Kevin Warsh as Fed Chair? What It Means for Rates, Liquidity & Markets w/ Andreas Steno Larsen
Summary
- The nomination of Kevin Warsh as Fed Chair signals a shift toward a politicized Fed aligned with the Trump administration; Warsh is expected to prioritize political loyalty over his historical hawkishness.
- A "major change of scenery" is expected regarding bank regulations. To shrink the Fed's balance sheet without breaking the repo market, the administration will likely relax the Supplementary Leverage Ratio (SLR/ESLR).
- This regulatory easing could free up "trillions of dollars" in bank balance sheet capacity, creating a liquidity environment similar to 2004-2005, which is viewed as "incredibly bullish" for risk assets.
- The silver market is exhibiting signs of a speculative blow-off top (ETF turnover exceeding annual mining supply), prompting a rotation into deeper, more liquid metals like Gold and Copper.
- ISM Manufacturing data (56.5) suggests a sharp economic re-acceleration, the strongest uptick in four years.
Trade Ideas
Steno notes that the upcoming relaxation of bank leverage rules (SLR) will allow for "indefinite leverage" similar to the 2004-2007 era. Increased bank leverage results in a flood of cheap funding and liquidity entering the system. Steno explicitly states this will result in "cheaper funding for your crypto bags." Crypto is a direct beneficiary of increased systemic liquidity and cheaper cost of capital. Regulatory delays or a sudden pivot back to hawkish monetary policy to combat inflation.
Steno is "fully out" of Silver but holds Gold (specifically Barrick), Copper miners, and Rare Earth metals. While the metals trade is strong due to geopolitics, Silver has become a speculative mania (illiquid relative to trading volume). Gold and Copper offer the same thematic exposure but with significantly deeper liquidity and lower volatility-adjusted risk. Long the miners and underlying metals as a safer way to play the commodities supercycle. A strengthening US Dollar or a deflationary bust could hurt commodity prices.
Steno sold his entire Silver position two weeks prior. He notes that on a single Friday, the SLV ETF turnover was $40 billion (40% of annual mining supply), signaling extreme speculation. When paper trading volume dwarfs physical supply to this degree, it indicates a "blowoff top" or extreme fragility. Steno advises staying out despite the temptation to chase. The risk/reward in Silver is poor compared to Gold/Copper due to extreme volatility and speculative frothing. Silver could continue to melt up irrationally in a "meme stock" fashion before crashing.
Andreas Steno Larsen
Founder, Steno Research
Steno argues that Kevin Warsh wants to shrink the Fed balance sheet, but cannot do so without causing a liquidity crisis in the repo market (as seen in Q4). The only way to shrink the Fed balance sheet safely is to allow private banks to take on more leverage. This requires rolling back post-2008 regulations, specifically the Supplementary Leverage Ratio (SLR). Steno predicts this easing will free up "trillions" in capacity. A rollback of leverage constraints allows banks to expand their balance sheets and profitability, creating a massive tailwind for the financial sector. If the administration fails to pass regulatory easing, the Fed cannot shrink its balance sheet without breaking the repo market.
Up Next
This Milk Road Daily video, published February 15, 2026, features Andreas Steno Larsen discussing BTC, GOLD, COPX, REMX, SLV, XLF, KRE. 4 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Andreas Steno Larsen · Tickers: BTC, GOLD, COPX, REMX, SLV, XLF, KRE