I broadly agree with this framework, but I think there are a couple things worth adding.

The administration can want lower rates, expensive dollar, all time high assets. Warsh can eventually cut. Bessent can lean on whatever levers Treasury has available.

But if the bond market looks at the fiscal situation + inflation + oil + Treasury issuance and is still demanding 5% on the long end, then cutting Fed Funds doesn’t necessarily give Trump the easing cycle he wants.

You could actually get the annoying scenario where the Fed cuts 100bps and the 10Y barely moves because the term premium keeps expanding.

And this is also why the Japan/Yen situation is more important than people think.

Japan is one of the biggest holders of Treasuries. You absolutely do not want a situation where defending the Yen forces Japan to become a seller of USTs at exactly the same time America is issuing enormous amounts of debt.

Bessent seems very aware of this.

The recent US/Japan intervention therefore wasn’t just about saving the Yen IMO. It was partly about protecting the global dollar system.

Basically:

Weak Yen → Japan needs dollars → potential Treasury selling → UST yields higher → US financial conditions tighten → housing/economy gets smoked.

And that’s probably the biggest risk to the bullish thesis IMO.

I agree that other energy resources will eventually replace oil, I’m also bearish oil longer term, but oil isn’t one market.

Transportation, petrochemicals, aviation and industrial demand are different from electricity generation. LNG can destroy gas/coal economics in certain places without necessarily destroying crude demand at the same speed.

And supply matters just as much.

https://x.com/arndxt_xo/status/2085169395001913519