what's his name with his lollipop all that oil prices spiked everybody said oh here we go again it's 1973 the tips market said not happening tariff inflation how many times do we hear tariff inflation tariffs are going to inflict something bad on the in as far as inflation Jamie Dimon 10-year is going to go to 7% and the tips market said not happening even earlier this year, the energy shock, the tips rates, the tips break evens, they did move up.

You got a multi-year high and the five-year break even, but it wasn't all that high to begin with. And you put it into context, the marketplace was saying, yes, you're going to get some shortrun disturbance in the CPI based on oil prices, but it is not going to be some kind of 1970s replay. It's not going to be some sustainable accelerating expansion inflation. So again, what has happened is people look at the 30-year long bond, for example, and see, oh, it's hit a 25-year high. That has to be inflation because what else could it possibly be, but when you look at what all the fundamental factors that go into bond yields, it's not inflation.

It's not economic growth. It is entirely about central banks interfering in the short end of the yield curve. So the inflation narrative makes sense. It's understandable why people believe it, but that just means you need to do more homework and make sure that's why bond yields are rising. And like I said, it you can start with tips. You can look at inflation swaps. You can look at interest rate swaps. You can look at interest rate forwards. The market is as close to unequivocal as it can possibly be. It is not inflation risk that is bothering interest rates in the marketplace.

And that means that inflation risk itself is not prominent in market thinking and market pricing.

Maggie Lake: So interesting. So, it sounds like bonds and sort of parts of the stock market value outside of AI are kind of safe places to think about if you're concerned and you start to see, trouble in credit. What about real assets? I mean, you mentioned precious metals, but they're volatile. There's been this sort of conversation that, real assets are something that should have a larger place in a portfolio. Has that been overstated based on the inflation concerns or is that true but for different reasons?

Jeff Snider: Both. I would say it's both of those because a couple different scenarios here, a couple different assets. You look at silver, for example. First of all, silver and gold, they're terrible inflation hedges. They're not inflation hedges. They never were inflation hedges. They're more error hedges, which is something that we're going into here. So silver, perfect example. I mean, silver shot up to $120 per ounce. And while some people thought that was the beginning of, oh, it's $500 silver and this is confirmation of dollar debasement and all that kind of stuff, no, it was a supply squeeze.

It was an obvious supply squeeze. You saw some of the forward rates and the lease rates in London and other Shanghai lease rates got to be ridiculous. So copper or excuse me, I'll get the copper in a second, but silver got squeezed 120 and we're just now we have the volatile the downside of what was a small-scale short-run silver bubble. Same thing we saw in 1980 with the Hunt brothers. So the downside and danger is for silver. By the way, I love silver. I love precious metals, but let's be honest here.

We got to be realistic. There's still more downside in silver because it went way too far, way too fast, and it's going to take a long time for silver to consolidate. I really think we're going to see $30, $20 per ounce simply because it was not a fundamental repricing of silver. It wasn't dollar debasement. So gold kind of got caught up in that too where gold had to run up to, but better than $5,000 per ounce. And while it's going to likely perform a lot better than silver, it's going to be dragged down as is, as part of the precious metal conversation until, the fundamentals reassert themselves in gold likely before silver.

Copper is another probably better example. Copper looks like it's pricing, like you said, Maggie, some kind of secular super cycle for commodities, dollar debasement, whatever. Copper is pricing non-economic factors again first of all you have lack of supply which is I know it's part of the super cycle argument you know you don't have investment in new supply the supply we do have like down in Chile continues to disappoint time and time again but the shortrun factor that's got copper prices up to record highs in this year have to do with tariffs you've got somewhere around 70% of the world's above ground supply therefore inventory accessible inventory sitting in the United States doing nothing which means the rest of the world is squeezed for copper supply which means copper prices have been elevated not because of dollar debasement or because you know the AI super cycle or data center buildout or you know solar whatever you know electric vehicle electrification it's simply a nonfundamental factor that has gotten copper prices soaring which means that copper has a near-term and intermediate term future that looks a lot like silver and so silver starts to go down even further.

What is it in the 40s now? Like I said, I think it goes lower. Copper is up around a record high, not far from it. It's kind of been sideways for the last several months. You get the Trump administration announcing that there will not be a tariff on copper. Copper prices are going to plunge. They're going to plummet.

Jeff Snider: So, there is commodity super cycle, I think, overstates the fundamentals of the and it's really one of those situations where you look at the price of copper like the 30-year long bond and you say, "Okay, these are two signals that are telling us the dollar's being debased and inflation is going to be out of control." when on the surface that may look like what's happening in those markets, but when you put the wider context, you see very easily that's not the case in either one of them.

Maggie Lake: Yeah. Which is why it's so important not to get caught up in those narratives, but they're so powerful and they're everywhere online. The good sounds like

Jeff Snider: I say what you do is when you see one of these signals, it's not the end of the discussion, it's the beginning. So, if you see the 30-year long bond at a 25-year high, you don't just sit there, okay, here it comes, the Treasury market rejection. You need to then start looking at everything else to see if they validate that signal. So a perfect example of that is copper to gold. The copper to gold ratio hit a record low and was on the way down. 2025 kept going lower and lower got to record lows and then in 2026 it started to peak up again and it started to break out of its trend which if that was the case that would be a reflationary signal.

So you look at the copper to gold ratio that went from a record low, oh this is really bad to is this reflation? Is this confirmation that the AI bubble is broadening out into the macroeconomy. Like I said, that's not the end of the discussion or end of your analysis. That's the beginning. So then you look at why is copper rising? Is copper a fundamental signal or are there non-economic factors? And suddenly is copper to gold ratio agreeing with other strong correlations. For example, copper to gold ratio corresponds very strongly with Chinese bond yields.

Are Chinese bond yields confirming what we're seeing in copper to gold? And the answer was unequivocally no because Chinese bond yields continue to hit record lows. So what I'm saying is you take these signals, they show up in social media that begins your analysis. It doesn't end it. You need to find corroboration and widespread corroboration in order to try to make some kind of a conclusive signal out of it.

Maggie Lake: Yeah. Super important. And this is why the work you do is so important, I think, because we all have to be sort of more engaged and look deeper underneath the headlines to make sense of this. Two final questions. It sounds like investors have time to think about what they want to do or how they want to prepare for this credit cycle that's inevitably going to roll over or bust. What kind of time? I mean, we don't know the timing, but it sounds like you think people should be thinking about doing things now as opposed to waiting until it's unraveling.

Jeff Snider: Well, I think what needs to happen now is people need to be prepared for what they should be watching for that time because like I said, we don't know where we are in the cycle. We have no idea how long and how far it'll go. But you should be able to come up with some signals that you would like to depend on that would tell you okay the risk-reward calculus is becoming more and more unfavorable and not you know not necessarily just from your gut feeling but you're getting that information from the rest of the marketplace.

That's why we you know I always depend on market signals unlike central bankers I trust markets a hell of a lot more than central bank DSGE models. So you're looking for these market signals because you have a broad coverage of information you've got inside information. You got trillions of dollars on the line. They are not perfect. Let's be honest. Market signals are not perfect. Markets are not perfectly efficient. However, given the imperfection that we're faced with and the high level of uncertainty, therefore potential very large differences in scenarios and pathways, you can do a lot worse than market signals.

However, you got to identify market signals that you want to follow. You want to make sure that they're historically validated, that they fit with the what you're trying to find out, what you're trying to analyze. And like I said before, never fall in love with one signal. It's one signal and then another, then look at an entirely different asset class or an entirely different data class or something else and see if you're getting a comprehensive view. And I think that's really the point. So you kind of put together a heat map or a dashboard.

You have all of these market signals that are giving you information. And when they start saying the same things at the same time in the same way with the same intensity, that's usually your sign to get the hell out of dodge. But until then, you got to understand it's going to be ambiguous. It's going to be difficult. There's going to be a lot of gray area. So you have to be you have to decide for yourself whether or not you're going to be comfortable with that level of ambiguity. And then when you start to get more and more confirmation across the marketplace, then you can start making more decisions.

Maggie Lake: Yeah. No, that's really well put and why everyone talks about it being so hard or so much harder right now because we are in this kind of transition period. Last question is there seems to be some sense that everyone thinks Scott Bessent's going to pull a rabbit out of a hat and sort of like magically reset the entire global monetary system with some really creative out of the box thinking that sort of puts the US on either better footing or kind of consolidates its place on the top of the hegemonic heap so to speak.

Do you think that Treasury is plotting some sort of reset or is that probable possible?

Jeff Snider: I think Treasury is plotting for everybody to talk about Treasury plotting. If you're Scott Bessent, what's the best case scenario for you is to get everybody to believe you have a rabbit and a hat when you don't have either the rabbit or the hat. It's central banking and government policy 101. You don't actually have the authority that people think you have. You just need to get them to believe you have that power and authority. And most people because they don't understand how the system works, they have very little knowledge about how money works.

They've kind of filled in this the central bank and the treasury department and the government as sort of the god of the system because you know just superstition and you've been taught the entire time

Maggie Lake: It's like it's Oz there they're like

Jeff Snider: Yeah that's the that's probably a better analogy. It's the Wizard of Oz. Absolutely. So Scott Bessent has an enormous interest in getting people to believe that he can pull a rabbit out of his hat. The problem is or not the problem for him it this isn't a risk you know the US dollar isn't going anywhere because we don't use the dollar we haven't used the dollar in any meaningful way in a century u the euro dollar system is the only reserve currency system we have and it is the only one that's even close to be able to there's nothing on the horizon that's going to challenge the functions that need to be done by the dollar system the euro dollar system there so treasuries are an important part of that system therefore that you know They're not going anywhere either.

There really is no move away from US government debt. There's usually there's no move away from US dollar assets in any meaningful sense. And again, there's data for this. Like I said, you don't just don't follow the narratives. Look up the information. And I'll give you a couple of points right now. You look at foreign holdings of US treasuries and US agency debt too, but you can focus on US Treasury, doesn't matter through something like TIC. TIC data shows that the rest of the world governments have to sell treasuries every once in a while when they're faced with a dollar shortage, but the rest of the system, the private system continues to buy treasuries handover fist.

Why? Because there are safe and liquid US dollar assets and the US dollar system isn't going anywhere. I say that for a couple of reasons, including another data point that I'll give you, which is from the Bank for International Settlements or BIS, which they track FX derivatives and the denominations that are used in FX derivatives. And everybody thinks the Chinese yuan is taking over for the US dollar. When you look at FX derivatives, which are the nuts and bolts of the monetary system we have, what you see is the Chinese yuan is ascending.

It's proportion of FX swaps has gone up, but not at the expense of the dollar. It's at the expense of the euro, the yen, and some other currencies. On the other side of almost every single FX transaction, it's roughly 88 to 90% is the US dollar, which means that the Chinese are not replacing the dollar. They're replacing the Europeans to be on the other side of that dollar swap because the dollar swap continues to be there. So, like I said, it's a comprehensive picture from one part to the next. The Treasury market is not pricing dollar debasement or dollar replacement.

And we have the data that shows why that's the case. Just like it's not pricing inflation because there really is no inflation background out there. Just look at the macroeconomic data on income. And so again the overall point is it's not one thing or another. You have a comprehensive picture that agrees between different parts of the system and different parts of the marketplace and different data sources and they all say the same thing. These are narratives that people are coming up with because they don't know why that fuzzy head, the floating head from in Oz.

They don't know why it floats or what it actually says.

Maggie Lake: It's so true and you can go down the rabbit hole on Jeff's eurodollar. And it's worth doing because it was really eye opening for me when we first started talking stable coins. There's so much talk about stable coins, but we kind of already have a digital dollar with eurodollar, don't we? Do you think it morphs into something that's called a different name or there seem to be a lot of similarities? I'm not sure what you achieve. Are you watching that space? Do you think there is innovation coming with stable coins?

Jeff Snider: Oh yeah. I think, I don't know when, but in some point in the future, we will have something that looks like a stable coin standard. So, cryptocurrencies and digital currencies are the future. They're just not there yet. And so you look at the history of monetary evolution from way back, way, going back to the gold and commodity money. We've been moving toward a ledger system because it's more elegant, it's more efficient, it's more elastic, which currencies need to be elastic. Sorry, gold bugs. Sorry, Bitcoiners. Currencies need to be elastic because the commercial system has chosen elasticity as the primary property in any monetary arrangement.

So the euro dollar represented what I call the second stage of ledger money evolution which was to take a bank centered decentralized ledger system and adopt it on a global framework. However, it is still based on bank balance sheets, which ever since August of 2007 hasn't performed the same way we need it to, which is the cause of all these major issues that we've been having, including why interest rates continue to be lower than people think they should be. But the point is the eurodollar system is past its expiration point, but because we don't have a replacement for it, we're kind of stuck with it until something can perform those reserve currency functions.

Stable coins have started to take up some of those reserve currency functions in a novel direction because now we're not talking about bank balance sheets and bank ledgers. We're talking about truly decentralized ledgers, which does represent a significant step in the evolutionary process to truly decentralize ledger money. However, like I said, they're still limited in their capabilities and capacities. And for me, they're not quite enough of a step toward a new system. It's sort of like a half step off the eurodollar system as we have it. In many ways reinforcing the euro dollar which isn't necessarily bad but for my own taste and I think what we're going to need in the future we need to go even further than stable coins but the point is that stable coins may represent sort of a midpoint bridge between what we are where we are today and a truly decentralized ledger money future down the road and therefore to me from a you know very macroeconomic or macroscopic standpoint that's tremendously helpful if we get people used to using a truly digital ledger that's that'll just help the adoption further down the road when we really do get to something that can that could potentially be euro dollar replacement.

By the way, that doesn't mean the euro dollar or the dollar as everybody says it doesn't mean the dollar collapses. You could have a scenario and I think the likely scenario is that as digital currencies and digital ledgers become more and more capable. They just take up slowly over time more and more of those functions. The dollar doesn't just crash. It just kind of slowly fades away. Before you know it, people stop and look around and think, well, what happened to the dollar? It's still there. It'll still likely perform some degree or some proportion of the functions.

It just won't be the preeminent reserve currency system because by then we'll have a much more capable system.

Jeff Snider: So, even the de-dollarization, dollar doomism, there really isn't any parts of that make any logical sense about where money is, where it's been, and where it's likely to go.

Maggie Lake: Yeah. So many questions about who controls what in a truly decentralized situation and that's interesting but that is going to have to be for another conversation but that's where it gets really interesting I think and probably why we're not there yet. Jeff it's so fantastic to catch up with you. I love the fact that you push against so many of the narratives and are digging around in the depths of the global financial system to understand how it really works and you always help us get a little closer to that as well.

So thank you so much for your time today.

Jeff Snider: My pleasure, Maggie.

Andrew Sarna in conversation with Maggie Lake

Maggie Lake: Hi everyone. To dig in a bit more on some of the topics Jeff brought up and understand what they mean for your portfolio, I'm joined by Andrew Sarna, portfolio manager at Forthlane Partners. Hi Andrew, it's great to see you.

Andrew Sarna: Hi Maggie, nice to see you too.

Maggie Lake: Thanks for jumping on. So we had a really interesting conversation with Jeff, but I just want to like tease out a couple of points because I think people probably have some additional questions about them or it has them wondering, hm, wait a minute. So, let's start with AI. This is just like the 9,000 pound gorilla in the room, right? And everyone's waiting for that bubble to burst. We're starting to see some signs of stress in technology. Jeff was pointing out that he's watching this the credit space, but like where are you on the whole AI bubble?

Like, should investors be thinking about making moves now? Does this thing seem like it's imminently going to start unraveling?

Andrew Sarna: I would characterize these markets as extremely anxious. It feels like everyone is just hyperventilating about the AI trade which I mean it's warranted and unwarranted. I think like if you look at the state of these companies today the market's still under supplied compute but at the same time if you project some of these forecasts further I think now 2027 hyperscaler capex excluding SpaceX is expected to be over a trillion dollars. I saw an interesting stat from SemiAnalysis that in 2027 if they hit their 50 gigawatt global compute target that's going to be all the compute in the world that was ever built up until 2024.

So I think investors are struggling to grasp at just like how big the magnitude of these compute additions are. And I mean the real concern is this is ultimately a commodity business and the thing that I struggle to wrap my head around is like what is going to cause these companies to stop investing before the overbuild occurs? Cuz if you're a commodity investor or ever looked at any commodity sector, it's like a tale as old as time. There's this gold rush. There's demand as far as the eye can see. And then all of a sudden this overbuild occurs, demand collapses and you know the companies that poured everything into capex.

They're left holding the bag. So there's definitely challenges ahead. I think the market is probably a little over anxious right now. I think we're going to see a rebound. But it's fair for the market to be concerned about it.

Maggie Lake: Yeah, that makes a lot of sense. And I think it echoes something that Jeff brought up too, which is that like the fears almost run ahead of reality, although wellbased, right? Like I think that's your point about it's hard to wrap our heads around these numbers and thank you for that because I feel like we're all trying, right? I look at all these calculations and I'm like, hang on a second. Like this is kind of unprecedented. So if there is it fair to say that we're in early innings? Like you're watching for the stress, but it doesn't sound like this is something that we need to like all reduce every bit of exposure to we have to technology.

It sounds like we'll miss out on something if that happens.

Andrew Sarna: Yeah, I mean I think the challenge for investors today is that just like so much of every single market has become the AI trade. Obviously you have equity markets, but even debt markets now. There was a 357% year-over-year increase in hyperscaler debt issuance. They used to issue between five and 40 billion every single year. Next year it's expected to be $40 billion of debt from the hyperscalers issued. So it's a question of I don't think it's time to panic. There's still a shortage of compute. I wouldn't be surprised if we eventually get to a place where u there is an overbuild but like look we have midterms on the horizon and I mean the rhetoric is extremely negative data centers even in Texas the one state where you thought they would never slow down data center capacity additions.

It looks like they're going to be pulling back and leveling out. So maybe it will be the impact or a decision from elsewhere that ultimately forces the hyperscalers to pull back and maybe that saves us from overbuilding. But still there's a lot of capacity coming online and it's not clear exactly where demand is going to be just because the supply numbers coming online are just so big.

Maggie Lake: Well, I know that you all have a lot of history and experience dealing with commodities. So, it sounds like you're going to look at are you going to lean into that as you try to figure out like what the signals are for the overbuild that start flashing warning signs for you? Do you think that's kind of what's on your dashboard?

Andrew Sarna: I mean, I think like timing it is a fool's errand. We're not going to be able to call the top. I think what investors can do practically speaking is understand your exposures and don't be all in. So one of the things I've noticed over the past couple weeks in markets is you had when they released Muse it was like everything was selling off due to high rates. Every sector was selling off due to high rising rates other than the AI trade and AI sectors were sort of propping up the market.

Now, in the past two weeks, we've seen the exact opposite where market hyperventilating over the AI trade. You have the majority of sectors green, but technology has dragged the index lower. So, and then on top of that, you've had like these bombs go off under the surface of like last week it was European credit. We saw extreme pain in biotechnologies. So, it's going to be impossible to tell, but one of the things that I'm fairly confident is eventually, through this buildout, we're going to see the AI trade puke a few times.

And I think what investors can do is understand, okay, how exposed am I to this? Do I have 80% of my portfolio in the S&P 500 and the triple Q's and find other things to invest in such as I mean you bring up the point on commodities where that's really the halo trade. Find things that aren't going to be disrupted. Yeah, maybe it's not as high-flying as some of the returns we've seen over the past couple years from the AI trade, but you know what? I don't think it's necessarily a time you want to be greedy.

Maggie Lake: Yeah, this is it's like we all know this, right? Diversification, but actually being smart about it and thinking about true diversification as opposed to sort of, a false sense of it given the AI trades everywhere I think is what we have to keep coming the framework we have to keep coming back to. So on that note of diversification, the other interesting thing that Jeff said was bonds. You know he is not traditionally a bond person. I mean, I think that after the terrible performance of bonds over the years, there weren't a lot of bond bulls out there, but I've been noticing people starting to flip and talking about bonds having a role once again in a portfolio.

The last time we spoke, you mentioned that you're getting calls from clients from the first time in a long time saying, "What about this bond market?" Where are you in terms of bonds right now? How are you thinking about that? Do they have a role in terms of diversifying away from the AI trade?

Andrew Sarna: I think it's a trade, not a long-term hold. I mean the challenge is like you know if I look out 10 years, you know what's going to happen. Like the US government cannot spend or run a 7% deficit indefinitely. And I don't see any candidate in the future pulling back on spending. Has become politically acceptable to spend like drunken sailors effectively. There was an interesting chart in the Wall Street Journal that showed voter concern around deficits has just plummeted over the past decade. Nobody cares about it anymore. It's not a voting issue, which is going to be a problem because eventually you know what I think the fiscal situation people are going to be forced to care about it.

Andrew Sarna: So that makes me not a long-term holder, but from a the nice part about bonds is you sort of know what you're getting at least from at least if you're investing in the short end of the curve. As yields are a pretty good predictor about forward-looking returns. You do have a question on like do we want to take credit risk which for the most part spreads remain pretty tight. So you're not really being compensated to take credit risk on the duration side of things. I think like maybe you can reach for a little bit of a yield pickup because I think there is a ceiling to how high sort of the 10-year can go because you know the government is the budget just doesn't work if yields are at or the 10 years at 6%.

Andrew Sarna: So I wouldn't be surprised to see yields eventually fall. I can't tell you when. Going back to the initial points we were talking about with AI like I view you have two strong or you have two drivers of economic growth right now is really AI and fiscal spend. So I think if you see the AI capex falter that's maybe the sign that you're going to see some economic weakness and the economy begin to fall off and that's when you get the yield relief and probably get out of the trade. But yeah, it's hard to time again.

Maggie Lake: Yeah. But clearly a role for like, maybe liquidity and a trade, but it sounds like you do not think 6040 is back. This is not a sort of permanent wheel in your portfolio.

Andrew Sarna: Yeah, definitely not. I mean, like I was looking at numbers. It's like definitely way better than the zero-rate era. And I'll take a 5% 10-year over what it was like 2% thinking back a couple years. So at least you're making something. But then I mean if you're a individual investor, you have to factor in taxes. So again that's another headwind. It's just it's certainly not 40% of the portfolio. I think like it's just quite simple that the new reaction function from governments is going to be spend more money which should make bond investors a little nervous.

Maggie Lake: Yeah, we are you know you mentioned we have to wade through a very sort of fraught midterm in the US. We're coming into year end which has all sorts of seasonal effects. Does it feel like the macro environment is getting any clearer here or is it just as sort of murky and difficult to navigate through as it seems like it's been all through 2026 given all the geopolitical and all the other risks?

Andrew Sarna: Yeah, you have a lot of pundits just essentially saying buy equity markets because they always go up after midterms which I mean it's sort of like hope and hope is not a great strategy. I would like some rationale. The one thing that keeps me up at night is without the overhang of midterms, will the administration escalate things with Iran, which should keep investors up at night? And it does worry me. At the same time, the bull case is really everyone is hyperventilating. I think is clear sentiment. I remember like months ago you were seeing people post the screenshots of their portfolio returns on X and that is like the classic sign you should probably lighten up on your equity exposure and this is essentially the opposite.

Everyone's paranoid that the AI trade is popping and I wouldn't be surprised if we're talking 3 months from now and that Santa Claus rally did happen and everyone was just over anxious. So there's I could see a recovery into year end for sure.

Maggie Lake: Yeah. Which I think is the challenge of the time we're in, right? There are short-term and long-term dynamics that we've got to hold and like two things can be true at the same time depending on your time frame and it's really important to kind of plug that into your thinking. Andrew, appreciate you jumping on with us. This was so helpful. Thank you so much and we're going to see you soon.

Andrew Sarna: Thanks for having me.

Sources & Disclosure

¹ Wealthion, "The Credit Market Warning That Could Hit Stocks," Jeff Snider and Andrew Sarna with Maggie Lake. Recorded November 3, 2026; published November 4, 2026. ² Federal Reserve, Financial Stability Report, November 2019, "Asset Valuation," footnote 6. ³ International Monetary Fund, Global Financial Stability Report, April 2024, Chapter 2, "The Rise and Risks of Private Credit." ⁴ Office of Financial Research, Ted Berg and Jung Hoon Lee, "Measuring Counterparty Exposures to Private Credit," March 12, 2026. ⁵ Federal Reserve, Financial Stability Report, May 2026, "Funding Risks" and "Developments in Private Credit." ⁶ Securities and Exchange Commission, "Fixed Income Investments: When Interest Rates Go Up, Prices of Fixed-Rate Bonds Fall," June 26, 2013.

Wealthion is a dba of Greylock Peak Investments, a registered investment adviser. This article is general information only. It is not investment advice or an offer or solicitation, and it is not tailored to your circumstances. Guests' views are their own and may not reflect those of Wealthion. Wealthion has not verified guest statements, including any performance figures. Investing involves risk, including loss of principal, and past performance does not guarantee future results. Wealthion refers readers to other registered investment advisers and shares in the fees they receive from referred clients, which creates a conflict of interest. Please see our Form ADV Part 2A and consult your own financial advisor before investing.