Monetary Policy Considerations - The Federal Reserve's upcoming decision is viewed as an agonizing one, with market probabilities at 50/50 [1][2] - The Fed funds rate is currently in a range of 3.75% to 4% [5][6] - Some believe the neutral Fed funds rate is much lower, potentially leading to a 50 basis point cut [6] - The real neutral Fed funds rate (adjusted for inflation) is estimated to be between 0.75% and 1% [7] - A neutral nominal Fed funds rate of 2.75% assumes inflation will return to 2%, but it's currently running at 2.75% to 3% [8] - Adding the current inflation rate (2.75% to 3%) to the real neutral rate (0.75% to 1%) yields a nominal rate of 3.5% to 3.75% [9] - The market is seeing more hawkish voices emerge because the Fed is closer to neutral, having already cut rates by 25 basis points in October [11] - The Fed needs to assess whether the labor market weakness is cyclical, due to the shutdown, or structural (mismatches between jobs and job seekers) [13] Economic Factors Influencing the Fed - Near-term tariffs are slowing growth [3] - Immigration policies and uncertainty around 12 to 15 million immigrants in the workforce are affecting supply and hurting growth [4] - The government shutdown has hurt growth, but its resolution will help [4][12] - Tailwinds in 2026 include the unwinding of the shutdown, tax incentives, and regulatory relief [4] - The AI data center power boom is considered near neutral on the Fed funds rate [5] - Inflation has been sticky and running 0.75% to 1% above target [12]

Inflation Rate Analysis - ZEC's high inflation rate in the past is correlated with its poor performance against BTC [1] - ZEC's inflation rate was hundreds of percent in 2017 [1] - ZEC's inflation rate was 25-100% until 2020 [1] - ZEC's inflation rate was approximately 10% until 2024 [1] - ZEC's current inflation rate is around 4% [1] ZEC/BTC Performance - The (log) annual inflation chart looks identical to ZEC/BTC performance [1]

Fed Independence & Monetary Policy - The market is concerned about a potential rupture in Fed independence [1] - Maintaining the objectivity and integrity of the monetary policy process is crucial [2] - The Fed should continue its responsibilities regarding monetary policy, financial stability, and bank supervision [4] - The Fed's 2% inflation target is reasonable, and low stable inflation (1-3%) is generally equivalent [12][13] Fed Structure & Governance - Regional bank presidents are appointed by local boards of directors, subject to approval by the board of governors, creating a system of checks and balances [6][7][8] - Fed governors are appointed to 14-year staggered terms to insulate the Fed from short-term pressures [9][10] Economic Impact - Tariffs are expected to have a net negative effect on the economy by distorting resource allocation and increasing costs for consumers [10][11]

Economic Overview - The unemployment rate is in the low fours, indicating near full employment [1] - Inflation remains elevated but is trending downward [1] - Small to medium-sized businesses are experiencing economic strain due to floating rate lines of credit [1] - Commercial clients are hesitant due to global uncertainties [1] Consumer Spending - Consumers are continuing to spend [2] - Bank of America consumers' spending is up by 4% to 5% this quarter compared to the second quarter of last year [3] - Consumers have money in their accounts, and credit quality is generally good [3] Future Outlook - Tax bill and trade policy are important factors for future growth [2] - Immigration policy is also a key consideration [2] - Clarity in these areas will likely stimulate further economic growth [2]

Market Anomalies - Historically, the dollar index increases when the S&P 500 declines by more than 10%, but recently the dollar decreased while the S&P 500 fell almost 20% [1] - Typically, the 10-year Treasury yield decreases following the first Federal Reserve rate cut, but this time it increased, and the yield curve is steepening [2] US Treasury Market & Debt - The US faces an unsustainable interest expense due to a $21 trillion budget deficit and persistent interest rates [3] - The average coupon on Treasuries has risen from below 2% to nearly 4% [3][4] - Maturing bonds issued in 2008, 2009, and even 2019 with coupons as low as 025% are being replaced with bonds at 425%, a 400 basis points increase [4][5] - The long-term Treasury bond is losing its status as a reliable flight to quality asset, not responding as expected to lower interest rates or the current 25% inflation rate [5] Inflation Outlook - Near-term inflation is likely to rise, as the cumulative headline CPI rolling off from a year ago was 01%, while the most recent CPI was 018% [6] US National Debt Concerns - The US national debt is rapidly approaching $37 trillion, requiring innovative solutions [7]