The small cap Russell 2000 rose 4.5% this week, boosting November returns to 9.7%. The KBW Bank Index has a month-to-date return of 13.0%, with the Broker/Dealers returning 13.6%. The Banks and Broker/Dealers have returned 47.4% and 53.9% y-t-d. The NYSE Financial Index gained 1.8% this week, pushing November and 2024 returns to 7.3% and 30.7%.
Investment-grade spreads ended the week at 78, up four bps from last week’s 26-year low. High yield spreads were only five bps higher than last week’s 17-year (June 2007) low. High yield CDS prices dropped 10 this week to 300 bps, near lows back to (pre-Fed rate hikes) December 2021.
November 18 – Bloomberg (Olivia Raimonde and Brian Smith): “High-grade corporate bond sales in the US this year have climbed to the second-highest level on record as companies rush to take advantage of relatively affordable borrowing costs before the year ends. Blue-chip companies have sold $1.417 trillion of high-grade bonds in the US this year… That volume surpasses 2021’s $1.411 trillion, before the Federal Reserve raised interest rates to tame inflation. The record for issuance was $1.75 trillion in 2020, when the US central bank cut rates back to zero to help stimulate the economy during the pandemic.”
November 21 – Bloomberg (Aashna Shah and Lily Meier): “State and local governments have sold more debt this year than ever before, borrowing roughly $460 billion since January. That tally of long-term sales already surpasses the prior annual record of more than $457 billion in 2021, a year when benchmark tax-exempt rates were below 1%...”
November 19 – Bloomberg (Jeannine Amodeo): “Monday’s record volume of US leveraged loan launches only slowed some Tuesday, with another 14 transactions emerging to put the two-day total at $48 billion.”
November 22 – Bloomberg (Kevin Kingsbury): “The US leveraged loan market has yet to start slowing down during what’s already a record year as the holiday season approaches, logging its fourth week ever of launches topping $50 billion… Seven of the 10 biggest days… dating to 2013 have occurred in 2024.”
November 22 – Bloomberg (Charles Williams and Immanual John Milton): “About $184.7 billion of bonds backed by buyout loans have been issued this year, setting an annual issuance record for the third time since 2018. Sales of collateralized loan obligations, which package leveraged loans into bonds, have climbed past the $183.8 billion record set in 2021... Before that, the level to beat was $130.4 billion, in 2018.”
November 20 – Bloomberg (Charles Williams): “Five auto ABS deals and a whole-business securitization from Wingstop priced Tuesday, putting this year’s new issues at approximately $328.9 billion, compared with $273.2 billion at this time in 2023.”
As should be expected when financial conditions remain so loose, the economy maintains a formidable head of steam. The S&P Global Services PMI Index (preliminary November data) was up two to a stronger-than-expected 57, the highest reading since March 2022. While the Manufacturing PMI was little changed at 48.8, the Composite PMI rose to the highest level since May 2022.
“The prospect of lower interest rates and a more pro-business approach from the incoming administration has fueled greater optimism, in turn helping drive output and order book
inflows higher,” Chris Williamson, chief business economist at S&P Global Market Intelligence.
November 22 – Wall Street Journal (Harriet Torry): “Republicans are feeling a lot perkier about the economy now that Donald Trump is on his way to the White House… The index of consumer sentiment in Republican households climbed more than 15 points in November, according to data released… by the University of Michigan. In Democratic households, the same index fell by over 10 points.”
Historic times. Keep in mind that Non-Financial Debt (NFD) expanded at a seasonally adjusted and annualized rate (SAAR) of $3.522 TN during Q2 (latest data). Prior to the pandemic year 2020, 2007 held the annual record for NFD growth at $2.534 TN. The federal deficit ended fiscal year 2024 at $1.83 TN, approaching 7% of GDP. Moreover, the “private Credit” boom has gained powerful momentum, pitting scores of new age financial operators against traditional banks. And the banking industry has argued they’re hamstrung in this Credit arms race by an oppressive regulatory environment.
November 22 – Bloomberg (Max Abelson and Hannah Levitt): “You wouldn’t have known JPMorgan… had just reported its best quarter by the way Jamie Dimon talked about his competition in July 2023. ‘They’re dancing in the streets,’ the chief executive officer said, referring to hedge funds and private equity firms that were piling into the lending business as banks like his faced higher capital requirements. When Donald Trump won a return to the White House, it was the financiers’ turn to boogie. ‘A lot of bankers, they’re, like, dancing in the street,’ Dimon told CEOs at a global summit on Nov. 14. ‘They’ve had successive years and years of regulations, a lot of which stymied credit.’”
Bankers on The Street doing the Trump Dance.
November 17 – Bloomberg (James Crombie): “Credit’s big shift to private markets is poised to accelerate under the next US administration. That will keep public bond and loan supply tight, distort traditional measures of corporate stress and push debt risk deeper into the shadows. Private credit’s jog to $1.6 trillion happened with surprising speed and the run to $40 trillion by piling on asset-based finance is expected to be swifter. The likely volatility, buyout boom, inflation, economic uncertainty and lax regulation expected from a second Trump administration hastens the move… Loose regulation is anticipated from the next US regime, playing to the strengths of private debt managers hoping to ‘democratize’ the investor base with as little friction as possible. Scant oversight gives shadow financial intermediaries free reign to build leverage and juice returns.”
“Private Credit,” DeFi, hedge funds, private equity – all together on The Street doing the Trump Dance, elated to have another billion-dollar hedge fund operator dancing for Trump at Treasury.
One would typically expect a push to loosen the regulatory environment in an economic environment constrained by sluggish Credit growth. Today’s backdrop is instead one of a proliferation of enterprising financial institutions and attendant lending excess. The banks, in particular, clamor for regulatory relief to more effectively compete against the scores of enterprising non-banks – including “private Credit.”
This is all late-super cycle super-crazy. Historic Bubbles in government debt, (subprime) “private Credit,” stock market speculation, a crypto mania, a manic AI arms race… Now the loaded partygoers are offered a little remedy ahead of the epic Trump Dance blowout. Updating William McChesney Martin: It’s the job of the Federal Reserve to remove the punchbowl way before partiers feel that doubling up on ecstasy for an all-night rave makes for an enlightened experience.
November 18 – Bloomberg (Neil Callanan, Gillian Tan, Tasos Vossos, Carmen Arroyo and Immanual John Milton): “At a dinner hosted by some of Morgan Stanley’s top bankers in New York last month, one topic dominated the table talk: the fortunes to be made from the frenzy around artificial intelligence. In the room were many of the marquee names of private capital. Apollo Global Management Inc., Ares Management Corp., Blackstone Inc., HPS Investment Partners, KKR & Co. and Oaktree Capital were all invited, the very same firms who’ve recently emerged as a serious threat to Wall Street banks’ long reign over the lucrative world of corporate finance. But on the night in question Morgan Stanley was preaching unity… So massive is the demand for investment dollars to build the scaffolding for the latest digital revolution, it argued, that there’s no need to compete over who gets to do the lending. Bankers and private financiers should instead be ready to combine their forces — and their firepower.”
It's a Credit Bubble Maxim that when money and Credit are readily available, they will indeed be spent in earnest. This late-cycle wedding of ultra-easy finance and an open-ended global “AI” arms race will be a most costly affair. It’s difficult to believe Treasuries will remain comfortable with the unfolding bash. But unlike stocks and crypto, bonds have a lot on their mind (i.e., Trump, supply, inflation, WWIII…).
November 21 – Financial Times (Ben Hall): “Ever since its full-scale invasion of Ukraine in February 2022, Russia has tried to deter the west from supplying Kyiv with ever more potent weaponry by threatening retaliation and escalation of the war. On each occasion — the supply of short-range missiles, tanks, F-16 fighter jets, longer-range missiles — Moscow’s bluff has been called. This week the Kremlin finally followed through on its threat. Some 72 hours after the US gave permission to Kyiv to use long-range US, UK and French missiles on targets inside Russia, Moscow hit back with a strike on Ukraine of the likes we have not seen before — the first combat use of what Kyiv called a nuclear-capable intercontinental ballistic missile.”
After three years of war, recurring Putin threats, and an unwavering market boom, it’s only natural that Ukraine War developments would be ignored. But Putin introducing a new Mach 10 (8,000 mph) ballistic missile with nuclear Multiple Independently Targetable Reentry Vehicle (MIRV) warhead capability into Russia’s war effort is noteworthy.
November 21 – Reuters (Guy Faulconbridge): “Vladimir Putin's hypersonic missile carried a simple message to the West over Ukraine: back off, and if you don’t, Russia reserves the right to hit U.S. and British military facilities. Russia fired a new intermediate-range hypersonic ballistic missile known as ‘Oreshnik’, or Hazel Tree, at Ukraine… in what Putin said was a direct response to strikes on Russia by Ukrainian forces with U.S. and British missiles.”
Arguably grave geopolitical developments, yet stocks don’t miss a beat. It’s tempting to conclude that equities just couldn’t care less. But perhaps it is more that acute risks globally help keep a lid on market yields – the perceived primary dance party risk. International yields were lower this week, with notable safe haven buying pushing German bund yields down 11 bps to a five-week low of 2.24%. Peripheral European bond spreads increased, with French spreads back near the widest level in 12 years.
With geopolitical and economic gloom seemingly on the verge of enveloping Europe, the euro currency fell 1.2% - trading Friday at a near two-year low. The “core” Dollar Index gained 0.8% to a two-year high. While risk markets enjoyed a booming week, troubling global developments were instrumental in the four bps decline in 10-year Treasury yields.
Our central bank has checked out. Financial conditions are precariously loose, leaving it to the bond market to impose some discipline. The bottom line is that this is absolutely the wrong time for conditions to loosen further. Timing couldn’t be worse for stoking the Credit Bubble – for feeding the equities, AI, and crypto manias. It’s Citigroup’s Chuck Prince “still dancing” in the summer of 2007 – only way more egregious. To see such a raving dance party as the world slides further into instability, violence, and turmoil – well, things just sink deeper into the worst-case scenario.
For the Week:
The S&P500 gained 1.7% (up 25.1% y-t-d), and the Dow rose 2.0% (up 17.5%). The Utilities were 2.0% higher (up 24.6%). The Banks added 2.0% (up 43.1%), and the Broker/Dealers gained 2.2% (up 52.2%). The Transports increased 0.8% (up 9.2%). The S&P 400 Midcaps jumped 4.2% (up 20.1%), and the small cap Russell 2000 surged 4.5% (up 18.7%). The Nasdaq100 gained 1.9% (up 23.5%). The Semiconductors jumped 2.5% (up 18.7%). The Biotechs rallied 4.5% (up 7.5%). With bullion surging $153, the HUI gold index recovered 8.1% (up 26.7%).
Three-month Treasury bill rates ended the week at 4.415%. Two-year government yields rose seven bps to 4.37% (up 12bps y-t-d). Five-year T-note yields slipped a basis point to 4.29% (up 45bps). Ten-year Treasury yields declined four bps to 4.40% (up 52bps). Long bond yields slipped three bps to 4.59% (up 56bps). Benchmark Fannie Mae MBS yields declined four bps to 5.76% (up 49bps).
Italian 10-year yields dipped five bps to 3.50% (down 20bps y-t-d). Greek 10-year yields dropped eight bps to 3.11% (up 6bps). Spain's 10-year yields fell eight bps to 2.97% (down 2bps). German bund yields sank 11 bps to 2.24% (up 22bps). French yields declined four bps to 3.05% (up 49bps). The French to German 10-year bond spread widened six bps to 79 bps. U.K. 10-year gilt yields fell nine bps to 4.39% (up 85bps). U.K.'s FTSE equities index rallied 2.5% (up 6.8% y-t-d).
Japan's Nikkei 225 Equities Index declined 0.9% (up 14.4% y-t-d). Japanese 10-year "JGB" yields added two bps to 1.09% (up 48bps y-t-d). France's CAC40 slipped 0.2% (down 3.8%). The German DAX equities index increased 0.6% (up 15.3%). Spain's IBEX 35 equities index inched 0.2% higher (up 15.4%). Italy's FTSE MIB index dropped 2.0% (up 10.4%). EM equities were mostly higher. Brazil's Bovespa index gained 1.0% (down 3.8%), while Mexico's Bolsa index was little changed (down 12.1%). South Korea's Kospi rallied 3.5% (down 5.8%). India's Sensex equities index rose 2.0% (up 9.5%). China's Shanghai Exchange Index fell 1.9% (up 9.8%). Turkey's Borsa Istanbul National 100 index added 1.7% (up 27.8%).
Federal Reserve Credit declined $39.0 billion last week to $6.893 TN. Fed Credit was down $1.997 TN from the June 22, 2022, peak. Over the past 271 weeks, Fed Credit expanded $3.166 TN, or 85%. Fed Credit inflated $4.082 TN, or 145%, over the past 628 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt fell $7.7 billion last week to $3.321 TN. "Custody holdings" were down $87 billion y-o-y, or 2.6%.
Total money market fund assets declined $22.2 billion to $6.648 TN. Money funds were up $514 billion over 16 weeks (27% annualized), $762 billion y-t-d (14.3% ann.), and $812 billion, or 13.9%, y-o-y.
Total Commercial Paper jumped $14.8 billion to $1.174 TN. CP was down $79 billion, or 6.3%, over the past year.
Freddie Mac 30-year fixed mortgage rose nine bps this week to a four-month high 6.87% (down 26bps y-o-y). Fifteen-year rates added three bps to 6.02% (down 56bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down six bps to 7.32% (down 50bps).
Currency Watch:
For the week, the U.S. Dollar Index added 0.8% to a two-year high 107.554 (up 6.1% y-t-d). For the week on the upside, the Canadian dollar increased 0.8%, the Australian dollar 0.6%, the South African rand 0.4%, and the Norwegian krone 0.1%. On the downside, the euro declined 1.2%, the Swiss franc 0.7%, the British pound 0.7%, New Zealand dollar 0.6%, the Swedish krona 0.6%, the South Korean won 0.5%, the Mexican peso 0.4%, the Singapore dollar 0.4%, the Japanese yen 0.3%, and the Brazilian real 0.2%. The Chinese (onshore) renminbi declined 0.26% versus the dollar (down 2.04% y-t-d).
Commodities Watch:
November 17 – Bloomberg (Jake Lloyd-Smith): “Gold will rally to a record next year on central-bank buying and US interest rate cuts, according to Goldman Sachs…, which listed the metal among top commodity trades for 2025 and said prices could extend gains during Donald Trump’s presidency. ‘Go for gold,’ analysts including Daan Struyven said…, reiterating a target of $3,000 an ounce by December 2025. The structural driver of the forecast is higher demand from central banks, while a cyclical lift would come from flows to exchange-traded funds as the Federal Reserve cuts, they said.”
The Bloomberg Commodities Index rallied 3.0% (up 0.3% y-t-d). Spot Gold surged 6.0% to $2,716 (up 31.7%). Silver recovered 3.6% to $31.35 (up 31.7%). WTI crude surged $4.22, or 6.3%, to $71.24 (down 1%). Gasoline jumped 5.8% (down 2%), and Natural Gas surged 10.8% to $3.129 (up 25%). Copper added 0.6% (up 6.2%). Wheat gained 1.4% (down 13.3%), and Corn increased 0.4% (down 10%). Bitcoin surged $7,450, or 8.2%, to $98,780 (up 132%).
Trump Administration Watch:
November 16 – Wall Street Journal (Aaron Zitner and Siobhan Hughes): “In naming a set of unconventional nominees to run federal departments, Donald Trump this week also took steps to push for a broader goal: realigning the balance of power among Washington’s major institutions so that more authority flows from the White House. Trump has threatened to take steps that would undermine the Senate’s confirmation powers and Congress’s role in budgeting—the most essential powers of the two chambers. He has insisted that senators allow him to place some nominees directly in their jobs, bypassing the Senate’s public hearings and confirmation process. He has said he would move to impound—or decline to spend—money appropriated by Congress for programs he dislikes, a step likely requiring him to overturn current law in court. Trump’s transition team is considering a plan to bypass the Pentagon’s regular promotion system, with a draft executive order that would create a panel to evaluate three- and four-star officers for potential removal.”
November 20 – Axios (Zachary Basu): “President-elect Trump's Cabinet increasingly resembles a European-style coalition government, staffed with a dizzying array of ideological rivals united — for now — by a grand MAGA vision. The incoming administration has a little something for everyone: isolationists and hawks, populists and bankers — even a couple of lifelong Democrats who ran for president against Trump. Some supporters have praised Trump for the eclectic mix of nominees… But if Trump's first term is any indication, his Cabinet of contradictions also could invite volatility and infighting… Trump's picks suggest there are at least three factions in the new Republican coalition with enough support to warrant representation in his administration. 1. ‘America First’ nationalists: These are the true believers tasked with Trump's highest-priority portfolios… 2. Establishment conservatives: The dominant forces in Trump's first Cabinet… have been weakened, but not fully exiled… 3. Dissident Democrats: The newest members of MAGA are among the most powerful, having endeared themselves to Trump's base as anti-establishment crusaders.”
November 20 – New York Times (Alan Rappeport): “The conflicting goals of President-elect Donald J. Trump’s economic agenda have been playing out as he debates whom to choose as his Treasury secretary, a job that will entail steering tax cuts through Congress, leading trade talks with China and overseeing the $30 trillion U.S. bond market… After a first term in which some of his top economic aides tried to tame his protectionist impulses, Mr. Trump is seeking a Treasury secretary who will carry out his unconventional plans while still having the credibility to keep markets buoyant. That mix of qualities is not easy to find. ‘I think Trump has a problem in that he wants two different things,’ said Lawrence H. Summers… ‘He wants somebody who will be deeply loyal, and he wants someone who will be deeply reassuring to markets. Since markets are fearful of the tariff agenda, it’s hard to square both things.’”
November 17 – Associated Press (Bill Weissert): “Donald Trump Jr. said… any pushback from the Washington establishment around his father’s unconventional choices for Cabinet proves they are just the kind of disruptors that voters are demanding. The younger Trump insisted the team… knows how to build out an administration, unlike when his father first took office. ‘The reality this time is, we actually know what we’re doing. We actually know who the good guys and the bad guys are,’ he told Fox News… ‘And it’s about surrounding my father with people who are both competent and loyal. They will deliver on his promises. They will deliver on his message. They are not people who think they know better, as unelected bureaucrats.’”
November 17 – Axios (Ivana Saric): “President-elect Trump confirmed… that he is planning to declare a national emergency and use the U.S. military to carry out mass deportations. Trump made his promise to deport millions of undocumented immigrants one of the cornerstones of his 2024 campaign, and his team has already begun strategizing how to carry its plan out. A Truth Social post early Monday is the first time the president-elect has confirmed how his administration will execute the controversial plan. Tom Fitton, the president of the conservative group Judicial Watch, posted on Truth Social earlier this month that Trump was ‘prepared to declare a national emergency and will use military assets to reverse the Biden invasion through a mass deportation program.’ Trump reposted Fitton's comment Monday with the caption, ‘TRUE!!’.”
November 17 – Axios (Avery Lotz): “House Speaker Mike Johnson said ‘there may be a function’ to facilitate the use of recess appointments to speed up the confirmation of President-elect Trump's Cabinet nominees. The process of adjourning the Senate to allow Trump to install his picks without congressional approval would mean the chamber would shirk its advice-and-consent role for cabinet confirmations. The president-elect demanded ahead of the Senate Republican leader race… that any senator seeking the position must agree to recess appointments, ‘without which we will not be able to get people confirmed in a timely manner.’ Thune has expressed willingness to use the tool, saying ‘all options are on the table.’ Driving the news: Johnson did not rule out the use of recess appointments…, saying, ‘We'll have to see how it plays out.’”
November 18 – Wall Street Journal (Jed Rubenfeld): “Can President Trump make recess appointments for nominees the Senate won’t confirm? Incoming Senate Majority Leader John Thune says the option is ‘on the table.’ But recess appointments are complicated, and if Mr. Trump tries this approach to overcome senatorial opposition, it would likely be struck down by the Supreme Court. The first problem… would be getting the Senate into recess. Mr. Thune can’t simply bang a gavel and declare a recess. The Supreme Court has held that an adjournment must at minimum be longer than three days to count as a ‘recess,’ and the Constitution says that both the House and Senate must agree by majority vote to any adjournment in either chamber longer than three days.”
November 19 – Financial Times (Myles McCormick and Jamie Smyth): “As Donald Trump sat in his Mar-a-Lago resort on election night, two of US oil’s most influential men were just feet away, toasting his victory: North Dakota governor Doug Burgum and shale magnate Harold Hamm. They had been stalwarts on the Republican’s campaign for months: Burgum… stumping for Trump at rallies, and Hamm offering advice on energy — and money. Both had been at a dinner organised by Hamm and attended by top US oil executives in April, when Trump asked for $1bn in donations, promising to gut President Joe Biden’s climate agenda if he won back the White House. Their loyalty has paid off. Trump has named Burgum as both his interior secretary and his ‘energy tsar’, handing him sweeping authority to open federal lands to frackers and deregulate agencies to boost US oil and gas output. On Saturday, the president-elect picked as his energy secretary Chris Wright, a shale executive who had been promoted by Hamm for months.”
November 16 – Financial Times (Felicia Schwartz and Andrew England): “Donald Trump’s new administration will revive its ‘maximum pressure’ policy to ‘bankrupt’ Iran’s ability to fund regional proxies and develop nuclear weapons, according to people familiar... Trump’s foreign policy team will seek to ratchet up sanctions on Tehran, including vital oil exports, as soon as the president-elect re-enters the White House in January, people familiar with the transition said. ‘He’s determined to reinstitute a maximum pressure strategy to bankrupt Iran as soon as possible,’ said a national security expert familiar with the Trump transition.”
November 18 – Wall Street Journal (Joyu Wang): “Donald Trump has given Taiwan more than a few reasons to be anxious. The president-elect pressed Taiwan during his election campaign to spend significantly more to defend against the growing threat of attack by China. He accused Taiwan’s chip makers… of stealing American jobs. He brought into his inner circle the billionaire Elon Musk, who has mocked Taiwan’s determination to maintain its autonomy. And he suggested that his own reputation is enough to deter Chinese leader Xi Jinping from invading.”
November 21 – Reuters (Hannah Lang): “A slew of crypto companies including Ripple, Kraken and Circle are jostling for a seat on President-elect Donald Trump's promised crypto advisory council, seeking a say in his planned overhaul of U.S. policy, according to several digital asset industry executives. Campaigning at a July bitcoin conference in Nashville, Trump promised a new council as part of a crypto-friendly administration. His transition team is discussing how to structure and staff it, and which companies should be included…”
November 21 – Financial Times (Harriet Agnew, Amelia Pollard and James Fontanella-Khan): “Ken Griffin has warned Donald Trump’s plan to raise tariffs would put the US ‘on a slippery slope to crony capitalism’ and offered other harsh critiques of the incoming president’s agenda, in surprisingly sharp criticism from a major Republican donor. The billionaire founder of hedge fund Citadel… said he was ‘gravely concerned’ that Trump’s plan to impose tariffs and curtail immigration would impose huge inflationary pressure on the US economy. He said: ‘Now you’re going to find the halls of Washington really filled with the special interest groups and lobbyists as people look for… higher tariffs to keep away foreign competition and to protect inefficient American businesses that fail to meet the needs of the American consumer.’”
November 19 – Bloomberg (Hadriana Lowenkron): “Billionaire entrepreneur Elon Musk defended embattled former Representative Matt Gaetz, President-elect Donald Trump’s pick for attorney general… ‘Matt Gaetz has 3 critical assets that are needed for the AG role: a big brain, a spine of steel and an axe to grind,’ Musk… wrote in a post on his social-media platform X… ‘He is the Judge Dredd America needs to clean up a corrupt system and put powerful bad actors in prison,” he added, referring to a fictional comic book character. ‘Gaetz will be our Hammer of Justice.’”
Ukraine War Watch:
November 22 – Reuters (Dan Peleschuk): “The Russian missile that struck the Ukrainian city of Dnipro on Thursday reached a top speed of more than 13,000 kph (8,000 mph) and took about 15 minutes to reach its target from its launch, Ukraine said on Friday in its first public assessment of the new weapon. Russian President Vladimir Putin said Moscow struck a Ukrainian military facility with a new intermediate-range, hypersonic ballistic missile known as ‘Oreshnik’ as a warning to the West against supporting Ukraine's war effort.”
November 19 – Associated Press (Hanna Arhirova and Illia Novikov): “Ukraine fired several American-supplied longer-range missiles into Russia…, marking the first time Kyiv used the weapons that way in 1,000 days of war. The use of the Army Tactical Missile System, known as ATACMS, came as Russian President Vladimir Putin formally lowered the threshold for using nuclear weapons, opening the door to a potential nuclear response by Moscow to even a conventional attack by any nation supported by a nuclear power. That could include Ukrainian attacks backed by the U.S.”
November 20 – Bloomberg (Alex Wickham and Daryna Krasnolutska): “Ukraine’s armed forces fired British cruise missiles at military targets inside Russia for the first time, a Western official familiar with the matter said. The strikes using Storm Shadow missiles were approved in response to Russia deploying North Korean troops in its war against Ukraine, a move by Moscow that the UK government considered to be an escalation of the conflict…”
November 20 – Reuters (Jack Kim and Joyce Lee): “Around 10,900 North Korean troops have been deployed to Kursk as part of Russia's airborne unit and marines, with some already participating in battles in the Ukraine war, a South Korean lawmaker said… North Korea has also shipped additional arms for the war in Ukraine, including self-propelled howitzers and multiple rocket launchers, parliament intelligence committee member Lee Seong-kweun told reporters, citing the National Intelligence Service.”
November 20 – Bloomberg (Jenny Leonard): “The US will provide Ukraine with antipersonnel land mines to blunt the advance of Russian troops, an official familiar with the decision said, the latest effort by the Biden administration to bolster support for Kyiv ahead of President-elect Donald Trump’s inauguration.”
November 20 – Reuters (Anastasiia Malenko, Tom Balmforth and Max Hunder): “The United States shut its embassy in Kyiv on Wednesday morning due to what it called the threat of a significant air attack, a day after Ukraine used American missiles to hit a target inside Russia in what Moscow described as an escalation in the war. Later, after an air raid siren in the early afternoon jangled nerves in the capital, Ukraine's military spy agency said Russia was trying to sow panic by circulating fake online messages about a massive looming missile and drone attack. ‘The enemy, unable to subdue Ukrainians by force, resorts to measures of intimidation and psychological pressure on society. We ask you to be vigilant and steadfast,’ it said.”
November 16 – Financial Times (Christopher Miller): “Pyongyang has supplied Moscow’s army with long-range rocket and artillery systems, some of which have been moved to Russia’s Kursk region for an assault involving North Korean soldiers to push out Ukrainian forces, a Ukrainian intelligence assessment has found. In recent weeks, North Korea provided some 50 domestically produced 170mm M1989 self-propelled howitzers and 20 updated 240mm multiple launch rocket systems that can fire standard rockets and guided ones…”
Market Instability Watch:
November 21 – Wall Street Journal (Ed Frankl): “The U.S. could face a sharp rise in borrowing costs and turmoil in financial markets as soon as next year if government debt continues to pile up rapidly, according to… Swiss Re’s group chief economist. U.S. 10-year Treasury yields… could rise above 5% in 2025 from around 4.4% currently, if the incoming administration prioritizes tax cuts and uses tariffs to offset lost revenues, Jerome Jean Haegeli said… ‘I don’t exclude next year that the U.S. is going to have a Liz Truss moment for Treasurys’ he said…”
November 19 – Bloomberg (Masaki Kondo and Ruth Carson): “Two of the world’s biggest foreign holders of US government debt offloaded a pile of Treasuries in the third quarter as they rallied before the presidential election. Japanese investors sold a record $61.9 billion of the securities in the three months ended Sept. 30… Funds in China offloaded $51.3 billion during the same period, the second biggest sum on record.”
November 17 – Financial Times (The editorial board): “Trillions of dollars of financial securities change hands every day. A few decades back, exchanges took place in raucous trading pits where dealers would bellow out prices to match buyers and sellers. Then the banks went electronic. Today, the task of market-making has evolved into a competitive and highly lucrative computerised sport beyond the banking sector… And as the Financial Times’ New titans of Wall Street series has outlined, a handful of innovators have mastered it, leaving the biggest names in banking in the dust. Independent trading firms, including Citadel Securities, Jane Street, Susquehanna International Group, XTX Markets and DRW, have taken advantage of electronic transactions and algorithms to trade and make markets in an array of assets… For measure, Citadel Securities handles almost a quarter of all US stock trades. Last year, Jane Street traded options with a notional value of $32tn.”
November 17 – Financial Times (Stephen Gandel): “The trading accounts of US banks topped $1tn in the third quarter — their highest level in more than 16 years and close to an all-time high — as the nation’s largest financial firms seek to profit from rebuilding their market-making businesses. That growth has at the same time left the banks, particularly the largest ones, more exposed to market moves than at any time since the financial crisis as they hold ever-greater inventories of price-sensitive securities. Their trading accounts last peaked at just over $1tn… in the first quarter of 2008…”
November 20 – AFP: “The European Central Bank warned… that sovereign debt risks are growing in the eurozone at a time of heightened political uncertainty and muted economic performance. In a regular review of the single currency area's financial stability, the ECB said that markets could again be hit by debt worries similar to the crisis that rumbled through the 2010s. Since its last assessment in May, ‘election outcomes at the European and national levels, notably in France, have rekindled concerns about sovereign debt sustainability,’ the central bank said… Already heavy debt burdens could limit the ability of some eurozone governments to respond to ‘adverse shocks’, the… institution warned.”
November 18 – Bloomberg (Laura Noonan): “Global watchdogs will move to rein in leverage at non-banks early next year, the Financial Stability Board promised…, more than a year after its chair signaled a probe into mounting borrowings at hedge funds, private capital markets and others. ‘By early 2025 the FSB will publish a consultation report with proposed policy recommendations for authorities to monitor vulnerabilities and use policy measures to address systemic risk from NBFI leverage,’ the FSB said in its annual report…”
Global Credit Bubble Watch:
November 21 – Financial Times (Robin Wigglesworth): “Interest rates are coming down… And they’re probably coming down too late, too little and too slowly for a lot of smaller companies and the investment funds that chucked money at them over the past few years. Private credit… has been one of the hottest asset classes over the past decade. Possibly the hottest. Depending on who you believe, there’s somewhere between $2tn and $3tn of money in private credit funds. The problem is that they make floating rate loans — typically priced at 5-10 percentage points above SOFR — and that can be a double-edged sword. Higher rates mean interest income balloons, but at some point it becomes a challenge for even a healthy, growing company to keep servicing its debts. And for many companies the weight of their debt burdens have almost doubled in just a few years.”
November 21 – Bloomberg (Scott Carpenter): “The world’s biggest private credit managers are turning to an obscure investment product to help raise billions from deep-pocketed insurance companies, testing the limits of industry safeguards meant to curb risk. The vehicles, known as rated feeders, package stakes in private debt funds into bonds, making it cheaper for insurers to buy them by effectively cutting the amount of capital that they need to hold against those investments.”
November 18 – Bloomberg (Carmen Arroyo and Jill R. Shah): “Silver Point Capital said it’s closed a $8.5 billion direct lending fund that will focus on providing loans to mid-sized companies, just two months after closing a $4.6 billion credit fund. Silver Point Specialty Credit Fund III brings the firm’s direct lending strategy to over $15 billion in investable capital… Silver Point added it now oversees $35 billion of assets across strategies including both private and public credit. Fundraising in the $1.6 trillion private credit market has proliferated as lenders fight to remain competitive against peers as well as Wall Street banks. This year’s issuance of broadly syndicated US leveraged loans has topped $1 trillion for the first time this year.”
AI Bubble Watch:
November 20 – Bloomberg (Tasos Vossos): “The artificial intelligence revolution is driving such an insatiable quest for cash that it’s rewiring one section of US capital markets. Utilities, which are racing to keep up with surging electricity demand to power AI data centers, have dethroned US banks as the biggest sellers of subordinated securities to big investors. Dominion Energy… and others have raised nearly $18 billion through sales in 2024, a ninefold jump from last year… More specifically, utilities are turning to hybrid bonds, an emerging category within the asset class…”
November 21 – Bloomberg (Ian King): “Nvidia Corp. assured investors that its new product lineup will continue to fuel an artificial intelligence-driven growth run, while also signaling that the rush to get chips out the door is proving costlier than expected… Chief Executive Officer Jensen Huang said that Nvidia’s highly anticipated Blackwell products will ship this quarter amid ‘very strong’ demand. But the production and engineering costs of the chips will weigh on profit margins, and Nvidia’s sales forecast for the current period didn’t match some of Wall Street’s more optimistic projections.”
November 17 – Reuters (Gursimran Kaur): “Nvidia's new Blackwell AI chips, which have already faced delays, have encountered problems with accompanying servers that overheat, causing some customers to worry they will not have enough time to get new data centers up and running, the Information reported… The Blackwell graphics processing units overheat when connected together in server racks designed to hold up to 72 chips, the report said, citing sources familiar with the issue.”
November 19 – Wall Street Journal (Belle Lin): “The coming wave of artificial-intelligence usage won’t just strain data centers and power grids—it will also stress the country’s network capabilities. That’s because more people will use AI chatbots and agents, which will talk in turn to still more AI agents—and all that requires more data, computing and back-end technology systems like networking… ‘The amount of traffic that’s starting and will continue to be generated with AI, where you get into a machine-to-machine environment, that amount of traffic is going to be monumental,’ said Chris Sharp, chief technology officer of data center operator Digital Realty.”
November 16 – Financial Times (Jamie Smyth): “A group of veteran community activists is planning legal action to block the reopening of Three Mile Island nuclear plant in a test of whether the American public will back an atomic energy boom financed by Big Tech and US taxpayers. Three Mile Island Alert, a group founded almost half a century ago to lobby for the closure of the plant in Middletown, Pennsylvania — site of the worst nuclear accident in US history — said it would challenge government licences required by operator Constellation Energy… The legal threat is one of several obstacles facing the utility as it races to meet the terms of a 20-year power supply deal struck with Microsoft. The $1.6bn project could become a potent symbol of the revival of nuclear energy in the US. Constellation must obtain numerous regulatory approvals, train hundreds of staff and upgrade equipment at a time when nuclear supply chains are stretched.”
Bubble and Mania Watch:
November 17 – Wall Street Journal (Gunjan Banerji): “A roaring market rally since the U.S. presidential election has driven up the price of everything from shares of technology and manufacturing giants to cryptocurrencies. Many investors are betting it has room to run. Investors have stampeded into funds tracking U.S. stocks and picked up trades that would profit if the rally that recently sent the S&P 500 above 6000… U.S. equity exchange-traded and mutual funds drew nearly $56 billion in the week ended Wednesday, the second-largest weekly haul in records going back to 2008… Such funds have drawn inflows for seven consecutive months, the longest streak since 2021…”
November 18 – Financial Times (Patrick Temple-West and Joshua Franklin): “Record numbers of US executives are selling shares in their companies, as corporate insiders from Goldman Sachs to Tesla and even Donald Trump’s own media group cash in on the stock market surge that has followed his election victory. The rate of so-called insider sales has hit a record high for any quarter in two decades, according to VerityData… While insider selling is routine… the surge following November 5 underscores how US executives are already profiting personally from his return before he re-enters the White House.”
November 20 – Bloomberg (Maxwell Adler and Eliyahu Kamisher): “The rally in technology stocks has created so much wealth in California that it has helped the state fill its coffers. California’s budget for the coming fiscal year is ‘roughly balanced,’ the state’s Legislative Analyst’s Office said…, citing a surge in corporate and personal-income tax revenue driven by Silicon Valley’s booming artificial intelligence and tech sectors… ‘In the first half of 2024, stock pay alone at four major technology companies accounted for almost 10% of the state’s total income tax withholding,’ the LAO said… Those companies are Nvidia Corp, Alphabet Inc., Meta Platforms Inc. and Apple Inc. Because of its reliance on its richest people, California’s economy… is sensitive to extreme booms and busts.”
November 19 – Bloomberg (Leah Nylen and Josh Sisco): “Alphabet Inc.’s Chrome browser could go for as much as $20 billion if a judge agrees to a Justice Department proposal to sell the business, in what would be a historic crackdown on one of the world’s biggest tech companies. The department will ask the judge, who ruled in August that Google illegally monopolized the search market, to require measures related to artificial intelligence and its Android smartphone operating system, according to people familiar...”
November 20 – Bloomberg (James Tarmy): “A painting by the surrealist artist René Magritte has sold for $121.2 million at Christie’s in New York, setting a new record for the artist at auction and becoming the biggest-ticket lot of this year’s New York November sales season.”
U.S./Russia/China/Europe Watch:
November 21 – Financial Times (Isobel Koshiw): “Vladimir Putin has said Moscow fired an experimental hypersonic missile at Ukraine… in response to the US and UK allowing Kyiv to use advanced western weaponry at targets inside Russia. The president of Russia said the Oreshnik missile, which can carry a nuclear warhead, targeted a factory in Dnipro, which was formerly the Soviet Union’s top-secret rocket-building facility. Putin said Russia would respond to ‘escalation… decisively and correspondingly’. Russia reserved the right to use its weaponry against military targets in countries that allowed Ukraine to use their weapons against Moscow’s forces, he added.”
November 19 – Axios (Ivana Saric): “Russian President Vladimir Putin signed a revised nuclear doctrine… to effectively lower his country's threshold for using nuclear weapons… The new doctrine suggests Russia could use nuclear weapons to respond to attacks by Ukraine carried out with American support. The new doctrine expands the range of countries and alliances — a clear reference to NATO — subject to nuclear deterrence. It also claims nuclear weapons would only be a last resort to protect Russia's sovereignty… It states that Russia will consider an attack from any non-nuclear state with the backing of a nuclear country as a joint attack. It also states that Russia reserves the right to use nuclear weapons in response to a conventional weapons attack that threatens its sovereignty. The Russian Defense Ministry on Tuesday accused Ukraine of firing six U.S.-made ATACMS missiles on Russia's Bryansk region.”
November 16 – Reuters (Liz Lee): “China's President Xi Jinping told his U.S. counterpart Joe Biden that the issues of Taiwan, democracy, human rights and rights to development are ‘red lines’ for China and not to be challenged, the official state media Xinhua said… Xi warned the United States not to get involved in bilateral disputes over islands and reefs in the South China Sea or ‘aid or abet the impulsion to make provocations’ in that region, it said.”
November 20 – Bloomberg (Olivia Solon): “Subsea cables are the arteries of the internet, transmitting data between continents and underpinning an increasingly digital economy. The cables are made up of tightly packed fiber-optic lines encased in layers of tough plastic or steel wire. When they break, it’s usually an accident caused by fishing trawlers or anchors dragging along the ocean floor. Occasionally, it’s sabotage: an act of vandalism or an attack orchestrated by a government for the purpose of hybrid warfare. Two fiber-optic cables were severed in the Baltic Sea in mid-November, one of them connecting Finland to Germany, the other linking Lithuania and Sweden. While the cause wasn’t immediately determined, governments in the region suspected the damage was deliberate.”
November 20 – Wall Street Journal (Bojan Pancevski): “Russia is suspected of orchestrating another major act of sabotage in Europe after two key fiber-optic data cables running below the Baltic Sea were cut off in quick succession earlier this week… A 135-mile internet link connecting Sweden’s Gotland Island and Lithuania stopped working on Sunday morning, and a similar 700-mile-long cable linking Finland and Germany ceased to operate the following night… Western officials said there are indications that Russia was behind the incidents, which they said were similar to other operations resulting from Moscow’s escalating hybrid warfare against NATO countries in Europe.”
November 19 – Reuters (Lidia Kelly): “A special hotline in place to deflate crises between the Kremlin and the White House is not currently being used, the Kremlin said…, as nuclear risks rise amid the highest tensions between Russia and West in decades. Russian President Vladimir Putin… lowered the threshold for a nuclear strike in response to a broader range of conventional attacks, days after reports said Washington had allowed Ukraine to use U.S.-made weapons to strike deep into Russia.”
De-globalization Watch:
November 20 – Bloomberg (Alberto Nardelli, Michael Nienaber and Samy Adghirni): “The caipirinhas were flowing, the samba and frevo dancers were swaying and a light ocean breeze enveloped the VIP guests in Rio de Janeiro. But as the Group of 20 communique popped up online, the mood was far from festive. The behind-the-scenes squabbling over language characterizing wars in Ukraine and the Middle East had been abruptly shut down by an impatient host, Brazil’s President Luiz Inacio Lula da Silva. That left a bitter taste, particularly among the US and its allies.”
November 20 – Barron's (Avi Salzman): “Escalating tensions between Russia and the United States have wide implications for global security. Ukraine fired long-range missiles at Russia this week, after the U.S. approved plans to do so. Russian President Vladimir Putin said the move has crossed a red line… The tensions are also impacting an important source of U.S. electricity: nuclear power plants. A few days ago, Russia pulled the export license for the company that sends enriched uranium to the U.S. for use in nuclear reactors. For now, it looks like all shipments of enriched Russian uranium, which accounts for 40% of the global supply, are stalled. It's not clear if or when they'll be back again.”
Inflation Watch:
November 20 – Bloomberg (Marcus Ashworth): “UK inflation jumped by more than expected to 2.3% in October — back above the Bank of England's 2% target — from 1.7% the month prior, but that won't have changed the Monetary Policy Committee's mind much… It's pretty clear that rates are on hold at 4.75% until at least its Feb. 6 meeting.”
Federal Reserve Watch:
November 21 – Financial Times (Colby Smith): “A top Federal Reserve official has warned that the US is more vulnerable to inflationary shocks than in the past, as businesses braced for increased protectionism and an onslaught of new economic policies when Donald Trump returns to the White House. Tom Barkin, president of the Richmond Fed, told the Financial Times that he expected inflation to continue dropping across the world’s largest economy, even though progress has plateaued… But he cautioned that businesses were passing on costs to consumers more readily than in the past... ‘We’re somewhat more vulnerable to cost shocks on the inflation side, whether they be wage-[related] or otherwise, than we might have been five years ago,’ said Barkin…”
November 20 – Reuters (Ann Saphir): “Federal Reserve Governor Michelle Bowman… expressed discomfort with the U.S. central bank cutting interest rates while inflation continues to run above the Fed's 2% goal, adding a bit more color to her call for a cautious approach to further rate reductions. ‘It's concerning to me that we're recalibrating policy, but we haven't yet achieved our inflation goal,’ Bowman said… Flexibility is a frequent theme in Bowman's public remarks…, as she emphasized the importance of optionality on rate decisions and the need to tailor banking regulation to size so that smaller community banks are not overburdened.”
November 20 – Reuters (David Hollerith): “The Federal Reserve’s top banking regulator said… he wouldn’t leave before his term was up even if President-elect Donald Trump tried to fire him, echoing remarks made by Fed Chair Jerome Powell earlier this month. ‘As Chair Powell said, we serve fixed terms of office and I intend to serve my fixed term of office,’ Michael Barr, the Fed’s vice chair for supervision, told lawmakers…”
U.S. Economic Bubble Watch:
November 21 – Reuters (Lucia Mutikani): “The number of Americans filing new applications for unemployment benefits fell to a seven-month low last week, suggesting that job growth likely rebounded in November after abruptly slowing last month amid hurricanes and strikes… Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 213,000 for the week ended Nov. 16, the lowest reading since April.”
November 17 – Yahoo Finance (Sam Ro): “Americans plan to spend more on holiday shopping this year than they did last year. That’s the takeaway from pretty much every consumer survey conducted over the past several weeks. Below are some highlights: ‘Our proprietary survey of ~2,000 US consumers reveals a more positive outlook for holiday shopping versus 2023 and 2022. Overall, 37% of consumers are planning to keep their holiday budgets roughly the same, 35% expect to spend more, and 22% expect to spend less yielding a net of +13%.’ - Morgan Stanley… ‘Consumer sentiment has also shown signs of improvement, and the 2024 Bank of America Holiday Survey suggests people are planning to spend $2,100 outside of typical obligations and necessities this holiday season, up 7% YoY.”
November 21 – Reuters (Lucia Mutikani): “U.S. mortgage rates increased to a four-month high this week, which together with higher home prices could sideline potential buyers from the housing market in the near term. The average rate on the popular 30-year fixed-rate mortgage increased to 6.84%, the highest level since July, from 6.785% last week…”
November 20 – CNBC (Diana Olick): “After flatlining the week before, mortgage demand rose last week, despite mortgage rates increasing for the fourth straight week… Applications for a mortgage to purchase a home rose 2% for the week but were 1% lower than the same week one year ago. Purchase demand was driven by conventional and FHA loans, with FHA purchase applications seeing a 7% increase.”
November 18 – Bloomberg (Michael Sasso): “Confidence among US homebuilders advanced to a seven-month high in November on a jump in sales expectations and optimism a Trump administration will ease regulatory burdens. A gauge of housing market conditions from the National Association of Home Builders and Wells Fargo climbed 3 points to 46 this month, exceeding all estimates… All three components of the index rose, led by the six-month sales outlook, which increased 7 points to the highest level since April 2022 on hope the Republican sweep in Washington will mean looser regulation and more construction. A measure of current sales improved to a six-month high and an index of prospective buyer traffic reached the highest level since April.”
November 21 – Reuters (Lucia Mutikani): “U.S. existing home sales rebounded sharply in October, posting the first annual gain since mid-2021, as buyers rushed into the market to take advantage of a brief decline in mortgage rates. Home sales jumped 3.4% last month to a seasonally adjusted annual rate of 3.96 million units… Housing inventory rose 0.7% to 1.37 million units last month. Supply increased 19.1% from one year ago. Despite the rise in inventory, the median existing home price rose 4.0% from a year earlier to $407,200 in October… At September's sales pace, it would take 4.2 months to exhaust the current inventory of existing homes, up from 3.6 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.”
November 19 – Reuters (Lucia Mutikani): “U.S. single-family homebuilding tumbled in October likely as Hurricanes Helene and Milton depressed activity in the South… The report… suggested that residential investment, which includes homebuilding, remained subdued at the start of the fourth quarter after contracting in the last two quarters… Single-family housing starts… plunged 6.9% to a seasonally adjusted annual rate of 970,000 units last month… Data for September was revised higher to show homebuilding rising to a rate of 1.042 million units… Single-family starts dropped 10.2% in the densely populated South, large parts of which were devastated by Helene in late September.”
November 18 – Bloomberg (Jonnelle Marte): “US consumers had a tougher time accessing credit this year, with applications for auto loans and mortgage refinancing being turned down at the highest rates in more than a decade. Despite largely stable demand, applications for various forms of credit were increasingly rejected in 2024, according to… the Federal Reserve Bank of New York… ‘Reported rejection rates for credit cards, mortgages, auto loans, credit card limit extension applications and mortgage loan refinance applications all rose in 2024,’ the New York Fed said…”
November 19 – Wall Street Journal (Vicky Ge Huang and Matt Wirz): “More Americans are falling behind on their car payments. Wall Street isn’t worried. Investors are snapping up bonds tied to car loans, betting that a strong U.S. economy will keep rising delinquency rates in check. Sales of bonds backed by the riskiest auto loans to subprime borrowers hit nearly $40 billion this year through October, up 17% from all of 2023… ‘We’ve seen deals almost 20 times oversubscribed,’ said Nicholas Tripodes, a senior portfolio manager at… Federated Hermes… Bonds of all kinds have surged in popularity over the past year… Demand is also being fueled by money managers that have teamed up with insurers, which have piles of cash from annuities and insurance premiums to invest.”
Fixed Income Watch:
November 22 – Bloomberg (James Crombie): “The private debt boom, central bank support, high Treasury yields and investor base changes are keeping credit spreads artificially tight, according to junk bond guru Marty Fridson. But the likelihood of losing money in corporate debt hasn’t diminished, Fridson, whose debt analysis has been studied by Wall Street for decades, wrote… ‘Risks to high-yield investors involving default probability, loss given default, illiquidity, and volatility have undergone no revolutionary change that justifies narrower average spreads than were observed in the past,’ the chief executive officer of FridsonVision High Yield Strategy wrote.”
China Watch:
November 19 – Associated Press (Kanis Leugn and Zen Soo): “Forty-five ex-lawmakers and activists were sentenced to four to 10 years in prison Tuesday in Hong Kong’s biggest national security case under a Beijing-imposed law that crushed a once-thriving pro-democracy movement. They were prosecuted under the 2020 national security law for their roles in an unofficial primary election… A Hong Kong court convicted 45 of 47 defendants of conspiracy to commit subversion for organizing or participating in an unofficial primary election for the city legislature in 2020. Most of the defendants were opposition politicians. Others included a businessman, a social worker and a new generation of pro-democracy activists… Legal scholar Benny Tai, whom the judges called the mastermind, received the longest sentence of 10 years.”
November 18 – Bloomberg: “Chinese consumers remain cautious on spending as the government’s recent stimulus measures haven’t yet yielded a substantive boost to their shaken confidence, Boston Consulting Group said… ‘Consumer confidence remains neutral to slightly negative,’ BCG wrote, adding that the stimulus package still hasn’t meaningfully improved consumers’ income.”
November 21 – Wall Street Journal (Brian Spegele): “On his first day in office, leader Xi Jinping inherited an ambitious road map to build 10,000 miles of high-speed rail to link China’s biggest cities. He took those plans and supersized them. What has emerged 12 years later is one of the biggest public works in history, soon to exceed 30,000 miles of high-speed rail… It’s becoming a giant money pit. China has spent more than $500 billion on new tracks, trains and stations in the past five years, while the country’s national railway operator, China State Railway Group, is nearing $1 trillion of debt and other liabilities. Just keeping up with its debt requires $25 billion annually.”
November 19 – Financial Times (Kaye Wiggins, Cheng Leng and Arjun Neil Alim): “Goldman Sachs’ chief executive has warned that global investors are still ‘predominantly on the sidelines’ over deploying capital in China because of weak consumer confidence and difficulties getting money out of the country. David Solomon said investors ‘continue to be concerned’ about cashing out of investments in the world’s second-largest economy. ‘It’s been very difficult over the course of the last five years to get capital out,’ he told an event… organised by the Hong Kong Monetary Authority… ‘I think you’ve got a combination of issues that have global investors predominantly on the sidelines with respect to capital deployment,’ Solomon said.”
Global Bubble Watch:
November 19 – Financial Times (Robin Wigglesworth and Ian Smith): “Citadel Securities is aiming to become a ‘material’ player in Eurozone government bond trading by next year after building a team of traders in Paris and securing valuable access to German debt auctions. The… high-speed trading firm founded by billionaire Ken Griffin is already a major participant in the US Treasury market and is now targeting a similarly prominent role in Europe. In September, Germany added Citadel Securities to the list of companies that were allowed to buy the country’s debt directly at its regular auctions — a move widely viewed as an implicit blessing that the market maker plans to use as a beachhead to expand its presence…”
Central Bank Watch:
November 20 – Reuters (Francesco Canepa): “The European Central Bank warned… about a ‘bubble’ in stocks related to artificial intelligence, which could burst abruptly if investors' rosy expectations are not met. The warning came as part of the ECB's twice-yearly Financial Stability Review, a laundry list of risks ranging from wars and tariffs, to cracks in the plumbing of the banking system… ‘This concentration among a few large firms raises concerns over the possibility of an AI-related asset price bubble,’ the ECB said. ‘Also, in a context of deeply integrated global equity markets, it points to the risk of adverse global spillovers, should earnings expectations for these firms be disappointed.’”
Europe Watch:
November 20 – Financial Times (Olaf Storbeck and Ian Smith): “The Eurozone risks another debt crisis if the bloc cannot boost growth, lower public debt and fix ‘policy uncertainty’, the European Central Bank has warned. In its annual Financial Stability Review…, the ECB sounded the alarm over a potential return of ‘market concerns over sovereign debt sustainability’. It pointed to ‘elevated debt levels and high budget deficits’ as well as tepid growth and uncertainties caused by recent ‘election outcomes at the European and national levels, notably in France’. Luis de Guindos, ECB vice-president, also pointed to ‘poor historical compliance with EU fiscal rules’ by some EU governments.”
November 20 – Reuters (Dominique Vidalon, Benoit Van Overstraeten, Makini Brice): “French far-right leader Marine Le Pen… threatened to seek to topple Prime Minister Michel Barnier's fragile coalition government if her National Rally (RN) party's cost-of-living concerns were not incorporated into the 2025 budget. Le Pen's warning shot comes as she faces a major potential setback, with prosecutors seeking an obligatory five-year ban from public office for her alleged role in embezzling EU funds. She denies the allegations.”
November 17 – Bloomberg (William Horobin): “France’s budget is advancing through fractious parliamentary debates toward a precipice in December when far-right leader Marine Le Pen can let the bill become law, or trigger chaos by toppling the government in a no-confidence vote. The initial version of a budget that was designed to plug widening holes in public finances and reassure investors is subject to a succession of votes and thousands of amendments as it winds between parliamentary committees and the floors of the National Assembly and the Senate until mid-December.”
November 20 – Financial Times (Valentina Romei): “Eurozone wages have risen at their fastest rate since the 1990s, according to data… that could complicate policymakers’ plans for more interest rate cuts. Negotiated wages jumped 5.4% in the three months to September compared with the year-ago period, up from an annual rise of 3.5% in the previous quarter, the European Central Bank said... It was the biggest increase since 1993, six years before the euro was launched.”
Japan Watch:
November 21 – Bloomberg (Yoshiaki Nohara): “Japan’s key inflation gauge held above the central bank’s target even as price gains moderated a tad, in data largely supporting the central bank’s view that underlying inflation remains solid. Consumer prices excluding fresh food rose 2.3% in October from a year earlier, down from 2.4% in September… That was above the consensus estimate of 2.2%. An index excluding energy costs and fresh food prices gained 2.3%, up from 2.1%.”
November 21 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda gave the clearest hint yet that the central bank’s next monetary policy meeting will involve a live discussion over whether to raise interest rates. ‘It’s impossible to predict the outcome of the meeting at this point,’ Ueda said… ‘The next meeting is December, but there’s still a month to go. The vast amount of data and information will become available between now and then.’”
November 21 – Bloomberg (Leika Kihara): “Bank of Japan Governor Kazuo Ueda said the central bank will scrutinise various data ahead its rate review next month, and ‘seriously’ take into account the impact yen moves could have on the economic and price outlook… The yen's renewed declines, which push up import costs and inflation, have already led some market players to bet the BOJ could hike rates as soon as its Dec. 18-19 policy meeting. ‘We do seriously take into account exchange-rate movements in forming our economic and inflation outlook including the question of what's causing the exchange-rate changes that are taking place at the moment,’ Ueda said…”
November 17 – Reuters (Leika Kihara): “Bank of Japan Governor Kazuo Ueda said the economy was progressing towards sustained wages-driven inflation and warned against keeping borrowing costs too low, leaving open the chance of another interest rate hike as early as next month. In a sign the BOJ was likely to push rates up again soon, Ueda said the bank must whittle down stimulus in a timely fashion as keeping real interest rates low for too long could accelerate inflation more than expected.”
Emerging Markets Watch:
November 20 – Bloomberg (Ameya Karve, Harry Suhartono and Abhishek Vishnoi): “Adani Group units scrapped a $600 million dollar bond sale after US prosecutors charged founder Gautam Adani with participating in an alleged bribe plot. The group’s existing US-currency notes plunged in Asian trading. The Indian media-to-mining conglomerate decided not to proceed with the offering in view of press releases from the Department of Justice and the Securities and Exchange Commission… Billionaire Adani, one of the richest men in the world, was charged with allegedly participating in a scheme that involved promising to pay more than $250 million in bribes to Indian government officials to secure solar energy contracts.”
Leveraged Speculation Watch:
November 21 – Financial Times (Cheng Leng, Arjun Neil Alim and Haohsiang Ko): “Foreign investors have dumped Chinese government bonds over the past two months, unwinding a popular and lucrative trade that had been enabled by Beijing’s efforts to support its currency. Investors had poured more than $130bn between November last year and August into a trading strategy that involves lending dollars to Chinese institutions and then using the renminbi proceeds to buy Chinese bonds. The return from loaning dollars and investing in bonds could be up to 6%, well above the yield on a US Treasury bond. But the announcement of a bumper stimulus package by Beijing in September sparked a sell-off in Chinese government bonds and a rebound in the renminbi, inflicting losses on investors who had piled into the trade.”
November 19 – Bloomberg (Nishant Kumar): “The era of explosive growth in multistrategy hedge funds is over, according to billionaire Ken Griffin, who runs one of the biggest such firms. ‘That chapter has come and gone,’ the Citadel founder said… ‘The AUM flows into multistrategy funds are basically a push today.’”
Social, Political, Environmental, Cybersecurity Instability Watch:
November 18 – Axios (Jim VandeHei and Mike Allen): “America witnessed tectonic shifts in politics and society in 2024 that will reshape elections, business, culture and the nation for years to come. X displaced Fox News as the most powerful platform for Republicans. Elon Musk and tech billionaires emerged as lasting, public forces in U.S. politics. Traditional media power waned and fragmented profoundly. Immigration and energy debates shifted in a decidedly conservative direction. A loose bipartisan consensus on China and domestic industrial policy hardened. Unfathomably high deficits are largely irrelevant to both parties. Hispanic voters are the most potent, fastest-growing swing group in U.S. politics. The future of politics and information will never be the same.”
November 22 – New York Times (David E. Sanger and Julian E. Barnes): “China’s recent breach of the innermost workings of the U.S. telecommunications system reached far deeper than the Biden administration has described, the chairman of the Senate Intelligence Committee said…, with hackers able to listen in on telephone conversations and read text messages. ‘The barn door is still wide open, or mostly open,’ the Democratic chairman, Senator Mark Warner of Virginia, a former telecommunications executive, said… Mr. Warner said he had been stunned by the scope and depth of the breach, which was engineered over the past year by a group linked to Chinese intelligence…”
November 16 – Reuters (Gloria Dickie): “The world’s warming tropical wetlands are releasing more methane than ever before, research shows — an alarming sign that the world's climate goals are slipping further out of reach. A massive surge in wetlands methane — unaccounted for by national emissions plans and undercounted in scientific models — could raise the pressure on governments to make deeper cuts from their fossil fuel and agriculture industries, according to researchers.”
Geopolitical Watch:
November 19 – Wall Street Journal (Laurence Norman): “Iran sharply increased its stockpile of nearly weapons-grade uranium amid its confrontation with Israel, according to the United Nations atomic-energy agency, in a challenge for the incoming Trump administration. Iran’s decision to expand its stockpile of nuclear fuel and its failure to fully cooperate with the International Atomic Energy Agency… is set to trigger fresh diplomatic pressure from Europe. Concerns are growing in Western capitals that Iran could decide to develop a nuclear weapon, after comments by senior Iranian officials that Tehran has mastered most of the techniques for doing so. Israel’s hollowing-out of Hezbollah, Iran’s most powerful proxy in the Middle East, has also prompted a public debate in Iran about whether the country’s best form of deterrence lies in having an atomic bomb.”
November 22 – Financial Times (Andrew England and Najmeh Bozorgmehr): “Iran said… it had started activating ‘new advanced centrifuges’, expanding its nuclear activity in a move that risks escalating tensions with the west, weeks before US president-elect Donald Trump takes office. Iran’s foreign ministry said the activation of the centrifuges, used to enrich uranium, was in response to a US and European-backed resolution by the board of the International Atomic Energy Agency that rebuked Tehran for its lack of co-operation with the UN nuclear watchdog.”
November 16 – Reuters (Praveen Menon and Sam McKeith): “Japanese troops will begin regular deployments in northern Australia as part of military cooperation with Australia and the U.S., Australia's Defence Minister Richard Marles said… Around 2,000 U.S. Marines are already hosted in Darwin… for six months of the year amid growing concern among Washington and its allies about China's growing military power in the Indo Pacific region.”
The S&P500 gained 1.7% (up 25.1% y-t-d), and the Dow rose 2.0% (up 17.5%). The Utilities were 2.0% higher (up 24.6%). The Banks added 2.0% (up 43.1%), and the Broker/Dealers gained 2.2% (up 52.2%). The Transports increased 0.8% (up 9.2%). The S&P 400 Midcaps jumped 4.2% (up 20.1%), and the small cap Russell 2000 surged 4.5% (up 18.7%). The Nasdaq100 gained 1.9% (up 23.5%). The Semiconductors jumped 2.5% (up 18.7%). The Biotechs rallied 4.5% (up 7.5%). With bullion surging $153, the HUI gold index recovered 8.1% (up 26.7%).
Three-month Treasury bill rates ended the week at 4.415%. Two-year government yields rose seven bps to 4.37% (up 12bps y-t-d). Five-year T-note yields slipped a basis point to 4.29% (up 45bps). Ten-year Treasury yields declined four bps to 4.40% (up 52bps). Long bond yields slipped three bps to 4.59% (up 56bps). Benchmark Fannie Mae MBS yields declined four bps to 5.76% (up 49bps).
Italian 10-year yields dipped five bps to 3.50% (down 20bps y-t-d). Greek 10-year yields dropped eight bps to 3.11% (up 6bps). Spain's 10-year yields fell eight bps to 2.97% (down 2bps). German bund yields sank 11 bps to 2.24% (up 22bps). French yields declined four bps to 3.05% (up 49bps). The French to German 10-year bond spread widened six bps to 79 bps. U.K. 10-year gilt yields fell nine bps to 4.39% (up 85bps). U.K.'s FTSE equities index rallied 2.5% (up 6.8% y-t-d).
Japan's Nikkei 225 Equities Index declined 0.9% (up 14.4% y-t-d). Japanese 10-year "JGB" yields added two bps to 1.09% (up 48bps y-t-d). France's CAC40 slipped 0.2% (down 3.8%). The German DAX equities index increased 0.6% (up 15.3%). Spain's IBEX 35 equities index inched 0.2% higher (up 15.4%). Italy's FTSE MIB index dropped 2.0% (up 10.4%). EM equities were mostly higher. Brazil's Bovespa index gained 1.0% (down 3.8%), while Mexico's Bolsa index was little changed (down 12.1%). South Korea's Kospi rallied 3.5% (down 5.8%). India's Sensex equities index rose 2.0% (up 9.5%). China's Shanghai Exchange Index fell 1.9% (up 9.8%). Turkey's Borsa Istanbul National 100 index added 1.7% (up 27.8%).
Federal Reserve Credit declined $39.0 billion last week to $6.893 TN. Fed Credit was down $1.997 TN from the June 22, 2022, peak. Over the past 271 weeks, Fed Credit expanded $3.166 TN, or 85%. Fed Credit inflated $4.082 TN, or 145%, over the past 628 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt fell $7.7 billion last week to $3.321 TN. "Custody holdings" were down $87 billion y-o-y, or 2.6%.
Total money market fund assets declined $22.2 billion to $6.648 TN. Money funds were up $514 billion over 16 weeks (27% annualized), $762 billion y-t-d (14.3% ann.), and $812 billion, or 13.9%, y-o-y.
Total Commercial Paper jumped $14.8 billion to $1.174 TN. CP was down $79 billion, or 6.3%, over the past year.
Freddie Mac 30-year fixed mortgage rose nine bps this week to a four-month high 6.87% (down 26bps y-o-y). Fifteen-year rates added three bps to 6.02% (down 56bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down six bps to 7.32% (down 50bps).
Currency Watch:
For the week, the U.S. Dollar Index added 0.8% to a two-year high 107.554 (up 6.1% y-t-d). For the week on the upside, the Canadian dollar increased 0.8%, the Australian dollar 0.6%, the South African rand 0.4%, and the Norwegian krone 0.1%. On the downside, the euro declined 1.2%, the Swiss franc 0.7%, the British pound 0.7%, New Zealand dollar 0.6%, the Swedish krona 0.6%, the South Korean won 0.5%, the Mexican peso 0.4%, the Singapore dollar 0.4%, the Japanese yen 0.3%, and the Brazilian real 0.2%. The Chinese (onshore) renminbi declined 0.26% versus the dollar (down 2.04% y-t-d).
Commodities Watch:
November 17 – Bloomberg (Jake Lloyd-Smith): “Gold will rally to a record next year on central-bank buying and US interest rate cuts, according to Goldman Sachs…, which listed the metal among top commodity trades for 2025 and said prices could extend gains during Donald Trump’s presidency. ‘Go for gold,’ analysts including Daan Struyven said…, reiterating a target of $3,000 an ounce by December 2025. The structural driver of the forecast is higher demand from central banks, while a cyclical lift would come from flows to exchange-traded funds as the Federal Reserve cuts, they said.”
The Bloomberg Commodities Index rallied 3.0% (up 0.3% y-t-d). Spot Gold surged 6.0% to $2,716 (up 31.7%). Silver recovered 3.6% to $31.35 (up 31.7%). WTI crude surged $4.22, or 6.3%, to $71.24 (down 1%). Gasoline jumped 5.8% (down 2%), and Natural Gas surged 10.8% to $3.129 (up 25%). Copper added 0.6% (up 6.2%). Wheat gained 1.4% (down 13.3%), and Corn increased 0.4% (down 10%). Bitcoin surged $7,450, or 8.2%, to $98,780 (up 132%).
Trump Administration Watch:
November 16 – Wall Street Journal (Aaron Zitner and Siobhan Hughes): “In naming a set of unconventional nominees to run federal departments, Donald Trump this week also took steps to push for a broader goal: realigning the balance of power among Washington’s major institutions so that more authority flows from the White House. Trump has threatened to take steps that would undermine the Senate’s confirmation powers and Congress’s role in budgeting—the most essential powers of the two chambers. He has insisted that senators allow him to place some nominees directly in their jobs, bypassing the Senate’s public hearings and confirmation process. He has said he would move to impound—or decline to spend—money appropriated by Congress for programs he dislikes, a step likely requiring him to overturn current law in court. Trump’s transition team is considering a plan to bypass the Pentagon’s regular promotion system, with a draft executive order that would create a panel to evaluate three- and four-star officers for potential removal.”
November 20 – Axios (Zachary Basu): “President-elect Trump's Cabinet increasingly resembles a European-style coalition government, staffed with a dizzying array of ideological rivals united — for now — by a grand MAGA vision. The incoming administration has a little something for everyone: isolationists and hawks, populists and bankers — even a couple of lifelong Democrats who ran for president against Trump. Some supporters have praised Trump for the eclectic mix of nominees… But if Trump's first term is any indication, his Cabinet of contradictions also could invite volatility and infighting… Trump's picks suggest there are at least three factions in the new Republican coalition with enough support to warrant representation in his administration. 1. ‘America First’ nationalists: These are the true believers tasked with Trump's highest-priority portfolios… 2. Establishment conservatives: The dominant forces in Trump's first Cabinet… have been weakened, but not fully exiled… 3. Dissident Democrats: The newest members of MAGA are among the most powerful, having endeared themselves to Trump's base as anti-establishment crusaders.”
November 20 – New York Times (Alan Rappeport): “The conflicting goals of President-elect Donald J. Trump’s economic agenda have been playing out as he debates whom to choose as his Treasury secretary, a job that will entail steering tax cuts through Congress, leading trade talks with China and overseeing the $30 trillion U.S. bond market… After a first term in which some of his top economic aides tried to tame his protectionist impulses, Mr. Trump is seeking a Treasury secretary who will carry out his unconventional plans while still having the credibility to keep markets buoyant. That mix of qualities is not easy to find. ‘I think Trump has a problem in that he wants two different things,’ said Lawrence H. Summers… ‘He wants somebody who will be deeply loyal, and he wants someone who will be deeply reassuring to markets. Since markets are fearful of the tariff agenda, it’s hard to square both things.’”
November 17 – Associated Press (Bill Weissert): “Donald Trump Jr. said… any pushback from the Washington establishment around his father’s unconventional choices for Cabinet proves they are just the kind of disruptors that voters are demanding. The younger Trump insisted the team… knows how to build out an administration, unlike when his father first took office. ‘The reality this time is, we actually know what we’re doing. We actually know who the good guys and the bad guys are,’ he told Fox News… ‘And it’s about surrounding my father with people who are both competent and loyal. They will deliver on his promises. They will deliver on his message. They are not people who think they know better, as unelected bureaucrats.’”
November 17 – Axios (Ivana Saric): “President-elect Trump confirmed… that he is planning to declare a national emergency and use the U.S. military to carry out mass deportations. Trump made his promise to deport millions of undocumented immigrants one of the cornerstones of his 2024 campaign, and his team has already begun strategizing how to carry its plan out. A Truth Social post early Monday is the first time the president-elect has confirmed how his administration will execute the controversial plan. Tom Fitton, the president of the conservative group Judicial Watch, posted on Truth Social earlier this month that Trump was ‘prepared to declare a national emergency and will use military assets to reverse the Biden invasion through a mass deportation program.’ Trump reposted Fitton's comment Monday with the caption, ‘TRUE!!’.”
November 17 – Axios (Avery Lotz): “House Speaker Mike Johnson said ‘there may be a function’ to facilitate the use of recess appointments to speed up the confirmation of President-elect Trump's Cabinet nominees. The process of adjourning the Senate to allow Trump to install his picks without congressional approval would mean the chamber would shirk its advice-and-consent role for cabinet confirmations. The president-elect demanded ahead of the Senate Republican leader race… that any senator seeking the position must agree to recess appointments, ‘without which we will not be able to get people confirmed in a timely manner.’ Thune has expressed willingness to use the tool, saying ‘all options are on the table.’ Driving the news: Johnson did not rule out the use of recess appointments…, saying, ‘We'll have to see how it plays out.’”
November 18 – Wall Street Journal (Jed Rubenfeld): “Can President Trump make recess appointments for nominees the Senate won’t confirm? Incoming Senate Majority Leader John Thune says the option is ‘on the table.’ But recess appointments are complicated, and if Mr. Trump tries this approach to overcome senatorial opposition, it would likely be struck down by the Supreme Court. The first problem… would be getting the Senate into recess. Mr. Thune can’t simply bang a gavel and declare a recess. The Supreme Court has held that an adjournment must at minimum be longer than three days to count as a ‘recess,’ and the Constitution says that both the House and Senate must agree by majority vote to any adjournment in either chamber longer than three days.”
November 19 – Financial Times (Myles McCormick and Jamie Smyth): “As Donald Trump sat in his Mar-a-Lago resort on election night, two of US oil’s most influential men were just feet away, toasting his victory: North Dakota governor Doug Burgum and shale magnate Harold Hamm. They had been stalwarts on the Republican’s campaign for months: Burgum… stumping for Trump at rallies, and Hamm offering advice on energy — and money. Both had been at a dinner organised by Hamm and attended by top US oil executives in April, when Trump asked for $1bn in donations, promising to gut President Joe Biden’s climate agenda if he won back the White House. Their loyalty has paid off. Trump has named Burgum as both his interior secretary and his ‘energy tsar’, handing him sweeping authority to open federal lands to frackers and deregulate agencies to boost US oil and gas output. On Saturday, the president-elect picked as his energy secretary Chris Wright, a shale executive who had been promoted by Hamm for months.”
November 16 – Financial Times (Felicia Schwartz and Andrew England): “Donald Trump’s new administration will revive its ‘maximum pressure’ policy to ‘bankrupt’ Iran’s ability to fund regional proxies and develop nuclear weapons, according to people familiar... Trump’s foreign policy team will seek to ratchet up sanctions on Tehran, including vital oil exports, as soon as the president-elect re-enters the White House in January, people familiar with the transition said. ‘He’s determined to reinstitute a maximum pressure strategy to bankrupt Iran as soon as possible,’ said a national security expert familiar with the Trump transition.”
November 18 – Wall Street Journal (Joyu Wang): “Donald Trump has given Taiwan more than a few reasons to be anxious. The president-elect pressed Taiwan during his election campaign to spend significantly more to defend against the growing threat of attack by China. He accused Taiwan’s chip makers… of stealing American jobs. He brought into his inner circle the billionaire Elon Musk, who has mocked Taiwan’s determination to maintain its autonomy. And he suggested that his own reputation is enough to deter Chinese leader Xi Jinping from invading.”
November 21 – Reuters (Hannah Lang): “A slew of crypto companies including Ripple, Kraken and Circle are jostling for a seat on President-elect Donald Trump's promised crypto advisory council, seeking a say in his planned overhaul of U.S. policy, according to several digital asset industry executives. Campaigning at a July bitcoin conference in Nashville, Trump promised a new council as part of a crypto-friendly administration. His transition team is discussing how to structure and staff it, and which companies should be included…”
November 21 – Financial Times (Harriet Agnew, Amelia Pollard and James Fontanella-Khan): “Ken Griffin has warned Donald Trump’s plan to raise tariffs would put the US ‘on a slippery slope to crony capitalism’ and offered other harsh critiques of the incoming president’s agenda, in surprisingly sharp criticism from a major Republican donor. The billionaire founder of hedge fund Citadel… said he was ‘gravely concerned’ that Trump’s plan to impose tariffs and curtail immigration would impose huge inflationary pressure on the US economy. He said: ‘Now you’re going to find the halls of Washington really filled with the special interest groups and lobbyists as people look for… higher tariffs to keep away foreign competition and to protect inefficient American businesses that fail to meet the needs of the American consumer.’”
November 19 – Bloomberg (Hadriana Lowenkron): “Billionaire entrepreneur Elon Musk defended embattled former Representative Matt Gaetz, President-elect Donald Trump’s pick for attorney general… ‘Matt Gaetz has 3 critical assets that are needed for the AG role: a big brain, a spine of steel and an axe to grind,’ Musk… wrote in a post on his social-media platform X… ‘He is the Judge Dredd America needs to clean up a corrupt system and put powerful bad actors in prison,” he added, referring to a fictional comic book character. ‘Gaetz will be our Hammer of Justice.’”
Ukraine War Watch:
November 22 – Reuters (Dan Peleschuk): “The Russian missile that struck the Ukrainian city of Dnipro on Thursday reached a top speed of more than 13,000 kph (8,000 mph) and took about 15 minutes to reach its target from its launch, Ukraine said on Friday in its first public assessment of the new weapon. Russian President Vladimir Putin said Moscow struck a Ukrainian military facility with a new intermediate-range, hypersonic ballistic missile known as ‘Oreshnik’ as a warning to the West against supporting Ukraine's war effort.”
November 19 – Associated Press (Hanna Arhirova and Illia Novikov): “Ukraine fired several American-supplied longer-range missiles into Russia…, marking the first time Kyiv used the weapons that way in 1,000 days of war. The use of the Army Tactical Missile System, known as ATACMS, came as Russian President Vladimir Putin formally lowered the threshold for using nuclear weapons, opening the door to a potential nuclear response by Moscow to even a conventional attack by any nation supported by a nuclear power. That could include Ukrainian attacks backed by the U.S.”
November 20 – Bloomberg (Alex Wickham and Daryna Krasnolutska): “Ukraine’s armed forces fired British cruise missiles at military targets inside Russia for the first time, a Western official familiar with the matter said. The strikes using Storm Shadow missiles were approved in response to Russia deploying North Korean troops in its war against Ukraine, a move by Moscow that the UK government considered to be an escalation of the conflict…”
November 20 – Reuters (Jack Kim and Joyce Lee): “Around 10,900 North Korean troops have been deployed to Kursk as part of Russia's airborne unit and marines, with some already participating in battles in the Ukraine war, a South Korean lawmaker said… North Korea has also shipped additional arms for the war in Ukraine, including self-propelled howitzers and multiple rocket launchers, parliament intelligence committee member Lee Seong-kweun told reporters, citing the National Intelligence Service.”
November 20 – Bloomberg (Jenny Leonard): “The US will provide Ukraine with antipersonnel land mines to blunt the advance of Russian troops, an official familiar with the decision said, the latest effort by the Biden administration to bolster support for Kyiv ahead of President-elect Donald Trump’s inauguration.”
November 20 – Reuters (Anastasiia Malenko, Tom Balmforth and Max Hunder): “The United States shut its embassy in Kyiv on Wednesday morning due to what it called the threat of a significant air attack, a day after Ukraine used American missiles to hit a target inside Russia in what Moscow described as an escalation in the war. Later, after an air raid siren in the early afternoon jangled nerves in the capital, Ukraine's military spy agency said Russia was trying to sow panic by circulating fake online messages about a massive looming missile and drone attack. ‘The enemy, unable to subdue Ukrainians by force, resorts to measures of intimidation and psychological pressure on society. We ask you to be vigilant and steadfast,’ it said.”
November 16 – Financial Times (Christopher Miller): “Pyongyang has supplied Moscow’s army with long-range rocket and artillery systems, some of which have been moved to Russia’s Kursk region for an assault involving North Korean soldiers to push out Ukrainian forces, a Ukrainian intelligence assessment has found. In recent weeks, North Korea provided some 50 domestically produced 170mm M1989 self-propelled howitzers and 20 updated 240mm multiple launch rocket systems that can fire standard rockets and guided ones…”
Market Instability Watch:
November 21 – Wall Street Journal (Ed Frankl): “The U.S. could face a sharp rise in borrowing costs and turmoil in financial markets as soon as next year if government debt continues to pile up rapidly, according to… Swiss Re’s group chief economist. U.S. 10-year Treasury yields… could rise above 5% in 2025 from around 4.4% currently, if the incoming administration prioritizes tax cuts and uses tariffs to offset lost revenues, Jerome Jean Haegeli said… ‘I don’t exclude next year that the U.S. is going to have a Liz Truss moment for Treasurys’ he said…”
November 19 – Bloomberg (Masaki Kondo and Ruth Carson): “Two of the world’s biggest foreign holders of US government debt offloaded a pile of Treasuries in the third quarter as they rallied before the presidential election. Japanese investors sold a record $61.9 billion of the securities in the three months ended Sept. 30… Funds in China offloaded $51.3 billion during the same period, the second biggest sum on record.”
November 17 – Financial Times (The editorial board): “Trillions of dollars of financial securities change hands every day. A few decades back, exchanges took place in raucous trading pits where dealers would bellow out prices to match buyers and sellers. Then the banks went electronic. Today, the task of market-making has evolved into a competitive and highly lucrative computerised sport beyond the banking sector… And as the Financial Times’ New titans of Wall Street series has outlined, a handful of innovators have mastered it, leaving the biggest names in banking in the dust. Independent trading firms, including Citadel Securities, Jane Street, Susquehanna International Group, XTX Markets and DRW, have taken advantage of electronic transactions and algorithms to trade and make markets in an array of assets… For measure, Citadel Securities handles almost a quarter of all US stock trades. Last year, Jane Street traded options with a notional value of $32tn.”
November 17 – Financial Times (Stephen Gandel): “The trading accounts of US banks topped $1tn in the third quarter — their highest level in more than 16 years and close to an all-time high — as the nation’s largest financial firms seek to profit from rebuilding their market-making businesses. That growth has at the same time left the banks, particularly the largest ones, more exposed to market moves than at any time since the financial crisis as they hold ever-greater inventories of price-sensitive securities. Their trading accounts last peaked at just over $1tn… in the first quarter of 2008…”
November 20 – AFP: “The European Central Bank warned… that sovereign debt risks are growing in the eurozone at a time of heightened political uncertainty and muted economic performance. In a regular review of the single currency area's financial stability, the ECB said that markets could again be hit by debt worries similar to the crisis that rumbled through the 2010s. Since its last assessment in May, ‘election outcomes at the European and national levels, notably in France, have rekindled concerns about sovereign debt sustainability,’ the central bank said… Already heavy debt burdens could limit the ability of some eurozone governments to respond to ‘adverse shocks’, the… institution warned.”
November 18 – Bloomberg (Laura Noonan): “Global watchdogs will move to rein in leverage at non-banks early next year, the Financial Stability Board promised…, more than a year after its chair signaled a probe into mounting borrowings at hedge funds, private capital markets and others. ‘By early 2025 the FSB will publish a consultation report with proposed policy recommendations for authorities to monitor vulnerabilities and use policy measures to address systemic risk from NBFI leverage,’ the FSB said in its annual report…”
Global Credit Bubble Watch:
November 21 – Financial Times (Robin Wigglesworth): “Interest rates are coming down… And they’re probably coming down too late, too little and too slowly for a lot of smaller companies and the investment funds that chucked money at them over the past few years. Private credit… has been one of the hottest asset classes over the past decade. Possibly the hottest. Depending on who you believe, there’s somewhere between $2tn and $3tn of money in private credit funds. The problem is that they make floating rate loans — typically priced at 5-10 percentage points above SOFR — and that can be a double-edged sword. Higher rates mean interest income balloons, but at some point it becomes a challenge for even a healthy, growing company to keep servicing its debts. And for many companies the weight of their debt burdens have almost doubled in just a few years.”
November 21 – Bloomberg (Scott Carpenter): “The world’s biggest private credit managers are turning to an obscure investment product to help raise billions from deep-pocketed insurance companies, testing the limits of industry safeguards meant to curb risk. The vehicles, known as rated feeders, package stakes in private debt funds into bonds, making it cheaper for insurers to buy them by effectively cutting the amount of capital that they need to hold against those investments.”
November 18 – Bloomberg (Carmen Arroyo and Jill R. Shah): “Silver Point Capital said it’s closed a $8.5 billion direct lending fund that will focus on providing loans to mid-sized companies, just two months after closing a $4.6 billion credit fund. Silver Point Specialty Credit Fund III brings the firm’s direct lending strategy to over $15 billion in investable capital… Silver Point added it now oversees $35 billion of assets across strategies including both private and public credit. Fundraising in the $1.6 trillion private credit market has proliferated as lenders fight to remain competitive against peers as well as Wall Street banks. This year’s issuance of broadly syndicated US leveraged loans has topped $1 trillion for the first time this year.”
AI Bubble Watch:
November 20 – Bloomberg (Tasos Vossos): “The artificial intelligence revolution is driving such an insatiable quest for cash that it’s rewiring one section of US capital markets. Utilities, which are racing to keep up with surging electricity demand to power AI data centers, have dethroned US banks as the biggest sellers of subordinated securities to big investors. Dominion Energy… and others have raised nearly $18 billion through sales in 2024, a ninefold jump from last year… More specifically, utilities are turning to hybrid bonds, an emerging category within the asset class…”
November 21 – Bloomberg (Ian King): “Nvidia Corp. assured investors that its new product lineup will continue to fuel an artificial intelligence-driven growth run, while also signaling that the rush to get chips out the door is proving costlier than expected… Chief Executive Officer Jensen Huang said that Nvidia’s highly anticipated Blackwell products will ship this quarter amid ‘very strong’ demand. But the production and engineering costs of the chips will weigh on profit margins, and Nvidia’s sales forecast for the current period didn’t match some of Wall Street’s more optimistic projections.”
November 17 – Reuters (Gursimran Kaur): “Nvidia's new Blackwell AI chips, which have already faced delays, have encountered problems with accompanying servers that overheat, causing some customers to worry they will not have enough time to get new data centers up and running, the Information reported… The Blackwell graphics processing units overheat when connected together in server racks designed to hold up to 72 chips, the report said, citing sources familiar with the issue.”
November 19 – Wall Street Journal (Belle Lin): “The coming wave of artificial-intelligence usage won’t just strain data centers and power grids—it will also stress the country’s network capabilities. That’s because more people will use AI chatbots and agents, which will talk in turn to still more AI agents—and all that requires more data, computing and back-end technology systems like networking… ‘The amount of traffic that’s starting and will continue to be generated with AI, where you get into a machine-to-machine environment, that amount of traffic is going to be monumental,’ said Chris Sharp, chief technology officer of data center operator Digital Realty.”
November 16 – Financial Times (Jamie Smyth): “A group of veteran community activists is planning legal action to block the reopening of Three Mile Island nuclear plant in a test of whether the American public will back an atomic energy boom financed by Big Tech and US taxpayers. Three Mile Island Alert, a group founded almost half a century ago to lobby for the closure of the plant in Middletown, Pennsylvania — site of the worst nuclear accident in US history — said it would challenge government licences required by operator Constellation Energy… The legal threat is one of several obstacles facing the utility as it races to meet the terms of a 20-year power supply deal struck with Microsoft. The $1.6bn project could become a potent symbol of the revival of nuclear energy in the US. Constellation must obtain numerous regulatory approvals, train hundreds of staff and upgrade equipment at a time when nuclear supply chains are stretched.”
Bubble and Mania Watch:
November 17 – Wall Street Journal (Gunjan Banerji): “A roaring market rally since the U.S. presidential election has driven up the price of everything from shares of technology and manufacturing giants to cryptocurrencies. Many investors are betting it has room to run. Investors have stampeded into funds tracking U.S. stocks and picked up trades that would profit if the rally that recently sent the S&P 500 above 6000… U.S. equity exchange-traded and mutual funds drew nearly $56 billion in the week ended Wednesday, the second-largest weekly haul in records going back to 2008… Such funds have drawn inflows for seven consecutive months, the longest streak since 2021…”
November 18 – Financial Times (Patrick Temple-West and Joshua Franklin): “Record numbers of US executives are selling shares in their companies, as corporate insiders from Goldman Sachs to Tesla and even Donald Trump’s own media group cash in on the stock market surge that has followed his election victory. The rate of so-called insider sales has hit a record high for any quarter in two decades, according to VerityData… While insider selling is routine… the surge following November 5 underscores how US executives are already profiting personally from his return before he re-enters the White House.”
November 20 – Bloomberg (Maxwell Adler and Eliyahu Kamisher): “The rally in technology stocks has created so much wealth in California that it has helped the state fill its coffers. California’s budget for the coming fiscal year is ‘roughly balanced,’ the state’s Legislative Analyst’s Office said…, citing a surge in corporate and personal-income tax revenue driven by Silicon Valley’s booming artificial intelligence and tech sectors… ‘In the first half of 2024, stock pay alone at four major technology companies accounted for almost 10% of the state’s total income tax withholding,’ the LAO said… Those companies are Nvidia Corp, Alphabet Inc., Meta Platforms Inc. and Apple Inc. Because of its reliance on its richest people, California’s economy… is sensitive to extreme booms and busts.”
November 19 – Bloomberg (Leah Nylen and Josh Sisco): “Alphabet Inc.’s Chrome browser could go for as much as $20 billion if a judge agrees to a Justice Department proposal to sell the business, in what would be a historic crackdown on one of the world’s biggest tech companies. The department will ask the judge, who ruled in August that Google illegally monopolized the search market, to require measures related to artificial intelligence and its Android smartphone operating system, according to people familiar...”
November 20 – Bloomberg (James Tarmy): “A painting by the surrealist artist René Magritte has sold for $121.2 million at Christie’s in New York, setting a new record for the artist at auction and becoming the biggest-ticket lot of this year’s New York November sales season.”
U.S./Russia/China/Europe Watch:
November 21 – Financial Times (Isobel Koshiw): “Vladimir Putin has said Moscow fired an experimental hypersonic missile at Ukraine… in response to the US and UK allowing Kyiv to use advanced western weaponry at targets inside Russia. The president of Russia said the Oreshnik missile, which can carry a nuclear warhead, targeted a factory in Dnipro, which was formerly the Soviet Union’s top-secret rocket-building facility. Putin said Russia would respond to ‘escalation… decisively and correspondingly’. Russia reserved the right to use its weaponry against military targets in countries that allowed Ukraine to use their weapons against Moscow’s forces, he added.”
November 19 – Axios (Ivana Saric): “Russian President Vladimir Putin signed a revised nuclear doctrine… to effectively lower his country's threshold for using nuclear weapons… The new doctrine suggests Russia could use nuclear weapons to respond to attacks by Ukraine carried out with American support. The new doctrine expands the range of countries and alliances — a clear reference to NATO — subject to nuclear deterrence. It also claims nuclear weapons would only be a last resort to protect Russia's sovereignty… It states that Russia will consider an attack from any non-nuclear state with the backing of a nuclear country as a joint attack. It also states that Russia reserves the right to use nuclear weapons in response to a conventional weapons attack that threatens its sovereignty. The Russian Defense Ministry on Tuesday accused Ukraine of firing six U.S.-made ATACMS missiles on Russia's Bryansk region.”
November 16 – Reuters (Liz Lee): “China's President Xi Jinping told his U.S. counterpart Joe Biden that the issues of Taiwan, democracy, human rights and rights to development are ‘red lines’ for China and not to be challenged, the official state media Xinhua said… Xi warned the United States not to get involved in bilateral disputes over islands and reefs in the South China Sea or ‘aid or abet the impulsion to make provocations’ in that region, it said.”
November 20 – Bloomberg (Olivia Solon): “Subsea cables are the arteries of the internet, transmitting data between continents and underpinning an increasingly digital economy. The cables are made up of tightly packed fiber-optic lines encased in layers of tough plastic or steel wire. When they break, it’s usually an accident caused by fishing trawlers or anchors dragging along the ocean floor. Occasionally, it’s sabotage: an act of vandalism or an attack orchestrated by a government for the purpose of hybrid warfare. Two fiber-optic cables were severed in the Baltic Sea in mid-November, one of them connecting Finland to Germany, the other linking Lithuania and Sweden. While the cause wasn’t immediately determined, governments in the region suspected the damage was deliberate.”
November 20 – Wall Street Journal (Bojan Pancevski): “Russia is suspected of orchestrating another major act of sabotage in Europe after two key fiber-optic data cables running below the Baltic Sea were cut off in quick succession earlier this week… A 135-mile internet link connecting Sweden’s Gotland Island and Lithuania stopped working on Sunday morning, and a similar 700-mile-long cable linking Finland and Germany ceased to operate the following night… Western officials said there are indications that Russia was behind the incidents, which they said were similar to other operations resulting from Moscow’s escalating hybrid warfare against NATO countries in Europe.”
November 19 – Reuters (Lidia Kelly): “A special hotline in place to deflate crises between the Kremlin and the White House is not currently being used, the Kremlin said…, as nuclear risks rise amid the highest tensions between Russia and West in decades. Russian President Vladimir Putin… lowered the threshold for a nuclear strike in response to a broader range of conventional attacks, days after reports said Washington had allowed Ukraine to use U.S.-made weapons to strike deep into Russia.”
De-globalization Watch:
November 20 – Bloomberg (Alberto Nardelli, Michael Nienaber and Samy Adghirni): “The caipirinhas were flowing, the samba and frevo dancers were swaying and a light ocean breeze enveloped the VIP guests in Rio de Janeiro. But as the Group of 20 communique popped up online, the mood was far from festive. The behind-the-scenes squabbling over language characterizing wars in Ukraine and the Middle East had been abruptly shut down by an impatient host, Brazil’s President Luiz Inacio Lula da Silva. That left a bitter taste, particularly among the US and its allies.”
November 20 – Barron's (Avi Salzman): “Escalating tensions between Russia and the United States have wide implications for global security. Ukraine fired long-range missiles at Russia this week, after the U.S. approved plans to do so. Russian President Vladimir Putin said the move has crossed a red line… The tensions are also impacting an important source of U.S. electricity: nuclear power plants. A few days ago, Russia pulled the export license for the company that sends enriched uranium to the U.S. for use in nuclear reactors. For now, it looks like all shipments of enriched Russian uranium, which accounts for 40% of the global supply, are stalled. It's not clear if or when they'll be back again.”
Inflation Watch:
November 20 – Bloomberg (Marcus Ashworth): “UK inflation jumped by more than expected to 2.3% in October — back above the Bank of England's 2% target — from 1.7% the month prior, but that won't have changed the Monetary Policy Committee's mind much… It's pretty clear that rates are on hold at 4.75% until at least its Feb. 6 meeting.”
Federal Reserve Watch:
November 21 – Financial Times (Colby Smith): “A top Federal Reserve official has warned that the US is more vulnerable to inflationary shocks than in the past, as businesses braced for increased protectionism and an onslaught of new economic policies when Donald Trump returns to the White House. Tom Barkin, president of the Richmond Fed, told the Financial Times that he expected inflation to continue dropping across the world’s largest economy, even though progress has plateaued… But he cautioned that businesses were passing on costs to consumers more readily than in the past... ‘We’re somewhat more vulnerable to cost shocks on the inflation side, whether they be wage-[related] or otherwise, than we might have been five years ago,’ said Barkin…”
November 20 – Reuters (Ann Saphir): “Federal Reserve Governor Michelle Bowman… expressed discomfort with the U.S. central bank cutting interest rates while inflation continues to run above the Fed's 2% goal, adding a bit more color to her call for a cautious approach to further rate reductions. ‘It's concerning to me that we're recalibrating policy, but we haven't yet achieved our inflation goal,’ Bowman said… Flexibility is a frequent theme in Bowman's public remarks…, as she emphasized the importance of optionality on rate decisions and the need to tailor banking regulation to size so that smaller community banks are not overburdened.”
November 20 – Reuters (David Hollerith): “The Federal Reserve’s top banking regulator said… he wouldn’t leave before his term was up even if President-elect Donald Trump tried to fire him, echoing remarks made by Fed Chair Jerome Powell earlier this month. ‘As Chair Powell said, we serve fixed terms of office and I intend to serve my fixed term of office,’ Michael Barr, the Fed’s vice chair for supervision, told lawmakers…”
U.S. Economic Bubble Watch:
November 21 – Reuters (Lucia Mutikani): “The number of Americans filing new applications for unemployment benefits fell to a seven-month low last week, suggesting that job growth likely rebounded in November after abruptly slowing last month amid hurricanes and strikes… Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 213,000 for the week ended Nov. 16, the lowest reading since April.”
November 17 – Yahoo Finance (Sam Ro): “Americans plan to spend more on holiday shopping this year than they did last year. That’s the takeaway from pretty much every consumer survey conducted over the past several weeks. Below are some highlights: ‘Our proprietary survey of ~2,000 US consumers reveals a more positive outlook for holiday shopping versus 2023 and 2022. Overall, 37% of consumers are planning to keep their holiday budgets roughly the same, 35% expect to spend more, and 22% expect to spend less yielding a net of +13%.’ - Morgan Stanley… ‘Consumer sentiment has also shown signs of improvement, and the 2024 Bank of America Holiday Survey suggests people are planning to spend $2,100 outside of typical obligations and necessities this holiday season, up 7% YoY.”
November 21 – Reuters (Lucia Mutikani): “U.S. mortgage rates increased to a four-month high this week, which together with higher home prices could sideline potential buyers from the housing market in the near term. The average rate on the popular 30-year fixed-rate mortgage increased to 6.84%, the highest level since July, from 6.785% last week…”
November 20 – CNBC (Diana Olick): “After flatlining the week before, mortgage demand rose last week, despite mortgage rates increasing for the fourth straight week… Applications for a mortgage to purchase a home rose 2% for the week but were 1% lower than the same week one year ago. Purchase demand was driven by conventional and FHA loans, with FHA purchase applications seeing a 7% increase.”
November 18 – Bloomberg (Michael Sasso): “Confidence among US homebuilders advanced to a seven-month high in November on a jump in sales expectations and optimism a Trump administration will ease regulatory burdens. A gauge of housing market conditions from the National Association of Home Builders and Wells Fargo climbed 3 points to 46 this month, exceeding all estimates… All three components of the index rose, led by the six-month sales outlook, which increased 7 points to the highest level since April 2022 on hope the Republican sweep in Washington will mean looser regulation and more construction. A measure of current sales improved to a six-month high and an index of prospective buyer traffic reached the highest level since April.”
November 21 – Reuters (Lucia Mutikani): “U.S. existing home sales rebounded sharply in October, posting the first annual gain since mid-2021, as buyers rushed into the market to take advantage of a brief decline in mortgage rates. Home sales jumped 3.4% last month to a seasonally adjusted annual rate of 3.96 million units… Housing inventory rose 0.7% to 1.37 million units last month. Supply increased 19.1% from one year ago. Despite the rise in inventory, the median existing home price rose 4.0% from a year earlier to $407,200 in October… At September's sales pace, it would take 4.2 months to exhaust the current inventory of existing homes, up from 3.6 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.”
November 19 – Reuters (Lucia Mutikani): “U.S. single-family homebuilding tumbled in October likely as Hurricanes Helene and Milton depressed activity in the South… The report… suggested that residential investment, which includes homebuilding, remained subdued at the start of the fourth quarter after contracting in the last two quarters… Single-family housing starts… plunged 6.9% to a seasonally adjusted annual rate of 970,000 units last month… Data for September was revised higher to show homebuilding rising to a rate of 1.042 million units… Single-family starts dropped 10.2% in the densely populated South, large parts of which were devastated by Helene in late September.”
November 18 – Bloomberg (Jonnelle Marte): “US consumers had a tougher time accessing credit this year, with applications for auto loans and mortgage refinancing being turned down at the highest rates in more than a decade. Despite largely stable demand, applications for various forms of credit were increasingly rejected in 2024, according to… the Federal Reserve Bank of New York… ‘Reported rejection rates for credit cards, mortgages, auto loans, credit card limit extension applications and mortgage loan refinance applications all rose in 2024,’ the New York Fed said…”
November 19 – Wall Street Journal (Vicky Ge Huang and Matt Wirz): “More Americans are falling behind on their car payments. Wall Street isn’t worried. Investors are snapping up bonds tied to car loans, betting that a strong U.S. economy will keep rising delinquency rates in check. Sales of bonds backed by the riskiest auto loans to subprime borrowers hit nearly $40 billion this year through October, up 17% from all of 2023… ‘We’ve seen deals almost 20 times oversubscribed,’ said Nicholas Tripodes, a senior portfolio manager at… Federated Hermes… Bonds of all kinds have surged in popularity over the past year… Demand is also being fueled by money managers that have teamed up with insurers, which have piles of cash from annuities and insurance premiums to invest.”
Fixed Income Watch:
November 22 – Bloomberg (James Crombie): “The private debt boom, central bank support, high Treasury yields and investor base changes are keeping credit spreads artificially tight, according to junk bond guru Marty Fridson. But the likelihood of losing money in corporate debt hasn’t diminished, Fridson, whose debt analysis has been studied by Wall Street for decades, wrote… ‘Risks to high-yield investors involving default probability, loss given default, illiquidity, and volatility have undergone no revolutionary change that justifies narrower average spreads than were observed in the past,’ the chief executive officer of FridsonVision High Yield Strategy wrote.”
China Watch:
November 19 – Associated Press (Kanis Leugn and Zen Soo): “Forty-five ex-lawmakers and activists were sentenced to four to 10 years in prison Tuesday in Hong Kong’s biggest national security case under a Beijing-imposed law that crushed a once-thriving pro-democracy movement. They were prosecuted under the 2020 national security law for their roles in an unofficial primary election… A Hong Kong court convicted 45 of 47 defendants of conspiracy to commit subversion for organizing or participating in an unofficial primary election for the city legislature in 2020. Most of the defendants were opposition politicians. Others included a businessman, a social worker and a new generation of pro-democracy activists… Legal scholar Benny Tai, whom the judges called the mastermind, received the longest sentence of 10 years.”
November 18 – Bloomberg: “Chinese consumers remain cautious on spending as the government’s recent stimulus measures haven’t yet yielded a substantive boost to their shaken confidence, Boston Consulting Group said… ‘Consumer confidence remains neutral to slightly negative,’ BCG wrote, adding that the stimulus package still hasn’t meaningfully improved consumers’ income.”
November 21 – Wall Street Journal (Brian Spegele): “On his first day in office, leader Xi Jinping inherited an ambitious road map to build 10,000 miles of high-speed rail to link China’s biggest cities. He took those plans and supersized them. What has emerged 12 years later is one of the biggest public works in history, soon to exceed 30,000 miles of high-speed rail… It’s becoming a giant money pit. China has spent more than $500 billion on new tracks, trains and stations in the past five years, while the country’s national railway operator, China State Railway Group, is nearing $1 trillion of debt and other liabilities. Just keeping up with its debt requires $25 billion annually.”
November 19 – Financial Times (Kaye Wiggins, Cheng Leng and Arjun Neil Alim): “Goldman Sachs’ chief executive has warned that global investors are still ‘predominantly on the sidelines’ over deploying capital in China because of weak consumer confidence and difficulties getting money out of the country. David Solomon said investors ‘continue to be concerned’ about cashing out of investments in the world’s second-largest economy. ‘It’s been very difficult over the course of the last five years to get capital out,’ he told an event… organised by the Hong Kong Monetary Authority… ‘I think you’ve got a combination of issues that have global investors predominantly on the sidelines with respect to capital deployment,’ Solomon said.”
Global Bubble Watch:
November 19 – Financial Times (Robin Wigglesworth and Ian Smith): “Citadel Securities is aiming to become a ‘material’ player in Eurozone government bond trading by next year after building a team of traders in Paris and securing valuable access to German debt auctions. The… high-speed trading firm founded by billionaire Ken Griffin is already a major participant in the US Treasury market and is now targeting a similarly prominent role in Europe. In September, Germany added Citadel Securities to the list of companies that were allowed to buy the country’s debt directly at its regular auctions — a move widely viewed as an implicit blessing that the market maker plans to use as a beachhead to expand its presence…”
Central Bank Watch:
November 20 – Reuters (Francesco Canepa): “The European Central Bank warned… about a ‘bubble’ in stocks related to artificial intelligence, which could burst abruptly if investors' rosy expectations are not met. The warning came as part of the ECB's twice-yearly Financial Stability Review, a laundry list of risks ranging from wars and tariffs, to cracks in the plumbing of the banking system… ‘This concentration among a few large firms raises concerns over the possibility of an AI-related asset price bubble,’ the ECB said. ‘Also, in a context of deeply integrated global equity markets, it points to the risk of adverse global spillovers, should earnings expectations for these firms be disappointed.’”
Europe Watch:
November 20 – Financial Times (Olaf Storbeck and Ian Smith): “The Eurozone risks another debt crisis if the bloc cannot boost growth, lower public debt and fix ‘policy uncertainty’, the European Central Bank has warned. In its annual Financial Stability Review…, the ECB sounded the alarm over a potential return of ‘market concerns over sovereign debt sustainability’. It pointed to ‘elevated debt levels and high budget deficits’ as well as tepid growth and uncertainties caused by recent ‘election outcomes at the European and national levels, notably in France’. Luis de Guindos, ECB vice-president, also pointed to ‘poor historical compliance with EU fiscal rules’ by some EU governments.”
November 20 – Reuters (Dominique Vidalon, Benoit Van Overstraeten, Makini Brice): “French far-right leader Marine Le Pen… threatened to seek to topple Prime Minister Michel Barnier's fragile coalition government if her National Rally (RN) party's cost-of-living concerns were not incorporated into the 2025 budget. Le Pen's warning shot comes as she faces a major potential setback, with prosecutors seeking an obligatory five-year ban from public office for her alleged role in embezzling EU funds. She denies the allegations.”
November 17 – Bloomberg (William Horobin): “France’s budget is advancing through fractious parliamentary debates toward a precipice in December when far-right leader Marine Le Pen can let the bill become law, or trigger chaos by toppling the government in a no-confidence vote. The initial version of a budget that was designed to plug widening holes in public finances and reassure investors is subject to a succession of votes and thousands of amendments as it winds between parliamentary committees and the floors of the National Assembly and the Senate until mid-December.”
November 20 – Financial Times (Valentina Romei): “Eurozone wages have risen at their fastest rate since the 1990s, according to data… that could complicate policymakers’ plans for more interest rate cuts. Negotiated wages jumped 5.4% in the three months to September compared with the year-ago period, up from an annual rise of 3.5% in the previous quarter, the European Central Bank said... It was the biggest increase since 1993, six years before the euro was launched.”
Japan Watch:
November 21 – Bloomberg (Yoshiaki Nohara): “Japan’s key inflation gauge held above the central bank’s target even as price gains moderated a tad, in data largely supporting the central bank’s view that underlying inflation remains solid. Consumer prices excluding fresh food rose 2.3% in October from a year earlier, down from 2.4% in September… That was above the consensus estimate of 2.2%. An index excluding energy costs and fresh food prices gained 2.3%, up from 2.1%.”
November 21 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda gave the clearest hint yet that the central bank’s next monetary policy meeting will involve a live discussion over whether to raise interest rates. ‘It’s impossible to predict the outcome of the meeting at this point,’ Ueda said… ‘The next meeting is December, but there’s still a month to go. The vast amount of data and information will become available between now and then.’”
November 21 – Bloomberg (Leika Kihara): “Bank of Japan Governor Kazuo Ueda said the central bank will scrutinise various data ahead its rate review next month, and ‘seriously’ take into account the impact yen moves could have on the economic and price outlook… The yen's renewed declines, which push up import costs and inflation, have already led some market players to bet the BOJ could hike rates as soon as its Dec. 18-19 policy meeting. ‘We do seriously take into account exchange-rate movements in forming our economic and inflation outlook including the question of what's causing the exchange-rate changes that are taking place at the moment,’ Ueda said…”
November 17 – Reuters (Leika Kihara): “Bank of Japan Governor Kazuo Ueda said the economy was progressing towards sustained wages-driven inflation and warned against keeping borrowing costs too low, leaving open the chance of another interest rate hike as early as next month. In a sign the BOJ was likely to push rates up again soon, Ueda said the bank must whittle down stimulus in a timely fashion as keeping real interest rates low for too long could accelerate inflation more than expected.”
Emerging Markets Watch:
November 20 – Bloomberg (Ameya Karve, Harry Suhartono and Abhishek Vishnoi): “Adani Group units scrapped a $600 million dollar bond sale after US prosecutors charged founder Gautam Adani with participating in an alleged bribe plot. The group’s existing US-currency notes plunged in Asian trading. The Indian media-to-mining conglomerate decided not to proceed with the offering in view of press releases from the Department of Justice and the Securities and Exchange Commission… Billionaire Adani, one of the richest men in the world, was charged with allegedly participating in a scheme that involved promising to pay more than $250 million in bribes to Indian government officials to secure solar energy contracts.”
Leveraged Speculation Watch:
November 21 – Financial Times (Cheng Leng, Arjun Neil Alim and Haohsiang Ko): “Foreign investors have dumped Chinese government bonds over the past two months, unwinding a popular and lucrative trade that had been enabled by Beijing’s efforts to support its currency. Investors had poured more than $130bn between November last year and August into a trading strategy that involves lending dollars to Chinese institutions and then using the renminbi proceeds to buy Chinese bonds. The return from loaning dollars and investing in bonds could be up to 6%, well above the yield on a US Treasury bond. But the announcement of a bumper stimulus package by Beijing in September sparked a sell-off in Chinese government bonds and a rebound in the renminbi, inflicting losses on investors who had piled into the trade.”
November 19 – Bloomberg (Nishant Kumar): “The era of explosive growth in multistrategy hedge funds is over, according to billionaire Ken Griffin, who runs one of the biggest such firms. ‘That chapter has come and gone,’ the Citadel founder said… ‘The AUM flows into multistrategy funds are basically a push today.’”
Social, Political, Environmental, Cybersecurity Instability Watch:
November 18 – Axios (Jim VandeHei and Mike Allen): “America witnessed tectonic shifts in politics and society in 2024 that will reshape elections, business, culture and the nation for years to come. X displaced Fox News as the most powerful platform for Republicans. Elon Musk and tech billionaires emerged as lasting, public forces in U.S. politics. Traditional media power waned and fragmented profoundly. Immigration and energy debates shifted in a decidedly conservative direction. A loose bipartisan consensus on China and domestic industrial policy hardened. Unfathomably high deficits are largely irrelevant to both parties. Hispanic voters are the most potent, fastest-growing swing group in U.S. politics. The future of politics and information will never be the same.”
November 22 – New York Times (David E. Sanger and Julian E. Barnes): “China’s recent breach of the innermost workings of the U.S. telecommunications system reached far deeper than the Biden administration has described, the chairman of the Senate Intelligence Committee said…, with hackers able to listen in on telephone conversations and read text messages. ‘The barn door is still wide open, or mostly open,’ the Democratic chairman, Senator Mark Warner of Virginia, a former telecommunications executive, said… Mr. Warner said he had been stunned by the scope and depth of the breach, which was engineered over the past year by a group linked to Chinese intelligence…”
November 16 – Reuters (Gloria Dickie): “The world’s warming tropical wetlands are releasing more methane than ever before, research shows — an alarming sign that the world's climate goals are slipping further out of reach. A massive surge in wetlands methane — unaccounted for by national emissions plans and undercounted in scientific models — could raise the pressure on governments to make deeper cuts from their fossil fuel and agriculture industries, according to researchers.”
Geopolitical Watch:
November 19 – Wall Street Journal (Laurence Norman): “Iran sharply increased its stockpile of nearly weapons-grade uranium amid its confrontation with Israel, according to the United Nations atomic-energy agency, in a challenge for the incoming Trump administration. Iran’s decision to expand its stockpile of nuclear fuel and its failure to fully cooperate with the International Atomic Energy Agency… is set to trigger fresh diplomatic pressure from Europe. Concerns are growing in Western capitals that Iran could decide to develop a nuclear weapon, after comments by senior Iranian officials that Tehran has mastered most of the techniques for doing so. Israel’s hollowing-out of Hezbollah, Iran’s most powerful proxy in the Middle East, has also prompted a public debate in Iran about whether the country’s best form of deterrence lies in having an atomic bomb.”
November 22 – Financial Times (Andrew England and Najmeh Bozorgmehr): “Iran said… it had started activating ‘new advanced centrifuges’, expanding its nuclear activity in a move that risks escalating tensions with the west, weeks before US president-elect Donald Trump takes office. Iran’s foreign ministry said the activation of the centrifuges, used to enrich uranium, was in response to a US and European-backed resolution by the board of the International Atomic Energy Agency that rebuked Tehran for its lack of co-operation with the UN nuclear watchdog.”
November 16 – Reuters (Praveen Menon and Sam McKeith): “Japanese troops will begin regular deployments in northern Australia as part of military cooperation with Australia and the U.S., Australia's Defence Minister Richard Marles said… Around 2,000 U.S. Marines are already hosted in Darwin… for six months of the year amid growing concern among Washington and its allies about China's growing military power in the Indo Pacific region.”