Before we delve into bugs and larvae currently gnawing away at the Bubble’s periphery, a brief jaunt down memory lane. From economist (and actor) Ben Stein’s August 12, 2007, New York Times op-ed, “A Market Crisis Disconnected From Reality” - which articulated the conventional view following that June's subprime eruption.
“The total mortgage market in the United States is roughly $10.4 trillion. Of that, a little over 13%, or about $1.35 trillion, is subprime - certainly a large sum. Of this, nearly 14% is delinquent, meaning late in payment or in foreclosure. Of this amount, about 5% is actually in foreclosure, or about $67 billion. Of this amount, according to my friends in real estate, at least about half will be recovered in foreclosure. So now we are down to losses of about $33 billion to $34 billion. The rate of loss in subprime mortgages keeps climbing. In time, perhaps it will double, maybe back to $67 billion… But by the metrics of a large economy, it is nothing. The total wealth of the United States is about $70 trillion. The value of the stocks listed in the United States is very roughly $15 trillion to $20 trillion. The bond market is even larger… My point is this: I don’t know where the bottom is on subprime. I don’t know how bad the problems are at Bear. Yet I do know that the market reactions are wildly out of proportion to the real problems that have been revealed or even hinted at… This economy is extremely strong. Profits are superb. The world economy is exploding with growth… Some smart, brave people will make a fortune buying in these days, and then we’ll all wonder what the scare was about.”
“Terminal phases” tend to be as confounding as they are enthralling. Things appear robust. Late-cycle loose financial conditions ensure boom-sustaining Credit excess. Booming debt bolsters corporate earnings, incomes and economic activity, as ever-inflating stock and asset prices crystallize the perception of boundless wealth and bright prospects (“permanently high plateau”).
For a bit, Ben Stein and the risk-dismissive bullish narrative appeared well-founded. The S&P500 reached a record 1,576 intraday on October 11, 2007. It’s worth noting that Q3 2007 saw Corporate Bonds (from the Fed’s Z.1) expand a then record $471 billion and Total Mortgages grow a strong $302 billion, as Credit boom momentum at the “Core” initially spurned cataclysmic “Periphery” developments.
But I’m getting somewhat ahead of the game. There is yet no cataclysm, though it was another week that suggests the clock is ticking. Friday’s 1.7% rally reduced the week’s losses for the KBW Regional Bank Index in half. Zions 5.8% Friday rally cut its weekly loss to 5.1%, with Western Alliance Bancorp’s 3.1% recovery reducing losses to 3.3%. Despite Friday’s gains, the Nasdaq Financial and Insurance indices closed the week down 1.9% and 3.6%. The Nasdaq Financial Index ended Thursday at the lowest close since June 27th, with the Nasdaq Insurance Index trading Thursday to lows since April 9th.
October 16 – Bloomberg (Yizhu Wang): “Shares of two regional US banks tumbled Thursday after the companies said they were the victims of fraud on loans to funds that invest in distressed commercial mortgages, fueling concern that more cracks are emerging in the credit markets. Zions Bancorp sank 13% after it disclosed a $50 million charge-off for a loan underwritten by its wholly-owned subsidiary, California Bank & Trust, in San Diego. And Western Alliance Bancorp tumbled almost 11% after it said it made loans to the same borrowers.”
October 16 – Bloomberg (Yizhu Wang): “Relative to the collapse of First Brands Group and Tricolor Holdings, the hits disclosed by regional lenders Zions Bancorp and Western Alliance Bancorp seemed small — a figure in the tens of millions, not billions. Still, the back-to-back reveal of loan fraud renewed the simmering debate on Wall Street about whether the era of freewheeling capital is about to cause a comeuppance for banks and non-banks alike. In the case of Zions and Western Alliance, the alleged culprits were the same: investment funds tied to Andrew Stupin and Gerald Marcil, among other parties, borrowed the funds to finance their purchase of distressed commercial mortgage loans.”
October 14 – Bloomberg (Sridhar Natarajan): “Investors spooked by the implosion of auto lender Tricolor Holdings and car-parts supplier First Brands Group got little reassurance Tuesday from the head of the biggest US bank. ‘My antenna goes up when things like that happen,’ Jamie Dimon, JPMorgan… chief executive officer, said… ‘I probably shouldn’t say this, but when you see one cockroach, there are probably more. Everyone should be forewarned on this one.’ The pair of bankruptcies were a shock for the credit markets, where companies have been borrowing at a record pace while handing investors outsized returns.”
Bubbles can run, but they can’t hide. There’s no cure, certainly not from looser monetary policy, government interventions/bailouts, and Wall Street promotion and chicanery. Prolonging Bubbles promotes myriad excess, including fraudulent activities. With so much “money” sloshing around the system, the prospect of making quick millions and, for this cycle, billions, becomes irresistible. If you are not a risk-taker, you’re a loser. And with loan officers, investment bankers, fin-tech operators, hedge fund managers, and countless financiers making so bloody much money, scores of even good-intentioned borrowers will push the limits of growth and leverage. When conditions tighten, fear of crushed dreams and financial ruin will see many resort to deceit - and begin the sad transformation to crookedness.
As for recent Cockroach sightings, the good news is they’re little critters, annoying, but, at least outwardly, not overly alarming. The bad news: these youngsters have much more imposing relatives – legions of grown-up roaches still gorging on the steroid of loose conditions - still propagating systemic Infestation.
October 14 – Financial Times (Joshua Franklin and Akila Quinio): “Goldman Sachs, JPMorgan Chase and Citigroup have reported bumper profits across their Wall Street divisions, even as they warned that investor exuberance risked driving a recent runup in financial markets into bubble territory. The three banks reported quarterly earnings… that comfortably beat analysts’ estimates… JPMorgan’s net income increased by 12% from the same quarter a year earlier to $14.3bn, while at Goldman — the bank whose business is most heavily geared towards investment banking and trading — net earnings rose 37% to $4.1bn. Citi’s net income increased by 18% to $3.5bn. Revenues from investment banking and trading increased by at least 12% at all three banks in a sign that Wall Street’s much-anticipated revival under the Trump administration is finally starting to materialise.”
October 14 – Wall Street Journal (AnnaMaria Andriotis, Alexander Saeedy and Ben Glickman): “Wall Street is firing on all cylinders. Dealmaking, trading and corporate lending are gaining steam and fueling profits at the nation’s biggest banks, with Goldman Sachs, JPMorgan…, Citigroup and Wells Fargo all beating third-quarter profit and revenue forecasts. Goldman is now on pace for its best year ever in its main investment-banking and markets division. JPMorgan is on track to make over $50 billion in annual profit for the second year in a row. BlackRock is sitting on a record $13.5 trillion in assets under management… Record high stock markets fueled increased trading and borrowing by hedge funds and others to buy even more securities. President Trump’s policymaking is adding volatility that keeps traders eager to move… Financing activity is surging, with mergers on the rise. Then there are the massive investments in the rise of artificial intelligence, building out data centers and other infrastructure.”
October 14 – Bloomberg (Silla Brush): “BlackRock Inc. pulled in $205 billion of client money in the third quarter as the world’s largest fund manager expanded its footprint in private credit and alternative assets. Investors added $153 billion on a net basis to stock, bond and other exchange-traded funds — which topped $5 trillion for the first time — reflecting the massive growth of the products this year… Net flows to long-term investment funds were $171 billion… ‘I believe the scale of the opportunity ahead for BlackRock, our clients and shareholders far exceeds what we’ve ever seen before,’ Chief Executive Officer Larry Fink said…”
October 14 – Wall Street Journal (Jack Pitcher): “The world’s biggest money manager just shattered its own record. BlackRock ended the third quarter with $13.46 trillion in assets under management, up 17% from a year ago… At an investor conference in June, BlackRock executives outlined plans to become a do-everything money manager and set an ambitious target of raising $400 billion for their private-market funds by 2030.”
October 16 – Bloomberg (Paige Smith): “Charles Schwab Corp. reported third-quarter earnings that beat estimates as the firm benefited from a surge in retail investing activity. The firm reported $134.4 billion in total net new assets, a 48% increase from a year earlier… Daily average revenue trades grew 30% to $7.42 trillion…”
Hoping to eventually move on, but I’m compelled to reiterate the Fed’s error in cutting rates a year ago despite perilously loose conditions and financial excess. The upshot: Q3 “Terminal Phase” worst-case scenario – booming lending, “subprime” financing, securitizing, leveraging, speculating, risk-transferring, cheating, and swindling – all right into deteriorating fundamentals and a fateful Credit cycle downturn. Classic. Epic. “Hangover” will not do justice.
October 16 – Bloomberg (Annika Inampudi): “Goldman Sachs… President John Waldron said there’s been an explosion in the growth of credit over the past decade — and that the fallout if things go south won’t be pretty. The executive pointed to the roughly $5 trillion of borrowings extended across high-yield bonds, leveraged loans and private credit — with the latter driving most of the growth. ‘We’ve had an explosion of credit extension, mostly in private credit — some in the banking system, but mostly in private credit over the last decade,’ Waldron said Thursday during a panel at a Semafor event… ‘We may, and probably will have some defaults there, and it’s not going to be pretty when it happens.’”
October 17 – Financial Times (Eric Platt, Kate Duguid and Amelia Pollard): “Investors in the $2tn leveraged loan market have warned that the abrupt collapse of First Brands Group is an early sign of trouble for a market where hasty deals and hurried due diligence have become commonplace. First Brands was among the largest issuers of loans bought by collateralised loan obligations, investment vehicles that buy up small slices of hundreds of individual corporate loans. CLOs have become popular with insurers and other big investors who bet that by spreading their lending across many different companies they are protected from the pain of defaults in one or two businesses. But the rapid bankruptcy of First Brands… has raised concerns over the rapid growth of the CLO market, which has provided almost unquenchable demand for the leveraged loans that private equity firms often use to finance their acquisition sprees. Some fund managers worry that a spate of CLO losses could cause Wall Street’s securitisation machine to sputter. ‘Inside credit markets for more than a year, there has been a grudging recognition that there was and is a series of credit problems that could be substantial and could be dangerous to the overall economy,’ said Andrew Milgram, chief investment officer of Marblegate Asset Management, a distressed-debt investor.”
To be clear, the global government Finance Bubble puts mortgage finance Bubble excess to shame. Inflation in “Core” government sovereign debt and central bank Credit is unparalleled. In more pressing analysis, the current cycle’s “subprime” “Periphery” so dwarfs previous cycle excesses to the point of making high-risking mortgage lending almost appear systemically inconsequential.
Hard to believe, but 17 years have passed since “the great financial crisis.” Memories have long ago faded. Years of zero (and near to it) rates spurred extraordinary financial innovation and development. Financial structure evolved with the proliferation of new age avenues for lending – fintech, brokerage accounts, crypto, buy now pay later, etc. In particular, booms in leveraged lending and “private Credit” fundamentally eased Credit Availability for high-risk borrowers – for financing business development, M&A, household spending and just about everything. Borrower and lender alike, most individuals at the forefront of today’s financial boom have scant recollection of 2008. It’s the old codgers on roach watch.
There will always be clever – even inventive - twists and spins. But high-risk lending remains high-risk lending. Given time, old derided “subprime” will be transformed into new, enhanced, upgraded, modernized, sophisticated, but still “subprime” – no matter how much the enterprising proponents of new age finance apply heavy eyeliner, eyelash extensions, and Hermès lipstick to disguise the porker. There is no revoking the Credit Cycle.
We’re in the throes of a high-risk lending boom without precedent. A historic multi-decade Credit Bubble culminated with a most protracted period of “Terminal Phase” excess. Thousands of businesses and enterprises have for too long feasted from the trough of easy Credit Availability and liquidity overabundance. For many, negative cash-flow operations and bloated balance sheets create acute vulnerability to abrupt financial conditions tightening. The happenings of Tricolor, First Brands, Zions, and Western Alliance have triggered a tightening of Credit conditions. Ominously, Credit issues were already surfacing despite loose conditions and booming finance.
October 17 – Bloomberg (Miguel Ambriz and Keith Naughton): “Car loans have gone from the safest consumer credit products to among the riskiest over the last 15 years as delinquencies rose more than 50%, driven by soaring car prices and rising interest rates, a new study shows. Consumers across all income categories are struggling to make monthly car payments, according to VantageScore, a credit-scoring company. Auto loans were once a safe haven, with drivers prioritizing payments on their transportation above other debts, but delinquencies on car loans have jumped since 2010.”
The VIX Index traded to 28.99 in early Friday trading, the high since April 24th – before reversing sharply lower to close the week at 20.78. Friday’s markets recovery made things look less bad. After losing 5% and 3.7% the previous week, the KBW Bank and Broker/Dealer indices recovered only 1% and 0.9% this week. Following last week’s 36 bps widening, High Yield spreads to Treasuries this week narrowed 11 bps. High Yield CDS declined seven bps after surging 21 bps. Notably, Leveraged Loan market recovery was MIA, with prices down another seven cents to 96.46 – closing Wednesday (96.35) at a five-month low.
With Credit blowups pressuring markets, we’ll now see the typical dynamic where news/analysis follow market direction. Festering issues will belatedly garner some attention. And they’ll be burning the midnight oil at the ratings agencies.
October 16 – Bloomberg (Rene Ismail and Kat Hidalgo): “The private credit industry’s claims of market-beating, stress-free returns are ‘illusory,’ a group of academics say, adding fuel to the fire in a week that already saw executives fend off broadsides from the likes of Jamie Dimon. Academics from Johns Hopkins University and University of California, Irvine, argue that direct lenders offer investors marginal returns compared with more transparent and widely-traded leveraged loans — and less in some cases. In research… in the Journal of Private Markets Investing, they contend that the asset class produces limited alpha, or extra compensation over market benchmarks. ‘Private credit performance is both lacking in alpha as well as a timely return of capital,’ Jeffrey Hooke, one of the authors… said... ‘The two main marketing points of the industry seem to be illusory.’ Their critique comes at a sensitive time for the market.”
October 12 – Financial Times (Lee Harris): “Rating agency S&P has warned of risks from the complexity and lack of disclosure in the private credit market, as US insurers push into the fast-growing asset class. ‘There’s just a lot less transparency’ about private credit assets, said Carmi Margalit, S&P’s head of North American life insurance. The agency estimates that $530bn, or about 23%, of life insurers’ corporate bond holdings were issued through private placements… Of these, about $218bn had a ‘private letter’ credit rating, confidential scores available only to the issuer and some investors. The private credit market provides trillions of dollars of loans to companies… The US life insurance industry, which has more than $8tn of invested assets and manages retirement savings for millions of people, has been among the biggest investors. The industry’s private credit holdings also include $71bn of structured finance bonds with private letter ratings, according to S&P.”
This week corroborated analysis of a Credit Cycle at a critical juncture. But it’s a safe bet that the colossal financial apparatus that has mushroomed over this long cycle will put up one hell of a fight. Wall Street, the banking system, fintech, and “private Credit” are all geared up to continue bankrolling the boom. And there’s this AI thing – histories blackest of financial black holes.
On the one hand, the staggering scope of the AI arms race buildout ensures endless Credit demand – borrowing with the potential to keep the high-risk leveraged lending and “private Credit” wheels turning.
On the other hand, I can’t imagine a more perilous late-cycle Credit dynamic than funding a multi-trillion dollar global AI arms race. So long as the mania holds, markets can pretend this is a sound Credit dynamic. But this perceived robust AI Credit boom mutates to a problematic subprime debacle as soon as financial conditions tighten, speculators head for the exits, and liquidity evaporates. To that end, there are clear and present potential catalysts.
October 14 – Wall Street Journal (Lingling Wei and Gavin Bade): “In its trade standoff with Washington, Beijing thinks it has found America’s Achilles’ heel: President Trump’s fixation on the stock market. China’s leader, Xi Jinping, is betting that the U.S. economy can’t absorb a prolonged trade conflict with the world’s second-largest economy, according to people close to Beijing’s decision-making. China is holding a firm line because of its conviction, the people said, that an escalating trade war will tank markets, as it did in April after Trump announced his Liberation Day tariffs, prompting Beijing to hit back. China expects that the prospect of another market meltdown ultimately will force Trump to negotiate at an expected summit with Xi late this month, the people said.”
October 14 – Telegraph (Hans van Leeuwen): “The world’s investors, executives, policymakers and politicians all now keep an eye on the Truth Social account @realDonaldTrump… Now there’s another habit they might need to cultivate: watching the announcements from China’s ministry of commerce. The ministry’s initially low-key announcement last week of new regulations on Chinese rare earth exports has sent shock waves through the West… ‘This is a completely new dawn. This no longer has anything to do with trade. We’ve morphed from a trade war into a grey-zone operation,’ says James Kynge, a China watcher at think tank Chatham House. ‘It’s a complete step change in China’s leverage and China’s ability to coerce not only the US, but every other country in the West, if it chooses to do so. The evidence of the past suggests that Beijing may well use this leverage. And then we’re into a whole different world.’”
The administration’s China trade war commentary has been dizzying.
President Trump: “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment.” “I think we’re going to be fine with China. I have a great relationship with President Xi. He’s a very tough man, a very smart man. He’s a great leader for their country. He’s a great leader.” “The USA wants to help China, not hurt it.”
The Sunday/Monday conciliatory fest was of the now ordinary market-pleasing TACO variety. Not only were equities needing a boost, but the crypto Bubble was suddenly faltering. I also suspect the President didn’t want a sinking stock market to detract from his Gaza ceasefire and trip to Israel. Conciliatory, however, had faded by midweek.
“US Blasts China as ‘Unreliable’ as Trade Tensions Mount.” “Bessent Says China ‘Can’t be Trusted’ as Trade Fight Escalates.” “Bessent Calls China Trade Negotiator ‘Unhinged’ Wolf Warrior. “Bessent Says China Trade Negotiator ‘Very Disrespectful,’ ‘Unhinged’” “Scott Bessent Slams China: ‘They Want to Pull Everybody Else Down With them.”’ “Bessent Urges World Bank to End Support for China.” “Bessent Says U.S. Supports Tariff on China for Buying Russian Oil – If Europe Also Acts.”
Come Friday (crypto under more pressure), the tone had changed again. “Trump Says Threatened High Tariffs on China ‘Not Sustainable.’” “US-China Trade Talks Seen Next Week as Trump Plays Down Tariffs.” “Bessent to Meet China’s Vice-Premier in Bid to Solve Rare Earths Spat.”
It was intriguing that Secretary Bessent, who has had a couple well-publicized rage incidents (Elon and Pulte), complained about a “very disrespectful” and “unhinged” Chinese trade minister. Beijing surely has by now deeply researched psychological profiles for senior U.S. officials, most notably the President and Treasury Secretary. It just seems the Chinese are carefully executing a sophisticated and comprehensive strategy.
There will be ebbs and flows – the trade war will heat up and temperatures will be brought back down. There will be some compromises, but the Chinese appear well dug in. Unless the Trump administration backs down, Beijing is prepared to “fight to the end.” They see the U.S. as vulnerable, and Trump lacking the fortitude to withstand market, economic, and political pain. Meanwhile, President Trump just doesn’t at this juncture seem of the frame of mind to easily give in to Chinese demands. The risk of major trade war escalation should not be dismissed.
With today’s confluence of cracks in Credit, fledgling risk aversion, and trade war friction, the possibility of deleveraging is back in the discussion. Major market dislocations in segments of the equities market (i.e., heavily shorted stocks) and in the precious metals are likely harbingers of bigger things to come. And my thoughts return to colossal “basis trade” leverage, a key unappreciated source of global liquidity excess. One of these days…
October 16 – Bloomberg (Masaki Kondo): “Hedge funds in the Cayman Islands held more Treasuries at end-2024 than US official data show, with their ownership likely to be $1.4 trillion higher than reported, according to researchers at the Federal Reserve. The funds’ holdings had increased by $1 trillion since 2022 to reach $1.85 trillion by end-December, the researchers including Daniel Barth and Daniel Beltran wrote... A report from the Department of the Treasury put the funds’ ownership at $423 billion. The Fed researchers said their figures showed the Cayman Islands is the largest foreign owner of US government securities, ranking ahead of China, Japan and the UK. The discrepancy in the data likely arose because the official data did not fully pick up transactions linked to the so-called basis trades, where hedge funds short Treasury futures and buy Treasury securities to profit from the difference in their prices... Hedge funds finance these trades by borrowing in the repurchase-agreement market and pledging the purchased securities as collateral... It may be difficult to track ownership of securities after they are exchanged as collateral.”
And a final ponderable…
October 13 – New York Times (Andrew Ross Sorkin): “Back in the 1920s, Charles Mitchell — the swaggering head of National City Bank, the forerunner to Citigroup — had a ritual. He would take his bond salesmen to lunch at the Bankers Club, perched atop the Equitable Building at 120 Broadway, and point to the city below, stretched out in miniature. ‘There are six million people with incomes that aggregate thousands of millions of dollars,’ he’d say. ‘They are just waiting for someone to come to tell them what to do with their savings. Take a good look, eat a good lunch and then go down and tell them.’ For Mitchell, finance and the new instruments of wealth — stocks, margin loans, investment trusts and even exotic foreign bonds — were not to be hidden away but promoted like any other product. ‘It has always seemed to me that there is, and always has been, too much mystery connected with banking,’ he liked to say. He wasn’t alone in preaching the gospel of access.”
For the Week:
The S&P500 rallied 1.7% (up 13.3% y-t-d), and the Dow recovered 1.6% (up 8.6%). The Utilities increased 1.4% (up 21.2%). The Banks recovered only 1.0% (up 13.5%), and the Broker/Dealers gained 0.9% (up 26.8%). The Transports rallied 4.0% (down 1.4%). The S&P 400 Midcaps rose 2.0% (up 3.0%), and the small cap Russell 2000 recovered 2.4% (up 10.0%). The Nasdaq100 rallied 2.5% (up 18.1%). The Semiconductors surged 5.8% (up 36.1%). The Biotechs advanced 2.9% (up 13.6%). With bullion ending the week $234 higher, the HUI gold index rose 3.9% (up 131.1%).
Three-month Treasury bill rates ended the week at 3.825%. Two-year government yields fell four bps to 3.46% (down 78bps y-t-d). Five-year T-note yields declined two bps to 3.59% (down 79bps). Ten-year Treasury yields dipped two bps to 4.01% (down 56bps). Long bond yields slipped a basis point to 4.61% (down 18bps). Benchmark Fannie Mae MBS yields dropped 10 bps to 5.02% (down 82bps).
Italian 10-year yields fell eight bps to 3.38% (down 14bps y-t-d). Greek 10-year yields sank 11 bps to 3.23% (up 1bp). Spain's 10-year yields fell nine bps to 3.11% (up 5bps). German bund yields declined six bps to 2.58% (up 21bps). French yields dropped 12 bps to 3.36% (up 17bps). The French to German 10-year bond spread narrowed six to 78 bps. U.K. 10-year gilt yields sank 14 bps to 4.53% (down 4bps). U.K.'s FTSE equities index dipped 0.8% (up 14.5% y-t-d).
Japan's Nikkei 225 Equities Index retreated 1.1% (up 19.3% y-t-d). Japan's 10-year "JGB" yield dropped six bps to 1.63% (up 53bps y-t-d). France's CAC40 rallied 3.2% (up 10.8%). The German DAX equities index fell 1.7% (up 19.7%). Spain's IBEX 35 equities index increased 0.8% (up 34.6%). Italy's FTSE MIB index dipped 0.7% (up 22.1%). EM equities were mixed. Brazil's Bovespa index gained 1.9% (up 19.2%), and Mexico's Bolsa index rose 1.9% (up 24.7%). South Korea's Kospi surged 3.8% (up 56.2%). India's Sensex equities index gained 1.8% (up 6.9%). China's Shanghai Exchange Index fell 1.5% (up 14.6%). Turkey's Borsa Istanbul National 100 index dropped 4.8% (up 3.8%).
Federal Reserve Credit increased $5.3 billion last week to $6.546 TN. Fed Credit was down $2.344 TN from the June 22, 2022, peak. Over the past 318 weeks, Fed Credit expanded $2.819 TN, or 76%. Fed Credit inflated $3.735 TN, or 133%, over 675 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $36.6 billion last week to $3.070 TN - a $134 billion nine-week decline to the low back to February 2012. "Custody holdings" were down $250 billion y-o-y, or 7.5%.
Total money market fund assets (MMFA) declined $17.8 billion to $7.367 TN (7-wk gain $161bn). MMFA were up $900 billion, or 13.9%, y-o-y - and ballooned a historic $2.783 TN, or 61%, since October 26, 2022.
Total Commercial Paper dropped $35.8bn to $1.311 TN. CP has expanded $224 billion y-t-d and $163 billion, or 14.2%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined three bps to 6.27% (down 17bps y-o-y). Fifteen-year rates slipped a basis point to 5.52% (up 11bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up one basis point to 6.54% (down 43bps).
Currency Watch:
For the week, the U.S. Dollar Index declined 0.4% to 98.541 (down 9.2% y-t-d). On the upside, the Brazilian real increased 2.1%, the Mexican peso 1.2%, the Swiss franc 0.8%, the South African rand 0.8%, the Swedish krona 0.6%, the Norwegian krone 0.5%, the British pound 0.5%, the Australian dollar 0.4%, the Japanese yen 0.4%, the euro 0.3%, the South Korean won 0.2%, and the Singapore dollar 0.2%. On the downside, the New Zealand dollar declined 0.1%. The Chinese (onshore) renminbi increased 0.12% versus the dollar (up 2.42% y-t-d).
Commodities Watch:
October 13 – Wall Street Journal (Ryan Dezember and Joe Wallace): “Silver prices set an all-time high Monday, eclipsing a 45-year-old record from 1980 when the Hunt brothers tried to corner the market for the precious metal. Silver futures rose 6.8% Monday to settle at $50.13 a troy ounce, topping the longstanding record of $48.70, set in January 1980 during one of the 20th century’s biggest commodity-trading scandals.”
The Bloomberg Commodities Index rallied 1.5% (up 6.9% y-t-d). In another week for the record books, spot Gold surged 3.4% to $4,252 (up 53.1%). Silver jumped 4.5% to $51.9205 (up 73.5%). WTI crude fell $1.36, or 3.3%, to $57.54 (down 17.9%). Gasoline recovered 1.0% (down 9%), while Natural Gas dropped 3.2% to $3.008 (down 17%). Copper sank 4.2% (up 22%). Wheat fell 3.3% (down 10%), and Corn lost 1.4% (down 10%). Bitcoin sank another $5,800, or 7.4%, to $107,450 (up 20.9%).
Market Instability Watch:
October 16 – Financial Times (Kate Duguid and Claire Jones): “Banks tapped the Federal Reserve’s short-term lending facility for more than $15bn over the past two days, in a sign of the liquidity pressures in the repo market that could drive the Fed to stop shrinking its balance sheet. Banks borrowed $6.75bn on Wednesday and $8.35bn on Thursday from the Fed’s standing repo facility (SRF), the largest amount borrowed over a two-day period since the Covid-19 pandemic. The SRF was introduced in 2021 as a permanent replacement for emergency repo operations launched by the Fed in the wake of market turmoil two years earlier.”
October 14 – Financial Times (Martin Arnold, Claire Jones and Sam Fleming): “Policymakers should strengthen their oversight of hedge funds, private equity and credit funds, which could amplify any downturn in financial markets and transmit stress to the banking system, the IMF has warned. The growth of financing activity outside of the traditional banking sector is adding an extra source of risk to the financial system, the IMF said, after finding many large lenders had increasingly high exposure to hedge funds and other non-bank institutions… Banks in the US and Europe have $4.5tn of exposures to hedge funds, private credit groups and other non-bank financial institutions — accounting for on average about 9% of total loan books… ‘Beneath the calm surface, the ground is shifting in several parts of the financial system, giving rise to vulnerabilities,’ the IMF said in its twice-yearly global financial stability report, reinforcing recent warnings from leading central bankers.”
October 15 – Financial Times (Claire Jones and Sam Fleming): “The US’s yawning deficit is set to remain the widest among the world’s richest countries despite revenues from Donald Trump’s trade tariffs, with the IMF warning the world’s largest economy needs to put its finances in order ‘sooner rather than later’. The IMF’s latest Fiscal Monitor showed the US’s general government overall balance… was set to be the highest of any rich nation… for this year and the rest of the decade. The US, unlike most other rich nations, is not expected to make any progress in lowering its deficit from current levels. The country’s gross debt-to-GDP ratio, expected to be 125% of GDP this year, will surpass record highs to hit 143% by the end of the decade, according to the IMF’s latest projections.”
October 14 – Bloomberg (Editorial Board): “Finance ministers and central bankers, gathering in Washington for the annual meetings of the International Monetary Fund, face a global trading system in disarray, uncertainty over the dollar’s standing and the likely course of interest rates, and financial markets that are (for now) unnervingly complacent. Amid all these challenges, policymakers must pay particular attention to one more: Following years of neglect, public debt has emerged as an increasingly serious risk… Before the pandemic, government debt was 84% of global gross domestic product. It currently stands at 95%. In country after country — including the US, the UK and most of the European Union — it’s on track to keep growing faster than output.”
October 14 – Reuters (Pete Schroeder): “Global markets are too comfortable with risks, including trade wars, geopolitical tensions and yawning government deficits, which, combined with already overpriced assets, increase the chance of a ‘disorderly’ market correction, the International Monetary Fund said… ‘Beneath the calm surface, the ground is shifting in several parts of the financial system, giving rise to vulnerabilities,’ the global lender wrote in its semi-annual Global Financial Stability Report.”
U.S. Credit Trouble Watch:
October 14 – Reuters (Anirban Sen, Saeed Azhar and Matt Tracy): “The bankruptcies of automotive-related companies First Brands and Tricolor, along with potential losses at banks and investment funds, are raising new concerns about hidden risks in parts of the credit market… The two collapses have rattled some stakeholders in Wall Street's multitrillion-dollar credit machinery, from leveraged loans and collateralized loan obligations (CLOs) to trade‑finance funds and subprime auto loans, raising questions about exposure levels of a number of Wall Street fund managers… ‘This would serve as a strong precedent for LPs (investors) to question risky offerings,’ said Zain Bukhari, associate director of risk and valuations at S&P Global. LPs, referring to limited partners, are passive investors that provide capital to a fund.”
October 15 – Bloomberg (Sridhar Natarajan): “On Wall Street, everyone’s a friendly rival until the losses start. A pair of blowups in the credit market have sparked a war of words over whether banks or private credit firms are better positioned to weather a broader downturn… Jamie Dimon used his bank’s losses from auto lender Tricolor Holdings to say there’s never just one cockroach — a quip some of his nonbank rivals have taken as a shot at them. Blue Owl Capital Inc. boss Marc Lipschultz fired back, saying the issue was in loans that banks led… ‘There are people who have meaningful, parochial interests in the industry not continuing to grow and succeed,’ Lipschultz said of the scorn heaped on private-market players. ‘Blackstone’s market cap exceeds the market cap of most financial institutions in the world today. It’s not as if that’s not coming from someone, and of course those people don’t like it.’”
October 12 – Bloomberg (Eliza Ronalds-Hannon and Aaron Weinman): “It is, by almost any measure, a golden era for US credit markets. Companies are selling debt at a near record clip; relative borrowing costs are hovering around historic lows; and investors are pocketing the best returns in years. But in recent months, a flurry of meltdowns — each of which inflicted losses of more than 60% on investors — has exposed cracks in that edifice. It began back in the spring with the luxury retailer Saks. Things went bad so fast, it restructured its bonds after making just a single interest payment. Days later, another bond — this one from natural-gas company New Fortress Energy — crashed, too. Then, a subprime auto lender, Tricolor Holdings, filed suddenly for bankruptcy, triggering a near-total wipeout on some debt. That, in turn, was followed by the collapse of an auto-parts supplier, First Brands Group.”
October 14 – CNBC (Hugh Son): “JPMorgan… CEO Jamie Dimon said… bankruptcies in the U.S. auto market are a sign that corporate lending standards grew too lax in the past decade-plus. Dimon, the longtime leader of the largest U.S. bank by assets, was speaking about the recent collapse of auto parts firm First Brands and subprime car lender Tricolor Holdings. ‘We’ve had a credit bull market now for the better part of what, since 2010 or 2012? That’s like 14 years… These are early signs there might be some excess out there because of it… If we ever have a downturn, you’re going to see quite a bit more credit issues.’”
October 15 – Financial Times (Ian Smith, Emily Herbert, Costas Mourselas and Euan Healy): “Big investors are cutting back their exposure to riskier corporate debt… Asset managers including BlackRock, M&G and Fidelity International have shifted towards safer corporate or government bonds, in response to a big decline in US credit spreads that means investors get little reward for taking extra risks. Some investors fret that the rally, driven by the easing of fears over a global trade war and expectations of deeper interest rate cuts by the US Federal Reserve, has left the credit market pricing in an overly optimistic scenario for global economic growth. ‘Credit spreads are so tight that there’s almost no ability for them to tighten further,’ said Fidelity International fund manager Mike Riddell…”
October 16 – Bloomberg (Rod Chadehumbe): “The spread between the highest- and lower-quality ABS tranches has widened to its highest level in a decade, signaling potential caution among market participants. The differential between the Bloomberg Non-AAA ABS Index (A1/A2 average quality) and the Bloomberg AAA ABS Index now exceeds 80 bps, about double from 2016 and well above the decade average of 54 bps. This sharp divergence reflects a rising investor preference for safety, as investors demand greater compensation to assume additional credit risk.”
October 13 – Bloomberg (Esteban Duarte): “Bank of America Corp. is planning a significant risk transfer tied to a $3 billion portfolio of loans to private market funds, according to people familiar with the matter. The portfolio underlying the potential transaction consists of so-called subscription lines, said the people…”
First Brands Watch:
October 13 – Associated Press (Matt Ott): “The founder and CEO of First Brands resigned Monday, weeks after the auto parts supplier filed for bankruptcy protection amid an accounting scandal that has left lenders scrambling for more than $2 billion in missing funds. Patrick James, who founded the company in 2013, will be replaced on an interim basis by Charles Moore, who was appointed as chief restructuring officer… After changing its name to First Brands from Crowne Group about five years ago, the Cleveland company began buying and then cobbling together a number of aftermarket auto parts manufacturers through debt-financed deals.”
October 16 – Bloomberg (Steven Church): “The federal watchdog for corporate bankruptcies joined a creditor’s demand for an independent investigation of the troubled auto-parts supplier First Brands Group, which has admitted it can’t find $2.3 billion related to off-balance sheet financing deals. The US Trustee argued in court filings that ‘serious allegations of fraud, dishonesty, incompetence, misconduct, or mismanagement,’ justifies a quicker-than-normal process to appoint a bankruptcy examiner in First Brands’ insolvency case.”
Global Credit and Financial Bubble Watch:
October 15 – Bloomberg (Selcuk Gokoluk): “Asset managers are looking to raise new private credit funds aimed at emerging markets to capitalize on an explosion of financing deals in the sector this year. Ninety One Plc said it’s working to close a $500 million fund in the first quarter of 2026, followed by another one by the end of the year. Gramercy Funds Management has already raised $760 million and is looking to reach $1.5 billion for a new fund… The efforts are picking up as EM funding from private lenders such as Blackstone Inc. and Apollo Global Management Inc. is on course for its biggest year on record.”
October 14 – Wall Street Journal (Miriam Gottfried): “Blackstone is officially entering the race to get assets such as private equity and private credit into 401(k)s. The investment giant is launching a business unit devoted to tapping the market for what are called defined-contribution retirement plans. The new unit will sit inside Blackstone’s $280 billion private-wealth group. It will focus on creating products for the defined-contribution market and managing strategic partnerships…”
Trump Administration Watch:
October 14 – Associated Press (Lisa Mascaro): “President Donald Trump is making this government shutdown unlike any the nation has ever seen, giving his budget office rare authority to pick winners and losers — who gets paid or fired, which programs are cut or survive — in an unprecedented restructuring across the federal workforce. As the shutdown enters its third week, the Office and Management and Budget said Tuesday it’s preparing to ‘batten down the hatches’ with more reductions in force to come. The president calls budget chief Russ Vought the ‘grim reaper’ and Vought has seized on the opportunity to fund Trump’s priorities… Trump said programs favored by Democrats are being targeted and ‘they’re never going to come back, in many cases.’”
October 15 – Bloomberg (Alicia Diaz, Erik Wasson and Caitlin Reilly): “President Donald Trump has in the span of just four days fired thousands of government employees, transferred billions in federal funds and threatened to unilaterally cancel ‘Democrat programs’ — all during a shutdown and without Congress’s approval. The moves, playing out against the backdrop of a standoff over federal spending now entering its third week, mark an escalation of the administration’s efforts to use the federal budget to centralize power. Republican congressional leaders have so far largely backed the White House’s expanded power claims, asserting that Trump has wide-ranging authority during a shutdown to pay military personnel and make other necessary moves in the absence of new federal funding.”
October 15 – Wall Street Journal (Siobhan Hughes and Lindsay Wise): “Republicans and Democrats both see a likely path to ending the government shutdown, involving extending enhanced Affordable Care Act healthcare subsidies for a year or longer. But there are a series of reasons why no deal has emerged, even with costs set to surge for more than 20 million Americans. The shutdown is now entering its third full week, with no serious talks under way… Democrats and Republicans think that they are on the stronger side of the argument and see little reason to budge. Both point to polling they say shows public opinion is on their side. ‘I think right now the problem is that both sides think they’re winning,’ said Sen. Angus King, a Maine independent...”
October 13 – Associated Press (Lisa Mascaro): “Republican House Speaker Mike Johnson predicted… the federal government shutdown may become the longest in history, saying he ‘won’t negotiate’ with Democrats until they hit pause on their health care demands and reopen… Vice President JD Vance has warned of ‘painful’ cuts ahead, even as employee unions sue. ‘We’re barreling toward one of the longest shutdowns in American history,’ Johnson… said.”
October 15 – Associated Press (Rio Yamat): “A startling message came over the radio from an air traffic control tower near Los Angeles less than a week into the federal government shutdown: ‘The tower is closed due to staffing.’ Without enough air traffic controllers to guide planes into and out of Hollywood Burbank Airport, the tower went dark for almost six hours on Oct. 6, leaving pilots to coordinate their movements among themselves.”
October 15 – Associated Press (Fatima Hussein and Andrea Vulcano): “The Trump administration is looking to provide an additional $20 billion in financing for Argentina through a mix of financing from sovereign funds and the private sector. That would come on top of the $20 billion credit swap line that the U.S. Treasury pledged to Argentine President Javier Milei and his government this month to bolster the South American nation’s collapsing currency. ‘We are working on a $20 billion facility that would complement our swap line, with private banks and sovereign funds that, I believe, would be more focused on the debt market,’ Treasury Secretary Scott Bessent told reporters... He called it ‘a private-sector solution’ and said ‘many banks are interested in it and many sovereign funds have expressed interest.’”
October 14 – Reuters (Nandita Bose): “U.S. support for Argentina hinges on the ruling party of President Javier Milei succeeding in this month's midterm legislative elections, President Donald Trump said on Tuesday, saying ‘we're not going to waste our time’ if Milei's party doesn't win… ‘I’m with this man because his philosophy is correct, and he may win it,’ Trump said… ‘He may not win, but I think he’s going to win. And if he wins, we’re staying with him. And if he doesn’t win, we’re gone…”
October 14 – Bloomberg (Manuela Tobias and Patrick Gillespie): “US President Donald Trump made it clear to his Argentine counterpart Javier Milei that any Chinese military activity in the South American country wouldn’t be received well in Washington… ‘You can do some trade, but you certainly shouldn’t be doing beyond that,’ said Trump… ‘Certainly shouldn’t be doing anything having to do with the military with China and if that’s what’s happening, I’d be very upset about that.’”
October 15 – Axios (Ben Berkowitz): “There is a ‘clever and generous’ bailout coming for farmers as soon as the government shutdown ends, National Economic Council director Kevin Hassett said… ‘I expect that when the government opens that very soon after you’re going to see what President Trump’s plan for farmers is, but it’s really quite clever and generous. I can say that,’ Hassett told Axios…”
October 15 – Wall Street Journal (Vera Bergengruen, Brett Forrest and Alex Leary): “President Trump has authorized the Central Intelligence Agency to conduct covert action in Venezuela, while also floating the idea of land strikes, in a broadening campaign against alleged drug trafficking. ‘I authorized for two reasons,’ Trump said…, alleging Venezuelan leaders have ‘emptied their prisons into the United States of America’ and ‘we have a lot of drugs coming in from Venezuela.’ The authorization enables the CIA to operate clandestinely in the country and potentially take action against Venezuelan strongman Nicolás Maduro, his government and drug traffickers, according to an administration official.”
October 16 – New York Times (Eric Schmitt and Tyler Pager): “The military commander overseeing the Pentagon’s escalating attacks against boats in the Caribbean Sea that the Trump administration says are smuggling drugs said… he was stepping down. The officer, Adm. Alvin Holsey, is leaving his job as head of the U.S. Southern Command, which oversees all operations in Central and South America, even as the Pentagon has rapidly built up some 10,000 forces in the region in what it says is a major counterdrug and counterterrorism mission.”
October 13 – Bloomberg (Hannah Levitt): “JPMorgan… vowed to funnel $1.5 trillion into industries that bolster US economic security and resiliency over the next 10 years — an initiative that will invest billions of dollars in companies and hire bankers and other professionals. The campaign will ramp up the amount of capital, resources and personnel that the largest US lender already dedicates to a variety of sectors, such as rare earth minerals, pharmaceutical precursors and robotics, or ventures developing defense, aerospace and energy technologies, such as drones, battery storage or grid resiliency.”
October 16 – Associated Press (Eric Tucker, Alanna Durkin Richer and Michael Kunzelman): “John Bolton, who served as President Donald Trump’s national security adviser during his first term and later became a vocal critic, was charged Thursday with storing top secret records at home and sharing with relatives diary-like notes about his time in government that officials said contained classified information. The 18-count indictment also suggests classified information was exposed when operatives believed linked to the Iranian regime hacked Bolton’s email account in 2021 and gained access to sensitive material he had shared.”
China Trade War Watch:
October 15 – Bloomberg: “US Treasury Secretary Scott Bessent lashed out at a top Chinese trade official, saying he turned up in Washington recently uninvited and behaved in an ‘unhinged’ fashion typical of Beijing’s so-called wolf warrior diplomats. Bessent claimed Li Chenggang’s August visit to the US capital was not at the request of the Trump administration. ‘Perhaps the vice minister who showed up here with very incendiary language on Aug. 28 has gone rogue,’ the Treasury chief said… ‘This individual was very disrespectful,’ he added, after earlier calling him ‘unhinged’… At that event, Bessent mispronounced Li’s given name as ‘Kuanggong’ and referred to him as a ‘lower level’ person despite Li having full ministerial rank in China.”
October 13 – Financial Times (Demetri Sevastopulo and James Politi): “US Treasury secretary Scott Bessent has accused China of trying to hurt the world’s economy… Bessent told the Financial Times that China’s introduction of the controls… reflected problems in its own economy. ‘This is a sign of how weak their economy is, and they want to pull everybody else down with them,’ Bessent said… ‘Maybe there is some Leninist business model where hurting your customers is a good idea, but they are the largest supplier to the world… If they want to slow down the global economy, they will be hurt the most… They are in the middle of a recession/depression, and they are trying to export their way out of it. The problem is they’re exacerbating their standing in the world.’”
October 15 – Axios (Courtenay Brown): “U.S. Trade Representative Jamieson Greer said that China’s plans for harsh export controls risk violating a trade pact struck earlier this year, as Treasury Secretary Scott Bessent warned ‘they can’t be trusted’… ‘This rule gives China control over the entire global supply chain,’ Greer said… ‘Many are suggesting that China's action is simply posturing to leverage the negotiations with the United States,’ Greer added. ‘While that may be one element of China’s approach, it’s obvious this is part of a broader play by China to control the world’s supply chains.’ Greer said that an agreement made in Switzerland earlier this year said that the U.S. would lower tariffs in exchange for access to China's rare earths minerals. ‘We have lowered tariffs since that time but now the Chinese have expanded their export controls,’ Greer said…”
October 14 – AFP: “China said… it was ready to ‘fight to the end’ in a trade war with the United States after President Donald Trump said he would slap additional 100% tariffs on goods from the country… The latest escalation has rattled markets and called into question a potential upcoming meeting with Chinese counterpart Xi Jinping in South Korea. ‘On the matter of tariff wars and trade wars, China’s position remains consistent,’ an unnamed commerce ministry spokesperson said… ‘If you wish to fight, we shall fight to the end; if you wish to negotiate, our door remains open… The United States cannot simultaneously seek dialogue while threatening to impose new restrictive measures. This is not the proper way to engage with China.’”
October 14 – Associated Press (Chan Ho-Him): “China’s Commerce Ministry said… it was banning dealings by Chinese companies with five subsidiaries of South Korean shipbuilder Hanwha Ocean in the latest swipe by Beijing at U.S. President Donald Trump’s effort to rebuild the industry in America. The ministry also announced that it was investigating a probe by Washington into China’s growing dominance in world shipbuilding, and threatened more retaliatory measures... ‘China just weaponized shipbuilding,’ said Kun Cao, deputy chief executive at… Reddal. ‘Beijing is signaling it will hit third-country firms that help Washington counter China’s maritime dominance.’”
October 16 – Bloomberg: “China’s Commerce Minister Wang Wentao… blamed the recent escalation in trade tensions with the US on American actions following the latest bilateral round of talks, in Madrid last month. ‘The recent fluctuations in China-US economic and trade relations are mainly due to the US’s intensive introduction of a series of restrictive measures against China after the Madrid’ talks, Wang told Apple Inc. Chief Executive Officer Tim Cook during a meeting in Beijing… US measures ‘seriously harmed China’s interests and undermined the atmosphere of the bilateral economic and trade talks,’ Wang said… ‘The two sides should engage in effective communication, properly resolve differences and promote stable, healthy and sustainable development of China-US relations,’ Wang said…”
October 13 – Bloomberg: “US President Donald Trump and Chinese leader Xi Jinping’s latest tit-for-tat showdown has both countries claiming the ball is now in the other’s court, with the clock ticking toward another escalation in import tariffs. After Trump signaled openness to doing a deal with Beijing, US Vice President JD Vance… declared the outcome would ‘depend on how the Chinese respond.’ Hours later, China’s Foreign Ministry made clear Beijing would take its cues from Washington’s next steps… ‘If the US continues on its wrong course, China will firmly take necessary measures to safeguard its legitimate rights and interests,’ Foreign Ministry spokesman Lin Jian said…”
October 16 – New York Times (Ana Swanson and Meaghan Tobin): “Over the past three years, Washington has claimed broad power to impose global rules that bar companies anywhere in the world from sending cutting-edge computer chips or the tools needed to make them to China. American officials have argued that approach is necessary to make sure China does not gain the upper hand in the race for advanced artificial intelligence. But a sweeping set of restrictions announced by Beijing last week showed that two can play that game. The Chinese government flexed its own influence over worldwide supply chains when it announced new rules clamping down on the flow of critical minerals that are used in everything from computer chips to cars to missiles. The rules, which are set to take effect later this year, shocked foreign governments and businesses, which may now need to acquire licenses from Beijing to trade their products even outside China.”
October 15 – Wall Street Journal (Rory Jones): “Chinese companies are pushing across the globe to conquer new markets, and American financiers are making a mint by helping them. The unlikely U.S.-China collaboration during heightened trade and military tensions between the two superpowers is raising concern on Capitol Hill… But it is producing frothy markets in Hong Kong, the place where Wall Street and China Inc. meet for mutual profit… Companies have raised $23 billion as of September in stock offerings… In September, Morgan Stanley led the $3.2 billion Hong Kong initial public offering of the Chinese mining company Zijin’s international gold-mining unit. BlackRock’s funds acted as an early investor underpinning the deal… ‘This is truly a spectacular year,’ said Robert Chan, who helps lead the execution of equity deals at Citigroup in the Asia-Pacific region.”
October 13 – Reuters (Lewis Jackson): “China’s rare earth exports fell 31% in September from August…, the third straight month of declines. New controls that were introduced by China last week have threatened a trade truce with Washington and the three months of declines are expected to raise questions about its agreements with Europe and the U.S. to ramp up exports after China's decision to restrict shipments in April triggered shortages worldwide.”
October 14 – New York Times (Peter Eavis): “The Trump administration broadened its trade war with China on Tuesday, as it began imposing fees on Chinese ships docking at American ports. The long-planned action is intended to counter China’s dominance of commercial shipbuilding and help revitalize the United States’ own shipbuilding industry, which has withered over the years. China’s Ministry of Transport threatened retaliation on Friday, saying it planned to hit American vessels with fees when they docked in China.”
October 13 – Bloomberg (Weilun Soon and Serene Cheong): “China sanctioned the US units of a South Korean shipping giant and threatened further retaliatory measures on the industry, the latest in a series of tit-for-tat moves as Beijing and Washington jockey for leverage before expected trade talks. The sanctions, which prohibit people or organizations in China from transacting with US units of Hanwha Ocean Co., helped fuel a slump in global equities on Tuesday… Hanwha Ocean closed down 6.2%...”
October 11 – Politico (Megan Messerly and Phelim Kine): “Beijing shattered a fragile trade truce with Washington this week… Former Trump officials say China’s latest salvo is a particularly sophisticated show of force — one that underscores a growing mismatch between China’s long-term strategy and the Trump administration’s more improvisational approach. ‘We’re playing 2-D chess while Beijing is playing 4-D chess,’ said Liza Tobin, who served as National Security Council director for China during the first Trump administration and the start of the Biden administration.”
October 14 – Wall Street Journal (Edith Hancock): “China’s fresh export controls on rare-earth materials are a critical issue for the European Union, EU trade chief Maros Sefcovic said, as tensions continue to rise between Brussels and Beijing. ‘These measures are seen as unjustified and of course causing a lot of problems and complications for the European companies and European industry,’ Sefcovic said…”
October 14 – Reuters: “Chinese rare earth magnet companies have been facing tighter scrutiny on export license applications since September, sources say… The lengthier reviews magnet makers face raise questions about whether China, the top global supplier, is seeking to throttle back magnet shipments, contrary to its commitment to speed up exports in a trade truce with the U.S. in May, to further tighten its grip on the products essential in military and commercial technology.”
October 14 – Associated Press (Chan Ho-Tim): “China’s biggest state-owned air carriers have hit back at a U.S. proposal to bar them from flying over Russia when traveling to or from the U.S. The U.S. side has said such flights give Chinese airlines an unfair cost advantage over American carriers, which cannot cross through Russian airspace.”
Trade War Watch:
October 14 – New York Times (Ana Swanson and Sydney Ember): “President Trump ushered in new tariffs on imported furniture, kitchen cabinets and lumber on Tuesday, adding a fresh round of levies as he once again threatened to expand his trade war with China. Tariffs ranging from 10 to 50% on foreign wood products and furniture snapped into effect just after midnight.”
October 15 – Politico (Irie Sentner and Megan Messerly): “India will no longer purchase Russian oil, according to President Donald Trump, a major victory in his effort to pressure Vladimir Putin to end the war in Ukraine. ‘I was not happy that India was buying oil, and [Indian Prime Minister Narendra Modi] assured me today that they will not be buying oil from Russia,’ Trump told reporters... ‘That’s a big step.’”
Constitution Watch:
October 15 – Bloomberg (Zoe Tillman, Lauren Dezenski and Jennifer A. Dlouhy): “A federal judge ordered the Trump administration to pause plans to fire thousands of federal workers during the government shutdown, just moments after White House Budget Director Russell Vought said he expects layoffs to exceed more than 10,000 people. The ruling on Wednesday from US District Judge Susan Illston in San Francisco follows layoff notices that have gone out to more than 4,100 federal employees since last week.”
October 15 – Washington Post (Alex Horton and Samuel Oakford): “The U.S. military’s elite Special Operations aviation unit appears to have flown in Caribbean waters less than 90 miles from the coast of Venezuela in recent days… The helicopters were engaged in training exercises… that could serve as preparation for expanded conflict against alleged drug traffickers, including potentially missions inside Venezuela. The U.S. military has struck at least five boats allegedly carrying illegal narcotics in international waters, killing at least 27 people…”
October 15 – Politico (Cheyanne M. Daniels): “President Donald Trump… floated targeting Venezuelan drug cartels with land strikes, an escalation of his administration’s repeated strikes on boats out of the country as he tries to staunch the flow of drugs into the U.S…. Trump said his administration has ‘almost totally stopped’ drug trafficking by sea and ‘now we’ll stop it by land.’ ‘I don’t want to tell you exactly, but we are certainly looking at land now because we have the sea very well under control,’ Trump said.”
October 15 – Bloomberg (Lauren Dezenski): “President Donald Trump said his administration would look to San Francisco as the next target of his federal crime crackdown, which has been mostly directed at Democrat-run cities. ‘I’m going to be strongly recommending at the request of government officials, which is always nice, that you start looking at San Francisco,’ Trump said… ‘I think we can make San Francisco — there’s one of our great cities 10 years ago, 15 years ago. Now it’s a mess, and we have great support in San Francisco.’”
October 14 – Associated Press (David Bauder): “Fox News, the former employer of Defense Secretary Pete Hegseth, has joined a near-unanimous outpouring of news organizations rejecting new rules for journalists based in the Pentagon. Fox signed on to a statement with ABC, CBS, NBC and CNN saying they would not agree to Hegseth’s new rules, saying ‘the policy is without precedent and threatens core journalistic protections.’ So far, only the conservative One America News Network has said its reporters would follow the new regulations… The Associated Press says it will not agree to the rules.”
Budget Watch:
October 16 – Bloomberg (Daniel Flatley): “The US budget deficit declined slightly for the 2025 fiscal year as tariff revenue hit a record high, though the pace of borrowing remains historically elevated at a time of economic expansion and financial stability. The deficit for the fiscal year was $1.78 trillion, down from $1.82 trillion in 2024, a drop of 2%... President Donald Trump’s dramatic tariff hikes helped spur a net $195 billion in tariff revenue for the fiscal year…”
U.S./Russia/China/Europe/Iran Watch:
October 12 – Reuters (Guy Faulconbridge): “The Kremlin said… Russia was deeply concerned about the possibility of the U.S. supplying Tomahawk missiles to Ukraine, warning that the war had reached a dramatic moment with escalation from all sides… Tomahawk missiles have a range of 1,550 miles, meaning Ukraine would be able to use them for long-range strikes deep inside Russia, including Moscow… ‘The topic of Tomahawks is of extreme concern,’ Kremlin spokesperson Dmitry Peskov told Russian state television reporter Pavel Zarubin… ‘Now is really a very dramatic moment in terms of the fact that tensions are escalating from all sides.’”
October 11 – Financial Times (Camilla Hodgson in London and Steff Chávez and Aime Williams): “The Pentagon has sought to procure up to $1bn worth of critical minerals as part of a global stockpiling spree to counter Chinese dominance of the metals that are essential to defence manufacturers… It follows export restrictions imposed on many of the materials by China, which dominates the supply chains for critical minerals and permanent magnets needed for technologies from smartphones to fighter jets. ‘They [the US defence department] are incredibly focused on the stockpile,’ said one former defence official. ‘They’re definitely looking for more, and they’re doing it in a deliberate and expansive way, and looking for new sources of different ores needed for defence products.’”
October 12 – Wall Street Journal (Thomas Grove and Karolina Jeznach): “For more than a decade, Poland has prepared for the worst-case scenario: becoming the front line in a war between Russia and the West. With an eye on growing Russian aggression in Europe, Warsaw’s military planners built out the country’s armed forces, turning it last year into the largest European military in the North Atlantic Treaty Organization. It ramped up military spending to 4.7% of gross domestic product this year—the highest in the alliance. A multi-billion-dollar spending spree has put Poland among the biggest buyers of U.S. weapons.”
October 12 – Financial Times (Raphael Minder): “Russia has used cryptocurrencies to pay saboteurs involved in its hybrid attacks on EU countries, in an attempt to prevent intelligence services from tracking the payments, according to a senior Polish security official. Poland’s national security bureau chief Sławomir Cenckiewicz told the Financial Times that Moscow was probably using this payment method to fund attacks… He also said evidence shared with western intelligence services showed Russia was using its shadow fleet to launch drones into European airspace.”
October 13 – Bloomberg: “China hit back at the US for what it called interference in its domestic affairs, after Secretary of State Marco Rubio condemned Beijing’s recent detention of church leaders. ‘The Chinese government governs religious affairs in accordance with law, protects the religious freedom of the citizens and the normal religious activities,’ Foreign Ministry spokesman Lin Jian said… ‘We firmly oppose the US interfering in China’s internal affairs with the so-called religious issues.’ The comments came after Rubio criticized the ruling Chinese Communist Party for detaining dozens of leaders of the unregistered Zion Church.”
New World Order Watch:
October 15 – Financial Times (Demetri Sevastopulo): “Treasury secretary Scott Bessent warned Beijing that its new sweeping export controls on rare earths and critical minerals would force the US and other countries to decouple from China… Bessent said China was taking on the entire world with the regime. ‘If China wants to be an unreliable partner to the world, then the world will have to decouple… The world does not want to decouple. We want to de-risk. But signals like this are signs of decoupling, which we don’t believe China wants.’”
October 13 – Bloomberg (Enda Curran): “Canada is importing more cars from Mexico than from the US. China has snubbed American soybean farmers at harvest time and is buying from South American growers instead. India and China are resuming direct flights between the two countries and trading rare earths, ending years of frozen relations. The new contours of global commerce are starting to emerge as governments redraw trade alliances and companies seek other markets to avoid the highest US tariffs since the 1930s. Smaller economies are also adapting to a world where US consumers and companies are costlier to reach… A group of 14 countries that includes New Zealand, Singapore, Switzerland and the United Arab Emirates has formed a partnership to boost trade and investment.”
Ukraine War Watch:
October 16 – Axios (Barak Ravid): “President Trump announced following a call with Vladimir Putin on Thursday that he and the Russian leader had agreed to meet in Hungary in the coming weeks to discuss how to end the war in Ukraine. The two-hour call took place a day before Trump will host Ukrainian President Volodymyr Zelensky at the White House. Trump and Zelensky will discuss the possibility of Ukraine receiving Tomahawk long-range missiles.”
October 11 – Financial Times (Christopher Miller, Amy Mackinnon and Max Seddon): “The US has for months been helping Ukraine mount long-range strikes on Russian energy facilities, in what officials say is a co-ordinated effort to weaken Vladimir Putin’s economy and force him to the negotiating table. American intelligence shared with Kyiv has enabled strikes on important Russian energy assets including oil refineries far beyond the frontline, according to multiple Ukrainian and US officials familiar with the campaign.”
October 12 – Wall Street Journal (Natalie Andrews): “President Trump threatened to send long-range Tomahawk cruise missiles to Ukraine, should Russian President Vladimir Putin continue to decline his efforts to negotiate a peace deal... ‘I might say, look, if this war’s not going to get settled, I’m going to send them Tomahawks,’ Trump told reporters… Trump is still hoping Moscow will make a deal to halt that conflict but has become frustrated at the lack of diplomatic progress and more open to pressuring Putin militarily.”
October 16 – Bloomberg: “Ukraine’s General Staff claimed a strike on Rosneft PJSC’s Saratov refinery as NATO allies ramp up pressure on Russia’s energy industry to bring President Vladimir Putin to the negotiating table. Ukrainian military forces attacked the facility in Russia’s Volga region overnight, the General Staff said…”
Middle East Watch:
October 13 – Associated Press (Melanie Lidman, Samy Magdy and Wafaa Shurafa): “Israel and Hamas moved ahead on a key first step of the tenuous Gaza ceasefire agreement on Monday by freeing hostages and prisoners, raising hopes that the U.S.-brokered deal might lead to a permanent end to the two-year war that ravaged the Palestinian territory. But thornier issues such as whether Hamas will disarm and who will govern Gaza — and the question of Palestinian statehood — remain unresolved, highlighting the fragility of an agreement that for now only pauses the deadliest conflict in the history of Israel and the Palestinians. For Israelis, the release of the 20 remaining living hostages brought elation and a sense of closure to a war many felt they were forced into by Hamas, although many pledged to fight on for the return of deceased hostages still in Gaza.”
Taiwan Watch:
October 15 – Wall Street Journal (Mike Cherney): “At a U.S. Army post just a few miles from tourist hotels and tropical beaches, troops here are testing an advanced, 360-degree radar—just one piece of what is slated to be an $8 billion system to defend this island from a Chinese missile attack. The defensive shield taking shape is part of a fundamental shift by the U.S. military: The Pentagon is transforming Guam, a U.S. territory closer to Beijing than to Honolulu, into an anchor of its strategy in the Pacific. The goal, military officials say, is to deter China’s increasingly powerful military from using force to take over Taiwan, the self-ruled island that Beijing claims as its own, and to show that the U.S. is ready to fight. The project is costly and logistically difficult, and must contend with a Chinese arsenal that now features upgraded versions of the DF-26, a missile known as the ‘Guam killer’.”
AI Bubble/Arms Race Watch:
October 15 – Financial Times (George Hammond): “Ten lossmaking artificial intelligence start-ups have gained close to $1tn in valuation over the past 12 months, an unprecedented increase that adds to fears about an inflating bubble in private markets that could spill over into the wider economy. OpenAI, Anthropic and Elon Musk’s xAI have seen their values marked up repeatedly over the past year amid a rush to back young AI companies. Smaller groups building AI applications have also surged, while established start-ups including Databricks have soared after embracing the technology. US venture capitalists have splashed $161bn over the year to date on a technology whose promise has not yet been matched by major economic gains. That equates to two-thirds of their total spend, according to PitchBook. The bulk of investment has been funnelled to just 10 AI groups — Perplexity, Anysphere, Scale AI, Safe Superintelligence, Thinking Machines Lab, Figure AI, Databricks, as well as OpenAI, Anthropic and xAI… ‘Of course there’s a bubble,’ said Hemant Taneja, chief executive of venture capital firm General Catalyst… ‘Bubbles are good. Bubbles align capital and talent in a new trend, and that creates some carnage but it also creates enduring, new businesses that change the world.’”
October 14 – Wall Street Journal (Steven Rosenbush): “AI companies are losing money at an epic pace, and the reasons go deeper than mere profligacy. The economics of artificial intelligence have turned sharply against them, at least for now, and for reasons that weren’t widely anticipated. You can’t blame people who believe a massive AI investment bubble is at risk of bursting… There are increasingly urgent concerns about massive capital spending, soaring valuations, high debt levels and the circular nature of AI firms pouring money into other AI firms. And sure, a handful of players would probably escape a sector collapse and go on to change the world, just like the dot-com survivors did. But even the most likely eventual winners in AI are losing billions of dollars right now.”
October 16 – Telegraph (Matthew Field): “Jensen Huang is one of the few chief executives to have led a business through the last great tech bubble. His start-up, Nvidia, went public in 1999, just months before the dotcom crash wiped $5tn from the stock market. His business lost around 85% of its value. Today, Huang is riding a fresh wave of tech euphoria. Nvidia is now worth more than $4.5tn thanks to its role as the chip supplier of choice to the artificial intelligence (AI) industry... Huang has estimated that between $3tn and $4tn will be spent on AI infrastructure by the end of the decade.”
October 16 – Bloomberg (Carmen Arroyo and Laura Benitez): “Mark Zuckerberg’s Meta Platforms Inc. is set to seal an almost $30 billion financing package for its data center site in rural Louisiana, marking the final step for the largest private capital deal on record. Blue Owl Capital Inc. and Meta will split ownership of the Hyperion data center site in Richland Parish, Louisiana, with the tech giant retaining just 20% of it… To finance the build-out, Morgan Stanley arranged over $27 billion of debt and about $2.5 billion of equity into a special purpose vehicle — a structure for large deals that’s becoming increasingly common.”
October 16 – Bloomberg (Aaron Weinman and Gowri Gurumurthy): “Alphabet Inc.-owned Google’s novel support on a $3.2 billion debt transaction for TeraWulf Inc.’s data center build-out has introduced a new tool to the burgeoning world of financing for artificial intelligence-linked infrastructure, and investors are champing at the bit to get a piece of the deal. Orders for the junk-bond sale were north of $10 billion, with investors latching onto the so-called ‘Google backstop’ for TeraWulf’s financing… Google’s support for the bond kicks in once the data center, located in Barker, New York, is operational and AI cloud platform Fluidstack begins its lease there…”
October 14 – Reuters (Arsheeya Bajwa): “An investor group, including BlackRock and Nvidia, will buy Aligned Data Centers from Macquarie Asset Management in a deal worth $40 billion…, as AI infrastructure expansion powers on. The deal underscores an intensifying race to expand the costly, supply-constrained infrastructure required to develop artificial intelligence technology, as companies rush to build sophisticated AI models.”
October 15 – Axios (Megan Morrone): “More people are concerned than excited about the rise of AI in daily life, with Americans topping the global worry list, per a new global report from Pew Research Center… Public concern over AI could shape how quickly the tools are adopted, and could upend workplaces if employees aren't comfortable with the changes. Half of U.S.-only respondents said they were more concerned with AI than excited about it in a study released in September. Wednesday’s report showed that only Italy matched the U.S. percentage of concern about AI. At the low end, 16% of people in South Korea and 19% of people in India say they're more concerned than excited.”
Bubble and Mania Watch:
October 17 – Bloomberg (Isabelle Lee): “When crypto prices were running hot, Wall Street pounced. Issuers rushed to file for a dizzying number of ETFs tied to altcoins — the volatile, thinly traded tokens that live on the speculative edge of digital finance. Then came the past week’s crash. Billions of dollars in market value has vanished as altcoins plunged, exposing just how illiquid and unstable many of these assets remain. Some tokens are down 70% over the past week, with bids disappearing as liquidity thinned. It’s a brutal reminder that large swaths of the digital asset world still resemble a financial wild west — even as product engineers race to repackage them for regulated markets. Roughly 130 ETF applications linked to smaller cryptocurrencies are now pending with the US Securities and Exchange Commission…”
October 14 – Reuters (Suzanne McGee): “Investors are directing money into U.S.-based exchange-traded funds at a rapid clip, pushing inflows so far this year across the $1 trillion line, State Street Investment Management said… That puts U.S. ETF inflows on pace to set a new annual record of as much as $1.4 trillion by the end of 2025, State Street said, with virtually every category benefitting from the torrent of new cash as investors continue to yank money out of traditional mutual funds in favor of lower-cost and more liquid ETFs… Last year, ETF flows reached the $1 trillion mark on December 11… Overall, assets in the U.S. ETF industry stood at $12.7 trillion at the end of September after 41 straight months of net inflows… Year-to-date, the pace of asset growth stands at nearly 23%, ETFGI said.”
October 10 – Wall Street Journal (Hannah Erin Lang and Anne Tergesen): “Gene Cao spends six days a week working at a Chinese restaurant near Tampa, Fla., dunking crab rangoons and chicken wings into the fryer. But his mornings, nights and lunch breaks are spent managing his six-figure stock portfolio. ‘In the beginning, I lost some money,’ said Cao, who started trading penny stocks on his phone as a teenager and dabbled in options. ‘It’s a learning experience.’ Now, the 25-year-old is hooked… Cao is part of a growing group of lower-earning investors who are flooding into financial markets at rates never seen before… Among Americans with incomes between $30,000 and $80,000, 54% now have taxable investment accounts. Half of those investors have entered the market in the last five years, according to a new survey of 2,750 adults by… Commonwealth and the BlackRock Foundation.”
October 15 – Bloomberg (Isabelle Lee and Sidhartha Shukla): “For much of this year, Bitcoin had been asserting itself as a new kind of portfolio diversifier on Wall Street — a digital counterpart to gold for mainstream investors looking to hedge against fiscal excess, inflation and more. Bitcoin exchange-traded funds were swelling with inflows, its price was setting records, and the idea that it could function as a modern store of value was edging closer to the financial mainstream. Then came a reminder of how fragile that promise remains. After last week’s violent selloff in digital assets, the same market that once symbolized independence from Wall Street looked indistinguishable from it — or worse. Bitcoin plunged, while smaller tokens and derivatives markets imploded as nearly $19 billion in leveraged bets were wiped out in less than a day. The rout left gold, once again, as the true haven in a world on edge.”
October 14 – Wall Street Journal (Peter Grant): “New York City’s office market is enjoying its biggest boom in nearly two decades… Businesses leased 23.2 million square feet of additional Manhattan office space during the first nine months of 2025, according to… CBRE Group. That is the largest amount of new workspace rented for that period in 19 years… Accounting and consulting company Deloitte signed one of the biggest leases this year when it rented nearly three-quarters of a new Hudson Yards skyscraper under development… Technology, media and advertising companies also gobbled up space this year, extending a recent run.”
Inflation Watch:
October 13 – Bloomberg (Katia Dmitrieva): “Americans are set to pay more than half of President Donald Trump’s tariff costs as companies raise prices, according to economists of Goldman Sachs… US consumers will likely shoulder 55% of tariff costs by the end of the year, with American companies taking on 22%, the Goldman analysts wrote… Foreign exporters would absorb 18% of tariff costs by cutting prices for goods, while 5% would be evaded… For now ‘US businesses are likely bearing a larger share of the costs’ as it takes time to raise prices, economists Elsie Peng and David Mericle wrote... ‘If recently implemented and future tariffs have the same eventual impact on prices as the tariffs implemented earlier this year, then US consumers would eventually absorb 55% of tariff costs.’”
October 15 – Bloomberg (Veena Ali-Khan and Naureen S Malik): “US households will see their winter electric bills climb by the most in three years, according to the Energy Information Administration. Average residential consumers are poised to spend $1,130 on electricity this year, a 4% increase from 2024, the agency said in its winter fuels outlook… Utility bills across the country have already been on the rise as the proliferation of AI data centers fuels a demand surge that’s raising prices for all consumers. In some regions, the cost of rebuilding infrastructure after extreme weather events is also driving up expenses.”
October 14 – Bloomberg (Gerry Smith): “JPMorgan… CEO Jamie Dimon said he expects the bank’s health costs to rise 10% next year, a sign of how employers are grappling with higher spending on medical services and prescription drugs… ‘We think it actually might be up another 10% in 2027 for a whole bunch of different reasons,’ Dimon said… The cost of health plans maintained by employers is expected to grow 8.5% next year, according to a PwC report… in July.”
Federal Reserve Watch:
October 15 – Bloomberg (Daniel Flatley): “Treasury Secretary Scott Bessent said he would present President Donald Trump with a list of candidates to serve as the next chair of the Federal Reserve in December. ‘Likely sometime after Thanksgiving, in December, we’ll present the president with three or four candidates for him to interview,’ Bessent told CNBC… Bessent said he’s culled the list of 11 candidates he interviewed to five.”
October 14 – Bloomberg (Amara Omeokwe, Alex Harris, and Maria Eloisa Capurro): “Federal Reserve Chair Jerome Powell signaled the central bank may stop shrinking its balance sheet in the coming months, an important shift necessary to preserve liquidity in overnight funding markets. The Fed chair also indicated labor-market prospects continue to worsen, a message that supports investors’ expectations for another interest-rate cut this month. ‘Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,’ Powell said…”
October 14 – New York Times (Colby Smith): “Jerome H. Powell, the chair of the Federal Reserve, signaled further room for the central bank to lower borrowing costs this year to shore up the labor market despite the recent re-acceleration in inflation. Mr. Powell… deviated little from his recent message that the Fed should be responsive to the slowdown in monthly jobs growth and other signs of softness across the labor market. While he conceded that economic activity was on a ‘somewhat firmer trajectory than expected,’ Mr. Powell stressed that ‘the downside risks to employment appear to have risen.’”
October 14 – Reuters (Howard Schneider): “The U.S. labor market remained mired in its low-hiring, low-firing doldrums through September, though the economy overall ‘may be on a somewhat firmer trajectory than expected,’ Federal Reserve Chair Jerome Powell said…, noting that policymakers will take a ‘meeting-by-meeting’ approach… ‘Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago’…”
October 16 – Bloomberg (Jonnelle Marte, Maria Eloisa Capurro, and Amara Omeokwe): “Federal Reserve Governor Christopher Waller said officials can keep lowering interest rates in quarter-percentage-point increments to support a faltering labor market, while Stephen Miran continued to advocate a larger reduction. ‘You don’t want to make a mistake, so the way to avoid that is to go cautiously or carefully and do 25, wait and see what happens, and then you can get a better idea of what to do,’ Waller said…”
October 15 – Bloomberg (Maria Eloisa Capurro and Amara Omeokwe): “Federal Reserve Governor Stephen Miran said recent trade tensions have increased uncertainty in the outlook for growth, making it more important for policymakers to lower interest rates quickly. ‘There’s now more downside risks than there was a week ago, and I think it’s incumbent upon us as policymakers to recognize that should get reflected in policy,’ Miran said… Higher uncertainty around trade policies between China and the US have introduced a ‘new tail risk,’ he said.”
October 16 – Reuters (Jamie McGeever): “Federal Reserve Governor Stephen Miran… said he was not concerned that easing monetary policy risks further inflating historically -- and in some cases record-high -- asset prices. ‘When I think about the financial condition that matters most in terms of the real economy it’s going to be ones related to housing, and those look a lot less easy,’ Miran told Reuters… ‘There are people who are concerned about that (asset price boom). I’m focused on inflation and maximum employment’… ‘There’s a lot of things that drive asset prices… Monetary policy is one of them, but also changes to fiscal policy, regulatory policy, global scenarios - there’s a lot of things that drive them.’”
October 13 – Reuters (Michael S. Derby and Howard Schneider): “In her first speech as head of the Philadelphia Federal Reserve, Anna Paulson said… rising risks to the job market argue for more interest rate cuts by the U.S. central bank… ‘Given my views on tariffs and inflation, monetary policy should be focused on balancing risks to maximum employment and price stability, which means moving policy towards a more neutral stance… Labor market risks do appear to be increasing - not outrageously, but noticeably. And momentum seems to be going in the wrong direction,’ so that now deserves to be the focus of policy, she said.”
October 13 – Wall Street Journal (Matt Grossman): “Price increases driven by tariffs will likely prove temporary, according to Philadelphia Fed President Anna Paulson, who also threw her support behind further interest-rate cuts this year as the Fed responds to a slowing labor market... ‘Here the lessons from economic theory are clear: So long as inflation expectations are anchored, increases in prices due to supply effects do not turn into an inflation problem,’ Paulson said.”
U.S. Economic Bubble Watch:
October 16 – CNBC (Jeff Cox): “President Donald Trump’s tariffs will cost global businesses upward of $1.2 trillion in 2025, with most of the cost being passed onto consumers, according to a new analysis from S&P Global… The firm said its estimate of additional expenses for companies is probably conservative. The price tag comes from information provided by some 15,000 sell-side analysts across 9,000 companies who contribute to S&P and its proprietary research indexes. ‘The sources of this trillion-dollar squeeze are broad. Tariffs and trade barriers act as taxes on supply chains and divert cash to governments; logistics delays and freight costs compound the effect,’ author Daniel Sandberg said... ‘Collectively, these forces represent a systemic transfer of wealth from corporate profits to workers, suppliers, governments, and infrastructure investors.’”
October 17 – Bloomberg (Nazmul Ahasan): “Applications for US unemployment benefits fell last week, according to analyses of unadjusted state-level filings released during the federal government shutdown. Initial claims decreased to about 215,000 in the week ended Oct. 11 from an estimated 234,000 in the prior week, according to a Bloomberg News analysis of the figures. Goldman Sachs… economists also saw a decline, estimating initial jobless claims totaled about 217,000 last week.”
October 13 – Bloomberg (Keith Naughton): “The average price of a new car in America topped $50,000 for the first time last month, driven by a surge in sales of expensive electric vehicles and luxury models. US car buyers paid an average of $50,080 for a new car in September, up 3.6% from a year ago, according to… the Kelley Blue Book car buying guide… ‘The $20,000-vehicle is now mostly extinct, and many price-conscious buyers are sidelined or cruising in the used-vehicle market,’ Erin Keating, executive analyst with KBB-parent Cox Automotive, said... ‘Today’s auto market is being driven by wealthier households.’”
October 15 – Bloomberg (Miguel Ambriz): “A rising number of Americans are trading in vehicles worth less than what they owe, the latest sign of stress in the automotive industry. Just over 28% of trade-ins toward new-car purchases carried negative equity, the highest level since the first quarter of 2021, according to… Edmunds.com. The amount owed on those so-called underwater loans was $6,905 in the latest quarter, a record high. The findings add to ominous developments in the auto market… Consumers have been struggling with high car prices, which climbed over $50,000 on average for the first time ever last month.”
October 16 – Axios (Emily Peck): “A key measure of CEO confidence dipped slightly lower into negative territory, according to a survey of executives… About two-thirds said they expect stagflation over the next year and a half. It’s a sign of the uncertain business environment — as leaders grapple with a constantly changing policy landscape, particularly around tariffs. By the numbers: Confidence dipped one point from the previous quarter, to 48, per… the Conference Board… an association of CEOs.”
October 14 – Reuters (Lucia Mutikani): “U.S. small-business sentiment declined in September amid expectations of unfavorable operating conditions in the next six months, and many owners reported raising prices or planning to, suggesting that inflation was poised to increase further. The National Federation of Independent Business said… its Small Business Optimism Index dropped 2.0 points to 98.8 last month. It was the first decline in three months.”
October 16 – Bloomberg (Michael Sasso): “Confidence among US homebuilders rose this month by the most since early 2024… An index of market conditions from the National Association of Home Builders and Wells Fargo increased 5 points in October to 37, the highest since April. A value below 50 means more builders see conditions as poor than good.”
October 15 – CNBC (Melissa Repko): “As the peak holiday shopping season approaches, most U.S. consumers have a downbeat outlook on the economy, according to an annual Deloitte survey… Most consumers surveyed — 57% — said they expect the economy to weaken in the year ahead… That compares with 30% who expected a weaker economy ahead of the year-ago holiday season and 54% in 2008, one of the years of the Great Recession. It marks the most negative economic outlook since Deloitte began tracking that in 1997. Seventy-seven percent of people surveyed said they expect higher prices on holiday items, up from 69% last year…”
China Watch:
October 14 – Financial Times (Thomas Hale): “China’s economy remained mired in deflation last month… The producer price index, which measures factory gate prices and has been negative for three straight years, last month declined 2.3% year on year, compared with a 2.9% drop in August. China’s consumer price index fell 0.3%, marginally less than economist forecasts, after a 0.4% decline last month. The index has been positive in only two months this year.”
October 12 – Reuters (Joe Cash): “China's export growth picked up pace in September, buoyed by manufacturers finding buyers in markets beyond the U.S. as a tariff deal with President Donald Trump remained elusive… Outbound shipments from the world’s second-largest economy rose an annual 8.3% last month…, up from a 4.4% gain in August…”
Central Bank Watch:
October 13 – Bloomberg (Craig Stirling): “Central bankers, already uneasy about trade tensions and swelling public debt, will collectively confront a new worry in the coming week: the danger of a market crash. Global policymakers and finance ministers will gather in Washington for the International Monetary Fund/World Bank fall meetings after a chorus of warnings that a stock bubble focused on artificial intelligence companies might burst before long. Kristalina Georgieva, the fund’s managing director, acknowledged the financial stability risk… ‘Valuations are heading toward levels we saw during the bullishness about the internet 25 years ago… If a sharp correction were to occur, tighter financial conditions could drag down world growth, expose vulnerabilities, and make life especially tough for developing countries.’”
October 14 – Bloomberg (Mark Schroers and Laura Noonan): “European Central Bank Governing Council member Martin Kocher advised against too drastic a move to loosen bank regulation at present, given the market backdrop. Questioned at the Bloomberg Global Regulatory Forum in New York on whether potential asset bubbles speak against a major shift to ease rules on lenders right now, the Austrian governor agreed. ‘You’re right — at the moment, a large-scale deregulation would not be appropriate… That doesn’t mean that there is a lot of room to actually simplify. And I think that’s the distinguishing distinction we have to make at some stage.’”
France/Europe Watch:
October 12 – Financial Times (Natacha Valla): “France is about to become a quiet but decisive test for Europe’s markets. The country has long been considered a core anchor of the euro area: too big to fail, too integrated to falter. Yet, that assumption will now be tested. The political fragmentation is unprecedented in the Fifth Republic. With secular fiscal drift and muted growth, France will become the next barometer of investor confidence in Europe’s ability to manage political risk. For now, the market reaction remains contained but this apparent calm masks a deeper, slow repricing of sovereign risk… But, as often in such environments, a liquidity event can spark more abrupt adjustments.”
Japan Watch:
October 15 – Bloomberg (Sakura Murakami and Yoshiaki Nohara): “Japanese ruling party leader Sanae Takaichi’s chances of becoming prime minister strengthened after progress on policy talks with the Japan Innovation Party, with Monday emerging as a deadline for deciding whether the parties form a new coalition. The Liberal Democratic Party and the Osaka-based JIP, also known as Ishin, confirmed they are on the same page on major policy items. But one major sticking point remains in place: reforms on political funding rules. That’s the very issue that ended the LDP’s quarter-century coalition with Komeito last week.”
October 14 – Bloomberg (Alastair Gale, Sakura Murakami, and Yoshiaki Nohara): “Less than a year ago, Yuichiro Tamaki was fighting to retain the leadership of his own opposition party amid reports of an extramarital affair. Now, the 56-year-old athletics fan is in the running to lead the nation, with the identity of the next administration largely in his grasp. The collapse of the ruling coalition last week has catapulted Tamaki into a position where he could become prime minister with the support of three opposition parties…”
October 15 – Bloomberg (Toru Fujioka): “Bank of Japan Board Member Naoki Tamura called for raising interest rates as he sees increasing upside inflation risks… ‘I believe that the bank is now in the phase of deciding on raising its policy interest rate,’ Tamura said… ‘Thereby adjusting the degree of monetary accommodation and setting the rate a little closer to the neutral interest rate.’”
Emerging Market Watch:
October 14 – Bloomberg (Rachel Gamarski, Gerson Freitas Jr, and Giovanna Bellotti Azevedo): “Mounting concerns over Brazilian corporate debt have spread to the nation’s largest biofuel producer, triggering a slump in its bonds as investors slash exposure to risky borrowers in Latin America’s biggest economy after being burned by two sudden routs. Bonds of Raízen SA — a sugar and ethanol joint venture owned by Shell Plc and Brazilian conglomerate Cosan SA — have plunged almost 19% in the past week, with its $1 billion of notes due 2035 falling to record lows.”
Levered Speculation Watch:
October 16 – Financial Times (Amelia Pollard and Costas Mourselas): “Top traders at some of the biggest hedge funds are taking home almost a quarter of the profits they make for investors, according to a Goldman Sachs report, as the likes of Citadel and Millennium extend their hold over the industry. A war for talent between multi-manager hedge funds has pushed up pay in the industry, with firms luring traders with packages that can be worth more than $100mn. Goldman said that managers at the highest paying firms had this year secured payouts worth 24.5% of the profits they made for investors… Hedge funds have evolved from a structure where star traders from banks, trading firms and asset managers would strike out on their own to one increasingly dominated by goliaths that house hundreds of portfolio managers and their teams of analysts trading a full spectrum of assets. Multi-managers have captured more than $425bn in assets, Goldman said, up more than a third since… 2022.”
Social, Political, Environmental, Cybersecurity Instability Watch:
October 12 – Reuters (Alison Withers): “Global warming is crossing dangerous thresholds sooner than expected with the world’s coral reefs now in an almost irreversible die-off, marking what scientists… described as the first ‘tipping point’ in climate-driven ecosystem collapse. The warning in the Global Tipping Points report by 160 researchers worldwide, which synthesizes groundbreaking science to estimate points of no return, comes just weeks ahead of this year's COP30 climate summit being held at the edge of the Amazon rainforest in Brazil… ‘Change is happening fast now, tragically, in parts of the climate, the biosphere,’ said environmental scientist Tim Lenton at the University of Exeter, who is the lead author of the report.”
October 16 – Bloomberg (Margi Murphy, Patrick Howell O'Neill and Jordan Robertson): “A potentially ‘catastrophic’ breach of a major US-based cybersecurity provider has been blamed on state-backed hackers from China... Seattle-based F5 Inc. disclosed on Wednesday morning in a regulatory filing that nation-state hackers had breached its networks and gained ‘long-term, persistent access’ to certain systems. The intruders stole files including portions of source code from the company’s BIG-IP suite of application services, which are widely used by Fortune 500 companies and government agencies, in addition to details about some flaws that could be used to target the company’s customers.”
October 14 – Bloomberg (Alex Wickham): “The UK urged corporate bosses to protect their businesses against cyber attacks, after a spate of high-profile incidents targeting companies from Jaguar Land Rover to Marks and Spencer Group Plc that it said represent just a fraction of the known threats. ‘Recent high-profile cyber incidents show how attacks can seriously disrupt operations and damage profitability,’ ministers including Chancellor of the Exchequer Rachel Reeves and Business Secretary Peter Kyle said in the letter…”
October 13 – Bloomberg (Renata Carlos Daou): “Wildfire disasters are becoming more frequent and severe globally, costing more human lives and racking up more economic damage than in previous decades, according to a new study by the University of Tasmania. The researchers… found over 43% of the costliest fires since 1980 happened in the past 10 years. ‘We’re now seeing societal effects of fire that are much larger than ever before, fueled by climate change,’ Calum Cunningham, research fellow at the Fire Center at the University of Tasmania, said.”
Geopolitical Watch:
October 15 – Wall Street Journal (Melissa Skorka): “South Asia is a powder keg. Afghanistan’s Defense Ministry last week accused Pakistan—once the patron of the Taliban, who now rule Afghanistan—of launching cross-border airstrikes and ‘breaching the skies’ of Kabul. Islamabad contends the relationship broke down because of the threat to Pakistan from terrorists operating out of Afghanistan. A Pakistani security official told Reuters that Islamabad had targeted the Pakistani Taliban’s leader in its strikes. The same day as the airstrikes, India announced it would re-establish its embassy in Kabul—New Delhi’s boldest engagement with the Taliban government in four years.”
October 12 – Associated Press (Riaz Khan): “Afghanistan said… it killed 58 Pakistani soldiers in overnight border operations, in response to what it called repeated violations of its territory and airspace. Pakistan’s army gave far lower casualty figures, saying 23 troops were killed… The Taliban government’s chief spokesman, Zabihullah Mujahid, said Afghan forces have captured 25 Pakistani army posts, leaving 30 Pakistani soldiers wounded.”
The S&P500 rallied 1.7% (up 13.3% y-t-d), and the Dow recovered 1.6% (up 8.6%). The Utilities increased 1.4% (up 21.2%). The Banks recovered only 1.0% (up 13.5%), and the Broker/Dealers gained 0.9% (up 26.8%). The Transports rallied 4.0% (down 1.4%). The S&P 400 Midcaps rose 2.0% (up 3.0%), and the small cap Russell 2000 recovered 2.4% (up 10.0%). The Nasdaq100 rallied 2.5% (up 18.1%). The Semiconductors surged 5.8% (up 36.1%). The Biotechs advanced 2.9% (up 13.6%). With bullion ending the week $234 higher, the HUI gold index rose 3.9% (up 131.1%).
Three-month Treasury bill rates ended the week at 3.825%. Two-year government yields fell four bps to 3.46% (down 78bps y-t-d). Five-year T-note yields declined two bps to 3.59% (down 79bps). Ten-year Treasury yields dipped two bps to 4.01% (down 56bps). Long bond yields slipped a basis point to 4.61% (down 18bps). Benchmark Fannie Mae MBS yields dropped 10 bps to 5.02% (down 82bps).
Italian 10-year yields fell eight bps to 3.38% (down 14bps y-t-d). Greek 10-year yields sank 11 bps to 3.23% (up 1bp). Spain's 10-year yields fell nine bps to 3.11% (up 5bps). German bund yields declined six bps to 2.58% (up 21bps). French yields dropped 12 bps to 3.36% (up 17bps). The French to German 10-year bond spread narrowed six to 78 bps. U.K. 10-year gilt yields sank 14 bps to 4.53% (down 4bps). U.K.'s FTSE equities index dipped 0.8% (up 14.5% y-t-d).
Japan's Nikkei 225 Equities Index retreated 1.1% (up 19.3% y-t-d). Japan's 10-year "JGB" yield dropped six bps to 1.63% (up 53bps y-t-d). France's CAC40 rallied 3.2% (up 10.8%). The German DAX equities index fell 1.7% (up 19.7%). Spain's IBEX 35 equities index increased 0.8% (up 34.6%). Italy's FTSE MIB index dipped 0.7% (up 22.1%). EM equities were mixed. Brazil's Bovespa index gained 1.9% (up 19.2%), and Mexico's Bolsa index rose 1.9% (up 24.7%). South Korea's Kospi surged 3.8% (up 56.2%). India's Sensex equities index gained 1.8% (up 6.9%). China's Shanghai Exchange Index fell 1.5% (up 14.6%). Turkey's Borsa Istanbul National 100 index dropped 4.8% (up 3.8%).
Federal Reserve Credit increased $5.3 billion last week to $6.546 TN. Fed Credit was down $2.344 TN from the June 22, 2022, peak. Over the past 318 weeks, Fed Credit expanded $2.819 TN, or 76%. Fed Credit inflated $3.735 TN, or 133%, over 675 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $36.6 billion last week to $3.070 TN - a $134 billion nine-week decline to the low back to February 2012. "Custody holdings" were down $250 billion y-o-y, or 7.5%.
Total money market fund assets (MMFA) declined $17.8 billion to $7.367 TN (7-wk gain $161bn). MMFA were up $900 billion, or 13.9%, y-o-y - and ballooned a historic $2.783 TN, or 61%, since October 26, 2022.
Total Commercial Paper dropped $35.8bn to $1.311 TN. CP has expanded $224 billion y-t-d and $163 billion, or 14.2%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined three bps to 6.27% (down 17bps y-o-y). Fifteen-year rates slipped a basis point to 5.52% (up 11bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up one basis point to 6.54% (down 43bps).
Currency Watch:
For the week, the U.S. Dollar Index declined 0.4% to 98.541 (down 9.2% y-t-d). On the upside, the Brazilian real increased 2.1%, the Mexican peso 1.2%, the Swiss franc 0.8%, the South African rand 0.8%, the Swedish krona 0.6%, the Norwegian krone 0.5%, the British pound 0.5%, the Australian dollar 0.4%, the Japanese yen 0.4%, the euro 0.3%, the South Korean won 0.2%, and the Singapore dollar 0.2%. On the downside, the New Zealand dollar declined 0.1%. The Chinese (onshore) renminbi increased 0.12% versus the dollar (up 2.42% y-t-d).
Commodities Watch:
October 13 – Wall Street Journal (Ryan Dezember and Joe Wallace): “Silver prices set an all-time high Monday, eclipsing a 45-year-old record from 1980 when the Hunt brothers tried to corner the market for the precious metal. Silver futures rose 6.8% Monday to settle at $50.13 a troy ounce, topping the longstanding record of $48.70, set in January 1980 during one of the 20th century’s biggest commodity-trading scandals.”
The Bloomberg Commodities Index rallied 1.5% (up 6.9% y-t-d). In another week for the record books, spot Gold surged 3.4% to $4,252 (up 53.1%). Silver jumped 4.5% to $51.9205 (up 73.5%). WTI crude fell $1.36, or 3.3%, to $57.54 (down 17.9%). Gasoline recovered 1.0% (down 9%), while Natural Gas dropped 3.2% to $3.008 (down 17%). Copper sank 4.2% (up 22%). Wheat fell 3.3% (down 10%), and Corn lost 1.4% (down 10%). Bitcoin sank another $5,800, or 7.4%, to $107,450 (up 20.9%).
Market Instability Watch:
October 16 – Financial Times (Kate Duguid and Claire Jones): “Banks tapped the Federal Reserve’s short-term lending facility for more than $15bn over the past two days, in a sign of the liquidity pressures in the repo market that could drive the Fed to stop shrinking its balance sheet. Banks borrowed $6.75bn on Wednesday and $8.35bn on Thursday from the Fed’s standing repo facility (SRF), the largest amount borrowed over a two-day period since the Covid-19 pandemic. The SRF was introduced in 2021 as a permanent replacement for emergency repo operations launched by the Fed in the wake of market turmoil two years earlier.”
October 14 – Financial Times (Martin Arnold, Claire Jones and Sam Fleming): “Policymakers should strengthen their oversight of hedge funds, private equity and credit funds, which could amplify any downturn in financial markets and transmit stress to the banking system, the IMF has warned. The growth of financing activity outside of the traditional banking sector is adding an extra source of risk to the financial system, the IMF said, after finding many large lenders had increasingly high exposure to hedge funds and other non-bank institutions… Banks in the US and Europe have $4.5tn of exposures to hedge funds, private credit groups and other non-bank financial institutions — accounting for on average about 9% of total loan books… ‘Beneath the calm surface, the ground is shifting in several parts of the financial system, giving rise to vulnerabilities,’ the IMF said in its twice-yearly global financial stability report, reinforcing recent warnings from leading central bankers.”
October 15 – Financial Times (Claire Jones and Sam Fleming): “The US’s yawning deficit is set to remain the widest among the world’s richest countries despite revenues from Donald Trump’s trade tariffs, with the IMF warning the world’s largest economy needs to put its finances in order ‘sooner rather than later’. The IMF’s latest Fiscal Monitor showed the US’s general government overall balance… was set to be the highest of any rich nation… for this year and the rest of the decade. The US, unlike most other rich nations, is not expected to make any progress in lowering its deficit from current levels. The country’s gross debt-to-GDP ratio, expected to be 125% of GDP this year, will surpass record highs to hit 143% by the end of the decade, according to the IMF’s latest projections.”
October 14 – Bloomberg (Editorial Board): “Finance ministers and central bankers, gathering in Washington for the annual meetings of the International Monetary Fund, face a global trading system in disarray, uncertainty over the dollar’s standing and the likely course of interest rates, and financial markets that are (for now) unnervingly complacent. Amid all these challenges, policymakers must pay particular attention to one more: Following years of neglect, public debt has emerged as an increasingly serious risk… Before the pandemic, government debt was 84% of global gross domestic product. It currently stands at 95%. In country after country — including the US, the UK and most of the European Union — it’s on track to keep growing faster than output.”
October 14 – Reuters (Pete Schroeder): “Global markets are too comfortable with risks, including trade wars, geopolitical tensions and yawning government deficits, which, combined with already overpriced assets, increase the chance of a ‘disorderly’ market correction, the International Monetary Fund said… ‘Beneath the calm surface, the ground is shifting in several parts of the financial system, giving rise to vulnerabilities,’ the global lender wrote in its semi-annual Global Financial Stability Report.”
U.S. Credit Trouble Watch:
October 14 – Reuters (Anirban Sen, Saeed Azhar and Matt Tracy): “The bankruptcies of automotive-related companies First Brands and Tricolor, along with potential losses at banks and investment funds, are raising new concerns about hidden risks in parts of the credit market… The two collapses have rattled some stakeholders in Wall Street's multitrillion-dollar credit machinery, from leveraged loans and collateralized loan obligations (CLOs) to trade‑finance funds and subprime auto loans, raising questions about exposure levels of a number of Wall Street fund managers… ‘This would serve as a strong precedent for LPs (investors) to question risky offerings,’ said Zain Bukhari, associate director of risk and valuations at S&P Global. LPs, referring to limited partners, are passive investors that provide capital to a fund.”
October 15 – Bloomberg (Sridhar Natarajan): “On Wall Street, everyone’s a friendly rival until the losses start. A pair of blowups in the credit market have sparked a war of words over whether banks or private credit firms are better positioned to weather a broader downturn… Jamie Dimon used his bank’s losses from auto lender Tricolor Holdings to say there’s never just one cockroach — a quip some of his nonbank rivals have taken as a shot at them. Blue Owl Capital Inc. boss Marc Lipschultz fired back, saying the issue was in loans that banks led… ‘There are people who have meaningful, parochial interests in the industry not continuing to grow and succeed,’ Lipschultz said of the scorn heaped on private-market players. ‘Blackstone’s market cap exceeds the market cap of most financial institutions in the world today. It’s not as if that’s not coming from someone, and of course those people don’t like it.’”
October 12 – Bloomberg (Eliza Ronalds-Hannon and Aaron Weinman): “It is, by almost any measure, a golden era for US credit markets. Companies are selling debt at a near record clip; relative borrowing costs are hovering around historic lows; and investors are pocketing the best returns in years. But in recent months, a flurry of meltdowns — each of which inflicted losses of more than 60% on investors — has exposed cracks in that edifice. It began back in the spring with the luxury retailer Saks. Things went bad so fast, it restructured its bonds after making just a single interest payment. Days later, another bond — this one from natural-gas company New Fortress Energy — crashed, too. Then, a subprime auto lender, Tricolor Holdings, filed suddenly for bankruptcy, triggering a near-total wipeout on some debt. That, in turn, was followed by the collapse of an auto-parts supplier, First Brands Group.”
October 14 – CNBC (Hugh Son): “JPMorgan… CEO Jamie Dimon said… bankruptcies in the U.S. auto market are a sign that corporate lending standards grew too lax in the past decade-plus. Dimon, the longtime leader of the largest U.S. bank by assets, was speaking about the recent collapse of auto parts firm First Brands and subprime car lender Tricolor Holdings. ‘We’ve had a credit bull market now for the better part of what, since 2010 or 2012? That’s like 14 years… These are early signs there might be some excess out there because of it… If we ever have a downturn, you’re going to see quite a bit more credit issues.’”
October 15 – Financial Times (Ian Smith, Emily Herbert, Costas Mourselas and Euan Healy): “Big investors are cutting back their exposure to riskier corporate debt… Asset managers including BlackRock, M&G and Fidelity International have shifted towards safer corporate or government bonds, in response to a big decline in US credit spreads that means investors get little reward for taking extra risks. Some investors fret that the rally, driven by the easing of fears over a global trade war and expectations of deeper interest rate cuts by the US Federal Reserve, has left the credit market pricing in an overly optimistic scenario for global economic growth. ‘Credit spreads are so tight that there’s almost no ability for them to tighten further,’ said Fidelity International fund manager Mike Riddell…”
October 16 – Bloomberg (Rod Chadehumbe): “The spread between the highest- and lower-quality ABS tranches has widened to its highest level in a decade, signaling potential caution among market participants. The differential between the Bloomberg Non-AAA ABS Index (A1/A2 average quality) and the Bloomberg AAA ABS Index now exceeds 80 bps, about double from 2016 and well above the decade average of 54 bps. This sharp divergence reflects a rising investor preference for safety, as investors demand greater compensation to assume additional credit risk.”
October 13 – Bloomberg (Esteban Duarte): “Bank of America Corp. is planning a significant risk transfer tied to a $3 billion portfolio of loans to private market funds, according to people familiar with the matter. The portfolio underlying the potential transaction consists of so-called subscription lines, said the people…”
First Brands Watch:
October 13 – Associated Press (Matt Ott): “The founder and CEO of First Brands resigned Monday, weeks after the auto parts supplier filed for bankruptcy protection amid an accounting scandal that has left lenders scrambling for more than $2 billion in missing funds. Patrick James, who founded the company in 2013, will be replaced on an interim basis by Charles Moore, who was appointed as chief restructuring officer… After changing its name to First Brands from Crowne Group about five years ago, the Cleveland company began buying and then cobbling together a number of aftermarket auto parts manufacturers through debt-financed deals.”
October 16 – Bloomberg (Steven Church): “The federal watchdog for corporate bankruptcies joined a creditor’s demand for an independent investigation of the troubled auto-parts supplier First Brands Group, which has admitted it can’t find $2.3 billion related to off-balance sheet financing deals. The US Trustee argued in court filings that ‘serious allegations of fraud, dishonesty, incompetence, misconduct, or mismanagement,’ justifies a quicker-than-normal process to appoint a bankruptcy examiner in First Brands’ insolvency case.”
Global Credit and Financial Bubble Watch:
October 15 – Bloomberg (Selcuk Gokoluk): “Asset managers are looking to raise new private credit funds aimed at emerging markets to capitalize on an explosion of financing deals in the sector this year. Ninety One Plc said it’s working to close a $500 million fund in the first quarter of 2026, followed by another one by the end of the year. Gramercy Funds Management has already raised $760 million and is looking to reach $1.5 billion for a new fund… The efforts are picking up as EM funding from private lenders such as Blackstone Inc. and Apollo Global Management Inc. is on course for its biggest year on record.”
October 14 – Wall Street Journal (Miriam Gottfried): “Blackstone is officially entering the race to get assets such as private equity and private credit into 401(k)s. The investment giant is launching a business unit devoted to tapping the market for what are called defined-contribution retirement plans. The new unit will sit inside Blackstone’s $280 billion private-wealth group. It will focus on creating products for the defined-contribution market and managing strategic partnerships…”
Trump Administration Watch:
October 14 – Associated Press (Lisa Mascaro): “President Donald Trump is making this government shutdown unlike any the nation has ever seen, giving his budget office rare authority to pick winners and losers — who gets paid or fired, which programs are cut or survive — in an unprecedented restructuring across the federal workforce. As the shutdown enters its third week, the Office and Management and Budget said Tuesday it’s preparing to ‘batten down the hatches’ with more reductions in force to come. The president calls budget chief Russ Vought the ‘grim reaper’ and Vought has seized on the opportunity to fund Trump’s priorities… Trump said programs favored by Democrats are being targeted and ‘they’re never going to come back, in many cases.’”
October 15 – Bloomberg (Alicia Diaz, Erik Wasson and Caitlin Reilly): “President Donald Trump has in the span of just four days fired thousands of government employees, transferred billions in federal funds and threatened to unilaterally cancel ‘Democrat programs’ — all during a shutdown and without Congress’s approval. The moves, playing out against the backdrop of a standoff over federal spending now entering its third week, mark an escalation of the administration’s efforts to use the federal budget to centralize power. Republican congressional leaders have so far largely backed the White House’s expanded power claims, asserting that Trump has wide-ranging authority during a shutdown to pay military personnel and make other necessary moves in the absence of new federal funding.”
October 15 – Wall Street Journal (Siobhan Hughes and Lindsay Wise): “Republicans and Democrats both see a likely path to ending the government shutdown, involving extending enhanced Affordable Care Act healthcare subsidies for a year or longer. But there are a series of reasons why no deal has emerged, even with costs set to surge for more than 20 million Americans. The shutdown is now entering its third full week, with no serious talks under way… Democrats and Republicans think that they are on the stronger side of the argument and see little reason to budge. Both point to polling they say shows public opinion is on their side. ‘I think right now the problem is that both sides think they’re winning,’ said Sen. Angus King, a Maine independent...”
October 13 – Associated Press (Lisa Mascaro): “Republican House Speaker Mike Johnson predicted… the federal government shutdown may become the longest in history, saying he ‘won’t negotiate’ with Democrats until they hit pause on their health care demands and reopen… Vice President JD Vance has warned of ‘painful’ cuts ahead, even as employee unions sue. ‘We’re barreling toward one of the longest shutdowns in American history,’ Johnson… said.”
October 15 – Associated Press (Rio Yamat): “A startling message came over the radio from an air traffic control tower near Los Angeles less than a week into the federal government shutdown: ‘The tower is closed due to staffing.’ Without enough air traffic controllers to guide planes into and out of Hollywood Burbank Airport, the tower went dark for almost six hours on Oct. 6, leaving pilots to coordinate their movements among themselves.”
October 15 – Associated Press (Fatima Hussein and Andrea Vulcano): “The Trump administration is looking to provide an additional $20 billion in financing for Argentina through a mix of financing from sovereign funds and the private sector. That would come on top of the $20 billion credit swap line that the U.S. Treasury pledged to Argentine President Javier Milei and his government this month to bolster the South American nation’s collapsing currency. ‘We are working on a $20 billion facility that would complement our swap line, with private banks and sovereign funds that, I believe, would be more focused on the debt market,’ Treasury Secretary Scott Bessent told reporters... He called it ‘a private-sector solution’ and said ‘many banks are interested in it and many sovereign funds have expressed interest.’”
October 14 – Reuters (Nandita Bose): “U.S. support for Argentina hinges on the ruling party of President Javier Milei succeeding in this month's midterm legislative elections, President Donald Trump said on Tuesday, saying ‘we're not going to waste our time’ if Milei's party doesn't win… ‘I’m with this man because his philosophy is correct, and he may win it,’ Trump said… ‘He may not win, but I think he’s going to win. And if he wins, we’re staying with him. And if he doesn’t win, we’re gone…”
October 14 – Bloomberg (Manuela Tobias and Patrick Gillespie): “US President Donald Trump made it clear to his Argentine counterpart Javier Milei that any Chinese military activity in the South American country wouldn’t be received well in Washington… ‘You can do some trade, but you certainly shouldn’t be doing beyond that,’ said Trump… ‘Certainly shouldn’t be doing anything having to do with the military with China and if that’s what’s happening, I’d be very upset about that.’”
October 15 – Axios (Ben Berkowitz): “There is a ‘clever and generous’ bailout coming for farmers as soon as the government shutdown ends, National Economic Council director Kevin Hassett said… ‘I expect that when the government opens that very soon after you’re going to see what President Trump’s plan for farmers is, but it’s really quite clever and generous. I can say that,’ Hassett told Axios…”
October 15 – Wall Street Journal (Vera Bergengruen, Brett Forrest and Alex Leary): “President Trump has authorized the Central Intelligence Agency to conduct covert action in Venezuela, while also floating the idea of land strikes, in a broadening campaign against alleged drug trafficking. ‘I authorized for two reasons,’ Trump said…, alleging Venezuelan leaders have ‘emptied their prisons into the United States of America’ and ‘we have a lot of drugs coming in from Venezuela.’ The authorization enables the CIA to operate clandestinely in the country and potentially take action against Venezuelan strongman Nicolás Maduro, his government and drug traffickers, according to an administration official.”
October 16 – New York Times (Eric Schmitt and Tyler Pager): “The military commander overseeing the Pentagon’s escalating attacks against boats in the Caribbean Sea that the Trump administration says are smuggling drugs said… he was stepping down. The officer, Adm. Alvin Holsey, is leaving his job as head of the U.S. Southern Command, which oversees all operations in Central and South America, even as the Pentagon has rapidly built up some 10,000 forces in the region in what it says is a major counterdrug and counterterrorism mission.”
October 13 – Bloomberg (Hannah Levitt): “JPMorgan… vowed to funnel $1.5 trillion into industries that bolster US economic security and resiliency over the next 10 years — an initiative that will invest billions of dollars in companies and hire bankers and other professionals. The campaign will ramp up the amount of capital, resources and personnel that the largest US lender already dedicates to a variety of sectors, such as rare earth minerals, pharmaceutical precursors and robotics, or ventures developing defense, aerospace and energy technologies, such as drones, battery storage or grid resiliency.”
October 16 – Associated Press (Eric Tucker, Alanna Durkin Richer and Michael Kunzelman): “John Bolton, who served as President Donald Trump’s national security adviser during his first term and later became a vocal critic, was charged Thursday with storing top secret records at home and sharing with relatives diary-like notes about his time in government that officials said contained classified information. The 18-count indictment also suggests classified information was exposed when operatives believed linked to the Iranian regime hacked Bolton’s email account in 2021 and gained access to sensitive material he had shared.”
China Trade War Watch:
October 15 – Bloomberg: “US Treasury Secretary Scott Bessent lashed out at a top Chinese trade official, saying he turned up in Washington recently uninvited and behaved in an ‘unhinged’ fashion typical of Beijing’s so-called wolf warrior diplomats. Bessent claimed Li Chenggang’s August visit to the US capital was not at the request of the Trump administration. ‘Perhaps the vice minister who showed up here with very incendiary language on Aug. 28 has gone rogue,’ the Treasury chief said… ‘This individual was very disrespectful,’ he added, after earlier calling him ‘unhinged’… At that event, Bessent mispronounced Li’s given name as ‘Kuanggong’ and referred to him as a ‘lower level’ person despite Li having full ministerial rank in China.”
October 13 – Financial Times (Demetri Sevastopulo and James Politi): “US Treasury secretary Scott Bessent has accused China of trying to hurt the world’s economy… Bessent told the Financial Times that China’s introduction of the controls… reflected problems in its own economy. ‘This is a sign of how weak their economy is, and they want to pull everybody else down with them,’ Bessent said… ‘Maybe there is some Leninist business model where hurting your customers is a good idea, but they are the largest supplier to the world… If they want to slow down the global economy, they will be hurt the most… They are in the middle of a recession/depression, and they are trying to export their way out of it. The problem is they’re exacerbating their standing in the world.’”
October 15 – Axios (Courtenay Brown): “U.S. Trade Representative Jamieson Greer said that China’s plans for harsh export controls risk violating a trade pact struck earlier this year, as Treasury Secretary Scott Bessent warned ‘they can’t be trusted’… ‘This rule gives China control over the entire global supply chain,’ Greer said… ‘Many are suggesting that China's action is simply posturing to leverage the negotiations with the United States,’ Greer added. ‘While that may be one element of China’s approach, it’s obvious this is part of a broader play by China to control the world’s supply chains.’ Greer said that an agreement made in Switzerland earlier this year said that the U.S. would lower tariffs in exchange for access to China's rare earths minerals. ‘We have lowered tariffs since that time but now the Chinese have expanded their export controls,’ Greer said…”
October 14 – AFP: “China said… it was ready to ‘fight to the end’ in a trade war with the United States after President Donald Trump said he would slap additional 100% tariffs on goods from the country… The latest escalation has rattled markets and called into question a potential upcoming meeting with Chinese counterpart Xi Jinping in South Korea. ‘On the matter of tariff wars and trade wars, China’s position remains consistent,’ an unnamed commerce ministry spokesperson said… ‘If you wish to fight, we shall fight to the end; if you wish to negotiate, our door remains open… The United States cannot simultaneously seek dialogue while threatening to impose new restrictive measures. This is not the proper way to engage with China.’”
October 14 – Associated Press (Chan Ho-Him): “China’s Commerce Ministry said… it was banning dealings by Chinese companies with five subsidiaries of South Korean shipbuilder Hanwha Ocean in the latest swipe by Beijing at U.S. President Donald Trump’s effort to rebuild the industry in America. The ministry also announced that it was investigating a probe by Washington into China’s growing dominance in world shipbuilding, and threatened more retaliatory measures... ‘China just weaponized shipbuilding,’ said Kun Cao, deputy chief executive at… Reddal. ‘Beijing is signaling it will hit third-country firms that help Washington counter China’s maritime dominance.’”
October 16 – Bloomberg: “China’s Commerce Minister Wang Wentao… blamed the recent escalation in trade tensions with the US on American actions following the latest bilateral round of talks, in Madrid last month. ‘The recent fluctuations in China-US economic and trade relations are mainly due to the US’s intensive introduction of a series of restrictive measures against China after the Madrid’ talks, Wang told Apple Inc. Chief Executive Officer Tim Cook during a meeting in Beijing… US measures ‘seriously harmed China’s interests and undermined the atmosphere of the bilateral economic and trade talks,’ Wang said… ‘The two sides should engage in effective communication, properly resolve differences and promote stable, healthy and sustainable development of China-US relations,’ Wang said…”
October 13 – Bloomberg: “US President Donald Trump and Chinese leader Xi Jinping’s latest tit-for-tat showdown has both countries claiming the ball is now in the other’s court, with the clock ticking toward another escalation in import tariffs. After Trump signaled openness to doing a deal with Beijing, US Vice President JD Vance… declared the outcome would ‘depend on how the Chinese respond.’ Hours later, China’s Foreign Ministry made clear Beijing would take its cues from Washington’s next steps… ‘If the US continues on its wrong course, China will firmly take necessary measures to safeguard its legitimate rights and interests,’ Foreign Ministry spokesman Lin Jian said…”
October 16 – New York Times (Ana Swanson and Meaghan Tobin): “Over the past three years, Washington has claimed broad power to impose global rules that bar companies anywhere in the world from sending cutting-edge computer chips or the tools needed to make them to China. American officials have argued that approach is necessary to make sure China does not gain the upper hand in the race for advanced artificial intelligence. But a sweeping set of restrictions announced by Beijing last week showed that two can play that game. The Chinese government flexed its own influence over worldwide supply chains when it announced new rules clamping down on the flow of critical minerals that are used in everything from computer chips to cars to missiles. The rules, which are set to take effect later this year, shocked foreign governments and businesses, which may now need to acquire licenses from Beijing to trade their products even outside China.”
October 15 – Wall Street Journal (Rory Jones): “Chinese companies are pushing across the globe to conquer new markets, and American financiers are making a mint by helping them. The unlikely U.S.-China collaboration during heightened trade and military tensions between the two superpowers is raising concern on Capitol Hill… But it is producing frothy markets in Hong Kong, the place where Wall Street and China Inc. meet for mutual profit… Companies have raised $23 billion as of September in stock offerings… In September, Morgan Stanley led the $3.2 billion Hong Kong initial public offering of the Chinese mining company Zijin’s international gold-mining unit. BlackRock’s funds acted as an early investor underpinning the deal… ‘This is truly a spectacular year,’ said Robert Chan, who helps lead the execution of equity deals at Citigroup in the Asia-Pacific region.”
October 13 – Reuters (Lewis Jackson): “China’s rare earth exports fell 31% in September from August…, the third straight month of declines. New controls that were introduced by China last week have threatened a trade truce with Washington and the three months of declines are expected to raise questions about its agreements with Europe and the U.S. to ramp up exports after China's decision to restrict shipments in April triggered shortages worldwide.”
October 14 – New York Times (Peter Eavis): “The Trump administration broadened its trade war with China on Tuesday, as it began imposing fees on Chinese ships docking at American ports. The long-planned action is intended to counter China’s dominance of commercial shipbuilding and help revitalize the United States’ own shipbuilding industry, which has withered over the years. China’s Ministry of Transport threatened retaliation on Friday, saying it planned to hit American vessels with fees when they docked in China.”
October 13 – Bloomberg (Weilun Soon and Serene Cheong): “China sanctioned the US units of a South Korean shipping giant and threatened further retaliatory measures on the industry, the latest in a series of tit-for-tat moves as Beijing and Washington jockey for leverage before expected trade talks. The sanctions, which prohibit people or organizations in China from transacting with US units of Hanwha Ocean Co., helped fuel a slump in global equities on Tuesday… Hanwha Ocean closed down 6.2%...”
October 11 – Politico (Megan Messerly and Phelim Kine): “Beijing shattered a fragile trade truce with Washington this week… Former Trump officials say China’s latest salvo is a particularly sophisticated show of force — one that underscores a growing mismatch between China’s long-term strategy and the Trump administration’s more improvisational approach. ‘We’re playing 2-D chess while Beijing is playing 4-D chess,’ said Liza Tobin, who served as National Security Council director for China during the first Trump administration and the start of the Biden administration.”
October 14 – Wall Street Journal (Edith Hancock): “China’s fresh export controls on rare-earth materials are a critical issue for the European Union, EU trade chief Maros Sefcovic said, as tensions continue to rise between Brussels and Beijing. ‘These measures are seen as unjustified and of course causing a lot of problems and complications for the European companies and European industry,’ Sefcovic said…”
October 14 – Reuters: “Chinese rare earth magnet companies have been facing tighter scrutiny on export license applications since September, sources say… The lengthier reviews magnet makers face raise questions about whether China, the top global supplier, is seeking to throttle back magnet shipments, contrary to its commitment to speed up exports in a trade truce with the U.S. in May, to further tighten its grip on the products essential in military and commercial technology.”
October 14 – Associated Press (Chan Ho-Tim): “China’s biggest state-owned air carriers have hit back at a U.S. proposal to bar them from flying over Russia when traveling to or from the U.S. The U.S. side has said such flights give Chinese airlines an unfair cost advantage over American carriers, which cannot cross through Russian airspace.”
Trade War Watch:
October 14 – New York Times (Ana Swanson and Sydney Ember): “President Trump ushered in new tariffs on imported furniture, kitchen cabinets and lumber on Tuesday, adding a fresh round of levies as he once again threatened to expand his trade war with China. Tariffs ranging from 10 to 50% on foreign wood products and furniture snapped into effect just after midnight.”
October 15 – Politico (Irie Sentner and Megan Messerly): “India will no longer purchase Russian oil, according to President Donald Trump, a major victory in his effort to pressure Vladimir Putin to end the war in Ukraine. ‘I was not happy that India was buying oil, and [Indian Prime Minister Narendra Modi] assured me today that they will not be buying oil from Russia,’ Trump told reporters... ‘That’s a big step.’”
Constitution Watch:
October 15 – Bloomberg (Zoe Tillman, Lauren Dezenski and Jennifer A. Dlouhy): “A federal judge ordered the Trump administration to pause plans to fire thousands of federal workers during the government shutdown, just moments after White House Budget Director Russell Vought said he expects layoffs to exceed more than 10,000 people. The ruling on Wednesday from US District Judge Susan Illston in San Francisco follows layoff notices that have gone out to more than 4,100 federal employees since last week.”
October 15 – Washington Post (Alex Horton and Samuel Oakford): “The U.S. military’s elite Special Operations aviation unit appears to have flown in Caribbean waters less than 90 miles from the coast of Venezuela in recent days… The helicopters were engaged in training exercises… that could serve as preparation for expanded conflict against alleged drug traffickers, including potentially missions inside Venezuela. The U.S. military has struck at least five boats allegedly carrying illegal narcotics in international waters, killing at least 27 people…”
October 15 – Politico (Cheyanne M. Daniels): “President Donald Trump… floated targeting Venezuelan drug cartels with land strikes, an escalation of his administration’s repeated strikes on boats out of the country as he tries to staunch the flow of drugs into the U.S…. Trump said his administration has ‘almost totally stopped’ drug trafficking by sea and ‘now we’ll stop it by land.’ ‘I don’t want to tell you exactly, but we are certainly looking at land now because we have the sea very well under control,’ Trump said.”
October 15 – Bloomberg (Lauren Dezenski): “President Donald Trump said his administration would look to San Francisco as the next target of his federal crime crackdown, which has been mostly directed at Democrat-run cities. ‘I’m going to be strongly recommending at the request of government officials, which is always nice, that you start looking at San Francisco,’ Trump said… ‘I think we can make San Francisco — there’s one of our great cities 10 years ago, 15 years ago. Now it’s a mess, and we have great support in San Francisco.’”
October 14 – Associated Press (David Bauder): “Fox News, the former employer of Defense Secretary Pete Hegseth, has joined a near-unanimous outpouring of news organizations rejecting new rules for journalists based in the Pentagon. Fox signed on to a statement with ABC, CBS, NBC and CNN saying they would not agree to Hegseth’s new rules, saying ‘the policy is without precedent and threatens core journalistic protections.’ So far, only the conservative One America News Network has said its reporters would follow the new regulations… The Associated Press says it will not agree to the rules.”
Budget Watch:
October 16 – Bloomberg (Daniel Flatley): “The US budget deficit declined slightly for the 2025 fiscal year as tariff revenue hit a record high, though the pace of borrowing remains historically elevated at a time of economic expansion and financial stability. The deficit for the fiscal year was $1.78 trillion, down from $1.82 trillion in 2024, a drop of 2%... President Donald Trump’s dramatic tariff hikes helped spur a net $195 billion in tariff revenue for the fiscal year…”
U.S./Russia/China/Europe/Iran Watch:
October 12 – Reuters (Guy Faulconbridge): “The Kremlin said… Russia was deeply concerned about the possibility of the U.S. supplying Tomahawk missiles to Ukraine, warning that the war had reached a dramatic moment with escalation from all sides… Tomahawk missiles have a range of 1,550 miles, meaning Ukraine would be able to use them for long-range strikes deep inside Russia, including Moscow… ‘The topic of Tomahawks is of extreme concern,’ Kremlin spokesperson Dmitry Peskov told Russian state television reporter Pavel Zarubin… ‘Now is really a very dramatic moment in terms of the fact that tensions are escalating from all sides.’”
October 11 – Financial Times (Camilla Hodgson in London and Steff Chávez and Aime Williams): “The Pentagon has sought to procure up to $1bn worth of critical minerals as part of a global stockpiling spree to counter Chinese dominance of the metals that are essential to defence manufacturers… It follows export restrictions imposed on many of the materials by China, which dominates the supply chains for critical minerals and permanent magnets needed for technologies from smartphones to fighter jets. ‘They [the US defence department] are incredibly focused on the stockpile,’ said one former defence official. ‘They’re definitely looking for more, and they’re doing it in a deliberate and expansive way, and looking for new sources of different ores needed for defence products.’”
October 12 – Wall Street Journal (Thomas Grove and Karolina Jeznach): “For more than a decade, Poland has prepared for the worst-case scenario: becoming the front line in a war between Russia and the West. With an eye on growing Russian aggression in Europe, Warsaw’s military planners built out the country’s armed forces, turning it last year into the largest European military in the North Atlantic Treaty Organization. It ramped up military spending to 4.7% of gross domestic product this year—the highest in the alliance. A multi-billion-dollar spending spree has put Poland among the biggest buyers of U.S. weapons.”
October 12 – Financial Times (Raphael Minder): “Russia has used cryptocurrencies to pay saboteurs involved in its hybrid attacks on EU countries, in an attempt to prevent intelligence services from tracking the payments, according to a senior Polish security official. Poland’s national security bureau chief Sławomir Cenckiewicz told the Financial Times that Moscow was probably using this payment method to fund attacks… He also said evidence shared with western intelligence services showed Russia was using its shadow fleet to launch drones into European airspace.”
October 13 – Bloomberg: “China hit back at the US for what it called interference in its domestic affairs, after Secretary of State Marco Rubio condemned Beijing’s recent detention of church leaders. ‘The Chinese government governs religious affairs in accordance with law, protects the religious freedom of the citizens and the normal religious activities,’ Foreign Ministry spokesman Lin Jian said… ‘We firmly oppose the US interfering in China’s internal affairs with the so-called religious issues.’ The comments came after Rubio criticized the ruling Chinese Communist Party for detaining dozens of leaders of the unregistered Zion Church.”
New World Order Watch:
October 15 – Financial Times (Demetri Sevastopulo): “Treasury secretary Scott Bessent warned Beijing that its new sweeping export controls on rare earths and critical minerals would force the US and other countries to decouple from China… Bessent said China was taking on the entire world with the regime. ‘If China wants to be an unreliable partner to the world, then the world will have to decouple… The world does not want to decouple. We want to de-risk. But signals like this are signs of decoupling, which we don’t believe China wants.’”
October 13 – Bloomberg (Enda Curran): “Canada is importing more cars from Mexico than from the US. China has snubbed American soybean farmers at harvest time and is buying from South American growers instead. India and China are resuming direct flights between the two countries and trading rare earths, ending years of frozen relations. The new contours of global commerce are starting to emerge as governments redraw trade alliances and companies seek other markets to avoid the highest US tariffs since the 1930s. Smaller economies are also adapting to a world where US consumers and companies are costlier to reach… A group of 14 countries that includes New Zealand, Singapore, Switzerland and the United Arab Emirates has formed a partnership to boost trade and investment.”
Ukraine War Watch:
October 16 – Axios (Barak Ravid): “President Trump announced following a call with Vladimir Putin on Thursday that he and the Russian leader had agreed to meet in Hungary in the coming weeks to discuss how to end the war in Ukraine. The two-hour call took place a day before Trump will host Ukrainian President Volodymyr Zelensky at the White House. Trump and Zelensky will discuss the possibility of Ukraine receiving Tomahawk long-range missiles.”
October 11 – Financial Times (Christopher Miller, Amy Mackinnon and Max Seddon): “The US has for months been helping Ukraine mount long-range strikes on Russian energy facilities, in what officials say is a co-ordinated effort to weaken Vladimir Putin’s economy and force him to the negotiating table. American intelligence shared with Kyiv has enabled strikes on important Russian energy assets including oil refineries far beyond the frontline, according to multiple Ukrainian and US officials familiar with the campaign.”
October 12 – Wall Street Journal (Natalie Andrews): “President Trump threatened to send long-range Tomahawk cruise missiles to Ukraine, should Russian President Vladimir Putin continue to decline his efforts to negotiate a peace deal... ‘I might say, look, if this war’s not going to get settled, I’m going to send them Tomahawks,’ Trump told reporters… Trump is still hoping Moscow will make a deal to halt that conflict but has become frustrated at the lack of diplomatic progress and more open to pressuring Putin militarily.”
October 16 – Bloomberg: “Ukraine’s General Staff claimed a strike on Rosneft PJSC’s Saratov refinery as NATO allies ramp up pressure on Russia’s energy industry to bring President Vladimir Putin to the negotiating table. Ukrainian military forces attacked the facility in Russia’s Volga region overnight, the General Staff said…”
Middle East Watch:
October 13 – Associated Press (Melanie Lidman, Samy Magdy and Wafaa Shurafa): “Israel and Hamas moved ahead on a key first step of the tenuous Gaza ceasefire agreement on Monday by freeing hostages and prisoners, raising hopes that the U.S.-brokered deal might lead to a permanent end to the two-year war that ravaged the Palestinian territory. But thornier issues such as whether Hamas will disarm and who will govern Gaza — and the question of Palestinian statehood — remain unresolved, highlighting the fragility of an agreement that for now only pauses the deadliest conflict in the history of Israel and the Palestinians. For Israelis, the release of the 20 remaining living hostages brought elation and a sense of closure to a war many felt they were forced into by Hamas, although many pledged to fight on for the return of deceased hostages still in Gaza.”
Taiwan Watch:
October 15 – Wall Street Journal (Mike Cherney): “At a U.S. Army post just a few miles from tourist hotels and tropical beaches, troops here are testing an advanced, 360-degree radar—just one piece of what is slated to be an $8 billion system to defend this island from a Chinese missile attack. The defensive shield taking shape is part of a fundamental shift by the U.S. military: The Pentagon is transforming Guam, a U.S. territory closer to Beijing than to Honolulu, into an anchor of its strategy in the Pacific. The goal, military officials say, is to deter China’s increasingly powerful military from using force to take over Taiwan, the self-ruled island that Beijing claims as its own, and to show that the U.S. is ready to fight. The project is costly and logistically difficult, and must contend with a Chinese arsenal that now features upgraded versions of the DF-26, a missile known as the ‘Guam killer’.”
AI Bubble/Arms Race Watch:
October 15 – Financial Times (George Hammond): “Ten lossmaking artificial intelligence start-ups have gained close to $1tn in valuation over the past 12 months, an unprecedented increase that adds to fears about an inflating bubble in private markets that could spill over into the wider economy. OpenAI, Anthropic and Elon Musk’s xAI have seen their values marked up repeatedly over the past year amid a rush to back young AI companies. Smaller groups building AI applications have also surged, while established start-ups including Databricks have soared after embracing the technology. US venture capitalists have splashed $161bn over the year to date on a technology whose promise has not yet been matched by major economic gains. That equates to two-thirds of their total spend, according to PitchBook. The bulk of investment has been funnelled to just 10 AI groups — Perplexity, Anysphere, Scale AI, Safe Superintelligence, Thinking Machines Lab, Figure AI, Databricks, as well as OpenAI, Anthropic and xAI… ‘Of course there’s a bubble,’ said Hemant Taneja, chief executive of venture capital firm General Catalyst… ‘Bubbles are good. Bubbles align capital and talent in a new trend, and that creates some carnage but it also creates enduring, new businesses that change the world.’”
October 14 – Wall Street Journal (Steven Rosenbush): “AI companies are losing money at an epic pace, and the reasons go deeper than mere profligacy. The economics of artificial intelligence have turned sharply against them, at least for now, and for reasons that weren’t widely anticipated. You can’t blame people who believe a massive AI investment bubble is at risk of bursting… There are increasingly urgent concerns about massive capital spending, soaring valuations, high debt levels and the circular nature of AI firms pouring money into other AI firms. And sure, a handful of players would probably escape a sector collapse and go on to change the world, just like the dot-com survivors did. But even the most likely eventual winners in AI are losing billions of dollars right now.”
October 16 – Telegraph (Matthew Field): “Jensen Huang is one of the few chief executives to have led a business through the last great tech bubble. His start-up, Nvidia, went public in 1999, just months before the dotcom crash wiped $5tn from the stock market. His business lost around 85% of its value. Today, Huang is riding a fresh wave of tech euphoria. Nvidia is now worth more than $4.5tn thanks to its role as the chip supplier of choice to the artificial intelligence (AI) industry... Huang has estimated that between $3tn and $4tn will be spent on AI infrastructure by the end of the decade.”
October 16 – Bloomberg (Carmen Arroyo and Laura Benitez): “Mark Zuckerberg’s Meta Platforms Inc. is set to seal an almost $30 billion financing package for its data center site in rural Louisiana, marking the final step for the largest private capital deal on record. Blue Owl Capital Inc. and Meta will split ownership of the Hyperion data center site in Richland Parish, Louisiana, with the tech giant retaining just 20% of it… To finance the build-out, Morgan Stanley arranged over $27 billion of debt and about $2.5 billion of equity into a special purpose vehicle — a structure for large deals that’s becoming increasingly common.”
October 16 – Bloomberg (Aaron Weinman and Gowri Gurumurthy): “Alphabet Inc.-owned Google’s novel support on a $3.2 billion debt transaction for TeraWulf Inc.’s data center build-out has introduced a new tool to the burgeoning world of financing for artificial intelligence-linked infrastructure, and investors are champing at the bit to get a piece of the deal. Orders for the junk-bond sale were north of $10 billion, with investors latching onto the so-called ‘Google backstop’ for TeraWulf’s financing… Google’s support for the bond kicks in once the data center, located in Barker, New York, is operational and AI cloud platform Fluidstack begins its lease there…”
October 14 – Reuters (Arsheeya Bajwa): “An investor group, including BlackRock and Nvidia, will buy Aligned Data Centers from Macquarie Asset Management in a deal worth $40 billion…, as AI infrastructure expansion powers on. The deal underscores an intensifying race to expand the costly, supply-constrained infrastructure required to develop artificial intelligence technology, as companies rush to build sophisticated AI models.”
October 15 – Axios (Megan Morrone): “More people are concerned than excited about the rise of AI in daily life, with Americans topping the global worry list, per a new global report from Pew Research Center… Public concern over AI could shape how quickly the tools are adopted, and could upend workplaces if employees aren't comfortable with the changes. Half of U.S.-only respondents said they were more concerned with AI than excited about it in a study released in September. Wednesday’s report showed that only Italy matched the U.S. percentage of concern about AI. At the low end, 16% of people in South Korea and 19% of people in India say they're more concerned than excited.”
Bubble and Mania Watch:
October 17 – Bloomberg (Isabelle Lee): “When crypto prices were running hot, Wall Street pounced. Issuers rushed to file for a dizzying number of ETFs tied to altcoins — the volatile, thinly traded tokens that live on the speculative edge of digital finance. Then came the past week’s crash. Billions of dollars in market value has vanished as altcoins plunged, exposing just how illiquid and unstable many of these assets remain. Some tokens are down 70% over the past week, with bids disappearing as liquidity thinned. It’s a brutal reminder that large swaths of the digital asset world still resemble a financial wild west — even as product engineers race to repackage them for regulated markets. Roughly 130 ETF applications linked to smaller cryptocurrencies are now pending with the US Securities and Exchange Commission…”
October 14 – Reuters (Suzanne McGee): “Investors are directing money into U.S.-based exchange-traded funds at a rapid clip, pushing inflows so far this year across the $1 trillion line, State Street Investment Management said… That puts U.S. ETF inflows on pace to set a new annual record of as much as $1.4 trillion by the end of 2025, State Street said, with virtually every category benefitting from the torrent of new cash as investors continue to yank money out of traditional mutual funds in favor of lower-cost and more liquid ETFs… Last year, ETF flows reached the $1 trillion mark on December 11… Overall, assets in the U.S. ETF industry stood at $12.7 trillion at the end of September after 41 straight months of net inflows… Year-to-date, the pace of asset growth stands at nearly 23%, ETFGI said.”
October 10 – Wall Street Journal (Hannah Erin Lang and Anne Tergesen): “Gene Cao spends six days a week working at a Chinese restaurant near Tampa, Fla., dunking crab rangoons and chicken wings into the fryer. But his mornings, nights and lunch breaks are spent managing his six-figure stock portfolio. ‘In the beginning, I lost some money,’ said Cao, who started trading penny stocks on his phone as a teenager and dabbled in options. ‘It’s a learning experience.’ Now, the 25-year-old is hooked… Cao is part of a growing group of lower-earning investors who are flooding into financial markets at rates never seen before… Among Americans with incomes between $30,000 and $80,000, 54% now have taxable investment accounts. Half of those investors have entered the market in the last five years, according to a new survey of 2,750 adults by… Commonwealth and the BlackRock Foundation.”
October 15 – Bloomberg (Isabelle Lee and Sidhartha Shukla): “For much of this year, Bitcoin had been asserting itself as a new kind of portfolio diversifier on Wall Street — a digital counterpart to gold for mainstream investors looking to hedge against fiscal excess, inflation and more. Bitcoin exchange-traded funds were swelling with inflows, its price was setting records, and the idea that it could function as a modern store of value was edging closer to the financial mainstream. Then came a reminder of how fragile that promise remains. After last week’s violent selloff in digital assets, the same market that once symbolized independence from Wall Street looked indistinguishable from it — or worse. Bitcoin plunged, while smaller tokens and derivatives markets imploded as nearly $19 billion in leveraged bets were wiped out in less than a day. The rout left gold, once again, as the true haven in a world on edge.”
October 14 – Wall Street Journal (Peter Grant): “New York City’s office market is enjoying its biggest boom in nearly two decades… Businesses leased 23.2 million square feet of additional Manhattan office space during the first nine months of 2025, according to… CBRE Group. That is the largest amount of new workspace rented for that period in 19 years… Accounting and consulting company Deloitte signed one of the biggest leases this year when it rented nearly three-quarters of a new Hudson Yards skyscraper under development… Technology, media and advertising companies also gobbled up space this year, extending a recent run.”
Inflation Watch:
October 13 – Bloomberg (Katia Dmitrieva): “Americans are set to pay more than half of President Donald Trump’s tariff costs as companies raise prices, according to economists of Goldman Sachs… US consumers will likely shoulder 55% of tariff costs by the end of the year, with American companies taking on 22%, the Goldman analysts wrote… Foreign exporters would absorb 18% of tariff costs by cutting prices for goods, while 5% would be evaded… For now ‘US businesses are likely bearing a larger share of the costs’ as it takes time to raise prices, economists Elsie Peng and David Mericle wrote... ‘If recently implemented and future tariffs have the same eventual impact on prices as the tariffs implemented earlier this year, then US consumers would eventually absorb 55% of tariff costs.’”
October 15 – Bloomberg (Veena Ali-Khan and Naureen S Malik): “US households will see their winter electric bills climb by the most in three years, according to the Energy Information Administration. Average residential consumers are poised to spend $1,130 on electricity this year, a 4% increase from 2024, the agency said in its winter fuels outlook… Utility bills across the country have already been on the rise as the proliferation of AI data centers fuels a demand surge that’s raising prices for all consumers. In some regions, the cost of rebuilding infrastructure after extreme weather events is also driving up expenses.”
October 14 – Bloomberg (Gerry Smith): “JPMorgan… CEO Jamie Dimon said he expects the bank’s health costs to rise 10% next year, a sign of how employers are grappling with higher spending on medical services and prescription drugs… ‘We think it actually might be up another 10% in 2027 for a whole bunch of different reasons,’ Dimon said… The cost of health plans maintained by employers is expected to grow 8.5% next year, according to a PwC report… in July.”
Federal Reserve Watch:
October 15 – Bloomberg (Daniel Flatley): “Treasury Secretary Scott Bessent said he would present President Donald Trump with a list of candidates to serve as the next chair of the Federal Reserve in December. ‘Likely sometime after Thanksgiving, in December, we’ll present the president with three or four candidates for him to interview,’ Bessent told CNBC… Bessent said he’s culled the list of 11 candidates he interviewed to five.”
October 14 – Bloomberg (Amara Omeokwe, Alex Harris, and Maria Eloisa Capurro): “Federal Reserve Chair Jerome Powell signaled the central bank may stop shrinking its balance sheet in the coming months, an important shift necessary to preserve liquidity in overnight funding markets. The Fed chair also indicated labor-market prospects continue to worsen, a message that supports investors’ expectations for another interest-rate cut this month. ‘Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,’ Powell said…”
October 14 – New York Times (Colby Smith): “Jerome H. Powell, the chair of the Federal Reserve, signaled further room for the central bank to lower borrowing costs this year to shore up the labor market despite the recent re-acceleration in inflation. Mr. Powell… deviated little from his recent message that the Fed should be responsive to the slowdown in monthly jobs growth and other signs of softness across the labor market. While he conceded that economic activity was on a ‘somewhat firmer trajectory than expected,’ Mr. Powell stressed that ‘the downside risks to employment appear to have risen.’”
October 14 – Reuters (Howard Schneider): “The U.S. labor market remained mired in its low-hiring, low-firing doldrums through September, though the economy overall ‘may be on a somewhat firmer trajectory than expected,’ Federal Reserve Chair Jerome Powell said…, noting that policymakers will take a ‘meeting-by-meeting’ approach… ‘Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago’…”
October 16 – Bloomberg (Jonnelle Marte, Maria Eloisa Capurro, and Amara Omeokwe): “Federal Reserve Governor Christopher Waller said officials can keep lowering interest rates in quarter-percentage-point increments to support a faltering labor market, while Stephen Miran continued to advocate a larger reduction. ‘You don’t want to make a mistake, so the way to avoid that is to go cautiously or carefully and do 25, wait and see what happens, and then you can get a better idea of what to do,’ Waller said…”
October 15 – Bloomberg (Maria Eloisa Capurro and Amara Omeokwe): “Federal Reserve Governor Stephen Miran said recent trade tensions have increased uncertainty in the outlook for growth, making it more important for policymakers to lower interest rates quickly. ‘There’s now more downside risks than there was a week ago, and I think it’s incumbent upon us as policymakers to recognize that should get reflected in policy,’ Miran said… Higher uncertainty around trade policies between China and the US have introduced a ‘new tail risk,’ he said.”
October 16 – Reuters (Jamie McGeever): “Federal Reserve Governor Stephen Miran… said he was not concerned that easing monetary policy risks further inflating historically -- and in some cases record-high -- asset prices. ‘When I think about the financial condition that matters most in terms of the real economy it’s going to be ones related to housing, and those look a lot less easy,’ Miran told Reuters… ‘There are people who are concerned about that (asset price boom). I’m focused on inflation and maximum employment’… ‘There’s a lot of things that drive asset prices… Monetary policy is one of them, but also changes to fiscal policy, regulatory policy, global scenarios - there’s a lot of things that drive them.’”
October 13 – Reuters (Michael S. Derby and Howard Schneider): “In her first speech as head of the Philadelphia Federal Reserve, Anna Paulson said… rising risks to the job market argue for more interest rate cuts by the U.S. central bank… ‘Given my views on tariffs and inflation, monetary policy should be focused on balancing risks to maximum employment and price stability, which means moving policy towards a more neutral stance… Labor market risks do appear to be increasing - not outrageously, but noticeably. And momentum seems to be going in the wrong direction,’ so that now deserves to be the focus of policy, she said.”
October 13 – Wall Street Journal (Matt Grossman): “Price increases driven by tariffs will likely prove temporary, according to Philadelphia Fed President Anna Paulson, who also threw her support behind further interest-rate cuts this year as the Fed responds to a slowing labor market... ‘Here the lessons from economic theory are clear: So long as inflation expectations are anchored, increases in prices due to supply effects do not turn into an inflation problem,’ Paulson said.”
U.S. Economic Bubble Watch:
October 16 – CNBC (Jeff Cox): “President Donald Trump’s tariffs will cost global businesses upward of $1.2 trillion in 2025, with most of the cost being passed onto consumers, according to a new analysis from S&P Global… The firm said its estimate of additional expenses for companies is probably conservative. The price tag comes from information provided by some 15,000 sell-side analysts across 9,000 companies who contribute to S&P and its proprietary research indexes. ‘The sources of this trillion-dollar squeeze are broad. Tariffs and trade barriers act as taxes on supply chains and divert cash to governments; logistics delays and freight costs compound the effect,’ author Daniel Sandberg said... ‘Collectively, these forces represent a systemic transfer of wealth from corporate profits to workers, suppliers, governments, and infrastructure investors.’”
October 17 – Bloomberg (Nazmul Ahasan): “Applications for US unemployment benefits fell last week, according to analyses of unadjusted state-level filings released during the federal government shutdown. Initial claims decreased to about 215,000 in the week ended Oct. 11 from an estimated 234,000 in the prior week, according to a Bloomberg News analysis of the figures. Goldman Sachs… economists also saw a decline, estimating initial jobless claims totaled about 217,000 last week.”
October 13 – Bloomberg (Keith Naughton): “The average price of a new car in America topped $50,000 for the first time last month, driven by a surge in sales of expensive electric vehicles and luxury models. US car buyers paid an average of $50,080 for a new car in September, up 3.6% from a year ago, according to… the Kelley Blue Book car buying guide… ‘The $20,000-vehicle is now mostly extinct, and many price-conscious buyers are sidelined or cruising in the used-vehicle market,’ Erin Keating, executive analyst with KBB-parent Cox Automotive, said... ‘Today’s auto market is being driven by wealthier households.’”
October 15 – Bloomberg (Miguel Ambriz): “A rising number of Americans are trading in vehicles worth less than what they owe, the latest sign of stress in the automotive industry. Just over 28% of trade-ins toward new-car purchases carried negative equity, the highest level since the first quarter of 2021, according to… Edmunds.com. The amount owed on those so-called underwater loans was $6,905 in the latest quarter, a record high. The findings add to ominous developments in the auto market… Consumers have been struggling with high car prices, which climbed over $50,000 on average for the first time ever last month.”
October 16 – Axios (Emily Peck): “A key measure of CEO confidence dipped slightly lower into negative territory, according to a survey of executives… About two-thirds said they expect stagflation over the next year and a half. It’s a sign of the uncertain business environment — as leaders grapple with a constantly changing policy landscape, particularly around tariffs. By the numbers: Confidence dipped one point from the previous quarter, to 48, per… the Conference Board… an association of CEOs.”
October 14 – Reuters (Lucia Mutikani): “U.S. small-business sentiment declined in September amid expectations of unfavorable operating conditions in the next six months, and many owners reported raising prices or planning to, suggesting that inflation was poised to increase further. The National Federation of Independent Business said… its Small Business Optimism Index dropped 2.0 points to 98.8 last month. It was the first decline in three months.”
October 16 – Bloomberg (Michael Sasso): “Confidence among US homebuilders rose this month by the most since early 2024… An index of market conditions from the National Association of Home Builders and Wells Fargo increased 5 points in October to 37, the highest since April. A value below 50 means more builders see conditions as poor than good.”
October 15 – CNBC (Melissa Repko): “As the peak holiday shopping season approaches, most U.S. consumers have a downbeat outlook on the economy, according to an annual Deloitte survey… Most consumers surveyed — 57% — said they expect the economy to weaken in the year ahead… That compares with 30% who expected a weaker economy ahead of the year-ago holiday season and 54% in 2008, one of the years of the Great Recession. It marks the most negative economic outlook since Deloitte began tracking that in 1997. Seventy-seven percent of people surveyed said they expect higher prices on holiday items, up from 69% last year…”
China Watch:
October 14 – Financial Times (Thomas Hale): “China’s economy remained mired in deflation last month… The producer price index, which measures factory gate prices and has been negative for three straight years, last month declined 2.3% year on year, compared with a 2.9% drop in August. China’s consumer price index fell 0.3%, marginally less than economist forecasts, after a 0.4% decline last month. The index has been positive in only two months this year.”
October 12 – Reuters (Joe Cash): “China's export growth picked up pace in September, buoyed by manufacturers finding buyers in markets beyond the U.S. as a tariff deal with President Donald Trump remained elusive… Outbound shipments from the world’s second-largest economy rose an annual 8.3% last month…, up from a 4.4% gain in August…”
Central Bank Watch:
October 13 – Bloomberg (Craig Stirling): “Central bankers, already uneasy about trade tensions and swelling public debt, will collectively confront a new worry in the coming week: the danger of a market crash. Global policymakers and finance ministers will gather in Washington for the International Monetary Fund/World Bank fall meetings after a chorus of warnings that a stock bubble focused on artificial intelligence companies might burst before long. Kristalina Georgieva, the fund’s managing director, acknowledged the financial stability risk… ‘Valuations are heading toward levels we saw during the bullishness about the internet 25 years ago… If a sharp correction were to occur, tighter financial conditions could drag down world growth, expose vulnerabilities, and make life especially tough for developing countries.’”
October 14 – Bloomberg (Mark Schroers and Laura Noonan): “European Central Bank Governing Council member Martin Kocher advised against too drastic a move to loosen bank regulation at present, given the market backdrop. Questioned at the Bloomberg Global Regulatory Forum in New York on whether potential asset bubbles speak against a major shift to ease rules on lenders right now, the Austrian governor agreed. ‘You’re right — at the moment, a large-scale deregulation would not be appropriate… That doesn’t mean that there is a lot of room to actually simplify. And I think that’s the distinguishing distinction we have to make at some stage.’”
France/Europe Watch:
October 12 – Financial Times (Natacha Valla): “France is about to become a quiet but decisive test for Europe’s markets. The country has long been considered a core anchor of the euro area: too big to fail, too integrated to falter. Yet, that assumption will now be tested. The political fragmentation is unprecedented in the Fifth Republic. With secular fiscal drift and muted growth, France will become the next barometer of investor confidence in Europe’s ability to manage political risk. For now, the market reaction remains contained but this apparent calm masks a deeper, slow repricing of sovereign risk… But, as often in such environments, a liquidity event can spark more abrupt adjustments.”
Japan Watch:
October 15 – Bloomberg (Sakura Murakami and Yoshiaki Nohara): “Japanese ruling party leader Sanae Takaichi’s chances of becoming prime minister strengthened after progress on policy talks with the Japan Innovation Party, with Monday emerging as a deadline for deciding whether the parties form a new coalition. The Liberal Democratic Party and the Osaka-based JIP, also known as Ishin, confirmed they are on the same page on major policy items. But one major sticking point remains in place: reforms on political funding rules. That’s the very issue that ended the LDP’s quarter-century coalition with Komeito last week.”
October 14 – Bloomberg (Alastair Gale, Sakura Murakami, and Yoshiaki Nohara): “Less than a year ago, Yuichiro Tamaki was fighting to retain the leadership of his own opposition party amid reports of an extramarital affair. Now, the 56-year-old athletics fan is in the running to lead the nation, with the identity of the next administration largely in his grasp. The collapse of the ruling coalition last week has catapulted Tamaki into a position where he could become prime minister with the support of three opposition parties…”
October 15 – Bloomberg (Toru Fujioka): “Bank of Japan Board Member Naoki Tamura called for raising interest rates as he sees increasing upside inflation risks… ‘I believe that the bank is now in the phase of deciding on raising its policy interest rate,’ Tamura said… ‘Thereby adjusting the degree of monetary accommodation and setting the rate a little closer to the neutral interest rate.’”
Emerging Market Watch:
October 14 – Bloomberg (Rachel Gamarski, Gerson Freitas Jr, and Giovanna Bellotti Azevedo): “Mounting concerns over Brazilian corporate debt have spread to the nation’s largest biofuel producer, triggering a slump in its bonds as investors slash exposure to risky borrowers in Latin America’s biggest economy after being burned by two sudden routs. Bonds of Raízen SA — a sugar and ethanol joint venture owned by Shell Plc and Brazilian conglomerate Cosan SA — have plunged almost 19% in the past week, with its $1 billion of notes due 2035 falling to record lows.”
Levered Speculation Watch:
October 16 – Financial Times (Amelia Pollard and Costas Mourselas): “Top traders at some of the biggest hedge funds are taking home almost a quarter of the profits they make for investors, according to a Goldman Sachs report, as the likes of Citadel and Millennium extend their hold over the industry. A war for talent between multi-manager hedge funds has pushed up pay in the industry, with firms luring traders with packages that can be worth more than $100mn. Goldman said that managers at the highest paying firms had this year secured payouts worth 24.5% of the profits they made for investors… Hedge funds have evolved from a structure where star traders from banks, trading firms and asset managers would strike out on their own to one increasingly dominated by goliaths that house hundreds of portfolio managers and their teams of analysts trading a full spectrum of assets. Multi-managers have captured more than $425bn in assets, Goldman said, up more than a third since… 2022.”
Social, Political, Environmental, Cybersecurity Instability Watch:
October 12 – Reuters (Alison Withers): “Global warming is crossing dangerous thresholds sooner than expected with the world’s coral reefs now in an almost irreversible die-off, marking what scientists… described as the first ‘tipping point’ in climate-driven ecosystem collapse. The warning in the Global Tipping Points report by 160 researchers worldwide, which synthesizes groundbreaking science to estimate points of no return, comes just weeks ahead of this year's COP30 climate summit being held at the edge of the Amazon rainforest in Brazil… ‘Change is happening fast now, tragically, in parts of the climate, the biosphere,’ said environmental scientist Tim Lenton at the University of Exeter, who is the lead author of the report.”
October 16 – Bloomberg (Margi Murphy, Patrick Howell O'Neill and Jordan Robertson): “A potentially ‘catastrophic’ breach of a major US-based cybersecurity provider has been blamed on state-backed hackers from China... Seattle-based F5 Inc. disclosed on Wednesday morning in a regulatory filing that nation-state hackers had breached its networks and gained ‘long-term, persistent access’ to certain systems. The intruders stole files including portions of source code from the company’s BIG-IP suite of application services, which are widely used by Fortune 500 companies and government agencies, in addition to details about some flaws that could be used to target the company’s customers.”
October 14 – Bloomberg (Alex Wickham): “The UK urged corporate bosses to protect their businesses against cyber attacks, after a spate of high-profile incidents targeting companies from Jaguar Land Rover to Marks and Spencer Group Plc that it said represent just a fraction of the known threats. ‘Recent high-profile cyber incidents show how attacks can seriously disrupt operations and damage profitability,’ ministers including Chancellor of the Exchequer Rachel Reeves and Business Secretary Peter Kyle said in the letter…”
October 13 – Bloomberg (Renata Carlos Daou): “Wildfire disasters are becoming more frequent and severe globally, costing more human lives and racking up more economic damage than in previous decades, according to a new study by the University of Tasmania. The researchers… found over 43% of the costliest fires since 1980 happened in the past 10 years. ‘We’re now seeing societal effects of fire that are much larger than ever before, fueled by climate change,’ Calum Cunningham, research fellow at the Fire Center at the University of Tasmania, said.”
Geopolitical Watch:
October 15 – Wall Street Journal (Melissa Skorka): “South Asia is a powder keg. Afghanistan’s Defense Ministry last week accused Pakistan—once the patron of the Taliban, who now rule Afghanistan—of launching cross-border airstrikes and ‘breaching the skies’ of Kabul. Islamabad contends the relationship broke down because of the threat to Pakistan from terrorists operating out of Afghanistan. A Pakistani security official told Reuters that Islamabad had targeted the Pakistani Taliban’s leader in its strikes. The same day as the airstrikes, India announced it would re-establish its embassy in Kabul—New Delhi’s boldest engagement with the Taliban government in four years.”
October 12 – Associated Press (Riaz Khan): “Afghanistan said… it killed 58 Pakistani soldiers in overnight border operations, in response to what it called repeated violations of its territory and airspace. Pakistan’s army gave far lower casualty figures, saying 23 troops were killed… The Taliban government’s chief spokesman, Zabihullah Mujahid, said Afghan forces have captured 25 Pakistani army posts, leaving 30 Pakistani soldiers wounded.”