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Monday, June 8, 2026

2026-06-07

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


Economic Fare:

The US and Iran exchanged military strikes on Wednesday as American oil inventories dropped to the lowest level in more than two decades.

.................. “As storages dwindle and run out, the only way to match demand to supply will be for the price to rise high enough to destroy something like 10 to 20% of global oil consumption,” Cooper wrote. “And because a great deal of oil demand is obligatory and therefore not very price-sensitive, that price will likely be north of $150 per barrel.” ...............





This week Goldman Sachs (GS) CEO David Solomon stated the obvious when he noted that there is “more greed than there is fear” in comments to the Economic Club of New York. Solomon’s observation came as Goldman projects that the war with Iran will cause “a modest drag” on U.S. and global GDP while significantly elevating inflation and delaying interest rate cuts.

In fact, we expect the war with Iran to result in higher interest rates, higher inflation and rationing of key petroleum byproducts in coming months, something that nobody in the Trump Administration seems willing to discuss. If Washington was populated by serious people, the federal government would already be making plans for rationing key refined products.  .........................

William H. Janeway, special limited partner of Warburg Pincus, distinguished affiliated professor in economics at the University of Cambridge, and author of Doing Capitalism in the Innovation Economy (Cambridge University Press, 2018) commented in Project Syndicate this week:
“One highly relevant place to examine how the world really works right now is the extraordinary boom in AI-related investment to fund construction of the physical infrastructure needed to enable the training and deployment of large language models. These investments are motivated by problematic long-term expectations with respect to commercially useful and financially rewarding applications of generative AI. The question from the world of financial economics is whether, in aggregate and with respect to specific players, the cash flows generated by these applications will be sufficient—and sufficiently timely — to validate the investments now committed. In turn, funding from the operational cash flows of the established, monopolistic tech giants has been giving way to rapidly growing issuance of debt securities. The entire phenomenon cries out for analysis in the spirit of Minsky’s Keynes.”
Bill Janeway, who we interviewed previously in The IRA (“The Interview: William Janeway on Capitalism and the Innovation Economy”) reminds us that America today is deep into the third phase of classical finance, the Ponzi phase, when valuations are purely a matter of manipulation and hubris. He recalls that the “Minsky Moment” arrived two years before the collapse of Lehman Brothers, when companies began to pay their debts by issuing more debt. Sound familiar? Like the standard practice today in private equity and debt. ...........


Record-high diesel costs, combined with rising fertilizer and chemical prices, threaten farm profitability and could drive food inflation in the coming months.





A dominant economic fact of the past half century is the extreme and increasing concentration of U.S. wealth into the hands of ever-fewer people, families, and dynasties, and the corporations (including banks, insurers, major media companies, etc.) that they own as shareholders — with the accompanying concentration of economic, political, and cultural power, influence, and control. The post-1980 era has been a complete reversal of the unprecedented and epochal six-decade wealth dispersal from the 1930s to the late 1970s ............




The U.S. economy appears resilient, judging from key economic measures. AI-driven capex continues to power investment, support equity markets, and sustain a wealth effect that has propped up consumption. Real GDP growth remains positive. Private sector balance sheets are in generally good condition and many higher income and wealthy households have benefited from equity markets gains.

However, fragilities are increasing, especially as U.S. households must now absorb another meaningful hit to their purchasing power, on top various other drags on real income growth. Tariffs, higher energy prices, slowing wage growth, and other factors have driven a sharp drop in real disposable personal income.

Usually, we would expect households to smooth through temporary changes in current income. However, households have been dealing with a series of shocks that have reduced the savings rate to historically low levels and risk denting expectations for future real income growth. Furthermore, AI is a new source of uncertainty for many workers.

This means real consumption growth, at some point, could catch down to real income reality. And if consumption slows, the effect could reverberate through the economy….





Market Fare:

Equity indexes remain in rally mode, but beneath the surface fragility persists

Key takeaways: Global equities remain in rally mode but have not been able to overtake commodities on a relative trend basis. Our models continue to incrementally increase exposure to US equities, relative to global equities, while steering clear of those sectors (Financials and Utilities) that have falling absolute trends.

Our broad, cross-asset risk appetite indicator shows an ongoing surge in risk on behavior. This is consistent with ongoing strength from equities. This sort of behavior, like increasing optimism, fuels bull markets. Risks rise when risk on behavior fades and they become more acute when evidence of a risk off environment emerges.



Today's number is... 1.3

The market's appetite for risk just reached its strongest level in roughly five years. The Risk On / Risk Off Indicator climbed to 1.3, breaking above a ceiling that had capped advances for years.

............. Credit, currencies, commodities, growth stocks, small caps, emerging markets, and cyclical assets are all contributing. Multiple asset classes are moving in the same direction at the same time.

That’s why this looks more like the environment we saw during the 2021 bull market than the choppier conditions that dominated much of 2024.

When risk appetite is expanding across multiple asset classes at the same time, I’m generally thinking about how to stay aligned with that trend rather than looking for reasons to fight it.









Credit Fare:





Bubble Fare:

Passive investing, active extraction.

Nasdaq changed its index rules in February.
Consultation opened, comment period closed February 27, rules came into effect May 1.
Three months, soup to nuts.
Fastest index overhaul in years.
(checking notes)
SpaceX announced it was listing on Nasdaq shortly after.
(re-checking notes)
Right. So. The Nasdaq-100 used to require a seasoning period - newly listed companies waited anywhere from three months to a year before getting swept into the index. The idea being: let the price actually get discovered. Let float build. Don’t force $527 billion in ETF assets to mechanically pile into something that went public last Tuesday.
That rule? *poof* Gone with the wind.
Effective May 1, any newly listed company in the top 40 by market cap enters the Nasdaq-100 after a grueling delay of 15 trading days.
The minimum float requirement? *poof* … also gone. Eliminated. A stock used to have 10% float to be able to be included. The quaint idea being that less float meant less price discovery. Instead, we now get a weighting multiplier of up to 3x. So a company that floats 3% of its shares gets treated as if it floated 9%.
I need you to hold that thought while I introduce SpaceX’s numbers.
$75 billion raise. Target valuation $1.5 to $2 trillion. Public float of 3% to 5%. GAAP loss of $4.28 billion in Q1 2026 alone, following a $4.9 billion loss for all of 2025. The company that was profitable in 2023 has been bleeding cash ever since it started integrating xAI and X into the corporate structure and decided Starship needed to happen faster.
Largest IPO in history.
Listing expected for June 12.
And 15 trading days later - so, July 7, give or take - every passive fund tracking the QQQ has to own it. Not “should consider”. Not “might want to”. HAS to.
The index says so, the algorithm executes, no human involved.
To buy SpaceX, they’ll have to sell everything else. Apple will get trimmed. Microsoft. Nvidia. Every constituent shaved proportionally to make room. Price-insensitively. At whatever the market clears on rebalance day, against a known wall of incoming mechanical demand. .........



....................... Normally, a company this unproven doesn't walk straight into your retirement account.

The S&P 500 has required 12 months of trading and four quarters of GAAP profitability since 2002. Both waived.

Nasdaq cut its inclusion window from 90 trading days to 15, and the FTSE Russell cut its to 5.

All three benchmarks are now structured to buy SpaceX at IPO pricing.

The rules designed to protect passive investors were quietly dismantled so they could be force-fed the largest, least-disclosed offering on record.

This forces over $30 trillion in passive 401(k) and retirement money to buy SpaceX at IPO valuations. ...........

The same profitability screen that kept Tesla out of the S&P 500 until late 2020 is now being broken three times in a single year.  ............



........................................... There are many good arguments that can be made about why you should not invest in SpaceX, but basing that conclusion on the fact that they are money-losing or have negative cash flows or trade at a high multiple of revenues is both lazy and unconvincing. In contrast, making a case against investing in SpaceX because you believe that the target markets for its businesses will be far smaller than the company thinks they will be, or that cost and competitive pressures will drive margins down or even that you find its corporate governance structure and dependence on a personality (Elon Musk) off-putting is perfectly reasonable. If you do make that case, though, it is worth remembering that this is your point of view, and that disagreements about market size and profitability across investors, especially in young companies, are natural and healthy. In short, based on my inputs and story, I think that SpaceX is worth about $1.25-$1.3 trillion, but if you contend that it is worth $3 trillion or only half a trillion, it is neither my job nor my place to convince you that I am right and that you are wrong. .................................

If you are a trader, though, the game changes. Specifically, the intrinsic value of the company is not central to your decision, perhaps even irrelevant, and your judgment on whether you seek to partake in the SpaceX offering will depend on your reading of market mood and momentum. I would not be surprised in the least to see the offering priced at $1.8 trillion, and see a jump in the price on the day of or in the weeks after the offering, and if that is your most likely scenario, being able to get into the offering at the offer price or even in the first few hours or days of trading will be a winning strategy. The risk, of course, is that momentum can shift quickly, causing a significant price drop, effectively making timing your trades right key to your trading strategy. The shifting and often unpredictable forces of mood and momentum are also the reason that as an investor, I would not sell short, notwithstanding my value assessment, even if the pricing for the company pushes from $1.8 trillion to $2 trillion or more. ........................



A.I. Fare:




Part I: The Math
1. Everybody, even Google, seems to be treating AI as if it were some kind of winner take all competition like web search was, in which Google taking over 90%

2. But everybody is building essentially the same technical solution with essentially the same data, so there is no moat.

3. If there is no moat, nobody is going to take 90% of the market.

4. With no clear winners, nobody can charge monopoly prices; instead, you get price wars and commodity pricing.

5. Which means everybody will wind up overpaying compared to the modest profits they will be able to make in an intensely competitive regime.

Am I missing something?

Part II: The Psychology
None of that would matter in the near term if people weren’t noticing.

But they are. Consider: .......


Digital Gods, real costs: why a rational world would see the doom of the foundation‑model-builder IPO, because the AI labs are highly unlikely to ever get profits, let alone hyperprofits…

.............. I do not see such a path for either Anthropic or Open AI. That has now crystalized for me. And it is reading Paolo Perrone that has done it, and that has led me to the conclusion in the title.

From Paolo Perrone I get four things: ..............

(2) Language models now have sufficient verbal fluency. What they do not have is judgment as to which pieces of the human information corpus that has made up their training data are knowledge as opposed to simply s***posting. Hence anything they produce that is not for the immediate assessment by a skeptical human for whom it is part of their information diet requires IMMENSE “babysitting” not to run off the rails: ............

........................ Thus for existing investors, especially those who came in at nosebleed prices, the only realistic way to “win” is to sell out to Ms. Market while she is still willing to dream: to get an IPO done soon, distribute their positions into public hands, and hope that the day when the economics of inference and the limits of judgment finally knock on the door comes after the lockup expires, rather than before.



 


........................ 
  • NVIDIA’s $2B investment in CoreWeave is effectively free optionality: NVIDIA received $2B+ back in GPU revenues the same year; if CoreWeave succeeds, the investment multiplies; if not, principal is recovered
  • Historical parallel: Lucent financing its own customers during the dot-com era (keeping the build-out going, then collapsing)
..........
  • “Never bet against engineers” — over time, efficiency improvements will reduce power and cooling requirements per unit of compute
  • However, even as efficiency improves, the grid is backed up and cannot be built overnight; demand growth is outpacing efficiency gains for the foreseeable future
............
  • Math can be right but “you can still lose your shirt” going against momentum in open capital markets
  • Goldman’s numbers show the year-over-year first derivative of CapEx growth is peaking right now — the rate of acceleration is topping out



Material Fare:


Why the world’s most critical metal is structurally short supply and consensus is still behind the ball.

Copper demand is set to rise by more than we have ever produced.

BHP’s own published outlook calls for global copper demand to grow roughly 70% to more than 50 million tonnes PER year by 2050. The world produced approximately 22 million tonnes in 2024. Total copper mined throughout the entire 6,000 years of human civilisation is around 700 million tonnes. The cumulative demand the global economy needs to meet between 2025 and 2050, integrating under that demand curve, runs close to 1 BILLION tonnes. We need to mine more copper in the next 25 years than humans have mined since the Bronze Age. We are not equipped to do this. We have not even tried in a millennia.



One of the most respected economists on Wall Street, Dr. Ed Yardeni, has maintained a relentlessly bullish outlook on the U.S. economy throughout this decade. His “Roaring 2020s” thesis; which targets the S&P 500 at 10,000 by the end of the decade, rests on a foundation of strong corporate earnings, A.I.-driven productivity gains, and a resilient consumer.

Even Dr. Yardeni, however, acknowledges the risks: elevated valuations, irrationally exuberant earnings expectations, bond vigilantes, a still-unresolved Gulf War, and the mounting stress in private credit markets.

Here is what makes the current moment so compelling for hard asset investors: it does not matter which road the economy takes. Whether Yardeni’s bull case plays out or a severe recession materializes, the destination for monetary metals and critical natural resources is the same; higher. The only variable is the path.

YOU NEED TO KNOW:
  • The Bull Case Carries Its Own Inflation: A “run it hot” Roaring 2020s scenario drives structural demand for critical natural resources that are already in supply constraint; prices must rise.
  • The Bear Case Forces the Fed’s Hand: A severe recession after decades of debt accumulation would be so damaging that the Fed would have no choice but to print aggressively, debasing the dollar and repricing everything denominated in it.
  • Resource Security Is a New Structural Driver: The Iran war and U.S.-China decoupling have permanently elevated the strategic value of domestically sourced critical minerals, adding a geopolitical premium that does not disappear in either scenario.
  • Yardeni’s Own Risks Confirm the Thesis: Elevated valuations, crowded momentum trades, private credit stress, and monster IPOs (SpaceX, Anthropic & OpenAI) are all conditions that historically precede the kind of volatility that drives capital into hard assets.
Both Roads Lead to the Same Destination: Boom or bust, the purchasing power of the U.S. dollar is under structural pressure; and monetary metals are the historically proven refuge.


  • Governments and industry have softened the impact of energy and commodity supply disruptions by releasing reserves, reducing inventories, and increasing operational flexibility.
  • These measures are temporary, and continued inventory drawdowns are pushing oil and metal markets toward historically tight conditions.
  • Once inventories become critically low, higher prices may become the primary mechanism for balancing supply and demand, leading to weaker economic growth and lower consumption.
.......................... Economists have a sanitised term for this process: demand destruction. The reality is more painful. Demand destruction occurs when prices rise to a level that forces consumers and businesses to reduce their consumption. Households spend more on fuel and less on everything else. Airlines reduce routes. Manufacturers delay investment. Energy-intensive industries curtail production. Consumption falls not because people choose to consume less but because higher prices leave them no alternative.

This is why inventory levels matter so much. As long as stockpiles remain available, markets can postpone the adjustment. Once they are exhausted, prices become the primary mechanism through which balance is restored. .....................



Vid Fare:






Quotes of the Week:

Thoughts of Dan Loeb (My 16 Favorite Takes)

The two macro variables that trump everything else right now: where oil goes (driven by war and geopolitics) and what AI does to infrastructure spending. Everything else the government reports — growth, unemployment, inflation, rates, currencies, gold, crypto — is secondary. Two variables. That’s it.

On Nvidia today at 15x 2027 earnings, 12x 2028 earnings: “Unless you’re really draconian and think the AI world is going to roll over in 2031 or 2032, I think it’s the most attractive sector right now. It’s where the bulk of our capital is invested.” Not a bubble call. A “we’re still early” call.


“I’ve had a lot of worries in my life, most of which never happened.”



Charts:
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7: 



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(not just) for the ESG crowd:

Arctic ocean passes 'irreversible' chemical tipping point

A new study spanning two decades reveals that the loss of sea ice has triggered an irreversible chemical shift in the Arctic Ocean. By exposing shallow coastal waters to intense sunlight, the melting ice has accelerated a process that destroys nitrate, the foundational fertiliser required for marine life to survive. ..........


The U.S. is impaired by a lack of supportive policy and subsidies, the unavailability of affordable Chinese models, and a preference for big cars.



Sci Fare:




War Fare:

Unwilling to finalize a peace deal with Iran and restrain Israel, the Trump administration attempts another illusory "ceasefire" in Lebanon

Despite repeatedly claiming that a peace deal with Iran is at hand, President Donald Trump is unwilling to finalize one. An agreement would cement the failure of Trump’s regime change war. It would also require recognizing Iran’s sovereign rights, including having an economy free of crushing US sanctions. Trump would also have to halt his Israeli ally’s continued attacks on southern Lebanon, which have killed more than 3,000 people and displaced more than 1.2 million since March. Israeli attacks on Gaza also continue daily, with no protest from Trump or his so-called “Board of Peace.”

Having promised to make a “final determination” on an Iran deal last week, the Trump administration can only stall with more deception. Secretary of State Marco Rubio told Congress this week that “the war is over” even as US-Iran clashes continue and Gulf states absorb Iranian retaliation. ............

Trump, like Biden before him, could simply tell Netanyahu to stop the bombing of Lebanon. Instead, every US action has been geared toward encouraging Israeli aggression. ..............


becoming?


How great is Iranian patience? How willing are they to end this war for good?



Geopolitical Fare:

Narratives of US decline are coinciding with explosive expressions of US dominance. Are we witnessing the transition between hegemons? The official dawn of multipolarity? Or force and hubris continuous with the Cold War and the unipolar moment?
The first issue of Phenomenal World features thirteen essays and interviews on American power.


Nukes, London, Belarus, Kaliningrad.

......... What does the future hold?

There was once an era of sea power. The tank introduced mechanized combat to the two world wars. The atomic bomb heralded the beginning of a new sky power. Subsequently, it seemed that mutually assured destruction foreclosed the possibility of great wars, limiting international conflict to conventional or irregular proxy wars.

But now things are different. There is no shortage of voices in London, Moscow, Kiev or Brussels speaking of an imminent world war. Many even agree on the dates — 2028-2030. Some would like to see it earlier. The red button beckons.

There is also a new approach towards the nuclear question. Palantir summed it up in their recent manifesto — nuclear deterrence, apparently, must be and is being replaced by artificial intelligence-powered unmanned weaponry.

Perhaps purifying destruction is necessary to move history forward. There are certainly some who think that way. ...........

In short, the idea is that by 2030, the EU will have an overwhelming military advantage over Russia, allowing this barbaric neighbour to be finally democratized through a storm of steel. ........



......... For those that didn’t twig it: a British drone manufacturer runs a war game that concludes the only way for Europe to survive is—you guessed it—for it to buy tens of thousands of that very drone manufacturer’s massively price-inflated drones. 

You can’t make this up.

The next paragraph is even richer, admitting the drones proved worthless in Ukraine: .................



Other Fare:

The tech elite are pouring billions into dispensing with inconvenient humans. Now governments want the same trick to wish away the migrants their economies desperately need, writes the author and Nerve columnist 

............................ The wealthy have always dreamed of transforming the proletariat into the precariat: desperate workers who do as they're told. But in the automation story of which AI is the latest chapter (and purportedly the climax), the precariat becomes the unnecessariat: workers who are surplus to requirements and can be vaporised or liquidated or warehoused or simply ignored. ...................


Partying Like It’s 1929?

.................................... All empires, and all Golden Ages, end in humiliation.  They end when they forget their origins.  They end when they believe too strongly in their mythologies and forget the luck that opened the door to their journey upward.  They forget that they are rooted in the same earth as everything else.  They forget that nature always dominates the ultimate destination of us all.

So it is.

It is with us now.

The excessive concentration of wealth has produced an efflorescence of stupidity.  The excess flows into itself creating a vortex heading towards self-destruction.  ................



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