I had barely sent out an update on GLD/TLT when market action has come to test me. If you have been living under a rock, the AI trade has swooned as the bonds of Coreweave has been sold aggressively. They are now yielding 15%, or perhaps more importantly, as a big discount to par - signalling fears of default.
I took a good look at Coreweave, and came up with two totally different outcomes. In one we enter a deflationary spiral in the tech space, with huge financial repercussions. Coreweave goes bust, and sets off a doom loop in the AI trade. In the other, inflation continues unchecked, and Coreweave is a buy here. GLD/TLT should point the way here, but as it happens, technically GLD/TLT is right in no man’s land at the moment.
So let me explain the logic of these two outcomes, and which I think is more likely.
