I know why you're here: Rate forecasts via AI debt and geopolitical forecasts.
Sure, we could talk that rates bumped up to 7.4%, 110BPS over last year. We could talk about labor numbers, but instead let's focus on what comes next.
The Fed: With the minutes out, we're at a 16% chance later this month for a rate hike, and 73% chance in December. They're also betting on at least one more bump next year. Labor stays stable, and unless we see a big swing it'll likely stay that way. Which means we really only need to look at one thing: Inflation.
Iran: The biggest factor, and if we're looking at inflation for next year we need to start looking at some of the downstream effects. The disruption doesn't just affect oil. Remember that it's also disrupting fertilizer, which means food prices, and plastics. Those are disrupted today, which means we'll feel the effects next year downstream.
Even with President Trump announcing no more escalations in Iran, we still want to factor in when it potentially ends in Iran. Let's get geopolitical.
Prepare for the long haul: Geopolitical forecaster Ryan Bohl with the RANE Network predicts we'll see things through the end of the year, and very likely deep into 2027 and even potentially up to 2028. Its not yet their baseline, but it seems safe to predict we at least have months left.
Strategic Reserves: We're down to 283 million barrels in the strategic reserve, the lowest since October 1982, and down from 415 million in March.
Crucial information? The operational floor is 250 million, where we start risking cavern integrity. We're already below the degraded zone. 70 million is the true bottom where we lose structural integrity of the caverns.
Since we've already projected another 40 million, we're already going to be hitting against that. Then prices go up even more.
Net effect? Higher oil, food, plastics. Even things like helium, aluminum, and sulfur!
Next up? Let's talk AI Debt.
Chase did a fascinating study here and the numbers are staggering. The major players such as Google, Amazon, and Nvidia have borrowed $320B for the year. They're borrowing at 70% of the pace of the entire US government. If we factor in utilities, chipmakers, and data center companies they're up to $750B.
That's relevant due to bond issuance: They're approaching $2T in corporate debt this year, and every dollar spent on Microsoft AI investments is a dollar not spent on mortgage-backed securities. We end up doubly hit with treasuries and MBS increases.
That puts my prediction well into the 8's for next year.
The good news? Cotality studies show the average homeowner has $310K in equity, with $11.5T tappable across the country. HELOC time.
Oh, one final note: Cambridge proved that reading lowers your risk of Alzheimer's by 33%. Good job reading this. You're welcome. I probably just helped you by at least .1%.