A Memo on Central Bank Theater and the Illusion of Control

To: Myself
From: Market Observer, November 24, 2025
Re: Why the Fed's about-face feels like watching a hostage negotiation in real-time

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Listen. John Williams walked out of the New York Fed building on Friday and said the word "cut"—even softly, even hypothetically, even buried in the phrase "room for a further adjustment"—and the entire machinery switched direction. Rate-cut odds went from 40% to 75% in an afternoon. Bitcoin tried to climb. The S&P 500 clawed back 0.98% after Thursday's Thursday-ness nearly took out two months of gains.

This is where we are now. One Fed president mumbling about flexibility sends $4 trillion in market sentiment into retrograde.

The question isn't whether there will be a December rate cut. The question is whether anyone—including the Fed itself—actually knows anything anymore.

The Fractured Institution

The Fed released meeting transcripts this week. Apparently, it's divided. Not "some disagreement." Divided. Deeply. With talk of genuine dissents at the December meeting—something that only happens about once every three years. Jerome Powell enters the final FOMC meeting of 2025 with the institution in visible tension between the doves (Williams, apparently) and whoever's manning the hawk table.

Here's what that tells you: the Fed doesn't have consensus. It's operating on instinct, politics, and fear. That's different from policy.

The jobs data delay to December 16—past the Fed's final meeting—is the bureaucratic equivalent of flying blind. Powell will vote on rates without November employment data. Without knowing whether the labor market just contracted, stayed flat, or added another 150,000. The Fed made a forecast spreadsheet in a vacuum. It will present quarterly projections—inflation, unemployment, GDP—from a calendar without data.

Williams probably isn't a radical dove. He's a realist watching a labor market that's softening at the edges (4.4% unemployment, 119,000 September jobs) and an inflation picture that's messy but not on fire. He's also watching a market that has repriced a decade of monetary policy based on a single hawkish jobs report. So he threw out one word—room—and pivoted the entire narrative.

That's not policy. That's crisis management.

The Odd Couple: Nvidia and Nihilism

Nvidia reported $57 billion in revenue, up 62% year-over-year. The AI narrative is working. The company is printing money.

And yet: the stock closed Friday down 1%. The Nasdaq fell 2.7% for the week despite Nvidia's transcendent quarter. The S&P 500 is headed for its worst November since 2008.

This is the tell. Markets aren't repricing growth. They're repricing leverage. They're not questioning whether AI is valuable—Jensen Huang spent his earnings call lecturing skeptics about their lack of vision. They're questioning whether anyone should have paid this much this soon and this confidently.

GPU datacenter stocks got hammered. CoreWeave (CRWV) fell 7.6%. Nebius (NBIS) dropped 11%. Oklo (OKLO) and Bloom Energy (BE) both fell as risk appetite compressed. These are the pure-play AI infrastructure bets. They got bid up on the assumption that every AI shop needs infinite hardware right now. They got sold on the realization that marginal ROI on the hundredth data center doesn't justify the debt.

But Eli Lilly hit $1 trillion in market cap. Not on Ozempic euphoria alone—demand is real, sales are real—but because healthcare is boring and profitable. It's boring and profitable in a world where the AI chip business is looking a lot less like a growth story and a lot more like a commoditized arms race.

The Crypto Surrender

Bitcoin is in its worst month since 2022. It's down 24% in the past three months. It spent Friday near $86,000 after hitting $126,000 in October. That's the distance between "digital gold" and "fingernail clipping" in six weeks.

The argument from crypto true believers is that November's collapse is just January 2024's bounce in reverse—a normal retracement. Maybe. But the structure is different this time.

Robinhood reported 266.7 million options contracts traded in October, up 69% year-on-year. Crypto notional volume was $32.5 billion in a single month. These numbers are enormous. They're also a warning. When your ecosystem is built on retail leverage and options volume, you're not riding a bull market. You're riding a Ponzi with good branding.

The approvals this week of Grayscale's Dogecoin ETF (GDOG) and XRP ETF (GXRP)—with Franklin Templeton's XRP trust (XRPZ) following—represent a peculiar kind of capitulation. They're saying: "Yes, fine, we'll let you speculate on meme coins with institutional wrappers." It's regulatory surrender. It's also a sign that retail demand has plateaued and institutions are chasing the trailing edge of a bull run with products designed to democratize late entries.

XRP traded above $2 on the ETF news. It's still down 60% from November 2021. The ETF doesn't change that. It just lets more people lose less money, slower, with a fee.

The Real Tension

Here's what's actually happening beneath the noise:

The Fed raised rates aggressively. Inflation started to break. Unemployment ticked up slightly but stayed near historical lows. Earnings held up because companies cut costs before revenues fell. But equity valuations never reset. The S&P 500 trades on AI dreams priced for a world where capex spending justifies infinite multiples.

Meanwhile, the labor market is softening—not collapsing, softening—and the Fed is now in the position of either cutting rates (which re-inflates everything and admits that inflation was never really gone) or holding firm (which crashes earnings, forces margin compression, and admits that AI's growth narrative requires lower financing costs to work).

Williams probably chose cut because watching the market repricing the past three months of policy in a single afternoon is scarier than making the wrong call in December.

That's the institution's real position: terrified of being wrong, uncertain about being right, and operating in a world where each meeting's transcript becomes a Rorschach test for what people want to believe about the trajectory of capital.

The Thing Nobody Says

In 1983, Paul Volcker broke the back of stagflation. Unemployment hit 10.8%. Real rates went north of 6%. It was brutal and necessary and everyone hated him until they didn't.

In 2025, the Fed has spent eighteen months pretending it can finesse its way through the transition from tightening to loosening without anyone noticing that valuations are based on a false premise. It's almost working. Markets are bid because there's no alternative. Rates are probably coming down because the pain of not cutting is more vivid than the pain of cutting.

But somewhere in the margin, someone is adding up the math and realizing that all of this—the AI capex, the valuations, the retail leverage, the crypto leverage, the entire re-leveraging cycle that started in September—is happening on the assumption that the Fed will keep its hand on the spigot.

If it doesn't, or if it can't, November won't look like a correction. It'll look like the opening scene.

Williams knows that. That's why he said "room for a further adjustment" on Friday. He wasn't forecasting policy. He was managing panic.

For now it worked. The question is whether it will work again. And again. And again.

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Action Items:

• Watch December 16 for the combined jobs report. This will be the real data point.
• Track energy sector weakness (oil fell 2% on Ukraine peace talk rumors). Geopolitics pricing in differently.
• Assume retail crypto demand has cycled. Look for cascading margin calls if Bitcoin closes below $85k for more than a day.
• Audit valuations in the "boring profitable" segment (healthcare, staples). Rotation here is real and durable.