**** denotes well-worth reading in full at source (even if excerpted extensively here)
Economic and Market Fare:
So let me be my own biggest critic for a moment.
As far as my macro outlook goes, I think I’ve been pretty clear: over time, I expect nominal prices of everything to drift—no, march—higher as governments and central banks eventually capitulate to the obvious: their only escape route from the irresponsible, slow-motion debt disaster they engineered is to quietly (or, recently, not so quietly) brutalize the middle and lower classes through inflation.
It’s not elegant, it’s not moral, but it’s historically reliable and gets politicians and bankers off the hook of taking actual responsibility—so of course it’s the easy choice.
That said, for the last year or two I’ve also argued that once the consumer and the broader economy finally run out of steam, we’ll see a sharp deleveraging event. A quick, violent move lower—one that unwinds years of easy money, risk-free speculation, and the hilariously reckless funding of things that, in hindsight, will look indistinguishable from hot air. (Think: Fartcoin, Dogecoin, Ethereum treasury companies, cash burning SPACs or any other asset whose primary utility is generating memes. This blog excluded, of course.) The tidal wave of hubris and euphoria that’s defined the last decade eventually gets taken out back and put down. Frankly, it’s years overdue.
But—because I try not to permanently live inside my own echo chamber no matter how luxurious and genius-shaped it feels—I found myself thinking today about the “what if I’m wrong” bull case. Everyone knows the long-term bull case. I’m talking about the very short-term bull case. .........
DB: Monthly Chartbook: Curveballs for 2026 (via TheBondBeat)
Although the annual outlook season is upon us, what’s been striking in recent years is just how little has played out as the consensus expected. So even as our World Outlook provides the central DB house view, this got us thinking about potential curveballs that could surprise us in 2026. These curveballs (both positive and negative) have played out repeatedly in recent years:
- In 2020 the pandemic meant any outlooks were redundant by the end of Q1.
- In 2021 a surge in inflation surprised the vast majority.
- In 2022 markets were caught off guard by the most aggressive rate-hiking cycle since the 1980s.
- In 2023 the consensus wrongly expected a US recession.
- In 2024 barely anyone thought the S&P 500 would rise over +20% for a second year running.
- In 2025 the Liberation Day turmoil led to the biggest market volatility since Covid and a huge surge in the US effective tariff rate. Then the positive bounceback was one of the fastest recoveries on record.
When it comes to next year, this chartbook considers some positive scenarios of further equity gains, AI-powered growth, tariff relief, and political stability. Then on the negative side, we think about persistent inflation, mounting fiscal concerns and some of the highest US equity valuations ever. .......
Outlooks, in our experience, tend to have the shelf life of yesterday’s fish and chips. So this is not an outlook, rather a reminder of the need for humility. We recall that the consensus of 2025 analyst forecasts had the US 10-year Treasury yield at about 5% by now. Instead, yields have moved sharply lower: after a brief move through 4%, the benchmark is trading almost 100bp beneath these forecasts.
The next Fed chair, whoever that may be, will likely view the neutral policy rate as lower than both current market pricing and the last FOMC dot plot. If markets continue to push expectations for this rate down towards 2.0% for the second half of 2026, the 10-year yield would more naturally gravitate towards 3.0%, not 4.0%. ......
....... Whether this improvement endures is unclear, but the feared surge in term premium has not appeared. Treasury auctions continue to see consistently strong demand.
Roughly speaking there are two types of corporations in China. State owned (SOE) and private. During the policy driven real-estate bust, the countries biggest builder, Evergrande, went under.
But there was an assumption that the government would bail out real-estate SOEs.
Well the largest one, Vanke, is going under, and the central government is going to let it. Moreover, Shenzen’s (China’s Silicon Valley, but on steroids) has repeatedly bailed it out and that means that not only is the central government not bailing out a SOE, they’re letting a municipal government (arguably the most important in the country) take a huge hit. That will send a message to all other municipal and provincial governments.
The biggest mistake of the US financial collapse was the bailout of participants. Every firm which had financialized should have been allowed to go under. The few that were truly necessary should have been put back on their feet AFTER the shareholders and bondholders took their hits, and after being broken up. Collateral damage (those companies not responsible, but simply getting hit by the backwash, such as GM, could receive bailouts in exchange for a government stake.)
Capitalism has issues even when run properly, but it is a simple proposition at heart: people who allocate resources well should be rewarded with more resources to manage, and those who allocate resources badly should lose their ability to allocate resources. Every participant in over-financialization had made bad allocations of resources. For the American economy to operate, they needed to no longer be participants.
The failure to do this meant that decision makers know (or believe) they can make risky bets that cause systemic economic issues, bets that damage the economy as a whole and expect to be bailed out rather than be required to take their lumps. (And, ideally, be investigated for fraud, which most of them were guilty of.)
An economy where economic decision makers are incentivized to take big risks which hold the entire economy hostage (because they might not be bailed out if the risk isn’t systemic) cannot work and doesn’t. The US economy requires a backstop that amounts to the full expectation that the Fed will print trillions on demand to bail out bad actors. (The current main bad actors are the AI cartel.)
China is, oddly, the only major economy in the world that runs markets more or less right. (Though they let their own real estate casino run for too long.)
The former World Bank chief economist also urges Beijing to adopt more proactive monetary and fiscal policies to achieve faster growth
........... In my view, the overall international economic environment China will face during the 15th Five-Year Plan period is likely to be very weak. In fact, developed economies have still not fully recovered from the 2008 global financial crisis.
According to World Bank data, from 1960 to 2008 the United States posted an average annual GDP growth rate of 3.3 per cent, but from 2008 to 2024 this dropped to 2.1 per cent, a decline of about one third. In the eurozone, average annual growth fell from 3.1 per cent in 1960–2008 to 1.1 per cent in 2008–2024, roughly one third of its earlier pace. For OECD countries as a whole, average growth slowed from 3.4 per cent to 1.6 per cent over the same periods, about half the previous rate.
IMF projections put U.S. growth at 2.0 per cent in 2025 and 2.1 per cent in 2026, while growth in the euro area is forecasted at 1.2 per cent in 2025 and 1.1 per cent in 2026.
Taken together, these numbers suggest that, since the 2008 financial crisis, the developed world has effectively been going through two “lost decades.”
Tweets of the Week:
...This is the AI revolution in a nutshell:
— Lukas Ekwueme (@ekwufinance) December 5, 2025
- Only ~10% of the committed data center build outs are actually underway
- Circular financing is being used to manufacture demand
- Data centers are already waiting years for grid access
- Gas turbine order books are beyond production… pic.twitter.com/gAY59fLWHd
Too Much Money, Too Few Deals And The Spread Compression Problem
— EndGame Macro (@onechancefreedm) December 6, 2025
This is the price of private credit risk compressing. In 2022 into early 2023, private lenders were getting paid 600–650 basis points over the floating benchmark on a typical deal. Since then, both the average and… pic.twitter.com/CJOdyFF0Aq
Charts:
1:
A bubble can’t be a bubble without a valuation extreme, and so far, we don’t have one (at least not for the major averages or the Mag 7). We can argue about the quality of earnings given the circularity of vendor financing and the use of depreciation timelines, but to my eye at… pic.twitter.com/tS8M0DAyWX
— Jurrien Timmer (@TimmerFidelity) December 5, 2025
(not just) for the ESG crowd:
The energy transition is collapsing—not in headlines, but in economics. What began as a hopeful vision for a cleaner future has become an economic bust. While markets and workers sense the failure, activists and policymakers remain caught in a consensus trance.
Bill Gates saw the winds shifting and changed course almost overnight. After years of climate evangelism, he now downplays the urgency. The public is angry about inflation, energy bills, and economic stagnation. They no longer see climate change or renewables as relevant to their daily lives. Gates didn’t reposition because the science changed—the political wind did. .............
The failure is global. COP30 exposed the widening gap between climate rhetoric and political will. ..........
The underlying problem is simple: the economics of wind and solar unravel once you ask them to behave like real power plants.
This may come as a surprise, since we’ve been told for years—by governments, banks, think tanks, and the industry itself—that wind and solar are the cheapest energy sources ever built. But that was always a narrow view, based on project-level metrics like Lazard’s Levelized Cost of Energy (LCOE). LCOE asks: “What does it cost to generate one megawatt-hour at the project site?” It ignores the cost of turning intermittent, weather-dependent output into reliable 24/7 power.
But LCOE doesn’t ask the right question. It doesn’t include the cost of backup, storage, grid integration, or the challenge of matching supply and demand second-by-second. It’s not wrong—it’s just not the real world.
Lazard also evaluates relatively small projects—150 MW for solar, 300 MW for wind—compared to the 500–1600 MW size range of typical gas, coal, or nuclear plants.
The entire premise of the transition has been built on an accounting illusion. Wind and solar may be cheap at the generator fence, but not at the system level. The gap between those two is where the economic case collapses. ...........
.............. the nuclear and geothermal projects I’ve modeled—despite high upfront costs—eventually break even. Wind and solar don’t, because they never produce firm output. Their intermittency prevents them from recovering the negative present value from capex.
............. Scaling is a recurring theme in complexity science and systems engineering. Whether it’s software, infrastructure, or power systems—what works at 5% penetration often fails at 30%. It’s hard to believe engineers didn’t warn of this.
............... This isn’t an argument against technology. It’s a recognition of physical, economic, and thermodynamic boundaries. ..........
This isn’t a failure of technology—it’s a failure of imagination. We believed we could transition to a fully electric, renewable economy without confronting growth, consumption, or planetary limits. The carbon pulse gave us a century of abundance. The challenge now isn’t to recreate it with wind and sun. It’s to grow up as a species—and learn how to live within the boundaries of a planet that no longer tolerates business as usual.
How peak copper arrived and went completely unnoticed
............. Simply put, we are on a collision course between tightening global copper supply and demand fueled by electrification and most recently: AI data centers. Copper is an essential component in everything electric due to it’s high heat and electrical conductivity, surpassed only by silver. Copper wires can be found in everything from power generation, transmission, and distribution systems to electronics circuitry, telecommunications, and numerous types of electrical equipment—consuming half of all mined copper. The red metal and its alloys are also vitally important in water storage and treatment facilities—as well as in plumbing and piping—as it kills fungi, viruses and bacteria upon contact and conducts heat very efficiently. Thanks to its corrosion resistance and biostatic characteristics, copper is also widely used in marine applications and construction, as well as for coinage.
Growth in copper demand thus comes from both ‘traditional’ economic growth—especially in the Global South—and the energy supply addition from “renewables”. ...............
According to this study a full transition to an alternative energy system—powered entirely by a combination of “renewables”, nuclear and hydro—would require us to mine 4575 million tons of copper; some four-and-a-half-times the amount we have located so far. To say that we have embarked on a “mission impossible” seems to be an understatement here. ...................
German scientists warn global warming is accelerating faster than expected, raising the risk of a 3 °C rise by 2050 and forcing Europe to confront unthinkable adaptation plans.
Sci Fare:
................. We’ve seen the most cases of influenza-like illness ever in the 2024-25 season. The next worse season was the previous season. It’s now getting worse every single year. And this current season is shaping up to be even worse.
It doesn’t take a genius or a conspiracy theorist to figure out that this vaccination strategy against COVID is not working, you just need to read the studies that are now coming out. There’s a reason people are now just sick all the time.
Most people still think that the consequences of these vaccines amount to a minor inconvenience. In reality however, we have unleashed a persistent SARS virus on the population through mass vaccination with negative efficacy vaccines.
Geopolitical Fare:
Donald J. Trump seems to be experiencing a phenomenon that has also captivated many of his predecessors, which is that they become almost monomaniacally consumed with foreign affairs, virtually to the exclusion of all else.
Not that this doesn’t make intuitive sense — it’s the domain where Presidents wield by far the most unchecked unilateral power. They can simply ignore a chronically inert Congress. They can even largely ignore public opinion, which typically doesn’t intrude on presidential decision-making until a critical mass of Americans divine some adverse impact from a far-off military action, which is rare. General lack of knowledge about international issues, coupled with a tendency to partisan-polarize around the personage of the President, makes the subject area especially ripe for shaping public attitudes in accordance with whatever the President wants to do. This can be observed in a recent poll showing that 87% of Republicans now believe Venezuela constitutes “a threat to US security.” .................................
........................ His policy toward Ukraine can be viewed in the same light, with Trump demanding a so-called “minerals deal” that effectively turns Ukraine into a sort of quasi-colonial US outpost, with the US expropriating vast swathes of Ukraine’s natural resources and physical infrastructure, in return for an uninterrupted supply of US weaponry. (The provision of which Trump has cleverly found a way to bypass any Congressional oversight or appropriations for.) Who knows what Kushner, Witkoff, and Rubio will ultimately cook up in terms of a “peace proposal” for Ukraine — if anything — but the early drafts of their negotiating document envision the US “leading” and thereby profiting from prospective “reconstruction” enterprises, including by seizing $100 billion in frozen Russian assets, paired with an indeterminate US “security guarantee” to defend Ukraine’s “sovereignty.”
Other Fare:
Generation 6-7
.............. Like nineteenth-century bourgeois families anxiously watching themselves for signs of hereditary ‘degeneracy’, the thing to suspect about yourself these days is that you are suffering from smartphone-induced ‘brain rot’.
.............. Like nineteenth-century bourgeois families anxiously watching themselves for signs of hereditary ‘degeneracy’, the thing to suspect about yourself these days is that you are suffering from smartphone-induced ‘brain rot’.
...................... That doesn’t make troves of genuinely worrying global statistics about teenage mental health disappear. Whether there is cause for optimism really depends on where you look. But at the very least, youth culture is not standing still: it is, in its own way, reflective about what former Google ethicist Tristan Harris called the “race to the bottom of the brainstem”; in diffuse and ambivalent ways, it is responding to it.
Vid Fare:
discusses nuclear fusion
The Australien Government has made an ad about the Social Media Ban for Under-16s, and it’s surprisingly honest and informative.
