Warsh Gets Cover | Microsoft Crashes | Saudi Oil Returns | Hormuz Fees

Two markets, one week. The Nasdaq had its worst week in over a year. The Dow barely noticed, carried by industrials, healthcare, and financials the whole way.

Tech stayed under pressure. 

SpaceX (SPCX) shares drifted back toward their $150 IPO opening price. Oil dropped nearly 4 percent as Saudi production came back online. And Minneapolis Fed President Kashkari said he now expects one rate hike this year. Three months ago he expected a cut. That's a full reversal in one quarter.

Investor Signal

Money moved out of tech and into financials, healthcare, and industrials this week—and stayed there. AI hardware held up. Everything downstream of it got sold. Kashkari flipping to a hike call heading into the weekend tells you the rate backdrop isn't softening. July FOMC is the next line in the sand.

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Trump still calls for rate cuts publicly. His entire economic team stopped doing the same. Treasury Secretary Bessent said Warsh will "be independent and do what he wants." Hassett said hold steady. Navarro said the data makes a "hold-steady case." All three aligned. Zero calls for cuts.

Warsh also hired two veteran Fed staffers as advisers today. One already published research calling the current economy "mild stagflation." That word, coming from inside the Fed, is doing a lot of work.

The forecaster consensus finally flipped too. More economists now expect hikes than cuts. First time since 2023.

The Cover Test

If Trump publicly criticizes Warsh by name again, the political cover cracks fast. If his team stays aligned through July FOMC, the rate path through 2027 is effectively locked. The gap between what Trump says publicly and what his advisors say privately is the only variable worth tracking right now.

Microsoft (MSFT) fell 21.6 percent in June. Worst month since the dot-com crash. It ranked 485th out of 503 S&P 500 stocks for the month. Not a rough patch. A full verdict from the market.

The issue is simple. Microsoft's AI spending is approaching $190 billion this fiscal year. That's up over 60 percent year-over-year. Free cash flow fell 10 percent at the same time. Investors signed up for a steady cash-flow business. They're now funding a massive infrastructure buildout instead. Many are walking.

The Repricing

The market is repricing Microsoft from a cash-flow business to a heavy-infrastructure story. Those are very different animals with very different valuations. This also explains why OpenAI pushed its IPO to 2027. Public markets simply can't price trillion-dollar AI valuations until the hyperscaler repricing finishes first.

The Re-Entry Level

The 22x versus 32x gap is where institutions eventually come back in. Alphabet (GOOGL), Amazon (AMZN), and Meta (META) face the exact same pressure. Microsoft just happened to go first.

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Saudi Arabia's Ras Tanura terminal loaded its first tankers since early March on Thursday. By today morning all seven berths at the Yanbu Red Sea terminal were occupied at once. Both routes back online simultaneously for the first time since the war started.

WTI dropped to $68.94. Brent fell toward $72. The entire round trip from pre-war prices through the wartime spike and back took about four months. Impressive and slightly terrifying at the same time.

The August Line

Saudi reaching 7 million barrels per day by end of August locks in the oil deflation path. For Warsh, cheaper energy arrives without him needing to say anything publicly. For Trump, sub-$70 oil before July 4 solves the pump-price political problem without a DOJ investigation needed.

Oman told European officials this week there is no going back to the pre-war Hormuz status quo. Ships may face fees for navigation services going forward. Iran wants joint management of traffic with Oman and is already building the infrastructure to collect tolls. The free era has an expiry date.

Ships currently must apply for Iranian insurance. Those free policies last about 60 days. The clock is running and nobody has pressed pause.

The Toll Stakes

Macron meets Oman's Sultan Haitham in Paris on Monday specifically on this issue. If fees go through, oil reverses the Saudi production moderation fast. If diplomacy holds free passage, oil stays capped near current levels. Both outcomes are still possible heading into the weekend.

The Monday Signal

A joint statement from Monday's Paris meeting supporting toll-free passage stabilizes oil markets immediately. Anything short of that keeps the Hormuz risk premium alive. The meeting is the most important diplomatic event of next week by a wide margin.

Jeremy Grantham went on CNBC and said it plainly. Based on total stock market value versus GDP, this is the most expensive market in American history. Not just recently. Ever.

The market cap to GDP ratio sits at 235 percent right now. Buffett historically called 200 percent "playing with fire." That was the 1999 to 2000 peak. We're 35 points above it and still going.

Grantham called SpaceX's $2 trillion valuation "one of the defining peaks of all time." He compared it to Amazon, which fell 92 percent after the dot-com bubble before eventually dominating everything. The warning isn't that these companies are bad. It's that the prices assume nothing can go wrong.

The Valuation Picture

Grantham's timing is often early. His valuation read is consistently sound. Either way it sets the framework every future market discussion will reference from here.

The Valuation Floor

Big spending announcements getting punished immediately is what a 235 percent Buffett indicator looks like in practice. The floor isn't visible yet and that's the uncomfortable part.

Five verdicts. One week. No ambiguity.

Warsh got political cover from Trump's own team. Microsoft got repriced to dot-com levels. Saudi Arabia restored full oil output across both routes. Oman told Europe Hormuz fees are coming. And Grantham called this the most expensive market in American history.

The AI buildout is still real. The bill just arrived everywhere at once.