The biggest single buyer of long-dated US Treasuries is now an index fund that buys bonds in proportion to their market value, which means it wants less of a bond the cheaper that bond gets.
Almost every commentator reading the same long-end selloff says it is the bond market losing faith in US public finances. Mike Green says the mechanism is a weighting rule, that the same selloff is happening in a country with a quarter of America's debt burden, and that Treasury Secretary Scott Bessent is doing the only sensible thing available to him.
"This is just debt management and it makes perfect sense."
Green wrote an open letter to Bessent earlier this year about exactly this, and has just launched Tier1 Alpha Asset Management to trade on the passive-flow research behind it.
I listened to the full interview so you can skip it. 60 minutes of audio, 28 minutes of reading.
Here are the 12 takeaways that matter.
👤 Guest: Mike Green, Chief Executive and Chief Investment Officer of Tier1 Alpha Asset Management, who wrote an open letter to Treasury Secretary Scott Bessent earlier in 2026 about how index funds price long-dated bonds
🎙️ Host: Maggie Lake, a longtime financial journalist and co-founder of The Market House
📰 Published: 10 September 2026, on YouTube (Wealthion)
🔴 YouTube | ⏱️ 1 hr | ✅ Time saved: 32 min
Key Takeaways
The long end is selling off because its biggest buyer is an index fund that buys in proportion to market value, so a cheaper bond gets less demand rather than more
Green calls it the world's dumbest algorithm: two high-quality bonds both mature at par, so the one priced at 150 loses a third of your money and the one at 50 doubles it
The Treasury can issue $1 of current-coupon paper and retire $2 of deeply discounted old paper, shrinking the debt for a modest rise in cash interest expense
Australia has debt to GDP of 25% and is having the same bond selloff, which Green says kills the US-fiscal-crisis explanation
US credit default swap spreads have contracted, and inflation swaps show no inflation fear
Bond markets are only about 15% passive, but passive is close to 50% of the marginal buying
Equity markets are around 55% passive, and the bond effect is stronger where it counts
Keeping interest rates high to fight inflation is itself inflationary, because it stops houses and cars being built and sold
Green puts himself alongside John Cochrane and Zoltan Pozsar on this
The root mistake was made in 1978, when the retirement system moved to individual defined-contribution accounts
A pension pools longevity risk across 100,000 people; an individual has to insure against living to 110 alone
Green says the passive factor explains about 50% of the price move of any individual security
His firm cut the time to aggregate fund flows into a single security from 45 minutes to under one second
A 30-year inflation-protected Treasury yielding 3% in real terms nearly funds the 4% withdrawal rule with no principal risk, and nobody wants it
Gold is about 400% overvalued against the one-ounce-buys-a-suit yardstick, on Green's own suit bill of roughly $1,200
He still expects it to rise, because he does not expect good policy yet
The macro economy shows resilience while the household experiences depletion, and buying necessities on credit registers as growth
The break comes as "consolidating households" — adult children moving back in — which is a collapse in spending
1. The Missing Long-End Buyer
Green's whole argument starts with who is on the other side of a 30-year Treasury, and he says the answer has changed without anyone repricing for it.
The selloff in long-dated bonds is global, and the cause is an absent marginal buyer. Green said duration is selling off worldwide because the buyer of the longer-dated bond is missing — though he immediately qualified that
He does not think the buyer has disappeared. He thinks the buyer has changed. "I actually don't think that buyer is missing the way other people do. I think they have simply assumed a different approach to how to manage their portfolios than traditional participants would"
The two traditional buyers both cared about price relative to something. An insurance company bought long bonds to match assets against liabilities, judging the bond against the value of those liabilities on both a duration and a required-income basis. The levered buyer financed the long end by selling the short end — shorting a three-month Treasury for financing and buying a longer-dated one with the proceeds
Today's marginal buyer is a passive bond fund, and it cares about neither. It is trying to match its exposure to the index on a notional basis, which Green called critical to understanding what follows
The perverse result is that a falling price reduces demand. After roughly a decade of very low-coupon issuance followed by Federal Reserve rate hikes, those bonds are deeply underwater — trading well below face value. A market-capitalization-weighted bond index fund holds them in proportion to price times notional outstanding, so as the price falls, its demand for them falls too
That creates the appearance of a buyers' strike that is really an algorithm. "This creates the perception that nobody wants the bond, but the players at the game are behaving somewhat irrationally"
He has a name for it from the equity market. Green said equity investors will remember roughly 2016 as the start of the Costanza market, the market that did the opposite of what you thought it should, and that the same thing has now come to bonds
The single line that captures the distortion. Green said the largest marginal player looks at a bond trading at 150 and thinks, "Wow, that's much more attractive than a bond that's trading at 50." His verdict on that: "And that is absolutely absurd. It makes no sense in bond language, but that is the algorithm under which they are programmed"
What is being ignored is a real feature, not a rounding error. Long-dated low-coupon bonds have positive convexity to the upside — the price gain accelerates as yields fall — and Green said your money can literally double in many of them
2. Retire $2, Issue $1
This is the trade Green thinks the Treasury has just worked out, and it is the reason he does not read the buyback program as a panic move.
The Treasury will be forced to act because private buyers are not. Green said it will have to address the problem through a combination of issuance, market involvement and buying back low-priced bonds, precisely because the current participants are ignoring them
The arithmetic is a two-for-one. He described the Treasury realizing "wait a second we can issue $1 of current coupon paper and retire $2 of low coupon paper that has a modest increase in our cash interest expense but in aggregate we are significantly shrinking the debt"
He called that ordinary debt-manager behavior. It is a great strategy for any debt manager to pursue, Green said, and a debt manager is exactly what the Treasury is
The second-order effect is the one that matters to bondholders. Green said Bessent has recognized he can shrink the national debt at the same time as driving the price of that debt higher, which in turn attracts the marginal buyer with greater intensity — the index fund buys more of a bond as its price recovers
Lake translated it for the audience rather than letting it sit. She said she does not expect every listener to follow the mechanics, but that the point is the selloff is not being driven by rational actors, and that someone who understands the bond market as well as Bessent does is doing something rational and smart
3. Not A Financial Crime
Lake put the opposing narrative to him in its own words, and Green's answer was the most quotable stretch of the interview.
The host read out the bear case as she had seen it posted. Unsustainable fiscal conditions in the US and other major countries leading to yield curve control, high inflation, hyperinflation, a monetary crisis and a move away from the dollar, all of it meaning soaring precious metals and commodity prices, with an instruction to rebalance immediately
Green answered with sarcasm before he answered with substance. He said the narrative was underselling the stakes, since the real worry must be "the potential extinction of polar bears and penguins" as a consequence of Bessent's fiscal policy
His actual objection is to the framing of the buyback as wrongdoing. Green said it is absurd that the announcement was treated as the financial crime of the century, when what was announced was increased purchases of low-priced bonds under an existing program in a voluntary exchange. His own reading of it: "This is just debt management and it makes perfect sense. It's exactly what he should do."
He said the criticism is aimed at a man who does not hold the relevant levers. Bessent does not control tax policy and does not control spending policy; the only spending he controls is what the government pays in interest, given rates set by the market and the Federal Reserve
The tourniquet image is his summary of the whole argument. Green said the critics are really saying the situation is a very dangerous wound to be taken seriously — "And Scott is sitting there with a tourniquet saying" whether to apply it: "Do you want me to put it on or not?" The answer, he said, is obviously yes — and then everybody else, Congress and the president included, has to do the jobs that are theirs
His household analogy was deliberately mundane. "If you as a household were given the opportunity to consolidate your credit card debt into the lowest interest rate debt that you possibly could, you would be foolish not to do so." He added that turning on Dave Ramsey or any similar program will find it as the very first step they recommend
4. Yield Curve Control Or Not
Lake asked directly whether this is the road to yield curve control. Green attacked the definition first.
He turned the term back on the questioner. If minimizing the interest expense on your own credit card payments counts as yield curve control, then yes, he is engaged in it — he is removing the interest from those who would charge him the most for it
In the classical sense, he said it is not happening. Yield curve control proper is the Federal Reserve and the Treasury conspiring to hold rates artificially at a certain level, and there is no sign of that at this point
The line he says would cross it is Fed participation. It could be called yield curve control the minute the Fed steps in to assist the Treasury in the process — though Green noted that Jerome Powell said repeatedly that the Fed is the fiscal agent of the US Treasury and has to pay attention to these things
He put himself in company on the claim that high rates are inflationary. Green named John Cochrane and Zoltan Pozsar, whose name he had to reach for on air, as making the same argument he does
The mechanism runs through supply, not demand. Keeping interest rates high in an attempt to forestall inflation prevents new homes being built, which means a relative shortage of homes and higher home prices and rents than there otherwise would be. Fewer cars are sold into the system, which supports used car prices on a relative basis
The endgame he describes is a policy-induced bust followed by an emergency cut. Distress caused by high rates would produce a catastrophic slowdown that the Fed would then have to answer with rapid cuts, which "appears to be the policy" and, in his words, "appears to be a very unsensible policy"
His analogy for it: "That's the equivalent of saying, you know, well, I'm going to keep feeding my teenager drinks until they feel responsible enough to hand me the keys to the car"
5. Resilience Vs Depletion
Asked where the panic narrative comes from, Green went to trust, and from there to the gap between the economy the data sees and the one households live in.
His answer was institutional, not financial. The narrative comes from a loss of faith in the institutions of government and others in the United States to let people achieve their objectives. "They are rats trapped in a cage being randomly subjected to shocks from their perspective and they're looking for somebody to blame"
He said his own profession chose to throw away the soft data. Consumer sentiment was discarded because it does not appear to affect economic activity much, which is ostensibly what the industry is paid to track
The reason the two diverge is that they count different things. Dollar-weighted measures reflect how much money people have, and the top of the income distribution is doing extraordinarily well — Green said the Fed's high-rate policy is a significant net stimulus to that group. Survey data is one household, one vote, like a democracy, so it shows what the median person is experiencing
He said the industry has stopped pretending otherwise. Green reported hearing repeatedly, as a stated investment rationale, that a fund only invests in things "sold to the top of the K"
Lake quoted his own line back at him: "The macro economy sees resilience, which is a word I hear a lot when I talk to, you know, analysts and strategists, while the household experiences depletion." She said another guest she had spoken to called the same phenomenon economic feudalism
The mechanism by which distress shows up as growth is the part most likely to mislead a reader of the data. As price levels rise, necessities cost more; a necessity has to be bought, so the household depletes savings and takes on debt to buy it. That registers as increased spending and increased economic activity, while the household's own experience is, in Green's words, "I'm slipping beneath the surface"
The break, when it comes, is abrupt. Green called it consolidating households — adult children moving back in with parents, eliminating the rent, a fraction of the consumption waste, and the energy needed to heat a second home. "That is a catastrophic reduction of spending that is created once people hit a breaking point. And more and more people are telling us they're getting closer and closer to that breaking point"
Lake connected it to politics, noting unusual and in some cases unthinkable election results in states the political class thought it understood, ahead of the midterms
6. Australia Has The Same Bug
Lake asked whether there is a market cost even if Bessent is doing his job well, and whether a loss of confidence in the Treasury market is the risk. Green's reply was to check the three instruments that would show it.
First, credit risk. There is a credit default swap contract available on the United States that prices the risk of a US default in a euro-denominated obligation, so a massive dollar depreciation would show up as a widening in US credit default swap spreads. It has not — Green said US credit default swap spreads have contracted over the past several months
Second, inflation risk. If the selloff were fear of inflation, it would appear in a market-traded inflation swap or inflation breakeven. It does not
Third, the fiscal explanation, tested on a country with barely any debt. If this were specific to a US debt-to-GDP ratio above 100%, Green said, then look at Australia: "Well, then we’d have to look over to Australia, which has debt to GDP of 25% and is experiencing the exact same bond market sell-off." His rhetorical follow-up: "So, is the market suddenly assessing that Australia's 25% debt-to-GDP has an unsustainable fiscal outlook?"
He called the fiscal-crisis reading unserious on that evidence. "Like, these are just silly and unthoughtful characterizations because they are not reflected in what we're seeing in the markets more broadly."
What is left, on his account, is a shared structural fact. A global phenomenon unique to western markets, in which the long end of the curve — after a decade of low-coupon issuance — is priced well below par and the marginal buyer does not care
7. The 1978 Mistake
Green's explanation for why nobody fixes the index rule runs back through the Department of Labor to a decision made in 1978.
He rejects the premise that there is a clean market price to appeal to. "There's no such thing as a quote unquote free market price. Prices are always established in regulatory frameworks." His example was a Moroccan souk: however free the market looks, there are rules about who gets to set up a stall
The specific regulatory decision he blames is not the Treasury's. Green said the Department of Labor blessed what he called "a particularly bad approach towards investing in bonds," and that the Treasury cannot change it — it is another cabinet-level decision, requiring the regulatory process and, ultimately, action by Congress against the interests of Wall Street's largest lobbyists
The industry has no reason to want the change. The methodology attracts assets and is simple to explain: buy things in proportion to market capitalization, make no credit assessment, and in theory distort nothing — provided every asset traded with similar liquidity. Green said everyone knows that last condition is false, but it is convenient at a top level, and certainly convenient for explaining to a member of Congress with no interest in a doctoral finance course
He conceded the underlying theory is still contested even at that level. Even inside a PhD finance course, he said, you would have to move into an area that remains disputed and is not accepted as fact
The deeper error is the design of the retirement system itself. By forcing every individual to insure themselves against the long-tail outcome of living a long time, the system structurally advantages equities over debt and raises the relative real cost of debt for issuers. "This was a mistake that was made in 1978"
Lake identified it: the 401(k). Green's correction was that the move to self-insured defined contribution instead of defined benefit is what lost the statistical sampling properties of a large population
His illustration of what pooling does. A pension spread across 100,000 participants has very different cash flow characteristics from those 100,000 individuals: some will live to 110, whose cash flow pattern bears no resemblance to someone who died at 65. The pension treats that as an actuarial property; the individual has to treat it as insurance and protect against living to 110
Green added, in an aside, that living to 110 sounds terrible to him personally, though he understands most people want a long retirement. Lake's response was that a long life should be a good thing and that from a financial planning perspective it is disastrous
8. 15% Passive, 50% Of Flow
Lake pushed him back to the composition of the buyer, saying it is the part of the story nobody discusses. Green gave the numbers.
The headline passive shares understate the bond effect. Green said he usually tells audiences that equities are around 55% passive and bond markets only about 15% passive, but said that understates their influence on the marginal activity, where they are "closer to 50% of the marginal buying activity"
Because that half of the flow ignores value, value is being ignored. He said the result in fixed income is the same thing that has already happened in equities
The other buyers left the long end for reasons that had nothing to do with US credit. Green said buyers typically manage to threshold characteristics rather than to price appreciation or yield maximization. Japanese life insurers do not care that a bond yields 5%; they care about an actuarial requirement, and the threshold for that was somewhere around 2%
That explains a decade of Japanese money abroad, and its return home. With Japanese interest rates at zero, insurers were forced around the world to find that 2%. "The minute interest rates are 2% in Japan, why would they do that?" Their needs are met domestically, in their own currency, and the rest of the world has to find a new marginal buyer
The buyer it found is the one Green considers indefensible. "That marginal buyer, unfortunately, has the world's dumbest algorithm." A stock at 150 versus one at 50 can at least reflect different expectations about where each ends up in ten years. Two high-quality bonds both end up at par, so preferring the one at 150 skews you toward losing roughly a third of your capital instead of doubling it
His conclusion is not to campaign against it but to trade against it. Green said the Treasury should take advantage of the choice people made — government-sponsored and, in his view, uniquely dumb — for the benefit of the aggregate American population rather than for bond index investors, about whom he said he could not care less: "They are my opponent in this game."
9. Blame Congress, Not Bessent
Asked whether the critics are wrong or merely aiming at the wrong department, Green said the latter, and then said the fiscal problem is arithmetically easy.
His answer on where the criticism belongs was one sentence. It should be directed at Congress for the fiscal behavior of the US, which he agreed is worrying and carries risk for the US bond market — not at the Treasury
He said he would believe in Treasury-market risk if the instruments showed it. Green said he would expect such a risk to be reflected in credit default swap contracts and inflation swaps, and "I'm not seeing that"
The fix, in his telling, is not technically hard. "You marginally increase your revenue and you marginally decrease your spending. And guess what? That unsustainable deficit will disappear or at least fall below the nominal growth rate of the US economy which means it begins to shrink as a percentage which is what Scott is highlighting"
What is missing is willingness, and specifically willingness at the top. "We simply lack the will to do it. And more importantly, we lack the will to ask people who have benefited from the system to benefit a little bit less. That's what progressive taxes are, right?"
He said the Fed's own policy makes the fiscal fix harder. Keeping rates high to prevent inflation — which he called seriously diluted as reasoning but certainly accepted monetary policy — is creating conditions that make shrinking the deficit harder to achieve
His bleakest claim is that the public does not actually want a solution. "I think we lack the will and candidly I don't think we really want a way forward. We want a way to complain and we want a way to see other people suffer"
He framed it as mythology rather than economics. This is the stage at which traditional mythology requires a scapegoat, somebody has to be sacrificed, and, with an aside that he is not volunteering himself, "But the simple reality is that people need blood at this point and they're going to take it in one form or another."
On whether a market crisis is needed, he rejected the word "need" and then conceded the function. A crisis makes change easier because it exposes false beliefs — including the belief that the Federal Reserve can always step in and fix everything by printing money
10. Why He Started Tier 1
Lake asked why he is launching a firm now. Green's answer was that the research only became implementable a year ago.
His reason for starting it was blunt. "the real answer is because I can"
He said his first successful trade on this thesis was partly luck. After roughly a decade of research into systematic investing and the risks it creates, his initial trades were tied to the XIV exchange-traded note and the Volmageddon event. What he had not fully appreciated was that XIV was a fund with a single security underneath it, so the fund and the security behaved identically — which made it predictable once he understood the flows
The intellectual breakthrough came about a year before the interview, and he called the gap his own mistake. "I had not understood that the fund was distinct from the underlying securities." He said this remains a major gap in the financial literature, which discusses securities as if they are the end recipients and barely discusses funds at all — a problem when most purchases are funds such as exchange-traded funds
The change he made was to invert the unit of analysis. In September of the previous year he told his team at Tier1 to stop tracking at the fund level and instead aggregate the information from every fund down into each individual security
The speed-up is what turned it into a business. That aggregation initially took about 45 minutes per security, which sharply limited how much they could analyze. By January it was down to about 45 seconds, and at the time of the interview it was under one second per security
What the speed buys is breadth and repetition. Green said they can now radically expand the number of securities they observe, run repeated models with different sources of flow, and build security portfolios that use the per-security insights directly
11. The Passive Factor Is 50%
Green's description of what his firm actually measures was the most concrete part of the interview about method.
He reframed what a fundamental is for. Earnings, cash balances and debt levels are researched not because they themselves create demand, but because they create demand from other people trained to read them the same way. If reading an earnings increase correctly predicts that others will buy, the fundamental is a predictor of future returns because it identifies buying activity
When the buying moves to index vehicles, those same signals invert. Green said the traditional fundamental investor is now watching a marginal pool of participants that is in aggregate experiencing outflows, so the insights carry negative loading factors — they point to net selling. That, he said, is how you get the Costanza market
His alternative is a picture of the crowd rather than of the company. He described building a stop-motion photograph that captures the crowd of 500 stocks in the S&P 500 at each point in time, with a wall of liquidity about to hit them — the way a fire hose is directed at a crowd in riot control
The analogy carries the whole point about which data matters. Collecting the crowd's credit scores, incomes, marital status and home towns tells you a lot about them as people and nothing about how they will react to a fire hose. What matters is how much they weigh, whether they are standing on two feet, whether any of them played on an NFL offensive line, and whether they are afraid of water
He said the traditional fundamentals become useful again when recombined. Green described intriguing evidence that they continue to work for the shrinking crowd of investors who still trade on them, which is why the two datasets are most powerful merged
Lake summarized it as a heat map of flows, and he accepted the description. "It is a heat map of flows that looks like a continuous picture but is really a stop motion photography"
He agreed that conventional macro signposts have been degraded rather than voided. Asked whether a big CPI print later that week still moves the market the way the models assume, Green said the models are no longer the indicators they were, and that this is precisely the opportunity his firm is built on
He calls the approach passive-aware investing. The objective is not to beat fundamental managers or passive managers, but to accept that passive players are the marginal source of flows and to work out what they will have to buy and how what they buy reacts to being bought
He put a number on the edge. Green said the passive factor is the single most important factor in market price behavior today: "In general, we think it explains about 50% of the price move of any individual security at this point."
The product is deliberately unexciting, and he explained why. Rather than running it at full force with leverage and long and short positions, the firm is aiming at investors who already hold the S&P 500 with a 35% to 40% allocation to US large-cap equities and want slightly better returns from a fraction of it. The alternative sales pitch he mocked: "Do you trust Mike Green's black box which is making all sorts of crazy calculations and running at 60 times leverage to deliver a 30% return with zero volatility?"
He still expects the passive build-up to end badly, and says that view is inside the products. Green said he continues to think it ultimately ends very badly, and that the insight is embedded in what the firm sells
12. Gold Is 400% Overvalued
Lake's last question was about gold and commodities as the answer to overexposed equity portfolios. Green's reply was the most quantitative debunking in the interview.
He began with how small commodities are in a household budget. Corn, grain and even oil are a very small fraction of spending next to child care, and even at elevated gasoline prices a driver spends far more on the depreciation of the car than on the fuel
A portfolio rotation into commodities is demand borrowed from the future. When investors allocate to commodities out of worry, that is an outward shift in aggregate demand that pushes prices higher immediately and is meant to call forth a production response. Green said a central bank holding rates artificially high retards that response, so prices have to go higher still to spur it — and if that in turn causes the Fed to hike, the required price goes higher again
Gold he treats as a different instrument entirely: the negative trust asset. Its appeal is that nothing anyone else does is required for it to remain gold. His comparison was wheat, where storing an equivalent monetary value needs a warehouse rather than a shoebox, someone to guard it, and processing into bread or grain alcohol before it is worth much — all of which requires other people to act
That is why it tracks real interest rates, and why 2022 broke the tracking. Green said US policy toward Russia in 2022 led counterparties to conclude that Treasuries were no longer a safe asset because the US government had shown it would seize them, and to redirect into gold. Gold watchers took the resulting divergence as proof that the relationship with real rates had died; Green says it only meant a marginal buyer had appeared for a period
The same logic explains why gold has been capped more recently. Middle Eastern buyers, hit by war, had to increase defense and social spending while their own restrained production meant they benefited less from high oil prices — so they had to sell some gold. Green said that has suppressed the price alongside rising real interest rates
On valuation he used Jim Grant's definition and then his own tailor. Green cited Grant's formulation of gold as one over n, where n is faith in central bankers, so that as faith falls the multiple of gold rises. He then said "Gold is expensive relative to everything else on almost any reasonable metric," tested it against the old claim that an ounce of gold buys a fine men's suit, priced his own custom suits at "somewhere around 1,200 bucks," and concluded: "So, gold is somewhere around 400% overvalued on that metric"
He dismissed the rival yardstick with a joke about livestock. Someone had argued on social media that an ounce of gold historically bought one cow, which would imply one cow per suit; Green said the price of cows relative to suits has exploded, "largely because suits are indeed an endangered species"
His conclusion is that gold is priced for the distrust it is hedging, and will still go up. Green said gold is "benefiting from this period of lack of trust" and that this is "somewhat priced in." He expects it to keep responding, because he does not think policymakers are yet at the point of making really good policy
Bonus Insights
Green's picture of what active managers were for: chaperones at a school dance. Their job was to say that a given behavior is not okay and force it back inside the norms. When the chaperones only come in at predictable intervals, the party looks completely tame and then goes completely crazy, alternately — and eventually the partygoers lose control and the chaperones are reduced to riot control, or to shutting the gym doors and saying there is nothing left to be done
He credited Eric Balchunas with calling the shape of the industry five years early. The observation, as Green related it: the more Vanguard-like the center of the portfolio becomes, the more money flows to Vanguard and low-cost indexing, and the more the active management industry produces what he called hot-sauce products to win attention at the edges. Green said active management has therefore confined itself to a sliver of about a trillion and a half dollars, all of it competing on back-tests, and that almost nobody offers an alternative to the S&P 500 itself
The security he thinks is being irrationally ignored is a 30-year inflation-protected Treasury. Green said one currently offers a 3% real yield, which against the 4% withdrawal rule means "You can accomplish almost all of that in an inflation-protected security for the next 30 years with no principal risk whatsoever" — and nobody wants it
He said rejecting it requires believing the government lies about inflation. The argument against holding it is dollar devaluation, but the security is inflation-protected, so the objection amounts to saying the US government will misreport inflation at every step
His history of the consumer price index was a defense of owner's equivalent rent. Green said the CPI methodology was built to address the Federal Reserve's behavior in the early 1980s under Volcker, when the Fed created its own inflation because it did not understand how "mortgage rates passed through to the CPI itself." Owner's equivalent rent was introduced to stop the Fed repeating that mistake — and he said the same behavior is now being encouraged again, against a formula that increasingly reflects a lagged three-, four- or five-year average
Asked whether the government is now captured by the need for asset prices to rise, he reframed it generationally. High asset prices create the conditions harming the next generation while preserving the purchasing power of the older one. On why younger people are angry: "It's not that we're saying you actively came into my crib and stole the lollipop. It's just you consistently have made the choice at every step in the process to protect your circumstances without considering how that's affecting other people's circumstances through time"
Lake brought in Ed Yardeni's label for it, from an earlier appearance on the channel: that this is not only a K-shaped economy but a G economy, for generational. Green agreed that decisions have been made benefiting the older generation over the younger
He said the government's own numbers show the misallocation. Green referred to analysis the US government has done itself on the return on investment of various social programs, and asked what anyone thinks the economic return is on giving 95-year-olds hip replacements. Lake supplied the comparison: Head Start
His explanation for civic disengagement was evolutionary, and he was careful about religion. Most people will choose the evolutionarily appropriate option of minimum caloric expenditure — you do not get up to look for food unless you need food. Green, who said he is not religious, praised churchgoers for making an effort to commune with their neighbors, and argued that people who say they stay home because the clergy are deviants are mostly avoiding the effort of finding a congregation they would share
He described himself as both extremely bearish and extremely optimistic, and meant it. The current choices are creating the conditions people are unhappy about, and the first step to being happier is diagnosing which of your own choices are causing it — which he thinks the country is painfully close to doing
His most contrarian closing claim was that the country is more unified than it looks, and that AI is pushing it that way. Green pointed to unexplained switching in election results as evidence of a large homogeneous center that can flip either way with disturbing frequency. He drew a distinction between search, where typing "is crypto a good investment" returns advertisements from crypto providers, and asking an AI the same question, which he said tries to give a more holistic answer and naturally pushes people toward the center
Lake added a detail from young people she had spoken to: the prompts they now write tell the model not to flatter them and to challenge them instead
Green's bottom line is that the long-end selloff is a plumbing problem rather than a solvency one — a market-capitalization weighting rule that makes the largest buyer of Treasuries want less of a bond as it gets cheaper — and that the right response is the one the Treasury has started on, buying the discounted paper back, while the fiscal repair that would actually matter sits with a Congress that he says lacks the will rather than the arithmetic.
Products, Companies & Tools Mentioned
Tier1 Alpha Asset Management (Green's newly launched firm, which aggregates fund flows down into individual securities and calls the approach passive-aware investing)
Vanguard (The center of the low-cost indexing shift Green says pushed active managers out to the edges of the portfolio)
XIV and the Volmageddon event (The inverse volatility note behind Green's first trade on this thesis; he said it worked partly because the fund had a single security underneath it)
30-year Treasury inflation-protected securities (Currently offering a 3% real yield, which Green says almost funds the 4% withdrawal rule with no principal risk and which nobody wants)
Head Start (Lake's counter-example to hip replacements for 95-year-olds in the government's own return-on-investment analysis of social programs)
Dave Ramsey (Green's reference point for debt consolidation as obvious first-step advice, which is what he says the Treasury's buyback amounts to)
Books & Resources Mentioned
Yes, I give a fig – Michael W. Green (Green's own Substack, where Lake says he laid out the solutions and the path forward, and where the resilience-versus-depletion line and the social-program analysis appeared)
Grant's Interest Rate Observer – Jim Grant (Source of the definition of gold Green says is still the best: one over n, where n is faith in central bankers)
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