***** denotes well-worth reading in full at source (even if excerpted extensively here)
Economic Fare:
Higher oil imports from Russia, US have partially offset fall in total shipment
Market Fare:
Variant Perception: Still risk-on - Aug. Macro Snapshot
- Our Macro Risk Indicator remains “risk-on” with G3 growth LEIs rebounding. US earnings estimate revisions are rising again, while low savings rates continue to sustain spending and profits.
- We believe the Situational Awareness stop-out marks a tradeable low in semis and AI. Semis remain capital scarce on our capital cycle models, while their crowding score has now reset to more neutral levels.
- The consensus reaction to the July Fed hold is that Warsh is going to be tested by markets in the coming months, pressuring him into a September hike. We lean against a hike this close to the mid-terms, as we expect core inflation to remain capped.
***** No1: Twilight over the Rising Sun
The Namazu stirs
Commodity Fare:
A quiet revolution is occurring on the balance sheets of the world’s largest gold producers, and the broader financial markets are completely missing the story. For the first time in a quarter of a century, the big 3 mining giants are sitting on a massive pile of net cash.
Newmont, Agnico Eagle, and Barrick Gold have collectively accumulated an astonishing $7+ billion dollars in positive net cash, meaning their cash reserves now exceed their total debt obligations.
This is a historic anomaly in a capital intensive industry that has operated with a net debt position for every single year over the past 25 years.
These senior producers are currently generating free cash flow at an unprecedented rate, yet their stock prices remain heavily discounted, largely ignored by a generalist investor base still fixated on technology multiples.
This $7+ billion dollar war chest represents far more than just financial stability; it is the fuel for an inevitable wave of industry consolidation. The major producers have spent the better part of the last 15 years prioritizing balance sheet repair over exploration, resulting in a severely depleted pipeline of new projects.
They are facing a looming production cliff and desperately need to acquire growth to replace their depleting reserves. With a mountain of cash at their disposal and a junior mining sector trading at generational lows, the stage is set for an aggressive acquisition cycle. ...........
A.I. Fare:
China’s clever upstarts are keeping pace with their American counterparts for a fraction of the cost
AI’s greatest mathematical successes have come from answers to problems posed by a mid-20th century iconoclast. By examining what makes the Erdős problems unique, mathematicians are trying to understand how AI might change the rest of math.
Tweets & Quotes of the Week:
This paper gives a fancy name to a problem you can already feel in your bones
— Zara Zhang (@zarazhangrui) August 8, 2026
"The Tragedy of the Cognitive Commons." Checking AI output requires deep expertise. Deep expertise comes from doing grunt work for years. And grunt work is the first thing AI eats
So we're building… pic.twitter.com/RYRU5Ob0OS
Charts:
0:
AI has become the backbone of US economic growth.
— The Kobeissi Letter (@KobeissiLetter) August 6, 2026
Private business investment in AI-related categories jumped +$300 billion YoY in Q2 2026, or +25%, to a record $1.5 trillion annualized rate.
The surge was driven primarily by investment in computers and peripheral equipment,… pic.twitter.com/g14BTgaN9d
(not just) for the ESG crowd:
Global warming is making many places hotter, drier and more combustible.
The prime minister should consider the potential outcomes of siding with his Bay Street buddies and oil industry bigwigs over climate-beleaguered Canadians.
Unusually hot weather is bad for you, your temper, your economy and your business. Climate change means you're going to get lots more of it.
There’s a big dispute in climatology, in regards to equilibrium climate sensitivity: How much does the Earth warm up, when you double CO2 in the air?
The IPCC maintains an estimate of 3 degree Celsius per doubling. Some, like James Hansen, think the number is much higher. He thinks it’s 4.8 per doubling, but many of the climate models the IPCC uses sit even higher, above 5 degree. The general idea is that these models “must be wrong”, so they’re not given the same weight when it comes to making predictions for how much warming we will get in the future as models that predict less dramatic warming get.
The main argument given to dispute the credibility of these models, is that they don’t properly reproduce the warming we have seen so far.
The dispute between models mostly comes down to differences in how the clouds are expected to respond. The “hot models” predict that the warming we experience from more CO2 results in a reduction in clouds that reflect sunlight. Thus these models are said to have “positive cloud feedback”.
But not everyone believes these models get it right of course, that’s why there is a scientific dispute. If these “apocalypse predicting” hot models were right, the Earth should be warmer than it actually is right now, that’s the idea upheld by those who are not convinced the hot models get it right.
The counter-argument to this idea, is that the hot models predict greater warming than we have seen so far, because there is other stuff we’re doing that is still keeping temperatures down.
So what are those things? One of them is the temperature reducing effect of air pollution, an effect known as global dimming. .......................................................
....................................... The last time CO2 concentrations in the air were as high as they are now, was between 14-16 million years ago.
The tropical grassy biomes only developed into expansive, dominant regional biomes roughly 8 to 3 million years ago. Today they support a fifth of the world’s human population.
With the climate trajectory we are on, there is essentially no guarantee, that the Earth will be capable of sustaining grassland ecosystems, including the artificial ones we depend on for our food ....................
Our animals are not safe either. A healthy young adult can survive a wet-bulb temperature of about 31 °C for a few hours in the shade. Cattle standing in an open pasture, with no shade and no relief overnight, start dying around 26 °C. They just don’t have bodies that can sweat as effectively as ours.
These conditions we are now dealing with, are not conditions under which we can sustain agriculture. ..................
Planning for 3°C doesn't make it survivable - but it makes it seem so
..................... Yet destabilisation of this kind is framed as something that might happen if action falls short. Instead, it’s the context in which the plan will be delivered. Warming once judged unacceptable has become the baseline assumption for plans, and the planning assumes governments that can still deliver, when the impacts of the warming are going to make delivery much harder.
Moreover, not long ago, 3°C functioned as a warning, a threshold invoked to illustrate the scale of failure that must be avoided. Now, 3°C is being presented as a new baseline. .........................
U.S. B.S.:
War Fare:
........................... At midnight on Monday, US Southern Command retired Joint Task Force-Southern Spear and put in its place Joint Task Force-Western Hemisphere (JTF-WHEM), with the stated goal of “build[ing] on a legacy of excellence to secure the region and defeat all threats.”
......................... “Naked Machiavellianism”
Established in the Trump administration’s 2025 National Security Strategy, published in November, the Donroe Doctrine seeks to secure hemispheric dominance of Latin America and the Caribbean for US interests by asserting a hardline US sphere of influence across the region. It also explicitly aims to shut out strategic competitors — primarily China, but also Russia and Iran — from controlling vital infrastructure, resources, or military positioning in the region.
We have already seen this in action in Marco Rubio-controlled Venezuela. “Brazen thuggery” and “naked Machiavellianism” were the four words Prof. Jeffrey D Sachs used to describe the US’ new (but not that different from the old) security doctrine ............
Your humble blogger had wondered at the timing of Iran moving forward in its talks with Oman on management of the Strait of Hormuz, particularly since Iran made clear this had nothing to do with the MOU, which expires later this month. The Trump administration piled on aggressively, using it as another opportunity to engage in misleading messaging and successfully push paper oil prices even lower. One trope was that the Iran-Oman pact would lead to the opening of the Strait pronto. In fact, as Iran repeatedly explained, any normalization of traffic depended on the US meeting MOU conditions and now even more yet-to-be articulated ones (the formulation now is that adhering to MOU provisions is “necessary but not sufficient”). ................
................. This has always been the problem Ukraine faces: Russia is just more powerful. Putin was very restrained for most of the war, not taking out dual use infrastructure, letting power stay on, etc, etc… This is the sort of stuff that the US usually takes out first, as it did in both Iraq wars. Russia didn’t.
But while Putin has been remarkably humane for a wartime leader, there is an implicit quid-pro-quo here: we leave certain things alone and you return the favor. Ukraine, knowing it was slowly losing by accepting that status quo has broken it multiple times and each time Putin’s release of constraints on the Russian military has meant that Ukraine was hurt worse than Russia. ............
Ukraine needs a comprehensive peace deal. Much like America in the Middle East, this is a war it cannot win and which hurts it more than it hurts Russia. When you can’t win a war, you make concessions and go to peace. Denial of reality is not a war plan, it’s a way of marching to doom. At some point the Ukrainian army will collapse, and the conditions that Russia imposes in an unconditional surrender scenario are a lot worse than those they’ll get, even now, in a negotiated peace.
The same is true in the Middle East. Yes, Iran can’t conquer America, but what happens when diesel and gasoline and fertilizer and plastic and medicine shortages all hit the US mainland? The deal America gets in that situation is worse than the deal it gets if it makes peace now.
When you’ve lost a war, you’ve lost the war. Making your opponent prove it across the board will never lead to a better outcome.
Geopolitical Fare:
.................. Xi, in this light, is just an extension of Deng: actually making Deng work. Deng’s policies caused rapid technological advance and improved light industry massively, but the principles were not actually being enforced.
Xi enforces them. Not just anti-corruption but changes in how the party recruits and trains and promotes, all intended to keep the CPC on the path to socialism.
Will they succeed? Well the transition will come, if it does, with the next leader, most likely. Xi is putting his successor in a good position. AI and robotics are being directed towards physical activities, there are dark factories with no workers, and so on.
Genuine socialism means people shouldn’t have to work a lot if they don’t want to, and should still live a good life. AI and automation, done properly, offers that possibility.
Of course huge problems around distribution and production remain and will have to be figured out. If China stays the course they’re trying to create something which has never existed: something genuinely new. Westerner’s might call it “fully automated luxury communism” though I don’t know if it’ll get that far. ................
......... China is the future. It’s success or failure will determine what political/economic models are considered usable and successful. The age of liberal democracy is near its end.
Other Fare:
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