FOR PEOPLE WHO WANT TO SEE WHAT BREAKS BEFORE IT BREAKS
Warsh named two Project 2025-linked advisers before his first meeting, BDC redemptions exceeded inflows for the first time on record, and 60% of 2027 data centers have not broken ground.
THE SETUP
Warsh sent his first memo to Fed staff Tuesday. Three reform priorities. Pare the $6.7 trillion balance sheet. Talk less about rate moves. Consider alternate inflation measures. He brought on two advisers. One wrote the Project 2025 Fed chapter.
BDC outflows topped inflows for the first time in Q1. And 60% of 2027 data center capacity has not broken ground.
PMD LENS
PMD identified the trimmed mean debate as the rate decision Monday. Warsh's memo lists it as a reform priority. The FOMC documented majority hike support. Waller removed the easing bias. The new chair's response is not an endorsement. It is a reform agenda questioning the inflation metric, the balance sheet, and forward guidance at once.
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WHAT MOST WILL MISS
Powell called Fed independence essential. Winfree's Project 2025 chapter pushed for shifting monetary authority toward the executive. Same dispute. Opposite sides.
The BDC gap is $6.4 billion unfilled in one quarter. Not a run. The first liquidity promise that came back partially honored.
PE evergreen funds held $534 billion at end of 2025. They hold equity, not loans. If the BDC pattern migrates, the exposure is larger.
Alphabet skipped buybacks last quarter for the first time since 2017. Meta skipped two straight. The AI cash crunch is landing on a different timetable at each hyperscaler.
Google owns a power company. The 2027 data center race turns on grid access, not checkbooks.
IN FOCUS
The Reform Agenda Arrived Before the First Meeting
The Memo
Warsh pledged to follow the best of the Fed's traditions. The substance runs deeper.
Three priorities. Shrink the balance sheet. Reduce forward guidance. Revisit whether the inflation metric captures price pressures. Each shifts its own input into June 16.
Balance sheet cuts conflict with the QT pause priced as a baseline. Less guidance means the dot plot carries less weight. And revisiting the metric puts the trimmed mean debate front and center. All in one memo. June 16 opens differently than anyone modeled a week ago.
The Personnel
Daniel Heil comes from Stanford's Hoover Institution. Paul Winfree assembled the Project 2025 Fed chapter. It advocated shifting monetary authority toward the executive branch.
Powell called independence essential and irreversible. Winfree's appointment puts what Powell warned about into concrete personnel. Not separate stories. The same institutional contest from opposite sides.
The Documented Split
PMD built the rate architecture across two weeks. The minutes documented majority hike support. Waller urged removing the easing bias. The chair's first act does not address those constraints. It runs on its own track.
Core PCE says 3.3%. The trimmed mean says 2.3%. The FOMC uses the first. The chair favors the second. That split has a date. June 16.
The June 16 Test
Before the meeting, identify which input your position requires. If it needs consensus, the chair just laid out a separate agenda. If it needs the alternate reading, the hike stance binds. Name the assumption. Size accordingly.
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SIGNALS IN MOTION
The signals below are not forecasts. They are mechanisms already in motion. Each one reveals the same pattern: duration is being financed before economics are fully proven.
Signal 1: The 2027 Build-Out Has Not Broken Ground
More than 60% of data center capacity due in 2027 has not started construction. Another 7% faces delays.
Alphabet's (GOOGL) $80 billion equity raise does not speed up construction if the transformer queue runs 18 months. Google holds one edge: a power company through its Intersect deal. Rivals with bigger checkbooks face the same 60% problem.
The Construction Lag Test
Check for project date revisions before June 12. A disclosed delay converts this into company-level risk ahead of the SpaceX roadshow. Silence means delays sit inside guidance.
Signal 2: BDC Outflows Broke a Record
More money left US non-traded BDCs than came in during Q1. Investors sought to pull $13.2 billion. Sponsors returned $6.8 billion. At least five funds met only part of requests. The unfilled gap: $6.4 billion.
PMD built this stress across five sends. The Q1 data adds the behavior layer. When investors grasp the mechanism, they act. That shift now sits in the wealth channel.
The Migration Signal
Monitor PE evergreen fund disclosures in June. Those funds hold equity, not loans. A jump in requests confirms the BDC pattern is crossing vehicle types. No jump keeps it contained.
Signal 3: AI Outlays Exceed Cash Flow Across Four Companies
Alphabet plans up to $190 billion in 2026 outlays against $214 billion in expected cash flow. Meta (META) may spend $145 billion against $133 billion. Amazon (AMZN) outlays already top cash flow. Microsoft (MSFT) faces $190 billion against $196 billion plus a $26 billion dividend.
A Janus Henderson analyst projected the consequence. More hyperscalers will likely issue equity. That call landed while the Alphabet raise is still settling.
The Equity Supply Test
Watch for another hyperscaler equity filing before June 12. A second raise from the same buyer pool confirms a structural funding shift competing with the largest IPO in history.
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THE PLAYBOOK
Check for FOMC responses to the inflation metric debate before June 16.
Watch for project date revisions before June 12. A disclosed delay reprices AI timelines.
Monitor PE evergreen fund June disclosures for redemption spikes.
Watch for a second hyperscaler equity filing before June 12.
Follow Alphabet's next buyback disclosure for a second straight skip.
CAPITAL DISCIPLINE
Warsh listed three priorities that each shift a distinct June 16 input. The FOMC documented a separate posture. Both sit on record.
Before June 16, take your most rate-sensitive position. Rerun the model with a split framework rather than consensus. If it clears, hold it. If it needs a unified FOMC, you hold a consensus bet when the chair laid out a rival plan. Size accordingly.
THE PMD REPOSITION
Warsh laid out his agenda before his first meeting. BDC outflows set a record. Sixty percent of 2027 data centers sit unstarted. AI outlays exceed cash flow across the sector.
Check for FOMC responses before June 16. Monitor PE evergreen migration. Watch for a second equity raise before the roadshow closes.
Those three shape what comes next. Consensus or split. Stress in one channel or two. AI equity supply as one-off or wave.
