The last time the 10-year Treasury paid what it pays today, it was the summer of 2007. That June, two Bear Stearns hedge funds stuffed with mortgage bonds started getting margin calls they couldn't meet — and within weeks they were worth almost nothing. Most people didn't notice. The stock market hit a record high that October.

I want you to remember that summer, because yesterday the 10-year yield closed at 5.21% — the highest since mid-2007. The 30-year touched roughly 5.48%, a level last seen in 2004.

So why does this matter to you? Because the price of money is the price of everything else. Your mortgage, your company's credit line, the value of every stock you own — all of it is priced off this one number. And this number is telling you the easy-money era isn't coming back.

Every paid-up subscriber should understand the three forces that pushed it here, because none of them is going away.

First, the Federal Reserve is hiking into an energy shock. On September 16, Chair Kevin Warsh's Fed raised rates a quarter point to 3.75%–4.00% — its first increase in three years — and 16 of 18 officials expect one more before year-end. Markets now put roughly 70% odds on another hike on October 28.

Second, Washington can't stop borrowing. The government ran a $2.0 trillion deficit in the first 11 months of fiscal 2026 — more than it borrowed in all of fiscal 2025 — including $168 billion in August alone. Gross debt has crossed $40 trillion. And just the interest on that debt now costs more than the entire defense budget.

Think about that. The United States now pays its lenders more than it pays for its military.

Third, the war. President Trump rejected Iran's latest ceasefire terms over the weekend, and Brent crude traded above $101 a barrel on Monday. Oil is up roughly 45% from a year ago — and every one of those dollars feeds inflation, which keeps the Fed hiking, which raises the interest bill, which widens the deficit.

Raising rates when the government owes $40 trillion is like dropping Mentos into a can of Diet Coke. Each hike makes the interest bill bigger, and a bigger interest bill means more Treasury bonds flooding the market to pay it. More supply means lower bond prices and higher yields. Rinse and repeat.

Most investors are still positioned for the world of 2021 — long-dated bonds and growth stocks priced on the assumption that money stays cheap. They're wrong.

As Buffett says, "Only when the tide goes out do you discover who's been swimming naked." The tide is going out.

Keep in mind: gold is falling too. It opened this morning at $4,150.10 an ounce, near its lowest level since August 5, and its gain for the year has shrunk to 9.5%. Silver dropped $3.87 in a single session on Monday to $60.91. When rates climb this fast, hard assets take a breather — and a breather is an entry point for anyone who missed the move.

If you own long-dated bonds, I urge you to shorten your duration now. If you don't own gold, use this pullback instead of chasing it later. And if you own businesses that must borrow heavily to grow, ask yourself what they look like with debt costing 6% or 7%.

These debts will never be repaid. Plan accordingly.

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The trade deal announced yesterday is smaller than the headlines — and what it leaves out tells you more than what it includes.

Coming out of last week's White House summit between Donald Trump and Xi Jinping, the two countries agreed to cut tariffs on $60 billion of bilateral trade — $30 billion each way. American exporters get relief on corn, wheat, sorghum, meat, dairy, seafood, logs, cosmetics, and medical devices. Chinese exporters get relief on coffee makers, toasters, bed linens, toys, fireworks, and holiday decorations. China also committed to import 10 million metric tons of U.S. coal a year in 2027 and 2028, and the trade truce — set to expire November 10 — now runs through January 10.

In other words, both sides agreed to cheaper Christmas ornaments.

Now look at what's missing. Soybeans — America's signature farm export to China — were left out. Rare earths weren't in the package. Advanced chips weren't in the package. The $14 billion Taiwan arms sale that's been on hold for months wasn't settled either, and Xi used the summit to warn that both nations would "lose in confrontation" over the island.

Beijing calls these "non-sensitive goods." That phrase tells you everything. China is happy to trade anything that doesn't give Washington leverage — and nothing that does.

The market understood immediately. Chinese stocks fell sharply after the announcement, with technology shares leading the decline, as a bipartisan group in Congress moved to bar Chinese-made data-center components from sensitive U.S. government systems. The trade in consumer goods is thawing. The trade in anything that powers an AI data center is freezing solid.

The two sides did agree to open a formal AI communication channel, with follow-up talks due by the end of November — a hotline, in effect, for the one technology both are racing to dominate.

If you're betting on a grand bargain between the world's two largest economies, stop. What you're watching is a managed truce on a two-month fuse.

Most people will read yesterday's headlines as "trade war over." The smartest money will read them as "trade war narrowed" — narrowed to exactly the sectors that matter most for your portfolio.

Iran's grip on the world's most important oil chokepoint is failing slowly — and that is the most important fact in the oil market today.

This is day 213 of a war that began February 28. Over the weekend, President Trump rejected Tehran's conditions for reopening the Strait of Hormuz; Iran insists any deal start from the memorandum of understanding the two sides reached in June. Mediators are shuttling between capitals this week, and Iranian officials reportedly doubt a deal comes before November's U.S. midterm elections.

And yet the oil keeps moving. Nineteen tankers transited the strait in the week ending September 27 — 17 of them supertankers. Gulf crude exports rebounded to 12.8 million barrels a day in September, the highest since the war began, against roughly 20 million before it. Saudi Arabia has restored about half the flow on its East-West pipeline, which bypasses Hormuz entirely, pushing 3.5 million barrels a day to the Red Sea.

So what does this mean for you? The market is pricing two forces at once. Headline risk sent Brent above $101 on Monday. Physical flows pulled it back to $97.51 this morning, while WTI slid 2% to $90.68.

Keep in mind that this war carries a human cost markets rarely price. Since February 28, 861 American service members have been wounded, including eight Marines hit in an Iranian missile attack on September 14.

And one more thing... Tehran still holds roughly 15 million barrels in storage at sea, which it can release or withhold as leverage. It is touting fresh attacks in the strait even as flows rise — the behavior of a regime that knows its chokehold is weakening and wants the world to believe otherwise.

If you own energy producers, keep them — oil is still up about 45% from a year ago, and Monday showed how fast one bad headline can add several dollars a barrel. But if you're buying oil here on the theory that Hormuz stays shut, you're late. The world is rerouting around the chokepoint. That's what markets do.

For three years, Washington's AI strategy rested on one assumption: cut China off from Nvidia, and China falls behind. DeepSeek is proving that assumption wrong — expensively, but wrong.

China's most famous AI lab is reportedly deploying at least 160,000 Huawei Ascend 950DT chips at a data center in Inner Mongolia. Now it's pushing Huawei silicon beyond running models into the harder job of training them. DeepSeek is training a 2-trillion-parameter model today, with plans for one four times that size.

What's the catch? Huawei's chips are weaker. Training a model on the scale of OpenAI's largest would take about 200,000 Ascend 950s versus 50,000 of Nvidia's GB300s — four times the hardware for the same result.

Most investors see that ratio and conclude China lost. They're wrong. Four times the chips means four times the power, land, and cooling — and China has all three in abundance. What it lacked was a domestic chip it could buy in volume without asking anyone's permission. Now it has one — and every order DeepSeek places funds the next generation of Huawei chips, which closes the gap a little further each cycle.

Let me put this in plain English. Export controls didn't stop China's AI program. They handed Huawei a captive customer — and the urgency to move faster. Huawei has pulled its next-generation Ascend 960DT forward to the first quarter of 2027, three quarters ahead of schedule.

The Red Queen Hypothesis says organisms must keep adapting just to survive. China's AI sector adapted. The question is whether the companies you own did.

If you own U.S. AI hardware names on the hope that China reopens to them, let that hope go. The world's second-largest AI market is building its own supply chain, and it isn't coming back.

When Xi Jinping arrived at the White House last week, he came armed with a rare-earth card — and he never had to play it.

He didn't need to. In August, China shipped 512 metric tons of rare-earth magnets to the United States, down 21% from July's 647 tons and 13% below August a year ago. There was no announcement and no new ban — just slower, selective licensing in the weeks before the summit. Trade analysts have a phrase for it: "It is a dial, not a switch."

Here's the idea. China doesn't need to cut America off. It only needs America to know it can.

Now look at the whole board. Beijing handed over $30 billion of tariff relief on consumer goods and kept every strategic input on the dial — the magnets inside missile guidance systems, EV motors, and fighter jets, and the AI chips it now builds for itself. Meanwhile, U.S. defense contractors face a January 1, 2027 deadline that bars Chinese-sourced magnets from American weapons systems. That's three months away.

Washington has started running. The administration has mobilized more than $7.3 billion across five agencies, including a $400 million Pentagon equity stake in MP Materials backed by a $110-per-kilogram price floor. But a mine-to-magnet supply chain takes the better part of a decade to build, and China's lead has compounded for decades. That's Lindy's Law at work: the longer a dominance lasts, the longer it's likely to last.

This is the Red Queen problem in its purest form. America is running as fast as it can — billions in subsidies, price floors, procurement deadlines — just to stay in the same place. Every month the magnet dial stays turned down, the gap stays open.

So what should you do?

First, own the builders of the non-Chinese supply chain. Companies with government price floors and Pentagon contracts have something rare in resource markets — a customer that can't walk away.

Second, treat every U.S.-China "breakthrough" as a trading event, not a structural change. The truce now expires January 10, and nine days before that date, the defense magnet ban takes effect. Expect Beijing to turn the dial right when Washington needs supply most.

Third, keep a core position in gold. When the two largest economies are fighting over the inputs to everything, the one asset neither side can print or embargo belongs in your portfolio.

I've given you the answer. Horse, meet water.

If you want to know whether the Fed hikes again, watch this number. August consumer prices rose 0.4% — the biggest monthly jump in four months — and 3.4% from a year earlier. A hot print tomorrow all but locks in an October hike.

August added 162,000 jobs with unemployment steady at 4.1%. If you're hoping a weak labor market rescues the bond market, you'll need a much uglier number than that.

Markets put roughly 70% odds on another quarter-point hike. If you carry floating-rate debt — credit cards, a home equity line — assume it gets more expensive before Thanksgiving.

BHP halted operations indefinitely at Escondida in Chile — the world's largest copper mine — after a fatal accident. Copper sits at $6.55 a pound, up about 36% from a year ago. If you own copper producers outside Chile, this is your tailwind.

China's September rare-earth magnet export data lands in the coming weeks. If shipments to the U.S. fall again, you'll know Beijing is already turning the dial ahead of January 10.