The AI Unwind And Warsh's Long-End Gamble | Weekly Roundup
Speakers
Felix Jauvin
— Co-Host, Forward Guidance
Quinn Thompson
— Co-Host, Forward Guidance / Founder, Lekker Capital
Summary
Felix Jauvin and Quinn Thompson discuss the AI and semiconductor unwind driven by forced leverage liquidation, the Fed’s decision to pause and Kevin Warsh’s communication strategy targeting the long end of the yield curve, and the resulting implications for growth, financial conditions, and market positioning ahead of the midterms.
- The AI/semiconductor selloff was amplified by retail 3x ETFs, Korean margin calls and a forced hedge fund liquidation.
- Citadel stepped in as the buyer of the distressed assets, prompting a sharp mean-reversion bounce.
- Quinn argues the Fed is deliberately letting long-end yields rise to tighten conditions without hiking short rates.
- The 30‑year bond sold off as Warsh signaled balance-sheet tightening, pushing real yields and credit spreads wider.
- Felix expects the AI trade to enter a multi‑month digestion period, advocating an avoidance strategy.
- Both see growth momentum fading as one‑off stimuli roll off and financial conditions tighten.
- They anticipate further policy-induced volatility and potential market manipulation ahead of midterm elections.
Ideas
Avoid semiconductors and AI trade near-term.
The AI and semiconductor trade was fueled by extreme leverage (retail 3x ETFs balloning AUM, Korean margin calls, a major levered fund liquidation) that caused a violent unwind and damaged the buyer base. The sector now faces a prolonged period of digestion and low-volatility chop, making it best to avoid for about six months to sidestep the brain damage, similar to how gold went through a long cool-down before resuming higher.
Long-end Treasury yields to rise further.
Fed Chair Kevin Warsh explicitly wants to remove balance sheet accommodation that has suppressed long-end yields. By letting the long end price to fair value, the 30‑year yield could climb another 50‑100bps to 5.5‑6%, steepening the curve and tightening financial conditions enough to slow the economy, credit and equities. The price action during the press conference confirmed this deliberate strategy, even if the long-term resolve is uncertain.
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This Forward Guidance video, published July 31, 2026, features Felix Jauvin, Quinn Thompson discussing SOXX, TLT. 2 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Felix Jauvin, Quinn Thompson · Tickers: SOXX, TLT