Good morning, investors. Did you see the market on Friday? One of the wildest metals sell-offs in history seemed to have been catalyzed by the nomination of Kevin Warsh as the next Chair of the Federal Reserve.
But that trading volatility seems near-sighted.
Let’s get into it.
Debasement isn’t stopping
The market is acting like the debasement trade is over with Kevin Warsh set to step in at the Fed, but the knee-jerk reaction doesn’t change the math of a $37 trillion mountain of debt.
On Friday, gold, silver and bitcoin tumbled while the US dollar surged after President Trump tapped the former Fed Governor to succeed Jerome Powell.
The financial world responded as if Warsh — historically hawkish, newly dovish, and always focused on “hard money” — can single-handedly restore the greenback’s stature and kill the debasement trade that’s fueled a rally in precious metals.
Warsh is expected to cut rates on account of an AI productivity boom (Chart courtesy of Exhibit A)
Since Warsh’s name hit the news, bitcoin has declined more than 6% to trade below $79,000, while spot gold and silver dropped roughly 9% and 29%, respectively.
Yet the belief that one central banker can have this much sway will have limited staying power.
A changing of the guard at the Fed doesn’t erase historic government debt and the challenges of the fiscal outlook.
While Warsh is expected to prioritize shrinking the Fed’s bloated balance sheet, he still faces a political system and economy pushing in the opposite direction.
That’s why selling “hard money” assets on expectations for Warsh to bolster the dollar feels near-sighted.
No matter who’s in charge at the Fed, the institution is constrained by the real and political costs of servicing the debt.
Bitcoin’s outperformance versus gold has shrunk over the last year (Chart courtesy of Exhibit A)
In isolation, it did in fact look like the debasement trade ended on Friday.
Warsh seems genuine in his “hard money” ambitions, and he may be able to steer the conversation in a productive way.
But unless fiscal policy follows suit — shrinking deficits, less debt growth, the political willingness to accept a regime change — the long-term theme of currency debasement isn’t going away.
Market snapshot
Elsewhere
📊 Markets await Friday’s jobs report. Economists expect the US added 65,000 jobs in the last month, while they see the unemployment rate staying the same at 4.4%. Meanwhile, Alphabet and Amazon will headline the earnings calendar.
🤖 Nvidia CEO Jensen Huang clarified his OpenAI investment. He said OpenAI invited them to invest “up to $100 billion” and that he was honored to get the invite, “but we will invest one step at a time.” (Bloomberg)
📉 Software stocks are getting crushed. The rise of AI has coincided with falling software share prices for names like Salesforce, ServiceNow, SAP and others. New technology, according to fears, could upend traditional software business models. (Yahoo Finance)
Rapid-fire
House Speaker Johnson said he’s confident the government will reopen by Tuesday (CNBC)
Kevin Moss’s Private Shares Fund has bet 13.6% of its fund on SpaceX at $1.1 billion (Bloomberg)
Silver mining stocks could keep rallying as the metal climbs (Barron’s)
Consumers rushed to buy iPhones in the last quarter of 2025 (CNBC)
The CFTC will weigh in on whether prediction markets are gambling (Barron’s)
This little-known micro-cap could rise 341% in 12 months as it transforms retail shopping (Best Ideas Club)
Mini van sales surged 21% in 2025 even as overall US sales ticked up just 2% (Yahoo Finance)
“Big Short” investor Danny Moses shares his favorite trades for 2026 (Full Signal)
On this day
🗓️ February 2, 1913: The ratification of the 16th Amendment granted Congress the power to collect income tax with apportionment, reshaping federal revenue and modern fiscal policy.
Last thing
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