A MEMO TO EQUITY BULLS, REGARDING YOUR VENEZUELAN DIVIDEND

The Dow hit 48,977 on Monday—an all-time high—up 1.23%, while the S&P 500 and Nasdaq both rallied, gaining 0.6% and 0.7% respectively. The driver? The U.S. capture of Venezuelan president Nicolás Maduro over the weekend, followed by Trump encouraging big investments from U.S. oil companies.

If you squint hard enough, this makes sense. Chevron surged 5.1% on the notion it would benefit from rebuilding Venezuela's oil infrastructure—the country has the largest proven oil reserves in the world. Halliburton and SLB moved higher by 7.8% and nearly 9%, respectively. Goldman Sachs rose 4%, JPMorgan 3%, and Bank of America, Wells Fargo, and Morgan Stanley all gained more than 2%, with all five major banks notching all-time intraday records.

What we witnessed Monday was the market pricing in a subsidy bonanza disguised as geopolitics. Trump suggested the U.S. may subsidize oil majors that invest in developing Venezuela's oil infrastructure. Translation: taxpayer-funded capex for Big Oil while gas prices sit near pandemic lows. One expert warned that rebuilding Venezuela's oil infrastructure would likely cost tens of billions of dollars and take years—hardly a Q1 earnings catalyst. But markets don't price reality anymore; they price the idea of reality, preferably one where Exxon gets a blank check and calls it "strategic investment."

Meanwhile, gold futures rose 2% to trade above $4,450 per troy ounce while silver futures gained as much as 7% to around $76 per ounce. That's not celebration. That's hedging. When gold pops 2% on the same day equities rip, you're watching two different movies play simultaneously—one where everything is fine, and one where nothing is.

The Fed, for its part, continues to telegraph confusion. Minneapolis Fed President Neel Kashkari told CNBC on Monday that the central bank is nearing the point where it should stop lowering interest rates, saying "My guess is we're pretty close to neutral right now". The federal funds rate currently sits between 3.5%-3.75%, only about half a percentage point from the committee consensus on the neutral rate. With the next FOMC meeting scheduled for January 27–28, the air is thick with anticipation—not for a rate cut, which markets now view as a remote possibility, but for the looming leadership vacuum when Powell's term expires on May 15, 2026.

CME FedWatch data shows an 83% probability that the Fed will maintain the current benchmark rate at the upcoming meeting. Yet the CME Group's FedWatch tool points to two cuts in 2026—one in April, and one in September. So we're simultaneously too close to neutral to cut and scheduled for two cuts. Pick your narrative.

Crypto showed up late but dressed for the party. Bitcoin climbed over 1% during Monday's Asian session, positioning itself for a five-day winning streak—the longest since early October—jumping from roughly $91,480 to $92,500. After over $6 billion in combined outflows across November and December, Bitcoin and Ether ETFs together captured $645.8 million in net inflows on January 2nd. BlackRock's IBIT absorbed $287.4 million of the total $471.3 million Bitcoin inflow, while Grayscale's ETHE led Ether inflows with $53.7 million. Call it the "January Effect" or call it desperation—institutions are back, testing whether 2026 will be the year crypto decouples from its own worst instincts.

The bond market, naturally, is screaming. The 30-year Treasury yield was up almost three basis points to 4.87% on Friday, hitting 4.88% earlier—the highest level since September. The 10-year held steady around 4.19% on Monday, hovering near four-month highs. Short-dated yields tumbled as the Fed made three quarter-point cuts beginning in September, while longer maturities declined less or increased, facing upward pressure from the dire long-term fiscal outlook and signs of U.S. economic resilience.

Here's the tell: China's major stock markets climbed to multiyear highs on Tuesday, with the benchmark CSI 300 Index advancing 1.6% to reach its highest close since January 2022, while the Shanghai Composite rose 1.5% to its strongest level in over a decade. Japan's Nikkei 225 rose 1.32% to end at 52,518.08, while the Topix advanced 1.75% to close at a new record high of 3,538.44. Capital is rotating out of U.S. exceptionalism and into everywhere else. Asian stocks are having their best-ever start to a year, with currencies and bonds also making gains as investors hunt out investments beyond the US.

The setup is textbook late-cycle euphoria. Energy stocks rally on a reconstruction project that doesn't exist. Banks hit all-time highs with no catalyst beyond vibes. Bitcoin bounces because institutions need somewhere to park cash. And Powell's replacement—rumored to be Kevin Hassett, with Polymarket assessing a 43% probability—will arrive in May to inherit an economy where unemployment has drifted higher to 4.6% while the Fed's preferred core inflation measure sits at 2.8%.

If you're long equities here, you're not betting on fundamentals. You're betting that someone else will pay more for the same fantasy tomorrow. The median Wall Street forecast puts the S&P 500 at 7,600 by year-end 2026, implying 11% upside. Maybe. But when the Dow rallies 600 points because we captured a dictator and promised oil companies a blank check, you're not in a bull market. You're in a subsidy auction dressed up as patriotism.

Watch the yields. Watch China. And for the love of god, watch what happens when the bill for Venezuela's "strategic investment" lands on the Treasury's desk.

A MEMO TO EQUITY BULLS, REGARDING YOUR VENEZUELAN DIVIDEND

The Dow hit 48,977 on Monday—an all-time high—up 1.23%, while the S&P 500 and Nasdaq both rallied, gaining 0.6% and 0.7% respectively. The driver? The U.S. capture of Venezuelan president Nicolás Maduro over the weekend, followed by Trump encouraging big investments from U.S. oil companies.

If you squint hard enough, this makes sense. Chevron surged 5.1% on the notion it would benefit from rebuilding Venezuela's oil infrastructure—the country has the largest proven oil reserves in the world. Halliburton and SLB moved higher by 7.8% and nearly 9%, respectively. Goldman Sachs rose 4%, JPMorgan 3%, and Bank of America, Wells Fargo, and Morgan Stanley all gained more than 2%, with all five major banks notching all-time intraday records.

What we witnessed Monday was the market pricing in a subsidy bonanza disguised as geopolitics. Trump suggested the U.S. may subsidize oil majors that invest in developing Venezuela's oil infrastructure. Translation: taxpayer-funded capex for Big Oil while gas prices sit near pandemic lows. One expert warned that rebuilding Venezuela's oil infrastructure would likely cost tens of billions of dollars and take years—hardly a Q1 earnings catalyst. But markets don't price reality anymore; they price the idea of reality, preferably one where Exxon gets a blank check and calls it "strategic investment."

Meanwhile, gold futures rose 2% to trade above $4,450 per troy ounce while silver futures gained as much as 7% to around $76 per ounce. That's not celebration. That's hedging. When gold pops 2% on the same day equities rip, you're watching two different movies play simultaneously—one where everything is fine, and one where nothing is.

The Fed, for its part, continues to telegraph confusion. Minneapolis Fed President Neel Kashkari told CNBC on Monday that the central bank is nearing the point where it should stop lowering interest rates, saying "My guess is we're pretty close to neutral right now". The federal funds rate currently sits between 3.5%-3.75%, only about half a percentage point from the committee consensus on the neutral rate. With the next FOMC meeting scheduled for January 27–28, the air is thick with anticipation—not for a rate cut, which markets now view as a remote possibility, but for the looming leadership vacuum when Powell's term expires on May 15, 2026.

CME FedWatch data shows an 83% probability that the Fed will maintain the current benchmark rate at the upcoming meeting. Yet the CME Group's FedWatch tool points to two cuts in 2026—one in April, and one in September. So we're simultaneously too close to neutral to cut and scheduled for two cuts. Pick your narrative.

Crypto showed up late but dressed for the party. Bitcoin climbed over 1% during Monday's Asian session, positioning itself for a five-day winning streak—the longest since early October—jumping from roughly $91,480 to $92,500. After over $6 billion in combined outflows across November and December, Bitcoin and Ether ETFs together captured $645.8 million in net inflows on January 2nd. BlackRock's IBIT absorbed $287.4 million of the total $471.3 million Bitcoin inflow, while Grayscale's ETHE led Ether inflows with $53.7 million. Call it the "January Effect" or call it desperation—institutions are back, testing whether 2026 will be the year crypto decouples from its own worst instincts.

The bond market, naturally, is screaming. The 30-year Treasury yield was up almost three basis points to 4.87% on Friday, hitting 4.88% earlier—the highest level since September. The 10-year held steady around 4.19% on Monday, hovering near four-month highs. Short-dated yields tumbled as the Fed made three quarter-point cuts beginning in September, while longer maturities declined less or increased, facing upward pressure from the dire long-term fiscal outlook and signs of U.S. economic resilience.

Here's the tell: China's major stock markets climbed to multiyear highs on Tuesday, with the benchmark CSI 300 Index advancing 1.6% to reach its highest close since January 2022, while the Shanghai Composite rose 1.5% to its strongest level in over a decade. Japan's Nikkei 225 rose 1.32% to end at 52,518.08, while the Topix advanced 1.75% to close at a new record high of 3,538.44. Capital is rotating out of U.S. exceptionalism and into everywhere else. Asian stocks are having their best-ever start to a year, with currencies and bonds also making gains as investors hunt out investments beyond the US.

The setup is textbook late-cycle euphoria. Energy stocks rally on a reconstruction project that doesn't exist. Banks hit all-time highs with no catalyst beyond vibes. Bitcoin bounces because institutions need somewhere to park cash. And Powell's replacement—rumored to be Kevin Hassett, with Polymarket assessing a 43% probability—will arrive in May to inherit an economy where unemployment has drifted higher to 4.6% while the Fed's preferred core inflation measure sits at 2.8%.

If you're long equities here, you're not betting on fundamentals. You're betting that someone else will pay more for the same fantasy tomorrow. The median Wall Street forecast puts the S&P 500 at 7,600 by year-end 2026, implying 11% upside. Maybe. But when the Dow rallies 600 points because we captured a dictator and promised oil companies a blank check, you're not in a bull market. You're in a subsidy auction dressed up as patriotism.

Watch the yields. Watch China. And for the love of god, watch what happens when the bill for Venezuela's "strategic investment" lands on the Treasury's desk.