Seems ominous. The Bank of Japan’s Friday 25 bps rate hike was widely expected. Yet 10-year JGB yields still jumped five bps to 2.02%, the high all the way back to February 17, 1999. It’s worth noting that Japan’s government debt-to-GDP ratio surged from 130% in 1999 to 221% (3/31/25). Curiously, the yen sank 1.4% on Friday’s “tightening”, the low versus the dollar back to January 14th.
December 19 – Financial Times (Leo Lewis): “Japan’s benchmark government bond yields hit their highest level since 1999 after the central bank pushed up short-term interest rates to address rising prices and wages. The Bank of Japan raised its policy rate by 0.25 percentage points to ‘around 0.75%’, a three-decade high, and signalled its readiness to continue monetary tightening if conditions are right. The rate increase, a unanimous decision by the bank’s Policy Board, was the fourth under governor Kazuo Ueda, continuing a ‘normalisation’ process he launched last year. The rate is the highest since 1995 as Japan emerges from decades when it maintained an ultra-loose monetary policy to try to fight deflation. Despite the prospect of further rate increases, the yen weakened against the dollar following the BoJ’s move.”
The yen closed the week less than 3% from July 2024’s multi-decade low (161.69) vs. the dollar (7/2/86) – during a period of yen devaluation following the September 1985 Plaza Accord.
December 15 – Bloomberg (Erica Yokoyama): “Japan’s finance minister sent a warning to speculators after the yen clearly weakened against the dollar, following the Bank of Japan’s rate hike decision… ‘I’m seeing one-sided and rapid FX movements over the course of half a day, or even within just a few hours, and I am deeply concerned,’ Finance Minister Satsuki Katayama told… ‘We will take appropriate responses against excessive currency movements, based on the US-Japan joint statement in September,’ she said.”
We’ll assume Finance Minister Katayama is only more concerned now than when she elevated her market warning in November, with the addition of “deeply concerned.” In the past, markets had a proclivity for testing government resolve to expend reserve holdings for often futile currency support operations.
With formidable international reserves, threats from Japan’s Ministry of Finance command market attention. But the power of policymakers threats operates under the laws of diminishing returns. It’s when governments are compelled to walk the walk that things tend to turn interesting: how much are they willing to spend, and will it be enough? Show time.
For the week, JGB yields jumped seven bps (to 2.02%). Again Friday, JGBs pulled global bond yields higher. German 10-year yields rose five bps Friday to 2.90% – the high since October 19th, 2023 – and within seven bps of the high back to July 2011. Meanwhile, German 30-year yields jumped seven bps to 3.55%, to the highest level since July 21, 2011. French 10-year yields rose four bps to 3.61%, the high since November 25th, 2011. French long bond (30yr) yields surged seven bps Friday to 4.52% – exceeding even the November 2011 European bond crisis spike, to the highest yield since June 10, 2009 (market nervousness on heavy global government debt issuance).
Treasury yields ended the week four bps lower at 4.15%, with yields declining three bps on Thursday’s weaker-than-expected November (“Swiss cheese”) CPI report.
December 19 – Wall Street Journal (Matt Grossman): “New York Fed President John Williams said Thursday’s… inflation report was likely distorted by technical factors, echoing a chorus of economists and confirming the central bank will be eager for further data ahead of its late January policy meeting… Before its next meeting, the Fed will get a look at December inflation data. With those figures, ‘I think we’ll get a better reading of how big that distortion – how big the effect was,’ Williams said.”
Year-end trading dynamics tend to muddle the analysis. With upward pressure on Japanese and global yields, it will be curious to gauge the Treasury market mood come January. I’ll assume the $1,776 “warrior dividend” is the opening salvo in midterm vote harvesting efforts. And I’ll stick with the analysis that so long as financial conditions remain so loose, surprises will be weighted to the upside for both growth and inflation. It’s reasonable to assume the Fed is on hold so long as markets hold “risk off” at bay (increasingly no easy feat).
December 19 – Bloomberg (Rita Nazareth): “The last stretch of a busy week for markets saw stocks climbing while traders faced the expiration of a record pile of options that threatened to amplify price swings. Bitcoin jumped. Bonds fell. A rally in several tech names that have been under scrutiny over their ambitious artificial-intelligence spending plans lifted equities… Nvidia Corp. led gains in megacaps. Oracle Corp. surged about 6.5%. More than 26 billion shares changed hands on US exchanges, about 50% above the 12-month average. Volume spiked amid a quarterly event known as triple witching — in which derivatives contracts tied to stocks, index options and futures mature. Citigroup Inc. estimated that $7.1 trillion of notional open interest would expire.”
Through the fog of year-end trading muddle, warnings of de-risking/deleveraging continue to flicker. Friday’s $2,200 rally cut bitcoin’s loss for the week to $2,550 (2.8%). Trading down to $84,413 late on Thursday, things were looking dicey. And speaking of “dicey,” the MAG7 index was down 2.1% in Wednesday’s session to a three-week low. Telsa dropped 4.6%, Nvidia 3.8%, and Alphabet 3.2%. Stocks rallied sharply in Thursday/Friday trading.
Oracle’s 5.4% Wednesday slump to a six-month low really had the market on edge. At Thursday’s close, the stock was down 45% from the September 22nd close. Oracle CDS gained six Wednesday to 156 bps, the high since 2009 – and up from the 57 bps level where it began Q4 (closed week at 145).
December 17 – Financial Times (Tabby Kinder and Rafe Rosner-Uddin): “Oracle’s largest data centre partner Blue Owl Capital will not back a $10bn deal for its next facility, as the software group faces increased concerns about its rising debt and artificial intelligence spending. Blue Owl had been in discussions with lenders and Oracle about investing in the planned 1 gigawatt data centre being built to serve OpenAI in Saline Township, Michigan. But the agreement will not go forward after negotiations stalled… The private capital group has been the primary backer for Oracle’s largest data centre projects in the US, investing its own money and raising billions more in debt to build the facilities. Blue Owl typically sets up a special purpose vehicle, which owns the data centre and leases it to Oracle.”
December 15 – Reuters (Niket Nishant): “The AI spending boom is entering a ‘dangerous’ phase as Big Tech firms increasingly tap external investors to cover mounting costs, a top executive at hedge fund giant Bridgewater Associates said… The warning underscores the degree of unease rippling through markets as several investors have begun to question the sustainability of massive capital spending on AI. While the technology has deeply permeated the economy, critics are beginning to wonder how severe the fallout could be if the boom fails to translate into tangible profits. ‘Going forward, there is a reasonable probability that we will soon find ourselves in a bubble,’ Bridgewater’s Co-Chief Investment Officer Greg Jensen wrote… With costs rising beyond what internal cash flows can support, companies are turning to outside sources of funding to pursue their ambitions.”
“The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system.” Coordinating national financial authorities on an international level, the FSB’s mission is to promote financial stability. With the Bank of England’s Andrew Bailey as chair, the organization is comprised of leading global central bankers and finance officials.
The FSB is the latest major regulatory body to highlight mounting systemic risks, this week with the timely publication of its “Global Monitoring Report on Nonbank Financial Intermediation 2025.” This exceptional report’s 87 pages are full of pertinent data, tables, charts, and informative narrative. While failing to do anything about it, global officials have at least made commendable headway in compiling and monitoring financial excess.
December 15 – Financial Times (Martin Arnold): “The value of assets held by insurers, private credit providers, hedge funds and other non-bank financial groups grew at more than double the rate of those in the banking sector last year as concerns grow about the opacity and potential risks posed by the sector. The assets of these non-bank groups rose in value by 9.4% to $256.8tn in 2024, meaning they accounted for more than half of global financial assets for the first time since the Covid-19 pandemic… By contrast, the value of heavily regulated banks’ assets rose 4.7% to just over $191tn in 2024, the Financial Stability Board said. The figures come as supervisors grow increasingly concerned about the opacity and potential risks non-bank groups could present, as well as their links back to the traditional banking system.”
December 15 – Bloomberg (Laura Noonan): “Global assets in the sprawling shadow banking sector have crossed the $250 trillion mark for the first time…, fueling fears of mounting systemic risks from less regulated corners of the financial sector. The FSB’s annual global financial monitor shows non bank financial institutions — a group that spans hedge funds, insurers, investment funds and others — had a record $256.8 trillion of assets at the end of 2024… The group now accounts for 51% of total financial assets… Within non banks, the fastest growth was in trust companies, hedge funds, money market funds and other investment funds, which all posted double digit rates of growth…”
Short of time for a comprehensive review, I’ve extracted a few passages:
“Hedge fund assets increased 19.2% globally, and the increase in Cayman Islands hedge fund assets accounted for 90.7% of the aggregate increase. This increase occurred despite the number of hedge funds in the Cayman Islands decreasing, and reflected changes in investment types, notably a significant increase in investments in master funds.”
“Bank financing of offshore hedge funds or private credit funds, for instance, can be systemically significant yet remain outside standard sectoral statistics.”
“…Recent analysis for the United States highlights a gap between U.S. Treasury International Capital data on hedge fund holdings of U.S. Treasuries, which could only be identified by combining various data sources. The analysis found that hedge fund positions appear increasingly concentrated offshore in the Cayman Islands.”
“…Regulatory data may contain gaps if non-domestic subsidiaries or branches providing prime brokerage services abroad are not captured by domestic reporting requirements. Commercial data based on voluntary reporting may be incomplete and lack robust quality assurance.”
“Regulatory data on private markets, such as private equity, private credit, and hedge funds, remain incomplete in several jurisdictions. Significant cross-border data blind spots persist, as exposures of domestic banks to foreign hedge funds, private credit funds, or offshore affiliates are frequently excluded from local reporting frameworks or available only in aggregated form. Some authorities note that derivatives, repo, and other securities financing transactions involving non-resident entities are only partially captured due to limitations in regulatory scope. Jurisdictions hosting large international financial centres also highlight that many domestic entities are managed from abroad, limiting access to transactional or counterparty-level data. In addition, regulatory and operational fragmentation, such as derivatives trades being cleared or reported in other jurisdictions, creates further challenges in tracing exposures and identifying foreign counterparties.”
EF1 [$58 TN of “collective investment vehicles with features that make them susceptible to runs”] growth rates above 20% were experienced in several advanced economies (Hong Kong, Italy, and the Cayman Islands) and emerging market economies (Chile, China and Mexico)… Hong Kong registered a 47.4% increase, driven by net MMF inflows… Italy’s growth of 20.2% was mainly driven by inflows into fixed income funds… Chile’s 26.1% growth was driven by inflows… Mexico’s 20.1% growth was driven by inflows into fixed income funds… The United States continued to account for the largest share of EF1, followed by the Cayman Islands, China, Luxembourg, and Ireland – together accounting for 79.0% of EF1 assets.”
“Annex 4: Main development per major NBFI subsectors” was especially informative. By subsectors, Insurance Corporations expanded 6.0% y-o-y – with AEs/Advanced Economies growth of 6.0% vs EME/Emerging Market Economies at 13.8% – to $38.9 TN. Pension Funds grew 6.9% y-o-y (AEs 6.6%; EMEs 15.9%) to $44.1 TN; Finance Companies 5.7% (4.5%; 12.0%) to $7.5 TN; Broker/Dealers 2.9% (2.8%; 4.3%) to $12.7 TN; and Structured Finance 6.7% (6.1%; 38.9%) to $6.5 TN. Solid growth, but nothing all that earth shattering.
Things get more interesting, however, with MMFs/Money Market Funds, Hedge Funds, Other Investment Funds, and Trust Companies. These subsectors, central to the Bubble thesis, reveal growth true to major Bubble dynamics.
Global “MMFs” surged 15.0% y-o-y to $12.1 TN, with AEs growth at 13.6% and EMEs at 21.7%. Hedge Funds surged 19.2% to $11.3 TN (AEs 14.2%; EMEs 18.5%). Other Investment Funds (excluding MMFs, hedge funds, and REITs) expanded 14.5% y-o-y to $69.1 TN (AEs 14.2%; EMEs 18.5%). And Trust Companies ballooned 20.8% to $4.9 TN (8.4%; 23.6%).
In this data, we see not only confirmation of the money market fund/hedge fund nexus as this cycle’s prevailing source of speculative leverage and market liquidity. Data also confirms the thesis that this monetary inflation evolved into a powerful global phenomenon. Amazingly, extraordinary growth in advanced economy securities finance is outstripped by bubbling emerging markets.
December 19 – Reuters (Chris Prentice and Marisa Taylor): “Days after being sworn in as President Donald Trump’s appointee at a top U.S. housing agency, Bill Pulte began cleaning house. Since taking over the Federal Housing Finance Agency in March, Pulte has driven out hundreds of employees from the mortgage regulator and Fannie Mae and Freddie Mac… Pulte has supplanted industry veterans with politically or personally connected advisors, including a business partner of Trump’s eldest son and a former registered sex offender who campaigned for the Republican president… ‘This reliance on a buddy system – in which people are getting into positions because of their political or personal connections – is unprecedented at these organizations,’ said Richard Painter, a Bush administration ethics attorney who co-authored a book about ethical lapses in the banking industry and the 2008 crisis. ‘It’s a potentially explosive and dangerous situation that could be damaging not only to the mortgage industry but to our economy as a whole’.”
In federal conservatorship since 2008 – and these days regulated by Bill Pulte’s Federal Housing Finance Agency – Fannie Mae and Freddie Mac continue to fatten into only more powerful financial institutions. Combined total assets (including guaranteed MBS) ended the third quarter at $7.804 TN. I’ll be closely monitoring GSE activities as we head into next year’s midterms. They’re certainly off to a forceful start. In the four months, July through October, Fannie’s retained mortgage portfolio (loans not sold to investors) surged $27.0 billion, or 32%, to $111.8 billion. Freddie’s retained portfolio jumped $25.2 billion, or 26%, to $121.75 billion. This places combined four-month retained portfolio growth at $52.2 billion, or 86% annualized.
For the Week:
The S&P500 was little changed (up 16.2% y-t-d), while the Dow dipped 0.7% (up 13.1%). The Utilities slipped 0.3% (up 12.5%). The Banks added 0.4% (up 29.7%), while the Broker/Dealers declined 1.3% (up 29.2%). The Transports increased 0.3% (up 10.5%). The S&P 400 Midcaps were unchanged (up 7.3%), while the small cap Russell 2000 lost 0.9% (up 13.4%). The Nasdaq100 rallied 0.6% (up 20.6%). The Semiconductors increased 0.5% (up 41.9%). The Biotechs gained 1.8% (up 28.7%). With bullion up $39, the HUI gold index added 2.3% (up 160.2%).
Three-month Treasury bill rates ended the week at 3.5225%. Two-year government yields declined four bps to 3.48% (down 76bps y-t-d). Five-year T-note yields fell five bps to 3.69% (down 69bps). Ten-year Treasury yields declined four bps to 4.15% (down 42bps). Long bond yields dipped two bps to 4.83% (up 4bps). Benchmark Fannie Mae MBS yields dropped 11 bps to 5.07% (down 77bps).
Italian 10-year yields rose four bps to 3.59% (up 6bps y-t-d). Greek 10-year yields added a basis point to 3.47% (up 25bps). Spain’s 10-year yields increased two bps to 3.33% (up 27bps). German bund yields gained four bps to 2.90% (up 53bps). French yields rose four bps to 3.61% (up 42bps). The French to German 10-year bond spread was little changed at 71 bps. U.K. 10-year gilt yields added one basis point to 4.52% (down 4bps). U.K.’s FTSE equities index jumped 2.6% (up 21.1% y-t-d).
Japan’s Nikkei 225 Equities Index dropped 2.6% (up 24.1% y-t-d). Japan’s 10-year “JGB” yields jumped seven bps to 2.02% (up 92bps y-t-d). France’s CAC40 advanced 1.0% (up 10.4%). The German DAX equities index added 0.4% (up 22.0%). Spain’s IBEX 35 equities index gained 1.9% (up 48.1%). Italy’s FTSE MIB index jumped 2.9% (up 30.9%). EM equities were mixed. Brazil’s Bovespa index fell 1.4% (up 31.7%), and Mexico’s Bolsa index declined 1.2% (up 29.2%). South Korea’s Kospi dropped 3.5% (up 67.6%). India’s Sensex equities index slipped 0.4% (up 8.2%). China’s Shanghai Exchange Index was about unchanged (up 16.1%). Turkey’s Borsa Istanbul National 100 index added 0.3% (up 15.4%).
Federal Reserve Credit increased $11.7 billion last week to $6.502 TN. Fed Credit was down $2.388 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.776 TN, or 74%. Fed Credit inflated $3.691 TN, or 131%, since November 7, 2012 (684 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt declined $6.5 billion last week to $3.074 TN. “Custody holdings” were down $201 billion y-o-y, or 6.2%.
Total money market fund assets (MMFA) gained $10.7 billion to a record $7.666 TN – with a 20-week surge of $590 billion, or 21.4% annualized. MMFA were up $895 billion, or 13.2%, y-o-y – and ballooned a historic $3.034 TN, or 65.5%, since October 26, 2022.
Total Commercial Paper jumped $11.1 billion to $1.325 TN. CP has expanded $168 billion, or 14.5%, y-o-y.
Freddie Mac 30-year fixed mortgage rates slipped a basis point to 6.21% (down 51bps y-o-y). Fifteen-year rates fell seven bps to 5.47% (down 45bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up two bps to 6.55% (down 71bps).
Currency Watch:
December 18 – Bloomberg (Tian Chen and Susie Kang): “In South Korea, calls for action to stem the won’s decline are getting louder by the day. On Thursday, the finance ministry warned of increased volatility and said it would take swift measures if needed, while the government eased FX rules to boost onshore dollar liquidity. Presidential policy chief Kim Yong-beom is set to hold an emergency meeting with seven conglomerates to discuss FX issues… The pressure comes as the currency nears the psychologically important 1,500 level — a threshold breached only during the global financial crisis and the Asian currency meltdown in 1997 — even after authorities leaned on a raft of familiar defenses in recent months.”
For the week, the U.S. Dollar Index increased 0.3% to 98.718 (down 9.0% y-t-d). On the upside, the South African rand increased 0.7%, the British pound 0.1%, and the Swedish krona 0.1%. On the downside, the Brazilian real declined 2.3%, the Japanese yen 1.2%, the New Zealand dollar 0.9%, the Australian dollar 0.6%, the euro 0.3%, the Canadian dollar 0.2%, the Mexican peso 0.2%, the Singapore dollar 0.1%, and the Norwegian krone 0.1%. China’s (onshore) renminbi increased 0.20% versus the dollar (up 3.67% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index slipped 0.2% (up 10.2% y-t-d). Spot Gold added 0.9% to $4,339 (up 65.3%). Silver surged 8.4% to $67.16 (up 132%). WTI crude declined 78 cents, or 1.4%, to $56.66 (down 21.0%). Gasoline fell 2.5% (down 16%), and Natural Gas dropped 3.1% to $3.984 (up 10%). Copper rallied 2.8% (up 37%). Wheat sank 4.6% (down 8%), while Corn jumped 2.8% (down 3%). Bitcoin lost $2,500 or 2.8%, to $87,800 (down 6.3%).
Market Instability Watch:
December 19 – Bloomberg (Rita Nazareth): “The last day of a busy week on Wall Street saw small gains for stocks as traders braced for a consumer sentiment reading and the expiration of a record pile of options that threatens to trigger sudden price swings. Bitcoin rallied. Bonds fell. Wall Street faces a quarterly episode ominously known as triple witching — in which derivatives contracts tied to stocks, index options and futures mature — compelling traders en masse to roll over their existing positions or to start new ones. This time around $7.1 trillion of notional open interest rolls off across the US options market…”
December 16 – Financial Times (Claire Jones, Amelia Pollard and Adrienne Klasa): “Citadel’s chief executive Ken Griffin has called for Donald Trump to create ‘distance’ between the Federal Reserve and the White House, highlighting investor angst that the US president will pick a close ally to chair the central bank. ‘The most important move the president and the incoming Fed chairman can make… is to create distance between the White House and the Fed,’ the billionaire hedge fund manager said… when asked whether Kevin Hassett, a White House economic adviser, should lead the Fed.”
December 18 – Bloomberg (Simon White): “A more discordant Federal Reserve next year increases the likelihood of higher short-term rate volatility, posing a risk to the basis trade and inflating Treasury funding costs. It’s going to be a year of flux for the Fed. A new chair is set to be more beholden to the White House and the Treasury, while individual members might be more willing to assert their independence. Short-term rates would face more volatility, increasing the risk of the repo-funded basis trade unwinding, and raising the cost of government funding as it deepens its dependence on shorter-term debt.”
December 14 – Bloomberg (Vinicius Andrade and Carter Johnson): “Big investors say that carry trades across emerging markets have further to run in 2026 following a blockbuster year for the popular strategy. Ebbing volatility in foreign exchange markets and a weak US dollar provided fertile ground for the trade, where investors borrow in low-yielding currencies to buy those offering a higher payout. One Bloomberg measure of the strategy has returned some 17% this year, the biggest gain since 2009. A bevy of asset managers and banks — from Vanguard Group Inc. to Invesco Ltd. and Goldman Sachs Group Inc. to Bank of America Corp. — expect the gap between rates in developed and emerging markets to persist next year…”
December 17 – Financial Times (Joshua Franklin): “JPMorgan… has withdrawn almost $350bn in cash from its account at the Federal Reserve since 2023 and ploughed much of it into US government debt… JPMorgan, which has more than $4tn in assets, slashed its balance at the Fed from $409bn at the end of 2023 to just $63bn in the third quarter of this year… The bank increased its holdings of US Treasuries over the same period from $231bn to $450bn, a move that allowed it to lock in higher yields in anticipation of the central bank cutting interest rates.”
U.S. Credit Trouble Watch:
December 15 – Wall Street Journal (Robbie Whelan): “CoreWeave, the largest of a new breed of companies driving the artificial-intelligence boom, has watched $33 billion of value vaporize in six weeks. The share-price plunge of 46% comes as investors worry about a possible AI bubble, the fallout from a failed merger and public criticism from high-profile short seller Jim Chanos, known for predicting the collapse of Enron.”
December 17 – Bloomberg (Reshmi Basu and Eliza Ronalds-Hannon): “First Brands Group has appealed to lenders for as much as $800 million in new financing to keep the auto-parts supplier afloat long enough to restructure in bankruptcy court. The company is huddling with existing creditors in a bid to raise the new cash… First Brands is also mulling sales of non-core assets…”
December 17 – CNBC (Yun Li): “U.S. prosecutors charged top executives of bankrupt subprime auto lender Tricolor Holdings with what they described as a yearslong, ‘systematic fraud’ scheme that sent shockwaves through the banking sector earlier this year. In an indictment unsealed in Manhattan, prosecutors allege that from at least 2018 through September 2025, founder and CEO Daniel Chu and chief operating officer David Goodgame orchestrated a series of fraudulent schemes that let Tricolor obtain billions of dollars from lenders and investors by misrepresenting the value of its loan collateral.”
December 13 – Financial Times (Claire Jones and Andrew Jack): “More than 9mn US student loan holders have missed at least one payment this year, as delinquencies in the $1.7tn market soar following the end of the Biden administration’s post-pandemic payments holiday. The government’s Financial Stability Oversight Council said… student loans were ‘a notable exception’ to low default rates on other loans held by American households.”
Global Credit and Financial Bubble Watch:
December 17 – Bloomberg (Vinicius Andrade and Cristiane Lucchesi): “Latin American bond sales have shattered forecasts from investment bankers who had predicted, at best, modest growth in a year of heightened volatility… Companies and governments from the region sold just over $184 billion of debt abroad so far this year, a jump of almost 50% from 2024. The figures are a record… back to 2014…, but longtime market watchers — themselves stunned by the surge — say it’s likely the best year ever. ‘That is going to be the absolute record, since the 1990s when the whole market evolved,’ said Lisandro Miguens, head of debt capital markets for Latin America at JPMorgan…, where he’s been for 33 years.”
December 17 – Bloomberg (Ameya Karve and Charles Williams): “Money managers have sold a record amount of bonds backed by portfolios of leveraged loans this year, profiting from heavy demand from investors for higher-yielding loans funding buyouts in a form that offers extra protections. Sales of collateralized loan obligations — or CLOs — have hit $201.5 billion this year, a fresh record and up from last year’s $201.2 billion… Most of the securities were backed by senior secured bank loans… The deluge of US new CLO issuance is seen extending into 2026 too… BNP Paribas SA expects new CLO sales to reach $215 billion next year, while Bank of America Corp. forecasts $195 billion of fresh issuance.”
December 13 – Bloomberg (Rainier Harris): “Fear is drifting out of the corporate-bond market again, even if the risks aren’t. US high-grade spreads touched 0.76 percentage point earlier this week, their tightest levels since October and close to their highest valuation in decades. They’ve been narrowing since late November. The cost of hedging in the North American high-grade credit derivatives market has been declining in recent weeks as well.”
Trump Administration Watch:
December 17 – Associated Press (Josh Boak): “President Donald Trump delivered a politically charged speech Wednesday carried live in prime time on network television, seeking to pin the blame for economic challenges on Democrats while announcing he is sending a $1,776 bonus check to U.S. troops… The remarks came as the nation is preparing to settle down to celebrate the holidays, yet Trump was focused more on divisions within the country than a sense of unity. His speech was a rehash of his recent messaging that has so far been unable to calm public anxiety about the cost of groceries, housing, utilities and other basic goods… Trump suggested that his tariffs… would fund a new ‘warrior dividend’ for 1.45 million military members, a payment that could ease some of the financial strains for many households.”
December 17 – Wall Street Journal (Siobhan Hughes, Lindsay Wise and Richard Rubin): “Four vulnerable House Republicans rebelled against Speaker Mike Johnson (R., La.) and backed a Democratic effort to force a vote on extending Affordable Care Act subsidies, exposing GOP fractures over surging healthcare costs headed into next year’s midterm elections… The lawmakers acted after the GOP leaders blocked votes on compromise measures aimed at extending and trimming the subsidies, saying the needs of their voters were urgent. The open split among Republicans shows the challenges facing the party, with about 20 million people on ACA plans facing higher costs because of the expiration of the enhanced subsidies at the end of this month.”
December 17 – Reuters (Richard Cowan, Bo Erickson and Nolan D. McCaskill): “An expanded U.S. federal healthcare subsidy that grew out of the pandemic is all but certain to expire at the year’s end as the House of Representatives advanced a Republican healthcare bill… that would not renew the tax credit.”
December 17 – Wall Street Journal (Benoit Faucon, Costas Paris and Shelby Holliday): “Venezuela has long used the same playbook as Russia and Iran to get around crippling American sanctions on its oil industry, tapping a shadowy fleet of aging vessels to carry crude to customers. President Trump’s partial oil blockade threatens to devastate this black market… U.S. officials said the military would be going after a network of ships already sanctioned by the Treasury Department. Such tankers account for about 70% of Venezuela’s oil exports, mostly sent to Asian buyers who pay in cryptocurrencies, Venezuelan economist Asdrúbal Oliveros said…”
December 17 – Axios (Marc Caputo): “President Trump designated Venezuela a ‘foreign terrorist organization’… and formally ordered a blockade of all U.S. sanctioned oil tankers servicing the country. Trump’s newest escalation, backed by a giant U.S. armada, exerts unprecedented pressure on Venezuelan leader Nicolás Maduro’s regime, threatening to bankrupt the country’s already struggling economy. ‘Venezuela is completely surrounded by the largest Armada ever assembled in the History of South America. It will only get bigger, and the shock to them will be like nothing they have ever seen before,’ Trump said… About 18 tankers under U.S. sanctions that are fully loaded with oil currently lie within Venezuelan waters and eight are classified as ‘Very Large Cargo Container’ ships like the tanker… the U.S. seized last week.”
December 15 – Reuters: “Venezuela’s state-run oil company PDVSA has been subject to a cyberattack, it said… Tensions are high between the U.S. and Venezuelan governments, amid a large-scale U.S. military buildup in the southern Caribbean, U.S. strikes on alleged drug trafficking boats and comments from U.S. President Donald Trump that land operations may begin soon in Venezuela.”
December 18 – Bloomberg (Scott Carpenter and Katy O’Donnell): “The Trump administration’s goal of releasing housing giants Fannie Mae and Freddie Mac from government control will take far longer than many investors realize, and there are underappreciated risks for retail traders who’ve driven a threefold surge in their shares, according to… Bloomberg Intelligence… It will take ‘months if not years’ to complete critical steps such as revising the capital requirements for the two government-sponsored enterprises, the report says. Bloomberg Intelligence estimates there’s a roughly one-in-three chance the job won’t get done before President Donald Trump leaves office — and says the chances of that outcome are rising.”
December 17 – Bloomberg (Zahra Hirji, Eric Roston, and Will Wade): “The US plans to dismantle the National Center for Atmospheric Research, a key climate-science hub in Boulder, Colorado, which the Trump administration says strayed from its mission decades ago by taking up climate change research. The announcement came as a shock to the scientific community as well as Colorado officials… Russell Vought, director of the Office of Management and Budget, said… the center, which is sponsored and funded by the National Science Foundation, would be dismantled. A senior White House official… called NCAR a stronghold for left-wing climate activism.”
December 16 – Associated Press (Rebecca Santana): “The Trump administration announced… it was expanding travel restrictions to an additional 20 countries and the Palestinian Authority, doubling the number of nations affected by sweeping limits announced earlier this year on who can travel and emigrate to the U.S. The Trump administration included five more countries as well as people traveling on documents issued by the Palestinian Authority to the list of countries facing a full ban on travel to the U.S. and imposed new limits on 15 other countries.”
December 19 – CNN (Kaanita Iyer and Betsy Klein): “New signage was installed Friday at Washington, DC’s performing arts center on Friday to include President Donald Trump’s name. It comes after the institution’s board of trustees voted a day earlier to rename the facility to honor the president. The building, known as the John F. Kennedy Center for the Performing Arts, has been renamed by the trustees to the Donald J. Trump and The John F. Kennedy Memorial Center for the Performing Arts. The center’s social media accounts were also updated on Friday to reflect the new name.”
“A very sad thing happened last night in Hollywood. Rob Reiner, a tortured and struggling, but once very talented movie director and comedy star, has passed away, together with his wife, Michele, reportedly due to the anger he caused others through his massive, unyielding, and incurable affliction with a mind crippling disease known as TRUMP DERANGEMENT SYNDROME, sometimes referred to as TDS. He was known to have driven people CRAZY by his raging obsession of President Donald J. Trump, with his obvious paranoia reaching new heights as the Trump Administration surpassed all goals and expectations of greatness, and with the Golden Age of America upon us, perhaps like never before. May Rob and Michele rest in peace!” Donald J. Trump, December 15, 2025
China Trade War Watch:
December 17 – Reuters (Fanny Potkin): “In a high-security Shenzhen laboratory, Chinese scientists have built what Washington has spent years trying to prevent: a prototype of a machine capable of producing the cutting-edge semiconductor chips that power artificial intelligence, smartphones and weapons central to Western military dominance, Reuters has learned. Completed in early 2025 and now undergoing testing, the prototype fills nearly an entire factory floor. It was built by a team of former engineers from Dutch semiconductor giant ASML (ASML.AS), opens new tab who reverse-engineered the company’s extreme ultraviolet lithography machines or EUVs… EUV machines sit at the heart of a technological Cold War.”
Trade War Watch:
December 14 – Politico (Paroma Soni): “President Donald Trump promised that a wave of emergency tariffs on nearly every nation would restore ‘fair’ trade and jump-start the economy. Eight months later, half of U.S. imports are avoiding those tariffs. ‘To all of the foreign presidents, prime ministers, kings, queens, ambassadors, and everyone else who will soon be calling to ask for exemptions from these tariffs,’ Trump said in April…, ‘I say, terminate your own tariffs, drop your barriers, don’t manipulate your currencies.’ But in the time since the president gave that Rose Garden speech…, enormous holes have appeared. Carve-outs for specific products, trade deals with major allies and conflicting import duties have let more than half of all imports escape his sweeping emergency tariffs. Some $1.6 trillion in annual imports are subject to the tariffs, while at least $1.7 trillion are excluded, either because they are duty-free or subject to another tariff…”
December 14 – New York Times (Eshe Nelson and Ana Swanson): “When Britain became the first country to reach a trade agreement with President Trump in May, critics warned that the terms were loose and the commitments vague. Now, the risks of that ambiguity are becoming apparent. The United States informed the British government this month that it would pause fulfilling a technology-related agreement between the two countries, which included more collaboration on artificial intelligence and nuclear energy… The move came because American officials felt that Britain wasn’t making sufficient progress in lowering trade barriers, as promised in the May trade agreement…”
December 15 – Financial Times (Peter Navarro): “Mexico’s decision last week to impose tariffs of up to 50% on a wide swath of Chinese and other Asian imports is more than a neighbourhood scuffle. It is a major milestone in President Trump’s trade revolution — and in the postwar international trading system itself. Now, one of America’s closest trading partners is openly aligning its tariff wall with the US to block Beijing’s predatory export machine. Mexico’s Senate has approved new duties on more than 1,400 products, from autos and steel to plastics and textiles, targeting countries like China that lack trade agreements with Mexico. The message from Mexico City is unmistakable: if you want preferential access to the US-Mexico-Canada region, you can’t be a front door — or a back door — for Chinese dumping.”
Budget Watch:
December 17 – Reuters (Patricia Zengerle): “The U.S. Senate voted overwhelmingly… to advance a $901 billion bill setting policy for the Pentagon, sending the massive piece of legislation to the White House, which has said President Donald Trump will sign it into law. The fiscal 2026 National Defense Authorization Act, or NDAA, is a compromise between separate measures passed earlier this year in the House of Representatives and Senate. It authorizes a record $901 billion in annual military spending, with a 4% pay raise for the troops.”
U.S./Russia/China/Europe/Iran Watch:
December 15 – Wall Street Journal (Max Colchester and Bertrand Benoit): “European security officials now regularly broadcast a message nearly unimaginable a decade ago: Get ready for conflict with Russia. Rarely a week goes by now without a European government, military or security chief making a grim speech warning the public that they are headed toward a potential war with Russia. It is a profound psychological shift for a continent that has rebuilt itself after two world wars by trumpeting a message of harmony and joint economic prosperity. Over the weekend, German Chancellor Friedrich Merz compared Russian President Vladimir Putin’s strategy in Ukraine to that of Hitler in 1938, when he seized the German-speaking Sudetenland region of Czechoslovakia before pressing on to conquer a large chunk of the continent. ‘If Ukraine falls, he won’t stop. Just like the Sudetenland wasn’t enough in 1938,’ Merz told a party conference…”
December 17 – Politico (Sascha Roslyakov): “Russian President Vladimir Putin called European leaders ‘little pigs’ who wanted to profit from the collapse of Russia. In the comments, made on the eve of a critical meeting of EU leaders to hash out a deal to secure funding for Ukraine, the Russian leader said Europe wanted to get back ‘something they’ve lost in previous historic periods and to take revenge’ on Russia… Putin blamed former U.S. President Joe Biden for ‘consciously’ unleashing the war in Ukraine and said that the ‘European little pigs’ immediately backed the Americans.”
December 14 – Financial Times (Henry Foy and Barbara Moens): “Donald Trump’s assault on the EU has opened rifts within the bloc’s executive and set national leaders at odds, threatening to paralyse Europe’s response over fears that standing up to the US will hurt Ukraine. Trump has lambasted EU leaders as ‘weak’ and issued a security strategy that called for ‘cultivating resistance’ on the continent, reflecting disdain for European institutions that his officials see as ‘adverse’ to US interests and bent on ‘civilisational suicide’. The co-ordinated attack on the EU this month… prompted widespread shock inside the European Commission and disagreement over how to respond, according to officials.”
December 16 – Wall Street Journal (Costas Paris): “President Trump’s push to loosen China’s influence in the Panama Canal has hit a wall now that Beijing is demanding that China’s largest shipping company get a controlling stake in a deal to sell dozens of ports to a BlackRock-led group. The proposed sale includes two ports at the Panama Canal and more than 40 others around the world, all controlled by Hong Kong-based CK Hutchison.”
China vs. Japan Watch:
December 13 – Bloomberg: “China warned against a return of Japanese militarism at a memorial ceremony Saturday honoring victims of a wartime massacre, while refraining from directly criticizing Japan’s leader amid escalating tensions between the two nations. Speaking at a ceremony in Nanjing, Politburo member Shi Taifeng recounted the violence of the Japanese capture of the city in December 1937. He said that under the leadership of the Communist Party, China had then beaten the invaders and become a great nation. Shi, who heads the party’s powerful organization department, also said that any attempt to revive ‘militarism’ and undermine the postwar order would fail.”
New World Order Watch:
December 19 – New York Times (Patricia Cohen): “Despite being swatted about like a tetherball by ever-shifting trade wars, shortages of critical minerals and tense standoffs between the United States and China, the global economy has turned out to be more resilient than predicted. But don’t think that it’s time to take a breath. The whirligig shows no sign of stopping. ‘We are living through a singularly turbulent time,’ said Daron Acemoglu, an economist at M.I.T. who won the Nobel in economic science last year. Transformational changes continue to rattle the global economy, including the revolution in artificial intelligence, rapidly aging populations, climate change, and a worldwide turn against liberal democracy and a rules-based international order.”
Ukraine War Watch:
December 16 – Wall Street Journal (Laurence Norman and Daniel Michaels): “European leaders rallying support for Kyiv say they are working to defend a democratic country, safeguard international law and counter Russian aggression. But there is another motivation rooted in self-interest: Europe believes a deal that favors Moscow risks a wider war that could engulf the whole continent. Russia is in a position to emerge from peace negotiations with vastly expanded military production capacity, confident it can redraw borders by force and viewing NATO as weak. Cash-drained European capitals fear they would have no other choice but to massively increase military spending and defensive preparations… President Trump and his team want a quick settlement to the conflict… For Europe, as much as for Ukraine, a bad peace deal that leaves Kyiv weak and vulnerable is worse than no deal at all for now. ‘The future of Ukraine is closely linked with our own,’ said German Defense Minister Boris Pistorius… ‘If we cannot achieve lasting and just peace for Ukraine, we will not have any guarantee for our own security either,’ he told a virtual gathering…”
December 15 – Reuters (Dan Peleschuk): “Three-quarters of Ukrainians reject major concessions in any peace deal, a Kyiv pollster said on Monday, highlighting the challenge facing President Volodymyr Zelenskiy as he negotiates under White House pressure to end the war with Russia. Ukraine has sought to push back on an original U.S.-backed plan it and its European allies saw as favourable to Moscow, which is demanding that Kyiv give up its entire eastern Donbas region and significantly restrict its military capabilities. The poll, by the Kyiv International Institute of Sociology, found that 72% of Ukrainians were prepared for a deal that froze the current front line and contained some compromises. However, 75% believed a Russia-friendly plan that included Ukraine ceding territory or capping the size of its army without receiving clear security guarantees was ‘completely unacceptable’.”
December 15 – Financial Times (Christopher Miller and Anastasia Stognei): “Ukraine’s security service… claimed responsibility for a first-of-its kind ‘special operation’ that it said critically damaged a Russian submarine in Novorossiysk, a key naval hub on Russia’s Black Sea coast. A Security Service of Ukraine (SBU) official told the Financial Times that the agency had deployed underwater drones together with the Ukrainian Navy to hit the Russian Kilo-class submarine known as the 636.3 Varshavyanka.”
December 19 – Bloomberg (Olesia Safronova): “Ukraine for the first time hit an oil tanker from Russia’s shadow fleet in the Mediterranean Sea, a fresh escalation in its drone strikes on ships helping carry barrels for Moscow. The 820-foot Qendil was hit more than 1,200 miles from Ukraine’s borders and was empty at the time, a person familiar with the matter said…”
December 15 – Reuters (Dan Peleschuk): “Ukrainian long-range drones struck a Russian oil production platform in the Caspian Sea for the third time in a week, a security source told Reuters… The latest attack involved the Korchagin oil rig…”
December 17 – Financial Times (Max Seddon in Berlin, Christopher Miller in Kyiv and Henry Foy): “Vladimir Putin has said Russia will not back down from its mission to ‘liberate its historic lands’ and predicted the European ‘swine’ backing Kyiv would ultimately lose power, in a speech that showed no readiness to compromise on the goals for his invasion of Ukraine. Russia’s president told a gathering of senior defence ministry officials… that his forces held the strategic advantage across the frontline and could step up their offensive almost four years into his full-scale invasion. The comments underscored Putin’s unwillingness to end the war on any terms other than the maximalist goals he set out when he ordered the invasion in 2022, which sought to all but end Ukraine’s existence as an independent state.”
Taiwan Watch:
December 19 – Bloomberg: “China reiterated that US weapons sales to Taiwan raise the chances of a clash between the superpowers — underscoring its displeasure after Washington approved a deal worth up to $11 billion. The military assistance served to ‘put the people in Taiwan on a powder keg, push the Taiwan Strait toward danger and inevitably increase the risk of China-US conflict and confrontation,’ Foreign Ministry spokesman Guo Jiakun said… ‘Any move of arming Taiwan will face serious consequences,’ he said…. Guo again said his nation ‘will take all measures necessary to safeguard national sovereignty and territorial integrity,’ without elaborating.”
December 18 – Associated Press (Matthew Lee and Simina Mistreanu): “President Donald Trump’s administration has announced a massive package of arms sales to Taiwan valued at more than $10 billion that includes medium-range missiles, howitzers and drones, drawing an angry response from China… If approved by Congress, it would be the largest-ever U.S. weapons package to Taiwan, exceeding the total amount of $8.4 billion in U.S. arms sales to Taiwan during President Joe Biden’s Democratic administration… China’s Foreign Ministry attacked the move, saying it would violate diplomatic agreements between China and the U.S.; gravely harm China’s sovereignty, security and territorial integrity; and undermine regional stability.”
AI Bubble/Arms Race Watch:
December 18 – Axios (Madison Mills and Jeffrey Cane): “Oracle keeps making investors nervous. Not just about the company itself, but about Big Tech’s enormous bet on AI… With so much money at stake, any sign of a delay in AI profits raises the risk that some players may never get there. Oracle’s stock, already in a deep slump, tumbled Wednesday morning after the Financial Times reported that Blue Owl Capital… walked away from talks with Oracle… Oracle told Bloomberg that its investment discussions over the data center were ‘on schedule,’ but that they did not involve Blue Owl. Blue Owl was concerned over possible delays, and also didn’t like the existing lease terms and debt terms… These are ‘the clanging bells,’ Paul Kedrosky, a venture capitalist and writer who has warned about an AI bubble, tells Axios.”
December 16 – Bloomberg (Chris Bryant): “Of all the eye-popping numbers that Oracle Corp. published last week on the costs of its artificial-intelligence data center buildout, the most striking didn’t appear until the day after its earnings… The more comprehensive 10-Q earnings report… detailed $248 billion of lease-payment commitments, ‘substantially all’ related to data centers and cloud capacity arrangements… These are due to commence between now and its 2028 financial year but they’re not yet included on its balance sheet. That’s almost $150 billion more than was disclosed in the footnotes of September’s earnings update. CreditSights analysts Jordan Chalfin and Michael Pugh called the lease disclosure a ‘bombshell’.”
December 17 – Bloomberg (Brody Ford and Rose Henderson): “Cloud-computing companies including Oracle Corp., Microsoft Corp. and Meta Platforms Inc. have committed to spend a combined $500 billion on data center leases in the coming years, an astronomical sum that underscores the bet the industry is making on artificial intelligence. These obligations have steadily climbed in recent quarters as tech giants inked deals to rent server farms…”
December 16 – New York Times (Ivan Penn and Karen Weise): “Three Democratic senators said… they are investigating whether and how the operations of technology companies are driving up residential electricity bills. In letters sent… to Google, Microsoft, Amazon, Meta and three other companies, the lawmakers said the energy needs of data centers used for artificial intelligence were forcing utilities to spend billions of dollars to upgrade the power grid… The senators… said they were concerned that customers other than the tech companies would be stuck footing the bill, especially if the A.I. boom ended. ‘We write in light of alarming reports that tech companies are passing on the costs of building and operating their data centers to ordinary Americans as A.I. data centers’ energy usage has caused residential electricity bills to skyrocket in nearby communities,’ the senators said.”
December 13 – Wall Street Journal (Corrie Driebusch): “This year’s largest stock sale wasn’t on the New York Stock Exchange or its uptown rival, the Nasdaq Stock Market. Instead, it was a $40 billion offering by OpenAI that was available to only the investors handpicked by the firm’s executive team, including Sam Altman himself. Fewer than 50 investors snagged shares. For most Americans, the universe of stocks they can invest in is rapidly shrinking. The number of public companies in the U.S. is half of its peak in the late 1990s.That’s not a problem for the rich. The ultrawealthy are able to buy and sell shares of the buzziest private companies via invite-only transactions long before they list their shares on public stock exchanges. That’s created a two-tier market.”
December 15 – Bloomberg (Akshat Rathi and Marilen Martin): “The chip equipment maker ASML Holding NV is so crucial that a swing in its fortunes can sway the Dutch economy and the global development of artificial intelligence. Now one of the company’s biggest growth plans — building a new campus that will employ as many as 20,000 people in the country’s Eindhoven region — depends on whether or not it can get an electricity connection. Despite the high stakes, there’s no guarantee ASML will get the electricity it needs. That’s because the company is one among 12,000 businesses in the Netherlands waiting to secure a link to the electric grid… ‘The Netherlands is already using as much electricity as was originally projected for the year 2030,’ said Netbeheer Netherland’s Debby Dröge. ‘The physical grid cannot keep pace with societal ambitions and developments — unless we fundamentally change how we design and use it’.”
Bubble and Mania Watch:
December 16 – Axios (Madison Mills): “Robinhood is making its biggest bet yet on the convergence of AI and prediction markets, unveiling an AI-powered investing assistant and sports trading tools. Robinhood is betting on the future of investing being, well, betting. ‘Robinhood is ushering in a new era in which AI and prediction markets will come together to change the future of finance and news,’ CEO Vlad Tenev said. Robinhood says more than 1 million customers have traded 11 billion contracts since its prediction markets feature made its debut late last year. Prediction market trading is already the fastest-growing revenue line in Robinhood’s history.”
December 15 – Wall Street Journal (Jonathan Weil): “The U.S. government has tried to address the long decline in stock-exchange listings by relaxing the rules for small public companies. But this approach creates a persistent risk: more stock scams. The quandary is on display now at the Securities and Exchange Commission. Its chairman, Paul Atkins, is pushing to further ease the reporting obligations for many smaller companies under a 2012 statute called the JOBS Act. The law gives special treatment to ‘emerging growth companies,’ or EGCs, including exemptions from many accounting, auditing and disclosure requirements. At the same time, Atkins is leading a fresh attack on stock frauds targeting individual investors. Since late September, the SEC has suspended trading in 12 companies’ stocks.”
December 14 – New York Times (Ben Protess, Andrea Fuller, Sharon LaFraniere and Seamus Hughes): “A cryptocurrency firm run by the billionaire Winklevoss twins was facing a punishing federal lawsuit. After Donald J. Trump returned to the White House, the Securities and Exchange Commission moved to freeze the case. The S.E.C. had also sued Binance, the world’s largest crypto exchange, but then dropped the case altogether… And after a yearslong legal fight with Ripple Labs, the new S.E.C. tried to reduce a court-ordered penalty against the crypto firm… The agency’s pullback from these cases illustrated a wide-ranging transformation in the federal government’s treatment of the crypto industry during President Trump’s second term, a New York Times investigation has found.”
December 15 – New York Times (Jack Ewing): “Ford Motor said… it would scale back plans to produce electric vehicles and take a $19.5 billion hit to its profit to cover the costs of a major change in strategy. The announcement amounted to an admission by Ford that it had overestimated demand for battery-powered vehicles and underestimated the staying power of vehicles powered by gasoline and diesel. Other big automakers… have also recently changed their plans and placed a far greater emphasis on combustion engine vehicles and hybrids. The U.S. auto industry’s move away from electric vehicles is also a result of a reversal in government policies since President Trump took office in January.”
Deflating Crypto Bubble Watch:
December 17 – Bloomberg (David Pan): “Bitcoin’s most entrenched investors are still cashing out — and the pressure is starting to show. More than two months after the token hit a record high above $126,000, Bitcoin has fallen nearly 30% and is struggling to find support. One reason: long-time holders haven’t stopped selling. New blockchain data shows that coins held for years are being divested at some of the fastest rates in recent memory… According to a report from K33 Research, the amount of Bitcoin that had remained unmoved for at least two years has declined by 1.6 million coins since early 2023, roughly $140 billion worth. That signals sustained selling by long-term holders.”
December 19 – Bloomberg (Sidhartha Shukla): “After years on the fringes, crypto hedge funds entered 2025 hoping for a breakout. New regulations, White House support and billions in institutional capital were meant to drag crypto out of the frontier into the mainstream. Instead, the year laid bare crypto’s unforgiving terrain, even for professionals built to profit from volatility. Through November, directional funds — designed to profit from large price swings in Bitcoin and other major coins — are down 2.5%, on pace for their worst year since the industry’s 2022 winter… Fundamental and altcoin-heavy strategies, where managers take long-term, bottom-up views on blockchain networks and tokens, are down about 23% after sharp drawdowns.”
December 16 – Bloomberg (Lu Wang): “Bitcoin was once considered too volatile, too unregulated, and too fringe for the kinds of financial instruments that respectable Wall Street firms package up and sell to wealthy clients. No longer. In July, Jefferies Financial Group Inc. issued the first US structured note tied to BlackRock Inc.’s Bitcoin exchange-traded fund. Since then, at least three other banks, including Goldman Sachs…, Morgan Stanley and JPMorgan… have followed suit. Together, they’ve sold more than $530 million in notes linked to iShares Bitcoin Trust (IBIT)… In effect, banks are wrapping crypto exposure into new products that offer returns tailored to distinct risk appetites with some downside protection. The pitch: investors get leveraged upside if Bitcoin rises and a buffer if it falls.”
Inflation Watch:
December 18 – CNBC (Fred Imbert): “Consumer prices rose less than expected in November… The consumer price index rose at a 2.7% annualized rate last month, a delayed report… showed. Economists… expected the CPI to have risen 3.1%. The core CPI… was also cooler than anticipated, increasing 2.6% over 12 months. It was expected to have risen by 3%… On a 12-month basis, food prices rose 2.6% and energy was up 4.2%. Shelter costs, which make up about one-third of the weighting in the index, rose 3%…”
December 18 – Bloomberg (Molly Smith): “After long-awaited government data showed underlying US inflation cooled to a four-year low in November, economists agreed on at least this much: something was off. In a report fouled by the record-long government shutdown, inflation in several categories that had long been stubborn seemed to nearly evaporate. Chief among those were shelter costs, which make up about a third of the consumer price index, but other categories like airfares and apparel notably declined… Several forecasters pointed to the absence of that October data… The titles of their analyses were telling: ‘Lost in Translation,’ according to TD Securities. ‘Delayed and Patchy,’ per William Blair, and a ‘Swiss Cheese CPI report’ from EY-Parthenon.”
December 15 – CNBC (Steve Liesman): “Inflation looks to be sapping some of Americans’ holiday cheer as they head out to buy gifts this Christmas season, according to the CNBC All-America Economic Survey. The survey found the high cost of goods has emerged as a major factor affecting how much shoppers spend and where they spend… The survey… found that the high cost of goods is the top reason Americans are spending less and, in a first for the survey, the main reason they are spending more. Among those spending less, 46% say it’s because of the high cost of goods, a 10-point increase from the 2024 survey. Even more striking, 36% of those spending more say it’s because of high prices, an 11-point increase from last year.”
December 17 – New York Times (Ivan Penn): “Consumers already tapped out from rising home energy costs face yet another strain on their pocketbooks — surging heating costs. Higher electricity and natural gas prices coupled with forecasts for unusually cold temperatures across parts of the country are expected to drive up bills as winter takes hold. The average U.S. household is projected to spend nearly $1,000 this winter to heat its home, up 9.2% from a year earlier…”
December 18 – Reuters (Laila Kearney): “Power bills for about a fifth of Americans are expected to continue to rise after the largest U.S. grid operator, PJM Interconnection, reported fresh record-high capacity prices… that reflected electricity demand by data centers overtaking supplies. The expansion of Big Tech’s data centers has driven up so-called capacity prices in PJM by about 1,000% over a roughly two-year period… Prices reached $333.44 a megawatt-day in the latest PJM capacity auction. ‘This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,’ said Stu Bresler, who becomes PJM’s chief operating officer next month. Rising costs in PJM have hit everyday power bills in the Mid-Atlantic and Midwest U.S. states in the grid’s territory, with some areas seeing a more than 20% jump in utility bills starting from last summer.”
December 18 – Yahoo Finance (Daniel Howley): “Memory maker Micron (MU) reported a blowout first quarter earnings report on Wednesday…, as data center builders look to grab as much of the company’s memory chips as possible. Micron builds memory, known as DRAM, for data centers… There’s just one problem: DRAM is also used in devices like smartphones and laptops. Consumer PCs and other systems use a type of DRAM called double data rate memory (DDR), while data centers use a version of DRAM called high-bandwidth memory, HBM. DRAM suppliers are currently focusing more on building HBM than DRAM, thanks to higher margins on data center parts. And that’s starving the broader market. It’s not just PC buyers who are feeling the sting, either. Everything from cars to medical equipment could be impacted by the dearth of memory chips.”
December 18 – Bloomberg (Aashna Shah): “New Jersey and New York commuters who ride
the PATH train will see four annual 25-cent fare hikes starting next year, raising ticket prices to $4 by 2029. The board for the Port Authority of New York and New Jersey voted… to approve the 33% increase over four years to boost operations and services on the PATH train, which millions of riders use each year.”
Federal Reserve Watch:
December 18 – Wall Street Journal (Joseph C. Sternberg): “As President Trump’s beauty pageant to select a new Federal Reserve chief grinds on, spare a thought for the booby prize Jerome Powell has left for his successor. Last week’s Federal Open Market Committee meeting dragged the central bank back into quantitative easing. Most attention after the meeting focused on Mr. Powell’s interest-rate cut, the sixth since September 2024, totaling 1.75 percentage points. But the Fed also announced (via a dry ‘implementation note’) that it will buy roughly $40 billion in short-term Treasury bills over the next month, and an indeterminate (but probably similar) monthly amount until at least April. There’s reason to believe that if the Fed has started expanding its balance sheet again, it will continue indefinitely.”
December 17 – Reuters (Michael S. Derby): “Federal Reserve Governor Christopher Waller said… the U.S. central bank still has room to cut interest rates amid concerns that the job market has softened. ‘I still think we’re probably, you know, maybe we’re 50 to 100 bps off of neutral,’ which means the Fed still has room to cut…, Waller said… Given the outlook, ‘there’s no rush to get down’ on interest rates, Waller said, and ‘we just can steadily, kind of bring the policy rate down towards neutral’ amid what’s likely to be an economy with moderating inflation.”
December 15 – Yahoo Finance (Jennifer Schonberger): “New York Federal Reserve president John Williams said… the central bank is closer to neutral on its benchmark policy rate, and he expects the economy will ‘pick up steam next year.’ ‘After a year of uncertainty, we will be starting 2026 from a place of resilience. The economy is poised to return to solid growth and price stability,’ Williams said… ‘We now appear to be turning the corner’.”
December 15 – Financial Times (Myles McCormick and Claire Jones): “Federal Reserve governor Stephen Miran has said that ‘phantom inflation’ is distorting the US central bank’s decision-making and causing it to keep interest rates too high. Miran, a staunch ally of US President Donald Trump and a vocal proponent of lower rates, said… when ‘noise’ was stripped out, underlying inflation was close to the Fed’s target. ‘We must be thoughtful in considering genuine underlying inflationary pressures,’ Miran told an audience… ‘Excess measured inflation is unreflective of current supply-demand dynamics’.”
U.S. Economic Bubble Watch:
December 16 – CNBC (Jeff Cox): “Nonfarm payrolls grew slightly more than expected in November but slumped in October while unemployment hit its highest in four years…, in numbers delayed by the government shutdown. Job growth totaled a seasonally adjusted 64,000 for the month… The unemployment rate rose to 4.6%, more than expected and its highest level since September 2021. A more encompassing measure that includes discouraged workers and those holding part-time jobs for economic reasons swelled to 8.7%, its peak going back to August 2021. In addition to the November report, the BLS released an abbreviated October count that showed payrolls down 105,000.”
December 18 – Associated Press (Matt Ott): “U.S. applications for unemployment benefits fell by 13,000 last week, remaining in the same historically healthy range of the past few years… The number of Americans applying for jobless claims for the week ending Dec. 13 declined by 13,000 to 224,000 from the previous week’s 237,000… The November job gains were higher than the 40,000 economists had forecast. The October job losses were caused by a 162,000 drop in federal workers, many of whom resigned at the end of fiscal year 2025 on Sept. 30 under pressure from billionaire Elon Musk’s purge of U.S. government payrolls.”
December 17 – Axios (Emily Peck): “Among executives and investors, confidence in the economy is at four-year highs, two new surveys find. It’s a sign that companies are ready to spend money and hire… but it’s also the kind of optimism that in the past has preceded economic slowdowns. Chief financial officers’ confidence in the final quarter of 2025 hit its highest point since 2021, according to Deloitte’s CFO Signals survey… Deloitte polled 200 CFOs at North American companies… The survey measured executives’ optimism about overall economic and business conditions on a scale of 1 to 10. Confidence rose to 6.6 in the fourth quarter from 5.7 in the previous quarter and 5.8 a year ago… Nearly six in 10 chief financial officers surveyed said now is a good time to take a risk.”
December 16 – Bloomberg (Jarrell Dillard): “US business activity expanded in December at the slowest pace in six months, while a measure of input prices jumped to a more than three-year high. The S&P Global flash December composite output index fell 1.2 points to 53… The composite prices-paid gauge rose nearly 3 points to 64.1. ‘A key concern is rising costs, with inflation jumping sharply to its highest since November 2022, which fed through to one of the steepest increases in selling charges for the past three years,’ Chris Williamson, chief business economist at S&P Global Market Intelligence, said… ‘Higher prices are again being widely blamed on tariffs, with an initial impact on manufacturing now increasingly spilling over to services to broaden the affordability problem,’ he said.”
December 17 – Bloomberg (Michael Sasso, Mark Niquette, and Steven Church): “America’s corporate landscape is taking on the same distinctive K-shape as the country’s consumer market. The relentless profit and stock gains on Wall Street are bypassing Main Street, where an increasing number of small businesses are struggling. High interest rates coupled with President Donald Trump’s zigzagging trade policies are depressing employment and stalling sales at the nation’s 36 million small businesses. There’s less data for this universe of companies than there is for publicly listed ones, but look here and there, and you’ll see signs of distress. Small-business bankruptcies are ticking up, while loan delinquencies are at multiyear highs.”
December 17 – CNBC (Diana Olick): “The Federal Reserve cut its benchmark interest rate last week, and just as happened the last two times, mortgage rates rose. That caused demand for home loans and refinances to drop… Applications for a mortgage to purchase a home fell 3% for the week and were 13% higher year-over-year.”
December 15 – Bloomberg (Michael Sasso): “Confidence among US homebuilders edged up in December as builders continued to deploy sales incentives to motivate buyers. An index of market conditions from the National Association of Home Builders… rose 1 point this month to 39, the highest since April. Still, a value below 50 means more builders see conditions as poor than good. ‘Builders continue to face supply-side headwinds, as regulatory costs and material prices remain stubbornly high,’ said Robert Dietz, chief economist at the NAHB. ‘Rising inventory also has increased competition for newly built homes’.”
China Watch:
December 14 – Bloomberg: “Chinese President Xi Jinping lashed out at inflated growth numbers and vowed to crack down on the pursuit of ‘reckless’ projects that have no purpose except showing superficial results. ‘All plans must be based on facts, aiming for solid, genuine growth without exaggeration, and promoting high-quality, sustainable development,’ Xi said last week…”
December 14 – Wall Street Journal (Hannah Miao): “China’s economic momentum slowed broadly in November, with a marked weakening in consumer spending, adding pressure on Beijing to stabilize household and business demand in the world’s second-largest economy. China’s retail-sales growth slowed to its lowest level since 2022, while investment and the property market continued to deteriorate… Retail sales: +1.3% in November from the prior year, down from +2.9% in October. Industrial production: +4.8% in November from a year prior, down from +4.9% in October. Fixed-asset investment: -2.6% in the January-to-November period compared with the same stretch in 2024, widening from -1.7% in the January-to-October period. Property investment: -15.9% in the January-to-November period compared with the same stretch in 2024, widening from -14.7% in the January-to-October period.”
December 14 – Reuters: “China’s factory output and retail sales growth slowed further in November, weighed by weak domestic demand and adding pressure on policymakers to take action to rebalance the $19 trillion economy, as trading partners take issue with its huge surplus. Industrial output rose 4.8% year-on-year… Retail sales, a gauge of consumption, grew 1.3%, after rising 2.9% in October, lagging forecasts for a 2.8% gain. Signs of fragile consumer demand have been mounting. Annual car sales slumped 8.5% in November, the steepest decline in 10 months…”
December 15 – Bloomberg: “China’s home-price slump dragged on in November… New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.39% from October, when they slid 0.45% in the biggest decline in a year… Resale home values, which are subject to less government intervention, fell 0.66%, the same pace as a month earlier. The readings put the spotlight on mounting problems in China’s property sector, where a four-year downturn has weighed on sentiment and become a hurdle to economic growth.”
December 16 – Bloomberg: “China Vanke Co., once the nation’s biggest homebuilder, lurched closer toward what would be one of the country’s largest-ever debt restructurings. Vanke has asked some commercial banks to accept delayed interest payments on certain borrowings, people familiar with the matter said. The developer was already struggling to convince a group of bondholders to extend the maturity on 2 billion yuan ($284 million) of notes that matured on Dec. 15. And it’s separately asking holders of a bond due Dec. 28 for another 12 months to meet obligations on that debt.”
December 14 – Bloomberg: “A $3 billion redemption crisis in eastern China is reviving concerns about the loosely-regulated shadow-banking industry as the nation’s prolonged property slump risks spilling over into the financial sector. Investors holding some 20 billion yuan ($2.8bn) in wealth management products sold through… Zhejiang Zhejin Asset Operation Co. failed to receive payments due in late November… The products’ underlying assets were debt claims of property developers affiliated with Sunriver Holding Group Co., documents… show.”
December 17 – New York Times (Meaghan Tobin and Xinyun Wu): “Robots made by Chinese start-ups have danced on television, staged boxing matches and run marathons. When one company debuted its most recent robot last month, people online in China thought it looked so much like a human that workers cut the robot’s leg open onstage to reveal its metal pistons. Despite the public fascination, concerns are growing that China’s robotics industry is moving too fast… Over 150 manufacturers are vying for a piece of the market, the Chinese government said last month, warning that the industry was at risk for a crowd of ‘highly repetitive products.’ ‘China has an attack-first approach when it comes to the adoption of new technology,’ said Lian Jye Su, a chief analyst at Omdia, a tech research firm. ‘But this generally leads to a large number of vendors fighting for small chunks of market’.”
December 17 – Financial Times (Editorial Board): “This week’s conviction by a Hong Kong court of media tycoon Jimmy Lai was deeply disturbing, even if it was sadly no surprise. Lai, a passionate campaigner for democracy and against the Chinese Communist party’s tightening grip over the territory, was found guilty of conspiring to collude with a foreign country and to publish seditious materials, charges he denied… The High Court judges left no doubt about the consequences for Hongkongers of standing up to Beijing. Lai’s ‘deep resentment and hatred for the Chinese Communist party led him down a thorny path’, they wrote…”
Central Banker Watch:
December 18 – Financial Times (Sam Fleming and Ian Smith): “The Bank of England cut interest rates by a quarter point to 3.75%… The central bank’s Monetary Policy Committee voted five to four in favour of a sixth rate cut since the summer of 2024, as it forecast that inflation is likely to fall close to its 2% target in the second quarter of 2026. Andrew Bailey, BoE governor, said he saw scope for ‘some additional policy easing’… ‘We’ve passed the recent peak in inflation and it continues to fall, so we have cut interest rates for the sixth time to 3.75% today,’ Bailey said. ‘We still think rates are on a gradual path downward. But with every cut we make, how much further we go becomes a closer call’.”
Europe Watch:
December 19 – Bloomberg (William Horobin): “France could face a market backlash if plans to repair the public finances fail to bring its deficit within 5% of economic output next year, the country’s central bank chief said. ‘Beyond a 5% deficit, France would clearly put itself in danger,’ Francois Villeroy de Galhau said… ‘The apparent calm of the markets can, in my experience, turn abruptly.’ France is heading into the end of the year with little chance of parliament adopting a full budget. The government has warned that portions of finance bills so far approved would only bring the deficit to 5.3% of economic output in 2026, down from 5.4% this year.”
Japan Watch:
December 19 – Bloomberg (Toru Fujioka): “The Bank of Japan raised its benchmark interest rate to the highest in 30 years and signaled more hikes are likely in the pipeline… The central bank cited the rising likelihood of its economic outlook being realized, and pointed to data showing solid wage growth momentum and receding risks from US tariffs… The BOJ made it clear that the hiking cycle will continue by asserting that it intends to keep raising borrowing costs if its economic outlook is realized, and the chances of that happening are increasing. It also said that underlying inflation is continuing to rise moderately. ‘We’ll keep making appropriate decisions at each policy meeting,’ Ueda said… ‘The pace at which we adjust our rate will depend on the state of the economy and prices’.”
December 15 – Bloomberg (Toru Fujioka): “The Bank of Japan indicated further progress on the wage front, a key consideration that effectively cements the case for a rate hike this week, with a report showing that momentum for pay increases remains intact despite US tariffs. ‘Most of the reports from the Head Office and branches mentioned that firms expected to raise wages in fiscal 2026 at about the same rates as in fiscal 2025, when high wage growth was realized,’ the BOJ said…”
Leveraged Speculation Watch:
December 19 – Bloomberg (Katherine Burton, Devika Krishna Kumar, and Hema Parmar): “Ken Griffin’s Citadel is on track for its worst annual return since 2018… The flagship fund gained 9.3% through Dec. 18, according to a person familiar with the results. It made money in stocks, fixed income, credit and quantitative strategies, and even eked out a profit from commodities, including natural gas, after clawing back from losses earlier in the year… Even so, with less than two weeks of trading left, this year could end up being just the sixth since Citadel’s 1990 inception that returned less than 10%…”
December 13 – Financial Times (Costas Mourselas, Rachel Millard and Amelia Pollard): “Hedge funds and trading firms are piling into physical commodities markets in search of new sources of returns, despite lacking the decades of experience and information accumulated by established players such as Trafigura and Vitol. Financial firms have a long history of trading contracts for power, natural gas and oil. But hedge funds such as Balyasny, Jain Global and Qube, as well as trading firm Jane Street, are expanding their operations to allow them to trade the underlying markets, deepening their exposure to global price swings.”
December 15 – Bloomberg (Denitsa Tsekova): “AQR Capital Management is riding high again, topping benchmarks across strategies and growing assets at a record pace. In the process of engineering a comeback, however, the quant pioneer has reined in a policy that once made it an outlier among hedge funds: An unusually open approach to explaining how it invests… Its five-year annualized returns range from 15% to 20%… and on track to repeat in 2025… Assets have grown by a record $65 billion this year, reaching $179 billion and approaching prior highs.”
Social, Political, Environmental, Cybersecurity Instability Watch:
December 15 – Bloomberg (Parmy Olson): “For a while last year, scientists offered a glimmer of hope that artificial intelligence would make a positive contribution to democracy. They showed that chatbots could address conspiracy theories racing across social media, challenging misinformation around beliefs in issues such as chemtrails and the flat Earth with a stream of reasonable facts in conversation. But two new studies suggest a disturbing flipside: The latest AI models are getting even better at persuading people at the expense of the truth. The trick is using a debating tactic known as Gish galloping, named after American creationist Duane Gish. It refers to rapid-style speech where one interlocutor bombards the other with a stream of facts and stats that become increasingly difficult to pick apart.”
December 16 – Financial Times (Attracta Mooney): “The Arctic has experienced its warmest and wettest year on record, a long-running study by the leading US atmospheric agency has found, and the rapid melt of permafrost has caused rivers to turn orange from leached metals. Climate change is affecting the northernmost part of the planet by more than double the global rate since annual tracking by the National Oceanic and Atmospheric Administration (Noaa) began 20 years ago.”
December 14 – Bloomberg (Brian K Sullivan, Srinidhi Ragavendran, and Dayanne Sousa): “Deadly flooding in Asia and early snowstorms across the US are signaling the return of a weather-roiling La Niña, a cooling of Pacific waters that can disrupt economies and trigger disasters worldwide. In recent La Niña years, global losses have ranged from $258 billion to $329 billion, according to Aon… Despite year-to-year swings in damage totals, the overall trajectory is unmistakable: Extreme weather is pushing losses higher. The La Niña phenomenon is often linked with droughts in California, Argentina and Brazil, and the destructive flooding that recently swept Southeast Asia. These types of catastrophes have become a larger factor in setting terms for insurers, farmers and energy providers. La Niña can intensify both droughts and downpours, fuel more active storms across the tropical Pacific and strengthen Atlantic hurricanes.”
December 16 – Bloomberg (Leslie Kaufman): “Even with no hurricanes making landfall in the US in 2025, insured losses from global natural catastrophes surpassed the $100 billion mark for the sixth consecutive year, according to… Swiss Re Institute… The $107 billion estimate is 24% lower than last year, when Hurricanes Helene and Milton hit the US back to back. Nevertheless, it shows that extensive property damage from weather volatility, fueled by climate change, has become the new normal.”
December 16 – Axios (Russell Contreras): “People in the year 2100 will be younger in Africa, and dramatically older in East Asia and Europe, as power tilts sharply toward the global South, per the U.S. Census Bureau’s latest global population projections. This radical reshaping, with mega-nations rising in Africa while China risks the steepest population decline in recorded history, will upend today’s geopolitical order.”
Geopolitical Watch:
December 14 – Reuters (Panu Wongcha-um): “Thailand’s military said it was considering blocking fuel exports to Cambodia, as fighting between the two countries spread to coastal areas of a disputed border region two days after U.S. President Donald Trump said the sides had agreed to a new ceasefire. The Southeast Asian neighbours have resorted to arms several times this year since a Cambodian soldier was killed in a May skirmish, reigniting a conflict that has displaced hundreds of thousands of people on both sides of the border.”
