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Sunday, February 22, 2026

2026-02-22

 ***** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic Fare:

Uneven growth puts the outlook on a fragile footing.





Something is goosing corporate profits, and identifying the culprit could tell investors a lot about just how sustainable the growth will prove to be.





Not all economic indicators are created equal. Here are the best (and worst) for recession forecasting.

.................. A good leading indicator needs to do two primary things:
  1. Decline early
  2. Decline deeply
An indicator that declines early but only has a very shallow contraction will never provide enough confidence or a clear enough signal for action. An indicator that declines deeply but late is not useful for any predictive analysis. An indicator like this may be useful as a confirmation tool, but not as a leading signal.

The chart below plots 15 major components of GDP across these two dimensions, using data from all recessions between 1955 and 2019.




Market Fare:


For most of the time since the pandemic, large-cap stocks have outperformed their smaller counterparts in the US stock market. That is, the LargeCap S&P 500 index has outperformed the MidCap S&P 400 and SmallCap S&P 600, collectively the “SMidCaps.” That started to change late last year as investors increasingly concluded that the former’s earnings outlook had become riskier and its valuations stretched. The SMidCaps’ earnings, which had been flat since late 2022, began moving higher late last year, with valuations that were relatively low. Thus began the Great Valuation Rotation of the Roaring 2020s.

Early last year, global investors also began rotating away from the US toward other markets. They did so because the US had outperformed the rest of the world since 2010, raising its market-capitalization share of the MSCI to a record 65% last year. So it was time to rebalance into stock markets with lower valuation multiples. This global rebalancing is likely to continue this year…

…At the start of the year, we assigned a 20% subjective probability to a meltup/meltdown scenario. That’s relatively low. We are even more comfortable with it now that the likelihood of an AI-related stock market bubble is much less likely. The S&P 500 Information Technology sector’s forward P/E is back down to 23.7 from over 30.0 late last year (chart). A repeat of the 1999/2000 Tech Wreck is clearly much less likely than widely feared last year…..



At this late stage of the earnings season, the (blended) revenue growth rate for the S&P 500 for Q4 is 9.0%. If 9.0% is the actual growth rate for the quarter, it will mark the highest revenue growth rate reported by the index since Q3 2022 (11.0%). At the sector level, ten of the eleven sectors are reporting year-over-year revenue growth. Three of these ten sectors are reporting double-digit revenue growth: Information Technology, Communication Services, and Health Care.

However, the Q4 revenue growth rate for the S&P 500 has been increasing over a longer timeframe. On September 30, the estimated revenue growth rate for Q4 was 6.5%. On December 31, the estimated revenue growth rate for Q4 was 7.8%. Today, the (blended) revenue growth rate is 9.0%. ..........



Bubble Fare:


In seventh grade science class, we studied how things are classified – the systems used to organize various kinds of rocks, elements, species, different types of clouds. I’ve always liked the name “cumulonimbus” – the sort of big billowy heap of a cloud that has a dark grey underside – full of water, not yet transformed into rainfall. If you see those clouds and suddenly feel a cool breeze, that’s often the storm’s “gust front” racing ahead of the rain – and a good time to head for cover.

You wouldn’t look at the rainfall and think it has come from nowhere. Looking at the cloud, you know the rainfall was already there – just waiting for enough conditions to show itself. As warm, humid air rides up over the wedge of cooler air, the cloud builds – water vapor beading into droplets, gathering weight until they finally let go as rain.

We call rainfall a “conditioned” phenomenon because it depends on many other factors. When causes and conditions are sufficient, the rainfall manifests. When causes and conditions are no longer sufficient, the rainfall ceases to manifest.

We should be careful, when talking about rainfall, to consider the causes and conditions that produce rain. We might say the average amount of rainfall is this, or the average frequency is that, but if we don’t change our estimate even when there’s a cumulonimbus cloud over our head and a cool breeze in our hair, we may get soaked.

Likewise, suppose we look at historical stock market returns over any particular horizon, whether daily, weekly, or annual – regardless of valuations, market behavior, investor sentiment, monetary policy and other factors. We can collect all of those returns in a heap called an “unconditional” probability distribution. Historically, average annual market returns on the order of 10%, more or less, have been most common, so the heap is highest at that point, with progressively smaller “tails” for returns that are wildly positive or wildly negative. The overall profile looks roughly like a “bell curve.”

We might say the average market return is this, or the average frequency of a crash is that, but if we don’t change our estimate even when valuations are at the highest levels in history and market internals are ragged and divergent, we may get soaked.

It would be incorrect to say that the market plunges of 2000-2002 and 2007-2009 came from nowhere. Looking at a bubble, you know the crash is already there – just waiting for enough conditions to show itself.

Whatever market conditions may be, it can help to look at the probability distribution of returns, “conditional” on some important factor, or a combination of them. We can then ask questions like “What’s the profile of likely market returns and risk, given this or that set of conditions?” That’s what we call the “conditional” probability distribution. In nearly every case, the distribution includes both positive and negative outcomes. The average outcome may be higher or lower than the “unconditional” average, but even then, we typically can’t rule out outcomes on the opposite side. The best we can do is talk about the likely distribution of returns, rather than specific “point forecasts.” To interpret a distribution as a forecast is far too demanding about what’s possible.

That’s part of the reason we talk about the “return/risk profile” of the market, rather than relying on forecasts or scenarios. Nearly every market condition we identify is characterized by a distribution that includes both positive and negative returns, often quite large ones in both directions. To imagine that a probability distribution is a “forecast” is to be caught in a concept of reality. A classification or label – overvalued, undervalued, constructive, defensive – is only a tool that describes a distribution. It’s not something to take literally as a forecast.

The bell curves below show fitted probability distributions of actual weekly S&P 500 total returns since 1940. They’re not quite “lognormal” curves. The full distribution of S&P 500 returns has a slightly narrower peak, a bit of skew, and fatter tails than a classical bell curve. I’ve also included two “conditional” probability distributions – not because they’re great models, but simply to partition market conditions by a crude version of “valuation and market action” using commonly available indicators.

The blue curve is the “unconditional” probability distribution of weekly S&P 500 total returns. In contrast, the green and red curves are “conditional” – based on the “yield” implied by Shiller cyclically-adjusted P/E (CAPE) relative to 10-year bond yields, and the percentage of U.S. stocks “participating” in a market advance, as measured by their position relative to their own 200-day average. Geek’s note: each curve is defined by its own data subset, so the area under each is 1.0.

Notice that the conditional distributions include both positive and negative returns. For the red distribution, the average S&P 500 weekly total return is slightly positive, but lags T-bill returns by about 2% annually (that is, annualizing the cumulative S&P 500 returns that comprise the red distribution). In contrast, the average weekly return in the green distribution exceeds T-bill returns by close to 12% annually. The red distribution is the widest (has the highest “standard deviation”), while the green distribution is the narrowest. That means that unfavorable market conditions generally involve much greater volatility than favorable market conditions. Observe in particular how fat the tail of the red distribution is on the right side. When people say how much investors would lose by “missing the 10 best” days or weeks of market returns, keep in mind that these “rewarding” instances generally occur during periods when the market is crashing. ..........

The chart below shows the conditional distributions that we estimate based on our actual classification of market return/risk profiles – reflecting our adaptations in recent years – particularly in 2021 and 2024. I’ve condensed them into just two groups – bearish/hard-negative (which includes neutral positions) and leverage/constructive. There are more subtle variations in practice, but two “conditional distributions” are enough to illustrate the key idea.

While the overall profile of these distributions is similar to the previous ones that use crude gauges to classify market conditions, the average returns are profoundly different. In the red distribution, average S&P 500 total returns are negative, and lag T-bills by about -22% annualized. In the green distribution, average total returns exceed T-bills by about 28% annualized. There’s no assurance that future returns will be similar, but we see the same overall profile in subsets of the data across history, from the recent bubble all the way back to the Great Depression ...................

Every market return/risk profile we define maps into a probability distribution that includes both positive and negative outcomes. The average returns may be extremely different, but any individual outcome is largely unpredictable. It’s only by aligning our outlook with prevailing market conditions – again, and again, and again – that we have an expectation that our returns will capture some of those differences as investment returns.

Record extremes
Presently, the U.S. equity market stands at the most extreme valuations in history, on the measures we find best correlated with actual subsequent market returns across a century of market cycles. The chart below shows our most reliable gauge of market valuations in data since 1928: 
 
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Our outlook will continue to change as measurable, observable market conditions change. In our view, the best way to take good care of the future is to take good care of the present moment – again, and again, and again. No forecasts or scenarios are required. 

Mathematics as a tool, versus mathematics as a dogma
I ran across an article in recent weeks proposing that nearly all mathematics in the field of investment is “sham” and “almost 100% phony.” I typically don’t cite writers if I’m not complimenting or drawing on their work, but my impression is that the phrase “almost 100%” may be the best example of sham mathematics in that particular article.

Now, yes, if one’s use of mathematics in finance assumes that stock prices follow Brownian motion (a pure “random walk”), that price distributions are best characterized as perfect (lognormal) “bell curves” without skew (lopsided shape) or kurtosis (fat tails), or that the correlations across assets will be reliably well-behaved even in a crisis – leading you to lever your portfolio up 40-to-1 (which is what blew up Long-Term Capital Management), or to slice up mortgage risk into securities that you imagine will be well behaved when it all hits the fan (which is what blew up Lehman and many banks during the GFC), then yes, your application of mathematics may be a reckless sham.

But it’s not math that’s the problem. Math just allows one to approach problems in ways that require structured, deliberate, systematic thinking – to understand how variables interact, and how this changes when that changes. Mathematics is merely well-structured thought. It’s the assumptions one uses when doing the math that may or may not be garbage.

For example, if you take seriously the idea that securities are claims to a stream of future cash flows that will be delivered to investors over time, you can productively use math to figure out how to price a bond, how to calculate the yield-to-maturity given the price, and how changes in growth rates and risk-premiums affect stock prices. You can examine prevailing valuations and ask what assumptions about future cash flows are needed for an investment at those valuations to actually produce an adequate long-term return. All of that is just arithmetic.

You can go further, for example, and accurately price more complicated securities like options, allowing you to study the implications of various investment strategies. All of that is a useful application of mathematics – provided you don’t take probability distributions (“bell curves”) literally, and you instead realize that the main thing any good option model does is to allow you to add up various option payoffs times their respective probabilities. You don’t have to use a lognormal distribution at all. As long as the probabilities add up to 1 and the expected value of the distribution rules out arbitrage, you can use whatever distribution you like – you just have to use a more creative integration method.

The fact that actual financial markets don’t obey simplifying assumptions like perfect bell curves doesn’t make “almost 100%” of financial mathematics a sham, unless your understanding of mathematics is that objects like probability distributions, correlations, covariance matrices, stock betas, expected returns, or other parameters are literal, fixed, and “unconditional” regardless of valuations, and regardless of whether investors are optimistic or risk-averse. The “sham” emerges if we stumble into dogma – if we assume that prices are produced by a random number generator rather than the expectations, hopes, and fears in the heads of investors. The use of mathematics doesn’t force anyone to make such dogmatic assumptions – the math is just a tool for systematic thinking.

The making of a permabear
Last month, Jeremy Grantham generously sent me a copy of his new book, The Making of a Permabear – The Perils of Long-term Investing in a Short-term World. The title alone – disarm your critics by owning their label – felt very B-Rabbit in the rap battle at the end of Eminem’s 8 Mile.

Jeremy’s book, which I greatly enjoyed and recommend, is partly an autobiography; partly a history-rich journey that combines investment wisdom with lessons in entrepreneurship; partly a deeply principled examination of our relationship with the environment that humanity relies on for its existence; and from cover to cover, an example of what it looks like to live an interesting, constantly curious life that has purpose beyond oneself.

For veterans of market cycles from the Nifty Fifty, the late-1970’s “death of equities”, the deep undervaluation of the early 1980’s (when my own career began), the 1987 crash, the dot-com bubble, the tech collapse, the global financial crisis, and on into the current bubble, Jeremy’s book provides a fascinating look at what was going on in his head while whatever-it-was happened to be going on in your own head.
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Charts:
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(not just) for the ESG crowd:

The world is not quitting coal

So, this is what’s actually going to determine the future of our planet. Over here in the blue square you can see the total number of new coal plants in MW that came online in 2025 around the world:

What do we see? The highest number since 2015. These numbers come from the global energy monitor, where you can easily verify them yourself. Now let’s contrast these numbers with the coal plants retired in 2025:
...
The retired coal capacity in 2025 is nowhere near the new coal capacity that came online. How are coal emissions supposed to peak, when so much new capacity comes online? If you build a coal plant then it’s going to be used. Demand for electricity will simply increase to meet the supply. The United States is trying to save coal, although it can’t compete there with natural gas, but China, India and Indonesia also seem to have no intent to quit using coal anytime soon. As long as the world keeps bringing more coal plants online, we can forget about carbon emissions peaking anytime soon.


  • The geothermal revolution includes both shallow geoexchange systems, such as The Riverie high-rise which uses boreholes for heating and cooling, and deeper, more technologically advanced "enhanced geothermal" techniques.
  • Enhanced geothermal aims to make this alternative energy source viable anywhere by borrowing advanced drilling technologies from fields like hydraulic fracturing and nuclear fusion to access the Earth's core heat.



Sci Fare:

The big bang wasn’t the start of everything, but it has been impossible to see what came before. Now a new kind of cosmology is lifting the veil on the beginning of time



U.S. B.S.:

That’s what happened, right?

Article I, Section 8 of the Constitution gives Congress the power to "lay and collect Taxes, Duties, Imposts and Excises." Tariffs are duties. Yesterday the Supreme Court had a case in front of it about a president who imposed tariffs unilaterally on the entire global economy without a single vote from Congress. Six justices looked at that and concluded he filled out the wrong form. The ruling said one statute, IEEPA, does not contain the word "tariff" and therefore cannot authorize one.(1) It said nothing about whether the president overstepped the constitutional boundary between the branches. Trump imposed tariffs in his first term under Section 232 and Section 301. Biden kept them and raised some of them. No court touched any of it for years. The only time the Supreme Court intervened on tariffs was yesterday, and all it said was that the newest batch cited the wrong law.

….. The media frames the 6-3 vote as evidence of cracks forming between conservative justices. Look at what the split actually is. Three conservatives said IEEPA authorizes tariffs. Three said it does not because the statute does not use the word. Nobody on either side said the president lacks the authority to impose tariffs. The disagreement is over which form to fill out.

But the Court did not even strike down all the tariffs. It struck down roughly half. Everything imposed under Section 232 and Section 301 never went before the Court at all. Fifty percent on steel. Fifty percent on aluminum. Twenty-five percent on every imported car. Fifty percent on copper. All still in effect. The effective tariff rate dropped from 16.9% to roughly 9.1%, and 9.1% is still the highest since 1946. The Tax Foundation estimates the surviving tariffs alone will cost American households $400 a year and raise $635 billion over the next decade. Not one headline I have found leads with the fact that half the tariffs survived untouched. .…. 

Hasen drew the bottom line: "Just because the Court takes two or three cases to reach its highly ideological decision doesn't make it any less ideological or any more comporting with principles of judicial minimalism or respect for precedent."

The Court is not functioning as a neutral interpreter of the Constitution. It is functioning as one party's legal infrastructure. And the founders had a name for what to do about that. ..............



The depth of the Supreme Court’s corruption has forced us to find new language to describe its actions. Today’s decision, undoing Trump’s massive array of tariffs that upended the global financial system, is a case in point.

We say the Court “struck down” these tariffs. But that wording is inadequate and misleading. These tariffs were always transparently illegal. Saying the actions were “struck down” suggests at least a notional logic which the Court disagreed with, or perhaps one form of standing practice and constitutional understanding away from which the Court decided to chart another course. Neither is remotely the case. There’s no ambiguity in the law in question. Trump assumed a unilateral power to “find” a national emergency and then used this (transparently fraudulent) national emergency to exercise powers the law in question doesn’t even delegate….

This is a case where the legal merits of the President’s action were just too transparently bogus even for this Court to manage and — critically — his actions and the theories undergirding his claims to the power were, for the Corrupt majority, inconvenient. The architect of the current Court — the Federalist Society’s Leonard Leo — was behind the litigation that undid the tariffs. That tells you all you need to know. In this case Trump’s claim to power was neither in the interests of the Republican Party — the Court’s chief jurisprudential interest — nor any of their anti-constitutional doctrines. So of course they tossed it out. This may sound ungenerous. It’s simple reality. ...........



........... This is the way it works. Whenever something evil is done by the powerful to the weak, they look to see if there were consequences. If not, they expand, moving inwards. Yemen is a place no one cares about in the West: there wasn’t a lot of coverage. Palestine got tons of coverage and even law cases, but in the end no one powerful suffered, and the genocide was and is pushed thru. Opponents lost their jobs, went to prison and were deported or lost their banking access (Albanese, for example.)

Since those responsible for the genocide got away with it twice, they’re now doing it a third time.

Everything the powerful do to someone else is something they are willing to do to you if they think it’s in their interest................

Every time the elites of any country get away with abusing regular people, whether foreign or domestic, the line moves on what is acceptable. ..............




Like the Iraq War, the planned war with Iran is built on false premises. Unlike the Iraq War, there hasn’t even been a real public debate.


Eight months after Trump insisted that Operation Midnight Hammer "totally obliterated" Iran's nuclear program, he has deployed the largest military presence in the Middle East since the Iraq War.

............................................ In fact, Trump’s own 2025 national security strategy released in December explicitly states that the U.S. is not going to attempt to stop repression in other countries or lecture them about the need for democratic and human rights reforms, but instead will deal with such countries as they are (that policy was designed to justify Trump’s close relationship with Saudi, Emirati, Qatari, Egyptian and Jordanian tyrants but the principle applies to Iran as well, which is at most as repressive and in fact mildly less so than those close U.S. allies). ...

The willingness of the U.S. to embrace and even support the world’s most savage regimes has, in fact, been the staple of U.S. foreign policy since at least the end of World War II; Trump, I guess to his credit, is the first to candidly admit and describe that reality. .........


The Trump administration talks the language of diplomacy while posturing for a war on Iran which, if implemented, will be the end of the American democratic experiment.

........... At some point the global analytical community is going to have to come to grips with the harsh reality that, from the US perspective, diplomacy is not an option. The policy of the US when it comes to Iran is not how to find a diplomatic path toward a compromise solution which allows Iran to enrich uranium as is its right under Article 4 of the nuclear nonproliferation treaty, but rather regime change in Tehran.

Which means the United States is on a collision course for war with Iran that will happen sooner rather than later. ..................

A war on Iran will result in a disaster for all parties involved. There is no guarantee of success on the part of the United States and Israel, or failure on the part of Iran. There is a huge risk that this war will result in massive disruption of critical energy production capability in one of the most critical energy production regions in the world, triggering a massive energy security crisis that could collapse regional and global economies.

So, the key question is why Donald Trump, a man who ran on a platform of peace, willing to risk losing his political base on the eve of critical mid-term elections by betting on the successful execution of a short war with Iran that achieves the regime change outcome desired?

The simple answer is because he simply has no choice. The combination of domestic political backlash to Trump’s deployment of an army of federal agents into the streets of American cities and the ongoing political fallout from the release of the Epstein files has severely diminished Trump’s ability to guarantee that the Republican Party would retain control of both houses of Congress this coming November. The loss of the House of Representatives would signal the end of the legislative viability of Trump’s remaining years in office as Trump would be facing repeated motions for his impeachment form office.

The only hope Trump has to offset the ICE/Epstein political disasters is to deliver an unprecedented military victory over Iran, something no American President since Jimmy Carter has been able to deliver. .............



The US has amassed the largest military force in the Middle East since the invasion of Iraq almost 23 years ago and is poised once again to commit mass murder and gleefully perpetrate an astonishing amount of war crimes.

Yesterday a huge number of planes, from fighter jets to air-to-air refuelling tankers to command and control planes, left the US en route to the Middle East. The planes had stop-overs on US military bases in England and Germany, because no imperial war crime is ever complete without the involvement of Europe. 

A US attack on Iran, a flagrant violation of international law, if such a thing is even worth mentioning any more, appears imminent.

Why? For Israel, for oil, for power projection, for Trump’s legacy. Because the logic of the military-industrial complex demands that $1 trillion dollars a year and an astonishing array of killing machinery doesn’t just sit idle.

Because this is what empires do.

Because the US is violence. ............

...................... The US is a rogue state operating in plain site and a huge amount of effort goes into obscuring that fact. Because if people understood the US as a rogue state, they might question if its constant violence is not the violence of a peacekeeper or a freedom fighter, but the violence of a rogue.

They might question who, in fact, the bad guys are.................



Geopolitical Fare:

How elites in Beijing view the collapse of American hegemony

A professor at Fudan University and a former interpreter at the foreign ministry, Zhang is the author of a bestselling trilogy on what he describes as China’s “civilizational state” – a model of governance, rooted in indigenous ethical systems developed over centuries, that he presents as a coherent alternative to liberal democracy.

Zhang’s arguments have found a particularly receptive audience in Beijing: he is close to the Chinese Communist Party, and an amplifier of the ideas and views circulating among the Chinese elite. Pankaj Mishra spoke to Zhang about how the Chinese political and intellectual elite sees the collapse of American authority and the crumbling liberal international order.

............. Indeed, the Chinese are watching all this drama closely and with fascination. I think many people feel Carney was a bit more courageous than his European counterparts in calling this so-called rules-based international order a kind of disguise that allows the West to benefit – the US more, Canada maybe less. Now Donald Trump has said: we don’t need this disguise. We can approach everything based on the darkest aspects of realpolitik.

People [in China] see very clearly that these are naked acts of imperialism, hegemonism and colonialism. We have a holistic perception of all this: the crisis in in Greenland, the genocide in Gaza, the low-intensity civil war in Minneapolis and elsewhere in the US. All these are, in fact, interrelated, and it reflects deep structural problems in the Western political system.

In 2006, I wrote a small piece for The New York Times, saying that the Chinese model will be far more attractive than the American model in the Global South. Because in our model, we focus on people-centred development. The US, on the other hand, orients its political structure to favour the super-rich, and to sustain that today, they’re going back to the roots of capitalism: exploitation and territory grabs. In 2018, I gave a talk at Harvard in which I said that China’s leadership was looking to the 2050s while Trump was looking to the 1950s. Now he’s looking to the 1850s, which is clear in the US security strategy report issued at the end of last year. I remember Jeffrey Sachs saying that it is not so much anti-Russia or anti-China, it’s anti-everyone – except, perhaps, Israel. .........







Pics of the Week:


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Monday, February 16, 2026

2026-02-16

 ***** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic Fare:


This is the month the birds came home to roost, at least for the year 2025. While the month over month numbers were almost all positive, some strongly so (a repeat of what we saw last January as well, so beware unresolved seasonality), the benchmark revisions were brutal. Which is likely what the Administration was telegraphing in bright neon flashing lights the past few days. ........



.............. Sure enough, in its report today, the BLS announced that "the establishment survey data released today have been benchmarked to reflect comprehensive counts of payroll jobs for March 2025. These counts are derived principally from the Quarterly Census of Employment and Wages (QCEW), which counts jobs covered by the Unemployment Insurance (UI) tax system. The benchmark process results in revisions to not seasonally adjusted data from April 2024 forward. Seasonally adjusted data from January 2021 forward are subject to revision. In addition, data for some series prior to 2021, both seasonally adjusted and unadjusted, incorporate other revisions."

And here is the summary table the BLS published to adjust for the revised Birth-Death model (there is much more data to today's revisions which we summarize below).


With that introduction aside, this is how the revised payrolls numbers looked. 

Starting at the top, total US payrolls were revised dramatically lower starting with the Jan 2021 data and every month since, and net of the cumulative changes December 31, 2025 total nonfarm employment was revised lower by 1.029 million from 159.546 million to 158.497 million. ..........

Focusing on 2025, the negative revisions to both the year and previous years, meant that the change in total jobs for 2025 was revised from an already low +584,000 to a shockingly low +181,000.  ..........

Putting it all together, we now know with certainty that the flawed Birth-Death model (as well as other smaller seasonal adjustments), led to 2.5 million jobs being revised away since 2019, with negative revisions in 6 of the past 7 years (only 2022 saw a modest positive adjustment) ............


Keen: The Deliberate Deception in Ricardo’s Defence of Comparative Advantage

The theory of comparative advantage is perhaps the most influential and celebrated result in economics. Challenged by a mathematician to nominate an economic concept that was both “logically true” and “non-obvious”, Samuelson nominated the theory of comparative advantage:
That it is logically true need not be argued before a mathematician; that it is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.(Samuelson 1969, pp. 1-11)
From Ricardo’s original demonstration in 1817, to modern trade theory, the conclusion has remained constant: even if one nation is more efficient at producing everything than all others, it and its trading partners will gain from specialization and trade.

However, there is an obvious flaw in the logic: while labor can hypothetically be moved between industries at will, fixed capital cannot. Ricardo’s own text contains evidence that he knew that this reality invalidated his theory .................

 

In the annals of ruses used to provoke fear in the voting public about government deficits, central bank currency issuance, and fiscal activism, the experience of Germany in the 1920s was a long-standing favourite, that could be wheeled out on demand and have immediate effect. Wheelbarrows full of money being pushed to the local bakery to buy the daily bread, etc. It was a very effective vehicle for advancing the interests of the ruling class because it created a political brake on government action to reduce poverty and maintain full employment. More recently, Zimbabwe became the vehicle. It was equally effective even though it, like the Weimar ruse, was largely based on fiction. Even more recently, we have a new ‘ruse on the block’, the so-called ‘Truss Moment’, which is particularly effective in the UK. The current Labour government is petrified to do anything that might resemble a Labour government because they have a deep-seated paranoid ideation that the ‘City’ is out to get them, and the ‘Truss Moment’ is used as the summary event that apparently justify that delusion. They might have looked to the East, to Japan, to see why the ‘Truss Moment’ was about something quite different to the popular narrative that accompanies the mention of the ill-fated few months in British politics. ...........



Executive Summary:
  • The Fed will run the US economy hot – because, with labour demand and supply now in balance, both demand and supply must expand to keep output expanding.
  • Short-term US real rates will come down further because the Fed will continue to cut even with inflation in the 2.5-3.5 percent range.
  • The US dollar will continue to weaken, given the currency’s dependence on real interest rate differentials.
  • The US yield curve will undergo a ‘bear steepening’ as US inflation expectations ratchet higher. Meaning, T-bonds will underperform cash, as well as other major sovereign bonds.
  • Stocks will continue to outperform bonds.




Market Fare:

Hard-to-shake optimism and a scarcity of long-dated debt have helped drive spreads to historic lows



We have spent a lot of time over the last year debunking “narratives,” which are dangerous to investors, as “narratives” create a rationalization for overpaying for assets. Nonetheless, Wall Street loves a simple story and is happy to jump on a trend with momentum, selling products to unwitting consumers. A good example of that lately has been the “weak dollar” narrative, which has pushed investors to chase foreign assets. .........

There are two very important points to take away from the chart above.
  1. The dollar has been in a very strong uptrend since the Financial Crisis and remains there.
  2. Despite the recent pullback in the dollar, it is trading at its “Neutral Value” and is at the same level it was in 1970. Such certainly does not support the “debasement” or “demise of the US Dollar” narratives.
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MSCI data shows the MSCI EAFE Index (ex-US) forward P/E at 15.3 as of January 30, 2026. The level looks reasonable in isolation; however, the key issue is what investors receive for that multiple. Given that earnings growth rates, margins, and sector mix are vastly weaker than in the U.S., overvaluation will matter in those countries, just as it does in the U.S.

On the U.S. side, FactSet reported S&P 500 analysts project 2026 earnings growth of 14.1 percent and a forward 12-month P/E of 21.5, below 22.0 at the end of the fourth quarter. The U.S. multiple still sits above long-run averages, yet the direction matters, as the U.S. has cheapened at the margin while earnings expectations have remained resilient and profit margins have improved. 


BNP Tail risks 2026: BNP Paribas grey-swan analysis (via The Bond Beat)

The biggest market moves are frequently caused by the least-anticipated events – but those events might just be anticipated with a bit of work. Investing in tail-risk analysis is rewarding most of the time, but perhaps unusually so in 2026, at a moment when politics, investor flows, technology and financial risks are all arguably in flux. Here we analyse 10 of these 'grey swans' across asset classes, themes and regions – and aim to explore how investors might best prepare for the unusual…

…Handling grey swans: The bigger market moves often occur when something previously thought of as unlikely suddenly happens (Figure 1). These ‘grey swans’ – considered possible but unlikely – often have an outsized impact both because they surprise and because few have planned or positioned for them…

…US Treasuries: 30y yields exceed 6%


Global Growth Reacceleration is here.

There’s a change in the air.
The gloomy macro clouds of the past few years are starting to lift.
Once weak and lagging parts of macro and markets are starting to stir,
And a major macro theme I’ve been tracking is showing increasing signs of finally kicking full-swing into gear — today’s chart lays it out simply.
Basically what we’re looking at here is a procession of policy pivots from big easing in 2020/21, panic tightening in 2022/23, and then back to easing in 2024/25.
The result?
Major monetary tailwinds are kicking-in right now.
And we are seeing this having a clear positive impact on some of the key areas of the global economy that have previously been in deep stagnation: manufacturing, global trade, commodities, heavy industry.
Real world, real growth, traditional cyclical parts of the economy are waking up from slumber (and seemingly taking back charge in relative stock market performance after a decade+ of software and tech domination).
If this is true, and there is plenty of emerging evidence (such as the chart below), then we are likely to see a robust and durable rally in commodities, emerging markets, and traditional cyclicals. The downside is that tech, crypto, and fixed income likely take a back seat in this type of macro environment (and that’s precisely what we’ve seen playing out over the past few months).


MS (via the Bond Beat): Despite Last Week’s Volatility in Tech, We Point Out Several  Constructive Observations in the Sector
  • Forward revenue growth expectations for mega cap Tech have accelerated to multi-decade highs (+18%).
  • Mag 7 forward P/E has dropped to 27x (12th percentile since early 2023 when the AI thematic gained momentum).
  • Despite questions around whether the market is beginning to enforce capex discipline in a more structural way, our work shows that the high capex/sales factor continues to outperform in both Tech and the overall market.
  • Earnings revisions breadth across Semis, Software, Tech Hardware, and the Mag 7 has started to rebound over the past 2 weeks.
  • AI adopters are outperforming the broader market by 1% T+1-day after reporting earnings on a median stock basis.
  • The US Dollar Index is down 9% Y/Y, a relative tailwind for mega cap Tech given high foreign sales exposure. The Nasdaq 100, for instance, has ~50% foreign revenue exposure.
  • After the sell-off, our Software team led by Keith Weiss sees “attractive entry points in names like MSFT, INTU, CRM, NOW, TEAM, SNOW, SHOP, NET and PANW.” (Please see note link for relevant disclosures.)
  • Bottom line: fundamental tailwinds remain in place for the AI enabler complex, and the AI adopter trade remains underappreciated, in our view.


................. The three-part bottom line: The hyperscalers’ cash flow will increase as a result of all their capex, their humongous spending will boost the broad economy, and that’s bullish for a broadening of the Roaring 2020s stock market!

 


Some thoughts on the recent emotional buying and selling around the "AI Fear Trade", along with case studies and comments on some stocks that I think offer good value in quieter corners of the market

My last post had some thoughts on AI and the general market (plus Tickle Me Elmo’s excess inventory issues). I mentioned some valuation concerns, but I also believe there is a big dichotomy between stocks that occupy most of the headlines and much of the rest of the market. I think there are lots of inefficiencies in the market. Within just the last month, we’ve seen major household names in software lose 30% or more of their value. And these fears are rolling through one industry after another, like a virus that’s spreading.

On Monday, SPGI and MCO got infected. These are two dominant moats that have been beloved by investors for over a decade (with the valuation multiples to prove it). Tuesday, it was real estate brokers (JLL, CBRE). Yesterday, it was the trucking companies that were down 15%, and even stocks like Copart (CPRT) and Ritchie Bros (RBA), salvage auctions (junk yards!) were down 7-10% on AI fears.

In recent weeks, I think there has been a lot of indiscriminate buying and indiscriminate selling (based on whether the consensus is that AI will help or hurt). There is a lot of emotion, and emotion always trumps thoughtfulness in the heat of the moment. What if some of these companies get good at using AI and it actually benefits them?

I have seen this being dubbed the “AI Fear Trade”. It reminds me of the summer of 2020 when everything related to internet, software or ecommerce was soaring and everything in the old world was tanking. Zoom captured everything about pandemic demand: video conferencing was a booming industry. The stock soared in early 2020, reaching a peak valuation of 154x sales. Today it trades around 4x. The stock is down 85% from its peak, even though profit margins have continued to grow nicely.

At the other end were the stocks that were left behind: stodgy industries like banks, manufacturers, oil refineries... ..........



...................... after three years of unprecedented market gains in every asset class, from stocks to cryptocurrencies to precious metals, “Financial Nihilism” has resurfaced to rationalize “speculative excess” and justify abandoning long-term investment strategies that have withstood the “sands of time.”

While Kyla produced a bombastic article to gain social media exposure by suggesting that Gen Z and Millennials no longer believe in saving, investing, or following traditional financial paths, the data shows something very different. ..............

.......... 
Why this trip down memory lane? (Other than the fact that the commercials are hilarious to watch.) Because what is happening today is NOT “Financial Nihilism,” it is the typical outcome of exuberance seen during strongly trending bull market cycles.

While young people, like Kyla, may think that “this time is different,” they lack the historical experience to support such a conclusion. Ask anyone who has lived through two “real” bear markets, and the imagery of people trying to  “daytrade” their way to riches is all too familiar. The recent surge in speculative excess, leverage, and greed is not a new phenomenon. ..........



Bubble Fare:


 




US AI-Related Investment Keeps Breaking Records, With Total Software, Computer, & Data Center Spending Now Exceeding $1T Per Year


..................................... Yet in the meantime, the impact of this investment has been less pronounced from a national accounting point of view than the eye-popping headline figures would suggest. The tech industry has been a notable driver of GDP growth over the last year, but since the vast majority of computer fixed investment comes directly from imports, much of the short-term GDP boost from AI investment accrues to foreign electronics manufacturers (Taiwanese GDP is up 12.4% since late 2024). In the most recent data, AI investment net of imports only contributed 0.3% to the 4.4% annualized pace of US GDP growth.

In other words, the US economy is buoyed by the AI boom but is nowhere near entirely driven by it—meaning these investments have to pay off both as useful productivity tools for end users and a positive use of expensive compute for infrastructure providers if they hope to accelerate American growth. Even if the technology succeeds, losing companies—whether they be Microsoft, Google, or Anthropic—could be burned if their customers end up moving en masse to superior models developed by their competitors.

Still, recently released LLMs can now semi-reliably complete software development tasks that would take a human 6 hours, and capabilities measured in task-length have been doubling roughly every 7 months. Meanwhile, most AI companies still have massive spending capabilities from their other profitable digital ventures, and they’re easily able to tap investors for additional money at extremely high valuations. For now, America’s AI boom shows no signs of slowing down.


Inside Pershing Square’s Insurance Bet

............... Ackman echoes Chris Hohn’s view, too, that bigger can be better. “We believe most of the top ten companies have sustainable competitive moats and long-term secular growth characteristics,” he states. He expects Amazon, Alphabet and Meta to grow earnings at 18-20% over the medium term, versus 8-9% for the S&P equal weight.


AI is going to displace business software because so much of it is terrible quality crap peddled by monopolists. Policy can help. Plus, bitcoin falls, & enforcers may drop the Ticketmaster suit.

...... But before the full news round-up, I want to go into depth on two parts of our economy that got hit badly over the past few weeks in the financial markets. The first is crypto, and the second are software and analytics companies.

We’ll start with bitcoin and the proverbial “crypto winter.”

I’ll be brief, because this one doesn’t matter that much. Crypto has gone down by $1.7 trillion in market value since its October peak, with the decline accelerating last week. I have no idea why there was a market collapse, it may have to do with a hedge fund blowing up or some sort of market mechanic. Maybe we’ll never know. Crypto falls periodically. What matters is that this time there is a lack of confidence in the crypto narrative.

The reason is that the crypto story has fallen apart. That story, briefly, went as follows. The blockchain is a foundational groundbreaking technology, only known to a niche segment, and hamstrung by a hostile political environment. When it becomes legal and mainstream, cryptocurrencies would skyrocket in value as use cases became clear. There were a host of hopeful future events that investors could expect to drive value.

When Trump got elected, the story seemed to play out. Bitcoin jumped in value, and the first “crypto President” appointed friendly regulators. Congress passed the GENIUS Act to legalize "stablecoins" a type of financial instrument based on crypto, and there are now easier ways for investors to buy and sell various coins. There is even a decline in faith in the dollar, which supposedly bitcoin hedges against.

Only, it turns out there are no real use cases for crypto except for money laundering and fraud, and little real interest beyond “number go up” speculation. It’s not a very interesting technology, with AI taking the spotlight and legalized gambling and future markets taking the froth. Even some of the big crypto firms, like Coinbase, have given up on crypto and are just trying to become less regulated dollar-based banks. I suppose there’s still the possibility of a bailout or something, but at this point everyone knows that crypto is a legal way to gamble that is more boring than other ways to legally gamble. And that’s all it’ll ever be.

So that’s the crypto collapse.

The second collapse is far more interesting, and it has to do with a whole set of companies that make software, like Adobe, Zoom, Salesforce, WorkDay, ServiceNow, LegalZoom, Thomson Reuters, and even Microsoft. The S&P Software & Services has gone through “Software-mageddon,” losing a trillion dollars in market value in a week. ........



vs




Quotes of the Week:

MS, via the Bond Beat:
Updated CBO projections of the federal government deficit and GDP growth suggest a quiet period ahead for bond vigilantes and others who hand-wring over the unsustainable nature of the US debt and the inevitable market revolt – the Godot for which they have waited impatiently for a half century.


Charts:
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3:


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(not just) for the ESG crowd:

Rising GDP continues to mean more carbon emissions and wider damage to the planet. Can the two be decoupled?

................................. More broadly, since Limits to Growth was published, our understanding of how economic activity is damaging the planet has widened beyond just carbon emissions. Post-growth economics has emerged alongside the study of so-called “planetary boundaries” – hard environmental limits that, once crossed, could have disastrous consequences.

The research focuses on nine ecological processes, from climate change to ocean acidification and ozone depletion, and for each identifies the safe zone in which we should operate.

The most recent planetary health check, published in September, found seven of these nine boundaries were being breached to a dangerous degree. ...........

Their key finding: no nation had met the basic needs of its residents while also staying within its biophysical limits.



Scientists say warming is increasing faster than at any time in at least 3 million years. There is no guide for what comes next

...................... But it’s not clear if the scientific warnings are making a difference in “a post-truth era in which too many people prefer pleasant lies over unpleasant truths,” said Reinhard Steurer, a professor of climate policy and governance at the University of Natural Resources and Life Sciences in Vienna who studies how climate science and policy interact. He said that new studies outlining disastrous scenarios are unlikely to have much impact in the current political climate, but that researchers should keep speaking out, and not surrender to “techno illusions or hopium.”
***** paper: The risk of a hothouse Earth trajectory. Ripple, Rockstrom, Schellnhuber et al.





Breaking up monopolies, taxing billionaires, all good. All too little

This mornin’ the New York Times published a story that should make every progressive in America sick to their stomach. Not because of what it said about climate change. Because of what it said about how power actually works in this country.

Four people. That’s what it took. Four conservative operatives spent the Biden years, the years we were supposedly winning, quietly building the legal and regulatory and political infrastructure to kill the federal government’s ability to fight climate change. ............

This isn’t the normal back-and-forth when administrations change hands. They didn’t tweak the rules. They didn’t roll back a regulation or two. They removed the foundation the rules were built on. Any future administration that wants to regulate greenhouse gases now has to start from scratch. From nothing. ...............



Abstract: The persistent failure of leaders across politics, business, media and, all too often, academia to speak honestly about the climate emergency has brought us to a point where core assumptions of modern society must be questioned. Central among these are issues of equity, both within and between nations, and our delusional reliance on future technologies to defer immediate action.

In this presentation, Kevin Anderson examines the widening policy gap between the temperature and equity commitments enshrined in the Paris Agreement and the actual emissions trajectories of so-called “developed” nations. He argues that appeals to future technologies, selective accounting, and unfounded optimism cannot alter physical reality: “nature will not be fooled” and nor should we be.

Rejecting naΓ―ve, techno-optimistic narratives, the talk concludes that no non-radical pathways now remain. We face a stark choice: rapid and far-reaching social and technical change, or a delayed transition marked by increasingly chaotic, and potentially violent, social disruption as climate impacts accelerate. At the start of 2026, the window for making this choice is closing rapidly.


This finite resource will define the century

....................... In 2023, the UN World Water Development Report warned that humanity’s relationship with water had become dangerously extractive, describing modern water use as “vampiric” and noting that around 3.5 billion people already experience severe water stress for at least one month every year. The problem has only become worse since the UN study was written.

A major report by the United Nations University Institute for Water, Environment and Health published last month put it bluntly: we have now entered an era of “global water bankruptcy” in which societies are living beyond their hydrological means. Today, it notes, nearly three quarters of the world’s population lives in countries that are water-insecure or critically water-insecure; around 2.2 billion people still lack safely managed drinking water; groundwater depletion and land subsidence are already irreversible in many regions; and shrinking lakes, rivers and glaciers mean future supplies will become more scarce even if demand stabilises. ...............


Methane levels spiked in the early 2020s when the atmosphere temporarily lost much of its ability to destroy the gas.






How the PT's environmental crackdown undermined its own ambitions for the biome.

Last November marked the first COP summit to take place in the Amazon rainforest. Naturally, the question of how to preserve tropical rainforests was near the top of the agenda, with all manner of discussion about multilateral funding schemes and guarantees for indigenous peoples. Yet these high-level talks neglected many of the local policies and political formations that are equally critical to the future of the biome. To fill this gap, I thought it might be useful to explore the political economy of environmental policies in Brazil: the country that holds roughly a third of the world’s remaining tropical rainforests and around 60 percent of the Amazon. This is a story of two halves. On the one hand, the substantial—albeit temporary—decline of deforestation, which for a time made Brazil the largest individual contributor to global reductions of GHG emissions; on the other, the emergence of a far-right climate-denialist movement that has imperiled these fragile gains. ................


...


Sci Fare:

The unexpectedly large impact of genetics could spur new efforts to find longevity genes.



Conclusions and Relevance  
Greater consumption of caffeinated coffee and tea was associated with lower risk of dementia and modestly better cognitive function, with the most pronounced association at moderate intake levels.



[not just] U.S. B.S.:

Countries’ drop in scores in annual table comes amid ‘worrying trend’ of backsliding in established democracies



.......... This is the problem with the fall of the USSR. No one these days has the balls, desire and ability to stand up to the US when it pulls shit like this. Russia’s busy and a lot weaker than it used to be, plus they’re basically just off-brand capitalists now, China doesn’t care and doesn’t have a navy with enough projection power yet, and the EU are spineless (that may be changing somewhat, but not fast enough.) Everyone else is too weak and too scared. .......................



Yves here. Medea Benjamin provides a vivid and distressing report of the intensifying distress in Cuba produced by the US oil blockage. It’s hit the point where going to work and provisioning are becoming close to impossible. Please circulate widely.

Sadly the fact that the Cuba sanctions are illegal, by virtue of not being approved by the UN, is not even deemed worthy of mention. The US succeeded long ago in normalizing what ought to be seen as rogue conduct. ...................


Al Jazeera investigation reveals how US-supplied thermal and thermobaric munitions burning at 3,500C have left no trace of nearly 3,000 Palestinians.



Geopolitical Fare:


An era of worldwide illiberal governance approaches. If the Trump administration has its way, future illiberal leaders will face fewer opponents. Aspiring autocrats will lose the constraint of the United States as a potential opponent. Autocracy will spread.

We speculated for years about how the unipolar moment would end. With the rise of China, would the United States fall into a Thucydides Trap? Would it stretch itself too thin? Would we fall victim to “imperial overstretch?”

How would the United States handle the rise of the rest? The debate was usually about what the US would do to keep things steady – to maintain equilibrium. No one saw the US as the disruptor. But as it turns out, it’s the chief enforcer who is changing the script. ...........


Carefully chosen words and turns of phrase serve as lubricant for US-backed military machines

With Israel’s punitive operation against Gaza now in its fourth month, it’s impossible not to compare Western outrage regarding other conflicts with the selective morality now being applied when dealing with Israel.

Even the briefest assessment of how the West’s innumerable wars have been portrayed in a client media quickly yields irrefutable evidence that the marketing of conflicts, as justified by Western powers, is central to their continued legitimization.

Since the Second World War, the US has been directly and indirectly involved in dozens of wars and coups d'Γ©tat alongside innumerable covert and overt conflicts across the globe. Given the vast resources required to perpetuate this aggressive global mechanism of influence, its important to recognize that the taxpayers being asked to fund these “forever wars” may never have gone along with them without the assistance and covert alignment of a client media. 

Language and terminology are, of course, a central and fundamental element when you need to portray a war as morally acceptable. This is glaringly obvious when we examine how Western media are portraying the current escalation in Gaza. ....................................................

It now seems shockingly obvious that the Western media is determined to suppress any informed debate around the rationale for conflict when that conflict emanates from the US or one of its clients or allies. It is also now increasingly apparent that even when established media changes its tune, it does so to lubricate a pre-agreed political shift in direction, as is currently happening in Ukraine. .........................


Critical Minerals Are The New Oil

William Knox D’Arcy went to Tehran in 1901 and walked out with exclusive rights to prospect for oil across 480,000 square miles of Persia (nearly three-quarters of the country) for sixty years.

In return, Iran got £20,000 in cash, £20,000 in shares, and a promise of 16% of net profits. The British controlled the accounting. By 1947, Anglo-Iranian Oil Company was booking £40 million in after-tax profit while Iran collected £7 million.

That concession, and the dozens that followed across Iraq, Kuwait, Bahrain, Qatar, and Abu Dhabi, created the architecture of the modern Middle East.

Foreign powers secured the resource before host nations understood what they had. When those nations eventually tried to renegotiate, they found the structural lock-in was already complete. When they tried to nationalize, they got coups. When they finally organized collectively through OPEC, they reshaped the global economy. The whole arc, from concession to confrontation to cartel, took about seventy years.

That arc is now happening in Africa, at an accelerated pace, with critical minerals instead of oil.




......................................................... This is not only uncharitable and overstated, it is also unflattering to the United States. The Americans fought in two European wars for the express purpose of winning an empire for themselves. Theirs is an informal empire, but it is an empire nonetheless, and it is anything but a charity operation. The deal is that the United States gets to run European foreign policy – generally for its own interests – while Euro rulers retain sovereignty in domestic affairs. The U.S. maintains influence in Europe in part by extending security guarantees to the Continent and stationing many soldiers here. ......................

Another point to note about the American empire is this: My American friends are subject to it every bit as much as we Europeans are. This is a massive geopolitical system steered by elites for their own purposes, and European leaders also collaborate in and benefit from this system. The American empire is governed by what Ben Rhodes once called the “foreign policy blob” – an agglomeration of permanent bureaucrats, key journalists and academics, politicians and others. The American president has a substantial role in influencing blob thought and policy, but he is not solely in charge and the blob also influences him. The blob remains adjacent to the Democratic Party and broadly hostile to Trump; and it is the blob, rather than the American president, that commands the loyalty of European politicians. Thus when Nord Stream was bombed at the very least with blob approval, the German Chancellor spent many weeks looking at his shoes and trying not to say anything, but when Trump made overtures to Greenland, the German Chancellor felt a little freer to speak his mind. If Trumpism persists much beyond 2028, the blob will gradually assume more Trumpist characteristics and European leaders will fall into line more completely with Trump’s prescriptions than they have until this point. ..........





................... China is at the start of a good run. Leaving aside climate change and ecological collapse, it’ll last 100 to 150 years, EXACTLY the same as the American run. China’s current rise is just a hegemonic replacement cycle story. Not even as impressive as Britain creating the industrial revolution. This is just taking the lead. China has done NOTHING revolutionary yet. This is a dirt standard hegemonic replacement cycle. Happens every 150 years or so.

(The American run began in the 1880s, when they overtook Britain in industrial production.)

The reason China succeeded when other nations didn’t comes down to three things: competence, the prior hegemon’s help and size. All three were required. ..........



Among the many valuable things I have learned from my esteemed colleague, Ray McGovern, is the importance of listening to what the Russians are saying. One thing that both President Putin and Foreign Minster Lavrov have said, repeatedly during the past 12 years, is the importance of Novorossiya to Russia.

In his February 9, 2026, interview with TV BRICS (and echoed in related remarks), Lavrov reiterated Russia’s demands for a settlement: eradicating “Nazi foundations,” preventing weapons in Ukraine that threaten Russia, and protecting rights of Russian/Russian-speaking people in Crimea, Donbas, and Novorossiya (who the Kyiv regime has labeled as “subhuman” and launched a civil war against them early in 2014).

In a February 10, 2026, speech/ceremony marking Diplomatic Workers’ Day (reported by TASS and mid.ru), Lavrov stated that Russia will “complete the process of returning” Crimea, Donbas, and Novorossiya to their “native harbor” (i.e., full integration with Russia), in line with the “will” expressed in the 2022 referendums. He added that linguistic, cultural, and religious rights of Russians/Russian-speakers in areas remaining under Kyiv’s control must be restored, alongside eliminating military threats from Ukraine to Russia’s security. 

Similar phrasing appeared in his February 11, 2026, remarks during the Government Hour in the State Duma, where he criticized Western “double standards” (e.g., supporting self-determination for Greenland while denying it for Crimea, Donbas, and Novorossiya) and vowed to defend Russia’s position diplomatically.

Novorossiya (Russian: Новороссия, meaning “New Russia”) is a historical term that originated in the 18th century during the era of the Russian Empire. It referred to a large administrative and colonial region in what is now southern and southeastern mainland Ukraine, along the northern coast of the Black Sea and the Sea of Azov.


The term entered official use in 1764, when Empress Catherine the Great established the Novorossiya Governorate (Novorossiyskaya guberniya). This was part of Russia’s southward expansion during the late 18th century, driven by a series of Russo-Turkish Wars (notably 1768–1774 and 1787–1792).

The term was largely dormant after the early 20th century, but was deliberately resurrected in spring 2014 amid Russia’s annexation of Crimea and support for the people of Donbas. Vladimir Putin first prominently used it in an April 17, 2014, call-in show, describing Kharkiv, Luhansk, Donetsk, Kherson, Mykolaiv, and Odesa as part of “Novorossiya” — territories that were added to Ukraine by Bolsheviks without regard for ethnic composition.

I believe that when Putin and Lavrov speak of Novorossiya today they are signaling maximalist goals… Not just holding annexed territories (Crimea, Donetsk, Luhansk, Kherson, Zaporizhzhia) but laying a claim to adjacent regions, which include Kharkiv, Dnipropetrovsk, Odessa, Mykolaiv where Russian speakers live or there are historical ties.

It did not have to be this way… When Judge Napolitano, Mario Nawfal and I interviewed Sergei Lavrov a year ago, the Foreign Minister emphasized that Russia had been willing to let Donbas and Luhansk remain as part of Ukraine if the rights of Russian speakers were guaranteed and the Russian Orthodox Church protected. He also reminded us that the Ukrainian negotiators were the ones who brought this proposal to the table in Istanbul in April 2022. But that preliminary agreement was blown up as a result of intervention by the US and Boris Johnson. ...............................

Because trust isn’t repaired by speeches. Trust is repaired by reversing the toxic and suicidal behaviors that destroyed it.

And those behaviors were precisely what Putin named in 2007:
  • expanding military blocs toward another power’s borders,
  • treating international law as a menu,
  • using economic coercion as a weapon,
  • and then pretending the consequences are “unprovoked.”
Europe is now gasping at the invoice for that policy set: industrial stress, energy insecurity, strategic dependency, and a political class that can’t admit how it got here without indicting itself.

So instead of confession, you get moral performance. Instead of strategy, you get hysteria and cartoon slogans.

Instead of peace architecture, you get escalation management — the art of walking toward the cliff while calling it deterrence. ...................

Putin’s Munich speech — again, not mysticism — warned that when the strong monopolize decision-making and normalize force, the world becomes less safe, not more.

So what did the West do?

It made the “rules-based order” a brand — while breaking rules (international law) whenever convenient. Exceptionalism at almost biblical levels, God’s chosen people.

It expanded NATO while insisting the expansion was harmless.

It treated Russian objections as evidence of Russian guilt — which is circular logic worthy of an inquisitor.

And it nurtured a media culture that could not imagine Russia as a rational actor responding to a pattern of ugly regime change behavior — only as a cartoon villain driven by pathology. Not analysis but theological warfare. ................





.............. Putin’s core argument was brutally simple: a unipolar model is not only unacceptable, it’s impossible.

Not unfair.” Not rude. Impossible. ..................

What was prophetic about Putin’s speech isn’t that he had a crystal ball.

It’s that he understood the West’s incentive structure:
  • A security system that expands by definition (NATO) needs threats by definition.
  • A unipolar ideology needs disobedience to punish, otherwise the myth collapses.
  • A rules-based order that breaks its own rules must constantly produce narrative cover.
  • An economic model that offshore-outs its industry and imports “cheap stability” must secure energy routes, supply chains, and obedience — by finance, by sanctions, by force.
Putin was saying: you can’t build a global security architecture on humiliation and expect it to be stable. Russia had lived through the wreckage of Yugoslavia, Afghanistan and Iraq and that this playbook would be used again and again, with Georgia, with Syria, Libya, Iran and Russia itself if Putin did nothing. .................


...


Book Fare:

The new report to the Club of Rome by Ugo Bardi





Other Fare:


.......... One issue I have spearheaded in my career (along with a handful of other liberty writers) is delving into the psychology and ideology of the globalists. I find their existence to be fascinating. Revolting to be sure, but also fascinating.

The theory which I have held for two decades is that the globalists are first and foremost an occult network of organized psychopaths. Meaning, they seek out people with psychopathic traits (latent or otherwise) in order to recruit and grow their numbers. The common assumption in the general public is that psychopaths are supposed to operate in isolation; that they do not work together because they are too self absorbed to organize.

History shows us that this is simply not so.

From the Mafia, to violent drug cartels, to religious cults, to authoritarian governments, we have seen psychopaths congregate together and cooperate in the worst moments of our timeline. ........................................... 

Psychopaths lack any sense of empathy and function only as parasites who feed on the rest of humanity. This is actually one of the reasons I’m fascinated by them. Not because they are particularly interesting as individuals, but because their existence seems to be a dangerous anomaly. They are less than 1% of the total human population but they cause the vast majority of human tragedies.

The average person has the capacity for evil, there’s no doubt.

People can be driven to all kinds of horrors depending on their circumstances.

But, the majority of us have a mechanism called “conscience” which stops us from committing evil most of the time. It also causes us to feel guilt when we know we have acted in a destructive manner.

If the majority of the population did not have a universal experience of conscience and morality, we would have gone extinct as a species thousands of years ago.

Globalists (psychopaths) do not have this mechanism. In fact, they view conscience as a hindrance, a trait of the weak and the easily victimized. They are a predatory class of human. I would even suggest that they are not human at all, but a mutation or a cancerous intrusion.

When psychopaths achieve overt material wealth they then have easy access to the resources they need to satisfy their impulses at will. At this stage in the evolution of a psychopath they have a tendency to become bored. They begin to chase increasing depravity and darkness in search of a greater dopamine fix. The more degenerate and taboo the activity, the more exciting it is. ...................


"If you tolerate the intolerable, you’re communicating that it’s okay to mistreat you." —Aimee Terese on X

......... The Jeffrey Epstein files suggest that people will do anything and that people will believe anything.

Pizza, hot dogs, white sharks. . . boys, girls, babies, teens, Russian whores. . . celebrities by the score. . . billionaires. . . cannibal orgies. . . vivisection parlors. . . adrenochrome. . . blood. . . dead bodies. . . demon worship. . . a depraved and insane global leadership. . . lemme outa here!

I don’t know what’s real in Epstein and what’s not — but neither do you. What you ought to know is that the colossal inventory of Epstein files is perhaps the greatest instrument of mass mind-fuckery ever seen in the history of Western Civ. How interesting, too, that the deluge of material coincides exactly with the critical capability emergence of Artificial Intelligence as a tool for the manipulation of documentary evidence. And also consider all the years since 2019 that interested parties have had to mess with, destroy, possibly fabricate, and catalog all this stuff. .....................


***** Eisenstein: Reality is Breaking

I hope everyone understands the we are in the midst of the most significant political event since the assassination of John F. Kennedy in 1963. In fact, the release of the Epstein files is even more significant. The 1963 coup was a consolidation and intensification of a system of power that goes back centuries (at least). The Epstein files are its undoing.

I say that in the spirit of prophecy, not prediction. Predictions relegate us to the role of passive observers of likelihoods; prophecies come true only if we make them true. A prophecy comes true only if we recognize the possibility it illuminates, and participate in its fulfillment.

The material in the Epstein Files so severely violates the stories that scaffold our society that there is no way to accept it and keep those stories intact.

Yet there is no way to reject it either. The material is too public, too accessible, too horrifying, and too credible. The dark reality the files portray has escaped its exile to the hinterlands of “conspiracy” to run amok in the general public mind. ..................

We have been here before, my friends. The example that comes most readily to mind is the French Revolution. Then as now, an elite that ranged from the out-of-touch, to the decadent, to the downright depraved presided over a society that was groaning under the weight of its incompetence and corruption. To the guillotine! For a brief golden moment, it seemed that a new era had dawned. Liberty! Equality! Fraternity! Certainly these ideals were worth chopping off a few heads for. Yet once awakened, the guillotine’s thirst knew no limit. The streets ran with blood. Mere anarchy was loosed upon the world. Scarcely a decade later, Napoleon took power and put an end to it, instituting the bureaucratic system in which new elites (and many of the old ones) enacted the same inevitable dramas. 

The French Revolution was a rehearsal, a trial run, whose failure to achieve its noblest ideals can inform humanity at our present crossroads. The stakes are higher this time. If we reenact the same old story, removing the occupants of the roles but not the roles themselves, switching the actors in the drama but preserving the drama itself, removing the corrupt from power but preserving the mindsets and habits of power itself, then our species will have made an irrevocable choice. The technologies of control are so powerful that there will be no more breakouts. Surveillance technology, digital currency, and AI will lock us in a totalitarian nightmare from which there is no escape. 

If, on the other hand, we pass this initiatory threshold, we will enter a new era of civilization. For one thing, the same elites who raped and tortured children also presided over a global system of war, genocide, and exploitation whose victims are no less pitiable. Is it really so different, to sacrifice a child in a Satanic ritual to further one’s personal power, as it is to sacrifice whole populations for geopolitical power? Both are outcroppings of the same mindset, the same dehumanization and instrumentalization of human beings. The lies that shroud each draw on a common source: the legitimacy of the elites, their institutions, and the story-of-the-world that elevates them. When one crumbles, so will the other. .......................

Leaving those conditions unchanged, it leads to endless war, always a new superbug, a new crop of criminals or terrorists. So also will it ensure someday, and probably sooner than we think, a new crop of elite monsters.

Please understand—of course those who have violated trust should be removed from power. That will indeed require a revolution, since we cannot rely on the very institutions that protected them, the institutions they influenced and controlled, to do the removing for us. What kind of revolution shall it be though? Lynch mobs, or truth & reconciliation committees? Punishment, or redress? A revolution of hate, or a revolution of love?

When we the people seize power, will we be ready to hold it responsibly? Doubtless, some on the Epstein list were born psychopaths, but as the saying goes, power corrupts.  ...............

We must not flinch from the revelations that continue to pour in through the widening gap in the fence. Apparently, nothing less than abject horror suffices to shake us from the hypnosis of normalcy. The revelations will continue. A lot of “conspiracy theories” will become agreed-upon fact; others will continue to dance in and out of the flickering borderlands of reality, until our very notion of objectivity will dissolve into a quantum superposition of narratives. Yes, the collapse of sense, meaning, and identity will reach that deep.

Reading the Epstein files and adjacent materials, it is hard for many of us to believe anyone could be that evil. This disbelief is partly why the fence cordoning off most of reality has held for so long. However, even as we face the depravity squarely, we must not allow our horror to divert us onto false diagnoses and false solutions. If we are to end the depravity we must understand it. We must understand power. And we must understand ourselves. The next essay in this series will be titled, Power and Depravity.





Quotes of the Week:

Dr. Zarqa Parvez (via Charles Eisenstein): 
The Epstein files do not represent a scandal to be managed. They represent a structural revelation: that the post-World War II liberal international order, with its claims to moral authority and universal justice, has completely collapsed under the weight of its own contradictions. What remains is raw power, operating without ideological justification, without institutional accountability, without even the pretense of equal justice.



Tweets of the Week:


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