For the most fascinating dynamics, look to international markets. European high-yield (“crossover”) CDS prices sank 11 to 261 bps Monday – trading only 13 bps off September’s multi-year (2021) lows. European (subordinated) Bank CDS dropped an outsized five to 99 bps. Curiously, emerging market (EM) CDS was the start performer. EM CDS declined three to 135 bps – the low all the way back to March 2018 (and 80bps below April 11th trading highs). UK yields traded Tuesday at a near one-year low of 4.37%, while France vs. Germany spreads narrowed to a three-month low (73bps).
At Monday’s close, major equities indices enjoyed y-t-d returns of 29% in Brazil, 33% in Mexico, 44% in Chile, and 61% in Colombia. In Asia, South Korean equities had returned 73%, China 21%, Hong Kong 37%, Taiwan 24%, Indonesia 23%, and Vietnam 26%. Strong returns in European EM include Poland’s 42%, Hungary’s 36%, and the Czech Republic’s 47%. Equities had returned 41% in Israel and 36% in South Africa. The iShares MSCI Equities ETF (EEM) had returned 34% y-t-d at Monday's close.
Major developing equities markets are similarly inflated. Notable Monday y-t-d equities index returns include Spain 46%, Italy 33%, Germany 20%, and the UK 23%. Japan’s Nikkei 225 Index closed Monday with a 30% y-t-d return.
The global market environment has been one of extraordinary liquidity overabundance. Monday trading particularly flashed precarious liquidity instability. Monday also saw Gold prices surge $114 (2.9%) to $4,116. Silver jumped 4.5% and Platinum added 1.8% - all adding to spectacular 2025 advances. The Bloomberg Commodities Index gained 1.7% to the high since February 1, 2023.
With eight Democrat Senators voting Sunday with Republicans in an initial procedural vote, markets could anticipate the end of the government shutdown. On Bloomberg television Monday morning, the anchors wondered what the government reopening had to do with surging AI and tech stocks. Simple enough: The news provided a catalyst for another round of short squeezes and the unwind of hedges.
Was Monday’s global trading symptomatic of a Last Gasp of historic global liquidity excess? I’ve discussed the faltering U.S. Credit cycle. I’ve delved into super-cycle “terminal phase excess” – culminating with a historic AI mania and arms race. Today, Credit cycle dynamics and a fragile AI Bubble are on a collision course. Monday was more about the third leg in the stool – the ongoing global liquidity Bubble.
Money market fund assets (MMFA) surged $347 billion, or 25% annualized, over the past 12 weeks - and have ballooned an incredible $2.96 TN, or 64%, since October 2022. I associate this historic monetary inflation with the proliferation of leveraged speculation (i.e., “repo” borrowing financing Treasury “basis trades”). Federal Reserve research recently corroborated this analysis, which highlighted a doubling of hedge fund holdings domiciled in the Cayman Islands over two years, to end 2024 at $1.85 TN.
There is every reason to fear that U.S.-style leveraged speculation has proliferated throughout global finance – every nook and cranny. Clearly, a massive “yen carry trade” funded by cheap Japanese finance has stoked bond issuance globally. I suspect massive speculative leverage has accumulated throughout emerging bond markets. Leveraged speculation also dominates European debt markets. Especially over recent years, a sophisticated global infrastructure developed to profit from leveraged speculation and derivatives trading. Moreover, this historic speculative bubble was stoked over the past year by a global central bank easing cycle.
A strong case can be made that we’ve witnessed the heyday in global speculative Bubble excess and resulting liquidity overabundance. Importantly, this liquidity onslaught has masked major festering problems – at home and abroad. In a less accommodating market environment, France would today be up against the wall; markets would forcefully punish Japan and the UK; Greek, Italian and others’ finance would be suspect; EM issues (i.e., Brazil’s corporate debt) would be pressing. If not for liquidity excess, we would have today quite different U.S. economic and Credit environments.
November 12 – Bloomberg (Kevin Kingsbury): “Annual US investment-grade corporate bond sales have reached their second-highest level ever as companies capitalize on lower borrowing costs to refinance debt, fund acquisitions and invest in AI initiatives. Supply of $1.499 trillion has edged last year’s total of $1.496 trillion… While issuance is unlikely to reach 2020’s record $1.75 trillion, borrowers have benefited from a favorable environment this year, with strong investor demand and central banks around the world lowering policy rates.”
Monday was about market exuberance for yet another episode of short squeezes and unwind of hedges, which stoke liquidity excess and further extend the speculative cycle. Thursday and Friday were something quite different: the fear of faltering crypto and tech/IA Bubbles unleashing risk aversion and deleveraging.
After a Tuesday morning high of 107,428, bitcoin sank 12% to trade to 94,147 at early-Friday trading lows (down 18% from October 28 highs). Bitcoin’s almost 35% y-t-d gain as of October 6th has quickly evaporated. Nvidia traded to almost $200 late Monday, only to sink a quick 10% to trade as low as $181 at Friday’s open. Meta traded from $635 down to $595, Oracle $247 to $211, Tesla $450 to $383, Strategy $250 to $195, and Amazon $252 to $233. It’s the type of rapid loss of perceived wealth that captures people’s attention.
At Friday’s lows, the MAG7 index was down 3.7% for the week, with the Nasdaq100 2.1% lower. For the second straight week, a (miraculous) Friday rally salvaged the week and (somewhat) eased concerns heading into the weekend. I expect the vigor of such recoveries and buy-the-dip enthusiasm to dissipate over time. Meanwhile, leveraged loan prices slipped seven cents for the week to 96.53, with prices now only 16 cents off October 14th (First Brands) lows.
Global Liquidity Abundance vs. Faltering AI Bubble:
November 14 – Bloomberg (Caleb Mutua): “The cost of protecting Oracle Corp.’s debt against default is surging by the most since 2021, as jittery investors and lenders rush to hedge against the billions of dollars the software giant is pouring into artificial intelligence. Oracle, known for its namesake database software, saw the spread on its five-year credit default swaps jump 13.5 bps on Friday to 101.68 bps. That’s the biggest bounce since December 2021…”
November 14 – Bloomberg (Rene Ismail): “CoreWeave bonds issued earlier this year hit fresh record lows Friday and were leading high-yield decliners amid a tech stock-led selloff in global markets. The data-center firm’s 9% note due 2031 fell 1.75 cents on the dollar to 93.25 cents…”
November 10 – Bloomberg (Victor Swezey): “The furious push by AI hyperscalers to build out data centers will need about $1.5 trillion of investment-grade bonds over the next five years and extensive funding from every other corner of the market, according to an analysis by JPMorgan… ‘The question is not ‘which market will finance the AI-boom?’ Rather, the question is ‘how will financings be structured to access every capital market?’’ according to strategists led by Tarek Hamid. Leveraged finance is primed to provide around $150 billion over the next half decade, they said. Even with funding from the investment-grade and high-yield bond markets, as well as up to $40 billion per year in data-center securitizations, it will still be insufficient to meet demand… Private credit and governments could help cover a remaining $1.4 trillion funding gap, the report estimates. The bank calculates an at least $5 trillion tab that could climb as high as $7 trillion, singlehandedly driving a reacceleration in growth in the bond and syndicated loan markets… The analysts project $300 billion in high-grade bonds going toward AI data centers next year. That could account for nearly one fifth of total issuance in that market, which a report from Barclays Plc estimates will grow to $1.6 trillion.”
After closing Wednesday at all-time highs, the big financial stocks came under notable pressure. Ominously, Goldman Sachs dropped 5.7% during Thursday/Friday trading, with JPMorgan sinking 5.2% and Morgan Stanley falling 3.6%. In two sessions, the Broker/Dealer Index dropped 3.3%, and the KBW Bank Index fell 2.9%. I’m again reminded of the feverish bank rally to record highs into mid-July 1998, only a few weeks before the Long-Term Capital Management/Russia deleveraging and market crisis.
“AI Bubble Talk is Overblown.” “Softbank Says Skipping AI is Riskier Than Betting Big.” “An AI Bubble? The Bond Market Is Not Seeing One.” “AI Boom vs. Dot-Com Bust: TD Wealth Says Today’s Market has Real Profits, Not Just Promises.” “The AI Bubble is a ‘Rational Bubble,’ Say’s Mohamed El-Erian.” “Ed Yardeni Says ‘Buy The Dip’ In AI Stocks, Calls market Nervousness Healthy Sign.” “AI Isn’t a Bubble – But It’s Showing Warning Signs.” “Microsoft President Brad Smith Says: There is no AI Bubble.” “Goldman Sachs Says We’re Not in an AI Bubble.” “AI Isn’t a Bubble but Rather an Opportunity, JPMorgan’s Erdoes Says.”
Blackrock’s Rick Rieder: “I don’t think it’s an AI Bubble. I don’t think there’s too much froth.” (Bloomberg, Nov. 7)
JPMorgan’s Mary Erdoes: “AI itself is not a Bubble. That’s a crazy concept... We are on the precipice of a major, major revolution in a way that companies operate. So, if you say to yourself, is AI in a Bubble, I feel you have to get very granular on how you’re going to answer that, because in the U.S., we’re starting to gain traction, but we’re nowhere near the ability to have the stuff all to the bottom line.” (CNBC, Nov. 13)
Ares Management’s Michael Arougheti: “We have a long way to go in terms of the economic investment relative to the size of the economy. We can’t bring the supply on fast enough to meet the near-term demand. So, I just feel there’s a lot of hyperbole because the numbers are big and it is that revolutionary.” (CNBC, Nov. 13)
Goldman Sachs’ Brittany Boals: “We did have a conversation about markets and whether or not we think we’re in a Bubble. We do not think we’re in a Bubble, and we pay very close attention to that.” (Fortune, Nov. 9)
BofA semiconductor analyst Vivek Arya: “We believe the recent concerns re AI financing are highly overstated.” (Investopedia, Oct. 9)
“This degree of concentration is, in our view, unsustainable, but this is not the same as saying that we are experiencing a Bubble.” (Goldman Sachs: “Why We Are Not in a Bubble… Yet,” Oct. 25)
I’ll simplify the Bubble discussion: the expansion of finance required for the historic AI and energy infrastructure arms race buildout is increasingly unstable and inevitably unsustainable. In Monday’s liquidity abundance and market exuberance, the AI boom appears at least somewhat feasible. But late in the week, with de-risking/deleveraging knocking on the door, it’s a different unfolding story.
November 11 – Wall Street Journal (Matt Wirz): “Tech giants need so much money for their artificial-intelligence ambitions that Wall Street is developing new ways to get it for them. Details of some of the biggest AI infrastructure deals, including those involving Meta, OpenAI and xAI, are coming into focus, revealing lucrative, innovative—and in some cases risky—funding schemes. Exhibit One is the deal fund manager Blue Owl Capital struck with Meta in their joint venture to build a giant data center in Louisiana called Hyperion. Blue Owl is buying private equity in the deal and is receiving a debt-like guarantee from Meta if the partnership falls apart, an extraordinary protection… Another deal involving OpenAI and Oracle involves a lending syndicate of more than 30 banks… Tech titans are offering sweeteners in their deals because they need to offload risk as the cost of the AI arms race soars, threatening even the strongest competitors. Meta’s market value dropped by around $300 billion in a few days after Chief Executive Mark Zuckerberg warned about higher spending on AI… Banks and fund managers are writing big checks for now, but many are worried about how the complicated deals being signed today will perform when the AI frenzy calms down. Another concern is that each time tech companies take on lots of new debt, their cost of borrowing rises.”
November 11 – Bloomberg (Chris Bryant): “Costing tens of thousands of dollars each, Nvidia Corp.’s pioneering AI chips make up a hefty chunk of the $400 billion that Big Tech plans to invest this year — a bill expected to hit $3 trillion by 2029. But unlike 19th-century railroads, or the Dotcom boom’s fiber-optic cables, the graphics-processing units (GPUs) fueling today’s AI mania are short-lived assets with a shelf life of perhaps five years. As with your iPhone, this stuff tends to lose value and may need upgrading soon because Nvidia and its rivals aim to keep launching better models. Customers like OpenAI will have to deploy them to stay competitive. So while it’s comforting that the companies spending most wildly have mountains of cash to throw around (OpenAI aside), the brief useful life of the chips and the generous accounting assumptions underpinning all of this investment are less consoling.”
Curiously reminiscent of April’s market dynamic, safe haven Treasury buying was notably MIA during Thursday and Friday’s “risk off” sessions. After trading down to 4.05% in Wednesday trading, 10-year Treasury yields reversed higher to end the week at 4.14%. UK 10-year yields surged a quick 19 bps, from 4.38% to 4.57% - gilts slammed after UK Chancellor Rachel Reeves reversed course on raising income taxes to reduce deficit spending (up 11bps for the week). Not receiving deserved attention, Japanese 10-year JGB yields rose three bps this week to 1.71% - a new high back to 2008 (new Prime Minister Sanae Takaichi gearing up for fiscal stimulus and to pressure the BOJ). Other noteworthy bond instability included two-day (Thursday/Friday) 10 bps surges in Greek and Italian yields.
It's reasonable to assume that huge leverage has accumulated throughout the crypto universe. Deleveraging has commenced, and, unlike equities, crypto currencies don’t enjoy the powerful liquidity backstop provided by corporate buybacks. Huge flows into bitcoin and crypto (perceived liquid) ETF structures now face the prospect of destabilizing deleveraging, an abrupt shift in perceptions, and a run from the asset class.
This tech/AI monster Bubble is an accident in the making. After a parabolic liquidity-induced speculative blowoff, the sector has transitioned to a pre-crisis, hyper-instability phase. Here, we can assume massive speculative leverage – margin debt, options and derivatives-related, hedge funds and such. Millions of speculators across the country embraced bigger balances for Credit cards, personal loans, auto loans, and mortgages to ensure greater liquidity available to play the ever-rising stock market.
An exceptionally powerful and protracted bull market has at this point thoroughly conditioned retail investors to buy the dip. The hedge funds and broader “leveraged speculating community” have similarly been conditioned. But they have daily market gains and losses, investors and, importantly, leverage. I have a hard time believing that the more sophisticated players haven’t begun – at the margin - the process of moving to mitigate risk and leverage.
I contend that we’re at peak global liquidity – Monday epitomizing a Last Gasp of liquidity excess-induced exuberance. Unfolding risk aversion and waning liquidity excess will accelerate Credit market deterioration.
November 14 – Bloomberg (Gowri Gurumurthy): “US junk bonds tumbled Thursday, posting their worst one-day loss in nearly five weeks… Yields jumped the most in five weeks to 6.89% and risk premium climbed to 291 bps. Losses swept across ratings tier, with CCC yields rising 18 bps to a near three-month high of 10.29%. Spreads widened 15 bps, the most in five weeks, to 652.”
November 14 – Bloomberg (Scott Carpenter and Josyana Joshua): “The record number of Americans falling behind on car payments is stoking concerns that more pain is in store for subprime auto lenders, following the recent high-profile collapses of Tricolor Holdings and PrimaLend Capital Partners. The worries are showing up most clearly in the market for bonds backed by car loans, a key source of funding for lenders to higher-risk borrowers. Investors now want roughly 50 bps of extra yield to own the lowest-rated slices of subprime auto ABS compared with two months ago…”
November 9 – Financial Times (Lee Harris, Euan Healy and Toby Nangle): “Seventeen years after credit rating agencies’ starring role in the financial crisis, ‘ratings shopping’ is in focus again. The first time around, large established agencies competing to grade a finite pool of debt gave out inflated stamps of approval to risky assets. Buyers of the assets were falsely left with the impression that the subprime credit they were holding was as safe as it got. This time it is not the big three agencies… in the line of fire, but second-tier shops that have shot to prominence by catering to the booming private credit market, which has grown to some $3tn in recent years. Smaller, specialist providers such as Morningstar DBRS, Kroll Bond Rating Agency, HR Ratings and Egan-Jones have seized market share by offering private capital groups the chance to shop around. Some of the world’s biggest asset managers, including Blackstone and Apollo, are now among the most frequent users of ratings from firms beyond the big three.”
November 12 – Wall Street Journal (Matt Wirz): “The private-credit boom is rapidly changing the investments made by U.S. life insurers, with some firms parking more than half the fixed-income assets they need to fund policies and annuities in hard-to-trade debt, according to new research by Moody’s… Illiquid investments accounted for $685 billion—about 18%—of the $3.8 trillion in fixed-income investments insurers held at the end of 2024. The pace of purchases seems to be increasing, with less-liquid private debt comprising about 23% of the $522 billion of bonds insurance companies bought in the first half of 2025, the report said. The industry’s holdings are unusually concentrated, with just 10 insurers controlling about 43% of the illiquid assets held at the end of 2024…”
A Friday evening Bloomberg headline: “Wall Street’s Retail Army Hammered as Crypto, Tech Trades Crack.” De-risking/deleveraging risk is now highly elevated. The extraordinary backdrop of highly unstable global liquidity, faltering Bubbles, and the risk of extremely destabilizing speculative de-leveraging seems to guarantee wild market volatility. Year-end rally – or a big downdraft that catches everyone by surprise?
When de-leveraging risk rises, I’m conditioned to ponder possible policy responses. Right now, a deeply divided Fed has its work cut with next month’s rate decision. What would it take for the Committee hawks to agree to the type of massive QE program that will be necessary when serious deleveraging erupts? The President back in April triggered one heck of a (squeeze and unwind of hedges) rally – that took on a life of its own - with a mere “pause.” The administration will surely pull out all stops and resort to extraordinary measures to sustain the Bubble. But I can’t help but believe the President’s astounding power and influence are weakening before our eyes.
Counter point…
Andrew Ross-Sorkin (October 20, 2025, CNBC): “I’m curious where you land on the private-Credit issue. There’s some people suggesting there are cracks in that, and therefore we need to be very mindful of those cracks – they could lead to other problems in the economy. Other people say private-credit is effectively separated from the banking system. The bank earnings have been pretty great. A lot of people are excited about all the things happening in the markets right now – IPOs, pipelines for M&A. Banks should be sort of set. Are they?”
Mohamed El-Erian: “First, in terms of financial stability Andrew, whether you call it cockroaches or ants, they’re correct. We’ve seen a few strains. We are going to see more. But they are not termites. I want to stress: they’re not eating away at the foundation of financial stability. These are isolated cases. They come in a period where people have stretched too far for returns. That’s what happens when spreads compress. It pushes certain people out the risk curve and they take on risks that they shouldn’t. So, I think of it as yes there will be more cases. I think Jamey Dimon is correct. But it’s not termite. In terms of the system as a whole, not only is it not a problem for financial stability, but actually it’s good. It’s allowing certain companies to get financing they wouldn’t get otherwise. And if you go to developing countries – if you see what’s happening to Credit in developing countries, that’s a really good thing as well.”
For the Week:
The S&P500 was little changed (up 14.5% y-t-d), while the Dow added 0.3% (up 10.8%). The Utilities declined 0.8% (up 17.2%). The Banks slipped 0.7% (up 17.4%), and the Broker/Dealers fell 1.2% (up 26.5%). The Transports declined 0.8% (up 1.1%). The S&P 400 Midcaps fell 1.2% (up 2.7%), and the small cap Russell 2000 lost 1.8% (up 7.1%). The Nasdaq100 slipped 0.2% (up 19.0%). The Semiconductors dropped 2.0% (up 20.7%). The Biotechs jumped 2.6% (up 20.7%). With bullion jumping $83, the HUI gold index rallied 6.2% (up 123.2%).
Three-month Treasury bill rates ended the week at 3.7875%. Two-year government yields increased four bps to 3.61% (down 64bps y-t-d). Five-year T-note yields rose five bps to 3.73% (down 65bps). Ten-year Treasury yields gained five bps to 4.15% (down 42bps). Long bond yields rose five bps to 4.75% (down 3bps). Benchmark Fannie Mae MBS yields jumped nine bps to 5.22% (down 63bps).
Italian 10-year yields rose four bps to 3.47% (down 5bps y-t-d). Greek 10-year yields increased four bps to 3.35% (up 13bps). Spain's 10-year yields gained four bps to 3.23% (up 17bps). German bund yields rose five bps to 2.72% (up 35bps). French yields were unchanged at 3.46% (up 26bps). The French to German 10-year bond spread narrowed five to 74 bps. U.K. 10-year gilt yields surged 11 bps to 4.57% (up 1bp). U.K.'s FTSE equities index added 0.2% (up 18.7% y-t-d).
Japan's Nikkei 225 Equities Index increased 0.2% (up 26.3% y-t-d). Japan's 10-year "JGB" yield gained three bps to 1.71% (up 63bps y-t-d). France's CAC40 jumped 2.8% (up 10.7%). The German DAX equities index gained 1.3% (up 19.9%). Spain's IBEX 35 equities index jumped 2.8% (up 41.0%). Italy's FTSE MIB index rose 2.5% (up 28.7%). EM equities were mixed. Brazil's Bovespa index rose 2.4% (up 31.1%), while Mexico's Bolsa index slumped 1.7% (up 25.9%). South Korea's Kospi added 1.5% (up 67.2%). India's Sensex equities index gained 1.6% (up 7.7%). China's Shanghai Exchange Index slipped 0.2% (up 19.1%). Turkey's Borsa Istanbul National 100 index dropped 3.3% (up 7.5%).
Federal Reserve Credit dropped $22.7 billion last week to $6.529 TN. Fed Credit was down $2.361 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.802 TN, or 75%. Fed Credit inflated $3.718 TN, or 132%, since November 7, 2012 (679 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $24.2 billion last week to $3.064 TN. "Custody holdings" were down $264 billion y-o-y, or 7.9%.
Total money market fund assets (MMFA) added $2 billion to a record $7.536 TN - with a 12-week surge of $347 billion, or 25% annualized. MMFA were up $866 billion, or 13.0%, y-o-y - and ballooned a historic $2.952 TN, or 64.4%, since October 26, 2022.
Total Commercial Paper declined $6.1 billion to $1.316 TN. CP has expanded $228 billion y-t-d and $157 billion, or 13.5%, y-o-y.
Freddie Mac 30-year fixed mortgage rates increased two bps to 6.24% (down 54bps y-o-y). Fifteen-year rates slipped a basis point to 5.49% (down 50bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up four bps to 6.46% (down 92bps).
Currency Watch:
November 11 – Bloomberg (Erica Yokoyama): “Japanese Finance Minister Satsuki Katayama issued a fresh warning on currency movements as the yen weakened toward the key threshold of 155 per dollar, inching closer to levels where authorities last intervened in markets. ‘We’re seeing one-sided, rapid currency moves of late,’ Katayama said… ‘The government is watching for any excessive and disorderly moves with a high sense of urgency.’”
November 12 – Bloomberg (Mia Glass and John Cheng): “Traders are increasingly skeptical that Japan’s new government will be able to shore up the yen by direct intervention… Unlike last year, when intervention took place in the run up to higher interest rates by the central bank, this time around Japan would be buying yen just as Prime Minister Sanae Takaichi signals her desire for a slowdown in rate hikes. Officials would also be wading into the market when Takaichi’s plans to boost spending are fueling the yen’s weakness. Additionally, any intervention would risk depleting Japan’s foreign exchange reserves needed to help fund a US investment package to placate President Donald Trump.”
For the week, the U.S. Dollar Index slipped 0.3% to 99.273 (down 8.5% y-t-d). On the upside, the Swiss franc increased 1.4%, the South African rand 1.3%, the New Zealand dollar 1.0%, the Swedish krona 0.8%, the Mexican peso 0.8%, the Norwegian krone 0.7%, the South Korean won 0.7%, the Australian dollar 0.7%, the Brazilian real 0.7%, the euro 0.5%, the Singapore dollar 0.2%, the Canadian dollar 0.2%, and the British pound 0.1%. On the downside, the Japanese yen declined 0.7%. The Chinese (onshore) renminbi increased 0.32% versus the dollar (up 2.82% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index advanced 1.7% (up 10.5% y-t-d). Spot Gold rose 2.1% to $4,084 (up 55.6%). Silver surged 4.7% to $50.5845 (up 75.0%). WTI crude increased 34 cents, or 0.6%, to $60.09 (down 16%). Gasoline rallied 3.7% (down 1%), and Natural Gas jumped 5.8% to $4.566 (up 26%). Copper gained 2.1% (up 26%). Wheat was little changed (down 4%), while Corn increased 0.7% (down 6%). Bitcoin sank $9,750, or 9.4%, to $94,100 (up 0.4%).
Market Instability Watch:
November 13 – Bloomberg (Alex Harris): “Pressures simmering in the $12 trillion market that serves as a critical source of day-to-day funding on Wall Street are spurring a growing chorus of calls for a more forceful Federal Reserve response to ease the pinch. Bank of America Corp., SMBC Nikko Securities Inc. and Barclays Plc are among firms warning that the central bank may need to take steps such as lending more in short-term markets or buying securities outright to pump money in the banking system and ease strains that have pushed up overnight interest rates. ‘The Fed seems to only gradually be changing balance-sheet policy given recent stresses,’ said Gennadiy Goldberg, head of interest rate strategy at TD Securities. ‘Some investors believe the Fed may be moving too slowly to prevent reserves from becoming scarce.’ A batch of key short-term rates has remained stubbornly elevated in recent weeks, from benchmarks tied to overnight repurchase agreements, or repos — loans collateralized by government debt — to the central bank’s own key policy target, which rarely moves between rate-setting decisions and yet has risen four times within its range over the past two months.”
November 10 – Bloomberg (John Cheng and Mia Glass): “Japan’s 30-year bonds dropped after a debt auction drew the lowest demand since June, pointing to renewed concerns about Prime Minister Sanae Takaichi’s fiscal policy. The 30-year yield rose four bps to 3.17% after the average bid-to-cover ratio at Tuesday’s sale of that tenor fell to 3.12 from 3.41 at the previous offering in October. That’s also below the 12-month average.”
November 11 – Bloomberg (Katanga Johnson): “US bank regulators have agreed on the terms for easing a set of capital requirements that lenders say limit their ability to hold more Treasuries… Officials from the Federal Reserve and other key agencies recently submitted a final plan for the so-called enhanced supplementary leverage ratio to the White House for review… The eased requirements, which would mean the biggest banks have to hold less capital relative to total assets, are largely in line with a proposal unveiled in June. The rule change would be a win for Wall Street lending giants, as Trump-era officials look to soften several bank capital measures established in the wake of the 2008 financial crisis. Still, some big banks were unsuccessful in pushing for regulators to exclude certain assets like Treasuries from the revised ratio calculation, the people said.”
U.S. Credit Trouble Watch:
November 12 – Bloomberg (Josyana Joshua): “More Americans than ever are falling behind on their car payments. The share of subprime borrowers at least 60 days past due on their auto loans rose to 6.65% in October, the highest in data going back to 1994, according to Fitch... With ongoing inflation pressures and the return of student loan bills, millions of car owners are struggling to afford their monthly payments… These cracks in consumer health came into stark view in September when Tricolor Holdings — a used car dealer and subprime auto loan lender — suddenly declared bankruptcy. That’s since forced a reckoning among major financial institutions that have exposure to subprime borrowers.”
November 12 – Bloomberg (Emily Graffeo): “Private companies are struggling to generate enough cash to manage mounting liabilities, handing management duties to their lenders in the highest numbers in at least six years. In the first nine months of the year, lenders took over 45 firms, more than twice as many than the year before, according to Lincoln International. In a separate report…, the firm also found that debt tied to these transactions rose to nearly $25 billion over the same period, also the highest since at least 2019, as companies increased their leverage while earnings growth slowed in the most recent quarter.”
November 10 – Bloomberg (Davide Scigliuzzo and Silla Brush): “About a month ago, BlackRock Inc. deemed the private debt it had extended to Renovo Home Partners, a struggling home improvement company, to be worth 100 cents on the dollar. As of last week, the firm had a new assessment: zero. The drastic revision comes as… Renovo — a roll-up of regional kitchen and bathroom remodeling businesses created by private equity firm Audax Group in 2022 — abruptly filed for bankruptcy last week, indicating it plans to shut down. BlackRock held the majority of Renovo’s roughly $150 million of private debt, while Apollo Global Management Inc.’s MidCap Financial and Oaktree Capital Management held smaller chunks… It was no mystery Renovo was in a tough spot.”
November 13 – Bloomberg (Davide Scigliuzzo and Ellen Schneider): “An Apollo Global Management Inc. private credit fund deemed a loan to Medallia Inc. worth 77 cents on the dollar, a level typically considered distressed. A rival fund co-managed by Future Standard and KKR & Co. offered a very different assessment: 91 cents. It’s the largest gap yet in valuations of the software company’s direct loan… And, for private credit skeptics, it’s another example of how lenders may have too much discretion in determining the value of their investments.”
November 10 – Bloomberg (Ameya Karve): “CLO managers are increasingly looking to sell collateralized loan obligations whose underlying loans could get hit by artificial intelligence risk, resulting in higher trading volume in the securities, according to Bank of America Corp. ‘We think AI-risk/AI-opportunity is going to be a focal point for CLO investors and managers going forward,’ strategists Pratik Gupta, Chris Flanagan, Victoria Xu and Akash Bhairav Gupta wrote... The average price on a set of loans considered to be ‘at the forefront’ of AI risk by BofA recently dropped to 89 cents on the dollar, from 97 in July.”
November 11 – Bloomberg (Silas Brown): “KKR & Co. publicly distanced its insurer Global Atlantic from Egan-Jones Ratings Co., a firm the US Securities and Exchange Commission is scrutinizing for its rating practices in the private credit industry. The private capital giant singled out Egan-Jones as rarely being used by Global Atlantic, in a presentation to investors to discuss its third quarter-earnings.”
November 10 – Bloomberg (Claire Ruckin and Pablo Mayo Cerqueiro): “Private equity firms are facing a double dilemma. IPO markets, the usual path for exiting investments, have been gradually reopening, but not enough for them to cash out completely. Option B for getting paid, borrowing the money by putting it on the company’s balance sheet, will only make the first problem worse by spooking equity investors. Enter Hellman & Friedman, which engineered a strategy last month that allowed it to cut its stake in security company Verisure Plc via an initial public offering and raise €1 billion ($1.2bn) for a payout by issuing debt from a special-purpose vehicle that sits outside of Verisure’s balance sheet. Now, analysts say the approach could become a model for other buyout firms that have struggled to return cash on investments made during the era of cheap financing and near-zero interest rates.”
November 13 – Bloomberg (Shruti Date Singh): “Investors and dealers are trading municipal bonds at a record pace this year, driven by strong government sales and a burst of volatility tied to tariffs and interest rate moves. Through Nov. 12, the number of trades has already surpassed 15.4 million, exceeding last year’s total of 14.5 million and marking the highest annual volume since the Municipal Securities Rulemaking Board began tracking data in 2006. These figures cover new issuance, secondary market transactions and both customer and inter-dealer trades.”
First Brands Ramifications Watch:
November 7 – Financial Times (Akila Quinio and Antoine Gara): “Asset manager BlackRock is winding down a social impact fund that invested in collapsed subprime car lender Tricolor... The firm told employees it would close its BlackRock Impact Opportunities fund to new investments… BlackRock would continue to manage the portfolio through what is expected to be a one-to-two-year period in which it will look to sell the $800mn fund’s investments, before closing the strategy fully.”
Global Credit and Financial Bubble Watch:
November 10 – Bloomberg (Tasos Vossos, Neil Callanan, and Esteban Duarte): “The value of banks’ synthetic securitizations has surpassed $670 billion, expanding at a double-digit pace as lenders race to offload risk and free up capital. The figure, the portion that banks retain after partially shifting the peril of loan losses through significant risk transfers, is an 18% increase for the 2024 financial year from the prior period… The metric is a proxy of activity in one of financial markets’ hottest corners.”
November 11 – Bloomberg (Swati Pandey): “Australian home loans surged beyond expectations in the third quarter to a record high, underscoring how easier monetary policy has reignited credit growth and property demand and giving the Reserve Bank another reason to stay on the sidelines. Figures from the Australian Bureau of Statistics… showed new loans for home investors jumped 13.6% in the three months through September to the highest level since early 2022, lifting total residential loans to a record.”
November 10 – Bloomberg (Giovanna Bellotti Azevedo): “Brazilian corporates face mounting pressure from their exposure to private credit funds that have grown rapidly in recent years, according to Fitch Ratings. The funds may now pose higher credit risks than traditional debt providers, with companies hampered by weak governance, tight liquidity and sluggish performance hit hardest, the ratings firm said.”
Trump Administration Watch:
November 11 – Wall Street Journal (Michael R. Gordon): “The U.S. Navy’s largest aircraft carrier arrived in waters near Latin America…, expanding the American military’s buildup as the Trump administration seeks to ratchet up the pressure on Venezuelan President Nicolás Maduro… Pentagon spokesman Sean Parnell said the carrier strike group ‘will enhance and augment existing capabilities to disrupt narcotics trafficking and degrade and dismantle Transnational Criminal Organizations.’”
November 11 – Reuters: “Venezuela is deploying weapons, including decades-old Russian-made equipment, and is planning to mount a guerrilla-style resistance or sow chaos in the event of a U.S. air or ground attack, according to sources… The approach is a tacit admission of the South American country's shortage of personnel and equipment. U.S. President Donald Trump has suggested the possibility of ground operations in Venezuela, saying ‘the land is going to be next’ following multiple strikes on alleged drug-trafficking vessels in the Caribbean and a large U.S. military build-up in the region. He later denied he was considering strikes inside Venezuela.”
November 11 – Associated Press (Paul Wiseman): “President Donald Trump boasts that his tariffs protect American industries, lure factories to the United States, raise money for the federal government and give him diplomatic leverage. Now, he’s claiming they can finance a windfall for American families, too: He’s promising a generous tariff dividend. The president proposed the idea on his Truth Social media platform Sunday, five days after his Republican Party lost elections in Virginia, New Jersey and elsewhere largely because of voter discontent with his economic stewardship — specifically, the high cost of living. The tariffs are bringing in so much money, the president posted, that ‘a dividend of at least $2000 a person (not including high income people!) will be paid to everyone.’”
November 12 – Reuters (Gram Slattery and Steve Holland): “President Donald Trump is committed to providing Americans a $2,000 check using money that has come into government coffers from Trump's tariffs, the White House said... White House press secretary Karoline Leavitt told reporters that Trump’s staff is exploring how to go about making the plan a reality.”
November 12 – Axios (Gram Slattery and Steve Holland): “Treasury Secretary Bessent slammed the ‘Sell America’ trade in a speech… that pitched the market for U.S. Treasury bonds as stronger than ever. The Trump administration has put the bond market at the center of an affordability agenda in ways not seen under recent predecessors, using unconventional means to try to encourage demand for U.S. debt. Bessent, who said ‘my job is to be the nation’s top bond salesman,’ used the occasion to blast the ‘negative rhetoric and doomsaying of market pundits, especially this spring’ when Treasury securities and the dollar sold off. ‘Maintaining a robust Treasury market — and strengthening it even further — is essential to Making America Affordable Again,’ Bessent said… He said the ‘bond market is more robust and more liquid than it's ever been.’ The intrigue: Bessent, at his third appearance at a Fed conference this year, said Treasury yields were ‘a strong barometer for measuring success’.”
November 7 – Bloomberg (Josh Wingrove and Ilena Peng): “President Donald Trump ordered a federal investigation into the meatpacking industry, blaming ‘majority foreign owned’ companies for soaring beef prices. Trump asked the Justice Department to ‘immediately begin’ the investigation into meat processors, accusing them of collusion, price fixing and manipulation… ‘I am asking the DOJ to act expeditiously,’ Trump posted… ‘Action must be taken immediately to protect Consumers, combat Illegal Monopolies, and ensure these Corporations are not criminally profiting at the expense of the American People.’”
November 12 – Financial Times (Antoine Gara, Akila Quinio and James Politi): “Donald Trump has summoned some of Wall Street’s biggest names including JPMorgan chief Jamie Dimon and billionaire Bill Ackman to a White House dinner as the administration faces pressure over US economic performance. BlackRock chief Larry Fink, Morgan Stanley’s Ted Pick, Goldman Sachs’ David Solomon, Blackstone’s Stephen Schwarzman and KKR co-founder Henry Kravis were among more than a dozen finance executives who attended the dinner on Wednesday… Citadel founder Ken Griffin also attended the dinner… The dinner came two months after Trump held a similar gathering of leaders at US tech companies including Microsoft’s Satya Nadella, OpenAI’s Sam Altman and Apple’s Tim Cook focused on artificial intelligence investments in the country.”
November 12 – Bloomberg (Katy O'Donnell): “Bill Pulte, the Federal Housing Finance Agency director, said the administration is ‘actively evaluating portable mortgages’ just days after President Donald Trump’s call for 50-year mortgages fell flat with industry and consumers. Pulte didn’t give any details… In theory, a portable mortgage would allow a homeowner to transfer their current mortgage rate from one home to another.”
November 13 – Bloomberg (Felice Maranz): “Common shares of Fannie Mae and Freddie Mac extended losses into a third day, tumbling to the lowest intraday since late July… Fannie shed as much as 22%; Freddie dropped as much as 25%; both have lost about 50% since a September peak. Investors may be growing increasingly concerned that the company’s biggest cheerleader — Federal Housing Finance Agency Director Bill Pulte — ‘may be losing influence with the administration,’ Bloomberg Intelligence analyst Ben Elliott says. Pulte also ‘continues to float new ideas to improve affordability that might be better executed with the enterprises in indefinite conservatorship,’ according to Elliott.”
November 11 – Wall Street Journal (Gina Heeb, Brian Schwartz and C. Ryan Barber): “Fannie Mae watchdogs who were removed from their jobs had been probing if Trump appointee Bill Pulte had improperly obtained mortgage records of key Democratic officials, including New York Attorney General Letitia James, according to people familiar... Fannie’s ethics and investigations group had received internal complaints alleging senior officials had improperly directed staff to access the mortgage documents of James and others… The Fannie investigators were probing to find out who had made the orders, whether Pulte had the authority to seek the documents and whether or not they had followed proper procedure…”
China Trade War Watch:
November 8 – Axios (Dave Lawler): “Look under almost every element of President Trump’s second-term foreign policy — from the trade war with China, to peace in Ukraine, to annexing Greenland — and you’ll find critical minerals. China has the U.S. in a bind when it comes to supplies of rare earths and other scarce minerals, and President Xi Jinping has proved he’s willing to squeeze. That’s why Trump was so intent on signing a one-year trade truce with Beijing, and why he’s scouring the world for alternative sources. The U.S. needs rare earth magnets to build everything from fighter jets to wind turbines. Virtually all global output runs through China… ‘Minerals have really become the most powerful form of currency when it comes to foreign policy now,’ says Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies.”
November 9 – Reuters: “China has begun designing a new rare earth licensing regime that could speed up shipments, but it is unlikely to amount to a complete rollback of restrictions as hoped by Washington, industry insiders said. The Ministry of Commerce told some rare earth exporters they will be able to apply for new streamlined permits in the future and in industry briefings outlined the documents that will be required… Following the agreement reached between Presidents Donald Trump and Xi Jinping, China said last week it would pause for one year the restrictions it imposed in October. However, China’s commerce ministry has said nothing publicly about a broader round of controls introduced in April that rattled global supply chains.”
November 10 – Wall Street Journal (Jon Emont and Raffaele Huang): “China plans to ease the flow of rare earths and other restricted materials to the U.S. by designing a system that will exclude companies with ties to the U.S. military while fast-tracking export approvals for other firms, according to people familiar... The ‘validated end-user’ system, or VEU, would enable Chinese leader Xi Jinping to follow through on a pledge to President Trump to facilitate the export of such materials while ensuring that they don’t end up with U.S. military suppliers… Beijing’s plan could still change and its licensing system wouldn’t be certain until it is implemented, the people said.”
November 9 – Financial Times (Camilla Hodgson, Cordu Krubally-N’Diaye and Martha Muir): “The US has claimed China’s dominance over rare earths is coming to an end, with Treasury secretary Scott Bessent telling the Financial Times in October that Beijing’s leverage over the metals would last no more than 24 months. China last month tightened sweeping export restrictions on rare earths and magnets, used in everything from electric cars to refrigerators, although the country’s leader Xi Jinping agreed a temporary reprieve… The rise in trade tensions has focused US policymakers’ minds on the country’s reliance on China for the minerals, with a race under way to develop new sources and processing facilities. But some observers have questioned Bessent’s two-year timeline, given the extent of China’s grip on the sector and the complexity and expense of building the mines and processing that will be needed to replace Chinese suppliers. ‘Promises of a year or two are either naivety or spin,’ said Tim Puko, director of commodities at the Eurasia Group consultancy. ‘There is no realistic way for the US to hit that target now.’”
November 12 – Bloomberg (Ben Westcott and Erin Ailworth): “China’s purchases of American soybeans appear to have stalled, less than two weeks after the US touted a wide-ranging trade truce that signaled thawing relations… After a flurry of orders late last month — which were the first of this season — Chinese imports of US cargoes seem to have faltered, according to traders… They said they were not aware of new shipments. The pause is fueling uncertainty over whether the biggest consumer of American soybeans will import as much as US President Donald Trump’s administration claims to expect.”
Trade War Watch:
November 11 – Reuters (Heejin Kim and Jihoon Lee): “Two weeks after U.S. President Donald Trump and South Korea's Lee Jae Myung met and announced they had resolved months of negotiations over tariffs and security issues, the two sides have yet to release any agreement on paper. South Korean officials say the delay appears to centre on discussions over their request for Washington’s blessing to build a nuclear-powered submarine, which Lee raised publicly when he met Trump on the sidelines of an Asia-Pacific forum in South Korea last month.”
November 12 – Financial Times (Andy Bounds and Kana Inagaki): “European carmakers and other industrial companies continue to face ‘devastating’ chip shortages that could halt global production lines within weeks despite China agreeing to lift export restrictions… The Dutch arm of the chipmaker Nexperia has not been sending silicon wafers to its breakaway Chinese subsidiary to be assembled as hostility between the two sides continued… Nexperia makes basic low-margin chips that are widely used in electronic systems in cars and control everything from lighting and airbag systems to locks and windows.”
Constitution Watch:
November 11 – Axios (Ben Berkowitz): “President Trump… claimed the U.S. would be on the hook for $3 trillion in refunds and lost investments if the administration loses the pending tariffs case at the Supreme Court... ‘The U.S. Supreme Court was given the wrong numbers. The ‘unwind’ in the event of a negative decision on Tariffs, would be, including investments made, to be made, and return of funds, in excess of 3 Trillion Dollars,’ Trump posted… ‘That would truly become an insurmountable National Security Event, and devastating to the future of our Country - Possibly non-sustainable!’”
November 9 – Axios (Avery Lotz and Andrew Pantazi): “U.S. Deputy Attorney General Todd Blanche urged young lawyers to join the administration's ‘war’ against ‘rogue activist judges.’ His stark language exposed how the Trump-aligned Justice Department treats the judiciary less as an independent branch of government and more as an adversary to be fought. ‘We need you, because it is a war, and it's something we will not win unless we keep on fighting,’ Blanche said Friday at an annual Federalist Society conference. He said the Justice Department’s lawyers are ‘bouncing around this country fighting these activist judges,’ who he said are ‘more political, or certainly as political, as the most liberal governor or’ district attorney, Blanche said.”
November 12 – Financial Times (Demetri Sevastopulo, Steff Chávez, David Sheppard and Charles Clover in): “The UK has paused some intelligence sharing with the US on counter-narcotic operations in the Caribbean, over fears the Trump administration’s policy of lethal military strikes against suspected smugglers could be illegal. The move comes after the US destroyed multiple alleged drug boats in recent months, killing dozens of people… Two people familiar with the situation said the UK had stopped sharing certain intelligence with the US because of concerns that Washington would use the information to help justify potentially illegal strikes.”
Government Shutdown/Budget Deficit Watch:
November 10 – Axios (Andrew Solender): “Democratic lawmakers and liberal grassroots groups erupted Sunday night as moderate Senate Democrats moved to cut a deal with Republicans that would put an end to the government shutdown. The deal threatens to reopen the deep divisions that have been roiling the Democratic Party all year, and the widespread opposition to it among House Democrats could complicate its path to passage. House Minority Leader Hakeem Jeffries (D-N.Y.)… suggested the bill fails to ‘decisively address the Republican healthcare crisis’… This ‘deal’ is a surrender that all congressional Democrats should reject out of hand,’ said Indivisible co-founder Ezra Levin. ‘We cannot afford a divided and weak opposition party.’ Eight Senate Democrats voted with Republicans on Sunday to advance a deal that would fund the government through the end of January…”
November 10 – New York Times (Julie Creswell and Linda Qiu): “For the better part of two years, well before the federal government shut down and SNAP payments were paused, lower-income consumers have been slowing their spending, especially for discretionary items. Nearly three-quarters of individuals who receive SNAP benefits live below the poverty line, making less than $32,000 a year for a family of four. The ripple effect of that spending pullback is being felt by retailers, food companies and restaurant chains. ‘We have now one of the worst consumer sentiments we have seen in decades as we go into the holiday season,’ the Kraft Heinz chief executive, Carlos Abrams-Rivera, told investors... Traffic from low-income consumers at quick-service restaurants declined by ‘nearly double digits in the third quarter, a trend that’s persisted for nearly two years,’ the McDonald’s chief executive, Chris Kempczinski, said…”
U.S./Russia/China/Europe/Iran Watch:
November 11 – Bloomberg (Muyao Shen and Patrick Howell O'Neill): “China’s cybersecurity agency accused the American government of orchestrating the theft of about $13 billion worth of Bitcoin, representing China’s most recent attempt to attribute major cyberattacks to the US. The theft of the 127,272 Bitcoin tokens from the LuBian Bitcoin mining pool that took place in December 2020 marks as one of the largest crypto heists in history. The hack, according to the Chinese National Computer Virus Emergency Response Center, is likely a ‘state-level hacker operation’ led by US…”
November 11 – Wall Street Journal (Bertrand Benoit and Daniel Michaels): “Europe is now caught somewhere between war and peace. In recent weeks, drones appearing mysteriously above airports and halting flights have made headlines. Those are just the tip of the iceberg. Germany alone has three drone incursions a day on average—over military installations, defense-industry facilities and critical infrastructure points… Drones are part of an intensifying barrage that European leaders suspect Russia is directing at the continent over its support for Ukraine. It includes sabotage, cyberattacks and disinformation campaigns. ‘We are not at war’ with Russia, German Chancellor Friedrich Merz said recently, ‘but we are no longer at peace either.’”
Ukraine War Watch:
November 9 – Associated Press: “Ukrainian strikes disrupted power and heating to two major Russian cities near the Ukrainian border, local Russian officials reported… The report comes as Russia and Ukraine have traded almost daily assaults on each other’s energy infrastructure and U.S.-led diplomatic efforts to stop the nearly four-year war have not advanced. Elsewhere, Ukraine’s top diplomat accused Moscow of deliberately endangering nuclear safety, as he said Russia’s mass drone and missile attack on Friday struck substations that power two nuclear power plants.”
Taiwan Watch:
November 10 – Bloomberg (Sakura Murakami and James Mayger): “Japanese Prime Minister Sanae Takaichi… defended her description of a conflict over Taiwan as potentially amounting to an existential risk for Japan after a Chinese diplomat accused her of meddling in Beijing’s internal affairs. Last Friday, Takaichi said that if military force were to be used in a Taiwan conflict, including the use of warships, it could be considered a ‘survival-threatening situation’ for Japan. That classification is significant because it would provide a legal justification for Japan to deploy its military to help defend friendly nations. Her comments… sparked anger from Xue Jian, the consul-general of China in the western city of Osaka, who took to X to say that Japan’s stance in considering a Taiwan contingency as threatening its own survival as a fatal path chosen by ‘foolish politicians.’ ‘If you go sticking that filthy neck where it doesn’t belong, it’s gonna get sliced right off. You ready for that?’ Xue wrote…”
AI Bubble/Arms Race Watch:
November 10 – Financial Times (Kate Duguid and Tabby Kinder): “Investors have been selling off the debt of US tech heavyweights, showing how jitters over Silicon Valley’s boom in spending on artificial intelligence have spilled into the bond market. A basket of bonds issued by so-called hyperscalers — companies that are building vast data centres, including Alphabet, Meta, Microsoft and Oracle — has sustained a hit in recent weeks. The spread, or premium in yield that investors demand to buy the debt over Treasuries, has climbed to 0.78 percentage points, the highest level since US President Donald Trump sent markets reeling in April…, and up from 0.5 points in September… ‘The important thing the market woke up to in the past two weeks is that it’s the public markets that are going to need to finance this AI boom,’ said Brij Khurana, a fixed income portfolio manager at Wellington Management.”
November 10 – Bloomberg (John Gittelsohn and Michelle Ma): “Two of the world’s biggest data center developers have projects in Nvidia Corp.’s hometown that may sit empty for years because the local utility isn’t ready to supply electricity. In Santa Clara, California…, Digital Realty Trust Inc. applied in 2019 to build a data center. Roughly six years later, the development remains an empty shell awaiting full energization. Stack Infrastructure, which was acquired earlier this year by Blue Owl Capital Inc., has a nearby 48-megawatt project that’s also vacant, while the city-owned utility, Silicon Valley Power, struggles to upgrade its capacity. The fate of the two facilities highlights a major challenge for the US tech sector and indeed the wider economy. While demand for data centers has never been greater, driven by the boom in cloud computing and AI, access to electricity is emerging as the biggest constraint.”
November 10 – Wall Street Journal (Jonathan Weil): “Microsoft has opened up a little bit about its dealings with OpenAI. It still has a long way to go to do right by investors. Here is the rub: Microsoft in its financial reports identifies OpenAI as an equity-method investment. That means OpenAI, by definition, is a related party of Microsoft under the accounting rules… Once again, however, Microsoft in its latest quarterly report didn’t include any related-party disclosures regarding OpenAI. The lack of information would be defensible if the two companies’ transactions were too insignificant to matter. However, it has become apparent that their dealings are quite material and that investors care tremendously about them. Under generally accepted accounting principles, companies reporting related-party transactions must disclose enough information about them so that an outside reader can gain ‘an understanding of the effects of the transactions on the financial statements.’ That is something Microsoft doesn’t do.”
November 11 – Bloomberg (Dina Bass, Caroline Hyde and Ed Ludlow): “CoreWeave Inc. shares tumbled after the company lowered its annual revenue forecast due to a delay in fulfilling a customer contract, a setback in its race to keep up with the artificial intelligence boom… ‘We are affected by temporary delays related to a third-party data center developer who is behind schedule,’ Chief Executive Officer Michael Intrator said… Delays getting more AI computing capacity online are persistent across the industry, Intrator said... And while CoreWeave was able to preserve the value of the contract, no one is happy about it. ‘Everybody is frustrated — the data center provider is frustrated, we’re frustrated, the client is frustrated,’ he said... ‘For that matter, people who are waiting for the next iteration of AI are frustrated.’”
November 8 – New York Times (Ian Frisch): “Like many companies trying to keep up in the A.I. boom, QTS Data Centers, a digital infrastructure company that’s wholly owned by the investment giant Blackstone, has been dropping billions of dollars to expand its network of cutting-edge computing facilities. It has also, like a growing number of fellow tech companies, found a way to unlock additional (and much-needed) cash: exotic financial instruments. According to… DealBook, Blackstone is on the cusp of closing a $3.46 billion commercial-mortgage-backed securities (C.M.B.S.) offering to refinance debt held by QTS, the biggest player in the artificial intelligence infrastructure market. It would be the largest deal of its type this year in a fast-accelerating market. The bonds would be backed by 10 data centers in six markets (including Atlanta, Dallas and Norfolk, Va.) that together consume enough energy to power Burlington, Vt., for half a decade. Blackstone’s offering is part of the latest push in the A.I. infrastructure financing blitz.”
November 10 – Bloomberg (Josh Saul, Mark Chediak and Paula Seligson): “Two of the biggest power companies in the US have had talks with private credit lenders about raising money in what would be a first for utilities. Duke Energy Corp. has spoken with private credit providers about financing pieces of its $87 billion capital plan and Xcel Energy Inc. has also had conversations with private credit firms about its $60 billion plan, executives said…”
November 11 – CNBC (April Roach and Dylan Butts): “SoftBank said… it has sold its entire stake in U.S. chipmaker Nvidia for $5.83 billion as the Japanese giant looks to capitalize on its ‘all in’ bet on ChatGPT maker OpenAI. The firm said in its earnings statement that it sold 32.1 million Nvidia shares in October. It also disclosed that it sold part of its T-Mobile stake for $9.17 billion. ‘We want to provide a lot of investment opportunities for investors, while we can still maintain financial strength,’ said SoftBank’s chief financial officer, Yoshimitsu Goto…”
Bubble and Mania Watch:
November 12 – Bloomberg (Olga Kharif and Isabelle Lee): “Bitcoin is struggling to climb out of a $330 billion hole, and the forces that once powered its ascent are in retreat. After a bruising October, the digital currency has staged only a halting recovery — climbing, dipping and stalling just above $100,000. What’s missing this time is the powerful tailwind that defined much of 2025: institutional conviction. Over the past month, many of the biggest buyers — from exchange-traded fund allocators to corporate treasuries — have quietly stepped back… For much of the year, institutions were the backbone of Bitcoin’s legitimacy and its price. ETFs as a cohort took in more than $25 billion…, pushing assets as high as roughly $169 billion.”
November 9 – Wall Street Journal (Gregory Zuckerman and Vicky Ge Huang): “The hottest crypto trade has turned cold. Some investors are saying ‘told you so,’ while others are doubling down. It was the move to make for much of the year: Sell shares or borrow money, then plow the cash into bitcoin, ether and other cryptocurrencies. Investors bid up shares of these ‘crypto-treasury’ companies, seeing them as a way to turbocharge wagers on the volatile crypto market. Michael Saylor pioneered the move in 2020 when he transformed a tiny software company, then called MicroStrategy, into a bitcoin whale now known as Strategy. But with bitcoin and ether prices now tumbling, so are shares in Strategy and its copycats. Strategy was worth around $128 billion at its peak in July; it is now worth about $70 billion. The selloff is hitting big-name investors including Peter Thiel, the famed venture capitalist who has backed multiple crypto-treasury companies…”
November 7 – Financial Times (George Steer): “US companies’ earnings are growing at the fastest pace in four years… Median earnings growth year-on-year across the Russell 3000 index — a benchmark for the entire US stock market — hit 11% in the third quarter, up from 6 per cent in the previous three months, according to Morgan Stanley. That is the fastest growth rate since the third quarter of 2021. Six of the 11 sectors that make up the blue-chip S&P 500 index have reported positive average earnings growth in the three months to September…”
November 11 – Bloomberg (Michael Msika): “Company executives are sounding remarkably upbeat about the economy this earnings season, even as trade tensions linger and stock valuations look stretched. Mentions of ‘economic slowdown’ and synonyms during sales, guidance and earnings calls tracked by Bloomberg are the lowest since 2007. That’s despite the disruption to official US data caused by the government shutdown and the murkier policy outlook it’s led to. And this is playing out as the S&P 500 heads for a third year of high returns, with stocks as expensive as they were at their post-pandemic peak.”
Inflation Watch:
November 10 – Bloomberg: “If this week’s gubernatorial elections are any indication, rising electricity costs could well be a defining issue in the 2026 US state elections. Nowhere is that more likely than in the PJM Interconnection, the nation’s most concentrated power market for energy-intensive data centers. In the 13 Midwest and mid-Atlantic states plus the District of Columbia with full or partial exposure to PJM capacity auctions, summer residential power prices have climbed 20—70% over the past five years.”
November 10 – Bloomberg (David Uberti): “Sen. Bernie Sanders (I., Vt.) and a group of Democratic senators are demanding the White House answer for higher electric bills they blamed in part on the artificial-intelligence boom driving one of the most expensive infrastructure build-outs in U.S. history. Sanders, Sen. Richard Blumenthal (D., Conn.) and others… called on the administration to share how it plans to mitigate price impacts and more from data centers needed to train and run AI applications. In a letter to the White House and Commerce Secretary Howard Lutnick, the group took aim at Meta, OpenAI, Alphabet, Oracle and other firms behind a data-center build-out stretching from the Washington suburbs to rural Oregon. President Trump’s push to fast-track these projects is forcing Americans into ‘bidding wars with trillion-dollar companies to keep the lights on at home,’ they wrote.”
November 11 – Bloomberg (Daniel Flatley): “US Treasury Secretary Scott Bessent deflected concerns about high costs under President Donald Trump, saying the administration had inherited elevated price levels and that its policies would generate real income gains for American workers. ‘We inherited an affordability crisis,’ Bessent said…, adding that inflation was the worst in 40 or 50 years under President Joe Biden. ‘We have slowed the price increases down, and they are going to continue to slow down’… Trump himself has rebuffed such concerns, telling reporters last week ‘I don’t want to hear about the affordability’ because prices are ‘much less.’”
November 12 – Axios (Ben Berkowitz): “Treasury Secretary Scott Bessent… touted ‘substantial’ actions in the coming days that he said would lower the prices of coffee and some fruits, among other grocery items… Just as former President Biden couldn't convince people inflation was under control when egg prices were soaring, it’s been hard for the Trump administration to make the case its economic policies are working when people are paying 20% more for a cup of coffee. ‘You’re going to see substantial announcements over the next couple of days in terms of things we don’t grow here in the United States,’ Bessent said… ‘Coffee being one of them, bananas, other fruits. Things like that. So that will bring the prices down very quickly.’”
Federal Reserve Watch:
November 13 – Reuters (Howard Schneider and Ann Saphir): “The historically routine process of reappointing the Federal Reserve’s 12 regional bank presidents is being watched for signs of becoming the newest challenge to the U.S. central bank’s independence… The twice-a-decade proceeding ordinarily occurs without controversy and produces the same result: The regional bank chiefs are reappointed by a majority of the Fed’s Board of Governors in Washington. But the surprise retirement announcement… by Atlanta Fed President Raphael Bostic, not long after the reappointment vetting had started, has cast fresh light on the process… Trump is also likely just weeks away from nominating his own choice to run the entire U.S. central bank system, with current Fed Chair Jerome Powell's term set to expire in May.”
November 11 – Wall Street Journal (Nick Timiraos): “The path for interest-rate cuts has been clouded by an emerging split within the central bank with little precedent during Federal Reserve Chair Jerome Powell’s nearly eight-year tenure. Officials are fractured over which poses the greater threat—persistent inflation or a sluggish labor market—and even a resumption of official economic data may not bridge the differences. The rupture has complicated what looked like a workable plan less than two months ago, though investors think a rate cut at the Fed’s next meeting is still more likely than not.”
November 12 – Associated Press (Christopher Rugaber): “Two Federal Reserve officials expressed opposition… to another interest rate cut at the central bank’s next meeting in December… The remarks by Susan Collins, president of the Federal Reserve Bank of Boston, and Raphael Bostic, president of the Atlanta Fed, suggest that the central bank’s rate-setting committee could be tilting against what had been an expected third straight cut next month. The officials cited several reasons for keeping rates unchanged… They argued that inflation is stubbornly elevated and has been above the Fed’s 2% target for nearly five years, while the economy is resilient and doesn’t appear to need more rate cuts.”
November 12 – Bloomberg (Maria Eloisa Capurro and Alex Harris): “Rising overnight funding costs are signaling that bank reserves are no longer abundant, and the US central bank ‘won’t have to wait long’ before purchasing assets to sustain desired liquidity levels, according to the Federal Reserve Bank of New York’s Roberto Perli. Several indicators, including higher money market rates, are providing ‘strong evidence that reserves are no longer abundant,’ Perli, who oversees the central bank’s securities portfolio, said… Perli, who runs the System Open Market Account, echoed remarks… by New York Fed President John Williams, who said it will not be long before the central bank reaches a level where reserves are considered ample and the ‘natural next stage’ would be a gradual purchase of assets.”
November 12 – Reuters (Michael S. Derby): “The official responsible for implementing monetary policy at the Federal Reserve Bank of New York said… firms that need to use the central bank’s Standing Repo Facility should tap the tool when needed, adding that large-scale usage would not be problematic. ‘It is desirable and fully expected that the [Standing Repo Facility] be used whenever it is economically sensible to do so,’ said Roberto Perli, who manages the bank’s System Open Market Account… ‘Our counterparties participated in large scale in the repo operations that the Federal Reserve offered in the past; if it makes economic sense, there is no reason why sizeable participation cannot take place’ in the two daily Standing Repo Facility operations, Perli said.”
November 9 – Bloomberg (María Paula Mijares Torres): “Federal Reserve Bank of New York President John Williams said financial strain among lower and middle-income Americans could threaten the US economy’s resilience, even as wealthier households benefit from a stock market boom… The Fed’s next rate decision in December is ‘really a balancing act,’ the FT quoted Williams as saying... While ‘inflation is high, and it’s not showing signs of coming down right now,’ the US economy ‘is showing some resilience’... Even so, many Americans are struggling with housing and other living costs. Williams said there’s evidence ‘that lower and moderate-income households are facing some constraints from an affordability point of view.’”
November 8 – Financial Times (Claire Jones and Patrick Jenkins): “The mounting problems facing poorer Americans are leaving the world’s most important economy exposed to risks of a downturn, a top Federal Reserve official has warned… John Williams, president of the New York Fed, said data and conversations with community leaders highlighted that many poorer households were facing an affordability crisis. ‘There is quite a bit of evidence… that lower and moderate-income households are facing some constraints from an affordability point of view,’ Williams told the Financial Times. ‘From the cost of living, the housing costs and basically many families living month to month.’ Meanwhile, wealthier Americans were benefiting from the stock market ‘booming near all-time highs’.”
U.S. Economic Bubble Watch:
November 9 – Wall Street Journal (Rachel Louise Ensign and Rachel Wolfe): “Many Americans who own stocks are feeling good about their finances… They have seen stocks dive through the dot-com bust, financial crisis and onset of the pandemic—only to recover and keep going up. Even after a big selloff following President Trump’s tariff announcements in April, and a smaller dip last week, the S&P 500 is up more than 14% so far this year. Gains in 30 top artificial intelligence-related stocks alone have added $5 trillion to household wealth across the country in the past year… Investors’ rosy feelings about having a lot more money—at least on paper—are powering spending on restaurant meals, business-class airline tickets, home improvement and more, keeping the broader economy humming. It’s a very different story for everyone else. Americans with large investment portfolios feel markedly better about the economy than those who don’t own stocks, according to the University of Michigan sentiment index.”
November 10 – Reuters (Karen Sloan): “Large and midsized U.S. law firms enjoyed a ‘sharp spike’ in client demand during the third quarter, setting the stage for a profitable 2025, according to a new analysis of firm financial data. Overall demand was up 3.9% from the third quarter of 2024—the fourth-highest quarterly increase of the past 20 years and the highest outside of 2021’s rapid post-pandemic rebound… Transactional practices fueled much of the third-quarter demand surge, especially among midsized law firms, which saw transactional demand climb 6.1% over the previous year. Across firms, mergers and acquisitions demand was up 6.7% over the third quarter of 2024, while all corporate work was up 4.4%, real estate was up 4.2%, and tax was up 3.7%. Transactional practices were ‘intensely busy across all segments,’ the report found.”
November 11 – Bloomberg (Julia Fanzeres): “US companies shed 11,250 jobs per week on average in the four weeks ended Oct. 25, according to… ADP…. The figures suggest the labor market slowed in the second half of October… ADP’s most recent monthly report, released last week, showed private-sector payrolls increased 42,000 in October after declining in the prior two months.”
November 11 – Bloomberg (Julia Fanzeres): “Sentiment among US small businesses eased in October to a six-month low on a deterioration in earnings and less optimism about the economy. The National Federation of Independent Business optimism index declined 0.6 point to 98.2… Five of the 10 components that make up the gauge decreased while four improved. The net share of owners reporting stronger earnings in the last three months fell 9 percentage points, the most since the pandemic and restrained by weaker sales and higher materials costs.”
November 12 – CNBC (Diana Olick): “As the housing market heads into its traditionally slowest season, homebuyers are making one last gasp, likely due to more supply on the market and softening prices. Mortgage applications to purchase a home rose 6% last week to their strongest pace since September, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 31% higher than the same week one year ago.”
November 10 – Financial Times (Zehra Munir and Akila Quinio): “Cash-strapped American seniors are turning to reverse mortgages, a controversial type of loan that soared during the financial crisis, as a tightening economy drives ageing homeowners to find ways to make ends meet. The number of federally insured reverse mortgages rose more than 6% in the 12 months ending September, according to… the National Reverse Mortgage Lenders Association. Several US lenders told the Financial Times that sales of reverse mortgages have jumped this year as looming cuts to government benefits and persistent inflation have weighed heavily on older people. ‘In terms of the drivers here, it’s really that the math doesn’t math,’ said Sarah Edelman, executive vice-president… at housing non-profit National Community Stabilization Trust. ‘You’ve got people living longer with less retirement resources.’”
China Watch:
November 13 – Bloomberg: “China’s credit expansion was the weakest in more than a year last month, dragged down by slower government bond sales and sluggish borrowing demand across the economy. Aggregate financing, a broad measure of credit, increased 815 billion yuan ($115bn) in October… That’s the lowest level since July 2024 and well short of the 1.2 trillion-yuan forecast by economists… Financial institutions recorded an expansion of 219 billion yuan of new loans in the month, also worse than expected, with growth in the outstanding stock of loans to the real economy reaching a record low.”
November 9 – Reuters: “China’s internet platforms are quietly reviving consumer lending, taking Beijing’s push to make household borrowing cheaper as a signal that regulators may be easing a years-long crackdown on the sector… Beijing began reining in what it described as ‘disorderly expansion’ by internet platforms in 2020 by pulling the IPO of Alibaba… In August, however, needing to spur weak consumption while managing a trade dispute with Washington, China introduced consumer-loan interest subsidies, naming Ant and Tencent-backed WeBank alongside traditional banks as eligible lenders.”
November 11 – Bloomberg: “China Vanke Co.’s bondholders were dealt a fresh blow last week, when the distressed developer’s biggest backer tightened the terms of its financing. The timing couldn’t have been worse. The shift in Shenzhen Metro Group Co.’s approach to financial support comes just as cash-strapped Vanke is staring at a series of debt repayments… In all, about 15 billion yuan ($2.1bn) of yuan-denominated bonds are due to mature or face redemption options by June 30, 2026… The shortfall is stirring concerns about the outlook for Vanke’s publicly issued bonds…”
November 9 – Bloomberg: “China’s consumer prices unexpectedly increased in October, as holidays during the month boosted travel, food and transport demand — a pick-up many economists saw likely as fleeting. The consumer price index rose 0.2% from a year earlier, after a 0.3% decline in September…”
Japan Watch:
November 10 – Bloomberg (Yoshiaki Nohara, Sakura Murakami, and Takashi Umekawa): “Japanese Prime Minister Sanae Takaichi aims to use her first stimulus package to jump-start the economy and initiate a new growth strategy through investment in key industries. A panel tasked to form a new economic strategy for the nation by next summer recommended that the prime minister use the package to kick off efforts to build robust growth through ‘crisis management investment and growth investment,’ according to documents… ‘We need to boost private investment through measures that enhance the predictability of investment,’ Takaichi said…”
November 10 – Reuters (Leika Kihara): “Japanese Prime Minister Sanae Takaichi said… she would work on setting a new fiscal target extending through several years to allow more flexible spending, essentially watering down the country's commitment to fiscal consolidation. The new prime minister also renewed calls for the Bank of Japan to go slow on interest rate hikes, despite signs that most central bank policymakers would prefer to see a resumption of monetary tightening sooner rather than later.”
November 12 – Bloomberg (Erica Yokoyama and Toru Fujioka): “Japan’s Prime Minister Sanae Takaichi said that monetary policy is vital for establishing a strong economy and stable inflation, following the first meeting of a key economic panel during her administration. ‘The conduct of appropriate monetary policy is very important for achieving both a strong economy and stable inflation at the same time,’ Takaichi said… ‘We will continue to work together for the development of the economy.’”
November 9 – Reuters (Takaya Yamaguchi): “Japan’s government will urge the central bank to focus on achieving strong economic growth accompanied by stable prices in an outline of its stimulus package, a draft… showed… The comment likely underscores Prime Minister Sanae Takaichi's preference for the Bank of Japan to keep interest rates low to help underpin a fragile economic recovery.”
November 9 – Bloomberg (Toru Fujioka): “A record of policy discussions from the Bank of Japan’s latest board meeting signaled that the next interest rate increase could come as soon as December… ‘It is likely that conditions for taking a further step toward the normalization of the policy interest rate have almost been met,’ one of nine board members said while noting the need to examine underlying inflation…”
November 12 – Reuters (Leika Kihara): “Japan’s wholesale prices rose more than expected in October as the cost of rice and other food remained stubbornly high… Analysts said wholesale inflation was likely to moderate in the coming months, but renewed yen weakness could push up the cost of imports and keep prices elevated. The corporate goods price index… rose 2.7% in October from a year earlier, slowing from 2.8% in September but exceeding market forecasts for a 2.5% increase.”
Emerging Market Watch:
November 11 – Reuters (Rodrigo Campos): “A pick-up in flows into stocks led the way as non-resident investors added $26.9 billion to their emerging markets' equities and debt portfolios in October, data from a banking trade group showed. The inflow last month marks an uptick on the $21.1 billion in September and compares to a $5 billion net outflow in October 2024 according to the Institute of International Finance. The overall $12.9 billion net inflow to emerging market stocks was the highest since July, and the $9.4 billion that went into equities outside China the strongest since December 2023.”
Leveraged Speculation Watch:
November 12 – Bloomberg (Nishant Kumar): “Steve Cohen is one of the richest people in finance thanks to teams of traders making short-term mark-to-markets bets. But over the last few weeks, the billionaire founder of Point72 Asset Management has had his people out talking to investors about an entirely different strategy — where patience, not speed, delivers the payoff. Cohen is among a number of high profile hedge fund veterans, including Millennium Management’s Izzy Englander and Jain Global’s Bobby Jain, who are moving into private credit and other opaque corners of finance — areas that have traditionally been dominated by asset management industry giants, such as Blackstone Inc., Ares Management Corp. and Apollo Global Management.”
Social, Political, Environmental, Cybersecurity Instability Watch:
November 9 – Associated Press (Seth Borenstein): “The world has changed dramatically in the decade since leaders celebrated a historic climate agreement in Paris a decade ago, but not quite in ways they expected or wanted. Earth’s warming climate has gotten nastier faster than society has been able to wean itself from burning the coal, oil and natural gas that emits carbon pollution that triggers global warming, several scientists and officials said… ‘I think it’s important that we’re honest with the world and we declare failure,’ said Johan Rockstrom, director of the Potsdam Institute for Climate Research in Germany. He said warming’s harms are happening faster and more severely than scientists predicted.”
November 13 – Bloomberg (Emily Forgash): “Weeks after ChatGPT was unleashed on the world in November 2022, sustainability executives at Microsoft Corp. realized they had a big problem. On the tech giant’s 500-acre campus… teams began holding regular ‘triage’ meetings to confront serious questions posed by the artificial intelligence boom: Where would the company find the gigawatts… needed for data centers? And how could Microsoft possibly secure that extra energy while still making progress toward a long-standing goal of going carbon-negative? The AI discussions were ‘interesting and terrifying all at the same time,’ said Brian Janous, who served until August 2023 as Microsoft’s vice president of energy. Microsoft and other major tech companies, he said, had to ‘look at the climate commitments they set and say, ‘Can I still do this?’’ Nearly three years later, Microsoft and rivals including Amazon.com Inc., Meta Platforms Inc. and Alphabet Inc.’s Google are still struggling to answer that question.”
November 9 – Bloomberg (Brian K Sullivan, Mary Hui, and Joe Wertz): “The odds of extreme cold this winter in the US, Asia and parts of Europe are climbing, threatening to boost energy bills for consumers already grappling with high costs and economic uncertainty. With the season’s start just weeks away, meteorologists see many of the same conditions that led to one of the warmest winters on record last year for the Northern Hemisphere. But there’s one key difference: Signs are emerging that the polar vortex, the girdle of winds around the Arctic, could weaken and allow frigid air to spill southward… ‘Further into December, keep an eye on the polar vortex,’ said Dan Hart, a meteorologist at London-based OpenWeather Ltd.”
November 12 – Bloomberg (Jonathan Tirone): “United Nations nuclear inspectors said they are seriously concerned about the status of Iran’s inventory of near-bomb-grade uranium, as the Islamic Republic continues to deny them access to sites bombed several months ago by the US and Israel. The International Atomic Energy Agency reiterated it hasn’t been able to verify Iran’s fuel stockpile since mid-June…”
November 12 – Reuters (Parisa Hafezi): “Iran is grappling with its worst water crisis in decades, with officials warning that Tehran — a city of more than 10 million — may soon be uninhabitable if the drought gripping the country continues. President Masoud Pezeshkian has cautioned that if rainfall does not arrive by December, the government must start rationing water in Tehran. ‘Even if we do ration and it still does not rain, then we will have no water at all. They (citizens) have to evacuate Tehran,’ Pezeshkian said on November 6.”
Geopolitical Watch:
November 12 – Financial Times (Leo Lewis in Tokyo and Joe Leahy): “The row has deepened concerns about the relationship between the region’s two biggest economies, diplomats and academics said, at a time when US President Donald Trump’s transactional approach to trade and diplomacy has shaken up geopolitics. The relationship between Japan and China, two regional heavyweights, is one of the most delicate in the world, said a senior adviser to three former Japanese prime ministers. ‘Every change of leader, outside shock or change of the underlying situation, puts that balance at risk,’ the person said. Since the hawkish Takaichi won the leadership of Japan’s ruling Liberal Democratic party last month, Beijing has been on high alert for signs she will emulate her mentor, the late nationalist prime minister Shinzo Abe, in taking a tough line on China.”
November 14 – Bloomberg (Foster Wong): “China’s Foreign Ministry urged its citizens to avoid traveling to Japan due to what it called comments by Japanese Prime Minister Sanae Takaichi on Taiwan that pose ‘major risks’ to safety of Chinese nationals. The warning, issued in a statement, is the latest in an escalating diplomatic row…”
November 11 – Wall Street Journal (Shan Li and Krishna Pokharel): “Pakistan blamed India-backed militants for a suicide bombing that killed 12 people in Islamabad…, raising the prospect of renewed tensions between the nuclear-armed rivals, as India’s prime minister vowed to hunt down the perpetrators of a car explosion in New Delhi the day before. A blast on Monday near a metro station by New Delhi’s historic Red Fort set several nearby cars on fire, killed eight and injured at least 20 others…”
The S&P500 was little changed (up 14.5% y-t-d), while the Dow added 0.3% (up 10.8%). The Utilities declined 0.8% (up 17.2%). The Banks slipped 0.7% (up 17.4%), and the Broker/Dealers fell 1.2% (up 26.5%). The Transports declined 0.8% (up 1.1%). The S&P 400 Midcaps fell 1.2% (up 2.7%), and the small cap Russell 2000 lost 1.8% (up 7.1%). The Nasdaq100 slipped 0.2% (up 19.0%). The Semiconductors dropped 2.0% (up 20.7%). The Biotechs jumped 2.6% (up 20.7%). With bullion jumping $83, the HUI gold index rallied 6.2% (up 123.2%).
Three-month Treasury bill rates ended the week at 3.7875%. Two-year government yields increased four bps to 3.61% (down 64bps y-t-d). Five-year T-note yields rose five bps to 3.73% (down 65bps). Ten-year Treasury yields gained five bps to 4.15% (down 42bps). Long bond yields rose five bps to 4.75% (down 3bps). Benchmark Fannie Mae MBS yields jumped nine bps to 5.22% (down 63bps).
Italian 10-year yields rose four bps to 3.47% (down 5bps y-t-d). Greek 10-year yields increased four bps to 3.35% (up 13bps). Spain's 10-year yields gained four bps to 3.23% (up 17bps). German bund yields rose five bps to 2.72% (up 35bps). French yields were unchanged at 3.46% (up 26bps). The French to German 10-year bond spread narrowed five to 74 bps. U.K. 10-year gilt yields surged 11 bps to 4.57% (up 1bp). U.K.'s FTSE equities index added 0.2% (up 18.7% y-t-d).
Japan's Nikkei 225 Equities Index increased 0.2% (up 26.3% y-t-d). Japan's 10-year "JGB" yield gained three bps to 1.71% (up 63bps y-t-d). France's CAC40 jumped 2.8% (up 10.7%). The German DAX equities index gained 1.3% (up 19.9%). Spain's IBEX 35 equities index jumped 2.8% (up 41.0%). Italy's FTSE MIB index rose 2.5% (up 28.7%). EM equities were mixed. Brazil's Bovespa index rose 2.4% (up 31.1%), while Mexico's Bolsa index slumped 1.7% (up 25.9%). South Korea's Kospi added 1.5% (up 67.2%). India's Sensex equities index gained 1.6% (up 7.7%). China's Shanghai Exchange Index slipped 0.2% (up 19.1%). Turkey's Borsa Istanbul National 100 index dropped 3.3% (up 7.5%).
Federal Reserve Credit dropped $22.7 billion last week to $6.529 TN. Fed Credit was down $2.361 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.802 TN, or 75%. Fed Credit inflated $3.718 TN, or 132%, since November 7, 2012 (679 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $24.2 billion last week to $3.064 TN. "Custody holdings" were down $264 billion y-o-y, or 7.9%.
Total money market fund assets (MMFA) added $2 billion to a record $7.536 TN - with a 12-week surge of $347 billion, or 25% annualized. MMFA were up $866 billion, or 13.0%, y-o-y - and ballooned a historic $2.952 TN, or 64.4%, since October 26, 2022.
Total Commercial Paper declined $6.1 billion to $1.316 TN. CP has expanded $228 billion y-t-d and $157 billion, or 13.5%, y-o-y.
Freddie Mac 30-year fixed mortgage rates increased two bps to 6.24% (down 54bps y-o-y). Fifteen-year rates slipped a basis point to 5.49% (down 50bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up four bps to 6.46% (down 92bps).
Currency Watch:
November 11 – Bloomberg (Erica Yokoyama): “Japanese Finance Minister Satsuki Katayama issued a fresh warning on currency movements as the yen weakened toward the key threshold of 155 per dollar, inching closer to levels where authorities last intervened in markets. ‘We’re seeing one-sided, rapid currency moves of late,’ Katayama said… ‘The government is watching for any excessive and disorderly moves with a high sense of urgency.’”
November 12 – Bloomberg (Mia Glass and John Cheng): “Traders are increasingly skeptical that Japan’s new government will be able to shore up the yen by direct intervention… Unlike last year, when intervention took place in the run up to higher interest rates by the central bank, this time around Japan would be buying yen just as Prime Minister Sanae Takaichi signals her desire for a slowdown in rate hikes. Officials would also be wading into the market when Takaichi’s plans to boost spending are fueling the yen’s weakness. Additionally, any intervention would risk depleting Japan’s foreign exchange reserves needed to help fund a US investment package to placate President Donald Trump.”
For the week, the U.S. Dollar Index slipped 0.3% to 99.273 (down 8.5% y-t-d). On the upside, the Swiss franc increased 1.4%, the South African rand 1.3%, the New Zealand dollar 1.0%, the Swedish krona 0.8%, the Mexican peso 0.8%, the Norwegian krone 0.7%, the South Korean won 0.7%, the Australian dollar 0.7%, the Brazilian real 0.7%, the euro 0.5%, the Singapore dollar 0.2%, the Canadian dollar 0.2%, and the British pound 0.1%. On the downside, the Japanese yen declined 0.7%. The Chinese (onshore) renminbi increased 0.32% versus the dollar (up 2.82% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index advanced 1.7% (up 10.5% y-t-d). Spot Gold rose 2.1% to $4,084 (up 55.6%). Silver surged 4.7% to $50.5845 (up 75.0%). WTI crude increased 34 cents, or 0.6%, to $60.09 (down 16%). Gasoline rallied 3.7% (down 1%), and Natural Gas jumped 5.8% to $4.566 (up 26%). Copper gained 2.1% (up 26%). Wheat was little changed (down 4%), while Corn increased 0.7% (down 6%). Bitcoin sank $9,750, or 9.4%, to $94,100 (up 0.4%).
Market Instability Watch:
November 13 – Bloomberg (Alex Harris): “Pressures simmering in the $12 trillion market that serves as a critical source of day-to-day funding on Wall Street are spurring a growing chorus of calls for a more forceful Federal Reserve response to ease the pinch. Bank of America Corp., SMBC Nikko Securities Inc. and Barclays Plc are among firms warning that the central bank may need to take steps such as lending more in short-term markets or buying securities outright to pump money in the banking system and ease strains that have pushed up overnight interest rates. ‘The Fed seems to only gradually be changing balance-sheet policy given recent stresses,’ said Gennadiy Goldberg, head of interest rate strategy at TD Securities. ‘Some investors believe the Fed may be moving too slowly to prevent reserves from becoming scarce.’ A batch of key short-term rates has remained stubbornly elevated in recent weeks, from benchmarks tied to overnight repurchase agreements, or repos — loans collateralized by government debt — to the central bank’s own key policy target, which rarely moves between rate-setting decisions and yet has risen four times within its range over the past two months.”
November 10 – Bloomberg (John Cheng and Mia Glass): “Japan’s 30-year bonds dropped after a debt auction drew the lowest demand since June, pointing to renewed concerns about Prime Minister Sanae Takaichi’s fiscal policy. The 30-year yield rose four bps to 3.17% after the average bid-to-cover ratio at Tuesday’s sale of that tenor fell to 3.12 from 3.41 at the previous offering in October. That’s also below the 12-month average.”
November 11 – Bloomberg (Katanga Johnson): “US bank regulators have agreed on the terms for easing a set of capital requirements that lenders say limit their ability to hold more Treasuries… Officials from the Federal Reserve and other key agencies recently submitted a final plan for the so-called enhanced supplementary leverage ratio to the White House for review… The eased requirements, which would mean the biggest banks have to hold less capital relative to total assets, are largely in line with a proposal unveiled in June. The rule change would be a win for Wall Street lending giants, as Trump-era officials look to soften several bank capital measures established in the wake of the 2008 financial crisis. Still, some big banks were unsuccessful in pushing for regulators to exclude certain assets like Treasuries from the revised ratio calculation, the people said.”
U.S. Credit Trouble Watch:
November 12 – Bloomberg (Josyana Joshua): “More Americans than ever are falling behind on their car payments. The share of subprime borrowers at least 60 days past due on their auto loans rose to 6.65% in October, the highest in data going back to 1994, according to Fitch... With ongoing inflation pressures and the return of student loan bills, millions of car owners are struggling to afford their monthly payments… These cracks in consumer health came into stark view in September when Tricolor Holdings — a used car dealer and subprime auto loan lender — suddenly declared bankruptcy. That’s since forced a reckoning among major financial institutions that have exposure to subprime borrowers.”
November 12 – Bloomberg (Emily Graffeo): “Private companies are struggling to generate enough cash to manage mounting liabilities, handing management duties to their lenders in the highest numbers in at least six years. In the first nine months of the year, lenders took over 45 firms, more than twice as many than the year before, according to Lincoln International. In a separate report…, the firm also found that debt tied to these transactions rose to nearly $25 billion over the same period, also the highest since at least 2019, as companies increased their leverage while earnings growth slowed in the most recent quarter.”
November 10 – Bloomberg (Davide Scigliuzzo and Silla Brush): “About a month ago, BlackRock Inc. deemed the private debt it had extended to Renovo Home Partners, a struggling home improvement company, to be worth 100 cents on the dollar. As of last week, the firm had a new assessment: zero. The drastic revision comes as… Renovo — a roll-up of regional kitchen and bathroom remodeling businesses created by private equity firm Audax Group in 2022 — abruptly filed for bankruptcy last week, indicating it plans to shut down. BlackRock held the majority of Renovo’s roughly $150 million of private debt, while Apollo Global Management Inc.’s MidCap Financial and Oaktree Capital Management held smaller chunks… It was no mystery Renovo was in a tough spot.”
November 13 – Bloomberg (Davide Scigliuzzo and Ellen Schneider): “An Apollo Global Management Inc. private credit fund deemed a loan to Medallia Inc. worth 77 cents on the dollar, a level typically considered distressed. A rival fund co-managed by Future Standard and KKR & Co. offered a very different assessment: 91 cents. It’s the largest gap yet in valuations of the software company’s direct loan… And, for private credit skeptics, it’s another example of how lenders may have too much discretion in determining the value of their investments.”
November 10 – Bloomberg (Ameya Karve): “CLO managers are increasingly looking to sell collateralized loan obligations whose underlying loans could get hit by artificial intelligence risk, resulting in higher trading volume in the securities, according to Bank of America Corp. ‘We think AI-risk/AI-opportunity is going to be a focal point for CLO investors and managers going forward,’ strategists Pratik Gupta, Chris Flanagan, Victoria Xu and Akash Bhairav Gupta wrote... The average price on a set of loans considered to be ‘at the forefront’ of AI risk by BofA recently dropped to 89 cents on the dollar, from 97 in July.”
November 11 – Bloomberg (Silas Brown): “KKR & Co. publicly distanced its insurer Global Atlantic from Egan-Jones Ratings Co., a firm the US Securities and Exchange Commission is scrutinizing for its rating practices in the private credit industry. The private capital giant singled out Egan-Jones as rarely being used by Global Atlantic, in a presentation to investors to discuss its third quarter-earnings.”
November 10 – Bloomberg (Claire Ruckin and Pablo Mayo Cerqueiro): “Private equity firms are facing a double dilemma. IPO markets, the usual path for exiting investments, have been gradually reopening, but not enough for them to cash out completely. Option B for getting paid, borrowing the money by putting it on the company’s balance sheet, will only make the first problem worse by spooking equity investors. Enter Hellman & Friedman, which engineered a strategy last month that allowed it to cut its stake in security company Verisure Plc via an initial public offering and raise €1 billion ($1.2bn) for a payout by issuing debt from a special-purpose vehicle that sits outside of Verisure’s balance sheet. Now, analysts say the approach could become a model for other buyout firms that have struggled to return cash on investments made during the era of cheap financing and near-zero interest rates.”
November 13 – Bloomberg (Shruti Date Singh): “Investors and dealers are trading municipal bonds at a record pace this year, driven by strong government sales and a burst of volatility tied to tariffs and interest rate moves. Through Nov. 12, the number of trades has already surpassed 15.4 million, exceeding last year’s total of 14.5 million and marking the highest annual volume since the Municipal Securities Rulemaking Board began tracking data in 2006. These figures cover new issuance, secondary market transactions and both customer and inter-dealer trades.”
First Brands Ramifications Watch:
November 7 – Financial Times (Akila Quinio and Antoine Gara): “Asset manager BlackRock is winding down a social impact fund that invested in collapsed subprime car lender Tricolor... The firm told employees it would close its BlackRock Impact Opportunities fund to new investments… BlackRock would continue to manage the portfolio through what is expected to be a one-to-two-year period in which it will look to sell the $800mn fund’s investments, before closing the strategy fully.”
Global Credit and Financial Bubble Watch:
November 10 – Bloomberg (Tasos Vossos, Neil Callanan, and Esteban Duarte): “The value of banks’ synthetic securitizations has surpassed $670 billion, expanding at a double-digit pace as lenders race to offload risk and free up capital. The figure, the portion that banks retain after partially shifting the peril of loan losses through significant risk transfers, is an 18% increase for the 2024 financial year from the prior period… The metric is a proxy of activity in one of financial markets’ hottest corners.”
November 11 – Bloomberg (Swati Pandey): “Australian home loans surged beyond expectations in the third quarter to a record high, underscoring how easier monetary policy has reignited credit growth and property demand and giving the Reserve Bank another reason to stay on the sidelines. Figures from the Australian Bureau of Statistics… showed new loans for home investors jumped 13.6% in the three months through September to the highest level since early 2022, lifting total residential loans to a record.”
November 10 – Bloomberg (Giovanna Bellotti Azevedo): “Brazilian corporates face mounting pressure from their exposure to private credit funds that have grown rapidly in recent years, according to Fitch Ratings. The funds may now pose higher credit risks than traditional debt providers, with companies hampered by weak governance, tight liquidity and sluggish performance hit hardest, the ratings firm said.”
Trump Administration Watch:
November 11 – Wall Street Journal (Michael R. Gordon): “The U.S. Navy’s largest aircraft carrier arrived in waters near Latin America…, expanding the American military’s buildup as the Trump administration seeks to ratchet up the pressure on Venezuelan President Nicolás Maduro… Pentagon spokesman Sean Parnell said the carrier strike group ‘will enhance and augment existing capabilities to disrupt narcotics trafficking and degrade and dismantle Transnational Criminal Organizations.’”
November 11 – Reuters: “Venezuela is deploying weapons, including decades-old Russian-made equipment, and is planning to mount a guerrilla-style resistance or sow chaos in the event of a U.S. air or ground attack, according to sources… The approach is a tacit admission of the South American country's shortage of personnel and equipment. U.S. President Donald Trump has suggested the possibility of ground operations in Venezuela, saying ‘the land is going to be next’ following multiple strikes on alleged drug-trafficking vessels in the Caribbean and a large U.S. military build-up in the region. He later denied he was considering strikes inside Venezuela.”
November 11 – Associated Press (Paul Wiseman): “President Donald Trump boasts that his tariffs protect American industries, lure factories to the United States, raise money for the federal government and give him diplomatic leverage. Now, he’s claiming they can finance a windfall for American families, too: He’s promising a generous tariff dividend. The president proposed the idea on his Truth Social media platform Sunday, five days after his Republican Party lost elections in Virginia, New Jersey and elsewhere largely because of voter discontent with his economic stewardship — specifically, the high cost of living. The tariffs are bringing in so much money, the president posted, that ‘a dividend of at least $2000 a person (not including high income people!) will be paid to everyone.’”
November 12 – Reuters (Gram Slattery and Steve Holland): “President Donald Trump is committed to providing Americans a $2,000 check using money that has come into government coffers from Trump's tariffs, the White House said... White House press secretary Karoline Leavitt told reporters that Trump’s staff is exploring how to go about making the plan a reality.”
November 12 – Axios (Gram Slattery and Steve Holland): “Treasury Secretary Bessent slammed the ‘Sell America’ trade in a speech… that pitched the market for U.S. Treasury bonds as stronger than ever. The Trump administration has put the bond market at the center of an affordability agenda in ways not seen under recent predecessors, using unconventional means to try to encourage demand for U.S. debt. Bessent, who said ‘my job is to be the nation’s top bond salesman,’ used the occasion to blast the ‘negative rhetoric and doomsaying of market pundits, especially this spring’ when Treasury securities and the dollar sold off. ‘Maintaining a robust Treasury market — and strengthening it even further — is essential to Making America Affordable Again,’ Bessent said… He said the ‘bond market is more robust and more liquid than it's ever been.’ The intrigue: Bessent, at his third appearance at a Fed conference this year, said Treasury yields were ‘a strong barometer for measuring success’.”
November 7 – Bloomberg (Josh Wingrove and Ilena Peng): “President Donald Trump ordered a federal investigation into the meatpacking industry, blaming ‘majority foreign owned’ companies for soaring beef prices. Trump asked the Justice Department to ‘immediately begin’ the investigation into meat processors, accusing them of collusion, price fixing and manipulation… ‘I am asking the DOJ to act expeditiously,’ Trump posted… ‘Action must be taken immediately to protect Consumers, combat Illegal Monopolies, and ensure these Corporations are not criminally profiting at the expense of the American People.’”
November 12 – Financial Times (Antoine Gara, Akila Quinio and James Politi): “Donald Trump has summoned some of Wall Street’s biggest names including JPMorgan chief Jamie Dimon and billionaire Bill Ackman to a White House dinner as the administration faces pressure over US economic performance. BlackRock chief Larry Fink, Morgan Stanley’s Ted Pick, Goldman Sachs’ David Solomon, Blackstone’s Stephen Schwarzman and KKR co-founder Henry Kravis were among more than a dozen finance executives who attended the dinner on Wednesday… Citadel founder Ken Griffin also attended the dinner… The dinner came two months after Trump held a similar gathering of leaders at US tech companies including Microsoft’s Satya Nadella, OpenAI’s Sam Altman and Apple’s Tim Cook focused on artificial intelligence investments in the country.”
November 12 – Bloomberg (Katy O'Donnell): “Bill Pulte, the Federal Housing Finance Agency director, said the administration is ‘actively evaluating portable mortgages’ just days after President Donald Trump’s call for 50-year mortgages fell flat with industry and consumers. Pulte didn’t give any details… In theory, a portable mortgage would allow a homeowner to transfer their current mortgage rate from one home to another.”
November 13 – Bloomberg (Felice Maranz): “Common shares of Fannie Mae and Freddie Mac extended losses into a third day, tumbling to the lowest intraday since late July… Fannie shed as much as 22%; Freddie dropped as much as 25%; both have lost about 50% since a September peak. Investors may be growing increasingly concerned that the company’s biggest cheerleader — Federal Housing Finance Agency Director Bill Pulte — ‘may be losing influence with the administration,’ Bloomberg Intelligence analyst Ben Elliott says. Pulte also ‘continues to float new ideas to improve affordability that might be better executed with the enterprises in indefinite conservatorship,’ according to Elliott.”
November 11 – Wall Street Journal (Gina Heeb, Brian Schwartz and C. Ryan Barber): “Fannie Mae watchdogs who were removed from their jobs had been probing if Trump appointee Bill Pulte had improperly obtained mortgage records of key Democratic officials, including New York Attorney General Letitia James, according to people familiar... Fannie’s ethics and investigations group had received internal complaints alleging senior officials had improperly directed staff to access the mortgage documents of James and others… The Fannie investigators were probing to find out who had made the orders, whether Pulte had the authority to seek the documents and whether or not they had followed proper procedure…”
China Trade War Watch:
November 8 – Axios (Dave Lawler): “Look under almost every element of President Trump’s second-term foreign policy — from the trade war with China, to peace in Ukraine, to annexing Greenland — and you’ll find critical minerals. China has the U.S. in a bind when it comes to supplies of rare earths and other scarce minerals, and President Xi Jinping has proved he’s willing to squeeze. That’s why Trump was so intent on signing a one-year trade truce with Beijing, and why he’s scouring the world for alternative sources. The U.S. needs rare earth magnets to build everything from fighter jets to wind turbines. Virtually all global output runs through China… ‘Minerals have really become the most powerful form of currency when it comes to foreign policy now,’ says Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies.”
November 9 – Reuters: “China has begun designing a new rare earth licensing regime that could speed up shipments, but it is unlikely to amount to a complete rollback of restrictions as hoped by Washington, industry insiders said. The Ministry of Commerce told some rare earth exporters they will be able to apply for new streamlined permits in the future and in industry briefings outlined the documents that will be required… Following the agreement reached between Presidents Donald Trump and Xi Jinping, China said last week it would pause for one year the restrictions it imposed in October. However, China’s commerce ministry has said nothing publicly about a broader round of controls introduced in April that rattled global supply chains.”
November 10 – Wall Street Journal (Jon Emont and Raffaele Huang): “China plans to ease the flow of rare earths and other restricted materials to the U.S. by designing a system that will exclude companies with ties to the U.S. military while fast-tracking export approvals for other firms, according to people familiar... The ‘validated end-user’ system, or VEU, would enable Chinese leader Xi Jinping to follow through on a pledge to President Trump to facilitate the export of such materials while ensuring that they don’t end up with U.S. military suppliers… Beijing’s plan could still change and its licensing system wouldn’t be certain until it is implemented, the people said.”
November 9 – Financial Times (Camilla Hodgson, Cordu Krubally-N’Diaye and Martha Muir): “The US has claimed China’s dominance over rare earths is coming to an end, with Treasury secretary Scott Bessent telling the Financial Times in October that Beijing’s leverage over the metals would last no more than 24 months. China last month tightened sweeping export restrictions on rare earths and magnets, used in everything from electric cars to refrigerators, although the country’s leader Xi Jinping agreed a temporary reprieve… The rise in trade tensions has focused US policymakers’ minds on the country’s reliance on China for the minerals, with a race under way to develop new sources and processing facilities. But some observers have questioned Bessent’s two-year timeline, given the extent of China’s grip on the sector and the complexity and expense of building the mines and processing that will be needed to replace Chinese suppliers. ‘Promises of a year or two are either naivety or spin,’ said Tim Puko, director of commodities at the Eurasia Group consultancy. ‘There is no realistic way for the US to hit that target now.’”
November 12 – Bloomberg (Ben Westcott and Erin Ailworth): “China’s purchases of American soybeans appear to have stalled, less than two weeks after the US touted a wide-ranging trade truce that signaled thawing relations… After a flurry of orders late last month — which were the first of this season — Chinese imports of US cargoes seem to have faltered, according to traders… They said they were not aware of new shipments. The pause is fueling uncertainty over whether the biggest consumer of American soybeans will import as much as US President Donald Trump’s administration claims to expect.”
Trade War Watch:
November 11 – Reuters (Heejin Kim and Jihoon Lee): “Two weeks after U.S. President Donald Trump and South Korea's Lee Jae Myung met and announced they had resolved months of negotiations over tariffs and security issues, the two sides have yet to release any agreement on paper. South Korean officials say the delay appears to centre on discussions over their request for Washington’s blessing to build a nuclear-powered submarine, which Lee raised publicly when he met Trump on the sidelines of an Asia-Pacific forum in South Korea last month.”
November 12 – Financial Times (Andy Bounds and Kana Inagaki): “European carmakers and other industrial companies continue to face ‘devastating’ chip shortages that could halt global production lines within weeks despite China agreeing to lift export restrictions… The Dutch arm of the chipmaker Nexperia has not been sending silicon wafers to its breakaway Chinese subsidiary to be assembled as hostility between the two sides continued… Nexperia makes basic low-margin chips that are widely used in electronic systems in cars and control everything from lighting and airbag systems to locks and windows.”
Constitution Watch:
November 11 – Axios (Ben Berkowitz): “President Trump… claimed the U.S. would be on the hook for $3 trillion in refunds and lost investments if the administration loses the pending tariffs case at the Supreme Court... ‘The U.S. Supreme Court was given the wrong numbers. The ‘unwind’ in the event of a negative decision on Tariffs, would be, including investments made, to be made, and return of funds, in excess of 3 Trillion Dollars,’ Trump posted… ‘That would truly become an insurmountable National Security Event, and devastating to the future of our Country - Possibly non-sustainable!’”
November 9 – Axios (Avery Lotz and Andrew Pantazi): “U.S. Deputy Attorney General Todd Blanche urged young lawyers to join the administration's ‘war’ against ‘rogue activist judges.’ His stark language exposed how the Trump-aligned Justice Department treats the judiciary less as an independent branch of government and more as an adversary to be fought. ‘We need you, because it is a war, and it's something we will not win unless we keep on fighting,’ Blanche said Friday at an annual Federalist Society conference. He said the Justice Department’s lawyers are ‘bouncing around this country fighting these activist judges,’ who he said are ‘more political, or certainly as political, as the most liberal governor or’ district attorney, Blanche said.”
November 12 – Financial Times (Demetri Sevastopulo, Steff Chávez, David Sheppard and Charles Clover in): “The UK has paused some intelligence sharing with the US on counter-narcotic operations in the Caribbean, over fears the Trump administration’s policy of lethal military strikes against suspected smugglers could be illegal. The move comes after the US destroyed multiple alleged drug boats in recent months, killing dozens of people… Two people familiar with the situation said the UK had stopped sharing certain intelligence with the US because of concerns that Washington would use the information to help justify potentially illegal strikes.”
Government Shutdown/Budget Deficit Watch:
November 10 – Axios (Andrew Solender): “Democratic lawmakers and liberal grassroots groups erupted Sunday night as moderate Senate Democrats moved to cut a deal with Republicans that would put an end to the government shutdown. The deal threatens to reopen the deep divisions that have been roiling the Democratic Party all year, and the widespread opposition to it among House Democrats could complicate its path to passage. House Minority Leader Hakeem Jeffries (D-N.Y.)… suggested the bill fails to ‘decisively address the Republican healthcare crisis’… This ‘deal’ is a surrender that all congressional Democrats should reject out of hand,’ said Indivisible co-founder Ezra Levin. ‘We cannot afford a divided and weak opposition party.’ Eight Senate Democrats voted with Republicans on Sunday to advance a deal that would fund the government through the end of January…”
November 10 – New York Times (Julie Creswell and Linda Qiu): “For the better part of two years, well before the federal government shut down and SNAP payments were paused, lower-income consumers have been slowing their spending, especially for discretionary items. Nearly three-quarters of individuals who receive SNAP benefits live below the poverty line, making less than $32,000 a year for a family of four. The ripple effect of that spending pullback is being felt by retailers, food companies and restaurant chains. ‘We have now one of the worst consumer sentiments we have seen in decades as we go into the holiday season,’ the Kraft Heinz chief executive, Carlos Abrams-Rivera, told investors... Traffic from low-income consumers at quick-service restaurants declined by ‘nearly double digits in the third quarter, a trend that’s persisted for nearly two years,’ the McDonald’s chief executive, Chris Kempczinski, said…”
U.S./Russia/China/Europe/Iran Watch:
November 11 – Bloomberg (Muyao Shen and Patrick Howell O'Neill): “China’s cybersecurity agency accused the American government of orchestrating the theft of about $13 billion worth of Bitcoin, representing China’s most recent attempt to attribute major cyberattacks to the US. The theft of the 127,272 Bitcoin tokens from the LuBian Bitcoin mining pool that took place in December 2020 marks as one of the largest crypto heists in history. The hack, according to the Chinese National Computer Virus Emergency Response Center, is likely a ‘state-level hacker operation’ led by US…”
November 11 – Wall Street Journal (Bertrand Benoit and Daniel Michaels): “Europe is now caught somewhere between war and peace. In recent weeks, drones appearing mysteriously above airports and halting flights have made headlines. Those are just the tip of the iceberg. Germany alone has three drone incursions a day on average—over military installations, defense-industry facilities and critical infrastructure points… Drones are part of an intensifying barrage that European leaders suspect Russia is directing at the continent over its support for Ukraine. It includes sabotage, cyberattacks and disinformation campaigns. ‘We are not at war’ with Russia, German Chancellor Friedrich Merz said recently, ‘but we are no longer at peace either.’”
Ukraine War Watch:
November 9 – Associated Press: “Ukrainian strikes disrupted power and heating to two major Russian cities near the Ukrainian border, local Russian officials reported… The report comes as Russia and Ukraine have traded almost daily assaults on each other’s energy infrastructure and U.S.-led diplomatic efforts to stop the nearly four-year war have not advanced. Elsewhere, Ukraine’s top diplomat accused Moscow of deliberately endangering nuclear safety, as he said Russia’s mass drone and missile attack on Friday struck substations that power two nuclear power plants.”
Taiwan Watch:
November 10 – Bloomberg (Sakura Murakami and James Mayger): “Japanese Prime Minister Sanae Takaichi… defended her description of a conflict over Taiwan as potentially amounting to an existential risk for Japan after a Chinese diplomat accused her of meddling in Beijing’s internal affairs. Last Friday, Takaichi said that if military force were to be used in a Taiwan conflict, including the use of warships, it could be considered a ‘survival-threatening situation’ for Japan. That classification is significant because it would provide a legal justification for Japan to deploy its military to help defend friendly nations. Her comments… sparked anger from Xue Jian, the consul-general of China in the western city of Osaka, who took to X to say that Japan’s stance in considering a Taiwan contingency as threatening its own survival as a fatal path chosen by ‘foolish politicians.’ ‘If you go sticking that filthy neck where it doesn’t belong, it’s gonna get sliced right off. You ready for that?’ Xue wrote…”
AI Bubble/Arms Race Watch:
November 10 – Financial Times (Kate Duguid and Tabby Kinder): “Investors have been selling off the debt of US tech heavyweights, showing how jitters over Silicon Valley’s boom in spending on artificial intelligence have spilled into the bond market. A basket of bonds issued by so-called hyperscalers — companies that are building vast data centres, including Alphabet, Meta, Microsoft and Oracle — has sustained a hit in recent weeks. The spread, or premium in yield that investors demand to buy the debt over Treasuries, has climbed to 0.78 percentage points, the highest level since US President Donald Trump sent markets reeling in April…, and up from 0.5 points in September… ‘The important thing the market woke up to in the past two weeks is that it’s the public markets that are going to need to finance this AI boom,’ said Brij Khurana, a fixed income portfolio manager at Wellington Management.”
November 10 – Bloomberg (John Gittelsohn and Michelle Ma): “Two of the world’s biggest data center developers have projects in Nvidia Corp.’s hometown that may sit empty for years because the local utility isn’t ready to supply electricity. In Santa Clara, California…, Digital Realty Trust Inc. applied in 2019 to build a data center. Roughly six years later, the development remains an empty shell awaiting full energization. Stack Infrastructure, which was acquired earlier this year by Blue Owl Capital Inc., has a nearby 48-megawatt project that’s also vacant, while the city-owned utility, Silicon Valley Power, struggles to upgrade its capacity. The fate of the two facilities highlights a major challenge for the US tech sector and indeed the wider economy. While demand for data centers has never been greater, driven by the boom in cloud computing and AI, access to electricity is emerging as the biggest constraint.”
November 10 – Wall Street Journal (Jonathan Weil): “Microsoft has opened up a little bit about its dealings with OpenAI. It still has a long way to go to do right by investors. Here is the rub: Microsoft in its financial reports identifies OpenAI as an equity-method investment. That means OpenAI, by definition, is a related party of Microsoft under the accounting rules… Once again, however, Microsoft in its latest quarterly report didn’t include any related-party disclosures regarding OpenAI. The lack of information would be defensible if the two companies’ transactions were too insignificant to matter. However, it has become apparent that their dealings are quite material and that investors care tremendously about them. Under generally accepted accounting principles, companies reporting related-party transactions must disclose enough information about them so that an outside reader can gain ‘an understanding of the effects of the transactions on the financial statements.’ That is something Microsoft doesn’t do.”
November 11 – Bloomberg (Dina Bass, Caroline Hyde and Ed Ludlow): “CoreWeave Inc. shares tumbled after the company lowered its annual revenue forecast due to a delay in fulfilling a customer contract, a setback in its race to keep up with the artificial intelligence boom… ‘We are affected by temporary delays related to a third-party data center developer who is behind schedule,’ Chief Executive Officer Michael Intrator said… Delays getting more AI computing capacity online are persistent across the industry, Intrator said... And while CoreWeave was able to preserve the value of the contract, no one is happy about it. ‘Everybody is frustrated — the data center provider is frustrated, we’re frustrated, the client is frustrated,’ he said... ‘For that matter, people who are waiting for the next iteration of AI are frustrated.’”
November 8 – New York Times (Ian Frisch): “Like many companies trying to keep up in the A.I. boom, QTS Data Centers, a digital infrastructure company that’s wholly owned by the investment giant Blackstone, has been dropping billions of dollars to expand its network of cutting-edge computing facilities. It has also, like a growing number of fellow tech companies, found a way to unlock additional (and much-needed) cash: exotic financial instruments. According to… DealBook, Blackstone is on the cusp of closing a $3.46 billion commercial-mortgage-backed securities (C.M.B.S.) offering to refinance debt held by QTS, the biggest player in the artificial intelligence infrastructure market. It would be the largest deal of its type this year in a fast-accelerating market. The bonds would be backed by 10 data centers in six markets (including Atlanta, Dallas and Norfolk, Va.) that together consume enough energy to power Burlington, Vt., for half a decade. Blackstone’s offering is part of the latest push in the A.I. infrastructure financing blitz.”
November 10 – Bloomberg (Josh Saul, Mark Chediak and Paula Seligson): “Two of the biggest power companies in the US have had talks with private credit lenders about raising money in what would be a first for utilities. Duke Energy Corp. has spoken with private credit providers about financing pieces of its $87 billion capital plan and Xcel Energy Inc. has also had conversations with private credit firms about its $60 billion plan, executives said…”
November 11 – CNBC (April Roach and Dylan Butts): “SoftBank said… it has sold its entire stake in U.S. chipmaker Nvidia for $5.83 billion as the Japanese giant looks to capitalize on its ‘all in’ bet on ChatGPT maker OpenAI. The firm said in its earnings statement that it sold 32.1 million Nvidia shares in October. It also disclosed that it sold part of its T-Mobile stake for $9.17 billion. ‘We want to provide a lot of investment opportunities for investors, while we can still maintain financial strength,’ said SoftBank’s chief financial officer, Yoshimitsu Goto…”
Bubble and Mania Watch:
November 12 – Bloomberg (Olga Kharif and Isabelle Lee): “Bitcoin is struggling to climb out of a $330 billion hole, and the forces that once powered its ascent are in retreat. After a bruising October, the digital currency has staged only a halting recovery — climbing, dipping and stalling just above $100,000. What’s missing this time is the powerful tailwind that defined much of 2025: institutional conviction. Over the past month, many of the biggest buyers — from exchange-traded fund allocators to corporate treasuries — have quietly stepped back… For much of the year, institutions were the backbone of Bitcoin’s legitimacy and its price. ETFs as a cohort took in more than $25 billion…, pushing assets as high as roughly $169 billion.”
November 9 – Wall Street Journal (Gregory Zuckerman and Vicky Ge Huang): “The hottest crypto trade has turned cold. Some investors are saying ‘told you so,’ while others are doubling down. It was the move to make for much of the year: Sell shares or borrow money, then plow the cash into bitcoin, ether and other cryptocurrencies. Investors bid up shares of these ‘crypto-treasury’ companies, seeing them as a way to turbocharge wagers on the volatile crypto market. Michael Saylor pioneered the move in 2020 when he transformed a tiny software company, then called MicroStrategy, into a bitcoin whale now known as Strategy. But with bitcoin and ether prices now tumbling, so are shares in Strategy and its copycats. Strategy was worth around $128 billion at its peak in July; it is now worth about $70 billion. The selloff is hitting big-name investors including Peter Thiel, the famed venture capitalist who has backed multiple crypto-treasury companies…”
November 7 – Financial Times (George Steer): “US companies’ earnings are growing at the fastest pace in four years… Median earnings growth year-on-year across the Russell 3000 index — a benchmark for the entire US stock market — hit 11% in the third quarter, up from 6 per cent in the previous three months, according to Morgan Stanley. That is the fastest growth rate since the third quarter of 2021. Six of the 11 sectors that make up the blue-chip S&P 500 index have reported positive average earnings growth in the three months to September…”
November 11 – Bloomberg (Michael Msika): “Company executives are sounding remarkably upbeat about the economy this earnings season, even as trade tensions linger and stock valuations look stretched. Mentions of ‘economic slowdown’ and synonyms during sales, guidance and earnings calls tracked by Bloomberg are the lowest since 2007. That’s despite the disruption to official US data caused by the government shutdown and the murkier policy outlook it’s led to. And this is playing out as the S&P 500 heads for a third year of high returns, with stocks as expensive as they were at their post-pandemic peak.”
Inflation Watch:
November 10 – Bloomberg: “If this week’s gubernatorial elections are any indication, rising electricity costs could well be a defining issue in the 2026 US state elections. Nowhere is that more likely than in the PJM Interconnection, the nation’s most concentrated power market for energy-intensive data centers. In the 13 Midwest and mid-Atlantic states plus the District of Columbia with full or partial exposure to PJM capacity auctions, summer residential power prices have climbed 20—70% over the past five years.”
November 10 – Bloomberg (David Uberti): “Sen. Bernie Sanders (I., Vt.) and a group of Democratic senators are demanding the White House answer for higher electric bills they blamed in part on the artificial-intelligence boom driving one of the most expensive infrastructure build-outs in U.S. history. Sanders, Sen. Richard Blumenthal (D., Conn.) and others… called on the administration to share how it plans to mitigate price impacts and more from data centers needed to train and run AI applications. In a letter to the White House and Commerce Secretary Howard Lutnick, the group took aim at Meta, OpenAI, Alphabet, Oracle and other firms behind a data-center build-out stretching from the Washington suburbs to rural Oregon. President Trump’s push to fast-track these projects is forcing Americans into ‘bidding wars with trillion-dollar companies to keep the lights on at home,’ they wrote.”
November 11 – Bloomberg (Daniel Flatley): “US Treasury Secretary Scott Bessent deflected concerns about high costs under President Donald Trump, saying the administration had inherited elevated price levels and that its policies would generate real income gains for American workers. ‘We inherited an affordability crisis,’ Bessent said…, adding that inflation was the worst in 40 or 50 years under President Joe Biden. ‘We have slowed the price increases down, and they are going to continue to slow down’… Trump himself has rebuffed such concerns, telling reporters last week ‘I don’t want to hear about the affordability’ because prices are ‘much less.’”
November 12 – Axios (Ben Berkowitz): “Treasury Secretary Scott Bessent… touted ‘substantial’ actions in the coming days that he said would lower the prices of coffee and some fruits, among other grocery items… Just as former President Biden couldn't convince people inflation was under control when egg prices were soaring, it’s been hard for the Trump administration to make the case its economic policies are working when people are paying 20% more for a cup of coffee. ‘You’re going to see substantial announcements over the next couple of days in terms of things we don’t grow here in the United States,’ Bessent said… ‘Coffee being one of them, bananas, other fruits. Things like that. So that will bring the prices down very quickly.’”
Federal Reserve Watch:
November 13 – Reuters (Howard Schneider and Ann Saphir): “The historically routine process of reappointing the Federal Reserve’s 12 regional bank presidents is being watched for signs of becoming the newest challenge to the U.S. central bank’s independence… The twice-a-decade proceeding ordinarily occurs without controversy and produces the same result: The regional bank chiefs are reappointed by a majority of the Fed’s Board of Governors in Washington. But the surprise retirement announcement… by Atlanta Fed President Raphael Bostic, not long after the reappointment vetting had started, has cast fresh light on the process… Trump is also likely just weeks away from nominating his own choice to run the entire U.S. central bank system, with current Fed Chair Jerome Powell's term set to expire in May.”
November 11 – Wall Street Journal (Nick Timiraos): “The path for interest-rate cuts has been clouded by an emerging split within the central bank with little precedent during Federal Reserve Chair Jerome Powell’s nearly eight-year tenure. Officials are fractured over which poses the greater threat—persistent inflation or a sluggish labor market—and even a resumption of official economic data may not bridge the differences. The rupture has complicated what looked like a workable plan less than two months ago, though investors think a rate cut at the Fed’s next meeting is still more likely than not.”
November 12 – Associated Press (Christopher Rugaber): “Two Federal Reserve officials expressed opposition… to another interest rate cut at the central bank’s next meeting in December… The remarks by Susan Collins, president of the Federal Reserve Bank of Boston, and Raphael Bostic, president of the Atlanta Fed, suggest that the central bank’s rate-setting committee could be tilting against what had been an expected third straight cut next month. The officials cited several reasons for keeping rates unchanged… They argued that inflation is stubbornly elevated and has been above the Fed’s 2% target for nearly five years, while the economy is resilient and doesn’t appear to need more rate cuts.”
November 12 – Bloomberg (Maria Eloisa Capurro and Alex Harris): “Rising overnight funding costs are signaling that bank reserves are no longer abundant, and the US central bank ‘won’t have to wait long’ before purchasing assets to sustain desired liquidity levels, according to the Federal Reserve Bank of New York’s Roberto Perli. Several indicators, including higher money market rates, are providing ‘strong evidence that reserves are no longer abundant,’ Perli, who oversees the central bank’s securities portfolio, said… Perli, who runs the System Open Market Account, echoed remarks… by New York Fed President John Williams, who said it will not be long before the central bank reaches a level where reserves are considered ample and the ‘natural next stage’ would be a gradual purchase of assets.”
November 12 – Reuters (Michael S. Derby): “The official responsible for implementing monetary policy at the Federal Reserve Bank of New York said… firms that need to use the central bank’s Standing Repo Facility should tap the tool when needed, adding that large-scale usage would not be problematic. ‘It is desirable and fully expected that the [Standing Repo Facility] be used whenever it is economically sensible to do so,’ said Roberto Perli, who manages the bank’s System Open Market Account… ‘Our counterparties participated in large scale in the repo operations that the Federal Reserve offered in the past; if it makes economic sense, there is no reason why sizeable participation cannot take place’ in the two daily Standing Repo Facility operations, Perli said.”
November 9 – Bloomberg (María Paula Mijares Torres): “Federal Reserve Bank of New York President John Williams said financial strain among lower and middle-income Americans could threaten the US economy’s resilience, even as wealthier households benefit from a stock market boom… The Fed’s next rate decision in December is ‘really a balancing act,’ the FT quoted Williams as saying... While ‘inflation is high, and it’s not showing signs of coming down right now,’ the US economy ‘is showing some resilience’... Even so, many Americans are struggling with housing and other living costs. Williams said there’s evidence ‘that lower and moderate-income households are facing some constraints from an affordability point of view.’”
November 8 – Financial Times (Claire Jones and Patrick Jenkins): “The mounting problems facing poorer Americans are leaving the world’s most important economy exposed to risks of a downturn, a top Federal Reserve official has warned… John Williams, president of the New York Fed, said data and conversations with community leaders highlighted that many poorer households were facing an affordability crisis. ‘There is quite a bit of evidence… that lower and moderate-income households are facing some constraints from an affordability point of view,’ Williams told the Financial Times. ‘From the cost of living, the housing costs and basically many families living month to month.’ Meanwhile, wealthier Americans were benefiting from the stock market ‘booming near all-time highs’.”
U.S. Economic Bubble Watch:
November 9 – Wall Street Journal (Rachel Louise Ensign and Rachel Wolfe): “Many Americans who own stocks are feeling good about their finances… They have seen stocks dive through the dot-com bust, financial crisis and onset of the pandemic—only to recover and keep going up. Even after a big selloff following President Trump’s tariff announcements in April, and a smaller dip last week, the S&P 500 is up more than 14% so far this year. Gains in 30 top artificial intelligence-related stocks alone have added $5 trillion to household wealth across the country in the past year… Investors’ rosy feelings about having a lot more money—at least on paper—are powering spending on restaurant meals, business-class airline tickets, home improvement and more, keeping the broader economy humming. It’s a very different story for everyone else. Americans with large investment portfolios feel markedly better about the economy than those who don’t own stocks, according to the University of Michigan sentiment index.”
November 10 – Reuters (Karen Sloan): “Large and midsized U.S. law firms enjoyed a ‘sharp spike’ in client demand during the third quarter, setting the stage for a profitable 2025, according to a new analysis of firm financial data. Overall demand was up 3.9% from the third quarter of 2024—the fourth-highest quarterly increase of the past 20 years and the highest outside of 2021’s rapid post-pandemic rebound… Transactional practices fueled much of the third-quarter demand surge, especially among midsized law firms, which saw transactional demand climb 6.1% over the previous year. Across firms, mergers and acquisitions demand was up 6.7% over the third quarter of 2024, while all corporate work was up 4.4%, real estate was up 4.2%, and tax was up 3.7%. Transactional practices were ‘intensely busy across all segments,’ the report found.”
November 11 – Bloomberg (Julia Fanzeres): “US companies shed 11,250 jobs per week on average in the four weeks ended Oct. 25, according to… ADP…. The figures suggest the labor market slowed in the second half of October… ADP’s most recent monthly report, released last week, showed private-sector payrolls increased 42,000 in October after declining in the prior two months.”
November 11 – Bloomberg (Julia Fanzeres): “Sentiment among US small businesses eased in October to a six-month low on a deterioration in earnings and less optimism about the economy. The National Federation of Independent Business optimism index declined 0.6 point to 98.2… Five of the 10 components that make up the gauge decreased while four improved. The net share of owners reporting stronger earnings in the last three months fell 9 percentage points, the most since the pandemic and restrained by weaker sales and higher materials costs.”
November 12 – CNBC (Diana Olick): “As the housing market heads into its traditionally slowest season, homebuyers are making one last gasp, likely due to more supply on the market and softening prices. Mortgage applications to purchase a home rose 6% last week to their strongest pace since September, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 31% higher than the same week one year ago.”
November 10 – Financial Times (Zehra Munir and Akila Quinio): “Cash-strapped American seniors are turning to reverse mortgages, a controversial type of loan that soared during the financial crisis, as a tightening economy drives ageing homeowners to find ways to make ends meet. The number of federally insured reverse mortgages rose more than 6% in the 12 months ending September, according to… the National Reverse Mortgage Lenders Association. Several US lenders told the Financial Times that sales of reverse mortgages have jumped this year as looming cuts to government benefits and persistent inflation have weighed heavily on older people. ‘In terms of the drivers here, it’s really that the math doesn’t math,’ said Sarah Edelman, executive vice-president… at housing non-profit National Community Stabilization Trust. ‘You’ve got people living longer with less retirement resources.’”
China Watch:
November 13 – Bloomberg: “China’s credit expansion was the weakest in more than a year last month, dragged down by slower government bond sales and sluggish borrowing demand across the economy. Aggregate financing, a broad measure of credit, increased 815 billion yuan ($115bn) in October… That’s the lowest level since July 2024 and well short of the 1.2 trillion-yuan forecast by economists… Financial institutions recorded an expansion of 219 billion yuan of new loans in the month, also worse than expected, with growth in the outstanding stock of loans to the real economy reaching a record low.”
November 9 – Reuters: “China’s internet platforms are quietly reviving consumer lending, taking Beijing’s push to make household borrowing cheaper as a signal that regulators may be easing a years-long crackdown on the sector… Beijing began reining in what it described as ‘disorderly expansion’ by internet platforms in 2020 by pulling the IPO of Alibaba… In August, however, needing to spur weak consumption while managing a trade dispute with Washington, China introduced consumer-loan interest subsidies, naming Ant and Tencent-backed WeBank alongside traditional banks as eligible lenders.”
November 11 – Bloomberg: “China Vanke Co.’s bondholders were dealt a fresh blow last week, when the distressed developer’s biggest backer tightened the terms of its financing. The timing couldn’t have been worse. The shift in Shenzhen Metro Group Co.’s approach to financial support comes just as cash-strapped Vanke is staring at a series of debt repayments… In all, about 15 billion yuan ($2.1bn) of yuan-denominated bonds are due to mature or face redemption options by June 30, 2026… The shortfall is stirring concerns about the outlook for Vanke’s publicly issued bonds…”
November 9 – Bloomberg: “China’s consumer prices unexpectedly increased in October, as holidays during the month boosted travel, food and transport demand — a pick-up many economists saw likely as fleeting. The consumer price index rose 0.2% from a year earlier, after a 0.3% decline in September…”
Japan Watch:
November 10 – Bloomberg (Yoshiaki Nohara, Sakura Murakami, and Takashi Umekawa): “Japanese Prime Minister Sanae Takaichi aims to use her first stimulus package to jump-start the economy and initiate a new growth strategy through investment in key industries. A panel tasked to form a new economic strategy for the nation by next summer recommended that the prime minister use the package to kick off efforts to build robust growth through ‘crisis management investment and growth investment,’ according to documents… ‘We need to boost private investment through measures that enhance the predictability of investment,’ Takaichi said…”
November 10 – Reuters (Leika Kihara): “Japanese Prime Minister Sanae Takaichi said… she would work on setting a new fiscal target extending through several years to allow more flexible spending, essentially watering down the country's commitment to fiscal consolidation. The new prime minister also renewed calls for the Bank of Japan to go slow on interest rate hikes, despite signs that most central bank policymakers would prefer to see a resumption of monetary tightening sooner rather than later.”
November 12 – Bloomberg (Erica Yokoyama and Toru Fujioka): “Japan’s Prime Minister Sanae Takaichi said that monetary policy is vital for establishing a strong economy and stable inflation, following the first meeting of a key economic panel during her administration. ‘The conduct of appropriate monetary policy is very important for achieving both a strong economy and stable inflation at the same time,’ Takaichi said… ‘We will continue to work together for the development of the economy.’”
November 9 – Reuters (Takaya Yamaguchi): “Japan’s government will urge the central bank to focus on achieving strong economic growth accompanied by stable prices in an outline of its stimulus package, a draft… showed… The comment likely underscores Prime Minister Sanae Takaichi's preference for the Bank of Japan to keep interest rates low to help underpin a fragile economic recovery.”
November 9 – Bloomberg (Toru Fujioka): “A record of policy discussions from the Bank of Japan’s latest board meeting signaled that the next interest rate increase could come as soon as December… ‘It is likely that conditions for taking a further step toward the normalization of the policy interest rate have almost been met,’ one of nine board members said while noting the need to examine underlying inflation…”
November 12 – Reuters (Leika Kihara): “Japan’s wholesale prices rose more than expected in October as the cost of rice and other food remained stubbornly high… Analysts said wholesale inflation was likely to moderate in the coming months, but renewed yen weakness could push up the cost of imports and keep prices elevated. The corporate goods price index… rose 2.7% in October from a year earlier, slowing from 2.8% in September but exceeding market forecasts for a 2.5% increase.”
Emerging Market Watch:
November 11 – Reuters (Rodrigo Campos): “A pick-up in flows into stocks led the way as non-resident investors added $26.9 billion to their emerging markets' equities and debt portfolios in October, data from a banking trade group showed. The inflow last month marks an uptick on the $21.1 billion in September and compares to a $5 billion net outflow in October 2024 according to the Institute of International Finance. The overall $12.9 billion net inflow to emerging market stocks was the highest since July, and the $9.4 billion that went into equities outside China the strongest since December 2023.”
Leveraged Speculation Watch:
November 12 – Bloomberg (Nishant Kumar): “Steve Cohen is one of the richest people in finance thanks to teams of traders making short-term mark-to-markets bets. But over the last few weeks, the billionaire founder of Point72 Asset Management has had his people out talking to investors about an entirely different strategy — where patience, not speed, delivers the payoff. Cohen is among a number of high profile hedge fund veterans, including Millennium Management’s Izzy Englander and Jain Global’s Bobby Jain, who are moving into private credit and other opaque corners of finance — areas that have traditionally been dominated by asset management industry giants, such as Blackstone Inc., Ares Management Corp. and Apollo Global Management.”
Social, Political, Environmental, Cybersecurity Instability Watch:
November 9 – Associated Press (Seth Borenstein): “The world has changed dramatically in the decade since leaders celebrated a historic climate agreement in Paris a decade ago, but not quite in ways they expected or wanted. Earth’s warming climate has gotten nastier faster than society has been able to wean itself from burning the coal, oil and natural gas that emits carbon pollution that triggers global warming, several scientists and officials said… ‘I think it’s important that we’re honest with the world and we declare failure,’ said Johan Rockstrom, director of the Potsdam Institute for Climate Research in Germany. He said warming’s harms are happening faster and more severely than scientists predicted.”
November 13 – Bloomberg (Emily Forgash): “Weeks after ChatGPT was unleashed on the world in November 2022, sustainability executives at Microsoft Corp. realized they had a big problem. On the tech giant’s 500-acre campus… teams began holding regular ‘triage’ meetings to confront serious questions posed by the artificial intelligence boom: Where would the company find the gigawatts… needed for data centers? And how could Microsoft possibly secure that extra energy while still making progress toward a long-standing goal of going carbon-negative? The AI discussions were ‘interesting and terrifying all at the same time,’ said Brian Janous, who served until August 2023 as Microsoft’s vice president of energy. Microsoft and other major tech companies, he said, had to ‘look at the climate commitments they set and say, ‘Can I still do this?’’ Nearly three years later, Microsoft and rivals including Amazon.com Inc., Meta Platforms Inc. and Alphabet Inc.’s Google are still struggling to answer that question.”
November 9 – Bloomberg (Brian K Sullivan, Mary Hui, and Joe Wertz): “The odds of extreme cold this winter in the US, Asia and parts of Europe are climbing, threatening to boost energy bills for consumers already grappling with high costs and economic uncertainty. With the season’s start just weeks away, meteorologists see many of the same conditions that led to one of the warmest winters on record last year for the Northern Hemisphere. But there’s one key difference: Signs are emerging that the polar vortex, the girdle of winds around the Arctic, could weaken and allow frigid air to spill southward… ‘Further into December, keep an eye on the polar vortex,’ said Dan Hart, a meteorologist at London-based OpenWeather Ltd.”
November 12 – Bloomberg (Jonathan Tirone): “United Nations nuclear inspectors said they are seriously concerned about the status of Iran’s inventory of near-bomb-grade uranium, as the Islamic Republic continues to deny them access to sites bombed several months ago by the US and Israel. The International Atomic Energy Agency reiterated it hasn’t been able to verify Iran’s fuel stockpile since mid-June…”
November 12 – Reuters (Parisa Hafezi): “Iran is grappling with its worst water crisis in decades, with officials warning that Tehran — a city of more than 10 million — may soon be uninhabitable if the drought gripping the country continues. President Masoud Pezeshkian has cautioned that if rainfall does not arrive by December, the government must start rationing water in Tehran. ‘Even if we do ration and it still does not rain, then we will have no water at all. They (citizens) have to evacuate Tehran,’ Pezeshkian said on November 6.”
Geopolitical Watch:
November 12 – Financial Times (Leo Lewis in Tokyo and Joe Leahy): “The row has deepened concerns about the relationship between the region’s two biggest economies, diplomats and academics said, at a time when US President Donald Trump’s transactional approach to trade and diplomacy has shaken up geopolitics. The relationship between Japan and China, two regional heavyweights, is one of the most delicate in the world, said a senior adviser to three former Japanese prime ministers. ‘Every change of leader, outside shock or change of the underlying situation, puts that balance at risk,’ the person said. Since the hawkish Takaichi won the leadership of Japan’s ruling Liberal Democratic party last month, Beijing has been on high alert for signs she will emulate her mentor, the late nationalist prime minister Shinzo Abe, in taking a tough line on China.”
November 14 – Bloomberg (Foster Wong): “China’s Foreign Ministry urged its citizens to avoid traveling to Japan due to what it called comments by Japanese Prime Minister Sanae Takaichi on Taiwan that pose ‘major risks’ to safety of Chinese nationals. The warning, issued in a statement, is the latest in an escalating diplomatic row…”
November 11 – Wall Street Journal (Shan Li and Krishna Pokharel): “Pakistan blamed India-backed militants for a suicide bombing that killed 12 people in Islamabad…, raising the prospect of renewed tensions between the nuclear-armed rivals, as India’s prime minister vowed to hunt down the perpetrators of a car explosion in New Delhi the day before. A blast on Monday near a metro station by New Delhi’s historic Red Fort set several nearby cars on fire, killed eight and injured at least 20 others…”
