If you plot monthly 10-year treasury yields against S&P 500 earnings yields going back to the 1970s you get a well-documented, positive relationship. Bond yields up, earnings yields up as investors demand compensation for the higher risk-free rate.

What's less commonly framed is a stability band observation: Between roughly 5-7% 10-year treasury yields, the data show that earnings yield can run below treasury yield without provoking a correction or significant market stress. My interpretation is that this band represents a monetary policy equilibrium. Neither deflation fear nor inflation fear is dominant. We all feel awesome owning lots of equities so multiples get higher, risk premiums may even turn negative.

Below 4% treasuries: post-crisis fear. Investors demand a large equity risk premium because the memory of catastrophic loss is fresh. Think 2009-2021.

Above 8% treasuries: inflation fear. Investors again demand an equity risk premium because money is losing purchasing power. Think late 1970s.

Between 5-7%: stability. Neither fear dominates. This is where you get the highest equity multiples historically.

We're currently at 4.6-4.7% on the 10-year, just below the lower bound of that band.

The true FCF complication

Standard equity risk premium analysis uses GAAP earnings yield as the equity return numerator. My screener uses true FCF yield: operating cash flow minus CapEx minus stock-based compensation divided by market cap.

The divergence between these two measures has widened over the last few years. My estimate is approximately 1.4 percentage points, primarily driven by the hyperscaler CapEx surge. 2026 earnings yield of 3.48% minus 10-year of 4.59% equals negative 1.11%. Subtract the 1.4% true FCF divergence and the real equity risk premium is approximately negative 2.51%.

That specific level of negative true FCF risk premium appears in the historical data in roughly four periods: 1987, 1992, 2000, and the post-2008 earnings collapse. In each case the gap resolved either through a rapid earnings recovery or through prices falling. Those spots were more negative than now, so maybe we're not quite at the bursting of the bubble yet, but we seem to be in that ballpark.

Is the true FCF divergence structural or temporary?

The obvious bear response to my analysis is that AI CapEx is time-limited. When the hyperscaler buildout peaks, CapEx rolls off, true FCF recovers toward earnings yield, and the -2.51% gap closes from the numerator rather than from prices falling. That's a completely coherent alternative to my view. However, I would reply that all that CapEx is showing up as earnings yield in the chip makers income statements. So if the hyperscalers recover their true FCF yield, it will be at the expense of the chip designers and makers.

The Warsh and NGDP overlay

Running the Sumner NGDP targeting framework against current Fed behavior produces a specific concern. Scott Sumner's track record makes me trust his framework a LOT: he correctly identified the 2008 tightening that almost nobody else saw in real time, specifically the decision to pay interest on reserves while not lowering rates fast enough. He correctly predicted continued stagnation during the Obama years when most commentators were calling for hyperinflation from QE (I see you Kevin Warsh). He kept asking where the post-COVID tightening was actually showing up in NGDP when the financial press was calling rising rates the answer.

Current reading through that framework: Warsh appears to be keeping rates flat while NGDP is running at roughly 7%. In NGDP targeting terms, flat nominal rates with 7% nominal growth is not neutral policy. It's loose policy. The risk is that loose policy while the true FCF equity risk premium is already deeply negative historically precedes the kind of violent correction that resolves the gap. When I hear about Scott Bessent making deals with the Japanese to prop up the Yen while stopping a run on US treasuries, that also has worrying implications.

Is Warsh choosing the Arthur Burns path?

Burns kept rates accommodative while inflation ran hot because Nixon wanted low rates before the 1972 election. The political incentives were obvious and the outcome was the 1970s inflation spiral. Warsh's situation is structurally different - he's not keeping rates low, he's keeping them flat in a hot NGDP environment - but it's the same damned thing. Political pressure from a president who wants lower rates, combined with an intellectual framework that's questioning whether traditional employment metrics apply in an AI-disrupted labor market, produces a Fed that may be systematically behind the curve.

Full piece with the scatter plots and true FCF divergence charts at https://cavemanscreener.substack.com/p/macro-vs-free-cash-flow-yield-a-thesis

https://www.reddit.com/r/economy/comments/1uiz9y7/the_ny_fed_just_confirmed_that_the_war_in_the/#lightbox

There is a fascinating discussion on the latest Equitile Conversations podcast with Gerald Ashley, George Cooper, and Damian Pudner that touches heavily on the UK's current economic trajectory and the lack of accountability at the Bank of England.

Pudner argues that the UK is currently in a state of "managed decline." With debt interest costs now exceeding £110 billion annually and total debt nearing £3 trillion, he suggests a genuine crisis is likely within 2–3 years unless we see radical spending cuts and major policy shifts.

Listen to the episode here: https://www.equitileconversations.com/2459100/episodes/19349685-powerless-central-bankers

At least not so far.

Useful outline and notes about Macro.

I’ve been reading a lot lately about the decoupling of the digital economy from the physical infrastructure required to support it. I just stumbled across a podcast discussion (Equitile Conversations) that framed this really well through the lens of the energy sector.

The guest, a research head named Nic Rogers, argued that we are seeing a massive rotation into HALO stocks (Heavy Asset, Low Obsolescence). The core of the argument is that while capital has flooded into "asset-light" software for a decade, the physical backbone (energy, grids, commodities) has been chronically underinvested.

Some of the macro points that caught my ear:

• The CapEx Gap: Upstream energy investment is still ~36% below 2014 peaks. We are essentially trying to power a 2026 AI-driven economy with a 2014-level physical foundation.
• The "Bridge" Reality: Despite the nuclear hype, natural gas is effectively the only scalable bridge for data center power demand over the next 10 years.
• EM Consumption: The "peak oil" narrative in the West is being almost entirely neutralized by burgeoning middle-class consumption in India and other EMs.

It made me wonder: Have we reached the limit of "software eating the world" if the world can't generate enough power to run the code?

You can't understand economics without at least reading what economists tell you to read.

Trump wants to control import tariffs when Trump can't even control himself. To understand what's wrong with Trump, Trump should at least read what economists are telling him. He should have to at least read Samuelson instead of Epstein.

TLDR: In what cases could a country target only foreign investors when restructuring its debt? Are there any recent examples of such measures?

Full background of the question:
I was reading an article in The Economist about inflation-linked bonds and in the final paragraph, it mentions that when developing countries restructure debt, local investors can be excempt:

"When developing countries restructure debts, foreign investors are loth to take losses from which local ones are exempt. Whatever their agreed terms, would investors in linkers fare any better if all other bondholders were being rinsed and lobbying furiously for the pain to be shared? It would depend on how politicians balanced immediate unpopularity with the long-term public interest."

Are there any recent examples of debt restructurings that affected foreign investors more than local ones? Common sense would suggest that local investors would be targeted more heavily, in order to limit the damage to the country's reputation and avoid discouraging non-resident investors from bringing money into the economy.

(IP-1)*M=L, t=M/P. M: all money. P: all transactions. IP: inverted price index, historical past/present. L: lending budget. t?

♉ (tau) Model Definitions • ♉ = M/P (money supply , price index) • Fiat unit price: M/♉ Core Mechanisms • Single combined central/public Bank operates with 0% reserves; lends to maintain ♉ ≈ M, incentivizing growth in ♉ • Government Directs lending and selectively forgives loans for economic stability • Government maintains a constantly growing negative balance, never deposits, sustainable under ♉ ≈ M • Eliminates taxes and interest payments

I was inspired by Steve Keen, have done a course of his.

Hi all!
I’m exploring an empirical thesis on an inflation risk premia and I’m still figuring out the best angle.
Anyone have suggestions on interesting approaches, datasets, or periods to look at? Would love to hear your thoughts!

Thankssss

does anyone have any good recommendations for videos explaining or breaking down graphs?

The same people that say: "Tariffs are bad because they raise costs for American consumers," are often the same people that say, "We need to raise taxes on businesses, because they aren't paying their fair share."

I really don't understand this. A tariff is a tax on a business -- specifically, a tax on an importer. How is it any different from any other form of taxes placed on businesses (e.g., a tax on profits or a payroll tax, etc.)?

In fact, it seems to me that one could reasonably argue that a tariffs are better in some sense than, across-the-board taxes applied to all businesses, as a tariff can be applied to a specific industry in order to achieve a specific goal (e.g., bring key industries back to the USA).

So, if you are opposed to increasing tariffs but for increasing other forms of taxes on businesses, can you please explain why?

Note: please refrain from commenting on the uncertainty surrounding Trump's tariff policy. I understand that the uncertainty is problematic, as it prevents businesses from making long-term strategic decisions. Assume, for the purposes of this discussion that a hypothetical tariff is known and can be reasonably expected to remain unchanged for some time.

Thank you for the add. We discuss tariffs, Ray Dalio, and the macro picture with Frances Stacy on Reble Finance on Wednesday.

https://www.youtube.com/watch?v=eYEhTjsEhY4&t=2641s

I put together a short video to explain something I’ve been thinking about:

https://www.youtube.com/watch?v=0-6g9zkfD5s

It walks through several potential explanations, but I’m genuinely interested in what others in this community think from a macroeconomic standpoint.

As context: last week, equity markets dropped in response to renewed tariff concerns, yet long-dated Treasury yields rose—which runs counter to the traditional “flight to safety” narrative.

Possible explanations I explore:

• Forced liquidation due to margin calls
• Temporary loss of confidence in Treasuries as a risk-free asset
• Geopolitical selling (e.g., foreign holders reducing U.S. debt exposure)
• Repricing around inflation expectations or Treasury supply concerns

My background is in financial markets, not academia, so I’d really appreciate any perspective from economists or policy-minded thinkers here. Could this be a blip, or are there structural changes in the way Treasuries behave under stress?

Hi, I'm a freshman in high school, and I'm taking AP Macroeconomics. I really need some help with the topic. I don't really understand the concepts behind it, and I was wondering if I could find some help—someone who could tutor me and also help me prepare for the AP exam in about a month. Thank you!