**** denotes well-worth reading in full at source (even if excerpted extensively here)
Economic and Market Fare:
The problems are real, the diagnosis is wrong and the solutions they recommend won't work. The good news? What was actually tried last time worked great.
.............................................. This does illustrate one of the basic problems with Canada’s economy, which is that banks have been willing to extend trillions in credit to Canadians in order to invest in driving up the price of existing real estate. There has been no such willingness to invest trillions of dollars into productive industries for long-term growth.
As I have written many times on this blog, it is crushing pressure of private debt in Canada (and other countries) that is acting as a deadweight on the economy - not taxes, regulations or government spending. The debt itself has driven up the cost of real estate and rent, which raises the cost of living and the cost of doing business. It means people can’t afford to pay their bills, and they need raises.
This is not just a problem for Canadians. It is also the fundamental underlying problem for the economies of the US, UK, Australia, Europe and many more. ..................
............................. Canada should emulate C D Howe and Mackenzie King. What they did worked, because they actually knew what they were talking about, and doing.
The Federal Reserve is way behind the curve
I began my career as an economist at the Bank of Canada, where I worked for five years before transitioning to the private sector. During my first two years, I was part of the Monetary and Financial Analysis Department, which was responsible for compiling data on monetary aggregates and bank credit, and for analysing their relationship with economic activity.
At the time, I observed that most data releases were subject to continuous revision. While initial figures on bank deposits and loans were relatively accurate—certainly more accurate than data on economic activity or employment—even these monetary data sets were frequently updated. These revisions often triggered adjustments to other interrelated data series related to money supply and credit conditions in the economy.
This brings me to the latest revisions made by the U.S. Bureau of Labour Statistics (BLS) concerning non-farm payrolls, one of the most closely watched economic indicators globally. If employment was overstated by nearly 1 million jobs (marking the largest revision since the Global Financial Crisis), effectively erasing a big chunk of the employment gains officially recorded in 2024, it also implies that household income was weaker than previously reported. .........
Policy & Macro Weekly Wrap-Up
The Federal Reserve can still save the economy
The Federal Reserve can still save the economy
What is an income-led recession? It is a downturn that begins not with collapsing inventories or credit-driven investment busts, but with households themselves. When real personal income declines, consumption falters, and because consumption is the largest share of GDP, close to 70 percent, the entire economy begins to lose momentum. This is fundamentally different from short-lived inventory corrections, which are quickly reversed, or from investment-led recessions, which typically arise when credit markets freeze. Income-led recessions are more subtle and more persistent, because they erode the foundation of demand.
In the United States today, this risk is becoming more tangible. Households are being hit on two fronts. Employment growth is slowing, and wages especially for low and middle income earners, are no longer keeping up with costs. At the same time, tariffs are raising the price of imported goods, creating a one-time price shock that squeezes real disposable income. The combination of softer revenues from work and higher prices at the checkout counter reduces spending power in a way that is both broad and difficult to reverse. Economists who argue that low unemployment rates guarantee resilience overlook this dynamic. Even reductions in labour supply or hours worked can reduce total household income, and once aggregate income starts to fall, recessions tend to feed on themselves.
This is why the Federal Reserve’s stance has become so critical. Since the spring, we have been warning that the Fed risks making a policy mistake by holding rates too high for too long. ........
An internal Federal Reserve study has reached a groundbreaking conclusion: the risks currently faced by the U.S. large banking system may exceed the levels seen prior to the 2008 Global Financial Crisis (GFC). An assessment based on a new “Economic Capital” model reveals that large banks, previously touted as safer, are actually experiencing a decline in their true solvency strength alongside an increasingly fragile deposit base.
This finding fundamentally challenges the post-crisis regulatory narrative maintained for over a decade, sounding a stark warning for the seemingly calm market. .........
............ In 2022-24, a surge in immigration offset the very small natural increase in the US population. When 2025 numbers become available, we will likely see that surge reversed.
Some Wall Street pundits believe that the recent Fed rate cut makes its policy too accommodative, and they also argue that the Fed is creating a “Goldilocks” scenario for the stock market. To wit, we recently saw the following comment and graph on X, which suggests we are in the “Goldilocks zone.”
“Market is currently pricing in a Fed that will be too loose into an economy that really doesn’t need this pace of accommodation. This is the Goldilocks zone for risk assets. That’s the top right quadrant.”
To explore how Fed policy might influence stock returns, we adjust the previous graph. We removed some labels, and in each quadrant, we display the three-month return statistics of the S&P 500. ...
Yardeni: 25 Or 50, To Be Or Not To Be?
Credit markets are adjusting to lower risk as government debt rises
........ The high-grade market on Tuesday set an issuance record for September, typically one of the busiest months of the year, as average spreads last week hit their tightest level in nearly three decades.
....................... This AI-related infrastructure boom is larger than what we saw during the telecom and broadband buildout in the late 1990s, and about as large as the railroad boom back in late 1800s. With the railroad boom, the companies built too many lines too fast, creating duplicate capacity. These sat idle for a while (hence the crash after the boom), but eventually became useful once again as the economy expanded. With the telecom boom, companies laid a lot more fiber optic cables than was needed back then (and so these companies lost money), but this “dark fiber” became useful in later years, especially after all of us started streaming cat videos on Youtube and later spent evenings at home with Netflix. The pattern we’ve seen has been:
- A massive capex boom
- Overbuilding
- A shake-out, leading to a crash
- Long-term benefit
The question right now is whether the current generation of data centers will actually lead to a long-term benefit. One big difference is that the lifespan of this AI infrastructure is much shorter than say railroads and broadband fiber optic cables—datacenters that are deployed with the latest, most sophisticated chips (which are used to train AI models and provide responses to our AI prompts) are likely going to be near obsolete in 3-4 years as chip technology advances. The depreciation of these assets happens much faster, in contrast to what we saw with railroads or telecom. (“Moore’s Law,” first stated in 1965, noted that the number of transistors in an integrated circuit had been doubling about every two years. That observation has continued to hold roughly true the last 60 years.)
Another difference is that there are only a handful of players are involved in the current AI boom, since only these large companies have the funds and scale to operate at these levels ...........
"At any moment of time, there are myriads of feedback loops at work, some of which are positive, others negative. They interact with each other, producing the irregular price patterns that prevail most of the time; but on the rare occasions that bubbles develop to their full potential, they tend to overshadow all other influences..” ~ George Soros
Summary: This is still a market you want to be long and buying. Sure, things are a bit overextended over the short term, and we could see a pullback soon. But we expect any pullback to be mild and an opportunity to add risk. Positioning and sentiment largely remain offsides (w/ CTAs & Vol control the sole exception), and there’s still lots of room for both to drive risk assets higher. Bonds and commodities remain in major compression regimes, suggesting BIG trends are coming. Our growth leads tell us reflation, not stagflation, is on the way .......
Below are the forward returns following a liquidity reading of 90%+. Gold was higher 80% of the time over the following 12 months, with average gains of 16%. And the SPX was higher 90% of the time, with average gains of 14%.
.......... Our Market Implied Macro Regime indicator isn’t currently pricing in significant odds for a specific regime. But I suspect we’ll see the probability of an “Overheating” regime rise over the coming months.
There’s A LOT of market data out there.
So much, that at any given time you can find a chart, stat, or study to back up whatever story you want to tell.
That’s the real enemy in this game…the bias we bring to the data.
The antidote is simple but not easy: weight the evidence.
Don’t stop at finding a data point that matches your opinion.
Stack the signals, count them up, and let the majority call the play. .........
I’ll always rip through hundreds of charts each week as it gives me a feel for the market that no model can replicate.
But I continue to added more composite frameworks to weigh the data I see with my eyes.
These frameworks don’t just spit out noise; they filter, weigh, and separate the rules from the exceptions.
............. Offense is on the field….ACT LIKE IT!
We can simplify the value we receive from our stocks into three simple categories:
- the cash we receive today (dividends and/or buybacks)
- the cash we receive tomorrow (growth in that available free cash flow)
- the change in the market’s valuation of that cash flow (e.g. the P/E ratio rising, or “multiple expansion”)
I call these the three engines of value, and any stock’s appreciation is a simple mathematical result of these factors.
Since the value we receive from these categories (whether measured in dollars or percentage returns) are fungible, I find it odd that investors tend to prefer prioritizing one of these engines over the other. All three can drive results.
“Quality” investors tend to prioritize returns on capital and the long term runway for growth, but ignore the impact that a shrinking multiple has to a stock’s performance — even the long-term performance. Costco is a world-class business, but trades at 55 P/E. Let’s say in a decade, the company replicates the exact same growth rate it had last decade (no easy feat given the larger starting base). If it trades at a reasonable 25 P/E (near its historical average), shareholders will earn just a 4% total annual return including dividends over the next 10 years. And if this multiple happens to come revert to its average in 5 years, the returns become negative over that period. A high enough price can lead to a risky investment even for the highest quality companies.
I think saying things like “we only invest in quality companies” is often a statement that does more harm than good to a portfolio over time, because it too often leads to the investor paying too much for these businesses collectively. The result here won’t usually be disastrous, but is often subpar.
“Value” investors often prioritize multiple expansion, and thus look for catalysts that might change the market’s perception of the business, causing its P/E ratio to rise. One thing growth investors might underestimate is that a rising P/E ratio can lead to a big tailwind even over a 10 year period. A stock that rises from 10 P/E to 25 P/E over a decade adds 10% per year to the annual return from the P/E ratio alone. If this company grows at just 4% and can pay out half of its earnings as dividends, the total return for these three engines will equal approximately a 20% annual return over a 10 year period. Not bad for a mature, 4% grower.
I see this undervalued-mature business theme play out frequently in large cap stocks when a business hits a rough patch. United Health Group (UNH) is a prime example right now; the health care industry is a large and important industry that I believe will be larger and just as important a decade from now; UNH has a wide moat in that industry and has issues which appear fixable over time, even if they take a few years. Ben Graham once said that the great thing about unpopular large caps is the market corrects itself very quickly if the company’s issues get resolved. I believe this could happen with UNH.
I also see this occur when a business has no specific issues but the industry is facing a headwind or perhaps there are fears of a recession. e.g. JP Morgan (JPM) is up nearly 3x in the last 3 years, a 44% CAGR for perhaps the world’s most well known bank. It was mispriced 3 years ago not because of company problems, but rather the fear that a recession would dent earnings in the near term. Stocks overreact to near term pressures even when those pressures have little impact on the total amount of future cash flows. JPM’s mispricing corrected itself rather quickly (as often occurs, as Ben Graham observed), but the results still likely would have been excellent even if the result took 5-10 years instead of only 3.
So, paying low prices obviously creates better long term results, but just as growth investors sometimes extrapolate current growth rates too far and almost ignore the P/E multiple; value investors sometimes spend too much time thinking about the multiple and not enough time on the value that can come from the long-term business results. One of the best features of a cheap stock is a high FCF yield, and as long as the stock stays cheap, the yield remains high and with proper capital allocation, this low growth cheap stock can turn into a compounder.
********** Hussman: Singularity and the Buzzard
......................... Division by zero is known as a “singularity.” It’s the point where equations break down, values become “indeterminate,” things stop working normally, and variables shoot toward infinity and suddenly collapse on the other side.
Black holes are called singularities, because the normal equations of physics become meaningless – things like density and curvature go to infinity.
I’ve never liked division by zero. In college, it was a bane of my existence, particularly in computer programming class. Aspiring geeks like me would be huddled in Northwestern’s Vogelback Computing Center, which could easily be mistaken for a bomb shelter, and you’d wait half an hour for some bored work-study student to push your stack of punch cards, wrapped in a printout, into your slot amid a beehive of mail cubbies, only to find a crash log of cascading “Fatal error!!” messages because you forgot to assign a variable and the computer tried to divide by zero.
I started my own investment company in 1985, and over the next 25 years, the relentless pursuit of geekiness was wonderfully rewarding across market cycles that included both bubbles and crashes. Those admirable outcomes hit an excruciating roadblock (which we’ve since resolved) when another singularity emerged in 2010.
That’s when Ben Bernanke introduced a full-throttle, hair-on-fire, “divide-by-zero” singularity into the U.S. financial markets.
Under Bernanke, the Fed recklessly drove the quantity of zero-interest Federal Reserve liabilities from just 6% of GDP in 2008 (a level historically associated with T-bill rates of roughly 4-6%), past 10% of GDP (a level associated with T-bill rates between 0-2%), past 14% of GDP (at which point T-bill yields hit zero), all the way to 25% of GDP by the time his term as Fed Chair ended. The expansion continued – abetted by Janet Yellen and initially by Jerome Powell – until the quantity of zero-interest base money created by the Fed peaked at a deranged and unprecedented 36% of GDP in early 2022.
The Fed created these zero-interest liabilities through “open market purchases” that took interest-bearing Treasury securities out of the hands of investors – and replaced them with zero-interest cash (mostly held by investors in the form of bank deposits).
Somebody had to hold these zero-interest Fed liabilities, in the form of cash, at every moment in time. Cash doesn’t “turn into” something else when you use it. It just goes into someone else’s hands, someone else’s bank account.
Nobody wanted it. As the Wiggles song goes, “Hot potato, hot potato.”
Several years of “quantitative tightening” have gradually brought Fed liabilities down to about 22% of GDP. These Fed liabilities primarily take the form of bank-reserves, currency in circulation, and “reverse-repurchase” agreements with money-market funds. The Fed would have to cut its balance sheet by another two-thirds, to roughly 7% of GDP, in order to achieve T-bill rates of 2-4% by market forces alone.
Given that Fed liabilities remain vastly above that level, the only way the Fed can hold short-term interest rates above zero at present is by explicitly paying interest to banks on the trillions of dollars of reserves it has created. Currently, the Fed pays banks interest on reserve balances (IORB) at a rate of 4.15% annually.
The chart below shows how all this works. It’s our version of what economists know as the “liquidity preference curve.” ................................
What will burst this bubble? (and based on the gap between surveys of investor expectations and cash flow growth rates and yields, I emphatically believe we’re in one). My view is simple, and it’s reflected in last month’s comment:
The bubble hasn’t burst yet because investors haven’t quite yet recognized that the highest valuations in history imply the lowest expected future returns in history. A market crash is nothing but risk-aversion meeting a market that’s not priced to tolerate risk. Every fresh record high in valuations amplifies the likely downside when that occurs, but examining the collapse of past bubbles, the “catalyst” typically becomes evident only after the market is in free fall. ....................
The chart below shows our most reliable gauge of market valuations in data since 1928: the ratio of nonfinancial market capitalization to gross value-added (MarketCap/GVA). Gross value-added is the sum of corporate revenues generated incrementally at each stage of production, so MarketCap/GVA might be reasonably be viewed as an economy-wide, apples-to-apples price/revenue multiple for U.S. nonfinancial corporations.
The current level of valuations is the highest in U.S. history, easily exceeding both the 1929 and 2000 extremes
The chart below shows the same valuation measure on log scale, versus actual subsequent S&P 500 nominal total returns over the following 12-year period, in data since 1928.
........... Look. I don’t want to criticize the well-intentioned work of others, so I’ll leave it there, but it’s important to remember that there’s a mathematical relationship between prices, cash flows and subsequent returns. It’s not surprising that theories promising “the price impact is perfectly long lasting” will become popular at exactly the same moment valuations have pushed to record highs. As Galbraith wrote about crowd psychology preceding the 1929-1932 collapse, “It was still necessary to reassure those who required some tie, however tenuous, to reality.”
So here we are, at the most extreme point to-date in what I continue to view as the third great speculative bubble in U.S. history. In my view, the appeal to an “inelastic market hypothesis” is an attempt to inject some sort of theoretical formalism around the idea that no price, no valuation, is too high. .......................
There are certain instances across history when the central feature of investor behavior is an “increasingly urgent impulse to buy the dip.” This semi-frantic investor behavior is typically associated with fluctuations that have progressively smaller ranges and progressively steeper slope.
In the book, “Why Markets Crash,” Didier Sornette described these dynamics in terms of what he called a “log-periodic bubble.” I’ve referenced Sornette’s work a few times in recent years: within days of the February 2018 peak (which was followed by a quick market loss of 10% and a secondary decline later in the year that brought the overall loss to nearly 20%), late-2021 a few weeks before the January 2022 market peak, and again in February of this year, within a few days prior to the interim peak that preceded current extremes.
Sornette offered this description of the market dynamics of bubbles in their final phase. What I’ve described as an “increasingly urgent impulse to buy the dip” is what Sornette describes as a “finite time singularity.” ....................
I’ll say this again (and again): nothing in our investment discipline relies on a market collapse, and no forecasts or scenarios are required. But my preference is to share my work, and interesting things I’m looking at, for free, despite having bottles thrown at me by drunk speculators like it’s a scene out of the Blues Brothers.
On a related observation, we’ve now gone 100 days with the S&P 500 above its 50-day moving average. That’s not our ideal situation, since even the hedging implementation we introduced a year ago prefers some amount of fluctuation to a diagonal, hypervalued advance with an increasingly narrow daily range.
For better or worse, these instances tend to be impermanent, and once you get beyond about 90 days without breaching that 50-day average (assuming investors are at least somewhat bullish), the market typically hits an air pocket of at least 4-6% within the next few weeks. It can be deeper of course, and it’s also possible we get nothing. My guess is 4-6% straight down, which is the standard outcome. That might be a starter, or it might be all we get for a while. Fortunately, no forecasts or scenarios are required.
................. Moreover, it’s taken a multi-year bubble, and an advance to the highest valuations in U.S. history, simply to bring the average annual nominal total return of the S&P 500 since the 2000 market peak to 7.9%.
QOTW:
Japan’s long stagnation has long served as a cautionary tale for policymakers across Asia. After the collapse of its asset bubble in the early 1990s, hesitant monetary easing, zig-zagging fiscal choices, a banking clean-up that came late, credit drifting into property, and a failure to nurture new industries did little to revive household demand or lift productivity. Li Xunlei, Chief Economist at Zhongtai Financial International Limited, revisits this history in a new essay that is ostensibly about Japan, but whose warnings are clearly aimed closer to home.
As he did in a recent piece featured in The East is Read, Li aims to counsel Beijing to avoid Japan’s missteps: curb the urge to splurge on concrete, especially in areas losing people. Instead, he contends, raising household incomes and encouraging consumption are far more promising ways to prevent China’s own economy from slipping into a prolonged chill. ................
P.E. Fare:
Also VC competition, the DallasNews deal, AI in finance, stablecoin lending and black swans.
PE (doom)
A simple gloomy model you could have of private equity is:
- Once upon a time, companies were mispriced. Lots of companies were available cheaply. Their price didn’t reflect the present value of their cash flows, or at least, it didn’t reflect the present value of the cash flows they could reasonably achieve if you added some leverage and improved their management.
- A few ambitious risk-seeking entrepreneurs noticed this systematic mispricing and set out to fix it. They raised money from friends and family and patient investors who were willing to take risk, they bought companies at low prices, levered them up, fixed their operations and resold them after a few years at higher prices.
- It helped, in doing this business, that interest rates were declining for decades and valuation multiples were rising. If you bought a company, did nothing to it, waited five years and sold it, you’d have a profit just from valuation tailwinds.
- The people who started this business — private equity — made great returns for their investors and became billionaires themselves.
- This attracted many, many more people to the business. Who wouldn’t want to become a billionaire by buying and selling companies? Who wouldn’t want to invest with them?
- So now private equity is the default career path for smart ambitious people entering the financial industry, and private equity firms are now giant alternative asset managers with hundreds of billions of dollars under management.
- Why would companies be mispriced?
Like: There was an arbitrage, and correcting it made people rich, and now it is corrected, so correcting it can no longer make you rich. If you want to buy a good company, lever it up, improve its operations and sell it back to the public markets:
- Other private equity firms have already bought most of the good companies;
- The companies that are left have all levered themselves up and hired consultants to improve their operations, like a private equity firm would have done, so there’s no reward to you for doing that;
- Interest rates have gone up, so borrowing money is more expensive now than it was a few years ago; and
- Other private equity firms own tons of companies that they want to sell, so you have to compete with them when you try to sell your company back to the public markets, and you won’t get a premium price.
In the golden age of private equity, private equity ownership was an exception, a way to move companies from a low-value state to a high-value state. In 2025, private equity ownership is almost the norm: Huge chunks of modern business are owned by private equity funds rather than public shareholders. It would be a little weird if those private equity funds could all sustainably get much higher returns than public shareholders.
................. Privately, many institutional investors concede that their expectations from private equity investments are muted for the next decade compared with the previous 10 years.
Perfect time to, uh, sell private equity to retail? .............
Bubble Fare:
Executive Summary
Markets move in cycles of innovation and speculation, and the present surge in artificial intelligence is no exception.
Today’s AI boom displays nearly all the features that have defined past bubbles—soaring valuations, concentrated flows of capital, euphoric investor sentiment, and media narratives that reinforce expectations of unstoppable growth. By most measures, the parallels extend beyond resemblance: the speculative fervor around AI rivals and in many ways exceeds the South Sea Bubble, the 1840s railway mania, the 1920s boom, the dot-com era, and the subprime mortgage frenzy.
At the center of the storm lies a combustible mix of genuine technological promise, abundant liquidity, and human psychology. Investors see the potential for world-changing transformation, credit remains accessible enough to fuel risk-taking, and fear of missing out drives behavior to extremes.
The result is an environment where both startups and established firms are valued as though flawless execution, relentless hypergrowth, and immediate mass adoption were inevitable.
Such assumptions are unsustainable.
Every historical bubble has revealed the danger of expectations drifting too far from reality. In the late 1990s, the mantra was that profits no longer mattered; today, many AI firms are projecting revenues and margins based on unproven scenarios.
When the gap between projections and actual results grows wide, the risks compound. Financial losses are the most visible outcome, but history shows that misconduct often follows. From the railway booms of the 19th century to Enron, WorldCom, and the more recent mortgage excesses, periods of extreme optimism have created fertile ground for creative accounting, misrepresentation, and fraud.
The warning signs are well known.
Extreme valuations relative to tangible earnings, heavy concentration of capital in a handful of celebrated winners, and the easy availability of venture funding or leverage all raise systemic risk. The proliferation of complex financial products magnifies fragility, turning small disruptions into cascading stress events.
And as always, the insistence that “this time is different” echoes loudly in the background, emboldening herd behavior while discouraging sober analysis.
When both retail and institutional investors chase momentum trades rather than fundamentals, the system edges closer to its breaking point.
History also offers a guide to navigating these environments. .................
Rather than ensuring stability or transparency, stablecoins represent an attempt to capture global payment systems. Their risks far outweigh the pain of clunky-but-tested networks
Amazon, Microsoft, Google, Meta and OpenAI plan to spend at least $325 billion by the end of the year in pursuit of A.I. We explain why they’re doing it.
Shortly before publishing this newsletter, I spoke with Gil Luria, Managing Director and Analyst at D.A. Davidson, and asked him whether the capital was there to build the 17 Gigawatts of capacity that OpenAI has promised.
He said the following:
No of course there isn't enough capital for all of this. Having said that, there is enough capital to do this for a at least a little while longer.
There is quite literally not enough money to build what OpenAI has promised. ..............
A confusing contradiction is unfolding in companies embracing generative AI tools: while workers are largely following mandates to embrace the technology, few are seeing it create real value. Consider, for instance, that the number of companies with fully AI-led processes nearly doubled last year, while AI use has likewise doubled at work since 2023. Yet a recent report from the MIT Media Lab found that 95% of organizations see no measurable return on their investment in these technologies. So much activity, so much enthusiasm, so little return. Why? .........
the stupidest industry is also, somehow, the most evil
.............. The crypto fantasy is beautiful, borderline utopian.
The crypto reality is a dystopian ponzi scheme.
.............
"Crypto is what happens when a tech bro fucks a casino and botches the abortion."
...the state of the AI investment bubble, in plain English:
— Daniela Gabor (@DanielaGabor) September 24, 2025
overcapacity projected at USD 2 trillion, higher energy prices, higher water wastage, for a technology we dont need at that scale pic.twitter.com/n1TLdTWBHy
Great line from Michael Cembalest, JPM.....
— Andrew Thrasher, CMT (@AndrewThrasher) September 25, 2025
"Other recent AI news: Oracle’s stock jumped by 25% after being promised $60 billion a year from OpenAI, an amount of money OpenAI doesn’t earn yet, to provide cloud computing facilities that Oracle hasn’t built yet, and which will…
MMT Fare:
Charts:
1:
...BofA: The S&P 500 is statistically expensive on 19 of 20 metrics
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) September 27, 2025
and has never been more expensive on Market Cap to GDP, P/BV, P/OCF and EV/Sales. But historical averages may not be comparable to today’s index pic.twitter.com/MfZCKK80f0
...Free cash flow yield on the S&P 500 is back down below 2.6%, the lowest since 2008, and before that the early 2000s. It's been a long road from when this peaked in 2009 at the market bottom. pic.twitter.com/dHboi8ihov
— Liz Thomas (@LizThomasStrat) September 24, 2025
...Via JPM's Michael Cembalest, AI-related stocks have driven:
— James Pethokoukis ⏩️⤴️ (@JimPethokoukis) September 24, 2025
- 75% of S&P 500 returns since ChatGPT’s launch in November 2022
- 80% of earnings growth over the same period
- 90% of capital spending growth
- Data centers are now eclipsing office construction spending.
- In the PJM… pic.twitter.com/tDp2QvbAT9
...AI-Capex is the everything cycle, now
— Random Walk (@MosesSternstein) September 9, 2025
Just under 50% of GDP growth is attributable to AI Capex pic.twitter.com/0nacpaOtHf
It’s worth remembering that while the top-heavy concentration during the late 1990’s was quickly reversed in the early 2000’s, during the 1950’s and 1960’s the market remained top-heavy for many years before excessive valuations finally took their toll. This could take some time. pic.twitter.com/tWF9tVOfUz
— Jurrien Timmer (@TimmerFidelity) September 25, 2025
(not just) for the ESG crowd:
In April, a senior European insurance executive warned in a viral LinkedIn post that climate change threatened his industry’s existence and, in turn, capitalism itself. “Flooded homes lose value. Overheated cities become uninhabitable. Entire asset classes are degrading in real time, which translates to loss of value, business interruption, and market devaluation on a systemic level,” wrote Günther Thallinger, of Allianz ..........
There was a Climate Summit at the UN this week. Trump gave a speech which will be “remembered forever”.
Ocean Acidification has been added to the growing list of Planetary Boundaries now considered to be breached, bringing the running total to seven out of nine, a new scientific report has declared.
China’s electric vehicle influence expands nearly everywhere – except the US and Canada
The annual slidedeck from Kingsmill Bond and the Ember Futures team unpacks how electrotech is rewriting the economics and geopolitics of energy.
As gold prices spike across the globe, one country slides toward ecological collapse.
Sci Fare:
The role of the conscious observer has posed a stubborn problem for quantum measurement. Phenomenology offers a solution
U.S. B.S.:
These Democrats Will Create the Next Trump
....................... Polls show that 72% of Americans believe the government is "mostly working to benefit itself and the elites." 68% say the economic system "unfairly favors the wealthy." When three-quarters of your country tells you the system is rigged, maybe stop debating messaging and start addressing the rigging.
Our economy has been turned into a house of cards, a casino where the house always wins. And who's the house? The same people who've decided they'd rather burn this whole thing down than give us what we're due.
What are we due? I am glad you asked. We're due a functioning society because this is our nation. It was built by our work, by our forefathers' labor. These are our roads, our bridges, our tunnels, our seaports, our airports. These are our airwaves and seaways. The corporate charters these companies exist under were granted by us, through our government. The market needs to learn whom it serves. It exists at the leisure of the American people.
But we've gotten so obsessed with this 50-year experiment of neoliberalism that we can't imagine anything different. We've lost the plot.
The Revolutionary Moment Requires Revolutionary Response
..................
Fights over power are bitter because the right has an ancient vision of liberty, and the left has not joined the debate. Plus a new Google trial, a bailout of Argentina and a big change in H-1b visas.
...... But I think the most important thing that happened last week is Americans woke up to the reality that we live in an oligarchy, which is a different system of power than the one we are brought up to understand. Since the election, I’ve been doing reading on the nature of liberty, and why the right feels that Trump is liberating them from oppression while Democrats are decrying sweeping authoritarianism. And I think it has to do with how most elites in America have adopted an odd and un-American definition of what liberty means, and that has spread confusion over who can legitimately hold power and what they can do with it. ....................
Geopolitical Fare:
The "Anti-American Autocratic Alliance", When al-Qaida Comes to Town, ..........
The long-held “nightmare scenario” of US foreign policy is a Russian-German (the latter meaning ‘Europe') alliance. The war in Ukraine has effectively put this nightmare to bed for the time being, but at the cost of pushing Russia into the embrace of China. This de facto alliance, one borne of necessity and reaction to US moves on the global chessboard, is now the main challenge for America for the short to medium term. It was manageable during the early phase of the Cold War, but the equation has changed quite a bit then, as Russia is much less powerful an opponent than the Soviet Union was, but China is a much stronger force due to the very rapid development of its economy and society. Where once Mao’s China was the junior partner to Stalin’s USSR, the roles have reversed as Beijing is now senior to Moscow. ............
..................... At present, the Trump regime is working overtime to create an ad hoc anti-China trade alliance, using both carrot and stick with its allies and with neutrals. Simultaneously, the Chinese are prolonging Russia’s ability to sustain a notable amount of casualties in its war in Ukraine through various ways, one of which includes supplying it much-needed parts for its war machine.
Make no mistake about it: the de facto anti-American alliance between Russia and China (and North Korea as well) is one borne of necessity and existential interests, but it is not one without its own gaps and internal inconsistencies. It is within these gaps that the Americans hope to drive a Mack Truck through in order to strengthen its hegemonic ambition, as Patricia M. Kim advises: .................................................
.......... This past 9/11 was the 24th anniversary of the terrorist attack that killed some 3,000 Americans, and was also the first to be commemorated after the USA handed over control of Syria to the Syrian branch of that very same terrorist organization.
You’d think that there would be some protest in the USA over this ugly fact, at least a minor revolt somewhere in the diplomatic ranks, but no…….memories are short and subjective, and Americans are fatigued from the constant onslaught of of news sensationalism that is a form of psychological terror in its own right. Al-Qaida has dropped down in the rankings of “things that I should worry about”, it seems.
At the very second that I am typing this, al-Qaida in Syria chief al-Jolani (now styling himself as Ahmed al-Sharaa, President of Syria), is meeting with his former boss, the former CIA Director David Petraeus at some event: ....................
............... The Interregnum of Unreality kicked off when Obama’s administration and Bernanke’s Fed elected to keep the markets and economy going via massive Quantitative Easing rather than structural reform of the markets that failed under Bush and Obama.
It was paired with a change in geostrategic tactics. No new boots on the ground invasions, although the Iraq and Afghanistan occupancies were maintained as long as possible.
Instead, Obama preferred no-fingerprints regime changes (Egypt, Tunisia, Ukraine, etc) or proxy wars (Syria, Ukraine). He also happily accepted the Nobel Peace Prize for essentially not being GW Bush, even while continuing and expanding on many of Bush’s worst policies (surveillance, drones, etc). .............
The Interregnum of Unreality (2008-?) is one in which The Empire can suffer enormous, humiliating defeats in what is basically the WW3 preseason, but it cannot be openly, undeniably revealed to the populace of the US that we are no longer the world’s dominant military power.
It’s why pausing the 12 Day War was so critical. It was essential for everyone to temporarily de-escalate things before someone got nuked.
Now Bibi’s Qatar attack is another instance of possibly self-destructive overreach. Poor Ukraine is losing out on the narrative control as it’s slowly strangled by the Russian python, which has little interest in conquering territory and every interest in drawing the UAF into bloody battles that are slowly but surely demilitarizing Ukraine, their #1 stated goal in the SMO. ..............
The point is to make forceful opposition to the Gaza holocaust mainstream. That is the goal here. This will necessarily entail celebrities cynically joining the cause far too late, politicians whose politics we despise joining our side, copious amounts of liberal cringe, and the same western media outlets who helped manufacture consent for this genocide suddenly pivoting against it.
Those of us who’ve been opposing Israel’s western-backed holocaust from the beginning should want this. We should welcome it, because we care about ending this mass atrocity more than we care about feeling superior to the mainstream liberals and conservatives who are carrying this issue into the front and center of public consciousness. Moving this issue out of the political fringes and into the mainstream has always been the goal; it’s too important to gatekeep.
As this issue picks up more and more steam, our role will shift from one of drawing attention to a historic injustice to one of leadership. The people in our communities whose attention is suddenly being steered toward this issue will need our help forming a clear picture of what’s been happening this whole time.
This will mean teaching people about the complicity of our own western governments. How both major political parties have played a role in inflicting this nightmare upon the Palestinians, not just since 2023 but for generations prior. How the mass media lied to them and manipulated their understanding of what was really happening. How we’ve been deceived about all the acts of mass military slaughter our government has involved itself in over the years. How we really don’t live in the kind of world we were taught about in school.
The mainstream public opening their eyes to Gaza creates an opportunity for us to help them open their eyes to so much more. Don’t waste your energy getting annoyed at the normies showing up late to the protest and saying naive things. Instead, be glad of their participation, help them form a truth-based understanding of what’s really going on with Palestine, and use this moment to radicalize them against the machine that gave rise to this horror.
In just three days, Israel has carried out strikes in Palestine, Lebanon, Syria, Tunisia, Qatar and Yemen.
Today's symbolic actions make no difference, but there are symbolic actions that could.
Meaningless gestures
Israel’s most genocidal Western supporters are planning to “recognize” a “Palestinian state”. France, Britain, maybe even Canada if the Palestinian state meets the Canadian Prime Minister’s novel criterion (the Canadian PM said he thinks there needs to be a “Zionist Palestinian State”). ............
The new prime minister, just like the old one, is handing Kiev the cash much needed at home
***** Lawrence: Our Age of Unreason
We have lost that connection between reason and morality …. We have decisively lost our idea of the commonweal as the anchor from which reason will make its case.
........... In everyday life, psychological operations and what we call cognitive warfare have so corrupted our public discourse that we are no longer be certain what is and is not true. Large proportions of the populations across the West are now incapable of understanding the world in which they live — this while remaining obstinately confident they do. ..............................................
........... Bob once memorably remarked, on the occasion of accepting one of his numerous awards, “I don’t care what the truth is. I just care what the truth is.”
This is an argument — succinct and elegant all at once — for a return to the Socratic. It is an argument for objective reason, an argument against the blight of subjective reason as we are borrowing this term from Horkheimer.
It is a protest. It is a great refusal, it is an argument against our Endarkenment.
And this is the argument we need to make, just as we make it as we gather here.
Welsh: London & New York Are Toast
Stumbled across this recently:
- China aims to become custodian of foreign sovereign gold reserves to strengthen its standing in the global bullion market, according to people familiar with the matter.
- The People’s Bank of China is using the Shanghai Gold Exchange to court central banks in friendly countries to buy bullion and store it within the country’s borders.
- The move would enhance Beijing’s role in the global financial system, furthering its goal of establishing a world that’s less dependent on the dollar and Western centers.
Remember when the US stole Venezuela’s gold? Remember when the West “froze” Russia’s reserves, including gold?
Actions have consequences. Since most countries do more trade with China than with the US, let alone the laughable UK, and since China appears a lot less likely to steal one’s reserves, this rather makes sense.
China does almost half of its trade now in Yuan, and the the remaining is often in local currencies. (The Russians pay in rubles, for example.) ............
........................ The idea that US public companies are worth more than China’s public companies is ludicrous. As the actual world economy is now centered on China, not America, this will become unsustainable, because the US dollar is going to copy what happened to the UK pound over the 20th century, and the US will no longer have currency seignorage: if other countries don’t want it, the US can’t just print it without massive and crippling inflation.
This means the eternal rising market created by Greenspan and treated as sacred by every President and Federal Reserve Chairman is in its last gasp. No matter how much they will wish to prop it up, they won’t be able to without crippling side-effects beyond what can be papered over by printing more money and giving it to rich people. (All of this before the fact the stock market is currently an AI circle jerk, with companies buying NVidia chips for AI and NVidia then investing in those companies. When AI turns out to be an ordinary tech, useful for some things but not revolutionary, BOOM.)
........................... This leads to the end of the American Empire, to vassals pulling away, and to a massive and sustained loss of standard of living, just as it did in the UK. Combined with ecological issues, I expect the American experiences of decline to be faster and worse.
Other Fare:
The latest article from Aurélien lays out a very good synopsis of the current state of politics in the west (a state, essentially, of incremental collapse). But as is so common with contemporary writing about complex systems, his compelling diagnosis is followed by IMO a rather naive and simplistic ‘prescription’ that is based on grass-roots organizing by groups that have “common interests”. If only it were so easy!
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Book Fare:
“A clearly written and compelling account of the existential risks that highly advanced AI could pose to humanity.” — Ben Bernanke
“Humans are lucky to have Yudkowsky and Soares in our corner, reminding us not to waste the brief window that we have to make decisions about our future.”— Grimes
Probably the first book with blurbs from both Ben Bernanke and Grimes, a breadth befitting of the book’s topic – existential risk (x-risk) from AI, which is a concern for all of humanity, whether you are an economist or an artist. As is clear from its in-your-face title, with If Anyone Builds It, Everyone Dies (IABIED), Eliezer Yudkowsky and Nate Soares have set out to write the AI x-risk (AIXR) book to end all AIXR books. In that, they have largely succeeded. It is well-structured and legible; concise, yet comprehensive (given Yudkowsky’s typically more scientific writing, his co-author Soares must have done a tremendous job!) It breezily but thoroughly progresses through the why, the how and the what of the AIXR argument. It is the best and most airtight outline of the argument that artificial superintelligence (ASI) could portend the end of humanity. ............
Fun Fare:
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