***** 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. ..........
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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.”
COATUE: Publics Update
................. 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.
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.
Charts:
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6:
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9:
(not just) for the ESG crowd:
(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.:
***** Welsh: Buy, Borrow, Die—Another Way the Rich Avoid Taxes
................. 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:
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