Weeks Where Decades Happen
January 11, 2026 – Weekly Comment
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You can tell we’re in the Fourth Turning. The last time the Chicago Bears beat the Green Bay Packers in a playoff game was 1941. A saeculum ago. Right after the Pearl Harbor attack formally brought the US into WWII. Nail-biter come-from-behind win for Chicago!
The original book The Fourth Turning by Stauss and Howe was originally published in 1997. At the beginning of last week, Neil Howe was on Adam Taggert’s Thoughtful Money podcast. Fascinating interview, though quite long.
https://www.youtube.com/watch?v=l86zUCh5FOg
Howe talks about three potential conflicts, 1) internal/civil war 2) geopolitical/China and 3) financial crash. On an optimistic note: “Conflict is the incubator of community.”
Just after the 13 minute mark: he talks about the Gini Coefficient, a measure of wealth inequality: “Great Depression, WWII …long term Gini rose to a high in 1929, fell in the 1930s somewhat. It fell even faster during WWII because of the enormous production that gave high wages to ordinary people [during] the ongoing inflation.”
“Inflation PLUS Wage Control PLUS Financial Repression… this is a package which always comes about during 4th turning climaxes. And it’s a great way of redistributing wealth… FINANCIAL REGULATION…what I call financial repression.” Hmm.
According to the St Louis Fed and other sites, current Gini is between 41 and 42. The recent low mark in 1980 was 34.7.
In any case, events from the past week certainly feel historically pivotal: Maduro’s extraction from Venezuela (including incredible details of tactics and weaponry)
https://x.com/nettermike/status/2009843044028428714
Russia’s firing of an Oreshnik missile (nuclear capable) in Ukraine. Ongoing mass protests in Iran. Trump’s threats to take Greenland. The seizure of several oil tankers.
Domestically: Minnesota and other state (IL) and city leaders openly calling for citizens to defy Federal Gov’t ICE agents (resulting in the death of a protestor and leading to new large public protests). Massive fraud investigations opening in many US states due to abuse and theft of social services resources.
At the same time Trump is bluntly inserting the administration into all sorts of economic/market functions: Instructing his people to buy $200 billion of mortgage bonds. Proposing to cap credit card interest at 10% (which will obviously lead to reduced credit access). Banning corporate ownership of single family homes. Pushing the oil majors to re-enter Venezuela (CEO of Exxon: “We’ve had our assets seized there twice. Under current structure, Venezuela is uninvestable.” Note to Mr Woods, you just MIGHT have your assets seized HERE!). Posting employment data on social media Thursday prior to the official release! Trump’s World Liberty Financial applying for a banking charter to issue/custody stablecoin USD1. Rich fleeing California due to wealth taxes. I have never seen as many social media comments questioning why people should pay taxes at all given the perception of massive waste and fraud.
Obviously it’s a lot to digest, But looking at VIX and MOVE (both near lows at 14.49 and 61.55) it almost feels like markets are being smothered by government intervention. Following is a brief summary of action in rates:
On the week, the two-year yield rose 6.1 bps to 3.536%. Most of that came on Friday, +4.8 bps as the employment report convinced traders that an ease in January is off the table. On the week, February Fed Funds (clean month which captures the Jan 28 FOMC) closed -3.5 at 9637.0. Fed Effective Rate is 3.64 or 9636.0, so odds of an ease have pretty much vanished. SFRH6 settled at 9648.5 on 2-Jan, and 9640.5 on Friday. This contract also prices the FOMC on March 18, and, to a lesser extent, April 29. It’s quite close to EFFR and only 7 bps higher in price than SFRF6, the January 3-month SOFR contract at 9633.5. The most inverted one-yr calendar on the SOFR strip is SFRH6/H7 at -41.0 (9640.5/9681.5). SFRZ6 and SFRH7 are tied for the peak on the strip, and at 9681.5 or 3.185%, the yield is less than 50 bps away from current EFFR. Whether right or wrong, perceptions of the Fed being ‘in play’ have been dramatically tamped down.
On the other end of the yield spectrum, the 30y bond ended the week at 4.818%, that’s DOWN 4.5 bps. 3.9 bps of that drop came on Friday as Trump on Thursday said he was instructing his minions to buy $200 billion in mortgages. It’s clear that Trump’s blurt on mortgages caught shorts offsides. Open interest levels from Friday: US -77.2k a decline of about 4%. (Although net change between FV, TY, UXY and WN was zero).
The one-two punch of ‘no ease’ and the Federal Gov’t buying long paper is clearly a flattener, though 2/10 at 63.4 is, for now, holding at the breakout level of the April through November range of 45 to 63 (high at the beginning of January is 71.5). Ten-yr TIP breakeven has bounced from a recent low of 225 bps to end the week at 230.3.
A large trade on Thursday was the new purchase of 200k 0QU6 9750 calls for 7.25. ~$36 million in premium. These options have SFRU7 as underlying, which was trading 9679 at the time. Expiration is THIS year on 11-Sept 2026. On Friday vol was crushed, and these calls settled 6.0 vs 9674.0. (On Thursday 0QU6 atm 9675^ settled 52.5 ref 9678.5, and on Friday settled 49.0 ref 9574.0).
Earlier in the week on Monday and Wednesday, the TY covered call buyer bought 100k TYH6 114c. On Monday, he paid 14 vs 112-135 with 17d and on Wednesday paid 15 vs 112-180 with 17d, 50k each. This call settled 9 vs 112-07. Instant premium evaporation.
News this week includes Dec CPI Tuesday, expected yoy 2.7 both headline and Core. Nov PPI and Retail Sales on Wednesday. Philly Fed Thursday. Atlanta Fed GDP Now is +5.1% having shot up last week on the huge move in the Trade Deficit to just $29.4b as imports of pharmaceuticals and industrial supplies showed steep declines (a reversal of previous hoarding according to Cameron Crise, and perhaps impacted by potential tariff ruling).
Three and ten year auctions on Monday. Thirty year on Tuesday.
We’re hanging on by a feather:
https://x.com/ValaAfshar/status/2009766549721162118
Like everyone else, Howe has an ETF called HEFT through Hedgeye. (Long short-dated treasuries, long precious metals, long WMT and Dollar General, long Defense).
| 1/2/2026 | 1/9/2026 | chg | ||
| UST 2Y | 347.5 | 353.6 | 6.1 | |
| UST 5Y | 373.7 | 375.5 | 1.8 | |
| UST 10Y | 418.7 | 417.0 | -1.7 | wi 417.2 |
| UST 30Y | 486.3 | 481.8 | -4.5 | wi 482.0 |
| GERM 2Y | 213.8 | 210.5 | -3.3 | |
| GERM 10Y | 289.9 | 286.2 | -3.7 | |
| JPN 20Y | 297.4 | 306.1 | 8.7 | |
| CHINA 10Y | 184.3 | 186.9 | 2.6 | |
| SOFR H6/H7 | -39.0 | -41.0 | -2.0 | |
| SOFR H7/H8 | 22.0 | 18.5 | -3.5 | |
| SOFR H8/H9 | 22.5 | 19.5 | -3.0 | |
| EUR | 117.19 | 116.37 | -0.82 | |
| CRUDE (CLG6) | 57.32 | 59.12 | 1.80 | |
| SPX | 6858.47 | 6966.28 | 107.81 | 1.6% |
| VIX | 14.51 | 14.49 | -0.02 | |
| MOVE | 62.36 | 61.55 | -0.81 | |
