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Money Market Fund Assets (MMFA) surged $132 billion last week to a record $7.654 TN – the largest increase since the week ended April 1, 2020 (massive covid-related QE). This week saw emerging market (EM) CDS drop five to 130 bps, the low since Q1 2018. What’s the source of all this liquidity fueling loose conditions and market complacency?

Global finance is in the throes of history’s greatest monetary inflation. Ongoing unprecedented Credit expansion fuels this inflation. Excessive sovereign debt growth is the most conspicuous offender. Corporate debt markets have been booming. Garnering increasing attention, so-called “private Credit” emerged as a potent force in high-risk lending.

Below the surface – in the shadows yet at the epicenter - a Bubble in speculative leverage evolved into the driving force behind destabilizing liquidity overabundance. The Bubble thesis holds that unprecedented “repo” financing of Treasury and myriad “basis trades” - coupled with global “basis” and “carry trades” - has been the origin of Trillions of liquidity, inflating speculative Bubbles from sovereign debt, equities, AI, crypto, M&A, upper-end real estate, sports franchises, and global asset prices more generally.

The market is pricing a 95% probability for a Fed cut next Wednesday. It’s worth noting that money market fund assets have inflated $1.412 TN, or 23%, in 16 months since “The time has come for policy to adjust… We do not seek or welcome further cooling in labor market conditions” - Powell’s August 23, 2024, Jackson Hole pronouncement of the end of the Fed’s “tightening” cycle.

But the origins of this great monetary inflation go back further. Over three years, money market fund assets inflated an incredible $3.07 TN, or 67%. Back in late-2022, stocks were under significant pressure. The cryptocurrency Bubble appeared to have burst. The Bank of England was forced to counter a major gilt market speculative deleveraging. To sustain its yield curve control (YCC) program, the Bank of Japan purchased a monthly record $128 billion of bonds in December. A few months later, the collapse of Silicon Valley Bank and the resulting panicky bank run saw Fed and GSE assets inflate $244 billion and $352 billion, respectively.

Myriad fragilities had markets convinced the Fed wouldn’t dare risk raising rates to the point of interrupting loose conditions. It was a most lucrative bet. “Repo,” “basis trade,” and speculative leverage began expanding aggressively in late 2022. This speculative Bubble later succumbed to blow-off excess as the Fed and global central community began cutting rates despite highly speculative markets and destabilizing liquidity overabundance.

Over the past 17 weeks, MMFA has inflated $578 billion, or 25% annualized. Anecdotes point to expanding “basis trade” speculative leverage across markets globally. Understandably, there are mounting central banker concerns. Additional insightful commentary (warnings) were provided this week by the Bank of England and Bank of International Settlements.

December 2 – Bloomberg (Greg Ritchie): “The Bank of England warned about growing risks from a profitable fixed-income hedge fund strategy known as the basis trade, calling on market participants to manage their risk taking to avoid a disruptive unwinding of trades that could prompt volatility in gilts. Hedge fund net gilt repo borrowing — where they borrow cash by pledging gilts as collateral — reached close to £100 billion ($132bn) in November…, the highest since data collection began. That compares to a £77 billion estimate in June. The BOE said the rise in borrowing is related to the cash-futures basis trade… The bulk of those positions are driven by entities that are managed outside the UK, with hedge funds managed by US managers accounting for around 60% of the figure. ‘The small number of funds running crowded and heavily leveraged trades in the gilt repo market increases the potential risk of sharp moves as funds could need simultaneously to deleverage in response to a shock,’ the BOE said.”

According to Bank of England estimates, hedge fund “repo” borrowings in the gilt market surged 30% just since June. This parabolic growth is consistent with “repo”/MMFA growth here in the U.S. And it’s not by coincidence, as U.S. hedge fund managers are responsible for 60% of the UK's phenomenal “repo” expansion. We can assume that similar aggressive speculative leverage has been employed throughout global markets, explaining what has become systemic liquidity overabundance.

Washington’s Office of Financial Research [OFR] was out Thursday with a weighty blog post, “Sizing the U.S. Repo Market” (Ashlyn Cenicola, Melanie Friedrichs, Robert Mann, and Luke M. Olson).

From the blog: “According to new data collected by the OFR, the U.S. repurchase agreement (repo) market averaged about $12.6 trillion in daily exposures in Q3 2025, a number that is about $700 billion larger than previous estimates. The repo market is one of the world’s largest and most important short-term funding markets, providing funding for securities dealers and serving as a cash management tool for banks. Despite this fundamental role, this market has historically had limited transparency.”

“Of the $12.6 trillion in daily average exposures in Q3 2025, $4.4 trillion was centrally cleared by the Fixed Income Clearing Corporation with another $3.1 trillion settled on Bank of New York Mellon’s (BNY’s) tri-party platform (excluding centrally cleared). NCCBR [non-centrally cleared bilateral repo] accounted for the remaining $5.0 trillion.”

“In Q3 2025, U.S. Treasuries collateralized 88.9% of exposures in the cleared repo segments, but only 61.8% of NCCBR exposures and just over half (52.6%) of the exposures in tri-party.”

A “repo” market that has inflated to $12.6 TN. Especially after the 2008 fiasco (not to mention 1994, LTCM in 1998, and March 2020), future historians will struggle to comprehend how speculative leveraging could have been nurtured to such egregious excess. In no way should have an unemployment rate in the low 4% area justified easing conditions with leveraged speculation running wild.

From the OFR blog post, we have confirmation that non-Treasury securities account for a significant amount of “repo” transactions, especially for transactions not centrally cleared (i.e., Mellon’s tri-party platform and NCCBR).

OFR data also corroborate the thesis of three years of speculative leverage blowoff dynamics. From September 30th, 2022, to June 30, 2025, hedge fund “repo” borrowings surged $1.972 TN, or 172%, to $3.121 TN. “Prime brokerage” borrowings inflated $1.404 TN, or 88%, to $3.005 TN.

The section “Borrowing by Strategy (U.S. dollars)” features seven hedge fund categories: Credit, Equity, Macro, Multi-Strategy, Event, Relative Value and Other. Notably, since September 2022, Multi-Strategy borrowings have surged $3.3 TN, or 235%, to $4.719 TN. The Equity strategy doubled borrowings over this period to $1.488 TN.

As for size, hedge fund “gross assets” expanded $4.094 TN, or 53%, since Q3 2022 to $11.795 TN, with “gross notional exposure” (incorporating derivatives) inflating $15.146 TN, or 69%, to $37.015 TN. The largest category, Multi-Strategy, saw gross assets expand $1.314 TN, or 60%, to $3.516 TN, with gross notional exposure surging $4.056 TN, or 55%, to $11.379 TN.

Growth in Treasury positions (cash and derivatives) is even more noteworthy. Hedge fund long U.S. Treasury exposures inflated $1.483 TN, or 166%, over 11 quarters to $2.379 TN, while Short U.S. Treasury exposures rose $1.15 TN, or 192%, to $1.748 TN.

Speculative leverage won’t balloon forever. De-risking/deleveraging alarm bells were sounding in early-August 2024, with a destabilizing unwind of yen swaps/derivatives. Louder alarms began blaring this past April, with a broadly based fledgling de-leveraging spurring sinking stock prices, along with surging Treasury and global bond yields. The tariff pause rally spurred blowoff levered speculation, with resulting liquidity overabundance masking myriad festering issues.

I can’t imagine a more fascinating market backdrop. Stocks are basically at record highs, though trading recently with extraordinary volatility. Bitcoin and crypto under intense deleveraging pressure. A “repo” market demonstrating notable tightness and instability. The yen under pressure, with Japanese government bond yields surging to highs since 2007.

A Friday afternoon Bloomberg headline (Elizabeth Stanton): “US Treasuries Wrap Up Worst Week Since April Amid Fed Doubts.” “Yields rose… on Friday to finish a week in which they spiked the most since April, when havoc erupted in global financial markets after the US administration rolled out its tariffs agenda. While traders widely expect the Fed to cut interest rates next week, jitters have emerged over expectations for additional cuts next year.”

I’m unconvinced Fed expectations were behind this week’s global yield rise. The rates market ended the week pricing almost 100% odds of a cut next week, with the market expecting 58 bps of cuts by the June 17th meeting (down 7bps w-o-w).

Ten-year Treasury yields jumped 12 bps this week to 4.14%, with long-bond yields surging 13 bps to a three-month high 4.79%. Japanese 10-year yields jumped another 14 bps to 1.95% - the high back to July 2007. Japan’s 30-year yields traded this week at an all-time high (3.41%). German (2.80%), French (3.53%), Greek (3.39%) and Portuguese (3.11%) yields all traded up 11 bps this week. German yields ended the week at the highest level since March. Spanish yields (3.26%) rose 10 bps, with Italian yields (3.49%) nine higher. Australian yields jumped 17 bps to a two-year high of 4.68%, while New Zealand yields rose 10 bps to 4.35% (3-month high). South Korean yields increased another three bps to an 18-month high 3.38%. Our dear friends to the north saw yields spike 26 bps to a three-month high of 3.43%.

December 3 – Financial Times (Elizabeth Menke and Wendi Carver): “In all the Monday morning quarterbacking of last month’s crypto flash crash, one word turns up consistently: leverage. Leading up to the crash, open interest in crypto derivatives had reached an all-time high of roughly $115bn. Within a day, almost $20B in trades were liquidated… While this may not have been a credit event per se, leverage — seemingly everywhere and nowhere at the same time — plays an integral part in the crypto story. Collateralised and unsecured lending in crypto has been around almost as long as the asset itself. After all, what else were you (legally) going to do with it in the early years? It is cited as the weak link that sent the crypto market into a tailspin in mid-2022. Since then, other forms of leverage have taken on greater significance, including margin trading on centralised and decentralised exchanges, options and futures open interest, staking as collateral, perpetual futures…, synthetic leverage, and rehypothecated tokens. Leverage in crypto can be built into smart (ie, programmable) contracts and can arise without explicit borrowing when specific parameters are met. While recent headlines have raised alarms about the borrowing undertaken by crypto treasury companies, at least you can see it on a balance sheet. But much of the leverage in crypto actually sits inside the code and the smart contracts.”

After trading down to 83,824 in Monday trading, bitcoin rallied 10,000 (12%) to trade around 94,000 in early Thursday trading. The cryptocurrencies then reversed sharply lower, with bitcoin trading back down to around 88,000 by Friday afternoon. I wouldn’t count on a merry crypto holiday season.

I suspect it’s early-innings for crypto deleveraging. And it wouldn’t take much for de-risking/deleveraging to gain momentum in the levered and crowded AI/tech space. Market operators, though, study the calendar and see a path to locking in strong 2025 gains.

More importantly, global bond markets remain vulnerable. For starters, these are highly levered markets facing endless new supply. Looking at the data, hedge fund leveraging has provided a critical source of demand for heavy government bond issuance in recent years. Rather suddenly, “basis trade” and hedge fund speculative leverage have come under heightened regulatory scrutiny. Pressure will mount on dealers to somewhat tighten “repo” securities finance.

December 2 – Bloomberg (Greg Ritchie and Laura Noonan): “The government-bond trades of the world’s largest hedge funds are facing increased regulatory scrutiny, as officials mull policies that would cap the leverage — and profitability — of popular strategies. In separate reports Tuesday, the Bank of England and the… Bank for International Settlements delved into the leverage such funds are accumulating through repurchase agreements, where investors borrow cash by pledging bonds as collateral. Both said borrowing by a small number of large hedge funds poses potential risks to financial stability. The warnings are the latest salvo in a policy debate that could limit the amount of leverage that can be accumulated in so-called repo markets.”

What’s more, there doesn’t appear much left to squeeze out of the global central bank easing cycle. Since September 18th, 2024, the Fed has slashed rates 150 bps. Ten-year Treasury yields closed September 17th, 2024, at 3.65% - 49 bps lower than this week’s close.

December 4 – Bloomberg (Ruth Carson): “Kevin Hassett may not have the ability to deliver the rapid pace of interest rate cuts US President Donald Trump would like even if he is approved as the next Federal Reserve Chair, said Gregory Peters, co-chief investment officer at PGIM Fixed Income… ‘Does he have the credibility within the committee to drive consensus?’ said Peters, who is also a member of the Treasury Borrowing Advisory Committee… ‘We don’t know that answer. I don’t think he has that credibility. I think that’s what the bond market is telling you’.”

Apparently, we’ll have to wait until early in the new year for confirmation that Hassett is the President’s Fed guy. And for markets, May is increasingly within the timeframe of concern. For me and others, it’s difficult to envisage Kevin Hassett managing a divided committee and operating as the Fed’s figurehead (including press conferences) without sounding much the partisan political hack. The confluence of mid-term campaigning and heightened instability will, regrettably, see the Fed knee deep in political muck. Whether it’s during Powell’s watch or Trump’s Chair, serious deleveraging will expose grave system fragilities.

And I chuckle every time I hear Scott Bessent and others discuss shrinking the Fed’s balance sheet – “a smaller, simpler Fed.” Whether it’s Kevin Hassett or not, the administration should be careful what they wish for. Instead, they will oversee a Fed confronting a series of big and complex problems, including markets desperate for liquidity.A surprising surge in global yields would throw sand in a lot of gears.

December 2 – Bloomberg (Elizabeth Stanton): “US government debt in Treasuries topped $30 trillion for the first time — having more than doubled since 2018 as the pandemic-era borrowing surge takes its toll. The combined total amount of Treasury bills, notes and bonds increased by about 0.7% in November to $30.2 trillion…”

December 2 – Reuters (David Milliken): “The Bank of England said… threats to Britain’s financial system had risen this year due to stretched valuations of companies investing in artificial intelligence, risky lending and bets with borrowed money in government bond markets. The comments in its half-yearly Financial Stability Report, build on warnings made in recent months by BoE Governor Andrew Bailey and other policymakers… The BoE judged that Britain’s banking sector was well capitalised and that aggregate indebtedness in the domestic corporate and household sector remained low, but saw risks from overseas and in other corners of financial markets. ‘Overall risks to financial stability have increased during this year. Key sources of risk include geopolitical tensions, fragmentation of trade and financial markets and pressures on sovereign debt markets,’ Bailey told a press conference. ‘As governments around the world face increasing spending pressures, their capacity to respond to shocks in the future may be more constrained than we’ve seen in the past,’ he added.”

For the Week:

The S&P500 added 0.3% (up 16.8% y-t-d), and the Dow increased 0.5% (up 12.7%). The Utilities sank 4.3% (up 14.4%). The Banks jumped 3.2% (up 24.8%), and the Broker/Dealers gained 1.7% (up 29.4%). The Transports advanced 3.6% (up 8.1%). The S&P 400 Midcaps increased 0.4% (up 6.4%), and the small cap Russell 2000 gained 0.8% (up 13.1%). The Nasdaq100 rose 1.0% (up 22.3%). The Semiconductors jumped 3.8% (up 46.5%). The Biotechs dipped 0.8% (up 28.7%). While bullion slipping $42, the HUI gold index declined 2.0% (up 140.9%).

Three-month Treasury bill rates ended the week at 3.6125%. Two-year government yields gained seven bps to 3.56% (down 68bps y-t-d). Five-year T-note yields rose 11 bps to 3.71% (down 67bps). Ten-year Treasury yields jumped 12 bps to 4.14% (down 43bps). Long bond yields rose 13 bps to 4.79% (up 1bp). Benchmark Fannie Mae MBS yields jumped 12 bps to 5.14% (down 71bps).

Italian 10-year yields gained nine bps to 3.49% (down 4bps y-t-d). Greek 10-year yields jumped 11 bps to 3.39% (up 18bps). Spain's 10-year yields rose 10 bps to 3.26% (up 20bps). German bund yields surged 11 bps to 2.80% (up 43bps). French yields jumped 11 bps to 3.52% (up 33bps). The French to German 10-year bond spread was unchanged at 72 bps. U.K. 10-year gilt yields increased four bps to 4.48% (down 9bps). U.K.'s FTSE equities index dipped 0.6% (up 18.3% y-t-d).

Japan's Nikkei 225 Equities Index added 0.5% (up 26.6% y-t-d). Japan's 10-year "JGB" surged 14 bps to 1.95% (up 85bps y-t-d). France's CAC40 was little changed (up 9.9%). The German DAX equities index increased 0.8% (up 20.7%). Spain's IBEX 35 equities index rose 1.9% (up 43.9%). Italy's FTSE MIB index increased 0.2% (up 27.0%). EM equities were mixed. Brazil's Bovespa index declined 1.1% (up 30.8%), and Mexico's Bolsa index slipped 0.3% (up 28.0%). South Korea's Kospi surged 4.4% (up 70.9%). India's Sensex equities index was unchanged (up 9.2%). China's Shanghai Exchange Index added 0.4% (up 16.4%). Turkey's Borsa Istanbul National 100 index gained 1.0% (up 12.0%).

Federal Reserve Credit increased $3.7 billion last week to $6.508 TN. Fed Credit was down $2.382 TN from the June 22, 2022, peak. Since the September 11, 2019 restart of QE, Fed Credit expanded $2.781 TN, or 75%. Fed Credit inflated $3.697 TN, or 132%, since November 7, 2012 (682 weeks). Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt jumped $9.5bn last week at $3.067 TN. "Custody holdings" were down $250 billion y-o-y, or 7.5%.

Total money market fund assets (MMFA) surged $132 billion to a record $7.654 TN - with a 17-week surge of $578 billion, or 25% annualized. MMFA were up $883 billion, or 13.0%, y-o-y - and ballooned a historic $3.070 TN, or 67%, since October 26, 2022.

Total Commercial Paper added $3.8 billion to $1.305 TN. CP has expanded $217 billion y-t-d and $146 billion, or 12.6%, y-o-y.

Freddie Mac 30-year fixed mortgage rates dipped four bps to 6.19% (down 50bps y-o-y). Fifteen-year rates fell seven bps to 5.44% (down 52bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up two bps to 6.51% (down 55bps).

Currency Watch:

For the week, the U.S. Dollar Index declined 0.5% to 98.986 (down 8.8% y-t-d). On the upside, the Australian dollar increased 1.4%, the Canadian dollar 1.2%, the South African rand 1.1%, the New Zealand dollar 0.7%, the British pound 0.7%, the Mexican peso 0.7%, the Japanese yen 0.6%, the Swedish krona 0.5%, the euro 0.4%, the Norwegian krone 0.2%, and the Singapore dollar 0.1%. On the downside, the Brazilian real declined 2.1%, the South Korean won 0.3%, and the Swiss franc 0.1%. The Chinese (onshore) renminbi increased 0.05% versus the dollar (up 3.23% y-t-d).

Commodities Watch:

December 1 – Bloomberg (Martin Ritchie and Yihui Xie): “Copper advanced to a record high in London on fears the global market is heading for a supply crunch. The metal rose as much as 1.3% to $11,334 a ton on the London Metal Exchange… A rush to get copper to America ahead of possible import tariffs looks set to exacerbate shortfalls elsewhere as miners struggle to keep up with demand.”

The Bloomberg Commodities Index gained 1.4% (up 13.4% y-t-d). Spot Gold dipped 1.0% to $4,198 (up 59.4%). Silver jumped 3.3% to $58.3414 (up 101.9%). WTI crude recovered $1.87, or 2.6%, to $60.08 (down 16%). Gasoline dropped 3.3% (down 9%), while Natural Gas jumped 9.1% to $5.289 (up 46.4%). Copper rose 3.6% (up 36%). Wheat gained 1.2% (down 3%), and Corn increased 0.3% (down 5%). Bitcoin fell $1,800, or 2.0%, to $89,334 (down 4.7%).

Market Instability Watch:

December 4 – Bloomberg (Muyao Shen): “Crypto’s riskiest tokens are crashing on a scale that stands out even by the industry’s own volatile standards, abandoned by retail speculators saddled with humiliating losses and a growing sense the game is rigged. Cryptocurrencies beyond Bitcoin have been hit hardest in the market downturn that kicked off early October. A MarketVector index tracking 50 mid- and micro-cap tokens has fallen nearly 70% this year, hitting its weakest level since early 2020. Altcoins have now shed $200 billion on paper since the market peaked. The retail tide that once lifted everything from Trump-branded coins to dog-theme tokens is no more.”

December 4 – Financial Times (Leo Lewis): “Yields on Japan’s benchmark government bonds rose to their highest level since 2007 as investors fretted over Prime Minister Sanae Takaichi’s spending plans and braced themselves for an interest rate increase. The 10-year yield on Thursday climbed 0.03 percentage points to 1.92%, approaching levels at which analysts said domestic banks could begin fundamentally adjusting their bond-buying strategies… The rise takes 10-year yields to levels last seen before the collapse of Lehman Brothers sparked a global financial crisis and ushered in an era of lower interest rates worldwide.”

December 1 – Financial Times (Kate Duguid, George Steer, Jill R Shah and Emily Herbert): “Global bond markets dropped on Monday after the Bank of Japan signalled that it could soon raise interest rates, in a decline that heaped fresh pressure on bitcoin and other speculative assets. Japan’s two-year government bond yield jumped above 1% for the first time since 2008 after Bank of Japan governor Kazuo Ueda indicated that the central bank might raise rates this month.”

November 30 – Financial Times (David Keohane and William Sandlund): “The yen strengthened against the dollar and bonds fell after Bank of Japan governor Kazuo Ueda gave one of his clearest indications yet that the central bank might raise interest rates this month… ‘If the outlook for economic activity and prices outlined so far is realised, the bank, in accordance with improvement in economic activity and prices, will continue to raise the policy interest rate and adjust the degree of monetary accommodation,’ Ueda said…”

December 3 – Bloomberg (Caleb Mutua): “A credit-risk gauge on Oracle Corp. debt closed at the highest level since the financial crisis after a flood of bond sales from tech giants amplified concerns that a bubble is forming in the artificial-intelligence industry. The cost of protecting Oracle’s debt against default reached its highest since March 2009 on Tuesday…, rising to about 1.28 percentage point a year… The price rose nearly 0.03 percentage point from the day before, and has more than tripled from as low as 0.36 percentage point in June.”

December 3 – Reuters (Anirban Sen and Nell Mackenzie): “Hedge funds are using near-record levels of leverage to trade equities and betting on debt-backed strategies in efforts to juice returns… Over the past few years, debt-fueled strategies have surged as funds have become larger and more complex. That trend is starting to raise concerns about whether the higher use of leverage could expose them and the broader market to steeper losses in the event of a correction. ‘We are seeing leverage around historical highs on our books,’ said John Schlegel, head of positioning intelligence at JPMorgan. ‘When you look at the amount of exposure relative to liquidity in the markets, markets have gone up pretty materially from pre-COVID to now - much faster than the hedge fund AUM (assets under management) has.’ Data compiled by Goldman Sachs, JPMorgan, and Morgan Stanley… show that leverage used to bolster returns for traditional hedge funds that go long or short on stocks is close to an all-time high and continues to rise…”

December 3 – Reuters (Nell Mackenzie): “Hedge funds’ exposure to artificial intelligence-related tech hardware reached its highest in October since Goldman Sachs started tracking the data in 2016… Hedge fund buying in semiconductor and related chip industry stocks… suggests speculators believe rising markets have further to go, Goldman said…”

December 2 – Bloomberg (Ruth Carson): “Narrowing yield differentials is one potential trigger for a lower dollar-yen, according to Eurizon SLJ Capital. ‘The biases of risk in the next 12 months are for the BOJ to raise rates faster and for the Fed to cut rates faster,’ Stephen Jen and Joana Freire of Eurizon wrote… One more catalyst for a lower dollar-yen is if Tokyo changed market expectations; if the FX pair is expected to trade lower, capital outflows from Japan would be curtailed. Firm cited Oct. 7, 1998 when the pair collapsed to 120 from 134 in one day as an example. ‘LTCM and the Russian default were proximate causes, but the huge JPY carry trades were the kindling ready to burn… We believe such JPY carry trades are huge today.’ The risks of a sudden unwind of the yen carry trade are not Low.”

U.S. Credit Trouble Watch:

December 4 – Bloomberg (Francesca Veronesi): “The worst bear markets in a generation brought private credit firms to prominence in 2022. This year’s bull markets have laid them low. The $1.7 trillion industry has been coming under threat from lower interest rates and competition from Wall Street banks dangling the most attractive borrowing costs in years. That’s left many private credit funds with idle cash — and falling returns — as they struggle to invest the billions they raised during the boom years. Private loan margins… have fallen to a median of below 500 bps in the latest quarter, according to Wells Fargo... data that spans global transactions, compared with 650 bps in the first quarter of 2023.”

December 5 – Bloomberg (Steven Church and Reshmi Basu): “As First Brands Group makes its way through bankruptcy court, the auto-parts supplier is bumping up against an unexpected snafu: Its customers don’t seem to know who to pay. As the extent of First Brands’ opaque web of debt spilled into plain sight, investors who snapped up its receivables via so-called factoring deals — fearing a wipeout from allegedly fraudulent invoices — directed companies that sell its fuel pumps and wiper blades to pay them directly, rather than going through a First Brands account where they were historically made. That created ‘significant confusion,’ according to restructuring advisory firm Alvarez & Marsal…”

December 4 – Financial Times (Eric Platt, Stephen Foley, Julie Steinberg and Robert Smith): “One of the largest middle men in First Brands’ financings has said that ‘a lot of people made a lot of money’ lending to the bankrupt car parts maker, as they chased the high yields that it paid on its debt. The comments from Raistone chief executive David Skirzenski… come as a Houston bankruptcy court looks to untangle a web of obligations asset managers, including Raistone, claim they are owed from First Brands and its customers. ‘Frankly a lot of people made a lot of money over many, many years on First Brands,’ Skirzenski said… ‘So they’re not all sad. They’re not all kicking themselves.’ ‘This is the business if you do single-B risk,’ he added, referring to lending to companies with low credit ratings.”

December 2 – Bloomberg (Tasos Vossos and Abhinav Ramnarayan): “A wall of money worth more than a quarter trillion dollars is changing the face of the corporate bond market and has left unwitting ‘mom and pop’ investors among the main drivers of the cost of capital for the world’s largest companies. Through bond purchases often criticized as indiscriminate they have taken on a role that was once the preserve of highly-paid traders… Triggered partly by social media and financial influencers, this change — the scale of which traders, portfolio managers and credit analysts are struggling to fully understand — is coming not from central bank initiatives, or Wall Street, but farmers, teachers, doctors and retirees. Many are buying baskets of bonds as a way to put money that’s been sitting idly in savings accounts to work. The vehicle for this transformation? Fixed-maturity funds.”

Global Credit and Financial Bubble Watch:

December 3 – Bloomberg (Greg Ritchie and Momoka Yokoyama): “The UK and Japan are responding to investor demand to boost short-term borrowing, a shift in strategy that offers governments lower interest payments but exposes them to potentially costly rates swings at the time of debt rollovers. Britain has slashed sales of long-dated bonds — traditionally a bedrock of its debt issuance — to record lows this year, and is now mulling expanding its market for ultra-short dated bills. Japan is heeding calls to up its issuance of short-term debt after a rout in its long bonds. They’re not alone. The US is relying more on bills to fund its federal deficit, and countries such as Australia have floated similar policies. Globally, the average maturity of government bonds has fallen to the lowest since 2014…”

December 4 – Bloomberg (Iris Ouyang): “China’s 30-year yield is heading toward its highest in a year as investors withdraw from fixed-income funds… Yields on 30-year sovereign notes jumped three bps… Thirty-year bond futures fell as much as 1.1% to their weakest in a year, signaling renewed pressure on the world’s second-largest debt market.”

December 3 – Bloomberg: “The spread between China’s three‑year AAA rated corporate yuan bonds and comparable government debt widened to about 46 bps this week, the highest since early April…, reflecting investor concerns following China Vanke’s debt-repayment struggles.”

Trump Administration Watch:

December 3 – CNBC (Jeff Cox): “Treasury Secretary Scott Bessent… predicted that the administration still will be able to implement its tariff agenda regardless of whether it prevails in a pending case before the Supreme Court. Repeating assertions he had made prior to the high court hearing a month ago, Bessent cited several sections of 1962 Trade Act that give the president sweeping powers over import duties. ‘We can recreate the exact tariff structure with [sections] 301, with 232, with 122,’ he said… Asked by host Andrew Ross… whether the administration had to implement those measures permanently, Bessent replied, ‘permanently’.”

November 29 – Financial Times (Jemima Kelly): “Remember Doge, aka the Department of Government Efficiency? You know, the pseudo federal agency dreamt up by Elon Musk and named after a memecoin that was going to cut trillions of dollars from America’s budget and drastically shrink the administrative state? It emerged in the past week that the head of the US government’s human resources office had given an interesting answer to reporters asking about the current status of Doge: ‘That doesn’t exist.’ Alas, it seems Doge has had its day. The grand bureaucracy-bashing, waste-walloping programme was due to keep running as a ‘temporary organisation’ until July 2026…, but it appears to have been quietly disbanded ahead of schedule. Office of Personnel Management director Scott Kupor told Reuters that Doge was no longer a ‘centralised entity’ and that his office had taken over many of Doge’s functions.”

December 3 – Bloomberg (Nancy Cook and Josh Wingrove): “Donald Trump’s aides and allies are discussing the possibility of making Treasury Secretary Scott Bessent the top White House economic adviser — in addition to his current job — should the president pick Kevin Hassett as the next chair of the Federal Reserve.... Tapping Bessent to lead the White House’s National Economic Council would allow him to consolidate oversight of Trump’s economic policies if Hassett — the current NEC director — becomes the next leader of the US central bank, an announcement Trump has hinted at in recent days.”

December 4 – Bloomberg (Katy O'Donnell): “A government watchdog is investigating whether Federal Housing Finance Agency Director Bill Pulte abused his position to level allegations of mortgage fraud at President Donald Trump’s perceived political opponents. The Government Accountability Office opened the probe after Senate Democrats last month requested the legislative watchdog look into the matter.”

China Trade War Watch:

December 3 – Bloomberg (Maggie Eastland, Oma Seddiq and Emily Birnbaum): “Nvidia Corp. Chief Executive Officer Jensen Huang said he’s unsure whether China would accept the company’s H200 artificial intelligence chips should the US relax restrictions on sales of the processors… Asked whether authorities in Beijing would allow Chinese companies to buy the H200, Huang expressed uncertainty. ‘We don’t know. We have no clue,’ Huang said... ‘We can’t degrade chips that we sell to China, they won’t accept that.’”

Trade War Watch:

December 3 – Bloomberg (Daniel Flatley and Yian Lee): “Commerce Secretary Howard Lutnick said that the US is expecting a large investment pledge from Taiwan in trade talks, while the self-governing island’s president, Lai Ching-te, listed areas that need improvement in order for projects to be completed. ‘We’re in the midst of discussions,’ Lutnick said… ‘But the fact is, this administration’s goal is to bring semiconductor manufacturing to America’.”

Constitution Watch:

December 5 – New York Times (Julian E. Barnes and Charlie Savage): “The two survivors of the U.S. military’s first boat strike on Sept. 2 climbed atop the overturned hull and waved to something overhead, according to multiple people who have seen video of the attack. The signaling by the survivors has been interpreted in different ways. Some of the people viewing the video thought the waving by the survivors could have been an attempt to surrender… Others who viewed the video said the most logical explanation was that the two survivors had seen the American aircraft above them and started signaling for a rescue.”

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

November 30 – Financial Times (Richard Milne): “Nato is considering being ‘more aggressive’ in responding to Russia’s cyber attacks, sabotage and airspace violations, according to the alliance’s most senior military officer. Admiral Giuseppe Cavo Dragone told the Financial Times that the western military alliance was looking at stepping up its response to hybrid warfare from Moscow. ‘We are studying everything… On cyber, we are kind of reactive. Being more aggressive or being proactive instead of reactive is something that we are thinking about,’ said Dragone, who is chair of Nato’s military committee.”

December 1 – Politico (Tim Ross): “Donald Trump’s drive to secure peace in Ukraine must not let Vladimir Putin off the hook for war crimes committed by Russian forces, a top EU official has warned… Michael McGrath, the European commissioner for justice and democracy, said negotiators must ensure the push for a ceasefire does not result in Russia escaping prosecution. His comments reflect concerns widely held in European capitals that the original American blueprint for a deal included the promise of a ‘full amnesty for actions committed during the war,’ alongside plans to reintegrate Russia into the world economy… ‘I don’t think history will judge kindly any effort to wipe the slate clean for Russian crimes in Ukraine… They must be held accountable for those crimes and that will be the approach of the European Union in all of these discussions. Were we to do so, to allow for impunity for those crimes, we would be sowing the seeds of the next round of aggression and the next invasion… And I believe that that would be a historic mistake of huge proportions’.”

December 1 – Bloomberg (Andrea Palasciano, Aliaksandr Kudrytski, and Samy Adghirni): “The European Union’s top diplomat expressed concern that US attempts to push Ukraine into a lopsided peace plan would only encourage Russia’s warmongering as Kyiv’s allies brace themselves for a week of talks to end Moscow’s invasion. ‘I’m afraid all the pressure will be put on the weaker side because that is the easier way to stop this war when Ukraine surrenders,’ Kaja Kallas, the EU’s high representative for foreign affairs, told reporters… ‘But this is not in anybody’s interest’.”

December 1 – Bloomberg (Yian Lee): “Taiwan plans to buy its first weapons for a major air-defense system announced less than two months ago, underscoring Taipei’s urgency to get the program online as China escalates its military intimidation. The Defense Ministry is working with the de facto US embassy to acquire Northrop Grumman Corp.’s Integrated Battle Command System so it can link domestically made weapons to it, the Taipei-based United Daily News reported…The IBCS connects sensors and weapons into one platform that allows for quickly targeting and attacking threats.”

China vs. Japan Watch:

December 1 – Wall Street Journal (Editorial Board): “The Chinese Communist Party is putting the squeeze on Japan to punish its new Prime Minister for telling the truth. Asked in Parliament on Nov. 7, Prime Minister Sanae Takaichi explained that an attack by Beijing on Taiwan could be ‘survival-threatening’ for Japan, potentially triggering a military response. Cue the weekslong campaign of outrage and coercion, as if it were Ms. Takaichi rather than China’s Xi Jinping who is threatening to blow up the status quo. Beijing began its reply by firing up tensions around disputed and even undisputed islands, dispatching ships and drones. Chinese diplomats assailed Japan, with one threatening, ‘We have no choice but cut off that dirty neck that has been lunged at us’.”

December 1 – Bloomberg (Danny Lee): “Some 40% of scheduled flights from China to Japan in December have been scrapped…, as the fallout for air travel and tourism from a deepening dispute between two of Asia’s largest economies grows. The number of cancellations has now topped 1,900 flights… Japanese cities Sapporo and Osaka — which rely heavily on tourism — saw the biggest cuts as a percentage of planned services, according to data from flight scheduling database AeroRoutes.”

November 29 – Bloomberg (Yoshiaki Nohara): “A Japanese singer was forced to stop her performance in Shanghai on Friday as the fallout from Prime Minister Sanae Takaichi’s remarks on Taiwan continues… Maki Otsuki — known for the theme song to the popular anime One Piece — was forced to interrupt her show… Footage posted to social media showed the lights were abruptly dimmed as Otsuki was performing a song and she was escorted offstage by two staff members.”

New World Order Watch:

December 1 – Financial Times (Gideon Rachman): “‘I’ve never seen men so scared.’ That was Donald Trump’s amused verdict after observing Xi Jinping’s intimidating effect on the Chinese leader’s entourage, at a recent meeting. ‘I want my cabinet to behave like that,’ joked the US president. Trump’s return to the Oval Office has signalled a revival of the strongman style in global politics. Bilateral meetings between powerful, headstrong leaders increasingly shape the international agenda. Multilateral summits such as the UN General Assembly, the G20 or the COP climate summit are dwindling in significance. Both Trump and Xi skipped the recent G20 summit in South Africa. It was an international conference that would have forced them to share the spotlight with leaders of smaller nations. Mohammed bin Salman of Saudi Arabia also gave the G20 summit a miss, as did Russia’s Vladimir Putin.”

November 29 – Wall Street Journal (Kejal Vyas and James T. Areddy): “For two decades, Venezuela cultivated anti-American allies across the globe, from Russia and China to Cuba and Iran, in the hope of forming a new world order that could stand up to Washington. It isn’t working. Russia, China, Cuba, Iran and other anti-American powers are offering little more than words of support for Venezuelan leader Nicolás Maduro as he faces a U.S. military buildup that President Trump has said is aimed at forcing his ouster. Like Iran when it came under military attack from Israel and the U.S., Venezuela is finding its authoritarian allies on the sidelines of conflict.”

December 3 – Financial Times (Adrienne Klasa, Joe Leahy and Leo Lewis): “France’s President Emmanuel Macron has warned of the risk of the ‘disintegration of the international order’ as he met Xi Jinping in Beijing amid growing trade tensions between China and Europe. ‘We are facing the risk of the disintegration of the international order that brought peace to the world for decades. In this context, dialogue between China and France is more essential than ever,’ Macron said…”

Ukraine War Watch:

December 4 – Politico (Ketrin Jochecova): “Russia will seize Donbas as well as Ukraine’s southern and eastern regions one way or another, President Vladimir Putin warned… ‘It all comes down to this. Either we liberate these territories by force of arms, or Ukrainian troops leave these territories and stop fighting there,’ Putin told the Indian news… The Russian leader’s statement comes during yet another round of peace efforts spearheaded by American officials and reaffirms that he has no intention of backing down from his maximalist war goals.”

December 2 – Wall Street Journal (Georgi Kantchev and James Marson): “The sun was setting over the Black Sea on Friday as a naval drone sped toward an oil tanker headed for a Russian port. The Sea Baby drone, developed by Ukrainian security services, slammed into the vessel’s hull moments later, triggering a fireball that lit up the pink-hued sky… In recent days, Kyiv has acknowledged drone strikes on two sanctioned, Russia-linked oil tankers off the Turkish coast in the Black Sea... In response, Russian President Vladimir Putin pledged to expand strikes on Ukrainian ports and the vessels entering them. ‘The most radical option is to cut Ukraine off from the sea, then piracy in general will be impossible,’ Putin said…”

December 1 – Bloomberg: “Ukraine carried out record attacks on strategic oil infrastructure in Russia last month as the US attempts to broker a peace deal to end the near four-year war. Ukraine’s military used drones to attack Russian refineries at least 14 times in November… That all-time high coincides with four attacks on Black Sea oil-loading facilities last month, as well as on explosions on tankers moving Moscow’s oil.”

December 2 – Financial Times (Anastasia Stognei, Polina Ivanova and Christopher Miller): “Ukraine has opened a new line of attack against Russia by targeting ships in its so-called ‘shadow fleet’… Kyiv has acknowledged for the first time attacking ‘shadow fleet’ oil tankers that Moscow has used to evade western sanctions since the full-scale invasion of Ukraine in 2022, after naval drones hit two sanctioned vessels off Turkey’s Black Sea coast on Friday. The attacks are part of Ukraine’s escalating campaign to squeeze Moscow’s energy revenues and reassure western partners of its continued striking power... ‘Targeting empty shadow-fleet tankers marks a deliberate extension of Ukraine’s deep-strike logic from fixed Russian energy infrastructure to mobile elements of the oil-export system,’ said Konrad Muzyka, director of Rochan Consulting, a Polish analytical group monitoring the war.”

December 1 – Associated Press: “A tanker carrying sunflower oil from Russia to Georgia was attacked in the Black Sea, the Turkish maritime authority said Tuesday, days after two Russian ‘shadow fleet’ oil tankers were attacked by Ukrainian naval drones.”

Taiwan Watch:

December 3 – Reuters (Yimou Lee and Ben Blanchard): “China is deploying a large number of naval and coast guard vessels across East Asian waters, at one point more than 100, in the largest maritime show of force to date… China is in the middle of what is traditionally a busy season for military exercises, though the People's Liberation Army has not made any announcements of large-scale officially named drills… The Chinese ships have massed in waters stretching from the southern part of the Yellow Sea through the East China Sea and down into the contested South China Sea, as well as into the Pacific, according to four security officials in the region.”

December 4 – Bloomberg (Roxana Tiron): “A majority of Americans back the US military’s defense of Taiwan against a potential Chinese invasion, according to a national security survey. The survey found 60% of Americans would support committing US forces to Taiwan’s defense in the event of a Chinese incursion. More than three-quarters of responders—81% of Republicans and 78% of Democrats—said it’s important for the US military to defend Taiwan against Chinese aggression.”

December 2 – Bloomberg (Yian Lee and Stephen Engle): “Taiwan is confident the Trump administration will allow President Lai Ching-te to make a US stopover, a senior official said, citing recent communication with Washington. ‘We don’t think having transit stops in the US will be an issue,’ Foreign Minister Lin Chia-lung said… ‘Based on our communication, we are confident in the near future, we can just have a visit to the Latin American countries by way of the United States.’”

November 30 – Bloomberg (Karishma Vaswani): “China is drawing lessons from the Trump administration’s still unfinished ‘peace plan’ for Russia and Ukraine, watching to see how far Washington will go to secure an agreement, and whether that means concessions to Moscow. President Xi Jinping is using the opportunity to sharpen the lines around his long-declared objective: Unification with Taiwan. This leaves the self-governed island in a dangerous place, as Washington’s signaling grows fuzzier and Xi’s intentions more explicit. Taiwan’s fate has been linked to Russia’s invasion of Ukraine before. In 2022, Japan’s former Prime Minister Fumio Kishida said: ‘Ukraine, today. Maybe East Asia tomorrow’.”

AI Bubble/Arms Race Watch:

December 2 – Wall Street Journal (Berber Jin): “OpenAI Chief Executive Sam Altman told employees… the company was declaring a ‘code red’ effort to improve the quality of ChatGPT and delaying other products as a result... Altman said OpenAI had more work to do on the day-to-day experience of its chatbot, including improving personalization features for users, increasing its speed and reliability, and allowing it to answer a wider range of questions. The companywide memo is the most decisive indication yet of the pressure OpenAI is facing from competitors that have narrowed the startup’s lead in the AI race. Of particular concern to Altman is Google, which released a new version of its Gemini AI model last month that surpassed OpenAI’s models on industry benchmark tests…”

'November 29 – Financial Times (Melissa Heikkilä, Tim Bradshaw and George Hammond): “OpenAI’s huge early lead in the race to dominate artificial intelligence is under the greatest pressure since ChatGPT’s launch, as rivals Google and Anthropic gain ground in the cutting-edge technology. Three years on from the debut of its popular chatbot, the $500bn start-up is grappling with the reality of soaring data centre costs, the technical challenges of remaining at the frontier of AI and the constant battle to retain key talent. It is also facing a resurgent Google, with the release last week of Gemini 3…, which is considered to have leapfrogged OpenAI’s GPT-5… ‘It’s quite a strong difference with the world we had two years ago where OpenAI was leading ahead of everyone else,’ said Thomas Wolf, co-founder and chief science officer of open-source start-up Hugging Face. ‘It’s a new world’.”

December 2 – Bloomberg (Jeran Wittenstein): “For two decades, the playbook for Big Tech was fairly simple and extremely successful: Create disruptive innovations, deliver blinding growth rates and keep a lid on spending. A handful of behemoths like Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Microsoft Corp. used this formula to seize market share from legacy businesses and power the US stock market to record after record. But a key part of the program — the relatively small amount of capital required to generate those huge profits — is increasingly under threat from the race to develop artificial intelligence. ‘They’re some of the best business models the market has ever seen,” said Jim Morrow, chief executive officer at Callodine Capital Management... ‘Now you’ve seen this explosion in capital intensity to the point where it’s now the most capital intensive sector in the market. That’s just a radical change’.”

December 4 – New York Times (Peter S. Goodman): “The computer chip factories rising from an empty expanse of the Sonoran Desert test the concept of immensity. The complex is under construction across 1,149 acres, an area larger than New York’s Central Park. It represents an investment of $165 billion, making it one of the most expensive undertakings on earth. Here on the northern edges of Phoenix stands a display of the American reach for industrial self-sufficiency. The factories are engineered to make advanced computer chips… Those chips will power data centers that deliver artificial intelligence… But the company at the center of this enterprise — one cast as vital to national security — is not American. Taiwan Semiconductor Manufacturing Company, or TSMC, the global leader in the industry, has marshaled the investment…”

December 4 – Bloomberg (Kyle Stock and Mark Chediak): “The Trump administration is moving to fast-track the construction of power-hungry data centers as a matter of national security. At the same time, it’s adding roadblocks for new solar and wind farms. But the two policies could be at odds: Hindering renewable energy projects risks slowing the AI boom — and could exacerbate rising electricity prices, a slew of data suggests. ‘It’s an all-hands-on-deck moment right now to get the power to supply this,’ said Robert Whaley, director of North American power at Wood Mackenzie, an energy consultancy. ‘In the next 10 years, there’s really nothing to replace renewables’.”

December 1 – Reuters (Jarrett Renshaw and Laila Kearney): “The residents came in camouflage hats and red shirts signaling unity, more than 300 of them packing into a rural Pennsylvania planning commission meeting to protest a proposed data center they feared would carve up their farmland and upend the quiet rhythms of their valley. Most were loyal supporters of President Donald Trump… But they bristled at Washington’s push to fast-track artificial intelligence infrastructure… Residents in this county of 18,000 people stepped to the microphone, questioning Talen Energy officials about how their planned data center might raise residents' utility bills, reduce working farmland, and strain local water and natural resources. ‘Say no to rezoning, so water keeps flowing and crops keep growing,’ two women sang… Political leaders across the U.S. are urging a rapid expansion of data-center capacity and new power production to keep the country competitive in AI.”

December 4 – Bloomberg (Rachel Metz and Dina Bass): “Nearly all leading artificial intelligence developers are focused on building AI models that mimic the way humans reason, but new research shows these cutting-edge systems can be far more energy intensive, adding to concerns about AI’s strain on power grids. AI reasoning models used 100 times more power on average to respond to 1,000 written prompts than alternatives without this reasoning capability or which had it disabled, according to a study... by the AI Energy Score project…”

December 1 – New York Times (Natasha Singer): “Artificial intelligence is the hot new college major. This semester, more than 3,000 students enrolled in a new college of artificial intelligence and cybersecurity at the University of South Florida... At the University of California, San Diego, 150 first-year students signed up for a new A.I. major. And the State University of New York at Buffalo created a stand-alone ‘department of A.I. and society,’ which is offering new interdisciplinary degrees in fields like ‘A.I. and policy analysis.’ The fast popularization of products like ChatGPT, along with skyrocketing valuations of tech giants like the chip maker Nvidia, is helping to drive the campus A.I. boom.”

Bursting Crypto Bubble Watch:

December 1 – Wall Street Journal (Vicky Ge Huang): “The rout in cryptocurrency is intensifying. Bitcoin tumbled more than 6% on Monday, its biggest one-day drop since March. The world’s largest digital currency traded at $85,468 as of 4 p.m. Eastern time in New York and is down more than 30% from a peak above $126,000 set in early October. The selloff has spilled into other digital coins, including ether and solana, and pulled down stocks tied to the crypto market such as exchange operator Coinbase Global and Strategy, Michael Saylor’s bitcoin-accumulation company. Bitcoin and other digital tokens have been caught up in a broader decline afflicting riskier trades across all markets. Unprofitable technology businesses, speculative shell companies and meme stocks have all fallen out of favor in recent months.”

December 1 – Wall Street Journal (Vicky Ge Huang and Nicholas G. Miller): “The largest bitcoin-accumulation company took steps to insulate itself from the crypto selloff. The company’s shares sold off anyway. Strategy, led by Michael Saylor, said… it has raised $1.44 billion through a stock sale to help ensure it can meet future dividend and debt-interest payments. The reserve should fund 12-24 months of its preferred-stock dividends. The company said it also bought 130 bitcoin in the past two weeks, bringing its total holding to 650,000, valued at roughly $56 billion based on current prices. None of this appears to be helping Strategy’s stock performance, which has lost nearly half its value this year. The company’s market cap has dropped from a peak of $128 billion in July to $49 billion now, which is $7 billion below the value of its bitcoin holdings.”

December 2 – Financial Times (Craig Coben): “Under executive chair Michael Saylor, Strategy (née MicroStrategy), the software firm turned bitcoin treasury vehicle, has often felt like corporate finance’s version of reality TV: loud, lurid and addictively compelling. Since the company’s pivot to bitcoin accumulation in August 2020, it has been almost impossible to look away, and as the stock price soared over twentyfold, the audience only grew in size and passion. Lately, however, investors seem to be reaching for the remote. At its height in late 2024, the formula worked like magic. Saylor’s prolific online activity — complete with AI-generated posts and quasi-messianic claims about bitcoin’s civilisational role — fuelled a self-reinforcing feedback loop that seemed almost too good to be true. Bitcoin went up, and in turn Strategy’s stock went up. A higher stock price meant the company could issue more shares at a massive premium to net asset value and buy more bitcoin… That magical spell has broken. The shares have fallen about 70% from their November 2024 peak…”

December 3 – Bloomberg (Vildana Hajric): “Retail investors who piled into Michael Saylor’s grand Bitcoin experiment are paying a heavy price. Strategy Inc. — the company once hailed for wrapping crypto exposure into a public stock — is scrambling to calm markets after its shares plunged more than 60% from recent highs, amid a sweeping digital-currency rout… The most popular exchange-traded funds tracking Strategy’s volatile stock — MSTX and MSTU, which offer double the daily return — have both dropped more than 80% this year.”

December 1 – Bloomberg (Suvashree Ghosh and Muyao Shen): “Almost $1 billion of leveraged crypto positions were liquidated during another sharp drop in prices on Monday that brought fresh momentum to a wide-ranging selloff. Bitcoin slid as much as 8% to $83,824 in New York, bringing its decline since early October to almost 30%. Ether dropped as much as 10% to as low as $2,719, and is down 36% over the past seven weeks. The market downturn has been even tougher on smaller, less liquid tokens that traders often gravitate toward because of their higher volatility and typical outperformance during rallies. A MarketVector index tracking the bottom half of the largest 100 digital assets is down almost 70% this year.”

December 3 – Bloomberg (Olga Kharif): “A record-breaking year for crypto mergers and acquisitions is facing a harsh reckoning since a recent rout in digital assets began to unravel industry gains spurred by a friendlier administration in the White House. Capitalizing on political tailwinds, major crypto firms have pushed deal values past $8.6 billion this year through Nov. 20 — an all-time high and more than the four previous years combined, according to PitchBook Data.”

Bubble and Mania Watch:

December 5 – Bloomberg (Paula Seligson and Natalie Harrison): “Netflix Inc. has lined up $59 billion of financing from Wall Street banks to help support its planned $72 billion acquisition of Warner Bros. Discovery Inc., which would make it one of the largest ever loans of its kind. Wells Fargo & Co., BNP Paribas SA and HSBC Plc are providing the unsecured bridge loan… Wells Fargo’s $29.5 billion portion of the loan commitment represents the biggest by a single bank for an investment-grade bridge facility at a time when Wall Street is looking to earn lucrative fees tied to a long-awaited revival in acquisitions.”

December 2 – Bloomberg (John Gittelsohn): “The home on Glenbrook Avenue stands on a hilltop high above almost every other San Francisco residence… For two years, even with a 10% price cut from an original $20 million asking price, there were no takers for the six-bedroom mansion featuring a 300-bottle wine cellar, sauna and outdoor spa. In November, a buyer sealed a deal on the home for $16.5 million. Such sales have suddenly become more frequent — a sign of the new wealth wave cresting over San Francisco. The tech hub, just a few years ago a symbol of post-pandemic urban doldrums, is now one of the hottest housing markets in the country. The artificial intelligence boom has reignited demand for high-end homes among buyers cashing in on soaring startup valuations… ‘I feel like this upcycle literally is just starting,” Frank Nolan, the listing agent for the mansion, said… ‘It just started hitting — a lot of AI buyers’.”

December 1 – Bloomberg (Katherine Doherty and Paula Seligson): “Jane Street Group and Citadel Securities reported gains in third-quarter trading revenue, cutting further into Wall Street’s dominance of that business and leaving the two market-making firms on track for record years. The increase at Jane Street was 18%..., bringing the firm’s third-quarter haul to $6.83 billion and placing it just below JPMorgan… and Goldman Sachs… in the rankings. At Citadel Securities, revenue from the business increased 9% to $2.64 billion… At rival Hudson River Trading, third-quarter revenue surged 81% from a year earlier, to $3.7 billion, people with knowledge of the matter said last month. That’s also on pace to reach a record for the year.”

December 1 – Bloomberg (Paula Seligson and Katherine Doherty): “Citadel Securities reported a bump in third-quarter net trading revenue that puts the firm on track to break last year’s record… The market-making firm’s net trading revenue rose 9% to $2.64 billion in the third quarter… The firm generated about $8.4 billion this year through September, the people said, asking not to be identified discussing information that isn’t public. In 2024, the firm pulled in $9.7 billion in net trading revenue.”

December 4 – Bloomberg (Paula Seligson, Sridhar Natarajan and Katherine Doherty): “Jane Street Group’s record haul this year has been boosted by savvy bets on the artificial intelligence boom that are showing up as big gains in its trading results… The market-making firm told investors that its investments in private companies and funds lifted its third-quarter trading revenue by about $830 million…”

November 30 – Bloomberg (Bernard Goyder): “As the US options market heads for a sixth straight year of record volume, some of the best-known names in the industry are growing nervous about its over-reliance on a small group of banks to guarantee trades for the biggest market makers. Every listed US options trade goes through The Options Clearing Corp., a central counterparty that handles more than 70 million contracts a day during busy periods. The trades are submitted to the OCC by its members — who… act as guarantors in case their clients go bust. There’s a small group of firms at the top. Out of dozens of members, the top five contributed almost half of the OCC’s default fund in the second quarter of 2025. Market participants cite Bank of America Corp., Goldman Sachs… and ABN Amro Bank NV as the three biggest…”

December 3 – Bloomberg (Denitsa Tsekova and Nicola M White): “The US Securities and Exchange Commission has issued a flurry of warning letters to some of the country’s most prolific providers of high-octane exchange-traded funds, effectively blocking the introduction of products designed to deliver three and even five times the daily returns of stocks, commodities and cryptocurrencies. In a set of nine almost identical letters…, the SEC told firms including Direxion, ProShares and Tidal that it would not move forward with reviewing proposed launches until key issues are addressed.”

November 29 – Axios (Madison Mills): “Young Americans are increasingly planning for retirement by investing in the stock market while putting off homeownership. For decades, owning a home has helped Americans build their nest eggs. A generation putting all its eggs into stocks without having weathered a prolonged market slump may be in for a surprise. The meme stock craze of 2020 caused a ‘generational shift in how people think about building wealth,’ Kevin Gordon, macro strategist at Charles Schwab, tells Axios. That means stocks, but Gen Z hasn’t experienced a ‘protracted and more painful bear market’ like older investors have… ‘It’s not the norm to see a 20% drop and then a record climb back to all-time highs,’ he notes… That rebound might have given younger investors the takeaway that ‘buying the dip’ almost always pays and carries little risk. Retail trading activity has doubled since 2010, making up about a quarter of daily trading volume.”

December 4 – Wall Street Journal (Juliet Chung): “The total number of billionaires across the globe reached new heights in 2025…, according to… UBS. Some 2,900 billionaires now control $15.8 trillion, up from about 2,700 billionaires with a cumulative wealth of nearly $14 trillion a year earlier. The number and wealth of billionaires as a whole were boosted by the second-highest number of new billionaires minted in a year—287—since UBS began tracking that figure in 2015... ‘You’ve seen this acceleration of billionaire growth, and it’s actually coming from all areas,’ said John Mathews, UBS’s head of private-wealth management in the U.S…”

Inflation Watch:

November 30 – Financial Times (Guy Chazan): “Mike Plante could hardly believe his eyes when he discovered how much his health insurance premiums will go up next year. The 64-year-old public relations consultant is paying $400 a month. But this will jump to $1,965 — a nearly 400% increase — if he renews his existing plan. ‘Me and some 65,000 other West Virginians are about to be run off a cliff,’ he said. Plante is one of nearly 22mn Americans enrolled in health insurance under the Affordable Care Act… who will see their premiums soar next year if their tax credits expire as expected on December 31. ‘It’s a full-blown crisis,’ said Mike Pushkin, chair of the West Virginian Democratic party. ‘Ours will be one of the states hardest hit by the failure of Congress and the Trump administration to extend these subsidies’.”

December 3 – Reuters (Hyunjoo Jin, Fanny Potkin, Wen-Yee Lee, Anton Bridge and Max A. Cherney): “An acute global shortage of memory chips is forcing artificial intelligence and consumer-electronics companies to fight for dwindling supplies, as prices soar for the unglamorous but essential components that allow devices to store data. Japanese electronics stores have begun limiting how many hard-disk drives shoppers can buy. Chinese smartphone makers are warning of price increases. Tech giants including Microsoft, Google and ByteDance are scrambling to secure supplies from memory-chip makers such as Micron, Samsung Electronics and SK Hynix… The squeeze spans almost every type of memory, from flash chips used in USB drives and smartphones to advanced high-bandwidth memory (HBM) that feeds AI chips in data centers. Prices in some segments have more than doubled since February…”

November 29 – Axios (Emily Peck): “A silver tsunami is washing across our shores, as record numbers of Americans start hitting retirement age. The U.S. isn’t ready. Older Americans are living longer than any previous generation and stepping into an unfamiliar, less secure version of retirement. Many of them haven’t caught up to this new reality, and neither have policymakers. About 45% of Americans will experience retirement-funding shortfalls if they retire at 65, according to Morningstar... Retirees on fixed incomes face an ever-rising cost of living. Out-of-pocket medical expenses are escalating, the cost of in-home care is growing more than three times faster than inflation, and an increasing share of the elderly are spending more than a third of their income on real estate too.”

November 30 – Wall Street Journal (Sharon Terlep): “For years it has seemed no sticker price was too high for American car buyers. Even as average new car prices approached $50,000 this year, dealers fretted more over depleted inventories than losing customers to sticker shock. Those days are coming to an end. Increasingly stretched consumers are starting to draw the line on what they will pay for a new car, according to dealers, analysts and industry data. Car buyers are downsizing, buying used vehicles, taking on longer car loans and holding out for deals. ‘People are asking, ‘How can I afford this?’’ said Robert Peltier, who owns dealerships in East Texas. He said traffic… ‘There are people who are in debt and living paycheck to paycheck’.”

November 29 – Wall Street Journal (Katherine Sayre and Patience Haggi): “Rahdeese Alcutt, an AT&T investigator, once managed line repairs for the telecommunications company in this sprawling city. Now, he is the copper police. Thieves have wreaked havoc in the area, prying open manholes, chipping away at asphalt and climbing trees and poles to cut and steal—and then resell—copper wires that transmit electrical signals for phone and internet lines. Alcutt patrols the streets and relies on sensors and geotrackers to get alerts… ‘We’ve become a little bit of a detective agency,’ said Andrea Moore, a director of access construction and engineering at AT&T. Los Angeles is a hot spot in a nationwide wave of copper thefts as prices for the metal sit near record highs, leaving telecommunications companies under siege.”

Federal Reserve Watch:

December 2 – Financial Times (James Politi and Claire Jones): “Donald Trump said he would announce his pick to lead the Federal Reserve ‘early next year’, as he touted Kevin Hassett, the top White House economic official, as the ‘potential’ new head of the US central bank… ‘I guess a potential Fed chair is here too. I don’t know. Are we allowed to say that? Potential?’ Trump said, introducing Hassett during a White House event. ‘He’s a respected person, that I can tell you. Thank you Kevin’… Trump said his search for a Fed chair was ‘down to one’ after about 10 candidates had been considered. But he said the announcement of his pick would have to wait until 2026.”

December 3 – Financial Times (Kate Duguid, Amelia Pollard, Claire Jones and James Politi): “Bond investors have told the US Treasury they are concerned about Kevin Hassett’s potential appointment as Federal Reserve chair, worrying he will cut interest rates aggressively to please President Donald Trump. The Treasury department solicited feedback on Hassett and other candidates in one-on-one conversations with executives at major Wall Street banks, asset management giants and other big players in the US debt market… The discussions took place in November, before Treasury secretary Scott Bessent held his second round of interviews with candidates to replace Jay Powell as Fed chair when his term expires in May 2026…”

December 2 – Bloomberg (Maria Eloisa Capurro and Catarina Saraiva): “After cutting interest rates by more than a percentage point, Federal Reserve officials are now wondering where to stop – and finding there’s more disagreement than ever. In the past year or so, prescriptions for where rates should end up have diverged by the most since at least 2012, when US central bankers started publishing their estimates. That’s feeding into an unusually public split over whether to deliver another cut next week, and what comes after that… It boils down to a question of whether the economy needs a touch more gas to shore up job markets, or whether policymakers should take their foot off the pedal because inflation is above-target and tariffs could push it higher still.”

December 3 - Associated Press (Christopher Rugaber): “Treasury Secretary Scott Bessent said… he would push a new requirement that the Federal Reserve’s regional bank presidents live in their districts for at least three years before taking office, a move that could give the White House more power over the independent agency… Bessent criticized several presidents of the Fed’s regional banks, saying that they were not from the districts that they now represent, ‘a disconnect from the original framing’ of the Fed. Bessent said that three of the 12 regional presidents have ties to New York… ‘So, do they represent their district?’ he asked. ‘I am going to start advocating, going forward, not retroactively, that regional Fed presidents must have lived in their district for at least three years.’”

December 1 – Bloomberg (Katanga Johnson): “The Federal Reserve said it was monitoring community and regional banks’ commercial real estate loan portfolios amid concerns over ‘elevated interest rates, tighter underwriting standards, and lower commercial property values.’ The central bank said those factors may affect borrowers’ ability to refinance or pay off their loans, according to a supervision and regulation report... Officials are monitoring commercial real estate loan trends in addition to closely reviewing underwriting practices and credit loss reserve levels.”

U.S. Economic Bubble Watch:

December 3 – Axios (Ben Berkowitz): “Early holiday retail data looks a lot like the rest of the economy: fine on the surface, with potentially dangerous cracks underneath… Early numbers on Black Friday and Cyber Monday look basically fine. All-in Black Friday sales excluding autos rose 4.1% this year, per Mastercard SpendingPulse, which measures sales in stores and online… Bank of America clocked credit card spending for the week ending Nov. 29 as up 0.2% from a year earlier, with spending growth for holiday items better at 2.6%. Cyber Monday sales rose about 7% to a new record, Adobe Analytics said. The National Retail Federation continues to expect that this will be the first $1 trillion holiday shopping season.”

December 2 – Reuters (Anuja Bharat Mistry): “U.S. shoppers spent $14.25 billion on Cyber Monday, pushing total online sales over the Thanksgiving weekend to $44.2 billion, according to an ‌Adobe Analytics report… Spending rose ‌7.7% during the so-called Cyber Week - the five days from Thanksgiving to Cyber Monday - compared with an 8.2% increase to $41.1 billion last year and above its prior expectations of $43.7 billion…”

December 4 – Axios (Courtenay Brown): “Economic pain is mounting quickly for America’s small businesses… The economic fortunes of mom-and-pop businesses are diverging from their larger counterparts. The dynamic is not new, but the divide is getting bigger, faster. It exposes a vulnerability for President Trump’s economic agenda, which top officials have said is focused on reigniting Main Street businesses. The private sector shed 32,000 jobs in November, according to payroll processor ADP. Small firms — those with fewer than 50 employees — accounted for the entirety of the losses. Those businesses reported a net loss of 120,000 jobs, the most small businesses have cut since the onset of the pandemic.”

December 3 – CNBC (Jeff Cox): “The U.S. labor market slowdown intensified in November as private companies cut 32,000 workers, with small businesses hit the hardest, payrolls processing firm ADP reported… The payrolls decline marked a sharp step down from October, which saw an upwardly revised gain of 47,000 positions… Larger businesses, entailing companies with 50 or more employees, actually reported a net gain of 90,000 workers. However, establishments with fewer than 50 workers saw a decline of 120,000, including a drop of 74,000 among firms with 20 to 49 employees. The total loss was the biggest drop since March 2023. Education and health services led gainers with 33,000 hires, while leisure and hospitality added 13,000.”

December 4 – Reuters (Lucia Mutikani): “The number of Americans filing new applications for unemployment benefits fell to a more than three-year low last week, allaying fears of a sharp deterioration in labor market conditions after independent surveys showed job losses in November… Initial claims for state unemployment benefits fell 27,000 to a seasonally adjusted 191,000…, the lowest level since September 2022.”

December 4 – Yahoo Finance (Emma Ockerman): “The US jobs market received a fresh set of mixed signals…, with claims for unemployment insurance dropping to a three-year low but employer layoff plans flashing another warning sign. Employers announced 71,321 layoffs last month, according to… Challenger, Gray & Christmas. The cuts were up 24% from the nearly 58,000 planned layoffs announced in November 2024, and amounted to the highest total for the month since 2022.”

December 3 – CNBC (Diana Olick): “Applications for a mortgage to purchase a home rose 3% for the week and were 17% higher than the same week one year ago… ‘We continue to see mixed results each week as the broader economic outlook remains cloudy, even as cooling home-price growth and increasing for-sale inventory bring some buyers back into the market,’ Kan added.”

November 29 – Wall Street Journal (Te-Ping Chen): “DeMond Chambliss used to run himself ragged with the small contracting business he owned in Columbus, Ohio: hanging drywall, chasing clients for payments and managing half a dozen employees. Since April, Chambliss has worked the night shift overseeing a team of 200 welders, plumbers and electricians at a local data-center construction site. He makes more than $100,000 a year—a significant increase from his previous pay... ‘I pinch myself going to work every day,’ the 51-year-old said. An investment boom in artificial intelligence is creating a thirst for massive data centers—and a bonanza for the workers building them. It is unclear how long that boom will last, but for now, workers like Chambliss are cashing in on high demand for their services. They are enjoying the trappings including perks, bonuses and, in many cases, pay boosts.”

November 29 – Wall Street Journal (Daniel Michaels): “Some of America’s best starting salaries are at sea. And they aren’t luring enough workers. Straight out of college, graduates from the country’s maritime academies can earn more than $200,000 as a commercial sailor, with free food and private accommodations… Despite the pay and perks, maritime jobs go begging, and it is raising national-security concerns. America is already short of commercial seafarers for a cargo fleet President Trump wants to see grow.”

December 2 – Axios (Ben Berkowitz): “Growth will slow and inflation will rise in the U.S. next year, the Organisation for Economic Co-operation and Development forecast…, as the labor market weakens and tariff price pressures remain. The pessimistic forecast has an even gloomier caveat: Things could get worse if the AI-driven stock market bubble were to burst. ‘A key downside risk to the projection is a correction to equity markets that have been buoyed by the hopes of high returns to investment in AI, although new advances in AI could boost growth in the years ahead,’ the OECD wrote…”

China Watch:

December 2 – Bloomberg: “China’s services activity expanded at the weakest pace in five months… The RatingDog China services purchasing managers’ index slowed for a third month and fell to 52.1 in November… ‘The softer services PMI this morning reinforced the picture of a patchy recovery,’ said Charu Chanana, chief investment strategist at Saxo Markets… ‘Investors now want clearer signs of follow-through — either concrete policy delivery, improving consumption data or more decisive credit support’.”

November 29 – Financial Times: “China’s factory activity fell for an eighth straight month in November while activity in services hit a three-year low, showing how persistent weak demand… The manufacturing purchasing managers’ index rose marginally to 49.2 this month… Another index tracking non-manufacturing business sectors, including services and construction, fell to 49.5, down from 50.1 last month. It is the first reading below 50 in nearly three years.”

November 30 – Bloomberg: “Two of China’s private data agencies withheld monthly home sales figures at the government’s behest, people familiar with the matter said, stoking transparency concerns in a critical sector of the world’s second-largest economy. China Real Estate Information Corp. and China Index Academy, which are among the country’s biggest private property data providers, didn’t disclose the combined sales of the nation’s 100 largest developers for November…”

Central Banker Watch:

December 2 – Financial Times (Delphine Strauss): “Leading economies will end their current rate-cutting cycles by the end of 2026, according to OECD forecasts that suggest most major central banks have little scope for looser policy despite an expected slowdown in growth. The… organisation expects the US Federal Reserve to cut interest rates just twice more by the end of 2026, before keeping the federal funds rate at 3.25% to 3.5% throughout 2027.”

Emerging Market Watch:

December 5 – Bloomberg (Vinícius Andrade, Daniel Carvalho and Giovanna Bellotti Azevedo): “Brazilian markets slumped, with stocks seeing their worst day since 2021 and the currency tumbling about 2.5% after former President Jair Bolsonaro endorsed one of his sons as the right-wing’s name in presidential elections next October. The real… accelerated losses after Flavio Bolsonaro confirmed the news on X. The Ibovespa stock index fell 4.3%, while some swap-rate contracts — indicators of monetary policy expectations — surged more than 50 bps…”
Leveraged Speculation Watch:

December 2 – Bloomberg (Greg Ritchie): “The world’s largest hedge funds are accumulating ‘substantially higher’ leverage in the bond market than smaller rivals thanks to their close relationships with dealers, according to the Bank for International Settlements. The average haircut — a reduction on the value of collateral in a repurchase agreement transaction — applied by banks to the 10 largest hedge funds was close to zero, according to BIS research... Such minimal haircuts allow these funds to obtain ‘very high levels of leverage relative to their smaller peers,’ it said. The BIS finding is the latest scrutiny into highly-profitable fixed-income strategies such as the basis trade, as regulators seek to tame the risks from such leverage being unwound in a selloff. Earlier Tuesday, the Bank of England called on participants to manage their risk taking to avoid market disruption. ‘These large hedge funds are key clients of major dealers, giving rise to strong trading relationships that dealers appear to reward with more attractive haircut terms,’ Felix Hermes, Maik Schmeling and Andreas Schrimpf wrote…”

Social, Political, Environmental, Cybersecurity Instability Watch:

December 4 – Axios (Emily Peck): “Young Americans say the country is heading down a dark road and fear their futures are unstable, according to the latest Harvard Youth Poll… Financial insecurity, intense political polarization and the rise of AI are eroding Gen Z’s faith in their economic prospects and public institutions overall. The authors of the report… warn that this massive upheaval is threatening the country’s stability. ‘Instability is shaping nearly every part of young people’s lives,’ said John Della Volpe, director of polling at the Harvard Institute of Politics… A majority of respondents (57%) say the country is headed in the wrong direction — a six-point rise from last year…”

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