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Bessent’s Bond-Burner Wasn’t the Big Move He Hoped The problem, after Treasury Secretary Scott Bessent made a small but hugely symbolic move to stop the steady rise in longer bond yields, is that even his power appears to be limited. Drastic changes in fiscal policy are needed, not signaling and symbols. Bessent’s key intervention, announced as Wall Street opened, was to double the amount of 10-year and longer bonds that the Treasury can buy back. If you think this sounds like something the Fed would do, you would be right.  Monetary policy ever since the Global Financial Crisis has revolved around quantitative easing (QE) — buying bonds to push down their yields. Kevin Warsh, the new Fed chairman, wants to move away from that and shrink the central bank’s enormous holdings of bonds.  The 30-year yield — at its highest since the eve of the crisis in 2007 —dropped eight basis points. But the upward trend remains intact. John Authers Bloomberg August 20, 2026 https://www.bloombe...

The Sargasso Sea, an elliptical area of the Atlantic around Bermuda, is a model for global markets in the depths of this hot summer. An area of relative calm caused by the space between four major Atlantic currents. As for the obvious geopolitical risks, there is a belief — correct or otherwise — that the market has a handle on them, and that they are less than catastrophic.  Equanimity is a state of psychological stability and composure which is undisturbed by the experience of or exposure to emotions, pain, or other phenomena that may otherwise cause a loss of mental balance.   https://en.wikipedia.org/wiki/Equanimity Whether markets are right to be this confident is another question. Meanwhile, the greatest risk, also diminished slightly by the slowdown in the recent data, comes from bonds.  But as it stands, Great Earnings + Goldilocks Economic Data + Absence of News = Continued Calm.  Just like eels must leave the Sargasso, this cannot go on indefinitely, but wi...

Vitaliy Katsenelson, chief executive officer of Investment Management Associates, says:  I wrote in the past that the AI rollout feels a lot like déjà vu of the 1999 telecom bubble. Today it is also starting to feel like the 1999 bubble is being supersized into something closer to what led to the 2008 financial crisis. This is not a good change. Comparisons with 1999 provided some perverse reassurance. Burst stock market bubbles are in many ways a price of technological innovation as investors balk at trying to price new inventions years into the future.  They didn’t stop canals, railroads, cars, or the internet from remaking the economy, and a stock market selloff needn’t stop the growth of AI. Now, investors are beginning to hear the rhyme with a different bubble — the 2008 collapse of a massive edifice of mortgage-backed credit that caused the Global Financial Crisis Book extract: The Fearful Rise of Markets, Authers   https://www.ft.com/content/6d6ad426-63ac-11df...

  Anthropic at $900 Billion Valuation Anthropic needs to make deals to pay for enough computing infrastructure to meet growing demand for its products, amid the breakout success of its AI software. Bloomberg May 12, 2026 https://www.bloomberg.com/news/articles/2026-05-12/anthropic-in-talks-to-raise-30-billion-at-900-billion-valuation Anthropic Was Behind. Now It’s the AI Boom’s Front-Runner. Anthropic is emerging as the presumptive front-runner in the race for artificial-intelligence supremacy, with faster growth and fundraising that could soon yield a higher valuation than rival OpenAI. Wall Street Journal 13 May 2026 https://www.wsj.com/tech/ai/anthropic-was-behind-now-its-the-ai-booms-front-runner-5020f621 Who blinks first on Hormuz? CNN 13 May 2026 https://edition.cnn.com/2026/05/13/politics/hormuz-strait-stalemate-mcgurk-analysis Nya rekord på Wall Street Dow Jones stängde svagt nedåt. Flera techjättar nådde nya toppnivåer   https://www.di.se/live/nya-rekord-pa-wall-stree...

De överväldigas av två enorma chocker: pengarna som strömmar in på att förverkliga artificiell intelligens, och slaget mot den globala oljeförsörjningen från kriget i Iran. Det förra överväger på något sätt fortfarande det senare och lämnar amerikanska aktier nära rekordnivåer. Genom att avfyra förnyade missilattacker idag signalerar Iran att de fortfarande har kapacitet att orsaka smärta och inte kommer att tvingas till kapitulation.  USA står i allt högre grad inför valet mellan ett långt krig som de inte vill utkämpa, eller en dålig, pinsam överenskommelse. Med mellanårsvalet som väntar sätter det press på USA att ingå en överenskommelse. Logiken pekar på en resolution som det kärnkraftsavtal som president Barack Obama gjorde (känt som JCPOA) som Trump medvetet drog sig ur 2018. Han är förståeligt nog ovillig att acceptera ett sådant resultat. Optimismen kommer från AI… Euforin är tillbaka till den första upphetsningen kring ChatGPT 2022 – förutom att den här gången gör vinstern...

Översättning gjord av Copilot: Servicearbetare kan inte lätt ersättas av billigare alternativ i Fjärran Östern; Två Phillipskurvor 1 maj 2026 Lång period med låg inflation. Men kanske var lite eller inget av detta centralbankernas verk. År 2020, precis när pandemin tog fart, väckte ekonomerna Charles Goodhart och Manoj Pradhan debatt genom att publicera The Great Demographic Reversal, som hävdade att ett åldrande samhälle också skulle vara ett inflationsinriktat samhälle. Nu har de gett ut en uppföljare. Deras argument framgår tydligt av titeln: Den obundna centralbanken: Demografi, finanspolitisk instabilitet och en erosion av centralbankens förmåga att bekämpa inflation. Invandringspolitiken förvärrar problemet. Ett regelbundet flöde av invandrare till USA och Västeuropa hjälpte till att stoppa detta problem och hålla lönetrycket nere, samtidigt som det skapade sociala problem. Det är klokt att anta att detta är över. Detta hände tydligt under 1950- och 1960-talen, och de keynesiansk...

The first Treasury-Fed Accord, in 1951 (discussed here ), gave the Fed independence to set rates after years when they had been held low by the Treasury to help repay war debts. Fed $6.5 trillion balance sheet, a legacy of the bonds it purchased to bail out the financial system after the 2008-9 crisis and the pandemic.  Slowly and deliberatively, I believe we need a smaller central bank balance sheet, Warsh told Senators. The issue — as Powell discovered when he tried to shrink the balance sheet in 2018 — is that selling bonds into the open market pushes up yields directly, while sucking out liquidity.  It led to a big market selloff and a demeaning “Powell Pivot (a major shift in direction) toward cheaper rates. Any such shrinking will have to be avoid repeating 2018. A further issue is the dollar. Bessent has made clear that he wants lower bond yields and a weaker dollar.  Steven Blitz of TS Lombard: “Warsh will find that the reality of large and growing deficits, the n...

Is it possible that, as in ‘Risk’ or the Mercator projection, everyone thinks Greenland is bigger and more important than it really is? Consumer Care Toys & Games, Collectibles & Playsets - Consumer Care The reason this will be hard to resolve is that NATO exists precisely to give joint protection to territory in the North Atlantic. If Russia or China were to invade Greenland, all the NATO allies are obligated to leap to its defense. Denmark has repeatedly sent troops to fight in US-led “coalitions of the willing.” It’s a loyal ally. Thus, just by raising the Greenland issue, the US shows that it doesn’t trust NATO. Even without use of force, this situation could mean the practical end of the alliance. The odds are that this mess can be fixed with a messy compromise.  That would mean another buying opportunity. But the danger of something worse is real, and not concentrated only on European assets.  There’s no need to panic, but trades that buy precious metals and sell...

With the world in mortal crisis throughout the 1930s, the leading capitalist intellectuals of the day met in a series of fraught conferences. Horrified by the advances of totalitarianism, economists like John Maynard Keynes, Friedrich Hayek, Karl Polanyi and Ludwig von Mises clashed, tried to understand what had gone wrong and sought a version of capitalism that people would accept. Today’s intellectual ferment among capitalists is uncomfortably similar. It’s no longer left to socialists or progressives to criticize free markets. Capitalists themselves are convinced they are facing the gravest crisis since the 1930s.  The Harvard historian Sven Beckert just published an immensely ambitious 1,300-page tome simply titled Capitalism.  https://www.penguinrandomhouse.com/books/541160/capitalism-by-sven-beckert/ His book is the latest in a stream of interventions that all start from the assumption that capitalism needs to be fixed, from The Crisis of Democratic Capitalism, by the Fi...

(An exterminator is a person whose job is to kill or eliminate certain unwanted animals, such as pests, insects, or rodents, typically in buildings or homes.)  Kackerlackor With a cockroach infestation, the most effective remedy is to call in an exterminator. The same logic applies to the fast-spreading risks in private credit that JPMorgan’s Chief Executive Jamie Dimon recently flagged.  Fear that it might come to this are contributing to the biggest  interruption to risk markets since the Liberation Day tariffs in the spring. John Authers Bloomberg November 19, 2025 https://www.bloomberg.com/opinion/newsletters/2025-11-19/dimon-cockroaches-are-living-in-risk-markets-heads Jamie Dimon, chief executive of JPMorgan, is worried about credit and expressing himself in typically pungent fashion.  Responding to the implosions of the auto lender Tricolor Holdings and the car-parts supplier First Brands Group in recent weeks, he said: “When you see one cockroach, there are p...

Investors expect the Federal Reserve to cut its policy rate on Oct. 29, and once more by the end of the year, but the case for cutting is weak. Core consumer-price inflation remains well above the central bank's target, and unemployment is still in line with the bank's mandate of "maximum employment". The Fed would be wiser to pause due to enormous uncertainty about where the economy is headed, with the inflation outlook and labor market trends being equally murky. Bloomberg Editorial Board October 28, 2025 https://www.bloomberg.com/opinion/articles/2025-10-28/federal-reserve-should-pause-in-cutting-interest-rates John Authers Bloomberg  October 29, 2025 https://www.bloomberg.com/opinion/newsletters/2025-10-29/record-stock-prices-aren-t-the-result-of-politics The stock market more overvalued than at almost any time in U.S. history https://englundmacro.blogspot.com/2025/10/this-bull-market-has-no-support-this.html  

  ”Problemets kärna är väl att privata kreditsektorn, utanför det traditionella banksystemet, har haft en snabb framväxt. Den har skett över en period då man kanske snarare skulle ha haft hårdare kreditvillkor och ökat på kraven för att få lån då amerikanska företag varit under press från högre räntor, tullar, inflation med mera”, säger Martin Ekstedt, bankanalytiker på Handelsbanken https://www.di.se/nyheter/kreditchefen-tecken-pa-att-marknaden-ar-overhettad/ K-Shaped Recovery Went Pear-Shaped Would it be V-shaped, with a swift rebound, or more of a U? Was there a risk of the dreaded L, leaving the economy bumping along horizontally for years? Then the Twitter personality Ivan the K (@IvantheK), an anonymous figure who describes himself as the “Lead Independent Director of Finance Twitter,” laid claim to the “K-shaped recovery.”  Developments in the last few days, as luxury-goods firms and investment banks unveiled great profits while auto lenders took massive losses, suggest...

Is AI a Bubble? It’s an impossible question to ignore, so let’s make another attempt to answer it.  In the run-up to the epic dot-com implosion the Nasdaq Composite index suffered seven separate corrections of more than 10% before finally reaching its peak in 2000. This raises the issue of the most obvious parallel for the AI excitement. A quarter-century has now passed since dot-com bombed; does this mean that its lessons have not been learned? Most money managers today do not carry the scars of the dot-com era. Of the approximately 1,700 active large-cap US portfolio managers, just 4% invested through that period.  There is a difference between living through a downturn and merely reading about it. As someone who lived through the dot-com bubble and burst I have probably been too ready to see other imminent disasters in the years since.  We are all prisoners of our own experience, and while most active managers don’t have direct experience of dot-com, the commentators t...

  Such milestones affect nothing and should have no psychological impact, but they do. On more foundational grounds, the most widely watched long-term stock metric is the CAPE (cyclically adjusted price/earnings) multiple, popularized by the Yale University economist Robert Shiller. Another metric, espoused by Alan Greenspan when he chaired the Federal Reserve, compares the earnings yield (the inverse of the p/e ratio) with the 10-year yield.  For two decades, stocks yielded more than bonds, making asset allocation easy. There Was No Alternative to stocks. Now there is. The 10-year is yielding more. It’s not clear that there’s a bubble in share prices, although they’re certainly not cheap.  There might well be a bubble in the amount people are prepared to spend on AI, in the earnings that the Magnificents make on the back of that, and in projected earnings for the future.  That is where trouble could arise. John Authers Bloomberg September 30, 2025 https://www.bloomb...

Under Donald Trump, the world has taken a sharp turn back toward the 17th century doctrine of mercantilism — the notion that trade is a zero-sum game in which countries should be self-sufficient and focus on exporting far more than they import. It worked for Louis XIV and other early European empires, and the aim of America First is to reintroduce it with the US this time the victor. The world has acquiesced in tipping the terms of trade sharply in favor of the US. So far, this looks like a crushing victory for America First.  But it ignores one critical factor. There is already one country that has been practicing mercantilism for decades, it’s very good at it, and it appears to be a step ahead of the US as it starts to play the same game: China. John Authers Bloomberg September 26, 2025 https://www.bloomberg.com/opinion/articles/2025-09-26/why-america-will-lose-its-mercantilist-game

Over time, analysts expect that the tariffs, if left in place, could be worth more than $2 trillion in additional revenue over the next decade.  Economists overwhelmingly hope that doesn’t happen and the United States abandons the new trade barriers. But some acknowledge that such a substantial stream of revenue could end up being hard to quit.  “We have so much money coming in, we’re thinking about a little rebate, but the big thing we want to do is pay down debt,” Mr. Trump said last month of the tariffs. New York Times 3 augusti 2025 https://www.nytimes.com/2025/08/03/business/trump-tariffs-how-much-money-debt.html Förra året hade den federala staten knappt 7 000 miljarder dollar i utgifter men bara 5 000 miljarder i inkomster. Under högkonjunktur, alltså. Det är klart att tillväxten blir hög. Amerikansk ekonomi lever på en finanspolitisk sockerkick The US economy grew throughout, yet nobody found a way to redeploy the people impoverished by globalization.  That wasn’t...

In 1997, the triumphant New Labour duo of Tony Blair and Gordon Brown celebrated their arrival in Downing Street by making the Bank of England independent. Until then, UK monetary policy was set by the Chancellor of the Exchequer, an elected politician. The Tory Kenneth Clarke, a lovable bruiser of British politics, was thereby turned into the last chancellor who also controlled the Bank’s monetary policy. He was irate. “Why has the Right Honorable Gentleman so swiftly changed a system in which my decisions as chancellor produced the United Kingdom’s best performance on inflation for 50 years?” he asked Brown in the House of Commons.  John Authers Bloomberg 3 July 2025 https://www.bloomberg.com/opinion/articles/2025-07-03/independence-is-the-worst-form-of-central-banking https://englundmacro.blogspot.com/2025/07/fed-independence-is-already-dead-trump.html

You’ve heard the fear of AI destroying jobs. During the Industrial Revolution, you actually had all sorts of destruction of all sorts of suboptimal jobs that were no longer needed and that allowed people to create more wealth, that allowed you to do more with less and it allowed our society to succeed.  Automobiles decimated the horse carriage industry, including the people who took care of the horses, their drivers and all the things that went along with them. Automation took us from a time when 80% of the people were involved in agriculture to 2% today. The answer to the question “Where will the jobs come from?”  is “I don’t know, but they will!” That has always been the answer, and it has always been the correct answer.  John Authers 6 June 2025 https://www.mauldineconomics.com/frontlinethoughts/good-news-and-creative-destruction

Three numbers are sending a spasm of concern through Wall Street: 899.  That’s the clause of the One Big Beautiful Bill Act currently before the Senate that gives the Treasury secretary the power to levy retaliatory taxes on the US investments of foreign countries that have levied “unfair taxes” on US companies. Treasury must tell Congress each quarter which countries apply “extraterritorial and discriminatory” taxes (the EU’s digital services tax is a prime example) It’s really likely to happen; and Future Democratic administrations might well leave it in place. The chief effects would be to weaken the dollar John Authers Bloomberg 3 June 2025 https://www.bloomberg.com/opinion/newsletters/2025-06-03/us-plans-to-tax-foreign-capital-is-alarming-the-bond-market

We’re hot-wired to do so; condense something complicated into a story, and we understand it more easily.  That raises the risk of over-simplification and narrative fallacy — a notion from Nassim Taleb — in which we grab hold of a version of events and allow it to color incoming data. Any good tale, even if it’s untrue, can change prices — and thereby the economy surrounding it — if enough people believe it. The S&P 500 had a great, broad advance Tuesday. It’s up 19% since its nadir on April 8, one of the biggest rallies ever for the index.  But it’s equally true that the S&P is lower than six months ago, and from the close on the day after the election.  How should we view it? Here are the narratives driving markets now: 1. The Bond Vigilantes Have Gone Away This is a reversal of last week’s “The Bond Vigilantes are back, and this time they really mean it” story.  2. US Consumers Are Back Americans continue to be the world’s spenders of last resort 4. The TAC...