The market is currently wrestling with a violent regime change, driven entirely by the long end of the Treasury curve. We have witnessed a terrifying bear steepener—the yield curve uninverting not because short rates are falling, but because the 30-year yield has blown out past 5.15%. When the 10-year and 30-year yields spike while the 2-year remains relatively anchored, the market is no longer pricing in Federal Reserve monetary policy; it is pricing in fiscal dominance and a sovereign bond supply shock.

This creates a dangerous reflexive loop. Higher long-term yields choke off equity valuations—particularly long-duration tech, as we've seen with the severe drawdowns in QQQ and NVDA—while simultaneously raising the cost of debt service, which only exacerbates the fiscal deficit that caused the bond selloff in the first place. When SPY and TLT fall simultaneously, it signals a liquidity drain where all assets are sold to raise cash. Holding 20-plus year duration in this environment is suicidal, and the traditional 60/40 portfolio offers no sanctuary.

I am aggressively raising cash to maximum defensive levels. We attempted to liquidate our entire risk-on equity exposure and our long-duration Treasury hedges yesterday, and we will continue to ensure our capital is protected from this sovereign stress. The only logical safe harbor when fiat credibility and fiscal discipline are questioned is gold. I am looking to rotate our remaining capital into GLD as soon as liquidity permits, while sitting heavily in cash. There is no reason to be a hero when the bond market is demanding a pound of flesh. We will watch and wait.