WATCH THE CRAIG SHAPIRO INTERVIEW HERE!
Description
Senior macro strategist Craig Shapiro returns to the Metals and Miners pod on 9/30 with a blunt read on the bond market. With the Treasury curve near or above 5 percent, interest expense crowding out the federal budget, and AI capex competing for the same pool of capital, he argues the cost of money is finally being repriced after years of suppressed volatility.
In this conversation with host Gary Bohm, Shapiro walks through why higher yields are not cleanly killing inflation, why the economy looks bifurcated between the AI build-out and everything else, and why he expects a financial accident before the midterms. He also covers Treasury-Fed coordination, Kevin Warsh, a possible Democratic sweep in the Mid-terms and what that would mean for spending and wider deficits, a near-term risk-off move versus a later hard-asset bid, housing, energy and the Strait of Hormuz, why a broad recession has not shown up yet, farmers and food inflation into 2027, and where the Fed put might actually sit.
Shapiro’s bottom line: the equity market has not fully noticed the rising cost of capital yet. That does not mean it will not. He frames this as a period for risk management, not heroics, with gold, natural gas, power and AI infrastructure as the areas he wants exposure to once liquidity returns.
Chapters
0:00 Intro
1:04 The cost of capital is rising
2:13 Can the U.S. sustain 5 percent rates and soaring interest expense?
3:41 Printing money, nominal GDP, and the AI spending boom
6:15 Are higher rates adding to inflation?
7:10 Interest expense, short-end issuance, and competing for capital
9:10 Credit stress, the K-shaped economy, and a break before the midterms
12:42 Bessent, buybacks, and whether the Fed gets pulled in
14:44 Inflating out of the debt, and what Warsh was hired to do
18:51 A quarter-point hike, politics, and more spending either way
21:02 Democratic sweep odds, term premium, and AI self-regulation
23:58 Crash, rotation, or a 2008-style collapse?
24:39 Near-term risk-off, then gold, Bitcoin, and hard assets
27:42 Housing after the liquidity comes back
29:45 Oil, diesel, Hormuz, and the war
34:52 Why there has not been a broad recession yet
39:02 Farmers, diesel, fertilizer, and food into 2028
42:19 Does the Fed stand aside or print?
47:48 What to own to get to the other side
Sound Bites
“The cost of capital is rising, and folks who are not used to trading in a volatile interest rate environment are going to be surprised.”
“The United States would never default on its debt because we can always print the money. The question is when, and how much inflation we will tolerate.”
“You’re running a bifurcated economy where parts of it are working regardless of the interest rate and parts of it are really struggling.”
“If the Fed really wanted to slay inflation, they could take rates to ten percent. I don’t think anyone would really like that.”
“The markets are trying to find the levels of interest rates that are going to break things.”
“I think they are going to break between now and the midterms.”
“It’s highly unlikely, over 100 percent of debt to GDP, that you grow your way out of this. What’s more likely is that we inflate our way out.”
“I don’t think they’re trying to engineer a crisis so they can print. It’s more likely we find ourselves in a crisis that begets the printing anyway.”
“Self-regulation is like giving my teenager the keys to the car while I’m away for the weekend.”
“The only way out of a risk-asset correction is with more liquidity. That’s when gold starts to work again. That’s when Bitcoin starts to work again.”
“To believe the Fed isn’t going to step in is naive. The question is where the Fed put is struck.”
“Just because the broad equity market hasn’t noticed the rising cost of capital yet doesn’t mean it’s not going to. This is a time for prudence.”
Takeaways
Shapiro sees a regime shift: bond volatility is back, and the post-GFC suppression of rates is ending.
AI capex, deficits, and energy inflation are competing for capital at the same time sovereign demand for Treasuries is softer.
He expects a correlated risk-off move into the election, then a liquidity response that favors gold, Bitcoin, and other hard assets.
Housing still looks too expensive relative to incomes and mortgage rates. He expects more price pressure, not a quick rebound.
Energy supply shocks make a fast return to low inflation harder and reduce the Fed’s room to cut.
The labor market and consumer data look recessionary outside AI, but capex and wealthy spending have masked it.
Food and farm-input uncertainty is a 2027 inflation risk if planting is cautious and weather is poor.
Portfolio stance he describes: stay long AI power and infrastructure, hold precious metals for the eventual print, look at natural gas, and keep cash while yields are high.
Connect With Craig Shapiro
NinjaTrader Live: Senior Macro Strategist
Connect With Metals and Miners
Website: https://www.metalsandminers.com
MineVantage: https://www.metalsandminers.com/MineVantage
Leave a Comment
Craig sees bond yields going vertical and believes something is going to break, and likely by the mid-terms. Do you agree? Leave a comment below!
Top 10 Golden Nuggets from Craig Shapiro
1. “You have this bizarre environment now where higher interest rates are not necessarily leading to the destruction of inflation as central banks have wanted… If the Fed really wanted to slay inflation, they could take rates to ten percent. It would lead to a pretty sizable reduction in GDP, a pretty broad slowdown, a pretty big reduction in asset prices and net wealth.”
Interest expense is paid to asset holders, who can spend it. In a high-debt state, more coupon income can feed nominal demand instead of choking it. Shapiro allows that a brutal enough hike would still work, but only by crushing growth, wealth, and employment. The uncomfortable middle is a rate level high enough to hurt rate-sensitive sectors and not high enough to finish inflation. That is the “troubling spot” he describes.
2. “It’s hard to see how there is enough capital to go around to finance the government deficits and finance the AI build-out and finance Japan’s deficits and Europe’s deficits and China’s deficits, particularly those abroad who are growing because of the elevated energy inflation.”
The constraint is global, not just American. Washington, the hyperscalers, and other large sovereigns are all in the market while an energy shock is already forcing importers to spend more. Shapiro treats the recent jump in bond volatility, wider credit spreads outside AI, and now wider spreads in leveraged AI projects and hyperscaler CDS as the market searching for the yield that breaks something. The lower half of the K-shaped economy is already absorbing that break.
3. “I think we’re pushing it into a point where things are likely to break. And I think they are going to break between now and the midterms… We’re setting ourselves up here for a potential financial accident in the coming weeks, as the markets need to reprice where this long-term cost of capital is.”
