Expect Trouble

“Terminal Phase Excess” is fundamental to my Credit Bubble analytical framework. Bubbles are sustained by ever increasing amounts of Credit, expanding purchasing power with myriad inflationary manifestations. Of particular significance, rising asset prices and speculative Bubbles intensify over time. Late in the cycle, monetary disorder takes hold — and systemic risk goes parabolic. This destructive phase sees rapid growth of increasingly risky loans. Expanding speculative leverage fuels unsustainable “blow off” market price inflation.

Moreover, the whirlwind of risky lending and leveraging ensures catastrophic end-of-cycle resource misallocation and structural maladjustment. Mechanisms to intermediate skyrocketing risks are pushed to the limit. Things don’t work well in reverse.

As I’ve discussed repeatedly over the years, Bubbles fueled by risky Credit do not generally pose major systemic risk. A boom financed by corporate high-yield bonds, for example, won’t get too carried away – or for too long - before a market “no more junk!” revolt terminates Bubble excess.

The great global government finance Bubble continues to illustrate the precarious nature of Bubbles financed by perceived safe and liquid “money” and “money-like” debt instruments. The uniquely insatiable demand for “money” presents a potentially catastrophic risk of uncontrollable booms and crises of confidence.

I’m again highlighting this analysis, because it’s increasingly pertinent. The walls have begun to close in. The historic AI-related debt boom is seeing associated debt instruments, especially at the margin, lose “moneyness.” Meanwhile, the unending massive issuance of Treasuries and government debt internationally is facing increasing market pressure – notably waning demand and higher yields. From Washington to Wall Street – along with Tokyo, Paris, London, Beijing, Seoul and beyond – too many are pushing the envelope to sustain increasingly fragile booms.

It’s been an illuminating six trading sessions.

Thursday August 6th: closing 10-year Treasury yield 4.68%. The following Friday: “Weak US Payrolls, Higher Layoffs Reduce Fed Rate Hike Bets.” Yet the unexpected loss of 23k jobs generated a modest three bps decline in yields - to 4.65%, with 10-year yields back up to 4.71% by Monday’s close. After closing Tuesday at 4.69%, Wednesday’s “US Core Inflation Comes in Subdued, Easing Pressure on the Fed” was disregarded, with yields ending the session at 4.70%. Thursday’s “Tame US Producer Prices to Give Fed Doves More Cover” supported a yield decline to 4.64%. But even Friday’s “US Retail Sales Fall Most Since May 2025” couldn’t hold yields back from ending the week at 4.69%. That yields ticked up in the face of a slew of typically constructive data corroborates the emergence of a troubling new bond market trading paradigm.

The recent backup in yields is more than justified. WTI jumped $4.22 this week to $82.40. With President Trump apparently digging in for economic pressure to force Iran’s hands – and Hegseth saying an Iranian blockade could be maintained “indefinitely” – energy markets adjusted to the possibility that passage through the Strait of Hormuz might be restricted for months. Even the December 2027 crude futures price jumped $2.20 to $70.52 – versus the $60 pre-war level. The Bloomberg Commodities Index advanced 2.8% this week. Despite last month’s somewhat encouraging data, the risk of upside inflation surprises remains elevated.

Beyond inflation issues, fragile bond markets face unrelenting massive supply.

August 12 – Reuters (David Lawder): “The U.S. federal budget deficit for July jumped ‌to $432 billion, a record for the month, as higher outlays and more negative tariff revenues also brought the 2026 fiscal-year-to-date budget gap to $1.799 trillion, topping the full fiscal 2025 deficit with two months left in the fiscal year… Last month’s budget gap, which was partly inflated by calendar shifts in benefit payments, was $141 billion, or 48%, higher than in July 2025 and was the largest monthly deficit since March 2021, when it hit $660 billion due to COVID-19 relief program spending. There ⁠have been only two other higher monthly deficits: $864 billion in June 2020 and $738 billion in April 2020… A Treasury official said unadjusted outlays for July were also a record for that month at $766 billion, up $137 billion, or 22%, from a year ago. But the month’s outlays were inflated by $99 billion due to the payment in July of many August 2026 benefits because the current month started on a weekend. Accounting for these and other calendar shifts brought the adjusted July deficit to $333 billion, up $50 billion, or 18%, from the prior year...”

Interest expense on Treasury Debt rose to $118 billion last month, second only to the $251 billion of expenditures at the Department of Health and Human Services (i.e., Medicare and Medicaid). Department of Defense expenditures came in at $86 billion. It’s worth noting that Interest expense was $40 billion in July 2019. Through 10 months of the 2026 fiscal year, debt service of $1.170 TN ran 14.5% ahead of comparable 2025. The full-year deficit is poised to exceed $2.1 TN (6.5% of GDP), which would be 17% ahead of last year.

August 13 – Financial Times (Myles McCormick and Kate Duguid): “The US has paid the highest borrowing costs to sell 30-year bonds since 2001… A $25bn Treasury auction of 30-year bonds on Thursday drew yields as high as 5.22%... It marked the highest yield since the 5.52% paid in August 2001, after which 30-year auctions were suspended for almost five years. The yield on Thursday’s auction compares with 5.06% at the previous 30-year sale in July, and 4.91% just before Trump’s second term began in January 2025. The jolt higher in borrowing costs comes as the US debt pile has swollen to almost $40tn, pushing the debt-to-GDP ratio towards an all-time high.”

August 13 – Bloomberg (Jonnelle Marte): “Federal Reserve Bank of Cleveland President Beth Hammack said she’s monitoring three things when it comes to US financial stability, including leverage in the Treasuries market. ‘We have a high amount of debt outstanding, and right now there’s a lot of leverage that’s being used to buy that debt,’ Hammack says… ‘The purchasers of that debt are actually borrowing funds, and so that can create some instabilities in the system when you think about that.’ ‘If you look at Congress, I don’t get a sense of a lot of fiscal discipline coming back in.’ Growth in private credit is another area to monitor, she said.”

The VIX (equities volatility) Index ended the week at a carefree summer yacht rock 14.25 – the lowest close since December. The MOVE (bond volatility) Index declined more than 2 points this week to a lowly 69.6 (5-yr avg. 99.2). The High Yield Volatility Index sank 16 to below 92 (lowest close since January) – and half the five-year average (187). JPMorgan CDS dropped to a near one-year low 37.9, with most bank CDS ending the week not far from one-year lows.

Emboldened by Bessent’s yen intervention gambit, equities and risk markets signal “the fix is in” through at least the midterms. Treasuries are sensibly uncomfortable. And this week, in particular, global bond market trading suggested incipient recognition of mounting deleveraging and liquidity risks. The problem children were viewed with wary eyes.

With its own budget issues, France’s 10-year yields surged 13 bps this week to 4.05% - the high all the way back to June 2009. The spread versus German yields widened six to 85 bps, the widest level since early October. Japan’s 10-year yield jumped seven bps to 2.87% - the high back to 1996. UK yields surged 12 bps to 5.04%, within 13 bps of highs back to pre-crisis 2008.

Governments have company when it comes to recklessly vociferous borrowing appetites.

August 13 – Financial Times (Robin Wigglesworth): “On Monday, Alphaville explored just how big the lease commitments of the AI hyperscalers have become as their financing approach shifts from plain vanilla bonds to more creative avenues. Goldman Sachs analysts had scoured through the footnotes of the hyperscalers’ regulatory filings and counted $1.5tn of lease commitments, of which $1tn hadn’t started yet and therefore didn’t appear in their financial accounts as conventional liabilities. As those analysts obliquely noted: ‘From a credit perspective, this treatment can understate leverage and future liquidity needs as these obligations are eventually recognised and contractual payments come due.’ We also threw in an interesting titbit from an earlier Morgan Stanley report from July, which also toted up the purchase commitments of Alphabet, Microsoft, Amazon, Nvidia and Oracle. These are typically contractual obligations to buy chips, compute, electricity to power data centres, and other equipment, and came to another $982bn at the end of the first quarter.”

Especially with global yields marching higher, ever-inflating AI borrowing requirements (stoked by briskly inflating costs) will prove increasingly challenging. Central to my analysis throughout the mortgage finance Bubble period was the concept of “Wall Street alchemy” – the transformation of increasingly risky mortgage Credit into perceived (mostly “AAA”) “money-like” instruments. It was risk intermediation to behold – that is until “terminal phase” crazy saw 2006’s fateful $1 TN of subprime derivatives.

August 11 – Wall Street Journal (Jack Pitcher, Anissa Gardizy and Peter Rudegeair): “Nvidia CEO Jensen Huang is running into a problem: Many of his customers can’t afford to buy his company’s coveted AI-powering chips. That explains why Huang teamed up with an array of Wall Street firms on a $500 billion plan that will theoretically standardize chip financing, creating asset-backed pools of capital for AI companies—while leaving Nvidia partly on the hook if things go wrong. Executives involved in the strategic partnership Huang unveiled this week with Apollo Global Management, BlackRock, Blackstone, Brookfield Asset Management, Goldman Sachs and KKR tout the effort as the launch of a new asset class akin to the securitization of everything from airplanes to credit cards to mortgages. To critics, it is a system that will cover up weaknesses in some corners of the AI marketplace. The concern isn’t about tech heavyweights—Meta, Microsoft, Google—with fortress balance sheets. Instead, it is about the many smaller AI labs, cloud companies and enterprises that have ravenous demand for Nvidia chips but face high interest rates if they want to finance purchases of them.”

I suppose a $500 billion scheme specifically to finance Nvidia chip purchases qualifies for “Expect the Unbelievable.” But the craziest part of this so far is that it’s not dismissed as crazy late-cycle phenomena. Using overpriced chips (at peak mania) as loan collateral could indeed work miraculously to sustain the boom. But gosh. For a system already acutely vulnerable to any sudden tightening of financial conditions, Wall Street is just hankering for trouble.

August 12 – Financial Times (Antoine Gara, Michelle Chan and George Hammond): “Wall Street is betting that AI chips can defy one of finance’s basic rules: that fast-moving technology quickly loses its value. Nvidia unveiled this week a $500bn deal under which tech groups will be able to lease semiconductors with financing from groups including Apollo Global, KKR, Brookfield, BlackRock and Goldman Sachs. The blockbuster partnership was underpinned by expectations that chip prices would remain higher for longer than many analysts had anticipated as a result of the clamour to secure the components powering the AI boom, finance executives involved in the deal told the FT. Nvidia chief Jensen Huang has said the pact will create a new asset class underpinned by chips, which would be ripe for investment from the $22tn private capital industry.”

Using homes, whose prices only go up, as collateral for risky loans intermediated through sophisticated Wall Street instruments and vehicles (i.e., ABS, CDOs, “CDO-squared”, synthetic CDOs, SIVs, etc.) worked miraculously - until subprime mortgage finance suddenly tightened and home prices tanked.

A likely scenario: markets are slammed by a bout of de-risking/deleveraging, with risk aversion and illiquidity forcing an abrupt reassessment of prospects for the multi-trillion AI arms race buildout. The chip price collapse will make the 2007/08 Phoenix home price deflation look like a walk in the park.

I have a hard time believing investors will today be willing to pony up a half Trillion to such a high-risk proposition. It’s worth noting that Nvidia CDS gained another three this week to 75.5 bps, after trading below 40 in early June. This $500 billion Nvidia plan is the latest example of a wildly emboldened Wall Street exuberantly playing with fire.

August 10 – Financial Times (Robin Wigglesworth): “You may have noticed that the hyperscalers have become increasingly inventive in how they raise the money required for a titanic series of data centres being built around the world. The first example of what this looks like was the record-breaking bond sale for Meta’s ‘Hyperion’ data centre in Louisiana, which Alphaville explored in depth here. In short, instead of just issuing bonds off its own balance sheet, Meta formed a joint venture with Blue Owl called Beignet that would develop and own Hyperion. Meta owns just 20% of Beignet, but made a rock-hard commitment to lease Hyperion for at least 20 years. That guarantee allowed Beignet to issue an amortising $27bn bond, but this debt doesn’t actually appear as debt on Meta’s balance sheet, even if it is on the hook for the payments. Anyway, a lot of the other hyperscalers seemed to think that this was a tremendous idea, and have since explored their own increasingly creative ways of raising a lot of money while limiting the optical impact on their balance sheets. And various lease structures vaguely along the lines of Beignet are the favoured way of doing so. But just how meaningful are these non-debt financial obligations? Fortunately, Goldman Sachs’ analysts have gone through all the fine print for us, and totted up a massive $1.5tn of lease commitments, of which about $1tn doesn’t appear in the financial statements of the hyperscalers.”

It’s tempting to group Friday afternoon’s Jane Street news into the “Expect the Unbelievable.” But it’s only too believable.

August 13 – Financial Times (Jill R Shah and Joshua Franklin): “Jane Street posted a roughly $15bn loss in July after turmoil at AI-focused hedge fund Situational Awareness wrongfooted the US trading firm. The… firm disclosed the figure to lenders as part of a deal to shift its roughly $11bn public debt pile to private investors including Pimco, according to people familiar… The loss represents a rare setback for a secretive trading shop that has in recent years become a dominant player in global markets. Jane Street has generated more than $40bn in net trading revenues in the year to Friday, even accounting for the July loss, which exceeds its entire haul for 2025… The drawdown in July came during a tumultuous month for US AI stocks, which fell sharply in a powerful reversal of a rally that carried them sharply higher throughout most of 2026. The sell-off also hit several AI-focused hedge funds including Leopold Aschenbrenner’s Situational Awareness, which counted Jane Street among its investors.”

August 14 – Financial Times (Toby Nangle): “Jane Street came to market this week with a $14.6bn multi-tranche monster bond issue. The lion’s share was used to refinance existing debt. Nothing unusual about that: most new bonds are issued to repay existing debt. However, the proprietary trading firm famed for both its financial acumen and fastidious secrecy paid through the nose to retire existing debt that had no business being retired. Why? MainFT… wrote (our emphasis) that: ‘[a] shift towards private markets would… allow the proprietary trading firm to limit disclosures on its financials, which it currently reports quarterly to a large group of debt holders.’”

A two-year-old hedge fund rides highly levered AI bets to inflate assets to $45 billion, only to get hit with a 67% loss in July – forced deleveraging that required liquidating positions to Ken Griffin’s Citadel hedge fund. In all the chaos, highly levered Jane Street loses a cool $15 billion, only to then refinance a huge chunk of debt in the private debt market. The S&P500 closes Thursday at a record high, with the VIX ending the week below 15. Now that chain of events qualifies as “Expect the Unbelievable.” Throw in rising global yields in highly leveraged bond markets, and it seems we’re witnessing enough to Expect Trouble.

China’s latest Credit data deserves a brief mention. Following typically booming Junes (final month of the quarter), Julys are usually slower months for Chinese lending growth. Last month was notably weak. New Loans contracted a record $51 billion (vs. July ‘25’s $7bn contraction), with one-year growth of $2.045 TN down 21% from comparable 2025.

Corporate loans declined a record $19.2 billion, the first contraction since July 2016’s less than $1 billion decline. This reduced y-t-d Corporate loan growth to $356 billion, 19% below comparable 2025. One-year growth slowed to 8.2%, matching the weakest reading since April 2017 (itself the weakest growth in at least a decade).

Consumer (chiefly mortgages) loans contracted another $68 billion, causing a one-year decline of $18 billion (1.3%). It’s worth recalling that years of double-digit consumer loan growth ended with the bursting of the apartment Bubble back in 2022.

Meanwhile, Total Aggregate Financing mustered a respectable $179 billion gain in July (to $68.7 TN), outpacing July ‘25’s $150 billion. While down y-o-y, one-year growth of $4.75 TN indicates massive ongoing Credit excess. Leading the charge, Government Bonds expanded $196 billion in July, up about $10 billion from July ’25 to $15.23 TN. In the year’s first seven months, Government Bonds surged $1.15 TN, with one-year growth of $1.882 TN. Outstanding Government Bonds have surged 39% in two years and 61% in three.

In addition, with Q1 data available, Chinese bank assets surged $2.18 TN during the first quarter to a record $73.39 TN – with one-year growth of a blistering $5.40 TN (7.9%). Bank assets inflated 15% over two years, 25% over three, 50% over five, and 137% over ten years, in one of history’s most spectacular Credit booms. China bank assets ended 2008 at $9.3 TN. A crisis of confidence in Chinese finance is overdue.

For the Week

The S&P500 added 0.4% (up 13.7% y-t-d), while the Dow slipped 0.6% (up 11.8%). The Utilities recovered 1.2% (up 4.7%). The Banks jumped 2.1% (up 18.1%), and the Broker/Dealers rose 2.0% (up 17.7%). The Transports gained 1.3% (up 25.6%). The S&P 400 Midcaps increased 1.1% (up 18.8%), and the small cap Russell 2000 gained 1.1% (up 23.6%). The Nasdaq100 advanced 1.1% (up 19.0%). The Semiconductors added 0.5% (up 75.3%). The Biotechs dipped 0.3% (up 24.3%). With bullion gaining $35, the HUI gold index rose 1.9% (up 9.4%).

Three-month Treasury bill rates ended the week at 3.949%. Two-year government yields dipped three bps to 4.17% (up 70bps y-t-d). Five-year T-note yields added a basis point to 4.36% (up 64bps). Ten-year Treasury yields rose five bps to 4.69% (up 53bps). Long bond yields jumped six bps to 5.26% (up 42bps). Benchmark Fannie Mae MBS yields were little changed at 5.63% (up 59bps).

Italian 10-year yields jumped eight bps to 3.98% (up 43bps y-t-d). Greek 10-year yields rose eight bps to 3.87% (up 43bps). Spain's 10-year yields also gained eight bps to 3.65% (up 36bps). German bund yields increased seven bps to 3.20% (up 35bps). French yields surged 13 bps to 4.05% (up 48bps). The French to German 10-year bond spread widened six to 85 bps. U.K. 10-year gilt yields jumped 12 bps to 5.04% (up 56bps). U.K.’s FTSE equities index retreated 1.1% (up 8.1% y-t-d).

Japan’s Nikkei 225 Equities Index rose 4.7% (up 36.5% y-t-d). Japan’s 10-year “JGB” yields jumped nine bps to 2.89% (up 83bps y-t-d). France’s CAC40 declined 0.9% (up 6.0%). The German DAX equities index added 0.5% (up 8.0%). Spain’s IBEX 35 equities index was little changed (up 16.5%). Italy’s FTSE MIB index slipped 0.2% (up 19.2%). EM equities were mostly lower. Brazil’s Bovespa index dropped 3.2% (up 3.6%), and Mexico’s Bolsa index fell 3.8% (unchanged). South Korea’s Kospi rallied 11.5% (up 65.6%). India’s Sensex equities index declined 0.6% (down 8.5%). China’s Shanghai Exchange Index slipped 0.3% (down 1.0%). Turkey’s Borsa Istanbul National 100 index rose 2.9% (up 25.8%).

Federal Reserve Credit gained $10.8 billion last week to a 16-month high of $6.707 TN, with a 35-week expansion of $217 billion. Fed Credit was down $2.183 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit has expanded $2.980 TN, or 80%. Fed Credit inflated $3.896 TN, or 139%, since November 7, 2012 (718 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt dropped $38.4 billion last week to $2.888 TN. “Custody holdings” were down $316 billion y-o-y, or 9.9%.

Total money market fund assets (MMFA) expanded $18.3 billion to $7.928 TN. MMFA were up $742 billion, or 10.3%, y-o-y - having ballooned a historic $3.343 TN, or 73%, since October 26, 2022.

Total Commercial Paper added $1.6 billion to $1.429 TN. CP increased $38 billion, or 2.8%, y-o-y.

Freddie Mac 30-year fixed mortgage rates slipped two bps to 6.67% (up 9bps y-o-y). Fifteen-year rates fell five bps to 5.96% (up 25bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down two bps to 6.78% (up 5bps).

Currency Watch

For the week, the U.S. Dollar Index was little changed at 99.636 (up 1.3% y-t-d). On the upside, the Norwegian krone increased 0.8%, the Mexican peso 0.7%, the Canadian dollar 0.5%, the British pound 0.4%, the Australian dollar 0.2%, and the euro 0.1%, On the downside, the Brazilian real declined 2.7%, the Japanese yen 1.0%, the Swiss franc 0.7%, the South Korean won 0.5%, the South African rand 0.3%, and the Swedish krona 0.3%. China's (onshore) renminbi increased 0.04% versus the dollar (up 3.64% y-t-d).

Commodities Watch

The Bloomberg Commodities Index rallied 2.8% (up 23.4% y-t-d). Spot Gold added 0.8% to $4,376 (up 1.3%). Silver gained 1.8% to $64.6843 (down 9.7%). WTI Crude rallied $4.22, or 5.4%, to $82.40 (up 44%). Gasoline surged 6.7% (up 86%), and Natural Gas gained 2.7% to $2.733 (down 26%). Copper rose 1.9% (up 18%). Wheat surged 5.5% (up 33%), and Corn jumped 4.6% (up 4%). Bitcoin dropped $2,070, or 3.2%, to $62,860 (down 28.3%).

Market Instability Watch

August 13 – Reuters (Harry Robertson): “Market gauges of inflation-adjusted borrowing costs have shot to their highest in more than a decade across major economies as AI companies and governments ramp up bond sales, raising risks for stock markets and the world economy… U.S. 30-year real yields, as measured by inflation-linked bonds, are near 18-year highs at around 3%, while British and German 10-year real yields are trading at around their highest in more than a decade. Investors and analysts say a surge in borrowing by AI ‘hyperscalers’, at a time when governments are still spending heavily, has been a leading factor pushing up yields, as buyers demand higher returns to keep purchasing the flood of bonds hitting markets.”

August 13 – Bloomberg (Tasos Vossos): “As a flood of debt sales by US tech companies ripples through the credit market, it seems to be triggering an inadvertent rise in risk metrics for some of the world’s safest firms. Strategists at BNP Paribas SA say these moves are a knock-on effect of intensifying competition for cash in the top end of the market. With Big Tech on a multi-billion dollar borrowing spree, this competition is pushing up the cost of credit default swaps even for companies that have nothing to do with data centers or artificial intelligence.”

August 10 – Bloomberg (Bernard Goyder): “Demand for protection against a drop in stocks has fallen to the lowest level since US President Donald Trump’s capitulation on tariffs last year, as indexes rally to record highs. The appetite for hedges on the S&P 500 Index can be measured through the options market by comparing the implied volatility of downside puts to upside calls, a concept known as skew. The one-month put-to-call skew on the benchmark gauge fell to the lowest level since April 2025, signaling traders fear missing out on a stock market rally and are not look looking for the same amount of shielding for their portfolios.”

August 11 – Bloomberg (Geoffrey Morgan): “Systematic buyers are getting ready to load up on stocks again after a massive unwind, according to Citadel Securities. ‘The leverage reset has largely run its course, creating room for systematic strategies to add exposure as volatility falls,’ said Scott Rubner, head of equity and derivatives strategy at Citadel Securities. ‘Breadth is improving, correlation is near record lows, and investors are increasingly willing to pay for upside.’ August is primed to draw back buyers after leveraged ETF assets under management plunged to $154 billion last month, a nearly 42% drop from $218 billion at the end of June, Citadel Securities data show.”

August 12 – Bloomberg (Sangmi Cha and Youkyung Lee): “South Korean stocks climbed, putting the benchmark index on track to enter a technical bull market, as a global rebound in the AI trade fueled a rapid reversal from last month's historic rout. The benchmark Kospi gained as much as 4.8% on Thursday, extending its gain from a July 30 low to around 22%. Heavyweight memory chipmakers Samsung Electronics Co. and SK Hynix Inc. drove the advance, each jumping more than 5%.”

U.S. Credit Trouble Watch

August 9 – Wall Street Journal (Matt Wirz): “Private credit is showing increasing signs of stress, despite comments to the contrary from some of the largest fund managers that are trying to put a year of turmoil behind them. Recent quarterly reports from funds overseen by the industry’s big players showed that loan health and investor returns are worsening, according to an analysis by The Wall Street Journal. Among funds overseen by Ares Management, Blackstone, Blue Owl Capital and Golub Capital, loan defaults touched their highest level since at least 2021. The funds’ stocks trade on public exchanges, requiring them to regularly update shareholders on their investments. Blue Owl, Blackstone and other investment firms have said fears gripping the relatively new market are overdone, and that their loan portfolios are doing well.”

August 11 – Wall Street Journal (AnnaMaria Andriotis): “Before software firm Medallia was taken over by creditors in a collapse that rattled the private-credit industry, it had been delaying interest payments for about four years on debt that had ballooned to some $2.8 billion. The option it used to defer payments became a popular sweetener in the private-credit industry as competition to win deals ramped up, with borrowers deploying it often being considered up-to-date on their loans. Then, more borrowers began using the relief valve—even including cash-strapped companies that requested it after taking out their loans—raising fears of looming defaults. Now, private-credit firms are clamping down on the option, known as payment in kind, or PIK. Some 13.5% of new private-credit loans originated in the second quarter had a PIK provision… down from 25% at the end of last year.”

August 12 – Bloomberg (Nicola M White and Silas Brown): “The Securities and Exchange Commission rejected credit rating firm Egan-Jones Ratings Co.’s application to re-enter the market for grading government debt and asset-backed securities, the latest sign of regulatory pushback against the small but prolific agency. Egan-Jones’ application contained material inaccuracies, the filing said, including certifications that were ‘years out of date’ from what the SEC called qualified institutional buyers.”

Global Credit Bubble and Boom Watch

August 10 – Bloomberg (Kevin Kingsbury): “A record pace in US investment-grade bond issuance continued Monday with 19 firms storming the market, the most in seven months. Companies ranging from utilities to overseas banks to Tyson Foods Inc. offered a combined $27.6 billion of notes… As of Friday, $1.4 trillion of US investment-grade notes were sold so far this year, 9% above the pace seen in 2020 — which ended at a record $1.75 trillion. Global issuance reached $5 trillion on Monday…, hitting the mark more than a month faster than the prior best set last year.”

August 13 – Financial Times (Emily Herbert and Michelle Chan): “A flood of foreign currency bond issuance by Big Tech groups is shaking up the world’s smaller credit markets, pushing borrowing costs higher and causing local issuers to shift the timing of their deals, investors have said. Silicon Valley’s so-called hyperscalers, including Amazon and Google parent Alphabet, have this year started issuing debt in foreign currencies including the Swiss franc, British pound and Canadian dollar, as they tap new funding sources in the race for AI dominance. The size of their deals has put the hyperscalers among the biggest issuers in those markets, in some cases crowding out other companies, analysts said.”

Leveraged Speculation Watch

August 10 – Telegraph (Louis Goss): “Hedge funds focused on AI stocks have suffered their worst month since 2008… A plunge in the value of US tech giants and Asian semiconductor groups led tech funds to drop by 7pc in July, according to… Hedge Fund Research (HFR). This is the worst period for them since the depths of the global financial crisis in January 2008. The slump underlines fears about an unravelling of the AI tech boom, which has driven Wall Street to record highs. Alarm over a possible bubble in tech stocks grew after an AI-focused hedge fund, Situational Awareness, founded by Leopold Aschenbrenner, came close to collapse amid a 67pc fall in value.”

August 9 – CNBC (Oliver Renick): “Stock market bulls got some huge affirmation this week as the S&P 500 made all-time highs, options volumes set records, and shares of this year’s star IPO – SpaceX – stabilized and rallied… On Friday, the Cboe Volatility Index (VIX) fell to its lowest level since January as the S&P 500 added 0.6%, bringing the week’s advance to 3.6%. More than four million S&P 500 index calls traded on Cboe Global Markets Tuesday as the benchmark gauge surged above 7,700 for the first time in history. That topped the previous record for call trading in May by 10%...”

August 14 – Bloomberg (Bernard Goyder): “As the stock market keeps surging to record highs, a growing worry among investors isn't that it may come tumbling back down. It’s fear of missing out… For at least 170 stocks in S&P 500, a measure of demand for upside calls — which pay off if the shares keeps rising — has outstripped demand for options on markets staying flat by the most since at least 2016, according to Citadel Securities. That’s a break from the typical pattern. ‘Demand for upside has accelerated toward record levels,’ wrote Scott Rubner, head of equity and equity derivatives strategy at Citadel Securities…”

August 12 – Bloomberg (Yiqin Shen): “Bank of America Corp. hedge fund clients had their biggest buying week in the firm’s data history going back to 2008, following near-record buying the previous week. BofA clients were net buyers of US equities for the 6th week in week ended Aug. 7, with inflows of $4.1 billion into exchange-traded funds and $2.4 billion outflows from single stocks, strategists led by Jill Carey Hall say…”

August 10 – Bloomberg (Jin Wu, Denitsa Tsekova and Denise Lu): “Wall Street history is littered with products that got too popular for their own good. Quant strategies smothered by crowding. Mortgage bundles that led to a crisis. Bets against volatility that became the main driver of turbulence. Now, leveraged exchange-traded funds look set to join the list. A dramatic expansion in the issuance and use of these products over the past few years has brought the vehicles — which harness derivatives to amplify, reverse, or reverse-and-amplify the performance of an underlying security — to the point when the risks are no longer contained solely to their own investors. That was emphatically demonstrated in South Korea over the past few weeks… ‘There are elements of the growth of levered ETFs that remind me of the meme frenzy,’ said Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets. ‘Even for investors who want nothing to do with levered ETFs, it is important to understand that it can still impact them.’”

August 10 – Bloomberg (Nishant Kumar and Katherine Burton): “Value Aligned Research Advisors, a New Jersey-based hedge fund with a philosophy and portfolio similar to Leopold Aschenbrenner’s Situational Awareness, fell 44% last month, whipsawed first by general pressure on artificial intelligence stocks, then by the volatility triggered by upheaval at its better-known rival. The losses pared the year-to-date returns for the $20 billion flagship AI Fund to 65% through July…”

August 12 – Bloomberg (Mpho Hlakudi): “This month’s most lucrative emerging-market carry trade is attracting foreign investors to South African rand bonds at the fastest pace since January. Global investors bought a net 23.1 billion rand ($1.43bn) of government debt in the first week of August, the largest weekly inflow since January…”

Iran War Watch

August 8 – Wall Street Journal (Seth G. Jones): “Iranian attacks against U.S. military bases in the Middle East, including recently in Jordan, highlight the growing threat from adversary missiles and drones. Yet the U.S. isn’t sufficiently prepared to defend its overseas bases, critical infrastructure and personnel. U.S. sites across the Pacific are particularly vulnerable to Chinese and North Korean attacks—as are U.S. locations in the Middle East. The choice before Congress and the Pentagon is clear: Spend the money now to protect these facilities or face a much more serious problem in the future. Since the beginning of Operation Epic Fury, Iran has conducted more than 2,000 air, missile and drone strikes across the Middle East, damaging at least 20 sites in eight countries used by the U.S. military... In total, Iran has damaged or destroyed more than 42 U.S. military aircraft, several of which were parked on air bases.”

August 10 – Wall Street Journal (Benoit Faucon): “When the U.S. and Israel began airstrikes on Iran in February, the attacks killed Supreme Leader Ali Khamenei and almost his entire team of security chiefs, wiping out a generation of decisionmakers on military policy. Now, the new supreme leader, Khamenei’s son Mojtaba, is putting his own stamp on the country’s national-security policy amid a confrontation with the U.S. that could last months or even years. In a sweeping overhaul of the government’s top echelon on Sunday and Monday, Iran named seasoned hard-liners to run the country’s security policies and institutions of repression. It marked the most significant government reshuffle under Mojtaba Khamenei… Analysts said the appointments signaled Khamenei’s determination to hold fast in a showdown with President Trump… ‘The regime is preparing for a more confrontational posture at home and abroad,’ said Kasra Aarabi, an expert on the Islamic Revolutionary Guard Corps… at United Against Nuclear Iran…”

August 11 – Wall Street Journal (Georgi Kantchev, Henna Moussavi and Summer Said): “President Trump is betting the pressure of sanctions and a naval blockade will force Iran to bend. But the country’s rulers are taking time-tested steps to keep their chronically battered economy functioning just enough to resist a drawn-out campaign. Tehran is rationing scarce goods, limiting access to foreign currency, slashing investment and shifting more of the burden onto households while preserving strategic imports and the essential machinery of the state, analysts say. The result will be a deepening economic malaise that leads to rising poverty and dysfunction, but also more room for Iran’s leaders to stall talks with the U.S.”

August 13 – CNBC (Lim Hui Jie): “The U.S. will be applying economic measures ‘that have never been seen on Iran,’ according to Treasury Secretary Scott Bessent. ‘It will be a combination of economic isolation like ‌the world has never seen before, and the continued blockade in ‌the Strait of Hormuz that will keep anything from going in or out of the ‌Iranian ports,’ Bessent said… His statements come as U.S. Defense Secretary Pete Hegseth reportedly said late Thursday stateside that the U.S. military can keep a naval blockade of Iran going ‘indefinitely.’ The Navy will rotate ships in and out ‘as we have, and we’ll continue to,’ Hegseth told reporters.”

August 12 – Bloomberg (Patrick Sykes, Tooba Khan, and Omar Tamo): “Iran has reorganized its military to be more aggressive abroad as talks on ending the war with the US remain mired in stalemate, a sign that Tehran is preparing for a protracted era of regional conflict. A raft of top military appointments by Supreme Leader Mojtaba Khamenei marks a shift to an ‘offensive doctrine,’ Mohammad Reza Naqdi, a general in the Islamic Revolutionary Guard Corps who advises the force’s new commander, said… ‘Whenever the conditions are favorable and the order is issued, we must be able to take the operation into enemy territory,’ he said, contrasting the approach with a pre-war doctrine that was ‘primarily based on defense and the preservation of the country.’”

August 10 – Wall Street Journal (Summer Said and Benoit Faucon): “Persian Gulf energy producers are concluding that Iran’s control over the Strait of Hormuz will become permanent, disrupting their oil and gas exports and global energy supplies indefinitely. The problem is they worry the alternative—going back to war—would be worse. The conundrum highlights how the war has unleashed a more antagonistic Iran and left a region that is vital to the world’s energy security with no good option for countering it. Iran’s rivals in the Gulf don’t like the deal now under consideration to crack open the vital waterway that formalizes Iranian oversight of inbound ships. But Gulf officials said the region sees the agreement as preferable to further military action between the U.S. and Iran, which would put Arab states’ energy infrastructure at risk.”

August 8 – Reuters (Hatem Maher, Nayera Abdallah, Tala Ramadan and Mohammed Ghobari): “Yemen’s Iran-aligned Houthis have attacked Saudi Aramco’s Jazan refinery…, two days after the kingdom signed a defence pact with Turkey and Pakistan in response to growing regional instability from the U.S.-Israeli war on Iran. The alliance with Sunni Muslim U.S. allies, Turkey and Pakistan, is intended ‌to strengthen collective deterrence against any act of aggression and stipulates that an armed attack against any of the three would be regarded as an attack on all. It was not clear whether or how either Pakistan or Turkey would join in any Saudi response to the latest attacks.”

August 14 – Associated Press: “The United Arab Emirates blamed Iran for firing drones at two tankers operated by a state-owned oil company as they sailed through the Strait of Hormuz, saying Friday that the attacks were acts of piracy. The attacks caused no casualties but underlined the dangers faced by vessels moving cargo through the critical waterway that connects the Persian Gulf to the open oceans, as Iran keeps a firm grip on the passage.”

Iran War Ramifications Watch

August 11 – Bloomberg (Magdalena Del Valle): “The US is running ‘dangerously low’ on the key munitions used during the war against Iran, according to a Bloomberg Economics report… The Pentagon’s stocks of hard-to-replace air defense interceptors are ‘critically low,’ while long-range missile supplies are ‘under pressure,’ Bloomberg Economics defense lead Becca Wasser and Courtney McBride said... The report found the US has likely fired more than half of its most advanced Patriot variant — the PAC-3 MSE — and about 40% of its Terminal High Altitude Area Defense interceptors as the US defended itself against Iranian retaliatory attacks. The Pentagon also burned through various types of long distance, so-called stand-off strike missiles in the opening days of the war, with numbers of Precision Strike Missiles ‘likely exhausted,’ as commanders tried to keep US troops out of harm’s way.”

August 12 – CNBC (Spencer Kimball and Deena Zaidi): “Ship traffic through the Strait of Hormuz is near a three-month low as doubt grows that the U.S. and Iran will reach an agreement to fully open the key Middle East oil export corridor. Vessel transits sat at a five-day average of around 13 on Tuesday, nearly the lowest level since May 12… This includes ships of all types, from cargo vessels to oil tankers. Traffic is about 90% lower than the daily average of 130 ships that transited Hormuz before the U.S. and Israel attacked Iran on Feb. 28.”

August 10 – CNBC (Spencer Kimball): “Crude oil stockpiles in the U.S. Strategic Petroleum Reserve have fallen below 300 million barrels, the lowest level in more than four decades, as global inventories stay under pressure due to the Iran war. The SPR fell by 6.1 million barrels to 298.7 million barrels last week… The reserve, created in 1975, is at its lowest level since January 1983. President Donald Trump ordered the release of 172 million barrels in March after Iran choked off oil exports through the Strait of Hormuz, triggering the largest disruption of crude oil supplies in history.”

August 12 – Axios (Ben Geman): “The state of the global diesel market is getting even more precarious as the Russia-Ukraine war and the Iran crisis squeeze supply from multiple angles. Diesel prices ripple through economies here and abroad, affecting shipping costs, construction and plenty in between. The average U.S. price is up 44 cents over the last month to $5.32 per gallon, compared to $3.71 a year ago, per AAA… A new S&P Global Energy analysis unpacks the ingredients behind the ‘big squeeze’ in global refined product markets. S&P estimates that refineries worldwide processed 7.5 million barrels per day less crude last month than the same period in 2025. A separate International Energy Agency analysis out this morning also tracks an extremely steep drop in how much crude that refineries are processing.”

August 11 – Bloomberg (Mia Gindis and Nathan Risser): “The US now expects oil supply disruptions stemming from the US-Iran war to reach about 600,000 barrels per day through the end of next year as the conflict continues to crimp shipments via the critical Strait of Hormuz. Oil transported through the waterway averaged 4.9 million barrels per day in the second quarter of this year, according to estimates from the US Energy Information Administration’s Short-Term Energy Outlook. That compares to an average of 21.6 million in the last quarter of 2025, before the US and Israel launched attacks on Iran.”

August 12 – Reuters (Jonathan Saul and Catherine Cartier): “A vast oil spill from a leaking tanker has started to hit Oman’s coastline, its environment agency confirmed…, in what threatens to become one of the world’s worst in years after spreading largely unchecked for ‌weeks. The oil could end up impacting 25 miles of coast near Ras Madraka as well as Masirah Island, the agency said. The slick now covers an area of more than 2,000 square km, said John Amos, an oil spill specialist who reviewed satellite imagery…”

August 11 – Wall Street Journal (Giulia Petroni): “Global oil demand is set for a deeper contraction this year as renewed hostilities in the Middle East and disruptions at key shipping chokepoints derail the recovery in supplies, pushing up fuel prices and weighing on consumption, the International Energy Agency said. The energy watchdog—a group of Western nations and their allies—now expects global oil consumption to fall by 1.6 million barrels a day in 2026, compared with its previous forecast for a 1-million-barrel-a-day decline. Demand is forecast to fall by 2.8 million barrels a day in the third quarter following a 4.9-million-barrel-a-day drop in the second quarter, before returning to growth in the final three months of the year.”

August 11 – Financial Times (Jamie Smyth and Eva Xiao): “Prices for the busiest shipping lanes in the Panama Canal have hit a new record, as falling water levels linked to an intensifying El Niño and strong demand driven by the Iran war constrain traffic. Daily auctions for a transit slot in August through the canal’s commonly used locks have averaged about $1.1mn so far this month, more than 16 times the average price for the same period last year. Prices have surged since the US and Israel-led bombardment of Iran began on February 28, leading to the closure of the Strait of Hormuz.”

Trump Administration Watch

August 9 – Wall Street Journal (Alexander Ward): “For weeks, President Trump had been laying the groundwork to declare victory in the Iran war should Tehran fully reopen the Strait of Hormuz, even floating the idea privately to senior aides that he’s willing to walk away without a nuclear deal, U.S. officials said. But that scaled-back objective became more difficult when Iran insisted Saturday on its highest price yet for permitting the free flow of traffic in the waterway, seeking billions of dollars in U.S. payments, the removal of American troops from the region and an end of the U.S. naval blockade, among other things. This rapid chain of events suggests Trump’s options for walking away from the conflict have again narrowed.”

August 9 – Financial Times (Andrew England in London and Bita Ghaffari): “Iran has warned that it will not reopen the Strait of Hormuz unless the US meets a series of conditions, including paying Tehran compensation for war damage, complicating Donald Trump’s push to get ships moving through the vital waterway. The hardening rhetoric from Tehran over the weekend came days after Iranian diplomats said they were in the final stages of reaching a provisional arrangement with Oman to manage shipping through the strait. It underscores the deep distrust between the US and Iran, and the challenges of securing a diplomatic breakthrough to ease hostilities in the region. Diplomats hoped that an Iran-Oman deal would lead to the reopening of the vital artery for global energy flows, de-escalate tensions between the US and Iran and get the warring parties to return to talks on a final settlement to end the war.”

August 12 – Wall Street Journal (Rebecca Feng and Georgi Kantchev): “President Trump said… the U.S. has total control of the Strait of Hormuz. The reality on the water tells a different story. Ship-tracking data shows that just 14 vessels on Tuesday crossed a waterway that routinely handled more than 130 a day before the war. Eleven of those ships took the route administered by Iran. Traffic was slow throughout July, with an average of 26 crossings a day, and in June, with 33 a day, as renewed Iranian attacks on ships cut short a deal to open the strait. The disconnect shows how Tehran has managed to squelch traffic through the crucial energy chokepoint with relatively little military force…”

August 9 – Axios (Barak Ravid): “President Trump signaled… he’s prepared to allow economic pressure on Iran to mount — as opposed to ordering a new military offensive — even as the country continues to defy the U.S. Only a week ago, Trump was on the verge of ordering a return to major combat operations. But in an interview with Axios, he did not make any new military threats. Trump also didn’t express any anger or frustration about the fact that Iran has been holding up an announcement on a deal with Oman to reopen the Strait of Hormuz… ‘We are low-keying it,’ Trump said… ‘We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money.’ He stressed that Iran ‘is in very bad shape’ economically and has no money to pay its troops. The U.S. naval blockade has exacerbated the Iranian regime’s economic crisis, Trump said.”

August 10 – Bloomberg (Daniel Flatley and Anya Andrianova): “Treasury Secretary Scott Bessent’s suggestion of a no-limits approach toward helping Japan rescue the yen risks getting called out by market participants flagging his limited firepower to do the job. Japan’s currency slid as much as 1% Monday, erasing half the gains triggered by first US-Japan joint intervention to prop up the yen since 1998. It dropped past 159 per dollar after having made a run at 155 in the wake of the July 31 actions. In the wake of that unusual operation, Bessent said ‘we will do whatever it takes to support them in a way that helps the American economy, the American taxpayer, stabilizes the global economy.’ Trouble is, as far as currency-intervention ammunition goes, the Treasury chief is seen limited by his main dedicated instrument — the Exchange Stabilization Fund, with holdings of less than $220 billion.”

August 12 – New York Times (Alan Rappeport): “The Trump administration is moving forward with a plan to scale back scrutiny of the shadowy shell companies that criminals use to launder money and traffic drugs. The initiative follows a yearslong campaign by lobbying groups, which contended that new financial reporting requirements were too onerous for businesses. The Treasury Department said… it was permanently halting the collection of data about the ownership of private American companies that was required as part of the 2021 Corporate Transparency Act. The law, which passed with bipartisan support, was intended to prevent the illicit use of shell companies by giving law enforcement agencies access to information about their ownership structures.”

Trade War Watch

August 13 – Financial Times (Demetri Sevastopulo): “The White House has accused more than 40 countries, including Canada, Mexico and Japan, of helping Beijing illegally avoid US tariffs by rerouting trade through nations subject to lower American import duties than China. The nations and the EU were enabling the evasion of tariffs for $60bn in trade, the White House said in a report titled ‘The Great Transshipment Scam’… Peter Navarro, head of the White House office of trade and manufacturing policy that issued the report, said China had used ‘extremely sophisticated’ ways to engage in transshipment since Donald Trump first imposed tariffs on the country in 2018.”

Deficit Watch

August 8 – Bloomberg (Anthony Capaccio): “The Pentagon’s No. 2 official asked major US defense companies to accelerate efforts to produce and deliver key weapons systems amid new concerns about shortages and gaps exacerbated by the Iran war. Steve Feinberg, the deputy secretary of defense, said the department is targeting accelerated or increased procurement for critical programs including wide-area surveillance, air-defense sensors and interceptors, and missile-tracking systems. ‘Years-long development cycles are not acceptable,’ he wrote in an Aug. 5 letter… to major defense companies, including Boeing Co., Lockheed Martin Corp. and RTX Corp. ‘We must dramatically accelerate our program schedules and expand our production capacity now.’”

U.S./Russia/China/Europe/Iran Watch

August 8 – Reuters (Joern Poltz): “Germany faces daily hybrid warfare attacks from abroad, Interior Minister Alexander Dobrindt was quoted by a local newspaper as saying on Sunday, ‌following a suspected attack attempt involving an explosive-laden drone at Leipzig/Halle Airport. Dobrindt told the newspaper Bild am Sonntag that foreign powers wanted to subdue Germany politically and socially by stirring up fear…”

August 12 – Associated Press: “Russian President Vladimir Putin… threatened retaliation for Western seizures of its commercial vessels, describing them as ‘piracy’… Putin described the Western moves to detain vessels linked to Russia as a breach of international maritime law. ‘It’s nothing but piracy and robbery,’ Putin said. ‘If this is done, we will be forced to respond in kind.’ He added that the Russian response wouldn’t necessarily come in the waters where the Russian ships were seized, noting that Moscow could retaliate ‘in any area where we see it as necessary and appropriate,’ including in the Pacific.”

August 13 – Politico (Ferdinand Knapp): “Authorities in Tokyo lashed out at Moscow after a visit by Russian President Vladimir Putin to the disputed island of Iturup on Thursday. The island, also known by its Japanese name Etorofu, lies northeast of Japan — around 100 kilometers from the coast of Hokkaido — in the Kuril Islands chain and is claimed by both Moscow and Tokyo… ‘Today, I was informed that Russian President Putin visited Iturup Island. The Northern Territories, including Iturup Island, are inherently Japanese territory both historically and under international law, and the Government of Japan strongly protests this visit.’”

Ukraine War Watch

August 13 – Associated Press (Illia Novikov): “Ukrainian drones struck a major refinery deep inside Russia…, the fourth in three days in Kyiv’s ongoing campaign to choke Moscow’s vital oil sector… The complex, located southeast of Moscow about 800 miles from Ukraine’s border, is one of Russia’s largest such facilities…”

August 14 – Bloomberg (Olesia Safronova): “Ukraine said it may halve its intended agricultural exports as the country’s remaining Black Sea ports in the Greater Odesa area are effectively shut amid Russian airstrikes, posing risks to the global food supply. ‘Since the beginning of August, no vessels have entered Odesa ports forcing Ukraine to use alternative routes,’ Ukraine’s agriculture minister, Taras Vysotskyi, told reporters... So far this month, the volume of grain exports slumped to just 590,000 tons, which constitutes only 30% of what has to be shipped, he said.”

August 12 – Wall Street Journal (Anastasiia Malenko and Ian Lovett): “The Black Sea, a hub for global grain trade and Ukraine’s lifeline to the world economy, has been transformed this summer. Attacks by Russia and more recently Ukraine have set ships and port infrastructure ablaze at both ends of the sea, an ominous sign for the rest of the world. On Tuesday night, Ukraine carried out a missile and drone attack on the Russian Black Sea port city of Novorossiysk, striking ‘air-defense positions, piers and seaport infrastructure,’ Ukrainian President Volodymyr Zelensky said. Russia relocated much of its Black Sea Fleet to Novorossiysk earlier in the war after repeated Ukrainian strikes on its ships docked in Russian-occupied Crimea. ‘The occupation fleet and all the infrastructure supporting it will not be safe as long as Russian aggression continues,’ Zelensky said…”

Taiwan Watch

August 13 – Wall Street Journal (Joyu Wang): “Taiwan is giving its coast guard an expanded role in national security as part of a defense strategy that is focused on keeping China’s landing forces from reaching its shores and warning Beijing of the difficulties it will encounter if it invades. As part of this transformation, a coast guard cutter led four missile boats out of the port of the southern Taiwan city of Kaohsiung on Saturday, followed about 30 minutes later by a naval deployment of mobile radars, missile launchers, assault boats and drones—a drill illustrating how Taiwan would respond to a Chinese amphibious invasion.”

AI Bubble/Arms Race Watch

August 10 – CNBC (Hugh Son): “Nvidia is attempting to turn its artificial intelligence chips into Wall Street’s newest asset class, partnering with six large asset managers on a $500 billion financing push designed to treat compute infrastructure much like commercial real estate, toll roads or other assets to borrow against. The chipmaker signed memorandums of understanding with Apollo Global Management, Blackstone, BlackRock, Brookfield Asset Management, Goldman Sachs and KKR to establish financing platforms for Nvidia’s customers, the company said... Executives from the seven companies joined CNBC’s Becky Quick in a rare, live joint interview to discuss the announcement.”

August 10 – Bloomberg (Rob Copeland and Kalley Huang): “In some quarters, the words ‘artificial intelligence’ have never been less popular, as many worry about job losses, environmental impacts and plain old uncertainty. Not so on Wall Street, where six giant asset managers, private-equity firms and banks came together on Monday to announce an effort to raise $500 billion to keep fueling the A.I. boom by financing more data centers, power plants and chips. The firms — BlackRock, Goldman Sachs and KKR among them — said they were working together to come up with that huge sum to lend to Nvidia’s customers, including the start-ups that use the company’s chips in data centers to develop and operate A.I. software. These customers, Nvidia said, have been struggling to secure financing for chips and data centers. Nvidia will connect its customers with one of the six lenders, which will provide financing that could range from loans to credit. The financing will be ‘at attractive rates,’ Nvidia said…”

August 13 – Financial Times (George Hammond): “Anthropic investors expect the AI start-up to float at a valuation of $2tn or more in October, a dizzying figure that would eclipse SpaceX and make the AI lab’s debut the largest ever initial public offering. Half a dozen of the company’s backers told the FT that Anthropic’s rapidly rising revenue would enable it to more than double its current valuation in a planned autumn float. A listing at that level could unlock billions of dollars in gains for the five-year-old company’s early investors but would also test public markets that are growing more nervous about the AI boom.”

August 13 – Financial Times (Jamie John and Clara Murray): “Leading US AI labs such as OpenAI and Anthropic are releasing cheaper models as they fight to retain cost-conscious customers who are switching to cut-price alternatives from Chinese rivals. The price war comes as rising AI bills push companies to curb usage and seek cheaper models, helping Chinese developers including Moonshot and DeepSeek make inroads with users from Silicon Valley to Europe. OpenAI recently said that it was slashing prices for GPT-5.6 Luna, its ‘fastest and most affordable model’, by 80%. Anthropic has launched Claude Opus 5, touting the system’s ‘frontier intelligence… at half the price’ of Fable 5, the company’s most capable model.”

August 11 – CNBC (Samantha Subin): “Intel announced… it had upsized its previously announced common stock offering to $20 billion, with an offer price of $95 per share. The chipmaker announced a $15 billion common stock offering on Monday to support skyrocketing customer demand for artificial intelligence computing power. Shares of Intel fell 4% in response. Intel said the offering, set to close on August 12, is expected to raise net proceeds of $19.7 billion…”

August 10 – Reuters (Saeed Azhar and Tatiana Bautzer): “The race to finance the U.S. data center boom is forcing banks and asset managers to confront an added risk: political and community opposition. A spate of projects has hit roadblocks or faces opposition, creating another level of due diligence for banks and financiers assessing opportunities. Senior bankers told Reuters they are scrutinizing community concerns when they ‌assess project loans and are leaning toward projects in states that are more welcoming toward data centers. Still, they remain keen to invest in or finance the red-hot sector.”

August 12 – Reuters (Saeed Azhar and Pritam Biswas): “Bank of America said… it plans to deploy $250 billion by July 2027 to support U.S. ‌digital and infrastructure projects, a move it says will boost the country’s economic growth ‌and help create tens of thousands of jobs. The Wall Street bank said its ‘Critical Infrastructure Finance Initiative,’ launched on the heels of the nation's 250th anniversary celebrations, will provide primary market lending, investments, capital markets services, and banking and advisory offerings.”

August 11 – Bloomberg (Miranda Davis): “Chicago Mayor Brandon Johnson is pushing for a temporary moratorium on data centers, and signed an executive order on Tuesday to create new rules for any future developments. The progressive Democrat’s order includes an increased review of air pollution permitting, additional rules on noise created by data center equipment, and a more thorough vetting process for future data centers that would consider water use, electricity demand and impact on neighborhoods, among other items. Johnson needs city council approval for a moratorium. Chicago is already home to about 39 data centers….”

Bubble Watch

August 13 – Bloomberg (Paulina Cachero): “Manhattan rents surged to the highest level on record in July as a historic collapse in available listings collided with the summer apartment hunt rush. The median rent on new leases signed in July hit $5,000, up 6.4% from a year earlier, according to… Miller Samuel Inc. and The Real Deal… The jump comes alongside a sharp drop in supply: Listing inventory last month plunged more than 39% year-over-year in Manhattan, one of the steepest declines the market has seen in a decade.”

August 9 – Wall Street Journal (Katherine Bindley and Will Parker): “Flowers and wine for listing agents at open houses. A year’s rent up front. And $2,250 for a room with no closet. San Francisco’s housing market was already a demolition derby for renters. The artificial-intelligence boom has pushed the bruising race for housing into overdrive—a lack of supply is colliding with sky-high AI salaries. In less than two years, the average asking rent across the San Francisco metropolitan area has risen 18% to reach $3,728 a month, according to… CoStar, surpassing the New York City metro area this year for the first time since 2019. San Francisco has reclaimed the crown for the highest average rent in the U.S. Rents in the most popular neighborhoods can go for twice the average. Bidding wars are pushing some prices into the five-figure range.”

August 10 – New York Times (Maureen Farrell): “The long-awaited deal-making boom has finally arrived. SpaceX set a record for the world’s largest initial public offering. David Ellison is pursuing a $110 billion deal linking Paramount with Warner Bros. The utility firm NextEra Energy has struck a deal to buy Dominion Energy that values it at more than $120 billion. But private equity — a deal-making machine for decades — is largely sitting on the sidelines. For the third consecutive year, private equity firms are saddled with a rapidly increasing number of companies that they cannot sell or take public at the returns their investors expect. As of June 30, private equity firms had 33,575 unsold companies in their portfolios, according to PitchBook... That’s up from 32,451 companies at the end of last year and 15,923 companies a decade ago.”

Crypto Bubble Watch

August 9 – Bloomberg (David Pan): “Michael Saylor’s Strategy Inc. spent another week revising the company’s capital structure by selling more Bitcoin and common shares to bolster its cash reserve. The largest corporate holder of the digital asset on Monday said that in the seven days ended Aug. 9 it sold $108.6 million of Bitcoin, offloaded 6.6 million common shares worth around $653 million and repurchased $108.6 million of its Stretch, or STRC, preferred shares. Strategy owns about $58 billion in Bitcoin.”

Inflation Watch

August 12 – CNBC (Jeff Cox): “A key inflation reading… showed prices moderating across a range of goods and services… The consumer price index… showed a seasonally adjusted increase of 0.1% during July… Excluding food and energy, the so-called core CPI rose 0.2%. On an annual basis, the inflation rates were 3.4% and 2.5%, both down 0.1 percentage point from June. All of the readings were line with… forecasts… Energy prices dropped another 1.5% for the month following a 5.7% decrease in June. Still, the sector saw an annual increase of 14.7%...”

August 12 – CNBC (Jeff Cox): “Wholesale costs for goods and services were flat in July… The producer price index… was unchanged for the month, below the 0.2% Dow Jones consensus estimate and after falling 0.1% in June… Excluding food and energy, the core PPI rose 0.2%, against the forecast for a 0.3% gain. The core PPI excluding trade services increased 0.4%. On an annual basis, the headline PPI increased 4.7% for the all-items index and 4.2% for core… Services prices rose 0.2% for the month… Goods prices fell 0.7%, helped by a 3.1% decrease in energy, including a 5.7% slide in the gasoline index. Food prices fell 0.9% though core goods prices rose 0.1%.”

August 11 – Axios (Emily Peck): “Memory chip prices are skyrocketing, thanks to AI demand, and there’s no end in sight. ‘Chipflation’ is pushing up the prices for electronic goods like smartphones and laptops, as well as the costs for cloud storage and hardward... While the overall effect on inflation may not be huge — other kinds of products get more weight in the government’s measure of consumer prices — the scale of this boom is unprecedented. The Producer Price Index for electronic components and accessories, which measures what companies pay for semiconductor chips and other electronics and accessories, has gone vertical this year. The PPI for those components rose 27.6% in June from the same time last year — the largest increase in records that date back to 1966, easily eclipsing the surge in prices during the dawn of the PC era in 1980 and the supply crunch in chips during the pandemic.”

Federal Reserve Watch

August 11 – Bloomberg (Bill Dudley): “New Federal Reserve Chair Kevin Warsh has gotten off to a rocky start. The main problem is an unwillingness to share his thoughts about how he would adjust monetary policy to changes in the economic outlook. Getting rid of forward guidance is desirable, but outsourcing monetary policy to financial markets is not a viable strategy. If the central bank is looking to the markets for guidance and the markets are looking to the central bank for guidance, policy expectations become indeterminate and that just leads to greater uncertainty, confusion, higher risk premia, and a loss of Fed credibility. But Warsh’s problems go deeper. He has undermined his credibility by how he has talked about the Fed’s inflation objective.”

August 10 – Bloomberg (Josh Wingrove and Courtney Subramanian): “President Donald Trump played down the frequency and length of his conversations with Federal Reserve Chairman Kevin Warsh, which raised fresh questions about whether he was seeking to directly influence the central bank. Trump insisted… he had spoken to Warsh only once ‘briefly’ since joining the Fed, despite one of his own top economic advisers and people familiar saying the talks have occurred more often. ‘I’ve only spoken to him one time briefly a few days ago, just a conversation,’ Trump told reporters. ‘They made it sound like I live and breathe, you know, I speak to Kevin all the time, every time.’”

August 10 – Bloomberg (Jonnelle Marte): “Federal Reserve Bank of Cleveland President Beth Hammack said it’s possible a number of interest rate hikes may be needed to bring inflation down to the central bank’s 2% target, but she does not want to prejudge what the end point will be. ‘I would say in general, one 25-bps move probably doesn’t do a whole lot for the economy,’ Hammack said… ‘So it’s probably some number,’ but ‘I don’t want to prejudge what that number is going to be’… Hammack said interest rates are not ‘meaningfully restricting’ the economy and she doesn’t see inflation returning to target on its own.”

August 13 – Reuters (Ann Saphir): “Cleveland Federal Reserve Bank President Beth Hammack… reiterated her view that the ‌U.S. central bank should raise rates immediately to bring down too-high inflation and restrain business growth and investment. ‘When I’m talking to businesses, I hear that businesses are excited to raise funds, they’re excited to borrow so they can continue to invest. They see the growth opportunities, which is great; I want them to continue to see growth opportunities, but if we have too much of that growth... it could mean that that’s putting additional ⁠pressure on price increases and that puts more of that inflationary pressure out there,’ Hammack said… ‘We need to make sure that we’ve got some amount of restraint coming from policy so that we can get inflation from this above-3% number back down to that 2% objective.’”

August 13 – Bloomberg (Jonnelle Marte): “Federal Reserve Bank of Cleveland President Beth Hammack questioned whether recent signs of a slowdown in inflation will continue and reiterated her call to raise interest rates now. ‘I love to see that those numbers are coming in lower — that’s a good thing — but I don’t have confidence that we’re going to continue to see that, or that we’re going to see them low enough that it’s going to bring us back down to that 2% number,’ Hammack said…”

August 11 – Financial Times (Claire Jones and Myles McCormick): “Poorer Americans are struggling to make ‘ends meet’ as the Iran war has worsened cost-of-living strains, according to a top Federal Reserve official who warned the central bank may need to raise rates to cool inflation. Boston Fed president Susan Collins told the FT businesses and households in the US north-east were being squeezed by inflation that has been above the central bank’s 2% goal for more than five years. ‘I hear [about prices] in every conversation, in some version,’ she said… Collins added that ‘among lower- and moderate-income households, I’m increasingly hearing about challenges… making ends meet. Energy prices are really challenging and especially in our region.’”

August 12 – Reuters (Rishabh Jaiswal): “U.S. Federal Reserve Bank of Boston President Susan Collins would back a September ‌interest rate rise if inflation remains high, with poorer Americans are struggling to make ‘ends meet’ as the Iran war has ⁠worsened cost-of-living strains… Collins told the FT in an interview that she would be open to backing an increase as soon as September if the data dictated ‌it. ‘I ⁠do see the possibility that economic conditions in the coming months will require tighter policy, and I ⁠would be prepared to raise rates in that context,’ she said.”

U.S. Economic Bubble Watch

August 11 – Reuters (Howard Schneider): “U.S. consumers took out a record amount in auto loans in the second quarter and boosted their credit card and home equity balances as well, the New York Fed said in its latest household ‌debt and credit report... Though overall consumer debt fell slightly to $18.8 trillion in the April-June period, the decline was linked to a change in how mortgage data is reported… The $19 billion rise in home equity loans is part of a now four-year trend that Fed researchers see as part of a substitution among older homeowners who want to avoid the current high mortgage rates that would be associated with a full refinancing. The $211 billion in auto loan originations was a record…”

August 11 – CNBC (Jessica Dickler): “Credit card balances are on the rise as of mid-2026, according to a new quarterly report on household debt from the Federal Reserve Bank of New York… Balances rose by $21 billion in the second quarter to a collective $1.26 trillion — nearing last year’s all-time high of $1.28 trillion. The total is up 1.7% from the previous quarter. The percentage of credit card balances in ‘late-stage delinquency,’ or more than 90 days past due on payments, jumped to 12.8% from 7.6% in the second quarter, ‘prompting concerns that Americans are falling behind on their debt payments at rates not seen since the Great Recession,’ the New York Fed researchers said…”

August 11 – Reuters (Lucia Mutikani): “U.S. small-business sentiment increased to an 11-month high in July amid a surge in the share of owners reporting plans to boost hiring, suggesting ‌that last month's slump in nonfarm payrolls was probably temporary. The National Federation of Independent Business ‌said on Tuesday its Small Business Optimism Index rose 2.4 points to 99.8 last month, the highest level since August 2025 and surpassing its 52-year average of 98.0… The survey's employment index rebounded 1.9 points to 102.1 following four ⁠straight monthly declines. The share of owners planning to create new jobs over the next three months jumped 9.0 points to 20%, the highest level since October 2022.”

August 13 – Associated Press (Paul Wiseman): “U.S. applications for unemployment benefits rose last week, but layoffs remain at historically healthy levels… 209,000 people filed jobless claims last week, up from a revised 200,000 the week before and higher than the 205,000… expected. The four-week average of applications… was unchanged at 199,000. The overall number of people collecting employment benefits… dropped by 22,000 to 1.78 million… ‘The labor market has yet to show any sign of wear and tear from the surge in oil prices since the start of the war with Iran and the global energy supply shock,’ Carl Weinberg, chief economist at High Frequency Economics, wrote…”

August 14 – Associated Press (Anne D’Innocenzio): “After splurging on the World Cup and Amazon Prime Day sales, Americans unexpectedly cut their spending in July by the biggest amount in more than a year. Retail sales fell 0.6% last month, marking the biggest decrease since May 2025, compared with a revised gain of 0.2% in June… Business at motor vehicle and parts dealers saw a 1.8% drop from a 1.9% increase in June which was helped by auto makers’ promotion incentives. Electronics and appliance sales declined 0.5%. Online sales fell 2.2% from June when they were fueled by Amazon’s four-day Prime Day event that began in late June, earlier than previous years. The data offers only a snapshot of consumer spending and doesn’t include activities like travel and hotel stays. The lone services category – restaurants – registered a 0.5% increase.”

August 11 – Associated Press (Matt Ott): “Sales of previously occupied U.S. homes slowed again in July as record prices and the highest mortgage rates in a year prove to be an insurmountable hurdle for many prospective homebuyers. Existing home sales fell 1.7% last month from June to a seasonally adjusted annual rate of 4.06 million units, the National Association of Realtors said... That’s slightly above the 4.05 million pace economists were expecting… July sales, however, were up 0.7% compared with last year. Home prices continued to rise, hitting unprecedented levels for the month of July… The U.S. median sales price increased 2% from a year earlier, to $434,100. In June, the median sales price hit $442,800, an all-time high for any month on data going back to 1999…”

August 12 – CNBC (Diana Olick): “After five weeks of gains, mortgage rates fell very slightly last week. That was enough to bring a bit of demand back to the market… Applications to refinance a home loan rose 5% for the week but were 22% lower than the same week one year ago… Applications for a mortgage to purchase a home rose 3% for the week and were 1% lower year over year.”

August 10 – Reuters (Lisa Baertlein): “U.S. imports of containerized goods in July hit the fourth-highest level for ‌the month, as shippers rushed in goods ahead of unknown ‌U.S. tariff changes, supply chain technology provider Descartes Systems Group said… U.S. seaports handled 2.5 million 20-foot equivalent units (TEUs) in July, down 4.3% from the near-record result in July 2025. Through the first seven months of 2026, imports were down 0.9% year over year…”

China Watch

August 8 – Reuters (Kevin Yao and Yukun Zhang): “China’s producer price inflation eased more than expected in July to its weakest in three months, while consumer inflation also cooled…, as global energy prices retreated despite the U.S.-Israel war against Iran… The producer price index rose 3.5% from a year earlier in July…”

Europe/UK Watch

August 9 – Bloomberg (Joe Wertz): “Another wave of intense heat is set to sweep across an already parched Europe this week, raising wildfire risks, threatening crops and drying watersheds feeding the region’s critically low rivers. A high-pressure heat dome is forecast to drive up temperatures in northern France to near 40C (104F) on Tuesday… Temperatures in southern England could reach the mid-30s, with 38C possible in Frankfurt on Friday… Europe’s fifth major heat wave of the year is likely to block moisture-bearing clouds from helping refill rivers such as the Rhine, Po and Danube, where record low water levels have disrupted navigation and power production.”

August 11 – Bloomberg (Eamon Farhat, Rachel Graham, and Sasha Draeger-Mazer): “Water levels on the Rhine river are dwindling further, with no relief in sight, forcing companies that rely on the waterway to adjust rapidly to keep goods flowing. Levels at Kaub, Germany — the Rhine’s shallowest point — have fallen to the lowest since records began in 1880, and could drop further as another heat wave bakes Europe this week. Forecasters say it would take weeks of sustained rain to lift the river toward more normal levels, meaning the crisis could drag on into October. The Rhine is a key shipping route through Europe’s industrial heartland, from Switzerland to Rotterdam, the continent’s busiest port. The disruption along the waterway is throwing up supply chain challenges for companies ranging from steelmaker Thyssenkrupp AG to BASF SE and Lanxess AG.”

August 13 – Bloomberg (Andra Timu and Zoltan Simon): “Romania shut down its sole nuclear plant while Hungary is trying to salvage the operation of its own facility as a persistent drought curbs Danube river flows and hampers the cooling of reactors. Authorities in Bucharest took the second reactor at the Cernavoda plant offline on Thursday… It’s the first time since 2003 that drought forced the 1,400 megawatt facility to be fully halted.”

Japan Watch

August 9 – Bloomberg (Yoshiaki Nohara): “The Bank of Japan flagged rising risks of inflation heating up in a summary of opinions from its July meeting, with one board member pointing to the possibility of an acceleration in the pace of interest rate hikes. ‘Given that underlying CPI inflation has been approaching 2% and greater consideration should be given to upside risks to prices than before, it could be considered that the pace of policy interest rate hikes will be faster than market expectations,’ one of the nine board members said, according to a summary from the July 30-31 meeting…”

August 12 – Bloomberg (Yoshiaki Nohara): “Prices for Japan’s corporate goods continued to rise at an elevated pace in July, keeping high cost pressure on companies, as central bank officials continue to consider whether to proceed with additional interest rate hikes to contain inflation. The measure of input prices for Japanese firms rose 7.2% in July from a year earlier, slightly slower than the revised 7.3% in June that was the highest since March 2023… On a monthly basis, prices climbed 0.1% after an upward revision to 0.5% in the previous month’s result.”

EM Watch

August 11 – Bloomberg (Jaehyun Eom): “South Korea’s 30-year government bond yield climbed to a record, as elevated energy prices and weaker demand from life insurers intensified pressure on the debt market. The yield reached 4.67% on Wednesday, the highest since the tenor was introduced in 2012.”

Social, Political, Environmental, Cybersecurity Instability Watch

August 10 – Associated Press (Seth Borenstein): “The contiguous United States sizzled to its hottest month ever last month, according to the National Oceanic and Atmospheric Administration. July averaged 76.89 degrees Fahrenheit across the Lower 48 states, eclipsing the Dust Bowl’s July 1936 by an eighth of a degree. Records go back to 1895. ‘It’s not good when you’re breaking records from the Dust Bowl, which we are in this case,’ said meteorologist Jeff Masters of Yale Climate Connections. ‘And that was a crazy sort of situation where you put tens of millions of people in motion. You had this great migration because of the drought and the heat that hit the center of the U.S. — just a cataclysmic event in U. S. history. If we’re exceeding records from The Dust Bowl, that says that we’re in deep trouble.’”

August 13 – Bloomberg (Eric Roston): “An unusually powerful El Niño is raising the odds that 2026 will surpass 2024 as the world’s hottest year on record, and regardless, 2027 is expected to set a new high, according to a monthly analysis… by Berkeley Earth, a nonprofit research group. ‘We are likely to see something quite dramatic in the next year or so,’ Robert Rohde, chief scientist at Berkeley Earth, said... ‘It will be giving us weather conditions that we would normally expect to be a decade or more away. It’s going to be a big deal.’”

August 10 – Financial Times (Attracta Mooney and Steven Bernard): “Global sea temperatures reached a record high for the month of July, while extreme heat drove droughts and wildfires in western Europe, as climate change is ‘playing out in front of our eyes’, scientists said. ‘Severe’ marine heatwaves affected parts of the Atlantic, Pacific and western Mediterranean, according to the Copernicus arm of the EU Earth observation service. The average sea temperature for the extra-polar oceans reached 20.96C, surpassing the previous July record of 20.89C, set during the previous El Niño warming phenomenon in the Pacific Ocean in 2023… Michael Meredith, an ocean and climate scientist at the British Antarctic Survey, said sea temperatures were ‘deeply concerning’, as records were being regularly broken and marine heatwaves were becoming more widespread and more persistent. ‘This is all what science predicts will happen as global warming progresses, but it’s startling to see it playing out in front of our eyes so readily.’”

August 14 – Bloomberg (Gautam Naik): “Extreme heat and unreliable water supplies are threatening asset valuations across a growing number of sectors as everything from labor productivity to energy costs gets impacted, according to an analysis by Moody’s. ‘Heat and water are no longer separate perils moving on separate timelines,’ Mohsen Rahnama, managing director and head of catastrophe modeling and insurance solutions at Moody’s, said in a fresh report. ‘They are converging, and doing so quickly.’ For investors, ‘both perils translate into operational risk, earnings volatility and stranded-asset exposure,’ he said.”

August 13 – Bloomberg (Zijia Song and Michelle Amponsah): “Sports betting is increasingly competing with traditional investing for younger Americans’ attention, with more than a quarter of Gen Z investors saying they see gambling on sports as part of their long-term financial strategy, according to a survey by personal finance platform Betterment. About 26% of Gen Z investors born between 1997 and 2007 said they treat sports betting as a deliberate, ongoing component of their financial plans, according to an online survey of 1,000 US retail investors…”