Fed Chair Kevin Warsh has rocked the boat by what he’s said… and what he’s not. Here’s why investors ought to beware.
Fedspeak 2.0
Former Fed Chair Alan Greenspan famously spoke gibberish, also known as “Fedspeak,” when making official statements and testifying before Congress.
In a 60 Minutes interview, he boasted, “I would engage in some form of syntax destruction, which sounded as though I were answering the question, but in fact, had not.”
The bemused interviewer noted how two different newspapers would respond with opposing headlines.
Greenspan: “I succeeded.”
Presumably, Greenspan’s impenetrable language helped inspire The Briefcase Indicator—a theory popularized by CNBC anchors that the size of Greenspan’s briefcase tipped the Fed’s next move. A thin briefcase indicated policy stability, and a thick briefcase (presumably full of supporting data) indicated a policy change. Greenspan later claimed that the thickness of his briefcase “depended on whether [his] wife had time to make [him] lunch.”
Undoubtedly, Wall Street firms and others still attempt to gain an edge through informal means. But times have changed. High-frequency and algorithmic traders now fight for nanoseconds. With proper strategy and execution, fortunes can be made by simply tuning in to Fed press conferences.
On August 29, Fed Chair Kevin Warsh repeatedly said “hike” in his opening remarks at Jackson Hole. Markets fluctuated wildly in real time.
It seems that Warsh and other FOMC members enjoyed the response. Last month, the Fed voted unanimously to hike rates by 25 basis points (bps).
I stand to be corrected, but I think Warsh knew exactly what he was doing—he intentionally provoked the markets to test outcomes.
Warsh uses more approachable language than Greenspan. With a wooden delivery, he speaks with great confidence, as though delivering a sermon. Yet he seemingly lacks the courage to make a move before testing the waters.
All this for the smallest rate hike (25 bps). For perspective, the largest rate hike in Fed history was 200 bps in December 1980. More recently, the Fed raised rates by 75 bps in the summer of 2022.
So how are we to judge this small move?
If the economy is strong, then a 25 bps hike is relatively unimportant. If 25 bps is significant, then the economy is far worse than we’re led to believe.
Either way, we appear to be in the era of Fedspeak 2.0–boring and boilerplate language offered primarily for Wall Street’s approval.
Mum’s the Word
Fed chairs are heavily scrutinized for what they say. But their strategic silence is no less important. Warsh talked a big game when lobbying for his position, particularly regarding the Fed’s balance sheet. Yet mum’s been the word during his last two public appearances.
In case you’re unfamiliar, the toxic assets at the core of the GFC were absorbed by the Fed, often at 100 cents on the dollar. The Fed now pays interest on the reserves that were offered in exchange: $226.8 billion in 2024, and $167.4 billion in 2025.
Why hasn’t Warsh even hinted of his plan to unwind the Fed’s balance sheet?
Are we to expect the meek Warsh to slaughter Wall Street’s cash cow?
Independence or Compliance?
Trump made it extremely clear that he thinks interest rates should be lowered. As his nominee, Warsh no doubt feels pressure to comply.
But how much power does Warsh actually have?
Federal Open Market Committee (FOMC) members have never overridden the chair’s vote. And they just unanimously voted to raise rates.
As Lobo noted in a recent version of our free Digest, Trump spoke to Warsh before the vote, telling him that nothing would be gained by Warsh voting 11 against one. Intentional or otherwise, a unanimous vote gives the appearance of Fed “independence” and “sincerity” in fighting inflation.
But how long will that last?
The Fed’s next interest rate decision is scheduled for Wednesday, October 28.
The midterm election is on Tuesday, November 3.
Should investors expect Warsh to unsettle the markets just before voters head to the polling booths?
For what it’s worth, prediction markets indicate a 56–71% chance of a rate hike. And the Fed has never hiked days before the midterm election.
Many will place their bets.
But why gamble when you can speculate?
Speculate Consciously
Milton Friedman once famously quipped, “We are all Keynesians now.” He explained that he did not actually convert to Keynesianism, but that Keynesians had seized control of the language and metrics used in economic discourse.
Friedman was 100% correct. One need not agree with Keynesians to understand and respect their influence.
Not to elevate myself to Friedman’s stature, but functionally speaking, we’re all speculators now (and have been for some time).
Lobo calls Trump an agent of change, if not chaos. The president is not shy about wielding geopolitical power and America’s military might. After an unfavorable Supreme Court ruling, he still threatens tariffs (introducing additional regime uncertainty in the process). Bond investors have met Bessent’s challenge to bet against him. But Bessent seems unlikely to change course. Seemingly with every word, Warsh seeks Wall Street’s approval.
Collectively, they might not have introduced new variables for investors to consider. But the rate at which pre-existing variables can change seems to have quickened.
I’m not predicting a GFC-level crisis, but the mere words of key figures can send markets into a brief but significant tailspin. Should that happen, investors with zero exposure to metals and miners would learn that they are, in fact, speculators nonetheless.
Tech, finance, energy… likely none would be spared.
So why not speculate consciously?
Lobo went to cash early this year and has largely remained there, lying in wait until conditions become clear and irresistible buying opportunities appear.
If you’re looking to begin resource speculating or to simply gain a better footing, consider chunking your options into three categories: inevitable, imminent, and happening now.
You might be interested to learn that the latest edition of our flagship service is titled “Finally, Patience Is Paying Off.” This week, Lobo purchased more uranium stocks.
All this is admittedly self-serving. But since we’re all speculating, I see an advantage to aiming for outsized profits (Lobo’s picks—including losses—average over 87%). With proper strategy, resource speculating is less risky than many believe.
If you’re interested, we’re happy to help.
KJ
P.S. Lobo currently favors uranium. But gold, silver, copper, and oil are also on the table. Follow his moves by subscribing to our free, no-hype, no-spam newsletter: The Digest.
