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Monday, October 12, 2026

2026-10-12

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


Economic Fare:



Lars Christiansen provides a useful, simple explanation for why the labor share of GDP has fallen, drawing on the writings of Polish Marxist economist Michal Kalecki. Kalecki was focused on centralized planning, yet his thinking seems to make sense. The profit share has increased because we have had fiscal easing with an interest rate peg. Now that interest rates are rising, we should start to see the profit share decrease and the labor share increase as a greater share of national income. Of course, we are seeing other effects, but we can say that rising interest rates should start to affect the share of national income going to profits. This does not mean that labor will be better off. It does mean, on a relative basis, that it will become a more important part of national income.






The debate about US and European competitiveness illustrates how narratives of economic decline and triumphalism tend to outrun their evidence



.................. The key question now is how much further the rally can go before it makes the business of buying crude, shipping it across the world and turning it into fuels unprofitable.







Market Fare:

Why the Level of Yields Matters Less Than What Drives Them


..................... That doesn’t mean policymakers can’t push long-term yields lower. History shows that governments can change the rules of the game. Central banks can impose yield-curve control by becoming the buyer willing to defend a certain yield, while governments can use forms of financial repression to create additional private-sector demand for their debt.

The distinction matters. If the central bank absorbs bonds the private sector is unwilling to hold at the targeted yield, more of the duration ends up on the public-sector balance sheet. Financial repression works differently. Regulation or other incentives redirect private capital toward government bonds that investors might otherwise not have bought. That can reduce the capital available for stocks, corporate bonds, real estate, or private investment. Either way, policymakers can influence the price of capital. But doing so doesn’t make the underlying scarcity disappear. It merely changes who has to absorb it.

Is that a likely scenario governments will eventually choose? Possibly. But we aren’t there yet. Demand for government bonds hasn’t collapsed, while long-term inflation expectations remain relatively anchored. For now, the market seems willing to absorb rising government debt, as long as the price is right.

In my view, the latest rise in real yields isn’t a warning about fiscal sustainability. It might simply reflect a world in which demand for capital is structurally increasing again, because more resources are being directed toward investment that could eventually raise real output and productivity. ..........

................ To sum up, at least part of the rise in yields appears consistent with stronger growth expectations and continued economic resilience. That is fundamentally different from an environment in which yields rise without stronger nominal growth, driven solely by a rising term premium or fiscal concerns.

Higher yields and higher stock prices are therefore not necessarily a contradiction. Under the right circumstances, they can be two sides of the same economic development. ...........



September was messy.
There’s really no way around it.
Only 112 of 503 S&P 500 stocks finished the month higher.
Roughly one out of every five stocks went up, while nearly four out of five went down. ..........
The mistake is assuming that means the entire market was bearish.
It wasn’t.
The equal weight S&P 500 was rolling over while the mega caps kept holding up. ..............


vs.
Beneath the surface, it’s already a bear market


Equity breadth weakening, watching the Cisco/Sycamore/Juniper analogs

 



Risks are overstated at the moment. You might be thinking “but the VIX is at 15!”. Don’t care. US equities have completed their transition into a different regime, one that I will write in length about in a mainline newsletter soon.

The start of the Iran war in March just happened to coincide with the first enormous upward inflection in revenue for both OpenAI and Anthropic. The improvement in their product over that time was the catalyst. That upward inflection transformed US tech into a huge call option - the optionality of runaway demand for AI providing unlimited upside with little downside.

This has proved more durable than most thought (including myself), but those that were most bullish were caught in the brutal high momentum beta sell-off in August.

The war hasn’t been forgotten - spend some time watching intra-day cross correlations and you’ll still see markets unduly affected by spikes in crude oil. As much as the market says it doesn’t care, it does in the short-term.

This has made oil into something that is more reflexive in terms of its relationship with equities. The VIX is dead as the indicator of risk on US equities because of the change in the underlying distribution of returns (I’m sorry but it just isn’t log-normal anymore, it is some sort of distribution with a fatter right tail as well as a skew in that direction as well).

Oil has become the new VIX. I’m not necessarily saying that oil doesn’t drive risk in equities. It does. But oil has become the asset to hedge a risky portfolio because the threat of all-out war again in the Persian Gulf is the outsized risk to equities where very little business-cycle type macro risks exist anymore. ...........



Summary: The evidence still points to the pain trade being higher, but risks and trend fragility keep climbing as yields stay elevated and the ex-AI divergence persists… In this week’s DD we walk through the unusual nature of this market and lay out why it’s actually typical Late Cycle behavior (which we’re in). We discuss what that means for forward returns and what we need to keep a close watch on. We then end with somewhat surprisingly bearish positioning and sentiment, and pitch two trade setups that should benefit in this single-narrative market, plus more…

.................. 8. The market is simply reflecting earnings. As GS notes, “At the stock level, AI infrastructure stocks are expected to drive more than half of S&P 500 EPS growth in Q3. The top 10 contributing stocks are expected to account for over two-thirds of aggregate S&P 500 earnings growth this quarter, with Micron (MU) and Nvidia (NVDA) together accounting for more than 1/3 of index growth.”













................. The key to avoiding the pitfalls of herd behavior is to think independently, question conventional “wisdom”, and always remember what it is you’re trying to do. In baseball, the goal is find players who can help win games, not to maximize exit velocity. In investing, the goal isn’t to buy growth stocks or value stocks or large caps or small caps. It’s to grow your capital over time.

............ Some well-known fund managers have said that quality investing is no longer working. One even suggested that adding a momentum component to his strategy might be necessary, because buying dips no longer works. But there is nothing wrong with the strategy of investing in growing companies. The problem is simply that growth stocks became overvalued.

........  Jake Taylor sent me this chart, which does a nice job at illustrating the sheer number of stocks in major corrections, even as the S&P 500 hits all time highs with lower and lower market breadth. This is the type of market that occurred in the late 90’s, and I think it presents a great opportunity for stock pickers over the coming years, just as it did then.



I think the key to long-term success (in the front office or as the portfolio manager) is to not get caught up in what others view as accepted practice. The crowd is often right, but don’t accept that it is right or wrong based on what conventional wisdom says. Make your own decisions. Don’t outsource your thinking, even to others who might be smarter or more experienced than you. When everyone piles into the same idea, that idea may no longer offer you any advantage.



Material Fare:

 
Portfolio Applications update: Our latest update to the Systematic Asset Allocation portfolios is now available. The key takeaway is that as bond breakdown and equity trends become ragged, commodities are cruising higher. Not having as commodities sleeve as part of your overall asset allocation is an expensive oversight at times like this. ..............


Every one was once a chart in progress

It’s been one year since we declared the commodity bull had begun, seven months since I shared the structure of my commodities swing trading playbook, and two months since our special report on the developing Super El Niño, the most significant climate event in 150 years. ...............



............ So China is backing up a very big truck, Retail is BTFDing in ETF-land, and India is still panicking over fuel costs (desperate to slow domestic demand for the only thing that hedges its currency's collapse).
“This isn’t a short-term trade, it’s a multiyear repositioning of household and official assets. The scale and persistence of Chinese buying is now a core driver of global gold prices and we expect it to hold as long as uncertainty over growth and geopolitics remains,” said Liu.
As Bloomberg's Garfield Reynolds notes, October in particular is looking like a sweet spot with rates traders sticking to bets that the Fed will delay any hikes until December, and with central bank appetite also showing little sign of abating, the level of demand out there has allowed bullion to show some resilience in the face of higher real yields and the resulting strength in the US dollar.

Gold is becoming an increasingly important diversifier for global investors at a time when government bonds no longer move inversely to stock markets.



Catherine Gordon, UBS's energy and resources expert, highlighted "AI Infrastructure Constraints Emerge As Next Leg Of The Trade" in a Friday note to clients. The theme closely aligns with our "Owning The Bottlenecks" note, which centered on companies positioned to benefit from supply constraints in the critical materials space that feed not only the AI infrastructure buildout but also the rearmament supercycle.

Gordon's note outlined that traders are shifting their focus to the power, data-center capacity, and financing needed to sustain the artificial intelligence buildout, as infrastructure constraints emerge as a potential driver of the next leg of the trade.




........ Ziegler said demand from electrification and data-center construction is expected to outpace supply growth and support high prices, as hopes for lower prices fade in a theme best described as scarcity. 

........ "Against that backdrop, the team continues to favor copper-linked miners with meaningful leverage to the theme. Preferred exposures include Freeport-McMoRan, First Quantum, Hudbay and Teck Resources, all of which are viewed as well positioned to benefit from what is expected to be a multi-year copper upcycle driven by structural demand and a constrained supply response."





 




Bubble Fare:


....... Mike Novogratz said that AI is in the "biggest bubble of our lifetime"... and that investors should jump right in. His reasoning, via Bloomberg, was a gem:
"Bubbles don't end like we are today. I know how bubbles end, and they end spectacularly, and this isn't spectacular enough."
In other words, the bubble is real, it's just not bubbly enough yet. 

Some 9,500 miles away in Singapore, Ray Dalio reached the opposite conclusion from the same premise, warning that AI is a "classic bubble" that is now close to bursting. Meanwhile, back in Greenwich, Nassim Taleb said both of them may be looking in the wrong place: the real fault line runs through the bond market. Below we lay out all three views, alongside Goldman's history of how every great capex bubble since the railways has ended ..............

......................... Dalio's rates-and-liquidation mechanism and Taleb's fragile bond market are two sides of the same coin, and the AI debt binge sits right in the middle of it, crowding out Treasuries for the same duration buyers.

So while it's possible that this bubble still has a spectacular blow-off ahead of it, the more likely outcome is that, as Molavi lays out, the stocks peak quietly while the capex keeps rising, and the "spectacular" part only becomes visible in hindsight. Then again, Novogratz did say it's the biggest bubble of our lifetime, and on that, at least, everyone agrees.



A.I. Fare:




Canadian Fare:

The organizer of an inaugural Canadian agriculture investment forum says new capital could help with farm succession and productivity



The Canadian government launched its first-ever National Food Security Strategy in June 2026. The strategy aims to invest $750 million to increase year-round Canadian production of fruits and vegetables, including on so-called vertical farms. ..............

........... Canadians have grown accustomed to supermarket shelves stocked year-round with fresh produce. Vertical plant factories promise to sustain this expectation instead of adapting food systems and consumption patterns to ecological limits.

Vertical plant factories are a vivid example of the politics of continuity. Our point is that enormous technological and material investments are being mobilized to preserve the expectation that a particular version of the present can be sustained into an increasingly unstable future.



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(not just) for the ESG crowd:





The PRI turns twenty in Amsterdam this week: 5,261 signatories, $139.6 trillion, 109 failing its minimum standard and none expelled.






Sci Fare:




U.S. B.S.:


................. Since oligarchs own the politicians and the supreme court, this won’t happen unless the rich lose their power in a Great Crash that even the Fed and Treasury can’t bail them out from, and since they can print as much money as they want, that means it isn’t going to happen short of some sort of revolution. The money as speech decision makes it unlikely this will be an electoral revolution (though not entirely impossible), so it will likely require a full revolution.

If that doesn’t happen America’s decline will continue until it is just a larger version of Brazil or India: lots of poor people, a small but prosperous upper middle class who are direct retainers of the rich and a mass of poor people.

It’s quite clever really, the only downside is that this sort of financialization and rentierism weakens America as a whole since returns on manufacturing can’t match financial returns under this sort of economic engineering, and industrial power is effectively military power in the post-industrial revolution world.

America’s oligarchs have thus chosen American decline in exchange for what they hope is permanent oligarch status.



War Fare:


Regardless of why Putin might have held off on this for so long, he's now arguably motivated at least in part by the tantalizing possibility of reaching big-ticket resource deals with the US after the conflict ends, the details of which his and Trump's envoys have been negotiating for over a year already.

The New York Times cited allegedly intercepted Russian communications to report that Russia plans to obliterate Ukraine's power, heating, and water systems this winter. While their claim can't be confirmed, it aligns with Putin mildly "escalating to de-escalate" over the summer in response to Zelensky's strike campaign, which has taken the form of ramping up attacks on Ukrainian infrastructure. If the report is true, then Russia doesn't just aim to sever Ukraine's military logistics, but to bring Ukraine to its knees.

Putin has thus far eschewed this arguably due to his belief that Russians and Ukrainians are kindred people. Some have suggested that Russia might not have had the drone and/or missile capacity to do so earlier, however, whether due to low production till now and/or to hedge against the scenario of a hot war with NATO. In any case, Putin now seems to have made peace with the humanitarian consequences of ending the war on Russia's terms sooner rather than later, or at least on as many of them as possible. ...........



................ Right now the US is still able to bully Latin American countries, but its clear that it’s lost the ability project power significantly beyond the Americas. The Iranians have picked up strikes against tankers, and it’s clear that the previous slow pace was a decision, and the decision has changed. 

During the initial part of the war they effectively destroyed all US bases in the Middle East, including radars. It would take tens of billions to rebuild them, but since they can’t be defended (the US had plenty of interceptors at the time) that’s pointless. Odds are that most of the permanent US military presence in the Middle East will never return.

It is impossible to overstate just how much the calculus of force has changed: the US can no longer simply sit aircraft carriers off any prepared country’s coast and bomb the hell out of them.

Likewise this makes building up troops for ground operations very difficult. Think about trying to invade Iran. Where would you stage the troops that Iran can’t hit even as you’re trying to bring them in? There will be no major invasion of Iran, because it’s straight up impossible. In the Gulf War the Americans spent months building up forces nearby, that can’t happen any more. .........

All of this will come to be. It cannot be stopped, only slowed. And with Chinese sanctions on the US and Japan crippling their war industries, plus the US’s pathetic financialized military-industrial complex being ridiculously expensive and slow to manufacture anything, the US will not even be able to keep up.

Plus, a lot of countries are target poor. The US and its allies aren’t. One of the reasons Ansar-Allah is going hog wild hitting Saudi infrastructure is that after over a decade of being bombed to hell there isn’t much for them to lose. Their missiles hit targets which matter, while the Sauds mostly are reduced to terror bombing, which won’t stop the Houthis any more than it did the North Vietnamese.

The world is changing, things are happening, and the world order is changing completely.


Israel is blocking thousands of ready-to-use shelter kits as part of its campaign of genocide, which entered its fourth year this week



................... That’s the sort of thing that changes you as a person. Changes your whole worldview. Changes your politics. Changes your beliefs. The average westerner needs to do a lot of internal restructuring to truly reckon with the Gaza holocaust and all its implications.

That, I think, has been the biggest reason why the genocide of the Palestinians has gotten so much attention and sympathy. It’s because its live-streamed nature caused it to affect us in ways other acts of mass military slaughter usually don’t.

Westerners are so propaganda-addled and indoctrinated that we are largely apathetic to what our bombs are doing to human bodies on the other side of the world. It’s only when we are given some skin in the game, as in the Vietnam draft, that we start caring in any politically significant way. Gaza gave us skin in the game in the way it entered into our lives through our electronic devices and showed us things that were so jarring it left a permanent mark upon our lives.

Gaza forced us to look, and forced us to see, against all the efforts the propagandists have expended trying to keep us from noticing such things. That’s why this thing isn’t going away. People are only getting angrier and angrier. The empire has spent three years scrambling around unsuccessfully trying to get us to close our eyes again, and it keeps failing and failing and failing.



Geopolitical Fare:




India faces the gravest risk any nation can face: it cannot supply the inputs it needs to stay independent. Every factory it is building to become an industrial power, every electric scooter, solar panel, transformer, medicine and missile, runs on materials controlled by the rival most likely to fight it. China holds the reins of India’s seven-headed horse. India holds no published reserve of any of them. Beijing has already stopped Indian production lines with nothing more than a slow export licence, in peacetime, and on 10 November its pause on wider controls runs out.

The irony is bitter: India's Black Warrant. A republic born of the fight to throw off colonial chains, whose first leaders built state plants to make its own rare earths, magnesium and penicillin, put on new chains by choice. It took up the West’s financial doctrine, which counts dollars and cannot see smelters. It closed the banks that funded its factories and let its plants rust. Today India is solvent in money and insolvent in matter, and the country that profits is the one it fears most. .............



QOTW:

Madam President, the most basic rules of international relations are being tested, not because we no longer know them. We do, but governments increasingly apply them selectively: international law applies until it becomes inconvenient; court decisions must be respected unless they challenge our own actions or those of our friends; sovereignty is sacred only unless someone else’s territory stands in the way of our ambitions.

We cannot build courts, celebrate them when they prosecute our enemies and undermine them when they turn their attention to our friends. When grave violations go unanswered, they are more likely to be repeated. And for small states, this is existential, not simply a matter of principle.
—Thorgerdur Katrin Gunnarsdottir, Minister for Foreign Affairs of Iceland, Sep 25, 2026.


he old world is dying, and a new world struggles to be born: now is the time of monsters.
— Norwegian Minister of Foreign Affairs Espen Barth Eide, Sep 25, 2026



Other Fare:


............ It’s essentially a race between revolution and high-tech totalitarianism. A race between the awakening of public consciousness to the urgent need for revolutionary change, and the ability of our rulers to prevent revolutionary change from ever occurring.

...... And right now our biggest disadvantage is that most of us don’t even know we’re in this race. Our rulers know it, but the average member of the public does not. Most of us are still chewing on the bait in the trap.

There is still time. The trap isn’t shut yet. But we need to awaken the other piggies in the pen to the reality of what the bastards have planned for us, and help them understand that the race is underway.

Posted by at No comments:

Sunday, October 4, 2026

2026-10-04

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


Economic Fare:

..................... This crisis is one of choice, and on top of that since there was no proper rationing which made sure that diesel and fertilizer and so on got to those parts of the economy which needed it most (yes, that means farmers in particular, but not just them) we’re going to be in a world of hurt.

Everyone with diesel refining who hasn’t already will put exports controls on at the least. That means if your country doesn’t produce enough, it’s not going to be able to buy enough otherwise. Yet another case of “no, you can’t buy anything that matters when it really matters.” Food exports will likely be restricted as well. Can your country feed itself? A lot can’t ..............


Tariffs, Hormuz, and fiscal policy are not good reasons to hike. The underlying growth trend and the asymmetric sensitivity of private sector spending to the level of interest rates are.

The test of whether you are genuinely sorry for a mistake, according to Maimonides, is if, when faced with the same circumstances as the last time you did wrong, you behave differently. “Not because of fear or a lack of strength,” but because you felt so much regret for what you did that you improved your character in response.

Federal Reserve officials may have started this process of atonement. For the past several years, they have repeatedly underestimated both the strength of the U.S. economy and the underlying inflationary trend. Those analytical errors led the central bank to wrongly lower interest rates in September-December 2024, and again in September-December 2025.

On September 16 2026, however, they raised their short-term interest rate target band from 3.5-3.75% to 3.75-4%. Tellingly, Fed boss Kevin Warsh characterized the move as “remov[ing] a dose of accommodation”, rather than a tightening or an increase in “restriction”. While many of his colleagues—most notably Governor Christopher Waller and New York Fed President John Williams—had been claiming that monetary policy was at least somewhat “restrictive” as recently as January, Warsh said that they “were hard-pressed to describe it that way” now. 

This shift has flowed through to the distribution of what officials believe will constitute “appropriate monetary policy” in the years ahead.

Almost all Fed officials now believe that short-term interest rates at the end of 2027 will be higher than they are now. None believed that as recently as the end of 2025. In fact, most officials back then expected rates to fall substantially from where they were at the time, with the vast majority expecting rates to be 3.25% or lower. (In January of this year I published a note titled "Is the Market Underpricing the Risk of Fed Hikes?" which I feel pretty good about now.) ...........



The summary is that:
  1. The bad news is that there really isn’t a reason for the sell-off to stop;
  2. The only way it could is if the Fed/ECB guided to a few hikes only;
  3. This means that the long end just won’t rally, but bull steepeners are the “bullish bond” play; and
  4. The out of consensus view is that it just doesn’t matter to risk assets at all.
....................... Inflation is a worry but isn’t driving these markets.

If the question comes to when this is all “priced in” I really can’t give that answer while growth is on the trajectory it is. Expectations were low into the middle of the year given that most thought the Iran situation would cause growth to slow. It clearly hasn’t.

These expectations need to be adjusted.  .................



..................... So we now have a Committee that just removed a dose of accommodation into a supply-driven inflation impulse while the demand side of the economy is already softer than the headline payrolls suggest. Housing is weak. The AI trade is crowded and levered. China is an acute problem. That combination has a name: policy error. Not because they raised 25 instead of 50 but because they are treating a supply shock as if it were a classic overheating demand problem and they are doing it with lagging, revised, and compositionally misleading labor data. ............

The cycle has not changed. Easy-money periods juice activity...sometimes with genuine investment and sometimes with fraud. Tightening and then the eventual easing cycle is when the previous juice gets exposed. We have seen the movie. The current episode has its own flavor: government deficit spending, labor-force distortions, an unprecedented illegal alien sugar high, speculative AI capex boom, an opaque private credit shadow banking complex and now a geopolitical supply shock layered on top. The Fed is late, as usual. Once they reverse course and start cutting again it will be into an accelerating slowdown. It will be too late as anything they do from here will take 12-18 months to hit the real economy. The next year is going to be tumultuous.

Ultimately rates are coming down, not because Warsh suddenly turns dovish, but rather because the real economy is already weaker than the official series admit and the lagged effects of tighter policy will show up in employment, housing, and credit. When that happens the Committee will discover, yet again, that they were fighting the last war with the wrong map.



Market Fare:

Every generation learns the right lesson about the wrong period. Which of the things we believe about investing are simply products of the world we happened to grow up in?

Part III of the regime-change series

For thirty-nine years, falling interest rates were the wind at every investor's back, and almost everything we were taught about markets was shaped by that one fact. In 2020 the wind stopped. This is the final part of a three-part series about what that means.

Part I asked why the price of money changed (our most read article)

Part II asked who has to sell into it

Part III (you are here): This one asks the question underneath both. It is also the only one that still matters if we turn out to be wrong about everything else.


Breadth breakdown and rising bond yields could test the resiliency of the bull market


Clarity In A Messy Tape

............... The Market of Stocks ≠ The Stock Market
This is where the breadth debate gets a little too simplistic.

The S&P 500 doesn’t care equally about all 500 stocks.

A relatively small group of mega-cap companies drives an enormous percentage of the index.

Mathematically, the S&P 500 cares as much about the top 20 stocks as it does the bottom 480.

Reread that. It’s not a typo.  ........

So yes, breadth can be bad.

But if Technology and the largest stocks in the market continue to hold up, the index can keep grinding sideways or higher while plenty of stocks underneath the surface struggle.

That’s exactly the environment we’ve been dealing with. ............


Why markets are breaking out into a new and final bull leg…

Summary: The weight of the evidence says the pain trade remains higher. Qs are breaking out from a tight daily compression regime. LQD/IEF is jumping to multi-month highs. Breadth has been weak and diverging lower, but the index has absorbed it on the resiliency of MAG7. That means a good chunk of the market has been in a deeper correction this past month while the index stayed buoyant on rotation into megacaps. The risks are real: weak seasonality and a buyback blackout over the next few weeks. But we overweight the read of the tape, and the tape says the path of least resistance is up. Positioning and sentiment back that up. So we’re buying here, but we’ll be waiting for breadth confirmation before we press, as we could see a shakeout first. 

................... 9. If the Iran escalation takes a breather and crude trades sideways, bonds get some relief and attention turns back to earnings. Those should keep coming in strong as long as the AI CAPEX cycle runs.




The first principle is that you must not fool yourself — and you are the easiest person to fool.— Richard Feynman

As the year has moved into autumn, the dominant topics in geopolitics and macroeconomics have remained largely unchanged. Oil prices and bond yields are still considered the key factors that could become a dagger for the economies of Europe and the US at a time when hard data shows few signs of slowing.

US 10-year yields reached 5.27% on Monday, a level not seen since 2007. Brent crude remains firmly above $100 per barrel. Despite growing warnings, stock market indices have remained close to all-time highs.

Especially the sharp rise in yields has sparked a heated debate in financial markets. Is now the time to go long bonds? Some argue that it is, while others — myself included — remain cautious. The question that will ultimately decide who is right is the trajectory of the economy through year-end.

Obviously, the Russia-Ukraine and US-Iran wars will have a strong say as well. But when it comes to war, taking statements from any of the parties involved at face value is rarely a good starting point. So far, the observable facts suggest that the probability of a quick resolution to either conflict remains low. .........


Oil, yields and the dollar climbed together in September, and the average stock quietly paid the bill. The S&P 500 barely flinched. From today, the calendar is on its side.

...................... IV. The six best months start today
Carson Investment Research cut every presidential cycle since 1950 into its sixteen quarters and averaged them. The two strongest sit next to each other, and together they cover the six months beginning today.

The fourth quarter of the mid-term year has averaged +6.6% and finished higher in 84% of cycles. The first quarter of year three has done even better, at +7.4% on average. ..............

V. The case against the calendar
A calendar has never paid anyone’s mortgage, and this year the case against it is serious.
  1. The monster is still awake. The seasonal averages were mostly built in years when the Fed could lean dovish into the election. This Fed is hiking into an oil shock with the 10-year above 5%. The last time it hiked into the fourth quarter of a mid-term year was 2018, and the S&P 500 lost around 14% that quarter.
  2. The banks are walking ahead again. Look back at Chart 1. Last winter the financials started falling in January while the S&P 500 drifted sideways, and in March the index finally gave out. Since August the same picture has formed: a sideways index and banks down about 9%. If the rhyme holds, the shop window is next.
  3. 1974. On paper the closest match to an oil shock with rising rates in a mid-term year is 1974, the worst mid-term on our chart at roughly −35%. Our own macro thesis says the 2030s will rhyme with the 1970s. Ignoring that rhyme in October would be convenient, and convenience is how investors get hurt.
  4. The short end of the calendar still points down. Nautilus’ composite measured from 20 August has negative average returns over the next ten days and the next month. October hosted 1929, 1987 and 2008, and since 1928 September and October have been the most volatile months of the year, particularly in mid-term years.
  5. Nineteen cycles is a small sample. Seasonal patterns are averages, and you can drown in a river that is one metre deep on average. The same goes for the breadth figures in Chart 2: a market where most members are already in a bear market can heal from below, or it can spread upwards into the leaders. ..............


Material Fare:

***** Conway: The Diesel Weapon
Why a rather unglamorous fuel is suddenly at the centre of a transatlantic power struggle, and why this matters for all of us

...................................... One of the reasons I wrote Trade World was that I needed a sort of user’s guide to geopolitics and economics over the coming decade. My suspicion was that, contrary to what many in Europe would like to believe, protectionism and geo-economics (of whatever you want to call it) would not go away after Donald Trump leaves office. Trade World is supposed to provide some answers, or at the very least some explanations or framing mechanisms, to help us all understand and interrogate why the world is the way it is today. If my suspicions are right, we will all have to think more deeply about all this stuff in the coming years, as energy policy and trade policy and politics collide on a frequent basis. This is the new world we inhabit.



A.I. Fare:

House Monopoly vs. House Speed Racer—and the citizen still not at the table

Winter is coming for the AI industry, and the great houses are already drawing swords

On one side sit OpenAI and Anthropic, wrapping themselves in the banner of “safety”…House Monopoly. On the other sit the accelerationists including David Sacks, President Trump, and a growing faction that wants the pathway cleared, not blocked…House Speed Racer. The fight is being sold as existential risk versus national destiny. This is a battle for power, money, and control. The average citizen is not at the table. .............



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(not just) for the ESG crowd:


I’ve been thinking lately about whether it is possible to save humans from the hotter climate that is advancing so quickly now. I see it entering that corner of the “J” curve—sometimes called the hockey stick—and knowing what I do about exponents, it is a scary moment. One thing I do know: if we do nothing, the worst will arrive. Doing whatever we can is required. ...............

We are not going to solve our way out of climate chaos one nation at a time, or one virtuous vegan at a time. Following the same primate behavioral programming that got us into this, our species is on track to bequeath to Earth a Hothouse Epoch that could last a million years. The “carbon budget” concept is a comforting fiction. We blew through that before most of the people reading this were born. Our remaining time is the only currency that matters now, and we are spending it like a drunk sailor at a titty bar.

It took two world wars and an atomic bomb to convince fifty-one proud, battered, well-armed, deeply suspicious nations that surrendering a sliver of their sovereignty might, on balance, beat vaporizing each other. That’s the UN’s origin story — not a triumph of idealism, but the diplomatic equivalent of two guys agreeing to stop fighting only after both have already lost an eye but are holding pistols to the other’s forehead. For seventy-five-plus years, this awkward arrangement has nudged the world toward settling some, not all, disputes with words instead of violence, which is, historically, not nothing. A quarter million souls with blue badges deliver vaccine jabs and food to starving, displaced people, every day.

I know it’s fashionable, especially among people who’ve never stood in a UNGA credentials line, to declare the whole enterprise ridiculous — a glorified debate club with some very old and decaying rules. And sure, it can look that way. Diplomacy is imperfect. I adore Kim Stanley Robinson’s Ministry for the Future, in which a plucky new UN body basically saves civilization through sheer competence and the occasional act of eco-terrorism. It’s a wonderful novel. It is also, notably, fiction.
We still have a chance to turn towards a safer, sustainable future. The impacts of breached Planetary Boundaries are already all around us, and they will continue to become more severe. But today, we still have a narrow window of opportunity. If we manage to bend the curves within this decade, we can put our societies on a course towards a safer, more just future. We have the tools, and we have taken steps in this direction, but our current efforts are far from sufficient. Only by pursuing urgent, ambitious, and decisive action across all sectors of our societies can we return to living within the Safe Operating Space on a healthy Planet.
—Planetary Health Check 2026
About those design flaws. Take the Security Council veto — one permanent member, one “no,” and the whole resolution goes up in smoke, no matter how the other fourteen voted. The Council’s actual job is to spot trouble somewhere on the planet and defuse it with mediation, sanctions, or — failing that — armed “peacekeepers.” Instead, five countries—the permanent members— hold a key that lets any one of them lock out the other 192.

This isn’t theoretical. Between late 2023 and mid-2025, the Joe Biden and Donald Trump delegations vetoed six separate resolutions calling for an immediate ceasefire in Gaza, then vetoed a resolution — backed by 143 member states and every other seat on the Council — that would have opened a path to UN membership for Palestine. One nation, one thumb, one downward gesture, and 143 votes evaporate. Russia has done the same trick for Ukraine, single-handedly blocking every resolution that dared use the word “condemn.” Russia and China have tag-teamed to shield North Korea’s missile program from international monitoring. And in a personal favorite bit of villain-monologue material, Russia vetoed a 2021 resolution that simply proposed formally classifying climate change as a threat to peace and security — as if naming the fire were the dangerous part.

Because amending the UN Charter itself requires the consent of all five permanent members, abolishing the veto is not just politically unlikely — it is insurmountable. It’s like giving the arsonist control of the fire exits.  ...................



Sci Fare:

There is growing concern that AI can blunt memory and reasoning. But science shows ways to keep the brain sharp.



U.S. B.S.:


Sanctions come with a cost. When the US, in Trump’s first term, put chip sanctions on China and particularly sanctioned Huawei (the leader in 5g networks), it galvanized China. They pivoted hard to supporting internal chip companies, and over time moved their government computers off US software. Huawei survived, prospered and created its own operating system. In the past couple years China has actually forbid import of US chips, though some still come in thru the gray market.

This isn’t an isolated issue. One of the reasons, ironically, that Iran is so strong in many ways is because of sanctions: they were forced to create their own industrial base, not just in weapons, but in things like railroads, engines, boilers, etc, etc… ..............

Every source of American power, for about 35 years, has been subject to systematic dismantling. Industry was offshored, they stopped refining and mining many key resources, sanctions were abused, dollar privilege was abused, and so on. Generally the external actions didn’t hit allies/vassals–until recently, but Trump has been on a tear: .............



Other Fare:


So, why are so many members of the elite pedophiles?

It starts with the fact that money or power gets you pretty much anything you want that’s legal. If you’ve wanted to do something, you can and you do. Hedonic adjustment sets in: if you can have all the boy toys and booze and fine homes and massages and trips and fine cuisine you want, after a while you get bored of it.

It comes second from “elite impunity”, the fact that in most countries a lot of laws aren’t enforced against rich or powerful people. Do crack, go to prison? Have a pricey cocaine habit, like half of American elites in the 80s, and you’re not touched. (Leaving aside immunities like being able to steal employees wages without usually being called on it, and when you are, not going to jail.)

The general observation is true: elites go to prison only when they prey on other elites. ..............

Wealth and power are deeply corrupting. They don’t corrupt everyone, but they can corrupt a plurality, and once the threshold where a plurality have been corrupted by evil acts, the system becomes self-sustaining: impossible to stop.

This is the sort of thing that Xi headed off. The Communist party and wealthy oligarchs were becoming corrupt, though as far as I know not yet to the level of pedophile rings. He headed it off with a savage crackdown.

Eventually some future leader will fail to do so, and China’s elites too will become corrupted: it’s a virtually universal experience.

And once you hit that point it generally requires revolution of one sort or another to clean up the mess.


Universe 25 and the Problem of Utopia

................... Universe 25 was taken to show (by Calhoun and others) that population growth was a significant danger to humans; that like mice, humans required not just the satisfaction of their physical needs, but also something more—something threatened by overpopulation. Calhoun recognized that human beings live not only in physical space, but also in what he called “conceptual space”: humans can use ideas to creatively engage in changes, mine natural resources, and manage social relations. But, he warned, this expansion of conceptual space might also have a “breaking point”: population density might limit human abilities to use conceptual space to overcome the disappearance of opportunities and physical space. And it might lead to humans who can perform all the normal functions of biological life, but who lack creativity and cannot endure challenges. ....................



More and more humans are suffering from empire psychosis.

People who can’t go ten minutes without checking their phones, losing hours a day to social media and mindless scrolling.

People talking to chatbots, learning about the world from them, learning about life from them, making friends with them, forming relationships with them.

Binging on podcasts, binging on streaming services, binging on video games, binging on apps, binging on vapes, binging on treats delivered to their door by underpaid workers from bombed-out countries.

The bread was designed in a lab to be furiously addictive, and the circuses track your preferences to serve you up all your favorite performances.

Empire psychosis keeps us in a constant state of distraction and escapism, always scrambling to avoid the here and now like we’re trying to climb out of our own skins.

It’s a frenzied discontentedness. A persistent delusion that satisfaction exists right around the corner after the next restless squirm. It’s an artificially manufactured mental disorder. And it’s worth trillions of dollars.

In the capitalist empire, there is no value to be generated by contented people. Our minds must be continually prodded and diddled to manipulate us out of our natural serenity so that we are in a constant state of toil and dissatisfaction, at all times reaching for the next fix of the next product. Clever manipulators have figured out how to generate vast fortunes by harnessing the restlessness they deliberately stir up within us.

We are psychologically hammered with advertisements and consumerist messaging from mainstream culture to convince us that we need more than we have and that we aren’t okay the way we are. That we’re not beautiful enough, not stylish enough, not successful enough, not abundant enough. The products are designed to be dependence-forming so we need to buy them, and they’re designed to quickly become obsolete so that we need to keep buying more.

They trick us out of our natural state of contentedness and then sell it back to us. They deceive us into leaving our home and then charge us an admission price to come visit.

Something went wrong. Humanity went off course. They enclosed the commons, colonized the new world, constructed a tiered society of haves and have-nots, and now we’re all living like space aliens on our own home planet.

We do not have to keep suffering from their man-made madness. We can do the inner work necessary to come back to our own contentedness, and we can do the outer work necessary to take back what the manipulators have stolen from us.

We don’t need to keep consenting to this abusive relationship any longer. A healthy world is our birthright. We will tear down the madness machine and stand at peace in the soil of the planet we were born on.



I strongly disagree with the idea that it’s unhelpful to bully celebrities about their position on Palestine. On the contrary, I think we should bully them more.

We tend to underestimate the consequences of the fact that all the most amplified voices in our society are millionaires. Under capitalism the people with the largest platforms and the biggest audiences are all wealthy enough to have a vested interest in preserving the status quo, so they’re reluctant to rock the boat politically in any major way.

When all the most influential voices in our society are creating the illusion that the system is more or less fine the way it is by what they say and what they don’t say, it cannot help but significantly influence public political opinion. In this way celebrities function as a kind of goalkeeper preventing dissident thought from reaching the minds of the masses.................

.......... Make it too uncomfortable to toe the imperial line and you’ll start seeing celebrities reluctantly follow the moral leadership of the public, thereby further weakening the vice-like grip of the imperial narrative control apparatus on our collective consciousness.

So we should do so happily and without hesitation. It is perfectly moral to ruin a millionaire’s day for both-sidesing a genocide. It is perfectly ethical to bully people with large platforms until they take a public stand against the abuses of the empire which has made them obscenely wealthy. It won’t solve all our problems, but it will weaken the power of the mass-brainwashing machine of the capitalist empire which has been manipulating the public into believing we don’t urgently need revolutionary change.





********** Joy In Twilight

This blog tends to cover grim events related to the fall of empire and the rise of a new hegemon: war, genocide, politics (sigh), climate change, poverty, starvation and so on.

Fun stuff!

The people who read this are, I hope, the realists: people who want to know how things will turn out, who want to understand how the world works; people who don’t want to live in illusions or false hope.

But in staring into the darkness there is always the danger of falling into, to becoming depressed and fearful and feeling powerless.

There’s no need for this: the world has always sucked. Oh, some times and places were better, but no matter what time you look at horrible things were always happening somewhere to some people. Empathy and compassion and realism are good, but it’s not a victory or admirable to lose ones ability to enjoy all the good that life offers. ............

............................ Don’t let the world make your miserable. Don’t let your awareness, compassion, empathy and intelligence be your enemy. Sup from the cup of happiness whenever and wherever you can. It’s happiness and joy we’re actually fighting for: that’s what we want for others, and its what we should want for ourselves.

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