Today’s late-cycle dynamics are especially affected by the perception of the all-powerful Federal Reserve liquidity backstop, coupled with an administration that will uniquely do and say anything to sustain the bull market (through the midterms and beyond).
Markets suffered a significant “risk off” period in 2022, with deleveraging dynamics gaining momentum around the Autumn UK gilts crisis. While cut short by the Fed/GSE’s quick $500 billion liquidity injection, “risk off” was taking hold during the March 2023 Silicon Valley bank/bank run crisis. Japanese yen “carry trade” unwind was on the brink of triggering a more systemic deleveraging in July 2024. That September, the Fed surprised the markets with the first of three straight rate cuts. Then with April 2025 “liberation day” instability, deleveraging was at the cusp of turning highly problematic.
The President’s tariff “pause” triggered a major short squeeze and reversal of market hedges. The resulting “blow-off” liquidity onslaught and loosened conditions were exacerbated by three additional consecutive rates cuts beginning last September.
It’s worth noting that money market fund assets have surged $916 billion, or 18% annualized, since the week of April 16th. I associate this monetary inflation with the rapid expansion of already huge, levered Treasury holdings financed in the “repo” market (i.e., “basis trades”). This massive liquidity dislocation stoked manic speculative excess in equities, corporate Credit and crypto, while feeding the historic AI mania and arms race.
Importantly, this liquidity and speculative melee masked festering late-cycle issues, at home and abroad. Despite a formidable confluence of liquidity overabundance, loose credit conditions, and booming markets, cracks nonetheless surfaced in U.S. high yield finance. The implosions at First Brands and Tricolor revealed serious deficiencies in lending standards, risk intermediation, structured finance, debt ratings, and such.
Leveraged loan prices came under significant pressure, while booming “private Credit” was viewed with a more jaundiced eye. There were clear parallels to the 2007 subprime mortgage implosion, which proved a momentous Credit cycle turning point – presaging the 2008 crisis by 15 months.
Bitcoin dropped 7.1% last Saturday, fell another 2.3% Sunday, rallied 2.7% Monday, dropped 3.0% Tuesday, was clobbered 4.6% Wednesday, sank 13.1% Thursday, and then rallied 11.5% on Friday. Six sessions of historic Silver market volatility – down 26.4%, down 7.0%, up 7.4%, up 3.5%, down 19.6%, and up 9.8%. The Goldman Sachs Most Short Index gained 1.5% Tuesday, dropped 3.4% Wednesday, sank 6.7% Thursday, and rallied 8.8% on Friday. The Dow Transports surged 8.7% this week, while the Bloomberg Software Index sank 6.9%. The Banks jumped 5.1%, and the Mid-caps rose 4.4%, while the MAG7 Index slumped 4.7%. Money market fund assets surged $85 billion last week to a record $7.797 TN. Dow 50,000. In short, Unbelievable Monetary Disorder.
Notably underperforming, the MAG7 Index fell 1.5% Tuesday, lost 1.7% Wednesday, dropped 1.8% Thursday, and then recovered only 0.4% in Friday trading. Losses for the week included Amazon 12.1%, Meta 7.7%, Microsoft 6.8%, Tesla 4.5%, Alphabet 4.5%, and Nvidia 3.0%.
Nvidia dropped 2.9% Monday, fell 2.8% Tuesday, dropped 3.4% Wednesday, and declined 1.3% Thursday – sinking 10% in four sessions, the most intense selling pressure since April. The stock then surged 7.9% Friday. Oracle was down 2.7%, 3.4%, 5.1%, 7.0% - for a four-day 17.1% pounding (exceeding even April losses). The stock recovered 4.6% in Friday’s session. Amazon dropped 13.4% in four sessions (Tues-Friday). The Semiconductor Index gained marginally (0.6%) this week, though volatility was anything but marginal. The SOX gained 1.7% Monday, fell 2.1% Tuesday, sank 4.4% Wednesday, and was little changed Thursday before rallying 5.7% Friday.
The Bloomberg Software Index declined 1.1% Monday, was slammed 6.9% Tuesday, recovered 1.1% Wednesday, fell 2.1% Thursday, and rallied 2.1% on Friday. Losses for the week included Intuit 11.1%, Salesforce 9.9%, Synopsys 8.2%, Block 7.4% and Workday 7.2%.
February 5 – Reuters (Jeffrey Dastin): “Technology startup Anthropic… launched what it called an improved artificial intelligence model, days after its product advances helped kick-start a selloff of traditional software stocks. The… lab, which is backed by Amazon.com and Alphabet's Google, said its Claude Opus 4.6 model is an upgrade to the Opus 4.5 model released in November. The new AI can work on tasks for longer and more reliably, while showing gains related to coding and finance, Anthropic said.”
“Anthropic Releases AI Upgrade as Market Punishes Software Stocks.” “Dan Ives Says Software Selloff is Worst He’s Seen in 25 Years…” “Global Software Stocks Extend Losses Amid Fears Over AI-led Disruption.” “The Dark Side of A.I. Weighs on Tech Stocks.”
Only during a manic silly season would a historic $3 TN AI arms race not conjure disruption dread. It appears the AI honeymoon has run its course, with software only the most obvious risk.
“Software Rout Hurts Debt of Companies.” “How the Software Panic Hit BDC Stocks.” “Private Credit Stocks Keep Falling as Software Wipeout Spreads.” “Heard on the Street: A Bad Time for Private Credit’s Trust-Me Numbers.” “Private Credit Stocks Keep Falling as Software Wipeout Spreads.”
Apollo Management declined 1% on Monday, sank 4.8% on Tuesday, rallied 4.7% on Wednesday, sank 5.1% on Thursday, and recovered 5.5% on Friday. Blue Owl dropped 1.6%, sank 9.8%, slipped 0.4%, slumped 3.6%, and rallied 7.7%. Similar volatility dogged KKR, Ares Management, and Blackstone. Blackstone sank 8.9% this week, expanding y-t-d losses to 15.9%. KKR slumped 9.7% (down 19.0% y-t-d), with Areas Management slammed 12.8% (down 19.3%) and Blue Owl hammered 8.2% (down 16.2%). And remember that these “private Credit/capital” stocks are coming off a rough fourth quarter (First Brands, Tricolor, leveraged lending, etc.)
February 3 – Bloomberg (Olivia Fishlow and Laura Benitez): “Some call it the ‘SaaSpocalypse.’ Others are saying it’s a software ‘loan-ageddon.’ Whatever the name, shares of Wall Street’s largest alternative-investment firms plunged on Tuesday, driven by fears that artificial intelligence-driven disruptions would cause steep losses on their books. Blue Owl Capital Inc., which initially focused on financing software businesses, led the decline, tumbling as much as 13% before closing at the lowest level since September 2023. Ares Management Corp., KKR & Co. and TPG Inc. each fell by more than 10% at one point, while Apollo Global Management Inc. and Blackstone Inc. dropped by as much as 8%. The decline in alternative investment firms’ shares caps a bruising start to the year. Last month marked their worst January in a decade, and the largest of them are down roughly 15% since the start of the year.”
February 4 – Bloomberg (Shannon D. Harrington): “As the AI-induced market selloff in software companies persisted on Wednesday, distressed mounted in the leveraged loan market, where private equity firms funded a host of buyouts in the sector in recent years. The amount of tech company loans trading at distressed levels surged by $17.7 billion in the past four weeks, reaching the highest level since October 2022. Amid the rout, private credit funds managed by Oaktree and Ares told investors that they have written off the equity stakes they held in educational-software business Pluralsight just 18 months after lenders took over the company.”
February 4 – Bloomberg (Dorothy Ma and Rachel Graf): “A selloff in software debt has pushed billions of dollars of loans into distressed territory, rapidly repricing a market amid the threat of AI disruption. More than $17.7 billion of US tech company loans in a Bloomberg index dropped to distressed trading levels during the past four weeks… That figure, which swells the total tech distressed debt pile to about $46.9 billion, is dominated by firms in software-as-a-service, or SaaS, an industry seen as particularly vulnerable because AI is supplanting tasks like writing code and analyzing data.”
February 5 – Financial Times (Eric Platt and Antoine Gara): “Shares of US private capital giants Ares, Blue Owl and KKR slid after they warned rising market volatility over fears of AI disruption could slow fundraising and delay asset sales until 2027. US markets have been roiled by a sharp sell-off in technology stocks as investors worry AI tools could lead to the broad obsolescence of many software businesses, undercutting a core asset class for private capital investors over the past decade. The volatility is causing groups to consider delaying asset sales that would allow them to generate lucrative performance fees or cause overall asset growth to slow as investors pull money from some funds or delay making new investments.”
February 4 – New York Times (Maureen Farrell): “Private credit, an industry focused on lending to risky companies, has been one of the fastest-growing sectors on Wall Street, raking in trillions of dollars of investments and minting a slew of billionaires. But the tide has started to turn. Blue Owl Capital, the largest private credit firm, has seen its stock fall more than 50% over the past year — including a 10% drop on Tuesday — and investors have been pulling money from funds that the firm manages. Apollo Global Management and BlackRock… have also rattled investors with write-downs on large loans to several troubled e-commerce companies. Concerns about risks in the industry have been rising for months after a smattering of loan losses have raised questions about the financial stability of private credit borrowers.”
Leveraged loan prices dropped 0.6 points this week to 95.40 – the low since April 22nd, along with the largest weekly drop since liberation day “risk off.” Importantly, high-risk lending was vulnerable ahead of “SaaSpocalypse.” The marketplace is now well past peak confidence/complacency. Speculative flows have reversed away from private funds, “business development companies” (BDC), and leveraged lending more generally. The upshot is newfound vulnerability to negative developments.
Under the headline, “The $3 Trillion AI Data Center Build-Out Becomes All-Consuming For Debt Markets:” February 2 – Bloomberg (Paula Seligson): “More than $3 trillion. That’s the staggering price tag to build the data centers needed to prepare for the artificial intelligence boom. Not even the world’s biggest technology companies—not Amazon.com, not Microsoft or Meta Platforms—are prepared to foot the bill with only their own cash. The massive equity investments in private companies such as OpenAI and Anthropic don’t come close to this Industrial Revolution-size cost. And government payments and subsidies can ease the financial burden only so much. So where will the money come from? Debt markets. Which ones? All of them. Blue-chip bonds, junk debt, private credit and complex asset-backed pools of loans. ‘The numbers are like nothing any of us who have been in this business for 25 years have seen,’ says Matt McQueen, who oversees global credit, securitized products and municipal banking and markets at Bank of America Corp. ‘You have to turn over all avenues to make this work’.”
Market dynamics were this week reminiscent of incipient April instability. Specifically, correlations between leveraged lending and technology stocks quickly manifest as a major market issue. Overhanging the market is the $3 TN AI buildout, which will require unprecedented bond issuance and risky lending. And the marketplace has begun to recognize the harsh reality that borrowing requirements will be massive and ongoing, but much of the borrowing will also be of high-risk variety. Profound AI arms race ambiguity turned more tangible this week.
February 2 – Bloomberg (Debby Wu): “Nvidia Corp. Chief Executive Officer Jensen Huang said the company’s proposed $100 billion investment in OpenAI was ‘never a commitment’ and that the company would consider any funding rounds ‘one at a time.’ ‘It was never a commitment,’ Huang told reporters... ‘They invited us to invest up to $100 billion and of course, we were, we were very happy and honored that they invited us, but we will invest one step at a time.’ As part of a letter of intent signed in September, Nvidia said it planned to invest as much as $100 billion in OpenAI to support new data centers and other artificial intelligence infrastructure.”
February 2 – Wall Street Journal (Jonathan Weil): “The likelihood that Nvidia will be investing far less than $100 billion in OpenAI raises big questions for Oracle. Foremost are whether the ChatGPT developer can make good on its five-year, $300 billion contract with Oracle, and whether the tech giant should really be recording the full amount of that deal on its own books. As of Nov. 30, Oracle reported $523 billion of remaining performance obligations, which represent contracted sales not yet recognized as revenue. The figure, which is a closely watched footnote disclosure, was about nine times Oracle’s revenue for the previous four quarters, and included the $300 billion related to OpenAI.”
Future AI cash flows and profits remain highly uncertain, while widespread problematic disruptions are a certainty. Both new and existing debt will become a pressing issue. Worse yet, this unprecedented surge in suspect borrowings comes so late in the Credit cycle. I often discuss how “terminal phase excess” promotes a parabolic rise in systemic risk. Suddenly, this insidious dynamic turns conspicuous.
February 2 – Bloomberg (Rene Ismail): “Private credit could see default rates surge to as high as 13% in the US if artificial intelligence triggers an ‘aggressive’ disruption among corporate borrowers, according to UBS... The asset class is more exposed to AI risk than the markets for leveraged loans and high-yield bonds, which could see default rates rise to as high as 8% and 4%, respectively, in an aggressive disruption scenario, UBS strategists including Sachin Ganesh wrote… AI disruption fears are accelerating weakness in credit globally, as investors grapple with the prospect that it renders existing business models obsolete. The impact is more outsized in leveraged finance markets…, noting US high-yield tech spreads have widened by more than 90 bps despite the broader index tightening. US leveraged loans in the tech sector have also dropped… ‘We attribute at least part of this underperformance to markets pricing in a disruption risk premium for pockets of the sector,’ the strategists wrote. ‘It is still too early to say when exactly AI disruption plays out at scale, but we believe that the trend is set to accelerate this year’.”
February 3 – Reuters (David French and Isla Binnie): “Disruption to businesses from artificial intelligence development is ‘top of the page’ for Blackstone, the world’s largest alternative asset manager, its president and chief operating officer Jon Gray said… ‘You want to be thinking about this in almost everything you’re doing now,’ Gray told the WSJ… event… Blackstone manages assets worth $1.27 trillion, spanning most sectors of the economy across the world. Some of its portfolio, including sandwich shops and apartment complexes, are ‘less at risk’, Gray said. But other businesses face much more serious questions, he added, citing an insurance firm lowering rates for customers using self-driving cars. ‘You start to say, well, what does that mean for collision repair? What does that mean for auto insurance? What’s going to happen to all sorts of rules-based businesses?’ he said. Along with other large private capital firms, Blackstone has invested heavily in the infrastructure around AI…”
Keep in mind that, unlike stock speculators, lenders and bond investors don’t enjoy big upside returns in the event of a successful AI build out. They, however, will be on the hook for big losses when this historic Bubble bursts. The unattractive AI debt market risk vs. reward calculus is coming into clearer view.
As risk aversion takes hold and speculative deleveraging gains momentum, a most inopportune tightening of financial conditions will strike at the heart of a fragile Credit market. Scores of levered and uneconomic enterprises risk getting cut off from new finance, as the Credit cycle’s fateful downside gains momentum. It’s increasingly difficult to ignore serious Credit market developments.
All eyes on the leveraged speculating community. Major crypto losses have unleashed a problematic deleveraging. We can assume enormous amounts of speculative leverage permeate technology stocks, ETFs, and related derivatives. This week saw the start of de-risking/deleveraging in big tech. Meanwhile, acute volatility along with extraordinary performance dispersion between sectors suggests the unwind of hedge fund “pairs trades” and derivatives bets.
February 6 – Bloomberg (Justina Lee, Lu Wang and Jan-Patrick Barnert): “The turmoil unleashed in stocks this week by worries about the impact of artificial intelligence has rattled a slew of hedge fund strategies that had been enjoying a strong start to 2026. As one of the wildest rotations in years scrambled the equity leaderboard, both fundamental and systematic long-short hedge funds posted the worst day since at least November on Wednesday, according to… Goldman Sachs… Multi-strategy equity portfolios suffered the worst session since April… ‘Wednesday’s moves severely impacted all equity strategies simultaneously with more than two thirds of funds in each index down,’ wrote a Goldman team led by Vincent Lin. ‘Last time all three strategies were down more than 75 bps in a single day happened during Covid sell-off’.”
In a world with unprecedented speculative leverage, every incipient speculator deleveraging now flags the issue of “basis trade” and Treasury market leverage. One of these days…
February 5 – Bloomberg (Edward Bolingbroke and Michael MacKenzie): “A highly leveraged hedge fund strategy is flashing signs of strain amid concern that a potential shift in Federal Reserve balance-sheet policy and broader risks could fuel renewed volatility in bonds. The trade, essentially a bet that Treasuries will outperform similar-maturity interest-rate swaps, widening the yield gap between the two, has come under pressure this week in the long end of the curve. Spreads there have narrowed to their tightest since mid-December. Some market watchers say the move bears the hallmarks of early deleveraging in crowded widener positions, which had delivered strong gains since rebounding from April’s tariff-driven selloff. ‘There’s been a long march wider in 30-year swaps spreads from last year, and that trade is coming down a little bit,’ said George Catrambone, head of fixed income at DWS Americas. ‘There’s probably some deleveraging going on and unwinds,’ and the sector is prone to ‘less liquidity’ at times as there’s a limited number of players in the market that far out the swaps curve, he added.”
February 4 – Bloomberg (Greg Ritchie): “The world’s top financial stability watchdog has urged policymakers to more closely scrutinize the multi-trillion dollar leveraged bets on government bonds popular with hedge funds and other investors. The Financial Stability Board pushed for more oversight of the risks being taken on by market participants in repurchase agreements, or repos, backed by government bonds. In a report… it identified and outlined several ‘vulnerability metrics’ that regulatory authorities can track ‘in order to strengthen surveillance capabilities.’ Hedge fund cash borrowing in repo markets has increased over the past few years, with FSB calculations putting it at $3 trillion — or 25% of their assets.”
The analysis of vulnerable Bubbles in Credit, AI, leveraged speculation, and global risk assets at the precipice is compelling. De-risking/deleveraging and a problematic tightening of financial conditions appear likely if not imminent. Objectively, however, general financial conditions remain extraordinarily loose. Investment-grade CDS ended the week at 50 bps (up 1bp for the week), with high yield CDS at 301 bps (5 higher). These levels suggest neither risk aversion nor waning liquidity. At 266 bps, high yield spreads-to-Treasuries compares to the one-year average of 294 bps – and is significantly below the April spike to 450 bps.
I’ll note again last week’s $85 billion surge in money market fund assets. Complicating the analysis, fledgling de-risking/deleveraging is unfolding in a global market environment rife with liquidity overabundance. It’s unclear if it’s “basis trade,” Treasury swaps-related, global “yen carry trade” leverage, or all the above. But there remains some source stoking global liquidity excess. This tug-of-war between upside liquidity dislocation and intensifying speculator deleveraging seemingly ensures ongoing volatility and breathtaking monetary disorder. I expect this clash to break toward “risk off” deleveraging and tighter conditions. Timing uncertain.
For the Week:
The S&P500 was little changed (up 1.3% y-t-d), while the Dow jumped 2.5% (up 4.3%). The Utilities were unchanged (up 1.8%). The Banks rose 5.1% (up 7.3%), while the Broker/Dealers slipped 0.2% (up 4.6%). The Transports surged 8.7% (up 14.6%). The S&P 400 Midcaps jumped 4.4% (up 8.5%), and the small cap Russell 2000 gained 2.2% (up 7.6%). The Nasdaq100 slumped 1.9% (down 0.7%). The Semiconductors added 0.6% (up 13.6%). The Biotechs were about unchanged (up 3.4%). With bullion recovering $70, the HUI gold index rallied 3.2% (up 15.0%).
Three-month Treasury bill rates ended the week at 3.5875%. Two-year government yields slipped two bps to 3.50% (up 2bps y-t-d). Five-year T-note yields dipped three bps to 3.76% (up 3bps). Ten-year Treasury yields declined three bps to 4.21% (up 4bps). Long bond yields slipped two bps to 4.85% (up 1bp). Benchmark Fannie Mae MBS yields were unchanged at 5.00% (down 4bps).
Italian 10-year yields added one basis point to 3.47% (down 9bps y-t-d). Greek 10-year yields increased a basis point to 3.45% (up 2bps). Spain's 10-year yields added a basis point to 3.22% (down 7bps). German bund yields were unchanged at 2.84% (down 1bp). French yields increased two bps to 3.45% (down 12bps). The French to German 10-year bond spread widened two to 59 bps. U.K. 10-year gilt yields slipped a basis point to 4.51% (up 4bps). U.K.’s FTSE equities index gained 1.4% (up 4.3% y-t-d).
Japan’s Nikkei 225 Equities Index rose 1.7% (up 7.8% y-t-d). Japan’s 10-year “JGB” yields dipped two bps to 2.23% (up 17bps y-t-d). France’s CAC40 gained 1.8% (up 1.5%). The German DAX equities index increased 0.7% (up 0.9%). Spain’s IBEX 35 equities index added 0.3% (up 3.7%). Italy’s FTSE MIB index gained 0.8% (up 2.1%). EM equities were mixed. Brazil’s Bovespa index added 0.9% (up 13.5%), and Mexico’s Bolsa index surged 4.7% (up 10.0%). South Korea’s Kospi dropped 2.6% (up 20.8%). India’s Sensex equities index increased 1.6% (down 1.9%). China’s Shanghai Exchange Index declined 1.3% (up 2.4%). Turkey’s Borsa Istanbul National 100 index fell 2.3% (up 20.1%).
Federal Reserve Credit increased $9.5 billion last week to $6.550 TN, with a eight-week rise of $59.2 billion. Fed Credit was down $2.340 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.823 TN, or 76%. Fed Credit inflated $3.739 TN, or 133%, since November 7, 2012 (691 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt added $3.4 billion last week to $3.090 TN. “Custody holdings” were down $190 billion y-o-y, or 5.8%.
Total money market fund assets (MMFA) surged $85.0 billion to a record $7.797 TN - with a 29-week surge of $774 billion, or 19.6% annualized. MMFA were up $924 billion, or 13.4%, y-o-y - having ballooned a historic $3.212 TN, or 70%, since October 26, 2022.
Total Commercial Paper jumped $11.0 billion to $1.411 TN. CP has expanded $191 billion, or 15.7%, y-o-y.
Freddie Mac 30-year fixed mortgage rates added a basis point to 6.11% (down 78bps y-o-y) - just off the low back to September 2022. Fifteen-year rates increased one basis point to 5.50% (down 55bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down seven bps to 6.36% (down 63bps).
Currency Watch:
February 1 – Financial Times: “Xi Jinping has called for the renminbi to become a global reserve currency, in some of his clearest comments on his ambitions for China’s currency as Beijing seeks to play a greater role in the international monetary system… China’s president said the country needed to build a ‘powerful currency’ that could be ‘widely used in international trade, investment and foreign exchange markets, and attain reserve currency status’.”
For the week, the U.S. Dollar Index rallied 0.7% to 97.633 (down 0.7% y-t-d). On the upside, the Mexican peso increased 1.1%, the Brazilian real 0.9%, the South African rand 0.7%, and the Australian dollar 0.7%. On the downside, the Japanese yen declined 1.6%, the South Korean won 1.5%, the Swedish krona 1.2%, the British pound 0.6%, the Canadian dollar 0.5%, the Norwegian krone 0.5%, the Swiss franc 0.4%, the euro 0.3%, the New Zealand dollar 0.1%, and the Singapore dollar 0.1%. China's (onshore) renminbi increased 0.30% versus the dollar (up 0.75% y-t-d).
Commodities Watch:
February 5 – Bloomberg: “With ample cash but fewer investment options, Chinese speculators have fanned a rally in global metals prices, underscoring just how difficult it is for authorities to channel capital into the real economy. International prices of base and precious metals, which are heavily keyed to demand in the world’s biggest buyer, went stratospheric last month. Copper, gold and silver all hit record highs, and activity on Chinese futures markets has soared.”
February 3 – Bloomberg: “Copper rebounded as a metals selloff led by silver and gold eased and a state-backed industry group called for China to boost its strategic reserves of the crucial industrial metal. China should expand the size of the reserves and also work with major state-owned producers to boost commercial stockpiles, according to the China Nonferrous Metals Industry Association…”
The Bloomberg Commodities Index dropped 2.3% (up 7.5% y-t-d). Spot Gold recovered 1.4% to $4,964 (up 14.9%). Silver dropped 8.6% to $77.8369 (up 8.6%). WTI crude fell $1.66, or 2.5%, to $63.55 (up 11%). Gasoline added 0.6% (up 14%), while Natural Gas sank 21.4% to $3.422 (down 7%). Copper dipped 0.7% (up 4%). Wheat declined 1.5% (up 5%), while Corn increased 0.5% (down 2%). Wild bitcoin collapsed $13,190, or 15.7%, to $70,560 (down 19.5%).
Market Instability Watch:
February 5 – Bloomberg (Carmen Reinicke, Alexandra Semenova, Vildana Hajric and Michael MacKenzie): “All across Wall Street, day by day, the headlong rush into the most popular trades, from tech stocks to gold to cryptocurrencies, has given way to a sudden retreat from risk. There’s been no single cause, like there was last April when President Donald Trump’s trade war sent markets into a fearful tailspin. Instead, it’s been a slow drumbeat of news that is sowing anxiety about valuations that many suspected had already run up too far — and causing investors to pull back all at once.”
February 5 – Bloomberg (Bernard Goyder): “The unrelenting selloff in software shares has left tech investors antsy enough that they’re starting to pony up for protection against yet another steep slide… That uncertainty sent insurance against a 10% drop in the Invesco QQQ Trust Series 1 ETF soaring to the highest level since March 2020 relative to bets on a rally… Meanwhile, implied volatility in the iShares Expanded Tech-Software Sector ETF is at its highest level since April’s tariff turmoil, pushing up options premiums.”
February 2 – Bloomberg (Allison Schrager): “When interest rates are near zero, government debt doesn’t matter. That was the theory at least, in the previous decade, not just from economists on the fringe but also from a few in the mainstream. If rates stayed low, the argument went, the US didn’t need to worry about debt. And it didn’t. Debt increased, and economists who cautioned against it (ahem) were dismissed as cranks, with many of our critics pointing to the history of one nation: Japan, which managed to keep interest rates low even as its debt grew to more than 200% of its GDP. Reality, however, has a way of catching up with theory eventually, and now it has for Japan, whose long-term bond yields are rising as the yen is depreciating. The Japanese experience, it turns out, is not an excuse to run up lots of debt. It is a cautionary tale.”
February 2 – Bloomberg (Naomi Tajitsu): “Apollo Management’s Torsten Slok said there’s a risk of the yen carry trade unwinding, citing recent sharp moves in speculative futures positioning. ‘Speculative futures positioning has swung sharply, highlighting that carry trades can unwind quickly even as the broader yen-funded footprint remains in place,’ Slok, Apollo’s chief economist, wrote… The yen carry trade, a strategy that involves borrowing cheaply in yen and investing the proceeds in other assets, has been a topic of debate among investors given the market volatility this year… Slok said these flows contrast with balance sheet data from the Bank of International Settlements, which show that yen lending to offshore financial centers and non-bank borrowers remains elevated, ‘suggesting a large stock of yen-funded positions’.”
February 3 – Reuters (Gertrude Chavez-Dreyfuss): “Investors are ramping up bets on higher long‑dated Treasury yields and a steeper yield curve as incoming Federal Reserve Chair Kevin Warsh is expected to press for interest rate cuts while shrinking the U.S. central bank’s balance sheet. Warsh’s preference for a materially smaller Fed balance sheet, currently around $6.59 trillion, implies a withdrawal of meaningful government demand for Treasuries, a move which tightens financial conditions because the central bank is not providing liquidity to the market. Reduced Fed bond reinvestments and purchases expand the amount of Treasury supply in the market, which tends to lift long‑dated yields - steepening the curve.”
February 5 – Bloomberg (Alice Atkins and David Finnerty): “A closely-watched metric in the Treasuries market is near its highest level in more than four years after a weak US jobs print collided with concern about the swollen budget deficit. The extra yield investors demand to hold 10-year notes compared with their two-year counterparts hit 73.7 basis points this week, just shy of the 2022 high touched in April.”
February 3 – Bloomberg (James Hirai and Naomi Tajitsu): “The yield on German 30-year bonds has climbed to the highest level since 2011 as investors demand higher compensation in response to a surge in government debt issuance. The return owed to holders of the benchmark bond rose 4 bps to 3.56%...”
February 2 – Bloomberg (Greg Ritchie and Donal Griffin): “Officials winding down Argentex Group Plc have walked away from a volatile portfolio of currency derivatives that helped cause the UK brokerage’s collapse, with customers facing a near-total wipeout on most of their profitable trades.”
U.S. and Global Credit Excess Watch:
February 2 – Financial Times (Michelle Chan and Rafe Rosner-Uddin): “Investors piled into Oracle’s latest $25bn bond offering on Monday after the software company pledged to preserve its investment-grade credit rating by keeping its debt load in check amid growing concern over AI spending. The blockbuster bond deal, which contains eight parts of debt with maturities ranging from three to 40 years, attracted an order book of $127bn during its peak… Bond investors were reassured that Oracle was taking steps to limit borrowing by also issuing new equity to help fund its huge AI capital expenditure, as the tech giant’s growing debt burden has weighed on its stock and bond prices in the past few months.”
February 2 – Axios (Nathan Bomey): “Oracle plans to raise up to $50 billion in cash through equity and debt sales in 2026 to build more capacity in its cloud Infrastructure business, doubling down on spending to serve the AI economy. Concerns about debt tied to AI projects are billowing as tech giants rush to build the systems needed to fuel their AI ambitions. Oracle plans to raise $45 billion to $50 billion in gross cash to finance its buildout — which it says is necessary to meet contracted demand from its largest cloud customers. The bond deal portion is expected to fetch $20 billion to $25 billion…”
February 2 – Bloomberg (Kevin Kingsbury): “Global publicly syndicated bond issuance has reached $1 trillion in record time as borrowers seize soaring demand to lock in relatively cheap costs. The threshold was passed on Monday…, after Oracle Corp. raised $25 billion in the year’s biggest corporate bond sale. In previous years, that milestone has been hit later — on Feb. 7 in 2024, and on Feb. 11 last year. More than 40% of this year’s volume consists of bonds sold by governments... Financial firms are closely behind at nearly 35% of overall supply…”
February 5 – Bloomberg (Yash Roy): “JPMorgan… forecasts that mergers and acquisitions will spur $230 billion of US high-grade bond sales this year, the most since 2015 and up from its prior expectation of $180 billion. The increased forecast is driven in part by the health-care sector… Other major sectors that bump the forecast include technology and consumer. JPMorgan expects $1.83 trillion in total gross supply for the year, a record amount.”
U.S. Credit Trouble Watch:
February 3 – Financial Times (Michelle Chan): “Banks are tapping investors such as insurance companies and private credit funds as they try to find buyers for tens of billions of dollars of loans tied to Oracle’s vast data centre projects. At least $56bn worth of data centre construction loans — supported by the software company’s future leases as part of its $300bn deal with OpenAI — have been given investment-grade ratings…These ratings, which are relatively rare for infrastructure construction loans, have allowed banks to attract a much broader base of investors than usual for project finance debt. While banks have mostly tended to fund project finance loans for the construction of toll roads and airports themselves, the massive deal sizes of recent data centre projects have overwhelmed this source of demand, leaving tech giants keen to find new sources of capital.”
February 5 – Bloomberg (Bailey Lipschultz and Ryan Gould): “Blackstone Inc.-backed Liftoff Mobile Inc. postponed its initial public offering, after tech stocks spiraled on concerns over the impact of artificial intelligence on operating companies. Given current market conditions, the company is taking additional time before listing…”
February 5 – Bloomberg (Olivia Fishlow and Georgie McKay): “Blue Owl Capital Inc.’s management told investors that its software lending portfolio is in ‘pristine’ condition, dismissing risks from the AI-driven sell off, even as its shares continued to be punished… The company’s software loan book is strong and isn’t seeing a deterioration in performance or meaningful losses, Co-Chief Executive Officer Marc Lipschultz said… Those loans have, on average, a loan-to-value in the low 30% range, he said, meaning the software debt is protected by a strong equity cushion. ‘We don’t have red flags,’ Lipschultz said. ‘We don’t have yellow flags. We actually have largely green flags.’ ‘The tech portfolio continues to be the most pristine amongst all of our portfolios,’ he added.”
Trump Administration Watch:
February 3 – Politico (Sophia Cai): “President Donald Trump signed a $1.2 trillion funding package into law Tuesday afternoon just hours after the House approved the bill, ending a brief partial government shutdown that began early Saturday morning. The House voted 217-215, with support from 21 Democrats, following Senate passage last week… While the agreement funds the vast majority of federal agencies through September, it leaves the Department of Homeland Security – which oversees agencies such as TSA and FEMA – funded only for two weeks, setting up a high-stakes confrontation over Trump’s immigration enforcement agenda.”
February 2 – New York Times (Alan Rappeport and Tony Romm): “President Trump… rolled out a $12 billion initiative aimed a bolstering domestic stockpiles of strategic critical minerals, as the United States looks to reduce its reliance on China for key components of technology that powers cars, computers and phones. Known as ‘Project Vault,’ the effort will entail procuring and storing minerals for American manufacturers… Mr. Trump likened the endeavor to the government’s oil reserves and other emergency caches. The reserve will be financed by $1.67 billion in private funds and a $10 billion loan from the U.S. Export-Import Bank.”
February 4 – Wall Street Journal (Nick Timiraos): “A key Republican senator said he doesn’t believe Federal Reserve Chair Jerome Powell committed a crime in testimony that has become central to an explosive Justice Department investigation. Sen. Tim Scott (R., S.C.), the chairman of the Senate Banking Committee, said… he wasn’t aware of any statement Powell had made during testimony last year that would be evidence of perjury. That is significant because Scott chaired that hearing and sparked the line of questioning at the center of the probe. ‘I do not believe that he committed a crime during the hearing,’ Scott said…”
February 3 – Wall Street Journal (Jon Emont): “The new U.S. strategy for rare-earth minerals looks a lot like China’s old one. A U.S. government agency is providing most of the funding for a $12 billion government-led stockpile of minerals, some of which will likely be sourced from mining companies partly owned by the government. The plan for the newly created U.S. Strategic Critical Minerals Reserve—which President Trump called Project Vault—borrows from Beijing’s longstanding playbook because that is the rival Washington is trying to combat… ‘That’s been a total paradigm shift in how the U.S. looks at these things,’ said Morgan Bazilian, director of the Payne Institute at the Colorado School of Mines.”
February 2 – CNBC (Kevin Breuninger): “President Donald Trump… said a criminal investigation into Federal Reserve Chairman Jerome Powell should continue, shrugging off a Republican senator’s vow to block Trump’s Fed chair replacement pick unless the probe is dropped. U.S. Attorney for Washington Jeanine Pirro… should ‘take it to the end and see,’ Trump told reporters...”
February 5 – CNBC (Justin Papp): “Treasury Secretary Scott Bessent… refused to rule out the possibility of a criminal investigation of Kevin Warsh… if Warsh ends up refusing to cut interest rates. Sen. Elizabeth Warren… questioned Bessent about a joke Trump made over the weekend about suing Warsh if he does not reduce rates to the president’s liking… ‘I think it was a joke, but just in case, this should be an easy one, Mr. Secretary: can you commit right here and now that Trump’s Fed nominee Kevin Warsh will not be sued, will not be investigated by the Department of Justice if he doesn’t cut interest rates exactly the way that Donald Trump wants?’ Warren asked. ‘That is up to the president,’ Bessent said…”
February 3 – Politico (Cassandra Dumay): “Federal Housing Director Bill Pulte signaled… the administration could back off plans to undertake an initial public offering of Fannie Mae and Freddie Mac but stressed that President Donald Trump will make the final decision. ‘President Trump keeps options on the table — all options at all times,’ Pulte said… ‘But the reality is, we don’t have to do that.’ Pulte said the administration is currently well positioned to make ‘big, bold decisions,’ like the call to purchase $200 billion in mortgage bonds, to address voters' housing affordability concerns.”
February 1 – Financial Times (Editorial Board): “It has taken the fatal shootings of two US citizens, but something has shifted in America. The violence by Immigration and Customs Enforcement agents in Minneapolis, and above all the killings of the protesters Renée Good and Alex Pretti, have resonated across US society in a way much of the Trump administration’s creeping authoritarianism has not. The White House’s retreat is only partial. But Americans have drawn a red line that makes this a key moment in Donald Trump’s second term.”
January 31 – Wall Street Journal (Kessler, Rebecca Ballhaus, Eliot Brown and Angus Berwick): “Four days before Donald Trump’s inauguration last year, lieutenants to an Abu Dhabi royal secretly signed a deal with the Trump family to purchase a 49% stake in their fledgling cryptocurrency venture for half a billion dollars, according to company documents and people familiar with the matter. The buyers would pay half up front, steering $187 million to Trump family entities. The deal with World Liberty Financial, which hasn’t previously been reported, was signed by Eric Trump… At least $31 million was also slated to flow to entities affiliated with the family of Steve Witkoff, a World Liberty co-founder who weeks earlier had been named U.S. envoy to the Middle East… The investment was backed by Sheikh Tahnoon bin Zayed Al Nahyan, an Abu Dhabi royal who has been pushing the U.S. for access to tightly guarded artificial intelligence chips…”
February 1 – Bloomberg (María Paula Mijares Torres and Jennifer A Dlouhy): “President Donald Trump said he plans to close the John F. Kennedy Center for the Performing Arts for about two years to carry out renovations after his takeover prompted a significant backlash. ‘I have determined that the fastest way to bring The Trump Kennedy Center to the highest level of Success, Beauty, and Grandeur, is to cease Entertainment Operations for an approximately two year period of time, with a scheduled Grand Reopening that will rival and surpass anything that has taken place with respect to such a Facility before,’ Trump wrote… Trump has paid significant attention to the Kennedy Center during his second term in the White House, becoming its board chair and renaming it the Trump Kennedy Center without approval from Congress.”
February 2 – Financial Times (Joe Miller, Ian Hodgson and Paul Caruana Galizia): “Donald Trump and his allies raised a record $429mn in donations last year, as tech billionaires and companies lobbying for policy changes helped build a war chest for the president ahead of the midterm elections. A single political action committee controlled by Trump allies, Maga Inc, is sitting on $304mn… The haul, highly unusual for a term-limited president who can no longer fund his own campaign, proves that Trump continues to dominate his party… It also underlines megadonors’ eagerness to bankroll an administration that has championed the crypto and AI industries, axed or eased regulations and ended legal probes into political allies.”
Constitution Watch:
February 3 – Wall Street Journal (Gareth Vipers): “President Trump said he is seeking $1 billion in damages from Harvard University, the latest escalation in his administration’s fight with the institution over alleged antisemitism. Trump posted… that his administration had dropped its demand for a $200 million payment to the government to settle the dispute. ‘Strongly Antisemitic Harvard University has been feeding a lot of ‘nonsense’ to The Failing New York Times,’ Trump wrote… ‘This case will continue until justice is served,’ he added. ‘We are now seeking One Billion Dollars in damages, and want nothing further to do, into the future, with Harvard University’.”
New World Order Watch:
February 3 – Associated Press (Paul Wiseman, Josh Boak and Elaine Kurtenbach): “Bullied and buffeted by President Donald Trump’s tariffs for the past year, America’s longstanding allies are desperately seeking ways to shield themselves from the president’s impulsive wrath. U.S. trade partners are cutting deals among themselves —- sometimes discarding old differences to do so — in a push to diversify their economies away from a newly protectionist United States. Some European governments and institutions are reducing their use of U.S. digital services such as Zoom and Teams. Central banks and global investors are dumping dollars and buying gold. Together, their actions could diminish U.S. influence and mean higher interest rates and prices for Americans already angry about the high cost of living.”
February 2 – CNBC (Chloe Taylor): “Legendary investor Ray Dalio warned… the world is ‘on the brink’ of a capital war, amid simmering geopolitical tensions and volatile capital markets… Dalio said we are close to teetering into capital war territory — when money is weaponized using measures like trade embargoes, blocking access to capital markets, or using ownership of debt as leverage. ‘We are on the brink,’ Dalio said… He pointed to recent escalating tensions over the Trump administration’s push to bring Greenland — a Danish territory — under Washington’s control. He warned of a ‘fear’ among European holders of U.S.-denominated assets that they could be sanctioned, and that ‘there could be a reciprocal fear on the part of the United States that it could not get the capital, or not get the buy [from Europe],’ he said.”
January 31 – Wall Street Journal (David Luhnow, Sune Engel Rasmussen and Bertrand Benoit): “Few cities are more emblematic of the postwar trans-Atlantic alliance than the German capital. In 1963, John F. Kennedy delivered his famous ‘Ich bin ein Berliner’ speech here promising American solidarity during the Soviet blockade. In 1987, Ronald Reagan stood before the Berlin Wall and challenged Soviet leader Mikhail Gorbachev to tear it down. And 21 years later, 200,000 Berliners turned out to hear then-Sen. Barack Obama herald a new era of U.S.-European friendship. Today, the mood toward Uncle Sam in Berlin, and much of the world, has darkened. After the tumultuous first year of Donald Trump’s second term, few Germans have positive things to say about the current U.S. president, partly because he doesn’t have nice things to say either… In… Switzerland last week, Trump taunted Europeans that without U.S. help in World War II, ‘you’d all be speaking German’.”
Iran Watch:
February 1 – Bloomberg (Arsalan Shahla): “Iran’s supreme leader warned of a ‘regional war’ as tensions continued to mount over potential US strikes on Tehran and top Israeli military officials visited Washington. ‘We don’t want to attack any country,’ 86-year-old Ayatollah Ali Khamenei said in a public speech broadcast on state television... ‘But in response to anyone who harbors ambitions, wants to attack, and seeks to cause harm, the Iranian people will strike back forcefully’.”
Ukraine Watch:
February 3 – Financial Times (Christopher Miller): “Russia resumed bombing Kyiv and its energy infrastructure just five days after Donald Trump said Vladimir Putin had agreed to a week-long ceasefire owing to the extreme cold in Ukraine. The massive barrage came on the eve of a second round of US-brokered talks… Between Monday night and Tuesday morning, Russian forces launched 71 ballistic and cruise missiles and 450 attack drones in a huge bombardment…”
February 3 – Wall Street Journal (Editorial Board): “President Trump has his hands full in Venezuela while also pondering military action in Iran, but the Ukraine war is grinding on and Vladimir Putin wants the world to think he can’t be defeated. A new, detailed report on the war underscores that Mr. Putin isn’t winning, and Mr. Trump can still apply military and economic pressure to produce a peace that is honorable. Russian forces have taken an astonishing 1.2 million casualties in Ukraine since 2022, according to estimates from Seth Jones and Riley McCabe of the Center for Strategic and International Studies. The Russian death toll may be as high as 325,000—more than five times than in all Soviet and Russian conflicts combined since World War II.”
Greenland Watch:
February 3 – Wall Street Journal (Alexander Ward and Robbie Gramer): “A new poll shows 76% of Greenlanders say they wouldn’t benefit from becoming part of the U.S., noting their concerns about exchanging the Danish welfare system for American healthcare, elder care and education. Only 3% of Greenlanders had a ‘very positive’ view of U.S. government-provided benefits, while 59% held a mainly or very negative view of it, the poll shows.”
Trade War Watch:
February 2 – Associated Press (Josh Boak, Aamer Madhani and Rajesh Roy): “President Donald Trump said… he plans to lower tariffs on goods from India to 18%, from 25%, after Indian Prime Minister Narendra Modi agreed to stop buying Russian oil. The move comes after months of Trump pressing India to cut its reliance on cheap Russian crude… Trump said that India would also start to reduce its import taxes on U.S. goods to zero and buy $500 billion worth of American products.”
February 2 – Financial Times (David Keohane, Leo Lewis, Harry Dempsey, and James Politi): “Three days before Donald Trump was due to dine with 100 of Japan’s corporate elite, some of the real business had begun at a luxury hotel near the US ambassador’s residence. From a private conference room at the Okura in central Tokyo, US commerce secretary Howard Lutnick was orchestrating what would become a cascade of investment commitments worth hundreds of billions of dollars. The pledges made that day triggered a frenzy of investment decisions, the likes of which Japan has never experienced. It had to be done at speed and on an unprecedented scale. As megadeals began to crystallise, they had to avoid becoming entangled in the shortest snap election campaign in Japan’s postwar history.”
U.S./Russia/China/Europe/Iran Watch:
February 6 – Financial Times (Demetri Sevastopulo and Kathrin Hille): “The US is compiling a large arms sale of Patriot missiles and other weapons for Taiwan that Beijing has privately warned could jeopardise President Donald Trump’s state visit to China in April. The Trump administration is developing a package of four systems for Taiwan to purchase on the heels of the record $11.1bn arms package it unveiled in December, according to eight people familiar with the situation. China has raised serious concerns about the package ahead of Trump’s planned meeting with President Xi Jinping in April. Three of the people said China had told the US that the arms sales could derail the visit.”
February 5 – Bloomberg (Cindy Wang): “The US could deliver several long-delayed weapons systems to Taiwan this year as backlogs in the defense supply chain improve and Washington streamlines procurement procedures, the self-ruled democracy’s defense minister said. US defense industry production has gradually recovered from global supply chain disruptions, Taiwan’s Defense Minister Wellington Koo said… The administration of US President Donald Trump has helped accelerate administrative procedures for arms sales to Taiwan, by, for example, revising the Arms Export Control Act to grant Taiwan equal treatment to ‘NATO Plus’ members, he added.”
February 4 – Bloomberg (Nectar Gan and Alfred Liu): “The Chinese government has denounced a ruling by Panama’s top court to void CK Hutchison Holdings Ltd.’s contract to operate two ports as ‘extremely absurd,’ warning the Central American country would pay a ‘heavy price’ if it fails to change course. The ruling disregarded facts and severely damaged the legitimate rights and interests of the enterprise in Hong Kong, the Beijing office overseeing affairs in the semi-autonomous Chinese territory said…”
AI Bubble/Arms Race Watch:
February 5 – Bloomberg (Matt Day and Annie Bang): “Four of the biggest US technology companies together have forecast capital expenditures that will reach about $650 billion in 2026 — a mind-boggling tide of cash earmarked for new data centers and all the gear housed within them. The spending planned by Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Microsoft Corp., all in pursuit of dominance in the still-nascent market for AI tools, is a boom without a parallel this century. Each of the companies’ estimates for this year is expected either near or surpass their budgets for the past three years combined. They would set a high-water mark for capital spending by any single corporation in any one of the past 10 years, according to Bloomberg data.”
February 5 – Bloomberg (Carmen Arroyo and Annie Bang): “Alphabet Inc. topped projections for quarterly revenue and outlined an ambitious capital spending plan, far surpassing predictions, leveraging its growth to build out the data centers and infrastructure needed to lead in the AI age. Google’s parent company said capital expenditures will reach as much as $185 billion this year, compared with the $119.5 billion analysts expected.”
February 5 – Wall Street Journal (Bradley Olson): “Anthropic once appeared as an also-ran in the chaotic race for AI supremacy. This week, the sophistication of the startup’s products upended the stock market. A simple set of industry-specific add-ons to its Claude product, including one that performed legal services, triggered a dayslong global stock selloff, from software to legal services, financial data and real estate. Then, Anthropic unveiled Super Bowl ads that taunt rival OpenAI. On Thursday, Anthropic unleashed its most advanced model yet, capable of synthesizing data and analysis, running teams of coding assistants, and functions akin to product management. Shares of software companies including Salesforce, Intuit and others fell again Thursday…”
February 1 – Bloomberg (Paul J. Davies): “Warren Buffett has a great line on how hard it is to pick winners when major industrial change is afoot. ‘What you really should have done in 1905 or so, when you saw what was going to happen with the auto, is you should have gone short horses,’ the Oracle of Omaha once said. No one knows which firm will ultimately win the artificial intelligence race, but many people have clocked that a lot of enterprise software companies could soon be put out to pasture. If investors aren’t outright betting against the sector, they’re taking money off the table. In public markets, shares and bonds of these businesses are being hit. Since late October the software segment of the S&P 500 is down by more than a fifth… Meanwhile, bond prices for companies such as McAfee LLC, ION Platform Investment Group Ltd. and Rackspace Technology Global Inc. have taken a beating. But it’s in private markets where the shock could be worst. The lack of regular reporting from private equity-owned, or private credit-funded, firms means the trouble isn’t immediately obvious, but there are signs.”
February 5 – Bloomberg (Olivia Fishlow): “High finance’s new ultra-rich lined up one by one, in TV spots, earnings calls and LinkedIn posts, to make the same pitch: Don’t take out big AI fears on private credit funds. Blue Owl Capital Inc. billionaire Marc Lipschultz insisted that there were no ‘red flags’ — or even ‘yellow flags’… Scott Nuttall at KKR & Co. similarly told analysts that ‘our level of anxiety is pretty low.’ Mike Arougheti, the billionaire chief executive of Ares Management Corp., vowed… that ‘there is a huge disconnect, and the narrative is wrong’ around artificial intelligence and the potential disruption it may cause. And Holden Spaht, managing partner at Thoma Bravo, said… that after a week of board meetings with software-as-a-service companies, he’s confident that ‘the growth numbers look to be accelerating, not decelerating’.”
February 5 – Yahoo Finance (Laura Bratton): “Big Tech CEOs this week brushed aside worries that AI will evaporate the competitive moats of established software companies, even as those firms have seen their stocks plunge amid a steep, months-long sell-off… Nvidia CEO Jensen Huang said, ‘There’s this notion that the tool industry is in decline and will be replaced by AI… It is the most illogical thing in the world, and time will prove itself.’ He continued, ‘If you were a human or robot — artificial general robotics — would you use tools or reinvent tools? The answer obviously is to use tools … like Service Now and SAP.’”
February 3 – Bloomberg (Naureen S Malik and Brian Eckhouse): “Texas has so many massive AI-related data centers in development that its grid operator is now considering reevaluating some projects that were previously approved. The Electric Reliability Council of Texas wants to examine projects unlikely to advance and provide greater clarity for when new sites are ready to connect to its system. Projects historically have been approved by utilities but in recent years Ercot has had to determine how this flood of new users can be served without breaking the grid.”
Bubble and Mania Watch:
February 5 – Bloomberg (Spencer Soper): “Amazon.com Inc. shares dropped after the company announced plans to spend $200 billion this year on data centers, chips and other equipment, worrying investors that its colossal bet on artificial intelligence may not pay off in the long run. The company reported spending roughly $130 billion on property and equipment in 2025. Analysts anticipated those expenses would reach about $150 billion this year. Chief Executive Officer Andy Jassy said the money ‘predominantly’ would go toward the company’s Amazon Web Services cloud unit… ‘I think this is an extraordinarily unusual opportunity to forever change the size of AWS and Amazon as a whole,’ Jassy said... ‘We see this as an unusual opportunity and we’re going to invest aggressively to be the leader’.”
February 3 – Financial Times (Michael Acton, Demetri Sevastopulo and Zijing Wu): “Nvidia’s sales of H200 AI chips to China are still awaiting final approval from Washington nearly two months after Donald Trump greenlit exports, as the US government conducts a national security review before granting licences to Chinese customers. Chinese customers are not placing H200 chip orders with Nvidia until it becomes clear whether they will be able to secure the licences or what conditions will be attached, people familiar… told the FT.”
February 2 – Financial Times (Stephen Morris, George Hammond and Hannah Murphy): “Elon Musk’s SpaceX has acquired xAI for $250bn, as the world’s richest man combines his two largest private ventures to pursue his ambition to win the AI race by developing data centres in space. SpaceX based the price for xAI on a recent $20bn funding round that valued the two-year-old start-up at $230bn… The deal valued the combined company at $1.25tn after Musk marked up the private valuation of SpaceX to $1tn, citing increases in revenue from its Starlink satellite broadband service… The rocket company was recently valued at $800bn…”
February 1 – Financial Times (Nikou Asgari): “Every second as many as 6,000 transactions zap through JPMorgan’s systems globally, as commuters tap their phones to pay for coffees, shoppers buy new clothes online, or businesses send wages to employees living in different corners of the world. Most people barely think about the behind-the-scenes financial plumbing that makes these and other transactions happen. But crypto companies are seeking to change that by muscling into the financial system and eventually running the money that powers the world. These efforts centre on stablecoins, a type of digital cash that is pegged one-to-one with currencies such as the dollar, and their expanding role in the financial system. Crypto advocates say stablecoins are an improvement upon regular money because they are designed for a digital world and are both faster and easier to move. The staunchest want them to supplant existing money completely. Wall Street banks, however, see their expansion as a risky experiment that potentially threatens the stability of the financial system, and are aggressively pushing back.”
Crypto Watch:
February 5 – Bloomberg (David Pan and Melos Ambaye): “Bitcoin’s plunge below $65,000 is intensifying the crisis rocking the digital-asset complex — and few companies are more exposed than Michael Saylor’s Strategy Inc… The Bitcoin-hoarding company confirmed a net loss of $12.4 billion for the fourth quarter, driven by the mark-to-market decline in its vast holdings. That pain deepened this week, as fresh market turmoil pushed the firm’s Bitcoin stash below its cumulative cost basis for the first time since 2023 — and erased the token’s post-election gains. The upshot: Saylor’s financial experiment is coming undone.”
February 5 – Reuters (Ateev Bhandari): “Strategy reported a wider fourth-quarter loss on Thursday, as a turbulent period for digital assets caused the world's largest hoarder of bitcoin to record losses on its holdings. Shares of the Michael Saylor-led company fell 1.5% in after-hours trading, extending heavy selling from earlier in the day. They are down nearly 30% this year… Strategy logged a loss of $12.4 billion, or $42.93 per share, for the three months ended December 31, compared with a loss of $670.8 million, or $3.03 per share, in the fourth quarter of 2024.”
February 5 – Bloomberg (Suvashree Ghosh and Emily Nicolle): “Crypto-hoarding treasury companies, which helped turbocharge a digital-asset rally in last year’s first nine months, are now at risk of sparking market contagion as selling pressure mounts. Publicly traded digital-asset treasuries, or DATs, have operated on the premise that accumulating specific cryptocurrencies would generate sustained stock market premiums. With the crypto market enduring its worst selloff since the aftermath of FTX’s collapse, the cracks in that narrative are starting to show. Crypto treasuries could come under increased pressure to sell assets…”
February 5 – Bloomberg (Emily Nicolle): “Crypto exchange Gemini Space Station Inc. said it plans to cut up to 25% of its workforce and wind down operations in the UK, European Union and Australia, citing a strategy to reduce costs and improve profitability. Cuts will impact as many as 200 roles across its global Workforce…”
February 4 – Bloomberg (Sidhartha Shukla): “Almost half a trillion dollars has been wiped off cryptocurrencies in less than a week as a selloff led by Bitcoin accelerated. Total crypto market value has slumped by $467.6 billion since Jan. 29, according to CoinGecko data. Bitcoin on Tuesday tumbled to its lowest level since US President Donald Trump won re-election in early November 2024 and ushered in a more crypto-friendly administration.”
February 5 – Bloomberg (Monique Mulima): “For a time, amassing cryptocurrencies was a surefire way for little-known companies to supercharge their share prices. These days, that strategy has turned into little more than a liability. In the past year, the biggest digital asset treasuries, or DATs, as these companies are known, have tumbled a median 62%, far more than even the steep declines in Bitcoin. That’s left a large swath of DATs trading at a discount to the underlying value of their crypto holdings… That’s quite a comedown from the go-go days of DATs, when companies that held, say $100 million of Bitcoin, could be worth $150 million or $200 million in the stock market.”
February 3 – Bloomberg (Emily Mason): “Michael Burry, the money manager made famous in The Big Short, warned that Bitcoin’s plunge could deepen into a self-reinforcing ‘death spiral,’ inflicting lasting damage on companies that have spent the past year stockpiling the token. In a Substack post…, Burry argued that the original cryptocurrency, which has fallen 40% since peaking in October, has been exposed as a purely speculative asset, failing to take off as a debasement hedge similar to precious metals. Further losses, he said, could rapidly strain the balance sheets of major holders, force selling across the crypto ecosystem and trigger widespread value destruction.”
Inflation Watch:
February 4 – CBS (Mary Cunningham): “Tens of millions of Americans are facing higher utility bills after regulators approved dozens of rate hikes last year. Regulators green-lit 43 rate hikes across the country in 2025, totaling $11.6 billion in increases, according to… PowerLines. The nonprofit… said the vast majority of hikes have already gone into effect, while eight are slated to go live in the coming months. All told, 56 million Americans will see higher utility bills…”
February 1 – Bloomberg (Alice Gledhill): “Money managers at BlackRock Inc., Bridgewater Associates and Pacific Investment Management Co. are shoring up their portfolios against a fresh bout of inflation. A BlackRock fund is building short positions in US Treasuries and gilts in case lower interest rates fail to materialize. Bridgewater prefers stocks to bonds. Pimco likes the buffer afforded by Treasuries that have an inflation adjustment baked into their yield. There are growing signs their concern is warranted: The difference between yields on ordinary Treasuries and inflation-protected notes has climbed sharply in January to the highest levels in months. Inflation swaps, another gauge of market expectations, have also risen.”
Federal Reserve Watch:
February 2 – Reuters (Ann Saphir): “Kevin Warsh, President Donald Trump’s nominee to be the next Federal Reserve chief, faces a ‘tall task’ in leading the U.S. central bank, particularly if he aims to convince the members of the policy-setting committee to go along with him on monetary policy decisions, Atlanta Fed President Raphael Bostic said... Bostic… said he believes the central bank should not cut rates at all this year, a view that several of his colleagues also share… ‘If you want to have policy enacted or go in a direction that you want, you’ve got to convince them to go along, and in order to do that, you've got to build a relationship with them," Bostic said… ‘You have to build their trust. You have to show your wisdom and guidance. And those things don’t happen overnight. And so it’s just a huge undertaking’.”
January 31 – Financial Times (Claire Jones, Myles McCormick and Amelia Pollard): “Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve will trigger a sweeping reappraisal of the central bank’s role at the centre of the world’s biggest economy, leading economists have said. Warsh… has spent years criticising the central bank for what he views as mission creep as policymakers expanded their toolkit to fight against the ructions wrought by the 2008 financial crisis and the coronavirus pandemic 12 years later. It is those calls for ‘regime change’ that helped win over Treasury secretary Scott Bessent, who has similarly decried the Fed’s ‘gain of function’ in recent years. Now, Warsh is poised to lead an overhaul of the institution… ‘The administration, especially Bessent, is taking on a really broad view of what can be changed at the Fed,’ said Derek Tang of research group LH Meyer. ‘A new chair is just the first part of that story’.”
February 2 – Bloomberg (Alexandra Harris): “For much of the time that President Donald Trump was mulling his potential choice for the next chair of the Federal Reserve, the debate in markets swirled around whether his pick would lower interest rates as aggressively as he preferred. Now, with his selection of former Fed Governor Kevin Warsh — an economist known as much for his fierce criticism of the central bank as his changing views on monetary policy — the debate has abruptly shifted from short-term rates to the Fed’s $6.6 trillion balance sheet and its very role in markets. Warsh has repeatedly and loudly blasted his old colleagues over the years for letting the bank’s assets balloon via so-called quantitative easing, prompting speculation in markets that he could move quickly to draw them down.”
February 5 – Financial Times (Claire Jones and Amelia Pollard): “Kevin Warsh… has, like other candidates in the race to succeed chair Jay Powell, claimed that American interest rates ought to be lower. A big reason why, Warsh says, is an AI boom that he believes is ‘the most productivity-enhancing wave of our lifetimes — past, present and future’… The Fed nominee believes he can afford to take a chance on those productivity gains in the same way former chair Alan Greenspan did in the 1990s. ‘[Greenspan] believed based on anecdotes and rather esoteric data that we weren’t in a position where we needed to raise rates,’ Warsh said in… December. ‘As a result we had a stronger economy, we had more stable prices’.”
February 1 – Bloomberg (Sam Kim): “The Federal Reserve should focus on getting its balance sheet ‘as lean as possible,’ President Donald Trump’s economic adviser Kevin Hassett says on Fox… Fed should focus on its job, which is financial stability, lower interest rates, lower unemployment and lower inflation, Hassett says Fed should do that in an ‘old-fashioned way, quietly,’ he says Trump’s Fed chair pick, Kevin Warsh, is the ‘right person at the right time,’ says Hassett, who was among contenders. Warsh is data-driven, independent person, Hassett says.”
U.S. Economic Bubble Watch:
February 3 – Associated Press (Christopher Rugaber): “Higher-income Americans and those with college degrees have ramped up their spending more quickly in the past three years than other consumers…, evidence of worsening inequality that may explain some of the growing pessimism about the economy. The data, released by the Federal Reserve Bank of New York, also show that in the final three months of last year, lower-income and rural households faced higher inflation than higher-income households… The… data show that households with incomes of $125,000 and higher have boosted their spending 2.3%, adjusted for inflation, since 2023, while middle-income households — those between $40,000 and $125,000 — have increased their spending by 1.6%. Those earning below $40,000 have lifted their spending by just 0.9%...”
February 4 – Bloomberg (Julia Fanzeres): “US service providers registered the strongest back-to-back growth since 2024 last month… The Institute for Supply Management’s index of services was unchanged at 53.8 in January, matching the highest since October 2024… The ISM measure of business activity… climbed more than 2 points to 57.4 — the highest since October 2024. Eleven industries reported growth last month, led by health care, utilities, construction and retail trade. Five, including transportation and warehousing, contracted. ISM’s employment gauge showed the first back-to-back months of expansion since early last year… The report showed an index of prices paid for services and materials climbed to a three-month high of 66.6.”
February 4 – CNBC (Jeff Cox): “The U.S. labor market barely budged in January, with hiring below even muted expectations, according to… ADP. Private companies added just 22,000 positions for the month… The total was less than the downwardly revised 37,000 increase in December and below the… forecast for 45,000. The report starts 2026 off on basically the same note where 2025 ended: A lackluster job market in a low-hire, low-fire environment that likely will do little to quell fears from Federal Reserve policymakers that more support may be needed.”
February 5 – CNBC (Jeff Cox): “Layoff plans hit their highest January total since the global financial crisis while hiring intentions reached their lowest since the same period, outplacement firm Challenger, Gray & Christmas reported… U.S. employers announced 108,435 layoffs for the month, up 118% from the same period a year ago and 205% from December 2025. The total marked the highest for any January since 2009… At the same time, companies announced just 5,306 new hires, also the lowest January since 2009, which is when Challenger began tracking such data.”
February 5 – Associated Press (Matt Ott): “The number of Americans applying for unemployment benefits jumped last week but remains in the same historically low range of the past few years. Applications for jobless aid for the week ending Jan. 31 rose by 22,000 to 231,000 from the previous week… That’s significantly more than the 211,000 new applications… FactSet had forecast.”
February 4 – CNBC (Diana Olick): “The harsh winter storm that recently hit much of the country took its toll on the mortgage market in the week that followed. Potential buyers stayed home, and mortgage rates didn’t move enough to spark refinance demand… Applications for a mortgage to purchase a home fell 14% for the week and were just 4% higher year over year.”
February 2 – Wall Street Journal (Nicole Friedman): “Many home shoppers have given up on the depressed housing market, where sales are stuck at a 30-year low. But those buying are enjoying discounts at the highest rate in years. About 62% of buyers last year purchased a home below the original listing price. That was the highest proportion since 2019, according to… Redfin. The average discount for the homes that sold below their original listing price was around 8%—the largest since 2012. Buyers are also obtaining concessions from sellers, including cash that can be used for closing costs or to buy down a buyer’s mortgage rate.”
China Watch:
January 31 – Wall Street Journal (Lingling Wei): “In purging his top generals, Chinese leader Xi Jinping put the command of the armed forces in the hands of one man—himself. Now, his vision alone will decide the course of Beijing’s looming confrontation with Taiwan. The arrest of Gen. Zhang Youxia, a close ally and childhood friend the Chinese leader called ‘big brother,’ removes any internal authoritative voices who could slow Xi’s hand in any move against Taiwan… The timing is critical. The Chinese military is racing toward a 2027 deadline Xi has set for ‘modernization,’ often interpreted as readiness for a Taiwan contingency.”
February 2 – Bloomberg: “China’s economy stumbled into the new year, bolstering the case for Beijing to ramp up policy support in coming weeks as strong exports failed to offset weak domestic demand. Official purchasing managers’ indexes… suggested an unexpected and broad slowdown in January, with activity in the non-manufacturing sector contracting at the worst pace since late 2022.”
February 3 – Bloomberg: “China’s services activity picked up after growing at a slower rate for four straight months…, suggesting that pockets of the economy are seeing renewed momentum despite a rocky start to the year. The RatingDog China services purchasing managers’ index rose to 52.3 in January from 52 in the prior month…”
February 1 – Bloomberg: “China Vanke Co.’s $12 billion record loss underscores how its ability to avoid default depends on how far its state shareholder is willing to support the stricken property developer. The homebuilder lost about 82 billion yuan ($12bn) last year… That is the equivalent of about 40% of its total equity attributable to shareholders at the end of the previous year, a sign of how quickly its losses are eating into capital buffers. The loss highlights the depth of Vanke’s financial troubles and its dependence on support from Shenzhen Metro Group Co.”
Central Banker Watch:
February 5 – Financial Times (Olaf Storbeck and Ian Smith): “The European Central Bank has held its benchmark interest rate at 2% for the fifth meeting in a row after recent growth in the Eurozone economy proved stronger than expected… It came after core inflation… fell in January to 2.2%, the lowest level since late 2021. GDP growth in the fourth quarter of last year was slightly higher than economists predicted, at 0.3%. ‘We are in a good place, inflation is in a good place,’ ECB president Christine Lagarde told journalists…”
February 5 – Bloomberg (Philip Aldrick, Tom Rees, and Alice Atkins): “The Bank of England came within a vote of cutting interest rates and predicted inflation will fall below its target, a closer-than-expected decision that revived hopes of a move next month. Governor Andrew Bailey was once again the swing voter in a 5-4 decision… Bailey said… ‘there should be scope for some further reduction in bank rate this year,’ as the BOE predicted inflation near its 2% target in April as well as slowing growth and rising unemployment.”
February 2 – CNBC (Lim Hui Jie and Anniek Bao): “Australia’s central bank raised its policy rate by 25 bps to 3.85%..., marking the Reserve Bank of Australia’s first rate hike since November 2023 as inflation continues to climb. The… move… followed data showing inflation at its highest level in six quarters... ‘Private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labour market conditions are a little tight,’ according to the central bank’s statement, noting that inflationary pressure picked up ‘materially’ in the second half of last year.”
Europe Watch:
February 2 – Reuters (Kate Abnett): “Long delays to get power grid connections are challenging Amazon's plans to expand data centers in Europe…, as industries ramp up pressure on policymakers to upgrade ageing energy grids. Energy-intensive industries have urged the European Union to invest more in grids, warning that a fast connection to stable, reliable power networks is a key criteria for investments in new industrial sites in Europe… Connecting to the transmission network in Europe can take up to seven years - versus the roughly two years it can take to develop a data center...”
Japan Watch:
February 1 – Bloomberg (Toru Fujioka): “A summary of opinions from the Bank of Japan’s January policy meeting indicated a growing awareness of the need to raise interest rates in a timely fashion as authorities monitor the impact of the weak yen on inflation. ‘Given that addressing rising prices is an urgent priority in Japan, the bank should not take too much time examining the impact of raising the policy interest rate, and should proceed with the next step, a rate hike, without missing the appropriate timing,’ one of the nine board members said… The summary signals the possibility of Governor Kazuo Ueda’s board raising the benchmark rate at a faster pace than the market consensus estimate of roughly once in every six months…”
February 5 – Bloomberg (Erica Yokoyama): “A key issue on the minds of voters heading into Japan’s national election on Sunday will be their stomachs — that is, the rising cost of filling them. Voter frustration over soaring living expenses led to major setbacks for Prime Minister Sanae Takaichi’s ruling Liberal Democratic Party in the last two national elections before she took the helm last October. While successive governments rolled out subsidies to reduce utility fees during that timespan, out-sized gains for food prices limited the overall impact of the aid on household budgets.”
Leveraged Speculation Watch:
February 3 – Wall Street Journal (Peter Rudegeair): “Citadel founder and CEO Ken Griffin criticized the Trump administration’s interference into the day-to-day business of American companies and raised concerns about self-serving decisions made by government officials. ‘When the U.S. government starts to engage in corporate America in a way that tastes of favoritism, I know for most CEOs that I’m friends with, they find it incredibly distasteful,’ Griffin said… ‘Most CEOs just don’t want to find themselves in the business of having to, in some sense, suck up to one administration after another to succeed in running their business’… ‘This administration has definitely made missteps in choosing decisions or courses that have been very, very enriching to the families of those in the administration,’ Griffin said. ‘That calls into question, is the public interest being served?’ Griffin, a Republican megadonor, emerged last year as President Trump’s most vocal critic on Wall Street.”
February 2 – Wall Street Journal (Gregory Zuckerman): “It is helpful to have friends in high places. Stanley Druckenmiller could soon have two of them. President Trump’s choice of Kevin Warsh as chairman of the Federal Reserve shines a spotlight on Druckenmiller, a billionaire investor who was Warsh’s longtime boss—and also mentored Scott Bessent, the Treasury Secretary. Druckenmiller and Warsh spent over a decade working together at Druckenmiller’s firm, discussing the economy, markets and more... Warsh’s relationship with Druckenmiller is one reason Wall Street largely appears comfortable that he will continue the central bank’s tradition of independence, despite pressure from Trump to lower interest rates.”
Social, Political, Environmental, Cybersecurity Instability Watch:
February 2 – New York Times (David Goodman): “Bare slopes. Closed terrain. Canceled vacations. In the Western United States, the 2026 ski season is shaping up to be one of the worst in decades. A snow drought of historic proportions is hobbling many ski areas, leading skiers to stay home, mountain towns to face economic uncertainty, and sparking fears of water shortages and wildfires come summer. In Colorado, the statewide snowpack is at 57% of average, a record low. Utah’s snowpack is at 62%, nearly the worst since observations began in 1980. ‘It seems like a joke, but technically, the Florida Panhandle has seen more snowfall than Salt Lake City this year,’ said Jon Meyer, assistant state climatologist at the Utah Climate Center… By Jan. 4, snow cover across the West was the lowest since NASA began tracking it via satellite in 2001. The drought is most severe in Washington, Oregon, Colorado, Utah, Arizona and New Mexico, with over 80% of all snow-monitoring stations in these states reporting severe snow drought (snowpack below the 20th percentile).”
February 2 – Axios (Sam Sabin): “A suspected China-based hacking group spun up a phishing campaign around Christmas that mimicked U.S. policy briefings in an attempt to hack diplomats, according to new research from cybersecurity firm Dream Security shared first with Axios. The campaign successfully infected ‘a lot of people,’ Dream CEO Shalev Hulio said... ‘We just don't know who and how big [of a] scale,’ he added. Researchers at Israel-based Dream uncovered a phishing campaign designed to ensnare officials tied to diplomacy, elections and international coordination around the world.”
The S&P500 was little changed (up 1.3% y-t-d), while the Dow jumped 2.5% (up 4.3%). The Utilities were unchanged (up 1.8%). The Banks rose 5.1% (up 7.3%), while the Broker/Dealers slipped 0.2% (up 4.6%). The Transports surged 8.7% (up 14.6%). The S&P 400 Midcaps jumped 4.4% (up 8.5%), and the small cap Russell 2000 gained 2.2% (up 7.6%). The Nasdaq100 slumped 1.9% (down 0.7%). The Semiconductors added 0.6% (up 13.6%). The Biotechs were about unchanged (up 3.4%). With bullion recovering $70, the HUI gold index rallied 3.2% (up 15.0%).
Three-month Treasury bill rates ended the week at 3.5875%. Two-year government yields slipped two bps to 3.50% (up 2bps y-t-d). Five-year T-note yields dipped three bps to 3.76% (up 3bps). Ten-year Treasury yields declined three bps to 4.21% (up 4bps). Long bond yields slipped two bps to 4.85% (up 1bp). Benchmark Fannie Mae MBS yields were unchanged at 5.00% (down 4bps).
Italian 10-year yields added one basis point to 3.47% (down 9bps y-t-d). Greek 10-year yields increased a basis point to 3.45% (up 2bps). Spain's 10-year yields added a basis point to 3.22% (down 7bps). German bund yields were unchanged at 2.84% (down 1bp). French yields increased two bps to 3.45% (down 12bps). The French to German 10-year bond spread widened two to 59 bps. U.K. 10-year gilt yields slipped a basis point to 4.51% (up 4bps). U.K.’s FTSE equities index gained 1.4% (up 4.3% y-t-d).
Japan’s Nikkei 225 Equities Index rose 1.7% (up 7.8% y-t-d). Japan’s 10-year “JGB” yields dipped two bps to 2.23% (up 17bps y-t-d). France’s CAC40 gained 1.8% (up 1.5%). The German DAX equities index increased 0.7% (up 0.9%). Spain’s IBEX 35 equities index added 0.3% (up 3.7%). Italy’s FTSE MIB index gained 0.8% (up 2.1%). EM equities were mixed. Brazil’s Bovespa index added 0.9% (up 13.5%), and Mexico’s Bolsa index surged 4.7% (up 10.0%). South Korea’s Kospi dropped 2.6% (up 20.8%). India’s Sensex equities index increased 1.6% (down 1.9%). China’s Shanghai Exchange Index declined 1.3% (up 2.4%). Turkey’s Borsa Istanbul National 100 index fell 2.3% (up 20.1%).
Federal Reserve Credit increased $9.5 billion last week to $6.550 TN, with a eight-week rise of $59.2 billion. Fed Credit was down $2.340 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.823 TN, or 76%. Fed Credit inflated $3.739 TN, or 133%, since November 7, 2012 (691 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt added $3.4 billion last week to $3.090 TN. “Custody holdings” were down $190 billion y-o-y, or 5.8%.
Total money market fund assets (MMFA) surged $85.0 billion to a record $7.797 TN - with a 29-week surge of $774 billion, or 19.6% annualized. MMFA were up $924 billion, or 13.4%, y-o-y - having ballooned a historic $3.212 TN, or 70%, since October 26, 2022.
Total Commercial Paper jumped $11.0 billion to $1.411 TN. CP has expanded $191 billion, or 15.7%, y-o-y.
Freddie Mac 30-year fixed mortgage rates added a basis point to 6.11% (down 78bps y-o-y) - just off the low back to September 2022. Fifteen-year rates increased one basis point to 5.50% (down 55bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down seven bps to 6.36% (down 63bps).
Currency Watch:
February 1 – Financial Times: “Xi Jinping has called for the renminbi to become a global reserve currency, in some of his clearest comments on his ambitions for China’s currency as Beijing seeks to play a greater role in the international monetary system… China’s president said the country needed to build a ‘powerful currency’ that could be ‘widely used in international trade, investment and foreign exchange markets, and attain reserve currency status’.”
For the week, the U.S. Dollar Index rallied 0.7% to 97.633 (down 0.7% y-t-d). On the upside, the Mexican peso increased 1.1%, the Brazilian real 0.9%, the South African rand 0.7%, and the Australian dollar 0.7%. On the downside, the Japanese yen declined 1.6%, the South Korean won 1.5%, the Swedish krona 1.2%, the British pound 0.6%, the Canadian dollar 0.5%, the Norwegian krone 0.5%, the Swiss franc 0.4%, the euro 0.3%, the New Zealand dollar 0.1%, and the Singapore dollar 0.1%. China's (onshore) renminbi increased 0.30% versus the dollar (up 0.75% y-t-d).
Commodities Watch:
February 5 – Bloomberg: “With ample cash but fewer investment options, Chinese speculators have fanned a rally in global metals prices, underscoring just how difficult it is for authorities to channel capital into the real economy. International prices of base and precious metals, which are heavily keyed to demand in the world’s biggest buyer, went stratospheric last month. Copper, gold and silver all hit record highs, and activity on Chinese futures markets has soared.”
February 3 – Bloomberg: “Copper rebounded as a metals selloff led by silver and gold eased and a state-backed industry group called for China to boost its strategic reserves of the crucial industrial metal. China should expand the size of the reserves and also work with major state-owned producers to boost commercial stockpiles, according to the China Nonferrous Metals Industry Association…”
The Bloomberg Commodities Index dropped 2.3% (up 7.5% y-t-d). Spot Gold recovered 1.4% to $4,964 (up 14.9%). Silver dropped 8.6% to $77.8369 (up 8.6%). WTI crude fell $1.66, or 2.5%, to $63.55 (up 11%). Gasoline added 0.6% (up 14%), while Natural Gas sank 21.4% to $3.422 (down 7%). Copper dipped 0.7% (up 4%). Wheat declined 1.5% (up 5%), while Corn increased 0.5% (down 2%). Wild bitcoin collapsed $13,190, or 15.7%, to $70,560 (down 19.5%).
Market Instability Watch:
February 5 – Bloomberg (Carmen Reinicke, Alexandra Semenova, Vildana Hajric and Michael MacKenzie): “All across Wall Street, day by day, the headlong rush into the most popular trades, from tech stocks to gold to cryptocurrencies, has given way to a sudden retreat from risk. There’s been no single cause, like there was last April when President Donald Trump’s trade war sent markets into a fearful tailspin. Instead, it’s been a slow drumbeat of news that is sowing anxiety about valuations that many suspected had already run up too far — and causing investors to pull back all at once.”
February 5 – Bloomberg (Bernard Goyder): “The unrelenting selloff in software shares has left tech investors antsy enough that they’re starting to pony up for protection against yet another steep slide… That uncertainty sent insurance against a 10% drop in the Invesco QQQ Trust Series 1 ETF soaring to the highest level since March 2020 relative to bets on a rally… Meanwhile, implied volatility in the iShares Expanded Tech-Software Sector ETF is at its highest level since April’s tariff turmoil, pushing up options premiums.”
February 2 – Bloomberg (Allison Schrager): “When interest rates are near zero, government debt doesn’t matter. That was the theory at least, in the previous decade, not just from economists on the fringe but also from a few in the mainstream. If rates stayed low, the argument went, the US didn’t need to worry about debt. And it didn’t. Debt increased, and economists who cautioned against it (ahem) were dismissed as cranks, with many of our critics pointing to the history of one nation: Japan, which managed to keep interest rates low even as its debt grew to more than 200% of its GDP. Reality, however, has a way of catching up with theory eventually, and now it has for Japan, whose long-term bond yields are rising as the yen is depreciating. The Japanese experience, it turns out, is not an excuse to run up lots of debt. It is a cautionary tale.”
February 2 – Bloomberg (Naomi Tajitsu): “Apollo Management’s Torsten Slok said there’s a risk of the yen carry trade unwinding, citing recent sharp moves in speculative futures positioning. ‘Speculative futures positioning has swung sharply, highlighting that carry trades can unwind quickly even as the broader yen-funded footprint remains in place,’ Slok, Apollo’s chief economist, wrote… The yen carry trade, a strategy that involves borrowing cheaply in yen and investing the proceeds in other assets, has been a topic of debate among investors given the market volatility this year… Slok said these flows contrast with balance sheet data from the Bank of International Settlements, which show that yen lending to offshore financial centers and non-bank borrowers remains elevated, ‘suggesting a large stock of yen-funded positions’.”
February 3 – Reuters (Gertrude Chavez-Dreyfuss): “Investors are ramping up bets on higher long‑dated Treasury yields and a steeper yield curve as incoming Federal Reserve Chair Kevin Warsh is expected to press for interest rate cuts while shrinking the U.S. central bank’s balance sheet. Warsh’s preference for a materially smaller Fed balance sheet, currently around $6.59 trillion, implies a withdrawal of meaningful government demand for Treasuries, a move which tightens financial conditions because the central bank is not providing liquidity to the market. Reduced Fed bond reinvestments and purchases expand the amount of Treasury supply in the market, which tends to lift long‑dated yields - steepening the curve.”
February 5 – Bloomberg (Alice Atkins and David Finnerty): “A closely-watched metric in the Treasuries market is near its highest level in more than four years after a weak US jobs print collided with concern about the swollen budget deficit. The extra yield investors demand to hold 10-year notes compared with their two-year counterparts hit 73.7 basis points this week, just shy of the 2022 high touched in April.”
February 3 – Bloomberg (James Hirai and Naomi Tajitsu): “The yield on German 30-year bonds has climbed to the highest level since 2011 as investors demand higher compensation in response to a surge in government debt issuance. The return owed to holders of the benchmark bond rose 4 bps to 3.56%...”
February 2 – Bloomberg (Greg Ritchie and Donal Griffin): “Officials winding down Argentex Group Plc have walked away from a volatile portfolio of currency derivatives that helped cause the UK brokerage’s collapse, with customers facing a near-total wipeout on most of their profitable trades.”
U.S. and Global Credit Excess Watch:
February 2 – Financial Times (Michelle Chan and Rafe Rosner-Uddin): “Investors piled into Oracle’s latest $25bn bond offering on Monday after the software company pledged to preserve its investment-grade credit rating by keeping its debt load in check amid growing concern over AI spending. The blockbuster bond deal, which contains eight parts of debt with maturities ranging from three to 40 years, attracted an order book of $127bn during its peak… Bond investors were reassured that Oracle was taking steps to limit borrowing by also issuing new equity to help fund its huge AI capital expenditure, as the tech giant’s growing debt burden has weighed on its stock and bond prices in the past few months.”
February 2 – Axios (Nathan Bomey): “Oracle plans to raise up to $50 billion in cash through equity and debt sales in 2026 to build more capacity in its cloud Infrastructure business, doubling down on spending to serve the AI economy. Concerns about debt tied to AI projects are billowing as tech giants rush to build the systems needed to fuel their AI ambitions. Oracle plans to raise $45 billion to $50 billion in gross cash to finance its buildout — which it says is necessary to meet contracted demand from its largest cloud customers. The bond deal portion is expected to fetch $20 billion to $25 billion…”
February 2 – Bloomberg (Kevin Kingsbury): “Global publicly syndicated bond issuance has reached $1 trillion in record time as borrowers seize soaring demand to lock in relatively cheap costs. The threshold was passed on Monday…, after Oracle Corp. raised $25 billion in the year’s biggest corporate bond sale. In previous years, that milestone has been hit later — on Feb. 7 in 2024, and on Feb. 11 last year. More than 40% of this year’s volume consists of bonds sold by governments... Financial firms are closely behind at nearly 35% of overall supply…”
February 5 – Bloomberg (Yash Roy): “JPMorgan… forecasts that mergers and acquisitions will spur $230 billion of US high-grade bond sales this year, the most since 2015 and up from its prior expectation of $180 billion. The increased forecast is driven in part by the health-care sector… Other major sectors that bump the forecast include technology and consumer. JPMorgan expects $1.83 trillion in total gross supply for the year, a record amount.”
U.S. Credit Trouble Watch:
February 3 – Financial Times (Michelle Chan): “Banks are tapping investors such as insurance companies and private credit funds as they try to find buyers for tens of billions of dollars of loans tied to Oracle’s vast data centre projects. At least $56bn worth of data centre construction loans — supported by the software company’s future leases as part of its $300bn deal with OpenAI — have been given investment-grade ratings…These ratings, which are relatively rare for infrastructure construction loans, have allowed banks to attract a much broader base of investors than usual for project finance debt. While banks have mostly tended to fund project finance loans for the construction of toll roads and airports themselves, the massive deal sizes of recent data centre projects have overwhelmed this source of demand, leaving tech giants keen to find new sources of capital.”
February 5 – Bloomberg (Bailey Lipschultz and Ryan Gould): “Blackstone Inc.-backed Liftoff Mobile Inc. postponed its initial public offering, after tech stocks spiraled on concerns over the impact of artificial intelligence on operating companies. Given current market conditions, the company is taking additional time before listing…”
February 5 – Bloomberg (Olivia Fishlow and Georgie McKay): “Blue Owl Capital Inc.’s management told investors that its software lending portfolio is in ‘pristine’ condition, dismissing risks from the AI-driven sell off, even as its shares continued to be punished… The company’s software loan book is strong and isn’t seeing a deterioration in performance or meaningful losses, Co-Chief Executive Officer Marc Lipschultz said… Those loans have, on average, a loan-to-value in the low 30% range, he said, meaning the software debt is protected by a strong equity cushion. ‘We don’t have red flags,’ Lipschultz said. ‘We don’t have yellow flags. We actually have largely green flags.’ ‘The tech portfolio continues to be the most pristine amongst all of our portfolios,’ he added.”
Trump Administration Watch:
February 3 – Politico (Sophia Cai): “President Donald Trump signed a $1.2 trillion funding package into law Tuesday afternoon just hours after the House approved the bill, ending a brief partial government shutdown that began early Saturday morning. The House voted 217-215, with support from 21 Democrats, following Senate passage last week… While the agreement funds the vast majority of federal agencies through September, it leaves the Department of Homeland Security – which oversees agencies such as TSA and FEMA – funded only for two weeks, setting up a high-stakes confrontation over Trump’s immigration enforcement agenda.”
February 2 – New York Times (Alan Rappeport and Tony Romm): “President Trump… rolled out a $12 billion initiative aimed a bolstering domestic stockpiles of strategic critical minerals, as the United States looks to reduce its reliance on China for key components of technology that powers cars, computers and phones. Known as ‘Project Vault,’ the effort will entail procuring and storing minerals for American manufacturers… Mr. Trump likened the endeavor to the government’s oil reserves and other emergency caches. The reserve will be financed by $1.67 billion in private funds and a $10 billion loan from the U.S. Export-Import Bank.”
February 4 – Wall Street Journal (Nick Timiraos): “A key Republican senator said he doesn’t believe Federal Reserve Chair Jerome Powell committed a crime in testimony that has become central to an explosive Justice Department investigation. Sen. Tim Scott (R., S.C.), the chairman of the Senate Banking Committee, said… he wasn’t aware of any statement Powell had made during testimony last year that would be evidence of perjury. That is significant because Scott chaired that hearing and sparked the line of questioning at the center of the probe. ‘I do not believe that he committed a crime during the hearing,’ Scott said…”
February 3 – Wall Street Journal (Jon Emont): “The new U.S. strategy for rare-earth minerals looks a lot like China’s old one. A U.S. government agency is providing most of the funding for a $12 billion government-led stockpile of minerals, some of which will likely be sourced from mining companies partly owned by the government. The plan for the newly created U.S. Strategic Critical Minerals Reserve—which President Trump called Project Vault—borrows from Beijing’s longstanding playbook because that is the rival Washington is trying to combat… ‘That’s been a total paradigm shift in how the U.S. looks at these things,’ said Morgan Bazilian, director of the Payne Institute at the Colorado School of Mines.”
February 2 – CNBC (Kevin Breuninger): “President Donald Trump… said a criminal investigation into Federal Reserve Chairman Jerome Powell should continue, shrugging off a Republican senator’s vow to block Trump’s Fed chair replacement pick unless the probe is dropped. U.S. Attorney for Washington Jeanine Pirro… should ‘take it to the end and see,’ Trump told reporters...”
February 5 – CNBC (Justin Papp): “Treasury Secretary Scott Bessent… refused to rule out the possibility of a criminal investigation of Kevin Warsh… if Warsh ends up refusing to cut interest rates. Sen. Elizabeth Warren… questioned Bessent about a joke Trump made over the weekend about suing Warsh if he does not reduce rates to the president’s liking… ‘I think it was a joke, but just in case, this should be an easy one, Mr. Secretary: can you commit right here and now that Trump’s Fed nominee Kevin Warsh will not be sued, will not be investigated by the Department of Justice if he doesn’t cut interest rates exactly the way that Donald Trump wants?’ Warren asked. ‘That is up to the president,’ Bessent said…”
February 3 – Politico (Cassandra Dumay): “Federal Housing Director Bill Pulte signaled… the administration could back off plans to undertake an initial public offering of Fannie Mae and Freddie Mac but stressed that President Donald Trump will make the final decision. ‘President Trump keeps options on the table — all options at all times,’ Pulte said… ‘But the reality is, we don’t have to do that.’ Pulte said the administration is currently well positioned to make ‘big, bold decisions,’ like the call to purchase $200 billion in mortgage bonds, to address voters' housing affordability concerns.”
February 1 – Financial Times (Editorial Board): “It has taken the fatal shootings of two US citizens, but something has shifted in America. The violence by Immigration and Customs Enforcement agents in Minneapolis, and above all the killings of the protesters Renée Good and Alex Pretti, have resonated across US society in a way much of the Trump administration’s creeping authoritarianism has not. The White House’s retreat is only partial. But Americans have drawn a red line that makes this a key moment in Donald Trump’s second term.”
January 31 – Wall Street Journal (Kessler, Rebecca Ballhaus, Eliot Brown and Angus Berwick): “Four days before Donald Trump’s inauguration last year, lieutenants to an Abu Dhabi royal secretly signed a deal with the Trump family to purchase a 49% stake in their fledgling cryptocurrency venture for half a billion dollars, according to company documents and people familiar with the matter. The buyers would pay half up front, steering $187 million to Trump family entities. The deal with World Liberty Financial, which hasn’t previously been reported, was signed by Eric Trump… At least $31 million was also slated to flow to entities affiliated with the family of Steve Witkoff, a World Liberty co-founder who weeks earlier had been named U.S. envoy to the Middle East… The investment was backed by Sheikh Tahnoon bin Zayed Al Nahyan, an Abu Dhabi royal who has been pushing the U.S. for access to tightly guarded artificial intelligence chips…”
February 1 – Bloomberg (María Paula Mijares Torres and Jennifer A Dlouhy): “President Donald Trump said he plans to close the John F. Kennedy Center for the Performing Arts for about two years to carry out renovations after his takeover prompted a significant backlash. ‘I have determined that the fastest way to bring The Trump Kennedy Center to the highest level of Success, Beauty, and Grandeur, is to cease Entertainment Operations for an approximately two year period of time, with a scheduled Grand Reopening that will rival and surpass anything that has taken place with respect to such a Facility before,’ Trump wrote… Trump has paid significant attention to the Kennedy Center during his second term in the White House, becoming its board chair and renaming it the Trump Kennedy Center without approval from Congress.”
February 2 – Financial Times (Joe Miller, Ian Hodgson and Paul Caruana Galizia): “Donald Trump and his allies raised a record $429mn in donations last year, as tech billionaires and companies lobbying for policy changes helped build a war chest for the president ahead of the midterm elections. A single political action committee controlled by Trump allies, Maga Inc, is sitting on $304mn… The haul, highly unusual for a term-limited president who can no longer fund his own campaign, proves that Trump continues to dominate his party… It also underlines megadonors’ eagerness to bankroll an administration that has championed the crypto and AI industries, axed or eased regulations and ended legal probes into political allies.”
Constitution Watch:
February 3 – Wall Street Journal (Gareth Vipers): “President Trump said he is seeking $1 billion in damages from Harvard University, the latest escalation in his administration’s fight with the institution over alleged antisemitism. Trump posted… that his administration had dropped its demand for a $200 million payment to the government to settle the dispute. ‘Strongly Antisemitic Harvard University has been feeding a lot of ‘nonsense’ to The Failing New York Times,’ Trump wrote… ‘This case will continue until justice is served,’ he added. ‘We are now seeking One Billion Dollars in damages, and want nothing further to do, into the future, with Harvard University’.”
New World Order Watch:
February 3 – Associated Press (Paul Wiseman, Josh Boak and Elaine Kurtenbach): “Bullied and buffeted by President Donald Trump’s tariffs for the past year, America’s longstanding allies are desperately seeking ways to shield themselves from the president’s impulsive wrath. U.S. trade partners are cutting deals among themselves —- sometimes discarding old differences to do so — in a push to diversify their economies away from a newly protectionist United States. Some European governments and institutions are reducing their use of U.S. digital services such as Zoom and Teams. Central banks and global investors are dumping dollars and buying gold. Together, their actions could diminish U.S. influence and mean higher interest rates and prices for Americans already angry about the high cost of living.”
February 2 – CNBC (Chloe Taylor): “Legendary investor Ray Dalio warned… the world is ‘on the brink’ of a capital war, amid simmering geopolitical tensions and volatile capital markets… Dalio said we are close to teetering into capital war territory — when money is weaponized using measures like trade embargoes, blocking access to capital markets, or using ownership of debt as leverage. ‘We are on the brink,’ Dalio said… He pointed to recent escalating tensions over the Trump administration’s push to bring Greenland — a Danish territory — under Washington’s control. He warned of a ‘fear’ among European holders of U.S.-denominated assets that they could be sanctioned, and that ‘there could be a reciprocal fear on the part of the United States that it could not get the capital, or not get the buy [from Europe],’ he said.”
January 31 – Wall Street Journal (David Luhnow, Sune Engel Rasmussen and Bertrand Benoit): “Few cities are more emblematic of the postwar trans-Atlantic alliance than the German capital. In 1963, John F. Kennedy delivered his famous ‘Ich bin ein Berliner’ speech here promising American solidarity during the Soviet blockade. In 1987, Ronald Reagan stood before the Berlin Wall and challenged Soviet leader Mikhail Gorbachev to tear it down. And 21 years later, 200,000 Berliners turned out to hear then-Sen. Barack Obama herald a new era of U.S.-European friendship. Today, the mood toward Uncle Sam in Berlin, and much of the world, has darkened. After the tumultuous first year of Donald Trump’s second term, few Germans have positive things to say about the current U.S. president, partly because he doesn’t have nice things to say either… In… Switzerland last week, Trump taunted Europeans that without U.S. help in World War II, ‘you’d all be speaking German’.”
Iran Watch:
February 1 – Bloomberg (Arsalan Shahla): “Iran’s supreme leader warned of a ‘regional war’ as tensions continued to mount over potential US strikes on Tehran and top Israeli military officials visited Washington. ‘We don’t want to attack any country,’ 86-year-old Ayatollah Ali Khamenei said in a public speech broadcast on state television... ‘But in response to anyone who harbors ambitions, wants to attack, and seeks to cause harm, the Iranian people will strike back forcefully’.”
Ukraine Watch:
February 3 – Financial Times (Christopher Miller): “Russia resumed bombing Kyiv and its energy infrastructure just five days after Donald Trump said Vladimir Putin had agreed to a week-long ceasefire owing to the extreme cold in Ukraine. The massive barrage came on the eve of a second round of US-brokered talks… Between Monday night and Tuesday morning, Russian forces launched 71 ballistic and cruise missiles and 450 attack drones in a huge bombardment…”
February 3 – Wall Street Journal (Editorial Board): “President Trump has his hands full in Venezuela while also pondering military action in Iran, but the Ukraine war is grinding on and Vladimir Putin wants the world to think he can’t be defeated. A new, detailed report on the war underscores that Mr. Putin isn’t winning, and Mr. Trump can still apply military and economic pressure to produce a peace that is honorable. Russian forces have taken an astonishing 1.2 million casualties in Ukraine since 2022, according to estimates from Seth Jones and Riley McCabe of the Center for Strategic and International Studies. The Russian death toll may be as high as 325,000—more than five times than in all Soviet and Russian conflicts combined since World War II.”
Greenland Watch:
February 3 – Wall Street Journal (Alexander Ward and Robbie Gramer): “A new poll shows 76% of Greenlanders say they wouldn’t benefit from becoming part of the U.S., noting their concerns about exchanging the Danish welfare system for American healthcare, elder care and education. Only 3% of Greenlanders had a ‘very positive’ view of U.S. government-provided benefits, while 59% held a mainly or very negative view of it, the poll shows.”
Trade War Watch:
February 2 – Associated Press (Josh Boak, Aamer Madhani and Rajesh Roy): “President Donald Trump said… he plans to lower tariffs on goods from India to 18%, from 25%, after Indian Prime Minister Narendra Modi agreed to stop buying Russian oil. The move comes after months of Trump pressing India to cut its reliance on cheap Russian crude… Trump said that India would also start to reduce its import taxes on U.S. goods to zero and buy $500 billion worth of American products.”
February 2 – Financial Times (David Keohane, Leo Lewis, Harry Dempsey, and James Politi): “Three days before Donald Trump was due to dine with 100 of Japan’s corporate elite, some of the real business had begun at a luxury hotel near the US ambassador’s residence. From a private conference room at the Okura in central Tokyo, US commerce secretary Howard Lutnick was orchestrating what would become a cascade of investment commitments worth hundreds of billions of dollars. The pledges made that day triggered a frenzy of investment decisions, the likes of which Japan has never experienced. It had to be done at speed and on an unprecedented scale. As megadeals began to crystallise, they had to avoid becoming entangled in the shortest snap election campaign in Japan’s postwar history.”
U.S./Russia/China/Europe/Iran Watch:
February 6 – Financial Times (Demetri Sevastopulo and Kathrin Hille): “The US is compiling a large arms sale of Patriot missiles and other weapons for Taiwan that Beijing has privately warned could jeopardise President Donald Trump’s state visit to China in April. The Trump administration is developing a package of four systems for Taiwan to purchase on the heels of the record $11.1bn arms package it unveiled in December, according to eight people familiar with the situation. China has raised serious concerns about the package ahead of Trump’s planned meeting with President Xi Jinping in April. Three of the people said China had told the US that the arms sales could derail the visit.”
February 5 – Bloomberg (Cindy Wang): “The US could deliver several long-delayed weapons systems to Taiwan this year as backlogs in the defense supply chain improve and Washington streamlines procurement procedures, the self-ruled democracy’s defense minister said. US defense industry production has gradually recovered from global supply chain disruptions, Taiwan’s Defense Minister Wellington Koo said… The administration of US President Donald Trump has helped accelerate administrative procedures for arms sales to Taiwan, by, for example, revising the Arms Export Control Act to grant Taiwan equal treatment to ‘NATO Plus’ members, he added.”
February 4 – Bloomberg (Nectar Gan and Alfred Liu): “The Chinese government has denounced a ruling by Panama’s top court to void CK Hutchison Holdings Ltd.’s contract to operate two ports as ‘extremely absurd,’ warning the Central American country would pay a ‘heavy price’ if it fails to change course. The ruling disregarded facts and severely damaged the legitimate rights and interests of the enterprise in Hong Kong, the Beijing office overseeing affairs in the semi-autonomous Chinese territory said…”
AI Bubble/Arms Race Watch:
February 5 – Bloomberg (Matt Day and Annie Bang): “Four of the biggest US technology companies together have forecast capital expenditures that will reach about $650 billion in 2026 — a mind-boggling tide of cash earmarked for new data centers and all the gear housed within them. The spending planned by Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Microsoft Corp., all in pursuit of dominance in the still-nascent market for AI tools, is a boom without a parallel this century. Each of the companies’ estimates for this year is expected either near or surpass their budgets for the past three years combined. They would set a high-water mark for capital spending by any single corporation in any one of the past 10 years, according to Bloomberg data.”
February 5 – Bloomberg (Carmen Arroyo and Annie Bang): “Alphabet Inc. topped projections for quarterly revenue and outlined an ambitious capital spending plan, far surpassing predictions, leveraging its growth to build out the data centers and infrastructure needed to lead in the AI age. Google’s parent company said capital expenditures will reach as much as $185 billion this year, compared with the $119.5 billion analysts expected.”
February 5 – Wall Street Journal (Bradley Olson): “Anthropic once appeared as an also-ran in the chaotic race for AI supremacy. This week, the sophistication of the startup’s products upended the stock market. A simple set of industry-specific add-ons to its Claude product, including one that performed legal services, triggered a dayslong global stock selloff, from software to legal services, financial data and real estate. Then, Anthropic unveiled Super Bowl ads that taunt rival OpenAI. On Thursday, Anthropic unleashed its most advanced model yet, capable of synthesizing data and analysis, running teams of coding assistants, and functions akin to product management. Shares of software companies including Salesforce, Intuit and others fell again Thursday…”
February 1 – Bloomberg (Paul J. Davies): “Warren Buffett has a great line on how hard it is to pick winners when major industrial change is afoot. ‘What you really should have done in 1905 or so, when you saw what was going to happen with the auto, is you should have gone short horses,’ the Oracle of Omaha once said. No one knows which firm will ultimately win the artificial intelligence race, but many people have clocked that a lot of enterprise software companies could soon be put out to pasture. If investors aren’t outright betting against the sector, they’re taking money off the table. In public markets, shares and bonds of these businesses are being hit. Since late October the software segment of the S&P 500 is down by more than a fifth… Meanwhile, bond prices for companies such as McAfee LLC, ION Platform Investment Group Ltd. and Rackspace Technology Global Inc. have taken a beating. But it’s in private markets where the shock could be worst. The lack of regular reporting from private equity-owned, or private credit-funded, firms means the trouble isn’t immediately obvious, but there are signs.”
February 5 – Bloomberg (Olivia Fishlow): “High finance’s new ultra-rich lined up one by one, in TV spots, earnings calls and LinkedIn posts, to make the same pitch: Don’t take out big AI fears on private credit funds. Blue Owl Capital Inc. billionaire Marc Lipschultz insisted that there were no ‘red flags’ — or even ‘yellow flags’… Scott Nuttall at KKR & Co. similarly told analysts that ‘our level of anxiety is pretty low.’ Mike Arougheti, the billionaire chief executive of Ares Management Corp., vowed… that ‘there is a huge disconnect, and the narrative is wrong’ around artificial intelligence and the potential disruption it may cause. And Holden Spaht, managing partner at Thoma Bravo, said… that after a week of board meetings with software-as-a-service companies, he’s confident that ‘the growth numbers look to be accelerating, not decelerating’.”
February 5 – Yahoo Finance (Laura Bratton): “Big Tech CEOs this week brushed aside worries that AI will evaporate the competitive moats of established software companies, even as those firms have seen their stocks plunge amid a steep, months-long sell-off… Nvidia CEO Jensen Huang said, ‘There’s this notion that the tool industry is in decline and will be replaced by AI… It is the most illogical thing in the world, and time will prove itself.’ He continued, ‘If you were a human or robot — artificial general robotics — would you use tools or reinvent tools? The answer obviously is to use tools … like Service Now and SAP.’”
February 3 – Bloomberg (Naureen S Malik and Brian Eckhouse): “Texas has so many massive AI-related data centers in development that its grid operator is now considering reevaluating some projects that were previously approved. The Electric Reliability Council of Texas wants to examine projects unlikely to advance and provide greater clarity for when new sites are ready to connect to its system. Projects historically have been approved by utilities but in recent years Ercot has had to determine how this flood of new users can be served without breaking the grid.”
Bubble and Mania Watch:
February 5 – Bloomberg (Spencer Soper): “Amazon.com Inc. shares dropped after the company announced plans to spend $200 billion this year on data centers, chips and other equipment, worrying investors that its colossal bet on artificial intelligence may not pay off in the long run. The company reported spending roughly $130 billion on property and equipment in 2025. Analysts anticipated those expenses would reach about $150 billion this year. Chief Executive Officer Andy Jassy said the money ‘predominantly’ would go toward the company’s Amazon Web Services cloud unit… ‘I think this is an extraordinarily unusual opportunity to forever change the size of AWS and Amazon as a whole,’ Jassy said... ‘We see this as an unusual opportunity and we’re going to invest aggressively to be the leader’.”
February 3 – Financial Times (Michael Acton, Demetri Sevastopulo and Zijing Wu): “Nvidia’s sales of H200 AI chips to China are still awaiting final approval from Washington nearly two months after Donald Trump greenlit exports, as the US government conducts a national security review before granting licences to Chinese customers. Chinese customers are not placing H200 chip orders with Nvidia until it becomes clear whether they will be able to secure the licences or what conditions will be attached, people familiar… told the FT.”
February 2 – Financial Times (Stephen Morris, George Hammond and Hannah Murphy): “Elon Musk’s SpaceX has acquired xAI for $250bn, as the world’s richest man combines his two largest private ventures to pursue his ambition to win the AI race by developing data centres in space. SpaceX based the price for xAI on a recent $20bn funding round that valued the two-year-old start-up at $230bn… The deal valued the combined company at $1.25tn after Musk marked up the private valuation of SpaceX to $1tn, citing increases in revenue from its Starlink satellite broadband service… The rocket company was recently valued at $800bn…”
February 1 – Financial Times (Nikou Asgari): “Every second as many as 6,000 transactions zap through JPMorgan’s systems globally, as commuters tap their phones to pay for coffees, shoppers buy new clothes online, or businesses send wages to employees living in different corners of the world. Most people barely think about the behind-the-scenes financial plumbing that makes these and other transactions happen. But crypto companies are seeking to change that by muscling into the financial system and eventually running the money that powers the world. These efforts centre on stablecoins, a type of digital cash that is pegged one-to-one with currencies such as the dollar, and their expanding role in the financial system. Crypto advocates say stablecoins are an improvement upon regular money because they are designed for a digital world and are both faster and easier to move. The staunchest want them to supplant existing money completely. Wall Street banks, however, see their expansion as a risky experiment that potentially threatens the stability of the financial system, and are aggressively pushing back.”
Crypto Watch:
February 5 – Bloomberg (David Pan and Melos Ambaye): “Bitcoin’s plunge below $65,000 is intensifying the crisis rocking the digital-asset complex — and few companies are more exposed than Michael Saylor’s Strategy Inc… The Bitcoin-hoarding company confirmed a net loss of $12.4 billion for the fourth quarter, driven by the mark-to-market decline in its vast holdings. That pain deepened this week, as fresh market turmoil pushed the firm’s Bitcoin stash below its cumulative cost basis for the first time since 2023 — and erased the token’s post-election gains. The upshot: Saylor’s financial experiment is coming undone.”
February 5 – Reuters (Ateev Bhandari): “Strategy reported a wider fourth-quarter loss on Thursday, as a turbulent period for digital assets caused the world's largest hoarder of bitcoin to record losses on its holdings. Shares of the Michael Saylor-led company fell 1.5% in after-hours trading, extending heavy selling from earlier in the day. They are down nearly 30% this year… Strategy logged a loss of $12.4 billion, or $42.93 per share, for the three months ended December 31, compared with a loss of $670.8 million, or $3.03 per share, in the fourth quarter of 2024.”
February 5 – Bloomberg (Suvashree Ghosh and Emily Nicolle): “Crypto-hoarding treasury companies, which helped turbocharge a digital-asset rally in last year’s first nine months, are now at risk of sparking market contagion as selling pressure mounts. Publicly traded digital-asset treasuries, or DATs, have operated on the premise that accumulating specific cryptocurrencies would generate sustained stock market premiums. With the crypto market enduring its worst selloff since the aftermath of FTX’s collapse, the cracks in that narrative are starting to show. Crypto treasuries could come under increased pressure to sell assets…”
February 5 – Bloomberg (Emily Nicolle): “Crypto exchange Gemini Space Station Inc. said it plans to cut up to 25% of its workforce and wind down operations in the UK, European Union and Australia, citing a strategy to reduce costs and improve profitability. Cuts will impact as many as 200 roles across its global Workforce…”
February 4 – Bloomberg (Sidhartha Shukla): “Almost half a trillion dollars has been wiped off cryptocurrencies in less than a week as a selloff led by Bitcoin accelerated. Total crypto market value has slumped by $467.6 billion since Jan. 29, according to CoinGecko data. Bitcoin on Tuesday tumbled to its lowest level since US President Donald Trump won re-election in early November 2024 and ushered in a more crypto-friendly administration.”
February 5 – Bloomberg (Monique Mulima): “For a time, amassing cryptocurrencies was a surefire way for little-known companies to supercharge their share prices. These days, that strategy has turned into little more than a liability. In the past year, the biggest digital asset treasuries, or DATs, as these companies are known, have tumbled a median 62%, far more than even the steep declines in Bitcoin. That’s left a large swath of DATs trading at a discount to the underlying value of their crypto holdings… That’s quite a comedown from the go-go days of DATs, when companies that held, say $100 million of Bitcoin, could be worth $150 million or $200 million in the stock market.”
February 3 – Bloomberg (Emily Mason): “Michael Burry, the money manager made famous in The Big Short, warned that Bitcoin’s plunge could deepen into a self-reinforcing ‘death spiral,’ inflicting lasting damage on companies that have spent the past year stockpiling the token. In a Substack post…, Burry argued that the original cryptocurrency, which has fallen 40% since peaking in October, has been exposed as a purely speculative asset, failing to take off as a debasement hedge similar to precious metals. Further losses, he said, could rapidly strain the balance sheets of major holders, force selling across the crypto ecosystem and trigger widespread value destruction.”
Inflation Watch:
February 4 – CBS (Mary Cunningham): “Tens of millions of Americans are facing higher utility bills after regulators approved dozens of rate hikes last year. Regulators green-lit 43 rate hikes across the country in 2025, totaling $11.6 billion in increases, according to… PowerLines. The nonprofit… said the vast majority of hikes have already gone into effect, while eight are slated to go live in the coming months. All told, 56 million Americans will see higher utility bills…”
February 1 – Bloomberg (Alice Gledhill): “Money managers at BlackRock Inc., Bridgewater Associates and Pacific Investment Management Co. are shoring up their portfolios against a fresh bout of inflation. A BlackRock fund is building short positions in US Treasuries and gilts in case lower interest rates fail to materialize. Bridgewater prefers stocks to bonds. Pimco likes the buffer afforded by Treasuries that have an inflation adjustment baked into their yield. There are growing signs their concern is warranted: The difference between yields on ordinary Treasuries and inflation-protected notes has climbed sharply in January to the highest levels in months. Inflation swaps, another gauge of market expectations, have also risen.”
Federal Reserve Watch:
February 2 – Reuters (Ann Saphir): “Kevin Warsh, President Donald Trump’s nominee to be the next Federal Reserve chief, faces a ‘tall task’ in leading the U.S. central bank, particularly if he aims to convince the members of the policy-setting committee to go along with him on monetary policy decisions, Atlanta Fed President Raphael Bostic said... Bostic… said he believes the central bank should not cut rates at all this year, a view that several of his colleagues also share… ‘If you want to have policy enacted or go in a direction that you want, you’ve got to convince them to go along, and in order to do that, you've got to build a relationship with them," Bostic said… ‘You have to build their trust. You have to show your wisdom and guidance. And those things don’t happen overnight. And so it’s just a huge undertaking’.”
January 31 – Financial Times (Claire Jones, Myles McCormick and Amelia Pollard): “Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve will trigger a sweeping reappraisal of the central bank’s role at the centre of the world’s biggest economy, leading economists have said. Warsh… has spent years criticising the central bank for what he views as mission creep as policymakers expanded their toolkit to fight against the ructions wrought by the 2008 financial crisis and the coronavirus pandemic 12 years later. It is those calls for ‘regime change’ that helped win over Treasury secretary Scott Bessent, who has similarly decried the Fed’s ‘gain of function’ in recent years. Now, Warsh is poised to lead an overhaul of the institution… ‘The administration, especially Bessent, is taking on a really broad view of what can be changed at the Fed,’ said Derek Tang of research group LH Meyer. ‘A new chair is just the first part of that story’.”
February 2 – Bloomberg (Alexandra Harris): “For much of the time that President Donald Trump was mulling his potential choice for the next chair of the Federal Reserve, the debate in markets swirled around whether his pick would lower interest rates as aggressively as he preferred. Now, with his selection of former Fed Governor Kevin Warsh — an economist known as much for his fierce criticism of the central bank as his changing views on monetary policy — the debate has abruptly shifted from short-term rates to the Fed’s $6.6 trillion balance sheet and its very role in markets. Warsh has repeatedly and loudly blasted his old colleagues over the years for letting the bank’s assets balloon via so-called quantitative easing, prompting speculation in markets that he could move quickly to draw them down.”
February 5 – Financial Times (Claire Jones and Amelia Pollard): “Kevin Warsh… has, like other candidates in the race to succeed chair Jay Powell, claimed that American interest rates ought to be lower. A big reason why, Warsh says, is an AI boom that he believes is ‘the most productivity-enhancing wave of our lifetimes — past, present and future’… The Fed nominee believes he can afford to take a chance on those productivity gains in the same way former chair Alan Greenspan did in the 1990s. ‘[Greenspan] believed based on anecdotes and rather esoteric data that we weren’t in a position where we needed to raise rates,’ Warsh said in… December. ‘As a result we had a stronger economy, we had more stable prices’.”
February 1 – Bloomberg (Sam Kim): “The Federal Reserve should focus on getting its balance sheet ‘as lean as possible,’ President Donald Trump’s economic adviser Kevin Hassett says on Fox… Fed should focus on its job, which is financial stability, lower interest rates, lower unemployment and lower inflation, Hassett says Fed should do that in an ‘old-fashioned way, quietly,’ he says Trump’s Fed chair pick, Kevin Warsh, is the ‘right person at the right time,’ says Hassett, who was among contenders. Warsh is data-driven, independent person, Hassett says.”
U.S. Economic Bubble Watch:
February 3 – Associated Press (Christopher Rugaber): “Higher-income Americans and those with college degrees have ramped up their spending more quickly in the past three years than other consumers…, evidence of worsening inequality that may explain some of the growing pessimism about the economy. The data, released by the Federal Reserve Bank of New York, also show that in the final three months of last year, lower-income and rural households faced higher inflation than higher-income households… The… data show that households with incomes of $125,000 and higher have boosted their spending 2.3%, adjusted for inflation, since 2023, while middle-income households — those between $40,000 and $125,000 — have increased their spending by 1.6%. Those earning below $40,000 have lifted their spending by just 0.9%...”
February 4 – Bloomberg (Julia Fanzeres): “US service providers registered the strongest back-to-back growth since 2024 last month… The Institute for Supply Management’s index of services was unchanged at 53.8 in January, matching the highest since October 2024… The ISM measure of business activity… climbed more than 2 points to 57.4 — the highest since October 2024. Eleven industries reported growth last month, led by health care, utilities, construction and retail trade. Five, including transportation and warehousing, contracted. ISM’s employment gauge showed the first back-to-back months of expansion since early last year… The report showed an index of prices paid for services and materials climbed to a three-month high of 66.6.”
February 4 – CNBC (Jeff Cox): “The U.S. labor market barely budged in January, with hiring below even muted expectations, according to… ADP. Private companies added just 22,000 positions for the month… The total was less than the downwardly revised 37,000 increase in December and below the… forecast for 45,000. The report starts 2026 off on basically the same note where 2025 ended: A lackluster job market in a low-hire, low-fire environment that likely will do little to quell fears from Federal Reserve policymakers that more support may be needed.”
February 5 – CNBC (Jeff Cox): “Layoff plans hit their highest January total since the global financial crisis while hiring intentions reached their lowest since the same period, outplacement firm Challenger, Gray & Christmas reported… U.S. employers announced 108,435 layoffs for the month, up 118% from the same period a year ago and 205% from December 2025. The total marked the highest for any January since 2009… At the same time, companies announced just 5,306 new hires, also the lowest January since 2009, which is when Challenger began tracking such data.”
February 5 – Associated Press (Matt Ott): “The number of Americans applying for unemployment benefits jumped last week but remains in the same historically low range of the past few years. Applications for jobless aid for the week ending Jan. 31 rose by 22,000 to 231,000 from the previous week… That’s significantly more than the 211,000 new applications… FactSet had forecast.”
February 4 – CNBC (Diana Olick): “The harsh winter storm that recently hit much of the country took its toll on the mortgage market in the week that followed. Potential buyers stayed home, and mortgage rates didn’t move enough to spark refinance demand… Applications for a mortgage to purchase a home fell 14% for the week and were just 4% higher year over year.”
February 2 – Wall Street Journal (Nicole Friedman): “Many home shoppers have given up on the depressed housing market, where sales are stuck at a 30-year low. But those buying are enjoying discounts at the highest rate in years. About 62% of buyers last year purchased a home below the original listing price. That was the highest proportion since 2019, according to… Redfin. The average discount for the homes that sold below their original listing price was around 8%—the largest since 2012. Buyers are also obtaining concessions from sellers, including cash that can be used for closing costs or to buy down a buyer’s mortgage rate.”
China Watch:
January 31 – Wall Street Journal (Lingling Wei): “In purging his top generals, Chinese leader Xi Jinping put the command of the armed forces in the hands of one man—himself. Now, his vision alone will decide the course of Beijing’s looming confrontation with Taiwan. The arrest of Gen. Zhang Youxia, a close ally and childhood friend the Chinese leader called ‘big brother,’ removes any internal authoritative voices who could slow Xi’s hand in any move against Taiwan… The timing is critical. The Chinese military is racing toward a 2027 deadline Xi has set for ‘modernization,’ often interpreted as readiness for a Taiwan contingency.”
February 2 – Bloomberg: “China’s economy stumbled into the new year, bolstering the case for Beijing to ramp up policy support in coming weeks as strong exports failed to offset weak domestic demand. Official purchasing managers’ indexes… suggested an unexpected and broad slowdown in January, with activity in the non-manufacturing sector contracting at the worst pace since late 2022.”
February 3 – Bloomberg: “China’s services activity picked up after growing at a slower rate for four straight months…, suggesting that pockets of the economy are seeing renewed momentum despite a rocky start to the year. The RatingDog China services purchasing managers’ index rose to 52.3 in January from 52 in the prior month…”
February 1 – Bloomberg: “China Vanke Co.’s $12 billion record loss underscores how its ability to avoid default depends on how far its state shareholder is willing to support the stricken property developer. The homebuilder lost about 82 billion yuan ($12bn) last year… That is the equivalent of about 40% of its total equity attributable to shareholders at the end of the previous year, a sign of how quickly its losses are eating into capital buffers. The loss highlights the depth of Vanke’s financial troubles and its dependence on support from Shenzhen Metro Group Co.”
Central Banker Watch:
February 5 – Financial Times (Olaf Storbeck and Ian Smith): “The European Central Bank has held its benchmark interest rate at 2% for the fifth meeting in a row after recent growth in the Eurozone economy proved stronger than expected… It came after core inflation… fell in January to 2.2%, the lowest level since late 2021. GDP growth in the fourth quarter of last year was slightly higher than economists predicted, at 0.3%. ‘We are in a good place, inflation is in a good place,’ ECB president Christine Lagarde told journalists…”
February 5 – Bloomberg (Philip Aldrick, Tom Rees, and Alice Atkins): “The Bank of England came within a vote of cutting interest rates and predicted inflation will fall below its target, a closer-than-expected decision that revived hopes of a move next month. Governor Andrew Bailey was once again the swing voter in a 5-4 decision… Bailey said… ‘there should be scope for some further reduction in bank rate this year,’ as the BOE predicted inflation near its 2% target in April as well as slowing growth and rising unemployment.”
February 2 – CNBC (Lim Hui Jie and Anniek Bao): “Australia’s central bank raised its policy rate by 25 bps to 3.85%..., marking the Reserve Bank of Australia’s first rate hike since November 2023 as inflation continues to climb. The… move… followed data showing inflation at its highest level in six quarters... ‘Private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labour market conditions are a little tight,’ according to the central bank’s statement, noting that inflationary pressure picked up ‘materially’ in the second half of last year.”
Europe Watch:
February 2 – Reuters (Kate Abnett): “Long delays to get power grid connections are challenging Amazon's plans to expand data centers in Europe…, as industries ramp up pressure on policymakers to upgrade ageing energy grids. Energy-intensive industries have urged the European Union to invest more in grids, warning that a fast connection to stable, reliable power networks is a key criteria for investments in new industrial sites in Europe… Connecting to the transmission network in Europe can take up to seven years - versus the roughly two years it can take to develop a data center...”
Japan Watch:
February 1 – Bloomberg (Toru Fujioka): “A summary of opinions from the Bank of Japan’s January policy meeting indicated a growing awareness of the need to raise interest rates in a timely fashion as authorities monitor the impact of the weak yen on inflation. ‘Given that addressing rising prices is an urgent priority in Japan, the bank should not take too much time examining the impact of raising the policy interest rate, and should proceed with the next step, a rate hike, without missing the appropriate timing,’ one of the nine board members said… The summary signals the possibility of Governor Kazuo Ueda’s board raising the benchmark rate at a faster pace than the market consensus estimate of roughly once in every six months…”
February 5 – Bloomberg (Erica Yokoyama): “A key issue on the minds of voters heading into Japan’s national election on Sunday will be their stomachs — that is, the rising cost of filling them. Voter frustration over soaring living expenses led to major setbacks for Prime Minister Sanae Takaichi’s ruling Liberal Democratic Party in the last two national elections before she took the helm last October. While successive governments rolled out subsidies to reduce utility fees during that timespan, out-sized gains for food prices limited the overall impact of the aid on household budgets.”
Leveraged Speculation Watch:
February 3 – Wall Street Journal (Peter Rudegeair): “Citadel founder and CEO Ken Griffin criticized the Trump administration’s interference into the day-to-day business of American companies and raised concerns about self-serving decisions made by government officials. ‘When the U.S. government starts to engage in corporate America in a way that tastes of favoritism, I know for most CEOs that I’m friends with, they find it incredibly distasteful,’ Griffin said… ‘Most CEOs just don’t want to find themselves in the business of having to, in some sense, suck up to one administration after another to succeed in running their business’… ‘This administration has definitely made missteps in choosing decisions or courses that have been very, very enriching to the families of those in the administration,’ Griffin said. ‘That calls into question, is the public interest being served?’ Griffin, a Republican megadonor, emerged last year as President Trump’s most vocal critic on Wall Street.”
February 2 – Wall Street Journal (Gregory Zuckerman): “It is helpful to have friends in high places. Stanley Druckenmiller could soon have two of them. President Trump’s choice of Kevin Warsh as chairman of the Federal Reserve shines a spotlight on Druckenmiller, a billionaire investor who was Warsh’s longtime boss—and also mentored Scott Bessent, the Treasury Secretary. Druckenmiller and Warsh spent over a decade working together at Druckenmiller’s firm, discussing the economy, markets and more... Warsh’s relationship with Druckenmiller is one reason Wall Street largely appears comfortable that he will continue the central bank’s tradition of independence, despite pressure from Trump to lower interest rates.”
Social, Political, Environmental, Cybersecurity Instability Watch:
February 2 – New York Times (David Goodman): “Bare slopes. Closed terrain. Canceled vacations. In the Western United States, the 2026 ski season is shaping up to be one of the worst in decades. A snow drought of historic proportions is hobbling many ski areas, leading skiers to stay home, mountain towns to face economic uncertainty, and sparking fears of water shortages and wildfires come summer. In Colorado, the statewide snowpack is at 57% of average, a record low. Utah’s snowpack is at 62%, nearly the worst since observations began in 1980. ‘It seems like a joke, but technically, the Florida Panhandle has seen more snowfall than Salt Lake City this year,’ said Jon Meyer, assistant state climatologist at the Utah Climate Center… By Jan. 4, snow cover across the West was the lowest since NASA began tracking it via satellite in 2001. The drought is most severe in Washington, Oregon, Colorado, Utah, Arizona and New Mexico, with over 80% of all snow-monitoring stations in these states reporting severe snow drought (snowpack below the 20th percentile).”
February 2 – Axios (Sam Sabin): “A suspected China-based hacking group spun up a phishing campaign around Christmas that mimicked U.S. policy briefings in an attempt to hack diplomats, according to new research from cybersecurity firm Dream Security shared first with Axios. The campaign successfully infected ‘a lot of people,’ Dream CEO Shalev Hulio said... ‘We just don't know who and how big [of a] scale,’ he added. Researchers at Israel-based Dream uncovered a phishing campaign designed to ensnare officials tied to diplomacy, elections and international coordination around the world.”