The Question:
Brad Gerstner (CEO Altimeter Capital Management), November 3, 2025: “OpenAI’s revenues are still a reported $13 billion in 2025, and, Sam, on your live stream this week you talked about this massive commitment to compute - $1.4 trillion over the next four or five years. With big commitments - $500 billion to Nvidia, $300 billion to AMD and Oracle, $250 billion to Azure. So, I think the single biggest question I’ve heard all week – and hanging over the market – is how can a company with $13 billion in revenues make $1.4 TN of spending commitments? And you’ve heard the criticism (cut off by Altman).”
OpenAI CEO Sam Altman: “First of all, we’re doing well more revenues than that. And, second of all, Brad, if you want to sell your shares, I’ll find you a buyer. Enough. I think there’s a lot of people who would love to buy OpenAI shares. I don’t think you want to sell Brad, including people who talk with a lot of like breathless concern about our compute stuff or whatever, that would be thrilled to buy shares. So, we could sell your shares or anyone else’s to some of the people who are making the most noise on Twitter, wherever, very quickly. We do plan for revenues to grow steeply. Revenue is growing steeply. We are taking a forward bet that it’s going to continue to grow, and that not only will ChatGPT keep growing, but we will be able to become one of the important AI clouds, that our consumer device business will be a significant and important thing. AI that can automate science will create huge value. So, there are not many times that I want to be a public company, but one of the rare times it’s appealing is when those people are writing these ridiculous ‘OpenAI is about to go out of business and whatever.’ I would love to tell them they could just short the stock and I would love to see them get burned on that.”
Perhaps a month ago, Sam Altman’s response could have been laughed off as childish Musk-like pomposity. Not this week – not now. Folks are beginning to have concerns and questions. Manic AI enthusiasm has started to dim. And while Altman is clearly fixated on OpenAI’s stock, everyone else is focused on the company’s $1.4 TN of industry commitments.
While the hype has been phenomenal, OpenAI is no Microsoft, Meta Platforms, Nvidia, Apple, or Oracle. It has not enjoyed years of market dominance and the accumulation of a massive financial war chest. It does not have a market monopoly position that continually generates tens of billions of free cash flow. Sober analysis would be cautious in extrapolating OpenAI’s current competitive advantage much into the future.
My thoughts this week returned to peak late-eighties Japanese Bubble madness. At the time, the grounds of Tokyo’s Imperial Palace were said to be worth more than all the real estate in California. Some things turn so preposterous that you can pretty much assume the cycle is running on fumes.
November 4 – Financial Times (Antoine Gara): “The financing package stitched together for Meta’s humongous Hyperion data centre campus in Louisiana made Alphaville curious about just how much energy the new AI infrastructure will consume if it all comes online. After all, massive new projects are being announced almost every week, in what even KKR’s digital infrastructure lead called a ‘bragawatts’ phenomenon… The latest example is OpenAI on Thursday revealing plans for a 1+ gigawatt data centre hub in Michigan. Together with previously announced ‘Stargate’ projects this brings the total to over 8 gigawatts — close to the 10 target it floated earlier this year. This will cost over $450bn over the next three years, according to the company that spends more on marketing and employee stock options than it makes in revenue. So how many data centre projects have now been started or announced? Which ones will actually happen and which ones are fantasy? As Barclays noted last week, tracking ‘what is real vs. speculative is a full-time job’... So what is the total so far? With OpenAI’s Michigan project they now total 46 gigawatts of computing power. Apologies for the virtual shouting, but this seems a bit mad. These centres will cost $2.5tn to build, according to Barclays, to service an industry that still doesn’t turn a profit. But the maddest bit arguably is how much energy they will require once completed. Using Barclays’ 1.2 ‘Power Use Effectiveness’ ratio, all these data centrers… would need 55.2 gigawatts of electricity to function at full capacity. If we also use Barclays’ rule of thumb that 1 gigawatt can power over 800,000 American homes, it means that these data centres will consume as much energy as 44.2mn households — almost three times California’s entire housing stock.”
November 3 – Bloomberg (Spencer Soper): “Amazon.com Inc. alleges that a Berkshire Hathaway Inc.-owned utility in Oregon is failing to provide sufficient power for four new data center facilities, highlighting the strain rapid expansion of technology facilities is putting on the electric grid. Amazon lodged a complaint last week with the Public Utility Commission of Oregon alleging that… PacifiCorp breached obligations that date back to 2021 to provide sufficient power for the projects. Amazon said the company provided insufficient power for one data campus, no power for a second campus and ‘has refused to even complete its own standard contracting process for the third and fourth Data Center Campuses.’”
Arms race. MAD – mutually assured destruction. How far will all this go? Where on earth is all the necessary electricity supposed to come from? At what price; at what disruption; and how long will all this take? How many Trillions will be spent before reality sinks in?
For sure, Sam Altman had better change his mindset and demeanor (time is of the essence). Key issues have little to do with OpenAI stock (that doesn’t even trade publicly), and he clearly relishes the relative insulation from scrutiny afforded private companies. As such a key industry executive, he fails to project the presence of someone who recognizes the many challenges that await. His company needs to borrow enormous sums – likely from banks, “private Credit,” and public markets. When markets begin to question the viability of such a massive financing challenge, concerns and skepticism will surround OpenAI’s $1.4 TN of commitments.
Importantly, the viability of financing the AI arms race will be determined by a confluence of factors. Market sentiment could certainly turn against such grandiose – and astonishingly expensive – industry spending plans. There are also mounting general Credit system issues, with repercussions of the First Brands fiasco coupled with rising consumer delinquencies signaling a turn in the Credit cycle.
Might OpenAI be the next Microsoft, Apple, or Amazon? I well remember when Mosaic was the go-to web browser. Netscape’s much improved Navigator browser dominated until it was crushed by all-powerful Microsoft and its Internet Explorer. Today, Google Chrome has about 70% market share, followed by Apple’s Safari. And let’s not forget how AOL.com completely dominated the Internet, until its virtual lock on dial-up was briskly made obsolete by cable broadband. Blackberry…
In today’s late-cycle backdrop, there is a phenomenally financially powerful tech oligarchy spending previously unimaginable amounts to ensure they are not left behind in the AI arms race. OpenAI today enjoys first mover advantage in a momentously important field of technological development. But in terms of the major AI players, OpenAI is financially vulnerable – the weaker, marginal operator. Especially when AI finance tightens, they will be vulnerable and an obvious takeover target. But who would be comfortable with their $1.4 TN of commitments?
There were curiously timed comments Wednesday from OpenAI CFO Sarah Friar (which she soon backed away from): “We’re looking for an ecosystem of banks, private equity, maybe even governmental, the ways governments can come to bear. The backstop, the guarantee that allows the financing to happen. That can really drop the cost of the financing but also increase the loan-to-value, so the amount of debt you can take on top of an equity portion.”
Of course, OpenAI – and those on the other side of their commitments – yearn for a Trump backstop/guarantee. The company’s financial position is so tenuous. And there reaches a point when the quiet part is said out loud – critical issues are broached, serious discussion and debate take hold, and the process of reality sinking in gathers momentum.
November 6 – CNBC (Ashley Capoot): “Venture capitalist David Sacks, who is serving as President Donald Trump’s artificial intelligence and crypto czar, said… there will be ‘no federal bailout for AI.’ ‘The U.S. has at least 5 major frontier model companies. If one fails, others will take its place,’ Sacks wrote... Sacks’ comments came after OpenAI CFO Sarah Friar said… the startup wants to establish an ecosystem… and a federal ‘backstop’ or ‘guarantee’ that could help the company finance its infrastructure investments. She softened her stance later… and said OpenAI is not seeking a government backstop for its infrastructure commitments. She said her use of the word ‘backstop’ clouded her point.”
“If one fails, others will take its place.” And there will no doubt be failures – and big ones. We can assume scores of uncompleted data center and energy infrastructure projects. Enormous losses will reverberate throughout the financial system and economy. A collapsing Bubble will reveal sickening resource misallocation and severe economic maladjustment. And anyone downplaying financial and economic risks associated with this historic multi-Trillion arms race has their head in the sand.
It is these days most important to appreciate that booms don’t end because of lack of enthusiasm or perceived investment opportunities. Their termination is the product of self-destructive late-cycle finance. Credit becomes deranged. Wildly inflated securities (asset) prices turn increasingly untenable - “money” hopelessly corrupted. Ben Bernanke and others have argued that the Great Depression would have been avoided had a competent Fed only printed money and recapitalized the banking system. No. The protracted Bubble had wrecked finance and economic structure. Similarly, conventional thinking holds that the Great Financial Crisis was the consequence of the Fed not bailing out Lehman Brothers. No. The Bubble had impaired the soundness of Trillions of financial claims, while leaving deep economic scars.
The ongoing AI arms race Bubble has added Trillions to already tens of Trillions of problematic financial claims.
November 6 – Bloomberg (James Crombie): “Fixed-income investors should tread carefully when it comes to funding the artificial intelligence boom, according to DoubleLine Capital’s Robert Cohen. ‘You have to be not only cautious about the tech sector, but the tangential, related sectors that are providing support for these new projects,’ the investment firm’s director of global developed credit, said… ‘Who knows what the spillover will be if the music stops?’… Cohen pointed to novel structures, like off-balance sheet funding, and the fact that no one knows whether these huge capital projects will make money. He warned of overcapacity driving losses and flagged potential trouble for related companies in sectors including power and chemicals. ‘At some point, it’s going to have to be proven that these projects are profitable,’ said Cohen… ‘If we find that most of them are not, then there’s going to be a severe reaction’. Morgan Stanley forecasts the big cloud computing companies known as hyperscalers will spend about $3 trillion on infrastructure projects such as data centers between now and 2028.”
AI arms race financing demands are on a collision course with an increasingly fragile Credit system.
November 4 – Financial Times (Arjun Neil Alim): “Insurers shopping for better ratings on their private credit assets are creating a ‘looming systemic risk’ to global finance, the chair of UBS has warned… Colm Kelleher said the insurance industry, especially in the US, was engaging in ‘ratings arbitrage’ akin to what banks and other institutions did with subprime loans before the 2008 financial crisis. Kelleher joins a growing chorus of voices pointing to risks in the multitrillion-dollar insurance industry, including its holdings of illiquid private credit loans and opaque disclosures. ‘What you’re seeing now is a massive growth in small rating agencies ticking the box for compliance of investment,’ said Kelleher, who stressed that regulators were failing to get a handle on the industry even as they were pushing for faster economic growth. ‘If you look at the insurance business there is a looming systemic risk coming through because of lack of effective regulation,’ he said.”
“Democrats sweep key races in 2025 elections in early referendum on Trump.” “Election Shocks Underscore Power Bills as New Political Risk.” “Cruz: Tuesday elections ‘disaster’ for Republicans.” “Donald Trump and Republicans react to ‘shocking’ election results.” “The affordability crisis, once Biden’s, is now Trump’s.” “Top Trump political adviser says president will focus on affordability going forward.”
One year until mid-terms. Tuesday’s election was a wake-up call for an administration already hyper-focused on next year’s elections and furthering its agenda. President Trump cast a lot of blame and made one unrealistic promise after another. Forget CPI data. People are seeing and feeling problematic inflation – health insurance and care, home and auto insurance, electricity, services, goods, food… That so much of the population is outraged with the stock market so inflated is a warning to all.
So much at stake, and there’s a case to be made that much of the Trump administration’s agenda today hangs in the balance. We surely haven’t heard the last of the administration’s assault on Federal Reserve independence. Their urgency to gain control of the monetary levers must have intensified. So, we can ponder the various mechanisms Team Trump will employ as crisis dynamics gain momentum. I watched in utter amazement as the GSEs evolved into powerful market liquidity backstops in 1994, 1998, 1999, and again during 2000-2003 with the bursting of the “tech” Bubble. It will be “fascinating” to observe what Team Trump and Bill Pulte devise now that they enjoy almost complete control.
November 7 – Bloomberg (Patrick Clark and Katy O'Donnell): “Bill Pulte, the director of the Federal Housing Finance Agency, said that Fannie Mae and Freddie Mac are looking at ways to take equity stakes in technology companies. ‘We have some of the biggest technology and public companies offering equity to Fannie and Freddie in exchange for Fannie and Freddie partnering with them in our business,’ Pulte said Friday… ‘We’re looking at taking equity stakes in companies that are willing to give it to us because of how much power Fannie and Freddie have over the whole ecosystem.’”
Extracted from my October 30th Tactical Short Q3 presentation: “Loose Conditions, Excess and Fed Accommodation.”
My interest in bubbles dates back to my experience as a Treasury analyst at Toyota’s U.S. headquarters in 1986/87. At the time, top Toyota management were concerned that a problematic bubble had taken hold in Japan. Loose monetary policies and an investment-led economic boom were fueling extraordinary asset inflation - most conspicuously in stock market and real estate bubbles. At the time, it appeared that the 1987 stock market crash had abruptly brought bubble inflation to a conclusion. While not as dramatic as the 22.6% one-day drop in the Dow, Japan’s Nikkei 225 Index was down 23% from highs to end 1987 at 20,500.
But something extraordinary unfolded that I still find absolutely fascinating. The Nikkei almost doubled in two years to end 1989 at 38,957, while already inflated real estate prices also roughly doubled.
That was my first experience with what I would later label “terminal phase excess” – somewhat along the lines of the great Austrian economist Ludwig von Mises’ “crack up boom.” The compact explanation: years of gratifying excess lay the foundation for exuberance, risk-taking, and manic behavior to go off the rails - to doom long cycles. The 1989 year-end high in Japan’s Nikkei would not be surpassed for over 34 years – a period where deep post-bubble financial and economic structural maladjustment would see Japanese policymakers resort to decades of reckless ultra-loose monetary and fiscal policies. And you know, inflationism’s upshot is a Japan today in a direr predicament than in 1989.
After the 1987 stock market crash, there were fears of another U.S. economic depression. Instead, Fed accommodation and loose conditions fueled our own late eighties “terminal phase”. The bursting of the late-80’s bubble would reveal massive fraud and recklessness at the savings & loans; Michael Milken, Drexel Burnham, and “junk” bond market crimes and shenanigans; Ivan Boesky, LBO madness and pervasive insider trading; awful loan underwriting, fraud and deflating real estate bubbles along both coasts. The 18th largest U.S. bank, Bank of New England, imploded in 1991. There were serious concerns for Citicorp and other major financial institutions.
Having witnessed in the U.S. and Japan parallel cycles of bubble excess, market dislocation, monetary accommodation, late-cycle bubble excess, and subsequent painful bubble collapses, it was clear that there were extremely consequential bubble dynamics that I had to understand. Fascination with bubble analysis drove my long and deep dive into understanding America’s preeminent bubble experience, the first world war inflation that evolved into historic “Roaring Twenties” excess, the 1929 market and financial crash, and the Great Depression.
I’ve previously discussed in some detail alarming parallels between that experience and today’s multi-decade bubble. In short, one cannot overstate the consequences of the interplay of phenomenal technological advancement and financial innovation – along with evolutionary changes in monetary management.
Today, I will offer context for current “terminal phase excess,” and the general disregard for risk in the face of mounting fragilities. Years ago, I read all the contemporaneous accounts of the late-twenties period I could find. And the more I studied, the more confounding and fascinating it all became. How could everyone have been blindsided - caught so exposed and unprepared in 1929?
At some point, I stumbled upon writings from a journalist who had interviewed a group of Wall Street traders after the crash. He wanted to understand how they could have failed to recognize the dangers associated with speculative excess - all the margin debt; the leveraged trusts; Wall Street chicanery; deteriorating economic prospects, and such.
I was struck by the commonality of their responses. It was not that they were unaware. Most had recognized the gravity of market excess. Concerns had intensified, especially during 1927 market and economic instability. But these Wall Street traders conveyed something quite profound – and especially pertinent for bubble “terminal phase” analysis. They admitted that you can only worry about such things for so long – explaining that surging stock prices eventually compelled all those operating in the markets to disregard risk.
“Terminal phase excess” is a period of intoxicating wealth accumulation – and I’m talking late-night whiskey shots rather than evening wine glass tipsiness. Just look these days at how hefty market returns continue to inflate investment accounts across the population.
Just ponder the incredible amounts of money Wall Street firms made during Q3 – and over the past year – earnings that feed huge compensation for traders, investment bankers, asset managers, structured finance specialists, corporate managers, and executives. There are also the energized commercial bankers and loan officers, along with those working in booming fin-tech and crypto. Those engaged in “private credit” and “private equity.” There are tens of thousands employed across investment management that have never had it so good. The investment arms of insurance companies are “printing money”. And let us not miss booming professions supporting this great asset inflation, including attorneys, accountants, consultants, and real estate and insurance agents. Millions have watched their net worth inflate tremendously – especially recently. Generations ago, economists referred to this inflationary phenomenon as “money illusion.”
“Terminal phases” are dominated by loose conditions and liquidity overabundance. Importantly, liquidity will always chase inflating prices, with finance habitually flooding into booming markets. And when everyone is making so damn much money, they’ll simply ignore risk until some development smacks them in the face. I’m reminded again of bubble insight from the great American economist Charles Kindleberger. I’ll paraphrase: Nothing causes more angst than watching your neighbor get rich.
My hope is to help bridge the divide between what many of us recognize as extraordinary risk and unmistakable evidence of systemic fragility - versus the bullish consensus view that downplays or dismisses things we know are so important.
It is not that we don’t learn from history, but especially when it comes to bubbles and inflating market and asset prices, the learning process is of the short horizon variety. In such a confounding and uncertain world, it has never been as important to adopt a historical perspective.
The seeds for today’s spectacular “terminal phase” were planted when the Greenspan Federal Reserve responded to late-eighties bubble collapse with a then dramatic loosening of monetary policy - “easy money” that stoked fledgling bubbles in securitizations, the GSEs, derivatives, “repo,” money market funds, hedge funds, and Wall Street securities finance. It was the genesis of the so-called “shadow banking” apparatus that continues its runaway expansion despite being at the epicenter of the Great Financial Crisis. Just a couple weeks ago, the IMF warned of mounting bank exposure to hedge funds, “private credit,” and other non-bank financial institutions.
The Greenspan Fed’s extraordinary market intervention sowed the seeds for 1994 bond market and derivatives mayhem; the so-called Tequila crisis and Mexican bailout; and later in 1998, with the collapse of the egregiously levered Long-Term Capital Management run by its genius Nobel laureates. The Fed-orchestrated LTCM bailout triggered 1999’s almost doubling of Nasdaq. “Tech” bubble “terminal phase excess” ended with spectacular bubble implosion, including collapses in technology stocks and the likes of WorldCom, Global Crossing, McLeod, and other highly levered telecommunications operators and scores of Dot.com darlings. Loose money and Wall Street finance propagated one of the biggest U.S. corporate swindles. The Enron fraud unraveled in 2001. Throw in Superior Bank and Conseco, along with accounting heavyweight Arthur Anderson.
Subsequent post-tech bubble monetary easing made Alan Greenspan’s early-nineties cuts to 3% look timid. Rates were held at 1% until June 2004 – despite double-digit annual mortgage credit growth in 2001, 2002, and 2003. Moreover, rates were slashed 325 bps in eight months after the 2007 subprime eruption, a dramatic loosening that prolonged bubble “terminal phase excess.” The 2008 bursting revealed an absolute fiasco of reckless lending, leveraged speculation, derivatives abuse, and seemingly systemic financial fraud and misconduct. Major collapses included Bear Stearns, Washington Mutual, insurer AIG and, of course, Lehman Brothers with its $640 billion of assets.
I first warned of the unfolding “global government finance bubble” in April 2009 – with outstanding Treasury debt at $6.2 TN and a then plump $2.1 TN Fed balance sheet. The Federal Reserve had just unleashed an unprecedented $1 TN of liquidity. It was clear that Washington’s desperate policies to reflate the markets and economy had crossed the Rubicon. Having scrutinized dynamics during the nineties and again following the burst tech bubble, all the makings were in place for a super bubble to inflate at the very heart of finance – central bank credit and government debt. And with this perceived safe “money” and credit enjoying insatiable demand, this bubble had unique potential to run longer and to greater excess than all previous bubbles.
Today, Treasury debt is approaching $29 TN, with the Fed at about $6.6 TN. It recently took just 71 days for federal debt to grow by an additional $1 TN, the fastest pace ever. Previously unimaginable monetary inflation and resulting disorder unleashed myriad forces now completely out of control.
Epic crazy has become deeply entrenched. Stock prices inflate to ever higher highs, fueled by a steady flow of trillions into stocks, mutual funds, and ETFs. Equities have come to be recognized as a no-lose proposition. Millions have discovered that you trade options to really juice returns. High-risk lending has boomed like never before, exemplified by trillions of leveraged loans and “private credit.” To be sure, speculative excess has entered uncharted waters – notably tech stock, AI, and crypto manias. In the dark shadows, leveraged speculation has reached unprecedented heights, with tens of trillions of “basis trades,” “carry trades,” and levered strategies propagating across virtually all markets - everywhere.
Excess long ago passed the point of no return. It is when and not if myriad bubbles burst. Again, my love affair with macro analysis took hold in 1987, mesmerized by the Telerate machine on Toyota’s U.S. trading desk. I will never forget summer of 1987 market instability that culminated with that October’s “Black Monday” crash. Curiously, Citadel’s Ken Griffin a couple weeks ago reminded an audience that the ’87 crash was without a clear catalyst. There was similarly no catalyst for “Black Monday”, October 28, 1929.
Parallels between the two “Roaring Twenties” are as striking as they are frightening. Both were culminations of protracted cycles characterized by epic technological advancement and innovation - intricately connected to equally phenomenal financial development. Momentous credit expansions characterized both periods. In both, the Federal Reserve was fundamental to such energized and prolonged cycles.
The Fed began its operations in 1914, at the onset of a major World War-related inflationary cycle. The perception of a central bank committed to actively backstopping system stability was essential to confidence that crystallized on Wall Street and throughout the economy. Bubble excess got out of hand, in a world experiencing monumental change, instability, and disorientation.
In 1927, New York Fed President Benjamin Strong’s infamous “coup de whiskey” injected liquidity into an already dangerously speculative marketplace - triggering a fateful two-year speculative blowoff. Caution was thrown to the wind. Faith in the Fed backstop spurred a fateful mania that saw bullish perceptions completely detach from deteriorating fundamental prospects and escalating systemic risk. In the “Roaring 20’s” finale, finance became deranged – precarious speculative excess, too much on leverage, that was financing a manic upsurge of new paradigm investment spending and resource misallocation. The 1929 stock market crash and financial crisis revealed epic fraud, financial chicanery, and malinvestment.
As is said, history may not repeat, but it sure rhymes. Today’s backdrop shares too many unnerving parallels to 1929. Having watched this historic bubble inflate to ever-greater extremes for more than three decades, it’s astounding how closely developments have followed the “Roaring 20’s” playbook. A powerful new central bank was paramount to the twenties bubble era, while the new ultra-powerful QE reflationary tool has been fundamental to this era. The $5 TN Covid-period monetary stimulus coupled with egregious fiscal stimulus – now that’s a whiskey double shot with beer chasers.
Fundamental to bubble analysis is the maxim that given sufficient time and monetary accommodation – a cycle of credit growth, loose conditions, speculation, and risky lending will invariably run completely amuck.
The third quarter was replete with notable financial excess that I’ll share in some detail. Investment-grade corporate bond issuance jumped to $208 billion in September alone, a September record – and the second largest month excluding Covid. Investment grade bonds traded at the narrowest spreads to Treasuries since 1998, reflective of incredibly depressed risk premiums throughout the markets. The strongest weekly issuance in five years powered high yield “junk” September issuance to $58 billion – one of the busiest months ever. Q3 volume of $118 billion was the strongest since 2021. The quarter saw almost $400 billion of leveraged-loan launches, an all-time high. At $161 billion, year-to-date collateralized loan obligations – CLO – issuance was 10% ahead of a booming 2024. “Private credit” CLOs were sold at record pace.
Fueled by loose conditions and booming debt markets, M&A activity has been on fire. Global deals surpassed $1 TN during Q3 for only the second time. At $3 TN, year-to-date activity is up 27% from last year - to the strongest pace since 2021. More than $255 billion was raised in the equities market during the first nine months of the year, also the most since Covid. The $55 billion buyout of Electronic Arts greatly exceeded the previous record set, while debt markets were “still dancing” in 2007 – the $32 billion buyout of utility TXU.
It would not be surprising if Q3 Wall Street earnings represented a high-water mark for years to come. Goldman net revenues were up 20% y-o-y to $15.2 billion, with earnings-per-share up a staggering 46%. Investment Banking fees surged 42% to $2.7 billion. Assets under management surged $159 billion to $3.34 TN. JPMorgan’s revenue was up 9% to $47 billion, with $14.4 billion of Net Income. Market trading was 25% higher to a record $9 billion. Client Assets inflated 20% y-o-y to $6.8 TN. At Bank of America, revenues were up 11% y-o-y to $28 billion. Investment Banking fees surged 43%. Charles Schwab Q3 revenues were 27% higher y-o-y to a record $6.1 billion. Net new assets were 48% higher at $134 billion, as daily average notional trading volume surged 30% to $7.42 TN. Blackrock revenues were up 25% to $6.5 billion. The company saw $205 billion of net inflows during the quarter, as assets under management reached a record $13.5 TN.
The Fed’s Q3 Z.1 report won’t be available until December, but Q2 data illuminate the scope of ongoing historic financial excess. The financial sector has been firing on all cylinders – the most powerful growth dynamic since peak mortgage finance bubble.
Banking system loan growth surged to $316 billion during Q2, or 8.4% annualized – the quickest pace since 2022. Loans – chiefly to business - expanded 16.4% annualized, with one-year growth of 10.4%.
Meanwhile, Wall Street left notably strong bank lending in the dust. Broker/Dealer Assets expanded $259 billion, or 18% annualized, during Q2 to a record $6.0 TN. Over one year, assets surged $849 billion, or 16.4%. In 11 quarters, assets ballooned $1.6 TN, or 36%. Broker/Dealer Debt Securities holdings surged $106 billion for the quarter, or 36% annualized. These holdings were up $316 billion, or 33%, in a year, and $677 billion, or more than doubling over 11 quarters.
Wall Street has been leaning on the “repo” market to finance ballooning balance sheets. “Repo” Liabilities ended Q2 at $2.71 TN – the high since Q3 2008. Over one year, “repo” liabilities inflated $333 billion, or 14%, with 11-quarter ballooning of $1.1 TN, or 68%. Total system “repo” assets jumped $291 billion, or 15% annualized, during Q2, to a record $8.1 TN. Repo assets inflated $1.1 TN, or 16% y-o-y, and $3.3 TN, or 68%, over 22 quarters.
Rapid financial sector expansion feeds asset inflation and inflating household perceived wealth, in the process boosting spending and economic activity. While robust corporate earnings are viewed as confirmation of the bullish thesis, they are a direct consequence of financial excess.
Household Net Worth - Assets less Liabilities - jumped $7.1 TN, or 17% annualized, during Q2 to a record $176 TN. Illuminating historic late-cycle bubble inflation, Net Worth was up a staggering $10 TN over one year; $30 TN over three years; and $65 TN, or 59%, over 21 quarters. Household Net Worth rose to a non-Covid record of 581% of GDP - compared to previous cycle peaks of 487% in Q1 2007 and 443% for Q1 2000.
American households have never enjoyed such a stock market bonanza. Household Equities holdings surged $3.7 TN during Q2 to a record $42 TN - with three-year growth of $15 TN, or 56%. Total equities and mutual fund holdings expanded to a record 180% of GDP - compared to previous cycle peaks 105% (Q3 2007) and 116% (Q1 2000).
I wish there were some deep analytical flaws here. But there is consistent and irrefutable thesis confirmation – unrelenting Washington debt growth, booming high-risk lending, conspicuous market excess, egregious amounts of levered speculation, the manic AI arms race, the crypto mania, and so on. It would be somewhat less concerning if markets demonstrated the capacity for orderly adjustment. But the opposite is true – markets become only more dismissive of risk and detached from the reality of extreme uncertainty, underlying fragility, and waning prospects.
The world’s preeminent banker, JPMorgan’s Jamie Dimon, recently offered a warning: “I probably shouldn’t say this, but when you see one cockroach, there are probably more. Everyone should be forewarned on this one.” He also said, “My antenna goes up when things like that happen.” Dimon was referring to the swift collapse of First Brands.
The First Brands fiasco is a big deal. I have compared it to the June 2007 collapse of two Bear Stearns credit funds that had invested in subprime mortgage derivatives. That event basically terminated subprime mortgage excesses – marking an inflection point for the mortgage finance bubble.
The Bear Stearns subprime eruption proved so consequential because it revealed the scope of egregious excess – especially the revelation of the critical role Wall Street structured finance had played in the intermediation of risky mortgages – what I refer to as the “Wall Street alchemy” transforming high-risk loans into mostly perceived safe money-like instruments.
This apparatus works miraculously – until increasingly precarious schemes collapse under their own weight – until the associated finance becomes too malignant. In the case of the Bear Stearns funds, it was subprime CLOs. The blow up of these two funds shattered perceptions and effectively ended what had become the critical source of finance to the marginal home buyer. The cycle reversed when marginal borrowers lost access to mortgages. Inventory piled up, prices declined, buyers backed away, terrible underwriting and widespread fraud were revealed and, much belatedly, the regulatory environment shifted. The bubble was doomed.
While not huge, First Brands is a microcosm of key facets of this cycle’s excess. It encompasses banks, Wall Street firms, hedge funds, flimsy structured finance, “private credit,” “business development companies”, leverage, so-called “fin-tech” and invoice and supply-chain finance, insurance companies, credit insurance, CPA firms, rating agencies, and a complacent investor community. The collapse revealed that across the spectrum of players, a boom-time ethos prioritized money-making above analysis and sound business practices. Loan underwriting was woefully deficient, as was the accounting and due diligence across the intermediation process. First Brands was willing to pay high borrowing rates for billions of liabilities, affording profit opportunities for layers of enterprising operators. It worked miraculously – until the scheme collapsed.
Remember that it was 15 months between the subprime eruption and the October 2008 financial crisis. Credit tightening at the “periphery” takes time to gravitate to the “core” – especially during periods of loose conditions and central bank accommodation. Indeed, aggressive Fed rate cuts sustained bubble excess in 2007’s second half, with declining AAA-rated MBS yields sustaining risky lending for prime mortgages. System credit growth remained highly elevated into 2008, with stock prices reaching record highs in October 2007 – months after the fateful subprime collapse.
We’re witnessing similar dynamics now. The drift higher in global bond yields ended abruptly a few weeks back, with the First Brands news. Ten-year Treasury yields recently dropped to a one-year low of 3.94%, despite a 3.9% Atlanta Fed GDPNow forecast and ongoing inflation risks. Markets now assume a more aggressive rate-cutting cycle, and the Fed just announced the end to its balance sheet drawdown.
More than a year ago – in September 2024 – the Fed began cutting rates despite loose conditions and conspicuous market excess. And over the past 13 months, we’ve witnessed historic bubble inflation go into high gear, notably in AI, leveraged lending, and “private credit.” Nvidia’s stock inflated almost 80%. For Oracle, it was 65%. The Semiconductor Index has returned almost 50% since the Fed’s first cut, boosting three-year gains to over 200%.
It’s important to note that Money Market Fund Assets (MMFA) inflated $1.09 TN, or 17%, since that first cut – expanding another $30 billion last week to a record $7.4 TN. Just over the past eight weeks, money funds inflated $191 billion, further extending one of history’s great monetary inflations – one I link directly to the expansion of leveraged speculation and “repo” market borrowings. Especially over the past year, this now international phenomenon has stoked global liquidity overabundance. That the Fed and global central bank community are slashing rates despite historic leveraged speculation is a perilous bubble dynamic.
I have previously highlighted the trillion-plus hedge fund “basis trade” – where extremely levered Treasury positions are financed in the “repo” market. Interestingly, Federal Reserve researchers recently released a report in which they estimate that hedge fund holdings of Treasuries domiciled in the Cayman Islands ended 2024 at $1.85 trillion – fully $1.4 TN more than tabulated in Treasury data. This position had doubled in two years. Amazingly, this places the Cayman Islands as the largest foreign owner of US government securities, ranking ahead of China, Japan, and the UK.
From this revelation, I’ll offer a few inferences. For one, estimates that hedge funds held a massive $3.4 TN Treasuries position in 2024 likely grossly understate actual holdings. Second, Fed analysis further confirms that “basis trade” and other Treasury leveraged speculation ballooned starting in 2022 – coinciding with the historic inflation of money market fund assets. Third, leveraged speculation has become critical to financing massive fiscal deficits, and is also a primary culprit behind over-liquefied speculative market bubbles. This is such a precarious market structure.
I’ll try to tie these various analytical threads together. In its semi-annual global financial stability report, the International Monetary Fund issued strong warnings. The IMF believes it is time for forceful oversight of Non-Depository Financial Institutions – or NDFI - the so-called “shadow banking” universe, which includes hedge funds, private credit, private equity, credit funds, insurance companies, and others. Quoting from the IMF: “Beneath the calm surface, the ground is shifting in several parts of the financial system, giving rise to vulnerabilities… Banks are increasingly lending to private credit funds because these loans often deliver higher returns on equity than traditional commercial and industrial lending…” From IMF data, reported by the Financial Times: “Banks in the US and Europe have $4.5 TN of exposures to hedge funds, private credit groups and other non-bank financial institutions...”
The IMF report was released three weeks after the First Brands’ bankruptcy. A week following the IMF, Bank of England Governor Andrew Bailey issued similar, but notably more urgent warnings – stressing that alarm bells were ringing: “We certainly are beginning to see, for instance, what used to be called slicing and dicing and tranching of loan structures going on, and if you were involved before the financial crisis then alarm bells start going off at that point.’”
“Wall Street’s practice of packaging subprime mortgages into asset-backed bonds fueled the 2008 financial crisis, with years of loose lending standards leading to a crash in the value of these assets when US house prices fell. In the run-up to the crisis, bankers and investors had regarded many such complicated financial products as virtually riskless. The perception encouraged large institutions to borrow heavily against their holdings…” “If you go back to before the financial crisis when we were having a debate about subprime mortgages in the US, people were telling us it was too small to be systemic. That was the wrong call.”
BOE deputy governor for financial stability, Sarah Breeden, added her own warning: “We can see the vulnerabilities here, the opacity, the leverage, the weak underwriting standards, the interconnections. We can see parallels with the global financial crisis. What we don’t know is how macro-significant those issues are.”
First Brands revelations have altered cycle dynamics. The quiet part is now being said out loud – and it’s being spoken at an elevated volume by top central bankers, financial regulators and even Wall Street professionals.
Providing additional perspective, the Financial Times last week highlighted analysis from JPMorgan, noting that the First Brands and Tricolor collapses had raised bank funding costs. “High-profile collapses… have highlighted the complex and often opaque financial arrangements between banks and ‘non-depository financial institutions’.” The article underscored a key development: “Regulators have become increasingly concerned about the interconnectedness of banks and NDFI.”
I believe a consequential tightening of high-risk lending is afoot, though ongoing market exuberance is currently masking it. Banks will tighten loan underwriting, with the leveraged lending crowd forced to adopt a more cautious approach. Importantly, the opacity and leverage that provided a boom-time advantage for “private credit” will increasingly prove a hinderance. And a tightening of subprime finance will become problematic for scores of levered and negative cash-flow borrowers whose existence depends on readily available new finance. And, over time, I expect revelations of widespread imprudent loan underwriting, along with historic quantities of fraud and financial shenanigans. The credit cycle has not been repealed. The old Austrian economists warned that the pain associated with the bust is proportional to the excesses of the preceding boom.
And this is what really worries me. Trillions of “basis trades” and speculative leverage have created seemingly unlimited liquidity – liquidity that has helped finance a historic AI arms race. Looking ahead, the AI and energy infrastructure buildout will require many trillions of additional borrowings. So far, much of the required AI finance has been from - or associated with - the cash-rich tech oligarchy. Going forward, much of the trillions required will have to come from the credit market and financial institutions. Future AI arms race profits are highly uncertain, if not dubious. Trillions of borrowings will be of a high-risk nature. Especially when the AI mania breaks, I doubt markets and the financial system will be willing and able to take on such colossal amounts of risky debt.
Meanwhile, there is this perilous issue of bond market and credit system leverage. A bout of de-risking/deleveraging will expose vulnerabilities to marketplace illiquidity and dislocation. We saw elements of this dynamic start to unfold during April market instability. And April tumult illuminated the tight correlation between deleveraging fears and aggressive selling of tech and AI-related stocks. Importantly, the AI arms race buildout depends on ongoing market exuberance and liquidity abundance. So long as “terminal phase excess” continues, the AI arms race appears miraculously feasible. Meanwhile, this bubble is uniquely vulnerable to a shift in market perceptions. A surprise market de-risking/deleveraging would immediately expose the fragile high-risk nature of AI finance – history’s greatest subprime lending bubble.
I’ll wrap this up with a concise summary. AI and tech are history’s greatest mania – and throw in crypto for good measure. The leveraged lending and “private credit” booms are the greatest high-risk lending bubble ever. U.S. and global sovereign debt is history’s most spectacular credit bubble. And “basis trades,” “carry trades,” and myriad levered credit market strategies comprise the most colossal levered speculative bubble. I often say I hope I’m wrong. I’m not wrong on this. Timing remains unknown, but this will end very badly.
For the Week:
The S&P500 fell 1.6% (up 14.4% y-t-d), and the Dow declined 1.2% (up 10.4%). The Utilities added 0.4% (up 18.2%). The Banks increased 0.6% (up 18.3%), and the Broker/Dealers declined 0.8% (up 28.0%). The Transports rose 2.0% (up 2.0%). The S&P 400 Midcaps were little changed (up 3.9%), while the small cap Russell 2000 fell 1.9% (up 9.1%). The Nasdaq100 dropped 3.1% (up 19.3%). The Semiconductors sank 3.9% (up 39.5%). The Biotechs gained 0.9% (up 17.7%). With bullion slipping $2, the HUI gold index dipped 0.2% (up 110.3%).
Three-month Treasury bill rates ended the week at 3.7575%. Two-year government yields slipped a basis point to 3.56% (down 68bps y-t-d). Five-year T-note yields were unchanged at 3.68% (down 70bps). Ten-year Treasury yields added two bps to 4.10% (down 47bps). Long bond yields gained five bps to 4.70% (down 8bps). Benchmark Fannie Mae MBS yields added one basis point to 5.13% (down 71bps).
Italian 10-year yields rose five bps to 3.43% (down 9bps y-t-d). Greek 10-year yields gained five bps to 3.30% (up 9bps). Spain's 10-year yields increased four bps to 3.19% (up 12bps). German bund yields increased three bps to 2.67% (up 30bps). French yields rose four bps to 3.46% (up 27bps). The French to German 10-year bond spread widened about one to 79 bps. U.K. 10-year gilt yields rose six bps to 4.47% (down 10bps). U.K.'s FTSE equities index slipped 0.4% (up 18.5% y-t-d).
Japan's Nikkei 225 Equities Index sank 4.1% (up 3% y-t-d). Japan's 10-year "JGB" yield added a basis point to 1.68% (up 58bps y-t-d). France's CAC40 fell 2.1% (up 7.7%). The German DAX equities index lost 1.6% (up 18.4%). Spain's IBEX 35 equities index declined 0.8% (up 37.1%). Italy's FTSE MIB index dipped 0.6% (up 25.5%). EM equities were mixed. Brazil's Bovespa index jumped 3.0% (up 28.1%), and Mexico's Bolsa index gained 1.0% (up 28.0%). South Korea's Kospi dropped 3.7% (up 64.8%). India's Sensex equities index declined 0.9% (up 6.0%). China's Shanghai Exchange Index gained 1.1% (up 19.3%). Turkey's Borsa Istanbul National 100 index slipped 0.4% (up 11.1%).
Federal Reserve Credit increased $10.7 billion last week to $6.551 TN. Fed Credit was down $2.338 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.825 TN, or 76%. Fed Credit inflated $3.740 TN, or 133%, since November 7, 2012 (678 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt gained $3.9 billion last week to $3.089 TN. "Custody holdings" were down $245 billion y-o-y, or 7.4%.
Total money market fund assets (MMFA) surged $116 billion to a record $7.535 TN - with an 11-week surge of $328bn, or 24% annualized. MMFA were up $945 billion, or 14.3%, y-o-y - and ballooned a historic $2.950 TN, or 64%, since October 26, 2022.
Total Commercial Paper declined $6.4bn to $1.322 TN. CP has expanded $234 billion y-t-d and $151 billion, or 12.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates rose five bps to 6.22% (down 57bps y-o-y). Fifteen-year rates jumped nine bps to 5.50% (down 50bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down two bps to 6.42% (down 84bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.2% to 99.603 (down 8.2% y-t-d). On the upside, the Brazilian real increased 0.8%, the Mexican peso 0.6%, the Japanese yen 0.4%, the euro 0.3%, the South African rand 0.2%, and the British pound 0.1%. On the downside, the South Korean won declined 2.2%, the New Zealand dollar 1.8%, the Australian dollar 0.8%, the Swedish krona 0.4%, the Norwegian krone 0.4%, the Canadian dollar 0.2%, and the Swiss franc 0.1%. The Chinese (onshore) renminbi slipped 0.04% versus the dollar (up 2.49% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index was unchanged (up 8.7% y-t-d). Spot Gold was little changed at $4,001 (up 52.5%). Silver declined 0.8% to $48.3229 (up 67.2%). WTI crude dropped $1.23, or 2.0%, to $59.75 (down 17%). Gasoline gained 2.0% (down 4%), and Natural Gas jumped 4.6% to $4.315 (up 19%). Copper dropped 2.6% (up 23%). Wheat fell 1.2% (down 4%), and Corn declined 1.0% (down 7%). Bitcoin sank $7,900, or 7.1%, to $102,300 (up 9.2%).
Market Instability Watch:
November 4 – Bloomberg (Alex Harris): “Strains in money markets could persist into November as funding costs remain stubbornly high, building pressure for the Federal Reserve to bolster liquidity even before it stops shrinking its portfolio next month, according to Wall Street analysts. The markets ended a volatile month with the Secured Overnight Financing Rate — a benchmark based on the cost of borrowing against Treasury securities — surging by 18 bps on Friday. That was the biggest one-day move outside of a Fed interest-rate hiking cycle since March 2020… ‘The Fed is out of time and it seems like they’re scrambling,’ said Mark Cabana, head of US interest rate strategy at Bank of America Corp. ‘Dec. 1 was the only compromise they could achieve. I suspect the markets will force them to react soon.’”
November 4 – Bloomberg (David Pan and Olga Kharif): “Bitcoin has been falling again — but unlike in last month’s selloff, it’s not leverage breaking the market. The original cryptocurrency fell as much as 7.4% on Tuesday to dip below the $100,000 mark for the first time since June. That’s down more than 20% from a record high reached a month ago… If October’s crash was about forced selling, the current drawdown may reflect something more sobering: conviction eroding. Long-time Bitcoin holders have offloaded around 400,000 Bitcoin over the past month, an exodus of about $45 billion…, according to Markus Thielen, head of 10x Research.”
U.S. Credit Trouble Watch:
November 6 – Bloomberg (Paul J. Davies): “The war of words between private credit and banks has stepped up a notch. Colm Kelleher, chairman of… UBS Group AG, warned this week that poor insurance regulation and credit ratings arbitrage were creating systemic risks, especially in the US. Marc Rowan, chief executive officer of Apollo Global Management, the private capital manager that owns life insurer Athene, shot back: ‘Colm is just wrong.’ In recent weeks, there’s been mutual sniping between the two sides of the debt industry about lending standards, risk management and who made the errors in financing the failed companies Tricolor and First Brands… But Kelleher trenchantly described a bigger issue…: The sheer scale of private credit that’s now being funded by insurers and whether insurance regulators are competent to oversee the risks involved. Credit ratings… play a critical role in this debate because they drive the calculations of how much capital insurers must hold for the investment risks they take.”
November 4 – Wall Street Journal (Sam Goldfarb and Soma Biswas): “A string of alleged frauds by corporate borrowers is spurring a reckoning across Wall Street, sending bankers and investors scrambling to prevent future blowups. Lenders are increasing due diligence and demanding a longer history of financial data from companies. Some are inserting conditions that permit them to do more frequent checkups before agreeing to make loans. A group of the biggest names in banking, investment management and accounting have formed a task force that will take a deeper look at the nature of the problem and how to protect investors. The frauds that have emerged so far… haven’t sparked widespread trouble in the market or economy. But they have generated fallout for both regional banks and Wall Street giants…, and the string of revelations has made it harder to dismiss any one case as an isolated event. ‘This is sending real ripples in the credit markets,’ said Colin Adams, partner at Uzzi & Lall, a restructuring adviser… ‘People are really starting to ask: ‘How does this happen?’’”
November 4 – Bloomberg (Constantine Courcoulas): “Distress is building up in the leveraged loan market, driven to a large extent by mounting financial pain in basic industries such as chemicals. The amount of US-dollar loans that are in distress jumped to $71.8 billion at the end of October… That’s taken the distressed ratio to 5.09%, the highest level since President Donald Trump first outlined his tariff policy in April.”
November 3 – Bloomberg (Victor Swezey): “More of the corporate bond market’s angels are losing their wings. About $42 billion of US corporate bonds this year have dropped from investment-grade to junk status, known as becoming ‘fallen angels,’ according to Barclays Plc. That’s up from $6 billion last year, and is on track to outstrip the value of ‘rising star’ — companies upgraded to investment-grade — for the first time since 2020. The wave of bonds losing their high-grade status is only set to grow next year. The percentage of bonds in the lowest tiers of investment grade — a BBB or BBB- rating — that have a negative outlook is nearing its highest level in a decade, according to a Barclays analysis.”
November 4 – Bloomberg (Eleanor Duncan and Kat Hidalgo): “When private equity firms buy up target companies, they rely on one major source of financial firepower — debt, and lots of it. But what happens when the interest on that debt jumps? For some, the answer is simple: Pay it later. In today’s higher interest rate environment, so-called payment-in-kind debt, otherwise known as PIK, is an appealing but risky way for buyout firms to keep their spending to a minimum while they try to extract returns from the businesses they’ve acquired. It allows them to push back interest payments until the moment when the debt itself has to be repaid. PIK was first popularized by bankers in the 1980s and made a name for itself when it was used for one of the world’s most famous leveraged buyouts — KKR & Co.’s takeover of RJR Nabisco in 1988.”
November 1 – Bloomberg (Rachel Graf and Dorothy Ma): “As Halloween monsters of all stripes flood neighborhoods in search of candy and parties this weekend, credit markets are seeing the resurgence of a different type of zombie. The tally of ‘zombie companies’ in the US that aren’t earning enough to cover their interest expenses stands at the highest since early 2022, with almost 100 gaining the designation in October. The main reason: Companies that gorged on debt at near-zero interest rates in the pandemic era have since been hurt by tariffs and higher funding costs… ‘Even if the Fed were continuing with cuts, the borrowing costs for small companies, zombie companies, are still multiples higher than historic averages,’ said Liz Ann Sonders, chief investment strategist at Charles Schwab. ‘A lot of these companies were barely scraping by at zero rates.’”
November 1 – Financial Times (Alexandra Heal): “Eighty per cent of all private capital groups could be zombie firms within the next decade, according to one of the industry’s most senior executives, surviving only to manage existing investments because they cannot raise fresh capital. Only about 5,000 of the 15,000 or more private capital firms that exist today had successfully raised funds in the past seven years, Per Franzén, chief executive of Sweden’s EQT, told the Financial Times. ‘How many of these firms will have a successful fundraising also in the next five to 10 years?... Probably less than half,’ he said. ‘The number of zombie firms will increase by an additional couple of thousand.’ Private equity groups have struggled to raise funds in recent years after finding it difficult to return cash to their backers because of a dealmaking drought.”
November 4 – Bloomberg (Scott Carpenter): “When auto loans suffer losses they are ‘dramatically higher’ than losses in other types of consumer credit products, according to a recent analysis by… TransUnion. The average auto loan fraud lost 21 times more than the average credit card fraud case, according to a recent analysis…, which reviewed performance across a variety of loans two years after they were made in 2023. Relative to unsecured personal loans, the average loss on each auto loan fraud was six times higher… The higher losses in auto loans are largely because auto loans tend to be bigger than other unsecured personal loans or credit cards…”
First Brands Ramifications Watch:
November 4 – Wall Street Journal (Alexander Gladstone, Alicia McElhaney and John Keilman): “One of the questions that has been hanging over the bankruptcy of First Brands: Where did all the money go? A lawsuit filed Monday by the auto-parts supplier’s new management team against founder Patrick James claims to have some answers. The lawsuit claims $500,000 was spent on a private chef, $150,000 went toward a personal trainer and $3 million was used to rent a New York townhouse. James enriched himself at the company’s expense…, leaving just $12 million in cash when the company filed for bankruptcy in September…”
November 3 – Bloomberg (Irene Garcia Perez): “Patrick James, the owner of bankrupt auto-parts supplier First Brands Group, is supporting the appointment of an independent examiner to look into the company’s collapse and its use of trade financing, but is asking for the scope to include claims against the third parties that provided off-balance sheet financing and factoring. Raistone — a provider of short-term financing that worked on deals for First Brands — requested the appointment of an examiner last month to look into $2.3 billion that had ‘simply vanished’ from the company. The request was joined later by the US Trustee… and by a group of lenders of the First Brands-related special purpose vehicles that have accused the auto parts supplier of ‘widespread fraud.’ Funds managed by Evolution Credit Partners, which had inventory finance agreements with special purpose vehicles, went further and asked for the appointment of an independent trustee.”
November 6 – Financial Times (Robert Smith, Olaf Storbeck and Mercedes Ruehl): “UBS has told clients that it will wind down an investment vehicle with significant debt exposure to First Brands Group, in the first major fund liquidation following the US auto parts maker’s shock bankruptcy. The Swiss bank is grappling with more than $500mn of exposure to First Brands across its asset management and investment arms, while facing particularly acute challenges at US hedge fund units that provided invoice-linked financing to First Brands.”
October 31 – Wall Street Journal (Alexander Gladstone and Mark Maurer): “The auditor of beleaguered auto-parts giant First Brands signed off on its financials this year months before the emergence of an accounting scandal that sent the company into bankruptcy and triggered a criminal investigation. Documents… show substantial discrepancies between the financial information that BDO USA validated and the financial picture that is now coming into focus. BDO’s audit of First Brands’ 2024 financials… didn’t reveal the billions of dollars of off-balance-sheet debt and unpaid balances owed to financing providers that weighed on the company as it descended into chapter 11.”
Global Credit and Financial Bubble Watch:
November 5 – Bloomberg (Hannah Benjamin-Cook, Claire Ruckin and Caleb Mutua): “Global bond sales have soared to a record this year as borrowers take advantage of easy market conditions to fund everything from the boom in artificial intelligence projects to a revival in acquisitions. Issuance has been on a tear for much of 2025 and set a new annual record of $5.94 trillion on Wednesday, topping the previous high in 2024… And there’s still more than a month of the year to go, with Wall Street bracing for the busiest November in over a decade. Sales have been dominated by financial institutions and increased issuance from governments to fund burgeoning budget deficits. A recent wave of jumbo-sized offerings from the likes of Google’s parent Alphabet Inc. and… Meta Platforms Inc. also makes the communications sector stand out with two-thirds more debt than last year.”
November 4 – Financial Times (Antoine Gara): “Apollo Global has reported near-record profits from its Athene insurance operations after a surge in new loans made by the unit generated more than enough income to offset declining investment returns from private credit. The better than expected results… may help alleviate investor fears about falling interest rates and tightening credit spreads crimping the profitability of one of the world’s largest lenders. Apollo reported $871mn in spread profits from its Athene insurance unit in the third quarter… Overall profits came in at $1.7bn… Apollo originated $75bn in new loans in the third quarter, meaning it has lent $273bn to corporate borrowers worldwide over the past 12 months. That was a 40% increase from its annual lending pace a year ago, buoyed by multibillion-dollar loans to companies, including Intel and EDF.”
Trump Administration Watch:
November 4 – Bloomberg (Gregory Korte): “Democrats registered their biggest political victories since their stinging loss to Donald Trump a year ago with a series of wins Tuesday night in Virginia, New Jersey, New York and California, as the party coalesced around a message of economic affordability and voters delivered a repudiation of the president. Mikie Sherrill in New Jersey and Abigail Spanberger in Virginia both campaigned for governor on pocketbook issues — lowering costs, expanding child care and restoring stability after months of economic turbulence and a government shutdown that’s stretched past five weeks.”
November 4 – Politico (Dasha Burns and Diana Nerozzi): “Inside the White House, there are two main takeaways from Tuesday’s miserable performance for the Republican Party. The first one — that fielding quality candidates matters — is the one GOP officials are eagerly messaging. But the second, perhaps more existential issue, is that President Donald Trump isn’t focused enough on the issues that matter most to the voters the party needs. ‘People don’t think he’s lived up to his promises,’ said one White House ally… ‘You won on lowering costs, putting more money back into people’s pockets. And people don’t feel that right now.’ The person noted parallels with former President Joe Biden, who he said insisted that America was on the upswing while people were struggling to make ends meet. ‘This is the problem Biden had,’ the person said.”
November 4 – Axios (Avery Lotz): “A majority of voters blame President Trump for rising prices, according to a recent poll… The cost of living is top of mind for Americans one year out from the 2026 election… A majority of U.S. adults say they’re spending more money on their groceries and utilities than they were last year, according to a Washington Post-ABC News-Ipsos poll conducted late last month. Some seven in 10 Americans say they’re spending more on groceries compared to last year. That comes as federal food assistance hangs in limbo amid a government shutdown and food banks brace for unprecedented need.”
November 2 – Bloomberg (MarÃa Paula Mijares Torres): “President Donald Trump said that immigration raids ‘haven’t gone far enough’ despite videos showing physical confrontations among federal agents, immigrants and protesters. ‘I think they haven’t gone far enough because we’ve been held back by the judges, by the liberal judges that were put in by Biden and by Obama,’ Trump said in an interview with CBS’ when asked if he approved of tactics shown in videos such as throwing people to the ground, smashing car windows and using tear gas in residential neighborhoods. Trump said the tactics used by immigration agents were acceptable ‘because you have to get the people out.’ Trump also repeated his claim that many of those detained had criminal records. Trump also said that he could use the Insurrection Act to use professional military, instead of the National Guard, to US cities ‘if I wanted to.’ ‘If you had to send in the Army or you had to send in the Marines I’d do that in a heartbeat,’ he said. ‘And no judge could challenge that’.”
November 5 – Axios (Colin Demarest): “Incredible amounts of U.S. firepower are coalescing in the Caribbean as President Trump plays geopolitical chicken with Venezuelan dictator Nicolás Maduro. U.S. Southern Command… is now at the heart of the action after decades of Pentagon priority paid to the Middle East and Indo-Pacific. America’s largest warship, the USS Gerald R. Ford, is steaming toward the region… The Ford and its escorts bring with them offensive and defensive punch — such as fighter, transport and early warning aircraft; helicopters; missiles; and jamming-and-spying tools — as well as thousands of troops. Vessels already in the region include the Iwo Jima, Gravely and Stockdale. Some are packing Tomahawks. Overhead, bombers are ducking in and out, prodding Caracas.”
November 2 – Financial Times (Peter Foster, Attracta Mooney and Kaye Wiggins): “Trump administration officials warned of additional trade tariffs and made personal threats against negotiators from other countries to block a historic climate deal for shipping, said people present at the talks. More than 10 diplomats, officials from other governments and industry observers told the Financial Times that the US ripped up normal global diplomacy rules and used ‘bully-boy tactics’ to derail the UN-backed Net Zero Framework for global shipping… last month. A phalanx of US officials intimidated African and small Pacific and Caribbean island countries into dropping support for the framework…”
November 3 – Reuters (Sarah N. Lynch, Chris Prentice and Marisa Taylor): “The internal watchdog for the U.S. Federal Housing Finance Agency is being removed from his role…, at a time when the housing regulator is playing a role in President Donald Trump's targeting of perceived political enemies. The ouster of Joe Allen, FHFA's acting inspector general, follows the agency’s director, Bill Pulte, becoming an outspoken voice in support of the Trump administration. Across the government, the Trump administration has so far fired or reassigned close to two dozen agency watchdogs, who police waste, fraud and abuse.”
China Trade War Watch:
November 2 – Axios (Aamer Madhani): “China has been an ‘unreliable partner’ in many ways, and the U.S. needs to get out from under the ‘sword’ of Chinese control of rare earth minerals, Treasury Secretary Scott Bessent said... The framework struck by the world's two largest economies isn’t even on paper yet, and already both sides are ramping up the rhetoric. It underlines concerns that the deal may not be lasting and may have only postponed trade tensions, rather than solving them. President Trump announced a framework trade deal with China early Thursday… Just a day later, Chinese leader Xi Jinping, at a summit in Asia, cautioned the world’s nations against taking the U.S. side in the ongoing dispute. ‘We don’t want to de-couple from China but we need to de-risk. They’ve shown themselves to be an unreliable partner in many areas,’ Bessent said…”
November 4 – Wall Street Journal (Yoko Kubota): “China has demonstrated it can weaponize its control over global supply chains by constricting the flow of critical rare-earth minerals… Beijing’s tools go beyond these critical minerals. Three other industries where China has a chokehold—lithium-ion batteries, mature chips and pharmaceutical ingredients—give an idea of what the U.S. would need to do to free itself fully from vulnerability. Behind China’s supply-chain dominance lie decadeslong industrial policies. Once Chinese companies have come to dominate a wide stretch of the supply chain, flooding global markets with lower-priced products in the process, Beijing brings in export controls that allow it to leverage its advantage and impose pain or threaten rival economies.”
November 3 – Financial Times (Zijing Wu and Eleanor Olcott): “China has increased subsidies that cut energy bills by up to half for some of the country’s largest data centres, as Beijing steps up efforts to boost its domestic chips industry and compete with the US. Local governments have beefed up incentives to help Chinese tech giants such as ByteDance, Alibaba and Tencent, which have been hit with higher electricity costs following Beijing’s ban on purchasing Nvidia’s artificial intelligence chips…”
November 3 – New York Times (Keith Bradsher): “President Trump has used tariffs to try to reduce American reliance on Chinese exports and prevent China’s factory overcapacity from swamping the U.S. economy. But his effort has hit an obstacle: Beijing was already well on its way to weaning its economy from the United States. For two decades, China has systematically pursued economic self-reliance. China has been able to establish choke points to pressure the U.S. economy, while making it harder for Washington to block China. Self-reliance has been a cornerstone of Chinese policymaking not just under Xi Jinping, the country’s top leader since 2012, but also under his predecessor, Hu Jintao.”
Trade War Watch:
November 5 – Financial Times (Peter Foster, Owen Walker and A. Anantha Lakshmi): “The Trump administration has added ‘poison pill’ termination clauses to trade pacts with south-east Asian countries, creating a new diplomatic weapon in Washington’s strategic competition with China. The clauses, embedded in two new deals signed with Malaysia and Cambodia last week, threaten to end the agreements if either country signs a rival pact that jeopardises ‘essential US interests’ or ‘poses a material threat’ to US security. Trade experts say the highly unusual and sweeping clauses amount to a ‘loyalty test’ for smaller countries that also have close trading relationships with China, and had the potential to reshape future US trade negotiations in south-east Asia and beyond.”
Constitution Watch:
November 6 – Associated Press (Paul Wiseman): “President Donald Trump has warned that the United States will be rendered ‘defenseless’ and possibly ‘reduced to almost Third World status’ if the Supreme Court strikes down the tariffs he imposed this year… The justices sounded skeptical during oral arguments… of his sweeping claims of authority to impose tariffs as he sees fit. The truth, though, is that Trump will still have plenty of options to keep taxing imports aggressively even if the court rules against him. He can re-use tariff powers he deployed in his first term and can reach for others, including one that dates back to the Great Depression. ‘It’s hard to see any pathway here where tariffs end,’ said Georgetown trade law professor Kathleen Claussen. ‘I am pretty convinced he could rebuild the tariff landscape he has now using other authorities.’”
November 4 – Axios (Courtenay Brown): “President Trump claimed… the U.S. would be ‘virtually defenseless’ against other nations if the Supreme Court strikes down a slew of tariffs... ‘Tomorrow’s United States Supreme Court case is, literally, LIFE OR DEATH for our Country,’ Trump posted…”
November 5 – Bloomberg (Greg Stohr): “US Supreme Court justices questioned President Donald Trump’s global tariffs, as arguments began in a case that could undercut his signature economic policy. Justices including John Roberts and Amy Coney Barrett pressed US Solicitor General D. John Sauer on his contention that a 1977 law designed for emergency situations gives Trump the authority to collect tens of billions of dollars in tariffs a month. ‘The vehicle is imposition of taxes on Americans, and that has always been the core power of Congress,” Roberts said.”
The S&P500 fell 1.6% (up 14.4% y-t-d), and the Dow declined 1.2% (up 10.4%). The Utilities added 0.4% (up 18.2%). The Banks increased 0.6% (up 18.3%), and the Broker/Dealers declined 0.8% (up 28.0%). The Transports rose 2.0% (up 2.0%). The S&P 400 Midcaps were little changed (up 3.9%), while the small cap Russell 2000 fell 1.9% (up 9.1%). The Nasdaq100 dropped 3.1% (up 19.3%). The Semiconductors sank 3.9% (up 39.5%). The Biotechs gained 0.9% (up 17.7%). With bullion slipping $2, the HUI gold index dipped 0.2% (up 110.3%).
Three-month Treasury bill rates ended the week at 3.7575%. Two-year government yields slipped a basis point to 3.56% (down 68bps y-t-d). Five-year T-note yields were unchanged at 3.68% (down 70bps). Ten-year Treasury yields added two bps to 4.10% (down 47bps). Long bond yields gained five bps to 4.70% (down 8bps). Benchmark Fannie Mae MBS yields added one basis point to 5.13% (down 71bps).
Italian 10-year yields rose five bps to 3.43% (down 9bps y-t-d). Greek 10-year yields gained five bps to 3.30% (up 9bps). Spain's 10-year yields increased four bps to 3.19% (up 12bps). German bund yields increased three bps to 2.67% (up 30bps). French yields rose four bps to 3.46% (up 27bps). The French to German 10-year bond spread widened about one to 79 bps. U.K. 10-year gilt yields rose six bps to 4.47% (down 10bps). U.K.'s FTSE equities index slipped 0.4% (up 18.5% y-t-d).
Japan's Nikkei 225 Equities Index sank 4.1% (up 3% y-t-d). Japan's 10-year "JGB" yield added a basis point to 1.68% (up 58bps y-t-d). France's CAC40 fell 2.1% (up 7.7%). The German DAX equities index lost 1.6% (up 18.4%). Spain's IBEX 35 equities index declined 0.8% (up 37.1%). Italy's FTSE MIB index dipped 0.6% (up 25.5%). EM equities were mixed. Brazil's Bovespa index jumped 3.0% (up 28.1%), and Mexico's Bolsa index gained 1.0% (up 28.0%). South Korea's Kospi dropped 3.7% (up 64.8%). India's Sensex equities index declined 0.9% (up 6.0%). China's Shanghai Exchange Index gained 1.1% (up 19.3%). Turkey's Borsa Istanbul National 100 index slipped 0.4% (up 11.1%).
Federal Reserve Credit increased $10.7 billion last week to $6.551 TN. Fed Credit was down $2.338 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.825 TN, or 76%. Fed Credit inflated $3.740 TN, or 133%, since November 7, 2012 (678 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt gained $3.9 billion last week to $3.089 TN. "Custody holdings" were down $245 billion y-o-y, or 7.4%.
Total money market fund assets (MMFA) surged $116 billion to a record $7.535 TN - with an 11-week surge of $328bn, or 24% annualized. MMFA were up $945 billion, or 14.3%, y-o-y - and ballooned a historic $2.950 TN, or 64%, since October 26, 2022.
Total Commercial Paper declined $6.4bn to $1.322 TN. CP has expanded $234 billion y-t-d and $151 billion, or 12.9%, y-o-y.
Freddie Mac 30-year fixed mortgage rates rose five bps to 6.22% (down 57bps y-o-y). Fifteen-year rates jumped nine bps to 5.50% (down 50bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down two bps to 6.42% (down 84bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.2% to 99.603 (down 8.2% y-t-d). On the upside, the Brazilian real increased 0.8%, the Mexican peso 0.6%, the Japanese yen 0.4%, the euro 0.3%, the South African rand 0.2%, and the British pound 0.1%. On the downside, the South Korean won declined 2.2%, the New Zealand dollar 1.8%, the Australian dollar 0.8%, the Swedish krona 0.4%, the Norwegian krone 0.4%, the Canadian dollar 0.2%, and the Swiss franc 0.1%. The Chinese (onshore) renminbi slipped 0.04% versus the dollar (up 2.49% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index was unchanged (up 8.7% y-t-d). Spot Gold was little changed at $4,001 (up 52.5%). Silver declined 0.8% to $48.3229 (up 67.2%). WTI crude dropped $1.23, or 2.0%, to $59.75 (down 17%). Gasoline gained 2.0% (down 4%), and Natural Gas jumped 4.6% to $4.315 (up 19%). Copper dropped 2.6% (up 23%). Wheat fell 1.2% (down 4%), and Corn declined 1.0% (down 7%). Bitcoin sank $7,900, or 7.1%, to $102,300 (up 9.2%).
Market Instability Watch:
November 4 – Bloomberg (Alex Harris): “Strains in money markets could persist into November as funding costs remain stubbornly high, building pressure for the Federal Reserve to bolster liquidity even before it stops shrinking its portfolio next month, according to Wall Street analysts. The markets ended a volatile month with the Secured Overnight Financing Rate — a benchmark based on the cost of borrowing against Treasury securities — surging by 18 bps on Friday. That was the biggest one-day move outside of a Fed interest-rate hiking cycle since March 2020… ‘The Fed is out of time and it seems like they’re scrambling,’ said Mark Cabana, head of US interest rate strategy at Bank of America Corp. ‘Dec. 1 was the only compromise they could achieve. I suspect the markets will force them to react soon.’”
November 4 – Bloomberg (David Pan and Olga Kharif): “Bitcoin has been falling again — but unlike in last month’s selloff, it’s not leverage breaking the market. The original cryptocurrency fell as much as 7.4% on Tuesday to dip below the $100,000 mark for the first time since June. That’s down more than 20% from a record high reached a month ago… If October’s crash was about forced selling, the current drawdown may reflect something more sobering: conviction eroding. Long-time Bitcoin holders have offloaded around 400,000 Bitcoin over the past month, an exodus of about $45 billion…, according to Markus Thielen, head of 10x Research.”
U.S. Credit Trouble Watch:
November 6 – Bloomberg (Paul J. Davies): “The war of words between private credit and banks has stepped up a notch. Colm Kelleher, chairman of… UBS Group AG, warned this week that poor insurance regulation and credit ratings arbitrage were creating systemic risks, especially in the US. Marc Rowan, chief executive officer of Apollo Global Management, the private capital manager that owns life insurer Athene, shot back: ‘Colm is just wrong.’ In recent weeks, there’s been mutual sniping between the two sides of the debt industry about lending standards, risk management and who made the errors in financing the failed companies Tricolor and First Brands… But Kelleher trenchantly described a bigger issue…: The sheer scale of private credit that’s now being funded by insurers and whether insurance regulators are competent to oversee the risks involved. Credit ratings… play a critical role in this debate because they drive the calculations of how much capital insurers must hold for the investment risks they take.”
November 4 – Wall Street Journal (Sam Goldfarb and Soma Biswas): “A string of alleged frauds by corporate borrowers is spurring a reckoning across Wall Street, sending bankers and investors scrambling to prevent future blowups. Lenders are increasing due diligence and demanding a longer history of financial data from companies. Some are inserting conditions that permit them to do more frequent checkups before agreeing to make loans. A group of the biggest names in banking, investment management and accounting have formed a task force that will take a deeper look at the nature of the problem and how to protect investors. The frauds that have emerged so far… haven’t sparked widespread trouble in the market or economy. But they have generated fallout for both regional banks and Wall Street giants…, and the string of revelations has made it harder to dismiss any one case as an isolated event. ‘This is sending real ripples in the credit markets,’ said Colin Adams, partner at Uzzi & Lall, a restructuring adviser… ‘People are really starting to ask: ‘How does this happen?’’”
November 4 – Bloomberg (Constantine Courcoulas): “Distress is building up in the leveraged loan market, driven to a large extent by mounting financial pain in basic industries such as chemicals. The amount of US-dollar loans that are in distress jumped to $71.8 billion at the end of October… That’s taken the distressed ratio to 5.09%, the highest level since President Donald Trump first outlined his tariff policy in April.”
November 3 – Bloomberg (Victor Swezey): “More of the corporate bond market’s angels are losing their wings. About $42 billion of US corporate bonds this year have dropped from investment-grade to junk status, known as becoming ‘fallen angels,’ according to Barclays Plc. That’s up from $6 billion last year, and is on track to outstrip the value of ‘rising star’ — companies upgraded to investment-grade — for the first time since 2020. The wave of bonds losing their high-grade status is only set to grow next year. The percentage of bonds in the lowest tiers of investment grade — a BBB or BBB- rating — that have a negative outlook is nearing its highest level in a decade, according to a Barclays analysis.”
November 4 – Bloomberg (Eleanor Duncan and Kat Hidalgo): “When private equity firms buy up target companies, they rely on one major source of financial firepower — debt, and lots of it. But what happens when the interest on that debt jumps? For some, the answer is simple: Pay it later. In today’s higher interest rate environment, so-called payment-in-kind debt, otherwise known as PIK, is an appealing but risky way for buyout firms to keep their spending to a minimum while they try to extract returns from the businesses they’ve acquired. It allows them to push back interest payments until the moment when the debt itself has to be repaid. PIK was first popularized by bankers in the 1980s and made a name for itself when it was used for one of the world’s most famous leveraged buyouts — KKR & Co.’s takeover of RJR Nabisco in 1988.”
November 1 – Bloomberg (Rachel Graf and Dorothy Ma): “As Halloween monsters of all stripes flood neighborhoods in search of candy and parties this weekend, credit markets are seeing the resurgence of a different type of zombie. The tally of ‘zombie companies’ in the US that aren’t earning enough to cover their interest expenses stands at the highest since early 2022, with almost 100 gaining the designation in October. The main reason: Companies that gorged on debt at near-zero interest rates in the pandemic era have since been hurt by tariffs and higher funding costs… ‘Even if the Fed were continuing with cuts, the borrowing costs for small companies, zombie companies, are still multiples higher than historic averages,’ said Liz Ann Sonders, chief investment strategist at Charles Schwab. ‘A lot of these companies were barely scraping by at zero rates.’”
November 1 – Financial Times (Alexandra Heal): “Eighty per cent of all private capital groups could be zombie firms within the next decade, according to one of the industry’s most senior executives, surviving only to manage existing investments because they cannot raise fresh capital. Only about 5,000 of the 15,000 or more private capital firms that exist today had successfully raised funds in the past seven years, Per Franzén, chief executive of Sweden’s EQT, told the Financial Times. ‘How many of these firms will have a successful fundraising also in the next five to 10 years?... Probably less than half,’ he said. ‘The number of zombie firms will increase by an additional couple of thousand.’ Private equity groups have struggled to raise funds in recent years after finding it difficult to return cash to their backers because of a dealmaking drought.”
November 4 – Bloomberg (Scott Carpenter): “When auto loans suffer losses they are ‘dramatically higher’ than losses in other types of consumer credit products, according to a recent analysis by… TransUnion. The average auto loan fraud lost 21 times more than the average credit card fraud case, according to a recent analysis…, which reviewed performance across a variety of loans two years after they were made in 2023. Relative to unsecured personal loans, the average loss on each auto loan fraud was six times higher… The higher losses in auto loans are largely because auto loans tend to be bigger than other unsecured personal loans or credit cards…”
First Brands Ramifications Watch:
November 4 – Wall Street Journal (Alexander Gladstone, Alicia McElhaney and John Keilman): “One of the questions that has been hanging over the bankruptcy of First Brands: Where did all the money go? A lawsuit filed Monday by the auto-parts supplier’s new management team against founder Patrick James claims to have some answers. The lawsuit claims $500,000 was spent on a private chef, $150,000 went toward a personal trainer and $3 million was used to rent a New York townhouse. James enriched himself at the company’s expense…, leaving just $12 million in cash when the company filed for bankruptcy in September…”
November 3 – Bloomberg (Irene Garcia Perez): “Patrick James, the owner of bankrupt auto-parts supplier First Brands Group, is supporting the appointment of an independent examiner to look into the company’s collapse and its use of trade financing, but is asking for the scope to include claims against the third parties that provided off-balance sheet financing and factoring. Raistone — a provider of short-term financing that worked on deals for First Brands — requested the appointment of an examiner last month to look into $2.3 billion that had ‘simply vanished’ from the company. The request was joined later by the US Trustee… and by a group of lenders of the First Brands-related special purpose vehicles that have accused the auto parts supplier of ‘widespread fraud.’ Funds managed by Evolution Credit Partners, which had inventory finance agreements with special purpose vehicles, went further and asked for the appointment of an independent trustee.”
November 6 – Financial Times (Robert Smith, Olaf Storbeck and Mercedes Ruehl): “UBS has told clients that it will wind down an investment vehicle with significant debt exposure to First Brands Group, in the first major fund liquidation following the US auto parts maker’s shock bankruptcy. The Swiss bank is grappling with more than $500mn of exposure to First Brands across its asset management and investment arms, while facing particularly acute challenges at US hedge fund units that provided invoice-linked financing to First Brands.”
October 31 – Wall Street Journal (Alexander Gladstone and Mark Maurer): “The auditor of beleaguered auto-parts giant First Brands signed off on its financials this year months before the emergence of an accounting scandal that sent the company into bankruptcy and triggered a criminal investigation. Documents… show substantial discrepancies between the financial information that BDO USA validated and the financial picture that is now coming into focus. BDO’s audit of First Brands’ 2024 financials… didn’t reveal the billions of dollars of off-balance-sheet debt and unpaid balances owed to financing providers that weighed on the company as it descended into chapter 11.”
Global Credit and Financial Bubble Watch:
November 5 – Bloomberg (Hannah Benjamin-Cook, Claire Ruckin and Caleb Mutua): “Global bond sales have soared to a record this year as borrowers take advantage of easy market conditions to fund everything from the boom in artificial intelligence projects to a revival in acquisitions. Issuance has been on a tear for much of 2025 and set a new annual record of $5.94 trillion on Wednesday, topping the previous high in 2024… And there’s still more than a month of the year to go, with Wall Street bracing for the busiest November in over a decade. Sales have been dominated by financial institutions and increased issuance from governments to fund burgeoning budget deficits. A recent wave of jumbo-sized offerings from the likes of Google’s parent Alphabet Inc. and… Meta Platforms Inc. also makes the communications sector stand out with two-thirds more debt than last year.”
November 4 – Financial Times (Antoine Gara): “Apollo Global has reported near-record profits from its Athene insurance operations after a surge in new loans made by the unit generated more than enough income to offset declining investment returns from private credit. The better than expected results… may help alleviate investor fears about falling interest rates and tightening credit spreads crimping the profitability of one of the world’s largest lenders. Apollo reported $871mn in spread profits from its Athene insurance unit in the third quarter… Overall profits came in at $1.7bn… Apollo originated $75bn in new loans in the third quarter, meaning it has lent $273bn to corporate borrowers worldwide over the past 12 months. That was a 40% increase from its annual lending pace a year ago, buoyed by multibillion-dollar loans to companies, including Intel and EDF.”
Trump Administration Watch:
November 4 – Bloomberg (Gregory Korte): “Democrats registered their biggest political victories since their stinging loss to Donald Trump a year ago with a series of wins Tuesday night in Virginia, New Jersey, New York and California, as the party coalesced around a message of economic affordability and voters delivered a repudiation of the president. Mikie Sherrill in New Jersey and Abigail Spanberger in Virginia both campaigned for governor on pocketbook issues — lowering costs, expanding child care and restoring stability after months of economic turbulence and a government shutdown that’s stretched past five weeks.”
November 4 – Politico (Dasha Burns and Diana Nerozzi): “Inside the White House, there are two main takeaways from Tuesday’s miserable performance for the Republican Party. The first one — that fielding quality candidates matters — is the one GOP officials are eagerly messaging. But the second, perhaps more existential issue, is that President Donald Trump isn’t focused enough on the issues that matter most to the voters the party needs. ‘People don’t think he’s lived up to his promises,’ said one White House ally… ‘You won on lowering costs, putting more money back into people’s pockets. And people don’t feel that right now.’ The person noted parallels with former President Joe Biden, who he said insisted that America was on the upswing while people were struggling to make ends meet. ‘This is the problem Biden had,’ the person said.”
November 4 – Axios (Avery Lotz): “A majority of voters blame President Trump for rising prices, according to a recent poll… The cost of living is top of mind for Americans one year out from the 2026 election… A majority of U.S. adults say they’re spending more money on their groceries and utilities than they were last year, according to a Washington Post-ABC News-Ipsos poll conducted late last month. Some seven in 10 Americans say they’re spending more on groceries compared to last year. That comes as federal food assistance hangs in limbo amid a government shutdown and food banks brace for unprecedented need.”
November 2 – Bloomberg (MarÃa Paula Mijares Torres): “President Donald Trump said that immigration raids ‘haven’t gone far enough’ despite videos showing physical confrontations among federal agents, immigrants and protesters. ‘I think they haven’t gone far enough because we’ve been held back by the judges, by the liberal judges that were put in by Biden and by Obama,’ Trump said in an interview with CBS’ when asked if he approved of tactics shown in videos such as throwing people to the ground, smashing car windows and using tear gas in residential neighborhoods. Trump said the tactics used by immigration agents were acceptable ‘because you have to get the people out.’ Trump also repeated his claim that many of those detained had criminal records. Trump also said that he could use the Insurrection Act to use professional military, instead of the National Guard, to US cities ‘if I wanted to.’ ‘If you had to send in the Army or you had to send in the Marines I’d do that in a heartbeat,’ he said. ‘And no judge could challenge that’.”
November 5 – Axios (Colin Demarest): “Incredible amounts of U.S. firepower are coalescing in the Caribbean as President Trump plays geopolitical chicken with Venezuelan dictator Nicolás Maduro. U.S. Southern Command… is now at the heart of the action after decades of Pentagon priority paid to the Middle East and Indo-Pacific. America’s largest warship, the USS Gerald R. Ford, is steaming toward the region… The Ford and its escorts bring with them offensive and defensive punch — such as fighter, transport and early warning aircraft; helicopters; missiles; and jamming-and-spying tools — as well as thousands of troops. Vessels already in the region include the Iwo Jima, Gravely and Stockdale. Some are packing Tomahawks. Overhead, bombers are ducking in and out, prodding Caracas.”
November 2 – Financial Times (Peter Foster, Attracta Mooney and Kaye Wiggins): “Trump administration officials warned of additional trade tariffs and made personal threats against negotiators from other countries to block a historic climate deal for shipping, said people present at the talks. More than 10 diplomats, officials from other governments and industry observers told the Financial Times that the US ripped up normal global diplomacy rules and used ‘bully-boy tactics’ to derail the UN-backed Net Zero Framework for global shipping… last month. A phalanx of US officials intimidated African and small Pacific and Caribbean island countries into dropping support for the framework…”
November 3 – Reuters (Sarah N. Lynch, Chris Prentice and Marisa Taylor): “The internal watchdog for the U.S. Federal Housing Finance Agency is being removed from his role…, at a time when the housing regulator is playing a role in President Donald Trump's targeting of perceived political enemies. The ouster of Joe Allen, FHFA's acting inspector general, follows the agency’s director, Bill Pulte, becoming an outspoken voice in support of the Trump administration. Across the government, the Trump administration has so far fired or reassigned close to two dozen agency watchdogs, who police waste, fraud and abuse.”
China Trade War Watch:
November 2 – Axios (Aamer Madhani): “China has been an ‘unreliable partner’ in many ways, and the U.S. needs to get out from under the ‘sword’ of Chinese control of rare earth minerals, Treasury Secretary Scott Bessent said... The framework struck by the world's two largest economies isn’t even on paper yet, and already both sides are ramping up the rhetoric. It underlines concerns that the deal may not be lasting and may have only postponed trade tensions, rather than solving them. President Trump announced a framework trade deal with China early Thursday… Just a day later, Chinese leader Xi Jinping, at a summit in Asia, cautioned the world’s nations against taking the U.S. side in the ongoing dispute. ‘We don’t want to de-couple from China but we need to de-risk. They’ve shown themselves to be an unreliable partner in many areas,’ Bessent said…”
November 4 – Wall Street Journal (Yoko Kubota): “China has demonstrated it can weaponize its control over global supply chains by constricting the flow of critical rare-earth minerals… Beijing’s tools go beyond these critical minerals. Three other industries where China has a chokehold—lithium-ion batteries, mature chips and pharmaceutical ingredients—give an idea of what the U.S. would need to do to free itself fully from vulnerability. Behind China’s supply-chain dominance lie decadeslong industrial policies. Once Chinese companies have come to dominate a wide stretch of the supply chain, flooding global markets with lower-priced products in the process, Beijing brings in export controls that allow it to leverage its advantage and impose pain or threaten rival economies.”
November 3 – Financial Times (Zijing Wu and Eleanor Olcott): “China has increased subsidies that cut energy bills by up to half for some of the country’s largest data centres, as Beijing steps up efforts to boost its domestic chips industry and compete with the US. Local governments have beefed up incentives to help Chinese tech giants such as ByteDance, Alibaba and Tencent, which have been hit with higher electricity costs following Beijing’s ban on purchasing Nvidia’s artificial intelligence chips…”
November 3 – New York Times (Keith Bradsher): “President Trump has used tariffs to try to reduce American reliance on Chinese exports and prevent China’s factory overcapacity from swamping the U.S. economy. But his effort has hit an obstacle: Beijing was already well on its way to weaning its economy from the United States. For two decades, China has systematically pursued economic self-reliance. China has been able to establish choke points to pressure the U.S. economy, while making it harder for Washington to block China. Self-reliance has been a cornerstone of Chinese policymaking not just under Xi Jinping, the country’s top leader since 2012, but also under his predecessor, Hu Jintao.”
Trade War Watch:
November 5 – Financial Times (Peter Foster, Owen Walker and A. Anantha Lakshmi): “The Trump administration has added ‘poison pill’ termination clauses to trade pacts with south-east Asian countries, creating a new diplomatic weapon in Washington’s strategic competition with China. The clauses, embedded in two new deals signed with Malaysia and Cambodia last week, threaten to end the agreements if either country signs a rival pact that jeopardises ‘essential US interests’ or ‘poses a material threat’ to US security. Trade experts say the highly unusual and sweeping clauses amount to a ‘loyalty test’ for smaller countries that also have close trading relationships with China, and had the potential to reshape future US trade negotiations in south-east Asia and beyond.”
Constitution Watch:
November 6 – Associated Press (Paul Wiseman): “President Donald Trump has warned that the United States will be rendered ‘defenseless’ and possibly ‘reduced to almost Third World status’ if the Supreme Court strikes down the tariffs he imposed this year… The justices sounded skeptical during oral arguments… of his sweeping claims of authority to impose tariffs as he sees fit. The truth, though, is that Trump will still have plenty of options to keep taxing imports aggressively even if the court rules against him. He can re-use tariff powers he deployed in his first term and can reach for others, including one that dates back to the Great Depression. ‘It’s hard to see any pathway here where tariffs end,’ said Georgetown trade law professor Kathleen Claussen. ‘I am pretty convinced he could rebuild the tariff landscape he has now using other authorities.’”
November 4 – Axios (Courtenay Brown): “President Trump claimed… the U.S. would be ‘virtually defenseless’ against other nations if the Supreme Court strikes down a slew of tariffs... ‘Tomorrow’s United States Supreme Court case is, literally, LIFE OR DEATH for our Country,’ Trump posted…”
November 5 – Bloomberg (Greg Stohr): “US Supreme Court justices questioned President Donald Trump’s global tariffs, as arguments began in a case that could undercut his signature economic policy. Justices including John Roberts and Amy Coney Barrett pressed US Solicitor General D. John Sauer on his contention that a 1977 law designed for emergency situations gives Trump the authority to collect tens of billions of dollars in tariffs a month. ‘The vehicle is imposition of taxes on Americans, and that has always been the core power of Congress,” Roberts said.”
November 7 – Bloomberg (Ben Penn): “The South Florida US attorney’s office is recruiting prosecutors and restructuring its chain of command in preparation for a grand jury investigation expected to target former Justice Department officials and others involved in cases against President Donald Trump. Under the leadership of a Trump-loyalist US attorney, Jason Reding Quiñones, the Miami-based office has been inviting current staff and outside lawyers to join the new investigative team to be housed within its national security unit, said four people familiar with the situation.”
Government Shutdown/Budget Deficit Watch:
November 7 – Bloomberg (Allyson Versprille): “Flight reductions in the US could escalate to as much as 20% if the ongoing government shutdown leads to worsening air traffic control staffing, Transportation Secretary Sean Duffy said… The Federal Aviation Administration on Friday began implementing flight reductions at 40 key airports across the US in a bid to reduce the impact of staffing issues brought about by the shutdown.”
Government Shutdown/Budget Deficit Watch:
November 7 – Bloomberg (Allyson Versprille): “Flight reductions in the US could escalate to as much as 20% if the ongoing government shutdown leads to worsening air traffic control staffing, Transportation Secretary Sean Duffy said… The Federal Aviation Administration on Friday began implementing flight reductions at 40 key airports across the US in a bid to reduce the impact of staffing issues brought about by the shutdown.”
November 4 – Bloomberg (Gregory Korte): “The US government has reached a major milestone of dysfunction as Congress has allowed a federal shutdown to drag into its 36th day — the longest in history — amid a stalemate over health-care and spending priorities. As the standoff continues, the economic pain is deepening. Budget maneuvers to pay active-duty troops and partially fund food aid will likely run out before the end of November. Air traffic controllers working without pay are calling out at higher rates as one of the busiest travel periods of the year approaches.”
November 5 – Bloomberg (Michael MacKenzie and Chris Anstey): “The US Treasury indicated it’s not looking to boost sales of notes and bonds until well into next year, in a decision that will see the government increasingly rely on bills to fund the budget deficit. In its so-called quarterly refunding statement…, the department said it anticipated keeping auction sizes unchanged for nominal notes, bonds and floating-rate notes, ‘for at least the next several quarters’… Next week’s auctions of 3-, 10- and 30-year maturities will total $125 billion, the same amount going back to May last year.”
U.S./Russia/China/Europe/Iran Watch:
November 1 – New York Times (Paul Sonne): “First came President Trump’s scrapping of a proposed summit in Budapest on the war in Ukraine and his imposition of sanctions on Russia. Then came the announcements by President Vladimir V. Putin that Russia had successfully tested two menacing nuclear-capable weapons designed for possible doomsday combat against the United States. The timing may not have been coincidental, analysts say, and Mr. Putin’s point was clear: Given the serious threat of Russia’s nuclear arsenal, the United States will ultimately need to respect Moscow’s power and negotiate — like it or not. It’s a message the Kremlin has relied on in its brinkmanship with the United States dating back to the days of the Cold War…”
November 5 – Bloomberg: “President Vladimir Putin said Russia has no plans to violate existing agreements on nuclear testing, but signaled that he’s ready to order them if Donald Trump moves forward with threatened US atomic weapons trials. ‘Russia has always strictly adhered to its obligations under the Comprehensive Nuclear-Test-Ban Treaty, and we have no plans to deviate from these commitments,’ Putin said… Moscow would ‘take appropriate retaliatory measures’ if the US or another power conducted such a test, he said.”
November 2 – Associated Press (Aamer Madhani): “President Donald Trump says that Chinese President Xi Jinping has given him assurances that Beijing would take no action toward its long-stated goal of unifying Taiwan with mainland China while the Republican leader is in office. Trump said that the long-contentious issue of Taiwan did not come up in his talks with Xi… But the U.S. leader expressed certainty that China would not take action on Taiwan, while he’s in office. ‘He has openly said, and his people have openly said at meetings, ‘We would never do anything while President Trump is president,’ because they know the consequences,’ Trump said…”
November 1 – Wall Street Journal (Rebecca Feng): “China has spent months building up its oil reserves… During the first nine months of the year, the world’s second-largest economy imported on average more than 11 million barrels of oil a day… Analysts estimate 1 million to 1.2 million of those barrels were stashed in reserves each day… China is the world’s biggest importer of crude and the largest buyer of Russian oil. Energy security has long been a priority for China’s leaders. The country’s dependence on foreign nations for its crude oil—China imports about 70% of the oil it consumes—is a headache. ‘The energy rice bowl must be held in our own hands,’ Chinese leader Xi Jinping has said repeatedly over the years.”
New World Order Watch:
November 4 – Bloomberg (Catherine Wong): “China and Russia should steadily expand mutual investment and deepen cooperation in traditional sectors such as energy, agriculture, and aerospace, Chinese President Xi Jinping says in a meeting with Russian Prime Minister Mikhail Mishustin... Xi also calls on both nations to tap into the potential of emerging industries like artificial intelligence, digital economy, and green development to create new drivers of growth… Xi adds that strengthening China-Russia relationship is a strategic choice for both sides.”
Ukraine War Watch:
November 3 – Reuters (Yuliia Dysa, Mark Trevelyan and Lucy Papachristou): “Russia said… its troops had advanced in the eastern Ukrainian city of Pokrovsk, a transport and logistics hub that they have been trying to capture for over a year, but Ukraine said its forces were holding on. The Russian Defence Ministry said its soldiers were destroying what it described as surrounded Ukrainian formations near Pokrovsk’s railway station and industrial zone, and had entered the city’s Prigorodny area and dug in there.”
November 3 – Bloomberg (Alex Wickham): “The UK government recently resupplied Ukraine with more Storm Shadow cruise missiles to enable Kyiv to continue its campaign of long-range strikes inside Russia… The delivery of an unspecified number of missiles was made to ensure Ukraine is stocked ahead of the winter months… As Russia increasingly struggles under the weight of sanctions, the UK and its allies are trying to show Vladimir Putin that Western support for Ukraine will outlast the ability of the Russian economy to sustain its war effort.”
Taiwan Watch:
November 1 – Bloomberg (Aya Wagatsuma, Yian Lee, and James Mayger): “China criticized Japan’s Prime Minister Sanae Takaichi for meeting with Taiwan officials on the sidelines of the Asia-Pacific Economic Cooperation summit and her subsequent social media posts about the discussions. ‘Those actions are egregious in nature and impact,’ China’s Ministry of Foreign Affairs said… ‘China expresses its firm opposition and has made serious demarches and protests to Japan.’ Takaichi met Lin Hsin-i, an advisor to Taiwan’s President Lai Ching-te, on Friday and Saturday, according to X posts by the Japanese prime minister. She said in one of the posts that she looks forward to deepening cooperation between Japan and Taiwan.”
November 2 – Bloomberg (Yian Lee): “President Donald Trump said China knows the risks of any attack on Taiwan but refrained from explicitly saying the US would intervene militarily… Speaking in an interview… with CBS’s 60 Minutes, Trump said that Chinese leader Xi Jinping ‘understands what will happen’ if the People’s Liberation Army tried to invade. When pressed by host Norah O’Donnell on what that meant exactly, Trump said: ‘I don’t want to give away, I can’t give away my secrets’.”
AI Bubble/Arms Race Watch:
November 3 – Financial Times (George Hammond and Rafe Rosner-Uddin): “OpenAI has signed a $38bn deal with Amazon Web Services, the latest in a string of agreements struck by the lossmaking start-up as it races to secure computing power. The seven-year deal, which takes OpenAI’s total recent commitments to close to $1.5tn, will allow the company to make immediate use of AWS infrastructure — including Nvidia chips — to run its products. The arrangement ties the ChatGPT maker more closely to Amazon… Amazon’s share price rose more than 5% to a record high in early trading. OpenAI has struck a series of massive deals this year with companies including Nvidia, AMD, Oracle, Broadcom, Google and Samsung. These contracts commit the company to spending close to $1.5tn on computing resources, but they are structured such that OpenAI pays in increments as new power is developed and delivered.”
November 4 – Wall Street Journal (Paul Vieira): “The artificial-intelligence trade is starting to make investors nervous… The major stock indexes rallied in April in part on optimism over the AI boom, and still aren’t far from their record highs. But in recent days, investors have appeared to flinch at news that Meta, Alphabet, Microsoft and Amazon.com all intend to spend even more in 2026 on their AI build-outs. ‘It’s a very big bet and I think the market is starting to treat it like a very big bet,’ said Jason Pride, chief of investment strategy and research at Glenmede.”
November 3 – Bloomberg (Helene Durand, Brian Smith and Caleb Mutua): “Alphabet Inc. sold $17.5 billion of bonds in the US, after issuing €6.5 billion ($7.48bn) of notes in Europe, adding to a wave of borrowing from technology companies as they invest aggressively in artificial intelligence… Morgan Stanley expects big firms known as hyperscalers to spend about $3 trillion on infrastructure such as data centers between now and 2028. Cash flow can fund about half of that, but debt will be a significant source of funds too.”
October 28 – Wall Street Journal (Jonathan Weil): “How long can Microsoft expect investors to tolerate big losses from OpenAI without getting antsy? It’s hard to say when Microsoft won’t even provide a clear number for the size of the losses. In its latest annual report, for the fiscal year ended June 30, Microsoft said it included the losses from its OpenAI stake in a $4.7 billion expense line called ‘other, net.’ The losses from OpenAI might have been larger than that, or smaller. Microsoft didn’t say. The expense line combined a hodgepodge of items, positive and negative.”
November 2 – Reuters (Alexandra Alper): “Artificial intelligence giant Nvidia's most advanced chips will be reserved for U.S. companies and kept out of China and other countries, U.S. President Donald Trump said. During… CBS’ ‘60 Minutes’ program and in comments to reporters aboard Air Force One, Trump said only U.S. customers should have access to the top-end Blackwell…”
November 3 – Bloomberg (Heesu Lee): “South Korean President Lee Jae Myung placed artificial intelligence at the heart of his administration’s economic vision, pledging to transform the country’s industries, public services and defense through aggressive AI investment and policy support. Delivering his first annual budget address to parliament since taking office in June, Lee described the 2026 budget plan as ‘the first national budget for the AI era,’ signaling a sweeping policy shift…”
Bubble and Mania Watch:
November 5 – Reuters (Oliver Griffin): “The world should watch out for three possible bubbles in financial markets, including artificial intelligence, the head of the World Economic Forum said…, in comments that came amid sharp falls in global technology stocks. Brokers and analysts say the falls are a cause for caution but not panic as markets have been touching record highs and some valuations are looking overblown. ‘We could possibly see bubbles moving forward. One is a crypto bubble, second an AI bubble, and the third would be a debt bubble,’ WEF president Borge Brende told reporters…”
November 4 – Reuters (Manya Saini and Niket Nishant): “CEOs of Wall Street heavyweights Morgan Stanley and Goldman Sachs… cautioned that equity markets could be heading toward a drawdown, underscoring growing concerns over sky-high valuations. Fears of a market bubble come as the benchmark S&P 500 continues its meteoric climb... ‘We should welcome the possibility that there would be drawdowns, 10% to 15%, that are not driven by some sort of macro cliff effect,’ Morgan Stanley CEO Ted Pick said… Markets have so far largely brushed aside concerns about inflation, elevated interest rates, policy uncertainty from shifting trade dynamics and the ongoing federal government shutdown, now in its fifth week. ‘When you have these cycles, things can run for a period of time. But there are things that will change sentiment and will create drawdowns, or change the perspective on the growth trajectory, and none of us are smart enough to see them until they actually occur,’ Goldman CEO David Solomon said…”
November 4 – Bloomberg (Alice French and Aya Wagatsuma): “Japanese shares dropped Wednesday as a global pullback in risk appetite weighed on tech stocks amid concern that AI bullishness has pushed their valuations too far. The blue-chip Nikkei 225 gauge plunged 4.7% at one point before closing 2.5% down, with the broader Topix Index losing 1.3%. Both benchmarks saw their steepest intraday declines since April 11 earlier in the day.”
November 5 – Bloomberg (Georgie McKay and Matthew Griffin): “Robinhood Markets Inc. has been one of Wall Street’s biggest winners since Donald Trump’s election victory… Shares of the platform — used to trade stocks, cryptocurrencies and other assets — have soared around 450% since Trump’s win last November through Tuesday’s close, making it the biggest gainer among companies that were worth at least $10 billion ahead of the 2024 election…”
November 5 – Bloomberg (Suvashree Ghosh and Alice French): “The trade was simple — and worked until it didn’t. Wrap crypto in a stock ticker. Call it innovation. Ride the wave. This week, with the crypto complex buckling alongside a tech-stock selloff, that wave is crashing. And some of its biggest promoters — including President Donald Trump ally David Bailey, Ethereum bull Tom Lee and Bitcoin evangelist Michael Saylor — must now deal with the fallout. Bitcoin’s slide below $100,000 for the first time since June has ratcheted up pressure on shares in digital-asset treasury firms, or DATs…”
November 4 – Bloomberg (Paul J. Davies): “The rebirth of private equity dealmaking has been supposedly just around the corner for well over a year. But even as investment bankers cheer a rush of mergers & acquisitions and the reopening of the market for initial public offerings, many financial sponsors are still struggling to catch the same wave. The lack of exits from portfolio companies by private equity has been a burden since interest rates shot higher in 2022. It’s left many managers struggling to raise fresh money from investors amid a drought of payouts in the other direction. It also led sponsors to hunt out new and potentially riskier ways to return cash to their backers.”
November 3 – Financial Times (Alexandra Heal): “An influential group representing some of the private equity industry’s largest backers has sounded the alarm about the risks to institutional investors from a rush of retail money into the sector. The number of deals needed to deploy wealthy individuals’ cash could pull managers’ attention away from investing the capital of pension plans and endowments, the Institutional Limited Partners Association warned… The flood of retail money could ‘fundamentally alter the landscape of private equity’, said Neal Prunier, managing director of industry affairs at ILPA.”
Federal Reserve Watch:
November 3 – Reuters (Howard Schneider): “U.S. Federal Reserve Governor Lisa Cook… said it took a ‘thick skin’ to pursue public service in the U.S. and pledged to fulfill the mandate given… to defend the central bank’s inflation and employment targets. Top public jobs ‘are definitely worth the scrutiny... I had to learn to have a thick skin if I thought the principle was worth pursuing,’ Cook said… Central bank independence ‘is something worth pursuing,’ she said. ‘This too shall pass. I will continue doing this work on behalf of the American people... I will execute this charge given by Congress.’”
October 31 – Bloomberg (Catarina Saraiva, Alexandra Harris and Jonnelle Marte): “Three US central bank officials said they did not support a decision to cut interest rates this week, underscoring… that another reduction in December is far from guaranteed. Dallas Fed President Lorie Logan and her Cleveland counterpart, Beth Hammack, said… they would have preferred to hold rates steady. Both were speaking… following a statement earlier in the day from Kansas City Fed President Jeff Schmid outlining the reasons for his dissent… The remarks from Logan, Hammack and Schmid were the first salvo in what is likely to be an intense debate over the next six weeks before the central bank’s next policy meeting in December…”
November 6 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Cleveland President Beth Hammack said monetary policy should continue putting downward pressure on inflation, which she says is too high and remains a bigger risk for the US central bank than labor-market weakness. ‘I remain concerned about high inflation and believe policy should be leaning against it,’ Hammack said… ‘To me, comparing the size and persistence of our mandate misses and the risks, inflation is the more pressing concern,’ she said.”
November 3 – Yahoo Finance (Jennifer Schonberger): “Chicago Federal Reserve president Austan Goolsbee said he is undecided about whether to cut interest rates again in December. The threshold for cutting again is higher… given inflation concerns and lack of official economic data. ‘I’m not decided going into the December meeting,’ Goolsbee told Yahoo Finance... ‘I am nervous about the inflation side of the ledger, where you’ve seen inflation above the target for 4.5 years and it’s trending the wrong way’… He said he remains worried about ‘front-loading rate cuts,’ noting that core inflation over the past three months has been running at 3.6% on an annualized basis, while core services inflation has been closer to 4% for the same period… ‘That’s worrying because that’s going the wrong way,’ he said. ‘If we’re just counting on that to go away because it’s transitory, that makes me uneasy.’”
November 3 – Reuters (Howard Schneider and Ann Saphir): “…Fed Governor Stephen Miran restated the case for deep interest rate cuts that he has voted for since joining the central bank's Board of Governors in September. He argued buoyant stock and corporate credit markets are no reasons to think monetary policy is too loose. ‘Financial markets are driven by a lot of things, not just monetary policy,’ said Miran…, in explaining why he dissented last week against the Fed's decision in favor of a bigger half-percentage-point reduction.”
November 3 – Bloomberg (James Crombie): “Pumped up asset prices bolster a hawkish stance from US policymakers, but Federal Reserve Governor Stephen Miran says private debt trouble supports the case for easier policy. While he may be clutching at dovish straws, Miran does make an important point that visible junk debt pricing is an unreliable gauge of risk. ‘I wonder if what we’re seeing now in some of the distresses that you see in private markets means that financial conditions have actually been tighter, but it’s masked by the fact we don’t get marks for those on a regular basis,’ Miran said…”
November 2 – Reuters (Andrea Shalal): “Parts of the U.S. economy, particularly housing, may already be in recession because of high interest rates, U.S. Treasury Secretary Scott Bessent said…, repeating his call for the Federal Reserve to accelerate rate cuts. ‘I think that we are in good shape, but I think that there are sectors of the economy that are in recession,’ Bessent said... ‘And the Fed has caused a lot of distributional problems with their policies.’”
November 4 – New York Times (Alan Rappeport and Colby Smith): “The Trump administration is wielding the possibility that parts of the economy are in a recession as it raises pressure on the Federal Reserve to cut interest rates, hoping to ensure that the central bank will bear the blame for any economic weakness. Treasury Secretary Scott Bessent and Stephen Miran… this week struck a downbeat tone about the health of the world’s largest economy. Mr. Bessent went so far as to say some sectors were already contracting... ‘I think that there are sectors of the economy that are in recession,’ Mr. Bessent said… He described the economy as being in a ‘period of transition’ because of a pullback in government spending to reduce the deficit. He called on the Fed to support the economy by cutting interest rates.”
November 5 – Bloomberg (Michael MacKenzie and Chris Anstey): “The US Treasury indicated it’s not looking to boost sales of notes and bonds until well into next year, in a decision that will see the government increasingly rely on bills to fund the budget deficit. In its so-called quarterly refunding statement…, the department said it anticipated keeping auction sizes unchanged for nominal notes, bonds and floating-rate notes, ‘for at least the next several quarters’… Next week’s auctions of 3-, 10- and 30-year maturities will total $125 billion, the same amount going back to May last year.”
U.S./Russia/China/Europe/Iran Watch:
November 1 – New York Times (Paul Sonne): “First came President Trump’s scrapping of a proposed summit in Budapest on the war in Ukraine and his imposition of sanctions on Russia. Then came the announcements by President Vladimir V. Putin that Russia had successfully tested two menacing nuclear-capable weapons designed for possible doomsday combat against the United States. The timing may not have been coincidental, analysts say, and Mr. Putin’s point was clear: Given the serious threat of Russia’s nuclear arsenal, the United States will ultimately need to respect Moscow’s power and negotiate — like it or not. It’s a message the Kremlin has relied on in its brinkmanship with the United States dating back to the days of the Cold War…”
November 5 – Bloomberg: “President Vladimir Putin said Russia has no plans to violate existing agreements on nuclear testing, but signaled that he’s ready to order them if Donald Trump moves forward with threatened US atomic weapons trials. ‘Russia has always strictly adhered to its obligations under the Comprehensive Nuclear-Test-Ban Treaty, and we have no plans to deviate from these commitments,’ Putin said… Moscow would ‘take appropriate retaliatory measures’ if the US or another power conducted such a test, he said.”
November 2 – Associated Press (Aamer Madhani): “President Donald Trump says that Chinese President Xi Jinping has given him assurances that Beijing would take no action toward its long-stated goal of unifying Taiwan with mainland China while the Republican leader is in office. Trump said that the long-contentious issue of Taiwan did not come up in his talks with Xi… But the U.S. leader expressed certainty that China would not take action on Taiwan, while he’s in office. ‘He has openly said, and his people have openly said at meetings, ‘We would never do anything while President Trump is president,’ because they know the consequences,’ Trump said…”
November 1 – Wall Street Journal (Rebecca Feng): “China has spent months building up its oil reserves… During the first nine months of the year, the world’s second-largest economy imported on average more than 11 million barrels of oil a day… Analysts estimate 1 million to 1.2 million of those barrels were stashed in reserves each day… China is the world’s biggest importer of crude and the largest buyer of Russian oil. Energy security has long been a priority for China’s leaders. The country’s dependence on foreign nations for its crude oil—China imports about 70% of the oil it consumes—is a headache. ‘The energy rice bowl must be held in our own hands,’ Chinese leader Xi Jinping has said repeatedly over the years.”
New World Order Watch:
November 4 – Bloomberg (Catherine Wong): “China and Russia should steadily expand mutual investment and deepen cooperation in traditional sectors such as energy, agriculture, and aerospace, Chinese President Xi Jinping says in a meeting with Russian Prime Minister Mikhail Mishustin... Xi also calls on both nations to tap into the potential of emerging industries like artificial intelligence, digital economy, and green development to create new drivers of growth… Xi adds that strengthening China-Russia relationship is a strategic choice for both sides.”
Ukraine War Watch:
November 3 – Reuters (Yuliia Dysa, Mark Trevelyan and Lucy Papachristou): “Russia said… its troops had advanced in the eastern Ukrainian city of Pokrovsk, a transport and logistics hub that they have been trying to capture for over a year, but Ukraine said its forces were holding on. The Russian Defence Ministry said its soldiers were destroying what it described as surrounded Ukrainian formations near Pokrovsk’s railway station and industrial zone, and had entered the city’s Prigorodny area and dug in there.”
November 3 – Bloomberg (Alex Wickham): “The UK government recently resupplied Ukraine with more Storm Shadow cruise missiles to enable Kyiv to continue its campaign of long-range strikes inside Russia… The delivery of an unspecified number of missiles was made to ensure Ukraine is stocked ahead of the winter months… As Russia increasingly struggles under the weight of sanctions, the UK and its allies are trying to show Vladimir Putin that Western support for Ukraine will outlast the ability of the Russian economy to sustain its war effort.”
Taiwan Watch:
November 1 – Bloomberg (Aya Wagatsuma, Yian Lee, and James Mayger): “China criticized Japan’s Prime Minister Sanae Takaichi for meeting with Taiwan officials on the sidelines of the Asia-Pacific Economic Cooperation summit and her subsequent social media posts about the discussions. ‘Those actions are egregious in nature and impact,’ China’s Ministry of Foreign Affairs said… ‘China expresses its firm opposition and has made serious demarches and protests to Japan.’ Takaichi met Lin Hsin-i, an advisor to Taiwan’s President Lai Ching-te, on Friday and Saturday, according to X posts by the Japanese prime minister. She said in one of the posts that she looks forward to deepening cooperation between Japan and Taiwan.”
November 2 – Bloomberg (Yian Lee): “President Donald Trump said China knows the risks of any attack on Taiwan but refrained from explicitly saying the US would intervene militarily… Speaking in an interview… with CBS’s 60 Minutes, Trump said that Chinese leader Xi Jinping ‘understands what will happen’ if the People’s Liberation Army tried to invade. When pressed by host Norah O’Donnell on what that meant exactly, Trump said: ‘I don’t want to give away, I can’t give away my secrets’.”
AI Bubble/Arms Race Watch:
November 3 – Financial Times (George Hammond and Rafe Rosner-Uddin): “OpenAI has signed a $38bn deal with Amazon Web Services, the latest in a string of agreements struck by the lossmaking start-up as it races to secure computing power. The seven-year deal, which takes OpenAI’s total recent commitments to close to $1.5tn, will allow the company to make immediate use of AWS infrastructure — including Nvidia chips — to run its products. The arrangement ties the ChatGPT maker more closely to Amazon… Amazon’s share price rose more than 5% to a record high in early trading. OpenAI has struck a series of massive deals this year with companies including Nvidia, AMD, Oracle, Broadcom, Google and Samsung. These contracts commit the company to spending close to $1.5tn on computing resources, but they are structured such that OpenAI pays in increments as new power is developed and delivered.”
November 4 – Wall Street Journal (Paul Vieira): “The artificial-intelligence trade is starting to make investors nervous… The major stock indexes rallied in April in part on optimism over the AI boom, and still aren’t far from their record highs. But in recent days, investors have appeared to flinch at news that Meta, Alphabet, Microsoft and Amazon.com all intend to spend even more in 2026 on their AI build-outs. ‘It’s a very big bet and I think the market is starting to treat it like a very big bet,’ said Jason Pride, chief of investment strategy and research at Glenmede.”
November 3 – Bloomberg (Helene Durand, Brian Smith and Caleb Mutua): “Alphabet Inc. sold $17.5 billion of bonds in the US, after issuing €6.5 billion ($7.48bn) of notes in Europe, adding to a wave of borrowing from technology companies as they invest aggressively in artificial intelligence… Morgan Stanley expects big firms known as hyperscalers to spend about $3 trillion on infrastructure such as data centers between now and 2028. Cash flow can fund about half of that, but debt will be a significant source of funds too.”
October 28 – Wall Street Journal (Jonathan Weil): “How long can Microsoft expect investors to tolerate big losses from OpenAI without getting antsy? It’s hard to say when Microsoft won’t even provide a clear number for the size of the losses. In its latest annual report, for the fiscal year ended June 30, Microsoft said it included the losses from its OpenAI stake in a $4.7 billion expense line called ‘other, net.’ The losses from OpenAI might have been larger than that, or smaller. Microsoft didn’t say. The expense line combined a hodgepodge of items, positive and negative.”
November 2 – Reuters (Alexandra Alper): “Artificial intelligence giant Nvidia's most advanced chips will be reserved for U.S. companies and kept out of China and other countries, U.S. President Donald Trump said. During… CBS’ ‘60 Minutes’ program and in comments to reporters aboard Air Force One, Trump said only U.S. customers should have access to the top-end Blackwell…”
November 3 – Bloomberg (Heesu Lee): “South Korean President Lee Jae Myung placed artificial intelligence at the heart of his administration’s economic vision, pledging to transform the country’s industries, public services and defense through aggressive AI investment and policy support. Delivering his first annual budget address to parliament since taking office in June, Lee described the 2026 budget plan as ‘the first national budget for the AI era,’ signaling a sweeping policy shift…”
Bubble and Mania Watch:
November 5 – Reuters (Oliver Griffin): “The world should watch out for three possible bubbles in financial markets, including artificial intelligence, the head of the World Economic Forum said…, in comments that came amid sharp falls in global technology stocks. Brokers and analysts say the falls are a cause for caution but not panic as markets have been touching record highs and some valuations are looking overblown. ‘We could possibly see bubbles moving forward. One is a crypto bubble, second an AI bubble, and the third would be a debt bubble,’ WEF president Borge Brende told reporters…”
November 4 – Reuters (Manya Saini and Niket Nishant): “CEOs of Wall Street heavyweights Morgan Stanley and Goldman Sachs… cautioned that equity markets could be heading toward a drawdown, underscoring growing concerns over sky-high valuations. Fears of a market bubble come as the benchmark S&P 500 continues its meteoric climb... ‘We should welcome the possibility that there would be drawdowns, 10% to 15%, that are not driven by some sort of macro cliff effect,’ Morgan Stanley CEO Ted Pick said… Markets have so far largely brushed aside concerns about inflation, elevated interest rates, policy uncertainty from shifting trade dynamics and the ongoing federal government shutdown, now in its fifth week. ‘When you have these cycles, things can run for a period of time. But there are things that will change sentiment and will create drawdowns, or change the perspective on the growth trajectory, and none of us are smart enough to see them until they actually occur,’ Goldman CEO David Solomon said…”
November 4 – Bloomberg (Alice French and Aya Wagatsuma): “Japanese shares dropped Wednesday as a global pullback in risk appetite weighed on tech stocks amid concern that AI bullishness has pushed their valuations too far. The blue-chip Nikkei 225 gauge plunged 4.7% at one point before closing 2.5% down, with the broader Topix Index losing 1.3%. Both benchmarks saw their steepest intraday declines since April 11 earlier in the day.”
November 5 – Bloomberg (Georgie McKay and Matthew Griffin): “Robinhood Markets Inc. has been one of Wall Street’s biggest winners since Donald Trump’s election victory… Shares of the platform — used to trade stocks, cryptocurrencies and other assets — have soared around 450% since Trump’s win last November through Tuesday’s close, making it the biggest gainer among companies that were worth at least $10 billion ahead of the 2024 election…”
November 5 – Bloomberg (Suvashree Ghosh and Alice French): “The trade was simple — and worked until it didn’t. Wrap crypto in a stock ticker. Call it innovation. Ride the wave. This week, with the crypto complex buckling alongside a tech-stock selloff, that wave is crashing. And some of its biggest promoters — including President Donald Trump ally David Bailey, Ethereum bull Tom Lee and Bitcoin evangelist Michael Saylor — must now deal with the fallout. Bitcoin’s slide below $100,000 for the first time since June has ratcheted up pressure on shares in digital-asset treasury firms, or DATs…”
November 4 – Bloomberg (Paul J. Davies): “The rebirth of private equity dealmaking has been supposedly just around the corner for well over a year. But even as investment bankers cheer a rush of mergers & acquisitions and the reopening of the market for initial public offerings, many financial sponsors are still struggling to catch the same wave. The lack of exits from portfolio companies by private equity has been a burden since interest rates shot higher in 2022. It’s left many managers struggling to raise fresh money from investors amid a drought of payouts in the other direction. It also led sponsors to hunt out new and potentially riskier ways to return cash to their backers.”
November 3 – Financial Times (Alexandra Heal): “An influential group representing some of the private equity industry’s largest backers has sounded the alarm about the risks to institutional investors from a rush of retail money into the sector. The number of deals needed to deploy wealthy individuals’ cash could pull managers’ attention away from investing the capital of pension plans and endowments, the Institutional Limited Partners Association warned… The flood of retail money could ‘fundamentally alter the landscape of private equity’, said Neal Prunier, managing director of industry affairs at ILPA.”
Federal Reserve Watch:
November 3 – Reuters (Howard Schneider): “U.S. Federal Reserve Governor Lisa Cook… said it took a ‘thick skin’ to pursue public service in the U.S. and pledged to fulfill the mandate given… to defend the central bank’s inflation and employment targets. Top public jobs ‘are definitely worth the scrutiny... I had to learn to have a thick skin if I thought the principle was worth pursuing,’ Cook said… Central bank independence ‘is something worth pursuing,’ she said. ‘This too shall pass. I will continue doing this work on behalf of the American people... I will execute this charge given by Congress.’”
October 31 – Bloomberg (Catarina Saraiva, Alexandra Harris and Jonnelle Marte): “Three US central bank officials said they did not support a decision to cut interest rates this week, underscoring… that another reduction in December is far from guaranteed. Dallas Fed President Lorie Logan and her Cleveland counterpart, Beth Hammack, said… they would have preferred to hold rates steady. Both were speaking… following a statement earlier in the day from Kansas City Fed President Jeff Schmid outlining the reasons for his dissent… The remarks from Logan, Hammack and Schmid were the first salvo in what is likely to be an intense debate over the next six weeks before the central bank’s next policy meeting in December…”
November 6 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Cleveland President Beth Hammack said monetary policy should continue putting downward pressure on inflation, which she says is too high and remains a bigger risk for the US central bank than labor-market weakness. ‘I remain concerned about high inflation and believe policy should be leaning against it,’ Hammack said… ‘To me, comparing the size and persistence of our mandate misses and the risks, inflation is the more pressing concern,’ she said.”
November 3 – Yahoo Finance (Jennifer Schonberger): “Chicago Federal Reserve president Austan Goolsbee said he is undecided about whether to cut interest rates again in December. The threshold for cutting again is higher… given inflation concerns and lack of official economic data. ‘I’m not decided going into the December meeting,’ Goolsbee told Yahoo Finance... ‘I am nervous about the inflation side of the ledger, where you’ve seen inflation above the target for 4.5 years and it’s trending the wrong way’… He said he remains worried about ‘front-loading rate cuts,’ noting that core inflation over the past three months has been running at 3.6% on an annualized basis, while core services inflation has been closer to 4% for the same period… ‘That’s worrying because that’s going the wrong way,’ he said. ‘If we’re just counting on that to go away because it’s transitory, that makes me uneasy.’”
November 3 – Reuters (Howard Schneider and Ann Saphir): “…Fed Governor Stephen Miran restated the case for deep interest rate cuts that he has voted for since joining the central bank's Board of Governors in September. He argued buoyant stock and corporate credit markets are no reasons to think monetary policy is too loose. ‘Financial markets are driven by a lot of things, not just monetary policy,’ said Miran…, in explaining why he dissented last week against the Fed's decision in favor of a bigger half-percentage-point reduction.”
November 3 – Bloomberg (James Crombie): “Pumped up asset prices bolster a hawkish stance from US policymakers, but Federal Reserve Governor Stephen Miran says private debt trouble supports the case for easier policy. While he may be clutching at dovish straws, Miran does make an important point that visible junk debt pricing is an unreliable gauge of risk. ‘I wonder if what we’re seeing now in some of the distresses that you see in private markets means that financial conditions have actually been tighter, but it’s masked by the fact we don’t get marks for those on a regular basis,’ Miran said…”
November 2 – Reuters (Andrea Shalal): “Parts of the U.S. economy, particularly housing, may already be in recession because of high interest rates, U.S. Treasury Secretary Scott Bessent said…, repeating his call for the Federal Reserve to accelerate rate cuts. ‘I think that we are in good shape, but I think that there are sectors of the economy that are in recession,’ Bessent said... ‘And the Fed has caused a lot of distributional problems with their policies.’”
November 4 – New York Times (Alan Rappeport and Colby Smith): “The Trump administration is wielding the possibility that parts of the economy are in a recession as it raises pressure on the Federal Reserve to cut interest rates, hoping to ensure that the central bank will bear the blame for any economic weakness. Treasury Secretary Scott Bessent and Stephen Miran… this week struck a downbeat tone about the health of the world’s largest economy. Mr. Bessent went so far as to say some sectors were already contracting... ‘I think that there are sectors of the economy that are in recession,’ Mr. Bessent said… He described the economy as being in a ‘period of transition’ because of a pullback in government spending to reduce the deficit. He called on the Fed to support the economy by cutting interest rates.”
November 7 – Bloomberg (Enda Curran): “BlackRock Inc. executive Rick Rieder, who is among those being considered to succeed Federal Reserve Chair Jerome Powell, said the labor market is softening and interest rates should be lowered to 3%. ‘We have a softening of the labor market that is quite significant,’ Rieder told Bloomberg Television…”
U.S. Economic Bubble Watch:
November 5 – Bloomberg (Nazmul Ahasan): “US services activity expanded in October at the fastest pace in eight months on a swift upturn in the growth of new orders. The Institute for Supply Management’s index of services rose 2.4 points last month to 52.4... Readings above 50 indicate expansion in the largest part of the economy, and the latest figure exceeded all projections… The orders index jumped 5.8 points to a one-year high of 56.2. The business activity index, which parallels the ISM’s factory output gauge, swung back into expansion territory having advanced 4.4 points to 54.3… The group’s prices-paid index rose to a three-year high of 70, indicating the services economy is bearing a bigger brunt of higher US import duties.”
U.S. Economic Bubble Watch:
November 5 – Bloomberg (Nazmul Ahasan): “US services activity expanded in October at the fastest pace in eight months on a swift upturn in the growth of new orders. The Institute for Supply Management’s index of services rose 2.4 points last month to 52.4... Readings above 50 indicate expansion in the largest part of the economy, and the latest figure exceeded all projections… The orders index jumped 5.8 points to a one-year high of 56.2. The business activity index, which parallels the ISM’s factory output gauge, swung back into expansion territory having advanced 4.4 points to 54.3… The group’s prices-paid index rose to a three-year high of 70, indicating the services economy is bearing a bigger brunt of higher US import duties.”
November 7 – Bloomberg (Nazmul Ahasan): “US consumer sentiment tumbled to near the lowest on record as the government shutdown weighed on the economic outlook and high prices soured views about personal finances. The preliminary November sentiment index dropped 3.3 points to 50.3, just above a June 2022 reading of 50 that was the weakest in University of Michigan data back to 1978…. A measure of current economic conditions slumped 6.3 points to a record low of 52.3 as anxiety mounted about the impact from the government shutdown.”
November 3 – Bloomberg (Nazmul Ahasan): “US factory activity shrank in October for an eighth straight month, driven by a pullback in production and tepid demand. The Institute for Supply Management’s manufacturing index eased 0.4 point to 48.7… The group’s production index slid 2.8 points to 48.2, marking the second month in the last three that output has contracted… The ISM’s employment gauge shrank for a ninth straight month, albeit at a slightly slower pace than in September.”
November 6 - CNBC (Jeff Cox): “Layoff announcements soared in October…, according to outplacement firm Challenger, Gray & Christmas. Job cuts for the month totaled 153,074, a 183% surge from September and 175% higher than the same month a year ago. It was the highest level for any October since 2003. This has been the worst year for announced layoffs since 2009. ‘Like in 2003, a disruptive technology is changing the landscape,’ said Andy Challenger… ‘At a time when job creation is at its lowest point in years, the optics of announcing layoffs in the fourth quarter are particularly unfavorable.’”
November 6 – Wall Street Journal (Harriet Torry): “Employers said they cut more than a million jobs so far this year, a sharp rise in job losses compared with the same period last year… The report, from consulting firm Challenger, Gray and Christmas, tracks job losses each month… Through October, employers reported slashing 1,099,500 jobs, an increase of 65% from the first 10 months of last year. That is up 44% from the 761,358 cuts announced in all of 2024.”
November 5 – CNBC (Jeff Cox): “Payroll growth at private companies turned slightly stronger than expected in October…, ADP reported… Companies added 42,000 jobs for the month, following a decline of 29,000 in September and topping the… estimate for a gain of 22,000… A gain of 47,000 in the trade, transportation and utilities grouping helped offset losses in multiple other categories. Education and health services also showed growth of 26,000, while financial activities added 11,000. Despite the artificial intelligence-fueled tech boom, information services saw a decline of 17,000 positions.”
November 3 – Reuters (Dan Burns): “Business loan demand from large and mid-sized U.S. firms strengthened by the most in about three years in the third quarter while demand from small firms was essentially unchanged from the prior quarter, a Federal Reserve survey showed… But the survey also showed banks on balance continue to tighten terms of credit for firms of all sizes, albeit not by the margin seen earlier in the year, the Fed’s quarterly Senior Loan Officer Opinion Survey showed.”
November 6 – The Hill (Andrew Dorn): “Total household debt climbed to a record $18.6 trillion last quarter, and while most borrowers remain on track with payments, young Americans are feeling the pressure. During the third quarter, 3% of outstanding balances became seriously delinquent — 90 days or more past due — the largest quarterly increase since 2014, according to the Federal Reserve Bank of New York. Among those ages 18 to 29, the rate was about 5% — more than double a year earlier and the highest of any age group. Much of that strain reflects missed student loan payments, with total outstanding debt climbing to a record $1.65 trillion last quarter.”
November 5 – Bloomberg (Maria Eloisa Capurro): “The share of US consumer debt in delinquency rose in the third quarter to the highest level in more than five years as unpaid student-loan balances continued to surge. Around 4.5% of debt was at least 30 days delinquent in the July-to-September period, the most since the first quarter of 2020, the Federal Reserve Bank of New York said… in its Quarterly Report on Household Debt and Credit. The share of student-loan debt becoming delinquent climbed to 14.4%, the most on record.”
November 3 – Bloomberg (Josyana Joshua): “The share of consumers in the subprime credit risk category has reached levels not seen since 2019, a sign that a growing number of borrowers are in poor financial health. Subprime borrowers accounted for 14.4% of consumers tracked by credit reporting firm TransUnion in the third quarter, up from 13.9% in the same period last year. It’s the highest share for the period since 2019, when 14.5% of borrowers fell into the subprime category… ‘We are seeing a divergence in consumer credit risk, with more individuals moving toward either end of the credit risk spectrum,’ Jason Laky, executive vice president and head of financial services at TransUnion, said... ‘This shift suggests that while many consumers are navigating the current economic climate well, others may be facing financial strain’… Total credit card balances hit $1.11 trillion in the third quarter. Meanwhile, unsecured personal loan origination grew 26% year-over-year and their balances hit a record $269 billion.”
November 5 – Reuters (Michael S. Derby): “Overall U.S. household debt levels increased modestly in the third quarter… The [New York] regional Fed bank said overall borrowing for the third quarter rose 1%, or $197 billion, from the second quarter, to $18.6 trillion. From a year ago, total borrowing was up $642 billion. Most categories of borrowing increased relative to the second quarter: Mortgage balances were up $137 billion to $13.1 trillion, credit card balances were up $24 billion to $1.23 trillion and student loans increased $15 billion to $1.65 trillion. Auto loan borrowing was stable… at $1.66 trillion.”
November 2 – Wall Street Journal (Nicole Friedman): “The unaffordable housing market is causing a growing number of home buyers to take on a type of riskier loan to cut their borrowing costs. They are opting for adjustable-rate mortgages, or ARMs. These loans initially offer cheaper borrowing rates compared with a fixed-rate mortgage. But ARMs reset, usually after three to 10 years, which can saddle borrowers with higher monthly payments…”
China Watch:
November 2 – CNBC (Anniek Bao): “China’s factory activity growth in October missed market expectations…, according to a private survey… The RatingDog China General Manufacturing PMI, compiled by S&P Global, dropped to 50.6 in October from the six-month high of 51.2 in September… New export orders fell at the quickest pace since May… New business and output both expanded at slower rates in October compared to the previous month, with business confidence slipping to its lowest level in six months…. ‘When assessing the one-year outlook for production, firms were the least upbeat in six months,’ it said.”
November 4 – Bloomberg: “China’s services activity expanded in October even though growth was the weakest in three months, a private survey showed… The RatingDog China services purchasing managers’ index slipped to 52.6 from 52.9 in September…, extending a growth streak that started after Covid lockdowns in 2022.”
November 2 – Bloomberg: “China Vanke Co.’s bonds slumped after its state-owned shareholder pressed it to secure earlier loans with collateral, tightening financing terms just as the developer reported a deeper third-quarter loss. The company said its largest shareholder, Shenzhen Metro Group Co., has requested collateral or pledges for 20.37 billion yuan ($2.86bn) worth of previously unsecured loans to ensure repayment… The move signals a shift in Shenzhen Metro’s approach to financial support…”
November 3 – Bloomberg (Jackie Cai): “New World Development Co. and China Vanke Co., two of the most closely watched distressed Chinese property names, are again forcing investors to reckon with the fallout from the country’s real estate crisis. About two weeks after New World said it wasn’t undertaking a liability management exercise, the Hong Kong distressed builder unveiled a $1.9 billion bond swap plan that includes haircuts for creditors… Meanwhile, some of Vanke’s dollar bonds slumped after its largest shareholder tightened terms for loans to the company, a move that may signal a shift in government-led financial support. The builder’s dollar bond due in November 2029 was poised for its biggest fall on record…”
Central Bank Watch:
November 6 – Reuters (William Schomberg, David Milliken and Suban Abdulla): “The Bank of England kept borrowing costs on hold…, but a narrow vote and signs that Governor Andrew Bailey might soon join those seeking a rate cut increases the chances of a December move after the government's budget later this month. Mindful of Britain’s still-high headline inflation rate, the nine-strong Monetary Policy Committee voted 5-4 to keep the central bank's benchmark Bank Rate at 4.0%, the BoE said.”
Global Bubble Watch:
November 4 – Wall Street Journal (Heather Gillers): “Canada said… it intends to run wider deficits to finance spending and tax measures aimed at unleashing the massive private-sector investments the economy needs to rebuild amid a protectionist U.S. To offset some of the elevated costs, Prime Minister Mark Carney’s government said it would cut the size of the federal public-sector workforce by about 5%, or 16,000 jobs. Prime Minister Carney and his Finance Minister… promised a budget plan packed with bold bets to secure the economy’s future amid trade turmoil fueled by President Trump’s tariffs. The trade row sparked sharp drops in exports and business investment, forcing policymakers to navigate a new course for an economy that grew too comfortable and too reliant on tariff-free trade with the U.S.”
November 2 – Reuters (Stella Qiu): “Australian home prices jumped by the most in more than two years in October as rate cuts and government policies fuelled buyer demand…, while rents also increased. That added to signs financial conditions might not be as tight as thought as the Reserve Bank of Australia worries about a resurgence in inflation that has crushed market bets of more policy easing this year. National home prices rose 1.1% to a record median value ofA$872,538 ($566,975.19) in October, marking the strongest monthly gain since June 2023…”
Japan Watch:
November 7 – Bloomberg (Brian Fowler, Toru Fujioka and Erica Yokoyama): “Japanese Prime Minister Sanae Takaichi signaled her determination to ramp up the active use of fiscal policy to power economic growth by dropping an annual budget-balancing goal that favors financial orthodoxy. Speaking in the lower house of parliament Friday, Takaichi said the government’s long-held target of achieving a primary balance surplus will no longer be reviewed on a single-year basis... ‘I’d like to take a slightly longer-term view of how I will manage finances from now on,’ Takaichi said…”
November 3 – Bloomberg (Nazmul Ahasan): “US factory activity shrank in October for an eighth straight month, driven by a pullback in production and tepid demand. The Institute for Supply Management’s manufacturing index eased 0.4 point to 48.7… The group’s production index slid 2.8 points to 48.2, marking the second month in the last three that output has contracted… The ISM’s employment gauge shrank for a ninth straight month, albeit at a slightly slower pace than in September.”
November 6 - CNBC (Jeff Cox): “Layoff announcements soared in October…, according to outplacement firm Challenger, Gray & Christmas. Job cuts for the month totaled 153,074, a 183% surge from September and 175% higher than the same month a year ago. It was the highest level for any October since 2003. This has been the worst year for announced layoffs since 2009. ‘Like in 2003, a disruptive technology is changing the landscape,’ said Andy Challenger… ‘At a time when job creation is at its lowest point in years, the optics of announcing layoffs in the fourth quarter are particularly unfavorable.’”
November 6 – Wall Street Journal (Harriet Torry): “Employers said they cut more than a million jobs so far this year, a sharp rise in job losses compared with the same period last year… The report, from consulting firm Challenger, Gray and Christmas, tracks job losses each month… Through October, employers reported slashing 1,099,500 jobs, an increase of 65% from the first 10 months of last year. That is up 44% from the 761,358 cuts announced in all of 2024.”
November 5 – CNBC (Jeff Cox): “Payroll growth at private companies turned slightly stronger than expected in October…, ADP reported… Companies added 42,000 jobs for the month, following a decline of 29,000 in September and topping the… estimate for a gain of 22,000… A gain of 47,000 in the trade, transportation and utilities grouping helped offset losses in multiple other categories. Education and health services also showed growth of 26,000, while financial activities added 11,000. Despite the artificial intelligence-fueled tech boom, information services saw a decline of 17,000 positions.”
November 3 – Reuters (Dan Burns): “Business loan demand from large and mid-sized U.S. firms strengthened by the most in about three years in the third quarter while demand from small firms was essentially unchanged from the prior quarter, a Federal Reserve survey showed… But the survey also showed banks on balance continue to tighten terms of credit for firms of all sizes, albeit not by the margin seen earlier in the year, the Fed’s quarterly Senior Loan Officer Opinion Survey showed.”
November 6 – The Hill (Andrew Dorn): “Total household debt climbed to a record $18.6 trillion last quarter, and while most borrowers remain on track with payments, young Americans are feeling the pressure. During the third quarter, 3% of outstanding balances became seriously delinquent — 90 days or more past due — the largest quarterly increase since 2014, according to the Federal Reserve Bank of New York. Among those ages 18 to 29, the rate was about 5% — more than double a year earlier and the highest of any age group. Much of that strain reflects missed student loan payments, with total outstanding debt climbing to a record $1.65 trillion last quarter.”
November 5 – Bloomberg (Maria Eloisa Capurro): “The share of US consumer debt in delinquency rose in the third quarter to the highest level in more than five years as unpaid student-loan balances continued to surge. Around 4.5% of debt was at least 30 days delinquent in the July-to-September period, the most since the first quarter of 2020, the Federal Reserve Bank of New York said… in its Quarterly Report on Household Debt and Credit. The share of student-loan debt becoming delinquent climbed to 14.4%, the most on record.”
November 3 – Bloomberg (Josyana Joshua): “The share of consumers in the subprime credit risk category has reached levels not seen since 2019, a sign that a growing number of borrowers are in poor financial health. Subprime borrowers accounted for 14.4% of consumers tracked by credit reporting firm TransUnion in the third quarter, up from 13.9% in the same period last year. It’s the highest share for the period since 2019, when 14.5% of borrowers fell into the subprime category… ‘We are seeing a divergence in consumer credit risk, with more individuals moving toward either end of the credit risk spectrum,’ Jason Laky, executive vice president and head of financial services at TransUnion, said... ‘This shift suggests that while many consumers are navigating the current economic climate well, others may be facing financial strain’… Total credit card balances hit $1.11 trillion in the third quarter. Meanwhile, unsecured personal loan origination grew 26% year-over-year and their balances hit a record $269 billion.”
November 5 – Reuters (Michael S. Derby): “Overall U.S. household debt levels increased modestly in the third quarter… The [New York] regional Fed bank said overall borrowing for the third quarter rose 1%, or $197 billion, from the second quarter, to $18.6 trillion. From a year ago, total borrowing was up $642 billion. Most categories of borrowing increased relative to the second quarter: Mortgage balances were up $137 billion to $13.1 trillion, credit card balances were up $24 billion to $1.23 trillion and student loans increased $15 billion to $1.65 trillion. Auto loan borrowing was stable… at $1.66 trillion.”
November 2 – Wall Street Journal (Nicole Friedman): “The unaffordable housing market is causing a growing number of home buyers to take on a type of riskier loan to cut their borrowing costs. They are opting for adjustable-rate mortgages, or ARMs. These loans initially offer cheaper borrowing rates compared with a fixed-rate mortgage. But ARMs reset, usually after three to 10 years, which can saddle borrowers with higher monthly payments…”
China Watch:
November 2 – CNBC (Anniek Bao): “China’s factory activity growth in October missed market expectations…, according to a private survey… The RatingDog China General Manufacturing PMI, compiled by S&P Global, dropped to 50.6 in October from the six-month high of 51.2 in September… New export orders fell at the quickest pace since May… New business and output both expanded at slower rates in October compared to the previous month, with business confidence slipping to its lowest level in six months…. ‘When assessing the one-year outlook for production, firms were the least upbeat in six months,’ it said.”
November 4 – Bloomberg: “China’s services activity expanded in October even though growth was the weakest in three months, a private survey showed… The RatingDog China services purchasing managers’ index slipped to 52.6 from 52.9 in September…, extending a growth streak that started after Covid lockdowns in 2022.”
November 2 – Bloomberg: “China Vanke Co.’s bonds slumped after its state-owned shareholder pressed it to secure earlier loans with collateral, tightening financing terms just as the developer reported a deeper third-quarter loss. The company said its largest shareholder, Shenzhen Metro Group Co., has requested collateral or pledges for 20.37 billion yuan ($2.86bn) worth of previously unsecured loans to ensure repayment… The move signals a shift in Shenzhen Metro’s approach to financial support…”
November 3 – Bloomberg (Jackie Cai): “New World Development Co. and China Vanke Co., two of the most closely watched distressed Chinese property names, are again forcing investors to reckon with the fallout from the country’s real estate crisis. About two weeks after New World said it wasn’t undertaking a liability management exercise, the Hong Kong distressed builder unveiled a $1.9 billion bond swap plan that includes haircuts for creditors… Meanwhile, some of Vanke’s dollar bonds slumped after its largest shareholder tightened terms for loans to the company, a move that may signal a shift in government-led financial support. The builder’s dollar bond due in November 2029 was poised for its biggest fall on record…”
Central Bank Watch:
November 6 – Reuters (William Schomberg, David Milliken and Suban Abdulla): “The Bank of England kept borrowing costs on hold…, but a narrow vote and signs that Governor Andrew Bailey might soon join those seeking a rate cut increases the chances of a December move after the government's budget later this month. Mindful of Britain’s still-high headline inflation rate, the nine-strong Monetary Policy Committee voted 5-4 to keep the central bank's benchmark Bank Rate at 4.0%, the BoE said.”
Global Bubble Watch:
November 4 – Wall Street Journal (Heather Gillers): “Canada said… it intends to run wider deficits to finance spending and tax measures aimed at unleashing the massive private-sector investments the economy needs to rebuild amid a protectionist U.S. To offset some of the elevated costs, Prime Minister Mark Carney’s government said it would cut the size of the federal public-sector workforce by about 5%, or 16,000 jobs. Prime Minister Carney and his Finance Minister… promised a budget plan packed with bold bets to secure the economy’s future amid trade turmoil fueled by President Trump’s tariffs. The trade row sparked sharp drops in exports and business investment, forcing policymakers to navigate a new course for an economy that grew too comfortable and too reliant on tariff-free trade with the U.S.”
November 2 – Reuters (Stella Qiu): “Australian home prices jumped by the most in more than two years in October as rate cuts and government policies fuelled buyer demand…, while rents also increased. That added to signs financial conditions might not be as tight as thought as the Reserve Bank of Australia worries about a resurgence in inflation that has crushed market bets of more policy easing this year. National home prices rose 1.1% to a record median value ofA$872,538 ($566,975.19) in October, marking the strongest monthly gain since June 2023…”
Japan Watch:
November 7 – Bloomberg (Brian Fowler, Toru Fujioka and Erica Yokoyama): “Japanese Prime Minister Sanae Takaichi signaled her determination to ramp up the active use of fiscal policy to power economic growth by dropping an annual budget-balancing goal that favors financial orthodoxy. Speaking in the lower house of parliament Friday, Takaichi said the government’s long-held target of achieving a primary balance surplus will no longer be reviewed on a single-year basis... ‘I’d like to take a slightly longer-term view of how I will manage finances from now on,’ Takaichi said…”
November 3 – Reuters (Kantaro Komiya): “Japan’s manufacturing activity shrank in October at the fastest pace in 19 months, hit by slumping demand in the key automotive and semiconductor sectors, a private-sector survey showed… The S&P Global Japan Manufacturing Purchasing Managers' Index (PMI) slipped to 48.2 in October from 48.5 in September, undershooting the flash reading of 49.3 and hitting the lowest since March 2024.”
Emerging Market Watch:
November 6 – Bloomberg (Giovanna Bellotti Azevedo and Vinicius Andrade): “Brazil sold dollar bonds for the fourth time this year, tapping a surge in investor appetite for emerging-market debt to raise $2.25 billion and notching its busiest annual spree since 2010… The sale adds to the busiest year of bond sales since 2014 for governments and companies from emerging markets. With investors hunting for debt from higher-yielding issuers, issuance is nearing $700 billion year-to-date… Deals from Latin America already broke the previous record, largely driven by Mexico’s borrowing spree.”
Leveraged Speculation Watch:
November 6 – Reuters (Elizabeth Howcroft): “Global hedge funds’ exposure to crypto markets is increasing, and more than half are now invested in the sector, with the U.S. government’s embrace of digital assets boosting interest, according to an industry report… Fifty-five percent of hedge funds hold some crypto-related assets, up from 47% the year before, with funds allocating on average 7% of their holdings to crypto, a survey of 122 investors and fund managers by the Alternative Investment Management Association (AIMA)… found.”
November 5 – Financial Times (Mary McDougall, Ian Smith and Lee Harris): “Insurers are increasingly using borrowed money to enhance the returns they earn on their gilt holdings, raising concerns that risky leverage is creeping back into the market for UK government debt. Legal & General, Phoenix Group and Pension Insurance Corporation are among the firms using gilt-backed derivative trades after a collapse in the gap between corporate and government borrowing costs threatened the profitability of ‘buyout’ deals, where insurers take over big chunks of companies’ pension liabilities.”
Social, Political, Environmental, Cybersecurity Instability Watch:
November 5 – Wall Street Journal (Jeanne Whalen, Rachel Louise Ensign, Jaclyn Jeffrey-Wilensky and Brian Whitton): “Discontent with the economy is once again proving to be the primary force in U.S. politics, defining elections in three states on Tuesday and punishing the party in power. Democratic candidates who focused their messages on economic issues will now lead the country’s biggest city, as well as two states: In New York City… it was housing affordability and the cost of big-city living. In New Jersey, a nearly 20% rise in power prices over the past year amped up voter frustration. In Virginia, voters felt the effects of President Trump’s cuts to the federal workforce and a government shutdown that has left many workers there without paychecks. Across the board, the biggest contests on Tuesday were decided by voters who listed the economy or cost of living as the leading issue where they live. Exit polls conducted by the firm SSRS show those voters broke for the Democrat by nearly 2 to 1 in all three races.”
November 5 – Associated Press (Anthony Izaguirre and Jill Colvin): “Zohran Mamdani was elected mayor of New York…, capping a stunning ascent for the 34-year-old, far-left state lawmaker, who promised to transform city government to restore power to the working class and fight back against a hostile Trump administration. In a victory for the Democratic party’s progressive wing, Mamdani defeated former Gov. Andrew Cuomo and Republican Curtis Sliwa. Mamdani must now navigate the unending demands of America’s biggest city and deliver on ambitious — skeptics say unrealistic — campaign promises. With his commanding win, the democratic socialist will etch his place in history as the city’s first Muslim mayor, the first of South Asian heritage and the first born in Africa. He will also become New York’s youngest mayor in more than a century when he takes office on Jan. 1.”
November 4 – Financial Times (Kenza Bryan and Steven Bernard): “The world was headed for a ‘climate breakdown’ at a global average temperature rise of 2.8C under existing government policies, according to the latest UN report... UN Secretary-General António Guterres once again warned about the prospects of global warming exceeding 1.5C since the start of the industrial era, saying it was now ‘inevitable’ and ‘the path to a liveable future gets steeper every day’. The findings come days ahead of global climate talks in Brazil, where the US will be absent and many national leaders will not be present at a gathering of heads of state held this week before COP30 begins next week. New climate plans that countries had so far submitted for the next decade have ‘done little’ to accelerate progress, the report said.”
November 5 – Reuters (Olivia Le Poidevin): “Record wildfires and rising temperatures are threatening decades of forest growth in the northern hemisphere, potentially turning vital carbon sinks into carbon emitters, a new U.N. report said… The report by the U.N. Economic Commission for Europe (UNECE)… found that forests in Europe, North America, the Caucasus and Central Asia are slowing in their ability to absorb carbon dioxide from the atmosphere. If current trends continue, these forests could reach a tipping point where they begin releasing more carbon than they absorb, it warned.”
Emerging Market Watch:
November 6 – Bloomberg (Giovanna Bellotti Azevedo and Vinicius Andrade): “Brazil sold dollar bonds for the fourth time this year, tapping a surge in investor appetite for emerging-market debt to raise $2.25 billion and notching its busiest annual spree since 2010… The sale adds to the busiest year of bond sales since 2014 for governments and companies from emerging markets. With investors hunting for debt from higher-yielding issuers, issuance is nearing $700 billion year-to-date… Deals from Latin America already broke the previous record, largely driven by Mexico’s borrowing spree.”
Leveraged Speculation Watch:
November 6 – Reuters (Elizabeth Howcroft): “Global hedge funds’ exposure to crypto markets is increasing, and more than half are now invested in the sector, with the U.S. government’s embrace of digital assets boosting interest, according to an industry report… Fifty-five percent of hedge funds hold some crypto-related assets, up from 47% the year before, with funds allocating on average 7% of their holdings to crypto, a survey of 122 investors and fund managers by the Alternative Investment Management Association (AIMA)… found.”
November 5 – Financial Times (Mary McDougall, Ian Smith and Lee Harris): “Insurers are increasingly using borrowed money to enhance the returns they earn on their gilt holdings, raising concerns that risky leverage is creeping back into the market for UK government debt. Legal & General, Phoenix Group and Pension Insurance Corporation are among the firms using gilt-backed derivative trades after a collapse in the gap between corporate and government borrowing costs threatened the profitability of ‘buyout’ deals, where insurers take over big chunks of companies’ pension liabilities.”
Social, Political, Environmental, Cybersecurity Instability Watch:
November 5 – Wall Street Journal (Jeanne Whalen, Rachel Louise Ensign, Jaclyn Jeffrey-Wilensky and Brian Whitton): “Discontent with the economy is once again proving to be the primary force in U.S. politics, defining elections in three states on Tuesday and punishing the party in power. Democratic candidates who focused their messages on economic issues will now lead the country’s biggest city, as well as two states: In New York City… it was housing affordability and the cost of big-city living. In New Jersey, a nearly 20% rise in power prices over the past year amped up voter frustration. In Virginia, voters felt the effects of President Trump’s cuts to the federal workforce and a government shutdown that has left many workers there without paychecks. Across the board, the biggest contests on Tuesday were decided by voters who listed the economy or cost of living as the leading issue where they live. Exit polls conducted by the firm SSRS show those voters broke for the Democrat by nearly 2 to 1 in all three races.”
November 5 – Associated Press (Anthony Izaguirre and Jill Colvin): “Zohran Mamdani was elected mayor of New York…, capping a stunning ascent for the 34-year-old, far-left state lawmaker, who promised to transform city government to restore power to the working class and fight back against a hostile Trump administration. In a victory for the Democratic party’s progressive wing, Mamdani defeated former Gov. Andrew Cuomo and Republican Curtis Sliwa. Mamdani must now navigate the unending demands of America’s biggest city and deliver on ambitious — skeptics say unrealistic — campaign promises. With his commanding win, the democratic socialist will etch his place in history as the city’s first Muslim mayor, the first of South Asian heritage and the first born in Africa. He will also become New York’s youngest mayor in more than a century when he takes office on Jan. 1.”
November 4 – Financial Times (Kenza Bryan and Steven Bernard): “The world was headed for a ‘climate breakdown’ at a global average temperature rise of 2.8C under existing government policies, according to the latest UN report... UN Secretary-General António Guterres once again warned about the prospects of global warming exceeding 1.5C since the start of the industrial era, saying it was now ‘inevitable’ and ‘the path to a liveable future gets steeper every day’. The findings come days ahead of global climate talks in Brazil, where the US will be absent and many national leaders will not be present at a gathering of heads of state held this week before COP30 begins next week. New climate plans that countries had so far submitted for the next decade have ‘done little’ to accelerate progress, the report said.”
November 5 – Reuters (Olivia Le Poidevin): “Record wildfires and rising temperatures are threatening decades of forest growth in the northern hemisphere, potentially turning vital carbon sinks into carbon emitters, a new U.N. report said… The report by the U.N. Economic Commission for Europe (UNECE)… found that forests in Europe, North America, the Caucasus and Central Asia are slowing in their ability to absorb carbon dioxide from the atmosphere. If current trends continue, these forests could reach a tipping point where they begin releasing more carbon than they absorb, it warned.”
