Bloomberg: “Bessent Urges Fed to Lower Rates by 150 Basis Points or More.” NYT: “Trump, Seeking Friendlier Economic Data, Names New Statistics Chief.” WSJ: “The Partisan Economist Trump Wants to Oversee the Nation’s Data.” CNBC: “Trump threatens Fed chair Powell with ‘major lawsuit,’ demands interest rate cut.” Reuters: “Trump’s attack on Goldman could prompt watering down of Wall Street’s independent analysis.” AP: “Trump says he’s placing Washington police under federal control and activating the National Guard.” AP: “US July budget deficit up 20% year-over-year despite record Trump tariff income.” Bloomberg: “Volatility Gauges Sink to Year’s Lows Across Markets.” Bloomberg: “US Corporate Bond Spreads Sink to 27-Year Low as ‘FOMO’ Sets In.” FT: “Investors are frogs in a Trumpian pot.”
Tuesday, November 3rd, 2026. Less than 15 months away, next year’s midterms will be one epic dogfight. “Newsom unveils California redistricting effort to counter Trump-backed push in Texas.” California’s governor Thursday announced his “fight fire with fire” plan for countering Republican redistricting measures in Texas, Florida, Ohio, Missouri and elsewhere. Listening to Gavin Newsom’s press conference, my thoughts returned to Alan Greenspan, of all people.
Between July 3, 1990, and September 1992, the Greenspan Fed slashed rates 525 bps to a then extraordinary 3.00%. The fiscal deficit had surged to $270 billion, or almost 4.5% of GDP. Costs for the S&L crisis had ballooned to $300 billion, as the collapse of the late eighties (“decade of greed”) Bubble posed a major risk to the U.S. banking system, along with federal finances. Greenspan orchestrated a steep yield curve, allowing banks to borrow cheap and lend dear – a surreptitious recapitalization that avoided a costly and likely destabilizing banking system federal bailout.
As much as it appears otherwise, there is no free lunch in (cheap) finance. Greenspan’s operation launched a fledging hedge fund industry, managing tens of billions to what has ballooned to $33.5 TN of assets under management (Bloomberg’s calculation surely understates total global levered speculative positions).
Alan Greenspan, the free markets ideologue, became spellbound by his newfound capacity to instantaneously stimulate markets with a mere comment. The traditional monetary policy transmission mechanism, which had operated (inherently slowly) through adjustments in policy rates, reserves and bank lending, had been supplanted. The leveraged speculating community has been easily incentivized for “risk on” levered securities and derivatives trading, with virtually immediate impacts on financial conditions, securities and asset prices, and economic confidence.
Such power is intoxicating. What started as seemingly warranted support for an impaired financial system and fragile economy morphed into policymaking held hostage by increasingly powerful Bubble Dynamics. Stoked by rates cuts and the Mexico bailout, the S&P500 returned 24% for the year up to December 4th, 1996. Greenspan proclaimed “irrational exuberance” on December 5th, and markets turned only more irrational. What followed was a series of ever greater Bubble excesses and burst Bubble crises. Reflationary policy measures regressed from aggressive asymmetrical rate cuts, to 2008’s trillion-dollar QE, to the pandemic’s $5 TN “money printing” fiasco. And with each iteration, leveraged speculation became only more expansive and powerful.
So what, you might ask, does my briefest of Bubble histories have to do with Gavin Newsom and an epic midterm dogfight? The Bubble’s fate will basically dictate whether the Trump administration’s (“Orbanesque”) breakneck implementation of their maximalist, authoritarian, nationalistic, protectionist agenda runs unchecked. Bubble holds, boom times ensure Republicans hold the House and Senate. Like never before, markets and Bubbles have become partisan issues. Will the leveraged speculating community continue to accommodate the Trump agenda?
So long as financial conditions remain so extraordinarily loose – fueling equities, high-risk lending, AI, crypto and the like - I have little doubt that the administration’s pro-growth and pro-Bubble policy course will bear fruit. It’s been six months, and Bubble excess continues to fuel strong gains for the wealthy and more fortunate segments of society. Whether the working class and MAGA over the next 15 months feel they’re benefiting equitably remains to be seen. Bubbles notoriously distribute wealth inequitably – especially late in the cycle.
The administration will have the pedal to the metal. Stocks this week inflated further into record territory. July Retail Sales were reported up a solid 0.5%, with a big upward June revision (to 0.9% from 0.6%) providing further confirmation of an economy strengthening into quarter end. Small Business Optimism (100.3 v. 98.6) was stronger-than-expected. Jobless claims (224k) remain at a historically low level, while the August Empire Manufacturing Index jumped to the highest reading since November. At a discouraging $291 billion, July’s federal deficit was $50 billion above forecast.
Pedal to the metal - with inflation already elevated and tariffs taking effect - poses clear inflationary risk. “Bets on Outsize Fed Cut Gain Steam as CPI Data Backs Doves.” It was a curious reaction to a mixed consumer price report. The rates market quickly lowered expectations for the December policy rate eight bps to 3.69% (64 bps of rate reduction) on the CPI report, but not mixed producer price inflation had the market pricing 3.78% (55bps reduction) by the week’s close. Market sentiment was not helped by University of Michigan August (preliminary) one-year inflation expectations jumping five tenths to 4.9%.
August 12 – Bloomberg (Enda Curran): “Treasury Secretary Scott Bessent suggested that the Federal Reserve ought to be open to a bigger, 50 basis-point cut in the benchmark interest rate next month, after having skipped a move at the last meeting. ‘The real thing now to think about is should we get a 50 bps rate cut in September,’ Bessent said in an interview on Fox Business…”
August 13 – Bloomberg (Daniel Flatley, Jonathan Ferro, and Annmarie Hordern): “US Treasury Secretary Scott Bessent made his most explicit call yet for the Federal Reserve to execute a cycle of interest-rate cuts, suggesting the central bank’s benchmark ought to be at least 1.5 percentage points lower…. ‘I think we could go into a series of rate cuts here, starting with a 50 bps rate cut in September,’ Bessent said… ‘If you look at any model’ it suggests that ‘we should probably be 150, 175 bps lower’… ‘I suspect we could have had rate cuts in June and July,’ Bessent said… Treasury secretaries have typically shied away from making specific calls on Fed rates, and Bessent has said for months he would only discuss the central bank’s past policy decisions — not their upcoming ones.”
August 14 – Bloomberg (Daniel Flatley): “US Treasury Secretary Scott Bessent said he isn’t calling for a series of interest-rate cuts from the Federal Reserve, just pointing out that models suggest a ‘neutral’ rate would be about 1.5 percentage points lower. ‘I didn’t tell the Fed what to do,’ Bessent said… in an interview on Fox Business, referring to his comments a day before… ‘what I said was that to get to a neutral rate on interest, that that would be approximately a 150-bps cut.’”
Treasury Secretary Bessent crossed the line, this week directly participating in the administration’s monetary policy meddling. And there may be a model that backs into a 2.8% fed funds rate, but it would be an outlier. Bessent undermines his credibility to suggest that “any model” would point these days to a 150/175 bps lower policy rate. According to Bloomberg calculations, the widely recognized “Taylor Rule suggests rates could be slightly higher than current levels.” Perhaps Powell and the FOMC aren’t Bessent’s target audience.
The administration is aggressively pursuing a pro-growth/pro-Bubble agenda, while implementing a radical tariff regime. Boosting oil production by 3 million barrels/day is part of Bessent and the administration’s “three arrow” plan, with lower energy prices to help contain inflation. Director of the White House Council of Economic Advisers – and Fed Governor nominee – Stephen Miran was out again this week propagandizing the party line: “There just still continues to be no evidence whatsoever of any tariff-induced inflation.”
An upside inflation surprise could really muck things up. Despite lower energy prices, tariffs coupled with an uptick in growth raise the odds of higher inflation. There were inklings in the CPI data, and more than inklings in elevating producer prices. The administration’s argument will soon shift from “no evidence” to tariff-related price increases are one-off and not inflationary.
The bond vigilantes lurk. And when the Treasury Secretary talks of 150-175 bps lower policy rates, I assume he’s speaking to the leveraged speculating community: Don’t get nervous over a temporary inflationary blip with significantly lower funding costs on the horizon. “Basis trade” and “carry trade” players – hang tough; we’ve got this. Help is on the way.
Pondering the administration’s elaborate scheme, my thoughts return to an outstanding April Financial Times article, “How the Treasury Market Got Hooked on Hedge Fund Leverage” (Robin Wigglesworth, Kate Duguid, Costas Mourselas and Ian Smith): “The gross US government bond holdings of all hedge funds that report to the SEC stood at nearly $3.4tn at the end of 2024, and has roughly doubled just since the beginning of 2023.”
“The Maestro” unleashed incredible power back in the nineties. Over three decades of historic Bubble excess later, leveraged speculation has ballooned to the point of becoming the key source of finance for the U.S. Treasury and governments around the world. Securities leverage has become fundamental to funding uncontrolled deficit spending; the primary source of liquidity overabundance fueling epic speculative asset Bubbles around the world; and the marginal source of finance underpinning perilously maladjusted Bubble Economies globally. Importantly, it was only a matter of time before politicians began to wrest control of this insanely powerful financial apparatus away from central bankers.
August 12 – Bloomberg (Josh Wingrove and Joe Mathieu): “President Donald Trump said he is weighing a lawsuit against Federal Reserve Chair Jerome Powell over the renovation of the central bank’s headquarters… Trump… resumed his criticism of the Fed chair over the central bank’s decision to hold interest rates steady and again hammered Powell over the renovation work. ‘The damage he has done by always being Too Late is incalculable. Fortunately, the economy is sooo good that we’ve blown through Powell and the complacent Board… I am, though, considering allowing a major lawsuit against Powell to proceed because of the horrible, and grossly incompetent, job he has done in managing the construction of the Fed Buildings.’”
In one way or another, the Trump administration will move to seize control of monetary policy. They surely view that controlling the levers for incentivizing levered speculation is an imperative for sustaining speculative Bubbles, economic expansion, and political control.
Their radical agenda and approach have already unnerved traditional investors internationally. The dollar index is down about 10% y-t-d, while data and myriad anecdotes point to central bank and institutional Treasury liquidations. It’s reasonable to assume that waning international demand has been offset by only greater levered holdings of Treasuries and agency securities.
Market structure indicates extraordinary market vulnerability. Can the administration sustain leveraged speculating community risk embracement? Will serious de-risking/deleveraging be held at bay?
The Treasury market has of late deflected what would have normally been troubling developments (i.e. tariffs, inflation, deficits, attacks on Fed independence, state interventionism, BLS firing…). Confidence has held that looser monetary policy is imminent. The “Trump put” is the markets’ reliable first line of defense, with the “Fed put” – lower rates and open-ended QE liquidity – available when things turn dicey.
Much has changed since Alan Greenspan was the exclusive conductor of the leveraged speculating community. Especially after 16 years of global government finance Bubble excess, speculative leverage permeates international markets and the entire global financial system. Even if the administration commandeers the Fed and U.S. monetary policy, there are international factors that significantly impact the leveraged speculating community and markets more generally.
Hats off to Treasury bonds this week. Ten-year yields rose a mere four bps (to 4.32%), despite CPI, PPI, Retail Sales, a huge July federal deficit, EJ Antoni, and such. Meanwhile, bonds globally showed signs of buckling under the pressure.
August 15 – Bloomberg (Alice Atkins): “European bonds extended declines at the long-end… German 30-year yields climbed eight basis points to 3.35%, while their French peers rose 10 basis points to 4.32%, both the highest levels since 2011. Gilts tracked the moves with 30-year yields up as much as 8bps to 5.57%, the highest level since May. German 10-year yields rose 7bps to 2.78%, the highest levels since March.”
August 12 – Bloomberg (Momoka Yokoyama and Masaki Kondo): “Japan’s five-year government bond auction saw the lowest demand since 2020 amid the prospect of tighter monetary policy and renewed concerns over poor market liquidity. The sale nudged bond prices lower across maturities… The bid-to-cover ratio was 2.96, compared with 3.54 at the prior sale and the 12-month average of 3.74.”
August 13 – Bloomberg (Julia Zhong and Shulun Huang): “A selloff in China’s bond market is accelerating, sending futures on ultra-long debt to a four-month low as a bull run in local stocks builds momentum. Futures on 30-year sovereign notes fell as much as 0.7% Thursday, extending this week’s drop to 1.5% at the low as a gauge of onshore equities reached its highest point since October.”
Japanese 10-year JGB yields jumped eight bps this week to 1.57%, boosting 2025’s yield gain to 47 bps. Forty-year JGB yields rose another three bps to 3.32% - increasing the y-t-d yield rise to 70 bps. UK 10-year gilt yields rose nine bps to 4.70% - the high since May, and within 19 bps of January’s spike to the highest yield since before the 2008 crisis.
August 13 – Bloomberg (Caleb Mutua): “A key measure of US corporate-bond valuations surged to the highest level in nearly three decades as investors raced to lock in still-elevated yields amid speculation that the Federal Reserve will resume cutting interest rates next month. The extra yield that investors receive for owning investment-grade corporate bonds instead of Treasuries shrunk to just 73 bps Friday, the lowest since 1998, according to Bloomberg index data.”
I do take note of global bonds trading as if yields could make a surprising lurch higher, while U.S. investment-grade spreads trade to “the lowest since 1998” – during carefree summertime days leading up to cataclysmic Long-Term Capital Markets/Russia meltdown.
On a related subject, there are unfolding AI developments worthy of mention. The historic AI mania and arms race are sucking up enormous amounts of finance. They become only more acutely vulnerable to de-risking/deleveraging. There are other significant festering risks, including energy limitations and “AI delusion.” AI concerns could provide a catalyst for general market de-risking.
August 14 – Financial Times (Richard Waters): “Much of the investment world’s excitement about artificial intelligence lies in its potential to make life more efficient and productive. If the technology yields better search engines, easier ways to shop or AI agents that can organise and book your next holiday, huge digital markets could be up for grabs. But what if millions of people are yearning for something more personal and profound from AI — and, in many cases, what if they are already starting to find it? As conversing with a chatbot becomes a common daily activity, tech companies have been waking up to unexpected new behaviours on the part of their users, and to the deeper levels of attachment this is causing. Rather than just a useful digital tool, many people are starting to treat AI as therapist, life coach, creative muse or just someone to talk to. Soon, according to OpenAI chief executive Sam Altman, ‘billions of people’ will be trusting ChatGPT to advise them on ‘their important life decisions’.”
August 8 – New York Times (Kashmir Hill and Dylan Freedman): “For three weeks in May, the fate of the world rested on the shoulders of a corporate recruiter on the outskirts of Toronto. Allan Brooks, 47, had discovered a novel mathematical formula, one that could take down the internet and power inventions like a force-field vest and a levitation beam. Or so he believed. Mr. Brooks, who had no history of mental illness, embraced this fantastical scenario during conversations with ChatGPT that spanned 300 hours over 21 days. He is one of a growing number of people who are having persuasive, delusional conversations with generative A.I. chatbots that have led to institutionalization, divorce and death. Mr. Brooks is aware of how incredible his journey sounds. He had doubts while it was happening and asked the chatbot more than 50 times for a reality check. Each time, ChatGPT reassured him that it was real.”
August 14 – Bloomberg (Naureen S. Malik): “Data centers looking to connect to the largest US grid must bring their power supply, the system’s independent watchdog said. The warning escalates the watchdog’s position from just a month ago when it said the grid operated by PJM Interconnection LLC, stretching across 13 states from Virginia to Illinois, has no spare supply for new data centers… However, in its quarterly report…, watchdog Monitoring Analytics LLC said it ‘recommends that large data centers be required to bring their own generation.’”
For the Week:
The S&P500 increased 0.9% (up 9.7% y-t-d), and the Dow rose 1.7% (up 5.6%). The Utilities declined 0.8% (up 12.9%). The Banks added 1.3% (up 12.2%), while the Broker/Dealers were unchanged (up 29.1%). The Transports advanced 2.1% (down 1.5%). The S&P 400 Midcaps rose 1.6% (up 1.7%), and the small cap Russell 2000 jumped 3.1% (up 2.5%). The Nasdaq100 added 0.4% (up 12.8%). The Semiconductors gained 1.3% (up 15.5%). The Biotechs surged 5.9% (up 5.0%). While bullion dropped $62, the HUI gold index increased 0.7% (up 72.8%).
Three-month Treasury bill rates ended the week at 4.1225%. Two-year government yields slipped a basis point to 3.75% (down 49bps y-t-d). Five-year T-note yields were unchanged at 3.84% (down 55bps). Ten-year Treasury yields increased four bps to 4.32% (down 25bps). Long bond yields rose seven bps to 4.92% (up 14bps). Benchmark Fannie Mae MBS yields were unchanged at 5.46% (down 38bps).
Italian 10-year yields jumped 11 bps to 3.59% (up 7bps y-t-d). Greek 10-year yields rose 10 bps to 3.43% (up 21bps). Spain's 10-year yields gained nine bps to 3.35% (up 29bps). German bund yields jumped 10 bps to 2.79% (up 42bps). French yields surged 12 bps to 3.47% (up 27bps). The French to German 10-year bond spread widened two to 68 bps. U.K. 10-year gilt yields rose nine bps to 4.70% (up 13bps). U.K.'s FTSE equities index increased 0.5% (up 11.8% y-t-d).
Japan's Nikkei 225 Equities Index surged 3.7% (up 8.7% y-t-d). Japanese 10-year "JGB" yields jumped eight bps to 1.57% (up 47bps y-t-d). France's CAC40 to gained 2.3% (up 7.4%). The German DAX equities index increased 0.8% (up 22.4%). Spain's IBEX 35 equities index advanced 3.1% (up 31.8%). Italy's FTSE MIB index jumped 2.5% (up 24.8%). EM equities were mostly higher. Brazil's Bovespa index added 0.3% (up 13.4%), and Mexico's Bolsa index increased 0.4% (up 17.8%). South Korea's Kospi added 0.5% (up 34.4%). India's Sensex equities index increased 0.9% (up 2.7%). China's Shanghai Exchange Index gained 1.7% (up 10.3%). Turkey's Borsa Istanbul National 100 index declined 0.9% (up 10.6%).
Federal Reserve Credit increased $2.5 billion last week to $6.595 TN. Fed Credit was down $2.294 TN from the June 22, 2022, peak. Over the past 309 weeks, Fed Credit expanded $2.869 TN, or 77%. Fed Credit inflated $3.784 TN, or 135%, over the past 666 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $24.6 billion last week at $3.204 TN - the low back to March 2017. "Custody holdings" were down $92 billion y-o-y, or 2.8%.
Total money market fund assets jumped $33.3 billion to a record $7.186 TN. Money funds were up $998 billion, or 16.1%, y-o-y.
Total Commercial Paper declined $7.6 billion to $1.390 TN. CP has expanded $303 billion y-t-d and $148 billion, or 11.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined five bps to 6.58% (up 9bps y-o-y). Fifteen-year rates dipped four bps to 5.71% (up 5bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down eight bps to 6.73% (down 33bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.3% to 97.852 (down 9.8% y-t-d). For the week on the upside, the Norwegian krone increased 0.9%, the South Korean won 0.9%, the British pound 0.8%, the Brazilian real 0.6%, the euro 0.5%, the Japanese yen 0.4%, the Swedish krona 0.2%, the Singapore dollar 0.2%, and the Swiss franc 0.2%. On the downside, the Mexican peso declined 1.0%, the New Zealand dollar 0.6%, the Canadian dollar 0.4%, the Australian dollar 0.2%, and the South Korean won 0.2%. The Chinese (onshore) renminbi slipped 0.06% versus the dollar (up 1.60% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index declined 0.4% (up 1.6% y-t-d). Spot Gold fell 1.8% to $3,336 (up 27.1%). Silver declined 0.9% to $38.001 (up 31.5%). WTI crude dropped $1.08, or 1.7%, to $62.80 (down 12%). Gasoline declined 0.7% (up 2%), and Natural Gas dropped 2.5% to $2.916 (down 19.3%). Copper rose 1.9% (up 13%). Wheat fell 1.6% (down 8%), while Corn increased 0.3% (down 16%). Bitcoin gained $1,200, or 1.0%, to $117,600 (up 25.5%).
Market Instability Watch:
August 13 – Bloomberg (Alice Gledhill): “Across equity, bond and currency markets, gauges of volatility are slumping to their lowest levels of the year. The Cboe Volatility Index, which measures the expected 30-day volatility for the S&P 500 — and dubbed Wall Street’s fear gauge — just fell to its lowest since December. A similar index for global currencies is the weakest in a year, while a gauge for US Treasuries is at levels last seen in early 2022.”
August 13 – Bloomberg (Lynn Thomasson and Sagarika Jaisinghani): “Traders are snapping up risky assets of all stripes in the hope that falling US interest rates will add rocket fuel to an economy that’s so far been able to withstand the effects of Donald Trump’s trade war… Across global markets, everything from volatility indexes to speculative European bank bonds to crypto is underscoring a sense of confidence about corporate profits and global economic growth… ‘The mood is surprisingly bullish; it’s almost like ‘what tariffs, who cares?’ said Neil Birrell, chief investment officer at Premier Miton Investors. ‘There’s this detachment from economic reality on what’s happening and there’s a wave of either optimism or exuberance in equity markets.’”
August 12 – Axios (Courtenay Brown and Emily Peck): “No longer are America’s most important economic institutions politically untouchable. Econ wonks — those far more comfortable with large datasets than the inner dealings of Washington — won’t just question the significance of indicators or policy decisions. Now they will wonder whether they can trust if data, or monetary policy conclusions, reflect reality or political motivations. President Trump said… he would nominate Heritage Foundation economist E.J. Antoni to lead the Bureau of Labor Statistics.”
August 11 – Reuters (Anirban Sen and Carolina Mandl): “Monthly U.S. inflation data is under increased scrutiny after President Donald Trump removed the head of the U.S. Bureau of Labor Statistics, a move that could undermine confidence in the $2.1-trillion market for Treasury debt designed to protect against inflation… Investors are likely to demand higher compensation to hold TIPS, or Treasury Inflation-Protected Securities, whose value is linked to the CPI, and raise the federal government’s cost of funding itself, analysts said. Rises in TIPS yields could be exacerbated by poorer liquidity compared to the much larger market for nominal Treasuries.”
August 13 – Associated Press (Josh Boak): “‘Depressing.’ ‘CRAZY!!’ That’s how staff at the Bureau of Labor Statistics reacted after President Donald Trump fired its commissioner, Erika McEntarfer… The emails… suggest an agency with little of the corrupting partisanship that Trump had claimed. He called the report ‘phony’ and ‘rigged’ after it indicated a paltry 73,000 jobs were added in July and after downward revisions that showed 258,000 fewer jobs were added in May and June than previously reported. After the commissioner’s firing, BLS employees talked about the importance of accurate numbers and professional integrity in producing data that is foundational for measuring the economy and holding elected officials accountable for how the nation performs.”
August 12 – Financial Times (Myles McCormick and Claire Jones): “Donald Trump’s sacking of the Bureau of Labor Statistics’ boss after a grim jobs report this month sparked investor fears that he was politicising the world’s most closely watched economic data. Trump’s pick to lead the BLS, EJ Antoni, a fierce loyalist and cheerleader for the president’s tariffs and economic strategy, has only deepened the anxiety. ‘The hope was that he would pick someone… who people would have trust in and could lead the BLS in an appropriate way, with relevant experience and, ideally, not hyper-partisan,’ said Stan Veuger, senior fellow at the right-leaning American Enterprise Institute think-tank. ‘EJ Antoni is really the opposite of that.’ ‘Even the people who may be somewhat sympathetic to his economic policy views don’t think he’s qualified,’ added Veuger.”
August 13 – Financial Times (Ian Smith, Leila Abboud and Amy Kazmin): “France’s long-term borrowing costs are converging with Italy’s for the first time since the global financial crisis, as nervous bond investors put the EU’s second-biggest economy on a level with a country that has been one of its most troubled borrowers. Yields on 10-year French government bonds have jumped above 3% over the past year… This has brought France’s benchmark borrowing costs to just 0.14 percentage points less than those of Italy... The convergence has upended long-held views on France’s position as one of the region’s safest borrowers and Italy as one of its most risky, with a huge stock of public debt equal to about 140% of GDP. Italy’s ‘spread’ over France… ballooned to more than 4 percentage points during the Eurozone debt crisis of the 2010s.”
August 12 – Bloomberg (Hidenori Yamanaka): “Japan’s current benchmark 10-year government bond wasn’t traded at all on Tuesday, the first such instance in more than two years… While light trading had been expected in Tokyo... it is a reminder of the poor liquidity that has been a feature of the Japanese bond market in recent months.”
Global Credit and Financial Bubble Watch:
August 12 – Bloomberg (Kevin Kingsbury): “As three US leveraged loans have lender commitments due Tuesday, this month has already notched a record for August launches even as activity has begun to slow. New deals through Monday totaled $48.6 billion, topping August 2017’s $45.6 billion…”
August 12 – Bloomberg (Jeannine Amodeo and Rachel Graf): “Call it the summer of 175. A hefty number of leveraged loans have priced at rock-bottom levels lately, a sign of growing froth in the market. Investors typically consider 1.75 percentage points over the benchmark as the floor for participation, but some even priced a bit lower. About 16 loans priced at this tight level from June 1 through Aug. 12, more than double the amount seen during the prior-year period…”
August 12 – Bloomberg (Rene Ismail): “The share of private credit borrowers that deferred at least some of their cash interest payments surged in the second quarter to the highest in almost four years, pointing to growing stress in the $1.7 trillion market, according to… valuation firm Lincoln International. The percentage of debt investments with some sort of payment-in-kind increased to 11.4% in the quarter… That compares with 7.4% in the third quarter of 2021, when the firm began tracking the data.”
August 8 – Financial Times (Will Schmitt and Ian Smith): “Investors are scooping up funds holding the debt of highly rated US companies at the fastest rate in almost five years, underscoring how markets remain sanguine despite signs the American economy is cooling. US exchange traded funds and mutual funds holding investment grade bonds recorded roughly $11.6bn of inflows from July 30 to August 6... That marked the fifth highest weekly inflow on record and the most since late 2020, according to JPMorgan.”
August 14 – Reuters (Matt Tracy): “A growing number of U.S. companies are seeking more flexible covenants in their credit agreements to increase their debt loads while avoiding approvals from all their existing lenders, according to… Moody’s… Moody’s said in a report… that U.S. corporate borrowers with weaker credit profiles were leaning harder on their lenders to get more flexibility in agreements to take out more debt without full consent from existing lenders, as they struggled to issue new debt in public markets.”
Trump Administration Watch:
August 11 – Wall Street Journal (Greg Ip): “A generation ago conventional wisdom held that as China liberalized, its economy would come to resemble America’s. Instead, capitalism in America is starting to look like China. Recent examples include President Trump’s demand that Intel’s chief executive resign; the 15% of certain chip sales to China that Nvidia and Advanced Micro Devices will share with Washington; the ‘golden share’ Washington will get in U.S. Steel as a condition of Nippon Steel’s takeover; and the $1.5 trillion of promised investment from trading partners Trump plans to personally direct. This isn’t socialism, in which the state owns the means of production. It is more like state capitalism, a hybrid between socialism and capitalism in which the state guides the decisions of nominally private enterprises.”
August 11 – Reuters (Karen Freifeld, Arsheeya Bajwa and Alexandra Alper): “U.S. President Donald Trump upended decades of U.S. national security policy, creating an entirely new category of corporate risk, when he made a deal with Nvidia to give the U.S. government a cut of its sales in exchange for resuming exports of banned AI chips to China. Historically, the U.S. government made decisions to control the export of sensitive technologies on national security grounds. Those decisions were viewed as non-negotiable… The latest move drew condemnation from U.S. lawmakers in both parties who warned that it risked creating a pay-for-play framework for the sale of sensitive technologies to U.S. adversaries, a concern echoed by analysts and legal experts.”
August 13 – Bloomberg (Daniel Flatley, Jonathan Ferro, and Annmarie Hordern): “Treasury Secretary Scott Bessent said the recent deal to allow Nvidia Corp. and Advanced Micro Devices Inc. to resume lower-end AI chip sales to China, on the condition they give the US government a 15% cut of the related revenue, could serve as a model for others. ‘I think we could see it in other industries over time,’ Bessent said... ‘Right now, this is unique, but now that we have the model and the beta test, why not expand it?’”
August 13 – New York Times (Tripp Mickle): “At an Oval Office meeting last week, President Trump dangled an offer to Jensen Huang, the chief executive of Nvidia. Mr. Trump said there would be a price for granting Nvidia the licenses it needed to sell artificial intelligence chips to China. ‘I want 20%,” Mr. Trump said. ‘Will you make it 15?’ Mr. Huang asked. Mr. Trump… agreed… Two days later, the administration granted Nvidia the licenses it wanted, with the unorthodox payments expected to go to the government. The negotiation was the most prominent example of Mr. Trump’s blunt interventions in the global operations of the chip industry’s most powerful companies. He has threatened to take away government grants, restricted billions of dollars in sales, warned of high tariffs on chips made outside the United States, demanded investments and urged one company, Intel, to fire its chief executive.”
August 11 – New York Times (Katia Dmitrieva and Philip J. Heijmans): “The revenue-for-exports deal between the US government and two of the world’s biggest chipmakers opens a new front in a trading regime turned upside down by Donald Trump… ‘To call this unusual or unprecedented would be a staggering understatement,’ said Stephen Olson, a former US trade negotiator now with the Singapore-based ISEA... ‘What we are seeing is in effect the monetization of US trade policy in which US companies must pay the US government for permission to export. If that’s the case, we’ve entered into a new and dangerous world.’”
August 10 – Wall Street Journal (Antoine Gara, Jamie John and Eric Platt): “Donald Trump this week opened the private equity and cryptocurrency industries to trillions of dollars in new investments from US retirement savers, potentially reshaping the financial future of 90mn Americans and turbocharging the growth of asset managers and digital currency groups. But the order enabling 401k savings plans to invest in a range of alternative assets also exposes America’s retirees to new risks. It follows heavy lobbying by private capital groups such as Apollo Global Management and BlackRock… The measure is expected to open retirement funds to a new array of unlisted investments, from corporate takeovers and private loans to infrastructure deals. In doing so, it potentially exposes them to higher fees and less transparency. Some of the $9tn held in these 401k plans is likely to be shepherded into assets that are harder to value and sell than the traditional stocks and bonds that today comprise the vast majority of retirement plans.”
August 11 – Wall Street Journal (Lingling Wei, Raffaele Huang and Amrith Ramkumar): “Jensen Huang, chief executive of… Nvidia, worked for months behind the scenes in Washington and Beijing to protect tens of billions of dollars in future sales from the heated U.S.-China trade rivalry. Huang told President Trump that restrictions on U.S. chip sales to China would backfire by pushing Chinese technology champions to achieve self-reliance. He advised the president to keep China hooked on American tech. As a sweetener, Huang said the company would invest as much $500 billion in the U.S. Huang’s argument, along with the half-trillion-dollar offer from the world’s most valuable company, appeared to seal the deal.”
August 12 – Wall Street Journal (Paul Kiernan): “Conservative economist Erwin John ‘E.J.’ Antoni sometimes jokes on social media that the ‘L’ in the Bureau of Labor Statistics’ acronym is silent. President Trump this week tapped Antoni to run the agency whose data and methodologies he has long criticized, especially when it produces numbers that Trump doesn’t like… Antoni went to work in 2021 as an economist at the Texas Public Policy Foundation, a conservative think tank in Austin that has sued the federal government to overturn climate-change regulations. The following year, he joined the conservative Heritage Foundation as a research fellow studying regional economics. He is now the foundation’s chief economist and an adviser to the Committee to Unleash Prosperity… Past BLS commissioners have had extensive research experience, and many have climbed the ranks of the agency itself. Antoni doesn’t fit that profile. He doesn’t appear to have published any formal academic research since his dissertation…”
August 12 – New York Times (Ben CasselmanAlan Rappeport and Lydia DePillis): “On Aug. 1, shortly after the Bureau of Labor Statistics released a surprisingly weak employment report, the conservative economist E.J. Antoni joined Steve Bannon’s influential ‘War Room’ podcast. ‘Have we put in our own person into B.L.S.?’ Mr. Bannon asked Dr. Antoni. ‘Is a MAGA Republican, that President Trump knows and trusts, are they running the Bureau of Labor Statistics yet?’ ‘No, unfortunately, Steve, we still haven’t gotten there,’ Dr. Antoni replied, going on to say that Erika McEntarfer, the head of the agency, was ‘incompetent.’ Hours later, Mr. Trump fired Dr. McEntarfer, accusing her, without evidence, of rigging the jobs numbers against him. And on Monday, the president said he would nominate Dr. Antoni to replace her. ‘Our Economy is booming, and E.J. will ensure that the Numbers released are HONEST and ACCURATE,’ Mr. Trump said…”
August 12 – CNBC (Kevin Breuninger): “President Donald Trump… said Goldman Sachs CEO David Solomon should either replace the bank’s economist or ‘just focus on being a DJ,’ days after Goldman’s chief economist warned that American consumers will pay for an increasing share of new tariffs. Trump’s broadside against Solomon — who moonlights as a DJ — came as the president touted what he called ‘massive’ revenue being collected by the federal government due to his tariff policies. ‘Tariffs have not caused Inflation, or any other problems for America, other than massive amounts of CASH pouring into our Treasury’s coffers,’ Trump wrote…”
August 13 – Reuters (Dan Burns): “A top economist for Goldman Sachs… signaled no plans to change how his team conducts and publishes its research after President Donald Trump lashed out at the Wall Street firm and its chief executive because of the research team’s estimate that American consumers would bear the brunt of the costs of Trump’s tariffs. Chief U.S. Economist David Mericle's defense of his team’s work came a day after Trump in a social media post said Goldman Chief Executive David Solomon should ‘not bother running a major financial institution’ and lambasted the bank’s economics research.”
August 11 – Reuters (Suzanne McGee and Isla Binnie): “The new White House order directing regulators to expand access to alternative investments in 401(k) plans, like crypto or privately owned companies adds a new layer of risk to the retirement portfolios for ordinary investors that they may not fully understand, investment professionals say. ‘This is brand new; none of it has been stress-tested yet’ in a market shock or long-term selloff, said Christopher Bailey, director of retirement, at Cerulli Associates, an asset management research firm. ‘There are liquidity concerns, issues around fees, among others.’”
August 13 – Financial Times (David Keohane and William Sandlund): “US Treasury secretary Scott Bessent has said that Japan’s central bank is falling ‘behind the curve’ on inflation and will probably have to raise interest rates, in a rare swipe by a senior official at the monetary policy of another country. ‘The Japanese have an inflation problem… They’re behind the curve so they are going to be hiking and they need to get their inflation problem under control,’ Bessent told Bloomberg TV, comments that stood in contrast to the position of Bank of Japan governor Kazuo Ueda.”
August 14 – Axios (Rebecca Falconer): “The Trump administration’s D.C. crackdown with National Guard deployment and 24/7 federal patrols was ramping up on Wednesday night, drawing a sharp rebuke from religious leaders in the U.S. capital. President Trump maintains his unprecedented action in declaring a ‘crime emergency’ in D.C. was necessary, but the interfaith group said his ‘sweeping language’ to justify it is ‘inaccurate and dehumanizing, increasing the risk of indiscriminate arrests and the use of excessive force.’ Trump has deployed some 800 National Guard soldiers and about 850 officers and agents to D.C. Trump’s federalization of the Metropolitan Police Department has a 30-day limit unless Congress extends it — and the president indicated… he’ll push for a ‘long-term extension’ in a crime bill that'll initially concern D.C. but will serve as a roadmap for other cities.”
August 14 – Bloomberg (Joe Deaux, Jennifer A. Dlouhy and Josh Wingrove): “President Donald Trump’s controversial plan to take a cut of revenue from chip sales to China is leading to concerns that the US government will find new ways to start charging companies for a range of business activities with other countries… The question that companies must now confront is whether the risk is worth taking. People familiar… said companies are struggling to figure out what the president’s order means for their future… ‘This is truly bizarre and unusual, and the troubling thing — beyond the individual instances of AMD and Nvidia — is the possibility that this will be expanded,’ said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. ‘Everything is now ‘national security,’ according to the new definition, which means it’s all subject to export licenses and then they give you a license based on your contribution.’”
August 14 – Axios (Jeffrey Cane): “The U.S. government has been holding discussions on taking an equity stake in the chip maker Intel… A deal would be another turn by the Trump administration away from laissez-faire policies and toward state capitalism, as it seeks to bolster the domestic fabrication of semiconductors. Intel's planned $20 billion semiconductor plant in Ohio has been repeatedly delayed, and a major government investment could provide a needed boost, Bloomberg noted. Taking a stake would echo previous moves by the administration. The U.S. government took a ‘golden share’ to allow Nippon Steel to acquire U.S. Steel. The U.S. Department of Defense is buying $400 million in preferred shares in MP Materials, a miner of raw earth minerals.”
August 13 – Bloomberg (Katy O'Donnell): “Forty-one former employees of Fannie Mae… sued the company, its chief executive and Federal Housing Finance Agency Director Bill Pulte for alleged defamation related to their dismissals in April. The ex-employees of the government-controlled mortgage giant are seeking damages amounting to more than $2 million per person… Fannie announced in April that more than 100 employees had been removed ‘for unethical conduct, including the facilitation of fraud.’ In a Fox News interview the following day, Pulte said an investigation found that workers were making donations to ‘the internal company charity’ and then getting kickbacks.”
August 11 – New York Times (David Yaffe-Bellany): “World Liberty Financial, the cryptocurrency start-up founded last year by the Trump family, announced on Monday that a publicly traded technology firm would begin buying large quantities of its signature digital coin. The firm, a little-known tech company called ALT5 Sigma, is planning to sell $1.5 billion worth of shares, using the proceeds to buy $WLFI, a cryptocurrency created by World Liberty… Similar initiatives have become wildly popular in the crypto world this year, after the success of Strategy, a public tech company formerly known as MicroStrategy…”
China Trade War Watch:
August 12 – Bloomberg (Mackenzie Hawkins and Ian King): “Beijing has urged local companies to avoid using Nvidia Corp.’s H20 processors, particularly for government-related purposes, complicating the chipmaker’s return to China after the Trump administration reversed an effective US ban on such sales. Over the past few weeks, Chinese authorities have sent notices to a range of firms discouraging use of the less-advanced semiconductors, people familiar with the matter said. The guidance was particularly strong against the use of H20s for any government or national security-related work by state enterprises or private companies…”
August 13 – Reuters (Fanny Potkin, Karen Freifeld and Jun Yuan Yong): “U.S. authorities have secretly placed location tracking devices in targeted shipments of advanced chips they see as being at high risk of illegal diversion to China, according to two people… The measures aim to detect AI chips being diverted to destinations which are under U.S. export restrictions, and apply only to select shipments under investigation, the people said.”
Trade War Watch:
August 11 – Axios (Madison Mills): “The White House continues to roll out sweeping tariff announcements with little detail, leaving investors scrambling for information. Then, often days later, key clarifications or exemptions follow. Even countries with direct involvement in the trade deals seem caught off guard by White House statements. ‘Washington is just randomly shooting, and they are shooting some like-minded countries from behind,’ Taro Kono, a member of Japan’s House of Representatives, said...”
August 5 – Japan Times (Jesse Johnson): “Prime Minister Shigeru Ishiba has found himself in a unique position in Japan’s staid political world. As he fights for his political survival, Ishiba — known for being a straight shooter — is calling things as he sees them. On Monday, he offered his views of U.S. President Donald Trump and the American leader’s negotiating tactics… ‘(Trump) is not a normal person. He’s someone who changes the rules,’ Ishiba said in response to demands in parliament by opposition parties that the government draft a formal document to put in writing the recent trade deal Japan sealed with the U.S. that lowers onerous tariffs.”
August 10 – Financial Times (Michael Stott and Michael Pooler): “The US is likely to step up a dispute with Brazil over the fate of Donald Trump’s ally Jair Bolsonaro by imposing fresh sanctions on justices who refuse to end his trial on coup charges, according to the former president’s congressman son Eduardo. Eduardo has been leading a lobbying campaign in Washington for US measures against Brazil’s top court to save his father from a jail sentence… ‘I know [Trump] has a range of possibilities on his table, from sanctioning more Brazilian authorities, to a new wave of visa withdrawals, to tariff issues,’ Eduardo told the Financial Times…”
Constitution Watch:
August 11 – Wall Street Journal (Michael R. Gordon, Vera Bergengruen and Lara Seligman): “President Trump’s decision to deploy National Guard troops in Washington, D.C., is his boldest move to date to expand the use of military power on U.S. soil. The deployment of 800 National Guard troops to Washington, which the president alleges has been ‘overtaken by violent gangs and bloodthirsty criminals,’ amplifies the law-and-order themes that play well with his political base. He buttressed this announcement Monday by effectively federalizing the Washington police department, putting it under the control of the Trump administration… The announcement was the latest in a series of moves by Trump to push the boundaries of how U.S. troops can be deployed in American territory, triggering a fierce legal debate over the U.S. military’s expanding footprint at home.”
Budget Watch:
August 12 – Bloomberg (Daniel Flatley): “US tariff revenue reached a fresh monthly record in July, though the increase wasn’t enough to prevent a widening in the monthly budget deficit — pointing to the federal government’s continuing fiscal challenges. Customs duties climbed to $28 billion last month… At the same time, the monthly budget deficit came in at $291 billion, or 10% more than the same month a year before, after accounting for calendar differences. As the fiscal year approaches its September end, the US is heading for another outsize deficit. The gap for the 10 months through July weighs in at $1.63 trillion.”
U.S./Russia/China/Europe/Iran Watch:
August 13 – Financial Times (Anne-Sylvaine Chassany, Ben Hall, David Sheppard and James Politi): “Donald Trump promised ‘very severe consequences’ for Russia if its leader Vladimir Putin refused to agree to end the war with Ukraine at their meeting in Alaska… The US president issued the threat after holding talks on Wednesday with European leaders that went some way to calming their fears he could strike a deal on territory with Putin and then try to impose it on Ukrainian President Volodymyr Zelenskyy. Trump described his call with European allies as ‘very good’ and ‘a 10’, adding he would like the Alaska meeting to be followed shortly by a trilateral gathering with Putin and Zelenskyy.”
August 13 – Reuters (Ben Blanchard and Karen Lema): “The Chinese military said… it monitored and ‘drove away’ a U.S. destroyer that sailed near the disputed Scarborough Shoal in the South China Sea, while the U.S. Navy said its action was in line with international law. The first known U.S. military operation in at least six years within the shoal's waters came a day after the Philippines accused Chinese vessels of ‘dangerous manoeuvres and unlawful interference’ during a supply mission around the atoll.”
New World Order Watch:
August 10 – Financial Times (Humza Jilani, John Reed and James Politi): “Pakistan’s chief of army staff Asim Munir smiled for the camera this weekend, arm in arm with a top American general — his second warm welcome this summer into the heart of the US establishment. Munir travelled to Florida for the retirement of General Michael Kurilla, the commander of US military forces in the Mideast, who has previously praised the Pakistan strongman for a ‘phenomenal partnership’ in the fight against terrorism… Even more remarkably, in June Munir had a two-hour private lunch… with Donald Trump, just a month after Pakistan and arch-rival India fought their bloodiest military confrontation for decades.”
August 11 – Financial Times (Michael Stott and Michael Pooler): “Hit by record US tariffs and demands to over-rule the supreme court, Brazil’s President Luiz Inácio Lula da Silva is digging in. Rather than call the author of the tariffs, US President Donald Trump, Lula decided last week to seek the counsel of other leaders, defying what he termed ‘unacceptable’ American interference. On August 7, he telephoned Indian Prime Minister Narendra Modi, seeking solidarity among allies in the Brics bloc of emerging powers and discussing closer ties. Two days later, he called Russian leader Vladimir Putin. Last night, the Brazilian president said he had spoken to China’s Xi Jinping for an hour. Lula’s response to punitive measures from a country that was long a close ally underlines the unconventional nature of the confrontation between Washington and BrasÃlia — one that shows no sign of quick resolution.”
August 12 – Bloomberg: “Brazilian President Luiz Inacio Lula da Silva spoke with his Chinese counterpart following talks with the leaders of India and Russia, as part of his outreach to allies after Donald Trump thrust Latin America’s biggest economy into the middle of his global trade war… During the phone conversation…, Xi called for coordinated efforts against unilateralism and protectionism — language usually used by China to criticize US trade policy. He said China supports the Brazilian people in safeguarding their country’s legitimate rights, describing ties between the two nations as being ‘at their best in history’… China is willing to work with Brazil to strengthen coordination and set an example of ‘unity and self-reliance among Global South nations,’ CCTV cited Xi as saying.”
August 9 – Bloomberg (Giovanna Bellotti Azevedo): “Russian President Vladimir Putin called Brazilian counterpart Luiz Inácio Lula da Silva to discuss cooperation among so-called BRICS countries, whose loose alliance has been energized by US tariff policy. The two leaders reaffirmed their determination to further strengthen their countries’ strategic partnership and coordination within BRICS, according to the Kremlin. Putin initiated the call…, Lula’s office said…”
August 12 – Wall Street Journal (Georgi Kantchev): “President Trump’s tariff policies have reordered global supply chains, redrawn investment maps and tested old alliances. In Switzerland, they have also spurred an uneasy audit of its role in the world. Switzerland thrived as an honest broker and diplomatic powerhouse for centuries. The War of the Spanish Succession between France and the Holy Roman Empire finally ended in 1714 with a treaty signed in the small town of Baden. In 1872, an arbitration court in Geneva ordered the U.K. to pay the U.S. compensation for providing war ships to the Confederacy during the Civil War… But many in the Alpine country—which the U.S. recently slapped with one of the highest tariff rates in the world—are now questioning whether its centuries-old model of neutrality and exceptionalism is still fit for purpose in a transactional, power-driven world.”
Canada Friend and Ally Watch:
August 14 – Wall Street Journal (Laura Cooper and Vipal Monga): “Canada’s prohibition on U.S. alcohol is creating a headache for American liquor and winemakers. On the shelves of many Canadian liquor stores, bottles of Jack Daniel’s, Maker’s Mark and Sailor Jerry Spiced Rum are nowhere to be found. Thousands of bottles of U.S. wine and spirits sit in storage across the country. At tastings, Canadian drinkers are turning their noses up at American alcohol.”
Ukraine Watch:
August 12 – Bloomberg (Daryna Krasnolutska and Olesia Safronova): “Ukrainian President Volodymyr Zelenskiy said he won’t cede the eastern region of Donbas to Russia and pushed for Kyiv to be included in talks as the US and Russian leaders prepare to meet on Friday. Vladimir Putin is demanding that Ukraine give up the Donetsk and Luhansk regions that together form Donbas as a condition to unlock a ceasefire and enter negotiations over a longer-term peace accord.”
August 10 – Bloomberg: “Ukraine’s General Staff said it made a successful drone strike early Sunday on a major refinery in the Saratov region, the latest in a series of attacks this month on Russian oil facilities. Earlier, the regional governor announced that UAVS from Ukraine hit an unspecified ‘industrial enterprise’ in the region, about 530 miles southeast of Moscow.”
Middle East Watch:
August 10 – Bloomberg (Arsalan Shahla): “Iran won’t allow nuclear site inspections when a senior International Atomic Energy Agency official visits Tehran on Monday, Foreign Minister Abbas Araghchi said. ‘Until we reach a new agreement framework, no cooperation will begin’ with the United Nations nuclear watchdog, he said…”
AI Bubble Watch:
August 13 – Financial Times (Tabby Kinder): “Meta is building ‘Prometheus’ and ‘Hyperion’, Elon Musk’s xAI has ‘Colossus’, and OpenAI is developing ‘Stargate’ — each a more than $100bn project to build the world’s most powerful supercomputer and usher in a new generation of artificial intelligence. But each of those gargantuan ventures is just a fraction of the spending required to build the data centres needed to power the AI era: one of the biggest movements of capital in modern history. ‘The amount of capital required is absolutely immense,’ said Rob Horn, global head of infrastructure and asset-based credit at… Blackstone, which manages an $85bn data centre platform. ‘The scale of the opportunity is exhausting the capital of [any one financial] market, and is requiring an all-of-the-above approach, with private capital playing a very large role.’ Google, Amazon, Microsoft and Meta will spend more than $400bn on data centres in 2026 — on top of more than $350bn this year.”
August 14 – Bloomberg (Tope Alake): “Efforts to meet booming US power demand from artificial intelligence will be hindered by a growing shortage of transformers, according to energy consulting firm Wood Mackenzie. Demand for power transformers, components that are necessary to deliver energy across the grid, will exceed supply in the US by as much as 30% this year, Wood Mackenzie said… The deficit is driving up costs and extending timelines for power projects, and the supply constraints are expected to persist into the 2030s. That threatens to undermine the US energy transition and efforts to improve grid reliability, said Ben Boucher, a senior analyst at WoodMac… The supply gap is emerging as a major concern amid growing demand for power to run factories and the data centers supporting artificial intelligence systems. ‘We have seen such a large increase in power demand,’ Boucher said... ‘AI is necessitating data center expansion, which is pushing up electricity usage.’”
August 14 – New York Times (Ivan Penn and Karen Weise): “The annual meeting of state utility regulators is typically a humdrum affair of dry speeches and panel discussions. But in November, the scene at the Marriott in Anaheim, Calif., had a bit more flash. The conference’s top sponsors included the nation’s biggest tech companies — Amazon, Microsoft and Google. Their executives sat on panels, and the companies’ branding was plastered on product booths and at networking events. Even the lanyards around attendees’ necks were stamped with Google’s colorful logo.”
August 10 – Wall Street Journal (Peter Rudegeair): “Leopold Aschenbrenner emerged last year as a precocious artificial-intelligence influencer after publishing a widely read manifesto. Then he decided to try his hand at stock picking. The 23-year-old with no professional investing experience quickly raised more money for a hedge fund than most pedigreed portfolio managers can when they strike out on their own. As valuations of Nvidia, OpenAI and other artificial-intelligence companies continue to soar, so do investments in hedge funds hoping to ride the AI wave. Aschenbrenner’s… firm, Situational Awareness, now manages more than $1.5 billion… He has described the firm as a ‘brain trust on AI.’”
August 13 – New York Times (Steve Lohr): “Nearly four decades ago, when the personal computer boom was in full swing, a phenomenon known as the ‘productivity paradox’ emerged. It was a reference to how, despite companies’ huge investments in new technology, there was scant evidence of a corresponding gain in workers’ efficiency. Today, the same paradox is appearing, but with generative artificial intelligence. According to recent research from McKinsey & Company, nearly eight in 10 companies have reported using generative A.I., but just as many have reported ‘no significant bottom-line impact.’”
Bubble and Mania Watch:
August 10 – Financial Times (Harriet Clarfelt): “Private markets ‘haven’t been tested’ yet by a steep economic downturn, the chief of $2.1tn bond giant Pimco has warned, urging the need to ‘constantly think about what can go wrong’. ‘We really haven’t had a hard recession since the great financial crisis,’ said Emmanuel ‘Manny’ Roman, chief executive of California-based Pimco… ‘You saw one very dicey month during Covid’ he added, before a flood of public money came to the rescue. ‘The private markets in their current form haven’t been tested, and they will be tested when there’s a recession.’ Roman is well-positioned to assess the potential pitfalls of the roaring expansion in private capital, as asset managers and private capital firms rush to expand investor access to private markets…”
August 14 – Reuters (Manya Saini and Niket Nishant): “After years of sitting on the sidelines, U.S. crypto companies are lining up to go public, buoyed by friendly policies under President Donald Trump’s second administration that have pushed the value of global cryptocurrencies to a record $4.2 trillion. Bullish, a cryptocurrency exchange operator that counts billionaire Peter Thiel among its backers, was the latest to tap U.S. public markets on Wednesday, raising over $1.1 billion. Analysts point to rising mainstream adoption and deep-pocketed corporate backers as forces reshaping the sector’s fundraising landscape and boosting demand for new crypto stocks.”
August 9 – New York Times (Danielle Kaye): “The private equity industry, facing a slowdown in exits and fizzling returns, has long coveted a $12.2 trillion pool of money: retirement savings. Now it is one step closer to managing some of the funds in Americans’ 401(k)s and related plans. President Trump signed an executive order… that clears a path for plan managers to add private equity and other alternative assets to retirement savings accounts. The administration’s stance ‘marks a major step forward in modernizing the retirement plans of everyday savers,’ Jaime Magyera, the head of BlackRock’s retirement business, said…”
August 14 – Wall Street Journal (Anne Tergesen and Hannah Erin Lang): “Americans’ nest eggs are increasingly tied to the fate of the stock market. Workers across nearly all age groups are investing record portions of their 401(k) accounts in equities. After years of relentless market gains, they are either allocating more to stocks or having it done for them by money managers. Workers in their late 30s had 88% of their 401(k)s in stocks last year, versus 82% a decade earlier, according to Vanguard Group… 401(k) investors in their early 60s had allocations to stocks of 60%, up from 57% a decade ago.”
August 15 – Yahoo Finance (Jake Conley): “The end of summer usually marks one of the slowest periods of the year for investment bankers. This year, however, markets aren’t taking a vacation. Halfway through August, the IPO market has already roughly doubled the amount of activity typically seen during the month, with 12 new issues worth at least $50 million raising some $2.9 billion in capital.”
August 11 – Wall Street Journal (Krystal Hur): “American companies are repurchasing their shares at a record pace… U.S. companies have announced $983.6 billion worth of stock buybacks so far this year, the best start to a year on record, according to Birinyi Associates data going back to 1982. They are projected to purchase more than $1.1 trillion worth overall in 2025, which would mark an all-time high. The biggest repurchasers include tech giants Apple and Google parent Alphabet. Big banks such as JPMorgan Chase, Bank of America and Morgan Stanley also are leading the charge.”
Inflation Watch:
August 11 – Bloomberg (Matthew Thomas): “The impact of President Donald Trump’s tariffs on consumer prices is just getting started, according to… Goldman Sachs…, adding more uncertainty to a Treasury market that has been gripped by shifting bets on the pace of interest rate cuts. US companies have so far taken the bulk of the hit from Trump’s tariffs but the burden will increasingly be passed on to consumers as companies hike prices, economists including Jan Hatzius wrote… Consumers in the US have absorbed an estimated 22% of tariff costs through June, but their share will rise to 67% if the latest tariffs follow the pattern of levies in previous years, they wrote. The net result: faster inflation.”
August 12 – Bloomberg (Jonathan Levin): “The case for Federal Reserve interest-rate cuts has always revolved around the idea that inflation was tame outside of the effects of tariffs, which policymakers supposedly ought to ‘look through’ when setting monetary policy… Unfortunately for those who are optimistic that rates will be lowered imminently, the inflation data for July… should give pause. While the consumer price index rose just 0.2% from June, prices of non-housing services rose 0.5%, the hottest reading since January. They were pushed higher by airline fares, dental services and event admissions, among other things (clearly not the sorts of products that you’d associate with President Donald Trump’s multi-front global trade war.)”
August 10 – Financial Times (Guy Chazan): “Small businesses are significantly raising prices in response to President Trump’s tariff regime that came into effect this month, in a development that could fuel inflation in the world’s biggest economy. Businesses surveyed by the Financial Times in the Midwestern city of St Louis said their suppliers had increased prices for a broad range of products in recent weeks, sometimes by as much as 30%, leaving them with little choice but to pass this on to customers. Many said they had stockpiled products priced at the pre-tariff level before the levies came into force, but have since run these stocks down. ‘I believe inflation will increase as each item that was in inventory is replaced by a new one,’ said Justin Breckle, chief executive of Authorized Appliance…”
August 14 – Financial Times (Myles McCormick and Kate Duguid): “US wholesale prices jumped in July, rising 3.3% from a year earlier, in the latest signal that President Donald Trump’s tariffs are seeping through to the American economy. The rise in the Producer Price Index… was the biggest jump since February. The reading… was well above June’s 2.4% annual gain and the 2.5% rise expected by economists… The figures suggest that despite muted inflation to date in consumer prices, the levies the president has imposed on US trading partners are driving an increase in prices further up the supply chain. ‘Tariffs are causing businesses to raise the prices they charge each other, which will show up in higher consumer prices over time,’ said Bill Adams, chief economist at Comerica Bank.”
August 15 – Reuters (Lucia Mutikani): “U.S. import prices rebounded in July, boosted by higher costs for consumer goods, the latest indication that inflation was poised to pick up because of tariffs. Import prices increased 0.4% last month after a downwardly revised 0.1% dip in June…”
August 13 – Bloomberg (Paulina Cachero): “Manhattan apartment rents hit a record high for the fifth time in the past six months. New leases were signed at a median of $4,700 in July, up $75 from June, according to… Miller Samuel Inc. and brokerage Douglas Elliman. Rents surged 9.3% from a year earlier, the second-biggest annual jump in the firms’ data going back to 2008.”
Federal Reserve Watch:
August 10 – Wall Street Journal (Editorial Board): “President Trump likes to stir things up, and he’s done it again with his choice of Stephen Miran to fill an open seat on the Federal Reserve Board of Governors. We can’t recall when a President nominated to the Fed someone whose abiding policy conviction is to weaken the U.S. dollar. Mr. Miran has been chairman of the White House Council of Economic Advisers in Mr. Trump’s second term. He’s an ardent promoter of the President’s economic policies, especially tariffs. For Mr. Miran, this is a matter of conviction. Before his White House days he offered a detailed case for rewriting the rules of the global trade and financial system.”
August 13 – Financial Times (Claire Jones, Kate Duguid and Myles McCormick): “Donald Trump said he had cut his Federal Reserve chair shortlist to ‘three or four’ candidates and left the door open to naming a shadow successor before Jay Powell departs. The president said… he had a small handful of contenders in mind who would be ‘great’ in the role, even as the US Treasury confirmed plans to interview 11 candidates. Trump did not provide names but the three front-runners for the job are… Kevin Hassett, former Fed governor Kevin Warsh, and incumbent Fed governor Christopher Waller. The list of candidates to be quizzed by Treasury secretary Scott Bessent features many names who are seen as long shots…, including David Zervos, chief market strategist at Jefferies. Former Fed governor… Larry Lindsey and BlackRock’s bond chief Rick Rieder were also candidates…”
August 12 – Bloomberg (Maria Eloisa Capurro): “Federal Reserve Bank of Richmond President Tom Barkin said uncertainty over the direction of the US economy is decreasing, but it’s still unclear whether the central bank should concentrate more on controlling inflation or bolstering the job market. ‘The fog is lifting,’ Barkin said… But risks remain, he added. ‘We may well see pressure on inflation, and we may also see pressure on unemployment, but the balance between the two is still unclear… As the visibility continues to improve, we are well positioned to adjust our policy stance as needed.’”
August 12 – Reuters (Ann Saphir): “The U.S. central bank should not take tariffs' muted effect on inflation so far as an opportunity to cut interest rates, but rather as a sign that monetary policy is ‘appropriately calibrated,’ Kansas City Federal Reserve President Jeffrey Schmid said…, in remarks that contrast with the increasingly dovish tone of some of his colleagues. ‘With the economy still showing momentum, growing business optimism, and inflation still stuck above our objective, retaining a modestly restrictive monetary policy stance remains appropriate for the time being… While increased tariffs seem to be having a limited effect on inflation, I view this as a rationale for keeping policy on hold rather than an opportunity to ease the stance of policy.’”
August 14 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of St. Louis President Alberto Musalem said it’s too early for him to decide on whether to lower interest rates at next month’s meeting. ‘For me, it’s too early to say exactly what policy I will be able to support’ at the September meeting, Musalem said… Asked about whether a 50 bps reduction could be warranted next month, Musalem said from his perspective that would be ‘unsupported by the current state of the economy and the outlook for the economy.’”
August 13 – Yahoo Finance (Jennifer Schonberger): “Chicago Fed president Austan Goolsbee and Atlanta Fed president Raphael Bostic… said they’d prefer to gain more clarity around the impact tariffs have on inflation before determining whether to cut rates. Goolsbee said he’s waiting to see whether tariff-induced inflation could prove persistent. Likening tariffs to ‘throwing dirt in the air,’ Goolsbee said he’s trying to figure out whether inflation and employment are still moving toward their goals of 2% and maximum employment... ‘If you start seeing prices go up and you start seeing employment go down, because tariffs, in my view, are a stagflationary shock, it makes both sides of the mandate go bad at the same time, and that’s the worst position that a central bank could be in because there’s not an obvious answer of what you do,’ Goolsbee said… Goolsbee cautioned that if we get more data like the latest Consumer Price Index report, which showed ‘core’ inflation… rising on account of higher goods and services prices, that would be concerning.”
August 13 – Reuters (Dan Burns): “Atlanta Federal Reserve President Raphael Bostic… said a U.S. job market holding near full employment offers the central bank the ‘luxury’ of being able to avoid rushing to make any policy adjustments. The Fed should avoid policy volatility that can be troublesome to the public, Bostic said…, adding that his ‘predisposition is to try not to do that’ and to wait for ‘a little more clarity on where things are going.’ ‘Now I feel we have the luxury to do that today because the labor market has been pretty much at full employment,’ Bostic said. ‘Our maximum employment mandate is not at risk in the same way that the inflation mandate is,’ he said.”
August 13 – Reuters (Ann Saphir): “Chicago Federal Reserve President Austan Goolsbee said… the U.S. central bank is grappling with understanding whether tariffs will push up inflation just temporarily or more persistently, which would inform its decision on when to cut interest rates. ‘As we go into the fall, these are going to be some live meetings and we’re going to have to figure it out,’ Goolsbee told the Greater Springfield Chamber of Commerce... ‘The hardest thing that a central bank ever has to do is to try to get the timing right when there are moments of transition’… ‘I think the state of the labor market is pretty strong, pretty solid,’ Goolsbee said.”
August 14 – Reuters (Rishabh Jaiswal): “San Francisco Federal Reserve President Mary Daly has pushed back against the need for an interest rate cut of 50 bps at the Federal Reserve's September meeting… ‘Fifty sounds, to me, like we see an urgent — I’m worried it would send off an urgency signal that I don’t feel about the strength of the labor market,’ Daly said… ‘I just don't see that. I don’t see the need to catch up.’”
August 14 – CNBC (Jeffrey Cox): “Wall Street veteran David Zervos added his name… to the list of potential Federal Reserve chairs who think the central bank is past due in approving an interest rate reduction. The chief market strategist at Jefferies told CNBC that central bankers shouldn’t be daunted by the July producer price index showing pipeline inflation pressures hotter than expected. Instead, he advocated the Fed move aggressively now to ease as a way to forestall a labor market slowdown and in fact help create a million more jobs. For the past three Fed meetings, Zervos has advocated a half percentage point cut in the federal funds rate… I’m still absolutely there. I think there is a reasonable storyline, a very cogent storyline, that suggests monetary policy is restrictive,’ he said. ‘Generally speaking, I don’t see any reason why this [PPI] number changes that view.’”
U.S. Economic Bubble Watch:
August 14 – Associated Press (Matt Ott): “The number of Americans filing for jobless benefits fell modestly last week, remaining in the historically low range since the U.S. economy emerged from the COVID-19 pandemic. Applications for unemployment benefits for the week ending Aug. 9 fell by 3,000 to 224,000… The total number of Americans collecting unemployment benefits for the previous week of Aug. 2 fell by 15,000 to 1.95 million.”
August 15 – Associated Press (Anne D’Innocenzio): “Shoppers spent at a healthy pace in July, particularly at the nation’s auto dealerships, as they appear to shrug off President Donald Trump’s tariffs… Retail sales rose a solid 0.5% last month, and June spending was stronger than expected… June’s retail sales were revised upward to 0.9%, from a 0.6% increase… The data showed solid spending across many retail sectors. Business at clothing stores was up 0.7% while online retailers saw a 0.8% increase. Business at home furnishings and furniture stores rose 1.4%... A category of sales that excludes volatile sectors such as gas, cars, and restaurants rose last month by 0.5% from the previous month.”
August 12 – Reuters (Lucia Mutikani): “U.S. small-business sentiment rose in July, though owners were becoming increasingly uncertain about the economic outlook and many worried about the quality of labor available. The National Federation of Independent Business said… its Small Business Optimism Index rebounded 1.7 points to 100.3 last month, with some viewing business conditions as better and reporting that it is a good time to expand… Twenty-one percent of small business owners reported labor quality as their single most important problem, up five points from June and ranking as the top problem.”
August 11 – Bloomberg (Brendan Murray): “Small US companies, the source of more than half of the country’s job creation in recent years, are struggling to comply with President Donald Trump’s new tariffs and cope with growing financial strains clobbering them from higher import costs… The US Chamber of Commerce estimated this month that the country has about 236,000 small-business importers — those with fewer than 500 employees. The goods they bought from abroad were worth more than $868 billion in 2023.”
August 15 – Axios (Emily Peck): “Rich Americans are spending at a higher rate this year — everyone else is basically slowing their roll… Spending increased nearly 2% in July from last year for higher income households, and 1% for middle-earners, according to a Bank of America Institute analysis… For the lowest third of households, those earning roughly $50,000 a year or less, spending growth was zero, zip, zilch, nada… Wage growth is slowing at the bottom, too. Up just 1.3% in July from last year… That’s compared with 3.2% for higher-income households, those earning above $120,000 a year.”
August 13 – CNBC (Diana Olick): “Homeowners are clearly looking for savings, even if it means taking on a riskier mortgage. Refinance demand, along with renewed demand for adjustable-rate loans, drove a sharp increase in overall applications last week. Total mortgage application volume rose 10.9% from the previous week… Applications for a mortgage to purchase a home rose 1% for the week and were 17% higher than the same week one year ago.”
August 14 – Associated Press (Alex Veiga): “The average rate on a 30-year U.S. mortgage fell this week to its lowest level in nearly 10 months, giving prospective homebuyers a sorely needed boost in purchasing power that could help inject life into a stagnant housing market. The long-term rate fell to 6.58% from 6.63% last week… A year ago, the rate averaged 6.49%.”
August 14 – Financial Times (Jamie Smyth and Kristina Shevory): “US shale producers are idling drilling rigs and holding back spending as they shelter from an Opec-induced price slump that is likely to send American output sharply lower. The number of crews fracking shale oil and gas wells — a crucial barometer of the industry’s activity levels — hit a four-year low last week and producers have wiped about $1.8bn from capital spending plans over just two quarters.”
China Watch:
August 13 – Bloomberg: “A key measure of lending at Chinese banks contracted for the first time in two decades in July while broad credit growth slowed, as borrowing demand languishes in an economy stuck in deflation. Financial institutions recorded a decrease of 49.9 billion yuan ($7bn) of yuan-denominated new loans in the month…, in the first decline since July 2005. That contrasts with the median forecast… for an increase of 300 billion yuan. The rare drop, driven by a net repayment from borrowers, adds to a slew of signs that households and companies have become even more reluctant to take on debt. Instead, the focus is on paying down what they owe, as their outlook on future income and growth dims.”
August 15 – Bloomberg: “China’s economy clocked its deepest slowdown of the year in July, raising expectations for Beijing to roll out more stimulus this year to offset the impact of Donald Trump’s trade war. A campaign to curb overcapacity at home is adding to the sting of higher tariffs. Fixed-asset investment fell the most since Covid erupted in early 2020, with industrial activity growth the weakest in eight months… Weaker spending on infrastructure and consumption was also a key culprit behind the slowdown, revealing the extent to which private demand remains frail.”
August 14 – Bloomberg: “China’s new-home prices fell at a faster pace in July, in a further sign that a series of stimulus measures has failed to revive the moribund market. New-home prices in 70 cities… dropped 0.31% from June, the biggest decline in nine months… Resale home-value slump narrowed to 0.55%, compared with 0.61% in June. China’s housing slump has dragged on for more than four years, with sales falling further since the second quarter.”
August 14 – Bloomberg: “China is preparing to mobilize companies owned by the central government in Beijing to purchase unsold homes from distressed property developers, following the limited success of a previous initiative that relied on local governments… Regulators are planning to ask some of the biggest state-owned enterprises and bad-debt managers including China Cinda Asset Management Co. to help clear the housing glut, said the people… The firms will be allowed to tap 300 billion yuan ($41.8bn) of funding that the central bank earmarked for the program last year, one of the people said.”
August 14 – Reuters (Yukun Zhang, Liangping Gao and Kevin Yao): “Property investment in China declined 12.0% in the first seven months of the year from the same period last year, after dropping 11.2% in the first half… Property sales by floor area fell 4.0% year-on-year, compared with a 3.5% drop in the first six months of the year. New construction starts measured by floor area slumped 19.4%, after contracting 20% in the January-to-June period.”
August 14 – Reuters (Kevin Yao, Joe Cash and Yukun Zhang): “China’s factory output growth slumped to an eight-month low in July, while retail sales slowed sharply… Industrial output grew 5.7% year-on-year in July…, the lowest reading since November 2024, and compared with a 6.8% rise in June. It missed forecasts for a 5.9% increase… Retail sales… expanded 3.7% in July, the slowest pace since December 2024, and cooling from a 4.8% rise in the previous month. They missed a forecast gain of 4.6%.”
August 10 – Wall Street Journal (Austin Ramzy): “China has begun the construction of a giant hydropower project at the earthquake-prone edge of the Tibetan plateau, a spectacular engineering feat that is central to Beijing’s enduring mission to become self-sufficient in critical areas such as energy. The $167 billion facility will require digging tunnels that plunge through high mountains to harness the power of a river that sharply descends through the deepest and possibly longest canyon on the planet. If its planners succeed—after shrugging off objections from neighbors—the project could generate triple the output of the world’s largest hydroelectric facility, China’s Three Gorges Dam, which is big enough to power around 40 million Chinese homes.”
August 13 – Bloomberg (Venus Feng): “China Evergrande Group’s delisting marks a bleak milestone for the nation’s property sector, now in a fourth year of paralysis that continues to weigh down the world’s second-largest economy. The company, once China’s biggest developer by sales, will be removed from the Hong Kong stock exchange on Aug. 25… The delisting comes as liquidators sifting through the books revealed that the developer’s debt load now stands at about HK$350 billion ($45bn), much bigger than previously disclosed.”
Central Bank Watch:
August 11 – Associated Press (Rod McGuirk): “Australia’s central bank… reduced its benchmark interest rate by a quarter percentage point for a third time this year to 3.6%, with inflation tamed and economic growth stalling. The Reserve Bank of Australia reduced its cash rate from 3.85%. The rate was cut from 4.1% in May… The new rate is the lowest since March 2023 and the cut was widely anticipated as inflation continues to fall.”
Japan Watch:
August 14 – Reuters (Makiko Yamazaki and Kantaro Komiya): “Japan’s economy grew much faster than expected in the second quarter as export volumes held up well against new U.S. tariffs, giving the central bank some of the conditions it needs to resume interest rate hikes this year. Gross domestic product (GDP) rose 1.0% on an annualised basis…, marking the fifth straight quarter of expansion…”
August 13 – Reuters (Mariko Katsumura and Leika Kihara): “The Bank of Japan will likely be raising interest rates as it is behind the curve in dealing with the risk of inflation, U.S. Treasury Secretary Scott Bessent told Bloomberg…, in his most explicit comment on Japan’s monetary policy. The remarks contrast with those of BOJ Governor Kazuo Ueda, who has repeatedly brushed aside the view the central bank was being too slow in raising rates… Bessent said U.S. Treasury yields are feeling the impact of overseas developments, with the 30-year yield getting dragged up by rising long-term bond yields in Japan and Germany. ‘There’s definitely leakage from — the Japanese have an inflation problem,’ Bessent said… Bessent mentioned that he had spoken with BOJ Governor Kazuo Ueda. ‘My opinion, not his — they’re behind the curve. So they’re going to be hiking,’ he added…”
August 11 – Financial Times (David Keohane): “Last month, the poster child of Japan’s bubble economy finally repaid the government bailout money it received almost a quarter century ago. Once called the Long-Term Credit Bank of Japan, SBI Shinsei Bank’s repayment of roughly ¥230bn ($1.5bn) in public cash signalled the end of an era. But as interest rates rise, the population falls and deposits become less sticky, Japan’s lenders are facing another period of turbulence. When the dust settles, the banking system could once again look different. Yutaka Ito, the newly installed head of the powerful markets regulator, the Financial Services Agency, agrees. In an interview…, Ito said some banks ‘are being confronted by the question of how they can survive’.”
EM Watch:
August 11 – Financial Times (Christine Murray): “President Claudia Sheinbaum… rejected the prospect of US military intervention in her country, insisting Mexico’s independence was ‘not at risk’. Her comments came after reports last week that President Donald Trump had signed a secret directive ordering the US military to target Latin American cartels, including several that send drugs across the border from Mexico. ‘We will never put our sovereignty at risk, we will never put Mexico’s independence at risk, Mexico is a free, sovereign, independent country,’ she said.”
Leveraged Speculation Watch:
August 10 – Bloomberg (Maria Elena Vizcaino, Vinicius Andrade, and Matthew Burgess): “The carry trade is making a comeback among emerging market investors amid bets the Federal Reserve will kick off interest-rate cuts next month, weakening the dollar and fueling appetite for high-yielding currencies. Money managers from Neuberger Berman Group LLC to Aberdeen Group Plc. are piling into currencies from Brazil, South Africa and Egypt, saying a weaker greenback and easing volatility make the environment ripe for the strategy, in which traders borrow in lower-yielding currencies to buy those that offer higher yields. The trade, which posted double-digit returns this year before hitting pause in July as the dollar rebounded, is now gaining steam again…”
Social, Political, Environmental, Cybersecurity Instability Watch:
August 8 – Wall Street Journal (Aaron Zitner): “America’s identity as a unified nation is eroding, with Republican- and Democratic-led states dividing into separate spheres, each with its own policies governing the economic, social and political rules of life. The bitter fight over redrawing U.S. House maps, triggered by President Trump’s effort to protect his party’s majority in the 2026 midterm elections, is the latest example of how the dominant party in many states is making extraordinary efforts to impose its will. In 40 states, a single party controls the House, Senate and governor’s office—a so-called trifecta—or else has enough power to block vetoes from a governor of the other party. That leaves less than 20% of Americans living in a state where the minority party has a meaningful voice in governance. The result has been a deepening of differences in red and blue America.”
August 11 – Bloomberg (Lauren Rosenthal and Mary Hui): “Climate change is cranking up the intensity of tropical cyclones. Known as hurricanes or typhoons depending on where they’re spawned, these spinning storms are becoming more potent as warmer seas and a hotter atmosphere provide more fuel. Ocean temperatures have been breaking heat records…, and ramped-up evaporation rates are loading cyclones with trillions of gallons of rainfall. At the same time, wind shear that can help keep storms in check has been weakening in some parts of the world as sea temperatures rise.”
Geopolitical Watch:
August 13 – Bloomberg (Misha Savic): “Months of anti-government rallies in Serbia lapsed into violence again as supporters of President Aleksandar Vucic clashed with his opponents in three of the Balkan country’s biggest cities. The rival groups hurled flares, rocks, firecrackers and bottles at each other in the capital of Belgrade, the northern city of Novi Sad and in Nis in the south as police struggled to keep them apart.”
The S&P500 increased 0.9% (up 9.7% y-t-d), and the Dow rose 1.7% (up 5.6%). The Utilities declined 0.8% (up 12.9%). The Banks added 1.3% (up 12.2%), while the Broker/Dealers were unchanged (up 29.1%). The Transports advanced 2.1% (down 1.5%). The S&P 400 Midcaps rose 1.6% (up 1.7%), and the small cap Russell 2000 jumped 3.1% (up 2.5%). The Nasdaq100 added 0.4% (up 12.8%). The Semiconductors gained 1.3% (up 15.5%). The Biotechs surged 5.9% (up 5.0%). While bullion dropped $62, the HUI gold index increased 0.7% (up 72.8%).
Three-month Treasury bill rates ended the week at 4.1225%. Two-year government yields slipped a basis point to 3.75% (down 49bps y-t-d). Five-year T-note yields were unchanged at 3.84% (down 55bps). Ten-year Treasury yields increased four bps to 4.32% (down 25bps). Long bond yields rose seven bps to 4.92% (up 14bps). Benchmark Fannie Mae MBS yields were unchanged at 5.46% (down 38bps).
Italian 10-year yields jumped 11 bps to 3.59% (up 7bps y-t-d). Greek 10-year yields rose 10 bps to 3.43% (up 21bps). Spain's 10-year yields gained nine bps to 3.35% (up 29bps). German bund yields jumped 10 bps to 2.79% (up 42bps). French yields surged 12 bps to 3.47% (up 27bps). The French to German 10-year bond spread widened two to 68 bps. U.K. 10-year gilt yields rose nine bps to 4.70% (up 13bps). U.K.'s FTSE equities index increased 0.5% (up 11.8% y-t-d).
Japan's Nikkei 225 Equities Index surged 3.7% (up 8.7% y-t-d). Japanese 10-year "JGB" yields jumped eight bps to 1.57% (up 47bps y-t-d). France's CAC40 to gained 2.3% (up 7.4%). The German DAX equities index increased 0.8% (up 22.4%). Spain's IBEX 35 equities index advanced 3.1% (up 31.8%). Italy's FTSE MIB index jumped 2.5% (up 24.8%). EM equities were mostly higher. Brazil's Bovespa index added 0.3% (up 13.4%), and Mexico's Bolsa index increased 0.4% (up 17.8%). South Korea's Kospi added 0.5% (up 34.4%). India's Sensex equities index increased 0.9% (up 2.7%). China's Shanghai Exchange Index gained 1.7% (up 10.3%). Turkey's Borsa Istanbul National 100 index declined 0.9% (up 10.6%).
Federal Reserve Credit increased $2.5 billion last week to $6.595 TN. Fed Credit was down $2.294 TN from the June 22, 2022, peak. Over the past 309 weeks, Fed Credit expanded $2.869 TN, or 77%. Fed Credit inflated $3.784 TN, or 135%, over the past 666 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $24.6 billion last week at $3.204 TN - the low back to March 2017. "Custody holdings" were down $92 billion y-o-y, or 2.8%.
Total money market fund assets jumped $33.3 billion to a record $7.186 TN. Money funds were up $998 billion, or 16.1%, y-o-y.
Total Commercial Paper declined $7.6 billion to $1.390 TN. CP has expanded $303 billion y-t-d and $148 billion, or 11.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates declined five bps to 6.58% (up 9bps y-o-y). Fifteen-year rates dipped four bps to 5.71% (up 5bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down eight bps to 6.73% (down 33bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.3% to 97.852 (down 9.8% y-t-d). For the week on the upside, the Norwegian krone increased 0.9%, the South Korean won 0.9%, the British pound 0.8%, the Brazilian real 0.6%, the euro 0.5%, the Japanese yen 0.4%, the Swedish krona 0.2%, the Singapore dollar 0.2%, and the Swiss franc 0.2%. On the downside, the Mexican peso declined 1.0%, the New Zealand dollar 0.6%, the Canadian dollar 0.4%, the Australian dollar 0.2%, and the South Korean won 0.2%. The Chinese (onshore) renminbi slipped 0.06% versus the dollar (up 1.60% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index declined 0.4% (up 1.6% y-t-d). Spot Gold fell 1.8% to $3,336 (up 27.1%). Silver declined 0.9% to $38.001 (up 31.5%). WTI crude dropped $1.08, or 1.7%, to $62.80 (down 12%). Gasoline declined 0.7% (up 2%), and Natural Gas dropped 2.5% to $2.916 (down 19.3%). Copper rose 1.9% (up 13%). Wheat fell 1.6% (down 8%), while Corn increased 0.3% (down 16%). Bitcoin gained $1,200, or 1.0%, to $117,600 (up 25.5%).
Market Instability Watch:
August 13 – Bloomberg (Alice Gledhill): “Across equity, bond and currency markets, gauges of volatility are slumping to their lowest levels of the year. The Cboe Volatility Index, which measures the expected 30-day volatility for the S&P 500 — and dubbed Wall Street’s fear gauge — just fell to its lowest since December. A similar index for global currencies is the weakest in a year, while a gauge for US Treasuries is at levels last seen in early 2022.”
August 13 – Bloomberg (Lynn Thomasson and Sagarika Jaisinghani): “Traders are snapping up risky assets of all stripes in the hope that falling US interest rates will add rocket fuel to an economy that’s so far been able to withstand the effects of Donald Trump’s trade war… Across global markets, everything from volatility indexes to speculative European bank bonds to crypto is underscoring a sense of confidence about corporate profits and global economic growth… ‘The mood is surprisingly bullish; it’s almost like ‘what tariffs, who cares?’ said Neil Birrell, chief investment officer at Premier Miton Investors. ‘There’s this detachment from economic reality on what’s happening and there’s a wave of either optimism or exuberance in equity markets.’”
August 12 – Axios (Courtenay Brown and Emily Peck): “No longer are America’s most important economic institutions politically untouchable. Econ wonks — those far more comfortable with large datasets than the inner dealings of Washington — won’t just question the significance of indicators or policy decisions. Now they will wonder whether they can trust if data, or monetary policy conclusions, reflect reality or political motivations. President Trump said… he would nominate Heritage Foundation economist E.J. Antoni to lead the Bureau of Labor Statistics.”
August 11 – Reuters (Anirban Sen and Carolina Mandl): “Monthly U.S. inflation data is under increased scrutiny after President Donald Trump removed the head of the U.S. Bureau of Labor Statistics, a move that could undermine confidence in the $2.1-trillion market for Treasury debt designed to protect against inflation… Investors are likely to demand higher compensation to hold TIPS, or Treasury Inflation-Protected Securities, whose value is linked to the CPI, and raise the federal government’s cost of funding itself, analysts said. Rises in TIPS yields could be exacerbated by poorer liquidity compared to the much larger market for nominal Treasuries.”
August 13 – Associated Press (Josh Boak): “‘Depressing.’ ‘CRAZY!!’ That’s how staff at the Bureau of Labor Statistics reacted after President Donald Trump fired its commissioner, Erika McEntarfer… The emails… suggest an agency with little of the corrupting partisanship that Trump had claimed. He called the report ‘phony’ and ‘rigged’ after it indicated a paltry 73,000 jobs were added in July and after downward revisions that showed 258,000 fewer jobs were added in May and June than previously reported. After the commissioner’s firing, BLS employees talked about the importance of accurate numbers and professional integrity in producing data that is foundational for measuring the economy and holding elected officials accountable for how the nation performs.”
August 12 – Financial Times (Myles McCormick and Claire Jones): “Donald Trump’s sacking of the Bureau of Labor Statistics’ boss after a grim jobs report this month sparked investor fears that he was politicising the world’s most closely watched economic data. Trump’s pick to lead the BLS, EJ Antoni, a fierce loyalist and cheerleader for the president’s tariffs and economic strategy, has only deepened the anxiety. ‘The hope was that he would pick someone… who people would have trust in and could lead the BLS in an appropriate way, with relevant experience and, ideally, not hyper-partisan,’ said Stan Veuger, senior fellow at the right-leaning American Enterprise Institute think-tank. ‘EJ Antoni is really the opposite of that.’ ‘Even the people who may be somewhat sympathetic to his economic policy views don’t think he’s qualified,’ added Veuger.”
August 13 – Financial Times (Ian Smith, Leila Abboud and Amy Kazmin): “France’s long-term borrowing costs are converging with Italy’s for the first time since the global financial crisis, as nervous bond investors put the EU’s second-biggest economy on a level with a country that has been one of its most troubled borrowers. Yields on 10-year French government bonds have jumped above 3% over the past year… This has brought France’s benchmark borrowing costs to just 0.14 percentage points less than those of Italy... The convergence has upended long-held views on France’s position as one of the region’s safest borrowers and Italy as one of its most risky, with a huge stock of public debt equal to about 140% of GDP. Italy’s ‘spread’ over France… ballooned to more than 4 percentage points during the Eurozone debt crisis of the 2010s.”
August 12 – Bloomberg (Hidenori Yamanaka): “Japan’s current benchmark 10-year government bond wasn’t traded at all on Tuesday, the first such instance in more than two years… While light trading had been expected in Tokyo... it is a reminder of the poor liquidity that has been a feature of the Japanese bond market in recent months.”
Global Credit and Financial Bubble Watch:
August 12 – Bloomberg (Kevin Kingsbury): “As three US leveraged loans have lender commitments due Tuesday, this month has already notched a record for August launches even as activity has begun to slow. New deals through Monday totaled $48.6 billion, topping August 2017’s $45.6 billion…”
August 12 – Bloomberg (Jeannine Amodeo and Rachel Graf): “Call it the summer of 175. A hefty number of leveraged loans have priced at rock-bottom levels lately, a sign of growing froth in the market. Investors typically consider 1.75 percentage points over the benchmark as the floor for participation, but some even priced a bit lower. About 16 loans priced at this tight level from June 1 through Aug. 12, more than double the amount seen during the prior-year period…”
August 12 – Bloomberg (Rene Ismail): “The share of private credit borrowers that deferred at least some of their cash interest payments surged in the second quarter to the highest in almost four years, pointing to growing stress in the $1.7 trillion market, according to… valuation firm Lincoln International. The percentage of debt investments with some sort of payment-in-kind increased to 11.4% in the quarter… That compares with 7.4% in the third quarter of 2021, when the firm began tracking the data.”
August 8 – Financial Times (Will Schmitt and Ian Smith): “Investors are scooping up funds holding the debt of highly rated US companies at the fastest rate in almost five years, underscoring how markets remain sanguine despite signs the American economy is cooling. US exchange traded funds and mutual funds holding investment grade bonds recorded roughly $11.6bn of inflows from July 30 to August 6... That marked the fifth highest weekly inflow on record and the most since late 2020, according to JPMorgan.”
August 14 – Reuters (Matt Tracy): “A growing number of U.S. companies are seeking more flexible covenants in their credit agreements to increase their debt loads while avoiding approvals from all their existing lenders, according to… Moody’s… Moody’s said in a report… that U.S. corporate borrowers with weaker credit profiles were leaning harder on their lenders to get more flexibility in agreements to take out more debt without full consent from existing lenders, as they struggled to issue new debt in public markets.”
Trump Administration Watch:
August 11 – Wall Street Journal (Greg Ip): “A generation ago conventional wisdom held that as China liberalized, its economy would come to resemble America’s. Instead, capitalism in America is starting to look like China. Recent examples include President Trump’s demand that Intel’s chief executive resign; the 15% of certain chip sales to China that Nvidia and Advanced Micro Devices will share with Washington; the ‘golden share’ Washington will get in U.S. Steel as a condition of Nippon Steel’s takeover; and the $1.5 trillion of promised investment from trading partners Trump plans to personally direct. This isn’t socialism, in which the state owns the means of production. It is more like state capitalism, a hybrid between socialism and capitalism in which the state guides the decisions of nominally private enterprises.”
August 11 – Reuters (Karen Freifeld, Arsheeya Bajwa and Alexandra Alper): “U.S. President Donald Trump upended decades of U.S. national security policy, creating an entirely new category of corporate risk, when he made a deal with Nvidia to give the U.S. government a cut of its sales in exchange for resuming exports of banned AI chips to China. Historically, the U.S. government made decisions to control the export of sensitive technologies on national security grounds. Those decisions were viewed as non-negotiable… The latest move drew condemnation from U.S. lawmakers in both parties who warned that it risked creating a pay-for-play framework for the sale of sensitive technologies to U.S. adversaries, a concern echoed by analysts and legal experts.”
August 13 – Bloomberg (Daniel Flatley, Jonathan Ferro, and Annmarie Hordern): “Treasury Secretary Scott Bessent said the recent deal to allow Nvidia Corp. and Advanced Micro Devices Inc. to resume lower-end AI chip sales to China, on the condition they give the US government a 15% cut of the related revenue, could serve as a model for others. ‘I think we could see it in other industries over time,’ Bessent said... ‘Right now, this is unique, but now that we have the model and the beta test, why not expand it?’”
August 13 – New York Times (Tripp Mickle): “At an Oval Office meeting last week, President Trump dangled an offer to Jensen Huang, the chief executive of Nvidia. Mr. Trump said there would be a price for granting Nvidia the licenses it needed to sell artificial intelligence chips to China. ‘I want 20%,” Mr. Trump said. ‘Will you make it 15?’ Mr. Huang asked. Mr. Trump… agreed… Two days later, the administration granted Nvidia the licenses it wanted, with the unorthodox payments expected to go to the government. The negotiation was the most prominent example of Mr. Trump’s blunt interventions in the global operations of the chip industry’s most powerful companies. He has threatened to take away government grants, restricted billions of dollars in sales, warned of high tariffs on chips made outside the United States, demanded investments and urged one company, Intel, to fire its chief executive.”
August 11 – New York Times (Katia Dmitrieva and Philip J. Heijmans): “The revenue-for-exports deal between the US government and two of the world’s biggest chipmakers opens a new front in a trading regime turned upside down by Donald Trump… ‘To call this unusual or unprecedented would be a staggering understatement,’ said Stephen Olson, a former US trade negotiator now with the Singapore-based ISEA... ‘What we are seeing is in effect the monetization of US trade policy in which US companies must pay the US government for permission to export. If that’s the case, we’ve entered into a new and dangerous world.’”
August 10 – Wall Street Journal (Antoine Gara, Jamie John and Eric Platt): “Donald Trump this week opened the private equity and cryptocurrency industries to trillions of dollars in new investments from US retirement savers, potentially reshaping the financial future of 90mn Americans and turbocharging the growth of asset managers and digital currency groups. But the order enabling 401k savings plans to invest in a range of alternative assets also exposes America’s retirees to new risks. It follows heavy lobbying by private capital groups such as Apollo Global Management and BlackRock… The measure is expected to open retirement funds to a new array of unlisted investments, from corporate takeovers and private loans to infrastructure deals. In doing so, it potentially exposes them to higher fees and less transparency. Some of the $9tn held in these 401k plans is likely to be shepherded into assets that are harder to value and sell than the traditional stocks and bonds that today comprise the vast majority of retirement plans.”
August 11 – Wall Street Journal (Lingling Wei, Raffaele Huang and Amrith Ramkumar): “Jensen Huang, chief executive of… Nvidia, worked for months behind the scenes in Washington and Beijing to protect tens of billions of dollars in future sales from the heated U.S.-China trade rivalry. Huang told President Trump that restrictions on U.S. chip sales to China would backfire by pushing Chinese technology champions to achieve self-reliance. He advised the president to keep China hooked on American tech. As a sweetener, Huang said the company would invest as much $500 billion in the U.S. Huang’s argument, along with the half-trillion-dollar offer from the world’s most valuable company, appeared to seal the deal.”
August 12 – Wall Street Journal (Paul Kiernan): “Conservative economist Erwin John ‘E.J.’ Antoni sometimes jokes on social media that the ‘L’ in the Bureau of Labor Statistics’ acronym is silent. President Trump this week tapped Antoni to run the agency whose data and methodologies he has long criticized, especially when it produces numbers that Trump doesn’t like… Antoni went to work in 2021 as an economist at the Texas Public Policy Foundation, a conservative think tank in Austin that has sued the federal government to overturn climate-change regulations. The following year, he joined the conservative Heritage Foundation as a research fellow studying regional economics. He is now the foundation’s chief economist and an adviser to the Committee to Unleash Prosperity… Past BLS commissioners have had extensive research experience, and many have climbed the ranks of the agency itself. Antoni doesn’t fit that profile. He doesn’t appear to have published any formal academic research since his dissertation…”
August 12 – New York Times (Ben CasselmanAlan Rappeport and Lydia DePillis): “On Aug. 1, shortly after the Bureau of Labor Statistics released a surprisingly weak employment report, the conservative economist E.J. Antoni joined Steve Bannon’s influential ‘War Room’ podcast. ‘Have we put in our own person into B.L.S.?’ Mr. Bannon asked Dr. Antoni. ‘Is a MAGA Republican, that President Trump knows and trusts, are they running the Bureau of Labor Statistics yet?’ ‘No, unfortunately, Steve, we still haven’t gotten there,’ Dr. Antoni replied, going on to say that Erika McEntarfer, the head of the agency, was ‘incompetent.’ Hours later, Mr. Trump fired Dr. McEntarfer, accusing her, without evidence, of rigging the jobs numbers against him. And on Monday, the president said he would nominate Dr. Antoni to replace her. ‘Our Economy is booming, and E.J. will ensure that the Numbers released are HONEST and ACCURATE,’ Mr. Trump said…”
August 12 – CNBC (Kevin Breuninger): “President Donald Trump… said Goldman Sachs CEO David Solomon should either replace the bank’s economist or ‘just focus on being a DJ,’ days after Goldman’s chief economist warned that American consumers will pay for an increasing share of new tariffs. Trump’s broadside against Solomon — who moonlights as a DJ — came as the president touted what he called ‘massive’ revenue being collected by the federal government due to his tariff policies. ‘Tariffs have not caused Inflation, or any other problems for America, other than massive amounts of CASH pouring into our Treasury’s coffers,’ Trump wrote…”
August 13 – Reuters (Dan Burns): “A top economist for Goldman Sachs… signaled no plans to change how his team conducts and publishes its research after President Donald Trump lashed out at the Wall Street firm and its chief executive because of the research team’s estimate that American consumers would bear the brunt of the costs of Trump’s tariffs. Chief U.S. Economist David Mericle's defense of his team’s work came a day after Trump in a social media post said Goldman Chief Executive David Solomon should ‘not bother running a major financial institution’ and lambasted the bank’s economics research.”
August 11 – Reuters (Suzanne McGee and Isla Binnie): “The new White House order directing regulators to expand access to alternative investments in 401(k) plans, like crypto or privately owned companies adds a new layer of risk to the retirement portfolios for ordinary investors that they may not fully understand, investment professionals say. ‘This is brand new; none of it has been stress-tested yet’ in a market shock or long-term selloff, said Christopher Bailey, director of retirement, at Cerulli Associates, an asset management research firm. ‘There are liquidity concerns, issues around fees, among others.’”
August 13 – Financial Times (David Keohane and William Sandlund): “US Treasury secretary Scott Bessent has said that Japan’s central bank is falling ‘behind the curve’ on inflation and will probably have to raise interest rates, in a rare swipe by a senior official at the monetary policy of another country. ‘The Japanese have an inflation problem… They’re behind the curve so they are going to be hiking and they need to get their inflation problem under control,’ Bessent told Bloomberg TV, comments that stood in contrast to the position of Bank of Japan governor Kazuo Ueda.”
August 14 – Axios (Rebecca Falconer): “The Trump administration’s D.C. crackdown with National Guard deployment and 24/7 federal patrols was ramping up on Wednesday night, drawing a sharp rebuke from religious leaders in the U.S. capital. President Trump maintains his unprecedented action in declaring a ‘crime emergency’ in D.C. was necessary, but the interfaith group said his ‘sweeping language’ to justify it is ‘inaccurate and dehumanizing, increasing the risk of indiscriminate arrests and the use of excessive force.’ Trump has deployed some 800 National Guard soldiers and about 850 officers and agents to D.C. Trump’s federalization of the Metropolitan Police Department has a 30-day limit unless Congress extends it — and the president indicated… he’ll push for a ‘long-term extension’ in a crime bill that'll initially concern D.C. but will serve as a roadmap for other cities.”
August 14 – Bloomberg (Joe Deaux, Jennifer A. Dlouhy and Josh Wingrove): “President Donald Trump’s controversial plan to take a cut of revenue from chip sales to China is leading to concerns that the US government will find new ways to start charging companies for a range of business activities with other countries… The question that companies must now confront is whether the risk is worth taking. People familiar… said companies are struggling to figure out what the president’s order means for their future… ‘This is truly bizarre and unusual, and the troubling thing — beyond the individual instances of AMD and Nvidia — is the possibility that this will be expanded,’ said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. ‘Everything is now ‘national security,’ according to the new definition, which means it’s all subject to export licenses and then they give you a license based on your contribution.’”
August 14 – Axios (Jeffrey Cane): “The U.S. government has been holding discussions on taking an equity stake in the chip maker Intel… A deal would be another turn by the Trump administration away from laissez-faire policies and toward state capitalism, as it seeks to bolster the domestic fabrication of semiconductors. Intel's planned $20 billion semiconductor plant in Ohio has been repeatedly delayed, and a major government investment could provide a needed boost, Bloomberg noted. Taking a stake would echo previous moves by the administration. The U.S. government took a ‘golden share’ to allow Nippon Steel to acquire U.S. Steel. The U.S. Department of Defense is buying $400 million in preferred shares in MP Materials, a miner of raw earth minerals.”
August 13 – Bloomberg (Katy O'Donnell): “Forty-one former employees of Fannie Mae… sued the company, its chief executive and Federal Housing Finance Agency Director Bill Pulte for alleged defamation related to their dismissals in April. The ex-employees of the government-controlled mortgage giant are seeking damages amounting to more than $2 million per person… Fannie announced in April that more than 100 employees had been removed ‘for unethical conduct, including the facilitation of fraud.’ In a Fox News interview the following day, Pulte said an investigation found that workers were making donations to ‘the internal company charity’ and then getting kickbacks.”
August 11 – New York Times (David Yaffe-Bellany): “World Liberty Financial, the cryptocurrency start-up founded last year by the Trump family, announced on Monday that a publicly traded technology firm would begin buying large quantities of its signature digital coin. The firm, a little-known tech company called ALT5 Sigma, is planning to sell $1.5 billion worth of shares, using the proceeds to buy $WLFI, a cryptocurrency created by World Liberty… Similar initiatives have become wildly popular in the crypto world this year, after the success of Strategy, a public tech company formerly known as MicroStrategy…”
China Trade War Watch:
August 12 – Bloomberg (Mackenzie Hawkins and Ian King): “Beijing has urged local companies to avoid using Nvidia Corp.’s H20 processors, particularly for government-related purposes, complicating the chipmaker’s return to China after the Trump administration reversed an effective US ban on such sales. Over the past few weeks, Chinese authorities have sent notices to a range of firms discouraging use of the less-advanced semiconductors, people familiar with the matter said. The guidance was particularly strong against the use of H20s for any government or national security-related work by state enterprises or private companies…”
August 13 – Reuters (Fanny Potkin, Karen Freifeld and Jun Yuan Yong): “U.S. authorities have secretly placed location tracking devices in targeted shipments of advanced chips they see as being at high risk of illegal diversion to China, according to two people… The measures aim to detect AI chips being diverted to destinations which are under U.S. export restrictions, and apply only to select shipments under investigation, the people said.”
Trade War Watch:
August 11 – Axios (Madison Mills): “The White House continues to roll out sweeping tariff announcements with little detail, leaving investors scrambling for information. Then, often days later, key clarifications or exemptions follow. Even countries with direct involvement in the trade deals seem caught off guard by White House statements. ‘Washington is just randomly shooting, and they are shooting some like-minded countries from behind,’ Taro Kono, a member of Japan’s House of Representatives, said...”
August 5 – Japan Times (Jesse Johnson): “Prime Minister Shigeru Ishiba has found himself in a unique position in Japan’s staid political world. As he fights for his political survival, Ishiba — known for being a straight shooter — is calling things as he sees them. On Monday, he offered his views of U.S. President Donald Trump and the American leader’s negotiating tactics… ‘(Trump) is not a normal person. He’s someone who changes the rules,’ Ishiba said in response to demands in parliament by opposition parties that the government draft a formal document to put in writing the recent trade deal Japan sealed with the U.S. that lowers onerous tariffs.”
August 10 – Financial Times (Michael Stott and Michael Pooler): “The US is likely to step up a dispute with Brazil over the fate of Donald Trump’s ally Jair Bolsonaro by imposing fresh sanctions on justices who refuse to end his trial on coup charges, according to the former president’s congressman son Eduardo. Eduardo has been leading a lobbying campaign in Washington for US measures against Brazil’s top court to save his father from a jail sentence… ‘I know [Trump] has a range of possibilities on his table, from sanctioning more Brazilian authorities, to a new wave of visa withdrawals, to tariff issues,’ Eduardo told the Financial Times…”
Constitution Watch:
August 11 – Wall Street Journal (Michael R. Gordon, Vera Bergengruen and Lara Seligman): “President Trump’s decision to deploy National Guard troops in Washington, D.C., is his boldest move to date to expand the use of military power on U.S. soil. The deployment of 800 National Guard troops to Washington, which the president alleges has been ‘overtaken by violent gangs and bloodthirsty criminals,’ amplifies the law-and-order themes that play well with his political base. He buttressed this announcement Monday by effectively federalizing the Washington police department, putting it under the control of the Trump administration… The announcement was the latest in a series of moves by Trump to push the boundaries of how U.S. troops can be deployed in American territory, triggering a fierce legal debate over the U.S. military’s expanding footprint at home.”
Budget Watch:
August 12 – Bloomberg (Daniel Flatley): “US tariff revenue reached a fresh monthly record in July, though the increase wasn’t enough to prevent a widening in the monthly budget deficit — pointing to the federal government’s continuing fiscal challenges. Customs duties climbed to $28 billion last month… At the same time, the monthly budget deficit came in at $291 billion, or 10% more than the same month a year before, after accounting for calendar differences. As the fiscal year approaches its September end, the US is heading for another outsize deficit. The gap for the 10 months through July weighs in at $1.63 trillion.”
U.S./Russia/China/Europe/Iran Watch:
August 13 – Financial Times (Anne-Sylvaine Chassany, Ben Hall, David Sheppard and James Politi): “Donald Trump promised ‘very severe consequences’ for Russia if its leader Vladimir Putin refused to agree to end the war with Ukraine at their meeting in Alaska… The US president issued the threat after holding talks on Wednesday with European leaders that went some way to calming their fears he could strike a deal on territory with Putin and then try to impose it on Ukrainian President Volodymyr Zelenskyy. Trump described his call with European allies as ‘very good’ and ‘a 10’, adding he would like the Alaska meeting to be followed shortly by a trilateral gathering with Putin and Zelenskyy.”
August 13 – Reuters (Ben Blanchard and Karen Lema): “The Chinese military said… it monitored and ‘drove away’ a U.S. destroyer that sailed near the disputed Scarborough Shoal in the South China Sea, while the U.S. Navy said its action was in line with international law. The first known U.S. military operation in at least six years within the shoal's waters came a day after the Philippines accused Chinese vessels of ‘dangerous manoeuvres and unlawful interference’ during a supply mission around the atoll.”
New World Order Watch:
August 10 – Financial Times (Humza Jilani, John Reed and James Politi): “Pakistan’s chief of army staff Asim Munir smiled for the camera this weekend, arm in arm with a top American general — his second warm welcome this summer into the heart of the US establishment. Munir travelled to Florida for the retirement of General Michael Kurilla, the commander of US military forces in the Mideast, who has previously praised the Pakistan strongman for a ‘phenomenal partnership’ in the fight against terrorism… Even more remarkably, in June Munir had a two-hour private lunch… with Donald Trump, just a month after Pakistan and arch-rival India fought their bloodiest military confrontation for decades.”
August 11 – Financial Times (Michael Stott and Michael Pooler): “Hit by record US tariffs and demands to over-rule the supreme court, Brazil’s President Luiz Inácio Lula da Silva is digging in. Rather than call the author of the tariffs, US President Donald Trump, Lula decided last week to seek the counsel of other leaders, defying what he termed ‘unacceptable’ American interference. On August 7, he telephoned Indian Prime Minister Narendra Modi, seeking solidarity among allies in the Brics bloc of emerging powers and discussing closer ties. Two days later, he called Russian leader Vladimir Putin. Last night, the Brazilian president said he had spoken to China’s Xi Jinping for an hour. Lula’s response to punitive measures from a country that was long a close ally underlines the unconventional nature of the confrontation between Washington and BrasÃlia — one that shows no sign of quick resolution.”
August 12 – Bloomberg: “Brazilian President Luiz Inacio Lula da Silva spoke with his Chinese counterpart following talks with the leaders of India and Russia, as part of his outreach to allies after Donald Trump thrust Latin America’s biggest economy into the middle of his global trade war… During the phone conversation…, Xi called for coordinated efforts against unilateralism and protectionism — language usually used by China to criticize US trade policy. He said China supports the Brazilian people in safeguarding their country’s legitimate rights, describing ties between the two nations as being ‘at their best in history’… China is willing to work with Brazil to strengthen coordination and set an example of ‘unity and self-reliance among Global South nations,’ CCTV cited Xi as saying.”
August 9 – Bloomberg (Giovanna Bellotti Azevedo): “Russian President Vladimir Putin called Brazilian counterpart Luiz Inácio Lula da Silva to discuss cooperation among so-called BRICS countries, whose loose alliance has been energized by US tariff policy. The two leaders reaffirmed their determination to further strengthen their countries’ strategic partnership and coordination within BRICS, according to the Kremlin. Putin initiated the call…, Lula’s office said…”
August 12 – Wall Street Journal (Georgi Kantchev): “President Trump’s tariff policies have reordered global supply chains, redrawn investment maps and tested old alliances. In Switzerland, they have also spurred an uneasy audit of its role in the world. Switzerland thrived as an honest broker and diplomatic powerhouse for centuries. The War of the Spanish Succession between France and the Holy Roman Empire finally ended in 1714 with a treaty signed in the small town of Baden. In 1872, an arbitration court in Geneva ordered the U.K. to pay the U.S. compensation for providing war ships to the Confederacy during the Civil War… But many in the Alpine country—which the U.S. recently slapped with one of the highest tariff rates in the world—are now questioning whether its centuries-old model of neutrality and exceptionalism is still fit for purpose in a transactional, power-driven world.”
Canada Friend and Ally Watch:
August 14 – Wall Street Journal (Laura Cooper and Vipal Monga): “Canada’s prohibition on U.S. alcohol is creating a headache for American liquor and winemakers. On the shelves of many Canadian liquor stores, bottles of Jack Daniel’s, Maker’s Mark and Sailor Jerry Spiced Rum are nowhere to be found. Thousands of bottles of U.S. wine and spirits sit in storage across the country. At tastings, Canadian drinkers are turning their noses up at American alcohol.”
Ukraine Watch:
August 12 – Bloomberg (Daryna Krasnolutska and Olesia Safronova): “Ukrainian President Volodymyr Zelenskiy said he won’t cede the eastern region of Donbas to Russia and pushed for Kyiv to be included in talks as the US and Russian leaders prepare to meet on Friday. Vladimir Putin is demanding that Ukraine give up the Donetsk and Luhansk regions that together form Donbas as a condition to unlock a ceasefire and enter negotiations over a longer-term peace accord.”
August 10 – Bloomberg: “Ukraine’s General Staff said it made a successful drone strike early Sunday on a major refinery in the Saratov region, the latest in a series of attacks this month on Russian oil facilities. Earlier, the regional governor announced that UAVS from Ukraine hit an unspecified ‘industrial enterprise’ in the region, about 530 miles southeast of Moscow.”
Middle East Watch:
August 10 – Bloomberg (Arsalan Shahla): “Iran won’t allow nuclear site inspections when a senior International Atomic Energy Agency official visits Tehran on Monday, Foreign Minister Abbas Araghchi said. ‘Until we reach a new agreement framework, no cooperation will begin’ with the United Nations nuclear watchdog, he said…”
AI Bubble Watch:
August 13 – Financial Times (Tabby Kinder): “Meta is building ‘Prometheus’ and ‘Hyperion’, Elon Musk’s xAI has ‘Colossus’, and OpenAI is developing ‘Stargate’ — each a more than $100bn project to build the world’s most powerful supercomputer and usher in a new generation of artificial intelligence. But each of those gargantuan ventures is just a fraction of the spending required to build the data centres needed to power the AI era: one of the biggest movements of capital in modern history. ‘The amount of capital required is absolutely immense,’ said Rob Horn, global head of infrastructure and asset-based credit at… Blackstone, which manages an $85bn data centre platform. ‘The scale of the opportunity is exhausting the capital of [any one financial] market, and is requiring an all-of-the-above approach, with private capital playing a very large role.’ Google, Amazon, Microsoft and Meta will spend more than $400bn on data centres in 2026 — on top of more than $350bn this year.”
August 14 – Bloomberg (Tope Alake): “Efforts to meet booming US power demand from artificial intelligence will be hindered by a growing shortage of transformers, according to energy consulting firm Wood Mackenzie. Demand for power transformers, components that are necessary to deliver energy across the grid, will exceed supply in the US by as much as 30% this year, Wood Mackenzie said… The deficit is driving up costs and extending timelines for power projects, and the supply constraints are expected to persist into the 2030s. That threatens to undermine the US energy transition and efforts to improve grid reliability, said Ben Boucher, a senior analyst at WoodMac… The supply gap is emerging as a major concern amid growing demand for power to run factories and the data centers supporting artificial intelligence systems. ‘We have seen such a large increase in power demand,’ Boucher said... ‘AI is necessitating data center expansion, which is pushing up electricity usage.’”
August 14 – New York Times (Ivan Penn and Karen Weise): “The annual meeting of state utility regulators is typically a humdrum affair of dry speeches and panel discussions. But in November, the scene at the Marriott in Anaheim, Calif., had a bit more flash. The conference’s top sponsors included the nation’s biggest tech companies — Amazon, Microsoft and Google. Their executives sat on panels, and the companies’ branding was plastered on product booths and at networking events. Even the lanyards around attendees’ necks were stamped with Google’s colorful logo.”
August 10 – Wall Street Journal (Peter Rudegeair): “Leopold Aschenbrenner emerged last year as a precocious artificial-intelligence influencer after publishing a widely read manifesto. Then he decided to try his hand at stock picking. The 23-year-old with no professional investing experience quickly raised more money for a hedge fund than most pedigreed portfolio managers can when they strike out on their own. As valuations of Nvidia, OpenAI and other artificial-intelligence companies continue to soar, so do investments in hedge funds hoping to ride the AI wave. Aschenbrenner’s… firm, Situational Awareness, now manages more than $1.5 billion… He has described the firm as a ‘brain trust on AI.’”
August 13 – New York Times (Steve Lohr): “Nearly four decades ago, when the personal computer boom was in full swing, a phenomenon known as the ‘productivity paradox’ emerged. It was a reference to how, despite companies’ huge investments in new technology, there was scant evidence of a corresponding gain in workers’ efficiency. Today, the same paradox is appearing, but with generative artificial intelligence. According to recent research from McKinsey & Company, nearly eight in 10 companies have reported using generative A.I., but just as many have reported ‘no significant bottom-line impact.’”
Bubble and Mania Watch:
August 10 – Financial Times (Harriet Clarfelt): “Private markets ‘haven’t been tested’ yet by a steep economic downturn, the chief of $2.1tn bond giant Pimco has warned, urging the need to ‘constantly think about what can go wrong’. ‘We really haven’t had a hard recession since the great financial crisis,’ said Emmanuel ‘Manny’ Roman, chief executive of California-based Pimco… ‘You saw one very dicey month during Covid’ he added, before a flood of public money came to the rescue. ‘The private markets in their current form haven’t been tested, and they will be tested when there’s a recession.’ Roman is well-positioned to assess the potential pitfalls of the roaring expansion in private capital, as asset managers and private capital firms rush to expand investor access to private markets…”
August 14 – Reuters (Manya Saini and Niket Nishant): “After years of sitting on the sidelines, U.S. crypto companies are lining up to go public, buoyed by friendly policies under President Donald Trump’s second administration that have pushed the value of global cryptocurrencies to a record $4.2 trillion. Bullish, a cryptocurrency exchange operator that counts billionaire Peter Thiel among its backers, was the latest to tap U.S. public markets on Wednesday, raising over $1.1 billion. Analysts point to rising mainstream adoption and deep-pocketed corporate backers as forces reshaping the sector’s fundraising landscape and boosting demand for new crypto stocks.”
August 9 – New York Times (Danielle Kaye): “The private equity industry, facing a slowdown in exits and fizzling returns, has long coveted a $12.2 trillion pool of money: retirement savings. Now it is one step closer to managing some of the funds in Americans’ 401(k)s and related plans. President Trump signed an executive order… that clears a path for plan managers to add private equity and other alternative assets to retirement savings accounts. The administration’s stance ‘marks a major step forward in modernizing the retirement plans of everyday savers,’ Jaime Magyera, the head of BlackRock’s retirement business, said…”
August 14 – Wall Street Journal (Anne Tergesen and Hannah Erin Lang): “Americans’ nest eggs are increasingly tied to the fate of the stock market. Workers across nearly all age groups are investing record portions of their 401(k) accounts in equities. After years of relentless market gains, they are either allocating more to stocks or having it done for them by money managers. Workers in their late 30s had 88% of their 401(k)s in stocks last year, versus 82% a decade earlier, according to Vanguard Group… 401(k) investors in their early 60s had allocations to stocks of 60%, up from 57% a decade ago.”
August 15 – Yahoo Finance (Jake Conley): “The end of summer usually marks one of the slowest periods of the year for investment bankers. This year, however, markets aren’t taking a vacation. Halfway through August, the IPO market has already roughly doubled the amount of activity typically seen during the month, with 12 new issues worth at least $50 million raising some $2.9 billion in capital.”
August 11 – Wall Street Journal (Krystal Hur): “American companies are repurchasing their shares at a record pace… U.S. companies have announced $983.6 billion worth of stock buybacks so far this year, the best start to a year on record, according to Birinyi Associates data going back to 1982. They are projected to purchase more than $1.1 trillion worth overall in 2025, which would mark an all-time high. The biggest repurchasers include tech giants Apple and Google parent Alphabet. Big banks such as JPMorgan Chase, Bank of America and Morgan Stanley also are leading the charge.”
Inflation Watch:
August 11 – Bloomberg (Matthew Thomas): “The impact of President Donald Trump’s tariffs on consumer prices is just getting started, according to… Goldman Sachs…, adding more uncertainty to a Treasury market that has been gripped by shifting bets on the pace of interest rate cuts. US companies have so far taken the bulk of the hit from Trump’s tariffs but the burden will increasingly be passed on to consumers as companies hike prices, economists including Jan Hatzius wrote… Consumers in the US have absorbed an estimated 22% of tariff costs through June, but their share will rise to 67% if the latest tariffs follow the pattern of levies in previous years, they wrote. The net result: faster inflation.”
August 12 – Bloomberg (Jonathan Levin): “The case for Federal Reserve interest-rate cuts has always revolved around the idea that inflation was tame outside of the effects of tariffs, which policymakers supposedly ought to ‘look through’ when setting monetary policy… Unfortunately for those who are optimistic that rates will be lowered imminently, the inflation data for July… should give pause. While the consumer price index rose just 0.2% from June, prices of non-housing services rose 0.5%, the hottest reading since January. They were pushed higher by airline fares, dental services and event admissions, among other things (clearly not the sorts of products that you’d associate with President Donald Trump’s multi-front global trade war.)”
August 10 – Financial Times (Guy Chazan): “Small businesses are significantly raising prices in response to President Trump’s tariff regime that came into effect this month, in a development that could fuel inflation in the world’s biggest economy. Businesses surveyed by the Financial Times in the Midwestern city of St Louis said their suppliers had increased prices for a broad range of products in recent weeks, sometimes by as much as 30%, leaving them with little choice but to pass this on to customers. Many said they had stockpiled products priced at the pre-tariff level before the levies came into force, but have since run these stocks down. ‘I believe inflation will increase as each item that was in inventory is replaced by a new one,’ said Justin Breckle, chief executive of Authorized Appliance…”
August 14 – Financial Times (Myles McCormick and Kate Duguid): “US wholesale prices jumped in July, rising 3.3% from a year earlier, in the latest signal that President Donald Trump’s tariffs are seeping through to the American economy. The rise in the Producer Price Index… was the biggest jump since February. The reading… was well above June’s 2.4% annual gain and the 2.5% rise expected by economists… The figures suggest that despite muted inflation to date in consumer prices, the levies the president has imposed on US trading partners are driving an increase in prices further up the supply chain. ‘Tariffs are causing businesses to raise the prices they charge each other, which will show up in higher consumer prices over time,’ said Bill Adams, chief economist at Comerica Bank.”
August 15 – Reuters (Lucia Mutikani): “U.S. import prices rebounded in July, boosted by higher costs for consumer goods, the latest indication that inflation was poised to pick up because of tariffs. Import prices increased 0.4% last month after a downwardly revised 0.1% dip in June…”
August 13 – Bloomberg (Paulina Cachero): “Manhattan apartment rents hit a record high for the fifth time in the past six months. New leases were signed at a median of $4,700 in July, up $75 from June, according to… Miller Samuel Inc. and brokerage Douglas Elliman. Rents surged 9.3% from a year earlier, the second-biggest annual jump in the firms’ data going back to 2008.”
Federal Reserve Watch:
August 10 – Wall Street Journal (Editorial Board): “President Trump likes to stir things up, and he’s done it again with his choice of Stephen Miran to fill an open seat on the Federal Reserve Board of Governors. We can’t recall when a President nominated to the Fed someone whose abiding policy conviction is to weaken the U.S. dollar. Mr. Miran has been chairman of the White House Council of Economic Advisers in Mr. Trump’s second term. He’s an ardent promoter of the President’s economic policies, especially tariffs. For Mr. Miran, this is a matter of conviction. Before his White House days he offered a detailed case for rewriting the rules of the global trade and financial system.”
August 13 – Financial Times (Claire Jones, Kate Duguid and Myles McCormick): “Donald Trump said he had cut his Federal Reserve chair shortlist to ‘three or four’ candidates and left the door open to naming a shadow successor before Jay Powell departs. The president said… he had a small handful of contenders in mind who would be ‘great’ in the role, even as the US Treasury confirmed plans to interview 11 candidates. Trump did not provide names but the three front-runners for the job are… Kevin Hassett, former Fed governor Kevin Warsh, and incumbent Fed governor Christopher Waller. The list of candidates to be quizzed by Treasury secretary Scott Bessent features many names who are seen as long shots…, including David Zervos, chief market strategist at Jefferies. Former Fed governor… Larry Lindsey and BlackRock’s bond chief Rick Rieder were also candidates…”
August 12 – Bloomberg (Maria Eloisa Capurro): “Federal Reserve Bank of Richmond President Tom Barkin said uncertainty over the direction of the US economy is decreasing, but it’s still unclear whether the central bank should concentrate more on controlling inflation or bolstering the job market. ‘The fog is lifting,’ Barkin said… But risks remain, he added. ‘We may well see pressure on inflation, and we may also see pressure on unemployment, but the balance between the two is still unclear… As the visibility continues to improve, we are well positioned to adjust our policy stance as needed.’”
August 12 – Reuters (Ann Saphir): “The U.S. central bank should not take tariffs' muted effect on inflation so far as an opportunity to cut interest rates, but rather as a sign that monetary policy is ‘appropriately calibrated,’ Kansas City Federal Reserve President Jeffrey Schmid said…, in remarks that contrast with the increasingly dovish tone of some of his colleagues. ‘With the economy still showing momentum, growing business optimism, and inflation still stuck above our objective, retaining a modestly restrictive monetary policy stance remains appropriate for the time being… While increased tariffs seem to be having a limited effect on inflation, I view this as a rationale for keeping policy on hold rather than an opportunity to ease the stance of policy.’”
August 14 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of St. Louis President Alberto Musalem said it’s too early for him to decide on whether to lower interest rates at next month’s meeting. ‘For me, it’s too early to say exactly what policy I will be able to support’ at the September meeting, Musalem said… Asked about whether a 50 bps reduction could be warranted next month, Musalem said from his perspective that would be ‘unsupported by the current state of the economy and the outlook for the economy.’”
August 13 – Yahoo Finance (Jennifer Schonberger): “Chicago Fed president Austan Goolsbee and Atlanta Fed president Raphael Bostic… said they’d prefer to gain more clarity around the impact tariffs have on inflation before determining whether to cut rates. Goolsbee said he’s waiting to see whether tariff-induced inflation could prove persistent. Likening tariffs to ‘throwing dirt in the air,’ Goolsbee said he’s trying to figure out whether inflation and employment are still moving toward their goals of 2% and maximum employment... ‘If you start seeing prices go up and you start seeing employment go down, because tariffs, in my view, are a stagflationary shock, it makes both sides of the mandate go bad at the same time, and that’s the worst position that a central bank could be in because there’s not an obvious answer of what you do,’ Goolsbee said… Goolsbee cautioned that if we get more data like the latest Consumer Price Index report, which showed ‘core’ inflation… rising on account of higher goods and services prices, that would be concerning.”
August 13 – Reuters (Dan Burns): “Atlanta Federal Reserve President Raphael Bostic… said a U.S. job market holding near full employment offers the central bank the ‘luxury’ of being able to avoid rushing to make any policy adjustments. The Fed should avoid policy volatility that can be troublesome to the public, Bostic said…, adding that his ‘predisposition is to try not to do that’ and to wait for ‘a little more clarity on where things are going.’ ‘Now I feel we have the luxury to do that today because the labor market has been pretty much at full employment,’ Bostic said. ‘Our maximum employment mandate is not at risk in the same way that the inflation mandate is,’ he said.”
August 13 – Reuters (Ann Saphir): “Chicago Federal Reserve President Austan Goolsbee said… the U.S. central bank is grappling with understanding whether tariffs will push up inflation just temporarily or more persistently, which would inform its decision on when to cut interest rates. ‘As we go into the fall, these are going to be some live meetings and we’re going to have to figure it out,’ Goolsbee told the Greater Springfield Chamber of Commerce... ‘The hardest thing that a central bank ever has to do is to try to get the timing right when there are moments of transition’… ‘I think the state of the labor market is pretty strong, pretty solid,’ Goolsbee said.”
August 14 – Reuters (Rishabh Jaiswal): “San Francisco Federal Reserve President Mary Daly has pushed back against the need for an interest rate cut of 50 bps at the Federal Reserve's September meeting… ‘Fifty sounds, to me, like we see an urgent — I’m worried it would send off an urgency signal that I don’t feel about the strength of the labor market,’ Daly said… ‘I just don't see that. I don’t see the need to catch up.’”
August 14 – CNBC (Jeffrey Cox): “Wall Street veteran David Zervos added his name… to the list of potential Federal Reserve chairs who think the central bank is past due in approving an interest rate reduction. The chief market strategist at Jefferies told CNBC that central bankers shouldn’t be daunted by the July producer price index showing pipeline inflation pressures hotter than expected. Instead, he advocated the Fed move aggressively now to ease as a way to forestall a labor market slowdown and in fact help create a million more jobs. For the past three Fed meetings, Zervos has advocated a half percentage point cut in the federal funds rate… I’m still absolutely there. I think there is a reasonable storyline, a very cogent storyline, that suggests monetary policy is restrictive,’ he said. ‘Generally speaking, I don’t see any reason why this [PPI] number changes that view.’”
U.S. Economic Bubble Watch:
August 14 – Associated Press (Matt Ott): “The number of Americans filing for jobless benefits fell modestly last week, remaining in the historically low range since the U.S. economy emerged from the COVID-19 pandemic. Applications for unemployment benefits for the week ending Aug. 9 fell by 3,000 to 224,000… The total number of Americans collecting unemployment benefits for the previous week of Aug. 2 fell by 15,000 to 1.95 million.”
August 15 – Associated Press (Anne D’Innocenzio): “Shoppers spent at a healthy pace in July, particularly at the nation’s auto dealerships, as they appear to shrug off President Donald Trump’s tariffs… Retail sales rose a solid 0.5% last month, and June spending was stronger than expected… June’s retail sales were revised upward to 0.9%, from a 0.6% increase… The data showed solid spending across many retail sectors. Business at clothing stores was up 0.7% while online retailers saw a 0.8% increase. Business at home furnishings and furniture stores rose 1.4%... A category of sales that excludes volatile sectors such as gas, cars, and restaurants rose last month by 0.5% from the previous month.”
August 12 – Reuters (Lucia Mutikani): “U.S. small-business sentiment rose in July, though owners were becoming increasingly uncertain about the economic outlook and many worried about the quality of labor available. The National Federation of Independent Business said… its Small Business Optimism Index rebounded 1.7 points to 100.3 last month, with some viewing business conditions as better and reporting that it is a good time to expand… Twenty-one percent of small business owners reported labor quality as their single most important problem, up five points from June and ranking as the top problem.”
August 11 – Bloomberg (Brendan Murray): “Small US companies, the source of more than half of the country’s job creation in recent years, are struggling to comply with President Donald Trump’s new tariffs and cope with growing financial strains clobbering them from higher import costs… The US Chamber of Commerce estimated this month that the country has about 236,000 small-business importers — those with fewer than 500 employees. The goods they bought from abroad were worth more than $868 billion in 2023.”
August 15 – Axios (Emily Peck): “Rich Americans are spending at a higher rate this year — everyone else is basically slowing their roll… Spending increased nearly 2% in July from last year for higher income households, and 1% for middle-earners, according to a Bank of America Institute analysis… For the lowest third of households, those earning roughly $50,000 a year or less, spending growth was zero, zip, zilch, nada… Wage growth is slowing at the bottom, too. Up just 1.3% in July from last year… That’s compared with 3.2% for higher-income households, those earning above $120,000 a year.”
August 13 – CNBC (Diana Olick): “Homeowners are clearly looking for savings, even if it means taking on a riskier mortgage. Refinance demand, along with renewed demand for adjustable-rate loans, drove a sharp increase in overall applications last week. Total mortgage application volume rose 10.9% from the previous week… Applications for a mortgage to purchase a home rose 1% for the week and were 17% higher than the same week one year ago.”
August 14 – Associated Press (Alex Veiga): “The average rate on a 30-year U.S. mortgage fell this week to its lowest level in nearly 10 months, giving prospective homebuyers a sorely needed boost in purchasing power that could help inject life into a stagnant housing market. The long-term rate fell to 6.58% from 6.63% last week… A year ago, the rate averaged 6.49%.”
August 14 – Financial Times (Jamie Smyth and Kristina Shevory): “US shale producers are idling drilling rigs and holding back spending as they shelter from an Opec-induced price slump that is likely to send American output sharply lower. The number of crews fracking shale oil and gas wells — a crucial barometer of the industry’s activity levels — hit a four-year low last week and producers have wiped about $1.8bn from capital spending plans over just two quarters.”
China Watch:
August 13 – Bloomberg: “A key measure of lending at Chinese banks contracted for the first time in two decades in July while broad credit growth slowed, as borrowing demand languishes in an economy stuck in deflation. Financial institutions recorded a decrease of 49.9 billion yuan ($7bn) of yuan-denominated new loans in the month…, in the first decline since July 2005. That contrasts with the median forecast… for an increase of 300 billion yuan. The rare drop, driven by a net repayment from borrowers, adds to a slew of signs that households and companies have become even more reluctant to take on debt. Instead, the focus is on paying down what they owe, as their outlook on future income and growth dims.”
August 15 – Bloomberg: “China’s economy clocked its deepest slowdown of the year in July, raising expectations for Beijing to roll out more stimulus this year to offset the impact of Donald Trump’s trade war. A campaign to curb overcapacity at home is adding to the sting of higher tariffs. Fixed-asset investment fell the most since Covid erupted in early 2020, with industrial activity growth the weakest in eight months… Weaker spending on infrastructure and consumption was also a key culprit behind the slowdown, revealing the extent to which private demand remains frail.”
August 14 – Bloomberg: “China’s new-home prices fell at a faster pace in July, in a further sign that a series of stimulus measures has failed to revive the moribund market. New-home prices in 70 cities… dropped 0.31% from June, the biggest decline in nine months… Resale home-value slump narrowed to 0.55%, compared with 0.61% in June. China’s housing slump has dragged on for more than four years, with sales falling further since the second quarter.”
August 14 – Bloomberg: “China is preparing to mobilize companies owned by the central government in Beijing to purchase unsold homes from distressed property developers, following the limited success of a previous initiative that relied on local governments… Regulators are planning to ask some of the biggest state-owned enterprises and bad-debt managers including China Cinda Asset Management Co. to help clear the housing glut, said the people… The firms will be allowed to tap 300 billion yuan ($41.8bn) of funding that the central bank earmarked for the program last year, one of the people said.”
August 14 – Reuters (Yukun Zhang, Liangping Gao and Kevin Yao): “Property investment in China declined 12.0% in the first seven months of the year from the same period last year, after dropping 11.2% in the first half… Property sales by floor area fell 4.0% year-on-year, compared with a 3.5% drop in the first six months of the year. New construction starts measured by floor area slumped 19.4%, after contracting 20% in the January-to-June period.”
August 14 – Reuters (Kevin Yao, Joe Cash and Yukun Zhang): “China’s factory output growth slumped to an eight-month low in July, while retail sales slowed sharply… Industrial output grew 5.7% year-on-year in July…, the lowest reading since November 2024, and compared with a 6.8% rise in June. It missed forecasts for a 5.9% increase… Retail sales… expanded 3.7% in July, the slowest pace since December 2024, and cooling from a 4.8% rise in the previous month. They missed a forecast gain of 4.6%.”
August 10 – Wall Street Journal (Austin Ramzy): “China has begun the construction of a giant hydropower project at the earthquake-prone edge of the Tibetan plateau, a spectacular engineering feat that is central to Beijing’s enduring mission to become self-sufficient in critical areas such as energy. The $167 billion facility will require digging tunnels that plunge through high mountains to harness the power of a river that sharply descends through the deepest and possibly longest canyon on the planet. If its planners succeed—after shrugging off objections from neighbors—the project could generate triple the output of the world’s largest hydroelectric facility, China’s Three Gorges Dam, which is big enough to power around 40 million Chinese homes.”
August 13 – Bloomberg (Venus Feng): “China Evergrande Group’s delisting marks a bleak milestone for the nation’s property sector, now in a fourth year of paralysis that continues to weigh down the world’s second-largest economy. The company, once China’s biggest developer by sales, will be removed from the Hong Kong stock exchange on Aug. 25… The delisting comes as liquidators sifting through the books revealed that the developer’s debt load now stands at about HK$350 billion ($45bn), much bigger than previously disclosed.”
Central Bank Watch:
August 11 – Associated Press (Rod McGuirk): “Australia’s central bank… reduced its benchmark interest rate by a quarter percentage point for a third time this year to 3.6%, with inflation tamed and economic growth stalling. The Reserve Bank of Australia reduced its cash rate from 3.85%. The rate was cut from 4.1% in May… The new rate is the lowest since March 2023 and the cut was widely anticipated as inflation continues to fall.”
Japan Watch:
August 14 – Reuters (Makiko Yamazaki and Kantaro Komiya): “Japan’s economy grew much faster than expected in the second quarter as export volumes held up well against new U.S. tariffs, giving the central bank some of the conditions it needs to resume interest rate hikes this year. Gross domestic product (GDP) rose 1.0% on an annualised basis…, marking the fifth straight quarter of expansion…”
August 13 – Reuters (Mariko Katsumura and Leika Kihara): “The Bank of Japan will likely be raising interest rates as it is behind the curve in dealing with the risk of inflation, U.S. Treasury Secretary Scott Bessent told Bloomberg…, in his most explicit comment on Japan’s monetary policy. The remarks contrast with those of BOJ Governor Kazuo Ueda, who has repeatedly brushed aside the view the central bank was being too slow in raising rates… Bessent said U.S. Treasury yields are feeling the impact of overseas developments, with the 30-year yield getting dragged up by rising long-term bond yields in Japan and Germany. ‘There’s definitely leakage from — the Japanese have an inflation problem,’ Bessent said… Bessent mentioned that he had spoken with BOJ Governor Kazuo Ueda. ‘My opinion, not his — they’re behind the curve. So they’re going to be hiking,’ he added…”
August 11 – Financial Times (David Keohane): “Last month, the poster child of Japan’s bubble economy finally repaid the government bailout money it received almost a quarter century ago. Once called the Long-Term Credit Bank of Japan, SBI Shinsei Bank’s repayment of roughly ¥230bn ($1.5bn) in public cash signalled the end of an era. But as interest rates rise, the population falls and deposits become less sticky, Japan’s lenders are facing another period of turbulence. When the dust settles, the banking system could once again look different. Yutaka Ito, the newly installed head of the powerful markets regulator, the Financial Services Agency, agrees. In an interview…, Ito said some banks ‘are being confronted by the question of how they can survive’.”
EM Watch:
August 11 – Financial Times (Christine Murray): “President Claudia Sheinbaum… rejected the prospect of US military intervention in her country, insisting Mexico’s independence was ‘not at risk’. Her comments came after reports last week that President Donald Trump had signed a secret directive ordering the US military to target Latin American cartels, including several that send drugs across the border from Mexico. ‘We will never put our sovereignty at risk, we will never put Mexico’s independence at risk, Mexico is a free, sovereign, independent country,’ she said.”
Leveraged Speculation Watch:
August 10 – Bloomberg (Maria Elena Vizcaino, Vinicius Andrade, and Matthew Burgess): “The carry trade is making a comeback among emerging market investors amid bets the Federal Reserve will kick off interest-rate cuts next month, weakening the dollar and fueling appetite for high-yielding currencies. Money managers from Neuberger Berman Group LLC to Aberdeen Group Plc. are piling into currencies from Brazil, South Africa and Egypt, saying a weaker greenback and easing volatility make the environment ripe for the strategy, in which traders borrow in lower-yielding currencies to buy those that offer higher yields. The trade, which posted double-digit returns this year before hitting pause in July as the dollar rebounded, is now gaining steam again…”
Social, Political, Environmental, Cybersecurity Instability Watch:
August 8 – Wall Street Journal (Aaron Zitner): “America’s identity as a unified nation is eroding, with Republican- and Democratic-led states dividing into separate spheres, each with its own policies governing the economic, social and political rules of life. The bitter fight over redrawing U.S. House maps, triggered by President Trump’s effort to protect his party’s majority in the 2026 midterm elections, is the latest example of how the dominant party in many states is making extraordinary efforts to impose its will. In 40 states, a single party controls the House, Senate and governor’s office—a so-called trifecta—or else has enough power to block vetoes from a governor of the other party. That leaves less than 20% of Americans living in a state where the minority party has a meaningful voice in governance. The result has been a deepening of differences in red and blue America.”
August 11 – Bloomberg (Lauren Rosenthal and Mary Hui): “Climate change is cranking up the intensity of tropical cyclones. Known as hurricanes or typhoons depending on where they’re spawned, these spinning storms are becoming more potent as warmer seas and a hotter atmosphere provide more fuel. Ocean temperatures have been breaking heat records…, and ramped-up evaporation rates are loading cyclones with trillions of gallons of rainfall. At the same time, wind shear that can help keep storms in check has been weakening in some parts of the world as sea temperatures rise.”
Geopolitical Watch:
August 13 – Bloomberg (Misha Savic): “Months of anti-government rallies in Serbia lapsed into violence again as supporters of President Aleksandar Vucic clashed with his opponents in three of the Balkan country’s biggest cities. The rival groups hurled flares, rocks, firecrackers and bottles at each other in the capital of Belgrade, the northern city of Novi Sad and in Nis in the south as police struggled to keep them apart.”
