Good morning. Choose your name carefully. Yesterday, Leonard Aschenbrenner’s fund, Situational Awareness, sold all $16bn of its public equity holdings to Citadel after its highly leveraged bets on AI companies went wrong. “Situational Awareness” is now a phrase that will only be possible to use ironicaly, at least on Wall Street.

I argued that a big part of the problem with Fed chair Kevin Warsh’s communication strategy was his argument for it. The Fed is not a “referee”; it can’t have a neutral view of markets because it sets short‑term interest rates. Warsh’s mischaracterisation creates market confusion, as we saw on Wednesday.

Warsh’s signature innovation, the withdrawal of forward guidance, might still be a good idea, but his description is so bad we must speculate about his motives. He may want a certain amount of “uncertainty premia” in markets, believing that suppressed volatility has inflated leverage and that a return to volatility will curb that build‑up.

If this theory is right, Warsh deliberately uses vague rhetoric to let the implicit message sink in. Allowing more volatility could prevent the buildup that leads to financial crises, aligning with his concern for full employment and price stability. Whether it works remains to be seen.