Real Vision · Nov 8, 2026 · 22m · 14m saved
With Cem Karsan, Founder of Kai Volatility
From 1900 to 1980, a 60/40 mix of stocks and bonds earned nothing after inflation in 60 of those 80 years. Cem Karsan, founder of Kai Volatility, told Ash Bennington on Real Vision that the 40 years of falling rates since then made the 60/40 portfolio look like a law of markets when it was an exception. Most investors still treat bonds as the safe half of a portfolio. Cem expects a Treasury crisis that ends with the Fed buying long-dated bonds at scale, in the style of the Bank of Japan.
"I believe we're about to embark on a massive... money printing at the long end of the curve... essentially QE, to hold down the long end of the curve." — Cem Karsan
Cem runs a volatility fund that sells protection against market swings, so his business depends on reading when the regime changes. Real Vision released this 22-minute conversation as a free preview of a longer episode.
The full interview is covered here so you can skip it. 22 minutes of audio, 8 minutes of reading.
Here are the 9 arguments that matter.
Key Takeaways
The Fed's hawkish turn was about credibility, not a change in the economy
There is "no air" between the Trump administration and Fed Chair Kevin Warsh, in Cem's view
The Fed will become the buyer of last resort for US bonds, as the Bank of Japan did for its own
Money given to lower-income households is spent, not invested, which makes redistribution inflationary
A 60/40 portfolio earned 0% in real terms over three separate 20-year stretches before 1982
Its Sharpe ratio over 125 years is 0.37, against 0.35 for the S&P 500
Buy-and-hold failed in the last comparable regime, so Cem favors hedges that pay off in a fall
1. Warsh Wants Credibility
Cem's read on Fed Chair Kevin Warsh is that his first job has been to make himself and the Fed look serious, not to fight inflation.
Cem Karsan says the Fed's goal under Warsh is credibility
"My view is that the primary goal for Warsh since he's started is to create credibility for himself and to create credibility for the Federal Reserve writ large." — Cem Karsan
He pointed to the Fed's swings. It was dovish, then suddenly hawkish at Jackson Hole, with talk of a 75-basis-point hike and three to four 25-basis-point raises. Then the hikes disappeared and the Fed did nothing. None of it, in Cem's view, followed a real change in the economy.
"Nothing has changed since they've started in terms of what's going on with structural inflation... All that's changed is that they tried to come out and show some level of caring about inflation." — Cem Karsan
