A GIFT TO ANYONE PAYING ATTENTION (Guest: Chase Taylor)

Key Points

• The episode features Chase Taylor from Pinecone Macro discussing current market drivers, focusing on crude oil as a central pressure point.
• Oil has quietly crept higher after a spectacular positioning washout in June, with legitimate supply shortages and inventory drawdowns now materializing.
• The oil trade is described as binary: as long as the war continues, oil goes higher; once it ends, oil drops significantly.
• Chase has migrated from December contracts to May 2027 oil futures, which remain mispriced if the conflict persists.
• The ETF "oil K" is highlighted for monetizing roll yield with a 30% annualized dividend and over 50% total return year-to-date.
• Inflation is re-accelerating: core CPI came in at 30 basis points, super core at 50 basis points, with energy, tariffs, technology, and agriculture all contributing.
• Fed rate hike probability for next week jumped to approximately 88-89% following the hot CPI print.
• Despite being a hardcore inflationist, Chase sees the front end of the curve (two-year) as increasingly attractive from the long side, as the market may be overpricing the number of hikes.
• Nominal growth is running at an eight-handle, jobs are strong, but real incomes are falling as wages fail to keep pace with inflation.
• A potential market correction or semiconductor crash could quickly pivot the Fed narrative back to financial stability priorities.

Summary

This episode of the podcast, featuring Chase Taylor from Pinecone Macro as a guest host alongside Patrick Ceresna, centers on the re-acceleration of crude oil prices and its cascading effects across financial markets. The discussion opens with oil, which has quietly climbed back to $100 per barrel after a dramatic positioning washout in June that caught traders who were certain about tight markets and Strait of Hormuz disruptions. Taylor describes the round trip back to pre-war price levels as one of the craziest things he has ever witnessed, especially given the obvious loss of production. He notes that China stepped away from buying in a way nobody saw coming, and they are only now nibbling back in. If they return to pre-war import levels, oil would move into the clouds very quickly.

The oil trade is framed as binary: as long as the war continues, prices will keep rising; once it ends, prices will fall substantially. Taylor has been long throughout, initially in December contracts, but has migrated to May 2027 futures because they are far less crowded and wildly mispriced if the conflict drags on. He highlights the ETF "oil K" as a way to monetize roll yield without K1 tax headaches, noting its 30% annualized dividend and over 50% total return year-to-date, beating semiconductors. He cautions, however, that once the war ends, Saudi Arabia, UAE, Iran, and Latin American producers could all ramp up output, potentially creating a nasty surplus and pushing oil back toward the $50s.

The conversation then shifts to inflation and interest rates. The August CPI print showed core at 30 basis points and super core at 50 basis points, with energy, tariffs, technology, and agriculture all contributing to an inflationary backdrop. Nominal growth is running at an eight-handle, and jobs remain strong, though real incomes are falling as wages fail to keep pace. The market is now pricing roughly 3.6 to 4 hikes, with the two-year yield serving as an over/under on four hikes. Despite being a hardcore inflationist, Taylor finds the front end of the curve increasingly attractive from the long side, believing the market may be overpricing the number of hikes. He would not own the long end outright but might buy calls on 10-year futures.

Ceresna raises the possibility of a curveball—a semiconductor crash or broader market correction driven by higher rates—that could quickly pivot the Fed narrative back to financial stability. Taylor agrees, noting that super core inflation at 0.5% month-over-month contrasts sharply with wage growth, meaning real incomes are falling and consumption could weaken. The episode concludes with both participants acknowledging that the market had been ignoring the war and its side effects, but yesterday marked a turning point where energy prices are rising due to SPR depletion and Chinese demand returning, making the inflationary backdrop increasingly difficult to dismiss.