On My Radar: Quick Thoughts
July 31, 2026
By Steve Blumenthal
Susan and I are in Stone Harbor enjoying a few days at the beach. Feet in the sand, waves crashing, great weather - checking in happy.
I mentioned last week there would be no On My Radar today, but too much happened to ignore. Following are a few quick thoughts:
South Korea
In May, total investor debt in South Korea, margin loans plus other borrowing, hit an all-time record of 60 trillion won, or roughly $41 billion. Its market became the world's hottest, most volatile trade.
Much of that fresh leverage flowed into one specific product: new single-stock leveraged ETFs tracking Samsung Electronics and SK Hynix, the two stocks that together make up more than half the KOSPI's weight. By early July, outstanding bets in those leveraged ETFs alone reached a record 29.2 trillion won, or about $19.7 billion.
Then the music stopped. Over a few weeks, the KOSPI fell nearly 44% from its June record high. More than 1.2 million retail accounts were hit with margin calls. Roughly 350,000 were forcibly liquidated. Some are already calling it worse than 1997 or 2008.
I don't think Korea is a one-off story. I think it's a preview.
Here at home, margin debt hit a record $1.53 trillion in June, up 51.5% year over year, the fastest pace of borrowing in three decades. Investor credit balances (cash minus debt owed) sit at a record negative $1.06 trillion. Leveraged ETF assets, now roughly $179 billion, are 85% concentrated in three sectors: technology, AI, and semiconductors. Source: AdvisorPerspectives
Concentration plus leverage is how an ordinary correction becomes something else. Korea just showed the world what that looks like in real time. The mechanics are the same everywhere leverage lives. It’s a fun party right up until the collateral everyone assumed would hold doesn't. Sources: Investing.com, Bloomberg
The Fed Held
The FOMC kept the fed funds rate at 3.50%–3.75% this week, but it wasn't a clean decision: three regional presidents dissented in favor of a hike, arguing that inflation already calls for tighter policy. Core PCE has climbed from 3.0% in December to 3.4% in May, pushed higher by tariffs and the reopening of hostilities between the U.S. and Iran.
New Fed Chair Kevin Warsh, in his second meeting at the helm, left the statement's language essentially unchanged and reiterated the 2% target. By his own account, his priority is rebuilding the Fed's credibility after years spent above target. He’s got a lot of work to do.
Good friend Barry Habib and his MBS Highway team have an interesting take on inflation in his client email this morning. Looking at the Dallas Fed’s Trimmed Mean (an indicator Warsh is following closely). Click here to understand a better way to measure inflation. Barry asks, “Are Inflation Fears Justified?” Worth the watch.
GDP
Q2 GDP came in at 1.5%, below what economists expected, and a step down from Q1's 2.1%. The headline slowdown was driven by weaker government spending and decelerating investment and exports, partly offset by a pickup in consumer spending. But the number that caught my eye is buried a line below the headline: the price index for gross domestic purchases jumped to 5.7%, from 3.6% in Q1. Nominal GDP grew 7.9%, which means that almost all of that "growth" was inflation, not output. Source: BEA, AdvisorPerspectives
That's not the combination a soft landing is built on. It's the combination that makes the Fed's job harder: growth cooling and prices still running hot at the same time. Think stagflation.
What Worries Me More: Yields Up, Dollar Down
Here's the combination I'm watching most closely. The 30-year Treasury yield touched 5.25% this week, a 19-year high, while the 10-year sits near 4.73%. At the same time, the dollar index has slipped toward the 100 handle, its weakest level since June, on pace for one of its worst weeks in a month. Source: StockCharts.com
Rising long-term yields next to a falling currency is not the usual pattern. Normally, rising yields reflect growth optimism, and a firmer dollar comes along for the ride. When yields rise, and the dollar falls together, the market is often doing something else: extracting a premium for uncertainty about who's minding the currency's value over time (inflation risk, fiscal spending, or doubts about the government setting policy). I don't think it's a coincidence this is happening in the same week Warsh is talking publicly about restoring credibility. I hope he succeeds.
Oil
Brent crude spiked to nearly $98 a barrel in mid-July as the U.S. and Iran traded fire and shipping through the Strait of Hormuz was disrupted. It has since eased to about $92, but that's still roughly $20 higher than a year ago. Energy is a direct input into the inflation numbers the Fed is already worried about.
Meanwhile, Stocks Are Partying Like It’s 1999
The S&P 500 jumped 1.66% Thursday to a fresh high, powered by blowout AI-related earnings. Microsoft's Azure growth sent shares up 16%, Amazon rallied on cloud strength, Apple beat on iPhone sales. The VIX, meanwhile, sits around 18, comfortably below its long-run average.
That's the part that gives me pause. A VIX near 18, next to a 30-year yield at a 19-year high, a weakening dollar, oil back above $90, and record margin debt concentrated in the same handful of AI names driving the rally. That rings complacency, pricing a near-perfect outcome with very little insurance against a shock. Think about that for a moment.
Ask your advisor about writing covered calls and using the premium received to buy out-of-the-money put options. Think of it as inexpensive portfolio insurance.
NOTE: NOT A RECOMMENDATION FROM ME TO YOU TO DO ANYTHING. TALK TO AN EXPERT TO SIZE CORRECTLY AND IMPLEMENT SPECIFICALLY FOR YOUR PORTFOLIO.
What's Next
Global PMI numbers and the July jobs report land next week. Payrolls, in particular, may be treated as the swing vote on whether the soft-landing narrative survives, and, by extension, where the dollar and interest rates head next.
Bottom Line
None of these threads- the Fed's split vote, the yield/dollar divergence, oil, or Korea's leverage unwind- is by itself a five-alarm fire. But together, they signal caution. Leverage doesn't announce itself until it's unwinding. Korea just showed the world what that unwind looks like up close. I don't know yet whether it's a preamble for us or simply a cautionary tale from someone else's market. But it is a reminder that leverage always blows things up. The U.S. markets are extremely leveraged up. I'd rather respect the possibility than dismiss it.
Wishing you a good weekend.
Steve
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Personal Note: Beach Day
By the time this week’s post hits your inbox, Susan and I will be holding a cold Head Hunter IPA and enjoying the sound of the waves crashing on the beach.
Stone Harbor is a wonderful beach town located in southern NJ. We rented a small cottage about two blocks from the beach. It is really quite nice. Son Tyler and his girlfriend are coming for the weekend. Happy indeed.
Have a great weekend!
Kind regards,
Steve
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Stephen B. Blumenthal
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Stephen Blumenthal founded CMG Capital Management Group in 1992 and serves today as its Executive Chairman and CIO. Steve authors a free weekly e-letter entitled, “On My Radar.” Steve shares his views on macroeconomic research, valuations, portfolio construction, asset allocation and risk management. Author of Forbes Book: On My Radar, Navigating Stock Market Cycles.
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