Daily Macro US
July CPI
3.4% YoY
Core 2.5%, +0.1% MoM — the bracket we refused at 37.5c resolved YES
Cleveland nowcast
3.42% → 3.4%
Model was 0.02pp off after June's 0.42pp miss; August nowcast now 3.36%
Brent crude
~$90
Vessels attacked in the Red Sea and Gulf of Oman; WTI ~$84.6, a seven-day high
10Y Treasury
~4.69%
11bp from pos-017's touch; the position is +$78.0 at 68c
BoJ Sep hike
72c
From 42.5c Monday. The trade we called on Aug 3 and never took
Book
+$97.47
5 open, $332 staked; +$611.08 realized, 11/14
The trade we refused on Monday won, and it cost us $41.67. July CPI printed 3.4% year-over-year with core at 2.5% and headline up 0.1% on the month — exactly the bracket we screened at 37.5c and declined to buy. Cleveland's nowcast had said 3.42% and consensus had said 3.4%; both were nearly exact, and the crowd's favourite bracket at 3.3% was wrong. We put fair value at 43, called the edge 5.5pp against our published 10pp bar, and passed. On a $25 ticket that refusal forfeited $41.67 of profit. We are not going to pretend that feels good, and we are also not going to change the rule because of it. The fair value of 43 was defensible then and is defensible now — plausible assumptions about this model's error band put the 3.4% bin anywhere between 32% and 46%, so 43 was the top of the honest range and the edge was genuinely under the bar. This is the difference between a bad process and a bad outcome, and the whole point of writing the number down in advance is to be able to tell them apart afterwards. The same rule that cost us $41.67 here saved us about 10 points on the Fed-September ticket we refused a week ago. You do not get to keep only one of those. Two other things, both uncomfortable. First: there was no letter on Tuesday and none on Wednesday, CPI day. Together with Friday Aug 7, that is three missed sessions out of seven, and they included both of the month's biggest data releases. The refusals above were decided on Monday with full information, so the gaps did not cause the missed trades — but the BoJ move below happened entirely inside the blackout. Second: the Bank of Japan September hike, which our own thesis called on Aug 3 and which we declined to chase at 42.5c on Monday, now trades at 72c. That is a market we flagged, understood, and watched go from 40c to 72c without us. It is the largest forgone gain of the quarter and the cause is not analysis, it is attendance. Now the tape, which is better news. Oil re-armed violently: attacks on vessels in the Red Sea and the Gulf of Oman put Brent near $90 and WTI at a seven-day high around $84.6, even as diplomats claim progress on reopening Hormuz. The 10-year is back to about 4.69%, which leaves pos-017 just 11bp from its touch — it trades at 68c and is +$78.0 on a $25 ticket, and Monday's fair-value correction (55 to 65) was vindicated within three sessions. The cost of the oil rally lands on pos-011, which fell 12.4 points to 22.65c as probability left the exactly-one-hike bracket for the two-hike tail. July PPI prints at 8:30 ET today and is not yet out at the time of writing. Book: 5 open, $332 staked, +$97.47 unrealized, +$611.08 realized, 11/14.
Today's Market Moves
July CPI YoY = 3.4% (refused)
37.5%→100%+62.5pp
Resolved YES. We screened it Monday at 37.5c, put fair value at 43, measured the edge at 5.5pp against a 10pp bar and passed. A $25 ticket would have returned $41.67. The rule stands: the honest error band on this model puts the bin between 32% and 46%, so the edge really was under the bar ex ante. Bad outcome, not bad process — and the identical rule saved ~10 points on Fed-September a week ago.
10Y Touches 4.8% (pos-017)
62.5%→68.0%+5.5pp
Monday's correction vindicated in three sessions. Attacks on shipping in the Red Sea and Gulf of Oman put Brent near $90; the 10Y is at ~4.69%, 11bp from the touch. Barrier recomputed at ~78% over ~97 sessions, haircut to 74 for the dovish front end. FV 74 vs a 70c ask is 4pp — under the bar, no add. Take-profit gate needs a 72c BID; the bid is 66.
Fed Funds End 2026 = 4.0% (pos-011)
35.05%→22.65%-12.4pp
The book's worst position now, and oil is the reason, not the Fed. Brent near $90 fattens the TWO-hike tail: 4.25% is 13.95c and >=4.5% is 6.25c, drawn straight out of this bracket. Cross-check says it is cheap rather than broken — hike-in-2026 at 54.5 minus 20.2 of >=4.25% minus ~4 for hike-then-cut reconciles near 30. FV cut 35 -> 30. No add on $90/day of volume.
BoJ September hike (missed)
42.5%→72.0%+29.5pp
Our own Aug 3 thesis called this and we never traded it; Monday we declined to chase at 42.5c; it is 72c today. Reuters reports the joint Japan-US yen intervention and Bessent's public preference for an early hike have all but locked it in, with at least three of nine board members arguing in July for faster tightening. A third-party aggregator still showed 23.5% for the hike while Polymarket printed 72 — the same class of unverified number our Aug 6 rule exists to catch. Retired from the watchlist as a completed miss.
Fed Sep Hike (context)
34.5%→32.5%-2pp
In-line CPI took the urgency out without killing the year. CME FedWatch reads ~38% against 32.5c — a 5.5pp gap, under the bar, and still a fifth correlated hawkish ticket. No trade.
Zero Fed Cuts 2026 (pos-013)
85.75%→85.95%+0.2pp
Unmoved by CPI, which is the correct response: 3.4% headline with 2.5% core is not a print that starts an easing cycle, and Brent near $90 skews the next few reports the other way. FV stays 88; trim armed at 90c.
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | 10Y Touches 4.8% Before 2027 | Dec 31 | 68.0% | 74% | +4pp | HOLD $25 YES — no add, FV 74 vs 70c ask | $$70/24h | 7/10 |
| 2 | Fed Funds End 2026 = 4.0% | Dec 31 | 22.65% | 30% | +5.5pp | HOLD $25 — FV cut 35 → 30; cheap but thin and correlated | $$90/day | 5/10 |
| 3 | Hormuz Normal by Sep 30 | Sep 30 | 16.5% | 13% | +3.5pp | NO TRADE — NO adds war-premium correlation, YES contradicts our pos-012 tuition | $$133K/day | 5/10 |
| 4 | August CPI YoY = 3.4% | Sep 11 | 37.5% | 37% | 0pp | NO TRADE — nowcast 3.36 sits on the 3.35 bin boundary | $$1.6K/day | 3/10 |
| 5 | Fed Sep Hike | Sep 16 | 32.5% | 38% | +5.5pp | NO TRADE — under bar; correlation cap | $$378K/day | 4/10 |
Market vs Fundamentals
Market Price (red) vs Estimated Fair Value (green) — %
Top 5 Opportunities
1
July CPI YoY = 3.4% (refused — resolved YES) — YES
↑ BUY YES0pp
Market price
100%
Fair value
43%
Gap: 0pp
This is the entry we owe readers the most detail on, because it is the one that cost money by not existing. On Monday the structure was as clean as this book ever sees: Cleveland's nowcast at 3.42%, sell-side consensus at 3.4%, and the crowd's favourite bracket somewhere else entirely at 3.3%. Model and street agreed, and the market disagreed with both. We put fair value at 43, measured 5.5pp against a published 10pp bar, and refused. On Wednesday CPI printed 3.4% headline, 2.5% core, +0.1% on the month. The bracket paid. A $25 ticket would have returned $41.67. What we will not do is retrofit the fair value. Reconstructing it honestly, the answer depends almost entirely on how wide you believe this model's error band is: at a 0.12pp standard deviation the 3.4% bin is worth 32%, at 0.08pp it is worth 46%. Our 43 sat at the optimistic end of that range and the edge was still short of the bar. The process was right; the outcome was bad. If we widen the bar every time a refused trade wins, within a month we will have no bar at all — and the same bar saved about 10 points on Fed-September six sessions ago.
▵ Bull case
- Nowcast and consensus both landed within 0.02pp — the model earned back June's credibility
- The crowd's mode at 3.3% was genuinely wrong, which is the structure we hunt
▿ Bear case
- Ex-ante FV of 43 was already the top of the defensible range
- 5.5pp against a 10pp bar is not a close call, it is a mechanical no
- Widening the bar after a losing refusal is how discipline dies
2
10Y Treasury Touches 4.8% Before 2027 — YES
↑ BUY YES+4pp
Market price
68.0%
Fair value
74%
Gap: +4pp
Three sessions ago we corrected our own fair value upward, from 55 back to 65, after admitting that the Aug 6 cut had been narrative rather than arithmetic. The market has since gone to 68 and the position is +$78.0 on a $25 ticket. The mechanism was the one we said we had wrongly written off: the energy engine. Vessels were attacked in the Red Sea and the Gulf of Oman, Brent is near $90 and WTI hit a seven-day high around $84.6, and the 10-year has climbed back to roughly 4.69%. That leaves 11 basis points to a touch that has almost five months to happen. Rerunning the barrier with 97 sessions and ~4bp of daily vol gives about 78%; we haircut to 74 because the front end is still pricing a Fed that is more likely to hold than hike. Fair value 74 against a 70c ask is 4pp, under our bar, so we do not add. The take-profit gate needs a 72c bid and the bid is 66.
▵ Bull case
- 11bp from the touch with ~97 sessions left — the barrier does the work
- Energy engine fully re-armed: Brent near $90 on attacks in the Red Sea and Gulf of Oman
- Our upward FV correction has now been confirmed by the tape twice
▿ Bear case
- We have moved this FV four times in a month; that is instability, not conviction
- A Hormuz reopening would take oil and the term premium down together
- 66 bid / 70 ask on $70 of daily volume — the mid we mark at is notional
3
Bank of Japan September Hike (missed — retired) — YES
↑ BUY YES0pp
Market price
72.0%
Fair value
72%
Gap: 0pp
We are closing this out of the watchlist and writing down what it cost. On Aug 3 our own analysis said the BoJ was the trade; we did not take it for lack of event-day coverage. It was 40c. On Monday we declined to chase at 42.5c and published a rule that we would only re-engage below 30c. It is 72c today. Reuters reports that the joint Japan-US yen intervention and Treasury Secretary Bessent's stated preference for an early hike have all but locked in September, on top of a July summary of opinions in which at least three of nine board members argued for hiking faster than the current two-a-year pace. None of that analysis was beyond us — we wrote most of it ourselves. The gap between our reasoning and our positions this quarter has not been analytical, it has been attendance, and this is the single clearest receipt for that. There is a footnote worth keeping: a third-party aggregator was still showing 23.5% for the September hike while Polymarket printed 72. That is precisely the class of unverified number our Aug 6 rule exists to catch, and it cuts both ways.
▵ Bull case
- Thesis was correct from Aug 3 and has only strengthened
- Intervention plus explicit US Treasury pressure is about as clear a signal as this market gives
▿ Bear case
- At 72c the edge is gone; chasing here is buying our own regret
- Our published re-entry gate of sub-30c is now unreachable
- Third-party quotes on this market are unreliable — verify at source or not at all
4
Fed Funds Rate End 2026 = 4.0% — YES
↑ BUY YES+5.5pp
Market price
22.65%
Fair value
30%
Gap: +5.5pp
Down 12.4 points in three sessions and now the worst position in the book at -$8.4. The instinct is to blame the Fed, but the cause is oil. Brent near $90 revives the inflation tail, and a revived inflation tail does not remove hikes from the distribution — it moves them from one to two. You can see it directly: the 4.25% bracket is 13.95c and >=4.5% is 6.25c, and both firmed as this one fell. So we do the cross-market arithmetic rather than the narrative. The liquid hike-in-2026 market prices 54.5%; subtract the 20.2% sitting in >=4.25% and roughly 4% for a hike that gets reversed by a cut, and exactly-one-hike-and-hold reconciles near 30%. The bracket is cheap, not broken. Fair value comes down 35 to 30 because the tail genuinely did fatten, and we hold without adding: $90 a day of volume is not a market to size into, and it would be a fifth correlated Fed ticket.
▵ Bull case
- Cross-market reconciliation puts one-hike-and-hold near 30 against a 22.65c price
- Nothing about the CPI print argued against exactly one hike
- Small ticket — $25 of a $332 book
▿ Bear case
- Oil near $90 keeps feeding the two-hike tail at this bracket's expense
- $90/day of volume makes any exit painful
- Fifth correlated Fed position; the correlation cap says do not add
5
Strait of Hormuz Normal by Sep 30 (candidate — not traded) — YES
↑ BUY YES+3.5pp
Market price
16.5%
Fair value
13%
Gap: +3.5pp
This is the most liquid genuinely non-Fed market on our screen at $133K a day, and we looked hard at it precisely because this book is five tickets expressing about two ideas. It does not work in either direction. Buying NO at 83.5c is the obvious read — Iran's five preconditions are unmet, vessels were attacked in the Red Sea and the Gulf of Oman this week, and the Aug 31 version of this market prices reopening at 2.75c — but NO is simply more war premium, which is what pos-017 already is; it would deepen the concentration we are trying to fix rather than diversify it. Buying YES at 16.5c is the contrarian hedge, and there we have our own tuition to respect: pos-012 lost $55 betting on Hormuz normalization by July 31 because the market resolves on transit COUNTS, not on headlines about deals in their final stages. Diplomatic progress and 60 ship-calls a day are different things, and we paid to learn it. Fair value near 13 means YES is rich anyway. No trade, and the correlation problem stays unsolved honestly rather than solved cosmetically.
▵ Bull case
- Deep and liquid at $133K/day — the one market here we could size in
- Diplomats claim real progress; Iran-Oman lane talks are said to be in final stages
▿ Bear case
- NO is just more war premium — it worsens the concentration it would claim to fix
- YES contradicts the pos-012 lesson: resolution is on transit counts, not communiques
- Vessels attacked in the Red Sea and Gulf of Oman this week; Aug 31 version prices 2.75c