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Negative Convexity

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Latest — Jul 13, 2026

You Can't Fire a Large Language Model

In financial markets, the big question on everyone's mind these days is whether or not AI will produce enough profits down the road to justify sky-high stock valuations and aggressive corporate bond issuance. I think the answer is no, for two reasons: 1. Most of the benefits

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Architecture: Who Has Been Buying Treasuries Recently?

We are living in a truly fiscally profligate era. From 2022-2025, Treasuries held outside the U.S. government but counting the Fed (Z.1 Table F.3.2) increased from $21.5 trillion to $28.5 trillion, absent any major recession or crisis. So the question is, who has

The May Jobs Report Is Nothing to Celebrate

Last Friday’s nonfarm payrolls release came in at +172k versus consensus estimates of +85k. Financial news outlets described it as a “blockbuster” result. I disagree. * 86% of the net job creation over the past three months came in sectors paying at or below the national 2025 full-time median

What I Found in a Federal Antitrust Court Case That Every Author Should Know

An analysis of United States v. Bertelsmann SE & Co. KGaA, the 2022 federal antitrust case that blocked the merger of Penguin Random House and Simon & Schuster, with economic implications for authors on royalties, advances, and audio and digital rights.

Social Security Will Run Out of Money in 2033, and That’s Just the Beginning of Its Problems

Social Security's trust fund depletes in 2033, and even then the SSA's fertility and labor share assumptions are too optimistic. The hole is bigger than projected.

Did You Know Japanese Debt-to-GDP is Declining?

Japan's debt-to-GDP is falling as nominal GDP growth outpaces debt accumulation—the inflation regime finally working after 30 years of trying. But bondholders are accepting deeply negative real returns. Why doesn't the market believe inflation will persist?

Resisting Bullies Is Good for the Economy

Two historical episodes show what happens when Fed chairs face presidential pressure: Burns capitulated to Nixon and got stagflation. Eccles resisted Truman and won independence. Powell has chosen resistance. History suggests that's good for the economy.

Are a Bunch of Law Schools About to Shut Down?

I started digging into the One Big Beautiful Bill Act (OBBBA) a few days ago thinking I'd write about its impact on student loan markets. What I found instead was more interesting: a provision that could force the closure of many law schools, depending entirely on how the

How Long Can the Market Remain Irrational?

I've been underweight stocks since 2018, thinking valuations were too high. I was wrong. This is my analysis of what the Shiller CAPE ratio actually tells us about market timing—and what it doesn't. A painful lesson in the difference between valuation and timing, with 150 years of data.

Today’s 2.7% CPI Release Is Nothing to Celebrate

The market and the White House are celebrating today’s cooler-than-expected Consumer Price Index (CPI) data release, which came in at 2.7% annualized inflation from November 2024 to November 2025. However, I don’t see anything to celebrate. 2.7% Is Par for the Course for 2025—