[Week 35 of 2025] Politics, Premia, and Pens

Welcome back to Price and Prejudice with a few musings from Week 35 of 2025.

Fed Drama Without Drama

This WSJ piece looks at why markets barely shrugged when President Trump tried to fire Fed governor Lisa Cook. The article runs through a handful of explanations: investors already expected Trump to pressure the Fed, Powell remains the key decision-maker, Cook may fight it in court, and Trump’s appointees so far look mainstream enough. All these scenarios suggest that there’s no new information here to move bond prices in a lasting way.

More generally, when markets don’t react to “big news,” the explanation is usually one of two things: (1) it was already priced in, or (2) the market just doesn’t care. And both cases depend on the same question—who is the marginal trader? If the investors who actually set prices don’t think the news changes their payoff, the screens won’t budge, no matter how dramatic the headlines look. This can feel jarring especially when the news seems seismic in our conversations with friends, colleagues, or Twitter. But the market isn’t your group chat, but rather just the sum of the people actually moving money at the margin.

When Everything Yields the Same

This chart from Apollo shows the convergence of yields across very different assets: 3-month Treasuries, investment-grade corporate bonds, S&P 500 forward earnings, and REIT cap rates. In theory, these should be distinct. Risk-free cash should yield less than risky corporate credit; equities should offer a higher return than both, compensating for volatility; real estate should have its own cycle tied to rents and leverage. Different asset classes, different risk premia.

So what’s driving this, and what does it mean? It probably still masks a lot of heterogeneity within each asset class—cap rates in New York aren’t the same as in Phoenix, and “investment-grade” covers a wide range of balance sheets. But the convergence across the headline measures is still worth paying attention to: it tells you that, at the big-picture level, risk premia are unusually flat. With the exception of the 3-month yield—really just the Fed’s policy lever—the other three moved together during the financial crisis and have been on a secular downward drift ever since.

That history makes today’s clustering less mysterious: when the global discount rate falls for 15 years, it drags everything down in parallel, regardless of the underlying cash flows. The oddity is not that yields rhyme now, but that they’ve all been trained to march in step with monetary policy. The convergence looks calm, but it also tells you that investors are making the same bet in different wrappers: that inflation stays low and the Fed doesn’t lose control.

The Pen That Moved Markets

This piece covers the latest oddity in Korean equities: Monami, a stationery company, surged 60% in two days after Trump praised a wooden fountain pen gifted by South Korea’s president. The punchline is that the pen wasn’t even Monami’s (it was handmade by a different firm, Zenyle) but Monami stock spiked anyway on speculation that some of its components were involved.

Korea has a long tradition of these “sympathy rallies” where stocks jump on the faintest, sometimes comical connections. The broader point is that thin liquidity, retail-heavy participation, and an appetite for “story stocks” create these micro-bubbles. If a headline, photo, or rumor can be linked—no matter how tenuously—someone will trade it. (The marginal buyer here is less an analyst and more a meme curator.) Nobody really believes Monami made the pen; they just need a ticker to trade, and Monami is the anchor. The result is a feedback loop where plausibility matters less than availability: if there’s a narrative, someone will price it.