Weekly Commentary: Sometimes Not Liquid at All

Crisis dynamics gained important momentum this week.

“Blue Owl Shares Post Worst Month Ever on Private Credit Fears.” “KKR BDC Slides on Rise in Troubled Loans.” “BlackRock Private Debt Fund Slumps After Slashing Dividend.” “Apollo’s MFIC Slashes Dividend, Marks Down Assets, Announces $100M Buyback.” “Private Credit Firm Invico Calls Investors to Manage Exodus Risk.” “No Fed, No Safety Net: Why Private Credit’s First Real Recession Will be its Moment of Truth.” “Blackstone Private Debt Fund Sees More Stress in Software Assets.” “Bain Warns Software Default Rate Risks Hitting Double Digits.” “Blackstone’s Schwarzman Reaped Near-Record $1.24 Billion in 2025.”

Blue Owl’s 2.4% decline this week pushed y-t-d (2-months) losses to 29.4%. KKR sank 13.3% (down 31.2% y-t-d), Ares Management 9.1% (down 30.7%), Apollo Management 12.6% (down 27.7%), and Blackstone 6.5% (down 26.5%). These stocks are sending a strong Credit cycle signal.

Bloomberg: “Bank Shares Walloped by More ‘Cockroach’ Credit Woes, AI.” “Banks Trade Like We’re in the Midst of Crisis.”

Ominously, the KBW Bank Index sank 5.9% this week, boosting losses from February 10th highs to double-digits (10.4%). It was the index’s largest decline since ‘liberation day’ week (April 4th). PNC Financial dropped 8.9% this week, Wells Fargo 8.2%, Zions Bancorp 8.4%, Goldman Sachs 6.8%, Bank of America 6.1%, Morgan Stanley 5.1%, Citigroup 5.0%, and JPMorgan 3.4%. The Broker/Dealer Index fell 2.4%, with losses since February 10th at 7.9%. The KBW Index’s 5.1% Friday slump was the largest single day decline since April 4th.

Concerns were not limited to the goliath “money center banks”. The KBW Regional Bank Index was clobbered 7.1% this week, with losses from February 9th highs at 10.0%.

Key individual bank CDS prices posted their largest gains since April. Morgan Stanley CDS surged 11 bps to a nine-month high of 66 bps – the biggest move since “liberation day.” Citigroup CDS rose eight to 61 bps; Goldman Sachs seven to 64 bps; Wells Fargo five to 54 bps; Bank of America five to 60 bps; and JPMorgan four to 45 bps – all to highs since November.

February 26 – Bloomberg (Constantine Courcoulas, Donal Griffin, and Scott Carpenter): “As Market Financial Solutions Ltd. hurtled toward collapse in London, the setting was new, but the themes felt familiar. Like US auto lender Tricolor Holdings, MFS was a nonbank finance firm looking to fill a gap that major banks had ignored or shunned, while tapping those Wall Street giants for the cash to do it. And like auto parts supplier First Brands Group, the banks took comfort in tangible collateral, only for accusations of double-pledging to rattle that assurance. Even some of the names were the same: Banco Santander SA and Jefferies Financial Group Inc. — both stung by First Brands in recent months — are once again scrambling to recoup whatever money they can from an embattled company. This time, they’re alongside the likes of Apollo Global Management Inc.’s Atlas SP Partners, Barclays Plc, Wells Fargo & Co. and Castlelake LP. ‘For the last six months the market has been constantly talking about how to prevent fraud,’ said Nicole Byrns, founder of asset-based finance fund Dumar Capital Partners. ‘Task forces have been put together. New anti-fraud products have developed. And yet this shows how there may still be weaknesses in the ability to spot it’.”

February 26 – Bloomberg (Constantine Courcoulas and Donal Griffin): “Barclays Plc and Atlas SP Partners are among Wall Street firms that helped arrange more than £2 billion ($2.7bn) of loans to a UK mortgage-finance company that has unraveled amid allegations of financial irregularities. Market Financial Solutions Ltd., or MFS, collapsed into a UK form of insolvency Wednesday, with the judge overseeing the case citing accusations of fraud and double-pledging of assets. Barclays and Atlas, the structured-credit arm of Apollo Global Management Inc., each lent hundreds of millions of dollars. Jefferies Financial Group Inc., Banco Santander SA, Wells Fargo & Co. and Castlelake LP are also among the lenders…”

International cockroach sightings. European (subordinated) Bank CDS jumped seven Friday to 101 bps – the biggest daily move in five months.

Signaling serious trouble, U.S. leveraged loan prices sank 80 cents this week to 94.57 - the low since April 9th – and only 16 cents off “liberation day” period lows. Loan prices were down $1.17 during February, the worst month since September 2022 (UK gilt deleveraging crisis).

High yield CDS surged 24 this week to a three-month high of 331 bps - the largest weekly gain since October 10th (up 25 bps on China trade war worries). Oracle CDS jumped seven to 164 bps – up 112 bps in five months to the high since the Great Financial Crisis.

Treasuries enjoyed notable safe haven demand. Ten-year Treasury yields sank 15 bps to a four-month low of 3.94%. Five-year Treasury yields fell 15 bps to an almost 17-month low of 3.50%, and two-year yields dropped 10 bps to 3.37% - the low back to August 2022. High yield spreads-to-Treasuries widened 21 this week to a three-month high 291 bps – the largest increase since October. Interestingly, investment-grade spreads caught fire this week. The seven bps increase was the largest widening since “liberation day” (to a 3-month high 291bps).

February 24 – Bloomberg (Yash Roy and Bruce Douglas): “A few weeks ago, analysts at UBS Group AG laid out a worst-case scenario for defaults in the private credit sector. Their outlook just became more grim. Strategists including Matthew Mish say private credit could see default rates surge as high as 15%, two percentage points more than the firm forecast less than a month ago, if artificial intelligence triggers an ‘aggressive’ disruption among corporate borrowers. ‘What is new: a clearer catalyst — rapid, severe AI disruption,’ according to the UBS strategists... Direct lenders that took a lead role in financing software companies in recent years now look dangerously exposed to AI’s impact, stirring comparisons to the 2008 financial crisis. Some estimates suggest that the firms have 40% of all sponsor-backed loans tied up in the software industry.”

“What is new: a clearer catalyst — rapid, severe AI disruption.” It’s certainly reasonable to target AI disruption risk as a catalyst. The critical unfolding issue is destabilizing tightening of Credit and liquidity conditions that commenced with last fall’s late-cycle cockroach sightings (i.e., First Brands and Tricolor). Late-cycle high-risk lending is inherently susceptible to abrupt shifts in perceptions. Notions of endless marketplace liquidity ensure loose Credit standards and aggressive lending – and consequences.

Yields associated with high-risk lending offer exceptional profit opportunities throughout the daisy chain of Wall Street loan intermediation – lending, structured finance, leveraged speculation, insurance, and asset management. So-called “private Credit” ranks high on the list of history’s greatest high-risk lending and speculative Bubbles. And as financial flows inundated the sector, “subprime” corporate Credit enjoyed an extended period of unprecedented access to finance. This boom held delinquencies and defaults at artificially low levels. Investor/speculator returns remained artificially elevated – providing Wall Street quite an earnings bonanza. Things, as they will do, got way out of hand.

February 23 – Axios (Emily Peck): “Private credit was hot, and now it’s not. That has some parts of the financial world on edge. A few trends — the AI scare trade and the retail investing boom — are colliding at once and stressing a trillion-dollar-plus piece of the economy… Facing high demand from investors in one of its funds to get their money back, Blue Owl sold off assets. It also changed the way redemptions at the fund operate, setting off alarm bells. Asset managers like Blue Owl, as well as better-known firms like Blackstone and KKR, take in money from investors to create funds that typically lend to mid-market businesses, like smaller nonpublic companies that don’t issue high-grade bonds. That investor money gets locked up for a while. Historically, that was OK because investors were often deep-pocketed institutional types, insurance companies or pension funds not apt to need to cash out very often. The dynamic started shifting about five years ago when retail stock investing started booming, and everyone seemingly had a Robinhood account and a stock strategy.”

The week further confirmed that the high-risk lending cycle has decisively turned. At this point, everything seems to point to a breakdown in high-risk loan intermediation – the miracle of Wall Street Alchemy. Myriad risks have been revealed, speculative flows have reversed, liquidity dynamics have deteriorated, Credit has tightened at the margin, and Credit issues have begun to materialize in earnest.

February 26 – Bloomberg (Olivia Fishlow): “A private credit fund overseen by Apollo Global Management Inc. cut its dividend and marked down the value of its assets amid signs of strain in parts of its loan book. MidCap Financial Investment Corp., a business development company focused on direct lending, lowered its quarterly payout to 31 cents a share from 38 cents and wrote down its portfolio by about 3%, citing weakness in a handful of older investments and a reassessment of its long-term earnings power as interest rates shift.”

February 24 – Bloomberg (Rachel Graf and Olivia Fishlow): “A potential migration of private credit loans from public business development companies into opaque debt vehicles could cause leverage to balloon tenfold while masking risk, Citigroup Inc. analysts warned. BDCs, which are facing pressure to pay back investors, can seek relief in selling assets to collateralized loan obligations, which are financed with long-term funding that cannot be withdrawn on short notice. But such a shift would trade public transparency for a much more leveraged and secretive structure, the analysts said... ‘This migration increases opacity in aggregate leverage in the ecosystem and dependencies amongst private credit, insurers, and securitization,’ Michael Anderson, Citigroup’s global head of credit strategy, wrote... ‘The public portfolio transparency that we have from BDCs would also be lost’.”

February 25 – Bloomberg (Edward Clark, Preeti Singh and Olivia Fishlow): “A publicly-traded private credit fund managed by Blackstone Inc. said that it’s seeing continued signs of stress in one of its largest investments — software company Medallia Inc. The Blackstone Secured Lending Fund has now marked the loan to Medallia at around 78 cents on the dollar…”

February 21 – Bloomberg (Scott Carpenter and Rachel Graf): “Fear of rising defaults is spreading from the leveraged loan market to some of the retail funds that ultimately buy the debt as investors get choosier about taking on credit risk. The biggest buyers of leveraged loans are money managers that bundle the debt into bonds known as collateralized loan obligations. Some retail funds that buy the riskiest parts of CLOs, known as CLO equity, are slashing their dividends as loan yields fall and anxiety about future defaults mounts. Investors are responding by heading for the exits. Share prices of a handful of closed-end funds, including ones backed by the billionaire Koch family and Carlyle Group Inc., fell to all-time lows this week.”

February 25 – Bloomberg (Ameya Karve): “Investors and managers are growing more cautious on collateralized loan obligations after a software-driven selloff in US leveraged loans eroded bond valuations, panelists said at SFVegas on Feb. 24. Refinancing risk has become the market’s primary concern, even for borrowers still generating double-digit revenue growth. The resulting selling has been broad, sweeping up stronger credits… Roughly 15% of CLO collateral is tied to software, increasing to about 20% in private credit CLOs. Panelists flagged potential rating actions as the next catalyst as several loans will see pressure to refinance by the end of the year.”

As high-risk lending booms go, this one seemed to last for an eternity. And as things over recent years went to blow-off extremes, Wall Street shifted its focus to unsuspecting “retail” flows oblivious to Credit and liquidity risks.

February 26 – Bloomberg (Allison McNeely): “Carlyle Group Inc. Chief Executive Officer Harvey Schwartz suggested that asset managers should have been more forthcoming about the relative illiquidity of investment funds sold to individual investors. ‘The industry did itself a bit of a disservice calling the vehicles semi-liquid,’ Schwartz said... ‘We just should have called them ‘sometimes not liquid at all.’ The industry’s push into retail wealth has attracted scrutiny over whether private investments are appropriate for individuals… Retail products are sometimes marketed as ‘semi-liquid’ because they allow quarterly or monthly redemptions until they hit a certain limit.”

“Sometimes Not Liquid at All” is an almost unalarming comment with alarming ramifications. Crises erupt when the perception of safety and liquidity is suddenly recognized as a misperception. Traditionally, bank deposits and money market instruments have been the epicenter of the shocking and destabilizing realization that what was believed safe and liquid “money” was instead a risk asset vulnerable to significant losses.

During the mortgage finance Bubble period, I highlighted mounting risks associated with the “moneyness of Credit” – in particular the perception of safety and liquidity for “AAA” MBS, ABS, mortgage derivatives, and structured finance (i.e., CDOs/CLOs). Over the global government finance Bubble period, I’ve often referred to the “moneyness of risk assets.” Decades of Fed/government market backstops, liquidity injections and unending loose conditions ensured the perception of safety and liquidity for an ever wider swath of financial assets – certainly including shares of thousands of ETFs across various asset classes.

February 23 – Associated Press (Alex Veiga): “For years, individual investors were dismissed by some on Wall Street as ‘dumb money.’ That typically referred to those prone to trading on hype, or chasing trends rather than company or industry fundamentals, or responding late to big market moves… These investors… accounted for $5.4 trillion in trading activity in 2025 across stocks and exchange-traded funds, or ETFs, according to Vanda, an independent data and research firm. That’s a nearly 47% increase from the previous year and the most going back to at least 2014.”

February 24 – Reuters (Suzanne McGee): “Nearly 90% of all the trading in leveraged single-stock ETFs in the U.S. market can be traced to transactions by individual investors, according to… Direxion... The data shows that the proliferation of these exchange-traded vehicles, which allow investors to speculate on short-term moves in an underlying stock, has been almost entirely driven by their allure for these retail investors. The study also found that last year trading in the leveraged single-stock ETFs accounted for 8% of total trading on all U.S. exchanges.”

Way too much Credit and liquidity risk has been distributed to the ETF complex. This will come back to haunt system stability. And it’s interesting to read about the recent forced loan sales from troubled “private Credit” vehicles sold to entities that appear ready to shift this risk to CDOs (collateralized debt obligations) and other structured Credit products. Sure brings back memories of 2007/2008.

February 23 – Bloomberg (Silas Brown, Olivia Fishlow, Leonard Kehnscherper and Ellen DiMauro): “Blue Owl Capital Inc.’s co-chief reeled off all the times he’d seen this type of fear before. Covid. Silicon Valley Bank’s collapse. Liberation Day. Marc Lipschultz was addressing analysts on the 11th straight day of losses for the firm’s shares, the worst streak since Blue Owl went public almost five years ago… But as Lipschultz saw it, this was par for the course when markets get jittery… It appears different now. Blue Owl last week permanently shut the gates on one of those funds — preventing investors from withdrawing their cash every three months as they’d previously been allowed — and began selling assets to return investor capital. It’s the latest sign of tumult in a $1.8 trillion market… ‘The red flags we are seeing in private credit today are strikingly familiar to those of 2007,’ said Orlando Gemes, chief investment officer of Fourier Asset Management. He pointed to worsening lender protections and convoluted liquidity terms that ‘obscure the mismatch between what investors believe they own and what they can actually exit’.”

Understandably, Blue Owl’s Marc Lipschultz and others would like to believe that current “private Credit” instability is similar to market challenges previously surmounted – i.e., Covid, SVB, “liberation day,” etc. But today’s backdrop is strikingly different.

I’ll posit that those past episodes were characterized by bouts of speculative deleveraging and attendant liquidity issues that risked bursting inflating Bubbles in high-risk leveraged lending and “private Credit.” Deleveraging was reversed, and it was repeatedly off to the races.

It's the opposite today. Importantly, faltering high-risk lending markets are at the cusp of triggering speculative deleveraging. The resolution of deleveraging risk will not today resolve leveraged lending and “private Credit” issues. Meanwhile, the unfolding de-risking/deleveraging dynamic will significantly exacerbate high-risk lending and liquidity risks.

February 24 – Bloomberg (Caleb Mutua, Jeannine Amodeo and Aaron Weinman): “Leveraged-loan traders are slashing their exposure to software debt — much of which entered 2026 priced at or near par — in a sign of how artificial-intelligence fears are rippling across the market. Broadly syndicated loans for software businesses… had slumped between 1 to 3 points in the secondary market from Friday to Tuesday… Those loans were all being quoted around 100 cents on the dollar as of Dec. 31.”

February 24 – Bloomberg (Tasos Vossos): “An ‘AI bubble’ is the biggest concern of credit investors for the first time ever, according to a survey among Bank of America Corp.’s clients. ‘Few worry about geopolitics or a central bank policy error,’ BofA strategists… wrote... Some 23% of survey’s investment-grade respondents saw the threat of an AI bubble as their top concern, up from 9% in BofA’s previous survey in December. Worries over a potentially unsustainable surge in investment and valuations of AI companies overtook ‘Bubbles in Credit’ as the top concern… Anxiety over trade tensions and a global recession had also been seen as the biggest perceived risk during 2025.”

February 26 – Financial Times (George Steer and Rachel Rees): “Investors are riding out the ‘whack-a-mole’ software sell-off by loading up on protection against volatility and exploiting the divergence in sectors tipped to be either winners or losers from AI’s advance. Some of Wall Street’s biggest players are turning to complex options and hedging strategies to navigate a market buffeted by blog posts and headlines that have recently wiped tens of billions of dollars off the value of some of the S&P 500’s largest tech groups.”

There are parallels between today’s faltering “subprime” Bubble and 2007. Subprime blowup ramifications were widely dismissed throughout 2007 and into 2008. Not appreciated was how high-risk mortgage lending had evolved to become the key marginal source of Credit sustaining housing Bubble inflation in key markets – and how huge quantities of risky loans had been intermediated into perceived safe instruments. The collapse of subprime lending and loan intermediation triggered a dramatic tightening in Credit conditions at the “periphery.” Mounting housing inventories and falling prices led to a contagious crisis of confidence in mortgage finance more generally (subprime to Alt-A to prime). The harsh realization of Trillions of mispriced mortgage Credit instruments unleashed powerful crisis dynamics.

Today, the systemic importance of “private Credit” is similarly dismissed, despite markets for leveraged loans and high-risk lending having inflated so far beyond the subprime mortgage market.

Importantly, today’s deteriorating Credit market is on a collision course with the AI mania and arms race. I couldn’t help but associate the poor response to blockbuster Nvidia earnings as confirmation that the market is increasingly questioning the viability of financing requirements for a $3 TN plus AI investment boom. The bottom line is AI finance is high risk, and the marketplace is already chin deep in risky Credit.

South Korean stocks were up another 7.5% this week (48% y-t-d), with Japan’s Nikkei Index (up 16.9%) and the Shanghai Composite (4.9%) higher by 3.6% and 2.0%. UK’s FTSE 100 rose 2.1%, while European equities for the most part enjoyed another solid week. Global liquidity remains abundant. But liquidity issues lurk.

The MAG7 Index was down another 1.8% this week, with the index now 6.8% lower y-t-d – to a level it traded at back in mid-September. Bitcoin was $2,000 lower for the week to $65,800, having lost almost half its value from October highs. Liquidity overabundance may persist globally, but speculative deleveraging has begun to gather momentum. Credit tightening fears are enveloping the tech/AI Bubble. And the historic AI Bubble has inflated to dominate the stock market, an equities Bubble integral to the entire maladjusted and over-indebted U.S. economy. This week’s $171 gold price advance and 10.8% silver surge corroborate the acute financial structure fragility thesis.

February 25 – Financial Times (Claire Jones and Ian Smith): “Global debt surged by almost $29tn to a record $348tn last year, according to an influential think-tank that expects the burden to worsen in the coming years as governments increase spending on areas such as defence. The Institute of International Finance said… governments’ investments in national security were the primary driver behind last year’s $28.8tn rise, with spending on AI and similar technologies also contributing to what was the biggest annual increase in the global debt burden since the Covid-19 pandemic. The IIF figures, which combine the debt burden for governments, companies and households, also showed that, as a share of global output, global debt ratios declined for a fifth consecutive year to around 308% of GDP. The debt-to-GDP ratio is seen as a vital indicator of borrowers’ capacity to honour their obligations.”

For the Week:

The S&P500 slipped 0.4% (up 0.5% y-t-d), and the Dow declined 1.3% (up 1.9%). The Utilities rallied 3.1% (up 11.3%). The Banks sank 5.9% (down 3.0%), and the Broker/Dealers slumped 2.4% (down 0.1%). The Transports dipped 0.8% (up 13.4%). The S&P 400 Midcaps declined 0.9% (up 8.2%), and the small cap Russell 2000 fell 1.2% (up 6.1%). The Nasdaq100 slipped 0.2% (down 1.1%). The Semiconductors lost 2.0% (up 14.3%). The Biotechs added 0.2% (up 1.5%). With bullion jumping $171, the HUI gold index surged 9.6% (up 39.5%).

Three-month Treasury bill rates ended the week at 3.575%. Two-year government yields dropped 10 bps to 3.37% (down 10bps y-t-d). Five-year T-note yields fell 15 bps to 3.50% (down 22bps). Ten-year Treasury yields dropped 15 bps to 3.94% (down 23bps). Long bond yields fell 11 bps to 4.61% (down 23bps). Benchmark Fannie Mae MBS yields declined eight bps to 4.81% (down 24bps).

Italian 10-year yields fell seven bps to 3.27% (down 28bps y-t-d). Greek 10-year yields declined seven bps to 3.27% (down 17bps). Spain's 10-year yields dropped nine bps to 3.06% (down 23bps). German bund yields fell nine bps to 2.64% (down 21bps). French yields declined eight bps to 3.22% (down 35bps). The French to German 10-year bond spread widened about one to 58 bps. U.K. 10-year gilt yields sank 12 bps to 4.23% (down 25bps). U.K.’s FTSE equities index rose 2.1% (up 9.8% y-t-d).

Japan’s Nikkei 225 Equities Index surged 3.6% (up 16.9% y-t-d). Japan’s 10-year “JGB” yields were unchanged at 2.12% (up 5bps y-t-d). France’s CAC40 increased 0.8% (up 5.3%). The German DAX equities index was little changed (up 3.2%). Spain’s IBEX 35 equities index gained 1.0% (up 6.1%). Italy’s FTSE MIB index rose 1.6% (up 5.0%). EM equities were mixed. Brazil’s Bovespa index declined 0.9% (up 17.2%), while Mexico’s Bolsa index was unchanged (up 11.0%). South Korea’s Kospi surged another 7.5% (up 48.2%). India’s Sensex equities index dropped 1.8% (down 4.6%). China’s Shanghai Exchange Index rose 2.0% (up 4.9%). Turkey’s Borsa Istanbul National 100 index declined 1.6% (up 21.8%).

Federal Reserve Credit declined $6.6 billion last week to $6.570 TN, with a 11-week rise of $79.7 billion. Fed Credit was down $2.320 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.843 TN, or 76%. Fed Credit inflated $3.759 TN, or 134%, since November 7, 2012 (694 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $26.3 billion last week to $3.075 TN. “Custody holdings” were down $200 billion y-o-y, or 6.1%.

Total money market fund assets (MMFA) gained $17.1 billion to $7.791 TN - with a 32-week surge of $776 billion, or 18.0% annualized. MMFA were up $868 billion, or 12.5%, y-o-y - having ballooned a historic $3.206 TN, or 70%, since October 26, 2022.

Total Commercial Paper added $2.5 billion to $1.407 TN. CP expanded $100 billion, or 7.6%, y-o-y.

Freddie Mac 30-year fixed mortgage rates dipped another three bps to 5.98% (down 78bps y-o-y) - the low since September 2022. Fifteen-year rates rose nine bps to 5.44% (down 50bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rate down six bps to 6.27% (down 77bps).

Currency Watch:

February 24 – Financial Times (Ian Smith, Kate Duguid and Nic Fildes): “The Australian dollar, Norwegian krone and New Zealand dollar have surged ahead of other major currencies this year, as foreign exchange markets point to a change in the direction of global interest rates from cuts to rises. The Aussie has gained more than 6% against the US dollar this year, taking it to around a three-year high, as the Reserve Bank of Australia this month kicked off what many analysts expect to be a new cycle of rate increases in response to a burst of inflation… The New Zealand dollar has jumped 4% as traders anticipate the country’s first rate rise in the coming months, while the krone is up 6% as an unexpected increase in inflation last month led traders to price in a small chance of a rate increase in the first half of the year.”

For the week, the U.S. Dollar Index slipped 0.2% to 97.608 (down 0.7% y-t-d). On the upside, the Brazilian real increased 1.0%, the Swiss franc 0.8%, the South African rand 0.6%, the Australian dollar 0.5%, the South Korean won 0.5%, the New Zealand dollar 0.4%, the Swedish krona 0.3%, the Canadian dollar 0.3%, the euro 0.2%, the Singapore dollar 0.2%, and the Norwegian krone 0.2%. On the downside, the Japanese yen declined 0.6%, and the Mexican peso 0.5%. China's (offshore) renminbi increased 0.62% versus the dollar (up 1.83% y-t-d).

Commodities Watch:

February 22 – Financial Times (Jamie Smyth): “One of the largest suppliers of enriched uranium fuel to US nuclear power plants has warned of a looming supply crunch because of fast-rising demand and a ban on Russian imports. Centrus Energy chief executive Amir Vexler told the FT the company is racing to build enrichment capacity at its Ohio plant to meet a $2.3bn backlog in sales of enriched uranium to customers... ‘It is my strong belief that there is a gap between supply and demand for the existing market — just the operating reactors that we have now,’ said Vexler, adding that plans to build new fleets of large and small reactors in the US would pose longer-term challenges.”

The Bloomberg Commodities Index gained 1.7% (up 10.9% y-t-d). Spot Gold rose 3.4% to $5,279 (up 22.2%). Silver ran 10.8% higher to $93.7867 (up 30.9%). WTI Crude added 54 cents, or 0.8%, to $67.02 (up 17%). Gasoline jumped 4.0% (up 21%), while Natural Gas sank 6.2% to $2.859 (down 22%). Copper rose 2.7% (up 7%). Wheat jumped 3.1% (up 17%), and Corn gained 2.6% (unchanged). Bitcoin fell $2,000, or 3.0%, to $65,830 (down 24.9%).

Market Instability Watch:

February 24 – Bloomberg (Edward Bolingbroke): “Traders in US futures and options markets are piling on bets that the Federal Reserve will continue cutting rates into next year instead of raising them. Futures spreads linked to the Secured Overnight Financing Rate, which closely track expected Fed policy, are becoming deeply inverted — a sign that traders are starting to price a more prolonged central bank easing cycle. Until recently, traders had been wagering that the central bank would resume hiking rates in 2027 after two quarter-point reductions by the end of this year.”

February 23 – Wall Street Journal (David Uberti): “It doesn’t take much to cause tumultuous stock moves in a market top-heavy with tech shares and jumpy about the prospects for artificial intelligence. But nothing underlines the sensitivity of stocks right now quite like what happened on Monday, when one of the factors behind the Dow’s 800-point drop was a 7,000-word hypothetical. A viral report by Citrini Research tapped into a new strain of fears about AI, painting a dark portrait of a future in which technological change inspires a race to the bottom in white-collar knowledge work. Concerns of hyperscalers overspending are out. Worries of software-industry disruption don’t go far enough. The ‘global intelligence crisis’ is about to hit. The new, broader question: What if AI is so bullish for the economy that it is actually bearish?”

February 23 – CNBC (Alex Harring): “Speculative investing tools have boomed in popularity since the Covid pandemic as more retail traders have entered the market… Leveraged and inverse funds are expected to see average daily trading volumes of 1.41 billion in 2025, per… Direxion... That’s a gain of more than 130% from 2024 and 250% from 2020... Leveraged funds aim to use derivatives to boost the returns of an underlying asset, but they can also amplify losses. Inverse funds set out to give investors the opposite performance of an underlying asset. Average daily options volume is projected to reach 58 million in 2025... This figure reflects a roughly 26% increase from the prior year and is more than double the amount seen in 2020. ‘People have gotten really smart about investing and investing in complex vehicles,’ Douglas Yones, Direxion’s chief executive, told CNBC…”

February 23 – Bloomberg (Ryan Vlastelica and Brody Ford): “International Business Machines Corp. shares had their worst day in more than 25 years on Monday, after AI startup Anthropic PBC said its Claude Code tool can help modernize Cobol, a dated programming language that’s run on IBM computers. The stock plunged 13% in its biggest single-day percentage loss since October 2000. With the decline, IBM shares have fallen 27% in February, on track for its biggest one-month slide since at least 1968…”

February 23 – Wall Street Journal (Joe Stonor): “European private-equity firms sold off steeply Monday as fears around the strength of their underlying holdings intensified. Shares in Stockholm-based EQT Group slid 8.85% to close at 269.70 Swedish kronor... In Switzerland, Partners Group fell 8.4% to 850 Swiss francs… Asset managers CVC Capital Partners and ICG also fell Monday, dropping 7.1% in Amsterdam and 4.95% in London... The sector has fallen steeply so far in 2026, with shares in EQT now down 26% for the year.”

February 20 – Financial Times (John Plender): “With US public debt approaching wartime levels as a percentage of GDP, professional investors are understandably in a funk. Increasingly they question whether the US has the fiscal capacity to support the huge balance sheet liabilities it creates through its current account deficits. Their worries are exacerbated — excuse the familiar litany — by Trump-induced geopolitical fragmentation, erratic policy shocks including a tariff policy designed to hurt America’s friends more than its foes, a sustained assault on Federal Reserve independence and neo-imperial threats to annex Greenland.”

U.S. and Global Credit Excess Watch:

February 23 – Financial Times (Joshua Franklin and Akila Quinio): “US banks generated record profits last year of almost $300bn as the industry paid lower levels of interest to savers while benefiting from an uptick in lending activity and benign credit losses. The 2025 profits at more than 4,300 US banks totalled $295.6bn... This was up 10% from a year earlier and set a new record, beating the industry’s previous high-water mark of $279bn in 2021. The figures highlight a period of prosperity for US banking under the Trump administration that has helped boost the pay of the industry’s top executives. ‘It was a happy year,’ said veteran banking analyst Christopher Whalen… ‘It’s another year where we have skipped past any credit concerns which to me is remarkable’.”

February 23 – Bloomberg (Hannah Levitt): “JPMorgan… Chief Executive Officer Jamie Dimon, asked about fierce competition across the financial industry, said he’s starting to see parallels to the era before the 2008 financial crisis, when a rush to make loans ended disastrously. ‘Unfortunately, we did see this in ’05, ’06 and ’07, almost the same thing — the rising tide was lifting all boats, everyone was making a lot of money,’ Dimon told investors... While JPMorgan isn’t willing to make riskier loans to boost net interest income, he said, ‘I see a couple people doing some dumb things. They’re just doing dumb things to create NII’... ‘There’s always a surprise in a credit cycle,’ Dimon said, adding that the surprise has often been which industry. ‘This time around it might be software because of AI’.”

February 23 – CNBC (Hugh Son): “JPMorgan… CEO Jamie Dimon said… he was anxious over the U.S. economy, citing elevated asset prices and a competitive environment in banking that reminded him of the pre-2008 crisis years… ‘My own view is people are getting a little comfortable that this is real, these high asset prices and high volumes, and that we won’t have any problems,’ said Dimon… Inevitably, Dimon said, the economic cycle will turn, leading to a wave of borrower defaults that would broadly affect lenders, and often impacting industries few people expect, he said. ‘There will be a cycle one day… I don’t know what confluence of events will cause that cycle. My anxiety is high over it,’ Dimon said. ‘I’m not assuaged by the fact that asset prices are high. In fact, I think that adds to the risk’.”

February 23 – Financial Times (Stephen Foley): “A gap in US accounting rules allows Big Tech companies to conceal tens of billions of dollars of potential liabilities for their AI data centres, the credit rating agency Moody’s warned… ‘Limitations’ in the rules mean AI companies may not have to account either for the cost of renewing a data centre lease or for the cost of not renewing it, even though either number could be huge… ‘Disclosures may not show the full picture’, the rating agency warned, adding ‘the accounting liability is unlikely to reflect certain plausible future scenarios’. A growing number of companies including Meta and Oracle are using special purpose vehicles owned and funded largely by other investors to build their data centres. The long-term cost of leasing the data centre back from the entities is equivalent to debt in the eyes of rating agencies and many investors.”

February 22 – Financial Times (Michelle Chan): “Data centre developers are seeking credit ratings — even while facilities are still under construction — as the tech industry tries to open up new sources of capital to fund hundreds of billions of dollars in AI investments. S&P, Moody’s, Fitch and Kroll Bond Rating Agency have in recent months expanded their coverage to data centre projects that are yet to be completed and in many cases given out private ratings for loans so that banks can offload them to a broader base of institutional investors.”

U.S. Credit Trouble Watch:

February 25 – Financial Times (Eric Platt and Antoine Gara): “Executives at private credit giant Blue Owl were scrambling. The firm was facing growing demands for withdrawals last autumn from its first private debt fund for retail investors. To drum up cash, it turned to vehicles it created including one named Loantaka, after a part of New Jersey once populated by the Lenape indigenous tribe. Its translation: ‘Place of cold winter.’ For Blue Owl’s top leaders, January and February have been the firm’s own cold winter. The… investment group, with $307bn in assets, has been racing to shore up confidence in a firm that emerged as one of the biggest beneficiaries of the boom in private lending as banks retreated from making risky loans in the wake of the 2008 crisis. Now, after some of Blue Owl’s flagship funds were hit by a surge in redemptions, it is being roiled by the consequences of its rapid expansion. Blue Owl’s troubles have added to worries about the broader private capital sector… Investors have started pulling money from some of the largest private credit funds, fretting about an uptick in defaults as well as exposure to and the impact of AI on the software industry where the sector has lent heavily.”

February 25 – Wall Street Journal (Miriam Gottfried and Gunjan Banerji): “Robert Hendricks immediately emailed his wealth adviser after seeing headlines on X saying Blue Owl Capital was halting redemptions in one of its private-credit funds. His adviser told him that he was invested in a different Blue Owl fund and that the fears around headlines were overblown. He plans to redeem the roughly $75,000 he has invested anyway. ‘The last thing you want to hear as an investor is that the door is closing,’ said Hendricks…, who first invested in private credit about two years ago. Hendricks is among the individual investors who piled into private-credit funds in recent years and are now wondering whether they made a mistake.”

February 25 – Financial Times (Michelle Chan): “Tech companies are increasingly turning to loans backed by the chips on which their large language models are trained as they hunt for ways to fund their massive AI investments. Such loans, which are secured against graphics processing units and backed by leases to the tech groups, are popular with a sector burning hundreds of billions of dollars a year in an AI arms race on chips that can quickly become obsolete. Investors have been attracted by yields in the high single digits to mid-teens, which are typically higher than those on debt issued by the tech companies themselves.”

February 23 – Wall Street Journal (Alicia McElhaney): “First Brands Group has been unable to find financing or a buyer to continue most of its companywide operations, the bankrupt auto-parts supplier said as it laid off employees in its aftermarket businesses Monday. First Brands said in a letter to laid-off workers that several potential buyers for the company ‘suddenly and unexpectedly’ withdrew or narrowed their bids to interest in certain units in recent days.”

February 24 – Bloomberg (Soma Biswas and Jonathan Randles): “Raistone Capital, a trade finance firm that was done in by the collapse of auto parts supplier First Brands Group, filed for liquidation…, weeks after winding down its operations.”

Trump Administration Watch:

February 23 – Financial Times (Peter Navarro): “Every so often, what looks like a defeat proves to be a strategic win. The Supreme Court’s ruling on US President Donald Trump’s tariffs is one of those moments. On its face, the ruling looks like a knockout punch. In a 6-3 decision, the court held that the International Emergency Economic Powers Act’s authorisation to ‘regulate importation’ does not include the power to impose tariffs. Because tariffs raise revenue, the majority concluded, they are in effect taxes — and taxes require explicit congressional approval. But look carefully at what the court actually did. It ruled that the IEEPA does not authorise tariffs. That’s all. The court did not declare tariffs unconstitutional. It did not strike down section 232 of the Trade Expansion Act. It did not invalidate section 301 of the Trade Act. It did not question the use of sections 122, 201 or 338. It did not revive the ‘nondelegation’ doctrine. And only three justices relied on the ‘major-questions’ doctrine, meaning the court created no sweeping precedent limiting presidential trade authority. In fact, even as the court struck down the IEEPA tariffs, it acknowledged that the president retains broad and powerful authority under numerous other statutes to impose tariffs.”

February 23 – Axios (Courtenay Brown): “When the Supreme Court threw out the Trump administration's use of a novel emergency tool to implement tariffs Friday, the White House quickly turned to a different novel emergency tool — but economists and lawyers are now questioning its legality as well. Goodbye, IEEPA tariffs… Hello, Section 122 of the Trade Act of 1974. But the new tool comes with its own questions and limitations. Over the weekend, the administration imposed 15% global tariffs under Section 122, which permits the president to impose that maximum tariff rate for up to 150 days in the event of a balance-of-payments crisis. But does the U.S. fit those circumstances? The nation is not exhibiting the typical symptoms: plunging currency, spiking interest rates or a freezing-up of foreign capital flowing in. ‘No matter how one looks at the current circumstances—the condition of the U.S. economy, its balance of payments or its currency regime—none of these meet the standards outlined under Section 122,’ RSM chief economist Joe Brusuelas wrote… Indeed, Justice Department lawyers themselves dismissed the provision as an option last year.”

February 23 – Wall Street Journal (Tom Fairless and Gavin Bade): “President Trump is doubling down on his tariffs, even though they have so far failed to achieve one of their key stated goals: rebalancing lopsided global trade. On the contrary, recent data show the tariffs that the Supreme Court struck down on Friday and that Trump has vowed to reimpose under a different statute are cementing these imbalances. From Berlin to Tokyo, the world’s biggest exporting countries have reacted to U.S. tariffs by further committing to economic policies that support exports, subsidizing manufacturers to help them leap over the tariff wall. As for America, it very much remains the world’s importer of last resort. The U.S. trade deficit in goods rose to a record high of $1.24 trillion in 2025, driven by a 4.3% increase in goods imports…”

February 26 – Financial Times (James Politi): “Donald Trump and his top officials have tried to argue that last week’s Supreme Court ruling striking down the core of his trade agenda is not a big deal. But the White House is facing a messy reality. For one, it is bracing for the impact of more than 900 lawsuits that have been filed challenging the emergency tariffs, which may now force the administration to issue refunds worth billions of dollars to aggrieved importers. ‘We are going to fight tooth and nail to make sure this money is given back quickly with no games and reservations about it,’ Neal Katyal, the lawyer who argued against Trump’s tariffs on behalf of US-based businesses before the Supreme Court, told Stefania Palma…”

February 22 – Bloomberg (Catherine Lucey): “Senior US officials said President Donald Trump’s tariff defeat at the Supreme Court won’t unravel deals negotiated with US partners as they sought to defend the administration’s assertive trade policies. Those deals — which the administration made with partners including China, the European Union, Japan and South Korea — remain in place, US Trade Representative Jamieson Greer said… He sought to separate those arrangements from the planned 15% global tariff Trump announced Saturday. ‘We want them to understand these deals are going to be good deals,’ Greer said. ‘We’re going to stand by them. We expect our partners to stand by them’.”

February 23 – Axios (Barak Ravid and Marc Caputo): “Joint Chiefs Chairman Gen. Dan Caine has been advising President Trump and top officials that a military campaign against Iran could carry significant risks, in particular the possibility of becoming entangled in a prolonged conflict… There’s an ongoing debate at the top levels of the Trump administration about how to handle the Iran standoff and what the consequences of each option would be. At the moment, several of the voices in Trump's circle are urging caution, though some sources think Trump himself is leaning towards a strike. Above all, there’s the question of what success would look like when it comes to military action, and how risky it would be to try to achieve it. On the other side, reaching a nuclear deal would likely mean walking back some of the president's previous red lines.”

February 23 – Associated Press (Konstantin Toropin and Ben Finley): “The Pentagon is building up the largest force of American warships and aircraft in the Middle East in decades, including two aircraft carrier strike groups, as President Donald Trump warns of possible military action against Iran if talks over its nuclear program fall apart. ‘It’s proven to be, over the years, not easy to make a meaningful deal with Iran, and we have to make a meaningful deal,’ Trump said last week. ‘Otherwise bad things happen’.”

February 25 – Wall Street Journal (Michael R. Gordon and Laurence Norman): “Iran’s atomic program hasn’t advanced significantly since the U.S. and Israel struck its three main nuclear sites last June, according to experts and diplomats, despite Washington’s top negotiator saying Tehran could make fissile material for a bomb within days. The appraisal… comes as U.S. and Iranian officials prepare to hold talks… Steve Witkoff, the U.S.’s chief negotiator with Iran, told Fox News last week that Iran is ‘probably a week away from having industrial-grade bomb-making material’.”

February 26 – Wall Street Journal (Amrith Ramkumar): “Anthropic said it wouldn’t back down in a dispute with the Defense Department over artificial-intelligence guardrails, complicating efforts to reach a compromise ahead of a Friday deadline. In a Tuesday meeting at the Pentagon, Defense Secretary Pete Hegseth gave Anthropic Chief Executive Dario Amodei until 5:01 p.m. Friday to agree to the military’s right to use the technology in all lawful cases. If Anthropic declines, Hegseth has threatened to invoke the Defense Production Act to make the company do what the military wants, or to designate the company a supply-chain risk, impairing its ability to work with other government contractors. Anthropic has refused to accept the military’s proposal and doesn’t let users deploy its Claude models in scenarios involving mass domestic surveillance or autonomous weapons.”

February 25 – Axios (Dave Lawler, Colin Demarest and Maria Curi): “The Pentagon asked two major defense contractors… to provide an assessment of their reliance on Anthropic’s AI model, Claude — a first step toward a potential designation of Anthropic as a ‘supply chain risk,’ Axios has learned. That penalty is usually reserved for companies from adversarial countries, such as Chinese tech giant Huawei. Using it to punish a leading American tech firm, particularly one on which the military itself is currently reliant, would be unprecedented.”

February 25 – Bloomberg (Maria Luiza Rabello): “An IPO of Fannie Mae and Freddie Mac this year is ‘very likely,’ FHFA Director Bill Pulte says on Fox Business. ‘I think it’s very likely. I think it’s more likely than not, but look, this is up to the president,’ he says. They’re worth $500b to $700b, Pulte reiterates.”

February 22 – CNBC (Annie Palmer): “President Donald Trump… called on Netflix to fire board member Susan Rice or ‘pay the consequences,’ after she said Democrats would push for corporate accountability if they regain power in the November midterm elections… Trump described Rice, who served as President Joe Biden’s domestic policy chief and held top foreign policy posts under President Barack Obama, as ‘purely a political hack’ with ‘no talent or skills.’ ‘HER POWER IS GONE, AND WILL NEVER BE BACK,’ Trump wrote. Rice argued during a podcast last week that ‘it is not going to end well’ for corporations, news organizations, and law firms that ‘bent the knee’ to Trump, and that their deference is unpopular.”

Trade War Watch:

February 22 – Bloomberg: “Chinese President Xi Jinping is heading to the negotiating table with Donald Trump with a boost in bargaining power… Weeks before Trump lands in Beijing on March 31, the first trip by an American president since his last visit in 2017, the Supreme Court invalidated his broad emergency tariffs — a key point of leverage over China. That’s eliminated Trump’s second-term levies on China and left Beijing facing the same 15% global fee applied to US allies, a rate that comes with a 150-day expiry date. The removal of tariff threats… will make it harder for Trump to press Xi for larger purchases of soybeans, Boeing Co. aircraft and energy. It also leaves him without a key weapon to strike back if Chinese negotiators make fresh demands…”

February 23 – Politico (Camille Gus and Max Griera): “The European Parliament froze ratification of the EU’s trade deal with the United States on Monday amid concerns that President Donald Trump’s latest tariff broadside breaches the terms of the transatlantic accord struck last summer… ‘The decision to postpone the vote on the implementation of the U.S. deal is the right one. Given the current enormous uncertainty, a vote would be unjustifiable,’ said Anna Cavazzini, who represents the Greens.”

February 23 – Bloomberg (Sakura Murakami): “Japanese Trade Minister Ryosei Akazawa called on the US to ensure that new tariff measures would not leave Tokyo with tougher conditions than those agreed in last year’s trade deal… Following the rapid changes in US tariffs in recent days, Akazawa and Lutnick agreed that Japan and the US would continue to work closely to ensure the swift and smooth implementation of projects that are part of a $550 billion investment mechanism…”

February 25 – Reuters (Allison Lampert, Laurie Chen, Lewis Jackson and Michael Martina): “Suppliers to U.S. aerospace and semiconductor firms face worsening rare earth shortages… The shortages center on rare earths such as yttrium and scandium, niche members of the family of 17 elements, which play tiny but vital roles in defence technology, aerospace and semiconductors and are almost entirely produced in China. While Beijing has allowed many rare earth exports to resume since it imposed restrictions in April, shipments of these materials still rarely make it to the U.S. despite the October detente with Washington…”

February 21 – Bloomberg (Sakura Murakami): “A heavyweight of Japan’s ruling Liberal Democratic Party called US tariffs ‘a real mess’ after President Donald Trump hiked levies in response to a Supreme Court decision that his previous tariffs were illegal. ‘To be very frank, it’s a real mess,’ Itsunori Onodera, a former defense minister who currently serves as chairperson of the party’s tax research group, said…”

February 24 – Financial Times (Joe Leahy and Anne-Sylvaine Chassany): “German Chancellor Friedrich Merz has urged China’s President Xi Jinping to reset trading relations between the EU and the world’s second-largest economy amid growing tensions. Merz… said he discussed Germany’s widening trade deficit and Chinese restrictions on German companies… The two leaders also discussed reducing risks in supply chains in critical sectors, he added, a reference to Germany’s reliance on rare earths from China for its car and defence industries.”

New World Order Watch:

February 21 – Bloomberg (Alexander Weber): “European Central Bank President Christine Lagarde said she walked out of a speech by US Commerce Secretary Howard Lutnick at the World Economic Forum because she found his anti-European rhetoric inappropriate given the setting. ‘To have as a last speaker, without any rebuttal of any arguments, someone who just bashed Europe, right, left, and center. I thought it was just too much and just unnecessarily offensive,’ Lagarde said…”

February 26 – Wall Street Journal (Paul Vieira and Shan Li): “For years, Canada and India have had bitter relations, expelling diplomats and stalling trade talks. Now, Prime Minister Mark Carney wants New Delhi as his newest friend as he travels the world building alliances with so-called middle powers. Carney departed on Thursday for India in a bid to… deepen commercial ties that could reduce Canada’s heavy economic reliance on the U.S… But underlying the trip is Carney’s call for closer partnerships among countries that have struggled to stand up on their own to China and the U.S. under President Trump.”

Iran War Watch:

February 27 – Axios (Barak Ravid): “The U.S. State Department announced… it started evacuating ‘non-emergency’ government personnel from the embassy in Israel and their family members, citing ‘safety risks’ amid growing tensions with Iran. The decision signals that a joint U.S.-Israeli military campaign against Iran could be imminent. In such a case, Iran could launch ballistic missiles toward Israel and U.S. targets in the region. Earlier this week the U.S. evacuated all non-essential staff and their family members from the embassy in Beirut, as well. Strikes on Iran could cause a war between Israel and Hezbollah to erupt.”

February 22 – Financial Times (Fabiola Sanchez): “Iran agreed a secret €500mn arms deal with Russia to acquire thousands of advanced shoulder-fired missiles in its most significant effort to rebuild air defences shattered during last year’s war with Israel. The agreement, signed in Moscow in December, commits Russia to deliver 500 man-portable ‘Verba’ launch units and 2,500 ‘9M336’ missiles over three years… The Verba is one of Russia’s most modern air-defence systems, a shoulder-fired, infrared-guided missile capable of targeting cruise missiles, low-flying aircraft and drones.”

February 24 – Reuters (John Irish, Parisa Hafezi and Gavin Finch): “Iran is close to a deal with China to purchase anti‑ship cruise missiles…, just as the United States deploys a vast naval force near the Iranian coast ahead of possible strikes on the Islamic Republic. The deal for the Chinese‑made CM‑302 missiles is near completion, though no delivery date has been agreed… Their deployment would significantly enhance Iran’s strike capabilities and pose a threat to U.S. naval forces in the region, two weapons experts said. Negotiations with China to buy the missile weapons systems, which began at least two years ago, accelerated sharply after the 12‑day war between Israel and Iran in June…”

Ukraine Watch:

February 23 – Reuters (Dan Peleschuk): “European leaders vowed… not to abandon Ukraine as Russia’s invasion entered a fifth year, though divisions among Kyiv's partners overshadowed commemorations of the outbreak of the continent's largest war in decades. Tuesday’s anniversary of the start of the conflict, which has killed hundreds of thousands and ravaged swathes of Ukraine, comes a day after Hungary vetoed new EU sanctions against Russia and a 90 billion euro ($105bn) loan critical to Ukraine's survival… President Volodymyr Zelenskiy, facing mounting U.S. pressure to secure a peace deal, has repeatedly urged Kyiv’s allies to tighten sanctions on Moscow and send more weapons as Russian President Vladimir Putin shows no signs of ending his war.”

February 23 – Wall Street Journal (James Marson and Alistair MacDonald): “A Ukrainian counterattack in the country’s southeast is chipping away at Russian advances there and demonstrating that Kyiv’s forces have got plenty of fight left as Moscow’s invasion stretches into a fifth year… Ukraine has embarrassed Russian generals’ claims of significant gains by largely clearing the city of Kupyansk in the northeast of Russian forces and retaking several villages in the southeastern Zaporizhzhia region. At the same time, long-range strikes by Ukraine, Western sanctions and ship seizures are pushing down prices for Russian oil that are critical for Moscow to sustain its military efforts.”

February 25 – Bloomberg (Thomas Escritt): “Hungarian Prime Minister Viktor Orban is going all in with an anti-Ukraine campaign less than seven weeks before an election, derailing the European Union’s latest packages to aid Kyiv and punish Moscow. And now the prospect of a historic defeat that would end his 16-year rule — an independent poll Wednesday showed Orban’s party trailing by 20 points — is forcing him into a corner.”

Taiwan Watch:

February 25 – Reuters (Greg Torode): “A large Chinese military drone has conducted regular flights over the South China Sea in recent months while transmitting false transponder signals that made it appear to be other aircraft, including a sanctioned Belarusian cargo plane and a British Typhoon fighter jet. Military attaches and security analysts scrutinising the operations say the flights represent a step-change in China's grey-zone tactics in the contested South China Sea and appear to be testing possible decoy capabilities in the event of a Chinese invasion of Taiwan.”

February 23 – New York Times (Tripp Mickle): “Federal officials have for years tried to wean Silicon Valley from its dependence on Taiwan, an island… that makes 90% of the world’s high-end computer chips. In secret briefings held in Washington and Silicon Valley, national security officials warned executives from companies like Apple, Advanced Micro Devices and Qualcomm that China was making plans to retake Taiwan, which Beijing has long considered a breakaway territory. A Chinese blockade of Taiwan, the officials said, could choke the supply of computer chips made on the island and bring the U.S. tech industry to its knees.”

U.S./Russia/China/Europe/Iran Watch:

February 24 – Reuters: “Russia’s Foreign Ministry… issued a statement warning of the risk of a direct clash between nuclear powers and the grave consequences such a clash could have. The ministry issued the statement after Russia's Foreign Intelligence Service (SVR)… accused Britain and France of preparing to secretly supply Ukraine with nuclear weapons parts and technology… ‘We once again warn of the risks of a direct military confrontation between nuclear powers and, accordingly, of its potentially dire consequences,’ the foreign ministry said…”

February 24 – Wall Street Journal (Editorial Board): “The world this week is marking the fourth anniversary of Russia’s war on Ukraine, but the Kremlin is also conducting a quieter war with the rest of Europe. That war is documented in a report this week from the International Centre for Counter-Terrorism. The Netherlands think tank tracked violence, sabotage, public disturbances, arson and bombing attempts, among other criminal or terrorist acts. It finds the Kremlin plotted or carried out at least 151 such actions since February 2022 in Europe—at least 12 since July.”

February 23 – Bloomberg (Josh Xiao, Stephen Stapczynski, and Nectar Gan): “China blacklisted 20 Japanese entities and tightened scrutiny on a raft of other firms, signaling Beijing won’t drop its pressure campaign against Tokyo even after Prime Minister Sanae Takaichi’s recent landslide victory. The Ministry of Commerce added top Japanese military suppliers… to an export control list… The move marks the first time Japanese firms were added to the list since its January 2025 debut. In another measure, Beijing placed an additional 20 entities, including automakers Subaru and Hino Motors, on a monitor list.”

AI Bubble/Arms Race Watch:

February 24 – Axios (Jim VandeHei and Mike Allen): “If AI were a politician, it’d be headed for a landslide defeat. Defeated by Democrats ... Republicans ... and independents. In the Trump administration, Silicon Valley, and select AI-obsessed homes or businesses, people are euphoric about the fast rise of generative AI tools. These groups see a coming utopia. Almost everywhere else, the vast majority are indifferent, pessimistic — even downright dystopian. The politics are shifting so fast against AI that Democratic governors who championed it are in fast retreat. It’s almost certain to get worse for AI. Every major AI company is racing frantically to pump out new, more human-like models and then boast about their awesome capabilities. Every advancement or boast likely causes an equal and opposite reaction from voters. They get more anxious. The AI companies are pouring money into politics, but it’s mostly to thwart regulation they think could slow AI, not polish its image. So AI’s image is shaped largely by critics or background noise.”

February 27 – Bloomberg (Shirin Ghaffary and Matt Day): “OpenAI said it has finalized a record-breaking $110 billion funding round at a $730 billion valuation, not including the money raised, fueling the ChatGPT maker’s costly push to secure more computing power and talent for AI development. Amazon.com Inc. is investing $50 billion in the financing round, OpenAI said Friday. SoftBank Group Corp. and Nvidia Corp. each invested $30 billion… OpenAI and rival Anthropic have ramped up their fundraising this year to support costly bets on chips and data centers to support their artificial intelligence software.”

February 25 – Axios (Chuck McCutcheon and Ben Geman): “Tech giants are expected to join President Trump at the White House next week to sign a pledge that they will build or buy their own electricity supplies for data centers. It’s the Trump administration’s latest response to election-year voter angst… Trump said during Tuesday night’s State of the Union address that he negotiated a ‘ratepayer protection pledge’ with tech companies. He said that the companies will ‘have the obligation to provide for their own power needs’ and touted building on-site generation.”

February 26 – Financial Times (Madhumita Murgia and John Reed): “Anthropic this week claimed that competitors from China were stealing its AI technology by mounting so-called distillation attacks on its models. The company said that three Chinese AI groups, including industry upstart DeepSeek, had extracted information in this way from its popular Claude software. While the practice was previously known, Anthropic laid out what it claimed was an ‘industrial-scale’ campaign to mine its capabilities ‘illicitly’.”

February 23 – Axios (Zachary Basu and Madison Mills): “A manic new phase of the AI boom is sweeping through Silicon Valley, powered by autonomous ‘agents’ capable of liquefying weeks of manual labor into minutes. For now, the frenzy is largely confined to software engineering. But inside that bubble, the shift feels seismic… ‘I’ve followed tech for 25 years and I’ve never felt a larger gap between the ~1 million people using Codex/Claude and the rest of humanity,’ tweeted James Wang, director of product marketing at Cerebras. Anthropic CEO Dario Amodei recently described the current state of software engineering as the ‘centaur phase’ — a reference to the half-human, half-horse creature of Greek mythology. Just as a chess player aided by a computer could once beat any standalone machine, an engineer paired with an AI agent may now be the most powerful unit in tech. Amodei argues that this hybrid phase may be ‘very brief’ — perhaps only a few years before AI systems can independently outpace even the best human-led teams.”

February 23 – Bloomberg (Shirin Ghaffary, Natasha Mascarenhas, and Rebecca Torrence): “Anthropic is offering some current and former employees the ability to sell shares in the company at a valuation of about $350 billion… allowing them to cash in at the level of a recent $30 billion fundraising. The company has lined up $5 billion to $6 billion for the share sale, but the final amount will depend on how many eligible Anthropic employees opt to sell…”

February 26 – Axios (Emily Peck): “Fortune 500 CEOs ranked AI and ‘new technology’ as the top risk to their industry… AI is roiling the markets and companies to a degree that is shaking up even the companies believed to be on the right side of history. For example, OpenAI investor Microsoft’s stock is down 15% this year, while hyperscaler Amazon is down 7%... AI or new technology was identified as a top concern by 60% of the 142 CEOs surveyed in early February by the Conference Board… It ranked third the previous quarter.”

February 24 – Axios (Amy Harder): “As many as half of the world’s data center projects slated to come online this year could face delays, according to a report… It’s a sign of mounting collisions in the AI race — from power constraints and grid equipment shortages to rising community opposition… Data center additions hit a record in 2025, and 2026 is on track to surpass it, Olivia Wang, a Sightline research analyst, told Axios. Nearly six gigawatts came online last year, and five gigawatts are already under construction this year. (One gigawatt can power about 1 million U.S. homes.)”

February 25 – Bloomberg (John Gittelsohn): “Construction of new data centers in the US fell for the first time since 2020 despite soaring demand for artificial intelligence computing capacity, as developers face delays in permitting, zoning and power procurement. Capacity under construction fell to 5.99 gigawatts at the end of 2025 from 6.35 gigawatts at the end of 2024, real estate brokerage CBRE Group Inc. reported... The construction delays and faster long-distance networks are driving development to move outside traditional data center sites like Northern Virginia, Gordon Dolven, CBRE’s data center research director, said…”

February 26 – Wall Street Journal (Jack Pitcher and Xavier Martinez): “One of the 21st century’s hottest sectors has become a market albatross. Concern over the threat that artificial intelligence poses to software companies has hit the shares of companies like Salesforce and Adobe hard. Investors are questioning whether software companies that sell to businesses can withstand competition from AI-powered rivals… The State Street SPDR S&P Software & Services ETF, which tracks an equal-weight benchmark of about 140 software companies, has dropped 20% in the first two months of 2026 and almost 30% since its high from this past fall.”

February 24 – Bloomberg (Bailey Lipschultz and Paula Seligson): “CoreWeave Inc. is looking to raise about $8.5 billion from banks including Morgan Stanley and Mitsubishi UFJ Financial Group Inc. to help finance a buildout of cloud computing capacity for Meta Platforms Inc., according to people familiar... The proposed delayed-draw term loan would be backed by a contract Meta signed last year to pay CoreWeave up to $14.2 billion for its services…”

Bubble and Mania Watch:

February 24 – Wall Street Journal (Corrie Driebusch): “This was supposed to be a blockbuster year for initial public offerings. Artificial-intelligence fears spoiled the party. Investors have been thirsting for new issues, and big names including SpaceX, OpenAI and Anthropic are readying debuts for later this year. The momentum created an opening for dozens of smaller, mainly private-equity backed software firms that had been waiting in the wings. Then fears that AI will upend the software industry sent stocks tumbling earlier this month… Bankers and investors now expect the few mega-offerings to dominate the year. Most private tech companies—many that have spent years biding their time—will be forced to keep waiting it out.”

February 25 – Bloomberg (Preeti Singh): “Fears that artificial intelligence may spell bad news for software giants have been pressuring stock market valuations for months. Now, those same fears are creeping into private markets too. Buyers are demanding discounts of as much as 20% to take a piece of private equity firms’ technology-heavy portfolios off their hands… That’s worse than the 5% discount they were seeking just weeks ago… As a result, some investors who were preparing to launch their portfolio sales have pumped the brakes for now, two of these people said.”

February 22 – Bloomberg (Preeti Singh): “Private equity returned fewer profits to investors for a fourth straight year as the industry sat on $3.8 trillion of unsold assets and struggled to raise money for new funds. Distributions as a percentage of net asset value remained at 14% last year — the second-lowest level since the depths of the 2008 financial crisis, according to… Bain & Co. And the duration of the rut is even more severe than what private equity firms faced then. The value of deals in 2025 rose 44% from a year earlier to $904 billion, fueled by large transactions including the $56.6 billion take-private of Electronic Arts… Total transactions fell 6% to 3,018.”

Crypto Crash Watch:

February 26 – Bloomberg (David Pan): “American Bitcoin Corp., the Trump family-backed miner that rode the crypto euphoria to a blockbuster Nasdaq debut, is caught in the wreckage of the industry’s deepest rout since 2022. The… firm reported a $59 million loss for the fourth quarter…, results that come amid a stock selloff that has wiped out around 90% of the firm’s market value since the September high as the broader Trump digital-asset trade misfires… World Liberty Financial, the decentralized finance platform that hosted Wall Street executives at Mar-a-Lago this month, has seen a 65% plunge in its native token since the cryptocurrency was launched in September.”

February 22 – Bloomberg (Olga Kharif and Emily Nicolle): “Cameron and Tyler Winklevoss spent more than a decade building Gemini Space Station Inc. into one of crypto’s longest-running exchanges, among the first to secure major US regulatory approvals and a survivor of the industry’s repeated cycles of scandal and collapse. Now, after a more than 40% plunge in Bitcoin erased the bull market that helped underpin the money-losing company’s growth plans, Gemini is testing just how fast it can reposition — with little margin for error. Earlier this month, Gemini said it was axing as much as a quarter of its staff and exiting the UK, European Union and Australia entirely. This week, it parted with its chief operating officer, chief financial officer and chief legal officer, all in a single day. Its stock has fallen more than 80% from a post-listing high last year…”

February 24 – CNBC (Liz Napolitano): “Most bitcoin miners are no longer profiting from their digital asset-related operations as the flagship cryptocurrency falls further into the red, according to… Rosenblatt… Earlier on Tuesday, the token sank just below $63,000… The crypto’s latest slides could deepen a reemerging threat to most bitcoin miners, Rosenblatt analysts noted. ‘With [the revenue earned on mining] now under [3 cents], it is down to levels that are unprofitable for all but the most efficient operations’ Rosenblatt analyst Chris Brendler said…”

Inflation Watch:

February 23 – Reuters (Michael S. Derby): “The underlying level of inflation heated up in December as measured by a New York Federal Reserve gauge, suggesting further challenges in getting overall price pressures ‌back to the U.S. central bank’s 2% target. The regional Fed bank said its Multivariate Core Trend inflation ‌reading ticked up to 2.8% in December from 2.4% in the prior month, boosted by pressures in prices for services outside of housing and by goods costs.”

February 24 – Bloomberg (Erin Hudson): “The cost of private school in the US is inching closer to $50,000, according to… S&P Global Ratings. Annual average tuition reached new highs, according to the rating firm’s report on 59 schools in the sector... For day schools, it jumped 3.6% to $48,922 on average and for boarding schools, tuition rose 3.5% to $75,466.”

Federal Reserve Watch:

February 26 – Wall Street Journal (C. Ryan Barber, Sadie Gurman and Nick Timiraos): “The Federal Reserve is waging a behind-closed-doors legal challenge to a pair of subpoenas issued as part of U.S. Attorney Jeanine Pirro’s criminal investigation into Chair Jerome Powell... Pirro, a longtime ally of President Trump, opened the probe to examine whether Powell gave false testimony to Congress last summer about the central bank’s building-renovation project… The Fed, in sealed proceedings, is asking a judge to quash the subpoenas, which could reduce or eliminate its obligation to respond.”

February 25 – Wall Street Journal (Matt Grossman): “Atlanta Fed President Raphael Bostic said… the rift between the Federal Reserve and the White House has begun to erode trust in the central bank’s apolitical standing, one of the most direct warnings yet from a top monetary-policy official… in a farewell essay ahead of his scheduled retirement… at the end of February, Bostic said his colleagues in the Federal Reserve system remain committed to insulating their work from politics. ‘But my travels over the past several months have made clear that the legal and rhetorical battles raging around the central bank right now have caused people across a wide cross-section of our population to begin to doubt the Fed’s independence,’ Bostic wrote. ‘This is a major concern’.”

February 24 – Bloomberg (Enda Curran): “Federal Reserve Governor Lisa Cook warned the US central bank may not be able to counter rising unemployment driven by adoption of artificial intelligence. ‘If AI continues to raise productivity, economic growth could remain strong, even as churn in the labor market leads to an increase in unemployment. In a productivity boom such as this, a rise in unemployment may not indicate increased slack,’ Cook said… ‘As such, our normal demand-side monetary policy may not be able to ameliorate an AI-caused unemployment spell without also increasing inflationary pressure,’ she said.”

February 25 – Bloomberg (Christopher Condon): “Federal Reserve Bank of Richmond President Tom Barkin said interest-rate policy shouldn’t be used to counter the disruption that artificial intelligence may cause to businesses and the labor market. ‘What you just described is creative destruction, and that’s been happening for hundreds of years in this country, and it’s part of the essence of capitalism,” Barkin said… The Fed’s principal tool… is a ‘blunt instrument,’ he added. ‘It’s not the answer to all these issues… If you support capitalism, which I do, you imagine creative destruction will work in the way it does, and you don’t actually turn to the Fed to solve all those problems’.”

February 25 – Reuters (Michael S. Derby): “Federal Reserve Bank of Kansas City President Jeffrey Schmid said… overly high inflation remains a key problem ‌the central bank needs to address, but he stopped short of saying how monetary policy should respond. ‘I think we have work to do on the inflation side of things,’ while ‘I think we’re in a pretty good place for employment,’ Schmid said…”

February 24 – Wall Street Journal (Matt Grossman): “A solid consumer economy and steady labor market mean that the Federal Reserve should be primarily focused on addressing elevated inflation, Chicago Fed President Austan Goolsbee said… Goolsbee acknowledged that gloomy consumer surveys and sluggish hiring warrant some caution… But by and large, Goolsbee said, consumer-spending growth and modest unemployment suggest the economy has held up well, making inflation the appropriate target of the Fed’s attention… Goolsbee… said ‘3% inflation is not good enough—and it’s not what we promised when the Federal Reserve committed to the 2% target.’ ‘Stalling out at 3% is not a safe place to be for a myriad of reasons,’ he added.”

February 24 – Bloomberg (Maria Eloisa Capurro): “Federal Reserve Bank of Boston President Susan Collins said interest rates are likely to stay unchanged ‘for some time’ as recent economic data shows an improvement in the labor market, while risks to inflation remain. The labor market is showing ‘at least some more signs of an unusual kind of stability,’ Collins said… ‘I think that it’s quite likely that it will be appropriate to hold the current range for some time,’ she said. ‘After 175 bps of easing over the past year and a half, we are at mildly restrictive, perhaps quite close to neutral already,’ Collins said…”

February 23 – Wall Street Journal (Matt Grossman): “Federal Reserve governor Christopher Waller indicated… he may join the majority of Fed officials likely to support leaving interest rates on hold in March if February data show the labor market on solid footing… ‘If these data support the idea of an improvement in the labor market in January that continued in February, along with additional progress toward 2% inflation, that could result in my outlook turning a bit more positive and my view of appropriate monetary policy may tilt toward a pause at our upcoming meeting,’ Waller said…”

February 25 – Bloomberg (Katanga Johnson): “Federal Reserve Vice Chair for Supervision Michelle Bowman said that while the banking system remains strong, it is important that traditional lenders be given tools and flexibility to ‘compete effectively.’ ‘Non-bank financial institutions continue to increase their share of the total lending market, creating strong competition for regulated banks without facing the same capital, liquidity, and other prudential standards,’ Bowman said… Trump-era regulators recently eased post-crisis rules that spurred complaints from bankers they were being sidelined by too much regulation amid rapid growth in the private credit industry. Officials have also eased some capital requirements for Wall Street lending giants and told examiners to focus on core financial risks instead of process-related items.”

February 26 – Reuters (Howard Schneider): “Federal Reserve Governor Stephen Miran said ‌strong job growth in January ‌was ‘a really good thing,’ but that the Fed should still cut a full percentage point from its policy rate this year because there were ‌still risks ⁠to the labor market while inflation was no longer ⁠a problem. ‘I think it's way too early to sort of sound an all clear that the labor market ‌doesn’t need more support from the Federal Reserve. I definitely think the labor market can be supported by the Federal Reserve further,’ ‌with four cuts this year, Miran said… ‘I really ‌do not think that we have an inflation problem’…”

U.S. Economic Bubble Watch:

February 24 – Associated Press (Matt Ott): “The American consumer’s confidence in the U.S. economy improved slightly in February after cratering a month earlier. The Conference Board said… its consumer confidence index rose to 91.2 in February from an upwardly revised 89 last month. A measure of Americans’ short-term expectations for their income, business conditions and the job market rose four points to 72… The measure of consumers’ assessments of their current economic situation fell by 1.8 points to 120. Respondents’ references to prices and inflation were little changed but remain elevated.”

February 26 – Associated Press (Matt Ott): “Slightly more Americans applied for unemployment benefits last week as layoffs remain at relatively healthy levels. The number of Americans filing for jobless aid for the week ending Feb. 21 rose by 4,000 to 212,000 from the previous week… The total number of Americans filing for jobless benefits for the previous week ending Feb. 14 fell by 31,000 to 1.83 million…”

February 24 – Reuters (Lucia Mutikani): “U.S. single-family house price gains slowed in December, but economists believe tight inventory could prevent an outright decline in national home prices. House prices edged up 0.1% after an upwardly revised 0.7% increase in November, the Federal Housing Finance Agency said... Prices increased 1.8% in the 12 months through December, after climbing 2.1% in November. They rose 0.8% in the fourth quarter. Supply remains tight, especially for entry-level homes, propping up prices and keeping the dream of owning a house out of reach for many Americans.”

February 26 – Associated Press (Alex Veiga): “The average long-term U.S. mortgage rate slipped this week below 6% for the first time since late 2022… The benchmark 30-year fixed rate mortgage rate fell to 5.98% from 6.01% last week… One year ago, the rate averaged 6.76%.”

February 24 – Wall Street Journal (Jessica Coacci): “U.S. home-price growth slowed to its lowest annual level in over a decade… The S&P Cotality Case-Shiller National Home Price Index… rose 1.3% in the 12 months through December, compared with a 1.4% increase in November. ‘National home prices grew just 1.3% for the year—the weakest full-year gain since 2011,’ said Nicholas Godec at S&P Dow Jones Indices.”

China Watch:

February 26 – Bloomberg (Foster Wong and Josh Xiao): “China removed nine military lawmakers from its national parliament in the latest sign that President Xi Jinping’s purge of key defense establishment personnel continues to widen. The country’s top legislative body revoked the membership of Ground Force Commander Li Qiaoming and Information Support Force Political Commissar Li Wei, along with seven other military officials…”

Japan Watch:

February 25 – Wall Street Journal (Megumi Fujikawa): “With deflation now firmly in the rearview mirror, the path is clear for the Bank of Japan to raise interest rates sooner rather than later, said policy board member Hajime Takata. ‘I believe the bank should make a further gear shift, and engage in communication that assumes that the price stability target is almost achieved,’ Takata said… He also flagged the risk that an external shock could drive Japan’s inflation up more than expected.”

February 24 – Reuters (Leika Kihara): “Japan must keep raising interest rates and tighten fiscal policy as the economy is already in ‘great shape,’ former central bank chief Haruhiko Kuroda said, warning that Premier Sanae Takaichi's big spending plan could stoke an inflationary upswing. With the economy enjoying solid growth and steady wage gains, the Bank of Japan can probably raise interest rates about twice a year in 2026 and 2027, said Kuroda… ‘When Abenomics was deployed, Japan was suffering from deflation and a strong yen. Now, Japan is experiencing inflation and a weak yen. Japan needs to move toward tighter fiscal and monetary policy,’ Kuroda said... ‘The BOJ must gradually raise interest rates towards levels deemed neutral to the economy. Fiscal policy must be tightened, too,’ Kuroda said.”

EM Watch:

February 22 – Financial Times (Song Jung-a, Daniel Tudor and William Sandlund,): “On the bustling streets of Seoul, it is common to see buses with adverts on their sides for exchange traded funds, encouraging people to put their retirement savings into versions of these normally vanilla investment products that are often complex and speculative. They have a receptive audience. After many missed out on the South Korean stock market’s world-beating 76% rally last year, and with markets powering ahead again, retail traders — commonly known as ‘ants’ — are flocking to these funds, particularly leveraged ones that amplify moves in the prices of the assets they track.”

February 22 – Bloomberg (Chiranjivi Chakraborty, Shruti Srivastava, and Ranjani Raghavan): “In the autumn of 2024, a senior Indian securities regulator stood before a room full of money managers and foreign investors with an unusual message: India did not want to be the world’s largest derivatives market. ‘This is a crown we don’t wish to wear,’ Ashwani Bhatia, then a board member of the Securities and Exchange Board of India said... The authorities raised the ante 10 days ago, when the Reserve Bank of India curbed lending to stock brokers and proprietary traders. The move targeted the leverage that fueled explosive growth in the derivatives market, where average daily notional turnover reached $5.2 trillion by the end of 2025.”

February 22 – Associated Press (Fabiola Sanchez): “The Mexican army killed the leader of the Jalisco New Generation Cartel, Nemesio Rubén Oseguera Cervantes, ‘El Mencho,’ on Sunday… The drug lord was the Mexican government’s biggest prize yet to show the Trump administration in its efforts to crack down on the cartels, and his death was met with a forceful reaction from the cartel… Cars burned out by cartel members blocked roads at more than 250 points in 20 Mexican states…”

Leveraged Speculation Watch:

February 23 – Bloomberg (Michael Msika): “Rotational volatility has pushed hedge funds to trim gross leverage from record levels and turn over their portfolio positions at the highest rate since 2021, according to… Goldman Sachs. A team led by Ben Snider writes gross leverage remains close to record highs, while short interest in the median S&P 500 stock is still near the highest seen in recent years, particularly in defensives and small-caps. Says concentration within hedge fund portfolios and crowding across these portfolios remain elevated versus historical trends…”

February 23 – Bloomberg (Jan-Patrick Barnert): “Hedge funds’ net sales of global stocks reached the fastest pace since the tariff meltdown of early April 2025, according to… Goldman Sachs… Net selling in the week through Feb. 19 was so strong that it registered a negative 1.4 standard deviation from typical levels…”

February 23 – Bloomberg (Sidhartha Shukla): “Hedge funds that helped fuel a boom in US exchange-traded funds holding Bitcoin are in rapid retreat. Aggregate Bitcoin ETF allocations among the largest hedge fund holders fell 28% from the third to the fourth quarter of 2025, according to… CF Benchmarks, a wholly-owned subsidiary of crypto exchange Kraken.”

Social, Political, Environmental, Cybersecurity Instability Watch:

February 26 – Wall Street Journal (Kris Maher): “Pollution from U.S. power plants rose last year, a rare uptick in an otherwise long-term downward trend, partly because of more coal being burned to generate electricity. Levels of sulfur dioxide emitted from power-plant stacks were up about 18%, with nitrogen oxide up 7% and carbon dioxide up 4%, according to… Environmental Protection Agency data... The rise in emissions comes as President Trump has promoted the use of coal and worked to unwind Biden-era environmental regulations. Earlier this month, the EPA reversed a finding that carbon dioxide poses a risk to public health and welfare. Last week, the agency repealed the Biden administration’s stricter emissions standards on mercury, arsenic and other air toxics…”

February 23 – Axios (Sam Sabin): “As artificial intelligence accelerates, so does the prospect of a cyberattack powerful enough to shut down hospitals, black-out cities and disrupt core government systems. Just by scaling and accelerating the cyberwarfare tools adversaries already have, AI can turn manageable intrusions into large-scale crises. Axios asked seven former senior cybersecurity officials and leading security experts what a major AI-enabled cyberattack would look like and what worries them the most about current advancements in generative AI. Several of the experts pointed to the vulnerability of utilities, particularly water and electricity… Gen. Paul Nakasone, former head of the NSA and Cyber Command, raised the possibility that a nation-state that has breached systems critical to supplies of food and water could trigger an outage accidentally, if they lose control of an AI agent.”

February 23 – CNBC (Gili Malinsky): “In December 2025, Australia became the first country to bar anyone under 16 from keeping or making social media accounts… The goal is ‘to protect young Australians from pressures and risks’ that emerge from social media use... Risks include ‘design features that encourage them to spend more time on screens’ and harmful content they might encounter… Around the world, other countries are following suit. Malaysia began barring kids under 16 from creating social media accounts in January, and Spain began doing so in February. Countries like Greece, France, and Denmark are currently working on their own restrictions for under 15 or 16-year-olds as well.”

February 25 – Wall Street Journal (Drew Hinshaw and Joe Parkinson): “In its 250th year, is America, land of immigration, becoming a country of emigration? Last year the U.S. experienced something that hasn’t definitively occurred since the Great Depression: More people moved out than moved in. The Trump administration has hailed the exodus—negative net migration—as the fulfillment of its promise to ramp up deportations and restrict new visas. Beneath the stormy optics of that immigration crackdown, however, lies a less-noticed reversal: America’s own citizens are leaving in record numbers, replanting themselves and their families in lands they find more affordable and safe.”

February 26 – Associated Press (Seth Borenstein): “Billions fewer birds are flying through North American skies than decades ago and their population is shrinking ever faster, mostly due to a combination of intensive agriculture and warming temperatures, a new study found. Nearly half of the 261 species studied showed big enough losses in numbers to be statistically significant and more than half of those declining are seeing their losses accelerate since 1987, according to Thursday’s journal Science.”

Geopolitical Watch:

February 27 – Financial Times (Humza Jilani): “Pakistan launched air strikes on Afghanistan on Friday, saying it had killed hundreds of Taliban forces and associated militants as conflict between the neighbours threatened to escalate into outright war. The bombardment included extensive air strikes and artillery fire targeting military installations as well as major urban areas, including the capital Kabul and Kandahar, where Taliban supreme leader Hibatullah Akhundzada is based. The assault came in response to an attack on Thursday night on Pakistani border posts that officials in Islamabad said was carried out by Afghan Taliban forces and the officially separate militant group Tehreek-e-Taliban Pakistan. Last weekend, Pakistan carried out air strikes on what it said were militant positions in east Afghanistan.”