Weekly Commentary: Need To Talk

We need to talk about Thursday. It’s now basically (at least) a “holy crap” moment a week. But Thursday’s “moment” was different – more destabilizing, more alarming. The session certainly confirmed that the unfolding de-risking/deleveraging dynamic is globally systemic - and it’s accelerating.

Things got rolling overseas. South Korea’s tech-heavy KOSPI dropped 2.8% Thursday, with Samsung down 4% and SK Hynix sinking 5.5%. The KOSPI closed Thursday at the low since early April, with the index now down 42% from the June 19th record high.

Sellers were lined up to dump U.S. technology stocks at the open. Selling was unrelenting throughout the entire session. The Semiconductors opened the session down 4% and ended with a 6.7% loss. The MAG7 index fell 3.4% Thursday, with the Nasdaq100 2.9% lower. Notable decliners included SpaceX 9.1%, CoreWeave (CRWV) 10.1%, Meta 7%, Lam Research (LRCX) 11.8%, KLA 9.6%, and Applied Materials (AMAT) 8.2%.

October 23 – Bloomberg (Matt Phillips): “Global hedge funds suffered one of their broadest declines since the Covid pandemic following the stock market selloff on Thursday, according to Goldman Sachs… ‘For the first time since Covid, all three broad equity strategies fell more than 1% on the same day,’ the firm said… Global fundamental long/short managers were down 1.4% at the market close on Thursday, their worst day since July 16, with telecommunications, media and technology-focused funds falling by an average of 2.7%... Global systematic long/short managers were hit by their third-worst day since December 2023, dropping 1.3%.”

The above article quoted the Goldman Sachs’ prime brokerage team: “If last Thursday felt bad, today has been worse.”

The faltering AI Bubble was integral to Thursday’s sell-off, though de-risking went much beyond tech. Again, we’re thinking systemic.

French 10-year yields rose another six bps Thursday to 5.07% - up 57 bps in a month to the high back to July 2002. The France to Germany 10-year (OAT to bund) yield spread widened 15 to 174 bps – the widest risk premium since November 2011. This spread was at 86 bps in early September. For the week, the spread widened an extraordinary 30 to 167 bps. It’s worth noting that this spread’s widest “great financial crisis” level was 63 bps in March 2009.

The European debt market has dislocated. Italian spreads to German bunds widened 16 bps this week, with Greek spreads 14 wider. It’s worth noting that the European Banks (STOXX 600 Index) dropped 4.9% this week, and were down 9.5% m-t-d. Talk has been that European banks are less exposed to bonds than in the past. Time will tell.

Hedge funds have accumulated huge levered European bond holdings. The crisis of confidence in French sovereign debt has spurred deleveraging – the selling of French bonds and the unwind of short positions in German bunds (the funding source). And as the market begins to dislocate, safe haven demand for bunds intensifies. Sinking bund yields widen spreads versus other levered European bond markets (i.e., Italy and Greece), as “contagion” effects foment a broadening de-risking/deleveraging dynamic.

Highly levered Treasury and U.S. bond markets are acutely vulnerable to “contagion” and de-risking/deleveraging. Importantly, Thursday saw trading turn increasingly disorderly. Ten-year Treasury yields rose to 5.15% in late Wednesday trading. They fell below 5.10% in early Thursday trading, before sinking as low as 4.94% in afternoon trading. For the session, yields sank almost 17 bps, the largest one-day drop since the March 2023 SVB/bank crisis.

Like Europe, the unwind of levered positions sees Treasuries significantly outperform higher yielding debt, while signs of market dislocation trigger aggressive “safe haven” Treasury buying. Derivatives also stoke market dislocation. There were reports of panicky buying of Treasury call options, as traders scurried to put on hedges to protect against surging Treasury prices (sinking yields). This can quickly turn problematic for various “carry trades” that use short positions in Treasuries to fund (or hedge) higher yielding instruments (i.e. corporates and MBS). Acute Treasury market instability and leverage don’t mix well.

High-yield spreads widened a notable 11 bps Thursday to 338 bps - the widest level since May 2025. Spreads have widened 74 bps in the past month. The yield on the Bloomberg High Yield index closed Friday at 8.37% - trading this week to the high (8.44%) back to “liberation day” April 2025.

Our deleveraging discussion must also include the marvelous funding source of the speculative world, the Japanese yen. The yen jumped 0.87% in Thursday trading. Using Japanese bonds as a funding source for yen “carry trades” (higher-yielding global debt instruments) has been such a home run. But not only is the yen showing a pulse, this week’s 12 bps drop in JGB yields was the largest weekly decline since “liberation day” de-risking.

European trading dynamics, especially for French and German bonds, have turned inhospitable to speculative leverage. This week’s yen and JGB trading dynamics were unfriendly to global yen “carry trade” leverage. And Thursday’s disorderly Treasury market trading solidified a trifecta of major risks for a highly exposed global leveraged speculating community.

This week’s intense liquidation of the precious metals is indicative of systemic de-risking/deleveraging risk, especially within the hedge fund community (with an understandable affinity to the metals). Silver sank 5.9% in chaotic Thursday trading. For the week, Silver dropped 5.4%, Gold 4.1%, and Platinum 4.3%. The precious metals get caught up in hedge fund de-risking/deleveraging. There is also the headwind of a deteriorating global liquidity backdrop.

When we discuss global de-risking/deleveraging and waning liquidity, we can’t overstate the impact on the historic AI mania and arms race.

October 23 – Axios (Matt Phillips): “Mark Zuckerberg’s Meta got smacked around Thursday after reporting earnings that looked pretty strong at first glance. Its drubbing in the stock market… suggests that investors are growing concerned that Big Tech’s insistence on pouring more and more capital into data centers could end up costing them in the long run. Meta’s revenue and adjusted earnings beat Wall Street estimates, but the company also raised the bottom end of its guidance for capital spending this year and deferred offering any guidance for 2027. ‘We expect to continue investing aggressively,’ the company said. Meta’s spending jag has fundamentally transformed the company’s cash flow dynamics, turning it from one of the greatest cash generators in the history of corporate America into a company that actually had negative free cash flow in the third quarter. Of course, it’s not alone. The AI buildout has had a similar impact on other hyperscalers…”

Meta Platforms fell 7% in Thursday trading and was down 12.4% for the week. With de-risking/deleveraging gaining momentum, the market message Thursday seemed loud and clear: the environment now beckons for spending, cashflow, and balance sheet discipline. That will certainly be a change of pace.

In my nomenclature, technology debt is losing its “moneyness.” Losses are mounting and liquidity is waning. Meta yields jumped another 12 bps this week to a record 6.29%, after ending June at 5.36%. CoreWeave (’32) yields spiked 92 bps to a record 15.07%

Following the previous week’s 25% drop, Goldman Sachs upgraded CoreWeave’s stock to buy and raised its price target to $139. The stock popped 6% at Monday’s open to $66. Buying was fleeting. CoreWeave closed the week down another 11.7% to $54.24, with a brutal 40.9% collapse over 13 sessions. The stock peaked at $187 on June 20th, 2025. CoreWeave CDS was up another 35 this week to 1,163 bps.

The environment has fundamentally changed. The days of endless liquidity, easy Credit, and general ultra-loose financial conditions finally ran their course. Today’s new paradigm will have significant consequences for the masters of the universe (within economies and markets), who for so long have feasted on the easiest “money” imaginable.

October 23 – Bloomberg (Carmen Arroyo and Laura Benitez): “SpaceX’s efforts to finalize a $40 billion off-balance-sheet debt structure for its artificial intelligence buildout have been roiled by recent market turmoil that’s driven up sector-wide borrowing costs and complicated price talks. The transaction under discussion is designed to fund the purchase of Nvidia Corp. (NVDA)’s chips through a special purpose vehicle, keeping the liabilities off SpaceX’s own books and safeguarding its investment-grade ratings, according to people familiar... Bankers led by Goldman Sachs... are discussing the structure with investors led by Apollo Global Management Inc. (APO), with Apollo-backed Atlas SP slated to manage the entity… While pricing discussions are ongoing, finding levels that both sides can agree on has become complicated by anxiety that has rippled through credit markets in recent days, the people said.”

SpaceX bond yields (’36) surged 22 bps Friday to a record 7.61%. Yields were 40 bps higher on the week, with yields now up 170 bps from the July 15th issuance level. SpaceX CDS surged 25 Friday to a record 266 bps, with a one-week gain of 49 bps. SpaceX CDS was 150 bps just five weeks ago.

It’s worth mentioning that SoftBank bond yields (’34) jumped another 28 bps this week to 10.23%, with a two-week surge of 75 bps. Meanwhile, U.S. junk bond yields traded this week to an 18-month high of 8.39%.

I’ve closely monitored de-risking/deleveraging episodes back to the 1994 bond market dislocation. Early in that unwind, it was perplexing that such a wrenching hedge fund deleveraging wasn’t having a more deleterious impact on system liquidity. But then I began to monitor extraordinary monthly growth in GSE assets, which by the end of the year had amounted to an unprecedented $150 billion of GSE “QE.”

The GSEs continued their quasi-central bank operations to resolve the 1998 LTCM/Russia deleveraging ($305bn) and the 2001 bursting Bubble de-risking/deleveraging episode ($345bn). The Fed’s balance sheet took over for the historic 2008 deleveraging ($1.3 TN). The 2011/2012 European bond deleveraging triggered a Trillion from the ECB (and another TN from the Fed). It took $5 TN to reverse pandemic de-risking/deleveraging. The 2023 SVB/Banking deleveraging was resolved by a quick $560 billion liquidity add from the Fed and FHLB.

There have been other fledgling de-risking/deleveraging episodes nipped in the bud by timely policymaker comments and policy measures. The June 2024 yen “carry trade” eruption and April 2025 “liberation day” episodes come to mind.

I have been repeatedly amazed by how deleveraging approaches the precipice – only to recoil. And I could be left awestruck once again. But the mechanisms necessary to get out of the mess this go round are unclear. Going back to the nineties, every time over-levered speculative markets were rescued, the upshot was only a bigger and increasingly systemic Bubble.

Everything went to such unbelievable extremes – across the globe. Debt debacles are everywhere, from the U.S. to Europe to China and Japan. Everything points to faltering sovereign debt Bubbles, fatefully coinciding with a floundering AI arms race/Bubble. Over the past 30 years, each deflating Bubble triggered a more precarious inflation.

I’ve argued the government finance Bubble was the end of the line. Never did I imagine a many trillions global AI debt Bubble. Now, with market risk aversion simultaneously pressuring government and technology debt, the next source of reflationary Credit is unclear.

At $103, WTI crude closed the week near highs since May. Energy markets are building in a premium for the resumption of major military conflict in the Gulf. Inflation would become an even bigger issue. The Warsh Fed will have no alternative than to significantly expand its balance sheet. The issue is how quickly and forcefully it will resume QE. The unfolding global de-risking/deleveraging will be shockingly destabilizing.

It’s such a different world than 2008 – and even from six years ago. There is so much uncertainty, animosity, hostility… Is the Fed willing to go big early? How might impaired bond markets respond to the prospect of massive global QE? To even more egregious deficit spending? Will there be global central bank coordination? How will an increasingly deviant Trump administration respond, especially if a blue wave materializes in 11 days?

Losses have started to mount. It’s difficult to envisage a backdrop more inhospitable to speculative leverage. Thursday was ominous. Fears were not allayed Friday. At this point, I assume de-risking/deleveraging is heading in the direction of the precipice. Then we’ll see what happens.

For the Week:

The S&P500 dipped 0.5% (up 11.4% y-t-d), while the Dow added 0.4% (up 8.6%). The Utilities gained 1.5% (up 2.0%). The Banks increased 0.9% (up 3.9%), while the Broker/Dealers lost 1.1% (up 12.5%). The Transports added 0.8% (up 15.5%). The S&P 400 Midcaps were little changed (up 9.4%), while the small cap Russell 2000 rallied 2.0% (up 11.8%). The Nasdaq100 declined 0.8% (up 14.7%). The Semiconductors slumped 3.2% (up 52.2%). The Biotechs jumped 2.2% (up 31.2%). With bullion down $169, the HUI gold index sank 8.3% (down 3.7%).

Three-month Treasury bill rates ended the week at 4.0284%. Two-year government yields slipped three bps to 4.68% (up 121bps y-t-d). Five-year T-note yields declined six bps to 4.81% (up 108bps). Ten-year Treasury yields fell eight bps to 4.99% (up 83bps). Long bond yields dropped 10 bps to 5.32% (up 48bps). Benchmark Fannie Mae MBS yields fell nine bps to 6.15% (up 111bps).

Italian 10-year yields rose eight bps to 4.57% (up 102bps y-t-d). Greek 10-year yields gained six bps to 4.38% (up 94bps). Spain's 10-year yields added a basis point to 4.04% (up 7bps). German bund yields dropped eight bps to 3.35% (up 49bps). French yields surged 21 bps to 5.02% (up 146bps). The French to German 10-year bond spread widened about 29 to 167 bps. U.K. 10-year gilt yields slipped two bps to 5.36% (up 88bps). U.K.’s FTSE equities index fell 1.8% (up 7.5% y-t-d).

Japan’s Nikkei 225 Equities Index dropped 4.0% (up 24.5% y-t-d). Japan’s 10-year “JGB” yields dropped 12 bps to 2.81% (up 74bps y-t-d). France’s CAC40 lost 2.2% (down 4.5%). The German DAX equities index fell 1.7% (up 2.8%). Spain’s IBEX 35 equities index declined 1.7% (up 9.7%). Italy’s FTSE MIB index slumped 2.6% (up 8.0%). EM equities were mostly lower. Brazil’s Bovespa was little changed (up 27.7%), while Mexico’s Bolsa index gained 1.3% (up 8.6%). South Korea’s Kospi dropped 2.1% (up 31.7%). India’s Sensex equities index fell 2.1% (down 14.2%). China’s Shanghai Exchange Index declined 0.7% (down 7.0%). Turkey’s Borsa Istanbul National 100 index sank 5.2% (down 1.3%).

Federal Reserve Credit was little changed last week at $6.707 TN, with a 45-week expansion of $216 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 (728 weeks). Elsewhere, NY Fed holdings for foreign owners of Treasury, Agency Debt recovered $18.3 billion last week to $2.839 TN - off the low back to August 2010. “Custody holdings” were down $223 billion y-o-y, or 7.3%.

Total money market fund assets (MMFA) gained $21.5 billion to $7.945 TN. MMFA were up $547 billion, or 7.4%, y-o-y - having ballooned a historic $3.313 TN, or 72%, since October 26, 2022.

Total Commercial Paper jumped $22.7 billion to $1.503 TN - the high back to 2009. CP increased $182 billion, or 13.8%, y-o-y.

Freddie Mac 30-year fixed mortgage rates declined eight bps to 7.32% (up 113bps y-o-y) - off the high back to November 2023. Fifteen-year rates slipped three bps to 6.68% (up 124bps). Bankrate’s survey of jumbo mortgage borrowing costs had the 30-year fixed rate down a basis point to 7.53% (up 103bps).

Currency Watch:

For the week, the U.S. Dollar Index was down slightly to 101.81 (up 3.5% y-t-d). On the upside, the Brazilian real increased 1.7%, the Australian dollar 1.3%, the Norwegian krone 1.2%, Canadian 1.0%, the New Zealand dollar 0.8%, the Japanese yen 0.7%, the South Korean won 0.7%, the British pound 0.4%, and the Singapore dollar 0.1%. On the downside, the Mexican peso declined 0.9%, the South African rand 0.7%, the euro 0.3%, the Swiss franc 0.1%, and the Swedish krona 0.1%. China's (onshore) renminbi gained 0.24% versus the dollar (up 4.76% y-t-d).

Commodities Watch:

The Bloomberg Commodities Index slipped 0.5% (up 31.0% y-t-d). Spot Gold dropped 4.1% to $3,996 (down 7.5%). Silver sank 5.4% to $53.8897 (down 24.8%). WTI Crude rallied $1.86, or 1.8%, to $103.27 (up 80%). Gasoline slipped 0.7% (up 87%), and Natural Gas dropped 15.3% to $2.64 (down 28%). Copper declined 1.0% (up 15%). Wheat dropped 5.4% (up 23%), and Corn fell 3.8% (up 4%). Bitcoin (BTC.X) declined $650, or 0.8%, to $80,860 (down 7.7%).

Market Instability Watch:

October 22 – Wall Street Journal (Vicky Ge Huang, Sam Goldfarb and Meghan Bobrowsky): “The vast amount of capital needed to fund the artificial-intelligence build-out is forcing tech giants to hunt for ever-larger sums of cash—and Wall Street is raising a bright red flag. Signals from Meta Platforms that it could soon go on a cash-raising spree helped trigger another massive rotation trade on Thursday… ‘The growing concern with AI isn’t about technology anymore,’ said Michael Antonelli, a market strategist for Baird Private Wealth Management. ‘It’s ‘how can we all fund this at once?’”

October 22 – Reuters (Stefano Rebaudo): “The premium investors demand to hold French government debt over safe-haven German Bunds widened to its highest in 15 years on Thursday, as concerns over France’s strained public finances and continuing street protests weighed on sentiment… The spread over German Bunds expanded to 177.7 bps, its widest since November 2011 during the euro zone debt crisis…”

October 19 – Bloomberg (Editorial Board): “France’s crisis keeps getting more extreme, spilling over the weekend into broader protests that precipitated hundreds of millions of euros in damage and nearly 2,400 arrests. The country’s leaders are rightly focused on curtailing the violence. Yet as they seek ways to placate a frustrated populace, they must be careful not to make a bad fiscal situation worse. It’s hard to overstate how dire France’s finances have become, particularly now that worried investors have pushed its 10-year bond yields to almost 5%. If borrowing costs remain this high, the interest rate the government pays will soon exceed the economy’s nominal growth rate. As a result, just stabilizing sovereign debt — currently about 120% of gross domestic product, among the highest in Europe — could require running a sustained primary budget surplus of as much as 2% of GDP.”

October 20 – New York Times (Eshe Nelson and Jim Tankersley): “When protests over high gas prices ripped through France in 2018, President Emmanuel Macron offered to enact about $11 billion in tax cuts and wage increases to try to quell the unrest. Today, after protests over education turned violent, Mr. Macron is in no position to use money to bring calm to the streets. That’s because the French government is also fighting the prospect of a crisis in its bond market. Investors have been dumping French debt, unsure of the government’s ability to manage its budget amid high interest rates and political uncertainty. Announcing a big financial commitment to mollify protesters would likely rattle investors further and lead to another jump in the government’s borrowing costs.”

October 19 – Axios (Emily Peck): “It got kind of wild in the U.S. Treasury market last week: The yield on the benchmark 10-year note swung in surprising ways as investors digested hot inflation reports and AI jitters. Get used to it. Volatility could be a new normal. The investors buying U.S. government bonds are different now. The share of buyers that are hedge funds, using borrowed money, has grown while foreign central banks have pulled back. The share of U.S. Treasury securities held by official foreign entities like central banks, finance ministries and sovereign wealth funds fell to 11.8% in August… That’s down from 40% during the financial crisis era. Hedge funds and other investors appear to have filled that void. The share of Treasury securities held by hedge funds hit 33.5%, up from around 10% over that period, per an analysis… by Adam Josephson, founder of Sakonnet Research.”

October 19 – Financial Times (Ramsay Hodgson and Euan Healy): “Investors are racing to buy credit default swaps to protect their portfolios in the event the AI boom unravels, sending trading volumes surging for an instrument that shot to prominence during the global financial crisis. The wave of borrowing to finance trillions of dollars of AI infrastructure spending is fuelling demand for these insurance-like derivatives, which pay out if the company they are tied to defaults on its debt. More than $9bn worth of CDS linked to bonds issued by Oracle (ORCL), SpaceX, Alphabet (GOOGL), Amazon (AMZN), Meta, Broadcom and Nvidia was traded on average each week in September, up from less than $2bn in July… US corporate CDS index trading volumes so far this year have overtaken last year’s total…”

U.S. Credit Trouble Watch:

October 22 – Bloomberg (Rachel Graf): “Some investors in a Crescent Capital Group investment vehicle are seeing their capital wiped out after the manager took the controversial step of deeming the vast majority of the deal’s underlying loans as credit risks. Crescent unwound Atlas Senior Loan Fund X Ltd. — a collateralized loan obligation which pools riskier corporate loans into bonds of varying risk and return — by applying this designation across most of its portfolio in June, according to deal documents… While unusual, the transaction’s governing documents grant the manager leeway for such a maneuver.”

October 22 – Bloomberg (Dorothy Ma, Irene García Pérez and Sri Taylor): “JetBlue Airways Corp. (JBLU)’s already difficult year took a dramatic turn for the worse Thursday, with a sharp selloff in its securities signaling mounting investor doubts about the airline’s financial outlook. Ahead of next week’s third-quarter earnings report…, JetBlue’s stock fell nearly 10% to close at $2.65, its lowest level since going public in 2002. In addition, $2 billion in bonds due 2031 plunged to about 40 cents on the dollar…”

Global Credit and Crisis Watch:

October 19 – Bloomberg (Haidi Lun and Richard Henderson): “Treasuries are losing their luster as a portfolio hedge as increasing supply, persistent inflation and rising neutral rates weaken their appeal, according to Citigroup Inc.’s top Australia banker. US 10-year government bonds trading at a 5% yield would typically form an ideal counterweight to an equity allocation, but the current market backdrop of rising consumer prices and interest rates has weakened demand, said Mark Woodruff, chief executive officer of Citigroup Australia… ‘The bond market still has some issues to deal with. We’ve got increasing supply, we’ve got increasing neutral rates — those pressures in itself don’t lead it to be as easy a hedge as what it might have been in previous cycles,’ Woodruff said.”

October 20 – Wall Street Journal (Margot Patrick): “This summer, Larry Ellison was going to sell a big chunk of his stock in Oracle, the company he founded five decades ago. He wanted cash to help pay for his son David’s takeover of Warner Bros. Discovery. Instead, in the run-up to the merger’s completion, Ellison added to a multibillion-dollar borrowing spree. He put up shares in Oracle, Tesla (TSLA), SpaceX and Paramount as collateral, and increased his lending from five banks: Citigroup, HSBC, JPMorgan, UBS and BNP Paribas. In September, Oracle said Ellison scrapped a plan to sell roughly $7.5 billion worth of stock. The borrowing let Ellison keep his stock and avoid locking in taxable gains, and highlighted how billionaires often employ a strategy called ‘buy, borrow and die’ to retain their wealth without selling assets.”

Leveraged Speculation Watch:

October 23 – Reuters (Summer Zhen and Anirban Sen): “Global hedge funds were hit by a fresh tech reckoning this week... A renewed selloff in big tech stocks, driven by growing skepticism over the massive AI buildout spending, swept through global markets and dealt a heavy blow to global hedge funds. ‘If last Thursday felt bad, today has been worse,’ Goldman Sachs’ prime brokerage team said…”

October 18 – CNBC (Hugh Leask): “Hedge funds’ increased presence in global bond markets makes the likelihood of a broader market shock ‘greater than what it was,’ Bank of England deputy governor Sarah Breeden told CNBC… ‘One of the things that has become increasingly apparent over the last several years is that the investors in our core government bond markets globally have changed,’ Breeden told CNBC’s Sri Jegarajah… ‘It’s not the real money investors, the insurance companies and pension funds, in the way it used to be. It’s increasingly hedge funds, and those hedge funds are price-sensitive, leveraged, international. That, of course, means that the likelihood of a shock in one market transmitting to another is greater than what it was.’”

October 22 – Bloomberg (Nishant Kumar and Giulia Morpurgo): “Arini Capital Management and Sona Asset Management’s main hedge funds were pummeled in recent weeks, as a sharp decline in pockets of the junk-debt market slammed their holdings. London-based Arini’s master fund lost 6.9% in the first half of October…, after already being down 15.7% this year through September. The Sona Master Fund, meanwhile, lost about 3.1% in the same two-week span…, erasing its 2026 gains and putting the firm on track for its worst month since it launched a decade ago. The losses highlight the tumult engulfing certain segments of the junk-rated credit markets…”

October 19 – Bloomberg (Jan-Patrick Barnert): “Hedge funds retreated from tech stocks at the fastest clip in at least a decade, according to Goldman Sachs Inc.’s prime desk. In the five trading sessions through Oct. 15, hedge funds reduced their positions on tech stocks by the largest proportion in Goldman’s data going back to 2016. At the same time, gross trading activity fell at the fastest pace in nearly three months…”

Iran War Watch:

October 21 – New York Times (Julian E. Barnes, Eric Schmitt, Farnaz Fassihi, Natan Odenheimer and Ronen Bergman): “The U.S. and Israeli militaries have developed specific plans for renewed strikes against Iran after the American midterm elections, according to U.S. officials and other people briefed on the deliberations. As planning for a short but intensive operation progresses, the U.S. and Israeli militaries have stepped up exercises, flying planes over Iraq to practice strike maneuvers. Defense Secretary Pete Hegseth met with Prime Minister Benjamin Netanyahu in Israel this week to discuss new strikes, U.S. officials said. The targets would likely include Iran’s energy infrastructure, nuclear facilities, and missile and drone arsenal. Some officials say one more big round of attacks could push Iran’s economy over the brink and force the country to make diplomatic concessions after nearly eight months of conflict.”

October 22 – Washington Post (Rachel Chason, Lior Soroka and Dan Lamothe): “Israeli Prime Minister Benjamin Netanyahu said… the Iranian regime must be overthrown once and for all, following preparations in recent weeks by the U.S. military for possible additional strikes on Iran after the midterm elections. Netanyahu… said that Iranian Supreme Leader Mojtaba Khamenei ‘decided to follow in his father’s footsteps’ and attempt ‘once again to develop the bombs of death.’ ‘And therefore, there is only one way to remove this threat once and for all: overthrow the regime in Iran,’ Netanyahu said. ‘And that is my directive to the IDF, the Mossad and the security branches.’ So long as the Iranian regime is standing, Netanyahu said, Israel faces an ‘existential threat.’”

October 23 – Wall Street Journal (Benoit Faucon and Alexander Ward): “Iran’s message is stark: If the U.S. and Israel restart their air campaign, Tehran will respond with strikes not only on American bases and warships but on airports, pipelines and other civilian targets in the neighboring countries of the Persian Gulf. The warnings, issued publicly and in private diplomatic communications, are clearly aimed at deterring any attack with tough talk. But they also signal a real threat. Iran retains significant missile and drone stocks and the ability to use them. Analysts estimate Iran has hundreds to thousands of ballistic missiles, and U.S. and regional officials believe it has resumed production of ballistic missiles in limited numbers using stockpiled components and working in underground facilities.”

October 22 – Associated Press (Stefano Rebaudo): “Iran’s state television reported that seven oil tankers caught fire and were damaged overnight Thursday after being targeted or striking naval mines in the Strait of Hormuz. If verified, it would be the largest single-day number of vessels damaged in the waterway since the start of the Iran war on Feb. 28 when the United States and Israel launched joint strikes against Iran… The Iranian report said four of the tankers were transferring oil when they were targeted and caught fire. Three more were damaged and immobilized after hitting naval mines.”

October 20 – Reuters (Weilun Soon, Charles Gorrivan, and Alex Longley): “Iranian attacks in the Persian Gulf are striking more ships and causing more severe damage than earlier in the conflict, bringing fresh risks to energy flows from the region. At least 23 incidents involving ships attacked in or near the Strait of Hormuz were logged in the first two weeks of October, with at least five reporting impacts to their engine rooms… Direct hits on engine rooms can cause fires and leave ships without power or propulsion, taking vessels out of service for months and leading to costly repairs.”

October 19 – Associated Press (Samy Magdy): “Iran-backed Houthi rebels struck Yemeni government forces with ballistic missiles on Monday, killing at least 53 soldiers at a military camp in one of the deadliest attacks since a resurgence in fighting this summer… The attack wounded an additional 200 recruits… The fighting between the Houthis and Yemen’s Saudi-backed government forces is a widening front in the Iran war that began in February.”

October 22 – CNBC (Anniek Bao): “The U.S. ordered non-emergency government employees and their families to leave Saudi Arabia as Houthi attacks on the kingdom escalate. The move comes as the U.S. and Israeli militaries have drawn up specific plans for renewed strikes on Iran after next month’s midterm elections… Planning for a ‘short but intensive’ operation is progressing, The Times said. The developments point to a possible widening of the nearly eight-month war, while U.S. and Iranian negotiators continue talks on Tehran’s nuclear program and the Strait of Hormuz.”

Iran War Ramifications Watch:

October 19 – Financial Times (Najmeh Bozorgmehr): “Two decades ago, Iran’s then-supreme leader Ayatollah Ali Khamenei issued a fatwa against developing nuclear weapons, a religious prohibition that would underpin the regime’s insistence that its atomic energy ambitions were peaceful even as rampant enrichment put it on a collision course with the west. Now, however, amid the devastation of the US-Israeli war on Iran, a growing number of hardline politicians, analysts and MPs are calling for Tehran to drop this stance, leave the international Non-Proliferation Treaty and embrace nuclear weapons. ‘The latest military confrontations showed that achieving nuclear weapons for Iran is not an ambition, but a necessity more important than bread,’ Davoud Modarresian, a political activist close to hardline forces, wrote...”

October 20 – Bloomberg (Weilun Soon): “Global shipping costs for oil have surged about sevenfold over the past year because of the war in the Middle East and they are likely to remain elevated, according to Goldman Sachs… The average rate for hauling crude has surged above $20 a barrel, up from $3 a year ago, analysts including Yulia Zhestkova Grigsby wrote... The rise includes an extra $7 for the war-risk premium in the Strait of Hormuz, and $4 each for higher fuel costs and the impact of ship—to-ship transfers.”

October 22 – Bloomberg (Yongchang Chin and Nathan Risser): “US crude oil exports to Asia are set to hit multi-year lows after the Iran war disrupted global shipping and pushed the cost to lease a tanker for the Pacific journey to a record of almost $80 million. Asian refinery orders for US crude for delivery in November tumbled roughly 50% to 24 million to 26 million barrels this month sequentially…”

Trump Administration Watch:

October 21 – Wall Street Journal (Alexander Ward, Natalie Andrews and Josh Dawsey): “Elon Musk ordered the slowdown of a military-grade version of Starlink relied on by Ukraine, a decision that sparked panic in Kyiv and confusion inside the Trump administration, U.S. officials and people familiar with the matter said. Both Musk and President Trump have expressed anger at Ukraine for attacking Russian diesel refineries in recent weeks, which the president blames for high energy prices. Last week, Musk capped the speeds at which Ukrainian hardware could stay connected to the satellite-based network, the people said, rendering some offensive drones and interceptor drones virtually useless. Musk and Trump discussed the Starlink decision in a call soon after the slowdown became public…, two of the people said. One of the people also claimed Musk and Trump discussed the matter prior to the decision to throttle Starlink.”

October 20 – Reuters (Gram Slattery): “US Secretary of State Marco Rubio said… that decisions regarding Ukraine’s access to Starlink were up to SpaceX and Elon Musk, not the White House, comments that suggested Musk may have restricted Kyiv’s access to the service. The Wall Street Journal reported… that Musk had ordered the slowdown of a military-grade version of Starlink that Ukraine relies on to defend itself against missile attacks from Russia. The Journal cited one source saying that Musk, President Donald Trump and White House officials discussed the matter ⁠beforehand, and two sources saying that Musk and the president discussed the matter in the days after the slowdown.”

October 19 – Wall Street Journal (Natalie Andrews, Marianne LeVine and Michael R. Gordon): “President Trump said… he would be open to meeting with the leaders of Russia and China to discuss denuclearization. Trump’s comments came after The Wall Street Journal reported that Russian President Vladimir Putin has proposed that he, Trump and Chinese leader Xi Jinping meet next month to talk about Ukraine in an attempt to negotiate an end to the four-year conflict that would favor Moscow.”

October 19 – New York Times (David E. Sanger): “He shunted aside a bipartisan law, signed just weeks ago, imposing new tariffs on Russia. He cut a deal to purchase diesel from Moscow. His negotiators agreed on the vague outlines of a deal for much of Lukoil, a battered Russian energy firm. And he called for the replacement of President Volodymyr Zelensky of Ukraine, whose success in taking the fight inside Russia deeply frustrates him. President Trump’s intensifying effort in the past few weeks to rehabilitate Russia and usher President Vladimir V. Putin back into diplomatic society is remarkable for its speed, its characterization of Mr. Zelensky as the primary obstacle to peace, and its brazen denial that Russia is continuing the war… ‘Russia, frankly, has been fine on Ukraine,’ Mr. Trump said... ‘They haven’t been doing much,’ he said, making no mention of the Russian missiles and jet-powered drones that have been targeting apartment buildings in Kyiv and Ukraine’s surviving electricity grid. In contrast, he said, ‘We’ve given a lot to Ukraine. They’ve given nothing to us. Remember that.’”

October 22 – New York Times (Valerie Hopkins): “Last October, President Trump imposed significant sanctions on Russia’s two largest oil companies, complaining that negotiations with President Vladimir V. Putin over ending the war in Ukraine ‘just don’t go anywhere.’ A red-carpet welcome for the Russian leader in Alaska had done nothing to bring peace. A planned summit in Budapest had fallen apart. Mr. Trump had started to acknowledge that Mr. Putin might just be playing him… Faint Ukrainian hopes glimmered of a Trump-Putin break. But the Russian president was playing a longer game. Now, exactly a year after the oil sanctions, Mr. Putin has never been so close to his goal of normalizing relations with Washington without having to make any compromises on Ukraine.”

October 18 – CNBC (Garrett Downs): “U.S. Treasury Secretary Scott Bessent warned Ukrainian President Volodymyr Zelenskyy… to ‘be careful’ in public statements about U.S. support for Ukraine. U.S.-provided Starlink internet was recently restricted in Ukraine, hindering the war-torn country’s ability to respond to Russian assaults… Bessent cautioned Zelenskyy about making those claims. ‘President [Donald] Trump and Secretary [Marco] Rubio have categorically said that no one under the Trump administration did that, and I think it is very reckless for President Zelenskyy to make such a charge,’ Bessent said on ‘Meet the Press.’ ‘President Zelenskyy should be very careful about making statements like this that aren’t true,’ he added.”

October 19 – Bloomberg (Enda Curran): “White House National Economic Council Director Kevin Hassett said prices have been falling for items such as beef and eggs, though consumer price data for September shows overall inflation continues to need policy attention. ‘If you look at the previous three months, it looked like inflation was completely under control, and now it looks like it's sort of back needing some work,’ Hassett told CNBC…”

October 20 – Bloomberg (Katherine Burton and Dani Burger): “Billionaire Ken Griffin said Republicans in Congress and President Donald Trump made a mistake by cutting taxes even further last year. After the US government’s heavy spending during the pandemic ‘we didn’t have the fiscal space to renew the tax cuts,’ Griffin said…, noting that the US debt has eclipsed $40 trillion. Republicans ‘have their hands dirty over the tax cuts the last two years than with spending increases.’”

October 21 – Financial Times (Sarah White): “President Emmanuel Macron hit out… at what he called ‘unacceptable and stupid’ comments by foreign leaders, including Donald Trump, about the riots in France allegedly being carried out by migrants. Trump, whose Republican Party is facing midterm elections in two weeks, has repeatedly brought up the violence and looting in France since demonstrations spiralled on Saturday. The US president warned voters to ‘just look at France’, blaming immigration for the violence and stating that ‘Paris is going to be a Muslim city very soon’.”

Trade War Watch:

October 20 – Bloomberg (Alicia Diaz, Eric Martin, and Gonzalo Soto): “US and Mexican trade negotiators have hit an impasse over tariffs on steel and aluminum, dashing earlier optimism for an imminent deal and likely kicking major progress until after the midterm elections, people familiar… said. Talks have cooled off in recent days after US officials including Commerce Secretary Howard Lutnick took issue with Mexican officials’ demands for reduced tariffs on metals, according to two of the people… Lutnick has sought to exert more influence in the talks and broader trade policy after taking a back seat to US Trade Representative Jamieson Greer…”

October 19 – Financial Times (Harry Dempsey, Leo Lewis, Demetri Sevastopulo and Arjun Neil Alim): “Japan is months from running out of supplies of yttrium, a critical metal, and has asked the US to push China to ease rare earth export controls that threaten severe disruption to the global automotive, defence and chip industries. Tokyo made the entreaty to the US government and American blue-chip companies, according to people familiar… Washington has urged China in recent months to increase the flow of rare earths, including yttrium — a heat-resistant metal crucial to manufacturing vehicles, jet engines and semiconductors — to the US and its allies. US defence supply chains rely on components made in Japan that contain yttrium. Unless Beijing changes tack or western allies find substitutes or additional stockpiles, shortages could emerge as early as the end of this year…”

Constitution Watch:

October 20 – New York Times (Tony Romm): “A legal group that has successfully sued to scuttle President Trump’s past tariffs filed another court challenge…, this time targeting the steep duties that he has imposed as part of an ongoing trade war with Canada. The lawsuit marked the fourth major case brought by the Liberty Justice Center, which once again asked a panel of federal judges to invalidate Mr. Trump’s actions on grounds that he had overstepped the law in ways that harmed American businesses. The emerging battle concerned the president’s use of Section 338 of the Tariff Act of 1930, a long-dormant section of a decades-old trade statute meant to protect U.S. industry from unreasonable foreign practices. In September, Mr. Trump became the first president to enforce that power as part of a trade spat with Canada…”

Budget Watch:

October 17 – Bloomberg (Yash Roy): “The US government’s debt interest burden reached a record high for fiscal 2026, eating up a growing share of federal revenue and risking a snowballing of borrowing that could leave the country more vulnerable to economic shocks. For the year through September, net interest costs came to $1.05 trillion, up more than 8% from the $970 billion in fiscal 2025... The Peter G. Peterson Foundation, a research group, sees the costs reaching 3.2% of gross domestic product, surpassing the previous record, reached in 1991.”

October 20 – New York Times (Kevin Draper): “President Trump said at a rally in Kansas… that the Agriculture Department would provide $8 billion in economic aid to farmers hurt by high diesel prices. It was the second time in two years that the president authorized billions of dollars in bailout money for farmers harmed by his administration’s policies, and came 15 days before a midterm election in which unhappy farmers and ranchers could be the deciding votes in close races across the country.”

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

October 19 – Bloomberg (Francine Lacqua, Michael Nienaber, and Arne Delfs): “German Chancellor Friedrich Merz warned against complacency over the dangers posed by Russia, saying that President Vladimir Putin is seeking to not only defeat Ukraine, but to also undermine democracy in Europe. ‘My biggest concern is the underestimated Russian impact on our societies,’ Merz said... ‘Russia is on the way to destabilize the entire political order of our European continent… Merz added that many people, including those in Germany, aren’t taking the threat from the Kremlin seriously enough. ‘They don’t see what the goal of Russia really is,’ Merz said. ‘This is not only territorial gain in Ukraine. They fear democracy. They fear open societies. They fear the success of European integration.’”

October 20 – Wall Street Journal (Bojan Pancevski): “A massive cargo plane, used to carry military assistance to Ukraine and parked at an airfield in eastern Germany, was attacked by explosive-packed drones in early August. German officials say they were piloted by Russian military-intelligence agents. One drone slammed into the Antonov freighter but failed to explode. Another collided with a different plane, and a third detonated near the airport perimeter... Had the assault worked as planned, investigators say, the result would have been mayhem and casualties at one of Europe’s most important air-cargo airports. U.S. intelligence agencies say the failed operation at Leipzig-Halle Airport this summer was one of the opening shots in a stepped-up campaign of sabotage and covert action against NATO countries ordered directly by Russian President Vladimir Putin…”

October 21 – Reuters (Kirsti Knolle): “Germany’s armed forces classified the threat of Russian sabotage against their own troops and facilities as ‘significant’ for the first time, the second-highest level on their internal threat scale, according to a Bundeswehr assessment… A defence ministry spokesperson confirmed the assessment, telling reporters: ‘We are noting that we face a significant sabotage threat overall for the Bundeswehr.’”

Ukraine War Watch:

October 19 – Reuters (Ron Popeski and Yuliia Dysa): “Ukrainian President Volodymyr Zelenskiy said… that decisions taken by the United States on the war in Ukraine, including delays in arms shipments and restrictions on intelligence sharing, were ‘hard to explain.’ ‘Because it all comes down to Putin’s refusal to end this war, and to decisions on the American side that are hard to explain between friends,’ Zelenskiy said in a meeting with a US congressional delegation.”

October 20 – Associated Press (Hanna Arhirova and Barry Hatton): “Ukrainian President Volodymyr Zelenskyy said… that Kyiv is once again receiving early warnings from its partners about incoming Russian missiles following recent strikes that he said occurred without enough notice, leaving civilians vulnerable. For at least a week, the Ukrainian leader has said that his country has not received early warnings about ballistic missiles aimed at the capital. Such intelligence… saves lives by allowing the public to be alerted and giving military units time to try to intercept the missiles.”

October 21 – Financial Times (Fabrice Deprez and Katya Arenina): “Russia carried out a heavy aerial attack on Ukraine that included cluster munitions, just hours after Russian President Vladimir Putin met a US envoy in St Petersburg to discuss the resumption of peace talks. Moscow unleashed a barrage of more than 20 missiles on Kyiv overnight that killed two people and injured more than 30… Ukraine President Volodymyr Zelenskyy said three ballistic missiles that hit the capital had been equipped with cluster warheads designed to spread damage over a wide area.”

October 17 – Financial Times (Max Seddon and Fabrice Deprez): “Ukraine carried out its largest-ever drone attack on St Petersburg…, defying US demands to halt strikes against Russian energy infrastructure. Fires broke out at the oil terminal in St Petersburg’s port, governor Alexander Beglov said, sending a large plume of black smoke billowing over the night sky. The attacks indicated Ukraine was determined to press on with its campaign of strikes against Russian refineries… It resumed its campaign after uninterrupted Russian attacks on Ukrainian energy infrastructure.”

October 20 – Reuters (Pavel Polityuk and Yuliia Dysa): “Russia has expanded strikes from eastern and central Ukraine to energy facilities in previously untargeted western regions, causing waves of blackouts, energy ministry officials and local authorities said… In October, before the start of the cold season, Russia resumed attacks on Ukraine’s energy sector, targeting power plants and electricity transmission systems.”

New World (Dis)Order Watch:

October 21 – Financial Times (Joe Leahy): “Beijing is increasing diplomatic pressure against Taiwan and expanding its maritime ‘grey zone’ tactics in what analysts say is an effort to isolate Taipei and exert control over its territory. China imposed sanctions on Paraguay’s communications minister and Belize’s foreign minister last week for visiting Taipei and meeting government officials, an unprecedented step against Taiwan’s allies… Meanwhile, in the waters east of Taiwan, China has increased maritime manoeuvres by coastguard and government vessels, part of its grey zone activity, a term analysts use to describe steps short of open war. Together, analysts said these actions amounted to an intensifying campaign to sever Taiwan from its few remaining allies and demonstrate Chinese jurisdiction.”

October 22 – Bloomberg (Slav Okov and Andra Timu): “Bulgarian shipbroker Yordan Petrov no longer sends his vessels into the Black Sea, calling the brave few who still do ‘kamikazes.’ Seven commercial ships have been attacked by drones off the coast of Bulgaria and Romania since the start of October, for which authorities of both countries blamed Russia. The strikes killed more than two dozen sailors, they said. The incidents took place within or on the cusp of NATO members’ territorial waters, spelling a dangerous new escalation.”

October 17 – Bloomberg: “China strongly condemned what it called Japan’s ‘negative moves’ concerning the Yasukuni Shrine, saying the actions were a provocation against the postwar international order, according to… the Chinese Embassy in Japan. The embassy said the shrine, where 14 Class-A war criminals are enshrined, is a symbol of Japanese militarism. It accused Japanese politicians of seeking to cover up wartime crimes, distort historical facts and pave the way for accelerating remilitarization.”

AI Bubble/Arms Race Watch:

October 19 – Bloomberg (Paul J. Davies): “Fear of missing out has driven data-center developers to build as much computing capacity as possible, as swiftly as they can. But investors funding the projects are getting nervous. They’re suddenly worrying that spending on artificial-intelligence services won’t be enough to justify the trillions of dollars backing the buildout. Political opposition to the boom in server farms is growing, while construction delays, equipment failures and power constraints are hurting developers and slowing down projects. The latest concern is that projections for likely revenues from AI tools and services are coming up far short of what’s needed to deliver any return on investments in the vast computer facilities. For smaller infrastructure providers, that could prove deadly. So-called neocloud companies such as Britain’s Nscale are feeling the pressure.”

October 17 – Financial Times (George Hammond, Ryan McMorrow, Kieran Smith and Eva Xiao): “Cracks are appearing in America’s debt-laden $10tn AI infrastructure boom as project delays, public backlash and shaky investor confidence bring a reckoning for the data centre build-out underpinning the US economy. A rush for computing power in recent years created what multiple people involved characterised as a ‘Wild West’ market. They said money has flooded into brand-new companies and due diligence for new projects has been expedited, with AI labs such as Anthropic and OpenAI accepting higher short-term costs to move as fast as possible. More than three years into the AI boom, these ambitious data centre plans are running into reality. At least 47 large projects have been delayed, withdrawn or blocked in 2026, according to… RegLayer, a regulatory intelligence company, which described it as a ‘conservative estimate’ focused on the largest sites. Analysts at Bernstein… estimated only about 35% of the planned US data centre pipeline was credible. More than 1,000 communities across the US have tried to introduce moratoria or other restrictions on AI infrastructure this year…”

October 22 – Bloomberg (Sarah Frier): “Meta Platforms Inc. said it has agreed to spend about $825 billion in the future on various leases and contracts, many of them related to computing power and infrastructure for artificial intelligence. Operating and finance leases not yet included on Meta’s balance sheet are valued at $355.7 billion… That includes data centers and energy infrastructure leases starting during the remainder of this year through to 2036. As of Sept. 30, the company separately had $454.5 billion in non-cancellable short- and long-term contracts. Many of those were related to third-party cloud computing power, energy agreements for data centers, or consumer hardware products for its Reality Labs division.”

October 20 – Reuters (Echo Wang): “Anthropic’s net loss widened sharply to $80.7 billion in the first half of this year, in large part due to a rise in the fair value of bonds convertible into shares of the AI startup, according to a draft prospectus for a planned initial public offering… The… company is expected to go public in November and some investors are now weighing a lower valuation of around $1.5 trillion following its latest financial disclosures… Its first-half loss, widening from a loss of $13 billion a year earlier, included a $72 billion accounting charge reflecting an increase in the ⁠estimated value of bonds that could eventually convert into Anthropic shares, rather than cash costs tied to its operations…”

October 20 – Financial Times (Rafe Rosner-Uddin): “OpenAI ‘agents’ turned off monitoring systems and safeguards intended to spot misbehaviour by the autonomous AI bots in the latest incident likely to heighten global concern about the safety of the technology. The ChatGPT maker… said that in two recent internal coding tasks so-called AI agents sought to deliberately deceive staff and took steps to weaken the company’s monitoring systems. In one incident…, an AI agent disabled automatic alerts to OpenAI’s security team. During a separate task a few days later, an agent removed a monitoring system and lied to OpenAI staff about having done so. ‘In both cases, the agents considered whether monitoring safeguards should be preserved, but interpreted routine coding instructions as permission to weaken them,’ OpenAI said…”

October 23 – Wall Street Journal (Jiyoung Sohn): “SK Hynix has scrapped plans for a major U.S. public offering of its flash-memory subsidiary Solidigm, highlighting deepening investor caution toward artificial-intelligence valuations despite robust demand for AI-related hardware. The memory-chip maker, a key partner to Nvidia, said Friday that market conditions and broader share-price trends drove the decision…”

October 20 – CNBC (Jenny Lee): “Shares of Australia’s NextDC plunged 39.5% on Wednesday after the data center operator slashed its annual earnings forecast, citing power supply delays at its Melbourne facility amid local community and stakeholder opposition.”

October 20 – Axios (Madison Mills): “Silicon Valley moves fast and breaks things, but the U.S. electrical grid moves slowly and requires permits. The explosive growth of AI is colliding with the glacial pace of building out new power infrastructure, prompting a new warning from Goldman Sachs that energy bottlenecks are set to stall the AI race. Amid a wave of anxiety from Wall Street about the debt-fueled AI buildout, Goldman points to power as the biggest risk to trillions in spending in a new report shared exclusively with Axios. Goldman expects global data center power demand to surge 170% between 2025 and 2030, with more than 60% of that growth coming from the U.S…. ‘Power is probably the forever bottleneck,’ Jason Tofsky, Goldman's global head of digital infrastructure investment banking, noted…”

October 22 – Bloomberg (Bailey Lipschultz): “The debate over artificial intelligence is keeping IPOs stuck on the launching pad, and with the shadow of Anthropic PBC’s market debut looming larger by the day, billions of dollars of capital and months of preparations are hanging in the balance. ‘People are truly paralyzed,’ said West Riggs, head of equity capital markets at Truist Financial Corp. ‘The market has to sort itself out.’”

October 20 – Bloomberg (Coco Liu and Alastair Marsh): “After successfully disrupting Oracle Corp.’s data center plans in New Mexico, environmental activists say they’ve now got a blueprint for waging similar campaigns against hyperscalers across the US. Mariel Nanasi, executive director of New Energy Economy (NEE), says Oracle’s handling of water and air permits opened the door for environmental nonprofits to challenge the company’s plans in court… The battle is far from over. On Oct. 15, 12 Republican state attorneys general asked federal regulators to allow construction of a gas pipeline that Oracle needs to power its data centers. And Oracle has sought to adjust its approach to address environmental concerns. But Nanasi says the activists she represents will keep fighting until Oracle is forced ‘to walk.’”

October 20 – Reuters (Carlos Méndez): “OpenAI said… two of its AI agents weakened parts of an internal monitoring system designed to detect misbehavior, the latest case of AI agents acting in ways their developers did not intend them to. While the ChatGPT maker said the incidents happened during internal coding tasks and were not deemed its most severe, the disclosure highlights even the systems developers rely on to catch AI misbehavior are vulnerable to the agents they monitor.”

October 21 – Axios (Sam Sabin): “The world’s most advanced AI models are suddenly capable of blueprinting cyberattacks on critical services like power grids and water systems with alarming success rates, according to new research. Critical infrastructure operators are running out of time. Top-tier frontier models are dangerously adept at mapping out attacks, new research from cybersecurity company Frenos shows, and it’s only a matter of time before freely available AI models make such hacks easier to execute. ‘It’s a clock that is moving faster than we’ve ever seen,’ Steve Swick, former top security executive at American Electric Power, told reporters…”

October 21 – Bloomberg (Rthvika Suvarna): “No one ever wants to give a technology team a blank check. Yet for many chief financial officers, that’s exactly what they were asked to do in the early rush to embrace AI. Now, after one-too-many surprise bills, finding a way to control costs has become an imperative. It’s a simmering issue in banks, where technology budgets are already under pressure from competing demands ranging from legacy IT modernization to cybersecurity. Some of the greatest hopes for productivity improvements are pinned on agentic AI, which can tackle complex tasks autonomously, but are inherently difficult to budget for as the amount of computing power each task consumes can be unpredictable.”

October 19 – Bloomberg (Ryan Vlastelica): “CoreWeave Inc. was upgraded to buy from neutral at Goldman Sachs, a move that represents a vote of confidence in the cloud-computing provider following a period of heavy volatility for the stock related to its debt. Shares sank 25% last week, their biggest weekly drop since November. The selloff came as CoreWeave’s debt fell to levels that typically indicate distress, while the cost of protecting CoreWeave bonds against default rose to the highest intraday level on record. Shares swung wildly again on Monday, rising as much as 7.4% before briefly falling more than 2%.”

October 22 – Bloomberg (Alexandre Rajbhandari): “US life insurers’ investment exposure to the artificial intelligence sector spiked in the first half of the year and is expected to keep growing, according to… Moody’s... US life insurers held about $85.2 billion in investments related to AI at the end of June, up 24% from the end of 2025… These holdings include hyperscalers, data centers and chip manufacturers.”

October 20 – Bloomberg (Katherine Burton and Dani Burger): “Billionaire Ken Griffin said investors are ‘almost certainly’ in the midst of an artificial intelligence bubble as many companies are still grappling with just how much they’ll spend on the technology and how it will transform the economy. Investors’ anxiety over the durability of the AI boom reached a fever-pitch in recent weeks… ‘Corporate America has been very uneven in its ability to extract value from its AI models,’ Griffin said… ‘I think all of Corporate America is looking at their bills from Anthropic and OpenAI and going, ‘Okay, we need to think about how to make sure we’re getting productivity out of this.”’

Global Bubble Watch:

October 21 – Wall Street Journal (Katherine Clarke): “In March 2023, cosmetics billionaire William P. Lauder paid $155 million for the longtime oceanfront estate of the late radio host Rush Limbaugh, setting a then-record for Florida’s Palm Beach. The roughly 24,000-square-foot main house, built in the early 1990s, had a grand salon modeled after Versailles and a library styled after one at the Biltmore Estate in Asheville, N.C… By July, Lauder had demolished it. The destruction of the Limbaugh house is one of the most extreme examples of a trend playing out in wealthy enclaves across the country: the $100 million-plus teardown. The house, once the central reason for making a big-ticket property purchase, has become almost beside the point as buyers compete for well-positioned land—a stretch of oceanfront or mountaintop that can’t be replicated, unlike the house sitting on it.”

Inflation Watch:

October 20 – Bloomberg (Eric Roston): “Home insurance rates have risen so dramatically over the last decade that the average premium now exceeds the average property-tax bill in two-thirds of US counties… It points to the role of insurance in the larger affordability crunch that is putting pressure on households and shaping battle lines ahead of the midterm elections next month. Rates are being pushed up, in part, by extreme weather linked to climate change. US homeowner policies, averaged at the county level, have gone up by an inflation-adjusted 45% in a decade. But some states are seeing much higher jumps — such as Nebraska, with a rise of 79%.”

October 22 – Wall Street Journal (Anna Wilde Mathews): “Corporate America is getting hit by healthcare sticker shock—and companies are passing a greater share of the cost on to workers. The trend is accelerating. New data shows that this year, the average cost of a family health plan crossed $28,000, rising by 5%, according to an annual survey from the nonprofit KFF… The share coming out of employees’ paychecks shot up even faster—to $7,471, an increase of 9% from 2025.”

October 19 – Financial Times (Patrick Temple-West): “US insurers including UnitedHealth and Humana (HUM) are cutting healthcare services for elderly clients and increasing the price of prescription drugs next year, raising costs for Americans already struggling with inflation. Older voters last week began picking their government healthcare plans for next year but face costlier and more limited options after insurers scrapped hundreds of plans for 2027 and reined in coverage. ‘For many people on Medicare, healthcare is one more bill going up alongside groceries and [petrol],’ said Russell Noga, founder of Medisupps, a healthcare comparison service in Austin, Texas.”

Federal Reserve Watch:

October 21 – Bloomberg (Editorial Board): “Last week’s surprisingly bad inflation figures pose a dilemma for the Federal Reserve. In recent speeches and interviews, Fed officials suggested they were in no hurry to raise interest rates again and that a pause might be appropriate. But holding the rate now looks harder to justify. Consumer prices rose in September by 0.6%, the fastest pace in five months, lifting year-over-year inflation to 3.7%, up from 3.4% in August… The Fed gives greater weight to the price index for personal consumption expenditures, a number that won’t be out until Oct. 29, but new figures for wholesale prices suggest that PCE inflation will also come in higher than expected.”

U.S. Economic Bubble Watch:

October 22 – Associated Press (Paul Wiseman): “U.S. unemployment claims fell to 194,000 last week, the fewest in three months and another sign that layoffs remain low and most Americans enjoy extraordinary job security… Claims were down from 200,000 the week before… The four-week average of claims, which strips out week-to-week ups and downs, dipped to 197,750.”

October 21 – CNBC (Diana Olick): “Mortgage demand took another leg lower, despite a brief respite from rising interest rates… Applications to refinance a home loan, which are most sensitive to weekly moves, fell just 2% week to week, a smaller drop than some previous weeks when rates were moving higher. Refinance demand was still 59% lower than the same week one year ago… Applications for a mortgage to purchase a home declined a steeper 7% for the week and were 18% lower from the year before.”

October 20 – Axios (Neil Irwin): “The AI boom is sucking up all the capital. The Federal Reserve is raising rates to try to cool inflation. And one sector is bearing the brunt of the pain from both: housing. The situation is lose-lose for both homebuilders and homebuyers. Builders are facing more expensive capital and bidding for scarce construction-related resources. Would-be buyers are being quoted some of the highest mortgage rates of this century. New September housing starts data… puts an exclamation point on what has been a slow-moving disaster for a sector that plays an outsized role in the economic cycle and in Americans’ basic living standards. The number of housing units started by builders fell 5.2% last month…, to 1.22 million. It’s down 7.4% year over year and near post-pandemic lows.”

October 20 – Reuters (Lucia Mutikani): “US single-family homebuilding fell sharply in September and permits for future construction tumbled to a 3-1/2-year low as higher mortgage rates suppressed demand… Single-family housing starts… dropped 4.6% to a seasonally adjusted annual rate of 859,000 units last month, the lowest level since ⁠September 2025… Homebuilding fell over the month in the South, Midwest and West regions, but increased in the Northeast. Single-family starts rose 2.6% on a year-on-year basis in September.”

October 19 – Wall Street Journal (Nicholas G. Miller): “America’s home-buying market is a house divided. On one side, near-record home prices and the recent surge in mortgage rates above 7% have relegated buyers to the sidelines. In many cities, sales are stagnant and sellers are cutting prices for lower-end and entry-level homes to lure back buyers. On the other is a robust luxury market, where wealthier home shoppers swerve around high rates with jumbo down payments or all-cash purchases. The top third of the market is still buying, and spending enough to push up home prices nationally by more than 4% over the past two years. This dichotomy is playing out across the country. In 33 of the top 50 metro areas, luxury home prices are rising faster or falling slower than starter home prices…”

October 19 – Reuters (Lucia Mutikani): “US homebuilder sentiment plunged to the lowest level in nearly 14-1/2 years in October as the Middle East conflict boosted mortgage rates and prices of energy-related building materials, a survey showed… The National Association of Home Builders/Wells Fargo Housing Market index dropped three points to 29 this month, the lowest level since June 2012. The decline also reflected labor shortages amid an immigration crackdown as well as rising costs because of tariffs on imports.”

October 19 – Yahoo Finance (Claire Boston): “Homebuyers are backing out of contracts at near-record rates, a potential sign of how higher mortgage rates are prompting buyers to rethink their plans. Nationwide, 14.5% of homes fell out of contract in September, according to Redfin…, the highest share on record apart from the early months of the COVID-19 pandemic.”

China Watch:

October 19 – Associated Press (Chan Ho-Him): “China said… its economy grew 4.5% in the July-September quarter from a year ago fueled by robust exports, moving closer to meeting its official annual growth target for the year… Economic growth accelerated from the 4.3% year-on-year rate recorded in the April-June quarter, the slowest expansion in more than three years. Its economy expanded 4.6% in the first three quarters.”

October 19 – Bloomberg: “China’s home prices fell at a slower pace in September, spurring hopes that the battered real estate market is turning a corner as the latest stimulus takes effect. New home prices in 70 cities, excluding state-subsidized housing, dropped 0.14% from August when they slid 0.17%... Resale home values, which are subject to less government intervention, decreased 0.26%.”

Europe/UK Watch:

October 22 – Wall Street Journal (Joe Wallace): “As France tries to restore order to the public finances and the streets, the government faces a significant financial challenge: an unusual reliance on foreign investors who no longer have a strong reason to come to its rescue. More than most other major economies, the French government depends on overseas lenders, especially in Japan, to fund its deficit. Almost 55% of French debt was owned outside the country last year… In the U.S., the figure stood at 31% and in Japan, 13%. For years, foreigners loved France’s debt market, one of the world’s biggest. The bonds were easy to trade and yielded a bit more than other economies, but were perceived as safe, backed up by the European Union’s second-largest economy.”

October 20 – Financial Times (Lee Harris): “The violent unrest in France last weekend is set to be among the country’s largest protest-driven loss events for insurers, even as the government seeks EU approval to require state-backed riot insurance for properties. Insurers face up to €1.2bn in losses, according to… Morningstar DBRS… While the streets had calmed by Monday night, they said costs could rise further if the unrest continued. Riots are becoming ‘like natural catastrophes’ in France, Morningstar analyst Marcos Alvarez told the FT…”

October 20 – Associated Press (Teresa Medrano and Suman Naishadham): “Rising fuel costs, discontent with the state of schools, declining public services and a housing crisis are fueling an autumn of protests in Europe. Crowds have protested for weeks in major cities, with some demonstrations marked by arrests, looting, injuries and violence across France, Italy and Albania. In Spain and Portugal, tent camps have sprung up to protest unaffordable housing. Young Europeans are experiencing ‘a strong sense of uncertainty and a lack of control,’ said María Silvestre, professor of sociology at the University of Deusto in Spain. ‘And when specific situations come together, a spark suddenly ignites that is capable of channeling that discontent and driving people into the streets.’ Cities have turned into battlefields as top EU economies, including France, Italy and Spain, approach pivotal elections…”

October 20 – Bloomberg (Andrew Atkinson and Philip Aldrick): “Britain borrowed more than forecast in the first six months of the fiscal year, highlighting the constraints facing Chancellor of the Exchequer John Healey ahead of his inaugural budget next week. The deficit for April to September widened to £97.8 billion ($130bn) — £6 billion more than the Office for Budget Responsibility predicted in March. Borrowing in September was £24.5 billion, above the OBR forecast and the shortfall a year earlier.”

October 20 – New York Times (Steven Erlanger): “Centrist parties are in trouble in Europe’s largest and most important nations. Anger over low economic growth, high inflation, sizable government debt and poor prospects for the young are feeding protest and populist parties of the far right and far left. The mass riots in France, which started as protests over underfunded schools, are a shocking example. But the phenomenon has been building for years, with the perceived failure of liberal democracy to make good on its promises of a better future, especially for the young and the salaried working class. There is a growing perception among many Europeans that traditional parties of the center-left and center-right do not offer real alternatives and are led by an educated elite that has lost its connection to the poor, the workers and the young. Facing rising deficits, expenses and interest rates, governments feel constrained in what they can do to respond.”

Japan Watch:

October 20 – CNBC (Lim Hui Jie): “Japan’s exports in September rose 16.7% from a year earlier, missing market expectations by a huge margin… Growth was supported by continued strong semiconductor exports, with shipments rising 49.4% year on year by value. Exports of machinery also bolstered growth, with semiconductor-related machinery shipments up 43.9% and power generation machinery exports climbing 22.6%. In terms of destinations, shipments to mainland China — Japan’s largest trading partner — rose 8.6%, while exports to the U.S. climbed 22.9%.”

October 20 – Bloomberg (Toru Fujioka and Sumio Ito): “The Bank of Japan will probably keep raising interest rates every three months to contain risks of inflation deviating from its stable price target, according to a former BOJ executive director... ‘I expect the next rate hike in December, followed by another in March or April,’ Eiji Maeda said… ‘The pace has now accelerated to roughly one hike every three months, and I think that’s appropriate.’”

Emerging Markets Watch:

October 22 – Reuters (Andre Romani): “Brazilian Senator Flavio Bolsonaro and President Luiz Inacio Lula da Silva are about even heading to Sunday's election runoff, a Datafolha poll showed… The senator… would receive 47% of the vote compared with 46% for the president, according to the poll. Last week, a Datafolha poll showed the younger Bolsonaro at 47% and Lula at 45%.”

October 19 – Bloomberg (Ankur Banerjee and Stefanno Sulaiman): “Indonesian capital markets were battered on Monday, with stocks hit by a record two-day rout as an expulsion warning from MSCI scared off investors… Jakarta’s benchmark stocks fell over 5% on Monday to a six-year low after plunging 11.6% on Friday, as the world’s worst-performing share market reeled from MSCI saying it was considering shifting Indonesia to ‘standalone’ status from its current ‘emerging markets’ mantle.”

Social, Political, Environmental, Cybersecurity Instability Watch:

October 21 – Reuters (Olivia Le Poidevin): “The El Nino weather pattern could cause a record rise in ocean temperatures in the Pacific as it barrels around the globe like a ‘wrecking ball’ causing floods and droughts, UN officials said… The new World Meteorological Organization seasonal outlook predicted the El Nino event would become extremely strong, with temperatures in the central Pacific rising about 3.8 degrees Celsius above normal between November and January, peaking around December. ‘We have not seen in ⁠our records 3.8. We have seen around 3 in some record El Ninos before, with very substantive impacts across the world. So we are beyond that limit,’ WMO Secretary-General Celeste Saulo said.”

October 20 – Axios (Ben Geman): “The Iran war and the Ukraine-Russia conflict are creating a ‘multidirectional squeeze on world agriculture’ that could spiral into a crisis, a new report finds. Wars and extreme weather are colliding to threaten global food supplies and drive up prices, especially in vulnerable economies. The report explores how the El Niño phenomenon could compound the problems of restricted supplies of key fertilizer ingredients, higher fuel costs on the farm and more. The S&P Global Institute report is an unusually holistic look at the topic. The analysis comes alongside new warnings about food from the International Monetary Fund.”

October 20 – Financial Times (Kenza Bryan and Steven Bernard): “The world is running headlong towards a long-term temperature rise of 2.8C based on present government policies, the latest UN report shows, with the US standing out among developed economies with sharply higher energy-related emissions. Under President Donald Trump’s policies, a rebound in coal generation to meet increased US power demand drove the rise, after mainly trending down over the past decade. Emissions also rose in Indonesia and China, but were lower in India and the European Union. The UN report confirmed that there was no longer any chance of preventing global warming of 1.5C above pre-industrial levels, the lower limit enshrined in the 2015 Paris accord between almost 200 countries.”

October 20 – Reuters (Maurice Tamman, Ben Welsh, Pete McKenzie, Charlie Szymanski, Delgerzaya Delgerjargal, Robbie Corey-Boulet, Loucoumane Coulibaly, Jeff Horwitz, and Joan Faus): “In less than a lifetime, about six and a half decades, heat waves have evolved from sporadic, isolated episodes to massive, cascading weather events that can blanket vast swaths of the planet for months or even years at a time. The largest heat wave of the 1960s reached about 6% of the planet as it drifted for 46 days over the Atlantic Ocean, parts of Latin America and West Africa. The largest one this decade swept across almost 85% of the globe during its 367-day lifetime, stretching into the polar latitudes and touching virtually every human being on Earth.”

October 21 – Associated Press (Seth Borenstein): “Losing more ground in the fight against climate change, humanity is heading for a hotter world than experts projected last year — and the United States is a big reason for that, a new United Nations report says. If all the countries do what they promise to reduce heat-trapping emissions, Earth will likely still warm another 2.2 degrees Fahrenheit above current temperatures, according to… the United Nations Environment Programme. That’s about two-tenths of a degree Fahrenheit more than last year’s projections by the same science team.”