Monetary Matters with Jack Farley The Fed Won’t Pop AI: It Will Save Housing | Blue Door’s Dan Krausz On The Three Neutral Rates, The Liquidity Waterfall, and Why Profits Rising While Employment Falters Is Not Bearish For The Stock Market
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Nov 23, 2025 Dan Krausz, an investment manager at Blue Door Asset Management, dives into the intersection of fiscal policy and AI's impact on the economy. He challenges conventional wisdom, suggesting that rising profits amid weakening employment can be positive for the stock market. Krausz explains the concept of a 'three-speed economy,' where 6% fiscal deficits create a liquidity waterfall, prioritizing government over small businesses and housing. He shares three critical investment rules, emphasizing the shift from AI infrastructure to practical implementation.
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Treasuries Top The Liquidity Waterfall
- Treasuries sit at the top of a 'liquidity waterfall' and must be funded before lower-risk private sectors receive liquidity.
- With bigger deficits, private-sector credit tightness appears faster when liquidity is withdrawn.
Implementation Trumps Pure Infrastructure
- The AI trade needs to shift from infrastructure to implementation for broad productivity gains to materialize.
- Krausz warns infrastructure alone risks oversupply unless implementers drive demand and returns.
Four Deficit Red Flags To Monitor
- Four signposts to watch for a deficit becoming market-problematic: dollar flows, term premium, 10-year vs GDP, and unanchored inflation expectations.
- Krausz says only term premium has moved materially so far; other red flags aren't flashing yet.