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Sunday, April 19, 2026

2026-04-19

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


Economic Fare:


After withstanding higher trade barriers and elevated uncertainty last year, global activity now faces a major test from the outbreak of war in the Middle East. Assuming that the conflict remains limited in duration and scope, global growth is projected to slow to 3.1 percent in 2026 and 3.2 percent in 2027. ...

Downside risks dominate the outlook. A longer or broader conflict, worsening geopolitical fragmentation, a reassessment of expectations surrounding artificial‑intelligence‑driven productivity, or renewed trade tensions could significantly weaken growth and destabilize financial markets. ...........................

 Should the conflict become more protracted than assumed in the reference forecast or the resumption of production and transport activities take longer than assumed because of possible scarring from closing of or damage to energy infrastructure, the impact on growth would be larger. To illustrate the potential range of magnitudes, the report considers two top-down model-based downside scenarios: an adverse one and a severe one.  .................

In the severe scenario, (1) The shock to commodity prices is more severe and persistent, with oil prices increasing by 100 percent starting in the second quarter of 2026, relative to the January 2026 WEO Update baseline, but also staying at that level in 2027, before dissipating in 2028 (corresponding to an average petroleum spot price index of about $110 per barrel in 2026 and about $125 in 2027). Gas prices for Europe and Asia increase by 200 percent over the same period, and food commodity prices increase by 5 percent in 2026 and 10 percent in 2027. (2) One-year-ahead inflation expectations ratchet up by as much as 100 basis points in advanced economies by 2027 and by as much as 130 basis points in emerging markets excluding China, also by 2027. (3) A significant risk-off episode pushes up corporate premiums in advanced economies and in China by 100 basis points in 2026, and they stay at that level in 2027, while emerging markets excluding China experience a widening in sovereign spreads of 100 basis points over the same period, along with an increase in corporate spreads of 200 basis points. As in the adverse scenario, the monetary policy response is geared toward containing inflationary pressures rather than stabilizing output. ..................................



Oil shocks hitting economies with weak demand and strained balance sheets are especially
damaging. Firms cannot fully pass on rising costs, so margins shrink, layoffs increase, and investment falls. Tightening monetary and credit conditions would cause inflation to fade faster but job losses, failures, and fragile household finances to be much worse. 

The word “stagflation” is often used to capture the economic consequences of an oil shock,
mainly because it gained prominence in the 1970s and serves as a convenient label for the rare mix of inflation and slowing growth. Yet this label misleads, since it implies economic stagnation rather than the actual reduction in real activity that follows oil shocks. More precise terms include “supply-side recession” or “cost-push recession,” which shift the aggregate supply curve inward (Chart 1, from AS0 to AS1), lowering output (real GDP) and increasing prices (P). .............................................

These stresses set the stage for a pattern observed in prior major oil shocks: the 1973
Arab Oil Embargo struck amid rising inflation and slowing growth; the 1979 Iranian Revolution
occurred when unemployment was already creeping up; the 1990 Iraq-Kuwait crisis coincided with a cyclical slowdown; and the 2007–2008 multi-factor oil shock hit during severe financial strains tied to the housing and banking sectors. In all cases, oil shocks compounded pre-existing weaknesses. Today, the combination of sluggish employment, downward payroll revisions, fragile household and corporate balance sheets, and heightened financial vulnerabilities leaves the economy unusually susceptible to a contractionary and destabilizing response to even a moderate rise in energy costs. ..................



The Middle East conflict and effective closure of the Strait of Hormuz have emphasised the global economy’s dependence on exports from Gulf Cooperation Council (GCC) countries– not only in oil and gas, but also in other products – which are crucial to various supply chains. Disruptions in these exports have already caused damage to supply chains in terms of shortages, delays in production and increase in production costs across the energy, manufacturing and transport sectors.

Disruptions are becoming more apparent as the last maritime shipments from GCC countries have arrived and stocks are dwindling. Even if the conflict ends soon, supply chains could take months or even years to recover, particularly if infrastructure has been damaged. Time will be required to repair the infrastructure, to clean and restart equipment that has been put on hold as a precautionary measure, and to clear bottlenecks in ports. At this point, the risk of escalation remains high, which would only prolong the closure of the Strait of Hormuz and cause further damage to energy and other infrastructure. ...................

Supplies of key computer chips, fibre optic cable or certain medical imaging systems could also be disrupted. Helium is essential for heat management during semiconductor production, and it has no viable alternatives currently. It is only produced in a handful of countries, with Qatar among the leading players in the industry. The situation is particularly concerning given that helium has an extremely short shelf life in its liquid form.



...................... In addition to the squeeze on energy and non-energy products derived from oil and natural gas, about one-third of the world's helium (a co-product of natural gas reservoirs) is now unavailable. Helium is essential for the production of semiconductors. Manufacturers of semiconductors will have to pay much more for helium or curtail semiconductor production. If those manufacturers successfully purchase what they need, then other users such as hospitals (in MRI machines), university researchers, and welders (who use it as shielding gas to make strong welds) will have to go without.

In general, as consumers and businesses pull back on spending due to rising costs and economic uncertainty, demand for many products will fall and companies will be forced to cut back on production and ultimately on workers. As workers are laid off, this reduces overall demand further, which can lead to a cascade of shrinking economic activity.

Even more danger lies ahead. If the war continues and threats on both sides to destroy oil and natural gas infrastructure are carried out in part or in whole, the world could be denied even more oil and natural gas - not just for the duration of the war, but for years afterward, since it would take years to rebuild this infrastructure. Some losses might be permanent, for when underground reservoirs of oil and gas are closed in, they can be damaged for various reasons I won't go into here.

It is not easy for the economy to adjust to such a shock, and the most likely outcome is a severe recession.

Widespread destruction of oil and natural gas infrastructure in the Persian Gulf could quickly lead to a worldwide depression from which it would be difficult to emerge. ................




...


Market Fare:


As I type this, there are two particularly salient facts:
  1.  Although the US and Iran are not lobbing bombs at one another at the moment, the Strait of Hormuz is still closed.
  2.  The US stock market is, on an intraday basis, at record highs
Huh?!? On almost no level does this make any basic sense. ..........



The US economy remains resilient, and so do corporate earnings. The US economy has passed several stress tests in recent years. The war in the Middle East is proving to be the latest stress test for the US economy, which seems to be passing it, so far. The macroeconomic data released in recent weeks confirms this resilience. The pre-war growth trajectory was solid enough that we were on the verge of raising our already bullish earnings estimates for 2026 and 2027. The war stopped us from doing that.

It seems Wall Street analysts haven’t received the memo about the war. Their consensus estimates for S&P 500 revenues and earnings for this year and next year have been rising noticeably in recent weeks. We thought our pre-war estimates were bullish. The analysts are even more bullish. For now, we are sticking with our pre-war earnings forecasts, which support our 7,700 forecast for the S&P 500 by the end of this year. It could be higher if the analysts’ estimates hold.

Consider the following: ...............



Happy days are here again! The S&P 500 and Nasdaq rose to record highs today, which just happens to be tax day. What’s all the excitement about? The AI bubble hasn’t burst, so far. Instead, hyperscaler stocks are leading the charge since the stock market bottomed on March 30 (chart). The private credit bubble may be losing some air, but it isn’t bursting, while banks are still lending. Real GDP slowed during Q4-2025 and Q1-2026, but some of that was related to bad weather. As Chauncey Gardiner correctly predicted, “There will be growth in the Spring.” .........


Despite great uncertainty from the war, the S&P 500 never fell 10% from its peak.

All-Time Highs Are Here Again!

The S&P 500 and Nasdaq 100 are back at all-time highs — in the latter’s case, the first in six months. Even with the flow of oil through the world’s most important artery at a standstill, it’s been an astonishing bounce. Since the close on March 30, the S&P and Nasdaq are up 10.7% and 14.2% respectively. Since 1950, this is only the 21st time that the S&P has managed a 10% rally this fast.

Stocks look expensive by any sensible measure, while the 10-year Treasury yield sits at 4.3% — higher than at any point during the 13-year rally that followed the Global Financial Crisis. Subtract the bond yield from the earnings yield (the inverse of the price/earnings ratio) of the S&P and you get what Yale University’s Robert Shiller calls the excess CAPE yield. For over a century, this offered a great guide to how equities would fare over the ensuing decade — and it currently suggests that this is an unappealing time to buy into the market:

.... Rallies this violent usually happen only when markets are seriously beaten down and far from 
record highs. This time, the S&P never fell 10% from its peak…



Congratulations, you made it through the panic…and now the market has decided none of it ever mattered and things are 5% better than they’ve ever been in history. Prices have not only recovered from the Iran war scare, they’ve pushed comfortably beyond where they were before it even started.

The NASDAQ is logging a batshit insane 13-day winning streak, marking its longest consecutive green run since July 2009.

That’s impressive, if your definition of impressive includes a complete disregard for unresolved risk and/or any type of valuation or fundamentals. Because despite what price action is implying, nothing has really been definitively fixed, guaranteed, or even clarified. Only time will solidify that, in my opinion.

Yet here we are, higher anyway. .............

Could this keep going? Absolutely. Markets can stay elevated, irrational, and frustratingly strong longer than seems reasonable. But I don’t think that makes it wise to press your luck here. At these valuations, with this kind of flow-driven backdrop, you are just not being particularly well compensated for the risk you’re taking, if you ask me. You’re relying on momentum to continue, and momentum is not a contract. ............



Tweets:



A.I. Fare:


New machine learning systems endanger our psychological and physical safety. The idea that ML companies will ensure “AI” is broadly aligned with human interests is naïve: allowing the production of “friendly” models has necessarily enabled the production of “evil” ones. Even “friendly” LLMs are security nightmares. The “lethal trifecta” is in fact a unifecta: LLMs cannot safely be given the power to fuck things up. LLMs change the cost balance for malicious attackers, enabling new scales of sophisticated, targeted security attacks, fraud, and harassment. Models can produce text and imagery that is difficult for humans to bear; I expect an increased burden to fall on moderators. Semi-autonomous weapons are already here, and their capabilities will only expand. ....................







Quotes of the Week:

via Tooze: In one particularly candid, off the record exchange, a well-connected DC/corporate operator remarked to a large table: “We know we are burning the house down. An entire system is being reduced to ashes. Its a historic transformation. But, you know, new growth flourishes after a fire.”


Charts:
1:
2:



(not just) for the ESG crowd:



The macroeconomic case for investing in climate adaptation

This report provides a groundbreaking new synthesis of the economic and fiscal risks arising from physical climate change and the economic case for investing in adaptation to climate impacts. The report combines the results of nearly 300 studies and more than 6,000 unique estimates of the consequences of climate change and adaptation investment, and includes case studies from six countries.

The report shows that the macroeconomic and fiscal consequences of climate impacts are already significant, growing, and likely to continue and intensify without further efforts to adapt and increase resilience. The evidence shows that early and strategic adaptation investments can bolster economic stability, reduce debt levels and borrowing costs, and accelerate development.



U.S. B.S.:

Not one of our presidents, least of all this lunatic, can resist starting wars

I took three days off for the first time since Barack Obama’s first term this weekend, turning my phone on just in time to read our President announcing the U.S. Navy “will begin ‌the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz.” Great. We’ve reached the Gorilla Flinging Its Feces Through the Bars stage of the Donald Trump experience, with years to go and many new lows within reach. There was once a gallows humor/amusement factor to go with America’s decline, but we’ve even been robbed of that. ..............


The long, steady Zionist takeover in Washington is now complete. There is no longer any flinching from this.

........ The Iran war faces Americans with many new realities. The limits of U.S. power is one of them, and we will address this in weeks to come. The more immediate truth is the abject surrender of American sovereignty by the hand of a president more beholden to the Zionist state than any other in history. As Americans are able fully to see this for the first time, they are also confronted now with realities from which, with media’s complicity, they have for decades averted their eyes, or shrugged off, or pretended were not of consequence, or to which they have otherwise acquiesced.

..................... The Israeli regime’s deep penetration into the U.S. government is not a new story, if this is not to state the obvious. Via the Zionist lobbies in Washington, Israel more or less owns both houses of Congress. The same is emphatically true of the Trump administration itself: Israel and its Zionist supporters in the United States have groomed Trump since he began his rise in national politics 11 years ago. Wealthy American Jews acting in Israel’s behalf donated $90 million to Donald Trump’s first campaign for the presidency, in 2016, and at least $100 million to his second. Israel owns Donald Trump.

These are known facts. But one must look very hard to find reference to them in mainstream media or in America’s public discourse altogether. No, Israel’s corruption of American politics and power is part of what I call the Great American Unsayable—a collection of truths too bitter to be acknowledged publicly other than rarely. ..............................



War Fare:


I hesitated before writing a post on this war. Until today.

Finally the fog of war has lifted. Trump’s decision to impose a blockade on shipping moving out of the Gulf is a deliberate act of economic sabotage of the global economy. It is in revenge for his and Israel’s own strategic and military defeats.

Defeats that even the Wall Street Journal’s editorial board is obliged to acknowledge.

Six weeks after its launch, and days after Israel’s ceasefire-busting massacre of hundreds of civilians in Lebanon, the defeated parties in this war are now igniting an economic conflagration that will cascade outwards and across the world - leading to a global recession - unnecessary inflation, defaults, bankruptcies, unemployment and deaths for many years into the future.

It is an action whose purpose will have only a slight impact on Iran, but one that constitutes an attack on China and other east Asian countries dependent on Iranian oil. As such it threatens to widen the war even further and draw in parties that had preferred neutrality.

Back in March, I asked: Would the Israeli-led war on Iran expand from its status as a regionalised war (expanded horizontally by Iran) to become a global war? 1 Looked at from today’s perspective the answer is clear. Israel and the United States have now ensured every economy in the world suffers the consequences of this reckless and illegal war.

It is a war sanctioned and sustained by American stock and bond markets largely inflated by Silicon Valley plutocrats and their AI bubble. In other words, without the active support provided to the wider US economy by Silicon Valley tech lords and their fast deflating bubble, Trump’s decision to submit to Netanyahu and Mossad’s desire for war would surely have been constrained by investors and markets. Instead these markets have provided comfort to the crazed warmongers in Trump’s administration.

But for how much longer? ......................


When you can’t open a door, board it up and call it strategy

Two blockades now sit on top of each other in the same 33-kilometre waterway. Iran has been running one since the start of the war. The US just stacked a second one on top, targeting Iranian ports specifically, as of 10 AM Eastern on Monday. The president wants you to believe this is checkmate. The Foundation for Defence of Democracies wants you to believe Iran folds in 13 days.

I’ve been covering this war daily since it started. The Bretton Whoops, Straight to Brrrr, and 20-something wrap-ups.

I’ve watched every escalation get framed as the move that finally ends it.

This one is no different in that respect.

But it is different in another, and it took me a while to put my finger on why: this is the first time the US has voluntarily made the problem worse in order to claim it’s making it better. ....................

So now the US is running its own members-only club on top of Iran’s members-only club.

Two bouncers, same door, opposite guest lists. ...............

So here’s my take on what I think will actually happen.

I see 6 scenarios for the next few weeks. They’re not mutually exclusive - several can and probably will overlap, cascade, or combine in ways that make all of them worse. Think of them less as predictions and more as the lanes this thing can drift into. I’ve also assigned rough probability scores for each. ........................

....................... Add the probabilities up and you notice something. The scenario USrael planned for - the one where Iran folds in 13 days and everyone goes home - sits at about 5%. The scenarios they didn’t plan for, or chose not to think about, or assumed wouldn’t happen because the spreadsheet said 13 days, make up the other 95%.

And the single most likely outcome, the forever war at 30%, is one that primarily benefits a man whose corruption trial cannot resume while the war continues.

I keep coming back to that. The architecture of this conflict increasingly looks like it was not designed to be won. It was designed to not end.

The blockade is not genius. Genius would have been not starting this war in the first place, when the strait was open and oil was $70.



........ It is enormously frustrating to see pervasive misreporting on the status of efforts of tankers and cargo ships to exit the Persian Gulf and proceed to their destinations. At least as of the time of publication, no vessel has gotten past the US naval forces sitting in the Sea of Oman and Arabian Sea, just beyond the Strait of Hormuz. Numerous outlets that should know better, including high profile YouTubers, normally reliable news sources (not just Janta Ka but even Aljazeera) and Substackers that make a show of sourcing1 are conflating an exit of the Strait of Hormuz with a successful challenge of the US blockade. 
That is false. .......................




....................... How sad, in retrospect, do all the threats of Marine and Airborne land invasion sound now? Just a couple weeks ago, the idea was all the rage, now Trump has resorted to launching his own pitiful shade of Iran’s blockade. With the USS Bush unable to go near the ‘Gate of Tears’, and the slinkin’ Lincoln only daring to scurry back toward the Sea of Oman during peace time, it’s clear that any such land invasion was always a fraud-job or an attempted diversion from the majorly failed special forces uranium-grab we saw transpire deep inside Iran.

That, however, doesn’t stop many from speculating that the current peace talks are still a deflection from a troop build-up for an ensuing ground operation of some kind. ........................................

As the circus stretches out, only one thing is for certain: Iran is rebuilding whatever was lost, while the US has depleted its most advanced and strategic systems. Any future resumption of hostilities will give Iran an increasingly bigger edge, particularly now that the deterrent factor of US’s “shock-and-awe” mystique has been eroded and squandered by an ineffective campaign.

That said, Trump appears to intuit this, which is why he’s now targeting Iran economically in the hopes of simply crashing its economy. But this would never work, particularly on a short time-scale. Just look how long Cuba survived, and Iran is a far larger and more resourceful nation, with a far more proximate complement of powerful allies able to help sustain the country through times of hardship.

The US has very few cards, and it is for the Americans—and particularly Trump’s political career—that time is ticking.


A blockade to end all blockades?

......... Spoiler alert: this whole war, and thus “peace negotiations” were never about enriching Uranium or finding a long-term solution. More so about regional hegemony, the petrodollar and ultimately: about controlling the flow of oil to China. You see, if China can control rare earth exports, we can control the only energy source there is no substitute for: oil. .................



Many serious sources anticipate a resumption of war between the US, Israel and Iran on Tuesday as soon as the current ceasefire expires. ..........



Trump sent his stooges Jughead Jared, Witless Witkoff, and Jittery JD to Islamabad last weekend to deliver surrender terms under the pretense of “negotiations” — immediately upon the conclusion of which, he ordered a Naval Blockade, right in the middle of the supposedly ongoing “ceasefire” that had been declared a few days prior, with conspicuously unspecified terms.

US military assets have been arrayed against Iran in a holding-pattern posture since the onset of this so-called “ceasefire” — “locked and loaded” — with thousands more troops deployed in the meantime. The “ceasefire” has not brought de-escalation, as the term would seem to superficially imply, but escalation — a Naval Blockade is an act of war by any intelligible definition, and Trump brags this one is even more powerful than the Blockade he previously imposed on Venezuela. Hopefully most of us still retain the capacity to remember things that happened more than five seconds ago, and can summon the memory of what the Venezuela Blockade was a precursor to.

This whole Iran “ceasefire” period since April 7, slated to expire after a two-week window on April 21, has been an extremely transparent ruse. The point of the ruse, as can be observed over and over again with Trump’s policy on Iran, is to justify further military action. .....................................

UPDATE BECAUSE I FORGOT TO INCLUDE THIS: “To the victor belong the spoils,” Trump said on April 6. That’s his declared intention for the ultimate end-state in Iran. As he’s explained, this vision includes him personally selecting the next Iranian political leadership (as with Venezuela) and also personally controlling the Strait of Hormuz. Because he would love to “take the oil” — one of his few consistently-articulated (and increasingly, implemented) foreign policy convictions. None of these Trump-declared goals are attainable if the current governmental structure of the Islamic Republic remains in place.


US President Donald Trump seems to be weaponising oil chokepoints - Venezuela, Hormuz, and Malacca - to pressure China, but Beijing's pipelines, reserves, and shadow fleets mean the real test is which side dares escalate further.

.............................. Experts have said this suggests US President Donald Trump has a plan, though most critics might disagree. The plan is likely to achieve strategic superiority over China by squeezing oil supply lines, rather than a direct, possibly military, face-off.

The idea - to choke sanctioned crude oil shipping lines to Beijing via an escalating ladder of energy denial. Venezuela was the test, Iran amplified the calculus, and Malacca, potentially, seals it. .................



Geopolitical Fare:


........... Russia remains China's top energy supplier. "Both sides should maintain strategic focus, trust each other, support each other, develop together," Xi continued, according to a Chinese state media readout.

Lavrov in turn told Xi that Chinese-Russian relations play a "stabilizing role in world affairs" at a time of global "chaos and turmoil." ...........



..................................... So, Iran must forget about Pakistan. The only people in this situation who understand diplomacy and the real tenor of geopolitical tectonic shifts are Russia and China, and it is they and only they who should be mediating anything with the US, mainly with a view to adumbrating for US benefit the speed and manner of its very probable decline. Is the US ready for this lesson? For the moment, no, and therefore for the moment diplomacy is a dangerous distraction from reality.

Rather more serious and important than anything we can expect from Islamabad are the noises coming out of Russia and China, the future masters of West Asia, which talk of “root causes,” acknowledgement of which would be akin to the end of the West. They are also putting pressure on the Gulf nations who have been party to this conflict ...........................



Peter Magyar defeated Victor Orban in Hungary’s election earlier this week, leading to an outpouring of joy from the liberal media and political establishment. Many took the Obama line, lauding it as a victory for democracy and the rule of law.

Indeed, Magyar is so committed to the rule of the law that he has invited Netanyahu to visit Hungary in October. ............

............ Until two years ago Magyar was an Orban loyalist, fully in lock-step with his Israel policy. He opportunistically split from Orban over corruption allegations, knowing he could position himself as a younger, fresher face of a new party which is still very much Zionist, and still very much of the nationalist right.

Yet headline after headline framed Magyar’s victory as a decisive break from the past. It was nothing of the sort, and this will be clear in the months and years to come.

Because in a time of monsters, we are served up the worst heroes ..................





Other Fare:



REFLECTIONS ON CRISIS & THE RISE OF AMATEURISM



Fun Fare:

********** No1: My Diary
PRIVAT, DO NOT READ, espesially Bibi

February 28
Started a war today. Told everyone it will be over by Tuesday. Everyone clapped
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Some time next week probably
People say Americans are the most sad they have been since 1952. I think this is beacuse they do not know yet about all the winning.



Vids of the Week:


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Posted by at No comments:

Sunday, April 12, 2026

2026-04-12

 happy birthday, brother

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


Economic Fare:


The Iran war and the closure of the Strait of Hormuz are a painful reminder that for all the changes of the past decades, much of the world economy still runs on oil. With every additional day of war, the effects ripple out through the rest of the world. Might our fate be decided by the price of oil? On a daily basis, I’m asked about the economic implications of the war. Here’s the not-so-good, the bad, and the ugly.

Can an oil price spike cause a global recession?

Absolutely. In fact, a significant portion of recessions, at least since the advent of fossil fuels, have been caused by spikes in the price of energy. Maybe you are still smarting from the collapse of real-estate prices in 2008, but historically, problems with energy costs have been a bigger problem. Those days are back. ............


Smells like Liberation Day.

Editorial note:

Before we start, a quick note: War is not a joke and I understand that real mothers and fathers are out there mourning dead sons and daughters. Honestly, I would rather not write about war and its effects on markets because I think the whole thing is gross. But this is my job, so I carry on.

Same deal with politics. I hate it. I dislike almost every U.S. politician on both sides equally. But normally you can quietly ignore all the political idiocy and hypocrisy because it doesn’t leak into the world of markets. In a sane world, good government works like a good referee: present, enforcing the rules, but invisible.

Bad and self-centered showboat referees and umpires make themselves the center of the game. The current government is the biggest, most interventionist, and most publicity-seeking of my lifetime and is constantly intervening in markets via direct state intervention or random policy shocks. So as much as I would prefer not to write about politics or war, I don’t have much choice.

My only other option would be to move to Maine and write novels—but I’m not quite ready to do that yet. Soon, but not yet. So while it often sounds like I am anti-Trump… Really I am anti-big government, anti-war, and anti-politics. I hated Biden’s 2021 fiscal stimulus and I hate the relentless government interventions in 2025/2026. I am an equal opportunity hater.

End of intro. Let’s get started.

I do believe there is a world where oil prices can remain high, supply can remain an issue, and stock prices just ramble on back up to the highs. Much like the cacophony in 2018 with China and the Liberation Day on/off switch, this feels like another situation where the fire gets hot enough that the arsonist finds a firehose, and that eventually leads to calm as people see the random policy shocks are fundamentally mean reverting as some or all of the actors have a finite pain threshold.

The simplest question in a world where 40% of the stock market is tech or tech-adjacent is: Will this thing hurt tech earnings or valuations? If the answer is no: ramble on. In 2022, the market thought the answer was: Yes, Fed hikes will torch long-duration assets. But that was not the case. Same deal in 2025 with the tariffs. Manufacturing is a tiny part of the U.S. economy and American consumers were able to pay the new tax. Even as tariffs created a new wave of inflation, it came on the heels of a disinflationary period so it all kind of cancelled out.

............... People like to make fun of the ECB for hiking in 2008 and 2011 but ultimately in the face of an oil shock, you have to make a decision. It could be right or wrong in hindsight, but you don’t have a time machine. If you don’t hike, oil might keep running and inflationary expectations could spiral out of control. If you hike, you crush demand, and oil prices will eventually drop in response. Sure, they can’t print oil, smart ass, but they can sure as heck dampen demand for it. :]



As the geopolitical theatre surrounding the ‘fragile truce’ between the US and Iran unfolds, a far more severe material crisis is quietly metastasising within the global supply chain. The physical reality of a month-long closure of the Strait of Hormuz is only just now preparing to hit Western shores, as the temporal lag of global shipping finally runs its course.

Orthodox economists and market commentators, trapped within the mechanistic worldview of the Strong Enlightenment tradition, are reflexively dusting off their 1970s playbooks. They are universally bracing for a massive, stagflationary price shock.

They are fundamentally wrong.

When the biophysical disruption of Hormuz finally collides with the current macroeconomic regime, the result will not be traditional consumer inflation. It will be a catastrophic deflationary liquidity crisis ..............

The modern global economy is entirely dependent on heavy industrial middle distillates—diesel for freight, shipping, mining, and agriculture; jet fuel for aviation. But to maximise those specific yields, the massive deep-conversion mega-refineries on the US Gulf Coast are physically engineered to process heavy, sour crude—the exact type of sludge that flows out of the Middle East.

By cutting off the Strait of Hormuz, the US has inadvertently starved its own refineries of their required feedstock. When these refineries are forced to run their own domestic light sweet shale oil through hardware designed for heavy crude, the diesel yield collapses while producing an immense, unmanageable glut of petrol and naphtha.

We are structurally trapped in a 19th-century yield profile while trying to operate a 21st-century heavy industrial supply chain. We have plenty of the fuel required to run consumer saloons, but we are running out of the specific biophysical exergy required to run the tractors, the container ships, and the freight trains that keep civilisation alive. ...............


Market Fare:




................. The most crucial dynamic to understand is that this parabolic melt-up is a purely financial phenomenon. While the indices explode upwards, a fatal divergence is occurring on the ground: the real, physical economy is being systematically starved of capital.

This is the mechanical result of the Resource Entropy Singularity. Real economic activity is not made of money; it is made of work, and work requires physical exergy. When the Middle East is blockaded and diesel crack spreads hit $74, the physical friction of doing anything in the real world—mining iron, manufacturing goods, or transporting food—becomes thermodynamically prohibitive

........................... The Linguistic Thinkers in the financial media are pathologically incapable of observing a terminal margin call. When they see a green arrow on a screen, their operating system immediately forces them to map it to a positive, grammatical narrative.

They attribute the hyper-inflationary explosion of the Nikkei to ‘cautious optimism’ over a geopolitical ceasefire. They cannot comprehend that a ceasefire does not instantly manifest the physical molecules required to restart the Asian petrochemical industry, nor does it reverse the 15% US tariff vacuum that is actively destroying the Yen. The market is not rallying on the hope of peace; it is melting up on the raw panic of base collateral destruction.

The financial press is looking at the thermal signature of a dying fiat currency and reporting it as a triumphant victory for diplomatic statecraft. ..............


Investors questioning private credit’s numbers could do the same at private-equity funds

............ Private-equity funds, for example, have ample opportunities to book large gains with subjective valuations and hold them in place for years. Unlike a debt-focused fund, where the upside is capped, a private-equity manager can manufacture home-run performance on paper by marking up ownership stakes in closely held companies or other private-equity funds


Today’s Private Credit Isn’t the GFC
  • In 2008, banks were levered anywhere from 25 to 40 times, primarily funded by short-term deposits and heavily exposed to subprime housing. The underlying assets were 90%+ loan-to-value mortgages, layered with complex derivatives that obscured the risk.
  • Simply put, this in no way resembles what is happening today.
  • In private credit, Business Development Companies (BDCs) typically borrow less than 1x their own capital. They use structures that don’t rely on deposits or overnight capital. And they lend to companies, not subprime homeowners, usually only around 40% of what the business is worth.


A.I. Fare:

Why Claude Code changes everything



............... Ciriello is one of five skilled workers aged 50 and older who spoke to the Guardian about how, after struggling to find work in their fields, they have turned to an emerging and growing category of work: using their expertise to train artificial intelligence models.

Known as data annotation, the work involves labeling and evaluating the information used to train AI models like Open AI’s ChatGPT or Google’s Gemini. A doctor, for example, might review how an AI model answers medical questions to flag incorrect or unsafe responses and suggest better ones, helping the system learn how to generate more accurate and reliable responses. The ultimate goal of training is to level up AI models until they’re capable of doing a job as well as a human could – meaning they could someday replace some of these human workers.

The companies behind AI training, such as Mercor, GlobalLogic, TEKsystems, micro1 and Alignerr, operate large contractor networks staffed by people like Ciriello. Their clients include tech giants like OpenAI, Google and Meta, academic researchers and industries including healthcare and finance.

For experienced professionals, AI training contracts can be a side hustle – or a temporary fallback following a layoff – where top experts can, in some cases, earn over $180 an hour. But that’s on the high end. For some older workers like Ciriello, it represents another thing entirely: a last refuge in a brutal job market that is harder to stay in, or re-enter, the older they get.



Quotes of the Week:

ChatGPT: Punchline: The market got a ceasefire, not a cure—so bonds are dating peace, not marrying it.



Charts:
1: 
2: 
3:



(not just) for the ESG crowd:

Study shows thawing permafrost releases much more greenhouse gas than expected

............... Globally, permafrost is estimated to contain about 1,700 billion tons of carbon, roughly three times the amount currently in the atmosphere. 

If warming causes more of that carbon to be released as carbon dioxide and methane, it risks creating a feedback loop: warming causes thaw, thaw releases gases, gases cause more warming. ...........



U.S. B.S.:

Notes on American exceptionalism, militarism, and the much-needed force of antiwar politics.

............... The media scribes who feed Americans information evade both America’s habit of war crimes and the false pretenses on which war crimes are being committed; they channel your attention only to these sociopathic cost-benefit questions about whether despicable acts of evil are maybe good (or not so good) for Americans. 

................ If the language of opposition to one war is the language of much larger war preparations elsewhere, then we are lost. At minimum, it’s a sign of just how hegemonic militarism is in American life.



War Fare:


It’s hard to separate signal from noise in assessing the Iran war and what it means going forward. War is always confusing, but there’s a growing sense that this one is different—more consequential than most conflicts of recent decades.  ............



........... We are seriously concerned about strikes that have hit schools, health facilities, and homes. The Iranian Red Crescent reports that “67,414 civilian sites have been struck, of which 498 are schools and 236 health facilities.”





............ Then there’s the fact that two C-130s were used to extract a single downed pilot—a plane meant to carry nearly 100 passengers. Does that strike anyone else as a little suspicious?

........ This puts the failed US clandestine operation 35km southeast of one of Iran’s main uranium sites.

It is therefore only logical to speculate that the F-15E “rescue” operation was a fake meant to smokescreen and conceal something more nefarious.

........................ Iran’s actual airforce, ballistic missile force, etc., has hardly been touched. It’s all underground and bunkered up in the east of the country, with the IRGC dispersed all over and simply “waiting the US out” until key offensive munitions run out.

....... This is precisely why Trump has now shifted to hitting only civilian infrastructure, as per his deranged rant earlier. He has nothing left to hit that could possibly move the needle at all—he’s out of options.


The consequences of the war with Iran will break Western hegemony and place significant resources and power into the hands of the Global South much more quickly than would have been the case under peaceful scenarios. Trump is merely deciding how deeply the world will be drenched in blood along the way.

It is truly staggering to realize that the Western media still have not recognized that this war against Iran—which Israel and the United States are waging in a manner that defies every legal and moral standard—is already lost, and that the consequences are already written in bold letters on the wall: Western hegemony is a thing of the past; the fate of the EU and NATO hangs by a thread; West Asia will have new masters; and Iran, as one of the oldest civilizations on Earth, will once again assume its rightful role in the future. 

In this article, I will first examine the final outcome, which is already foreseeable, since the balance of power and the parties’ sustainability are obvious, and the fanatical aggressors’ capacity for escalation is far more limited than it appears at first glance. The war may come to an end in various ways, but the result will be the same in any scenario. The question is “only” how deep President Trump is willing to wade through blood. The death toll is directly proportional to the duration of the conflict.

So I’ll start with the end of the story, since the ending is easier to outline than the path leading up to it. ...........



................. Eleven: Iran is not going to sign a ceasefire deal, because they know that Israel and the US will keep assassinating their leaders and eventually launch another war. Well, I was WRONG. I suspect Iran’s making a mistake, but we’ll see. Iran is saying Trump accepted their 10 point proposal, if so Iran won the war and this ceasefire makes sense.

Twelve: There can be no peace deal which leaves the US any bases in the region, because the US is, to use the delightful Russian phrase “agreement incapable.” The US has never kept any agreement it didn’t feel like keeping and it certainly won’t do so with Iran. Any promises to never attack again and stop assassinations cannot and will not be trusted by Iran’s leadership. This means Iran must win the war decisively, in a way that makes it as difficult as possible for the US to attack again (no bases in region) and Israel too scared to do so because they know any attack or assassination will mean immediate and savage retaliation.

Thirteen: The Iranians have included Lebanon and Hezbollah in their demands: Israel will have to withdraw from Lebanon and stay out and not bomb it ever again. Again, this is a maximal goal and requires a complete victory.

Fourteen: Iran is never giving up control over the Strait of Hormuz. This is especially true now that their industry and civil networks have been hit hard. They will need a lot of money to rebuild. They have also said they want reparations. I don’t think that will happen, but I could be wrong. The more damage the US and Israel do, the more Iran is incentivized to use Hormuz as a lever to get money. ....................

Nineteen: Barring the use of nukes, Iran will win this war. The longer it takes and the more damage that is done to them, the more they will use their control of Hormuz and their ability to hit any Gulf State, to obtain the needed reconstruction funds and assistance.

........... Twenty-One: The economic impact of this war, even if it stopped today, would be bad enough to cause a major worldwide recession. If it continues, we will see economic devastation which will last for years. There will be famines. There will be brown outs and blackouts. Jet travel will only be for the wealthy. ............


How the United States lost control—and Iran gained it


(there are no good ones)




This will not last for long... 

...................... Whether the war lasts for a few weeks or months from here on, it will continue. Do not trust any ceasefire nonsense. It’s here just to provide a short breather and for markets.


The Netanyahu government wants different things than the US, so even if Trump wanted to pursue peace, his 'partner' is likely to make things difficult


Killing the Negotiators Doesn't Help

........ On Tuesday evening (April 7th) when the American press began reporting the alleged details of the cease fire agreement, it quickly became apparent that the Americans hadn’t read the Iranian proposal. The American press was reporting that the Iranians had agreed to the Trump administration’s ’15 Point’ plan while the Iranians were under the impression that the US had agreed to the Iranian ’10 Point’ plan. There is little overlap between the two plans. In other words, there is no conceptual basis for peace negotiations.

......... Recall that Donald Trump’s first announcement regarding the alleged cease fire deal was that the Strait would be immediately reopened and that ship traffic would transit the Strait smoothly. Had Iran capitulated on control of the Strait, its main source of economic leverage against the West would have been given away. That the Strait is still closed suggests that the Iranians finally understand who they are dealing with.

................................ With respect to Iran, Trump is calling on NATO to open the Strait of Hormuz for the US. Apparently, no one has explained to him that through both strategy and geography, Iran will control the Strait for the foreseeable future. Trying to enlist other nations in a fool’s errand is a fool’s errand. It indicates that Trump simply does not have the mental capacity to lead the US back out of the mess that he has gotten us into. The triumvirate of crazy, stupid and evil are coalescing. But again, Trump is but a symptom. Biden brought us to the same place in Ukraine.

..... With the Iranians knowing most of what is written here, their choice to move ahead with negotiations suggests either knowledge of facts that we aren’t privy to, a need to keep China on Iran’s side at whatever the cost, or a basic human willingness to talk in order to work through problems. Again, it appears that they know who they are dealing with now.

................

The complete statement from Iran regarding the alleged cease fire with the US can be found below my comments in bold. It the best explanation of recent Iranian actions that we are likely to get.

.................. The honourable nation of Iran must know that, by the grace of their children’s struggle and their historic presence on the scene, the enemy has been pleading for over a month for the cessation of the fierce fire of Iran and the Resistance. However, the country’s officials—because it had been decided from the very beginning that the war would continue until objectives were achieved, including the enemy’s regret and desperation and the removal of long-term threats from the country—gave a negative response to all these requests, and the war continued until today, which is the fortieth day.

Furthermore, Iran has so far rejected several deadlines presented by the President of the United States and continues to emphasise that it grants no importance to any type of deadline from the enemy.

We now give tidings to the great nation of Iran that almost all war objectives have been realized and your brave children have driven the enemy to a historic helplessness and a lasting defeat. Iran’s historic decision, backed by the unified support of the entire nation, is to continue this battle for as long as necessary until its massive achievements are consolidated and new security and political equations are created in the region based on the acceptance of the power and sovereignty of Iran and the Resistance.

.......... To this end, while rejecting all plans presented by the enemy, Iran drafted a 10-point plan and presented it to the American side via the country of Pakistan. It emphasized fundamental points such as controlled passage through the Strait of Hormuz in coordination with Iran’s armed forces (which grants Iran a unique economic and geopolitical position), the necessity of ending the war against all components of the Axis of Resistance (which signifies a historic defeat for the aggression of the child-killing Israeli regime), the withdrawal of U.S. combat forces from all bases and deployment points in the region, the establishment of a secure transit protocol in the Strait of Hormuz such that it guarantees Iranian dominance according to the agreed protocol, the full payment of Iran’s damages according to estimates, the removal of all primary and secondary sanctions and resolutions of the Board of Governors and the Security Council, the release of all blocked Iranian properties and assets abroad, and finally, the approval of all these items in a binding Security Council resolution. It is worth noting that the approval of this resolution will turn all these agreements into binding international law and will create an important diplomatic victory for the nation of Iran.

Now, the honourable Prime Minister of Pakistan has informed Iran that the American side, despite all outward threats, has accepted these principles as the basis for negotiations and has surrendered to the will of the Iranian nation. Accordingly, at the highest level, it has been decided that Iran will engage in negotiations in Islamabad with the American side for a period of two weeks, based solely on these principles. It is emphasised that this does not mean the end of the war; Iran will only accept the termination of the war once the details—given the acceptance of Iran’s preferred principles in the 10-point plan—are finalised in the negotiations. ...................

If the enemy’s surrender on the battlefield is transformed into a decisive political achievement in the negotiations, we will celebrate this massive historical victory together; otherwise, we will fight side-by-side on the battlefield until all the demands of the Iranian nation are met. Our hands are on the trigger, and the moment the slightest error is committed by the enemy, it will be responded to with full power.”

End of Iranian Statement


............... This is probably why Trump is considering blockading access to the Strait himself, but countries will start sending military escorts, especially China if he does, because many countries are going to have serious problem: no cars on the road, no fertilizer for farms, no diesel for tractors, no bunker fuel for ships crises if this goes on much longer. Plus, of course, Ansar Allah will then shut the other Strait.

However much they may be scared of the US, however much they may be trained to be vassals, East Asian countries NEED Gulf Oil.

And if the US fires on escorts, well, that’s how World War III starts



...



Geopolitical Fare:

Hormuz and the end of American hegemony

The closure of a strategic waterway by a besieged nation ranks among the rarest and most consequential events in the history of the global economy. It has happened only twice in the postwar era. In 1956, Egypt closed the Suez Canal for five months – an act that broke Britain’s imperial currency and inaugurated the petrodollar age. It demonstrated for the first time that a small country could inflict serious damage on the economic order that had subjugated it. Now Iran has effectively blockaded the Strait of Hormuz, through which a quarter of the world’s seaborne oil passes. The question is whether this crisis heralds the end of American hegemony – and marks the beginning of the struggle over who or what will replace it.

............................................. In retrospect, then, Suez did not quite mark the end of an era. Rather, it was the moment when the transition from sterling to dollar hegemony first became visible. Much the same is true of Hormuz. The question is: what is the next order going to look like? ....................





Other Fare:

Or: If you're so smart, why aren't you happier?

...................... Today you might hear self-help gurus talk about flow so constantly that the monosyllable has become a cliché without a clear definition. Csikszentmihalyi summed it up this way:
The best moments usually occur when a person’s body or mind is stretched to its limits in a voluntary effort to accomplish something difficult and worthwhile.
That’s pretty good. But of all the passages in his 1990 book Flow, I think this one comes closest to capturing the nearly spiritual quality that he was trying to convey:
The optimal state of inner experience is one in which there is order in consciousness. This happens when psychic energy—or attention—is invested in realistic goals, and when skills match the opportunities for action. The pursuit of a goal brings order in awareness because a person must concentrate attention on the task at hand and momentarily forget everything else. These periods of struggling to overcome challenges are what people find to be the most enjoyable times of their lives
Flow suggests a waterway—something liquidly effortless, an unimpeded stream. But the wisdom of Csikszentmihalyi was to recognize that well-being is no lazy river. It is neither ease nor effortlessness that leads to the highest happiness. It is something close to their opposite. It is immersion in an activity that is hard, but just hard enough; it is the discovery of comfort at the outer realm of difficulty. Life feels best, not when it is smoothed with frictionlessness, but when it is filled with achievable challenges. ..................

I’ve come to believe that something similar has happened in pop culture. Entertainment and tech companies have gotten smarter about putting consumers into bastardized flow states that leaves people feeling drained and sad rather than challenged and enlarged as selves. Modern leisure recapitulates the goal of flow while evacuating the purpose, which Csikszentmihalyi summarized as “to make life more rich, intense, and meaningful.” Algorithmic flow is flow without achievement, flow without challenge, flow without even volition. What Wu calls “passive flow” and Bloom calls “shitty flow” deserves a harsher and more specific label. To be lost in the lazy river of algorithmic media is to be lost the current of life without a mind. Zombie flow. .............


Wealth and asset concentration in the United States, by the numbers.


The real cost of building a home is measured in thousands—not hundreds of thousands. The rest is extraction.


Thus Spoke Zarathustra?
Zoroastrianism: Religion of Ancient Iran

Zoroastrianism is one of the world’s oldest religions. Otherwise known as Mazadayasna by those who follow it, the roots of Zoroastrianism date back as far as the Second Millennium BC and served as the state religion of Persia and other Iranian Empires for more than a millennium.


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