Bloomberg: “Wall Street Gets the Rally Signals From Powell It Was Hoping For.” The Friday rally saw the Nasdaq Bank Index jump 4.5%, the Dow Transports 3.3%, the KBW Bank Index 3.2%, the Semiconductors (SOX) 2.7%, the Bloomberg MAG7 Index 2.5%, the Broker/Dealers Index 2.0%, and the S&P500 1.5%. The ARK Innovation ETF jumped 4.1%. The Goldman Sachs Short Index surged 3.4%.
Friday’s “may warrant adjusting” triggered a decent squeeze and unwind of hedges, in a replay of the market’s response to Powell’s “time has come” 2024 Jackson Hole speech. An explicit signal of looser monetary policy on August 23, 2024, saw the S&P500 gain 1.1%, MAG7 1.8%, the Semiconductors 2.8%, the KBW Bank Index 2.4%, the Broker/Dealers 1.8%, the small cap Russell 2000 3.2%, the Goldman Sachs Short Index 3.7%, and the ARK Innovation ETF 4.5%.
It's worth noting that the S&P500 has returned 17.6% since “time has come”, the Banks 37.3%, Broker/Dealers 59.0%, MAG7 35.2%, Goldman Sachs Short Index 24.4%, and the Nasdaq100 21.5%. ARK has returned 72.9%. Notable one-year returns include Nvidia 44%, (Micro)Strategy 168%, Palantir 141%, and Tesla 61%.
Political, economic, and geopolitical backdrops have changed so momentously in a year. Market dynamics, not so much. If anything, Bubble markets have turned only more speculative, ensuring a keen fixation on financial conditions. Markets rallied a year ago on the prospect of the Fed slashing rates despite already loose financial conditions, strong Credit growth, and highly speculative markets. Markets rallied Friday on confidence in more of the same.
At this market juncture, it doesn’t take much to trigger squeezes. The risk attentive (who hedge and short) have been burned so many times they operate in the markets with weak (singed) hands. They are easily targeted, especially at key events (i.e., Jackson Hole, CPI, Non-Farm Payrolls...) where potential bearish scenarios are avoided. Shooting fat bear in a barrel.
“May warrant adjusting” was actually less dovish and more “Balanced Powell.” The rates market Monday was pricing an 85% probability of a 25 bps September rate cut, and ended the week at 81%.
Powell: “In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside—a challenging situation. When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate. Our policy rate is now 100 bps closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. Monetary policy is not on a preset course.”
Last year’s “time has come” speech delivered a five bps 10-year Treasury yield decline, to 3.80%. The Treasury market’s loose “money” enthusiasm was short-lived. Yields were at 3.90% a week later; 4.29% to close October; and 4.57% to end 2024.
Ten-year Treasury yields declined seven bps Friday, to 4.26%. It will be interesting to see how long bond market warmth for loosey-goosey lasts. And how long will the bond market accommodate the administration’s moves to seize control of the Federal Reserve? As the Chair spoke in Jackson Hole, President Trump threatened to fire one of Powell’s fellow Fed Governors.
August 22 – CNBC (Kevin Breuninger): “President Donald Trump said Friday he will fire Federal Reserve Governor Lisa Cook if she does not resign from her position. ‘What she did was bad,’ the president told reporters… ‘So I’ll fire her if she doesn’t resign,’ he said… If Trump were to successfully remove Cook ‘for cause,’ he would get the chance to reshape the central bank’s governing board, potentially for years to come. Two of the seven current governors, Christopher Waller and Michelle Bowman, are Trump appointees. Both dissented from the Fed’s most recent decision to hold interest rates steady. Another seat opened up earlier this summer, when Adriana Kugler announced she would step down. If Trump is able to remove Cook, he would appoint her successor — potentially ensuring that a majority of the board shares his view on monetary policy. Board members serve 14-year terms.”
Washington is so rife with corruption (i.e., insider trading; gifts accepted by Supreme Court justices to lawmakers to the top of the Executive Branch; families accumulating incredible wealth because of Washington policies and connections). Spare us the histrionics over allegations of mortgages designated for a primary residence that might not have served as the borrower’s primary residence for the required period (typically one year). This “bad” “mortgage fraud” has resulted in the borrower paying somewhat smaller monthly mortgage payments. It seems resources would be better spent prosecuting scores of deadbeat borrowers who fraudulently default on loans and mortgages.
August 20 – Axios (Avery Lotz): “Federal Reserve governor Lisa Cook is the latest target of one of the Trump administration’s new pathways to pursue its perceived enemies: alleged mortgage fraud. Trump has waged a revenge tour from his seat in the White House, with prominent members of his grudge list now facing probes from a MAGA-aligned DOJ. If the accusation against Cook evoked a sense of déjà vu, that’s because the Trump administration is also investigating Sen. Adam Schiff (D-Calif.) and New York Attorney General Letitia James (D) on similar grounds. Driving the news: Federal Housing Finance Agency Director Bill Pulte, a Trump ally, referred Cook to the DOJ over allegations she ‘falsified bank documents and property records to acquire more favorable loan terms, potentially committing mortgage fraud under the criminal statutes.’”
It's despicable to attack a Fed Governor as if she’s on the President’s enemy list. As a nation, are we okay with normalizing such behavior? Bloomberg: “Pulte Regains MAGA Hero Status by Aiding Trump’s Anti-Fed Fight.”
August 20 – Wall Street Journal (Editorial Board): “Federal Housing Finance Agency (FHFA) director William Pulte… accused Federal Reserve Governor Lisa Cook, a Biden appointee, of mortgage fraud. President Trump then demanded her resignation. Where this goes is hard to know, but it’s an ominous turn in political lawfare… Citing Mr. Pulte’s allegations, Mr. Trump demanded on Truth Social that she ‘resign now!!!’ Mr. Pulte then tweeted that ‘the President has great cause to fire Lisa Cook’ and mused that Federal Reserve Chair Jerome Powell might ‘be complicit with Cook’s alleged fraud.’ He reiterated his insinuations that Mr. Powell is covering up Ms. Cook’s alleged fraud in a CNBC interview. This is nasty business. Mr. Powell doesn’t have the authority to remove Ms. Cook, and why would he know anything about her mortgages? The context for Mr. Pulte’s accusations is relevant. Mr. Trump is angry that the Fed hasn’t cut interest rates. Ms. Cook voted with Mr. Powell to stand pat at last month’s meeting of the Federal Open Market Committee.”
August 20 – Bloomberg (Christopher Condon and Katy O'Donnell): “Federal Reserve Governor Lisa Cook signaled her intention to remain at the central bank, defying calls for her resignation by President Donald Trump over allegations of mortgage fraud. ‘I have no intention of being bullied to step down from my position because of some questions raised in a tweet,’ Cook said… ‘I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts.’”
Dr. Cook is a distinguished economist and the first African American woman (first woman of color) to serve on the Federal Reserve Board of Governors. To so attack her and for the President to threaten to fire her (apparently without due process) over allegations of erroneous residence mortgage declarations confirm my fears for the direction things are heading. Put to rest any doubts that the Trump administration is obsessed with taking control of the Federal Reserve.
President Trump: “We called him too late for a reason. He should have cut them a year ago. He’s too late.” Well, the Fed cut rates 50 bps more than 11 months ago – 100 bps over the past year.
The Dollar Index dropped 1% Friday to a four-week low of 97.716, ominously reversing a recent rally attempt. While the stock market remains enamored by loose “money” and so far unbothered by Washington’s shenanigans, international investors appear less tolerant of both.
Ten-year Treasury yields ended the week down six bps to 4.25%. Don’t assume the “all’s clear” has sounded. Treasury yields traded to 4.35% in Thursday afternoon trading. After Monday’s pullback, European bond yields were back on the march by Tuesday. German 30-year yields rose to 3.36% in Wednesday trading, a new high back to 2011. French long yields traded to 4.34% in early Friday trading, also a high since 2011. Japan’s 30-year yield traded to a record high 3.21% in Friday trading, while 10-year JGB yields rose five bps this week to 1.63% - a new high back to 2008.
Future readers often occupy the back of my mind. At least there won’t be a TDS diagnosis associated with my analysis. I can relate to them (to you). A decade from now – or decades and even a century ahead – future historians and students of history might stumble across my weekly posts. They will undoubtedly be curious, intrigued and likely befuddled – as I have been reading contemporaneous accounts of the “Roaring Twenties.” How could everyone have believed it all? How could they have disregarded so much – remaining oblivious to the Bubble right to the end? This felt like a notable week – the believing, the disregarding, the power of Bubble excess to so distort perceptions of reality. It will appear obvious in post-Bubble hindsight.
“Is the A.I. Sell-Off the Start of Something Bigger?” “Is the Artificial-Intelligence Winter Finally Upon Us?” “Meta Freezes AI Hiring After Blockbuster Spending Spree.” “AI Slurs Are Just the Start of the Backlash.” “Private Credit-Powered AI Boom at Risk of Overheating, UBS Says.” “Default Warnings Start to Pile Up in the Private Credit Market.” “Leveraged Loan Default Rate Ticked Up to 5.2% in July: Fitch.” “The Nationalization of Intel?” “Trump’s Attacks on Fed Overshadow a Critical Moment for the Central Bank.” “Trump’s Crackdown in DC Leaves Residents on Edge as Federal Agents Set Up Checkpoints.” “National Guard Troops From Six Red States Head to DC to Help Tackle Crime.” “Trump Eyes National Guard Expansion Into New York, Chicago.” “MAGA Celebrates John Bolton’s Home Being Raided: ‘How Does It Feel?’” “Putin’s Ukraine Summitry Was a Big Con.”
August 25 – Bloomberg (Myles Miller, Miranda Davis and Georgia Hall): “President Donald Trump said Friday he’s preparing to expand federal deployments of the National Guard beyond Washington, DC, with Chicago and New York among the cities under review. The president has already moved the DC’s Police Department under federal control and ordered about 2,000 troops to patrol the nation’s capital. In the Oval Office on Friday, he said his next steps could involve other large, Democratic-led cities he has repeatedly criticized for crime and mismanagement.”
August 25 – CNBC (Dan Mangan): “The law enforcement investigation of former Trump national security advisor John Bolton is ‘in the very early stages,’ Vice President JD Vance said on the heels of the FBI’s raid of Bolton’s Maryland home on Friday morning. Vance, in a new interview with NBC News’ Kristen Welker, said that classified documents are ‘certainly part of’ that probe, but that ‘there’s a broad concern about Ambassador Bolton.’ Bolton is not being targeted because of his criticism of President Donald Trump, Vance told Welker…”
John Bolton has been a distinguished public servant back to the Reagan administration. An outspoken and controversial hard-line conservative, claims he is not being targeted for his criticism of the President are dubious. Fed independence under overt attack. Checkpoints in our nation’s capital, with red state governors sending reinforcements. Will red state forces be redeployed to Chicago, New York, and San Francisco? This is going beyond simple disregard. Markets are complicit. The President was out Friday touting the Dow’s 1,000 point advance.
Indicative of a hasty reversal of hedges, high yield CDS dropped 15 Friday to 313 bps, the largest one-day decline since May 27th (strong gain in consumer confidence data and easing US-EU trade tensions). Meanwhile, notable curve steepening continues. More specifically, the five and 30-year Treasury yield differential widened five Friday to 112 bps – the largest term premium since October 5, 2021. Not surprisingly, but curiously, market inflation expectations (five-year “breakeven rate”) jumped four bps Friday to a one-month high 2.51% - and to within three bps of the high back to April 3rd (day following “liberation day”). Gold jumped $33 Friday to $3,372, boosting one-year gains to 36%. Silver surged 2% (up 34% y-o-y) and Platinum added 0.4% (up 43%).
Meager risk premiums indicate extreme complacency. The weak dollar, steepening yield curve, higher market inflation expectations, vulnerable bond markets, and inflating precious metals prices suggest festering Monetary Disorder concerns. Exuberant markets may dismiss near-term risks, but discounting the loss of Fed independence has commenced.
For the Week:
The S&P500 increased 0.3% (up 10.0% y-t-d), and the Dow gained 1.5% (up 7.3%). The Utilities added 0.5% (up 13.5%). The Banks jumped 3.5% (up 16.1%), and the Broker/Dealers added 0.5% (up 29.7%). The Transports advanced 2.8% (up 1.3%). The S&P 400 Midcaps jumped 2.6% (up 4.3%), and the small cap Russell 2000 surged 3.3% (up 5.9%). The Nasdaq100 declined 0.9% (up 11.8%). The Semiconductors were little changed (up 15.6%). The Biotechs increased 0.7% (up 5.7%). With bullion rising $36, the HUI gold index rose 2.8% (up 77.7%).
Three-month Treasury bill rates ended the week at 4.085%. Two-year government yields declined five bps to 3.70% (down 55bps y-t-d). Five-year T-note yields fell eight bps to 3.76% (down 62bps). Ten-year Treasury yields fell six bps to 4.25% (down 32bps). Long bond yields dipped four bps to 4.88% (up 9bps). Benchmark Fannie Mae MBS yields were down eight bps to 5.38% (down 47bps).
Italian 10-year yields declined six bps to 3.53% (unchanged y-t-d). Greek 10-year yields fell six bps to 3.36% (up 15bps). Spain's 10-year yields dipped five bps to 3.30% (up 24bps). German bund yields retreated seven bps to 2.72% (up 36bps). French yields declined five bps to 3.42% (up 23bps). The French to German 10-year bond spread widened two to 70 bps. U.K. 10-year gilt yields were little changed at 4.69% (up 13bps). U.K.'s FTSE equities index jumped 2.0% (up 14.1% y-t-d).
Japan's Nikkei 225 Equities Index dropped 1.7% (up 6.9% y-t-d). Japanese 10-year "JGB" yields gained five bps to 1.63% (up 52bps y-t-d). France's CAC40 added 0.6% (up 8.0%). The German DAX equities index was little changed (up 22.4%). Spain's IBEX 35 equities index increased 0.8% (up 32.8%). Italy's FTSE MIB index rose 1.5% (up 26.7%). EM equities were mixed. Brazil's Bovespa index gained 1.2% (up 14.7%), and Mexico's Bolsa index added 1.5% (up 19.6%). South Korea's Kospi fell 1.8% (up 32.1%). India's Sensex equities index gained 0.9% (up 3.6%). China's Shanghai Exchange Index jumped 3.5% (up 14.1%). Turkey's Borsa Istanbul National 100 index surged 4.5% (up 15.7%).
Federal Reserve Credit declined $18 billion last week to $6.577 TN. Fed Credit was down $2.312 TN from the June 22, 2022, peak. Over the past 310 weeks, Fed Credit expanded $2.851 TN, or 76%. Fed Credit inflated $3.766 TN, or 134%, over the past 667 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $37.3 billion last week at $3.167 TN - the low back to February 2017. "Custody holdings" were down $132 billion y-o-y, or 4.0%.
Total money market fund assets added $4 billion to a record $7.190 TN. Money funds were up $973 billion, or 15.6%, y-o-y.
Total Commercial Paper rose $13.9 billion to $1.404 TN. CP has expanded $316 billion y-t-d and $169 billion, or 13.6%, y-o-y.
Freddie Mac 30-year fixed mortgage rates were unchanged at 6.58% (up 12bps y-o-y). Fifteen-year rates slipped two bps to 5.69% (up 7bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up one basis point to 6.72% (down 21bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.1% to 97.716 (down 9.9% y-t-d). For the week on the upside, the Norwegian krone increased 1.3%, the Mexican peso 1.0%, the South African rand 0.8%, the Swiss franc 0.7%, the Swedish krona 0.6%, the South Korean won 0.5%, the Japanese yen 0.2%, the euro 0.1%, and the Singapore dollar 0.1%. On the downside, the New Zealand dollar declined 1.0%, the Brazilian real 0.5%, the Australian dollar 0.3%, the British pound 0.2%, and the Canadian dollar 0.1%. The Chinese (onshore) renminbi increased 0.24% versus the dollar (up 1.84% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index rallied 1.2% (up 2.9% y-t-d). Spot Gold gained 1.1% to $3,372 (up 28.5%). Silver rallied 2.3% to $38.8888 (up 34.6%). WTI crude recovered 86 cents, or 1.4%, to $63.66 (down 11%). Gasoline jumped 4.1% (up 7%), while Natural Gas sank 7.5% to $2.698 (down 25%). Copper slipped 0.6% (up 12%). Wheat dipped 0.3% (down 9%), while Corn gained 1.2% (down 15%). Bitcoin fell $1,650, or 1.4%, to $115,950 (up 23.7%).
Market Instability Watch:
August 18 – Reuters (Naomi Rovnick and Alun John): “The spectre of U.S. stagflation is stalking global markets, causing some investors to position portfolios to dodge the potential damage that tariffs could wreak on growth and inflation in the world's dominant economy. Some 70% of global investors surveyed by BofA Global Research in early August said they expect stagflation - the combination of below trend growth and above trend inflation - in the next 12 months.”
August 19 – Bloomberg (Bernard Goyder): “Options traders are increasingly nervous about a plunge in technology stocks in the coming weeks and are grabbing insurance to protect themselves from a wipeout. The tech-heavy Nasdaq 100 Index is up almost 40% since its early April plunge triggered by President Donald Trump’s sweeping tariffs… Traders are ‘less concerned’ about a ‘normal run-of-the-mill pullback’ and seem to be more worried about a repeat of the April selloff, said Jeff Jacobson, head of derivative strategy at 22V Research Group, who thinks a shallower dip is more likely.”
August 19 – Financial Times (Ian Smith): “Investors have warned that big economies are entering a new period of ‘fiscal dominance’, in which central banks are under growing pressure to keep interest rates artificially low to offset the cost of record government borrowing. The most prominent case is the US, where President Donald Trump has urged the Federal Reserve to slash rates to save billions of dollars in debt-servicing charges. But government debt loads and rising borrowing costs in countries such as the UK and Japan are also putting central banks under pressure to ease monetary policy… The combination of government debt and increased costs was ‘creating enormous political incentives for governments around the world to put pressure on central banks to lower rates’, said Kenneth Rogoff, a professor at Harvard and former chief economist of the IMF.”
August 21 – Reuters (Mike Dolan): “Market talk may be of fiscal dominance in the U.S. debt market but Washington's startling moves to take a direct stake in its leading chipmakers look like industrial policy on overdrive - alarming some investors about where it might end. For an administration that loudly espouses a credo of deregulated free markets, that’s quite a look. Donald Trump’s second administration is proving anything but a ‘light touch’ government - pursuing high trade barriers, greater control of monetary policy, heavy-handed re-industrialization, strict immigration controls and heightened national security priorities.”
Global Credit and Financial Bubble Watch:
August 18 – Bloomberg (Olivia Fishlow): “Private credit lenders, and their deep pockets, are rapidly becoming an important source of capital for artificial intelligence development. That’s raising concerns at UBS Global Research. As private credit grows beyond its roots of lending to smaller, heavily indebted companies, large-scale tech firms have started to see the asset class as a way to fulfill their growing capital needs. Private debt had about $450 billion loaned to the technology sector as of early 2025, up $100 billion from 12 months earlier, according to UBS estimates. For business development companies — or funds that hold direct corporate loans — tech lending has nearly doubled to $150 billion from $80 billion… Microsoft Corp., Amazon.com Inc., Google-parent Alphabet Inc., and Meta Platforms Inc. plan to spend over $344 billion this year, mainly driven by AI. At OpenAI, Chief Executive Officer Sam Altman is looking for new ways to bankroll the trillions he expects to spend on AI data center construction.”
August 21 – Bloomberg (Kat Hidalgo): “Warnings on defaults are starting to pile up in the $1.7 trillion private credit market, prompting at least some analysts to raise concern about underappreciated risks in one of Wall Street’s favorite money spinners. For years, losses have been contained by the fact that private credit firms have more room than many other investors to be patient with borrowers when times are tough. During the pandemic direct lenders granted companies more time to pay their obligations, often by negotiating behind the scenes with private equity owners. But a number of analysts this month are holding up a light to underlying stress… While there is no universal definition of what constitutes default in private credit, default rates for the market are currently in the 2% to 3% range. If so-called non-accrual loans… are added to the mix, that rate climbs to 5.4%, according to a JPMorgan... report…”
August 18 – Financial Times (Lee Harris): “Apollo has hit back against criticism of the close ties between its asset management arm and in-house insurer in an investor filing that instead points the finger at its chief rivals. A presentation published by Apollo’s in-house insurer Athene last week zeroed in on life insurers owned by or affiliated with KKR, Blackstone and Brookfield… The presentation showed 12% of Athene’s assets were ‘related party’ ones. That compared with 22% for KKR’s Global Atlantic, 30% for Brookfield’s American National Insurance, 35% for Blackstone’s Everlake and 43% for Security Benefit Life, the insurer owned by the holding company of billionaire sports investor Todd Boehly.”
August 20 – Bloomberg (John Cheng): “Japan’s 20-year government bond yields climbed to fresh multi-decade highs, driven by persistent concerns over fiscal expansion and fading demand from key investors. The so-called super-long yield briefly touched 2.655% on Thursday, surpassing its previous high in 1999. The benchmark 10-year yield climbed to 1.61%, a level unseen since 2008. Meanwhile, yields on 30-year notes rose to 3.18%, approaching the all-time peak of 3.2% seen in July.”
August 20 – Financial Times (William Sandlund): “Issuance of renminbi debt outside mainland China is heading for a record high this year… Offshore issuance of renminbi debt — known as ‘dim sum’ bonds because most are issued in Hong Kong, where the Cantonese cuisine is popular — has hit Rmb475bn ($66.3bn) so far in 2025, on track to surpass last year’s record high, as issuers take advantage of borrowing costs near record lows.”
August 21 – Bloomberg (Julia Zhong, Wenjin Lv, and Shulun Huang): “A weak auction sent a fresh warning signal in China’s bond market… The Ministry of Finance sold a new 30-year special sovereign note at an average yield of 2.15% on Friday, the highest since December… At the same auction, it also sold 10-year paper at 1.83%, the highest since November…”
Trump Administration Watch:
August 21 – Associated Press (Chris Megerian and Jacquelyn Martin): “Federal authorities have set up checkpoints around the nation’s capital, sometimes asking people for their immigration status and detaining them, as President Donald Trump’s crackdown ensnares more residents each day. Trump claimed that a crime crisis required his Republican administration’s intervention in the Democratic-led city this month, brushing aside statistics that showed the problem was already waning. However, immigration enforcement appears to be a priority… Hundreds of federal agents and National Guard soldiers have surged into Washington, leaving some residents on edge and creating tense confrontations in the streets.”
August 21 – Axios (April Rubin): “President Trump shared his ultimate voting reform goal in a Wednesday Truth Social post, saying he wants the GOP to pick up 100 congressional seats. Trump’s unrealistic vision of a Republican supermajority in the House relies on a combination of GOP-led states redistricting out Democrats and ending mail-in balloting nationwide. ‘If we do these TWO things, we will pick up 100 more seats, and the CROOKED game of politics is over,’ he wrote. The Texas House on Wednesday passed a new congressional map that would give Republicans five more seats in the House. Other Republican-led states are expected to follow, with Democratic-led states responding in kind… ‘Texas never lets us down,’ Trump wrote on Truth Social. ‘Florida, Indiana, and others are looking to do the same thing.’”
August 21 – Axios (Avery Lotz): “The redistricting battle is reaching a new precipice this week, as state lawmakers in Texas and California sprint to send their measures to their outspoken governor's desks. The Texas GOP has an enthusiastic President Trump behind their push, urging other states to redraw their maps in the controversial mid-decade race that's sparked a historic chain reaction. Meanwhile, Democrats seeking to counter Texas' redistricting blitz received a significant endorsement from former President Obama Tuesday. Trump’s strategy to maintain Republican control and net up to five House seats has positioned Newsom as the face of the redistricting resistance while Democrats vow to fight fire with fire. California’s redistricting ‘trigger’ measure could also pick up five seats in 2026 for Democrats in an attempt to offset Trump's desired GOP grab.”
August 21 – Bloomberg (Katy O'Donnell): “Federal Housing Finance Agency Director Bill Pulte suggested… his referral of Federal Reserve Governor Lisa Cook for alleged mortgage fraud was part of a broader crackdown on the issue. ‘We partnered with Palantir at Fannie Mae,’ Pulte said... ‘We said, look, everybody, beware: We are looking for mortgage fraud. We brought in Palantir. We have made tremendous efforts globally, across the population, across the data set, across the data set of loans from Fannie Mae.’ Pulte had urged Attorney General Pam Bondi to open a probe into Cook over a pair of mortgages allegedly claiming primary occupancy in a letter… He spent much of the day Wednesday calling on Cook to step down or be removed, with President Donald Trump chiming in that she ‘must resign, now!!!’ in asocial media post that morning.”
August 18 – Wall Street Journal (Editorial Board): “The Trump Administration is reportedly negotiating to take a 10% stake in Intel Corp., in what would amount to a de facto nationalization of the storied but struggling semiconductor firm. Does President Trump really believe that the same government that has so mismanaged air-traffic control can turn around the chip-making giant?”
August 21 – Wall Street Journal (Robbie Whelan, Yang Jie and Amrith Ramkumar): “The Trump administration is considering taking equity stakes in companies receiving funds from the 2022 Chips Act but has no plans to seek shares in bigger semiconductor firms that are increasing their U.S. investments, according to a government official. Commerce Secretary Howard Lutnick confirmed… that the government is in talks to take a 10% equity stake in the troubled semiconductor company Intel and said the administration may consider equity stakes in other firms as well.”
August 19 – Bloomberg (Joe Deaux): “He didn’t campaign on it. It wasn’t even broached during his first administration. He criticized his predecessor for it. But this month President Donald Trump made clear that he’s willing to use the full force of the US government to directly intervene in corporate matters to achieve his economic and foreign policy goals. Trump, backed by his team of Wall Street financiers, took the unprecedented step of seeking to collect a portion of money generated from sales of AI chips to China by Nvidia… and Advanced Micro Devices Inc. And in a move that could see the US government become Intel Corp.’s largest shareholder, the administration is said to be in talks for taking a 10% stake in the beleaguered chipmaker. Last month, the Pentagon also decided to take a $400 million preferred equity stake in a little-known rare earth mining company.”
August 21 – Reuters (Ernest Scheyder and Jarrett Renshaw): “The Trump administration is considering a plan to reallocate at least $2 billion from the CHIPS Act to fund critical minerals projects and boost Commerce Secretary Howard Lutnick's influence over the strategic sector… The proposed move would take from funds already allocated by Congress for semiconductor research and chip factory construction, avoiding a fresh spending request as it seeks to reduce U.S. dependence on China for critical minerals…”
August 19 – Financial Times (Kate Duguid and Claire Jones): “Treasury secretary Scott Bessent is betting the crypto industry will become a crucial buyer of Treasuries in coming years as Washington seeks to shore up demand for a deluge of new US government debt. Bessent has signalled to Wall Street that he expects stablecoins, digital tokens that are backed by high-quality securities such as Treasuries, to become an important source of demand for US government bonds… Bessent’s focus on stablecoins comes at a time when many investors are growing anxious about the country’s deteriorating public finances. Independent analysts expect Washington’s debt-to-GDP ratio to reach record highs over the next decade, with borrowing accelerating as a result of Donald Trump’s ‘big, beautiful’ tax bill.”
August 19 – Axios (Philip Wang): “President Trump continued his crusade against the Smithsonian museum…, saying he has instructed his attorneys to ‘go through the Museums’ the same way that the administration has investigated universities nationwide. Trump's latest announcement came at the backdrop of the White House’s extensive reviews of Smithsonian’s exhibitions to root out what the president said was ‘divisive or ideologically driven’ language. Trump said in a Truth Social post that the Smithsonian museums are ‘OUT OF CONTROL’ and that the museums in Washington are the last segment of ‘WOKE.’ ‘[E]verything discussed is how horrible our Country is, how bad Slavery was, and how unaccomplished the downtrodden have been — Nothing about Success, nothing about Brightness, nothing about the Future,’ Trump said. ‘I have instructed my attorneys to go through the Museums, and start the exact same process that has been done with Colleges and Universities where tremendous progress has been made.’”
August 21 – Axios (Emily Peck): “The White House crackdown appears to have driven 1.5 million immigrants out of the country, according to a new tally from Pew Research. It’s the first time the immigrant population has fallen in decades, a clear win for the Trump administration. It could slow the economy. Labor shortages in important industries like caregiving, agriculture and meatpacking, already showing up anecdotally, could become a more systemic problem.”
August 22 – Associated Press (Eric Tucker): “The FBI is searching the Maryland home and Washington office of John Bolton, who served in President Donald Trump’s first administration as national security adviser but later became critical of the president, as part of an investigation into the handling of classified information, a person familiar with the matter said Friday.”
August 18 – Reuters (Steve Holland): “Three U.S. Aegis guided-missile destroyers will arrive off the coast of Venezuela in the next 36 hours as part of an effort to address threats from Latin American drug cartels, two sources briefed on the matter said… President Donald Trump has wanted to use the military to go after Latin American drug gangs that have been designated as global terrorist organizations.”
China Trade War Watch:
August 22 – Reuters (Lewis Jackson): “China, the world’s dominant rare earth supplier, issued on Friday measures to regulate the mining, smelting and separation of the critical minerals key to energy transition, further tightening its grip over supply… The new rules will include imported raw materials in that quota system, the Ministry of Industry and Information Technology said... The inclusion of imported ore signals a further tightening of supply, analysts said. The proposal sparked opposition from companies concerned they could lose access to feedstock.”
August 20 – Financial Times (Zijing Wu and Cheng Leng): “Beijing’s move to restrict sales of Nvidia’s China-specific artificial intelligence processor was prompted by remarks from US commerce secretary Howard Lutnick about chip exports that officials found ‘insulting’. A group of Chinese regulators have mobilised in an effort to dissuade domestic tech companies from acquiring the H20… According to people with knowledge…, the Cyberspace Administration of China (CAC), the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) moved in response to comments made by Lutnick last month. ‘We don’t sell them our best stuff, not our second-best stuff, not even our third-best,’ Lutnick told CNBC on July 15… ‘You want to sell the Chinese enough that their developers get addicted to the American technology stack, that’s the thinking,’ he added.”
August 22 – Financial Times (William Sandlund and Eleanor Olcott): “Cambricon Technologies led a rally of Chinese chipmakers on Friday after artificial intelligence start-up DeepSeek unveiled an updated model that would be compatible with domestically made semiconductors. Shanghai-listed shares of Cambricon, one of China’s leading AI chipmakers, jumped 20% to a record high, taking the company’s market capitalisation past Rmb500bn ($70bn) for the first time. Its value has more than quadrupled in the past year.”
Trade War Watch:
August 19 – CNBC (Erin Doherty): “The Trump administration has quietly expanded its 50% steel and aluminum tariffs to include more than 400 additional product categories, vastly increasing the reach and impact of this arm of its trade agenda. The new tariffs… expand the scope of the levies that President Donald Trump previously announced on the valuable commodities. The tariff list now covers products such as fire extinguishers, machinery, construction materials and specialty chemicals that either contain, or are contained in, aluminum or steel. ‘Auto parts, chemicals, plastics, furniture components—basically, if it’s shiny, metallic, or remotely related to steel or aluminum, it’s probably on the list,’ Brian Baldwin, vice president of customs at Kuehne + Nagel International AG wrote… ‘This isn’t just another tariff—it’s a strategic shift in how steel and aluminum derivatives are regulated,’ he wrote.”
August 18 – Reuters (Shubham Kalia and Nidhi Verma): “White House trade adviser Peter Navarro said India’s purchases of Russian crude were funding Moscow’s war in Ukraine and had to stop. New Delhi was ‘now cozying up to both Russia and China,’ Navarro wrote… in the Financial Times... ‘If India wants to be treated as a strategic partner of the U.S., it needs to start acting like one… India acts as a global clearinghouse for Russian oil, converting embargoed crude into high-value exports while giving Moscow the dollars it needs’…”
August 19 – Bloomberg (Chiranjivi Chakraborty): “US Treasury Secretary Scott Bessent claimed some of the ‘richest families in India’ benefited from the purchase of Russian crude oil, while reiterating plans to boost tariffs on the South Asian nation. ‘We have planned to up the tariffs on India — these are secondary tariffs for buying the sanctioned Russian oil,’ Bessent said… Before Russia’s 2022 invasion of Ukraine, less than 1% of India’s oil came from Russia, ‘and now, I believe, it’s up to 42%. So India is just profiteering,’ he said. ‘They are reselling, they made $16 billion on excess profits — some of the richest families in India,’ he said.”
August 18 – Financial Times (Michael Stott and Michael Pooler): “Brazil has reached an impasse with the US over the record tariffs it has imposed on the South American nation, its finance minister Fernando Haddad has said… The US imposed 50% tariffs on most Brazilian exports after President Donald Trump accused the country of conducting a ‘witch-hunt’ against his ally, far-right former president Jair Bolsonaro, and demanded his supreme court trial be halted. ‘The US is trying to impose on Brazil a solution which is constitutionally impossible,’ Haddad said... ‘An impasse has been reached, it’s a request which cannot be fulfilled.’”
August 19 – Wall Street Journal (Jason Douglas): “In return for billions of dollars of investment pledges and promises to buy more American goods, U.S. allies in Asia and Europe say President Trump agreed to lower tariffs on key exports such as cars and steel. Weeks later, they are still waiting. Earlier this year, Trump threatened many of the U.S.’s trading partners with lofty import duties. Then, in a rapid series of deals culminating this month, he lowered them in pacts that, in some cases, included pledges by those countries to invest in the U.S. The administration, however, has so far left in place a series of tariffs levied for national-security reasons on sensitive products such as cars, steel and aluminum.”
Constitution Watch:
August 21 – Axios (Rebecca Falconer): “The Trump administration said Thursday it’s scrutinizing the records of all U.S. visa holders for potential violations that could result in deportations — from overstays to ‘terrorist activity’… Confirmation of the ‘continuous vetting’ of the more than 55 million U.S. visa holders came the same day Secretary of State Marco Rubio announced that the administration was immediately pausing issuing new visas for commercial truck drivers. And it comes during the same week as the State Department announced it had revoked some 6,000 student visas for overstays and other alleged legal violations.”
U.S./Russia/China/Europe/Iran Watch:
August 21 – Financial Times (Fabrice Deprez and Max Seddon): “Russia has targeted Ukraine’s cities and hit a US-owned consumer electronics factory in the largest combined drone and missile attack in more than a month, only five days after Donald Trump’s meeting with Vladimir Putin in Alaska. Kyiv’s air force on Thursday said Moscow had launched 574 drones and 40 cruise and ballistic missiles overnight, targeting five cities… A missile strike on Mukachevo, a city 30km from the Hungarian border, struck a large US-owned electronics manufacturing plant… Officials said 19 people were injured, and some 600 employees were on shift but had taken shelter after an air raid warning.”
August 21 – Wall Street Journal (Yaroslav Trofimov and Georgi Kantchev): “Russia warned… it should effectively hold veto power over any action to assist Ukraine after a peace deal is reached, rendering planned Western security guarantees for Kyiv moot and delivering a setback to negotiations championed by President Trump. Russian Foreign Minister Sergei Lavrov also played down the likelihood of a summit between the leaders of Russia and Ukraine occurring soon… Lavrov’s insistence that Russia must have a say in how any security guarantees for Ukraine would be enacted contradicted the Trump administration’s assertion that Putin agreed to European and U.S. security guarantees at the Alaska summit on Friday. Lavrov’s remarks were a potent sign that Moscow’s maximalist demands in the war haven’t shifted…”
August 20 – BBC (Laura Gozzi): “The Kremlin has played down talk of an imminent summit between Russian President Vladimir Putin and Ukraine's Volodymyr Zelensky, as Donald Trump renewed his call for the two leaders to meet to discuss ending the war in Ukraine. The push for a bilateral meeting comes after the US president met Putin in Alaska last week, and welcomed seven European leaders and Zelensky to the White House… Trump admitted the conflict was ‘a tough one’ to solve and conceded it was possible the Russian president was not interested in ending hostilities. ‘We’re going to find out about President Putin in the next couple of weeks,’ he said… ‘It’s possible that he doesn't want to make a deal.’”
August 20 – Reuters (Mei Mei Chu, Joe Cash and Xiuhao Chen): “China will stage a massive military parade next month in Beijing to commemorate 80 years since the end of World War Two following Japan's surrender, mobilising tens of thousands of people and showcasing weapons never seen before. Hundreds of aircraft including fighter jets and bombers as well as high-tech armaments such as precision-strike weapons capable of travelling at five times the speed of sound will be featured…”
New World Order Watch:
August 21 – Bloomberg: “China used an event marking the final stretch before its biggest diplomatic huddle of the year to accuse the US of ‘threatening world peace,’ in a thinly veiled critique of the rival superpower just before it hosts a key gathering of global leaders. More than 20 foreign leaders are set to attend the annual summit of the Shanghai Cooperation Organisation, a bloc of countries led by Russia and China… Russia’s Vladimir Putin, Indian Prime Minister Narendra Modi and Turkish President Recep Tayyip Erdogan are among those expected at the meeting in the northeastern port city of Tianjin Aug. 31-Sept. 1. Alluding to the US in shrouded terms typically used by China, Liu framed the gathering hosted by President Xi Jinping as a break with the ethos of ‘a certain country’ that ‘seeks to put its national interest above the interest of others.’ ‘The guiding principles and core spirit’ of the SCO transcend ‘outdated concepts such as the clash of civilizations and Cold War mentality and zero-sum games,’ Liu said. It ‘has become stronger over time and is becoming even more prominent.’”
August 19 – Financial Times (Andres Schipani and Joe Leahy): “China and India have achieved a ‘new environment’ of ‘peace and tranquillity’, New Delhi’s national security adviser told Beijing’s top diplomat, as the world’s two most populous countries move to repair ties shattered by a deadly border clash in 2020. China’s foreign minister Wang Yi… had meetings with Indian Prime Minister Narendra Modi and India’s national security adviser Ajit Doval, encounters that will pave the way for Modi’s first visit to China in seven years at the end of this month.”
August 19 – Associated Press (Sheikh Saaliq and Rajesh Roy): “Indian Prime Minister Narendra Modi hailed ‘steady progress’ in improving relations with China after meeting its top diplomat Tuesday following a yearslong standoff between the nuclear-armed Asian powers. Modi noted ‘respect for each other’s interests and sensitiveness’ in a statement on social media after meeting Chinese Foreign Minister Wang Yi. China’s foreign ministry said the countries have entered a ‘steady development track’ and should ‘trust and support’ each other.”
August 20 – Wall Street Journal (Ed Frankl): “Europe should deepen its relationships with trade partners outside the U.S., European Central Bank President Christine Lagarde said. ‘While the U.S. is—and will remain—an important trading partner, Europe should also aim to deepen its trade ties with other jurisdictions, leveraging the strengths of its export-oriented economy,’ Lagarde told a panel at the World Economic Forum…”
Ukraine Watch:
August 16 – Wall Street Journal (Lara Seligman, Thomas Grove and Meridith McGraw): “President Trump welcomed his Russian counterpart to Alaska with the former showman’s signature extravagance: a red carpet, a military flyover and a ride in the presidential limousine. But Trump headed back to Washington with little to show for all the pageantry. The U.S. president and Russian leader Vladimir Putin ended their highly anticipated meeting without announcing a breakthrough, leaving the path toward ending the war in Ukraine unclear. By Friday evening, Trump, who had taken a risk in inviting the sanctioned Kremlin leader to the U.S., was stuck in the same predicament he faced days prior: Putin remains unwilling to end the 3½-year war without concessions on Ukraine’s future. Both men staked their political reputations on a successful summit, and Putin appears to have gained the upper hand. The Russian president was treated as an equal on U.S. soil, managed to sidestep any potential American sanctions for now and announced no battlefield concessions.”
August 19 – Axios (Barak Ravid): “Senior officials from the U.S., Ukraine and several European countries are expected to work in the coming days on a detailed proposal for security guarantees for Ukraine, likely involving U.S. air power, two sources… tell Axios. U.S. and European security guarantees are a key Ukrainian demand. After months of refusing to discuss the issue, President Trump has come around to the idea of U.S. involvement in such a scheme…. Trump stressed there will be no U.S. boots on the ground but said he is open to providing American military air support to any European military forces stationed in Ukraine.”
August 17 – Reuters (Trevor Hunnicutt and David Ljunggren): “U.S. President Donald Trump could offer NATO-like protection of Ukraine, and Russia is open to the idea, one of his top foreign policy officials said on Sunday ahead of a meeting with Ukraine and European leaders to hammer out details of possible security guarantees for Kyiv. ‘We were able to win the following concession, that the United States could offer Article 5-like protection,’ Steve Witkoff, Trump's special envoy to Russia, told CNN… ‘The United States could offer Article 5 protection, which was the first time we had ever heard the Russians agree to that.’”
August 21 – Wall Street Journal (Editorial Board): “The Trump-Putin Alaska summit followed by the visit of European leaders at the White House were supposed to jump-start momentum to end the Russia-Ukraine war. A week later we are back at the same old stand, as Vladimir Putin is playing familiar tricks and showing no serious interest in a deal. The question is what President Trump will do about it.”
August 22 – Associated Press: “Russia’s top diplomat said Friday there are no plans for a meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy to discuss their three-year war, days after U.S. President Donald Trump said he had begun arrangements for them to sit down together. ‘There is no meeting planned’ between the Russian and Ukrainian leaders, Russian Foreign Minister Sergey Lavrov said…”
August 21 – Bloomberg (Olesia Safronova and Aliaksandr Kudrytski): “Ukrainian president Volodymyr Zelenskiy pushed back against Russia’s idea to add China as a security guarantor in the event of a ceasefire. ‘We don’t need guarantors who don’t help Ukraine, and didn’t help Ukraine at the moment when we really needed it,’ Zelenskiy told reporters… ‘We need security guarantees only from those countries that are ready to help us.’”
August 20 – Financial Times (Anastasia Stognei and Fabrice Deprez): “Wholesale petrol prices in Russia have hit record highs this week and the fuel is in short supply in several regions as a result of Ukrainian drone strikes on refineries. The crisis prompted Moscow last week to suspend exports of petrol so that it could keep refined products for the domestic market.”
Middle East Watch:
August 20 – Financial Times (Alison Killing, Andrew England, Ahmed Al Omran and Joe Leahy): “Saudi Arabia is struggling to deliver its desert-defying ski resort for the 2029 Asian Winter Games and has held internal discussions about finding alternative countries to host the event, said five people familiar with the project. Saudi officials have discussed approaching South Korea or China about relocating the 2029 games and instead holding the subsequent edition in the kingdom four years later… Trojena, the futuristic ski facility that forms part of Saudi Arabia’s $500bn Neom mega-project, is still under construction and faces escalating engineering and logistical hurdles.”
AI Bubble Watch:
August 19 – CNBC (MacKenzie Sigalos): “The artificial intelligence boom that Sam Altman helped ignite with ChatGPT in late 2022 is starting to make even him uneasy. Startups with little more than a pitch deck are raising hundreds of millions. Valuations have become ‘insane.’ Capital is chasing a ‘kernel of truth’ with feverish speed. The OpenAI CEO still believes the long-term societal upside of AI will outweigh the froth, and he’s ready to keep spending in pursuit of that goal. ‘Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes,’ he said... ‘Is AI the most important thing to happen in a very long time? My opinion is also yes.’ He repeated the word ’bubble’ three times in 15 seconds, then half-joked, ‘I’m sure someone’s gonna write some sensational headline about that. I wish you wouldn’t, but that’s fine.’”
August 21 – Bloomberg (Catherine Thorbecke): “You may not be familiar with the word ‘clanker.’ Its roots come from the Star Wars franchise1, but it has recently entered the Gen Z lexicon as a blanket derogatory term for artificial intelligence and robots. In viral TikTok and Instagram videos, people use it to express their frustration with everything from the AI slop that has taken over the internet to chatbot hallucinations to outright dystopian applications of the technology. Google Trends data shows search interest for ‘clanker’ rocketed this summer, especially in Australia, China and the US… Global backlash against AI has simmered within pockets of society, but it’s now gained enough momentum that the kids have a slur for it. And it’s showing no signs of slowing down.”
August 16 – Wall Street Journal (Asa Fitch): “Big Tech’s insatiable thirst for AI talent is threatening to kill its golden goose. Tech companies are paying AI researchers billions of dollars and using unorthodox tactics to grab the brightest minds. Their moves might help them near-term in the battle for AI supremacy, but they could also stifle a Silicon Valley innovation engine they badly need. Alongside job offers worth as much as $1 billion, Microsoft, Meta Platforms, Amazon.com and Google-parent Alphabet have all indulged in some version of what has come to be called the ‘reverse acquihire’: Instead of acquiring startups, they have hired away founders and top AI researchers—or licensed startups’ technology—and left the husk of the businesses to either find new missions or be acquired by someone else.”
Bubble and Mania Watch:
August 21 – Bloomberg (Natalie Wong): “An 18-story office tower near Manhattan’s Hudson Yards sold at a significant discount to its 2018 purchase price, according to a person familiar with the matter. Property investor David Werner bought 440 Ninth Ave. for slightly more than $100 million in cash — less than half the last price of $269 million…”
August 21 – Bloomberg (Natalie Wong and Carmen Arroyo): “Money managers who bought a $705 million commercial-mortgage bond tied to Manhattan’s Worldwide Plaza building are at risk of substantial losses after the property’s appraisal was slashed amid the departure of key tenants. The 49-story skyscraper at 825 8th Ave. was recently reassessed at $345 million…, less than a fifth of its original $1.74 billion value when the debt was issued in 2017. That’s left holders of the once-AAA portion of the bond on track for losses of about $53 million, or 20%, should the property be sold…”
Inflation Watch:
August 20 – Axios (Emily Peck and Joann Muller): “The corporate pricing dam is cracking — companies are raising prices, or signaling that increases are coming, to absorb some of the costs of the Trump administration's tariffs. Americans are already under strain from rapidly rising prices during the Biden administration. Another bout of hot inflation… will hurt. President Trump’s announcement of steep tariffs in April triggered widespread worries of higher prices. But the process took time. There were delays and back-and-forth between the White House and other countries over rates. Companies, fearful that high prices could spook their customers, held the line in the meantime. They stockpiled goods before tariffs kicked in. Reality is biting. At the beginning of the month, the U.S. started levying tariffs of about 15% on dozens of countries. That was on top of China tariffs of 30%. Companies are ‘coming to the point where their margins are getting squeezed and they need to start passing that onto consumers,’ Beth Hammack, president of the Federal Reserve Bank of Cleveland, told CBS News…”
August 17 – Axios (Courtenay Brown): “Consumers and businesses are feeling the pinch from President Trump’s trade war, with costs soaring for grocery staples and critical materials. It’s no longer anecdotal. The effects are difficult to ignore across key inflation indicators that might only get hotter in the months ahead. Global tariffs are putting upward pressure on costs. U.S. businesses are bearing the brunt… Import prices might cool if exporters around the globe were discounting goods to help ease the tariff burden for their U.S. buyers. But the opposite was the case last month: Import prices rose at the quickest pace this year, ‘casting further doubt on the 'foreigners will pay' talk from the administration,’ ING global economist James Knightley wrote this week.”
August 21 – Associated Press (Matthew Daly): “With electricity prices rising at more than twice the rate of inflation, President Donald Trump has lashed out at renewable energy sources such as wind and solar power, blaming them for skyrocketing energy costs. Trump called wind and solar power ‘THE SCAM OF THE CENTURY!’ in a social media post and vowed not to approve wind or ‘farmer destroying Solar’ projects. ‘The days of stupidity are over in the USA!!!’ he wrote… Energy analysts say renewable sources have little to do with recent price hikes, which are based on increased demand, aging infrastructure and increasingly extreme weather events such as wildfires that are exacerbated by climate change.”
August 20 – Axios (Tina Reed): “Big employers who’ve tried to insulate workers from rising health costs are preparing to share the pain next year in the form of higher premiums to reflect year-over-year increases of as much as 10%. The added costs will hit workers already reeling from inflationary pressures and reflect a change in thinking for corporations that have tried to maintain generous benefits in tight labor markets. ‘The story this year is perhaps more daunting and sobering than it ever has been,’ Ellen Kelsay, CEO of Business Group on Health, said… A survey the group released of 121 large employers insuring 11.6 million people found companies’ medical costs sharply outpaced their expectations over the past two years. They are now projecting health costs to jump a median of 9% next year absent any cutbacks in benefits to offset the increases. A survey from the International Foundation of Employee Benefit Plans projected a median increase of 10%.”
August 21 – Bloomberg (Mark Niquette): “The Christmas-decorations industry is hoping Donald Trump’s tariffs don’t ruin the holidays. The vast majority of artificial Christmas trees, lights and other decor are imported — mostly from China. Because seasonal items typically need to be shipped months ahead of time, stiffer levies already added millions of dollars in unexpected costs. Jared Hendricks, founder and chief executive officer of Village Lighting Company in West Valley City, Utah, had to take a line of credit leveraged by his house and office to help cover the $1.5 million in extra tariff costs. ‘This is the most stressful year I’ve ever had,’ said Hendricks… ‘Over the last 20-some-odd years we’ve been through a lot, and I’m just kind of operating on faith that we’ll find a way.’”
August 20 – Reuters (Zaheer Kachwala): “Sony will raise prices of its PlayStation 5 consoles in the United States by around $50 from Thursday, as the Japanese conglomerate navigates a slow recovery in the videogame market while U.S. tariffs threaten to raise costs.”
Federal Reserve Watch:
August 20 – Bloomberg (Prashant Gopal and Alex Tanzi): “President Donald Trump and his allies are demanding Federal Reserve Governor Lisa Cook resign over alleged owner-occupancy fraud — a practice the central bank itself has found to be ‘broad-based’ across the US. Philadelphia Fed researchers in a 2023 report assessed the number of ‘fraudulent investors’ in the mortgage market, which they defined as those who had more than one owner-occupied home purchase loan within four quarters after the first one was originated… The paper’s data set consists of 584,499 loans made from 2005 to 2017. Of those, 22,431 were considered fraudulent.”
August 19 – Bloomberg (Elizabeth Stanton): “Treasury Secretary Scott Bessent’s view that the Federal Reserve’s interest rate is more than a percentage point above levels indicated by models is wrong, Deutsche Bank interest-rate strategists said. Bessent said on Aug. 13 that ‘any model’ suggests that the Fed’s policy rate ‘should probably be 150, 175 bps lower.’ Since then, a search for applicable models has come up empty, with Deutsche Bank strategists led by Matthew Raskin being the latest to join the effort. The rules in the Fed’s semiannual monetary policy report still ‘don’t obviously call for a cut, let alone 150-175bp of reductions,’ Raskin, a former Fed economist and adviser, and his group wrote… ‘The main point to note is that the current funds rate falls squarely within the relatively narrow range of rule prescriptions’ which spans about 4% to 4.65%...”
August 19 – Reuters (Kanishka Singh and Ann Saphir): “President Donald Trump said… Federal Reserve Chair Jerome Powell is ‘hurting’ the housing industry ‘very badly’ and repeated his call for a big cut to U.S. interest rates. ‘Could somebody please inform Jerome ‘Too Late’ Powell that he is hurting the Housing Industry, very badly? People can't get a Mortgage because of him. There is no Inflation, and every sign is pointing to a major Rate Cut,’ Trump wrote…”
August 20 – Bloomberg (Jana Randow, Catarina Saraiva, and Maria Eloisa Capurro): “Central bankers gathering in Jackson Hole, Wyoming this week for the Federal Reserve’s annual conference are prepared to go beyond swapping research papers and savoring mountain views — they’re coming to defend Jerome Powell. The Fed chair is facing relentless attacks from President Donald Trump for refusing to cut interest rates. Trump has also pledged to replace Powell next year when his term as chair expires with someone more compliant. And this week the president escalated his attacks by demanding the resignation of Fed Governor Lisa Cook after the administration accused her of mortgage fraud. The offensive has rattled policymakers from around the world, raising fears that central-bank independence — seen as essential to keeping inflation in check — could be undermined.”
August 20 – Bloomberg (Maria Eloisa Capurro): “Most Federal Reserve officials highlighted inflation risks as outweighing concerns over the labor market at their meeting last month, as tariffs fueled a growing divide within the central bank’s rate-setting committee. Officials acknowledged worries over higher inflation and weaker employment, but a majority of the 18 policymakers in attendance ‘judged the upside risk to inflation as the greater of these two risks,’ according to the minutes of the Federal Open Market Committee’s July 29-30 meeting… Their statement… characterized the labor market as ‘solid’ but said inflation remained ‘somewhat elevated.’ Several said they saw the risks to their dual mandate as roughly balanced, the minutes showed, while a couple said they were more concerned about the labor market.”
August 20 – Wall Street Journal (Nick Timiraos): “The Federal Reserve’s decision to hold interest rates steady last month was broadly supported despite two officials who dissented in favor of a cut, according to minutes… The minutes said ‘almost all’ officials supported the decision, implying that apart from the two dissenting officials, it was backed by the remaining 16 officials who participated. The decision followed a period of intense political pressure on Fed Chair Jerome Powell by the White House to lower interest rates.”
August 21 – Bloomberg (Catarina Saraiva and Michael McKee): “Federal Reserve Bank of Kansas City President Jeff Schmid said he thinks inflation risks are marginally higher than risks to the labor market, though monetary policy is in a good place as policymakers consider an interest-rate adjustment next month. ‘As you get closer to the optimum dual mandate numbers it actually becomes more difficult to make decisions on the margins relative to where that policy rate should go,’ Schmid said… Schmid said the debate around when to cut interest rates now comes down to whether individual policymakers think policy is too restrictive or not. ‘I think they’re modestly restrictive… I think we’re on a good path.’”
August 17 – Bloomberg (Jonnelle Marte): “Raphael Bostic had two key takeaways from a recent tour through a stretch of the southeast US overseen by the Federal Reserve Bank of Atlanta — consumers are growing more stressed, and tariff costs are real. In conversations with bankers, educators and business owners based in northern Alabama and Mississippi, Bostic, who is president of the Atlanta Fed, also heard about the burden of higher borrowing costs squeezing businesses’ profit margins and making it harder for families to buy a home. Employer struggles to find and retain workers was another refrain.”
August 21 – CNBC (Jennifer Schonberger and David Hollerith): “Cleveland Fed president Beth Hammack said… the case for cutting interest rates in September would be a hard one to make given recent economic data. ‘There's a lot of data we’re going to get between now and September and I walk into every meeting with an open mind about what the right thing to do is, but with the data I have right now and with the information I have, if the meeting was tomorrow, I would not see a case for reducing interest rates,’ Hammack told Yahoo Finance…”
August 20 – Bloomberg (Maria Eloisa Capurro): “Charles Plosser, the former president of the Federal Reserve Bank of Philadelphia who became an outspoken critic of the Fed’s easy-money policies following the 2008 financial crisis, has died. He was 76… Plosser spent almost three decades as an economics professor and later dean at the graduate school of business administration at the University of Rochester, before joining the Fed in 2006.”
U.S. Economic Bubble Watch:
August 21 – Reuters (Dan Burns): “The number of Americans filing new applications for jobless benefits rose by the most in about three months last week and the number of people collecting unemployment relief in the prior week climbed to the highest level in nearly four years… Initial claims for state unemployment benefits climbed 11,000… to a seasonally adjusted 235,000 for the week ended August 16… The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 30,000 to a seasonally adjusted 1.972 million, the highest level since November 2021…”
August 21 – CNBC (Diana Olick): “Sales of previously owned homes rose 2% in July compared with June to 4.01 million units, on a… annualized basis… Sales were 0.8% higher than July 2024… There were 1.55 million homes for sale at the end of July, an increase of 15.7% from the same month last year. At the current sales pace, that represents a 4.6-month supply. A six-month supply is considered balanced between buyer and seller. Inventory is now at the highest level since May 2020 but still well below pre-Covid years… The median price of an existing home sold in July was $422,400, an increase of 0.2% from the same month a year earlier and a record high price for the month of July. Prices have been higher annually for the last 25 months…”
August 19 – Wall Street Journal (Rebecca Picciotto): “Housing construction in the U.S. jumped much more than expected last month, reflecting a recovery in the multifamily market as developers respond to demand for rental housing. Housing starts, a measurement of home construction, were 12.9% higher in July compared with a year earlier… Rental housing drove the big increase. Construction of projects with five units or more was 27.4% higher in July compared with last year, while starts of single-unit projects were 7.8% higher.”
August 21 – Bloomberg (Prashant Gopal): “Home-purchase contracts in the US were canceled at a record rate for July as jittery buyers got cold feet. About 58,000 agreements fell through last month, equivalent to 15.3% of homes that went under contract, according to Redfin. It was the highest cancellation rate for a July in data going back to 2017… It’s not just that the housing market’s expensive, with mortgage rates still elevated and home prices that have soared 50% since early 2020.”
August 18 – Reuters (Dan Burns): “A gauge of U.S. homebuilder sentiment fell unexpectedly in August, slipping back to its lowest level in more than two-and-a-half years, with more than a third of residential construction firms cutting prices and roughly two-thirds of them offering some form of incentive to lure buyers sidelined by still-high mortgage rates and economic uncertainty.”
August 16 – Wall Street Journal (Imani Moise and Dalvin Brown): “Americans are starting to pull back from a pandemic-era credit-card binge. After a surge in credit-card spending that pushed Americans’ card balances above $1 trillion, growth is now moderating. Credit-card spending has been growing more slowly than debit-card spending since late last year, the first such stretch in nearly four years, according to… Visa and Mastercard. Credit-card originations had soared during the recent period of high inflation. That allowed Americans to keep spending on discretionary items even after money ran out from pandemic stimulus payments.”
China Watch:
August 21 – Bloomberg: “When President Xi Jinping faced a deflation spiral a decade ago, he not only cracked down on China’s oversupply problem but also unleashed an almost $900 billion housing investment boom. It’s a similar situation today, except Chinese policymakers are rolling out only half the solution. While Beijing’s recent push to curb overcapacity is helping rein in the glut in steel and solar sectors, the ‘anti-involution’ campaign is missing a stimulus spark and could hurt the economy instead of bringing inflation back. ‘It’s going to be hard to simply rerun the 2015 playbook,’ said Christopher Beddor… at Gavekal Dragonomics. ‘The fundamental problem is broad macroeconomic forces such as weak household demand, which probably won’t be fixed by a series of haphazard government interventions to limit competition in a few industries.’”
August 18 – Bloomberg: “China’s central bank added a substantial amount of cash into the financial system on Tuesday, in a move that’s seen stabilizing bonds that have come under pressure from investors migrating into equities. The People’s Bank of China added a net 465.7 billion yuan ($65bn) of short-term cash via reverse repurchase agreements, the largest daily net injection since July 25 and also the third biggest this year.”
August 17 – Bloomberg: “China’s central bank indicated it’s holding back from aggressively easing monetary policy with moves such as interest-rate cuts, even though the economy just recorded its worst month so far this year. The People’s Bank of China pledged to ‘thoroughly’ enact its ‘moderately loose’ monetary policy while highlighting targeted support to the economy.”
Europe Watch:
August 20 – Bloomberg (Mark Schroers): “The euro area’s private sector grew at the quickest pace in 15 months as manufacturing exited a three-year downturn despite a deal locking in higher levies for exports to the US. The Composite Purchasing Managers’ Index compiled by S&P Global rose to 51.1 in August from 50.9 in July… While services weakened a little, in line with estimates, manufacturing saw a jump to 50.5…”
August 22 – Wall Street Journal (Joshua Kirby): “Wages in the eurozone rose at a slightly faster pace during the three months through June as unemployment remained at record lows, likely keeping the European Central Bank cautious as it deliberates a possible resumption of interest-rate cuts. The ECB said… wages set through negotiations between employers and labor unions or similar bodies were 3.95% higher over the second quarter than a year earlier, accelerating from 2.46% growth in the first quarter of 2025…”
August 20 – Bloomberg (Mark Schroers): “German wage growth jumped in the second quarter, though recent agreements suggest lower increases going forward, according to the Bundesbank. Negotiated pay rose 5.7% from a year ago, compared with just 0.9% in the previous three months, the central bank said…”
August 19 – Financial Times (Sam Fleming): “UK inflation accelerated more than expected to 3.8% in July on the back of higher food prices and airfares, deepening doubts over whether interest rates would be cut again this year to support lacklustre growth. The figure… was the highest since January 2024 and up from the 3.6% recorded a month earlier… July’s gains were driven by transport, including a sharp rise in air fares, as well as higher motor fuel costs. Food and non-alcoholic beverage prices were up 4.9% from the same period a year ago, the fourth consecutive increase... In a sign of the price pressures in the economy, services inflation, a key measure for the Bank of England’s rate-setters, climbed from 4.7% in June to 5% last month…”
August 20 – Financial Times (Sam Fleming): “UK business activity rose to a 12-month high and public borrowing came in below official forecasts… The S&P Global UK Composite Purchasing Managers’ index for August picked up to 53, led by an upturn in services business, from 51.5 in July. It was the fourth consecutive monthly reading above the 50 level, indicating expansion, with volumes of new business rising at the strongest pace since October 2024.”
Japan Watch:
August 21 – Wall Street Journal (Kosaku Narioka): “Japan’s consumer inflation cooled in July, but remained well above the central bank’s target of 2%, reinforcing expectations of a coming interest-rate increase. Consumer prices, excluding volatile fresh food, climbed 3.1% from a year earlier last month, compared with June’s 3.3% rise…”
August 19 – Wall Street Journal (Kosaku Narioka): “Japan’s exports in July saw their biggest drop in over four years, falling for a third straight month amid concerns over the impact of U.S. tariffs. Exports declined 2.6% compared with the same period a year earlier, following a 0.5% drop in June… Shipments to the U.S. fell 10.1% on year due to weakness in automobile exports. That compared with June’s 11.4% contraction and marked the fourth straight month it has declined.”
August 21 – Bloomberg (Takahiko Hyuga): “Bonds with the longest maturities are disappearing from Japan’s corporate market as surging yields push companies into shorter debt… Corporate bond sales this fiscal year are set to top last year’s record, with about 75% in maturities of up to five years and 22% in over five years and up to 10 years. Bonds with tenors of more than 20 years have almost vanished, with the only issuer of 30- and 40-year deals being University of Tokyo… The pullback reflects surging yields on Japanese government bonds, with 40-year borrowing costs climbing to a record 3.675% in May.”
EM Watch:
August 16 – Financial Times (Joseph Cotterill): “Banks and companies in emerging markets outside China are selling international bonds this year at the fastest rate since 2021, as the premium investors’ demand to own their debt over US Treasuries has fallen to its lowest since 2007. Such borrowers issued at least $250bn in bonds between January and July, a pace that will bring them close to matching the full-year volume of 2021…, according to JPMorgan…”
Leveraged Speculation Watch:
August 20 – Bloomberg (Liza Tetley): “Investors have been pouring money into hedge funds at the fastest rate in a decade, hoping volatile markets will produce outsized returns. A net total of about $25 billion went into hedge funds in the three months through June, according to data compiled by Hedge Fund Research. That brought net flows for the first half of the year to more than $37 billion…, the most since 2015. Global investor appetite for hedge fund strategies appears to be rebounding this year after a prolonged lull.”
Social, Political, Environmental, Cybersecurity Instability Watch:
August 21 – Reuters (Jason Lange, Nolan D. McCaskill and James Oliphant): “Most Americans believe that efforts to redraw U.S. House of Representatives districts to maximize partisan gains, like those under way in Texas and California, are bad for democracy, a new Reuters/Ipsos poll found. More than half of respondents -- 57% -- said they feared that American democracy itself was in danger, a view held by eight in 10 Democrats and four in 10 in President Donald Trump’s Republican Party… The poll found that 55% of respondents, including 71% of Democrats and 46% of Republicans, agreed that ongoing redistricting plans - such as those hatched by governors in Texas and California in a process known as gerrymandering - were ‘bad for democracy.’”
August 16 – New York Times (David Gelles, Claire Brown and Karen Zraick): “In the Biden administration, the American environmental movement reached what many of its supporters considered an apex. Congress passed the largest ever federal law to combat climate change. Coal-burning power plants were shutting down. Hundreds of billions of dollars of federal investment in renewable energy, batteries and electric vehicles was beginning to flow. But in just months, President Trump has attacked much of that work. The Biden-era climate law, known as the Inflation Reduction Act, is in tatters. The White House is trying to revive coal, the dirtiest fossil fuel, while boosting oil and gas and hindering solar and wind power. And it is weakening or trying to scrap environmental policies and regulations, some dating to 1970.”
August 20 – CNBC (Spencer Kimball): “President Donald Trump… said his administration will not approve solar or wind power projects, even as electricity demand is outpacing the supply in some parts of the U.S. ‘We will not approve wind or farmer destroying Solar,’ Trump, who has complained in the past that solar takes up too much land, posted on Truth Social. ‘The days of stupidity are over in the USA!!!’ The president’s comment comes after the administration tightened federal permitting for renewables last month. The permitting process is now centralized in Interior Secretary Doug Burgum’s office.”
August 20 – Reuters (Peter Hobson): “Rapid loss of Antarctic sea ice could be a tipping point for the global climate, causing sea level rises, changes to ocean currents and loss of marine life that are impossible to reverse, a scientific study published… said. The paper in the journal Nature aimed to describe in previously unseen detail the interlocking effects of global warming on the Antarctic… ‘Evidence is emerging for rapid, interacting and sometimes self-perpetuating changes in the Antarctic environment,’ it said… ‘A regime shift has reduced Antarctic sea-ice extent far below its natural variability of past centuries, and in some respects is more abrupt, non-linear and potentially irreversible than Arctic sea-ice loss,’ it said, referring to melting at the North Pole.”
August 16 – Financial Times (Attracta Mooney and Carmen Muela): “Wildfires have spread dangerously close to capital cities including Madrid, Athens and Podgorica in the past week, as data shows the number of blazes in Europe has jumped by nearly 50% compared with last year. Firefighters are tackling fires in Spain, Portugal, France, Turkey, Greece and Montenegro as temperatures in parts of southern Europe soar above 40C and countries issue warnings.”
The S&P500 increased 0.3% (up 10.0% y-t-d), and the Dow gained 1.5% (up 7.3%). The Utilities added 0.5% (up 13.5%). The Banks jumped 3.5% (up 16.1%), and the Broker/Dealers added 0.5% (up 29.7%). The Transports advanced 2.8% (up 1.3%). The S&P 400 Midcaps jumped 2.6% (up 4.3%), and the small cap Russell 2000 surged 3.3% (up 5.9%). The Nasdaq100 declined 0.9% (up 11.8%). The Semiconductors were little changed (up 15.6%). The Biotechs increased 0.7% (up 5.7%). With bullion rising $36, the HUI gold index rose 2.8% (up 77.7%).
Three-month Treasury bill rates ended the week at 4.085%. Two-year government yields declined five bps to 3.70% (down 55bps y-t-d). Five-year T-note yields fell eight bps to 3.76% (down 62bps). Ten-year Treasury yields fell six bps to 4.25% (down 32bps). Long bond yields dipped four bps to 4.88% (up 9bps). Benchmark Fannie Mae MBS yields were down eight bps to 5.38% (down 47bps).
Italian 10-year yields declined six bps to 3.53% (unchanged y-t-d). Greek 10-year yields fell six bps to 3.36% (up 15bps). Spain's 10-year yields dipped five bps to 3.30% (up 24bps). German bund yields retreated seven bps to 2.72% (up 36bps). French yields declined five bps to 3.42% (up 23bps). The French to German 10-year bond spread widened two to 70 bps. U.K. 10-year gilt yields were little changed at 4.69% (up 13bps). U.K.'s FTSE equities index jumped 2.0% (up 14.1% y-t-d).
Japan's Nikkei 225 Equities Index dropped 1.7% (up 6.9% y-t-d). Japanese 10-year "JGB" yields gained five bps to 1.63% (up 52bps y-t-d). France's CAC40 added 0.6% (up 8.0%). The German DAX equities index was little changed (up 22.4%). Spain's IBEX 35 equities index increased 0.8% (up 32.8%). Italy's FTSE MIB index rose 1.5% (up 26.7%). EM equities were mixed. Brazil's Bovespa index gained 1.2% (up 14.7%), and Mexico's Bolsa index added 1.5% (up 19.6%). South Korea's Kospi fell 1.8% (up 32.1%). India's Sensex equities index gained 0.9% (up 3.6%). China's Shanghai Exchange Index jumped 3.5% (up 14.1%). Turkey's Borsa Istanbul National 100 index surged 4.5% (up 15.7%).
Federal Reserve Credit declined $18 billion last week to $6.577 TN. Fed Credit was down $2.312 TN from the June 22, 2022, peak. Over the past 310 weeks, Fed Credit expanded $2.851 TN, or 76%. Fed Credit inflated $3.766 TN, or 134%, over the past 667 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $37.3 billion last week at $3.167 TN - the low back to February 2017. "Custody holdings" were down $132 billion y-o-y, or 4.0%.
Total money market fund assets added $4 billion to a record $7.190 TN. Money funds were up $973 billion, or 15.6%, y-o-y.
Total Commercial Paper rose $13.9 billion to $1.404 TN. CP has expanded $316 billion y-t-d and $169 billion, or 13.6%, y-o-y.
Freddie Mac 30-year fixed mortgage rates were unchanged at 6.58% (up 12bps y-o-y). Fifteen-year rates slipped two bps to 5.69% (up 7bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up one basis point to 6.72% (down 21bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.1% to 97.716 (down 9.9% y-t-d). For the week on the upside, the Norwegian krone increased 1.3%, the Mexican peso 1.0%, the South African rand 0.8%, the Swiss franc 0.7%, the Swedish krona 0.6%, the South Korean won 0.5%, the Japanese yen 0.2%, the euro 0.1%, and the Singapore dollar 0.1%. On the downside, the New Zealand dollar declined 1.0%, the Brazilian real 0.5%, the Australian dollar 0.3%, the British pound 0.2%, and the Canadian dollar 0.1%. The Chinese (onshore) renminbi increased 0.24% versus the dollar (up 1.84% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index rallied 1.2% (up 2.9% y-t-d). Spot Gold gained 1.1% to $3,372 (up 28.5%). Silver rallied 2.3% to $38.8888 (up 34.6%). WTI crude recovered 86 cents, or 1.4%, to $63.66 (down 11%). Gasoline jumped 4.1% (up 7%), while Natural Gas sank 7.5% to $2.698 (down 25%). Copper slipped 0.6% (up 12%). Wheat dipped 0.3% (down 9%), while Corn gained 1.2% (down 15%). Bitcoin fell $1,650, or 1.4%, to $115,950 (up 23.7%).
Market Instability Watch:
August 18 – Reuters (Naomi Rovnick and Alun John): “The spectre of U.S. stagflation is stalking global markets, causing some investors to position portfolios to dodge the potential damage that tariffs could wreak on growth and inflation in the world's dominant economy. Some 70% of global investors surveyed by BofA Global Research in early August said they expect stagflation - the combination of below trend growth and above trend inflation - in the next 12 months.”
August 19 – Bloomberg (Bernard Goyder): “Options traders are increasingly nervous about a plunge in technology stocks in the coming weeks and are grabbing insurance to protect themselves from a wipeout. The tech-heavy Nasdaq 100 Index is up almost 40% since its early April plunge triggered by President Donald Trump’s sweeping tariffs… Traders are ‘less concerned’ about a ‘normal run-of-the-mill pullback’ and seem to be more worried about a repeat of the April selloff, said Jeff Jacobson, head of derivative strategy at 22V Research Group, who thinks a shallower dip is more likely.”
August 19 – Financial Times (Ian Smith): “Investors have warned that big economies are entering a new period of ‘fiscal dominance’, in which central banks are under growing pressure to keep interest rates artificially low to offset the cost of record government borrowing. The most prominent case is the US, where President Donald Trump has urged the Federal Reserve to slash rates to save billions of dollars in debt-servicing charges. But government debt loads and rising borrowing costs in countries such as the UK and Japan are also putting central banks under pressure to ease monetary policy… The combination of government debt and increased costs was ‘creating enormous political incentives for governments around the world to put pressure on central banks to lower rates’, said Kenneth Rogoff, a professor at Harvard and former chief economist of the IMF.”
August 21 – Reuters (Mike Dolan): “Market talk may be of fiscal dominance in the U.S. debt market but Washington's startling moves to take a direct stake in its leading chipmakers look like industrial policy on overdrive - alarming some investors about where it might end. For an administration that loudly espouses a credo of deregulated free markets, that’s quite a look. Donald Trump’s second administration is proving anything but a ‘light touch’ government - pursuing high trade barriers, greater control of monetary policy, heavy-handed re-industrialization, strict immigration controls and heightened national security priorities.”
Global Credit and Financial Bubble Watch:
August 18 – Bloomberg (Olivia Fishlow): “Private credit lenders, and their deep pockets, are rapidly becoming an important source of capital for artificial intelligence development. That’s raising concerns at UBS Global Research. As private credit grows beyond its roots of lending to smaller, heavily indebted companies, large-scale tech firms have started to see the asset class as a way to fulfill their growing capital needs. Private debt had about $450 billion loaned to the technology sector as of early 2025, up $100 billion from 12 months earlier, according to UBS estimates. For business development companies — or funds that hold direct corporate loans — tech lending has nearly doubled to $150 billion from $80 billion… Microsoft Corp., Amazon.com Inc., Google-parent Alphabet Inc., and Meta Platforms Inc. plan to spend over $344 billion this year, mainly driven by AI. At OpenAI, Chief Executive Officer Sam Altman is looking for new ways to bankroll the trillions he expects to spend on AI data center construction.”
August 21 – Bloomberg (Kat Hidalgo): “Warnings on defaults are starting to pile up in the $1.7 trillion private credit market, prompting at least some analysts to raise concern about underappreciated risks in one of Wall Street’s favorite money spinners. For years, losses have been contained by the fact that private credit firms have more room than many other investors to be patient with borrowers when times are tough. During the pandemic direct lenders granted companies more time to pay their obligations, often by negotiating behind the scenes with private equity owners. But a number of analysts this month are holding up a light to underlying stress… While there is no universal definition of what constitutes default in private credit, default rates for the market are currently in the 2% to 3% range. If so-called non-accrual loans… are added to the mix, that rate climbs to 5.4%, according to a JPMorgan... report…”
August 18 – Financial Times (Lee Harris): “Apollo has hit back against criticism of the close ties between its asset management arm and in-house insurer in an investor filing that instead points the finger at its chief rivals. A presentation published by Apollo’s in-house insurer Athene last week zeroed in on life insurers owned by or affiliated with KKR, Blackstone and Brookfield… The presentation showed 12% of Athene’s assets were ‘related party’ ones. That compared with 22% for KKR’s Global Atlantic, 30% for Brookfield’s American National Insurance, 35% for Blackstone’s Everlake and 43% for Security Benefit Life, the insurer owned by the holding company of billionaire sports investor Todd Boehly.”
August 20 – Bloomberg (John Cheng): “Japan’s 20-year government bond yields climbed to fresh multi-decade highs, driven by persistent concerns over fiscal expansion and fading demand from key investors. The so-called super-long yield briefly touched 2.655% on Thursday, surpassing its previous high in 1999. The benchmark 10-year yield climbed to 1.61%, a level unseen since 2008. Meanwhile, yields on 30-year notes rose to 3.18%, approaching the all-time peak of 3.2% seen in July.”
August 20 – Financial Times (William Sandlund): “Issuance of renminbi debt outside mainland China is heading for a record high this year… Offshore issuance of renminbi debt — known as ‘dim sum’ bonds because most are issued in Hong Kong, where the Cantonese cuisine is popular — has hit Rmb475bn ($66.3bn) so far in 2025, on track to surpass last year’s record high, as issuers take advantage of borrowing costs near record lows.”
August 21 – Bloomberg (Julia Zhong, Wenjin Lv, and Shulun Huang): “A weak auction sent a fresh warning signal in China’s bond market… The Ministry of Finance sold a new 30-year special sovereign note at an average yield of 2.15% on Friday, the highest since December… At the same auction, it also sold 10-year paper at 1.83%, the highest since November…”
Trump Administration Watch:
August 21 – Associated Press (Chris Megerian and Jacquelyn Martin): “Federal authorities have set up checkpoints around the nation’s capital, sometimes asking people for their immigration status and detaining them, as President Donald Trump’s crackdown ensnares more residents each day. Trump claimed that a crime crisis required his Republican administration’s intervention in the Democratic-led city this month, brushing aside statistics that showed the problem was already waning. However, immigration enforcement appears to be a priority… Hundreds of federal agents and National Guard soldiers have surged into Washington, leaving some residents on edge and creating tense confrontations in the streets.”
August 21 – Axios (April Rubin): “President Trump shared his ultimate voting reform goal in a Wednesday Truth Social post, saying he wants the GOP to pick up 100 congressional seats. Trump’s unrealistic vision of a Republican supermajority in the House relies on a combination of GOP-led states redistricting out Democrats and ending mail-in balloting nationwide. ‘If we do these TWO things, we will pick up 100 more seats, and the CROOKED game of politics is over,’ he wrote. The Texas House on Wednesday passed a new congressional map that would give Republicans five more seats in the House. Other Republican-led states are expected to follow, with Democratic-led states responding in kind… ‘Texas never lets us down,’ Trump wrote on Truth Social. ‘Florida, Indiana, and others are looking to do the same thing.’”
August 21 – Axios (Avery Lotz): “The redistricting battle is reaching a new precipice this week, as state lawmakers in Texas and California sprint to send their measures to their outspoken governor's desks. The Texas GOP has an enthusiastic President Trump behind their push, urging other states to redraw their maps in the controversial mid-decade race that's sparked a historic chain reaction. Meanwhile, Democrats seeking to counter Texas' redistricting blitz received a significant endorsement from former President Obama Tuesday. Trump’s strategy to maintain Republican control and net up to five House seats has positioned Newsom as the face of the redistricting resistance while Democrats vow to fight fire with fire. California’s redistricting ‘trigger’ measure could also pick up five seats in 2026 for Democrats in an attempt to offset Trump's desired GOP grab.”
August 21 – Bloomberg (Katy O'Donnell): “Federal Housing Finance Agency Director Bill Pulte suggested… his referral of Federal Reserve Governor Lisa Cook for alleged mortgage fraud was part of a broader crackdown on the issue. ‘We partnered with Palantir at Fannie Mae,’ Pulte said... ‘We said, look, everybody, beware: We are looking for mortgage fraud. We brought in Palantir. We have made tremendous efforts globally, across the population, across the data set, across the data set of loans from Fannie Mae.’ Pulte had urged Attorney General Pam Bondi to open a probe into Cook over a pair of mortgages allegedly claiming primary occupancy in a letter… He spent much of the day Wednesday calling on Cook to step down or be removed, with President Donald Trump chiming in that she ‘must resign, now!!!’ in asocial media post that morning.”
August 18 – Wall Street Journal (Editorial Board): “The Trump Administration is reportedly negotiating to take a 10% stake in Intel Corp., in what would amount to a de facto nationalization of the storied but struggling semiconductor firm. Does President Trump really believe that the same government that has so mismanaged air-traffic control can turn around the chip-making giant?”
August 21 – Wall Street Journal (Robbie Whelan, Yang Jie and Amrith Ramkumar): “The Trump administration is considering taking equity stakes in companies receiving funds from the 2022 Chips Act but has no plans to seek shares in bigger semiconductor firms that are increasing their U.S. investments, according to a government official. Commerce Secretary Howard Lutnick confirmed… that the government is in talks to take a 10% equity stake in the troubled semiconductor company Intel and said the administration may consider equity stakes in other firms as well.”
August 19 – Bloomberg (Joe Deaux): “He didn’t campaign on it. It wasn’t even broached during his first administration. He criticized his predecessor for it. But this month President Donald Trump made clear that he’s willing to use the full force of the US government to directly intervene in corporate matters to achieve his economic and foreign policy goals. Trump, backed by his team of Wall Street financiers, took the unprecedented step of seeking to collect a portion of money generated from sales of AI chips to China by Nvidia… and Advanced Micro Devices Inc. And in a move that could see the US government become Intel Corp.’s largest shareholder, the administration is said to be in talks for taking a 10% stake in the beleaguered chipmaker. Last month, the Pentagon also decided to take a $400 million preferred equity stake in a little-known rare earth mining company.”
August 21 – Reuters (Ernest Scheyder and Jarrett Renshaw): “The Trump administration is considering a plan to reallocate at least $2 billion from the CHIPS Act to fund critical minerals projects and boost Commerce Secretary Howard Lutnick's influence over the strategic sector… The proposed move would take from funds already allocated by Congress for semiconductor research and chip factory construction, avoiding a fresh spending request as it seeks to reduce U.S. dependence on China for critical minerals…”
August 19 – Financial Times (Kate Duguid and Claire Jones): “Treasury secretary Scott Bessent is betting the crypto industry will become a crucial buyer of Treasuries in coming years as Washington seeks to shore up demand for a deluge of new US government debt. Bessent has signalled to Wall Street that he expects stablecoins, digital tokens that are backed by high-quality securities such as Treasuries, to become an important source of demand for US government bonds… Bessent’s focus on stablecoins comes at a time when many investors are growing anxious about the country’s deteriorating public finances. Independent analysts expect Washington’s debt-to-GDP ratio to reach record highs over the next decade, with borrowing accelerating as a result of Donald Trump’s ‘big, beautiful’ tax bill.”
August 19 – Axios (Philip Wang): “President Trump continued his crusade against the Smithsonian museum…, saying he has instructed his attorneys to ‘go through the Museums’ the same way that the administration has investigated universities nationwide. Trump's latest announcement came at the backdrop of the White House’s extensive reviews of Smithsonian’s exhibitions to root out what the president said was ‘divisive or ideologically driven’ language. Trump said in a Truth Social post that the Smithsonian museums are ‘OUT OF CONTROL’ and that the museums in Washington are the last segment of ‘WOKE.’ ‘[E]verything discussed is how horrible our Country is, how bad Slavery was, and how unaccomplished the downtrodden have been — Nothing about Success, nothing about Brightness, nothing about the Future,’ Trump said. ‘I have instructed my attorneys to go through the Museums, and start the exact same process that has been done with Colleges and Universities where tremendous progress has been made.’”
August 21 – Axios (Emily Peck): “The White House crackdown appears to have driven 1.5 million immigrants out of the country, according to a new tally from Pew Research. It’s the first time the immigrant population has fallen in decades, a clear win for the Trump administration. It could slow the economy. Labor shortages in important industries like caregiving, agriculture and meatpacking, already showing up anecdotally, could become a more systemic problem.”
August 22 – Associated Press (Eric Tucker): “The FBI is searching the Maryland home and Washington office of John Bolton, who served in President Donald Trump’s first administration as national security adviser but later became critical of the president, as part of an investigation into the handling of classified information, a person familiar with the matter said Friday.”
August 18 – Reuters (Steve Holland): “Three U.S. Aegis guided-missile destroyers will arrive off the coast of Venezuela in the next 36 hours as part of an effort to address threats from Latin American drug cartels, two sources briefed on the matter said… President Donald Trump has wanted to use the military to go after Latin American drug gangs that have been designated as global terrorist organizations.”
China Trade War Watch:
August 22 – Reuters (Lewis Jackson): “China, the world’s dominant rare earth supplier, issued on Friday measures to regulate the mining, smelting and separation of the critical minerals key to energy transition, further tightening its grip over supply… The new rules will include imported raw materials in that quota system, the Ministry of Industry and Information Technology said... The inclusion of imported ore signals a further tightening of supply, analysts said. The proposal sparked opposition from companies concerned they could lose access to feedstock.”
August 20 – Financial Times (Zijing Wu and Cheng Leng): “Beijing’s move to restrict sales of Nvidia’s China-specific artificial intelligence processor was prompted by remarks from US commerce secretary Howard Lutnick about chip exports that officials found ‘insulting’. A group of Chinese regulators have mobilised in an effort to dissuade domestic tech companies from acquiring the H20… According to people with knowledge…, the Cyberspace Administration of China (CAC), the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) moved in response to comments made by Lutnick last month. ‘We don’t sell them our best stuff, not our second-best stuff, not even our third-best,’ Lutnick told CNBC on July 15… ‘You want to sell the Chinese enough that their developers get addicted to the American technology stack, that’s the thinking,’ he added.”
August 22 – Financial Times (William Sandlund and Eleanor Olcott): “Cambricon Technologies led a rally of Chinese chipmakers on Friday after artificial intelligence start-up DeepSeek unveiled an updated model that would be compatible with domestically made semiconductors. Shanghai-listed shares of Cambricon, one of China’s leading AI chipmakers, jumped 20% to a record high, taking the company’s market capitalisation past Rmb500bn ($70bn) for the first time. Its value has more than quadrupled in the past year.”
Trade War Watch:
August 19 – CNBC (Erin Doherty): “The Trump administration has quietly expanded its 50% steel and aluminum tariffs to include more than 400 additional product categories, vastly increasing the reach and impact of this arm of its trade agenda. The new tariffs… expand the scope of the levies that President Donald Trump previously announced on the valuable commodities. The tariff list now covers products such as fire extinguishers, machinery, construction materials and specialty chemicals that either contain, or are contained in, aluminum or steel. ‘Auto parts, chemicals, plastics, furniture components—basically, if it’s shiny, metallic, or remotely related to steel or aluminum, it’s probably on the list,’ Brian Baldwin, vice president of customs at Kuehne + Nagel International AG wrote… ‘This isn’t just another tariff—it’s a strategic shift in how steel and aluminum derivatives are regulated,’ he wrote.”
August 18 – Reuters (Shubham Kalia and Nidhi Verma): “White House trade adviser Peter Navarro said India’s purchases of Russian crude were funding Moscow’s war in Ukraine and had to stop. New Delhi was ‘now cozying up to both Russia and China,’ Navarro wrote… in the Financial Times... ‘If India wants to be treated as a strategic partner of the U.S., it needs to start acting like one… India acts as a global clearinghouse for Russian oil, converting embargoed crude into high-value exports while giving Moscow the dollars it needs’…”
August 19 – Bloomberg (Chiranjivi Chakraborty): “US Treasury Secretary Scott Bessent claimed some of the ‘richest families in India’ benefited from the purchase of Russian crude oil, while reiterating plans to boost tariffs on the South Asian nation. ‘We have planned to up the tariffs on India — these are secondary tariffs for buying the sanctioned Russian oil,’ Bessent said… Before Russia’s 2022 invasion of Ukraine, less than 1% of India’s oil came from Russia, ‘and now, I believe, it’s up to 42%. So India is just profiteering,’ he said. ‘They are reselling, they made $16 billion on excess profits — some of the richest families in India,’ he said.”
August 18 – Financial Times (Michael Stott and Michael Pooler): “Brazil has reached an impasse with the US over the record tariffs it has imposed on the South American nation, its finance minister Fernando Haddad has said… The US imposed 50% tariffs on most Brazilian exports after President Donald Trump accused the country of conducting a ‘witch-hunt’ against his ally, far-right former president Jair Bolsonaro, and demanded his supreme court trial be halted. ‘The US is trying to impose on Brazil a solution which is constitutionally impossible,’ Haddad said... ‘An impasse has been reached, it’s a request which cannot be fulfilled.’”
August 19 – Wall Street Journal (Jason Douglas): “In return for billions of dollars of investment pledges and promises to buy more American goods, U.S. allies in Asia and Europe say President Trump agreed to lower tariffs on key exports such as cars and steel. Weeks later, they are still waiting. Earlier this year, Trump threatened many of the U.S.’s trading partners with lofty import duties. Then, in a rapid series of deals culminating this month, he lowered them in pacts that, in some cases, included pledges by those countries to invest in the U.S. The administration, however, has so far left in place a series of tariffs levied for national-security reasons on sensitive products such as cars, steel and aluminum.”
Constitution Watch:
August 21 – Axios (Rebecca Falconer): “The Trump administration said Thursday it’s scrutinizing the records of all U.S. visa holders for potential violations that could result in deportations — from overstays to ‘terrorist activity’… Confirmation of the ‘continuous vetting’ of the more than 55 million U.S. visa holders came the same day Secretary of State Marco Rubio announced that the administration was immediately pausing issuing new visas for commercial truck drivers. And it comes during the same week as the State Department announced it had revoked some 6,000 student visas for overstays and other alleged legal violations.”
U.S./Russia/China/Europe/Iran Watch:
August 21 – Financial Times (Fabrice Deprez and Max Seddon): “Russia has targeted Ukraine’s cities and hit a US-owned consumer electronics factory in the largest combined drone and missile attack in more than a month, only five days after Donald Trump’s meeting with Vladimir Putin in Alaska. Kyiv’s air force on Thursday said Moscow had launched 574 drones and 40 cruise and ballistic missiles overnight, targeting five cities… A missile strike on Mukachevo, a city 30km from the Hungarian border, struck a large US-owned electronics manufacturing plant… Officials said 19 people were injured, and some 600 employees were on shift but had taken shelter after an air raid warning.”
August 21 – Wall Street Journal (Yaroslav Trofimov and Georgi Kantchev): “Russia warned… it should effectively hold veto power over any action to assist Ukraine after a peace deal is reached, rendering planned Western security guarantees for Kyiv moot and delivering a setback to negotiations championed by President Trump. Russian Foreign Minister Sergei Lavrov also played down the likelihood of a summit between the leaders of Russia and Ukraine occurring soon… Lavrov’s insistence that Russia must have a say in how any security guarantees for Ukraine would be enacted contradicted the Trump administration’s assertion that Putin agreed to European and U.S. security guarantees at the Alaska summit on Friday. Lavrov’s remarks were a potent sign that Moscow’s maximalist demands in the war haven’t shifted…”
August 20 – BBC (Laura Gozzi): “The Kremlin has played down talk of an imminent summit between Russian President Vladimir Putin and Ukraine's Volodymyr Zelensky, as Donald Trump renewed his call for the two leaders to meet to discuss ending the war in Ukraine. The push for a bilateral meeting comes after the US president met Putin in Alaska last week, and welcomed seven European leaders and Zelensky to the White House… Trump admitted the conflict was ‘a tough one’ to solve and conceded it was possible the Russian president was not interested in ending hostilities. ‘We’re going to find out about President Putin in the next couple of weeks,’ he said… ‘It’s possible that he doesn't want to make a deal.’”
August 20 – Reuters (Mei Mei Chu, Joe Cash and Xiuhao Chen): “China will stage a massive military parade next month in Beijing to commemorate 80 years since the end of World War Two following Japan's surrender, mobilising tens of thousands of people and showcasing weapons never seen before. Hundreds of aircraft including fighter jets and bombers as well as high-tech armaments such as precision-strike weapons capable of travelling at five times the speed of sound will be featured…”
New World Order Watch:
August 21 – Bloomberg: “China used an event marking the final stretch before its biggest diplomatic huddle of the year to accuse the US of ‘threatening world peace,’ in a thinly veiled critique of the rival superpower just before it hosts a key gathering of global leaders. More than 20 foreign leaders are set to attend the annual summit of the Shanghai Cooperation Organisation, a bloc of countries led by Russia and China… Russia’s Vladimir Putin, Indian Prime Minister Narendra Modi and Turkish President Recep Tayyip Erdogan are among those expected at the meeting in the northeastern port city of Tianjin Aug. 31-Sept. 1. Alluding to the US in shrouded terms typically used by China, Liu framed the gathering hosted by President Xi Jinping as a break with the ethos of ‘a certain country’ that ‘seeks to put its national interest above the interest of others.’ ‘The guiding principles and core spirit’ of the SCO transcend ‘outdated concepts such as the clash of civilizations and Cold War mentality and zero-sum games,’ Liu said. It ‘has become stronger over time and is becoming even more prominent.’”
August 19 – Financial Times (Andres Schipani and Joe Leahy): “China and India have achieved a ‘new environment’ of ‘peace and tranquillity’, New Delhi’s national security adviser told Beijing’s top diplomat, as the world’s two most populous countries move to repair ties shattered by a deadly border clash in 2020. China’s foreign minister Wang Yi… had meetings with Indian Prime Minister Narendra Modi and India’s national security adviser Ajit Doval, encounters that will pave the way for Modi’s first visit to China in seven years at the end of this month.”
August 19 – Associated Press (Sheikh Saaliq and Rajesh Roy): “Indian Prime Minister Narendra Modi hailed ‘steady progress’ in improving relations with China after meeting its top diplomat Tuesday following a yearslong standoff between the nuclear-armed Asian powers. Modi noted ‘respect for each other’s interests and sensitiveness’ in a statement on social media after meeting Chinese Foreign Minister Wang Yi. China’s foreign ministry said the countries have entered a ‘steady development track’ and should ‘trust and support’ each other.”
August 20 – Wall Street Journal (Ed Frankl): “Europe should deepen its relationships with trade partners outside the U.S., European Central Bank President Christine Lagarde said. ‘While the U.S. is—and will remain—an important trading partner, Europe should also aim to deepen its trade ties with other jurisdictions, leveraging the strengths of its export-oriented economy,’ Lagarde told a panel at the World Economic Forum…”
Ukraine Watch:
August 16 – Wall Street Journal (Lara Seligman, Thomas Grove and Meridith McGraw): “President Trump welcomed his Russian counterpart to Alaska with the former showman’s signature extravagance: a red carpet, a military flyover and a ride in the presidential limousine. But Trump headed back to Washington with little to show for all the pageantry. The U.S. president and Russian leader Vladimir Putin ended their highly anticipated meeting without announcing a breakthrough, leaving the path toward ending the war in Ukraine unclear. By Friday evening, Trump, who had taken a risk in inviting the sanctioned Kremlin leader to the U.S., was stuck in the same predicament he faced days prior: Putin remains unwilling to end the 3½-year war without concessions on Ukraine’s future. Both men staked their political reputations on a successful summit, and Putin appears to have gained the upper hand. The Russian president was treated as an equal on U.S. soil, managed to sidestep any potential American sanctions for now and announced no battlefield concessions.”
August 19 – Axios (Barak Ravid): “Senior officials from the U.S., Ukraine and several European countries are expected to work in the coming days on a detailed proposal for security guarantees for Ukraine, likely involving U.S. air power, two sources… tell Axios. U.S. and European security guarantees are a key Ukrainian demand. After months of refusing to discuss the issue, President Trump has come around to the idea of U.S. involvement in such a scheme…. Trump stressed there will be no U.S. boots on the ground but said he is open to providing American military air support to any European military forces stationed in Ukraine.”
August 17 – Reuters (Trevor Hunnicutt and David Ljunggren): “U.S. President Donald Trump could offer NATO-like protection of Ukraine, and Russia is open to the idea, one of his top foreign policy officials said on Sunday ahead of a meeting with Ukraine and European leaders to hammer out details of possible security guarantees for Kyiv. ‘We were able to win the following concession, that the United States could offer Article 5-like protection,’ Steve Witkoff, Trump's special envoy to Russia, told CNN… ‘The United States could offer Article 5 protection, which was the first time we had ever heard the Russians agree to that.’”
August 21 – Wall Street Journal (Editorial Board): “The Trump-Putin Alaska summit followed by the visit of European leaders at the White House were supposed to jump-start momentum to end the Russia-Ukraine war. A week later we are back at the same old stand, as Vladimir Putin is playing familiar tricks and showing no serious interest in a deal. The question is what President Trump will do about it.”
August 22 – Associated Press: “Russia’s top diplomat said Friday there are no plans for a meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy to discuss their three-year war, days after U.S. President Donald Trump said he had begun arrangements for them to sit down together. ‘There is no meeting planned’ between the Russian and Ukrainian leaders, Russian Foreign Minister Sergey Lavrov said…”
August 21 – Bloomberg (Olesia Safronova and Aliaksandr Kudrytski): “Ukrainian president Volodymyr Zelenskiy pushed back against Russia’s idea to add China as a security guarantor in the event of a ceasefire. ‘We don’t need guarantors who don’t help Ukraine, and didn’t help Ukraine at the moment when we really needed it,’ Zelenskiy told reporters… ‘We need security guarantees only from those countries that are ready to help us.’”
August 20 – Financial Times (Anastasia Stognei and Fabrice Deprez): “Wholesale petrol prices in Russia have hit record highs this week and the fuel is in short supply in several regions as a result of Ukrainian drone strikes on refineries. The crisis prompted Moscow last week to suspend exports of petrol so that it could keep refined products for the domestic market.”
Middle East Watch:
August 20 – Financial Times (Alison Killing, Andrew England, Ahmed Al Omran and Joe Leahy): “Saudi Arabia is struggling to deliver its desert-defying ski resort for the 2029 Asian Winter Games and has held internal discussions about finding alternative countries to host the event, said five people familiar with the project. Saudi officials have discussed approaching South Korea or China about relocating the 2029 games and instead holding the subsequent edition in the kingdom four years later… Trojena, the futuristic ski facility that forms part of Saudi Arabia’s $500bn Neom mega-project, is still under construction and faces escalating engineering and logistical hurdles.”
AI Bubble Watch:
August 19 – CNBC (MacKenzie Sigalos): “The artificial intelligence boom that Sam Altman helped ignite with ChatGPT in late 2022 is starting to make even him uneasy. Startups with little more than a pitch deck are raising hundreds of millions. Valuations have become ‘insane.’ Capital is chasing a ‘kernel of truth’ with feverish speed. The OpenAI CEO still believes the long-term societal upside of AI will outweigh the froth, and he’s ready to keep spending in pursuit of that goal. ‘Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes,’ he said... ‘Is AI the most important thing to happen in a very long time? My opinion is also yes.’ He repeated the word ’bubble’ three times in 15 seconds, then half-joked, ‘I’m sure someone’s gonna write some sensational headline about that. I wish you wouldn’t, but that’s fine.’”
August 21 – Bloomberg (Catherine Thorbecke): “You may not be familiar with the word ‘clanker.’ Its roots come from the Star Wars franchise1, but it has recently entered the Gen Z lexicon as a blanket derogatory term for artificial intelligence and robots. In viral TikTok and Instagram videos, people use it to express their frustration with everything from the AI slop that has taken over the internet to chatbot hallucinations to outright dystopian applications of the technology. Google Trends data shows search interest for ‘clanker’ rocketed this summer, especially in Australia, China and the US… Global backlash against AI has simmered within pockets of society, but it’s now gained enough momentum that the kids have a slur for it. And it’s showing no signs of slowing down.”
August 16 – Wall Street Journal (Asa Fitch): “Big Tech’s insatiable thirst for AI talent is threatening to kill its golden goose. Tech companies are paying AI researchers billions of dollars and using unorthodox tactics to grab the brightest minds. Their moves might help them near-term in the battle for AI supremacy, but they could also stifle a Silicon Valley innovation engine they badly need. Alongside job offers worth as much as $1 billion, Microsoft, Meta Platforms, Amazon.com and Google-parent Alphabet have all indulged in some version of what has come to be called the ‘reverse acquihire’: Instead of acquiring startups, they have hired away founders and top AI researchers—or licensed startups’ technology—and left the husk of the businesses to either find new missions or be acquired by someone else.”
Bubble and Mania Watch:
August 21 – Bloomberg (Natalie Wong): “An 18-story office tower near Manhattan’s Hudson Yards sold at a significant discount to its 2018 purchase price, according to a person familiar with the matter. Property investor David Werner bought 440 Ninth Ave. for slightly more than $100 million in cash — less than half the last price of $269 million…”
August 21 – Bloomberg (Natalie Wong and Carmen Arroyo): “Money managers who bought a $705 million commercial-mortgage bond tied to Manhattan’s Worldwide Plaza building are at risk of substantial losses after the property’s appraisal was slashed amid the departure of key tenants. The 49-story skyscraper at 825 8th Ave. was recently reassessed at $345 million…, less than a fifth of its original $1.74 billion value when the debt was issued in 2017. That’s left holders of the once-AAA portion of the bond on track for losses of about $53 million, or 20%, should the property be sold…”
Inflation Watch:
August 20 – Axios (Emily Peck and Joann Muller): “The corporate pricing dam is cracking — companies are raising prices, or signaling that increases are coming, to absorb some of the costs of the Trump administration's tariffs. Americans are already under strain from rapidly rising prices during the Biden administration. Another bout of hot inflation… will hurt. President Trump’s announcement of steep tariffs in April triggered widespread worries of higher prices. But the process took time. There were delays and back-and-forth between the White House and other countries over rates. Companies, fearful that high prices could spook their customers, held the line in the meantime. They stockpiled goods before tariffs kicked in. Reality is biting. At the beginning of the month, the U.S. started levying tariffs of about 15% on dozens of countries. That was on top of China tariffs of 30%. Companies are ‘coming to the point where their margins are getting squeezed and they need to start passing that onto consumers,’ Beth Hammack, president of the Federal Reserve Bank of Cleveland, told CBS News…”
August 17 – Axios (Courtenay Brown): “Consumers and businesses are feeling the pinch from President Trump’s trade war, with costs soaring for grocery staples and critical materials. It’s no longer anecdotal. The effects are difficult to ignore across key inflation indicators that might only get hotter in the months ahead. Global tariffs are putting upward pressure on costs. U.S. businesses are bearing the brunt… Import prices might cool if exporters around the globe were discounting goods to help ease the tariff burden for their U.S. buyers. But the opposite was the case last month: Import prices rose at the quickest pace this year, ‘casting further doubt on the 'foreigners will pay' talk from the administration,’ ING global economist James Knightley wrote this week.”
August 21 – Associated Press (Matthew Daly): “With electricity prices rising at more than twice the rate of inflation, President Donald Trump has lashed out at renewable energy sources such as wind and solar power, blaming them for skyrocketing energy costs. Trump called wind and solar power ‘THE SCAM OF THE CENTURY!’ in a social media post and vowed not to approve wind or ‘farmer destroying Solar’ projects. ‘The days of stupidity are over in the USA!!!’ he wrote… Energy analysts say renewable sources have little to do with recent price hikes, which are based on increased demand, aging infrastructure and increasingly extreme weather events such as wildfires that are exacerbated by climate change.”
August 20 – Axios (Tina Reed): “Big employers who’ve tried to insulate workers from rising health costs are preparing to share the pain next year in the form of higher premiums to reflect year-over-year increases of as much as 10%. The added costs will hit workers already reeling from inflationary pressures and reflect a change in thinking for corporations that have tried to maintain generous benefits in tight labor markets. ‘The story this year is perhaps more daunting and sobering than it ever has been,’ Ellen Kelsay, CEO of Business Group on Health, said… A survey the group released of 121 large employers insuring 11.6 million people found companies’ medical costs sharply outpaced their expectations over the past two years. They are now projecting health costs to jump a median of 9% next year absent any cutbacks in benefits to offset the increases. A survey from the International Foundation of Employee Benefit Plans projected a median increase of 10%.”
August 21 – Bloomberg (Mark Niquette): “The Christmas-decorations industry is hoping Donald Trump’s tariffs don’t ruin the holidays. The vast majority of artificial Christmas trees, lights and other decor are imported — mostly from China. Because seasonal items typically need to be shipped months ahead of time, stiffer levies already added millions of dollars in unexpected costs. Jared Hendricks, founder and chief executive officer of Village Lighting Company in West Valley City, Utah, had to take a line of credit leveraged by his house and office to help cover the $1.5 million in extra tariff costs. ‘This is the most stressful year I’ve ever had,’ said Hendricks… ‘Over the last 20-some-odd years we’ve been through a lot, and I’m just kind of operating on faith that we’ll find a way.’”
August 20 – Reuters (Zaheer Kachwala): “Sony will raise prices of its PlayStation 5 consoles in the United States by around $50 from Thursday, as the Japanese conglomerate navigates a slow recovery in the videogame market while U.S. tariffs threaten to raise costs.”
Federal Reserve Watch:
August 20 – Bloomberg (Prashant Gopal and Alex Tanzi): “President Donald Trump and his allies are demanding Federal Reserve Governor Lisa Cook resign over alleged owner-occupancy fraud — a practice the central bank itself has found to be ‘broad-based’ across the US. Philadelphia Fed researchers in a 2023 report assessed the number of ‘fraudulent investors’ in the mortgage market, which they defined as those who had more than one owner-occupied home purchase loan within four quarters after the first one was originated… The paper’s data set consists of 584,499 loans made from 2005 to 2017. Of those, 22,431 were considered fraudulent.”
August 19 – Bloomberg (Elizabeth Stanton): “Treasury Secretary Scott Bessent’s view that the Federal Reserve’s interest rate is more than a percentage point above levels indicated by models is wrong, Deutsche Bank interest-rate strategists said. Bessent said on Aug. 13 that ‘any model’ suggests that the Fed’s policy rate ‘should probably be 150, 175 bps lower.’ Since then, a search for applicable models has come up empty, with Deutsche Bank strategists led by Matthew Raskin being the latest to join the effort. The rules in the Fed’s semiannual monetary policy report still ‘don’t obviously call for a cut, let alone 150-175bp of reductions,’ Raskin, a former Fed economist and adviser, and his group wrote… ‘The main point to note is that the current funds rate falls squarely within the relatively narrow range of rule prescriptions’ which spans about 4% to 4.65%...”
August 19 – Reuters (Kanishka Singh and Ann Saphir): “President Donald Trump said… Federal Reserve Chair Jerome Powell is ‘hurting’ the housing industry ‘very badly’ and repeated his call for a big cut to U.S. interest rates. ‘Could somebody please inform Jerome ‘Too Late’ Powell that he is hurting the Housing Industry, very badly? People can't get a Mortgage because of him. There is no Inflation, and every sign is pointing to a major Rate Cut,’ Trump wrote…”
August 20 – Bloomberg (Jana Randow, Catarina Saraiva, and Maria Eloisa Capurro): “Central bankers gathering in Jackson Hole, Wyoming this week for the Federal Reserve’s annual conference are prepared to go beyond swapping research papers and savoring mountain views — they’re coming to defend Jerome Powell. The Fed chair is facing relentless attacks from President Donald Trump for refusing to cut interest rates. Trump has also pledged to replace Powell next year when his term as chair expires with someone more compliant. And this week the president escalated his attacks by demanding the resignation of Fed Governor Lisa Cook after the administration accused her of mortgage fraud. The offensive has rattled policymakers from around the world, raising fears that central-bank independence — seen as essential to keeping inflation in check — could be undermined.”
August 20 – Bloomberg (Maria Eloisa Capurro): “Most Federal Reserve officials highlighted inflation risks as outweighing concerns over the labor market at their meeting last month, as tariffs fueled a growing divide within the central bank’s rate-setting committee. Officials acknowledged worries over higher inflation and weaker employment, but a majority of the 18 policymakers in attendance ‘judged the upside risk to inflation as the greater of these two risks,’ according to the minutes of the Federal Open Market Committee’s July 29-30 meeting… Their statement… characterized the labor market as ‘solid’ but said inflation remained ‘somewhat elevated.’ Several said they saw the risks to their dual mandate as roughly balanced, the minutes showed, while a couple said they were more concerned about the labor market.”
August 20 – Wall Street Journal (Nick Timiraos): “The Federal Reserve’s decision to hold interest rates steady last month was broadly supported despite two officials who dissented in favor of a cut, according to minutes… The minutes said ‘almost all’ officials supported the decision, implying that apart from the two dissenting officials, it was backed by the remaining 16 officials who participated. The decision followed a period of intense political pressure on Fed Chair Jerome Powell by the White House to lower interest rates.”
August 21 – Bloomberg (Catarina Saraiva and Michael McKee): “Federal Reserve Bank of Kansas City President Jeff Schmid said he thinks inflation risks are marginally higher than risks to the labor market, though monetary policy is in a good place as policymakers consider an interest-rate adjustment next month. ‘As you get closer to the optimum dual mandate numbers it actually becomes more difficult to make decisions on the margins relative to where that policy rate should go,’ Schmid said… Schmid said the debate around when to cut interest rates now comes down to whether individual policymakers think policy is too restrictive or not. ‘I think they’re modestly restrictive… I think we’re on a good path.’”
August 17 – Bloomberg (Jonnelle Marte): “Raphael Bostic had two key takeaways from a recent tour through a stretch of the southeast US overseen by the Federal Reserve Bank of Atlanta — consumers are growing more stressed, and tariff costs are real. In conversations with bankers, educators and business owners based in northern Alabama and Mississippi, Bostic, who is president of the Atlanta Fed, also heard about the burden of higher borrowing costs squeezing businesses’ profit margins and making it harder for families to buy a home. Employer struggles to find and retain workers was another refrain.”
August 21 – CNBC (Jennifer Schonberger and David Hollerith): “Cleveland Fed president Beth Hammack said… the case for cutting interest rates in September would be a hard one to make given recent economic data. ‘There's a lot of data we’re going to get between now and September and I walk into every meeting with an open mind about what the right thing to do is, but with the data I have right now and with the information I have, if the meeting was tomorrow, I would not see a case for reducing interest rates,’ Hammack told Yahoo Finance…”
August 20 – Bloomberg (Maria Eloisa Capurro): “Charles Plosser, the former president of the Federal Reserve Bank of Philadelphia who became an outspoken critic of the Fed’s easy-money policies following the 2008 financial crisis, has died. He was 76… Plosser spent almost three decades as an economics professor and later dean at the graduate school of business administration at the University of Rochester, before joining the Fed in 2006.”
U.S. Economic Bubble Watch:
August 21 – Reuters (Dan Burns): “The number of Americans filing new applications for jobless benefits rose by the most in about three months last week and the number of people collecting unemployment relief in the prior week climbed to the highest level in nearly four years… Initial claims for state unemployment benefits climbed 11,000… to a seasonally adjusted 235,000 for the week ended August 16… The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 30,000 to a seasonally adjusted 1.972 million, the highest level since November 2021…”
August 21 – CNBC (Diana Olick): “Sales of previously owned homes rose 2% in July compared with June to 4.01 million units, on a… annualized basis… Sales were 0.8% higher than July 2024… There were 1.55 million homes for sale at the end of July, an increase of 15.7% from the same month last year. At the current sales pace, that represents a 4.6-month supply. A six-month supply is considered balanced between buyer and seller. Inventory is now at the highest level since May 2020 but still well below pre-Covid years… The median price of an existing home sold in July was $422,400, an increase of 0.2% from the same month a year earlier and a record high price for the month of July. Prices have been higher annually for the last 25 months…”
August 19 – Wall Street Journal (Rebecca Picciotto): “Housing construction in the U.S. jumped much more than expected last month, reflecting a recovery in the multifamily market as developers respond to demand for rental housing. Housing starts, a measurement of home construction, were 12.9% higher in July compared with a year earlier… Rental housing drove the big increase. Construction of projects with five units or more was 27.4% higher in July compared with last year, while starts of single-unit projects were 7.8% higher.”
August 21 – Bloomberg (Prashant Gopal): “Home-purchase contracts in the US were canceled at a record rate for July as jittery buyers got cold feet. About 58,000 agreements fell through last month, equivalent to 15.3% of homes that went under contract, according to Redfin. It was the highest cancellation rate for a July in data going back to 2017… It’s not just that the housing market’s expensive, with mortgage rates still elevated and home prices that have soared 50% since early 2020.”
August 18 – Reuters (Dan Burns): “A gauge of U.S. homebuilder sentiment fell unexpectedly in August, slipping back to its lowest level in more than two-and-a-half years, with more than a third of residential construction firms cutting prices and roughly two-thirds of them offering some form of incentive to lure buyers sidelined by still-high mortgage rates and economic uncertainty.”
August 16 – Wall Street Journal (Imani Moise and Dalvin Brown): “Americans are starting to pull back from a pandemic-era credit-card binge. After a surge in credit-card spending that pushed Americans’ card balances above $1 trillion, growth is now moderating. Credit-card spending has been growing more slowly than debit-card spending since late last year, the first such stretch in nearly four years, according to… Visa and Mastercard. Credit-card originations had soared during the recent period of high inflation. That allowed Americans to keep spending on discretionary items even after money ran out from pandemic stimulus payments.”
China Watch:
August 21 – Bloomberg: “When President Xi Jinping faced a deflation spiral a decade ago, he not only cracked down on China’s oversupply problem but also unleashed an almost $900 billion housing investment boom. It’s a similar situation today, except Chinese policymakers are rolling out only half the solution. While Beijing’s recent push to curb overcapacity is helping rein in the glut in steel and solar sectors, the ‘anti-involution’ campaign is missing a stimulus spark and could hurt the economy instead of bringing inflation back. ‘It’s going to be hard to simply rerun the 2015 playbook,’ said Christopher Beddor… at Gavekal Dragonomics. ‘The fundamental problem is broad macroeconomic forces such as weak household demand, which probably won’t be fixed by a series of haphazard government interventions to limit competition in a few industries.’”
August 18 – Bloomberg: “China’s central bank added a substantial amount of cash into the financial system on Tuesday, in a move that’s seen stabilizing bonds that have come under pressure from investors migrating into equities. The People’s Bank of China added a net 465.7 billion yuan ($65bn) of short-term cash via reverse repurchase agreements, the largest daily net injection since July 25 and also the third biggest this year.”
August 17 – Bloomberg: “China’s central bank indicated it’s holding back from aggressively easing monetary policy with moves such as interest-rate cuts, even though the economy just recorded its worst month so far this year. The People’s Bank of China pledged to ‘thoroughly’ enact its ‘moderately loose’ monetary policy while highlighting targeted support to the economy.”
Europe Watch:
August 20 – Bloomberg (Mark Schroers): “The euro area’s private sector grew at the quickest pace in 15 months as manufacturing exited a three-year downturn despite a deal locking in higher levies for exports to the US. The Composite Purchasing Managers’ Index compiled by S&P Global rose to 51.1 in August from 50.9 in July… While services weakened a little, in line with estimates, manufacturing saw a jump to 50.5…”
August 22 – Wall Street Journal (Joshua Kirby): “Wages in the eurozone rose at a slightly faster pace during the three months through June as unemployment remained at record lows, likely keeping the European Central Bank cautious as it deliberates a possible resumption of interest-rate cuts. The ECB said… wages set through negotiations between employers and labor unions or similar bodies were 3.95% higher over the second quarter than a year earlier, accelerating from 2.46% growth in the first quarter of 2025…”
August 20 – Bloomberg (Mark Schroers): “German wage growth jumped in the second quarter, though recent agreements suggest lower increases going forward, according to the Bundesbank. Negotiated pay rose 5.7% from a year ago, compared with just 0.9% in the previous three months, the central bank said…”
August 19 – Financial Times (Sam Fleming): “UK inflation accelerated more than expected to 3.8% in July on the back of higher food prices and airfares, deepening doubts over whether interest rates would be cut again this year to support lacklustre growth. The figure… was the highest since January 2024 and up from the 3.6% recorded a month earlier… July’s gains were driven by transport, including a sharp rise in air fares, as well as higher motor fuel costs. Food and non-alcoholic beverage prices were up 4.9% from the same period a year ago, the fourth consecutive increase... In a sign of the price pressures in the economy, services inflation, a key measure for the Bank of England’s rate-setters, climbed from 4.7% in June to 5% last month…”
August 20 – Financial Times (Sam Fleming): “UK business activity rose to a 12-month high and public borrowing came in below official forecasts… The S&P Global UK Composite Purchasing Managers’ index for August picked up to 53, led by an upturn in services business, from 51.5 in July. It was the fourth consecutive monthly reading above the 50 level, indicating expansion, with volumes of new business rising at the strongest pace since October 2024.”
Japan Watch:
August 21 – Wall Street Journal (Kosaku Narioka): “Japan’s consumer inflation cooled in July, but remained well above the central bank’s target of 2%, reinforcing expectations of a coming interest-rate increase. Consumer prices, excluding volatile fresh food, climbed 3.1% from a year earlier last month, compared with June’s 3.3% rise…”
August 19 – Wall Street Journal (Kosaku Narioka): “Japan’s exports in July saw their biggest drop in over four years, falling for a third straight month amid concerns over the impact of U.S. tariffs. Exports declined 2.6% compared with the same period a year earlier, following a 0.5% drop in June… Shipments to the U.S. fell 10.1% on year due to weakness in automobile exports. That compared with June’s 11.4% contraction and marked the fourth straight month it has declined.”
August 21 – Bloomberg (Takahiko Hyuga): “Bonds with the longest maturities are disappearing from Japan’s corporate market as surging yields push companies into shorter debt… Corporate bond sales this fiscal year are set to top last year’s record, with about 75% in maturities of up to five years and 22% in over five years and up to 10 years. Bonds with tenors of more than 20 years have almost vanished, with the only issuer of 30- and 40-year deals being University of Tokyo… The pullback reflects surging yields on Japanese government bonds, with 40-year borrowing costs climbing to a record 3.675% in May.”
EM Watch:
August 16 – Financial Times (Joseph Cotterill): “Banks and companies in emerging markets outside China are selling international bonds this year at the fastest rate since 2021, as the premium investors’ demand to own their debt over US Treasuries has fallen to its lowest since 2007. Such borrowers issued at least $250bn in bonds between January and July, a pace that will bring them close to matching the full-year volume of 2021…, according to JPMorgan…”
Leveraged Speculation Watch:
August 20 – Bloomberg (Liza Tetley): “Investors have been pouring money into hedge funds at the fastest rate in a decade, hoping volatile markets will produce outsized returns. A net total of about $25 billion went into hedge funds in the three months through June, according to data compiled by Hedge Fund Research. That brought net flows for the first half of the year to more than $37 billion…, the most since 2015. Global investor appetite for hedge fund strategies appears to be rebounding this year after a prolonged lull.”
Social, Political, Environmental, Cybersecurity Instability Watch:
August 21 – Reuters (Jason Lange, Nolan D. McCaskill and James Oliphant): “Most Americans believe that efforts to redraw U.S. House of Representatives districts to maximize partisan gains, like those under way in Texas and California, are bad for democracy, a new Reuters/Ipsos poll found. More than half of respondents -- 57% -- said they feared that American democracy itself was in danger, a view held by eight in 10 Democrats and four in 10 in President Donald Trump’s Republican Party… The poll found that 55% of respondents, including 71% of Democrats and 46% of Republicans, agreed that ongoing redistricting plans - such as those hatched by governors in Texas and California in a process known as gerrymandering - were ‘bad for democracy.’”
August 16 – New York Times (David Gelles, Claire Brown and Karen Zraick): “In the Biden administration, the American environmental movement reached what many of its supporters considered an apex. Congress passed the largest ever federal law to combat climate change. Coal-burning power plants were shutting down. Hundreds of billions of dollars of federal investment in renewable energy, batteries and electric vehicles was beginning to flow. But in just months, President Trump has attacked much of that work. The Biden-era climate law, known as the Inflation Reduction Act, is in tatters. The White House is trying to revive coal, the dirtiest fossil fuel, while boosting oil and gas and hindering solar and wind power. And it is weakening or trying to scrap environmental policies and regulations, some dating to 1970.”
August 20 – CNBC (Spencer Kimball): “President Donald Trump… said his administration will not approve solar or wind power projects, even as electricity demand is outpacing the supply in some parts of the U.S. ‘We will not approve wind or farmer destroying Solar,’ Trump, who has complained in the past that solar takes up too much land, posted on Truth Social. ‘The days of stupidity are over in the USA!!!’ The president’s comment comes after the administration tightened federal permitting for renewables last month. The permitting process is now centralized in Interior Secretary Doug Burgum’s office.”
August 20 – Reuters (Peter Hobson): “Rapid loss of Antarctic sea ice could be a tipping point for the global climate, causing sea level rises, changes to ocean currents and loss of marine life that are impossible to reverse, a scientific study published… said. The paper in the journal Nature aimed to describe in previously unseen detail the interlocking effects of global warming on the Antarctic… ‘Evidence is emerging for rapid, interacting and sometimes self-perpetuating changes in the Antarctic environment,’ it said… ‘A regime shift has reduced Antarctic sea-ice extent far below its natural variability of past centuries, and in some respects is more abrupt, non-linear and potentially irreversible than Arctic sea-ice loss,’ it said, referring to melting at the North Pole.”
August 16 – Financial Times (Attracta Mooney and Carmen Muela): “Wildfires have spread dangerously close to capital cities including Madrid, Athens and Podgorica in the past week, as data shows the number of blazes in Europe has jumped by nearly 50% compared with last year. Firefighters are tackling fires in Spain, Portugal, France, Turkey, Greece and Montenegro as temperatures in parts of southern Europe soar above 40C and countries issue warnings.”